Macquarie Bank Limited v Meinhardt (NSW) Pty Ltd

[2010] NSWSC 1320

CITATION:	Macquarie Bank Limited v Meinhardt (NSW) Pty Ltd [2010] NSWSC 1320
HEARING DATE(S):	20/09/10, 21/09/10, 23/09/10, 30/09/10
JUDGMENT DATE :	16 November 2010
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Reasons given for holding that plaintiff entitled to recover for certain categories of damage only. Parties to bring in short minutes of order reflecting the reasons.
CATCHWORDS:	Damages - Whether plaintiff entitled to any and if so, what form of damages following determination upholding plaintiff's claims under Trade Practices Act 1974 (Cth)
LEGISLATION CITED:	Civil Liability Act 2002 Trade Practices Act 1974 (Cth)
CATEGORY:	Principal judgment
CASES CITED:	CBD Investments Pty Ltd v ACE Ceramics Pty Ltd (1992) 10 BCL 437 McPhee and Son (Aust) Pty Ltd v Technopolis Pty Ltd (1996) 13 BCL 189 Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 Shrimp v Landmark Operations Limited (2007) 163 FCR 510
TEXTS CITED:	S Walmsley, A Abadee and B Zipser, Professional Liability in Australia (Thomson Lawbook Co, 2nd ed, 2007)
PARTIES:	Macquarie Bank Limited (Plaintiff) Meinhardt (NSW) Pty Ltd
FILE NUMBER(S):	SC 2010/00059668
COUNSEL:	Mr M Elliott (Plaintiff) Mr I Roberts (Defendant)
SOLICITORS:	Minter Ellison (Plaintiff) DLA Phillips Fox (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMERCIAL LIST

Einstein J

Tuesday 16 November 2010

2010/00059668 Macquarie Bank Limited v Meinhardt (NSW) Pty Ltd

JUDGMENT – on damages

1 This judgment is a continuation of a judgment delivered on 30 September 2010 in these proceedings. Since that judgment the parties have been required to exchange submissions, and further submissions in reply, on the question of what damages, if any, the plaintiff is entitled to apropos the trade practices cause of action upon which it succeeded.

Reserved rulings on evidence

2 During the hearing both parties put forward particular evidentiary objections to material sought to be placed into evidence through their opponent’s affidavits.

3 A number of objections were initially dealt with in the usual way.

4 Early in the piece the parties agreed that efficiency dictated that certain classes of evidence be initially dealt with by way of a voir dire on the basis that the counsel would be permitted in final address to make submissions on which objections should be sustained and which rejected.

5 To my mind the only real question of any significance was concerned with the defendant's contention that certain sections of the plaintiffs evidence were objectionable by reason of the provisions in section 5 D of the Civil Liability Act 2002 which is in the following terms:

5D General principles

(1) A determination that negligence caused particular harm comprises the following elements:


(a) that the negligence was a necessary condition of the occurrence of the harm ( factual causation ), and

(b) that it is appropriate for the scope of the negligent person’s liability to extend to the harm so caused ( scope of liability ).


(2) In determining in an exceptional case, in accordance with established principles, whether negligence that cannot be established as a necessary condition of the occurrence of harm should be accepted as establishing factual causation, the Court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party.

(3) If it is relevant to the determination of factual causation to determine what the person who suffered harm would have done if the negligent person had not been negligent:

(a) the matter is to be determined subjectively in the light of all relevant circumstances, subject to paragraph (b), and
(b) any statement made by the person after suffering the harm about what he or she would have done is inadmissible except to the extent (if any) that the statement is against his or her interest.
(4) For the purpose of determining the scope of liability, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party.

6 The answer to the defendant's contentions was really twofold:

1. First the objection overlooked the fact that the plaintiff also had a Trade Practices Act claim to which the section has no application.

2. In addition a deal of the paragraphs which were the subject of this form of objection, does not fall foul of the above described provision because what it in large measure treated with was to set out evidence as to the witnesses’ experience which the court would take into account in deciding what would have happened on the hypothetical scenario.

CF for example the evidence given by Ms Pryor where she describes in her second affidavit three consequences which in her belief would have ensued if the defendant had accurately reported and then she identifies them. What she then does is to go on and give to the Court evidence that is not of the nature of 'if x had happened I would have done y'. Instead her evidence is of a different character as she identifies the relevant options and gives the Court evidence going to whether one or more of those options would have been attractive to a financier.

7 It is possible to simply now rule that evidence of type sought to be adduced by the plaintiff which is permissible for the reasons identified in (2) above is allowed. However evidence which otherwise contravenes section 5 D of the Civil Liability Act 2002 and in particular sub paragraphs (a) and (b) is disallowed.

8 None of the other objections put forward by either party are sustained.

9 Save as aforesaid the evidence adduced by the parties on the voir dire is allowed.

The effect of the 30 September judgment

10 One aspect of the debate which has occurred since the September judgment is that the parties disagree as to the effect of that judgment.

11 At [70] of the September judgment I found that Meinhardt’s statements of 10 and 20 May 2005 contained an express representation that was misleading or deceptive. At [75] and [80] I found that the implied representations made in Meinhardt’s statements of 10 and 20 May 2005 were misleading or deceptive.

12 At [86] I then concluded in respect of all of the representations that:

Ultimately, … I accept that in continuing to pay out money in respect of hydraulics works, MBL relied on the misrepresentations made by Meinhardt. I accept, as strongly supporting this conclusion, MBL’s submission that had it known the true state of affairs as at the date of Meinhardt’s certifications, it would not have advanced moneys to enable JLB to pay Vav’s plumbing.

13 The plaintiff contends, and the defendant disputes, that the effect of the finding in that paragraph is that the plaintiff is at least entitled to amount representing the draw downs permitted by MBL in reliance on Meinhardt’s misleading or deceptive conduct, namely $147, 077.

14 The proper interpretation of [86] is that it was found that MBL had demonstrated that Meinhardt’s misleading or deceptive conduct caused it to continue to advance funds - which enabled JLB to pay Vav’s plumbing – after the relevant representations were made. Put simply, MBL succeeded in proving causation with respect to the drawdowns allowed after certification.

15 However, it does not follow from that finding that MBL is entitled to the $147, 077 figure. This is because, as the defendant submitted, (paraphrasing s 82(1)) MBL is entitled to recover loss or damage suffered by the conduct of Meinhardt. It is necessary for the $147, 077 figure to represent loss or damage in order for MBL to be entitled to recover it.

16 Moreover, although I accepted in the September judgment that MBL had shown causation with respect to the drawdowns, I made it clear that I did not intend to determine any entitlement to damages at that stage. At [93] I stated that:

The Court has not yet determined the questions which separate the parties concerning whether or not the plaintiff is entitled to any, and if so, what form of damages apropos the Trade Practices Act cause of action.

17 The relevant context included:

i. Meinhardt had disputed in its closing submissions that relevant amounts claimed by MBL constituted losses. Thus, even if it were determined that MBL paid out the amounts as a result of Meinhardt’s conduct, MBL would need to show the amounts represented loss or damage before they would be recoverable.

ii. I provided at [93] for a way forward in order for the Court to receive proper assistance in resolving the lengthy and detailed debate between the parties as to what damages were recoverable by the plaintiff.

Has the Bank failed to prove loss or damage?

18 Meinhardt submitted that there was no specific sum that MBL could identify as having been advanced by it – in reliance on Meinhardt’s conduct – to Lexus (the original developer) or the receiver in respect of hydraulics works.

19 I do not accept that this submission is of substance. In my view, MBL’s claim, framed as one for moneys it would not otherwise has paid out, is at this general level valid.

20 Meinhardt further submitted that since MBL still has an interest as mortgagee in the property it either has recovered or remains able to recover the whole of the amount advanced by it.

21 In my view this submission is likely not open to Meinhardt since this was not ever specifically pleaded, was not notified to MBL prior to or during the hearing, and was not put to any of MBL’s witnesses.

22 In any case, I am satisfied that Meinhardt’s submission is not supported by the evidence. As the plaintiff contended Ms Prior’s evidence in cross-examination was that the lending was a high-risk form of lending even to begin with. The evidence shows that after MBL committed itself to this high risk lending the project became beset with problems, substantial cost overruns and fall outs, leading to the financial collapse of the project and the receivership of the developer.

23 The evidence establishes that in December 2005, based on what was then estimated to be a further $3 million in additional costs going forward (on top of cost overruns to date), MBL was projecting a principal loss of over $9 million. By June 2006 the cost to complete the project had risen to over $26 million – a cost overrun of about $7 million (based on the $19.7 million that the MBL had been prepared to advance as a form of high risk lending under the loan contract executed in 2004), and that additional $7 million in cost did not even include the receivers costs, legal costs, quantity surveying costs and authority fees [PX 8/3610].

24 I now turn to the debate between the parties on specific heads of damage claimed.

Item A Draw downs after 10 May 2005 report

25 The parties are in dispute as to whether the whole of the draw downs permitted by MBL for hydraulics works after Meinhardt’s 10 May 2005 report are recoverable losses or damage suffered by MBL.

26 Meinhardt’s major contention in this area was that MBL should not be allowed to recover amounts it paid out after the May 2010 report for hydraulics works that were not defective.

27 It is necessary to consider various sub-issues raised by this contention.

How would have MBL acted had the May 2005 report been accurate?

28 A sub-issue dividing the parties in this area is how MBL would have acted had Meinhardt accurately reported - as to the quality of the work completed by Vav’s – in May 2005. MBL’s position was essentially that had the report been accurate, as financier of the project it would have:

i. Ensured that Vav’s plumbing was replaced with another contractor;

ii. Not advanced moneys to enable JLB to pay Vav’s;

iii. Stopped the project as a whole and further hydraulics works continuing on as if the hydraulics work was acceptable;

iv. Required that the defective hydraulics works first be rectified.

29 Against this, Meinhardt contended that had it correctly reported in May 2005, Vav’s would simply have been asked to rectify non-conforming works, and continue to complete further work. Meinhardt highlighted that JLB, the builder, had a contractual right to insist that Vav’s continue to complete the works and to rectify non-conformances.

30 Meinhardt submitted that the evidence established that even in late 2005 the receiver was attempting to get Vav’s to rectify non-conformities.

31 I accept the plaintiff’s submission on this point – namely that had Meinhardt correctly reported the true extent of the non-compliance of the hydraulics work in May 2005, Vav’s would have been replaced with another contractor and defective hydraulics works would have been rectified at that point.

32 It is true that in November and December 2005 – when Vav’s was eventually replaced and the work rectified – the whole project was under review, following the receivership of the developer, Lexus and the involvement of Probuild. But in my view this does not alter what would likely have happened if Meinhardt had correctly reported in May 2005.

33 It will be apparent that I do not accept Meinhardt’s view that on the evidence the developer and subsequently the receiver was chasing Vav’s to rectify the work even as late as December 2005. I note that a 5 December 2005 letter from the developer’s joint receiver to Vav’s, stated that “given the quality of works completed by Vav to date, another contractor will be engaged to rectify and complete the works”. In another letter of 13 December, Mr Robinson, the joint receiver, stated that “the costs of delays to the completion of the project are substantial and as a consequence, Lexus Developments cannot afford to extend Vav further time to fix and rectify”. In my view, it does not follow from this latter statement that the receiver was in fact seeking that Vav’s rectify the work.

34 It is true that if MBL had become aware of the non-conforming work in May 2005 it could have withheld money for non-conforming work, but did not have a contractual power to withhold payment for work properly carried out. But importantly, the contract with Vav’s could be terminated at will. It is my view that had the true, substantial, extent of the non-conformities of the hydraulics work been properly reported in May 2005, MBL would have caused Vav’s contract to be terminated, such that Vav’s would not have undertaken any more work.

35 Thus MBL succeeds on its essential proposition that had Meinhardt correctly reported, MBL would not have paid out any money after the May 10 2005 report for hydraulics works performed after that date by Vav’s. This assists MBL substantially in its contention that it is entitled to the draw downs allowed after the May report.

Was all of the work performed after the May 2005 report defective?

36 The next major sub-issue that divides the parties is whether all of the work performed after the May 2005 report was defective. This sub-issue goes to:

i. Whether all of the work performed after the May 2005 report had to be removed and replaced, or whether pursuing that course was a commercial decision of MBL’s;

ii. Whether MBL should be taken to have received anything of value in the post May report work – that is whether it received any proper work which it then chose to remove. Accordingly, whether the value of any such proper work should be deducted from any damages to which MBL is otherwise entitled.

37 In this area, the burden of proof must be borne closely in mind.

38 The Harris Page and Warren Smith expert reports assist the plaintiff in establishing that clearly a very substantial part of the hydraulics works was defective. It is true that those reports do not go as far as stating either that all of the work was defective or that the complete removal or replacement of the work was warranted.

39 Another part of the evidence that assists the plaintiff in this area is an email from Mr Martin Langen of Gallagher Jeffs, to Ms Prior of MBL, of 29 November 2005 [Exhibit PX5/2394A]. Mr Langen was responding to a query of the previous day by Ms Prior as to whether Harris Page could be asked to consider ways in which the hydraulics works could be “brought up to code requirements” without removing and replacing it. Mr Langen replied, “We have addressed the option that may reduce the extend of the works to be redone and received response from Harris Page as per the attached Email. Unfortunately, there not match [it appears this should be much] option to reduce the rework scope so that the certification can be obtained”.

40 The defendant did not call any evidence to show that some of the work was properly executed and did not need to be removed. The defendant first submitted there was no evidence for it to respond to. It secondly submitted that it was not possible for it to call such evidence because it was not able to view the site before the work was removed. This submission of the defendant is rejected. While the defendant did not have access to the site before the relevant work was removed, it continued to have access to routine forensic litigious entitlements to discovery and possibly in this case interrogatories, which could potentially have assisted it in advancing the above contention.

41 I am ultimately satisfied that the plaintiff has proved on the balance of probabilities that all of the hydraulics works were defective and required removal and replacement.

42 Accordingly, I do not think that MBL received any value from the hydraulics works undertaken after the May 2005 report which ought to be deducted from any damages to which it is entitled.

43 I further note that in this area Meinhardt contended that the decision to remove and replace the hydraulics work was made by MBL. The decision was, in fact, taken by Lexus on advice from Probuild. It is true that MBL, as financier, may have been able to influence such decisions. But significantly in my view there was no claim by Meinhardt that either Lexus or Probuild had contributed to MBL’s loss in this area and were therefore were concurrent wrongdoers.

The level 4 rough-in issue

44 In relation to an element of the draw downs allowed by MBL after the May 2005 report, namely some $79,550 paid for progressing the level 4 rough-in from 38% to 75% completion, Meinhardt disputes it can be liable.

45 Meinhardt contends that this element of the draw downs was paid in reliance on Napier, the quantity surveyor. The basis of this contention is that whilst it was claimed that after Meinhardt’s report Vav’s had progressed the level 4 rough-in from 38% to 75%, in fact contrary to Napier’s advice only 24% of the level 4 rough in was carried out by the time Vav’s left the site. That is, Meinhardt contends it cannot, in reporting on the hydraulics work, have caused the bank to pay for work that did not exist.

46 In my view Meinhardt’s submission is contrary to my above finding that had Meinhardt correctly reported MBL would not have advanced any more moneys to enable JLB to pay Vav’s. Instead, it would have essentially halted the project, replaced the hydraulics contractor and required the defective hydraulics works first be rectified.

47 Moreover, Meinhardt’s submission overlooks the possibility that MBL, in paying out the amount in question, could, and indeed did in my view, rely both on the quantity surveyor’s advice and on Meinhardt’s advice that the hydraulics works were relevantly complaint.

48 Meinhardt’s submission is also inconsistent with the finding already made in the September judgment that MBL continued to pay out moneys in respect of the hydraulics works in reliance on Meinhardt’s misrepresentations, and would not have done so had Meinhardt reported accurately.

49 Item A has now been dealt with and the plaintiff has succeeded in establishing that it is entitled to the full amount of draw downs allowed in respect of hydraulics after Meinhardt’s report.

Item B Cost of removing hydraulics works installed after Meinhardt’s report

50 Under this head MBL seeks to recover damages for the cost of removing hydraulics works executed by Vav’s after Meinhardt’s report. MBL contends had Meinhardt correctly reported, Vav’s would not have installed this further work and therefore MBL would not have had to pay for it be removed.

51 Meinhardt’s essential contention in this area was that MBL could not recover for the cost of removing work that was carried out after its reports and was compliant.

52 Meinhardt also contended that certain work carried out after the its report – the hot and cold water rough in – would have had to removed for reasons that had nothing to do with it.

53 Meinhardt’s submissions in this area cannot succeed in light of my findings above that:

i. All of the hydraulics work carried out after Meinhardt’s report was defective and required removal;

ii. MBL would not have allowed Vav’s to carry out further hydraulics works had Meinhardt correctly reported.

Item C Cost of reports

54 MBL seeks to recover some $8,300 it spent on Harris Page and Warren Smith reports. MBL contends that if Meinhardt had properly reported it would not have been necessary to obtain these two reports. It draws on the instructions given by Ms Prior to Meinhardt, which required it to identify any significant non-conformities and recommended remediation.

55 It is necessary to bear in mind that Meinhardt’s instructions were qualified by Ms Prior’s statement that:

“The inspections do not need to cover every part of the project, but should be comprehensive enough to give you confidence that the works are generally to an acceptable standard. If significant non-conformances are identified, further visits may be required”.

56 Meinhardt drew on this qualification, submitting that even if it had properly reported, the costs of the additional dilapidation reports would still have been incurred.

57 In my view even if Meinhardt had correctly reported, the need for the additional reports would not have been entirely avoided given the qualification on the scope of Meinhardt’s instructions. Further visits and reporting would have been required to establish the conformity and required remediation of the whole of the hydraulics work.

58 However, if Meinhardt had correctly reported as to defects and recommended remediation the scope and therefore costs of the subsequent reports would have been reduced.

59 Accordingly, I would allow the plaintiff to recover for half of the damages claimed under this head.

Item D – Delay costs

60 There has been an extensive debate between the parties as to:

i. Whether there was a delay caused by Meinhardt’s incorrect report;

ii. What the cost of any such delay was.

61 The plaintiff’s essential submissions were that:

i. The discovery of the defective hydraulics works in late 2005 led to a delay to the project of 4 weeks, which led to MBL incurring costs it would not otherwise have incurred.

ii. It was necessary to consider a hypothetical scenario of how the works would have been sequenced had Meinhardt correctly reported that the hydraulics works were defective in May 2005;

iii. In the hypothetical world, if MBL had known of the need to do hydraulic rectification works earlier, it would have ensured those works were done earlier, and as such the subsequent activities in the path of the project would have been attended to earlier such that the project would have finished earlier than it did;

iv. If the project was delayed for four weeks as MBL contended costs of $339,755.21 would have been avoided.

62 Meinhardt submitted inter alia that at the time that the hydraulics rectification work was carried out:

i. There were other activities that controlled completion of the project unrelated to the hydraulics rectification work, namely the investigation and rectification of the atrium beams;

ii. The need to carry out large components of the subject hydraulic work existed independently of the defects identified, namely the need to remove and replace the timber framed walls and floors through which the electrical, gas and hydraulics services ran; and

iii. The hydraulics rectification work was concurrent with other activities at the time, namely the removal and replacement of the electrical and gas services and the rectification of the timber framed walls and floors.

iv. Further, regardless of whether completion of the project or the issue of the interim occupation certificate was regarded as the project goal, the atrium roof was the activity that controlled both.

63 The parties are in agreement that it does not matter to the present analysis whether the project goal was the issue of the interim occupation certificate or the actual date of completion of all of the works.

64 In order to decide this area of the case, it is necessary to consider a hypothetical scenario in which Meinhardt correctly reported in May 2005 and hydraulics rectification works were accordingly undertaken at an earlier date. Nevertheless, it is necessary to include in such hypothetical scenarios factors besides the hydraulics rectification work which would still have affected the project’s completion.

65 It is critical to closely examine the defendant’s proposition that there were other issues besides the hydraulics rectification which delayed the project and meant the project would not have finished any earlier even if Meinhardt had correctly reported and accordingly the hydraulics rectification was undertaken earlier.

66 A critical non-hydraulics issue is the rectification of the atrium beams. Meinhardt essentially submitted that the project was always going to finish when it did because of this issue. Against this, MBL contended that had the hydraulics rectification been undertaken earlier, the rectification of the atrium beams could have occurred earlier.

67 The evidence of Mr Langen, of Gallagher, the project manager, was central to the plaintiff’s position. He gave evidence inter alia that:

i. In order for the hydraulics rectification work to be carried out scaffolding had to be erected in the atrium area of the site from December 2005 onwards;

ii. The scaffolding prevented contractors from gaining access to the atrium beams to undertake rectification works;

iii. By late January 2006 the rectification of the hydraulics works and completion of subsequent new fit out works was performed up to a stage that permitted the partial removal of the scaffolding within the atrium area, thereby allowing access to the atrium beams requiring rectification;

iv. The scaffolding, which was erected to allow, amongst other things, the hydraulics rectification work to be completed, therefore delayed the rectification work on the atrium beams and consequently the installation of the atrium bridge structure.

68 The relevant chronology for the atrium beam rectification is set out in an email authored by Mr Quentin Howell of Probuild, the construction manager, of 3 February 2006 appearing at MFI D3 p13

69 It is apparent that the cracking in the atrium beams was evident from at least 30 November 2005, because that is when Probuild requested an engineer (M+G) come to the site to inspect the cracking. Importantly, MBL did not submit - and indeed I do not think that it could have submitted – that had the hydraulics rectification been undertaken earlier the atrium beam cracking would have been discovered earlier. Thus this issue – assuming that the atrium beam cracking was only apparent from 30 November 2005 - must be factored in to any hypothetical scenario in which the hydraulics rectification was undertaken earlier.

70 In relation to the atrium beams, the engineer could not get to the site until 5 December. There was then some delay in getting the engineer to respond with a proposal to deal with the problem. Probuild placed phone calls with the engineer on the 6, 8^t 12, 14, 15 and 16 December 2005 chasing a response from the engineer. Probuild then issued a formal request for information to the engineer on 19 December 2005 to prompt a written response. Clearly Probuild was pursuing the atrium beam rectification with some urgency. This lends weight to an inference that the atrium beam rectification was happening as quickly as possible, notwithstanding the hydraulics rectification issue.

71 The engineer responded on 22 December but Probuild was then on a Christmas break. The appropriate inference is that Probuild received the response when it returned to work on 3 January 2005 (as to the Christmas break period see MFI D3 p64). The engineer’s advice was to scabble certain beams and then call the engineer for further inspection whereupon confirmation of final rectification advice would be provided.

72 There was a requirement for Probuild to get three quotes for any trade contract. Probuild got its first quote on 11 January from Civico and two more on 17 January. The procedure for letting a trade contract was for Probuild to submit a Trade Package Recommendation to Mr Langen who would then get the quantity surveyor’s approval and then send it on to the receiver and manager. Once that was approved he would advise Probuild who would then arrange to let the contract to carry out the work. In this case Probuild submitted its recommendation to Mr Langen on 18 January. Mr Langen thinks it is likely that he gave verbal approval for the recommendation on 23 January and followed that in writing on 24 January. That is consistent with the email being sent in the afternoon of 23 January from the receiver and manager to Mr Langen approving the recommendation.

73 The scabbling work was then carried out on 23 and 24 January, as soon as the approval was given. Once it was completed the engineer inspected on 25 January. Having inspected the exposed reinforcing steel, the engineer then had to produce a rectification proposal. Probuild chased the engineer for that on several occasions. Ultimately, the engineer responded with an instruction on 2 February. Probuild began chasing three prices the following day.

74 On 3 February Ms Prior in an email suggested that due to the urgency Probuild should provide a budget estimate with a view to proceeding without the need to obtain three quotes.

75 On 3 February Probuild submitted to Mr Langen a Notice of Potential Delay. The notice referred to considerable delays due to no details being available from the structural engineer.

76 It follows from the above facts that irrespective of any delay due to the hydraulics rectification, Probuild could only have taken action to have the atrium beams scabbled from 3 January onwards, once it had the engineer’s advice. The contract for the scabbling was in reality on let on 23 January 2006, some three weeks later.

77 Mr Langen’s position, maintained under cross-examination, was that the scabbling could not have occurred before 23 January 2006 because of the scaffolding for the hydraulics rectification being in the way. Mr Langen’s evidence was that if there had been any merit in activating the scabbling contract at an earlier date the project team would have found a way to speed up the process of letting the trade contract. Mr Langen deposed that in his experience in the industry a scabbing contractor could be identified an retained within a day or two if necessary.

78 Meinhardt submitted that Mr Langen’s contention that the atrium beam rectification was delayed by scaffolding issues should not be accepted as it was not supported by any documentary records. In this regard, Meinhardt drew on the fact that Mr Langen had not sought to qualify the chronology set out in the email of Mr Howell which may no mention of delays caused by scaffolding. Indeed, Mr Langen had responded to Mr Howell’s email by stating: “Well done! I think your response on this was spot on. I appreciate your time spent on this”.

79 Ultimately, I do not accept that the hydraulics rectification work delayed the carrying out of the atrium beam rectification. In my view, the atrium beam rectification was undertaken as quickly as was possible.

80 Importantly, Mr Shahady, an expert for the plaintiff, accepted that from 2 February 2006 the atrium works were controlling completion of the project.

81 The relevance of this is that combined with the findings above – namely that the hydraulics rectification did not delay the atrium beam rectification, and as to the relevant chronology - it leads to the conclusion that the delay in undertaking the hydraulics rectification works did not delay the completion of the project, or the issue of the IOC.

82 Thus the plaintiff has not succeeded on its delay case.

Proportionate liability

83 Meinhardt pleads that if it has any liability to the plaintiff, Vav’s is a concurrent wrongdoer and accordingly Meinhardt’s liability should be reduced to nil under the proportionate liability provisions, namely section 35 of the Civil Liability Act 2002 or section 87CD of the Trade Practices Act 1974 (Cth). Meinhardt pleads this case on the basis that Vav’s owed MBL a duty of care.

84 In what follows I accept the position of the plaintiff, namely that Meinhardt has not succeeded in proving that Vav’s is a concurrent wrongdoer for the purposes of the relevant provisions.

85 In Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187, Barrett J held at [32] that:

“The provisions of Pt 4 [of the Civil Liability Act 2002 ] are compulsory. They change substantive rights, so that a plaintiff’s ability to obtain an adjudication of joint and several liability is removed where the circumstances are of the type to which the alternative regime of proportionate liability is applied. A case no doubt needs to be pleaded and proved by one or more defendants so as to engage the statutory provisions”.

86 Consistent with this, in Shrimp v Landmark Operations Limited (2007) 163 FCR 510, Besanko J held that a “concurrent wrongdoer” referred to in s 87CB(3) of the Trade Practices Act only includes persons whose acts or omissions caused the damage or loss that is the subject of the claim if they are liable to the claimant for that loss or damage. His Honour stated at 523 [62]: “The definition of concurrent wrongdoer seems to be the critical subsection and, in my opinion, the word ‘caused’ in s 87CB(3) should be read as meaning such as to give rise to a liability in the concurrent wrongdoer to the plaintiff or applicant.”

87 In the present case Meinhardt simply has not proved what it has pleaded, namely that Vav’s Plumbing owed MBL a duty of care. Indeed, there is not even evidence that Vav’s Plumbing knew that MBL (or any financier for that matter) was involved in the Project.

88 In CBD Investments Pty Ltd v ACE Ceramics Pty Ltd (1992) 10 BCL 437, Giles J refused to accept an argument that a sub-contractor providing supplies to a builder owed the builder’s principal a duty of care simply because the sub-contractor knew that it was supplying product to enable the builder to fulfil its obligations to the principal. Critical to his Honour’s rejection of a duty of care was the fact that there was no allegation or evidence the sub-contractor even knew who the principal was.

89 On application of that reasoning to the present case, and the extension of it to the position of a financier such as MBL, it cannot be said that Vav’s owed MBL a duty of care.

90 In McPhee and Son (Aust) Pty Ltd v Technopolis Pty Ltd (1996) 13 BCL 189, the Supreme Court of South Australia held that the party who purchased a building after it had been constructed by the builder under a construction contract with a previous owner could sue the builder in negligence. The important facts in that case relevant to the finding of a duty of care were that the builder knew the purchaser, was aware of the purpose for which the purchaser required the structure and the two were in contact during the building works so as to make it clear the purchaser was relying on the builder.

91 Applying the approach adopted in that case to the present, one can equally see how the distinguishing features of that case which gave rise to the existence of a duty of care between non-contracting parties are not present here as between MBL and Vav’s.

92 These authorities and the relevant principles are considered by S Walmsley, A Abadee and B Zipser, Professional Liability in Australia (Thomson Lawbook Co, 2nd ed, 2007) at [6.510]. The authors correctly recognise that in particular cases there may be actual reliance by an owner of a property on the sub-contractor, or the assumption of responsibility by a sub-contractor, or other matters establishing the existence of a duty of care owed by a sub-contract to an owner in particular cases (such as McPhee), but that if the case does not fall into such a category an owner will not usually have a remedy in tort against the sub-contractor.

93 Applying that rationale, the position is that Vav’s Plumbing did not owe MBL a duty of care.

94 That conclusion is reinforced by the findings of the Court on liability in this case, namely that Meinhardt did not owe MBL a duty of care.

95 Indeed, Meinhardt made its submissions in this area (filed after the judgment on liability) on the basis that “If the Bank were able to demonstrate Meinhardt owed it a duty of care, the same duty would be owed by Vav’s”. On one view - with MBL having failed to establish that Meinhardt owed it a duty of care – this submission constitutes a concession by Meinhardt that Vav’s did not owe MBL a duty of care.

96 For the above reasons, Meinhardt has failed to make out its proportionate liability defence.

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