Huy Bui and Suzanne Bui v DB Homes Pty Ltd

CLAIM FOR COMPENSATION FOR "INSUFFICIENT INSULATION"

The homeowners seek an order that the builder install the correct insulation in accordance with the Contract or pay them compensation. The homeowners stated at the hearing that the amount of compensation claimed was $10,000.00.
Addendum 3 (Scope of Works and Specifications) which forms part of the building contract states under the heading Carpentry-Frame & Truss: "R3 Batts Insulation to all external walls + R1.5 Sisalation to wall frame R3 Batts insulation to Ceiling"
At Appendix 2 in the homeowners' bundle of documents they have calculated the estimated additional heating and cooling costs over a 50 year period which they will incur as a result of the installation of a R 1.5 batt as opposed to a R3.0 rated batt.
The homeowners have not provided the Tribunal with the source data for making the calculations nor provided evidence from a suitably qualified person confirming the accuracy of the figures in the schedule. The calculations appear to be based on differences in temperature depending on the rating of the insulation and the additional electricity costs to cool or heat the granny flat.
The Drexler Report at item 6 of the Scott Schedule notes that "The foil insulation in the wall has been installed back to front" and "It is not feasible to remove the existing foil insulation and replace it since this repair would necessitate the demolition of all the internal plasterboard walls in the house." He estimated a fair value of compensation is $2000.00.
Subsequently the second Frizzell Report was prepared and after an invasive inspection of the property concluded at point 1.7 that " I confirm my findings from item 7 of my previous Report No. 99171, that the Bradford Thermoseal Wall Wrap had been installed in accordance with the manufacturer's literature."
He assessed at point 1.8 of his report "the total R value of the wall insulation using these products is 2.7.". This is 0.3 less than the R3 rated batts which were to be installed by the builder under the Contract.
Both parties informed the Tribunal that an R 3.0 batt is not available for external walls. The homeowners submit that they consider the builder has engaged in misleading and deceptive conduct by advertising that it would install R 3 Batts insulation to all external walls and ceilings and R 1.5 Sisalation to the wall frame. The builder claimed that there was an error in the advertising.
The builder referred to the Drexler Report and argued that the only defect noted was in regards to the sisalation. There was no mention of any problem with the ceiling batts. Mr Sidey told the Tribunal that Mr Drexler was invited to attend the inspection on 31 January 2017 but declined the invitation. He submitted that I should accept Mr Frizzell's conclusions and find that the sisalation in the walls was installed correctly.
Mr Sidey argued that there was no evidence before me that the sisalation did not have any R rating. The Drexler Report makes no comment or finding in respect of the foil insulation other than it was installed incorrectly. That finding is no longer sustainable in view of the findings in the second Frizzell Report that the sisalation was installed correctly. Further Mr Drexler's opinion that the fair value of compensation is $2,000.00 for this item is irrelevant.
The Drexler Report makes no comment or finding on the rating of the insulation batts used in the external walls and ceilings. Mr Drexler's observation was that the fibre insulation has been haphazardly installed in the roof cavity. He did not offer an opinion about the rating of the insulation.
The homeowners relied on a photograph of the Earthwool batts insulation and wall wrap material found on site to prove that the insulation used in the external walls had a rating of R1.5. They also tendered a photograph taken on 22 February 2016 showing Bradford Thermoseal wall sisalation installed on their building and technical information sheets. They argue that this evidence establishes the builder's breach of contract and the insulation was not R3 as provided for in the contract.
The homeowners alleged that the installer used a mixture of R1.5 and R3.0 batts when he ran out of R 3.0 batts and rely on photographs in Appendix 2.
There is no independent expert evidence from either party as to the ratings of the insulation batts installed in the walls and ceilings. There has been no assessment by a suitably qualified expert as to the rating of the insulation. The homeowners rely primarily on photographic material and technical information sheets provided by manufacturers.
The builder conceded at the hearing that R2 batts were installed in the walls rather than R 3. The onus is on the homeowners to prove they have suffered loss and damage from the breach of contract. Mr Sidey argued that the homeowners have not adduced evidence to prove their loss or even if they have suffered a loss, the amount of that loss.
It is undisputed that the contract provided for the builder to provide R3 batts insulation to all external walls and ceilings, and R 1.5 sisalation to wall frames. The undisputed evidence establishes that R3 batts were not installed in the walls. Mr Frizzell in his second report concluded that the overall R rating of the products was 2.7. The homeowners did not receive insulation in conformity with the contract. I find that the builder has breached the contract.
There is some circumstantial evidence that R3 batts were not installed throughout the ceiling. The evidence from the homeowners is that there was a mixture of R3 and R 1.5 installed in the ceiling. The R ratings of the batts in the ceiling was not addressed by either expert so it is difficult to conclude as to what proportion of the batts were R3 rated. In the absence of evidence to the contrary, I accept the homeowners' evidence on this issue.
The applicant seeks an order for the insulation batts to be replaced with batts which conform with the specifications in the contract or damages paid for breach of contract. I find that the replacement of the insulation batts is not a reasonable course to adopt in accordance with the principles in Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613. In Bellgrove v Eldridge the High Court stated that the normal measure of damages was that an owner would be entitled to the cost of rectification of defective building work.
As noted by Mr Drexler in his report, it was not feasible to remove the existing foil insulation and replace it since the repair would necessitate the demolition of all internal plasterboard walls in the house. In my opinion, the same comments apply to the replacement of the R1.5 batts in the walls.
In Bellgrove v Eldridge the Court stated at page 617: 'In the present case, the respondent was entitled to have a building erected upon her land in accordance with the contract and the plans and specifications which formed part of it, and her damage is the loss which she has sustained by the failure of the appellant to perform his obligation to her. This loss cannot be measured by comparing the value of the building which has been erected with the value it would have borne if erected in accordance with the contract; her loss can, prima facie, be measured only by ascertaining the amount required to rectify the defects complained of and so give to her the equivalent of a building of her land which is substantially in accordance with the contract'
The court also stated at page 617 - 618: 'Subject to a qualification to which we shall refer presently the rule is, we think, correctly stated in Hudson on Building Contracts, 7th ed. (1946), p. 343. "The measure of the damages recoverable by the building owner for the breach of a building contract is, it is submitted, the difference between the contract price of the work or building contracted for and the cost of making the work or building conform to the contract, with the addition, in most cases, of the amount of profits or earnings lost by the breach". Ample support for this proposition is to be found in Thornton v. Place [1832] EngR 767; (1832) 1 M & Rob 218 (174 ER 74) ; Chapel v. Hickes [1833] EngR 95; (1833) 2 C & M 214 (149 ER 738) and H. Dakin& Co. Ltd. v. Lee (1916) 1 KB 566 . (See also Pearson-Burleigh Ltd. v. Pioneer Grain Co. (1933) 1 DLR 714 and cf. Forrest v. Scottish County Investment Co. Ltd. (1915) SC 115 and Hardwick v. Lincoln (1946) NZLR 309). But the work necessary to remedy defects in a building and so produce conformity with the plans and specifications may, and frequently will, require the removal or demolition of some part of the structure. And it is obvious that the necessary remedial work may call for the removal or demolition of a more or less substantial part of the building. Indeed - and such was held to be the position in the present case - there may well be cases where the only practicable method of producing conformity with plans and specifications is by demolishing the whole of the building and erecting another in its place. In none of these cases is anything more done than that work which is required to achieve conformity and the cost of the work, whether it be necessary to replace only a small part, or a substantial part, or, indeed, the whole of the building is, subject to the qualification which we have already mentioned and to which we shall refer, together with any appropriate consequential damages, the extent of the building owner's loss. (at p618) The qualification, however, to which this rule is subject is that, not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt. No one would doubt that where pursuant to a building contract calling for the erection of a house with cement rendered external walls of second-hand bricks, the builder has constructed the walls of new bricks of first quality the owner would not be entitled to the cost of demolishing the walls and re-erecting them in second-hand bricks. In such circumstances the work of demolition and re-erection would be quite unreasonable or it would, to use a term current in the United States, constitute "economic waste". (See Restatement of the Law of Contracts, (1932) par. 346). We prefer, however, to think that the building owner's right to undertake remedial works at the expense of a builder is not subject to any limit other than is to be found in the expressions "necessary" and "reasonable", for the expression "economic waste" appears to us to go too far and would deny to a building owner the right to demolish a structure which, though satisfactory as a structure of a particular type, is quite different in character from that called for by the contract'.
In my view, the demolition of the internal plasterboard walls and installation of replacement batts is quite unreasonable and constitutes "economic waste". The cost of rectification is out of proportion to the benefit to be obtained.
68 The onus is on the homeowners to adduce evidence from which the Tribunal can quantify the damage which they have suffered. Have the homeowners discharged the onus of proof as to the quantification of their loss?
69 In Macquarie Grove Homes Pty Ltd v Tony Aylott & Glen Aylott t/as T & G Bricklaying; Tony Aylott & Glen Aylott t/as T & G Bricklaying v Macquarie Grove Homes Pty Ltd [2016] NSWCATAP 142 (28 June 2016), the Appeal Panel considered the principles relevant to the assessment of damages. The Appeal Panel said at [100]: "Similar principles were recently considered by the Appeal Panel in Baak v Concrete Services Group Pty Ltd [2016] NSWCATAP 42. In that case the tribunal had found that the applicant had established an entitlement to damages but had not proved on the evidence the amount of those damages. It awarded nominal damages of $1,000.00. It is useful to set out some passages from those reasons, which although lengthy, are apposite: 81 Nominal damages are just that. The usual meaning of "nominal" is; "being such in name only, a price or consideration, etc nominated as a mere matter of form, being trifling in comparison with the actual value" ( Maquarie Concise Dictionary 4th Ed), "existing in name only; not real or actual, (of a sum of money, rent, etc ) virtually nothing; much below the actual value of a thing" (Australian Concise Oxford Dictionary second Edition 1992). In The Australian Law Dictionary, University Press 2010, "nominal" is described as: in name only. Thus nominal damages are small and as a token of the legitimacy of the plaintiff's claim rather than being compensatory in nature. They are:awarded as a demonstrable mark or vindication of the plaintiff's rights in a situation in which the plaintiff cannot establish substantial loss. They are awardable only in torts actionable per se and in breaches of contract....However, if the plaintiff fails to satisfy the court that substantial damages have been suffered, the plaintiff run the risk of an award of a nominal award of damages or of no damages. (See Halsbury's Laws of Australia Vol 9 pp 260286-260287, par [135-590]) Another category of decisions is where the breach is proved and there is some evidence relevant to deciding the amount of the damage but insufficient evidence to prove precise quantification of the damage or loss. In Chaplin v Hicks [1911] 2 K.B. 786, the submission of the appellant was that because the amount of the loss that would be suffered was subject to contingencies, only nominal damages of 1 shilling should be awarded. That was rejected and the jury verdict of 100 pounds was upheld. Farwell LJ said (at p 799): In my opinion the existence of a contingency, which is dependent on the volition of a third person, is not enough to justify us in saying that the damages are incapable of assessment. Vaughan Williams LJ said (at 792)Sometimes however, there is no market for the particular class of goods but no one has ever suggested that, because there is no market, there are no damages. In such a case the jury must do the best they can, and it may be that the amount of their verdict will really be a matter of guess work. But the fact that damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paying damages for his breach of contract. That decision was followed by the Full Bench of the NSW Supreme Court in Howe v Teefy (1927) NSWSR 301 and there Street CJ said (at 306): There may be cases where it would be impossible to say that any assessable loss had resulted from a breach of contract, but short of that, if a plaintiff has been deprived of something that has a monetary value, a jury is not relieved from the duty of assessing the loss merely because the calculation is a difficult one or because the circumstances do not admit of the damages being assessed with certainty. This line of authorities was continued in the High Court decision of Fink v Fink [1946] HCA 54(1946) 74 CLR 127. There Dixon and McTiernan JJ (with whom Latham CJ and Williams J agreed) held (at p143): Where there has been an actual loss of some sort, the Common Law does not permit difficulties of estimating the loss in money to defeat the only remedy provided for breach of contract, and award of damages. Similarly in Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54, Mason CJ and Dawson J said (at [31]: The settled rule, both here and in England, is that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can: Fink v. Fink [1946] HCA 54; (1946) 74 CLR 127, at p 143; McRae v. Commonwealth Disposals Commission [1951] HCA 79; (1951) 84 CLR 377, at pp 411-412:, Chaplin v. Hicks (1911) 2 KB 786, at p 792. Indeed, in Jones v. Schiffmann [1971] FICA 52; [1971] HCA 52; (1971) 124 CLR 303, Menzies J went so far as to say that the 'assessment of damages ... does sometimes, of necessity involve what is guess work rather than estimation': at p 308. Where precise evidence is not available the court must do the best it can: Biggin and Co. Ltd. v. Permanite Ltd. (1951) 1 KB 422, per Devlin J. at p 438. And uncertainty as to the profits to be derived from a business by reason of contingencies is not a reason for a court refusing to assess damages: see McGregor on Damages, 15th ed. (1988), pars 357-359.Deane J said (at [4] of his reasons): One such subsidiary rule is that, even in an action for repudiation or breach of contract where damage is not an element of the cause of action, a plaintiff bears the onus of establishing the extent of her loss or injury on the balance of probabilities. To satisfy the requirements of that rule, a plaintiff must, if she is to recover more than a nominal amount in such an action, affirmatively establish assessable damage, that is to say, loss or injury which is capable of being measured in monetary terms (see e.g. Luna Park (NSW) Ltd. V Tramways Advertising Pty Ltd [1938] HAC 66; [1938] HCA 66; (1938) 61 CLR 286at pp 301, 307, 311, 312).Toohey J (at [11] of his reasons) said: However, to say as a general proposition that it is for the plaintiff to prove his damages is not to say that, in some instances, damage may be not be inferred or presumed: see McGregor on Damages, par 1785 in relation to damages in tort. Nor is it to fail to recognise that the quantification of damages is 'in many cases no more than approximation lacking in mathematical or economic accuracy or sufficiency' (Pennant Hills Restaurants, at p636) or even that the assessment of damages 'does sometimes, of necessity, involve what is guesswork rather than estimation': Jones v Schiffman [1971] HCA 52; (1971) 124 CLR 303, at p 308. In the Victorian decision of JLW (Vic) Pty. Ltd v. Tsiloglau and Anor [1994] (Vic) Rp 16: [1994] 1VR 237, a decision of the Appeal Division of the Supreme Court of Victoria, Brooking J, who wrote the leading judgment said (at [9] of his reasons): A plaintiff cannot recover substantial as opposed to nominal damages unless he proves both the fact and the amount of damage: The Commonwealth v Amann Aviation Pty Ltd 11991] HCA 54; (1991) 174 CLR 54; (1991)174 CLR 64; [1991] HCA 54; 104 ALR 1, at CLR at 80, per Mason CJ and Dawson J, at CLR at 99, per Brennan J., at CLR at 118, per Deane J. and at CLR at 137-8, per Toohey J. If he proves the fact of the loss but does not call the necessary evidence as to its amount he cannot be awarded substantial damages (McGregor on Damages, 14th ed., at 190 and 222): he must put the tribunal in the position of being able to quantify in money the damage he has suffered: Watts v Rake[1960] HCA 58; (1960)108 CLR 158, at 159, per Dixon CJ. So juries in personal injuries cases are often directed that the plaintiff must prove to their satisfaction what he has suffered and will suffer and what is fair and reasonable compensation in respect of that. It is often said that the amount of the damage must be proved with certainty, but this only means as much "certainty" as is reasonable in the circumstances: Ratcliffe v Evans [1892] 2 QB 524, at 532-3. Where precise evidence is obtainable, the court naturally expects to have it; where it is not, the court must do the best it can: Biggin and Co Ltd v Permanite Ltd [1951] 1 KB 422, at 438; The Commonwealth v Arnann Aviation Pty Ltd, at CLR at 83, per Mason CJ and Dawson J. The nature of the damage may be such that the assessment of damages will really be a matter of guesswork, as in the well-known case of Chaplin v Hicks [1911] 2 KB 786, where the plaintiff had lost a chance of winning an engagement as an actress as a prize. So damages will be assessed for the wrongful detention of a racehorse even though it may be necessary to guess at the amount: Wilson v Matthews [1913] VicLawRp 54;119131 VLR 224; compare Howe v Teefy [1927] NSWStRp 41; (1927) 27 SR (NSW) 301. Claims for damages for loss of publicity are another example of cases of inherent difficulty in assessing the plaintiff's loss with any approach to certainty: see the decisions cited in Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd [1938] HCA 66; (1938) 61 CLR 286, at 301. An interesting decision is Aerial Advertising Co v Batchelors Peas Ltd (Manchester) (1938) 2 All ER 788, where the loss suffered could not have been proved with precision. Atkinson J. awarded three hundred pounds as all he could allow on an absolutely safe basis, saying that it was undoubtedly too little, but that the plaintiff could have called better evidence if it had wanted a larger figure. But while in some cases guesswork may be permissible in assessing damages, in others it is not. Guesswork was not good enough in Williams v Stephenson (1903) 33 SCR 323 (breach of contract by preventing plaintiff from continuing to conduct hotel; trial judge wrong in assessing damages by guessing); Wood v Grand Valley R Co 16 DLR 361; affirmed 22 DLR 614; 51 SCR 283 (breach of contract to construct railway line; any estimate of loss practically guesswork); Toronto Transit Commission v Aqua Taxi Ltd 6 DLR (2d) 721 (violation of exclusive right of ferry; no intelligent conclusion possible as to amount of loss); Sunley (B) and Co Ltd v Cunard White Star Ltd [1940] 1 KB 740 and Woodman v Rasmussen [1953] St R Qd 202 (breach of contract to carry machinery; in Sunley trial judge wrong to assess damages while admitting that any attempt at analytical analysis of award must fail); Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd [1938] HCA 66;(1938) 61 CLR 286 (breach of advertising contract; impossible to reach any estimate of damage suffered); Noske v McGinnis [1932] HCA 32; (1932) 47 CLR 563, at 599 (breach of contract for sale of hotel; Evatt J, dissenting as to sufficiency of evidence, holds that it will not found a fair estimate of damages); and Ashcroft v Curtin [1971] 1 WLR 1731(diminution of profitability of business as result of plaintiffs injuries; quantification quite impossible). It all depends on the circumstances. Where a vessel was damaged by negligence and there was evidence that it was impossible to make a reasonably accurate estimate of the cost of repairs, the Full Court of Queensland upheld a direction that in estimating the cost of repair the jury must do its best on what seems to have been the exiguous material before it: Wheeler v Riverside Coal Transport Co Pty Ltd [1964] QdR 113. The plaintiff may have been fortunate in the briefly noted case of Bovet v Walker(1917) 62 Sol Jo 104, where no evidence to enable the diminution in value to be quantified seems to have been led; I should have thought that expert evidence would have been available and should have been called. His Honour said later in the judgment (at [11]): There is no rigid dividing line between cases in which guess work is permissible in assessing damages and cases in which it is not. The borderline between guess work and rational assessment is itself indistinct, as it the line between evidence that is "precise" (The Perminite Case Dictum) and evidence that is not. His Honour also stated (at [27]):We were asked by Mr McInnes, if we were not prepared to order a retrial on damages, to substitute for the award of damages below an award of nominal damages. But this we cannot do. ""Nominal damages" is a technical phrased which means that you have negatived anything like real damage, but that you are affirming by your nominal damages that there is an infraction of a legal right, which, though it gives you no right to any real damages at all, yet gives you a right to the verdict or judgement because your legal right has been infringed. ("The Mediana" v "TC, Cint"" [1900] AC 113 at 116 Lord Halsbury LC, cited by Griffiths CJ in Baune v The Commonwealth [1906] HCA 92: (1906) 4 CLR 97 at 116 In Yan Tun Wwu; Dong Fang Chen; Feng Wei L; Lei Wang: Wei Kang Jiang; Hong Lian Zhu; Zhi Fen Adele Dai; Shao Hua Chen v Great Wall Travel Service Pty. Ltd [2014] NSWCA CD 50. The Tribunal member determined (at [64]): There is uncertainty as to the applicant's loss and damage, but nevertheless the Tribunal must do the best it can: Biggin and Co Limited v Permanite Limited (1951) 1KB 422 at pp 438-439 per Develin J (as he was): by forming what was described in Callaghan v William C Lynch Pty Limited (1962) NSWR 871 at p877 as 'conclusions on matters, on slender material; to make allowance for contingencies, even to the extent of guess work or speculation.... many cases illustrate that uncertainty in the quanification of damage, either in cases of contract or Tort, does not prevent an assessment: provided that some broad estimate can be made'". The Tribunal member (at [65]) relied upon the approval of these principles in NZ Enzed Ltd v Wynthea Pty. Ltd [1984] SCA373: FCR 450 at [68] where it was held: The principle is clear. If the court finds damage has occurred it must do its best to quantify the loss, even they agree that speculation and guess work is involved. Furthermore, if actual damage is suffered, the award must be for more than nominal damages. We should add that we can see no reason why this principle should not apply in cases under the Trade Practices Act as well as in cases of Common Law. We emphasise, however, that the principle applies only when the Court finds that loss or damage has occurred. It is not enough plaintiff merely to show wrongful conduct by the defendant.Another decision where these principles were applied is Marskell & Anor v Davis & Ors t/as TV Local Bloke Removals [2015] NSWCATCD 34.The evidence in the proceedings was insufficient to precisely quantify the cost of rectifying the cracking of the floor along the walls sustained as a result of the poor workmanship by the builder in breach of the contract and implied warranties. It was not a case where there could not have been evidence establishing the extent of the breach, available methods of rectification and the likely cost of each. There could have been evidence by an expert as to the preferable method of rectification and evidence as to the cost of rectification. Neither the extent of this breach nor the damage was incapable of proof. It was not a situation where, according to the authorities, the damages should be nominal
I accept that the homeowners have suffered damage from the builder's breach of contract and are entitled to recover damages. In circumstances where precise evidence is not available, the Tribunal must do its best to quantify the loss, even if there is an element of guesswork or speculation.
I reject the homeowners' evidence regarding quantification of their loss. In my view, the homeowners have not put before the Tribunal proper evidence so as to be able to assess their loss. The evidence relied on by the homeowners was the schedule in Appendix 2 and the technical information sheets.
The homeowners have provided no expert evidence to support their claim that they will incur additional heating and cooling costs because of the breach of contract. There is insufficient evidence before me from which I can determine that over a period time, the homeowners will pay additional heating and/or cooling costs. I reject the homeowners' claim for payment of additional heating and/or cooling costs.
I accept that there is a likely cost difference between R2 and R3 batts. Neither party has provided any evidence about the cost difference or the likely rectification costs to remove and install the insulation as provided for in the contract.
I am satisfied that the homeowners should be placed in a position they would have been had the insulation been installed in conformity with the contract. There would have been material and labour costs to the builder in having rectification works. I assess the homeowners' damages at $5,000.00.
I have had regard to Mr Drexler's opinion in item 6 of the Scott Schedule that the fair value of compensation in respect of the sisalation was $2,000.00. I consider that there are additional costs involved in removing all R2 batts and replacing them with R3 batts where appropriate. Further, the homeowners have not received what they bargained for and are entitled to be compensated for their loss.

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