Janbar Pty Ltd v Arborcrest Pty Ltd

[2020] FCA 1519

Federal Court of Australia

Janbar Pty Ltd v Arborcrest Pty Ltd [2020] FCA 1519

File number:

SAD 148 of 2018

Judgment of:

WHITE J

Date of judgment:

21 October 2020

Catchwords:

CONTRACTS – breach of implied statutory warranties under s 32(2) of the Building Work Contractors Act 1995 (SA) – consideration of the jurisdiction of the Federal Court of Australia under s 40 – whether window and door system installation was fit for purpose under s 32(2)(f) – apportionment of liability and contributory negligence.

CONSUMER LAW – misleading or deceptive conduct under s 18 of the Australian Consumer Law – whether alleged representations were made and misleading or deceptive.   

Legislation:

Australian Constitution ss 75, 76, 77

Australian Consumer Law ss 18, 57, 236

Competition and Consumer Act 2010 (Cth) ss 87CB, 87CD, 137B

Evidence Act 1995 (Cth) s 46

Federal Court of Australia Act 1976 (Cth) s 19

Judiciary Act 1903 (Cth) s 39B

Trade Practices Act 1974 (Cth) s 74(2)

Acts Interpretation Act 1915 (SA) s 34

Building Work Contractors Act 1995 (SA) ss 3, 32, 37, 40

Development Act 1993 (SA) ss 4(1), 45(2), 67, 72

Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) ss 3, 7, 8

Magistrates Court Act 1991 (SA) ss 3, 8, 10, 38

Sale of Goods Act 1895 (SA) s 15

Development Regulations 2008 (SA) regs 4(1), 83

Planning, Development and Infrastructure (General) Regulations 2017 (SA)

Cases cited:

Australian Competition and Consumer Commission v Dukemaster Pty Ltd (ACN 050 275 226) [2009] FCA 682

Australian Competition and Consumer Commission (ACCC) v Coles Supermarkets Australia Pty Ltd [2014] FCA 634; (2014) 317 ALR 73

Australian Competition and Consumer Commission v Metcash Trading Ltd [2011] FCAFC 151; (2011) 198 FCR 297

Badger v John Kagelaris Pty Ltd [2019] NSWSC 1792

Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; 218 CLR 592

Carter v Mid‑Murray Council [2007] SASC 145; (2007) 97 SASR 462

CGU Insurance Ltd v Blakeley [2016] HCA 2; (2016) 259 CLR 339

Cirocco Constructions Pty Ltd v Clarke [2015] SADC 98

Commissioner of Railways v Ruprecht (1979) 142 CLR 563

Comyn Ching & Co Ltd v Oriental Tube Co Ltd (1981) 17 BLR 47

Drummond v Van Ingen (1887) 12 App. Cas. 284

Duthy Homes Pty Ltd v Tincknell & Tincknell [2017] SADC 133

Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640

Fencott v Muller [1983] HCA 12; (1983) 152 CLR 570

GB Energy Ltd v Protean Power Pty Ltd [2009] WASC 333

GH Myers & Co v Brent Cross Service Co [1934] 1 KB 46

Grant v Australian Knitting Mills Ltd [1936] AC 85

Griffiths v Peter Conway Ltd [1939] 1 All ER 685

Hadley v Baxendale (1854) 9 Ex 341; (1854) 156 ER 145

Helicopter Sales (Australia) Pty Ltd v Rotor‑Work Pty Ltd [1974] HCA 32; (1974) 132 CLR 1

Hoad v Scone Motors Pty Ltd [1977] 1 NSWLR 88

Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553

Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10; (2013) 247 CLR 613

Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313

Ingham v Emes [1955] 2 All ER 740

Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110

Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298

Medlin v State Government Insurance Commission [1995] HCA 5; (1995) 182 CLR 1

Moriatic Pty Ltd v Gordon [2007] NSWSC 5; (2007) 13 BPR 24,713

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104

Parkdale Custom Built Furniture Proprietary Ltd v Puxu Proprietary Ltd [1982] HCA 44; 149 CLR 191

Peters v CW McFarlang Floor Servicing Ltd [1959] SASR 261

Prior v McManus Childs Ltd [1967] 3 All ER 451

Rana v Google Inc [2017] FCAFC 156; (2017) 254 FCR 1

Re Wakim; Ex parte McNally [1999] HCA 27; (1999) 198 CLR 511

Richard Roberts Holdings Ltd v Douglas Smith Stimson Partnership (No 2) (1989) 46 BLR 50

Taylor v Crossman (No 2) [2012] FCAFC 11; (2012) 199 FCR 363

Von Stanke v Northumberland Bay Pty Ltd [2008] SADC 61

Watts v Rake (1960) 108 CLR 158

Division:

General Division

Registry:

South Australia

National Practice Area:

Commercial and Corporations

Sub-area:

Commercial Contracts, Banking, Finance and Insurance

Number of paragraphs:

599

Date of last submissions:

20 September 2019

Date of hearing:

17, 19-21, 24 and 25 June, 10-12 and 20 September 2019

Counsel for the Applicants and Cross-Respondents :

Mr M Hoile

Solicitor for the Applicants and the Cross-Respondents:

Hackett Lawyers

Counsel for the Respondents and Cross-Claimant:

Mr R Ross-Smith

Solicitor for the Respondents and the Cross-Claimant:

FBR Law

ORDERS

SAD 148 of 2018

BETWEEN:

JANBAR PTY LTD (ACN 007 647 252)

First Applicant

COREY JOHN AHLBURG

Second Applicant

AND:

ARBORCREST PTY LTD (ACN 065 391 808)

First Respondent

PAUL PARISI

Second Respondent

AND BETWEEN:

ARBORCREST PTY LTD (ACN 065 391 808)

Cross-Claimant

AND:

JANBAR PTY LTD (ACN 007 647 252)

First Cross-Respondent

COREY JOHN AHLBURG

Second Cross‑Respondent

order made by:	WHITE J
DATE OF ORDER:	21 October 2020

THE COURT ORDERS THAT:

1.The parties are, by 28 October 2020, to confer with a view to reaching agreement on the issues of interest, costs and the appropriate form of orders.

2.In the event of agreement, the agreed minutes of orders are to be provided to the Associate of Justice White by 29 October 2020, and the orders will be made in Chambers.

3.In the absence of agreement, the Applicants are by 3 November 2020, to file and serve their proposed minutes and an outline of submissions in support and the Respondents are by 6 November 2020 to file and serve their proposed minutes and an outline of submissions in support.

4.The outlines of submissions are not to exceed five pages.

5.Unless the parties indicate in their outlines of submissions that they wish to be heard orally, the Court will determine the remaining issues on the papers.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

WHITE J:

Introduction	[1]
Factual setting	[10]
The Causes of Action	[44]
Breach of contract	[45]
Misleading or deceptive conduct	[46]
Negligence	[48]
Negligent Misstatement	[49]
The scope of the applicants’ claim	[50]
The witnesses	[52]
The wind rating for the Property	[73]
The Hafele/HAWA Variotec 150/GV bi-fold door system	[83]
The Alspec Hawkesbury bi-fold door system	[86]
Meetings with Mr Parisi	[88]
Discussions at the First Meeting	[104]
The involvement of Mr Hodgson	[116]
The Arborcrest-Hodgson Meeting	[118]
The Third Meeting	[134]
The Fourth Meeting	[135]
The Hafele SA Showroom Meeting	[136]
The Hodgson Site Meeting	[140]
The Hodgson email	[145]
Findings concerning the pre-contractual meetings	[154]
Strip Drains	[174]
The fall of the first floor balcony	[198]
The problems with the Hafele doors	[200]
The replacement of the Hafele doors with Alspec doors	[211]
Inappropriate use of Hafele doors	[223]
The replacement of the Hafele doors and contract variation	[231]
The problems with the Alspec doors	[239]
Mr Ahlburg’s evidence	[242]
Mr Jovanovic’s evidence	[251]
Mr Burdett’s evidence	[257]
Mr Parisi’s evidence	[261]
Conclusion regarding the Alspec doors	[268]
Breach of contract	[270]
The source of the written contract terms	[274]
Identifying the terms of the contract	[278]
The statutory warranties claim	[283]
The allegations of breach	[287]
The jurisdiction of the Federal Court with respect to the warranties under the BWC Act	[288]
The submission concerning sale by sample	[318]
The s 32(2)(f) warranty - fitness for purpose	[328]
The s 32(2)(c) warranty - compliance with statutory requirements	[342]
The s 32(2)(a) warranty - performance to accepted trade standards	[372]
The Hafele doors were not fit for purpose	[374]
The Alspec doors were not fit for purpose	[380]
Apportionment of liability	[383]
Contributory negligence	[397]
The caulking of the junction between the sills and the tiles	[413]
The absence of a hob, set-down and drainage system	[428]
Absence of head and jamb flashings	[441]
Summary on contributory negligence	[470]
The misleading and deceptive conduct claim	[472]
Misleading and Deceptive Conduct – general principles	[480]
Were the pleaded representations made?	[481]
Negligence and negligent misstatement	[491]
The claim for replacement of the Alspec windows	[492]
The shutters	[520]
Other remedial work	[524]
The loss of rent claim	[532]
The claim	[532]
The evidence	[535]
The defence to the loss of rental claim	[541]
Consideration of the loss of rental claim	[542]
Failure to mitigate	[569]
Betterment	[578]
Deduction for the cost of KRI installing drains	[585]
Conclusion on damages before reduction for contributory negligence	[587]
The reduction for contributory negligence	[588]
Summary and conclusions	[596]

Introduction

1. The applicants in these proceedings, Janbar Pty Ltd (Janbar) and Corey Ahlburg, are the owners of the property at 12 Maidencombe Drive Moana in South Australia (the Property).  It is a beachfront property located on an escarpment with direct exposure to Gulf St Vincent.

2. In 2014 and 2015, the applicants constructed a three storey luxury home on the Property.  They contracted with the first respondent, Arborcrest Pty Ltd (Arborcrest) to design, supply and install external windows and bi‑fold glass doors (defined in the pleadings as the “Arborcrest Work”).  The doors were 3 m in height so as to take advantage of the available views.  Several of the windows were of the same height.

3. The second respondent, Mr Parisi, is (and was at material times) a director of Arborcrest and was personally engaged in its business.

4. Arborcrest installed the doors and windows in December 2015.  The doors were ““Hafele” Variotec Frameless Bi-Fold doors” (the Hafele doors).  The windows were an “Alspec Hunter Fixed Window System” (the Alspec windows).  The applicants found that both the Hafele doors and the Alspec windows were not waterproof as rainwater penetrated the home.  They also complained that the windows and doors were not adequate having regard to the wind strengths to which the property is subject.

5. During 2016, Arborcrest carried out remedial work.  This included replacing (at its own expense) the Hafele doors with “Alspec Hawkesbury Framed Bi-Fold doors” (the Alspec doors).  The applicants claim that these remedial works were unsuccessful. 

6. In March 2017, the applicants engaged another supplier, Maximum Trading Pty Ltd trading as KR Installations (KRI), to replace the bi‑fold glass doors with Schüco sliding glass doors (the Schüco doors).  KRI also replaced some of the windows.  The applicants are satisfied with the Schüco doors and the Schüco windows.

7. In these proceedings, the applicants seek to recover from the respondents: 

   (a)the sum of $191,711 paid to KRI in March 2017 in respect of the replacement and repair work which it carried out;

   (b)the sum of $249,681.74 which the applicants claim may be necessary in respect of further remedial work;

   (c)the sum of $15,149 paid to A & J Shutters Pty Ltd in February 2017;

   (d)other costs totalling $22,286 in respect of the remedial work; and

   (e)damages in respect of the lost opportunity to obtain income from the rental of the Property. 

8. In [23] of the Amended Statement of Claim (ASC) the applicants seek an order that the respondents account for the money which they received for the disposal of the Hafele doors and windows, which they achieved by selling those items to a neighbour of the Property, and reimburse that sum to them.  However, this claim was not pursued in the trial.

9. Arborcrest filed a cross‑claim asserting a quantum meruit in respect of additional works it claimed to have performed in 2016 and early 2017.  However, no party (but particularly the respondents) made any reference to the cross‑claim at the trial or in the final submissions.  The respondents did not lead evidence to support the claimed quantum meruit, although there was some evidence directed to some aspects of the work pleaded to support the claim.  The respondents made no reference to the cross‑claim in their opening submissions at trial or in their list of trial issues.  Item 52 in the Respondents’ Statement of Issues filed on 15 May 2019 (one month in advance of the trial) was “Counterclaim”.  However, the Respondents’ Written Outline of Opening Submissions filed on 14 June 2019, while referring to every other issues in the Statement of Issues filed on 15 May 2019, omitted any reference to the cross‑claim or counterclaim.  In all these circumstances, I have taken the cross‑claim to have been implicitly abandoned.

   Factual setting

10. In 2013, the applicants commenced the design of a three storey luxury home on the Property.  The undercroft was to contain garages.  The next two storeys were to contain the living area.  The applicants intended that the home, being on a rise and overlooking the sea to the west and north, would take advantage of the views over Gulf St Vincent.  They planned, accordingly, that the home would have floor to ceiling glass doors and fixed windows on its western and northern sides on both the ground and first floor levels.  For this purpose they wished to have bi‑fold doors, rather than fixed doors.

11. The applicants retained Red Building & Landscapes Pty Ltd trading as Saralee Aufderheide Architects to produce design and construction drawings.  Saralee Aufderheide is the director of that firm.  The terms of the retainer of Saralee Aufderheide Architects were not in evidence and it is not possible to be certain of the precise scope of works undertaken by Ms Aufderheide. 

12. On 17 October 2013, the first applicant (Janbar) entered into a building contract with Felmeri Homes Pty Ltd (Felmeri Homes) for the construction of the home.  It was not suggested that the fact that Mr Ahlburg was not a party to the building contract had any significance in the trial.  The contract price was $1,545,000 inclusive of GST.

13. Ms Aufderheide did issue construction drawings and instructions to Felmeri Homes but Mr Ahlburg acknowledged that she had not been appointed as the administrator of the building contract with Felmeri Homes.

14. Construction of the home commenced on 10 January 2014.

15. On 29 June 2014, Ms Aufderheide issued a written instruction to Felmeri Homes directing it to “remove the supply of the windows and glazed doors from the contract”.  Ms Aufderheide’s direction referred to Felmeri Homes giving Janbar a credit of $67,000 in respect of the items which it was no longer to supply, but it seems that negotiation concerning the amount of the credit continued for some time thereafter.

16. Thereafter, Mr Ahlburg attended personally to the procurement of the windows and doors.

17. On 2 October 2014, Mr Ahlburg obtained a quotation from ReliableGlass of $149,130 for the supply and installation of doors and windows to a maximum height of 3 m.  The quotation was for the supply of top-hung bi-fold glass doors.  The applicants did not proceed with that quotation. 

18. On 10 October 2014, Arborcrest (via Mr Parisi) provided the applicants with a quotation of $158,609 inclusive of GST for framed multi-fold glass doors and fixed windows.  The applicants did not accept that quotation either.

19. In evidence in chief, Mr Ahlburg said that he obtained quotations at that time by sending the architectural drawings and council design requirements to various glass companies via email with a request that they provide a quotation.  In his cross-examination, Mr Ahlburg accepted that he had telephoned Mr Parisi in September or October 2014 with a request for a quotation.  Nothing turns on that difference, but I am inclined to think that the latter account is more likely to be correct.

20. Although the quotations from both ReliableGlass and Arborcrest were for folding, rather than fixed doors, Mr Ahlburg said, and I accept, that at the time he sought the quotations in October 2014 he was still exploring his options with respect to the doors and windows, and had not made a final decision.

21. In February and March 2015, meetings involving at least Mr Ahlburg and Mr Parisi occurred at the showroom of Arborcrest at Payneham Road, Stepney.  There was disagreement between the parties as to the number of meetings and the attendees at those meetings, and it will be necessary to return to make findings concerning them.  It seemed, however, to be common ground that Mr Ahlburg’s father, Russell Ahlburg, had attended the first of the meetings.  I am satisfied that Mr Nicholas Hodgson from Hafele South Australia (Hafele SA) was an attendee at one of the meetings.  At an early stage Mr Parisi informed Mr Ahlburg that the maximum height of the glass doors which could be provided was 3 m.  This was a disappointment to Mr Ahlburg as the then planned height from floor to ceiling was 3.2 m.  After some discussion, the applicants resolved to have a horizontal steel beam inserted into the construction so as to reduce the door height to 3 m and to have fixed windows in the space between the beam and the ceiling. 

22. The meetings resulted in Arborcrest (by Mr Parisi) providing the applicants on 26 February 2015 with a quotation of $93,880 for the supply and installation of Alspec brand windows.

23. On 16 March 2015, Ms Aufderheide issued an instruction to Felmeri Homes with respect to the installation of the horizontal steel beam, and at the same time provided revised drawings reflecting this change.

24. On 23 March 2015, Arborcrest (via Mr Parisi) provided the applicants with a quotation of $191,889 inclusive of GST for the supply and installation of six Hafele doors (the 23 March Quotation).  Mr Hodgson described the Hafele Variotec system as “a semi‑frameless sliding door system which can be adapted to just about any opening, [but] usually used for commercial and high end residential applications”.  He said that a company known as HAWA was the manufacturer of the Variotec system and that Hafele was its international distributor. 

25. Further negotiation occurred, during the course of which Mr Ahlburg requested Arborcrest to separate out the supply and installation costs.  It seems that this was related to Mr Ahlburg’s negotiations with Felmeri Homes concerning the credit to be allowed on account of the supply and installation of the doors and windows having been removed from its scope of works.

26. Subsequently, on 31 March 2015, Arborcrest provided two quotations with respect to the Hafele doors: one relating to the supply ($118,209) and the other relating to the installation ($42,680).  The latter was in the name of Felmeri Homes, even though it had not requested the quotation.  By a separate email of 31 March 2015, Mr Parisi provided the following explanation of the breakdown of the two quotations:

Supply of the six Hafele doors	$118,209
Cost of installation	$42,680
Cash payment	$25,000
Discount	$6,000
Total (inclusive of GST)	$191,889

1. As is apparent, with the exception of the discount of $6,000, the two quotations of 31 March represented an apportionment of the quotation of 23 March into supply and installation costs.  Mr Parisi said that he had done this at the request of Mr Ahlburg.  I am satisfied that it was never intended that Felmeri Homes would contract with Arborcrest with respect to the installation of the Hafele doors and windows, and that it did not do so.

1. In his evidence, Mr Ahlburg explained that the discount of $6,000 was on account of him paying Arborcrest $25,000 of the total amount in cash.

2. The applicants accepted the quotations of 31 March 2015 and it was common ground that they had paid Arborcrest a total of $160,889 in addition to the $25,000 cash payment. 

3. On 4 May 2015, Ms Aufderheide issued another instruction to Felmeri Homes directing it to refer to documents provided by PT Design (a structural engineering firm) in relation to the provision of additional structural steel to support the change in the selection of the Hafele doors. 

4. In early June 2015, the applicants terminated their retainer of Ms Aufderheide.  Mr Ahlburg said that he had discharged Ms Aufderheide because “she was overcharging and under-delivering in her role”.  I make no finding as to whether that view was justified.  Ms Ahlburg then retained another architect, Rolf Proske, the principal of Proske Architects, to provide architectural services in relation to the remaining construction work. 

5. In approximately August 2015, the applicants also terminated the contract with Felmeri Homes.  Again, Mr Ahlburg considered that that firm was “overcharging and under-delivering”, as well as making mistakes.  I make no finding as to whether those views of Mr Ahlburg were justified.  Having terminated the contract with Felmeri Homes, Mr Ahlburg then acted as his own building manager and dealt with the trade contractors.  This included organising the sequence with which they came on site.

6. The precise scope of Mr Proske’s retainer was not entirely clear.  Mr Proske said that he had not been engaged as a project manager and, in particular, had not been engaged in the programming of the works or the coordination of the various trades. Mr Ahlburg acknowledged that Mr Proske had not been engaged as contract administrator or site superintendent.  After the termination of the Felmeri Homes contract, it had been Mr Ahlburg who had attended to those matters.  Of particular relevance presently, Mr Proske was not responsible for the design of the doors or windows.  He made it plain to Mr Ahlburg that Proske Architects were not preparing “a window and door schedule”.  He said, and I accept, that Arborcrest had been advised that was so and were “okay with that”.  As part of his work Mr Proske did check the work performed already against the “for construction” drawings and the specifications and provided new drawings when necessary.  Mr Proske said, and I accept, he had become involved in suggesting sequencing of work in the construction, but not in “actioning” the sequencing.

7. After the engagement of Mr Proske, construction work was put on hold while Proske Architects familiarised themselves with the existing position, carried out checks, prepared further construction drawings and liaised with some suppliers.

8. Installation of the windows and doors commenced in November 2015 and was completed by Christmas.  Arborcrest, by its contractors, installed six Hafele doors: three on the ground floor and three on the first floor.  One of the first floor doors was a multi‑fold window above a bench top.  When Arborcrest completed the installation, some work remained to be performed.  These included the fitting of seals.  Further, because the floor tiles had not been placed at that time, some final adjustments and the like could not be completed.  A consequence was that the door and window openings were not weather proof.

9. The applicants paid for the work carried out by Arborcrest in November and December 2015.

10. During 2016, Mr Ahlburg noted that, during even light storms, rainwater “literally just poured in” through the doors.  He recorded this by taking videos and photographs.  Mr Ahlburg regarded some of the workmanship as “terrible” because the doors were not exactly vertical and were unstable because of faults in the locking mechanisms.  Mr Ahlburg said that he contacted Mr Parisi about these problems on numerous occasions.  He also said that from time to time Mr Parisi sent workers to check the position but the work which they did was of a minor kind, such as fitting duct tape. 

11. In December 2016 and January 2017, following agreement between Mr Ahlburg and Mr Parisi, Arborcrest replaced the Hafele doors with Alspec Hawkesbury doors.  These are a form of bi‑fold door.  Arborcrest carried out this work at its own expense.  While the period between the commencement and conclusion of the installation was five weeks, approximately two and a half weeks was attributable to the Christmas shutdown.  Arborcrest completed some final adjustments and sealing in relation to that work on 2 February 2017.

12. Mr Ahlburg remained dissatisfied.  In particular, he noticed that during stormy weather on 13 and 19 January 2017 water continued to come into the house.  On 23 January 2017, Mr Ahlburg’s lawyers, Hackett Lawyers, gave notice of a claim to Arborcrest.

13. Mr Proske then referred Mr Ahlburg to KRI.  Mr Burdett inspected the property on or about 27 February 2017 and, on 5 March 2017, provided a quotation for the replacement of five Alspec doors as well as three windows.  The amount of the quotation was $181,138.10 inclusive of GST.  The applicants accepted the KRI quotation with respect to the replacement of the Alspec doors and in June 2017, KRI replaced those doors with Schüco doors.  As part of that work, KRI cut out a channel about 160 mm wide and 90 mm deep in the floor immediately under the doors on both the ground and first floors.  Mr Burdett inserted drainpipes (about 40 mm in diameter) and waterproofing into the channel.  On the first floor, these drainpipes drained water through the ceiling space into a stormwater pipe.

14. The Schüco doors have been effective in keeping out the wind and rain.

15. In December 2017, the applicants accepted the quotation of $15,014 plus GST by KRI for the replacement of the three highlight windows with Schüco windows.  Mr Ahlburg said that he had replaced those windows because they were leaking.

16. The applicants would like to replace the remaining Alspec windows because they too are leaking.  They have received a quotation from KRI for $249,681.74 for this work.  Mr Ahlburg said that he has not yet accepted this quotation because he cannot afford it.  It is this work which is the subject of the applicants’ claim with respect to future remedial work.

    The Causes of Action

17. The applicants sue the respondents on four causes of action:

    (a)breach of contract, in particular breach of six warranties implied into the contract with Arborcrest by s 32 of the Building Work Contractors Act 1995 (SA) (the BWC Act);

    (b)misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law (ACL) in Sch 2 of the Competition and Consumer Act 2010 (Cth) (the CC Act);

    (c)negligence in the design, supply and installation of the Arborcrest work;

    (d)negligent misstatement in the making of the representations on which the applicants relied for the misleading or deceptive conduct claim.

    Breach of contract

18. This was the principal cause of action on which the applicants relied. Ultimately, it rested on the warranties implied by the BWC Act.

    Misleading or deceptive conduct

19. The applicants allege that Mr Parisi had represented orally in February 2015 that he and Arborcrest were able to design, supply and install glass panels and frameless bi-fold glass doors at the Property which were waterproof, which had a wind rating adequate and suitable for the Property, and which would prevent any water ingress into the house.

20. The applicants allege that these representations were misleading or deceptive in contravention of s 18 of the ACL. By way of particulars of that allegation, the applicants rely on the same matters on which they rely for their allegations of breach of contract.

    Negligence

21. The applicants allege that the respondents were negligent in their design, supply and installation of the Arborcrest work.

    Negligent Misstatement

22. The applicants allege that the respondents “made negligent misstatements” in making the representations on which the applicants rely for their misleading or deceptive conduct claim.

    The scope of the applicants’ claim

23. Counsel for the respondents noted that the applicants’ claims are confined to a claim for the recovery of damages for “defective glass doors and windows designed, supplied and installed at the applicants’ house”.  Counsel submitted that the claim being confined in this way meant that the respondents could not be liable for the cost of retrofitting a plumbed strip drain.

24. I agree that the applicants make their claims in contract, negligence and for misleading and deceptive conduct on the basis of the representations of the respondents, and Arborcrest’s contract to “design, supply and install glass panels and frameless bi‑fold glass doors”.  As will be seen, I am also satisfied that the installation of strip drains was not an incident of the work to be performed by Arborcrest; it was instead the responsibility of the applicants.  The consequence is that it is the applicants who must bear responsibility for the absence of strip drains on the first floor balconies and for the positioning of the strip drains on the ground floor.  This means that, even if otherwise successful, the applicants should not be able to recover from the respondents the cost of the work performed by KRI in installing the drains. 

    The witnesses

25. Mr Ahlburg gave evidence at the trial.  He was the person who made the day to day decisions concerning the construction of the home and it is evident that it was very much his project.  In addition, the applicants led evidence from Mr Burdett; from Mr Proske; from Mr Jim Jovanovic, the director of Jovanovic Architecture who gave evidence of an expert kind following his inspection of the Property; and from Mr Nicholas Roach, an engineer who gave expert opinion evidence concerning aspects of the construction of door and window systems at the Property.

26. Mr Parisi gave evidence.  In addition, the respondents led evidence from Mr Hodgson, formerly of Hafele SA, and expert evidence from Mr Anthony Gramlick and Mr Bassam Deek.  Both Mr Gramlick and Mr Deek are engineers.

27. Mr Ahlburg and Mr Parisi were the principal witnesses on each side.  I did not regard the evidence of either as being reliable.

28. Mr Ahlburg was 46 years old when he gave evidence.  He is a qualified locksmith and his work history includes periods as a restauranteur, financier and finance broker.  Mr Ahlburg described himself as being “a very bad reader” and “almost dyslexic”.  Much of his evidence was generalised and reconstructed.  It revealed that, in many respects, Mr Ahlburg does not have good attention to detail, especially for detail contained in documents.  There were many parts of Mr Ahlburg’s evidence, including on important matters, on which he said he had no memory.  In many instances he could recall details only of matters which suited the applicants’ claims.  I regarded parts of his evidence as unconvincing.  I had the firm impression that Mr Ahlburg has a tendency to focus more on matters of appearance than he does on matters of detail and underlying substance.  Accordingly, I have significant reservations about much of Mr Ahlburg’s evidence.  That does not mean, however, that I am not willing to accept any of his evidence and there are some matters upon which I do accept his evidence.

29. It is appropriate to refer expressly to one particular submission of the respondents concerning Mr Ahlburg’s credibility.  They contended that Mr Ahlburg had not told the Onkaparinga Council honestly of his intended use of the Property.  Counsel made this submission by reference to correspondence which passed between Ms Hockey, the Development Officer (Planning) at the City of Onkaparinga, and Ms Aufderheide.  By an email of 4 December 2013, Ms Hockey drew attention to the plans provided to the Council for development application approval and the subsequent builder’s certified plans.  She said that differences between the two plans made her question the use of the dwelling and said that there was the potential for an alternate use “to trigger the requirement for a further development application”.  In her response, Ms Aufderheide described the intended use of the Property as “a secondary residence for my client”.  She continued by saying that Mr Ahlburg wished to be able to “entertain his guests in lavish style and [he] has appointed the bedrooms to provide a unique experience” and that “[e]ach bedroom has now been given its own en suite bathroom to allow privacy for his friends”.  Counsel submitted that this response had been misleading because it did not say anything about Mr Ahlburg’s intended use of the Property for rental purposes.

30. Mr Ahlburg said that he had no memory of seeing Ms Aufderheide’s letter at the time it was sent.  He also said that he had believed in any event that he had not been required “to tell the Council” of an intended use of the home for Airbnb and rental purposes. 

31. I do not accept the respondents’ submission that Ms Aufderheide’s response to Ms Hockey of 4 December 2013 evidences dishonesty by Mr Ahlburg.  He was not the author of the response.  It was not a matter on which Ms Aufderheide would, self‑evidently, have required Mr Ahlburg’s instruction before responding to the Council.  Moreover, I note that only two hours and twenty one minutes elapsed between the time Ms Hockey sent her email (5.04 pm) and the time of Ms Aufderheide’s response (7.25 pm).  It is entirely plausible in those circumstances that Ms Aufderheide made the response without reference to Mr Ahlburg so that his statement that he had no memory of seeing the document was correct. 

32. I will refer later to Mr Ahlburg’s evidence concerning his intentions with respect to the use of the home.

33. Mr Burdett was an impressive witness.  The respondents accepted, appropriately, that he has expertise as a glazier and could express opinions.  I accept his evidence.

34. I also regarded the two experts called by the applicants, Mr Jovanovic and Mr Roach, as being impressive.  Each understood the role of an expert witness and each gave his evidence with objectivity.  Subject to one matter concerning the evidence of Mr Jovanovic, I regarded their evidence as providing a sound basis for my findings.

35. I considered that the evidence of Mr Proske was generally reliable and accept it.

36. Mr Parisi was 43 years old at the time he gave evidence.  He and his wife are the shareholders of Arborcrest and he is its director.  Arborcrest’s principal business is the supply of windows and doors to home owners and builders for high end residential projects and the supply of commercial windows and doors.  Mr Parisi has conducted a business of this kind since 1986 but established Arborcrest in about 2007.  He is very much involved in all of the day to day activities of Arborcrest.  He has experience as a glazier and fabricator as well as in building and/or renovating properties for profit.  I accept that he has considerable experience in aspects of the building industry, in particular, the fabrication and installation of glass doors and windows.

37. I had the strong impression that Mr Parisi had a good grasp of where his interests lay in the litigation and that there were occasions when Mr Parisi allowed that appreciation to influence the evidence which he gave.  Quite apart from those matters, there were several aspects of Mr Parisi’s evidence which I consider were reconstruction.  It follows that I do not accept all of his evidence.

38. Both Mr Gramlick and Mr Deek were seemingly impressive witnesses.  However, there were aspects of their evidence which caused me to doubt their objectivity and detachment.  In Mr Gramlick’s case, on several occasions he gave answers which were not responsive to the questions asked of him but which were justificatory of the respondents’ position in the litigation.  His willingness to confirm that both the Hafele doors and Alspec doors had been designed and manufactured so as to comply with Australian Standard 2047 (AS 2047) when he had not even seen them was a matter of surprise.  It was also a matter of concern when it emerged during Mr Gramlick’s cross-examination that, despite deposing to having disclosed in his report the documents provided to him (and inferentially those on which he had based his opinion), he had obtained further information which he had not disclosed.  Mr Gramlick revealed for the first time in his cross‑examination that “there might have been a subsequent check with Arborcrest to get the relevant information”.  Later in re-examination, with reference to the question of whether Arborcrest had installed a sub-sill with the Hafele doors, he said:

    I think at that stage [having reviewed Mr Roach’s report] I must have made contact with Arborcrest, sort of saying, you know, ‘What’s going on?  I don’t – you know.  ‘Is this correct?’, you know?  I couldn’t believe that you would use that particular section without the sub-sill.  You know it’s just not possible.

39. Mr Gramlick then said that Mr Parisi had provided him with an explanation and had provided a fabrication report concerning the components used by Arborcrest which supported the conclusion that Arborcrest had installed a sub‑sill with the Alspec doors.  Mr Gramlick’s report did contain an incidental reference to Arborcrest “cutting lists and fabrication reports” but he had not disclosed any of these matters previously.  It caused me to doubt whether Mr Gramlick did understand fully the obligations of an expert witness, and, as indicated, to doubt his objectivity and detachment.

40. In Mr Deek’s case, I thought that there were several instances in which he revealed a wish to support the cause of the party calling him, and so was not entirely detached and objective.  By way of example, Mr Deek’s statement that, according to the Guide issued by the Australian Windows Association, “it is the builder’s responsibility to ensure that windows and doors are installed in such a way that water does not penetrate from the outer skin to the inner skin of the building envelope” (emphasis in the original), was not responsive to the issue raised with him and, accordingly, a seemingly gratuitous statement in support of the respondents’ case.  There were other instances of Mr Deek seemingly going out of his way to attribute responsibility to the “owner‑builder”.  He too obtained information directly from Mr Parisi in relation to the preparation of his report.

41. Mr Hodgson has been involved in the sale of building and hardware products for many years, both in hardware stores and in industrial hardware.  His work experience includes working with a number of window suppliers and/or installers and he has held a number of managerial sales positions.  Between 2013 and 2016, he was employed by Hafele SA.

42. It was evident that Mr Hodgson was on friendly terms with Mr Parisi. 

43. I have reservations about accepting the whole of Mr Hodgson’s evidence.  I consider that in some respects he gave exaggerated accounts of events and conversations in which he was involved.

44. Neither Russell Ahlburg nor Ms Aufderheide gave evidence.  In the case of Russell Ahlburg, this was attributed to his state of health.  Neither party sought to call Ms Aufderheide although each party had had access to her file by discovery.  In their final submissions, the respondent submitted that a Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 inference should be drawn against the applicants by reason of their omission to call Ms Aufderheide. Counsel submitted that she had been the applicants’ agent and was in their “camp”.

45. Although the applicants did not provide any specific explanation for not calling Ms Aufderheide, I decline to draw the adverse inference for which the respondents contended.  By reason of the termination of her retainer, there is no reason to suppose that she and the applicants have a good relationship.  The respondents had access to the same documents of Ms Aufderheide and were in the same position as the applicants to have called her.  In any event, the respondents did not identify the particular issue or issues on which an inference adverse to the applicants should be drawn.

    The wind rating for the Property

1. In designing a domestic building, engineers and architects apply a wind classification or wind rating calculated in accordance with an Australian Standard.  It is a method of identifying the wind speeds to which the structure will be subject for which provision should be made in the design.  The Australian Standard has six wind classifications for residential buildings in non‑cyclonic areas, N1 to N6. 

2. On 28 September 2011, a firm of consulting engineers (Ron Selth & Associates) supplied a wind classification for the Property of N3 (41 m/s).  It was common ground that this rating was mistaken as the wind classification for the property, calculated in accordance with the Australian Standard, was the higher N4 classification (61 m/s).  The mistake went unnoticed until after the present dispute arose. 

3. The specification and drawings provided to the respondents for the purposes of providing the quotations in early 2015 contained the mistaken classification of N3.  The respondents pleaded that they had designed and manufactured windows and doors to meet the N3 classification, and not the N4 classification.  This plea received some support from Mr Deek who said:

   [10]I agree … that the Hafele bi-fold doors which were designed and manufactured in accordance with the requirements of the ‘incorrect and underestimated’ Site Wind Classification N3, would have been unlikely to meet the weather proofing performance requirements of the [Building Code of Australia].

   [11]… If the window system has not coped adequately with the exposed conditions to which it has been subjected, as alleged, in terms of coping with wind velocity and driving rain under storm conditions, it is because it (the window system) was designed and manufactured in accordance with the requirements for the ‘incorrect and underestimated’ Site Wind Classification N3 instead of the appropriate Site Wind Classification N4 (61 m/s).

4. However, as Mr Roach pointed out in his report of 29 March 2019, the difference between the N3 and N4 classification is, for relevant purposes, immaterial.  That is because the water penetration and air filtration performance requirements outlined in AS 2047 are identical for both the N3 and N4 wind ratings for exposed locations and the issue in this case concerns the degree of water penetration and air filtration through the doors, not their structural sufficiency.

5. By the time the experts gave their evidence in the trial, all agreed with Mr Roach.

6. Mr Parisi’s response to the Notice of Claim from Hackett Lawyers on 28 February 2017 indicated an awareness on his part at that time that the correct wind classification for the Property was N4.  The evidence did not indicate when Mr Parisi first became aware that that was the correct classification. 

7. The respondents’ final submissions on this topic were mixed.  At one point, they submitted that the applicants had contributed to the water leaks because they had designed the house to N3.  At another point, they acknowledged that “the wind rating under design is not in the end influential in the claim, one way or the other”, although they added the rider that the Hafele doors are certified to N3 and not N4.  I proceed on the basis that the mistaken wind classification is of no significance to the issues to be decided in the trial.

8. The opinion given by Mr Deek in relation to the mistaken wind classification was one of the matters which undermined my confidence in his opinions more generally. In his report he referred on several occasions to the “incorrect and underestimated” Site Wind Classification N3, giving that as the reason why the Hafele doors were unlikely to have met the weatherproofing performance requirements of the Building Code of Australia (BCA) and why the Alspec doors may have been inadequate. He did so without any reference to the fact that the water penetration and air filtration requirements for the N3 and N4 classifications were identical. That circumstance meant that his opinions lacked a proper basis. In his cross‑examination, Mr Deek conceded that in the circumstances of this case, the distinction between the N3 and N4 classifications was a “red herring”.

9. Another matter which caused me concern about Mr Deek’s evidence was his readiness to opine that the Hafele system had been designed and manufactured in accordance with the requirements for a site with the wind classification N3 when he had never physically inspected the Hafele doors so as to be able to make an assessment of the quality of their manufacture. 

10. Mr Deek’s readiness to proffer this opinion was even more surprising given his later acknowledgment that he does not have experience “working in the window and door manufacturing field”. 

    The Hafele/HAWA Variotec 150/GV bi-fold door system

11. The Hafele door system is a “frameless” glass folding door system produced by HAWA of Switzerland.  It has no frames or seals on the vertical edges of the glazing. 

12. In a promotional brochure, HAWA described Hafele doors as “predestined for a host of interior applications, for instance in shopping malls, hotels, railway stations, airports, banks, unheated conservatories or in industrial and administration buildings” (emphasis added).  The evidence indicated that neither Mr Parisi nor Mr Hodgson had this brochure in February or March 2015 (Mr Hodgson said only that he had seen the picture of the Hafele door system appearing in the brochure in “the latest Hafele catalogue book”).  Mr Roach said, and I accept, that the Hafele website did not contain any data concerning the weather resistance of the Hafele doors.  He added that this was probably because the system is typically used for internal shop‑front applications and not subjected to external weather.  That evidence was not challenged, and I accept it.  I record at this stage my satisfaction that neither Mr Parisi nor Mr Hodgson told Mr Ahlburg or Ms Aufderheide that Hafele doors were intended for internal locations, that is, not as external doors.

13. I have not overlooked that the drawings of a Hafele door which was tested by AZUMA Design on 11 August 2010 for compliance with AS 2047 did include a below floor level subsill, apparently associated with the drainage of water.  Mr Hodgson thought that the below floor element was not part of the Hafele door system.

    The Alspec Hawkesbury bi-fold door system

14. Unlike the Hafele door system, the Alspec Hawkesbury door system is a fully framed bi‑fold door system.

15. The Alspec doors installed by Arborcrest at the Property had fixed to the floor at their base a sill system with the following profile:

    Meetings with Mr Parisi

16. Before addressing the applicants’ causes of action, it is appropriate to make some general findings with respect to the formation of the contract between the applicants and Arborcrest and with respect to the issues arising out of the performance of Arborcrest’s work.

17. Mr Ahlburg’s first communication with Mr Parisi was in late September or early October 2014 when he requested a quotation for the supply and installation of windows.  Arborcrest provided the quotation on 10 October 2014 for the supply of both Alspec doors and windows.  The email by which Mr Parisi provided the quotation commenced:

    Hi Corey, thanks for the opportunity to quote on your project.  It’s a great home and I’m sure will look brilliant when finished.

18. Apart from one or two follow up emails, Mr Ahlburg did not have further contact with Mr Parisi until February 2015 when he arranged a meeting. 

19. In his evidence in chief, Mr Ahlburg said that he had had two meetings with Mr Parisi at the Arborcrest showroom at Payneham before accepting the Arborcrest quotations. He said that the first occurred about one week before Mr Parisi provided the quotation dated 26 February 2015 and that the attendees at that meeting were, in addition to himself and Mr Parisi, Ms Aufderheide and his father.  In cross‑examination, he accepted that the first meeting had been on 18 February 2015.  I will refer to this as “the First Meeting”.

20. Mr Ahlburg’s father attended some meetings with him because of his experience in building work.  Mr Ahlburg said that at the First Meeting he had informed Mr Parisi of the location of the house, being seafront and on a cliff, with the consequence that it was exposed to a lot of wind and rain; that he had explained that the Property was to be an “architectural house” about which he was passionate; and that he wished the glass and doors to be “seamless”. 

21. Mr Ahlburg said that he saw some frameless glass doors on display in the Arborcrest showroom and that he had told Mr Parisi that that was the “look” which he was seeking.  He said that Mr Parisi had said, almost immediately, that bi-fold glass doors of 3.2 m in height would not be suitable because, at that height, “there would be some leakage issues and there would be some framework issues”, and that a maximum height of 3 m was recommended for the Hafele system.  This was a disappointment to Mr Ahlburg as the applicants’ planned floor to ceiling height was 3.2 m.

22. Mr Ahlburg said that he had left Ms Aufderheide and his father at the meeting while he went to other business.  Later that day, it had occurred to him that, if he inserted a horizontal structural beam so as to limit the height of the glass doors to 3 m, it may be feasible to install the Hafele system.  With that in mind, he telephoned Mr Parisi and arranged a second meeting with him later on the same day.  He and Mr Parisi were the only attendees at this second meeting.  Mr Ahlburg said that their conversation was to the following effect:

    Mr Ahlburg:               I’ve been thinking about this.  If I get Stevens Structural, the steel company, to put another beam in, a secondary beam to make this space smaller and make it to three metres, can we have this system?

    Mr Parisi:That would be perfect.

23. Mr Ahlburg could not remember any other meeting at the Arborcrest showroom.  Nor could he remember attending the Hafele SA showroom to look at the Hafele doors on display there. 

24. Mr Parisi thought that he had had four meetings with Mr Ahlburg at Arborcrest’s Payneham premises.  The first was in mid‑February 2015 at which the participants were Mr Ahlburg, his father, and himself. 

25. The second occurred two or three days later and followed a telephone conversation with Ms Aufderheide.  The attendees at this meeting were Mr Ahlburg, Ms Aufderheide, Mr Hodgson and himself.  Mr Parisi said that he had requested Mr Hodgson to come to that meeting.  I will refer to this as “the Arborcrest‑Hodgson Meeting”.

26. Mr Parisi did not agree that he had met Mr Ahlburg at the Arborcrest showroom later on the day of the First Meeting, but did agree that Mr Ahlburg had telephoned him later that day; that Mr Ahlburg had mentioned his “brainwave” of reducing the height of the doors to 3 m; that he had responded with words to the effect “that would be perfect”; and that he had said he would contact “Hafele”.

27. The third meeting occurred approximately one month later.  The attendees were Mr Ahlburg and himself. 

28. The fourth meeting occurred on 30 March 2015.  The participants in the meeting were again Mr Ahlburg and himself. 

29. Mr Parisi’s account of the Arborcrest‑Hodgson Meeting was generally supported by the evidence of Mr Hodgson.  In addition, Mr Hodgson said that, a few days after that meeting, Mr Ahlburg and Ms Aufderheide attended the Hafele showroom in Chesser Street, Adelaide.  He then showed them the Hafele products on display.

30. I consider that the evidence of Mr Parisi about the number of meetings and their timing was much more reliable than that of Mr Ahlburg and accept it.  The latter’s account was simplistic and implausible.  Amongst other things, it would mean that he had sought the quotation from Arborcrest with respect to the windows after only two meetings with Mr Parisi, the second of which was quite short.  Further, although Mr Ahlburg claimed that he had seen a display of the Hafele doors in the Arborcrest showroom, I accept the evidence of Mr Parisi and Mr Hodgson that there was no such display at that time.  It was not until later that Hafele SA had supplied Arborcrest with an example of the Hafele door system for display purposes.

31. Apart from the differences between the witnesses as to the number of meetings and who it was who participated in them, there were differences between them on three principal matters:

    (i)the suitability of the Hafele doors for the use proposed by Mr Ahlburg;

    (ii)the potential for ingress of water; and

    (iii)the installation of drains.

    Discussions at the First Meeting

32. Until the time of the First Meeting, the drawings prepared by Ms Aufderheide provided for a different glass door system (the Lotus Glas‑Stax system). 

33. There was not a great deal of difference between the accounts of Mr Ahlburg and Mr Parisi of the First Meeting.  Mr Ahlburg’s account was that the focus at the First Meeting was on whether he would be “happy to use Arborcrest” and whether Arborcrest could supply the doors and windows which he needed.

34. Mr Parisi described the discussions as not being overly detailed, as involving “a bit of a meet and greet”, and as directed to making sure that the extent of Mr Ahlburg’s requirements was understood.  He said that it was Mr Ahlburg’s father who was more involved in the discussion, seemingly because he had relevant building industry experience. 

35. Mr Ahlburg had said that he wanted a frameless glass door system.  The doors in such systems do not have any attachments to the glass at the top, bottom or sides (other than a potential pivot), whereas semi‑frameless doors have rails at the top and bottom while the vertical sides are frameless.

36. Mr Parisi acknowledged that he had some idea at the First Meeting of what Mr Ahlburg was seeking because he had spoken to him on the telephone before providing his quotation of 10 October 2014.  In that telephone conversation, Mr Ahlburg had told Mr Parisi that he was building “a high‑end property”, that he wanted full height glass doors and some louvres, and wanted a frameless door system so as to take advantage of the Property’s views.

37. Mr Parisi could not remember whether there had been any discussion at the First Meeting of the brand type which may be suitable as a frameless door system.  Mr Ahlburg said that it was Mr Parisi who, on learning of Mr Ahlburg’s desire to have a “frameless, seamless look”, had mentioned the Hafele system.  He said, however, that Mr Parisi had said that that system could not be used because of the height of 3.2 m.  According to Mr Ahlburg, Mr Parisi had said that the maximum recommended height for the Hafele system was 3 m.  Mr Parisi had also said that, at a height of 3.2 m, there would be “some leakage issues” and “some framework issues”.  As already noted, Mr Ahlburg said that, when he had returned later that day and asked Mr Parisi if the problem could be solved by the insertion of a structural beam so as to limit the height to 3 m, Mr Parisi had responded with words to the effect “that would be perfect”. 

38. It was put to Mr Ahlburg in cross‑examination that, at the Arborcrest‑Hodgson Meeting, he had said that he wanted “frameless bi‑fold doors” but had requested a quote for the windows only as he intended to get the doors from somewhere else.  Mr Ahlburg said that he had no recollection of the second meeting about which he was being questioned and, in particular, no recollection of making the statements suggested by counsel in cross‑examination.  Mr Parisi’s evidence was in accord with that put to Mr Ahlburg in cross‑examination.  I accept that evidence.  It is consistent with Mr Parisi being asked in mid‑February to provide a quotation for windows only.

39. It is, however, likely that there was some discussion at some stage about the planned use of the Lotus product because, as indicated, that was the product which Ms Aufderheide had shown on her drawings.  That discussion is more likely to have occurred at the First Meeting.

40. I think it likely that Mr Parisi said at the First Meeting that Arborcrest did not use the Lotus range of products (that being the fact).  I also think it likely (and so find) that it was in that context that Mr Parisi mentioned the Hafele system.  Mr Parisi agreed that he had said “I can offer you a Hafele system but that system won’t work if the height to be covered is 3.2 metres … at that height I would be concerned that there would be leakage and framework issues and we wouldn’t recommend it”.  I accept that it is also possible that Mr Parisi mentioned the Hafele system to Ms Aufderheide in a telephone conversation before the Arborcrest‑Hodgson Meeting.  In either event, I am satisfied that it was Mr Parisi who introduced the Hafele system into the discussions.

41. In his cross-examination, Mr Parisi agreed that, at the First Meeting, he had told Mr Ahlburg and his father that he could achieve “the seamless, see‑through look”, that he had made this statement in a positive and encouraging way, and that he had had in mind at the time using the Hafele product.

42. It is difficult to reach a firm conclusion as to the way in which things were left at the end of the First Meeting.  Mr Ahlburg said that he had left the meeting early in order to attend to other business.  Mr Parisi could not recall whether that was so.  My impression is that the First Meeting was introductory and explanatory, and think it likely that it was left on the basis that Mr Ahlburg and Ms Aufderheide would reflect on the information they had been given by Mr Parisi.

43. Nor is it possible to make a firm finding as to when Mr Ahlburg asked for the quotation for the Alspec windows which Arborcrest provided on 26 February 2015.  I am satisfied, however, that the request for that quotation and its provision on 26 February 2015 supports the view that Mr Ahlburg had not made a decision concerning the use of the Hafele doors until after that date and, inferentially, not until after the Arborcrest‑Hodgson Meeting.  To the extent that Mr Ahlburg’s evidence is to the contrary, I reject it.

    The involvement of Mr Hodgson

44. Mr Hodgson said that Mr Parisi had telephoned him in relation to the Moana project and had told him that the customer wanted the Variotec frameless product.  He said that he recognised straightaway that this was the same project as that for which another glazier had asked him some months earlier for a quotation.  Mr Hodgson said that he told Mr Parisi immediately that “I’ve already looked at this job, and it’s not going to work as drawn, and it’s on a hill”.  He said that, despite this, Mr Parisi had suggested that they meet “because the client was very adamant that they wanted that product”.  He had agreed to meet but had said “the design needs to change, and it needs to be clear that this product doesn’t seal”.

45. In the cross‑examination, Mr Hodgson explained that by saying that “it” would not work and that the design would have to change, he was referring to the position of the structural columns and what would be required if the doors were to open inwards or outwards.

    The Arborcrest-Hodgson Meeting

46. Mr Parisi said that he had had some telephone discussions with Ms Aufderheide before the Arborcrest‑Hodgson Meeting.  In those telephone discussions, Ms Aufderheide had been enquiring about the mechanical detail concerning the installation of bi‑fold doors.  As already indicated, it is possible that those discussions also included some reference to the Hafele system.

47. Mr Parisi said that he knew before the commencement of the Arborcrest‑Hodgson Meeting that the brand of door to be discussed was Hafele and that it was for that reason that he had arranged for Mr Hodgson, as the representative for Hafele SA, to be present.  Mr Parisi explained that he had done so because at that time he did not have a display of the Hafele doors at his showroom and that Mr Hodgson’s experience made it “good to get him involved”.

48. Mr Hodgson took some models of the Variotec system to the Arborcrest‑Hodgson Meeting.  He said that he asked Mr Ahlburg to describe where the house was located and, on being told that it was on a hill, an exchange to the following effect occurred:

    Hodgson:                   This is going to leak like a sieve.

    Ahlburg:That doesn’t matter.  It’s all about the look and I’ve got floorboards, jarrah floorboards, running all the way through the floor, so I don’t care if it leaks.

    Hodgson:Well, that’s dangerous with timber, with water ingress.

    Ahlburg:It doesn’t matter.  I [will] use towels or whatever to mop it up.  I’m not fussed.

1. Mr Hodgson said that neither Mr Ahlburg nor Ms Aufderheide had shown interest in any product other than the Hafele Variotec system.

2. Mr Hodgson claimed that the plans he had seen did not make any allowance for a drainage system and that he had suggested that strip drains be installed to help minimise the water ingress.  He went on to say that he had recommended use of a particular drainage system in front of the doors.  Mr Hodgson said that by use of his models he had shown how the use of double brush and double rubber seals could help reduce water ingress. 

3. Mr Ahlburg had no memory of the Arborcrest‑Hodgson Meeting or of the matters put to him by counsel as having been discussed at that meeting:

   (a)they had discussed weather seals between the door panels;

   (b)all of them had looked through brochures which Mr Hodgson had brought with him, including of the Variotec semi‑frameless system;

   (c)Mr Hodgson had said that Hafele frameless bi‑fold doors are not a fully sealed system and, accordingly, would leak water;

   (d)Mr Parisi had said that the Hafele frameless bi-fold doors are not a fully sealed system because they did not have a bottom track;

   (e)Mr Ahlburg had been told that, with the Hafele system, he could expect “considerable” water ingress;

   (f)Mr Ahlburg had responded by saying that he was not “fussed” by doors leaking;

   (g)they had discussed using tiles instead of jarrah flooring so as to make mopping up water easier;

   (h)Mr Parisi had said that strip drains would be required under the doors;

   (i)irrespective of the drainage to the balcony, water would still get inside the frameless bi‑fold doors; and

   (j)Mr Parisi had said that he would give a quote conditional upon there being adequate provision for drainage to the balcony.

4. Mr Ahlburg denied these suggestions and said that, if he had been told that there was going to be “huge water ingress” and the potential for his proposed jarrah floor to be ruined, he would not have ordered Hafele doors.  He did accept that there had been some discussion about the installation of stainless steel strip drains and said that, at some time after the meeting, he had ordered such drains.

5. Counsel also put that various matters had been discussed concerning the windows, including the colour and type of glass, the use of louvre windows and a “specific jamb detail that [Ms] Aufderheide was adamant [that] Arborcrest achieve for the windows”.

6. Mr Parisi said that, at the Arborcrest‑Hodgson Meeting, Ms Aufderheide explained that she wanted the jambs for the doors to be rebated into the columns “to give a nice, flush, clean look”.  He said that he had explained at the meeting that as the top floor was designed at 3.2 m, Hafele doors could not be used “because it was just over the height for what had been tested” and that had led to a discussion about reducing the height of the doors.  I consider that this was reconstruction by Mr Parisi as the 3 m height limit had been made plain at the First Meeting.  There was no need for it to be repeated.

7. Mr Parisi said that he explained that, by reason of the doors being top‑hung, there was a gap underneath the bottom of the doors, with the consequence that “the actual door system itself would likely experience water ingress at some point during its lifespan depending on weather conditions”.  He said that, in that context, they had discussed the possibility of Mr Ahlburg changing the floors upstairs from jarrah to tiles.

8. Mr Parisi said that he and Mr Hodgson had explained that seals would be required between the door panels and on the top and bottom of the doors and that Mr Hodgson had initiated a discussion about the drainage system which would be available.  He said that Mr Hodgson had referred to Stormtech strip drains and said that, despite everyone having “a good understanding of what a strip drain is”, Ms Aufderheide had enquired as to the kind of strip drain which would be used in the system.  He had responded that they had used the Stormtech strip drain system on other projects and had described them as “just a sort of flush grated doorsill which would sit on the ground and not stick up past floor level”.  He also said that Mr Hodgson had described the Stormtech strip drain system as “an integral part of the design system for when they’re quoting doors themselves or packages including the door”.

9. Mr Parisi said that they had also discussed windows at the Arborcrest‑Hodgson Meeting.

10. Mr Parisi said that the Arborcrest‑Hodgson Meeting had concluded with an arrangement for Mr Ahlburg and Ms Aufderheide to visit the Hafele SA showroom.

11. Mr Parisi’s evidence about what was discussed at the Arborcrest‑Hodgson Meeting was given at a level of generality.  I had the firm impression that much of it was reconstruction, rather than actual recollection. 

12. I consider that much of Mr Hodgson’s evidence about what was said at the Arborcrest‑Hodgson Meeting was also reconstruction, although he had greater actual recall than Mr Parisi.

13. Accordingly, although I am willing to accept at a level of generality that several of the identified topics were discussed, I do not accept the particularity claimed by Mr Parisi and Mr Hodgson.

    The Third Meeting

14. Mr Parisi’s evidence about the third meeting was brief and again I had the strong impression that it comprised reconstruction.  Mr Parisi said that the third meeting occurred after he had provided the quotation for the windows on 26 February 2015 and that the discussion had been more about the doors.  He said that he and Mr Ahlburg had discussed again that the height of the doors was an issue because the maximum height for the Hafele doors was 3 m.  It was difficult, on Mr Parisi’s evidence, to see the purpose of the third meeting.  I doubt anything of significance for the purposes of the present litigation was discussed at that meeting.

    The Fourth Meeting

15. Mr Parisi gave very little evidence about the Fourth Meeting which he seemed to fix by reference to his email of 31 March 2015 providing the amended quotations.  In that email he had referred to a meeting on the previous day.  I infer that it was at that meeting that Mr Ahlburg explained his wish to have the quotation of 23 March 2015 split into separate quotations for supply and installation and in which he and Mr Parisi negotiated that $25,000 would be paid in cash and a discount of $6,000 provided on that account.

    The Hafele SA Showroom Meeting

16. In relation to this meeting, counsel for the respondents put to Mr Ahlburg that:

    (a)Mr Hodgson had shown Ms Aufderheide and him a model of the system, the rubber seals and brushes and how the system worked;

    (b)Mr Hodgson had pointed out that the system would leak but Mr Ahlburg had said that he was not “fussed” and was “prepared to deal with that problem in order to achieve the look [he] wanted”; and

    (c)Mr Hodgson had mentioned that driving rain would come into the house “irrespective” and that Mr Hodgson had said in that respect “don’t ring me in the middle of July complaining about water coming into your home”.

17. Mr Ahlburg said that he had no memory of these matters being discussed, or of the meeting at all.

18. Mr Hodgson said that the meeting at the Hafele SA showroom in Chesser Street in the City had lasted for about 20‑25 minutes.  In the course of the meeting, he had shown the Variotec system on display to Mr Ahlburg and Ms Aufderheide and had demonstrated its use and how the doors stacked together.  Mr Hodgson said that he had told Mr Ahlburg that use of the rubber seals together with a strip drain would mean less penetration of water through the gaps.  He said that he had added that the rubber seals would give the best sealing application “but don’t ring me in July, in the middle of July, when it’s raining, and say “my doors are leaking””.  He claimed that Mr Ahlburg had responded again by saying that he was not “fussed” about the leakage because “it’s all about the look”.

19. Mr Hodgson said that the meeting was left on the basis that Ms Aufderheide would look at the drainage system for which he had given her details.

    The Hodgson Site Meeting

20. Mr Hodgson also claimed that he had attended a site inspection within two or three weeks of the attendance of Mr Ahlburg and Ms Aufderheide at the Hafele SA showroom.  He said that Mr Ahlburg and Mr Parisi were also present. 

21. Mr Hodgson’s evidence about this site meeting came as a surprise as there had been no questioning of Mr Ahlburg about it.  Nor had Mr Parisi given evidence of any such meeting.  It seems, however, that the principal focus of the site meeting was the structural steel which had been installed and its location. 

22. Mr Hodgson claimed that he had said again:

    It’s going to leak like a sieve up here with the winds and location.

23. Mr Hodgson claimed that Mr Ahlburg had again responded by saying that he was not fussed about the leakage and that it was “all about the look”.  He also claimed that Mr Parisi had been “in agreeance with what I was saying about water egress”.

24. While I accept that the site meeting did occur, I do not regard Mr Hodgson’s claim as to what he said as being reliable.

    The Hodgson email

25. It is convenient to mention at this point one matter which, although occurring later in the chronology of events, caused me to have concerns about the credibility of both Mr Parisi and Mr Hodgson.  This was the evidence of each about a communication from Mr Hodgson to Mr Parisi which purports to be a report by Mr Hodgson of an inspection which he carried out at the Property in December 2015 after the installation of the Hafele doors.  The substance of the document is as follows:

    Hello Paul,

    In relation to the Moana Variotec project:

    1.I carried out a site inspection in December 2015 as per your request. 

    2.All the Variotec systems were manufactured and installed as per Hafele and Hawa specification and recommendations, and fully functional. 

    3.I noted the flooring and drainage was not complete at the time. 

    Regards,

    Nick Hodgson

26. The copy of the document in evidence does not contain an email header, that is, the header showing the sender, the recipient, the date and time that the email was sent and a subject line.  Nevertheless, I am satisfied that the document is from an email.  That is apparent from the company description following Mr Hodgson’s name which is in the form commonly used on emails, the appearance of the document, and because there is no indication that it was sent as a physical letter (for example, it does not include Mr Hodgson’s signature).  I will accordingly refer to the document as “the Hodgson email”.

27. Mr Parisi attached a copy of the Hodgson email to his email of 28 February 2017 in which he responded to the notice of claim from Hackett Lawyers.  He did so, saying:

    After the doors were installed they were checked by the hardware manufacturer on site as part of our licensing requirement.  They were passed as correct in manufacture and installation.  (See attachment 2).

28. By these terms, Mr Parisi implied that the Hodgson email was a contemporaneous document, that is, provided shortly after an inspection by Mr Hodgson in December 2015.

29. Both Mr Parisi and Mr Hodgson were cross‑examined as to the time and circumstances in which the Hodgson email was sent and received.  The suggestion was that Mr Parisi had requested Mr Hodgson to provide it only after receiving the notice of claim from Hackett Lawyers of 23 January 2017 to which I referred earlier.

30. Mr Parisi testified that he had asked Mr Hodgson to send the email after he had looked at the doors, because that was the first project that he had done with the Hafele Variotec system.  He could not say when he had received the email but said that he had requested it before receiving Mr Hackett’s letter.  He added “I don’t think I received it, though, immediately.  But, you know, I’ve had – yes, I’ve had that for a while”.  He also said that he did not think that he had discussed Mr Ahlburg’s complaints about the Hafele door system with Mr Hodgson at the time of requesting the email.

31. Later, Mr Parisi said that he had made the request to Mr Hodgson to provide the letter “well after” the doors were installed but that he would be guessing as to when he had made the request. 

32. Mr Hodgson claimed that he had sent the email in December 2015, but it was apparent that he relied for that purpose on the reference to that date in the body of the email.  However, in cross‑examination, he said in answer to the suggestion that he had sent the email long after the inspection in December 2015, that he was “not really sure”.

33. I have considerable disquiet about the reliability of the evidence of Mr Parisi and Mr Hodgson on this topic.  In my view, the email is not expressed in the terms one would expect if it was written very shortly after the inspection to which it purported to refer.  Its contents are more suggestive of a document written retrospectively.  My reservations are heightened by the fact that the copy provided by Mr Parisi to Hackett Lawyers did not include the email header.  It seems that someone, probably Mr Parisi, went to the trouble of omitting it.  I infer that that was done in order to give the impression claimed by Mr Parisi in his letter to Hackett Lawyers of 28 February 2017 to the effect that the installation had been checked at the time of installation by the manufacturer.  This is one of the matters which caused me to have reservations about the reliability generally of the evidence of both Mr Parisi and Mr Hodgson. 

    Findings concerning the pre-contractual meetings

34. Mr Ahlburg’s evidence provides only a limited basis on which to make findings concerning the pre‑contractual meetings.  This means that the principal evidence on which findings could be made comes from Mr Parisi and Mr Hodgson but there are a number of aspects of their evidence which I do not accept. 

35. I commence by finding that an important part of the factual matrix is that both Mr Parisi and Mr Hodgson knew that the Property was intended to be a high end luxury home.  Both knew that Mr Ahlburg intended that the glass window and door systems were to be supplied and installed in keeping with that objective. 

36. I am satisfied that Mr Parisi did at an early stage of the First Meeting say that it was not possible to install bi‑fold glass doors of any brand with a height of 3.2 m.  In doing so, he was not referring only to Hafele doors.  This was because of issues relating to the structural strength of doors of that height generally and because the bi‑fold doors had been tested to a maximum height of 3 m. 

37. I am also satisfied that it was Mr Parisi who introduced the possible use of Hafele doors into the discussions in the First Meeting.  He did so because they were of the general kind being sought by Mr Ahlburg, because he did not supply the Lotus Glas‑Stax model, and because he had the means, by reason of his existing contact with Mr Hodgson, of supplying Hafele doors.  At the time, Mr Parisi had not previously installed any Hafele Variotec bi‑fold doors and had no experience in using them.  I consider it likely (and so find) that he was unaware of the inability of the Hafele Variotec door to provide a complete seal against the ingress of water.  That explains why, when Mr Ahlburg asked whether Hafele doors could be installed if the height was reduced to 3 m, he had responded by saying that that would be “perfect”.  He did so in a way which was positive and encouraging and without any qualification with respect to water leakage.  I consider that Mr Parisi was not aware at the time that the Hafele Variotec system was really intended for interior, rather than exterior, use. 

38. It was in that context that Mr Parisi said that he would arrange the meeting with Mr Hodgson in order for Mr Ahlburg and Ms Aufderheide to explore the possible use of Hafele doors further.  I do not accept that Mr Ahlburg had made a definite decision at that time to use Hafele doors.  It is improbable that he would have done so without seeing them or at least brochures of them.  Mr Parisi could not have shown Mr Ahlburg any brochures as Mr Hodgson said that at that time he did not have any brochures.  The suggestion to Mr Ahlburg in his cross‑examination that the attendees at the Arborcrest‑Hodgson Meeting had looked through brochures was not borne out by the later evidence, and was one of the matters suggestive of reconstruction by Mr Parisi.  

39. If Mr Parisi did tell Mr Hodgson that Mr Ahlburg was adamant that he wished to use the Hafele door, then he did not convey accurately Mr Ahlburg’s then state of mind.  It is improbable that Mr Ahlburg had formed such a firm view after only the First Meeting.  What Mr Parisi told Mr Ahlburg then, as well as his representation that lowering the door height to 3 m would be “perfect”, may have made Mr Ahlburg keen on the Hafele doors but the purpose of the Arborcrest‑Hodgson Meeting was to explore further the possible use of Hafele doors.  Moreover, part of the purpose of Mr Ahlburg and Ms Aufderheide going to the Hafele SA showroom was to see models of the Hafele door system so as to inform their decision about their use.  I note that Mr Parisi did not claim in his evidence that Mr Ahlburg had definitely decided on Hafele doors even before the Arborcrest‑Hodgson Meeting.  I think it likely that this part of Mr Hodgson’s evidence was reconstruction and reflective of hyperbole. 

40. I accept that, on his becoming involved, Mr Hodgson did raise issues concerning water leakage. I have considered carefully whether to accept Mr Hodgson’s claim that he had told Mr Ahlburg and Ms Aufderheide that the Hafele door system would, at the Property, “leak like a sieve”. On one view, Mr Hodgson’s use of an expression of that kind would be in keeping with his tendency to hyperbole. However, the suggestion that he had done so was never put to Mr Ahlburg. By itself, this may not be significant. Mr Ahlburg’s general poor memory suggests that he would probably have said that he had no memory of this statement either. And there was no application under s 46 of the Evidence Act 1995 (Cth) for him to be recalled to give evidence on the topic.

41. However, more significantly, Mr Hodgson’s evidence that he had made this statement at the Arborcrest‑Hodgson Meeting was not supported by Mr Parisi.  Moreover, despite the respondents’ filed defence descending to considerable detail as to what Mr Ahlburg was told, there is no plea that he had been told that the system would “leak like a sieve” or “don’t ring me in the middle of July”. 

42. I also note that, in his response of 28 February 2017 to the notice of claim from Hackett Lawyers, Mr Parisi made no claim that Mr Ahlburg had been warned that the system would leak “like a sieve”.  Instead, Mr Parisi said only:

    At our initial discussions with your client he was advised very clearly that because of the nature of frameless doors, he could expect that there would be some water entry under the doors as there is no bottom track.

    (Emphasis added)

43. A statement that some water would enter is very different from a warning that the system would “leak like a sieve”.

44. In my view, had a statement in the graphic terms claimed by Mr Hodgson been made, it is likely to have stayed in Mr Parisi’s mind and, when the later issues arose, for him to have reminded Mr Ahlburg of it.  He did not do so.

45. These matters suggest that Mr Hodgson’s evidence to the effect that he said that the system would “leak like sieve” is the result of reconstruction, perhaps occurring only shortly before he gave evidence.  I am not satisfied that Mr Hodgson did say words to that effect to Mr Ahlburg or Ms Aufderheide at either the Arborcrest‑Hodgson Meeting or at the Hafele SA showroom or at the site meeting and reject his evidence that he did.

46. For similar reasons, I do not accept Mr Parisi’s evidence that he had warned Mr Ahlburg at one of the meetings that a “considerable amount of water” would come inside.  Mr Parisi’s claim that he had done so was plainly wishful reconstruction for the purposes of these proceedings, and did him no credit.  The claim stands in contrast with the claim made by Mr Parisi in his letter of 28 January 2017 that he had warned Mr Ahlburg only that “some” water would come inside.  This was one of the matters which led me to doubt the honesty of all of Mr Parisi’s evidence.  

1. The respondents did adduce some evidence from Mr Jovanovic to the effect that, with normal building practice, gyprock and plasterboard linings are not placed until the structure has been made weatherproof.  They did not, however, point to any evidence indicating that the practice had not been followed in the present case in a way which had resulted in the damage which is the subject of the applicants’ claims.  

2. Having regard to all these matters, I consider that, subject to contributory negligence, the applicants are entitled to recover in full items (a) and (b) of the other remedial works, being a total of $21,318.

   The loss of rent claim

   The claim

3. By [31] of the ASC, the applicants claimed damages in respect of the loss of the chance to obtain rental income in the period between September 2015 and July 2017 and thereafter.  The applicants claimed that the Property could have been rented at approximately $14,000 per week during periods of peak demand (presumably the warmer months) and at lower rates during periods of lower demand (presumably the colder months). 

4. The plea of the applicants in [31] of the ASC is inconsistent with their pleading in [28] that the “failure of the Arborcrest Work” meant that the applicants had been unable “to use the Property for occupation and for rental from [September 2015] until approximately March 2017”.  Neither the evidence nor the submissions sought to explain that inconsistency.

5. In the final submissions, the applicants confined the claim with respect to the lost opportunity to obtain rental income to the period from September 2016 to July 2017.  The latter time was fixed because it had been on 31 July 2017 that the applicants first obtained rental income.  That was shortly after KRI had replaced the Alspec doors with Schüco doors.

   The evidence

6. The applicants submitted that, in the period from 1 July 2017 to 30 June 2018, the Property had been rented for 46 nights and had produced gross income of $83,903 (which I note is an average of $1,613.52 per week and an average of 0.88 nights per week).  In the period from 1 July 2018 to 12 April 2019, they submitted that the Property had been rented for 67 nights and had produced gross income of $132,500 (which I note is an average of $3,231.71 per week and an average occupancy of 1.63 nights per week).

7. The manner by which the gross income figures and the nights on which the Property was identified was not explained in the submissions.  The applicants did provide a document in the nature of an aide memoire which purported to be a rental summary.  However, several of the entries in the aide memoire are not supported by the documentary evidence provided by Mr Ahlburg.  He acknowledged that that was so.  Given my general reservations about Mr Ahlburg’s evidence, I also have concerns about relying on his evidence concerning the cash payments.

8. The respondents submitted that the evidence concerning the rental income contains inconsistencies. 

9. If I was satisfied that the loss of rent claim was otherwise made out, it would be necessary to consider in detail the underlying evidence concerning the claimed rental income.  However, as I am not satisfied that the basis for the claim has been established, it is not necessary to engage in that assessment.

10. The applicants claimed that, by not being able to rent the Property in the period from September 2016 to July 2017, they had lost the opportunity to obtain approximately $160,000 in rental income.  Their submissions did not indicate the precise manner of calculation of the figure of $160,000, but I understood it to be derived from the average weekly income and the average weekly occupancy they had calculated for the period from 1 July 2018 to 12 April 2019.

11. In his evidence in chief, Mr Ahlburg said that his “idea” in building the Property had been to have a family holiday home and, in addition, to derive income from it as “a high end luxury guest stay”.  He had designed and constructed the house with that in mind, including by incorporating a bathroom into each bedroom, having each room individually airconditioned and provided with underfloor heating, and by providing a television set in each room.  Mr Ahlburg said that he had discussed his intentions with Mr Parisi and said that he told him in particular of his plan to obtain an income stream by letting the house out.  He said that some of the rentors sought services in addition to the rental of the Property, including the provision of food and drink, the provision of chauffer services, catering and the hire of recreational equipment.  He had provided these at an additional charge to the rentor, with the effect that this had been an additional source of income.  Mr Ahlburg said that he had sought interest from rentors by advertising on a number of online booking platforms.  During the course of the cross‑examination, Mr Ahlburg said that he had also intended to use the house for “corporate” events, such as weddings or receptions.

    The defence to the loss of rental claim

12. The respondents raised a number of defences to the loss of rent claim.  These included:

    (a)the applicants had not proven when the house had been completed to the stage at which it could have been rented were it not for the claimed defects in the doors and windows;

    (b)the evidence did not establish that bookings for rental had not been made because of the claimed defects in the doors and windows;

    (c)in so far as the loss of rental was claimed as damages for breach of contract, it was not within the “rules” stated in Hadley v Baxendale (1854) 9 Ex 341 at 354; (1854) 156 ER 145 at 151;

    (d)clause 7 of Arborcrest’s Standard Terms and Conditions excluded specifically Arborcrest having any liability for late completion;

    (e)given the terms on which the applicants had obtained development approval from the Onkaparinga Council, their use of the house for rental purposes was unlawful;

    (f)as no certificate of occupancy has been issued by the City of Onkaparinga in respect of the Property, the applicants’ occupation of the Property constitutes an offence under s 67 of the Development Act; and

    (g)the applicants’ proof was deficient as the evidence established only the gross receipts from rental and not the net income.

    Consideration of the loss of rental claim

13. Despite my reservations about Mr Ahlburg’s evidence, I am willing to accept his evidence concerning his planned use of the Property.  I also accept that he has derived some income from rental of the Property since July 2017, but for the reasons given earlier, there are difficulties in making findings about the actual extent.

14. However, a fundamental difficulty for this claim is that the applicants did not prove when the house would otherwise have been available for rental had it not been for the claimed defects in the doors and windows.  Mr Ahlburg’s evidence in chief was directed to his intention with respect to rental and not to the time when the house would, apart from the claimed issues concerning the doors and windows, had been fit for rental.  He gave the following evidence:

    XN:Prior to [the first rental], had it been your intention to rent it earlier than in … July of 2017?

    A:Yes.

    XN:Can you explain to his Honour what had been your intention?

    A:Well, prior – I mean, it’s – it’s hard to say, but I would say, your Honour, due to having to redo glass, pull out doors, redo them, we were literally about a year to a year and a half – more – well, more than a year and a half behind schedule on actually being able to lease it out.  So there were so many – because of the leaks I couldn’t have guests there, number one, because for the bad media side of it.  You know, they – they get on TripAdvisor these days or they get on the – well, the booking platform that they come from, complain and then next minute you don’t – you don’t have them return and/or that platform doesn’t give you the work or give you the customers.  So we had to make sure that by this time it was – it was perfect.

15. As is apparent, Mr Ahlburg’s answer was not directly responsive to the question.

16. My impression at the time the evidence was given, which has been confirmed on reading and rereading the transcript, was that it comprised a significant amount of reconstruction.  Mr Ahlburg had not kept a construction diary and did not point to any matter by which the delays in construction could be measured.  The evidence did indicate that the Hafele doors and the window had been installed at the end of 2015 (18 months before July 2017) but did not indicate that the house was otherwise habitable at that time.  Mr Ahlburg did not give evidence as to when the house would otherwise have become fit for rental.  Nor did the applicants lead evidence from Mr Proske on this question even though he was, presumably, in a position to have provided evidence to that effect. 

17. In the cross-examination, it was put to Mr Ahlburg that the house could not have been ready for rental at the beginning of 2016 (that is, 18 months before 31 July 2017) because it was not even finished at that time.  Mr Ahlburg acknowledged that that was so but attributed the delay in the completion to the shortcomings in the Hafele doors.  By way of example, he said that he had delayed the cabinet makers carrying out their work by reason of the issues with the Hafele doors. 

18. Again, I had the firm impression that this was reconstruction.  If Mr Ahlburg’s evidence be correct, there must have been a considerable amount of documentary evidence available to support the claim, for example, documents evidencing the contracts with the trade persons such as the cabinet makers, documents evidencing the communications with them concerning the time of installation and in particular, the applicants’ requests that they delay the installation, and documents concerning the actual time of installation.  The applicants did not lead any evidence to this effect.  I note again, that the applicants did not lead any evidence from Mr Proske as to when the house had been completed.  The Court should not be left to speculate about these matters.

19. The absence of evidence on the topic is underlined by the fact that the video footage and photographs taken on 14 September 2016 which the applicants tendered to prove the ingress of water also show that the construction of the house had not been completed.  For example, it is apparent that the laying of floor tiles had not been completed, although later photographs suggested that the tiling had been completed by 28 December 2016.  The laying of the floor tiles was not a matter which was delayed by the Hafele doors.  On the contrary, it had not been possible for Arborcrest to make the final adjustments to the Hafele doors until the tiles had been laid.

20. Mr Burdett’s evidence that it was a “finished house” when he attended to install the Schüco doors in June 2017 does not assist in establishing exactly when, before July 2017, it had achieved that state.

21. In the final submissions, counsel for the applicants sought to fill the gap in the evidence by reference to the Notice of Claim sent by Hackett Lawyers to Mr Parisi on 23 January 2017.  In that letter, Mr Hackett gave notice of the claim for loss of rental income and said:

    The property would have been finished in Sept 2016 but for the glass defects.

22. Counsel submitted that this statement provided a basis on which the Court could find that, but for the defects in the doors and windows, the Property would have been ready for rent in September 2016.  Plainly, Mr Hackett’s Notice of Claim is inadequate for this purpose.  He did not give evidence in the trial and it was not, in any event, suggested that he had the expertise with which to express an opinion about the time when, but for the claimed defects, the project would have been finished.  The statement Mr Hackett made was at best a hearsay assertion, the unreliability of which is evidenced by its inconsistency with the two claims made by the applicants in their pleadings, which were prepared by Mr Hackett. 

23. Another difficulty with the applicants’ claim for loss of rental is that they did not establish that they had in fact foregone the opportunity to rent the Property which had been available to them.  Mr Ahlburg said that he had started promoting the Property for rental purposes “at least six months to a year” before July 2017.  However, he did not give evidence of enquiries having been made by prospective rentors before July 2017 which he had had to decline. 

24. A further difficulty is that the applicants provided evidence only of the gross receipts from rental after 31 July 2017.  They produced no evidence at all of the expenses incurred in renting the Property.  Whilst it may be reasonable to infer that, at the prices involved, the premises were being let profitably, the Court should not have to speculate as to the extent of the profit.

25. Having regard to these matters, I am not satisfied that the applicants have established a claim with respect to loss of rental income.

26. In case the matter goes further, I indicate that I would, had it been necessary to do so, have rejected the respondents’ Hadley v Baxendale submission, as Mr Parisi did not dispute, in his evidence, Mr Ahlburg’s evidence that he had been informed of the intention to rent the Property. 

27. I add on this topic that I do not accept the applicants’ submission that the respondents had, by [4.4] of the Amended Defence, formally admitted that they knew of Mr Ahlburg’s intention to rent the premises.  The submission is based on a misunderstanding of [4.4].  The respondents’ pleading that the applicants had misrepresented to the Onkaparinga Council their true intention with respect to use of the Property cannot reasonably be characterised as an admission by them that they knew of those circumstances and, in particular, the applicants’ true intentions at the time Arborcrest entered into the contract.

28. I would not have regarded cl 7 of the Arborcrest’s Terms and Conditions as precluding Arborcrest from being liable.  Clause 7 provides:

    The commencement and/or completion date for the works stated in this quotation (if any) are the estimate[d] dates only and the Company shall be under no liability for any loss or damage howsoever arising if the work is not commenced and/or completed on those dates.  The Company will not be held responsible for loss of pay due to any rescheduling or delay for work completion. 

    (Emphasis in the original)

29. As is apparent, cl 7 speaks to delays in the completion of the work within the estimated periods, and not to liability arising from work which is defectively performed and to the consequences of such work. 

30. In [4.4] and [31.7] of their Amended Defence, the respondents pleaded that the applicants had obtained development approval from the Onkaparinga Council for the Property unlawfully by misrepresenting its intended use.  The respondents pleaded that the applicants had informed the Onkaparinga Council incorrectly that the Property would be used as a secondary residence when its real purpose was for short term rental accommodation.  In the final submissions, the respondents submitted that the commercial use of the Property was accordingly unlawful and precluded the applicants’ loss of rent claim.

31. At a general level, the respondents seemed to be invoking the principle that the law will not, as a matter of policy, assist persons to obtain benefits from illegal activities.

32. However, the respondents did not support this submission by reference to any legislative or regulatory provision said to give rise to the unlawfulness they claimed.  Nor did they refer to any authority indicating the appropriate application in the circumstances of this case of the general principle of illegality on which they relied.  It may also be pertinent that, despite knowing of the applicants’ use of the Property, the Onkaparinga Council has not taken any enforcement action against them.  Accordingly, I would not have regarded this contention of the respondents as providing a defence to the loss of rent claim.

33. The respondents raised a different plea of unlawfulness in [31.8] of their Amended Defence. This was that, contrary to s 67 of the Development Act, no certificate of occupancy has been issued by the Onkaparinga Council in respect of the Property. This meant, they submitted, that the use and or occupation of the Property by the applicants or others constituted an offence, with the consequence that the use of the Property for rental purposes was unlawful. This was said to preclude the applicants’ claim for loss of opportunity to rent the Property.

34. Mr Proske confirmed in cross-examination that no certificate of occupancy had been issued.

35. In the final submissions the respondents did no more than repeat in substance the plea in [31.8] of the Amended Defence. They did not develop a submission concerning it, let alone seek to support it by reference to legislative or regulatory provisions.

36. The respondents’ plea that the applicants were not entitled to occupy the Property because a certificate of occupancy had not been issued by the Onkaparinga Council is based on a false premise, namely, that such a certificate was necessary before the Property could be occupied. Section 67(1)(a) of the Development Act prohibits a person from occupying a building in respect of which building work has been performed unless a certificate of occupancy has been issued. However, it also provides that this prohibition does not apply if “the building is of a type excluded by the regulations from the requirements as to certificates of occupancy.”

37. Regulation 83 of the Development Regulations, as in force at relevant times, stated that “a certificate of occupancy is not required in respect of a Class 1a or 10 building” under the Building Code. A Class 1a building in the Building Code includes “a single dwelling being…a detached house”. That definition encompasses the house constructed on the Property. Accordingly, it was not necessary for the applicants to obtain a certificate of occupancy before occupying the house.

38. The exclusion of Class 1a buildings has since been repealed in the Planning, Development and Infrastructure (General) Regulations 2017 (SA). However, these regulations were not in force during the period between September 2015 and July 2017.

39. While I reject these particular defences of the respondents, for the reasons given earlier, the applicants’ evidence in support of the claimed loss of rental income was not sufficient to establish the claim, and it is dismissed.

    Failure to mitigate

40. The respondents’ Amended Defence raised two allegations of a failure by the applicants to mitigate loss.  The first was that the applicants had failed to act immediately upon ascertaining the ingress of water to the Property and thereby to have avoided the loss and damage which they claim.  The second is that the applicants had failed to mitigate their loss by providing Arborcrest with the opportunity “to assess and if required remedy the leaks to the [Alspec doors] and the Windows”. 

41. The respondents have the onus of establishing the applicants’ failure to mitigate: Watts v Rake (1960) 108 CLR 158 at 159; Medlin v State Government Insurance Commission [1995] HCA 5, (1995) 182 CLR 1 at 22. In my opinion, the respondents have not discharged that onus.

42. In relation to the first matter, the respondents did not identify, let alone prove, a loss which could have been avoided had earlier remedial action been taken.

43. In relation to the second, counsel for the respondents raised the following matters:

    (a)the applicants had not contacted Mr Parisi after his Site attendance on 2 February 2017 to do the final adjustments;

    (b)Mr Parisi had given evidence that it was possible to install larger sills and sub‑sills in the Alspec doors at relatively minor cost but these alternatives had not been explored; and

    (c)the applicants had not sought advice from Mr Burdett about steps which could be taken to modify or adjust the Alspec doors: they had sought only a quotation for their replacement. 

1. In my view, two matters indicate that the respondents have not discharged their onus with respect to this assertion.  The first is the long period which elapsed after Arborcrest’s installation of the Hafele doors during which time they had been found to be unsatisfactory.  I accept Mr Ahlburg’s evidence that he had been pressing Mr Parisi repeatedly to attend to the problems.  That did not occur until December 2016 when the Hafele doors were replaced with the Alspec doors.  Despite the optimism which the applicants may reasonably have had that this action of the respondents had remedied the position, the ingress of water continued.  It was more than just that water was entering at the bottom of the doors as Mr Jovanovic’s tests on 20 March 2017 confirmed.  The problems were made particularly manifest by the significant ingress of water during the rain on 13 and 19 January 2017.  Mr Hackett notified Mr Parisi about this by his letter of 23 January 2017.  Mr Parisi’s email of 26 February 2017 suggested that Arborcrest did not accept responsibility for the continuing problems about which the applicants were complaining.  It was not unreasonable for the applicants to proceed on the basis that the respondents had had adequate opportunity to remedy the matter.

2. I note further that, while the respondents complain of Mr Ahlburg’s failure to contact them after 2 February 2017, they did not themselves initiate contact to check on the adequacy of their work.

3. The second matter is that the applicants did take expert advice.  Mr Ahlburg discussed the situation with Mr Proske.  Mr Proske suggested that the applicants take expert advice from Mr Burdett.  They did so and thereafter proceeded in accordance with the recommendation of Mr Burdett.  It was not unreasonable for the applicants to act in accordance with competent expert advice.  Nor was it a failure on their part to mitigate their loss.

4. It may well have been the case that a larger sill or larger sub‑sill at the base of the Alspec doors could have been installed, as Mr Parisi indicated in his evidence.  However, Mr Parisi had not thought it appropriate to install a larger sill or larger sub‑sill, even given his awareness of the extreme weather to which the Property was exposed, his awareness of the problems which had been experienced with the Hafele doors, and the notification given to him by Mr Hackett’s letter of 23 January 2017.  It is even more remarkable given Mr Parisi’s knowledge that there were no strip drains (or appropriately located strip drains) and that the Property was intended as a high end luxury home.  He had had a reasonable opportunity to suggest or try that alternative and he had not done so.

5. For these reasons, the respondents’ claim of a failure to mitigate by the applicants fails.

   Betterment

6. The respondents submitted that there should be an adjustment of the damages to which the applicants are entitled in respect of the replacement of the Alspec doors because they chose to have remedial works carried out to a higher standard than was strictly necessary to redress the consequences of their breach of contract.  I understood the respondents to make the same submission with respect to the damages claimed by the applicants for the replacement of the Alspec windows.

7. The submissions which the Court received on this topic were relatively brief.  The respondents submitted that the Court should apply the principles stated by Judge Lovell in Von Stanke v Northumberland Bay Pty Ltd [2008] SADC 61 at [130]:

   1.The general rule of restitutio in integrum applies and a plaintiff should be compensated for its loss but not overcompensated.

   2.This principle will vary according to the circumstances and each case depends on its own facts.

   3.The plaintiff should credit the defendant for the fact that the plaintiff now receives new goods in place of old except where the plaintiff would never have replaced the chattel in question.

   4.The measure of damages which gives best effect to the principle of compensation is the value of the replacement less a deduction for betterment plus an amount for the forced early investment of money.

   (Citations omitted)

8. The applicants agreed that it was appropriate for the Court to apply these principles and emphasised the following statement in Richard Roberts Holdings Ltd v Douglas Smith Stimson Partnership (No 2) (1989) 46 BLR 50 at 69:

   If the only practicable method of overcoming the consequences of a defendant’s breach of contract is to build to a high standard than the contract had required, the plaintiff may recover the cost of building to that higher standard.  If, however, a plaintiff, needing to carry out works because of a defendant’s breach of contract, chooses to build to a higher standard than is strictly necessary, the courts will, unless the new works are so different as to break the chain of causation, award him the cost of the works less a credit to the defendant in respect of betterment.

9. It is accordingly unnecessary for the Court to address some of the issues concerning the application of the principles of betterment discussed in Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313 and in Hoad v Scone Motors Pty Ltd [1977] 1 NSWLR 88. See also the discussion in “The Issue of Betterment in Claims for Reinstatement Costs” by Ava Sidhu, (2016) 16 Macquarie Law Journal 127.

10. The respondents submitted that the Schüco doors with which the applicants replaced the Alspec doors are superior and that the applicants had thereby achieved betterment for which they should not be held responsible.  They referred to Mr Burdett’s evidence that Schüco products are a superior window and door product; that this is because of the design of the framing systems, the componentry used and the rigorous testing applied to it; that Schüco doors are “high end”, attract a high price and are more expensive than other brands including Alspec; and to Mr Burdett’s evidence that KRI is not competing in the same market as Arborcrest because “our value is probably double Arborcrest’s price, so we’re a completely different sales perspective”.

11. The difficulty in the way of acceptance of the respondents’ submissions is that they did not adduce any evidence by which the Court could make any assessment of the betterment for which they contend.  There was no evidence of the cost of installing a door system which would be appropriate for the Property but which does not have the superior qualities of the Schüco doors.  Moreover, as counsel for the applicants pointed out, the cost to the applicants of installing the Schüco doors is approximately the same as the amount they paid for the Hafele doors.  The Schüco doors are better in the sense that they provide a waterproof seal but that does not mean that the applicants have obtained an advantage relative to the price which they paid for the Hafele doors. 

12. Accordingly, I decline to make any reduction on the damages otherwise payable by the respondents on account of betterment. 

    Deduction for the cost of KRI installing drains

13. Earlier, I held that, even if the applicants were otherwise successful, they should not be able to recover from the respondents the cost of that part of the work carried out by KRI in mid‑2017 which comprised the installation of drains.  Neither party sought to adduce evidence as to the amount of KRI’s quotation of $191,711 which should be attributed to that part of its work.  There is accordingly some surmise involved in my estimate of an amount of approximately $10,000 being allowed for that work.  I have fixed on that figure taking into account the apparently extensive nature of the work involved.

14. The amount to be allowed for the replacement of the Alspec doors will accordingly be $181,711.

    Conclusion on damages before reduction for contributory negligence

15. In summary, I assess the applicants’ damages, before reduction for contributory negligence, as follows:

(a)	Replacement of the Alspec doors	$181,711.00
(b)	Replacement of highlight windows	$16,515.40
(c)	Cost of future repair of Alspec windows	$45,000.00
(d)	Wasted expenditure on shutters	$15,149.00
(e)	Other remedial work	$21,318.00
Total	$279,693.40

The reduction for contributory negligence

1. On my assessment, the culpability of Arborcest commences with its initial suggestion and effective recommendation of the inappropriate Hafele doors.  That set off the whole sorry saga.  Arborcrest was also in error in proposing the Alspec doors as the replacement system given their inappropriateness for the severe weather conditions experienced at the Property.  There were also shortcomings in the manner of the installation of the Alspec doors as indicated by the evidence of Mr Jovanovic and Mr Burdett.  Mr Parisi knew when he recommended the replacement of the Hafele doors with Alspec doors that the applicants had not installed appropriate strip drains.  Despite that, he proceeded with the installation and used a form of sill and sub‑sill which was less than optimal.  His own evidence acknowledged that deeper sills and sub‑sills could have been installed. 

2. I have accepted that Arborcrest was not itself obliged to supply and install head and jamb flashings.  However, that does not mean that it had no part to play in ensuring that there was an appropriate interface between the doors and windows which it did install and the building envelope.  I refer again to Mr Roach’s evidence, which I have accepted, that it is the responsibility of the window supplier/installer to understand how the windows it is installing will be flashed to a building, even if the responsibility for the provision of the flashings is allocated to others and to his evidence that the window system designer/fabricator/installer is expected to notify the client if the site conditions are not appropriate to achieve the BCA requirements.  To my mind, his evidence that issues concerning the interface between windows and doors and the building envelope are matters sorted out between the respective trades on site is a matter of common sense.  Arborcrest did not involve itself in that process.  It is a matter of surprise that it did not liaise with the applicants or with Mr Proske about the installation of appropriate head and jamb flashings, and other flashings, when it carried out the initial installation of the Hafele doors and windows.  It is a matter of even greater surprise that it did not raise the same issues at the time it installed the Alspec doors.  It knew that none had been installed and that, if head and jamb flashings were to be installed, that had to occur at the time of the installation of the Alspec doors.  It was not something which could be done later.  Further it had known that Mr Proske was not advising the applicants with respect to the doors and windows.

3. On the other hand, the applicants were at fault in failing to provide the conditions in which the Alspec doors had the best prospect of success.  The failure of the applicants to install appropriately located strip drains was a glaring error.  I note Mr Proske’s evidence concerning Mr Ahlburg’s dismissive attitude when their omission was raised with him.  Likewise, the omission of Mr Ahlburg to ensure that flashings were installed was serious mistake.  It seems to have been attributable to Mr Ahlburg’s lack of attention to matters of detail. 

4. I accept that Mr Ahlburg’s relative inexperience must have been obvious to Mr Parisi.  It should have made it even more evident to him that he needed to involve himself in the obtaining of an appropriate interface between the windows and doors he installed and the building envelope, even if Arborcrest was not itself to supply the necessary flashings. 

5. So there is responsibility to be apportioned on both sides. Any assessment of contributory negligence involves a broad assessment of the respective culpability of the wrongdoer against the responsibility of the applicant in failing to take reasonable steps in its own interest. See the definition of contributory negligence in s 3(1) of the Law Reform Act and Commissioner of Railways v Ruprecht (1979) 142 CLR 563 at 570‑573.

6. Putting the cost of replacement of the highlight windows to one side, I consider that the respective degrees of responsibility of the applicants and the respondents for the loss and damage are approximately equal.  I will accordingly reduce the damages to which the applicants are otherwise entitled for all items, other than the cost of replacing the highlight windows, by 50%.

7. The position of the highlight windows should be considered separately because the absence of the strip drains did not bear upon their inadequacy.  In respect of that item, I consider that the appropriate reduction is 30%.

8. This means that the applicants are entitled to damages of $11,560.78 in respect of the cost of replacement of the highlight windows and $131,589 respect of the remaining items making up the damages.  The total is $143,149.78. 

   Summary and conclusions

9. In summary, I uphold the applicants’ claim of breach of contract based on Arborcrest’s failure to comply with the warranty as to fitness for purpose implied by s 32(2)(f) of the BWC Act.

10. I assess the applicants’ damages, after allowance for the applicants’ contributory negligence, at $143,149.78.

11. The applicants’ remaining claims, including their claim against Mr Parisi personally, are dismissed.

12. I will hear from the parties as to interest and costs and as to the orders which are appropriate to give effect to these reasons. 

I certify that the preceding five hundred and ninety-nine (599) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice White.

Associate:

Dated:       21 October 2020