Australian Capital Territory Electricity Authority v Peddle Thorp and Walker (A Firm); Epm Concrete Pty Limited; Gordon Campbell Rigg; Francis Reginald Wells; Haydn Keith Davies; Ralph John Ellis; James Glen; John Rankine; Michael Walter Garnett; Danie [1986] ACTSC 63 (14 July 1986)

SUPREME COURT OF THE ACT

AUSTRALIAN CAPITAL TERRITORY ELECTRICITY AUTHORITY v. PEDDLE THORP and WALKER
(A firm); E.P.M. CONCRETE PTY LIMITED; GORDON CAMPBELL RIGG; FRANCIS REGINALD
WELLS; HAYDN KEITH DAVIES; RALPH JOHN ELLIS; JAMES GLEN; JOHN RANKINE; MICHAEL
WALTER GARNETT; DANIEL BARTON; ALAN HAYES; CIVIL and CIVIC PTY. LIMITED;
RANKINE and HILL (A FIRM)
S.C. No. 1437 of 1978
S.C. No. 1393 of 1981
Action by Building Owner against Architects

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Kelly J.(1)

CATCHWORDS

Action by Building Owner against Architects - Manufacturer of components of building, consulting engineers and builder joined as third parties and subsequently sued by owner for negligence - Both actions commenced more than 6 years after certificate of final completion of building - Whether clause limiting liability of builder available to exclude its liability - Whether architects may be sued in tort and contract - Whether defence that actions statute barred available - consolidation of actions.

Rules of the Supreme Court A.C.T. - 0.29, rr.2 & 3, 0.37. r.2 and 0.51, r.1.

HEARING

CANBERRA
14:7:1986

ORDER

The hearing of actions Nos. S.C. 1437 of 1978 and S.C. 1393 of 1981 be conducted as one, the evidence in one to be used as the evidence in the other.

Otherwise the applications be dismissed.

DECISION

By its statement of claim delivered with the writ in action number S.C.1437 of 1978 (the first action) commenced on 14 September 1978 the plaintiff (the Authority) alleged that in or about November 1965 it retained and employed the defendant, Peddle Thorp & Walker (the architects), as architects in connection with the design and construction of a building known as "Electricity House" (the building). It alleged that in breach of a promise made by them to it, the architects failed to exercise reasonable diligence, competence and care in and about the design and administration of the construction of the building and in and about the selection of materials for use in connection with its construction.

2. It alleged further that the architects were guilty of negligence in and about the said design, administration and selection. Claiming that in the result it had suffered loss and damage, the Authority sought damages from the architects.

3. On 30 May 1967 the Authority entered into an agreement (the building agreement) with Civil & Civic Pty. Ltd. (the builder) for the erection of the building in accordance with the drawings and specifications prepared by or under the direction of the architects.

4. On 3 July 1967 the architects authorised the builder to instruct E.P.M. Concrete Pty. Ltd. (the fabricator) as an approved nominated sub-contractor to supply and deliver precast concrete facade units (the units) for the building.

5. The architects issued a third party claim in the first action against the fabricator, a firm of consulting engineers (the engineers) said to have been retained by the Authority in connection with the design and construction of the building, and the builder alleging that each of them in its or their several circumstances owed the architects a duty of care and that each of them had breached that duty. The architects claimed, therefore, indemnity or contribution from each in respect of any sum that they might be ordered to pay the Authority.

6. As early as 13 December 1967 the fabricator advised the builder that excessive surface crazing was evident after casting of the units. The fabricator blamed the problem on the sandstone aggregates being used in accordance with the specifications.

7. By letter dated 9 January 1968 the architects advised the builder that defects were evident in the panels both in the structural concrete and the sandstone veneer. To judge by the correspondence annexed to the affidavit sworn 4 September 1984 by Colin Frederick Moore, a director of the builder, attempts to solve the problems with the units were the subject of considerable time and effort over the next three months until 13 March 1968.

8. On 5 March 1969 the architects gave notice that the works had been practically completed on 20 January 1969 on which date the defect liability period commenced. On 3 December 1969 the architects sent the builder three copies of a Defects and Maintenance List dated 28 November 1968. Under the heading "Exterior" the following items appeared:-

"1. It was noted in some places around Gantry

level where access was available, that a few
sections of the precast concrete coping
pieces has (sic) spalled. In addition some
cracks have appeared in the precast concrete
units. The whole facade was not inspected
however, we require that the total facade be
thoroughly inspected and any cracking and
spalling be made good.
2. Refer to Drawing No. 151. Thiokol pointing
is required in the horizontal joint between
the precast concrete facade units and the
trachite stone facing around ground floor
level."

9. Clause 25(f)(ii) of the building agreement was in the following terms:-

"(f) Unless notice in writing of a dispute or
difference shall have been given in
accordance with Clause 26 hereof before the
final certificate has been issued or within
14 days of its presentation by the Builder to
the Proprietor provided that time shall not
run against the Builder until he receives the
certificate, the final certificate shall be
conclusive evidence in any proceedings
arising out of this Contract (whether by
arbitration under Clause 26 hereof or
otherwise) that the Works have been properly
carried out and completed and properly and
accurately measured and valued in accordance
with the terms of this contract save insofar
as it is proved in the said proceedings that
any sum mentioned in the said certificate is
erroneous by reasons of:
(ii) any defect (including any omission) in
the Works which reasonable inspection
or examination at any reasonable time
during the course of the execution of
the Works or before the issue of the
said certificate would not have
disclosed;"

10. Further correspondence annexed to Mr Moore's affidavit indicates that there were continuing difficulties with the units. On 19 October 1970 the architects advised the Secretary of the Authority that they had telephoned Mr Gudgeon of the fabricator in connection with certain rectification work that was to be done to the units. He was said to have reported that he was waiting on approval from his Melbourne office before work could be commenced.

11. As appears from the builder's amended defence to the third party claim the final certificate of completion seems to have been given under the building agreement on or about 7 October 1970.

12. The Authority alleges that it first became aware that extensive cracking and crazing of the units had occurred in the course of their manufacture by the fabricator on or about 28 January 1976.

13. On 16 January 1976 the engineers wrote to the architects and said, inter alia,

"It is important to note that the above
inspection (when the units were being
stripped before leaving the fabricator's
yard, presumably before 20 January 1969) did
not reveal any cracking of the type now
reported which appears to be longitudinal and
parallel to the axis of the spandrel panels.

POSSIBLE CAUSES OF PRESENT CRACKING.

In our opinion the nature of the cracking
appearing on the internal side and near the
bottom of the soffit downturn indicates that
it was most probably initiated during the
subsequent stacking, transport and erection
stages when the units could have been resting
on the downturn soffit.
Cracking due to the above would have been of
a hairline type not readily visible after
erection which could have been subsequently
accentuated by the temperature variations
occurring in Canberra and due to moisture
penetration increasing the crack size by
expansion during freezing cycles."

14. On 23 September 1981 the Authority commenced a further action (the second action) against the fabricator, the engineers and the builder. It is to put the position very succinctly but sufficiently for the purposes of the applications with which I am dealing to say that by its statement of claim in the second action the Authority alleged that the three defendants were negligent in the performance of duties they owed the Authority in connection with the construction of the building.

15. By their amended defence in the first action the architects said, inter alia:

". . . the defendants raise the points of law
that:-
(i) no facts are alleged in the statement of
claim which if true give rise to the
duty of care the breach of which is
alleged;
(ii) there was no duty of care in negligence
under the law of tort owing by the
defendants to the plaintiffs having
regard to the facts alleged in
paragraphs 2, 3 and 4 (the count in
contract) of the statement of claim and
to the contractual obligation there
alleged to be owed by the defendants to
the plaintiffs."

16. They also pleaded that the Authority's claim upon each of the alleged causes of action was barred by s.3 of the Statute 21 James 1, c.16 (The Statute of Limitations 1623).

17. In its ameded defence to the architects' third party claim against it the builder pleaded that the whole of the Authority's claim against the architects was statute barred because more than six years had elapsed between the date of accrual of any cause of action in negligence against the architects and the date of commencement of the first action.

18. It then pleaded (in paragraph 7) that:-

"In answer to the whole of the third party
claim the (builder) says that the whole of
the third party claim is statute barred by
reason of the fact that a period in excess of
six (6) years has elapsed between the date of
accrual of any cause of action in negligence
that the (Authority) might otherwise have had
against the (builder) and the date of the
commencement of the proceedings herein."

19. It pleaded further that any liability it might have had to the Authority arising out of the building agreement lay in contract and not in tort. It then set out the effect of that part of clause 25 of the building agreement quoted above and alleged that by the defects and maintenance list referred to above the Authority by the architects required it to make good certain cracks and spalling in the units, that rectification of the cracks and spalling was carried out, that a final certificate was given under the building agreement on or about 7 October 1970, that the whole of the damages the subject of the Authority's claim in the first action was in respect of alleged defects which reasonable inspection or examination at any reasonable time during the course of the construction of the building or before the issue of the final certificate would have disclosed and that in the premises the final certificate was conclusive evidence that the work which the builder had undertaken to do had been carried out properly. Accordingly the Authority was not entitled to damages against it and the architects were not entitled to contribution or indemnity from it in relation to any judgment against them in favour of the Authority.

20. I pause here to observe that the builder in attempting to plead to the Authority's claim against the architects appears to have been labouring under a misapprehension. Without leave, a third party cannot be treated as a defendant. Order 20, r.4 of the Rules and Eden v. Weardale Co. (1887) 35 ChD 287.

21. In the second action the builder again pleaded that any liability to the Authority which it might have had arose out of the subject matter of the building agreement and hence lay in contract and not in tort. Having set out that part of clause 25(f) of the building agreement which I have already quoted, it pleaded its effect as it had in the defence to the third party claim by the architects and accordingly denied liability.

22. In their defence delivered in the second action the engineers pleaded s.3 of the Statute of Limitations 1623 in respect of any alleged cause of action.

23. The architects sought orders that the two actions be consolidated or, alternatively, that they be heard together and that a point of law, namely, whether the defence pleaded under s.3 of the Statute of Limitations 1623 is available (if proved in fact) against the Authority, should be set down to be heard and disposed of before trial.

24. At the hearing the point of law was conceded, rightly, as I think, and needs no further consideration.

25. Order 51, r.1 of the Rules provides that causes or matters may be consolidated by order of the Court or Judge in the manner in use in the Supreme Court of the State of New South Wales. A sidenote to the rule says, "Cf. N.S.W. Pt.32 r.7", thus indicating the current New South Wales rule introduced following the passage of the New South Wales Supreme Court Act 1970.

26. While I have some doubt as to whether any current New South Wales rule may be taken into account in construing rules of this Court made before 1970 (see In re Universal Distributing Co. Ltd. (In Liquidation) [1933] HCA 2; (1933) 48 CLR 171 at p 173 per Dixon J (as he then was)), I am, nevertheless, satisfied that this Court has power, at least at the instance of defendants, to consolidate actions where the same plaintiff brings actions against two or more defendants in respect of the same subject matter. Malone v. Great Northern Railway Company (Ireland) (1931) IR 1 and Cameron v. McBain (1948) VLR 245. I think, however, that the consolidation of the two actions in this case could conceivably have results which might be inimical to the interests of either plaintiff or defendants and which are not readily foreseeable at this stage. I think, therefore, that the better course is to order that the actions be heard together and, the parties consenting, to order further that the evidence in one action shall be taken to be the evidence in the other. In this I follow what was done by Blackburn CJ in Australian Consolidated Press Pty. Ltd. v. Bond & Anor. and associated actions (unreported 6 May 1982). His precise order was that "the hearing of the four actions be conducted as one". Having heard those four actions together I may say that the course adopted occasioned no difficulty whatever.

27. The builder has sought an order pursuant to 0.37, r.2 of the Rules that, before any evidence is given or any question or issue of fact tried in the action, the questions of law set out hereunder be decided:-

(a) whether the defence under the Statute of
Limitations pleaded by the builder to the
Authority's claim against the architects in the
first action is available (if proved in fact)
against the plaintiff; (I need consider this no
further.)
(b) whether the defence under the Statute of
Limitations pleaded by the builder to the
architects' claim is available against the
architects; and
(c) whether the Authority is entitled to maintain any
claim against the architects in tort concurrently
with the claim in respect of the contract between
the two parties.

28. At the hearing of the motions counsel for the builder also requested that there should be a preliminary hearing as to the date when the Authority's cause of action in tort against the builder accrued.

29. Determination before full hearing of an action of preliminary questions such as those raised in the present proceedings is provided for by 0.29, rr.2 and 3 and 0.37, r.2 of the Rules which are in the following terms:-

0.29"2. Any party may raise by his pleading any
point of law, and any point so raised shall
be disposed of by the Judge at or after the
trial, but by consent of the parties, or by
order of the Court or Judge, on the
application of either party, the same may be
set down for hearing and disposed of at any
time before the trial.

3. If, in the opinion of the Court or Judge,
the decision of such point of law
substantially disposes of the whole action,
or of any distinct cause of action, ground of
defence, set-off, counter-claim, or reply
therein, the Court or Judge may thereupon
dismiss the action or make such other order
therein as is just."

0.37"2. If it appears to the Court or Judge that
there is in any cause or matter a question of
law which it would be convenient to have
decided before any evidence is given, or any
question or issue of fact is tried, or before
any reference is made to a referee or
arbitrator, the Court or Judge may make an
order accordingly, and may direct such
question of law to be raised for the opinion
of the Court, either by special case or in
such other manner as the Court or Judge deems
expedient, and all such other or further
proceedings as the decision of such question
of law may render unnecessary may thereupon
be stayed."

30. If a point of law, decided one way, would be decisive of litigation advantage should be taken of the Rules to enable it to be disposed of but if its resolution depends upon controverted allegations of fact generally it should not.

31. I set out hereunder what seem to me to be, on the present state of the authorities, the relevant propositions of law:-

1.A plaintiff may successfully sue architects and
consulting engineers in tort as well as in
contract in respect of the same employment if it
be shown that, in addition to breaching the
contract of employment, they have been guilty of a
tortious act, which may be the relevant breach, in
and about that employment.
2.A builder who has entered into a contract for the
erection of a building may be liable in tort as
well as for breach of the contract in respect of a
tortious act, which again may be the relevant
breach, committed in relation to the erection of
the building provided that the terms of the
contract do not exclude liability for such
tortious acts.
3.Despite the growing tendency towards assimilation
of tort and contract, specific terms in a contract
may operate to exclude any liability in respect of
tortious breaches of the duty of one party to the
contract to the other.
4.That the limitation period in respect of breaches
of contract runs from the moment of breach.
5.That in respect of a building contract the
limitation period runs from the completion of the
contract since to that point a builder would
normally be in a position to rectify any breach.
6.The limitation period in respect of an action for
tort commences when there has been a wrongdoing by
the defendant from which loss or damage (not being
insignificant) is suffered by the plaintiff,
irrespective of his knowledge of such loss or
damage.
7.Depending upon the nature of the damage
(subsidence due to mining being an example), there
may be successive causes of action in respect of
one tortious act because relevant damage due to
that act may occur at intervals and the limitation
period in respect of each such damage may vary
accordingly.
8.A builder, although his liability for damages to a
person with whom he has contracted to erect a
building may be excluded by the terms of the
contract or operation of law, yet remains liable
to a third party even for purely economic loss
when the relationship between him and the third
party is sufficiently close.
9.The Statute of Limitations 1623 did not begin to
run in favour of a third party tort-feasor,
against whom a claim for contribution or indemnity
is made, until after the liability of the original
tort-feasor has been ascertained for it is only
then that the right of contribution or indemnity
arises.

32. Although I have not heard submissions as to the effect of the Limitation Ordinance 1985, I take the view that, despite its ss.3, 21 and 40, it has no practical effect at this stage on the questions I am considering.

33. All matters of fact not conceded in the pleadings and in particulars are said to be in dispute. The dispute relates particularly to the nature of the damage alleged and to the date or dates on which it occurred. The questions of law posed seem to me to depend for their resolution largely upon these disputed questions of fact. In my opinion, therefore, subject possibly to one matter, the advantages which must be apparent before such preliminary questions as those posed may be ordered to be tried just do not present themselves in these cases.

34. The one exception is the possibility that the builder might be dismissed as a defendant in the second action because, on the tentative view I have formed, there is a real possibility that the limitation defence would operate successfully against the Authority in favour of the builder. However, as I understand the situation, dismissal of the builder from the second action would not necessarily ensure its dismissal as a third party from the first action. Accordingly, while I might be tempted to agree that the preliminary issue concerning the limitation defence raised by the builder in the second action could be tried as a preliminary point, I do not see any real advantage in making an order for such a trial nor do I think there would be any material shortening of the proceedings.

35. In the light of the foregoing, I think that no advantage would accrue to parties if I granted the application for trial of the preliminary issues.

36. Accordingly I dismiss the applications on the question of law but order that the hearing of the two actions be conducted as one, evidence in the one being evidence in the other.