Supreme Court New South Wales

• Medium Neutral Citation: Dymocks v Capral [2013] NSWSC 343
• Hearing dates: 18/02/2013, 19/02/2013, 20/02/2013, 21/02/2013, 22/02/2013, 25/02/2013, 26/02/2013, 27/02/2013, 28/02/2013
• Decision date: 16 April 2013
• Jurisdiction: Equity Division - Technology and Construction List
• Before: McDougall J

Decision

Plaintiff to recover against each defendant $764,545.45 and interest. Cross-claims for contribution and costs to be reserved.

• Catchwords: NEGLIGENCE - Duty of care - pure economic loss - where contract for the provision of services by an architect the content of an architect's duty of care informed by the nature and scope of the retainer - duties in contract and tort co-extensive - plaintiff entitled to select the most advantageous action.; NEGLIGENCE - Duty of care - pure economic loss - where no contract for the provision of services by an architect - factors relevant to establishing existence of duty of care include assumption of responsibility, known reliance and reasonable forseeability of economic loss.; EVIDENCE - witnesses - credibility - deleterious effect of the effluxion of time on the reliability of witness testimony.
• Legislation Cited: Civil Liability Act 2002 (NSW); Trade Practices Act 1974 (Cth)
• Cases Cited: Albion Insurance Company Limited v Government Insurance Office of New South Wales (1969) 121 CLR 342; Associated Midland Corporation Limited v Bank of New South Wales (1984) 51 ALR 641; Astley v Austrust Limited (1999) 197 CLR 1; Barclay v Penberthy (2012) 86 ALJR 1206; Bellgrove v Eldridge (1954) 90 CLR 613; Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; The North Shore Gas Company Limited v The Commissioner of Stamp Duties (NSW) (1940) 63 CLR 52Voli v Inglewood Shire Council (1963) 110 CLR 74; Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; Woolmington v Bronze Lamp Restaurant Pty Ltd [1984] 2 NSWLR 242
• Category: Principal judgment
• Parties: Dymocks Book Arcade Pty Ltd (Plaintiff); Capral Limited (First Defendant); Peter Dalton Architects Pty Ltd (Second Defendant); Stramit Corporation Limited (Formerly KH Stramit Corporation Limited) (First Cross-Defendant to Second Cross-Claim)
• Representation: Counsel: D T Miller SC / D A Hughes (Plaintiff); H J A Neal (First Defendant); I G B Roberts SC / L W F Chan (Second Defendant); I R Pike SC / J J Hutton (First Cross-Defendant to Second Cross-Claim); Solicitors: Norton Rose (Plaintiff); Colin Biggers & Paisley (First Defendant); Kennedys (Second Defendant); Sparke Helmore (First Defendant to Second Cross-Claim)
• File Number(s): 2009/298893

Judgment

1 HIS HONOUR: The plaintiff (Dymocks) is the lessee of land at Grassy Head, on the mid-north coast of New South Wales. There is constructed on that land a residence and associated buildings. The complex comprises a number of discrete structures, referred to as "units", adapted for various purposes.

2 The units, their verandas and connecting walkways are roofed, or covered (in the case of the walkways), by coated corrugated aluminium sheeting. Some idea of the extent of the complex can be gained from the fact that the total covered area is about 2500m².

3 Dymocks says, and it appears to be uncontroversial, that the roof sheetings and fixings are affected by corrosion. There is corrosion in the roof sheets around the screws that are used to fasten them to the underlying mild steel purlins. There is corrosion at the points where the fastening screws enter the purlins. And there is corrosion of and adjacent to the "saddles", by which the retaining force exerted by the screws is applied over a larger area.

4 In these proceedings, Dymocks claims damages, on the basis that all the roof sheeting must be replaced. It sues the first defendant (Capral, the supplier of the coated aluminium sheets that were formed into the corrugated roofing material) on a warranty given by Capral in a deed made on 18 November 1991. And it sues the second defendant (Dalton, the architectural practice that designed the residence and associated works, and prepared the specifications) for alleged negligence in connection with the preparation of the roofing specification.

5 Capral had cross-claimed against Stramit Corporation Pty Ltd (Stramit, the company that formed the coated aluminium sheets supplied by Capral into the corrugated roof sheeting, and supplied the corrugated sheeting to the roofing contractor). That cross-claim was resolved after the conclusion of the hearing, and while judgment was reserved.

6 The parties agreed on the real issues in dispute. However, an understanding of those issues requires more factual detail than I have given so far. Accordingly, before I set out the real issues in dispute, I will state the factual background.

Background

7 The land in question is and at all relevant times has been owned by a company known as Wirrabeena Pty Limited. Wirrabeena owns (and at all material times has owned) the land as trustee for a unit trust. It is not necessary to go into the detail.

8 In the 1980s, Dymocks commenced to use the land for agricultural purposes, developing it as a macadamia nut and mango plantation. At least from the 1989 calendar year, Dymocks made payments to Wirrabeena that were characterised as rent for the land. The lease was formalised on 13 August 1991. Wirrabeena leased the land to Dymocks for a period of 20 years, with an option for renewal for a further 20 years. The starting date for the tenancy thus created was 1 July 1990.

9 The individual standing behind the corporate structures involved is Mr John Forsyth. He is and at all material times has been the chairman of the board of directors of Dymocks. In about 1982, Mr Forsyth and his late wife Mrs Marion Forsyth retained Dalton to design their home at Terrey Hills. Dalton carried out that retainer. The home was built.

10 In the mid or late 1980s, Dymocks retained Dalton to design alterations and additions to Dymocks' premises in George Street, Sydney. The retainer was fulfilled and the works were carried out.

11 Mr Forsyth said that in about 1989, he and his late wife retained Dalton to design the buildings at Grassy Head. Mr Peter Dalton, the principal of Dalton, accepts that he was retained by Mr Forsyth (or by Mr and Mrs Forsyth) to carry out that work. It is uncontentious that Mr and Mrs Forsyth emphasised, as they had done with their residence, that the work was to be done to the highest possible, or "first class", standard; and that Mr Dalton understood this. (As an aside, and to emphasise the significance of this, the construction cost for the Grassy Head buildings, in 1990, was about $3.4 million. Mr Dalton said that, in present day terms and taking into account inflation in construction costs, that would be about $15 million. It is hardly surprising that Mr and Mrs Forsyth wanted the best possible standard of design and workmanship.)

12 At some time in late 1988 or early 1989, Mr Forsyth instructed Dalton to put Dymocks' name on the plans and specifications, as the client. Dalton did so (although with some confusion - in some documents the client, or proprietor, is referred to as "Dymocks Pty Limited"; and in others, by its then correct title).

13 The Grassy Head property is located less than 100 metres from a surf beach. It is common ground between the parties that, in that particular environment, there was a significant risk of corrosion, because of the constantly moist and salty atmosphere. Further, the area is apparently subject to violent weather events. The roof was required to be designed so as to withstand a category 1 cyclone.

14 Mr Dalton said that he consulted an engineer, Mr Jack Davies, in relation to the roof fixing system. Mr Davies is said to have recommended the use of a proprietary "Buildex" screw and fastening system. The screw was a self tapping stainless steel screw. It was to pass through the aluminium sheeting and into holes predrilled into the mild steel purlins that supported the roof. The design load required the restraining force exerted by the screw to be spread across a greater area of the roof sheeting than that immediately in contact with the head of the screw (or screw and washer). That was to be achieved by the use of a coated mild steel saddle. As the name suggests, a saddle is a piece of metal through which the screw passes and which extends out beyond the shank of the screw, and rests on the roof sheeting. Since the screw was intended to (and did) pass through the crest of the corrugations, the saddle would in effect sit over the crest and down the slope on each side of the screw.

15 There was to be a washer between the underside of the head of the screw and the upper side of the saddle. That would prevent direct contact between the head of the screw and the saddle. There was to be another washer below the saddle and above the roof sheeting. The lower washer would serve two functions. First, it would prevent contact between the saddle and the roof sheeting (the act of tightening the screw would of course force the roof saddle downwards). Secondly, it would cover the hole in the aluminium sheeting, and thus minimise the entry of moisture from above into that hole.

16 Because the screws were inserted through the crest of the corrugations, there was no direct contact between the roof sheeting and the mild steel purlins at the points of affixation. However, the valleys of the roof sheeting would come into contact with the purlins.

17 The specification required the roof sheeting to be coated on each side with a material known as polyvinyl difluoride, commonly referred to as PVF2, to a thickness of 25 microns above and below. The specification also required the saddles to be coated with zincalume, and then dipped in PVF2 to achieve a thickness (of PVF2) of 25 microns all around.

18 At some stage, it was discovered that the roof sheeting that had been installed, and that was awaiting installation, was defective because the underside was coated with PVF2 to a thickness of 10 microns only.

19 Dalton rejected the sheeting, and required compliance with the specification. There is no doubt that, as administrator of the building contract, Dalton was entitled to act in this way. Not unnaturally, the rejection of such a large and expensive amount of roof sheeting caused consternation to the roofing contractor, the builder, the supplier (Stramit) and the supplier to Stramit (Capral). It appears to be the case that Capral had arranged for the aluminium sheeting produced by it to be coated with PVF2. By oversight on the part of Capral, the PVF2 coating was deficient in the manner that I have described.

20 The dispute was resolved by execution of the deed of 18 November 1991. The parties to the deed were Dymocks, the builder (Adco), the roofing contractor (Bayline), Capral and Stramit. It will be necessary to go in more detail to the terms of the deed. It is sufficient to note at present that:

(1) on the conditions set out in the deed, Dymocks would accept installation of the non-compliant roof sheeting;

(2) by cl 3(a), Stramit undertook the obligation to make regular inspections of the installation of the roof sheeting;

(3) by cl 3(b), on completion of the installation work in accordance with the specification and Stramit's installation procedures, Stramit was required to issue a certificate that the roof sheeting had been so installed; and

(4) the issue of that certificate triggered a warranty given by Capral to Dymocks pursuant to cl 2(a) of the deed, whereby among other things Capral warranted that the roof sheeting would be free from perforation due to corrosion for a period of 40 years.

The real issues in dispute

21 I now set out the real issues in dispute, as agreed by the parties. Because the cross-claim between Capral and Stramit has been resolved, I have deleted the issues relating only to that cross-claim.

Dymocks and Capral

1. In respect of the deed dated 18 November 1991:

(a) whether it was a condition precedent to the issue of a valid certificate for the purpose of clause 2(a) that the Uninstalled Specified Sheeting was installed in accordance, either strictly or materially, with the Specification and Stramit's installation procedures;

(b) if 'yes', whether the Uninstalled Specified Sheeting was so installed;

(c) whether Stramit issued a clause 3(b) certificate;

(d) whether Capral is liable to Dymocks under the Warranty contained in clause 2(a) of the Deed?

2. The extent of 'perforation by corrosion' on the roof sheeting of the dwelling.

3. If Capral is liable under the warranty, the quantum of such liability.

Dymocks and Dalton

4. Whether Dalton was engaged by Dymocks?

5. Whether Dalton owed Dymocks a tortious duty of care, and if so the content of that duty of care?

6. Whether Dalton breached its duty of care to Dymocks?

7. If so, the quantum of damage that Dymocks has sustained (including, whether it has an interest in the subject dwelling so as to give rise to any loss or damage in tort)?

8. Whether Dalton engaged in misleading or deceptive conduct in contravention of section 52 of the Trade Practices Act 1974 (Cth)?

9. If so, whether Dymocks sustained damage by that conduct, and in what amount.

10. Whether Dymock's claims against Dalton are apportionable claims under Pt 4 of the Civil Liability Act 2002 (NSW), and if so, how Dalton's liability to Dymocks should be adjusted accordingly?

11. Whether Dymocks' claims against Dalton are statue-barred?

...

Capral and Dalton

15. If Capral is liable to Dymocks under the warranty, whether it is entitled to contribution from Dalton?

The witnesses; assessment of credibility

22 In Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541, McHugh J commented at 551 and following on the impact of delay on, among other things, the quality of evidence. His Honour said (in quotations from cases, the citations to which I will omit) that delay causes the quality of justice to deteriorate, among other things because "what has been forgotten can rarely be shown". His Honour pointed out, again at 551, that evidence may disappear, and the very fact that it once existed may be lost. Again, his Honour said, the passage of time will often diminish the significance of what is remembered. Thus, his Honour concluded:

A verdict may appear well based on the evidence given in the proceeding, but, if the tribunal of fact had all the evidence concerning the matter, an opposite result may have ensued. The longer the delay in commencing proceedings, the more likely it is that the case will be decided on less evidence than was available to the parties at the time that the cause of action arose.

23 His Honour's words have particular application to these proceedings. The relevant events happened more than 20 years ago. Evidence has been lost. In part, that is because documents were destroyed before the proceedings were commenced, and at a time when there was no reason to think that proceedings might be commenced. The quality of recollection of the principal witnesses of fact who were cross-examined has been markedly impaired, and (it seemed to me) what purported to be recollection more often represented reconstruction based on perceptions of what, in the present view of the witness, must or should have happened at the time. Finally, the testimony of a key witness, Dr Greig Wallwork, has been lost because, it is common ground, Dr Wallwork's state of health does not permit him to give evidence.

24 In this case, more than in most, an assessment of what is likely to have happened at the relevant time must depend on what remains of the contemporaneous documentary record and on the probabilities as, objectively, they might now be assessed. But even the latter exercise is impaired, and its utility diminished, because of the passage of time and the loss of important evidentiary material.

25 One simple point makes this clear. There was an issue on the "pleadings" whether, at the time the design (including in particular the specification for the works) was prepared, Dalton was retained by Mr Forsyth or by Dymocks. In the ordinary way, one would expect a formal matter such as a contract of retainer to be proved by the tender of the contract. A contract had been prepared (according to Mr Dalton) but had been lost.

26 Alternatively, one might have regard to invoices: in particular, by whom they were prepared, to whom they were addressed and by whom they were paid (see the observations of Gibbs J in Associated Midland Corporation Limited v Bank of New South Wales (1984) 51 ALR 641 at 643-644. Those documents too have been destroyed or lost.

27 With those observations in mind, I turn to the witnesses of fact.

28 Dymocks called a number of witnesses of fact. Only two of those witnesses were cross-examined: Mr Forsyth, and his brother Mr Andrew Forsyth. For convenience, I will continue to refer to the former as "Mr Forsyth", and to the latter as "Mr Andrew Forsyth".

29 I do think that the quality of Mr Forsyth's evidence was significantly affected by the passage of time. To some extent, I think, his testimony was the product of reconstruction rather than actual recollection. To that extent, it is inevitable that, even in the absence of dishonesty (and I emphasise that I regarded Mr Forsyth as an honest witness who sought to give truthful evidence to the best of his ability), the reconstruction is likely to accord with Mr Forsyth's present view of what should have happened, rather than, perhaps, with what did happen.

30 Nonetheless, there were significant aspects of Mr Forsyth's evidence which were either:

(1) not directly challenged (or in some instances, not challenged at all); and

(2) in other cases, consistent with contemporaneous documents or what seem to me to be the probabilities, objectively ascertained.

31 On balance, and repeating that in my view Mr Forsyth sought to give truthful evidence to the best of his ability, I accept his evidence, so far as it goes, with the obvious limitation flowing from the deleterious impact of the passage of time.

32 Mr Andrew Forsyth is (and at the time was) a solicitor, and a non-executive director of Dymocks. He impressed me, as his brother had done, as a careful and conscientious witness who sought, to the best of his ability, to give truthful evidence.

33 In many cases, Mr Andrew Dymock's evidence was anchored to contemporaneous documents. Accordingly, the deleterious impact of the passage of time was perhaps less marked in his case than it was in his brother's.

34 As I have indicated, the other witnesses of fact whose affidavits were read for Dymocks were not required for cross-examination. It follows that I accept their evidence, so far as it goes.

35 The only (non-documentary) evidence adduced by Capral was expert evidence.

36 Dalton called its principal, Mr Peter Dalton, to give evidence of fact. I have to say that I had significant concern with aspects of Mr Dalton's evidence. Although Mr Dalton's principal statement had been prepared over a period of some 12 months (interrupted, I acknowledge, by significant episodes of ill health), it was a marked feature of his oral evidence that he claimed to recollect, with a degree of precision, events and conversations that had received, at most, only scanty and generalised attention in his statement (or supplementary statement). This applies, in particular, to Mr Dalton's cross-examination on the question of his alleged reliance on advice received from a corrosion expert, Dr Wallwork.

37 I do accept of course that the passage of time has had the inevitable effect of diminishing Mr Dalton's power of recollection. I take into account, also, that as part of Dalton's routine procedures, contemporaneous documents that might have been of great assistance in refreshing Mr Dalton's recollection were destroyed. But making allowance as best I can for those matters, nonetheless I did not find the controversial aspects of Mr Dalton's evidence persuasive.

38 To my mind, Mr Dalton had a marked tendency to reconstruct events in a manner that was favourable to his defence of the allegations made against him. It is of particular concern that, as I have observed, this tendency manifested itself in cross-examination: that is, well after Mr Dalton had been given an ample opportunity to consider and respond (in his statements) to the case against him.

39 Part of the reason for the delay in the production of Mr Dalton's principal witness statement (leaving aside his ill health) was that, before it had been finalised, the evidence of Dymocks' architectural expert, Mr Sarlos, was served. Understandably, Mr Dalton took the opportunity to consider and respond to the criticisms that Mr Sarlos had made.

40 Even if the detailed review of events and documents had not provoked Mr Dalton's memory before his evidence was committed to paper, one would have expected his review of Mr Sarlos' statement to do so. But Mr Dalton said in cross-examination that his recollection of crucial events improved still further in the witness box.

41 Whilst I do not think that Mr Dalton sought in any way consciously to mislead the court, I do have very significant concerns at the reliability of his testimony. That is significant, in particular, in relation to Mr Dalton's evidence of his reliance on experts.

42 Although it is now not significant, I record that Stramit's only evidence was documentary and expert.

43 There was a significant body of expert evidence. To my mind, each of the experts understood, and did his best to perform, his duty to the court. To the extent that there remain differences between the experts, those differences are to be resolved by analysis of the underlying facts and the logic of what they say, not by reference to any consideration of credibility in the more general sense.

Issue 1: the warranty

44 The parties' submissions ranged widely over the deed. Hence, in setting out what were said to be the relevant provisions, I shall err on the side of inclusion rather than exclusion:

A. A contract was entered into between Dymocks and Adco ("the Head Contract") pursuant to which Adco agreed to construct for Dymocks a building at Grassy Heads in the said State ("the Project").

B. The Head Contract included a specification ("the Specification") pursuant to which Adco was to supply and install on the roof of the Project roof sheeting coated with polyvinyl di-fluoride to a thickness on both sides of the sheeting of 25 microns ("the Specified Sheeting").

C. A contract was entered into between Adco and Bayline numbered 201670 pursuant to which Bayline agreed to supply and install the Specified Sheeting ("the Sub-Contract").

D. A contract was entered into between Bayline and Stramit pursuant to which Stramit to rollform and supply the Specified Sheeting ("the Supply Contract").

E. A contract was entered into between Stramit and Alcan pursuant to which Alcan agreed to supply the roofing for the Project.

F. Pursuant to the contracts referred to in Recitals A, C, D and E hereof, some sheeting has been supplied to the Project ("the Unspecified Sheeting").

G. Some of the Unspecified Sheeting has been installed on the roof of the Project as shown on the plan attached hereto and marked with the letter "A" ("the Installed Sheeting") and some has not been installed ("the Uninstalled Sheeting").

H. Adco has agreed in accordance with the Head Contract to install Specified Sheeting on the balance of the roof of the Project ("the Uninstalled Specified Sheeting").

I. Dymocks has alleged that the Unspecified Sheeting does not comply with the Specification ("the Dispute").

J. Bayline has removed from the Project the Uninstalled sheeting and returned it to Stramit.

K. The parties hereto have agreed to settle the dispute subject to the terms and conditions contained herein.

...

2. Dymocks and Alcan agree one with the other as follows:

(a) subject to Stramit providing the certificate pursuant to clause 3(b)hereof. Alcan warrants the Installed Sheeting and the Uninstalled Specified Sheeting for a period of forty (40) years from the date of the installation of the Uninstalled Specified Sheeting against perforation due to corrosion;

(b) Alcan warrants the integrity of the polyvinyl di-fluoride paint film on the Installed Sheeting against peeling, flaking or blistering for a period of ten (10) years;

(c) the warranties contained in sub-clauses (a) and (b) of this clause shall not apply in respect of perforation or corrosion caused by any incident occurring after the Installed Sheeting and the Uninstalled Specified Sheeting have been installed or failure to follow recommended maintenance procedures as set out in sub-clause (h) of this clause on failure to inform Alcan:

(i) in respect of perforation, within 14 days or

(ii) in respect of corrosion, within sixty (60) days of the existence thereof becoming known to the then owner of the Project or, in the case of a corporate owner thereof, of a director of such corporate owner. Alcan shall bear the burden of providing that the warranties contained in sub-clauses (a) and (b) of this clause do not apply by reason of this sub-clause (c);

(d) the warranties contained within sub-clauses (a) and (b) of this clause apply only in respect of:

(i) the cost of removal of the corroded and/or deteriorated portion of the roof and its replacement and the supply of new roofing material painted on each side with 25 microns of polyvinyl di-fluoride paint film or its equivalent. Alcan shall, at its option pay such costs or arrange at its cost for the work to be carried out;

(ii) damage to roof structure, ceilings and insulation resulting from such perforation which is not covered by household and contents insurance policies taken out by the party having the benefit of this warranty;

...

(h) any party having the benefit of the warranties contained within sub-clauses (a) and (b) of this clause shall maintain, clean and protect the Installed Sheeting and the Uninstalled Specified Sheeting in accordance with the procedure outlined in this sub-clause. Regular hosing down of the underside of the exposed exterior surfaces with potable fresh water is required for maintenance of the Alcan paint finish. This should be done at least three times each year to remove deposited salt; cobwebs; mildew and other airborne pollutants. Particular care should be taken to prevent any accumulation of salt crystals or industrial dirt. Care must also be taken to ensure that no alteration or addition to the Project occurs with the Installed Sheeting and the Uninstalled Specified Sheeting that no water is permitted to splash onto the Installed Sheeting and the Uninstalled Specified Sheeting from copper bearing, iron bearing or lead bearing materials and that no water (other than direct rain, potable tap water or sea water) discharges onto the Installed Sheeting and the Uninstalled Specified Sheeting.

3 Stramit agrees with Dymocks, Adco, Bayline and Alcan, jointly and severally, that:

(a) every two weeks, commencing on 22 November 1991 and ending on the date when it certifies in accordance with sub-clause (b) of this clause, it shall certify to Bayline that the installation of such of the Uninstalled Specified Sheeting as has then been installed has or has not been carried out in accordance with the Specification and Stramit's installation procedures;

(b) within twenty one (21) days after installation of the Uninstalled Specified Sheeting in accordance with the Specification and Stramit's installation procedures it shall certify to Alcan that the installation of the Installed Sheeting and the Uninstalled Specified Sheeting has been carried out in accordance with the Specification and Stramit's installation procedures; and

(c) it shall not unreasonably withhold issuing the certificate pursuant to sub-clause (b) of this clause, and in that regard the only ground for Stramit not providing that certificate is the failure of the Uninstalled Specified Sheeting to be installed in accordance with the Specification and Stramit's installation procedures.

4. Adco agrees with Dymocks that, if Stramit does not so certify within twenty one (21) days as is referred to in clause 3(b) hereof, it will refund to Dymocks all payments made by Dymocks to Adco in respect of the purchase and installation of the Installed Sheeting and the Uninstalled Specified Sheeting and that, in default of such payment, Dymocks shall be entitled to deduct that amount from payments which might otherwise be due to Adco pursuant to the Head Contract.

5. Notwithstanding clause 4 hereof. Adco agrees with Dymocks that Dymocks shall not be obliged to pay to Adco in respect of the purchase and installation of the Installed Sheeting and the Uninstalled Specified Sheeting more than 75 per cent of the cost of the purchase and installation of the Installed Sheeting and the Uninstalled Specified Sheeting until the certificate referred to in clause 3(b) hereof has been provided but this clause shall not affect Adco's entitlement to be paid and Dymock's obligation to pay Adco 100 per cent of the progress claims it submits in relation to the cost of the purchase and installation of the Installed Sheeting and the Uninstalled Specified Sheeting until such claims and payments have reached 75 per cent of the cost of the purchase and installation of the Installed Sheeting and the Uninstalled Specified Sheeting.

6. Bayline warrants to Dymocks, Adco and Alcan jointly and severally, that it has installed the Installed Sheeting and agrees that it will install the Uninstalled Specified Sheeting in accordance with the Specification and Stramit's installation procedures.

7. Stramit agrees with Dymocks, Adco and Bayline, jointly and severally, that it shall return to the Project at no cost the Uninstalled Sheeting it removed from the project and which is identified in the Schedule annexed hereto and marked with the letter "B".

8. Adco agrees with Dymocks that it will procure the Uninstalled Specified Sheeting to be delivered to the Project and installed on the remaining part of the roof of the Project which has not, as at the date of this Deed, been sheeted.

9. Stramit agrees with Dymocks, Adco, Bayline and Alcan, jointly and severally, that it shall supply to Dymocks the warranty referred to in clause 8.9 of the Specification.

10. Adco and Dymocks agree one with the other that the Contract Sum in the Head Contract is to be reduced by the sum of $20,000.00.

11. Dymocks hereby releases Adco, Bayline (subject to the warranty contained in clause 6 hereof), Stramit and Alcan, jointly and severally, from all claims, causes of action, demands, actions, costs, suits or proceedings of whatsoever nature arising out of the fact that the Installed Sheeting and the Uninstalled Sheeting did not comply with the Specification including breach of contract, negligence, tort, breach of statute (as far as the law permits), at law, in equity or otherwise which Dymocks either before or after the execution of this Deed had or may have had against any of the parties having the benefit of this release provided that this release does not apply to any liquidated damages which Dymocks may be able to claim against Adco pursuant to the Head Contract.

[Clauses 12 to 15 contained the like releases given by, respectively, ADCO, Bayline, Stramit and Alcan to the other parties to the deed.]

...

16. The parties hereto agree one with the others, jointly and severally, that the terms of this Deed are not, except to auditors or holding companies of any of the parties hereto, to be disclosed and are to remain confidential except where any party requires legal advice in relation to the terms hereof or seeks to enforce any or all of the terms of this Deed.

45 As recital G contemplated, there was attached to the deed a plan showing where the "Installed Sheeting" had been placed. In broad terms, that plan showed that the Installed Sheeting had been placed over the verandas to the bedroom unit, on the roof (or part of the roof) of the living unit and on the verandas, or parts of the verandas, adjacent to it. Thus, only a relatively small amount of roof sheeting had been installed as at 18 November 1991.

First sub-issue: the proper construction of cl 2(a)

46 The background against which cl 2(a) operates may be stated succinctly (and in doing so, I do not wish it to be thought that I am having regard to the factual matrix for any impermissible purpose). The background appears, in the main, in the recitals.

47 Capral had supplied the coated aluminium sheeting to Stramit. Stramit had formed the sheeting into the lengths of corrugated material that were to be installed. Bayline had installed some of the sheeting thus formed. The sheeting did not comply with the specification. Dalton had rejected it.

48 There can be little doubt that Dymocks was entitled to insist on performance of the contract. This would mean, among other things, that the Installed Sheeting must be removed, and sheeting that complied with the specification installed. It is clear that this would have caused considerable delay, to the disadvantage of everyone, and financial cost to everyone except, perhaps, Dymocks.

49 The solution was that the Installed Sheeting could be left where it was, sheeting conforming with the specification should be installed over the remainder of the project, and Dymocks could keep the non-compliant sheeting that had not been installed. (The purpose of this last aspect of the bargain is obscure, but there is no need to give it any further attention.)

50 Dymocks took, in exchange for acceptance of the non-compliant sheeting, a 40 year warranty from Capral extending not only to the Installed (non-compliant) Sheeting but also to the sheeting (compliant) yet to be installed. Thus, Dymocks gained a right which it did not have under the contract. By cl 8.9 of the specification, the only warranty that it would get from a party external to the building contract was a 10 year warranty from Stramit.

51 The other parties were relieved of the no doubt severe consequences that would otherwise have flowed from the installation of non-compliant sheeting. The price paid by Capral was the warranty.

52 There are a number of points about the warranty that are not contentious. First, it does not commence to operate until the introductory condition, defined by the words "subject to Stramit providing the certificate pursuant to cl 3(b) hereof", is satisfied.

53 Secondly, once the warranty commences to operate, it will be activated by the appearance of "perforation due to corrosion". It is not necessary that the corrosion be due to some defect in either the Installed Sheeting or the Uninstalled Specified Sheeting.

54 Thirdly, the warranty will not operate, in the event that defects are discovered in the Installed Sheeting or the Uninstalled Specified Sheeting, unless and until those defects manifest themselves (if they do) in perforation due to corrosion.

55 Finally, for present purposes, the content of the warranty - that is to say, the nature of the obligation cast on Capral in the event that the warranty attaches - is spelled out by cl 2(d).

56 Two questions divided the parties (Dymocks on the one hand and Capral and Stramit on the other). The first was the meaning to be attributed to the prefatory condition, upon satisfaction of which the warranty commences. The second was the proper construction to be given to (or perhaps, the application in fact of) the words "perforation due to corrosion".

"... subject to Stramit providing the certificate pursuant to cl 3(b) hereof..."

57 The essential point was whether the words "pursuant to cl 3(b) hereof" indicated that the certificate was to be not just one issued under or by the authority of cl 3(b), but one issued following the process described in the initial words of cl 3(b) - that is to say, completion in fact of "installation... in accordance with the Specification and Stramit's installation procedures".

58 Counsel's submissions were detailed and helpful. I intend no disrespect by the brief summary that follows.

59 Mr Miller of Senior Counsel, who appeared with Mr Hughes of Counsel for Dymocks, submitted that all that was required was the issue of a certificate that in terms certified to Capral "that the installation... has been carried out in accordance with the Specification and Stramit's installation procedures". If the certificate so certified, Mr Miller submitted, its issue satisfied the condition precedent to commencement of the cl 2(a) warranty.

60 Mr Miller submitted that, viewed objectively, the parties could not have intended their rights and obligations to depend on the question of whether, in fact, before the certificate (or purported certificate) had been issued, the roof sheeting had been installed "in accordance with the Specification and Stramit's installation procedures". If this were so, Mr Miller submitted, then, bearing in mind that the warranty endured for a period of 40 years, the parties might be required to investigate, many years after the work had been done, whether or not there were defects in the installation.

61 Mr Neal of Counsel, who appeared for Capral, submitted that it was apparent from the doubled use of the descriptive phrase "in accordance with the Specification and Stramit's installation procedures" - in particular, the first use of that phrase - that the parties, objectively, intended that Stramit should not certify until completion of installation in the manner thus described. Mr Neal pointed out that, under cl 3(a), Stramit was required to undertake regular fortnightly inspections and certifications. The deed assigned no such role to Capral, and Capral undertook no such obligation. Mr Neal submitted that it was inherently improbable that Capral would have agreed to give a warranty lasting 40 years in circumstances where it must have been obvious that "perforation due to corrosion" might result from, or be facilitated by, defective installation of the roof sheeting.

62 Mr Pike of Senior Counsel, who appeared with Mr Hutton of Counsel for Stramit, took a position consistent with Mr Neal's.

63 Mr Miller and Mr Neal each pointed to what he said were inconvenient, absurd or uncommercial aspects of the construction adopted by the other.

64 In addition, Mr Miller and Mr Neal made reference to other provisions of the deed. They included cl 3(c) (which limited the grounds on which Stramit might refuse to certify), cls 4 and 5 (which took effect upon, or had effect by reference to, the issue of the certificate) and cls 6 to 10 (which operated independently of the issue of the certificate).

65 Clearly enough, the intention of the parties, apparent from the words of the deed itself (including, of course, the recitals), was that the dispute in relation to the installation of roof sheeting that did not comply with the specification should be resolved on the term of the deed. Dymocks' position, and its contractual rights, were clear. It was entitled to insist that, at no cost to itself, the non-compliant sheeting be removed and the walkways and roofs be constructed with compliant sheeting.

66 It is also clear that all parties involved (by which I mean, for present purposes, the parties to the deed) understood the importance of compliance with the specification. They must have known that the environment was one likely to promote damage by corrosion. They must have known that the specification, insofar as it dealt with the roofing, had been drafted to prevent or minimise corrosion. Specifically, they must have understood the importance, in that regard, of the specified thickness of the PVF2 coating.

67 It is also I think important to note that Dymocks relied on others for assurance as to the compliance of the work and materials with the requirements of the specification. Dymocks had no expertise in the areas of architecture, engineering or building. By contrast, Stramit (in particular) had expertise in relation to the roofing material. The deed itself makes clear that there were "installation procedures" that Stramit published or suggested should be followed. (The evidence suggests that such procedures as there were, were not contained in any written form, but that does not seem to me to matter. What does matter is that the parties recognised that Stramit's installation procedures - whatever they might be and wherever they might be found - were to be followed.)

68 In the circumstances, I think it unlikely, looking at the matter objectively, that Dymocks would have given up the rights that it had - the strength of its position - in exchange for a warranty, the attachment of which would depend not on the objective fact of certification but, rather, on whether or not the certification was, in point of fact, correct. Such a construction would mean that Dymocks might be required to prove, 20 or 30 years after the event of installation, that what had been done was (put shortly) properly done. As the facts of this case show, and as the parties must have understood had they turned their minds to the point, that exercise would become more difficult with the passage of time.

69 Further, I think, the other parties to the deed, and specifically Capral, viewed objectively, must have understood that Dymocks wanted certainty. To my mind, it is unlikely that the parties would have thought that Dymocks was giving up undeniable present rights, not in exchange for an enforceable warranty but, rather, in exchange for a warranty, of which not just the enforceability but the very existence would be contestable if in the future (over 40 years) it were called upon.

70 Those considerations to my mind favour the construction propounded by Dymocks.

71 It is significant that Stramit was to undertake the role of inspection and certification. Such evidence as there is suggests (and presumably, at the time, the parties knew) that it was Capral, not Stramit, that was responsible for the defective coating. Capral manufactured the sheeting. It sent it to a third party to be coated. Apparently, it was usual for sheeting to be coated to a thickness to 25 microns on the top and 10 microns on the bottom. Capral appears to have overlooked to specify that the sheeting was required to be coated to 25 microns thickness on each side. The coated sheeting was delivered to Stramit in circumstances where it could not be expected that Stramit would inspect or check the coating for itself.

72 Thus, although Stramit might have had legal liability for the defective sheeting, it had no part in the creation of the defect. But regardless of this, Stramit had an interest in seeing that the sheeting was installed in accordance with the specification and its own procedures. That is because, as cl 8.9 of the specification required, and as was done by cl 9 of the deed, Stramit warranted the sheeting for a period of 10 years. It is clear, and the parties must have understood, that defects in the installation of the sheeting might promote its deterioration in such a way as to render Stramit liable under that warranty.

73 The effect of cl 3(a) is that Stramit was agreed by the parties to be the entity responsible for inspecting the installation of the roof sheeting on a regular basis (it could hardly certify in accordance with cl 3(a) if it did not carry out regular inspections), with a view to ensuring that the installation did in fact proceed in accordance with the specification and Stramit's procedures. Clause 3(a) required certification one way or the other: no doubt, so that any non-compliant installation work could be redone before completion of the roofing.

74 By reason of that obligation, and by reason of its own expertise, Stramit was well qualified to provide the requisite certification. This applies not only to cl 3(a), but also to cl 3(b). Further, and as I have noted, it had a very real commercial interest in ensuring that the installation work was done properly. The parties seem to have accepted, in those circumstances, that Stramit was an appropriate certifier.

75 Those considerations suggest, further, that what the parties were looking to, as the trigger for those obligations in the deed that depended on certification under cl 3(b), was the fact of certification. That certification was to follow the process of installation, and was to state whether or not the relevant procedures had been followed. That highlights a significant point: that the certification was as to installation of the roof sheeting (both that which had been installed before the deed was made and that which was installed thereafter).

76 It is convenient at this point to set out cl 8.6 of the specification:

Corrugated Aluminium Roofing

Supply and install K H Stramit corrugated profile, Alcan 0.9mm thick marine grade 5251 H 36 aluminium roofing, coated both sides with polyvinyl di-fluoride (PVF2) to a thickness of 25 microns, approved colour - off white.

Roof sheeting is to be fixed with Buildex Taptite Austentic premium grade 316 hardened stainless steel roofing screws with EPDM cyclone zincalume seals. Seals are to be dipped in polyvinyl di-fluoride to match roofing.

All side laps are to be double corrugated lapped.

End laps are to be 200mm.

77 The reference to "EPDM cyclone zincalume seals" is difficult to follow. It is common ground that it was the saddles that were to be coated with zincalume and dipped in PVF2, and that those saddles would be manufactured from mild steel sheeting. EPDM is a form of rubber: ethylene propylene diene monomer. I think that what has happened is that the specification effectively misquoted or elided the description of the fixing mechanism. According to the supplier, Buildex, the EPDM seals were the washers, or cups, that were used to separate the head of the stainless steel screw from the saddle, and to separate the underside of the saddle from the roof sheeting (and, in the latter case, supposedly to provide a watertight seal as well). Regardless of this confusion, it was common ground that this part of the specification described (except for the screws) the fasteners that were in fact installed.

78 Clause 8.8 of the specification is also of some significance, and I set it out:

Roof Inspections by KH Stramit

Arrange inspection of the finished roof by K H Stramit and provide certificate of inspection by K H Stramit stating compliance with the manufacturer's specification for installation of the roof.

79 It is clear from cl 8.8 that the idea (apparent in cls 3(a), (b) of the deed) that Stramit would inspect and certify was not novel.

80 To my mind, the determining factor, in the question of construction, is the issue of certainty. I think that the parties' intention, viewed objectively, was to fix their rights and liabilities, on completion of the installation of the roof sheeting, by reference to a certificate that Stramit was required to issue. The only reason that Stramit could refuse to issue the certificate was that the fact to be certified did not exist. Thus, it was certain that, once the roof work was completed properly, the certificate would issue.

81 These considerations suggest that the (uncontestable) fact of certification was the relevant event - the trigger for commencement of (among other things) the cl 2(a) warranty - not the (contestable) existence of the fact certified.

82 I do not think that the intention of the parties, regarded objectively, was to make their rights and liabilities depend not on the fact of issue of the certificate but, rather, on proof in fact of the state of affairs certified.

83 I do accept, as Mr Neal submitted, that there are difficulties in adopting this approach. The first is that it makes it difficult to attribute meaning and purpose to the words "in accordance with the Specification and Stramit's installation procedures" where they first appear in cl 3(b). However, where what is to be certified is the existence of that state of affairs, as perceived by the certifier (this is I think made clear by cl 3(c)), then the words qualify and give meaning to the concept of "after installation". They define the time at which, or by reference to which, the certificate is to be issued. In this context, the parties must have known that, in the ordinary way, the building contract provided for a concept of practical completion subject to minor defects, and provided for a defects liability period.

84 The next difficulty arises from the contrasting language of cls 2(a), 4 and 5. The first refers to "the certificate pursuant to 3(b) hereof". The second refers to certification "as is referred to in cl 3(b) hereof". The third refers to "the certificate referred to in cl 3(b) hereof".

85 On analysis, however, I think that the distinction is more apparent then real. Each phrase seeks to call up the certificate that Stramit is to issue under cl 3(b). Thus, regardless of the language used, each calls up the concept of a certificate to be issued within 21 days "after installation... in accordance with the Specification and Stramit's installation procedures". If, as Mr Neal submitted, those words prescribe a condition that must be satisfied in fact before an effective certificate can be issued, then they do so for the purposes of cls 4 and 5 as well as for cl 2(a).

86 In my view, the proper construction of cl 2(a) is that Dymocks and Capral agreed that the warranty given by Capral would commence to operate when Stramit issued a certificate answering the description given in cl 3(b). That description requires that the certificate should:

... certify to [Capral] that the installation of the Installed Sheeting and the Uninstalled Specified Sheeting has been carried out in accordance with the Specification and Stramit's installation procedures...

87 I do not think that cl 2(a) of the deed on its proper construction embodies, as an additional requirement of commencement of operation of the warranty, the existence in fact, at or shortly before the certificate was issued, of the state of affairs certified.

88 For those reasons, I think that a "certificate pursuant to cl 3(b) hereof" means "a certificate answering the description given in cl 3(b) hereof": that is to say, a certificate that states that installation has been carried out in accordance with the specified procedures. It does not require examination of the underlying state of affairs.

Strict or material compliance?

89 It is thus strictly speaking unnecessary to consider a subordinate issue of construction. If it were the case that, to be effective to trigger the warranty, the state of affairs certified should exist in fact as well as be certified to exist, a question would arise as to whether existence in fact of that state of affairs should be absolute, or in some way qualified (for example, by some notion of substantial compliance, or material compliance, with the relevant standards). Mr Miller argued, in the alternative, for the concept of substantial or material compliance. Mr Neal submitted that what was required was strict compliance.

90 Mr Neal did accept that, even on his approach of strict compliance, there must be allowed some room for "de minimis" non-compliance. To take an obvious example: there were approximately seven thousand fasteners holding down the roof sheeting over the whole complex. The specification required the use of Buildex Taptite Austenitic marine grade 316 hardened stainless steel roofing screws. In fact, either the majority or at least a very substantial number of the screws used were grade 304 stainless steel. The experts agreed that this had no impact one way or another on the occurrence and extent of galvanic corrosion.

91 Mr Neal accepted that if one screw, out of the seven thousand, were grade 304 rather than grade 316, this could not amount to non-compliance, so as to justify the withholding of the certificate or to prevent inception or attachment of the cl 2(a) warranty. He accepted, further, that it would be a question of fact and degree as to where non-compliance would pass from being "de minimis" to being contractually significant.

92 To my mind, the intention of the parties, regarded objectively, was that the requisite standard of compliance should be "material". Thus, viewed negatively, non-compliance would be immaterial if it had no impact on the life or durability or serviceability of the roof: specifically, its susceptibility to perforation due to corrosion.

93 From Capral's perspective, compliance with the requisite standards was important because it might be expected that non-compliance would enhance the risk of perforation due to corrosion. On that basis, non-compliance which could not have any impact on susceptibility to corrosion would be immaterial to the purpose for which the certificate was required. For example, the use of a saddle which was in fact stronger than the specified saddle, and coated more durably so as to make it less susceptible to the risk of corrosion, would be a non-compliance with the specification; but it would not be a non-compliance that could affect the inception of the cl 2(a) warranty.

94 Thus, if it were necessary to assess the extent of non-compliance, the assessment should take into account at least two things. The first is a point that I have suggested already: namely, that the certification was directed to the process of installation of the roof sheeting. Thus, it focused attention on whether the roof sheeting had been laid in the manner required by the specification (as to overlapping, direction of joints and the like) and as to the materials used in the fastening system and the way in which the fastening system was in fact installed. Other matters relating to the roof but not relating to the process of installation (by way of example only, the thickness of the sheeting or its coatings) do not form part of the installation process that was to be inspected and certified.

95 The second point is that to the extent that defects in the process of installation have been ascertained, their materiality, having regard to the purposes intended to be served by certification and to the impact of certification on Capral's cl 2(a), warranty, would require careful examination.

96 In this context, I think (as again I have suggested already) that it is necessary to bear in mind the understanding to be attributed to the parties in relation to the concept of practical completion and the existence of a defects liability period. Clearly enough, they must have understood that some defects in the process of installation might be tolerated, at least for the purpose of cl 3(b) as well as the purposes of the building contract.

Second sub-issue: alleged defects in installation

97 Mr Neal referred to what he said were numerous defects in relation to the roofing work. However, many of those defects, whilst undoubtedly they relate to the roofing trade overall, do not relate to the method or process of installation of the aluminium roof sheeting (compare the point made at [94] above).

98 One aspect of non-compliance, which undoubtedly relates to the process of installation, was the widespread use of grade 304 stainless steel screws rather than the specified grade 316. As I have noted, the corrosion experts agreed that this departure from the specification was not relevant to the occurrence of corrosion. The mechanism of galvanic corrosion which they identified was as likely to happen with the specified grade 316 screws as with the unspecified grade 304 screws. At most, the use of the grade 304 screws would have some impact on the long term serviceability of the roof: and that was not the subject of any warranty given by Capral.

99 Accordingly, whilst I accept that the use of the grade 304 screws was a departure from the specification, I think that for the purposes of the warranty it was not a material departure.

100 Another matter to which Mr Neal referred was the presence of scratches on some ten (I think it was) identified panels of roof sheeting. There is no doubt that those scratched sheets existed. Nor is there any doubt that each certificate given (to jump ahead for a moment, there were two certificates, and what I am about to say relates to each of them) was given before those scratches had been rectified. The clerk of works (a Mr Peter Saravanos) reported those to Dalton and Dalton required the scratches to be rectified. Presumably, they were.

101 Those scratches, to the extent that they existed, seem to me to fall within the concept of minor defects which would not prevent practical completion, and which would in the ordinary way be rectified over the defects liability period (if in fact they were not rectified more promptly). But regardless, there is no evidence that the scratches increased the susceptibility of the aluminium roof sheeting to corrosion. On the contrary, as I understand the evidence of the experts, it was their view that aluminium in its natural state oxidises quickly on exposure to the atmosphere, and that the oxidised surface itself protects against the risk of atmospheric corrosion.

102 Again as I understand the evidence, the scratches might be relevant to corrosion:

(1) if they were in an area where dissimilar metals were in contact: in this case, the risk of galvanic corrosion would be increased; or

(2) if they were in an area that was covered over in some way so as to increase the risk of what was called crevice corrosion.

103 There is no evidence that the scratches were located so as to promote either form of corrosion, or to increase the susceptibility of the roof sheeting to those forms of corrosion.

104 I have referred above to the subject of Stramit's obligations of inspection and certification. Even assuming (and I do not decide) that those obligations required Stramit's attention, and rectification, before a certificate could issue under cl 3(b), they do not seem to me to have any relevance to Capral's cl 2(a) warranty. That is because they have not been shown to be relevant to the question of corrosion.

105 The other defects in the roofing works identified by Mr Neal were even more remote from that which Stramit was required to inspect and certify (matters such as suggested defects in the flashings, the presence of drill swarf and other undesirable substances on the roof, and the like). I do not propose to go through them one by one.

106 If, contrary to my view, Capral's warranty depends, or arises only, on existence of the state of affairs certified, and if (as I think is the case) what is required is material compliance, I conclude that such non-compliance as has been shown is immaterial. Thus, if it were necessary to do so, I would conclude that Capral's obligations under cl 2(a) are not affected or negated by such defects as have been shown in the installation of the roof sheeting.

Third sub-issue: issue of the certificate

107 Stramit issued a certificate on 18 June 1992. It was headed "certificate of installation of roofing". Leaving aside formal parts, Stramit certified:

"... that the installation of the Installed Sheeting and the Uninstalled Specified Sheeting, each as defined in the Deed [which was referred to earlier in the certificate], has been carried out in accordance with the Specification, as defined in the said Deed and in accordance with its own installation procedures."

108 The certificate was given under the hand of Stramit's general manager, Mr John Quinn. It was sent by letter to Adco and to Alcan. By some means, it came into the hands of Dalton.

109 Dalton purported to reject the certificate. It asserted, correctly that installation of the sheeting had not been carried out in accordance with the relevant requirements, because the specified screws had not been used. Dalton noted further, although not given as a reason of rejection, that the certificate had not been issued under seal.

110 Dalton had no power to reject (or for that matter to accept) the certificate. It was not a party to the deed. There was no requirement for the certificate to be given to it. There was no requirement for Dalton to verify what was stated in the certificate. Thus, the purported rejection has no effect in terms of operation of the deed.

111 If, as I think is the case, it is the fact of issue of the certificate, in or to the effect of the formula contained in cl 3(b), that causes the commencement of Capral's warranty obligation, the ineffective "rejection" of that certificate by Dalton has no impact on the position as between Dymocks and Capral.

112 Mr Neal submitted that Dalton was acting as Dymocks' agent. There is no doubt that, under the building contract, Dalton was for some purposes the agent of Dymocks. But in relation to the certificate and its purported rejection, Dalton was not exercising any function under the building contract. Thus, Dalton's rejection could not be regarded as an exercise of the agency given to it by that contract.

113 Mr Dalton said in evidence that he had been instructed by Mr Andrew Forsyth to issue the rejection letter in the terms that Dalton did.

114 That evidence, as to the direction said to have been given by Mr Andrew Forsyth, did not appear in either of Mr Dalton's statements. It came out only in cross-examination, in the course of his attempting to explain how it was that he could have written and issued the letter in question when (as he had said was the case) he had not seen the deed. In the circumstances in which the evidence was given, Mr Andrew Forsyth (who had been called as a witness in Dymocks' case) had no opportunity to answer it.

115 I do not accept that aspect of Mr Dalton's evidence. The letter in question was always factually important in the case. I would have expected Mr Dalton to turn his mind to it in the course of preparing his affidavits. I do not regard as in any way persuasive or convincing the way in which the evidence was given. Rather, I think, it was an attempt to explain what was otherwise inexplicable: namely, how Mr Dalton could have written the letter in question if (as he said was the case) he did not have a copy of the deed.

116 Mr Miller criticised Mr Dalton for what Mr Miller submitted was Mr Dalton's propensity to "remember" conversations in the course of, so as (according to Mr Miller) to avoid difficulties in, cross-examination. Although I do not accept that the propensity went so far as Mr Miller submitted, I do regard this as an aspect or manifestation of that propensity.

117 Were it necessary to do so, I would conclude that Mr Dalton had obtained and considered a copy of the deed or its relevant provisions. I do not think that cl 16 of the deed would have prevented disclosure to Mr Dalton, if (for example) Dymocks needed his advice in connection with the possible enforcement of its rights under the deed. Clearly enough, those rights included completion of the roofing in accordance with the specification and, where relevant, Stramit's procedures.

118 Mr Neal noted that the letter had been copied to both Mr Forsyth and Mr Andrew Forsyth, as well as to the clerk of works Mr Saravanos. He noted, further, that so far as the documentary record showed, Dymocks had not sought to countermand or otherwise qualify what was said in the letter. So far as the evidence goes, that is correct - although, bearing in mind the circumstances referred to at [23] above, that may not be significant. This may well be a case either where relevant evidence has been lost or where the present significance of something was not apparent at the time.

119 Be all that as it may, I do not regard the silence of Dymocks (assuming for the moment that the letter came to the attention of and was considered by either of the Messrs Forsyth at the time) to amount to some form of ratification.

120 I do not think that Dymocks is bound by the terms of the letter.

121 Mr Neal accepted that Stramit had issued a further certificate. The circumstances in which that occur can be shortly stated. On 30 July 1992, Adco wrote to Stramit advising that "the roof on the above project is now complete and ready for inspection as required by the deed". The letter continued:

Upon satisfactory inspection could you please issue the Certificate required under the Deed in the same form as the Certificate enclosed with your letter dated 18 June 1992 (under signature of Mr John Quinn).

122 That letter was copied to, among others, Mr Dalton.

123 Stramit has produced an extract from its seal register for the period 22 January 1990 to 21 December 1994 (the page that was produced is far less extensive in date range). Item 359 in that register, bearing date 21 August 1992, is:

"CERTIFICATE OF INSTALLATION OF ROOFING executed by the COMPANY to [Capral] that the installation of the Installed Sheeting and the Uninstalled Specified Sheeting has been carried out in accordance with Stramit's installation procedures."

124 No one has been able to produce a copy of the certificate so issued. Having regard to the passage of time and (in particular in Dalton's case) the routine destruction of records, that is hardly surprising.

125 By the time of final submissions at least, the real issue was not whether a certificate had been issued (everyone appeared to accept that it had) but, rather, whether it was a certificate that conformed to the requirements of cl 3(b). Specifically, the issue was whether the certificate stated (as its predecessor had done) that installation had been carried out in accordance with the specification as well as Stramit's procedures.

126 Mr Neal and Mr Pike pointed to the wording of the seal register. They noted that although the wording appeared to follow cl 3(b) to some extent, it omitted the words "the Specification and" before the words "Stramit's installation procedures". Thus, whilst accepting that the seal registrar proved the issue of some form of certificate, they submitted that it did not prove the issue of a certificate in the requisite terms.

127 Mr Miller submitted that, having regard to the terms of the letter of 30 July 1992, and the obvious inference that the certificate was issued in response to that letter, the likelihood was that (as the letter had requested) the second certificate was "in the same form as" the prior certificate.

128 Further, Mr Miller pointed to a letter of 2 September 1992 from Dalton to Adco (copied to, among others, Capral and Stramit). The heading to that letter was:

8711 DYMOCKS COMPLEX - STRAMIT CERTIFICATE & ALCAN CONFIRMATION OF WARRANTY CONTAINED IN CLAUSE 2(A) OF DEED IS OPERABLE

129 The first paragraph of that letter read:

I acknowledge receipt of a copy of Certificate of Installation of Roofing issued by Stramit Industries.

130 The letter made no complaint as to any formal inadequacy in the wording of the certificate. Mr Dalton explained that by saying that he had not been given a copy of the deed, and thus was not aware of the precise wording required. Mr Neal and Mr Pike relied on this aspect of Mr Dalton's evidence.

131 For the reasons that I have given, I think it likely that Mr Dalton did have a copy of the deed. Having observed Mr Dalton at length in the witness box, I do not accept that, if he had had a copy of the deed, he would not have checked the certificate against it. I do not accept that, if Mr Dalton thought that the wording of the certificate fell short of what was required, he would not have referred to this. On the contrary, it appears from the heading of the letter that Mr Dalton thought that the certificate was of a kind required to make Capral's warranty "operable".

132 Further, I think that if Mr Andrew Forsyth in particular had regarded the wording as the certificate as defective, he would have required a fresh certificate to be issued. Mr Andrew Forsyth impressed me as a careful, capable and conscientious solicitor (and witness). I do not think that he would have let such a defect slip by without remark: particularly having regard to the contractual significance of a certificate in the correct form.

133 It may be, of course, that Mr Andrew Forsyth did not receive a copy of the second certificate. But it is clear that Mr Dalton did. And it is equally clear that Mr Dalton's practice was to provide copies of everything that he regarded of significance to his client, including in many cases to both the Messrs Forsyth.

134 There was no evidence from Stramit as to:

(1) the way in which entries were made in its seal register back in 1992;

(2) whether there was some practice that the entries should describe fully and accurately the documents executed under seal, or whether the description should simply be sufficient to enable some understanding of what it was that had been so executed;

(3) how the second certificate came to be prepared. In the absence of direct evidence, I would infer that Mr Quinn prepared it and submitted it to the board (or to the company's secretary) for execution under seal. If Mr Quinn had prepared it then, one would think, it was likely to have been "in the same form as" the earlier certificate which he had signed; or

(4) who it was made the summary recorded in the seal registrar. Presumably, that was the responsibility of the company's secretary. It is at least conceivable that such a person, reading the certificate, might have regarded its significant aspect as being certification of compliance with Stramit's own procedures.

135 There may be other points of speculation. But to my mind, the key points are that Stramit must be taken to have known what it was required to certify; the certificate was issued in response to a request for a certificate in the same form as the first certificate; and there was no evidence of protest or demur on the grounds of some formal defect in the second certificate. I conclude, on the balance of probabilities, that the second certificate was in the same form as its predecessor.

136 Thus, were it necessary to do so, I would conclude that Stramit did issue, under seal and in the correct form, and on about 21 August 1992, a certificate of the kind required by cl 3(b).

Is Capral liable under its warranty?

137 It follows from what I have said that in my view that this question should be answered "yes".

Issue 2: the extent of perforation by corrosion

Perforation due to corrosion

138 The starting point is: what did Dymocks and Capral mean by "perforation due to corrosion"?

139 The method of installation of the roof sheeting necessarily involved that it would be comprehensively "perforated". The installation of each self tapping screw would cut a hole (if it had not already been drilled) in the sheeting through which it passed, through the underlying EPDM seal into the mild steel purlin.

140 Understanding and resolution of the debate between the parties, as to the meaning of the phrase "perforation due to corrosion", require a little background. The corrosion experts agreed that in many places the roof sheeting had been corroded at the points where the stainless steel screws passed through it. In some cases, that corrosion took the form of enlargement of the holes made by or for the self tapping screws. Thus, the diameter of the holes became larger (in an irregular fashion) as the aluminium sheeting was eaten away by corrosion.

141 The experts also agreed that corrosion occurred in the form of "satellite holes". As the name suggests, that refers to holes made through the aluminium sheeting (undoubtedly by corrosion) adjacent to the screw holes (whether as drilled or as enlarged). In time, the experts said, it was likely that the satellite holes would increase in size and, eventually, meet up with the hole through which the screw passed (either as drilled or as enlarged by corrosion), thus enlarging still further the size of the hole.

142 In substance, the experts agreed, those processes would occur under and within the overall diameter of the EPDM washers.

143 Mr Neal submitted that the expression "perforation due to corrosion" required that there be some perforation separate and distinct from the perforation in any event caused by the process of installation. Mr Miller submitted that any corrosion which caused the roof sheeting to perforate was sufficient.

144 No one suggested that the word "perforation" had some special or technical meaning, in the context in which it appears.

145 It is convenient to refer to some definitions of "perforation". The Macquarie Dictionary (online) gives the following:

(1) a hole, or one of a number of holes, bored or punched through something... .

(2) a hole made or passing through a thing.

(3) the act of perforating.

(4) the state of being perforated.

146 The Oxford English Dictionary (online) gives similar, although more extensive, definitions including relevantly:

The action of perforating; ... the fact or condition of being perforated.

147 The same sources define the verb "perforate" as:

(1) Macquarie Dictionary:

(1) to make a hole or holes through by boring, punching, or other process.

(2) To pierce through or to the interior of; penetrate.

(2) Oxford English Dictionary:

to make a hole or holes right through; to pierce...

148 The warranty given was a warranty against "perforation due to corrosion". The parties must have known that the material being warranted would be perforated in any event by the process of affixation.

149 It seems to me to be entirely artificial to say that corrosion which penetrates right through the metal at the point of perforation, and thus increases the aperture of the perforation, does not fall within the ambit of the warranty. The corrosion is penetrating and consuming the aluminium roof sheeting. The fact that it does so by enlarging an existing perforation rather than by creating a fresh perforation does not seem to me to be significant. The warranty is directed to the roof sheeting as installed. Corrosion which perforates the roof sheeting is the subject of the warranty. The parties must have known that one of the possible areas of corrosion was the point at which each of the stainless steel fastening screws passed though the aluminium roof sheeting.

150 In any event, as the expert evidence shows, there are in many cases separate perforations due to corrosion: the satellite holes. Even if it be correct to say that corrosion which, whilst it penetrates right through the roof sheeting, does no more than enlarge the existing perforation made by the self tapping screws is not caught by the warranty (and I do not agree with that view), nonetheless the satellite holes cannot be so characterised.

151 The fact that, as the satellite holes expand, they may further enlarge the original perforation cannot change this.

152 In my view, there is perforation by corrosion:

(1) simply because corrosion penetrates through the metal at the circumference of the holes made by the self tapping screws, and enlarges those holes; and

(2) because satellite holes develop adjacent to, but are not initially linked up to, the holes in question (either as made or as enlarged).

The extent of corrosion

153 The corrosion experts agreed in substance that the coverings to the verandas and walkways were substantially corroded, and that they required replacement. They differed, however, as to the extent and significance of corrosion in the roofs over the main buildings.

154 That difference of opinion may seem surprising, given that the same construction materials were used throughout, and that the same primary corrosion mechanism - galvanic corrosion - might be expected to occur. But there is a significant difference between the verandas and walkways on the one hand, and the roofs over the main buildings on the other .

155 The verandas and walkways were constructed so that, on the underside, they were open to the elements. Thus, among other things, each point where the screw passed through the aluminium sheeting was exposed, as was each point where the screw penetrated the purlin.

156 By contrast, the underside of the roof sheeting over the main buildings was not exposed. Immediately underneath the sheeting, sarking had been installed. The ceiling comprised plasterboard lined on its upper side with aluminium. Insulating material was placed on top of the ceiling - that is to say, between the upper side of the ceiling and the underside of the sarking. In those circumstances, although there was some capacity for air and thus moisture to penetrate (because the ceiling spaces were not hermetically enclosed or sealed), salt laden moisture could not pass freely around the underside, as well as the upper side, of the main roofs.

157 For galvanic corrosion to occur, two things are necessary. One is that "dissimilar metals" should be in contact (the nature of the contact requires a little explanation). The other is the presence of an electrolyte. It was common ground between the corrosion experts that moisture deposited from the salt laden atmosphere in which the complex was built would provide an ideal electrolyte, and that aluminium and stainless steel were dissimilar metals (as were stainless steel and mild steel).

158 Where an electrolyte is present, galvanic corrosion will occur where dissimilar metals are in physical contact. But it may also occur where there is no direct physical contact, provided that the gap is "bridged" by the electrolyte. Thus, even if there were no direct contact between (for example) the shank of the fixing screw and the aluminium sheeting, galvanic corrosion could occur if the gap between the two were bridged by salt laden moisture.

159 Because the verandas and walkways were much more exposed to the salt laden atmosphere than the roofs over the main buildings, they were much more susceptible to galvanic corrosion.

160 Professor Young, the corrosion expert retained by Dymocks, gave evidence that in his view galvanic corrosion was likely to be widespread over all the main buildings that were roofed with aluminium sheeting.

161 It is convenient to note, at this point, that one of the main buildings - the guest unit - was not roofed with aluminium. It was also common ground that there was a shed on the property which was constructed of corrugated aluminium. That does not form any part of Dymocks' claim. To the extent hereafter that I speak of "main buildings" or the roofs over them, I exclude those two buildings, and what I say should be so read.

162 Professor Young has been to the property on a number of occasions. On one of his visits, he sought to make a systematic inspection of the main roofs. He attempted to remove fasteners with a view to ascertaining whether corrosion, and in his view perforation by corrosion, had occurred. In some cases, he was able to remove the fasteners. In most cases where he did, he observed evidence of corrosion.

163 However, from time to time, Professor Young encountered significant resistance when he attempted to remove a fastener. It was common ground between the corrosion experts that the likely reason was that the fastening screw had rusted into the metal purlin. Where Professor Young encountered abnormal resistance, he abandoned his attempt to remove the fastener, because of the risk that the head of the screw might be torn off. The other experts who attempted to remove screws for inspection took a similar approach.

164 Professor Young, whilst acknowledging that his sampling on the main roofs was small, nonetheless concluded that there was a "significant frequency" of corrosion. The other experts who inspected the main roofs, Mr Salome and Dr Sussex, saw no visible evidence of corrosion on the main roof. Nor did Mr Plaister.

165 Mr Plaister was not a corrosion expert, but it was accepted that the qualifications and experience that he possessed as (among other things) a builder qualified him to express an opinion on the existence of corrosion.

166 I do not regard the differences in observation as significant. No expert sought to replicate, nor for that matter monitored, inspection undertaken by another. (Mr Salome did work with Mr Plaister, but that does not affect the point.) Nor was it suggested that the observations made by any of them were incorrect.

167 Professor Young expressed the opinion that, given the observed corrosion mechanisms (both galvanic corrosion and crevice corrosion), and given that the conditions for both existed across the main roofs as well as across the walkways and verandas, it was likely that corrosion had occurred in the main roofs and would continue to occur, to the point where the whole of the main roofs would become unserviceable.

168 The other experts would not go so far. They relied, among other things, on the fact that although the main roofs had been erected for over 20 years and must have been corroding over that time, there was no evidence that water was leaking through into the rooms below. But, for so long as the EPDM washers covered the hole (whether enlarged by corrosion or not), and remained in contact with the uncorroded roof sheeting, one might expect them to keep moisture out of the roof cavity. In this context, I note again that the screws are affixed through the crests of the roof sheeting, so that rain would drain down into the valleys as it fell.

169 That however is not the end of the matter. Each of the main buildings (for clarity, excluding the guest unit but including the garages and the caretaker's unit) was flanked on at least two sides by verandas or walkways. Where there were verandas adjacent to main buildings, the verandas were covered in the way that I have described: aluminium sheeting laid over and affixed to the purlins, but open to the elements beneath. The unchallenged evidence of Mr Drakakis, a building expert called by Dymocks, was that in every such case the main roof sheeting overlapped the veranda sheeting for some distance (to provide a continuous surface that would deflect water away from those walking below).

170 Mr Drakakis said, further, that where this overlap occurred, the outer ends of the roof sheeting were affixed to the underlying (exposed) purlins by fasteners passing through both the main roof sheeting and the underlying veranda sheeting.

171 It was common ground that each main roof was constructed with lengths of aluminium sheeting long enough to pass, on one end, over the veranda sheeting in the way that I have described, up and over the dome of the roof and, on the other side of the building, again over the veranda sheeting in the way that I have described. No doubt, there were several sheets laid in this fashion over each of the main buildings, but that is not the point; there is no issue as to the overlapping detail. The significance is that not all the penetrations through the main roof sheeting are into purlins at points protected, on the underside, in the way that I have described at [156] above. On the contrary, at the outer ends of each of the main roof sheets, the undersides of the sheets are more exposed to the elements, and thus more susceptible to galvanic corrosion.

172 I should add that Mr Plaister did not disagree with this aspect of the observations made by Mr Drakakis.

173 Professor Young estimated that some 60% of the veranda and walkway coverings were affected by corrosion. It may be that the other experts were not prepared to go so far, but as I have said they agree that all those sheetings must be replaced.

174 It seems to me to follow that each of the main roof sheetings is affected in the same way, and substantially at least to the same extent, at its outer end on each side of the building that it covers.

175 For that reason alone, and leaving aside the disagreement between Professor Young and some of the other experts as to the extent of corrosion in the main roof sheeting in areas where the underside is not exposed to the elements, I conclude that the main roof sheeting is affected by corrosion to an extent that requires its replacement, just as the veranda and walkway sheetings are corroded and require replacement.

176 In addition, and were it necessary to do so, I would accept the evidence of Professor Young, as to the incidence of corrosion in the main roof sheeting in what might be called the protected locations, in preference to the evidence of the other experts. I would do so for three reasons. The first is that Professor Young went to the property more often, and was able to make more detailed observations and conduct more detailed tests. The second is that, as I have remarked already, the fact that one expert does not observe corrosion, in a small sample of screws removed, does not mean that there is no corrosion. The third is that I accept the inherent logic of Professor Young's approach: namely, that where the mechanism exists, and the conditions are suitable, corrosion will in due course occur.

177 I conclude, as between Dymocks and Capral, that all the sheeting, both over the verandas and walkways and over the main buildings (to the extent that it is placed over the main buildings) is perforated due to corrosion to the extent that it requires replacement.

Issue 3: the cost of replacement

178 The costing experts, Mr Makin and Mr Plaister, agreed that what might be called the theoretical cost of replacement, deduced from "publications", was $707,000.00 inclusive of GST. However, Mr Makin considered that the more appropriate figure was what he deduced as the market cost of $841,000.00 inclusive of GST. Mr Makin deduced that cost by reference to two quotations that Dymocks had received, from builders in the area, for replacement of the roof. The quotations were in evidence, and the author of each swore an affidavit. Each affidavit was read without objection, and neither deponent was required to attend for cross-examination.

179 One quotation came from a company known Jeff Fuller Plumbing Metal and Roofing Pty Limited. Initially, Mr Fuller, the principal of that company, prepared a quotation for a stainless steel roof. After detailed consideration and revision, the quotation was for $959,920.00 inclusive of GST.

180 The other quotation came from a company known as Red 8 Roofing Pty Ltd. The principal of that company, Mr Cavanagh, prepared an updated quotation which, after various amendments and making allowance for the cost of removing the roofing, was for about $909,000.00, again inclusive of GST.

181 Mr Makin gave consideration to both quotations. He made adjustments to Mr Fuller's quotation for a number of matters, including the use of aluminium rather than stainless steel. He made further adjustments after discussing the matter in conclave with Mr Plaister.

182 Mr Makin expressed the view, based on Mr Fuller's quotation as adjusted in the manner I have described, that the market cost of the work was the sum to which I have referred.

183 Mr Miller submitted that I should prefer the market-based cost. Mr Neal submitted that I should rely on the theoretical costing deduced (and agreed) by the experts on the basis of industry publication. Mr Roberts of Senior Counsel, who appeared with Ms Chan of Counsel for Dalton, took the same approach as Mr Neal, if I were to conclude that all the roof sheets should be replaced.

184 Mr Neal submitted that the theoretical cost should be preferred because (for example) the quotations given by Mr Fuller and Mr Cavanagh might have been influenced by their knowledge of the pendency of the litigation. In circumstances where neither was cross-examined, I do not accept that proposition.

185 Each witness (Mr Fuller and Mr Cavanagh) gave an account of the way his company's quotation was prepared. I am satisfied that it was prepared with care, and was reconsidered as required to ensure that it reflected an appropriate market cost for the work described in it. I am satisfied, in the circumstances, that the quotations provide a surer guide to the likely actual cost of the work than do the theoretical costings prepared by Messrs Makin and Plaister.

186 I am comforted in this approach by the way that Mr Makin dealt with the quotations: in particular, the way that he assessed and made changes to the final version of Mr Fuller's quotation. I take into account also that, as I have mentioned, Mr Makin made yet further changes to his assessment based on the quotation, following his conclave with Mr Plaister.

187 The relevant joint report of the experts was dated 31 January 2013. Based on my preference for the market-based approach to costing taken by Mr Makin, I conclude that, as at that date, the cost of the work, inclusive of GST, was $841,000.00.

188 Mr Miller's closing submissions put the claim on an "ex-GST" basis. On that basis, the figure is $764,545.45 and that is the amount that should be awarded, as between Dymocks and Capral.

Issue 4: Dalton's retainer

189 As I have noted, Dalton (or if not the company than its principal Mr Dalton) had carried out work for Mr Forsyth and Dymocks on previous occasions. In about 1982, Mr Forsyth and his late wife retained Dalton to design their proposed home at Terrey Hills. Subsequently, Dymocks (by Mr Forsyth) instructed Dalton to design and manage extensions and renovations to the Dymocks building in George Street, Sydney.

190 According to Mr Forsyth, the engagement (to use a neutral word) of Dalton, for the Grassy Head project, arose in the following circumstances (affidavit sworn 17 December 2010, paras 23 to 26):

23. In or about 1987 I telephoned Dalton and said words to him to the following effect:

"Peter, its John Forsyth. I would like you to have a look at the house at 510 Grassy Head Road, Grassy Head to see what can be done with it. I would like to extend it so that there are more bedrooms, bathrooms, living and office space."

24. Subsequently, Dalton inspected the old cottage. Upon his return he said words to me to the following effect:

"John, I am sorry but there is nothing I can do with that house. But I have a come up with a concept for a new building if you are interested."

25. Subsequently, in or about 1987 Dalton showed me a preliminary drawing of his concept (of which I do not now hold a copy). His concept was for a group of separate buildings connected by wooden decking, with a continuous metal roof over much of the decked areas.

26. I was impressed and said words to him to the following effect:

"How much do you think this is likely to cost?"

Dalton said:

"I would expect it to cost in the order of $2.5 to 3 million dollars but we'd need to go out to tender to get an accurate cost. We'll also need to prepare a specification as well as the necessary drawings".

I said:

"Okay, lets do it on the basis the workmanship must be "first rate". It is very important that the building is of a first class standard, with first class finishes."

191 Mr Dalton's account of the same event was not markedly dissimilar (statement dated 23 December 2011, paras 8 to 14):

8. Some years after that project was completed, John Forsyth contacted me. I do not recall precisely when. We had a conversation, probably at John Forsyth's home in Terrey Hills, to the following effect:

John Forsyth: "I want you to design a new house on a property I own at Grassy Head. There is an old cottage on the property. I have had a local architect look at extending the cottage, but I don't like the ideas he's had."

Me: "I need a written statement from you with the rooms you require and their size."

9. Following that conversation and not long after it, I met with John Forsyth and his wife, Marion at their home at Terrey Hills. During that meeting they provided me with the list of rooms and sizes I had requested during the conversation set out above. During the meeting John Forsyth said words to me to the following effect:

"I would be happy to have a design in which you walked from room to room by going out onto a veranda as is as the case at the family weekender at Palm Beach." [since demolished]

192 At the relevant time, the land was owned by Wirrabeena. The capacity in which it owned the land, and the beneficial interests under the trusts pursuant to which it held the land, need not be explored. What emerges clearly, both from Mr Forsyth's account and from Mr Dalton's, is that neither paid any attention to the legal ownership of the land. Nor, at that stage, did either pay any attention to the activities that (according to Mr Forsyth, whose evidence I accept), Dymocks was proposing to conduct on the land (and hence, obviously, to the means by which it would be authorised to conduct those activities on the land of another).

193 Mr Forsyth and his late wife had many discussions with Mr Dalton about the project and their requirements. I have no doubt that they were heavily involved in the evolution of the design.

194 At some stage, according to Mr Dalton, Mr Forsyth instructed him that the relevant design and contractual documents were to be prepared in the name of "Dymocks". That must have happened no later than the time Dalton prepared a building application for submission to the local council, together with its supporting documentation. One supporting document was a form of specification. That document, which is described as the "B.A. EDITION", is said to be:

SPECIFICATION

FOR

CONSTRUCTION OF

DYMOCKS PTY. LTD. RESIDENCE

....

195 Mr Dalton accepted that this document was prepared in late 1988 or, at the latest, by January 1989.

196 The contract version of the specification, which was also prepared by Dalton and which is dated "July 1989" is described as:

SPECIFICATION

FOR

DYMOCKS COMPLEX

....

197 The building contract, which was made on 24 October 1990, was prepared by Dalton. Among other things, it names the proprietor as:

DYMOCKS BOOK ARCADE LIMITED

198 To my mind, the clear inference from this is that, at least by January 1989, Mr Dalton recognised that the "client" for whom his company was providing professional architectural services was a company with the name "Dymocks." Dymocks was the company for whom the building contract was prepared. And read in conjunction with the complete description of the proprietor in that document, it was clearly the client for whom the contract edition of the specification was prepared.

199 Mr Dalton was cross-examined as to what I will continue to call the engagement, by reference to (among other things) these documents. He gave the following evidence about the change in the engagement (T128.10-.36):

Q. Can we go then to court book 1 please, sir. (Shown). Just before I do, is it your evidence to this Court that throughout this project the work that you undertook, you undertook not for the company, but for Mr Forsyth personally?

A. That is my recollection.

Q. And was the project, to your understanding, being carried out by him in his personal capacity, is that right?

A. That is my understanding.

Q. The company, Dymocks Book Arcade Pty Limited or any other company was, to your understanding, entirely irrelevant to the project that was being undertaken?

A. That was that is my understanding at the beginning.

Q. At the beginning? Did that position change, did it?

A. Yes.

Q. You said the words "at the beginning"?

A. Yes.

Q. Does that mean that your understanding changed at some point?

A. Mr Forsyth instructed me to call the after the design had been completed, at the time of preparing documents for tender, Mr Forsyth instructed me to call the building "the Dymocks complex" and my recollection is that the building contract was to be prepared between the builder and one of his Mr Forsyth's companies. I would have to refer to the building contract to refresh my memory about that.

200 It will be noted that, in his last answer, Mr Dalton suggested that the change occurred, or his understanding of the identity of the client changed, after the design had been completed. It is clear from the documents that this was wrong. The design (or that aspect of it which included the preparation of the specification) was not complete as at January 1989. The "BA Edition" of the specification was essentially a pro forma document that had not been adapted to suit or reflect the needs of the particular project. That process - of producing a project-specific specification - does not seem to have been completed until mid 1989. Mr Dalton accepted as much (T131.9-.12, although he sought to qualify this evidence in the immediately following answer through to .18):

Q. As at around January 1989, you would agree that the construction that you were designing, or the dwelling that you were designing was one that you understood was for a corporate entity, correct?

A. That is correct.

Q. That is, by about this time, you understood that the work that you were carrying out was work that was being carried out for Dymocks the company, correct?

A. I understood that I was working for John Forsyth and John Forsyth instructed me in how to title certain documents.

201 Mr Dalton's position appeared to fluctuate somewhat thereafter. However, when questioned specifically as to the BA Edition of the specification, he accepted a number of propositions which culminated in acceptance of the proposition that "Dymocks Pty Ltd" was, at the time the document was prepared, his client (T134.46-135.14):

Q. You would accept, wouldn't you, that the specification that you prepared for the purposes of the building application edition would have conveyed to the reader that you had prepared that specification for Dymocks Pty Ltd, correct?

A. Correct.

Q. Sir, you are careful in the preparation of your documents, aren't you?

A. Yes.

Q. And if you are going to go into print with something that is inaccurate, you would take steps to prevent that occurring, correct?

A. Correct.

Q. You have always conducted your business in that way?

A. Correct.

Q. And the reason why that document records the fact that it was a template specification for Dymocks Pty Ltd was that at that time, the planning application time, that was in fact the case, that was your client?

A. Yes.

202 I accept the substantial truth of that part of Mr Dalton's evidence. It seems to me to reflect reality. The misnomer of the client is hardly a matter of concern. What is important is the recognition, by Mr Dalton, that although the initial engagement may have been by Mr and Mrs Forsyth, that position had changed by, at the latest, January 1989, from when the engagement was on behalf of a company who was thereafter "the client". The detailed work on the preparation of the specification, and indeed the detailed design, was, on Mr Dalton's evidence undertaken for that "client".

203 The correspondence emanating from Dalton after the building contract was made is also illuminating. As I understand it, it is legitimate to take that correspondence into account in considering whether a contract was made (and, a fortiori, between whom). That correspondence refers almost, if not entirely, invariably to the "Dymocks Complex". It is almost, if not entirely , invariably copied to (among others) Mr Forsyth. On some occasions, Mr Forsyth's name is not adorned or enhanced by any description. But on other occasions, he is referred to as "Chairman, Dymocks Pty Limited" or, "Chairman, Dymocks Book Arcade".

204 To my mind, the correspondence confirms that Mr Dalton understood that at some stage the entity for whom his company was retained to provide architectural services became Dymocks, or some company answering that description, and not Mr Forsyth personally.

205 Mr Dalton said that a short written retainer had been prepared, but had since been lost. He did not give any evidence of its content.

206 There was no evidence of the entity to whom, from time to time, Dalton directed its invoices for professional fees. Nor was there any direct evidence of the entity by whom those fees were paid.

207 Ms Tiberio, who was Dymocks' financial controller at the relevant time, gave evidence that Dymocks had paid all costs associated with the farming enterprise and the construction of the residence at Grassy Head. Although Ms Tiberio did not (because she could not) give evidence of the precise detail of payments of fees for architectural services, I think the proper inference to draw from her evidence is that, no matter to whom Dalton addressed its invoices, they would have been paid by Dymocks.

208 There is no other direct evidence, at least to which I was taken in submissions, that bears on the identity of the client by whom, from time to time, Dalton was retained.

209 I conclude that, probably from late 1988 and certainly from January 1989, Dalton was, and through Mr Dalton understood that it was, retained by Dymocks to continue and finish the provision of architectural services for the Grassy Head project. Those services included both the preparation and finalisation of the detailed design and specification and the role of "Architect" under the building contract. As Architect, Dalton had various responsibilities, which it was to fulfil as agent for Dymocks (see cl 5.01 of the building contract). It is not necessary to go to the detail of those responsibilities.

Issue 5: duty of care

210 Mr Miller and Mr Roberts addressed me at length, and by reference to many authorities. To some extent, the submissions (in particular, Mr Roberts') proceeded on the basis that the existence of the duty of care was to be considered in the absence of any consideration of retainer.

Duty of care and retainer

211 I have found that, probably from 1988 and certainly from January 1989, Dalton was, and Mr Dalton understood that it was, retained by Dymocks. No formal contract of retainer has been proved. But it does not follow that there was no such contract.

212 I do not think that it is necessary to consider all the cases to which counsel referred me. I take the appropriate starting point to be the statement of principle of Windeyer J in Voli v Inglewood Shire Council (1963) 110 CLR 74 at 84:

An architect undertaking any work in the way of his profession accepts the ordinary liabilities of any man who follows a skilled calling. He is bound to exercise due care, skill and diligence. He is not required to have an extraordinary degree of skill or the highest professional attainments. But he must bring to the task he undertakes the competence and skill that is usual among architects practising their profession. And he must use due care. If he fails in these matters and the person who employed him thereby suffers damage, he is liable to that person. This liability can be said to arise either from a breach of his contract or in tort.

213 I do not understand there to be anything in more recent decisions to subvert the proposition that a common law duty of care may exist alongside contractual duties. I do accept, of course, that the common law duty of care should be no more than co-extensive with the contractual duties; and that the content of the common law duty of care must take account of specific provisions of the contract (see, by way of example, Astley v Austrust Limited (1999) 197 CLR 1 at [44] to [48] in the reasoning of the majority). But in this case, Dymocks has not argued for any common law duty wider or more extensive than the implied duties imposed on Dalton under a contract or retainer.

214 That approach seems to me to be consistent with the reasoning of Kiefel J in Barclay v Penberthy (2012) 86 ALJR 1206 at [170]. Her Honour said in substance that it followed, from the decision in Astley, that a contract for services contained an implied promise to exercise reasonable care and skill in the provision of those services, and that this liability was concurrent in contract and in tort. Thus, her Honour said, "a plaintiff may select the most advantageous action".

Duty of care in the absence of retainer?

215 Were it necessary to consider whether a common law duty of care should be imposed in the absence of a contract of retainer, one would need to look at, among other things, questions of assumption of responsibility and known reliance (see, for example, Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 at [24] in the reasons of the plurality and at [112] in the reasons of McHugh J).

216 Mr Dalton seemed to accept that both conditions were present in this case. First, at T145.24-.40, he accepted that he was responsible for the design, including coordinating the input of specialist consultants:

Q. And you have already agreed with me that you were the person responsible for the design, correct?

A. I was responsible also for coordinating the input of specialist consultants whose expertise was required for the project.

Q. Indeed. Part of your retainer as the architect was that, to the extent it was necessary to augment your knowledge with further expertise, your role was to gather that and coordinate it and document it in the specification, correct?

A. Yes.

Q. And you knew that your client was looking to you to discharge that responsibility, correct?

A. Yes.

Q. And you well knew in 1989 that no one from Dymocks or Mr John Forsyth personally had the expertise or function to carry out that task, correct?

A. Yes.

217 He accepted, further, that his work included checking relevant specifications (T190.40-191.7):

Q. Sir, yesterday you told me that in 1989 as part of your checking process leading to the documentation of the specification, you had regard to the Lysaght's 1988 document, do you remember that?

A. Yes.

Q. And you told me that you specifically turned it up to ascertain whether stainless steel and aluminium as a connection was acceptable under that document, do you remember saying that to me?

A. Yes.

Q. And the position was, was it not, that you did not at the time in 1989 identify it to so be consistent but you you deferred to the Standard?

A. I deferred to the Standard.

Q. Similarly, is the position that in 1989, you turned up Australian Standard 2312 as part of your checking exercise for the purposes of preparing the roof specification?

A. Yes.

218 Against that background, the following evidence given by Mr Dalton is, I think, crucial (T193.48-196.33):

Q. Sir, you, as you agreed with me yesterday, had the responsibility of documenting out the specification, correct?

A. Yes.

Q. You had the responsibility of pulling together the information for the purposes of the roof design, correct?

A. Yes.

Q. To that end, your responsibility involved you liaising with relevant experts where you thought it appropriate, correct?

A. Yes.

Q. To that end, you not only received their information but as you say in paragraph 37, where you got advice, you considered it and checked it and formed your own view, correct?

A. Yes.

Q. You were then, you would agree with me, responsible for pulling together or supervising the engineering design on behalf of the client, correct?

A. I did not supervise the engineering design. I coordinated it.

Q. You coordinated it? What is the difference in the circumstances that I have described between coordinating it and supervising it, in your mind?

A. Supervising would would assume that I had the technical knowledge to determine that the calculations that were carried out by the structural engineer or any other specialist consultant were technically correct in relationship to their level of expertise. I do not have that.

Q. Putting that aside and dealing with corrosion, what you did was receive advice from, you say, Dr Wallwork that dealt with corrosion matters by reference to Standards and you went yourself and checked those Standards for the purposes of informing yourself that the information was correct, do you agree?

A. Yes.

Q. What you were concerned to do was to ensure that the roof design that was going to be provided to the client had incorporated in it all, to your knowledge, relevant information about matters pertaining to corrosion, correct?

A. Yes.

Q. You understood that your client was concerned about corrosion in this location?

A. Yes.

Q. And you understood that your client relied on you to prepare a design that minimised or avoided the risk of corrosion in the metal elements of the roof, correct?

A. That's the reason why I advised him to engage a corrosion consultant.

Q. That is the reason why you took responsibility for gathering all of the information together, correct?

A. That is correct.

Q. And you knew that if the information that was gathered together under your direction was deficient, that your client would end up with a building that was less durable and less corrosionresistant than it otherwise should be, correct?

OBJECTION (ROBERTS)

ROBERTS: That is a very broad proposition.

QUESTION ALLOWED

WITNESS: Please repeat the question.

MILLER

Q. You knew that if there were deficiencies in the information that was gathered and documented by you, that your client would get a building that had a roof that was less durable than it otherwise should have been, correct?

A. In relying upon the expertise of specialist consultants, I relied upon their qualification, knowledge and experience to advise on the matters that they were equipped to do so.

MILLER

Q. Indeed. And in the case of the corrosion expert, when you were given advice, you went and checked it and satisfied yourself that it was correct, as you tell us in paragraph 37?

A. I took the advice of the corrosion consultant with respect to the protection of the structural steel and that advice is extensively specified in the painting specification where Australian Standard 2312 is referenced, and that standard is extensive in its methodology for providing enhanced protection, as is recommended in AS 1562. And Dr Wallwork introduced the painting supply company and checked that that specification of the painting for protection of the steel was appropriate and correct.

Q. Sir, if we come bluntly to the point, you knew that with regard to the design of this roof for corrosion protection, you knew that your client relied upon you to ensure that it was appropriately documented for the setting, that is, the setting in which the house was going to sit?

A. Yes.

OBJECTION (ROBERTS)

QUESTION ALLOWED

HIS HONOUR: The answer may stand.

MILLER

Q. And because you were getting paid for that, you assumed responsibility for ensuring that the design incorporating the corrosion resistance factors built into the design was appropriate for the setting in which the house was going to be located?

A. I also relied upon the specialist consultant who was also employed by the client.

219 To my mind, it is clear from this evidence that Mr Dalton agreed that:

(1) his client (I interpose, "Dymocks") relied on him to prepare a design that would minimise or avoid the risk of corrosion in the roof structure;

(2) accordingly, he took responsibility for gathering all the information together;

(3) he knew that his client relied on him to ensure that the house was appropriately designed for its location; and

(4) he assumed responsibility for ensuring that the design was appropriate in relation to corrosion taking into account its setting.

220 There is no reason to think that the position of Dalton, as opposed to that of its principal Mr Dalton, would be any different. It is clear that Mr Dalton was the controlling mind and, in substance, alter ego of Dalton.

221 Of course, in the last of the answers that I have set out, Mr Dalton referred to his reliance on another consultant. But that, it seems to me, was in addition to, and as part of his discharge of, the assumed responsibility for the design which was the subject of the question.

222 Known reliance may of itself create vulnerability in the requisite sense. As Kiefel J said in Barclay at [174]:

Knowledge of an individual who is reliant, and therefore vulnerable, is a significant factor in establishing a duty of care, although vulnerability can arise other than by reliance.

223 It seems to me that the view of the plurality in this case (French CJ, Gummow, Hayne, Crennan and Bell JJ) was not dissimilar: see their Honours' citation at [44], with apparent approval, of observations of the trial judge to the same effect.

224 On the facts of this case, there was in my view:

(1) assumption of responsibility;

(2) known reliance; and

(3) the obvious proposition that breach of duty was likely to lead to economic loss.

225 Finding that a duty of care was owed by Dalton to Dymocks would not raise any question of indeterminate liability to an indeterminate class of claimants. It would do no more than reinforce, by the imposition of legal responsibility, the duties which, in my view, Dalton plainly accepted that it undertook for Dymocks, and its obligation to perform those duties in a proper and professional way.

226 Thus, I would conclude, were it necessary to do so, that the factors of assumption of responsibility and known reliance existed at the relevant time, so as to justify imposition of a common law duty of care (to avert economic loss) even in the absence of a contract of retainer.

Issue 6: breach of duty

The potential for corrosion

227 It was common ground that the project was to be constructed in a salt laden marine environment where there was an obvious (and recognised) risk of corrosion and, thus, that particular care needed to be paid to protect the metal elements of the structures from corrosion. It was also common ground that the area was subject to the risk of extreme weather, and that the buildings, once constructed, must be able to withstand a category 1 cyclone.

228 Mr Dalton was aware, and stressed to others involved in the project, that it was to be completed to a very high standard. For example, in writing to consulting engineers who were to be engaged, he said the following (letter of 17 December 1990 to Bird, Walch and Tierney, omitting formal parts):

I am writing to emphasize that the quality of materials and workmanship that is called for in the specification and drawings for the Dymocks Complex is "FIRST CLASS", and that anything less than this standard is to be rejected.

Would you ensure that your subconsultants or staff who carry out site or workshop inspections are aware of this requirement and knowledgeable with respect to the qualities necessary to achieve this standard.

The very strictest of interpretations of "FIRST CLASS" is to apply.

In addition, should you consider additional inspections are necessary to ensure this standard is meet by the Builder or their sub-contractors please advise in order that the Client's approval may be sought for the additional inspections.

229 As I have observed already, the project cost was very substantial indeed.

230 Although the evidence ranged somewhat more widely, the essential issues, in relation to breach of duty, focussed on corrosion. Mr Miller identified three relevant points in the structures:

(1) the point where each stainless steel fastening screw passed through the aluminium roof sheeting;

(2) the point where each coated mild steel saddle came into contact with the aluminium sheeting; and

(3) the point where each stainless steel screw penetrated into the underlying mild steel purlin.

231 There was much evidence devoted to the potential for galvanic corrosion at each of those points. In addition, there was evidence directed to the inherent inadequacy of the saddles, both as specified and as supplied and installed. I hasten to say that, to the extent that what was supplied or installed was defective, then, bearing in mind that no case was asserted of failure to supervise, it cannot be to Dalton's account.

232 Mr Roberts submitted that the particular complaint in relation to the stainless steel screw / mild steel purlin contact had not been properly pleaded or particularised. It is unnecessary to rule on that submission. It was clear that each of the corrosion experts had addressed that aspect of corrosion. Indeed, the questions that the parties agreed the corrosion experts should consider in their conclave referred specifically to the risk of corrosion where the screws penetrated the purlins.

Inadequacy of the saddles

233 There was a sub-issue, or side issue, in relation to the saddles. The specification required that they be zincalume coated mild steel, dipped in PVF2 to achieve a coating (of PVF2) 25 microns thick. The corrosion experts considered that the saddles that were supplied were not fully coated in zincalume. That appeared to be, as Professor Young suggested, an inherent result of the manufacturing process. The saddles were punched out of sheets of mild steel. The mild steel sheets had been coated with zincalume on each side. But the process of punching the saddles out meant, necessarily, that the sides of the saddles would be uncoated by zincalume.

234 That may be regarded as a defect in supply rather than something for which Dalton was liable. It meant, at most, that the saddles did not comply with the specification. I interpose to note that that this was not one of the instances of non-compliance relied on by Capral to suggest that its warranty had not come into effect. That may reflect an appreciation on Capral's part that this particular defect in the saddles did not result in any corrosion of, let alone perforation due to corrosion in, the aluminium sheeting on which the saddles rested.

235 The experts did, however, agree that the saddle specification was inadequate in any event because its materials were inappropriate in the environment, and for other reasons (see T287 and following; I will not set out the relevant passages).

236 The experts also agreed that the saddles were inadequately coated with PVF2. Further, I think, they agreed that it would not be possible to achieve the requisite coating by (as the specification said should be done) dipping the saddles in PVF2. The experts were doubtful that it would be possible to obtain PVF2 in liquid form for this purpose. But regardless of that, they said that this aspect of the specification could not work.

Suggested reliance on another expert

237 I turn to what appeared to be Dalton's primary defence to the claim of breach of duty. That defence was, that Dalton took and relied upon the advice of a corrosion expert, Dr Wallwork; and that it was reasonable for Dalton to do so. As I understand it, that defence was put both in general terms (that is, as being a sufficient discharge of the duty of care); and, specifically, by reference to s 5O of the Civil Liability Act 2002 (NSW).

238 Mr Dalton recommended the engagement of a structural engineer, Mr Davies. That was done. Mr Davies' involvement was required specifically (although not necessarily only) because the roof fixings needed to be sufficiently strong to withstand a category 1 cyclone.

239 Mr Dalton said that he recommended to Mr Forsyth not only the engagement of Mr Davies but also the engagement of a corrosion expert, who turned out to be Dr Wallwork. Mr Forsyth did not specifically recall the conversations set out in Mr Dalton's statement. However, he did not deny that they may have occurred.

240 The only evidence that Mr Dalton gave in his first statement of his dealings with Dr Wallwork is set out in paras 27- 28 and 32-35 of that statement. I set out those paragraphs:

27. Early during the design of the roof, I met with Greig Wallwork and Jack Davies. During that meeting I said to Mr Wallwork words to the following effect:

Me: "I have selected aluminium for the roof to achieve the curved roofs the client wants. Is it your judgment that this will resist the salt air corrosion?"

Greig Wallwork: "Yes, but it has to be painted with polyninyl di-flouride to a thickness of 25 microns on both sides."

28. In that same conversation or at another time I said to Messrs Wallwork and Davies words to the following effect:

"The only supplier of aluminium I think we should work with is Alcan, I think we should get Alcan and whoever they think should produce the roof sheeting in for a meeting with us to discuss the design and specification of the roof."

...

32. A further meeting took place at my office attended by myself, Messrs Wallwork and Davies and representatives of Alcan and Stramit. By this time it had been confirmed that Stramit could achieve the recommended thickness of polyninyl di-flouride on the underside of the sheets.

33. At the meeting a conversation to the following effect took place:

Jack Davies: "I recommended Buildex Taptite Austenitic 316 stainless steel screws for fixing the roof sheeting."

Me: "Will this hold the roof down in a Category 1 cyclone?"

Jack Davies: "Yes"

Me: "Greig, is that acceptable to you?"

Greig Wallwork: "That is consistent with the AS1562."

34. At that meeting there was a discussion about the saddle component of the roof fixing mechanism that provided the bearing pressure on the roof. In a cyclone the strength of the saddle was critical in holding the roof down. During this discussion I said words to the following effect:

I don't want a situation where a category 1 cyclone comes along, rips the roof sheeting off and it flies through the air and cuts someone in half.

35. During the discussion regarding the saddles Mr Wallwork said words to the following effect:

You will need to coat those saddles with the polyvinyl di-flouride paint and incorporate the EPDM washer to keep the rain out of the holes.

241 In a second or supplementary statement dated 19 December 2012, Mr Dalton returned, in very vague terms, to this topic. He did so to supplement para 39 of this first statement, no doubt appreciating that it was likely to be the subject of objection and rejection (as in fact happened). To enable what follows to be understood, I will set out the rejected para 39; in doing so, I am not to be taken as giving it any evidentiary weight:

39. Part 8 of the Specification reflects the advice of Messrs Davies and Wallwork and the manufactures (both by their representatives and published product information) as set out above.

242 In the supplementary statement, Mr Davies repeated (this time without objection) the offending paragraph. Although it was neither objected to nor rejected, it is not in form admissible and I give it no evidentiary weight. He then referred to structural and corrosion issues and said, in para 6:

6. Those matters are outside my expertise and are matters on which I would have to obtain and rely on specialist advice. That was the purpose in recommending to Forsyth that he retain those specialist consultants at the commencement of the design / development phase of the project. The specification of the roof sheeting fixing system reflects the specialist advice that I received from Davies and Wallwork. It is not something that I could have specified without it.

243 The second and third sentences of that paragraph were objected to and rejected; again, I am not, by setting them out, to be taken as giving them any evidentiary weight.

244 The supplementary statement then continued to narrate:

(1) what Mr Dalton said was his invariable practice of circulating draft specifications to the relevant experts for their consideration and input; and

(2) that he believed he did so in relation to the Grassy Head project.

245 Taken at its highest, the admissible evidence of communications from Dr Wallwork would show that Dr Wallwork recommended that:

(1) the aluminium roof sheeting should be painted with PVF2 to a thickness of 25 microns on both sides;

(2) the suggested fixing screws would be "consistent with the AS1562"; and

(3) the saddles should be coated with PVF2 and there should be an EPDM washer to keep rainwater out of the drill holes.

246 Leaving aside the evidence as to practice, there is nothing in Mr Dalton's evidence to suggest that Dr Wallwork was given any opportunity to consider the detail of the proposed fastening system. Further, the offhand comment attributed to Dr Wallwork - that the use of the Buildex fastener and aluminium sheeting "is consistent with" AS 1562 - says nothing about the contact between the stainless steel screws and the mild steel purlins. I interrupt to note that it was common ground that, at all material times, those two metals have been regarded as dissimilar metals, so that there is a risk, if they are brought into contact in the presence of an electrolyte, of galvanic corrosion.

247 I do not accept this aspect of Mr Dalton's evidence. For the reasons indicated earlier (which I stress involve no criticism of Mr Dalton), it is uncorroborated. Thus, it has to be weighed, first according to my assessment of Mr Dalton as a witness and, secondly, by reference to the probabilities as they can be ascertained.

248 As to the first point: I refer to what I have said at [37] above. As to the second point: the unanimous view of the corrosion experts is compelling.

249 In the concurrent evidence session, the corrosion experts were asked about each of the points of connection to which I have referred. They were asked, also, about the connection between the aluminium roof sheeting where it rested on the mild steel purlins. Each of them, agreeing that he had been in practice in 1989 and for years before, said that he would not have specified the connections that were used, at least without taking steps to prevent corrosion. Mr Miller summarised the evidence given in a question which was directed to eliciting from the experts what might have been done to remove the risk of corrosion (T294.44-295.10):

MILLER: Thank you. Can I move to so I can understand then, to summarise where we've got to so far, each of you seems to be in agreement that the problems that you've described at the purlin mould steel connection ought to have been obvious to a corrosion person in 1989. Each of you has agreed that the corrosion, galvanic corrosion problem at the aluminium stainless steel thread, at least in the walkways, verandas, ought to have been apparent to a corrosion and obvious to a corrosion expert in 1989 and each of you has agreed to that same proposition with respect to the fasteners, the saddles which was the Zincalume saddles. What I want to understand working bottom up is if in 1989 if you had been asked how might you have minimised or avoided galvanic corrosion or corrosion at each of those points, what would the answer be if any? Starting with the purlin and the mild steel, the stainless steel mild steel on the purlin, is there anything that could have been done in the construction/design to have removed oxygen, removed moisture from that intersection for us to arrive at or eliminate or reduce the extent of corrosion that is now there. Mr Salome?

250 Although the statement as to what had been agreed came from Mr Miller, it reflected fairly the many preceding pages of discussion. None of the experts disagreed with it. I am quite sure that, if any of them had disagreed with what was attributed to him by Mr Miller, he would have said so. None of them struck me as being at all backward in seeking to correct any attribution to him of an incorrect view.

251 The point of this is not, of course, that Mr Dalton, as an architect and not a corrosion expert, should have been aware of the problems. It is that if (as Mr Dalton said was the case) Dr Wallwork was in 1989 an expert in the field of corrosion of metals, one would have expected him to have had the same understanding as the experts professed, in the manner summarised by Mr Miller. However, if this aspect of Mr Dalton's evidence is to be accepted, Dr Wallwork must have had a view that was fundamentally inconsistent with the unanimous view of the experts.

252 Taking into account the unanimous expert evidence on the point, and assuming (in favour of Dalton) that in 1989 Dr Wallwork was qualified and experienced in the area of metal corrosion, the probabilities, viewed objectively, are that he would not have signed off on, or approved, or let go without comment, a draft specification that contained the three potential risks for corrosion to which I have referred.

253 In relation to the assumption as to Dr Wallwork's qualifications and experience in 1989: they have not been proved in detail, nor admitted. The highest the evidence goes is an assertion in Mr Dalton's statement that he said to Mr Forsyth that Unisearch (an arm of the University of New South Wales) had "recommended Mr [sic] Greig Wallwork as a corrosion consultant. His CV and work performance seem satisfactory".

254 Dr Wallwork was retained to give some advice in about 2006, when corrosion in the roof was discovered. I would infer that this was because he was then perceived to have the appropriate qualifications and experience. Further, Mr Dalton's evidence, that he had consulted Unisearch and been given Dr Wallwork's name, was not challenged.

255 Reality suggests that I should conclude that Dr Wallwork was indeed an appropriately qualified expert in the field of metal corrosion, and that Mr Dalton was entitled to regard him as such.

256 The difficulty, as I have said, is that making the assumption as to Dr Wallwork's qualifications and experience, the actions (or more accurately inactions) attributed to him through Mr Dalton's evidence are inherently improbable. Even if (as, according to Mr Dalton, Dr Wallwork said) the use of stainless steel screws was "consistent with" AS1562, nothing in that Standard could justify the contact between stainless steel and mild steel where the fastening screws penetrated the purlins. And, on the unanimous view of the corrosion experts, nothing could have justified the selection of mild steel zincalume coated saddles as an appropriate element of the fastening system.

257 In relation to the involvement of Dr Wallwork, he was consulted (as I have noted) in 2006, after corrosion had become manifest. Dr Wallwork wrote to Mr Andrew Forsyth. He attached answers to a number of questions. Although the questions are not set out, one of the answers given by Dr Wallwork is significant:

3. It is necessary to establish who selected this method of fixation, i.e., whether it was the architect or Stramit.

258 The obvious inference from this is that, at least in 2006, Dr Wallwork did not consider that he had had any role in choosing the system whereby the roof sheeting was attached to the underlying purlins. Unless that comment was completely disingenuous (and, Dr Wallwork not having been called for the reasons given, I could not find that it is), is inconsistent with this aspect of Mr Dalton's evidence.

259 I do not accept Mr Dalton's evidence that he relied on advice obtained from Dr Wallwork in documenting the specification for roof fastening in the way that was done. Thus, I do not accept Dalton's defences based on reasonable reliance on an independent and qualified expert.

Reliance on Standards?

260 Mr Dalton sought to justify his design by reference to the then applicable Australian Standard, AS1562-1980. The subject of that Standard was the design and installation of metal roofing. Its scope, set out in cl 1.1, was as follows:

This standard relates to the design and installation of self-supporting metal roofing having no transverse joints.

261 It was common ground that this described the roofs and the covers to the walkways and verandas.

262 Clause 3.8 dealt with protection against corrosion. It said among other things that:

Roof systems shall be designed so that direct contact between two or more incompatible metals or alloys does not occur.

263 Table 3.2 set out "metals and alloys between which direct contact is acceptable as good practice". The notes to this section of the Standard made it clear that the table was "a general guide to acceptable combinations of metals in the light of current knowledge".

264 Another note stated:

The life of vulnerable materials in severe marine atmospheres and industrial areas with atmospheres contaminated by acid-bearing agents can be extended by the use of special painting procedures (see AS2312).

265 Table 3.2 had some 3 columns. The first column set out kinds of sheeting materials. The second and third columns set out "material with which direct contact is permissible". That was divided into "industrial and salt laden marine atmospheres" and "urban, suburban and rural atmospheres". It was common ground that the former classification was appropriate in this case.

266 On that basis, Table 3.2 indicated that direct contact was permissible between aluminium or aluminium or aluminium alloy sheeting material and, among other things, stainless steel. It did not approve of direct contact between stainless steel and mild steel.

267 AS2312 - 1984 dealt with the protection of iron and steel against exterior atmospheric corrosion. The statement of its scope sets out what the Standard seeks to achieve:

This standard provides guidelines on coating systems for the protection of iron and steel against exterior atmospheric corrosion.

268 Clause 2.2 dealt with atmospheric classifications applicable to steel. The "very severe" classification includes coastal/marine areas that are "subject to 'marine' coastal fallout (salt deposition)". It was I think accepted that the Grass Head environment could be so described.

269 Section 4 of the Standard dealt with planning and designing for corrosion protection. It included Table 4.1, whose subject was "galvanic reaction to steel". That Table indicated, among other things, that aluminium was anodic to steel and thus that it would protect steel. This meant, as everyone agreed and as I think Mr Dalton understood, that where aluminium and steel come into contact in the presence of an electrolyte, the aluminium would "sacrifice itself" to protect the steel: that is to say, the aluminium would corrode but the steel would not.

270 Clause 4.3.3.4 contained the following information:

Stainless steel. Stainless steels as a class offers great resistance to corrosion.

... The behaviour of stainless steel is much the same as other metals in regard to galvanic corrosion. For example, aluminium, cadmium, iron and steel tend to protect stainless steel, and corrosion, if any, will take place on those metals..."

271 Again, it must have been appreciated that cl 4.3.3.4 indicated that where aluminium and stainless steel came into contact in the presence of an electrolyte, the aluminium would corrode.

272 The Standards, and other literature to which I will turn in a moment, are important. It was Mr Dalton's evidence was that he did not simply rely without checking on the advice that he claimed was given to him by Dr Wallwork.

273 In his first statement, Mr Dalton said at para 37 that it was his practice to keep relevant Australian Standards in his office, and to check them if a specialist consultant referred to them. In cross-examination, Mr Dalton accepted that he did so. Further, he agreed, he consulted another industry reference known as "The Referee", produced by the Coated Products Division of BHP Steel. By reference to the former name of that division, the publication was frequently referred to as "Lysaght's." Mr Dalton accepted that The Referee did not accept as permissible the combination of aluminium and stainless steel, but said that he took the view that AS1562 should prevail (T137.29-.50):

Q. And if you were going to specify anything utilising Lysaght's product, do I take it that good practice meant that you went to that document to ensure that specification was appropriate?

A. I went to that document, amongst many documents including those that are listed here.

Q. Does that mean then in 1989 you turned your attention to whether aluminium and stainless steel was permissible as a combination under the Lysaght's Referee 1988 document; yes or no?

A. Yes, I did.

Q. And you would agree that it does not countenance it as being an acceptable metal on metal contact?

A. But it is merely an industry reference and you do do not take industry references above Australian Standards.

Q. That is how you approached the design in this case, did you?

A. That is correct.

Q. So notwithstanding it was a document from the product manufacturer, it was one that was dropped down in the order of hierarchy?

A. Correct.

274 Further, Mr Dalton agreed, he had considered AS2312. He was asked whether he recognised that it disapproved contact between aluminium and stainless steel. His evidence on this point could best be described as evasive (T190.40-191.7, 191.30-192.9):

Q. Sir, yesterday you told me that in 1989 as part of your checking process leading to the documentation of the specification, you had regard to the Lysaght's 1988 document, do you remember that?

A. Yes.

Q. And you told me that you specifically turned it up to ascertain whether stainless steel and aluminium as a connection was acceptable under that document, do you remember saying that to me?

A. Yes.

Q. And the position was, was it not, that you did not at the time in 1989 identify it to so be consistent but you deferred to the Standard?

A. I deferred to the Standard.

Q. Similarly, is the position that in 1989, you turned up Australian Standard 2312 as part of your checking exercise for the purposes of preparing the roof specification?

A. Yes.

...

Q. You understood in 1989 when you turned up Australian Standard 2312 that in the design section of it, it contained information which would suggest that aluminium in contact with stainless steel was contact of dissimilar metals that was not good building practice, correct?

A. I also referred to the advice in the Standard that protective coating would provide protection. I discussed that with Greig Wallwork and he recommended a whole painting system to achieve that purpose.

Q. Well, breaking that down into bits. As at 1989, you understood that Australian Standard 2312 did not regard as good building practice the aluminium/stainless steel connection, correct?

OBJECTION (ROBERTS). QUESTION ALLOWED

A. I understood that the Australian Standard 2312 was for the purpose of protecting protecting various metals with particular coatings. And that that was in fact done on advice from Dr Wallwork. The the the primary reference in terms of fixing of the roof was the previous Standard, 1526.

Q. Sir, you can take it from me that I accept what you say that your primary reference was 1562. What I am putting to you is that you were additionally aware from your reference to Standard 2312 that it contained information in the design section of that Standard that recommended against aluminium and stainless steel coming into contact?

A. Yes.

Q. And it recommended that because it identified in a table that those two metals were dissimilar metals with a risk of galvanic corrosion, correct?

A. That is correct, and the Standard then goes on to advise on many methods for protecting.

275 Mr Dalton was then asked whether he accepted that, on the basis of the three sources that he had said he had consulted, there was a conflict, and he agreed (T193.4-.8):

Q. Well, on the basis of that, I want you to assume that it is 1988. If that assumption is right, by the time that you came to draw together the design, you had conflicting information about the appropriateness of that connection as good building practice, correct?

A. Correct.

276 However, he said, he "referred those issues to Dr Wallwork" (T193.12).

277 At this point, I note that there is nothing in Mr Dalton's statements to suggest that he had considered both Standards and The Referee, and had recognised a conflict. Nor is there anything in those statements to suggest that, having recognised a conflict, he consulted Dr Wallwork about it. Mr Miller accused Mr Dalton of making up this answer. Mr Dalton denied the suggestion. But I do not accept his evidence that he consulted Dr Wallwork on the conflict. Nor do I accept Mr Dalton's explanation (T193.31-.32) that his "memory of conversations has been evolving as a consequence of the presentation of information to" him.

278 Ultimately, Mr Dalton suggested that this evidence (in relation to the conflict and Dr Wallwork) was covered by the proposition in his supplementary statement at para 6, that the specification of the roof sheeting reflected the specialist advice he had received from, among others, Dr Wallwork.

279 He then gave the following evidence (T193.43-.46):

Q. And from that we are meant to understand that you had yet another conversation, are we, about conflicting standards between 2312, 1562 and the Lysaght's referee, is that your evidence?

A. Yes.

280 The architectural experts (Mr Sarlos and Mr Bullen) agreed on a number of matters. As to the contact between stainless steel and aluminium, they agreed that:

(1) AS1562 would permit it;

(2) AS2312 would not permit it;

(3) The Referee would not permit it;

(4) another industry publication current at the time and available to and consulted by architects at the time was equivocal on the topic; and

(5) yet another industry publication of the same kind would permit it.

281 Thus, there were two publications, commonly consulted by architects at the time, which would permit the connection (one of which was an Australian Standard), two which would not (one of which was an Australian Standard), and one which was equivocal.

282 The architects also agreed that there was a conflict in the publications as to contact between the saddles and the aluminium sheeting. No one suggested that there was any publication that sanctioned contact between the stainless screws and the mild steel purlins.

283 As I have said, Mr Dalton's evidence that he was aware of the conflict, at least in relation in relation to contact between aluminium and stainless steel. I do not think that Mr Dalton referred to any publication in relation to contact between the saddles and the aluminium sheeting, nor to contact between the stainless screws and the mild steel purlins.

284 As to contact between the stainless steel screws and the mild steel purlins, Mr Bullen, who was called as an expert for Dalton, gave the following evidence (T448.47-449.22):

Q. You agree that in 1989 a reasonable competent architect would have appreciated in a seaside setting such as the present that mild steel being pierced by stainless steel would give rise to one such point of risk?

A. Yes.

Q. And you would agree, would you not, that in those circumstances, if the architect had accepted as part of their scope of work a requirement to document up a specification for the roof that minimised the possibility of corrosion, they ought to have turned their attention to this particular interface at the purlin, correct?

A. To the extent that they were relying on their own officers and not relying on the officers of others.

Q. And if they went and sought advice from others, which I take it to be some other person who was skilled in matters of corrosion, because of the setting of the building and the number of contact points of this kind, you would agree, wouldn't you, that a reasonable architect in that situation would have required a sensible explanation as to why that sort of connection was acceptable?

A. It would be part of a normal inquiry, yes.

Q. A reasonable architect wouldn't simply defer to what appeared to be, you would agree, an inappropriate point of contact and accept it without questioning if there was no sensible explanation provided, do you agree?

A. I think an architect would question why the corrosion consultant had advised on certain aspects and upon receipt of a reasonable answer would adopt the advice.

285 AS1562 did not sanction contact between those two metals. AS2312 indicated that it was unacceptable. Mr Dalton said that he read the Standards in question. He must have appreciated that the contact was apparently impermissible. Even accepting his evidence at face value (and for the reasons I have given I do not, in all respects), he made no inquiry. Even accepting (and again, I do not) that Mr Dalton had referred the draft specification to Dr Wallwork and Dr Wallwork had returned it without question, Mr Dalton made no inquiry.

286 The point is made by the following further evidence given by Mr Bullen (T449.39-450.10):

Q. If the architect had not sought advice specifically about that contact point, you would not then regard that as being an acceptable connection detail in 1989?

A. I agree.

Q. And it must then follow that unless the architect sought and received some cogent, reasoned explanation for that design interface remaining, then to simply accept any answer without that sort of reasoning would be irrational?

A. I don't agree with that.

Q. Do you say that in 1989 it was acceptable for an architect, appreciating there to be a risk in terms of corrosion in the design, could go to another party and accept without explanation an indication that the design was appropriate?

A. I think there's a matter of degree. I think the architect has certain knowledge and skills about corrosion, galvanic and atmospheric, and is capable of asking questions to a point. After that, the architect in a normal practice would take the advice given unless they have got something obviously contrary.

Q. That was my next point. This was an obvious point of corrosion failure, of likely corrosion failure, wasn't it?

A. I've agreed.

287 Mr Bullen agreed, further, that contact between the stainless steel screws and the aluminium sheeting was the subject of conflict in the relevant publications. He agreed, further, that the conflict could have been avoided by a design which prevented contact (for example, by interposing a grommet between the screw and the sheeting). Another way to deal with the conflict was to make inquiries of an expert (T450.16-451.7):

Q. Can I turn to the aluminium sheeting and the stainless steel screw point of connection. You and Mr Sarlos have agreed that in 1989 that was a matter of some conflict in the standards publications?

A. Yes.

Q. That conflict could be addressed in two ways I want to suggest to you and see if you agree. First, the conflict could have been avoided by a design that prevented that dissimilar metal contact, correct?

A. Yes.

Q. And one such obvious means of doing so would have been a design that included a grommet or a sleeve around the shank of the screw at the point at which the screw passed by the aluminium sheet?

A. I don't think that was can you just put the question to me again because I think I might have missed the thrust of it.

Q. The obvious way of overcoming that point of contact would have been to put a grommet in place over the screw?

A. At the time isolating the stainless steel from the aluminium might reasonably have been considered not an issue by the consultant team.

Q. My question came from the premise that the two of you, Mr Sarlos and yourself, have agreed there was a conflict.

A. Yes.

Q. I said the first of the ways to avoid that conflict would have been to design the connection up in a way that you didn't have dissimilar metal contact?

A. I can't disagree with that. I agree with that.

Q. Do you agree an obvious way to do it in 1989 would have been to put a grommet around the screw?

A. Yes, you could have put a grommet around the screw.

Q. The other way in which the architect could have resolved that issue would have been to seek some sort of rational and reasoned explanation from another consultant more skilled in that particular area, would you agree?

A. I think the architect would have taken those steps, by my assumptions.

Q. You have been told to assume and your report proceeds on the assumption that he in fact made inquiries?

A. That there was a corrosion consultant available through which these issues the architect took advice on.

288 It is implicit in Mr Bullen's answers that inquiries should have been made. For the reasons that I have given, I am not satisfied that any inquiry was made.

289 Mr Bullen was then asked whether, if an architect had checked the relevant documents and discovered a conflict, he would seek a reasoned explanation from the corrosion expert as to why (in the face of that conflict) the design would be suitable, and would require a rational or reasoned answer from the expert (T452.3-.37):

Q. You would agree, wouldn't you, that if at that point, having checked whatever it is that might have been ticked off by the corrosion consultant, a reasonable architect in that position perceived yet a, or still a further conflict, it would have required a reasonable architect in that position to seek a reasoned explanation as to why the connection would be suitable, in the setting, would you agree?

A. I think before that an architect would decide what the issue was. In fact, which of the documents, of which there were a number one says you can, one says you can't a number say you can and some seem confused in themselves. So the first thing I think a reasonable, competent architect would do would be to seek some clarification of precisely what the issue is and they would, if they doubted the corrosion or thought that they would get a second opinion, other than that of the corrosion consultant, they might refer reasonably to the industry, which is the roofing supplier in this case.

Q. I just want you to focus on the assumption. I just want to deal with this as quickly and directly as I can. I want you to assume that after the corrosion consultant had given advice

A. Yeah.

Q. the architect does his own exercise of checking and confirmation and forms the opinion himself that, despite that advice, there is still a conflict in the standards and the publications?

A. Mmhmm.

Q. You would agree, wouldn't you in those circumstances, that the obligation on the reasonable architect in that situation, would not just be to go back and get a tick, but to get a reasoned explanation as to why that design would be suitable in the setting?

A. Yes.

Q. And if there was an answer that came back that was not reasoned or rational, it would be incumbent upon the architect to take a further step before specifying that work in the specification?

A. Yes.

290 Further, and in this context, Mr Bullen agreed that contact between the stainless steel screw and the mild steel of the saddle (which would be exposed because of the hole drilled or cut through the saddle to take the screw) would be unacceptable (T455.4-.19):

Q. You know what I'm talking about?

A. You are talking about the size of the hole in the saddle and the stainless steel screw going through it, with the mild steel contact between stainless steel and mild steel, where the hole is?

Q. Yes.

A. I understand.

Q. Yet another point of unacceptable dissimilar metal contact under 1562?

A. If the two came into contact, it would be unacceptable.

Q. Well, they are inevitably going to, aren't they?

A. I don't know that that is true. There are two rubber washers, one on top of the screw fitting where it comes down onto the saddle, and one under the saddle and I would imagine that the rubber washer, not always, sometimes keeps them apart.

291 I accept all of that evidence of Mr Bullen. It follows, in my view, that Dalton breached the duties that I have found it owed to Dymocks. Mr Dalton was aware of the risk of corrosion in the salt laden marine environment. He was aware, in relation to the use of stainless steel screws and aluminium roof sheeting, that there was a conflict in the publications on the topic as to whether or not this was permissible. Even if (and I repeat, contrary to my finding) he did consult Dr Wallwork, he gave no evidence whatsoever of any rational or reasoned explanation as to why the connection would be permissible.

292 As to the contact between the stainless screw and the mild steel purlin, and the contact between the stainless screw and the mild steel saddle, Mr Dalton gave no evidence at all. As to each: it would have needed a very powerful explanation indeed to overcome the fact that none of the publications permitted, and those that dealt with the subject warned against, that form of metallic contact.

293 The result was that Dalton designed and specified a roofing system that was inherently susceptible to corrosion and failure. It was inherently likely that galvanic corrosion would occur where the dissimilar metals (stainless steel and aluminium, and stainless steel and mild steel) came into contact. It was inherently likely that the saddles would fail. The saddles were an essential part of the design, because they were intended to provide a sufficient restraining force to resist category 1 cyclones.

294 The problems could have been minimised, or perhaps entirely averted, if contact between dissimilar metals had been prevented (for example, by the use of a grommet or some such other device) or if moisture could have been excluded at the point of contact. As I have said, galvanic corrosion cannot occur in the absence of moisture. It appeared to be a general consensus that sealants could have been applied, at the points of contact, to keep water out, although I think there was some concern as to the practical execution of this technique.

295 Clause 9.7 of the specification, which was in the section dealing with metalwork, was directed to preventing the contact of dissimilar metals. It recommended the application of a mastic. Mr Bullen agreed that this would not prevent dissimilar metal contact, but that it might have been of help in minimising the access of moisture to the point of contact (T447.9-.22; I will not set out that passage).

296 Regardless, Mr Bullen thought "it would have assisted" to have had this repeated in cl 8.10 of the specification, dealing with dissimilar metal contact in the roofing section of the specification. As Mr Bullen agreed, it did tell the builder what needed to be done, but did so in a different part of the specification (T447.35-.37; again, I will not set out this passage).

Conclusion on breach of duty

297 I am satisfied, on the whole of the evidence, that Dalton breached its duties of care, in relation to its design and specification of the roof fixing system. And I am not satisfied that anything that Mr Dalton did in this context was authorised or sanctioned by Dr Wallwork.

Issue 7: damages as between Dymocks and Dalton

298 There were three substantial questions raised. The first question was whether Dymocks had in fact suffered any loss. Dalton submitted that Dymocks did not have a sufficient interest in the land to enable it to claim the cost of repair of the roof.

299 The second question was whether it was necessary to replace the whole of the roof, or whether some more limited repair would be sufficient.

300 The third question was whether the roof - in particular, the fixing systems - were as damaged as Dymocks submitted.

First question: no interest, no loss?

301 I am satisfied that Dymocks was at least an equitable lessee of the land from the 1988/1989 financial year onwards. Ms Tiberio's evidence was that rent was recorded in the books of Dymocks as having been paid to Wirrabeena from that time. The payment and acceptance of rent, so characterised, is evidence of the existence of a lease.

302 The position was formalised in August 1991, with effect from 1 July 1990.

303 Thus, Dymocks had an interest in the land as lessee, at all material times.

304 The evidence of Ms Tiberio showed, further, that Dymocks has paid for all the construction and associated costs. The asset - the building complex - has been carried in Dymocks' financial records, and depreciated, every year. That is consistent with Mr Dalton's recognition (see at [198] above) that Dymocks was his client from some time in 1988 or, at the latest, January 1989.

305 No doubt, the buildings are fixtures, and thus form part of the land. But it does not follow that Dymocks' interest in the whole of the land, as lessee, is insufficient to enable it to recover damages for breach of duty on the part of the architect whose duty it was to design those very buildings for Dymocks.

306 Mr Roberts submitted, correctly, that the only obligation of repair imposed on Dymocks by the lease was one to:

... maintain and leave the demised premises in good repair reasonable wear and tear, war damage, and damage by fire, lightning, flood and tempest accepted.

307 Mr Roberts submitted, again correctly, that this obligation of repair would not impose on Dymocks any contractual obligation to rectify defects in the buildings arising from defective design or construction. But it does not follow that Dymocks can only have an entitlement to damages if (and to the extent that) it is liable to Wirrabeena to reinstate the damage.

308 Dymocks' economic interest has been injured, because the value of that for which it paid has been diminished. It is not necessary to go further, and analyse the economic interest as giving Dymocks some equitable interest in the property over and above its legal interest as lessee. The question is whether, under the retainer or in the circumstances known to both Dymocks and Dalton when Dalton was providing services to Dymocks, it was reasonably foreseeable that if Dalton breached its duty of care so that the buildings were constructed in a defective way, Dymocks would suffer loss. In circumstances where, to the knowledge of both parties to the contract, Dymocks was paying for the construction and the buildings were to be used and occupied by Dymocks (as some of the documents suggests, as a "residence"), the answer must be "yes".

309 The lease between Wirrabeena and Dymocks was varied on 30 June 2010, when Dymocks exercised its option of renewal of a further 20 years. Among other things, the variation contained the following provision (cl 14(1)(d)):

"Despite any other term of this Lease, the Lessor and Lessee:

(1) acknowledge that:

...

(d) the residence subsequently erected on the Land in or about 1992 and existing on the Land in 2010 (New House):

1. was constructed at the cost of the Lessee pursuant to a building contract made between the Lessee and its builder;

2. by agreement between the Lessor and the Lessee at the time of construction of the New House, has been served from the Land and is the property of the Lessee as a tenant's fixture; and

3. at all times since the commencement of its construction, has been recorded as an asset in the balance sheet of the Lessee."

310 Mr Andrew Forsyth accepted that this aspect of the variation had been documented because he became aware of the defence based on the asserted absence of any interest in the land. He said, and I accept, that the words in question clarified what was shown in the financial records of Dymocks, and reflected an agreement that he understood had always existed between Dymocks and Wirrabeena.

311 Mr Roberts submitted that the attempt at severance was ineffective, because the buildings had not been physically removed from the land. In this context, he referred to the judgment of Dixon J in The North Shore Gas Company Limited v The Commissioner of Stamp Duties (NSW) (1940) 63 CLR 52 at, in particular, 68. That case concerned gas mains and service pipes laid in land in which the gas company had no interest. The statute which authorised the laying of those mains and pipes provided also that the gas company would retain property in and control of them.

312 Dixon J said at 68 that the primary consequence of fixing things to the soil is that they form part of it, so that ownership of them forms part of the land. His Honour said:

Though removable tenants' fixtures may during the term be detached and become chattels belonging to the tenant, yet the better opinion appears to be that unless and until the tenant exercises his right of removal they form part of the realty... and for this reason, subject to the exercise of the tenant's right to convert them again into chattels, pass with the land.

313 In the result, his Honour concluded at 70 that the mains and pipes were fixtures, notwithstanding the special statutory provisions relating to them which reserved ownership and the right of removal to the gas company.

314 No doubt, in this case, that reasoning would suggest that although the house may be severed (indeed, although as between Wirrabeena and Dymocks it may be the property of Dymocks), nonetheless, if the property were sold, the house would pass with the land. But again, that does not seem to me to be the point. The point is whether Dymocks has a sufficient interest in the land to recover damages for what I have found is Dalton's negligence. For the reasons that I have given, I think it does.

Second question: replacement or repair?

315 I referred at [183] above to submissions put by Mr Roberts, as to the preferred costing, if I were to conclude that all the roof sheets should be replaced. I note however that Mr Roberts' primary position was that it was not necessary to replace all the roof sheets. He submitted that it would be possible to remove (if necessary, by drilling out) all the fasteners, and to replace them, in a way that would prevent, or at least very significantly minimise, the risk of further corrosion. Thus, Mr Roberts submitted, the cost should be assessed on the basis of this work only.

316 It is fair to say that the relevant experts accepted that it would be possible to undertake the more limited form of repair proposed by Mr Roberts. They did say that the washers to be placed on top of the roof sheeting (under the saddles) should be larger than those presently installed, so as to cover completely the holes (enlarged, as in my view many of them will be, by corrosion) through which the fastening screws will pass. The experts accepted that if this were done in a proper and workmanlike way, the washers would be likely to prevent the entry of moisture through those holes (enlarged or otherwise).

317 The experts accepted, further, that there were measures that could be taken in an attempt to prevent or very substantially minimise the risk that dissimilar metals would come into contact in the presence of an electrolyte. There was some disagreement about the efficacy of the various methods suggested. There was also some disagreement, or perhaps more accurately doubt, as to whether it would be practicable to effect some of the methods suggested.

318 Nonetheless, I think, the overall impression to be gained from the expert evidence is that with care and very close attention to detail and good workmanship, it might be possible to repair the roof sheeting in the manner that I have broadly outlined, without replacing the sheets.

319 Thus, Mr Roberts submitted, this was all that needed to be done.

320 I do not accept that submission. If one thing is clear from Mr Dalton's evidence (both given for the purposes of the hearing, and as it appears from such of his documents as survive), it is that he well understood that Mr Forsyth and Dymocks required that the work should be done to the highest possible, "first class", standard. It is completely inconsistent with that understanding of the result to be achieved by the exercise of Dalton's professional skill, that some bandaid solution, producing a less than first class result, should be adopted for repairs necessitated (as I have concluded they are) as a result of Dalton's breach of duty.

321 Dalton and Dymocks must have had in mind that, if repair works were necessary as a result of Dalton's breach of duty, those repairs works should be carried out to the same high standard as the original works, so that Dymocks would get the desired, and mutually contemplated, result.

322 In my view, nothing in Bellgrove v Eldridge (1954) 90 CLR 613 or Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272 requires any different conclusion.

323 For completeness, I add that Mr Roberts did not raise (nor did Mr Neal), in respect of the quantum of damages, any question as to what might be called "betterment": namely, that the replacement of the roof, by a new roof properly installed, would have the effect of giving Dymocks something that would be serviceable for much longer than might have been required either under Dalton's retainer or Capral's warranty. That should be understood simply as an observation of fact, and not as a suggestion that the concept might be of any relevance.

Third question: extent of damage

324 Mr Roberts put a number of submissions, to the effect that the damage was not as extensive as the experts had indicated (more accurately, as Mr Miller had submitted that they had indicated).

325 First, Mr Roberts submitted, the extent of damage to the purlins was not as great as Professor Young at least had said. Mr Roberts based this submission on observations made by Mr Robinson when he walked underneath the verandas and walkways and looked at the purlins. Professor Young had said that there was red rust in many locations. Mr Salome had said rust was widespread. By contrast, Mr Robinson thought the purlins were in good condition in an "aggressive, severe marine environment" (T240.50-241.1). But as Mr Robinson in fact acknowledged, there was evidence of recent painting (T241.5-.7).

326 Further, as Mr Miller submitted, there was unchallenged evidence from Mr Fishburn, who was employed as the maintenance manager at the site and who had worked there for about 10 years (although not always as maintenance manager), as to routine maintenance. One of the things that Mr Fishburn did, and has done for some years, was cleaning down rusted or corroded metalwork whenever it was observed, and painting over it. Thus, it was not surprising that Mr Robinson did not observe much in the way of rust in the purlins.

327 Mr Roberts referred to numerous photographs of the roofs, and submitted that in many cases they showed that the saddles had not corroded or failed. (In fact, what they showed, as Mr Miller submitted, was that the saddles had not corroded to the point where red rust had appeared.) I do not think that the unanimous view of the experts, as to the inadequacy of the saddles, can be set aside simply on the basis of inexpert assessments made of photographs, particularly when the point sought to be drawn from those photographs was not put to the experts in a challenge to this aspect of their evidence.

328 Mr Roberts raised a number of other challenges. It is not necessary to go through them in detail.

Conclusions on damages as between Dymocks and Dalton

329 In my view, because Dalton's breach of duty extends to the whole of the roofing system (but with the exclusion noted at [163] above), and because in my view the whole of the roof (qualified in the same way) requires replacement, Dalton's liability is co-extensive in amount with that of Capral. Thus, I assess damages against Dalton at $764,545.45 exclusive of GST.

Issues 8 and 9: misleading or deceptive conduct

330 By the time of final submissions, Dymocks did not press its claim based on alleged misleading or deceptive conduct.

Issue 10: apportionable claim?

331 Dalton accepted that Dymocks' claim against it was not an apportionable claim, and thus there was no ground for adjusting its liability under Part 4 of the Civil Liability Act.

Issue 11: limitation

332 Dymocks' case was that the damage was discovered in late September 2003, and that proceedings were commenced (barely) within six years of the date of discovery.

333 It was I think common ground that a cause of action in negligence, relating to defects in a building, accrues when the defects become manifest or are discovered, or could first have been discovered with the exercise of reasonable diligence.

334 Mr Forsyth gave unchallenged evidence that the defects were first discovered underneath screws which the maintenance manager at the time, Mr Ainsworth, had removed. This happened, Mr Forsyth said, "in or about September 2003" (affidavit sworn 17 December 2010, para 64).

335 Mr Forsyth said that, shortly after the damage was reported to him, he inspected it; and more such damage was found. He then wrote a letter to Capral dated 25 September 2003, advising it of the corrosion damage.

336 That evidence, which I accept, provides a basis for inferring, as I do, that the corrosion damage was first discovered within a week or so before 25 September 2003.

337 I have no doubt that a maintenance manager in the position of Mr Ainsworth would have regarded the presence of corrosion in the roof as significant. I have no doubt that he would have reported it promptly to Mr Forsyth. I have no doubt that Mr Forsyth would have been concerned at the report. I have no doubt that Mr Forsyth would have arranged to inspect the damage very soon after the report was given to him. And I have no doubt that, the report having been confirmed by personal inspection, Mr Forsyth would have acted swiftly to communicate the discovery to Capral.

338 Dalton's attack was based not so much on that chain of events as on the proposition that, with reasonable diligence, the corrosion could and should have been discovered at some earlier time. Mr Roberts referred to evidence given by the corrosion experts to the effect that they would have expected corrosion to manifest itself earlier.

339 I do not think that the question is to be resolved by speculative evidence of this kind given by experts. It is to be resolved by looking at the facts, so far as they are known. At all material times there has been a maintenance manager employed at the property. At all material times, the maintenance manager's duties have included regular inspections of the property, including the roof. The roof has been washed down regularly, to prevent corrosion occurring underneath accumulated leaf litter and the like.

340 In those circumstances, I think it more likely than not that visible evidence of corrosion would not have passed unnoticed. Further, I think it more likely than not that that if some evidence of corrosion had been detected, the maintenance manager would have reported it (as Mr Ainsworth did in September 2003) to Mr Forsyth. There is no evidence to suggest that any earlier report was made; indeed, this aspect of Mr Forsyth's evidence (which relates to "discovery of corrosion") was not challenged.

341 I conclude that the limitation defence has not been made good.

Issues 12, 13 and 14: Capral's claim against Stramit

342 Since Capral's cross-claim against Stramit has been resolved, it is not necessary to consider these issues.

Issue 15: contribution between Capral and Dalton

343 The claims for contribution were based on the principle that two persons who are under a coordinate liability to make good the one loss must contribute rateably to the satisfaction of that loss; so that, if one of those persons contributes more than his or her rateable share, the other will be liable to make good the excess. That principle is exemplified in the decision of the High Court of Australia in Albion Insurance Company Limited v Government Insurance Office of New South Wales (1969) 121 CLR 342. The principle was not in doubt, nor could it be.

344 Neither Mr Neal nor Mr Roberts addressed on this issue. At first blush, it might be thought that the application of the principle is plain. However, even if it should be assumed that the liabilities (having, as they do, separate sources) are coordinate, orthodox principle suggests that, neither party having paid anything, let alone more than its rateable share, there is no present ground for the court to intervene. See Woolmington v Bronze Lamp Restaurant Pty Ltd [1984] 2 NSWLR 242.

345 In the circumstances, I suggested, in the course of submissions, that if the question of contribution between Capral and Dalton arose, it should be left until the parties had had an opportunity of considering the reasons why it did arise. Mr Neal and Roberts agreed with that suggestion.

346 Accordingly, I reserve further consideration of this issue.

Conclusions and orders

347 Capral is liable under its warranty to pay the cost of replacing all the roofing (that is to say, over both the verandas and walkways and the main buildings). Dalton is liable to the same extent, for negligence. The amount of that liability, exclusive of GST, is $764,545.45. That sum was assessed (by Mr Makin) as at 31 January 2013. Interest should run from that date, if Dymocks wishes to calculate it.

348 Capral's cross-claim against Stramit is to be dealt with in accordance with the agreement between them.

349 The claims for contribution between Capral and Dalton should be reserved for further consideration.

350 Prima facie, costs should follow the event that Dymocks has succeeded against Capral and Dalton. I will however hear the parties on costs.

351 In those circumstances, I will stand the matter over to a date to be fixed to enable the parties to bring in short minutes of order to give effect to these reasons. On that date, I will deal with any dispute as to the form of orders, and (should it be in dispute), with the question of costs. If Capral and Dalton wish to agitate their cross-claims for contribution, that should be dealt with in the orders.

352 I make the following orders:

(1) direct the plaintiff to submit to the defendants by 19 April 2013, and to provide to my Associate, a draft of the orders sought to give effect to these reasons.

(2) In the event that there is a dispute as to the orders to be made, direct the parties opposing the orders sought by the plaintiff to submit to each other by 26 April 2013 with a copy to my Associate, the orders sought; the parties to exchange, and to deliver to my Associate, brief written submissions in support of the orders for which each contends within seven days thereafter.

(3) Stand the matter over to 10:30am on 29 April 2013 for the making of final orders.

(4) Reserve liberty to apply in chambers in the event that there is no dispute as to the orders to be made.

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Decision last updated: 17 April 2013