Building Construction - Effect Of Lewis V. Threadwell (vcat 2004)

The Applicant, Lewis, bought land in Ocean Grove in 1995 to build two units. The applicant applied to Newey & Associates for a building permit in 1997. The Applicant engaged the First Respondent, Threadwell, as builder to construct the two units in 1997. The building permit was issued in 1997. Also in that year, the three mandatory inspections were performed by the Fourth Respondent (Miller) as a delegate of Newey & Associates.

The building reached lock-up stage. Problems then resulted in the Applicant determining Threadwell's building contract. An occupancy certificate was issued by Newey & Associates in September 1997.

The Applicant sued the builder at VCAT in 2002 for a large number of building defects in the two units. The case was heard in early 2004. Prior to the case commencing at VCAT, the Applicant settled with the builder, Threadwell.

A lengthy and careful judgment was handed down by Senior Member Robert W. Davis. This decision is an interesting and complete examination of the statutory and common law duties of care owed by building surveyors and inspectors in the context of domestic building disputes.

VCAT examined first the allegations against the building surveyor/inspector in contract. VCAT rejected a contention by the Applicant/owner that in the absence of an express contractual condition, the normal contractual standard of care implied from the appointment of a building surveyor/inspector exceeded a requirement that services would be rendered with due care and skill. Wider contractual obligations (more suitable for actions for breaches of a trade practices duty of care or a sale of goods action) that services would be fit for the purposes for which they were being brought, or would be reasonably fit for a particular purpose, or would be such as might be expected to achieve their desired result, did not form part of the contractual responsibility owed by Newey & Associates or by Miller in this case. These wider duties could only form part of the surveying contract by express written inclusion.

VCAT also rejected an allegation that the building surveyor/inspector had engaged in misleading and deceptive conduct. Senior Member David drew a distinction between a contractual promise which subsequently is breached or shown to be false on the one hand with a contractual promise which was demonstrably false from the very moment it was made on the other hand. Only if a building owner could establish the latter could the surveyor or inspector be sued in misrepresentation.

VCAT did conclude that the building owners could sue the surveyor/inspector for negligence at common law. VCAT relied upon Taitapanui in deciding that the duty of care owed by a building surveyor/inspector is to exercise professional skills in examining plans and specifications and in carrying out inspections to ensure that the building work for which they have been appointed as the building surveyor/inspector is in conformity with the requirements of relevant legislation. However, Senior Member Davis seemed to restrict the ambit of the duty of care or responsibility of a surveyor in negligence to a duty to act in conformity with the requirements of the Act and Regulations. That is his/her sole function. Senior Member Davis specifically doubted whether a surveyor or inspector could be held liable in negligence in relation to design, supervision, or workmanship except insofar as those issues relate to the Act and Regulations. That is of course an important qualification.

VCAT also considered whether or not the Applicant could establish a private right to sue for damages (in this case for pure economic loss) if the surveyors or inspectors were in breach of a statutory duty. Senior Member Davis seemed to indicate that such a cause of action was available but not in the circumstances of this case. The Member would have required for three steps to be established:

- The property built does not comply substantially or fully with the plans;

- The failure is one of compliance with the Building Act or Building Regulations;

- It was reasonable for the building surveyor or the inspector to have picked up the failure at an inspection or mandatory stage.

VCAT next considered the question of the standard of care required by the surveyor/inspector in complying with the various contractual or common law duties of care.
Interestingly, Senior Member Davis relied upon a Court of Appeal of the Supreme Court of Victoria decision in Linsley v. Petrie (1998) where the Court of Appeal decided that the standard of care required of a surveyor where there has been personal injury is higher than the standard of care required where there has only been pure economic loss. In other words, if the surveyor's breach of duty has led to personal injury as opposed to pure economic loss, a Court is more likely to find the surveyor in breach having regard to the applicable standard of care.

VCAT spent considerable time analyzing each of the alleged instances of breach of duty complained of by Lewis against Newey & Associates and Miller. Each one of the allegations failed. Senior Member Davis was at pains to point out that surveyors and inspectors cannot be held responsible for defects that could not have been readily apparent at the time of the inspection or which occurred after the inspection had taken place. Likewise, if building standards subsequently, after inspections have been carried out, classify various building materials as not being suitable for certain types of construction, applicants will not be able to retrospectively allege breach of duty for inspections which pass those building materials. Otherwise, building inspectors would be forever having to issue retrospective demolition notices requiring substantial rebuilding of construction which was considered appropriate at the time.

As already explained, VCAT was not impressed by a defence by the surveyor/inspector based upon an immunity when issuing the Form 14 Occupancy Certificate. The defence was based upon the certificate issued by Miller (building inspector) to Newey & Associates (building surveyor). Senior Member Davis was critical of the form of the certificate which he found to lack sufficient detail and notices as required by the legislation. However, Senior Member Davis noted that the immunity defence was of little real use. The failure to have a properly completed Form 14 did not create a right of action in itself by a building owner against a building surveyor or against a building inspector. The owner must establish traditional negligence or breach of contract.