McIntyre v Quality Roofing Services Pty Ltd
[2019] SASCFC 29
•3 April 2019
Supreme Court of South Australia
(Full Court)
MCINTYRE & ANOR v QUALITY ROOFING SERVICES PTY LTD
[2019] SASCFC 29
Judgment of The Full Court
(The Honourable Justice Parker, The Honourable Justice Lovell and The Honourable Auxiliary Justice Tilmouth)
3 April 2019
APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
The appellants contend the trial judge erred in concluding that a building agreement was for 'two separate verandahs’ and 'consequently ... that what had been built was in accordance with the agreed design', in concluding the contract could be completed in accordance with that agreement, in making a costs indemnity order in respect of collateral proceedings in the Environment Resources and Development Court against them, and in failing to award damages on their counterclaim for rectification.
Held: Allowing the appeal:
1: The conclusion of the trial judge to the effect that the contractual documents made it clear what was contemplated were two separate verandahs, is set aside as inconsistent with the proper construction of those documents, and unsupported by other evidence in the case.
2. Since the conclusion that the contract could be completed in accordance with the agreement was dependent on the conclusion that a final design was not agreed upon, it must be set aside, and it was in any case based on a proposal that was not in accordance with the contractual arrangements.
3. In making the award for indemnity costs, the judge failed to identify precisely what cause of action or what breach of contract gave rise to liability for those damages, to identify the chain of causation linking the two, and did not resolve the rival contentions underpinning the basis for such damages.
4. The appropriate orders are to allow the appeal, set aside the judgment and the orders dismissing the appellants’ cross-action, the orders for interest, the orders for indemnity costs and the costs of the proceedings and to remit for hearing and determination by another judge of the District Court the resolution of the cross-action and counter-claim, the costs of the proceedings in the collateral action, the costs of the trial proceedings and questions of pre and post-judgment interest.
Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CCR 359; Luna Park (NSW) Limited v Tranways Advertising Propriety Limited (1938) 61 CLR 286; Development Act 1993 (SA) s 85; City of Charles Sturt v McIntyre [2014] SAERDC 45; Livingstone v Rawyards Coal Co (1880) 5 App Cas AC 25; Robinson v Harman (1848) 1 Ex 850; Astley v Austrust Ltd (1999) 197 CLR 1; Johnson v Perez (1988) 166 CLR 351; Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653; Egan v State Transport Authority (1982) 31 SASR 481; Short v Kalloway (1839) 11 A&E 28, 33; Bellgrove v Eldridge (1954) 90 CLR 613; Carosella v Ginos & Gilbert Pty Ltd (1982) 57 ALJR 315; Day v O'Leary (1992) 57 SASR 206; D.Galombos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10; Hadley v Baxendale (1854) 9 Ex 341; Berry v British Transport Commission [1962] 1 QB 306; Union Discount Co Ltd v Zoller [2002] 1 WLR 1517; Bostock & Co Ltd v Nicholson & Sons Ltd [1904] 1 KB 725; Hammond & Co v Bussey (1887) 20 QBD 79; Morton-Norwich Products Inc v Intercen Ltd (No 2) [1981] FSR 337; Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; Nunkuwarrin Yunti of SA Inc v AL Seeley Constructions Pty Ltd (1998) 72 SASR 21; Building Work Contractors Act 1995 (SA), referred to.
Pacific Carriers Ltd v BHP Paribas (2004) 218 CLR 451; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Warren v Coombes (1978-1979) 142 CLR 531; Fox v Percy (2003) 214 CLR 118, applied.
MCINTYRE & ANOR v QUALITY ROOFING SERVICES PTY LTD
[2019] SASCFC 29Full Court: Parker and Lovell JJ and Tilmouth AJ
PARKER J: I agree with the reasons of Tilmouth AJ and the orders he proposes. I also agree with the additional observations of Lovell J.
LOVELL J: I agree with the reasons of Tilmouth AJ and the orders he proposes. I add the following remarks.
The primary judge identified the fundamental issue as ‘whether the structure QRS built was’ in accordance with the contract. While the primary judge made a number of findings in relation to issues that arose at trial, which are not challenged, it was common ground on the appeal that the primary judge made no specific findings as to the actual terms of the contract.
An issue before the primary judge was the question of whether there was to be a ‘hip’ joining the two verandahs. The appellants gave evidence that they understood there was to be a hip joining the verandahs. The primary judge rejected their evidence and the appellants do not challenge that finding.
The appellants submitted, however, that the fact that they may have misunderstood the question of whether there was to be a ‘hip’ did not mean that the contract allowed for a departure, without consent, from other matters that had been agreed by the parties. The contract, it was submitted, clearly showed that, however the verandahs were to be constructed, they were to be fully enclosed.
The respondent submitted that although the primary judge made no specific finding as to whether the structure was to be fully enclosed, she implicitly found that there was no agreement about the final design. The respondent submitted that there had been a variation to the terms of the agreement; the final design was to be agreed later. To put that another way, the respondent submitted that the parties had not agreed on the final detail of the design, particularly relating to ventilation, and that by their conduct (possibly including some conversations), the appellants had agreed to a term that the final design was to be deferred until after the verandahs had been built. Thus, the question of whether the verandahs were to be fully enclosed was deferred to a later time.
The respondent conceded that, at trial, they had not contended for such a variation to the contractual terms nor was such an assertion pleaded. Indeed, at trial, the respondent had asserted that the contract was wholly in writing.
I reject the submission that the primary judge implicitly made such a finding. The contract documents clearly establish that what was to be constructed was a fully enclosed verandah section on the southern side of the building turning to the west for about 3.5 m. Any conduct or conversations leading to a variation of that term needed to be specifically identified. The findings made by the primary judge on the question of ventilation do not lead to the conclusion that the parties agreed to such a variation.
For the reasons articulated by Tilmouth AJ the evidence does not support such a finding in any event. The terms of the contract required the verandahs to be fully enclosed.
As the law of contract is concerned with the rights and obligations arising from the making of a promise which the law enforces, it is important, when deciding a case based on a contract, that the court identify the terms agreed upon by the parties. This includes issues such as whether the contract is in writing, an entirely oral agreement, or a combination of the two. If the contract is in writing or partly in writing the court should identify the documents said to be relevant. If the contract is oral or partly oral, the court should identify those conversations said to be relevant to the terms of the contract.
If there is said to be a variation to the terms of the original contract, the terms of the variation should be identified. This is necessary for the court to determine whether the original contract has in fact been terminated and replaced by a new contract or whether the original contract has been varied in certain respects.
It is only after the terms of the contract have been identified that the court can construe the meaning of the words used to express the terms of the contract. Once that task has been undertaken, a court should determine the facts in issue in order to decide whether there has been a breach of the terms of the contract, and if so, what remedies may or may not flow from the breach.
No doubt the primary judge considered these matters. However specific findings as to the terms of the contract were required. It is difficult if not impossible, on appeal to conclude that there has been an implicit finding of a variation of a term when the term allegedly varied has not itself been specifically identified.
I would allow the appeal.
TILMOUTH AJ:
Overview
This appeal by building owners Mr and Mrs McIntyre, challenges a judgment entered in favour of the building contractor, Quality Roofing Services Pty Ltd, in proceedings relating to a building contract entered into between them.[1] The contract was in respect of the construction of a verandah, roof restoration and the installation of new gutters on the McIntyres’ home in West Lakes.
[1] Quality Roofing Services Pty Ltd v McIntyre [2017] SADC 62. The parties are hereinafter referred to as ‘the McIntyres’ and ‘QRS’ respectively.
The underlying proceedings
The original action was commenced in the Magistrates Court in early April 2012. In its amended claim QRS sued the McIntyres for breach of contract in the sum of $37,360 based upon a progress payment alleged to be due on completion of the verandah, plus interest and costs. The McIntyres filed a defence, cross‑action and counterclaim in which they sought relief by way of declarations as to the proper construction of the building contract, compensation for breach of contract and other unliquidated damages. The action was transferred and later tried in the District Court in November 2015.
The issues between the parties relate primarily to the fulfilment or otherwise of the building contract. In essence, the McIntyres contend the contract specified the construction of an enclosed ‘return style verandah’, whereas QRS maintains the specifications were for the construction of two curved verandahs on the western and southern sides of the property.
In a judgment delivered of 22 June 2017, the trial judge awarded QRS ‘quantum meruit’ damages and held the McIntyres liable to indemnify it for costs incurred in associated proceedings in the Environmental, Resources and Development Court,[2] as well as making other consequential orders.[3] The judgment to this effect was founded on the conclusion that:[4]
The terms of the Quote, when taken in the context of the Construction Plan, made it clear that what was being described was in effect, two separate verandahs.
and:[5]
In my view, the fact the verandah was removed is not the point. Having found that what was built was as agreed between the parties, the Defendants received the benefit which they had requested, and QRS is entitled to the progress payment less the value of the remedial works.
[2] Hereinafter the ‘ERD Court’.
[3] Quality Roofing Services v McIntyre [2017] SADC 62, [431]-[436;] Quality Roofing Services v McIntyre [2017] SADC 118.
[4] Quality Roofing Services v McIntyre [2017] SADC 62, [343].
[5] Ibid [424].
Her Honour came to the subsidiary conclusion that QRS ‘contended construction could be built and the contract completed’.[6] Accordingly, she held QRS was entitled to its progress claim of $37,360 on a quantum meruit basis, before deducting the costs of carrying out rectification works costed at $9,457.[7] The judge dismissed the McIntyres’ cross-claim for damages as a further consequence of these primary findings.[8]
[6] Ibid [386].
[7] Ibid [432]-[434].
[8] Ibid [436].
The principal grounds of appeal complain of errors on the part of the trial judge in concluding the agreement was for ‘two separate verandahs’ and ‘consequently … that what had been built was in accordance with the agreed design’, in concluding the contract could be completed, in making the costs indemnity order, and in failing to award the McIntyres damages on their counterclaim. There is on the other hand no challenge to the finding that although the erection of a ‘hip’ or return-style design was discussed, there was no join or design that could be so described between the south and western verandahs.[9]
[9] Ibid [341]-[343], Full Court transcript T2.29-34.
The contract documentation
Her Honour determined the contractual terms between the parties were to be gathered from those documents comprising the contract. These were the Quote, the Construction Plan, the Contract Details and the Variation Document.[10]
[10] Ibid [32].
The initial Quotation of 29 June 2011, provided for building services involving ‘Roof Restoration, Guttering and a Colorbond Victory Verandah System’ for the total price of $37,360 (including GST). A portion of this Quotation contained the following specifications:
QUOTE 3:-
Scope of Works:-
Supply and install a new Curved Verandah attached to main residence using a roof mounted kingpost system. Approximately 3.9 metres wide x 6 metres long on southern side of main residence connecting to a 1.5 metre wide x 7.5 metre long section, then 3.5 metres wide across the full distance of residence on water side. Blue Mountain gutter mesh to be installed between existing roof and new Verandah to stop any leaf debris blowing through.
The Quotation further provided for additional ‘Optional Extras’ in these terms.
Optional Extras:-
a) To supply and install a 50mm thick insulated Bondor wall full height approximately 14 metres long, along southern boundary, then 1.1 metres high approximately 3.6 metres long (2 off) to support glass panels is an additional $5,720.00 Inc GST.
b) To Supply and install stainless steel balustrade with a Colorbond top rail along waterside of Verandah then returning back to side fence on northern side, including a 3.6 metre gate opening, with full height Visiontex blind is an additional $4,690.00 Inc GST.
c) To Supply and install 10.38mm reinforced safety glass panels approximately 1.5 metres high x 3.6 metres long (2 off) to waterside corner of new Verandah as discussed is an additional $9,980.00 Inc GST.
The Contract Details of 7 July 2011 were these:[11]
[11] The note in paragraph (a) of this document was struck out in the Exhibit, however it is accepted that this was unintentional and not therefore deleted: Full Court transcript T6.5-.11, Quality Roofing Services Pty Ltd v McIntyre [2017] SADC 62, [81].
a) Full Height 50mm Insulated Bondor Wall approximately 14m long southern boundary stopping at waterfront corner of residence.
Colour: _____________________________________
b)
Curved Verandah system with 10mm Lexan Polycarbonate sheeting roof mounted on King posts with curved arcing from residence to southern boundary.
Colour: _____________________________________
c) Curved Verandah system with 10mm Lexan Polycarbonate sheeting roof mounted on King posts with curved arcing from residence to waterfront, running across full length of property.
Colour: _____________________________________
d) 50mm Insulated Bondor dwarf wall approximately .9 m high with reinforced aluminium channel to support glass panels.
Colour: _____________________________________
e) 10.38mm reinforced safety glass with aluminium powder coated frame approximately 3.5m wide x 1.3m high.
f) Powder coated double gate opening of approximately 3.6m x .9 m high with stainless steel balustrade at 100mm centres.
g) Visiontex Ziptrak Mesh Blind approximately 3.6m wide x 2.2m high.
Colour: _____________________________________
h) Stainless Steel balustrade with Colorbond top rail approximately .9 m high with 100mm centres.
i) Complete Roof Restoration. Pressure clean, Antifungal Treatment, Re-point ridge cappings and Commercial Membrane coating.
Colour: _____________________________________
j) Regutter whole of main residence with OG Guttering. 75mm PVC downpipes and reinstate existing Blue Mountain Gutter Mesh.
Colour: _____________________________________
k) Install new Gutter Mesh between new verandah roof mounted beam and existing roof line to stop any leaf debris.
These specifications appear to have reduced the height of the wall on the western side by about .1 - .2 of a metre, leaving the wall on the southern side as it was.
The Construction Plans drawn on 18 October 2011 by a Mr Dalgarno, who was at that time the carport and verandah building supervisor for QRS, contained 15 side notes under the heading ‘Scope of work’, two of which read:
1. + 2200 To Fascia From Ground
…
7.Fit Flashing Behind Gutter Out & Over Off-Set Columns To Seal Against New Glass Panels
These plans envisaged enclosure to full height of about 2.2 m, completely sealed and enclosed. In the course of his evidence during the trial, Mr Dalgarno said that glass panels were included in these plans ‘[j]ust for future reference so that everybody knew what was going to be there … because I had to allow for what will be there in the end’.[12]
[12] Quality Roofing Services Pty Ltd v McIntyre [2017] SADC 62, [118].
The Construction Plans contained cross-references to items (a) to (k) in the ‘Contract Details’ (quoted in full above), which by reference to items (d) and (e) for instance, indicated a ‘Bondor’ wall with a glass wall above it, totalling 2.2 m in height from the floor to the verandah edge.
The final document referred to by the trial judge was the ‘Variation to Contract’ of 20 September 2011. This provided for ‘additional works’ in these terms:
DETAILS OF ADDITIONAL WORKS
Supply and install a Colorbond flat verandah system to northern side of main residence with pitch falling back to house approximately 2.8 metres wide x 9 metres long with 5 polycarbonate skylight sheets.
Supply and install a powdercoated gate 1.8 metres high x 1.5 metres wide with stainless steel balustrading.
Removal of the two old roller doors from carport and replace with new panel lift doors complete with motors and 2 remotes.
Replace the full height solarspan wall along boundary line with 1.1 metre high blue board to both sides on 90mm timber frame on the bottom section with 4 x 1.2 metre high x 3.5 metre wide 10.38mm safety glass panels to top section. Blue board wall reduces to 900mm high from point of gate as discussed.
Supply and Install new Colorbond Fascia covers to perimeter of existing main residence, eave repairs and New Blue Mountain Gutter mesh including valleys.ADDITIONAL COST:
$32,900.00
Includes GST
It appears the net effect of this variation was to reduce the height of Bondor walls by 200 mm from 1100 mm to 900 mm, so as ‘to give a clear view over the lake’.[13]
[13] Ibid [47].
Reading the variation in conjunction with the Contract Details, it can be seen that the verandah along both the south and west of the house connected at the south west corner, and was enclosed to 2.2 m in height. This proposed alteration came at an additional cost of $32,900 above the initial quote.
Primary findings - contractual terms
Based on the four previously specified documents, the trial judge found ‘the Contract Details document made it clear that what was contemplated was two separate verandahs.’[14] Her Honour elaborated on this conclusion a little later in the reasons:[15]
Even in the event there was any ambiguity in the words of the Quote, the drawing on the Construction Plan although perhaps rudimentary, clearly showed the design of the verandahs. There was no join or design that could be described as a ‘hip’ or a return-style between the south and western verandahs. The terms of the Quote, when taken in the context of the Construction Plan, made it clear that what was being described was in effect, two separate verandahs.
…
For these reasons I have concluded that what QRS built was in accordance with the design agreed between the parties, with obvious flow-on effects to other aspects of the issues in dispute.
and still later:[16]
Had there been a final design arrived at with respect to the enclosure, it logically would have formed part of the one application to Council. Mr Ryan said the Defendants were undecided about the exact design of the fence or enclosure and I note they made no complaint about the lack of an enclosure until after the Court action was commenced.
[14] Ibid [339].
[15] Ibid [343], [345].
[16] Ibid [369].
Two separate verandahs in accordance with an agreed design?
The documents referred to so far do not support the conclusion that two separate verandahs were contemplated. On the contrary:
·the Quotation envisages a fully enclosed floor to ceiling wall;
·the Contract Details contemplated walls of ‘full height’; that is floor to ceiling (with some adjustment to the dimensions of the glass panels);
·the Construction Plan envisages a wall at full height composed of a Bondor section on the lower portion, a glass section on the upper portion and it clearly allows for a single post at the south-west corner;
·consistently with the Construction Plan, the Variation to Contract essentially makes no material alteration in the above respects.
To this point in the analysis it can be seen there is little, if anything at all, in these documents to support the conclusion that they described two separate verandahs. A consistent and common thread remained one of full enclosure from floor to ceiling on both southern and western sides and at the south-western corner. The very nature of the terms used, rather premise a single continuous fully enclosed structure attached to the main residence. Nor is there anything to be found in these documents demonstrating there would be any gap opened to the elements in or between the walls at the junction of the south-west corner.
The plans show a fully walled enclosure on the western and southern sides to full height of about 2.2 m high, completely sealed and enclosed, apart from a 150 mm gap between the roof of the existing home and the top of the verandah, fitted to the house itself by ‘king’ posts coming through the roof of the house.[17] What was constructed was not fully enclosed, and consisted of two posts at the south-western corner, with a gap of somewhere between 150 mm to 300 mm, with no provision for closure.
[17] This can be seen most clearly in the photographs at AB1, 110-111.
Quite apart from the abovementioned documents, an edited set of the plans prepared by Mr Dalgarno were submitted to the City of Charles Sturt Council as the Local Government Authority responsible for Planning Development of the West Lakes area, on 17 February 2012.[18] In a covering letter, Mr Hann a draughtsman employed by QRS, wrote:
Although the structure has not changed size, certain changes needed to be made in beam height and also the radius of the curved sections for the development to be feasible from a construction stand point.
[18] Hereinafter referred to as ‘the Council’.
These plans contained a somewhat different and edited series of notes regarding the scope of the work to those of 18 October 2011. Both were the same plan, however the latter noticeably omitted what was point 7 ‘fit flashing behind gutter out and over offset columns to seal against new glass panels’. Still further, this plan made no reference to a glass wall so as to fully enclose the verandah to full height, or to seal against the flashings as the original plan had. Clearly this plan formed no part of the contractual documents, whereas the earlier Dalgarno Plans of 18 October 2011 did.
The original application for consent as submitted on 17 August 2011 by QRS, merely described the nature of the proposed development as a ‘verandah’ and likewise failed to mention enclosure. The application for Building Consent and Full Development Approval of 4 October 2011 equally only referred to the proposed development of a ‘verandah’.
What was built was completed in November 2011. Soon after the McIntyres refused QRS further access to the site and in fact terminated the contract on 19 December 2014.[19] They further rejected offers by QRS to bring the work into compliance with the approved plans or to render the work structurally adequate in accordance with the recommendations of its expert witness, Mr John.[20]
[19] Quality Roofing Services Pty Ltd v McIntyre [2017] SADC 62, [371].
[20] Ibid [427]. What was built can be seen in the photographs at AB1 97, 366-371 and AB2 472, 584-6.
There are express findings by the trial judge that Mr Barry, the sole Director of QRS, knowing the Council approval did not permit enclosure, instructed Mr Hann to forward those altered plans in the letter of 17 February 2012 to the Council, in order to secure development approval for the structure which was in fact already built by that time. The differences between the original notes and those attached to the covering letter to the Council, were made on his ‘instructions too … reflecting what was actually built on site at the time … for the structure that was physically on site …’.[21] The McIntyres were not informed about this application until late February 2012.[22]
[21] Ibid [192] - [193].
[22] Ibid [219].
The decision of the Council approving the original Development Plan was conveyed to QRS by a covering letter of 23 September 2011. This contained the explicit condition that the ‘verandah shall not be enclosed on any side with any solid material, roller door, or the like’.
Clearly enough it was the contractual documents which led her Honour to conclude there was a variation of the contract with no final design actually agreed upon, as appears in the following sequential passages from her Honour’s reasons:[23]
I heard a great deal about what Mr McIntyre said as regards the specific instructions he gave to QRS for the enclosure and it is plain on the evidence that QRS agreed to construct an enclosure. The issue is whether it was agreed that the final design of the enclosure was to be deferred until the verandah had been built. QRS says it did not obtain approval for the enclosure because it had been agreed that the final design would be deferred and that the Defendants have insisted that the verandah was to be fully enclosed to take advantage of the reference in the Planning Approval there be no enclosure and for no other reason.
I accept that the Variation Document made no mention of a deferral of the construction of the proposed enclosure, nor did any of the email correspondence between the parties. There is simply no direct evidence of what was agreed as to the scheduling of the various components of the work. While Mr Ryan’s evidence was that he understood the Defendants wanted to proceed with all of the work that had been incorporated into the Quote, that is not to say it was not to progress in stages. Nor in my view does the fact Mr Dalgarno agreed that at the Check Measure, he knew the agreed plan included an infill wall structure.
The observations I have made about the Defendants’ failure to arrive at a settled position as regards the design of the verandah also applies to the issue of the design of the enclosure. I have little confidence in Mr McIntyre having settled on what he wanted as regards the enclosure.
Had there been a final design arrived at with respect to the enclosure, it logically would have formed part of the one application to Council. Mr Ryan said the Defendants were undecided about the exact design of the fence or enclosure and I note they made no complaint about the lack of an enclosure until after the Court action was commenced.
[23] Ibid [366 ]- [369].
The reference in the reasoning process contained in the latter paragraph that if there was ‘a final design arrived at with respect to the enclosure’ it ‘logically would have formed part of the one application to Council’, cannot stand in light of the evidence of Mr Barry as to his peculiar reasons for lodging the plan in February 2012. Clearly his purpose was to obtain retrospective approval for a non-compliant structure already built, as this did not conform with the terms of the original Council approval, and perhaps as the trial judge suggested, ‘to cure some perceived vulnerability around the issue of whether it was licenced to build enclosed verandahs’.[24] Her Honour accepted the expert evidence on both sides ‘that the verandah as erected … was not structurally adequate’ and ‘did not have development approval’.[25] For the reasons already outlined, the plan in the letter to the Council of February 2012 did not conform with the contractual designs either. More than that, there is no clear evidence to sustain the conclusion that ‘Mr Ryan said the Defendants were undecided about the exact design…’.[26]
[24] Ibid [365].
[25] Ibid [373].
[26] Ibid [369].
Whilst coming to the conclusion that the McIntyres failed ‘to arrive at a settled position as regards the design of the verandah’, her Honour duly acknowledged that there was ‘no mention of a deferral of the construction’ in the Variation Document, or in email correspondence between the parties and there was ‘simply no direct evidence of what was agreed as to the scheduling of the various components of the work’.[27] Even then her Honour failed to identify the evidence from which a meeting of minds was achieved in arriving at a variation. In addition this process of reasoning involves mutually incompatible propositions, in that the capacity to apply for Development Approval is predicated on prior agreement to a final design. It is moreover irrelevant that the McIntyres ‘… made no complaint about the lack of enclosure until after the Court action was commenced’,[28] because any party may sustain the repudiation of a contract upon any ground, whether or not such a ground was previously relied on or known: Shepherd v Felt and Textiles of Australia Ltd,[29] Luna Park (NSW) Limited v Tramways Advertising Propriety Limited.[30]
[27] Ibid [367] - [368].
[28]Ibid [369].
[29] (1931) 45 CCR 359. [370]-[371] and [377]-[378].
[30] (1938) 61 CLR 286, [305].
During his submissions, Mr Robertson SC endeavoured to support the conclusion reached by the trial judge that ‘the final design of the enclosure was to be deferred until the verandah was built’,[31] especially in light of her Honour’s observation that she had ‘little confidence in Mr McIntyre having settled on what he wanted as regards the enclosure’.[32] For this purpose he directed attention to a number of passages in the trial evidence of Mr McIntyre and Mr Ryan in support of Mr Ryan’s proposition ‘that it was never going to be sealed off from the weather in the way that the appellants might suggest’ and that there was a variation to ‘build the verandah first and then put the walls up second.’[33]
[31] McIntyre v Quality Roofing Services Pty Ltd [2017] SADC 62, [366].
[32] Ibid [368].
[33] Full Court Transcript T81.7-10 and 88.18-19.
Mr McIntyre’s evidence-in-chief was that he told Mr Ryan ‘I wanted it fully enclosed … and leave a small gap for ventilation up on the roof … to put a curved roof up onto my existing roof … for ventilation’.[34] When considered in context, it becomes apparent that this evidence related to something quite different to the primary construction of enclosed walls on the western and southern sides and at the south-west corner.
[34] Full Court Transcript T663.28-664.33.
The evidence of Mr Ryan to the effect that his highly subjective ‘impression’ as to the issue of ventilation was that Mr McIntyre:[35]
… wanted a full height wall to put his barbecue and stuff against. We did speak about ventilation and heat and I was under the impression that that wasn’t finalised. It was to get the verandah up so to speak and finalise all those things later which, as it turned out, did get changed.
His impression is not to the point, fundamentally because ‘the meaning of commercial documents is determined objectively …’, that is to say by what a reasonable person in the position of the parties would have taken them to mean: Pacific Carriers Ltd v BHP Paribas,[36] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd.[37]
[35] T27.12-.17.
[36] (2004) 218 CLR 451, [461]-[462].
[37] (2004) 219 CLR 165, [40]-[41].
As the proper construction of the documents comprising the subject building contract are not in dispute, this ‘court is in as good a position as the trial judge to decide on the proper inference to be drawn from the facts …’: Warren v Coombes,[38] Fox v Percy.[39] It follows with due respect that the trial judge erred in concluding the final design of the enclosure was to be deferred until the verandah was built. Consequently that conclusion must be set aside.
[38] (1978-1979) 142 CLR 531, 551.
[39] (2003) 214 CLR 118, [25]-[27].
Could the contract be completed?
A conclave of experts convened by the court shortly before trial, comprising Mr Kokkinakis and Mr John, agreed that the verandah as erected, did not comply with the approved Development Plan, and that work could be undertaken to the verandah as so erected to enable completion ‘with structural adequacy’. Both were equally agreed that an Axilite design bore ‘virtually no resemblance to the design shown on the Approved Development Plan, if based on QRS construction of the building contract and that it ‘bore virtually no resemblance’ when judged against the McIntyres contended construction.
However in the opinion of Mr Kokkinakis demolition was required, whereas in the opinion of Mr John full demolition was not. The basis of the disagreement so far as demolition is concerned may be seen from this paragraph in the combined position paper:
Opinion on the matter – summary
KokkinakisThe extent of modifications that would be required to the verandah would have been such that any modification (all footings, virtually all columns and king post connections at the very least) would be impractical, expensive and would compromise the aesthetic integrity of the structure and as such demolition and rebuild is considered the most effective solution.
In the case of the McIntyres’ contended construction demolition and rebuild is considered as the only effective solution.
JohnThe verandah could have been modified to comply with the structural requirements of the National Construction Code Series 2011 Volume 2 without requiring demolition.
A wall complying with QRS’ contended wall construction and the intent of the McIntyres’ contended wall construction could have been constructed without requiring demolition of the verandah.
On this issue her Honour concluded that QRS’ ‘contended construction could be built if steel was used as designated by Mr Kokkinakis’ and therefore ‘the contract completed’.[40] Her Honour did so on the basis of an apparent concession by Mr Kokkinakis accepting the use of steel infills in the wooden columns ‘which complied with the intent of the [McIntyres] contended construction’.[41] This in turn led to her conclusion that it was possible to achieve conformity with the approved plans, as seen from these passages in the judgment:[42]
Mr Kokkinakis was of the view that the extent of the modifications required would mean that any modification would have been ‘impractical, expensive and possibly aesthetically compromised’ with a demolition and rebuild the most effective solution.
Mr John’s opinion was that the verandah could have been modified to comply with the structural requirements of NCC-2011 without demolition, and a wall complying with both QRS’ contended construction and the intent of the Defendants’ contended wall construction, could have been constructed without the need for demolition.
[40] Quality Roofing Services Pty Ltd v McIntyre [2017] SADC 62, [385]-[386].
[41] Ibid [384].
[42] Ibid [387 ] - [388].
The QRS proposal was based upon a ‘fence’ built in accordance with QRS produced drawings 5C and 5D. Drawings E and F were subsequently substituted for C and D. The essential difference between the two was that the former did not include glass panels, whereas the latter did and they contained references to ‘airflow’ gaps and a ‘free standing powder coated support frame’ whereas the former did not.
Mr John’s opinion that partial demolition could suffice was premised on the assumption that ‘steelwork had been provided for as part of the framing’. This understanding was not a comparable one, since the McIntyres’ instructions were always solely for a ‘timber wall’ construction. In any event, the so-called ‘concession’ by Mr Kokkinakis was made in the context of demolition and complete redesign, was not in accordance with the original plans. Mr John’s proposal was a different structure comprising infill walls. Mr John acknowledged as much in the conclave reports at 3.8.6 in response to the question ‘what wind speed parameters were applicable and appropriate for any requisite further plans or approval?’:
With regard to the McIntyres’ contended construction.
The appropriate course have been to submit a plan for approval on the basis of demolishing the verandah as erected and re-designing and re-building it, but only for the reason that the McIntyres’ contended construction did not include any framing to the infill wall other than 90mm timber framing.
The reference by Mr John and for that matter by her Honour to ‘the intent of the McIntyres’ is a puzzling one. The fact remains that Mr John’s proposal was non-contractual because it was not what they intended at all – they always wanted entirely timber framing, fully enclosed.
The trial judge noted these differences in the respective proposals but then concluded that as both experts ‘agreed that [McIntyres] contended construction could be built, if steel was used as designed by Mr Kokkinakis’, that the contract could be completed.[43] She concluded these aspects in her reasons with the passing observation that a ‘wall complying with both QRS contended construction and the intent of the [McIntyres] contended wall construction could have been constructed without the need for demolition’, without explaining how this conclusion was reached and without examining what ‘the intent’ of the McIntyres actually was to support that conclusion.[44]
[43] Quality Roofing Services Pty Ltd v McIntyre [2017] SADC 62, [385]-[386].
[44] Ibid [388], and see [328] and [384].
The conclusive point here is that QRS contended construction was not fully enclosed in accordance with the contractual arrangements. The basis of Mr Kokkinakis’ suggestion incorporating steel work was contingent upon completely redesigning the entire project, which again was non‑contractual. It represented a significant and incompatible departure from the original plans. This aspect of the judgment is in any case dependent on the conclusion that a final design was not agreed upon, a conclusion that cannot stand for the reasons explored earlier.
The Environmental, Resources and Development Court issue
Owing to non-compliance with the terms of Development Approval, the Council wrote to QRS in August 2013 directing it to remedy the situation by obtaining the consent of the McIntyres to demolish the verandah, whilst at the same time directing the McIntyres to remove it.[45] The McIntyres gave approval to QRS to enter the property in order to do so. As the invitation was rejected, the McIntyres applied and then withdrew their application to demolish the verandah, deciding instead to construct a new verandah, with Council approval. Later in October 2013 they obtained approval to construct a two-storey addition in lieu of a verandah. This was approved by the Council in January 2014.
[45] Ibid [26].
Given the impasse, the Council applied to the ERD Court in January 2014 seeking orders for removal of the verandah. The ERD Court determined that the structure was unauthorised and directed removal within 60 days.[46] The application was brought pursuant to s 85 of the Development Act 1993 (SA), naming the McIntyres and QRS as respondents. The judgment records that the McIntyres consented to the making of those orders, whereas QRS opposed them. It in fact sought and was refused a stay of proceedings pending the outcome of the underlying District Court action commenced in the civil jurisdiction.[47]
[46] City of Charles Sturt v McIntyre [2014] SAERDC 45, [63] and [68].
[47] Ibid [3].
The ERD judgment further records that a Council inspector concluded the verandah failed to comply with the Development Approval, that it may ‘be structurally unsound’,[48] and that it was within the power of the McIntyres to remove the verandah at any time after February 2012, when they returned from overseas.[49] The ERD Court also accepted the opinions expressed in a joint statement of Mr Kokkinakis and Mr John that the verandah did not comply with the Development Plan Consent in the following respects:[50]
5.1The height of the posts (columns) to the western and southern perimeters was less than that shown.
5.2The curved roof shape is asymmetric in that the high point (ridge) is not in the centre but is offset to one side.
5.3The number of curved rafters on the western and southern parts of the verandah were less than shown.
5.4The width of the western verandah varies (northern part 3.2m, southern part 3.7m) whereas the verandah was shown as having a constant width of 3.0m.
5.5There were 2 posts at the south-western corner whereas there was only 1 post shown.
5.6The eastern end of the fascia beam to the southern verandah was supported from the existing residence, not on a post.
5.7The spacing of the posts vary, but the number of posts is the same, other than the posts identified in 5.5 and 5.6 above.
[48] Ibid [14].
[49] Ibid [46].
[50] City of Charles Sturt v McIntyre [2014] SAERDC 45, [37].
In a later judgment in respect of costs, the ERD Court judge concluded that QRS maintained the above stance on the footing that the McIntyres did not own the verandah and therefore could not consent to its removal or demolition.
During the trial in the District Court, each party sought indemnification from the other of the costs and disbursements in the ERD Court proceedings. The trial judge ordered the McIntyres to pay QRS the ‘costs of the ERD Court action on a party and party basis’. Her Honour did so on this view of the matter:[51]
I accept that the Defendants took positive steps to encourage Council to issue proceedings, and for that reason I order that the Defendants pay QRS’ costs of the ERD Court action, and indemnify QRS for the costs it has paid to Council.
[51] Quality Roofing Services v McIntyre [2017] SADC 62, [435].
It is evident that her Honour resolved this question on the basis of the antecedent conclusions as to the course of those proceedings:[52]
Had the Defendants allowed Council to assess the Amendment Application and allowed QRS to carry out the remedial works then the verandahs would have been compliant, avoiding the ERD Court action. I accept QRS’ submission that the Defendants chose not to do either in an effort to achieve their desired outcome in the District Court action, namely the demolition and removal of the verandah. That this was so, is plainly evident from the email correspondence between Ms McIntyre and Mr Travaglione.
By 1 October 2013 Mr Pangallo was involved and had sent a number of emails to Mr Barry. It is evident that Ms McIntyre, in bringing Mr Pangallo into the matter, was trying to exert pressure on QRS. I accept Mr Barry withdrew QRS’ consent for the verandahs to be demolished because he was concerned at the prospect of Mr Pangallo’s involvement.
QRS submits that the ERD Court action arose only because of the Defendants’ conduct and that the Defendants could have authorised QRS to carry out the remedial works without prejudice to their position in the District Court.
[52] Ibid [427] - [430].
In reaching these conclusions, her Honour fails to identify precisely what cause of action or what breach of contract gave rise to the liability for damages for the ERD Court costs. Neither does she explain by which principles that breach sounds in damages, or identify and trace the chain of causation linking the two. Nor did she resolve the rival contentions that QRS could easily have consented to the Council’s application without prejudice to its case in the ERD Court proceedings, as against the contention that it was the McIntyres’ unreasonable conduct which precipitated them.
The language ‘took positive steps to encourage Council to issue proceedings’ is, if anything, rather reminiscent of damages in tort rather than contract. This may be important because the measure of damages may prove to be quite different. It is established principle that in tort a plaintiff is entitled to be put in the same position as would be the case had the wrong not been committed: Livingstone v Rawyards Coal Co,[53] whereas in contract the plaintiff is entitled to recover the loss of the bargain, in other words compensation as if the contract was performed: Robinson v Harman.[54]
[53] (1880) 5 App Cas AC 25, 39.
[54] (1848) 1 Ex 850, 855.
Since the above conclusions were in any event dependent on the dual flawed premises that the final design was not agreed and that the ERD proceedings were necessitated by the McIntyres ‘refusing QRS the ability to carry out the remedial works recommended by Mr John’, the order for indemnity costs must fall with them.
It can be accepted that damages may well flow for adverse costs of related or collateral legal proceedings in some circumstances, especially when liability is concurrent in contract and tort, as in legal negligence for example: Astley v Austrust Ltd.[55] This usually occurs according to the duty to mitigate loss, a duty that does not require a party to do something that is unreasonable: Johnson v Perez.[56] Nor can a party complain of the failure to mitigate the consequences of another party’s wrongful act when that act itself makes it impossible for the wronged party to take the necessary steps in mitigation: Burns v MAN Automotive (Aust) Pty Ltd,[57] Egan v State Transport Authority.[58] By the same token, ‘no person has a right to inflame his own account against another by incurring additional expense in the unrighteous assistance to an action which he cannot defend’: Short v Kalloway.[59]
[55] (1999) 197 CLR 1, [44]-[48].
[56] (1988) 166 CLR 351, 387.
[57] (1986) 161 CLR 653, 660.
[58] (1982) 31 SASR 481, 525.
[59] (1839) 11 A&E 28, 33 (113 ER 322, 323).
The cost of making the building works conform to the contract must nevertheless be a reasonable course to adopt: Bellgrove v Eldridge,[60] rather than diminution in value on account of defective workmanship: Carosella v Ginos & Gilbert Pty Ltd.[61] In some cases, the costs of demolition and replacement may be appropriate when that is the only reasonable course available to ensure adherence to the contract: Day v O’Leary,[62] D.Galombos & Son Pty Ltd v McIntyre.[63]
[60] (1954) 90 CLR 613, 616-618.
[61] (1982) 57 ALJR 315.
[62] (1992) 57 SASR 206.
[63] (1974) 5 ACTR 10.
During the course of the appeal the McIntyres maintained that they were entitled to costs of the ERD proceedings, although Mr Whitington QC readily accepted that would require remission, as no relevant findings of fact were made, and potentially because not all heads of damage were necessarily crystallised in liquidated sums at the present time.[64] He submitted such damages fell within the first limb of Hadley v Baxendale.[65] He made reference to a number of authorities referencing analogous circumstances in which the recovery of costs in collateral proceedings might be reasonable, as illustrative of a particular application of the rule in Hadley v Baxendale, including Berry v British Transport Commission,[66] and Union Discount Co Ltd v Zoller.[67]Other examples may perhaps be found in Bostock & Co Ltd v Nicholson & Sons Ltd,[68] Hammond & Co v Bussey,[69] and Morton-Norwich Products Inc v Intercen Ltd (No 2).[70]
[64] Full Court Transcript T62.13 – 63.36.
[65] (1854) 9 Ex 341, 354-355.
[66] [1962] 1 QB 306, 322.
[67] [2002] 1 WLR 1517.
[68] [1904] 1 KB 725.
[69] (1887) 20 QBD 79.
[70] [1981] FSR 337 Fleet Street Reports, High Court of Justice-Patents Court.
Residual issues
Given the above conclusions, it is unnecessary to enter into an analysis of the notices of alternative contention filed by QRS. It is sufficient to observe that the trial judge allowed the quantum meruit claim despite the fact that QRS was not licenced to construct enclosed structures, on the basis of well-established authority: Pavey & Matthews Pty Ltd v Paul,[71] Nunkuwarrin Yunti of SA Inc v A L Seeley Constructions Pty Ltd.[72] It transpires that QRS held a building licence pursuant to the Building Work Contractors Act 1995 (SA) limited to ‘plumbing, fencing excluding brick and brush, carports, pergolas and verandahs’. By reference to a glossary contained within the Australian Building Standards, the licence to build verandahs was limited to those which were ‘open or partly open’. Her Honour made findings to this effect.[73] She also found that Mr Barry was the holder of building works supervisory registration with limitations.[74] There is an implicit finding in any event to the effect that the structure as built, was not a verandah falling within the definition contained in the Australian Building Standards.[75] Equally, it is unnecessary to consider the bases upon which her Honour made the various interest and costs orders that she did.
[71] (1987) 162 CLR 221.
[72] (1998) 72 SASR 21, [23].
[73] Quality Roofing Services Pty Ltd v McIntyre [2017] SADC 62, [401].
[74] Ibid [402].
[75] Ibid [401]-[406].
Conclusion and orders
For the reasons articulated above, the appeal must be allowed and as a consequence the following orders made:
1. The judgment in favour of QRS for $27,403 is set aside;
2. The order dismissing the McIntyres’ cross-action is set aside;
3. The orders for interest against the McIntyres are set aside;
4. The orders in favour of QRS for the costs of the ERD action are set aside;
5. The costs orders in favour of QRS are set aside;
6. The following issues are remitted for hearing and determination by another judge of the District Court;
a. resolution of the McIntyres’ cross-action and counterclaim;
b. costs of the proceedings in the ERD Court;
c. costs of the proceedings in the Magistrates and District Courts;
d. questions of pre and post-judgment interest;
7. The McIntyres be at liberty to file and serve written submissions as to the question of costs in this court within 14 days hereof, and QRS be at liberty to file and serve within a further 7 days of service on it, its response thereto.
13
1