Richards v Dimitriou - [2016] SADC 111

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
RICHARDS & ANOR v DIMITRIOU & ORS
[2016] SADC 111
Judgment of His Honour Auxiliary Judge Clayton
7 September 2016
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - THE CONTRACT - CONSTRUCTION OF PARTICULAR CONTRACTS AND IMPLIED CONDITIONS - IMPLIED TERMS
Plaintiffs purchased property built by the defendants’ partnership, and claim the building was defective and breached statutory warranties implied under the Building Work Contractors Act. Defendants concede a number of items of work specified in a schedule were defective. Whether the remaining contested items breach the statutory warranties – whether the bricks supplied to clad the property were “good and proper”.
HELD: Bricks supplied contained a cosmetic defect and accordingly not “good and proper”. A number of other items of work in the schedule not performed by the builder in a proper manner, and so in breach of the implied statutory warranties.
Measure of damages – breach of statutory warranties amounts to a breach of contract. The application of the ruling principle dictates that the plaintiffs are entitled to the amount of money required to put them in the position they would have been in had the property been constructed in compliance with the contract.
HELD: Plaintiffs are entitled to have the bricks replaced. Plaintiffs have not provided any admissible evidence as to the costs of rectifying other defects. Judgment in favour of the plaintiffs in the sum of $84,955 for the replacement of the bricks. Order made under the Building Work Contractors Act for remedial work in respect of the other items of work found to be defective.
Building Work Contractors Act 1995 ss 32, 37, 40; Development Act 1993 s 72, referred to.
Robinson v Harman [1848] 1 Exch 850; Westpoint Management Ltd v Chocolate Factory Apartments Ltd [2007] NSWCA 253; Carosella v Ginos and Gilbert Pty Ltd (1981) 27 SASR 515; Unique Building Pty Ltd v Brown [2010] SASC 106; Willshee v Westcourt Ltd [2009] WASCA 87; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8, considered.

RICHARDS & ANOR v DIMITRIOU & ORS
[2016] SADC 111

At all material times the plaintiffs have been in a de facto relationship. In November 2008 they purchased a house property at 2A Nevis Street Klemzig from JS J&A Nominees Pty Ltd, a company in which the second defendant Dimitrios Makris was a shareholder and director. The plaintiffs continue to reside in the property.
The house had been constructed by the defendants who were trading in partnership under the name “Lifestyle Building Group”. The defendants sold the house to JS J&A Nominees Pty Ltd.
The defendant Nikolaos Dimitriou passed away on 23 June 2016. Up until the time of his death he had the conduct of this action on behalf of the defendants. At the commencement of the trial, on the application of the defendant Dimitrios Pantzikas, I appointed Mr Pantzikas to be the representative of the estate of Nikolaos Dimitriou for the purposes of this action pursuant to r 76(2)(b). As partners, Mr Pantzikas and the deceased had a similar interest in this action in that they are jointly and severally liable for the obligations of the partnership.
The action has a sad history. The plaintiffs purchased the property almost 8 years ago. They took possession of the property on 9 January 2009. In March 2009 there were difficulties with the alarm system and the plaintiffs contacted Mr Makris in connection with the “three-month new home maintenance warranty”. Between February and April 2009, Mr Richards noticed a problem with the bricks on the eastern side of the house by the clothesline. As time went by other problems manifested themselves. The problem with the bricks has continued to worsen up until the present time. On 25 June 2009 the plaintiffs made a complaint to the Office of Consumer and Business Affairs, and proceedings were commenced in the Magistrates Court almost seven years ago.
On 30 May 2012 the Magistrates Court action was dismissed by Mr D Sprod SM, apparently because the solicitor then acting for the plaintiffs had lost the file. Nothing happened for about 12 months until the action was resurrected. In early 2015 the action was referred to this court. The provisions of Part V of the Building Work Contractors Act 1995 apply “as if a reference to the Magistrates Court were a reference to the civil division of the District Court.”[1]
[1] Building Work Contractors Act (SA) 1995 s 40(2).
The action has therefore taken about six years to get to trial. During the course of the evidence at the trial there were references to the fact that the parties had appeared in the Magistrates Court on more than 50 occasions.
There were preliminary hearings in this court before his Honour Judge Chivell and his Honour Judge Slattery. A date was fixed for the hearing of the action in April of this year but unfortunately no judge was available and the trial could not proceed.
At one preliminary hearing Mr Makris announced that he wished to go to America. He was advised that he must attend at the trial. He ignored that direction and chose to go to America. He did not appear at the trial, although his son whom I permitted to sit at the bar table, did attend on his behalf.
On the application of counsel for the plaintiff I ordered that in default of appearance interlocutory judgment be entered in favour of the plaintiffs against Dimitrios Makris for damages to be assessed.[2]
[2] T9-17.
The only defendant to attend at the trial was Mr Pantzikas. He claimed that Mr Dimitriou and Mr Makris were the only persons involved in the case and they were the only persons with any knowledge of the case.[3] The defendants had no legal representation. The defence case was conducted by Mr Pantzikas who is an engineer. He is an intelligent person and conducted the defence in a way which for a layperson was quite competent. However there can be no doubt that the defendants were prejudiced by reason of the fact that they did not have the benefit of legal representation. By way of example, Mr Pantzikas was not familiar with the Rules of Court, in particular the rules relating to discovery of documents and expert evidence. As a consequence the defendants were unable to contradict some of the expert evidence adduced on behalf of the plaintiffs or to present expert evidence which might otherwise have been available.
[3] Exhibit D38.
The plaintiffs rely upon two causes of action. First they rely upon the statutory warranty created by s 32 of the Building Work Contractors Act 1995. While the plaintiffs’ contract to purchase the property was with JS J & A Nominees Pty Ltd, the plaintiffs succeeded to the rights of that company in respect of the statutory warranties by reason of s 32(3) of the Act. Secondly the plaintiffs pursue a claim in negligence.
I find that the plaintiffs are the successors to the rights of JS J & A Nominees Pty Ltd and that they are entitled to the benefit of the warranties implied into the building contract between JS J & A Nominees Pty Ltd and the defendants by reason of s 32(2) of the Building Work Contractors Act 1995. Those warranties include “a warranty that the building work will be performed in a proper manner to accepted trade standards and in accordance with the plans and specifications agreed to by the parties” (sub-s (2)(a)), “a warranty that all materials to be supplied by the contract for use in the building will be good and proper” (sub -(2)(b)) and a warranty that the building work will be performed in accordance with all statutory requirements (sub-s (2)(c)).
The plaintiffs have not established a case in negligence. The alleged case in negligence was not particularised and the evidence does not establish any specific breach of duty. The questions to be considered are whether there has been a breach of the warranties and if so what should the consequences be.
The alleged defects.
The first problem to manifest itself was the problem with the alarm system. Other defects with the house which became apparent as time went by led to an inspection of the property on 14 June 2010 by an assistant of Mr Peter Jankovic. Following that inspection Mr Jankovic wrote a report dated 8 July 2010.[4] Mr Jankovic conducted another inspection on 17 November 2010 which led to a second report which is dated 3 May 2011.[5]
[4] Exhibit P9-2.
[5] Exhibit P9-4 and photographs in Exhibit P 4-250 to 258.
To prove the alleged defects in the property, the plaintiffs rely principally upon the evidence of Mr Jankovic which lists and describes them. The defects fall into two main categories. The most significant category relates to the spalling or delamination of the faces of bricks.
A schedule to the report of Mr Jankovic, which describes the defects and the necessary remedial work, is Schedule A to the Statement of Claim. The defence sets out the builder’s response in a responding Scott schedule.
The defendants have made admissions with respect to some of the defects. However, they have never admitted that the bricks contained a defect. That has had a practical consequence in that the offers by the defendants to carry out remedial work did not include an offer to remedy the brickwork. As a result, the parties were unable to reach any agreement and no remedial work has been carried out.
The defendants’ admissions are partly set out in Schedule A to the Defence, and in a letter to the plaintiffs’ solicitors.[6] The plaintiffs are still required to prove the reasonable cost of rectifying the items which are not in dispute.
[6] Exhibit P1.
Items which remain in dispute are Item 21 of Schedule A (the spalling of the bricks) and Items 23, 24 and 25 (damage to fencing a concrete plinth and paving adjacent to the house). The defendants contend that Items 23, 24 and 25 were not within the builder’s scope of works.[7]
[7] Exhibit P1.
At the trial Mr Pantzikas requested that the defendants be given permission to carry out some remedial work but the plaintiffs object to the defendants carrying out remedial work. The plaintiffs seek compensation.
The spalling of the brickwork.
The problem with the bricks is that the outside face of bricks has been delaminating, leaving voids in the brick where part of the brick has fallen away. The parts that have fallen away accumulate on the ground around the outside of the walls. The experts have referred to the phenomenon as spalling.
Where spalling occurs there is a cosmetic defect. The evidence does not establish any structural defect.
The defendants question the severity of the cosmetic defect. In some ways the void which is formed by parts of the brickwork falling away is not inconsistent with the pattern of the bricks. However a close inspection demonstrates that there is an obvious cosmetic defect which is likely to affect the value of the property.
To put this claim into perspective, it is necessary to understand the nature of a brick veneer house which derives its structural strength from the framework, not the brick veneer. It is the framework which supports the roof. The method of construction of a brick veneer house permits the brick veneer to be removed and replaced without affecting the structural integrity of the house.
The plaintiffs’ claim with respect to the brickwork is based upon the cost of removal of all the bricks and their replacement by bricks which are not faulty.
The defendants argue that the cost of replacing all the bricks is excessive having regard to the cost of constructing the entire house. The total amount claimed by the plaintiffs for replacing the bricks is $92,400 and the cost of rectifying other defects said to be the consequence of breaches of warranty is $40,302.50. The total claim is $152,200.63. An argument that the cost of replacement is unreasonable is common in cases such as this and the principles are addressed in the cases to which I refer below.
Expert evidence as to the spalling of the brickwork – are the bricks in conformity with the warranty.
The court heard expert evidence as to the defective bricks from three appropriately qualified experts. I accept the evidence of each of them even though their opinions as to the cause of the spalling differ. The circumstances do not permit a definitive diagnosis of the cause of the spalling. All that the experts can do is to speculate.
Mr Jankovic
At the relevant time Mr Jankovic conducted building inspections, provided building advice and provided expert evidence under the business name “SA Building Consultants”. His curriculum vitae demonstrates extensive experience in the building industry and as an expert witness in building disputes. He is a Court appointed expert on building and construction disputes in the Magistrates Court.
In the opinion of Mr Jankovic the problem was caused by a manufacturing defect.[8] He thought that the problem may have been caused with the clay, dirty water or high salt content. He said that when such a brick, particularly a soft brick, takes in moisture then salt crystals within the brick grow causing it to “explode” thereby breaking away a piece of the face of the brick.[9] In the worst cases the bricks end up looking like someone has scooped out the centre of the brick.[10]
[8] T122.
[9] T123.
[10] T126.
In the opinion of Mr Jankovic the position will continue to get worse until the material completely deteriorates over a period of time.[11] He has visited the site five or six times and on each occasion he has noted soft pieces of brick which have broken away lying on the ground. In his opinion it is a deteriorating situation.[12]
[11] T124.
[12] T125.
It is the opinion of Mr Jankovic that properly manufactured bricks should not deteriorate in the way that these bricks have and he therefore maintains that the bricks are defective.[13] On that evidence, which I accept, there is a breach of the warranty that all materials supplied will be “good and proper”.[14]
[13] T128.
[14] Section 32(2)(b).
Mr Taggart
Mr Taggart is a senior consulting and structural engineer. He first inspected the property at the request of the plaintiffs and prepared a report dated 17 April 2010.[15] He has been involved with the Clay Brick and Paver Institute and has contributed to the Australian Standards regarding masonry.[16] In the 1970s the brick manufacturers throughout Australia formed an association and joined with the CSIRO to create the Brick Development Research Institute for the development and research into the properties of bricks. He said that while he does not have extensive experience in the manufacture of bricks he does have experience in their use and the codes that surround their manufacture.[17] He has spent a lot of time considering problems or defects with brickwork and bricks.
[15] Exhibit P9-1.
[16] T145.
[17] T146.
On his first inspection Mr Taggart noted that in some panels of brickwork up to 10% of the bricks were affected by the problem which he described as “a manufacturing defect where part of the face of the brick, to a depth of several millimetres is missing”. At first he thought that constituted a cosmetic flaw that should not adversely affect the structural adequacy or the long-term durability of the brickwork. He did say that to the untrained eye the cosmetic flaw would be likely to cause concern and raise doubts as to the quality of the brickwork as a whole.[18] He had only encountered such a problem about three times in 30 years.
[18] Exhibit P9-1.
Mr Taggart inspected the property again on 8 June 2014. He observed that the number of affected bricks had increased significantly and the extent to which the affected bricks had undergone exfoliation on the face surface had increased. He observed that around the perimeter of the home on the pavement adjacent to the footings it was possible to observe many small brick fragments ranging in size from 1 mm to approximately 20 mm.
In his conclusions Mr Taggart said that the opinion in his initial report that “the affected bricks constitute a cosmetic flaw that should not adversely affect the structural adequacy or the long-term durability of the brickwork” has proven to be incorrect with regard to the long-term durability. He concluded:
Given the passage of time and the clear evidence the bricks are continuing to deteriorate it is now possible to state unequivocally that the bricks failed to achieve the minimum durability standard required. It is not possible to say with any confidence that a cement render coating, if applied to these bricks, would remain adequately bonded to the surface throughout the service life of the building. In the opinion of the author all the face brickwork should be removed and replaced.[19]
[19] P9-5.
It was Mr Taggart’s opinion that the problem was akin to “lime pitting”. When calcium carbonate is incorporated in the clay from which the bricks are made that turns to calcium oxide in the kiln and over time moisture from the air, humidity et cetera get to the calcium oxide and hydrates it to calcium hydroxide. In the process it expands causing pieces of the brick to be pushed out of the surface.[20]
[20] T151.
The 2008 Australian Standards for Masonry Units provides in clause 2.5.1:
Masonry units shall have sufficient durability to perform the required function in the finished structure without deteriorating under the action of environmental conditions of intended use.
In the opinion of Mr Taggart the bricks in question do not satisfy the requirement of the standard.[21] Mr Taggart expressed the opinion that the brickwork as a whole, as well as individual bricks, did not meet the required standard.[22] He said that in either case the bricks failed to meet the minimum standard because of the way the bricks were clearly continuing to deteriorate.[23]
[21] T153.
[22] T155.
[23] T155-27 ff.
The evidence of Mr Taggart does not accord with the evidence of Mr Jankovic as to the cause of the defect. Both of the witnesses expressed their opinion as to the cause. The facts do not permit a definite diagnosis of the cause. Mr Taggart accepted that he cannot unequivocally give a reason for the failure of the bricks.[24] He said that it is an evident fact that the deterioration is taking place and that it is simply the mechanism which is a theory.[25] I have no hesitation in accepting the evidence of Mr Taggart. I accept his evidence that the bricks do not meet the required standard. He has no doubts about the bricks being defective.[26]
[24] T161.
[25] 161.
[26] T157-10.
The evidence of Mr Taggart provides further reason for the finding that that the bricks were materials supplied which were not good and proper and there was therefore a breach of the warranty.
Mr Taggart last visited the site in April of this year and observed that there were many more brick fragments on the ground. He made a rough estimate that the number of affected bricks doubled in the six years since his first visit. About 20% of the bricks were affected so that in six years it had gone from 10% to 20%.[27] He has seen no evidence that the deterioration is slowing down and does not know when it will stop. He said you cannot put a time on it.[28]
[27] T157-7.
[28] T157.
Using a straight edge he measured across the face of the bricks and measured a depth of 7 mm loss of face.[29] Overall the brick is 110 mm in depth. That means 7/110 mm on a particular brick had worn away in 7 years.[30]
[29] T157, 158.
[30] T158, Exhibit P22.
In his second report Mr Taggart made comments about the possibility of rendering the bricks as a solution. In his evidence he said:
The problem with these bricks goes beyond cosmetic as I had first thought and they are-they are failing the durability requirement. So, render is not going to change that. It is going to cover the cosmetic appearance, but the bricks are still below the minimum standard and render has to adhere to the face of the brick and if that face is falling apart then the render may well not last for the 50 year lifetime of the building. So I don’t think render is a viable option in this case.[31]
[31] T156-5.
Mr Deek

Bassam Pierre Deek was requested by the defendants to prepare a “technical report” regarding the condition of the bricks. He inspected the site on 2 September 2014 and provided a report on 15 September 2014.
On examination of the brick walls Mr Deek observed random defects to bricks scattered along all elevations (except the front elevation which does not have bricks). He said that the defects consist of localised deterioration, i.e. exfoliation or flaking off of the face surface of bricks in thin layers, and that the defects occurred randomly and did not follow a particular pattern.
Use of a screwdriver on the exposed defective surface indicated that the damage to the bricks was superficial, and use of a hammer (tapping test) indicated that the quality of bricks was sound beyond the deteriorated surface.
Mr Deek formed the opinion that the cause of the defects was as a result of a defective batch produced and supplied by the brick manufacturer. He said that the defect is the likely result of airborne water being trapped behind the “laminate” surface of the clay brick during production.
Mr Deek said that while further defects to the brickwork face may still continue to occur the damage is considered to remain superficial. He said the surface defect to the bricks is only that and had not compromised the structural integrity of the building structure.
He proposed that a suitable render coat be applied to the brick surface.[32] However he agreed that he would not recommend rendering if there was a risk that the brick faces remained unstable. For reasons expressed elsewhere I have rejected the suggestion that the walls should be rendered.
[32] Exhibit P9-6.
Mr Deek inspected the building again on 21 March 2016. In a second report Mr Deek advised that the defects to the brickwork which he observed previously generally remained unchanged. He said the brickwork was structurally adequate and fit for purpose and that if required a suitable render coat may be applied to the brick surface as a cosmetic cover.[33]
[33] Exhibit P9.
Mr Deek holds the degrees of Bachelor in Civil Engineering and Master of Civil Engineering and has 32 years’ experience in structural design and construction. For the last seven years he has been Senior Forensic Engineer with FMG Engineering. His practice involves the examination and forming of opinions on all construction materials, not specifically on bricks. He said “bricks” fall under “masonry” and that he was an expert in concrete specifically as well and that concrete bricks are no different.
Like the other expert witnesses he was an impressive witness who provided no reason for his evidence to not be accepted
Finding as to bricks
The evidence does not enable me to make any finding as to the cause of the defects in the bricks. On that question the opinions of the experts differ. However the expert witnesses are ad idem that the bricks are defective. I find that there is a defect in the bricks which is cosmetic. The evidence does not establish that the defect gives rise to structural problems.
I find that the defendants were in breach of the warranty that the materials to be supplied for use in the building work would be good and proper. That finding gives rise to the question of what relief is appropriate.
I should make an observation. There is no evidence the bricks were defective at the time that they were installed in the property. There is no evidence that the defendants were aware of any defect or should have been aware of any defect in the bricks until after the plaintiffs had complained. This is a classic case of latent defect. Apparently the manufacturer of the bricks has now gone out of business and the defendants have no recourse. The unfortunate consequence for the defendants therefore is that they are responsible for a defect in the bricks which was unknown to them and was out of their control. That is the effect of the legislation.
The consequences of the breach of warranty with respect to the bricks.
The plaintiffs want the brickwork removed and replaced with sound bricks. The defendants do not accept that replacement is necessary.
There was evidence about the possibility of replacing panels of the bricks that have been affected. However there is no means of knowing which bricks may fail in the future. Also the result of replacing panels of bricks would be unsightly. I find that replacing panels of defective bricks would not provide a satisfactory solution
The defendants have argued that the brickwork could be rendered. Mr Deek suggested that as a possibility. The plaintiffs do not want a rendered house. They gave evidence setting out their reasons.
I am not satisfied that rendering would be a satisfactory solution. If the bricks continue to break down, which on the evidence appears likely, there is the possibility that the render will fall away in the same way that the damaged bricks have fallen away. On this topic I accept the evidence of Mr Taggart.
More importantly the plaintiffs never contracted to purchase a rendered house. The cases to which I refer below, establish that in a case of breach of contract, the plaintiffs are entitled to that which they contracted for.
The cost of rendering the walls would be much cheaper than the cost of replacing all the bricks but that is not the relevant criterion.
There is been no suggestion that the plaintiffs’ loss should be measured by comparing the value of the building produced with the value of the building which should have been built had there been no breach of warranty.
What has been described as the “ruling principle” by the High Court of Australia with respect to damages at common law for breach of contract is that stated by Parke B in Robinson v Harman[34] in the following terms:
The rule of common law is that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.
[34] 1848] 1 Exch 850, 855.
In Bellgrove v Eldridge[35] a builder had constructed a house which, in breach of contract, contained defective concrete and mortar. The builder argued that the measure of damages was limited to diminution in value and did not extend to the costs of rectification. The court (Dixon CJ, Webb and Taylor JJ) said (at 617):
In the present case the respondent was entitled to have a building erected upon her land in accordance with the contract and the plans and specifications which formed part of it, and her damage is the loss which she has sustained by the failure of the appellant to perform his obligation to her. This loss cannot be measured by comparing the value of the building which has been erected with the value it would have borne if erected in accordance with the contract; a loss can, prima facie, be measured only by ascertaining the amount required to rectify the defects complained of and so give her the equivalent of a building on her land which is substantially in accordance with the contract.
[35] (1954) 90 CLR 613
I accept the plaintiffs’ submission that as a matter of principle there is no reason to adopt any alternative test when assessing damages for breach of a statutory warranty. The vendors of the property had a contract with the builder. The legislation implies a warranty by the builder into the contract and gives the plaintiffs, as successors to the vendors, the benefit of the warranty.
In Bellgrove v Eldridge the High Court pointed out that there was a qualification to the rule. The court said:
The qualification, however, to which this rule is subject is that, not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt.[36].
[36] (1954) 90 CLR 613 at 618.
The position therefore is that the work required to produce conformity with the builders obligations must represent a necessary and reasonable course to adopt (whether or not that work has been, or ever will be, carried out)[37]. What remedial work is both “necessary” and “reasonable” is a question of fact. Bellgrove v Eldridge at 619
[37]Robinson V Harman. Westpoint Management Ltd v Chocolate Factory Apartments Ltd [2007] NSW CA 253
In Carosella v Ginos and Gilbert Pty Ltd[38] the Supreme Court of South Australia held that it was reasonable to insist on the demolition and reconstruction of a house which had problems as a consequence of a defective foundation notwithstanding the fact that there was a cheaper remedy.
[38] 1981) 27 SASR 515.
A similar result was reached in Unique Building Pty Ltd v Brown[39] where Layton J (with whom Sulan and Vanstone JJ agreed) said ([94]):
The measure of damages is the difference between the contract and the cost of making it conform to the contract with consideration of the reasonableness of what is necessary to conform to the contract. This does not require consideration to be given as to the future intention of the respondents as to whether they wish to sell the site. If the only reasonable way to bring about conformity with the contract is by demolition and rebuilding because rectification and repair in itself would not be adequate to bring about conformity with the contract, and if such a course is reasonable, then demolition and rebuilding will be the measure of the damages. What in fact the owner decides to do with the damages which arise from the decision of the court is a matter for itself.
[39] [2010] SASC 106.
Mr Bullock who appeared for the plaintiffs referred me to the decision of the Court of Appeal in Western Australia in Willshee v Westcourt[40]. That case has similarities to the present. The defendant had constructed a house for the plaintiff which included walls using a sandstone veneer finish. The walls were not structural but were intended to produce an attractive visual finish. The sandstone which was used was unexpectedly of poor quality and began deteriorating unexpectedly. Like the present case the plaintiff wanted to remove and replace the defective sandstone. The defendant argued that the plaintiff should accept a cheaper but functional solution, by which the inferior sandstone would be treated in order to prolong its life. The cost of removal and replacement of the sandstone was estimated to be $257,977. The treatment proposed by the defendant would have cost $9290.
[40] [2009] WASCA 87.
On appeal the Full Court allowed an appeal from the judge at first instance and found that the plaintiff was entitled to have a house constructed using quality sandstone rather than the inferior stone. The plaintiff was awarded $257,977.91, being the cost of removing the inferior stone and replacing it with material of appropriate quality
The judge at first instance said:
The plaintiff contends that it is reasonable to spend some $258,000 in rectifying defects in a house worth $1.7 million. I do not accept that proposition. In my view would be unreasonable to demolish the entire external cladding of the plaintiff’s house, including a substantial number of satisfactory blocks, when the structural integrity of the house is not in dispute and when the plaintiffs complaint can now be based only on the aesthetic quality of the limestone, about which the contract was silent.
I have set out that passage because it describes an argument that might be put for the defendants in the present case.
Ruxley Electronics and Construction Ltd v Forsyth is a case which supports the defendants’ case. A builder had constructed a swimming pool that was 1’6” too shallow. The owner sought £21,650 damages for the cost of reconstructing the swimming pool. The House of Lords held that cost was out of all proportion to the benefit to be obtained and that the appropriate measure of damages was not the cost of reinstatement but the diminution in the value of the work occasioned by the breach. In coming to that conclusion Lord Jauncey of Tullichettle took the following matters into account (at 354-355):
The trial judge made the following findings which are relevant to this appeal: (1) the pool as constructed was perfectly safe to dive into; (2) there was no evidence that the shortfall in depth had decreased the value of the pool; (3) the only practicable method of achieving a pool of the required depth would be to demolish the existing pool and reconstruct a new one at a cost of £21,560; (4) he was not satisfied that the respondent intended to build a new pool at such a cost; (5) in addition such cost would be wholly disproportionate to the advantage of having a pool of a depth of only 6 feet as opposed to 7’6” and it would therefore be unreasonable to carry out the works; and (6) that the respondent was entitled to damages for loss of amenity in the sum of $2500.
After referring to Ruxley Electronics and Construction Ltd v Forsyth[41] the learned trial judge in Willshee continued:
In my view, this example is analogous to the present case. Accepting that a significant proportion of the limestone used in the construction of the plaintiffs house was originally unsuitable for that purpose, the present position is that the deterioration has been halted by the sealing carried out by Mr Stratfold. It is now true to say, therefore, that the house is “entirely adequate for its design purpose”, thus, the plaintiffs concern can only be “the lack of aesthetic pleasure” which he might have derived from the site of limestone in pristine condition. [336]
[41] 1996] AC 344 at [74].
On the appeal the appellant argued that the trial judge erred by failing to award damages equal to the amount required to put him in the position in which he would have been had the contract been performed and had he been provided with a house in which only limestone of high quality was used.
The Full Court referred to Tabcorp Holdings Ltd v Bowen Investments Pty Ltd[42] which had been decided since the decision of the trial judge. Martin CJ said that the High Court had reaffirmed the “ruling principle” that the measure of damage at common law for breach of contract was that stated by Parke B in Robinson v Harman and continued:
Applying that principle to the facts of this case, under the terms of the contract for the construction of his house, Mr Wilshee was entitled to a house constructed using limestone which was all of high-quality. That is not what he got. Under the “ruling principle” he was entitled to damages in the amount required to put him in that position-namely, by demolishing the existing external wall and replacing it with limestone which was all of high quality.
As the High Court points out in Tabcorp, the words of Baron Parke in Robinson v Harman are not to be equated with being placed in “as good a financial position as if the contract had been performed. So in the case of land and buildings diminution in value is not the only measure of damages available - although, of course, in some cases it may be the appropriate measure.
[42] 2009] HCA 8.
The Chief Justice referred to Bellgrove v Eldridge saying:
The qualification to which the High Court referred in Bellgrove was that “not only must the work undertaken the necessary to produce conformity, but that also, it must be a reasonable course to adopt”. On the facts of Bellgrove’s case, the High Court was of the view that insistence upon the performance of the remedial work by demolition and reconstruction was entirely reasonable given the nature of the breaches of the building contract.
In the present case, part of the reasoning relied upon by the trial judge was the proposition that Mr Willshee’s concern was primarily aesthetic, but it could not be said that his view of aesthetic desirability would necessarily be shared by others, and there was no term of any contract requiring a particular aesthetic standard to be achieved, nor any objective measure by which Mr Willshee’s views could be assessed.
The decision in Tabcorp establishes that this process of reasoning is erroneous. Although in the present case there was no express term of the contract relating to the aesthetic standard to be achieved by the limestone cladding, there was a term of the contract which required the limestone cladding to be of high quality. It was a breach of that term which resulted in accelerated deterioration of the limestone surfaces which Mr Willshee did not regard as aesthetically pleasing. As the High Court points out in Tabcorp, the question of whether or not Mr Willshee’s views in this respect are idiosyncratic, or would be shared by others, is not to the point. Mr Willshee entered into a contract which he considered served his interests, and is entitled to the performance of that contract quite irrespective of the views which other people might form in relation to the advancement of those interest, such as the views relating to the aesthetic appearance house.
In Tabcorp, the High Court also elucidated and explained the qualification of “unreasonableness” established by the earlier decision of Bellgrove. It established that this qualification is only to apply in “fairly exceptional circumstances… only… where the innocent party is “merely using a technical breach to secure an un-covenanted profit”…” (17) Quoting from Radford v De Froberville (1977) 1 WLR 1262 (Oliver J)”
The Chief Justice said that the question of whether or not the work will in fact be undertaken is “quite immaterial”. Bellgrove (620).
Later he distinguished Ruxley saying:
With respect to the trial judge, that is a very different situation to the present case. In the present case there was a contractual obligation to supply limestone of high-quality for use as the external cladding of the house. The external cladding of a house is quite obviously a matter of great significance and importance to its owner. Notwithstanding that contractual obligation, Westcourt installed a significant quantity of limestone which was of inferior quality, with the result that it deteriorated rapidly, necessitating significant remedial work. Even though the deterioration did not adversely affect the structural soundness of the building it was nevertheless material to the calibre and quality of the building supplied, when compared to the calibre and quality of the building for which Mr Willshee contracted.
In this case, application of the “ruling principle” governing the measure of damages for breach of contract means that Mr Willshee is entitled to the amount of money required to put him in the position in which he would have been had his house been constructed using only limestone of high-quality. As it could not be concluded that Mr Willshee was relying on a technical breach of contract to obtain for himself a profit which was outside the terms of the building contract in claiming damages measured in this way, the trial judge erred in concluding that the case came within the qualification of “unreasonableness” referred to in Bellgrove.
The appeal court increased the amount of damages by the amount of $5000 for distress and inconvenience plus the further sum of $295,216.91 for the cost of replacing the limestone.
Tabcorp Holdings Ltd V Bowen Investments Proprietary Limited[43] concerned a claim for damages by a landlord as a result of a breach of covenant in a lease by a tenant who had carried out work to the foyer of a building resulting in the substantial remodeling of the foyer. The trial judge held that there had been a breach of covenant and awarded damages of $34,820 being the difference between the value of the property with the old foyer and the value of the property with the new foyer. The Full Court of the Federal Court of Australia increased the judgment to the sum of $1.38 million which included the cost of restoring the foyer to its original condition. The High Court upheld that decision. The High Court reaffirmed that the “ruling principle” was that described by Parke B in Robinson v Harmon and acknowledged the statement of Dixon CJ Webb and Taylor JJ in Belgrove.
[43] [2009] HCA 8.
Compensation for breach of warranty-bricks.
The plaintiffs claim the cost of removing all of the defective bricks and replacing them with bricks which satisfy the warranty. The cases to which I have referred establish that the cost of replacement is an appropriate remedy, provided that the cost of replacement is necessary and reasonable.

The fact that the present case is a claim for breach of warranty under the Act, whereas the other cases were concerned with damages for breach of contract, is immaterial.
The warranties in question are implied in the domestic building work contract by reason of s 32(2) of the Building Work Contractors Act 1995. They are therefore terms of the contract, and it is appropriate to treat the breach of warranty as a breach of the contract.
I have found that the bricks are defective and that there has been a breach of the warranty implied by s 32(2) that the materials to be supplied by the contract for use in the building will be good and proper. The plaintiffs as purchasers of the house have succeeded to the rights of the vendor or in respect of the statutory warranties.[44]
[44] Building Work Contractors Act 1995 s 32(3).
I am satisfied that it is necessary for the defective bricks to be replaced.
I am satisfied that the cost claimed for replacing the bricks is reasonable.
During the hearing the Court undertook a view of the property. The property is kept by the plaintiffs in a neat and tidy condition and the damaged brickwork is incompatible with the general appearance of the property.
Sub-section 37(6) describes the powers of the court if it is satisfied that there has been a breach of warranty in the following terms:
(6)     If, on an application under this section, the Magistrates Court is satisfied that there has been a breach of, or failure to perform or fulfil, a contract or warranty to which the proceedings relate, the court may, subject to this section, make one or more of the following orders:
(a)      to the extent to which it is satisfied that it is practicable for the breach or failure to be remedied by the performance of building work-an order requiring the performance of remedial work;
(b)      an order requiring the payment of an amount due under the contract or an order requiring the payment of an amount by way of compensation for the breach.
(7)     an order made against a person under subsection (6) (a) may-
(a)      require the person to perform remedial work specified in the order within the time specified; or
(b)      if the Magistrates Court is of the opinion that the person is not likely to perform the remedial work properly-require the person to employ at the person’s own expense a licensed building work contractor to perform remedial work specified in the order within the time specified.
The evidence of Mr Petris
I do not accept the evidence of Mr Petris as to the cost of rectification. He gave evidence of a quotation for his business to carry out certain work. His business is no longer operating and Mr Petris is no longer a position to carry out the work. His quotation has become irrelevant. More fundamentally, the evidence of Mr Petris does not establish the basic requirement that the estimate of costs to be used on the assessment of damages should be fair and reasonable and in accordance with the practice of the particular trade or industry. The traditional way of proving the cost of work is to specify the time to carry out each item and the customary labour charge for that work. The allowance for materials such as bricks and cement should be proved by reference to the price of each item. Mr Petris gave a quotation for his firm to carry out the work, not an assessment of the reasonable cost of carrying out the work. The two things are not the same.
Mr Deans is an experienced quantity surveyor. I accept his evidence without reservation. He estimated the cost of replacing the bricks to be $78,155 on the basis of his evidence. I do not regard that amount to be unreasonable.
There is a second aspect to the report of Mr Deans. It reveals that the quote of Mr Petris for the brickwork is not a reasonable quotation. It therefore follows that the quotation of Mr Petris for the other work is not reasonable either. As I have mentioned, Mr Petris has not followed the traditional method of proving a loss in an assessment of damage. All that he has done has been to give his own quote which is no longer applicable.
Mr Petris built-in a margin of 25%. There is no evidence that margin is reasonable. Apparently the builders use 15%.[45]
[45] T171-27.
Relying upon the cases to which I have referred I find that the plaintiffs are entitled to $78,155 for the cost of removing and replacing the defective bricks.
I have considered Ruxsley Electronics and Construction Ltd v Forsyth. That was an exceptional case which can be distinguished on its facts. In the present case the plaintiffs purchased a brand-new house which did not have defective bricks. That is what they are entitled to. While the defect may only be cosmetic it is significant. Their enjoyment of the property and its value are significantly diminished because of the brickwork.
The plaintiffs will be required to vacate their home while the remedial work is carried out and to rent alternative premises. They will experience inconvenience. I must assess compensation in respect of these matters.
Development Act – s 72
Mr Pantzikas referred to s 72 of the Development Act 1993. He suggested that the court should make an order for contribution. The pre-requisite for an order is that there should be defective building work arising from the wrongful acts or defaults of two or more persons who would apart from the section be jointly and severally liable for damage or loss resulting from the defective work. A breach of warranty is not a wrongful act or default for the purposes of the section. More importantly there is no evidence that 2 or more persons are jointly and severally liable for damage or loss resulting from the defective work.
As to the alleged negligence I have found there is no evidence that the builder was or should at the time the building was constructed have been aware of any defect in the bricks. There is no evidence of negligence on the part of the builder in using the particular bricks.
I find that s 72 of the Development Act 1993 has no application in this case.
Schedule A Items 23, 24 and 25-damage to fencing, concrete plinth and paving adjacent to the house.
In the schedule, the defendants say this work was not in the scope of works, that each of the items was “not of the builder’s doing,” that the fencing was existing, and that “paving was undertaken by the owner”.
Item 23. The evidence does not establish who carried out the fencing. The claim in Item 23 of Schedule A is dismissed
Item 24. The evidence does not establish who was responsible for the concrete plinths. The claim in Item 24 of Schedule A is dismissed.
Item 25-Paving. Notwithstanding the defendants claim that the builders had not done the paving the contract shows paving (concrete pavers to the perimeter) to be a prime costed item for which an allowance of $2500 was made. I find that the paving was part of the builder’s contract.[46]
[46] Exhibit P4-29, Exhibit P4-58 and Exhibit P4-84.
The problem is that the paving in a particular area was not been properly drained. That has resulted in the pooling of water and the subsidence of the paving.
I find that the paving was not performed by the builder in a proper manner to accepted trade standards, and there is a breach of the warranty under sub-s 32(2)(a).
The defendants’ offers to carry out remedial work.
In its response in Schedule A the defendants advise that they have made offers to carry out remedial work with respect to Items 6, 9, 10, 11, 12, 16, 18, 22, 27, 28, 29, 30, 31, 32, 33.
The defendants still seek the opportunity to carry out rectification work. The plaintiffs dispute the entitlement of the defendants to carry out rectification work and they seek compensation. In paragraph 19 of the Third Statement of Claim the plaintiffs plead that “the defendants have now lost the right to remedy the defects.” That plea follows paragraph 17 which refers to s 37 of the Act and paragraph 18 which alleges that the defendants “have failed and refused to rectify the defects”
I do not accept the plaintiffs’ claim that the defendants have now lost the right to remedy the defects.
Similarly I do not accept the plea in paragraph 18 that the defendants have failed and refused to rectify the defects. That issue was not fully traversed at the trial. From what I have heard there are arguments both ways.
So far as the defects apart from the brickwork are concerned the plaintiffs seek compensation pursuant to s 37(6)(b) of the Building Work Contractors Act 1995. I do not accept the allegation in paragraph 17 of the 3^rd Statement of Claim that the plaintiffs are entitled to request the defendants to either remedy the defects or engage another contractor to remedy the defects at the defendants’ expense. On my interpretation of s 37(6) the court has the option of deciding whether to make an order requiring the performance of remedial work or to make an order requiring the payment of compensation.
An order requiring that a breach of warranty be remedied by the performance of remedial work does not exist in the usual case of breach of a building contract. That remedy has presumably been made available in the case of a warranty created by s 32 of the Building Work Contractors Act 1995 so that a building work contractor who is made liable for the warranties implied by s 32 should have the right to rectify defective building work or materials
As I have mentioned I do not accept the evidence of Mr Petris as to the cost of rectifying the defects other than the brickwork. There is therefore no evidence upon which the court could assess compensation in respect of the other items in any event.
I propose to make an order against the defendants under sub-s (6)(a) and sub‑s (7) requiring the defendants to employ at their own expense a licensed building work contractor to perform the remedial work which will be specified in the order within the time specified. I have made an order that the defendants employee a licensed building work contractor pursuant to sub-s (7)(b) because I am of the opinion that the defendants are not likely to perform the remedial work properly. Mr Dimitriou has passed away. Mr Makris has health problems and is overseas. Mr Pantzikas is an engineer who had no hands-on role to play in the building of the house. As the persons who are required to employee the licensed building work contractor the defendants will have some say over the costs. I will hear the parties as to the person whom should be nominated to perform the work and the time within the in which the work is to be performed.
The remaining items in Schedule A.
An order that item 13 (paving) be remedied should be included in the order which I propose with respect to the other items.
The remaining items in Schedule A were pointed out to the court on the view by Mr Pantzikas. The plaintiff has chosen to rely upon the description of the defects in the reports of Mr Jankovic. In general the remaining defects have not been the subject of the plaintiffs’ oral evidence. Mr Pantzikas was able to give some evidence as to these items, but he was limited by the rules relating to expert evidence.
In their response to Schedule A the defendants assert that many of the alleged defects would have been seen by the purchasers at the time of purchase. It is true that many of the defects predated the purchasers’ first inspection of the property. However there is no actual evidence that the defects were noticed by the purchasers and the evidence does not permit an inference that defects were noticed by the purchasers. However the defendants’ allegation raises one of the unusual aspects of claims such as this. The statutory warranty to which the purchaser of a house succeeds by reason of s 32 (3) of the Building Work Contractors Act 1995 extends to defective work which could reasonably have been identified by an inspection of the property. That means that a person who purchases a new house can assume that the house comply with the warranties created by the Act.
I deal with these claims in the order they are dealt with in Schedule A with reference to the report of Mr Jankovic dated 3 May 2011.[47]
[47] Exhibit P9-4.
1 Portico
This relates to cracking shown in photograph 8. The comment made by Mr Jankovic is:
The cracking occurring so soon after completion is not the normal event an owner would expect from a new building. The problem appears in our opinion not to be due to movement in the building but shrinkage caused by moisture drying too rapidly during the construction issue. This is seen as a workmanship issue. (BWC Act Division 2 section 32 (2) and AS 3700 2001 Sec2.
I am not satisfied that the plaintiffs have established that the cracking is a consequence of any breach of warranty.
2 Arch
Mr Jankovic advised that the lower end of the curved arch finishes in line with the outer walls and the builder has not correctly installed a curved return block to fit the curved arch, preferring to use a mass of mortar instead. He said this provides an unacceptable poor visual finish and a shaped return block to fit the curve of the arch should have been installed and a neat horizontal joint formed between the blocks. Mr Jankovic considered this to be a workmanship issue (cosmetic) (BWC Act Div 2 s 32(2)(f).
The builder’s response is this is not a defect and it would have been seen by the purchasers at the time of purchase.
I do not understand the context of the reference to s 32(2)(f). The plaintiffs have failed to establish liability for this item.
3 Fascia/ Eaves
Mr Jankovic reported that along the front wall there are gaps which are not even or constant. Again Mr Jankovic refers to a workmanship issue (cosmetic) and s 32(2)(f).
The builder’s response is that this is not a defect and the plaintiff would have seen the work at the time of purchase. Additionally the builder has stated that this may be considered as a maintenance issue as soil movement occurs and cracks and the like will appear.
The plaintiffs have not made out a case pursuant to s 32(2)(f).
4 Brickwork
In the opinion of Mr Jankovic the joints over the entry and garage doors are of uneven with and not fully sealed. He considers it to be cosmetic.
The defendants’ response is this is not a defect and that the plaintiffs would have seen the position at the time of purchase.
There is no allegation of breach of warranty. The plaintiffs have not established that this is a defect for which the defendants are responsible.
5 Gaps
Mr Jankovic has referred to gaps in the reveals of the front windows and the fact that a full block has not been used over a window lintel resulting in an unacceptable finish. Again he refers to s 32(2)(f).
The defendants’ response is that some gaps around the windows at the front elevation have been attended to.
The evidence does not enable me to make any finding as to this item. As have mentioned, I propose to make an order pursuant to sub-s 37(6) and (7) that remedial work be carried out. If the builder is correct, and the gaps have been attended to, remedial work will not be necessary. Otherwise this item will be covered by the proposed order.
Item 7 Roof
This item relates to the roof flashing. The defendants assert this item was fixed by the roofer on 22 January 2010 as there was a court agreement in place. The issue was raised in Mr Jankovic’s first report following inspection on 14 June 2010. Again the dispute can be resolved by including this item in the order for rectification work. If, as the defendant asserts, the item has been fixed there will be no further work to carry out.
Item 8 Brickwork / Stone
Mr Jankovic reported that the stone at the front corner of the garage wall has been left squared to the angled boundary wall and the expansion joint is uneven and unsealed. Again Mr Jankovic refers to s 32 (2)(f).
The defendants’ response is that this is not a defect and the situation would have been seen by the plaintiff at the time of purchase. The defendant also asserts this is cosmetic and not a defect.
The evidence does not enable me to make any finding as to this item.
Item 13 Paving
The defendants claim that the builder did not do the paving which was undertaken by the owner. For reasons already expressed I reject that assertion. The paving should be included in the order for rectification work.
Item 14 Eaves
Mr Jankovic advises that the eaves line or the ceiling line to the rear veranda is not even with the brickwork with the right hand north-western corner being the most noticeable. In his report he said this is a workmanship issue (cosmetic). The defendants’ response is that this is not a defect and the plaintiff would have seen the situation at the time of purchase. They also say it is a maintenance issue as soil movement occurs and cracks and the like will appear.
The evidence does not establish any liability on the part of the defendants in the case of this item.
Item 15 French doors
Mr Jankovic has referred to scratch marks on the aluminum section and the glass of the French doors.
The defendants’ response is that at the time of handover there was no comment from the previous owner. Mr Jankovic in his report said this is considered a workmanship issue (cosmetic).
The evidence does not enable me to make any finding as to liability for scratching of the French doors.
19 Eaves
Mr Jankovic reported that the eaves line is not even with the brickwork and is most noticeable. Also the junction of the eaves/veranda lining has moved out of the jointing mould due to poor fixing. He said that the eaves required to be adjusted to suit the brickwork to remove the visual impact and the joint requires to be installed correctly.
The defendants say this is not a defect and the plaintiffs would have seen the situation at the time of purchase. They also say this item may be considered as a maintenance issue as soil movement occurs and cracks and the like will appear. The defendants say this is cosmetic not a defect.
On the basis of the evidence of Mr Jankovic I find that there is a breach of the warranty created by s 32(2)(a). This item should be included with the matters to be rectified.
Item 26 Sewer IP’s
The evidence of Mr Jankovic is based on information provided to him, and assumptions. He concluded “No notation was made by SA Water in relation to this concern therefore I presume that the installation complies even though we have noted the concern.”
There is no basis for any relief in respect of this item.
Compensation.
The defendants have consistently denied liability for the bricks. I am not satisfied that they would attend to the rectification. I therefore find that in the case of the removal and replacement of the bricks an order for compensation is the appropriate remedy.
I assess the compensation in respect of the removal and replacement of the bricks at $78,155.
For the cost of alternative accommodation whilst the work is carried out I allow 12 weeks at $400 per week making a total of $4800.
For distress and inconvenience I allow the sum of $1000 for each of the plaintiffs.
There will be judgment in favour of the plaintiffs against the defendants in the sum of $84,955.
As I have mentioned I do not accept the evidence of Mr Petris. Apart from the reasons which I have already expressed some of the costs stated by Mr Petris are unreasonable and relate to work which I would find to be not necessary. There is no admissible evidence as to the cost of rectifying defects other than the cost of replacing the brickwork.
In my opinion the nature and number of the defects which are complained of means that an order for remedial work is more appropriate than an order for compensation.
Remedial work
I propose to make an order pursuant to s 37(6) and (7) of the Building Work Contractors Act 1995 requiring the performance of remedial work with respect to the items in Schedule A to the Statement of Claim which I have identified. The order will require the defendants to employ, at the defendants’ own expense, a licensed building work contractor to perform the remedial work specified in the order within the time specified.

I invite the plaintiffs’ solicitors to prepare draft minutes to give effect to the order. It will be necessary to nominate the licensed building work contractors who can perform the remedial work. I think that in the first instance the defendants should nominate the licensed building work contractors. If the plaintiffs do not accept the defendants’ nominee I will hear argument.
It seems appropriate for the defendants to nominate the building work contractor because my interpretation of the Building Work Contractors Act is that the building work contractor whose work is found to be in breach of the statutory warranty should be given the opportunity to remedy the breach of warranty
I make the observation that it is not appropriate to nominate the defendants themselves to perform the building work. I am not satisfied that they have any capacity to carry out the work.
The time to be allowed for the work to be completed must be fixed. In fixing the time, regard should be had to the convenience of the plaintiffs. I do not know to what extent the remedial work pursuant to the order can fit in with work relating to the removal and replacement of the bricks.
If the plaintiffs wish to have the bricks replaced it may be that the same contractors could attend to all of the work. That is a matter of the parties.