Emmetlow Pty Ltd v Baker and Staff Pty Ltd

[2003] QDC 17

DISTRICT COURT OF QUEENSLAND

CITATION:	Emmetlow Pty Ltd v Baker & Staff Pty Ltd [2003] QDC 017
PARTIES:	EMMETLOW PTY LTD (ACN 010 408 429) Plaintiff v BAKER & STAFF PTY LTD (ACN 060 746 429)
FILE NO:	775 of 1999
DIVISION:	Civil
PROCEEDING:	Action for Damages for breach of Contract.
ORIGINATING
COURT:	District Court Brisbane
DELIVERED ON:	17 March 2003
DELIVERED AT:	Brisbane
HEARING DATE:	5 and 6 February, 2003
JUDGE:	Boulton DCJ
ORDER:	Judgment for the Plaintiff in the sum of $37,192.80. The defendant is to pay the plaintiff’s costs of and incidental to the action to be assessed.
CATCHWORDS:	BREACH OF CONTRACT – rectification requiring replacement of some fittings – Necessary and Reasonable – avoidance of windfall benefit.
COUNSEL:	Mr A K Cooper for the plaintiff Mr A M Hoare for the defendant
SOLICITORS:	Irish Hughes & Bentley for the plaintiff McKays, Solicitors for the defendant

REASONS FOR JUDGMENT

1. The plaintiff is the owner and operator of “the Colonial Mobile Village and Motel” at 351 Beams Road, Taigum. The defendant is a large painting and decorating company which operates throughout the greater Brisbane area.

2. It would seem that the motel buildings were constructed in about 1994. There is metal balustrading to the verandah and stairway areas which is adequately depicted in the drawings which are Ex 7. It seems that within a couple of years of the motel’s construction the paintwork on these panels was blistered. The manufacturers of the paint, Wattyl (Qld), would seem to have accepted some responsibility for that failure and offered the plaintiff an advance of $1,000 worth of its product for the purposes of rectification. The plaintiff would seem to have accepted that offer.

[3] That led to the plaintiff seeking a labour only quotation from the defendant for the
stripping and repainting of the metal balustrading. That quotation is Ex 8.

1. Some discussions followed between Mr Rezes of the plaintiff, Mr Stephen Baker of the defendant and Wattyl representatives as to the paint to be used. It was agreed that Wattyl Super Etch Primer would be used to be followed by two coats of a gloss epoxy paint specified as Poly-U 400 gloss (a two pack recoatable aliphatic isocyanate-cured acrylic).

2. I accept that Mr Baker recommended the abovementioned product while pointing out that it was relatively more expensive. I also accept that he told Mr Rezes that the cost of the paint would be “a little over the $1,000” which was the amount of the credit that the plaintiff had with Wattyl. A precise figure was not given.

[6] The abovementioned quotation provided for the chemical stripping of the balustrades before priming. It seems that some of the balustrades were actually unbolted and removed for sand blasting. In retrospect this procedure would have avoided all of the subsequent problems if the balustrades had been stripped and repainted at another location and then refitted. This, however, did not occur and the painting of the balustrading was done in situ.

1. The standard of the work that followed was nothing short of appalling. Mr Steven Baker who gave evidence at the trial, while not conceding the full extent of the problems, was obviously embarrassed. The plaintiff’s further and better particulars delivered the 30 July 1999 listed in para 5 some 58 areas of unsatisfactory work. The trial began with Counsel for the defendant making admissions as to 33 of these areas and partial admissions in respect of a further two. As the trial proceeded it became obvious that the further and better particulars were derived from a list of defects Ex 3 which was not subjected to attack. There was argument concerning the extent of some of the damage but with one or two trivial exceptions, the plaintiff made out the particulars of damage. There was an area of efflorescence and some rust around the footing of one of the panels where other causes may have intervened.

2. The work was inspected by a Materials and Process Chemist, Mr Matthew Johnson. He produced a report dated 5 April 2002. Mr Johnson’s conclusions are highly critical of the defendant’s work. He describes the extent of overspray as severe and affecting approximately 80% of areas in close proximity to the balustrades. He attributes the chalking to the top coat of the coating system to one or a combination of sunlight breakdown of the binder and/or insignificant agitation during mixing. The extent of the problem would suggest to the latter. He attributes de-lamination to the absence of the epoxy super-etch primer and/or insignificant surface preparation and attributes corrosion of the vertical balustrading to low dry film thickness.

3. The loss adjuster, Mr Steley, obtained quotations for the repairs to the work in or about mid 1998. These quotations were obtained from Mullins Builders and from Alliance Constructions. The quotations are Ex 1, Ex 2, Ex 4 and Ex 5. There is a huge discrepancy between the first and second Mullins’ quotations from $4,617 to $46,491. The Alliance quote of 27 May 1998 was for $36,215. A revised quotation was issued on 13 August 1998 in the amount of $47,480 with concerns expressed about the powder coated aluminium doors and windows. The work to the handrails was suggested to require complete re-stripping. Rather:

   “It was also noted that the paint finish to the handrails was a two (2) Pac epoxy finish and would be successful in touching up, it would require completely being stripped back and refinished. Our amended budget cannot be firm, as the extent of works will, without a doubt, change during the repairs.”

[10] Mr Steley was obviously troubled by the discrepancies in the quotations. In a letter
to the plaintiff dated 22 June,1998, Ex 6, he adverted to the difficulty:

“It is indeed possible that much of the overspray and damaged painted surfaces can be removed without causing any permanent damage. We would be prepared to authorise repairs to proceed on this basis with a caveat that if they were unsuccessful, total replacement or repainting of surfaces will be considered at an additional cost.”

1. Mr Fairley was a building estimator employed by Mullins Builders. He produced the two quotations Ex 1 and Ex 2. He explained that it was possible to remove the overspray with chemicals but that the effect on the surface being cleaned was unpredictable. He was asked:

   “All right. Now, your second quote, which is approximately 10 times that amount, the basis for the variation is that you provided for the replacement of roofs?-- That is correct.

   The replacement of doors?-- Mmm.

   The replacement of windows?-- Correct.

   As an alternative to cleaning?-- That is correct. chemicals that were used to remove the epoxy, the question was asked could we guarantee that we weren’t doing any further damage to the powder coating on the windows or the Colorbond and we couldn’t guarantee it.

   All right. You couldn’t guarantee that?-- No.

   So a requirement was made of you to fully replace those parts of the building where there had been overspray?-- That is correct.”

2. The plaintiff was therefore confronted with the dilemma. If chemical removal was attempted on the powder coated aluminium or the Colorbond it would be successful in removing the overspray but with the prospect of damaging those surfaces thereby shortening their effective life. The alternative was to replace those powder-coated fittings and Colorbond sections which were affected. This option was fortified by evidence of damage to the powder coating by earlier attempts to remove the overspray.

3. Mr Englert was a former painting contractor who acted at times as an inspector for the Master Painters of Australia. Mr Englert produced two reports Ex 27 and Ex 28. Mr Englert described the defects as being of a minor nature. He thought for instance that the overspray on the Colorbond roof could be rectified by painting over it and such painting would last for the life of the Colorbond roofing. His opinions varied radically from those of Mr Johnson both as to the extent of the damage and as to the mode of rectification. I much prefer the evidence of Mr Johnson.

4. In Bellgrove v Eldrige (1953-1954) 90 CLR 613 at 617 Dixon CJ, Webb and Taylor JJ considered the measure of damages in a case where a builder had not performed his obligations under the contract. They observed:

   “This loss cannot be measured by comparing the value of the building which has been erected with the value it would have borne if erected in accordance with the contract; her loss can, prima facie, be measured only by ascertaining the amount required to rectify the defects complained of and so give to her the equivalent of a building on her land which is substantially in accordance with the contract.”

[15] That was a case which required the demolition of a building. But the principle in
the present case is the same. The Justices go on to observe at 618:

“In none of these cases is anything more done than that work which is required to achieve conformity and the cost of the work, whether it be necessary to replace only a small part, or a substantial part, or, indeed, the whole of the building is, subject to the qualification which we have already mentioned and to which we shall refer, together with any appropriate consequential damages, the extent of the building owner’s loss.”

1. Questions of what is necessary and reasonable will depend on the circumstances. Having regard to the severity of the damage and the threat to the integrity of the existing surfaces if chemical removal were attempted it seems reasonable for the plaintiff to have its loss assessed on the basis of the replacement of some of the affected items.

2. In assessing damages on a replacement basis, however, a windfall benefit is impermissible. The principle was described in the High Court of Australia in The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 in the joint judgment of Mason CJ and Dawson J as follows:

   “The corollary of the principle in Robinson v Harman is that a plaintiff is not entitled, by the award of damages upon breach, to be placed in a superior position to that which he or she would have been in had the contract been performed. In L Albert & Son v Armstrong Rubber Company (1949) 178 F. 2d. 182 at p 189, Chief Judge Learned Hand said:

   “On those occasions in which the performance would not have covered the promisee’s outlay, such a result imposes the risk of the promisee’s contract upon the promisor. We cannot agree that the promisor’s default in performance should under this guise make him an insurer of the promisee’s venture.”

   Chief Judge Learned Hand went on at p 191 to approve the statement made by Fuller & Perdue in their celebrated article, “The Reliance Interest in Contract Damages”:

   “We will not in a suit for reimbursement for losses incurred in reliance on a contract knowingly put the plaintiff in a better position than he would have occupied had the contract been fully performed.”

3. I have already pointed out that according to the evidence of Mr Rezes the Motel was built in 1994. The quotations Ex 1 and Ex 2 were contained in mid 1998 at a time when questions of rectification were still in the hands of the loss adjuster, Mr Steley. It is appropriate in the circumstances to discount the quotation contained in Ex 2 by 20%.

4. Rectification work of course has not been carried out to this day and may well be never carried out. Mr Hoare refers me to the decision of Smith J in the Victorian Supreme Court in Alucraft Pty Ltd (in liquidation) v Grocon Ltd (No 2) (1996) 2 VR 486. In that case rectification costs of $35,000 were discounted heavily to produce a damages figure of $5,000. The issue, however, was quite different being between subcontractor and head contractor, the proprietor not having made any call on the head contractor to rectify the defective work despite the passage of three years following the issue of the final certificate.

5. In the present case the issue is one between the proprietor and the contractor. It will be for the proprietor to decide what course to take. A similar factual situation was considered by the High Court in Bellgrove (supra) at p 620:

   “If 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 costs of erecting another one. To our mind this circumstance is quite immaterial and is but one variation of the feature which presents itself in the assessment of damages in cases where they must be assessed once and for all.”

6. The other limb of the plaintiff’s claim concerns the $1,000 credit which the plaintiff had with Wattyl and the conversation that Mr Rezes had with Mr Baker to the effect that the paint would cost a little more than $1,000. In fact the plaintiff was charged a sum of $3,978.04 in excess of that figure.

7. The Wattyl invoices are Ex 14. The plaintiff, however brought no other evidence concerning the issue. Mr Cooper did cross-examine Mr Steven Baker commencing at p 108 of the transcript concerning the amount of primer and paint used but Mr Baker’s response was that the volumes were “roughly right”. Some further cross- examination followed in respect of the amount of thinners which suggested that an abnormally large quantity of thinners was used on the project. The cross- examination extended to chemical strippers, steel wool, paint scrapers and methylated spirits but at the end of it all the plaintiff failed dismally to make out this element of its case. The plaintiff’s original conversation with Mr Baker concerning the cost of the paint was itself cast in vague terms and did not at any stage purport to relate to materials other than the paint.

8. I give judgment for the plaintiff against the defendant in the sum of $37,192.80. I will hear further submissions on the subject of interest. Unless persuaded otherwise I propose to order that the defendant pay the plaintiff’s costs of and incidental to the action to be assessed.