Sunlight Nominees Pty Ltd v Zotti - [2017] SASC 176

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
SUNLIGHT NOMINEES PTY LTD v ZOTTI & ZOTTI
[2017] SASC 176
Judgment of The Honourable Justice Doyle
22 November 2017
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
The appellant (plaintiff) laid a concrete driveway for the respondents (defendants) at their residential property. The plaintiff charged $57,933.13 for this work, which the defendants did not pay. The plaintiff sued the defendants for this sum.
In their defence and counterclaim, the defendants alleged that the works were defective and in breach of contract, including because the concrete did not comply with the specified strength of 25MPa. The defendants sought damages measured by reference to the cost of replacing the driveway.
The Magistrate upheld the defendants’ allegation of breach of contract in relation to the concrete strength, and awarded damages measured by reference to the cost of replacing the driveway, but capped at the pleaded amount of $56,600, giving a net judgment in the plaintiff’s favour of $1,333.13.
On appeal, the plaintiff complains that the Magistrate erred:
1.       in finding that the defendants specified the use of concrete with a strength of 25MPa;
2.       in holding that this specification was a term of the contract; and
3.       in holding that the defendants were entitled to recover damages for the cost of replacing the driveway.
The plaintiff’s appeal also complained about an evidential ruling by the Magistrate, and sought to rely upon fresh evidence in relation to two matters.
The defendants cross-appealed, complaining that the Magistrate erred in confining their damages to the pleaded quantum.
Held (per Doyle J):
1.       No error has been established in the Magistrate’s finding that the defendants specified concrete with a strength of 25MPa (at [66]) or holding that this was a term of the contract (at [69]).
2.       Consideration of the principles governing the receipt of further evidence on appeal (at [82]).
3.       Not appropriate to exercise the Court’s discretion in favour of permitting further evidence to adduced in this case (at [86] and [89]).
4.       No error has been established in the Magistrate’s decision to exclude evidence in relation to the finish applied to the driveway (at [94]).
5. Consideration of the general rule in Bellgrove v Eldridge (1954) 90 CLR 613 in favour of the recoverability of damages reflecting the cost of rectification work, and the qualification to that rule that the work be necessary and reasonable to achieve contractual conformity (at [96]-[100]).
6.       No error has been established in the Magistrate’s decision that the general rule applied, and that the qualification had not been made out (at [111).
7.       In circumstances where the defendants provided advance notice of expert evidence seeking a figure slightly higher than the pleaded figure, opened on that higher figure and neither the plaintiff nor the Magistrate suggested that the defendants would be held…

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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Details

Case: [2017] SASC 176
Decision Date: 22 November 2017

CaseChat Overview and Summary

The case of Sunlight Nominees Pty Ltd v Zotti involves a dispute between the plaintiff, who operates a concreting business, and the defendants, a married couple who engaged the plaintiff to construct a concrete driveway on their property. The central issue in the case pertains to whether the plaintiff breached the contract by using concrete of a lower strength than specified. The defendants argued that the plaintiff used 20MPa concrete instead of the 25MPa concrete they had specified, leading to a claim for damages. The defendants also cross-appealed, arguing that the trial court erred in limiting their damages to the amount pleaded, instead of the higher amount supported by the evidence. Additionally, the defendants sought permission to introduce new evidence regarding the condition of the driveway since the trial.

The court was required to decide whether the contract included a term specifying the use of 25MPa concrete and whether the plaintiff breached this term by using a lower strength concrete. The court also had to determine the appropriate amount of damages to be awarded to the defendants. The reasoning of the court involved assessing the credibility of the evidence presented by both parties, particularly focusing on the conversation between the plaintiff and the defendants regarding the strength of the concrete. The court found that the evidence supported the existence of an oral term specifying the use of 25MPa concrete. It also upheld the trial court's decision on the amount of damages, rejecting the defendants' argument that they were entitled to a higher amount.

In conclusion, the court held that the contract did include a term specifying the use of 25MPa concrete and that the plaintiff breached this term by using 20MPa concrete. The court upheld the trial court's decision on the amount of damages, finding no error in the trial court's assessment. The defendants' cross-appeal was dismissed, and they were not granted permission to introduce new evidence regarding the condition of the driveway.

Orders

Orders of the court

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Background

Background to the litigation

The defendants have cross-appealed. Their sole ground of cross-appeal is that the Magistrate erred in confining them to their pleaded claim for $56,600, as opposed to the amount of $65,000 that was supported by the evidence. The defendants also seek permission to rely upon fresh evidence in relation to the use and condition of the driveway since the trial.Background The plaintiff has for a number of years carried on a concreting business under the name Security Cement Works. It has done so through its sole director, Mr Antonio Russo. The defendants are a married couple who live on a property in Yatala Vale. The property is a relatively large one. Looking at the property from the street, the defendants’ home is to the right and towards the rear of the property. There is a large shed to the left. The shed was constructed by the defendants in 2003, and has a concrete hardstand area to one side of it. In early 2008 the defendants contacted the plaintiff to provide a quote to construct a concrete driveway from the street through to the area alongside the defendants’ home at the rear of the property. The shed and hardstand area was to the left of the proposed driveway area, and some metres away rather than adjoining it. While there was some dispute about the area to be covered by the concreting works, it was ultimately determined to be approximately 490 m2. The plaintiff provided a written quote for construction of the driveway dated 24 February 2008. It contained a basic description of the work to be done, specified that the concrete would be 100 mm thick, and would be reinforced with SL72 mesh in the driveway itself and with SL62 mesh in the remaining areas. The quote was for $29,780, but only related to an initial area of 322 m2. Through subsequent discussions with the defendants, the work was expanded to cover an area of approximately 490 m2. The additional work was not the subject of a written quote, but it was agreed that it would be carried out at the same rate as the work contemplated by the 24 February 2008 quote. The work commenced with the first pour of concrete occurring on 24 April 2008. There were eight subsequent pours of concrete, with the last of these occurring on 13 May 2008. The work did not proceed entirely smoothly. One area was damaged by rain, resulting in the plaintiff having to redo the relevant part of the work. Further, Mr Russo became unwell and was hospitalised during the course of the work, and so while he was there at the start of the work, he did not personally supervise the people that he had arranged to execute the work. Mr Zotti was at the property each day. On 2 April 2008 and the plaintiff invoiced the defendants for the figure of $29,780 contained in the initial quote. After the work was completed, the plaintiff rendered a second invoice[2] for the additional works, being for an amount of $28,153.13 and taking the invoiced total to the claimed amount of $57,933.13. [2] The invoice was dated 26 July 2009, being a date over a year after the work was completed, although Mr Russo’s evidence was that this was the date the copy of the invoice in evidence was printed rather than the date it was first issued.

Evidence

Evidence Before The Court

The plaintiff challenges the Magistrate’s finding that Mr Zotti specified concrete with a strength of 25MPa. In order to understand this challenge it is useful to commence by summarising the evidence on this issue, and her Honour’s reasons for accepting the evidence of Mr Zotti on this issue. Mr Zotti’s evidence Mr Zotti’s evidence was that in 2003 he had built what he described as an industrial shed on the property. It was about 13.5 by 13.5 metres in area, with an adjoining concrete hardstand area. His plan had been to use the shed to store hydraulic fluids or oils that he had a contract to supply to the Department of Defence. While it was not proposed that the driveway to be constructed by the plaintiff would join up with the hardstand area, Mr Zotti intended at a later stage to construct a connecting driveway leading to the shed and hardstand. Mr Zotti said that when Mr Russo came to give a quote for the work, in addition to discussing matters such as the area to be covered and the finish to be used, he said to Mr Russo that he wanted “extra strength”. When Mr Russo asked him what strength he wanted, he initially said 32MPa. When Mr Russo asked him why he needed this, Mr Zotti mentioned the shed and hardstand, and said to Mr Russo that he hoped to be selling oil and needed to be able to have trucks going up and down from the shed. Mr Russo then suggested that 20MPa concrete would be sufficient, but Mr Zotti’s evidence was that he was aware from experience with his mother’s concrete driveway that using forklifts resulted in stress and cracking on a driveway with a thickness of 90 mm and thin reinforcing wire. So he explained to Mr Russo about his mother’s drive, and that he wanted to use concrete with a strength of 25MPa or 32MPa, with a thickness of 100 mm, and with extra or thicker reinforcing wire. Mr Russo told Mr Zotti that he automatically used the extra reinforcement, and that 25MPa would be more than enough. Mr Zotti said that after their discussion to this effect, they settled on 25MPa. On the topic of the thickness of the drive, Mr Zotti’s evidence was that he said to Mr Russo that he would extend the driveway down to the shed later on; that he wanted the entrance towards that extension to be 150 mm thick so that when trucks turned over that area (and the edge of the driveway) there would be extra thickness and strength. He said that Mr Russo responded that this was “not a problem”. He said that they discussed and agreed that the rest of the area would be 100 mm thick, even though Mr Russo had said to him that the pathway areas did not need to be that thick. Mr Zotti described the conversation about the work to be undertaken as being friendly but business-like, and as lasting about 40 minutes. According to Mr Zotti, he did not realise that 20MPa concrete had been used until after the work had been completed. He said that he found a delivery docket on the site which suggested that 20MPa concrete had been delivered. He was then worried that 20MPa concrete had been used rather than the 25MPa concrete that he had specified. He said that he telephoned Mr Russo and sent letters to him by facsimile and post questioning the strength of the concrete that had been used and enclosing a copy of the docket that he had found.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

In summary, I am not satisfied that the plaintiff has established error in the Magistrate’s findings. To the contrary, I am satisfied that her Honour’s reasoning was sound, and that the evidence supported a finding that Mr Zotti specified the use of 25MPa concrete.Incorporation of oral term that the concrete have a strength of 25MPa The plaintiff contends that the Magistrate erred in finding that the contract included a term that 25MPa concrete would be used. In my view, having rejected the challenge to her Honour’s finding of fact that Mr Zotti specified use of 25MPa concrete, whatever remains of this aspect of the plaintiff’s appeal can be disposed of fairly readily. The plaintiff’s basis for suggesting there was no term in relation to the use of 25MPa concrete appears to be that the evidence as to the specification of the 25MPa was relatively equivocal; that the Court should be cautious in finding the existence of an oral term when there is a written contract (here, the 24 February 2008 quotation document); and that the need for caution in this case is enhanced by the express reference in the written contract to 100 mm thick concrete. I do not accept the evidence was equivocal. On the Magistrate’s finding, which I have upheld, Mr Zotti specified the use of 25MPa concrete prior to accepting the quote and commencing the work, and Mr Russo agreed to the specification. While it is appropriate to exercise caution in making findings of facts sufficient to found a contractual term based upon evidence of conversations that occurred eight years earlier, the evidence here provided a sufficient basis for the term contended for by the defendants. Nor was the existence of a written quotation any barrier to finding an additional oral term as to the strength of the concrete to be used. That is so both as a matter of principle, and in the circumstances of this case. As to the point of principle, it is true that courts are generally cautious in finding the existence of oral terms where the parties have otherwise agreed to detailed and apparently complete written terms. The reasons for this are obvious. But equally, the authorities accept that the same caution or reticence is not necessary or appropriate in the case of agreements expressed only in very general terms or only partially reduced to writing. In such cases, the Courts will more readily find the existence of oral terms that supplement or clarify the written terms.[10][10] See the discussion, and authorities referred to, in Masterton Homes Pty Ltd v Palm Assets Pty Ltd (2009) 261 ALR 382 at [90]. Here, there is no doubt that the 24 February 2008 document was in relatively general terms and was an incomplete record of the parties’ agreement. It was prepared prior to discussions between the parties that expanded the scope of the works, and hence only covered the first part of the work ultimately undertaken. It specified a price of $29,780 when the total price ended up being $57,933.13. The plaintiff emphasises, however, that the 24 February 2008 quote did specify the use of concrete with a S72 mesh and thickness of 100 mm, and submits that while the subsequent discussions expanded the area of the work, it was agreed that this would be done at the same rates as the work the subject of the quote.