Potts v Beechwood Homes (NSW) Pty Limited

[2021] NSWCATCD 143

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Potts v Beechwood Homes (NSW) Pty Limited [2021] NSWCATCD 143

Hearing dates:

13 August 2021

Date of orders:

10 November 2021

Decision date:

10 November 2021

Jurisdiction:

Consumer and Commercial Division

Before:

K Ross, Senior Member

Decision:

(1) Beechwood Homes (NSW) Pty Limited is to pay to Rebecca Potts & Daniel Potts the sum of $25,149.00 on or before 9 December 2021.

Catchwords:

BUILDING AND CONSTRUCTION — Breach of contract — Where house positioned other than as shown on the plans — Where the position of the house had been specifically required — Loss and damage — Remoteness — Causation

Legislation Cited:

Home Building Act 1989 (NSW)

Cases Cited:

Bellgrove v Eldridge (1954) 90 CLR 613; 28 ALJR 319; [1954] ALR 929

Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 at 151; [1843-60] All ER Rep 461; [1854] EngR 296

Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705

Texts Cited:

Nil

Category:

Principal judgment

Parties:

Rebecca Potts (First Applicant)
Daniel Potts (Second Applicant)
Beechwood Homes (NSW) Pty Limited (Respondent)

File Number(s):

HB 21/00180

REASONS FOR DECISION

Application

1. Mr and Mrs Potts (“the Homeowners”) engaged Beechwood Homes (NSW) Pty Ltd (“the Builder”) to construct a home for them on the block of land which they had purchased in Cooranbong. They asked the Builder to position the home as close to the southern boundary as possible, to maximise the access on the northern boundary to the back of the block. This involved the construction of an edge beam to avoid the necessity for a retaining wall. The home was approved 1000mm from the boundary.

2. When the slab was laid, the Homeowners questioned its position on the block. They were assured by the Builder’s employees that it was correct. However, those assurances proved hollow. The home has not been positioned 1000mm from the southern boundary in accordance with the approved plans, but rather 1180mm. The Homeowners allege that the Builder’s error means that they cannot get their car, or the boat they had planned to purchase, down the side of the house to the carport.

3. The Homeowners acknowledge that demolition and reconstruction of the house would be excessive. Instead they seek compensation of $100,171.43 from the Builder, made up as follows:

• Refund of cost of retaining wall $6,028.00

• Drop edge beam $27,076

• Half the cost of the shed/carport $6900

• Loss of value of property $35000

• Costs to relocate: Agents fees $17075.33, conveyancing costs $1716.60, stamp duty $27663, removalist costs $3012.50.

4. The Builder concedes that the house has been positioned 1180mm instead of 1000mm from the boundary but, for the reasons which will be set out below, opposes the orders sought.

5. The Tribunal made directions for both parties to provide the documents (including witness statements) which they intended to rely upon for the hearing, to each other and to the Tribunal. No documents or statements were provided by the Builder.

Jurisdiction

6. This claim is a building claim which arises from the provision of building goods and services by the Builder to the Homeowners. The claim is brought within time. I am satisfied that the Tribunal has jurisdiction to hear and determine it as a building claim under the Home Building Act 1989.

Agreed facts

7. Many of the facts are not disputed and I make the following findings:

1. The Homeowners engaged the Builder to construct a home on their land at Cooranbong in NSW.

2. The Homeowners requested the salesperson Denise Kinmond to maximise the side access on the northern boundary of the block. Plans were drawn by the Builder showing the house 1000mm from the southern boundary.

3. Lake Macquarie Council initially refused to consent to the positioning of the home 1000mm from the southern boundary because of the need for a retaining wall. The plans were redrawn to provide a drop edge beam and delete the retaining wall, and the amended plans were approved with a 1000mm setback from the southern boundary.

4. The Homeowners questioned the positioning of the house when the slab was laid but the Builder’s representatives assured them that it was correct.

5. Construction proceeded. The house as constructed is 1180mm from the southern boundary and not 1000mm.

6. The Homeowners are living in the house and have not relocated, but say they would like to, because the position of the house does not now meet their needs.

7. The survey provided in evidence does not provide any distances from the northern boundary.

8. The Homeowners have not purchased the boat which they say they had intended to purchase and which they say will not fit down the side of the house to the carport.

The law

8. The leading case in respect of the measure of damages for defective building work is Bellgrove v Eldridge (1954) 90 CLR 613; 28 ALJR 319; [1954] ALR 929. In this case, the builder’s work on construction of a house departed substantially from the specification. The owner demolished and rebuilt it and claimed that cost as damages. The High Court held that the owner’s right to undertake remedial work at the builder’s expense is not subject to any limit other than that it is reasonable and necessary to produce conformity with the specification. If the work is necessary to produce conformity but is not reasonable, the owner’s loss is the diminution in value. What is “reasonable” and what is “necessary” is a question of fact.

9. The purpose of an award of damages is to put the innocent party in the position he would have been in had the contract been performed in accordance with its terms. The extent to which a Plaintiff can recover is governed by the rule in Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 at 151; [1843-60] All ER Rep 461; [1854] EngR 296 per Alderson B, precluding damages that are too remote, expressed as follows:

“Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, ie, according to the usual course of things, from such breach of contract itself, or such as may be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.”

What loss did the Homeowners suffer?

10. In this matter the Homeowners accept that it would not be reasonable for the house to be demolished and rebuilt. Other than the non-conformity in relation to the positioning of the house, the contract has been complied with. It follows, applying Bellgrove & Eldridge, that the measure of damages to which the Homeowners are entitled is the diminution in value of the home as constructed.

11. If the Homeowners are to be successful in respect of the balance of the claims which they make, those damages must pass the test in Hadley v Baxendale. The loss must either arise from the breach of the contract, or have been in the contemplation of the parties at the time they made the contract.

12. In addition, the Homeowners will need to prove the quantum of the loss claimed.

13. In respect of each of the claims:

Refund of cost of retaining wall $6,028.00

14. The Homeowners say that a retaining wall should not have been required as “our house was supposed to be the same height as the neighbour’s house”. They allege that the retaining wall was required “because the block was cut and filled incorrectly”.

15. The Builder says that there has been no breach of its obligations under the contract. At the hearing the Builder’s representative said that the neighbours were supposed to batter the left hand side of the block and failed to do so. No evidence to support that assertion was provided.

16. I am however not satisfied that the Homeowners have proven that the retaining wall was required because of anything which the Builder did or didn’t do. It is not apparent that the need for the retaining wall is related to the positioning of the house on the block. No evidence has been provided of the levels required or constructed which would enable me to make a finding as to whether there has been a breach of the contract in respect of that matter.

17. As applicants, the Homeowners have the onus of proving the claim. I am not satisfied that they have done so in respect of this alleged loss.

Drop edge beam $27,076

18. The Homeowners say that the only reason they incurred the cost of the drop edge beam was to minimise the set back from the southern boundary in order to maximise the setback from the northern boundary. I accept their evidence in this regard.

19. I am also satisfied that, at the time the contract was entered into, it ought to have been in the contemplation of the parties that a breach of the obligation to position the home 1000mm from the southern boundary would render the additional expenditure on the drop edge beam unnecessary.

20. In respect of the quantum of this part of the claim, the Homeowners rely upon an email dated 1 November 2017 from the Builder’s representative Clayton Poole, which provided an approximate costing of $35,170.00 for the drop edge beam and associated works:

“additional 350t of fill $10,500

Scaffolding $3500

Laundry landing and steps $1250

Edge beams $19,670

Patio steps $750”

21. From that amount the applicants have deducted various credits on the final account, although at the hearing they could not say why they had done that, or indeed which credits they had deducted. Relevantly, the final account included credits of $1927 for scaffolding and $8094 for fill.

22. The Builder submitted that the Homeowners have not proven the quantum of this part of the claim, as there is no evidence of what the house would have cost without the drop edge beam. The Builder also submits that there is no way of knowing whether the credits relate in any way to the cost of the drop edge beam.

23. I accept that the evidence provided has shortcomings, but I note that the Builder did not provide any evidence to refute the claim. Whilst it is not for the respondent to prove the applicants’ claim, there is no evidence that the amount provided to the applicants as an estimate of the costs, and on which they based their decision to proceed with the variation, was not ultimately the amount they were charged. In these circumstances, the evidence of the amount the Homeowners were told they would be charged is the best evidence available.

24. In addition, whilst it is true that the credits may not have related to the work for the drop edge beam, the Builder gets the benefit of that uncertainty if the credit is allowed to counter the allowances in the email estimate.

25. Taking all of this into account, I am satisfied that the applicants are entitled to compensation for having paid for the drop edge beam, without seeing the full benefit of that cost, and I allow compensation in an amount of $25,149.00.

Half the cost of the shed/carport $6900

26. The Homeowners say that they cannot use the carport for its intended purpose, because there is insufficient room to manoeuvre their car down the driveway, with their preferred boat attached. They have in fact not purchased the boat which they had intended to store in the carport.

27. In respect of this part of the claim:

• The surveyor’s report supplied does not include any measurements of distance between the house and the northern boundary. The applicants have measured the distance from the wall of the house to the fence but there is no evidence to determine whether the fence is positioned on the boundary.

• The applicants say that the northern access should be 2840mm. They say that it is actually 2600mm. This is a variation of 240mm. However, the surveyors report shows that the southern boundary measurement is 1180 not 1000. The difference is 180 mm, so the variation of 240mm cannot be caused entirely by the positioning of the house. It is probable that the problem has been exacerbated by the positioning of the fence relative to the boundary.

• The problem with the position of the house was discovered before the applicants paid for the carport. They say that they had already committed to the contract for the carport before they discovered the error in the position of the house.

28. The respondent submits that there has been a break in the chain of causation, because the applicants elected to continue to build the carport even though they were aware of the issue with the location of the house.

29. I am not satisfied that the Homeowners are entitled to the compensation claimed in respect of this issue. They have not shown that the carport cannot be used for the storage of a boat, but rather claim not to have purchased their preferred boat because they could not, they say, get it down the driveway. However, I am not satisfied:

• that if the fence was relocated onto the boundary, the boat could not be manoeuvred down the driveway.

• that the applicants could not, when they discovered the issue with the positioning of the house, have redesigned the carport. There is no evidence of what the financial consequence of doing so might have been.

• that the applicants have lost the benefit of the carport. It now forms part of the property, and presumably will add value to the property if it is sold in the future. There is no evidence that it cannot be used for other purposes.

30. For all these reasons I disallow the claim for one half of the cost of the carport.

Loss of value of property $35000

31. As stated above, Bellgrove & Eldridge is authority for the proposition that, where demolition and rebuilding is not reasonable, an applicant will be entitled to compensation for any diminution in value between the house as constructed, and the value of the house if it had been constructed in conformity with the contract.

32. The Homeowners rely in this regard upon a number of market appraisals. There is no evidence from a registered valuer, and none of the estate agents who have provided market appraisals has adopted the Tribunal’s code of conduct.

33. Mr Ken Melvey from Ourimbah Real Estate says that in his opinion the property would achieve $740,000 - $760,000. He states “with wider access to the shed I believe a higher price could be achieved”. Mr Melvey does not say how much wider, nor give any indication of how much higher the value might be with “wider access”.

34. Ms Jean Olivier of Wilson Britten gives an estimate of $650,000 - $680,000, and opines that “If the property had proper side access, it would be worth in the vicinity of $680,000 - $720,000”. Ms Olivier gives no indication of what she means by “proper side access”.

35. Ms Sally Wrigley of Ellejayne Realty gives an estimate of $720,000 - $760,000 and says that she believes that “if the home was to have a wider side access, I believe the property could achieve $760,00 - $790,000”. Ms Wrigley does not say how much wider that access would need to be to achieve a price in the higher range.

36. I cannot be satisfied that the evidence supplied supports a finding that there has been a diminution in value because the home has been positioned 180mm closer to the northern boundary for the following reasons:

• There is substantial variation in the estimates given. In fact, the price ranges which each of the agents supplies overlap (that is, the highest estimate given for the property “as is” is the same as the lowest estimate with “wider access”.

• None of the agents says that the “wider access” to which he or she refers is the 180 mm difference between the planned and built position.

• When considering expert evidence, the Tribunal needs the expert to explain the facts on which the opinion given is based. In Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705, the principle was espoused as follows,

85 In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of "specialised knowledge"; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be "wholly or substantially based on the witness's expert knowledge"; so far as the opinion is based on facts "observed" by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on "assumed" or "accepted" facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert's evidence must explain how the field of "specialised knowledge" in which the witness is expert by reason of "training, study or experience", and on which the opinion is "wholly or substantially based", applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ's characterisation of the evidence in  HG v R [1999] HCA 2; (1999) 197 CLR 414, on "a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise" (at [41]).

37. The evidence provided simply does not meet these requirements, and I can place no weight upon it.

38. As there is no reliable expert evidence on which I can rely, I cannot be satisfied that there has been any diminution in value, and I disallow this part of the claim.

Costs to relocate: Agents fees $17075.33, conveyancing costs $1716.60, stamp duty $27663, removalist costs $3012.50.

39. The Homeowners submit that, as the home does not now meet their requirements, they are considering selling it to buy a more suitable property. However, they have not identified any such property, and have not placed the subject property on the market.

40. I am not satisfied that these costs are a loss which arises from the breach of contract. Furthermore, I am not satisfied that these costs would have been contemplated by the parties at the time the contract was entered into, as costs which would ordinarily be incurred upon a breach of the contract. For these reasons I disallow these claims.

Orders

1. Beechwood Homes (NSW) Pty Limited is to pay to Rebecca Potts & Daniel Potts the sum of $25,149.00 on or before 9 December 2021.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 15 February 2022