Plastertech Systems Limited v Parbhu

[2018] NZHC 1660

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-002582

[2018] NZHC 1660

UNDER

Section 124 of the District Court Act 2016

IN THE MATTER

of an appeal from the decision of the District Court at Manukau

BETWEEN

PLASTERTECH SYSTEMS LIMITED

First Appellant

KEITH MURRAY WHITLOW
Second Appellant

AND

CHAMPAKLAL PARBHU, VIDAYWATI PATEL and SHANTILAL PATEL as

Trustees of the C PARBHU FAMILY TRUST

Respondents

Hearing:

28 June 2018

Appearances:

S Moore for the Appellants

M R Taylor for the Respondents

Judgment:

6 July 2018

JUDGMENT OF WOOLFORD J

This judgment was delivered by me on Friday, 6 July 2018 at 3:30 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:           Ong & Partners, Auckland

Ms M Taylor, Auckland

Counsel:S Moore, Auckland M Taylor, Auckland`

PLASTERTECH SYSTEMS LIMITED v PARBHU [2018] NZHC 1660 [6 July 2018]

[1]                   On 27 September 2017, Judge GA Andrée Wiltens gave judgment against the first and second appellants, Plastertech Systems Limited (Plastertech) and its director, Keith Murray Whitlow, in the sum of $265,156.44 in favour of the respondents, Champaklal Parbhu, Vidaywati Patel and Shantilal Patel as trustees of the C Parbhu Family Trust. Plastertech and Mr Whitlow now appeal against the judgment. They do not challenge the Judge’s finding that they are liable to pay the standard measure of contractual liability for non-performance of a construction contract. Rather, they say that the Judge erred in assessing the quantum of damages.

Factual background

[2]                   The respondents are the owners of a leaky building at 13 Macadamia Close, Goodwood Heights, Manukau. In 2010, the respondents lodged proceedings in the Weathertight Homes Tribunal seeking compensation for defects and damage to the property. The respondents in those proceedings included the builders, MS Aldridge Construction Limited and its director Mr Aldridge, the developer Mr Sorm, the designer Mr Bergquist, Plastertech and Mr Whitlow.

[3]                   As part of the proceedings, a Weathertight Homes Resolution Service Assessor made a report dated 13 May 2010 which set out a number of defects in the property. Upon reviewing the report an engineer, Craig George Turner of Forensic Building Consultants Limited, produced a scope of works to remedy the defects set out in assessor’s report.

[4]                   In 2012, following extensive discussions and negotiations, a settlement agreement was reached between the parties. The agreement recorded that the trustees of the C Parbhu Family Trust would enter into a construction contract with Plastertech for remedial work to be carried out in accordance with the scope of works produced by Mr Turner. In terms of the settlement agreement, Plastertech and Mr Whitlow were to pay the sum of $10,000 and provide labour and materials in respect of the construction contract to a total of $59,000. Others were to pay a further $147,500. It was envisaged that contributions to the cost of the remedial work would also be available from the Crown (25 per cent) and Auckland Council (25 per cent) under a Financial Assistance Package (FAP).

[5]                   On 30 July 2014, Plastertech entered into a construction contract with the trustees of the C Parbhu Trust pursuant to the settlement agreement. The appellants commenced remedial work around August 2014. A number of payment claims were made by the trustees of the C Parbhu Family Trust. These were assessed by Mr Turner, who authorised payments totalling $64,744.93. Difficulties arose and, following a recommendation by Mr Turner, the respondents cancelled the construction contract. The remedial work was then completed by Day Construction (2004) Limited.

[6]                   The respondents incurred additional costs with Day Construction over and above the sums they were obligated to pay Plastertech pursuant to the construction contract. After completion of the remedial work, the respondents issued proceedings in the Manukau District Court. They alleged that they were entitled to recover the additional payments made to Day Construction to complete the remedial work from Plastertech and Mr Whitlow pursuant to the settlement agreement.

Appellants’ submissions

[7]                   The appellants challenge several aspects of the Judge’s assessment of quantum. They submit:

(a)The Judge was wrong to include the engineer’s costs of $79,493.45 in the judgment sum.

(b)The Judge was wrong to include other costs of $61,385.30 in the judgment sum.

(c)The Judge was wrong to include the sum of $59,000, which the appellants were to provide by way of labour and materials in respect of the construction contract in the judgment sum.

(d)The Judge made an arithmetical error of $10,000 in totalling the combined settlement payment.

[8]                   As to Mr Turner’s costs, the appellants submit that they are not specified in the scope of works document prepared by Mr Turner and are, therefore, not recoverable.

Mr Turner’s continued involvement was, however, envisaged by both the scope of works document and the construction contract itself. For example, clauses 20 and 21 of the scope of works document provided:

20.Assistance to be given to the Engineer for further investigation of decayed framing and collection of evidential proof of failures. (The Engineer is to be informed when new failures are uncovered).

21.Remove all decayed timbers. There will be a need to liaise with the Engineer in regard to identification of the areas of decay.

[9]                   Mr Turner was also specifically appointed as the engineer under clause 6 of the construction contract. In terms of the contract, Mr Turner was acting as an expert advisor and representative of the respondents, but also as an impartial decision-maker assessing the value of the appellants’ payment claims. Further, under clause 13, disputes between the appellants and the respondents were to be referred to Mr Turner for an engineer’s determination.

[10]               While I accept that in the case of a normal construction contract, the engineer is paid by the principal, this case is far from ordinary. The settlement agreement provided that the respondents were able to cancel the construction contract if the appellants failed to proceed with reasonable diligence or persistently, fragrantly or wilfully neglected to carry out their obligations under the contract. The respondents were then at liberty to engage an alternative building contractor to complete the remedial works.

[11]The settlement agreement then provided:

13.The Respondents agree that any and all sums required to be paid by the Claimants to complete the Remedial Work (over and above the Payments and any funds received pursuant to a Homeowners’ Agreement under the FAP) shall be a debt due and owing, jointly and severally, by the Respondents to the Claimants (the Additional Payments)…

14.The Claimants shall be entitled to recover the Additional Payments as a debt due from the Respondents (joint and severally) and the Respondents shall have no right of set-off, cross-demand and/or counterclaim in any action by the Claimants for recovery of the Additional Payments.

[12]               I am of the view that the clause “any and all sums required to be paid by the Claimants to complete the Remedial Work” goes beyond materials and labour. For instance, the respondents had to pay the sum of $16,204.60 to Auckland Council for consents to undertake the remedial work and the issuance of a code compliance certificate when it was completed. Those costs are not mentioned or listed in the scope of works document yet were required to be paid by the respondents to complete the remedial work. I put the engineer’s costs in the same category. The appellants’ liability to pay arises under the settlement agreement, not the construction contract under which the engineer’s costs would normally be paid by the principal.

[13]               As to other costs of $61,385.30, the appellants submit that the respondents failed to produce sufficient evidence to prove that such a sum was payable. Counsel acknowledges that Mr Whitlow did not question Mr Turner about the detail of the costs or whether they were properly payable, but submits that the respondents, nevertheless, did not meet the standard of proof required, that of proof on the balance of probabilities.

[14]               With respect, I do not agree. The total of $61,385.30 is the sum of 29 separately itemised invoices included in an annexure to Mr Turner’s brief of evidence less betterment, which is also separately identified in respect of three of the invoices. In each case the following details are provided:

(a)The name of the provider of the goods or services.

(b)Whether the FAP is applicable.

(c)The invoice date.

(d)The invoice number.

(e)The cost including GST.

(f)The betterment cost to be deducted.

(g)Notes such as “Balustrade design services”.

[15]               The appellants further submit that the total sum includes the cost of cosmetic items and building works which were not part of the scope of works document. As an example, they cite the sum of $12,281.05 for the replacement of curtains and submit that such a cost does not relate to the appellants’ failure to perform under the contract.

[16]               Mr Turner’s schedule of costs does include reference to an invoice from Curtain Studio for that amount. But there is no indication that it related to the replacement of curtains. The scope of works provided:

16.Include for the protection of existing floorcoverings and furnishings, the removal and refitting of curtains, blinds and associated tracks/rails.

[17]               Furthermore, if there was an element of betterment, I consider Mr Turner would have calculated the monetary value of it and deducted it from the invoice amount as he has done with a number of other invoices. Finally, Mr Whitlow had the opportunity to challenge this evidence, but chose not to do so. Mr Turner’s evidence on quantum was uncontradicted at trial.

[18]The respondents acknowledge that the Judge was wrong to include the sum of

$59,000, which the appellants were to provide by way of labour and materials in respect of the construction contract in the judgment sum. This was pleaded as an alternative cause of action.

[19]               Finally, the respondents also acknowledge that the Judge made an arithmetical error of $10,000 in totalling the combined settlement payments. The amount should be $157,500, not $147,500. There were also a number of other discrepancies. These resulted from inconsistences between the body of Mr Turner’s affidavit and the annexure to it. The respondents have corrected these on appeal and this is reflected in the revised judgment sum below.

[20]               The appeal is therefore allowed. The judgment sum of $265,156.44 is quashed and replaced with the sum of $190,117.54 made up as follows:

Cost of Remedial Work
Mr Turner (Engineer)	$79,498.451
Day Construction	$602,349.482
Other costs	$61,385.303
Plastertech	$64,744.93
Sub-total	$807,978.16
Less
FAP contribution	$395,615.69
Combined settlement payments	$157,500.00
Payments to Plastertech	$64,744.93
Total	$190,117.54

[21]Interest of $6,823.82 is payable on this judgment sum together with costs of

$22,517 and disbursements of $9,596.

[22]The appellants are, however, entitled to costs on this appeal on a 2B basis.

Woolford J

1      Does not include sums deducted by way of betterment.

2      Above n 1.

3      Above n 1.