Ginos & Associates Pty Ltd v NBD Bank NA and Anor No. Scgrg-97-727 Judgment No. S6646

[1998] SASC 6646

GINOS & ASSOCIATES PTY LTD V NBD BANK NA (FORMERLY KNOWN AS NATIONAL BANK OF DETROIT) & SOUTH ITALY TILING (SA) PTY LTD TRADING AS BRIANNI CONSTRUCTION

Full Court
Coram:  Cox, Mullighan and Williams JJ

Cox J

Appeal against a District Court judgment in a building case.

In July 1989 the first respondent NBD Bank NA ("NBD") bought the house and land at 31 Birksgate Drive, Urrbrae from All Teichman Investments Pty Ltd ("All Teichman") for a residence for its senior staff member, Mr Bateman. The house had been built for All Teichman by the second respondent South Italy Tiling (SA) Pty Ltd ("Tiling") whose director and de facto manager, Mr Brianni, was an experienced builder. Bateman took possession of the house in September 1989. The following winter the house began to show signs of structural distress which progressively worsened as the north-west corner of the house subsided. The house had to be underpinned at a cost of $54 120. NBD sued Tiling and also the firm of consulting engineers, Ginos and Associates Pty Ltd ("Ginos") whose staff engineer, Mr Alberton, had designed the footings and supervised their construction. NBD claimed that the builder was in breach of the warranties prescribed by s27(2) of the Builders Licensing Act and that both defendants were in breach of the duty of care they owed to NBD, as a subsequent purchaser of the house, by reason of its faulty construction. It relied on the principle established in Bryan v Moloney (1995) 182 CLR 609. The defendants denied liability. The learned trial Judge found that both defendants were liable to the bank and entered judgment accordingly against both of them, but he also held that Tiling’s degree of responsibility for NBD’s loss was relatively insignificant and ordered Ginos to indemnify Tiling to the full extent of the judgment entered against it. (In this and other respects I ignore a judgment for NBD against Tiling alone for $2 050 which is separate from the main judgment and is not challenged in this appeal.)

Ginos has appealed against the District Court’s judgment. It does not now deny that it was in breach of its duty to NBD but it disputes certain findings of fact and it challenges the order under the Wrongs Act that leaves it bearing in effect the whole of the bank’s loss. It argues that the judge should have found on the evidence that there were four persons or bodies that contributed to the house damage - Tiling, the local council, the excavation contractor and Ginos itself - and that in accordance with s72 of the Development Act 1993 Ginos should have been required to pay no more than its proportionate share of the damages. Alternatively, if s72 does not apply, it says that liability should have been apportioned under the Wrongs Act equally between the two defendants. Tiling, for its part, has not cross-appealed - it is content with the Judge’s order - but its counsel submitted to us that the finding of negligence that the learned judge made against Tiling was not warranted by the evidence and should be set aside.

We heard submissions about the interpretation and operation of s72. Whether those matters fall to be decided in this appeal will depend on the view we take of the facts and the contribution order.

The house, of two storeys, was being built on the northern side of Birksgate Drive on land that sloped away from the road towards the north and also the west.  The footings design, prepared by Ginos, provided for concrete piers to be founded on shale, or bedrock, so that any risk of damage to the house from soil movement would be eliminated.  Ginos had obtained soil samples and reckoned that the shale was about 1.5 metres below the surface of the land.  However, this proved not to be the case.  The depth of the subterranean shale face varied across the site.  At the front of the house it was quite close to the surface.  However, the pier hole in the north-west quadrant of the house was excavated to a depth of 3.5 metres without the builder encountering shale.  Alberton was called in.  He formed the opinion that the pier hole was down to solid clay.  It is possible to build a house on solid clay but the footings will require a much larger bearing surface than in the case of a shale foundation.  Alberton redesigned the footings to allow for this and told the builder to go ahead and pour the piers.  He did so.  The following year, after the house had started to subside, it was discovered that the footings on the northern side of the house were standing on unconsolidated landfill, a quite inadequate support.  The question for the Judge was whether the misjudgment about the foundation was the fault of one or more of Ginos and Tiling and the excavator and the council inspector and other possible tortfeasors proposed by Ginos at the trial.

Evidence was given by those who were involved in the relevant events and also by a number of experts.  The evidence was voluminous and the learned Judge’s careful and thorough judgment ran to eighty pages.  However, many of the issues that occupied a lot of witness time at the trial were not in dispute on the appeal.  As I have said, Ginos admits its negligence - Alberton had insufficient grounds for concluding that it was natural clay at the bottom of the pier excavation - and the question now is whether the evidence required the learned Judge to find that others were liable to NBD as well. 

The evidence relating to Tiling’s position was as follows.  The excavator, one Macheda, who was evidently a subcontractor of and brother to Tiling’s footings subcontractor, was digging the pier holes with a backhoe fitted with a closed bucket.  He had excavated in the north-west corner to about 3.5 metres, the limit of the backhoe’s reach, but he had not got to the shale.  Brianni realized that they had been digging through fill before this but he believed that they had then reached naturally occurring clay.  The specification required that the footings be founded on shale so Brianni needed further instructions before he could proceed.  He reported the matter to Mr Teichmann, the developer, and was told to call Alberton.  He did so and Alberton came to the site late in the afternoon.  The light was fading but it was not too dark to see the bottom of the pier excavation.  The excavated spoil was heaped to the side of the hole and Macheda was still on site.  Alberton got Macheda to dig down a little further and Alberton examined some of the clay that was brought up.  He also got a reinforcing rod and tested the firmness of the base of the trench.  He formed the "very confident" opinion (as he later described it) that they had dug to natural clay that would carry the structure provided that the footings were enlarged by the construction of a continuous pier in this section of the footings.  He altered Brianni’s copy of the specification accordingly and told Brianni that it was okay to pour.  He then left the scene and Brianni completed the footings in accordance with the revised instructions.

Alberton was a geo-technical engineer who specialized in this kind of work.  He realized that Brianni was relying on his advice and direction.

I have said that Macheda was present when Alberton made his inspection.  The general thrust of the expert evidence was that one would expect an excavator to report the presence of foreign material or anything else that might indicate that he was excavating unconsolidated fill, although one of the engineers, Mr Bastick, observed that not all excavators necessarily evaluate the soil that comes out.  Alberton did not have any actual recollection of having sought information from the excavator at the time of his inspection but, he thought, he "almost certainly" would have done so.  The implication was that Macheda’s response was consistent with his having reached natural clay.  There is nothing to suggest that the learned trial Judge did not accept Alberton’s evidence on that subject.

Alberton acknowledged that he could not see the lower faces of the sides of the 3.5 metre trench.  However, his concern was not with the nature of the material through which the trench had been excavated, but with the material at the bottom of the trench.  He formed his opinion about that from the appearance and feel of the excavated clay and from his probing with the rod.

The learned Judge found that Alberton should have investigated the bottom of the trench more thoroughly either by bringing in a larger excavating machine that could take the trench deeper or by commissioning another soil bore log from below the 3.5 metre level.  Had he taken either of those steps he would have identified the material thus excavated as unconsolidated fill.  Instead, he made a judgment on inadequate evidence.  He failed to exercise the care and skill and diligence required of an engineer in his position.  Ginos, his employer, was thus in breach of its duty of care to NBD.

As I have said, the learned Judge’s finding of negligence against Ginos was not disputed on the appeal.  However, his finding that Tiling was also negligent was disputed.

This issue involved a consideration of the knowledge and care shown by Brianni as Tiling’s manager with respect to the identification of the foundation in the north-west corner.

Brianni knew that the excavator had been digging through fill, probably spill from the adjacent roadworks, but his evidence was that he believed that Macheda had got below the fill by the time he reached the bottom of the trench.  There was a question whether Brianni’s evidence about that could be reconciled with Tiling’s pleadings and, indeed, with Brianni’s own cross-examination, but the learned Judge made an express finding that Brianni was of the opinion at the time that the base of the trench was natural clay.  There is no reason to doubt the correctness of that finding.  Mr Lunn, for Ginos, pointed to the evidence of Mr Palmer, the builder who did the remedial underpinning in 1989, which showed that springs and pieces of brick and other rubbish were excavated from the foundation that subsided - unmistakable evidence of landfill - but the Judge held that these things were found at a lower level than the original excavation.  However, Brianni agreed that it was a "distinct possibility" that when he saw Mr Teichmann on May 12 he was uncertain whether he was still in fill or not, even though it was his opinion that they had reached natural clay.  He was told to consult the developer’s engineer and he did so.  He relied on Alberton’s decision.  If he had been required to act alone he would have checked to make sure it was clay, but the engineer told him to pour and he thought he was protected.  The learned Judge held that calling in Alberton was a reasonable step for Brianni to take - strictly speaking, it was Teichmann’s step, not Brianni’s - but that he should have done more.  It was not enough simply to rely on Alberton’s opinion and instruction.  Brianni was not expected to have the skill to make an accurate identification of the material at the bottom of the trench but, his Honour considered, "a competent builder should at least satisfy himself by observation or enquiry whether or not, and if not, why not, an engineer had done that which the builder himself would have done in all the circumstances."  Tiling, by its employee Brianni, was thus in breach of the duty of care it owed to the bank.

It is not disputed that Tiling was in breach of the statutory warranty implied in its contract with All Teichmann.  The warranty enured for the benefit of the bank as a subsequent purchaser.  The question is whether Tiling was also guilty of negligence.

The learned Judge’s criticism of Brianni appears to have been that Brianni simply accepted Alberton’s opinion at face value, without finding out on what it was based, and that in the circumstances this was unreasonable.  Brianni said in evidence that he did not recall having actually seen Alberton make a physical inspection of the excavated material;  he just saw him probing the base of the trench.  Nor, it seems, did he hear or see Alberton interrogate Macheda.  In the circumstances, the learned Judge thought, Brianni should have carried out those investigations for himself and not simply acted on Alberton’s bare instruction.

Alberton’s evidence was that he did, in fact, make a visual and also a tactile examination of the material at the bottom of the trench.  Brianni did the first but not, it seems, the second.  Whether feeling the spoil would have affected Brianni’s opinion may be doubted.  Be that as it may, he left the decision to Alberton who was the expert he had been told to consult.  He did not interrogate Alberton and he did not question Alberton’s judgment.  He had no information of his own on the subject, not known to Alberton, that pointed in a different direction.  As I have noted, the tell-tale articles that Palmer unearthed later were outside the area excavated by Macheda.

In my opinion Brianni acted reasonably in the circumstances.  He was entitled to take at face value the advice and direction of the developer’s expert.  He was not obliged to interrogate him or to check his opinion by conducting tests of his own.  I do not think that the finding of negligence against Tiling can stand. 

It is relevant to the question of apportionment generally to consider whether any such tests or interrogation on Brianni’s part would have made any difference.  If, as seems likely, Alberton questioned Macheda about the nature of the material at the bottom of the trench and got a reply that was consistent with the presence of natural clay, one may conclude that any similar questioning of Macheda by Brianni would have been met with the same response.  Brianni may not have seen Alberton make a tactile examination of the spoil, but Alberton’s evidence was that he did, in fact, do so.  If follows that for Brianni to have questioned Alberton about that would not have disclosed a counter indicator to Brianni’s belief that it was natural clay at the base of the trench.  Nor, surely, would questioning Alberton generally about the grounds for his own firmly-held judgment.

The fact is that no on-the-spot investigation by Brianni is likely to have made any difference to what happened, short of doing what Alberton plainly thought unnecessary, namely, bringing in a larger digging machine or taking further bore samples.  We can see now that it would have been an excellent idea for Brianni to have taken one of those courses, but that is simply being wise after the event.  Indeed, I do not understand that the learned Judge thought that Brianni was duty bound to do that.  If, contrary to my view, Brianni was at fault in the way described by the learned Judge, it was not established that this contributed in any way to NBD’s loss or damage.

I would, as I say, acquit Tiling of negligence. However, it was in breach of its statutory warranty. If the Development Act does not apply, there is a question whether the learned Judge’s apportionment of liability between Ginos and Tiling, with Ginos obliged to give Tiling a full indemnity, should be set aside.

The learned trial Judge took the view that the acts or defaults of Tiling as the cause of the bank’s loss were insignificant compared with those of Ginos’s servant Alberton.  He said -

"Alberton investigated and appraised the relevant circumstances himself and made his own decision, neither wanting to nor in fact relying on anything said or done by Brianni, or anyone else for that matter, and knowing that Brianni was relying on him.  It was Alberton who devised and directed the change in the design for and the construction of the piers, deciding to abandon the search for shale as a foundation base.  In my opinion it is just and equitable that Ginos should bear the whole of the plaintiff’s loss   "

His Honour obviously thought that the breach of the statutory warranty was in the circumstances of a substantially formal kind.

I agree with the Judge’s assessment of the respective responsibilities of Ginos and Tiling.  It was not argued that Tiling’s liability on the statutory warranty should not have been brought into the contribution order under s25 of the Wrongs Act, or that there was no power under that section to order that one defendant recover completely from another.  We were simply asked to strike a different balance between these defendants on the facts.  In my opinion the learned Judge came to the correct decision on the matter of contribution.

The result must be the same, as between Ginos and Tiling considered alone, if, as Ginos argues, s72 of the Development Act applies. The only wrongful act or default on Tiling’s part upon which Ginos could possibly rely is its breach of the statutory warranty. On that footing it was proper for the learned Judge to hold, as he did, for the reasons applicable to his Wrongs Act ruling, that any judgment given under s72 should be against Ginos alone. It would not be just and equitable to regard Tiling as having contributed significantly to NBD’s damage or loss.

All that, however, must be subject to Ginos’s submission that its contribution to the bank’s damages should be reduced, in accordance with s72, by reason of the wrongful acts or defaults of Macheda and the Council. Again, it is convenient to look first at the evidence.

Ginos’s case against Macheda, the footings excavator, was dealt with by the trial Judge thus -

"It is not clear to me whether the excavator who was engaged to dig the pier trenches was the same excavator who dug the sewer line trenches.  I will assume it was the same person or entity.  The claim is that the excavator failed to excavate to shale or naturally occurring foundation material or to notify Tiling, or Ginos, of the nature and extent of fill upon the site and that the material at the base of such excavation was not naturally occurring clay.

In respect of the footing trenches the presence of fill was irrelevant if the piers had in fact been taken down to shale.  As I have already found, Alberton altered the design of the piers to provide that they be founded on clay.  Alberton said that the pier trenches in the north western quadrant and along the northern footing line were excavated to a base the material of which he assessed to be naturally occurring clay.  The excavator had done what Alberton’s redesign called for, but it is claimed the excavator was negligent in failing to identify that the material was not that which Alberton incorrectly identified it to be.  It is said that a reasonably skilful excavator would have done so.  The evidence on that topic is sparse consisting of observations by some of the engineers and Brianni in the course of their evidence.  Ginos has failed to call or adduce evidence to satisfy me that the excavator knew or was negligent in failing to discover that the pier excavation had not reached naturally occurring clay.  An excavator, on the evidence I have heard, is not equipped with skills in relation to material recognition, or the bearing capacity of various soils, which is equal to, let alone superior to, those of a builder or an engineer and insofar as an excavator can and should recognise fill on a site, by the time of the redesign of the piers Alberton by observation of trenches already dug, the spoil heaps from them and the materials uncovered in the cut and fill works carried out by Brianni, knew as much as the excavator did about the nature and extent of fill on the site.

In my opinion and in respect of the footing trenches the excavator was not guilty of any wrongful act or default giving rise to the defective building work."

Mr Lunn submitted that the learned Judge overstated the issue with respect to the excavator.  No-one could expect him to have technical skills in relation to the recognition or soil-bearing capacities of subterranean materials, but he should have realized that on May 12, when he had got to the limit of the backhoe’s reach, he was still working in unconsolidated fill.  Mr Lunn relied particularly on the evidence of Palmer, who did the underpinning, and Goldfinch, one of the expert engineers.  Both of them considered that any excavator who worked through soil containing bricks and springs and other rubbish would know that he was working in landfill.  However, as I have already noted, no such objects were found, according to the Judge’s unassailable finding, during Macheda’s pier excavations.  They were turned up when Palmer dug deeper and wider the following year.  However, Palmer also said generally that he would expect an excavator to know when he was in fill;  you get a "definite feel on the hand controls."  Goldfinch said that the excavator "gets a very good idea.  A skilled excavator can even get an idea of the texture of the soil, for example, just through the feel of his hydraulic control."

That all sounds quite plausible.  One would expect that an excavator would acquire in time, perhaps even a short time, a useful degree of practical knowledge about the different kinds of material that underly building sites around Adelaide and learn to distinguish them readily in one way or another.   However, the acquisition of such knowledge must require some training or practical experience, however modest, on the excavator’s part and the evidence tells us nothing at all about the training or experience of this particular excavator.  Macheda, indeed, is but a shadowy figure in this case;  there is even a degree of uncertainty about his name.  There is no evidence to support the proposition, implicit in Mr Lunn’s submission, that an excavator on a building site such as this is required to be experienced enough to distinguish between unconsolidated clay fill and naturally occurring clay.  Alberton’s evidence is that he almost certainly spoke to Macheda on May 12, and Macheda said nothing to him to suggest that he was still in fill at the bottom of the trench.  It is reasonable to suppose, as the learned Judge obviously did, that Macheda answered Alberton’s enquiries to the best of his ability.  The evidence does not establish that he should have had sufficient knowledge and judgment to realize that he was still excavating fill and that he owed a duty to those concerned, and ultimately to the bank, to provide accurate information on that subject.  In my opinion, the learned Judge’s acquittal of Macheda of any wrongful act or default giving rise to the defective building work was correct.

Finally, the appellant argued that, if s72 of the Development Act applied, its share of NBD’s damages should have been reduced by reason of the wrongful act or default of the Corporation of the City of Mitcham. Paragraph 15A.4 of the appellant’s shotgun defence alleged that the Council owed a duty to the bank to take due care to protect the bank’s interests as owner of the land and building, and it referred by way of particulars to the failure of the Council to inspect adequately the preparation for and pouring of the concrete for the footings for the building so as to identify whether the nature of the foundation material was as reported in the "foundation recommendations construction" report and to advise the results of its inspection to All Teichmann, then the registered owner.

The evidence showed that Mr Parker, a building inspector employed by the Council, attended the site on 12 May 1988.  Mr Parker did not give evidence but a memorandum of his in the Council’s records was admitted into evidence without objection.  It read -

"12/5/88   Engineer on site.  Excavation incomplete.  Piers excavated to shale except front beams (very deep).  Engineer will issue certificate after inspection."

The Judge concluded that Parker attended the site on May 12 at the time Alberton made his inspection.  The appellant argued that Parker must have seen the excavated fill and realized what it was - it sought support from an inconclusive remark he is said to have made to Brianni - and that Parker was negligent in failing to ensure that the foundations were constructed in accordance with the Building Regulations.  The Council thus failed to perform its statutory duty and must take some of the responsibility for the subsidence of the house.

The learned Judge rejected this submission.  He said -

"I think I can infer that Parker was on site on 12th May 1988 and that Alberton was present, but I am not prepared to infer that the absence of any mention of fill in that note means that Parker did not observe fill in, or on, the site and neither am I prepared to place much weight at all on Brianni’s evidence as to what he said "the inspector" told him to the effect that the site had been filled so many years ago that it was to be classed as natural ground.  Even if that was said Alberton did not apparently hear it and I am not satisfied that such a statement, if Parker made it, amounted to an opinion about the nature of the material at the base of a deep trench.  In any event so far as the evidence goes there is nothing to suggest that Parker, and through him the Corporation, knew that the system of piering to shale set out in the plans the Corporation had was to be changed to something else and I am not prepared to infer such knowledge from the cryptic note Parker made on Exhibit P2 page 122.  Hence in my view on 12th May 1988 so far as the Corporation was concerned the piers were to be founded on shale and that is what Alberton reported in the certificate dated 28th October 1988 (Exhibit P2 page 165) although that was sent to the Corporation a long time after its date.  As a number of the witnesses said, if the piers had been founded on shale the fact they passed through fill was structurally irrelevant.

If, contrary to what I consider was the knowledge of the Corporation, Parker knew that the piers were to be founded on clay I do not think that the Corporation had a duty to anyone to assess the nature of the material at the base of the excavated trenches for the purpose of determining whether it was in fact naturally occurring clay.  There is nothing to suggest the inspector was skilled in such a matter, nor that he should have been or that the Corporation should detail its own experts to attend to make such an assessment.  The evidence is that if the base of the trench had been naturally occurring clay Alberton’s redesign would have probably been appropriate.  In my opinion therefore the Corporation was not guilty of any wrongful act or default giving rise to the defective building works."

The Council was aware, of course, that the footings specification required that the footings be founded on shale.  Evidently Mr Parker satisfied himself that the piers had been excavated to shale except at the "front" (by which he must have meant the northern side).  Eventually, although not until the following year, Ginos provided the Council with the required certificate of inspection which implied that all of the footings were in fact founded on shale, but that cannot have influenced Parker’s state of mind at the time the footings were poured.  However, Brianni’s evidence suggests that Parker was not privy to Alberton’s decision to change the footing design.  He said he thought that Alberton arrived at the site as Parker was leaving.  Parker was not an engineer or a soils expert.  He was aware that the footings were being designed and supervised by an engineer engaged by the developer, and that the engineer was required to provide in due course an inspection certificate.  The evidence would seem to indicate that the Council was never informed of Alberton’s change of plans.  It was reasonable in the circumstances for Parker to assume, as no doubt he did, that the footings would be founded on shale, even if at unusual depth, and that Alberton would see that the work was done competently.  Parker acted reasonably in the circumstances.

Mr Lunn put forward an argument based on ss14 to 16 of the Building Act 1970 and reg33 of the Building Regulations 1973. The regulation provided that footings should be so designed and constructed as not to impair the stability of the superstructure, and the Act provided that all building work within a council area should be subject to the supervision of the council’s building surveyor and that its building surveyor or building inspector might at all reasonable times during the progress of any building work enter and inspect any land or premises for the purpose of determining whether the building work complied with the requirements of the Act and, where appropriate, serve a notice of irregularity to have any contravention of the Act amended. We were referred to Sutherland Shire Council v Heyman (1985) 157 CLR 424 and the High Court’s recent decision in Pyrenees Shire Council v Day (1998) HCA 3; 72 ALJR 152. Neither authority supports Ginos’s case that the Council was in breach of a duty of care that it owed the bank. The learned Judge came to the correct decision when he held that the Council was not guilty of any relevant wrongful act or default within the meaning of s72 of the Development Act.

For these reasons, Ginos, in my opinion, fails on the facts. It is therefore unnecessary for me to consider its submission that, contrary to the view of the learned trial Judge, s72 of the Development Act applied in this case.

The appeal should be dismissed.

Mullighan J

I agree that the appeal should be dismissed for the reasons given by Cox J.

Williams J

For the reasons given by Cox J I agree that this appeal should be dismissed.