Reed v Peridis - [2005] SASC 136

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
REED & ORS v PERIDIS & ANOR
Judgment of The Honourable Justice Besanko
8 April 2005
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS
Appeal against order of a Magistrate that appellants pay respondents damages of $11,200 for breach of contract - where appellants conducted an earthmoving business - where appellants contracted to enlarge an existing dam on the respondents' rural property - where respondents claimed the dam seeped excessive amounts of water - whether Magistrate erred in finding that it was an implied term of the contract that the clay used to line the dam would be reasonably fit for its purpose - whether Magistrate erred in finding that it was an implied term of the contract that the work or services to be performed by the appellants would be performed in a proper manner and in accordance with accepted standards - whether Magistrate erred in treating published reference works as the best evidence of appropriate or acceptable practice rather than the common practice used in the Adelaide Hills area and used by the appellants - whether Magistrate erred in finding that the clay used by the appellants was inadequate and inappropriate - whether Magistrate erred in finding that the method of compaction undertaken by the appellants was inadequate - whether Magistrate erred in finding that there was excessive seepage from the dam - whether Magistrate erred in accepting the evidence of the respondents' expert over that of the appellants' expert - whether Magistrate erred in his assessment of damages in finding that rectification work costing $11,200 was necessary and reasonable - appeal dismissed.
Magistrates Court Act 1991 s 40; Supreme Court Rules 1987 r 97.17; Consumer Transactions Act 1972 s 7; Building Work Contractors Act 1995 s 32, referred to.
Bellgrove v Eldridge (1954) 90 CLR 613, applied.
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; Chicco v City of Woodville (1989) 150 LSJS 89, considered.

REED & ORS v PERIDIS & ANOR
[2005] SASC 136
Magistrates Appeal

BESANKO J: This is an appeal from orders made by a Magistrate in a civil action in the Magistrates Court. The Magistrate made an order that the defendants to the action pay the plaintiffs the sum of $11,200. The defendants appeal to this Court against that order pursuant to s 40 of the Magistrates Court Act 1991. The appeal is by way of rehearing (r 97.17 Supreme Court Rules 1987).
The defendants are Mr Christopher John Reed and Ms Julianne Pearl Reed, and at the relevant time they were trading in partnership as Reeds Excavations. The business of the partnership was the carrying out of earthmoving works and included the construction of dams on rural properties.
The plaintiffs are Mr Peter Peridis and Mr Matthew Moores and they own a rural property at Cleggett Road, Little Hampton in the State of South Australia. In November 2000 the plaintiffs wished to establish an arboreal park on the property and to that end they had begun to plant rare and exotic trees on the property. In November 2000 there was an existing dam on the property and the plaintiffs wished to increase the capacity of the dam. They entered into a contract with the defendants for (among other things) work to be carried out to the existing dam. The claim by the plaintiffs relates to that contract and the work carried out by the defendants under that contract. The defendants agreed to carry out other work under the contract (eg., excavating and forming a roadway), but that other work is not in issue on the appeal.
The case occupied some time before the Magistrate and there were a number of issues. Two experts in the field of geotechnical engineering gave evidence. Mr Lyndon Sanders, a geotechnical engineer, gave evidence on behalf of the plaintiffs, and Dr Peter Mitchell, also a geotechnical engineer, gave evidence on behalf of the defendants. The Magistrate was required to decide a number of issues and there were issues which he decided against the plaintiffs. For example, he rejected the plaintiffs’ claim that the defendants had acted in breach of contract or made a false representation in relation to the expected capacity of the dam as a result of the defendant’s work. He also rejected a number of claims for loss and damage said by the plaintiffs to have resulted from the defendants’ defective performance of the required work. The plaintiffs have not filed a cross appeal or notice of alternative contentions and I will mention the issues upon which the plaintiffs failed only where it is necessary in order to deal with the issues raised on the appeal.
The other point I mention by way of introduction is that unfortunately the plaintiffs did not clearly articulate in their pleadings, or indeed, in their submissions, what they say were the terms of the contract. Nor does the Magistrate clearly articulate the terms of the contract in his reasons for judgment. I will return to this point later in these reasons.
It is convenient if I continue to refer to the parties as the plaintiffs and defendants respectively.
A summary of the Magistrate’s reasons
The Magistrate found that there was a contract between the plaintiffs and the defendants and that under that contract the defendants were to carry out work on an existing dam on the plaintiffs’ property and other work for an agreed sum of $7,700 including Goods and Services Tax. The Magistrate found that the defendants carried out work under the contract in November 2000, and again in January 2001. The Magistrate found that in order to line the dam the defendants used clay from the plaintiffs’ property near the existing dam.
The Magistrate found that the clay used by the defendants to line the wall of the dam was too porous. Mr Stewart Dent was an employee of the defendants at the relevant time and he was in charge of the work carried out by the defendants. Before the contract Mr Dent told the plaintiffs that in order to carry out the earthworks required to expand the capacity of the dam he would need to remove topsoil from the land adjoining the existing dam until he reached clay. He proposed to use that clay for the purpose of lining the wall of the dam to be enlarged. He proposed to then return the topsoil that had been moved and put it back in place.
The Magistrate found that Mr Dent carried out a visual examination of the clay which he proposed to use and that a visual examination was an acceptable test of the clay. I will need to discuss the effect of this finding by the Magistrate in more detail later in these reasons.
Although the Magistrate said a visual examination of the clay was an acceptable test, he went on to say that the fact was that the clay used to line the wall of dam was too porous and that therefore the materials used in the construction of the dam were, to use the Magistrate’s words, “inadequate and inappropriate”. The Magistrate found that the seepage of water from the dam was too great and was explained by the fact that the materials used were too porous. The seepage of water from the dam (or perhaps more accurately, the fall in the level of water) could not be explained by use of the dam for irrigation purposes or by evaporation. The Magistrate found that the wrong materials had been used and he said a breach of contract was established.
The Magistrate also made findings as to method of compaction undertaken by the defendants. The Magistrate preferred the evidence of Mr Sanders to that of Dr Mitchell, and he found that the method of compaction of the clay used to line the dam was not in accordance with (again, to use the Magistrate’s words) “documented good practice for construction of farm dams”. The Magistrate referred to Australian Standard No 3798 “Guidelines on Earthworks for Commercial and Residential Development” (“the Standard”) and he said that the word “should” in the Standard should be read as “shall” rather than “ought”. The Magistrate found that the method of compaction undertaken by the defendants was (to use the Magistrate’s word) “inadequate”.
The Magistrate clearly found that the seepage from the dam was excessive and that that was a breach of contract which had caused loss and damage. I think that he found there were two causes of that state of affairs, namely, the wrong quality clay was used and an inadequate method of compaction was undertaken.
The Magistrate assessed damages by reference to the rectification work which he found was necessary to correct the defective work carried out by the defendants. He had before him a quote from Andrew Keogh Earthmoving dated 15^th December 2002 which was tendered by the plaintiffs by consent and which detailed certain work required to deal with “poor clay content and lack of compaction”. I will call this “the quote” although I note that in fact it states that it is not a firm quote. However, no point was made about that fact. The Magistrate assessed damages in accordance with the quote which was for the sum of $11,200.
I will need to consider at the Magistrate’s findings in more detail later, but it is convenient at this point to identify the challenges by the defendants to the Magistrate’s reasons.
The grounds of appeal
The Amended Supplementary Notice of Appeal filed by the defendants complains of a number of findings and conclusions of the Magistrate. It is convenient to group the complaints into the following topics.
Findings as to the terms of the contract:
1The Magistrate erred in finding that AS 3798 was a term of the contract. Non-compliance with AS 3798 was irrelevant to the question of whether there was a breach of contract.
2The Magistrate erred in failing to find that it was a specific or at least implied term of the contract that soil from the plaintiff’s property would be used at less cost to the plaintiffs.
3The Magistrate erred in finding that the contract, so far as the dam was concerned, was a contract for the supply of work and materials and that the defendants warranted that the clay was of good quality. He should have found that it was a contract for work to be done or services to be provided.
4The Magistrate erred in failing to make any or any proper finding as to the alleged implied terms and the content of those terms in light of the common practice for dam building in the Adelaide Hills, the constraints of the site and that all earthen dams exhibit seepage of water.
Findings as to the breach of contract:
1The Magistrate erred in failing to provide reasons as to why he preferred the evidence of the plaintiffs’ expert to the evidence of the defendants’ expert.
2The Magistrate erred in finding that the moisture content of the soil was “too high” when there was no evidence as to what was the appropriate moisture content.
3The Magistrate erred in failing to take account, at all or properly, of the fact that the dam had stood for four years.
4The Magistrate erred in finding the soil used was not appropriate when there was no evidence as to how much the level of the dam would drop due to evaporation and normal seepage and usage.
5The Magistrate erred in finding that the dam wall laid by the defendants was not of the right quality and had not been properly compacted and therefore the wrong materials had been used when the defendants had only done work to and deposited clay on the inside of the dam wall and there was no evidence as to where the Dynamic Core Penetrometer tests were carried out.
6The Magistrate erred in that he incorrectly found that the expert engineer Mr Sanders had expressed the opinion that the rate of seepage was too great.
7The Magistrate erred in that he failed to consider the evidence of Mr Sanders that the seepage would have come through the floor of the dam or the toe of the dam wall.
8The Magistrate failed to consider the evidence that the original dam suffered water loss and that any loss of water had significantly reduced by 2003/2004 year.
9The Magistrate erred in failing to consider the evidence of Dr Mitchell that keying in the new clay was impractical on the site as was the use of a scraper to compact the clay.
10The Magistrate erred in that he confused the concepts of compaction and keying in.
Findings as to loss and damage:
1The Magistrate erred in awarding damages of $11,200 for a breach of contract when the entire contract sum was $7,700 and the plaintiffs had obtained the benefit of the defendants’ work for four years.
2The Magistrate erred in finding that it is reasonable for the plaintiffs to carry out the work identified in the quote from Andrew Keogh Earthmoving. There was no evidence to this effect and the fact was not proved by the tender of the quote which was by consent.
These grounds were refined by the defendants in their written and oral submissions on the appeal.
I turn now to consider the issues on the appeal.
The issues on appeal
The terms of the contract
As I have said, it is unfortunate that the plaintiffs did not clearly articulate what they say were the terms of the contract. Nor, with respect, has the Magistrate done that in his reasons for judgment.
In a paragraph in their Further Amended Particulars of Claim alleging that the certain representations were false and misleading, there is an allegation that the clay used to line the dam was not fit for the purpose and that it was not applied and compacted properly.
As far as the Magistrate’s reasons for judgment are concerned, it is necessary to work backwards from the breaches of contract found by the Magistrate and infer from those breaches the terms of the contract found by the Magistrate.
In the end, I think the Magistrate found that it was a term of the contract that the clay to be used by the defendants to line the dam would be fit for its purpose and it was a term of the contract that the work or services to be performed by the defendants would be performed in a proper manner and in accordance with accepted standards. It is perhaps only a refinement of those terms to say that, the plaintiffs having made known to the defendants the purpose for which the work was required and the result the plaintiffs desired the work to achieve (ie., a dam which held water and was not subject to excessive seepage) so as to show that they relied on the defendants’ skill and judgment, the defendants warranted that the work performed and the materials used would be reasonably fit for that purpose and of such a nature and quality that they might reasonably be expected to achieve the desired result.
The Magistrate did not identify whether the relevant terms of the contract were in writing or oral or were express or implied. He did identify the documents which he said were relevant to the contract being the defendants’ advertisement, the defendants’ quotation dated 6^th November 2000, tax invoices of the defendant and a report from the defendants dated 4^th December 2000. The report was written after the bulk of the work had been carried out by the defendants in November 2000. The report might be some evidence of what the contractual terms were, but being a document prepared after the work was carried out it cannot be a document containing the contractual terms.
I have considered these documents and the Magistrate’s findings as to the conversations which took place at about the time the contract was entered into and I do not think it can be said that there were express terms (either in writing or oral) about the quality of the clay to be used or the method of compaction to be undertaken. The documents do not deal with those matters. There were no conversations between the plaintiffs and the defendants about the method of compaction to be undertaken. As to the question whether there was an express oral term as to the quality of the clay to be used, I note that there was a conversation about the clay to be used but not expressly about the quality of the clay to be used. Mr Dent, on behalf of the defendants, told the plaintiffs that he proposed to use clay from the plaintiffs’ property to line the wall of the dam. That conversation does not give rise to an express oral term about the quality of the clay to be used.
In my opinion, the terms found by the Magistrate and what I have referred to as a refinement of those terms were implied terms of the contract. Subject to one argument which I need to address, I do not think the Magistrate erred in finding that it was an implied term that the clay to be used by the defendants would be fit for its purpose, and an implied term that the work or services to be performed by the defendants would be performed in a proper manner and in accordance with accepted standards. Furthermore, there was an implied warranty that, the plaintiffs having made known to the defendants the purpose for which the work was required and the result the plaintiffs desired to achieve so as to show that they relied on the defendants’ skill and judgment, the method of compaction undertaken by the defendants and the clay used by the defendants would be reasonably fit for the purpose and of a nature and quality as would achieve the result of a dam which was not the subject of excessive seepage. I think the common law tests for the implication of terms of the nature I have identified are satisfied (B P Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 per Mason J (as he then was) at 345 – 347) and I note that such terms are implied by law in the case of what might be considered analogous contracts (s 7 Consumer Transactions Act 1972; s 32 Building Work Contractors Act 1995).
The defendants submitted that they did not give a warranty about the quality of the clay to be used because they were not supplying the clay. They were to take it from the plaintiffs’ property. It was submitted that the Magistrate incorrectly treated the contract as one for the provision of services and materials, whereas in fact it was a contract only for the provision of services. I reject this argument. It is true that the defendants were not supplying the clay and it was to come from the plaintiffs’ property. However, it was the defendants who suggested that they use clay from the plaintiffs’ property, and I think that in those circumstances they were under an obligation to select suitable clay from the plaintiffs’ property or, if that could not be found, to advise the plaintiffs of that fact. The plaintiffs would then be faced with a decision as to whether to cancel the contract or to go ahead and pay extra for clay to be purchased from elsewhere. It was after all the defendants who were the experts in dam construction and who advertised that fact by saying in their advertisement that they had 35 years experience in excavations, including dam construction.
The next submission made by the defendants was that the Magistrate erred in finding that it was a term of the contract that the compaction would be carried out by the defendants in accordance with the Standard and the point was made that the Standard was not pleaded as a term of the contract. However, I do not think that the Magistrate found that the Standard was a term of the contract. He considered the method of compaction undertaken by the defendants and he considered whether it was carried out in accordance with documented good practice for the construction of farm dams including the Standard. I do not think that he erred in taking that approach. It is true that a breach of the Standard was not pleaded as a particular of breach, but both experts addressed the Standard and I do not think that the defendants can say that they were taken by surprise by reference to it. Of course it is another question whether the Standard was relevant to breach and, if so, the proper construction of the Standard. I will return to those questions when considering the relevant findings of the Magistrate in the context of breach.

I reject the defendants’ grounds of appeal in relation to the terms of the contract.
The breaches of the contract
The defendants submitted that the two key findings of the Magistrate, namely, that the method of compaction undertaken by the defendants was inadequate, and that the clay used by the defendants was inadequate and inappropriate were wrong. The Magistrate clearly found that the fact that the clay used by the defendants was inadequate and inappropriate was a cause of what he found to be excessive seepage from the dam, and as I have said, I think he also found that the inadequate method of compaction was a cause of the excessive seepage.
The defendants challenged the Magistrate’s finding that there was excessive seepage from the dam and it is convenient to start with their challenge to that finding. The Magistrate relied on evidence from Mr Peridis to the effect that there had been a fall in the level of water in the dam. The ground beyond the main wall of the dam was soggy in November 2001 and the level of water in the dam had fallen by about one metre in the course of a month. At a meeting on site at that time, Mr Dent said it was an act of God and that there could never be a guarantee that the dam would not leak. The Magistrate also relied on evidence from the plaintiffs’ expert that there was excessive seepage. Mr Sanders was asked whether the seepage he observed was significant or insignificant. He referred to it as “significant seepage”. Dr Mitchell, the defendants’ expert, said that the seepage was not abnormal but the Magistrate must be taken to have rejected that evidence. The Magistrate also referred to photographs taken at various times and he said that they showed a considerable drop in the level of water in the dam. The Magistrate considered whether there were other reasons which might have contributed to the drop in the level of the water. He rejected the contention that it was due to the removal of water from the dam for irrigation purposes or by reason of evaporation.
In my opinion, there was sufficient evidence to support the Magistrate’s conclusion that the seepage of water from the dam was excessive. He was entitled to rely on the evidence of Mr Peridis as to his observations about the level of water in the dam, the conversation with Mr Dent in November 2001 and the photographs. He was entitled to prefer the evidence of Mr Sanders to that of Dr Mitchell based as it was on his observations and his conclusion as to the inadequate nature of the clay used to line the dam wall. One must be careful not to engage in circular reasoning, but I think that if there was objective evidence that the clay used was inadequate in the sense of being too porous then that supports the conclusion that the seepage was excessive. There was objective evidence in this case in the form of the Dynamic Cone Penetrometer tests carried out by Mr Sanders’ associate and they support the conclusion that the clay used was inadequate. For reasons I will give, I reject the defendants’ challenge to the Magistrate’s reliance on the results of those tests.
I turn now to the two findings made by the Magistrate as to the causes for the excessive seepage of water from the dam.
First, the Magistrate found that the method of compaction used by the defendants was inadequate. The Magistrate referred to the concepts of “keying in” and compaction. “Keying in” means a process whereby a layer of new material such as a layer of clay liner is made to coalesce with the soil underneath. One method of doing this is to cut benches into the ground and lay the fill material in near horizontal layers. A related operation is to apply compaction to soils in embankment dams using appropriate compaction machinery. The Magistrate identified the method of compaction adopted by the defendants. He said that Mr Dent brought clay from further up the hillside above the dam, it was spread over the excavated areas and he then drove his bulldozer up and down and then again at 45-degree angle across the fill material. The bulldozer was a 13 tonne bulldozer. The defendant did not cut benches into the ground and lay the fill material in near horizontal layers.
Both the experts referred in their evidence to the Standard and the method of compaction adopted by the defendants. The Magistrate noted that the experts differed as to whether the requirements of the Standard were mandatory. Mr Sanders acknowledged that the method of compaction adopted by the defendants was a practice commonly used, but his opinion was that it was not a good or acceptable practice. On the other hand, Dr Mitchell said that the method of compaction undertaken by the defendants was acceptable having regard to the constraints of the site and industry practice.
The Magistrate found that the method of compaction undertaken by the defendants was not in accordance with documented good practice for the construction of farm dams. In referring to “documented good practice” the Magistrate was referring to the reference works identified in Mr Sanders’ report comprising the Standard and two books or papers and his opinion that the adoption of poor compaction practice was the most likely cause of seepage through the embankment wall. The Magistrate took the view that the requirements set out in the reference works, including the Standard were mandatory save where it was impractical to meet a particular requirement. The Magistrate said that there was no suggestion that keying in by benching, or the use of appropriate compaction equipment, was impractical. The Magistrate did admit of one exception in the case of the use of appropriate compaction equipment in that he accepted Mr Dent’s evidence that it was impractical to use a “sheep’s foot” roller. The Magistrate found that the method of compaction was inadequate because of the use of inappropriate compaction equipment and/or the failure to key in the clay liner by benching. The Magistrate said that he preferred the evidence of Mr Sanders to that of Dr Mitchell.
The defendants submitted that the Magistrate erred in making the findings I have just identified. It was submitted that the Magistrate and Mr Sanders treated the Standard as if it was legally binding and that was an error. It was submitted that the best evidence of appropriate or acceptable practice was the common practice adopted in the Adelaide Hills area and that in fact was the method adopted by the defendants.
It is true that of itself AS 3798 is not legally binding, and it is probably only relevant insofar as it is said by an expert to embody good practice (Chicco v City of Woodville (1989) 150 LSJS 89). The Magistrate relied on the evidence of Mr Sanders and the Magistrate did not proceed on the basis that of itself the Standard was legally binding. Did Mr Sanders make the error of assuming that the Standard was legally binding and base his opinion on that assumption? There are some passages in his evidence which might suggest he took that approach, but reading his evidence as a whole I do not think he did take that approach. Mr Sanders referred to and relied on two other publications for his conclusion as to what was good practice. He explained why the method of compaction adopted by the defendants was not adequate. I refer to the following passage in his evidence:
“QParagraph 4 Dr Mitchell concludes in the first paragraph of that, ‘It is common practice to compact placed filled by repeated rolling with the crawler tracks of the bulldozer’. Do you agree with that.
A I agree it’s common practice.
Q Do you agree that it’s an acceptable practice.
ANo, not at all. Bulldozers are equipment that are designed carefully to apply low stress to the soil. To apply low pressure to the soil to allow the bulldozer to move over soil without chewing it up. That is exactly the opposite of what you would like to do if you were trying to compact earth works. To compact clay you actually want to kneed (sic) it, to sheer it in order to bring it into the compacted state.”
In my opinion, the Magistrate was entitled to rely on the evidence of Mr Sanders. He was required to have regard to what was common practice in the Adelaide Hills area, but of course he was not bound to conclude that common practice is the appropriate practice. My reading of the evidence suggests that the issue was fairly finely balanced and had the defendants used one of the two methods of keying in by cutting benches into the ground and laying the fill material in near horizontal layers or compaction using appropriate compaction machinery it might well have been appropriate to decide the issue in favour of the defendants. However, the defendants did not adopt either method and I am not persuaded that I should interfere with the Magistrate’s conclusion.
Secondly, the Magistrate found that the clay used by the defendants to line the dam wall was inadequate and inappropriate and he relied (at least in part) on the Dynamic Cone Penetrometer tests carried out by Mr Sanders’ associate. The defendants submitted that there was no evidence that the tests had been carried out in the correct area of the dam. This appears not to have been an issue raised before the Magistrate and he has proceeded on the basis that the tests were carried out in the correct locations. I do not think the Magistrate erred in taking that approach. It is reasonable to assume that Mr Peridis gave correct instructions to Mr Sanders and that his associate identified the correct locations for the tests. More importantly perhaps, is that it was not suggested to Mr Sanders in cross-examination that the testing which was so important to his conclusions was carried out in the wrong locations. In those circumstances I would not be prepared to interfere with the Magistrate’s conclusion that the testing was carried out in the correction locations. The Magistrate’s other relevant conclusion on this topic, namely that the results of the tests support the conclusion that the clay was too porous is not, in my view, open to challenge.
I reject the defendants’ grounds of appeal in relation to the breaches of the contract.
Loss and Damage
There were a number of challenges to the award of damages made by the Magistrate. The first challenge is that the Magistrate should have found that there was no evidence that the work identified in the quote was work which had to be done to rectify the defendants’ defective work. The defendants consented to the tender of the quote in evidence and they accepted that the figures shown in the quote were the figures Andrew Keogh Earthmoving would charge for the work, and, it would seem, that those figures were reasonable. However, the defendants submitted that the link between the defendants’ defective work and the work identified in the quote was not established by the tender of the quote and it was not otherwise established by the plaintiffs.
The Magistrate discussed the quote in the following passage of his reasons (at [28]):
“The document was tendered by consent upon the basis that the costs quoted by Mr Keogh represent a fair and reasonable estimation of the likely cost of carrying out the work identified in the document. The defendant does not concede that the work is work required to be done and the document was tendered without prejudice to the defendants’ contention that the workmanship of the defendant was satisfactory and that there were no defects in the dam for which the defendant was responsible or which required rectification. I note that the quotation relates to work required to deal with ‘poor clay content and lack of compaction’. The quotation does not suggest that any work is proposed to increase the capacity of the dam.”
I think the Magistrate was right to proceed on the basis that the necessary rectification work was that identified in the quote for the two reasons given by him in the above passage, namely, the quote referred to poor clay and lack of compaction which were the two aspects of defective work identified by the Magistrate, and the fact that there was no suggestion that any of the work was work to increase the capacity of the dam.
The second challenge to the award of damage is that the carrying out of the rectification work was and is not reasonable having regard to the comparison between the cost of the rectification work ($11,200) and the contract price of $7,700 which contract price included work in addition to the work on the dam. I reject this argument. The plaintiffs are entitled to be compensated for the cost of necessary rectification work unless the carrying out of the rectification work is not a reasonable course to adopt. Whether the carrying out of rectification work is a reasonable course to adopt is a question of fact which depends on the circumstances of the case (Bellgrove v Eldridge (1954) 90 CLR 613). A mere comparison of the contract price and the cost of the rectification work is insufficient to establish that the carrying out of rectification work is not a reasonable course to adopt. In fact, I note that in Bellgrove v Eldridge the contract price was £3,100 and the cost of the rectification work was £4,950 and the award of damages on that basis was not disturbed on appeal.
The defendants challenged an allowance for some of the items shown in the quote. The quote contains an allowance for the hiring of a sheep’s foot roller. The defendants submitted that that item should not have been allowed because the Magistrate had previously said that he accepted Mr Dent’s evidence that a sheep’s foot roller could not have fitted on the particular site. On the face of it there appears to be some substance in this complaint. However, I would not interfere with the Magistrate’s decision to include this item in the award of damages. Perhaps the Magistrate’s earlier finding is wrong or the configuration of the site has changed. What is known on the evidence is that Mr Keogh has been on site for the purposes of preparing the quote. Presumably he considered what equipment could be used on the site. The defendants had the opportunity not to agree to the tender of the quote and they could have asked for Mr Keogh to be presented for cross-examination. In those circumstances, I would not interfere with the Magistrate’s decision.
The defendants also challenged the allowance in the quote for 200 tonnes of clay at around $16 per tonne ($3,200). They submitted that this item should not have been allowed because it was not part of the original contract that the plaintiffs would pay for clay. As I understand the argument it was that it was never part of the contract that the defendants would supply clay in connection with the work under the contract and the plaintiffs did not have to pay for clay under the contract. The cost of new clay is not a loss caused by the defendants’ defective performance because the plaintiffs never paid for clay under the contract. There are a number of matters potentially relevant to this submission which were not explored in the evidence before the Magistrate. For example, was there clay on the plaintiffs’ property, other than that selected by Mr Dent, which would have been suitable for the purpose? What would the plaintiffs have done if they had been advised by Mr Dent at or about the time of the contract that there was no suitable clay on the defendants’ property? Why did Mr Keogh see the need to purchase the quantity of clay identified in the quote and precisely how is it going to be used? I must judge the matter having regard to the evidence put forward by the parties including the quote which was tendered by consent. I think I should uphold the award made by the Magistrate. The fact is the dam on the property is defective by reason of the two failures of the defendants identified by the Magistrate. A person presumed to have a level of expertise in the relevant area has estimated the cost of making good the defects and that includes the cost of clay. The two failures of the defendants have led to excessive seepage from the dam and the work identified by Mr Keogh will rectify that situation. I am not satisfied that the Magistrate erred in allowing the cost of clay.
I reject the defendants’ grounds of appeal in relation to loss and damage.
Conclusion
For these reasons I would dismiss the appeal.