Articles

Mindful of heightened concerns regarding fire safety in the Australian building industry, this paper, initially presented in a keynote address by Kim Lovegrove at an Annual Fire Protection Association of Australia Conference in 2011, bears fresh relevance in that it addresses the role of the common law in assigning liability to those involved with the certification and assessment of fire safety measures of as-built product. In light of the recent cladding crisis, it has been updated somewhat.

In Australia, engineers can be found accountable at common law (for example under the tort of negligence), under statute, in certain contexts, and in some jurisdictions they can be found liable for professional misconduct. This paper focuses upon liability trends and the increased risk paradigm that has emerged in discretion-based building control system.

Common Law Liability

Law suits are not necessarily about rights and wrongs, they are everything about the seeking of recovery from whoever is in the litigation process for moneys lost on projects or damages sustained. Australia is a proportionate liability environment. This doctrine provides that any defendant who potentially has accountability or a responsibility for a loss will, if found liable, have to account in financial terms for that adjudicated level of responsibility.

Because some actors in the construction and engineering dynamic may be uninsured, plaintiffs are typically very vigilant in ensuring that they “rope in” any party that is potentially liable. Insured professionals are very attractive because of the perceived “deep pocket” of the insurer standing behind the engineer. Some jurisdictions like Victoria and the NT make it compulsory as a prerequisite for building practitioner registration for a practitioner to be insured. In New South Wales, whilst certifiers, engineers, architects and building consultants are required to hold professional indemnity insurance, builders are not. Builders in NSW are, however, required to take out home warranty insurance cover.

A fire engineer needs to be aware of which construction actors are required by law to be insured vis-a-vis those that are not because it impacts upon the risk matrix. Uninsured actors harbour less appeal than insured actors for plaintiffs as litigants are always intent on seeking out defendants that can in fact pay.

“Claims against an engineer may occur even if he did nothing wrong. This is because if there are large losses, all potentially responsible parties may be sued with a goal of letting the courts determine who is at fault. Design professionals get named because they were at the scene of the crime… the legal obligation of any engineer is to perform in accordance with the generally accepted professional standard of care.” (Fire Protection Engineering – Potential Pitfalls with Professional Liability Insurance by Mark Blankenship, magazine published by the Society of Fire Protection Engineers USA).

Note that Blankenship states correctly that an engineer may be sued even if s/he or it did nothing wrong. This is correct, some litigation is speculative and sometimes defendants are joined and sued as part of a fishing exercise – to see what emerges. There is also a view held by some that where there is an insured defendant, if the insurer considers that there is any risk, albeit remote, then it is “worth a crack” to get what is called a nuisance value pay out.

Litigation is can be a game and it is not for the light of heart. A few years ago we acted for one geotechnical engineering company that was on the receiving end of three separate claims, for three separate apartments in a block of town houses. They had, in our view, no case to answer, but being a small company; they could not afford to fund the defence of three different claims for 2 years or thereabouts, even though at the “end of the day” we were very confident of their total exoneration. They thus made a decision to wind the company up, such was their fear that the sheer cost of defending the matters would inevitably lead to the insolvency of the company. You see: engineers and contractors are not in the business or industry of litigation. Insurers, on the other hand, are very familiar with litigation in light of the fact that many claims are contentious, of a multi-causation derivative and are very rarely a “lay down mesire”; litigation is part of their raison d’etre.

“The standard of care owed by professionals is determined by what can reasonably be expected by professionals professing the professional skill, taking into account all the relevant circumstances of the time – that is appropriate professional performance in that particular situation… if a particular profession does not have a generally applicable and widely shared view of professional practice, the professionals duty and standard of care is defined by default by the view of performance formed by the court in retrospect, in the course of the particular litigation proceeding… So there remains a very significant “missing link” for the engineering profession and industry: there is no standard of professional performance in engineering that is ‘widely accepted in Australia by professional peer opinion”.[1]

Tests in this arena are fluid, imprecise and in the area of fire engineering particularly so. This is because there is so much fire engineering modelling. This type of modelling particularly in the fire dynamic requires calculated hypothesis, intelligent and informed speculation and the ability to “have a go” at predicting fire behaviour. One thing that the Black Saturday Bush fires in Victoria taught us all was that one can so easily underestimate the brutality and immensely destructive forces of what can be at times a malevolent force of nature. Some would say that the previous “rule book” on fire controls and the understanding of the fire dynamic had to be thrown out.

A prominent fire engineer once told me that he considered fire engineering to be a “dark art”, a relatively new and evolving discipline in its own right. If his observations “hold water” then it would be considered to be an evolving science and accompanying that will be the metamorphosis of legal liability in so far as it relates to fire engineering.

I have quoted a very insightful and poignant extract published by The Warren Centre titled “Professional Performance Innovation and Risk in Australian Engineering Practise”. Although it does not appear to have been written by lawyers it nevertheless captures the disquiet, disillusionment and nervousness of members of the engineering profession with respect to the modern day litigation that if anything is gaining momentum.

“It seems not uncommon for engineering professionals to view with scepticism – if not disdain – what takes place when engineering liability issues are the subject of litigation, and the excessive time and costs involved for all parties…

[There has been] an intensified role of adversarial advocacy frequently leading to drawn out over-complicated proceedings; and the increase of ‘entrepreneurial’ expert witnesses who bring to legal proceedings limited experience, or exposure, at the rock face of contemporary professional engineering practice. The result over recent years has been a significant increase in the duration and cost of engineering litigation, significant increase in the concerns expressed in the engineering industry and profession about varying standards of expert testimony on engineering issues, and most importantly, when these issue are the subject of deal debate, the outcomes much more unpredictable”. The unpredictability is the difference between the ‘prospective’ view that the engineer must take of any new task and its outcomes and inherent risks, and the ‘retrospective’ view that can be taken in expert testimony of exactly the same task and outcomes and risks after the event – with the advantage of knowing what actually happened…

It may not be a perfect view, but the view formed in prospect – before the actual task gets under way – is nonetheless that of the responsible and competent professional engineer making effective use of the contemporary bank of engineering knowledge and experience… there is a ‘missing link’.”[2]

The above passage raises a great many poignant points. Adversarialism is indeed on the “up and up”. It is not likely to abate because in the West we have an adversarial heritage; the only glimmer of hope on the horizon is that mediation is becoming far more popular once legal proceedings have been issued. Mediation however will not arrest the initiation of legal proceedings; rather it may serve to conclude proceedings at an earlier juncture than would otherwise be the case. Reason being when a letter of demand is issued, in the case of insured defendants it has to be dispatched to the insurer. Insurers do not always negotiate prior to the initiation of legal proceedings. Some may consider this to be problematic. This is not surprising as insurers know that some letters of demand may only be speculative and unlikely to culminate in legal proceedings.

The comments about “prospective views” rather than “retrospective views” are insightfully correct. The judgement calls that are made at the time a decision is made with respect to a particular fire engineering scenario will be based upon prudent thought, the application of current if not best practice fire engineering intelligence, consideration of the relevant facts at hand along with the factoring in of certain calculated assumptions. In due course, if there is a calamity and it is analysed and judged in retrospect, there is every chance that different expert evaluators will have a “different take” on matters. Ironically, the retrospective analyses of the expert in a post calamity scenario are artificial and to some extent contrived. This is because “after the event” reconstruction modelling can never be totally accurate or diagnostically conclusive, because it involves a reconstruction of the events, the facts and certain scenarios in circumstances where relevant evidence may have literally vaporised. Much reliance will then be afforded to recollection, to finding out under cross examination why a person approached an engineering solution the way he or she did, what calculations were factored into the fire modelling, what were the fire scenarios that were contemplated and so forth. If per chance the fire occurred, say seven years previously, then it is not inconceivable that important evidentiary documentation that formed the basis of judgement had disappeared.

As stated in the above-quoted material, there are indeed “varying standards of expert testimony”. The variance can be due to respective sizes of the hip pockets. A large hip pocket can afford a top expert and a more limited budget will compel one to engage a lesser light. Just like the legal profession has a graduated scale of legal experts ranging from junior barrister, to senior to Queens’ Counsel there are technical experts that enjoy a preeminent reputation and there are “Johnny Come Latelys” who have a tendency to underwhelm.

But it is not the variance in seniority and juniority that is the greatest cause for variance; rather it is the fact that the experts have a remarkable propensity in litigation matters to not agree. In 25 years of practice, having had conduct or involvement with thousands of cases, I cannot recall one case where the experts have agreed on the diagnosis and the costs. Sometimes the variance in term of opinion simply beggars belief. I recall one matter where one side stated that the cost of rectification would be $30,000.00 and the other side said $1,200,000.00. The lower sum I might add was closer to the mark. One expert may overestimate, whereas the other side may underestimate, when in fact the decision maker will find somewhere in the middle.

Performance Regulation and Fire Engineering

With the advent of the performance-based building code in Australia in the mid-ninety’s, the country moved away from predominantly prescriptive regulation to performance-based building control. Performance regulation troubled a great many prominent fire engineers and I recall addressing a conference with the well-known fire engineer Dr John Hall from the USA. Dr Hall made somewhat of an ominous yet accurate prognosis and observation when he stated that property developers when they look for performance-based solutions are rarely ever motivated by increasing the benchmarks of public safety. Rather, they are more motivated by determining the cheapest way to build. With the coupling of private certification in Australia in the early nineties and the convergence of a more flexible building code, there occurred a paradigm shift in building control. There was a rapid metamorphosis from a prescriptive building control dynamic to a more discretion-based building control regime courtesy of the discretion that was afforded to building surveyors to sanction alternative solutions. This did not appear to bode well for regulatory control.

The case in NZ has been miserable, the flexibility that was afforded by the NZ Building Code, a code that was heralded in the mid-nineties as being world’s best practise, proved in the fullness of time to be very problematic. The flexibility within the code was such that a very liberal approach was taken to installation of fabric and material. The culmination was the leaky building debacle, which resulted in the establishment of an Act of Parliament and a tribunal dedicated to dealing with the leaky building maelstrom. At last count it is predicted that by the time all claims are resolved there may be as much as 25 billion dollars’ worth of economic downside associated with the reconstruction of woefully compromised buildings. For NZ, that is a calamity as the economy does not have the capacity to easily digest that sort of impact.

Back onto home shores, there are those who have nevertheless been nervous about a highly flexible performance based building code that is applied in a discretion-based/subjective building control decision making environment when there is a particular application to fire engineering. The concern is heightened when active, rather than passive fire resistant proposals are sanctioned. The former approach tends to rely more upon alternative solutions and there is a contemplation that is implicit in the assumptions that human beings will be relied upon to have an active input into the maintenance of the fire mitigation regime; if someone responsible for maintaining an aspect of a fire retardant system goes “MIA” (missing in action) then unintended consequences may emerge. A very good paper on point titled “Essential Safety Measures, Building Upkeep and the Legal Liabilities of Property Owners and Owners Corporations” is worth reading.

The flexibility that has emanated from the performance system seem to resonate with the negative inklings of Dr Hall, where he states that alternative solutions are rarely used to increase the benchmarks of public safety. The author has had firsthand experience in cases where alternatives to fire sprinkler systems have invariably been cheaper than sprinkler systems and those systems have been found wanting. Alternative solutions lend themselves to a more imaginative or creative approach to fire engineering. It follows that there will be greater regard to fire engineering modelling and less reliance upon prescriptive measures and well established verification methods. Expert appraisal and expert thinking thus becomes paramount. So the appraisal better be “damn good”.

As sure as day follows night when there is retrospective analysis of fire modelling that is applied to a scenario where the modelling is brought into question, it will be very easy to find a chorus of experts, some of whom may be hired guns (or should I say ‘high pressure hoses’?), who will be able to stridently criticise and attack the fire modelling assumptions that underpinned the alternative solution.

And here lies the problem and the higher than normal risk profile for the fire engineering profession. If a defendant cannot fall back upon a prescriptive deemed to satisfy provision but is reliant upon fire modelling and associated assumptions, and I emphasise assumptions, that formed the basis of that which is sanctioned by fire engineering experts, then the rationale for the decision will be susceptible to conflicting opinion and expert attack. The experts briefed to dissect all of the ingredients that characterise the assumptions underpinning the modelling will be able to indulge themselves knowing that they are paid handsomely by the hour and are afforded a fair bit of time to form a view. On balance the blending of a plaintiff who has been the victim of a fire engineering failure complemented with the ingredients of a top expert intent on professionally shaming the hapless engineer will, from the defendant’s point of view, prove very challenging.

Compare this with a defendant being able to say that the fire engineering solutions were based upon recognised deemed to satisfy provisions or very well recognised verification methods in circumstances where a reputable expert can confirm that such compliance did occur and one has a very robust and confident defence. Alternative solutions require discretion and a high level of subjectivity; they are thus pretty easy to attack whereas DTS compliance is not.

Risk management

Where performance standards are applied and there is an election to resort to alternative solutions, there need to be some belts and braces to “douse the flames”, as it were. The fire engineering concerned needs to have either internal or expert peer review so that some of the fire modelling assumptions are tested. Fire engineering is not really a discipline that lends itself to the sole practitioner paradigm as internal peer review seems to be a critical part of enlightened fire modelling

Ensure that a fire engineered alternative solution is not driven by cost cutting as the paramount maxim. Fire causes the greatest potential for menace – it is not an area that lends itself to bargain pricing. Do not accept briefs where there is not a sufficient level of remuneration to get the job done properly.

Choose one’s clients carefully; the combination of a client who displays a parsimonious approach to payment but equally an enthusiasm for imaginative alternative solutions is fraught with risk.

If work is hard to find, do not compromise by engaging in fee cannibalisation. The building surveying profession does too much of this and, in doing so, lowers the charge-out rate floor. As an aside, 10 years ago I used to do a lot of prosecution work for councils, other law firms began to cannibalise rates and it got to the point where I refused to drop my rates so I changed direction and largely vacated the prosecution arena. The market dictated that too little was being charged for too much risk. Conveyancing, likewise, 20 years ago was a lucrative area of practice for lawyers, until fee cannibalisation began. It would now cost less to do a conveyance than it did 10 years ago. Little wonder that conveyancers are regularly on the receiving end of law suits. The price they charge is not remotely commensurate with the time and precision that is required for the task. Price has to marry up with risk, if it does not, it will not bode well.

Use well-known fire engineering verification methods when it comes round to fire modelling. Fire engineering is the last place to “push the envelope”, the last place to try something novel and new. Even in the alternative solution paradigm apply conservatism.

By Adj Professor Kim Lovegrove MSE, RML, Senior Lawyer, Lovegrove & Cotton – Construction and Planning Lawyers

[1] The Warren Centre for Advanced Engineering Ltd, “Professional Performance, Innovation and Risk in Australian Engineering Practice”, Sydney University NSW 2006 Australia.

[2] The Warren Centre for Advanced Engineering Ltd, “Professional Performance, Innovation and Risk in Australian Engineering Practice”, Sydney University NSW 2006 Australia.