LAWS1114 Lecture 7

Defective Structures


  • Builders, architects and engineers owe a duty of care to any person who might reasonably be expected to suffer physical damage, that is personal injury and damage to property other than the defective structure as a consequence of their negligent workmanship: Voli v Inglewood Shire Council (1963) 110 CLR 74.
  • Defective structures – damage to the fabric of the building (perhaps due to faulty structure)
  • Amount of diminishing value is the economic loss.
  • Defects in the construction or design of a building can also bring about economic loss.
    • This economic loss is ‘pure’ in the sense that it is not consequent upon physical harm.
    • It arises because there is a defect in the building and consists of the cost of rectifying the defect or the diminution in value of the structure due to the defect.

Liability of local councils

  • NB: Local authority might have particular discretionary powers of inspection at certain stages of the construction process.
  • When is a council liable for acting on this, or for inaction?
  • If there’s a discretionary power and the council does nothing and isn’t asked to do anything, often no duty of care arises.
  • If a council does act, then it must do so with reasonable care.
    • And in doing so, either create or increase a risk of loss, then a duty of care can arise.

Sutherland Shire Council v Heyman

NB: Reasoning of HCA more in the reasoning of omissions and proximity)
* The HCA hasn’t rejected Heyman
* However, the basis of reasoning these days is different

  • s 317A was a certificate of compliance with the required building
    • If there was a request to the council, then it would issue one.
    • If no request was made, it did not have to issue one.

In 1975, without having sought a section 317A certificate, the plaintiffs purchased a house in the Sutherland Shire. The house had been constructed on inadequate footings which, through subsidence, eventually caused structural damage.

  • Cracks started to appear.
  • Thus, the plaintiffs sued the council.
    • NB: These certificates had never been issued (the original owner did not request one either).

The council granted approval for the construction of the house in September 1968. The approval was made subject to conditions designed to give the council the opportunity to inspect the work at various stages during the construction process, including the stage when the foundation trenches were open, before the foundations were laid.

  • Although there was no direct evidence of an inspection at that stage, the trial judge inferred that a council officer had inspected the foundations when the trenches were open and before the foundations were laid.
    • On this basis it was held that the council was liable for the failure to detect the inadequacies.
      • But this did not indicate that the foundations had been inspected
    • However, the New South Wales Court of Appeal decided the conclusion that there had been an inspection before the foundations were laid was not justified. There was evidence of only one inspection having taken place and that was on 3 December 1969 upon completion of the framework.
      • Nevertheless, the Court of Appeal upheld the finding of liability in the court below. It held that the council was liable for either the failure to inspect when the trenches were open or the negligent inspection carried out in December.

Gibbs CJ (with whom Wilson J agreed) took the view that the council owed the plaintiffs the relevant duty of care. This was based on the House of Lords decision in Anns which was subsequently rejected in Australia. However, their Honours thought the plaintiff’s case failed because there was no evidence of breach.

According to Gibbs CJ at page 447:
‘The Council had no statutory duty to inspect the building at any time before completion, and there was nothing in the relationship between the Council and the building owners, or in the circumstances, that gave rise to a duty to make an inspection. The Council had a discretion as to how and when it should exercise its powers, and it could not be rendered liable for negligence unless it were shown that it had not properly exercised that discretion.
At page 448:
‘The onus of proving that a public authority is negligent in failing to consider the exercise of a statutory power, when the decision whether or not the power should be exercised is discretionary, is not a light one. Unfortunately for the respondents, they have not discharged it in the present case.

Mason J took the view that a council could owe a duty to inspect to as to protect against independently created damage. His Honour based this liability on a plaintiff’s general reliance on the performance of a statutory function: at 463-464. When Mason J spoke of this general reliance, he said he was referring to a situation where there is generated (page 464): ‘…on the one side (the individual) a general expectation that the power will be exercised and on the other side (the authority) a realisation that there is general reliance or dependence on its exercise of power…’

However, in the circumstances Mason J concluded that no duty of care was owed.

According to his Honour at page 452:
‘There is no direct evidence that the appellant carried out any inspection when the house was completed or before its occupation. The respondents [Heyman] did not apply for or obtain any certificate in respect of it under the provisions of s. 317A of the Act, and there is no record that the previous owners applied for or obtained a certificate under that section.’
  • Note: The concept of general reliance has since been rejected by the High Court.
  • Brennan J concluded that in the circumstances the council did not owe a duty of care. His Honour emphasised the importance of: (1) creation or increasing the risk of loss; and (2) inducing a reasonable expectation on the part of a plaintiff.

(1) Creation or increasing the risk of loss

According to Brennan J at page 479:
‘Thus a duty to act to prevent foreseeable injury to another may arise when a transaction — which may be no more than a single act — has been undertaken by the alleged wrongdoer and that transaction — or act — has created or increased the risk of that injury occurring. Such a case falls literally within Lord Atkin's principle in Donoghue v. Stevenson [1932] AC 562. Where a person, whether a public authority or not, and whether acting in exercise of a statutory power or not, does something which creates or increases the risk of injury to another, he brings himself into such a relationship with the other that he is bound to do what is reasonable to prevent the occurrence of that injury unless statute excludes the duty. An omission to do what is reasonable in such a case is negligent whether or not the person who makes the omission is liable for any damage caused by the antecedent act which created or increased the risk of injury.’

(2) Inducing a reasonable expectation on the part of a plaintiff

According to Brennan J at pages 485-6:
‘In Shaddock the performance of public functions by the Council was one of the circumstances which warranted a conclusion that the Council realized or ought to have realized that a person seeking information from the Council about town planning proposals intended to act upon the information given so that a duty of care arose in the giving of the information…Again the duty of care arose not by reason of the statutory powers with which the Council was invested but because the Council had adopted a practice of providing information which it possessed as a planning authority and private persons were accustomed to seek and to act on the information provided.

Deane J concluded that no duty of care was owed.

His Honour used the now rejected ‘proximity’ line of reasoning but also relied on the concept of ‘specific reliance’ at pages 510-11:
‘There was no contact at all between the Council and the respondents prior to the respondents' purchase of the house. Nor is there anything in the circumstances which could warrant the conclusion that there was some special element in the relationship between the Council and the previous owners, their builder or the respondents or that the Council had assumed any special duty or obligation to any one or more of those persons. The approach of the previous owners, their builder and the respondents was, plainly enough, to ignore rather than to rely upon the Council with respect to the erection or the condition of the house: only one of the notices indicating that a particular inspection stage had been reached was returned to the Council by the previous owners or their builder; no notice of completion of the building was given to the Council as required by Ordinance No. 71, cl. 83; at the time of their purchase, the respondents made no inquiry about what the Council's records disclosed in relation to the house; the respondents neither applied for nor obtained a certificate of compliance under s. 317A of the Act. There is nothing in the evidence to suggest that the Council made any particular representation to the respondents or anyone else about the exercise of its statutory powers and functions in relation to the house. Nor is there anything in the evidence to suggest that the respondents or anyone else placed any reliance upon the actual or assumed exercise by the Council of those statutory powers or functions.’
  • Council did not have a positive duty to inspect the foundations
    • Thus, in not doing so, there was no breach

Application of Heyman: Woollahra Municipal Council v Sved (1996) 40 NSWLR 101

In August 1987, the original owners offered to sell the house to Mr and Mrs Sved. Mr and Mrs Sved required one of the s 317A certificates before they went through with the contract.

The settlement was to be on 14 October 1987. No certificate had been issued during this time, though there had been a request. Mrs Sved phoned the council and enquired into where the certificate was. She spoke to Mr James, who said that one would be issued shortly and that it appeared that everything would be alright.

The contract date arrived and it went through (ie. they went ahead with the contract). It was about settlement date when a written certificate appeared. The certificate did not raise any problems. Sometime after, there was heavy rain and as a result, the house became flooded. This happened every time it rained.

It was the telephone conversation that was in issue (which made the plaintiffs decide to go through with it). Mrs Sved identified clearly the purpose of the certificate (ie. to decide whether to go through with the contract). Her reliance on the assurance was reasonable in the circumstances

Current position regarding Heyman

  • Amaca Pty Ltd v New South Wales [2004] NSWCA 124 (17 May 2004)
    • Mason J’s judgment is authority for the statement that, generally, when a public authority, which is under no statutory obligation creates or increases the risk of loss, a duty of care arises.
  • Sutherland Shire Council v Becker [2006] NSWCA 344 (12 December 2006)
    • Council approved building plans but some storm water pipes were installed by a contractor (and there was a problem with them)
    • No duty of care by the council was found.
    • At [20], Giles JA referred to Graham Barclay Oysters.
    • At [87], Bryson J says that it’s been 20 years since Heyman was decided and that there was such a diversity of reasoning
      • A rich mine of opinion but a source of little illumination
  • Western Districts Developments v Baulkam Hills Shire Council [2008] NSWSC 770 (31 July 2008)
    • Look at [49]-[50]
    • A compliance certificate was issued. There was a problem.
    • The court concluded that the developer could have gone and checked things out for itself.
    • Because this experienced developer did not bother to check things for himself, he was not vulnerable since he could have self-protected himself.

Liability of builders and design professionals

Bryan v Maloney (1995) 182 CLR 609

It was a novel situation that got before the HCA. In 1979, Mr Brian built a domestic dwelling in Tasmania. Mrs Maloney was a subsequent owner. Sometime after she moved in, cracks started to appear in the walls. The reason for this was because the foundations were faulty. Mrs Maloney had an inspection undertaken but this didn’t reveal anything.
Mrs Maloney sued the original builder for negligence. This was decided in the area of proximity.

  • Brennan J was in dissent and said it wasn’t an issue for tort.
  • There was no doubt that the builder owed the original owner a duty of care, which would have arisen out of the contract.
  • However, this was a subsequent owner.
    • A majority of the HCA concluded that a duty of care was owed.
    • The joint majority (which is often referred to) relied heavily on proximity.
    • Because a home is such an important investment for people, there should have been an assumption of some duty to take care.
  • After Bryan v Maloney, there was a lot of uncertainty.
    • What about commercial premises?
    • The reliance on proximity.
      • Since proximity has been discarded, does this mean that the judgments are meaningless?
    • What if you build a building that is part-commercial and part-residential?

Woolcock Street Investments v CDG Pty Ltd (2004) 216 CLR 515

  • There was a view that Woolcock settled the issue. Hinchy’s article disagrees.

There was an office warehouse complex in Townsville. The defendants in this case were consultant engineers. They were involved in the design of the building. The plaintiff (Woolcock Street Investments) was a subsequent owner. Cracks started to appear. There was economic loss suffered. It was found that there were defective foundations.

Did the principle of Bryan v Maloney extend to commercial premises?

  • Joint majority (Gleeson CJ, Gummow, Hayen and Heydon JJ) concluded no duty of care.
  • McHugh J, in a separate judgment, also concluded that there was no duty.
  • Callinan J also concluded that no duty was owed.
  • Kirby J in dissent.
  • NB: Prior to construction, the consultant engineers apparently suggested that soil tests should be carried out but the original owners said no (due to cost reasons).
  • In [3], ‘Case Stated’ – the parties can agree to put up to a higher court an agreed case stated … both parties agreed on the essential facts and put that before the court to determine a question of law
    • This is critically important for the joint majority
    • Recognising that danger in developing common law on the basis of an agreed ‘case stated’
      • Saying that we need a trial of all the evidence in order to have a trial principle made.
    • Refer to Bryan v Maloney – have a look …
      • Highlight threads through the cases (Esanda, Bryan v Maloney, Crimmins, Perre v Apand etc)
      • Talk about vulnerability
  • The original Statement of Claim did not indicate that the subsequent owner could not self-protect
  • In the Statement of Claim, there was nothing pointing out that they could not self-protect
  • Perhaps they decided that there was no duty because of this.
  • The judgment did not say that a duty could never be owed – the decision was on the basis of the Statement of Claim.
    • Did not say that a duty would never be owed.
  • McHugh J – applied principles of Perre v Apand
    • Concluded that the plaintiffs were not vulnerable
    • Reasoning was wider than joint majority and concluded that it would be more difficult to extend the law to commercial property
    • If an engineer now was asked to inspect a building, he may have to contact the original builder.
    • Inspection of buildings does not appear to be a problem. If they could, then they should have done it.
      • Hinchy doesn’t really agree.