Dunn v Hanson Australasia Pty Ltd
[2017] ACTSC 169
•12 July 2017
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Dunn v Hanson Australasia Pty Ltd |
Citation: | [2017] ACTSC 169 |
Hearing Dates: | 29 and 30 May 2017 |
DecisionDate: | 12 July 2017 |
Before: | Mossop J |
Decision: | See [75] |
Catchwords: | CONTRACTS – BUILDING CONTRACTS – Breach – breach of statutory warranties – breach of express written terms – breach of contractual warranty – failure to rectify defects – quantum of damages TRADE PRACTICES – MISLEADING AND DECEPTIVE CONDUCT – Representations – quantum of damages – ancillary liability for damages – proportionate liability DAMAGES – CONTRIBUTION AND APPORTIONMENT – Proportionate liability – “building action” – “apportionable claim” – “concurrent wrongdoer” |
Legislation Cited: | Building Act 2004 (ACT), ss 88, 140, 141, Part 9 Civil Law (Wrongs) Act 2003 (ACT), ss 107A, 107F(3)(b) |
Cases Cited: | Bellgrove v Eldridge (1954) 90 CLR 613 Ellis’s Town House Pty Ltd v Botan Pty Ltd [2017] NSWCA 20 Hadgelias Holdings and Waight v Seirlis & Ors [2014] QCA 177 Helkeast Pty Ltd v Ruckschloss [2017] ACTSC 65 Hunt & Hunt Lawyers v Mitchell Morgan Nominess Pty Ltd [2013] HCA 10; 247 CLR 613 Radford v De Froberville [1977] 1 WLR 1262 Selig v Wealthsure Pty Ltd [2015] HCA 18; 255 CLR 661 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; 236 CLR 272 The Owners Units Plan 1917 v Koundouris [2016] ACTSC 96 Tomasetti v Brailey [2012] NSWCA 399 Williams v Pisano [2015] NSWCA 177; 90 NSWLR 342 |
Texts Cited: | Explanatory Statement for the Building Bill 2003 (ACT) J L R Davis, Inquiry Into the Law of Joint and Several Liability: Report of Stage Two (Commonwealth of Australia, 1995) |
Parties: | Kathryn Anne-Marie Dunn (First Plaintiff) Thurston Benjamin Dunn (Second Plaintiff) Hanson Australasia Pty Ltd (First Defendant) Henry Lau (Second Defendant) Qun Cai (Third Defendant) Raymond Guy Howard (Fourth Defendant) |
Representation: | Counsel Mr M Hassell (First and Second Plaintiffs) Mr P Johannessen (First and Second Defendants) No appearance (Third and Fourth Defendants) |
| Solicitors Backhouse Legal (First and Second Plaintiffs) Johannessen Legal & Migration (First and Second Defendants) No appearance (Third and Fourth Defendants) | |
File Number: | SC 164 of 2015 |
MOSSOP J:
Introduction
This is an action to recover damages arising from the defective construction of a residential building in Macgregor, a suburb of Canberra.
The plaintiffs are the owners of the property. They purchased the property from the third defendant Ms Qun Cai. In July 2009 the third defendant had entered into a contract with the first defendant (Hanson Australasia Pty Ltd) for the first defendant to build a two-storey four-bedroom house on the land. The second defendant is and was the sole director of the first defendant. In April 2010, prior to completion of the construction of the house, the third defendant entered into a contract to sell the house and land to the plaintiffs. Construction of the house was to be finalised prior to settlement.
The fourth defendant was the certifier who issued a Certificate of Completion of Building Work in relation to the house on 16 June 2010.
Settlement of the purchase of the property by the plaintiffs took place on 13 July 2010. The plaintiffs alleged that after settlement, numerous defects in the building work were identified. They alleged that, over time, further defects emerged. When the plaintiffs approached the first defendant to remedy the defects, the first defendant responded:
Hanson Australasia is not the builder of these premises. Mr [sic] Cai Qun utilised the services of my building company in a limited way to source building materials at cost and to source suitable contractors who performed services directly for him. He himself was the builder of the property and all matters relating to rectification need to be referred directly to him.
Causes of action
By the Further Amended Statement of Claim (“FASOC”), filed on 2 April 2015, the plaintiffs causes of action against the four defendants were as follows:
(a)In relation to the first defendant:
(i)Breach of statutory warranties implied by s 88 of the Building Act 2004 (ACT) by virtue of the first defendant’s status as builder of the house, in particular:
i.breach of the warranty that the residential building work relating to the house would be carried out in a proper and skilful way and in accordance with the Approved Plans;
ii.breach of the warranty that the residential building work relating to the house would be carried out in accordance with the Building Act, and in particular that the first defendant would either carry out or supervise the residential building work relating to the house;
(ii)Misleading or deceptive conduct contrary to the Trade Practices Act 1974 (Cth), as in force at the relevant time (“the TPA”), namely falsely representing that, being a registered builder, it would conduct and/or supervise the conduct of the building work relating to the house (referred to as the Approved Builder Representation).
(b)In relation to the second defendant: ancillary liability for damages under the TPA arising from involvement in the misleading or deceptive conduct of the first defendant in relation to the Approved Builder Representation, and a further representation made by the second defendant on behalf of the first defendant in relation to the completion of landscaping (referred to as the Landscaping Work Representation).
(c)In relation to the third defendant: breach of contract, and in particular:
(i)breach of an express warranty contained in the Special Condition 8 of the Contract of Sale between the third defendant and the plaintiffs, that the construction of the house would be carried out “in a proper and workmanlike manner”;
(ii)breach of the Special Condition 8 of the Contract of Sale that the third defendant would include in the residence all of the inclusions set out in a list which formed part of the Contract; and
(d)In relation to the fourth defendant: negligence in the discharge of his professional duties as a certifier.
Status of proceedings in relation to the defendants
The plaintiffs proceedings against the fourth defendant have been finalised. On
20 January 2017 judgment was entered by consent against the fourth defendant in the sum of $75,000, with a further sum for legal costs.
In relation to the other defendants:
(a)third defendant: default judgment was obtained against the third defendant in the ACT Magistrates Court on 13 February 2013, with damages to be assessed. In addition, despite being aware of the ongoing proceedings, the third defendant has taken no active part in the proceedings since that date.
(b)first and second defendants: judgment was entered by consent against the first and second defendant on 28 September 2016, with damages to be assessed.
At the hearing of the assessment of damages the plaintiffs were represented by
Mr M Hassall of counsel. The first and second defendants were represented by
Mr P Johannessen. The other parties did not appear.
The plaintiffs read:
(a)an affidavit of the first plaintiff affirmed 16 January 2015;
(b)affidavits of the second plaintiff affirmed 16 January 2015 and 16 December 2015;
(c)an affidavit of Benjamin Travis Green affirmed 19 December 2014;
(d)an affidavit of Rodney John Barnett affirmed 5 January 2015; and
(e)two affidavits by Ashlee Jane Berry, both affirmed 29 May 2017.
They also tendered a report of Mr Andrew Montgomery, a principal building surveyor and engineer, dated 19 December 2014, as well as two reports of Mr Nicholas Rowe, a builder, dated 18 March 2015 and 11 May 2017.
Counsel for the first and second defendants briefly cross-examined the first plaintiff as well as Mr Montgomery and Mr Rowe. The evidence of these witnesses was not significantly challenged in cross-examination.
Issues
In the light of the judgments entered against the first, second and third defendants, the issues which need to be resolved in relation to the first to third defendants are:
(a)The quantum of damages to which the plaintiffs are entitled in respect of:
(i)the breach of statutory warranties by the first defendant;
(ii)the misleading or deceptive conduct engaged in by the first and second defendants;
(iii)the breach of the contractual warranty by the third defendant;
(b)The extent to which the defendants’ liabilities in respect of the abovementioned causes of action are governed by proportionate liability provisions, and, if so, the proportionate liability of each defendant.
Damages
The plaintiffs relied on the expert reports of Mr Montgomery and Mr Rowe in relation to:
(a)the nature of the defective building work affecting the house; and
(b)the cost of rectifying those defects.
The defects affecting the house are set out in an itemised list of defects annexed to the FASOC. The key defects, identified by Mr Montgomery, were:
(a)Rising damp affecting the garage, laundry and bath/ensuite on the ground floor of the house, caused by the incorrect installation of a vapour barrier between the garage cement slab and the main cement slab of the house;
(b)The external balcony on the first floor of the house has not been set down from the level of the floor of the adjacent internal bedrooms, is not sufficiently sloped to direct water away from the house, and has not been properly waterproofed, with the result that water is entering the hall and lounge room, including through light fittings in the ground floor of the house;
(c)The concrete slab in the garage has shrinkage cracks due to a failure to place reinforcing steel correctly and a total absence of contraction and isolation joints;
(d)Failure to correctly provide flashing in relation to the roof of the house resulting in water entering the house and damaging ceilings in the garage and hall on the ground floor, as well as incorrect installation of insulation;
(e)Failure to construct the external concrete pathway with isolation joints resulting in paint and render spalling and the likely cracking of the concrete path and adjacent walls in the future;
(f)Blocked perpends which prevent proper ventilation and drainage of the wall cavities in the house; and
(g)Incorrect construction of the internal staircase (with inconsistent risers and goings) rendering the staircase potentially unsafe.
Further defects identified in the report of Mr Rowe were:
(a)Poor standard of plastering throughout, requiring replastering of nearly all walls and replacement of some walls;
(b)Poor standard of painting throughout with poor quality paint, inconsistent finishes, and incorrect finishes on some surfaces;
(c)None of the bathrooms or other wet areas are compliant with requirements of the Building Code;
(d)Poor and inconsistent finish of the external render in some areas;
(e)Incorrect installation/fitting of doors, cupboards, and architraves throughout the house;
(f)Loose wall at the top of the internal staircase;
(g)Uneven panels in the internal polished timber floor;
(h)Side fencing not erected in accordance with approved plans;
(i)Landscaping work not undertaken.
Mr Rowe expressed the opinions that:
(a)A skilful tradesman would not have caused the above issues;
(b)The number of defects in the house suggests a significant lack of supervision throughout the entire build from the foundations to the finish;
(c)Many fundamental failures have occurred throughout the build which gives rise to grave concerns about the ongoing structural soundness of the residence;
(d)There maybe still be other defects which have not been identified, meaning that, if he were to carry out rectification work, he would not be prepared to provide any warranty in relation to the general structural soundness of the property;
(e)The preferable and safer option is that the property be demolished and rebuilt due to potential additional structural deficiencies such as the lack of reinforcement in the foundations and concrete slabs.
In oral evidence it was clear that his concern was that, having regard to the defects that he had identified, further defects would be discovered upon “opening up” the building to conduct repairs or would remain hidden within the foundations.
Mr Rowe has estimated the cost of demolishing the house and constructing a new dwelling, as at the date of his report, as $496,152.
Mr Rowe also quantified the costs of individually remedying each of the identified defects. Those costs were set out in a schedule to his report. As at the date of his report the total of these individual costs was $346,770.
He also identified the cost of supplying and installing those items listed as inclusions in the contract between the plaintiffs and the third defendant which had not been installed. His evidence was that this would cost $39,440.
Based on Mr Rowe’s opinion as to the desirability of constructing a new dwelling, the plaintiffs submitted that demolition and re-construction as opposed to rectifying defects identified to date, was the appropriate course to adopt. The plaintiffs therefore submitted that the damages suffered by them was $496,152.
The first and second defendants submitted that it was possible to achieve contractual conformity by rectifying the identified issues rather than by knocking down the building and starting again. They pointed to the fact that the plaintiffs have now been living in the building for more than six years and that if any further structural problems beyond those specifically identified in the expert reports were going to emerge, they would have emerged by now.
The evidence of Mr Rowe and Mr Montgomery was not challenged in any significant way. I accept their evidence as to the nature of the defects. I also accept Mr Rowe’s opinion as to the costs of remedying those defects, either individually, or by demolishing and rebuilding the dwelling.
The reason that Mr Rowe articulated for preferring the knock down and rebuild option was because of the “potential additional structural deficiencies such as the lack of reinforcement in the foundations and concrete slabs”. His oral evidence made clear the potential for the existence of other defects and the desirability, so far as he was concerned, of demolishing and rebuilding the building.
In The Owners Units Plan 1917 v Koundouris [2016] ACTSC 96 at [487], I summarised the principles derived from the decision of the High Court in Bellgrove v Eldridge (1954) 90 CLR 613 and subsequent cases as follows:
487. The cases stand for the following propositions:
(a) The primary remedy is rectification so as to produce contractual conformity: Bellgrove [at] 618;
(b) That is qualified by the requirement that the work undertaken to achieve conformity must be a reasonable course to adopt: Bellgrove at 618;
(c) Providing only the cost of a “doubtful remedy” would not adequately compensate a claimant, because it could not in any sense be regarded as ensuring that the claimant received the equivalent of a substantial performance of the contractual obligations: Bellgrove at 620;
(d) Because damages are assessed on a once and for all basis, the law must be astute to ensure that the measure of damages accurately reflects the restoration of the claimant to the position they would have been in had the defendant not failed in its duty: Kirkby at [59] [Kirkby v Coote [2006] QCA 61].
Bellgrove itself involved the construction of a two-story brick house. The builder had substantially departed from the specifications for the concrete and cement that was to be used in the construction. The evidence was that the departure resulted in “grave instability” in the building. The choice was between underpinning of the building by piecemeal replacement of the foundations or knocking down and replacing it. The evidence disclosed that the underpinning process would present problems from a practical point of view. The trial judge found that the weakness of the mortar may cause a collapse in the brickwork if the underpinning was carried out. The High Court found that awarding damages by reference to the cost of underpinning would by no means adequately compensate the claimant because it was at the very best a doubtful remedy. The Court therefore upheld the decision of the trial judge to award the cost of demolishing and reconstructing the building in accordance with the plans and specifications as well as consequential losses.
In relation to point (b) in the quote above at [25], the judgment of the High Court in Bellgrove gives as an example of a situation in which it would be unreasonable to require demolition and rebuilding, a contract in which walls were to be built with second hand bricks but were instead built with new bricks.
In Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; 236 CLR 272 at [17], the High Court referred to this example and emphasised that “the test of ‘unreasonableness’ is only to be satisfied by fairly exceptional circumstances.” The Court also referred with approval to the example given in Radford v De Froberville [1977] 1 WLR 1262 at 1270 of a situation in which the diminution in value measure of damages might be appropriate if the innocent party is “merely using a technical breach to secure an uncovenanted profit”. The application of Bellgrove has recently been considered by the New South Wales Court of Appeal in Ellis’s Town House Pty Ltd v Botan Pty Ltd [2017] NSWCA 20 at [38]–[42], [56].
Bellgrove, as explained in Tabcorp, is clearly a very significant decision so far as a plaintiff seeking enforcement of contractually required standards of building construction is concerned. Fundamentally, a plaintiff is entitled to insist upon the meeting of the contractual standard even if it is expensive to achieve in the circumstances. A plaintiff is not required to settle for a doubtful remedy that may be cheaper and more expedient so far as the defaulting party is concerned.
In the present case the evidence is of widespread but discreetly identifiable defects with the building. Unlike the situation in Bellgrove, the nature of the defects is not such that they necessarily pervade the whole of the structure. It is not possible, on the evidence, to reach a conclusion that the whole of the structure is defective. Nor, on the evidence, is it possible to reach the conclusion that it would cost less to demolish the building and start again rather than fixing each problem individually: there remains a difference of $150,000 between the cost of repairs as opposed to demolition and reconstruction. While Mr Rowe expressed the opinion that it would be more desirable to have a competent contractor complete the whole of the construction and hence be assured of the quality of the work, there was not evidence that remedial works would be unable to achieve contractual conformity. All he identified was that it would be possible to avoid potential additional but unidentified defects. The evidence did not establish on the balance of probabilities the existence of such additional defects. Further, although he referred to the unattractiveness to building contractors of the contract to remedy the defects, the evidence did not establish that the building was such that it would not be possible to get a contractor to take on the job. Indeed Mr Rowe’s evidence, which indicated current prices for the works, necessarily implied that it would be possible to let a contract for the works.
I consider that the plaintiffs have established an entitlement to damages to cover the cost of repairs but have not demonstrated the need for complete demolition and reconstruction. While the latter would also achieve contractual conformity, on the evidence, the former will also achieve such conformity but at a lower cost. I therefore find that the damages suffered by the plaintiffs because the building was not constructed in accordance with the Building Act, is $346,770. That amount does not include the additional amount suffered by reason of the failure of the third defendant to install items required by the inclusions list incorporated into the contract of sale. In relation to those items, I accept Mr Rowe’s evidence that the cost of achieving conformity with the contract for sale would be an additional $39,440.
Proportionate liability issues
An inquiry and subsequent report by Professor Davis in 1995 (‘the Davis Report’) resulted over time in the Commonwealth States and Territories enacting legislation providing for regimes of proportionate liability for various types of claims: see Hunt & Hunt Lawyers v Mitchell Morgan Nominess Pty Ltd [2013] HCA 10; 247 CLR 613 at [10]-[14]; Selig v Wealthsure Pty Ltd [2015] HCA 18; 255 CLR 661 at [20]. In the present case there are three different regimes that potentially apply to different aspects of the plaintiffs claims. They involve the provisions of the Building Act, Civil Law (Wrongs) Act 2002 (‘CLW Act’) and the TPA.
The defence of the first and second defendants did not raise the issue of proportionate liability. The plaintiffs did not contend that because the relevant proportionate liability provisions were not pleaded that damages should be assessed without regard to them. Because this approach was taken, it is unnecessary to decide whether the Court is obliged to apply those provisions in circumstances where they are not pleaded.
Building Act provisions
Part 9 of the Building Act, as in force at the relevant time, contained proportionate liability provisions in respect of “building actions”. Section 140 defines “building action” as follows:
building action –
(a) means an action (including a counterclaim) for damages for loss or damage in relation to –
(i) defective building work; or
(ii) defective construction work other than building work; or
(iii) the negligent exercise by a licensed construction practitioner of a function as a
certifier, or the negligent failure to exercise such a function; but
(b) does not include an action for damages for death or personal injury.
“Action” is not defined. Specifically the Act does not make express whether the word should be interpreted as the equivalent of a “claim” or, instead, as the equivalent of “proceedings”.
I will refer to “building actions” as “Building Act Apportionable Claims”. Section 141 of the Act provided (and still provides) that:
(1) A court ... must give judgment against each defendant ... who is found to be jointly or severally liable for the proportion of the total amount of the damages that the court considers to be just, having regard to the extent of that defendant’s responsibility for the loss or damage.
(2) The liability for damages of a person ... in a building action is limited to the amount for which judgment is given against the person, even if another Act or rule of law provides otherwise.
The provision was originally enacted in the Construction Practitioners Registration Act 1998 (ACT). That provision was then re-enacted in the Building Act. It should be noted that the section only provides for an apportionment between “defendants”. Thus, the operation of the section will be determined by a plaintiff who makes the decision as to who is joined as a defendant in the proceedings. It therefore ameliorates to some extent the shifting of the risk to a plaintiff that is present in other provisions based upon the model provisions that followed the Davis Report. The wording of the provision may be contrasted with the wording of s 107A of the CLW Act and s 87CD(5) of the TPA which provide an extended definition of defendant so as to capture any party other than a claimant.
Thus, to the extent that the plaintiffs action against each of the defendants is a “building action”, it is governed by the principles set out in s 141 of the Building Act.
The action by the plaintiffs against the first defendant is clearly within the definition of a building action in that it seeks damages for breach of the statutory warranties.
The action against the fourth defendant is clearly a building action as the definition of building action makes it clear that it extends to a claim in negligence against a certifier.
However I do not consider that the action against the second or third defendants is a building action. The words of s 140 are sufficiently broad to encompass any action in which a claim is made for damages for loss or damage “in relation to ... defective building work”. “In relation to” is a broad connecting phrase. Where there is a warranty as to the standard of the building work or the inclusions that are required to form part of the building work, then it can reasonably be said that a claim for breach of warranty is a claim for damages “in relation to” such building work. However the claim against the third defendant is a claim for breach of warranty under a contract for the sale of land. It is not a claim against an entity regulated under the Building Act. It does not arise out of any involvement by the third defendant in building or construction work. The Explanatory Statement for the Building Bill 2003 refers to the limitations on the liability to pay damages to be enacted in Part 9 as being “necessary in that they contribute to the viability of the building and building certification industries in the Act by providing certainty about the liabilities that the part covers.” The reference to the viability of the “building and building certification industries” is consistent with a legislative intention to impose the limitation on liability in relation to claims against those involved in the building work rather than a broader class of claims that could be characterised as “in relation to” building work. Similarly the Explanatory Statement says in relation to the clause that became s 141 that it “has the intention of ensuring that certain liabilities for damages amounts are divided among those responsible”. This language is also more consistent with limiting the scope of the provisions to those actually involved in the building or construction work.
I therefore read the words “in relation to” as qualified by the context in which they appear and the legislative purpose expressed in the Explanatory Statement as limited to claims against those responsible for the building work or construction work and not extending to a person not responsible for the building work who has given a contractual warranty in a contract for sale.
This conclusion is consistent with but not compelled by the decision of Walmsley AJ in Helkeast Pty Ltd v Ruckschloss [2017] ACTSC 65 which turned on his Honour’s finding that the work of an engineer in preparing design plans and a certificate relating to the structural sufficiency of the building was neither building work nor construction work other than building work.
Civil Law (Wrongs) Act provisions
The CLW Act, as in force at the relevant time, also contained proportionate liability provisions which applied to an “apportionable claim”. That term was defined at
s 107B(2)(a), relevantly as:
a claim for economic loss … in an action for damages (whether in tort, under contract or otherwise) arising from a failure to take reasonable care.
The relevant provisions limited the liability of each “concurrent wrongdoer” to an amount reflecting the proportion of the loss or damage claimed that the Court considers just, having regard to the extent of the defendant’s responsibility for the loss or damage.
The plaintiffs submitted that the action against the first, second and third defendants were not apportionable claims because they were not claims “arising from a failure to take reasonable care”.
As I pointed out in Koundouris at [612], the scope of this concept has been the subject of some contention:
612.What is involved within the concept of “a claim … arising from a failure to take reasonable care” has been the subject of some contention. In relation to the New South Wales provisions (which are relevantly similar), Macfarlan JA has said in obiter dicta that the requirement was only satisfied if “the absence of reasonable care was an element of the, or a, cause of action upon which the plaintiff succeeded”: Perpetual Trustee Co Ltd v CTC Group Pty Ltd (No 2) [2013] NSWCA 58 at [22] (Perpetual Trustee Co Ltd). In the same case Barrett JA suggested a wider enquiry involving determining the nature or quality of the claim by looking at a combination of the terms in which the claim was framed or pleaded and the relevant findings of the court. This was consistent with his Honour’s previous decision at first instance in Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 at [19]-[30]. Meagher JA did not consider it necessary or appropriate to express any view on the issue: see [36]. Subsequent cases have not had to determine which of these approaches should be adopted: Owners – Strata Plan No 68372 v Allianz Australia Insurance Limited [2014] NSWSC 1807 at [31]; Smart v AAI Ltd [2015] NSWSC 392 at [156].
Having regard to the nature of the claims made against the first, second and third defendants, I do not consider that they are claims arising from a failure to take reasonable care in the statutory sense. In my view the expression “failure to take reasonable care” is designed to encompass actions which involve the establishment of that legal standard. It is not meant in some non-technical sense that invites a characterisation exercise so as to establish that the breach of some other legal standard involves a failure take reasonable care.
In the present case it is not open to re-characterise breaches by the first defendant of the statutory warranties under the Building Act as failures to take reasonable care, even though, in a colloquial sense, such breaches might be said to so arise.
Even more clearly, the breaches by the first and second defendants of the TPA do not arise in the statutory sense from a failure to take reasonable care. True, it is that a person might not engage in a misleading or deceptive course of conduct if the person was taking reasonable care. However neither the cause of action that has been pleaded, nor the admissions implicit in the admission of liability involves an admission of failure to take reasonable care.
So too with the third defendant. The claim against her is a breach of warranty. That warranty (“that the construction of a residence on the land will be carried out in a proper and workmanlike manner”) does not expressly or necessarily involve a failure to take reasonable care.
Trade Practices Act
The TPA, as in force at the relevant time, contained proportionate liability provisions which applied in respect of a claim for damages under s 82 for economic loss caused by conduct that was done in contravention of s 52 (“TPA Apportionable Claims”).
Because of their terms, those provisions can only apply to the claims for damages under s 82. That is because the claim referred to in s 87CB(2) is the same claim as referred to in s 87CB(1), namely a claim for breach of s 52: Selig at [29]. Where
sub-s (2) refers to more than one cause of action, it is referring to more than one cause of action for breach of s 52: Selig at [29], [31].
In the present case, the claims alleging breach of s 52 are those made against the first and second defendants only. The first defendant is alleged to have made the Approved Builder Representation and the second defendant, as the sole director of the company, in fact signed the document relied upon to constitute the representation. Therefore on this aspect, the conduct alleged is the same conduct. There is a further and separate allegation of a representation in relation to landscaping alleged to have been made by the second defendant on behalf of the first defendant. The second defendant is alleged to be liable as a person involved in the contravention. The act of the director creating primary liability is also necessarily the act giving rise to secondary liability on the part of the second defendant.
In Tomasetti v Brailey [2012] NSWCA 399, Macfarlan JA with whom McColl and Campbell JJA agreed, dealt with a case in which advice had been given by an investment adviser and his company. The question was whether the Civil Liability Act 2002 (NSW) required that damages be apportioned between the two defendants. The conduct engaged in by the individual was the same conduct which rendered the company liable. Macfarlan JA said at [154]:
The acts and omissions of Mr Brailey in advising the appellants were the corporate acts of TJC. Accordingly, they were both responsible for the appellants' losses, their acts and mind being the same. I find nothing in the terms of s 35(1) that requires responsibility for a loss to be apportioned between concurrent wrongdoers of this type so that the total of the percentages for which they are liable is 100 per cent. The section simply limits the liability of the defendant to the proportion of the loss that the Court considers just having regard to the defendant's responsibility for the damage or loss. Here Mr Brailey and TJC were each fully responsible for the losses and it is just that each be liable for 100 per cent of the losses.
In Hadgelias Holdings and Waight v Seirlis & Ors [2014] QCA 177 the Queensland Court of Appeal construed the definition in s 87CB:
as concerned with distinct acts (or omissions) or sets of acts (or omissions) by different actors combining all working independently to cause loss or damage, and consequently inapplicable where there is but a single act or set of acts causing loss, attributable to more than one person.
The New South Wales Court of Appeal returned to the issue in Williams v Pisano [2015] NSWCA 177; 90 NSWLR 342. Emmett JA (with whom Bathurst CJ and McColl JA agreed) noted the operation of s 87CI which preserved the law relating to vicarious liability. His Honour noted that the Queensland Court of Appeal had not made reference to that provision in Hadgelias. He also noted that Tomasetti had not paid particular attention to the definition of “concurrent wrongdoer” but did not need to consider the conclusion reached further because the facts of Tomasetti were distinguishable.
In Williams, two vendors of property jointly committed a single act namely the making of representations that caused loss to the plaintiff. Emmett JA concluded that there was no reason why the regime of proportionate liability “should not extend to wrongdoers who jointly commit a single act that causes the loss claimed by the plaintiff”.
The present case is most closely analogous to the circumstances dealt with in Tomasetti. I reach the same conclusion as the New South Wales Court of Appeal in Tomasetti but by a slightly different route.
Section 87CB(3) of the TPA provided:
(3) In this Part, a concurrent wrongdoer, in relation to a claim, is a person who is one of 2 or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim.
In the case where the acts of the director are the acts of the company and hence, there is only the act of a single person, it cannot be said that the act or acts caused “independently of each other or jointly” the damage or loss the subject of the claim. First, it cannot be said that the acts are independent because there is a single set of acts carried out by the person which are also the acts of the company. Second, it cannot be said that the acts “jointly” caused the damage or loss. That is because there was only a single set of acts by one person which the law considers to be the acts of the other. When the acts of a director giving rise to the loss or damage are the same acts attributed to the company, it is artificial to say that there are acts of two persons which “jointly” caused the loss or damage. Upon this interpretation, where the acts of a director give rise to a contravention of s 52 and those are the same acts which give rise to a contravention by the company because they are the acts of the company, then the director and the company are not concurrent wrongdoers in relation to the claim. It is consistent with the decision of the New South Wales Court of Appeal in Tomasetti but avoids the apparent anomaly arising from the reasoning in that decision that it would permit the total percentages of the apportioned liability to exceed 100 per cent. It avoids the artificiality that would arise from being compelled to apportion liability in circumstances where the act giving rise to liability are one and the same.
As a consequence, even though the claim is an apportionable claim, the first and second defendants are not concurrent wrongdoers so far as the Approved Builder Representation is concerned.
However, because it also involves a claim for damages under s 82 for a contravention of s 52, the Landscaping Work Representation claim is also part of the apportionable claim by virtue of the operation of s 87CB(2). There is no allegation against the first defendant in relation to this claim. While the pleading does allege that, by reason of the conduct of the second defendant, the first defendant engaged in misleading and deceptive conduct and the second defendant was a person involved in the first defendant’s contravention. Thus, on the pleading, the only route to liability is ancillary liability for a breach by the first defendant even though no claim for damages in relation to these representations is made against the first defendant. But for the absence of a claim for damages against the first defendant arising from the pleaded facts, the situation would be the same as in relation to the Approved Builder Representation. In the absence of such a claim is it possible to say that the first and second defendants are concurrent wrongdoers because of the claim from the approved builder representation made against the first defendant and the claim of the Landscaping Work Representation?
I am inclined towards the view that even in that situation they would not be concurrent wrongdoers because it could not be said that, where the conduct of the company arose solely from the conduct of the director, the damage or loss had been caused “independently” or “jointly” for the purposes of the definition. In the circumstances of this case it is unnecessary to reach a conclusion on that issue because I am not satisfied that the plaintiffs suffered any damage as a result of the Landscaping Work Representation. That was a representation that the second defendant would return to spray grass as part of the landscaping work and that he would “speak to ‘Bob’” about completing the balance of landscaping work. Although the pleading asserts that the plaintiffs relied upon the representations, there is nothing in the affidavit which identifies any loss arising from that reliance.
The end result is that there is no need for any apportionment under the TPA.
In summary the position is, therefore as follows:
(a)The following are Building Act Apportionable Claims:
(i)The plaintiffs action against the first defendant, in so far as it relates to a breach of statutory warranties; and
(ii)The plaintiffs action against the fourth defendant (although this action has been concluded by the judgment entered against the fourth defendant);
(b)The only CLW Act Apportionable Claim was the claim against the fourth defendant which is now resolved.
(c)The following claims are not apportionable claims under any of the schemes:
(i)The TPA claims against the first and second defendants; and
(ii)The claim for breach of contractual warranty against the third defendant.
In relation to those actions not subject to any of the schemes, it is clear that they must be decided without regard to the apportionment schemes: CLW Act s 107F(3)(b); TPA s 87CD(2)(b).
Awards of damages against each defendant
In the light of the findings above it is necessary to determine the award of damages against each defendant.
In relation to the first defendant, insofar as breaches of the statutory warranties are concerned, the starting point is an award of damages of $346,770: see [19] above. Because the plaintiffs claim for breach of statutory warranties is an apportionable claim, it is necessary to apportion responsibility between each defendant to the action who is found to be jointly or severally liable for the damage. The other defendant found jointly or severally liable is the building certifier. I consider that the proportion of the total amount of the damages which it is just for the builder to bear, having regard to the extent of the builder’s responsibility for the loss or damage, is 85 per cent. In reaching a conclusion I do not accept the submission made by the first and second defendants based upon the evidence of Mr Montgomery that the builder and certifier should bear a very similar degree of responsibility being borne by the builder and the certifier. It must be borne in mind that the certifier is a regulator who is not primarily responsible for the quality of the work. The regime of the Building Act imposes very significant and onerous obligations upon the builder. The certifier is required to undertake a regulatory role designed to ensure that those standards are met. However the principal responsibility lies with the builder. The regime is not one in which the builder is entitled to build to the minimum standard that a certifier may accept. The obligation is first and foremost upon the builder, even if the certifier has the capacity to refuse certification at particular stages or refuse to undertake the steps necessary for a certificate of occupancy to be granted.
Therefore the damages awarded on this claim are $294,754.50 (85 per cent x $346,770).
In relation to the claim under the TPA the appropriate starting point is an award of damages of $346,770. Because there are no concurrent wrongdoers, it is not necessary to apportion the damages. I am satisfied that the plaintiffs have established a causal link between the misleading and deceptive conduct involved in the Approved Builder Representation and the damage incurred. That is because although the plaintiffs did not rely upon that representation, the damage was caused “by” the conduct of the first defendant. Had the Building Commencement Notice Application not been signed then it would not have been possible for the certifier to issue a commencement notice and the whole scheme by which the building was built with inadequate supervision by the builder would not have been able to occur.
Therefore the damages award for the plaintiffs TPA claim is $346,770. Having regard to the fact that this is more favourable than the award in relation to the apportionable claim for breach of statutory warranties, this greater amount should be awarded.
In relation to the claim against the second defendant, the position is the same as in relation to claim against the first defendant under the TPA, namely that there should be an award of $346,770.
In relation to the third defendant, the plaintiffs are entitled to damages for breach of the contractual warranties contained in clause 8. The damages for the breach of those warranties are $346,770 for the breach of the warranty in relation to the standards of construction and $39,440 in relation to the supply and installation of the inclusions as specified in the contract. This gives a total of $386,210.
Orders
The orders of the Court are:
1. Judgment be entered for the plaintiffs against the first and second defendants in the sum of $346,770.
2.
Judgment be entered for the plaintiffs against the third defendant in the sum of
$386,210.
3.
Note that the judgment amount of $386,210 in order 2 includes the amount of
$346,770 referred to in order 1.
4.
The proceedings are listed for Wednesday 19 July 2017 at 9:30am for any
argument in relation to costs.
| I certify that the preceding seventy-five [75] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Mossop Associate: Date: 12 July 2017 |
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