David and Heather Dodd v Blue Sky Developments (SA) Pty Ltd

[2005] SADC 34

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

DAVID AND HEATHER DODD v BLUE SKY DEVELOPMENTS (SA) PTY LTD

Judgment of His Honour Judge Robertson

3 May 2005

DAMAGES - MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT

Breach of Building Contract by Builder - Assessment of Damages for Breach - Measure of Damages is the cost of bringing the building works into a state of compliance with the original contract - damages are subject to controlling factor of reasonableness - damages for physical inconvenience and mental stress

De Cesare v Delux Motors Pty Ltd (1995) 67 SASR 28; Boncristiano v Lohmann (1998) VICSC 5, applied.

DAVID AND HEATHER DODD v BLUE SKY DEVELOPMENTS (SA) PTY LTD
[2005] SADC 34

JUDGE ROBERTSON
CIVIL

1. This action comes before me as an assessment of damages.  On 10 February 2005 Master Norman ordered that the Defence of the Defendant be struck out.  On that same day the Master entered Judgment for the Plaintiffs on their claim.  He also ordered that the Defendant’s Counterclaim be struck out.  As the Plaintiffs seek relief by way of damages for breach of contract, it is now necessary for those damages to be assessed.

2. On 8 March 2005 the matter first came on for hearing.  There was no appearance by the Defendant.  The evidence indicates that the director and shareholder of the Defendant, Sharon Thain is bankrupt.  There is further evidence that Neville Thain who was also involved in the Defendant company is also bankrupt.  As I was satisfied that the Defendant had notice of the hearing date, I ordered that the hearing proceed in the absence of the Defendant.  I also ordered that the Plaintiffs be permitted to adduce their evidence in support of their claim for damages by Affidavits.  I received into evidence, on 8 March 2005, an Affidavit of Heather Dodd sworn on 3 March 2005 and an Affidavit of Des Edwards sworn on 5 March 2005.  A further Affidavit of Desmond Arnold Edwards sworn on 19 March 2005 was received at a subsequent hearing on 22 March 2005.

3. Before I proceed to assess damages, a brief history of the dispute between the Plaintiffs and the Defendant is required.

4. On 16 February 2001, the Plaintiffs entered into a written agreement with the Defendant for the Defendant to build a residential dwelling on land owned by the Plaintiffs for the sum of $289,800 (“the Contract”).  During the course of the Contact a number of disputes arose between the parties, not the least being the Defendant’s delay in completing the work.  Following a Conciliation Conference between the parties a Conciliation Agreement was executed by the parties (“the Conciliation Agreement”).  One of the matters agreed was that the time for the completion of the work under the Contract was extended to 31 March 2003.  It was also agreed, that if the work was not completed by 31 March 2003 then the Defendant would pay to the Plaintiffs the costs incurred by the Plaintiffs in renting premises until the work was completed.

5. There were further delays by the Defendant in undertaking the works and 31 March 2003 passed without the building work being anywhere near completed. 

6. On 18 December 2003 the Plaintiffs served a Notice of Substantial Breach on the Defendant requiring the Defendant to recommence work on the house by 5 January 2004.  The Defendant did not recommence work by 5 January 2004.  As a result, the Plaintiffs gave to the Defendant a written Notice of Termination of the Contract on 6 January 2004.

7. The Plaintiffs seek damages for the Defendant’s breach of contact.  The Plaintiffs claim the following heads of damages:

·	Cost of completing the Contract works and rectifying faulty work of the Defendant	$ 354,681
·	Cost of rental for the period from 31 March 2003 until 10 June 2004	$    8,600

1. Each of the Plaintiffs also claim damages for stress and inconvenience. 

2. It is conceded by the Plaintiffs that the Defendant is entitled to a credit of $115,847 being the amount unpaid from the price agreed to be paid by the Plaintiffs for the work to be completed under the Contract.

3. With respect to the Plaintiffs’ claim for the cost of completing the Contract works and rectifying the faulty work, resulting from the Defendant’s breach of Contract, the measure of damages is the cost of completing the work the subject of the Contract and the cost of remedying the defective work subject to a controlling factor of reasonableness.  The relevant principles are stated by Doyle CJ in De Cesare v Deluxe Motors Pty Ltd (1996) 67 SASR 28 (at 31-32):

   “In my opinion the governing principle may be stated at various levels of generality.  The highest level of generality is that damages in contract are compensatory and not punitive.  At a lower level of generality it may be said that a successful plaintiff in a claim for damages in contract is entitled to such amount as will put the plaintiff in the position in which the plaintiff would have been if the contract had been carried out.  Applying that principle to cases such as this, one commences from the starting point that prima face the measure of the plaintiff’s damages is the cost of achieving that state of affairs, that is, the cost of completing the building works in accordance with the requirements of the contract.  But that is subject to a controlling factor of reasonableness.
   What this illustrates is that the plaintiff in such a case does not recoup the amount which the plaintiff has in fact expended in completing the contract works, although in a case in which the work has been performed by the plaintiff that would normally be the best evidence of the cost of doing so.  The plaintiff is entitled to recover the cost of bringing about compliance with the contract, whether or not the plaintiff has in fact done so, and it is clear from the case that the intention of the plaintiff to do so is not a decisive fact.  On that point I refer to what the High Court said in Bellgrove v Eldridge (at 620):

   ‘It was suggested during the course of argument that if the respondent retains her present judgment and it is satisfied, she may or may not demolish the existing house and re-erect another.  If she does not, it is said, she will still have a house together with the cost of erecting another one.  To our mind this circumstance is quite immaterial and is but one variation of a feature which so often presents itself in the assessment of damages in cases where they must be assessed once and for all.’

   In my opinion that statement is not explicable simply on the basis that damages must be assessed once and for all.  It also reflects the principle upon which damages in this area are awarded.  What is awarded is the cost of bringing the building works into a state of compliance with the contract, not an amount which the plaintiff has in fact expended to do so or proves will be spent.  In principle, the owner who chooses to make do with defective contractual performance is entitled still to an appropriate award of damages because that is the measure of what the plaintiff has lost.  There are plenty of cases which illustrate that point, and citation of authority is not necessary.”

4. I now turn to assess the Plaintiffs’ damages.

5. The first head of the Plaintiffs’ claim, being the sum of $354,681, is calculated in the following manner:

·	Cost of completing the work and rectifying work as contained in the quote of Des Edwards Pty Ltd dated 23 December 2003	$ 315,800
·	Amounts paid by the Plaintiffs to remedy defective work, apart from the cost of defective work contained in the quote of Des Edwards Pty Ltd	$    9,650
·	Work not contained in the quote of Des Edwards Pty Ltd but part of the Contract works for the Defendant to complete namely:          Landscaping   $   3,000          Paving  $ 14,101          Fencing & Gates  $ 11,770          Letterbox  $     360	$  29,231

1. Included in the quote of Des Edwards Pty Ltd (“Des Edwards”) for $315,800 is an amount of $39,500 which is the cost to rectify defective work.  This quote was based on two Reports, first that of Mr Chris Short, a Building Consultant who identified the defective work of the Defendant and secondly of Mr Stuart Humphries, an Engineer.

2. The balance of the quote of $315,800, namely the sum of $276,300 is for the cost of completing the building work which the Defendant agreed to do under the Contract.

3. The evidence of Mr Edwards of Des Edwards is that the quote for the completion of the work was based upon the drawings and specifications relevant to the Contract between the Plaintiffs and the Defendant.  The evidence is that the cost to complete most of the work the subject of the Contract amounted to $276,300.  I have said “most of the work” because Des Edwards did not include in its quotation a small number of items of work which were required to be done under the Contract.  I will refer to these items shortly.  Mr Edwards deposed that his company uses almost entirely sub-contract tradesmen to carry out its building work.  He said that in this case, the quote for the work to complete the remedial work to rectify defective work was calculated on the basis of quotations from various sub-contract tradesmen, together with a profit margin for his company added to the cost.   Mr Edwards also deposed that Des Edwards provides site supervision and contract administration.  He said that the sub-contract tradesmen who undertake work with his company do so at very competitive prices. 

4. I am satisfied that the costs for the completion of the building of the house and the remedial work to rectify defective work contained in the quotation of Des Edwards are reasonable. 

5. I am also satisfied that the Plaintiffs have proved that they have expended an amount of $9,650 for work which was required to be performed by the Defendant as part of the Contract and which work was not included in the quote of Des Edwards.  That work and the cost thereof is as follows:

·	Installing of and wiring of air‑conditioning system	$     150
·	Curtains	4,918
·	Carpets	2,200
·	Agricultural and Stormwater drains	2,382
Total	$   9,650

1. Finally, under this head of damages, is the cost of landscaping, paving, fencing, gates and installing a letterbox amounting to a total of $29,231 which I referred to earlier in these Reasons.  This work apparently has not been completed at the present time.  Each of the individual amounts is supported by a quotation, save for the letterbox which is an estimate.  I am satisfied that these amounts are reasonable costs for the work to be completed.  This work was required to be undertaken by the Defendant pursuant to the Contract.

2. The cost of completing the work which was required to be undertaken by the Defendant pursuant to the Contract is the addition of the sum of $276,300 (being the quote of $315,800 less $39,500 rectification costs) and the sum of $29,231, which I referred to only a moment ago.  The total is $305,531.  This is an amount in excess of the original contract price of $289,800. 

3. The Contract was executed in February 2001.  The quote by Des Edwards was made in December 2003.  The quotes for the work which makes up the amounts in the sum of $29,231 were for the most part provided in early 2004.  It was Mr Edward’s evidence, that in the period of approximately two and half years between February 2001 and December 2003, the cost of labour and materials had increased significantly.  I accept that evidence.  He also deposed that upon a review of the drawings and specifications, he is of the opinion that the original contract price of the Defendant was low and it would have been extremely difficult for the Defendant to make a profit from the price which the Defendant contacted to build the house.  I accept that opinion.

4. In my opinion, the only reasonable course to adopt by the Plaintiffs was to have the defective work rectified and the house completed.  I am satisfied that the costs for the defective work and the costs of completion of the original contract works as contained in the quotations are reasonable.  Mr Jenner, Counsel for the Plaintiffs, conceded that the Plaintiffs will not have all the work set out in the quote of Des Edwards completed precisely in the manner envisaged in the original Contract, because of restrictions in finance brought about by all the problems caused by the Defendant’s breach of contract.  The Plaintiffs have in some areas been required to compromise because of the financial restrictions.  However, in my opinion, that does not disentitle the Plaintiffs to damages for the cost of completing the work and rectifying the defective work as set out in the quotation of Des Edwards and the costs confirmed in the quotations for work which Des Edwards did not include in its quotation.  The Plaintiffs are entitled to an award of damages representing the cost of bringing the building works into a state of compliance with the original Contract and not on an amount which the Plaintiffs have in fact expended, or proves will be spent at some time in the future (De Cesare v Deluxe Motors Pty Ltd (supra) at 32).

5. Accordingly, the Plaintiffs are entitled to damages in the sum of $354,681 less the sum of $115,847 owing under the original Contract, leaving an amount of $238,834.

6. The claim for rental costs can be dealt with briefly.  The Conciliation Agreement provided that if the Defendant did not complete the building works by 31 March 2003 then it would pay the rental costs of the Plaintiffs from that time until completion.  In breach of the Conciliation Agreement the Defendant failed to complete the building works by that date.  The evidence of Mrs Dodd is that the Plaintiffs rented a home until 10 June 2004 at the rate of $160 per week.  Thereafter, the Plaintiffs lived in a caravan on the land whilst work was being done on the house for the purpose of completing it.  The total rental paid was $9,920.  Mrs Dodd has deposed that the Plaintiffs received rental assistance from Centrelink of $20 per week.  As a result after giving credit for the Centrelink payments, the Plaintiffs are entitled to damages of $8,600 for the cost of rental arising from the Defendant’s breach of the Conciliation Agreement.

7. I now turn to the final head of the claim, namely damages for the stress and inconvenience of each of the Plaintiffs.  Each Plaintiff makes a separate claim under this heading.  Mrs Dodd claims the sum of $5,500 and Mr Dodd claims the sum of $4,500. 

8. It has been recognised in Australia for some time that a building owner may be awarded damages against a builder for physical inconvenience and mental distress arising from the builder’s breach of contract.  However, such a claim can only arise where the physical inconvenience and mental distress are directly related to the inconveniences which have been caused by the breach of contract (Boncristiano v Lohmann (1998) VICSC 5 at p.13).

9. In her affidavit, Mrs Dodd referred to the inordinate delays on the part of the Defendant.  It was the Defendant’s failure to complete within the extended time period which led to the Plaintiffs terminating the Contract. 

10. Mrs Dodd also refers to failure of the Defendant to comply with the plans and specific conditions during the course of construction.  The Plaintiffs recognised this non-compliance.  Attempts were made to require the Defendant’s compliance.  Mrs Dodd deposes that a year passed with the Defendant refusing to return to rectify the problems and finish the home.  She says that she and her husband were at a loss to know what to do.  She says that she became depressed.  Mrs Dodd also mentions Mr Dodd’s depression.

11. I have earlier mentioned the delays by the Defendant required the Plaintiffs to live in rental accommodation and thereafter they were forced to live in a caravan on their property whilst the builder Des Edwards rectified the defective work of the Defendant and completed the construction of the house.  The Contract required the Defendant to complete the construction of the house by September 2001.  It is Mrs Dodd’s evidence that they were only able to move into their house in 2005.  I accept the evidence of Mrs Dodd.

12. There has been enormous physical inconvenience to Mr & Mrs Dodd arising from the Defendant’s breach of the Contract.  They have both suffered stress and anxiety over the long period of time arising from the breaches of the Contract by the Defendant. 

13. The difference between the claim of $5,000 under this head of damages by Mrs Dodd and the claim of $4,500 by Mr Dodd was explained by their Counsel on the basis that the mental stress of Mr Dodd was as not severe as that of Mrs Dodd.  The evidence supports this. 

14. Accordingly, I assess Mrs Dodd’s damages for physical inconvenience and mental distress at $5,000.  I assess Mr Dodd’s damages for physical inconvenience and mental distress at $4,500.

15. I now set out in summary form, the damages I have awarded jointly to the Plaintiffs:

·	Cost of completing the Contract work	$ 276,300
·	Cost of rectifying faulty work (Des Edwards)	$   39,500
·	Amount paid by the plaintiffs to remedy defective work	$     9,650
·	Work not contained in quote of Des Edwards Pty Ltd but part of original contract price	$   29,231
$ 354,681
·	LESS Credit for balance of Contract price not paid	$ 115,847
$ 238,834
·	Cost of house rental for period 31 March 2004 to 10 January 2004	$     8,600
Total	$ 247,434

1. In addition, the first Plaintiff is to receive $4,500 damages for stress and inconvenience and the second Plaintiff is to receive the sum of $5,000 damages for stress and inconvenience.

2. There will be judgment for the Plaintiffs jointly for the sum of $247,434.

3. There will be judgment for the first Plaintiff for the sum of $4,500.

4. There will be judgment for the second Plaintiff for the sum of $5,000.

5. I will hear Counsel on the questions of interest and costs.