Wilson v Pilgrim No. Scciv-02-453

WILSON v PILGRIM
[2002] SASC 205
Magistrates Appeal
BLEBY J
Background

The respondents are the owners of a house property at Mallala. One or both of them has occupied the premises since about April 1970. The male respondent had carried out some extensions to the original house in 1971. That building work was approved by the Mallala Council. It comprised an extension at the rear of the premises, the external timber frame for the walls being mounted on timber stumps. The floor was a non-reinforced concrete floor. The external cladding was cement weatherboard, and the interior walls were lined with gyprock or cement sheeting. The male plaintiff had also installed a toilet, a wash basin and hot water service, with a dividing wall to create the water closet. He had intended to sub-divide the area further into a bathroom, shower and toilet, laundry and sewing area, together with an enclosed porch way. However, those divisions were never completed by him.
The appellant is a builder. In 1996 he agreed with the respondents to carry out some limited renovation work on the extensions which the male respondent had built. There was a dispute as to the terms of the contract which was resolved in the Magistrates Court and which does not concern this appeal. In general terms, the scope of the works comprised the removal and replacement of the existing concrete floor, the installation of new plumbing, the installation of a new ceiling and the recladding of the internal walls of the extension.
Shortly after the building work commenced the appellant ascertained that the work originally intended to be carried out in relation to the replacement of the concrete floor was complicated by the existing footing system. Without any formal variation to the contract, he proceeded to replace that system with a thickened edge to the concrete floor, the timber framed walls and roof in the meantime being supported by ropes and bricks.
As the work progressed, disputes arose between the appellant and the respondents. On 9 December 1996 building work was suspended after a heated discussion on the site.
Various discussions and investigations took place which revealed, according to the advice of the respondents’ engineers, that the new floor and replacement footings did not comply with relevant building regulations and was in many respects defective. Their advice was that the floor and footing system could not be repaired or otherwise made to comply with the regulations without complete removal. This entailed demolition of the whole extension and rebuilding. This was commenced in November 1998 and completed in February 1999. The respondents claimed, as damages for breach of contract in the action they subsequently brought against the appellant, the cost of demolition and rebuilding.
The respondents had also relied on a representation by the appellant at the time of entering into the contract that the work did not require approval by the District Council of Mallala because it was renovation work and not the construction of a new building or extension. Accordingly, no such approval was sought or was given.
After the building work had been suspended and the respondents’ dissatisfaction had been made known to the Council, on 30 April 1997 the Council wrote to the female respondent requesting her, among other things, to lodge a development application with the Council, along with all relevant plans and information on the proposal for processing and for decision, or to lodge a development application, along with all necessary plans and existing structural details together with an engineer’s certificate of compliance under the building rules. The letter informed the respondents that should an engineer be unable to certify structural adequacy of the existing structure, it would be necessary to demolish the structure prior to the commencement of any new structure.
On 15 September 1997 the respondents lodged a development application with the Council, but not in respect of the work carried out by the appellant. That application proposed the demolition of the whole structure and its replacement. After some variation, it was that proposal which, with the approval of the Council, subsequently proceeded.
The appellant had engaged an engineer, Mr Goldfinch. In a report dated 14 November 1997 he expressed the view that the replacement of the stump footing system with a shallow concrete raft footing was a structural enhancement to the original building work which the Council had approved, and that the reinforced slab rendered the new alteration work structurally sound. He expressed the view that, notwithstanding non-compliance with the then building code, the Council could exercise its discretionary powers to grant an approval. He did not express any view as to the likelihood of that occurring.
Later, however, in a report dated 24 April 1998, Mr Goldfinch suggested, among other things, some further remedial work by way of the construction of a further outer perimeter reinforced footing which would support the existing walls, the structural integrity of which he would then be prepared to certify to the Council. This was work over and above what had been carried out or agreed to be carried out by the appellant. He expressed the view that there was “every chance” that the original proposal as then proposed to be modified by him, would be approved by the Council.
The Pleadings
The action was commenced on 30 March 2000. In their Statement of Claim the respondents alleged the formation of the contract with the appellant, the representation, on which they relied, that council approval was not necessary, but that in fact and as a matter of law it was necessary and was not obtained. They pleaded that the work performed was in breach of implied warranties contained in the Building Work Contractors Act 1995 that the building work would be performed in accordance with all statutory requirements, and that it would be carried out and completed in a careful and competent manner and in accordance with applicable statutory controls. They pleaded that the appellant had breached the terms of the contract, the statutory warranties implied by s 32 of the Building Work Contractors Act and warranties implied by common law. In particular it was alleged that there were defects in the floor slab, of which numerous particulars were given. They pleaded that it was not possible for the respondents to gain approval from the District Council of Mallala for the structure built by the defendant and alleged that “by reason of the defects in the building work and the inability to gain approval from the District Council of Mallala, it was necessary and appropriate for the plaintiffs to demolish the structure built by the defendant.”
There was considerable delay between the suspension of the building works and the engagement of a second builder to demolish the house extension and to build a new extension. By reason of the demolition and of the delay, the respondents claimed that they were put to far greater expense.
The Magistrate’s Relevant Findings
There were many disputes beyond that relating to the adequacy of the floor slab and the footings. In general terms, the Magistrate accepted the evidence of the respondents where that was in conflict with the evidence of the appellant. Findings consequent upon his preference for that evidence are not in issue on this appeal.
There were other significant findings which are also not in dispute on the appeal. Accepting expert engineering evidence led by the respondents, the Magistrate rejected the opinion of Mr Goldfinch expressed in his report of 14 November 1997 that there was substantial compliance by the appellant with the appropriate building standards. Mr Goldfinch had conceded as much himself in the subsequent report by suggesting that substantial rectification work was required by way of the additional footing. Nevertheless, the Magistrate also found that his rectification proposal did not have the support of four other experienced engineers, all of whom concluded that a properly engineered but cost effective repair of the slab was not possible. He made findings, which were not the subject of challenge, of a great many defects which existed in the slab. He accepted that the plaintiffs were entitled to a footing and slab that accorded with appropriate building standards, and that the footings and slab clearly failed to comply with those standards. That was based on his preference for the engineering evidence led by the respondents.
As to the decision to demolish, the Magistrate found that it was a decision made after careful consideration of a large body of engineering and building opinion, not only that the work was defective, but that rectification work was too expensive, and could not be guaranteed. Accordingly, he awarded damages based on the cost of demolition and of rebuilding.
Appeal Ground 1
The appellant’s first ground of appeal alleges:
“1.The learned Magistrate erred as a matter of law in finding that the plaintiffs were justified in demolishing the premises and rebuilding the same without seeking approval of the local council for the works performed under the contract as modified by the proposed additional works of Mr Goldfinch. In the circumstances where the plaintiffs failed to lead evidence from the local council and the engineer was prepared to certify the works, the Learned Magistrate should have found that the true measure of the plaintiffs loss was the cost of the remedial work required by Mr Goldfinch namely $3,366.00 and interest thereon.”
In argument, the appellant relied heavily on the respondents’ pleading that there had been a failure to obtain approval of the District Council of Mallala for the original work and that by reason not only of the defects in the building work but also of the inability to gain approval, it was necessary and appropriate for the plaintiffs to demolish the structure. The complaint was that the respondents did not lead evidence of the inability of the council to approve the work as built, and that the only evidence as to the likelihood of the council approving the proposal was that of Mr Goldfinch in his report of 14 November 1997.
However, by the time the matter came to trial, not even the defendant was relying on that aspect of Mr Goldfinch’s opinion. After all the defects in the construction of the slab had been pointed out by other engineers, the defendant’s case at trial, based on Mr Goldfinch’s second report, was that even if there were such defects, the structural integrity of the extension could have been secured by Mr Goldfinch’s proposal of the additional footing, whilst leaving the slab and superstructure in place. However, even he had some reservations about whether the Council would approve that proposal. He said:
“If council were prepared to accept my design philosophy which, as I have said previously in evidence, was related to code clauses 1.1 and 3.1.5, then I think the chances would have been very good of getting it approved, but council may have said ‘Look, we are not going to accept that. We want tie footings going through at re-entrant corners, and we want those – to be strictly in accordance with the Australian Standards, and therefore go away and have another think about it’, in which case I’m having a 50/50 fence-sit bet on that, because that’s the best way I can answer it. I would have been putting to council that here is a fairly unique situation in that this extension had been there for 20 odd years, and in terms of the Australian Standards being put into place to prevent significant cracking in footings and superstructures, I think that that had been achieved way back in 1977 with the original structure, even with the stumps or stump-and-bearer type of support and with only a 60 mm unreinforced floor slab. I would have been adding that in my argument to council to say what I have done here is a structural enhancement to that, and attempted to find a resolution to a building dispute between and owner and a builder, but again to reiterate, it’s up to council whether they accept that design philosophy or go for the alternative design philosophy.” (emphasis added)
In the light of what were alleged to be, and what the Magistrate found to be, a multitude of defects in the construction of the slab and the thickened edge, it had ceased to be the defendant’s case that the original work could be approved. What was being suggested in Mr Goldfinch’s evidence was an alternative way forward to demolition, with grave reservations expressed by Mr Goldfinch as to whether even that would be approved. The respondents’ plea that demolition occurred because of the failure of the appellant to obtain council approval had fallen by the wayside and become irrelevant. There was overwhelming evidence, accepted by the Magistrate, that the appellant’s work was not competently or adequately performed. That evidence also suggested, which the Magistrate was entitled to accept, that Mr Goldfinch’s alternative proposals would not overcome the defects and restore the respondents to the same situation in respect of damages as if the contract had been performed: Robinson v Harman [1848] 1 Ex 850 at 855. They were entitled to be placed in the same position which they would have occupied had the defendant performed the original contract. The Magistrate accepted the respondents’ evidence that Mr Goldfinch’s proposal would not do that. The question of council approval to the original proposal therefore became irrelevant, as did the question of council approval to Mr Goldfinch’s proposal.
However, the appellant’s first ground of appeal does not rely upon the respondents’ plea expressed in the Statement of Claim that their loss was caused in some way by their inability to gain approval from the council for the work carried out by the appellant. What this ground of appeal raises is an alleged failure on the part of the respondents to mitigate their loss by pursuing an alternative and cheaper course. In their joint judgment in Goldburg v Shell Oil Co of Australia Ltd (1990) 95 ALR 711, Sweeney and Ryan JJ said (at 714):
“In our view there is a clear conceptual difference which the learned primary judge understood and applied between the measure of damages and a plaintiff’s duty to mitigate damages properly measured: see eg Liesbosch Dredger v SS Edison [1933] AC 449 per Lord Wright at 461. The onus remains on the plaintiff to prove, according to the appropriate measure, that he has suffered loss. An example of a plaintiff’s failure to discharge that onus is provided by Kargotich v Mustica [1973] WAR 167. If the defendant contends that the loss proved by the plaintiff could have been minimised or avoided altogether by the taking of some step which the plaintiff could reasonably have taken but did not take, the onus is on the defendant to make out that contention on the evidence.”
There was evidence before the Magistrate on which he could find, as he did, that the decision to demolish and rebuild was properly taken, and that Mr Goldberg’s alternative proposal would not have remedied the defects. Accordingly, the appellant failed to discharge his onus to prove that the plaintiff could have minimised the loss by taking some alternative step. This ground of appeal must be rejected.
Ground 2
The appellant’s second ground of appeal is by way of alternative. It reads:
“2.In the alternative to ground 1, the Learned Magistrate erred law [sic] in finding that the measure of the plaintiffs’ loss was the cost of demolishing and constructing a new extension when the contract between the parties did not provide for that scope of works. The Learned Magistrate should have found that the proper measure of the plaintiffs’ loss was the repayment of monies paid to the appellant under the contract of $10,320.95 and interest thereon.”
The appellant argues, in effect, that at the time the works were suspended by the respondents, the renovations then constructed by the appellant had placed the extension to the house in better condition than it had been prior to the commencement of the building work. He claims that the appropriate measure of damages is the repayment of the monies that he had received pursuant to the contract, thereby enabling the respondents to determine the nature and extent of any building work they wished to undertake. By finding for the respondents in the manner in which the Magistrate did, he was placing them in a better position than if the original contract had been performed: Commonwealth v Amman Aviation Pty Ltd (1991) 174 CLR 64 per Mason CJ and Dawson J at 82.
However, this was not a case of rescission where, so far as possible, the parties must be restored to their original position. There was no basis for rescission of this contract. The only remedy the respondents could pursue was damages for breach of the contract. Once the findings were made by the Magistrate that the nature of the defects in the slab and the thickened concrete edge were such that they could not be repaired, there was no alternative but to provide for the demolition of the whole structure and to start again. Damages were properly assessed on that basis. It is not surprising that that substantially exceeded the amount that had been paid to the appellant given that additional demolition work was required, that inevitable delays had caused cost increases, and that not all materials could be re-used. I reject this alternative ground of appeal.
Ground 3
The final ground of appeal is as follows:
“3.In the alternative to grounds 1 and 2 the Learned Magistrate erred as a matter of fact in only allowing a credit of $800 in respect of the betterment enjoyed by the plaintiffs and should have found that the true measure of the betterment was $6,951.25.”
This ground was the subject of compromise before the hearing of the appeal. It was agreed that, if grounds 1 and 2 were dismissed, the appeal should be allowed and the judgment sum reduced by $1,700.00. There will therefore be an order to that effect. In all other respects the appeal is dismissed. It was also agreed that each party should bear their own costs of the appeal in so far as it related to ground 3. I will hear the parties as to the cost of the appeal regarding grounds 1 and 2.

[2002] SASC 205

12 July 2002