Woolcock Street Investments Pty Ltd v Cdg Pty Ltd

• Jurisdiction: Australia Federal only
• Court: High Court
• Judge: Gleeson CJ,Gummow,Hayne,Heydon JJ.,McHugh J.,Kirby J.,Callinan J.
• Judgment Date: 01 April 2004
• Neutral Citation: 2004-0401 HCA A,[2004] HCA 16
• Docket Number: B19/2003
• Date: 01 April 2004

[2004] HCA 16

HIGH COURT OF AUSTRALIA

Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan AND Heydon JJ

B19/2003

Woolcock Street Investments Pty Ltd

Appellant

and

CDG Pty Ltd (formerly Cardno & Davies Australia Pty Ltd) & Anor

Respondents

Representation:

D F Jackson QC with A M Daubney SC and G D Beacham for the appellant (instructed by Gilshenan & Luton Lawyers)

P A Keane QC with P D T Applegarth SC and M A Hoch for the respondents (instructed by Thynne & Macartney)

Home Building Act 1989 (NSW), ss 18A-18G, 90–99.

House Contracts Guarantee Act 1987 (Vic), ss 5–8.

Domestic Building Contracts Act 1995 (Vic), ss 8–10.

Building Work Contractors Act 1995 (SA), ss 32–35.

Building Act 1975 (Q), ss 52–53.

Queensland Building Services Authority Act 1991 (Q), ss 68–69, Sched 2.

Home Building Contracts Act 1991 (WA), ss 25A-25D.

Housing Indemnity Act 1992 (Tas), ss 7–9, 11–14.

Building Act 1972 (ACT), ss 62, 64–65.

Woolcock Street Investments Pty Ltd v CDG Pty Ltd

Negligence — Duty of care — Where pure economic or financial loss — Whether engineer owed duty of care to subsequent owner of commercial premises — Salient features of relationship giving rise to duty — Vulnerability — Assumption of responsibility — Known reliance (or dependence) — Relevance of latent defects and structural defects.

Negligence — Duty of care — Where pure economic or financial loss — Whether engineer owed duty of care to subsequent owner of commercial premises — Construction of dwellings and construction of other buildings — Relevance of the contract with the original owner — Relevance of statutory protection.

Practice and procedure — Whether cause of action on agreed facts — Sufficiency of pleading — Limitations on determining separate questions.

Words and phrases — ‘salient features’, ‘vulnerability’, ‘assumption of responsibility’, ‘known reliance (or dependence)’, ‘construction of dwellings and construction of other buildings’.

Gleeson CJ, Gummow, Hayne AND Heydon JJ.

The issue

1 In 1987, the first respondent, a company carrying on the business of consulting engineers, designed foundations 1 for a warehouse and offices in Townsville. The land on which this building (referred to in the pleadings as ‘the Complex’) was to be built was owned by the trustee of a property trust. Some years after the building was finished it was sold by the then trustee of the property trust to the appellant. The contract for the sale of the land did not include any warranty that the building was free from defect and there was no assignment by the vendor of any rights that the vendor may have had against others in respect of any such defects.

2 More than a year after the appellant bought the land, it became apparent that the building was suffering substantial structural distress. It is agreed that the distress was and is due to the settlement of the foundations of the building, or the material below the foundations, or both. The appellant alleges that the first respondent and its employee, the second respondent, each owed it a duty to take reasonable care in designing the foundations for the building. The respondents deny that they owed the appellant any duty of care; they deny that they acted in breach of any such duty; they say that despite advising the then owner of the land to allow them to obtain soil tests, the then owner instructed them to proceed without soil tests and to use structural footing sizes provided by the builder. Did the respondents owe the appellant a duty of care?

The procedural context

3 The appellant commenced proceedings in the Supreme Court of Queensland. After it had delivered a further amended statement of claim and each respondent had filed a defence to that pleading, the parties consented to an order stating a case for the opinion of the Court of Appeal. The question asked in the Case Stated was: ‘On the agreed facts, does the further amended statement of claim delivered on 11 April 2000 disclose a cause of action in negligence against the defendants?’ The Case Stated set out some agreed facts, but those added little to the exiguous allegations of fact made in the pleadings.

4 The critical paragraphs of the appellant's statement of claim asserted that the respondents had owed it a duty of care but said very little about why that was so. It is as well to set out those paragraphs:

Particulars were given under par 7 of the respects in which it was alleged that there had been a failure to discharge the duties.

• ‘6(a) The Complex was, at all material times, to be a permanent structure to be used indefinitely.

• (b) It was, at all material times, foreseeable that:

• (i) failure to design the structure of the Complex properly;

• (ii) failure to design the foundations of the Complex properly;

• (iii) failure to take any or any proper account of the sub-soil conditions under the Complex; and/or

• (iv) failing to construct the foundations properly,

• would result in an owner of the Complex suffering loss and damage of the kind pleaded in paragraphs 3, 4 and 5 herein.

• 7 The said loss and damage to the Plaintiff has been caused by reason of the negligence of the First Defendant and/or the Second Defendant in discharge of their respective duties to the Plaintiff.’

5 The appellant's statement of claim took a form that is common enough in claims for negligence. The allegation of duty was rolled up with the allegation of breach. The pleading did allege that the respondents had been engaged to perform engineering work in connection with the construction of the building, a ‘permanent’ structure, and alleged that the adverse consequences of which the appellant complained were foreseeable but it alleged no other matter bearing upon the existence of the asserted duty of care.

6 The question reserved for the opinion of the Court of Appeal could have been understood as inviting attention only to the sufficiency of the appellant's pleading. In both the Court of Appeal and this Court, however, the Case Stated has been treated as requiring an answer to a substantive question of law. That is, argument proceeded on the basis that this Court, and the Court of Appeal, were to assume that whether either respondent owed the appellant a duty of care was a question which could be resolved having regard only: first, to the facts set out in the Case Stated; secondly, to any inference that might reasonably be drawn from those facts; and thirdly, to the facts alleged in the appellant's statement of claim.

7 If a plaintiff is willing to have a point determined by reference only to the facts which that plaintiff chooses to put before the court, and the parties join in seeking determination of the issue, there may appear to be little reason to refuse to decide the point tendered by the parties. It is important, however, to recognise that there may be difficulty in using such procedures in cases in which it is necessary to consider developing, as distinct from applying, common law principles. The dangers of developing common law principle against an artificially constricted body of fact are self-evident. That is why, in some cases, even if the parties join in asking a court to determine a question separate from trial of the facts, it may be prudent for the court to decline to answer the question presented as being one which it is inappropriate to answer 2. Indeed, as Bass v Permanent Trustee Co Ltd illustrates 3, in some circumstances to answer a question may be contrary to the judicial process. If the question is answered, it is important to identify any limitations which the procedure adopted may impose on the breadth of any principle that is to be identified as having been established or applied.

The Court of Appeal

8 The Court of Appeal answered the question reserved: ‘On the agreed facts, does the further amended statement of claim delivered on 11 April 2000 disclose a cause of action in negligence against the defendants?’, ‘No’ 4. Both McMurdo P 5 and Thomas JA 6 (with whose reasons Douglas J 7 agreed) concluded that Bryan v Maloney8 established that the builder of a dwelling may owe a duty

of care to a remote purchaser. Their Honours concluded 9, however, that those who built or designed commercial buildings did not owe any duty of care to subsequent purchasers. As Thomas JA put the matter 10, ‘there is no good reason, in terms of principle or policy, to extend the decision in Bryan v Maloney to cases other than residential dwellings’ (footnote omitted). McMurdo P was of the view that in Fangrove Pty Ltd v Tod Group Holdings Pty Ltd11 the Court of Appeal had earlier considered and rejected what her Honour described 12 as ‘[t]he extension of the Bryan v Maloney principle to commercial buildings’ and concluded that there was no reason to depart from that earlier decision 13.

9 What did Bryan v Maloney decide?

Bryan v Maloney

10 In Bryan v Maloney, the Court (Mason CJ, Deane, Toohey and Gaudron JJ, Brennan J dissenting) decided that the builder of a dwelling house owed a subsequent purchaser, Mrs Maloney, of the house a duty to take reasonable care to avoid the economic loss which the subsequent purchaser suffered as a result of the diminution in value of the house when the fabric of the building cracked because the footings were inadequate. Both Mason CJ, Deane and Gaudron JJ in their joint reasons 14, and Toohey J in his separate reasons 15, noted that there was no direct relationship between the builder and the subsequent purchaser, but concluded 16 that the necessary relationship of proximity existed to warrant finding that the builder had owed the subsequent purchaser a duty of care.

11 It is important to identify the reasoning that underpinned this conclusion. It is convenient to do that by reference to the joint reasons of Mason CJ, Deane and Gaudron JJ. The reasons of Toohey J, although...