Granosite Sales Pty Ltd & Granosite Pty Ltd v Thiess Contractors Pty Ltd

[1993] QCA 325

IN THE COURT OF APPEAL	[1993] QCA 325
SUPREME COURT OF QUEENSLAND	Appeal No. 9 of 1993
Brisbane
Before	The President Mr Justice Davies Justice White

[Granosite Sales Pty Limited & anor. v. Thiess Contractors Pty

Limited & anor.]

BETWEEN:

GRANOSITE SALES PTY LIMITED

(Second Defendant) First Appellant

AND:

GRANOSITE PTY LIMITED

(Third Defendant) Second Appellant

AND:

THIESS CONTRACTORS PTY LIMITED

(Plaintiff) First Respondent

AND:

TEROKELL PTY LIMITED

(First Defendant) Second Respondent

REASONS FOR JUDGMENT - THE COURT

Judgment delivered 06/09/93

The appellants were the second and third defendants in an action in the Supreme Court in which the respondent, Thiess Contractors Pty Ltd ("Thiess"), was the plaintiff and the other respondent, Terokell Pty Ltd ("Terokell"), was the first defendant. Thiess was the head contractor for the construction of a building known as The Precinct Building in George Street, Brisbane for the State Government. Terokell was a subcontractor to Thiess. Its obligation was to prepare various surfaces of the building, mostly concrete surfaces, for the reception of a finish known as granostone supplied by the first appellant pursuant to a contract between it and Terokell, and to apply that finish to those surfaces of the building. It did this between December 1984 and April 1986. The dispute between the parties arose because the granostone in many places failed and delaminated.

Thiess sued Terokell in contract for faulty workmanship and the appellants for supply of a defective product, framing its action against the latter in breach of a collateral contract, negligent mis-statement and breaches of ss. 52, 53 and 55 of the Trade Practices Act. Terokell sought an indemnity from the appellants, claiming breach of contract, negligent mis- statement and breaches of the Trade Practices Act. There were also District Court proceedings between Terokell and the appellants in which the same issues were raised, which were transferred into the Supreme Court and heard with these proceedings. In each case the second appellant was sued as the principal of the first appellant.

The action between Thiess and Terokell was settled prior to trial and at the trial both of those parties were represented by the same counsel. There was no issue between the appellants and consequently they, too, were represented at the trial by the same counsel. It had been resolved prior to the trial that only the issue of liability would be determined at the trial with appropriate declarations. His Honour declared that the appellants were liable to each of the respondents for damages for breach of contract, negligent mis-statement and breaches of ss. 52, 53 and 55. It is against those declarations that the appellants appeal.

The statements alleged to constitute the contractual terms breached, the mis-statements and the conduct or representations alleged to constituted breaches of the Trade Practices Act included statements that granostone supplied by the appellants had an acrylic base, that it formed a barrier to external moisture, that it was extremely durable and had a long life expectancy and that no acrylic glazing coat was necessary. The appellants did not contest that the alleged statements were made or their contractual effect but denied that they were untrue or broken and that in consequence the respondents suffered loss.

Before this Court the appellants no longer contested that the promise and representation that the granostone had an acrylic base was broken and untrue. However, the central issue between the parties, here and below, was whether the failure and delamination of the granostone finish were caused by a defect in the product supplied by the first appellant or were caused by faulty workmanship by employees of Terokell. The respondents asserted that the failure was caused by the fact that the base material of the granostone was predominantly polyvinylacetate, not an acrylic compound, and that it was subject to attack by water; that the reinforcing agent,

arbocel, was ineffective; and that the granostone was not sealed by an acrylic glaze. The appellants asserted that the workmen employed by Terokell failed to carry out preparatory work in accordance with the specifications; failed to prime in accordance with the specification; and failed to mix the granostone components in the proportions specified.

Although his Honour drew the attention of the parties to the possibility that fault on both sides may have contributed to the failure, the parties nevertheless conducted their respective cases on the basis that one or the other was wholly to blame and his Honour in the end so found.

Before turning to the questions raised by these contentions, it is convenient to dispose of two grounds of appeal, grounds 1 and 2, which in the end were not pursued. The first of these asserted that the learned trial judge was in error in refusing leave to the second appellant to withdraw its admission that the first appellant was at all material times its agent acting within the scope of its authority as such agent. The second was that his Honour erred in the exercise of his discretion in refusing to allow the appellants to call expert evidence responsive to issues raised by the respondents' expert witness.

Although these grounds were pursued in written submissions by the appellants, in the course of his oral argument Mr Gyles Q.C. for the appellants conceded that these grounds alone would not entitle the appellants to a new trial and that if, on the other grounds, a new trial were granted, the matters raised in these grounds ought more appropriately to be dealt with upon that new trial. Accordingly, there is nothing further that we need say about these grounds.

We should also add that, although the notice of appeal seeks judgment for the appellants, in his oral argument Mr Gyles did not seek any relief other than a new trial.

There is no doubt what Terokell's contractual obligations were.
The specification required that the substrate be free of dirt,
grease, existing paint, scaling, laitance, efflorescence,
mould, funghi infection, stains, rust, form oil, mastic
compound or other foreign matter; and Terokell was obliged to
make good any substrate not finished to required standards. In
order to ensure that the substrate complied with the
specification it was obliged to clean it by scrubbing it with
detergent and hosing it down with clean water. It then had to
apply a primer before mixing and applying the granostone. The
mixing was necessary because the granostone consisted of two
components, a base substance and a hardener. Aggregate then

had to be applied to the compound after the latter had been

applied to the substrate.

The main attack of the appellants, both below and in this Court, upon the workmanship of the Terokell employees, was upon the performance by them of their obligation to clean the substrate prior to priming and application of the granostone compound. There were two bodies of evidence on this question; one by Terokell employees to the effect that they had cleaned and prepared the substrate in accordance with their obligation and their usual practice; the other from employees of Thiess and the State Government as to observations which they made from time to time of the performance of that work. His Honour accepted the evidence of the Terokell employees. Even assuming for the moment that the evidence of the Thiess and State Government employees contradicted that of the Terokell employees, there were strong reasons for accepting the evidence of the latter. In the first place they were the persons who performed whatever work was done and who might be expected to be best able to recall, six or more years after the event, what they did. Moreover, it is unlikely that they were mistaken in their evidence about what they did. It is more likely either that they were truthful witnesses or that they had conspired to fabricate their evidence. The Thiess and State Government employees, on the other hand, were at best observers, most of them merely casual observers on a busy work site where many different aspects of construction work were being performed; and none were, to use his Honour's words, "closely involved in the application of the coating". Only one of these witnesses, Mr Sternberg, whose recollection his Honour accurately described as "less than clear", appears to have had any direct supervisory role in respect of the Terokell employees.

Once there is a finding of fact depending to some extent on credibility, it becomes even more difficult to argue that that finding of fact cannot stand. See for example Devries v. Australian National Railways Commission (1993) 112 A.L.R. 641 at 646. Apprehending this difficulty, Mr Gyles sought to argue that his Honour's acceptance of the evidence of the Terokell employees was not based on credibility but on the improbability that experienced tradesmen, as the Terokell witnesses were, would have done any less than they said they did because they believed that any inadequacy in preparation would result in a failure occurring almost immediately. Although his Honour referred to this as an improbability, it is plain from the whole of what he said about the evidence of those witnesses that his acceptance of their evidence also involved acceptance of their credibility.

Moreover, it would be stating the appellants' case too highly to say that all or even most of the evidence of the Thiess and State Government witnesses, upon which they relied, contradicted that of the Terokell employees. The specific issue was whether, in every case, the Terokell employees washed the substrate with detergent and a scrubbing brush and then hosed it off. None of the Thiess or State Government witnesses said that that was not done although a number of them said that they did not see it done. Not surprisingly, however, their recollections differed. Some saw only brushing or dusting with a broom, bannister brush or rag. Others also saw washing with brushes and buckets or hoses. The most specific evidence upon which the appellants rely was that of Mr Lowrie, who was at the time assistant site manager on the project and whose role was to organise and coordinate a lot of trades on the site. He said that if the concrete panels had mud marks or something like that on them they were washed down with a detergent and scrubbed and then washed down with a hose to remove any detergent. If the panels were clean he said they were just brushed with a broom and hosed down. However, there was nothing to indicate that he was closely involved with the work of the Terokell employees and his use of the phrase "they would have been" indicates at least the possibility that he was reconstructing what he thought was the appropriate method of cleaning, rather than recollecting precisely what he saw. No doubt after six or more years it would have been difficult for him to differentiate between the two.

We think that his Honour was justified in concluding, as he did, that the evidence of the Thiess and State Government employees was not necessarily inconsistent with that of the Terokell employees. In any event, there was nothing in the evidence of the Thiess or State Government employees which, in our view, incontrovertibly established the contrary of the evidence of the Terokell employees or rendered it glaringly improbable.

We do not think that, as appears to have been contended, the mere fact that it was the respondents who called most of the Thiess and State Government witnesses on this question should have caused his Honour to arrive at any different conclusion. Nor do we think that the compromise between Thiess and its insurer, by which Thiess was prepared to accept less than its total cost of rectification, in any way reflects on the credit of the Terokell witnesses. Even putting on one side the evidence about the quality of the product supplied by the appellants to which we will shortly refer, there was no reason why his Honour should not have accepted the evidence of the Terokell employees as he did.

His Honour did not conclude from his acceptance of the evidence of the Terokell employees that in all cases the substrate was prepared in accordance with Terokell's contractual obligations.

On the contrary, he accepted as a probability that in some cases that was not so. However, he found that that was only in a small area in total and insufficient to explain the places in which and the extent to which failure and delamination of the granostone occurred. That finding was consistent with the evidence of the Terokell employees; the evidence that even if the substance seen and described by some witnesses as dirt was in fact dirt, in most cases in which delamination occurred there was no indication of that substance or even of any damage to the primer coat; and the evidence to which his Honour later referred pointing to a defective product as the likely cause of the failure.

Before going to the evidence which he thought supported the view that the PVA- based material supplied was so defective as to cause the failure, his Honour adverted to the onus of proof.

We mention this because Mr Gyles, more than once during the course of his address, reminded us of the onus of proof. His Honour said that it was critical to the liability of the appellants that there be proof that the loss and damage was in fact caused by the supply of surface coating material which did not meet the quality standards expressly or impliedly imposed on them by law.

His Honour then proceeded to consider both circumstantial and expert evidence upon the question whether it was a defect in the product supplied by the first appellant which caused the failure. Although he found persuasive the evidence of Dr George, a witness for the respondents, who expressed the opinion, supported by scientific theory, that a PVA-based substance, such as this was, failed when exposed to moisture of the kind ordinarily experienced on exposed surfaces in Brisbane, his Honour did not find it necessary to reach a concluded view on the scientific explanation for what occurred.

However, he found in the circumstantial evidence support for the conclusion that it was a faulty product rather than faulty workmanship of the Terokell employees which caused the failure.

It may not have been necessary for his Honour to embark upon a consideration of this evidence. He had already concluded that the extent of faulty preparation of the substrate by the Terokell employees could not have been a cause of the failure and delamination of the granostone finish. His acceptance of the evidence of the Terokell witnesses seemed to require a similar conclusion in respect of the application of the primer coat and the mixing of the granostone components and his Honour had so concluded. And in respect of the application of the primer coat his conclusion was supported by evidence that, on most occasions on which delamination had occurred, the primer coat was still intact. Having regard to the way in which the case was conducted, his Honour would have been entitled, on those findings, to conclude that the probable cause of the failure and delamination was the supply by the first appellant of a faulty product. His Honour plainly appreciated this but nevertheless considered other evidence which he thought supported that conclusion.

The most telling of this evidence, in our view, was that which compared the external surfaces of The Precinct Building on the one hand with those of the nearby Education House and the Ipswich Hospital on the other. Terokell, with most of the same employees, performed the preparatory and plastering work and the first appellant supplied the granostone product on all three jobs which were performed in close succession; the Ipswich Hospital followed by The Precinct Building and Education House in that order. The only difference between them was that, on The Precinct Building, the granostone had a predominantly PVA base and was unglazed, whilst in each of the other cases either it had an acrylic base or was glazed with an acrylic glaze. There was no failure of the granostone on either of the other buildings.

Also giving some support to his Honour's conclusion was evidence about a building in Fiji which used the granostone formula used in The Precinct Building. The surface was then glazed with an acrylic coating; but when, after some time, the glaze deteriorated and cracked, the granostone failed in exactly the same way as on The Precinct Building. It was common ground that no glaze had been applied to The Precinct Building, the appellants having said that that was unnecessary.

This evidence, in our view, supported the conclusion that the granostone used in this building was defective, at least for exposed surfaces for that was where almost all the failures occurred, and that granostone with an acrylic base and, except possibly in the long term, PVA-based granostone with an acrylic glaze would not have been.

His Honour dealt with other circumstantial evidence which he thought supported his conclusion. We do not find it necessary to consider that evidence. It is sufficient to say that none of it tended to contradict the factual findings which he had made.

The evidence to which we have so far referred was sufficient to enable his Honour to make the factual findings which he did and consequently to make the declarations which he made.

The appeal is therefore dismissed with costs.
IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 9 of 1993

Brisbane

[Granosite Sales Pty Limited & anor. v. Thiess Contractors Pty

Limited & anor.]

BETWEEN:

GRANOSITE SALES PTY LIMITED

(Second Defendant) First Appellant

AND:

GRANOSITE PTY LIMITED

(Third Defendant) Second Appellant

AND:

THIESS CONTRACTORS PTY LIMITED

(Plaintiff) First Respondent

AND:

TEROKELL PTY LIMITED

(First Defendant) Second Respondent

_______________________________________________________________

__

THE PRESIDENT
DAVIES J.A.

WHITE J.

_______________________________________________________________

__

Judgment delivered 06/09/1993

REASONS FOR JUDGMENT - THE COURT

_______________________________________________________________

__

APPEAL DISMISSED WITH COSTS.

_______________________________________________________________
__

CATCHWORDS: CONTRACT - CONDITIONS AND WARRANTIES - Respondents claimed damages for failure of surface coating material called "granostone" - Alleged breach of collateral contract and/or promissory representation, negligent mis- statement and breach of ss. 52, 53 and 55 Trade Practices Act - Whether trial judge erred in finding failure of granostone finish caused by defect in product supplied by appellants rather than by faulty workmanship of second respondent

Devries v. Australian National Railways
Commission (1990) 112 A.L.R. 641

NEGLIGENCE - MISREPRESENTATION - Respondents claimed damages for failure of surface coating material called "granostone" - Alleged breach of collateral contract and/or promissory representation, negligent mis-statement and breach of ss. 52, 53 and 55 Trade Practices Act -Whether trial judge erred in finding failure of granostone finish caused by defect in product supplied by appellants rather than by faulty workmanship of second respondent

Devries v. Australian National Railways
Commission (1990) 112 A.L.R. 641

TRADE PRACTICES - MISLEADING AND DECEPTIVE CONDUCT - Respondents claimed damages for failure of surface coating material called "granostone" -Alleged breach of collateral contract and/or promissory representation, negligent mis-statement and breach of ss. 52, 53 and 55 Trade Practices Act - Whether trial judge erred in finding failure of granostone finish caused by defect in product supplied by appellants rather than by faulty workmanship of second respondent

Devries v. Australian National Railways

Commission (1990) 112 A.L.R. 641

Counsel:  R. Gyles Q.C. with him Ms J. Dalton for the
Appellant/Second Defendant and Appellant/Third
Defendant
R. Wensley for the Respondent/Plaintiff and the
Respondent/First Defendant

Solicitors: Minter Ellison Morris Fletcher for the
Appellant/Second Defendant and Appellant/Third
Defendant
Clayton Utz for the Respondent Plaintiff and the
Respondent/First Defendant

Hearing Date(s):  23/24 August 1993