Eagle Star Trustees Ltd & Permanent Trustees Ltd v White Industries Qld Pty Ltd & Ors [1994] QSC 78

./A• State Reporting Bureau TRANSCRIPT OF PROCEEDINGS (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bu:-eau.) SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION AMBROSE J No 2600 of 1989 EAGLE STAR TRUSTEES LTD and PERMANENT TRUSTEES LTD and WHITE INDUSTRIES QLD PTY LTD and HENNESSEY GLASS & ALUMINIUM SYSTEMS PTY LTD and FORD MOTOR COMPANY and FORD GLASS AND METAL INC and PITTSBURG PLATE GLASS COMPANY and WILLIAM JAMES JOB First Plaintiff Second Plaintiff First Defendant Second Defendant Third Defendant Fourth Defendant . Fifth Defendant Sixth Defendant 4th Floor, The Law Courts, George Street, Brisbane, Q. 4000 Telephone: (07) 227 4360. Facsimile: (07) 227 5532 -- 1 of 56 -- and HARVEY DAVID RUSSELL and GRAHAM J DANIELS and WILLIAM JOB & ASSOCIATES PTY LTD (in liquidation) and GRAHAM BELL BRISBANE .. DATE 2 5 I 0 3 I 9 4 JUDGMENT 2 Seventh Defendant Eighth Defendant 10 Ninth Defendant Tenth Defendant 20 30 40 50 60 -- 2 of 56 -- 250394 ham (Ambrose J) HIS HONOUR: In this action I give judgment for the plaintiff against the second defendant in the sum of $897,531 with costs to be taxed. I give judgment for the first defendant against the second defendant for the sum of $938,561 plus the amount of the plaintiff's costs against the first defendant to be taxed on a party and party basis. I tentatively order that the second defendant pay to the first defendant its costs of the action, including its costs of its third party proceedings against the second defendant to be taxed. I publish my reasons for all those judgments and orders. HIS HONOUR: I will vary the order from the form of judgment I announced and the order I made and I make the variation on the basis of an offer to settle made by the plaintiff to all defendants pursuant to Order 26 on 27 October 1993. I make that having taken into account, or keeping in mind, that Eagle Star Trustees Limited exercised a power of appointment to appoint Permanent Trustees Limited to be the trustee in its stead of the trust relating to the property at Albert Street subject to the action in December 1991. The orders which I make now presently in substitution for the orders that I made prior to hearing submissions on costs are these: I give judgment for the plaintiff against the second defendant for the sum of $897,531, together with costs to be taxed on a solicitor and client basis. I give judgment for the first defendant against the second defendant in the sum of - JUDGMENT 3 10 20 30 40 50 60 -- 3 of 56 -- 250394 ham (Ambrose J) $938,561, together with the judgment given in favour of the plaintiff by consent of the first defendant for costs to be taxed on a solicitor and client basis. I order that the second defendant pay to the first defendant its costs of and incidental to the action, including the third party proceedings upon which it has succeeded, such costs to be taxed on a solicitor and client basis. _ JUDGMENT 4 10 20 30 40 50 -- 4 of 56 -- JN THE SUPREME COURT OF QUEENSLAND No. 2600 of 1989 Brisbane Before Mr. Justice Ambrose / [ Re :/ Eagle Star Trustees Ltd] BETWEEN: EAGLE STAR TRUSTEES LTD First Plaintiff AND: PERMANENT TRUSTEES LTD Second Plaintiff WHITE INDUSTRIES OLD. PTY LTD. First Defendant HENNESSEY GLASS & ALUMINIUM SYSTEMS PTY LTD. Second Defendant FORD MOTOR COMPANY Third Defendant FORD GLASS AND METAL INC. Fourth Defendant PITTSBURG PLATE GLASS COMPANY Fifth Defendant WILLIAM JAMES JOB Sixth Defendant HARVEY DAVID RUSSELL Seventh Defendant GRAHAM J. DANIELS Eighth Defendant WILLIAM JOB & ASSOCIATES PTY LTD (In liquidation) Ninth Defendant GRAHAM BELL Tenth Defendant -- 5 of 56 -- 2 REASONS FOR JUDGMENT - AMBROSE J. Judgment delivered: 25/3/1994 CATCHWORDS: Building Contract - Property Law Act s.52 - whether owner can enforce contract between head contractor and subcontractor - inherent defect in goods supplied - future breakage. Counsel: Solicitors: Hearing Date(s): Whether offeror in contract liable in tort - whether duty of care owed by subcontractor to owner - pure economic loss - inherent defect in imported goods - whether offeror in breach of duty by not making reasonable investigation. Mr S. Doyle for first and second plaintiffs Mr H. Fraser Q.C. with him Mr P. Hastie for first defendant Mr S. Couper for second defendant Mr D. Ryan for seventh and tenth defendants Mr P. Lilley for ninth defendant Clayton Utz for first and second plaintiffs Minter Ellison Morris Fletcher for first defendant John McGaw Solicitors for second defendant Thynne & Macartney for seventh and tenth defendants Sly Weigall Cannon & Peterson for ninth defendant 15/11/93- 3/12/93 -- 6 of 56 -- IN THE SUPREME COURT OF QUEENSLAND No. 2600 of 1989 Brisbane Before Mr. Justice Ambrose [Re: Eagle Star Trustees Ltd] BETWEEN: EAGLE STAR TRUSTEES LTD First Plaintiff AND: PERMANENT TRUSTEES LTD Second Plaintiff WHITE INDUSTRIES OLD. PTY LTD. AND: AND: AND: AND: First Defendant HENNESSEY GLASS AND ALUMINIUM SYSTEMS PTY LTD. Second Defendant FORD MOTOR COMPANY Third Defendant FORD GLASS AND METAL INC. Fourth Defendant PITTSBURG PLATE GLASS COMPANY Fifth Defendant WILLIAM JAMES JOB Sixth Defendant HARVEY DAVID RUSSELL Seventh Defendant GRAHAM J. DANIELS Eighth Defendant WILLIAM JOB & ASSOCIATES PTY LTD (In liquidation) Ninth Defendant GRAHAM BELL Tenth Defendant -- 7 of 56 -- 2 REASONS FOR JUDGMENT -AMBROSE J. Judgment delivered: 25/3/1994 In about 1983 the ninth defendant, William Job & Associates Pty Ltd (In liquidation) ("William Job & Associates") prepared an illustrated conceptual plan of a building that might be erected on a site at 80 Albert Street, should it be redeveloped in accordance with the terms of a planning consent obtained for redevelopment of that site from Brisbane City Council. It was the seventh defendant, Harvey David Russell ("Russell"), who actually drew or was responsible for the drawing of that plan. The planning consent was obtained by the then owner of the building site. Armed with that planning consent and the plan drawn by Russell the owner made efforts to sell the land together with the planning consent which, pursuant to s.20D of the City of Brisbane Town Planning Act would be irrevocable for only two years. Time was running out by the time that Brick Securities ("the developer") showed interest in acquiring that land for the purpose of its development with a high rise glass clad commercial building in accord with the current town planning consent. In fact the town plan for the city of Brisbane was changed after planning consent for the proposed development had been given and under the new town plan it was not likely that consent for a development in terms of that obtained earlier would be obtainable. It seems likely that the current planning consent was a matter canvassed in negotiations leading to the purchase of 80 Albert Street by the developer in about 1983. -- 8 of 56 -- 3 Immediately after the property was purchased the developer established a property trust to which members of the public subscribed. The object of the trust was to redevelop the land at 80 Albert Street in accordance with the planning consent then current with a building having the appearance of that shown on the illustrated plan drawn by Russell in 1983. The appearance of the proposed building was significantly different from other high rise buildings in Brisbane at that time. Indeed, it was different in material respects from other glass clad high rise commercial buildings in Australia. Mr Donovan the person acting for the developer at the time in connection with redevelopment of the site, was conscious of two things - (1) that there had been a public subscription of funds which were to be invested in a building having the size, shape, and appearance of that drawn by Russell to facilitate the sale of 80 Albert Street as a redevelopment site. Mr Donovan was anxious to avoid the possibility of any problems with the Australian Securities Commission which might result from a development upon that site of a building different in appearance from that represented to investors to persuade them to subscribe funds for the proposed trust. (2) If there were not substantial progress made in the construction of the proposed building within two years of the giving of planning consent, that consent would be at risk of revocation under s.20D of the City of Brisbane Town Planning Act. Once progress with the building construction -- 9 of 56 -- 4 was under way it was likely that any necessary extension of time would be granted. (3) The matter was further complicated by the fact that planning consent was conditional upon building approval being obtained for the construction of the proposed building and at the date of the land purchase by the developer no plans had even been drawn for submission to the Council for building approval. The only thing that had been prepared was the illustrated plan by Russell as employee of William Job & Associates. A plan had been drawn, it seems, principally, if not solely for the purpose of facilitating the obtaining of planning consent for construction of the building sketched and for the subsequent sale of the undeveloped land to a purchaser interested in carrying forward that development. The illustrated plan drawn to facilitate the sale of the land at 80 Albert Street showed an 18 storey building comprising a 14 storey tower block upon a 4 storey podium. The external walls of this building were almost entirely sheeted in glass panels of different colours. The appearance of the building showed no framework to hold the glass panels. No builders in Brisbane (or perhaps Australia) had any experience in constructing such a glass curtain wall exterior to a building of that height, although such walls had been constructed overseas, particularly in North America. The method eventually adopted to fix the glass curtain walls to the building was to glue the glass panels involved onto aluminium framework in a factory and then transport each panel -- 10 of 56 -- 5 to the building site where it was lifted by various means to its ultimate location where the aluminium frame to which it was stuck was bolted on to the concrete building structure. Each panel was separated from adjacent panels by about 30 rnrn. Obviously the building technique for application of glass panels to the external surface of a building which rose 18 storeys above street level when adherence of the panels to the framework depended upon the strength and durability of glue used for that purpose and the way in which the frames were fixed to the building structure was of great importance. Not merely did William Job & Associates involved in the project have no previous experience in the installation of glass curtain walls in this manner, but nobody associated with that organisation seems to have had much, if any, experience in the installation of glass curtain walls of the sort envisaged in the sketch drawn by Russell in any other manner. The sixth defendant, William James Job, ( "Mr Job"), had reservations about William Job & Associates being involved with the "innovative" building techniques necessary to erect the glass curtain wall proposed to produce a building having the appearance of that shown in the illustrated diagram prepared by Mr Russell. It eventually fell to Mr Russell who had drawn the plan of the proposed building to investigate the system, which on all accounts corning to the knowledge of the architects involved, had been used successfully in other parts of the world. One of the men employed by William Job & Associates who was involved in this investigation and research work was Mr Windress. Mr Windress had -- 11 of 56 -- 6 no prior experience in the installation of glass curtain walls of the sort proposed for the redevelopment of 80 Albert Street. It was Mr Windress who investigated the matter and eventually took over the preparation of the specifications etc. for the erection of the glass curtain wall. He did this under the supervision of Russell. I accept the evidence of Mr Parker and Mr Hartog, both practising as architects in the 1980s, that by 1983-84 there was information available to them which led them to suspect that "toughened" or "tempered" glass sometimes failed because of nickel sulphide inclusions. However, expert opinion differed at this stage as to the part played by nickel sulphide inclusions in the failure of panels of fully toughened glass. Mr Calderonie of Pilkington Glass recommended against its use in locations where it would be subject to heat stress; his view was that toughened glass should be heat soaked to avoid spontaneous failure when heat stressed. Comalco said that it had had "bad experiences" with toughened glass. H.H. Robertson, carrying on the same business as Hennessey, recommended against the use of toughened glass for curtain wall construction and referred to heat soaking the glass to reduce the failure rate due to nickel sulphide. By October, 1985, contractual documents had been prepared by solicitors for the developer for the development work to proceed at 80 Albert Street. The long specifications for the work to be performed by the builder pursuant to the contract were prepared by William Job & Associates. Tenders were called and it was decided to accept one submitted by Hutchinson & Co. However -- 12 of 56 -- 7 that contract was abandoned when the builder asserted that computer error had resulted in a mistake in the tender submitted. The builder was released from contractual obligation. The developer at this stage became anxious to have development work commence, inter alia, to avoid the risk of revocation of planning consent and because significant funds had been subscribed by investors for the purpose of effecting the proposed redevelopment of the site. Hutchinson & Co had apparently arranged for another glass erecter, J. James & Co, to be its subcontractor to erect the glass curtain wall although the terms of that arrangement did not emerge upon trial. The specifications for the construction of the building are very detailed and only those dealing with the supply and erection of glass curtain walls, the subject of the action, were considered upon trial. Eventually the first defendant, White Industries Qld Pty Ltd, ("White") negotiated with the developer and William Job & Associates to become the contractor to build the proposed commercial building. It was White which introduced the second defendant, Hennessey Glass & Aluminium Systems Ltd ("Hennessey"f, as the proposed subcontractor for the supply and erection of the glass curtain wall. It is clear on the evidence that all parties involved in the tender at this stage regarded Hennessey and experts it retained from the United States (Cal Asia), as the source of knowledge and expertise necessary to design and erect the glass curtain wall proposed for the building. -- 13 of 56 -- 8 The specifications drawn by William Job & Associates were performance specifications. That is they specified the result to be achieved and relied upon the expertise of Hennessey to supply and fix glass panels to produce a curtain wall having the appearance and characteristics required. It was Hennessey who was to select the appropriate glass and design the manner of its fixing. This involved Hennessey designing the aluminium frames to be glued to the glass panels, selecting the type and thickness of glass, supplying materials, sticking the glass panels to the frames in its factory off site and then erecting the curtain walls. I will refer later in more detail to the specific terms of the contractual specifications. It is clear that White had commenced to construct the building sometime before Hennessey was accepted by Job & Associates as the subcontractor to supply and erect the glass curtain wall. I will deal in more detail later with what passed between White, Hennessey, and the architects preceding acceptance of Hennessey as the glass supplying and erecting subcontractor for the construction of the building at 80 Albert Street and preceding also the completion of that subcontract work. Under the contract practical completion was required by 28 August 1987. A certificate to that effect was given by the architect in compliance with cl.25 of the contract on 5 October 1987. On 29 June 1987, White forwarded an instruction of William Job & Associates to and notified Hennessey that 24 glass panels were scratched to such an extent at date of practical completion -- 14 of 56 -- 9 as to be unacceptable under the terms of the subcontract. Subsequently demands were made on a number of occasions upon Hennessey that the damaged panels be replaced. Hennessey, however, denied any legal obligation to replace them and refused to do so. Shortly after the building construction had been completed glass panels commenced to shatter spontaneously for no apparent reason. Exhibit 42 records chronologically the shattering of various glass panels between February 1987 and January 1993. After the building had been completed an architectural company called Resource Co-ordination Partnership Pty Ltd was retained by the developer to do the internal fitting out for tenants obtained for the building. It was in the course of that work being performed by this company that the glass panels commenced to explode spontaneously and it was asked to investigate the matter and take steps to correct whatever problem there was. Mr. Bylett of that company dealt with this problem and in the course of his investigations obtained advice from a Mr Ballantyne, who while employed as a scientist with CSIRO in the 1960s had examined a similar spontaneous shattering of glass panels in a high rise building in Melbourne. That building is known as the I.C.I. Building. Mr. Ballantyne, having investigated the matter thoroughly, had concluded that the cause of the spontaneous shattering in the I.C.I. Building was the presence of impurities comprising particles of nickel sulphide in glass panels which had been toughened by a heat process to which they were subjected. This heat process caused a reduction in volume of the nickel sulphide -- 15 of 56 -- 10 particles which over time expanded to their original volume. Depending upon the size of the particles the pressure exerted upon the toughened glass in which they were imbedded caused the glass to shatter without warning. The glass shattered in a way leaving a pattern which was recognisable as one caused by the sort of pressures exerted by the expanding impurity. Mr Ballantyne published his conclusion in a number of articles including one published in Melbourne in 1961. (vide ex.?) In about 1974 another building in Adelaide clad with toughened glass also had glass panels shatter spontaneously and an investigation of that failure led to publication of a conclusion as to the cause of the shattering similar to that reached and published by Mr Ballantyne 13 years earlier, that the shattering resulted from the expansion in toughened glass of nickel sulphide impurities which had suffered a volumetric change in the heat toughening process. In this case, unsuccessful efforts were made by the first plaintiff, Eagle Star Trustees Ltd ("Eagle Star") to be compensated by one or more of the current defendants in this action and by various other persons including the manufacturers and suppliers of the glass used, which were American companies. I infer that Eagle Star was the nominee of Eagle Star Nominees Ltd, the corporation used by Brick Securities to develop the project at 80 Albert Street. Not having succeeded in these attempts to negotiate a settlement, Eagle Star commenced this action in 1989. By date of trial Eagle Star had been acquired by the second plaintiff, Permanent Trustees Ltd, ("Permanent Trustees") which conducted -- 16 of 56 -- 11 the case on the basis that it was entitled to all the rights to which Eagle Star had been entitled to enforce the rights of the developer. Upon the evidence I find that Permanent Trustees did have that entitlement. When this trial commenced the only defendants in the action were the builder White, the glass subcontractor Hennessey, the architectural group William Job & Associates (in liquidation) and two of the architects involved with William Job & Associates Pty Ltd at the material time, Russell and Bell. At the trial Permanent Trustees based its case against White and Hennessey in contract, negligence, and a breach of obligation under the Trade Practices Act; against the archi teet William Job & Associates Pty Ltd in contract and tort and against the two architects Russell and Bell in tort. On the twelfth day of the trial on 30 November 1993, the issue in dispute between White and Permanent Trustees was settled. In effect, White conceded liability in contract and consented to have judgment entered against it by Permanent Trustees in the sum of $938,561 plus costs. This settlement between Permanent Trustees and White occurred during the course of the case being led for Bell. At the close of the evidence for Bell (the evidence for Russell already having closed), Permanent Trustees then discontinued its action against Russell, Bell and William Job & Associates. Russell, Bell and William Job & Associates then discontinued third party proceedings against White and Hennessey. The case then continued so that the only live issues to be determined upon the whole of the evidence led to that time was -- 17 of 56 -- 12 the issue between Permanent Trustees and Hennessey and the third party proceedings between Hennessey and White. At the close of evidence Permanent Trustees did not pursue its claim against Hennessey under the Trade Practices Act. While it did not abandon its claim against Hennessey in negligence it certainly relied principally upon its claim in contract. White claimed a contractual indemnity against Hennessey. One of the bases of the claim was that White in fact was contractually liable to Permanent Trustees by reason of Hennessey's breach of its obligations under the subcontract and the settlement it had made of the plaintiff's claim against it was a reasonable one and therefore recoverable against Hennessey under the principles applied in Biggin v. Permanite (1951) 2KB 314. I will deal only with the issues debated between Permanent Trustees, Hennessey and White at the conclusion of the evidence. The claims by Permanent Trustees against White in contract include claims in respect of - (1) The replacement of the scratched glass panels. (2) Loss flowing from the spontaneous shattering of the toughened glass panels, being - (a) the likely cost of future replacement plus various items of loss associated with failure of the glass; the liability for the cost of replacement to date is in issue but the quantum of that cost is not; (b) the cost of erecting works to protect pedestrians in the street in the vicinity of the building on 80 Albert Street from falling glass. -- 18 of 56 -- 13 Consideration of these matters will involve determination of what, if any, contractual obligation there was between Eagle Star Nominees Ltd and Hennessey. It is Hennessey's case that in fact there was no contractual arrangement between Eagle Star Nominees Ltd as principal and Hennessey as subcontractor, but only one between Hennessey as subcontractor and White as contractor, and that it was only that arrangement which included the long specifications. It is contended that William Job & Associates did not on behalf of Eagle Star hand to White those long specifications for the supply and installation of glass wall panelling. With respect to the indemnity claim between White as contractor and Hennessey as subcontractor, White claims of course that the long specifications were part of the subcontract it had with Hennessey and consequently Hennessey's liability under the subcontract is to be determined by reference to what it was obliged to do under the long specifications. Hennessey concedes that the long specifications did form part of the subcontract it had with White, but contends that the subcontractor's breach of the subcontract is irrelevant to White's contractual obligations to Eagle Star because the long specifications, which were admittedly part of the subcontract, were not part of the head contract and so White is not liable to Eagle Star for breach of the long specifications. It is a contention of Hennessey that upon the evidence the characteristic of the toughened glass supplied and fitted to the building to shatter was simply one of its inherent -- 19 of 56 -- 14 characteristics and it breached no contractual obligation either express or implied in supplying and fitting it. With respect to the condition, quality and characteristics of the glass in issue at relevant times, I find that 24 of the glass curtain wall panels erected by the subcontractor at date of practical completion in October 1987 were scratched to such an extent as to make them unacceptable. The subcontractor was asked to replace those scratched panels on 29 June 1987 and on subsequent occasions. The subcontractor denied any obligation to replace them and has failed to do so. Upon the evidence I infer that the panels were probably scratched by employees of the subcontractor when they were working in the course of fixing those panels to the building. In any event there was a contractual obligation upon Hennessey to have in place panels of glass free of such scratches by date of practical completion. Between 28 February 1987 and 6 January 1993, 26 of the glass panels failed. 24 of those failures were spontaneous and not related to or caused by impact or the application of mechanical force to them. Most of the panels which have so far failed have been replaced by Hennessey which has reserved its right to claim payment pending the determination of its liability in this action. Only one panel has been replaced at the plaintiff's cost and that is reflected in item "D" in ex.102 and is assessed in accordance with that schedule. -- 20 of 56 -- 1 5 On the balance of probabilities I find that each of the 24 failures was caused by the expansion of "stones" of nickel sulphide contained in the panels. Only a relatively small percentage of the panels seems to have contained nickel sulphide particles of a size and in a position to cause spontaneous fracture of the panels to date. The fractures probably resulted as a consequence of the nickel sulphide inclusions gradually increasing in volume as time passed to achieve their original volume or mass which had been reduced in the heat process applied to them in the course of toughening. The toughened glass supplied and fixed to the plaintiff's building by the subcontractor was manufactured in the United States of America. The manufacture involved, inter alia, subjecting sheets of annealed glass cut to the size ultimately required to a very high temperature and then rapidly cooling them. This process resulted in the glass cooling more quickly on its surfaces than between the surfaces. This resulted in the surfaces being subject to tension forces while between the surfaces the glass was subjected to forces of compression. Some of the sheets of annealed glass so treated, contained particles of nickel sulphide in various sizes. When subjected to extreme heat the mass or volume of the nickel sulphide particles was reduced. When not subject to such heat, the particles gradually (over some period of time) expanded to attain their former size. This expansion generated forces within the glass sheet resulting in its spontaneous fracture. The time taken for the expanding particles of metal sulphide to exert sufficient force to the toughened glass to cause spontaneous fracture depended upon the -- 21 of 56 -- 16 size of the deposits and/or the forces exerted on or generated within the panel of toughened glass from time to time as the result of wind pressure and/or the application of heat from the sun. The effect of heat toughening annealed glass upon deposits of nickel sulphide in it has been known at least by a limited number of people for many years. Efforts to extract the nickel sulphide from the material used in making annealed glass have not been successful. Some batches of annealed glass appear to contain less deposits of nickel sulphide of a size and in a location likely to cause problems than other batches. Upon the evidence, of the 1354 sheets of toughened glass applied to the building in 1987, 24 have failed in the absence of impact. It appears therefore that the result to date is that nearly 1.7 percent of the panels supplied have been so defective that while fixed to the building they needed replacement within seven years. Upon the evidence, I find that over the next three or four years it is likely that further panels of glass will fail as a result of nickel sulphide impurities in them. On the one hand, both the history of failures to date and some of the scientific evidence suggests that the rate of failure lessens with the passage of time. On the other hand, there is little evidence as to possible effects in the future of wind and heat on panels of glass containing nickel sulphide deposits of a size which to date have not led to failure. The manufacturers of the glass panels were apparently only prepared to warrant their product to the subcontractor to the extent that the sub-contractor was prepared to "guarantee" the performance of the -- 22 of 56 -- 17 glass for 10 years and not for 15 years as initially sought by the plaintiff's architect. I find that the reasonable cost of replacing the 24 scratched panels which need replacing will be $77,346.00. In fact one scratched panel has been replaced at a cost of $3,642 (vide "D" at p.107 of ex.102). That sum for convenience is included in item "D" rather than "D1" in that exhibit. Upon the evidence I find that it is reasonable for the plaintiff/owner to employ experts to examine carefully all the glass panels which have not yet failed (with the exception of the 24 scratched panels that must be replaced) to determine the location and size of nickel sulphide particles in them. It is unfortunate that testing was not performed prior to trial. Had that been done, the cost of the test plus the cost of replacing all panels in which particles of nickel sulphide of a size and position which would make it likely that they would cause failure at some time in the future, would prima facie be one of the measures of damage. I propose to assess damages to compensate for the cost of an investigation to detect panels which will fail in the future and as well, the present value of the cost of replacement of panels which will probably fail in the future. The outcome of the test to be performed in the future as advised by Drs McKinnon and Barry may only be predicted at this stage. It is possible no doubt that no future failures may occur. On the other hand many more failures may occur. Mr Bylett has expressed the opinion that 27 further failures are likely by approximately 1998. -- 23 of 56 -- 18 On the state of the evidence I have regard to the whole of the cost of investigation services available from Drs McKinnon and Barry. This sum will however, only partly compensate the plaintiff for undertaking a necessary expense which might reasonably have been undertaken prior to trial to make more certain by scientific means the probable number of future failures of panels which will need replacing. Doing the best I can I find on the probabilities that about 21 panels will have to be replaced at some time in the future by reason of their failure as a consequence of the nickel sulphide deposits in them. In coming to this conclusion I have had regard to the evidence of Dr Mckinnon who said that a minimum of 15 panels would fail during the next four or five years and the evidence of Mr Bylett that another 27 panels would fail by 1998 or thereabouts. Mr Bylett has had a lot to do with the failure of the glass panels in issue up to date and his evidence is consistent with the advice he gave to the building manager in February 1993. I find that at least 15 of those 21 panels will probably have failed within three years if not replaced and a further 6 panels will probably have failed within four or five years by reason of nickel sulphide inclusions presently detectable by Drs McKinnon and Barry. All failures have resulted and will result in the future by reason of inherent defect which interferes to an unacceptable extent with their appearance, service and function as glass curtain wall panels. I take into account both the cost of performing the test over all panels in the building to identify those at risk which amounts to $144,500 and the adjusted cost of replacing 21 panels -- 24 of 56 -- 19 postponed for one year using the 7 per cent tables which amounts to $93,458. Both sums are relevant in the assessment of damages to compensate the plaintiff for the supply and fixing of replacements for defective glass panels which have not yet but which will probably fail in the future. I assess this sum at $237,958. I make no assessment of the cost of replacing the 24 panels that have failed to date. I find that monies reasonably spent by the plaintiff in the erection of screens, baffles etc. around the building to protect public areas from falling glass should the glass panels fracture spontaneously, are recoverable. It was reasonably necessary for the owner of the building to take those steps to prevent injury to people and property in public areas in the vicinity of where glass might fall, and indeed, where it did fall upon spontaneous fracturing of the panels. The necessity to spend this money resulted directly from the supply and fitting of the defective glass panels to the plaintiff's building. It was really a matter of good fortune that people were not injured by falling glass which commenced in 1987. The money so spent amounts to $276,159.96. The legal consequences of the findings I have made require consideration of - (1) relevant contractual Nominees Ltd (as contractor); obligations between owner/developer) and Eagle White Star (as ( 2) relevant contractual obligations between White (as contractor) and Hennessey (as subcontractor); and -- 25 of 56 -- (3) 1 . relevant Nominees 20 contractual obligations Ltd (as owner/developer) subcontractor). Contractual obligation between Contractor between Eagle and Hennessey Owner/Developer Star (as and The lump sum contract is dated 13 March 1986. It is not entirely clear at what precise date the contract was made. In specifications of work and materials tendered as part of ex.113 there is an endorsement suggesting that perhaps the contract was entered into on 9 April 1986. However that may be, in s.150 of the specifications of that date headed "windows and doors" brief mention is made of "windows & curtain wall". The provisional sums included in the contract are set out on p. 12 (a) of the general specifications. The provisional sum specified for windows and curtain walls in s.020-01 on p.12(a) is $1,540,000. In annexures (b) and (c) to the contract reference is made to discounting the p.c. sum for curtain walling and glazing by $150,000. Each annexure goes on to provide "and we would then use our buying power to achieve the same general specifications as that specified". It is quite clear that the general specifications, ex. 113, contain no specifications whatever as to quality or type of glass for walls and windows. In the preamble to the agreement dated 13 March 1986 it is recited that the proprietor "has caused drawings and/or specifications and/or documents showing and/or describing the work to be done ... ". Under cl.1 (a) of the agreement, it is provided, inter alia: -- 26 of 56 -- 21 "The architect may in his absolute discretion and from time to time issue further drawings details and/ or written instructions ... respecting (iii) any errors omissions or discrepancy in or divergence between the contract drawings and/or specifications". It is clear upon the evidence that a document referred to as "the long specification" setting forth in very considerable detail the requirements for the glass curtain wall were in fact produced in March - May 1985 at a time when Hutchinson & Co and J James & Co were negotiating for the construction of glass curtain wall work on the proposed development. In this respect I refer to the evidence of Mr Russell. It is clear that reference was made to these long specifications prior to the execution of the contract dated 13 March 1986. Indeed, the builder had discussed them with G James which according to Mr Russell played a significant part in their preparation when the original building contract with Hutchinson and Co was on foot or in contemplation. It is abundantly clear from the way the owner and its architect and the contractor and subcontractor discussed matters relating to the glass curtain walling that the long specifications were available to and acted upon by all parties involved in the construction of the glass curtain wall. Indeed they were included in and became part of the subcontract (ex.131) -vide cl.44(d). It is clear that the contractor provided the long specification to the subcontractor prior to 13 February 1986 (see ex.114), and it formed part of Subcontract Agreement No. 16.060 -- 27 of 56 -- 22 forwarded to the subcontractor for signature on 30 May 1986 (see ex. 1 31 ) . On 26 February 1986 the architect acting for the owner at site meeting number two advised the contractor that guarantees to be provided by the subcontractor with respect to the windows and curtain walls must be those specified in the long specification. At this stage a number of glaziers had offered to do the work although Hennessey had not yet submitted a tender. In its letter of 18 March 1986 the contractor forwarded to the architects a copy of the subcontractor's tender dated 17 March 1986, for the very works described in the long specification. It was subsequent to that correspondence that the architect, on behalf of the owner by letter of 26 March 1986, advised the contractor that it accepted Hennessey as subcontractor for the performance of the work described in the specification. By letter of 27 March 1986 the contractor advised the subcontractor that its tender had been accepted and that the long specifications would form part of the agreement. On 3 April 1986 the contractor, at a special projects meeting, requested that the architect ask the owner to shorten the 15 year period of guarantee specified in the long specification to one of 10 years. On 30 April 1986 the owner agreed to a reduction in the period of guarantee from 15 years to 10 years. On 30 May 1986 the contractor submitted to the subcontractor the form of subcontract including the long specification which was subsequently executed. It is abundantly clear in my judgment that the glass curtain wall erection as part of the building to be constructed was a -- 28 of 56 -- 23 complicated and quite expensive part of the overall construction work. The specification was a performance specification and in my view, it would be most unlikely that White in those circumstances would not be under a contractual obligation to Eagle Star for the performance of the work to be performed by the subcontractor in accordance with the long specification. Indeed, without reference to the long specifications there is no contractual provision whatever concerning the design or weather sealing of the structural glazing. Neither is there any specification of colour, thermal properties or wind loading of the glass to be fixed. Not surprisingly, it was conceded on behalf of the contractor that the long specifications were part of the contract between contractor and owner. It was only the subcontractor who contended that the long specifications were never part of the contract between contractor and owner, while conceding that they were indeed part of the subcontract between contractor and the subcontractor. I find upon the material that the long specifications which are ex.142 did form part of the contract between the owner and the contractor. The same specifications are included in the subcontract under cl.44(d) thereof (ex.131). In any event, in my view, even had the long specifications not been part of the contract, there would certainly have been a contractual obligation imposed upon the contractor to supply a curtain walling system which was reasonably fit for its purpose and which was of merchantable quality. I accept the contention of the plaintiff in this respect without need to rely upon the -- 29 of 56 -- 24 concession of the contractor. I refer only to Young and Martin Ltd v. McManus Childs Ltd (1969} 1 AC 454 and Gloucester Shire County Council v. Richardson (1969} 1 AC 480. Clearly the glass panels which failed and which will fail did not meet the standard required to comply with this obligation. 2. Contractual obligations between Contractor and Subcontractor For the reasons I have already expressed, the evidence establishes clearly that the long specifications (ex.142} did form part of the contract between the contractor and sub-contractor. Those specifications together with other material are expressly incorporated in the subcontract pursuant to cl.34(d} thereof (ex.131}. It is clear upon the evidence that the subcontractor specifically requested that the period of guarantee under subs. 002 of the long specifications be reduced from the period of 15 years specified in specifications 02, 03, and 04, to one of 10 years. This request was made at a special projects meeting on 3 April 1986. It was on 30 April 1986 that the owner agreed to the reduction of the periods of guarantee referred to subs. 002 -01, 02, 03, and 04. There is no reference whatever to any period of guarantee in the general specification being part of the contract between the owner and the contractor. In the course of argument reference was made to condition 3 of the general conditions of subcontract between the contractor and subcontractor. Under 3A( 1}, it is specifically provided that except to the extent that they are: "strictly inconsistent with the express provisions of this subcontract all provisions of the head contract as may be applied and/or related to the works and to the rights and obligations to be observed, performed -- 30 of 56 -- 25 and complied with by the company and the principal under the head contract in relation to the head contract works and in particular the works shall be deemed to be included in and to form part of the subcontract which shall be read as though such prov1s1ons of the head contract were (mutatis mutandis) expressly set forth herein ... ". Had the long specifications not been specifically included as part of the subcontract no doubt general condition 3A (i) and perhaps (ii) may have been called in aid to demonstrate that the subcontractor was contractually bound to the contractor, inter alia, in terms of the specifications to be found with other documents in ex.132. In my view, however, it is unnecessary to have resort to the general condition 3 of the subcontract. On the express terms of the subcontract it is clear beyond argument that the long specifications did form part of it. In my view, on the material to which I have referred the contractual obligations to be found in the long specifications for the construction of the glass curtain wall are imposed upon both the contractor (White) and the subcontractor (Hennessey). It follows that one has regard to the obligations imposed by the long specification in determining both the liability of the contractor (White) to the plaintiff and also the liability of the subcontractor (Hennessey) to the contractor (White). The liability of the contractor (White) to the plaintiff under the head contract, is now relevant only in determining the remaining issue between the contractor (White) and subcontractor (Hennessey). White has settled its obligation to the plaintiff by consenting to judgment against it for the sum of $798,561 plus interest of $140, 000 plus costs in full settlement of the -- 31 of 56 -- 26 plaintiff's claim. White.now seeks a contractual indemnity from Hennessey under general condition 3B of the subcontract. Even without this express provision, the subcontractor would be obliged to indemnify the head contractor against loss suffered by the head contractor as a direct consequence of the subcontractor's breach of its contractual duty to the contractor. If the settlement of the action between the plaintiff and White be reasonable in the circumstances then the amount paid under the settlement is to be taken as the measure of damages. In this respect I refer to Biggin & Co Ltd v. Permanite (1951) 2 KB 314. With respect to the contractual liability of the contractor to the owner and of the subcontractor to the contractor on the findings which I have made, it is necessary to go only to subs.003 - 09 of the long specifications which reads: "09 Glass Generally - Glazing Glass shall comply generally with BS 952 be the kinds and grades specified or shown on the drawings and shall be free from cracks, scratches, bubbles, blisters and other defects which will interfere with the appearance or service." Under sub-section 002 - 01 "Guarantees" it is provided that the subcontractor shall: "Provide in the name of the proprietor Guarantees effective from the date of Practical Completion of the Building Contract for the supply, manufacture and installation of the total works of the subcontract as set out below ... 04 GLAZING INCLUDING STRUCTURAL SILICONE. A further guarantee shall be given to the Proprietor which assures making good any glazing defects which result in air or water infiltration and replacement of glass which fractures due to workmanship or materials and including all associated glazing materials as may be required to make good for a period not less than ( 15) years. Allow for all costs associated with making good any defects or breakages ... " -- 32 of 56 -- 27 I would construe the term "guarantee" used in these specifications to mean or at least to include "warranty". I find that Hennessey breached the obligations imposed on it by the specifications, to which I have referred, in failing to replace the scratched glass panels and in supplying and fixing to the plaintiff's building glass which was defective by reason of nickel sulphide impurities in it which have interfered and will interfere with its appearance and service. On 30 November 1993 White consented to judgment being entered against it in favour of Permanent Trustees Limited:- "On the basis of contractual liability for a breach of the term alleged in paragraph 7 of the amended statement of claim delivered 22 November 1993 without any finding of negligence or breach of the Trade Practices Act or otherwise in the sum of $798,561 (together with an amount of $140,000) as interest together with costs awarded on a solicitor and client basis." Paragraph 7 of the amended statement of claim delivered 22 November 1993 alleged:- "7. Subsection 01 0. 003. 09 of the specification provided that the glass to be provided pursuant to the contract should comply generally with BS952 be the kinds and grades specified or shown on the drawings and should be free from cracks, scratches, bubbles, blisters and other defects which would interfere with the appearance or service." In the revised quantum schedule which is ex.102B the loss and damage suffered and to be suffered by the plaintiff as the result of the installation of glass curtain wall panels with scratches and defects attributable to nickel sulphide inclusions is stated to be $798,561.06. The summary of damage is expressed as follows:- (A) (B) Erection and removal of scaffolding Construction of external permanent canopy $477,90.27 $269,659.96 -- 33 of 56 -- 28 (C) Installation of safety features (D) Replacement of glass (D1) Replacement of scratched panels (E) Costs of administration (F) Expert reviews and reports (G) Legal Costs (exclusive of the costs of these proceedings) (H) Loss of rental income (I) Other loss and damage Sub Total (J) Estimate of investigation to localise Ni s $6,500.00 $16,135.00 $77,346.00 $53,176.36 $25,430.75 $24,614.15 $21,513.32 $1,897.25 $544,061.06 inclusions and replace affected panels (Estim) $254,500 Total $798,561.06 The basis upon which the first defendant consented to judgment against it for interest in the sum of $140,000 is not apparent. However the losses incurred up to the date of trial (excluding items (D1) and (J)) were specified at $466,715. The initial expenses were incurred about the end of 1989. If interest of $140,000 were awarded on that sum for a period of 2! years it would be awarded at the rate of 12 per cent; if awarded in respect of a period of 3 years it would be interest at the rate of 10 per cent. Without attempting to go into minute detail of calculations it would seem to me that in arriving at the figure of $140,000 for interest under the Common Law Practice Act a rate of from 10 per cent to 12 per cent was applied to $466,715 for a period of between 2~ and 3 years. Upon the whole of the material I am satisfied that the first defendant acted reasonably in settling the plaintiff's -- 34 of 56 -- 29 action on the terms in which it did settle it. There was not a great deal of time spent in evidence investigating the voluminous material tended to support the revised quantum schedule, which is ex. 102B. Upon the evidence however I find the items contained in this schedule to be established. In my view upon the evidence adduced against it upon trial, the first defendant had no real prospects at all of succeeding against the plaintiff on the issue of contractual liability. I am satisfied upon the evidence that each of the items A to I were items of damage and expense resulting to the plaintiff as a consequence of the breach by the first defendant of the contractual obligations referred to in para. 7 of the amended statement of claim of 22 November 1993. I am further satisfied that the estimated cost of investigating and locating the nickel sulphide inclusions and the replacement of the affected panels was reasonable. The only item requiring consideration is Item (J) which is based upon the estimated cost of replacing 25 panels at a cost of $4,000 each. In my view the expenditure of the sum of $144,500 to have Drs McKinnon and Barry inspect those glass panels which have not yet fractured and by scientific means determine which of them are likely to disintegrate in the future is reasonable. A matter for consideration in respect of this aspect of the plaintiff's claim is the estimate contained in the quantum schedule that 25 panels are likely to need replacement. Upon the evidence I have already found that probably 21 glass panels will have to be replaced as a result of nickel sulphide inclusions. -- 35 of 56 -- 30 It does not follow from that however that White in settling Eagle Star's claim on the basis that 25 glass panels will fail was acting unreasonably. In arriving at the conclusion that 21 would fail, I have simply taken the mean between two estimates given - 15 and 27 failures. It cannot be contended that settlement on the basis of 25 failures was unreasonable in the circumstances which involved also the consideration of minimising the incurring of further costs. The estimated cost of replacement of each panel is $4,000. Between February, 1988 and January, 1993, 24 panels failed by reason of the inclusion in them of nickel sulphide. Nine failed in the first two years. Twelve failed in the following two years and four failed in the year following the second two year period. All told then, 24 panels failed in a little over five years. By date of trial a period of nearly six years had elapsed from the time the glass panels commenced to fail in February 1988. While it is true that most of the failures had occurred within a period of about four years of the first failure, the scientific evidence seems to have been sketchy with respect to experimental work conducted to enable confident prediction to be made as to the likely time within which some remaining glass panels may crack, keeping in mind the length of time that has elapsed since their manufacture. The effect of wind pressures and temperatures generated by exposure to the sun and the size of the nickel sulphide inclusions, as well as their location in the panels, are all factors which make it difficult to predict what failures may occur over the next few years or when they may occur. The evidence indicates that there have been no strong -- 36 of 56 -- 31 wind pressures exerted on the glass panelling from the time the building was constructed. The effect, which cyclonic winds may have upon glass less able to withstand wind pressures by reason of nickel sulphide inclusions in it, is a matter which, while not specifically addressed in the evidence, is, to my mind, a factor which ought be taken into account. What is clear upon the scientific evidence is that the glass panels on the plaintiff's building have failed at a much greater rate than the rate at which similar types of glass panel have been recorded as failing on other buildings in other locations. There were 1,354 glass panels applied to the building. So far 11 silver coloured panels have failed and 10 grey coloured panels have failed. Only two blue coloured panels and one green coloured panel have failed. It seems clear that the silver panels and grey panels commenced to fail well before any failures in the blue panels and green panels were experienced although there has been a failure of a silver panel and a grey panel since failures have occurred in the blue and green panels. Upon the whole of the evidence I am persuaded that even if the sum paid in settlement of the plaintiff's claims against the first defendant was towards the upper limit of what was reasonable having regard to the history of glass panel failures to date of trial it was nevertheless a reasonable sum. It does not cease to be reasonable merely because upon my assessment of the evidence I have preferred to select 21 future failures rather than 25 in exercising judgment in the difficult task of prediction of uncertain future events. Accepting as I do that -- 37 of 56 -- 32 the scratched panels were probably scratched by the second defendant's workmen in the course of erecting them and were not scratched as the result of other building operations and in any event had occurred before date of practical completion and that the 24 failures of glass also were caused by the spontaneous fractures of the panels caused by the expansion of nickel sulphide inclusions in the glass it was reasonable for the first defendant to accept full responsibility in respect of the replacement of the panels of glass. Prior to the time of settlement it had been strenuously contended on behalf of the second defendant that many, if not all, of the glass panels which failed had been scratched or broken upon impact with a building maintenance unit which was suspended from the top of the building and moved up and down some distance away from the glass panelling to enable it to be cleaned. This was a matter strenuously contested on behalf of the second defendant and it was reasonable in my view for the first defendant to wait until all evidence along those lines had been called before deciding whether or not to admit to contractual liability in respect of the broken and/or scratched glass. The evidence led and suggestions made in cross-examination on behalf of the second defendant failed to make out this matter so strenuously argued on its behalf. Indeed it became clear that some of the affected panels could not possibly have come into contact with the building maintenance unit having regard to the configuration of the structure where the damaged panels were located. A witness called for the second defendant said that on -- 38 of 56 -- 33 the only occasion he had seen the building maintenance unit come into contact with the glass panelling no damage had been caused to it. The evidence showed that the unit had been constructed with a view to avoiding any of its parts which might scratch the glass coming into contact with it. The scratches on the glass in respect of which the plaintiff claims damages in any event were scratches to the inside of the glass which could not have been caused by contact with the building maintenance unit. Detailed examination on behalf of the second defendant of the glass panelling indicated that there was some chipping at the very edges of some of the panels. I am quite unpersuaded as to how the chipping occurred. In any event it seemed to have nothing to do with any of the fractures of the glass which were attributed by the plaintiff to the nickel sulphide inclusions in it. I infer in the present case that the settlement of the plaintiff's claim by the first defendant was made on legal advice. That legal advice was given upon the basis of an evaluation of all the evidence adduced in the case prior to the settlement being effected. Upon settlement, the plaintiff discontinued its action against the architects and the architectural firm involved in the design of the building. Had there been no such discontinuance no doubt further days would have been spent litigating the question of their alleged negligence and/or breach of contract. Although the evidence led upon the trial indicated that some scientific investigation had been carried out in Australia years before the construction of the building in question in this action and publications had been -- 39 of 56 -- 34 made of views that nickel sulphide particles in heat toughened glass led to spontaneous fractures of that glass, the matter here was complicated by the fact that the architects on behalf of the plaintiff called for tenders for a performance specification placing upon the glazier who accepted the tender the obligation of providing glass, framework, glue etc. and fittings to fix it to the building to achieve the specified result. The long specifications were also drawn to require the glazier to provide "guarantees" that the glazing would be free of defects, etc. for a period of 15 years. Subsequently of course at the request of the glazier this period was shortened to 10 years. It further emerged at the close of the case that in fact as one might perhaps expect Hennessey also provided the usual sort of financial guarantee of its work - presumably to avoid any part of the subcontract price for the work performed being retained during the period "guaranteed" or warranted. Upon the whole of the evidence I find that the figure for which White settled the plaintiff's action was a reasonable one. I further find that it was reasonable in the circumstances for White to consent to pay the plaintiff's costs of and incidental to the action against it to be taxed. On that finding the first defendant, White must have judgment against the second defendant, Hennessey upon the indemnity proceedings taken by it against Hennessey for the sum of $938,561 together with the amount of the plaintiff's taxed costs in its action against the first defendant on a party and party basis. -- 40 of 56 -- 35 I am unpersuaded upon the whole of the evidence as to items which may be included in a solicitor and client taxation which would not be recoverable if the costs were taxed on a party and party basis. In the circumstances then I am unable to come to any conclusion as to the reasonableness of those costs recoverable on a solicitor and client basis which might not be recoverable on a party and party basis. The second defendant should pay to the first defendant its costs of and incidental to the third party proceedings between it and the second defendant, such costs to be taxed. 3. Contractual obligations between Owner /Developer and Subcontractor For the plaintiff it is contended that by entering into the subcontract with the contractor, Hennessey made promises with respect to the glass to be installed under the subcontract for the benefit of the owner, Eagle Star. Under cl. 2 (a) of the subcontract, Hennessey agreed to carry out and complete the works "to the satisfaction of the principal and the company" (i.e. Eagle Star and White Industries). It is contended that upon this very wording it is clear that the promises of the subcontractor were made for the benefit of the owner. Under subs.002 of the long specifications it is required that the "guarantees" (i.e. warranties) be provided "in the name of the proprietor". It is contended that this wording of the specifications makes it clear that the subcontract made by Hennessey which includes these terms is one made for the benefit of the owner, Eagle Star. Reference is made to sub-cl.04 under -- 41 of 56 -- 36 the heading "Glazing including structural silicone" to which reference has already been made. That sub-clause provides, inter alia: "A further guarantee shall be given to the proprietor which assures making good any glazing defects which result ... " It is contended that the owner, Eagle Star, clearly accepted the benefit of the warranties given by Hennessey under the subcontract and that the acceptance was demonstrated by the owner agreeing to accept a reduction to a period of 10 years in the guarantee or warranty specified in the long specifications to be for a period of 15 years. Reference is made to exs.124 and 127. It is contended that the necessity for Hennessey to obtain the assent of the owner to reduction of the "warranty period" and the owners giving such assent to that reduction demonstrates clearly that the owner, Eagle Star accepted, not merely Hennessey as a subcontractor but accepted indeed the benefit of the various warranties made by Hennessey in the subcontract. Section 55 of the Property Law Act provides: "(1) A promisor who for valuable consideration moving from the promisee promises to do or to refrain from doing an act or acts for a benefit of a beneficiary shall upon acceptance by the beneficiary be subject to a duty enforceable by the beneficiary to perform that promise ... " Under s. 55 ( 6), the term "acceptance" is defined to mean "an assent by words or conduct communicated by or on behalf of the beneficiary to the promisor or to some person authorised on the promisor's behalf in the manner (if any) and within the time specified in the promise, or if no time is specified within a reasonable time of the promise coming to the notice of the -- 42 of 56 -- 37 beneficiary". It is contended for the plaintiff that on the facts to which I have referred, Eagle Star clearly accepted the benefit of the obligations imposed upon Hennessey under its subcontract with White and under s.55(3) Eagle Star is entitled, as beneficiary under the subcontract in its own name, to recover from Hennessey the same relief with respect to breach of the terms of the subcontract as might be available to White as contractor. Reference is made to the observations of the majority in Trident General Insurance Co Ltd v. McNiece Bros Pty Ltd (1988) 165 CLR 107 and to Burleigh Forest Estate Management Pty Ltd v. C.I.G.N.A. Insurance Australia Ltd (1992) 2 Qd R 54. On the facts of this case, so it is said, the promises of Hennessey are expressly given in favour of Eagle Star and on the face of the documents Eagle Star is the beneficiary of the promises of Hennessey to be found in the subcontract. It is contended for Hennessey that there is no privity of contract between Eagle Star and Hennessey and that there is nothing in this particular subcontract to distinguish it from any other subcontract and that the general rule is that a contracting party, who is not a party to a subcontract may not sue a subcontractor but must look to the person with whom he is in direct contractual relationship should the work done by a subcontractor under the subcontract not satisfy the contractual obligations imposed upon the contractor under the head contract. Every case, of course, must be determined on its own facts. There may very well be subcontracts made where upon the facts and in the circumstances of that particular contractual arrangement, a subcontracting party does not make promises for the benefit of -- 43 of 56 -- 38 a party to the head contract, who is not also a party to the subcontract. On the cases however to which I have referred and having regard to s.55(3) there are clearly cases where a person not a party to a subcontract may be a beneficiary under that subcontract. The question is whether this is such a case. In my view, upon its express terms and upon the events leading to the making of the subcontract (including the variation of the period of "guarantee" from 15 years to 10 years) the subcontract between White and Hennessey may be characterised as one in which Hennessey makes promises for the benefit of Eagle Star. Expressed in the language of s. 55 of the Property Law Act, Hennessey as promisor for valuable considerable moving from White as promisee, promised to provide and fix glass which complied with the requirements of the long specifications, to which I have referred, for the benefit of Eagle Star as beneficiary. Eagle Star accepted the benefit of that promise and consequently is able to enforce against Hennessey the contractual obligations imposed upon it by the terms of the long specifications. It is clear that the specifications under the subcontract were performance specifications. Both Eagle Star and White relied upon the knowledge and skill of Hennessey and its experts in the design and provision of the glass curtain wall to be constructed on the building and it was of critical importance that Hennessey as subcontractor, as well as exercising skill and taking care in the performance of its subcontract work give a "guarantee" (more precisely "make a warranty") to Eagle Star as to the quality and performance of the glass curtain wall it -- 44 of 56 -- 39 erected for Eagle Star as subcontractor of White. Initially the period of warranty under both contract and subcontract was for 15 years and it was at the express request of Hennessey that Eagle Star agreed to a reduction of this period to 10 years. The plaintiff claims against the second defendant as a party entitled pursuant to s. 50 of the Property Law Act to enforce a promise made by the second defendant to the first defendant. I find that subs-s. 002-01 and 002-09 in the long specifications are promises by Hennessey for valuable consideration moving from White to do the things therein specified for the benefit of Eagle Star which have been accepted by Eagle Star. Upon that finding the settlement of the action between the plaintiff and White is a matter res inter alios acta. I have already referred to the material contained in the quantum schedule which is ex.102B. In the action between Eagle Star and Hennessey I find established the items A to I (inclusive) and this sum amounts to $544,061.06. I find that the 24 panels which have failed were supplied and fixed in breach of the second defendant's obligation to provide and fix glass panels free of defects which would interfere with appearance or service and that Eagle Star suffered damage as a result. With respect to Item J the finding which I have already made that this was a reasonable sum to include in White's settlement of the claim by Eagle Star is not it seems to me of itself sufficient to justify a finding, that the sum of $254,500 is the proper assessment of damages for the plaintiff with regard -- 45 of 56 -- 40 to the cost of investigation of glass panels which will, but have not yet failed, and the cost of their replacement. For the reasons I have already given, I assess this item of damage against the second defendant in the plaintiff's action in the sum of $237,958. In total therefore, I assess damages in the plaintiff's claim in contract in the sum of $782,019.06. 4. Owner's Claim against Subcontractor in Negligence With respect to the plaintiff's claim against Hennessey in negligence, the conclusions I have reached on the plaintiff's claims in contract and that of White for a contractual indemnity, are of no assistance. I note initially that the plaintiff, while not abandoning its claim in negligence, did not attempt to argue the matter at any length. Because it is at least formally an issue that was not abandoned, I will deal briefly with it. The plaintiff's abandonment of its claim in negligence against its architects is irrelevant to its claim not abandoned against Hennessey. In any event, the case against the plaintiff's architects involved their duty of care to the plaintiff when they procured the services of Hennessey, being one of a number of glass suppliers and fixers who tendered for the work involving the meeting of a performance specification. The architects did not hold themselves out as being expert in either the characteristics of glass to be used for curtain walling purposes or in the manner of the fixing of that glass to the building. The architects did specify in the long specifications (ex.142), inter alia, that- "Glazing shall be in safety glass of thickness complying with the requirements of AS1288 using the designed wind pressures set out in appendix "A" in section 010-09 'Glass Generally- Glazing'" -- 46 of 56 -- 41 Although in subsection 06 Installation - 01 Schedule of Glass after specifying five types of glass, it was noted - "The above glass is PPG and is indicative of the colours and thermal properties required. The type and thickness of safety glass required will comply with the previously mentioned codes having regard for the wind loadings as set out in appendix A. All tenderers must submit a conforming tender but are requested to submit an additional tender including for laminated glass of similar colour and thermal properties. In addition to the above tenderers may submit a further tender based on alternative brand glass possessing similar colour and thermal properties as that nominated." That specification, of course, must be read as generally subservient to and as not permitting departure from the requirement under s.010- 09 Glass Generally- Glazing, that the glass "shall be free from cracks, scratches, bubbles, blisters and other defects which will interfere with the appearance or service". It is perfectly clear upon the evidence that it was Hennessey who obtained for its own purposes, the advice of an expert from Cal Asia who had experience in the construction of glass curtain walling of the kind contemplated by the architects which was innovative, at least insofar as construction of commercial buildings in Australia was concerned. Whatever may have been the duty of care imposed upon the architects, it is the plaintiff's contention that there was certainly a duty in tort as well as in contract imposed upon Hennessey, given the width of choice permitted to it under the express terms of the tender when it knew that both Eagle Star and -- 47 of 56 -- 42 the architects were relying upon its expertise in connection with this aspect of the building, to use reasonable care when selecting glass to avoid providing and fixing glass to the building, which was known by reasonably well informed persons with experience in the glass trade to have the characteristic of spontaneously failing for reasons of the sort that had been set forth in Australian publications from 1961 onwards and indeed, had been referred to in some American literature from the early seventies. It is abundantly clear that other glaziers, particularly J James & Co, had indicated that they were not keen on selecting and applying toughened glass to high rise buildings. The evidence is silent as to what led to this unwillingness, although one might be forgiven for strongly suspecting that that firm knew something of the events concerning the ICI building in Melbourne in 1961 and the Glenfell building in Adelaide in the 1970s. Both buildings were large buildings, innovative no doubt for their time, relying upon the use of extensive glass panelling and both failed. It is hard to imagine that in a competitive industry involving the application of glass panels to large structures, the characteristics of toughened glass experienced in those buildings would not have come to the attention of other glaziers in Australia whether directly involved or not. However, the evidence does not establish that the articles written by persons who had investigated this phenomena in connection with the Melbourne and Adelaide buildings had even achieved wide distribution in the trade circles in which Hennessey operated and competed. I infer on the evidence generally that manufacturers -- 48 of 56 -- 43 of toughened glass had a commercial interest in refraining from conceding too readily that unavoidable defects resulting from nickel sulphide inclusions sometimes but not always led to failures of toughened glass. Because Hennessey had obtained and presumably relied to some extent at least upon the expert advice of Cal Asia, an American organisation with experience in the erection of glass curtain walling of the sort which Eagle Star proposed, perhaps it saw no reason to raise the matter or give consideration to it, if it were not adverted to by experts with Cal Asia. However, there is clearly to be found in the literature circulated by PPG and by other glass industry organisations, reference to certain dangers in the use of toughened glass which might be avoided by the use of heat soaked glass, whether toughened or not. The plain fact is, upon the evidence, that there were other types of "safety glass" which could have been selected and which probably would not have resulted in panels which failed spontaneously at significant heights above public areas when applied to the external portions of the building. Had the toughened glass in the present case been heat soaked, the evidence strongly suggests that the problems which did arise in this case would not have arisen or at least if there had been any failures they would have been minimal. Similarly, if safety glass had been prepared from laminated glass, which was either heat strengthened or not, there would have been a conforming tender in respect of such glass. -- 49 of 56 -- 44 It is clear from the evidence of Mr Donovan that had Eagle Star been advised by people who knew of the tendency of some toughened glass to spontaneously fragment over a period of years after the building had been completed, it certainly would not have used that type of glass. In my view, the fact that Hennessey once its tender was accepted took upon itself the obligation to use its skill as a glazier to comply with the performance specification which it submitted, does not lead inevitably to the conclusion that it owed any duty in tort not to submit a tender or in effect make an offer which if accepted would lead to its supply of a type of glass which contained inherent defects - particularly when its tender would to its knowledge be considered by Eagle Star's architects. I am unpersuaded that Hennessey owed the owner of the building a duty of care when tendering to supply glass to be manufactured by a reputable manufacturer to advise either the architect, or Eagle Star in this case, of any inherent self-destructive characteristics which some, but not all glaziers believed the glass proposed might have even if it was aware, or should have been aware of those views so that persons could be fully informed of those beliefs before considering the tender it submitted. It is clear upon the material, and it must have been clear to Hennessey at all relevant times, that it was submitting a tender to comply with a performance specification for the erection of a glass curtain wall, where both the architects concerned and the building developer or owner, Eagle Star, were relying upon it to select the glass and all the materials -- 50 of 56 -- 45 necessary to fit it to the building as an exterior wall, and indeed to design the framework etc to be used to hold the glass with glue etc for that purpose. If Hennessey in fact knew of the inherent characteristic of the toughened glass to be supplied by PPG to fail spontaneously, even if it was not aware of the scientific explanation for such spontaneous failure, the question is was there a duty placed upon it in the circumstances of this case to bring that fact to the notice of White, W. Job & Associates and Eagle Star when it made its offer to supply and fix toughened glass when the specifications imposed a contractual obligation that the glass have no defect which interfered with appearance or service and when the specifications also imposed a warranty against such defects for a period of 15 years (later reduced to 1 0 years). Mr Hennessey, who seems to have been personally involved with this matter, was not called to give evidence on behalf of Hennessey. What knowledge of nickel sulphide inclusions in toughened glass and their effect Hennessey gleaned from glass manufacturers both in Australia and overseas in printed material distributed to glaziers in Australia before 1985-86 has not emerged in the evidence. Even upon the assumption that before its tender was accepted, Hennessey was under a duty to advise Eagle Star or its architects of any knowledge it had, or ought to have had, about possible defects in the PPG toughened glass it offered to supply, the liability of Hennessey to the plaintiff in negligence upon -- 51 of 56 -- 46 the evidence in the case would depend substantially upon whether it ought to have known of the self destructive characteristics of some toughened glass prior to the time it submitted its tender for acceptance. A difficulty in the way of the plaintiff is that a good deal of evidence was called to show that the architects in this case ought to have been aware, or at least would and should have become aware of this characteristic of toughened glass before it was supplied and fixed to Eagle Star's building. No evidence was called that they did know about it. All the persons called who had been connected with the architect at this time, gave evidence that they did not in fact know about this particular characteristic of toughened glass in spite of the fact that they kept up subscriptions to various professional journals touching on developments etc in the building industry and architectural profession. To succeed in negligence against Hennessey with respect to the failure of glass because of nickel sulphide inclusions assuming a duty in tort did exist, it seems to me the plaintiff must show Hennessey ought to have known of the characteristic of toughened glass to fracture spontaneously even if unaware of the reasons made public by Mr Ballantyne in the early sixties and the reasons given in various publications in the 1970s. There is no evidence that such information was probably contained in literature which would be available to glaziers but not available to architects. There is evidence that some glaziers were aware of "problems" with toughened glass - Pilkington, Comalco and H. H. Robertson. However, opinions on this matter varied. All the -- 52 of 56 -- 47 evidence indicates that the archi teet in this case had no knowledge of the work published by Mr Ballantyne because it had not been published in a way to bring his conclusions to the knowledge of people generally in the archi teet ural profession and building industry but only as a paper which could be purchased through CSIRO apparently by somebody who had heard or knew about it. One evidentiary problem in the way of the plaintiff recovering in respect of the spontaneous fracture of panels in my judgment is the absence of satisfactory evidence that at the relevant time Hennessey ought to have known of that particular characteristic of toughened glass. There was no evidence whatever led to show that at the relevant time persons supplying and fixing glass curtain walls in Brisbane or elsewhere in Australia for that matter ought reasonably to have known of that characteristic of toughened glass which had not been heat soaked, although upon the evidence there were several large organisations then carrying on business similar to and in competition with Hennessey that had reservations about the use of such glass unless heat soaked. The plaintiff led no evidence whatever as to the availability of this information to persons carrying on the sort of business that Hennessey was carrying on. The only evidence from which arguably such an inference might be drawn is that given by the architects Parker and Hartog. I would be unprepared to draw such an inference from that evidence because it is not sufficient in my judgment to demonstrate that at the material time glaziers generally accepted as a fact the conclusions reached by Mr Ballantyne. It was a time when -- 53 of 56 -- 48 opinions of people in the trade varied and indeed some rejected the suggestion that the glass was defective. Evidence called by the plaintiff on the question of negligence seems to have been directed to the duty of care owed by architects. Whatever finding against the architects on the issue of negligence may have been open upon the evidence, in my judgment there was not sufficient evidence led to support a finding of negligence against Hennessey (even if it were open in law to do so). In my judgment in making the offer which conformed with the specification provided, Hennessey owed no duty of care to the plaintiff in tort to advise it or its architect of the danger of inherent defects in toughened glass, which possibly or even in all likelihood would result in spontaneous failure of the glass. I have held Hennessey to be liable to the plaintiff in contract, pursuant to s.52 of the Property Law Act. I am comforted by the observations of the Judicial Committee in Tai Hing Cotton Mills Ltd v. Liu Chong Heng Bank Ltd (1986) AC 80 at p.107 in concluding that there was no duty of care upon Hennessey as offeror in submitting to White its tender for the performance of subcontract work in accordance with specifications provided to it by Eagle Star's architects. Authorities dealing with obligations in tort which run parallel with those in contract are of little assistance in this case which deals with obligation in tort arising in precontract negotiations resulting in the making of an offer. The plaintiff's claim against Hennessey in negligence for loss it suffered as a result of the scratching of the 24 panels -- 54 of 56 -- 49 of glass is in a different category from the claim with respect to the offer to supply and fix glass with inherent defects in it. With respect to the scratching of the glass, it is more probable than not, in my view, on the whole of the evidence that the glass was scratched by employees of Hennessey in the course of working on the installation of those glass panels. The damage, even on the assumption that it was merely economic damage, having regard to the relationship between Hennessey and the plaintiff, is actionable at the instance of the plaintiff because there is sufficient proximity between them. In this respect, I apply Caltex Oil (Australia) Pty Ltd v. The Dredge "Willemstead" (1975 - 1976) 136 CLR 529. The damage suffered as the result of the scratching I have already assessed in the sum of $77,346. In light of the judgment, I propose to give in favour of the plaintiff against Hennessey in contract, it is unnecessary for me to specifically give judgment against it in tort. The quantum of damage with respect to the scratching of the glass is the same whether it be pursued in contract or in tort. The plaintiff is entitled to judgment against the second defendant in the sum of $782,019 together with interest pursuant to S.72 of the Common Law Practice Act at the rate of 11 per cent per annum for a period of 2.25 years upon $466,715 of that sum, which is $115,512 with costs to be taxed. I give judgment for the plaintiff against the second defendant in the sum of $897,531 with costs to be taxed. I give judgment for the first defendant against the second defendant for the sum of $938,561 plus the amount of the plaintiff's costs against the first defendant to be taxed on a -- 55 of 56 -- 50 party and party basis. I order the second defendant to pay the first defendant its cost of this action including its costs of its third party proceedings against the second defendant to be taxed. -- 56 of 56 --