Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16
The High Court, by six Justices to one, dismissed an appeal from the answer "No" given by the Court of Appeal of the Supreme Court of Queensland to the question in a case stated. The question was whether, on the agreed facts, a subsequent owner's pleading disclosed a cause of action in negligence against the engineers who designed its commercial building's foundations. The joint reasons of Gleeson CJ, Gummow, Hayne and Heydon JJ held that, on the facts agreed and pleaded, neither respondent owed the subsequent owner a duty of care to avoid its pure economic loss. Kirby J dissented.
What the court decided
In 1987 the first respondent, a consulting engineering company, designed the foundations of a warehouse and office building in Townsville [1]. The second respondent was the first respondent's employee [2]. Payment for sub-soil testing was refused on the owner's behalf, and the building went ahead untested [41]. The appellant bought the property in 1992 under a contract with no warranty against defects and no assignment of the vendor's rights, if any, against those who designed or built it [39]. Structural distress from settlement appeared in 1994 [40].
In the appellant's negligence action in the Supreme Court of Queensland, Atkinson J by consent stated a case for the opinion of the Court of Appeal [3], [42]. It asked whether, "On the agreed facts", the pleading disclosed a cause of action in negligence [3]. The Court of Appeal answered "No", holding that Bryan v Maloney did not extend to commercial buildings [8], [43]. On appeal by special leave, the High Court dismissed the appeal with costs [44], [36], [117], [234].
The joint reasons held that, on the facts agreed and pleaded, neither respondent owed the appellant a duty of care to avoid the economic loss it claimed [25]. Bryan v Maloney depended on an anterior step, that the builder owed the first owner a duty to avoid that kind of economic loss [14]. That anterior step was not made out on these facts [27]. The original owner had refused to pay for geotechnical investigations, and so asserted control over the engineer's investigations [25]. The agreed facts pointed away from the assumption of responsibility and known reliance on which Bryan v Maloney rested [26].
Nor did the facts show that the appellant was vulnerable, meaning unable to protect itself from the consequences of a want of care, at least in a way that casts the loss on the defendant [23], [31]. The materials were silent on whether it could have obtained a warranty or an assignment, and it was not alleged or agreed that the defects were undiscoverable [31], [32]. Their Honours left open whether disconformity between the original contract and the duty alleged would always deny a duty, and whether doubt should be cast on the result in Bryan v Maloney [28], [30], [35].
McHugh J held that those who design or construct commercial premises owe later purchasers no duty in tort to protect them from pure economic loss, absent a contract between them [37], [112]. He treated vulnerability as critical, and said that absent evidence the Court must assume a purchaser of commercial premises can bargain for vendor warranties [80], [96].
Callinan J held that the case was distinguishable from Bryan v Maloney, and that allowing the claim would be a "marked and unwarranted extension of it" [210]. In his view no purchaser is especially vulnerable, because protection such as a warranty or an expert inspection is available [212], [213]. He questioned the correctness of Bryan v Maloney but expressed no final opinion on it [211], [218]. He preferred close examination of the facts to stating an inflexible principle [231].
Kirby J, dissenting, would have allowed the appeal, answered the question "yes" and returned the proceedings for trial [192]. Applying Perre v Apand Pty Ltd, he considered the appellant's case on duty, including vulnerability, reasonably arguable [168], [175].
Why it matters
The joint reasons decided the case on the facts agreed and pleaded, not by a rule that no duty is ever owed for a commercial building; the separate reasons of McHugh and Callinan JJ go further, though only McHugh J stated a general rule. On the joint reasons, the pleaded claim failed because nothing in the materials showed a duty to the original owner to avoid that kind of loss, or that the later owner was vulnerable, for example because it could not have obtained a warranty or assignment or discovered the defect. An owner bringing such a claim should be ready to plead facts on both points, though the joint reasons did not say that such facts would suffice.
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