Duty of care for economic loss flowing from engineering designs

Actron Investments Queensland Pty Limited v D.D.S Project Management Pty Ltd & Ors [2016] QSC 306

Mullins J

The plaintiff purchased a newly constructed industrial building in 2007 for use as a warehouse. The building site contained marine clays which consolidated causing uneven slab settlement. The defendant engineer had designed the slab and certified the slab in accordance with the Standard Building Regulation 1993 (Qld).

The plaintiff settled its claim against the fourth and fifth defendants for $100,000 and against the first defendant on a confidential basis.

Issues

The issues for Mullins J were, inter alia, whether the second and third defendant (the engineers) owed the plaintiff a duty of care in designing and certifying the slab and whether issuing of a form which purported to certify certain building standards in relation to the slab constituted misleading and deceptive conduct.

Importantly, the Australian Standard for concrete structures includes a clause which states, of concrete slabs:

“The foundation shall be investigated and suitably modified, where necessary, to ensure that the sustained and any intermittent service loads, can be resisted by the slab without undue differential or uniform settlement.”

Misleading and deceptive conduct

After discussing the expert evidence, her Honour went on to state:

[118] Before evaluating whether a duty of care was owed by DEQ and Mr Henry to avoid economic loss to the subsequent purchaser of the building arising out of the design of the slab on ground, it is necessary to consider the nature of the design flaw alleged by the plaintiff which is otherwise expressed as whether a slab on ground should ever have been considered as a feasible option for this building.  I proceed on the basis of the expert evidence of Mr Wright and Mr Healey that the settlement of the slab was due to consolidation of the underlying marine clays.

[124] I am persuaded by Mr Wright’s evidence which supports Mr Henry that, in the circumstances in which Mr Henry designed the slab on ground, including the warnings in the first and second reports, the design was of a slab, “without undue differential or undue settlement” and therefore compliant with the BCA.

[125] It follows from this conclusion that there was no breach by DEQ and Mr Henry of relevant design standards in designing the slab for the subject building as a slab on ground. That conclusion has the consequence that the issuing of the Form 15 was not a breach of either the SBR or the Regulation.

Therefore, her Honour found no basis for the claims based on misleading and deceptive conduct.

Duty of care?

When considering whether the engineers owed the plaintiff a duty of care, Mullins J referred to whether the plaintiff was affected by a vulnerability in the sense referred to in Woolcock and Brookfield. In Woolcock the plurality explained vulnerability as follows:

[23] … vulnerability’ is to be understood as a reference to the plaintiff’s inability to protect itself from the consequences of a defendant’s want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant.

Similarly, in Brookfield French CJ stated that vulnerability referred to:

[22] … the plaintiff’s incapacity or limited capacity to take steps to protect itself from economic loss arising out of the defendant’s conduct.

Applying those principles to the present case, Mullins J concluded as follows:

[158] The plaintiff knew what its intended use was of the building, including the installation of racking to store air-conditioning units which would exert a downward force on the concrete slab, and yet the plaintiff made no inquiries before entering into the contract, when exhibit 6 alerted the plaintiff to the fact that “No allowance has been made for pallet racking or punching”.  Not only did the plaintiff not engage an engineer to inspect the building and the engineering drawings to ascertain whether the building was suitable for the plaintiff’s intended commercial use (for which maintaining a level floor was important) prior to entering into the contract, the plaintiff agreed to the deletion of the standard clause 4 which would have otherwise made the contract conditional on a building report.  It is submitted on behalf of the plaintiff that a building inspection prior to completion would not have disclosed the design issues in respect of the slab.  This overlooks the fact that any inspection done in conjunction with inspecting the S drawings, would have revealed the nature of the construction of the concrete slab, the floor design loads for the slab, and the express qualifications about anticipated settlement.

[163] If there had been negligence by DEQ and Mr Henry in designing the slab as a slab on ground, the plaintiff has failed to establish vulnerability in the sense explained in Woolcock and Brookfield to permit the imposition of a duty of care owed by DEQ and Mr Henry in respect of the design and/or certification of the slab for the subject building.

The proceedings against the engineers were dismissed.

David Cormack – Brisbane Barrister & Mediator

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