Lauro v The Marble House of Australia Pty Ltd
[2013] SASC 186
•2 December 2013
SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
LAURO v THE MARBLE HOUSE OF AUSTRALIA PTY LTD
[2013] SASC 186
Judgment of The Honourable Justice Blue
2 December 2013
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - REPUDIATION AND NON-PERFORMANCE
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - FORMATION OF CONTRACTUAL RELATIONS
DAMAGES - MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT - GENERAL
The Marble House of Australia Pty Ltd contracted with Mr Lauro to supply and install granite kitchen benchtops and supply marble floor tiles. Mr Lauro rejected the benchtops and tiles because he claimed the they were not in accordance with the contract. He sued Marble House for, inter alia, damages for breach of contract. A Magistrate dismissed Mr Lauro's action.
Mr Lauro appeals against the dismissal of his action. The issues which arise on appeal are:
1. Did the Magistrate err in finding that it was not an oral term of each contract that Marble House would pay interest on the deposit paid by Mr Lauro at 15 percent per annum if the benchtops or tiles were not supplied?
2. Did the Magistrate err in finding that the granite benchtops delivered by Marble House complied with the benchtop contract? If yes, was Mr Lauro entitled to damages of $555 and $400 for additional costs incurred? If not, was Marble House entitled to $4200 for them?
3. Did the Magistrate err in rejecting Mr Lauro’s case that he terminated the tile contract for breach of an essential condition? If yes, is he entitled to damages of $7966 for additional costs incurred?
Held by Blue J dismissing the appeal:
1. The Magistrate was entitled to find that it was not an oral term of each contract that Marble House would pay interest on the deposit (at [61]-[67]).
2. The Magistrate was entitled to reject Mr Lauro's case that the granite benchtops complied with the benchtop contract. The evidence adduced by Mr Lauro failed to show that the granite benchtops were not fit for purpose (at [83]-[95]):
a) The Magistrate was entitled to find that Marble House was entitled to retain $4200 on account of the value of the granite benchtops which it had supplied (at [101]-[102]).
b) The Magistrate was entitled to find that, even if there was a breach of contract, Mr Lauro was not entitled to damages of $555 for additional costs because he failed to prove the market value of Sorrento Verde granite benchtops as at August 2005 and he was not entitled to damages of $400 for additional costs because he failed to prove that he paid that amount for removal of the benchtops (at [112] and [117]-[120]).
3. The Magistrate was entitled to reject Mr Lauro’s case that he was entitled to loss of value of bargain damages in respect of the tiles. Mr Lauro did not communicate in a manner capable of making time of the essence for supply and delivery under the tile contract (at [134]-[138]).
Sale of Goods Act 1895 (SA) s 14(a), s 50, referred to.
Clarke v Cort (1840) Cr & Ph 154; 41 ER 449; Creamoata Ltd v Rice Equalization Association Ltd (1953) 89 CLR 286; DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; Kostka v Addison [1986] 1 Qd R 416; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457; Tony Lee Motors v MS MacDonald (1974) Ltd (1981) 2 NZLR 281, considered.
LAURO v THE MARBLE HOUSE OF AUSTRALIA PTY LTD
[2013] SASC 186Magistrates Court: Appeal Civil.
Blue J:
This is an appeal against dismissal by a Magistrate of an action following trial.
In August 2004, the plaintiff/appellant, Mr Lauro, entered into contracts with the respondent/defendant, The Marble House of Australia Pty Ltd (“Marble House”), for the supply and installation of granite kitchen benchtops and purchase of marble floor tiles.
In September 2005, Marble House delivered and started to install the granite benchtop. Mr Lauro rejected them because he claimed that their quality was not in accordance with the contract. In September/October 2005, the benchtop and tile contracts were terminated.
Mr Lauro sued Marble House in the Magistrates Court for damages for breach of contract. He also claimed interest on the deposits which had been paid at 15 per cent per annum pursuant to alleged oral terms of the contracts.
In June 2012, a Magistrate dismissed Mr Lauro’s action. Mr Lauro appeals against that dismissal.
The appeal raises the following principal questions:
1.Did the Magistrate err in finding that it was not an oral term of each contract that Marble House would pay interest on the deposit at 15 per cent per annum if the benchtop or tiles were not supplied?
2.Did the Magistrate err in finding that the granite benchtop delivered by Marble House complied with the benchtop contract? If yes, is Mr Lauro entitled to damages of $555 and $400 for additional costs incurred? If no, was Marble House entitled to $4,200[1] for them?
3.Did the Magistrate err in rejecting Mr Lauro’s case that he terminated the tile contract for breach of an essential condition? If yes, is Mr Lauro entitled to damages of $7,966 for additional costs incurred?
[1] All dollar figures are inclusive of GST.
Background
Marble House carries on business as a supplier of natural stone products including granite benchtops and marble tiles. It is owned and controlled by Mr and Mrs Scardigno. Its head office and showroom is at Kent Town and its factory and warehouse is at Gepps Cross.
Mr and Mrs Lauro purchased land at Rostrevor. In November 2003, Mr Lauro entered into a contract with a builder to construct a large two storey house on the land for approximately $450,000. In July 2004, Mr Lauro instructed the builder to stop work and took over construction himself.
In July 2004, Mr and Mrs Lauro visited the Kent Town showroom and asked Mr and Mrs Scardigno to quote for the supply and installation of granite surfaces for the kitchen comprising benchtops, a servery top and splashbacks. He also asked Marble House to quote for the supply of marble floor tiles for common areas, namely the family room, dining room, lunch room and passage. Mr Scardigno showed to Mr Lauro samples of granite and marble tiles.
Mr Scardigno gave evidence, which was not challenged or contradicted, that he explained to Mr Lauro that Botticino tiles could be either Classico or Semi Classico and that the Classico have more gold veins but are more susceptible to the clay coming away in the vicinity of the veins. Mr and Mrs Scardigno gave evidence, which was not challenged or contradicted, that they had never purchased Botticino Fiorito tiles, which were inferior to both Classico and Semi Classico. Mrs Scardigno’s evidence that Mr Lauro wanted the tiles calibrated and bevelled but left the thickness to Marble House was not challenged or contradicted.
Mr Lauro selected Sorrento Verde granite for the kitchen surfaces and Botticino Semi Classico marble tiles. Mr Scardigno gave to Mr Lauro a sample Semi Classico tile (exhibit D12). Mr Scardigno claimed and Mr Lauro denied that Mr Lauro was given a sample of Sorrento Verde granite.
On 31 July 2004, Mr and Mrs Lauro returned to the Kent Town showroom and spoke to Mr and Mrs Scardigno. Mr Lauro and his son Daniel Lauro gave evidence that Daniel was also present on this occasion. Mr and Mrs Scardigno gave evidence that generally Mr Lauro was accompanied by his wife but on one occasion Daniel was present. On this occasion, Mr Lauro was given two quotations by Mr and Mrs Scardigno. The quotation for the granite kitchen surfaces was $5,370 for the benchtops and $1,595 for the splashbacks. The quotation for the tiles specified 150 square metres of Botticino Semi Classico tiles 400 mm x 400 mm x 12/13 mm approximately. It totalled $14,685.
Marble House had Verde Sorrento granite slabs generally available for installation when required. However, the Botticino Semi Classico tiles were not routinely kept in stock and were ordered from Italy when required for a particular customer.
On 12 August 2004, Marble House prepared revised quotations for the granite kitchen surfaces and marble tiles. In relation to the kitchen surfaces, a single price was now shown for both the benchtops and splashbacks and the total was reduced to $6,495. In relation to the marble tiles, an “important notice” was added that the material was natural stone which contained variations and that, on arrival in store, tiles must be inspected and if not accepted Marble House would refund the deposit.
On 16 August 2004, Mr Lauro and Daniel Lauro returned to the Kent Town showroom and spoke to Mr and Mrs Scardigno. Mr Lauro either had already received or was then given the two revised quotations dated 12 August 2004. Mr Lauro signed each quotation as accepted and gave it to Mr and Mrs Scardigno.
The quotation for the granite kitchen surfaces was in the following terms:
REVISED QUOTATION
Site – 107 Stradbroke Rd, Rostrevor
RE: KITCHEN BENCHTOP, SERVERY TOP & SLPASHBACKS as per plan supplied.
We are pleased to submit the following quotation –
MATERIAL: VERDE SORRENTO Granite 30mm
EDGE: 3mm PENCIL ROUND
SUPPLY & INSTALL: $6495-00
PLEASE NOTE:
Splashbacks will be 20mm thickness.
GST has been included in the above price.
Templates are to be supplied by the cabinetmaker or owner and The Marble House is responsible to check templates on site.
A deposit of 50% is required on order confirmation to secure the material selected, balance on installation.
The quotation for the marble tiles was in the following terms:
QUOTATION
Site: 107 Stradbroke Road – ROSTREVOR
RE: TILES We are pleased to submit the following quotation.
MATERIAL: Botticino Marble – Semi Classico Calibrated/bevel edge
SIZE: 400 X 400 X 12/13mm approx
150m2 x $89 = $13,335 + 10%
TOTAL: $14,685.00 EX-FACTORY
IMPORTANT NOTICE
This material is a natural stone comprising natural veins, pittholes, filling, crossvein cracks and shade variation from tile to tile and must be accepted as part of its character. On arrival of goods in store tiles must be inspected by randomly selecting from each crate.
Should you not accept the material we will refund the deposit within 14 days of inspection.
No complaints will be accepted once tiles are fixed.
PLEASE NOTE –
GST has been included in the above price.
1/3 deposit is required, $4895.00, on order confirmation to secure the material selected, balance payable on arrival of goods in store.
Mr Lauro subsequently claimed, and Mr Scardigno subsequently denied, that on 16 August 2004 it was orally agreed between them that, if it transpired that Marble House could not supply the materials ordered, each contract would be null and Marble House would pay 15 per cent per annum on the relevant deposit paid.
On 17 August 2004, Mr and Mrs Lauro paid into Marble House’s bank account the deposits of $3,247.50 and $4,895.
Marble House ordered Botticino Semi Classico tiles from Marmi S Rocco. Marble House ordered 300 square metres of 400 mm x 400 mm tiles. At the same time, Marble House ordered 110 square metres of smaller, 305 mm x 305 mm Botticino Semi Classico tiles.
On 26 October 2004, Marmi S Rocco issued an invoice to Marble House. The invoice included (302 square metres) of polished Botticino Semi Classico 400 x 400 calibrated and bevelled tiles. It also included 111 square metres of polished Bottincino Semi Classico 305 x 305 tiles.
On about 6 December 2004, the tiles from Marmi S Rocco were discharged by Customs at Port Adelaide.
Some time thereafter, Mr Lauro was informed that the tiles had arrived at Marble House’s Gepps Cross warehouse. A stock card shows 302 square metres of 400 mm x 400 mm tiles as having arrived from Marmi S Rocco, and 111 square metres of 305 mm x 305 mm tiles as having also arrived from that manufacturer. Mr Lauro, accompanied by his wife and son Daniel, attended to inspect the tiles. He was shown a box of tiles by Mr and Mrs Scardigno’s nephew Nick Scardigno. Mr Lauro’s case at trial was that he was shown tiles which were the wrong dimensions and of inadequate quality. As to dimensions, his case was that the tiles he was shown were 300 mm x 300 mm (rather than 400 mm x 400 mm), and were not bevelled or calibrated.
As to quality, Mr Lauro’s case was that the tiles he was shown were of inadequate quality. Both Mr Lauro and Daniel Lauro were adamant that the tiles they were shown were Fiorito and Mr Lauro said that the box showed that their origin was India and not Italy. The Magistrate rejected this evidence as to quality and his rejection is not challenged on appeal.
Mr Scardigno gave evidence that, upon hearing that Mr Lauro had complained about the tiles at the warehouse, he asked his employees to bring some random boxes of tiles, he checked them and found that they were good quality, with better calibration than he expected.
Subsequently, Mr Lauro had a discussion with Mr Scardigno concerning the tiles. It was common ground at trial that Mr Lauro was unhappy with the tiles and complained that they were Fiorito and not Semi Classico. Mr Scardigno gave evidence that Mr Lauro further complained that there were insufficient gold veins, which Mr Lauro denied. Mr Lauro gave evidence that he further complained that the tiles were 300 mm x 300 mm and not calibrated or bevelled, which Mr Scardigno denied.
There was also a dispute about the discussion concerning timing for replacement tiles. Mr Lauro gave evidence that the replacement tiles were to arrive within two months. Mr Scardigno gave evidence that Mr Lauro said there was no hurry and it would still take him one or two years to complete his house.
Mr Scardigno gave evidence that he made telephone enquiries about the availability of stock in Italy.
On 17 June 2005, Mr Scardigno sent a facsimile message to Gamstone in Italy. He requested a container containing, amongst other things, 160 square metres of Botticino Semi Classico tiles 400 x 400 x 12 mm. He said that “tiles must be bevelled, calibrated and good quality as client has already rejected first shipment”.
In September 2005, Mr Lauro informed Marble House that he was now ready for the granite benchtops to be made up and installed.
On 17 September 2005, Marble House employees attended at the Lauro house and made a template for the granite benchtops. The granite was prepared and cut at the factory on 19, 20 and 21 September. On 21 or 22 September 2005, Marble House delivered to the property the granite benchtops and employees of Marble House commenced to install them on the kitchen bench. Mr Lauro was unhappy with the granite and telephoned Mr Scardigno.
On 22 September 2005, Mr Scardigno and Nick Scardigno attended at the house and met with Mr and Mrs Lauro. Mr Lauro complained that the benchtops had pit holes and were unsatisfactory. Mr Scardigno explained that the pit holes could be filled with a lacquer and gave a small test demonstration. Mr Lauro instructed Mr Scardigno not to proceed with the application of the lacquer and said that the granite was unacceptable. Mr Scardigno offered to exchange it for a different type of granite to the same value to be selected by Mr Lauro, either from Marble House or an alternative supplier. There was a dispute at trial as to whether Mr Scardigno accepted that the granite was faulty or merely offered to replace it as a gesture of goodwill.
On 24 September 2005, Mr and Mrs Lauro with Daniel attended at the Gepps Cross warehouse and met with Nick Scardigno. There was no granite acceptable to Mr Lauro.
On 25 September 2005, Mr Lauro sent by facsimile a letter to Mr Scardigno in Italian. He requested that Marble House remove the granite. He said that the only possible alternative stone seemed to be Nero Galaxi which should be provided without additional cost as had been offered by Mr Scardigno. In postscript, he said that, as regards sourcing the materials from Victoria (which apparently referred to the marble tiles), the order was frozen until he confirmed in writing.
On 26 September 2005, Mr Tropeano, Marble House’s solicitor, sent by facsimile a letter in response. He set out his understanding that Mr Lauro was not happy with the kitchen benchtops and was confirming not to proceed until further notice with the marble tiles. He stated that Mr Lauro had repudiated the tile contract and Marble House accepted the repudiation and terminated the contract. He said that the deposit for the tiles would be returned in full when Mr Lauro gave an address for the purpose of sending the cheque. He said that Marble House regarded the benchtop contact as still binding and was prepared to honour its obligations thereunder. He said that it proposed that a building inspector attend and provide a report to identify any rectification required.
On 27 September 2005, Mr Lauro sent a facsimile to Mr Tropeano. He said that Mr Scardigno had accepted that the granite had defects by way of pit holes and cracks and offered to replace it with another stone of Mr Lauro’s choice at no extra cost. He said that the good relationship could continue on condition that Marble House removed the faulty granite from his home by 30 September and otherwise he would instruct another contractor to remove and replace the granite. He said that he had not terminated the contract/s with Marble House but was forced to seriously contemplate it. He referred to the clause in the tile contract providing for refund of the deposit if the material was not accepted.
On 4 October 2005, Mr Lauro sent by facsimile a letter to Mr Tropeano. He said that Marble House had supplied a non-hygienic stone, had offered to dismantle the benchtop and had insisted that this occur. He said that Marble House had utilised his deposits since 2004 and demanded a return of the money with the “compute of the overdraft interest”.
On 5 October 2005, Mr Tropeano sent by facsimile a letter to Mr Lauro dated 3 October 2005. He said that a consulting engineer, Mr Franz Wenger, had been appointed to provide an expert report in relation to the kitchen benchtop and no other works would be provided until that issue had been resolved. He said that, if Mr and Mrs Lauro wished to terminate the benchtop contract, Marble House would consider that and only charge for work performed to date.
On 7 October 2005, Mr Tropeano sent a facsimile to Mr and Mrs Lauro requesting an address for the refund of the tile deposit.
On 8 October 2005, Mr Lauro sent a facsimile to Marble House. He requested refund of his deposits of $8,142.50 plus the compute of overdraft interest of $1,221.37 for the use of his money for 15 months plus $1,000 for stress.
On 11 October 2005, Mr Tropeano wrote to Mr and Mrs Lauro. He said that Marble House accepted the termination of the tile contract and the benchtop contract. $4,200 would be deducted from their deposits on account of work done to date in respect of the kitchen and the balance of $3,942.50 would be refunded to an address to be provided by Mr and Mrs Lauro.
Mr Lauro’s case at trial was that in October 2005 he organised for his joiner to remove the granite from the kitchen and he paid $400 for this.
On 30 November 2005, Mr Tropeano sent a letter to Mr and Mrs Lauro enclosing a cheque for $3,942.50.
In December 2005, Marble House sold to Mr Tropeano some of the Botticino Semi Classico marble tiles which had been ordered for Mr and Mrs Lauro. Mr Tropeano subsequently installed them in his office.
On 19 December 2005, Black Cleland, acting for Mr and Mrs Lauro, wrote to Mr Tropeano. They alleged that there had been an agreement that interest at 15 per cent would be payable in the event that the tiles were not supplied. They requested a refund of the deposit together with interest in respect of the tiles. They alleged that Marble House had supplied a different tile, namely Botticino Fiorito which was not of the same description and was of a different size. They said that Mr and Mrs Lauro did not accept the replacement. They said that the granite benchtop had excessive pitting and was unsuitable for use in food preparation. They sought a refund of that deposit together with 15 per cent interest running from 23 December 2005. They said that the kitchen stone would need to be removed.
On 22 December 2005, Direct Interiors issued an invoice to Daniel Lauro for, inter alia, 131 square metres of Silkstone Nizwa polished tiles 450 x 450 x 12 for $16,711 including the delivery charge.[2] On 14 March 2006, Direct Interiors issued a further invoice for another 24.3 square metres of Silkstone tiles for $3,088.
[2] The invoice also included 16 square metres of black silkstone tiles but they were ultimately returned. The price for black silkstone tiles was $2,851. The invoice also included stainstop for $938.
On 19 and 20 April 2006, Daniel Lauro obtained quotations from International Ceramics Supplies and Italia Ceramics for 150 square metres of Botticino Semi Classico tiles for 400 x 400. One quote was $154 per square metre and the other $155 per square metre.
In August 2006, Mr Lauro entered into a contract with Q Kitchens to supply and install 25 mm Midnight Black granite benchtops for $4,500 and 15 mm splashback around the servery area for $950. In October 2006, Q Kitchens installed the granite benchtops and splashback. In November 2006, A & M Borg supplied and fitted glass splashbacks to the kitchen for $1,600.
On 10 May 2006, Mr Lauro issued a summons in the Magistrates Court against Marble House seeking damages for breach of contract and contractual interest. The particulars of claim pleaded breach of, inter alia¸ an implied term of the benchtop contract of fitness for purpose because of defects and imperfections and defective workmanship. It pleaded representations which induced Mr Lauro to enter into the tile contract, which were false because the tiles were not of best quality, not veined throughout with a gold colour, did not have edges bevelled and were not calibrated to uniform fitness. It pleaded an oral agreement on 31 July 2004 that interest of 15 per cent would be payable on the deposits in the event that the tiles and benchtop were not supplied.
Mr Lauro’s case at trial
Mr Lauro pleaded causes of action for breach of contract, misleading and unconscionable conduct under the Trade Practices Act 1974 (Cth) and misrepresentation under the Misrepresentation Act 1972 (SA). By the time of final addresses, he abandoned the causes of action other than breach of contract.
Mr Lauro’s case in contract was that:
1.it was an oral term of each contract that he was entitled to interest at 15 per cent per annum on the amount of the deposit;
2.he was entitled to damages, including for loss of bargain, for breach of the benchtop contract due to defective materials and workmanship; and
3.he was entitled to loss of bargain damages for repudiation of the tile contract.
Mr Lauro’s claim for damages for breach of the granite contract comprised:
(a)return of $4,200 appropriated by Marble House out of the deposits towards the cost of the benchtops supplied;
(b)$555 being the difference between the contract price and the cost of substitute benchtops;
(c)$400 being the cost of removal of the granite benchtops;
(d)$750 being the cost for replacement of a sink damaged by Marble House;
(e)consequential losses being the cost or value of storage in the garage (claimed in the original pleading at $100 per day); and
(f) delay in substantial completion of the house (claimed in the original pleading at $200 per day).
Mr Lauro claimed damages for repudiation of the tile contract comprising:
(a)$7,966 being the difference between the contract price and the cost of purchasing substitute tiles;
(b)consequential losses being the cost or value of storage in the garage and of delay in substantial completion of the house (being the same losses claimed in respect of the benchtop contract).
The Magistrate made adverse credit findings in relation to the evidence of Mr Lauro and Daniel Lauro. The Magistrate rejected each of the three principal claims. The Magistrate rejected in any event each of the heads of damages on the assumption that liability had been established (except the claim for $7,966 which he did not expressly address). The Magistrate’s credit finding was based in part on the Lauros’ evidence concerning the claimed consequential losses.
On appeal, Mr Lauro contends that the Magistrate erred in respect of each of the three principal claims. He contends that the Magistrate erred in rejecting the heads of damage listed at paragraph [52] in (a), (b) and (c) as well as at paragraph [53] (a). Mr Lauro does not challenge the Magistrate’s rejection of the heads of damage referred to at [52] (d), (e) and (f) and [53] (b). Mr Lauro does not challenge the Magistrate’s rejection of his defective workmanship case in respect of the benchtop.
Contractual interest
Mr Lauro pleaded that it was a term of each of the tile and benchtop contracts that:
an interest rate of 15 per cent would be payable by Marble House to the plaintiff in the event the [tiles/granite] were not supplied, such interest rate to apply to a deposit of [$4,895/$3,247.50] paid by the plaintiff to Marble House to secure the material selected.
Mr Lauro claimed interest at 15 per cent per annum on the deposit of $3,247.50 for the benchtop from 17 August 2004 to the date of judgment. He claimed interest on the deposit of $4,895 for the tiles from 17 August 2004 to 30 November 2005 and thereafter until judgment on the unpaid balance of $952.50.
Mr Lauro and Daniel Lauro gave evidence of a discussion with Mr and Mrs Scardigno whereby Mr Scardigno agreed to pay 15 per cent on the deposits if Marble House could not supply the tiles or granite. Mr and Mrs Scardigno denied any such discussion.
The Magistrate made adverse credit findings in relation to Mr Lauro and Daniel Lauro and favourable credit findings in respect of the evidence of Mr and Mrs Scardigno. The Magistrate referred to the fact that the “Important Notice” incorporated in the tile contract was not deleted and the interest agreement was not included on that document. He concluded:
I reject the plaintiff’s claim that the defendants promised to pay 15% on monies held by them. I do not believe Daniel Lauro to be a witness of truth and therefore do not consider his testimony has any corroborative value. Mr and Mrs Scardigno both gave credible and natural accounts and denied the assertion concerning the 15%. Their evidence is that they have never made such a promise to any of their clients in the past and it is unrealistic to imagine that such an oral term would form part of a contract for the supply of goods. This aspect of the plaintiff’s claim is unfortunately another unconvincing afterthought and is rejected as a convenient invention.
On appeal, Mr Lauro contends that the alleged oral term was not implausible because Mr Lauro had been friends with the Scardignos for some years and the dealing was not a typical arms’ length contract. He contends that the agreement was not implausible because the tile contract expressly contemplated that he might not be satisfied with the tiles in which event his deposit would be refunded. He contends that the Magistrate should not have dismissed a diary note dated 16 August 2004 as an invention.
I agree with the Magistrate’s assessment that the alleged interest term was inherently implausible. It is inherently unlikely that Mr Scardigno would volunteer, as claimed by Mr Lauro and Daniel Lauro, to pay interest on the deposit when no request was made by Mr Lauro. It is inherently unlikely that he would have offered an extremely high rate of 15 per cent per annum. In relation to the benchtop contract, Marble House had Sorrento Verde slabs in its possession and there was no suggestion by Mr Lauro or Daniel Lauro that in the pre-contractual discussions there was any doubt about the ability of Marble House to supply the granite for the benchtops. While the tile contract explicitly contemplated that Mr Lauro might choose to reject the marble tiles when he saw them, there was no suggestion by Mr Lauro or Daniel Lauro that in the pre-contractual discussions there was any prospect that Marble House would not supply marble tiles at all. Mr and Mrs Scardigno’s evidence that there was no doubt about their ability to supply the granite and the marble tiles was not challenged.
There were inconsistencies in Mr Lauro’s evidence as to occasions on which interest was discussed. In evidence-in-chief, he said that the discussion occurred on 16 August 2004 being the day on which he signed the contracts. In cross-examination, he said that the discussion occurred on 31 July 2004 in the presence of his wife and he was not sure whether it was discussed again on 16 August 2004. His statement of claim had pleaded a discussion on about 31 July 2004. Mrs Lauro was not called as a witness at trial.
There were inconsistencies in Mr Lauro’s claims concerning interest over time. On 27 September 2005, he wrote to Mr Tropeano in which he referred to the clause in the tile contract providing for a refund of the deposit if the material was not accepted. He said “interest will be since the absurd delay” as which suggestive of no prior agreement for interest. On 4 October 2005, he wrote to Mr Tropeano demanding return of his money “with the compute of the overdraft interest”. He did not claim to be entitled to interest at 15 per cent per annum, and such a rate was greatly in excess of overdraft interest rates at the time. On 8 October 2005, he wrote to Mr Tropeano claiming interest of $1,221.37 described as “due overdraft interest” calculated over 15 months. Interest of $1,221.37 calculated over 15 months implies an interest rate of 12 and not 15 per cent per annum. On 19 December 2005, Black Cleland wrote to Mr Tropeano. They claimed that it was a term of the tile contract that interest be paid on the deposit and claimed interest calculated from 17 October 2004. They did not claim that there was any such term of the benchtop contract and claimed interest at 15 per cent per annum only from 23 December 2005.
It is inherently implausible that Mr Lauro made the diary note, exhibit P6, on 16 August 2004. The note appears in Italian. The English translation is as follows:
Luigi (signed the contract for the tiles that will arrive in two months from Italy plus marble for the kitchen).
It’s clear that if he does not have the materials ordered, the contract/s are null and Luigi will offer 15 per cent interest as he does with others.
Mr Lauro’s evidence was that he was a strong friend of Mr Scardigno and Mr Scardigno said not to worry about the terms written on the contracts because they were friends. It is inherently unlikely, on Mr Lauro’s own evidence, that he bothered to make a diary note at the time. There was no reason, on Mr Lauro’s own account, to doubt that Mr Scardigno would not have the materials ordered.
The Magistrate saw and heard the witnesses and prima facie was entitled to make the credit findings which he did. Mr and Mrs Scardigno both denied any conversation about interest and they were not challenged in cross-examination in this respect.
In relation to that credit finding, Mr Lauro contends that the Magistrate’s comment about Mr Lauro’s Italian diary note bearing the date 16 August 2004 that he was “deeply suspicious of its origin and authenticity” was unwarranted. The Magistrate was entitled to take that view for the reasons given above. Mr Lauro contends that the Magistrate failed to give sufficient weight to his evidence that he was a prolific diary keeper and kept a contemporaneous account of his dealings. This contention depends upon the Magistrate accepting Mr Lauro’s evidence in the first place and does not detract from the grounds for suspicion concerning the authenticity of the diary note. Mr Lauro contends that Daniel Lauro was careful to limit his evidence to what he knew, admitted when he could not recall matters and did not embellish. Nevertheless, it was open to the Magistrate to reject the credibility of Daniel Lauro’s evidence.
Mr Lauro fails on this ground of appeal.
Benchtop contract
The Magistrate found that there was no breach by Marble House of the benchtop contract and that, in any event, Mr Lauro failed in proving each of the heads of damages claimed.
Fitness for purpose
Mr Lauro pleaded that it was a term of the benchtop contract that:
the materials when supplied and installed would be reasonably fit for use as a kitchen benchtop, servery top and splashback.
Section 14(a) of the Sale of Goods Act 1895 (SA) (“the Act”) provides:
Subject to the provisions of this Act, and of any Statute in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows:
(a) where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply (whether he be the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purpose: Provided that in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose;
The expert evidence
Mr Lauro called as an expert witness Mr Mann, who described himself as a dimension stone consultant and testing specialist. Marble House called as an expert witness Mr Wenger who described himself as a certified master stonemason.
The complaint made by Mr Lauro when he rejected the benchtops in September 2005 was that their surface contained thousands of microscopic pit holes. Mr Scardigno gave evidence that exhibit D12 was typical of the degree of microscopic pitting of Sorrento Verde granite and that it was comparable to the level of microscopic pitting in the benchtops supplied to Mr Lauro. Mr Scardigno also gave evidence that microscopic pitting is present in the majority of granite supplied for benchtops in South Australia, although it depends upon the particular variety of granite.
Mr Mann gave evidence that he collected a small section of benchtop from Mr Lauro and applied certain tests to it. Mr Mann was asked by Mr Lauro to evaluate the section provided to him against section 3.2.3(b) of the Food Safety Standard (“the commercial food standard”). That standard applied to the preparation of food by commercial operations such as restaurants and required that food contact surfaces must be:
unable to absorb grease, food particles and water if there is a likelihood that they will cause food contamination.
Mr Mann gave evidence that he was not generally familiar with Verde Sorrento and did not recall having seen it previously. He described the microscopic pits which he saw on the section provided by Mr Lauro and described them as greater than typical of a fine grained granite such as Adelaide Black granite. Mr Mann expressed the opinion that the segment provided to him by Mr Lauro did not comply with section 3.2.3(b) and was not fit for use as a food contact surface such as a kitchen benchtop.
Mr Mann applied a water absorption test to the specimen provided by Mr Lauro and said that it complied with an American standard specification for the use of granite for general construction being ASTM C615. He performed two staining tests, exposing the granite to a standard green staining agent and to olive oil overnight. The green staining agent did not penetrate but the oil penetrated through the full thickness of the benchtop. He also applied a flexural strength test to the specimen and measured flexural strength at 6.6 MPa compared to the ASTM C615 granite specification at a minimum of 8.27 MPa.
Mr Wenger collected the granite benchtops from Mr Lauro’s address in 2010. He gave evidence that Verde Sorrento is a medium to coarse grain granite which is used for benchtops and other purposes. His evidence was that processing of the granite exposes the large granular structure of the stone. He gave evidence that pit marking represented the flaking of crystal particulates as a result of sawing and polishing of natural stone. It occurs in all granites and is generally more pronounced in medium to large crystal structure natural stone types. He gave evidence that the pit marking of Mr Lauro’s benchtops was within the range expected of Verde Sorrento generally. He expressed the opinion that Mr Lauro’s benchtops were commercial grade and suitable for use as kitchen benchtops.
Mr Wenger undertook an oil penetration test on one of the panels he collected from Mr Lauro. He left it overnight in the same manner as Mr Mann had done. He observed no penetration and observed pearling of the oil on the surface, which he said was typical when a granite has been sealed.
The Magistrate’s reasons
In his reasons for judgment, the Magistrate referred to and set out cross-examination of Mr Mann in which it was put to him that, if the surface was kept clean and dry, there was no inherent likelihood of food contamination. Mr Mann did not take issue with that proposition but responded that it was irrelevant to his report because he had been asked to express an opinion on the assumption that the food commercial standard had application. It was common ground at trial that Mr Lauro’s house was not subject to the standard. The Magistrate also referred to evidence by Mr Wenger that, if not sealed, most granites absorb oil and it was common to apply sealants to prevent this occurring.
The Magistrate accepted Mr Wenger’s evidence, which he found was not contradicted by Mr Mann’s evidence, that typically Verde Sorrento granite absorbs oil and that it is common practice to apply a sealant to prevent this occurring. The Magistrate found that the granite benchtops supplied to Mr Lauro were not unfit for purpose in this respect.
In relation to the flexural strength, the Magistrate referred to Mr Mann’s cross-examination in which he said that, if properly installed, there should be no reason why the granite benchtops supplied to Mr Lauro would break.
Appeal Contentions
Mr Lauro makes two principal complaints on appeal.[3] Mr Lauro’s first complaint is that the Magistrate erred in not finding that the benchtops supplied were not fit for their purpose due to oil absorption. The principal submission made by Mr Lauro is that it was not a term of the benchtop contract that the benchtops be sealed and, absent a sealant, the benchtops supplied were not fit for their purpose as domestic kitchen benchtops because they would tend to absorb oil.
[3] Ground 4.
I reject this contention. Any implied warranty as to fitness for purpose needs to be analysed in the context that this was a sale by sample within the meaning of section 15 of the Act. Mr Lauro selected Sorrento Verde out of the variety of different granites on display at Marble House. This is not necessarily inconsistent with an implied warranty of fitness for purpose arising under section 14(a) of the Act, but the warranty needs to be considered in the context that the variety had been selected by Mr Lauro and the sale was a sale by sample.
At trial, Mr Lauro did not adduce any evidence about the oil absorption properties of Sorrento Verde granite generally, nor did he adduce evidence about the merchantability of Sorrento Verde as kitchen benchtops, nor as to whether it was common in the industry for granite benchtops, and Sorrento Verde benchtops in particular, to be sealed before use.
If Mr Lauro had adduced evidence that Sorrento Verde granite benchtops generally do not absorb oil in their unsealed state, that generally they are supplied on the basis that they are and are to remain unsealed and that the particular granite supplied to Mr Lauro was atypical in its oil absorption properties, he might have established that the granite supplied was not fit for its purpose. He did not adduce any such evidence. The only evidence adduced on these topics was the unchallenged evidence by Mr Wenger that Sorrento Verde is commonly supplied for use as kitchen benchtops, is commonly sealed and that the benchtops supplied to Mr Lauro were typical of Sorrento Verde granite benchtops.
The contrast between the oil absorption tests conducted by Mr Mann and Mr Wenger was extreme. The granite tested by Mr Mann permitted oil penetration through the entire thickness of the benchtop. The granite tested by Mr Wenger did not permit any significant oil penetration at all. The most obvious explanation for the divergence results is that the segment provided by Mr Lauro to Mr Mann was unsealed, whereas the segment collected by Mr Wenger from Mr Lauro and tested by Mr Wenger was sealed. On appeal, Mr Lauro proffers the explanation for the divergence that Mr Wenger did not have expertise in testing oil penetrability and this accounts for the radically different results. By contrast, Marble House proffers the explanation that Mr Mann was given by Mr Lauro the unsealed sample which, on Mr Scardigno’s evidence, Mr Lauro had obtained in August 2004 from Mr Scardigno to Mr Mann.
The oil penetrability test as described by Mr Mann and Mr Wenger was extraordinarily simple and it is implausible that Mr Wenger performed it in such a manner that no oil penetrated when, properly performed, the oil would have penetrated through the thickness of the granite. Mr Wenger gave evidence that he did not apply any sealant to the segment which he was provided and that evidence was not challenged in cross-examination. The inference should be drawn that the segment provided to Mr Mann was unsealed (this being consistent with Mr Mann’s own evidence); whereas the segment provided to Mr Wenger was sealed.
Given this conclusion, there are only two reasons why the segment provided to Mr Mann was unsealed. One potential explanation is that the segment given to Mr Mann was an unsealed sample which Mr Lauro had been given by Mr Scardigno in August 2004. The other potential explanation is that the Marble House had sealed some, but not all, of the granite benchtops supplied in September 2005 and that the segment given by Mr Lauro to Mann happened to be an unsealed one. Mrs Scardigno gave evidence that it was general practice to seal granite benchtops at the factory and her evidence was not challenged or contradicted. If the Marble Factory had a genuine practice of sealing benchtops at the factory, it is unlikely that some benchtops were sealed but not others.
There was no suggestion put to Mr Wenger in cross-examination that, when he collected the granite benchtops from Mr Lauro, he was not provided with all of the benchtops. The segment photographed by Mr Mann appears to be square, and Mr Mann described it as approximately 350 mm x 350 mm, which is characteristic of a sample (a sample tendered by Marble House – exhibit D2 – is square) and uncharacteristic of actual benchtops. In cross-examination, it was put to Mr Mann that he did not know whether the piece he was given was a Marble House piece or a piece that came from somewhere else, and he agreed. Mr Mann was not able to say whether the piece he was given was a sample or a piece of the benchtops supplied by Marble House to Mr Lauro. However, he said that he compared the segment he was given with the benchtops he saw in Mr Lauro’s garage and they shared the same characteristics. However, it is not possible from looking at a benchtop to tell whether it has been sealed. In all of the circumstances, the inference should be drawn that Mr Mann was provided with the August 2004 sample.
Even if that is not the case and Mr Mann was provided with part of the kitchen benchtops, it must be that Marble House had sealed some of the benchtops but not others. On this latter assumption, it is plain from the evidence that Mr Scardigno was willing, at Marble House’s cost, to seal all of the benchtops. On Mr Mann’s evidence, the benchtops would not have exhibited the oil penetrability which he found on his test if they were sealed.
Mr Lauro failed to prove that the granite benchtops supplied to him by Marble House were not fit for their purpose due to oil absorbility.
Mr Lauro contends that there was no term of the contract specifying that Marble House would seal the benchtops and it follows that they were required in unsealed state not to absorb water or oil in order to be fit for their purpose. In relation to the first proposition, Mrs Scardigno’s evidence that it was standard practice for Marble House to seal granite benchtops was not challenged or contradicted. Mr Lauro himself gave evidence that, when he later purchased Midnight Black granite benchtops from Q Kitchens, they were sealed on both top and bottom. As to the second proposition, it does not overcome the fundamental problems concerning fitness for purpose identified above.
Mr Lauro makes an ancillary complaint that the Magistrate should have approached Mr Wenger’s evidence with a greater degree of caution given his past association with Marble House. Mr Lauro does not contend that Mr Wenger’s evidence was inadmissible due to that association. The Magistrate set out in his reasons the past association between Mr Wenger and Marble House. One of Mr Wenger’s companies had contracted to do granite benchtops for a number of months some eight or nine years earlier for Marble House. In addition, Mr Wenger was engaged from time to time by Marble House to provide reports about its benchtops (he also being engaged by Consumer Affairs for the same purpose). The Magistrate saw and heard Mr Wenger and appropriately took into account his association with Marble House in weighing his evidence. In any event, the relevant evidence given by Mr Wenger which is determinative of this appeal was not challenged or contradicted at trial.
Mr Lauro’s second complaint is that the Magistrate erred in failing to find that the granite benchtops supplied to Mr Lauro were not fit for their purpose because their strength was low and did not comply with the American standard, which created a risk of breakage.
In evidence in chief, Mr Mann said that the flexural strength of the benchtop did not relate directly to his opinion that the benchtop was not fit for use as a food contact surface. In cross-examination, Mr Mann accepted that the American standard ASTM 615 referred to general building and structural use as opposed to kitchen benchtops and that the criteria for the different uses were different. He also accepted that, if the granite were of a greater thickness than normal, that would compensate for a lack of flexural strength. He said that the granite segment provided to him by Mr Lauro was 30 mm in thickness, which exceeded the normal thickness.
The overall result of Mr Mann’s evidence as a whole was that he did not express the opinion that the segment shown to him was of inadequate strength. He did not express an opinion that the segment shown to him was atypical of Verde Sorrento. He did not suggest that Verde Sorrento generally was not fit for purpose as a kitchen benchtop. Mr Wenger’s evidence that Verde Sorrento is commonly used for kitchen benchtops was not challenged or contradicted. In these circumstances, the Magistrate did not err in the conclusion which he reached.
On appeal, Mr Lauro’s principal submissions were addressed to oil absorption and flexural strength as opposed to the microscopic pitting which was the reason given by him in September 2005 for rejecting the benchtops. To the extent that the issue of pitting was pursued on appeal, Mr Lauro’s complaint was not justified by the evidence called at trial. The evidence of Mr and Mrs Scardigno and Mr Wenger that microscopic pitting as seen on the specific benchtops supplied to Mr Lauro was typical of all Sorrento Verde granite was not challenged or contradicted. Mr Mann was not familiar with the particular variety of granite being Sorrento Verde. He was unable to give evidence that Mr Lauro’s benchtops were atypical of Sorrento Verde generally.
Monies retained by Marble House
Marble House retained $4,200 from the deposits paid by Mr Lauro on account of the value of the granite benchtops which it had supplied. This was based on evidence by Mr Scardigno being his estimate of that value. The Magistrate observed that Mr Lauro presented no evidence to contradict the accuracy or appropriateness of that amount.
Mr Lauro contends that the Magistrate reversed the onus of proof and that Marble House did not prove that the value of the benchtops supplied was $4,200.[4]
[4] Ground 9.
Mr Scardigno’s evidence was that all of the benchtops were cut and delivered to Mr Lauro’s house. His evidence was that the servery top had also been cut on an approximate basis, leaving a final cut to be made after the benchtops and splashbacks had been installed. His evidence was that it was unlikely that any of that granite could be reused and sold to another customer. He did not suggest that the splashbacks had been cut.
In the original quotation dated 31 July 2004, there was a breakdown given between the 30 mm benchtops and the 20 mm splashbacks of the total quoted price of $6,965. The amount of $5,370 was allocated to the benchtops and $1,595 to the splashbacks. In the revised quotation, the total was reduced to $6,495. A pro rata reduction results in an allocation of approximately $5,000 for the benchtops and $1,495 for the splashbacks.
Mr Scardigno gave evidence, which was not challenged or contradicted, that most of the cost incurred in the supply and installation was in the cost of purchase of the slabs and that most of the labour had been incurred in the cutting and polishing of the benchtops in the factory. His evidence was that little work remained to be done on site to install the benchtops. In those circumstances, Mr Scardigno’s estimate of $4,200 for the benchtops and servery top represented approximately 84 per cent of the total for those items and was eminently reasonable.
The Magistrate did not reverse the onus of proof, but acted on his acceptance of Mr Scardigno’s evidence.
Quantum: price differential
Mr Lauro obtained a quotation from Q Kitchens dated 29 August 2006. The quotation was $4,500 for supply and installation of Midnight Black granite benchtops 25 mm and $950 for supply and installation of Midnight Black splashback 15 mm around the servery area. The benchtops and splashback were installed in October 2006.
On 27 November 2006, A & M Borg issued an invoice to Mr Lauro for $1,600 for supply and fitting of glass splashbacks. The invoice was not tendered but a statement from A & M Borg referring to the invoice was tendered and received in evidence.
Mr Lauro gave evidence that he looked for alternative kitchen benchtops between May and August 2006. He suggested that suppliers of Italian granite who he approached were not willing to supply because they had been told by Mr Scardigno not to deal with him. He did not suggest that he made any inquires before May 2006.
Mr Lauro gave evidence that he selected Midnight Black granite but did not satisfactorily explain why he did not or could not choose Sorrento Verde. He gave evidence that Q Kitchens sealed the granite on the top and bottom.
Mr Lauro gave evidence that the splashback supplied by Q Kitchens was the riser between the benchtop and servery top and that the splashbacks supplied by A & M Borg were glass rather than granite.
The total costs invoiced by Q Kitchens and A & M Borg were $7,050, which was $555 greater than the contract price under the granite contract with Marble House. Mr Lauro claimed the difference as damages for breach of contract.
The Magistrate rejected this claim because he found that Mr Lauro had failed to prove breach of contract and in any event the replacement benchtops were of a different type.
Mr Lauro contends that the Magistrate erred because he could not procure a replacement benchtop of the same type of granite from another supplier.
The Magistrate did not make any finding accepting Mr Lauro’s evidence that he could not obtain Sorrento Verde from a supplier in Adelaide. Mr Lauro’s evidence in that regard was inherently implausible. It was inconsistent with Daniel’s ability to obtain quotes in April 2006 from two suppliers of marble tiles.
The prima facie measure of damages under the Act for breach of contract by non supply is the difference between the contract price and the market value of Sorrento Verde granite benchtops and splashbacks as at August 2005.[5] Mr Lauro did not adduce any evidence of the market value of Sorrento Verde benchtops and splashbacks as at August 2005. If he had done so, the mere fact that he chose instead to use Midnight Black granite and glass splashbacks would not have prevented his recovering the difference based on the market value of Sorrento Verde. In the absence of any evidence about the market value of Sorrento Verde granite benchtops and splashbacks as at August 2005, the Magistrate correctly concluded that Mr Lauro failed to prove loss in this respect.
[5] Sale of Goods Act 1895 (SA) s 50.
Quantum: cost of removal
Mr Lauro claimed $400 which he said he paid to Mr Ellul and Leone Battista to remove the benchtops from the kitchen into his garage in October 2005.
In support of his claim, Mr Lauro produced a cheque butt dated 10 November 2005 on which the payee was shown as Natural Stone Adelaide and the amount as $2,000. Mr Lauro annotated the cheque butt as comprising $200 to Ellul, $200 to Battista and $1,600 to Cucina BJ Incorporated.
The Magistrate rejected Mr Lauro’s evidence that he paid $400 to Mr Ellul and Mr Battista in this way. Mr Lauro complains of the Magistrate’s finding and reasoning.[6]
[6] Ground 8.
Mr Lauro did not adduce any evidence of the length of time spent by Mr Ellul and Mr Battista in removing the benchtops or any hourly rate applied by them for that work. Even if the Magistrate had accepted that the payment was made, Mr Lauro failed to demonstrate that it was reasonable.
It was open to the Magistrate to make the finding which he did. On its face, the cheque butt showed a single cheque for $2,000 made out to Natural Stone Adelaide. It was inherently implausible that Mr Lauro utilised such a manner to make payments of $200 to each of Mr Ellul and Mr Battista. Mr Lauro’s evidence was that Mr Ellul told him that he did not want any payment and Mr Lauro did not explain why he nevertheless paid $400 to Mr Battista in the circumstances.
Marble House tendered particulars of claim filed by Natural Stone Adelaide in a Magistrates Court action in which it sued Mr Lauro for $14,800. Natural Stone pleaded that Mr Lauro engaged it to supply and install granite in the kitchen,[7] laundry, bathrooms, entrance foyer, passageways and staircase between April and June 2006. Natural Stone pleaded that it inspected the granite benchtops installed in the kitchen in April-May 2006 and provided an inspection report to Mr Lauro in May 2006. It pleaded that Mr Lauro then instructed Natural Stone to remove the existing benchtops. There was no plea of any payment or entitlement to payment in respect of such removal.
[7] This was granite other than the benchtops.
In cross‑examination, Mr Lauro said that the particulars of claim were false and that the work undertaken by Natural Stone Adelaide had in fact been undertaken earlier and completed by January 2006. It is inherently implausible that Natural Stone Adelaide would falsify the dates when the work was undertaken by post‑dating them. Marble House tendered an invoice by Natural Stone Adelaide for $30,330 dated 11 July 2006 (exhibit D8). The Black Cleland letter dated 19 December 2005 tends to suggest that the benchtops were still in the kitchen at that stage.
This evidence is inconsistent with Mr Lauro’s evidence that the removal of the benchtops was undertaken in October 2005.
Tile contract
Mr Lauro originally pleaded in May 2006 a misleading and unconscionable conduct case in relation to the tiles. He pleaded a representation that the tiles would be of the best quality, veined throughout with a gold colour and with bevelled edges and uniform thickness calibration and that those representations were false. He did not plead a breach of contract cause of action in relation to the tiles, nor did he plead any complaint about the width of the tiles. In July 2006, Mr Lauro amended the claim to plead breach of the tile contract due to the same properties not being as represented.
In December 2009, Mr Lauro sought leave to amend and in due course filed an amended claim. He pleaded that it was a term of the tile contract that the tiles would be 450 mm x 450 mm in size as well as having the qualities previously pleaded. He pleaded that Marble House breached the tile contract by supplying a Botticino Fiorito of the size 300 mm x 300 mm as well as not being veined throughout with the gold colour, and not being bevelled and calibrated. There was no plea of any subsequent events in relation to the tile contract by way of further breaches after December 2004/January 2005, communications between the parties about the tile contract or termination of the tile contract.
Visit in December 2004/January 2005
It was common ground at trial that Mr Lauro and Daniel Lauro visited Marble House’s Gepps Cross warehouse in December 2004/January 2005 to inspect the marble tiles which had by then arrived. It was common ground that Nick Scardigno showed marble tiles to Mr Lauro and Daniel Lauro on that occasion.
Mr Lauro and Daniel Lauro gave evidence that they were shown Fiorito tiles. They gave evidence that the tiles they were shown were 300 mm x 300 mm in size, not calibrated and not bevelled. They disclaimed any concerns about gold veining. Nick Scardigno was not called by Marble House at trial.
It was common ground that, following the visit to Gepps Cross, Mr Lauro spoke to Mr Scardigno and said that the tiles inspected were unsatisfactory. It was common ground that one reason given by Mr Lauro for the tiles being unsatisfactory was that they were Fiorito and not Semi Classico. There was a dispute about other grounds given by Mr Lauro. Mr Lauro gave evidence that he told Mr Scardigno that the tiles were only 300 mm x 300 mm and were not calibrated or bevelled. Mr Scardigno denied this, but gave evidence that Mr Lauro complained that the tiles did not have sufficient gold veining. This was in turn denied by Mr Lauro. Mr Lauro denied any concern or complaint about gold veining.
The Magistrate accepted Mrs Scardigno’s evidence that no Fiorito tiles were received, and there is no challenge on appeal to that finding. The Magistrate went on to reject the evidence of Daniel Lauro and Mr Lauro that they were shown the wrong size tiles which were not calibrated or bevelled and that Mr Lauro told Mr Scardigno about that.
Mr Lauro complains about the Magistrate’s findings. No case is pursued on appeal about the quality of the tiles shown by Nick Scardigno to the Lauros – either being Fiorito or lacking gold veining. Mr Lauro contends that the evidence of Mr Lauro and Daniel Lauro as to what they saw at Gepps Cross was not inherently improbable and was not contradicted by any evidence from Nick Scardigno. Mr Lauro contends that the Magistrate ought to have found that the failure of Marble House to supply the tiles by August 2005 was a gross delay amounting to repudiation of the contract.[8]
[8] Ground 5.
The objective evidence before the Magistrate corroborated the evidence given by Mr Lauro and Daniel Lauro to the extent that in December 2004 or January 2005 they were shown by Nick Scardigno tiles which were 300 mm x 300 mm and not bevelled and calibrated. Tiles of that description had in fact been ordered by Marble House and received from Marmi S Rocco at the same time as the tiles which were 400 mm x 400 mm calibrated and bevelled. Disclosure of documents was not made by Marble House until February 2011 and the invoice from Marmi S Rocco showing the 300 mm x 300 mm tiles was not disclosed by Marble House until trial and yet Mr Lauro had brought forward a draft pleading in December 2009 that the tiles he was shown were 300 mm x 300 mm and not bevelled and calibrated. The Magistrate ought to have accepted that Mr Lauro and Daniel Lauro were shown such tiles (whether or not they were also shown the 400 x 400 mm bevelled and calibrated tiles which had arrived at the same time as the smaller tiles).
Nevertheless, the crucial issue at trial was not which tiles were shown to Mr Lauro and Daniel at the warehouse but rather what conversation occurred between Mr Lauro and Mr Scardigno after that inspection. In this respect, the Magistrate preferred Mr Scardigno’s evidence over that of Mr Lauro.
He was entitled to make that finding and it was supported by the objective evidence. Mr Scardigno’s evidence that a major complaint was that the tiles were not sufficiently gold veined was corroborated by Mr Lauro’s particulars of claim filed in May 2006 in which he explicitly pleaded that the tiles shown to him did not match the representation that they would be veined throughout with a gold colour. That allegation was rentained in the subsequent versions of the particulars of claim. It was renounced by Mr Lauro and Daniel Lauro in their evidence at trial in strident and unconvincing terms.
Mr Scardigno gave evidence, which was not challenged, that he himself called for inspection of the tiles and verified that they were in accordance with the contract. If Mr Lauro had told him that the tiles were 300 mm x 300 mm and not bevelled or calibrated, it is almost incomprehensible that Mr Scardigno would not have disputed that and demonstrated that tiles of the correct dimensions had in fact been received by Marble House from Italy. Assuming that Mr Lauro and Daniel Lauro were shown the 300 mm x 300 mm tiles, the Magistrate was entitled to find that they were also shown the 400 mm x 400 mm tiles which were bevelled and calibrated. Even if they were not shown those tiles, the Magistrate was entitled to find that, in the discussion between Mr Lauro and Mr Scardigno, no complaint was made about the dimensions (as opposed to the quality) of the tiles.
Repudiation/breach of essential condition
Mr Lauro gave evidence that he did not treat the failure of Marble House to procure tiles in accordance with the contract in December 2004/January 2005 as a breach of contract or repudiation entitling him to terminate the contract. On the contrary, he told Mr Scardigno that Marble House could have further time in which to procure acceptable tiles.
There was a contest on the evidence between Mr Lauro and Mr Scardigno as to the length of that time and as to further follow ups. Mr Lauro’s evidence was that he allowed a further two months and so on successively until about June 2005 when he asked for his deposit back. Mr Scardigno gave evidence that Mr Lauro said that he was in no hurry and that it would be at least a year until he completed the house and that there was no subsequent follow up until the dispute concerning the benchtop contract arose in September 2005. The Magistrate generally preferred Mr Scardigno’s evidence over that of Mr Lauro. There was no independent corroboration of Mr Lauro’s evidence in these respects.
There was no term of the contract stipulating the time for supply of the marble tiles. In order to make time of the essence so as to entitle Mr Lauro to terminate the contract for non supply, it was incumbent on Mr Lauro to give reasonable notice to Marble House of a time by which he required supply (failing which Marble House would be regarded as being in breach of an essential condition of the contract entitling Mr Lauro to terminate).[9] On Mr Scardigno’s evidence which was accepted by the Magistrate, this did not occur. Given that both parties knew that the tiles were required to be delivered from Italy, a significant time would have had to be allowed by Mr Lauro in order to make time of the essence.
[9] Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 638 per Mason CJ, 646-647 per Brennan J and 654-655 per Deane and Dawson JJ.
There was considerable correspondence between Mr Lauro and Mr Tropeano between 25 September and 11 October 2005. In the course of that correspondence, Mr Lauro did not communicate in a manner capable of making time of the essence for supply and delivery under the tile contract. On 27 September 2005, Mr Lauro wrote that he was still waiting for the tiles and asserted that Marble House was in breach of contract, but did not stipulate a time for delivery, make time of the essence or foreshadow an intention to terminate the tile contract.
On 7 October 2005, Mr Tropeano wrote to Mr Lauro stating that he was instructed that the deposit being held for the tiles would be returned once an address was provided. Mr Lauro did not demur from the contract being mutually treated as at an end. On the contrary, on 4 October and again on 8 October 2005, Mr Lauro requested a refund of the deposit which he had paid for the tiles. Aside from asserting an entitlement to interest on his deposits, Mr Lauro did not in September/October 2005 assert an entitlement to damages for breach of an essential condition or repudiation of the tile contract. By Black Cleland’s letter dated 19 December 2005, Mr Lauro did not assert an entitlement to damages.
Mr Lauro did not make time of the essence so as to render the non-delivery of tiles by Marble House breach of an essential term of the contract. Marble House did not repudiate the contract. By their conduct, and in particular by the letters dated 25, 26 and 27 September and 4, 5, 6, 8 and 11 October 2005, the parties terminated the contract by agreement[10] and were thereby discharged from the obligation to deliver and pay for the tiles respectively.[11]
[10] Creamoata Ltd v Rice Equalization Association Ltd (1953) 89 CLR 286 at 306 per Williams ACJ and 326 per Kitto J. This is a stronger case than abandonment, as to which see DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 434 per Stephen, Mason and Jacobs JJ.
[11] McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476-477 per Dixon J.
If Marble House had in December 2004/January 2005 proffered tiles which did not comply with the tile contract, nevertheless Mr Lauro was not entitled to and did not terminate the contract for breach of an essential condition or repudiation and was not entitled to damages for loss of the bargain.
Quantum
Mr Lauro claimed as damages for loss of bargain of $7,966 being the difference between the contract price of $14,685 and the cost of purchasing Silkstone tiles from Direct Interiors in December 2005 and March 2006 totalling $22,651.
The Magistrate made no assessment of damages, having found against Mr Lauro on liability. Mr Lauro contends that he should have assessed damages at $7,966.[12]
[12] Ground 11.
The prima facie measure of damages for non delivery under section 50 of the Act is:
the difference between a contract price and the market or current price of the goods at the time or times when they ought to have been delivered, or, if no time was fixed, then at the time of the refusal to deliver.
The relevant date for the purpose of assessment of the market price of the Botticino Semi Classico tiles was August 2005 when the tile contract was terminated.
Mr Lauro calculated his claim by reference to the cost of purchasing 171 square metres of Silkstone tiles from Direct Interiors in December 2005 and March 2006. This is to be compared with the contract price for 150 square metres of Botticino Semi Classico tiles as at August 2004.
Mr Lauro over‑claimed because his calculations were based on an additional 21 square metres of tiles. Sixteen square metres of those tiles were, on Mr Lauro’s evidence, returned to Direct Interiors for a credit but, in any event, the assessment of damages must proceed on the basis of 150 square metres.
The Silkstone tiles were, on Mr Lauro’s evidence, quite different tiles to the Botticino Semi Classico tiles. The cost of the Silkstone tiles was not appropriate to be used in the assessment of damages.
Daniel Lauro obtained quotations from Italia Ceramics and International Ceramic Supplies for 150 square metres of Botticino Semi Classico tiles which were $23,780 and $23,100 respectively. Those quotations were in and as at April 2006. They indicate that the market value of such tiles had increased substantially since August 2004. Mr Lauro did not adduce any evidence of the market price of Botticino Semi Classico tiles as at September 2005. He failed to prove loss. If he had succeeded in liability, he would only have been entitled to nominal damages of $10.
Deduction against deposit
The Magistrate held that Marble House was entitled to deduct the $4,200 owing under the benchtop contract against the deposits paid under both contracts.
Mr Lauro contends that, even if Marble House was entitled to $4,200 under the benchtop contract, it was not entitled to deduct the additional sum of $952.50 from the deposit paid under the tile contract.
There is no substance to this complaint. Marble House’s claim against Mr Lauro under the benchtop contract was not for unliquidated damages but for a liquidated amount by way of quantum meruit. A set-off was available at common law against the liquidated amount due under the tile contract by way of refund of the deposit. In any event, in the circumstances, an equitable set off was available.[13]
[13] See, for example, Clarke v Cort (1840) Cr & Ph 154; 41 ER 449; Tony Lee Motors Ltd v M S MacDonald& Son (1974) Ltd, (1981) 2 NZLR 281; Kostka v Addison [1986] 1 Qd R 416.
Conclusion
I dismiss the appeal. I will hear the parties as to consequential orders, including costs.
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