Hardwicke v Paul Richards Plumbing Pty Ltd

Consideration

1. The Tribunal has jurisdiction pursuant to s 48K(3) of the HBA to determine the applicant's claim. The claim meets the definition of "building claim" in s 48A of the HBA in that: the claim is a claim for relief from payment of a specified sum of money, that arises from a supply of building goods or services, that is, goods or services supplied for or in connection with the carrying out of residential building work or specialist work, supplied by a person who contracts to do the work (see section 48A of the HBA).
2. Section 18B(1) of the HBA implies into any contract to do 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", and … (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 known to the holder of the contractor licence …, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder's or person's skill and judgment."
3. The issues which I must determine are: 1. What were the terms of the contract between the parties? 2. Was the contract between the parties terminated and if so how? 3. Was the work carried out by the respondent defective, that is, in breach of the statutory warranties implied by s 18B(1) (a) or (f) of the HBA? 4. What if any relief is the applicant entitled to?

1 Terms of the contract

1. The terms of the contract between the parties are to be determined objectively. As Stern JA (with whom Kirk and Adamson JJA agreed) stated in C & V Engineering Services Pty Ltd v Metropolitan Demolitions Pty Ltd [2023] NSWCA 167 at [83] - [85]: 83 As held by the primary judge at [133], consistent with Equuscorp v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55 at [34], the "legal rights and obligations of the parties turn upon what their words and conduct would be reasonably understood to convey, not upon actual beliefs or intentions." 84 As to what evidence is relevant to this task, it was common ground in this Court that post-contractual conduct could not be relevant to construction of the contract but was relevant to the question of identification of the terms of this partly oral and partly written contract. The principle is as set out by Basten JA in Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150 at [124]: "With respect to an alleged agreement not wholly reduced to writing, the post-agreement conduct of one party known to the other, and communications between the parties, which reveal a common assumption as to the existence and terms of an agreement may provide evidence of such an agreement. However, the subjective views or reservations of one party, undisclosed to the other, cannot provide a basis for inferring the terms of a pre-existing agreement." 85 To the extent that the parties' post-contractual conduct is consistent with the common assumption as to the terms of the contract revealed by such matters, in my judgment that can also be taken into account in further supporting the conclusion that, objectively construed, the parties shared a common assumption as to the terms of the contract.
2. The parties did not dispute that the contract between them was constituted by the quotation provided by the respondent on 11 July 2022 and the applicant's response on 17 July 2022 stating "I would like you to do the plumbing work for me for quote 11133 please. Thank you Paul"
3. There is nothing in the email from the applicant to indicate that she was not issuing an instruction to the respondent to carry out both parts of the quote.
4. The covering email from the respondent accompanying the quotation did refer to the possibility of the parties proceeding with option 1 only, if "option 2 isn't within budget right now". However, that clearly left it to the applicant to indicate to the respondent if she did not intend to proceed with both options.
5. I also note that the applicant's response to the quotation sought the variation of the description of both options (although not any variation of the scope of work). The request for a variation of the wording of option two also suggested that the applicant was committing to both parts. It would not have been difficult for the applicant to have said that she was accepting option one only. She did not do so. She accepted the quote without differentiation.
6. It is notable that, although the applicant says that she was not aware that the respondent was undertaking works comprising comprised in option two because she was not well enough to venture into the yard to observe, she did not, when told by Mr Sullivan that option two works had commenced, raise any issue with Mr Richards. Nor did she do so when she first received an invoice claiming payment for the option two works. Thus, the parties' post-contractual conduct, the respondent proceeding with option 2 and the applicant failing to raise objection to it doing so, reveals a common assumption that the contract extended to both options, which, consistently with the statement of Stern JA in C & V Engineering Services can be taken into account in determining the terms of the contract.
7. Accordingly, I find that the terms of the contract between the parties are those set out in the quote forwarded by the respondent on 11 July 2022, including both parts of the scope of work, identified as option one and option two, for a contract price of $11,520 plus GST. The price was reducible by $800, if the price of option one was paid in cash.

2 Termination

1. I find that the applicant repudiated the contract both by seeking to terminate the contract and by instructing the respondent not to return to complete the work. The applicant's obligation under the contract was to give the respondent access to complete the work and to pay the contract price. By refusing to permit the respondent access to complete the work, the applicant manifested a clear refusal to abide by the contract. I find that the applicant had no grounds to terminate the contract for breach by the respondent. Even if, as I will discuss below, there were defects in the work, the respondent had not refused to rectify such defects and had not claimed to have completed the work.
2. I find that the respondent accepted that repudiation on 15 November 2022 when Mr Richards caused to be forwarded to the applicant the invoice on the letterhead of Plumbers Please Pty Ltd seeking payment of $7,172, identified as being the balance of the contract price, less $1000 by reason of the applicant's cancellation of the job.

3 Breach of the implied warranties

1. In alleging that the work performed by the respondent was defective, the applicant relied upon the letters from Mr Gsellmann and Mr Sullivan referred to above and also upon a further letter dated 15 May 2023 from Mr Trevor Geldenhuis of Shireservices Pty Ltd trading as Detect A Leak. Mr Geldenhuis stated: "After a meeting at the above address, 15-05-2023 the following observations were made: 1. The type of drainage system that was installed is inadequate for the purpose that it is trying to achieve. 2. The main objective is to eliminate water from seeping under the house and into the garage. The drainage installed is not installed at the correct depth or alignment to achieve this outcome. 3. The current drainage system will only collect minimal water run-off from neighbouring properties (essentially surface water) After viewing the quotation and invoice, I noticed that recycled aggregate was used and not the original Blue metal that was quoted on. Whilst I know clay type ground is extremely difficult to excavate and will add to costs, I do feel the price charged for this job is excessive and that the desired outcome was not met. In summary: the job is incomplete, materials quoted for were not the same as materials used, drainage collects some surface water and not the sub surface water which is the problem. The client is no better off now than before the works were undertaken."
2. Mr Geldenhuis was not available for cross-examination.
3. The issues identified in the three letters relied upon by the applicant may be summarised as: 1. The trenches dug by the respondent were not deep or wide enough; 2. The tap had been installed in the wrong place; 3. The respondent had used recycled aggregate rather than blue metal in filling the trenches.
4. Mr Richards contested the proposition that the trenches were not deep enough or wide enough.
5. Mr Richards accepted that the respondent had installed aggregate rather than blue metal. He suggested that recycled aggregate does the same job as blue metal and that the cost of the necessary quantity for the job was only $40 less than blue metal. He justified the use of the incorrect material as being due to blue metal not being available at the time it was required.
6. Mr Richard stated that the respondent had been prepared to move the tap at no further cost to the applicant if required.
7. The evidence relied upon by the applicant was not ideal and could be the subject of legitimate criticism.
8. Mr Sullivan was a licensed plumber but did not provide any detail of the basis on which he suggested the respondent's workmanship was "bad" and "not to code and regulations". Mr Gsellmann is a carpenter. Mr Geldenhuis did not identify his qualifications, although he does hold a New South Wales builder's licence of some description and his company's trading name would imply that he is a plumber.
9. Moreover, none of the authors of the three letters relied upon was made available for cross-examination at the hearing. Thus, the respondent was not able to challenge their conclusions.
10. However, the respondent did not lead any independent evidence to contradict the assertions of the three tradesmen upon whose opinions the applicant relied.
11. In the absence of any contradictory evidence, beyond Mr Richards' own assertions, I accept the common assessment of Messrs Gsellmann and Geldenhuis that the trenches excavated by the respondent in the applicant's backyard for the installation of agg pipe were too shallow, and accordingly not constructed with due care and skill. Had the applicant not repudiated the contract, the respondent would have been obliged to increase the depth of the trenches to ensure the backyard stormwater drainage system was functional.
12. I also find that the installation of recycled aggregate rather than blue metal was a failure to carry out the work in accordance with the specifications in the contract, which the respondent would have been responsible for correcting.
13. Likewise, the installation of the tap in the incorrect location was a failure to carry out work in accordance with the specifications.
14. Nevertheless, because the respondent did not purport to have completed the work and had not refused to complete the work, I cannot find that the respondent was in breach of the warranty that the work would be carried out with due care and skill or in accordance with the specifications set out in the contract (Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSWCA 248 at [65] - [69]; Little v J & K Homes Pty Ltd [2017] NSWCATAP 84 at [20] -[21]). However, any assessment of the payment to which the respondent may be entitled must take into account the cost of increasing the depth of the trenches, replacing the recycled aggregate with blue metal, and moving the tap.

Was the work fit for purpose?

1. The applicant's purpose in retaining the respondent, as notified in the email sent from the applicant to the respondent on 5 July 2022, was water running under the house. I accept the evidence in Mr Sullivan's second letter that the source of the problem was a broken pipe under the house, which Mr Richards did not identify.
2. Mr Richards submitted on behalf the respondent that, regardless that the immediate problem may have been the broken pipe, it was apparent to him that there was no drainage in the backyard and the installation of drainage in the backyard was necessary, regardless of the existence of the leak under the house. Mr Richards submitted that he had not been retained to undertake investigative work but acknowledged that he had understood the applicant's concern to be the water running under the house and that her objective in retaining the respondent was to resolve that issue.
3. I accept that the applicant made it clear to Mr Richards that she relied upon his skill and judgment in identifying and resolving the issues she was experiencing with water running under her house.
4. I also accept that the scope of work prepared by the respondent and set out in the contract was not suitable to achieve the applicant's purpose and for that reason find that the respondent breached the implied warranty that the goods and services provided would be reasonably fit for the purpose of eliminating the dampness in the brick wall and saturated soil as referred to in the applicant's email of 5 July 2022 and the attached photographs.

4 To what, if any, remedy is the applicant entitled?

1. As noted above, the applicant was not seeking compensation but rather an order that she does not owe money to the respondent.
2. Because the applicant has repudiated the contract, the respondent is entitled to payment for the value of the work performed, assessed consistently with the contract (Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560; [2019] HCA 32; Paraiso v CBS Build Pty Ltd [2020] NSWSC 190 at [99] - [102]).
3. Ordinarily that amount would be calculated as the balance of the contract price less the cost to the respondent of completing the remaining work. Although Mr Richards submitted that the $1,000 which he had allowed in the invoice submitted to the applicant on 15 November 2022 was a fair assessment of that cost, I do not accept that proposition. As noted above, I accept the common assertion of the other tradesmen that the trenches were too shallow, and that the completion of the work would have required the removal of the aggregate, the excavation of the trenches to a greater depth and the installation of blue metal. Mr Richards' estimate of $1,000 was not calculated on the basis that the respondent would have been required to carry out that work.
4. I am not on the evidence before me able to assess the cost of completion of the works the subject of the contract.
5. However, the applicant seeks an order that she does not owe the respondent any money.
6. Clearly, the respondent has no entitlement to any payment of sums in excess of the balance of the contract price by way of interest or reimbursement of administrative costs. The contract makes no provision for interest on amounts owing under the contract or for the payment of administrative costs.
7. Had I not found that the respondent was in breach of the warranty of fitness for purpose, doing the best I can, I would have deducted $2000 from the remaining contract balance to allow for the cost to the respondent of completion of the work.
8. However, I have found that the respondent has breached the warranty of fitness for purpose. The completion of the drainage lines provided for by the scope of works proposed by the respondent would not have satisfactorily prevented water from running under the house, because it was not directed to the major source of the problem. In those circumstances it may be questioned whether the work performed by the respondent had any value to the applicant.
9. The appropriate measure of damages for the breach of the warranty of fitness for purpose, as with any contractual term, is the amount required to place the innocent party in the position they would have been in if the warranty had been fulfilled. In this case that would be measured by reference to the amount which the applicant would reasonably have been required to spend in order to achieve the expressed purpose.
10. I accept Mr Richards' evidence that the installation of some drainage in the rear yard was necessary to ensure water was drained away from the house, but, given that there was another substantial cause for the dampness which the respondent did not identify, I am not persuaded that the extent of drainage for which the respondent quoted was necessary, or that the applicant would have agreed to the extent of work included in the quotation, if she had understood that most of the water she was observing was coming from a broken pipe under the house.
11. The evidence discloses that the applicant paid Mr Sullivan $976.80 to rectify the broken pipe. There is no evidence to establish precisely what work would have been necessary and appropriate to ensure proper drainage of the applicant's property, if the substantial source of the water which caused the applicant to seek the respondent's assistance had been identified from the start. In the absence of such evidence, I am unable to conclude that the amount which the applicant would have spent, if properly advised, would have been more than the amount of $4,000 which she has paid the respondent. I am equally unable to conclude that the value to the applicant of the work performed by the respondent exceeded that $4,000.
12. In the circumstances, I find that, by reason of the breach of the warranty of fitness for purpose, the respondent is not entitled to further payment and I will make the order sought, that is that the applicant does not owe the respondent the sum of $9,1048.44, being the amount last demanded by Bluechip Collections on behalf the respondent (although inaccurately said to be owing to Plumbers Please Pty Ltd).

orders

1. I make the following order: 1. The applicant does not owe the respondent the sum of $9,108.44 the subject of demands served upon the applicant by Bluechip Collections Pty Ltd on 28 March and 6 April 2023.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 26 September 2023