Archonstruct P/L v Karalis (No 3) - [2008] SADC 70

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
ARCHONSTRUCT P/L v KARALIS & ORS (No 3)
[2008] SADC 70
Judgment of His Honour Judge Kitchen
6 June 2008
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS
Johnson v Perez (1988) 166 CLR 351; Radford v de Froberville (1978) 1 All ER 33, applied.

ARCHONSTRUCT P/L v KARALIS & ORS (No 3)
[2008] SADC 70

On 17 November 2004 the court, constituted by his Honour Judge Bright, ordered “that (the defendants, Mr and Mrs Karalis) have judgment against (the plaintiff, Archonstruct) for the reasonable cost of inserting a viscourse damp‑proof membrane at the appropriate level into all walls and dwarf walls supporting the floor slab”. That order was made in the course of the trial of the action between the plaintiff and the defendants, a summary of the background to which, and the order of Judge Bright, appears at pages 1 to 3 inclusive of the reasons for judgment which I delivered on 30 March 2007. I will not repeat that summary in these reasons.
The work to insert a damp-proof membrane was referred to for brevity in the trial as “undersetting”, and I will continue to so refer to it. The work of undersetting commenced in October 2006 and was completed in May 2007. The work was carried out by LJ Palmer & Co Pty Ltd (Palmer & Co) for the price of $118,287 pursuant to an agreement in writing between it and the defendants dated 12 September 2006 (exhibit O177). The defendants claim that price (less some adjustments I will refer to later in these reasons) plus a proportion of the fees of $5,764 paid to FMG Consulting Koukourou, consulting engineers which I will refer to as Koukourou, as the reasonable cost of carrying out the undersetting.
The plaintiff disputed the amount claimed by the defendants. It contended that no allowance for a consulting engineer in the claimed or any sum should be made. In relation to the work of undersetting it concedes the reasonable cost should be $35,000 and no more; I think that concession was based upon the evidence of Mr Langdon Palmer. Mr Palmer, I infer, in effect controls Palmer & Co and was the person who prepared the quotations, or estimates, his company provided to the defendants concerning remedial work recommended by Koukourou.
The specifications for the defendants’ house, to be built by the plaintiff, included that the mortar for the brickwork of the underfloor walls must contain a waterproofing additive. The omission, or insufficiency, of such an additive from those walls was confirmed in a report by Amdel dated 12 October 2000 following tests conducted by it.
On 27 July 2001 Mr John Goldfinch of Koukourou advised the defendants that based upon a further report from Amdel provided on 25 July 2001, the scope of the remedial works concerning the underfloor walls, which Koukourou had earlier prepared, required inter alia that the underfloor walls be removed and rebuilt. In September 2001 Palmer & Co estimated $108,433 as its price to carry out those works.
In a report dated 13 May 2004 (exhibit O9) Koukourou proposed the remedial means of undersetting the underfloor walls by inserting a viscourse damp-proof membrane which did not involve the removal of the entire underfloor walls, but rather the removal of a set number of the lowest layer of bricks, the placement of the viscourse damp-proof membrane on the footings and the reinstatement or replacement of the removed bricks onto the viscourse damp‑proof membrane and so progressively for all the underfloor walls. That report also canvassed an alternative remedial means which involved the chemical treatment of the underfloor walls. To gauge the feasibility of that alternative, Koukourou sought tenders from three entities for both remedial means; all of them refused to tender for the undersetting. The defendants were thus left with the Palmer & Co quotation given in 2001.
During the weekend of 14 November 2004, prior to the second week of the hearing before his Honour Judge Bright, Mr Palmer was contacted by the defendants’ solicitor (Mr Black). Mr Palmer had not been back to the defendants’ house since providing the quotation for $108,433 in 2001. He provided to the defendants’ solicitor a “best estimate” of $78,168 to insert the viscourse damp-proof membrane; exhibit O34. At page 410 of the transcript of the trial before Judge Bright, Mr Palmer was asked whether on the previous weekend he had been contacted and asked to reconsider his earlier quotation, that is the quotation he had presented in September 2001. He said
ANo, I wasn’t asked to reconsider it. I was asked if I would be prepared to attend court, but during discussion I did say that – I asked whether the scope of the work had changed, I was told yes, it had changed. The mortar was now deemed to be, or considered to be satisfactory and it was thought no requirement was required for the slip joint under the Bondek and therefore only the viscourse needed to be added. Straight off the top of my head, which is what I said it would be, straight off the top of my head, I thought probably $30,000-$35,000 but further to that I sat down and did some figures and either on the Sunday afternoon or the Monday morning rang Mr Black and said that those figures would be considerably out of scope because of the work involved.
QDid you then, in fact, prepare a further quotation and fax it to Mr Black.
AI did, but it is not classed as a quotation, its classed as a best estimate because with the reduction in the scope of the work and the area in which it needed to be got at to do it we would need to go up there and spend sometime just to see exactly how we are going to get in there. There still needs to be some holes cut through walls to allow access to allotted areas, which previously were going to be removed when the walls were taken down. We would therefore have access right up through the middle, but now that’s not going to happen I still think we can get into the biggest part of it by still having to knock some holes into the walls, yes.
And at page 418 when being cross-examined about how he had arrived at his price he said that he had made an allowance:
A… to cover the difficulties I’ll run into in the areas that I haven’t been to and seen. I’ve already stated that we need to go to the job before I am giving you a fully quoted price just to make sure that what is going to be done is – I don’t intend to lose money on it, I don’t intend to make a lot of money on it either.
Following the order made by his Honour Judge Bright on 17 November 2004, Koukourou on 16 June 2005 prepared and applied for development approval to the remedial undersetting work for the defendants’ house in accordance with the specifications submitted with that application (exhibit O125). Approval was granted on 5 August 2005 (exhibit O126). The approval was subject to two conditions which, in summary, required firstly that the contractor carrying out the work, on completion of the work, was to provide a statement in writing advising that the work had been carried out in accordance with the specifications and secondly, that Koukourou must inspect the remedial works and on completion of the works certify to the Council that the works had been undertaken in accordance with the specification.
Although Mr Liney, of Koukourou, in September 2005 contacted Mr Palmer to ask for a quotation for the approved works, Mr Palmer because of personal and business commitments was unable to inspect the site of the works or provide a quotation until in June 2006 (exhibit O135). The defendants, in that period, approached Mr Dominic Scutella for a price to carry out the works according to Koukourou’s council‑approved specification. Mr Scutella (who gave evidence in the defendant’s case) looked at the premises, read the various reports and gave the defendants a “rough idea” of the costs “but basically said to them that if you have somebody else it would be preferable if they did it”; he was not keen to take on the work. Upon a second approach to him by the defendants in February 2006, he told them his preference was for somebody else to carry out the work. Palmer & Co’s quotation in June 2006 was for $113,287 (including GST). Subsequently there was, what I found to be, a misunderstanding, between Mr Karalis and Mr Palmer, as a consequence of which Mr Karalis concluded that Mr Palmer did not wish to proceed and Mr Karalis sought a quotation from Mr Scutella.
Mr Scutella has been a general builder for twenty five years. He was provided with various reports and specifications and copies of the application for approval and the Council’s approval, upon the basis of which, and an inspection of the defendants’ house, he quoted on 6 August 2006 a price of $191,000 plus GST (exhibit O132); that price included the work of removing and later replacing wooden floors and a concrete slab which he judged to be necessary to gain access to some portions of the underfloor walls – the areas of flooring are highlighted in yellow on exhibit O123. Mr Scutella also required that the defendants vacate the house for the duration of the work of undersetting, which he estimated would take approximately sixteen weeks, although in his evidence he stated twelve weeks.
The defendants having come to the view that Mr Palmer was no longer prepared to carry out the remedial works, and so approached Mr Scutella, Mr Palmer was called, on subpoena, by Carn Byrne and Associates, the architect. Mr Palmer gave evidence on 25 August 2006 concerning the events that had occurred since the quotation, exhibit O135, in June 2006 and stated that he was happy to do the work; as I have said I found the reason for the works not having been embarked upon by Mr Palmer at an earlier date was a misunderstanding between him and Mr Karalis.
I note that Mr Palmer’s plan to carry out the remedial works did not involve the removal and reconstruction of any wooden flooring or concrete slab floor, or the defendants going to live elsewhere during the progress of the works. Mr Palmer described the work he was to carry out to be “very difficult in very cramped conditions”; “a stinking job-grovelling around the dirt underneath the house with no ventilation where a fan was pushing air underneath so we could breath.”
Mr Palmer has specialised in construction repair work for some thirteen years; he said and I accept his evidence that he is not aware of any others in Adelaide who specialise as he does in that sort of work.
Mr Liney, the engineer who periodically inspected the progress of, and finally certified, the works carried out by Mr Palmer described the working conditions encountered by the workmen carrying out the undersetting:
I mean, in some circumstances, especially towards the east and top end of the site flowing from east to west, if he was working in an area that was at the most 400mms high and in some areas for me to get through I had to take my glasses out of my pocket and shirt and put them in my pants because I just couldn’t get through without them and I am not a big person, but I couldn’t get through into those areas. So they were dusty, they were claustrophobic, dirty and they could not stand up to do the work. They would have to do it lying on their backs to operate the equipment and they did this for six months. I mean, it was amazing. (T100)
The plaintiff’s submission that the reasonable cost of the undersetting works should be assessed in the sum of $35,000 was a concession made by the plaintiff before His Honour Judge Bright in a context where the plaintiff conceded it was liable to the defendants for the remedial work of undersetting, and offered to carry out the undersetting to Koukourou’s specification, on or before 31 March 2005, to the certification of an independent engineer and to the satisfaction of the Burnside Corporation; or alternatively said the defendants should be allowed the sum of $35,000 for the work to be done. In the result a different order was made by his Honour but the figure of $35,000 as I understand it, was derived from the passages of Mr Palmer’s evidence which I set out above; I have not found and counsel did not draw my attention to any other evidence which appears to be obviously relevant to that particular figure.
In relation to the estimate of $78,168 made by Mr Palmer (exhibit O34), he was questioned upon it at some length by counsel for the plaintiff during which he identified that his estimate included a contingency of 20%, a profit component of 20% on the cost of materials and labour, and $10,000 to “cover the difficulties I’ll run into in the areas that I haven’t been to and seen”. The largest component of the estimate was $44,040 for the labour and materials to be deployed under the floor to carry out the undersetting (apparently calculated at $120 per lineal metre for 367 lineal metres – T417). Except for Mr Palmer’s reference to percentages for contingencies and the profit component, and a lump sum allowed for “difficulties” which may be encountered, I do not consider that either Mr Palmer’s intimation, or estimate, of $35,000 or $78,168 respectively, or his explanation of them are of any real assistance to the task of assessing the reasonable cost of carrying out the undersetting work in fact performed by Mr Palmer.
Mr Sam Paddick gave evidence before Judge Bright. Mr Paddick is a quantity surveyor. His evidence concerned his report (exhibit O27) in which he set out his opinion of the cost of remedial work upon the defendant’s house which included demolishing all under-floor walls and rebuilding them on a damp proof membrane. That work was the subject of the quotation provided in September 2001 by Mr Palmer, the sum of which ($98,575.45 before GST) was included in Mr Paddick’s report. In the course of his evidence Mr Paddick said that there had been escalations in costs across the industry in Adelaide, since September 2001 to the time he gave evidence (15 November 2004) of between 20-25% in his own experience and by reference to Rawlinsons’ Australian Construction Handbook, 16.4% to 16.5%, the latter of which Mr Paddick described as inherently conservative.
Mr Liney, who is an engineer of approximately forty years experience in private practice during which he has drawn specifications such as those for the remedial building works carried out by Mr Palmer and advised his clients upon the range of the likely cost to carry out such works, said he “thought” the likely cost would be in excess of $150,000. That opinion was not part of any report previously provided by the defendants to the plaintiff. I allowed that evidence to stand, noting that Mr Liney would not be released from being further cross‑examined on that topic by the plaintiff until after the plaintiff’s counsel had had full opportunity to obtain his own expert evidence on the issue of “reasonable cost”. The plaintiff did not call evidence on the issue, or further cross‑examine Mr Liney on his view of the likely cost of the remedial works.
The defendants’ case, as I understand the submission, is that approaches to builders for prices, whether as estimates or tenders, to carry out the remedial work of undersetting elicited either no wish to respond or the responses of Mr Palmer and Mr Scuttella. The defendants, I infer, knew the physical underfloor conditions which would be encountered by whomever the work was carried out. Mr Palmer’s plan of work indicated that no existing floors would need to be broken open to gain access to the under-floor walls and would permit the defendants to remain in occupation of their house, neither of which intrusions or inconveniences could be avoided if Mr Scuttella were to carry out the work, and whose price, even before the addition of GST, was approximately $85,000 more than Mr Palmer’s price.
In August and September 2006 the defendants sent to the plaintiff various letters reporting on the steps they were taking to engage Palmer & Co to carry out the work, the price and provided a copy of the contract which the defendants ultimately entered into with that company. None of that correspondence elicited any reply or response from the plaintiff.
Upon this course of events the defendants submit:
·the work set out in the specification prepared by Koukourou was reasonably required to rectify the defect in the under-floor walls;
·the specified work was carried out by Palmer & Co;
·that as required by the conditions of the development approval granted by the Burnside Corporation each of Palmer & Co and Koukourou has stated, or certified, to satisfy those conditions;
·that the price paid to Palmer & Co was the reasonable cost for the work, as specified, which it carried out.
The defendants submit that the terms of the order made on 14 November 2004 clearly envisaged that the words “reasonable cost” meant the cost to carry out the works after that date, and not the cost at some earlier date to reflect any alleged failure of the defendants to mitigate their loss. In my opinion the words of the order do not readily bear that interpretation, and it appears that his Honour Judge Bright contemplated there may well be matters concerning an issue of mitigation (T429/430). Accordingly, in my opinion, there is an issue as to the date at which the defendants’ damages should be assessed.
The prima facie general rule is that damages whether for tort or for breach of contract should be assessed as at the date when the cause of action arose. Johnson v Perez (1988) 166 CLR 351. However, there are exceptions, and the rule must yield if “some other date is necessary to provide adequate compensation” (Wilson, Toohey and Gaudron JJ at 367), for example “where a plaintiff does not move immediately to carry out repairs or to mitigate his loss, but it is not unreasonable for him to delay doing so”, (Dawson J at 386) in which case damages may be assessed at an appropriate later date. Perhaps the proper approach is to assess the damages at the date of the hearing and then look at the question of mitigation to see whether assessment at an earlier date is justified, an approach, although in a different context, adopted by Oliver J in Radford v de Froberville (1978) 1 All ER 33.
As I observed earlier in these reasons, the plaintiff, in conceding it was liable to the defendants for the remedial work of undersetting, offered (T426) to carry out that work to Koukourou’s “specification”. That specification, it appears, was originally that dated 12 July 2001 (exhibit O14) which was amended later in that month (exhibit O15) and then superseded by a later specification dated 13 May 2004 (exhibit O9). Each specification described the scope of the work to be carried out, and was before the court when the plaintiff made its concession concerning liability to the defendants for undersetting. Except that the plaintiff submits, as I understand, that the reasonable cost of undersetting should not include the work of removing and replacing the concrete slab laid in the porch area and the cost of removing and replacing pavers, and build-up, on the perimeter of the building, the plaintiff does not challenge the reasonableness of the work of undersetting as described in the Koukourou specification (exhibit O9) dated 13 May 2004, which, in my opinion, is essentially the same as that which was approved by the Burnside Corporation.
Palmer & Co, I find, carried out the work described in the Koukourou specification approved by the Burnside Corporation and has stated accordingly to the Corporation. Included in that work was the application of protective material at the points of contact between the Bondek supported slab floor and the underfloor wall, and the installation of means to ventilate the underfloor area, neither of which is to the plaintiff’s account, and the cost of which is not claimed by the defendants.

Mr Liney said, and I accept, that during the course of the work carried out by Palmer & Co he attended the site of the work on twelve occasions, that he was satisfied Palmer & Co had completed the works in compliance with the specification and he (Mr Liney) had certified accordingly to the Burnside Corporation.
I will deal first with what I understand to be the plaintiff’s contention that neither the cost of removing portion of the porch concrete slab, and the reconstruction of the removed portion, nor the cost of removing and replacing pavers and fill build-up against the external face of the perimeter walls, together with the cost of applying waterproofing means to the external wall before the replacement of fill should be included as part of the reasonable cost of the remedial works. The removal of portion of the slab and the removal of build-up was necessary to obtain access to permit undersetting at those points.
In my reasons for judgment delivered on 30 March 2007, I accepted Mr Karalis’ evidence that it was not until in the month of June or July 2000 that he first became aware of the concept of undersetting as a possible remedial means for the absence of a sufficient damp proof course in the underfloor walls. In July 2001 Koukourou detailed the method by which undersetting could be carried out.
Mr Karalis’ evidence is that before he knew of the nature and extent of the underfloor defects because of the omission of a damp proof course he arranged for a concrete slab to be laid in the porch, pavers laid (T691) and soil, or spoil, to be built-up against some perimeter walls; he said the build-up was put in place before July 2000 as a means to direct water run-off away from the foundations. Mr Palmer said that a concrete slab had not been laid in the porch when he inspected the defendants’ house for the purpose of providing, in September 2001, his estimate of the cost to carry out the work of undersetting. Exhibit O14 is a report by Koukourou addressed to Mr Karalis; it is dated 12 July 2001. The report, which was received by His Honour Judge Bright, described the scope of the work to carry out undersetting; no mention is made that a concrete slab in the front porch would need to be removed, either in whole or part, as an item of the works. The exhibit has attached to it as exhibit O20 (at page 423 of volume 4 of the defendants’ documents) a plan of the footings, and the floors placed on the brick build-up walls constructed on the footings, marked by Mr Liney to indicate which footings could be accessed for undersetting and identifying, by hatching, areas of floor that would need to be removed. A note on exhibit O20 reads in part “….. Bondek slab to be removed (and porch slab on ground)”. At page 231 of the transcript before His Honour Judge Bright, it appears that Mr Liney assumed that the porch concrete slab was not laid on brick build-up. Mr Karalis was not questioned about his knowledge or information concerning the base or support on which the porch slab was laid. It is probable he had no different information than Mr Liney’s assumption. However Palmer & Co’s estimate, dated 13 September 2001, was made upon the basis of the work of “Demolish and replace all under slab brick walls and correctly install DPC and Bondek slip joint” set out in the report of Mr Paddick exhibit 027; that same report discusses the work of demolishing and re-constructing the concrete slab in the entry porch area. The introduction to the report states that “WT Partnership undertook various site visits to (the defendants’ house)”. Clearly the report is evidence that the porch slab was in place when Mr Palmer went there for the purpose of preparing his estimate. I note that the work concerning the porch slab appears in the Paddick report as separate items (93 – 105 inclusive) from those to which Palmer’s estimate related (160 – 187 inclusive); that suggests it was not necessary for Mr Palmer to pay any particular regard to the porch slab. I consider Mr Palmer was mistaken in his evidence that the slab was not present in about September 2001.
In my view, even if Mr Karalis arranged for the slab to be laid after he became aware of the defect in the damp proofing of the brick build-up walls, it has not been shown that he knew or should have known the laying of the slab would prevent access to build-up walls to carry out undersetting, or that the slab might have to be demolished to gain access for that purpose.
I find the removal and replacement of the porch concrete slab was part of the reasonable cost of undersetting.
I accept Mr Karalis’ evidence that soil, or spoil, was mounded up against some external walls before he was informed of the damp proof course problem. However, in carrying out that work, no viscourse material, or other damp proofing means, was placed for the purpose of isolating the brick work from the soil, which in Mr Liney’s view contributed to the appearance of salt damp in the brick work. Mr Liney (T98-100 before Judge Bright) expressed his opinion concerning the external walls, in these passages during his cross-examination by counsel for the plaintiff:
QIf I can come back a stage: you agree that the external walls, as they currently are, aren’t designed to have fill-dirt-stacked up against them.
AI’m led to believe so, they’re not, no.
QYou could see that this morning could you not.
AWell my impression was that that was the intention on the western side of the southern wall. Obviously the front of the building, the eastern side and around the corners towards the garage and portion of the paved area at the southern end, I would have thought that was intended to be covered by soil.
QI didn’t state my question properly. I meant the walls as they are currently constructed, without any tanking protection.
ASorry, what was the question?
QAs they are currently constructed, without any tanking, those walls aren’t designed to have external fill placed against them.
ANo, they’re not built-let’s put it that way, they’re not built to have material against them.
QIf they are properly tanked and the landscaping is carried out to an appropriate level, then externally those walls will cause no problems.
AProvided the fill is not too high above the footing, yes.
(T99)
I infer that even if the underfloor walls had been constructed in accordance with the specification, that is if they included mortar of the appropriate hardness which contained the prescribed waterproofing additive, soil or similar build-up materials should not be placed in contact with the walls unless the wall face were first treated with, typically, a bituminous compound. The defendants failed to protect the external walls in that way, or any appropriate way, before build-up soil was placed against the walls.
It is not clear to me whether if the defendants had applied an appropriate isolating material to the relevant sections of the external wall before soil was placed, the isolating material would have required repair or re‑application in its entirety after the undersetting work was completed. Some substantial repair or re‑application would probably have been necessary having regard to the nature and extent of the work to install the damp‑proof course.
The specification for the undersetting work (exhibit O125) prepared by Koukourou and which the Council approved, provided for the placing of a damp proof course, such as viscourse, over the full height of the back‑fill soil to be placed against the wall, the wall to be treated first with two coats of an identified proprietary material before placing the viscourse.
Although the defendants now have a sufficient barrier between the soil build-up and the external walls, protection which was entirely lacking from the build-up works carried out by them, there is no proper basis to conclude the defendants should not recover the cost of the isolating barrier between the external walls and the build-up soil; in my opinion it is part of the reasonable cost of the undersetting works. As I have said, the defendants did not place the build‑up soil knowing it would increase the cost of any remedial works; I therefore find that the cost of removing and replacing the soil and pavers is also part of the reasonable cost of the works.
The plaintiff pressed, through the witnesses, a case that the extent of the work of removing bricks to permit the placement of a viscourse layer was increased by the means of removal which Palmer adopted. The plaintiff identified a particular type of saw (shown in exhibit B182) which was put to Mr Palmer as a superior machine capable of more cleanly and swiftly removing bricks. Mr Palmer used a device equipped with a diamond‑tipped disc for that task. He said he or his workmen tried the particular machine the plaintiff’s counsel identified (in exhibit B182), and rejected it in favour of the device he in fact used. There was nothing in the evidence of Mr Palmer, or Mr Liney, which brings me to the view that Mr Palmer’s means of brick removal was inferior to the use of the machine in exhibit B182 or unreasonably contributed to the cost of the remedial works.
Mr Palmer was questioned about the make‑up of his price to carry out the undersetting work. He broadly described that it incorporated:
·Wages paid to the company’s workmen (including payments to the Australian Taxation Office) to which he added 150% to cover for example, office staff costs, worker’s compensation levies, superannuation payments, rent, general and indemnity insurance and advertising, observing there were many more costs than those examples. Common experience would suggest provision would have to be made also for holiday pay, sick leave and long service leave to mention only some of the indirect costs to be absorbed in “overheads”. Mr Palmer agreed that the number of hours worked by his employees at the site (numbering 12) was 1,331 and that the average weekly wage was $750 for a 40 hour week. That produces a total, as I calculate, of $62,390.62.
·The purchase of materials, the hire of equipment and payments to sub‑contractors. These payments are included in the bundle of invoices exhibit O183, the sum of which is $13,264.22. Additionally there was what Mr Palmer identified to be the price paid, totalling $860, for Forticon, brick sand, cement, viscose materials and fees or costs incurred to dump waste materials. The grand total is $14,124.22.
·The sum of $62,390.62 and $14,124.22 is $76,514.84. If the profit margin is 20%, that produces $91,817. Mr Palmer said that in constructing his price he included the sum of about $2,000.00 for “unforseen items”. The total before the addition of GST (Goods and Services Tax) is $93,817. I do not have evidence to identify the sum of the impost of that tax upon the amounts I have identified, but it likely it would have brought the total to more than $100,000. That is up to $18,000 less than Palmer & Co’s price to carry out the remedial works.
Mr Palmer said he frequently visited the site during the course of the remedial work. One of his 12 employees engaged at the site was a supervisor. Each day Mr Palmer directed to the site the appropriate number of workers - I understand they assembled at Palmer & Co’s depot before travelling to the site - and he recorded the number of hours each workman spent at the site each day. He referred to his records for the purpose of giving evidence as to the number of hours worked at the site. He accepted that he had to rely upon his workers’ honesty in reporting the number of hours worked. He said he trusted them.
I note his evidence that he also attended the site from time to time - I accept his evidence, even though it appears unusual that Mr Liney said he did not sight Mr Palmer on the occasions Mr Liney visited the site; Mr Palmer said he did see Mr Liney on the site on a number of occasions. Mr Liney and Mr Palmer have worked together before on other projects, and they certainly spoke with each other during the remedial works at the defendants’ house.
The difference in their evidence about sighting each other at the site is not, in my judgment, one which gives me pause about accepting each of them to be witnesses of truth upon whose evidence I can generally rely. I accept Mr Palmer’s evidence that his records of hourly labour are accurate.
I also accept Mr Palmer’s evidence of the need for his workman to report to his premises in the morning before going to the site, and returning there in the evening. He described that there was an insufficient area at the site to store materials, particularly bricks and waste masonry which had to be frequently (I understood every day) transported from the site to his premises.
The sub‑contractors engaged by Mr Palmer, and whose prices are included in Palmer & Co’s price, were not hired following any tender process and they were not called to give evidence. Mr Palmer said that all the sub‑contractors had previously been engaged by him on other contracts of Palmer & Co, and he trusted them.
I infer from his evidence that it was in Palmer & Co’s interests to keep the prices of sub‑contractors as low as practicable. The sub‑contractors’ component of the works carried out by Palmer & Co for the defendants was relatively small, as a proportion of the total price. The invoices from the sub‑contractors to Palmer & Co are in exhibit O183.
It is the case that the invoices from each of the two Marchegiano organisations do not contain any detail of hours spent or machinery employed in the tasks of “Prepare and lay concrete for front porch and retaining wall. Re‑lay brick paving around the house and driveway” the subject of those invoices, which were a particular focus of the plaintiff’s criticism of the evidence in the defendants’ case.
However, the work concerning the entry porch and the paving was part of the remedial undersetting and the extent of it was, I infer, known to the plaintiff from, at least, the view of the property held by the Court in November 2004.
In those circumstances, and in the absence of any contrary evidence raising questions as to the reasonableness of those particular invoices, in my view, there is no reason to reduce or discount the defendants’ claim.
The plaintiff was critical of Mr Palmer’s evidence concerning the multiple of 150% applied to the total wages paid to Palmer & Co’s named workmen to cover the several “overhead” costs. Mr Palmer said that the multiple he used “is generally straight out of the Chamber of Manufacturers or any of the Department of Labour and Industry” and “at the end of the 12 month period any accountant could work backwards and tell us what your costs are as against your cost of wages”, but such an exercise had not been carried out in respect of “his” business. In re-examination, Mr Palmer said the multiple of 150% was used on advice from the Chamber of Manufacturers and that annual financial statements prepared by Palmer & Co’s accountants “support a similar proportion”.
Mr Palmer in the course of all his evidence, did not convey to me any sense of being a witness who would attest to a matter he did not believe to be true, or be careless of whether it be true or not. It appears to me that Mr Palmer’s approach to working up a tender price was perhaps less disciplined than that of Mr Scutella. Mr Scutella in the context of speaking about his tender price said his figure for overheads was about 15% applied to “all direct costs of the trades” (transcript 1384). However, my understanding of his evidence (transcript 1375 et seq) is that Mr Scutella’s price was worked up from prices he obtained from the four different sub-contractors he would engage if his tender were accepted by the defendants. In that case, some of the components which Mr Palmer included to assess his overhead would be borne by the sub-contractors whom Mr Scutella was intending to engage and would no doubt be reflected in the prices those sub‑contractors provided to Mr Scutella. What the practical monetary effect would be in trying to compare the different overhead multiplier used by Mr Palmer and Mr Scutella respectively was not explored; it could be there is no substantial difference upon the ultimate costs, but whatever be the fact I am not persuaded there is any evidence to warrant rejecting the multiplier used by Mr Palmer as being wholly inappropriate in arriving at the reasonable cost of the undersetting works.
The difference between the respective prices of Mr Palmer and Mr Scutella might be partly explained by Mr Scutella (as he said he did) pricing for the “worst case scenario” of possible difficulties which might be encountered in the course of the works and, it could be inferred, including a premium for the remedial building task with which Mr Scutella was not keen to be involved.
The defendants, it appears, worked closely with and were dependent on Koukourou’s in obtaining advice which resulted in the specification for the remedial works. Mr Liney, of Koukourou, estimated the works would cost $150,000. Mr Scutella set his price for the works in the sum of $191,000 (plus GST which, if it were to amount to say $19,000 would have produced a total of $210,000). Palmer & Co’s final price for the completed works before the deductions, which I will come to in a moment, was $118,287. Other builders from whom Koukourou sought a price declined to tender for the undersetting work. Mr Scutella’s scope of works included partly demolishing and then replacing concrete slab floors and also timber flooring to such an extent that, taken with the other associated works, it would have been necessary for the defendants to go and live elsewhere for the whole period of the progress of the works which Mr Scutella said would take twelve weeks or sixteen weeks. The defendants chose to accept Palmer & Co’s offer. There were no other offers for them to consider. I find that the defendants acted reasonably in accepting Palmer & Co’s offer. The defendants informed the plaintiff concerning Palmer & Co’s price. Although the plaintiff had no duty to respond to the information provided to it, the fact that the defendants provided the information shows in my view the reasonableness of the defendants’ actions in relation to the cost of the remedial works.
Notwithstanding the apparent discrepancy of up to $18,000 I have identified by using the evidence of Mr Palmer concerning Palmer & Co’s price, I am not persuaded that the plaintiff’s challenge to that price has, in the circumstances of this case, raised sufficient grounds to show the defendants have failed to prove that the price paid to Palmer & Co was the reasonable cost of carrying out the remedial works. I note that the plaintiff did not call any evidence in its own case directed to the issue of the reasonable cost; it was not obliged to but the absence of any positive counter evidence on the topic means the court is left only with the evidence I have summarised in these reasons.
Some components of the cost of the work carried out by Palmer & Co are to be removed – they do not form part of the defendants’ claim for damages. They are the work of the “sealing” of Bondek sheeting at its junction with the masonry walls and the work in relation to the ventilation of the under floor space, including in both cases the necessary materials. In the final account to the defendants (part of exhibit 0178) Palmer & Co identified those two components to be 2% and 0.5% respectively of the total cost of all the works, translating into a sum of $2,958 to be deducted from $118,287. I do not understand the plaintiff to have taken issue with Mr Palmer’s assessment of the cost of the “excluded” works as a percentage of the whole. The balance is $115,329.
The defendants also claim a further small amount as part of the reasonable cost of the undersetting works. The defendants installed a security gate giving access into the grounds of the property and also a secure roller door to the garage incorporated into the main house structure; the lock to each of them was operated by the same remote control. To enable Palmer & Co to have access to the property, but not into the garage, the defendants purchased a remote control which would operate only the security gate. The cost was $111.10. In my view, that amount was reasonably incurred as part of the cost for the remedial undersetting works.

I turn to the defendants’ claim for the fees paid to Koukourou, to inspect and certify the works carried out by Palmer & Co, as part of the reasonable cost to carry out the undersetting.
The plaintiff submits that, the defendants’ case being that they engaged Palmer & Co in the view that Palmer & Co had a particular expertise in the kind of work the undersetting required, it is unreasonable for the defendants to seek to recover the fees paid to Koukourou to inspect for, or to certify, the compliance of the works with the Koukourou specification.
Two matters immediately confront the plaintiff’s submission. First, the plaintiff made an open offer to the defendants to carry out the undersetting works in accordance with the Koukourou specification, to the certification of an independent engineer and to the satisfaction of the Burnside Corporation. Second, the plaintiff, as I understand, had been informed of the Corporation’s approval of the works which included the two conditions I set out earlier in these reasons; one was that Koukourou must inspect the works and on completion of them certify they had been undertaken in accordance with the specifications.
An explanation for the plaintiff’s offer to carry out the undersetting works to the “certification” of an independent engineer is to be found in the history of the dispute between the parties and, it would seem, a recognition by the plaintiff that the defendants would, not unreasonably, require the comfort of an independent assessment of compliance by the plaintiff on completion of the work. However, the matter went further than that; it appears from exhibit O124 that the Burnside Corporation sought, and on 24 May 2005 obtained, an opinion upon Koukourou’s proposal for the remedial works from an independent engineer (Mr Ahern of Tonkin Consulting) to be assured that the materials used and the process of installation of the damp proof course would meet the relevant requirements of the Building Code of Australia. It further appears that the Corporation wanted evidence that the materials used and the process of installation had in fact been duly deployed.
From the evidence before the court the correct laying of the viscourse material was of substantial importance to the efficacy of the remedial works. In my view it would not have been unreasonable for the defendants to look for the engineer, Koukourou’s, to assure them that the remedial works had been properly carried out whatever the claimed expertise of the contractor. The defendants had been frustrated in their plans to complete their house by the discovery of the plaintiffs’ omission of a sufficient damp course and they could confidently proceed only when that defect had been remedied. In the result the Corporation stipulated as one of the two conditions attached to its approval for the works, that there be an engineer’s certification. I find that such a certificate is properly to be included as part of the reasonable cost of the undersetting.
The undersetting required the placement of the viscourse material on the footing, with the material being lapped for 150 millimetres at joining points occurring “every four bricks”, this work being carried out, in some locations under the house, where the workman engaged in the task was lying in a vertical space of as little as 400 millimetres. That procedure involved, Mr Liney estimated, probably thousands of such lapped joints. If the viscourse material were poorly laid or positioned the intended damp proofing protection would have been ineffective; it was to ensure such protection was achieved that an engineer’s certification was stipulated (see for example Transcript P.236 in the trial before Judge Bright). Mr Liney, during his inspections, photographed some of the remedial works as they progressed. He was asked why he did not arrange for one of the workmen to photograph the works, and (as I understood) avoid the need for him (Mr Liney) to frequently go to the site and personally inspect; as counsel for the plaintiff put it, why not instruct a workman to “nip down there and take a few photographs and come back up”. Mr Liney said he would not be prepared to certify unless he had seen the work himself because his reputation was “on the line”. I accept his response to the suggestion. I find that for so serious a task as certifying compliance by Palmer & Co with the specification it was entirely appropriate for Mr Liney to personally inspect at appropriate intervals during the progress of the works.
The fees charges by Mr Liney for inspections and reports concerning the remedial works were at the rate of $300 per hour. Although counsel for the plaintiff was critical of there being no evidence to compare that hourly rate with a professional or other fee structure standard, I find there is no reason to reject the hourly rate charged by Mr Liney as being unreasonable.
Mr Liney’s account to the defendants (exhibit O181) for inspections of the remedial works was in the sum of $5,764. That included fees of $561 in relation to the Bondek “slip joint” and the underfloor ventilation, for which the plaintiff is not liable, so reducing Mr Liney’s fees to $5,147. Further, Mr Liney agreed (at T56) that he spent approximately 30 minutes on 29 January 2007 discussing with Mr Karalis proposals for the construction of stairs at the rear of the house, the subject matter of which was not part of the remedial works and should be deducted from the Koukourou’s account. I calculate the sum of the deduction to be $150 plus $15 (GST) = $165, so reducing the account to $4,982.
Additionally, Mr Liney said that also on 29 January 2007, he inspected the defendants’ house for about 30 minutes in relation to concerns Mr Karalis had about cracking in the superstructure, and he charged, he estimated, $100 for a letter, dated 8 February 2007, to Palmer & Co which dealt with matters, including the cracking.
He concluded that cracking was not a consequence of the works carried out by Palmer & Co. Some deduction should be made for Mr Liney’s time and some proportion of the cost of the letter which together I assess in the broad in the sum of $185 including GST. The Koukourou’s account therefore is in the sum of $4,797.
I turn to the plaintiff’s submission that the defendants’ damages for the reasonable cost of the remedial works should be assess in the year 2001, at the latest, at about the time Palmer & Co tendered for the work described in the Koukourou’s specification prepared in July 2001. Palmer & Co’s price was $108,433, but that was to, inter alia, entirely demolish the underfloor walls and rebuild them on a viscourse sheeting laid on the footings.
In July 2002, the plaintiff filed an Amended Statement of Claim. In September 2002, the defendants filed an Amended Defence and, by way of a set off and counterclaim, alleged, inter alia, loss and damage attributable, among other things, to the omitted or insufficient damp‑proofing of the underfloor walls.
The information the defendants had was that works to remedy the defective damp‑proofing would cost in excess of $108,000, that is Palmer & Co’s estimated price.
In the early part of 2003, the plaintiff engaged its own experts concerning the omitted damp‑proofing and remedial works. In April 2003, Mr Bastick, a consulting engineer, reported (exhibit B134) to the plaintiff’s solicitor:
6.03..... Therefore notwithstanding any apparent lack of water proofing admixture and lower cement content in the mortar it is the writer’s opinion that potential attack from rising damp is likely to be in the very low risk category.....
9.02..... It does appear to the writer that Mr Goldfinch’s approach to the remedial works is to undertake “work down from the top” approach which involves significant areas of demolition, possibly resulting in unnecessary costs.....
12.0..... It is further recommended that masonry specialist consultant (Mr Roger Taggartt) be engaged to provide a separate assessment of the underfloor masonry. Once these results are to hand it will then be possible to make a judgement as to whether or not remedial works are required to the underfloor walls.
...... If further investigations indicate that the walls are of insufficient quality to prevent rising damp then either the walls should be chemically injected or undersetting should be carried out incorporating a damp proof course in order to guarantee long term performance of the walls with regard to damp proofing.
In May 2003, Mr Bay, a civil and structural consulting engineer, reported (exhibit B122) to the plaintiff (page 5):
Undersetting of the brickwork would be difficult, destructive, disruptive and not cost effective. Poorly installed membrane damp‑proof course would result in ineffective protection of the brickwork.
..... the chemical injection, the electro‑osmotic damp‑proof system or equal should be considered to minimise stress on the building.
In a report (exhibit A167) in July 2003 to the architect’s solicitor, which I think I can safely infer was provided to the plaintiff, Mr Combe, a civil engineer, said that he agreed the mortar of the underfloor brickwork could be rectified by chemical injection as Mr Bay had recommended.
As to the Koukourou report, dated 12 July 2001, Mr Combe stated:
6.3Mr Liney identifies the problems with a lack of (damp‑proof course), a lack of a slip joint and a lack of ventilation to the underfloor space. The remediation recommendation then consists of cutting and removing panels of Bondek slab and treating and reinstating and lifting slabs to install slip joints and undersetting the entire sub floor walls.
In my opinion this is a gross exaggeration of the remedial works required and with the extent of cutting and movement, may cause more damage to the dwelling than it cures.
In November 2003, the plaintiff sought from Damp Busters (Australia) Pty Ltd a quotation to remedy the inadequate damp‑proofing of the underfloor brickwork by chemical injection, stating that “the (plaintiff) accepts responsibility to reinstate the DPC which has not been provided by the bricklayer in accordance with the architect’s specification and will be responsible for the payment of your account”. I note that even at the date the trial commenced before his Honour Judge Bright in November 2004, the plaintiff, as I understand, maintained a denial concerning the omitted damp‑proof course.
In March and April 2004, Koukourou sought tenders from three entities for the remediation of the damp‑proof course by chemical injection, or similar means. The responses to those requests were included in the report prepared by Koukourou in May 2004, which canvassed the merits of alternative means of remediation, that is undersetting and chemical injection. The tenders for the latter ranged between $27,236 and $80,949.
It is apparent, in my view, that the identification of the integrity of the mortar used in the underfloor brickwork and the extent of the use of a waterproofing additive in the mortar, took a considerable time to resolve. The plaintiff and the defendants were in dispute about the extent, and the consequence, of the failure of the plaintiff to comply with the specification concerning the composition of the mortar. The means of rectification was also in issue between the plaintiff and defendants in circumstances where the nature and cost of rectification was intrusive and expensive. All these considerations weighed with the defendants and persisted from in late 2001 until resolved by the consent judgment in November 2004.
The delay in carrying out the remedial works has probably led to the costs of them being greater in 2006 than they would have been in 2001, perhaps (based on Mr Paddick’s evidence) in the range of a factor between 16.4% and 25% for the period to November 2004 alone.
In my opinion, although the delay in the defendants arriving at the point where they set out to engage Palmer & Co to carry out the undersetting is significant, this is a case where it was not unreasonable for the defendants to be particular in their approach to the several issues involved in the nature and extent of the remedies required, where the plaintiff was agitating those issues as being matters of substance. In my view, the defendants have not failed to mitigate their loss by delaying until in October 2006 the carrying out of the work of undersetting.
I find that the reasonable cost of the undersetting work is the sum of the amounts I identified earlier in these reasons paid to:
Palmer & Co  $ 115,329.00
        Koukourou   $     4,797.00
        Costs of additional remote control      $        111.10
        Total  $ 120,237.10
There is a final matter. The parties agreed that all issues concerning alleged defects identified in the Scott Schedule (other than the undersetting, the slip joint and underfloor ventilation) should be, and they were, referred to trial by arbitration, pursuant to s33 of the District Court Act. I am informed that by consent the arbitrator made an award of $10,000 against the plaintiff in favour of the defendants.
On 30 March 2007, I determined that the plaintiff was entitled to recover from the defendants, on its claim, the sum of $242,828 against which the defendants were entitled to set off:
-      Damages for disturbance, inconvenience and
diminution in the value of the defendants’ land
and house   $    28,000.00
-      The reasonable cost of the undersetting works,
which I now assess in the sum of  $ 120,237.10
-      The consent award in the defendants’ favour for
the outstanding Scott Schedule items  $    10,000.00
-      Total set off   $ 158,237.10
leaving a balance of $84,590.90, less the sum, before interest, of $35,000, the interim order I made on 24 October 2007 pursuant to s38 of the District Court Act.
I would propose therefore to enter final judgment for the plaintiff against the defendants in the sum of $49,590.90 in addition to the interim award. The plaintiff should have simple interest on that sum from 1 July 2000 at the rate of 1.5% per month to this date; the commencing date and the rate are fixed for the same reasons as appear in my reasons for judgment delivered on 24 October 2007.
There is one remaining matter, and that concerns the removal or other disposition of the lien registered by the plaintiff on the title to the defendants’ land pursuant to the Worker’s Liens Act. I will hear counsel on that issue and also questions of costs.