| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : SALFINGER & ANOR -v- MITCHELL [2005] WADC 117 CORAM : SLEIGHT DCJ HEARD : 12, 13 & 14 JANUARY 2005 DELIVERED : 17 JUNE 2005 FILE NO/S : CIV 1842 of 2003 BETWEEN : PAUL FRANCIS SALFINGER First Plaintiff
LYNETTE ANN SALFINGER
Second Plaintiff
AND
ZANE QUINTEN MITCHELL
Defendant
Catchwords: Contract for construction of dams - Personal liability of company representative for breach of duty of care
Legislation: Nil
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Result:
Claim dismissed Representation:
Counsel:
First Plaintiff : Mr M D Cuerden
Second Plaintiff : Mr M D Cuerden
Defendant : Mr M L Bennett
Solicitors:
First Plaintiff : Bowen Buchbinder Vilensky
Second Plaintiff : Bowen Buchbinder Vilensky
Defendant : Bennett & Co
Case(s) referred to in judgment(s):
Astley v Austrust (1999) 197 CLR 1
Council in the Shire Noosa v JE Farr Pty Ltd [2001] QSC 60
Fairline Shipping Corporation v Adamson [1975] 1 QB 180
Perre v Apand Pty Ltd (1999) 198 CLR 180
Sullivan v Moody (2001) 207 CLR 562
Trevor Ivory Ltd v Anderson [1992] 2 NZLR 517
Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830
Case(s) also cited:
Aitkin Transport Pty Ltd v Voysey [1990] 1 Qd R 510
Bellgrove v Eldridge (1954) 90 CLR 613
Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389
H J Lyons & Sando Ltd v Houlson [1963] SASR 29
Home Office v Dorset Yacht Co Ltd [1970] AC 1004
Jones v Dunkel (1959) 101 CLR 298
London Borough of Merton v Lowe (1981) 18 BLR 130
March v E & MH Stramare Pty Ltd (1991) 171 CLR 506
Moresk Cleaners Ltd v Hicks [1966] 2 Lloyd's Rep 338
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Orlit Pty Ltd v J F & P Consulting Engineering Pty Ltd (1995) 11 BCL 260
Pearmine v R [1988] WAR 315
Sullivan v Moody (2001) 75 ALJR 1570
White Industries (Qld) Pty Ltd v Flower & Hart (a Firm) (1998) 156 ALR 169
(Page 4)
1 SLEIGHT DCJ: The first and second plaintiffs were at all material times the registered proprietors of Lot 62 and Lot 58 being a part of the Myers Mountain Estate on the outskirts of Denmark in the south of Western Australia.
2 At all material times Hakea Investments Pty Ltd traded as Deep South Earthmoving and Engineering (hereinafter referred to as Deep South). Deep South conducted an earthmoving business within the district of Denmark. 3 At all material times the representative of Deep South was the defendant, Zane Quinten Mitchell ("Mr Mitchell"). Mr Mitchell was a qualified engineer. From time to time Mr Mitchell was also a director of Hakea Investments Pty Ltd. Mr and Mrs Salfinger engaged either Deep South or Mr Mitchell to construct two dams on Lot 58. It is an issue to be decided in this case whether the contract to build the two dams was with Deep South or Mr Mitchell personally. 4 After the construction of the dams, one of the dams had uncontrollable seepage (this was a dam constructed in the upper portion of Lot 58). This seepage led to instability and cracks. 5 As a result of these defects Mr and Mrs Salfinger engaged an engineer who recommended that the wall of the dam be reconstructed. The claim of Mr and Mrs Salfinger relates to the costs incurred. They claim damages of $55,853. 6 Hakea Investments Pty Ltd has been deregistered and the proceedings were commenced against Mr Mitchell personally, based upon a claim for damages for negligence. In the statement of claim filed with the writ, it was pleaded that the contract was between Mr and Mrs Salfinger and Deep South, but that a personal liability also existed against Mr Mitchell based upon negligence. At the trial leave was given for Mr and Mrs Salfinger to amend their statement of claim to plead in the alternative that the contract was with Mr Mitchell. Notwithstanding this amendment, the claim against Mr Mitchell remains a tortious claim and there is no claim against him for damages for breach of contract.
The plaintiffs' claim 7 The plaintiffs' claim personally against Mr Mitchell is based upon a breach of an alleged duty of care. The duty of care owed is said to arise from matters pleaded in pars 2(c), 5 and 7 of the amended statement of claim which pleads as follows:
(Page 5)
"2. At all material times … (c) the defendant was a qualified engineer. …
5. Prior to the date on which the plaintiff and the defendant alternatively Hakea entered into the Agreement, the defendant alternatively the defendant on behalf of Hakea made the following representations to the plaintiff. (a) that the defendant had considerable expertise and experience in building dams on the type of terrain pleaded in paragraph 4 above; (b) that the defendant was a consultant in respect of civil engineering matters and was able to give professional advice on such matters; and (c) that the defendant would personally oversee the construction of both dams. Particulars
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properties situated in Walpole and Nornalup in similar terrain (which the plaintiff duly did). (iii) Insofar as the representations were in writing, the plaintiff relies upon the following facts, matters and circumstances: (A) at the said meeting referred to in sub-paragraph (ii) hereof the defendant provided to the plaintiff a business card on which the defendant's name and academic qualifications appear, and (B) the defendant's name and advertisement appeared in a copy of the Denmark Walpole Business & Community Telephone Directory and in the Denmark Chamber of Commerce Business Directory which inter alia stated words to the effect that the defendant provided civil engineering advice, supervised earthworks and constructed dams. (iv) Insofar as the representations were made by conduct, the plaintiff relies upon the following facts, matters and circumstances: (A) at or subsequent to the meeting at the site referred to in sub-paragraph (ii) hereof the defendant alternatively the defendant acting on behalf of Hakea agreed to build the two dams on the land and at no material time informed the plaintiff that the terrain was unsuitable for the purpose and/or that the defendant did not have the appropriate expertise to build dams on the type of terrain pleaded in paragraph 4 hereof;
(Page 7)
8 The plaintiffs, in par 8 of the amended statement of claim plead the standard of care as follows: "8. By reason of the matters pleaded in paragraphs 2(c), 5 and 7 hereof at all material times the plaintiff relied upon the defendant, and the defendant owed to the plaintiff, a duty of care to: (a) exercise reasonable skill and care in supervising and co-ordinating construction of the dams to the standard expected of a competent engineer; (b) exercise reasonable skill and care to ensure that the dams would be constructed to a proper and workmanlike standard and that the defendant would cause the construction of the dams to take place in a professional manner to meet the recognised standards of good engineering practice; (c) exercise reasonable skill and care to ensure that the dams were constructed in a manner such that they were reasonably fit for their intended purpose." 9 The plaintiffs plead that the defendant was in breach of his duty of care as follows: "10. The defects pleaded in paragraph 9 hereof were as a result of the defendant's breach of his duties owed to the plaintiff as set out in paragraph 8 hereof.
(Page 8)
Particulars (a) The defendant failed to adequately supervise and co-ordinate construction of the dams to the standard expected of a competent engineer in that there was a failure to achieve adequate compaction and/or appropriate compaction of the embankments to and trenches underlying the dams, thereby resulting in the defects pleaded in paragraph 9 hereof; and/or (b) The defendant failed to exercise reasonable skill and care to ensure that the dams would be constructed to a proper and workmanlike standard and/or to cause the construction of the dams to take place in a professional manner to meet recognised standards of good engineering practice in that there was a failure to achieve adequate compaction and/or appropriate compaction of the embankments to and trenches underlying the dams, thereby resulting in the defects pleaded in paragraph 9 hereof; and/or (c) The defendant failed to exercise reasonable skill and care to ensure that the dams were constructed in a manner such that they were reasonably fit for their intended purpose in that there was a failure to achieve adequate compaction and/or appropriate compaction of the embankments to and trenches underlying the dams, thereby resulting in the defects pleaded in paragraph 9 hereof; (d) Further and better particulars will be provided by way of expert evidence prior to trial. 10 As a result of the alleged breach of duty of care, the plaintiffs say that they suffered loss and incurred expenses which include the costs of engaging an independent engineer and the costs of reconstructing the dam as recommended by the independent engineer. 11 The damages claimed are particularised in par 11 of the amended statement of claim as follows:
(Page 9)
"11. …
Particulars
The plaintiff has had to incur the following expenses by reason of the defects pleaded in paragraph 9 hereof. (a) | repairs to dam walls on 5 July 1999 | $11,830.00 | (b) | excavator hire for inspection of dams on 31 January 2001 | $363.00 | (c) | removal and stockpile dam wall for drying out on 3 May 2001 | $8,915.00 | (d) | rebuilding dam wall to the engineer's specifications on 12 June 2002 | $27,500.00 | (e) | report from Ian Haycock, Geo Technical Engineer | $1,250.00 | (f) | report from Nelson Amoah, Senior Geo Technical Engineer | $2,277.00 | (g) | report from Bruce Pully, Principal Engineer Geologist | $3,718.00 | | TOTAL | $55,853.00 | 12 The defendant denies that he owed a duty of care to the plaintiffs, denies any breach of such a duty of care and denies the entitlement for damages. 13 In par 5 of the defence, the defendant pleads as follows: "5) The Defendant denies paragraph 5 of the Statement of Claim and says further that: 5.1 at no stage did the Defendant represent to the Plaintiff, either orally or in writing, that the Defendant was qualified to provide the Plaintiff with professional engineering advice in respect of the proposed construction of 2 dams on the Plaintiff's Property;
(Page 10)
5.2 the Defendant recommended to the Plaintiff that the Plaintiff obtain professional engineering advice from Wood & Grieve Engineers; 5.3 on or about 18 December 1998, at a meeting with the Plaintiff, the Defendant and Mr John Tomlinson of Wood & Grieve Engineers orally advised the Plaintiff that they did not recommend the construction of the 2 dams due to the unsuitability of the soil conditions on the Plaintiff's Property;
Particulars
The meeting was held at the Plaintiff's Property and was attended by the Plaintiff, the Defendant, Mrs Salfinger, Mr Bill Gibb, Mr Richard Kratochvill and Mr John Tomlinson of Wood & Grieve Engineers. At this meeting a number of test holes were dug across the Plaintiff's Property to ascertain the suitability of the site for the Plaintiff's proposed construction of an upper level and lower level dam. After reviewing the results of the test holes, Mr John Tomlinson orally advised the Plaintiff that: (a) he recommended that the Plaintiff did not construct the dam in the upper level location because of the steep site gradient and possible unstable site conditions; and (b) he recommended that the Plaintiff did not construct the dam in the lower level location because of permeable sub-soil conditions. On the basis of the findings and recommendations of Mr Tomlinson, the Defendants also advised the plaintiff that he did not recommend the construction of the dams. 5.4 notwithstanding the advice of the Defendant and Mr Tomlinson, the Plaintiff decided to proceed with the construction of the upper and lower level dams;
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5.5 in or about March 1998 the Plaintiff and Hakea and Hakea (sic) entered into the Agreement on the terms and conditions contained in paragraphs 3.1 to 3.3 above; and 5.6 due to the unsuitability of the Plaintiff's Property, in or about March 1999 and prior to the provision of services by Hakea, the Defendant orally advised the Plaintiff that neither Hakea nor the Defendant could guarantee that the construction of the dams would be successful."
Evidence called by the plaintiffs
Evidence of Paul Francis Salfinger 14 Mr Salfinger stated in his evidence that he and his wife approached a Mr Peter Robertson, a land sales representative and indicated a desire to purchase Lot 58 which was situated immediately below Lot 62. Lot 62 was at that time owned by Mr and Mrs Salfinger. 15 Mr and Mrs Salfinger indicated to Mr Robertson that they wished to purchase Lot 58 to landscape it with large ponds or dams. Mr and Mrs Salfinger wanted to ensure the property had suitable clay to construct such ponds or dams before entering into any agreement to purchase Lot 58. 16 A meeting was arranged at the site of Lot 58 by Mr Robertson with the earthmoving contractor who had carried out the earthworks for the Myers Mountain Estate. This contractor was Deep South and its representative was the defendant, Mr Mitchell. It was also arranged for Mr Tomlinson, an engineer from Wood & Grieve, to attend at the meeting. The meeting was organised to take place on 18 December 1998. 17 Mr Salfinger stated that he had already had dealings with Deep South and Mr Mitchell as Mr Mitchell had previously installed a small pond on Lot 62 for Mr and Mrs Salfinger. An invoice dated 28 July 1998 was received for this construction. The invoice was issued in the name of Deep South Earthmoving and Engineering (exhibit 22). There was no mention in the invoice of Hakea Investments Pty Ltd. The invoice was paid by Mr Salfinger by writing a cheque to Deep South Earthmoving and Engineering. 18 Mr Salfinger could not recall having any discussion with Mr Mitchell about Lot 58 prior to the meeting on 18 December 1998.
(Page 12)
19 On arrival at the site on 18 December 1998 Mr Salfinger stated that Mr Mitchell gave Mr Salfinger a business card. A copy of the business card was tendered into evidence (exhibit 2). In bold print is the name "Deep South Earthmoving and Engineering". Below this is printed:
20 Mr Salfinger stated that the reasons he later selected the defendant to construct the dams on Lot 58 were that: 1. He was recommended by Mr Peter Robertson as the contractor who did the initial works on the Myers Mountain sub-division. 2. He had already had dealings with the defendant Mr Mitchell on the construction of a small pond on Lot 62. 3. There was an advertisement in the Denmark Walpole Business directory which indicated that Mr Mitchell had engineering qualifications. 21 A copy of the advertisement was tendered into evidence (exhibit 3). The advertisement contained the following wording in prominent type: "Deep South Earthmoving and Engineering".
22 There were also listed a number of tasks that the business could perform, which included: 23 At the bottom of the advertisement is typed in prominent letters: "Zane Mitchell ph/fax 9848 1786".
24 The meeting on the 18 December 1998 was attended by Mr and Mrs Salfinger, Mr Peter Robertson, Mr Mitchell and Mr Tomlinson. Also attending the meeting were Mr William Gibbs and a backhoe operator, Mr Richard Kratochvill. 25 Mr Salfinger stated that at the meeting Mr Tomlinson pointed to an area on Lot 58 for the excavator operator to dig holes for the purpose of finding suitable clay. Mr Salfinger stated that two or three holes were dug
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until eventually white clay was located. He said that Mr Tomlinson commented "ah, that's what we're looking for, white clay". He stated that Mr Tomlinson stated that the clay would be suitable to build a dam. 26 Mr Salfinger stated that he believed Mr Tomlinson said that they had found what they were looking for and that the excavator driver could fill in the holes. 27 Mr Salfinger said a discussion then took place concerning the positioning of the dams and this discussion was between Mr Tomlinson, Mr Mitchell and Mr Bill Gibbs, but he was not exactly sure what comments were made. 28 Mr Salfinger stated that there was discussion concerning Shire approval. Mr Mitchell stated that Shire approval was not required. He said that Mr Mitchell then indicated that he would provide Mr Salfinger with a quote. 29 Mr Salfinger also said that Mr Mitchell gave several addresses in Denmark and Walpole where Mr Mitchell had constructed dams. Mr Salfinger said that Mr Mitchell said that he had considerable expertise in building dams and that Mr and Mrs Salfinger were invited to look at these other dams. 30 Mr Salfinger stated that neither Mr Tomlinson nor Mr Mitchell said anything to suggest that he should not build a dam on Lot 58. 31 Mr Salfinger said that there was no mention of a company Hakea Investments Pty Ltd at the meeting. 32 Mr Salfinger also stated that there was no discussion that Mr Salfinger would personally supervise the constructions of the dams. 33 Mr Salfinger stated that he and his wife went to the various addresses given by Mr Mitchell and inspected the dams that were constructed. 34 Mr Salfinger stated that about four days later Mr Mitchell telephoned him and gave him a quote for the construction of a roadway on the two properties (Lots 62 and 58) and the two dams on Lot 58. The quote for the roadway was $30,000 and the quote for two dams was $40,000. A day or so later, Mr Salfinger contacted Mr Mitchell and gave him the go-ahead. Mr Salfinger said that he added the proviso that he wanted a good job.
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35 Mr Salfinger then prepared a surface diagram for Lot 58 to show the positioning of the two dams. This was faxed to Mr Mitchell. Mr Salfinger denied that at any time did Mr Mitchell state that he could not guarantee the dams.
36 Mr Salfinger stated that he and his wife visited the site after the construction of the lower dam and observed the top dam being constructed. He observed two wide tracked bulldozers and an excavator being used. 37 Mr Salfinger stated he later received an invoice from Deep South dated 6 March 1999 for $40,497. A copy of this invoice was tendered into evidence (exhibit 6). The invoice was directed to Mr Paul Salfinger. Stamped on the invoice was the following wording: "Deep South Earthmoving and Engineering Lot 11, Yarrimbah Road, Denmark, 6333 Phone/fax. (098) 481786 Hakea Investments ats Zane Mitchell Family Trust ACN 057 123 547" 38 Mr Salfinger stated he did not notice the words "Hakea Investments ATS Zane Mitchell Family Trust". He stated he "was always dealing with Deep South. All my cheques were made out to Deep South". (T48) 39 After both dams had been constructed, Mr Salfinger stated that he received a telephone call from Mr Mitchell stating that some minor slumping had occurred in the upper dam and that Mr Mitchell had attended to it. Mr Salfinger had noticed a green patch where seepage had occurred. Initially the slumping was dealt with by the placement of rocks, sand, planks and star pickets on the dam wall. 40 Mr Salfinger said he received a further telephone call from Mr Mitchell stating that a further slump in the dam wall had occurred and that Mr Mitchell arranged for a few truck loads of rock to be placed at the place of the slumping. 41 A further invoice was received from Deep South dated 5 July 1999. This invoice included a charge for repairs of the dam wall for which the plaintiffs were charged $11,830. Again this invoice was made out to Paul Salfinger. Stamped below the addressee was again the wording:
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"Deep South Earthmoving and Engineering. Lot 11, Yarrimbah Road, Denmark, 6333 Phone/fax. (098) 481786 Hakea Investments ats Zane Mitchell Family Trust ACN 057 123 547" 42 Again, this invoice was paid by Mr Salfinger. 43 Mr Salfinger said that he had further meetings with Mr Mitchell as the dam wall was still unsatisfactory. There was water streaming through the rocks that had been placed in the dam wall and there was further deterioration in the wall. 44 Mr Salfinger stated that Mr Mitchell suggested the rocking up of the entire dam wall. At this stage Mr Salfinger said he indicated he was not happy with that proposal. 45 Mr Salfinger said that there was discussion concerning the method of construction of the dam wall. He had been informed by Mr Mitchell that the compaction had been done by the use of the bucket on the excavator. He also was told that a road roller had been run around the rim of the dam. 46 At this stage Mr Salfinger said that he and his wife engaged a firm of engineers, Gutteridge Haskins & Davy ("referred to hereinafter as GHD"). 47 A Mr Haycock from GHD visited the site. After this visit Mr Salfinger said he had a number of telephone discussions with Mr Mitchell seeking some compromise, but Mr Mitchell rejected a compromise. 48 By this stage Mr Salfinger said that a major slump in the dam wall had occurred. Subsequently GHD arranged for Dr Amoah to inspect the dam and he submitted a report to the plaintiffs. This report recommended that the dam be drained and that the dam wall be removed and reconstructed. 49 Tendered into evidence through Mr Salfinger were various invoices received for the advice from GHD and also the reconstruction works. 50 The reconstructions works was carried out by Denmark Earthmoving Contractors.
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51 Under cross-examination Mr Salfinger stated he was a retired company director. He understood people used companies to conduct businesses and used trading names.
52 He knew Deep South Earthmoving and Engineers to be a trading name. He did not bother to do a business name search to ascertain the proprietor of the trading name. 53 On receipt of the invoices which mentioned "Hakea Investments" he did not notice the fine print and simply made out the cheques to Deep South. 54 Mr Salfinger said that the advertisement he had seen in the 1998 Denmark-Walpole Business and Community telephone directory indicated that Deep South was the only earthmover offering civil engineering advice, or that it had a civil engineer supervising the earth works. Mr and Mrs Salfinger were not looking for an engineer as such but someone experienced to handle the job. 55 He claimed the meeting on 18 December 1998 lasted after about half to three quarters of an hour. He believed that it was the fourth hole that was dug by Richard Kratochvill which led to the location of the clay. 56 Mr Salfinger's recollection was that Mr Bill Gibbs did not have much to say at the site meeting and he seemed to be there because he brought the excavator and the driver. 57 Mr Salfinger stated that he asked Mr Robertson to bring an engineer along to the meeting as he wanted an engineer to certify that the clays were suitable. He also wanted an engineer to say it was safe to put a house on the building envelope on Lot 62. The engineer they employed to give this advice was John Tomlinson. 58 Mr Salfinger stated that the dams being constructed were for ornamental purposes only. He gave directions concerning the adding of some jetties to the dams to add to the appearance of the dams. There was also some additional work required by way of landscaping. He stated that he did not recall Mr Tomlinson stating at the site meeting that "as an engineer he would not build dams on the land, but as a farmer you could construct a dam on the lower portion of Lot 58". Mr Salfinger did not recall being advised that he could build a dam on the lower portion and that it would hold a reasonable amount of water, but it was likely to leak.
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59 Mr Salfinger also stated that he did not recall Mr Gibbs recommending that he not build a dam on the upper part of the block.
60 Likewise, he did not recollect Mr Mitchell saying that there were problems with sand seams throughout the area and he could not guarantee the success of the dams because of the sand seams. 61 Mr Salfinger denied he was told by Mr Mitchell that the quote would be on an equipment hire basis because it was unknown what the final dimensions would be and the difficulties that might be encountered. 62 It was put to him in cross-examination that the person who indicated that dams had been built in the past and could be inspected, was Mr Gibbs and not Mr Mitchell. In response to this Mr Salfinger stated "you've got three people or four people with all heads in together. From my memory, it was Zane Mitchell" (T119). 63 Mr Salfinger was not able to explain why having been given the go-ahead as to the suitability of the site by Mr Tomlinson, Mr Salfinger signed a contract of sale the next day which contained a term that the contract was subject to "getting an engineer to confirm that there are suitable clays on site for the construction of said dams, no later than February 28, 1999". 64 Mr Salinger stated that he gave instructions to Mr Mitchell to insert a key trench in the dam wall (a key trench was later described by Dr Amoah, an engineer called by the plaintiffs. In simple terms it is a trench which is excavated below the dam wall and filled with compacted material. The dam wall is then built on the top of the key trench). 65 Mr Salfinger admitted that he gave directions to Mr Mitchell to place over-burdened soil excavated over the top of the dam wall. He said this was simply to dress it with top soil and it was not meant to be a part of the dam wall. 66 Mr Salfinger admitted that he received a letter from the Shire of Denmark dated 19 May 1998 stating that it had come to the Shire's attention that Mr Salfinger had commenced an unauthorised development on Lot 58.
(Page 18)
67 The letter stated as follows:
"You are reminded that prior to commencing any development on this property you are required to submit plans in adequate detail, so that they may be assessed by Council prior to construction. If you intend to construct a structure larger than 10 metres square in the area, a building licence will require being applied for and issued. Any other alteration to the property such as construction of dams, removal of vegetation located within a Tree Preservation Area, and construction of driveways accessing the block will require Planning Consent." 68 Subsequent to this letter, Mr Salfinger drew up a sketch and submitted it to the council for their approval. Council gave approval to commence the development subject to a number of conditions. The conditions were contained in a "Notice of Approval of Planning Consent" dated 29 June 1999 and sent to Mr and Mrs Salfinger by the Shire of Denmark. One of these conditions was as follows: "3. Engineer certification being received by Council to prove the stability of the construction of the two dams". 69 Against this item of the conditions, Mr Salfinger wrote the words "Wood & Grieve". 70 Mr Salfinger faxed a copy of the "Notice of Approval of Planning Consent" to Mr John Tomlinson on or about 7 July 1999. The facsimile cover sheet contained the following note to Mr Tomlinson from Mr Salfinger: "Please view this information (item 3) and discuss with Zane Mitchell letter of certification". 71 Subsequently Mr Salfinger received a letter from Mr John Tomlinson dated 15 July 1999 suggesting some remedial work, but otherwise stating that Mr Tomlinson considered the dams to have been well constructed. The letter was accepted by Mr Salfinger and submitted to the Council. 72 Mr Salfinger admitted he instructed solicitors, Messrs Bowen Buchbinder Vilensky, who wrote a letter addressed to "Hakea Investments Pty Ltd trading as Deep South Earthmoving and Engineering". This letter was dated 1 June 2000.
(Page 19)
73 The letter stated, inter alia :
"In early 1999 our client engaged your company to undertake certain work on two adjacent lots owned by our client in Denmark". (My emphasis) 74 Mr Salfinger said that he had always been dealing with Deep South and although Hakea would have been the proprietary company, he always dealt with Zane Mitchell (T151). He stated his instructions to his solicitors were "to Zane Mitchell" but that his solicitors would have "gone down the correct legal procedure" in sending the letter of demand and addressing the letter of demand to Hakea Investments Pty Ltd (T151). 75 Mr Salfinger stated that in relation to the expenses claimed by the plaintiffs, some of the accounts were paid by him and other accounts were paid through the Salfinger Family Trust. All accounts paid after July 1999 were paid from the Salfinger Family Trust. This was done on advice from his accountant.
Evidence of Lynette Ann Salfinger 76 Mrs Salfinger also gave evidence. She attended the meeting on 18 December 1998. She said the meeting was held because they wanted to ascertain whether the soils were suitable for dam building. She stated that she asked Mr Mitchell whether he was confident in building the sort of dams they required, to which he replied "I am an engineer and I can consult". 77 She stated that Mr Tomlinson was there to ascertain whether the soils were suitable for building dams and he instructed the excavator to dig various sample holes. She stated that eventually he said "ah, that's the clay we're looking for, white clay". (T236) 78 She also stated that Mr Mitchell, when asked about whether he could build the sort of dams they required, gave the addresses of two or three dams in Walpole and Nornalup to go and inspect. 79 She stated that Mr Tomlinson's advice on having found the white clay, was that the site was suitable for the construction of dams. (T238) 80 Mrs Salfinger stated that she could not recall if the Deep South advertisement in the Denmark Walpole business directory had been seen by her before or after the meeting on 18 December 1999.
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81 She also gave evidence of inspections of Lot 58 by her husband and herself after the contract had commenced and the slumping that appeared in the dam wall.
82 Mrs Salfinger stated that the upper dam was re-constructed in about March 2002 and since then there has not been any problem with the dam. 83 Under cross-examination she stated that she recalled that a pond had been constructed on Lot 62 in about July 1998. She said Mr Salfinger had approached the earthmoving contractors working on the Myers Mountain sub-division and asked them to build the small pond. She recollected that Mr Gibbs had done the work and this had been organised by Mr Mitchell's company Deep South. 84 Her recollection was that the site meeting on 18 December 1998 was probably for an hour or so but she could not exactly recall. 85 She did not recall Mr Tomlinson saying at the site meeting on 18 December 1998 anything suggesting the site was unsuitable but she clearly recalled Mr Tomlinson commenting that the white clay found was suitable because she is a ceramist and thought she could take the clay home and fire it. 86 She did not recall either Mr Gibbs or Mr Tomlinson saying that the upper section of Lot 58 was unsuitable. 87 She did not recall Mr Mitchell saying that he agreed that perhaps a lower dam could be installed, but not an upper dam. 88 Mrs Salfinger could not explain, having received the advice from Mr Tomlinson, why a contract signed by Mr and Mrs Salfinger the next day for the purchase of Lot 58 included a condition that the purchase was subject to a report from an engineer confirming that there were suitable clays on site for the construction of the dams..
Peter Robertson 89 The plaintiffs also called as a witness Mr Peter John Robertson who was a real estate agent. Mr and Mrs Salfinger had purchased Lot 62 through Mr Robertson. They approached him with a view to purchasing Lot 58, subject to them being satisfied that dams could be constructed on Lot 58. 90 He was subsequently able to sell Lot 58 to Mr and Mrs Salfinger as agent for the vendor.
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91 His evidence was that at the site meeting on 18 December 1998 everyone was satisfied with the soil type found and its suitability for building dams. However, he stated that he could not recall the exact words used. He said it was either Mr Mitchell or John Tomlinson who said something to the effect "this is more like the stuff we need to build dams".
92 Under cross-examination he admitted he had not been at the entire site meeting. He arrived late and left when "the business of why we were there was concluded to everybody's satisfaction". (T78) 93 He did not recall Mrs Salfinger being at the site meeting, nor Mr Kratochvill. 94 He could not recall exactly how many holes had been dug.
Dr Nelson Amoah 95 The plaintiffs called an expert witness, Dr Nelson Amoah, who was an engineer who held a PHD in the field of geotechnical engineering. Geotechnical engineering deals with soil properties, soil behaviour and the use of soils in construction, as well as foundations of various structures. The construction of earth filled dams was within the field of expertise of a geotechnical engineer. 96 Dr Amoah inspected the site on 22 January 2001. At this inspection excavation was made of the dam wall in the slip area. A visual inspection of the cut face lead him to the conclusion that materials used to construct the dam walls were probably placed with little compaction. 97 The dam was then drained by cutting a channel through the south western part of the embankment. The excavation of the channel offered an opportunity for Dr Amoah to observe the entire profile through that section of the embankment. He made the following observations: "• The top 0.7m consisted of moist, yellowish brown, loosely compacted clayey SAND/sandy clay material (SC/CL) consistent with the material found in the failed section. • The next 0.8m consisted of slightly moist, dark grey, medium dense, fine to medium grain SAND, with high organic content including, grass, roots etc. This material was consistent with the unstripped topsoil found in the surrounding areas of the dam.
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• The next layer down, approximately 1.0m to the bottom of the channel consisted of slightly moist, reddish brown clayey SAND with traces of ferruginous materials including lateritic ironstones and representing the natural undisturbed in situ. A careful inspection was conducted through the cut faces but there was no sign of key trench in that location even though anecdotal information suggests that key trench extends beyond that section. Analysis of the profile observed in that section of the dam suggested that topsoil was not stripped but rather fill material was placed on the natural ground and loosely compacted." 98 Dr Amoah concluded in a report dated 12 February 2001 as follows: "After a careful analysis of the observations from site, inspections of construction photographs and anecdotal information the following summaries are the potential causes of embankment instability and slope failure. (i) Although the construction materials are suitable for this kind of small dams, the embankment has been poorly constructed. (ii) The poorly compacted embankment on itself will have low shear strength to resist any destabilising forces such as high pore pressures. Moreover the poorly compacted dam embankment and the key trench mean that significant seepage will occur through these permeable sections. This leads to high internal water pressures with further reduction in shear strength which then triggers slope instability. (iii) Poorly compacted embankments are usually not stable even on gentle slopes and a slope of approximately 1.75 horizontal to 1.0 vertical is unsuitable. (iv) The removal of material in the downstream part of an already unstable slope is not a good engineering practice to enhance stability. Moreover the dumping of boulders on the sloping
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face of an unstable slope has the potential to increase the surcharge and further trigger downstream movement or slip. Traditionally such materials could be used to construct slope remediation structures such as a toe berm to stop or arrest the destabilising forces. Proposed Remedial Measures The current state of the dam embankment leaves very little option for employing many of the remedial measures that are traditionally used for such situations. The entire embankment is very weak and permeable. Moreover the key trench (if it is present) cannot minimise seepage therefore it is recommended that the following should be done. (i) The entire embankment should be removed and material spread in adjacent areas to allow drying so that the moisture content could reach a point suitable for re-use in construction. This will involve careful removal of material and stockpiling to avoid contamination with topsoil. (ii) Alternatively materials could be sought in adjacent areas for construction. (iii) Any topsoil should be strip (sic) and all organic matter removed and deposited away from embankment footprints. (iv) A new key trench as shown in Figure 3, should be constructed using selected clayey SAND/clayey SILT material typical of what is found on site especially in the southwest corner where the drainage channel was constructed. (v) The key trench should be compacted in layers to 98% of standard maximum dry density and with moisture content between – 1% dry and 2% wet of the optimum moisture content. The materials should be compacted in layers not exceed (sic) 200mm thick (compacted thickness) using a sheepsfoot roller or equivalent.
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(vi) The embankment material will also be similar to that of key trench (clayey SAND/clayey SILT) and compacted in similar layers to 98% of maximum standard dry density but with moisture contents between -2 and 2% of optimum moisture content. It is recommended that, key aspects of the construction work should be inspected by a qualified engineer who is familiar with dam design and/or construction. This is especially important when the foundation is exposed so that the engineer can advise on any requirements for construction and material suitability for the works."
The defendant's evidence 99 The defendant gave evidence himself and also called Mr Gibbs, Mr Tomlinson and Mr Kratochvill.
Evidence of Zane Mitchell 100 Mr Mitchell stated he received a Bachelor of Construction Engineering in 1987 from the Curtin University. He had various positions of employment prior to commencing his own business in August 1995 trading as "Deep South Earthmoving and Engineering". 101 In February 1996 a company, Hakea Investments Pty Ltd, of which he was a director, took over and thereafter ran the business of Deep South Earthmoving and Engineering. 102 Until the events in question, Mr Mitchell stated he had no experience in the construction of dams. 103 He stated that in 1998 Deep South was engaged to undertake earthworks on the Myers Mountain sub-division in Denmark. Also in 1998, Deep South constructed a waterhole on lot 62 owned by Mr and Mrs Salfinger. 104 In December 1998 Mr Robertson contacted him and requested he attend a site meeting and to bring Mr Bill Gibbs along. The meeting was in regard to building some dams on Lot 58 and some earth works on Lot 62.
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105 Mr Mitchell said that he was contacted by Mr Salfinger and Mr Mitchell suggested to Mr Salfinger that Mr Salfinger contact John Tomlinson.
106 The meeting on Lot 58 took place on or about 18 December 1998. Mr Mitchell said that Mr Salfinger "was looking at the purchase of that block and he wanted to ascertain the suitability for construction of dams on that block" (T313). Mr Mitchell stated that at the meeting they also looked at the other block (Lot 62) for the construction of the house site pad. 107 Mr Mitchell stated that six to ten test holes were dug on Lot 58. There were varying types of clay over the site, and the clay was changing in colour. There were also sand seams quite prevalent and pockets of sand. There was also water flowing from the sand seams causing the holes to collapse. 108 Mr Mitchell said that Mr Tomlinson said that: "from an engineering point of view he couldn't recommend the construction of engineered dams on that block; the site just wasn't suitable and the materials weren't suitable in his opinion". (T315) 109 He said Mr Tomlinson then said: "if you took the engineer's hat off, from a farmer's point of view, a farmer may be prepared to take a risk and attend to the construction of a farm dam on the lower portion of the block". (T315) 110 Mr Mitchell stated that Mr Tomlinson advised that under no circumstances would he recommend attempting any works on the upper portion of the block. Mr Mitchell also stated that Mr Tomlinson said that there would be no guarantees to the success of the lower portion dam. 111 Mr Mitchell also said that Bill Gibbs gave advice that it was possible to attempt a farm style dam on the bottom of the block, but definitely with no guarantee. It was risky operation and Mr Gibbs definitely recommended that no dam work was attempted on the upper portion of the block. 112 Mr Mitchell's evidence was that he also gave similar advice, stating that "Hakea would be unable to guarantee it as well".
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113 He claimed that Mr Salfinger said that he believed an engineer's work should have a lifetime guarantee to which Mr Mitchell replied "No, not this engineer".
114 After the meeting Mr Mitchell said that he was contacted by Mr Salfinger who wanted to go ahead with the work. Mr Mitchell said that he said to Mr Salfinger: "Hakea Investments was keen to take on his work, but with regards to the dam work on lot 58 we would give no guarantee of success; it will be done on an hourly hire, plant hire basis, and that Paul Salfinger would instruct us as the work was done as to what he wanted". (T317) 115 Subsequently, Mr Mitchell received a facsimile from Mr Salfinger of a rough plan of two dams to be constructed on Lot 58. 116 Mr Mitchell stated that he was often on site on a regular basis as he had other works to attend to including the construction of the roads and house pad. Bill Gibbs commenced construction of the dams using an excavator and two swamp-dozers. A swamp-dozer is a bulldozer that is used in work in wet conditions. The site was quite wet and probably a conventional bulldozer would have got bogged. 117 No compactor was used in the construction of the dams. 118 He said that he observed the over-burden was stripped off the site of the upper dam, and that sand seams were exposed all over the site. He observed the dozers trying to intersect the sand. He observed water was entering from the floor area of the dam and the mouth area of the dam through the sand seams. 119 Mr Mitchell stated the first dam was completed in the lower section and Mr Salfinger was quite happy with this construction. 120 In relation to the upper dam, Mr Mitchell stated that Mr Salfinger instructed Mr Mitchell that a key trench was to be used in the construction of the dam wall. 121 On the upper dam, Mr Salfinger instructed that a Karri tree be left in the dam wall and was not to be removed. This meant that the key trench could not be constructed under the roots of the Karri tree. 122 The over-burden was stock piled on the side of the dam. Later, on instructions from Mr Salfinger, the over-burden was spread between the
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two dams so as to level out the area ready for landscaping and to make the ground level for walking. 123 Mr Salfinger also requested a track be built on the upper side of the lower dam and jetties be constructed out on to the upper dam. 124 Subsequently Mr Mitchell noted seepage below the upper dam wall that was wetting the over-burden material that had been spread. 125 He said the matter was discussed with Mr Salfinger. Mr Mitchell suggested that one option was to drain the dam and push it back in and level it off, and reinstate the site. The other option was to try to undertake some remedial work. Mr Salfinger elected to have remedial work done. 126 Mr Mitchell stated he arranged for the over-burden material to be excavated away. On excavating of the over-burden he said that he could see that the natural clay below the over-burden was still stable. He then placed iron stone rock, that was imported to the site, in the same area from where the over-burden had been removed. Later in 1999, Mr Mitchell observed further slippage. He again notified Paul Salfinger. The slippage was adjacent to the remedial work done. 127 Upon Mr Mitchell's suggestion, Mr Salfinger instructed Mr Mitchell to drain the dam with the intention of coming back in the summer months the following year to assess the situation and look at remedial work. He stated that he recalled on this occasion standing on top of the dam bank with Paul Salfinger and Paul Salfinger saying words that he "wished he had taken our advice and not try to build the dam in the top location". (T327) 128 Mr Mitchell said in accordance with Mr Salfinger's instructions, Mr Mitchell arranged to drain the dam. This was done, but with winter rains it again refilled, and the dam had to be re-drained. This was in about February 2000. At about this time, Mr Mitchell stated that Mr Salfinger said that he had engaged some experts in Perth. Mr Mitchell suggested they have a meeting. Mr Salfinger indicated that he was not prepared to give any further instructions for Mr Mitchell to carry out remedial work. Mr Mitchell said he persisted with trying to arrange a meeting with all relevant parties but Mr Salfinger did not agree. At some stage John Tomlinson had a look at the dam. Mr Mitchell contacted Mr Salfinger and told him that Mr Tomlinson suggested that the seepage was not a construction problem but a ground water problem and that Mr Tomlinson suggested one course of remedial action would be to continue doing the rocking that had already been done.
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129 Mr Mitchell stated he received a letter of demand from Bowen Buchbinder Vilensky in June 2000 which contained excerpts from a report from GHD. In March 2001 he received from the plaintiffs' solicitors an excerpt of a report from Dr Amoah.
130 He later observed the dam being reconstructed by a local contractor. He observed on driving by that the tree in the dam embankment had been removed and that there were a large number of quite large sand seams, directly below where the tree had been and that water was freely flowing from the area.
Cross-examination of Mitchell 131 Mr Mitchell was asked a series of questions about the operation of Hakea Investments Pty Ltd. His working knowledge of the financial structure was extremely poor. He was not able to explain why Hakea Investments Pty Ltd took over his business. It was on his accountant's advice. He did not know when the business ceased to operate. He did not know who the shareholders of the company were. He was not sure as to what period of time he was a director of the company. He was not certain whether his wife was a director of the company. On being shown the Amended Defence document he admitted that he was not a director of the company between 25 September 1998 and 14 August 2000. He could not explain as to why he was not a director during this period. He said that the company closed down on 15 December 2002 on his accountant's advice. Prior to that he said the company was experiencing a tight financial situation, the result of borrowings, and that loans were refinanced. 132 He stated at the time of deregistration the company was not operating and for this reason it was deregistered. 133 He stated that the company had not done any major works after the Salfinger contract. 134 He stated that after the Salfinger contract he operated a quarry under contract with the Shire of Denmark using a company, Gold Boss Pty Ltd. It was a 10 year contract commenced some time in about 1998 or 1999. 135 He stated that Deep South had not done any dam construction work or sub-contracted such work either before the Salfinger contract or after it (T343).
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136 This was despite the fact that in the 1998 Denmark Walpole Business and Community telephone directory Deep South advertised itself as "Dam Constructors".
137 At the time he was engaged by Mr Salfinger, he only had a rough idea of what a "keyway" (key trench) was. He had never previously constructed a key trench. He did not understand the specific process involved and what equipment was required to construct a key trench. 138 He was also cross-examined about an entry in the 2000 Albany Chamber of Commerce and Industry telephone industry. 139 A part of the advertisement contained the words "all works civil engineer supervised". His explanation of these words was that works would only be civil engineer supervised "if someone requested something to be civil engineered". He further explained it as follows: "I can if you want something to be supervised, if it's within my knowledge" (T347) 140 He did not know why he used the words "all works" and suggested that he prepared the advertisement hurriedly. 141 He admitted that although he said Hakea had issued the invoice for the work completed in 1998 on lot 62, the invoice only referred to "Deep South Earthmoving and Engineering" and made no mention of Hakea Investments Pty Ltd. 142 He stated that when he agreed with Mr and Mrs Salfinger to do the works on Lot 62 he did not mention Hakea Investments Pty Ltd. 143 Mr Mitchell did not recall giving the Salfingers his business card at the site meeting on 18 December 1998 but did not dispute that he did so. 144 He denied telling the Salfingers "I have considerable experience in building dams". 145 It was put to him that he had advertised in such a way as to mislead people as to his qualifications. He denied this and stated it was not his intention to mislead. 146 He denied saying to the Salfingers when handing them a business card "I am a qualified engineer and I can consult".
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147 He denied telling Mr Salfinger he had considerable experience in building dams and denied that he gave Mr Salfinger the address of two properties to inspect.
148 He said Mr Gibbs told the plaintiffs that he was an expert dam builder and directed to them to the inspection of the dams at Nornalup and Walpole. 149 Mr Mitchell stated that he did not recollect Mr Tomlinson taking some clay and saying words to the effect "that's what we're looking for". However, he recalled people taking handfuls of clay from various holes. 150 He stated that at the site meeting Mr Gibbs had confirmed the opinion of Mr Tomlinson that a dam should not be built in the upper section of Lot 58. 151 He admitted that when he stated in his evidence-in-chief that he told Mr Salfinger that "Hakea gave no guarantee" he did not actually mention Hakea Investments but (in his position as manager for Deep South) he stated "I could not give any guarantee to dam works that were possibly going to be done". (T362) 152 Mr Mitchell stated that he did not send a written communication to the Salfingers' confirming that the construction of the dams was against his recommendations. 153 Mr Mitchell was cross-examined about the inconsistency between his evidence that he told Mr Tomlinson at the site meeting on 18 December 1999 that the works could not be guaranteed, and the further and better particulars filed by his solicitors which stated that this occurred in or about March 1999. 154 He claimed that the Salfingers' were told numerous times that no guarantee could be given. 155 Mr Mitchell agreed that when he had the conversation with Mr Salfinger after the site meeting he did not use the word "Hakea" when indicating Deep South Earthmoving and Engineering was happy to proceed with the work. 156 He disputed that he quoted Mr Salfinger $70,000 for the works which were broken up as to $30,000 for the road and $40,000 for the two dams.
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157 He maintained that the agreement was that the dam construction would be charged on an hourly hire basis. He could not recall whether there was a discussion as to how many machines would be hired. He did not fax a price list through to Mr Salfinger as to the hire rates. He did not know if his business had such a document.
158 He admitted that the instructions being provided by Mr Salfinger were as to the lay out of the dams but not as to the construction of them. Mr Salfinger gave no instructions as to the depth of the key trench. He gave no instruction as to the level of compaction required. He gave no instructions as to the height of the embankments. He did not tell the contractor the exact dimensions of the dam. 159 He agreed Mr Salfinger gave no instructions of a technical nature. 160 Mr Mitchell likewise gave no directions to Mr Gibbs on how the dams were to be constructed, nor did he supervise the construction. 161 When asked about a conversation in March 1999 (as pleaded) that there would be no guarantee, he was not able to recall the details of how such a conversation occurred. He could not say whether it was by telephone or at a meeting. 162 He confirmed that there was no compaction equipment on site and that the compaction was done simply by the swamp-dozer and excavator tracking over the dam wall. 163 He could not recall telling Mr Salfinger that the retention of the tree was inconsistent with the requirement to build a key trench along the wall of the dam. Mr Mitchell did not understand that the preservation of the tree could be a problem. 164 Mr Mitchell was unable to explain what the words "Hakea Investments ATS Zane Mitchell Family Trust" meant in an invoice sent dated 6 March 1999. 165 He was cross-examined about the make up of the invoices, and the fact that there were no hourly rates mentioned, or identification of equipment hired. Mr Mitchell was unable to say how the $40,497 was made up. 166 He claimed that the $40,497 was for machine hire, but he was unable to produce any invoices from the hirer (Mr Gibbs), nor any break up of the calculations.
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167 Mr Mitchell stated that after the first winter rains, slumping occurred in the dam wall. Initially he arranged for some planks and star pickets to be placed in the dam wall.
168 Later the slumping became worse. As a result Mr Mitchell stated he met with Mr Salfinger and recommended that the wet material be excavated from the wall and rocks inserted. On Mr Salfinger's instructions this was done. Mr Mitchell arranged for Deep South to invoice Mr Salfinger for this remedial work. The amount charged was $11,830 which was included in an invoice dated 5 July 1999. 169 Mr Mitchell agreed that after the rocks were inserted the slumping became worse. A meeting was held between Mr Mitchell and Mr Salfinger. Mr Mitchell recalled discussing further rocking up of the dam wall but did not recall saying the entire wall needed to be rocked up. 170 Mr Mitchell stated that Mr Salfinger agreed to drain the dam and re-assess it in summer. The dam was drained but had to be re-drained prior to summer as it had filled up again after winter rains. Mr Mitchell stated that about February or March 2000 Mr Salfinger indicated to Mr Mitchell that Mr Salfinger did not wish to further meet as he now had GHD involved. 171 Mr Mitchell stated that in June 2000 he received a letter from Bowen Buchbinder & Vilensky dated 1 June 2000. This letter contained advice from GHD as to what was required to remedy the situation. Mr Mitchell stated that he treated this letter as a threat of legal action. 172 Mr Mitchell admitted that at no time had he said to Mr Salfinger "Mr Gibbs did the work, speak to him about fixing it up". 173 Mr Mitchell could not explain why his solicitors had not cross-examined Mr Salfinger about the evidence given by Mr Mitchell that Mr Salfinger had stood on the embankment and said that he wished that he had taken our advice and not built the dam.
Re-examination of Mr Mitchell 174 In re-examination, a letter from Bowen Buchbinder Vilensky to Hakea Investments Pty Ltd t/as Deep South Earthmoving and Engineering, and dated 1 June 2000 was tendered into evidence. This letter contained recommendations from GHD that the wall of the upper dam be reconstructed. The letter demanded that Hakea Investments Pty Ltd give an undertaking to undertake the remedial work required.
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The letter threatened that if this was not done then Mr Salfinger would engage the services of an independent earthmoving contractor to undertake the work, and commence legal action against Hakea Investments Pty Ltd for recovery of all damages and costs incurred. Also tendered into evidence was a response to this correspondence from Bennett & Co denying liability on behalf of Hakea Investment Pty Ltd.
Evidence of John Michael Tomlinson 175 Evidence was given by John Michael Tomlinson ("Mr Tomlinson"). He is by qualification a civil engineer having obtained in 1966 an Associateship in Civil Engineering from the West Australian Institute of Technology. In 1977 he was appointed a director of Wood & Grieve. 176 He stated that he was contacted by Mr Salfinger by telephone in 1998 and discussed the fact that Mr Salfinger wished an investigation to be made concerning proposed dams to be constructed on land he was considering acquiring. 177 Prior to the meeting on 18 December, Mr Salfinger sent to Mr Tomlinson a facsimile enclosing a plan of Lot 62 and Lot 58. The plan had a sketch as to the possible location of the dams. 178 Mr Tomlinson described attending the meeting on site on 18 December 1998. He said the meeting started at 2 pm and lasted about three hours. He described that about six excavations were made using the excavator. He said that he observed that the sides of the holes were generally of a clay material with sand seams running through the clay and containing ground water. He was disappointed with the soil he encountered because it was not good material for the construction of an earth dam. He stated that he recollected advising that the proposed construction was to be of an earth dam with a clay key trench and that the key trench was to be extended into the sub-soil to a point where it could reach an impermeable barrier. However, he said that he explained that the excavations showed that there was no impermeable barrier at the depth they dug to and therefore there was always going to be water transmitting through the soil. He stated that he recommended that the proposed higher dam definitely not be constructed. He also said that he advised that if the lower dam was to be constructed, it would probably be effective because it was in an area that was continuously wet so, although the dam may leak, it would continue to receive water. 179 Mr Tomlinson stated that he discussed the overall vision with Mr and Mrs Salfinger for the area. It was to achieve an aesthetically pleasing
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outcome from the house site, together with the planting of native type plants to improve the area and bring in birds. The site was a disused farm and was not in really good repair. Mr Tomlinson felt that the intended use by Mr and Mrs Salfinger was appropriate. 180 Mr Tomlinson stated that prior to writing the letter to Mr Salfinger dated 15 July 1999, he inspected the site and observed a slumping of the toe of the upper embankment of the upper dam with considerable ground water seepage. 181 He stated that there was no discussion that he could recall between Mr Salfinger and himself concerning this problem. 182 Under cross-examination he maintained that the meeting on 19 December 1998 had taken about three hours. He stated that he did not recall indicating that he had found the clay he was looking for. He agreed that he had drawn a distinction between the suitability of the upper dam location and the lower dam location. He had given advice that the Salfingers could build a dam on the lower dam site as a farm dam, indicating that from an engineering point of view he considered both sites unsuitable, but from a practical farm point of view a lower dam could be constructed. (T440) 183 He maintained that he had advised that no dam should be built on the upper dam site. 184 Mr Tomlinson was cross-examined on a letter he sent to Mr Mitchell dated 16 June 2000, wherein he stated that his advice at the site meeting was as follows: "(a) I could not recommend a dam be constructed in the higher location because of the steep site gradient (larger amounts of cut and fill for obtaining a comparatively small area of water) and the possible unstable site conditions. (b) Although I could not recommend the lower dam due to the permeable sub-soil conditions, this location was considered more favourable as it was less steep, and our experience with the adjoining land construction was that ground water was present throughout the year. In this circumstance a water body may be possible to maintain even though leakage from the dam would occur".
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185 Mr Tomlinson stated that his reference to "unstable site conditions" in relation to the upper dam was a reference to the issue of permeable sub-soil conditions.
186 Mr Tomlinson stated that the reason he stated that the upper area was not suitable was that the dam would most likely not hold water because being higher, it would be more prone to dry up in the summer time as the ground water seeped further down the slope. He stated that you could not ensure that you achieve a good water body, especially if you could not get a key trench into an impermeable base. 187 Mr Tomlinson acknowledged that he did not confirm his written advice concerning the dam construction. However, he did give written advice concerning the construction of the house pad on Lot 62. He stated that the reason that he did not give any confirmation of advice concerning the construction of the dams was that he rejected the construction of the dams from an engineering point of view. 188 Mr Tomlinson was cross-examined about the letter he sent Mr Salfinger dated 15 July 1999. He agreed that if the repair work recommended by him in that letter was carried out, then the dams would be stable from an engineering perspective. He agreed that from an engineering perspective, the upper dams could be built but they may be empty in summer.
Evidence of Mr William Edward Gibbs 189 Mr Gibbs gave evidence that he was an earthmoving contractor. For the last 10 years he had been self employed, primarily in dam construction and agricultural earthworks. 190 He stated that his first contact with the plaintiffs was in 1998 when he constructed a small dam on Lot 62. He said that they also had a conversation about the possibility of constructing a larger dam. He stated to Mr Salfinger that he thought Lot 58 might be better as the soil on Lot 62 was not very good. He said he told Mr Salfinger "if you wanted to build a big dam that one down there would be the block to have. That's where you could build a nice dam, not up here on a hill" (T454). 191 Mr Gibbs stated that he recollected attending the site meeting on 18 December 1998. 192 He stated that nearly all the dams in the Denmark and Walpole area are farm dams which are basically just a void in the ground that can be
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filled up with water. He stated that the water would seep out but would be maintained by water coming into the dam. 193 Mr Gibbs stated that at the site meeting Mr John Tomlinson said "that as an engineer he could not recommend the site for a dam", although he did add that "because he was a farmer also, that as a farmer he could probably have a go at putting a hole there, and it would work, but from an engineering point of view he would not recommend it because the material wasn't suitable". (T456) 194 Mr Gibbs stated that he went along with John Tomlinson, but then stated as follows: "I mean, I'd dug holes in a lot of worse spots than that. I mean, we've constructed them out of sand before, never mind about clay, and then there's seepage there, you know they will maintain a water level." (T456) 195 Mr Gibbs stated that he did not hear what Mr Mitchell said to Mr Salfinger. 196 Mr Gibbs said that he told Mr Salfinger that he had constructed dams and that Mr Salfinger was free to go and have a look at these. 197 Mr Gibbs said that Mr Salfinger indicated that he wanted a large expanse of water. Mr Gibbs stated that he agreed that a bottom dam could be constructed, and that he "wasn't too sure whether the top one would work, and we would have to wait and see what we found when we started digging around". (T457) 198 He described the construction of the dam. He said that he used a swamp-dozer. It is a specialist machine that is used on all dams in the south-west. They also used an excavator. 199 He stated that after he had completed the lower dam and started digging the upper dam he told Mr Mitchell that he wasn't happy with the top dam because after digging around, it was clear that it was a lot of red porous type material that was not really clay.
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200 Mr Gibbs gave evidence concerning the construction of the dam. From his point of view he did not believe that the construction of a key trench was particularly suitable because there was no gully in which to locate the key trench.
201 He admitted in cross-examination that at some point Mr Tomlinson had said words to the effect "this is the clay we're looking for". However, he said that this was not the last hole but one of the holes that they had dug earlier. 202 Mr Gibbs stated that his main concern about the upper dam was that there might not be sufficient seepage through the soil to maintain a body of water. However, he said that after they had started work, they discovered there was seepage there and it was quite clear that it would become a soak because of the extent of seepage. 203 He stated that on the construction of the dam he only used a roller to put a smooth top on the wall of the dam. 204 He stated that the Karri tree in the embankment which was required by Mr Salfinger was not a problem. There was no real need for the key trench around where the Karri tree was located. The key trench was on the other side of the dam. 205 In re-examination he said that Mr Tomlinson, when he examined the first couple of holes excavated on 18 December 1998, said words to the effect that they "weren't too good". On one hole he said something to the effect "this is looking better".
Evidence of Richard John Kratochvill 206 Mr Kratochvill gave evidence that he was the excavator who attended the site meeting on 18 December 1998. He said the meeting lasted two to three hours. He recalled that at some stage during the meeting, Mr John Tomlinson stated that he could not condone the suitability of the site for engineered dams, but as an ex-farmer and from a practical point of view that "you could dig a hole or dig a soak basically and it would probably work". (T475) He stated that Mr Bill Gibbs basically agreed with the advice given by Mr John Tomlinson. 207 His recollection was that this discussion was in relation to the lower dam. He recalled handfuls of material being dug up and passed around. 208 He admitted that he only heard bits and pieces of the conversation which took place.
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209 He was cross-examined about the reliability of his recollection given the time that had elapsed. He maintained that his recollection was correct.
210 He also gave evidence that he took about 10 to 15 minutes to dig each hole.
Findings of fact 211 I make the following factual findings: (a) Mr and Mrs Salfinger were the owners of Lot 62 in the Myers Mountain Estate on the outskirts of Denmark in the State of Western Australia. Sometime after the purchase of Lot 62 they engaged an earthmoving business trading as Deep South Earthmoving and Engineering to construct a small dam or pond on the property. (b) Mr Salfinger was a businessman who had an understanding that a business or trading name could be owned by a company, but he did not make any enquiry as to the proprietor of the trading name Deep South Earthmoving and Engineering. (c) At all material times Deep South Earthmoving and Engineering was a trading name of Hakea Investments Pty Ltd. Hakea Investments Pty Ltd was trustee of the Zane Mitchell Family Trust. (d) Mr Mitchell had established an earthworks business in August 1995 trading as Deep South Earthmoving and Engineering. In February 1996 Hakea Investments Pty Ltd took over the business trading as Deep South Earthmoving and Engineering. At that time Mr Mitchell was a director of Hakea Investments Pty Ltd. On advice from his accountant, Mr Mitchell resigned as a director between 25 September 1998 and 14 August 2000. Again on advice from his accountant, Mr Mitchell arranged for Hakea Investments Pty Ltd to be deregistered as a company on 15 December 2002. This was done as result of advice from his accountant as Hakea Investments Pty Ltd was not at that stage trading. (e) The works undertaken by Deep South on Lot 62 were performed by Mr William Gibbs under a sub-contract with Deep South. During the construction of the pond, Mr Gibbs and Mr Salfinger had a discussion concerning
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Mr Salfinger's desire to construct large dams to create a large expanse of water for landscaping purposes. Mr Gibbs commented that Lot 62 was unsuitable but if Mr Salfinger was to purchase Lot 58 (which was situated below Lot 62), then Lot 58 might be suitable. (f) Mr and Mrs Salfinger spoke to Mr Peter Robertson, the agent who was selling the lots which formed the Myers Mountain Estate, with a view to purchasing Lot 58. However, Mr and Mrs Salfinger made it clear that they did not wish to purchase Lot 58 unless it was suitable for the construction of dams. Mr Peter Robertson recommended a site meeting on Lot 58 with Mr Mitchell of Deep South Earthmoving and Engineering. This recommendation was made on the basis that Deep South Earthmoving and Engineering had carried out the earthworks on the sub-division of the Myers Mountain Estate. Mr Salfinger also had a discussion prior to the meeting with Mr Mitchell who recommended that Mr John Tomlinson of Wood & Grieve attend the meeting to give engineering advice. Mr Tomlinson was the engineer who gave engineering advice in relation to the earthworks for the Myers Mountain Estate. Mr Mitchell also arranged for Mr Gibbs (a contractor experienced in construction of dams), and Mr Richard Kratochvill (a back hoe operator) to attend the meeting. (g) A meeting was arranged on site at Lots 58 and 62 on 18 December 1998. Attending this meeting were Mr and Mrs Salfinger, Mr Peter Robertson, Mr Mitchell, Mr Tomlinson, Mr Gibbs and Mr Kratochvill. (h) Mr Mitchell handed to Mr and Mrs Salfinger a Deep South Earthmoving and Engineering business card which included on it Mr Mitchell's name. Below Mr Mitchell's name was a notation that he held a Bachelor of Engineering. (i) At the meeting a number of holes were dug by the back hoe operator Mr Kratochvill and the soil conditions in each hole were examined by those present at the meeting. On the digging of the holes it was found that there was considerable seepage into the soil and there were sand seams running through the soil. In one of the holes excavated there was located white clay and this was passed
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around the group. Mr Tomlinson made the comment that this was the sort of clay he was looking for as suitable for the building of dams. (j) I accept that Mr Tomlinson in effect told the Salfingers that from an engineering point of view he could not recommend the construction of engineered dams on the block as the site was unsuitable. However, he further stated that taking off his engineering hat, from a farmer's point of view a farmer may be prepared to take a risk and construct a farm dam on the lower portion of the block. In reaching this conclusion I do not accept the evidence of Mr and Mrs Salfinger that no words of advice were given discouraging them from building dams on Lot 58. I conclude that both Mr and Mrs Salfinger have a poor recollection of what was actually said at the meeting on 18 December 1998. I reach this conclusion because of a number of factors: (i) Mr and Mrs Salfinger did not have an accurate record of how long the meeting took. I am satisfied that the meeting took approximately three hours. This accorded with the evidence of Mr Tomlinson and is also consistent with the evidence of Mr Kratochvill as to the time it took to dig the holes with the backhoe operated by him. Mr Salfinger estimated it lasted half an hour to three quarters of an hour and Mrs Salfinger thought it lasted an hour or so. (ii) I conclude that Mr and Mrs Salfinger were looking for encouragement to have the dams built on Lot 58. I believe that this meant that they did not focus on negative advice but only on positive indications given to them. (iii) I am satisfied Mr and Mrs Salfinger are incorrect in their evidence that Mr Mitchell had told them that he had constructed dams previously and gave them the addresses of various dams that he had constructed. I accept the evidence of Mr Gibbs that he was the person who gave this information to Mr and Mrs Salfinger. Mr Gibbs had constructed
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the dams, whereas Mr Mitchell in his evidence stated that he had not previously constructed dams. (k) In relation to the top dam I am satisfied that Mr Tomlinson was not completely adamant in his advice that a top dam should not be constructed. His advice was to the effect that he would not recommend the construction of the upper dam because he did not believe it would hold water during the summer period. (l) I conclude that Mr and Mrs Salfinger felt that there was sufficient encouragement from what was said to consider proceeding with construction of two dams on Lot 58. I am satisfied that at the time they were aware of the risk involved in constructing the upper dam. For this reason when they signed the contract for the purchase of Lot 58 the next day, they included the clause that it was subject to an engineer's report that there was suitable clay for the construction of the two dams proposed by them. This gave them a potential excuse not to proceed with the contract if, having considered the matter, they decided not to proceed with the construction of the dams. (m) On or about 22 December 1998, Mr Salfinger and Mr Mitchell discussed the matter on the telephone, and Mr Mitchell provided a quote for the construction of a roadway on Lots 62 and 58, and also the construction of the two dams. The total quote was for $70,000 being $30,000 for the roadway and $40,000 for the two dams. I accept the evidence of Mr and Mrs Salfinger that the quotation for the construction of the two dams was a lump sum quotation. The evidence of Mr Mitchell that it was for equipment hire on an hourly basis is not supported by the evidence. Mr Mitchell was unable to produce any document which supported such a contention. (n) I am satisfied that Mr Salfinger instructed Mr Mitchell to proceed with the construction of the two dams. Mr Salfinger did not assume a supervisory role in the construction of the dams. However, he set out the specifications that he required by way of a plan or sketch which he sent to Mr Mitchell. Mr Salfinger also indicated that he wished the dam wall to have a key trench.
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(o) At the time Mr Salfinger instructed Mr Mitchell, Mr Salfinger understood that the contract was with Deep South Earthmoving and Engineering. Mr Salfinger was not concerned as to the ownership or corporate structure of the business. He did not make any enquiry nor was he concerned as to precisely what Mr Mitchell's position was within the business. (p) I conclude that the engagement by Mr and Mrs Salfinger of Deep South Earthmoving and Engineering to construct the dams was principally on the basis that it was the earthmoving company that had been introduced to them by Mr Peter Robertson as the company that had conducted the earthworks on the Myers Mountain Estate. The Salfingers were not relying upon the engineering qualifications of Mr Mitchell to give engineering advice concerning the constructions of the dams. I conclude this because firstly, Mr John Tomlinson was engaged to give advice as to the suitability of the site (rather than Mr Mitchell), and secondly, when an engineer's certificate was required by the Denmark Shire, Mr Salfinger approached Mr Tomlinson to provide this certificate. I do not accept that Mr and Mrs Salfinger had selected Deep South Earthmoving and Engineering as a result of viewing the Denmark Walpole Business Directory which contained an advertisement for Deep South and included a notation as to Mr Mitchell's engineering qualifications. Mrs Salfinger was unable to state whether she had seen the advertisement prior to the meeting on 18 December 1998. Mr Salfinger gave evidence that they had previously had dealings with Deep South Earthmoving and Engineering for the construction of the small pond on Lot 62. Accordingly, I believe it is likely that the same company would be engaged to construct dams on Lot 58. Although Mr and Mrs Salfinger may have been somewhat influenced by Mr Mitchell having an engineering qualification, I do not believe it was significant in their decision making to engage Deep South Earthmoving and Engineering to construct the two dams. Mr Salfinger stated in his evidence they were not looking for an engineer but a reliable contractor. I conclude that what mainly influenced Mr and Mrs Salfinger was that Deep |