Toohey v D & C Homes Pty Ltd - [2018] SADC 121

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Minor Civil Review)
TOOHEY v D & C HOMES PTY LTD
[2018] SADC 121
Judgment of His Honour Judge Cuthbertson
5 December 2018
MAGISTRATES - APPEAL AND REVIEW
Application to review a judgment of a Magistrate.
Held:
Appeal allowed.
1. The respondent is entitled to a variation in respect of a cost of living increase between the time of signing the contract and the time of confirming it of $2,415.
2. The respondent is entitled to a variation for additional costs incurred by the location and removal of a concrete structure found below the ground surface during excavation for footings.
3. The respondent is not entitled to a variation for additional trunk drains ($684) and electricity cabling ($500) but is entitled to a variation brought about by the requirement for the use of expansion joints.
4. The respondent is not entitled to a variation for the cost of disposal of trench soil of $1,984.
5. The respondent is not entitled to a variation for a charge of $197.39 for interest.
6. The applicant is entitled to damages for replacement of brick mortar of the wrong colour which was provided ($7,880).
Building Work Contractors Act 1995 ss3, 29, 32, 37, referred to.
Homestead Award Winning Homes V The State of South Australia (1998) 72 SASR 299, considered.

TOOHEY v D & C HOMES PTY LTD
[2018] SADC 121
Introduction

This is an application for review of a decision of a Magistrate made in a minor civil dispute, which arose out of a HIA Building Contract for the building of a house for the applicant by the respondent.
The plaintiff is the applicant on the review (the householder) and the defendant is the respondent on the review (the builder).
The applicant’s claim at first instance was for the disallowance of certain variations in the contract, and for damages for certain defects in the construction of the house. The respondent counterclaims for the sum of $4,917.07, which it claimed was due to it under the contract to build as legitimate variations in the contract price and for monies unpaid.
The applicant eventually entered into possession of the property contrary to the terms of the contract and hence the builder has not been in a position to finally complete the building.
Both on the application for review and at first instance, the applicant was represented by her friend, Mr Daniel Moore, who is the owner of the allotment adjoining the land of the applicant and who conducted most of the discussions with the respondent on behalf of the applicant during the building of the house.
At one time, Mr Moore and the applicant were in a relationship and they had entered into negotiations with the respondent for the construction of two houses, the first of which was on a block owned by Mr Moore and the second of which was on a block owned by the applicant. It was at least tacitly agreed that the construction of Mr Moore’s house would proceed first and construction of the applicant’s house would commence after its completion.
I will deal with the various claims of the applicant as nearly as possible, in the order they were dealt with by the Learned Magistrate as they are extremely difficult to follow from the pleadings.
Variation number 4 - additional costs for cost of living increase between signing and confirming of contract
I have already mentioned that there was at least tacit agreement that the building for the applicant would commence after completion of the building for Mr Moore.
The contract provided that it was subject to the applicant obtaining finance of $150,000.00 on or before the 31^st of January 2015. In fact, finance was not approved until late June 2015.
The applicant complains that she was told by the respondent that she would have to agree to a variation (number 4) in the original contract price for an amount of $2,415.00 to pay for increases to materials etc, due to the cost of living increasing over the time between the signing of the contract and the time the parties were ready to start building. (see Exhibit A1).
The applicant claims that this was a misrepresentation of the terms of the contract by the respondent because there was no provision in the contract that allowed for increases in price, it being a fixed price contract.
I agree with the analysis of the Magistrate. The contract lapsed for the failure to obtain finance by the 31^st of January 2015. The obtaining of finance on or before 31 January, 2015 was a condition precedent to the commencement of the contract.
The respondent was not obliged to proceed with the contract as a condition precedent had not been fulfilled. The respondent was entitled to assert that the contract had lapsed under its own terms, that it was no longer obliged to proceed with the contract at the price stipulated and that it was prepared to enter into a fresh contract for a price $2,415.00 higher than the original price due to cost of living increases.
It is true that the manner in which the additional cost of living increase was dealt with, namely by variation of the original contract, was probably technically incorrect. Nevertheless, the respondent was not obliged to continue with the original contract, and the applicant agreed to a variation to the price, albeit that she says that it was done under pressure that the contract would not otherwise proceed.
I agree with the view of the Learned Magistrate, namely that the respondent is entitled to its increase for the cost of living of $2,415.00.
Variation number 8 – cost of additional concrete as a result of location of a concrete structure below the ground surface during excavation for the footings
During excavation for the footings, a concrete structure, probably an old septic tank, was located below the surface. There is no evidence that the respondent was aware of this at the time of quoting on the building. Indeed, the likelihood is that the respondent was not aware of it.
The respondent was entitled to charge extra for a variation caused by the need to deal with the additional expense of the buried septic tank.
In the course of the additional excavation required for the footings, the sides of the trench collapsed and required labour for additional digging and extra concrete to fill the expanded trench and the removing of additional fill.
It has not been established that the collapse of the trench was the result of negligence on the part of the respondent. The suggested cause of the collapse by the applicant is the passing and re‑passing of machinery over the land. There is no evidence that establishes this and I find it to be an unlikely explanation.
The applicant also alleges that more concrete was used by the respondent (the cost of which was charged to the applicant), than was needed.
The evidence on the matter is extremely confusing. The onus is on the applicant to show that the amount of concrete used was excessive in the light of the production of accounts by the respondent as to the amount of concrete that it was supplied with and used.
On the applicant’s case, either the respondent or the third party, who delivered the concrete, is deliberately misleading the court as to the amount of concrete needed. The basis for this is said to be that by looking at photos and the plans it can be discerned that an excessive amount of concrete was used. This is against the assertion by the third party as to the amount of concrete he delivered.
Alternatively, if additional concrete to what was required was used, it is difficult to see what happened to it.
I am not prepared to find on the balance of probabilities, that excessive concrete was used.
I agree with the finding of the Magistrate that the variation in the amount of $2,234 is an appropriate one.
Variation number 10 and variation number 14 – builder’s claim for expansion joints and additional provision of trunk drains and electricity cabling
The contract allowed for only eight metres of drains and only eight metres of single phase wiring. The amount of each that was in fact required was in excess of eight metres and the respondent claims a variation for the additional amount used.
It was quite clear to the respondent at the time of entering the contract that the eight metres referred to in the contract bore no relation to the amount of electrical wiring and the amount of drain that would actually be required on the site. The contract clearly makes it appear to the home owner that eight metres would be sufficient for, respectively, the drains and the electrical wiring, when in fact, it would depend on the particular circumstances of the particular block in question. It is said by the respondent to be standard practice in the building industry, no doubt to allow for a fixed price contract and thereby to give a competitive advantage to the particular builder who is prepared to offer a fixed price contract.
The issue of whether compliance with standard practice in the building industry is sufficient, when the builder well knows that a variation will be inevitable was discussed in Homestead Award Winning Homes v The State of South Australia (1998) 72 SASR 299 in the judgment of Prior J.
In reference to the houses under scrutiny in that case his Honour said,
In each case, the contract signed by the parties was in a form prepared by the Housing Industry Association for the exclusive use of its members. By that contract, it was expressly agreed between the parties that footings had been costed on one of two bases. The first was where no engineer’s construction footing report had been obtained and provided to the builder before the date of the contract, the other when that had occurred. In the first situation, the footings quoted were ‘to be suitable for stable soils and a level site requiring no fill (except normal under-footing fill) and of sizes specified in the schedule’. If variations were required before the commencement of footing construction the variation was treated as a ‘builder proposed variation’, the builder giving the house purchaser written notice of the variation and specifying the increase or decrease to the contract price. In the case of these home owners, the schedule for their contracts stated the same footing dimensions for their houses, no engineer’s footing report having been provided at the time of the contract.
The unfairness sought to be identified before the Tribunal was the practice pursued by Homestead and other builders of having home purchasers accept the contract in the form so far summarised, without a real appreciation of the fact that the footings charges would be an additional amount above what the purchasers thought was the total price they were paying for the house they had agreed to buy. Evidence from Mr Beattie, in particular, was that the Office of Fair Trading was troubled by this particular clause in the Housing Industry Association standard form contract. It was the Department’s view that project-home builders should not be selling houses on the basis of a contract that listed footings as standard for a flat level site when the builders well knew that the actual footings cost would always require a variation and rarely result in a purchaser having to pay less than the contract price concluded by reference to footings costs suitable for stable soils and a level site requiring no fill.
His Honour continued:
The evidence satisfies me that Homestead was using the advantage to it of signing up a purchaser, often anxious about price, without properly alerting the purchaser to the reality of footings charges that would mean that the true contract price was more than the amount identified in the contract, that price most likely being varied upwards, in many cases . . . .
Building contracts are now governed by the Building Work Contractors Act 1995.
The respondent is a building work contractor within the meaning of s3 of the Act.
The applicant is a building owner within the meaning of s3 of the Act.
The contract between the applicant and the respondent is a domestic building work contract within the meaning of s3 of the Act.
Division 1 of the Act sets out the requirements in relation to domestic building work contracts.
In particular s29(1) provides as follows:
(1) Subject to this Division, a domestic building work contract must stipulate a specific price for the performance of the building work specified in the contract, being a price that is fixed and not subject to change, and the terms of payment.
Section 29(8) provides as follows:
(8) A price specified in a domestic building work contract that is an estimate only must be a fair and reasonable estimate.
Section 29(5) provides as follows:
(5)     Despite the preceding provisions of this section, it is lawful to include in a domestic building work contract a provision entitling the building work contractor to recover –
(a)     The actual cost to be incurred –
(i)     in acquiring materials specified in the contract;
(ii)    in performing works specified in the contract, together with an    additional amount not exceeding 10%, or such other percentage as may be      prescribed, of that cost; …
Section 32 of the Act provides certain statutory warranties that are implied in every domestic building work contract.
In particular s32(2)(c) provides that there is a warranty that the building work will be performed in accordance with all statutory requirements.
In my view it is contrary to the statutory requirements under s29(1) of the Act to stipulate a specific price for the contract knowing a variation in relation to the length of the electrical conduit and drains will inevitably occur without warning the building owner of its inevitability.
In my view there has been a breach of the statutory warranty to perform the work in accordance with all statutory requirements in relation to both the claimed variations for the drainage and the electrical conduit.
Section 37(6) of the Act provides that if there has been a breach or failure to perform a contract or warranty the Court may order remedial work or under s37(6)(b) require payment of an amount by way of compensation for the breach.
I would allow compensation to the applicants for the additional variations required to be paid in relation to both the provision of the electrical conduit and the drains.
Accordingly, I would vary the decision of the Magistrate by not allowing to the respondent an amount of $684.00 for the additional variation for the trunk drain nor $500.00 for the additional electrical conduit.
As to the claim for the expansion joints, no evidence has been led by the applicant to the effect that the respondent must have known that the expansion joints would inevitably be required, and thus I am not able to make a finding in favour of the applicant in relation to the provision of the expansion joints. I affirm the Magistrate’s decision in favour of awarding the respondent the sum of $355.00.
Variation number 11 - costs of disposal of trench soil
In this respect, there was a variation in the contract of $1,984.00.
It would appear that the claim of the applicant is that she had made arrangements for the removal of excess soil and that she was not advised that the respondent was going to do that and so did not get the opportunity to remove the soil at her own expense.
The Magistrate found that there is no obligation on the respondent to find out from the applicant if the applicant had made arrangements for the removal of the soil before doing so itself. I disagree. The applicant is made “responsible for [r]emoval of any rubbish or excess soil or fill from the site”. If the applicant has arranged to do that at a cheaper price the respondent cannot simply take it on itself to do it and then charge the applicant a higher price (see Exhibit A3 para 8.7.1). The amount sought by the respondent is $1,984.00. I would disallow it. However, it would have cost the applicant some money to remove the soil and to the extent that the respondent has done it, that has been a saving of something to the applicant. I would allow $300.00 paid to the respondent rather than the amount of $1,984.00 allowed by the Magistrate.
Interest claim
It is agreed that in relation to a claim for interest for late payment, the applicant was incorrectly overcharged by the respondent in the amount of $197.39.
I see no reason to vary the Magistrate’s finding in this respect.
Claim for brick mortar being the wrong colour
This claim did not receive the attention of the Learned Magistrate at all as part of his judgment. Essentially, the claim is that during construction the applicant indicated that the colour of the mortar she required was white. It is to be noted that in the contract the initial agreement was for grey mortar. (see A3 External Walls).
Clearly the mortar that has been supplied is not white mortar. There would now appear to be no dispute that white mortar was requested.
The respondent’s answer to this claim is that the applicant agreed a particular type of mortar and did not specify white sand to be used in the formulation of the mortar. White sand would have provided a mortar of a more obviously white colour than the use of yellow sand.
The home owner, however is not required to specify a particular brand of mortar or stipulate as to how the mortar is to be formulated. Very few home owners would know that the colour of mortar might depend at least in part, on the colour of the sand used to formulate it and the particular brand of material that is used to which the sand is added.
I accept that the applicant asked for white mortar. The house was not constructed with white mortar.
The applicant is entitled to damages for breach of contract to rectify the mortar to the colour that was specified. This is an amount of $7,880.00.
Summary
Accordingly, the judgment of the Learned Magistrate for the applicant is varied by the addition of $7,880.00 for the mortar.
There will be judgment for the applicant in the sum of $1,554.39 plus $7,880.00 total $9,434.39.
There will be judgment for the respondent on the counterclaim for $4,917.07 reduced by $2,868.00 which totals $2,049.07.
This means the respondent must pay to the applicant an amount of $7,385.32.
I will hear the parties as to costs.