R and K Services Pty Ltd v Di Stasio Pty Ltd (No. 1)

[2017] VCC 502

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No. CI-15-02351

R & K SERVICES PTY LTD	Plaintiff
V
DI STASIO PTY LTD	Defendant

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JUDGE:	HIS HONOUR JUDGE MACNAMARA
WHERE HELD:	Melbourne
DATE OF HEARING:	31 January, 1, 2, 3, 6, 7, 8, 9, 10 February, 10, 11, 12 April 2017
DATE OF JUDGMENT:	19 May 2017
CASE MAY BE CITED AS:	R & K Services Pty Ltd v Di Stasio Pty Ltd (No. 1)
MEDIUM NEUTRAL CITATION:	[2017] VCC 502

REASONS FOR JUDGMENT
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Subject:CONTRACT LAW

Catchwords:              Building Contracts; two-stage renovation project for restaurant premises; cost plus contract for Stage 1 and fixed price contract for Stage 2; Whether progress claims validly made; errors in architect certificate; lack of tax invoice from builder for amount certified; some claims not certified by architect; doctrine of prevention; claim in quantum meruit; contract in force and not frustrated; quantum meruit not available; claims for additional work; whether excluded as within builder’s obligation to rectify defects.

Legislation Cited:     Evidence Act 2008; Electricity Safety Act 1998; Electrical Safety (Installations) Regulations 2009; Building Act 1993; Water Industry Act 1994; Water Industry Regulations 2006;

Cases Cited:Sopov v Cane Constructions Pty Ltd (No 2) [2009] VSCA 141; Bellgrove v Eldridge (1954) 90 CLR 613; Jones v Dunkel (1959) 101 CLR 298; Mannai Investment Co Ltd v Eagle Star Assurance [1997] AC 749; Colonial Ammunition Company Ltd v The King [1938] NZLR 354; Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696; Minchillo v Ford Motor Company of Australia Ltd [1995] 2 VR 594; Spotlight Pty Ltd v NCON Australia Ltd (2012) 46 VR 1

Judgment:                  1.  Within 14 days of this day, the parties must bring in short minutes to give effect to these reasons.

2.Costs reserved.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr S. Smith, Solicitor	S. Smith & Associates
For the Defendant	Mr M Sharkey	Norton Gledhill

HIS HONOUR:

Background

1        Café Di Stasio is a well-known, long-established restaurant in Fitzroy Street, St Kilda, with an emphasis on Italian cuisine.  In 2012, it occupied the premises at No 31C Fitzroy Street, which were part of a brick building dating from before World War II.  The shop front immediately next door, but part of the same building, had been occupied by a sushi bar which had ceased trading.  Upstairs were three residential units.  The restaurant’s principal, Mr Ronnie Di Stasio, and his partner/restaurant general manager, Ms Mallory Wall, saw the vacancy next door as, in Ms Wall’s words ─

“… an opportunity to not have bad neighbours … It was extra space, we would be able to use the whole of the back of the premises and then it was office space, … storage space, it seemed silly not to use it in some sort of retail fashion …” (Transcript (“T”) 824, Line (“L”)14-19)

They decided to expand the restaurant so as to incorporate the space previously occupied by the sushi bar.  The plan was to ─

“… put a bar in the front, utilise the back and ultimately have a kitchen that was more than double in size [than the one enjoyed by the original restaurant premises] and create a beautiful working environment …” (Ibid, L20-23)

2        The restaurant had occupied the premises known as 31C Fitzroy Street and the company took over the tenancy at 31A Fitzroy formerly occupied by the sushi bar.

3        Of the three apartments upstairs, one was used by the company for office space, a second was sublet on a short-term basis to a staff member and the third was the subject of a long-term sublet to a young couple and their child, who had lived there for some 12 years. (T825, L2-8)

4        Mr Hartman is the principal of the plaintiff company, R & K Services Pty Ltd (“R & K”).  Shortly after he established this company, it was carrying out work for one of Mr Hartman’s friends whose architect was Mr S.  In the next 10 years, R & K and Mr S worked on numerous projects together. (T46, L17-26)  In April 2012, Mr S invited Mr Hartman to a meeting at Café Di Stasio.  Mr S had been appointed architect and he retained Mr Hartman’s company, R & K, to do the construction work.  There was no tender process.  Mr Di Stasio ─

“… said he wanted to create a café style bar in the sushi shop next door.  He also said he wanted to modify this kitchen … so that the staff traffic flow would be a lot easier … the design and fit-out of the kitchen [would be carried out by a company called] Sharpline, in particular he had a contact there by the name of Harold Locklear and he wanted Harold to do the design and construct an installation of the kitchen area and its facilities”. (T47, L13‑24)

5        At this time, it seemed the sushi shop was in a derelict condition.  The power had been cut off though food remained in the freezers and fridges. (T48, L18-28)  Mr Hartman took the drawings prepared by Mr S and commenced work on an indicative budget. (T49, L1-7)  On 16 May 2012, there was a meeting at Mr S’s office in Carlton attended by Mr Hartman, Mr S and a cadet architect from Mr S’s office which discussed a wide range of aspects of the project.  Mr S stated, “Sharpline has allowed $130,000 excl. GST for kitchen equipment supply and install”. (Court Book (“CB”) 84-85)  A further meeting was held at Mr S’s office on 10 July 2012 where further details of the project were discussed. (CB 86-87, T50, L22-29)  R & K began work on 9 July removing debris from the sushi shop and began demolition work on 20 or 23 July. (T51, L1-6)  A further meeting was held on 3 August 2012. (CB 89-92)  On 8 August 2012, the parties executed a written cost plus contract in a form approved by the Royal Australian Institute of Architects and the Master Builders Association 1976 Edition, reprinted 1997. (CB 94-105)  The architectural plans are in the Court Book at pages 106-120. (T51, L15-22)

6        At the August meeting, one of the matters identified for investigation and action was Item 6.03, “smell to kitchen (bain-marie) to be identified by JM”.  “JM” is Jeremiah Mierke, an employee of R & K, who acted as its site supervisor on this initial stage of the project and the subsequent Stage 2.  While work was being carried out in the old kitchen area in October 2012, a smell was identified, all equipment was removed and the floor was found to be “rotted out and unsafe”.  Pipework under the floor had “separated and there was foodstuffs and water and mud under the floor and this was creating a smell”. (T52, L12-17)  Mr S directed R & K to make good the pipework and reconstruct the subfloor and flooring of the kitchen. (T52, L21‑23)  The pipework in question here was PVC. (T54, L11)  As work progressed, there were frequent consultations between Mr Hartman and Mr S, both of whom were frequently on site. (T55, L25-29)  Following discussions with Mr S and Mr Di Stasio, according to Mr Hartman “the project was ever evolving on a daily basis to … what was included and what was taken out of the works”. (T56, L1-3)  Mr Hartman said, “We had no design responsibility and we took all of our instructions from the architect”. (Ibid, L26-28]

7        As the project continued, R & K submitted a number of progress claims which were certified by the architect and paid. (T59, L30-7)  The invoice included a detailed breakdown of charges made by the various trades. (T59‑60)  The indicative budget prepared costed the works at $615,500 with actual cost of $713,820.  The two figures are not exactly comparable because, as will appear, whilst the charges to be made by Sharpline were included in the indicative budget, ultimately Sharpline was paid independently and outside the scope of the contract between Di Stasio and R & K. (T60, L26-T61, L31)  Whilst generally payments as claimed by R & K were made by Di Stasio if certified by the architect, there was one item which was discounted by $20,000.  (T62, L19-28)

8        Mr Di Stasio’s contact at Sharpline suffered a breakdown in health.  Sharpline proved difficult to contact and there were delays in arranging for installation of appliances. (T62, L29-T63, L8)  Mr Mierke, who was acting as site supervisor from R & K, found himself unable to contact Mr Locklear of Sharpline. (T366, L23-T367, L3)  In Mr Locklear’s absence, it proved difficult to get other people at Sharpline to take responsibility and, whilst some installation work was done, Mr Mierke was given to understand that the installation could not be completed by any early date or by a date which would conform to the timeline established for the project as a whole. (T368)  As a result, Mr S instructed installation to be carried out by R & K’s plumber and electrician. (T63, L6-8)  It took approximately two days to install all the cooking equipment. (T373, L7‑14)  The equipment installed included two pasta cookers which will assume major significance in the course of this narrative. (T373, L15-19)  Amongst the items which Sharpline did install were extraction canopies.  (T366, L17)  At a view conducted during the trial, I observed that there was a bank of some four extraction canopies which apparently dated from Stage 1 of the project.

9        By the end of October, the restaurant was trading again.  It seemed that every time the pass-through door to the new bar established on the site of the old sushi shop was opened, the notes of the orders made by the restaurant’s customers would fly off the board to which they were attached.  Mr Mierke was contacted by Mr Ken Taylor, who became a major figure in the narrative.  He is a plumber in semi-retirement who, for many years, had carried out maintenance work at Café Di Stasio.  Mr Taylor raised the problem with Mr Mierke.  The problem seemed to be that the fans were extracting so much air from the kitchen that there was insufficient inflow of what is popularly known as “make-up” air.  Mr Mierke replied:

“I wasn’t the right person that he should be talking to as we didn’t have any of the design responsibility and that it was Sharpline’s kitchen installation and we didn’t do the installation.  So he really needs to talk to [Mr S] if he’s got any dramas and I really couldn’t help him because I wasn’t involved in the design.”  (T374, L23-28)

10       Mr S commissioned electrical engineers, Fryda Dorne & Associates, who prepared a report in mid-December, as a result of which Mr S directed R & K to remove a panel from the door of the rear of the kitchen, which exited into a courtyard, and replace it with mesh to enable the inflow of more air.  This work was carried out. (T375)

11       Sharpline’s design for the kitchen in Stage 1 provided that the existing air supply would be re-used; that is, there was no provision for additional “make-up” air.  An evaporative cooling unit, which was pre-existing at the beginning of Stage 1, was to be re-used but, upon testing, it was found to be defective.  As a result, Mr S instructed R & K to obtain and install a new unit to replace the former one.  (T67, L11-22)

12       According to Mr Mierke, the pasta cookers were installed in late October 2012 with the Stage 1 project completed by November of 2012. (T376, L30-T377, L1).

13       Following completion of the Stage 1 Contract, all appeared to be well.  In about June 2013, Mr S rang Mr Hartman informing him that Mr Di Stasio wanted to carry out some further works on Café Di Stasio entailing extension of the kitchen, incorporation of the cool room and a dry store in the area that, at that stage, was occupied by an office and a toilet area. (T69, L23-T70, L4)  Mr Hartman received documents for the further works from Mr S and submitted a price for carrying out those works which included a “trade breakdown”.  He obtained prices from sub-contracting trades which were incorporated as a basis for the price which he submitted. (T70, L9-15)  Mr S made certain stipulations which had the effect of decreasing the price. (T70, L26-29)  The Stage 1 Contract had incorporated a 12 per cent margin for profit plus Goods and Services Tax based upon a disclosure of the cost of doing the work.  According to Mr Hartman, the pricing which he submitted for Stage 2, even though this was to be documented as a fixed-price contract, gave the same disclosure of underlying cost and entailed the same profit margin as the Stage 1 Contract; namely, 12 per cent. (T71, L18‑23)  The fixed-price contract was documented by the execution by the parties of a contract in the form of the Australian Building Industry Contract, ABIC BW-1 2002 Basic Works Contract, on 15 October 2013.  It provided for a date for practical completion of 29 November 2013. (CB 167-179)  The contract price was $245,760.90.

14       Mr Hartman said R & K started work in a couple of days. (T72, L29-30)  According to Mr Hartman:

“The works progressed in the normal process, we demolished, we attended to the works and reconstructed and it was all completed within six weeks” – viz at the end of November 2013.  (T73, L13-18)

15       Mr S signed a Notice of Practical Completion under the terms of the contract which he issued on 12 December 2013.  This certificate stated inter alia:

“The defects liability period for the works has now commenced and concludes on 12 June 2014 in accordance with the terms of this contract.”

16       The certificate entitled the builder to release 50 per cent of the security.  Clause N8.1 of the building contract headed “Effect of Final Certificate” stated: 

“The final certificate is evidence of the parties’ entitlements under this contract and that the contractor has performed its obligations under this contract.” 

17       Clause N4.1 of the building contract stated: 

“The contractor is entitled to claim for a final payment when the defects liability period has ended and the contractor has rectified all defects and finalised all incomplete work.” 

18       Clause N5.1 of the contract stated:

“The architect must assess the contractor’s claim for a payment and issue a certificate setting out any payment due within 10 works days after receiving the claim.  The architect must take account of:

·The value of the work completed making allowance for the cost of rectifying defects;

·An allowance for cash retention;

·GST”

19       Clause N6.1 of the contract provided under the heading “Contractor to Prepare Tax Invoice”:

“On receiving the certificate from the architect, the contractor must prepare a tax invoice equal in value to the certificate and present both documents to the owner for payment.”

20       The architect was defined as being Mr S’s company.  Clause A5.1 provided that the architect was appointed to administer the contract on behalf of the owner and continued:

“The architect is the owner’s agent for giving instructions to the contractor.  However, in acting as assessor, valuer or certifier, the architect acts independently, not as an agent of the owner.”

21       Clause A5.3 stated:

“The owner warrants that the architect has authority to administer this contract.”

22       On 6 November 2013, R & K issued Invoice I905 addressed to Café Di Stasio, care of Mr S.  This was designated as Invoice Claim No 1 and sought payment of $118,950.19 inclusive of GST. (CB 164)  According to Mr Hartman, it was certified by Mr S and paid by Café Di Stasio. (T75, L9-11)

23       The second progress claim, according to Mr Hartman, was sent to Mr S on 3 December 2013.  The second document, which is to be found at CB 211‑212, is in a different format.  It is headed “Claim No 2” and seeks payment of $98,591.71.  It included breakdowns of a number of items of work and a statement as to the percentage of completion of those items of work.  All items are said to have been completed to 100 per cent, save electrical work which is shown as complete to 95 per cent.  A certificate dated 11 December 2013 appears on the following page 213 of the Court Book on the letterhead of Mr S’s practice.  It refers to an amount certified as due and payable to R & K in the sum of $109,333.45.  This is rendered in figures and below it appears the following:  “One hundred and eighteen thousand, nine hundred and fifty dollars, nineteen cents”.

24       The certificate includes a line for the signature over the designation “Architect”, but no signature appears on the document.  Uncertainty seems to surround this claim.  Additional documents were produced and added to the Court Book following cross-examination of Mr Hartman.  These disclosed that on 3 December 2013 at 11.06am, Mr Hartman sent a letter to Mr H, an architect assistant to Mr S, stating:

“Please find attached our claim No 2 for the above project.”

25       The attached tax invoice, which is in the same format as the first tax invoice, shows it as dated 3 December 2013 and designates it Invoice I 908.  It claims a total amount of $118,165.72 inclusive of GST. (CB 237A, 237B and 237C)  Also attached is a further document with trade breakdowns headed “Claim No 1” and dated 5 November 2013.  The amount claimed was $210,302.36 with a statement “Less retention $5,257.56; Less previous payment $108,136.54” and showed a “Total balance outstanding $107,423.38.” (CB 237D-237E)

26       Late on the afternoon of 11 December 2013, Mr Hartman emailed Mr H what he described as a revised claim.  This showed a tax invoice dated 3 December 2013 stating “This invoice Claim No 2” sought $120,420.72 inclusive of GST. (CB 237F-237G)  It included an attachment with a breakdown of trades, once again headed, it would seem erroneously, “Claim No 1” showing a total amount of $212,302.36 payable; less retention $5,307.56; less previous payment $108,136.54, leaving a total of $109,473.38. (CB 237I and 237J)  Mr Hartman sent a further email to Mr H on 12 December 2013 headed “Café Di Stasio Claim No 2 Rev”.  The covering email said “Try again”.  The invoice showed a total claim inclusive of GST $120,112.46.  The breakdown attached, once again with the erroneous heading “Claim No 1”, showed a total claim of $212,028.97; less retention $5,300.72; less previous payment $108,136.54; total claimed $109,193.15. (CB 237K-237O)  Mr H sent an email later the same morning to Mr Hartman stating:

“Attached is my certificate which has slightly different retention numbers.”  (CB 237P)

27       No certificate is attached to this email in the Court Book.  There is a tax invoice showing a total claim of $108,450.88 and a trade breakdown attachment, again erroneously headed “Claim No 1”, showing $212,028.97 payable; less retention $5,300.72; less $108,136.54 previous payment; amount payable $98,591.71.”

28       In so far as one of the invoices of claims referred to the figure of $98,591, that would appear to be an amount exclusive of GST.  To correct this error, according to Mr Hartman, he sent a version of the tax invoice I 908 dated 3 December 2013 which appears at CB 218, claiming $108,450.88. (T77, L3-13)  According to Mr Hartman, Claim No 2, in whatever version, remained unpaid, he said that Mr H certified the claim but at a higher figure.  He continued:

“… what normally happens is that the architect certifies the figure and then sends the invoice on to the client so when I sent it to [Mr H] it has the claim and the invoice, he certifies it, with his certification he sends the invoice to the client.”  (T77, L25-29)

29       The other explanation which he offered as to the differing figures was that at least in one of the earlier versions of this claim, he added the amount of retention rather than deducting it, as he should have, and this error was pointed out to him by Mr H and he revised accordingly. (T76, L14-30)  The certificate from Mr S’s office referred to by Mr Hartman is at CB 232.  It certifies an amount outstanding of $109,333.45 but gives the figures in words as “One hundred and eighteen thousand nine hundred and fifty dollars nineteen cents”.  The line over the word “Architect” provided for a signature is blank.  Mr Hartman said he received no further communication from Mr S about the submission of any further revised tax invoice or any step which might be necessary to obtain payment.  Mr S told Mr Hartman:

“We need to fix the pasta cooker, the drain to the pasta cooker otherwise we won’t get paid and I’m owed $50,000 as well, so neither of us will get paid until that is fixed.”  (T80, L20-23)

30       In May 2014, according to Mr Hartman, he submitted an invoice designated Invoice I913, dated 19 December 2013, to Café Di Stasio care of Mr S.  It purported to be the third claim and sought payment of an amount of $1,566.39.  Attached to it was a document designated Claim No 3 with a breakdown between the trades showing an amount payable of $1,423.99 against a total of $213,489.48; minus retention $5,337.24; and a previous payment of $206,728.25.  This last deduction suggests that Claim No 2 had been met, though the evidence is that it had not and has not been paid.  (CB 213B-215)  Asked why this invoice was so delayed in its submission, Mr Hartman said:

“… I may have submitted it on 19 December, I can’t be entirely sure but I think I may have then resubmitted it to the architect in the same form in May 2014.” (T88, L15-18)

31       Claim No 4 is dated 6 October 2014. (CB 216-217)  It seeks payment of $5,337.24.  Mr Hartman said that he submitted it to the architect for payment on 6 October 2014 but neither Claim No 3 nor Claim No 4 had been certified. (T88, L26-30)  Mr Hartman said that he spoke to Mr Di Stasio in March 2014 about these outstanding amounts.  Mr Di Stasio said payment would be made when the defects were sorted out.  Mr Hartman suggested that payment of a portion of the outstanding amounts might be made in the interim with the rest held until rectification of defects:

“and … he made some derogatory comment about our plumber and the quality of the plumber’s work and that we wouldn’t get  paid until such time as the defects were completed and with that he hung up.” (T89, L23-T90, L1)

32       At one stage around this time, Mr Hartman said he received a call from Mr Di Stasio who said:

“I can’t get hold of Robert [that is, Mr S], is he okay?  Was there anything wrong?  I think he said, ‘Is Robert okay?  I can’t get hold of him, and he doesn’t seem to answer my calls’ and with that I said, ‘Well I’m not having any trouble getting hold of him and I spoke to him yesterday.’”  (T90, L18-23)

33       An occupancy certificate for the Stage 2 works was signed off by the relevant building surveyor on 29 November 2013. (T90, L28-T91, L1)  The certificate is at CB 222 and 223.  It appears that on 12 December 2013, as well as issuing an apparently unsigned certificate for progress Claim 2, Mr S’s office, apparently through the agency of Mr H, issued what is described as a contract summary describing an original contract price exclusive of GST of $223,419; variations negative $10,896.08; monetary allowance $966.56; leaving a current adjusted contract price exclusive of GST $213,489.48; GST $21,348.95; leaving a “current adjusted price contract inclusive of GST” $234,838.43.  This document shows progress payments of $205,182.72; showing amounts authorised for payment, $108,136.54 authorised 23 April 2013 (no explanation as to this date); 12 December 2013, $91,785.09; and 12 December 2013, $5,261.09; leaving a total payment $205,182.72.  There is a reference to a current certificate presumably for progress Claim 2, $99,394.03 plus GST $9,938.40; leading to the certified figure of $109,333.43. (CB 232-237)

34       Meanwhile at the end of October, Mr Mierke received a complaint from one of the restaurant’s waiters known as Jack, who said:

“Hey, we’re having this problem with the pasta cooker, when we empty it sometimes it seems to overflow and come out on the floor, can you have a look at it?” (T386, L13-21)

35       The pasta cooker was installed during Stage 1 but this problem manifested itself toward the end of the Stage 2 work.  Mr Mierke said he asked Jack to leave the pasta cooker full of water overnight with a view to his opening the valve the following morning. (T386, L29-T387, L5)  Mr Mierke said he:

“…witnessed that it was overflowing on the floor.  So I called our plumber that is [Mr G], let him know, hey, we’re having a problem, there must be a blockage or something is going on with this drain, can you come in and disconnect the gas lines so we can have a look because we couldn’t see the drain because of the installation of the two pasta cookers.  So they needed to be disconnected from the gas line and pulled out.” (T387, L5-13)

36       Mr G disconnected the units and according to Mr Mierke:

“…we tried to rod the drain just with a flexible rod and the rod was getting stuck about half a metre in.  So we didn’t have enough time to change anything then … we needed to get everything back in order for the staff who had come back into the kitchen so we put everything back and the following day [Mr G] organised one of his camera guys to come down and put a camera down the line so we could see better what was going on.  So again, pulled the machines out, put the camera down the line and the camera got stuck again at about half a metre but we couldn’t quite get a clear picture of what was going on.  So again we put all the machines back, put it all in working order again.”  (Ibid, L17-30)

37       Mr Mierke said that the following day he cut an access hole in the floor and that day, 22 November 2013, (T388, L1-3) he said:

“We identified the pipe where it had been saddled to the bottom of the joist had deformed.  The heat from the water had caused the pipe to deform, well, that’s what we thought it was.  So we replaced the trap and the pipe and put the cover back on the floor and put the machines back in.”  (Ibid, L4-10)

38       According to Mr Mierke:

“The pipe had actually drooped slightly each side and instead of being round the pipe was now oval.  So it appeared to be the weight of the warm water or the hot water in the trap, the weight of that was causing it to pull down on the saddle causing it to deform.”  (Ibid, L13-18)

39       Mr Mierke said the pipe “had slightly collapsed.”  (Ibid, L24)

40       The pipe was not blocked but the deformation “was slowing the water down”.  (Ibid, L21)

41       Mr Mierke said that the pasta cookers were reinstalled and he made inquiry of the company which supplied the pasta cookers to Sharpline.  The manual for the pasta cookers did not shed any light on the issue as to the temperature at which water could safely be discharged. (T389, L15-17)  Mr Mierke said that from his observation:

“…the heat from the water was obviously too great – and the heat and the weight, you know, if the pipe had been laying [sic] on the ground it might not have done it, or if it had been directly buried in the ground maybe it might not have done it.”  (T390, L2-7)

42       Mr Mierke then spoke to an organisation known as Vinidex, a supplier of PVC and HDPE pipe.  The gentleman whom he spoke to at Vinidex said that PVC was not rated for 90 degrees Celsius or any temperature close to boiling point for water.  Rather, it was rated for 65 to 75 degrees.  (T390, L23-26) 

43 In light of an objection by Mr Sharkey on behalf of Di Stasio, I directed that the evidence as to what was said by the Vinidex representative could be received only for the fact that the utterance had been made, not for the truth of what was said. I made that direction under s136 of the Evidence Act 2008. (T392, L3-17) After the identification of the deformed pipe, Mr Mierke said that the installation was fixed with a new section of PVC pipe:

“So at least [it] could be operational for the staff that day.”  (T397, L5-10)

44       Following these events and his talks with the Vinidex representative, Mr Mierke concluded that: 

“PVC wasn’t going to be an option moving forward.”  (T398, L7-8)

45       He said he believed the problem “was going to happen again” (if PVC pipe were persisted with), “whether it took another six months to happen.  It was likely it was going to happen again.”  (Ibid, L14-16)

46       Mr Mierke said that he spoke face to face with Mr Di Stasio and sent an email to Mr H at the architect’s office. (T399, L14-16)  As time went on, Mr Mierke became involved in work on another job and became less centrally involved with this problem. (T400, L17-23)  Mr Hartman began taking over responsibility.  He said that in December 2013 the PVC connection to the sewer was replaced with copper pipe. (T401, L9-10)  There was talk of using other chemically fabricated material such as UPVC and HDPE.  These, according to the advice Mr Mierke received, would be more resistant to high temperature water but would “only last for a certain amount of life cycles.” (T403, L1-19)  Mr Mierke said, of substituting copper, that it would tend to heat to the same temperature as the water passing through it:

“So it just extends wherever that’s going to, to be still expelling hot water and the drains there are all PVC, so at their destination point they are still PVC.  So it’s just going to mean the hot water is travelling further to get to the PVC so at some point it’s still going to touch PVC.”  T403, L27-T404, L2)

47       Eventually Mr Taylor, Di Stasio’s maintenance plumber, and Mr H, Mr S’s assistant:

“…through discussion with each other came up with the idea of putting a cooling tank through there and pumping it out so it could mix with tempered water and cool the body of water down.  So later on in the following year of 2014 there were several site visits overnight to cut the holes and dig holes and bits and pieces.”  (T404, L22-28)

48       According to Mr Mierke, as far as he knew, the manufacturers of the pasta cookers did not supply or manufacture a cooling tank. (T405, L13-14)  Mr Mierke said that the tank fitted was:

“Specially fabricated, I picked the tank up from the factory where they built it in Dandenong … And we had to wait for it to be manufactured …”  (T405, L28-31)

49       The tank was approximately 800 millimetres long, 800 deep, approximately 350 to 400 millimetres wide.  (T406, L7-9)  Mr Mierke said that:

“it [the tank] is [a single tank] with a baffle in the centre and a pump on one side…once the volume of water breaches over the centre baffle it turns into the pumping department where it is pumped away and the idea is that at any one time it hold an amount of water that is cool and when the hot water is introduced will mix the two together and put it over to the pumping and discharge it at a cooler temperature.”  (Ibid, L12-20)

50       The tank included no filters.  (T407, L14-15)

51       During the course of the excavation for the installation of the cooling tank, Mr Mierke found what he described as ─

“… a piece of earthenware pipe just within the dirt.  …  It was roughly about 3 inches long, maybe 50 millimetres wide, it had four almost like a diamond shape, I suppose, it had four broken sides on it but all the sides were covered in dirt, the whole piece was covered in dirt.  It wasn’t a new fracture, it was a piece of fragment that had been covered over somewhere in its past.” (T409, L6-17)

52       Mr Mierke remembers Mr G’s assistant pulling the pipe fragment out with Mr Mierke standing on one side of the hole.  Mr Taylor was in attendance, overlooking the scene, and he came down and inspected the pipe. (T410, L1‑9)  According to Mr Mierke’s recollection, the fragment “was sitting roughly in the centre of where the tanks are now, so a centre in both directions”. (T410, L13-15)

53       Mr Taylor’s recollection of this event was broadly similar, though his recollection was not that the item in question was a mere fragment.  He said:

“It was a length of pipe, earthenware pipe, 100 millimetre in diameter or 4 inch and it was about yay long from memory. … Approximately 400 to 500 mil long.” (T623, L15-20)

54       Mr Mierke concluded that the pipe or pipe fragment was part of an old stormwater drain.  Mr Taylor said he accepted that “a hundred per cent” and had no reason to question Mr Mierke about it. (Ibid, L21-24)  Following this event, according to Mr Taylor “the excavations continued and the cooling tank was installed.” (T624, L1‑3)  Completion of the job required the reconstruction of subfloor timbers, the relaying of the floor and the installation of a temporary hatch. (Ibid, L6-10)  The following day, a 50 millimetre ventilation pipe was installed from the cooling tanks to the atmosphere which required the cutting of access holes in the ceiling and the installation of access hatches. (Ibid, L24‑31)

55       Mr Taylor said that, on 17 March 2014, he was called out upon a complaint that the carpet was wet in the back corner of the restaurant and “directly behind that area was a wash up or scullery area for the restaurant kitchen”. (T626, L22‑26)  Investigation made by Mr Hartman the following morning at 6am entailed the removal of the floor tray in the scullery area which showed that the waste pipes were not properly connected and ─

“… all the food scraps and water from the sink, the dishwasher and the floor tray water [were] discharging under the floor of the wash up area.  And that water was then running across, damaged the plaster wall in the kitchen which is adjacent and the water was – that was why the carpet was wet in the restaurant.” (T627, L4-15)

56       The following day, Mr Taylor attended with Mr Mierke from R & K, and the plumber, Mr G, and his assistant, and removed the food waste and debris. (T633, L6-13)  Mr S and his assistant, Mr H, were on site to inspect and supervise the clean-up and refit of the floor tray. (T633, L14-16)  There was also work involved in directing the dishwasher discharge into the trap under the floor tray in the scullery to ensure that the bend in the pipe remained charged with water to prevent sewage odours escaping.

57       Beginning on 1 April 2014, a new problem, which for some time proved intractable, manifested itself.  Mr Taylor was summoned to the restaurant on that day to try to locate what were described as “strong sewerage odours”. (T641, L21-26)  These odours persisted for some weeks and the various “fixes” proved unsuccessful.

58       The odours became particularly strong and pervasive around Easter.  Mr Taylor was on site on Easter Sunday, 20 April 2014. (T647)  Mr Hartman had been away on his Easter holiday and was summoned back to Melbourne, having to undertake a four-hour drive.  This was 19 April 2014, Holy Saturday, and after a four-hour drive from Mount Buller, Mr Hartman arrived at Café Di Stasio at 10pm, where he met Mr S. (T92, L30-T93, L10)  On that occasion, according to Mr Hartman:

“We decided we would come back early in the morning and fit some duct work to the subfloor space of the upper part of the kitchen and try and direct the air flow – create an air flow coming out of the subfloor to exhaust the odours out of the building.  At 7 o’clock the following morning, [Easter] Sunday morning, I met Mr Taylor there.  I purchased some ducting and we moved forward on installing these ducts to the open air.” (T93, L20-28)

59       It seemed to Mr Hartman that the odour was coming from “the subfloor area”. (Ibid, L18-19)  There were continued attendances without a solution to the problem.  According to Mr Taylor, on 15 May, he, Mr Hartman and Mr Mierke were in attendance ─

“… and we were racking our brains to try and think where these odours could be coming from.  So some of the sewer vents above the roof line were extended further away from the evaporative coolers, a chimney was located which was not in use, that was sealed, that was sealed on top of the chimney and also down below – that chimney was located, I recall, in the waiters station in the bar, so that was also sealed from downstairs in the bar area as well.” (T663, L26-T664, L3)

60       There was further work done on 20 May.  According to Mr Taylor:

“The work we did prior to this item of sealing the chimney and the floor openings and extending the vent pipes did not eliminate the odours.  There was [sic] a further two ventilation pipes located at a greater distance away from air-conditioners, they were extended as well just in case the wind was blowing the odours towards the evaporative coolers.” (T664, L17-24)

61       Eventually, Mr Taylor resorted to what are popularly described as smoke bombs.  On one day, he used two bombs available to him, thereby exhausting his supply. (T665, L22)  He returned the following day, 23 May, with five more smoke bombs and his garden leaf blower.  According to Mr Taylor:

“… we put a smoke bomb down the drain which was lowered in, in like a bowl and I then put the garden blower down the sewer pipe as well … the air pressure forces the smoke to go up the drain, it would have come out of every opening in the drain, it would have come out of the vent pipes on the roof, but it came out under the floor in a specific location which was adjacent to the cooling tank which was installed.” (T665, L24-T666, L3)

62       A previous investigation with the use of a drain camera proved unavailing. (T666, L5-21)

63       There was an unsealed branch of the sewer in that location adjacent to the cooling tank.  Mr Taylor sealed the pipe. (T666, L22-31)  The relevant branch, according to Mr Taylor ─

“… was a 45 degree branch on the drain and it was right where that piece of earthenware pipe was removed during excavations.  The branch was not marked on the sewer plan which was available from South East Water, but sometimes work is done and there is no up-grade of the plans.” (T667, L13-20)

64       The 45 degree branch pointed to the back of the restaurant and was on the horizontal plane. (Ibid, L23-29)

65       Mr Taylor conceded that the pipe or pipe fragment discovered in the same general area might have been, as was judged at the time of the excavation, an old stormwater pipe.  He said:

“It was feasible it was an old stormwater pipe, there was nothing marked on the sewer plan to indicate it was a sewer point.” (T726, L13-16)

66       He said further:

“I took the assumption which I will live to regret that Jeremiah knew what he was talking about …”. (T726, L5-7)

67       The pipe from which the smell was emanating “had maybe 100 mil or so of cover over it, that’s approximately 6 inches below the surface under the subfloor”, according to Mr Taylor. (T730, L21-24)  Mr Taylor said:

“… at the time the excavation was completed the offending pipe wasn’t exposed, the open sewer line wasn’t exposed.  But months later when we did the smoke tests the smoke came out and the odours came readily out of the pipe, and I don’t know whether over a period of time the earth’s dried up and some of it’s dropped away exposing the pipe, but it was open.” (T733, L11-18)

68       Once the offending pipe was capped, the odour issue disappeared.

69       According to Mr Hartman, when R & K carried out the Stage 1 work, design for the kitchen was provided by Sharpline.  He said:

“The existing air supply to the kitchen was to be re-used.  It was found that unit was faulty and obviously not working properly.  The architect instructed us to obtain and install a specified evaporative cooling unit to replace the existing unit.  The exhaust canopies were again actually installed by Sharpline.” (T67, L11-22)

70       Airflow in the restaurant was found to be problematic.  A hatchway from the kitchen leading into the new bar area in what had previously been the sushi shop created draughts which tendered to whip away the notes on which customer’s orders were written.  The problem seemed to be that the four extractor fans installed by Sharpline as part of the Stage 1 work extracted so much air that there was an insufficient inflow of air to the kitchen area to make up for the outflow.  This is referred to as “make-up air”.  With inadequate make-up air provided to the kitchen, troublesome draughts were created.  There was an on-site meeting to consider this issue on 4 February 2014.

71       The Minutes of the meeting are at CB 239 on the architect’s letterhead.  According to the Minutes, the action agreed to was for the canopy extraction rates to be tested.  The contractor which replaced Sharpline, who had provided design and fittings for Stage 1, namely KBR Commercial, was “to provide a contact”.

72       KBR Commercial was represented at the meeting by Mr Bruce Jenkins and Mr Jason Dean.  Also in attendance was Mr John Clarke, of J Clarke Heating and Cooling and mechanical contractor to R & K.  (T130, L26-30)  Mr Clarke merely observed and said nothing.  (T130, L31-T131, L1).  Mr Jenkins of KBR suggested that an organisation known as “Vining Air” be retained to carry out testing.  Vining Air was engaged by the architect, however, according to Mr Hartman, “we actually paid their first bill”.  (T131, L11-20).  Mr Hartman said that, in his view, the make-up air problem was a design issue for which R & K had no responsibility.  Nevertheless, in his words, “the problem was stagnating”.  Mr S rang him and asked him to pay the bill “so we can get this underway”.  Mr Hartman agreed that R & K would pay “to try and solve the problem”. (T 131, L21-31).  Vining Air provided a report (CB 243FF).  It showed the “client” as R & K Services and was dated 12 February 2014.  The report observed:

“The evaporative cooler is boxed in by the structure of the building and refrigeration condenser units, which is restricting the airflow and decreasing the capacity of the unit by inducing heated air from the condensers.

The system draws through the back door and any other opening into the space rather than through the make up ductwork because the doors and walkways are the path of least resistance.

Recommendations

1.  Relocate the evaporative cooler into a more open area without external head loads.

2.  Upsize the evaporative cooler and increase the supply ductwork size.

3.  Install make up air fans into the make up ductwork to pressurise the make up supply ducts.”  (CB 244-5).

73       According to Mr Hartman:

“There was a direction given [by the architect] to install a further evaporative cooler in the rear of the extended kitchen and mounted on the roof above”. (T130, 23-25)

74       This direction was, according to Mr Hartman, oral. (T132, L23-30)  He believed the person who gave the direction was Mr H. (T133, L9-12)  Once again, R & K paid for this installation. (T133, L30)  Mr Hartman said he was prevailed on at a meeting at Mr S’s office to make the payment, though he believed, and Mr S agreed, that this was “extra works and it should be a client/customer [liability]”.  (T134, L1-10).

75       In October 2014, Mr H sent an email to Mr Hartman directing that an existing register apparently fitted flush to the ceiling should be replaced with “an Air Plus ACP1 plenum”. (CB 249)  There was some debate as to the appropriateness of this installation because the plenum projected below the ceiling, which had a clearance of 2.4 metres, which clearance would be reduced to 2.2 metres. (CB 249-250).  The installation, nevertheless, proceeded.  According to Mr Hartman, the plenum was “almost like a box that sits below the ceiling and has outlets on the side of it.  So when the air comes out of the unit it actually pushed the air across the ceiling space.” (T135, L7-10)  Mr Hartman said this installation meant that R & K was “adding an additional unit”. (T136, L12)  Mr Hartman referred to a tax invoice from “J.A.C. Air Pty Ltd”, Mr Clarke’s company, for $1,760, rendered 30 April 2014, for the installation of a temporary evaporative cooling unit, relocating an evaporative cooling unit and installing a new Braemar evaporative cooling unit. (CB 256).  He also referred to a tax invoice from Rayson RTK for the supply of duct material, for $218.66 inclusive of GST (CB 257).  He also referred to invoices from Mr Taylor’s company of 21 July 2014, for $1,034, inclusive of GST, relative to the installation of two evaporative cooler drains and two hose drains restricting box gutter downpipe (CB 258) and an invoice dated 25 August 2014 for $2,002, inclusive of GST, for rectification of non-compliant works in the roof, $1,500, and also the removal of five Easy Hooker water hoses to evaporative cooler, extending a copper water line and reconnection, $320. (CB 259)  He said that R & K had paid these invoices.  He said he purchased materials from Rayson RTK because “we had to relocate an exhaust duct alongside the unit, so this was … I think it was the toilet exhaust from the dining room.”(T137, L23-7).  He said the invoice at page 259 “was part of the works in installing the evaporative cooler”.  (T137, L31-T138, L2).

76       On 1 April 2014, the architect issued a “defects list”, which included items relative to make-up air. (CB 263)  The following were included under this heading:

“1.1.1The existing evaporative cooler is to be replaced with a new larger unit, at a slightly higher level so as to clear the surrounding refrigeration motors, with variable speed controllers.  This must deliver a minimum of 1100 litres of air per second

1.1.2Additional registers are to be installed to the end of the existing duct and between the two existing registers which are closest to the north end of the duct.  Delete to most southerly register. 

1.1.3Adjust or replace the existing length of flexible duct, if possible, to maximize air supply

1.1.4The existing evaporative cooler unit is to be relocated to as far north as possible of the existing roof access hatch with a 4 way register located directly below it.  Register must have adjustable louvers.  This must deliver a minimum of 2400 litres of air per second.

1.1.5Switching and controls for both units to be located next to canopy controls if possible.  To be discussed on site with architect.”

77       The penultimate item appears to have been the direction which led to the installation of the “plenum”.

78       At CB 270, Mr Hartman identified an invoice from R & K for $11,686.82 headed “Braemar Evap Cooler”, which included services from R & K, including 22 hours supervision, and invoices from Taylor Plumbing and Mr Clarke.  This represents the total claim which R & K makes relative to these matters in the proceeding. (T138, L16-T139, L30)  As an interim measure, Mr Hartman said that his company acquired a second-hand unit and installed it. (T140, L3-18)  The total effect was that, in both stages of the work, there were some three air-conditioning units supplied by R & K and one of them was relocated. (T141-2).

79       At some stage around May of 2014, Mr Taylor as Di Stasio’s maintenance electrician, on one of his attendances at the restaurant:

“… found an electric Salamander which is like a grill, wall mounted grill was not working.  Checking the electrical box or fuse box in the restaurant nothing had tripped, there was no circuit breakers tripped or anything like that.  Upon investigation it was discovered that the power supply for that appliance was in the new bar, and listed on that circuit in the new bar was a power point in the adjoining kitchen, lighting in the adjoining kitchen and one exhaust canopy in the adjoining kitchen.”  (T662, L16‑26)

80       The salamander is not a defect that is the subject of this proceeding. (Ibid, L30-31)  It seems that arising out of this discovery relative to the “salamander”, Mr Taylor and Di Stasio’s maintenance electrician, Nissal Electrics, called in an independent electrical inspector to carry out an audit.  (Ibid, L2-5) The inspector involved was a Mr Di Martino who carried on his practice under the name of “Blue Sky”. Mr Di Martino gave evidence at the trial describing himself as “a licensed electrical inspector and A-Grade electrician.” (T806, L15 and 16) Whilst electrical installations require certification from the electrician making the installation, in certain circumstances, for more complex or significant installations, regulations require that an inspector such as Mr Di Martino provide, in effect, a counter-signature to the primary electrician’s certification. (T807) Mr Di Martino did not provide a statement in accordance with Order 44 of the Court Rules and Mr Smith, on behalf of R & K, objected in those circumstances to his expressing any expert opinion. I ruled that in the circumstances he was entitled to give evidence as to what he observed. He provided a report at CB 295. I gave a direction under s136 of the Evidence Act 2008 that this report was admitted into evidence but only for the purpose of establishing matters other than the truth or validity of any opinions contained in it. (T819, L7-13)

81       The report included a number of factual observations which I set out without suggesting that they are exhaustive of the matters contained in the relatively brief report. 

“Junction boxes not used in kitchen area.

Junction boxes not fixed in kitchen area.

Conduit work on roof not properly supported.

Conduit work on roof supported by other services.

Junction box on roof will allow entry of water to GPO.

…”

82       Amongst the “action items” were the following:

“All cables in this area are required to be labelled every 2 meters along their length where possible.

All GPOs, lights, and equipment are to be permanently marked with durable labelling to indicate the DB from which they are supplied.
Label all DBs and MSB to indicate that final sub-circuits in the area are supplied from other DBs.
Abolish metered supply for public light and power.
Abolish metered supply to 31C Fitzroy Street.
Install a DB adjacent to the MSB to control DBs in 31A, 31C, ex-public L&P, and other circuits in the kitchen area currently supplied by the existing public L&P supply.”

83       The “public light and power” supplies a laneway adjacent to the building in which the restaurant was situated traversing private land not being a public highway.  Mr Di Martino agreed that insofar as the Stage 2 works had enclosed a switchboard with power meters for the separate tenancies upstairs which had previously been part of an open courtyard, his report did not direct or advocate the relocation outside of those items.  (T821, L14-17)  According to Mr Taylor:

“Because of all the legal [scil illegal] work we found which caused us to conduct an electrical audit, we can’t comfortably – when I say we, the café and myself, we couldn’t comfortably let him [R & K’s electrician, Mr T] continue with his works because of the standard of the work and the things he had done there.”  (T786, L12-17)

84       There was no formal banning of Mr T from further work but thereafter all electrical work was done by Nissal, Café Di Stasio’s maintenance electrician.  Nissal Electrics called in a CitiPower inspector to view the electrical work.  (T673, L22‑24)  Also present at this inspection was Mr Dorne of Fryda Dorne, the electrical engineers who had advised the architect, Mr S.  (T675, L11)  Speaking of the location of the meters and switchboard in the enclosed area which had formerly been a courtyard, according to Mr Taylor:  “The CitiPower inspector picked up his bag and said, ‘I’m not repeating myself, this is illegal’, and walked off of the job.”  (Ibid, L12-14)  Mr Dorne “laughed it off and said it was fine where it was.”  (Ibid, L11 and 12)

85       Mr Taylor said he then had a conversation with Mr Di Stasio and Mr Taylor “recommended [Mr Di Stasio] do the electrical works rather than risk the power shut down which was imminent.”  (T789, L12-14) 

86       The move of the switchboard from the internal location in the kitchen to an external location in the backyard occurred in 2014, with Mr Taylor acting as labourer or assistant to Nissal Electrics who relocated the power cabinet.  (T693, L23 – T694, L1)  A new switchboard was installed in the kitchen as part of the work to the left of the location, the original switchboard.  (T694, L6-9, Exhibit A Photograph 16)  Nissal rendered a bill to Café Di Stasio, 25 September 2014, $31,680 inclusive of GST, for the “main switchboard relocation and CT metering”.  Mr Taylor charged separately for his services (CB 412) $2,640 inclusive of GST (CB 413) $4,125.  The high cost derived from the fact that the existing switchboard could not be removed and “a new switchboard had to be fabricated and mounted on the wall”.  (T698, L11-13)  There was also ‘make good’ work once the old switchboard was removed.  It had been rebated or recessed into the concrete floor.  According to Mr Taylor: 

“… it was quite a job to get the new switchboard out and then we had to get some stainless steel panels and angles and we re‑concreted the floor to bring it up close to the existing floor level.  The concrete floor in stage 2 had an epoxy finish on top of the concrete and that had to be repaired and this work we conducted with Nissal Electrics.  We quoted all this for Mr [S], but the epoxy floor repair was not included in that quote.  We didn’t realise at the time the power box was actually recessed into the concrete.”  (T699, L6-15)

87       Another element of Café Di Stasio’s counterclaim related to plumbing work in the subfloor area beneath the location of the bain-marie in the lower kitchen.  This entailed cutting the floor in the lower kitchen and reworking the sewerage pipes below. (T705, L18-22)  In addition to commissioning an electrical audit which was conducted by “Blue Sky” (Mr Di Martino), the defendant arranged a plumbing audit which was known as the Wenning Report.  This report was produced during the trial, but not put into evidence.  According to Mr Taylor:

“Located under the Bain-marie was a 100 millimetre sewer pipe which was called – the technical word is a tundish and the overflows from the larder fridges ran into that.  Now, that tundish under the Bain-marie was the lowest point on the sewer system.  So if there was a sewer blockage in South East Water’s mains, the sewer would overflow at that point in the kitchen.  Now, that was brought to notice in the Wenning report and we brought a laser level in and took levels of the floor level and also a drainage point in the laneway which was then made into an overflow gully.  We put a removable grate on … a pop-up grate.” (T706, L20-T707, L1).

88       The purpose of the pop-up grate was to ensure that if there is a back-up in the sewer system, the overflow would emerge at that point rather than within the building.  (T707, L11-15) Reflux valves were essential, because it was not possible to regrade the sewer so that the outside point of discharge was the lowest point.  (Ibid, L23-30).  According to Mr Taylor, when he carried out the necessary excavations, he uncovered a pipe junction which is depicted in photographs 120 and 122 of Exhibit 2, photographs taken by Mr Taylor. This was a junction pipe which, according to Mr Taylor was “laying (sic) on its back”. T708, L30).  A PVC pipe junction of the same type was admitted into evidence as Exhibit 4.  According to Mr Taylor, when properly used, this junction is placed vertically with an intercepting pipe joining from the horizontal plane at a slightly obtuse, that is, more than 90 degree angle, so as to provide a downward slope for gravity draining (T708, L4-14).  He said that, used in the way it was in photograph 120 the pipe would tend to hold water and “it could quite easily cause a blockage in that drain”.  (T709, L10-11).  Mr Taylor said “We cut that section of drain out and we put in a fitting that way [demonstrating] with a screw cap on it”, Exhibit 2, photograph 125.  (T709, L26-28).  Of the original junction, Mr Taylor said:

“I don’t know who installed the fitting, I wasn’t there when that work was done but that was what we located.”  (T707, L8-10).

89       In answer to cross-examination by Mr Smith, Mr Taylor agreed that the work entailed in replacing the pipe junction “laying on its back” was subsumed in the more elaborate work which he undertook to install the reflux valve.  (T792, L1-5, T793, L3-6).

90       Mr Taylor was summoned to the restaurant with a complaint of “a strong sewerage smell”.  (T641, L30).  Subfloor investigation disclosed:

“… the pump line from the pasta cooker had blown apart, there was a bend there which had never been glued and the water was discharging under the floor.  Each time the pump kicked in to drain the pasta tank, the water is draining under the floor.” (T642, L2-6). 

91       Mr G, R & K’s plumber, was, in Mr Taylor’s words given “the red card … not allowed back on site”.  (Ibid, L12-14)  According to Mr Taylor, he was informed by Mr Di Stasio:

“We’re not going to have him [Mr G] back, everything he touches he buggers up so I want you [Mr Taylor] to rectify and locate any remaining faults and rectify them.”  (Ibid, L19-22)

92       Prior to 6 May 2014, there were complaints that ventilation from two of the toilets was “flowing into the kitchen ceiling”.  According to Mr Taylor, during Stage 2 work, R & K “built over the outlet for the ducting from the toilets”.  Mr Taylor supervised the rectification.

“They [R & K] had to install a length of ducting, an exhaust fan, I think they put another fan in and a length of ducting to terminate the outlet vent clear of the roof and above the evaporative coolers.”  (T656, L15-19, CB 396)

93       Mr Taylor made a charge for his supervision.

94       On 13 May 2014, again, Mr Taylor attended relative to odours.  He said that he checked under the scullery floor and noticed that the carpet was wet and “there was lots of odours in the dining room, the private dining room.” (T661, L7-9)  He observed:

“Under the scullery floor it was wet and damp and smelly but you couldn’t see any water actually running under there from what I recall.” (Ibid, L18-20)

95       A floor drain in the scullery had a pipe which was not properly connected to the sewer and the grey water flowed straight into the subfloor void (see photograph 57 of Exhibit 2, T236)

96       Arising out of the Wenning Report there was a miscellany of matters involving box gutters et cetera which were identified as defective works and, it seems, accepted as such by R & K.  According to Mr Taylor:

“…anything [Mr G] hadn’t done, I had to invoice to R & K Hartman which I did do, and R & K Hartman paid those invoices.  And the rest of the work was invoiced to [Mr G] who paid for the rectification work.

97       Those invoices were paid and Mr Taylor carried out the rectification work. (T681, L18 – T682, L4)

98       Other items of rectification were paid by R & K on the basis that they were not Mr G’s work.  (CB 258-259)  (T682, L5-10)

99       Other items of work were done by Mr Taylor relative to drains and downpipes.  (T682-3)  These items were paid by Café Di Stasio, the plaintiff. (CB 401, Exhibit 2 photographs 38, 40, 42 and 46) (T682, L13-684, L10)

100     It will be seen that Mr Taylor has been an almost constant presence in rectification work.  Sometimes he was there merely as a person who gave access to the premises and supervised.  At other times, after Mr G was “shown the red card”, he carried out plumbing work himself.  On other occasions he provided his assistance as a labourer in electrical work.  At all times, whether Mr Taylor was merely supervising and granting access, providing his services as a qualified plumber, or providing his assistance as a labourer, he charged at the normal rate which he used for charging his time as a qualified plumber.  Where he has been carrying out plumbing rectification work and R & K has accepted liability for that work, his bills have been paid either by R & K or by Mr G.  R & K has not paid and has denied liability for Mr Taylor’s services when he was merely supervising.

The proceedings

101     In an amended statement of claim, R & K alleged the fixed-price contract for Stage 2 of the work.  Next, it alleged the making of the progress claims referred to above and alleged that no payment had been made on the second, third and final claims.  It was conceded that the architect “has not issued any certificates in respect of [R & K’s] third and final claims.”  It sought payment of an amount of $116.770.81 with respect to those three claims.

102     Next, there is a claim for payment for what were described as “Requested Additional Works”.  These it was said were carried out at the request of Café Di Stasio and were “beyond what [R & K] was contractually agreed to do.” (sic)

103     With respect to investigations and work to abate odours, there was a claim for $11,893.30 “based on the builder’s charge-out rates of $200 an hour including GST and their employees at $143 an hour GST inclusive and labour at $70 an hour GST inclusive, plus a builder’s margin of 15 per cent.”

104     Next, it was alleged that additional works by way of the supply and installation of a Braemar evaporative cooler and associated work were carried out in or about May 2014 at a cost inclusive of GST of $11,686.82.

105     Next, there was a claim for payment for work done between April 2014 and September 2014 in the supply and installation of a pasta cooker cooling tank and associated work at a cost of $39,491.76 inclusive of GST.  The builder’s margin included here was at the rate of 12 per cent which was also the margin claimed with respect to the supply and installation of the evaporative cooler.

106     Finally, there was a claim for $349.46 for repairs to the light in the bar area.  Again, the builder’s margin claimed was at the rate of 12 per cent.

107     Alternatively, there was a claim for remuneration “upon a quantum meruit”.  It was said that Café Di Stasio had failed to pay $115,888.26 or any sum at all in respect of the contract or for any of the additional work.

108     It was said there was a balance of $116,770.81 outstanding under the contract; $11,893.30 for odour eradication works; $11,686.82 for work relative to the evaporative air conditioning unit; $39,491.76 for work relative to the pasta cooker cooling tank and some $349.46 for works relative to the bar light. 

109     The prayer for relief sought “damages in the sum of $211,677.83”, interest, costs and further or other relief.

110     In its defence, Di Stasio made certain admissions and denials.  As to the allegation of failure to pay $116,770.81 payable under the contract, it said some $30,429 was admitted to have been paid as part of the second claim with the admission appearing in a letter dated 20 January 2015 from R & K’s then solicitors to Di Stasio’s solicitors.

111     Next, it said that there was no obligation to pay any of the second, third or final progress claims “as no person [had] prepared tax invoices equal in value to any certificates of the architect issued in relation to those claims and presented those documents to Di Stasio for payment as required by clause N6.1 of the Stage 2 Contract.”

112     As to the claim relative to additional works concerning odour eradication, Di Stasio admitted that a representative of R & K attended Di Stasio’s premises “when issues arose in relation to an odour at the premises.”  It said the odour was caused by defective works.  It denied liability.

113     As to the issues relative to ventilation and lack of make-up air, it said those matters were “caused by defective works carried out at the premises”.  It therefore denied liability.

114     As to the pasta cooker, it said the problems with the pasta cooker were caused by defective work and it therefore denied liability.  It raised the same defence relative to the claim for light problems in the bar area.  It denied liability for the plaintiff’s claims generally and entitlements to quantum meruit et cetera.

115     By way of counterclaim, Di Stasio repeated the matters in its defence and alleged the existence of the Stage 1 Contract.  It said R & K was obliged under that contract to carry out the works:

“in a thorough and workmanlike manner and with all reasonable expedition and in accordance with the Stage 1 Drawings and the Stage 1 Specifications or any authorised variations. …” 

116     It was obliged to:

“deliver and pay for all materials and provide all labour required for the efficient performance of the Stage 1 Contract and would at its own expense and with all reasonable expedition remove and replace with best quality any defective work and any work not in accordance with the Stage 1 Contract.”

117     It was obliged to provide “a competent general foreman”.  It said R & K was liable to indemnify Di Stasio against liability, loss or damage to its real or personal property “due to the negligence, omission or default of” R & K, its servants and agents or sub-contractors.  It alleged the making of claims by R & K and the Stage 1 Contract and the payment of those claims by Di Stasio with the issue of the certificate of final inspection on 16 November 2012 and a certificate of practical completion for Stage 1 on 30 November 2012.

118     Next, it alleged the Stage 2 Contract was said to entail an obligation that R & K “carry out the Stage 2 Works diligently” with a warranty from R & K “that it had the skill, technology and human and financial resources necessary to perform [its] obligations.”  R & K, it was said, was obliged to “direct the manner of the performance of the Stage 2 Works and supervise the Stage 2 Works competently.”  And R & K was liable for work done by its sub-contractors.

119     As to payment, it was said that R & K was “entitled to submit to the Architect progress claims for payment based on works completed” with the architect obliged to assess those claims for payment “and to issue a certificate setting out any payment due within 10 working days after receiving the claim.”

120     On receiving the certificate, R & K “was required to prepare a tax invoice equal in value to the certificate and to present both documents to Di Stasio for payment” with Di Stasio obliged to pay the contract price adjusted in accordance with the Stage 2 Contract progressively and in accordance with certificates.  Such payment was required within five working days after delivery of the certificate and the final tax invoice.  It was said that if R & K wished to dispute its certificate, notice or decision issued by the architect or failure of the architect to issue something, it was “required to give the Architect written notice within 15 working days after receiving the certificate, notice, written decision or written assessment or becoming aware of the failure of the Architect to issue something.”  It was said that if R & K failed to give notice of dispute it would “not be entitled to dispute the matter at all.”

121     Next, there was a list of defects.  The electrical matters, it was said, were set out in the “Blue Sky report”.  The plumbing defects were set out in the Wenning report and the problems with make-up air, it was said, were to be found in a report prepared by Bryson Wells.  Other defects were set out in a report by Dr Ian Eilenberg.  Rectification of these defects was said to have cost Di Stasio $123,346 in particulars set out in the Schedule together with consequential loss of $60,352 representing $45,000 in lost revenue “due to the private dining room not being in use due to odours during about April and May 2014.”  Some $800 expended on “scented candles, perfume and oil burners … used for every service during about April and May 2014”; $2,552 in “complementary food and beverages given to customers as compensation due to wet carpet walls and resulting odours”; and $12,000 of lost revenue due to the rear tables in the dining room…being unsuitable for ten services in or about March 2014 due to odour”.  These matters indicated a breach of contract on the part of R & K, with Di Stasio suffering loss and damage “of at least $183,698.”

122     The counterclaim sought damages, interest, costs and further or other relief.

Plaintiff’s submissions

123     Mr Smith, on behalf of the plaintiff, said that its claim was made either pursuant to the fixed-price contract for the Stage 2 works or based on requests to the plaintiff to carry out additional works pursuant to the costs, plus the contract made for Stage 1.  The plaintiff claimed alternatively to these two contractual bases on a quantum meruit.  The works claimed for were identified as follows.  First, under the Stage 2 Contract:

·Invoice No 1 908 – 3 December 2013 (CB 218) $108,450.88

·Invoice No 1 013 – 19 December 2013 (CB 213B) $1,566.39

·Invoice No 1 959 – 6 October 2014 (CB 220) $5,870.99.

124     Under the Stage 1 Contract:

·Attendance to odour problem (CB 286) $11,893.30

·Make up Air Works (CB 270) $11,686.82

·Cooling tank works (CB 383) $39,491.76

·Work on the light in the bar (CB 10), $349.46.

125     Mr Smith conceded that of the $108,450.88 sought in relation to Invoice 1-908, 3 December 2013, the amount shown as a disbursement of $30,429, had been paid directly to the sub-contractor, KBR, and this sum should be deleted from the amount claimed.

126     As to the claim for $108,450.88 being the second progress claim, Mr Smith submitted that it had been certified by the architect.  The progress certificate dated 11 December 2013 (CB 232), had a cross in the box, indicating that it had been circulated to the owner.  Mr Smith noted that there was no evidence on behalf of the defendant that it had not received this certificate.  Mr Smith continued:

“The principal person who could have best given evidence on this point was Mr R Di Stasio.  He was not called to give evidence and no explanation was given as to his absence.”

127     It was conceded, said Mr Smith, that Mr S had been paid all of the fees which his firm claimed.  Mr Smith said that Mr S was not called, nor was anyone from his practice and “no explanation was given as to his absence.”  He said that Ms Wall (on behalf of the defendant) gave evidence that, to her knowledge, Mr Di Stasio, said to Mr Hartman:

“You’ll get paid when you pay us for the electrical board.”

128     Mr Smith noted that, in his expert report, Dr Eilenberg disclosed receipt of the architect’s Progress Claim Certificate PC02 and the Notice of Practical Completion for Stage 2 (CB 452, Item 3(n)).  He said Dr Eilenberg’s report also referred to his having received Progress Claim 2, dated 3 December 2013 and the certification thereof, as at 2 March 2015.  Mr Smith said that this material was not obtained from R & K’s solicitors or from R & K.

129     As a result, according to Mr Smith:

“The circumstantial evidence given in respect of certification and transmission of an invoice for Progress Claim 2, support a similar inference on like ground that the same occurred with respect to Progress Claims 3 and 4 of the Stage 2 Contract.”

130     Mr Smith referred to Clause M1.2 in the Stage 2 Contract providing for the architect to issue a Notice of Practical Completion.  He said Mr S issued such a certificate on 12 December 2013 (CB 166), which was marked as having been transmitted “to the owner”.  Mr Smith said it was:

“… anathema to common sense and the relationship between the architect and the defendant for the defendant to assert that it did not receive the progress claims and certificates from the architect.”

131     Mr Smith said that, if contrary to his contention, some or all of Progress Claims 2, 3 and 4 of the Stage 2 Contract were not certified or received by Café Di Stasio, then “such process and the contract has been frustrated by reason of the wilful default of the architect as the agent of the defendant.”  He said the Court ought “infer and find on the balance of probabilities that there has been a frustration of the Stage 2 Contract” based on Mr Hartman’s evidence that the architect was in dispute with the defendant and requested Mr Hartman to accept design issue responsibility for items for which the defendant had withheld $40,000 from the architect, and the letter from Café Di Stasio’s solicitor’s to Mr S’s professional indemnity solicitors claiming defects/losses (CB 469), along with the following additional matters:

(a)      The evidence of Ms Wall that the defendant has paid the architect;

(b)The evidence of Mr Hartman that Mr Di Stasio was prepared to pay once the items of complaint are rectified;

(c)The evidence of Ms Wall that Mr Di Stasio was prepared to pay the plaintiff once the electrical board relocation was paid for by the plaintiff;

(d)      The fact that Mr Di Stasio was not called to give evidence;

(e)      The fact that the architect was not called to give evidence;

(f)The lack of correspondence or documentation from either the architect or the defendant as to unpaid claims by the plaintiff;

(g)The fact that no claim was made in the proceeding by the defendant to join the architect as a third party or a defendant to counterclaim.

132     Mr Smith said, “on the basis of the contract being frustrated”, R & K was entitled to be remunerated for the contract works it had performed “up to the date of frustration” on a quantum meruit basis.  Otherwise, Di Stasio would be “unjustly enriched from the labour and materials supplied by [R & K]”.  He said Mr Hartman’s evidence, which was uncontradicted was that his price for the works were:

“… fair and reasonable and were in accordance with industry rates, as established during the Stage 2 Contract negotiation process between Mr Hartman on behalf of the Plaintiff and [the architect] on behalf of the Defendant.”

133     As to R & K’s claim for works associated with the pasta cooker, Mr Smith contended that the pasta cooker works properly pertains to Stage 1 for which design responsibility lay with Mr S, the architect, and the contractor, Sharpline.  Mr Smith said that R & K took over installation work under the direction of the architect, Mr S, and was not responsible for design of the pasta cooker or determining whether any additional appliances or devices were required for the pasta cooker’s operation.  Mr Smith said that, according to the evidence, the pasta cooker was installed as specified and R & K was paid on a cost plus basis “for such installation after certification by the architect on a cost plus basis.”  Mr Smith noted that the manifestation of the problem with the PVC drainage pipe occurred outside the defects liability period.  He referred to CB 128.  The additional work involved the piping to the grease trap cooling tanks and the pump:

“were not prescribed in the Stage 1 Contract and therefore constitute[d] additional work for which [Di Stasio] has received the benefit of and for which [R & K] is entitled to be paid.”

134     As to the work associated with installation of the reflux valves, he said these were additional works and never part of the Stage 1 Contract works:

“The situation had existed for many years without the installation of the reflux valves, they were not part of the design, and again the Stage 1 Contract works had been completed, certified and paid in full.”

135     Again, he said this took place after the expiry of the defects liability period.

136     Accordingly, he submitted, these things could not be regarded as a defect in R & K’s work:

“as they were simply never costed or specified as part of [R & K’s] contractual works.”

137     If they had been, R & K would have been entitled to claim payment on a cost- plus basis.

138     As to Mr Taylor’s work in relation to these matter, Mr Smith submitted that it was substantially supervisory.  It was not requested by R & K and constituted new work which if referable at all to the contract were referable to the Stage 1 cost plus contract.  Therefore, he submitted, there was no basis for Di Stasio’s claim for reimbursement of amounts paid or payable to Mr Taylor relative to these matters.

139     As to the odour from the open sewer pipe, Mr Smith submitted that this derived, “from a latent, pre-existing condition” in Di Stasio’s premises.  The unsealed pipe was not identified on any plumbing or drainage plan.  He submitted that the work associated with the pasta cooker was done carefully and under the supervision of Mr Taylor who did not advocate the taking of any further investigative measures or steps.  Mr Smith made the same submission with respect to Mr Taylor’s involvement.  He said, the work which Mr Taylor did and the claims for remuneration which he made relative to the odour problem, “were not the result of [R & K’s] negligence or breach of contract.”

140     Mr Smith said that R & K’s claims were fair and reasonable “and in accordance with industry rates and pricing”.  Mr Taylor made claims for “time and a half”.

141     As to the relocation of the electrical meter panel, the decision at Stage 2 not to relocate this panel was made by the architect acting upon the advice for consulting electrical engineer, Fryda Dorne.  As a result, R & K was not, during the Stage 2 construction period, asked to price the relocation of the meter panel or actually to effect a relocation of it.  There was no architect design for the relocation of the panel and no design for its relocation.  Mr Smith submitted that leaving the panel where it was, was not illegal and it was not in the circumstances inaccessible.  Mr Smith said, even if it were correct to say that the location of the meter panel following the Stage 2 works was illegal, R & K “simply did not perform any works in respect of the meter panel at the relevant time.”

142     Mr Smith said:

“The claim for the cost of relocating the meter panel, if allowed, would constitute an unjust enrichment to [Di Stasio] as it would effectively be obtaining $40,000 plus worth of electrical works which were never within the scope or contemplation of the parties or the Stage 2 Contract.”

143     Mr Hartman gave evidence there was no request for a relocation of the board until 23 June 2014, “which was after the defects liability period ending 12 June 2014 for the Stage 2 Contract”.  He referred to CB 166.  Mr Smith noted evidence from Mr Taylor that he had obtained the quotation for the relocation and forwarded it to Mr S’s professional indemnity insurer.

144     As to the claim for works associated with “make up air”, Mr Smith submitted that the design for Stage 1 which gave rise to the make up air issue was provided as to the relevant appliances by contractor Sharpline which determined that the existing make up air arrangements would be sufficient without supplementation and referred to CB 131.  With the manifestation of the problem there was an inspection by Fryda Dorne who suggested replacement of the door panel with a mesh insert (CB 271).  This work was done by R & K.  As part of the Stage 2 works, a second evaporative cooler was specified by Mr S, the architect, and installed by R & K.  Then a further evaporative cooler was directed to be installed by Mr S’s assistant, Mr H.  As a result of supply difficulties a temporary unit was obtained and supplied pending installation of the one directed by the architect.  These problems were design issues for which, according to Mr Smith, R & K was not responsible.  He said Mr Hartman’s evidence was that his company’s claim was fair and reasonable and in accordance with industry charges and rates.

145     On the credibility of witnesses, Mr Smith submitted I should find R & K’s witnesses, Mr Hartman and Mr Mierke gave “cogent and responsive” evidence.  He submitted that the evidence by Ms Wall on behalf of Di Stasio was “indirect and evasive under cross-examination”.  He said Ms Wall’s explanation for failure to produce a series of her company’s bank statements and alleged threatened charge by the bank of $1,300 was “fanciful”.  He submitted adverse inferences should be drawn against Di Stasio based upon its failure to call Mr R Di Stasio or provide any explanation as to his absence from the witness box.  He also submitted Mr S, the architect, would have been an appropriate witness as to alleged defects.

146     Finally, Mr Smith submitted that I should find affidavits of documents sworn on behalf of Café Di Stasio by Mr Di Stasio were false as they failed to disclose a Progress Claim Certificate and plaintiff’s Progress Claim No 2 dated 3 December 2013, Certificate of Practical Completion dated 12 December 2013 and the contentious bank statements which it appeared were held in storage by Stannards Accountants.  Finally, he said:

198     As to Claims 3 and 4, therefore, I conclude on the balance of probabilities that tax invoices were submitted to Di Stasio along with progress claims which were enclosures to the email to the architect dated 20 December 2014.  The claim for the amounts sought in Progress Claims 3 and 4 therefore succeeds.

199     The situation with Progress Claim 2 is, in one sense, a stronger one for R & K.  There is an architect’s certificate.  On the other hand, the case against R & K might be thought weaker based upon the confusion surrounding the multiplicity of tax invoices and the confusion as to what was certified by the architect.

200 First, based on the documents which Dr Eilenberg admits to having received, I conclude that an architect’s certificate and a progress claim for Claim No 2 were received by Di Stasio. The obvious inference to draw is that this material was delivered to Di Stasio through the agency of the architect’s office. I am fortified in that view by the consideration that the version of the certificate found at CB 213, which certifies $109,333.45 as being payable, includes an ‘X’ in a box indicating it was copied to the owner. The certificate forms part of the records of the architect’s practice and contains a representation for the purposes of that business as to the distribution of copies of the certificate: s69(1) Evidence Act 2008. The person who completed the boxes must reasonably be supposed to have personal knowledge as to the distribution of the certificate: s69(2). That evidence is receivable despite the hearsay rule. I reach these conclusions based upon the evidence which emerged at trial and by drawing inferences based upon my examination of the document: s183 Evidence Act 2008.

201     Confusingly, however, the rendition of the amount payable in words is “One hundred and eighteen thousand, nine hundred and fifty dollars, nineteen cents” on this document at CB 232.  $109,333.45 is the value of building work completed, including GST of $234,070.84, minus the total of a number of items including the value of building work nominated in the previous certificate, the amount of cash retention and the amount of liquidated damages.  The amount shown in words, “One hundred and eighteen thousand, nine hundred and fifty dollars, nineteen cents”, is therefore an error.  This obvious error should be disregarded.  So to do is in accordance with what is taken to be the contemporary approach to the construction of documents advocated by the majority of the House of Lords in Mannai Investment Co Ltd v Eagle Star Assurance [1997] AC 749.

202     The learned editors of Hudson (op.cit.13^th ed) state with respect to architects’ certificates:

“In relation to significant and material matters, if there is an error in the certificate which is neither the result of interference by the Employer, nor of the Certifier’s decision to rely on extraneous or inappropriate considerations, or to apply the wrong test, or of any other unfairness but simply the result of human error, then it cannot invalidate the certificate.  It may be grounds for revising the certificate at a later stage through a contractual review process or in court.  Nevertheless, in the meantime the certificate will be valid.” [4-065, p.586]

203     In my view, on its true construction, the certificate should be regarded as certification of the sum of $109,333.45 being due and owing to R & K.  This amount must of course be reduced by the amount of the direct payment by Di Stasio to sub-contractor KBR.  The same certificate appears at CB 213.  The tax invoice relied upon by the plaintiff is at CB 218 in the sum of $108,450.88.  Is the fact that the amount of this tax invoice is slightly less than the certified amount fatal to R & K’s claim?  Clause N6.1 of the fixed-price contract states:

“On receiving the certificate from the architect, the contractor must prepare a tax invoice equal in value to the certificate and present both documents to the owner for payment.”

204     Clause N7.1 provides:

“The amount stated as owing in any certificate must be paid within 5 working days, after delivery of the certificate and of the tax invoice.”

205     Mr Smith in his closing submissions did not deal with the discrepancy between the figure in the architect’s certificate and the tax invoice relied upon, or how it could be said that the one is “equal in value” to the other.  The language in the contract as to the preparation of a tax invoice “equal in value” to the certificate, appears mandatory.  I have found no judicial authority that would support the view that the phrase “equal in value” could be regarded as satisfied where two documents referring to the same currency seek payment of different amounts. One would expect that a progress payment claim certified by an architect and a tax invoice relative to the same claim would only be “equal in value” if they both sought precisely the same amount of money.  In Colonial Ammunition Company Ltd v The King [1938] NZLR 354, 365, speaking of a contract for the purchase by the New Zealand government of ammunition, Myers CJ said:

“I regard the words ‘equal to’ as meaning ‘equal in value to’, or ‘equivalent to’.”

206     No doubt, the maxim de minimis non curat lex, meaning the law does not worry about trifles, might cover a situation where there was a rounding-up or a rounding-down in the one document or the other, rounding perhaps to the nearest dollar, the nearest ten dollars, or the nearest hundred dollars, perhaps even the nearest thousand dollars.  Certainly, one would have thought the maxim would apply if the one document stated a number of cents and the other document omitted any reference to cents.  Here, the difference between the two documents is small but apparently material.  It is plainly not the result of a clerical error misstating one digit or transposing a digit, nor is it the result of any rounding process.  The difference seems to be the result of a small but material difference in calculation as to the value claimable for works at the relevant time as between the builder and the architect.  That a claim such as the present should founder on so trivial a point seems a scandal to the law, yet it appears to be the result of the words which the drafter of the standard form chose, and which the parties saw fit to adopt.  Again, as Mr Sharkey observed, there would seem to be no time limit for the rendering of the tax invoice.  It would, on the face of it, have been open to R & K at any stage prior to the end of the trial to have rendered a tax invoice “equal in value” to the architect’s certification.  The only consequence, except perhaps as to costs in the proceeding, would be upon the interest claimable.  This step would of course be subject to R & K’s obtaining leave to make a further amendment to its statement of claim.

207     This part of the contractual claim therefore fails.

208     Mr Smith sought to rely on a “fall back” claim in quantum meruit.  R & K’s ability to rely on a claim in quantum meruit was said to derive from an alleged “frustration” of the contract based on the architect’s failure to certify.  In the case of Claim No 2, the architect has certified.  The failure seems to be by R & K in not rendering a tax invoice in accordance with the architect’s certification.  If this were to constitute frustration, it would, so far as R & K is concerned, be characterised as “self-induced”.  In any event, I do not believe that anything has occurred here that would constitute frustration.  According to Professor Carter in his work, Carter on Contract:

“A contract is discharged by frustration where, without fault, an unforeseen event (or events) renders performance of the contract radically different from that intended by the parties.” ([39-001] 96,021, Service 28)

209     The phrase “without fault” denotes a situation where neither party is in default of its obligations: Ibid, and see Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 at 729. Later in the same Chapter, Professor Carter says:

“The doctrine of frustration cannot be invoked if frustration was self-induced; that is, the event (or events) alleged to have frustrated the contract was caused by the default of the party who relies on the event (or events) as frustrating the contract.” ([39-490] 96,395, Service 28)

210     More fundamentally, however, nothing that occurred could be regarded as rendering performance of the contract “radically different”.  In so far as the problem in making a claim derived from the architect’s failure to certify, it may be that the doctrine of “prevention” referred to above and described in Hudson would be the appropriate response for R & K to make.  I reject the contention that this contract has been “frustrated” in any respect in which that expression is used in the law of contract.

211     A builder under a building contract is not at liberty simply to elect to claim upon a quantum meruit rather than in accordance with the terms of the contract.  To take a fairly obvious example, a builder who succeeded on tender in obtaining a contract by radically underquoting his price, would not be able to escape from the uneconomic bargain he had made simply by electing to claim reasonable remuneration upon a quantum meruit.  The learned editors of Mason and Carter’s Restitution Law in Australia (3^rd ed) state in relation to quantum meruit:

“the object of the count was to provide the plaintiff with a remedy in circumstances where there was no contract, or no enforceable contract, in relation to the services rendered.” ([119] p. 19)

212     In addition, they identified two examples of “contractual” quantum meruit:

“Under the modern law, a claim to recover a reasonable sum may be available in cases where there is an effective contract.  There are two types of case.  First, the contract may contain an express or implied promise to pay a reasonable sum (or price) for performance rendered.  ... Second, in cases where price was not agreed or where the transaction into which a term is sought to be implied would otherwise be ineffective, there may be a genuine implied contract to pay a reasonable sum for performance rendered.” ([913] p. 339)

213     It will be seen that in accordance with the example given earlier, quantum meruit may only be relied upon where there is no contract, either because it has been discharged because it was never entered into in the first place, or because the contract that exists includes a “blank” as to what the appropriate remuneration is.  In Lumbers v W Cook Builders Pty Ltd (In Liq) [2008] HCA 27 Gummow, Hayne, Crennan and Kiefel JJ said:

“…if an enforceable contract were made then no action would lie for a quantum meruit while the contract remained on foot.” (2008 CLR 635, 671 [111]

A contract was made and remains on foot.  The claim based on quantum meruit must likewise fail.

214     I turn next to the counterclaim, dealing first with the item relative to an alleged defect in the front door.  During the cross-examination of Di Stasio’s building consultant, Dr Eilenberg, at T494, L5 and following, I asked him:

“Since we’re dealing with the door I might ask this question because I could forget otherwise; I have absolutely no expertise in building, I could hardly drive a nail so that is the worth of my opinions. But at the view yesterday it seemed to me the problem with the door was it had a structure which was insufficiently rigid, there was a glass of not terribly heavy gauge and a framework that consisted of just single timber members around the edges, and the total effect was a door that was flexible, and that it was likely that capacity to flex that led to the break in the glass?”

Dr Eilenberg replied:

“I agree with everything you have just said.”

The problem with the door, in light of Dr Eilenberg’s agreement with my analysis, is a matter of design and not workmanship.  The defect counterclaim relative to the front door therefore fails.

215     For reasons already explained the counterclaim relative to lack of make-up air in the kitchen also fails.  The counterclaim relative to the cooling tanks for the pasta cookers succeeds.  The counterclaim relative to the open-ended sewer pipe, for the reasons already explained, necessarily fails.

216     This leaves a number of counterclaim matters yet to be dealt with.  My treatment of them is embarrassed by the fact that in closing submissions Mr Smith did not deal with them at all.  They were dealt with by Mr Sharkey in a schedule which was placed at the front of the folder of authorities upon which he relied.  To the extent that the Eilenberg report is not mentioned in this schedule, it may be disregarded. (T1076, L15-20)  These further matters are as follows:

(i)     Unfinished areas to the bar

(ii)    The garbage disposal unit or waste pump was incorrectly installed

(iii)    The larder fridges were not plumbed correctly

(iv)    Items summarised by Mr Sharkey as “Electrical defects, including the location of the switchboard”.  I have already explained why the counter­claim relative to the relocation of the switchboard fails.  This appears to leave for disposal certain other alleged electrical defects.

(v)Various plumbing defects requiring a report to be obtained.

217     I deal first with the “various plumbing defects”.  A footnote to Mr Sharkey’s outline says: “This is the report of Peter Wenning which was addressed in evidence, however not tendered because the plaintiff agreed to be liable for the defects identified – T290.5.”  I have read the transcript at page 290, and it is not clear to me that an admission as clear as the footnote to Mr Sharkey’s submission was in fact made.  If such admission were made, I agree that these defects should be regarded as having been established.  The Wenning report cannot be relied upon because the author was not called as a witness, Order 44 was not complied with, etc.  It was not put into evidence.  At T290 Mr Hartman was being cross-examined about an invoice from Mr Taylor dated 30 April 2014 in the sum of $4,886.20.  This referred to a number of different items, including issues relative to the smell, apparently a meeting described as “Mark, Ken, list of repairs and photos,” the commissioning of a plumbing audit, work relative to the dishwasher, etc etc.  I asked Mr Hartman:

“So what were the Taylor services which, if [Mr G] didn’t pay for them, the company would accept liability for, was the distinction turning on whether Mr Taylor was doing the actual work as distinct from supervising and granting access or was the distinction of some other type?”

218     Mr Hartman replied:

“Any work Mr Taylor did for either myself or [Mr G] was work Mr Taylor quoted.”

219     I continued:

“So just stopping you there, does that mean your company accepted liability only for work which had been quoted in advance?”

220     Mr Hartman replied:

“Correct.”

221     Mr Sharkey then proceeded with his cross-examination, putting to Mr Hartman, accurately enough, that R & K was seeking payment for additional works which were not the subject of an advance quotation.  It is difficult in the circumstances to see, with the Wenning report not put into evidence and there being no clear admission at T290, that this point has been properly made out.

222     I turn next to the counterclaim for relocation of the switchboard.  The decision to leave the switchboard in situ as part of the Stage 2 works was a design decision made by the architect, Mr S. with expert advice provided by Mr Dorne of Fryda Dorne.  The obligation upon R & K and its sub-contractors to provide good workmanship does not render R & K liable for defects in design (Minchillo v Ford Motor Company of Australia Ltd [1995] 2 VR 594). In this respect R & K simply built to the plan it was given. Mr Sharkey placed particular reliance on s44 of the Electrical Safety Act 1998 which provides:

Compliance and testing of electrical installation work

(1)A licensed electrical installation worker must ensure that all electrical installation work carried out by that worker—

(a)complies with this Act and the regulations; and

(b)is tested in accordance with and at the intervals required by the regulations before it is connected to the electricity supply, or if the electrical circuits or electrical equipment handled in the course of that work were not disconnected from the electricity supply, before the work is first used after it is completed.

Penalty:     40 penalty units.

(2)A licensed electrical installation worker who carries out electrical installation work must, within 4 business days after the completion of that work—

(a)complete and sign a certificate of compliance in respect of that work; and

(b)if the worker is not the person responsible for the carrying out of the work, give to the person who is responsible for the carrying out of the work a signed certificate of compliance in respect of that work.

Penalty:     10 penalty units.

(3)A licensed electrical installation worker must not sign a certificate of compliance in relation to any electrical installation work carried out by that worker unless the certificate—

(a)describes the work; and

(b)states that the work complies with this Act and the regulations; and

(c)contains any other details in relation to the work required by the regulations.

Penalty:     10 penalty units.

223     He contended that Theo who enclosed the switchboard had contravened this section in his Stage 2 work.  As Mr Smith noted, when the switchboard was worked on in Stage 1 it was in an unquestionably legal location.  Theo did nothing to it during Stage 2.  It was R & K’s general construction workers rather than Theo who enclosed the switchboard.. In any event, with one exception, none of the sections or regulations referred to by Mr Sharkey purport to reallocate the risks and responsibilities under a private contract between a building owner and a building contractor. Rather, these statutes and regulations impose public-law duties upon all concerned. Even where the obligations are imposed directly upon an electrical contractor, it must be supposed that a person outside the trade who counselled and procured the commission of the relevant offence would also be criminally liable. The only exception here is s42 of the Electricity Safety Act 1998 which provides as follows:

“42    Implied conditions relating to electrical installation work

It is an implied condition of each contract entered into by the electrical contractor in relation wholly or partly to any electrical installation work to be carried out by the electrical contractor that the quality of the materials, fittings and apparatus to be used in connection with the electrical installation work and the methods to be followed in carrying out the electrical installation work are in accordance with the regulations.”

224 This section creates contractual liabilities upon an electrical contractor in favour of those with whom the electrical contractor enters into contractual relations. Di Stasio had no contract directly with Theo. Rather, he was contracted on a sub-contract basis by R & K. Section 42 therefore also has no application to the resolution of the question of liability for the cost of relocating the switchboard.

225     It would seem to follow from this that liability for the cost of relocating the switchboard should lie with Mr S and his practice which undertook design responsibility, and perhaps also the consultant electrical engineer who advised Mr S’s practice.

226     Even if I were wrong, the claim as framed against R & K proceeds on the false premise that R & K contracted to move the switchboard, together with the other Stage 2 works, for the fixed price set out in the contract.  Had the plans required the relocation of the switchboard, as I accept they should have done, this would have been a different job, and it is reasonable to suppose that R & K would have sought a higher price to carry out the relevant works.  As it is, however, the steps in the relocation which were described in some detail by Mr Taylor in his evidence were more costly when they were done by way of “retrofitting” after the completion of the Stage 2 works than if they had been done as part of the Stage 2 works while the rest of them were being executed.  If I had been persuaded that this element of the counterclaim ought to succeed, it would be only the additional cost of retrofitting which would properly be recoverable.  The evidence available to me did not disclose what the difference was.  No doubt I could have picked a figure, but the selection of the figure, upon the evidence available to me, would have been little more than speculation.  This may well have been an instance where a claim or a counterclaim might fail simply because the relevant party has failed to put on adequate evidence to enable the damages to be assessed: Spotlight Pty Ltd v NCON Australia Ltd (2012) 46 VR 1.

227     As to the electrical defects which are claimed at $39,600, according to Mr Sharkey’s final submissions this sum is to be found at CB 300-301.  So far as I can see, the two amounts invoiced, namely $28,800, representing an 80 per cent deposit on the amount quoted, and $7,200, representing the 20 per cent balance, appear to relate to “main switchboard relocation and CT metering”.  I have already explained why I reject this portion of the counter­claim.

228     In the schedule handed up with Mr Sharkey’s final submissions, Di Stasio claimed some thousands of dollars in payments to Mr Taylor relative to electrical faults.  Reference to his invoices shows that for the most part these attendances relative to electrical matters were attendances at site meetings and the like.  If the defendant, and plaintiff by counterclaim, were a natural person, one might have expected that he or she would have made those attendances or perhaps dispensed with them.  In another scenario, with a corporate defendant and plaintiff by counterclaim, a director or other corporate officer would have been in attendance.  In those circumstances there would not, so far as I can see, have been any question of this time being remunerated at the expense of the builder.  Di Stasio is of course at liberty to pay Mr Taylor at his rates as a qualified plumber for these attendances, but they are not, in my view, outgoings which in the circumstances are, in terms of the formulation in Bellgrove v Eldridge, necessary and reasonable.  I do not allow them as damages.

229     In so far as the evidence showed that during the relocation process for the electrical switchboard Mr Taylor provided his services as a labourer to assist Nissal, if this item were recoverable on the counterclaim, it would be proper to allow some remuneration for Mr Taylor, though it might be that the proper rate would be a labourer’s rate rather than the rate for a qualified plumber.  In the result, however, I do not allow as part of the counterclaim any of the amounts paid or payable to Mr Taylor relative to the rectification of electrical issues.

230     As to counterclaims for the rectification of miscellaneous plumbing defects, in accordance with paragraph 25(h) of the counterclaim some $360 is claimed for Mr Taylor’s attendance at a site meeting.  For the reasons already given, I do not believe that this amount is recoverable as damages.

231     Next, there is a claim for $120 for Mr Taylor in organising a plumbing audit.  In my view that is a proper outgoing relative to the rectification of defects.

232     Next, there is a claim for $80 for work by Mr Taylor on 22 April relative to Energy Safe.  According to Mr Taylor’s evidence:

“Energy Safe is the controlling body for gas work, and I called an audit or an on site meeting with two of the inspectors, Paul Harris and a chap I know, Enzo, who I had met at a trade night a couple of nights prior.”

233     Mr Sharkey thanked Mr Taylor for that answer, and said:

“I won’t push that item any further.” (T647, L31-T648, L5)

234     Mr Sharkey’s statement appears to constitute an abandonment of this claim.  In any event, it does not seem to be related to any proven defect, and so if the item is not abandoned, I would disallow it.

235     The next items claimed under this heading are for $1320 and $620.  The $1320 represents an outlay for a plumbing audit.  The $620 appears to relate to an attendance with Mr Wenning, the plumbing auditor. (T649, L22-31)  I accept that the outlay for the plumbing audit was properly incurred.  I am not convinced that it was necessary or reasonable for Mr Taylor to be on hand to “host” Mr Wenning.  The $620 ought not be allowed.

236     The next item, $520, once again related to an Energy Safe audit (CB 395).  Mr Sharkey said:

“I will also skip that next item, Energy Safe gas audit.” (T651, L26-27)

237     I treat that claim as abandoned, but, even if not abandoned, I would not have allowed it.

238     The next item claimed at CB 399 is “External plumbing audit – Roof, HWunit, Vap coolers etc $560”.  The reference in the transcript given by Mr Sharkey for this item is T673, L20.  That appears to be evidence by Mr Taylor as to a meeting which he attended on-site with Nissal Electrics and CitiPower inspector, Mr Long.  In the circumstances I do not believe that this item has been properly proven, and so I reject it.

239     The next claim relates to an invoice from Mr Taylor, 8 July 2014, at CB 400.  The entire amounts on the invoice are not claimed.  Rather, $800 plus $110 plus $4,520 are claimed.  The $4,520 is a payment for the plumbing audit and report.  I accept that as being a proper outgoing in rectification of the defect.  As to the balance of the items, they appear to be supervisory attendances which are not, for the reasons previously given, recoverable.

240     At CB 401 there is a claim for $360 entailed in an attendance on 2 July to inspect plumbing faults in accordance with the plumbing audit.  In my view, this was a proper outgoing for defect rectification and should be allowed, as should attendances to determine how to rectify plumbing faults and plan repairs, $900, and cutting an access hatch to investigate how to install gutter overflows, $360, total $1,782 inclusive of GST.  There is a further sum of $682 for which no proof is offered, and I disallow it.

241     The final item for miscellaneous plumbing defects is to be found at CB 404, an invoice from Mr Taylor dated 30 September 2014.  Two items are sought: $840 for Scullery vinyl floor, stainless steel trims, Scullery ventilation floor transition strip, “*Kitchen floor very hot!!” on 9 September, and $890 for Floor transition strip and three anti-slip treads, “*Locate hot water leak under floor, access hole and repair”.  These matters are dealt with at T685-687.  They do not appear to have been the subject of cross-examination of the plaintiff’s witnesses, and their relationship to any the defects or alleged defects identified in the course of the trial is not obvious, and so I disallow them.

242     A further amount claimed arising out of Mr Taylor’s invoice, 31 October 2014 at CB 406, refers to “detailed accounts for plumbing works, $240”.  Mr Sharkey’s summary refers to T699, L25, which deals with the installation of an evaporative cooler, which was a different subject matter.  There appears to be no reference to the detailed accounts for plumbing works, and so in the absence of proper proof I disallow that item.

243     On the plumbing front, this summary from Mr Sharkey’s Schedule does not appear to cover the work done relative to the installation of reflux valves [87] – [89] above.  The omission from the Schedule may mean that no counterclaim is made for this work and no more need be said about it.  If not, I should say it is not clear to me that this work was within the scope of works in either contract.  It came to light only as a result of the Wenning report.  It was a long-standing and pre-existing issue in the plumbing system in the premises.  The cost of rectifying the pipe junction “laying on its back” was subsumed in those costs and therefore could not properly be charged for as a separate item. [89] supra.

244     Paragraph 25(i) of the counterclaim refers to “ice wells in the bar did not drain due to defective plumbing”.  Mr Sharkey’s summary describes this as “included as plumbing defects costs”.  Accordingly, I pass on from this item as being an apparent duplication.

245     Paragraph 25(l) of the counterclaim seeks damages for “no box gutter overflows installed”.  This is said to derive from the invoice at CB 388, which is Mr Taylor’s invoice of 28 February 2014.  The only item for $250 on that invoice is for an air test in the kitchen on 12 February.  The reference in the transcript given in Mr Sharkey’s table is T616, L16.  Again, this appears to refer to different matters, namely ventilation and cooling tank installation.  I do not allow this item.

246     Paragraph 25(n) of the counterclaim seeks damages for “toilet ventilation was inadequate, $1400”.  The claim is said to derive from an invoice by Mr Taylor at CB 386 dated 27 January 2014. (T612, L10)  Both the invoice and T612 refer to work relative to the drainage system from the pasta cooker.  This material does not make good the claim relative to toilet ventilation, and accordingly it is not allowed.  Moreover, it appears that Mr Taylor’s role here was solely supervisory. (T613, L20-21)  That is a further reason for not allowing this item.

247     Paragraph 25(p) of the counterclaim seeks damages for “wash-up floor tray was not connected properly to the drain and the drain was not clipped properly under the floor”.  On 17 March, Mr Taylor attended in light of a complaint of wet carpet.  He found a leak from the wash-up area.  The following morning he removed the floor tray from the wash-up area and found the wastepipe not connected and a pipe hanging down.  The charges for these two attendances were, according to CB 390, $480 and $420.  These matters seem to be a defect, and the amounts were properly incurred and should be recoverable.

248     There was a claim for $560 and $360 relative to an invoice from Mr Taylor at CB 391 dated 31 March 2014.  $560 relates to Mr Taylor’s supervising of work done by R & K’s workers.  He was not “on the tools”. (T634, L10-12)  For reasons previously given, I disallow this item.

249     There is also an attendance on the 25th to check carpets and try and arrange a site meeting.  With some hesitation I allow this item for $360 as well.

250     Then there is a claim for $2082 deriving from an invoice at CB 392 dated 30 April 2014.  Mr Taylor explained this matter in answer to a question from me at T639, L5-14:

“Is that the defect that you described earlier, the thing was fitted and it didn’t engage and you looked down the outlet pipe and identified that?
---That is another issue but that was where this work was done. So that trap, what happens with that trap, the food and water and that which is in that trap lays there, it is not being replenished, it will eventually evaporate, and the odours from the sewerage drain and the greasy drain go into the dishwasher, come back up and into the building.”

251     This seems a very large expenditure to correct a fault or defect which required only the pouring of a small amount of water down the relevant drain from time to time. (T639, L15-23)  Again, there was no explanation from Mr Taylor as to why this matter was not dealt with the first time work was being done in this area.  Acknowledging that it was necessary and reasonable to carry out work in this plumbing area, I am not satisfied that the costs which were incurred were not excessive, given that the job was not done all at once.  I do not allow the further claim for $2082.

252     The next claim is from an invoice from Mr Taylor at CB 404 dated 30 September 2014 in the sum of $840.  This has already been dealt with under paragraph 25(n) of the counterclaim by Di Stasio.  Moreover, it does not appear to pertain to the defect claimed at paragraph 25(p).  This item is disallowed.

253     An amount of $890 described as “locate hot water leak under floor access hole and repair”.  A reference in Mr Sharkey’s list is to T684, L27, which appears not to pertain to this item.  In any event, the item for which damages are claimed under paragraph 25(p) relates to a drainage problem, not a problem in the water reticulation system.  Accordingly, this item is not allowed.

254     There is also a claim for some $520 said to derive from an invoice from Mr Taylor at CB 396.  This item is described as “check for odours – kitchen, bar, odours in bar waiters station”, and the reference is to T684, L27, which pertains to a site meeting on 26 August, whilst the item claimed for relates to work done on 7 May.  This item is not allowed for want of proper proof.

255     Paragraph 25(q) of the counterclaim seeks $160 for “drainage pipes from the dishwasher were not connected properly”.  The item seems to be “4 April, 5pm to 11pm, RD Mallory phoned – smells”.  The transcript reference given in Mr Sharkey’s list is to T636, L6, which refers to Mr H, the architect’s assistant, and Mr Taylor doing an inspection of the premises and photographing items for further repair.  The item at CB 392 appears to pertain to the odour problem, which is dealt with separately.  In the circumstances, this item is not allowed.

256     The item appearing at CB 408 is as follows:

“Ice Machine Room Ventilation.

Source extraction fan and materials.  Install 200 millimetre ducting and fan unit into ceiling cavity - Install ceiling register, 200 millimetre ducting, thru roof [indecipherable] flashing and china hat.

Materials and labour $2840.

Invoice dated 30 November 2014.”

257     This is said to derive in Mr Sharkey’s table from “pest control problems”.  He refers to T510, L30, which is cross-examination of Dr Eilenberg.  Mr Smith said: “Item number 8, are you aware of there being any complaint about that that was ever sent to the plaintiff at any time?” (T510, L30-T511, L1).  Dr Eilenberg replied: “Outside of my knowledge”, and at L2-3 he said he observed no pests.

258     There was a further reference, T469, L8, where Mr Mierke was asked whether he knew that a labourer had to go around and seal a hole and make good services to prevent the entry of pests and rodents.  Mr Mierke replied:

“I don’t know where this relates to, there is no indication of where these holes or cavities might be. From my understanding we didn’t leave any gaps or cavities but it’s not really specific about where these might have been so I can’t tell you if - - -”

259     This alleged defect must be regarded as in the “not proven” category, and so I disallow it.

260     The final item in Mr Sharkey’s table is “ice machine room ventilation”.  There is an amount in the sum of $340 claimed as being part of Mr Taylor’s invoice dated 30 April 2014 at CB 392.  The only item in that sum is 1 April, “Mark, Ken, List of repairs and photos.”  Mr Sharkey’s table includes a transcript reference to T636, L6, which refers to a meeting between assistant architect Mr H and Mr Taylor to do “an inspection of the premises listed, further repairs to the [sic] done and photographed items”. (T636, L6‑8)  This documentary and viva voce evidence does not make good the item claimed for, which is disallowed.

261     Relative to the same alleged defect there is a claim for $460 on an invoice from Mr Taylor dated 8 July 2014, CB 399, claiming $460 for work done on 5 June, “Measure floor hatch, repairs to temporary hatch, vap cooler register, scullery fan to be reconnected”.  There is no transcript reference.  The connection of this with an ice machine is not obvious.  I disallow this item for want of proper proof.

262     The final item claimed under this heading is $80, said to be derived from the invoice at CB 414 from Mr Taylor dated 26 March 2015.  There is a charge of $80 for an on-site meeting with a building consultant.  There is no transcript reference.  Again this item fails for want of proper proof.

263     This has disposed of all of the items in the final Defects Schedule, save for paragraph 25(p) “larder fridges”.  This was identified as a defect by Dr Eilenberg but on the premise that this plumbing work was performed by R & K or Mr G.  He said this was a defect which still existed at the time of his report. (T485, L24-31; T510, L15-25)  Mr Mierke said all this work was done by Sharpline’s sub-contractor. (T469, L2-6)  In these circumstances, I am not satisfied that this is an issue for which R & K should be held liable.

Disposition

264     I will direct the parties within 14 days of this day to bring in short minutes to give effect to these reasons.

265     I have heard no submissions on the question of costs, and so I will reserve them.

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