For the reasons given the Builder's claim fails except for the extra payment for the garage slab, which is $2,095.60. The frame stage is not payable because that stage was not reached. The claim for the windows fails for the reasons given.
The amounts to be awarded to the Owners with respect to incomplete and defective work are the assessed cost to bring the work to frame stage. Consequently, there must be a credit to the Builder to be set off against these damages for the frame stage payment. For the same reason, there must a credit in favour of the Builder for the extra due to it for the deeper stump holes to be set off against the amount allowed for re-stumping.
The counterclaim is proven in the following amounts:
[2]
Less: Builder's allowance for stumps $ 450.00 $67,049.99
[3]
Credit for reduction because only one bottom plate $ 288.00
[4]
Damages for failing to fix prime cost with care $ 1.00
[5]
Total $ 94,826.34 Less: Frame stage payment $ 82,600.00 Balance due to Owners $ 12,263.34
[6]
In addition, the amount standing to the credit of the bank account holding the final payment must be released to the Owners because the Builder is not entitled to it.
[7]
There will be an order on the claim that the Owners pay the Builder $2,095.60. There will be an order on the Counterclaim that the Builder pay to the Owners $12,263.34.
In addition there will be an order that the Builder provide to National Australia Bank Limited such authorization as that bank may require in order to transfer to the Owners all funds standing to the credit of the bank account. There will be a declaration that those funds belong to the Owners and liberty to the Owners to apply in the event of any dispute as to whether this part of the order has been complied with.
Costs will be reserved for further argument. This will include the claims for the various expert inspections and reports which were sought as damages.
Parties
Applicant/Plaintiff:
Harmonious Blend Building Corporation Pty Ltd trading as Clark New Homes
Respondent/Defendant:
Ibraham
Legislation Cited (2)
Building Contracts Act 1995
Building Regulations 2006
Cases Cited (11)
Harmonious Blend Building Corporation Pty Ltd trading as Clark New Homes v Ibraham (Building and Property) [2014] VCAT 1084 (26 August 2014)
On the Builder's own admission, there were "frame completion items" to attend to and so the frame was incomplete. Further, it appears from the inspection by the building inspector on 28 February 2012 that the stumps were also incomplete and defective.
Mr Twigg relied upon the decision of the Court of Appeal in Cardona v. Brown[2012] VSCA 174 as authority for the proposition that, if the Base Stage is not reached, nor is the Frame Stage. In a judgement with which the other members of the Court agreed, Tate AJ said that the various stages for payment under a building contract such as this are cumulative. She said (at para. 67):
Mr Twigg submitted, correctly, that the measure of damages for defective workmanship by a builder is now governed by of Tabcorp Holdings Ltd v Bowen Investments Pty Ltd[2009] HCA 8. In that case, the Court said (at para. 13):
Before the decision in Tabcorp, damages in building cases had been assessed having regard to what the High Court said in Bellgrove v Eldridge[1954] HCA 36; (1954) 90 CLR 613. That was a case where a house was built so defectively that the faults could not be rectified. The owner claimed the cost of demolishing and rebuilding the house. The builder argued that the house had some value and that the measure of damages was the diminution in value caused by the defects. In rejecting this argument the High Court said that the owner was entitled to have a building erected upon her land in accordance with the contract and that her loss, prima facie, was the amount required to rectify the defects complained of and so give to her the equivalent of a building on her land substantially in accordance with the contract.
The Court qualified that prima facie rule, saying that, not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt. On that basis it has been thought that it is always open to a court, or a tribunal such as this, to find that, having regard to the nature or extent of a particular defect, it would be unreasonable to award the cost of rectification and that a lesser monetary award could be made instead to adequately compensate an owner for the defect. However in Tabcorp, the Court referred to the example of unreasonableness given in Bellgrove and suggested that the "reasonableness test" will only be satisfied in "fairly exceptional circumstances".
In the course of submissions I referred Mr Twigg to the House of Lords decision in Ruxley Electronics and Construction Ltd v Forsyth[1994] 1 WLR 650. In that case the builder had constructed a swimming pool that was shallower than the contract required. The owner claimed as damages the cost of removing the pool and rebuilding it to the correct depth, The House of Lords held that the expenditure necessary to rectify the defect was out of all proportion to the benefit to be obtained from doing so and that, in such circumstances, the appropriate measure of damages was not the cost of reinstatement but the diminution in the value of the work occasioned by the breach, even if that would result in a nominal award. In reaching this conclusion, they considered the following matters relevant (pp.354-355:
The Court in Tabcorp queried whether, on one view, the result arrived at in Ruxley could be reconciled with what Oliver J had said in Radford. However the Court quoted the above passage without apparent disapproval. It observed that the facts in Ruxley were "quite exceptionable" and were distinguishable from the case before it.
I do not accept Mr Twigg's submission that Ruxley is not good law in Australia. Although in a different court hierarchy, a judgment of the House of Lords is of such persuasive authority that, in practical terms, this Tribunal must follow it unless required to do otherwise by contrary binding authority. That point was made in a decision of the High Court in Piro v. Foster[1943] HCA 32, where Latham CJ said:
Mr Twigg submitted that, where a successful applicant recovers an award of damages, it is up to him how he spends the money and that is certainly right. I also accept that, where the construction is not in accordance with the contract documents, the applicant is entitled to incur the expense of altering the work so as to accord with the contract documents and recover the cost from the Builder if that is a reasonable course to adopt. However where he has accepted what has been built and indicated that that is how the work shall remain, either by proceeding with the construction on that basis or otherwise, and it is clear that he does not propose to incur the expense of altering the work to accord with the contract, then his real loss is any actual expense and loss of amenity that may arise from the non-compliance. Such a case is exceptional in the Ruxley sense and in those circumstances it would be unreasonable to award him damages designed to compensate him for an expense to alter the work that he will not incur.
Apart from certain well defined exceptions, damages are compensatory in nature, not punitive. They are to compensate for a loss arising from a breach of contract. It is the real loss that requires compensation, not a theoretical one. As Oliver J said in the above quotation from Radford, the innocent party is seeking compensation for a genuine loss and not merely using a technical breach to secure "an uncovenanted profit".
Whether a particular course is reasonable is a question of fact. The Builder bears the onus of proof that it would be unreasonable to award the full rectification cost. (see: Rares J of the Federal Court in Tabcorp; Clarendon Homes Vic Pty Ltd v Zalega[2010] VCAT 1202 at para 163).
In my earlier decision in Clarendon Homes Vic Pty Ltd v Zalega I expressed my own view, which I still hold, as to the principles to be applied as follows (at para 165):
She said that the stress had resulted in behaviour from her husband that she had not previously seen, including the making of comments that are the subject of defamation proceedings, they have been put under serious financial strain and their future as a result remains uncertain and insecure. Their lives have been put on hold for the past three years and they have been unable to make or carry out significant plans or move forward. Their ability to work effectively at their jobs and spend quality time as a family has also been affected by the magnitude of the stress, the financial strain and the time consuming nature of this proceeding. She said that it had had an impact upon her mental health that she still deals with. She added that the House "is far from the house we envisaged."
She expanded on these matters in the witness box. She has three children who are now aged between a few months and six years. At the time of construction they were living in Ringwood and she drove the now eldest child to kindergarten in Gembrook one day a week in 2011 and then three days a week in 2012. The round trip took her two and a half hours and this continued until the House was completed.
After taking over construction they moved in without floor coverings and some windows were uncurtained. The House was cold and they were unable to entertain guests apart from children's birthday parties.
Although they had the frame stage payment available to them they were unable to access the money in the bank account to pay for the lock up stage and they had the substantial burden of paying legal costs in order to conduct these proceedings.
Mr Silver submitted that, since the Builder had contracted to construct a family home to lock up stage, all of this was reasonably foreseeable. He suggested that a fair and reasonable sum to compensate the Owners would be in the range from $25,000 to $45,000.
He referred me to a number of authorities in regard to the awarding of general damages in a claim for breach of contract.
In Boncristiano v. Lomann[1998] VSC 228, in the majority judgment of the Full Court of the Supreme Court of Victoria, Winneke P. said:
"It now appears to be accepted, both in England and Australia, that awards of general damages of the type to which I have referred can be made to building owners who have suffered physical inconvenience, anxiety and distress as a result of the builders' breach of contract, but only for the physical inconveniences and mental distress directly related to those inconveniences which have been caused by the breach of contract (see Franklin; "More Heartache : A Review of the Award of General Damages in Building Cases"; (1992) 8 Construction L.J. 318; see also Baltic Shipping Co. v. Dillon[1993] HCA 4; (1993) 176 C.L.R. 344 at 364). Although it would seem to have been accepted in England that such awards should be "restrained" or "modest" (Perry v. Sidney Phillips & Son[1982] 3 All.E.R. 705 at 709 per Lord Denning, M.R.; Watts v. Morrow, supra, at 958 per Ralph Gibson, L.J. and 960 per Bingham, L.J.; Ruxley Electronics & Construction Ltd. v. Forsyth [1996] A.C. 344 at 374 per Lord Lloyd of Berwick), this injunction has not met with the approval of the Court of Appeal in New South Wales in the Campbelltown case, supra, where Kirby, P. (at 504) said that he "could find no logical basis for it" and Samuels, J.A. (505) found it "extremely difficult to attribute any meaning to the phrase".
As this passage makes clear, physical inconvenience, anxiety and distress as a result of a builders' breach of contract are compensable but only physical inconveniences and mental distress directly related to those inconveniences which have been caused by the breach of contract. The Court also cautions that damages awarded under this head will rarely be large but this is because of the very nature of the loss being compensated, not any vague principle of restraint.
The Tribunal's power to award damages in an order resolving a domestic building dispute is conferred by s.53(2)(b)(ii) of the Act. However, by s,54(2), the term "domestic building dispute" does not include a dispute or claim for personal injury. In a number of case this Tribunal has determined that, as a consequence of s.54(2), a claim for personal injury cannot be pursued in proceedings in the Tribunal under the Act, even if it arises out of a domestic building dispute (see: Henley Arch Pty Ltd v Hannagan[1999] VCAT 29 at para 10; Anderson & Anor v Wilkie[2012] VCAT 432 at para 29).
Damages of the nature now sought have been awarded by this Tribunal in building cases although the amounts awarded have tended to be much less than the figures that Mr Silver suggested.
In Anderson & Anor v Wilkie[2012] VCAT 432 I found that the damage suffered by the Applicants living in a wet house for 2 ½ years and facing the inconvenience of having to move out while repairs were effected were compensable in the Tribunal whereas claims for headaches said to have been caused by having to work long hours to pay for the house and lack of sleep and stress resulting from both the defects themselves and the dispute with the builder were not. For the former matters I awarded $5,000. In Kounelis v Ross Horton Homes Pty Ltd[2014] VCAT 319 I awarded $2,000 damages for the damages arising from having to live in the house whilst substantial repairs were affected.
The awards in those cases turned on their own facts and are not suggested as a guide as to what should happen in other cases. Putting into money something that is nor readily quantifiable in money is not easy but an assessment must be made. In each case the question is what is a fair and reasonable amount to compensate the applicant for the loss suffered?
(1954) 90 CLR 613
I have no jurisdiction to award damages for injury and that would include psychological injury (see: Henley Arch Pty Ltd v Hannagan ). However I see no reason why upset and distress not amounting to physical injury would not compensable, as long as it is directly related to matters which have been caused by the breach of contract.
The Builder's primary breach in the present case was suspending work without lawful justification. This resulted first in delay and then in the Owners terminating the Contract and undertaking the work to complete the House themselves.
As to the delay, the construction period was 250 days. On my calculation that expired on 25 April 2012, almost a month after termination. I cannot say with certainty whether the Builder would have finished in time if it had continued construction for that period but that is not material. It had refused to do any more work. The Owners were not builders and it was reasonably foreseeable that, if the task were thrown upon them:
(a) the completion of the House might be delayed beyond the time it ought to have been completed;
(b) in the meantime they would suffer form not having a habitable house; and
(c) after moving in, they might well have the discomfort of living in an incomplete house.
The Owners moved in sometime in October 2012. It seems likely that, had the Builder completed lock up on 25 April 2012 as it ought to have done, fixing and completion would not have taken as long as six months. It seems likely they would have moved in earlier but the evidence does not permit me to say with any precision when that would have been. Doing the best I can and having regard to the extent of the delays by the Builder during the building period, I find that completion was delayed by three months. That accords somewhat to the period of suspension with some allowance for the rectification work that the Builder did following the suspension.
As stated above, liquidated damages payable by the Builder for late completion are fixed by Item 5 in the Appendix and Clause 11.1 of the Contract at only $100 per week. Since the Contract was duly terminated by the Owners during the building period, that provision does not apply and the Owners are free to prove their actual damage. I must assess fair and reasonable compensation for the physical inconvenience, anxiety and distress they suffered from being without their house for three months.
They were living in rented accommodation and paid $1.217 per month in rental. During the running of the case I was given to understand that the claim for rental was not pressed but it has re-emerged in final submissions as one of the elements to be considered in the claim for general damages.
The Owners also had to assume responsibility for completing the frame stage and then the lock up stage. The stress and inconvenience arising from having this thrown upon them is also compensable.
Although I have found that the Frame stage was incomplete there was very little to do to bring it to completion. They then had to do the lock up stage, which the Builder should have done. They had to do that without having access to the money they had allocated for the lock up stage because that was in an account partly controlled by the Builder. However they did have access to the frame stage payment which they did not pay to the Builder and that was considerably more than the money in the account.
The stress and worry of completing frame and lock up stages should not be overstated. They were actively involved in the construction from the outset as a result, no doubt, of interest in the outcome of the project. Further, it was always the case that they were to complete the House from lock up stage themselves.
The financial stress and worry of these proceedings, although understandable, is not compensable. Legal proceedings are by their nature stressful and expensive and place the participants under severe financial pressure. However damages are assessed for loss arising from the breach, not from the process whereby the innocent parties seek compensation. Although the proceedings can be argued to have been the result of the breach in a causal sense, they are not so connected with the breach as to be compensable.
Doing the best that I can, I assess $6,000 as damages under this head.