Brown Falconer Group Pty Ltd v South Parklands Hockey & Tennis Centre Inc - [2005] SASC 75

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
BROWN FALCONER GROUP PTY LTD & ANOR v SOUTH PARKLANDS HOCKEY & TENNIS CENTRE INC & ORS
Judgment of The Full Court
(The Honourable Justice Duggan, The Honourable Justice Besanko and The Honourable Justice White)
9 March 2005
DAMAGES - MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT
DAMAGES - MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR TORT - MEASURE OF DAMAGES
Appeal against assessment of damages - negligent advice in construction of recreation facilities - claim for damages in contract and tort against first appellant and in tort against second appellant - liability admitted - damages awarded by trial judge on basis of the cost of rectification - whether trial judge assessed damages appropriately - respondents would not have proceeded if correct advice had been given - wasted expenditure is the appropriate measure of damages - appeal allowed - award of damages made by trial judge set aside - appellants to pay respondents' damages in sum of $452,608.
Haines v Bendall (1991) 172 CLR 60; Bellgrove v Eldridge (1954) 90 CLR 613; Bevan Investments Ltd v Blackhall & Struthers (No 2) [1978] 2 NZLR 97; Gates v The City Mutual Life Assurance Society Limited (1986) 160 CLR 1; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, applied.
Beregold Pty Ltd v Mitsopoulos (1992) 15 BCL 290; Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313, distinguished.
Auburn Municipal Council v A.R.C. Engineering Pty Ltd [1973] 1 NSWLR 513, discussed.

BROWN FALCONER GROUP PTY LTD & ANOR v SOUTH PARKLANDS HOCKEY & TENNIS CENTRE INC & ORS
[2005] SASC 75
Full Court: Duggan, Besanko and White JJ

DUGGAN J. This appeal arises out of a claim for damages by the respondents against the appellants for negligent advice in relation to the construction of recreational facilities in the South Parklands of Adelaide. The appellants admitted liability and damages were assessed by a judge of this court. The appeal is against that assessment.
In 1992, the second respondent, Pulteney Grammar School (“the School”) and the third respondent, Adelaide Hockey Club Incorporated (“the Hockey Club”) used recreational facilities in the South Parklands pursuant to arrangements with the Adelaide City Council. The School had the use of tennis courts and a hockey field. The Hockey Club also had the use of a hockey field.
The facilities were of poor quality and, in 1992, the School and the Hockey Club had discussions with a third organisation, the Veterans Tennis Association Inc. (“the Tennis Club”) which did not operate its own sporting facilities, but conducted a tennis competition. It was decided that these organisations would enter into a joint venture and form an association to be called “The South Parklands Hockey and Tennis Centre Inc.” to conduct a new facility to be used by all three. In due course, the association was incorporated and it is the first respondent in the proceedings.
The respondents formulated a project to construct facilities suitable for Hockey and Tennis. They were summarised by the trial judge as follows:
“1the hockey pitch and tennis courts, which included fencing and flood-lighting of the playing surface;
2a pavilion or spectator stand which was intended to be a roofed spectator stand of modest size with a canteen, changing rooms, toilet facilities, storage rooms and other facilities beneath; and
3an extension of the South Park Bowling Club premises to provide additional change rooms.”
The playing surface was to consist of synthetic material. The proposed site included the area on which the School’s bitumen tennis courts were located. The project contemplated replacing the old tennis courts with a new synthetic playing surface which could be used both as a hockey pitch and as twelve tennis courts. Ancillary facilities included floodlighting, change rooms, storage facilities and a canteen.
After extensive negotiations between the respondents concerning the nature of the facilities and the necessary finance to construct them it was decided to appoint the first appellant as the architect for the project. In due course, the Adelaide City Council granted development consent and building approval.
The construction of the facilities was let to Premier Sport Surfaces Pty Ltd which was not a party to these proceedings.
The quotation for the cost of the pavilion was $83,930 and a further $601,404 was quoted as the cost of the construction of the pitch. It was decided not to proceed with the proposed extension to the South Park Bowling Club. The respondents were given a Commonwealth Government Grant of $237,000 for the project, but that was conditional upon the funds for the project being spent by 20 May 1995. The remainder of the costs were contributed by the School, the Tennis Club and the Hockey Club in equal shares.
Construction work on the project commenced in the latter part of 1994. The site for the pitch was excavated and a base of crushed dolomite or similar material was laid. The base was approximately 150 millimetres thick. A shock-pad was then laid on top of the base and the playing surface was constructed on top of that. Prior to this work being undertaken the second appellant was engaged by the first appellant to be the civil engineer for the project. Included in the duties of the civil engineer were an examination of the state of the soils at the site and the preparation of plans for the construction of the pitch.
The trial judge found that the respondents specified a flat even surface to a specification required for international hockey matches. He said the playing surface was constructed to specification, but he also found that a few months after the pitch had been constructed the playing surface became uneven due to soil movements below the playing surface. According to the findings, the playing surface was not suitable for its intended purpose.
The respondents commenced proceedings against the first and second appellants claiming damages in contract and tort against the first appellant and in tort against the second appellant. The first appellant admitted liability in contract to the second, third and fourth respondents and in negligence to all respondents. The second appellant admitted liability in negligence to all respondents. The respondents discontinued their action in negligence against another defendant to the action which had been engaged by the second appellant to conduct a soil survey of the site.
I have referred to the trial judge’s finding that soil movements resulted in distortions to the playing surface. He said:
“The plaintiffs took possession in about March 1995. The playing surface remained even and level for a short time. However, winter rains in June 1995 caused soil movement below the pitch causing the pitch to heave, resulting in a substantial deformation of the playing surface. The effect of the movement was first noticed following rains in late June 1995. On Sunday, 24 June 1995 Professor Spencer of the Hockey Club telephoned Mr Carroll to inform him of significant movement in the playing surface. The movement had occurred at a number of places causing rise and fall at different points of the surface. The movements had caused water to form in large pools and the pools clearly demonstrated the extent of the deformation at different points in the playing surface and that the deformations had occurred over the greater part of the playing surface. The exhibits include photographs taken on 24 June 1995 and on other occasions after rainfall. Those photographs graphically illustrate the extent of movement and the resultant pooling of water.
The deformations in the playing surface are extensive and can be readily noticed by an ordinary visual inspection. Variations in level occur over the whole of the playing surface. Generally speaking, the area of the whole of the pitch has risen to an average of 50mm and about one third of the pitch has risen more than 100mm. At different points in the playing surface there are rapid changes, that is to say, there are areas where there is quite a steep difference in levels. The surface is distorted. The heave of the playing surface is most pronounced in the south-east corner of the pitch, where several large pine trees had been removed to make way for the pitch. Because trees are a desiccant, removal of the trees would be likely to result in an increase in moisture content after the pitch had been put in place. The variations in the surface are readily apparent after rain has fallen on the surface when water forms large pools on the surface.”
The trial judge continued:
“I find that the surface is extremely deformed and constitutes a substantial departure from the standard of playing surface specified by the plaintiffs. The variations cause such interference with the ordinary movement of either a hockey or tennis ball that the surface is unsuitable for competition in district hockey as well as for tennis competition. In its present state the surface is suitable for a little more than social tennis or hockey. I find that the playing surface is wholly unsuited for the specified purpose. The plaintiffs did not get the pitch they had specified and had contracted to have constructed for them.”
Experts called by the appellants and the respondents agreed that the site is in an area known for highly reactive clay soils. It was necessary to take this into account when designing the pitch and it became clear from the evidence that inadequate advice was given by the appellants in this respect. The method of construction based on that advice was insufficient to counteract problems inherent in the site and the pitch developed deformities as a result.
The action did not come on for trial until November 2002. The trial judge noted that the geo-technical experts called at the trial agreed that by that time the soils below the surface of the site were approaching equilibrium which meant that the moisture content was nearing the point at which it would remain constant. This meant that, in the event that the pitch was re-constructed, the excavation and preparation of the base would not need to be as elaborate as would have been the case at the time of the original construction.
The trial judge then proceeded to find that the most appropriate measure of damages was the cost of necessary and reasonable work to rectify the defects. This would involve reconstructing the pitch. Whether or not this was the appropriate approach to the assessment of damages is the major issue on appeal.
Before dealing with the arguments on this issue, it is appropriate to explain the further steps by which the trial judge calculated the award of damages.
He proceeded on the basis that the reconstructed pitch would need to be 500 millimetres thick. The cost of reconstruction was then calculated at $713,415. However, an adjustment in the appellants’ favour had to be made by reason of the fact that the replacement pitch would be of a higher standard so that the respondents would have to contribute to the cost of providing a more substantial base. This cost was calculated at $189,691. Accordingly, the appellants were required to pay $523,724 towards the cost of the reconstructed pitch and playing surfaces.
The total amount of damages before interest added was calculated as follows:
“Cost of Rectification  523,724.00
Extra cost of shock pad and surface           20,500.00
Survey costs   17,942.95
Hire of alternative facilities
Hockey   10,000.00
Tennis   20,600.00
General damages   30,000.00
$622,766.95”
I have said that the respondents claimed damages against the first appellant in tort and for breach of contract and that the action against the second appellant was in tort. The case against each appellant was that there had been a breach of the duty to exercise reasonable care and skill in giving advice.
Each appellant acknowledged breaching that duty.
The aim of compensatory damages in actions for tort and contract “is that the injured party should receive compensation in a sum which , so far as money can do, will put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committed”: Haines v Bendall (1991) 172 CLR 60 at 63.
The precise method by which the injured party is to be compensated in accordance with this general principle will depend upon the circumstances of the particular case. This is illustrated in Bellgrove v Eldridge (1954) 90 CLR 613. The appellant, a builder, contracted with the respondent to build her a house. In the course of construction the appellant departed to a substantial degree from the specifications and this resulted in serious instability in the building.
The High Court rejected a submission that, in these circumstances, the proper measure of damages was the difference between the value of the building as it stood after completion and its value if erected in accordance with the specifications.
Dixon CJ, Webb and Taylor JJ said at 617:
“It is true that a difference in the values indicated may, in one sense, represent the respondent’s financial loss. But it is not in any real sense so represented. In assessing damages in cases which are concerned with the sale of goods the measure, prima facie, to be applied where defective goods have been tendered and accepted, is the difference between the value of the goods at the time of delivery and the value they would have had if they had conformed to the contract. But in such cases the plaintiff sues for damages for a breach of warranty with respect to marketable commodities and this is in no real sense the position in cases such as the present. In the present case, the respondent was entitled to have a building erected upon her land in accordance with the contract and the plans and specifications which formed part of it, and her damage is the loss which she has sustained by the failure of the appellant to perform his obligation to her. This loss cannot be measured by comparing the value of the building which has been erected with the value it would have borne if erected in accordance with the contract; her loss can, prima facie, be measured only by ascertaining the amount required to rectify the defects complained of and so give to her the equivalent of a building on her land which is substantially in accordance with the contract.”
Their Honours continued at 617:
“Is the owner in these circumstances without a remedy? In our opinion he is not; he is entitled to the reasonable cost of rectifying the departure or defect so far as that is possible. Subject to a qualification to which we shall refer presently the rule is, we think, correctly stated in Hudson on Building Contracts, 7^th ed. (1946) p 343. ‘The measure of the damages recoverable by the building owner for the breach of a building contract is, it is submitted, the difference between the contract price of the work or building contracted for and the cost of making the work or building conform to the contract, with the addition, in most cases, of the amount of profits or earnings lost by the breach.’ Ample support for this proposition is to be found in Thornton v Place (1832) 1 M & Rob 218 [174 ER 74]; Chapel v Hickes (1833) 2 C & M 214 [149 ER 738] and H Dakin & Co Ltd v Lee (1916) 1 KB 566. (See also Pearson-Burleigh Ltd v Pioneer Grain Co. (1933) 1 DLR 714 and cf. Forrest v Scottish County Investment Co. Ltd (1915) SC 115 and Hardwick v Lincoln (1946) NZLR 309. But the work necessary to remedy defects in a building and so produce conformity with the plans and specifications may, and frequently will, require the removal or demolition of some part of the structure. And it is obvious that the necessary remedial work may call for the removal or demolition of a more or less substantial part of the building. Indeed – and such was held to be the position in the present case – there may well be cases where the only practicable method of producing conformity with plans and specifications is by demolishing the whole of the building and erecting another in its place. In none of these cases is anything more done than that work which is required to achieve conformity and the cost of the work, whether it be necessary to replace only a small part, or a substantial part, or indeed, the whole of the building is, subject to the qualification which we have already mentioned and to which we shall refer, together with any appropriate consequential damages, the extent of the building owner’s loss.”
The qualification referred to by the court is that the work undertaken must be not only necessary to ensure conformity with the contract, but it must also be a reasonable course to adopt. This is a question of fact to be decided in accordance with the particular circumstances of each case.
The approach identified in Bellgrove v Eldridge and relied upon by the respondents in this case has been applied constantly in building cases and those cases have included not only actions against builders, but also cases in which the breach of duty has occurred by reason of the failure to provide proper advice by professionals such as engineers.
However, the appellants submitted that this approach was inappropriate in the present case. They relied upon the decision of the New South Wales Court of Appeal in Auburn Municipal Council v A.R.C. Engineering Pty Ltd [1973] 1 NSWLR 513. In that case the defendant, an engineering company, contracted to carry out design work for the plaintiff in relation to the construction of a works depot. The design work was performed negligently. The plaintiff, acting on independent advice, proposed to demolish the structure and start afresh with the new design.
Hutley JA held that the proper measure of damages for breach of contract depended upon the character of the contract. He distinguished a contract to exercise professional skill in designing a structure from a contract to achieve a specific result. He continued at 531:
“It is true that in many cases the measure of damages for failure to exercise professional skill can be reached by inquiring what are the costs involved in getting to the desired result. Thus, if the results of the careless failure to specify a beam of a certain strength can be rectified by the insertion of a replacement beam, those costs are the measure of damages in that it is in contemplation of the parties to the contract that the consequences of breach of contract will within reason be made good.
However, the fact that in a number of cases the same methods of proof may be resorted to does not mean that in the two cases there is an identical measure of damages. The two measures of damage diverge where it is necessary to destroy the structure erected and replace it by another structure. The designer cannot be called upon to do anything more than exercise his skill to produce a correct design and pay damages for the consequence of his neglect. He cannot be called upon to give the client the structure designed.”
Referring to the trial judge’s reliance on Bellgrove v Eldridge, Hutley JA said at [532]:
“If his Honour had found that it was possible in this particular case to rectify the buildings, the passage which he quoted from Bellgrove v Eldridge might have been applicable, but he proceeded to find that the only method of dealing with the problem was to demolish all the structures and start anew. Once there had to be a new design and a new structure, the effects of the original breach in failing to show proper skill in design are exhausted. The further consequences have become too remote.”

Hutley JA concluded at 535:
“The loss which the respondent experienced qua the appellant was not the loss of the building which it contracted to get, but the loss of its money in a futile enterprise.”
Hardie JA was in substantial agreement with the views of Hutley JA and could see no basis for applying to the case a measure of damages for total breach approved by the High Court in Bellgrove v Eldridge.
The decision in the Auburn case was subjected to careful analysis by the New Zealand Court of Appeal in Bevan Investments Ltd v Blackhall & Struthers (No 2) [1978] 2 NZLR 97 where the defendant architect was employed by the plaintiff to design a recreation centre. The architect employed a structural engineer to assist in the design. Structural defects resulted from the design. It was held that the agreement between the plaintiff and the architect included an implied term that reasonable care would be used in the design and supervision of construction. The plaintiff decided for mainly financial reasons not to complete the building after the structural faults were discovered.
The Court of Appeal rejected the argument that Auburn’s case should be followed so as to lead to the result that the plaintiff’s remedy should be restricted to wasted expenditure. Richmond P held (at 108) that, despite the views expressed in the Auburn case, he could see no reason why –
“… the general rule that a plaintiff is entitled to be placed in the same position as he would have been in had the contract been performed should not provide the starting point in the case of an action for damages brought against an engineer for failing to carry out his implied contractual undertaking to use proper care and skill in the design and supervision of a building.” (Original emphasis)
After reviewing these authorities, the trial judge in the present case said:
“The decision in Auburn was not followed in Bevan Investments Ltd v Blackhall and Struthers (no 2) [1978] 2 NZLR 97 at 108-109 where the correct approach is explained. Subsequent decisions in this country have not followed the reasoning of Hutley JA but, instead, have applied the principle that, generally speaking, the measure of damages for defective advice is the cost of making good the defective work: Beregold Pty Ltd v Mitsopoulos (1992) 15 BCL 290 and Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313. Hutley JA himself acknowledged this principle in Auburn at 534-535. In Hyder Consulting at [19] Meagher JA described the cost of rectification as an impeccable method of calculating the loss and at [99] Giles JA said that the cost of rectification should ordinarily provide the basis for damages. The decision in Auburn should not, I think, be regarded as a correct statement of the principles for assessing the damages payable for negligent design. Instead, it should be regarded as an example of the principle in Bellgrove v Eldridge, that is to say, it is an example of the principle that, where it is not reasonable to require the design engineer to pay the cost of a replacement building, the measure of damages is the wasted expenditure and the costs of making good the land.”
After finding that the removal of the current pitch and the construction of a new pitch was a necessary and reasonable remedy, the trial judge proceeded to assess damages on this basis.
However, in the Bevan Investments case Richmond P did identify one distinction between an action in contract against a builder and an action for damages in contract against a professional adviser such as an engineer or architect which, in my view, is of importance in the present case. He said at 108:
“It must be accepted however that usually a plaintiff in an action for damages for breach of contract against a builder is in an easier position, so far as the onus of proof is concerned, than a plaintiff claiming damages for breach of contract against an engineer. In the former case the plaintiff need only prove the builder’s contractual obligation to erect a building in accordance with the contract. If the builder has failed to do so then prima facie the plaintiff is entitled to be put, in terms of money, into the same position as he would have been in if the builder had duly completed the building. A plaintiff who is suing an engineer, on the other hand, must establish what his position would have been if the engineer had in fact exercised proper care and skill. There could be a case, as indeed was the position in the Auburn case, where on the probabilities the plaintiff would have proceeded to let a contract, on the basis of a properly prepared design, at a cost which would have been substantially higher than the contract price for the building erected in accordance with a defective design. This higher cost factor would be automatically taken care of when determining the amount of money required to put the plaintiff in the same position as he would have been in if he had let a contract on a design prepared with proper skill and diligence by the engineer. If it appeared, on the other hand, that proper care and skill by the engineer would have led to a situation where the owner would have completely abandoned all idea of building then the approach which I think to be the proper one would lead to the same result as found favour with Hutley JA.” (Emphasis added)
Later in his reasons he said at 109:
“For the foregoing reasons I reject Mr Clayton’s submission that as a matter of law the basic liability of Mr Struthers [the structural engineer] was merely to indemnify Bevan Investments against moneys uselessly expended on a futile enterprise. However, it must be accepted that if Bevan Investments wished to obtain damages calculated by reference to the correct principles applicable in claims for breach of contract then it carried the onus of establishing, at least on the probabilities, that if Mr Struthers had used proper care and skill it would have proceeded with the erection of a building in accordance with his plans. Proof to that effect would in turn involve a question as to the probable price of a properly designed building, for that would be relevant to the question whether Mr Bevan would have gone ahead with the project and also to the quantum of any damages.” (Emphasis added)
Casey J agreed with Richmond P and said at 129:
“Where the failure to get the contemplated building is due to the default of the architect or engineer whose task was to design or supervise it, I can see no reason why he should be treated any differently from a builder, when it comes to selecting the fairest method to compensate the owner. The Court in Bellgrove v Eldridge spoke of the owner being entitled to have a building erected in conformity with her contract, but I do not take this reference to contractual obligation as excluding from the approach to damages the owner’s reasonable expectation of a building, in conformity with what the parties contemplated in an architectural or engineering contract. I am therefore of the view that the costs of such reinstatement reasonably undertaken by the owner should be the prima facie measure of damages in this contract, once it is established that the owner would have proceeded with a properly designed building, meeting the additional costs of the alterations.” (Emphasis added)
The relevance of determining what the plaintiff would have done if the contract to provide proper advice had been carried out or, in the case of tort, the negligent advice had not been given, is illustrated by comments made in two further authorities. The first is a misrepresentation case which, in my view, is analogous to the present case because of the common element of reliance.
In Gates v The City Mutual Life Assurance Society Limited (1986) 160 CLR 1 at 13 Mason, Wilson and Dawson JJ said:
“Because the object of damages in torts is to place the plaintiff in the position in which he would have been but for the commission of the tort, it is necessary to determine what the plaintiff would have done had he not relied on the representation. If that reliance has deprived him of the opportunity of entering into a different contract for the purchase of goods on which he would have made a profit then he may recover that profit on the footing that it is part of the loss which he has suffered in consequence of altering his position under the inducement of the representation. This may well be so if the plaintiff can establish that he could and would have entered into the different contract and that it would have yielded the benefit claimed: cf. Esso Petroleum Co Ltd v Mardon [1976] QB 801 at pp 820-821, 828-829; Doyle v Olby (Ironmongers) Ltd [1969] 2 QB at p 167. The lost benefit is referable to opportunities foregone by reason of reliance on the misrepresentation. In this respect the measure of damages in tort begins to resemble the expectation element in the measure of damages in contract save that it is for the plaintiff to establish that he could and would have entered into the different contract.”
In Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 80 Mason CJ and Dawson J referred to the statement of Parke B in Robinson v Harman (1848) 1 Ex. 850 at 855 “that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed”. Later their Honours said at 81:
“A further example of the application of Robinson v Harman which will result in a plaintiff being entitled to claim damages for wasted expenditure is in a contract for services such as that between a solicitor and a client. Where a solicitor has breached his or her contractual duty of care, the measure of damages to which a client will be entitled will be such an amount as would put the client in the position he or she would have been in had the contract of retainer been performed without negligence. In cases where, had non-negligent advice been given, the client would not have entered into a subsequent transaction, for example a purchase of real property, then, in conformity with Robinson v Harman, the client will be entitled to recover as damages expenditure wasted on account of the negligent advice, less anything subsequently recovered and given reasonable acts of mitigation Hayes v Dodd [1990] 2 All ER 815 at p 820 per Staughton LJ. The amount of wasted expenditure will be the appropriate measure of damages in such a situation because, it having been established that the client would not have entered into the subsequent contract if proper advice had been given, it is not sensible to speak of loss of profits.”
Although the trial judge adopted the criticisms of Auburn’s case which were implied in the Bevan Investments decision, he did not go on to discuss the qualification referred to by Richmond P that, if proper advice had been given which would have led to the owner abandoning the project, then it would have been appropriate to proceed on the “wasted expenditure” approach which found favour with Hutley JA.
The cases of Beregold Pty Ltd v Mitsopoulos and Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd referred to in the passage from the trial judge’s reasons as examples of the application of the cost of rectification method of assessment were not concerned with whether the owner would have gone ahead with the contract if correct advice had been given. In Beregold’s case the defendant engineer had designed a concrete slab which was too thin for its purpose. Cole J accepted that the remedy for this defect was to add an additional layer to the slab. The engineer was liable for the cost of this structural work. The Hyder Consulting case was not an advice case. The negligence of the architect consisted of a failure to pass on to an engineer information which was relevant to the load bearing capacity of a paved area.
Neither case refers to advice being given to the plaintiff which was relevant to the question as to whether the project would go ahead. The cost of rectification in each case was the obvious basis for the assessment of damages.
The authorities demonstrate that, in applying the compensatory principle referred to in Robinson v Harman and Haines v Bendall in the context of advice cases, the focus is on placing the plaintiff in the position he or she would have been in if the correct advice had been given. That issue cannot be resolved without reference to the likely consequences of that advice, in other words what the plaintiff would have done in response to the advice. If the project would not have gone ahead, the wasted expenditure in pursuing it on incorrect advice is the appropriate measure of damages. To assess damages on a rectification basis in those cases where the project would not have gone ahead ignores the principle that the plaintiff is to be placed in the position he or she would have been in if the correct advice had been given.
I respectfully agree with the view expressed by the New Zealand Court of Appeal in holding that the approach to the assessment of damages applied in Bellgrove v Eldridge can be applied not only to a builder who contracts to erect a building in accordance with a contact, but also to an architect or engineer who is under a duty to exercise reasonable care and skill in designing or advising on the project. However, the court made it clear that the appropriateness in these circumstances of an assessment of damages based on total replacement would be subject to proof that the owner would have gone ahead with the project if properly advised.
Before dealing further with this aspect it is appropriate to say something about the contract between the first appellant and the respondents. The first appellant was appointed pursuant to a letter from the first respondent’s administrator dated 1 June 1994 to prepare a tender and manage the construction phase of the project. Its duties as outlined in the letter were to include, but not be limited to:
“a)Negotiations with Adelaide City Council for planning and construction approval.
b)Surveyors fees for the subject area and environs whose drainage may be affected.
c)Civil and Structural and Hydraulic works.
d)Electrical engineering associated with illumination of the pitch and general power and lighting for the new structure.
e)Mechanical engineering advice for relocation of existing refrigeration equipment of the South Park Bowling Club premises. (New)
f)Full Architectural service including design, documentation and supervision of the Project and coordination of all associated disciplines.
g)Formulation of the tender for construction of the Project.”
Paragraph 4 of the letter states:
“Consortium Members Requirements
To ensure that the requirements of each of the consortium members are incorporated in the detailed planning procedure and the subsequent Request for Tender, the Manager is to incorporate in the planning and tender process the Specific Requirements of each member, draft outlines of which accompany as Annexures 1, 2 and 3 to this letter agreement.
Certain of these requirements will require discussion both with the Manager and other members of the consortium to obtain final agreement and each member is to approve the finalised Specific Requirements that will be inserted in the Construction Agreement for tender purpose prior to the tender being despatched.”
The specific requirements of the Tennis Club are not directly relevant for present purposes and the School did not submit any particular requirements by way of annexures to the letter.
Although the evidence is somewhat vague, it would appear that two documents were handed by the Hockey Association to a representative of the first appellant. The first was a paper from a seminar entitled “Field Design” obtained by some members of the Hockey Association at a seminar which they attended. The second was a document entitled “Handbook of Requirements For Synthetic Hockey Pitches” published by the International Hockey Federation.
In my view, the first respondent contracted to design a structure which took into account the requirements which were broadly expressed in these documents. There was an implied undertaking to use reasonable care and skill in so doing. In this respect the first respondent provided written advice in the form of a design. This distinguishes the first respondent’s role from that of a builder who is under a “contractual obligation to erect a building in accordance with the contract” (Bevan Investments at 108). As was pointed out in Bevan Investments, this does not prevent the court from assessing damages in accordance with Bellgrove v Eldridge, but it does make relevant the question as to whether the owner would have proceeded with the project if proper advice had been given. This, in turn is relevant to the proper method of assessment of damages.
It is also clear that the second respondent’s duty was in tort alone and the question as to whether the owner would have proceeded if it had been given correct advice by the second respondent is again relevant to the method of assessment of damages payable by that respondent.
The trial judge found that the respondents would not have gone ahead with the project on this site if the correct advice had been given. He said at [99]:
“In short, the plaintiffs have got something altogether different from that which they specified and contracted to have provided to them. Although the playing surface is not entirely useless, it is of an extremely low standard and should be replaced. The soil conditions are now suitable for a replacement pitch. It is entirely reasonable for the plaintiffs to seek to replace it provided that the costs of doing so are not unreasonable. I find that, if properly advised, they would not have constructed a pitch on this site. However, that is only one part of the question. The other part is whether it is financially reasonable to rectify the pitch as proposed.”
His Honour said at [135] that the appellants caused the respondents to build a pitch in an entirely unsuitable location. He added that the respondents were denied the opportunity to investigate a more suitable site and explore other means of funding on that alternative site.
There is ample evidence from the experts who were called to support these findings. It is unnecessary to canvass that evidence in detail, but as at 1994 the cost of constructing the desired pitch on this site would have been at least $1m. This was conceded by Mr Keith, for the respondents. The effect of the evidence from the respondents is that it was, at the very least, highly unlikely that they would have proceeded with the project for the construction on this site if they had been advised of the difficulties involved and the finance necessary to overcome them.
The trial judge accepted the evidence of the witness Finlay as to the standard and method of construction which should be adopted if a new pitch is to be installed on the site. As has been pointed out, the cost of constructing a pitch to the desired standard on the site has been reduced substantially because of the stabilisation of the soil to a significant degree.
His Honour said that it was irrelevant to enquire whether the respondents had the financial capacity in 1994 to pay for a pitch constructed to the standard recommended by Mr Finlay. Nevertheless, he proceeded to undertake this exercise and reached the conclusion that the extra $150,000 which would now be necessary might have been within the fundraising capabilities of the respondents. However, this exercise was conducted on the basis of Mr Finlay’s recommendations in relation to the site in its present state and the estimated costs of construction based on those recommendations. The exercise was not for the purpose of determining whether the respondents could have funded the far more expensive project which would have been required if an adequate pitch was installed on the site in 1994.

In my view, it follows from the application of the authorities to which I have referred to the evidence in the case that it was inappropriate to assess damages on the basis of the reconstruction of the pitch. If they had been given the correct advice the respondents would not have gone ahead with this particular project. The most that can be said is that they might have investigated going to some other site and making a fresh start. The appropriate measure of damages in these circumstances is the wasted expenditure on a project which they would not have embarked upon if they had received correct advice.
The respondents’ case for damages was not put forward at trial or on appeal on the basis of wasted expenditure. However, the evidence relevant to such a claim was before the court and the trial judge tested his assessment of the amount to be awarded by reference to the wasted expenditure method: reasons at [121]. Mr Trim QC, for the appellants, agreed that if there was a claim for damages, it was a claim for wasted expenditure. However, he pointed out that the claim was made on another basis and that, in any event, the expenditure was not wasted because of the continuous use of the facility by the respondents after it had been installed. In his submission only nominal damages should have been awarded.
The assessment of damages based on wasted expenditure is a straightforward exercise in the present case. The potential components of such an award were in evidence at the trial. The only controversial aspect is whether the respondents’ use of the facility is a matter to be taken into account. This was an issue before the trial judge, albeit in a somewhat different context. In the view that I take of the matter it is not unfair at this stage to consider whether the respondents should be compensated on account of wasted expenditure.
The commencement point for an assessment on this basis is the costs of construction thrown away. The respondents paid $601,404 for the construction of the playing surface, lighting and other facilities. The amount allowed for lighting was $113,223. It would appear that it is the intention of the respondents to construct another playing surface on the same site. There was no complaint about the construction of the lighting facility and no reason why it should not be utilised in the future. The same can be said of the supply and erection of fencing ($47,515), tennis nets ($3,000) and hockey nets ($3,000). The cost of construction after making these deductions is $434,666.
To this must be added survey costs of $17,942. This expenditure was required in order to determine the extent of the damage and to consider the appropriateness of remedial work.
The total wasted expenditure on these calculations is $452,608.
Wasted expenditure would not include the cost of hiring facilities while any remedial work was being undertaken; nor would an award of general damages be appropriate.
On the other hand, I do not think that any reduction should be made for the past use of the facility. The standard of the facility was a far cry from the standard which had been stipulated. The playing surface remained even and level for only a short time. The trial judge found that the deformations in the playing surface were extensive. Players of hockey and tennis have to contend with erratic ball movement. The deformations have resulted in an increased risk of injury to players.
In the course of his reasons the trial judge said at [50]:
“The evidence was, and I find, that in hockey the run of the ball is a very important aspect of the game particularly with more skilled players. The surface is now not suitable for premier league competition in the district competition so that, not only is it not possible to play those games on this pitch, but also the Hockey Club cannot allow its facilities to be used for inter-state or international games or even by players practising for inter-state or international games. On 21 April 1998, Hockey SA wrote to the Hockey Club informing it of complaints it had received concerning the unevenness of the surface and asking the Hockey Club to inform it as to progress of these proceedings. I find that concerns about the uneven surface have not been confined to the plaintiffs.
For tennis, the variations in surface cause an erratic and irregular bounce of the ball. The ball not only bounces either high or low in some locations but in others it bounces either left or right instead of coming relatively straight on towards the players. In addition, the variations in surface level create a risk of injury to players running to play a stroke. On 31 July 2000, Tennis SA wrote to the Tennis Club. It referred to complaints it had received as to the uneven surface and stated that it would not recommend the facility for competitions while the pitch remained in that condition.”
In the light of these findings the trial judge held that, in its present state, the surface is unsuitable for little more than social tennis or hockey. He found that the playing surface is wholly unsuited for its specified purpose.
In the circumstances I do not think any reduction should be made in the award of damages for the respondents’ use of the defective playing field (cf. Roman Catholic Trusts Corporation v Van Driel Ltd & Ors [2001] VSC 310 (28 August 2001) at [264] – [266]).
I have referred to the fact that the respondents were the recipients of a Commonwealth Government Grant of $237,000 to be used for the purposes of the project. It is apparent from the terms of the grant (D1 AB 8/906) that the funding was to be paid direct to the respondents. The fact that this was done is supported by correspondence from the Department of the Environment, Sport and Territories to the respondents’ representative dated 20 February 1995 (P24 AB 7/596) and the financial statements of the first respondent (D1 AB 8/888). It follows, therefore, that the monies comprising the grant became the property of the respondents to be spent by them in accordance with the terms of the grant. There is no reason why the payment of these monies by the respondents to the contractor should not be considered as part of the wasted expenditure by the respondents.
It follows that I would allow the appeal and set aside the award of damages made by the trial judge. In lieu thereof I would order the appellants to pay the respondents damages in the sum of $452,608.
I would hear the parties as to interest and costs.
BESANKO J. I agree with the orders proposed by Duggan J and with his reasons.
WHITE J. I agree with the orders proposed by Duggan J and with his reasons.