Virginia Nursery Pty Ltd v Cassar Plumbing Pty Ltd

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
VIRGINIA NURSERY PTY LTD v CASSAR PLUMBING PTY LTD
[2013] SASCFC 22
Judgment of The Full Court
(The Honourable Justice Anderson, The Honourable Justice Peek and The Honourable Justice Nicholson)
5 April 2013
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - PERFORMANCE
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - THE CONTRACT - CONSTRUCTION OF PARTICULAR CONTRACTS AND IMPLIED CONDITIONS
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - AMOUNT
The appellant appeals a decision in the District Court in favour of the respondent - judgment was entered for the respondent in regard to a number of unpaid invoices by the appellant with reductions made for certain items within the invoices - a counterclaim by the appellant was rejected by the trial judge - the appellant appealed against this judgment on grounds including that the trial judge incorrectly construed the terms of the agreement, failed to find that the respondent discharged its obligations under the contract, and wrongly rejected uncontested evidence regarding losses by the respondent.
Held: Appeal dismissed - the trial judge correctly determined the amount owing on the invoices - the counterclaim was correctly rejected by the trial judge - the trial judge had the advantage of seeing and hearing the witnesses.
Fox v Percy (2003) 214 CLR 118, applied.

VIRGINIA NURSERY PTY LTD v CASSAR PLUMBING PTY LTD
[2013] SASCFC 22
Full Court: Anderson, Peek and Nicholson JJ
ANDERSON J.
Introduction

The appellant company Virginia Nursery Pty Ltd (“Virginia”) operates a plant nursery with a difference. Mr Jim Gencheff and his son are the shareholders and directors of the company. Although commencing as an ordinary nursery, the business has expanded considerably over the years and now comprises a large complex which includes the nursery but also contains such facilities as a gift shop, pet shop, cafe and restaurant and includes in the centre of the operation a mall, approximately 2,000 square metres in size. The total area occupied by the whole enterprise is 25 acres of which about 10 acres is dedicated to the retail aspects of the business.
The respondent company Cassar Plumbing Pty Ltd (“Cassar”) carries on the business of a plumber. It is a family business with Mr Joe Cassar operating as a plumber and his wife doing the bookwork.
The dispute in the District Court concerned plumbing work performed by Cassar for Virginia. No formal contract was ever entered into but invoices were rendered upon work being completed. The invoices covered both the aspect of labour and the materials used. Payment was made periodically but at acceptable intervals for Cassar.
In relation to this dispute Virginia has not paid the full amount comprised in three invoices and Cassar sues for the balance outstanding for the work and labour done and for materials paid for by Cassar.
After analysing the invoices and making findings the District Court judge found that Cassar was owed an amount in the sum of $65,680.60, which was reduced by the amount of $10,000 creating a total of $55,680.60. Judgment was entered for Cassar in that amount. There is no dispute in this appeal as to the findings in relation to the invoices except in relation to the amount of $10,000 taken from the total to compensate for Cassar installing wrong sized pipes. The judge found that $10,000 was an agreed amount. Virginia disputes that finding.
Virginia counterclaimed in the trial for a substantial sum of money in excess of $600,000 and considerable evidence was given in support of the counterclaim which alleged defective work by Cassar. The judge rejected the counterclaim by rejecting the evidence upon which it was based. The appellant has now agreed that the counterclaim is limited to $51,510.97, and provided the Court with a document (headed Evidence re Quantum of Counterclaim) of how that amount is calculated.
Virginia appeals on numerous grounds. Many of them relate to findings of fact. Mr Ross-Smith, counsel for Virginia, has related the grounds of appeal to three main headings. First, that the judge incorrectly construed the terms of the agreement, secondly, that he failed to find that Cassar did not discharge its obligations under the contract, and finally that he wrongly rejected uncontested evidence regarding alleged losses by Virginia in its counterclaim.
Background
Cassar had previously carried out plumbing work for Virginia on a number of occasions. On this occasion Mr Gencheff approached Mr Cassar regarding the installation of an underground fire service and below ceiling sprinkler system. Mr Cassar said he was reluctant to do the work because he was afraid of losing his work with other customers. He eventually agreed to carry out the work. It was agreed that the work would be done in stages. The work involved an underground fire service connected to a sprinkler system in the ceiling to what has been called the retail section of the building and the central mall. It was anticipated that the plumbing work would proceed as various stages of the building works were completed.
Cassar’s claim relates to labour and materials included in three invoices in March, May and September 2007. It was Mr Cassar’s case that he charged Virginia the cost of materials as they were charged to his company with no added mark up. On this particular job Mr Cassar carried out some plumbing work himself but also engaged other plumbers on a subcontract basis. Mr Cassar stated the hourly rate for labour was charged to Virginia at $50 or $60 an hour depending on what the subcontractors initially charged him. There is a dispute between the parties regarding this hourly rate. Mr Gencheff disputed the hourly rate that was agreed. He said it was $50 an hour. Most of the labour was charged at $60 per hour.
As indicated there is a dispute between the parties regarding the amount of $10,000 that was deducted from invoice 2788 dated 3 September 2007. Mr Cassar said he deducted this amount, as agreed upon by both parties, as the cost of remedying a mistake he made in installing the wrong diameter pipe for sprinkler droppers. Virginia disputes that the amount was agreed or that it was reasonable.
In addition to the disputed amount of $10,000, Virginia claimed reductions from those invoices because it alleged that Cassar had not proved an entitlement to certain items. The judge after hearing the evidence regarding the invoices allowed Virginia some reductions. The judge found a balance owing to Cassar, in the amount of $65,680.60. There is no need to set out the details of the invoices and the reductions made by the judge because they are no longer in dispute. Additionally, his honour found that the $10,000 reduction Mr Cassar made within his invoices for his mistake was sufficient repayment. Thus the judge found the final amount owed by Virginia based upon the three invoices less the deduction of $10,000 was $55,680.60. Judgment was entered for that amount.
As I have said the amount of the counterclaim is now limited to a maximum of $51,510.97. Many of the arguments which were made at trial regarding the quantum of the counterclaim are no longer relevant, and a lot of the judge’s careful analysis of the counterclaim as presented to him is likewise irrelevant.
At trial there was a dispute about what drawings were used by Mr Cassar to enable him to carry out the plumbing work. Mr Cassar gave evidence that he worked from a drawing but it was neither of the drawings produced to him in the trial, namely the drawings called Revision A and Revision B. He said he left the actual drawing from which he worked on the site when he left the site. This drawing was never produced.
Cassar ceased work and left the site when Virginia failed to pay the invoice amounts owed to Cassar. Virginia argued that based upon implied terms of the contract Cassar was not entitled to leave the site without completing the work initially agreed upon. Cassar argued that when payment was not made within a reasonable time it was entitled to cease work and leave the site.
After Cassar ceased work on the site, Virginia replaced and substantially redesigned the system that Cassar had begun installing, using the services of Combined Fire Systems. Virginia claimed at trial the total costs of this remedial work from Cassar. Virginia is now claiming in this appeal only certain costs of this remedial work, alleging that due to mistakes made by Cassar, as well as its failure to complete the work, Virginia suffered a loss having the new system installed. But the majority of the counterclaim presented to the judge is now abandoned.
The judge’s reasons
I now set out the relevant findings of the judge on the issues which have arisen in argument on the appeal:
(i) Amount unpaid for work performed
As I have mentioned there was a dispute regarding the amount charged for labour. Virginia contended at trial that the agreed labour rate was $50. His Honour found that the agreed labour rate was $60 per hour at [59]:
[59]I accept the evidence of Mr Cassar and find on balance that the plaintiff has proved that the agreed rate was $60 per hour. I am influenced by the fact that $60 per hour is the rate which the plaintiff had charged the defendant in a number of the invoices without demur. Also $60 per hour is the rate which the plaintiff paid the other plumbers. Why would the plaintiff agree to charge the defendant an amount which was less than the rate which the plaintiff paid to the other plumbers?
(ii) Deduction of $10,000 for wrong size piping used by Mr Cassar
As mentioned above the judge found the balance of the invoices owed to Mr Cassar by Virginia was $65,680.60, as set out below:
[87]I find that the plaintiff has proved the following claim:
Invoice 2770        $32,176.82
Invoice 2784        $11,257.41
Invoice 2788        $22,246.37
Total                $65,680.60
[102]Accordingly I find that the plaintiff's claim, subject to any liability to set off the defendant's claim, should be assessed at $55,680.60.
[237]I find that the only criticism of the plaintiff with any merit is that relating to the use of 20 mm copper pipe instead of 25 mm copper pipe for the sprinkler droppers. That issue was resolved by the agreed credit of $10,000.
The judge allowed a deduction of $10,000 on the basis that Cassar had installed 20 millimetre copper pipe when 25 millimetre copper pipe was the appropriate size.
The droppers are the short pieces of piping approximately 1 metre in length from the main overhead line in the roof which come down below the ceiling and to which are attached the sprinkler heads.
His Honour accepted at [97] that Mr Cassar’s admission as to the wrong diameter pipe, was only in respect of approximately 40 droppers in total. No size for the dropper pipes is shown on Revision A, as found by the judge at [96]. The judge also said at [89]:
[89]He said that pipe was installed at a time when he was asking for Lucid to give him more drawings. He said the plaintiff had done all the main runs and needed more precise drawings to put sprinklers in. The plaintiff had started installing droppers when a person, whose name he was not sure of, pointed out that the plaintiff had "got a couple of things wrong". He said "we got wrong droppers coming down, the pipe size is too small". Mr Cassar accepted what he was told without question and acknowledged that the droppers had to be replaced.
[Footnotes omitted]
The judge found that following a discussion between Mr Cassar and Mr Gencheff there was an agreement as to the reduction of $10,000 from the invoice total for the 5 millimetre error relating to the copper pipe. It is clear the judge accepted the evidence of Mr Cassar, in which he stated to Virginia he would reduce the bill by $10,000 for materials and labour. His Honour said that the agreement was corroborated by the endorsement of the words “minus for incorrect installation as agreed” on invoice 2788.
The judge goes on to find that even if there was no agreement, the sum of $10,000 was, on the evidence, sufficient compensation and accordingly deducted that amount. The amount of $10,000 was based on a calculation by Mr Cassar as to how long it would take to replace approximately 40 such droppers and the judge accepted that evidence.
(iii) The drawings
The judge made several findings in relation to the dispute as to which drawing was used by Cassar. His Honour found that initially Virginia had used the services of a firm of engineers called SECON but the fire sprinkler system was eventually designed and drawings prepared by Lucid Consulting Engineers Pty Ltd (“Lucid”). The proposed installation of the sprinkler system was to cover two discrete areas, that being the mall and the area referred to as the specialty shops or retail area.
The judge accepted Mr Cassar’s evidence regarding the drawings. His Honour found the drawing Mr Cassar used was not produced at trial. He also found the two which were produced to Cassar, Revision A and Revision B, both of which became exhibits in the trial, were not the drawings from which Mr Cassar worked.
The judge found Revision B, although containing more detail than Revision A, still only contained specifications relating to the diameter of the droppers in the main hall. As mentioned above these specifications were not included in Revision A. The judge found at [24]:
[24]Revision A was prepared in February 2007. Mr Cassar said that he first saw Revision A after he had started work on the fire service. Revision B was prepared in August 2007, after the plaintiff had ceased work. Revision B cannot have been the drawing which the plaintiff worked from.
[Footnotes omitted]
(iv) The counterclaim of alleged breaches of contract
The judge sets out the quantified counterclaim at [113]. The amount of the counterclaim has undergone some changes. As I have stated earlier, in the counterclaim filed as part of the defence the amount sought was $128,000. At trial that amount became, first, $632,863.02 and then, second, was reduced to a final figure of $507,126.40. Mr Ross-Smith has now conceded that the maximum amount of the counterclaim is limited to $51,510.97. The judge found much of the counterclaim as presented through expert witnesses called by Virginia related to work which went beyond that which Cassar had agreed to do. His Honour also found that there was no attempt made by Virginia to compare the subsequent work done with the costs which would have been associated with remedying the alleged defects.
Certain express terms and implied warranties alleged by Virginia were found to exist by the judge. However his honour found these terms were not breached by Cassar:
[256]The express terms referred to in para 2 and the implied warranties alleged in para 3 of the counterclaim are uncontroversial provisions and I have no difficulty in finding that those terms and warranties applied to the work carried out by the plaintiff. However those terms and warranties do not advance the defendants counterclaim.
As I mentioned above, the judge accepted Mr Cassar’s evidence regarding the drawings, stating at [257]:
[257]I find that the evidence does not establish that it was a term of the contract that the plaintiff would comply with Revision A as alleged in para 7 of the counterclaim. I also find that Revision A did not specify the requirements which the plaintiff relies upon.
The judge found that Cassar commenced installing the system in late 2006, even though Lucid had not provided the drawings which Mr Cassar had requested by this time.
The judge found that significantly the only non-compliance in the contract was the use of the 20 millimetre copper pipe instead of 25 millimetre pipe for the droppers at [237]:
[237]I find that the only criticism of the plaintiff with any merit is that relating to the use of 20 mm copper pipe instead of 25 mm copper pipe for the sprinkler droppers. That issue was resolved by the agreed credit of $10,000.
In regards to the allegations by Virginia that Cassar erred in many areas of the installation, the judge found at [258] that “it is clear that the design of the fire sprinkler system was the responsibility of Lucid” and Lucid were therefore responsible for issuing the instructions for the manner in which the work should proceed with regard to the installation of the sprinkler system. He found that Cassar was not responsible, nor did it play a role, in the fire sprinkler system design as alleged in the counterclaim at [255]:
[255]I find that the plaintiff was not retained to design the fire sprinkler system and that it had no supervisory role. There is no basis for the allegation in para 4.2 of the counterclaim.
His Honour found that Mr Pat Callisto from Lucid was responsible for the design and plan preparation of the fire sprinkler system. Mr Boere, also employed by Lucid, drew the fire services layout of the plans.
The judge in his reasons in paragraph [148] found that Virginia had, prior to receipt of Cassar’s statement of claim, never sought to have any of the work rectified. When Mr Cassar lodged his claim, allegations were made for the first time in the counterclaim of Virginia regarding the nature and the quality of the work performed by Cassar. The judge found that any additional work performed after Cassar left the site was not required as the result of any poor workmanship by Cassar but because of the failure of Lucid to design a proper system in the first place.
The judge analysed the evidence of each of the witnesses for the appellant in detail. He was clearly not impressed with the evidence given by those witnesses. After reviewing all of the evidence called in support of the counterclaim his honour found there was a lack of evidence to establish any alleged defective work performed by Cassar. He did not accept any opinion evidence put forward by Lucid which had responsibility for the design of the fire sprinkler system. He found that that firm was not independent and had an interest in protecting its own position. As I have said, the judge concluded that the only criticism of the plaintiff with any merit was that relating to the use of the wrong diameter copper pipe for which he had allowed the credit of $10,000: see reasons [237].
In regards to the allegation by Virginia that Cassar breached the contract by ceasing work before completion, his honour stated at [258]:
[258]I find that the plaintiff had no obligation to complete all of the works, either within a set timeframe, or at all. It had no obligation to design the fire sprinkler system or any other part of the defendant’s complex.
The judge made a number of findings in relation to this allegation, concluding that Cassar acted reasonably in ceasing the work for Virginia until requests for payment were met:
[264]I find that the contract was a "do and pay" arrangement in respect of that work which Mr Gencheff identified to Mr Cassar. That is that the plaintiff carried out work at the direction of Mr Gencheff, was paid an agreed hourly rate for labour and was to be reimbursed the cost of materials supplied.
[279]Mr Ross-Smith argued that the plaintiff was not entitled to abandon the site. I reject that submission. I find that the failure of the defendant to pay the three invoices within a reasonable time, in particular the failure to reimburse the plaintiff for the cost of materials purchased from Reece, was sufficient reason for the plaintiff to refuse to perform further work.
[283]I find that in all the circumstances it was reasonable for the plaintiff to refuse to perform any further work. Although my review of the invoices has resulted in a reduction of the plaintiff's entitlement there was still a sufficient debt to justify cessation of work by the plaintiff. At the time both parties believed that the full amount of the invoices was due.
[284]I find that the plaintiff has not incurred any liability to the defendant as a consequence of its refusal to carry out further work.

These are crucial findings in relation to Cassar’s decision to refuse to perform any further work and whether that decision was reasonable.
Arguments on appeal
1. Appellant
(i) Amount unpaid for work performed
Although Mr Ross-Smith had earlier contended that the agreed labour rate in the terms of the contract was $50 per hour, it is difficult to see how he can continue to pursue that aspect of the appeal. In his submissions to this Court he accepts the judge’s findings regarding the amount claimed on the invoices, which of course includes the rate claimed per hour for labour.
(ii) Deduction of $10,000 for wrong piping used by Mr Cassar
In regards to the finding of an agreement between the two parties to deduct $10,000 from Invoice 2788, to compensate for the use of the wrong diameter copper pipe, Mr Ross-Smith submits there was no agreement between Virginia and Cassar as to this amount. Mr Ross-Smith submits the trial judge did not adequately consider the evidence presented by Virginia on the counterclaim. He further argues that in any event $10,000 would not be sufficient to remedy the mistake by Cassar.
(iii) The Drawings
Mr Ross-Smith maintains that he had established through his cross-examination of Cassar that the drawing from which Cassar worked was Revision A. Mr Ross-Smith argued that because Cassar had worked from Revision A, it was a term of the contract Cassar would install the system according to the specifications on Revision A.
(iv) The counterclaim of alleged breaches of contract
Mr Ross-Smith argued that the judge failed to properly analyse the terms of the contract between Cassar and Virginia. He submitted that the judge erred in failing to find any breaches of the contract by Cassar. He further submitted that it was not simply a “do and charge” contract as found by the judge at [254].
Mr Ross-Smith analysed the contract into seven suggested terms as follows:
1.     An implied term in the contract that Cassar would complete the work he agreed to do, namely, the installation of the fire sprinkler system to practical completion.
2.     The work was to be performed in certain areas of the site as they became available.
3.     The work was to be done within a reasonable time of the sites being made available.
4.     The work was to follow that depicted in the drawing from which Mr Cassar worked which Mr Ross-Smith argued was Revision A.
5.     The agreed rate for Cassar to perform the work was $50 per hour.
6.     The materials would be charged by Cassar to Virginia at cost.
7.     Virginia would pay Cassar for the work within a reasonable time of being invoiced.
In relation to the amended counterclaim Mr Ross-Smith produced a summary relating to paragraph 13 of the counterclaim. His client has now abandoned its claim under paragraphs 13.1, 13.4 and 13.6.
The amount claimed for remedial work under paragraphs 13.2 and 13.3 totalled $48,383.47, which included new supplies totalling $5,252.47.
Under paragraph 13.5, the appellant also seeks a rebate on labour charged because of the suggested overcharge of $10 per hour. This came to $3,127.50 including the amount charged out for subcontractors. However in view of the concession made by Mr Ross-Smith concerning the judge’s findings about the respondent’s invoices I cannot see how this aspect can be pursued.
Mr Ross-Smith alleges Cassar was provided with an accurate drawing to be followed. He further alleges the judge made a mistake in his findings of fact, in that Cassar installed defective materials (in addition to the wrong sized copper pipes mentioned above) and thus the rectification costs claimed by Virginia are justified.
Mr Ross-Smith maintains that the appellant owed the respondent nothing at the time Mr Gencheff and Mr Cassar had the conversation regarding payment of the invoices. It should be noted that this submission is with the benefit of hindsight because no claim for rectification had been made at that point in time, and no complaint was made other than the incorrect pipe diameter of the droppers.
In relation to the cessation of work by Mr Cassar, Mr Ross-Smith argues that Mr Cassar had no right to walk off the job. Mr Ross-Smith submits that the conversation between Mr Gencheff and Mr Cassar regarding the fixing of defects and in particular Mr Cassar asking “When am I going to get paid”, was before the debt on the invoices was payable.
Mr Ross-Smith accepted that payment of the amount specified in the invoices had to be made within a reasonable time. The judge found that the last day that Cassar carried out work on the site was mid-May 2009. Mr Ross-Smith submits that this was a typographical error and should read May 2007. Mr Ross-Smith argues that the above conversations occurred shortly after this date.
At the time of those conversations Mr Ross-Smith submits that there was a part-paid earlier invoice of $30,000, $32,500 still outstanding, and there was another invoice payable around May 2007 for $80,000. As I have mentioned above, Mr Ross-Smith argued these amounts were actually not due to be paid by Virginia at the time of conversation between Mr Gencheff and Mr Cassar as the rectification costs (to be discovered later) were higher than the amounts claimed by Cassar.
2. Respondent
Mr Miller for the respondent took the Court to Revision A. He submits that the area at the top of the plan, namely the specialty shops, is the only area where Mr Cassar admits to using the wrong dimension of the droppers. There were 40 droppers in that area.
Mr Miller submitted that the work Mr Cassar undertook in the mall area is simply not shown on the Revision A plan. He emphasizes that Revision A was not the plan that Cassar worked from.
Mr Miller submits that Revision A does not specify what size the droppers should be and more importantly does not show the area in which the defective droppers were located.
Mr Miller submits that Cassar only made an admission during cross-examination that he used the wrong size droppers in the mall because he thought the topic of discussion was the droppers in the specialty area.
Mr Miller’s position is effectively that Mr Gencheff was in breach of the conditions of the contract, namely to pay the outstanding invoices within a reasonable time. Even though Mr Cassar conceded that there was defective work he told Mr Gencheff that he would come back to the site if he was paid $50,000.
Mr Miller did not suggest that either party went as far as repudiating the contract.
Mr Miller agrees that the contract which has been referred to by the judge as a “do and charge” was an agreement to do the fire installation work from beginning to end subject to payment being made regularly and within a reasonable time.
Mr Miller pointed to the evidence of Mr Callisto where he said in evidence:
Rob was commissioned to prepare a drawing, which he did, in about October 2006. That was the first preliminary drawing which was issued. There were some issues I think from the architect and from Jim regarding the aesthetics, so that drawing was then revised and reissued in a different design layout in … February 2007.
Mr Callisto said the function of that drawing was “not yet for a trade”. According to Lucid, Revision A was not an appropriate drawing to issue. Mr Miller then pointed to the evidence of Mr Boere where he says:
The purpose of A is the final agreed layout of the fire services.
There seems to be some confusion as to whether Revision A is a preliminary plan or a final agreed plan.
Mr Miller notes that the pipe that is alleged to be the wrong size is apparently still in place.
The respondent contends that no complaint can be made about the mall work because there was insufficient detail in the drawings to enable any work to be performed properly.
Mr Miller argued that the complexity involved in the design of the system was such that Cassar could not be held responsible and that it was reasonable that he relied on whatever drawings he was provided with. He could only work with what he was provided.
Consideration
(i) Amount unpaid for work performed
In my view, the dispute regarding what the rate for labour was has been resolved by Mr Ross-Smith’s clear statement to this Court that the judge’s analysis of the invoices and reductions he made from these invoices is not in dispute. This submission was made in answer to specific questions from the bench. This statement that the judge’s analysis of the invoices and reduction of $10,000 is not in dispute must include the rate at which labour was charged by Mr Cassar.
In any event, even if it was still open to argue the point I would not allow the appellant’s claim in regards to the labour rate of $50 per hour. I would still uphold the finding of the judge that Mr Cassar’s labour rate was $60 per hour. Mr Cassar paid most of his subcontractors at $60 an hour, and as the judge rightly said at [59] “...why would the plaintiff agree to charge the defendant an amount which was less than the rate which the plaintiff paid to the other plumbers?” It simply would not make sense, especially having regard to the fact that all materials were being charged at cost.
(ii) Deduction of $10,000 for wrong piping used by Mr Cassar
As I have discussed, the quantum of Cassar’s claim as found by the judge, namely $55,680.60, is not in dispute except as to the amount of $10,000 deducted because the wrong diameter pipe was used by Cassar. Virginia has submitted there was no agreement for a reduction of $10,000 between the parties as found by the judge.
The judge accepted Mr Cassar’s evidence regarding the agreement for a reduction of $10,000 over the evidence of Mr Gencheff. This finding was influenced by the wording on invoice 2788 dated 3 September 2007. It stated “minus for incorrect installation as agreed”. I consider that it has not been shown that the judge erred in accepting Mr Cassar’s evidence that $10,000 was the agreed amount. In my view there is no basis in the evidence which would permit an appellate court to overturn this finding of fact.
Further, I agree with the judges reasoning that it does not matter whether there was an agreement or not, as the amount of $10,000 represented a reasonable amount to compensate for the acknowledged error. Based upon Mr Cassar’s evidence, which the judge was entitled to accept, Mr Cassar calculated how much new material was needed and what it was going to cost, as well as how long it was going to take given there were approximately 40 droppers to be replaced. The judge concluded that these calculations were reasonable at [98]:
[98]If an allowance of 15 minutes is made for each dropper, the time to rectify 40 droppers would be 10 hours. At $60 per hour the labour cost would be $600. There would also be the cost of 40 x 25 mm copper pipes. On that basis the allowance of $10,000 which has been by the plaintiff made was not unreasonable.
I agree with the above calculations and the judge’s conclusion that $10,000 was reasonable in any event.
(iii) The Drawings
A considerable amount of time was devoted at the trial and during this appeal in determining what drawings were used by Cassar for its installation of the fire sprinkler system. The evidence from Mr Cassar is all to one effect. He says that the drawing he used was not produced in the trial and that the two which were produced to him, namely, Revision A and Revision B, both of which became exhibits in the trial, were not the drawings from which he worked. The judge accepted his evidence on that topic.
Mr Cassar repeated throughout his evidence that the drawing he used had “more detail through the guts”. He specifically dismissed the suggestion that he worked from the drawing called Revision A. He initially thought that he might have worked from a drawing called Revision B but he later acknowledged that he did not. He could not have worked from Revision B in any event because it was produced in August 2007, after Cassar left the site.
Mr Cassar said that he had asked Mr Gencheff for a drawing as the work progressed but that he never actually received what he had requested. It is clear that he used a drawing and on the findings made by the judge that drawing has not been produced.
The evidence before the judge was that whatever drawing was used there was an acknowledgment by Mr Cassar that he used the wrong diameter pipe for the droppers but this admission was only in respect of approximately 40 droppers in the retail area.
In regards to which plan Cassar worked from, the judge was correct in accepting Mr Cassar’s evidence on the topic.
The judge found Mr Gencheff’s evidence regarding the plan that was used by Mr Cassar was not helpful. It is clear that he did not pay any sufficient attention to this aspect. He acknowledges that there may have been a request for better plans but he cannot recall. Lucid, the company responsible for the drawings, claim that only three drawings were produced. The first was unsatisfactory, the second was Revision A and the third was the later Revision B. Mr Gencheff acted as the owner/builder and supervised the work done by all tradesmen on a daily basis. Mr Gencheff was unable to say what plan Mr Cassar had worked from.
The argument regarding the drawings is a little academic in any event. To a lay person Revision A does not look like the type of detailed drawing you would expect to find for such work. It is lacking in any fine detail including the essential sizes of the various diameter pipes to be used. In particular it does not contain the dimensions of the droppers. The diameter of the pipes is important because of the hydraulics involved in the flow of water and the pressure required to operate the sprinklers. Thus even if Cassar was found to be working from Revision A, as Mr Ross-Smith has submitted, it still does not contain enough detail to warrant the claims against Cassar, or allegations of breach of contract.
However, in my view the evidence points clearly to the conclusions made by the judge.
(iv) The counterclaim of alleged breaches of contract
Mr Ross-Smith submitted that the trial judge failed to make findings in relation to any specific terms that were part of the agreement regarding the agreed work to be undertaken with respect to the fire safety work as set out earlier. There was never a formal written contract between the parties; the agreement was verbal. The judge found that:
[252]For a number of years the relationship between the parties had been that the plaintiff would carry out work at the direction of the defendant, render accounts for the work done and materials supplied and in due course receive payment. The work in connection with the fire sprinkler system was no different from other work carried out by the plaintiff for the defendant.
The judge found that the following terms and warranties applied to the contract:
2.It was an express term of the Contract that the defendant by counterclaim would undertake the Contract Works:
2.1properly and skilfully;
2.2in accordance with the plans and specifications provided;
2.3as required by any Statute; and
2.4using goods and proper materials.
3.It was an implied warranty of the Contract that:
3.1the works would be performed in a proper manner to accepted trade standards and in accordance with the plans and specifications;
3.2all materials to be supplied for use would be good and proper; and
3.3the work would be performed in accordance with all statutory requirements.
He goes on to say at [265]:
[265]Terms can be implied as to matters such as the quality of the work but there were no express terms of the contract other than that it was a do and charge arrangement. In particular there was no specification of the scope of the work, no express term that the plaintiff would carry out all of the specified work in a particular manner or that the work would be completed by a certain date.
The judge found that Virginia did not establish any relevant terms of the contract to support its counterclaim. The judge appropriately took into account the relevant evidence of Mr Gencheff and Mr Cassar regarding the terms of contract. In my opinion, having reviewed the evidence of both parties, the evidence supports the findings of the judge. He said at [264]:
[264]… the plaintiff carried out work at the direction of Mr Gencheff, was paid an agreed hourly rate for labour and was to be reimbursed the cost of materials supplied.
I return to the terms of the contract argued for by Mr Ross-Smith and identified in paragraph [43] above. I deal with them in turn:
1.     There was in my view an implied term that Mr Cassar would complete the work but this was subject to him being paid for his work and reimbursed for materials within a reasonable time. However, even if the respondent breached a term that he would complete the work the appellant would still need to establish that it suffered loss as a result of any wrongful abandonment of the work by the respondent.
2.     On the evidence the work was performed on the sites as they became available.
3.     On the evidence the work was performed (until the dispute) within a reasonable time.
4.     Revision A was not the drawing from which Mr Cassar worked. Mr Gencheff was the on-site supervisor and responsible for providing the correct drawings. The drawing from which Mr Cassar worked was not produced by the appellant although it must have been at some stage within its custody and control.
5.     The agreed rate for labour was $60 per hour as found by the judge.
6.     The materials were supplied by Cassar to Virginia at cost.
7.     Virginia failed to pay Cassar for work and labour and for materials within a reasonable time.
I will now consider the arguments put to support the reduced counterclaim, even though most of the arguments dealt with by the judge have been conceded in this appeal.
Several witnesses were called by Virginia in the trial to support the expanded counterclaim as it then was. The counterclaim as finally presented to this Court consisted of the remediation work carried out by Combined Fire Services amounting to $48,000 in round figures. There had earlier been numerous expenses claimed by Virginia for additional work for which they held the respondent responsible. This additional work resulted in a figure of in excess of $600,000. It is to be noted that much of the work performed after Cassar left the site was in accordance with the plan known as Revision B which was of course not even in existence at the time Mr Cassar did the work.
The excessive amounts of these claims as put forward, and now abandoned, arose from the extravagant estimates of a Mr Centofani. In my opinion these estimates extended way beyond the work which Mr Cassar had agreed to do. When analysed the counterclaim, as presented to the judge, did the appellant’s cause no credit and led to the only logical result, namely, that it had to be abandoned in this appeal.
The main area of argument, now abandoned by the appellant, related to the extent to which defective work had to be replaced. It should be borne in mind that the appellant has not been able to prove that any work performed by Mr Cassar was done contrary to what was shown in the plans which he worked from. That is aside from the incorrect diameter pipe previously referred to.
As I have pointed out earlier in these reasons the plans from which Mr Cassar worked have gone missing. The appellant supervised Mr Cassar’s work on a daily basis and no complaints were made during the progress of the work.
In broad terms the appellant argued that the alleged defective work included incorrect diameter piping in areas other than the droppers previously referred to. It included an allegation of using incorrect spacing between sprinklers as well. It was suggested that these errors in total affected 75% of the ceiling area of the premises. It was said that the appellant was forced to replace “basically all lines that were below the main pipe”. That work involved removal of the ceiling in order to access the pipes.

Mr Ross-Smith properly conceded the difficulties he faced in proving his client’s loss. He made it clear that he was arguing for additional costs over and above what would have been paid to Mr Cassar to complete the work on the basis on which he was engaged. This concession was necessary because the nature of the project, that is the subject of the extensive additional costs, was quite different to the project which Mr Cassar was engaged in. It could be said that Virginia went and ordered a Holden and when not satisfied changed course and then ordered a Rolls Royce.
There is no evidence to show what the actual costs of completing the work, in the same manner as it was being performed by Mr Cassar, would have been. The whole nature of the works changed. Stainless steel was used instead of copper even though it had been agreed between Mr Gencheff and Mr Cassar that copper pipe should be used. No evidence was offered so as to enable a calculation to be made as to the cost of completing the work in copper.
I agree with the judge’s findings in this respect and do not find Virginia’s submission on the additional claims to be upheld.
His Honour made findings at [142], [143] and [144] regarding work done by Compliant Fire Services and rightly concluded that the quotation by that firm was of no assistance.
Likewise, the judge dealt with the evidence of Mr Henderson from Combined Fire Services at [175], [177] to [183] and at [190]. I agree with the judge’s conclusions that the rectification work described by Mr Henderson went far beyond the replacement of the droppers.
The judge dealt with the Lucid report at [193]. His Honour’s observations that the whole report was based on Revision B is pertinent. It can have no relevance in this matter. His Honour specifically dealt with 18 items in this report between [195] to [225]. I agree with his conclusion that the only item with any merit related to the incorrect diameter pipes for the droppers that have already been compensated for.
The judge rejected the whole of the estimates prepared by Mr Centofani of C. & W. Building Services Pty Ltd. That estimate was in the vastly extravagant amount of $632,863.02. His Honour criticised the report prepared by Mr Centofani. His Honour found that there was no evidentiary basis for the estimates made by Mr Centofani. His Honour said at [238]:
[238]The evidence does not establish any factual basis for the cost estimate in the C&W report. Additionally there is no evidence supporting the reasonableness of the cost estimates .For example Item 2.3 is described as:
Incorrect pipe size for fire sprinklers in the mall. Work is to be carried out by various trades and after hours (Outlines in the spreadsheet Details of Estimated Cost of Remedial Work in the Mall).
The judge then found:
[241]Item 2.4 in the C&W report is described as “Incorrect pipe size for fire sprinklers in the canopies”. The alleged cost of the work was $43,851.92. Again there is reference to a spreadsheet which forms part of Appendix 2. The spreadsheet relates to the installation of “a new 50 mm copper line next to the existing so as to maintain the fire sprinkler system fully operational". The total cost shown for that work in Appendix 2 was $98,132.11, not $43,851.92.
[242]Again the evidence does not establish either the need for the work claimed in Appendix 2 or the reasonableness of the charges.
[243]Specifically the evidence does not establish that the plaintiff was responsible for the installation of new 50 mm pipe. Lucid was responsible for the design of the system. Counsel did not address on the need to install 50 mm pipe. That part of the C&W report – like many other parts, has not been shown to be relevant to this action.
[Footnote omitted]
Finally His Honour said:
[249]I have no doubt that Mr Centofani is a successful builder. However, in his evidence Mr Centofani misunderstood the nature of the exercise that he had embarked upon in preparing a cost estimate for the purpose of this case.
[Footnote omitted]
Once again I agree with His Honour’s findings. Having looked at the reports prepared by the witnesses just referred to, which reports were to justify the extent of the expanded counterclaim, I find myself in total agreement with the judge. His Honour has rightly rejected the evidence for the reasons he gives.
In regards to whether Cassar had the right to cease work on the site, the judge made a finding which was to accept the evidence of Mr Cassar. That evidence was to the effect that because Virginia was behind in its payments, Cassar was entitled to refuse to carry out any further work until a certain amount was paid in reduction of the arrears. When that amount was not paid, although the job was incomplete, Cassar was entitled to walk off the job. The judge found that because of the absence of an express term stipulating a time period for the payment of invoices, it was to be implied that payment was required within a reasonable time. Despite requests by Cassar, Virginia failed to respond with any payment within a reasonable time.
His Honour found that Cassar’s last day on site was mid-2009. I have already mentioned that this should be May 2007.
By this time, there were three outstanding invoices for $62,599.90, $17,869.50 and $35,147.34 totalling $115,616.74. Virginia had part-paid $30,000 towards the 31 March 2007 invoice, making the total balance $85,616.74. As I have set out earlier the judge deducted certain amounts from these invoices based on his review of the invoices and came to the final amount of $55,680.50, after the deduction of $10,000.
In addition the judge made these findings:
[281]It is important to note the requirements of the contract. The plaintiff was required to purchase and pay for the necessary material itself. Until such time as the defendant made payment for those purchases the plaintiff was financing the defendant’s project for no consideration.
[282]At the time when the plaintiff refused to carry out any further work the defendant was indebted to the plaintiff in a considerable sum. Mr Gencheff understood that the plaintiff was chasing him for $86,000. A significant proportion of that debt was for costs which the plaintiff had incurred with Reece.
[283]I find that in all the circumstances it was reasonable for the plaintiff to refuse to perform any further work. Although my review of the invoices has resulted in a reduction of the plaintiff's entitlement there was still a sufficient debt to justify cessation of work by the plaintiff. At the time both parties believed that the full amount of the invoices was due.
[Footnote omitted]
I agree with His Honour’s reasoning and conclusions.
Mr Cassar told the Court that he told Mr Gencheff that he knew he had made a mistake but he needed to be paid for the materials he had already paid for and if he was paid the amounts owing he would continue and rectify the work.
Mr Gencheff’s refusal to pay until an extensive range of repairs were carried out does not ring true. He was the on-site supervisor and apart from the acknowledged mistake as to the diameter of the pipes, Mr Gencheff made no other allegations of faulty work until much later. This is all convenient ex post facto reasoning by Mr Gencheff. The judge was right to reject it.
Conclusion
In my view it cannot be shown that the judge has erred in any way. He examined the invoices carefully and made the necessary deductions in favour of the defendant which is no longer under challenge. He then allowed the defendant a credit of $10,000 for the wrong diameter copper pipe. I have found that even if there was no agreement the amount of $10,000 as deducted was reasonable based on the acceptance of Mr Cassar’s evidence.
In relation to the counterclaim the judge’s reasons are extensive for rejecting the evidence given on behalf of the defendant. I have set out much of this reasoning earlier in these reasons. Much of the counterclaim has been abandoned.
In my view the judge was quite correct in his conclusions as to both the claim and the counterclaim and the appeal should be dismissed.
PEEK J. I agree that the appeal should be dismissed for the reasons given by both Anderson and Nicholson JJ.
NICHOLSON J: I agree that the appeal should be dismissed for the reasons given by Anderson J. I provide the following brief additional remarks.
Important issues of fact determined against the appellant by the trial Judge and based on his Honour’s acceptance of Mr Cassar’s evidence and rejection of the evidence given by Mr Gencheff and other witnesses called on behalf of the appellant, included the following.
The question of the agreed hourly rate.
The questions of the agreement reached to allow the appellant a $10,000 deduction from the amount otherwise properly invoiced by and due to the respondent and whether or not this was a reasonable amount in any event.
The question of the drawings available to Mr Cassar at the time that he performed work, which was highly significant to the issue of the extent to which, if any, the respondent failed to comply with its contractual obligations with respect to the works it did complete.
The Judge expressed or implied on a number of occasions throughout his judgment that he accepted the evidence of Mr Cassar on a topic.[1] He did not at any time expressly reject his evidence. Whilst at no time did the Judge expressly advert to matters of demeanour or impressions about credibility of either Mr Cassar or the appellant’s witnesses including Mr Gencheff, it must be accepted that he did have the advantage of seeing and hearing the witnesses.
[1] For example, [2012] SADC 99 at [35], [59], [99], [138], [239], [251], [259], [263] and [267].
In Fox v Percy[2] Gleeson CJ, Gummow and Kirby JJ said this.
[2] (2003) 214 CLR 118 at [25]-[29], citations omitted.
Within the constraints marked out by the nature of the appellate process, the appellate court is obliged to conduct a real review of the trial and, in cases where the trial was conducted before a judge sitting alone, of that judge’s reasons. Appellate courts are not excused from the task of “weighing conflicting evidence and drawing [their] own inferences and conclusions, though [they] should always bear in mind that [they have] neither seen nor heard the witnesses, and should make due allowance in this respect”. In Warren v Coombes, the majority of this Court reiterated the rule that:
“[I]n general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge but, once having reached its own conclusion, will not shrink from giving effect to it.”
As this Court there said, that approach was “not only sound in law, but beneficial in … operation”.
After Warren v Coombes, a series of cases was decided in which this Court reiterated its earlier statements concerning the need for appellate respect for the advantages of trial judges, and especially where their decisions might be affected by their impression about the credibility of witnesses whom the trial judge sees but the appellate court does not. Three important decisions in this regard were Jones v Hyde, Abalos v Australian Postal Commission and Devries v Australian National Railways Commission. This trilogy of cases did not constitute a departure from established doctrine. The decisions were simply a reminder of the limits under which appellate judges typically operate when compared with trial judges.
The continuing application of the corrective expressed in the trilogy of cases was not questioned in this appeal. The cases mentioned remain the instruction of this Court to appellate decision-making throughout Australia. However, that instruction did not, and could not, derogate from the obligation of courts of appeal, in accordance with legislation such as the Supreme Court Act applicable in this case, to perform the appellate function as established by Parliament. Such courts must conduct the appeal by way of rehearing. If, making proper allowance for the advantages of the trial judge, they conclude that an error has been shown, they are authorised, and obliged, to discharge their appellate duties in accordance with the statute.
Over more than a century, this Court, and courts like it, have given instruction on how to resolve the dichotomy between the foregoing appellate obligations and appellate restraint. From time to time, by reference to considerations particular to each case, different emphasis appears in such reasons. However, the mere fact that a trial judge necessarily reached a conclusion favouring the witnesses of one party over those of another does not, and cannot, prevent the performance by a court of appeal of the functions imposed on it by statute. In particular cases incontrovertible facts or uncontested testimony will demonstrate that the trial judge’s conclusions are erroneous, even when they appear to be, or are stated to be, based on credibility findings.
That this is so is demonstrated in several recent decisions of this Court. In some, quite rare, cases, although the facts fall short of being “incontrovertible”, an appellate conclusion may be reached that the decision at trial is “glaringly improbable” or “contrary to compelling inferences” in the case. In such circumstances, the appellate court is not relieved of its statutory functions by the fact that the trial judge has, expressly or implicitly, reached a conclusion influenced by an opinion concerning the credibility of witnesses. In such a case, making all due allowances for the advantages available to the trial judge, the appellate court must “not shrink from giving effect to” its own conclusion. Finality in litigation is highly desirable. Litigation beyond a trial is costly and usually upsetting. But in every appeal by way of rehearing, a judgment of the appellate court is required both on the facts and the law. It is not forbidden (nor in the face of the statutory requirement could it be) by ritual incantation about witness credibility, nor by judicial reference to the desirability of finality in litigation or reminders of the general advantages of the trial over the appellate process.
In considering the evidence relied on by the parties generally including, in particular, as relevant to the three factual issues identified above, I have had regard to these principles which are binding on an intermediate appellate court.
It can be said that the evidence on the three topics identified above, both oral and documentary, was conflicting and left, ultimately, in a confused state. Nevertheless, it cannot be said, in my view, that any of the conclusions reached by the trial Judge based on, in effect, his preference for the evidence of Mr Cassar over that of the appellant’s witnesses, is contradicted by incontrovertible facts or uncontested testimony. Nor are the findings glaringly improbable in the context of the parties’ relationship as demonstrated by the evidence as a whole. Nor can any of the findings be said to be contrary to compelling inferences that might be drawn from other established facts. On the contrary, in my view, there was well sufficient evidence to justify all of the Judge’s findings, including those specifically identified above, on a balance of probabilities.
During the appeal, the appellant’s counterclaim was distilled so as to include only a claim for rectification of alleged poor work by the respondent. As counsel for the appellant pithily put it at the very end of his submissions “the claim is for the cost of the rectification works to fix what Cassar installed”. As such, any claim for the difference in cost of the work as ultimately completed, as compared with the cost that would have been incurred had Mr Cassar completed that work, has been abandoned. I agree with both the trial Judge and Anderson J that the evidence does not demonstrate that any work performed by Mr Cassar was defective (other than with respect to the droppers problem, the subject of the $10,000 compensation). Nor, in any event, has the appellant proved costs of rectification of any alleged defective work as opposed to costs of the replacement and different works, as has been explained more fully by the trial Judge and Anderson J.

[2013] SASCFC 22

5 April 2013

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