Civilstruct & Anor v Lyons

[2000] HCATrans 471

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P5 of 2000

B e t w e e n -

CIVILSTRUCT PTY LTD (TRADING AS ANDREOTTA CARDENOSA CONSULTING ENGINEERS)

First Applicant

ALBERT ANDREOTTA

Second Applicant

and

HENRY MICHAEL LYONS

First Respondent

PAMELA FRANCES LYONS

Second Respondent

JANDON CONSTRUCTIONS (A FIRM)

Third Respondent

Application for special leave to appeal

GLEESON CJ
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON FRIDAY, 27 OCTOBER 2000, AT 10.55 AM

Copyright in the High Court of Australia

__________________

MR M.C. GOLDBLATT:   May it please your Honour, I appear on behalf of the applicants.  (instructed by Freehills)

MR T. LAMPROPOULOS:   May it please the court, I appear on behalf of the respondents.  (instructed by Gibson & Gibson)

GLEESON CJ:   Yes, Mr Goldblatt.

MR GOLDBLATT:   Your Honours, it is submitted there are two issues which merit the grant of special leave in this matter.  Firstly, there is the issue of the measure of damages for torts affecting land where rectification work may result in a building that is less valuable than it was prior to the wrongful act.  There is the second issue which is put in the summary of argument on the basis of a legal point, in my submission, properly put as a procedural regularity issue in relation to the different views taken by the majority and the minority in the Full Court in relation to a relatively narrow question of fact.

GLEESON CJ:   I was going to offer for your comment the suggestion that the division of opinion in the Full Court appears, at least at first sight, to have turned upon the approach they took to a question of fact, rather than on any difference of legal opinion.

MR GOLDBLATT:   Yes.  Well, with respect, his Honour Mr Justice Wallwork dealt with it purely on a factual basis, but on a careful analysis of his Honour Justice White’s judgment, in my submission, he probably was not that far apart in relation to the facts, but it is as a result of applying a contractual measure of damages that he erred in the final result.  If I might briefly demonstrate that to your Honour by referring to page 72 ‑ ‑ ‑

GLEESON CJ:   Let me put it more precisely, Mr Goldblatt.  I think your task is to demonstrate to us that if we took on this appeal, we would not simply be resolving a question of fact.

MR GOLDBLATT:   Yes, that is my submission, that your Honours would not need to descend into the factual arena because if the majority had correctly applied the law in relation to the measure of damages in tort as opposed to contract, they would have come to the right result on the same facts.

At page 72, to deal with that point, your Honours, of this question of whether your Honours would need to decide a question of fact, page 72, the decision of his Honour Mr Justice White, I would refer your Honours to between C and D where his Honour is reflecting the evidence of the expert, Mr Glick, and he says:

Well, it was just discussed that probably the essential thing is to minimise moisture movement in that soil.  I firmly believe that it has taken 8 years or so, whatever it is, to get to its current regime and then that varies slightly from summer to winter.  Now, it might of its own accord remain like that.  There are precautions one can take to help maintain that level of equilibrium.

That was a vital question because it was common cause that if you can stabilise the soil, then you can rectify –

So once you have removed or virtually minimised the cause of a large number of these cracks having originally occurred and subsequently moving slightly, then that’s why I say you can repair them –

and your Honours will, of course, bear in mind that there was no evidence called by the defendant.  There is no credibility issue here.  There were only experts called by the plaintiffs, by the respondents.

CALLINAN J:   In the judgment of Justice Wheeler at page 74, particularly at about paragraph 92, the second‑last sentence, one of the experts said that such a result, stabilisation, was possible, but did not put it any higher than that.

MR GOLDBLATT:   Well, your Honour, with respect, if one goes to, for example, page 97, or, for example, at page 48, sorry ‑ I beg your Honours’ pardon ‑ of the application book, paragraph D, that was just one aspect.  Your Honours will see at paragraph D:

In cross‑examination Mr Van der Meer –

he was the expert for the plaintiff –

agreed that the suggested drain and membrane was not an extremely doubtful remedy.  It was likely to succeed.

Then, again, at 51D, paragraph 26:

In my opinion it is apparent from what is set out above, that Mr Glick also thought that stabilisation by way of the trench and associated work would be very likely to work.

What is said at page 72 in that evidence reflected in the judgment of his Honour Mr Justice White is that you can stabilise and you can repair, but what his Honour then did, if your Honours would turn over the page to page 73, Mr Glick says, between A and B, he says does not believe “the roof is going to collapse”, but you should tie it down.  Then his Honour comments on this evidence at paragraph 86:

I consider that the patching up of the house as suggested by the appellants would result in the respondents –

so he does not say it is not possible, but he says –

would result in the respondents having a house less valuable and very different from the house that they bargained and paid for.

Well, that is what the builder was responsible for and the builder was found ‑ ‑ ‑

GLEESON CJ:   It is the next sentence, is it not?

MR GOLDBLATT:   Yes, your Honour.  With respect, that is the language of Bellgrove v Eldridge, which is an out and out contractual case, it is a case of a breach of contract, and this reference to a “doubtful remedy”, with respect, is a reference to the principle of reasonableness as applied to the measure of damages in contract which, in my submission, has a different application in relation to the measure of damages in tort because in relation to contract, where one applies the principle of reasonableness, one is in some circumstances mitigating the harshness of requiring strict conformity with the contract because there you would not be getting what you bargained and paid for.

When one deals with the principle of reasonableness in relation to the measure of damages in tort on the authority of cases such as Public Trustee v Hermann, one is dealing with the situation of whether or not the cost of reinstatement is disproportionate to the diminution in value and diminution in value is, with respect, the prima facie test in relation to the measure of damages in tort affecting land.  What the cases do, if one has regard to those cases – material was sent to your Honours earlier this week – if one has regard to those cases, they apply the principle of reasonableness, in my submission, as set out in Public Trustee v Hermann.

If I might briefly refer your Honours to that case which is in the material at paginated page 16, and if I might refer your Honours to paginated page 18, which is page 447 of that case.  Your Honours will see it is the third‑last paragraph.  It is about the middle of page 447:

The second principle is that the plaintiff may elect as between damages for loss of market value after the subsidence and damages representing the reasonable cost of restoration to pre‑slide condition, provided in the latter case that the cost of restoration is not disproportionate to such diminution or loss of market value; if it is then the plaintiff can only recover the difference in market value of the subject property.

Then his Honour applied Minter v Eacott, which was a Full Court decision in New South Wales, to the same effect where their Honours there had applied a passage found in the American restatement of the law, and your Honours will see approximately eight lines up from the foot:

“If, however, the cost of replacing the land in its original condition is disproportionate to the diminution in the value of the land caused by the trespass . . . damages are measured only by the difference between the value of the land before and after the harm. . . .”

GLEESON CJ:   As I understand it, the point of departure between the majority and the minority can be seen on page 54 in paragraph 41 of the judgment of Justice Wallwork.  Is that correct?  That is where they parted company.

MR GOLDBLATT:   On the facts.

GLEESON CJ:   On the facts.  I do not find any discussion, for example, in the judgment of Justice Wallwork of these issues of principle you wish to raise.

MR GOLDBLATT:   Yes, with respect, your Honour, in paragraph 41, if one has regard to page 72 of the judgment of his Honour Mr Justice White, he did not say that it could not be fixed.  What his Honour said was, where he erred, with respect, is in applying the contractual measure, because he had just referred to the evidence of the plaintiff’s own expert that said it could be fixed, but he then applied the contractual measure of the plaintiffs being left with “a house less valuable” than “the house that they had bargained and paid for”.

With respect, what appears to have weighed heavily on the minds of their Honours Justices White and Wheeler was what appears at page 65 of the application book, and if I might refer to this as the “pack of cards” evidence of the one expert, Van der Meer, and, in my submission, it was misunderstood by their honours.  Perhaps if your Honours would look at the foot of page 64, Van der Meer is asked the question:

To stabilise the house and bring it into, let’s use the expression, habitable condition although opinions might differ as to what that means ‑ stabilise it and bring it into habitable condition, could you just tell me what you would do?---Certainly articulation would be the number 1 priority to enable us to introduce joints in all the walls.

Then about four lines down, he says:

That’s the worrying thing about introducing joints into this house –

and then I will stress, your Honours –

without specific measures to reinforce these joints – is that you introduce a lot of instabilities –

and he says it becomes like “a pack of cards”, vulnerable to seismic movement.  Then, your Honours, at C:

Mr Van der Meer replied:

I would like to see a design for the joint and discuss between engineers before the work is done because that’s the only part –

there is obviously a typographical error –

that I have a problem – the stability of the house with all the joints in it.  Special measures have to be taken –

so if your Honour goes higher up to just below A, he says, “without specific measures” it is like “a pack of cards”, and he says special measures must be taken.  Your Honours can see, with respect, that her Honour Justice Wheeler also emphasised this point.  If I might refer your Honours to page 73.  Her Honour said at paragraph 90:

The appellants relied principally on two propositions:  the first that the soil underlying the house could be stabilised; and the second that, once soil stabilisation had occurred, there would be no further movement in the house of any significant kind.  There was some evidence for both of those propositions ‑

by the plaintiff’s witnesses, your Honours ‑

At a variety of points, both the experts appeared to agree with the proposition that once the soil was stabilised, there would be no further movement.

CALLINAN J:   But both her Honour and Justice White were impressed by the evidence quoted by Justice White at page 71, that you would need to “keep the moisture content exactly as it is in a hermetically sealed bag” and her Honour referred to that same evidence and was obviously impressed by it at page 74, and I must say it impresses me to the effect that this would be a very, very exacting requirement and there would be considerable doubt about whether it could be satisfied.  That was a factual view that the Full Court was entitled to take, and upon that basis, to take the view of damages that they did.

MR GOLDBLATT:   With respect, your Honours, if I might just pursue the point ‑ ‑ ‑

CALLINAN J:   I read the evidence, frankly, as saying, in an ideal world, under perfect conditions, you might be able to achieve this result, or that that is at least a possible view of the evidence, an open view of the evidence.  There may be other views open, but that is certainly an open view of the evidence.

MR GOLDBLATT:   Your Honours, in my submission, what is open is that cut‑off drains are likely to succeed.  Certainly, I think that is what Mr Van der Meer said, it is “likely to succeed”, but he would give no guarantee, but one simply would never be able to give a guarantee in relation to any rectification work of this nature, even rebuilding the house, one would not be able to give a guarantee, but her Honour went on to say, after having said there was evidence, she said the problem was, at the foot of page 73:

In Mr Van der Meer’s case, it appears to me that he was saying that there will not be significant movement, assuming that the moisture content of the ground is stabilised –

not hermetically sealed, with respect, and then her Honour says at the top of page 74 –

and that joints are put into the structure.  This is significant because of the problem with joints to which White J has referred.

My submission is that that is the “pack of cards” evidence which their Honours misinterpreted.  If I might refer your Honours to page 28 to show the theme in relation to the role that this “pack of cards” evidence played.  At page 28C, his Honour Mr Justice Anderson said:

Mr Van der Meer also pointed out that the house was located in “a designated seismic zone” and that a worrying consequence of the amount of jointing that would be required is that the structure of the house would be weakened and the house would become “vulnerable to virtually total collapse under an earthquake…..So you might be living in what we call a pack of cards.”

But that was not his evidence, with respect.  His evidence was, yes, you would be living in what we call a pack of cards if you did not take specific measures to reinforce the joints, which he said could be done.

Your Honours, the submission is the correct test in relation to damages affecting land in tort is the diminution in value.  Reinstatement is on the cases open provided that it is not disproportionate to the diminution in value.  So that, for example, in Public Trustee v Hermann, where the cost of repair reinstatement was $14,500 and the diminution in value was $2,000, his Honour there said it was disproportionate and you are limited to the diminution in value.

With respect, there is no evidence as to special circumstances.  In fact, the building contract here was $132,000 and the damages awarded against the builder was $132,000 because of a limitation of liability clause in the contract.  But the damages awarded against the engineer, the applicant, was $273,000, almost double.  The danger, with respect, if it is disproportionate to the diminution in value, is the potential, as pointed in Public Trustee v Hermann, for a windfall profit.  What the plaintiff does is he sells the house as is and pockets the windfall and in that way obtains a position which, in fact, exceeds the position he would have been in but for the tort.  As your Honours please.

GLEESON CJ:   We do not need to hear you, Mr Lampropoulos.

The division of opinion in the Full Court in this matter turned upon issues of fact, not upon questions of legal principle, and the view of the facts taken by the majority in the Full Court was well open to them.  The case is not a proper one for the grant of special leave and the application is dismissed with costs.

We will adjourn for a short time to reconstitute.

AT 11.14 AM THE MATTER WAS CONCLUDED