Hueppauff v Inter-Continental Travels P/L No. Scciv-01-70

HUEPPAUFF & ORS v INTERCONTINENTAL TRAVELS PTY LTD
[2001] SASC 119
Magistrate’s Appeal

MARTIN J. In 1994 the respondent (“the plaintiff”) purchased a house property situated at Mount Compass from the appellants (“the defendants”). Following the discovery of defective plumbing work, the plaintiff sued the defendants for damages. The claim was based on an alleged breach of a warranty in the contract of sale. In a judgment delivered 14 December 2000, a Magistrate found in favour of the plaintiff. The defendants appeal against the judgment alleging errors in connection with the merits of the claim and asserting that the action was statute barred by the operation of s 73 of the Development Act 1993.
The parties entered into the contract of sale on 10 October 1993. Settlement occurred on 17 January 1994. The relevant warranty was in the following terms:
“The Vendor warrants that to the Vendor’s knowledge, no building work has been carried out on the Land without all necessary consents and approvals having been obtained, except as set out in Item R of the Schedule.”
The word “nil” was inserted at item R of the Schedule.
It was common ground that in July 1986, in connection with the proposed construction of the house, the defendants submitted an application to the relevant Council for planning and building approval. That application was accompanied by an engineer’s report and a plan which indicated that the house was to be serviced by a septic tank located at the front of the house. The septic tank proposed in the plans was an all purpose tank designed to receive both sewage from the water closet and sullage from the kitchen, laundry and bathroom. The proposal was approved by the Council.
Contrary to the plan submitted to the Council and approved, the defendants did not install an all purpose tank at the front of the house. They installed a water closet only septic tank at the rear of the premises which was designed to receive only sewage. Sullage from the house by-passed the septic tank. The approval of the South Australian Health Commission was required for the installation of the septic tank system that was ultimately installed. One of the critical issues was whether the defendants sought and obtained that approval.
Mr Huepauff gave evidence at trial that he submitted to the Health Commission the original plan incorporating an all purpose septic system to be located at the front of the property. He said that when he and his wife decided to place the septic tank near the rear of the property, he sent a modified version of the plan showing the intended position of the tank, designed to take sewage only, to the Health Commission. According to Mr Huepauff he received approval for the amended proposal.
The original plan was not amended by an engineer. The Magistrate found that Mr Huepauff did not bring any amendment to the attention of the Council. The defendants were unable to produce a copy of any application to the Health Commission in respect of either proposal and could not produce a copy of either approval from the Health Commission that Mr Huepauff said he received. According to Mr Huepauff, he gave a copy of the plan and the approval to a plumber, Mr Carter, but Mr Carter no longer had a copy. Mr Carter resides in Queensland and was not called to give evidence.
The plaintiff set out to prove that the defendants did not obtain the approval of the Health Commission. In addressing this issue, the Magistrate referred to the evidence in the following terms:
“Kim Vivian testified that the Alexandria Council holds all the Health Commission records including approvals for the installation of septic systems in the 1980s for its own council area. Exhaustive investigations revealed that no records were found either of an application or of any approval nor was there any reference to same. Mehlika Kayaalp told us that there was neither an application nor an approval noted on the commissions record cards. Neil James confirmed that evidence and confirmed that no records had been destroyed by the Commission relating to late 1980s, early 1990s matters since all of those records were passed on to the relevant councils. What is more important from the plaintiff’s point of view is the practice which was adopted when a separate docket and card were created which become separate records kept at different locations - thus it is submitted by Mr Dal Chin that where no record exists at all it is most unlikely that any application was ever received.”
After outlining the evidence of Mr Huepauff to which I have referred, the Magistrate found in favour of the plaintiff in the following conclusion:
“Having reviewed the evidence I am satisfied that the defendant, Mr Trevor Huepauff did not seek Health Commission approval for the amended septic system and consequently never received authority to proceed. I find much of his testimony to be convenient but unconvincing.”
The Magistrate also found as follows:
“I find that the defendants knew that council had approved the building on the basis that sewerage and sullage was to be disposed through the septic system (all purpose system). The defendant knew Health Commission approval was required and yet he failed either to obtain approval for the all purpose system as per his plan or obtain any approval for a water closet only tank.”
Counsel for the defendants challenged the Magistrate’s finding. He submitted that the Magistrate had erred in rejecting the evidence of Mr Huepauff because his Honour did so solely on the basis that Mr Huepauff’s evidence was contradicted by the absence of a Health Commission record of an amended proposal and approval for that amended proposal. Counsel contended that as the records could not be relied upon, this was an unsound basis upon which to reject the evidence of Mr Huepauff.
In 1995 the responsibility for approving proposals of the type under consideration passed from the Health Commission to local Councils. According to Mr Vivian, the senior Environmental Health Officer of the Alexandrina Council, hundreds of boxes each containing hundreds of dockets were forwarded to the Council by the Health Commission. Neither the boxes nor the dockets inside the boxes were arranged in any order. The Council employed a person for three months to integrate the dockets into the Council record system. This was done physically docket by docket. There was no record of an approval being granted to the defendants.
An officer of the Health Commission, Mr James, gave evidence of the system that had been used within the Health Commission for the storage of applications and approvals prior to 1995. He described how the dockets processed prior to 15 May 1995 were despatched to various Councils around the State. He said that because of the potential for mislocation in this process, the Commission sent a letter to each of the Councils to the effect that if they received documents that did not belong to their Council, they should redirect those records to the appropriate Council. He was not aware of any contact in response to that letter other than receipt of anecdotal information that some Councils did receive incorrect records and sent them on.
Mr James explained that the Health Commission photocopied the dockets sent to the Councils. He made a calculation of how many cards were held at the Alexandrina Council in comparison with the number that had been sent. There was a discrepancy in the order of 2800 compared with 2390. Counsel submitted that this was a very large discrepancy which had to lead to a conclusion that the records were unreliable. He argued that it was inappropriate for the Magistrate to have relied upon the records as the basis for rejecting the evidence of Mr Huepauff.
I do not agree with the interpretation of the Magistrate’s remarks for which counsel contended. His Honour did not simply use a finding as to the accuracy of the records as the sole basis for rejecting the evidence of Mr Huepauff. In his conclusion, his Honour specifically said that having reviewed the evidence in its entirety, he found that Mr Huepauff did not seek Health Commission approval for the amended proposal. In the course of that conclusion his Honour observed that he found much of Mr Huepauff’s testimony “to be convenient but unconvincing”. There is no basis for inferring that his Honour reached that conclusion solely because he relied upon the accuracy of the records.
This is not a case in which the Magistrate has palpably misused his advantage or where his finding is contradicted by strong or incontrovertible evidence. His Honour was not impressed with the evidence of Mr Huepauff. Having read that evidence, I can understand why his Honour arrived at that view. In my opinion it was open to his Honour to find in favour of the plaintiff that the defendants did not seek approval for the installation of the septic tank system that was ultimately installed.
On the assumption that the finding adverse to the defendants is upheld, the defendants submitted that the plaintiff’s claim must nevertheless fail because the absence of consent was not causative of any damage. In essence, the defendants argued that as the measure of damages was the cost of obtaining approval, no damage was sustained by the plaintiff because the septic system had been constructed in a manner which complied with the requirements of the Health Commission and no additional work was required to obtain approval. Any defects in the plumbing system related to the system for disposing of sullage and no approval for that system was required.
Regulation 81 of the Health Regulations 1968 prohibited the installation of a septic tank until plans and sections of the proposed tank, including details of all fittings, drains and water closets in connection with the septic tank, had been submitted to and approved by the Central Board of Health. A technical bulletin had been issued by the South Australian Health Commission containing information relating to the installation of septic tank systems. It also provided details of the normally accepted methods for house plumbing, septic tanks and effluent disposal. The bulletin contained reference to reg 81 and identified the requirements and information to be provided with the application for approval to install a septic tank system. Those requirements included a site plan showing:-
“Block dimensions: contours and natural ground fall; location of buildings on the allotment; position of the proposed septic tank, impervious pumping sump, effluent disposal site; location of roof, surface and sub-surface waters disposal system.”
The bulletin also referred to the provision of a layout plan showing the following:
“The position of all sanitary fixtures to be connected to the septic tank (e.g. water closet, basin, bath, shower, laundry trough, washing machine, kitchen sink, dishwasher, food waste, disposal unit.)
The method of connecting the fixture to the drainage system including:-
Location of the sewer drain, inspection openings, junctions and bends; size and fall of sewer drain; position and size of traps (fixtures, floor and drain), vents, and waste pipes.
The position, type and capacity of the septic tank and pumping sump.
The position, type and capacity of the disposal system.”
The technical bulletin recognised the distinction between a sewage only septic tank and an all purpose septic tank. That distinction was specifically noted with reference to approved types of septic tanks. The definitions of “drain” and “waste pipe” also recognise the same distinction.
It is necessary to outline briefly the manner in which the disposal systems operated or were said to operate. As previously mentioned, only sewage flowed from the house into the septic tank. Sullage from the kitchen, laundry and bathroom did not flow into the septic tank.
On behalf of the defendant, Mr Huepauff gave evidence that sewage flowed directly from the house into the septic tank and then overflowed into a soakage trench. From the soakage trench it overflowed into a pumping chamber which was fitted with a pump for the purposes of discharging the overflow from the chamber onto a nearby woodlot. Mr Huepauff said that sullage by-passed the septic tank and flowed directly into the soakage trench. It then overflowed into the pumping chamber. Thus a combination of treated sewerage and sullage was removed from the pumping chamber by pumping it onto the woodlot.
Mr Adams was an experienced plumber who replaced the septic system for the plaintiff. His evidence was accepted by the Magistrate. Mr Adams discovered that the sullage waste pipe emanating from the house was connected to a pipe that led from the septic tank to the pumping chamber. When it was put to him that such a junction could not have existed between the septic tank and the pumping chamber because of the presence of the soakage trench in that section, Mr Adams pointed out that there was nothing to prevent the positioning of the soakage trench on the other side of the pumping chamber resulting in overflow being pumped from the pumping chamber into the soakage trench. While Mr Adams did not deny that a soakage trench may have existed at some point in the process, he did not find one.
The Magistrate did not make any specific finding concerning the soakage trench. However, his Honour was impressed with the evidence of Mr Adams. I have no doubt that his Honour accepted the evidence of Mr Adams concerning the positioning of the junction. Once that evidence is accepted, it inevitably follows that if, as claimed by Mr Huepauff, the soakage trench had been positioned between the septic tank and the pumping chamber, in view of the work carried out by Mr Adams in replacing the pipes in that section, it is likely that he would have found that trench. The most likely explanation is that the trench was not positioned between the septic tank and the pumping chamber. If a plan had been submitted to the Health Commission for construction of the septic system in such a form, it would not have been approved.
According to the evidence of Mr James, if an application had been presented to the Health Commission for approval of a sewage system only, the Commission would not have been concerned with approving or inspecting a separate sullage system. However, if the plan showed that sullage flowed into the same soakage trench as the sewage, the Health Commission would not have approved the sewage system unless the soakage trench was an appropriate size to take both flows. In addition, if a plan had been presented to the Health Commission which included a proposal that sewage overflow from the pumping chamber would be pumped out into a woodlot, such a proposal would not have been approved. Although it is unclear from the evidence of Mr Huepauff, counsel for the defendants submitted that, in substance, Mr Huepauff said that the plan submitted for approval did not include any reference to pumping the overflow onto a woodlot.
The plaintiff succeeded in establishing a breach of warranty because the septic system had been installed without approval first being obtained from the Health Commission. The plaintiff also succeeded in establishing that the Health Commission would not have approved a plan which included a proposal to pump septic overflow onto a woodlot. Thirdly, although the Magistrate did not make a specific finding, in my opinion the weight of the evidence supports the view that the soakage trench was not positioned between the septic tank and the pumping chamber and that sewage from the septic tank and sullage from the house flowed directly into the pumping chamber. A proposal to construct such a system would not have been approved.
Was the breach of warranty causative of any damage? According to the evidence called for the plaintiff, it was not the septic tank system which caused the problems. Drains associated with the sullage emitted a bad odour and backed up causing water to pour into the bathroom and other wet areas. The Magistrate was satisfied that these defects were caused by defective plumbing work. There is no challenge to that finding. His Honour accepted the evidence of Mr Adams that the underfloor plumbing work was the worst he had ever seen in his extensive career.
The measure of the plaintiff’s damage can be determined by ascertaining the cost to rectify the defect: Bellgrove v Eldridge (1954) 90 CLR 613. The trial proceeded on the basis that the measure was the cost to the plaintiff of obtaining approval for the septic system. The plaintiff replaced the entire septic system and sought to recover the cost of doing so. According to the defendant, however, in order to obtain approval it was not necessary to replace the septic system because it had been installed in accordance with Health Commission recommendations. Counsel contended that as no approval was needed for the separate sullage system, the defective plumbing work associated with the sullage system did not need to be replaced in order to obtain approval for the septic system. Unnecessary cost was incurred because neither the plumber nor the health inspector appreciated that the septic system was not an all-purpose system.
The Magistrate referred to the submission that obtaining approval was not causative of the expenses for which the plaintiff sued and to the erroneous basis upon which the plaintiff proceeded to replace the whole system. His Honour found, however, that the external drains and septic tank were not installed in accordance with the technical specification produced by the Health Commission. His Honour did not identify the specific deficiencies within the septic tank system. Having observed that the defendant proceeded to install a completely different system from the system in respect of which building approval was given by the Council and that the system installed “offended against proper standards of design and workmanship”, the Magistrate rejected the suggestion by the defendant that the failure to obtain approval was not causative of damage because the sullage system did not require Health Commission approval. In doing so his Honour referred to the defective workmanship and what he described as the “blatantly deceptive behaviour” of the defendants. His Honour found that the defendant breached the contract and that the plaintiffs relied upon the truth of the representations in deciding to enter into the contract. His Honour then said:
“I conclude that he [Mr Huepauff] knowingly misled the plaintiff in regard to the issue of obtaining proper consent to the plumbing work. The misrepresentation enables the plaintiff to succeed in its claim for damages for the replacement of all defective, unapproved plumbing and septic tank work. Having found this I need not deal with the claim pursuant to the Misrepresentation Act other than to say that the facts clearly support a verdict in the alternative, were that required.”
The simplistic approach taken by counsel for the defendants overlooks the reality of the situation facing the plaintiff at the time the plaintiff was required to seek approval for the septic system. Neither the plaintiff nor the Council (which was then the authority from which approval was needed) was in a position to know that the system installed was not an all purpose system. The plan at the Council showed an all purpose system. At the relevant time, a number of specific defects within the septic system had been identified which would have required rectification before approval. In the context of approval having been given for an all purpose system, from the perspective of those examining the system, the problems existing with respect to the flow of sullage were problems within the septic system. Mr Adams had discovered that, contrary to the plan approved by the Council, sullage by-passed the septic tank and joined the pipe carrying sewage from the septic tank. He had been unable to find a soakage trench. The investigation by Mr Adams had disclosed that the plumbing work was grossly defective.

Against that background, whichever way the issue was approached, at the time the plaintiff was required to seek approval it was inevitable that Mr Vivian, the Senior Environmental Health Officer for the Alexandrina Council, would require exposure of the entire system and replacement of it. Viewed in this way, the cost of obtaining approval was as claimed by the plaintiff.
In my opinion, the plaintiff proved its case based on the breach of warranty. In addition, in view of the findings of the Magistrate, the plaintiff also made out its case for damages pursuant to s 7 of the Misrepresentation Act 1972.
I turn to the defendants’ contention that the claim is statute barred by the operation of s 73 of the Development Act 1993 (“the Act”). Section 73 is in the following terms:
“Limitation on time when action may be taken
73.    (1)    Despite the Limitation of Actions Act 1936, or any other Act or law, no action for damages for economic loss or rectification costs resulting from defective building work (including an action for damages for breach of statutory duty) can be commenced more than 10 years after completion of the building work.
(2)    This section does not affect an action to recover damages for death or personal injury resulting from defective building work.
(3)    The period prescribed by subsection (1) cannot be extended.”
The contract for sale was signed on 1 October 1993. Settlement occurred on 17 January 1994. As a consequence of notice placed in the Gazette on 27 October 1993, the Development Act came into operation on 15 January 1994.
There is no dispute that the plumbing work under consideration was building work for the purposes of s 73. In essence, the defendants argued that s 73 applied notwithstanding that the plaintiff’s claim was for a breach of warranty. As counsel put it, s 73 extinguishes the remedy, not the right. As the remedy sought was damages for rectification costs resulting from defective building work, the cause of action is barred by s 73. In response, the plaintiff submitted that the claim was not for damages “resulting from defective building work”. The claim was for damages resulting from a breach of a contractual warranty as to approvals or for misrepresentation as to approvals. The Magistrate accepted the plaintiff’s submission that s 73 of the Act did not apply.
The application of s 73 was previously considered in these proceedings by Perry J: Inter-Continental Travels Pty Ltd v Huepauff & Ors (2000) 206 LSJS 307. Upon the application of the defendants, and relying upon the operation of s 73, a Magistrate had dismissed the plaintiff’s action after hearing what amounted to a preliminary argument on a question of law. The plaintiff appealed and the appeal was allowed by Perry J. The defendants submitted before Perry J that both the right and the remedy were extinguished by s 73. His Honour rejected that proposition. He held (p 309):
“In my opinion s 73(1) operates so as to bar the remedy but not the right.”
Perry J observed that he was not purporting to finally rule on the issue of law as further argument and evidence would be necessary before the point could be resolved. However, his Honour’s observations are helpful. He said (p 309):
“If a warranty had been given which expressly referred to the soundness of a building, in my opinion the section is hardly likely to apply so as to put a plaintiff out of court, even if the alleged breach of warranty is as a result of defective building work which had been completed more than ten years before the action was brought.
To give the section such a construction would result in quite bizarre consequences. It would mean on Mr Manetta’s argument that if an express warranty was given as to the soundness of a building as part of a contract of sale, the warranty could not be relied upon as a basis for the award of damages, if the unsoundness was as a result of building work which was more than ten years old. In my opinion, much clearer words in the section would be necessary before it could have such a strange result.”
I agree. I also agree that s 73 operates to bar the remedy, but not the right. Section 73 has no application to a claim for damages resulting from a breach of a contractual warranty as to approvals and consents or for damages for misrepresentation as to approvals and consents.
There is a further obstacle in the path of the defendants’ claim that s 73 is a bar to the plaintiff’s cause of action. Regulation 97 of the Development Regulations 1993 provides that s 73 of the Act does not apply to defective building work carried out before the commencement of the Act. If reg 97 is a valid regulation, s 73 has no application.
Section 108 of the Act provides that the Governor may make regulations for the purposes of the Act. Section 7(1) of the Act provides that, subject to s 7, the Act applies throughout the State. Section 7(3) provides as follows:
“(3) The regulations may provide –
(a)that a specified provision of this Act does not apply, or applies with prescribed variations, to a part of the State specified by the regulations;
(b)that a specified provision of this Act does not apply, or applies with prescribed variations, in respect of a particular class of development, or in any circumstance or situation (or circumstance or situation of a prescribed class), specified by the regulations,
and, subject to any condition to which the regulation is expressed to be subject, the operation of this Act is modified accordingly.”
Counsel for the defendants argued that s 7(3) amounts to an unconstitutional abdication of sovereign legislative power because it confers on the Governor in Council an unlimited discretion to repeal or modify the Act. As a consequence, he contended that s 7(3) and reg 97 are void.
As I have taken the view that s 73 of the Act has no application, strictly speaking it is unnecessary for me to determine this issue. In addition, I was referred to a limited number of authorities. However, in brief I will indicate my views.
There is no doubt that while Parliament may delegate legislative power, it may not abdicate it: Giris Pty Ltd v Federal Commissioner of Taxation (1969) 119 CLR 365 at 373 Barwick CJ. In my opinion, s 7(3) does not amount to an abdication. While the delegation of power is broad, it does not confer upon the Governor in Council “the independent and unqualified authority which is an attribute of true legislative power ...”: Victorian Stevedoring and General Contracting Co. Pty Ltd and Meakes v Dignan (1931) 46 CLR 73 at 102 Dixon J. The legislature has reserved for itself the ability to repeal or qualify s 7. The regulations must be tabled in each House of Parliament within six sitting days after they have been made and Parliament retains the power to disallow any regulation: Subordinate Legislation Act 1978. Section 7 does not purport to create a new legislative body with general legislative authority.
In my opinion reg 97 is valid and precludes the operation of s 73.
An issue was also raised as to whether, independently of reg 97, s 73 had any retrospective operation. Limited submissions were directed to that issue and to the question as to when the plaintiff’s cause of action arose. It is unnecessary for me to resolve these matters.
The Magistrate entered judgment against all defendants who were parties to the contract. The final ground of appeal complains that the Magistrate should have found that neither the second nor the third defendant had committed any breach of contract or other wrong.
The defendants are Mr Huepauff, his wife and his son. All three signed the contract. Clause 1.24 of the contract defined “the vendor” as meaning “the person named and described in Item A of the Schedule”. At Item A in the Schedule, the three defendants were named as the “vendor”.
Notwithstanding the wording of the contract, and without reference to any authority, counsel for the defendants submitted that the warranty should be construed as several rather than joint. In those circumstances, as it was the uncontradicted evidence of Mr Huepauff and the second defendant that neither Mrs Huepauff nor their son had anything to do with the plumbing work or obtaining the necessary consents, the Magistrate should have found that neither the second nor the third defendant had committed any breach of contract. Alternatively, and again without reference to any authority, counsel for the defendants submitted that if the defendants had given a joint warranty, as only one of the defendants knew that building work had been carried out without all necessary consents and approvals having been obtained, none of the defendants were in breach of the warranty. Counsel accepted that such an approach would lead to an absurd result.
In my opinion, there is no ambiguity in the wording of the contract. In particular, there is no ambiguity in the wording of the warranty. The obligations undertaken by the defendants pursuant to the contract were joint obligations. They jointly gave the relevant warranty. In these circumstances, all defendants are liable for a breach by one of them of a contractual obligation. In my opinion there is no substance in this ground of appeal.
The appeal is dismissed.

[2001] SASC 119

20 April 2001