CITATION: Grasso and Anor v CMG Consulting Engineers

Pty Ltd (No 2) [2011] QCAT 621 PARTIES: Steven Grasso

Diane Grasso v CMG Consulting Engineers Pty Ltd APPLICATION NUMBER: BD330-08 MATTER TYPE: Building matters HEARING DATE: 8, 9 November 2011 HEARD AT: Cairns DECISION OF: Barry Cotterell, Member DELIVERED ON: 7 December 2011 DELIVERED AT: Cairns ORDERS MADE:

1. CMG Consulting Engineers Pty Ltd shall pay Steven Grasso and Diane Grasso the sum of $100,800.00 in satisfaction of their claim by 21 December 2011.

2. CMG Consulting Engineers Pty Ltd shall pay Steven Grasso and Diane Grasso interest at the rate of 9% in the sum of $29,229.24 by 21 December 2011.

3. The parties shall file and serve submissions on the question of costs by 30 January 2012.

CATCHWORDS: Domestic Building – Claim against engineer for

defective design of footings – Site classified as “P” – Footings to be designed in accordance with engineering principles under AS 2870 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR 529 Pullen v Gutteridge, Haskins & Davey Pty Ltd [1993] 1 VR 27

2

APPEARANCES and REPRESENTATION (if any): APPLICANTS: Mr Steven Grasso and Mrs Diane Grasso

represented by Mr Chris Ryall, Counsel

RESPONDENT: CMG Consulting Engineers Pty Ltd represented by Mr Ron Ashton, Counsel

REASONS FOR DECISION Background to the Application [1] Mr and Mrs Grasso (the Grassos) contracted with a builder, Colin

McNaughton, to build them a house at 29 Paul Street, Innisfail. [2] The plans for the house were drawn by Robert Wolff, who engaged CMG

Consulting Engineers Pty Ltd (CMG) to draw and certify the engineering plans.

[3] The subject residence at 29 Paul Street, Innisfail, is a single storey

building. The main section of the house consists of perimeter block work walls supported on a concrete strip footing at close to natural ground, occasional concrete piers internally which support timber bearers which in turn support timber joists and a timber floor. Timber roof trusses span across the short dimension of this rectangular internal space. At the front of the building (facing the river) is a slab on ground patio sitting on a fill platform. There is also a rear double garage (facing the road) constructed on an elevated pad and constructed of a slab on ground supporting block work walls with timber roof trusses.

[4] The Grassos’ home has suffered significant structural damage, the cause

of which is the subject of these proceedings. The damage includes significant cracking to the garage block work wall, less serious cracking to some other perimeter block work walls and damages to finishes within the main building including some cracked tiles, wall to wall separation and wall to ceiling separation.

[5] These proceedings commenced upon the Applicants filing an

'Application – Domestic Building Dispute' in the Commercial and Consumer Tribunal on 10 September 2008.

[6] The Applicants joined four respondents to the proceedings. The

Applicants allege in their Statement of Claim that their residence at Lot 59 Paul Street, Innisfail, was displaying damage that had been caused by failures during construction of the residence by the builder, Mr McNaughton, (the First Respondent), their earthmoving contractors (the Second Respondent), a consulting engineer, CMG, (the Third Respondent) and an architect, Mr Wolff, (the Fourth Respondent).

[7] The Applicants have recently withdrawn their claims against the First,

Second and Fourth Respondents resulting in the proceedings only continuing to hearing against the Third Respondent CMG.

3

[8] While these proceedings were commenced in the Commercial and

Consumer Tribunal, on 1 December 2009 they came within the jurisdiction of the Queensland Civil and Administrative Tribunal when the tribunals were amalgamated.

The Hearing [9] The application was listed for a four-day hearing in Cairns but the hearing

was finalised on 8 and 9 November 2011. [10] At the hearing, both Mr and Mrs Grasso, Alfred Strano, a real estate

agent, George Thirkell, the Grassos’ structural engineer and Michael Ganza, a geotechnical engineer, gave evidence for the Grassos. Charles Gianarakis, the managing director of CMG, and Eric Fox, the Third Respondent’s expert, gave evidence for the Third Respondent. In addition evidence was filed by the Grassos from Peter Santariga, a builder, and by the Third Respondent from Brian Hewett, another builder. The builders were not required to give evidence as the parties advised the Tribunal at the hearing that they had agreed the cost of rectification of the garage, if required, is $100,000. CMG advised that “it did not require Mr Santariga for cross-examination as to the other scenario covered in his evidence”.

[11] The parties prior to the hearing agreed on a statement of agreed facts as

follows:

1. On or about 16 April 1998, the Applicants signed a contract to purchase land at the address "Paul Street, River Park Estate'", Innisfail. The contract was settled on 15 May 1998.

2. In about July 1993r the Applicants met with the fourth respondent regarding the design of a home to be constructed on their land. The fourth respondent subsequently prepared and provided to the applicants a design sketch plan. The Applicants met again with the fourth respondent who produced a revised design sketch plan.

3. At about the same rime, the fourth respondent informed the Applicants that it would be necessary to obtain a geotechnical site report. He recommended Far North Queensland Testing Pty Ltd to do this work. The Applicants engaged Far North Queensland Testing Pty Ltd for that purpose and they received and paid for a report from that company on 4 May 1998.

4. The Applicants provided the fourth respondent with either a copy of the report or the Original.

5. The fourth respondent then supplied to the third respondent a copy of the design sketch plan and a copy of the geotechnical site report and asked Mr Gianarakis of the third respondent to design and certify the foundation system for the proposed residence.

6. Mr Gianarakis prepared the foundations design and provided a draft copy of it to the fourth respondent who incorporated that design into final building approval plans for the residence. Mr Gianarakis checked the foundation design as thus incorporated and gave a written certification dated 10 July 1998 addressed to the Chief

4

Executive Officer Johnstone Shire Council. 7. On 10 July 1998, the third respondent issued an invoice in the

amount of $150. That invoice was paid on 16 July 1998. 8. The Applicants organised the building pad to by constructed by

Innisfail Machinery and Earthmoving Company (IMEC) and it was completed at a cost of $6,930.00 in August 1998.

9. The Applicants engaged Colin McNaughton to build the house and entered into a building contract with him on 7 September 1998.

10. The Applicants moved into the house in April 1999 as soon as it was finished.

11. In approximately 2002 the Applicants noticed cracking on the outside of the northern wall. They contacted Mr McNaughton and asked him to come and have a look. Mr McNaughton attended at the Applicants’ residence about 2-3 months after initial contact.

12. The Applicants then repaired the crack in the garage wall with the assistance of Pedro Kassiotes, a plumber. They used a little jackhammer to hammer out the crack and then re-plastered the area. They then repainted it.

13. The cracking continued. The Applicants again contacted Colin McNaughton.

14.The Applicants made a complaint to the BSA (Kerry Maggs) on 23 November 2006. On 30 November 2006 BSA wrote to the Applicants advising that they could not assist and were not prepared to take any action over it because the house was more than six years old when the complaint was made.

15. On 10 April 2007 the BSA wrote to the Applicants again advising that they were not prepared to take any action because the house was more than six years old when the complaint was made.

[12] The parties also agreed on the following up-dated Joint Issues List:

1. Whether or not CMG owed the applicants a duty of care in designing the original footing. If such a duty was owed, what is its source and content?

2. If a duty was owed: a. what was the standard of care owed; b. whether the original footing was designed by CMG in

compliance with the applicable standard of care; c. whether the original footing design by CMG was consistent

with the reasonable practice of reasonably competent structural engineers.

3. If the original footing design was negligent whether or not the design caused any loss and damage.

4. If so, the extent, if any, of damage to the Applicants' home caused by any breach of duty.

5. The required rectification and the cost of such rectification of that damage.

6. The time the applicants’ cause of action arose and flowing from that, whether that claim is barred by the Limitation of Actions Act 1974.

7. Whether the applicants are entitled to a rectification order against CMG.

5

[13] Following Directions issued by the Tribunal dated 25 June 2010, an Experts’ Conclave had been held in Cairns on 23 August 2010. The experts in attendance at the Conclave were:

For the Applicants: Mr George Thirkell and Mr Michael Ganza; For the First Respondent: Mr Michael Donnan; For Second Respondent: Mr Howard Dickerson; For the Third Respondent: Mr Eric Fox.

[14] The Fourth Respondent's expert, Mr Edwin Helmold, was not required to

attend the Conclave, given his expertise as an architect differed from the other parties' engineering expertise.

[15] On 14 October 2010, the tribunal received a conclave report signed by all

experts save for Mr Thirkell, the expert retained by the Grassos. [16] The conclave report shows a difference of opinion between Messrs Fox

and Thirkell. The Tribunal noted that Mr Fox did not directly answer anything expressed by Mr Thirkell nor did he answer the issues raised by the Grassos.

[17] The Grassos formed the view, with the benefit of the opinions expressed

by the engineers at the conclave, other than Mr Thirkell, and another expert who they engaged after the conclave, that the damage to their house could be satisfactorily repaired without the whole house being rebuilt. Mr Thirkell is of the view that the house needs to be rebuilt.

[18] The Grassos then applied unsuccessfully to the Tribunal to substitute

another expert for Mr Thirkell and in this application some unfavourable comments were made by the Grassos about Mr Thirkell’s solution to the problem. However, the Tribunal’s decision, which was upheld on appeal to the President, resulted in the Grassos having to rely upon the evidence of Mr Thirkell at the hearing.

THE EVIDENCE FOR THE APPLICANTS [19] The Grassos’ evidence as to when the cracks first appeared in the

northern wall of the garage was not precise, given the time that had elapsed, but it was sufficiently clear to identify late 2002 just before or after Christmas as the relevant time. The Grassos contacted Mr McNaughton who assured them that these were just normal cracks and would settle down. The Grassos had them repaired and painted.

[20] When the cracks continued and became wider, the Grassos contacted Mr

Wolff in January 2006. He carried out an inspection and he said that he would refer the matter to CMG. The Grassos did not hear from Mr Wolff for about 12 months and then after numerous phone calls, but everyone in Innisfail was busy due to Cyclone Larry. The Grassos contacted their insurer after Cyclone Larry and were told to contact the Building Services Authority (BSA) by the insurer’s engineer who attended their property. Mr Grasso said that he had never heard of the BSA before then.

6

[21] The Grassos made a complaint to the BSA on 23 November 2006 but the BSA declined to assist them as the house was more than 6 years and 3 months old (the extent of the statutory insurance) when the complaint was made.

[22] In May 2007, Mr Wolff attended the property with Mr Gianarakis from

CMG. According to Mr Grasso, “they said that they had never seen anything like it and had no idea what could be the cause”. They took levels of the house and said they would return in 3 months to see if the house was still moving. Mr Wolff returned in late September 2007 again after numerous phone calls. This time he did not bring the laser level. He again returned in late October 2007 with the laser level but said he could not do the levels as the light was not right. He suggested Mr McNaughton may not have put steel in the garage wall and said that he would return with a metal detector to check this. Mr Wolff did not return despite many calls from the Grassos.

[23] Mr Grasso contacted Mr McNaughton in November 2007 who attended

the property and, after identifying some timber shrinkage under the house, said that he could tighten some bolts under the house and this would reduce the gap between the floor boards and the skirting.

[24] In late 2007 Mr Grasso spoke to his solicitor who advised him that he

should get a report from an engineer which identified the actual cause of the problem and what needed to be done to rectify it. Mr Thirkell from Beachcomber Building Solutions Pty Ltd inspected the house on 6 December 2007. The Grassos received his report dated 28 April 2008 in May 2008.

[25] Mr Thirkell subsequently produced reports dated 28 July 2009,

24 September 2009 and 28 October 2011. He is a Register Practicing Engineer of Queensland with a Bachelor of Engineering (1993) who specialises in the civil field as a Structural Engineer. He said that he has over 15 years experience in structural design including the structural design of residential buildings.

[26] Far North Queensland Testing Pty Ltd (FNQT) had carried out the

required soil test before the construction of the house and provided a report dated 4 May 1998. It was written by Andrew Maddocks, Engineer, but neither party sought any further evidence from him and he was not required to attend the hearing. Its assessment was based on the “excavation of 2 auger test holes, penetrometer tests, compaction testing and limited laboratory testing.” It goes on to state “This report is of limited scope.”

[27] The FNQT Report made the following comments:

1. The level of compaction recorded was 92.5%. 2. Penetrometer testing was carried out over the site. Testing

indicates a consistent degree of compaction in the fill. The site materials were generally stiff.

7

3. A laboratory classification was carried out on a sample of fill from the site. The material has a PI of 24 (LL=54, PL=30) and a linear shrinkage of 10.0%.

[28] Under “ENGINEERING COMMENTS” the Report stated:

“There is estimated to be a high potential for swell shrink movements. The site should be classified as a Class P site according to Australian Standard AS 2870-1996. The problem Classification is provided because of the presence of up to 2400 of uncontrolled fill. The level of compaction required by the Australian Standard is 95% Standard Dry Density. Compaction testing of the adjacent site was carried out at a depth of 1.7m. The level of compaction recorded was 92.5% Standard Dry Density. Penetrometer testing indicates that surface materials are generally stiff. The foundation system should be designed by a Registered Engineer. The design should take account of anticipated settlement within the fill. It may be required to take further laboratorty testing to estoimate the likely amount of settlement and allow design by Engineering Principles. Special treatment wmay also be required under driveways and paved areas. It is suggested that the buildings be provided with full articulation and be jointed at close centres.”

[29] The FNQT Report then goes on tho suggest “An alternative to the design

of the footing system to accommodate the likely settlement…” which alternative was not adopted. However, in this section it does state: “but it should be noted that the fill has a high liquid limit and plasticity index.”

[30] Both parties accept FNQT’s classification of the site as Class P. [31] However, Mr Thirkell and Mr Ganza base their evidence on the FNQT

Engineering Comments about the soil having “a high potential for swell shrink movements”. Mr Fox and Mr Gianarakis disagree with FNQT’s comments and base their evidence on their interpretation of the data contained in the earlier section of the Report set out above.

[32] Mr Thirkell initially thought that the cracking may have been caused by

leaking plumbing under the house but after digging up the plumbing it was concluded that this was not the cause. Robert Donnan, an engineer with ARUP, who were at that stage acting for all four respondents agreed with this conclusion as the plumbing when exposed was in good condition and no sleeves were noted.

[33] Mr Donnan was not called by CMG as he had been replaced as their

expert by Mr Fox. However, he continued to represent Mr McNaughton, and in that capacity, attended the Experts’ Conclave on 23 August 2010.

8

The Tribunal was provided with his reports1 and in the report dated 16 September 2009, when ARUP were still acting on behalf of all respondents including CMG, he made the following observation:

“Assuming that the pad material has a low clay content, which it appears to be, then it will not be greatly affected by moisture changes, however what may be more of an issue is if the red soil filler layer below ever dries out to depth as it could lead to significant ground movements within the red soil filler layer due to its high clay content…”.

Mr Donnan suggested seeking an opinion from a geotechnical engineer in this regard as it was outside his area of expertise. Mr Ganza was later engaged by the Grassos.

[34] Mr Donnan then in relation to the cracking stated:

“The severe cracking to the northern carport wall is probably due to the strip footing below the retaining wall (which is sitting on the red soil fill), settling vertically. This retaining wall separates the higher pad thickness below the carport and the thinner pad thickness below the main house. This retaining wall strip footing seems to be settling differentially, that is, it is settling more at the northern end than its southern end. The settlement of the northern end is in turn dragging down the end of the carport wall which connects to this wall. Although there is a vertical control joint at this location the transfer of vertical force is occurring through the dowelling bond beam above this. The external door very close to this location in the northern carport wall is acting as a weak point in the wall. This is allowing the wall to rotate locally at the top of the door frame and generally fall away from the stiffened bond beam above the section of wall to the street side of the doorway.”

[35] Mr Donnan went on to say:

“The repair of the carport wall will be difficult. If it is underpinned to depth, assuming that the original material below the red soil fill is found and is sound, it may then lead to longer term differential settlement issues if the main house then continues to settle over time and the repaired area does not. Probably more sensibly it should be rebuilt but designed to deal with the expected long term movements i.e. additional reinforcement, particularly around the door and window openings. The doorway may also be able to be relocated to a less critical area.”

[36] Before leaving Mr Doonan’s evidence, the Tribunal noted that at the

Experts’ Conclave on 23 August 2010 he agreed with Mr Fox and the Second Respondent’s engineer that:

1 Section 28(3)(c) of the QCAT states that the Tribunal can inform itself in any way it

considers appropriate and here Mr Donnan’s evidence was relevant and available to the parties and the Tribunal.

9

“The original footing design by CMG was consistent with reasonable practice used by structural engineers at that time.”

Mr Thirkell at the Experts’ Conclave disagreed and said: “The design was not in accordance with AS 2870 or the recommendations contained in the original site classification report.”

[37] Mr Thirkell in his report of 24 September 2009 states as follows:

“1. The northern wall has a high floor level point… … The forces created at the high point are due to highly reactive clays heaving and pushing the foundations upwards. Damage would have been reduced if there was articulation between the North-East wall and the North-West garage wall. Where a built structure is founded on different materials, it is good practice to articulate the structure. The garage footings are founded on 800 mm deep of low plasticity clay fill. The main residence has 450 mm deep of low plasticity clay fill beneath it and the footings are 400 to 450 deep. Therefore the footing is bearing on the sites silty clay and there is no benefit of the low plasticity clay being to the rear of the residence. The recommended depth of low plasticity clay fill was 1000mm (Report: Far North Qld Testing, May 1998).”

[38] Mr Thirkell in his report of 24 September 2009 went on to conclude:

“The damage to the residence as shown on our drawing DR.01 is adjacent to high floor level points identified on the survey drawing by Charles O’Niell Pty Ltd Consulting Surveyors. The high floor levels are due to soil heave. The soil investigation report by Dirt Professionals dated 21 August 2009, Field Density Report, indicates the moisture content to be above optimum moisture content at 600 mm depth at Test Pit 2. This point is 150 mm below the 450mm depth building pad. The site silty clays tested have a high liquid limit of 58% and have an ability to absorb and retain water. A sound foundation is one that has the ability to maintain a constant moisture content. The footings to the main residence are founded on the High liquid limit silty clay. The moisture is being absorbed under the footings and therefore under the main building. This is the reason for the soil under the main building being damp and mouldy. AS 2870 (Australian Standards), Residential Slabs and Footings – Construction recommends 600 mmm deep footings into Class H soils. We have provided an “as built” footing detail and recommended footing detail in accordance with AS 2870 on our drawing DR-01. Subsurface drainage is shown to restrict the ingress of water beneath the footings.

10

The as built footing system does not restrict the ingress of water beneath the footing. The nature of the silty clay being one of a high liquid limit has the ability to swell and move the building upwards. This is evident by the high floor level points surveyed by Charles O’Niell Pty Ltd Consulting Surveyors. The density ratio of the soil tested outside the garage is 94%, 1% below the minimum recommended compaction. The density ratio confirms that settlement of the garage to cause such extensive damage is most unlikely.”

[39] Mr Thirkell concluded his report and recommended rectification as

follows:

“To provide a sound, serviceable building on the rear building site, a new stable foundation must be provided. We recommend re-building the main residence as any repair would not be practical. The garage northern wall is to be removed and re-built and separated with isolation joints to the rear building. Render is to be removed from the north-west wall and the cracks assessed to instruct repair. The lintel supported by the residence wall is to be isolated by cutting and re-supported to the new main residence.”

[40] Mr Ganza is the principal of ETS Geotechnical and has significant civil

engineering qualifications as well as his geotechnical qualifications. He inspected the property on 22 April 2010 and observed the boreholes and dynamic cone penetrometer testing being completed by Construction Soil Test technicians. He commented on each of the boreholes and stated that:

“The boreholes indicated uncontrolled fill to levels of approximately 2.4 meters beneath existing ground surface.”

[41] Mr Ganza, in relation to the subsurface conditions, stated:

“As the imported fill is of unknown strength and there is no density results from the construction of the pad it must be assumed that there is potential for settlement. Based on the Atterberg Limit testing undertaken by Far North Queensland Testing, it is most likely that the layer would exhibit “H” class shrink swell characteristics. That is a highly reactive site with settlement expected in the range of 40 to 70mm.”

[42] Mr Ganza, in relation to the earthworks pad, stated:

“It is understood that no density testing was undertaken on the earthworks pad prior to construction of the subject dwelling. It would be reasonable to expect that a competent building designer and earthworks contractor would be aware of the above standards and testing requirements.”

11

[43] Mr Ganza, in relation to the selection of footings, stated:

“When a site is classified as a problem site, a competent engineer is required to design and certify the footings as AS 2870 does not provide prescriptive solutions for this scenario. It is assumed that CMG Consulting Engineering based their design of footings on the site classification completed by Far North Queensland Testing on the 4th May 2008. The use of high level footings may have been suitable if a stiffen raft system were used or alternatively a bored pier and beam solution may have been chosen. The use of strip footings with an allowable bearing pressure of 100 kPa is considered inappropriate for the subsurface conditions due to the low bearing capacity of the soils.”

[44] Mr Ganza concluded his report as follows:

1) The site classification completed by Far North Queensland Testing Pty Ltd was generally completed in accordance with AS 2870 “Residential Slabs and Footings – Construction”. It identified the site as a problem site with high shrink swell characteristics.

2) The earthworks pad has been constructed without density or strength testing. A competent building designer or earthwork’s contractor should be aware of the relevant Australian Standards and testing requirements for such operations.

3) The selection of high level footing is possible with the use of stiffened raft slab to minimise differential settlement. Alternatively a bored pier and beam system may have been appropriate.

THE EVIDENCE FOR CMG [45] Mr Gianarakis, the managing director of CMG, who graduated as an

engineer in 1978, gave evidence as to his involvement in the design of the footings for the property.

[46] He stated in his statement of 20 December 2010 that he was retained by

Mr Wolff in late June or early July 1998 to design and certify the foundations. Mr Wolff provided him with a copy of Wolff’s concept drawings and a copy of the Report from FNQT dated 4 May 1998. He was not required to physically attend the property.

[47] Mr Gianarakis stated that he:

a. noted that the site had been classified as a “Class P” site according to AS2870, simply due to the presence of uncontrolled fill;

b. noted the field data which accompanied the FNQT Report; c. noted that the subgrade was consistently stiff and hard; and d. noted the plasticity findings and concluded that this was a plastic

site with the potential to shrink and/or swell.

12

[48] At the hearing, Mr Gianarakis enlarged on his statement and stated that he looked at the Code, looked at articulation, the option from FNQT, and considered a stiffened raft (i.e. one single raft for the entire house, garage and patio). He said that he rejected the stiffened raft because it would have added $20 to $25,000 to the cost. Mr Gianarakis obviously considered that a stiffened raft was a suitable alternative design but he rejected it on the basis of extra cost. The Tribunal noted that Mr Gianarakis did not discuss this option with the Grassos.

[49] Mr Gianarakis stated that he considered the site to be “high moderate to

low H” with a high potential for movement. He also said that his design is meant to rotate but he admitted that the photos showed excessive cracking. When he was asked about whether or not he considered a “monolithic slab design” he said he was comfortable with the alternative he had chosen. He had earlier said the design was functioning as it should.

[50] When asked specifically about the comment in bold in the FNQT Report

statement “There is estimated to be a high potential for swell shrink movements” Mr Gianarakis stated that he always looks at the whole report and the Atterbergs and penetrometers because that is what he has always done.

[51] Mr Fox had been engaged by CMG on 9 October 2009 and provided

reports dated 4 November 2009, 14 May 2010 and 29 June 2010. At the hearing, Mr Ashton, counsel for CMG, stated that he would be relying on the report dated 14 May 2010. Mr Fox is a qualified and registered civil engineer and has had considerable involvement with committees responsible for AS 2870 “Residential Slabs and Footings – Construction”.

[52] In his report dated 4 November 2009, Mr Fox made some relevant points

as follows:

“Nothwithstanding the above discussion, in my experience, albeit not in the Innisfail area, soil described as “red/brown grey mottled silky clay” (the filling) and “yellow brown silty clay” (the natural ground) normally would exhibit some significant reactivity.”

[53] Significantly, given his later focus on the Atterberg numbers in the FNQT

Report, in his report dated 4 November 2009, in relation to the Atterberg Limits and LS test conducted by the Dirt Professional in August 2009, he states: “Note that AS 2870 does not recognise these tests as being reliable for assessment of soil reactivity. Rather, AS 2870 recommends the use of the so-called Shrink-swell Test.”

[54] He went on to say in relation to the garage:

“Based on my experience in investigating similar patterns of damage in other house my feeling is that the foundation under the subject wall has heaved due to “wetting” of reactive clay”.

13

[55] With regard to the influence of the footing system he made the following

comments in his report dated 4 November 2009:

“It appears that the damage that is evident in the residence is unrelated to the footing system selection, design and construction. 4.3.1 Garage The design is for a reinforced concrete stiffened raft substructure, which is a common and conventional construction for such residences. Such footings have no capacity to resist ground movement of the type that apparently has happened on the subject site and (t)he movement would have occurred irrespective of whether or not a more heavily stiffened raft had been used.”

[56] With regard to the rectification of the damage, Mr Fox in his report dated

4 November 2009 said:

“There is insufficient information available to enable confident recommendation of rectification that is warranted; however, in my opinion the level of defects is certainly well below that where full or partial demolition is indicated, and underpinning is not warranted, as there is presently no evidence to indicate that subsidence has occurred.”

[57] The Tribunal notes that Mr Fox made all of the above comments before

he had inspected the property. [58] It is apparent from Mr Fox's report of 14 May 2010 that he conducted an

examination into the damage to the house, the site conditions and quality of design to form a view on the adequacy or other wise of the footing design of CMG. He did not directly answer anything that had been expressed by way of opinion on the part of Mr Thirkell and did not directly answer the particular issues raised in the Application in its original form.

[59] In his report dated 14 May 2010, Mr Fox, while again stating that the tests

for Atterberg Limits and Linear Shrinkage are not recommended by AS 2870, goes on to place great emphasis on these tests to draw his conclusions that the soils are in the lowest range of potential swells, are in the lower range of “moderate” expansive nature, and have low potential volume change.

[60] He refers to the FNQT report and says:

“FNQT reported that the site had “high potential for swell shrink movements”; however the basis for this determination is unstated and I note that it conflicts with generally accepted correlations between plasticity and reactivity as (he) described above.”

[61] He went on to say later that the comment was not consistent with the test results (the Atterberg Limits and LS tests) which indicated only relatively low reactivity.

14

[62] The site classification as Class P has been agreed, by all experts who

have been involved, as correct. Therefore, the deemed-to-comply standard designs in accordance with Section 3 of AS 2870 were not applicable and design in accordance with engineering principles was required.

[63] Mr Fox said that:

“With respect to the founding level of footings the designer had the choice between deep founding in the natural ground beneath the filling by means of piers or piles and founding at a higher level in the uncontrolled fill.”

[64] He went on to say:

“The deep founding option was uncertain, as the natural ground that was encountered in FNQT test hole 1 was not significantly stronger that the filling and the location of the site apparently in a flood plain suggested that the strength of the ground would probably not increase appreciably with the practical depth of founding. Further, if the footings were founded on deep piles the expected settlement of the filling would mean that other improvements such as the driveway and paths would settle relative to the house, and if long term consolidation of the natural ground occurred due to weight of the fill platform, which was a distinct possibility, the house would still be vulnerable due to variations in depth of filling.”

[65] The Tribunal noted that this was the first mention of the site being

“apparently in a flood plain” as this would appear to have relevance to the design of the footings. If the site were on a flood plain and FNQT were aware of this from local knowledge or their site inspection, that may explain the reason for their “high potential for swell shrink movement”. This was not further mentioned by either party so speculation by the Tribunal is unwise.

[66] Mr Fox then concluded:

“In my opinion, the decision to found the footings at high level was practical and reasonable, notwithstanding the presence of uncontrolled fill. All of the FNQT investigation and testing results indicated that the fill was consistent and reasonably strong, albeit possibly with compaction slightly lower than desirable. It follows that if settlement did occur it would be expected to be relatively uniform over the area of the house.”

[67] Mr Fox then went on to say:

“The substructure design comprised three separate sections of the footing system, reflecting the different floor finishes required by the building design. Each of these substructure sections comprised in itself a continuous structure with no separate or isolated footing elements,

15

and the three sections were structurally connected to each other. It follows that the overall structure had considerable capacity to “bridge over” any soft spots that were present due to the uncontrolled filling and, in conjunction with the reinforced concrete blockwork perimeter walls, had capacity to accommodate any ground movement due to soil reactivity. The design included vertical control joints in the blockwork (designated “W.C.J.” on the drawings) at the point where the Garage structure connected to the house proper.”

[68] Mr Fox then went on to conclude:

“I conclude that the footing system as designed and certified was reasonable and in accordance with commonly accepted engineering principles. The likelihood of satisfactory performance was consistent with the requirements of AS 2870.”

AS 2870 [69] It is stated in AS 2870 that:

“Footing design and construction involves a number of steps; site classification, selection of the footing system, structural design, construction in accordance with the required design details and construction methods, and proper maintenance.”

[70] The Tribunal finds that CMG was responsible for selection of the footing

system and structural design. It was not responsible for site classification.

[71] Here the classification was carried out by FNQT and it is accepted that it

is a Class P site. A Class P site is defined in AS 2870 as “sites which include soft soils, such as soft clay or silt or loose sands; …reactive sites subject to abnormal moisture conditions or sits which cannot be classified otherwise.”

[72] The Tribunal also noted that, when it comes to the identification of the soil

profile, AS 2870 allows for local knowledge where available to be applied (2.2.2) and in classification by characteristic surface movement for “visual-tactile identification of the soil by an engineer or engineering geologist having appropriate expertise and local experience” (2.2.3(c)).

[73] According to AS 2870:

“The purpose of site investigation is to provide sufficient information to enable a site classification to be made, and to include information on the presence and depth of fill material, natural soil profile, and soil reactivity where required.”

The Tribunal finds that the FNQT report of 4 May 1998 complies with AS 2870.

16

[74] The standard designs for footing systems do not apply to Class P sites which are required by AS 2870 to have footing systems designed using engineering principles. Section 4 of AS 2870 sets out the requirements for a stiffened raft system which supports a superstructure that relies entirely on the footing system or raft stiffness to resist movement and cracking and then addresses the design of shallow footing systems other than stiffened rafts. However, section 4 is not prescriptive of a footing system.

[75] Relevantly at 5.5.2 in relation to Variations in foundation material AS

2870 states:

“If the footing or slab is partly on rock and partly on reactive clay, structural continuity of the entire footing shall be maintained and allowance shall be made for potential movement in the superstructure near the junction of foundation types.”

[76] Here the footings were partly on fill and partly on reactive clay but the

Tribunal assumes that this principle would apply. [77] AS 2870 provides a classification of damage due to foundation

movements and Mr Fox accepts that the cracking in the blockwork at the external corner of the garage was category 3 in accordance with AS 2870. This is referred to as significant damage. Mr Gianarakis did not assign a classification but accepted that at least some of the cracks were “excessive”.

[78] AS 2870 Supplement 1-1996 at page 1 discusses design for swelling and

shrinkage movements and states:

“The reactivity of clay soils cannot be clearly evaluated by tests. In particular, the usual engineering index properties (I.e. liquid and plastic limits and linear shrinkage) on their own may not be reliable”.

[79] It goes on to discuss strip footings and stiffened raft footings and

concludes: “Therefore, for highly reactive sites the alternative of an integral stiffened raft is preferred.”

[80] The AS 2870 Supplement at C7.3 refers to Design for Filled Sites and

provides the following advice:

“The design of a footing system on a filled site may be based on the following: (a) Where the footing is to be founded in the fill, an assessment should

be carried out of the potential settlement and reactive movements of both the fill and the underlying soil.

A slab-on-ground or stiffened raft may be adopted if this assessment indicates the movements are with the limits in Clause 2.1.

Allowance may be required for possible differential movement in accordance with Appendix B.

17

(b) Where the footing system can be founded on natural soil, a pier-and-beam or pier-and-slab deign may be suitable.

(c) Where the fill is shallow, deep strip footings founded on the underlying soil may be suitable.”

[81] At Appendix B2.1 Foundation soils are discussed and it states:

“All soils are affected by water. Silts are weakened by water and some sands can settle if heavily watered, but most problems arise on clay foundations. Clays swell and shrink due to changes in moisture content and the potential amount of the movement is implied in the site classification in this Standard…”

THE LAW [82] The common law of negligence recognizes the existence of the duty to

take reasonable care to avoid a reasonably foreseeable risk of injury to another.

[83] In Bryan v Maloney2, the High Court (Mason CJ, Deane, Toohey and

Gaudron JJ, Brennan J dissenting) decided that the builder of a dwelling house owed a subsequent purchaser, Mrs Maloney, of the house a duty to take reasonable care to avoid the economic loss which the subsequent purchaser suffered as a result of the diminution in value of the house when the fabric of the building cracked because the footings were inadequate.

[84] In Woolcock Street Investments Pty Ltd v CDG Pty Ltd3 the High Court, in

the majority decision, examined the reasoning in Bryan v Maloney and said as follows:

“The joint reasons began by examining the relationship between the appellant (the builder) and the first owner of the house (Mrs Manion). They, of course, were the parties to the contract in performance of which the builder had built the house. That contract was said4 to be "non-detailed and [to contain] no exclusion or limitation of liability". Accordingly, the content of the contract was said not to preclude the existence of a duty of care owed by the builder to Mrs Manion, not only to take reasonable care to avoid injury to her person or property5 but also to avoid "mere economic loss by Mrs Manion of the kind ultimately sustained by Mrs Maloney when the inadequacy of the footings became manifest"6. That was because "the ordinary relationship between a builder of a house and the first owner with respect to that kind of economic loss is characterized by the kind of assumption of responsibility on the one part (i.e. the builder) and known reliance on the other (i.e. the building owner) which commonly

2 Bryan v Maloney (1995) 182 CLR 609.

3 (2004) 216 CLR 515.

4 (1995) 182 CLR 609 at 622.

5 (1995) 182 CLR 609 at 622-3.

6 (1995) 182 CLR 609 at 623.

18

exists in the special categories of case in which a relationship of proximity and a consequent duty of care exists in respect of pure economic loss."7 There was said8 to be nothing to suggest that the relationship between the builder and the first owner was not characterised by such an assumption of responsibility and reliance.”

[85] The words of the High Court apply here. Whether or not there was a

contract between the Grassos and CMG is irrelevant as there was no evidence before the Tribunal of any exclusion or limitation of liability to preclude the existence of a duty of care owed by CMG to the Grassos. The Tribunal finds that CMG had a duty to take reasonable care to avoid injury to the Grassos person or property but also to avoid "mere economic loss by Grassos of the kind ultimately sustained by them if the inadequacy of the footings became manifest".

[86] Here it was foreseeable by the footing designer (CMG) that the design of

inadequate footings was likely to cause economic loss when the inadequacy became manifest. It was also foreseeable that no other causative event would occur between the construction and the sustaining of the economic loss.

[87] In Woolcock9 McHugh J said of the defendant's knowledge of the risk and

its magnitude:

“The case for imposing a duty is always strengthened if the defendant actually knew of the risk. It is strengthened further if the defendant knew the magnitude of the risk. The significance of the defendant's knowledge of the risk of loss and its magnitude will depend on the facts of each case. However, it would be a rare case where those involved in the construction of commercial premises would not be aware of the risks arising from particular defects and their potential magnitude.”

[88] In the present case, the Tribunal finds that CMG were fully aware of the

risk because they had the FNQT Report which stated:

“There is estimated to be a high potential for swell shrink movements. The site should be classified as a Class P site according to Australian Standard AS 2870-1996. The problem Classification is provided because of the presence of up to 2400 of uncontrolled fill. The level of compaction required by the Australian Standard is 95% Standard Dry Density. Compaction testing of the adjacent site was carried out at a depth of 1.7m. The level of compaction recorded was 92.5% Standard Dry Density. Penetrometer testing indicates that surface materials are generally stiff.

7 (1995) 182 CLR 609 at 624.

8 (1995) 182 CLR 609 at 624.

9 (2004) 216 CLR 515.

19

The foundation system should be designed by a Registered Engineer. The design should take account of anticipated settlement within the fill. It may be required to take further laboratory testing to estimate the likely amount of settlement and allow design by Engineering Principles. Special treatment may also be required under driveways and paved areas. It is suggested that the buildings be provided with full articulation and be jointed at close centres.”

[89] The inference is irresistible that, as consulting engineers, CMG were well

aware of the magnitude of the damage that the Grassos would suffer if the risk should eventuate. According to the evidence of Mr Gianarakis at the hearing he made his own assessment based on the figures the FNQT report provided and not on the above FNQT comments. Mr Gianarakis made his own assessment without checking with FNQT to see if an engineering geologist, having appropriate expertise and local experience, had applied local knowledge or used visual-tactile identification of the soil in classification of the likely surface movement. There was also no suggestion by him that he considered “further laboratory testing to estimate the likely amount of settlement”. The Tribunal finds on the basis of this evidence at the hearing that CMG down-graded FNQT’s prediction of “high potential for swell shrink movement” to “high moderate low high” without checking with FNQT.

[90] While Mr Gianarakis did say that he provided articulation and referred to

the Wall Control Joints in this regard, there was no evidence that the building was provided with full articulation and was jointed at close centres. The Tribunal finds this to be evidence of CMG accepting responsibility for the risk identified by FNQT.

[91] Mr Gianarakis, at the hearing, but not in his statement, said that he

considered a (single) stiffened raft but rejected this as it would have added $20-25,000 to the cost. However, it was clear from the evidence that he did not discuss this with the Grassos and give them the option for decision. He simply assumed the risk on their behalf and on CMG’s. He did say that he was comfortable with the design he chose. He was asked under cross-examination if his design was meant to rotate and crack which he acknowledged. He also acknowledged that the photographs taken of the dwelling showed excessive cracking. This cracking is accepted to be category 3 under AS2870 by Mr Fox.

[92] Damages for pure economic loss are not recoverable if all that is shown

is that the defendant's negligence was a cause of the loss and the loss was reasonably foreseeable. However, in Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad"10, the High Court held that there were circumstances in which damages for economic loss were recoverable. In Caltex Oil, cases for recovery of economic loss were seen as being exceptions to a general rule, said to have been established in Cattle v Stockton Waterworks11, that even if the loss was foreseeable, damages are not recoverable for economic loss which was not

10

Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR 529 at 576-578. 11

(1875) LR 10 QB 453.

20

consequential upon injury to person or property. In Caltex Oil, Stephen J isolated a number of "salient features" which combined to constitute a sufficiently close relationship to give rise to a duty of care owed to Caltex for breach of which it might recover its purely economic loss12. Chief among those features was the defendant's knowledge that to damage the pipeline which was damaged was inherently likely to produce economic loss13.

[93] In Woolcock14 the High Court said:

“Since Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" and most notably in Perre v Apand Pty Ltd15, the vulnerability of the plaintiff has emerged as an important requirement in cases where a duty of care to avoid economic loss has been held to have been owed. "Vulnerability", in this context, is not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken. Rather, "vulnerability" is to be understood as a reference to the plaintiff's inability to protect itself from the consequences of a defendant's want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant16. So, in Perre, the plaintiffs could do nothing to protect themselves from the economic consequences to them of the defendant's negligence in sowing a crop which caused the quarantining of the plaintiffs' land. In Hill v Van Erp17, the intended beneficiary depended entirely upon the solicitor performing the client's retainer properly and the beneficiary could do nothing to ensure that this was done. But in Esanda Finance Corporation Ltd v Peat Marwick Hungerfords18, the financier could itself have made inquiries about the financial position of the company to which it was to lend money, rather than depend upon the auditor's certification of the accounts of the company.”

In other cases of pure economic loss (Bryan v Maloney is an example) reference has been made to notions of assumption of responsibility and known reliance.

[94] Here it does not matter which test is applied. CMG assumed the

responsibility and knew, or ought to have known, that the Grassos would rely upon their expertise. The Grassos were vulnerable as they depended entirely upon the CMG design and reasonably could do nothing to ensure that the footings design was adequate.

12

Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR 529 at 576-578. See also Hill v Van Erp (1997) 188 CLR 159 at 233-234; Pyrenees Shire Council v Day (1998) 192 CLR 330 at 389 [168]; Perre v Apand Pty Ltd (1999) 198 CLR 180 at 254 [201] per Gummow J.

13 (1976) 136 CLR 529 at 576.

14 (2004) 216 CLR 515.

15 (1999) 198 CLR 180.

16 Stapleton, "Comparative Economic Loss: Lessons from Case-Law-Focused 'Middle

Theory'", (2002) 50 UCLA Law Review 531 at 558-559. 17

(1997) 188 CLR 159. 18

(1997) 188 CLR 241.

21

[95] In its Amended Defence filed on 13 July 2011, CMG pleaded that the cracking arose prior to 10 September 2002. However, the Tribunal finds that it arose in December 2002. This raises the question of when did the Grassos cause of action arise.

[96] In Pullen v Gutteridge, Haskins & Davey Pty Ltd19, Brooking, Tadgell and

Hayne JJ in their joint judgement referred to the decision in the High Court of Deane J in Hawkins v Clayton20 to conclude that the cause of action only arises when it is actually known that there is a latent defect such as a problem with foundations. In this case the earliest date a cause of action could be said to have arisen was in January 2006. On this basis, the Tribunal finds that the commencement of this application in negligence in September 2008 was well within time and the claim is not barred.

DISCUSSION OF THE EVIDENCE AND THE LAW [97] The Tribunal accepts the evidence of Mr Ganza that the use of high level

footings may have been suitable if a stiffened raft system were used or alternatively a bored pier and beam solution may have been chosen.

[98] The Tribunal also accepts the evidence of Mr Ganza that the use of strip

footings with an allowable bearing pressure of 100 kPa is inappropriate for the subsurface conditions due to the low bearing capacity of the soils. The Tribunal also accepts the evidence of Mr Donnan that:

“This retaining wall strip footing seems to be settling differentially, that is, it is settling more at the northern end than its southern end. The settlement of the northern end is in turn dragging down the end of the carport wall which connects to this wall. Although there is a vertical control joint at this location the transfer of vertical force is occurring through the dowelling bond beam above this.”

[99] The Tribunal also accepts the evidence of Mr Ganza that it is a highly

reactive site with settlement expected in the range of 40 to 70mm. In this regard the Tribunal accepts the evidence from Mr Fox based on the survey results that the garage has heaved by a maximum of 52mm reducing to 10mm at the rear of the garage and zero in the laundry.

[100] The Tribunal notes that Mr Thirkell’s alternative design requires

articulation due to the different foundations. This is in line with the FNQT report. The Tribunal does not have to identify a suitable alternative design but simply be satisfied that the one adopted by CMG was inappropriate for the site.

[101] The Tribunal accepts Mr Fox’s evidence that the ground movement of the

type that has happened on the subject site would have occurred irrespective of whether or not a more heavily stiffened raft had been used. However, the Tribunal is of the opinion that the damage would have been

19

[1993] 1 VR 27. 20

(1988) 164 CLR 539 at 587-8.

22

reduced because the whole slab would have moved instead of the garage slab heaving and hinging where it was joined to the strip footings of the house.

[102] The Tribunal notes Mr Gianarkis’ evidence that the footings are

functioning as designed but that excessive cracking has resulted from the ground movement under the garage. Excessive cracking constituting damage category 3 is not meant to occur under AS 2870.

[103] Based on all of the evidence, the Tribunal finds that the chosen design

was not adequate to minimise differential settlement on this site where the soil has moved as predicted by FNQT. The Tribunal finds that CMG did not comply with all of the requirements of AS 2870 in designing these footings and as a result the design adopted by CMG was not suitable for this site.

[104] The Tribunal finds that the damage that has occurred to the garage has

resulted from that breach of CMG’s duty of care. [105] The Tribunal rejects the evidence of Mr Thirkell that the damage to the

rest of the house arises from the footing design. The Tribunal accepts the evidence of Mr Fox that this damage, which is relatively minor, is as a result of the shrinkage of the timber floor joists and not attributable to CMG.

[106] The parties have agreed on the cost of rectification of the garage at

$100,000. The Tribunal accepts the submission of Mr Ryall, Counsel for the Grassos, based on the evidence of Mr Fox that this work will require the design, supervision and certification of an engineer and accepts Mr Fox’s estimate of this cost at $800.

[107] The Tribunal awards the Applicants the sum of $100,800 in satisfaction of

their claim. [108] The Applicants are also entitled to interest on that sum from the date they

issued proceedings, 10 September 2008, to the date of this order. Mr Ryall has sought interest at 9%. The Tribunal awards interest at the common law rate of 9% resulting in an award of interest of $29,229.24.

[109] The Applicants have claimed costs. The Tribunal should not award costs

without hearing from both parties in view of section 100. The most appropriate order is to order that the parties file and serve submissions on the question of costs by 30 January 2012.

ORDERS [110] The Tribunal orders as follows:

1. CMG Consulting Engineers Pty Ltd shall pay Steven Grasso & Diane Grasso the sum of $100,800.00 in satisfaction of their claim by 21 December 2011.

23

2. CMG Consulting Engineers Pty Ltd shall pay Steven Grasso & Diane Grasso interest at the rate of 9% in the sum of $29,229.24 by 21 December 2011.

3. The parties shall file and serve submissions on the question of costs

by 30 January 2012.