Building Construction - Building Surveyors (victoria).

Judging Building Surveyors - Part 2 - Effect of MIG Textiles Decision (VCAT 2005)

FACTS - MIG owned a block of land in Carlton. It was to be developed into 4 x 3-storey townhouses. The respondent architect, Myer, obtained a town planning permit for the development and prepared working drawings. The original town planning permit assumed the retention of existing retaining walls. The owner received engineering advice to the effect that the walls would need to be demolished. During the course of demolition, the local council intervened to stop work on the project because the degree of demolition was greater than that permitted by the town planning permit. MIG had to pay damages to the builder and sustained economic loss itself. MIG sued to recover those losses from Myer, alleging that it was the fault of the architect that the work was stopped and the delay occurred.

The building surveyor who had issued the building permit approving extensive demolition of walls contrary to the original town planning permit was not sued.

Senior Member Walker, an experienced VCAT officer, found in favour of the defendant architect and dismissed MIG's claim. Senior Member Walker noted that the building surveyor had issued a permit for demolition for work without first satisfying himself of the existence of a planning permit which would have allowed the demolition. Evidence called by the developer that in fact the building surveyor had acted reasonably was rejected by VCAT. VCAT also rejected evidence from another consultant building surveyor to the effect that the project building surveyor could have delegated his responsibilities to Council by sending in plans for Council to determine whether the planning permit covered the removal, demolition and replacement of walls. Senior Member Walker decided that the project building surveyor had a responsibility under the Building Act 1993 to satisfy himself/herself that there was a relevant planning permit in existence. The final responsibility was personal and non-delegatable. However, MIG made the fatal error of not having sued the building surveyor as well as the architect.

The reason why the claim against the architect failed was that VCAT was satisfied that the architect had no contractual responsibility to determine whether the planning permit would allow demolition which only arose after the planning permit had been issued. VCAT noted that MIG had effectively taken responsibility for splitting responsibility between Myer to obtain the planning permit and others to obtain the building permit. VCAT noted, somewhat caustically, that the small amount of money saved by the developer ended up being insignificant by comparison to the damages ultimately sustained.

Effect of Taitapanui Decision (VSCA 2006) and (HCA 2006)

FACTS - Mr. & Mrs. Taitapanui purchased a house in 1999 at Torquay. The house was originally built by owner/builders, Mr. & Mrs. Watson in 1996. Watson had his own construction company, Watson Construction Pty Ltd. When the house had been originally constructed, Wally Mellis, employed by the Mooroobool Shire Council's Building Department, had been project surveyor. The Taitapanuis subsequently sustained loss and damage being pure economic loss when part of the foundations of the house collapsed. The Taitapanuis sued the original owner/builder (Watson Construction) and Mooroolbool Shire Council as Mr. Mellis' employer. Before VCAT, the Taitapanuis were successful both against the building surveyor/local Council and original owner/builder. Both appealed to the trial division of the Supreme Court. The appeal was dismissed in 2004. The Municipal building surveyor/Council again appealed to the Victorian Supreme Court of Appeal. Again, the appeal was dismissed.

The question before the Court of Appeal was whether the building surveyor owed any duty of care to the Taitapanuis .

The building permit was issued by Mellis in August 1996. Construction commenced later that year. Mellis issued a certificate of occupancy in January 1997. In July 1997, the Watson's sold the property to a Mr. & Mrs. Pozman. Early in 1999, the Pozmans further sold the property to Mr. & Mrs. Taitapanui. Defects only became apparent once the Taitapanuis were owners. Engineers and consultant builders retained by the Taitapanui's identified a number of serious structural deficiencies in the footings.

VCAT decided that the surveyor had been in substantial default by issuing the permit. Contrary to regulations, no specifications had been provided describing the materials and methods to be used and the plans did not identify the particular wall material. VCAT described the surveyor's conduct as to mounting to gross carelessness and incompetence. The Trial Division of the Supreme Court criticized the building plans, calling them as though they had been done by a thumbnail dipped in tar. The Supreme Court noted that there were many construction defects which should have been picked up by the surveyor in the course of his inspection - in particular, sub floor defects in the bearers and joists, defects in the roof framing, clear shortcomings in the flashings, and a failure to provide the correct safety glass for certain window and door panels.

VCAT concluded that the house was so compromised that it needed to be demolished and rebuilt.

The Court of Appeal noted that the Taitapanuis did not themselves rely upon anything that the surveyor or his employer, the Shire Council, said or did when they purchased the property from the Pozmans.

The Court of Appeal thoroughly analysed the Building Act 1996. The Court noted the critically important role of the surveyor relating to the approval of future construction work and building inspectors to regulate buildings which are under construction. The Court of Appeal noted that the role of the surveyor in respect of building work was not limited to that of issuing building permits. There is a duty to make mandatory inspections, and a power to conduct other inspections. The Court noted that a surveyor had broad authority when conducting an inspection. For instance, the occupancy permit should not be granted unless the building to which it applies is fit for occupancy.

The Court of Appeal concluded that Mr. Mellis, as building surveyor, owed a duty of care to not only the current owner/builder of a property but also to future owners. The Court of Appeal was influenced in this finding by the surveyor's gross failure of reasonable care when performing the statutory functions of issuing a building permit. The Court of Appeal stressed the important role which a surveyor performs, particularly to prospective purchasers of property who will conduct searches of documents such as the Section 32 statement attached to contracts of the sale of land.

The Court of Appeal framed the relevant duty of care owed by a building surveyor as a duty to exercise reasonable care in granting a building permit in respect of building work the subject of an application for the permit. The Court of Appeal warned surveyors that this duty applied equally to future purchasers who, in many respects, were in more vulnerable positions than the original building owner. The Court concluded that the surveyor must have been aware of the risk of economic harm being suffered by a later purchaser in the event that the surveyor neglected his statutory obligations.

The Court of Appeal also remarked on whether or not the Taitapanuis could have been said to consciously rely upon anything actually done by the surveyor as being causative of their loss. In many respects, the Taitapanuis (who may not have even been aware of Mr. Mellis' original involvement) might have found the requirement of reliance difficult. The Court side-stepped this defence by holding that the Taitapanuis established reliance in the sense of having inspected the Section 32 certificate under the Sale of Land Act which included the building permit granted by Mr. Mellis.

In many respects, Taitapanui is an extension of the High Court Authority in Bryan v. Maloney (1995) to building surveyors. It seems settled law in Australia that a wide variety of building practitioners such as architects, engineers, draftspersons, builders and surveyors, owe a duty of care to subsequent owners of the house to avoid mistakes leading to future pure economic loss. These decisions may depend upon whether these building practitioners owed duties of care to first owners to avoid pure economic loss. However, having regard to the essential role played by surveyors in the building process, that salient feature is inevitably likely to be satisfied.

The High Court refused special leave to appeal to the surveyor/Shire Council. The High Court was satisfied that the Court of Appeal's application of the law to the facts was correct.