Harding v Horticultural Holdings Pty Ltd

Harding v Horticultural Holdings Pty Ltd - [2022] NSWCATCD 22 - NSWCATCD 2022 case summary — Zoe

[5]

Relevant law

In the HBA, s 18B(1) contains the following statutory warranties in relation to residential building work: (a) a warranty that the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract, (b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new, (c) a warranty that the work will be done in accordance with, and will comply with, this and any other law, (d) a warranty that the work will be done with due diligence and within the time stipulated in the contract or, if no time is stipulated, within a reasonable time, (e) a warranty that, if the work consists of the construction of a dwelling, the marking or alternations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling, (f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes know to the holder of the contractor licence or person required to hold a contractor's licence, or another person with express or apparent authority to enter into or vary any contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires that work to achieve, so as to show that the owner relies on the holder's or person's skill or judgment.
It is also necessary to note that s 48MA of the HBA provides: A court or tribunal determining a build claim involving an allegation of defective residential building work or specialist work by a party to the proceedings (the responsible party) is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.
Prior decisions which have considered those words assist in its consideration in this case. Galdona v Peacock [2017] NSWCATAP 64 is an Appeal Panel decision which noted that s 48MA provided for a preferred outcome, not a mandatory outcome. That case suggested that a work order would not be appropriate where (1) the relationship between the parties has broken down, (2) the builder has not acknowledged a poor standard of work, and/or (3) there are reservations as to the ability of the builder to rectify the work with due care and skill. However, those categories cannot be regarded as confining the operation of s 48MA since the test to be applied is not that decision, but the words of the statute set out above.
Kurmond Homes Pty Ltd v Marsden [2018] NSWCATAP 23 at [32] suggests s 48MA operates as a preference rather than a right and only operates to prevent unreasonable refusal by the owners to prevent the builder from carrying out rectification work.
It is clear the Tribunal is required to weigh up the factors in each case and make an evidence-based decision: Brooks v Gannon Constructions Pty Limited [2017] NSWCATCD 12 at [64].
If a money order is to be made, such as by reason of a breach of contract, the assessment of the amount payable must be determined by reference to the fundamental principle that the party affected by the breach should be put in the same position as if the breach had not occurred: Haines v Bendall [1991] HCA 15 (Haines). It is also necessary to note that, where there has been defective work, the rectification method must be both necessary and reasonable and the rectification cost must be reasonable: Bellgrove v Eldridge [1954] HCA 36 (Bellgrove).

[10]

Solid timber

In determining this question, the Tribunal only has the appearance of those words in the invoice and the opinions expressed by Mr Frizzell and Mr Valstar in their respective reports.
Many decisions, such as that of the High Court of Australia in Taylor v Johnson [1983] HCA 5 and numerous subsequent decisions, have held that contract law is concerned not with the subjective intentions of the parties to a contract, but rather with the outward manifestations of those intentions. That is sometimes referred to as the objective theory of contract because the assessment is not made from the subjective view of either party but objectively, as if a reasonable person was considering what was said and done by both parties at the relevant time. In other words, what either the Owners or the Builder thought was meant by the words "Solid timber" does not determine the issue.
The meaning given to the words "solid timber" depends on the evidence of what those words usually denote by reference to the context in which they were used, namely the supply and installation of a kitchen.
Mr Frizzell's view was that the words "solid timber" requires at least the "drawers, doors, end panels, infill panels, edge trims, kickboards, and loose shelves to be selected furniture grade solid timber". Mr Valstar suggested the words "solid timber" are ambiguous, covering both lumber (being milled timber which is rough sawn then dressed) and engineered work (including plywood, fibreboard, MDF and particle board). The Tribunal notes that MDF is an abbreviation of the words 'medium density fibreboard', which is an engineered wood product made by breaking down hardwood or softwood residuals into fibres. As a result, the Tribunal has difficulty with a suggestion that MDG could ever be considered as falling within the words "solid timber".
However, the crucial problem with the opinion expressed by Mr Valstar is that it would render the words "solid timber" superfluous. It is plain the inclusion of those words denoted a higher quality product for the Owners and a higher price for the Builder. Consistent with what was said in Sauvage v Cleardon [2017] NSWCATAP 47 at [31], the Tribunal prefers the view of Mr Frizzell as that view gives the words "solid timber" an effect while they would have no effect at all under the alternative interpretation suggested by Mr Valstar.
A consideration of the photographs included in the report of Mr Frizzell provides clear support for the view that what was supplied and installed was not "solid timber" and this constituted a breach of contract which entitles the Owners to an award of damages.
Beyond the general basis for a breach of contract, the Tribunal considers the kitchen supplied and installed involved a breach of paragraph (a) of s 18B(1) of the HBA in that such work was not done in accordance with the specification set out in the contract, namely the specification of "solid timber" in the Builder's tax invoice.
The work that would be required to rectify this aspect of the work weighs significantly against the contention that the work done can be repaired rather than removed and replaced.

[11]

Defects

The report of Mr Frizzell for the Owners grouped the alleged defects under four topics, considered separately below. His views complied with what is expected of an expert witness, as set out in Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305, which made it clear that an expert's opinion must clearly indicate the facts upon which that opinion is based and either the reasons or the process of reasoning which led to the that opinion.
The unsigned report of Mr Valstar, which did not set out his qualifications and experience, did not respond to the individual defects. Although he did not refer to the Tribunal's Procedural Direction 3, which contains a Code of Conduct for Expert Witnesses, his report did refer to such codes and it is clear he is aware of the expectation that an expert witness will regard his or her primary duty as assisting the court or tribunal and not being an advocate for the party for whom the report was provided.
Mr Valstar's views included the following propositions: (1) the work was not complete, (2) he found "the quality of the build to be below average, exhibiting concerns as to the selection and quality of material used", (3) the assembly of the units was below average, and (4) quality control was "below expectations", (5) the work should be repaired rather than removed and replaced. "The timber used is not of furniture grade quality"
Mr Frizzell expressed the view that: "The timber used for the drawers is not furniture grade, has excessive knots, knots have fallen out and been filled, gum streaks, roughly finished, torn surfaces." Supporting photographs were provided. That evidence was neither challenged nor contradicted. "There is inconsistent/poor design and manufacture"
Photographs of a drawer unit installed hard against a wall, without a side filler panel, requiring the skirting board to be cut to allow the doors to be opened and closed, provided clear evidence of poor design. Mr Valstar's use of the words "below average" and quality control being "below expectations" do not stand in the way of a finding that this defect has been established. "Multiple areas [of damage] at the production or installation stage …"
Mr Frizzell provided evidence in support of this defect under no less than eight items with photographs providing evidentiary support. While matters such as "works not cleaned and tested" could be remedied, timber which has not been sealed on unexposed sides is more consistent with cutting time and cost than a failure to complete work. If the suggestion of Mr Valstar that there were aspects which were incomplete work and could be corrected is directed to this group of defects, that suggestion is rejected as being an adequate response to each of the eight items listed by Mr Frizzell.
The Tribunal also accepts the evidence of Mr Frizzell that these items involve failures to comply with the provisions of AS4386-2018. "The paint finish is poor, inconsistent and bleeding onto stained areas"
Photographs included by Mr Frizzell in his report satisfy the Tribunal that the paint finish warrants a finding that it is defective and not merely below average.
It is convenient to here note that the Tribunal is satisfied that each of these four topics warrants a finding that there has been a breach of paragraph (a) of s 18B(1) of the HBA in that the subject work was not done with due care and skill.
Further, for the sake of completeness, it is noted that the evidence reveals that Mr Belaunde, an expert retained by the Builder, inspected the subject kitchen on 1 April 2021. However, no report from him has been provided not has his absence been explained.

[12]

Repair or replacement?

Although Mr Valstar contended for repair rather than replacement of the kitchen, he did not suggest any costs of repair. Further, it must be noted his view on the issues of repair or replacement was obviously based on his opinion that what was provided was with the words "Solid timber" in the invoice. It must be doubted whether that view could be maintained when the Tribunal's finding that what was supplied and installed was not a "Solid timber" kitchen and amounted to a breach of contract and a breach of statutory warranty by the Builder.
The nature and extent of the matters requiring attention satisfies the Tribunal that Mr Frizzell's opinion that the existing kitchen should be removed and replaced is to be preferred.
An issue was raised as to whether the claim for the cost of replacing the bench tops should be allowed. There is no evidence that the Owners installed the bench tops despite knowing that the kitchen was defective. Given that the cost of the bench tops was not included in the contract between the Owners and the Builder, it is unlikely that the Owners would incur that cost if they knew the kitchen was so defective as to require removal and replacement. Nor is there any evidence that the Builder advised the Owners not to install the bench tops.
While it might be contended that the installed bench tops could be re-used, it is clear from the evidence before the Tribunal that they were fixed in position, presumably glued. As a result, the force required to remove them may result in cracks. Even if that did not occur, it appears, as is usually the case, that a sink was cut into a least one of the bench tops which would have required specific measurements that may not be matched when that sink is removed and replaced. In those circumstances, the Tribunal is satisfied that the replacement of the bench tops is, in accordance with Bellgrove, both necessary and reasonable, and the cost of replacing the bench tops, obtained by reference to Rawlinsons, appears to be reasonable.
The principles relating to when a consequential loss can be recovered are well-established, by Hadley v Baxendale (1854) 9 Ex 341, which set out two tests, either of which needed to be satisfied for there to be an entitlement to recover. The first test is whether the damages claimed may fairly and reasonably be considered as arising naturally, in the usual course of things, from the breach. The second test is satisfied when the subject damage "may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it."
It is clear the replacement of the bench tops arises due to the need to replace the joinery on which they rest. Accordingly, the first test in Hadley v Baxendale is satisfied and the recovery of that cost by the Owners is justified both as a matter of law and on the evidence.

At a glance

Court

Decision date

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Judgment (19 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (9)