(The Honourable Chief Justice Kourakis, The Honourable Justice Doyle and The Honourable Justice Hinton)
22 June 2017
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH
TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - CONSUMER PROTECTION - MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS
DAMAGES - MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT
The appellants (plaintiffs) contracted with the respondents (defendants) to construct the shell and framework of an apartment in a retirement village in Leabrook. The respondents built and operated the retirement village.
The parties entered into a Residents Agreement on or about 22 December 2009 by which the plaintiffs acquired a licence to occupy apartment 107. Under the terms of the contract the defendants were to construct only the shell and framework of the apartment. The plaintiffs were to fit out the apartment at their own cost. The plaintiffs paid the sum of $1,853,254 for their apartment.
The plaintiffs alleged that the defendants breached the contract by not constructing the shell and framework in accordance with plans forming part of the contract. In particular, the plaintiffs alleged that the contract provided for a ceiling height of 2700 mm, and that the apartment was not built in accordance to this. The plaintiffs also alleged that the defendants made representations to the effect that the ceiling would be this height, and thus engaged in misleading conduct.
The trial judge held that the contract did contain a term to the effect alleged, and that it was breached in that the ceiling height was on average 48 mm less than the required height of 2700 mm.
The plaintiffs sought damages reflecting the cost to rectify this defect, which they quantified in the amount of $331,188. The trial judge rejected the claim for damages assessed in this way for three reasons. First, the plaintiffs had elected not to seek rectification damages. Secondly, the ceiling as constructed was substantially in accordance with the contract. Thirdly, it would be unreasonable to carry out the rectification work contemplated. The trial judge instead awarded the plaintiffs damages to reflect the loss of amenity suffered by them on account of the departure from the contractual specification as to the ceiling height, which he assessed in the amount of $30,000.
As to the case alleging misleading conduct by the defendants in relation to the ceiling height, the trial judge held that the plaintiffs had not proven that the defendants made any representation as to ceiling height relied upon by the plaintiffs. Accordingly, that aspect of the claim failed.
In addition to the claim in relation to the ceiling height, the trial judge awarded the plaintiffs contractual damages reflecting the cost to rectify two other breaches of contract (in relation to the door frames and window seals), less an amount…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Stone v Chappel [2017] SASCFC 72
Case
[2017] SASCFC 72
Decision Date
CaseChat Overview and Summary
The case of *Stone v Chappel* involved an appeal and cross-appeal heard by Kourakis CJ, Doyle and Hinton JJ. The dispute concerned a contract, likely for building works, where the plaintiffs sought damages for alleged defects and misleading conduct, while the defendants sought to set off interest on late payments.
The court was required to determine several legal issues. These included whether the trial judge erred in refusing to award the plaintiffs damages for the cost of rectifying a ceiling height deficiency and for misleading conduct. Additionally, the court had to consider the defendants' challenge to the trial judge's awards of damages for loss of amenity related to the ceiling height and for defective door frames. Finally, the court needed to assess the defendants' challenge to awards made for premature instalment payments and their refusal to permit a set-off for interest on a late payment.
The court's reasoning, particularly as articulated by Doyle J and agreed with by Hinton J, involved a careful application of contractual principles and the rule in *Bellgrove v Eldridge*. While disagreeing with some of the trial judge's reasoning, the court ultimately dismissed the plaintiffs' appeal regarding damages for rectification of the ceiling height and misleading conduct. On the defendants' cross-appeal, the court upheld challenges to awards for loss of use of monies due to premature payments. Crucially, the court allowed the defendants' set-off for interest on the late payment of the second instalment, calculating this at $33,486.90. The court also affirmed the principle from *Bellgrove v Eldridge* that rectification costs are recoverable only if they are necessary and a reasonable course to adopt, otherwise, the measure of loss is the diminution in value.
Consequently, the plaintiffs' appeal was dismissed, and the defendants' cross-appeal was allowed in part. The original judgment for the plaintiffs in the sum of $81,046.98 was set aside and substituted with a judgment for the plaintiffs in the reduced sum of $11,347.54, reflecting the various adjustments including the set-off for interest.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
Under the contract, interest is payable on late payments at the rate of 10.61 per cent per annum. On the defendants’ unchallenged calculation, this equates to an amount of $33,486.90 in interest. It is appropriate that the cross appeal be allowed to include a set off in the defendants’ favour of $33,486.90 on account of interest.Conclusion and orders On the plaintiffs’ appeal, while disagreeing with some aspects of the trial judge’s reasoning, I have ultimately rejected the plaintiffs’ challenges to the trial judge’s refusal to award them damages for the cost of rectifying the ceiling height deficiency, and to the trial judge’s refusal to award damages for misleading conduct. My rejection of the latter is based on various grounds which include, but are not confined to, the matters raised in the defendants’ notice of contention. On the defendants’ cross appeal, I have rejected their challenge to the trial judge’s awards of damages for loss of amenity associated with the defective ceiling height and for the defective door frames. However, I have upheld the challenge to the awards of damages on account of the first two instalment payments being premature, and, consequentially, the challenge to the trial judge’s refusal to permit a set off for interest owing to the defendants on account of the second payment being late. It follows that I would dismiss the plaintiffs’ appeal and allow the defendants’ cross appeal to the extent of setting aside the awards of $30,676.85 and $5,535.39 in favour of the plaintiffs on account of damages for loss of use of monies, and include a set off in favour of the defendants of $33,486.90 on account of interest for the late payment of the second instalment of the purchase price. The plaintiffs’ reduced entitlement to damages would be calculated as follows:· loss of amenity $30,000.00· cost of rectifying door frames $19,942.45· cost of window seals $445.00· fire inspection fee $539.00· less cost of variations ($6,092.51)· less interest on late payment ($33,486.90)Total $11,347.54 Accordingly, I would make the following orders:1. Appeal dismissed.2. Cross appeal allowed in part.3. The judgment for the plaintiffs in the sum of $81,046.98 dated 4 March 2016 be set aside, and there be substituted judgment for the plaintiffs in the sum of $11,347.54. HINTON J: I have had the benefit of reading the judgment of Doyle J for which I am grateful. I agree with Doyle J for the reasons he gives that the plaintiffs’ appeal should be dismissed and the defendants’ cross-appeal should be allowed to the extent that his Honour has indicated. I also agree with the dispositional orders that Doyle J would make. With respect to the second, third and fourth grounds of appeal and the application of the rule expounded in Bellgrove v Eldridge and, in particular, the qualification to that rule, I prefer to express my own reasons.[159] [159] (1954) 90 CLR 613. Bellgrove v Eldridge is authority for three propositions.[160] First, the appropriate measure of damages in cases where a builder has departed from specifications forming part of a contract for the erection of a building is “the reasonable cost of rectifying the departure or defect so far as that is possible”.[161] Second, that rule is subject to the qualification that the rectification work to be undertaken must “be necessary to produce conformity” with the contract and “must be a reasonable course to adopt”[162] in that it constitutes a “reasonable method of dealing with the situation” (the qualification).[163] Third, if undertaking the necessary rectification work is not a reasonable course to adopt, “the true measure of the building owner’s loss will be the diminution in value, if any, produced by the departure from the plans and specifications or by the defective workmanship or materials”.[164][160] (1954) 90 CLR 613.[161] Bellgrove v Eldridge (1954) 90 CLR 613 at 617 (Dixon CJ, Webb and Taylor JJ).[162] Bellgrove v Eldridge (1954) 90 CLR 613 at 618 (Dixon CJ, Webb and Taylor JJ).[163] Bellgrove v Eldridge (1954) 90 CLR 613 at 618, 619 (Dixon CJ, Webb and Taylor JJ).[164] Bellgrove v Eldridge (1954) 90 CLR 613 at 619 (Dixon CJ, Webb and Taylor JJ).