Bevendale Pty Limited v Equiset Constructions (Epping) Pty Limited 92010 VCC

County Court of Victoria

Background

A building contractor applied to add its steelwork subcontractor as a co-defendant to the proceedings by the proprietor of a shopping centre for breach of certain contractual warranties concerning workmanship that resulted in damage to the building. The contractor contended that the subcontractor, which had allegedly caused the damage, was a concurrent wrongdoer under Part IVAA of the Wrongs Act 1958 ('the Act') with the result that the contractor could apportion its liability.

The Court held that the subcontractor was not a concurrent wrongdoer because it had no legal liability to the proprietor in contract or tort. The joinder application was therefore refused.

Background

Bevendale Pty Limited ('the proprietor') owned a shopping centre in Epping ('the shopping centre'). The proprietor entered into a building contract with Equiset Construction (Epping) Pty Limited ('the contractor') to carry out construction works at the shopping centre. The contractor subcontracted with GFC Industries Pty Limited ('the subcontractor') to supply and install structural steel.

Some years later, a structural steel truss and four concrete wall panels fell and caused damage to the shopping centre. The proprietor sued the contractor for breach of contractual warranties regarding quality of material, workmanship, and fitness for purpose. The warranties covered acts and omissions of subcontractors.

The contractor alleged that the incident occurred because the subcontractor had failed to take reasonable care in attaching the structural steel truss to prefabricated concrete panels.

The contractor applied to join the subcontractor. In order to succeed under the Act, it needed to be established that the subcontractor was a concurrent wrongdoer, which required, in this case, that the subcontractor owed a duty to the proprietor, to take reasonable care and the breach of that duty had resulted in the loss or damage.

The arguments

It was common ground that there was no contractual relationship between the subcontractor and the proprietor, and any apportionable claim would be based on a duty of care owed to the proprietor. The contractor argued that there was a duty of care because to hold otherwise would leave the proprietor vulnerable to loss and damage arising from defective workmanship by the subcontractor. The proprietor argued otherwise.

The decision

The Court found that the subcontractor owed no duty to the proprietor. There was no contractual relationship between them and no grounds to require a duty of care. The proprietor was not vulnerable in any way; it was fully protected by the contractual warranties from the contractor. In arriving at this conclusion, the Court relied on the reasoning of members of the High Court in Woolcock Street Investments Pty Limited [2004] 216 CLR at 515 where the majority held that an engineering company responsible for designing the foundation of a warehouse and office complex did not owe a duty of care to subsequent purchasers. It was said there that the purchasers were not vulnerable because they could have inspected the building for defects before purchase and protected themselves by contractual and other means.

McHugh J made particular reference to outflanking of the operation of the law of contract and the ability of a proprietor to obtain warranties from the contractor if a duty of care were to exist.

The Court said that to require a duty of care in the circumstances would be, in effect, to impose on the subcontractor the obligations of the contractor under the warranties. This would dilute the effect of contractual warranties given by the contractor and substantially change long established contractual relationships in the building industry.

The Court therefore held that the contractor failed to show an arguable proposition for an apportionable claim. The joinder application was refused. Of course, the contractor may still be able to sue the subcontractor for damages for breach of the subcontract, its loss being comprised of the contractor's liability to the proprietor and perhaps other expenses.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.