Stubing v Halling - [2012] SASCFC 123

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
STUBING & ANOR v HALLING & ANOR
[2012] SASCFC 123
Judgment of The Full Court
(The Honourable Justice Gray, The Honourable Justice Sulan and The Honourable Justice White)
5 December 2012
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
DAMAGES - GENERAL PRINCIPLES
INTEREST - RECOVERABILITY OF INTEREST - AWARD OF INTEREST AS DAMAGES
The appellants and the respondents entered into a land sale contract containing a warranty that, except as set out in a schedule, “to the Vendor’s knowledge, no building work has been carried out on the Land without all necessary consents and approvals having been obtained”.
The appellants had built walls on the property without obtaining the necessary development approval. The schedule to the contract did not contain any reference to the unauthorised walls.
The trial Judge found that the appellants had breached the warranty and assessed the damages, including damages for loss of use of money (described as “interest”), at $86,879.76.
The appellants appeal against the finding of breach of warranty, the assessment of damages (including the assessment of “interest”) and the costs orders.
Held (dismissing the appeal):
(1)     Per White J at [60], [65] (Sulan J agreeing): The warranty should be understood as a warranty by the vendors that, to the extent to which they themselves have carried out building work, the necessary consents and approvals were obtained and, to the extent to which building work was undertaken by their predecessors, it was, so far as the vendors are aware, carried out in accordance with the necessary consents and approvals.
On this construction of the warranty, the respondents had to establish three matters: that the appellants had carried out building work; that that building work required approval; and that the appellants had not obtained that approval. On the trial Judge’s findings, the respondents had established those matters.
Per Gray J at [21]: The warranty should be understood as meaning that to the extent that the appellants knew the work had been done on the property during their ownership, they warranted that all necessary approvals and consents had been obtained for such work.
(2)     Per White J at [77] (Sulan J agreeing) and Gray J at [24]: The trial Judge was justified in relying on a valuer’s opinion in the assessment of damages.
(3) Per White J at [86] (Sulan J agreeing): If the Judge had been awarding pre-judgment interest under s 39 of the District Court Act 1991 (SA), he would have had discretion to award a lesser amount if the respondents had been responsible for the delays in obtaining judgment. However, the s 39 discretion was not available in relation to the damages awarded for the respondents’ loss of use of money.
Per Gray J at [25]: It was entirely reasonable for the trial Judge to award damages for the loss of use of money.
(4)     Per Gray J at [32] (White and Sulan JJ agreeing): The trial Judge did not err in awarding the respondents the costs of the proceedings in the terms ordered.
Development Act 1993 (SA) s 84(1); s 84(2); s 84(6); s 84(7); s 88(1); District Court Act 1991 (SA) s 39; Supreme Court Act 1935 (SA) s 40(1); Supreme Court Civil Rules 2006 (SA) r 263(1), referred to.
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; Creeper v Cooper [2012] SADC 94; GT Corporation Pty Ltd v Amare Safety Pty Ltd [2008] VSC 296; Howe v Teefy (1927) 27 SR (NSW) 301; Hungerfords v Walker (1989) 171 CLR 125; RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) 41 FCR 164; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Vettese v Kemp (2000) 77 SASR 53; Wenham v Ella (1972) 127 CLR 454, considered.

STUBING & ANOR v HALLING & ANOR
[2012] SASCFC 123
Full Court: Gray, Sulan, White JJ
GRAY J.

This is an appeal against a judgment entered in favour of the plaintiffs for damages for breach of warranty following a trial before a Judge of the District Court.
Introduction
In 2003, the plaintiffs and respondents, Dale Halling and Rachel Morgan, purchased a rural property from the appellants and defendants, Ian Trevor Stubing and Gillian Flora Stubing. The property comprised a house on about nine acres of land near the township of Woodchester in the upper Fleurieu Peninsula.
The property had been purchased by the Stubings in the year 2000. Following purchase, Mr Stubing built several walls from local stone. The walls became a significant feature of the property. Some sections of the walls required council approval before they could be built. The Stubings did not obtain the necessary approval. Parts of the walls which had required approval collapsed following the purchase of the property by Mr Halling and Ms Morgan. It was these events that led to the litigation between the parties.
It was common ground that council approval was required to build the walls and in that respect the Judge observed:[1]
There is no dispute that, at all relevant times, the construction of walls was a development for the purposes of the Development Act 1993 and that council approval to proceed with the construction of walls was required unless some aspect of the contemplated wall was exempt from this requirement: See s 4, 32 – 34, and 108. Schedule 3 of the Building Regulations 1993 excludes a number of activities from the ambit of a development for the purposes of the Act. Relevantly, Clause 4(e) of Schedule 3 excludes “a fence not exceeding two metres in height … other than “a masonry fence that exceeds (or would exceed) one metre in height ….”.
Accordingly, it follows that Mr and Mrs Stubing required council approval in order to build those sections of the walls which were intended to be in excess of one metre in height and approval was not required to build those sections of the walls which were intended to be one metre, or less, in height. Approval was also not required to build fences from other materials up to a height not exceeding two metres.
If a development which requires council approval is undertaken without the necessary approval having been sought and granted, then certain action can be taken by the council: See s 83.
[1] Halling & Anor v Stubing & Anor [2011] SADC 167, [35]-[37].
The 2003 sale was effected through a licensed land agent and followed a period of unremarkable negotiation. The contract of sale contained vendor warranties which relevantly provided:
5.6 Warranties by the Vendor
The Vendor warrants, except as set out in the schedule;
5.6.1 no notices, orders or charges have been issued or received in respect of the Land, any boundary fence or any road or footpath abutting the Land which have not been complied with;
5.6.2 that to the Vendor’s knowledge, no building work has been carried out on the Land without all necessary consents and approvals having been obtained;
5.6.3 the Vendor is not aware, and gives no warranty, that any improvements on the Land encroach on any adjoining land or on any easement on the Land, nor that any improvements upon any adjoining land encroach upon the Land, nor is the Vendor aware that any fence, wall or party wall is not on the correct boundary or alignment of the Land.
The Schedule to the contract contains a clause N which provided:
Alterations, Repairs and Improvements erected without consent [Clause 5.6.2]
NONE KNOWN TO VENDOR
The heading to clause N formed part of the printed pro forma and the words “NONE KNOWN TO VENDOR” were handwritten.
The Judge construed the warranty as follows:[2]
When the warranty and the schedule are read in the context of the contract as a whole, and in the context of the commercial context identified, a reasonable person who knew that the walls had been built by the vendor would take the language of the warranty and the schedule to mean that the vendors were providing an assurance that they did not know of any building work which required council consent or approval having been carried out on the property without any necessary approvals having been first sought and obtained and that this assurance extended to the walls.
In other words, a reasonable person would take the warranty and the schedule to mean that Mr and Mrs Stubing were providing an assurance that, as far as they were aware, council approval had not been required to build the walls, or any section of them, or, if council approval had been required, then as far as they were aware, the necessary approvals had been sought and obtained before the walls were built.
By the warranty and the schedule thus construed, Mr and Mrs Stubing were providing an assurance as to their state of mind on the topic of building work, including the walls, carried out on the land. If the warranty does not carry with it the additional assurance that their assurance about their state of mind was reasonably based, then they would only be in breach of the warranty if they knew for a fact, or believed to the point of certainty in their own minds, that council consent or approval was required before a particular building project could be undertaken and that the project had ultimately been carried out without the relevant approvals having first been sought and obtained. It follows that if the warranty does not carry this additional assurance with it, and if the evidence of Mr and Mrs Stubing on the topic of council approvals was to be accepted, then they would not have been in breach of the warranty.
The question thus becomes one of whether, as a matter of construction, and whether, and in so far as the relevant sections of walls are concerned, the warranty carries with it the additional assurance that it is based on reasonable grounds.
[2] Halling & Anor v Stubing & Anor [2011] SADC 167, [134]-[137].
The Judge made findings in regard as to what Mr Halling and Ms Morgan would have done had they been aware that the walls had been built without the appropriate approval of council. In this respect, the Judge observed:[3]
Mr Halling said he would have regarded disclosure of the fact that the walls had been built without council approval as a matter of significance. He said that if this had been disclosed to him he would have become concerned that the council might require him to demolish the walls and that this would have had ramifications for housing the dogs. He said that he would not have entered into the contract had this been disclosed to him and that he would have obtained a building report and that he would have contacted the council. He said that he would not have entered into the contract if he had been advised that the walls were structurally unsound.
Obviously there is a degree of hindsight in Mr Halling’s evidence in these regards and indeed he acknowledged that this was so. Notwithstanding this, and particularly given that the walls were a matter of some significance to him, and to the property as a whole, and given that what he said that he would have done had he known the truth of the matter is inherently likely, I am satisfied that Mr Halling would not have signed the contract had he known that some sections of the walls were built without approval and that he would not have proceeded with the purchase in any event had he known the true state of the walls.
[3] Halling & Anor v Stubing & Anor [2011] SADC 167, [183]-[184].
The Judge then addressed the measure of damages. He considered the measure to be the difference between the value of the property at the time of sale and the price actually paid. In particular, the Judge observed:[4]
[Counsel for the defendants’] submission will be accepted accordingly. The question of damages will be determined in accordance with the principles informing awards of damages in actions for deceit or breach of warranty in contracts for the sale of goods. Those principles are well settled. In each instance, the measure of damages is the difference between the real value of the property or the item at the time of sale and the price actually paid, if the latter is the greater.
Thus in order to discharge their onus to prove their loss and their damages, Mr Halling and Ms Morgan must prove the real value of the property as at the date of the contract and also that the real value was less then the price they actually paid. If they fail to provide evidence which has the capacity to establish the real value of the property their claim must be dismissed: Potts v Miller (1940) 64 CLR 282, Dixon J at 301, Ted Brown Quarries v General Quarries (Gilston) (1977) 16 ALR 23, Gibbs J at 36-37, Aicken J at 39, Voss Real Estate v Schreiner (1998) 70 SASR 545, Perry J.
[4] Halling & Anor v Stubing & Anor [2011] SADC 167, [191]-[192].
The Judge accepted that the purchase price paid by Mr Halling and Ms Morgan was a fair reflection of its value, assuming the walls to be in sound condition. The transaction was entered into at arm’s length in circumstances where the Stubings were advised by a professional agent and the negotiations for the contract were conducted during an ordinary marketing period. They were under no financial pressure to sell and were not in a hurry to sell. Mr Halling and Ms Morgan were not acting impetuously or out of desperation.
Evidence was led at trial from a qualified valuer. A formal valuation was not prepared due to the absence of comparable sales. However, the valuer expressed an opinion as to diminution of value and provided reasons for that opinion. There was no contrary evidence as to value or diminution of value. The Judge accepted the evidence of the valuer and, as a consequence, concluded that he was satisfied that the diminution in the value of the property was $50,000.00.
The Judge awarded Mr Halling and Ms Morgan damages for the loss of use of money in accordance with the principle of Hungerfords v Walker.[5] The effect of the Judge’s finding on diminution of value was that Mr Halling and Ms Morgan paid $50,000.00 too much for the property. Had the correct amount been paid, they would have had the use of $50,000.00 between the date of settlement of the contract and the date of judgment. The Judge had regard to the failing interest rates throughout that period and made an award of damages for the loss of use of money of $36,879.76. Accordingly, the judgment in favour of Mr Halling and Ms Morgan was in the amount of $86,879.76.
[5] Hungerfords v Walker (1989) 171 CLR 125.
The Judge then turned his attention to the question of costs. The Judge noted that ordinarily costs follow the event, but that in exceptional circumstances a successful party may be deprived of some or all of the costs because of conduct in commencing or maintaining the proceedings.
Originally proceedings were issued naming the land agent retained by the Stubings as the third defendant. This led to contribution notices between the defendants. The claim against the land agent was resolved during the course of the trial when consent orders were made. In substance, the claim against the land agent was dismissed, each party bearing their own costs. The Stubings sought an order that they recover against Mr Halling and Ms Morgan the costs of their contribution proceedings. The Judge rejected this claim, noting that the Stubings had been advised before trial that Mr Halling and Ms Morgan were prepared to discontinue the proceedings against the agent and would not be pursuing a case based on any representation made by the agent.
Ultimately, the Judge exercised his discretion to order that the Stubings pay Mr Halling and Ms Morgan’s costs of the action, including the costs of the argument on interests and costs, and that the Stubings pay the agent’s costs of the contribution proceedings. Otherwise, no orders for costs were made.
The Appeal
On the appeal, the Stubings challenged the Judge’s construction of the terms of the warranty, the conclusion that they had breached the warranty, the assessment of damages and the orders for costs.
Mr Halling and Ms Morgan submitted that the Judge had construed the warranty too favourably to the Stubings. Otherwise, they supported the Judge’s findings, analysis, reasons and conclusions.
The Warranty
The Stubings contended that the Judge found that the plain meaning of the warranty was that the Stubings “were providing an assurance that, as far as they were aware, council approval had not been required to build the walls, or any section of them, or, if council approval had been required, then as far as they were aware, the necessary approvals had been sought and obtained before the walls were built”. It was said that this finding was flawed insofar as the Judge concluded that it extended to an additional assurance that the knowledge was based on reasonable grounds and that it was intended to be understood in that way.
It was contended that the application of the natural and ordinary meaning rule sufficed in construing the meaning of the warranty. It was said that there was no factual or legal basis for the implication of the additional assurance. It was claimed that the impugned construction did not meet the various conditions for the implication of a term into a contract.
As earlier noted, Mr Halling and Ms Morgan submitted that the construction advanced by the Judge was unduly favourable to the Stubings. In my view, this submission was well based. To prove the breach of warranty, all that was required was for Mr Halling and Ms Morgan to prove that the walls had been built during the period when the Stubings owned the property, that the construction of the walls required council consent, that council consent had not been obtained and that the Stubings knew that council consent had not been obtained.
To the extent that knowledge was required on the part of the Stubings, all that was required was knowledge of the construction of the walls and knowledge that no approval had been obtained for that construction. The Stubings’ belief as to whether council consent was required was irrelevant.
In my view, the warranty is to be understood as meaning that to the extent that the Stubings knew the work had been done on the property during their ownership, they warranted that all necessary approvals and consents had been obtained for such work.
Damages
There was no challenge to the finding of the Judge that Mr Halling and Ms Morgan would not have proceeded with the sale had they known that the walls had been erected without council consent. On the appeal, both parties accepted that the approach of diminution in value was the correct approach to be taken to the assessment of damages.
Earlier in these reasons I have set out the basis on which the Judge considered that the purchase price paid by Mr Halling and Ms Morgan was a reflection of the value of the property at the time. This, of course, assumes that the walls had been built with council approval and that they were sound.
The Judge was entitled to accept the evidence of the valuer as to diminution in value. No basis has been shown on which his acceptance of the evidence could be fairly criticised.
On the approach taken to the assessment, Mr Halling and Ms Morgan lost the use of $50,000.00 from the time of the settlement of the contract to the date of judgment. Mr Halling and Ms Morgan were entitled to damages for the loss of use of this money in accordance with the principles set out in Hungerfords v Walker.[6] In my view, it was an entirely reasonable approach to take to this head of damage and the consequent award was unexceptional.
[6] Hungerfords v Walker (1989) 171 CLR 125.
Costs
It is convenient to first start with a reference to the relevant statutory provisions governing costs. Section 42(1) of the District Court Act 1991 (SA) provides:
Subject to subsection (2) and the rules, costs in any proceedings in the Civil Division will be in the discretion of the Court and may be awarded against any person (whether a party to or a witness in the proceedings or not).

Rule 263(1) of the District Court Rules 2006 (SA) is the relevant rule of Court and provides that, ‘[a]s a general rule, costs follow the event.’ These provisions have their parallel in the Supreme Court, being section 40(1) of the Supreme Court Act 1935 (SA) and rule 263(1) of the Supreme Court Civil Rules 2006 (SA).
In GT Corporation Pty Ltd v Amare Safety Pty Ltd, Robson J conducted a comprehensive review of relevant authorities before concluding:[7]
[7] GT Corporation Pty Ltd v Amare Safety Pty Ltd [2008] VSC 296, [59].
Based on these authorities, the general principles relevant to GT’s application in relation to costs are as follows.
1.The award of costs is in the discretion of the Court or Judge: s 24 Supreme Court Act 1986.
2.The discretion must be exercised judicially: Donald Campbell & Co v Pollak; Cretazzo v Lombardi.
3.The discretion cannot be exercised arbitrarily or capriciously and it cannot be exercised on grounds unconnected with the litigation: Cretazzo v Lombardi; or the circumstances leading up to the litigation: Oshlack v Richmond City Council.
4.Costs are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings. The order is not made to punish the unsuccessful party: Latoudis v Casey.
5.As a general rule, costs should follow the event, and a successful party should obtain all of the costs of the action even though it failed to establish some of the alternative heads of its claim: Ritter v Godfrey; McFadzean v CFMBEU.
6.Rule 63.04(1) permits the court, in its discretion, to make an order not only as to a distinct question or issue in the pleading sense, but also to any part of the proceeding: Woolf v Burmon; Cretazzo v Lombardi.
7.The court may, in its discretion, decline to order costs in favour of a successful party, or may order the successful party to pay the costs of the unsuccessful party, where the plaintiff failed to establish discrete heads of claim or failed to establish issues which it pursued in its claim, although ultimately succeeding on the basis of another discrete head of claim: McFadzean v CFMBEU.
8.It is not necessary that the issue concerned was raised unreasonably by the party: Rosniak v GIO. Although, a relevant consideration may include whether the issue was raised unreasonably: Mickelberg v Western Australia.
9.The court may, in its discretion, make an order that is a single order, fixing what proportion of a party’s costs should be paid by another party, thus obviating cross-orders or particular orders as to particular costs: Byrns v Davie; McFadzean v CFMBEU; Nolan v Nolan.
10.The caveat referred to by Jacobs J in Cretazzo v Lombardi may have less weight today than when it was decided: Primcom Pty Ltd v Sqarioto; Mickelberg v Western Australia; and Victoria v Master Builders Association of Victoria.
11.Although the quantum of damages recovered compared to that claimed may be a relevant consideration to the court in exercising its discretion, greater emphasis should be given to the failure or loss on discrete claims or issue and the time occupied in relation to them.
[Footnotes omitted.]
I respectfully adopt and apply these observations.
Mr Halling and Ms Morgan joined the land agent as a party in the initial proceedings. This led to the issue of contribution notices between the defendants. Earlier in these reasons, I have noted that the Judge declined to make an order as sought by the Stubings with respect to the costs of the contribution proceedings.
The Judge addressed the issue in some detail as follows:[8]
Ordinarily costs follow the event. Exceptionally a successful party may be deprived of some or all of his costs because of his conduct in mounting or maintaining the proceedings.
[Counsel for the Stubings] submits that this is such a case. His submissions are conveniently set out in the outline of argument he filed and tendered on the questions of costs and interest.
[Counsel for the Stubings] submits that the defendants have been put to unwarranted expense and inconvenience because the plaintiffs initially foreshadowed and then pleaded a multiplicity of causes of action which they then ultimately abandoned. There is no doubt that the causes of action were whittled away as the proceedings unfolded. There is also no doubt that some delay which was caused by the plaintiffs has already been reflected in an order for costs which was made by a Master of the court. But in any event most of the causes of action which were ultimately abandoned had their origins in the warranty and the allegation of negligence. Refinement of the pleadings and the abandoning of causes of action during the interlocutory phase and then in the lead up to trial can be regarded as ordinary incidents of litigation and there is nothing which has happened here which takes the case so out of the ordinary that ought to be reflected in costs.
As I have mentioned, the plaintiffs originally issued proceedings against the land agent who had been retained by the defendants. Unsurprisingly this led to the filing of contribution notices. As I have also mentioned, these proceedings resolved during the course of the trial whereupon I made a number of orders by consent.
[Counsel for the Stubings] submitted that the conduct of the plaintiffs unreasonably obliged the defendants to hold the agent in the proceedings thus causing the defendants unnecessary inconvenience and expense. I do not agree. The plaintiffs informed the defendants in writing before trial that they were prepared to discontinue the proceedings against the agent and that they would not be “pursuing any case against your clients based on any representations made by the agent …”. Plainly the letter provided the defendants with any protection that they might have needed and the plaintiffs thus should not be held responsible for the continuation of the contribution proceedings which then held the agent in the action.
However, and in all the circumstances it seemed to me to be appropriate to dismiss the plaintiffs’ application that the first and second defendants pay the costs awarded against the plaintiffs in favour of the third defendant and that there be no order as to costs as between the plaintiffs and the first and second defendants on the contribution proceedings.
[8] Halling & Anor v Stubing & Anor [2011] SADC 167, [275]-[280].
On the appeal, counsel for the Stubings submitted that the order with respect to the costs of the contribution proceedings was flawed, that it should be set aside and that an order should be made that Mr Halling and Ms Morgan pay those costs. It was contended that Mr Halling and Ms Morgan had acted unreasonably and that the Stubings had acted reasonably and, in these circumstances, that the Stubings should have their costs on this issue.
The Judge had a wide discretion as to costs. The Judge explained in his reasons why he reached the conclusion to reject the Stubings’ application. There was nothing arbitrary or capricious about his ruling. The order made by the Judge was well within his discretion.
Having regard to the foregoing, in my view, it was open as a matter of discretion for the Judge to award Mr Halling and Ms Morgan the costs of the proceedings in the terms ordered. No error has been identified on the part of the Judge. No other basis has been established to interfere with the Judge’s discretionary costs order.
Conclusion
I would dismiss the appeal.
SULAN J: I would dismiss the appeal. I agree with the reasons of White J.
WHITE J. A District Court Judge found that the appellants had breached a warranty in a contract for the sale of residential land, thereby entitling the purchasers to damages. He assessed the damages, including damages described as “interest”, at $86,879.76 and entered judgment for the purchasers in that amount.[9]
[9] Halling & Anor v Stubing & Anor [2011] SADC 167.
The appellants appeal against the finding of breach of warranty, the assessment of damages (including the assessment of “interest”) and the Judge’s costs orders.
For the reasons which follow, I consider that the appeal should be dismissed.
Background Facts
Between July 2000 and early 2003, the appellants (the Stubings) owned a nine acre property on Callington Road, Woodchester on the upper Fleurieu Peninsula. The property had a house located on it.
Mr Stubing built a number of stone walls on the property, using stone which he collected on the property itself. The total length of the walls was more than 120 metres and of this length some 80.6 metres (66 per cent) was built to a height of more than one metre. The Judge found that by reason of their length, height, manner of construction and utilitarian value, the walls were a significant feature of the property.[10]
[10] Ibid at [3], [70], [255]-[258].
By virtue of ss 32-34 of the Development Act 1993 (SA) and the definitions of “building” and “building work” in s 4 of that Act, development approval was required at the relevant time for the construction of that part of the walls which exceeded one metre in height. Masonry fences exceeding one metre in height were not excluded by Sch 3 of the Development Regulations 2008 (SA) from those developments which did require development approval. It was common ground at the trial that the Stubings had not obtained any development approval or consent at all for the construction of the walls.
The Stubings and the respondents entered into a contract for the sale of the property on 1 February 2002 for a purchase price of $250,000. Clause 5.6 contained warranties by the vendor as follows:
5.6 Warranties by the Vendor
The Vendor warrants, except as set out in the schedule:
5.6.1 no notices, orders or charges have been issued or received in respect of the Land, any boundary fence or any road or footpath abutting the Land which have not been complied with;
5.6.2 that to the Vendor’s knowledge, no building work has been carried out on the Land without all necessary consents and approvals having been obtained;
5.6.3 the Vendor is not aware, and gives no warranty, that any improvements on the Land encroach on any adjoining land or on any easement on the Land, nor that any improvements upon any adjoining land encroach upon the Land, nor is the Vendor aware that any fence, wall or party wall is not on the correct boundary or alignment of the Land.
It is the wording in cl 5.6.2 which is presently pertinent.
Paragraph N of the Schedule related to cl 5.6.2. Under the heading “Alterations, Repairs and Improvements erected without consent [clause 5.6.2]”, the handwritten words “NONE KNOWN TO VENDOR” were inserted.
Settlement on the contract occurred on 14 March 2003.
Subsequently, significant portions of the walls collapsed. The first portion collapsed in about May 2003 and the collapse of other portions continued until August 2009. All in all, some eight sections of wall totalling about 15 metres in length collapsed. The Judge found that the collapses compromised significantly both the aesthetics and utility of the walls.[11] He also found that the collapses occurred because the walls were structurally unsound.[12]
[11] Ibid at [83]-[84].
[12] Ibid at [106].
The Judge’s Findings concerning the Breach of Warranty
The Stubings submitted at the trial that, on the proper construction of the warranty in cl 5.6.2, a breach would occur only if, at the date of the contract, they had knowledge of each of the three elements to which it refers. This meant that the respondents had to establish that they had had actual knowledge, first, that the walls had been built; secondly, that development approval was required for those portions of the walls which exceeded one metre in height; and thirdly, that these sections had been erected without the requisite approvals having been granted. Evidence that they had knowledge of the second was lacking with the effect, so the Stubings submitted, that a breach of the warranty was not established.
The Judge rejected this construction. He held that a reasonable person would have construed cl 5.6.2 and cl N in the Schedule to mean that the Stubings “were providing an assurance that, as far as they were aware, council approval had not been required to build the walls, or any section of them, or, if council approval had been required, then as far as they were aware, the necessary approvals had been sought and obtained before the walls were built”. [13] The Judge had earlier expressed this conclusion slightly differently by saying that cl 5.6.2 and the Schedule meant that the vendors were “providing an assurance that they did not know of any building work which required council consent or approval having been carried out on the property without any necessary approvals having been first sought and obtained and that this assurance extended to the walls”.[14]
[13] Ibid at [135].
[14] Ibid at [134].
The Judge then went on to hold that the warranty also involved an assurance based on reasonable grounds. His reasoning on this topic appears in the following paragraphs:
[139]What would a reasonable prospective purchaser who knew that the defendants had built the walls make of the words of the warranty and the schedule? In my view a reasonable person who was contemplating purchasing the property knowing that Mr Stubing had built the walls himself would understand the warranty to mean that Mr and Mrs Stubing knew for a fact that the walls had been built after all necessary council approvals had been sought and obtained, or that they knew for a fact that [council] consent or approval to build the walls was not required and also that it was implicit in this latter assertion that it was deliberately and carefully made, that is, that it was based on reasonable grounds and that it was intended to be understood in this way.
[140]Mr and Mrs Stubing would thus be in breach of the warranty if the assurances they gave in the warranty and the schedule were not based on reasonable grounds.
In determining whether or not the Stubings had, on this construction of cl 5.6.2, breached the warranty the Judge acted on the evidence given by them. Mrs Stubing’s evidence was that she had made an enquiry of the Alexandrina Council about whether development approval was necessary. However, on her own evidence, her enquiry was one about fences and not walls. On this basis the Judge found that the Stubings did not have reasonable grounds for the assurance which they had given. He said:
[141]… In my view enquiries and information about fences, without more, is not an objectively reasonable basis on which to give the assurance that the walls were not, to the vendor’s knowledge, built without all necessary council consents and approvals having been obtained. Even accepting the evidence of the defendants on this topic, I am nonetheless satisfied that the relevant assurance that they gave in the warranty was not based on reasonable grounds.
[142]I find that the defendants have breached the warranty accordingly.
The Stubings challenged this conclusion. On appeal, they repeated the submission as to the proper construction of cl 5.6.2 which they had made to the Judge. They contended in addition that there was no basis for construing cl 5.6.2 as containing an additional warranty that the knowledge asserted by them was based on reasonable grounds.
Did the Appellants Breach the Warranty?
The Judge observed, correctly, that cl 5.6.2 is to be construed on the basis of what a reasonable person would understand from the language of the contract when read in the commercial context in which it was signed, taking into account such of the surrounding circumstances as were known to the parties.[15] This requires consideration of the terms of cl 5.6.2, the context in which it appears and its evident purpose.
[15] Ibid at [124]. See Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 at [40]; (2004) 219 CLR 165 at 179 per the Court.
The contract in this case is in the form of the standard form contract for sales of residential land issued by the Real Estate Institute of South Australia. Clause 5 is headed “Title and Risk”. Its sub‑clauses deal with a diverse range of subject matters. The three sub‑clauses of cl 5.6 also address three discrete subject matters: compliance with requisitions issued or received in relation to the land (cl 5.6.1); the performance of work on the land (cl 5.6.2); and the location of improvements in relation to the boundaries of the land (cl 5.6.3).
Clause 5.6.1 is expressed in absolute terms. The vendor warrants that there has been compliance with all requisitions issued or received in relation to the land. This warranty is qualified only by any exceptions which may be set out in the Schedule. Unlike cl 5.6.2, it is not qualified at all by reference to the vendor’s knowledge.
In my opinion, cl 5.6.3 is of limited assistance in construing cl 5.6.2. It is a curiously worded sub‑clause. Despite the opening words to cl 5.6, sub‑cl 5.6.3 provides expressly that, at least in relation to some matters, the vendor gives no warranty at all. Further, the subject matter of cl 5.6.3 appears to be the static condition of the land, rather than the lawfulness of the developments carried out on the land.
The evident purpose of cl 5.6.2 arises from the potential consequences for the owner of land on which building work has been carried out without the requisite consents and approvals. By Part 11 of the Development Act 1993 (SA) a “relevant authority”[16] may take a number of actions in relation to non‑compliant developments, including requiring the contravenor to make good the breach in a manner specified by the authority.[17] If the contravenor does not take the required action, the relevant authority may itself cause that action to be performed and recover the costs of doing so from the owner.[18] This may lead to court orders for the demolition and removal of the offending work.[19]
[16] See s 84(1) of the Development Act 1993 (SA).
[17] Section 84(2).
[18] Sections 84(6) and 84(7).
[19] Section 88(1).
These potential enforcement actions indicate that the consequences for purchasers who acquire properties upon which building work has been performed unlawfully may be drastic. The purchase price paid by such purchasers will usually reflect the value of the improvements made to the property and much of that value may be lost if some or all of the improvements are in jeopardy.
It is reasonable to construe cl 5.6.2 as intended to provide a measure of assurance to purchasers in this context.
It is also appropriate to keep in mind that the building work to which cl 5.6.2 refers may be of different kinds. It may be work carried out before the vendor’s period of ownership of the property, as well as work carried out during that ownership. Vendors may not know of all the building work carried out before their ownership, for example, whether it was all carried out at one time or in a succession of developments. Nor will vendors necessarily have ready access to the regulatory regime relating to the performance of building work which was in force from time to time, so as to be able to ascertain whether previous owners obtained all the necessary approvals for the work they carried out. In this circumstance, the inclusion of the qualifying words “to the vendor’s knowledge” is readily understandable.
On the other hand, vendors will know the building work which they have carried out and will know or have the means of ascertaining readily the regulatory regime applicable to such work.
The “Vendor’s knowledge” to which cl 5.6.2 refers may relate to work which has been performed, or to the requirement for consents and approvals, or both. Given these alternatives, it seems appropriate to adopt a construction which will best achieve the evident purpose of the clause.

Having regard to its terms, context and evident purpose, I consider that cl 5.6.2 should be understood as a warranty by vendors that, to the extent to which they themselves have carried out building work, the necessary consents and approvals were obtained and, to the extent to which building work was undertaken by their predecessors, it was, so far as the vendors are aware, carried out in accordance with the necessary consents and approvals. This is consistent with the construction of cl 5.6.2 which was adopted by this Court in Vettese v Kemp.[20] In that case, Duggan J, with whom Debelle and Bleby JJ agreed, discussed cl 5.6.2 briefly and said:
In order to establish a breach of the warranty set out above, it would have to be proved that council approval was needed for the particular structure which Mr Vettese erected and that he did not obtain approval for it.[21]
It can be seen that the Court in Vettese did not require the purchaser to prove that the vendor had knowledge that development approval was required for his erection of a structure.
[20] [2000] SASC 154; (2000) 77 SASR 53.
[21] Ibid at [59]; 67.
In Creeper v Cooper,[22] a judgment of the District Court delivered after the judgment in this case, Judge Boylan concluded in relation to cl 5.6.2:
… I am of the view that clause 5.6.2 is to be understood as meaning that, to the extent that the vendors know that building work has been done on the land during their ownership, they warrant that all necessary approvals and consents were obtained for such work. That is, the clause is to be construed positively. On that construction, even though Mr and Mrs Cooper were unaware of the necessity to obtain the relevant approvals and consents, I find that they were in breach of the warranty.[23]
I respectfully agree with this construction.
[22] [2012] SADC 94.
[23] Ibid at [34].
The construction proposed by the appellants would mean that the warranty would have only a limited operation in practice. Further, it would be difficult to enforce. Aggrieved purchasers would only be able to establish a breach by proving the subjective state of knowledge of the vendors at the time of completion of the contract. In most cases, the purchasers would have no knowledge of the vendors’ state of mind and no ready means of obtaining that knowledge. A reasonable person would expect the contract to have a more practical operation than this.
On the construction of cl 5.6.2 which I consider to be appropriate, it is neither necessary nor appropriate to regard cl 5.6.2 as conveying implicitly an additional assurance that the contractual promise is based on reasonable grounds. In this respect I respectfully disagree with the Judge. I observe that the case to which the Judge referred for support for this construction of cl 5.6.2, namely, RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd[24] concerned the effect of an opinion as a representation of fact, and not the construction of a contractual warranty. It was accordingly of limited assistance in the present context.
[24] [1993] FCA 92; (1993) 41 FCR 164.
I do not wish to be understood as implying that a contractual warranty as to a person’s knowledge may never be properly construed as containing implicitly a representation of reasonable grounds for the person’s knowledge to exist: only that there is no basis upon which cl 5.6.2 can be construed in this way in the present case.
On the construction of cl 5.6.2 which I favour, the present respondents had to establish three matters: that the appellants had carried out building work; that that building work required approval; and that the appellants had not obtained that approval. On the Judge’s findings, the respondents established those matters.
For these reasons, the appellants’ appeal against the finding that they were in breach of the cl 5.6.2 warranty should be dismissed.
The Assessment of Damages
The respondents still owned the property at the time of trial and sought a remedy in damages only.
The Judge found that the respondents would not have agreed to buy the property had they known that the walls had been constructed without the necessary Council approvals.[25] This meant that the respondents were entitled to damages in respect of the loss resulting from their reliance on the promise contained in the Stubings’ warranty. Prima facie, and putting to one side for the moment any consequential losses, this loss was the difference between the price which they had paid for the property, on the one hand, and its value, on the other. This reflects the common law principle that a party sustaining loss by reason of a breach of contract is, so far as money can do it, to be placed in the same position as if the contract had been performed.[26]
[25] Halling & Anor v Stubing & Anor [2011] SADC 167 at [184], [186].
[26] Wenham v Ella (1972) 127 CLR 454 at 471 per Gibbs J; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 80 Per Mason CJ and Dawson J, 98 per Brennan J, 116 per Deane J, 134 per Toohey J, 148 per Gaudron J, and 161 per McHugh J.
The respondents led evidence at the trial indicating that not only was the construction of the walls unauthorised, the walls were structurally unsound. The Judge accepted this evidence. He found that the walls were a significant feature of the property as a whole;[27] that they were structurally unsound;[28] and that that unsoundness was the cause of the various collapses.[29]
[27] Ibid at [70].
[28] Ibid at [106].
[29] Ibid at [106].
The respondents’ amended statement of claim indicated that they sought damages on alternative bases. Ultimately the claim which they pursued at trial was one for “damages for diminution in value of the house property” in addition to consequential losses. This manner of expression of their claim was unfortunate as it resulted in a focus at the trial on the effect on the value of the property because the walls were unauthorised and unsound, and not the difference, if any, between the price paid by the respondents, on the one hand, and the value of the property, on the other.
The Judge approached the assessment in the manner indicated by the respondents’ statement of claim, ie, by an assessment of the “diminution in value” of the property by reason of the walls having been constructed without necessary approvals and being structurally unsound. This led the Judge to consider whether the purchase price paid by the respondents reflected the value of the property at the time of completion if the walls had been both structurally sound and erected with approval, and to compare that with the value of the property if the walls were unsound and unauthorised. The Judge accepted that the price paid reflected market value at the time of sale and assessed that difference at $50,000.
In making that assessment, the Judge relied heavily, but not solely, on the evidence of an expert valuer called by the respondents, Mr Bruce.
The Stubings challenge to the Judge’s assessment of loss in the sum of $50,000 was based upon criticisms of the Judge’s reliance on the evidence of Mr Bruce. First, they contended that Mr Bruce had not provided any opinion as to the market value of the property as at the date of completion, as required for an assessment in accordance with the principles outlined above. Secondly, they contended that Mr Bruce’s assessment of “a diminution in value” of the entire property by an amount of $50,000 was not supported by proper valuation principles and amounted to little more than “an idiosyncratic assessment” on his part. Finally, they contended that Mr Bruce had not stated adequately the factual basis for his estimate of value, and that that basis had not otherwise been proved in the evidence.
The Stubings did not adduce any expert opinion as to the value of the property. They did, however, tender a report from two valuers, Messrs Spencer and Singleton, which was in the nature of a critique of the methodology and approach adopted by Mr Bruce.
In my opinion, the Stubings’ criticisms of the evidence of Mr Bruce have some force, but they are not sufficient to warrant interference with the Judge’s assessment.
Some of the difficulties in Mr Bruce’s evidence arose from the brief given to him by the respondents’ then solicitor. Mr Bruce understood that he was asked to give an opinion as to the “diminution in value” on the basis outlined earlier. He estimated that diminution in value at $50,000. Mr Bruce acknowledged that he had been unable to identify sales of comparable properties on which to base this estimate. He said that he had instead relied upon “my experience as a valuer and how I consider the market would react to the circumstances described within your letters of instruction and this report”.
In my opinion, the Judge was justified in relying upon Mr Bruce’s opinion and other evidence in concluding that the difference between the price paid by the respondents, on the one hand, and the true value of the property, on the other, was $50,000. First, Mr Bruce’s general experience as a valuer and, in particular, his experience of valuation of properties in the Woodchester area, was pertinent. It meant that his estimate that the value of the property was reduced by about $50,000 by reason that the walls were both unauthorised and unsound had some probative value.
Secondly, the Judge had evidence from a qualified stonemason as to the cost of demolishing the walls and rebuilding them. The demolition costs were said to be of the order of $6,850 and the cost of re‑building them between $40,000 and $126,000 depending on the method of construction and materials employed. The expenditure of monies of that order would not of course necessarily translate into an increase in the value of the property by an equivalent amount. The size of the expenditure involved does, however, provide a means of cross‑check against the difference in value suggested by Mr Bruce.
Thirdly, the Judge made a positive finding that the walls were an attractive feature of the property and added value to it. The Stubings did not challenge those findings. That being so, the finding that the walls were both unsound and unauthorised meant that the respondents had suffered some loss. The difficulty in assessing that loss did not mean that they were disentitled to an assessment.[30]
[30] Howe v Teefy (1927) 27 SR (NSW) 301 at 306 per Street CJ.
Finally, I observe that the Stubings did not adduce any expert evidence as to value themselves, even though they knew the claim being mounted by the respondents and even though they had themselves retained expert valuers in connection with the litigation. The respondents of course had the onus of proof but, in considering whether or not that onus had been discharged, it was appropriate for the Judge to keep in mind that no evidence against the opinion adduced from Mr Bruce was proffered by the Stubings.
In my opinion, this ground of appeal fails.
Hungerfords v Walker Damages
The respondents borrowed $268,000 in order to purchase the property. This was to cover the purchase price as well as ancillary costs.
The Judge found that if the respondents had purchased the property for $200,000, they would have borrowed at least $50,000 less than they did.[31] He held that the respondents were entitled to recover the borrowing costs of this $50,000 in accordance with the principles stated in Hungerfords v Walker.[32] There may be some inconsistency between this finding and the Judge’s earlier finding that the respondents would not have proceeded with the purchase at all, had they known the true position in respect of the walls. However, no point was taken about that on the appeal.
[31] Halling & Anor v Stubing & Anor [2011] SADC 167 at [269].
[32] (1989) 171 CLR 125.
After the Judge announced his decision that the respondents were entitled to damages of the Hungerfords v Walker kind, the parties agreed on a calculation. That was the sum of $36,879.76 and was calculated on the sum of $50,000 for the period commencing on the date of settlement (14 March 2003) until the date of judgment (15 December 2011). As I understand it, the calculation was made by reference to the interest rates on the respondents’ mortgage.
The Judge awarded the sum of $36,879.76 in full, describing it as “interest”. He rejected the claim by the Stubings that he should exercise the discretion said to be available under s 39 of the District Court Act 1991 (SA) (DCA) to award the respondents a lesser sum. That submission was based on delays in the conduct of the litigation for which the Stubings contended the respondents had been responsible.
The Stubings repeated this submission on appeal. In my respectful opinion, the submission was misconceived because it failed to distinguish between an award of damages for loss of use of money, on the one hand, and pre‑judgment interest under s 39 of the DCA, on the other. If the Judge had been awarding pre‑judgment interest under s 39, he would undoubtedly have had a discretion to award a lesser amount if the respondents had been responsible for the delays in obtaining judgment. However, that discretion was not available in relation to the damages awarded for the additional and unnecessary expense incurred by the respondents.
An award of damages for the loss of use of money is to compensate plaintiffs for losses which they have suffered as a result of having to pay money away, or having money withheld, in consequence of a defendant’s wrongful act. It is assessed under the common law principles applicable to the assessment of damages, including the principles relating to causation, remoteness, foreseeability and mitigation. An award of pre‑judgment interest is made under statute, in this case s 39 of the DCA. Unlike the award of damages at common law, s 39, when it is applicable, involves the exercise of a statutory discretion.
If the Stubings wished to contend that the respondents were themselves responsible for the incurring of the unnecessary expenditure by delays in the conduct of the proceedings, it was incumbent upon them to raise this as an issue on the pleadings, perhaps by way of a plea of failure to mitigate loss or perhaps as an issue of causation. The Stubings did neither. It does not seem that there was any examination during the course of the evidence of the manner of conduct by the respondents of the litigation. That being so, there was no basis upon which the Judge could have awarded a lesser sum on the basis of the Stubings’ submission.
I note that the Stubings did not contend that the respondents should not be entitled to recover Hungerfords v Walker damages at all on the basis that, had they not purchased the Woodchester property for $250,000, they would have purchased another property of similar value thereby incurring expenditure of a similar order.
Costs
I agree with the reasons of Gray J on this issue.
Summary
For the reasons given above, I consider that the appeal should be dismissed.