Dymocks v Capral
[2013] NSWSC 343
•16 April 2013
Supreme Court
New South Wales
Medium Neutral Citation: Dymocks v Capral [2013] NSWSC 343 Hearing dates: 18/02/2013, 19/02/2013, 20/02/2013, 21/02/2013, 22/02/2013, 25/02/2013, 26/02/2013, 27/02/2013, 28/02/2013 Decision date: 16 April 2013 Jurisdiction: Equity Division - Technology and Construction List Before: McDougall J Decision: Plaintiff to recover against each defendant $764,545.45 and interest. Cross-claims for contribution and costs to be reserved.
Catchwords: NEGLIGENCE - Duty of care - pure economic loss - where contract for the provision of services by an architect the content of an architect's duty of care informed by the nature and scope of the retainer - duties in contract and tort co-extensive - plaintiff entitled to select the most advantageous action.
NEGLIGENCE - Duty of care - pure economic loss - where no contract for the provision of services by an architect - factors relevant to establishing existence of duty of care include assumption of responsibility, known reliance and reasonable forseeability of economic loss.
EVIDENCE - witnesses - credibility - deleterious effect of the effluxion of time on the reliability of witness testimony.Legislation Cited: Civil Liability Act 2002 (NSW)
Trade Practices Act 1974 (Cth)Cases Cited: Albion Insurance Company Limited v Government Insurance Office of New South Wales (1969) 121 CLR 342
Associated Midland Corporation Limited v Bank of New South Wales (1984) 51 ALR 641
Astley v Austrust Limited (1999) 197 CLR 1
Barclay v Penberthy (2012) 86 ALJR 1206
Bellgrove v Eldridge (1954) 90 CLR 613
Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272
The North Shore Gas Company Limited v The Commissioner of Stamp Duties (NSW) (1940) 63 CLR 52Voli v Inglewood Shire Council (1963) 110 CLR 74
Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515
Woolmington v Bronze Lamp Restaurant Pty Ltd [1984] 2 NSWLR 242Category: Principal judgment Parties: Dymocks Book Arcade Pty Ltd (Plaintiff)
Capral Limited (First Defendant)
Peter Dalton Architects Pty Ltd (Second Defendant)
Stramit Corporation Limited (Formerly KH Stramit Corporation Limited) (First Cross-Defendant to Second Cross-Claim)Representation: Counsel:
D T Miller SC / D A Hughes (Plaintiff)
H J A Neal (First Defendant)
I G B Roberts SC / L W F Chan (Second Defendant)
I R Pike SC / J J Hutton (First Cross-Defendant to Second Cross-Claim)
Solicitors:
Norton Rose (Plaintiff)
Colin Biggers & Paisley (First Defendant)
Kennedys (Second Defendant)
Sparke Helmore (First Defendant to Second Cross-Claim)
File Number(s): 2009/298893
Judgment
HIS HONOUR: The plaintiff (Dymocks) is the lessee of land at Grassy Head, on the mid-north coast of New South Wales. There is constructed on that land a residence and associated buildings. The complex comprises a number of discrete structures, referred to as "units", adapted for various purposes.
The units, their verandas and connecting walkways are roofed, or covered (in the case of the walkways), by coated corrugated aluminium sheeting. Some idea of the extent of the complex can be gained from the fact that the total covered area is about 2500m².
Dymocks says, and it appears to be uncontroversial, that the roof sheetings and fixings are affected by corrosion. There is corrosion in the roof sheets around the screws that are used to fasten them to the underlying mild steel purlins. There is corrosion at the points where the fastening screws enter the purlins. And there is corrosion of and adjacent to the "saddles", by which the retaining force exerted by the screws is applied over a larger area.
In these proceedings, Dymocks claims damages, on the basis that all the roof sheeting must be replaced. It sues the first defendant (Capral, the supplier of the coated aluminium sheets that were formed into the corrugated roofing material) on a warranty given by Capral in a deed made on 18 November 1991. And it sues the second defendant (Dalton, the architectural practice that designed the residence and associated works, and prepared the specifications) for alleged negligence in connection with the preparation of the roofing specification.
Capral had cross-claimed against Stramit Corporation Pty Ltd (Stramit, the company that formed the coated aluminium sheets supplied by Capral into the corrugated roof sheeting, and supplied the corrugated sheeting to the roofing contractor). That cross-claim was resolved after the conclusion of the hearing, and while judgment was reserved.
The parties agreed on the real issues in dispute. However, an understanding of those issues requires more factual detail than I have given so far. Accordingly, before I set out the real issues in dispute, I will state the factual background.
Background
The land in question is and at all relevant times has been owned by a company known as Wirrabeena Pty Limited. Wirrabeena owns (and at all material times has owned) the land as trustee for a unit trust. It is not necessary to go into the detail.
In the 1980s, Dymocks commenced to use the land for agricultural purposes, developing it as a macadamia nut and mango plantation. At least from the 1989 calendar year, Dymocks made payments to Wirrabeena that were characterised as rent for the land. The lease was formalised on 13 August 1991. Wirrabeena leased the land to Dymocks for a period of 20 years, with an option for renewal for a further 20 years. The starting date for the tenancy thus created was 1 July 1990.
The individual standing behind the corporate structures involved is Mr John Forsyth. He is and at all material times has been the chairman of the board of directors of Dymocks. In about 1982, Mr Forsyth and his late wife Mrs Marion Forsyth retained Dalton to design their home at Terrey Hills. Dalton carried out that retainer. The home was built.
In the mid or late 1980s, Dymocks retained Dalton to design alterations and additions to Dymocks' premises in George Street, Sydney. The retainer was fulfilled and the works were carried out.
Mr Forsyth said that in about 1989, he and his late wife retained Dalton to design the buildings at Grassy Head. Mr Peter Dalton, the principal of Dalton, accepts that he was retained by Mr Forsyth (or by Mr and Mrs Forsyth) to carry out that work. It is uncontentious that Mr and Mrs Forsyth emphasised, as they had done with their residence, that the work was to be done to the highest possible, or "first class", standard; and that Mr Dalton understood this. (As an aside, and to emphasise the significance of this, the construction cost for the Grassy Head buildings, in 1990, was about $3.4 million. Mr Dalton said that, in present day terms and taking into account inflation in construction costs, that would be about $15 million. It is hardly surprising that Mr and Mrs Forsyth wanted the best possible standard of design and workmanship.)
At some time in late 1988 or early 1989, Mr Forsyth instructed Dalton to put Dymocks' name on the plans and specifications, as the client. Dalton did so (although with some confusion - in some documents the client, or proprietor, is referred to as "Dymocks Pty Limited"; and in others, by its then correct title).
The Grassy Head property is located less than 100 metres from a surf beach. It is common ground between the parties that, in that particular environment, there was a significant risk of corrosion, because of the constantly moist and salty atmosphere. Further, the area is apparently subject to violent weather events. The roof was required to be designed so as to withstand a category 1 cyclone.
Mr Dalton said that he consulted an engineer, Mr Jack Davies, in relation to the roof fixing system. Mr Davies is said to have recommended the use of a proprietary "Buildex" screw and fastening system. The screw was a self tapping stainless steel screw. It was to pass through the aluminium sheeting and into holes predrilled into the mild steel purlins that supported the roof. The design load required the restraining force exerted by the screw to be spread across a greater area of the roof sheeting than that immediately in contact with the head of the screw (or screw and washer). That was to be achieved by the use of a coated mild steel saddle. As the name suggests, a saddle is a piece of metal through which the screw passes and which extends out beyond the shank of the screw, and rests on the roof sheeting. Since the screw was intended to (and did) pass through the crest of the corrugations, the saddle would in effect sit over the crest and down the slope on each side of the screw.
There was to be a washer between the underside of the head of the screw and the upper side of the saddle. That would prevent direct contact between the head of the screw and the saddle. There was to be another washer below the saddle and above the roof sheeting. The lower washer would serve two functions. First, it would prevent contact between the saddle and the roof sheeting (the act of tightening the screw would of course force the roof saddle downwards). Secondly, it would cover the hole in the aluminium sheeting, and thus minimise the entry of moisture from above into that hole.
Because the screws were inserted through the crest of the corrugations, there was no direct contact between the roof sheeting and the mild steel purlins at the points of affixation. However, the valleys of the roof sheeting would come into contact with the purlins.
The specification required the roof sheeting to be coated on each side with a material known as polyvinyl difluoride, commonly referred to as PVF2, to a thickness of 25 microns above and below. The specification also required the saddles to be coated with zincalume, and then dipped in PVF2 to achieve a thickness (of PVF2) of 25 microns all around.
At some stage, it was discovered that the roof sheeting that had been installed, and that was awaiting installation, was defective because the underside was coated with PVF2 to a thickness of 10 microns only.
Dalton rejected the sheeting, and required compliance with the specification. There is no doubt that, as administrator of the building contract, Dalton was entitled to act in this way. Not unnaturally, the rejection of such a large and expensive amount of roof sheeting caused consternation to the roofing contractor, the builder, the supplier (Stramit) and the supplier to Stramit (Capral). It appears to be the case that Capral had arranged for the aluminium sheeting produced by it to be coated with PVF2. By oversight on the part of Capral, the PVF2 coating was deficient in the manner that I have described.
The dispute was resolved by execution of the deed of 18 November 1991. The parties to the deed were Dymocks, the builder (Adco), the roofing contractor (Bayline), Capral and Stramit. It will be necessary to go in more detail to the terms of the deed. It is sufficient to note at present that:
(1) on the conditions set out in the deed, Dymocks would accept installation of the non-compliant roof sheeting;
(2) by cl 3(a), Stramit undertook the obligation to make regular inspections of the installation of the roof sheeting;
(3) by cl 3(b), on completion of the installation work in accordance with the specification and Stramit's installation procedures, Stramit was required to issue a certificate that the roof sheeting had been so installed; and
(4) the issue of that certificate triggered a warranty given by Capral to Dymocks pursuant to cl 2(a) of the deed, whereby among other things Capral warranted that the roof sheeting would be free from perforation due to corrosion for a period of 40 years.
The real issues in dispute
I now set out the real issues in dispute, as agreed by the parties. Because the cross-claim between Capral and Stramit has been resolved, I have deleted the issues relating only to that cross-claim.
Dymocks and Capral
1. In respect of the deed dated 18 November 1991:
(a) whether it was a condition precedent to the issue of a valid certificate for the purpose of clause 2(a) that the Uninstalled Specified Sheeting was installed in accordance, either strictly or materially, with the Specification and Stramit's installation procedures;
(b) if 'yes', whether the Uninstalled Specified Sheeting was so installed;
(c) whether Stramit issued a clause 3(b) certificate;
(d) whether Capral is liable to Dymocks under the Warranty contained in clause 2(a) of the Deed?
2. The extent of 'perforation by corrosion' on the roof sheeting of the dwelling.
3. If Capral is liable under the warranty, the quantum of such liability.
Dymocks and Dalton
4. Whether Dalton was engaged by Dymocks?
5. Whether Dalton owed Dymocks a tortious duty of care, and if so the content of that duty of care?
6. Whether Dalton breached its duty of care to Dymocks?
7. If so, the quantum of damage that Dymocks has sustained (including, whether it has an interest in the subject dwelling so as to give rise to any loss or damage in tort)?
8. Whether Dalton engaged in misleading or deceptive conduct in contravention of section 52 of the Trade Practices Act 1974 (Cth)?
9. If so, whether Dymocks sustained damage by that conduct, and in what amount.
10. Whether Dymock's claims against Dalton are apportionable claims under Pt 4 of the Civil Liability Act 2002 (NSW), and if so, how Dalton's liability to Dymocks should be adjusted accordingly?
11. Whether Dymocks' claims against Dalton are statue-barred?
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Capral and Dalton
15. If Capral is liable to Dymocks under the warranty, whether it is entitled to contribution from Dalton?
The witnesses; assessment of credibility
In Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541, McHugh J commented at 551 and following on the impact of delay on, among other things, the quality of evidence. His Honour said (in quotations from cases, the citations to which I will omit) that delay causes the quality of justice to deteriorate, among other things because "what has been forgotten can rarely be shown". His Honour pointed out, again at 551, that evidence may disappear, and the very fact that it once existed may be lost. Again, his Honour said, the passage of time will often diminish the significance of what is remembered. Thus, his Honour concluded:
A verdict may appear well based on the evidence given in the proceeding, but, if the tribunal of fact had all the evidence concerning the matter, an opposite result may have ensued. The longer the delay in commencing proceedings, the more likely it is that the case will be decided on less evidence than was available to the parties at the time that the cause of action arose.
His Honour's words have particular application to these proceedings. The relevant events happened more than 20 years ago. Evidence has been lost. In part, that is because documents were destroyed before the proceedings were commenced, and at a time when there was no reason to think that proceedings might be commenced. The quality of recollection of the principal witnesses of fact who were cross-examined has been markedly impaired, and (it seemed to me) what purported to be recollection more often represented reconstruction based on perceptions of what, in the present view of the witness, must or should have happened at the time. Finally, the testimony of a key witness, Dr Greig Wallwork, has been lost because, it is common ground, Dr Wallwork's state of health does not permit him to give evidence.
In this case, more than in most, an assessment of what is likely to have happened at the relevant time must depend on what remains of the contemporaneous documentary record and on the probabilities as, objectively, they might now be assessed. But even the latter exercise is impaired, and its utility diminished, because of the passage of time and the loss of important evidentiary material.
One simple point makes this clear. There was an issue on the "pleadings" whether, at the time the design (including in particular the specification for the works) was prepared, Dalton was retained by Mr Forsyth or by Dymocks. In the ordinary way, one would expect a formal matter such as a contract of retainer to be proved by the tender of the contract. A contract had been prepared (according to Mr Dalton) but had been lost.
Alternatively, one might have regard to invoices: in particular, by whom they were prepared, to whom they were addressed and by whom they were paid (see the observations of Gibbs J in Associated Midland Corporation Limited v Bank of New South Wales (1984) 51 ALR 641 at 643-644. Those documents too have been destroyed or lost.
With those observations in mind, I turn to the witnesses of fact.
Dymocks called a number of witnesses of fact. Only two of those witnesses were cross-examined: Mr Forsyth, and his brother Mr Andrew Forsyth. For convenience, I will continue to refer to the former as "Mr Forsyth", and to the latter as "Mr Andrew Forsyth".
I do think that the quality of Mr Forsyth's evidence was significantly affected by the passage of time. To some extent, I think, his testimony was the product of reconstruction rather than actual recollection. To that extent, it is inevitable that, even in the absence of dishonesty (and I emphasise that I regarded Mr Forsyth as an honest witness who sought to give truthful evidence to the best of his ability), the reconstruction is likely to accord with Mr Forsyth's present view of what should have happened, rather than, perhaps, with what did happen.
Nonetheless, there were significant aspects of Mr Forsyth's evidence which were either:
(1) not directly challenged (or in some instances, not challenged at all); and
(2) in other cases, consistent with contemporaneous documents or what seem to me to be the probabilities, objectively ascertained.
On balance, and repeating that in my view Mr Forsyth sought to give truthful evidence to the best of his ability, I accept his evidence, so far as it goes, with the obvious limitation flowing from the deleterious impact of the passage of time.
Mr Andrew Forsyth is (and at the time was) a solicitor, and a non-executive director of Dymocks. He impressed me, as his brother had done, as a careful and conscientious witness who sought, to the best of his ability, to give truthful evidence.
In many cases, Mr Andrew Dymock's evidence was anchored to contemporaneous documents. Accordingly, the deleterious impact of the passage of time was perhaps less marked in his case than it was in his brother's.
As I have indicated, the other witnesses of fact whose affidavits were read for Dymocks were not required for cross-examination. It follows that I accept their evidence, so far as it goes.
The only (non-documentary) evidence adduced by Capral was expert evidence.
Dalton called its principal, Mr Peter Dalton, to give evidence of fact. I have to say that I had significant concern with aspects of Mr Dalton's evidence. Although Mr Dalton's principal statement had been prepared over a period of some 12 months (interrupted, I acknowledge, by significant episodes of ill health), it was a marked feature of his oral evidence that he claimed to recollect, with a degree of precision, events and conversations that had received, at most, only scanty and generalised attention in his statement (or supplementary statement). This applies, in particular, to Mr Dalton's cross-examination on the question of his alleged reliance on advice received from a corrosion expert, Dr Wallwork.
I do accept of course that the passage of time has had the inevitable effect of diminishing Mr Dalton's power of recollection. I take into account, also, that as part of Dalton's routine procedures, contemporaneous documents that might have been of great assistance in refreshing Mr Dalton's recollection were destroyed. But making allowance as best I can for those matters, nonetheless I did not find the controversial aspects of Mr Dalton's evidence persuasive.
To my mind, Mr Dalton had a marked tendency to reconstruct events in a manner that was favourable to his defence of the allegations made against him. It is of particular concern that, as I have observed, this tendency manifested itself in cross-examination: that is, well after Mr Dalton had been given an ample opportunity to consider and respond (in his statements) to the case against him.
Part of the reason for the delay in the production of Mr Dalton's principal witness statement (leaving aside his ill health) was that, before it had been finalised, the evidence of Dymocks' architectural expert, Mr Sarlos, was served. Understandably, Mr Dalton took the opportunity to consider and respond to the criticisms that Mr Sarlos had made.
Even if the detailed review of events and documents had not provoked Mr Dalton's memory before his evidence was committed to paper, one would have expected his review of Mr Sarlos' statement to do so. But Mr Dalton said in cross-examination that his recollection of crucial events improved still further in the witness box.
Whilst I do not think that Mr Dalton sought in any way consciously to mislead the court, I do have very significant concerns at the reliability of his testimony. That is significant, in particular, in relation to Mr Dalton's evidence of his reliance on experts.
Although it is now not significant, I record that Stramit's only evidence was documentary and expert.
There was a significant body of expert evidence. To my mind, each of the experts understood, and did his best to perform, his duty to the court. To the extent that there remain differences between the experts, those differences are to be resolved by analysis of the underlying facts and the logic of what they say, not by reference to any consideration of credibility in the more general sense.
Issue 1: the warranty
The parties' submissions ranged widely over the deed. Hence, in setting out what were said to be the relevant provisions, I shall err on the side of inclusion rather than exclusion:
A. A contract was entered into between Dymocks and Adco ("the Head Contract") pursuant to which Adco agreed to construct for Dymocks a building at Grassy Heads in the said State ("the Project").
B. The Head Contract included a specification ("the Specification") pursuant to which Adco was to supply and install on the roof of the Project roof sheeting coated with polyvinyl di-fluoride to a thickness on both sides of the sheeting of 25 microns ("the Specified Sheeting").
C. A contract was entered into between Adco and Bayline numbered 201670 pursuant to which Bayline agreed to supply and install the Specified Sheeting ("the Sub-Contract").
D. A contract was entered into between Bayline and Stramit pursuant to which Stramit to rollform and supply the Specified Sheeting ("the Supply Contract").
E. A contract was entered into between Stramit and Alcan pursuant to which Alcan agreed to supply the roofing for the Project.
F. Pursuant to the contracts referred to in Recitals A, C, D and E hereof, some sheeting has been supplied to the Project ("the Unspecified Sheeting").
G. Some of the Unspecified Sheeting has been installed on the roof of the Project as shown on the plan attached hereto and marked with the letter "A" ("the Installed Sheeting") and some has not been installed ("the Uninstalled Sheeting").
H. Adco has agreed in accordance with the Head Contract to install Specified Sheeting on the balance of the roof of the Project ("the Uninstalled Specified Sheeting").
I. Dymocks has alleged that the Unspecified Sheeting does not comply with the Specification ("the Dispute").
J. Bayline has removed from the Project the Uninstalled sheeting and returned it to Stramit.
K. The parties hereto have agreed to settle the dispute subject to the terms and conditions contained herein.
...
2. Dymocks and Alcan agree one with the other as follows:
(a) subject to Stramit providing the certificate pursuant to clause 3(b)hereof. Alcan warrants the Installed Sheeting and the Uninstalled Specified Sheeting for a period of forty (40) years from the date of the installation of the Uninstalled Specified Sheeting against perforation due to corrosion;
(b) Alcan warrants the integrity of the polyvinyl di-fluoride paint film on the Installed Sheeting against peeling, flaking or blistering for a period of ten (10) years;
(c) the warranties contained in sub-clauses (a) and (b) of this clause shall not apply in respect of perforation or corrosion caused by any incident occurring after the Installed Sheeting and the Uninstalled Specified Sheeting have been installed or failure to follow recommended maintenance procedures as set out in sub-clause (h) of this clause on failure to inform Alcan:
(i) in respect of perforation, within 14 days or
(ii) in respect of corrosion, within sixty (60) days of the existence thereof becoming known to the then owner of the Project or, in the case of a corporate owner thereof, of a director of such corporate owner. Alcan shall bear the burden of providing that the warranties contained in sub-clauses (a) and (b) of this clause do not apply by reason of this sub-clause (c);
(d) the warranties contained within sub-clauses (a) and (b) of this clause apply only in respect of:
(i) the cost of removal of the corroded and/or deteriorated portion of the roof and its replacement and the supply of new roofing material painted on each side with 25 microns of polyvinyl di-fluoride paint film or its equivalent. Alcan shall, at its option pay such costs or arrange at its cost for the work to be carried out;
(ii) damage to roof structure, ceilings and insulation resulting from such perforation which is not covered by household and contents insurance policies taken out by the party having the benefit of this warranty;
...
(h) any party having the benefit of the warranties contained within sub-clauses (a) and (b) of this clause shall maintain, clean and protect the Installed Sheeting and the Uninstalled Specified Sheeting in accordance with the procedure outlined in this sub-clause. Regular hosing down of the underside of the exposed exterior surfaces with potable fresh water is required for maintenance of the Alcan paint finish. This should be done at least three times each year to remove deposited salt; cobwebs; mildew and other airborne pollutants. Particular care should be taken to prevent any accumulation of salt crystals or industrial dirt. Care must also be taken to ensure that no alteration or addition to the Project occurs with the Installed Sheeting and the Uninstalled Specified Sheeting that no water is permitted to splash onto the Installed Sheeting and the Uninstalled Specified Sheeting from copper bearing, iron bearing or lead bearing materials and that no water (other than direct rain, potable tap water or sea water) discharges onto the Installed Sheeting and the Uninstalled Specified Sheeting.
3 Stramit agrees with Dymocks, Adco, Bayline and Alcan, jointly and severally, that:
(a) every two weeks, commencing on 22 November 1991 and ending on the date when it certifies in accordance with sub-clause (b) of this clause, it shall certify to Bayline that the installation of such of the Uninstalled Specified Sheeting as has then been installed has or has not been carried out in accordance with the Specification and Stramit's installation procedures;
(b) within twenty one (21) days after installation of the Uninstalled Specified Sheeting in accordance with the Specification and Stramit's installation procedures it shall certify to Alcan that the installation of the Installed Sheeting and the Uninstalled Specified Sheeting has been carried out in accordance with the Specification and Stramit's installation procedures; and
(c) it shall not unreasonably withhold issuing the certificate pursuant to sub-clause (b) of this clause, and in that regard the only ground for Stramit not providing that certificate is the failure of the Uninstalled Specified Sheeting to be installed in accordance with the Specification and Stramit's installation procedures.
4. Adco agrees with Dymocks that, if Stramit does not so certify within twenty one (21) days as is referred to in clause 3(b) hereof, it will refund to Dymocks all payments made by Dymocks to Adco in respect of the purchase and installation of the Installed Sheeting and the Uninstalled Specified Sheeting and that, in default of such payment, Dymocks shall be entitled to deduct that amount from payments which might otherwise be due to Adco pursuant to the Head Contract.
5. Notwithstanding clause 4 hereof. Adco agrees with Dymocks that Dymocks shall not be obliged to pay to Adco in respect of the purchase and installation of the Installed Sheeting and the Uninstalled Specified Sheeting more than 75 per cent of the cost of the purchase and installation of the Installed Sheeting and the Uninstalled Specified Sheeting until the certificate referred to in clause 3(b) hereof has been provided but this clause shall not affect Adco's entitlement to be paid and Dymock's obligation to pay Adco 100 per cent of the progress claims it submits in relation to the cost of the purchase and installation of the Installed Sheeting and the Uninstalled Specified Sheeting until such claims and payments have reached 75 per cent of the cost of the purchase and installation of the Installed Sheeting and the Uninstalled Specified Sheeting.
6. Bayline warrants to Dymocks, Adco and Alcan jointly and severally, that it has installed the Installed Sheeting and agrees that it will install the Uninstalled Specified Sheeting in accordance with the Specification and Stramit's installation procedures.
7. Stramit agrees with Dymocks, Adco and Bayline, jointly and severally, that it shall return to the Project at no cost the Uninstalled Sheeting it removed from the project and which is identified in the Schedule annexed hereto and marked with the letter "B".
8. Adco agrees with Dymocks that it will procure the Uninstalled Specified Sheeting to be delivered to the Project and installed on the remaining part of the roof of the Project which has not, as at the date of this Deed, been sheeted.
9. Stramit agrees with Dymocks, Adco, Bayline and Alcan, jointly and severally, that it shall supply to Dymocks the warranty referred to in clause 8.9 of the Specification.
10. Adco and Dymocks agree one with the other that the Contract Sum in the Head Contract is to be reduced by the sum of $20,000.00.
11. Dymocks hereby releases Adco, Bayline (subject to the warranty contained in clause 6 hereof), Stramit and Alcan, jointly and severally, from all claims, causes of action, demands, actions, costs, suits or proceedings of whatsoever nature arising out of the fact that the Installed Sheeting and the Uninstalled Sheeting did not comply with the Specification including breach of contract, negligence, tort, breach of statute (as far as the law permits), at law, in equity or otherwise which Dymocks either before or after the execution of this Deed had or may have had against any of the parties having the benefit of this release provided that this release does not apply to any liquidated damages which Dymocks may be able to claim against Adco pursuant to the Head Contract.
[Clauses 12 to 15 contained the like releases given by, respectively, ADCO, Bayline, Stramit and Alcan to the other parties to the deed.]
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16. The parties hereto agree one with the others, jointly and severally, that the terms of this Deed are not, except to auditors or holding companies of any of the parties hereto, to be disclosed and are to remain confidential except where any party requires legal advice in relation to the terms hereof or seeks to enforce any or all of the terms of this Deed.
As recital G contemplated, there was attached to the deed a plan showing where the "Installed Sheeting" had been placed. In broad terms, that plan showed that the Installed Sheeting had been placed over the verandas to the bedroom unit, on the roof (or part of the roof) of the living unit and on the verandas, or parts of the verandas, adjacent to it. Thus, only a relatively small amount of roof sheeting had been installed as at 18 November 1991.
First sub-issue: the proper construction of cl 2(a)
The background against which cl 2(a) operates may be stated succinctly (and in doing so, I do not wish it to be thought that I am having regard to the factual matrix for any impermissible purpose). The background appears, in the main, in the recitals.
Capral had supplied the coated aluminium sheeting to Stramit. Stramit had formed the sheeting into the lengths of corrugated material that were to be installed. Bayline had installed some of the sheeting thus formed. The sheeting did not comply with the specification. Dalton had rejected it.
There can be little doubt that Dymocks was entitled to insist on performance of the contract. This would mean, among other things, that the Installed Sheeting must be removed, and sheeting that complied with the specification installed. It is clear that this would have caused considerable delay, to the disadvantage of everyone, and financial cost to everyone except, perhaps, Dymocks.
The solution was that the Installed Sheeting could be left where it was, sheeting conforming with the specification should be installed over the remainder of the project, and Dymocks could keep the non-compliant sheeting that had not been installed. (The purpose of this last aspect of the bargain is obscure, but there is no need to give it any further attention.)
Dymocks took, in exchange for acceptance of the non-compliant sheeting, a 40 year warranty from Capral extending not only to the Installed (non-compliant) Sheeting but also to the sheeting (compliant) yet to be installed. Thus, Dymocks gained a right which it did not have under the contract. By cl 8.9 of the specification, the only warranty that it would get from a party external to the building contract was a 10 year warranty from Stramit.
The other parties were relieved of the no doubt severe consequences that would otherwise have flowed from the installation of non-compliant sheeting. The price paid by Capral was the warranty.
There are a number of points about the warranty that are not contentious. First, it does not commence to operate until the introductory condition, defined by the words "subject to Stramit providing the certificate pursuant to cl 3(b) hereof", is satisfied.
Secondly, once the warranty commences to operate, it will be activated by the appearance of "perforation due to corrosion". It is not necessary that the corrosion be due to some defect in either the Installed Sheeting or the Uninstalled Specified Sheeting.
Thirdly, the warranty will not operate, in the event that defects are discovered in the Installed Sheeting or the Uninstalled Specified Sheeting, unless and until those defects manifest themselves (if they do) in perforation due to corrosion.
Finally, for present purposes, the content of the warranty - that is to say, the nature of the obligation cast on Capral in the event that the warranty attaches - is spelled out by cl 2(d).
Two questions divided the parties (Dymocks on the one hand and Capral and Stramit on the other). The first was the meaning to be attributed to the prefatory condition, upon satisfaction of which the warranty commences. The second was the proper construction to be given to (or perhaps, the application in fact of) the words "perforation due to corrosion".
"... subject to Stramit providing the certificate pursuant to cl 3(b) hereof..."
The essential point was whether the words "pursuant to cl 3(b) hereof" indicated that the certificate was to be not just one issued under or by the authority of cl 3(b), but one issued following the process described in the initial words of cl 3(b) - that is to say, completion in fact of "installation... in accordance with the Specification and Stramit's installation procedures".
Counsel's submissions were detailed and helpful. I intend no disrespect by the brief summary that follows.
Mr Miller of Senior Counsel, who appeared with Mr Hughes of Counsel for Dymocks, submitted that all that was required was the issue of a certificate that in terms certified to Capral "that the installation... has been carried out in accordance with the Specification and Stramit's installation procedures". If the certificate so certified, Mr Miller submitted, its issue satisfied the condition precedent to commencement of the cl 2(a) warranty.
Mr Miller submitted that, viewed objectively, the parties could not have intended their rights and obligations to depend on the question of whether, in fact, before the certificate (or purported certificate) had been issued, the roof sheeting had been installed "in accordance with the Specification and Stramit's installation procedures". If this were so, Mr Miller submitted, then, bearing in mind that the warranty endured for a period of 40 years, the parties might be required to investigate, many years after the work had been done, whether or not there were defects in the installation.
Mr Neal of Counsel, who appeared for Capral, submitted that it was apparent from the doubled use of the descriptive phrase "in accordance with the Specification and Stramit's installation procedures" - in particular, the first use of that phrase - that the parties, objectively, intended that Stramit should not certify until completion of installation in the manner thus described. Mr Neal pointed out that, under cl 3(a), Stramit was required to undertake regular fortnightly inspections and certifications. The deed assigned no such role to Capral, and Capral undertook no such obligation. Mr Neal submitted that it was inherently improbable that Capral would have agreed to give a warranty lasting 40 years in circumstances where it must have been obvious that "perforation due to corrosion" might result from, or be facilitated by, defective installation of the roof sheeting.
Mr Pike of Senior Counsel, who appeared with Mr Hutton of Counsel for Stramit, took a position consistent with Mr Neal's.
Mr Miller and Mr Neal each pointed to what he said were inconvenient, absurd or uncommercial aspects of the construction adopted by the other.
In addition, Mr Miller and Mr Neal made reference to other provisions of the deed. They included cl 3(c) (which limited the grounds on which Stramit might refuse to certify), cls 4 and 5 (which took effect upon, or had effect by reference to, the issue of the certificate) and cls 6 to 10 (which operated independently of the issue of the certificate).
Clearly enough, the intention of the parties, apparent from the words of the deed itself (including, of course, the recitals), was that the dispute in relation to the installation of roof sheeting that did not comply with the specification should be resolved on the term of the deed. Dymocks' position, and its contractual rights, were clear. It was entitled to insist that, at no cost to itself, the non-compliant sheeting be removed and the walkways and roofs be constructed with compliant sheeting.
It is also clear that all parties involved (by which I mean, for present purposes, the parties to the deed) understood the importance of compliance with the specification. They must have known that the environment was one likely to promote damage by corrosion. They must have known that the specification, insofar as it dealt with the roofing, had been drafted to prevent or minimise corrosion. Specifically, they must have understood the importance, in that regard, of the specified thickness of the PVF2 coating.
It is also I think important to note that Dymocks relied on others for assurance as to the compliance of the work and materials with the requirements of the specification. Dymocks had no expertise in the areas of architecture, engineering or building. By contrast, Stramit (in particular) had expertise in relation to the roofing material. The deed itself makes clear that there were "installation procedures" that Stramit published or suggested should be followed. (The evidence suggests that such procedures as there were, were not contained in any written form, but that does not seem to me to matter. What does matter is that the parties recognised that Stramit's installation procedures - whatever they might be and wherever they might be found - were to be followed.)
In the circumstances, I think it unlikely, looking at the matter objectively, that Dymocks would have given up the rights that it had - the strength of its position - in exchange for a warranty, the attachment of which would depend not on the objective fact of certification but, rather, on whether or not the certification was, in point of fact, correct. Such a construction would mean that Dymocks might be required to prove, 20 or 30 years after the event of installation, that what had been done was (put shortly) properly done. As the facts of this case show, and as the parties must have understood had they turned their minds to the point, that exercise would become more difficult with the passage of time.
Further, I think, the other parties to the deed, and specifically Capral, viewed objectively, must have understood that Dymocks wanted certainty. To my mind, it is unlikely that the parties would have thought that Dymocks was giving up undeniable present rights, not in exchange for an enforceable warranty but, rather, in exchange for a warranty, of which not just the enforceability but the very existence would be contestable if in the future (over 40 years) it were called upon.
Those considerations to my mind favour the construction propounded by Dymocks.
It is significant that Stramit was to undertake the role of inspection and certification. Such evidence as there is suggests (and presumably, at the time, the parties knew) that it was Capral, not Stramit, that was responsible for the defective coating. Capral manufactured the sheeting. It sent it to a third party to be coated. Apparently, it was usual for sheeting to be coated to a thickness to 25 microns on the top and 10 microns on the bottom. Capral appears to have overlooked to specify that the sheeting was required to be coated to 25 microns thickness on each side. The coated sheeting was delivered to Stramit in circumstances where it could not be expected that Stramit would inspect or check the coating for itself.
Thus, although Stramit might have had legal liability for the defective sheeting, it had no part in the creation of the defect. But regardless of this, Stramit had an interest in seeing that the sheeting was installed in accordance with the specification and its own procedures. That is because, as cl 8.9 of the specification required, and as was done by cl 9 of the deed, Stramit warranted the sheeting for a period of 10 years. It is clear, and the parties must have understood, that defects in the installation of the sheeting might promote its deterioration in such a way as to render Stramit liable under that warranty.
The effect of cl 3(a) is that Stramit was agreed by the parties to be the entity responsible for inspecting the installation of the roof sheeting on a regular basis (it could hardly certify in accordance with cl 3(a) if it did not carry out regular inspections), with a view to ensuring that the installation did in fact proceed in accordance with the specification and Stramit's procedures. Clause 3(a) required certification one way or the other: no doubt, so that any non-compliant installation work could be redone before completion of the roofing.
By reason of that obligation, and by reason of its own expertise, Stramit was well qualified to provide the requisite certification. This applies not only to cl 3(a), but also to cl 3(b). Further, and as I have noted, it had a very real commercial interest in ensuring that the installation work was done properly. The parties seem to have accepted, in those circumstances, that Stramit was an appropriate certifier.
Those considerations suggest, further, that what the parties were looking to, as the trigger for those obligations in the deed that depended on certification under cl 3(b), was the fact of certification. That certification was to follow the process of installation, and was to state whether or not the relevant procedures had been followed. That highlights a significant point: that the certification was as to installation of the roof sheeting (both that which had been installed before the deed was made and that which was installed thereafter).
It is convenient at this point to set out cl 8.6 of the specification:
Corrugated Aluminium Roofing
Supply and install K H Stramit corrugated profile, Alcan 0.9mm thick marine grade 5251 H 36 aluminium roofing, coated both sides with polyvinyl di-fluoride (PVF2) to a thickness of 25 microns, approved colour - off white.
Roof sheeting is to be fixed with Buildex Taptite Austentic premium grade 316 hardened stainless steel roofing screws with EPDM cyclone zincalume seals. Seals are to be dipped in polyvinyl di-fluoride to match roofing.
All side laps are to be double corrugated lapped.
End laps are to be 200mm.
The reference to "EPDM cyclone zincalume seals" is difficult to follow. It is common ground that it was the saddles that were to be coated with zincalume and dipped in PVF2, and that those saddles would be manufactured from mild steel sheeting. EPDM is a form of rubber: ethylene propylene diene monomer. I think that what has happened is that the specification effectively misquoted or elided the description of the fixing mechanism. According to the supplier, Buildex, the EPDM seals were the washers, or cups, that were used to separate the head of the stainless steel screw from the saddle, and to separate the underside of the saddle from the roof sheeting (and, in the latter case, supposedly to provide a watertight seal as well). Regardless of this confusion, it was common ground that this part of the specification described (except for the screws) the fasteners that were in fact installed.
Clause 8.8 of the specification is also of some significance, and I set it out:
Roof Inspections by KH Stramit
Arrange inspection of the finished roof by K H Stramit and provide certificate of inspection by K H Stramit stating compliance with the manufacturer's specification for installation of the roof.
It is clear from cl 8.8 that the idea (apparent in cls 3(a), (b) of the deed) that Stramit would inspect and certify was not novel.
To my mind, the determining factor, in the question of construction, is the issue of certainty. I think that the parties' intention, viewed objectively, was to fix their rights and liabilities, on completion of the installation of the roof sheeting, by reference to a certificate that Stramit was required to issue. The only reason that Stramit could refuse to issue the certificate was that the fact to be certified did not exist. Thus, it was certain that, once the roof work was completed properly, the certificate would issue.
These considerations suggest that the (uncontestable) fact of certification was the relevant event - the trigger for commencement of (among other things) the cl 2(a) warranty - not the (contestable) existence of the fact certified.
I do not think that the intention of the parties, regarded objectively, was to make their rights and liabilities depend not on the fact of issue of the certificate but, rather, on proof in fact of the state of affairs certified.
I do accept, as Mr Neal submitted, that there are difficulties in adopting this approach. The first is that it makes it difficult to attribute meaning and purpose to the words "in accordance with the Specification and Stramit's installation procedures" where they first appear in cl 3(b). However, where what is to be certified is the existence of that state of affairs, as perceived by the certifier (this is I think made clear by cl 3(c)), then the words qualify and give meaning to the concept of "after installation". They define the time at which, or by reference to which, the certificate is to be issued. In this context, the parties must have known that, in the ordinary way, the building contract provided for a concept of practical completion subject to minor defects, and provided for a defects liability period.
The next difficulty arises from the contrasting language of cls 2(a), 4 and 5. The first refers to "the certificate pursuant to 3(b) hereof". The second refers to certification "as is referred to in cl 3(b) hereof". The third refers to "the certificate referred to in cl 3(b) hereof".
On analysis, however, I think that the distinction is more apparent then real. Each phrase seeks to call up the certificate that Stramit is to issue under cl 3(b). Thus, regardless of the language used, each calls up the concept of a certificate to be issued within 21 days "after installation... in accordance with the Specification and Stramit's installation procedures". If, as Mr Neal submitted, those words prescribe a condition that must be satisfied in fact before an effective certificate can be issued, then they do so for the purposes of cls 4 and 5 as well as for cl 2(a).
In my view, the proper construction of cl 2(a) is that Dymocks and Capral agreed that the warranty given by Capral would commence to operate when Stramit issued a certificate answering the description given in cl 3(b). That description requires that the certificate should:
... certify to [Capral] that the installation of the Installed Sheeting and the Uninstalled Specified Sheeting has been carried out in accordance with the Specification and Stramit's installation procedures...
I do not think that cl 2(a) of the deed on its proper construction embodies, as an additional requirement of commencement of operation of the warranty, the existence in fact, at or shortly before the certificate was issued, of the state of affairs certified.
For those reasons, I think that a "certificate pursuant to cl 3(b) hereof" means "a certificate answering the description given in cl 3(b) hereof": that is to say, a certificate that states that installation has been carried out in accordance with the specified procedures. It does not require examination of the underlying state of affairs.
Strict or material compliance?
It is thus strictly speaking unnecessary to consider a subordinate issue of construction. If it were the case that, to be effective to trigger the warranty, the state of affairs certified should exist in fact as well as be certified to exist, a question would arise as to whether existence in fact of that state of affairs should be absolute, or in some way qualified (for example, by some notion of substantial compliance, or material compliance, with the relevant standards). Mr Miller argued, in the alternative, for the concept of substantial or material compliance. Mr Neal submitted that what was required was strict compliance.
Mr Neal did accept that, even on his approach of strict compliance, there must be allowed some room for "de minimis" non-compliance. To take an obvious example: there were approximately seven thousand fasteners holding down the roof sheeting over the whole complex. The specification required the use of Buildex Taptite Austenitic marine grade 316 hardened stainless steel roofing screws. In fact, either the majority or at least a very substantial number of the screws used were grade 304 stainless steel. The experts agreed that this had no impact one way or another on the occurrence and extent of galvanic corrosion.
Mr Neal accepted that if one screw, out of the seven thousand, were grade 304 rather than grade 316, this could not amount to non-compliance, so as to justify the withholding of the certificate or to prevent inception or attachment of the cl 2(a) warranty. He accepted, further, that it would be a question of fact and degree as to where non-compliance would pass from being "de minimis" to being contractually significant.
To my mind, the intention of the parties, regarded objectively, was that the requisite standard of compliance should be "material". Thus, viewed negatively, non-compliance would be immaterial if it had no impact on the life or durability or serviceability of the roof: specifically, its susceptibility to perforation due to corrosion.
From Capral's perspective, compliance with the requisite standards was important because it might be expected that non-compliance would enhance the risk of perforation due to corrosion. On that basis, non-compliance which could not have any impact on susceptibility to corrosion would be immaterial to the purpose for which the certificate was required. For example, the use of a saddle which was in fact stronger than the specified saddle, and coated more durably so as to make it less susceptible to the risk of corrosion, would be a non-compliance with the specification; but it would not be a non-compliance that could affect the inception of the cl 2(a) warranty.
Thus, if it were necessary to assess the extent of non-compliance, the assessment should take into account at least two things. The first is a point that I have suggested already: namely, that the certification was directed to the process of installation of the roof sheeting. Thus, it focused attention on whether the roof sheeting had been laid in the manner required by the specification (as to overlapping, direction of joints and the like) and as to the materials used in the fastening system and the way in which the fastening system was in fact installed. Other matters relating to the roof but not relating to the process of installation (by way of example only, the thickness of the sheeting or its coatings) do not form part of the installation process that was to be inspected and certified.
The second point is that to the extent that defects in the process of installation have been ascertained, their materiality, having regard to the purposes intended to be served by certification and to the impact of certification on Capral's cl 2(a), warranty, would require careful examination.
In this context, I think (as again I have suggested already) that it is necessary to bear in mind the understanding to be attributed to the parties in relation to the concept of practical completion and the existence of a defects liability period. Clearly enough, they must have understood that some defects in the process of installation might be tolerated, at least for the purpose of cl 3(b) as well as the purposes of the building contract.
Second sub-issue: alleged defects in installation
Mr Neal referred to what he said were numerous defects in relation to the roofing work. However, many of those defects, whilst undoubtedly they relate to the roofing trade overall, do not relate to the method or process of installation of the aluminium roof sheeting (compare the point made at [94] above).
One aspect of non-compliance, which undoubtedly relates to the process of installation, was the widespread use of grade 304 stainless steel screws rather than the specified grade 316. As I have noted, the corrosion experts agreed that this departure from the specification was not relevant to the occurrence of corrosion. The mechanism of galvanic corrosion which they identified was as likely to happen with the specified grade 316 screws as with the unspecified grade 304 screws. At most, the use of the grade 304 screws would have some impact on the long term serviceability of the roof: and that was not the subject of any warranty given by Capral.
Accordingly, whilst I accept that the use of the grade 304 screws was a departure from the specification, I think that for the purposes of the warranty it was not a material departure.
Another matter to which Mr Neal referred was the presence of scratches on some ten (I think it was) identified panels of roof sheeting. There is no doubt that those scratched sheets existed. Nor is there any doubt that each certificate given (to jump ahead for a moment, there were two certificates, and what I am about to say relates to each of them) was given before those scratches had been rectified. The clerk of works (a Mr Peter Saravanos) reported those to Dalton and Dalton required the scratches to be rectified. Presumably, they were.
Those scratches, to the extent that they existed, seem to me to fall within the concept of minor defects which would not prevent practical completion, and which would in the ordinary way be rectified over the defects liability period (if in fact they were not rectified more promptly). But regardless, there is no evidence that the scratches increased the susceptibility of the aluminium roof sheeting to corrosion. On the contrary, as I understand the evidence of the experts, it was their view that aluminium in its natural state oxidises quickly on exposure to the atmosphere, and that the oxidised surface itself protects against the risk of atmospheric corrosion.
Again as I understand the evidence, the scratches might be relevant to corrosion:
(1) if they were in an area where dissimilar metals were in contact: in this case, the risk of galvanic corrosion would be increased; or
(2) if they were in an area that was covered over in some way so as to increase the risk of what was called crevice corrosion.
There is no evidence that the scratches were located so as to promote either form of corrosion, or to increase the susceptibility of the roof sheeting to those forms of corrosion.
I have referred above to the subject of Stramit's obligations of inspection and certification. Even assuming (and I do not decide) that those obligations required Stramit's attention, and rectification, before a certificate could issue under cl 3(b), they do not seem to me to have any relevance to Capral's cl 2(a) warranty. That is because they have not been shown to be relevant to the question of corrosion.
The other defects in the roofing works identified by Mr Neal were even more remote from that which Stramit was required to inspect and certify (matters such as suggested defects in the flashings, the presence of drill swarf and other undesirable substances on the roof, and the like). I do not propose to go through them one by one.
If, contrary to my view, Capral's warranty depends, or arises only, on existence of the state of affairs certified, and if (as I think is the case) what is required is material compliance, I conclude that such non-compliance as has been shown is immaterial. Thus, if it were necessary to do so, I would conclude that Capral's obligations under cl 2(a) are not affected or negated by such defects as have been shown in the installation of the roof sheeting.
Third sub-issue: issue of the certificate
Stramit issued a certificate on 18 June 1992. It was headed "certificate of installation of roofing". Leaving aside formal parts, Stramit certified:
"... that the installation of the Installed Sheeting and the Uninstalled Specified Sheeting, each as defined in the Deed [which was referred to earlier in the certificate], has been carried out in accordance with the Specification, as defined in the said Deed and in accordance with its own installation procedures."
The certificate was given under the hand of Stramit's general manager, Mr John Quinn. It was sent by letter to Adco and to Alcan. By some means, it came into the hands of Dalton.
Dalton purported to reject the certificate. It asserted, correctly that installation of the sheeting had not been carried out in accordance with the relevant requirements, because the specified screws had not been used. Dalton noted further, although not given as a reason of rejection, that the certificate had not been issued under seal.
Dalton had no power to reject (or for that matter to accept) the certificate. It was not a party to the deed. There was no requirement for the certificate to be given to it. There was no requirement for Dalton to verify what was stated in the certificate. Thus, the purported rejection has no effect in terms of operation of the deed.
If, as I think is the case, it is the fact of issue of the certificate, in or to the effect of the formula contained in cl 3(b), that causes the commencement of Capral's warranty obligation, the ineffective "rejection" of that certificate by Dalton has no impact on the position as between Dymocks and Capral.
Mr Neal submitted that Dalton was acting as Dymocks' agent. There is no doubt that, under the building contract, Dalton was for some purposes the agent of Dymocks. But in relation to the certificate and its purported rejection, Dalton was not exercising any function under the building contract. Thus, Dalton's rejection could not be regarded as an exercise of the agency given to it by that contract.
Mr Dalton said in evidence that he had been instructed by Mr Andrew Forsyth to issue the rejection letter in the terms that Dalton did.
That evidence, as to the direction said to have been given by Mr Andrew Forsyth, did not appear in either of Mr Dalton's statements. It came out only in cross-examination, in the course of his attempting to explain how it was that he could have written and issued the letter in question when (as he had said was the case) he had not seen the deed. In the circumstances in which the evidence was given, Mr Andrew Forsyth (who had been called as a witness in Dymocks' case) had no opportunity to answer it.
For completeness, I add that Mr Roberts did not raise (nor did Mr Neal), in respect of the quantum of damages, any question as to what might be called "betterment": namely, that the replacement of the roof, by a new roof properly installed, would have the effect of giving Dymocks something that would be serviceable for much longer than might have been required either under Dalton's retainer or Capral's warranty. That should be understood simply as an observation of fact, and not as a suggestion that the concept might be of any relevance.
Third question: extent of damage
Mr Roberts put a number of submissions, to the effect that the damage was not as extensive as the experts had indicated (more accurately, as Mr Miller had submitted that they had indicated).
First, Mr Roberts submitted, the extent of damage to the purlins was not as great as Professor Young at least had said. Mr Roberts based this submission on observations made by Mr Robinson when he walked underneath the verandas and walkways and looked at the purlins. Professor Young had said that there was red rust in many locations. Mr Salome had said rust was widespread. By contrast, Mr Robinson thought the purlins were in good condition in an "aggressive, severe marine environment" (T240.50-241.1). But as Mr Robinson in fact acknowledged, there was evidence of recent painting (T241.5-.7).
Further, as Mr Miller submitted, there was unchallenged evidence from Mr Fishburn, who was employed as the maintenance manager at the site and who had worked there for about 10 years (although not always as maintenance manager), as to routine maintenance. One of the things that Mr Fishburn did, and has done for some years, was cleaning down rusted or corroded metalwork whenever it was observed, and painting over it. Thus, it was not surprising that Mr Robinson did not observe much in the way of rust in the purlins.
Mr Roberts referred to numerous photographs of the roofs, and submitted that in many cases they showed that the saddles had not corroded or failed. (In fact, what they showed, as Mr Miller submitted, was that the saddles had not corroded to the point where red rust had appeared.) I do not think that the unanimous view of the experts, as to the inadequacy of the saddles, can be set aside simply on the basis of inexpert assessments made of photographs, particularly when the point sought to be drawn from those photographs was not put to the experts in a challenge to this aspect of their evidence.
Mr Roberts raised a number of other challenges. It is not necessary to go through them in detail.
Conclusions on damages as between Dymocks and Dalton
In my view, because Dalton's breach of duty extends to the whole of the roofing system (but with the exclusion noted at [163] above), and because in my view the whole of the roof (qualified in the same way) requires replacement, Dalton's liability is co-extensive in amount with that of Capral. Thus, I assess damages against Dalton at $764,545.45 exclusive of GST.
Issues 8 and 9: misleading or deceptive conduct
By the time of final submissions, Dymocks did not press its claim based on alleged misleading or deceptive conduct.
Issue 10: apportionable claim?
Dalton accepted that Dymocks' claim against it was not an apportionable claim, and thus there was no ground for adjusting its liability under Part 4 of the Civil Liability Act.
Issue 11: limitation
Dymocks' case was that the damage was discovered in late September 2003, and that proceedings were commenced (barely) within six years of the date of discovery.
It was I think common ground that a cause of action in negligence, relating to defects in a building, accrues when the defects become manifest or are discovered, or could first have been discovered with the exercise of reasonable diligence.
Mr Forsyth gave unchallenged evidence that the defects were first discovered underneath screws which the maintenance manager at the time, Mr Ainsworth, had removed. This happened, Mr Forsyth said, "in or about September 2003" (affidavit sworn 17 December 2010, para 64).
Mr Forsyth said that, shortly after the damage was reported to him, he inspected it; and more such damage was found. He then wrote a letter to Capral dated 25 September 2003, advising it of the corrosion damage.
That evidence, which I accept, provides a basis for inferring, as I do, that the corrosion damage was first discovered within a week or so before 25 September 2003.
I have no doubt that a maintenance manager in the position of Mr Ainsworth would have regarded the presence of corrosion in the roof as significant. I have no doubt that he would have reported it promptly to Mr Forsyth. I have no doubt that Mr Forsyth would have been concerned at the report. I have no doubt that Mr Forsyth would have arranged to inspect the damage very soon after the report was given to him. And I have no doubt that, the report having been confirmed by personal inspection, Mr Forsyth would have acted swiftly to communicate the discovery to Capral.
Dalton's attack was based not so much on that chain of events as on the proposition that, with reasonable diligence, the corrosion could and should have been discovered at some earlier time. Mr Roberts referred to evidence given by the corrosion experts to the effect that they would have expected corrosion to manifest itself earlier.
I do not think that the question is to be resolved by speculative evidence of this kind given by experts. It is to be resolved by looking at the facts, so far as they are known. At all material times there has been a maintenance manager employed at the property. At all material times, the maintenance manager's duties have included regular inspections of the property, including the roof. The roof has been washed down regularly, to prevent corrosion occurring underneath accumulated leaf litter and the like.
In those circumstances, I think it more likely than not that visible evidence of corrosion would not have passed unnoticed. Further, I think it more likely than not that that if some evidence of corrosion had been detected, the maintenance manager would have reported it (as Mr Ainsworth did in September 2003) to Mr Forsyth. There is no evidence to suggest that any earlier report was made; indeed, this aspect of Mr Forsyth's evidence (which relates to "discovery of corrosion") was not challenged.
I conclude that the limitation defence has not been made good.
Issues 12, 13 and 14: Capral's claim against Stramit
Since Capral's cross-claim against Stramit has been resolved, it is not necessary to consider these issues.
Issue 15: contribution between Capral and Dalton
The claims for contribution were based on the principle that two persons who are under a coordinate liability to make good the one loss must contribute rateably to the satisfaction of that loss; so that, if one of those persons contributes more than his or her rateable share, the other will be liable to make good the excess. That principle is exemplified in the decision of the High Court of Australia in Albion Insurance Company Limited v Government Insurance Office of New South Wales (1969) 121 CLR 342. The principle was not in doubt, nor could it be.
Neither Mr Neal nor Mr Roberts addressed on this issue. At first blush, it might be thought that the application of the principle is plain. However, even if it should be assumed that the liabilities (having, as they do, separate sources) are coordinate, orthodox principle suggests that, neither party having paid anything, let alone more than its rateable share, there is no present ground for the court to intervene. See Woolmington v Bronze Lamp Restaurant Pty Ltd [1984] 2 NSWLR 242.
In the circumstances, I suggested, in the course of submissions, that if the question of contribution between Capral and Dalton arose, it should be left until the parties had had an opportunity of considering the reasons why it did arise. Mr Neal and Roberts agreed with that suggestion.
Accordingly, I reserve further consideration of this issue.
Conclusions and orders
Capral is liable under its warranty to pay the cost of replacing all the roofing (that is to say, over both the verandas and walkways and the main buildings). Dalton is liable to the same extent, for negligence. The amount of that liability, exclusive of GST, is $764,545.45. That sum was assessed (by Mr Makin) as at 31 January 2013. Interest should run from that date, if Dymocks wishes to calculate it.
Capral's cross-claim against Stramit is to be dealt with in accordance with the agreement between them.
The claims for contribution between Capral and Dalton should be reserved for further consideration.
Prima facie, costs should follow the event that Dymocks has succeeded against Capral and Dalton. I will however hear the parties on costs.
In those circumstances, I will stand the matter over to a date to be fixed to enable the parties to bring in short minutes of order to give effect to these reasons. On that date, I will deal with any dispute as to the form of orders, and (should it be in dispute), with the question of costs. If Capral and Dalton wish to agitate their cross-claims for contribution, that should be dealt with in the orders.
I make the following orders:
(1) direct the plaintiff to submit to the defendants by 19 April 2013, and to provide to my Associate, a draft of the orders sought to give effect to these reasons.
(2) In the event that there is a dispute as to the orders to be made, direct the parties opposing the orders sought by the plaintiff to submit to each other by 26 April 2013 with a copy to my Associate, the orders sought; the parties to exchange, and to deliver to my Associate, brief written submissions in support of the orders for which each contends within seven days thereafter.
(3) Stand the matter over to 10:30am on 29 April 2013 for the making of final orders.
(4) Reserve liberty to apply in chambers in the event that there is no dispute as to the orders to be made.
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Decision last updated: 17 April 2013
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