Engineered Fire and Safety Solutions Pty Ltd v The Owners Strata Plan 45205

[2009] NSWDC 309

CITATION:	Engineered Fire and Safety Solutions Pty Ltd v The Owners Strata Plan 45205 [2009] NSWDC 309
HEARING DATE(S):	19 - 23 October 2009
EX TEMPORE JUDGMENT DATE:	27 November 2009
JURISDICTION:	Civil
JUDGMENT OF:	Murrell SC DCJ
CATCHWORDS:	Building and construction contract – Fire detection and alarm system - Total failure of consideration - Requirement to supervise – Responsibility for design
LEGISLATION CITED:	Civil Liability Act 2002 s 5O
CASES CITED:	Bolan v Friern Hospital Management Committee [1957] 1 WLR 582 David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48 Dobler v Halverson [2007] NSWCA 335 Rogers v Whitaker [1992] HCA 58 Sheldon v McBeath (Court of Appeal, 12 March 1993) Sidaway v Governors of Bethlehem Royal Hospital [1985] AC 871 Sutcliffe v Chippendale and Edmondson (1971) 18 BLR 149
PARTIES:	Engineered Fire and Safety Solutions Pty Ltd The Owners Corporation Strata Plan 45205
FILE NUMBER(S):	3749/08
COUNSEL:	Mr Chen for the Plaintiff and Cross Defendant Mr Young for the Respondent and Cross Plaintiff
SOLICITORS:	Kennedys for the Plaintiff and Cross Defendant Doyle Edwards Anderson Lawyers Pty Ltd for the Respondent and Cross Plaintiff

1 On 3 December 2004, there was a fire in a unit of the Hyde Park Plaza (HPP), a 15 - 16 storey residential owner occupied and serviced apartment building in College Street, Sydney. A resident complained to the Fire Brigade that, at the time of the fire, no alarm had sounded on their floor (Exhibit 1, tab 4). In late 2004/ early 2005, officers of the Fire Brigade and Council visited the building (Exhibit 1, tab 18, Exhibit DA 1, p 21).

2 Although the building had been constructed in 1971 when the fire detection and alarm standard was categorised as CA 15, on 7 December 2004 the Fire Brigade issued a fire order requiring certification of compliance with AS 1670 Building Code of Australia (BCA) E 2.2a, the current building standard for automatic fire detection and alarm systems.

3 The building was a class 3 building. It housed a transient population. In the case of a transient population that is unfamiliar with the layout of a building, it is necessary to take greater precautions. The building was more than 25 m in height. Where the height of a building exceeds 25 m, Fire Brigade access is limited (Exhibit IG1, page 703). For a class 3 building more than 25 m in height, strict compliance with AS 1670 required sprinklers throughout the building.

4 HPP had a sprinkler system to the second floor only. Above the second floor, there were heat detectors in the common areas and residential/hotel units, plus a few smoke detectors in common areas. The heat and smoke detectors were connected to a fire indicator panel or FIP (Exhibit DA1, p 21).

5 Although the fire order issued on 7 December 2004 was not pursued, HPP remained concerned that the Council would order a fire safety upgrade. Officers of the Fire Brigade and the Council "politely (intimated) that an upgrade (was) necessary" (Exhibit DA1, pp13, 21).

6 HPP’s building manager spoke to Mr Alexander of Engineered Fire and Safety Solutions Pty Ltd (EFSS), fire safety engineers. Mr Alexander pointed out to the Council and the Fire Brigade that the building was governed by CA 15 rather than AS 1670. Those organisations were "not happy" with that approach. Mr Alexander advised the building manager that "a proactive approach is better than the forced approach” (Exhibit DA 1, p13). HPP decided to undertake a voluntary upgrade.

7 Having spoken to Mr Alexander, on 24 January 2005 HPP’s building manager advised HPP that there were three options (Exhibit DA 1, tab F, p 22):

(1) A sprinkler system throughout the building. The estimated cost was $1.5 to 2 million.
(2) Smoke detectors in units and common areas, hardwired to a FIP that was connected to an Emergency Warning Intercommunication System (EWIS). On activation of an alarm, an alert would sound to all occupants on the affected floor. The estimated cost was $150,000 to $190,000.
(3) Smoke detectors in the common areas only, connected to an EWIS. The estimated cost was $80,000-$120,000.

8 The building manager recommended that HPP engage EFSS to

“…formulate and submit a specification and estimates that are both economically viable for the body corporate and approved by the Council and Fire Brigade.

This would firstly keep the Council and the Fire Brigade from taking any action and would definitely bode well in any submission we have to make to them."

9 Option (1) entailed strict compliance with AS 1670 but was very expensive. Option (2) was designed to achieve a performance equivalent to AS 1670. Under the Building Code of Australia (BCA) it is possible to design a system that does not satisfy the prescriptive requirements of AS 1670 but is "deemed to satisfy" the standard because it meets the performance requirements of the standard. As a fire safety engineer, Mr Alexander was qualified to develop a "deemed to satisfy" design concept.

10 Mr Alexander gave evidence that, in his view, option (3) was unacceptable in the context of the many deficiencies in the overall fire safety system within the building. Inter alia, the stairs were not pressurised to prevent smoke entry; long corridors were not smoke separated; and the fire separation between floors was incomplete. He said that, from a fire safety perspective, option (3) could not be justified. Further, had EFSS proposed a system that was not equivalent to AS 1670, the proposal may have provoked the Council or the Fire Brigade to issue a fire upgrade order requiring the installation of sprinklers.

11 Mr Alexander said that, prior to the meeting at which the building manager presented the report to HPP, he had cautioned the building manager against option (3), saying that it “may not comply with the regulations and EFSS will not support” ([25] of Mr Alexander’s affidavit).

12 I accept that Mr Alexander did believe that option (2) was the minimum acceptable upgrade and did convey that opinion to the building manager. Mr Alexander appeared to be a credible witness. The asserted opinion was consistent with that of Mr Nenadovich, the expert witness called by EFSS. The asserted statement to the building manager was consistent with the fact that EFSS and HPP were concerned to placate the Council and Fire Brigade. There was no evidence from the building manager (HPP's agent) to the effect that Mr Alexander did not express the opinion that option (2) was the minimum acceptable upgrade.

13 HPP engaged EFSS to implement option (2) in accordance with a letter of offer from EFSS dated 4 March 2005 (Exhibit DA 1, pp 23 - 25). The letter referred to four phases of service: Phase 1 was "determination of scope and documentation", Phase 2 was "fire safety engineering report preparation", Phase 3 was "tendering" and Phase 4 was "post-tender/construction".

Progress of the Work

14 EFSS completed a specification (Exhibit DA 1, tab I). The documents that were issued for reference in the preparation of tenders were the specification, AS 4300 ("General Conditions of Contract for Design and Construct") as amended, AS 4302 (sample "Form of Formal Instrument of Agreement for Design and Construct Contract") and architectural drawings indicating general floor layout (Clause A11 of the Specification, Exhibit DA 1, p30).

15 HPP was supposed to provide the architectural drawings but was unable to locate them. EFSS obtained new drawings.

16 EFSS called for tenders. Three tenders were received. Essential Fire Services (EFS) provided the most competitive tender. On the recommendation of EFSS, in March 2006, HPP entered into an agreement with EFS to undertake the option (2) upgrade.

17 At least one multi sensor detector was installed in each unit, instead of a smoke detector. Multi sensors react to both smoke and heat. They can be programmed to react with different levels of sensitivity.

18 The new detectors were installed in the same position as the old heat detectors.

19 From June 2006 when it began to come on line, the new system generated a high level of false alarms. Most of the false alarms were initiated by inadequate ventilation of cooking smoke or inadequate ventilation of bathroom steam (table in [98] of Mr Nenadovich’s first report).

20 By November 2006, HPP and EFSS were in dispute about the level of false alarms. HPP refused to make further payments to EFSS until the problem was rectified.

21 In late 2006, Mr Alexander began to liaise with AMPAC Technologies Pty Ltd (AMPAC), the multi sensor manufacturer, to develop a solution. EFSS recommended an Alarm Investigation Facility (AIF). The AIF would involve AMPAC reprogramming the alarm system to incorporate "day "and “night" modes. An alarm enunciator panel would be installed at the HPP front desk (which was staffed 24 hours a day). If smoke activated a detector, there would be an alarm at the alarm enunciator panel. Provided a staff member indicated that he/she had received the alarm, there would be a delay in transmitting the alarm to the Fire Brigade. In the "day" mode, the delay would be five minutes. In the "night" mode, the delay would be one minute. During the delay period, the staff member would telephone and/or attend the unit in question to investigate whether the problem was caused by inadequate ventilation. If the staff member reset the relevant smoke/ multi sensor detector within the delay investigation period, the Fire Brigade would not be notified.

22 In December 2006, HPP declined to adopt the recommended AIF (Exhibit DA1, p 93). In March 2007, HPP terminated the services of EFSS.

HPP Engages Resources Risk Management

23 In April 2007, HPP engaged Resources Risk Management (RRM) to audit the system, supervise rectification and commission the work by EFS. Mr Garbutt of RRM, a fire protection consultant, issued 14 rectification directions to EFS, including directions that detectors be moved or installed and directions that lights be moved. Minor non-compliances were overlooked (for example, where the distance between a detector and a light was 280 mm rather than the required 300 mm).

24 Mr Garbutt considered that the upgrade implemented by EFSS was unduly expensive and that two other options would have been better suited to the classification and characteristics of HPP:

(1) Install smoke detectors in the common areas only. Under this option, the existing heat detectors would have remained within the units and would have been supplemented by battery-operated smoke alarms located in the egress path from the sleeping area within each unit. A smoke alarm would have sounded within the unit when the smoke sensor reached 60% of its nominal alarm threshold, permitting the occupant to take measures to clear the smoke and avoid a false alarm. The estimated cost was $125,000. This option was very similar to the third option mooted by Mr Alexander, except that Mr Garbutt’s option also included a battery-operated smoke alarm within each unit.
(2) Make no changes in the common areas and simply install smoke alarms with sounders in the egress path from sleeping areas in each unit, at an estimated cost of $25,000.

25 At the hearing, option (2) was not seriously advocated. It can be dismissed peremptorily as falling far short of modern standards of fire safety. It is an option that neither the Council nor the Fire Brigade would have supported.

26 Each of the options proposed by Mr Garbutt relied upon smoke alarms (as opposed to smoke detectors). Mr Nenadovich explained that smoke detectors are hardwired to a FIP. Usually, they have no inbuilt sounder, although one can be incorporated to sound only in the unit where the detector operates. The fire alarm system at HPP included a FIP and an EWIS panel. Generally, fire alarm systems that include an EWIS panel are configured to operate sounders on the floor or zone where the detector has activated and then operate sounders on other floors, often cascading two floors above and one floor below the fire floor, until all floors of the building are alerted. Unlike smoke detectors, smoke alarms are stand-alone devices that utilise a built-in sounder. Generally, they are not connected to a FIP. They do not transmit a signal externally.

27 By the time that Mr Garbutt became involved, it was too late to implement either of his recommended options. Mr Garbutt modified the EFSS system by adding an AIF. There is now an alarm investigation period of five minutes after the receipt of an alarm from any residential sole occupancy unit and before a full building alarm is raised and the alarm is transmitted to the Fire Brigade. During this period, the building manager can determine the source of the alarm and, if appropriate, reset the alarm. However, Mr Garbutt stated that the AIF system is not a suitable permanent solution to the problem of false alarms.

28 Because of deficiencies in building construction, deficiencies in fire egress (including lack of fire stair pressurisation) and other matters, in early 2008 the Council issued a fire safety order (Exhibit IG1, pp 701 - 704). The fire safety order required certification of the automatic smoke detection and alarm system to AS 1670/ BCA E 2.2a standard. In March 2009, the order was amended to require the addition of a sounder base to at least one multi sensor detector in each sole occupancy unit to provide additional early warning for occupants (Exhibit IG1, page 714).

29 As the retrofitting of sounder bases would be very expensive, Mr Garbutt has been attempting to negotiate the removal of the requirement for sounder bases and the substitution of local alarm sounders.

Issues

30 EFSS sued HPP for unpaid invoices in relation to work performed. HPP cross claimed, alleging breach of an implied contractual condition that EFSS would exercise reasonable skill, care and diligence in the provision of services and breach of the duty of care in relation to the provision of services.

31 The principal issues are:

1. Whether there was a total failure of consideration.
2. Whether EFSS breached its contractual obligations/ duty of care by failing to undertake a needs assessment and prepare an alternative solutions report.
3. Whether EFSS failed to recommend the most suitable and appropriate upgrade of the fire alarm system, being the first option proposed by Mr Garbutt.
4. Whether an AIF is an appropriate permanent solution to the problem of false alarms.
5. The effect of s 5O of the Civil Liability Act 2002.
6. Whether, as part of its design or supervisory role, EFSS was responsible for ensuring that the new detectors were located where they did not generate false alarms.
7. To what extent EFS is responsible for any deficiency in the placement of detectors.
8. Damages

A Total Failure of Consideration?

32 HPP contended that there was a total failure of consideration in that EFSS recommended a completely inappropriate upgrade.

33 There is a total failure of consideration where, from the perspective of the payer, the payer has received no part of the benefit for which it bargained under the contract: David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48.

34 This claim is not made out. In general terms, HPP received what it bargained for, i.e. a design concept, tender documents, assistance with the tendering process and some supervision of the installation of a new fire alarm system. The real issues concern whether the fire alarm system was the most appropriate system, whether EFSS fulfilled all its contractual and common law obligations, and the quality of the system.

Needs Assessment and Alternative Solutions Report

35 HPP contended that EFSS failed to undertake a needs assessment and failed to prepare an alternative solutions report as required by the contract. As a consequence, EFSS failed to recommend the most appropriate upgrade.

36 HPP engaged EFSS in accordance with the EFSS offer of services dated 4 March 2005 (Exhibit DA 1, tab G), which provided:

" Phase 1 -- Determination of Scope and Documentation.
Undertake a needs assessment for the systems replacement
…
Phase 2 -- Fire Safety Engineering Report preparation
Prepare an alternative solution report based on Fire Safety Engineering guidelines for the continued deletion of sprinkler protection from the upper storeys of the building.
Liaison with Sydney City Council in respect of the report and any clarifications.
Liaison with the NSW Fire Brigades in support of the FSE report…”

37 HPP argued that, as EFSS had developed a design concept prior to the offer of 4 March, the contract must have envisaged that, after 4 March, EFSS would undertake a more detailed needs assessment and, following liaison with the Council and the Fire Brigade, EFSS would prepare a detailed report on alternative solutions.

38 There is some attraction to the argument that, to give meaning to the contractual references to needs assessment and alternative solutions reporting, the contract must have envisaged that design alternatives would be developed after 4 March.

39 However, the building manager’s report to HPP (Exhibit DA 1 tab F) supports Mr Alexander’s evidence that, prior to 4 March 2005, he had considered the needs of the building and outlined three design concepts to HPP’s building manager. There is no suggestion that the building manager had the expertise to devise the three options mentioned in his report, let alone give an estimate as to the cost of each. The report must reflect a conversation between Mr Alexander and the building manager. Consequently, despite the terms of the letter of 4 March 2005, I accept that the needs assessment and design concept development substantially occurred prior to that date.

40 The Phase 2 "alternative solutions report" must have been intended to serve a purpose other than the purpose served by the needs assessment/concept development that was part of Phase 1. Phase 1 also included preparing tender documents. There would be little point in preparing tender documents prior to determining the design concept.

41 Mr Alexander said that the purpose of the Phase 2 report was to convince the Council and Fire Brigade that option (2) was an adequate upgrade and it was not necessary to upgrade to a full sprinkler system. He gave evidence that, in April 2005, the building manager told him that the Council and the Fire Brigade had accepted the option (2) upgrade. The two men agreed that it was therefore unnecessary to prepare a Phase 2 report ([39] of Mr Alexander's affidavit). Mr Alexander said that, in lieu of undertaking the Phase 2 work, EFSS arranged the architectural drawings that HPP was supposed to provide but could not locate.

42 In effect, Mr Nenadovich, the fire safety engineer called by EFSS, said that, while it was usual to do a report, the explanation given by Mr Alexander made good sense.

43 Generally, Mr Alexander appeared to be a credible witness. HPP did not call their building manager to contradict Mr Alexander's evidence concerning the conversation of April 2005. I accept Mr Alexander's evidence that the parties agreed to proceed without an "alternative solutions report". I accept Mr Alexander’s explanation that, in lieu of undertaking the Phase 2 work, EFSS arranged the architectural drawings that HPP was supposed to provide but could not locate.

The Most Suitable and Appropriate Upgrade

44 In March 2009, Mr Garbutt claimed that certification of the building should be to CA15 standard only (Exhibit 1, tab 26). At other times, he appeared to accept that it was appropriate to upgrade to meet the requirements of AS 1670 and BCA Specification B2.2a. Mr Garbutt acknowledged that, having regard to the age of the building, the task of upgrading to AS 1670 was destined to be difficult.

45 HPP relied on the evidence of Mr Garbutt in support of its contentions that EFSS recommended a system that was inappropriate and/or noncompliant with AS 1670.1 clause 2.1 because it failed to prevent an excessively high level of false alarms.

46 AS 1670.1 clause 2.1 provides:

" 2.1 Components

System components shall be selected and located in order to achieve a stable and reliable performance."

47 Mr Nenanovich was the only relatively independent expert called in the case. He was a well-qualified and impressive witness whose credit was not substantially questioned. I accept his expert opinion in relation to all matters about which he expressed an opinion.

48 Mr Nenadovich said that there was "every chance" and it was "likely" that, in the absence of an acceptable voluntary upgrade, the Council would have ordered an upgrade to sprinklers throughout the building. He said that, in the last 20 years, he had not seen another class 3 building with a CA 15 system.

49 At [55] of his first report, Mr Nenadovich stated:

"[55] Having regard to:
a) the needs assessment undertaken by EFSS (and in particular the deficiencies of the fire safety systems identified in such assessment);
b) the risk of a fire order requiring the installation of a sprinkler system;
c) the history of the fire brigade involvement in December 2004,
in my view, the system proposed by EFSS was well within the range of solutions that would be devised by the ordinary skilled fire engineer exercising and professing to have that special skill. In my view, that system accorded with ordinary good practice of a competent fire safety engineer and was in fact the correct fire safety solution."
(emphasis added)

50 Mr Nenadovich said that Mr Garbutt's option (1) was both contrary to good fire engineering practice and noncompliant with the BCA and AS 1670 ([109-110] of his first report). It was contrary to good fire engineering practice because a fire in an unoccupied unit would generate an alarm that sounded only in the particular unit. Any fire would grow substantially before the heat detector in the unit or a common area smoke detector was activated, sounding an alarm to the occupants of the floor and calling the Fire Brigade. He said that one cannot rely upon the integrity of sole occupancy units to contain smoke. Mr Garbutt's option (1) was contrary to AS 1670 because BCA specification E2.2a does not permit a system of smoke alarms and heat detectors in a class 3 building that is higher than 25 m.

51 I find that, had HPP failed to implement an upgrade to a standard equivalent to AS 1670, there was a very real prospect that the Council or Fire Brigade would have issued a fire order requiring strict compliance with AS 1670, i.e. sprinklers throughout the building. EFSS was entitled - if not required - to take that consideration into account when determining the level of upgrade that it recommended to HPP. Further, any lesser upgrade would have been contrary to good fire safety engineering practice because, in the case of a real emergency, it would have generated an inadequate alarm.

52 A particular criticism made by Mr Garbutt was that the EFSS system did not include a sounder base fitted in each sole occupancy unit to provide early warning to the occupants of that unit. However, Mr Garbutt is resisting a 2008 demand by the Fire Brigade that sounder bases be retrofitted. I conclude that Mr Garbutt himself does not believe that sounder bases are essential.

53 Another criticism made by Mr Garbutt was that EFSS should have sought development approval for the upgrade. Neither the legal necessity nor the practical desirability of seeking development approval was clearly explained. The Council was aware that a voluntary upgrade was in progress. There is no evidence that the Council expressed disapproval or requested HPP to lodge a development application. Mr Nenadovich saw no need for a development application because the upgrade was voluntary, did not depart from AS 1670 and was in no way inferior to CA 15, the standard that applied when the building was constructed.

54 EFSS was alert to the risk of false alarms. EFSS considered the use of multi sensor detectors because they have a range of settings, each of which has a different level of sensitivity. Section B3.2 of the specification provided:

"B3.2 in maisonette/bed-sitter rooms a multi sensor heat and smoke detector or approved alternative detector shall be considered to overcome possible false alarms caused by cooking other activities."

55 Section B29 of the specification provided:

"The costs of Fire Brigade attendances to false alarms caused by defective installation, faulty or malfunctioning equipment in the fire protection systems shall be charged directly to the Contractor for the duration of the defects liability period.”

56 The fact that the specification required that the successful tenderer bear the cost of any false alarms is a further indication that EFSS understood that false alarms might be generated while the work was under way and during the defects liability period of 52 weeks from the commissioning and practical completion (specification section A 18).

57 Even if it was the responsibility of EFSS rather than EFS to ensure that systems components were selected and placed such that they gave "stable and reliable performance" in accordance with AS 1670.1 clause 2.1, there remains an issue as to the point in time at which such performance was required.

58 Mr Nenadovich made the common sense observation that, in his experience, a new system must be connected before any problem of nuisance alarms could be assessed during the "settling-in period" ([100] of his first report).

59 Consistent with this approach, once the problem of false alarms was identified, EFSS liaised with AMPAC, the multi sensor manufacturer. HPP rejected an AIF, the proposed solution to the problem of false alarms.

60 Having regard to the inherent difficulties of achieving stable performance in an old building like HPP, the practice to which Mr Nenadovich referred, the terms of the specification and section B29 of the specification, I find that initial unstable performance was a recognised risk. Such instability did not necessarily mean that the design concept was deficient.

61 EFSS did recommend the most suitable and appropriate upgrade system. Further, the upgrade systems recommended by Mr Garbutt were inappropriate.

An Alarm Investigation Facility as a Solution to the Problem of False Alarms

62 Mr Garbutt obtained Fire Brigade authority to install an AIF while he attempted to negotiate removal of the requirement for sounder bases. He said that it was "an interim solution pending resolution of the most cost-effective manner of preventing unwanted alarms" (p 7 of his second report). He maintained that an AIF was not a permanent solution to the problem of false alarms because it depended on human intervention and, during the alarm investigation period, a loud and disruptive alert signal would be transmitted to every sole occupancy unit on the affected floor.

63 Mr Garbutt drew attention to AS 4428.10 (p 11 of his second report). It provides:

"The AIF is to be incorporated only in detection systems where staff trained in its operation are present and the inclusion of an AIF has been sanctioned by the local fire authority."

64 As the HPP front desk was staffed 24 hours a day, HPP was capable of complying with this provision.

65 The AIF proposed by EFSS was more sophisticated than that installed by Mr Garbutt. The EFSS system was to have different day and night modes. An alarm enunciator panel was to be installed at the front desk rather than at the FIP, at an anticipated cost of $6,000. The purpose of the proposed alarm enunciator panel was ensure that HPP staff were immediately notified of any alarm, maximising their response time and minimising unnecessary disruption to residents.

66 Mr Nenadovich said that an AIF was an allowable and recognized means of dealing with alarms and was not a "temporary measure".

67 Mr Alexander gave uncontradicted evidence that EFSS has successfully utilised an AIF at a comparable location ([84] of his affidavit). The AIF at HPP has been in place for more than two years and there is no evidence of unsatisfactory performance resulting from staff error or otherwise (Exhibit 1, tab 7).

68 Having regard to the proven success of the AIF installed by RRM at HPP, the experience of Mr Alexander and the expert opinion of Mr Nenadovich, I find that the AIF proposed by EFSS was an appropriate permanent solution to the problem of false alarms. Insofar as the original system was inappropriate because it generated false alarms or failed to comply with AS 1670 clause 2.1, the proposed AIF would have resolved that problem.

Section 5O of the Civil Liability Act

69 The standard of care required of EFSS was governed by the common law as modified by s 5O. Section 5O of the Civil Liability Act 2002 creates a further hurdle in relation to HPP’s claim in negligence.

70 Prior to the introduction of s 5O, the standard of care to be exercised by a professional person was that of the ordinary, skilled person exercising and professing to have the relevant special skill: Rogers v Whitaker [1992] HCA 58. Section 5O partially reinstated the test expressed in Bolan v Friern Hospital Management Committee [1957] 1 WLR 582 and Sidaway v Governors of Bethlehem Royal Hospital [1985] AC 871 as a requirement to act in accordance with a practice accepted by a responsible body of professional opinion, although there may be another body of professional opinion.

71 Section 5O provides:

“(1) A person practising a profession ( “ a professional ” ) does not incur a liability in negligence arising from the provision of a professional service if it is established that the professional acted in a manner that (at the time the service was provided) was widely accepted in Australia by peer professional opinion as competent professional practice.
(2) However, peer professional opinion cannot be relied on for the purposes of this section if the court considers that the opinion is irrational.
(3) The fact that there are differing peer professional opinions widely accepted in Australia concerning a matter does not prevent any one or more (or all) of those opinions being relied on for the purposes of this section.
(4) Peer professional opinion does not have to be universally accepted to be considered widely accepted.”

When there is a division of professional opinion, a professional person whose conduct is criticised may rely upon the “defence” that there is a body of professional opinion that favours the professional person's position (unless that opinion is irrational): Dobler v Halverson [2007] NSWCA 335.

72 EFSS argued that Mr Garbutt's professional opinion was irrelevant because he was a fire protection consultant rather than a fire safety engineer, asserting that, as a fire protection consultant, Mr Garbutt lacked graduate or postgraduate engineering qualification and was not qualified to design fire safety systems that were “deemed to satisfy” building standards.

73 Mr Garbutt's lack of engineering qualification may affect the weight to be attached to his opinion regarding whether the engineering design of fire safety systems was appropriate or inappropriate. However, his ample experience does enable him to express an opinion.

74 The insurmountable difficulty with HPP's case in negligence is that the evidence of Mr Alexander and Mr Nenadovich establishes a body of opinion that not only was the EFSS fire safety solution an appropriate solution; from a fire safety perspective, it was the minimum upgrade that was acceptable. At [55] of his first report, Mr Nenadovich said:

"In my view, the system proposed by EFSS was well within the range of solutions that would be devised by the ordinarily skilled fire at engineer exercising and professing to have that special skill. In my view, that system accorded with ordinary good practice of a competent fire safety engineer and was in fact the correct fire safety solution."

75 For the reasons stated above, I accept the evidence of Mr Nenadovich. In relation to the appropriateness of the design concept, HPP’s claim in negligence cannot succeed because the EFSS design concept accorded with competent professional practice.

The Design Responsibilities of EFSS

76 In Phase 1 of the contract, EFSS was required to prepare technical sections of tender documents "for design and construct tendering of the project". In Phase 4, EFSS was required to "review contractor’s design drawings".

77 Section B8 of the specification provided:

"The Contractor shall produce and submit draft design drawings of the works to (EFSS) for review and comment before the commencement of the project, including equipment, cable and duct routes.

Any reworking of materials and/or equipment installed without comment shall be carried out at the contractor’s cost."

78 The agreement between HPP and EFS (Exhibit DA 1, tab L) was a "design and construct contract". Under the specification, it was contemplated that preliminary design would take approximately 4 weeks (section A12, Exhibit DA1, page 30).

79 In other words, EFSS contracted to develop the overall concept and ensure compliance with AS 1670. The tenderer would devote considerable time to the detailed design. EFSS would review the design drawings prepared by the tenderer and comment on them. I infer that the purpose of the review on was to determine whether the design complied with the overall design concept and the Australian Standard.

80 The design drawings submitted to EFSS were deficient in that they failed to identify cable and duct routes in accordance with section B8 of the specification. However, it is not alleged that any damage flowed from that failure.

81 HPP argued that, as part of the review process, EFSS should have ensured that each detector would be positioned where there was good ventilation, rather than merely indicating the general area in which each detector would be placed, with the result that multi sensor detectors were inappropriately positioned in the location of old heat detectors. Mr Garbutt stated (p 6 of his second report):

"I would have expected a reasonably competent fire safety consultant to have dealt with this issue during the review of the design drawings and would have expected the installing contractor to be advised to locate the smoke detectors away from the cooking appliances whilst still satisfying the requirements of BCA Specification E 2.2a.”

82 It was not part of EFSS's role to review every detail of the design. EFS had the primary responsibility for design. EFS was a fire alarm system specialist and was to be paid a substantial sum of money for designing and constructing the upgraded system.

83 In any event, according to Mr Harper of EFSS ([33] of his affidavit), on 22 March 2006 Nick Bouseka, a representative of HPP, agreed that detectors should be positioned where an existing heat detector was located in order to minimise cost. There was a significant cost saving associated with placing the new, sensitive multidetectors in the location of the old heat detectors. Mr Bouseka was not called to contradict Mr Harper.

84 Further, the evidence does not establish that the problem of false alarms would have been obviated by different placement of the detectors. The evidence did not link particular false alarms with particular detectors that were located close to cooking facilities and thereby establish that different placement was warranted despite the additional cost.

Adequacy of Supervision

85 HPP submitted that EFSS inadequately supervised the works and that, as a consequence, detectors were positioned where they were liable to cause false alarms.

86 As part of Phase 4, EFSS was to:

"Inspect works 2 x 3 hour visits per week for an envisaged 20 week installation program
Prepare reports on quality, conformity and progress, recommend the extent of payment to the client;"

However, " full-time supervision of construction works" was expressly excluded.

87 Consistent with the contract between HPP and EFSS, the specification provided:

"(EFSS) will inspect the works on a regular basis for progress and quality. Any works which do not meet the requirements of the specification, appropriate Standards and/or legislation shall be made good at no cost to the Owners."

88 In the contract between HPP and EFS, EFSS was nominated as the "superintendent". Under the "general conditions of contract for design and construct" that formed part of the specification:

"30.3 If the Superintendent discovers material or work provided by the Contractor which is not in accordance with the Contract, the superintendent shall as soon as practicable notify the Contractor. The Superintendent may direct the Contractor --
…
(c) to redesign, reconstruct, replace or correct the material or work; or …”

89 Mr Harper of EFSS inspected unit interiors only infrequently. According to his evidence, he attended HPP at least once a week but was rarely given access to hotel rooms. He inspected the interior of any unit on which EFS was working at the time of an inspection, but did not seek to inspect other units because he did not wish to inconvenience the occupants. Otherwise, inspections were confined to the common areas. He said that he examined the work in progress "from a technical compliance perspective". Consistent with this evidence, the defects list prepared by Mr Harper of EFSS on 26 October 2006 addresses problems in the common areas rather than within units.

90 HPP relied on the decision in Sutcliffe v Chippendale and Edmondson (1971) 18 BLR 149 in support of the proposition that a supervising architect was required to follow the progress of work and ensure that it complied with the general requirements of the contract before certifying progress payments. Similarly, in Sheldon v McBeath (Court of Appeal, 12 March 1993), the majority referred to the typical case of architectural supervision that required the supervisor to inspect the principal parts of the work on a continuing basis in order that he/she was in a position to certify progress payments.

91 Reliance on such cases was hardly necessary. In this case, the contract expressly required six hours per week supervision. It required that EFSS certify progress payments, impliedly necessitating adequate prior inspection. Further, the specification contemplated a significant level of supervision, such that significant defects were likely to be "discovered" in the course of construction.

92 Arguably, there was inadequate supervision of unit interiors during the course of the work. However, the evidence of inadequate supervision of unit interiors was vague and there was no evidence of particular damage flowing from deficient supervision. For example, there was no evidence that EFSS had authorised particular progress payments although the work the subject of the payments had not been inspected and was substandard. As stated above, there was no evidence linking particular detectors to particular false alarms.

93 In any event, at the end of the project Mr Garbutt undertook a full inspection. He gave EFS only 14 directions. EFS complied with those directions and thereby - presumably - cured any significant defects. Mr Garbutt considered that the work was complete and substantially complied with AS 1670. He authorised final payment to EFS.

EFS

94 Under the specification, any unsatisfactory work was to be removed and replaced in a satisfactory manner without cost to the owner (section B6). Under the "general conditions of contract for design and construct" that were incorporated into the EFS contract, EFS was required to complete the work so that, when completed it was fit for the stated purpose (clause 4.1 (e) (i)), and was required to rectify any defects or omissions existing at the date of practical completion (clause 37).

95 Section B3.1 of the specification required that detectors be “installed” in accordance with AS 1670.1 and BCA specification E2.2a. Under sections B29 and B30 of the specification:

"B29 COSTS OF FALSE ALARMS
The costs of Fire Brigade attendances to false alarms caused by defective installation, faulty or malfunctioning equipment in the fire protection systems shall be charged directly to the Contractor for the duration of the defects liability period.

B30 WARRANTY AND MAINTENANCE
The Contractor shall include within the Offer, the full warranty and regular maintenance of the system for a period of 52 weeks after practical completion.
The warranty and maintenance shall include ALL regular servicing activities, along with the cost of any consumables required for the period of the warranty."

96 Had any damage flowed from the incorrect placement of detectors, EFS would have been primarily responsible for that damage. EFS was responsible for the cost of false alarms caused by “faulty installation” and “installation” was to comply with AS 1670.1.

The Unpaid Invoices

97 In addition to the original work, EFSS undertook other work - in relation to equipment maintenance - for which it charged HPP the sum of $3,640 plus GST (Exhibit DA 1, p 119). EFSS is entitled to the total sum of $45,470 (the original contract price of $41,830 and the sum for the additional work of $3,640), less the sum of $2,000 in relation to defects inspection, plus GST, a total of $47,817. It was paid $40,084 (Exhibit DA 1, tab Z, handwritten notes).

98 On the claim, there will be a verdict for EFSS in the sum of $7,733 plus interest ($2370.54 to 27 November 2009). On the cross-claim, there will be a verdict for EFSS.