Ashglow Pty Ltd as trustee for Ashglow Trust v Castano

Introduction 1. This is an action commenced by way of statement of claim filed by the plaintiff ("Ashglow") on 8 th June 2007. The defendant ("Mr. Castano") filed his defence to the claim on 30 th November 2007. There are no amendments or any other relevant pleadings. 2. The matter was heard at the Downing Centre Local Court on 16 th June 2008, 24 th September 2008 and 9 th October 2008. On the last occasion written submissions were handed up as were a number of authorities. The parties also made lengthy oral submissions. The issues 3. The matter is a building dispute regarding work done in the basement of Ashglow's premises located at 211 Fox Valley Road Wahroonga NSW ("the premises"). Ashglow alleges it contracted with Mr. Castano to perform concreting work of a certain type and quality on the basement. 4. Ashglow says the alleged quality formed part of the contract because of representations made by Mr. Castano and that Mr. Castano breached the contract because his work was not of the same quality as the representations. Consequently Ashglow claims damages for demolition and rectification work done of the basement of the premises. 5. Mr. Castano denies he was party to a contract with Ashglow. Instead he says the contract was between Ashglow and Wildstorm Pty Ltd ("Wildstorm"). Mr. Castano is a director of Wildstorm, a company that performs a type of concreting known as "shotcreting". Mr. Castano has said that he does not do this type of work himself. 6. Additionally, Mr. Castano says Wildstorm performed the contract as agreed between the parties. Mr. Castano maintains that there are either no flaws with the work performed by Wildstorm or any such flaws are a normal end result of shotcreting. 7. The issue of whether the contract was between Ashglow and Mr. Castano or Ashglow and Wildstorm is fundamental to these proceedings and so I turn to it first. Who was the contract between? Ashglow's legal submissions 8. Ashglow has submitted that the contract was between it and Mr. Castano as an individual. In so doing Ashglow relies on what it says were discussions that took place between its director Michael Porter and Mr. Castano. It submits that these discussions do not refer to Mr. Castano's company in any way being involved. It also submits that an objective assessment of the circumstances leading up to the formation of the contract point to Mr. Castano being a party and not Wildstorm. 9. In support of this position Ashglow referred me to various relevant parts of the law of agency. In particular, Ashglow in its written submissions referred to a relevant passage at page 500 from the 2006 eighteenth edition of the Bowstead and Reynolds text Agency . 10. This particular passage described three methods by which an agent (such as Mr. Castano) could conclude a contract with a third party (such as Ashglow) in circumstances where there is a principal (such as Wildstorm) in the background to negotiations. Without paraphrasing all of the learned authors' thinking on the topic, it would appear the relevant method is the third referred to on page 500. 11. The third method is one where the agent creates a privity of contract between the agent and the third party but not between the third party and the principal. Applying this the principal is a stranger to the transaction as far as the third party is concerned. Rather, as observed by the learned authors at page 502: "The agent may be solely liable…he has not made any contract binding his principal at all but has made the contract himself." 12. They then go on to observe at page 507: "When the principal is undisclosed at the time of contracting, the contract is made with the agent and he is personally liable and entitled to it." 13. In furtherance of this argument Ashglow referred to Carminco Gold and Resources Ltd v Findlay and Co Stockbrokers (Underwriters) Pty Ltd [2007] FCAFC 194. This case specifically acknowledges that an agent can make itself the party to a contract in substitution of the agent's principal. 14. From paragraph 22 onwards the full bench deals with what test should be applied when determining whether such a substitution has occurred. In that regard the Court refers to a decision of Brandon J in The "Swan" [1968] 1 Lloyd's Rep 5 and adopts the position that the court should look at the objective intentions of both parties. In particular the court should make a conclusion as to what two reasonable business people would intend when entering into a contract of the relevant kind with the relevant terms and taking into account the relevant circumstances. 15. This still leaves open the issue of what point in time the objective test should be applied and what circumstances can be taken into account. This is a particularly important issue if after the formation of the contract (as was the case here) there have been communications between the parties that reveal the existence of a previously undisclosed principal. 16. On that issue Ashglow referred to Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 where at paragraph 59 the full bench of the Court of Appeal held that subsequent communications cannot be taken into account when attempting to construct the terms of a contract. 17. Ashglow thus submitted that the issue of whether Mr. Castano was a party to the contract is one of contractual construction. They also submitted that the court should apply an objective test based on the conversations and representations made between the parties at the time the contract was formed, and on this issue the Court should disregard subsequent communications between the parties. Mr. Castano's legal submissions 18. Mr. Castano denies he was a party to the contract; instead he maintains that the contract was between Ashglow and Wildstorm. The basis of this argument is that Mr. Porter was aware of the fact that Ashglow contracted with an entity of some kind by the name of Alpha Concrete Spraying & Pumping. It is not in dispute that Wildstorm owns this name. 19. The defendant referred to various provisions of the Business Names Act 2002 (NSW) ("the act"). In particular the defendant referred to subsection 4(1) of the act that states: 1) A person must not carry on business in New South Wales under any business name unless the business name is registered in the name of that person and of each other person (if any) with whom that person is carrying on that business. Maximum penalty: 50 penalty units. 20. The defendant also referred to section 20 of the act which states: 20 Register of business names (1) The Director-General is to establish and maintain a register of business names ( the Register ) for the purposes of this Act, and for the purposes of Part 3 of the Licensing and Registration (Uniform Procedures) Act 2002 , as applied by this Act. (2) For each registered business name there are to be recorded in the Register: (a) the proper name and proper address of each person in whose name the business name is registered, and (b) an address for service of notices in relation to each such person, and (c) such other particulars as are required by the regulations to be recorded in the Register in relation to each such person. (3) For each registered business name under which business is carried on in New South Wales there are also to be recorded in the Register: (a) the date on which business commenced to be carried on under that name, and (b) the date on which business ceased to be carried on under that name, and (c) the nature of the business carried on under that name, and (d) the address of each place at or from which business is carried on under that name, and (e) such other particulars as are required by the regulations to be recorded in the Register in relation to the business carried on under that name. (4) The regulations may make provision with respect to the manner and form in which the Register is to be maintained. (5) The Director-General is to ensure that the Register is made available for public inspection during normal business hours at such places as may be prescribed by the regulations. 21. Mr. Castano submitted that the prohibition contained within subsection 4, coupled with the register created and kept by virtue of section 20 of the act, put Ashglow on notice that it was in fact contracting with Wildstorm and not with Mr. Castano. In so doing the Mr. Castano also referred to Pethybridge and in particular the Court of Appeal's analysis of Re Johnson & Anor; Ex Parte Greendale Engineering and Cables Pty Ltd (1968) 11 FLR 335. 22. Re Johnson stands as authority for the proposition that the Business Name Register is prima facie proof of the contents therein. It is however a rebuttable presumption with paragraphs 37 and onwards of Pethybridge dealing with this issue. 23. The defendant also submitted that the Court must consider whether the parties intended to create a legal relationship as was one of the issues in Ermogenous v Greek Orthodox Community of SA (2002) 209 CLR 95. Ermogenous is also authority for the proposition that there is an objective test on the issue of intention and there should not be any prescriptive rules on the issue. Factual analysis 24. I now turn to the facts of this matter. On this issue Ashglow gave evidence via its director Michael Porter. Mr. Porter executed affidavits dated 23 rd May 2008 and 20 th June 2008 that formed exhibits 12 and 13 respectively. 25. In his affidavit of 23 rd May 2008 Mr. Porter gave evidence as to the discussions that took place in the lead up to entering into the agreement. These discussions took place at Ashglow's premises and are detailed in paragraphs 11 to 22 of the affidavit. 26. The discussions deal with the type of work to be done and its cost. They are therefore fundamental to the formation of the contract between the parties. They go to the very nature of the work to be performed and spell out the responsibilities of the parties. 27. During these discussions Mr. Castano refers to himself in the first person. He discusses what he can do for Ashglow and what he has done in the past. He does not mention any type of company or use the word "we" to imply a joint or corporate effort. 28. Mr. Porter observes at paragraph 21 that there was never any mention of the names Alpha Concrete Spraying & Pumping or Wildstorm Pty Ltd. According to his affidavit of 20 th June 2008 the first time Mr. Porter received any representation that Alpha was involved in the agreement was after its terms had been negotiated. 29. In particular in paragraphs 34 and 35 of his second affidavit Mr. Porter details that Mr. Castano handed him a business card that became Exhibit 1 in these proceedings. This takes place after the terms of the contract have been finalised, as Mr. Castano is walking back to his car after the terms have been agreed upon. 30. The business card bears close scrutiny. On the left hand side it has a triangular logo and the word "ALPHA" in large bold upper case letters. Under this is "EDGAR CASTANO" in smaller upper case letters and then under that is the word "PRINCIPAL" in even smaller upper case letters. 31. On the right hand side of the card - separated by a vertical line - are the words "CONCRETE SPRAYING & PUMPING" in upper case letters that are smaller than the word "ALPHA" but larger than Mr. Castano's name. The rest of the card contains contact details. 32. On Mr. Porter's evidence there is never any mention of the company or business name until after the contract is formed. For reasons detailed below I also conclude that handing Mr. Porter the business card did not properly bring up the business name either. 33. In applying Pethybridge and looking only at the communications leading up to the formation of the contract, an objective assessment points to Mr. Castano being a party to the contract. There is no mention of the business or company name in any of the discussions leading up to the formation of the contract. In fact when one reads Mr. Castano's words, the continual use of the first person implies he is entering into the contract himself. 34. Even if the formation phase is defined quite liberally so as to include the time up until the business card is handed over there is still no mention of the business or company name. This is because I am of the view the business card does not properly describe the business name. My reasoning is detailed below in my analysis of Mr. Castano's evidence. 35. Mr. Castano gave evidence by his affidavit of 5 th June 2008 that became Exhibit 17 of the proceedings. Annexure B of that affidavit contains an extract from the Business Names Register that shows Wildstorm Pty Ltd owns the name "Alpha Concrete Spraying and Pumping". 36. Mr. Castano also refers to receiving a phone call from Mr. Porter that he has submitted must have been the result of Mr. Porter looking in the Yellow Pages and seeing advertisements that are detailed at Annexure A of the affidavit. These advertisements are in the name "Alpha Concrete Spraying & Pumping". 37. According to Mr. Castano he went to the Ashglow premises on 4 th October 2005 and there were discussions about the type of work to be done and how much it would cost. These are detailed at paragraphs 12 to 15 of Mr. Castano's affidavit. 38. During these discussions Mr. Castano says he used the words "we" and "my business" when referring to the work. These imply that there may have been a corporate entity involved in the transaction. 39. In addition to these communications Mr. Castano relies on the business card as representing that the owner of "Alpha Concrete Spraying & Pumping" was a party to the contract. 40. He also refers in paragraph 16 to invoices from Maccaferri Pty Ltd that he gave to Mr. Porter. He says these invoices refer to the business names that thus imply that Wildstorm was the relevant party to the contract. 41. Mr. Castano also details that the invoice for the work was under the business name and the cheque used to pay for the invoice was made out to the business name. 42. In short, Mr. Castano says there were numerous communications that either imply or directly state that the contract was between Ashglow and the owner of Alpha Concrete Spraying & Pumping. 43. In analysing Mr. Castano's case I will first turn to the issue of the Business Names Register. In that regard I accept that in some circumstances the register is both prima facie and conclusive evidence as to whom the parties to a contract might be. 44. However in relation to this case, Mr. Castano even on his own evidence did not refer to the business name in his initial discussions with Mr. Porter. Instead his wording of the conversation at most only implies he is acting on behalf of a company. 45. For reasons that I will detail below, when Mr. Castano's evidence is in conflict with Mr. Porter's I prefer Mr. Porter's version of events. Therefore in relation to this issue I do not accept Mr. Castano's version of the conversation or the implications contained therein. 46. However even leaving aside the issue of credibility I believe that Mr. Castano must fail on this issue. To begin with, my conclusion is that I am bound by the decision of Pethybridge, a very recent decision of the NSW Court of Appeal. Therefore the appropriate time to objectively assess the parties to the contract is in the lead up to its formation. 47. On my reading of Ermogenous there is little that would contradict the Court of Appeal's reasoning in Pethybridge other than the fact that Ermogenous promotes the Court taking a flexible approach to contractual interpretation. It also states that the Court should take into account the intentions of the parties at the time they enter into a contract. However it does not contradict the finding in Pethybridge that when there is a dispute as to what the terms of a contract might be, the appropriate point in time at which to make an objective assessment of the terms is the time of formation. 48. Even if there is a contradiction between the two cases, Ermogenous is a South Australian Industrial Magistrate's case that ended up on appeal in the High Court of Australia. It is therefore dealing with the laws of another state and also a different subject matter. 49. On the issue of subject matter, I note that Ermogenous is an employment law case dealing with a claim for annual and long service leave by a clergyman. The principal issue in the case was whether a clergyman could be an employee for the purposes of South Australia's employment law. It was in that context that the High Court considered the intention to create relations between the parties. 50. My view is that a case examining the difference between a contract for service (as an employee) and a contract for services (as a contractor or a class exempted from the employment relationship) would have little application in a dispute for the provision of concreting services. This is because employment contracts are special at law and have their own separate body of law that applies only in that area. I therefore prefer the position taken in Pethybridge . 51. Pethybridge specifically refers to different jurisdictions taking a different approach to construing the terms of a contract. Therefore if there is any difference between the two decisions, I prefer the position taken by the NSW Court of Appeal. The NSW Court of Appeal is a superior court of this state and was applying the laws of NSW. It is therefore appropriate to follow its ruling on this issue. 52. Even if I am wrong on this part of the issue, I do not believe that Mr. Castano can rely on the Business Names Register to show that Wildstorm was a party to the contract. The first reason for this is that even if I accept Mr. Castano's version of the discussions leading up to the formation of the contract, there is no reference to the business name whatsoever. There is therefore no name for which Ashglow could conduct a search of the register. 53. The next representation that Mr. Castano relies on is the business card. However, as referred to above, the card does not contain the words "Alpha Concrete Spraying and Pumping" as one conjunctive term. 54. My view is that the combination of the logo and the large printing of the word "Alpha" imply the name of the business is "Alpha". The words "Concrete Spraying & Pumping" are in smaller letters and on a different part of the card and in my view they cannot objectively be construed as forming part of a business name on the card. If Ashglow conducted a search of the register is would be in a name different to the one owned by Wildstorm. 55. Additionally, I do not accept that Mr. Castano can rely on the invoices he provided to Mr. Porter later that day. The first invoice in Annexure E of Mr. Castano's affidavit of 5 th June 2008 is in the name of "Alpha Concrete Pumping" and the second invoice is in the name of "Alpha Concrete Australia and Pumping". There is no evidence before me that would indicate that a search of these names would lead to any indicator that their owner is Wildstorm. 56. It therefore seems that in the early stages of the formation and performance of the contract, on Mr. Castano's version of events the only time the business name was possibly referred to explicitly and correctly was in the telephone directory. At other times the name of the business was referred to as "Alpha", "Alpha Concrete Pumping" and "Alpha Concrete Australia and Pumping". 57. There are too many different combinations of names that would need to be searched by Ashglow in order to discover the corporate identity of Wildstorm. My view is that even if I am able to take into account representations and conduct that go beyond the initial discussions leading up to the formation of the contract, an objective assessment of those circumstances cannot lead me to conclude that Wildstorm is a party. 58. I am also of the view that by the time the parties were at the stage of issuing invoices and writing cheques it is too late to examine any representations that have been made. Whether a party to a contract is a corporation is a fundamental issue. Corporations are designed to limit liability and thereby minimise risk on one side of a transaction and increase risk on the other. 59. Given the shift in risk burden, it seems important that there be a clear statement of corporate involvement. This would be particularly the case for the type of contract that is the subject of these proceedings. 60. The contract was of a relatively modest value and was entirely oral. It was formed after brief discussions and was performed in a short time thereafter. Given the nature of the contract, it is perfectly reasonable for the parties to reach a quick agreement and then for Mr. Castano to get to work. 61. It is unreasonable for a party in the position of Ashglow to be expected to conduct numerous business name searches in order to find out with whom it is contracting. This is particularly the case when there are only limited indicia that there is a corporation involved in the transaction and the contract is only a small one that is to be performed quickly. 62. In summary, I accept Mr. Porter's version of events as to the lead up to the formation of the contract. On an objective assessment of Mr. Porter's evidence I find that the contract was between Ashglow and Mr. Castano as an individual. 63. Additionally, I find that even on Mr. Castano's version, a detailed analysis of the facts and law still supports the finding that the contract was between Ashglow and Mr. Castano as an individual. The dispute as to the terms of the contract 64. The parties are in dispute as to many of the terms of the contract that was formed between them. However there are some terms of the contract that are not in dispute. 65. Not in dispute is that the contract was formed on 4 th October 2005 at the premises.. It also seems not be in dispute that at least the majority of the terms of the contract were expressed orally. 66. Also not in dispute is that the contract was for Mr. Castano to perform a type of concrete work known as "shotcreting" on the basement premises. It also seems to not be in dispute that shotcreting results in a concrete finish that is not perfectly smooth in the same way that more refined rendering might be. 67. However, there is a dispute as to whether the contract contained a term that the end result of the shotcreting would be a surface that was smoother than the end result of the work that was performed. 68. Likewise there is a dispute as to the level of precision of angles between the floors and walls of the basement and the level and straightness of the ledges on top of the walls. 69. The smoothness and angularity of the work was referred to in the proceedings as needing to be done to an aesthetically satisfactory level. This is an appropriate measure as the negotiations on these terms were not precise in nature and seemed to be based on photographs that I describe below. 70. It is also in dispute as to what extent the floor of the basement would be level and the type and quality of drainage that would be installed into the basement by Mr. Castano. Likewise it was in dispute as to whether it was a term of the contract that the distance from the floor to the ceiling girders would be 2.4 metres. 71. According to the evidence of the parties, this aspect of the contract was discussed in greater detail by reference to specifications. I will therefore examine this aspect of the contract separately. The aesthetic appearance of the work 72. Ashglow has particularised what it says are the terms of the contract in paragraph 7 of its Statement of Claim. The terms are said to arise from negotiations that took place between Mr. Porter and Mr. Castano on 4 th October 2005. Details of these negotiations are contained in paragraphs 12 to 20 of Mr. Porter's affidavit of 23 rd May 2008. 73. According to Mr. Porter's affidavit Mr. Castano accepted the terms he proposed. In fact, according to Mr. Porter it was Mr. Castano that proposed the used of strip drains on the basement. As highlighted above, I will deal with the issue of drainage and the level of the floor separately and will concentrate first on the aesthetic nature of the work. 74. It was after this discussion that Mr. Castano showed Mr. Porter a series of photographs that showed some shotcreting work that had previously been done by Mr. Castano. Whilst showing these photographs Mr. Castano said to Mr. Porter that he could perform work of similar quality on Ashglow's basement. 75. In particular, Mr Porter alleged that Mr. Castano said that he could produce a concrete surface that would be smooth and with a sponge finish. He also represented that walls would be straight and would have ledges on top. 76. Mr. Porter's evidence is that when Mr. Castano made the representations as to smoothness, ledges, and angularity of the work he specifically referred to the photographs that were being shown. 77. This is relevant in two regards; firstly on Mr. Porter's evidence the photographs were a representation upon which he relied. This means that it was a term of the contract that the work done on the basement would be a similar quality to the work depicted in the photographs. 78. The second relevance of the photographs is that they of themselves corroborate Mr. Porter's evidence as to what was agreed between the parties. The quality of the work depicted in the photographs is similar to the terms described in paragraph 7 of the Statement of Claim. 79. Mr. Castano's version of events is that he agreed to perform the shotcreting work but did not agree to provide work of a quality deposed to by Mr. Porter. Mr. Castano deals with this aspect of the matter in paragraphs 12 to 14 of his affidavit and then annexes the relevant photographs that were shown to Mr. Porter at Annexures D1 to D8. 80. Annexure D1 and D2 show concrete being pneumatically sprayed - that is shotcreted. Of relevance is they show that the end result of shotcreting - as also illustrated by D3 - is that it leaves concrete that is mostly smooth. There is some evidence of pocking in the end result but the majority of the surface is smooth. 81. Annexures D4, D5 and D6 show the end result of concrete that has been sponge finished. The finish on this concrete is smoother although it is not completely smooth. Small waves can be seen in the surface of the concrete in what I described in submissions as being a "dappled" effect. 82. Annexures D7 and D8 show work that has been performed on two swimming pools. These photographs show a surface that has some pock marks but which again is mostly smooth. Importantly, these photographs show that top edges of the pool are straight. It is not possible to tell if they are perfectly level, but they appear to be very straight. 83. These last two photographs also show that horizontal and vertical surfaces that meet with each other. They do not meet at a perfect right angle but in photograph D8 in particular, the two surfaces meet in what I would describe as a gentle sweeping curve. 84. In Mr. Castano's affidavit at paragraph 14 he says he told Mr. Porter that the sponge finish would look better than the shotcreting. In so doing Mr. Castano points to the photographs. 85. This is after he told Mr. Porter that he would be able to apply a sponge finish. It is also after he tells Mr. Porter that the bottom of the walls will most likely stick out more than the top. 86. My view is that the showing of the photographs is part of the negotiation process. Mr. Castano has therefore made a representation as to the quality of the work he will provide under the contract. 87. I have come to this conclusion just on Mr. Castano's version events. There seems to be no logical reason why Mr. Castano would show the photographs to Mr. Porter unless it was to make representations as to the quality of work Mr. Castano could perform on the basement. 88. Leaving this aside, when it comes to comparing the two versions of the conversation I prefer that of Mr. Porter's. This is because I am of the view that Mr. Porter's recollection of events is more reliable that Mr. Castano's. 89. My view of the evidence is that Mr. Porter initially asked Mr. Castano to perform work of a quality that Mr. Castano was not able to deliver. Mr. Castano replied to this by saying that he could do work of a lesser quality but one which was close to that required by Mr. Porter. 90. He then showed Mr. Porter the photographs to illustrate the quality of work that was possible. Under cross examination Mr. Castano admitted that he showed the photographs to Mr. Porter in order to show Mr. Porter what could be achieved by the work to be performed. 91. By showing these photographs to Mr. Porter a counter offer was made by Mr. Castano and a compromise position reached between the parties. That compromise position was that the quality of work to be performed by Mr. Castano would be consistent with the photographs. 92. Therefore the contract reached between the parties was that the surface area of the concrete would be mostly smooth; there would possibly be some pock marking and certainly be some undulations in the surface. 93. It was also agreed that the walls would not be perfectly perpendicular but they would be close to perpendicular. Likewise the walls and floor would not meet at a perfect right angle and there might be a gently sloping curve between the walls and floor. 94. Additionally, it was agreed that the ledges on top of the walls would be reasonably level in the same way they are in the photographs. It was not necessarily agreed that they would pass a spirit level test, but they would come close. 95. In short, as Ashglow has pleaded the work would be "aesthetically satisfactory" and would be of a "good and workmanlike manner". However, the work would not be of a level of architectural or engineering precision that might be possible using other concreting methods. Was this part of the contract breached? 96. I am firmly of the view that Mr. Castano breached the contract by failing to perform shotcreting in a way that was consistent with the terms of the contract. This is illustrated graphically by a number of photographs that were tendered on behalf of the parties. 97. For instance in Mr. Porter's affidavit of 22 nd September 2008 he annexes at "E" a photograph of a wall that Mr. Castano had worked on. It shows that the slope of the wall is very far from the vertical. I accept Mr. Porter's evidence at paragraph 15 that the wall at floor level is excessively thick. I also accept that the thickness of the wall at the bottom has reduced the floor space of the basement and made it impossible to affix shelves to the wall. 98. Likewise Annexures F1 and F2 of the affidavit illustrate the extent to which the walls depicted were sloping away from the vertical. This would have the same effect on floor space and shelving as that described above. 99. The photograph at G1 depicts a wall that is undulating and not anywhere close to straight. A close inspection of a number of photographs reveals that the edges of the walls were not level and undulated in a way that is easily detected. In fact one of the photographs contained at Annexure A1 of Mr. Castano's affidavit of 8 th September 2008 shows an edge that is far from straight and which undulates considerably. 100. However, it has to be said that the smoothness of the concrete was of a reasonable level. The sponge finish appears to have left the surfaces smooth with minimal dappling. 101. I have observed above that the terms of the contract did not require the work to be done to an architectural or engineering standard. This would simply not be possible with shotcreting and would go beyond the standard of work depicted in the photographs that Mr. Castano showed to Mr. Porter. 102. However each of the photographs originally shown to Mr. Porter that contain a wall show the wall to be very straight. Additionally, each of the photographs originally shown to Mr. Porter that have a ledge shows the ledge to be reasonably straight. 103. Therefore my conclusion is that the contract between the parties was breached in that the end work done of the walls was not sufficiently close to the vertical. This was inconsistent with the photographs shown to Mr Porter when the contract was formed and also inconsistent with the oral communications between the parties. 104. Likewise the contract was breached by virtue of the ledges produced by Mr. Castano not being sufficiently straight. Again this was inconsistent with the photographs shown to Mr. Porter when the contract was formes as well as the oral communications between the parties. 105. I am of the view that the smoothness of the work performed was consistent with the terms between the parties. However given the findings I have made with regards to the walls and ledges this is no longer a material issue. Work performed on the floor of the basement 106. I will now deal with the issue of what were the terms of the contract with regards to work to be performed on the floor of the basement. This aspect of the contract arose solely from the conversations between Mr. Porter and Mr. Castano. 107. According to Mr. Porter this aspect of the contract was discussed in considerable detail. It is plain from all of Mr. Porter's evidence that the work to be done of the floor was of considerable importance to Ashglow as was the issue of drainage of the basement. 108. At paragraph 12 of Mr. Porter's affidavit of 23 rd May 2008 he describes a conversation with Mr. Castano where Mr. Porter states that the floor is to be 100mm thick. This figure was specified because Mr. Porter wanted to maintain a floor to ceiling height of at least 2.4 metres. 109. Mr. Porter is also very specific about level of the floor and states that he wants it to be level and flat with a 1 in 100 slope to allow for drainage. Drainage is said to be of particular importance as the basement could be subject to flooding. 110. At paragraph 15 Mr. Porter gives evidence that during this conversation Mr. Castano states that he will do the job the way wanted by Mr. Porter. In particular Mr. Castano says that he will install strip drains in the wall and across the floor. He also confirms that the floor will be flat with a slope of 1 in 100. 111. Therefore on Mr. Porter's version there is a clear acceptance of the terms by Mr. Castano. Conversely on this issue Mr. Castano says at paragraph 12 of his affidavit of 5 th June 2008: "…For the floor, I can concrete it but we can't level it…" 112. These details are in stark contrast to each other. On Mr. Castano's version there is no responsibility on his part to ensure that the floor is flat and sloped at 1 in 100. If accepted this would mean that the floor could be uneven and therefore would be prone to at least isolated pooling and flooding. It would come nowhere near what Mr. Porter said that Ashglow wanted from the contract. 113. Mr. Castano also does not refer to the issue of the height between the floor and the ceiling. He therefore omits any reference to what according to Mr. Porter was an essential term of the contract. 114. On these issues I prefer Mr. Porter's version of events. These aspects of the contract were extremely important for Ashglow. It is difficult to believe that the contract would have been entered into at all if the conversation was as described by Mr. Castano. 115. There is also the general issue of credibility that I will deal with below which leads me to prefer Mr. Porter's version of events. 116. I am therefore satisfied that the contract between the parties contained a term that the shotcreting was to be performed such that there was a uniform distance of 2.4 metres between the floor and the ceiling. I am also satisfied that it was agreed that the floor was to be flat with a slope of 1 in 100 and there was to be appropriate drainage installed in the floor and walls. 117. I am also satisfied that these terms were breached. In his affidavit and during cross examination Mr. Porter confirmed that the floor of the basement was extremely uneven. He spoke of there point in the floor where he could put down a spirit level and then place his hand underneath it. 118. There were also a number of photographs annexed to Mr. Porter's affidavit of 23 rd May 2008 that showed a spirit level on the floor of the basement. These photographs show a clear gap that was referred to by Mr. Porter during his oral evidence. They were also shown to Mr. Castano during his cross examination. 119. I accept Mr. Porter's evidence that there was clearly not a slope of 1 in 100 across the floor of the basement. Instead the floor of the basement was extremely uneven. It would not come close to achieving a proper system of drainage on the basement. 120. I also accept Mr. Porter's evidence that the floor was uneven in a number of places and did not comply with the term that there was to be a 2.4 metre height between the floor and the ceiling. A number of spot checks were performed on the floor and they confirm that the floor was extremely uneven. 121. Given my finding in relation to the floor and the walls it is not necessary to deal with the issue of the strip drains. The combination of the floors being uneven and the walls being badly sloped satisfy me that it was appropriate for Ashglow to remove and then re-do the work that was done by Mr. Castano. Credibility Issues 122. Throughout this judgment I have on a number of occasions stated that where the evidence of Mr. Porter is conflict with Mr. Castano's I prefer the version of events proffered by Mr. Porter. I will now explain why I have taken this approach. 123. From the outset I must state that I do not consider Mr. Castano to have been deliberately dishonest. However the issue of credibility goes beyond the issue of honesty and dishonesty. In particular for this case there have been a number of positions that tended to accredit Mr. Porter to the detriment of Mr. Castano. 124. One such issue is the purpose behind the photographs that Mr. Castano showed to Mr. Porter. It is apparent from Mr. Castano's evidence that he still does not acknowledge the importance of making a representation in photographic form to a customer. 125. This is an important issue because it makes it difficult to accept Mr. Castano's version as to what were the terms of the contract in general. He does not seem to place sufficient weight on the representations he has made. 126. By contrast it is plain from Ashglow's case that Mr. Porter placed great weight on the conversations and representations made. Mr. Porter was able to explain with great clarity what he believed the terms to be. 127. Also Mr. Porter's version of events was inherently logical. Given the nature and importance of the work to be performed, Mr. Porter's version seemed sensible and was easy to believe. By contrast the more casual approach taken by Mr. Castano was not easy to believe. 128. Additionally this was a case where the recollection of particular conversations was extremely important. Given the effluxion of time, my observations of Mr. Porter's powers of recall were that he had an excellent recollection of event. 129. During cross examination Mr. Porter was able to recall and provide fine details on the issues in dispute between the parties. He was able to refer to documents and he could quote facts and figures with relative ease. He was also prepared to make concessions from time to time that he might be wrong on some issues but right about others. 130. By contrast, Mr. Castano's recollection of events was not as clear. Under cross examination Mr. Castano's memory appeared to fail him. He was also reluctant to make concessions about the quality of his work even when photographs were shown to him that clearly showed defects. He also refused to acknowledge that the photographs showing the defective work he performed depicted concreting that was clearly inferior in quality to the photographs first shown to Mr. Porter. 131. Mr. Porter was generally able to answer questions directly whereas Mr. Castano would sometimes avoid the question. He also often lapsed into advocacy rather than directly answering a question. 132. There were therefore a number of general issues relevant to the credibility of the parties. Additionally there was one particular issue as to credibility that reflected negatively on Mr. Castano. That was the fact that Mr. Castano was not licensed to do this type of work on houses. 133. Annexure C to Mr. Castano's affidavit of 5 th June 2008 is a copy of the Contractor Licence issues to Wildstorm by the Department of Fair Trading. The licence states clearly that Wildstorm is licensed to perform general concreting and floor tiling on swimming pools only. 134. When Mr. Castano was cross examined on this issue his responses were not ones that would inspire confidence. He acknowledged that the work performed on the basement was outside the terms of the licence. He also acknowledged that he had not shown the licence to Mr. Porter. 135. Leaving aside the issue of the legality of operating outside the terms of the licence, it is concerning that the job that was done by Mr. Castano was on the face of it outside his skill set. When asked if he was concerned about this aspect of the matter Mr. Castano replied that "everybody does it". 136. Therefore on the one hand this case involves Mr. Porter who is able to give clear and consistent evidence on all the relevant forensic issues. On the other hand Mr. Castano's evidence was somewhat vague. It was also the case that Mr. Castano was not licensed to undertake the type of work performed. 137. Considering all of these issues I find that Mr. Porter is a considerably more credible witness than Mr. Castano. Therefore whenever the two witness' evidence is in conflict I prefer the evidence of Mr. Porter. Damages 138. Having determined that the contract was breached I now turn to the issue of damages. Before undertaking any calculations it is necessary to consider the issue of whether the damages claimed by Ashglow are reasonable. 139. Mr. Castano led no evidence on the issue of damages but did challenge Ashglow's evidence. Mr. Castano also made legal submissions on the issue. 140. On the issue of reasonable damages, Mr. Castano submitted that this was matter to which the rule in Ruxley Electronics v Forsyth & Ors [1996] 1 AC 344 (" Ruxley ") applies. From the outset I should state that I am somewhat reluctant to apply an English case to this matter. On my reading of the case some Australian authorities are considered and adopted whereas others are rejected. 141. It is not longer the case that decisions of the House of Lords should be considered automatically binding in NSW. As a Magistrate in the lowest court of the NSW hierarchy, before adopting a foreign case I would prefer to see if it has been accepted into the laws of NSW. Notwithstanding this, my view on the issue is that on application of the Ruxley principals Ashglow should still succeed. 142. Ruxley case was an English decision of the House of Lords that considered what damages should be due a landowner who contracts with a builder to perform works that do not satisfy aesthetic standards but are satisfactory in the practical sense. The effect of the authority is that the landowner is entitled to little if any damages. 143. I do not believe that the rule requires practical consideration in this case. The main reason for this is that the damage suffered by Ashglow goes beyond the aesthetic. The sloping of the walls affects their practical functionality, as shelves cannot be affixed to them. 144. Likewise the edges of the walls cannot be used for their intended purpose - that is for the storage of items. The defects in the floor also prevent the proper drainage of the basement. It is therefore not correct to say that the practical efficiency of the basement is unaffected. Consequently Ruxley does not prevent Ashglow from recovering damages. 145. It was also submitted to me that I should consider the rule in Bellgrove v Eldridge (1954) 90 CLR 613. This case is authority for the rule that in construction cases in order for a plaintiff to recover for remedial work the work must be both necessary and reasonable. 146. I am of the view that the remedial work sought by Mr. Porter was both necessary and reasonable. The walls were plainly unfit for their intended purpose as were the edges. I am also of the view that the unevenness of the floor was a substantial problem that could have led to flooding or pooling of water. 147. It was therefore necessary to perform the remedial work in order to establish the level of functionality required of the walls and floor. I am also of the view that the remedial works were reasonable, as they appear to have directly addressed the problems in a practical and cost effective way. 148. The walls could not be made closer to the vertical by the addition of more concrete without the loss of substantial space in the room. It was therefore reasonable to remove the walls and re-do them. This also remedied the problem with the ledges on the walls. 149. It was also not possible to rectify the floors without cutting them out and replacing them. It was not practical to try and level out the floors, as it would decrease the height between the floors and wall. 150. It was therefore the case that the rectification work would incur substantial costs to Ashglow. The rectification work involved tearing down the wall work and replacing it. It also involved removing the floor and replacing it. This last aspect of the work appears to have been a mammoth task given the amount of concrete that had to be removed. 151. Mr. Porter's affidavit of 23 rd May 2008 contains a series of tables at Annexure F in which the claim for damages is quantified. The first table is headed "Alpha Concrete Spraying and Pumping" and details monies paid to Mr. Castano for the work performed. 152. There is an incorrect entry in the table where the amount paid to CSR is described as $4402.00 when according to paragraph 10 of Mr. Porter's affidavit of 20 th June 2008 that amount should be $4402.20. I have adjusted my calculations accordingly. 153. The table also allows for the cheque for $4,500.00 that was paid to Mr. Castano but stopped. In accordance with that table I award Ashglow the sum of $6010.65. 154. The next table is headed "Consultation and Reports". The entries in this table appear to be legal or litigation costs. They may be the subjects of a separate application and consequently I do not include them in the award for damages. 155. The next table is headed "Removal as advised for Rectification of the Floor". The entries in this table are all reasonable and necessary and I therefore award Ashglow the sum of $13,680.00 for this heading of damages. 156. The next table is headed "Remedial Rectification of the Walls - Material and Labour". There is an incorrect entry of $1463.00 paid to Michael Wildraut. According to Mr. Porter's affidavit of 20 th June 2008 at paragraph 23 this amount should be $1596.00. I have adjusted my calculations accordingly. 157. Again these items appear to be reasonable and necessary and I award Ashglow the sum of $9991.43 for this heading of damages. 158. The final table is headed "General Labour Required for the Rectification" and includes invoices that were issued by Geoff Waymouth. Mr. Waymouth was a labourer who assisted with the rectification work. 159. According to paragraphs 29 and 30 of Mr. Porter's affidavit of 20 th June 2008, and evidence given under cross examination, Mr. Waymouth's work was necessary to complete the job. On the face of it his invoices are very reasonable. I therefore award Ashglow the sum of $7763.92 for this heading of damages. 160. Mr. Porter's affidavit of 20 th June 2008 annexes the invoices that are referred to in the tables I have just described. Paragraph 5 of this affidavit mistakenly describes Annexure B of the affidavit as being an EFTPOS receipt for the sum of $103.30 whereas the receipt is actually for $103.50. This is the same amount as that contained in the table so it does not affect my calculations above. 161. Consequently I make the following orders: 1. Verdict for the Plaintiff; 2. Judgment in the sum of $37,446.00; 3. Interest is payable on the judgment amount; 4. Failing any application to the contrary I award the Plaintiff costs on an ordinary basis. 5. Failing any application to the contrary, any security for costs held against the Plaintiff is to be released to the Plaintiff on or before 3 rd December 2008. 6. The parties are to prepare a minute of order detailing the judgment and interest amounts and file same on or before 3 rd December 2008. 7. Any application to re-list on the issue of costs is to be made on or before 3 rd December 2008. The Registrar may then list the application before me on a date I am available. On that date, the parties are to bring any authorities upon which they rely to Court to be handed up. 24 th NOVEMBER 2008 DOWNING CENTRE LOCAL COURT GEOFFREY JAMES DUNLEVY LCM