Rivergum Homes Pty Ltd v Penney
[2009] SADC 54
•21 May 2009
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
RIVERGUM HOMES PTY LTD v PENNEY AND ANOR
[2009] SADC 54
Judgment of His Honour Judge Barrett
21 May 2009
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - PERFORMANCE OF WORK - REMEDIES FOR BREACH OF CONTRACT - DAMAGES - OTHER MATTERS
Plaintiff began building a house with defective workmanship. The defendants accordingly refused to pay later instalments and ordered a stop of the work. Plaintiff employed consultant to advise on rectification work then undertook remedial works and completed the building. Delays in completion of the house. Whether the plaintiff's completion of the house was to a satisfactory standard. Whether defendants entitled to damages for delay and, if so, to what extent.
Held: Plaintiff had completed the building work to a satisfactory standard. Defendants entitled to recover rental expenses for some parts of the delay but not entitled to other substantial monies sought in counterclaim.
RIVERGUM HOMES PTY LTD v PENNEY AND ANOR
[2009] SADC 54Background
This is a building dispute. It arises out of a written contract pursuant to which the plaintiff built a house for the defendants at Wallaroo. The contract was signed on the 30 July 2004. The house was to be finished by the middle of June 2005. The defendants made progress payments as the building went along. There were defects in the building work. The plaintiff accepts that there were defects but says the work has now been satisfactorily completed. It acknowledges that it is responsible for compensable delay. The defendants say the defective workmanship was irreparable. They say that they should be wholly compensated for what they have paid and that they have a substantial counterclaim.
At about the time the house was to be completed, the defendants wrote to the plaintiff itemising defects. The defendants ordered the plaintiff to stop work on the 29 July 2005. There was correspondence and there were meetings between the parties. The plaintiff concedes that there were defects. It made several proposals for rectification. The defendants did not accept its proposals. The plaintiff engaged a building consultant to inspect the work and prepare a report. The consultant prepared the first report on the 30 November 2005. The defendants did not accept the plaintiff’s own proposals for rectification and they were at least ambivalent about the proposals in the consultant’s report. Nevertheless, the plaintiff proceeded to carry out rectification in accordance with the consultant’s initial report and 3 subsequent reports. The defendants remain dissatisfied with the rectification works. The plaintiff concedes that the defective work and the rectification work delayed the completion of the house. It concedes 53 weeks of delay. The defendants say the delay is longer. The plaintiff sues for the 2 remaining building instalments amounting to $53,665.00. It sued in the Magistrates Court. The defendants prepared for themselves a counterclaim alleging many deficiencies in the building work. They seek repayment of the monies paid to the plaintiff and damages which, combined, amount to over $500,000. As a result of the quantum of the counterclaim, the matter was transferred to the District Court.
Issues in the trial
The issues in the trial are:
1.Whether the plaintiff completed the building to a satisfactory standard?
2.To what extent is the plaintiff liable to the defendants for delays caused by defective workmanship?
3.To what extent are the defendants entitled to recover loss and damages set out in their counterclaim?
The course of the trial
The plaintiff was represented by counsel. The defendants were unrepresented. The trial was protracted because the defendants were unrepresented. I took steps to assist the defendants in the presentation of their case and I gave them opportunities to obtain legal representation. When they said they did want legal assistance I adjourned the case to enable them to get it. They were not able to secure representation.
The trial began on 23 June 2008. After the plaintiff’s opening, I asked the defendants whether they had legal representation. On behalf of them both, Mr Penney said they had unsuccessfully sought representation from Legal Aid. They wished to proceed using the materials they had including videos of the building work. I explained to the defendants how they might go about conducting their case. I also explained that I was unable to do more than explain how they might go about that task. I told them I was unable to step outside my role as the judge so as to represent them. The plaintiff called Mr Centofanti, a building consultant engaged by it to report on the deficiencies. Mr Penney cross-examined him. There was brief re-examination. I gave further advice to the defendants about the desirability of them seeking legal advice and the necessity of them providing particulars of their counterclaim which, from the cross-examination, I suspected was deficient. That was the end of the hearing on 23 June.
On 24 June the plaintiff called its Construction Manager, Mr Woods. The plaintiff showed video evidence of the remedial work.
Mr Penney then gave evidence speaking for both him and his wife. Principally his evidence consisted of speaking to his own two videos of what he said was the defective workmanship. The videos started on 24 June and finished on 25 June. After the videos were completed I had a further discussion with the defendants about their counterclaim which it seemed to me was so lacking in particulars and supporting documentation that I would have to dismiss it unless further particulars were provided and unless further documentation was obtained. I advised the defendants to seek legal advice. They indicated they wished to do so. I granted them an adjournment for that purpose. I adjourned the matter to 9 July.
On 9 July Mr Reeves appeared for the defendants emphasising that he was doing so as a friend of the Court and that it would be for the defendants to discuss their representation with another practitioner Mr Hall, who was then overseas. I adjourned the matter to 1 September so that I could clarify the question of representation but at the same time I fixed a date for the resumption of the trial on 19 September.
On 1 September Mr Hall appeared, also as a friend of the Court. He said that he had not been retained by the defendants. They were not in a position to pay him. I informed the defendants that we would have to resume the trial on 19 September.
On 19 September the defendants again appeared unrepresented but said that they were trying to find a way to get themselves representation. They said they were trying to get help from Channel 7 and they were trying to access their superannuation funds. I further adjourned the matter to 10 October to see what could be done.
On 10 October a telephone link was set up at the request of the Penneys who said it would be difficult for them to come to Adelaide. On the telephone link up Mr Penney indicated that they could not get legal representation and they wanted the trial to go ahead. I explained that I would adjourn the trial to 24 October so that Mr Penney could be cross-examined. Up to that time he had only given evidence in chief. Cross-examination had not started. I fixed 14 November for submissions to be made by the plaintiff and by the defendants.
On 24 October there was no appearance by the defendants. I adjourned the matter to 14 November, the date I had set for submissions. Counsel for the plaintiff volunteered to provide his outline of submissions to the defendants one week before 14 November so that the defendants could prepare themselves for the submissions to be made. It was not known whether the defendants would appear on 14 November.
On 14 November the defendants appeared again. There was discussion about whether I should abandon the submissions stage of the trial and proceed with the cross-examination of Mr Penney. Cross-examination had not been possible on the day appointed for it, namely 24 October, because the defendants had not appeared. Mr Penney explained he had got confused about what I had told him over the telephone link on 10 October about the adjourned dates. Counsel for the defendants elected to briefly cross-examine Mr Penney on that day so that the parties could make submissions. The plaintiff had served the defendants with its outline of submissions as promised. After the cross-examination of Mr Penny, I heard submissions from both parties on 14 November and reserved judgment.
The First Issue: Has the plaintiff completed the building to a satisfactory standard?
The plaintiff conceded at an early stage that its initial building work was defective. The defendants complained verbally to the plaintiff’s workers onsite that, in his view, there were deficiencies in the slab which was laid in February 2005. Mr Penney said there were deficiencies in the framework that was erected thereafter. The defendants had nevertheless approved 4 instalment payments to the plaintiff, the last being made on 1 June 2005. On the 15 June, they wrote to the plaintiff identifying deficiencies (Exhibit P4, pages 269-277). There was no complaint about delay, but I do not regard that as significant. The defendants were more concerned at that stage to identify their complaints about the plaintiff’s workmanship. There is however one failure to complain that does have significance. The defendants did not complain that they were suffering investment losses. The plaintiff asserts that the defendants later claims in that regard are false. I will return to that topic later. On 15 June the complaint was about defective workmanship.
Between 15 June and 18 August, there must have been one, or possibly several, meetings onsite between senior officers of the plaintiff and the defendants to discuss the defendants’ complaints. It is not clear from the evidence who met and when.
On 22 July, Mr Graham Rowland, the then building operations manager, wrote to the defendants referring generally to “our meetings” and he listed rectification works that the plaintiff proposed to undertake (Exhibit P1, pages 278-279).
The defendants were dissatisfied with the proposed rectifications. Mr Penney wrote to the plaintiff on 29 July ordering it to stop work so he could obtain an independent report on the property. Mr Penney says that, despite that letter, the plaintiff continued to work on the site. He is unable to say for how long the work went on. He says that the plaintiff only stopped work when contractors could not be found. I do not reject the defendant’s evidence on that topic, but I am unable to say when work did stop.
The defendants appear to have obtained their own report from a Mr Dennis Willshire, dated 27 March 2006 (Exhibit P1, pages 17-25). The defendants did not seek to call Mr Willshire to give evidence. Towards the end of his cross-examination of Mr Woods, the plaintiff’s construction manager, Mr Penney sought to tender a report he said he had obtained from an engineer, Mr Menz. I explained to him that he would have to call Mr Menz to give evidence just as the plaintiff had called their witnesses. The defendants did not seek to call the engineer or Mr Willshire as a part of their case. The defendants called no witnesses.
The plaintiff’s Construction Manager, Mr Woods, gave evidence. He has a long building background and began working for the plaintiff in 1998. He was promoted from construction supervisor (of whom there were 6 at the time) to construction manager on 8 August 2005. He immediately became involved in the dispute between the defendants and the plaintiff. He met with the defendants and the Group Operations Manager, Mr Ross Perre, onsite on 18 August. Mr Woods broadly supports Mr Penney’s account of that meeting. He says that the defendants were not satisfied with the workmanship. There was a big problem with aspects of the kitchen. The fitting of certain architraves, skirtings and doors was unacceptable. These were only some of the deficiencies that Mr Woods conceded needed to be fixed. He said that the work had been done by local tradesman. He undertook to have the remedial work done by workers from Adelaide. He supervised the work himself, although that task would normally be undertaken by the construction supervisors.
Between the site meeting on 18 August and November 2005, there was correspondence between the parties and at least one meeting. The defendants travelled to Adelaide on 25 August and met with officers of the plaintiff. The plaintiff was seeking the defendants’ permission to proceed with the rectification works that they identified in some detail. The plaintiff proposed a deed of settlement which referred to the remedial works. The plaintiff’s offers were unacceptable to the defendants. Mr Woods said that the defendants stormed out of the meeting organised in Adelaide on 25 August (T84-85). Mr Penney denies storming out but agrees he was dissatisfied with the plaintiff’s offers and agrees that he and his wife walked out without a resolution (T144). Mr Woods says that the defendants’ attitude was that the building should be demolished and begun again.
I find it a fact that the defendants were taking the position that nothing short of demolition of the partly constructed building was sufficient. While Mr Penney denied that explicitly in Court (T145), that state of mind is implicit in every aspect of his case, including his evidence, his correspondence and his pleadings.
I will not detail the exchanges between the parties between the meeting in Adelaide on 25 August and November 2005. The plaintiff decided to engage a building consultant, Mr Fred Centofanti. He has had a lot of experience in the building industry. His curriculum vitae appears in Exhibit P1 at pages 169-170. He was not an employee of the plaintiff. I accept that, although Mr Centofanti was engaged by the plaintiff to inspect and report on the deficiencies in the plaintiff’s work on the property, he acted professionally and independently. He did so in his assessment of the deficiencies in the plaintiff’s workmanship, in the rectification works he recommended and in his assessment of the sufficiency of the works when the job was completed. He said that he had done consulting work of this sort both for builders and for members of the public.
Mr Centofanti was critical of the construction work when he first inspected it on 22 November 2005. He says he spent 7 hours on site on that occasion. He met the defendants on site that day and took with him a folder of complaints and photographs handed to him by them.
He produced his first report on 30 November 2005 (Exhibit P1, pages 1-13). He made inspections and reports as set out below:
Inspection Date
Report Date Exhibit Ref. Comments 22 November 2005 30 November 2005 P1, pages 1-13 7 ½ hour inspection onsite with defendants 20 March 2006 24 April 2006 P1, pages 14-15 15 September 2006 15 September 2006 P1, pages 26-50
(2 reports)This included a separate commentary on the Willshire report obtained by the defendants 29 November 2006 18 December 2006 P1, pages 71-86 8 March 2007 13 March 2007 P1, pages 87-101 Report to lawyers for litigation 5 September 2007 9 October 2007 P1, pages 152-168, with annexures to page 175
Final report, including taking a video (Exhibit P2)
The defendants filmed, and produced in Court, two videos showing aspects of the house. The first video was taken between February and August of 2005 (Exhibit D11). The second was taken in May 2006 (Exhibit D12). Mr Centofanti viewed both videos. Both videos were played in Court as part of the defendants’ case. Mr Centofanti took a video himself which was also played in Court (Exhibit P2). That video was taken by Mr Centofanti on 5 September 2006.
The defendants’ first video was taken before the plaintiff’s rectification work began. The second video was taken before it was completed. The plaintiff’s video was taken after the rectification work was finished. Mr Centofanti said that in his video he focused on aspects of the workmanship that the defendants particularly criticised and videoed.
Mr Centofani gave evidence that the building work undertaken on the house which he inspected in November 2005 was defective. He said that he reported all defects to the plaintiff. He says that when the rectification was finally completed, he was satisfied that the work was of a satisfactory standard. He has taken account of the defendants’ written complaints, their still photographs, their two videos and the report of their builder, Mr Willshire. He has responded to complaints of bad workmanship put to him in cross-examination by Mr Penney. He has admitted that there were several aspects of the building work that he was unable to inspect because subsequent building work covered them up, but he said that deficiencies put to him by Mr Penney and which had been covered up, would, if present and significant, be expected to have shown visible signs within the time he was carrying out his inspections (T39).
I found Mr Centofanti to be professional in his manner and in his detachment from the plaintiff. I find his evidence reliable. The defendants have produced no evidence to contradict Mr Centofanti. Mr Penney’s own evidence does not in my view detract in any way from that given by Mr Centofanti. I find that the plaintiff has completed the building work to a satisfactory standard. The work was initially defective, but the defects have been rectified to a satisfactory standard. I find that the works were practically complete on the date when notice of completion was given by the plaintiff on 20 October 2006.
The remaining issues in the trial concern the delay in completing the work and the damages recoverable by the defendants for that delay.
The Second Issue: To what extent is the plaintiff liable to the defendants for the delays caused by defective workmanship?
The contract between the parties was signed on 30 July 2004. The contract provides for a start date for the work being “approx 6 weeks from all approvals”. The finish date is expressed to be “18 to 20 weeks after start”. The work started in late January. There is no dispute that approvals took some time and there is no suggestion of delay in starting. For convenience the start date might be fixed as 1 February. Eighteen weeks from that date is 7 May. Some variations were agreed. Paragraph 11 of the contract provides for the time for doing the work. Paragraph 11.3.8 provides that a variation will put back the finish time. There is no suggestion by the defendants of undue delay during the first stages of the building works. Progress payments were authorised by the defendants as shown in the following table. I have included, for completeness, the two final stages which were not authorised by the defendants and not paid for.
Progress Claim Amount Date
SubmittedDate Paid 1. Footings poured $58,181.00 04/02/05 15/02/05 2. Wall and roof
frame$54,181.00 29/03/05 11/05/05 3. Roof cover
and cladding$32,888.00 22/04/05 11/05/05 4. Internal linings $21,672.00 20/05/05 01/06/05 5. Second fix $31,992.00 01/08/05 Unpaid 6. Final $21,673,00 20/10/06 Unpaid Total $216,587.00 (see Exhibit P5)
The defendants first written complaint about faulty workmanship was on 15 June 2005 (Exhibit P4 pages 269-277). The plaintiff replied to that letter on 22 July. It set out a list of remedial works it would undertake. In effect, it admitted deficiencies and agreed to remedy them (Exhibit P1 pages 278-279).
On 29 July Mr Penney wrote to the plaintiff asking it to stop work pending his obtaining an independent report on the works. He said he would “contact Rivergum in the near future to progress discutions (sic) for rectification works” (Exhibit P4, page 280).
The plaintiff submits the delay was there caused by the defendants’ order to stop work. In effect it was being denied access to the job and instructions to continue. Mr Penney says that, despite his letter, work went on for some time but he was not able to say when it did stop. The plaintiff submits that it should not be liable for the defendants’ costs incurred as a result of that delay. It says that it should not resume responsibility for delay until 30 November 2005 which is the date it nominates as the resumption of work. Work may not have in fact resumed on that very day but the plaintiff accepts liability from 30 November. That happens to be the date on which Mr Centofanti produced his first report and it was 8 days after the defendants had met with Mr Centofanti on site.
The first question concerning responsibility for delay is therefore whether the plaintiff should be responsible for delay from 29 July 2005 when the defendants told it to stop.
The first observation to make about Mr Penney’s letter of 29 July is that the stop work order is said to be “so I can have a (sic) independent report on the property”. It appears the defendants did not obtain a written builder’s report from Mr Willshire until late March 2006. That report was given to Mr Centofanti and he commented on it in one of his two reports dated 15 September 2006. Clearly in my view the plaintiff could not be expected to bear the cost of so long a delay in obtaining an independent report.
The second observation is that Mr Penney says in his letter that he will contact the plaintiff “in the near future” to discuss the dispute. However, the plaintiff did not sit idly by waiting to be contacted. It had already written a letter dated 22 July undertaking to carry out remedial work. Mr Woods, the construction manager and Mr Perre the group operations manager met with the defendants on site on 18 August. They arranged a meeting with the defendants in their Adelaide office on 25 August. The defendants walked out of that meeting. The plaintiff wrote again on 26 September, 4 October and 14 October offering to undertake remedial works. There was no reply. On 3 November it sent a deed setting out a proposed resolution of the matter. There was no response. Its solicitors wrote to the defendants on 14 November advising that the plaintiff intended to resume the building works. It then engaged Mr Centofanti who met with the defendants on 22 November. He prepared his report dated 30 November. I find that in the period from July to at least November (and probably much later) the defendants took the view that nothing short of demolition of the works would suffice. In my view that was an unreasonable stance to take. They had not been constructive or timely in trying to resolve the matter. They had been unresponsive to correspondence. They had been less than reasonable in discussions. They were dilatory in obtaining a report of their own.
On the other hand, at the time when Mr Penney ordered the work to stop, the construction was defective. It was not unreasonable for the defendants to be cautious about permitting the works to continue until the plaintiff took some reasonable steps to assure them that the defects would be properly fixed and that the further construction works would be done competently. The plaintiff had already acknowledged in its letter of 22 July that remedial work would have to be done. It is not easy to fix a date when it would have been reasonable to expect the defendants to be satisfied of the plaintiff’s bona fides. It might be 18 August, 3 weeks after the stop order, when the plaintiff took the trouble of having its group manager and construction manager meet with the defendants on site. At that meeting Mr Wood undertook to supervise the further works himself and to employ city trades people. It might be a week later, on 25 August, when the defendants met with the plaintiff at the Adelaide office of the plaintiff. The defendants walked out of that meeting. It might be a month later on 26 September when the plaintiff wrote its next letter setting out its proposals for rectification. There were further letters on 4 October, 14 October and 3 November, to which there was no response. There might have been some delay between the time at which it might reasonably be expected the defendants would accept the plaintiff’s bona fides and offers and the date upon which works could resume.
I do not think the plaintiff can avoid liability for delay from 29 July when the stop work letter was sent. I think the plaintiff should be held liable until it would be reasonable to expect the defendants to accept the plaintiff’s bona fides and its offers to remedy the works. I do not think that that date can be fixed with certainty, but I find that by the time of the meeting in Adelaide on 25 August, the defendants ought to have agreed to permit the plaintiff to return to the site and to continue work. By then there had been one written and two verbal acknowledgments of unsatisfactory work and there had been undertakings to rectify the work and proceed more professionally. There would then have to be some allowance for time in which to reduce the terms of any agreement to writing and to restart work. I would allow two weeks for those purposes. I think the plaintiff should be liable for the delay to 8 September 2005. It acknowledges liability to the 29 July but I think it should be extended to 8 September. From then until the nominal return to work on 30 November 2005, the plaintiff should not be responsible for the defendants’ costs. The plaintiff acknowledges that it is liable for the delay from 30 November 2005 until the date on which Mr Centofanti certified practical completion on 20 October 2006.
The failure by the defendants to instruct the plaintiff to continue with the works constitutes a breach of the defendants’ contractual obligations. Clause 11.3.9 imposes an obligation upon the defendants to instruct the plaintiff as needed. As I have already indicated there came a point when the plaintiff had done all it reasonably could to assure the defendants of its bona fides by offering to repair the defective work and to complete the rest of the job professionally. I fix that date as 8 September. Thereafter, in my view, the defendants were in breach of their obligation to instruct the plaintiff to resume work. The plaintiff was not able to resume work until 30 November 2005. From that date, further delays become the responsibility of the plaintiff. The quantum of the plaintiff’s liability for the defendants’ costs during delay caused by the plaintiff will be discussed under the heading of the Defendants’ entitlement to recover loss and damages.
Issue 3 – To what extent are the defendants entitled to recover the loss and damages set out in their counterclaim?
There are eight heads to the counterclaim making a total of $544,039. Particulars of the counterclaim were never provided despite many directions by Masters of this Court prior to the trial. Inadequate particulars were provided during the trial. As mentioned above, after Mr Penney gave evidence of his counterclaim I told him that the evidence he gave for his counterclaim was so deficient that unless further information was forthcoming I would have to dismiss it. I adjourned to enable him to get legal advice and/or to provide more information. No further relevant information was provided. I will deal with each head of the claim.
i)“Paid direct to Rivergum $162,000”
This sum is not claimable. I have already found that in the end the plaintiff built the defendants’ house to a satisfactory standard.
The sums claimed by the plaintiff for the construction are therefore to be paid, less any other legitimate heads of counterclaim.
ii)“Loss of wages (wife and I) $164,780”
The evidence given and documents produced did not support the defendants’ claim, and in one particular, the evidence is, I find, false. In response to my asking how the defendants arrived at the figure for loss of wages, Mr Penney gave completely unhelpful answers. At T154 he said:
As I have put on the thing, the claim was a lot more than that, it’s just what we broke down the part of the figure we thought we were entitled to.
Further he said:
We arrived at the figure of $82,390 for my wife.
He was quite unable to explain how he arrived at the figure. He offered this answer (T154):
From, it’s under what we earned, but I just thought that’s what we roughly figured on earning them years from the real estate.
Mr Penney produced tax returns for the years 2001 and 2002 when he earned income as a fisherman. He had given up fishing to undertake land development. For that reason the tax returns he produced for the years when he was fishing are irrelevant to his claim for loss of wages. The financial years ending June 2001 and June 2002 are therefore irrelevant. His first income for land development appears to be in the financial year 2003. The tax return for that year shows the defendants receiving $126,620 for gross sales of land. The net income for that year for both the defendants was $65,496.
Mr Penney said that no tax return were lodged by him or his wife for the years 2004, 2005 or 2006 because they had no income in those years. In respect of those years he said (T153):
No, we didn’t have to put the tax returns in because we didn’t get no income. We only had to sign a declaration.
There are thus no tax returns for the relevant financial years. (The building contract was signed on 30 July 2004 and, at the earliest, the house might have been sold and settled upon by the beginning of the 2006 financial year. This is despite Mr Penney saying that it might have been sold before 30 June 2005.)
In the absence of tax records of income for any but the 2003 year and in the absence of any other records the defendant gave oral evidence of the profit he lost as a result of the delay in completing the house. He said that the blocks of land they owned were to be sold in three stages. The stages comprised respectively 6 blocks, 13 blocks and 10 blocks. The defendants had sold all 6 blocks of the first stage before 2004 (T136). That might account for the sales referred to in the 2003 tax return. Exhibit P14 pages 4 to 9 demonstrate that all sales of the stage 1 blocks were completed in the calendar year 2003.
The plan for stage 2 was to sell all of the blocks except the one on which the subject house was built. Mr Penney’s evidence was that the profit from the sale of the house was going to finance the subdivision and sale of the stage 3 blocks. Because they received no profit from the sale of the house, they were unable to proceed with stage 3 (T147 and T156).
However, Lands Titles Office documents tendered by the plaintiff tell another story. First they demonstrate that all of the stage 2 allotments, except the subject house block, were sold in the 2004/5 financial year (Exhibit P14 pages 12-32). So by 30 June 2005, by which time I find it would not have been possible to have sold the house, all the other blocks of stage 2 had been sold. There are no tax records for those sales. Mr Penney said that there was no income for that year and so no tax return had to be filed.
The records also show that even the subdivision of the stage 3 allotments had already taken place. Exhibit P14 page 34 shows that the stage 3 subdivision allotment plan was lodged on 9 August 2004, just a week or so after the contract for the construction of the house was signed. This was at least 10 months before the house could be expected to have been finished.
In fact, all of the stage 3 blocks had been sold by the end of May 2005. Plainly the subdivision and sale of the stage 3 allotments did not depend in any way on the sale of the house. They had all been sold before the house could ever have been sold. The claim by the defendants that no income was received from the land sales in the financial year 2004/5 must be false. Mr Penney was cross-examined on this topic and gave no satisfactory explanation (T250-252).
In the defendants’ 20 page written summary of submissions submitted at the end of the trial, no mention is made of the loss of wages claim. There is no reference at all in that document to any hold up in the proposed sale of allotments.
That really disposes of the claim for lost wages in the relevant financial years but I will refer for completeness to the defendants’ evidence regarding the loss of profit on the sale of the house. The defendants did maintain in their written submissions that there was a loss of profit on the sale of the house.
The process of reasoning by which the loss of profit is arrived at is both fallacious and unsatisfactory. No evidence was produced in support of Mr Penney’s oral evidence. He said that the house was meant to be finished in May 2005. I pass over why I think the reasonable completion time would be a little later than that. Mr Penney said that he and his wife planned to have the house on the market before June 2005. He said that average land sales in the area took 14 days (T154). No evidence supported that rather optimistic expectation. The defendants planned to sell the house for $355,000 net, ie after selling expenses (T155). There was no evidence of that being a reasonable price. The contract price for the construction of the house was $200,102 (Exhibit P4 page 19). There were variations which Mr Penney said amounted to a further $17,000. That suggests the cost of building the house was to be approximately $217,000. Mr Penney said that he sold the house for $265,000 (T148).
No evidence was given about how much the defendants had paid for the block of land on which the house was built. Mr Penney said that he and his wife got the house for nothing. He elaborated by saying that no allowance should be made for the cost of the land because they had paid for it out of the profits of the sale of the first subdivision. That reasoning is simply fallacious. Mr Penney said that he sold the blocks each side of the house for $65,000 and some others for $85,000. Clearly the cost of purchasing and subdividing the blocks would have to be deducted from the sale price of the house to determine the net value of the house. No evidence of this sort was produced.
The whole claim for the loss of profit is unsustainable. There is no evidentiary basis upon which a loss of profit can be calculated.
(iii)“intrest (sic) on totle (sic) investment $96,799” (see T159 to T163).
For the reasons I have already given for finding that there is no basis for the claim for lost income, there is in my view, no basis upon which interest can be claimed on the loss of investment. I will hear from both parties what interest component generally I should include in the judgment and, more specifically, I will hear submissions about whether I should allow the defendants an interest component relating to the monies paid for the construction of the house prior to the delays. ($166,922 was paid by way of instalments and I have allowed for delays of 59 weeks – see below.)
(iv)“Renting house $124,780” (T163)
The plaintiff acknowledges delay in the completion of the house and acknowledges that as a consequence it is liable to the defendants for rental costs incurred by them. It acknowledges that it is liable for delay from 15 June to 29 July 2005 (six weeks) (see paragraph 53a of the Outline of the plaintiff’s closing address). I have already found that the plaintiff is liable for a slightly longer period. I find it is liable for the delay from 15 June to 8 September 2005 (see supra paragraph 77). That is 12 weeks. The plaintiff further acknowledges its liability for a further period of delay from 30 November 2005, the date nominally fixed for its return to work, until 19 October 2006, the day before practical completion (see paragraph 53b of Outline). That is a further 47 weeks. That makes a total of 65 weeks. The rent paid by the defendants is agreed to be $180 per week. For 59 weeks that is $10,620. The defendants seek rental for a much longer period. I disallow the claim for that longer period.
(v)“Loss of rentle (sic) property $24,780” (T163-164).
The basis for this claim is not easy to understand. The defendants had apparently lived in a house at 18 Charles Terrace, Wallaroo for some 15 years (T164). Mr Penney said that:
We planned on moving out of that and living with our mother-in-law for a while and renting that out while we were doing the next house after the Rivergum one (T164).
The explanation for why that plan was not realised is as follows:
Because we had to sell the house to live, because we had no income, because we couldn’t sell the Rivergum house, we had to sell the Charles Terrace house to pay the bank for the works we had been doing on the other land, the rest of the blocks to cover that and we got twin girls, 16, and just going through Year 11, you can imagine it’s a pretty financial time and we were forced to sell it so we missed out on all those rents.
Apparently the method of calculating the quantum of rent is that it was said to be the same as that which they were paying, ie $180 a week. In my view this claim is unsustainable. It seems to have its foundation on the claim that the defendants had no income by reason of the delayed sale of the Rivergum home (for which there is some basis) and the delayed sale of the third stage of the subdivisions, (for which I have found there is no basis). Further, the lost rental under this head of the counterclaim is claimed for the longer period for which the cost of rental under the previous item is claimed. I dismiss this head of claim.
(vi)“Direct expenses $25,745” (T164 to 167)
The first item of the claim was for moving house three times. I dismiss this claim. There is no evidence whatever to support the need to move at all as a result of the delay in building the house.
There is a claim for $2,400 for the inspection of the house by experts. There is no detail in the claim, the experts were not called and, in relation to Mr Wilshire, his report was very late. I dismiss this claim.
There is an unspecified claim for car expenses for $6,600. There is no evidentiary basis for this claim.
There is likewise no evidentiary basis for a claim of $1,340 for phone calls.
There is a claim for $13,260 which Mr Penney acknowledged was duplicated by the claim for loss of income. He agrees I should ignore this part of the claim. I dismiss all of the claims under this head.
(vii)“Future expenses $35,000” (T167)
Mr Penney’s explanation for this claim is as follows:
By the amount of money for our next house now we are going to have to start again from 3 years ago. The expense extra on, I think it is something like 13 per cent, everything has gone up and there was about, I think there was about $100,000 in extras. It’s going to have to be redone for the next that are going to cost extra because of the interest or inflation, petrol, etc.
That was the last substantive claim under the counterclaim. It was the point at which I told Mr Penney that it was my tentative view that he had given quite insufficient evidence to make out any one of the counterclaim amounts. This particular part of the claim is incomprehensible. No further oral evidence or materials were present in support of it. I dismiss it.
(viii)“Court fees $155”
I take this to be a filing fee or some associated cost. Such a claim is dealt with in the usual way in the context of costs.
Conclusion
I find that while the plaintiff’s workmanship on the defendants’ house was originally defective, the plaintiff has taken all reasonable steps to rectify the defects and has completed the house to a satisfactory standard. The plaintiff was prompt to admit the originally defective work and was prompt to put forward proposals for remedying it. It was prompt in making reasonable proposals for finishing the job professionally. The defendants’ claims to the contrary are without foundation.
The plaintiff’ originally defective work caused delays. In these proceedings the plaintiff has always acknowledged delay. I have found that the plaintiff should be liable for six weeks more than the delay it acknowledged. The plaintiff has, in these proceedings, always acknowledged that it is liable to the defendants for their reasonable costs occasioned by the delay. Those costs are limited to rent incurred by the defendants.
The defendants’ counterclaim is completely unsustainable, except for the claims for rent. Even then the period for which the defendants claim rent is unreasonably long.
I will allow the plaintiff’s claim for the two unpaid instalments totalling $53,665. I will deduct from that sum part of the rent component of the counterclaim amounting to $10,620.
Orders
1. Judgment for the plaintiff in the sum of $53,665.
2. Judgment for the defendants on the counterclaim in the sum of $10,620.
3. Overall, judgment for the plaintiff in the sum of $41,965. (See correction below)
I will hear both parties on consequential orders including interest and costs.
Matters arising after delivery of judgment
Judgment was delivered on 21 May 2009. Both parties were present in court on that occasion. Questions of consequential orders, including orders for interest and costs were reserved. Submissions on those topics were adjourned to 29 May 2009. At the request of the defendants a telephone link was to be organised on the adjourned date to relieve the defendants of the necessity to travel to Adelaide. Their contact telephone number was confirmed.
On 29 May the plaintiff’s counsel attended court but the defendants could not be contacted on the telephone number they had provided. Mr Jenner for the plaintiffs indicated that he did not wish to make any oral submissions adding to the written submissions and Minutes of Order dated 22 May and 29 May 2009 respectively. I agreed to his suggestion that I direct a letter be sent by the Registry to the defendants advising them that unless they responded to the letter within a prescribed time, I would proceed to make final orders.
A letter was sent by the Registry on 2 June 2009 advising the defendants that I would proceed to make final orders if they did not respond in seven days. There has been no reply to that letter. I now proceed to make final orders.
Correction to order made on 21 May 2009.
The judgment sum for the claim by the plaintiff is $53,665 (paragraph [72]).
The judgment sum for the counterclaim by the defendants is $10,620 (paragraph [73]) (that is rental calculated for 59 weeks. There is an erroneous reference to 65 weeks in the 11th line of paragraph [59] but, as the following line shows, the rent calculation was made on 59 weeks).
The difference between the two judgment sums is $43,045, not, $41,965 as shown in paragraph [115].
Judgment for the plaintiff is in the sum of $43,045.
Interest
I agree with the plaintiff’s written submission (paragraphs [3] to [10]) that interest is payable by the defendants on unpaid sums due under the contract from 5 days after the claims were made. There are two unpaid sums and interest is payable on each. From each unpaid sum there should be deducted the rent paid by the defendants. I reproduce the interest calculations included in the plaintiff’s written submissions.
Interest Calculations Account issued on 21/04/2006 $ 31,992.00 Less 38 weeks rental at $180.00 per week Less $ 6,840.00 Net $ 25,152.00 Interest calculated at 15% per annum on $25,152 $3,772.80 Daily rate of interest on 15% per annum on $25,152 $10.34 Payment due under the Contract on 27/04/06 Number of days from 27/4/06 to 29/05/09 1,128 days Total interest payable on $26,232.00 $11,659.50 Account issued on 19/10/2006 $ 21,673.00 Less 21 weeks rental at $180.00 per week Less $ 3,780.00 Net $ 17,893.00 Interest calculated at 15% per annum on $17,893.00 $2,683.95 Daily rate of interest on 15% per annum on $17,893.00 $7.35 Payment due under the Contract on 26/10/06 Number of days from 26/10/06 to 29/05/09 946 days Total interest payable on $17,893.00 $6,956.21 Total Interest $18,615.71
The total interest payable is $18,615.71 calculated to 29 May 2009. Interest will continue to accrue thereafter on the first unpaid sum at a daily rate of $10.34 and on the second unpaid sum at the daily rate of $7.35. There will thus be a total daily rate of interest of $17.69 accruing from 29 May 2009 until payment.
Costs
In the ordinary course the plaintiff would be entitled to its cost on a party/party basis. District Court Rule 6R188(6)(b)(ii) provides that the situation may be different where a defendant has not accepted a pre-trial offer made by the plaintiff which is less than that which the plaintiff obtains in the final judgment. If the court ordered judgment sum is greater than the pre-trial offer, the plaintiff may, subject always to the courts discretion, recover costs on the higher level of solicitor/client. In this case the plaintiff made a pre-trial offer on 5 October 2007 to accept $35,000 inclusive of interest and costs. On judgment it has recovered $43,045 plus interest and costs.
The question is whether there are considerations tending to disentitle the plaintiff to its claim for solicitor/client costs pursuant to Rule 6R188(6).
The defendants were unrepresented at trial. That may cause them difficulties in appreciating the strengths and weaknesses of the cases for each party. It is not clear what legal advice the defendants received. Their counterclaim has been successful only to the extent always acknowledged by the plaintiff. The plaintiff has accepted throughout the trial that it should set off the defendants’ legitimate claims for rent during the period of reasonable delay caused by the plaintiff’s initial faulty workmanship. The large counterclaim of over $500,000 was misconceived. It has been almost entirely unsuccessful. Its quantum took the case from the Local Court to the District Court where the plaintiff incurred greater costs. The defendants continually failed to provide the particulars of the counterclaim sought by the Master in pre-trial processes.
In my view it is reasonable that the plaintiff recover its costs on the solicitor/client basis. I adopt the practice discussed by Bleby J in Formosa and Ano v Eminent Forms Pty Ltd [2005] SASC 35 at [9] to [31] of not making a separate order for costs for a defendant on the counterclaim.
Final Orders
1. Judgment for the plaintiff in the sum of $43,045.
2. Interest on the judgment sum fixed at $18,615.71 on 29 May 2009 and - accruing thereafter at the rate of 15 per cent per annum.
3. The defendants pay the plaintiff’s costs on a solicitor/client basis.
Reference to Tax Department
In the light of the matters referred to in paragraphs [45] to [59] of this judgment I believe I am obliged to draw this matter to the attention of the Tax Department. It will be for that department to determine what, if any, investigations it should undertake.
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