Engineer Negligence and Compensation in Australian Construction Law

Introduction

To begin the research for this case and the argument that follows, one must first examine the case and determine what is essential. It is assumed that the engineer was negligent because he should have known about the circular advising that further structural support would be required for the type of building he was constructing. It is not enough to rely upon twenty years of experience in the field, because situations change in ways that may negate that experience. Thus, this does not appear to be a legitimate argument for the engineer. It could be argued that the engineer was never made aware of the circular and that the negligence lay with whoever filed the document before he had seen it. Unfortunately, this would seem to be immaterial, because it is the engineer's responsibility to stay abreast of important changes within the industry — not that of anyone else. The fact that he had not encountered the contents of the circular within a six-month period is difficult to explain for someone who is well-regarded in his field. It would therefore be difficult for the engineer to find a legitimate excuse for his actions.

Two other facets of the case remain. First, how is the building owner to be compensated for this mistake? Since the engineer performed the work in good faith with the knowledge he possessed, it could be argued that his failure was not one of incompetence and that the entire cost should reside with the owner. However, this argument has already been refuted. Most likely it will be found that the owner of the building should be fully compensated for the cost of reconstruction. Since the current building is completely unusable and another could be constructed on the same site with adequate structural support, the owner should be permitted to have a correctly constructed building built at that site if that is his wish, with all additional costs borne by the engineer. The second issue concerns the amount of compensation. The fact that land has dropped in value should not affect the cost of constructing a new building, and the projected cost of the new building has already been established.

The role of the advisor in this case is to examine legal precedent and determine what the likely outcome of the case will be, then discuss that assessment with the client. This analysis is based on current law and the particulars of the case, taking into account the three separate items identified above as pertinent.

This is the main thrust of the case. Under established case law, it does not matter that the engineer was originally performing the work as a favour for a friend at a reduced rate (Brickhill v Cooke, 1984). What is important to the case is that the two parties had a contract for the building. The engineer agreed to do the work for a lower price as a gesture of goodwill, but the owner would still have expected the work to be completed to a standard that allowed him to conduct business on the premises. The court therefore cannot take into account that the work was performed at a lower price due to the parties' friendship.

Engineer's Culpability

The primary problem is the relative incompetence of the engineer, and there is precedent in Australian courts and legislation that addresses this issue directly. As Chris Lenz (2012) states, "Construction lawyers and their plaintiff clients are confronted with having to identify the likely cause or causes of construction defects. Therefore the onus of determining the cause of the issue is with the lawyer and complainant." In this particular case, all that the lawyer and plaintiff need to do is refer to the circular discussed in the case study. The circular reportedly advised all relevant personnel that a certain type of construction required additional structural support. The case states that the building was unique — meaning it was likely a type the engineer had not constructed before — which should have prompted him to pay even closer attention to any new knowledge available before taking on the job. His failure to do so indicates incompetence in this particular matter.

Whether the engineer had previously managed other successfully completed projects is also immaterial. Because this was a unique construction undertaking, the engineer should have recognised the need to consult recent documentation that would have given him a better understanding of the project. The fact that such a document had actually been sent to his office is deeply problematic: it demonstrates that he conducted no prior research but relied solely on knowledge acquired during previous jobs. The unique nature of this construction did not appear to prompt any effort to seek additional guidance.

The building that the engineer designed failed. The case states that workers could not safely use it, rendering the building condemned. The fact that a new building designed and constructed by an engineer with a "sound reputation" is nonetheless unsafe to occupy strongly suggests that the engineer was incompetent and culpable in this instance.

Relevant precedent also exists for this type of situation. In Carosella v Ginos & Gilbert Pty Ltd (1981), an engineer was held liable for failing to keep his professional knowledge up to date. The critical point in the present case is that the circular — which contained the knowledge necessary to design and construct the project safely — had been sent to the engineer's office six months before the project commenced. This demonstrates that the engineer did not work to keep his knowledge current, and that this failure was a major cause of the building's structural inadequacy. In accordance with Carosella v Ginos & Gilbert Pty Ltd (1981), the engineer can therefore be held liable for the damage caused by his negligence. For further context on professional negligence standards applicable to engineers and other professionals, academic and legal commentary consistently confirms that practitioners have a duty to remain informed of developments in their field.

The owner of the building acted in good faith, relying on his knowledge of his friend's standing as an engineer and expecting that the work would be performed in accordance with best professional practices. Since the owner bore no culpability for the building's failure, he will be compensated in full. In NJF Holdings Pty Ltd v De Pasquale Bros Pty Ltd (2000), the judge found that "the loss is economic where damage consists of a defect in the structure itself arising from inadequate design or building so that the value of the structure is diminished and it may require remediation." This and other precedents establish that, because the engineer designed the building without exercising due diligence to ensure it would perform as intended, the engineer is fully culpable and must make restitution for the building.

The main question the owner is asking is how much he will be compensated. The case sets out several facts that must be examined using established case law. The first is that it will ostensibly cost the owner one million dollars to rebuild the structure to a usable condition. It can be assumed that none of the original building can be salvaged, so construction must begin from the ground up. The case also states that a third party is willing to pay the owner $100,000 for the site and the existing building — presumably for salvage — and that the owner could rebuild for just $600,000 if he moved the project to another site. The engineer's lawyers might therefore argue that the owner can be adequately compensated with $500,000 rather than the full million. This is not correct.

Compensation Type

Hadley v Baxendale (1854) is one of the oldest and most foundational cases dealing with compensation for an injured party. In that case, Hadley sued Baxendale for failing to fulfil a contract, which allegedly caused £300 in lost business. The court awarded Hadley £25, ruling that "the damages were those fairly and reasonably considered to have arisen naturally from the breach itself." This reasoning applies directly to the dispute between the building owner and the engineer.

The question then becomes the proper measure of the damages arising from the breach. It is reasonable for the owner to expect that he would be able to conduct business at the original site — the site of the breach — and that being relocated to a less convenient site would actually cost his company more money in the long run, given the greater distance from his suppliers. The ruling in Hadley v Baxendale holds that the breach itself must be compensated. Since the breach in this case is the building's unusability, it follows — both from reason and from precedent — that the engineer should make restitution in the full amount required to rebuild the structure at the original site. Nothing in the original contract made any allowance for the possibility of constructing the building elsewhere at lower cost. That consideration has no bearing on the case because it is entirely unrelated to the nature of the breach.

Conclusion

Carosella v Ginos & Gilbert Pty Ltd (1981) 27 SASR 515.

Hadley v Baxendale (1854) 9 Exch. 341, 156 Eng. Rep. 145.

Lenz, C. (2012). Guide to identification of construction defects. Retrieved from

NJF Holdings Pty Ltd v De Pasquale Bros Pty Ltd (2000) 16 BCL 116 at 127.