Court of Appeal (WA)|2009-06-26|Before: Pullin JA

HOULAHAN -v- PITCHEN [2009] WASCA 104 (26 June 2009)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : HOULAHAN -v- PITCHEN [2009] WASCA 104

Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA

Citation : PITCHEN -v- CADO METAL DESIGN PTY LTD & ORS [2008] WADC 16

Negligence - Building contract - Appellants agreed to construct house for first respondent - First respondent arranged for installation of balustrade - After house completed first respondent injured when balustrade collapsed - Whether balustrade part of building contract - Whether appellant negligent in failing to inquire as to subcontractor's method of installation of balustrade - Turns on own facts

Damages - Crossappeals by first respondent - Appeal against award for loss of earning capacity - Whether trial judge erred in failing to assess loss of earning capacity by reference to new employment of former work colleague - Appeal against award of general damages - Relevant principles - Whether award proportionate to injuries and disabilities suffered

Butler v Barnfield Holdings Pty Ltd [2001] WASCA 277

Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520

Dan v Barclays Australia Ltd (1983) 46 ALR 437

Hunter v Transport Accident Commission [2005] VSCA 1

Mount Lawley Pty Ltd v Western Australian Planning Commission [2000] WASCA 149; (2004) 29 WAR 273

Pitchen v Cado Metal Design Pty Ltd [2008] WADC 16

Planet Fisheries Pty Ltd v La Rosa [1968] HCA 62; (1968) 119 CLR 118

Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93

3 NEWNES JA: On the evening of 24 February 2005, before retiring to bed, the first respondent (Mr Pitchen) leant over the balustrade on the first floor of his newly-constructed house in Karakin to see if the ground floor lights were still on. As he did, the balustrade gave way and Mr Pitchen fell to the ground floor, suffering serious injuries.

4 Mr Pitchen brought proceedings in the District Court against the designer and installer of the balustrade, Cado Metal Design Pty Ltd (Cado Metal), and against the builders of the house, Kim Houlahan and Robyn Houlahan (the Houlahans). Cado Metal and the Houlahans brought contribution proceedings against each other. The plaintiff obtained judgment against both Cado Metal and the Houlahans, with damages being assessed in the total sum of $946,489.30 and liability in negligence being apportioned 75% to Cado Metal and 25% to the Houlahans: Pitchen v Cado Metal Design Pty Ltd [2008] WADC 16.

5 Several appeals have arisen out of those proceedings. The Houlahans appeal against the decision that they are liable to Mr Pitchen; Mr Pitchen appeals against the adequacy of the award of damages made in his favour; and Cado Metal appeals against the finding that it was not entitled to be indemnified by the Houlahans in respect of Mr Pitchen's claim.

6 In October 2000, Mr Pitchen and Ms Wiese purchased a property at Karakin, near Lancelin, with the intention of building a house on it. Plans for the two-storey house were prepared by an architectural draftsman. In May 2002, Mr Pitchen and Ms Wiese entered into a contract with the Houlahans for the construction of the house. The contract was in the form of a printed Housing Industry Association contract entitled Lump Sum Building Contract. The total contract price was $370,920. The contract was expressed to be conditional upon Mr Pitchen and Ms Wiese obtaining finance of $390,000.

7 The contract provided that the Houlahans agreed to:

build and complete for [Mr Pitchen and Ms Wiese] the building work described in Item 3 of the Schedule ('the Works') upon the land and existing improvements described in Item 3 of the Schedule ('the Site') in a

proper and workmanlike manner and in accordance with this Contract and the Drawings and Specifications, inclusive of all attached Addenda to Specifications agreed between the parties and, for the purposes of identification, signed by each of them ('the Contract Documents') for the Contract Price, terms and conditions herein.

8 Item 3 of the schedule to the contract (the original schedule) contained a description of the land but not of the Works. However, drawings of the house to be constructed were prepared and the balustrade in question was shown on the drawings, although the drawings did not include any detail as to how the balustrade was to be fixed in place.

9 Item 10(a) of the original schedule contained provision for the insertion of provisional sums and item 10(b) for prime cost items. In the contract signed by the parties, item 10(b) was left blank. Item 10(a), however, specified an amount of $13,450 for provisional sums and referred to the 'Addenda to Specifications' for details of the provisional sums.

10 A handwritten document headed 'PC Sums' (addendum) was prepared by Ms Wiese. It was dated 30 May 2002 and signed by Mr Houlahan. It contained six items, namely 'site work allowance', '2 wall ovens', '2 hot plates', 'tiles $38 sqm', 'balcony & stairs', and 'pool fencing'. Against each item, except the tiles, there was written a monetary amount, the total of those amounts being $13,450. Against the item 'balcony & stairs' appeared an amount of $8,000. Ms Wiese gave evidence that the item 'balcony & stairs' referred to the balustrade which was to be installed on the internal stairs and the first floor of the house.

11 Although the addendum is headed 'PC Sums', it is clear that it contains the provisional sums referred to in the original schedule.

12 It turned out that Mr Pitchen and Ms Wiese were unable to obtain the finance they needed to construct the house for the contract price. After discussions with their financial adviser, Ms Wiese and Mr Pitchen informed Mr Houlahan that their loan capacity was about $310,000. Mr Houlahan said he would see what items he could take out of the building contract to reduce the contract price. He subsequently told them (ts 59) that he had reduced the price to $310,000 and that the cupboards, tiling and painting had been omitted from the building contract.

13 A fresh schedule to the contract (the schedule), using the same printed form, was prepared by Mr Houlahan and, on 21 April 2003, signed by Mr Pitchen and Ms Wiese, and by Mr Houlahan on behalf of the Houlahans. The schedule stated a contract price of $310,000. Items 10(a) and 10(b) of the schedule, which provided for provisional sums and prime costs respectively, were left blank.

14 However, Ms Wiese gave evidence (ts 60) that at the time the schedule was signed she discussed with Mr Houlahan a type-written list of items of work and materials. The document concerned (exhibit 15) is in two sections; one section is headed 'PC sums' and the other 'Price Allowed', with a list of items under each. The section headed 'PC Sums' contains the same six items as the addendum and the same monetary amounts in respect of each. While the document refers to 'balustrade', rather than 'balcony & stairs' as in the addendum, it was not in issue that it is a reference to the same balustrade. Against the item 'tiles', however, a cross is marked in hand. Similarly, under the heading 'Price Allowed', a cross is marked against an item 'kitchen cupboards'.

15 Ms Wiese said (ts 60) that in the course of the discussion with Mr Houlahan she had placed the crosses against 'tiles' and 'kitchen cupboards' to indicate that those items had been omitted from the building contract.

16 It appears that, although the parties signed the schedule in substitution for the original schedule, no new contract was signed and the parties proceeded on the basis that the original contract applied to the schedule. As with the original schedule, item 3 of the schedule described the land but not the Works.

17 The Houlahans subsequently commenced the construction of the house.

18 Ms Wiese said (ts 62) that, in about September or October 2003, she had a discussion with Mr Houlahan about the balustrade. Mr Houlahan suggested a company that might be able to provide it. Mr Pitchen and Ms Wiese obtained a quote from that company but decided that the price quoted was well beyond their financial capacity. They then made enquiries of their own and ultimately approached Cado Metal.

19 Cado Metal had a form of balustrade which Mr Pitchen and Ms Wiese liked. Mr Hilz of Cado Metal told them that the cost of the balustrade would be $9,600. Ms Wiese said they told Cado Metal to go ahead with the manufacture and installation of it. Ms Wiese gave Mr Hilz a cheque in the sum of $1,600, which she said in evidence (ts 63) represented the difference between the sum of $9,600 and the $8,000 allowed for the balustrade in the building contract.

20 Ms Wiese said (ts 63) that she and Mr Pitchen then informed Mr Houlahan that they had arranged for Cado Metal to supply and install the balustrade.

21 Subsequently, on 13 October 2004, Cado Metal sent an invoice to Mr Pitchen and Ms Wiese confirming the cost of supply and installation of the balustrade in the sum of $10,560, being an amount of $9,600 plus GST. Ms Wiese gave evidence (ts 73) that she had overlooked the GST when she gave the cheque for $1,600 to Mr Hilz.

22 On 18 October 2004, Mr Pitchen and Ms Wiese sent a facsimile to Mr Houlahan regarding the progress of the work and for his 'information and planning' notified him when the cabinets, tiles, internal staircase and balcony would be available. In the facsimile they said that the internal staircase would be 'available immediately tiling completed.'

23 Some time later, Cado Metal sent an invoice, dated 17 December 2004, to Mr Pitchen and Ms Wiese for the first progress payment for the balustrade. The invoice was for an amount of $3,300. Ms Wiese said in evidence (ts 64) that when she received the invoice she gave it to Mr Houlahan.

24 Subsequently, Cado Metal sent an invoice, dated 3 February 2005, to Mr Pitchen and Ms Wiese for a second progress payment in the sum of $3,460. Ms Wiese said (ts 64) that she also gave that invoice to Mr Houlahan.

25 Ms Wiese gave evidence (ts 65) that the balustrade was installed by Cado Metal on 10 February 2005. A final invoice, dated 11 February 2005, in the sum of $2,200 was sent by Cado Metal to Mr Pitchen and Ms Wiese.

26 On 11 February 2005, the office manager of Cado Metal, Ms Marjorie Doust, telephoned Ms Wiese regarding payment of the outstanding amount of $3,300 for the first progress payment. Ms Wiese told Ms Doust that the invoices should have been sent to the Houlahans. Immediately following that conversation, Ms Doust sent the invoices for the first two progress payments and a statement of account to Mr Houlahan by facsimile (ts 111).

27 On 16 February 2005, Ms Doust telephoned Mr Houlahan regarding payment of the accounts. Mr Houlahan told Ms Doust that payment would be made by 18 February 2005 (ts 111 - 112). Payment was not made by that date.

28 In the meantime, over the period 16 February to 20 February 2005, Mr Pitchen and Ms Wiese moved into the house.

29 Ms Wiese gave evidence that, on 21 February 2005, she had a meeting with Mr Houlahan at the house at which they discussed the amount owing by Mr Pitchen and Ms Wiese under the building contract. In the course of her evidence, Ms Wiese was asked, 'was there any agreement on the balance of moneys owing to Cado [Metal]?' Ms Wiese said, '[Mr Houlahan] was going to pay the $4,000 outstanding to Cado [Metal]' (ts 68).

30 On 22 February 2005, a director of Cado Metal, Mr Doust, spoke to Mr Houlahan about the outstanding accounts. Mr Houlahan told Mr Doust that he would pay one half then and the balance a week later (ts 102, 106).

31 The next day, 23 February 2005, Cado Metal received from the Houlahans, by electronic funds transfer, the sum of $4,128. Cado Metal treated that sum as being payment of the sum of $3,300 due on the invoice dated 17 December 2004 and $828 as part payment of the invoice of 3 February 2005_._ That left a balance of $4,832 owing to Cado Metal. I should say that why the amount transferred was the specific sum of $4,128 was not explained. Ms Wiese said she did not know and the Houlahans did not give evidence. It was, however, almost half of the amount then owing to Cado Metal.

32 As I have mentioned, the accident occurred on the evening of Thursday, 24 February 2005.

33 On 13 March 2005, Ms Wiese sent a facsimile to Mr Houlahan in which she said (relevantly):

Firstly, I hereby confirm my telephone conversation to you on the morning of 28 February 2005 informing you of the collapsing [sic] of a panel of internal balustrade on the top floor of our new home, resulting in [Mr Pitchen] sustaining a serious back injury.

At that time I recommended to you not to pay the outstanding account to Cado Metal Design until further notice. I now advise we have engaged a lawyer to take legal action on our behalf. We therefore suggest the outstanding monies not be paid until the matter is resolved.

34 The telephone conversation of 28 February 2005 referred to in the facsimile was before the balance of the sum owing to Cado Metal was due to be paid by the Houlahans pursuant to the arrangement made with Mr Doust on 22 February 2005. It is not in dispute that Houlahans did not make that payment.

35 Subsequently, on 28 April 2005, Mr Pitchen and Ms Wiese sent a facsimile to the Houlahans informing them, among other things, that Cado Metal had completed installation of the internal balustrade and asking that the Houlahans advise of their intentions regarding the final payment to Cado Metal. Once again, there was no evidence as to what (if any) reply the Houlahans sent to that facsimile.

36 Mr Pitchen and Ms Wiese sent a facsimile to the Houlahans on 9 May 2005 containing a calculation of the amount they regarded as owing by them to the Houlahans and deducting from it the sum of $4,000 in respect of the amount owing to Cado Metal. In the facsimile, Mr Pitchen and Ms Wiese said they had settled Cado Metal's account in full. Ms Wiese gave evidence (ts 70, 74) that Mr Houlahan had said that he would not pay the Cado Metal account because Mr Pitchen and Ms Wiese still owed the Houlahans the sum of $4,000 for the external balustrade.

37 The calculation in the facsimile of 9 May 2005 produced the result that Mr Pitchen and Ms Wiese owed the Houlahans an amount of $316, which Mr Pitchen and Ms Wiese said they were writing off against several small items for which they had been wrongly charged.

38 After the accident, Mr Pitchen and Ms Wiese engaged Mr Peter Airey, a consulting engineer, to investigate the cause of the collapse of the balustrade. Mr Airey reported (exhibit 25) that the section of the balustrade which had collapsed had been secured at the northern end by a spigot inserted in a vertical hole drilled in the extreme edge of the concrete slab and at the southern end by two horizontal rails welded to the newel post. Mr Airey concluded that the spigot had failed by shearing out of the edge of the concrete slab. The balustrade was then subject to horizontal bending movements, causing the welded connections at the northern end to be subject to horizontal prying action. Mr Airey considered that the one millimetre wide welds between the balustrade and the newel post were so small as to have no effective strength. Those welds failed when Mr Pitchen leant against the balustrade, which rotated and fell to the ground floor.

39 Mr Airey concluded that the balustrade did not comply with the relevant building code because it was unable to resist the horizontal loads provided for in the code.

40 It was Mr Airey's opinion (ts 85) that prior to the accident the defective installation of the balustrade would not have been 'particularly obvious'. In the course of cross-examination by counsel for Cado Metal, Mr Airey agreed (ts 90, 91) with the suggestion put to him that the inadequacy of the connection between the northern newel and the suspended concrete slab would have been 'intuitively obvious' to anyone with reasonable experience in the building industry. Mr Airey regarded a builder as such a person (ts 91). He did not explain what he meant by 'intuitively obvious'.

41 Mr Pitchen pleaded (relevantly) that by the building contract the Houlahans had expressly agreed to construct, among other things, the balustrade in a proper and workmanlike manner: pars 11, 12. He alleged that the Houlahans' obligations under the contract required them to supervise the installation of the balustrade so as to ensure that it was supplied and installed in accordance with the building contract: par 14. In breach of that obligation, the Houlahans failed to perform the building work in a proper and workmanlike manner, in that (among other things) they failed properly to supervise the installation of the balustrade and failed to ensure that the balustrade was installed in accordance with the relevant Australian standard: par 17.

42 Mr Pitchen also pleaded that by reason of the building contract the Houlahans owed to Mr Pitchen a duty of care to act with reasonable skill, care and diligence in the performance of the building work: par 13. That duty required the Houlahans to supervise the installation of the balustrade so as to ensure that it was supplied and installed in accordance with the building contract: par 14. The breach of that duty is pleaded (in par 17) in the same terms as the breach of contract.

43 In their defence, the Houlahans (relevantly) admitted that it was an express term of the building contract that they would carry out the building work in a proper and workmanlike manner: par 15(a). They also admitted that the balustrade was originally a provisional sum item, but said that the internal balustrade was omitted as a provisional sum and ceased to form part of the work to be completed by the Houlahans under the building contract: par 15(b).

44 In amplification of that allegation, the Houlahans pleaded that the internal balustrade was omitted from the building contract by reason of Mr Pitchen and Ms Wiese, of their own volition, engaging Cado Metal to design, manufacture, supply and install the internal balustrade, and paying a deposit; the subsequent rendering of accounts by Cado Metal to Mr Pitchen and Ms Wiese; and the installation of the balustrade by Cado Metal without any input, direction or control from the Houlahans: pars 10 - 14. The Houlahans pleaded that the payment of $4,128 they made to Cado Metal was made on behalf of Mr Pitchen and Ms Wiese: par 13.

45 The Houlahans denied that they were under any obligation to supervise the installation of the balustrade: par 17. The Houlahans also denied any relevant duty of care to Mr Pitchen.

46 The claim by Mr Pitchen against Cado Metal was based upon, first, the breach of implied terms of the contract for the manufacture and installation of the balustrade that Cado Metal would install the balustrade in a fit and proper manner, and that it would carry out the installation with reasonable skill and care and in a workmanlike manner; and secondly, the breach by Cado Metal of a duty of care to exercise reasonable skill and care in the installation of the balustrade.

47 The Houlahans claimed against Cado Metal contribution or indemnity pursuant to the Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947 (WA). Cado Metal claimed against the Houlahans contribution or indemnity pursuant to that Act, and/or damages for breach of an alleged term of the building contract that the Houlahans would insure Cado Metal for any claims against it arising out of the building work, which term Cado Metal was entitled to enforce by virtue of s 11 of the Property Law Act 1969 (WA).

48 The trial judge rejected the contention by the Houlahans that the entry by Mr Pitchen and Ms Wiese into the contract with Cado Metal for the manufacture and installation of the balustrade had impliedly amended the building contract to delete the balustrade.

49 His Honour found there was no evidence from which that conclusion could be drawn. It was contrary to the uncontroverted evidence of Ms Wiese. It was Ms Wiese's evidence that when she received the invoices from Cado Metal she gave them to Mr Houlahan. The Houlahans had paid the whole of the invoice of 17 December 2004 and part of the invoice of 3 February 2005. Ms Wiese gave evidence that until 9 May 2005, the arrangement between Mr Pitchen and Ms Wiese and the Houlahans was that the Houlahans would pay the balance due to Cado Metal. In the end, Mr Pitchen and Ms Wiese paid the outstanding balance and deducted that amount from the monies they owed to the Houlahans. His Honour noted that neither Mr Houlahan nor Mrs Houlahan gave evidence.

50 His Honour concluded that the installation of the internal balustrades by Cado Metal was at all times part of the building contract.

51 The trial judge found that the Houlahans were in breach of the term of the contract that they would build the house in a proper and workmanlike manner. His Honour accepted the evidence of Mr Airey that the balustrade was inadequately fixed. His Honour concluded that it was not therefore installed in a proper and workmanlike manner and the Houlahans were in breach of the building contract.

52 His Honour further found that the Houlahans owed to Mr Pitchen a duty to exercise reasonable care in relation to the building work to avoid foreseeable risk of injury. There was an obvious risk of serious injury if the balustrade on the top floor of the house was not adequately installed. His Honour found that in the exercise of reasonable care, the Houlahans should have made some enquiry of Cado Metal as to how it proposed to secure, or had secured, the balustrade. There was no evidence that such an enquiry had been made. If it had been made, it would have been clear that the installation was inadequate. The trial judge concluded that the Houlahans were negligent and that Mr Pitchen's injuries were suffered as a result of their negligence.

53 In the course of the trial, Cado Metal admitted it was in breach of an implied term of its contract with Mr Pitchen and Ms Wiese that it would install the balustrade with reasonable skill and care, and also admitted that it was liable in negligence to Mr Pitchen.

54 The trial judge then turned to the contribution proceedings between Cado Metal and the Houlahans. His Honour rejected the contention of Cado Metal that under the building contract the Houlahans were obliged to have a policy of insurance against any liability of third parties to Mr Pitchen, and that this obligation conferred a benefit on Cado Metal which Cado Metal was entitled to enforce by virtue of s 11 of the Property Law Act. His Honour concluded that there was nothing in the building contract to suggest that Cado Metal was a beneficiary of the insurance provisions.

55 In apportioning liability, his Honour found that while the Houlahans had overall responsibility for the construction of the house, it was Cado Metal which had physically installed the balustrade in a defective manner. His Honour found that in those circumstances, liability should be apportioned 75% to Cado Metal and 25% to the Houlahans.

56 In relation to his Honour's findings on damages, for the purposes of this appeal it is necessary to consider only two aspects of those findings, namely the findings in respect of loss of earning capacity and of general damages.

57 In assessing Mr Pitchen's loss of earning capacity, the trial judge rejected a contention on behalf of Mr Pitchen that his earning capacity should be judged by the earnings of one of Mr Pitchen's former co-workers at Wiluna, a Mr Sieben, who at the time of trial was in different employment and earning substantially more than the $87,500 per annum applicable to Mr Pitchen's pre-accident employment. His Honour concluded that it did not follow that Mr Pitchen would have obtained employment at that higher rate of remuneration. His Honour therefore assessed Mr Pitchen's loss of earning capacity by reference to the earnings applicable to Mr Pitchen's pre-accident employment.

58 His Honour assessed damages for non-pecuniary loss at $65,000. His Honour did not explain how he had arrived at that figure but simply observed that no party had submitted that any award in any other case should be referred to in determining general damages.

59 As I have mentioned, there are three appeals to this court. The Houlahans appeal against the finding of the trial judge that they are liable to Mr Pitchen in contract and negligence, respectively; Mr Pitchen cross-appeals against the adequacy of the amounts awarded for loss of earning capacity and general damages; and Cado Metal cross-appeals against the finding that it is not entitled to be indemnified by the Houlahans in respect of Mr Pitchen's claim.

60 I will deal first with the appeal by the Houlahans.

The learned trial judge erred in law in finding that the builders, the Houlahans, were responsible for the default of [Cado Metal] when on ordinary principles, a builder is not to be held answerable for the fault of an independent contractor.
The learned trial judge erred in fact in accepting the evidence of Mr Peter Airey, a consultant structural engineer, because he was not qualified to give evidence as to the practices of registered builders and accordingly he erred in fact in finding that Mr Airey's evidence established any negligence on the part of the Houlahans.

The learned judge erred in fact in finding that Mr Airey's evidence established any negligence on the part of the Houlahans since Mr Airey's evidence was based on his interpretation of the contract rather than on his experience, if any, of the practice of registered builders and he gave no evidence of the practice of registered builders.

The learned trial judge erred in fact in finding that:

(a) in the exercise of reasonable care the Houlahans should have made some enquiry of Cado Metal as to how it proposed to secure or had secured the balustrade; and

(b) if they had made enquiry of Cado Metal it would have been clear that the installation was inadequate.

Pitchen and Wiese entered into a contract with Cado Metal for the manufacture, supply and installation of the balustrade. The learned trial judge erred in law and in fact in finding that the allowance of the balustrade as a prime cost item in the building contract between the Houlahans and Pitchen and Wiese imposed any obligation on the Houlahans - Pitchen and Wiese having chosen to enter into a contract with Cado Metal rather than to include the balustrade in their building contract with the Houlahans.
The learned trial judge erred in finding that the direct payments to Cado Metal by the Houlahans were not made on behalf of Pitchen and Wiese.

61 It is convenient to turn first to grounds E and F by which, in substance, the Houlahans contend that the trial judge erred in finding that the Houlahans had an obligation under the building contract to ensure that the balustrade was installed in a proper and workmanlike manner, and say that he should have found the installation of the balustrade was the subject of a separate contract between Mr Pitchen and Ms Wiese and Cado Metal and that the Houlahans had no liability under the building contract in respect of the balustrade.

62 In support of those grounds of appeal, it was submitted on behalf of the Houlahans that although the balustrade had initially been included in the building contract as a provisional sum item, that work had, by implication, subsequently been omitted from the contract work.

63 Counsel argued that the intention to omit the balustrade from the building contract was evident from the fact that Mr Pitchen and Ms Wiese had subsequently entered into the contract with Cado Metal to construct and install the balustrade. Counsel argued there could not be two concurrent enforceable contracts to install the balustrade, one between Mr Pitchen and Ms Wiese and Cado Metal, and another between Mr Pitchen and Ms Wiese and the Houlahans. The effect of Mr Pitchen and Ms Wiese subsequently entering into the contract with Cado Metal was that the balustrade ceased to form part of the building contract and no obligation arose on the Houlahans under the building contract in respect of the manufacture, supply or installation of the balustrade.

64 It was also submitted that although the balustrade had been included in the building contract as a provisional sum item, as a provisional sum item it still remained for Mr Pitchen and Ms Wiese to decide whether or not to include it in the building contract. They had not elected to include it. There had never been any agreement between Mr Pitchen and Ms Wiese and the Houlahans as to the price and specification of the balustrade; instead Mr Pitchen and Ms Wiese had entered into a separate contract with Cado Metal to design and install the balustrade.

65 Counsel for the Houlahans argued that the payments made by the Houlahans to Cado Metal did not reflect any contractual obligation of the Houlahans in respect of the balustrade. The Houlahans had simply agreed to make payment on behalf of Mr Pitchen and Ms Wiese in an amount equal to the original PC Sum of $8,000. The agreement was no more than an accounting exercise and did not reflect any assumption of liability on the part of the Houlahans for the work done by Cado Metal.

66 It is clear that when the building contract was entered into, installation of the balustrade constituted part of the work to be carried out under it. It was included on the drawings which formed part of the building contract, and it was one of the provisional sum items specified in the schedule. It is plain that it was included as a provisional sum item, not (as contended on behalf of the Houlahans) because Mr Pitchen and Ms Wiese had not decided whether or not to include it in the work, but rather because the design of the balustrade and materials to be used for it were still to be determined. Those matters were determined when Mr Pitchen and Ms Wiese selected the Cado Metal balustrade.

67 The substantive issue is whether the installation of the balustrade was subsequently omitted from the building contract.

68 It is well-established that the parties to a contract may agree to vary it and that an agreement to vary may be implied from conduct. Whether an intention to vary a contract is to be implied from the conduct of the parties is to be determined objectively. See generally Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93, 144; Dan v Barclays Australia Ltd (1983) 46 ALR 437, 448; Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520, 533.

69 The question, then, is whether the conduct of the parties evinced an intention to vary the building contract to relieve the Houlahans of their contractual obligation to ensure that the balustrade was installed in a proper and workmanlike manner.

70 In my view, it did not. That case was simply not made out on the evidence at trial.

71 I do not accept the submission of counsel for the Houlahans, in effect, that a variation to exclude the balustrade from the building contract is to be implied because the contract made by Mr Pitchen and Ms Wiese with Cado Metal was necessarily inconsistent with any continuing liability of the Houlahans under the building contract for the installation of the balustrade. That submission appeared ultimately to be based upon the proposition that under the building contract the Houlahans were only responsible for work carried out by sub-contractors they had engaged, so that the engagement of Cado Metal by Mr Pitchen and Ms Wiese was necessarily inconsistent with any continuing liability of the Houlahans for the installation of the balustrade. That does not seem to me, however, to be the effect of the building contract.

72 The effect of the building contract was that the Houlahans were responsible for ensuring that all work which fell within it (whether or not the work in question was carried out by the Houlahans personally or by some other party such as a sub-contractor) was carried out in a proper and workmanlike manner. It was expressly agreed by the parties that certain aspects of the building work were excluded from the building contract, namely the tiling, painting and kitchen cupboards, so that no such obligation lay on the Houlahans for that work. There was no such agreement in respect of the balustrade. The fact that Mr Pitchen and Ms Wiese subsequently engaged Cado Metal to supply and install the balustrade was not inconsistent with a continuing obligation on the Houlahans under the building contract to ensure that the balustrade was installed in a proper and workmanlike manner.

73 Nor was there anything else in the conduct of the parties which revealed an intention to omit the balustrade from the building contract. The fact that Ms Wiese subsequently forwarded the invoices she received from Cado Metal to Mr Houlahan, who told both Ms Wiese and Cado Metal that he would arrange payment of the invoices, is inconsistent with such an intention. The referral of the invoices to Mr Houlahan to arrange payment was consistent with an intention that the Houlahans were responsible for supervising the installation work and ensuring that it was carried out in a proper and workmanlike manner.

74 The contention that the payments the Houlahans made to Cado Metal were made simply on behalf of Mr Pitchen and Ms Wiese finds no support in the evidence. The evidence of Ms Wiese is to the contrary and the Houlahans did not give evidence. The terms of the facsimile of 13 March 2005, in which Ms Wiese 'recommended' that Mr Houlahan not pay the amount then owing to Cado Metal and 'suggest[ed]' that it not be paid until the matter of Mr Pitchen's accident was resolved, are hardly consistent with the position that the payments were simply being made on behalf of Mr Pitchen and Ms Wiese. I would add that the contention advanced by counsel for the Houlahans that the Houlahans made the payment of $4,128 to Cado Metal on behalf of Mr Pitchen and Ms Wiese pursuant to some arrangement or agreement with Mr Pitchen and Ms Wiese, was not put to either Mr Pitchen or Ms Wiese at the trial.

75 In my respectful view, on the evidence the trial judge correctly found that the Houlahans had an obligation under the building contract to ensure that the installation of the balustrade was carried out in a proper and workmanlike manner, and that they were in breach of contract in failing to do so.

76 I would dismiss grounds E and F of the grounds of appeal.

77 In the light of that conclusion, it is unnecessary to consider the appeal against the finding of negligence. I will, however, deal briefly with it.

78 The learned trial judge concluded that the exercise of reasonable care required the Houlahans to make 'some enquiry' of Cado Metal as to how it proposed to secure, or alternatively how it had secured, the balustrade, and that had such enquiry been made 'it would have been clear that the installation was inadequate'. His Honour does not, however, indicate the nature or extent of the enquiry that was necessary to discharge the duty. It is not therefore clear why his Honour concluded that it would clearly have revealed that the installation was inadequate. Nor is it clear how simply a failure to enquire could of itself be said to be causative of the accident.

79 In fact, neither the findings of fact made by the trial judge nor the expert evidence at trial appear to support a finding that if the Houlahans had made some enquiry of Cado Metal, whether before or after Cado Metal installed the balustrade, it is probable that the enquiry would have revealed the inadequacy of the proposed installation method or of the actual installation (as the case may be). That is because it is not clear on the evidence whether the accident occurred because the installation work was done poorly, or whether the installation method was itself inherently inadequate so that the accident is likely to have occurred regardless of the manner in which the installation work was carried out. Thus, for example, while Mr Airey considered that the balustrade should have been fixed to the mullion at the northern end, in his report of 8 October 2007 (exhibit 25, GB 171) he said that had the spigot at the northern end been installed at an appropriate distance from the edge of the concrete slab, the shearing out of the slab edge resulting in a loss of support would have been unlikely. That is, he appears to suggest that the accident would not have occurred if the spigot had been located further from the edge of the slab. It is far from clear that enquiry, particularly enquiry before the installation, would have disclosed that problem.

80 The problem arises, I think, because on the material before this court it appears Mr Pitchen's case at trial was not run on the basis on which the learned trial judge found the Houlahans were negligent, and accordingly these matters were not explored in the evidence. Mr Pitchen's case was run on the broader basis that the Houlahans failed properly to supervise the installation to ensure that it met the relevant Australian standard including, among other things, that they failed to ensure the spigot was appropriately installed. The trial judge did not deal with that case beyond the finding to which I have referred.

81 I would therefore allow ground D of the grounds of appeal. In ordinary circumstances, I would remit the issue of negligence for retrial. However, in light of my finding on grounds E and F, it appears that no purpose would be served by that. It was not contended on behalf of the Houlahans that any different measure of damages would be applicable depending upon whether they were found liable in contract or in negligence. And while the possibility of the appeal being successful on this ground but unsuccessful on the contract ground was raised with counsel, it was not suggested that in that event the issue of negligence should be remitted. In that connection, I note that the judgment of the primary judge apportioning liability between the Houlahans and Cado Metal is not the subject of any challenge, so that judgment stands.

82 I do not think it is necessary to consider ground A of the grounds of appeal.

83 It is also unnecessary to deal with grounds B and C. In the first place, there is nothing to suggest that the trial judge did in fact rely on the evidence of Mr Airey in the respects alleged in those grounds or in any material respect and, in any event, for the purpose of the resolution of this appeal nothing turns on the matters relied upon in those grounds.

The learned trial judge erred in fact and in law in his assessment of future loss of earning capacity and future superannuation by utilising the figure of $87,500 gross per annum when the unchallenged evidence was that [Mr Pitchen] had an ability to earn at the higher rate of $105,000 gross per annum and that work was readily available such as to enable him to earn at that higher figure.
The learned trial judge erred in law in failing to give any or any adequate reasons for rejecting [Mr Pitchen's] claim for future loss of earning capacity at the higher rate of $105,000 gross per annum.
The learned trial judge erred in fact and in law in his assessment of general damages for pain, suffering and loss of amenity, such assessment being too low and outside a reasonable range for that assessment and wholly disproportionate to the injuries and consequences flowing therefrom.

84 Evidence was given at the trial by one Gunter Sieben that he had worked with Mr Pitchen at Wiluna Gold's mine at Wiluna as a crane-driver/serviceman. Mr Pitchen had commenced work at the mine as a crane-driver/serviceman a year earlier than Mr Sieben. At the date of the accident they were both earning the sum of $70,500 gross per annum. After Mr Pitchen ceased work due to the accident, that pay rate increased so that by July 2007 it was $87,500 gross per annum (ts 56).

85 Mr Sieben gave evidence that in the middle of July 2007 the Wiluna mine closed down and that he received a redundancy payment of $30,000. Mr Sieben said that he was readily able to obtain alternative work; work was plentiful.

86 At the time of the trial in October 2007, some three months after the closure of the mine, Mr Sieben was employed by Skilled Group Ltd, working as a sub-contract crane-driver/serviceman at Rio Tinto's operation at Yandicoogina earning the sum of $105,000 gross per annum (ts 57).

87 It was contended that, there being no evidence to suggest that Mr Pitchen would not have obtained similar employment to Mr Sieben at the same level of remuneration, the trial judge erred in basing his assessment of future loss of earnings at the rate of $87,500 per annum, rather than $105,000 per annum.

88 It was also submitted that the trial judge had erred by failing to give adequate reasons for concluding that he was not satisfied the income subsequently earned by Mr Sieben was the income that Mr Pitchen would have earned.

89 Counsel argued that as there was no controversy as to Mr Sieben's evidence, this court should assess Mr Pitchen's damages for loss of earning capacity.

90 It was also submitted that the award of general damages of $65,000 was too low. Counsel argued that in light of the injuries suffered by Mr Pitchen, and the disabilities he has suffered as a consequence of those injuries, the award was wholly inadequate and represented, at most, approximately one half of what would be an appropriate award.

91 It was argued on behalf of the Houlahans that the trial judge correctly rejected the earnings of Mr Sieben as a basis for assessing Mr Pitchen's loss of earning capacity. The evidence did not support such an approach. Mr Sieben is 11 years younger than Mr Pitchen. There was no evidence regarding Mr Sieben's work history and experience and, in particular, whether it was similar to Mr Pitchen's experience. Mr Sieben's earnings could have been due to any one of a number of factors personal to Mr Sieben. There was therefore insufficient information for the trial judge to make any comparison with Mr Pitchen.

92 It was argued that the reasons of the trial judge were adequate in the circumstances.

93 It was also submitted the award of $65,000 for general damages was an adequate and appropriate award. Mr Pitchen's residual injuries were not unusually severe or devastating such as to warrant this court interfering with the award. The award was not out of all reason, or wholly or grossly disproportionate, to the injuries and their consequences to justify an appellate court interfering with it.

94 In my view, with respect, the trial judge did not give adequate reasons for rejecting Mr Pitchen's claim for loss of earning capacity based on Mr Sieben's earnings. I consider it was incumbent upon his Honour to explain why he concluded that the earnings of Mr Sieben did not provide a basis for assessing Mr Pitchen's loss of earning capacity. It was not necessary that the reasons be lengthy or elaborate but fairness required that Mr Pitchen should know why his case on that issue was rejected. In my respectful opinion, it was not sufficient for his Honour simply to say that it did not follow that Mr Pitchen would have obtained similar employment, without explaining why he had reached that view. The reader must not be left to wonder which of a number of possible routes have been taken to the conclusion expressed: Hunter v Transport Accident Commission [2005] VSCA 1 [35]. And generally see Mount Lawley Pty Ltd v Western Australian Planning Commission [2000] WASCA 149; (2004) 29 WAR 273, 283

95 However, I consider that the trial judge was correct in rejecting the contention that Mr Pitchen's loss of earning capacity was to be assessed having regard to the earnings of Mr Sieben.

96 There is no doubt that where it is probable that a plaintiff would have increased his or her earnings by promotion, advancement or simply by securing better paid employment, that is a factor for which allowance may be made in calculating what the plaintiff's earning capacity would have been. But there must be evidence upon which the court can estimate the likelihood that that would have occurred. In a case like the present one, where it is sought to establish the loss of the plaintiff's earning capacity by reference to the post-accident earnings of others, the plaintiff must establish that the comparison is a proper basis upon which to make an assessment of the plaintiff's loss of earning capacity.

97 In the present case, the evidence was, in my view, much too slight for the assessment to be made on that basis. The likelihood that Mr Pitchen would, or could, have undertaken comparable employment, and indeed whether such employment was available on anything more than a temporary or casual basis, remained matters of conjecture.

98 In the first place, the evidence in respect of the comparative qualifications and experience of Mr Pitchen and Mr Sieben was quite inadequate for any proper comparison to be made. It went no further than establishing that both had worked at the Wiluna mine as crane-driver/servicemen, Mr Pitchen for 'nearly two years' (ts 11) and Mr Sieben for a year less than Mr Pitchen (ts 56). There was no other evidence on that point. Nor did Mr Sieben give any evidence as to what qualifications and experience were required for his current employment.

99 There was also no evidence upon which any proper finding could be made as to the likelihood that Mr Pitchen would have taken up such employment. There was, for instance, no evidence as to Mr Sieben's conditions of employment by Skilled Group, including matters such as the hours required to be worked, whether the work involved rosters (and, if so, the nature of the rosters), whether (given that Mr Sieben's workplace was in a remote location) Mr Sieben worked on a 'fly-in, fly-out' basis (as Mr Pitchen had worked at Wiluna) or on some other basis, and whether Mr Sieben was employed on a permanent, casual or some other basis. (In that connection, I might observe that the pay slips of Mr Sieben which were put into evidence describe his 'employment type' as 'casual', although there was no evidence as to what that meant.) It is also the case that at the time of the trial, Mr Sieben had been in the employment in question for less than four months.

100 While Mr Sieben also gave evidence that other work was plentiful and that he had refused offers of work, he did not give any evidence as to the nature of the work concerned, the terms of employment, or the remuneration offered.

101 In my view, the evidence simply did not permit any conclusion reasonably to be drawn as to whether Mr Sieben's remuneration at the time of the trial provided an appropriate basis upon which to assess Mr Pitchen's loss of earning capacity, and the trial judge was correct to exclude Mr Sieben's earnings from consideration.

102 I would dismiss this ground of the cross-appeal.

103 The other ground of the cross-appeal relates to the award of general damages made by the trial judge. In support of that ground of appeal, counsel for Mr Pitchen referred to a statutory maximum amount of $292,000 for general damages and argued that, in light of that, when regard is had to the nature of the injuries and incapacity suffered by Mr Pitchen the amount of $65,000 allowed by the trial judge was manifestly inadequate.

104 The submission proceeds, however, upon a flawed premise, namely, that there is a relevant statutory maximum amount of $292,000 for general damages. The figure referred to by counsel and the schedule which he handed up at the hearing of the appeal in support of his submission, relate to the Motor Vehicle (Third Party Insurance) Act 1943 (WA), not to the Civil Liability Act 2002 (WA) with which we are concerned in this case. Unlike the former Act, there is no maximum figure for general damages in the latter Act.

105 I should mention that the trial judge pointed that out (ts 136) when counsel for Mr Pitchen made a submission on general damages at the trial based on the same premise. It appears from the transcript below that at that time counsel for Mr Pitchen accepted that his submission may be ill-founded. It is all the more extraordinary, then, that it should have been advanced again on the appeal.

106 Turning to the question of the adequacy of the award of general damages, it is clear that an appellate court will not interfere with an award of general damages simply because it would have awarded a different figure. It will only interfere if satisfied that the trial judge acted on an error of principle or a mistaken view of the facts, or that the amount of damages awarded is outside the limits of what a sound discretionary judgment could reasonably adopt: Butler v Barnfield Holdings Pty Ltd [2001] WASCA 277 [22] - [23].

107 The principle to be followed in assessing damages is that the amount of damages must be fair and reasonable compensation for the injuries received by the plaintiff and the disabilities caused, having regard to current general ideas of fairness and moderation: Planet Fisheries Pty Ltd v La Rosa [1968] HCA 62; (1968) 119 CLR 118, 125. The amount must be proportionate to the situation of the particular plaintiff. While the court is entitled to refer to earlier cases for the purpose of establishing the appropriate award in the proceedings (s 10A, Civil Liability Act), it is not a proper approach to endeavour to extract from the amounts awarded in earlier cases some norm or standard and to determine the award by reference to that: Planet Fisheries (125).

108 In determining whether an award of general damages is outside the bounds of a proper exercise of discretion, the question, therefore, is not whether the award is proportionate to some such standard or norm, but whether in the particular case it is proportionate to the injuries received and the disabilities suffered by the plaintiff.

109 At the time of the accident, Mr Pitchen was 48 years old. He was, as the trial judge observed, a fit and active man. As a result of the accident, Mr Pitchen suffered an unstable burst compression fracture of the T12 thoracic vertebra, two fractured ribs and soft tissue injuries to his lumbar spine. Mr Pitchen was in hospital for 11 days, during which time he was in constant pain. He was discharged from hospital with a brace which he had to wear constantly for three months. He still has constant back pain and, although it has reduced, he has to take pain killers regularly. He will continue to suffer significant pain.

110 As a result of his injuries, Mr Pitchen has lost the enjoyment of his previous recreational activities of gardening, fishing and cooking. He suffers insomnia and has depressive symptoms caused by the pain and restrictions that result from his injuries. He has no significant retained earning capacity. In June 2006, Ms Wiese ceased working to care for him and provide him with regular massages.

111 While it is clear from the evidence that Mr Pitchen has experienced significant pain, suffering and loss of enjoyment of life as a result of his injuries, in the end I am not persuaded that they are of such a nature that an award of general damages of $65,000 falls outside the limits of a sound discretionary judgment. I would not, therefore, interfere with the decision of the trial judge.

112 I would dismiss this ground of the cross-appeal.

The learned trial judge erred in law in finding that [Cado Metal] could only enforce clauses 13(b) and 13(c) of the building contract if [Cado Metal] was identified as a beneficiary under the contract.
In the alternative to paragraph 1 above, the learned trial judge erred in law in finding that the building contract did not identify [Cado Metal] as a beneficiary.
The learned trial judge erred in law in failing to find that [Cado Metal] was entitled to be indemnified by [the Houlahans] in relation to [Mr Pitchen's] claim, pursuant to clauses 13(b) and/or 13(c) of the building contract.

113 In the course of argument on the appeal, counsel for Cado Metal abandoned reliance on cl 13(c) of the building contract, so it is necessary to deal with the grounds of appeal only insofar as they relate to cl 13(b).

[The Houlahans] shall insure against any liability, loss or damage claim demand and proceedings whatsoever arising out of or connected with or in any way due to the following namely:

(i) any personal injury to or death of any person arising out of or in connection with or in the course of the Works, other than due to the negligent act or omission of the Owner or any person for whom the Owner may be responsible;

...

115 It was submitted on behalf of Cado Metal that the obligation on the Houlahans to insure under cl 13(b)(i) was not limited to insurance in respect of their own liability, but extended to insurance in respect of the liability of any person who might be liable for the personal injury or death of any other person arising out of or in connection with or in the course of the Works. Consistently with that, counsel for Cado Metal argued that the obligation of the Houlahans to insure was not limited to the liability of their agents and sub-contractors, and it was therefore irrelevant whether or not Cado Metal was their sub-contractor. As the obligation was a general one, it included Cado Metal whether or not it was a sub-contractor of the Houlahans.

116 Counsel argued that cl 13(b)(i) therefore expressly in its terms conferred a benefit directly on Cado Metal, which was not named as a party to the contract. Accordingly, pursuant to s 11(2) of the Property Law Act, cl 13(b)(i) is enforceable by Cado Metal in its own name.

117 Cado Metal seeks an order that it be indemnified by the Houlahans in respect of its liability to Mr Pitchen. I should say that quite how, even on the construction of cl 13(b)(i) for which it contends, Cado Metal might be entitled to that relief is not clear.

118 In any event, the matter can be dealt with quite shortly. In my view, the construction of cl 13(b)(i) contended for by Cado Metals is quite untenable. On a plain reading of the clause, the obligation on the Houlahans was to insure against their own liability. There is simply no basis upon which the clause can reasonably be read as extending to an obligation to insure for the benefit of an indeterminate number of presently unidentifiable persons who might become liable for personal injury to, or the death of, any person in connection with or in the course of the Works. The plain words of cl 13(b)(i) do not lend themselves to such a construction and there is no reason why that clause should be read in a way which would cast such an obligation on the builder.

119 I consider the cross-appeal by Cado Metal to be without substance and I would dismiss it.

dismiss the appeal by the Houlahans;
dismiss the cross-appeal by Mr Pitchen; and
dismiss the cross-appeal by Cado Metal.

Vehicle (Third Party Insurance) Act 1943

Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947

HOULAHAN -v- PITCHEN [2009] WASCA 104 (26 June 2009)

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Judgment (143 paragraphs)

HOULAHAN -v- PITCHEN [2009] WASCA 104 (26 June 2009)

Legislation Cited (4)

Cases Cited (5)