Mory Pty Ltd v Alfred Medical Imaging Pty Ltd
[2011] NSWDC 75
•29 July 2011
District Court
New South Wales
Medium Neutral Citation: Mory Pty Ltd v Alfred Medical Imaging Pty Ltd [2011] NSWDC 75 Hearing dates: 16, 17, 18 February, 9 March & 1 April 2011, last written submissions received 27 July 2011 Decision date: 29 July 2011 Before: Levy SC DCJ Decision: 1.Verdict for the plaintiff in the sum of $87,790.69 on the plaintiff's claim against the defendant;
2.Pre-judgment interest on the plaintiff's verdict is assessed in the amount of $32,961.55;
3.Verdict for the cross defendant/plaintiff on the cross claim brought by the cross claimant/defendant ;
4.Judgment for the plaintiff in the sum of $120,838.38 including pre-judgment interest;
5.I will hear the parties on the question of costs;
6.Exhibits may be returned;
7.Liberty to apply on 7 days notice if further orders are required.
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
Catchwords: CONTRACT - claim for damages for cost of contract works - TORTS - claim for set-off for damage caused to equipment stored in defendant's premises whilst plaintiff had possession of the premises for the purpose of carrying out agreed building works - water damage to CT Scanner to be used in radiology practice - consequential claim for economic loss Legislation Cited: Civil Liability Act 2002, s 5B Cases Cited: Banco de Portugal v Waterlow & Sons Ltd [1932] UKHL1; (1932) AC 452
Luxton v Vines [1952] HCA 19; (1952) 85 CLR 352Category: Principal judgment Parties: Mory Pty Limited t/as Premier Commercial Interiors (Plaintiff/Cross-defendant)
Alfred Medical Imaging Pty Limited (Defendant/Cross claimant)Representation: Ms R Francois (Plaintiff/Cross-defendant)
Mr T Davie (Defendant/Cross claimant)
Picone & Co (Plaintiff/Cross-defendant)
Mulally Mylott (Defendant/Cross claimant)
File Number(s): 2009/333139
Judgment
Table of Contents
Nature of case
[1] - [4]
Issues
[5]
Summary of findings
[6]
Credit issues
[7]
Factual background
[8] - [22]
Decision on Issue 1 - Condensate on CT scanner
[23] - [78]
Decision on Issue 2 - Liability for claim by Alfred
[79] - [98]
Decision on Issue 3 - Quantum of claim by Premier
[99]
Decision on Issue 4 - Alfred's cross claim
[100] - [107]
Decision on Issue 5 - Whether set-off arises
[108]
Disposition
[109]
Orders
[110]
Nature of case
The plaintiff, Mory Pty Limited, which trades under the name Premier Commercial Interiors ["Premier"], contracted with the defendant, Alfred Medical Imaging Pty Limited ["Alfred"] to carry out some building and internal fit-out works at the defendant's premises where it was setting up a radiology practice at 144 Great North Road, Five Dock, NSW ["the premises"].
During the period when Premier was in formal possession of the premises, a CT scanner was delivered to the premises and stored there for subsequent installation. Between the period 29 January and 4 February 2008 the machine remained stored in the premises. Between 3 and 4 February it had become adversely affected by moisture from air-conditioning condensate that had accumulated due to a very low thermostat setting.
There was a substantial dispute as to the circumstances in which the condensate had accumulated on the CT scanner, and as to who was responsible for that occurrence.
Alfred has cross claimed against Premier for the cost of repairs to the CT scanner and for compensation for claimed consequential business losses, as well as for the claimed financial consequences of the resultant delays in commissioning the premises for active use as a radiology practice.
Issues
The legal relationship between the parties was governed by a written agreement, which was unambiguous in its terms. The primary issues calling for decision in these proceedings are of a factual nature with regard to the actual cause of the condensation which affected the CT scanner. The secondary issues that arise are of a legal nature, and concern the responsibility for any resultant damage, the quantum of claimable damages, and the final balance of the rights and entitlements of the parties. The issues may be conveniently identified as follows:
Issue 1 : Whether the person or persons responsible for operating the air-conditioning in the premises, resulting in condensate affecting the CT scanner stored therein, can be identified by evidence or reasoned inference;
Issue 2 : Which of the parties, and on what basis, bears the legal responsibility for any losses sustained by Alfred as a consequence of air-conditioning condensate affecting the CT scanner;
Issue 3 : The appropriate quantum of the claim by Premier on the principal claim;
Issue 4 : The appropriate quantum of the claim by Alfred on the cross claim;
Issue 5 : Whether a set-off arises on a consideration of the respective claim and cross claim, and with what result.
Summary of findings
I have found that the evidence does not permit a reasoned finding as to the identity of the person or persons who operated the air-conditioning equipment in the premises at the relevant time so as to cause the accumulation of the air-conditioning condensate that affected the CT scanner. In the result, Premier's claim against Alfred has succeeded. Alfred has not succeeded in its cross claim against Premier.
Credit issues
The first matter to be addressed is the issue of credibility of testimony. In this regard I find that each of the respective witnesses made honest efforts at recounting their evidence truthfully. I had no sound basis upon which to reach a reasoned conclusion that it was more probable than not that the evidence of any one witness was less likely to be correct than another witness who gave a slightly differing account of events , as no witness was able to describe the critical event of how the air-conditioning was left on in the premises overnight at a temperature setting of 10 degrees Celsius. When it came down to the critical issues of differences in the evidence, I consider that those differences related to subjective matters such as perception of heat and cold, based on considerations of personal comfort, and these did not raise issues of credibility or reliability of testimony.
Factual Background
In late 2007 the parties entered into an agreement for building work to be carried out at premises at Five Dock that were being fitted out for use as a radiology practice. That agreement was subsequently formalised in the form of an ABIC-SW-1 2002 simple works contract for Premier to carry out building work at Alfred's premises at the request of Alfred pursuant to an agreed design. The signing of the agreement post-dated the works however the parties have agreed that nothing turns on that fact. The amended contract sum was for $635,471.32.
In due course, on 29 February 2008 the project architect for the works signed all the necessary certificates that were required pursuant to the contract , certifying that all monies claimed by Premier were properly due and payable by Alfred and practical completion had been achieved. The premises were then formally handed over to Alfred. Ultimately, Premier had satisfactorily completed the work in accordance with the terms of the contract and Alfred paid Premier the sum of $531,793.85, being part of the agreed contract price.
At the commencement of the hearing the parties ultimately agreed that if Premier's claim were to be successful, it should be properly quantified in the adjusted sum of $87,790.69, plus pre-judgment interest.
The real dispute between the parties arose in relation to the cross claim by Alfred. The undisputed facts that underpin the cross claim are as follows.
Premier commenced work on the site in mid-November 2007. The anticipated date for practical completion of the works was 21 January 2008. Alfred had intended to re-enter the premises at the end of January 2008 for the purposes of conducting its radiology practice. For that purpose, on 29 January 2008, a CT scanner machine was delivered to the premises to be stored there pending a process of commissioning of that machine by the original supplier, Siemens.
The CT scanner in question was not new. It had already been installed and had been in use at other premises operated by Alfred at its practice located at Camperdown. At the time in question, Siemens had decommissioned the machine from the Camperdown site and it had been delivered to the Five Dock site for recommissioning at that site. At the time of delivery and anticipated re-installation, the machine was still subject to a warranty issued by Siemens.
On the weekend, between Friday 1 February and Sunday 3 February 2008, building work continued at the site to make the premises ready for the installation of machinery in preparation for commencement of practice.
During that weekend, due to prevailing weather conditions, high temperatures were reportedly experienced inside the premises whilst the works were still in progress. Before the premises were locked up on the afternoon or the evening of 3 February, an unknown person or persons had switched on the air-conditioning system that serviced the CT room in the premises.
On the morning of Monday 4 February 2008 it was discovered that the air-conditioning in the premises had been left on and had been operating in that state at least overnight. At that time, following further investigations, it was discovered that the master controls at the distribution board, or more particularly, the thermostat of the air-conditioning system, had been set at the very low temperature of 10 degrees Celsius.
Significantly, on the morning of 4 February an inspection also revealed that the CT scanner in question was covered in water condensate. As a result of that observation the installation technicians from Siemens advised Alfred that the planned installation could not proceed.
On 6 February 2008 Siemens advised Alfred that it considered the warranty for the CT scanner no longer applied because of the preceding events. On 8 February 2008 Siemens advised that the installation of the CT scanner could proceed as planned but in the circumstances it was not prepared to provide the usual warranty for the machine. Between 11 and 13 February 2008 Siemens engineers examined the equipment and provided an assessment report on its condition.
Following these inspections, on 14 February 2008, Siemens advised Alfred that the warranty on the equipment was void. At that time the expectation was that the machine would develop problems as a result of it having been affected by air-conditioning condensate.
As a result of condensate affecting the CT scanning equipment, Alfred took the advice of Siemens and commissioned that company to undertake certain repairs and the replacement of some critical parts of the equipment. That work resulted in the CT scanner eventually being installed and commissioned at the site. Between 19 March 2008 and 30 January 2009 Siemens invoiced Alfred for a total of $398,515.50 in respect of those repairs and for replacement parts. The need for such repairs arose from early signs of water caused corrosion and resultant concerns over the integrity and unpredictable reliability of the CT scanner that had been affected by moisture in the manner described. The principal component of the resultant costs incurred was for the replacement of the gantry component of the CT scanner. The ultimate cost of repairs was $401,569.
The responsibility for the initiating events that led to water condensate affecting the CT scanner, and the quantification of the losses claimed by Alfred as a result of those matters, were substantially disputed by Premier. I will set out my findings on those disputed matters in conjunction with my findings on the specific issues to which those matters relate.
In addition to an array of affidavit evidence and documents tendered in relation to the surrounding events leading to the discovery of air-conditioning condensate on the CT scanner, on behalf of Premier, the following witnesses called by Alfred were cross-examined: Dr Ho-Shon, Dr Anura, Dr Kapoor, Dr Drivas, Ms Sebastian, Mr Carroll and Professor Magnussen, who were all associated with the Alfred group. On behalf of Alfred, the following witnesses called by Premier were cross-examined: Mr Yaldwyn, the air-conditioning contractor, and Mr Oliver, Mr Stewart, Mr Houlihan and Mr Wilcocksen, the latter group being associated with Premier.
Decision on Issue 1 - Events leading to condensate affecting the CT scanner
The critical questions concerning how the condensate came to be formed in the CT room and as a result affected the CT scanner are first, which person or persons turned on the air-conditioning system, and secondly, how the thermostat on the air-conditioning control panel for that system came to be set at 10 degrees Celsius.
It appears to be common ground between the parties that the air-conditioning system in question had been left on at least overnight on the evening of Sunday 3 February, and that it had been set at 10 degrees, as that was the setting at which it was found to be operating shortly after 8 .00 am on the following day, Monday 4 February 2008.
It was also not in dispute that a thermostat setting of 10 degrees would require the system to be operated in the premises for some hours before dew point would be reached so as to cause the accumulation of the observed condensation on the CT scanner in the premises.
The evidence concerning the two identified critical issues was entirely circumstantial. There was no evidence or admissions that directly inculpated any party or person in respect of those events.
Nevertheless, Alfred seeks an inference that the responsibility for these events must rest with an employee or a sub-contractor of Premier as that company had relevant possession of the site at the time and was in charge of carrying out works on the site at the time in question.
In contrast, Premier disputed the availability of the contended inferences, claiming that on the evidence, such inferences as sought by Alfred involved unwarranted and inappropriate speculation.
Accordingly, it is necessary to review the evidence on these matters.
The starting point for the analysis is to observe that on the weekend in question, and more particularly, on Sunday 3 February, various persons with differing interests had both reason and opportunity to have access to the site.
The first group of people with access and opportunity to operate the air-conditioning system were the employees of Premier who were working to complete rectifications to the planned fit-out of the x-ray room, as distinct from the room in which the CT scanner was located. The purpose of that work was to enable the installation of equipment to proceed as planned. Those employees were reportedly working in confined spaces, in uncomfortable, hot and muggy conditions. Those persons would have had ample opportunity and reason for switching on the air-conditioning system in order to make their working environment more comfortable. There is no evidence that they actually did so.
The second group of people to have access and opportunity to switch on the air-conditioning system were the persons associated with the Alfred group. The evidence disclosed that there were a number of Alfred personnel who had made informal visits to the premises at various times on 3 February. Those persons would have also had an opportunity and to perhaps a lesser degree, a motive, to make the atmosphere more comfortable for the duration of their respective visits, but there was no evidence that they actually did so.
The third group of people who could have accessed the site were the owners of the premises or their representatives, including a glazing contractor, who was attending to the repair of a water leak that had reportedly developed and which had affected the premises and required urgent attention on 3 February 2008.
In considering this latter group, on the evidence there was no dispute that the responsibility for the repair of the water leak rested with the owner of the property and that the contemplated repair required the attendance of a glazier. That work was entirely independent to the work being undertaken on the site by Premier. I infer from the context of the occurrence of the leak during fit-out work that was already behind schedule, and from the evidence of Professor Magnussen, that this remedial work was required to be undertaken as a matter of urgency.
That said, there is no direct evidence to either exclude or support a finding or an inference to the effect that the owner or any glaziers and allied workmen retained on behalf of the owner, had switched on the air-conditioning system that served the CT room. Any positive finding or inference inculpating the owner of the premises or the glazier would be entirely based upon speculation, and is thus not open on the evidence.
This then leaves for consideration the liability evidence called from the witnesses for the respective parties. There were two bodies of evidence on the likely cause of these circumstances, and in each instance, the evidence was circumstantial and the parties sought to have differing inferences drawn from that evidence. Oral evidence was called to variously supplement and test the affidavit and documentary evidence tendered.
Evidence called by Alfred on the air-conditioning issue
The first body of oral evidence called on behalf of Alfred on the issue of the air-conditioning comprised the evidence of Dr Ho-Shon, Dr Anura, Mr Carroll, Dr Kapoor, Dr Drivas, Ms Sebastian and Professor Magnussen. That evidence supplemented the affidavit evidence of those witnesses. The significance of the evidence of these witnesses is summarised in the following paragraphs.
Dr Ho-Shon
Alfred drew upon the evidence of Dr Ho-Shon to provide a basis for inferring that the air-conditioning was either not operating, or had not been operating on a very cold setting, at some unspecified time during the day of 3 February.
Dr Ho-Shon could not recall the details of the prevailing outside temperatures on 31 January or 2 February 2008 during his visits, which were informal, he did not recall the climate as being either too hot or too cold. On his inspection of the downstairs rooms of the premises on 3 February he did not find the ambient temperature to be uncomfortable. He explained that he had walked into the premises from rainy conditions that prevailed outside. He believed that if the premises were very cold at the time of his entry on that date he would have noticed discomfort from the cold because he was wet from the rain at that time. These observations were not linked to a specific time. I do not consider Dr Ho Shon's evidence of the conditions he observed on 31 January and 2 February to be probative of the events of 3 February 2008 , as the conditions between those times were not static.
At about 8.00am on Monday 4 February 2008 Dr Ho-Shon entered the CT room of the premises and notice d the room was very cold and that the walls and the CT scanner were wet from droplets of condensed moisture from the air-conditioning system. He asked Mr Carroll, Alfred's Practice Manager, to turn off the air-conditioning immediately. Mr Carroll, who had been on site from about 8.00am on that day, advised him he did not know where the controls were but undertook the task of following through with that request.
Dr Anura
Alfred drew upon the evidence of Dr Anura, the CEO of Alfred, to base a finding it sought to the effect that apart from visits from various members of the Alfred group, the only other persons on site on 3 February, and who had an interest in switching on the air-conditioning systems, were the tradesmen and employees of Premier.
Dr Anura initially stated that he attended the reception area of the premises on the morning of 3 February , this was for about 15 minutes in order to investigate a reported water leak. In his further cross-examination he agreed his inspection was for about 7 to 10 minutes. He did not venture into other parts of the premises. He stated that he had not particularly noticed whether it was either hot or cold at that time. He agreed that he had not made a note of whether it was a warm and humid day on the day in question.
Dr Anura described circumstances where a number of his own staff and the employees of some suppliers, including a glazier, were on the site on Friday 1 February. He stated that to his recollection those persons were not on site on Saturday 2 February or Sunday 3 February. He stated that those people only worked on weekdays and did not work on site on a Saturday or a Sunday. His basis for giving that evidence appeared to be that he was the person responsible for authorising payment of weekend rates and he had no recollection of having done so on those days. I do not consider that evidence to be definitive of whether or not there were Alfred employees, or any other employees, working on the site on 3 February 2008.
Dr Anura's reliance on his recollection of staff payments could only have related to the employees of Alfred, but not the other doctors in the Alfred group who visited the site. I cannot take his comment to refer to the employees of Premier or other suppliers including the glaziers. Further, Since Dr Anura was only on the site for some 7 to 10 minutes on 3 February, his evidence as to who was, or was not present, was of limited probative value and was based on an assumption that any persons present would have recorded their presence in time sheets. That said, I consider that Dr Anura's evidence was truthful albeit necessarily limited in its scope and content on the issues of who was present on the site and whether, and at what setting, the air-conditioning had been left on at the end of the day.
Dr Anura arrived at the premises at about 8.30am on Monday 4 February 2008, at which time the air-conditioning condensate had already been discovered.
Professor Magnussen
Professor Magnussen had attended the site on 29 January, 2 February and 3 February for the purpose of following up on progress of outstanding issues concerning the works. On 3 February he also attended to deal with the issue of a water leakage into the premises. On that date he also noted that a previously identified safety problem with the wiring that he had raised with Premier on 29 and 30 January, was fixed by the time he had visited the site on 3 February.
The significance of that safety issue was that before that safety issue had been addressed and fixed, the air-conditioning to the premises had to be shut off.
On his inspection on 3 February, Professor Magnussen had noted that the previously identified safety problem had been resolved at some stage after his previous inspection on 2 February. His understanding was that the remedial or rectification work involved, and matters to do with the electrical switchboard room, were the responsibility of the building owner rather than Premier. The purpose of this evidence was to show that it was in fact possible that the air- conditioning could have been left on and operating on 3 February. Ultimately, that was not a matter that was relevantly in dispute.
Whilst Professor Magnussen could not specifically recall doing so, his practice on the occasions of his site visits was to walk around the rooms to inspect for issues that needed to be raised or addressed with Premier. His practice was to then enter relevant data onto his personal digital assistant, which was also the source of his subsequent email communications on site issues and was the basis upon which he had refreshed his recollection of relevant events. In that regard, some visual images he had taken on such inspections were also tendered on a USB drive.
Professor Magnussen understood that the equipment on site, and the data communications room, needed to be accommodated in a cool and relatively dry environment. The thermostat was intended to be set for an ambient temperature of 22 degrees Celsius . This is what had led to a contract variation for the inclusion of a dedicated split system air-conditioning system with an inbuilt thermostat alarm to alert personnel to high temperatures.
At this point it is relevant to note that the air-conditioning system in question was designed and intended to operate in the premises for 24 hours per day 7 days per week to meet the requirements of keeping certain equipment in a constant cooled environment, but not at 10 degrees Celsius. The required calibration was 22 degrees Celsius.
It is clear from the evidence of Professor Magnussen that in the days leading up to the discovery of the condensate which had affected the CT scanner , there were a number of outstanding rectification tasks required to be undertaken in connection with building work on the premises , and that those tasks were variously being addressed by Premier, as well as by the owner of the premises and a glazing contractor engaged by the owner.
Professor Magnussen had a clear recollection of being on the premises on 3 February and seeing two workmen in the x-ray room looking as if they were hot and also hearing them complain of the temperature and the working conditions, from which I infer the conversation was about hot working conditions in that room.
The clear purpose of introducing this latter evidence was to provide a basis for inferring that someone on behalf of Premier had an interest in switching on the air-conditioning system within the premises because they were hot. The evidence was called to support an inference that such persons had in fact switched on that air-conditioning system.
An attack was made on the credibility of the evidence of some of Professor Magnussen's reconstructed recollections concerning those conversations. I consider that no relevant credibility issue arose. It would not have been unreasonable for Professor Magnussen to be concerned about the hot conditions in which people were working and it was not incredible that after the event, his recollection of conversations on that issue were incomplete. I did not consider it to be remarkable that Professor Magnussen's evidence was primarily based upon his notes of his site observations rather than on side issues of a passing nature such as conversations about the ambient temperature conditions in the days preceding the discovery of the condensate on 4 February 2008.
Mr Carroll, Dr Kapoor, Dr Drivas and Ms Sebastian
I found the evidence given by Mr Carroll, Dr Kapoor, Dr Drivas and Ms Sebastian to be non-contributory to the critical issues as they were not in a position to make any pertinent observations of the events of 3 February that related to the setting of the air-conditioning at the end of the day on Sunday 3 February 2008. Further, climatic observations made on the preceding days, without explanatory evidence to justify it, is not compelling evidence of the prevailing climatic conditions on subsequent days. Those parts of their evidence which was used to justify an inference that because there was unfinished work on the site on 2 February, that Premier's workers were on site on 3 February, was not in serious dispute.
Evidence called by Premier on the air-conditioning issue
The second body of oral evidence on the subject of the air-conditioning was called on behalf of Premier and comprised the evidence of Mr Yaldwyn, Mr Oliver, Mr Stewart, Mr Houlihan and Mr Wilcocksen. The evidence was in affidavit form, supplemented by oral testimony. The significance of the evidence of these witnesses is summarised in the following paragraphs.
Mr Yaldwyn
Mr Alan Yaldwyn, of Aircon Services Pty Ltd gave evidence at the request of Premier. His company was in the process of being wound up. He was a contractor for Premier on the site. His company installed a dedicated air-conditioning system for the communications room. The control mechanism that had been designed for that system was that it would run for 24 hours per day with a calibrated temperature alarm in the case of untowardly high temperatures occurring. That system was in addition to the system that had already existed in the premises. Mr Yaldwyn stated that after the new air-conditioning system had been installed, and after the existing system had been cleaned, the entire air-conditioning system, that is both systems, had been shut down in readiness to be switched on at handover of the site. There was no evidence that suggested it was unsafe or in any way dangerous for anyone to switch on the air-conditioning systems within the premises from that time onwards. I infer from Mr Yaldwyn's evidence that when he had shut the air-conditioning system off in anticipation of handover at a later stage, the thermostat setting had been at the intended 22 degrees Celsius.
Mr Yaldwyn stated that he had not turned on the air-conditioning in the communications room prior to the events in question but he had heard some discussion about workmen from the company supplying the x-ray machine working in 40 degree heat in one of the rooms.
Mr Yaldwyn's evidence gave me the impression that although the air-conditioning systems to the premises had been shut down, it would not have been difficult for those systems to be turned on again notwithstanding that he had turned them off with the intention of leaving them turned off until the time of handover of the site to Alfred on completion of the works. It was plain from Mr Yaldwyn's evidence that whoever had switched on the air-conditioning system for the CT room either must have known which of the unlabelled controls was the appropriate one, or the switching was effected by trial and error or at random. Either way the thermostat setting was tampered with resulting in an inappropriate setting at 10 degrees Celsius.
In identifying the photographs comprising the air-conditioning control units in the premises Mr Yaldwyn confirmed that it would not have been difficult for a person with a flat edged screwdriver, a nail file, a pen knife or even a stout thumb nail to adjust the thermostat setting on the control panel in order to set it to 10 degrees Celsius.
Although Mr Yaldwyn had disagreed with the proposition that Mr Wilcocksen had spoken to him about turning on the old air-conditioning because men were working in the x-ray room. I do not consider a relevant credibility issue arose from that evidence. It appears to me that any differences in relevant recollections are based on conflation of recollected conversations rather than misleading evidence.
Mr Oliver
Mr Darren Oliver, an employee of Premier, was in charge of the site during the period of the works including on Sunday 3 February 2008. He described the presence of about 5 workmen on the site working in the x-ray room on Saturday 2 February and about 2 workmen at the same place on Sunday 3 February.
Mr Oliver described the conditions in the confined working space as being hot and muggy. He agreed that on occasions on the site he may have operated the wall switch to turn on the existing air-conditioning system when working in the x-ray room but he had no specific recollection of in fact doing so. He was not certain that air-conditioning was available in the x-ray room at the relevant time because there was no ceiling or ceiling ducting in place when he was working there at the times in question. He said he was aware of the switchboard location but was unaware there were thermostats located there because he had not had cause to venture into that room where they had been located.
Mr Stewart
Mr Camilo Stewart was an employee of Premier. He was a first year apprentice working in the x-ray room of the site on the weekend in question. His work, which was under the supervision of Mr Oliver, involved putting up a new suspended ceiling in that room. He worked on both 2 and 3 February. He could not recall that it was hot in the x-ray room on those days.
Mr Houlihan
Mr Houlihan was an employee of Premier. Mr Houlihan arrived at the site on the morning of 4 February at which time he observed the presence of condensation on the CT scanner. He also saw some water discolouration on the ceiling tiles which, after investigation, proved to be coming from the accumulation of moisture in the communications room and which was also tracking down a cable in the ceiling.
Mr Houlihan stated that if the air-conditioning had been available on the weekend he would have turned it on for cooling whilst working during the day. He said this would have been achieved by operating the digital control pad on the wall. He said he recognised the general importance of turning the air-conditioning off at the end of each day to avoid freezing of the lines and allowing condensate to accumulate. It appears to me that his concession in that regard could not have had any relevance to an air-conditioning system that was designed to operate at a constant 22 degrees Celsius for 24 hours per day 7 days per week.
Mr Houlihan also said the air-conditioning would have been turned off as a matter of course, including in order to save power. He was not familiar with the controls for the new air-conditioning system and no-one had shown him how to operate them and he had never turned them on. He said that if the new system had wall mounted digital pads, he would have turned them on, however they were not, and he had not switched them on. He was unaware as to the switching arrangements for the new air-conditioning system. He was unaware that the new system was designed not to be turned off at the end of the day.
There was no evidence that suggested Mr Houlihan was aware on 3 February 2008 that at the end of the working day the air-conditioning was in operation and either could or should have been switched off when Premier's workers left the premises for the day.
Mr Houlihan arrived at the site on the morning of 4 February and he observed the presence of condensation on the CT scanner. He also saw some water discolouration on the ceiling tiles which, after investigation, proved to be coming from the accumulation of moisture in the communications room and which was tracking down a cable.
Mr Wilcocksen
Mr Mark Wilcocksen was a director of Premier. Mr Wilcocksen stated that because there was an identified potential electrical hazard associated with air-conditioning drainage issues, the existing air-conditioning system had been turned off. He explained that the new air-conditioning system was in the CT room and the existing system was in the x-ray room. His evidence was to the effect that if the air-conditioning in the CT room had been turned on it would have been of no assistance to the men working in the x-ray room, as distinct from turning on the existing air-conditioning system, which might have had some effect on the climate in that room, to provide some cooling for those men working there.
Mr Wilcocksen indicated his awareness that persons from the Alfred group thought the working atmosphere in the x-ray room were " warm " on the weekend. Those persons were not under his instruction or control. The apparent purpose of that evidence was to provide a basis for inferring that someone on behalf of Alfred may have switched on the air-conditioning in the premises.
Mr Wilcocksen denied that on 31 January 2008 he had a conversation with Mr Yaldwyn to the effect that he made a single request to the effect that he wanted to have the air-conditioning turned on in the x-ray room as his men would be working there on the weekend.
Mr Wilcocksen agreed that there had been a conversation in which he had asked Mr Yaldwyn how to turn on the air-conditioning. He differed from Mr Yaldwyn's account of the conversation as to " terminology " in that he said that it was a request he had passed on from Professor Magnussen because the latter was concerned about the heat and the uncomfortable working conditions within the premises.
Mr Wilcocksen said he had no reason at that time to delve into the workings of the thermostat regulator system that controlled the temperature of the new air-conditioning system, which is why he came to ask Mr Yaldwyn how that system was switched on.
Conclusions on the air-conditioning issue
Whilst Alfred argued that there was a reasonable basis upon which to infer that someone, probably a workman, wanted to have the air-conditioning turned on in the premises in order to render the working conditions more comfortable, the basis for drawing such an inference is not sound because that is not the only inference available. This is because the employees of Premier were not the only persons in the premises who could have turned on the air-conditioning and had an interest in doing so.
In those circumstances, where there are competing inferences and there is no particular evidence which permits a satisfactory reasoned conclusion on the balance of probabilities that one inference should be preferred over another, it is not permissible for a court to choose between competing guesses where there is nothing that would allow for a reasoned tipping of the balance in a consideration in favour of one inference in preference to another: Luxton v Vines [1952] HCA 19; (1952) 85 CLR 352.
This analysis leads me to conclude that although the air-conditioning had undoubtedly been left in operation in the CT scanning room overnight on 3 February, so that it was found to be in that state on the morning of 4 February, with the presence of accumulated condensate on the CT scanner, on the evidence adduced, I cannot reasonably determine who was responsible for that occurrence. That finding is of significance to the determination of the issue of liability.
Decision on Issue 2 - Legal responsibility for Alfred's resultant losses
The terms of the contract between the parties govern the liability of the parties in respect of the risk of damage to property. The provisions of the Civil Liability Act 2002 [" CL Act "] also govern questions of negligence and causation of loss.
Turning first to the terms of the contract, these are quite specific with regard to liability for a claim of negligent damage to equipment.
The parties had agreed that from the time Alfred gave Premier possession of the site until the time the project architect certified practical completion, the contractor bore the risk of damage to property within the premises where that damage occurred as a result of the works, and this risk extended to plant and to equipment and equipment intended to be incorporated into the works: Contract, Clause D1 . The " works " were defined as " fit out of existing premises to accommodate a new medi c al imaging suite and offices ": Introduction to the Contract, Item 5 .
Although the definition of " works " did not refer to the CT scanner, that scanner clearly came within the ambit of the contract definition of " property ": Contract, Clause D1 .
The scope of Premier's liability for indemnity to Alfred was for negligence on the part of Premier, Premier's employees, agents or sub - contractors: Contract, Clause D2.1.
This must necessarily mean that for Premier to avoid liability for damages to Alfred, it must be shown that the damage in question did not occur as a result of negligence on the part of Premier, or on the part of persons for whom it was responsible.
The question of whether or not there was any relevant negligence on the part of Premier is a matter to be determined according to a consideration of the requirements of s 5B of the CL Act.
In my view, there was nothing within the evidence that suggested that Premier was negligent. There were no relevant admissions made by Premier's witnesses, and there was no evidence from which a reasoned inference of negligence could be drawn against any person or persons for whom Premier was responsible. I accept the submission that Premier called all relevant witnesses to demonstrate that there was no negligence on the part of persons for whom it was responsible.
Putting aside for the moment the considerations required by s 5B of the CL Act, I have already recorded my finding that the evidence does not reasonably permit identification of the person or persons responsible for switching on the air-conditioning and setting the thermostat calibration at 10 degrees Celsius instead of the required 22 degrees Celsius. The identification of that person or those persons who switched on the system and calibrated it to the very low setting at which it was later found, is in my view an essential starting point in a liability analysis and it has not been satisfied.
Allowing for the possibility that it may be found on appeal that I have erred in arriving at that conclusion, I am also of the opinion that the requirements of s 5B which are essential pre-requisites for a finding of negligence are not satisfied in this case.
In my view it cannot be negligent for an employee on a building site to switch on an air-conditioning system that had beforehand been considered by the installation contractor to be in working order ready for handover, as Mr Yaldwyn stated to have been the case, where the working conditions inside the premises would have been improved or made more comfortable for persons working there if the air-conditioning was switched on in that manner. This must be so especially where there is no evidence that the person or persons responsible for switching on the air-conditioning would have had notice that the thermostat had been inappropriately manipulated to a very low setting of 10 degrees Celsius. There was no evidence that the air-conditioning controls were the subject of signs that warned against use at the time because of the very low thermostat setting.
In those circumstances I consider that the provisions s 5B(1)(a) of the CL Act have not been engaged. Those provisions require that the risk in question, namely the accumulation of air-conditioning condensate on the stored equipment, must have been foreseeable, that is, a reasonable person in the circumstances either knew or ought to have known this might occur.
Furthermore, at the relevant time, in my view the risk of air-conditioning condensate accumulating so as to cause damage overnight, or after some hours of operation, must in this case be seen as being an insignificant one where the system was designed to be run for 24 hours per day 7 days per week and in circumstances where it has not been shown that there was no actual or constructive notice that the thermostat control for the system had been tampered with or inappropriately set for 10 degrees Celsius: s 5B(1)(b) of the CL Act.
In circumstances where, as in this case, it cannot be shown that the person or persons who switched on the air-conditioning either knew or ought to have known that it was set on 10 degrees rather than 22 degrees, the probability of condensate accumulating must be seen as being very low, and commensurately, in those circumstances, the prospect of harm must have been seen by a reasonable person to have been relatively slight or remote: s 5B(2)(a) and (b) of the CL Act.
In this context, the questions of the burden of taking precautions against the harm and questions of social utility of the activity creating the risk do not arise for consideration in the absence of proof of knowledge of a significant risk of damage: s 5B(2)(c) and (d) of the CL Act.
I also consider that it has not been shown that there was a relevant failure to switch the air-conditioning system off overnight before leaving the site. I have come to this conclusion for a number of reasons.
First, there is no evidence that Premier employees knew, either by any obvious sounds that indicated the system was in operation, or from the temperature in the premises, that the air-conditioning was running at the time they left the site on 3 February. Secondly, the system was designed to run 24 hours per day 7 days per week and in the absence of notice of the very low 10 degrees Celsius setting, there was no need to consider questions of possible condensate and moisture accumulation within the premises. In my view the question of wasted energy costs, whilst important in a financial sense, are irrelevant to this consideration. Thirdly, there is no evidence that at the end of the day's work on 3 February, it ought to have been evident to Premier employees responsible for locking up the site, that the temperature was unduly cold, thus indicating an investigation be undertaken of the status of the operation of the air-conditioning system. In fact the evidence was that it may have taken some hours for the conditions in the premises to cool down to the extent of reaching dew point, which could well explain why no-one noticed the temperature to be low when the site was locked up for the night on 3 February 2008. In this context, there is no evidence as to when the thermostat was set to the very low temperature of 10 degrees Celsius.
As I have concluded that Alfred has not satisfied the requirements of s 5B of the CL Act, it is not necessary for me to consider the question of causation.
I have also found that Premier has shown that the claimed damage to the CT scanner did not occur as a result of negligence on its part. In that regard, I consider that Premier has shown that at the relevant time the damage occurred, a number of persons other than Premier, its employees or sub-contractors, had access to the premises and could possibly have turned on the air-conditioning, so as to cause the damage that was subsequently identified.
In the circumstances that I have found to be the case, the losses incurred by Alfred in connection with the damage to the CT scanner, including the claimed repairs and the claimed resultant business losses, must lay where they have fallen. Premier should not be held to be liable for such losses in the circumstances. It follows that Alfred's cross-claim against Premier must fail.
Decision on Issue 3 - Quantum of claim by Premier
The parties have agreed that if successful Premier's claim should be assessed in the amount of $87,790.69. After the addition of pre-judgment interest on that sum in the amount of $32,961.55, the plaintiff is entitled to a verdict in its favour in the amount of $120,838.38.
Decision on Issue 4 - Quantum of cross claim by Alfred
In view of the conclusions I have reached on the liability issues, it is not necessary for me to set out a detailed review of the evidence in support of the damages claimed by Alfred on the cross claim. However, in accordance with convention, to allow for the possibility of a successful appeal from my liability finding, in the paragraphs that follow, I set out in brief terms, my assessment of the damages that would otherwise have been awarded to Alfred if the cross claim had succeeded.
The damages claimed in the cross claim have two broad components. These are first, the cost of additional repairs, servicing and parts for the condensate affected CT scanner, namely $401,569, and secondly, an assessment of loss of income claimed in the amount of $38,995 said to be due to down times when the CT scanner was not able to be used in Alfred's practice. These amounts total $440,564 plus pre-judgment interest in the submitted sum of $85,050 and $8259.
In relation to the first component, I consider that it was both reasonable and necessary for Alfred to seek advice from Siemens on what was to be done in the circumstances. The CT scanner was a complex piece of machinery with intricate electrical components used for accurate diagnosis in medical practice. In those circumstances it was only right, and in accordance with the duty to mitigate potential losses, that the supplier of the device be consulted as to what was to be done in the circumstances. In this regard, I consider the opinion given by Mr Cousin s was reasonable.
The investigation that followed the condensate being found to have affected the CT scanner came at a cost and a problem arose because the supplier voided the remaining warranty on the machine. This was because of the fact that the machine had been affected by moisture which clearly had the potential to cause corrosive or reactive damage to the intricate electrical and other metallic componentry which would have had an obvious effect on the reliability of the equipment in the longer term. In those circumstances I consider that Alfred had acted reasonably in accepting expert advice which it had no reason to doubt, namely, to replace the gantry of the machine and to undertake the recommended servicing and repairs in order to re-institute the warranty and to ensure correct and efficient working order of the machine in view of its intended use as a diagnostic medical tool. I would reject the submission to the contrary as being based on inappropriate hindsight considerations: Banco de Portugal v Waterlow & Sons Ltd [1932] UKHL1; (1932) AC 452 per McMillan LJ at p 506.
In my view the position taken by Alfred was supported by the evidence of Mr Surlan and Mr Cousins. There was no evidence to indicate that the claimed amount of $401,569 was unreasonable. That said, I consider that amount should nevertheless be discounted to allow for what I consider would have been a degree of inevitable settling in work, maintenance, and servicing in respect of such complex machinery. The evidence does not permit a precise identification of such factors, and although it may appear to be to a degree arbitrary, I consider that the claimed amount should be discounted by 15 per cent to accommodate the factors I have identified. This produces an amount of $341,333, which I would round down to $340,000 in recognition of the fact that on the evidence adduced, the assessment process is not one that permits precision.
The second component of the claim is for economic loss or lost revenue to Alfred, claimed in the sum of $39,995. In my view that calculation is too high and based on assumptions that are not necessarily proven. For example, the calculation assumes an average patient fee of $265 based on the evidence of Mr Carroll, however, this may not be a true average because of the variable nature, pattern, incidence and therefore, cost of procedures used as a basis for calculation. Further, it cannot be reasonably assumed that all of the bookings for imaging procedures or investigations claimed as losses to the practice were not rescheduled within the practice to times when the machine would have been available in any event and not otherwise booked. These imponderables are not capable of precise dissection.
Accordingly, recognising that some patient bookings were lost to the practice entirely, and recognising that even with the rescheduled bookings within the practice this could have incurred a loss of opportunity to take any other last minute bookings for the available time slots that were taken up due to rescheduling, some form of assessment is required. In my view, the preferred approach to assessing this component of the loss in such circumstances is to award a general buffer amount assessed in the sum of $20,000.
If the cross claim had succeeded, pre-judgment interest would have applied to these amounts. The first interest component would have been as submitted, in the amount of $85,050. The second interest component would have been a proportion of that which was submitted, namely $4235. The total of Alfred's claim and pre-judgment interest would have amounted to $510,944 if the cross claim had succeeded.
Decision on Issue 5 - Whether a set-off relevantly arises
As the defendant has not succeeded in its cross claim against the plaintiff, the issue of a set-off does not relevantly arise for decision.
Disposition
The plaintiff's claim has succeeded against the defendant with a resultant award of damages and pre-judgment interest in the total sum of $120,838.38. The cross claim should be dismissed. The costs consequences of this result require that the parties be heard on the question of costs.
Orders
I make the following orders:
(1) Verdict for the plaintiff in the sum of $87,790.69 on the plaintiff's claim against the defendant;
(2) Pre-judgment interest on the plaintiff's claim is assessed in the amount of $32,961.55;
(3) Verdict for the cross defendant/plaintiff on the cross claim brought by the cross claiman t / defendant ;
(4) Judgment for the plaintiff in the sum of $120,838.38 including pre-judgment interest;
(5) I will hear the parties on the question of costs;
(6) The exhibits may be returned;
(7) Liberty to apply on 7 days notice if further orders are required;
Decision last updated: 02 August 2011
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