Asset Building Certifiers Pty Ltd v Hyblewski
[2020] ACTCA 21
•5 May 2020
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
COURT OF APPEAL
Case Title: | Asset Building Certifiers Pty Ltd v Hyblewski |
Citation: | [2020] ACTCA 21 |
Hearing Date: | 13 November 2019 |
DecisionDate: | 5 May 2020 |
Before: | Burns, Loukas-Karlsson JJ and Robinson AJ |
Decision: | Appeal dismissed. See [86]. |
Catchwords: | APPEAL – CONTRACT – Causation – defective building works – nature of the contractual duty owed by appellant to respondent – whether respondent has proved loss – whether finding of trial judge on issue of causation not open – consideration of |
Legislation Cited: | Building Act 2004 (ACT) ss 42, 43, 44, 45 Building (General) Regulation 2008 s 33 Civil Law (Wrongs) Act 2002 (ACT) ss 41, 45 Court Procedures Rules 2006 (ACT) r 406 |
Cases Cited: | Australian Capital Territory v Crowley [2012] ACTCA 52; 7 ACTLR 142 Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 Girlock (Sales) Pty Ltd v Hurrell [1982] HCA 15; 149 CLR 155 Ho v Powell [2001] NSWCA 168; 51 NSWLR 572 Hyblewski v Bellerive Homes Pty Ltd [2019] ACTSC 44 Northam vFavelle Favco Holdings Pty Ltd (Unreported, Supreme Court of New South Wales, Justice Bryson, 7 March 1995) Trustees of Property Cummins (a bankrupt) v Cummins [2006] HCA 6; 227 CLR 278 |
Parties: | Asset Building Certifiers Pty Ltd (Appellant) Alicia Hyblewski (Respondent) |
Representation: | Counsel A Cheshire SC with S Adair (Appellant) P Greenwood SC with W Buckland (Respondent) |
| Solicitors Sparke Helmore (Appellant) Aulich Law (Respondent) | |
File Number: | ACTCA 13 of 2019 |
Decision under appeal: | Court: ACT Supreme Court Before: Justice Mossop Date of Decision: 1 March 2019 Case Title: Hyblewski v Bellerive Homes Pty Ltd Citation: [2019] ACTSC 44 |
THE COURT
At the trial of this matter, the Owner of land brought proceedings against both the Builder under a building contract and also the Certifier engaged by the Owner in respect to that building contract.
On the first day of the trial, the proceedings between the Owner and the Builder were settled. The Owner’s claim against the Certifier proceeded to trial and continued to judgment in favour of the owner: Hyblewski v Bellerive Homes Pty Ltd [2019]
ACTSC 44.
By an Amended Notice of Appeal, the Certifier appeals from the decision of
Justice Mossop (the trial judge) whereby his Honour entered a judgment in the sum of $156,706 together with costs against the Certifier.
It is common ground that this appeal is by way of rehearing. See, for example, Australian Capital Territory v Crowley [2012] ACTCA 52; 7 ACTLR 142.
At the hearing of the appeal, Mr Cheshire SC with Mr Adair appeared for the Certifier and Mr Greenwood SC with Mr Buckland appeared for the Owner. Neither
Senior Counsel appeared at the trial.
After introduction of the parties below, for convenience only, we will refer to those parties by way of their respective roles as Owner, Builder and Certifier.
Background
In 2011, Alicia Hyblewski (the Owner) purchased land at Casey in the
Australian Capital Territory (ACT) and on 4 May 2011 entered into a building contract for the construction of a single-storey dwelling with Bellerive Homes Pty Ltd. The contract price was $177,750 inclusive of GST.
The contract was upon the terms of the Housing Industry Association standard form “ACT Residential Building Contract for New Dwellings” January 2008 edition and contained no unusual terms material to the proceedings.
Asset Building Certifiers Pty Ltd (the Certifier) was appointed by the Owner on
27 August 2012 as the Certifier in respect to this building contract. The Certifier had, as its guiding mind, Mr Michael Collins. The trial was conducted on the basis that the actions of Mr Collins were the actions of the Certifier for all relevant purposes.
In the trial below, the Builder had denied in its pleadings any liability to the Owner and had also filed a counter claim for the unpaid portion of the total building contract price. That sum was $44,412.
On the first day of the hearing before the trial judge, the claim between the Owner and the Builder was settled. The Builder’s Counterclaim for the unpaid portion of the contract price for the building was discontinued. Significantly, for present purposes, no other evidence was tendered before the trial judge concerning the terms on which that aspect of the proceedings was settled.
The course of the trial below
There were a number of issues contested at the trial. It is unnecessary to set out all of these issues either because they are not pressed on appeal or are not material to the outcome. A summary of the trial proceedings is sufficient to place the grounds of appeal in their proper context.
The following are selected extracts taken from the agreed chronology in the
Appeal Book:
(a) On 9 November 2012 the Certifier issued a Commencement Notice.
(b)
On 9 November 2012 the Certifier issued a certificate, at the
“slab stage” inspection.
(c)
On 1 February 2013 the Certifier issued a certificate, at the
“pre-sheet stage” inspection. (The trial judge found that no certificate should have been issued at this stage because the work was defective and not in accordance with the approved plans.)
(d) A notice of practical completion was issued sometime prior to 21 May 2013.
(e) On 21 May 2013, the Owner and Builder arranged to examine the house together. The Builder failed to attend, and the Owner carried out the inspection herself.
(f)
The Certifier issued a certificate, at the “final stage” inspection on
23 May 2013. (The trial judge found that no certificate should have been issued at this stage either, because the work was defective and not in accordance with the approved plans.)
(g)
On 12 June 2013 the Owner inspected the house with the
Builder’s Representative. The Owner identified a number of matters of concern.
(h) On the same day, the Builder prepared a proposed defects list. The Owner did not agree with this list because it did not address or identify the matters of concern noted by her.
(i) On 30 June 2012 the Owner inspected the house. The Owner issued her own list of remaining defects to the Builder following inspection. The Owner declined to pay balance of $44,412.
(j) Communications break down at that point. The Builder, by its solicitor, lodged a caveat on 4 July 2013.
(k) No further rectification work was undertaken by the Builder.
(l) On 22 June 2016 proceedings were commenced by the Owner.
It was common ground between the parties that damages ordered against the Certifier could only relate to those defects which would not have occurred had the Certifier done his job to the requisite contractual standard. As the trial judge explained, there can be a difference between the damages for which the Builder is liable as a result of a breach of the building contract, and the damages for which the Certifier is liable by reason of failing to reach the contractual standard in the performance of the duties of a certifier. The Certifier may not be in a position to detect every defect which amounts to a breach of the building contract.
The trial judge fashioned his judgment by setting out main questions and then answering them. Relevantly, for the purposes of the appeal, these were:
(a) Were there defects in the construction of the building?
(b) What was the contractual duty of the certifier?
(c) Did the certifier breach the contract?
(d) What are the damages flowing from the breach of contract?
In the passages extracted from the trial judge’s decision, we have underlined, for later reference, portions of that judgment relevant to the central issue of causation.
Were there defects in the construction of the building?
A number of defects in the building works were found by the trial judge. A description of the deficiencies is set out below at paragraph [48]. There is no challenge to those findings on appeal. It is, however, necessary to take note of an aspect of them for the issue of causation. The trial judge found at [90] that:
[E]ach of the defects in question was a defect which was or ought to have been obvious to a Certifier who was carrying out his role with due care and skill. Each was evident by examining the exterior of the building work without any need to uncover, expose or otherwise interfere with materials that had already been put in place…
What was the contractual duty of the certifier?
The trial judge found that the contract between the Certifier and the Owner of the land contained an implied term that the Certifier would carry out the certification work with all due care and skill. As the trial judge explained, the content of that duty must have regard to the provisions of the Building Act 2004 (ACT) (the Act). The trial judge drew particular attention to ss 42, 43 and 44 of that Act and also to s 33 of the
Building (General) Regulation 2008made under that Act.
Critical to the resolution of this appeal is that statutory framework. This framework, as expressed by the trial judge at [64] of his Honour’s judgment, is as follows:
Certifiers are appointed by an owner of land: s 19 [the Act]. Certifiers then issue building approvals under the Act: s 28. The certifier controls when building work commences and thereby ensures that a building approval has been issued for the building work and a builder who is licensed has been engaged to do the work: s 37. The Act and a regulation made under the Act prescribe stages of building work: s 43; Building (General) Regulation 2008 (ACT), s 33. The three prescribed stages are, in lay terms, the slab stage, the pre-sheet stage and upon completion of the building work. At each of those stages the certifier is required to be satisfied on reasonable grounds that the building work that has been carried out complies with the requirements in s 42 of the Act. Those requirements include that the building work is in accordance with the approved plans and has been carried out in a proper and skilful way. If the certifier cannot be so satisfied then no certificate that the work complies may be given and the builder may not proceed further: ss 44(2), 43(3). If the certifier does not give a certificate then the certifier must give directions to the builder that are reasonable and appropriate for achieving compliance with the requirements of s 42.
Did the certifier breach the contract?
The trial judge found that Mr Collins, in undertaking his role of a Certifier, clearly failed to comply with both his contractual and statutory duty. The trial judge next considered whether a certifier, who was complying with his statutory and contractual obligations, would have identified the defects the subject of these proceedings in the course of the certification process. The trial judge expressed his Honour’s conclusion at [94].
His Honour said:
Had Mr Collins performed the duties of a certifier with reasonable care and skill then, relevantly, following the pre-sheet and final stage inspections no certificate would have been given under s 44(2)(b) [the Act]. For the reasons given above, the approach that he took to the task of certification was inconsistent with his duties under the Act and hence under the contract. Had he performed his statutory and contractual duty then he would have identified the defects that Mr Davies did and could not have had reasonable grounds for being satisfied that the work complied with s 42. As a consequence, he would have been obliged to give written notice to the builder under s 44(2)(a). I am satisfied that had he given written notice to the builder, the builder would not have contravened s 43(3) and hence the building work would have stopped until the builder was able to obtain a certificate under s 44(5) by remedying the defects that have been proved by the plaintiff.
What are the damages flowing from the breach of contract?
There were several sub-issues, but for the purposes of the appeal, the issue of critical relevance is whether the cost of remedying some or all of the defects is causally related to the breach of duty by the Certifier in issuing the stage certificates.
At [96], the trial judge recorded the submission made by the Certifier:
Asset submitted that it was significant that the plaintiff’s pleadings did not allege as a breach of contract a failure to give directions to the builder to remedy the work in question. This was said to be significant because Asset submitted that there was no causal link between the damage suffered by the plaintiff as a result of defective work by the builder and the giving of a certificate at an inspection stage that permitted the work to proceed. Asset submitted that by the time the inspection had occurred, the defect was already built into the construction. It submitted that the damage had occurred before any breach and hence the damage was not a causally related consequence of the breach. It submitted that in those circumstances the only damages that could be said to have arisen from the giving of the certificate were any increased costs for which the plaintiff would be required to expend as a result of the continuation of the building beyond that stage. In other words, the damages would be limited to the increased costs of rectification because the work was allowed to continue rather than the whole of the costs of rectification. Asset then submitted that the case run by the plaintiff did not prove those increased costs because the plaintiff had assumed that the whole of the cost of remedying the defect was recoverable.
The trial judge did not accede to that submission. It is convenient to set out, in full, the trial judge’s reasoning for rejecting that submission because it is directly or indirectly canvassed on appeal. His Honour said at [97]-[98]:
I do not accept the submission of the defendant as it fails to properly characterise the relevant breach. The submissions focus on the breach by the builder in carrying out building work other than in accordance with the approved plans or other than in a “proper and skilful way”. If that breach is focused upon, then it is true that the damage is suffered prior to the issuing of each relevant certificate. However, for the purposes of the cause of action against the certifier, the relevant breach is that of the certifier by failing to carry out the s 44 function with due care and skill. The damage that arises is because the certifier has failed to exercise the undoubted power, and in the present case the obligation, to decline to issue a certificate which would allow the work to proceed. Because of the regulatory function of the certifier and the criminal penalties imposed upon builders who proceed without certification, the scheme is such that any builder who wishes to proceed with the building must remedy the defects or departures from the approved plans which are identified by the certifier at the relevant inspection stage. Therefore, in the context of the statutory scheme of the Act, it can be said that the failure by the certifier to exercise the regulatory role under the Act with due care and skill caused the plaintiff to end up with a building that has passed its final inspection stage in a form which incorporates defects and departures from the approved plans.
More particularly, I am satisfied that had the builder been given written notices of the defects pursuant to s 44(2)(a) following the pre-sheet and final stage inspections, the builder would have remedied those defects in order to obtain a certificate under s 44(5). As a consequence, I am satisfied that but for the breach of duty by the certifier, the plaintiff would not have suffered loss, namely, the costs of remedying the defects which would not have occurred had the certifier done his job to the contractual standard. In the present case the “but for” test is appropriate, but bearing in mind what was said in Alexander v Cambridge Credit Corp (1987) 9 NSWLR 310, I am also satisfied that as a matter of common sense the breach of duty by the certifier was a cause of the loss.
On the question of what damages were recoverable, the trial judge found that all of the identified defects were able to be or should have been detected by the Certifier in fulfilment of his contract. His Honour said at [99]:
The damages are limited to the damages relating to those defects which would not have occurred had the certifier done his job to the contractual standard. There can be a difference between the damages for which a builder is liable as a result of a breach of a building contract and the damages for which a certifier is liable by reason of failing to reach the contractual standard in the performance of the duties of a certifier. That is because a certifier may not be required to detect every defect which amounts to a breach of the building contract. However in the present case for the reasons I have given above none of the relevant defects fall into that category.
The Grounds of Appeal
The grounds of appeal in their amended form are:
(i)The primary judge erred in finding that any breach of contract by the appellant caused the respondent loss or damage.
(ii) The primary judge failed to find that the respondent had not proven that any breach of contract by the appellant had caused loss or damage.
(iii) The primary judge ought to have found that the respondent had not proven causation in that she had failed to prove that, but for any of the breaches of contract alleged against the appellant, the building defects she alleged would not have been present.
(iv) The primary judge erred in finding for the respondent on a basis that had not been pleaded or advanced at trial, namely that:
(a) the appellant would have given written notice(s) to the Builder, which would have prevented the building defects; and
(b) the appellant ought to have given the Builder written notice(s) which would have prevented the building defects.
(v) The primary judge erred in finding for the respondent on a basis for which there was no evidence, namely that:
(a) the appellant would have given written notice(s) to the Builder which would have prevented the building defects; and
(b) the appellant ought to have given the Builder written notice(s) which would have prevented the building defects.
(vi) The primary judge erred in failing to find that the respondent had not proven her loss in circumstances where:
(a) the respondent sued both the appellant and the Builder in respect of the same loss;
(b)
on the first day of the trial before the primary judge, the respondent announced the compromise of her claim as against the
Builder; and
(c) the respondent adduced no evidence of the nature and quantum of her compromise with the Builder.
These grounds were augmented in the Certifier’s written submissions, filed prior to the hearing of the appeal, where it was contended that the trial judge erred in the following ways:
(a)in finding that the [Owner] had established causation, given that:
(i)his Honour found for the [Owner] on a case that was not available to her given that it was not pleaded, there was no acquiescence in her running such a case and in any event it was not advanced at trial;
(ii)the case that was pleaded by the [Owner] on causation could not succeed;
(iii)the case run by the [Owner] at trial was not available (given that it was not pleaded and there was no acquiescence in her running such a case) but in any event could not succeed;
(iv)his Honour’s factual finding in that regard were not supported by the evidence;
(b)in finding that the [Owner] had established her loss.
A distillation of the grounds of appeal and the Certifier’s submissions invites consideration under three convenient headings:
· whether the findings made were open to be made as a result of the pleaded case or the course of the trial;
· whether the Owner has proved her loss; and
· whether there was evidence available to support the actual findings made by the trial judge on the issue of causation.
Whether the findings made are open upon the pleadings or the course of the trial
The case ultimately went to trial on the Amended Statement of Claim dated
24 October 2017 and the Second Further Amended Defence dated 18 February 2019.
Paragraphs 23 - 26 of the Amended Statement of Claim allege against the Certifier that it was in breach of its contractual duties to the Owner, that it was in breach of its statutory duties to the Owner and that, as a result of the contractual and statutory breaches, the Owner suffered loss and damage. The alleged breaches can be paraphrased and include:
(a) providing stage certificates for building works that were built otherwise than in a proper and skilful manner;
(b) providing stage certificates for building works that were built otherwise than in accordance with the approved plans;
(c) providing stage certificates for building works that were built otherwise than in accordance with the Building Code of Australia;
(d) failing to satisfy itself on reasonable grounds that the requirements of the Building Act had been complied with;
(e) failing to satisfy itself that the building works had been completed with all due care and skill;
(f) failing to satisfy itself that the building works had been completed in accordance with the approved plans.
The pleading of causation was simply put as follows: “[a]s a result of the [Certifier’s] breach of its contractual and statutory duties, the [Owner] suffered loss and damage”.
These paragraphs were the subject of a simple denial in the
Second Further Amended Defence.
It is to be acknowledged that the minimalist pleading on the issue of causation pleads no primary facts setting out facts or circumstances or sequences of them establishing any pathway or relationship between the alleged breaches and the alleged losses. The expression “as a result of” is a conclusion at a high level of generalisation.
The Court Procedures Rules 2006 (ACT) relating to pleadings are in familiar form and undemanding in their nature. Rule 406 provides:
(1)Each pleading must—
(a)be as brief as the nature of the case allows; and
(b)contain a statement in a summary form of the material facts on which the party relies but not the evidence by which the facts are to be proved; and
(c)state specifically any matter which if not stated specifically may take the other party by surprise;
…
No complaint was made to the trial judge concerning the pleading of causation. As was pointed out by Bryson J in Northam vFavelle Favco Holdings Pty Ltd (Unreported, Supreme Court of New South Wales, Justice Bryson, 7 March 1995) at 3:
It is common for cases to go to trial on pleadings which are very inadequate. It is for parties to calculate the advantages and disadvantages of allowing this to happen and of the risks in which they are involved and to set them against the expense and trouble of pursuing interlocutory applications, and it is obvious enough that many defendants decide to go to trial on the basis of what they regard as a reasonable understanding of what the issues will be, even though pleadings leave them unclear...
At the hearing of the appeal, Senior Counsel for the Certifier did not suggest that, by the pleading alone, the Certifier was taken by surprise. Senior Counsel’s fuller submission was that the course of the trial, taken together with the inadequate pleading of the issue, produced a circumstance where the trial judge’s conclusions on causation miscarried. This was said to arise out of how the issue was actually presented in opening and closing submissions coupled with how the Certifier was cross-examined.
On the hearing of the appeal, the Court was taken through portions of the transcript of proceedings before the trial judge where relevant submissions, observations and comments were made by both counsel and the trial judge, concerning causation. No passages of great legal clarity emerged. It is, however, clear enough that counsel for the Certifier in the trial below was conscious of and pointed out to the trial judge the critical differences as to causation in respect of a Builder and a Certifier arising from their different contractual and statutory obligations.
It is not contended that the trial judge erred in identifying the nature of the contractual obligations which had to be met by the Certifier. Rather, it was urged that the trial judge erred in finding for the Owner on a basis that had not been pleaded or advanced at trial. It was said that the proper analysis, which the trial judge should have imposed on
his Honour’s reasoning, commenced with the precise content of the written notices to be given to the Builder, what the Builder’s reaction to these properly formulated notices would have been, and hence whether the notices would have prevented the building defects.
At trial, there was no precise formulation of the content of the written notices which should have been issued by the Certifier at the pre-sheet and final stages when he should have refused to issue a certificate.
It is, however, clear that the trial judge dealt with the issue of causation on the footing that written notices should have been have issued by the Certifier to remedy the defects found. It is correct that the trial judge does not expressly formulate the content of the written notices that should have been issued from a competent certifier. However, the implicit content of these written notices, derived from the trial judge’s reasoning, was simply that steps needed to be taken to redo the defective work and rebuild according to the approved plan. His Honour dealt with causation on this basis.
Senior Counsel for the Certifier at the hearing of the appeal developed a submission which sought to challenge the efficacy of the implicit content of the written notices. The submission interpreted s 45(5) of the Act as effectively derogating from the strict compliance with s 42 of that Act. It is necessary to set out the scheme of the Act to appreciate the submission.
Section 42, paraphrased, requires that the builder must carry out building work using proper materials, in a proper and skilful way and in accordance with approved plans.
Sections 43 and 44 deal with stages of building work and stage inspections. The trial judge found at the “pre-sheet” and “final” stage inspections written directions should have been issued by the Certifier and the work should have been halted.
Section 44(5) is relevantly in these terms:
(5) A certifier must certify that building work complies with section 42 and give the certificate to the building licensee in charge of the building work if the certifier—
(a) has given a notice mentioned in subsection (2) (a) to the licensee; and
(b) is satisfied on reasonable grounds that—
(i) the building licensee in charge of the building work has done what is reasonable and appropriate to achieve compliance (even if what is done is not in accordance with the directions in the notice); and
(ii) the building work otherwise complies with section 42;
…
From s 44(5), it was submitted by Senior Counsel for the Certifier that, “as long as the builder has done what is reasonable and appropriate to achieve compliance, even if he hasn’t quite achieved compliance, that will be sufficient”.
Acceptance of that construction would, in a given case, have the effect of the trial judge having to formulate the precise content of the written directions which the Certifier should have been required to give.
Senior Counsel for the Owner disagreed with this construction and said there was no derogation from the strict compliance with s 42 of the Act. He contended that the directions which a (competent) certifier would make served only as a form of guidance to the builder but the work either complied or did not comply with the requirements of
s 42. In other words, the builder could take up the directions or not, but the result had to be that “the building work otherwise complies with s 42”.
We think the better view is that put forward by Senior Counsel for the Owner, but it is not necessary to determine that matter on the facts of this case. It might be important where the defects were more subtle and when minds could differ on whether what was done was reasonable and appropriate to achieve compliance. This is not such a case. As the trial judge observed at [92]:
[The] certifiers [sic] task cannot be reduced to an exact science. While it is correct that, in common with any judgment based upon specialised knowledge or experience, there is some room for differing opinions, in the context of work done on a residential dwelling, if a certifier is performing the function required by s 44 the scope for differences of opinion will be relatively narrow. That is a combination of the fact that any state of satisfaction under s 44 must be based upon reasonable grounds and that the existence of the BCA [Building Code of Australia], Australian Standards and the Guide to Standards and Tolerances all tend to confine the scope for different conclusions to be reached. It is certainly not a case where a broad discretionary decision is to be made about which reasonable minds might differ. Rather, it is a statutory test which must be determined on reasonable grounds in relation to which many if not most of the requirements will be governed by accepted standards.
In this case the defective work, as found by the trial judge, which should have been the subject of written notices, consisted of:
(a)failing to install, or install correctly, a moisture barrier beneath and/or next to the slab as required by cl 5.5.2 of Australian Standard 2870-2011 (AS 2870‑2011);
(b)
failing to install, or install correctly, a moisture barrier between external concrete slabs and the waffle pod slabs, including a failure to comply with
Building Code of Australia (BCA) Performance Objective P2.2.3;
(c)installing perpends in the brickwork which were too large and/or inadequately or incompletely damp proofed;
(d)installing an infill slab in a manner contrary to the BCA and/or suppliers’ recommendations;
(e)failing to install any, or any adequate, damp course, including failing to comply with clause 3.3.4.5 of the BCA and/or Australian Standard 3700;
(f)installing or allowing to be installed brickwork of poor workmanship, including works that were not plumb, not level, used unmortared joints, uneven, unengaged, over sailed the slab beyond BCA tolerances, had blocked weep holes and/or used broken bricks;
(g)constructing a shared double brick wall on the boundary of the land and the adjoining property, which served as a party wall where the approved plans called for the construction of two separate walls on the land and the adjoining block; and
(h)failing to construct brick extensions (nib walls) for the front wall of a bedroom on the premises.
Where the Certifier misunderstood his contractual obligations and failed to issue a written direction to resolve the defects, we are unpersuaded that the finding by the trial judge on the issue of causation was not open to his Honour upon the pleadings or the course of the trial. It is a different question whether the finding actually made by the trial judge on this issue was the correct finding. Accordingly, we would dismiss the
grounds of appeal (iv) and (v).
Whether the owner has proved her loss
It will be recalled that the trial judge was informed on the first day of the hearing that the proceedings between the Owner and the Builder had been settled. The Court was informed from the bar table that a deed was to be exchanged between those two parties and that a Notice of Discontinuance of the Cross Claim brought by the Builder was to be filed. No other details of the settlement were given to the Court or proved in the evidence.
In his Honour’s conclusion on the quantum of damages to which the plaintiff was entitled, the trial judge recorded the fact at [125]:
[T]here is no evidence that as part of the settlement between the [Owner] and the builder the [Owner] has either paid any further amount to the builder on account of the contract price under the building contract or that the builder has paid her any amount.
The trial judge went on to give judgment according to the evidence before his Honour and made no allowance for the fact that there may have been a payment as part of the settlement.
Senior Counsel for the Certifier submits that the trial judge was in error in taking this approach to the quantification of damages. He submits that it was for the Owner to satisfy the Court of the loss and also the quantum of that loss. Senior Counsel further submits that the Owner failed to prove her loss and that her claim ought to have been then dismissed on that basis.
We are unable to accept this submission. The trial judge was entitled and indeed had to proceed upon the evidence before him. On the evidence before his Honour, ignoring any speculation, the Owner was entitled to judgment on the loss proved in the evidence.
There is a well-developed jurisprudence on the principle of double satisfaction (also known as double recovery) in relation to judgments. However, the evidence before the trial judge did not engage this principle.
We dismiss ground of appeal (vi).
For completeness, we record that there was no pleading or argument at the trial concerning the applicability of apportionment legislation under the
Civil Law (Wrongs) Act 2002(ACT) (the Wrongs Act). We also record that, although damages claimed on the pleadings by the Owner against the Builder and Certifier overlapped, the basis of each of the claims was different.
Whether factual findings on causation are supported by the evidence
In paragraphs [19]-[20] and [22]-[24] above, we have set out and underlined much of the trial judge’s reasoning on the issue of causation. His Honour concluded that, had the Builder been given written notices of the defects pursuant to s 44(2)(a) following the
pre-sheet and final stage inspections, the Builder would have remedied those defects in order to obtain a certificate under s 44(5).
A number of matters can be noted. First, neither party contended that
ss 41(1) and 45 of the Wrongs Act brought a departure from common law causation in this case. The harm suffered, for which damages are sought, is the construction of a defective building not built in accordance with the approved plans.
Second, as a matter of law, the Owner bore the onus of proving that the breach of contract by the Certifier was a cause of the loss.
Third, the Builder was not called at trial to give evidence about what response he would have made had he received written notices at the pre-sheet and final stages. That meant that the Owner’s claim for loss was to be determined on the hypothetical actions of the Builder and only inferences, as to his response to the posited written notices and
non-issue of the certificates, were available.
Fourth, the trial judge did not fully set out the reasoning process for his Honour’s conclusion on this issue. His Honour referred to his conclusion at [94] and at [98], reproduced as follows, and in context at [20] and [23] above:
[I] am satisfied that had he given written notice to the builder, the builder would not have contravened s 43(3) and hence the building work would have stopped until the builder was able to obtain a certificate under s 44(5) by remedying the defects that have been proved by the plaintiff.
…
More particularly, I am satisfied that had the builder been given written notices of the defects pursuant to s 44(2)(a) following the pre-sheet and final stage inspections, the builder would have remedied those defects in order to obtain a certificate under s 44(5). As a consequence, I am satisfied that but for the breach of duty by the certifier, the [Owner] would not have suffered loss, namely, the costs of remedying the defects which would not have occurred had the certifier done his job according to the contractual standard…
Fifth, in the second extract in [98] above, the trial judge contemplates the intervention of the Certifier at each of the two stages. This is significant because as the building progressed, without appropriate intervention by the Certifier, the Builder’s negotiating position changed as did the prevailing economics of the situation.
Certifier’s submissions
The Certifier submitted that there was simply no evidence to support a conclusion that the Builder would have rectified the defects had those defects been brought to his attention through written notices and consequent non-issue of certificates. The Certifier drew attention to the alternative course open to the Builder: that the Builder would simply have stopped work and not resumed it. The Certifier submitted that the alternative course was, at least, equally consistent with the evidence if not more so. The parties conducted the appeal on the basis that the only possible response of the Builder was binary.
The analysis brought to bear in such circumstances is familiar. The joint judgment of the High Court in Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1, 5 expressed the point:
[I]n questions of this sort where direct proof is not available it is enough if the circumstances appearing in the evidence give rise to a reasonable and definite inference: they must do more than give rise to conflicting inferences of equal degrees of probability so that the choice between them is mere matter of conjecture… But if circumstances are proved in which it is reasonable to find a balance of probabilities in favour of the conclusion sought then though the conclusion may fall short of certainty it is not to be regarded as a mere conjecture or surmise…
(Citations omitted).
It is also relevant to note the observation by Mason J in such an analysis of conflicting inferences arising from the evidence. In Girlock (Sales) Pty Ltd v Hurrell (1982) 149 CLR 155, 169, his Honour observed that “where there is no direct evidence of a fact it is not possible to attain entire satisfaction as to the true state of affairs”.
This process of reasoning has been restated many times. An example occurred in Trustees of Property Cummins (a bankrupt) v Cummins [2006] HCA 6; 227 CLR 278. At [33]-[34], the trustees were required to prove that the circumstances supported a reasonable and definite inference that the bankrupt, in making a transfer of property, had the “main purpose” of preventing that property from becoming divisible amongst his creditors or to hinder the process of making the property available to his creditors.
We interpolate here to record that the case before this Court was not argued on the basis of a loss of a chance.
Analysis
The question posed on appeal by Senior Counsel for the Certifier was whether, had the Builder been given written notices of the defects pursuant to s 44(2)(a) following the
pre-sheet and final stage inspections, the Builder would have remedied those defects in order to obtain a certificate under s 44(5) of the Act.
At a general level, a rational analysis of the question would include the Builder’s financial capacity and economic incentive to do so, as well as intangible and subjective factors such as an individual’s normative tendency to adhere to his or her own contractual undertakings.
There were a number of facts and circumstances, some of which were derived from the evidence, which tended to support one or the other of the postulated binary outcomes or at least assisted in evaluating the strength of any inference.
These were rather eclectic in nature:
(a)
The financial situation of the Builder, as at 1 February 2013 and
23 May 2013, was not in evidence.
(b)The Builder was licensed and had apparently otherwise complied with all its other statutory building obligations.
(c)The Builder had at least three building projects under construction in the same street as at the first half of 2013.
(d)Each of the three building projects was to be certified by the Certifier.
(e)Between 9 November 2012 and 23 May 2013, the Builder had been issued with three inspection certificates by the Certifier.
(f)By June 2013, the Builder had been paid $133,338 out of a total contractual sum of $177,750 leaving $44,421 outstanding. (The payment being about three quarters of the total contract price).
(g)
There is no precise evidence of the timing of when early progress payments had been made and what correlation the progress payments bore to the value of the completed works at any given time. Item 13 of the
Building Contract showed incremental progressive payments against completion of the works. As at 1 February 2013, it seems clear enough that approximately a quarter of the contract price had been earned.
(h)There is no evidence as to the costs of rectification as at 1 February 2013. Findings were made by the trial judge that the defects in the construction of the brick walls were able to be observed and the deviations from the plans were also apparent at that time.
(i)The Builder, from about 25 May 2013 onwards, regarded himself as being in a position to obtain for the Owner an occupation certificate which could be processed when the Owner signed the application form, which he had uploaded to the relevant shared portal, and the Builder produced the necessary certification certificates from subcontractors to the Certifier.
(j)The Builder proffered his own defects list to the Owner during a joint inspection. The list was rejected by the Owner but there was significance in the fact that the Builder had not walked away from the works at that time.
(k)
The Owner sent her own defects list to the Builder and withheld
payment of $44,421.
(l)The Builder responded by consulting “legal counsel” and promptly lodged a caveat on the property to secure the $44,421 outstanding.
(m)There is no evidence as to the value of deficient work which the Owner herself (from her own defects list) was pursuing, as at June 2013, so that a comparison could be made between $44,421 and that value.
(n)The trial judge’s finding as to the actual rectification cost of $201,118 is a basis or at least some indication of the magnitude of the defective work which would have been apparent in June 2013.
(o)A comparison can be made between the $44,421 owing to the Builder against the likely costs of rectification to the Builder.
(p)The Builder had not been wound up by the time of the trial (February 2019), had participated in the litigation steps, and “settled” the proceedings at that time with Owner.
It is appropriate to observe that by reason of having received the three certificates from the Certifier and the fact that the same Certifier was to attend to the occupation certificate, the Builder was placed in a relatively strong negotiating position, in
June 2013, against the Owner. The same negotiating position would not have applied at the time of the “pre-sheet” stage certification on 1 February 2013. This fact has significance for much was made of the behaviour of the Builder, at the time when he had gained the three certificates, as demonstrating an unwillingness to comply with his obligation to deliver the house without defects and in accordance with the plans.
Owner’s submissions
The Owner’s submissions on this topic approached causation by a different pathway. In his written submissions on appeal, Senior Counsel put the matter in the following way:
38. The [Certifier] also contends that it was for the [Owner] to prove what the Builder would have done if the [Certifier] had issued a stop work notice. This overstates the obligation on the [Owner] to “prove” causation.
39. The [Owner] was only obliged to prove facts which supported a conclusion that the [Certifier’s] breach of contract was a cause of her loss and damage.
40. The evidence led by the [Owner] included evidence that the Builder was licensed and had entered into a Housing Industry Association contract to undertake the construction in accordance with that contract and all relevant laws and statutory requirements; had complied with its obligations under the Act to apply for approval to commence work; had given notice in accordance with the Act when inspections were required by the [Certifier] and was constructing other residences at the same time in the same street which were also being inspected by the [Certifier].
41. It was for the [Certifier] to establish that the [Owner] either:
(a)would have suffered that damage in any event because the Builder would have continued in spite of a stop work notice; or
(b)suffered a different kind of damage because the Builder would have abandoned the work.
42. So much is clear from cases such as Purkess v Crittenden & Watts v Rake. Once the [Owner] established that the [Certifier’s] breaches caused her loss in the manner described in Reasons [97] (which was the manner pleaded), it fell to the [Certifier] to adduce evidence that would interrupt that chain of causation. It was not for the [Owner] to negate every possible alternate cause of her loss, but rather for the [Certifier] to introduce evidence that an alternative cause severed the connection between the [Certifier’s] conduct and the loss.
(Emphasis in original; citations omitted).
Conclusion
The facts and circumstances outlined in [72] above could be said by a student of behavioural economics to be an incomplete or inadequate view of the factors at play to determine the likely response of the Builder. That may be so. However, our task is to apply the legal analysis set out above having regard to the observation in Girlock above and also the requirement to have sufficient material available to make a reasonable decision: Ho v Powell [2001] NSWCA 168; 51 NSWLR 572, [14].
The first finding of fact made by the trial judge to take account of is that the building progress should have come to a standstill on 1 February 2013 and remained at a standstill until the Builder rectified the then-current defects and failures to build in accordance with the plans.
It is true that these defects and failures, evident upon inspection on 1 February 2013 to a certifier using reasonable diligence, were to the Builder’s account only at that time. However, the Certifier had the power and the obligation to issue a written notice and withhold a certificate so that works could not proceed further until the defective works were rectified and built in accordance with the plans.
The power given to the Certifier is coercive in nature. It is coupled with a sanction that to continue building without a certificate is a criminal offence. As the trial judge observed, at [65], “the legislation aims to ensure that defective work is remedied at an early stage and the interests of owners are thereby protected”.
The issue arises: what would the Builder have done if he had been given directions to rectify the work and was denied a certificate on 1 February 2013, by a competent certifier acting in accordance with the Certifier’s contract? There are three possibilities. The Builder could have abandoned the works and been liable for a breach of his building contract (loss of bargain and rectification costs). The second possibility is that he may have continued to build without a certificate. This second alternative can be dismissed. The same competent certifier would have reported this breach to the regulatory authority and the builder’s building licence would be, at least, at risk and he would also be liable to prosecution. The third possibility is that he would have complied with directions in a notice (or taken alternative appropriate effective methods) to rectify the work and build in accordance with the plans.
We have concluded that there is a reasonable and definite inference that on the balance of probabilities, the Builder after having been denied a certificate on
1 February 2013, would have rectified the work and obtained a certificate of compliance at that time allowing the works to proceed further. In coming to this conclusion, we have taken into account the fact that the Builder had incurred a liability under his contract for rectification, that he had three building projects in that street at the time, that he was a licensed Builder, that the Builder had otherwise complied with his statutory requirements, the fact that the strength of the Builder’s negotiating position was weak owing to the absence of the certificate of compliance and that, as at 1 February 2013, there is no evidence of a lack of capacity to rectify defects.
However, we cannot conclude with the requisite degree of confidence, that the Builder would have complied with appropriate written notices and rectified the work, as that work then stood on 23 May 2013, in order to achieve compliance.
The second finding of fact, a corollary of the first, made by the trial judge to take account of is that the Certifier was in breach of his contract with the Owner in allowing the building to progress after 1 February 2013 without rectification.
The third finding of fact made by the trial judge to take account of is that further building defects and failures to build in accordance with the plans eventuated after
1 February 2013 which caused further damage.
The permitting of building work to progress by the Certifier after 1 February 2013 is a cause of this further damage. It is clear that these further building defects and failures to build in accordance with the plans could not have occurred if the Certifier was not in breach of his contract.
There is no error in the trial judge’s conclusion on causation. The factual finding was supported by the evidence. We would dismiss this ground of appeal.
Order
It follows that we dismiss the appeal. The Certifier must pay the costs of the appeal.
| I certify that the preceding eighty-six [86] numbered paragraphs are a true copy of the Reasons for Judgment of their Honours Justice Burns, Justice Loukas-Karlsson and Acting Justice Robinson. Associate: Date: |
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