J-Corp Pty Ltd v Gilmour
[2005] WASCA 136
•27 JULY 2005
J-CORP PTY LTD -v- GILMOUR [2005] WASCA 136
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2005] WASCA 136 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | FUL:60/2003 | 13 MAY 2005 | |
| Coram: | STEYTLER P WHEELER JA MCLURE JA | 27/07/05 | |
| 16 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed Cross-appeal allowed | ||
| B | |||
| PDF Version |
| Parties: | J-CORP PTY LTD ROSS STEWART GILMOUR |
Catchwords: | Contract Defective building work Damages Appropriate measure Whether cost of demolition and reinstatement reasonable Turns on own facts |
Legislation: | Trade Practices Act 1974 (Cth), s 52 |
Case References: | Bellgrove v Eldridge (1954) 90 CLR 613 De Cesare v Deluxe Motors Pty Ltd (1996) 67 SASR 28 Jandon Constructions v Lyons [1999] WASCA 310 Ruxley Electronics and Construction Ltd v Forsyth (1996) 1 AC 345 Warren v Coombes (1979) 142 CLR 531 Magistro v Custom Credit Corporation Ltd, unreported; FCt SCt of WA; Library No 920048; 20 February 1992 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : J-CORP PTY LTD -v- GILMOUR [2005] WASCA 136 CORAM : STEYTLER P
- WHEELER JA
MCLURE JA
- Appellant
AND
ROSS STEWART GILMOUR
Respondent
ON APPEAL FROM:
Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA
Coram : MACKNAY DCJ
Citation : J-CORP PTY LTD -v- GILMOUR [2003] WADC 2
File No : APP 137 of 2000
Catchwords:
Contract - Defective building work - Damages - Appropriate measure - Whether cost of demolition and reinstatement reasonable - Turns on own facts
(Page 2)
Legislation:
Trade Practices Act 1974 (Cth), s 52
Result:
Appeal dismissed
Cross-appeal allowed
Category: B
Representation:
Counsel:
Appellant : Mr M D Cuerden
Respondent : Mr S R Sirett
Solicitors:
Appellant : Hotchkin Hanly
Respondent : Wojtowicz Kelly
Case(s) referred to in judgment(s):
Bellgrove v Eldridge (1954) 90 CLR 613
De Cesare v Deluxe Motors Pty Ltd (1996) 67 SASR 28
Jandon Constructions (A Firm) v Lyons [1999] WASCA 310
Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344
Warren v Coombes (1979) 142 CLR 531
Case(s) also cited:
Magistro v Custom Credit Corporation Ltd, unreported; FCt SCt of WA; Library No 920048; 20 February 1992
(Page 3)
1 STEYTLER P: I agree with the judgment of McLure JA and with her conclusion that the appeal should be dismissed, the cross-appeal allowed and that the appellant should pay to the respondent the sum of $66,727.
2 WHEELER JA: I have had the advantage of reading in draft the reasons for decision of McLure JA. I agree with those reasons and have nothing to add.
3 MCLURE JA: The appellant, a builder, constructed a house for the respondent on his land at Chidlow pursuant to a building contract dated 11 April 1996. The appellant sued the respondent in the Local Court for the final progress payment under the building contract and the respondent counterclaimed for damages for, among other things, breach by the appellant of the building contract. The learned trial Magistrate, B A Lane, dismissed the appellant's claim and gave judgment for the respondent on his counterclaim for damages assessed on the need for the house to be demolished and reconstructed (reinstated). The Magistrate delivered her reasons on 24 November 2000.
4 The appellant appealed to the District Court. The learned Judge, Macknay DCJ, concluded that the Magistrate had omitted to make a number of findings relevant to the question of whether it was reasonable that damages be assessed on the basis of demolition and reinstatement. On 13 February 2003 he ordered that the appeal be allowed and the action be remitted to the Local Court for determination by the Magistrate in accordance with his reasons.
5 The appellant appeals from the remittal order on the grounds that the Judge erred in failing to find that the house did not require demolition and in failing to conclude that the Magistrate erred in assessing damages on the basis of demolition and reinstatement.
6 The respondent cross-appeals from the remittal order on the ground that, based on the findings upheld by the Judge, he should have concluded that the Magistrate did not err in her assessment of damages. Understandably, both parties were desirous of this Court finally resolving the question. To that end, the parties agreed that if the appeal is dismissed, the respondent's damages are $66,727 ($82,747, less an unpaid progress payment of $16,020). If the appeal is allowed, the respondent's damages are agreed at $20,960.
7 In the District Court appeal the appellant challenged many of the factual findings made by the Magistrate. It was largely unsuccessful in
(Page 4)
- that endeavour. The focus in this appeal is whether the appellant's breaches of the building contract relating to the footings and the seismic design of the house are capable of supporting and do justify the Magistrate's award of damages.
Background
8 The parties made an agreement on 31 January 1996 for the preparation of plans, including engineer's drawings. The plans agreement provided for "engineer's [footing] detail E2 …". The respondent paid $3100 for those details, which amount was included in the building contract price.
9 The engineer retained by the plaintiff was Mr Purich of Structerre. On 7 February 1996 Mr Purich signed a Certificate of Inspection which stated that the site had been assessed as a Class "S" site and "[a]s such, it is recommended to use the attached footing detail B1 upon normal earthworks, ensuring compliance with the notes and information on the detail". The Certificate also stated, "If clay is encountered the footing detail will need to be amended appropriately." Although clay was encountered, the footing detail was not amended.
10 The B1 footing detail provided for a footing with a depth of 280 mm, a slab thickness of 100 mm, F63 mesh and a layer of MRBL50 masonry reinforcing mesh in the bed joint immediately over door and window head level, continuous throughout the building in both internal and external walls.
11 The E2 footing detail provided for a footing with a depth of 300 mm, a slab of 100 mm and F82 mesh for the slab where (as here) its length exceeds 18 m. F82 mesh comprises a mesh with 8 mm bars spaced 200 mm by 200 mm apart within the concrete. F63 mesh has 6 mm bars spaced at 300 mm by 300 mm apart.
12 The building contract was made on 11 April 1996. It incorporated the B1 footing details (the cost of which was less than half the cost of the E2 details but the contract price was not reduced). The substitution of the B1 footing details for the E2 details was not drawn to the respondent's attention. The Magistrate concluded that the failure to disclose the change constituted misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth).
13 The Magistrate also found that the B1 footing details did not comply with the standard identified by the parties as relevant, namely, Australian
(Page 5)
- Standard 2870.1-1988 (the "Footing Standard"). The purpose of the Footing Standard is to lay down specific designs for footing systems for foundation conditions commonly found in Australia, including in particular, designs for reactive clay sites. It incorporates a system of soil classification taking into account the soil composition found at the site of construction. The Magistrate made an unchallenged finding that the soil on the respondent's site contained some clay and should have been classified as a Class S site. That being the case, the footing design nominated in the Footing Standard (cl 2.1.4) was in line with the E2 details for which the respondent had paid. However, cl 1.1 of the Footing Standard states:
"Provided that the requirements of this Standard are maintained, this Standard shall not be interpreted so as to prevent the use of materials or methods of design not specifically referred to herein."
15 Australian Standard 2870.2-1990 provides guidance on the design of footings by engineering principles and it is expressly noted that the guides should not be used to prevent the use of locally proved designs.
16 The appellant contended at trial and in the District Court appeal that it was not necessary to use the specific design identified in the Footing Standard, that it was open to it to conform with that Standard by the use of a "locally proven design" and that the B1 footing was such a design.
17 The Magistrate did not accept Mr Purich's evidence that the B1 footing detail was a locally proven design and was adequate and safe. She preferred the evidence of the respondent's expert, Mr Ferritto, and concluded the slab design was not adequate for the site.
18 To add insult to injury, the house as constructed did not conform to the B1 footing detail. It provided for a slab thickness of 100 mm throughout its length. The Magistrate said:
"The thickness of the floor slab of the Works was measured at the site of a small hole created in the slab in the kitchen area adjacent to a crack in the slab and was found to have a cross-section of only 75 mm and not the required 100 mm. Even though there was only one measurement taken it can be
(Page 6)
- implied from this inspection that other parts of the slab also have a thickness of 75 mm. I accept the evidence of Mr Ferritto and Mr Jones on this point."
19 A challenge to that finding was dismissed by the Judge. Further, the B1 footing detail provided for a depth of 280 mm whilst the footings in fact had a depth of between 230 mm and 260 mm.
20 At all material times prior to and at the time of the Local Court trial there were cracks in the floor slab and the walls of the house. The respondent's expert, Mr Ferritto, referred to the cracking in a report dated April 1999 and in oral evidence. He described in evidence-in-chief that in 1997 there were three main cracks through the slab varying in width from approximately a millimetre to a millimetre and a half as well as other cracks of less than a millimetre. In his report he noted that the main cracks that were visible at his first inspection in 1997 had been filled with what appeared to be a cement slurry and that the slurry had cracked along the pre-existing cracks. The fresh cracking in the filled areas could have been due to further movement in the slab or shrinking of the cement slurry, he was unable to say which. Mr Ferritto continued in his report:
"We noted that the crack that had commenced in the bathroom at our previous inspection has now traversed the bathroom and cracked the tiles. We were advised that the tiles over the crack had been replaced previously and relaid with a flexible adhesive. In our opinion the repairs have not had the desired effect, as the tiles have cracked again.
We also noted that there were cracks in the internal walls throughout the residence particularly over doors and under and over windows, and also in locations of the cracking to the slab. We did not note any cracks to walls at our previous inspection. The cracks varied in width but were less than 1 [mm] wide …".
21 In evidence-in-chief Mr Ferritto said that the cracked tiles in the bathroom indicated there had been further movement of the slab after the tiles had been relaid. He attributed the cracking in the wall to the inadequate depth of the footing and inadequate reinforcement in the slab. It was his opinion, accepted by the Magistrate, that the appellant should have used F82 rather than F63 mesh.
22 The Magistrate accepted Mr Ferritto's evidence that the construction of the slab to an insufficient thickness contributed to the tendency of the
(Page 7)
- floor slab to crack and that the insufficient footing depth may have contributed to the cracking of the walls and the slab.
23 Turning now to the seismic design. Chidlow is in a seismic zone. Australian Standard AS 1170.4-1993 (the "Earthquake Standard") concerns the designing of structures for earthquake loads to, inter alia, improve the expected performance of structures. The design of structures to the Standard does not necessarily prevent structural and non-structural damage in the event of an earthquake, rather they provide the minimum criteria considered to be prudent for the protection of life by minimising the likelihood of collapse of the structures.
24 Areas are classified according to their "acceleration co-efficient". Chidlow has an acceleration co-efficient of 0.105 and a soil factor of 1 which puts it in design category H2. Pursuant to cl 3.2.2 of the Earthquake Standard, ductile domestic structures of category H2 require no specific earthquake design or structural detailing. Non-ductile domestic structures in that category must be detailed in accordance with cl 3.3. That clause provides that the principal requirement for structural detailing is that all parts of the structure shall be tied together, both in the horizontal and vertical planes, so that forces from all parts of the structure, including structural and non-structural components, generated by earthquake are carried to the foundation.
25 When the appellant applied for a building licence, it submitted drawings from Structerre entitled "Earthquake Design cat. H22 AS 1170.4-1993". The drawing showed various items of reinforcement of the proposed structure ("seismic details"), found by the Magistrate to include:
(a) the placement of various steel columns within the brickwork of the Works;
(b) the placement of steel tie-down rods in the carport roof beams;
(c) the fixing of the roof truss to wooden wall plates;
(d) the placement of steel wires within the brickwork to anchor the said wall plates to the brickwork;
(e) the specification of solid bricks at the tops of walls to anchor the said wires;
(Page 8)
- (f) the placement of horizontal reinforcement of the corners of walls; and
(g) the placement of additional reinforcement in the footing of the Works, including two layers of 3F8 trench mesh joined by ligatures spaced one metre apart.
26 The house as constructed did not contain any of the seismic details. Further, the B1 footing detail specified MRBL50 mesh. The appellant's case was that this mesh would have rendered the structure "ductile" thereby avoiding the need to include the seismic details. Nothing turns on this issue because the MRBL50 mesh was also omitted. The Magistrate found that the failure to include the seismic details and the mesh was a breach by the appellant of the building contract. That finding was not challenged.
27 The Magistrate accepted Mr Ferritto's evidence that the works were non-ductile for the purpose of the Earthquake Standard and as such required the incorporation of seismic details. She continued:
"From the evidence of Mr Ferritto the plaintiff has not provided any of the structural details that would ordinarily be incorporated by an engineer to comply with the Australian Standard such as two layers of reinforcement mesh in the footings, a tie between the footings and slab, adequate anchoring for the walls to the base, the provision of wall plates, adequate connection of the roof to the wall plates, brick column and adequate brick reinforcement.
Once a design departs from the applicable building codes or standards it can be prima facie a faulty design unless it can be shown that the plaintiff conformed to accepted engineering practise [sic]. In this case I prefer the evidence of Mr Ferritto to the evidence of Mr Purich."
28 It was a condition of the building licence for the works the subject of the building contract that "BCA specification B1.3(p) Building to conform to Seismic Zone 1 conditions". The evidence was that Seismic Zone 1 was a reference to the provisions of the Building Code of Australia 1996 which was adopted from 1 July 1997. The Magistrate went on to find that the failure to include the seismic details also resulted in a breach of the Building Code. However, it was conceded in the District Court appeal that this finding was not open and ought not to have been made.
(Page 9)
29 On the issue of the quantum of damages, the Magistrate stated:
"The defendant submitted that based on the evidence before the court that the footings and slab cannot be properly rectified without the demolition of the Works as the steel mesh reinforcement is integral to the slab and footings constructed. The works provided were quite different in character to that called for by the contract and reconstruction is the appropriate remedy."
30 And then later:
"I accept the defendant's submissions that the defendant is entitled to damages based upon a cost of obtaining a house constructed in accordance with the contract, namely a house constructed in a proper and workmanlike manner. To do this, it is my opinion that the appropriate course to take is for the Works to be demolished and reinstated."
31 The District Court Judge concluded that implicit in the Magistrate's finding was a determination that such a course was reasonable in the circumstances. He continued:
"In that regard the learned Magistrate had found that the floor slab and footing design was not adequate for the site and was not persuaded it was 'safe'.
That significant defect was exacerbated, her Worship found, by the appellant's failure to construct the slab even to the standards of that inadequate design.
Cracking to the slab and walls was a likely consequence of that failure.
There was also a failure to include any of the required seismic details.
The appellant had not even included the MRBL50 mesh provided for in the B1 slab and footing detail substituted for the E2 slab and footing detail without the respondent's knowledge.
…
However, it is clear that the learned Magistrate also relied on the absence of the seismic details.
(Page 10)
- The learned Magistrate found that the standard AS1170.4-1993 was applicable, the failure to include the seismic details, or even the MRBL50 mesh, rendering the house 'non-ductile', so that the failure to incorporate the seismic details [b]reached the standard.
There is no appeal from that finding.
The learned Magistrate went on to find that the failure also resulted in a breach of the then existing Building Code of Australia specification B1.3(p), that standard incorporating the Australian standard in certain conditions, and being referred to in the building licence.
It would appear that at trial the learned Magistrate was invited to make that finding by the respondent.
On the appeal, however, the respondent, through counsel, expressly conceded the finding was not open and ought not to have been made.
The issue was material to any decision, and the learned Magistrate apparently treated it as such.
For that reason alone therefore the finding must be set aside.
The question of the effect of the absence of the seismic details on the integrity of the house, in the light of relevant standards, including those in place at the time of the trial, was plainly relevant, and Mr Ferritto gave evidence in relation to that, as did Mr Purich.
It was I think necessary for the learned Magistrate to make a finding in relation to that question, as well as to the other circumstances considered by her to be relevant to her decision that it was reasonable that damages be allowed on the basis of demolition and reconstruction of the house.
Those findings do not appear from the learned Magistrate's reasons.
I consider that it is necessary that the learned Magistrate's finding be set aside for that reason also."
(Page 11)
32 In my view, the Judge erred in concluding that the finding of breach of the Building Code made any material difference to the Magistrate's reasoning or her conclusion. The absence of the finding concerning the Building Code leaves the unchallenged finding that the failure to incorporate the contractually specified seismic details breached the Earthquake Standard.
33 Further, the trial Judge's statement that the Magistrate did not make any finding concerning the effect of the absence of the seismic details on the integrity of the house is not accurate. She concluded that a departure from the relevant Australian Standards results in a prima facie faulty design. Further, it is clear from the Magistrate's reasons that she accepted Mr Ferritto's evidence on the need to comply with the Earthquake Standard. It follows that the house as constructed does not comply with the minimum criteria for the protection of life by minimising the likelihood of its collapse in an earthquake.
34 The Judge concludes that the Magistrate failed to make findings "as to the other circumstances considered by her to be relevant" to her decision that it was reasonable that damages be allowed on the basis of demolition and reinstatement. He does not identify the other circumstances he had in mind or why they were necessary to enable a finding to be made. Moreover, what the Judge should have done was to consider whether, on the basis of the unchallenged findings of the Magistrate and those that survived challenge in the District Court, the proper inference to be drawn was that it was reasonable to award damages on the basis of demolition and reinstatement (see Warren v Coombes (1979) 142 CLR 531). To determine that question, it is necessary to have regard to the relevant legal principles.
Relevant Legal Principles
35 The leading Australian authority on the measure of damages for breach of a building contract is Bellgrove v Eldridge (1954) 90 CLR 613. In that case the builder had substantially departed from the contractual specifications resulting in defective footings and "grave instability in the building". The trial Judge had found that demolition and reinstatement in accordance with the building contract was the only practical solution for producing conformity with the building contract. The builder contended that the correct measure of damages was the amount by which the defective performance diminished the market value of the relevant property (house and land). The High Court rejected this proposition. It
(Page 12)
- referred with approval to the rule stated in Hudson on Building Contracts, 7th ed (1946), p 343 that:
"The measure of the damages recoverable by the building owner for the breach of a building contract is … the difference between the contract price of the work or building contracted for and the cost of making the work or building conform to the contract …".
"The qualification, however, to which this rule is subject is that, not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt."
37 Based on the trial Judge's finding that the only practical method of dealing with the situation was to demolish and reinstate, the High Court held that the usual measure of damages was reasonable. An alternative and less expensive option involving the piecemeal replacement of the foundations was found to be a doubtful remedy. As the High Court noted, to give to the respondent the cost of a doubtful remedy "could not in any sense be regarded as ensuring to her the equivalent of a substantial performance by the appellant of his contractual obligations".
38 A factual scenario at the other end of the spectrum was considered by the House of Lords in Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344. In that case the building contract specified that a swimming pool should have a diving area seven feet six inches deep. On completion the pool was suitable for diving but the diving area was only six foot deep. There was no diminution in value of the relevant property occasioned by the breach. The estimated cost of rebuilding the pool to the specified depth was £21,560. The House of Lords held that the cost of reinstatement was out of all proportion to the benefit to be obtained and was unreasonable.
39 A factual scenario between those two extremes was considered by the Full Court in Jandon Constructions (A Firm) v Lyons [1999] WASCA 310. As a result of inadequate and wrongly designed footings for the soil conditions, there was movement in the foundations causing extensive and significant cracking in the house, displacement (changes in plane) in the walls, wall tilting and difference in floor levels. Damages
(Page 13)
- were awarded (and upheld) on the basis of the cost of demolition and reinstatement.
40 Relying on these authorities, the appellant contended that damages for reinstatement were only available where there were structural defects. The authorities do not support that proposition. The builder is obliged to pay the cost of making the work conform to the building contract if that is a reasonable course to adopt. What is reasonable will depend on the particular circumstances, including a careful consideration of what was contracted for and what has been lost: De Cesare v Deluxe Motors Pty Ltd (1996) 67 SASR 28 at 35 per Doyle CJ.
Analysis
41 The appellant contends that it is unreasonable to require it to pay the cost of making the house conform to the building contract. It says damages should be assessed on the basis of the cost to carry out the rectification works identified in Mr Ferritto's April 1999 report which were costed (and agreed by the parties) at $36,980 from which is to be deducted the unpaid progress payment of $16,020. Although not formulated in these terms, the appellant's contention must be that the rectification works proposed by Mr Ferritto constitute a practicable method of producing contractual conformity in substance or effect.
42 In his April 1999 report Mr Ferritto recommends rectification work as follows:
"1 Epoxy resin injection of the cracks to the slab. … Once the cracks are stable and sealed the floors can be tiled over as required. We suggest that you try to line up the edge of the tiles along the crack wherever possible so that if cracking does occur it will occur in the grout and not through the tiles. We recommend that all the tiles be bedded on a flexible adhesive to allow for some minor movement of the slab and hence tile. … We would recommend that you use a carpet or similar floor treatment to cover over the cracks so that the cracks will not be transferred through the floor treatment as may be the case with tiles or brittle floor treatments. The cost of replacing the slab would involve the demolition of the residence and reconstruction of the residence to the appropriate standard.
(Page 14)
- 2 Install the cavity column within the brickwork cavity in the section of brickwork between the kitchen window and family room sliding door.
3 Provide the 10 diameter tie down rods for the beams in the carport.
4 Remove the roof and top two courses of brickwork and provide top two courses of solid brickwork throughout the residence. Provide brickwork reinforcement to the top two courses of brickwork at the same time.
5 Provide timber wall plates with masonry anchors at 1800 maximum centres fixed into the second top course of brickwork.
6 Ensure all the tie down straps are tensioned and adequately connected to the trusses.
…
The above works will still not entirely bring the residence up to the requirements of the BCA as the reinforcement in the footings will not have two layers of two 12 diameter bars, tied with R8 ligatures at centres not greater than 2.5 times the depth of the footings. If this work was required to be performed then the residence would be required to be demolished and reconstructed.
In our opinion however once this work has been completed the residence should be structurally adequate. We however do not provide any guarantee that further cracking to the residence will not occur."
43 It is apparent from Mr Ferritto's report that there may be further cracking notwithstanding his recommended rectification work. That is implicit in the recommendation to use soft floor coverings. Further, the Judge concluded that, having regard to the appellant's breaches of the Trade Practices Act, the Magistrate could properly have regard to the inadequacy of the B1 footing detail for the site in determining whether it was reasonable to award demolition and reinstatement costs. There is no challenge to the Judge's conclusion on that matter. I assume it is on the basis that, but for the misrepresentation, the building contract would have provided for the E2 footing detail.
(Page 15)
44 I commence with the cracking. But for the appellant's breaches (statutory and contractual) the house would have footings that comply with the E2 footing detail which is in accordance with the Footing Standard. The Footing Standard is designed to ensure "that acceptable probabilities of serviceability and safety are achieved during the design life of the building". The B1 footing detail is inadequate for the soil conditions. Not only is the B1 footing detail inadequate, the footings as constructed are reduced in thickness and in depth. The totality of these inadequacies caused or contributed to the cracking of the slab and the walls of the house. The weight of expert opinion is that the cracking is not structural in the sense of undermining the stability of the house. Even so, cracks appeared and continued to appear, including in areas where repairs had previously been effected. It is clear from Mr Ferritto's report that there is a real risk of continued cracking sufficient to justify a recommendation that soft floor coverings be used in the house. In those circumstances, the use of epoxy resin in the existing cracks is a doubtful remedy in the sense it cannot be regarded as ensuring the equivalent of substantial performance by the appellant of its contractual obligations. It leaves the respondent to carry the acknowledged risk of continued cracking of the house.
45 Turning to the seismic details. Items 2 - 6 of the Mr Ferritto's recommendations concern the seismic design of the house. The appellant relied on Mr Ferritto's evidence in re-examination to suggest that his recommendations would bring the house up to standard. That evidence is inconsistent with his April 1999 report. In any event, Mr Ferritto was referring in re-examination to the standard in the Building Code, not the Earthquake Standard. He was asked:
"… [I]n your opinion, has the house been built in accordance with the requirements of seismic zone 1?---No. Again, the building licence required the building to be built in accordance with seismic zone 1, but I don't believe that was the case.
And the various rectification points that were put in your report in April 1999 would bring it up to that standard?---I believe they would."
46 The contractual drawings, prepared by the appellant's expert, Mr Purich, were in accordance with the requirements of the Earthquake Standard. None of the seismic details were included in the house as constructed. The Earthquake Standard sets out minimum detailing requirements for structures in relation to earthquakes loads. The proposed
(Page 16)
- rectification works do not reach the minimum requirements of the Earthquake Standard which requires the placement of additional reinforcement in the footings, including two layers of 3F8 trench mesh joined by ligatures spaced one metre apart which Mr Ferritto expressly acknowledged would require the demolition and reinstatement of the house. Although Mr Ferritto states in his report that if the rectification work is completed, the house "should be structurally adequate", the house has a lower standard of earthquake protection than that required in the building contract or by the Earthquake Standard.
47 I am satisfied that the rectification works proposed by Mr Ferritto do not give the respondent the equivalent of substantial performance of the building contract. They are not a practical alternative solution. The appellant seeks to transfer to the respondent the risk of continued cracking of the house and the reduced protection in an earthquake. Reasonableness does not require the respondent to carry those risks. The cost of reinstatement is not out of proportion to the benefit to be obtained. The appellant says the respondent will receive a "windfall" if he chooses not to demolish and rebuild. That is not an impediment to recovery: Bellgrove at p 620; De Cesare at p 34 - 35. In any event, the departures from the contractual requirements are of such a nature and magnitude that they are more likely than not to adversely affect the market value of the respondent's property.
48 I am satisfied that the Magistrate was correct in concluding that the appellant should bear the cost of bringing the works into conformity with the building contract which requires demolition of the house and reinstatement. Accordingly, I would dismiss the appeal, allow the cross-appeal and order that the appellant pay to the respondent the sum of $66,727.
9
4
1