Construction Services Australia v Fleming & Fleming - [2006] SADC 71

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
CONSTRUCTION SERVICES AUSTRALIA v FLEMING & FLEMING
Judgment of His Honour Judge Anderson
29 June 2006
CONTRACTS
Claim by builder for balance due under Building Contract - Counterclaim for breach of contract - value of defects agreed shortly before trial - damages for stress and inconvenience not made out - allowance for delay.
Judgment on claim for Plaintiff in sum of $47,606.60 inclusive of interest.
Judgment on Counterclaim for Defendants with no further order.
Baltic Shipping Company v Dillon (1992-1993) 176 CLR 344, considered.

CONSTRUCTION SERVICES AUSTRALIA v FLEMING & FLEMING
[2006] SADC 71

Construction Services Australia Pty Ltd (ACN 007 641 787) (“CSA”) claims from Mr & Mrs Fleming, the Defendants, what, in effect, is said to be the balance due, pursuant to a contract between them, for the construction of a house upon land owned by the Defendants at Victor Harbor.
Mr Keen of counsel appeared for the Plaintiff, CSA, and Mr Anderson for the Defendants.
It is not in issue either that at the relevant time CSA was incorporated or that it held the appropriate builders licence in this State.
The Defendants’ intended to build upon their land and, after some misadventure with another builder, came in contact with a representative of CSA in late 2000. After inspection of a show home constructed by CSA, they decided to use that company to build a house which they had substantially previously designed.
To this end they executed the following documents on 20 December 2000:
·a Building Agreement which included thirteen schedules;
·a Home Finance Schedule;
·a Preliminary Work Agreement;
·a Specification; and
·a Classic Schedule.
Clause 3 of the Building Agreement provided that it was not binding upon CSA until signed by that company.
The Building Agreement was accepted by Mr Czeglik, then the Building Manager of CSA, on 24 February 2001. I find that on or about that day he also signed the Preliminary Work Agreement, the Specification and the Classic Schedule.
By the Third Schedule of that Agreement, the total contract sum was $147,970.00.
Also, on 20 December 2000, the Defendants signed CSA’s Quotation Form of three pages which was in the same sum. Importantly, that quotation indicated that whilst the design of the premises was the Defendants’, the quotation was based on the “Classic Schedule”. This was the fit out description of the show home which had been inspected by the Defendants at a site at Woodcroft.
Mr Czeglik said in evidence that the Classic Schedule, which formed part of the contract documents, set out a description of what a building constructed in accordance with such a schedule, without variations, would comprise.
A further and final document, said by CSA to form part of the Agreement, were the Final Master Plans, dated 5 March 2001, and signed by the Defendants on about 13 March 2001.
The Plaintiff has pleaded that the agreement was made on or about 20 December 2000. That is clearly wrong. In his final submission, Mr Keen sought leave to amend that date to 24 February 2001. Mr Anderson consented and I ordered accordingly.
The plans of 5 March 2001 incorporate changes made by the Defendants to what is set out in the Classic Schedule in relation to roofing material and type and size of skirting boards and architraves inter alia. An issue arose as to the type of gutters. Commonsense dictates that they be of the same material as the roof and, in the absence of any evidence to the contrary, I accept Mrs Fleming’s evidence that that was agreed between the Defendants and CSA’s agent when Colourbond roofing was included in the accepted quotation.
The Defendants signed a variation costing request on 20 December 2000 which related to an upgrade of the skirtings and the architraves. It also related to the conversion of dual roller doors to a single door and the supply of a motor for that door so as to render it automatic.
Subsequently, on or about 14 February 2001, the Defendants signed a further variation costing request, dated 9 February 2001. That document had been sent to them by Mr Michael, the sales consultant employed by CSA and with whom they had conducted all negotiations since they first met him at the Woodcroft show home. He did not give evidence.
That request, which I am satisfied related to items discussed between the Defendants and Mr Michael, was signed by them and returned. This request for execution included the statement, in what I take to be Mr Michael’s hand, “so that I can complete approval and acceptance”. It was apparent then at this time that CSA did not consider the Building Agreement complete.
In examination in chief, Mrs Fleming explained why she executed this document:
Q.Did you understand that those prices were in addition to the price you agreed in December.
A.Yes. I would have queried them.
Q.Do you recall querying them with Mr Michael.
A.I would have queried them but look, he would have given me an explanation and therefore I’ve signed it. (T154)
It is apparent that at the time she did so, she knew it was a variation from the quotation of 20 December 2000 and that she understood that to be so. Confirmation of that is to be found in the note adjacent to Item 14 of this document where the words “credits shown on contract” appear. A perusal of the contract shows credits for “ETSA - WATER - Septic and Drains”. Item 1 shows a deletion of an item, at like cost as shown in the 20 December 2000 quotation.
A further variation costing order of 21 February 2001, signed by the Defendants and returned to CSA on that day, confirms the 9 February 2001 variation request, deletes another item in the 20 December 2000 quotation and contains a request that CSA “cut block and prepare site” with the possibility of there being extra costs.
Thus, well before 24 February 2001, the Defendants agreed to several variations to the content of the quotation which they accepted on 20 December 2000. When they did so, it could not reasonably be said that there was no consideration for the changes. They were part of the ongoing negotiations between the parties and the evidence does not support any proposition to the effect that they did not understand what was occurring. It is apparent from the evidence that they knew that there had been changes, both for and against their pocket, from 20 December 2000 until at least 21 February 2001.
Against this background, and having regard to the pleading by the Plaintiff that the final plans, dated 5 March 2001, formed part of the whole Agreement between the parties, Mr Anderson has made a somewhat novel submission.
It is that, because the variations to which I have referred are included in the final plans of 5 March 2001, and those plans are part of the Agreement between the parties as pleaded, then, (irrespective of the evidence of Mrs Fleming as to her understanding and expectation) there is no consideration flowing for those variations. They are in the plans and, as there is no consideration, they do not have to be paid for separately and a credit for their value, as taken from the proved variations, should flow to the Defendants.
Such a proposition seems to ignore Clause 11.1 of the Building Agreement, which is in these terms:
Should the owner request any variations or alterations to the plans and specifications or require additional work to be performed he shall supply full details thereof to the builder in writing. Should the builder agree to incorporate such variations in the said works (and it may decline to accept such variations in whole or in part) it shall submit to the owner a ‘request for variation’. No additional work or variation can be incorporated unless the builder has received from the owner the above referred to ‘request for variation’ duly signed by the owner and the builder and the owner has produced evidence which satisfies or has made arrangements which satisfy the builder that the owner can finance the cost of the variation.
This Clause allows for such a request to be made at any time from when there are plans and specifications. There is no doubt on the evidence that the Defendants had existing plans which were used by CSA to produce firstly, the 20 December 2001 quotation, and ultimately, the final plans of 5 March 2001 which, sensibly, incorporated all changes made and agreed by the parties to that time. The suggestion that, in these circumstances, the Defendants should obtain an enrichment to their position, where they have acknowledged, at the time and in evidence, their obligation to pay for the variations and to receive credits, is without merit. The variation requests procedure provides for the project to be adjusted on a sensible commercial basis as it develops. This is the course followed by the Defendants from the outset. See also Clause 11.5.
The submission must fail.
An agreed adjustment in favour of the Defendants in the sum of $9,479.00 arises from the items in the Scott Schedule, which is in evidence, excluding Item 18.93. This schedule comprises all of the items set out in paragraph 18 of the Third Further Amended Defence (“Amended Defence”) except Item 18.95.
Item 18.93 is an agreed sum of $3,060.00 and has been separated from the Schedule by consent. It is agreed that this sum was not spent and is to reduce the sum claimed by CSA from $49,295.50, as set out in the Statement of Claim, to $46,235.60. That amendment was made at the outset.
Item 18.95 of the Amended Defence is in these terms:
The brickwork is not the same colour or consistency in colour as the show home.
Evidence was given of the Defendants’ concern in this regard. That concern was drawn to the attention of CSA. There was an inspection of the brickwork by the local representative of the brick manufacturer. His report is in evidence as exhibit P1, Tab 39.
It is unnecessary to resolve the uncertainty on the evidence as to who organised this inspection. The report concludes that the bricks used in the construction of the Defendants’ home are “representative” of the type ordered and identified in the plans of 5 March 2001. I find, contrary to the plea, that the bricks are as specified. Thus, this issue is resolved in favour of the Plaintiff without the need to resort to the protection offered in the Specification attached to the Building Agreement.
The figure of $46,235.60 includes adjustments for the variations as set out in exhibit P1, Tab 10 and are itemised in paragraph 7 of the Statement of Claim. Each variation there identified, except that of 6 September 2001, has been signed by the Defendants. The variation of 6 September 2001 relates to the “Additional cost for Colourbond gutters, fascia and downpipes ..... in lieu of standard” in the sum of $850.00. As I have indicated, I accept the evidence of Mrs Fleming that it was part of the original Agreement that the roof and gutters be Colourbond. Thus, this sum is also to be deduced from the Plaintiff’s claim. The claimed figure is therefore reduced to $45,385.60. I shall return to the question of interest subsequently.
Before going further, it is necessary to set out the history of the project as the elapsed time underpins the Defendants’ claim based upon lack of reasonable despatch as being the cause of some of the Defendants’ alleged loss.
The essence of the Defendants’ complaint as to the time taken by CSA in construction depends upon the original plea by CSA that the Agreement between the parties was made on 20 December 2000 (Statement of Claim, paragraph 2). In fact, this plea, which was admitted by paragraph 11 of the Amended Defence, was amended by consent, as I have earlier described. Thus, the agreed date of Agreement is 24 February 2001.
As Clause 4 of the Building Agreement identifies, the important relevant date for the commencement of works is what is known as the “OK to Start Date”.
This date was advised to the Defendants as 18 July 2001 on 13 July 2001 by Mr Czeglik by letter. In accord with the Fifth Schedule to the Building Agreement, completion time for construction was then to be 90 working days from the date the footings were poured.
After 24 February 2001, it is plain from the evidence that the 5 March 2001 plans were accepted by the Defendants on about 13 March 2001.
The required soil test was obtained by 26 March 2001 and the site report and site plan were also completed on that day.
Thereafter, the completed plans were lodged at Council on 5 April 2001. A private certifier was engaged to enable development approval. A requisition by that firm to CSA is dated 18 April 2001.
Finance approval was granted by the Defendants’ bankers on 27 April 2001.
A delay at Council caused by a short payment at plan lodgement was rectified on 8 May 2001. Provisional Development Plan Consent was granted by Council on 7 June 2001 and the private certifier gave Provisional Building Rules Consent on 20 June 2001. A requisition relating to effluent disposal was completed six days later. Final approval was granted by Council on 29 June 2001 and received by CSA on 6 July 2001.
In evidence, Mr Czeglik said that this time line was within usual bounds. I accept his evidence in that regard. There is no acceptable evidence to the contrary.
Based upon calculations not substantially supported by the evidence, and using the date of 20 December 2000, Mr Anderson submitted that there was significant delay to the “OK to Start Date” in accord with paragraph 17 of the Amended Defence. Whilst it will always be possible to say that a day here and there could be saved in this time line, regard must be had to the nature of the task in hand and the many players involved. It is no place for a counsel of perfection.
I am not satisfied that it has been shown that there was undue delay by CSA from when it accepted the Agreement until it notified the “OK to Start Date”.
The pouring of the footings occurred on 8 August 2001. Thus, the commencement of the construction time line, as set out in the Fifth Schedule, is 9 August 2001. To this period of 90 working days is to be added an allowance for the Christmas holidays of one month in terms of Clause 6.2 of the Building Agreement. In addition, it is not in dispute that, because of one week’s delay by the Defendants in making a due payment, that period should also be added. I accept the suggestion made during addresses that there should be one week allowed for inclement weather. Conversion to working days gives a total of 120 days for completion.
In the context of the construction, it is agreed, as pleaded in paragraph 8 of the Statement of Claim, that progress payments were made on 23 August 2001, 18 September 2001, 20 November 2001, 24 December 2001 and 7 January 2002. By then, $104,184.50 had been paid.
It is also not in dispute that advice of practical completion was sent by CSA to the Defendants on 25 January 2002. That was 119 working days from commencement. I leave aside for the moment the submission that, on this day, because of recently acknowledged defects, and in particular, those relating to tie downs and to waterproofing, the house was not substantially complete.
In the normal course, Mr Czeglik said that following advice of practical completion, final settlement would usually occur in a few days. It was usual for there to be an inspection and for any defects there detected to be remedied before final settlement. Here, the final inspection was held on 16 February 2002 because of a stand off between the Defendants and the on‑site supervisor of CSA as to availability to attend.
Allowing 10 working days for this process, then on the Plaintiff’s case, the final settlement would have been on about 9 February 2002. What occurred thereafter is a delay attributable solely to the breakdown in the relationship between them.
This adds to the previous total of 119 working days such that in the normal course, final settlement would have occurred 129 working days after the “OK to Start Date”. The difference is nine working days or, say, two weeks.
This is therefore the extent of any liability of CSA to the Defendants on the topic of delay.
The sub‑items set out in paragraph 18 of the Amended Defence are, with the exception I have mentioned, included within the Scott Schedule.
That paragraph alleges:
Say that the works were not carried out in a proper and workmanlike manner, nor in accordance with the contract, nor in accordance with the plans and/or specifications nor in accordance with engineer’s requirements, nor in accordance with the council’s requirements, nor in accordance with the Building Code of Australia, nor to the same standard as the CSA exhibit home.
Consideration of this plea requires a return to the chronology of construction, but all the while having in mind that the quantum of the required repairs is agreed at $9,479.00.
The Defendants first wrote to CSA after construction had commenced on 10 September 2001. In that letter they complained of several matters.
The matters were addressed by Mr Czeglik in reply on 20 September 2001. This brought a further letter from the Defendants on 22 September 2001. On 12 October 2001, they advised Mr Czeglik that they had hired “a house inspector” for a full written report. That report, dated 26 October 2001, is in evidence. Its production was the cause of the delayed payment to which I have already referred. On that day, the report went to CSA. Thereafter, an on‑site meeting brought a detailed response to the Defendants from Mr Czeglik on 15 November 2001.
The Defendants continued to express their disappointment at this response by letter of 29 November 2001.
Thereafter, on 21 January 2002, advice of the need for the Defendants to attend a pre‑handover inspection was sent, to be followed by the letter of 25 January 2001 to which I have referred. The Defendants responded to both of these letters on 11 February 2002 and the final inspection referred to was conducted on site on 16 February 2002. That inspection produced a list of defects which the Defendants described as incomplete. They refused to sign it or the Certificate of Practical Completion dated that day.
On 25 February 2002, the Defendants advised of a further inspection by their inspector. It produced a further list of defects, dated 5 March 2002. In relation to these, Mr Czeglik and Mrs Fleming met on site on 25 March 2002. No satisfactory resolution eventuated after Mr Fleming later spoke to Mr Czeglik on this topic.
Apart from correspondence between the Council’s solicitors and CSA regarding two matters relevant to compliance with the Building Rules, there was no further correspondence with CSA by the Defendants until their solicitor wrote to the company on 18 May 2002 alleging a breach of contract for failure to remedy defects and so complete construction. The certificate of practical completion, dated 16 February 2002, and unsigned, was said, in the circumstances of a failure to remedy defects, to be improperly issued. In fact, nothing turned on its issue. Advice was given of the Defendants’ intention to occupy the house in any event. This they did on that day.
Proceedings issued on 23 March 2004.
By his report of 30 September 2004, Mr Jankovic, CSA’s building consultant expert, acknowledged many of the matters which had been items of complaint by the Defendants from, in some instances, October 2001 when their first house inspection took place. There was no agreement as to either the items or their quantum. They then made their way into the Scott Schedule. Shortly before trial, the sum of $9,479.00 was agreed on their value.

Several complaints have been made, both in evidence on behalf of the Defendants, and in submissions by Mr Anderson, as to the need for certain rectifications and the cost thereof. However, like the allegations as to defective brickwork, all items on the schedule have, as it were, been taken out of play by that agreement and it is not appropriate to consider any differences between the experts as to the cost of rectifying specific items in the Schedule.
It is not necessary to make specific findings in relation to any items within the Scott Schedule because of this agreement. This is especially so in relation to the brickwork quality (except for Items 18.22, 18.23 and 18.25 where an allowance is included in the agreed sum) and the topics of tie down and waterproofing which have also been overtaken by the agreement as to quantum. In these circumstances, nothing flows from the conversation between Mr Czeglik and Mrs Fleming on 25 March 2002 wherein an offer in contemplation of resolution was made. Not only was it subsequently and emphatically rejected by Mr Fleming, but the topic is subsumed in the later agreement as to quantum.
I accept the expert view of Mr Jankovic that the house was, in January 2002, “practically complete”. This is particularly so when regard is had to the fact that the Defendants and their family have been living in it since May 2002, apparently with minimal inconvenience and without the need for repair or restoration.
It follows that CSA was entitled to write the letter of 25 January 2001. There has been substantial compliance with the construction contract. The agreed cost of the defects is well under 10% of the value of the total project. I am not persuaded by any argument to the contrary.
The Defendants claim damage for stress and inconvenience pursuant to the principal in Baltic Shipping Company v Dillon (1992-1993) 176 CLR 344.
Accepting, for present purposes, that a contract such as this is within the exception to this rule, i.e. that there is the breach of a term to provide pleasure or enjoyment or physical inconvenience is suffered, I am not of the view that the evidence here supports such a finding.
Whatever physical inconvenience there is has not been such as to prevent, or hinder, ongoing occupation for in excess of four years. As such, it is difficult to see that, if there is an express or implied term to provide pleasure or enjoyment, it has been breached. That the Defendants have not undertaken further work to the house environs, as intended, because of this dispute, is nothing to the point in this regard.
Accordingly, CSA has succeeded on its claim to the extent of $45,385.60 for the reasons I have given.
The counterclaim is successful in the agreed sum of $9,479.00. There is delay of, say, two weeks. I accept the value of $150.00 per week referred to at trial. This is a total of $9,779.00.
CSA claims interest in the sum of 20%, as identified in Clause 8.5 of the Building Agreement. That clause purports to be an estimate of the liquidated damages suffered as the costs and expenses of recovery. In this case, such a percentage could not possibly be a genuine pre‑estimate of damages and I did not understand Mr Keen to do other than but faintly suggest it. No persuasive evidence was called on the topic. In my view, the rate sought is a penalty and the clause is unenforceable in equity.
CSA is, however, entitled to compensation for being kept out of its money. It has been kept out of money to the value of the difference between claim and counterclaim; namely, $35,606.60 since when final settlement should reasonably have occurred. In view of the value of the agreed defects and the estimation given in evidence as to the time necessary to affect them, that time is reasonably not later than the end of March 2002. The appropriate rate for interest is in the Third Schedule. It will, of necessity, be an average. I fix interest at $12,000.00.
The Building Work Contractors Act 1995 is not relevant to these proceedings.
On the claim, there will be judgment for the Plaintiff in the sum of $47,606.60, inclusive of interest.
On the counterclaim there will be judgment for the Defendants but, because of how I have reached the judgment sum, there will be no further order.
I shall hear counsel as to the question of costs. I should say that, in my view, the Defendants are entitled to the costs of their “house inspector” and engineers’ disbursements.