Wimmera-Mallee Rural Water Authority v FCH Consulting Pty Ltd (No 2) [2000] VSC 193 (16 May 2000)

Last Updated: 17 May 2000

SUPREME COURT OF VICTORIA
COMMERCIAL AND EQUITY DIVISION

BUILDING CASES LIST

No. 4272 of 1998

WIMMERA-MALLEE RURAL WATER AUTHORITY	Plaintiff
v
FCH CONSULTING PTY LTD (ACN 007 254 864)	First Defendant
- and -
R & L TANK FABRICATIONS PTY LTD (ACN 058 389 864)	Second Defendant

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JUDGE:	Byrne J
WHERE HELD:	Melbourne
DATE OF HEARING:	28 April 2000
DATE OF JUDGMENT:	16 May 2000
CASE MAY BE CITED AS:	Wimmera-Mallee Rural Water Authority v FCH Consulting Pty Ltd (No.2)
MEDIUM NEUTRAL CITATION:	[2000] VSC 193

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PRACTICE AND PROCEDURE - application by defendant to join further defendant - building action -need to show question may exist between defendant applicant and proposed defendant - material to be provided. RSC R. 9.06 Building Act 1993 s. 131

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr S. O'Meara	Deacons Graham & James
For the First Defendant	Mr P.J. Cosgrave	Phillip Quinn & Associates
For the Second Defendant	No Appearance
For the Third Party (MGZ Pty Ltd)	No Appearance

HIS HONOUR:

1. On 24 March 2000 I refused the application of the first defendant, FCH Consulting Pty Ltd ("FCH") to add the third-party, MGZ Pty Ltd ("MGZ") as a third defendant. FCH now returns to renew the application by summons filed on 5 April 2000. It is supported by fresh affidavits, two by Bruce Hilton, a director of FCH, sworn on 4 April 2000 and 17 April 2000 respectively, and one by its solicitor, Philip Joseph Quinn, sworn 5 April 2000. Mr Quinn also relies upon his affidavits filed in the earlier unsuccessful application, sworn respectively on 2 February 2000, 16 February 2000 and 3 March 2000. The summons has been served on the plaintiff, Wimmera-Mallee Rural Water Authority ("the Authority"), the second defendant, R&L Tank Fabrications Pty Ltd ("R&L") and on MGZ. No party appeared before me other than FCH and the Authority.
2. In its summons, FCH seeks an order that MGZ be joined as a defendant and that, thereupon, FCH have leave to file a Form 11B Notice on MGZ in the form of the exhibit "PQ1" to Mr Quinn's affidavit of 5 April. A Form 11B Notice is, of course, a notice by one tortfeasor claiming contribution against another. Exhibit "PQ1" is in terms of a statement of claim in which FCH seeks contribution against the third defendant, MGZ, pursuant to s.23A of the Wrongs Act 1958. I should observe at the outset that such a claim is denied to FCH by the operation of s.132 of the Building Act 1993. Argument before me, however, proceeded on the basis that what in truth FCH sought to achieve by the joinder was to attract the apportionment provisions of s.131 of the Building Act and, thereby, to reduce the amount of damages which it might have to pay to the Authority. I, too, shall proceed on that basis.
3. I shall not here repeat the observations as to the law and procedure applicable to an application of this kind, which I set out in my judgment in the earlier application by FCH.[1] I shall deal with this application on the same basis.
4. The question, therefore, which I must first address is whether it is fairly arguable that MGZ will be found jointly or severally liable to the Authority. As in my earlier judgment,[2] I shall apply the conventional pleading test as the measure by which the prospects of success of the claim are to be judged. I shall use the proposed statement of claim as an indication of the basis put forward by FCH to establish such liability. The relevant allegations in that document are set out below. I have modified them only so that the names of the parties conform with those that I have adopted. I have also corrected other apparent errors as appear in square brackets.

"3. At all material times FCH was a project manager engaged by the Authority in respect of the construction of the tank. 4. R&L constructed the tank pursuant to a design and construct contract made 29 April 1996 between it and the Authority. 5. R&L engaged MGZ as a sub-contractor to prepare the design. PARTICULARS Particulars will be provided after discovery. 6. R&L constructed the tank pursuant to the design prepared by MGZ. 7. At all material times the Authority: a) knew or assumed that MGZ was the designer of the tank; b) relied upon MGZ to prepare the necessary documentation to enable a building permit to be obtained in respect of the construction of the tank. c) relied entirely or partly upon MGZ to properly design the tank. PARTICULARS MGZ had previously designed a similar tank to the tank for the Authority at Piangil (`the Piangil tank') as sub-contractor to R&L. The Authority project managed the design and construction of the Piangil tank. The Authority had sought and received tenders prior to engaging FCH in respect of the construction of the tank. Prior to the award of the tender for the tank, Mr Heydon of the Authority informed FCH that it knew and had no problem with R&L as tenderer as a result of the construction of the Piangil tank. The Authority accepted the recommendation of R&L as successful tenderer and must have assumed or known that MGZ was the relevant sub-contractor. The Authority knew that the building permit could not be obtained without the documentation to be prepared by the designer and relied upon him to properly prepare the same. 8. At all material times MGZ: a) knew that its drawings and computations would be relied upon to construct the tank; b) knew that if there was any error in its design and computations the Authority was vulnerable to suffering loss and damage by reason of the tank collapsing as it did; c) knew or must have assumed, even if FCH checked its drawings and computations that, if there was any error in its design and computations the Authority was vulnerable to suffering loss and damage by reason of the tank collapsing as it did; d) knew that a building permit could not be obtained without its design and computations; e) assumed responsibility (or some responsibility) for the proper design of the tank. PARTICULARS FCH refers to and repeats, so far as relevant, the particulars to paragraph 8 [7?]. Further Mr Lewis of MGZ was aware that the tank was to be built for the Authority. Mr Lewis also knew that no building permit could be obtained without his drawings and computations. Otherwise the matters set out can be inferred. 9. By reason of the matters set out in paragraphs 4-8 above, in preparing the design of the tank[s], MGZ owed the Authority a duty of care in respect of the design of the tank[s]. 10. Wrongfully, and in breach of its duty of care to the Authority, MGZ failed to properly design the tank[s]. PARTICULARS MGZ was negligent in that it: (a) Failed to prepare a detailed design when requested to do so by both FCH and R&L; (b) Failed to prepare a detailed design as a term of its retainer by R&L; (c) Failed to prepare an adequate and proper design to ensure the tank did not collapse; (d) Failed to include in the design [or] any adequate bracing so as to prevent the collapse of the tank; (e) Failed to prepare a design that was capable of ready interpretation and was not confusing."

I would suppose that these paragraphs would be followed by allegations in terms of s.131(1) that, as a consequence, the Authority has suffered its loss and damage; that MGZ is jointly or severally liable to the Authority for those damages; and that the Authority is, by reason of s.131(1) of the Building Act 1993, entitled to judgment against MGZ for such proportion of those damages as the court considers to be just and equitable, having regard to the extent of the responsibility of MGZ for the Authority's loss and damage.

5. The cause of action which FCH puts in the mouth of the Authority is one of common law negligence. It must, therefore, appear on the material that there may exist a duty of care owed by MGZ to the Authority, a breach of that duty and loss and damage suffered by the Authority as a consequence.
6. As on the first application, attention focussed on the existence of the duty of care and on causation. There is before me further factual material and I am able, therefore, to enlarge the chronology of supposed uncontroversial facts which I had set out in the earlier judgment.[3]

Date	Activity
?	R & L submits a tender for the design and construction of the water tank (defence, para. 5(b)).
26 February 1996	FCH offer to undertake project management (Ex "BH1").
March 1996	FCH enters into a contract with the Authority (statement of claim, para. 3; defence, para. 3).
26 March 1996	Authority accepts FCH offer and forwards certain tenders received (Ex "BH1").
29 March 1996	R&L tender design SK1 prepared (defence, para. 5(b)).
?	R&L tender design checked by FCH (statement of claim, para. 5(b); defence para. 5(b)(vi)).
17 April 1996	FCH tender evaluation (4 tenders) recommends acceptance of the R&L tender (statement of claim, para. 5(a); Ex "BH3").
25 April 1996	Authority accepts recommendation and advises FCH (Ex "BH4").
7 June 1996	Authority asks FCH for a copy of the design (Ex "BH5").
July 1996	Detailed design prepared by MGZ including SK1 (possibly a different sketch), SK2 and eight sheets of computations (Exhibit A).
12 August 1996	FCH "eventually" obtains a copy of the MGZ computations and drawings (Ex "BH6").
12 August 1996	FCH applies for building permit (statement of claim, para.5(b); Ex "BH6").
?	R&L detail design checked by FCH (statement of claim, para 5(b); defence para. 5(b)(vi)).
7 January 1997	Certificate of Practical Completion (statement of claim, para. 6).
17 February 1997	The tank fails.

7. Insofar as I am concerned with the liability of MGZ to the Authority, it is apparent from this chronology that it is likely that the design of MGZ was prepared at a time when FCH was actively engaged as the Authority's consultant and at a time when the contract to R&L had already been awarded by the Authority. The question still remains whether it is fairly arguable that, in the circumstances of this case, the sub-contractor designer owed a duty of care to the Authority.
8. On behalf of FCH, counsel presented the argument that the law with respect to the duty of care for economic loss is in such a state that it could not be said with confidence that it was not arguable that a duty was owed. In this way he sought to sweep aside any concerns I might have on a number of matters:

§ That this was not a domestic building.[4]

§ That there might have been some contractual provision as between MGZ and FCH which affected the former's duty.[5]

§ That there was nothing to suggest actual reliance by the Authority on the design of MGZ.[6]

§ That there was the prospect of informed and critical examination of the work of MGZ before it was implemented.[7]

§ That, unlike the flooring sub-contractor in Junior Books Ltd v Veitchi Co Ltd,[8] MGZ was not nominated by the Authority; it was selected by R&L for the performance of part of the work for which R&L itself assumed responsibility to the Authority. It is not possible, therefore, to say that the Authority relied upon the expertise of MGZ or that its relationship with the Authority was akin to that of contract.

§ That there was nothing to suggest that the Authority, supported as it was by its own engineering consultant, was particularly vulnerable to the harm to which the defective work of MGZ exposed it.[9]

§ That there was nothing to suggest that MGZ assumed any responsibility towards the Authority for the consequence of its work if defectively performed.

§ That the role of MGZ was that of designer, not that of a constructor. Its work, insofar as it is, when performed negligently, capable of causing damage to a party which implements it or relies on it, has more in common with a representation or an advice than with the manufacture or construction of a thing.

§ That I was not referred to, nor have I been able to find a case where a design sub-contractor or, indeed any sub-contractor, other than a nominated sub-contractor, has been held liable in negligence to a proprietor for loss of the present kind in the absence of special circumstances.[10]

9. The difficulty about this aspect of the case is that the application before me did not involve any detailed examination of these concepts or these authorities. This was understandable in the circumstances. Nevertheless, if this were an application to strike out a pleading already filed in the court, these uncertainties might encourage me to conclude that I should not be satisfied that the plea was clearly unarguable or manifestly groundless or hopeless. But this is not such an application; it is an application in which it is for the applicant, FCH, to demonstrate, to the appropriate degree, the Authority's claim against MGZ. It is not sufficient for the applicant merely to proffer a pleading containing allegations which, if found to be justified, would make out the cause of action
10. In my earlier decision in this matter I set out the deficiencies in the material of FCH then before the court[11]. What has now become apparent, at least to the extent of the documents now in evidence, is that the recommendation of FCH that the contract be awarded to R&L was not based on engineering aspects of the tender design. When MGZ undertook its work which is presently the subject of criticism, the contract was already let to R&L. The terms under which and the circumstances in which MGZ undertook its work still remain unknown to me. There is no evidence that any officer of the Authority ever saw the detailed design prepared by MGZ.
11. As I mentioned in my earlier judgment, a party seeking to add a defendant must satisfy the court that the joinder is proper. This may not be a heavy burden since Rule 9.06(b)(ii) requires no more than that there may exist a question. Where such a question is based on a breach of a duty of care, the existence of that duty will often be self-evident. Where, as here, this is not the case and where the application is opposed, the onus lies on the applicant to discharge this burden offering material in support where this is necessary.[12] I have anxiously considered the affidavits. I have been ready, as a judge in charge of a specialist list, to draw inferences from these affidavits and to approach the suggested cause of action in a practical way. I regret that I am left with the conclusion that the burden on the applicant has not been discharged.
12. This being the case, it is not necessary for me to turn to the discretionary matters which were pressed on behalf of the Authority. Principally, this was the long and totally unexplained delay on the part of FCH in bringing this application. My attention was drawn to the chronology of the litigation:

Date	Activity
4 February 1998	The Authority's writ is filed.
3 June 1998	FCH applies orally to join R&L as second defendant which application was refused at first instance.
20 May 1999	The FCH application is ultimately allowed by the Court of Appeal.
27 August 1999	The proceeding is set down for trial after management in the building cases list.
14 October 1999	The proceedings is fixed for trial to commence on 8 March on an estimate of seven to 10 days.
9 February 2000	I gave leave to FCH to serve a third party notice on MGZ as a first step in the process of adding this party as a defendant. As a consequence the trial date is vacated.
16 February 2000	The first application of FCH to add MGZ as defendant is filed.

13. As I have mentioned, the failure of FCH for some 18 months to seek to join MGZ was entirely unexplained. I will not speculate on the reasons for this. In an application of this kind, however, silence on this topic encourages the court to infer that there was in truth no good reason for the delay.
14. The application of FCH will be refused with costs.
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[1] [2000] VSC 102.

[2] 2000 VSC 102 at [8].

[3] 2000 VSC 102 at [18].

[4] See Bryan v Moloney (1995) 182 CLR 609 at 630 per Mason CJ, Deane and Gaudron JJ; Zumpano v Montagnese [1997] 2 VR 525 at 529, per Brooking JA.

[5] Bryan v Moloney (1995) 182 CLR 609 at 625, per Mason CJ, Deane and Gaudron JJ; at 641-4, per Brennan J dissenting; Zumpano v Montagnese [1997] 2 VR 525 at 534-5, per Brooking JA.

[6] If reliance be a requirement, as to which, see Pyrenees Shire Council v Day [1998] HCA 3; (1998) 192 CLR 330 at 386, per Gummow J; Zumpano v Montagnese [1997] 2 VR 525 at 533-4, per Brooking JA.

[7] See Bryan v Maloney (1995) 182 CLR 609 at 627, per Mason CJ, Deane and Gaudron JJ.

[8] [1982] UKHL 4; [1983] 1 AC 520, a much criticised decision which has now been disapproved in England: D & F Estates Ltd v Church Commissioners for England [1988] UKHL 4; [1989] AC 177, and Scotland: Landcatch Ltd v International Oil Pollution Compensation Fund [1998] 2 Lloyd's Rep 552 at 570-1, per Lord Gill.

[9] Perre v Apand Pty Ltd [1999] HCA 36; (1999) 164 ALR 606.

[10] See too Hudson's Building and Engineering Contracts 11^th ed. 1995, par 1.292.

[11] [2000] VSC 102 at [19].

[12] Boral Resources (Vic) Pty Ltd v Robak Engineering and Construction Pty Ltd [1999] VSCA 66 at [13], per Batt JA and at [76], per Chernov JA.