Guide To Identification of Construction Defects
Guide To Identification of Construction Defects
Guide To Identification of Construction Defects
Defects
Chris Lenz
BSc (Eng) LLB (Hons) MIE Aust CP Eng MIAMA, Solicitor
Introduction
briefing the appropriate expert.
Background Finally, construction lawyers and their insurance
Construction lawyers and their plaintiff clients company clients need to identify the cause or causes
are confronted with having to identify the likely of construction defects to assist in:
cause or causes of construction defects to assist to: identifying whether the insurance policy
have the work rectified and completed with the responds to an insured’s claim;
minimum fuss; denying liability on behalf of the insured;
properly identify the parties responsible for the seeking appropriate contribution from others
defects; involved or associated with the construction;
identify the cause or causes of action against and
those parties; briefing the appropriate expert.
ensure that limitation periods do not prevent
pursuing the claim; The source of construction defects
find other possible defendants that are not Many people not closely associated with the
insolvent or may carry insurance; construction industry think that design methodology
limit using the ―shotgun approach‖ to suing and construction techniques are completely
everyone because of the possible adverse cost scientific, so that if there is a construction defect
consequences; then, using a cooking analogy:
deal with the client’s insurance issues and those there must have been a failure in the recipe;
of any defendants; and a failure to properly follow the recipe;
brief the appropriate experts. the ingredients were defective; or
It is equally important for construction lawyers the oven was defective or the utensils were
and their defendant clients to identify the cause or unsuitable,
causes of construction defects to assist in: causing the loss.
determining whether they are responsible for In any case, his or her argument is ―someone is at
rectification; fault, find out who they are and sue them!‖
identifying parties who may be contributors to This approach fails to recognise that there is as
the plaintiff’s loss; much art as science in design, and that construction
denying liability; does not generally involve precision work where
determining whether any insurance policy everything is or could be perfect. In addition,
responds to the plaintiff’s claim; and science itself does not purport to be exact, and
engineers, in particular, recognise that models, even design, if the latter is part of the contractor’s
theories etc are the current best ―guess‖ at obligation.‖
approximating reality. Therefore, it is incorrect to The difficulty with Hudson’s broad definition is
expect that nothing will go wrong, or that that one may well have something that is technically
everything is 100 per cent foolproof. defective as accepted by any architect or engineer,
Lawyers need only look at their own discipline for example, as regards quality, but it may well
of the law to confirm that the law is not black and comply with the contractual specification. In these
white, but varying shades of grey. However, instances, the contractor may well argue that it has
outsiders to the law often have the perception that it complied with its obligations under the contract, and
is all cut and dried. Hopefully, construction lawyers providing the contract does not embody a
can appreciate the frustration felt by those involved performance specification, the contractor may well
in the construction and engineering industries that succeed. One is dealing with a ―contractual defect‖
hold the view that sometimes a ―defect‖ may not for want of a better term, and the pass mark is
necessarily mean that anyone is at fault. compliance with the contract. This may not
However, designs generally work, construction necessarily fall within the dictionary definition of
usually complies with the contract and science does being a fault, imperfection or falling short; it is
approximate reality reasonably well. Accordingly, simply something constructed which was not
the task of succeeding in sheeting home liability to agreed. Equally, something may well be a fault or
the defendant or defendants appears relatively imperfection as described by the dictionary, but in
straightforward. Unfortunately, construction defects compliance with the contract.
are elusive and devilishly difficult to capture, and This illustrates the mercurial nature of the
construction lawyers could well educate their meaning of defect and introduces a potential for
respective clients to develop a realistic appreciation significant confusion between construction lawyers
of the difficulties involved. One merely needs to and their experts preparing a case for litigation.
start with the definition of a defect. Furthermore, at trial, the plaintiff’s experts may
well miss the distinction in a claim for breach of
Definition of ―Defects‖ contract and adopt an intransigent position during
The Oxford English Dictionary meaning of cross-examination to the detriment of the plaintiff’s
defect is: case. The same can apply to the defendant’s experts.
Equally, counsel and instructing solicitors during a
―1. The fact of being wanting or falling short; trial may be confused by answers given by their
lack or absence of something essential to own or the other side’s experts, and without the
completeness (opposed to excess); intuitive technical expertise to properly distinguish
deficiency. or challenge the content of the expert’s answers, a
2. A shortcoming or failing; a fault, blemish, trial may well go off the rails.
flaw, imperfection (in a person or thing). The parties may not have the luxury of an
3. The quality of being imperfect; experienced judge to thoroughly sort through the
defectiveness, faultiness.‖ evidence. With respect, his Honour Giles J, carried
out a magnificent job in the case of RW Miller & Co
However, in the context of construction law, Pty Ltd v Krupp (Aust) Pty Ltd (1995) 11 BCL 74.
defects are considered more broadly in certain The case is 78 pages long with a significant
circumstances. Hudson1 suggests that a defect component of the judgment dealing with the very
(when used the context of a contractual defects complex expert evidence relating to the cause of
clause), ―includes any breach of contract affecting collapse of a large bucket wheel reclaimer used in
the quality of the work, whether structural on the mining. The contending scientific explanations
one hand or merely decorative on the other, and involved very difficult theories, which were
whether due to faulty material or workmanship, or advanced to prove or disprove liability. His Honour
commented on the evidence of one of the experts
who fairly stated that his analysis was getting close
to reality but did not completely replicate reality.
1
Hudson’s Building and Engineering Contracts (10th ed, Sweet
and Maxwell) p 389.
His Honour said:
―It would be wrong to treat that figure as gospel. The search for causes of actions and potential
For example, one of the fixed values was defendants requires identification of construction
founded on a buffer compression of 380mm, but defects, and this article attempts to summarise the
it was simply not possible to conclude that the literature and some cases in the area as well as
buffer compression was precisely that figure: a provide some personal observations in order to
variation of even a few millimetres was highly provide some guidance to help construction lawyers
significant to the calculation.‖2 prepare for litigation. Discussion follows in
progressively lesser detail in relation to:
Perhaps one needs a means of classifying and Design faults — the ―recipe‖
differentiating between construction defects into Faulty workmanship — not following the
two categories: (1) contractual defects and (2) those ―recipe‖
that are technical defects. A construction lawyer Faulty materials — incorrect ―ingredients‖
could concentrate on classifying the former because Foundation movements — the ―oven or
they have contractual expertise and leave technical utensils‖ being defective.
defects for classification by technical experts if
negligence or some other non-contractual cause of Design faults
action is pleaded. However, as many are no doubt
Halsbury3 states that design involves the
aware, most traditional construction contracts
description of work to be done, including the
incorporate technical specifications and drawings
materials to be used, and may even extend to the
that require technical input. In determining whether
manner of performance.
there is a contractual defect, it is necessary,
therefore, to look at the technical aspects, which Current law
requires assistance from experts.
The classic statement of Windeyer J in Voli v
The inability to pursue certain parties for Inglewood Shire Council (1963) 110 CLR 74 at 84
defects identified the standard of care required of an
architect:
There can be a number of reasons that
realistically prevent a plaintiff receiving adequate ―An architect undertaking any work in the way
compensation for its loss resulting from of his profession accepts the ordinary liabilities
construction defects, for example: of any man who follows a skilled calling. He is
exclusion clauses in the construction contract or bound to exercise due care, skill and diligence.
consultancy agreement; He is not required to have an extraordinary
exclusion clauses in the plaintiff’s insurance degree of skill or the highest professional
policy; attainments. He must bring to the task he
designer not negligent undertakes the competence and skill that is usual
plaintiff does not have standing to sue, for among architects practising their profession. And
example, TPA claims — for instance, not a he must use due care. If he fails in these matters
consumer; and the person who employed him suffers
insolvency of defendant; damage, he is liable to that person. This liability
Limitation of actions; and can be said to arise from a breach of his contract
issue of final certificate by a superintendent. or in tort.‖
In these circumstances, the construction lawyer is
then required to establish other causes of action This same duty applies to others providing
against other defendants so as recover the client’s professional services: Astley v Austrust Ltd (1999)
loss against someone of substance within the 73 ALJR 403.
requisite time limitations. The duty expected of an engineer was reaffirmed
recently in a Queensland case. (De Pasquale Bros
2
R W Miller & Co Pty Ltd v Krupp (Aust) Pty Ltd (1995) 11 3
Halsbury’s Laws of Australia (Butterworths, Looseleaf
BCL 74 at 87 per Giles J. Service), para 65-1415.
Pty Ltd v Cavanagh Biggs & Partners Pty Ltd; NJF Other liability examples
Holdings Pty Ltd v De Pasquale Bros Pty Ltd
A structural engineer who designed the
(2000) 16 BCL 116.) In this case, an engineer
structure and prepared working drawings and
breached his duty of care in failing to commission
who visited the site during excavations was not
geotechnical consultants to carry out a geotechnical
held to be negligent when an adjoining property
investigation prior to design and also to engage
collapsed. He had given some suggestions to
them after discovering a damp spot in the excavated
the builder to check adjoining buildings and
area prior to allowing further construction to
keep earth support on the boundary, but did not
proceed. The water was artesian water, which
advise the builder to underpin the adjoining
caused an adjoining building’s foundation to be
property. This omission was not held to be
destabilised as well as that of the building being
negligent: Loth Properties v Roy B Hoskins
constructed. Both buildings suffered structural
(unreported, Qld Sup Ct, Ryan J, 31 July
damage. The engineer did not have the geotechnical
1986).8
skill to determine the reason for the damp spot, but
he ought to have recommended advice from In 1985, a structural engineer designed a
someone who had that skill. parapet for a commercial building at Eagle
If the geotechnical report had been obtained, a Farm. The parapet collapsed in January 1995
suitable design to accommodate the artesian water due to inadequate design according to the
for the new building could have been developed. In learned trial judge. The present owner who
addition, appropriate measures could have been bought the building in 1989 sued the engineer
taken to prevent the damage to the adjoining for damages for negligence. (Tod Group
building. Chesterman J held that the damage to the Holdings Pty Ltd v Fangrove Pty Ltd (1999) 15
adjoining building was physical injury, thereby only BCL 328.) The Court of Appeal classified the
requiring the plaintiff of that building to establish damages as being ―pure economic loss‖. The
reasonable foreseeability of injury for the duty of court was not prepared to extend the Bryan v
care to be made out.4 The damage to the new Maloney9 principle of a special relationship of
building was characterised as economic loss, which proximity between a builder and subsequent
has a more confined basis for liability than that for house owner to commercial buildings. The
physical damage. His Honour stated that: plaintiff, in the court below, had failed to make
out that it had relied upon the engineer’s design
―The loss is economic where damage consists of or that the designer had assumed responsibility.
a defect in the structure itself arising from The court specifically declined imputing
inadequate design or building so that the value of reliance or assumption of responsibility in the
the structure is diminished and it may require case of a commercial building, so that
remediation.‖5 negligence was not made out.
Damages
The designer does not, however, warrant that the
structure is fit for its purpose,6 unless they are also Under this topic and ―Faulty workmanship‖
the constructor.7 below, there is brief reference to calculation of
damages because this can be tricky. A useful
summary can be obtained from the case of Beregold
Pty Ltd v D Mitsopoulos & Associates (1999) 15
BCL 290. Cole J referred to the rule that the injured
party is to be put in the same position it would have
4
De Pasquale Bros Pty Ltd v Cavanagh Biggs & Partners Pty
been in if they had not sustained the injury for
Ltd; NJF Holdings Pty Ltd v De Pasquale Bros Pty Ltd (2000) 16 which damages are claimed and also provided three
BCL 116 at 127 per Chesterman J, citing Bryan v Maloney categories of loss that flow from negligent
(1995) 182 CLR 609at 617.
5
Ibid at 127.
6
Orlit Pty Ltd v JF & P Consulting Engineering Pty Ltd (1992)
11 BCL 260. (Qld Sup Ct).
7
High Mark (M) Sdn Bhd v Patco Malaysia Sdn Bhd (1984) 28 8
Referred to in ―Current Topics‖ (1987) 3 BCL 91.
9
BLR 129. (HC Malaysia). Bryan v Maloney (1995) 182 CLR 609 at 617.
representatives of a specialist product. Ensure (c) reconstruct, replace or correct the work;
reasonable inquiry and testing if one is and
unfamiliar with a product, unless there are trade (d) not deliver it to the site.‖
secrets.19
AS 2124–1992 does not define defects and
provides a similar regime regarding defective
Faulty workmanship materials and work in cl 30.3.
In both contracts, therefore, the pass mark is
Current law compliance with the contract rather than some other
A contractor has the obligation to construct the test, and construction lawyers should start with
work free of defects at final completion. 20 As interpreting the contract, with expert technical
discussed above, the work is defective when it fails assistance to help understand the drawings and
to comply with the contract and it is necessary to specifications.
have regard to the terms of the contract.21 In Onerati Damages that flow from faulty workmanship in
v Phillips Constructions Pty Ltd (in liq) (1989) 16 Australia are still evaluated in accordance with the
NSWLR 730, the court held that faulty principles in Bellgrove v Eldridge (1954) 90 CLR
workmanship is a reference to the manner in which 613 as the plaintiff’s rectification costs plus profits
something was done, to fault on the part of a or earnings lost with the proviso that:
workman or workmen.22 Rectification was necessary to produce
A brief analysis of two well-known standard conformity with the contract; and
construction contracts is made to determine what is It is a reasonable course to adopt.23
meant by a defect. In the event rectification is unreasonable, then
AS 4000–1997 provides in the interpretation one may have regard to the diminution in value
clause 1 that ―defects has the meaning in clause 35 created by the defective workmanship or
and includes omissions;‖ however, cl 35 does not materials.24
provide any guidance in this regard. One is In the English case of Ruxley Electronics and
compelled to look at cl 29.3 for some guidance, Construction Ltd v Forsyth [1996] AC 344, the
which provides: House of Lords have adopted a measure based on
the loss of amenity to the owner caused by breach of
―29.3 Defective work contract. This approach is an attempt to quantify the
If the Superintendent becomes aware of work ―loss truly suffered by the promisee‖. 25 This
done (including material provided) by the principle does not appear to have been followed in
Contractor that does not comply with the Australia but one commentator is of the view that
Contract, the Superintendent shall as soon as this principle could sit comfortably with the High
practicable give the Contractor written details Court’s approach in Bellgrove v Eldridge.26
thereof. If the subject work has not been
rectified, the Superintendent may direct the Discussion
Contractor to do any one or more of the In light of the complexity that can be associated
following (including times for commencement with the investigations into construction defects and
and completion): the alarming costs that can be very quickly incurred,
(a) remove the material from the site; construction lawyers should consult technical
(b) demolish the work; experts early so as to gain an understanding of
drawings and specifications. No client is
19
Sealand of the Pacific v Ocean Cement Ltd (1973) 33 DLR
23
(3d) 625. Bellgrove v Eldridge (1954) 90 CLR 613 at 617.
20 24
Qantas Airways Ltd v Joesland & Gilling (1986) 6 NSWLR Ibid at 619.
25
327. Ruxley Electronics and Construction Ltd v Forsyth [1996] AC
21
Halsbury’s Laws of Australia (Butterworths, Looseleaf 344 at 360 per Lord Mustill.
Service), para 65-1495. 26
Bates, ―The Assessment of Contractual Damages for Defective
22
Referred to in Dorter, ―Performance‖ (1999) 15 BCL 361 at Building Work in Australia: Is loss of Amenity an Available
369. Measure?‖(1999) 15 BCL 2.
action against the corporation.‖ computer program and wait for the computer to give
the right answer.
Section 75AC provides for the meaning of the Foundation design is an art and a science that
goods having a defect. requires particular skill, experience and judgment
A starting point for identification of defects in that one cannot simply glean from textbooks.
this area could be as follows: Engineering judgment plays a significant role in this
Construe the particular construction contract, area. Test holes and core samples cannot possibly
with particular attention to drawings and cover the whole area in which a structure requires
specifications with expert help. foundations. The use of statistical models, which are
If there are no express clauses that assist, in now very sophisticated, can assist greatly, but
providing liability or exculpation by way of an everything is based on the primary assumptions
exclusion clause, then have regard to the made by the engineer. These assumptions require
implied terms of merchantable quality and experienced engineering judgment based on
fitness for purpose. academic knowledge honed by years of experience.
Consider the statutory provisions that may Accordingly, sensible extrapolation, ―gut feeling‖,
imply terms of merchantable quality and fitness experience and instinct play as important a role as
for purpose. the engineering calculations and running of
If one is dealing with a building for private use, computer models. The critical issue remains the
check s 75AG of the TPA. assumptions on which these calculations are based,
and nothing takes the place of experience.
Foundation movements
Current law
This topic is so contentious that a paper of this
sort could not hope to make a significant inroad into In Orlit v JF & P Consulting Engineering (1995)
the area. It is perhaps better in this regard to provide 11 BCL 260, Moynihan J held that a consulting
a brief philosophical background to the topic, so engineer specialising in civil engineering ought to
that the reader has an appreciation of the difficulties have appreciated that the propensity of the soil to
confronting engineers when designing foundations. vary in volume as moisture content varied with the
Whilst the writer appreciates that most consequent imparting of stresses, was an important
construction lawyers left the sciences and design consideration to be taken into account. 32 This
mathematics, at the end of their schooling (with a case is a useful starting point for the search for
welcome sigh of relief no doubt), it may interest defect identification, and also provides the names of
them to know that some significant engineering some of the experts in this area; in the event one is
advances and formulas have been derived confronted with a problem of this kind. Further
empirically. This means that there was no elaboration is precluded because of the nature of
theoretical foundation for the formulas, often this article is to provide a guide only.
because ―it was too hard to find science or In the event the construction lawyer is dealing
mathematics to fit‖. In these cases, observation of with a residential foundation failure, it is
events and experiments have taken the place of appropriate to obtain a copy of Australian Standard
theory, and through trial and error a formula or AS 2870 — Residential Slabs and Footings and get
process is developed which is then accepted into expert advice with regard to its interpretation.
engineering ―folklore‖. Discussion
In the past, engineers have recognised the
limitations of these formulas and have tempered At the start of this topic, it was mentioned that
their application of them with a lot of common the area is so contentious that it was thought best to
sense and judgment. Unfortunately, there is now provide some insight into the difficulties with this
enormous computer power available to engineers, area, so that the investigation into identification of
together with a vast array of engineering computer foundation defects does not become some fruitless
programs. This has allowed a new generation of
engineers to enter the profession, some of whom
who believe that one merely needs to ―plug the 32
Orlit v J F & P Consulting Engineering (1995) 11 BCL 260 at
experimental or test result variables‖ into the 264 per Moynihan J.
33
Ibid at 264.