Unique Building Pty Ltd v Brown

Case [2010] SASC 106

SUPREME COURT OF SOUTH AUSTRALIA

(Full Court)

UNIQUE BUILDING PTY LTD ACN 008 107 837 v BROWN & ANOR

[2010] SASC 106

Judgment of The Full Court

(The Honourable Justice Sulan, The Honourable Justice Vanstone and The Honourable Justice Layton)

21 April 2010

CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - PERFORMANCE OF WORK - REMEDIES FOR BREACH OF CONTRACT - DAMAGES

DAMAGES - GENERAL PRINCIPLES - DIFFICULTY OF ASSESSING DAMAGES

Appeal against decision of a Judge as to liability and also the basis for assessment of damages for breach of contract – the appellant building company entered into an Agreement which consisted of three lump sum contracts to build four townhouses for the respondents – Judge found serious defects in building work constituting breaches of contract by appellant and that respondents were entitled to terminate the contracts – whether Judge erred in finding the appellant liable – new point raised on appeal as to whether respondents had the right to terminate the Agreement when allegedly in breach of contractual terms by failing to pay a progress payment due under the Agreement – whether this new point should be considered on appeal – whether respondents were in breach – respondents lodged new plans with Council varying original buildings, after building site abandoned by appellants – whether Judge erred in assessing damages as the cost of demolition, rebuilding and the additional cost to complete the Agreement.

Held:  Appeal dismissed – a party may not, except in exceptional circumstances, raise an argument on appeal that had not been put before the Judge – rare exceptions to this rule do not apply here – in any event, on a proper construction of the Agreement, respondents were not in breach at the time of terminating the Agreement – the only reasonable way to bring about conformity with the contract was by demolition and rebuilding – what the respondents decide to do with the damages is a matter for themselves with the qualification that it is of restricted relevance in determining reasonableness.

University of Wollongong v Metwally (No 2) (1985) 59 ALJR 481; National Australia Bank Ltd v KDS Construction Services Pty Ltd (1987) 163 CLR 668; Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; Tabcorp Holdings Pty Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; Tito v Waddell (No 2) [1977] Ch 106; Westpoint Management Ltd v Chocolate Factory Apartments Ltd [2007] NSWCA 253; Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344; Bellgrove v Eldridge (1954) 90 CLR 613; De Cesare v Deluxe Motors Pty Ltd (1996) 67 SASR 28, considered.

UNIQUE BUILDING PTY LTD ACN 008 107 837 v BROWN & ANOR
[2010] SASC 106

Full Court:       Sulan, Vanstone and Layton JJ

  1. SULAN J:             I agree with the reasons of Layton J.  I agree with the orders that she proposes.  I would dismiss the appeal.

  2. VANSTONE J:     I would dismiss the appeal.  I agree with the reasons provided by Layton…

Continue reading Unique Building Pty Ltd v Brown

Sign in free to access the full text

Details
AGLC
Unique Building Pty Ltd v Brown [2010] SASC 106
Case
[2010] SASC 106
Decision Date

CaseChat Overview and Summary

The appeal in Unique Building Pty Ltd v Brown concerns a dispute between the appellant, a building company, and the respondents, a group of individuals who contracted the company to build townhouses. The central issue was whether the respondents had the right to terminate the construction agreement when they were allegedly in breach by not paying a progress payment due under the agreement. The second major issue was the proper basis for assessing damages, with the appellant arguing that the Judge erred in awarding damages for demolition and rebuilding instead of repair and rectification.

The appeal hinged on two critical questions. The first was whether the respondents had the right to terminate the Agreement when they themselves were in breach, as they had not paid a progress payment due under the Agreement at the time they issued notice to terminate. The second question was about the correct method for assessing damages, with the appellant challenging the Judge’s decision to award damages based on the cost of demolition and rebuilding rather than repair and rectification. The appeal did not challenge the factual findings of the Judge nor did it allege any errors of law. Instead, it questioned the inferences drawn from the facts, the application of the law to those facts, and the conclusions reached by the Judge.

The court found that the respondents had the right to terminate the Agreement even though they were in breach of contractual terms by not paying a progress payment. The court reasoned that the respondents had made efforts to resolve the issue of the referee's nomination, which showed their intention to adhere to the agreement's terms. The court also upheld the Judge’s assessment of damages, stating that the significant defects and failures to conform with the Agreement necessitated demolition and rebuilding rather than repair and rectification. The court concluded that the Judge's reasoning and conclusions were correct and dismissed the appeal.

In light of the findings, the court ordered that the appeal grounds 1 and 2 be rejected and dismissed, and grounds 3, 4, and 5 of the appeal be dismissed. This decision upheld the original ruling and the method of assessing damages.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

The appeal is limited to two major issues. First, whether the respondents had the right to terminate the Agreement at a time when they were allegedly in breach of contractual terms, as they had not paid a progress payment due under the Agreement (Progress Claim No 3) at the time when notice to terminate the Agreement was given. The second question for consideration is the proper basis for assessment of damages. The appellant contends that the Judge erred in finding that damages should be awarded on the basis of demolition and re‑building, rather than the cost of repair and rectification. Essentially, the appellant did not challenge the factual findings of the Judge, nor did it allege any error of law. The appellant challenged the inferences which were drawn on facts as discussed hereafter, the application of the law to those facts and the Judge’s conclusions.Brief background and overview The first respondent, Michael Brown, is an architect. He acquired a portion of land to provide housing for himself, the second respondent, David Brown, and his sister, Roslyn Brown. The land is located in the CBD of Adelaide. The land was known as, and is referred to in the reasons of the Judge as, Lots A, B, C and D, Moger Lane. [1] Michael Brown was the registered proprietor of Lots A and C; Roslyn was the proprietor of Lot B and David Brown owned Lot D.[1] Certificates of Title Register Book Volume 5800, Folio 774, 776, 770 and 775. Michael Brown designed the four townhouses. On 21 December 2001, the respondents entered into three separate contracts. Michael Brown’s contract for two townhouses on Lots A and C was for a total sum of $340,000. David Brown’s contract for Lot D was $120,000 and Roslyn’s contract for Lot B was $155,000. The terms of each contract, apart from price, were identical. For convenience in these reasons, I refer to the contracts collectively as the Agreement. The date for practical completion of the Agreement was to be 18 July 2002, but was later amended to be 30 July 2002. I will return to an analysis of the terms of the Agreement later, however for convenience, the clauses of the Agreement which are relevant to this appeal are set out in Schedule 1 to these reasons. The site was handed over to the appellant on 14 January 2002. An important physical feature of the building site was that it had very tight dimensions. The width of the building site was only some 13.4 metres, to accommodate the four residences. Chronology A relevant chronology against which to consider the issues on appeal is as follows. In early April 2002, the floor slab was installed for the development. The respondents allege that there were a number of problems with the floor slab, which is discussed in greater detail hereafter. Briefly, it was said that the slab was too high, it restricted access, it encroached upon adjoining land on both the western and eastern elevations, and that the step did not comply with the drawings. On 23 May 2002, the appellant issued a claim to the respondents seeking a progress payment of $109,483.28 (Progress Claim No 1).[2] The respondents paid $69,405.63, but disputed the balance of the progress payment. In short, the appellants disputed the claim for costs related to what the parties called the “rapid walls”, on the grounds that the rapid walls material was unfixed and because of some extra site preparation costs. On 31 May 2002, they sent a memorandum[3] to the appellant indicating that they were disputing Progress Claim No 1 and that, pursuant to clause 10.3.1 of the Agreement, they would put the matter before a referee. They enclosed with that memorandum a ‘Notice of Referral to Referee’ addressed to the appellant.[4] In the memorandum, the respondents drew attention to the fact that the Agreement nominated the referee as being “the President of the Australian Institute of Architects” and that there was no power of the President to nominate others. This was clearly very restrictive if the President was not available. They then requested permission from the appellant to vary the Agreement to allow the President to nominate another as referee. They also enclosed an Agreement to vary the referee and requested that this be counter-signed.[5][2] AB 4, 914.[3] AB 4, 942.[4] AB 4, 944.[5] AB 4, 945.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

These defects and failures to conform with the Agreement should be assessed individually and collectively. Save for the defect in the cross-walls which has already been addressed, the remaining instances of non-compliance are not simply minor shortfalls of conformity such that repair work would reasonably rectify the defects or departures from the Agreement. These departures and defects could only be reasonably rectified to bring the building into conformity by demolition and rebuilding. The conclusions and detailed reasoning by the Judge was correct.Conclusions I would make the following orders:1I would reject the right of the appellant to pursue grounds 1 and 2 of the Notice of Appeal and in the alternative I would dismiss those grounds of appeal.2I would dismiss grounds 3, 4 and 5 of the appeal.Schedule 1…5.3.1All instructions given by the Proprietor to the Builder shall be in writing, and signed by the Proprietor, and must be within the general scope of the Works as contemplated by this Agreement.5.3.2The Builder shall comply promptly with all Proprietor’s instructions.…6.7QUALITY OF WORK AND MATERIALSPrior to Practical Completion, any dispute between the parties that cannot be resolved is to be referred to the Referee in Accordance with Section 13.6.8VARIATIONSThe Builder shall not vary the Works without written instructions. The Proprietor without invalidating this Agreement may instruct Variations.Notwithstanding the previous provisions of this clause the Builder shall not be obliged to make any Variation which is beyond the scope of this Agreement (except a Variation arising from the provisions of clauses 3.2 or 6.3) if within 5 days of receiving the instruction to do so the Builder shall make to the Proprietor written objection stating reasons provided always that such objection is not made unreasonably or vexatiously.6.9MAKING GOOD DEFECTSAny defects, excessive shrinkages, and other faults apparent and notified in writing by the Proprietor to the Builder during the Defects Liability Period and which are due to materials or workmanship not in accordance with this Agreement shall be made good by the Builder within 20 days of the date of notification. Unless the Proprietor shall otherwise instruct the Builder shall make good at the Builder’s own cost.…SECTION 10 PAYMENT AND ADJUSTMENT OF THE CONTRACT SUM10.1PROGRESS CLAIMSAt intervals of not less than the period stated in item K of the Appendix the Builder may submit to the Proprietor claims for progress payments including:10.1.1A detailed statement by trades of the Contract Sum and showing the Builder’s valuation of work done by trades including work completed on agreed Variations;10.1.2evidence of compliance with clause 8.9;10.1.3certification by the Builder that the work has been carried out in accordance with this Agreement;10.1.4a schedule of Contract Sum Adjustments required by sub-clause 10.6.2.…10.3 PROGRESS PAYMENTS10.3.1Within the time stated in Item L1 of the Appendix of receiving any Progress Claim, the Proprietor shall pay to the Builder the amount stated on the Claim or any part of such claim that is not in dispute. Any part of such claim disputed by the Proprietor shall be referred to the Referee.10.3.2Any payment made pursuant to sub-clause 10.3.1 shall be subject to adjustment for Retention in accordance with the provisions of sub-clause 10.3.3 or clause 10.12.10.3.3Where a Lending Institution is named in Item B3 of the Appendix, Progress Payments shall be at the rate that is customary for such Lending Institution, and as set out in Item L2 of the Appendix, provided that the rate shall be the Lending Institution’s reasonable valuation of the Works executed and material incorporated in the Works less any payment previously made, and less any moneys, not exceeding 10 percent, normally retained by the Lending Institution.10.3.4Should the Builder request a Progress Payment which necessitates an inspection on behalf of the Proprietor by a person appointed by the Lending Authority, and such inspection is later found to have been premature, then the cost of such inspection shall be borne and paid by the Builder and if not so paid, may be deducted by the Proprietor from any Progress Payment due and owing to the Builder.10.3.5The making of any payment to the Builder shall not be taken as proof or admission of the acceptability of the Works, or that the Works have been executed in accordance with the Drawings and Specifications but shall be taken to be a payment on account.10.4 FAILURE TO PAY PROGRESS CLAIMSShould the Proprietor fail to pay the Builder in accordance with the provisions of clause 10.3 then the Builder shall be entitled to interest at the rate stated in Item M of the Appendix compounding monthly upon all overdue payments from the date on which such payments were or should have been due until the date of payment.…12.2PROPRIETOR’S NOTICE OF BUILDER’S DEFAULTIf the Builder makes default in any one or more of the following respects:12.2.1If the Builder, without reasonable cause, wholly suspends the carrying out of the Works before Practical Completion thereof; or12.2.2fails to proceed diligently with the Works; or12.2.3fails to comply with the Proprietor’s notices; or12.2.4is in substantial breach of the provisions of this AgreementThen the proprietor may given written notice sent by certified mail to the Builder specifying the default.12.3 DETERMINATION BY PROPRIETORIf the Builder either shall continue in default for 10 days after receipt of a notice issued in accordance with clause 12.2 or shall at any time repeat such default (whether previously repeated or not) then the Proprietor without prejudice to other rights or remedies may within 10 days of such continuance or repetition by written notice sent by certified mail to the Builder immediately determine the employment of the Builder under this Agreement provided that notice pursuant to this clause shall not be given unreasonably or vexatiously. If the Proprietor is at the time of such notice in breach of this Agreement, then the said notice of determination of the employment of the Builder shall be deemed to be void and of no effect.…12.6CONSEQUENCES OF DETERMINATION BY PROPRIETORIn the event of determination under clauses 12.3, 12.4 or 12.5, then without prejudice to any other rights which the Proprietor may possess, the Proprietor shall be entitled:12.6.1To purchase materials and goods and employ persons as necessary to carry out and complete the Works and to use all temporary buildings, plant, tools, equipment, materials and good intended for and delivered to the Works.12.6.2To have the Builder assign to the Proprietor without payment but subject to any necessary consent the benefit of any agreement for the supply of materials or goods and/or the execution of work for the purposes of this Agreement and to pay any supplier or sub-contractor for any materials or goods delivered or work executed (whether before or after the date of determination) insofar as payment has not already been made by the Builder.12.6.3To have the Builder, when so required and not before, remove from the Works any temporary buildings, plant, tools, materials and goods.12.6.4Not to make any further payment to the Builder until completion of the Works.As soon as practicable after completion of the Works, the Proprietor shall ascertain and notify the costs properly incurred by the Proprietor under this clause, any other expense and/or loss caused to the Proprietor by the determination and any other liability of the Builder to the Proprietor under this Agreement. Should the total of such amounts and any amounts already paid to the Builder result in a total amount in excess of or less than that which would have been otherwise payable under this Agreement, then the difference shall be a debt payable by the Builder to the Proprietor or the Proprietor to the Builder as the case may be.12.7 DETERMINATION BY BUILDERWithout prejudice to any other rights and remedies which the Builder may possess if the Proprietor shall make default in any one or more of the following respects:12.7.1If the Proprietor fails to make any payment due under the provisions of clause 10.3 within 10 days of its becoming due or commits any other breach of this Agreement, or12.7.2If the Proprietor or any person for whom the Proprietor is responsible seriously interferes with or obstructs the carrying out of the Works or fails to more than 20 days to make the Site available for the Builder in accordance with clause 1.4; or12.7.3If the Proprietor fails to produce evidence of the capacity to pay the Contract Sum in accordance with sub-clauses 1.4.5 and 10.10.1; or12.7.4If the Proprietor intimates that he is unable or unwilling to make any payment required by this Agreementthe builder may give a written notice sent by certified mail to the Proprietor specifying the default and immediately suspend the carrying out of the works and if after 10 days of receipt of such notice the Proprietor has not remedied the default then the Builder may by notice in writing left at or forwarded by certified mail addressed to the Proprietor immediately determine the employment of the Builder under this Agreement provided that notice pursuant to this clause shall not be given unreasonably or vexatiously.…SECTION 13 DISPUTE RESOLUTION AND ARBITRATION13.1 REFEREE (Refer to sub-clause 1.2.4)13.1.1Subject always to the provisions of sub-clause 13.1.3 any dispute or difference whatsoever that shall arise from the performance or as to the meaning of this Agreement before Practical Completion shall be submitted to the Referee.13.1.2In the event that any dispute or difference whatsoever shall arise from the performance or as to the meaning of this Agreement after Practical Completion and before Final Payment such dispute may be submitted to the Referee.…13.1.5the Referee’s determination shall be binding on both parties unless it is overruled by an Arbitrator’s Award.…13.2 LETTER OF DISPUTE AND RESPONSE13.2.1The Claimant shall give written notice, detailing the subject of the dispute and the proposed remedy, to the Referee and the Respondent.13.2.2Within 5 days of receipt of the Claimant’s notice the Respondent shall provide to the Referee and the Claimant a written reply to the notice of dispute.13.3 PROCEDUREThe following rules shall apply to the process of resolving the dispute.13.3.1Neither party shall be represented by a legal practitioner.13.3.2In submitting the notice to the Referee the Claimant shall pay the Referee’s fee in full. The Referee is not obliged to act until this sum has been received.13.3.3The Referee shall give equal opportunities to both parties to put their case.13.3.4The Referee shall be allowed access to the Works and the subject of the dispute.13.3.5The Referee’s determination including allocation of the costs of the reference shall be provided in writing, without reasons, to both parties.13.4 DETERMINATION BY THE REFEREE13.4.1The Referee shall determine the dispute or difference no later than 5 days from receipt of the Respondent’s reply or 10 days from receipt of the Claimant’s letter of dispute and if appropriate after discussion with both Claimant and Respondent.13.4.2The Referee may determine that the dispute or difference shall be arbitrated in accordance with clause 13.5.13.4.3The Referee’s award and costs of the reference as allocated by the Referee may be dealt with as an adjustment to the Contract Sum Adjustment.13.5 ARBITRATION13.5.1Notwithstanding anything to the contrary in clauses 13.1, 13.2, 13.3 and 13.4 neither party to this Agreement shall be prevented from submitting to arbitration or litigation in accordance with clause 13.6 a dispute concerning the determination of the Builder’s employment under this Agreement.13.5.2After Practical Completion either party to this Agreement may submit to arbitration or litigation any dispute arising out of this Agreement in accordance with clause 13.6.…13.13 PROCEEDING WITH THE WORKSNotwithstanding the foregoing provisions of this Section the Builder shall if the Works (including the making good of any defects under clause 6.9) have not been completed at all times (subject as otherwise may be provided for in this Agreement) proceed without delay to continue to perform and execute the Works and in so doing shall comply with all written instructions provided that the same shall not touch upon or involve the subject matter of the dispute or difference in respect of which notices have been given pursuant to clause 13.2 and 13.6.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.