C and E Critharis Constructions Pty Ltd v Cubic Metre Pty Ltd

[2020] NSWCA 348

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

C & E Critharis Constructions Pty Ltd v Cubic Metre Pty Ltd [2020] NSWCA 348

Hearing dates:

14 December 2020

Date of orders:

22 December 2020

Decision date:

22 December 2020

Before:

Macfarlan JA; McCallum JA

Decision:

(1)   Dismiss the Notice of Appeal on the ground that it is incompetent.

(2)   Dismiss the application for leave to appeal.

(3)   Order the applicant to pay the respondent’s costs of the application for leave to appeal and the appeal.

Catchwords:

APPEALS – leave to appeal – whether leave required – monetary threshold of $100,000 under s 101(2)(r) Supreme Court Act – amount in issue $99,999 – strictly no right of appeal – closeness of sum in issue to the threshold relevant to discretion to grant leave

CONTRACTS – remedies – damages – sub-contractor breached contract with builder by supplying and installing materials unfit for purpose – builder paid in full by proprietors and no prospect of it rectifying work – builder not exposed to risk of liability to proprietors – builder did not prove that it suffered loss

Legislation Cited:

Supreme Court Act 1970 (NSW)

Cases Cited:

Alucraft Pty Ltd (in liq) v Grocon Ltd (No 2) [1996] 2 VR 386

Jones v Stroud District Council [1988] 1 All ER 5

Westpoint Management Ltd v Chocolate Factory Apartments Ltd [2007] NSWCA 253

Category:

Principal judgment

Parties:

C & E Critharis Constructions Pty Ltd (Applicant)
Cubic Metre Pty Ltd (Respondent)

Representation:

Counsel:
R K Weaver (Applicant)
B Webster (Respondent)

Solicitors:
Konstan Lawyers (Applicant)
Just Dispute Resolution (Respondent)

File Number(s):

2020/159548; 2020/284172

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Common Law

Citation:

[2020] NSWSC 479

Date of Decision:

1 May 2020

Before:

Adamson J

File Number(s):

2019/235538

Judgment

1. THE COURT: This is an application for leave to appeal from a judgment of Adamson J of 1 May 2020 ([2020] NSWSC 479) in which her Honour allowed an appeal from a decision of Magistrate E Kennedy of the Local Court dated 4 June 2019.

2. The issue sought to be raised on appeal to this Court is whether C & E Critharis Constructions Pty Ltd (“the Builder”) proved that it suffered loss by reason of a breach of contract by the respondent, Cubic Metre Pty Ltd (“the Sub-Contractor”). The Builder contracted to do work at a property in Watsons Bay for the owners, including repairs on a seawall on the property. The Builder in turn sub-contracted the supply and installation of sandstone cladding for the seawall to the Sub-Contractor. The sandstone supplied by the Sub-Contractor in 2011 was however found by Kennedy LCM to be unfit for its purpose, rendering the Sub-Contractor in breach of a warranty given to the Builder.

3. Adamson J noted that in 2012 the owner observed that the stone in the seawall was deteriorating. Although the Builder notified the Sub-Contractor that that was the case, nothing was done over the following years to rectify the wall. Her Honour then noted that the Builder had been paid in full under its contract with the property owners, that the property owners had not required the Builder to rectify the work and that it had been found in the Local Court that there was “no prospect that the Builder would actually rectify the wall or arrange for someone else to rectify it”. In these circumstances, her Honour held that the Builder had not proved it suffered any loss and that it was not entitled to recover from the Sub-Contractor the costs that it would incur if it rectified the wall.

4. The Builder’s first proposed ground of appeal asserts that Adamson J misunderstood the decision in Jones v Stroud District Council [1988] 1 All ER 5.

5. In that case, the owners of a house sued the predecessors of the defendant Council for failing, when the house was built in 1964, to inspect its foundations properly. After the plaintiffs purchased the house in 1975, they had repairs undertaken to it by a company controlled by the first plaintiff. The Court held that the plaintiffs’ cause of action against the Council was not statute-barred and that the plaintiffs were entitled to recover from it the cost of the repairs necessary to eliminate the danger resulting from the defective foundations.

6. Neill LJ, with whom Fox and Ralph Gibson LJJ agreed, said at 1150:

“The plaintiffs failed to provide any documents relating to the work carried out by Marlothian Ltd [the repairer company controlled by the first plaintiff] and there is no evidence that the plaintiffs had paid or are liable to pay any sum to Marlothian in respect of that work.

…

It is true that as a general principle a plaintiff who seeks to recover damages must prove that he has suffered a loss, but if property belonging to him has been damaged to an extent which is proved and the court is satisfied that the property has been or will be repaired I do not consider that the court is further concerned with the question whether the owner has had to pay for the repairs out of his own pocket or whether the funds have come from some other source.”

7. These observations relevantly say no more than that, to prove that it has suffered a loss as a result of work done on a property, a plaintiff will have to establish that it either owns the property or has a liability to rectify, or pay for rectifications of, the defective work. We do not understand Adamson J to have interpreted the decision otherwise. Her Honour applied that conventional principle by finding that, as the Builder did not own the subject property, it could not recover the cost of rectification from the Sub-Contractor because the Builder was not proved to be liable to the property owners for the cost of rectification.

8. In Jones v Stroud D C the plaintiffs were held to be entitled to recover the cost of rectification because they owned the property that needed rectification. In the present case, the Builder was not the owner of the property, had been paid in full for the work it had done on it and the owner could no longer, due to the passage of time, require the Builder to rectify it. Moreover, there was a factual finding that there was “no prospect that the Builder would actually rectify the wall or arrange for someone else to rectify it”.

9. In its proposed second ground of appeal, the Builder contends that Adamson J erred in her consideration of the decision in Alucraft Pty Ltd (in liq) v Grocon Ltd (No 2) [1996] 2 VR 386. In that case, Grocon (the head contractor) was found to have suffered some, albeit limited, loss as a result of its sub-contractor, Alucraft, performing defective work. Because Grocon remained “exposed to the risk of being called upon by the proprietor to rectify Alucraft’s defective work or pay for its rectification”, Grocon was awarded damages against Alucraft to compensate it in respect of this possible liability to the owners. As the risk faced by Grocon was held to be “very remote”, discounted damages of $5,000 only were awarded.

10. Alucraft is entirely consistent with Adamson J’s reasoning. In Alucraft the head contractor was exposed to a risk of liability to the proprietor which was reflected in limited damages being awarded, whereas in the present case the Builder was found not to be subject to any material risk, as a result of which it was not awarded other than nominal damages of $1 for breach of contract by the Sub-Contractor.

11. Alucraft was followed by this Court in Westpoint Management Ltd v Chocolate Factory Apartments Ltd [2007] NSWCA 253 at [46].

12. The Builder’s third proposed ground of appeal is that Adamson J erred in accepting that there was “no prospect” that the rectification would be carried out by the Builder. This proposed ground of appeal raises a pure question of fact. As the Builder has not identified any special circumstances that would cause this Court to depart from its general disinclination to grant leave to appeal in respect of such questions, this ground does not advance the Builder’s application for leave to appeal.

13. A further ground of appeal appeared in the Builder’s filed Notice of Appeal (as to which see [15] below) but it added nothing to the points made under the other grounds we have addressed above. It asserted, in effect, that the Builder did not need to prove that it suffered loss in order to recover substantial damages. It will be apparent from what we have said above that we reject that proposition.

14. For these reasons, the Builder’s proposed appeal has no reasonable prospects of success. As a result, we dismiss its application for leave to appeal, with costs.

15. Another matter that arises concerns a Notice of Appeal filed by the Builder on the assumption that it does not require leave to appeal because it has a right of appeal under s 101(1)(a) of the Supreme Court Act 1970 (NSW). At the hearing of the Builder’s leave application it was agreed by the parties that in its judgment on the leave application this Court should consider the competence of that appeal.

16. Section 101(2)(r) has the effect of requiring leave to appeal unless an intended appeal involves, so far as is relevant to the present proceedings, “a matter at issue amounting to or of the value of $100,000 or more”. The Builder’s claim in the Local Court was for an amount of $123,332 but it recognised that by reason of the Local Court’s jurisdictional limit it could not recover more than $100,000. It acknowledged this before Adamson J and in this Court.

17. Although Adamson J held that the Builder had not proved that it had suffered any loss, on her Honour’s findings the Sub-Contractor breached its contract with the Builder. As a result, the Builder was entitled to be, and was awarded, a judgment for nominal damages of $1.

18. The consequence of that is that the Builder’s claim in this Court is to increase the judgment in its favour from $1 to $100,000 (that is, there is marginally less than $100,000 in issue). Strictly therefore the Builder has no right of appeal but needs leave to appeal. Although the closeness of the sum in issue to the threshold of $100,000 (being short of it only by $1) is relevant to the Court’s discretion to grant leave to appeal, that leave should nevertheless be refused because, as we have concluded above, there are no reasonable prospects of an appeal succeeding.

19. For these reasons, we make the following orders:

1. Dismiss the Notice of Appeal on the ground that it is incompetent.

2. Dismiss the application for leave to appeal.

3. Order the applicant to pay the respondent’s costs of the application for leave to appeal and the appeal.

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Decision last updated: 22 December 2020