Supreme Court of the ACT|2019-03-01|Before: Mossop J

Hyblewski v Bellerive Homes Pty Ltd [2019] ACTSC 44 (1 March 2019)

BUILDING AND CONSTRUCTION - Building Act 2004 (ACT) - defective building works - statutory and contractual duty of the certifier - breach of duty by certifier in issuing stage certificates - failure to carry out statutory function of certifier with due care and skill - damages flowing from breach of contract - quantification of damages for remedial work - remoteness - recovery of damages for loss of rent - evidence presented at trial contrary to pleaded claim - apportionment of damages not available

Building Act 2004 (ACT), ss 19, 28, 37, 42, 42(1), 42(1)(c), 42(1)(d)(i), 42(2), 43, 43(2), 43(3), 44, 44(2), 44(2)(a), 44(2)(b), 44(5), 88, 140, 141, 141(1)

Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175

Alexander v Cambridge Credit Corp (1987) 9 NSWLR 310

Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279

Dunn v Hanson Australasia Pty Ltd [2017] ACTSC 169; (2017) 12 ACTLR 138

George v Rockett [1990] HCA 26; (1990) 170 CLR 104

Hadley v Baxendale [1854] EngR 296; (1854) 9 Exch 341; (1854) 156 ER 145

Explanatory Statement, Building Bill 2003 (ACT)

Asset Building Certifiers Pty Ltd (Second Defendant)

J Moffett (18 February 2019) M Mascitti (19 February 2019) (First Defendant)

1. This is a claim by an owner of land against a building certifier who, it is alleged, failed to exercise due care and skill in performing his functions as a certifier. In particular, it is alleged that the certifier should not have provided stage certificates that allowed the construction to proceed when there were defects in the building work.

2. The plaintiff is Alicia Hyblewski. She purchased the land in May 2011 and at the same time executed a contract with a Bellerive Homes Pty Ltd (the builder) for the construction of a single-storey house on the land. The builder is the first defendant. Asset Building Certifiers Pty Ltd (Asset) is the entity engaged by the plaintiff to perform the functions of a certifier under the Building Act 2004 (ACT) (the Act). A director and shareholder of that company was Mr Michael Collins who in fact performed the functions of the certifier in this case. Asset was a two dollar company through which he and his wife conducted business.

3. It is useful to set out a brief chronology of the events giving rise to the present dispute and the conduct of the present litigation.

4. The contract for the purchase of land was entered into on 4 May 2011. It is not clear when the completion date was. The building contract was also entered into on 4 May 2011. The building contract was a Housing Industry Association standard form "ACT Residential Building Contract for New Dwellings" January 2008 edition. It required, subject to the other terms of the contract, that the building reach practical completion 126 days after commencement. The plans for the building were attached to the contract.

5. On 27 August 2012, the plaintiff appointed Asset and Mr Collins as the certifier. Although the form of appointment is unclear as to whether the company (Asset) or the individual (Mr Collins) is the subject of the appointment, it is admitted in the pleadings that as a consequence of the appointment and payment by the plaintiff, a contract was formed between the plaintiff and Asset which contained an implied term that the certification work will be carried out with "all due care and skill". For the purposes of this case, it was uncontroversial that the actions of Mr Collins were the actions of Asset.

6. On 24 September 2012, Mr Collins assessed the plans as involving development which was exempt from the requirement for development approval under the Planning and Development Act 2007 (ACT) by completing an "Exempt Development Assessment Checklist". On 1 October 2012, he issued a building approval under s 28 of the Building Act. At the same time, the seven pages of plans the subject of that approval were stamped by Mr Collins as having been granted building approval as an exempt development. The plans that were the subject of building approval included revised versions of most of the plans that were annexed to the contract, as well as some additional plans. Nothing in this case turns upon the differences between the contract plans and the plans that were the subject of the building approval.

7. A Commencement Notice was issued by Asset on 9 November 2012. Such a notice is required by s 37 of the Act.

8. The building progressed and Mr Collins inspected the building work at the stages where that was required, namely, the slab stage, the pre-sheet stage and upon completion of the building work. In each case Mr Collins issued a certificate indicating that the work could proceed. The dates of those inspections and certificates were as follows:

(a) slab stage: 9 November 2012;

(b) pre-sheet stage: 1 February 2013; and

(c) final stage: 23 May 2013.

9. The inspection certificate for the slab stage inspection conducted on 9 November 2012 records under the heading "Observations made at inspection" the following: "OK TO PROCEED". Under the heading "The following information is required" it records: "SURVEY REPORT AT DPC". This is a reference to the survey report at the damp proof course level required by s 43(2) of the Building Act.

10. The inspection certificate for the pre-sheet stage inspection conducted on 1 February 2013 also records "OK to proceed". Under the heading "The following information is required" it records "DPC needed". Mr Collins explained in his oral evidence that this also was a reference to the need for the survey at the damp proof course level.

11. A survey report dated 21 February 2013 was ultimately provided to Mr Collins on about that date.

12. On 8 May 2013, a representative of the builder, Mr de Waal, had arranged an inspection with the plaintiff to take place on 21 May 2013. He did not attend the inspection. The plaintiff examined the house herself and expressed concerns about whether or not the house was complete. Mr de Waal apologised and conceded that the house was not at practical completion at that stage.

13. During the course of the construction, communications between builder and the plaintiff took place via a software system called "Co-Construct". On 25 May 2013 (two days after the final stage certificate had been issued), a document entitled "Application for Certificate of Occupancy and Use" was uploaded to the Co-Construct portal. The request made on 8 May 2013 when the 21 May 2013 inspection was being organised was:

Separate to this notice, we will upload a form for you to complete and sign at the time you feel is appropriate, which will allow us to apply for a certificate of occupancy on your behalf, at no cost to you. Without a certificate of occupancy, this home cannot be legally occupied.

14. Subsequently, on 12 June 2013, the plaintiff attended an inspection of the building with Mr de Waal. The plaintiff observed a number of matters which were of concern to her including the quality of the external brickwork. She declined to agree on a defects list prepared by Mr de Waal at that time.

15. On 25 June 2013, a friend of the plaintiff who was also a builder conducted an inspection of the premises and told her that there were numerous problems with the house. He offered to assist her with preparing a list of defects.

16. The plaintiff contacted the Australian Capital Territory (ACT) Planning and Land Authority as well as Mr Collins in relation to her concerns about the building work. During a conversation with the plaintiff, Mr Collins said that he already met with Mr de Waal and had given him some ideas about how to fix the problems with the house.

17. At a subsequent inspection of the property on 30 June 2013, a number of changes had been made but the defects of concern to the plaintiff had not been remedied. She prepared a written list of defects and sent it to Mr de Waal.

18. The plaintiff declined to pay an amount of $44,412.50 out of the total contract price of $177,750.

19. The plaintiff was not given access to the property. There is no evidence of any subsequent request for her to sign an application for a Certificate of Occupancy and Use. After July 2013 she was no longer able to access the Co-Construct portal.

20. No application for a Certificate of Occupancy and Use was received by the Construction Occupations Registrar and notwithstanding the issue of the final stage certificate, there is no evidence on the building file that the building certifier had stated to the Registrar that the building work had been completed.

21. The Originating Claim in the proceedings was filed on 22 June 2016. There is no explanation in the evidence as to why it took three years before proceedings were commenced. It is however evident that in 2015 the plaintiff or her solicitors had obtained geotechnical and engineering advice in relation to the house and its slab.

22. The claim was brought against the builder as well as against Asset. The claim against the builder was a straightforward claim for breach of contract in constructing the building. The builder made a counterclaim which sought the unpaid balance of the contract sum. The claim against Asset was a claim for breach of contract or, alternatively, breach of statutory duty. Overall, the case was a straightforward building case in relation to the construction of a modest dwelling. Notwithstanding these features, the proceedings took until February 2019 to come on for trial. Having regard to the lack of complexity in the case, it is completely unsatisfactory that it took in excess of two and a half years to come on for trial. It is not necessary for present purposes to apportion responsibility for that or decide whether the delay was result of torpid languor or drowsy procrastination: cf Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 at [156]. It is sufficient to observe that a case such as this should have been listed for trial less than 12 months after it commenced.

23. In May 2017, an agreement was reached between Asset and the builder that, in exchange for a sum of money, the builder would indemnify Asset in relation to any judgment obtained against it. That agreement resulted in Asset ceasing to be separately represented and being represented by the solicitors acting for the builder. For reasons not disclosed in the evidence, that arrangement subsequently broke down and quite late in the proceedings Asset became separately represented once again.

24. On the first day of the hearing before me the proceedings as between the plaintiff and the builder were settled. That settlement resulted in the proceedings by the plaintiff against the builder as well as the builder's counterclaim being discontinued. There was no other evidence about the terms on which the proceedings were settled. In particular, there was no evidence about how the amount outstanding under the building contract was to be dealt with and no evidence of any payment by one party to the other as part of the settlement.

25. That left the proceedings on foot as against Asset and the builder played no further part in the proceedings.

26. In order to decide this case, it is necessary to determine the following issues:

(a) Were there defects in the construction of the building?

(b) What was the contractual duty of the certifier?

(c) Did the certifier breach the contract?

(d) What are the damages flowing from the breach of contract?

(e) Do the apportionment provisions in ss 140 and 141 of the Building Act apply?

27. A number of these issues contain within them a series of sub-issues. I will identify those sub-issues as I turn to consider each issue.

Were there defects in the construction of the building?

28. This issue involves determining, on the basis of the expert evidence, whether there were defects in the building work. Whether or not any such defects were defects which a certifier was required to identify at an inspection stage and whether or not there is any causally related damage recoverable by the plaintiff will be considered when addressing subsequent issues.

29. The relevant evidence was largely contained in the expert report prepared by Mr Colin Davies, a building inspector, valuer and property consultant. Evidence in relation to the condition of the fill beneath the concrete slab and the performance of that slab in the period since it was laid was contained in the evidence of Mr Jeremy Murray, a geotechnical engineer, Mr Alan Tingcombe, a structural engineer, and Mr Kenneth Murtagh, a structural engineer.

30. Mr Davies' expert report identified a number of different categories of defect. He was cross-examined on his report. His evidence was largely uncontradicted. A report had been obtained by the builder for the purposes of the proceedings, but, for reasons it is unnecessary to traverse, Asset was unable to rely upon that report at the hearing.

31. Not all of the defects particularised in the Statement of Claim were pressed at the hearing. The particularised defects relied upon were:

(a) failing to prepare, or prepare properly, the land prior to the installation of the waffle pod slab;

(b) failing to provide an adequate foundation for the Building Works;

(c) failing to install, or install correctly, a moisture barrier beneath and/or next to the slab as required by clause 5.5.2 of Australian Standard 2870-2011 (AS 28702011);

(d) failing to install, or install correctly, a moisture barrier between external concrete slabs and the waffle pod slabs, including a failure to comply with Building Code of Australia (BCA) Performance Objective P2.2.3;

(e) installing perpends in the brickwork which were too large and/or inadequately or incompletely damp proofed;

(f) installing an infill slab in a manner contrary to the BCA and/or suppliers recommendations;

(g) failing to install any, or any adequate, damp course, including failing to comply with clause 3.3.4.5 of the BCA and/or Australian Standard 3700;

(h) installing or allowing to be installed brickwork of poor workmanship, including works that were not plumb, not level, used unmortared joints, uneven, unengaged, over sailed the slab beyond BCA tolerances, had blocked weep holes and/or used broken bricks;

(i) constructing a shared double brick wall on the boundary of the land and the adjoining property, which served as a party wall where the approved plans called for the construction of two separate walls on the land and the adjoining block; and

(j) failing to construct brick extensions (nib walls) for the front wall of a bedroom on the premises.

(a) Failing to prepare the land prior to installation of waffle pod slab

(b) Failing to provide an adequate foundation

32. These two particulars may be dealt with together.

33. The fall across the site meant that around half of the slab was constructed in an area that was cut and half constructed on fill. There was no evidence from the builder or anyone involved in the actual construction of the dwelling as to what steps had been taken to compact the fill under that portion of the waffle pod slab which was supported by fill. The only evidence of Mr Collins was that it was his usual practice to stamp his feet and that "if I see or feel any softness in the ground of 10-20mm when doing so, I assume that the ground has not been properly compacted...". The inference that the court was invited to draw from this evidence was that he did not detect any inadequate compaction when he gave the slab certificate. There was no evidence as to whether or not the stamping technique described by Mr Collins was a reliable rule of thumb method.

34. The report of Mr Murray, a geotechnical engineer, dated 12 July 2017 disclosed loose or very loose uncontrolled fill at a borehole and test pit on the site. These had been excavated in 2015 by Mr Murray. The borehole was in the driveway near the boundary with the adjoining property and the test pit was at the front of the house outside the front bedroom. He estimated the fill at the borehole as being 1m deep. The depth of fill in the test pit was 0.7m deep. While the design bearing capacity at foundation level should have been 50kPa under all beams and support thickening for slab construction, the density of fill was less than that and probably closer to 10kPa. That was in contravention of the requirements of AS 2870-2011.

35. At the time of Mr Murray's inspection in 2015 he observed Damage Category 1 or 2 cracking as assessed in accordance with AS 2870-2011. He said that long-term settlement was likely to result in Damage Category 2 or 3 cracking. Damage Category 3 "could mean that cracks can be repaired or filled, the door and windows stick, weather tightness can be impaired, and service pipes can fracture". In oral evidence he said that the majority of settlement would have occurred by the time of his 2017 report. In order to achieve the appropriate level of support for the slab and prevent further settlement. His opinion was that the footings would have to be underpinned. He provided a description of that underpinning and estimated that it would cost in the order of $30,000.

36. The report of Mr Alex Feng, a quantity surveyor engaged by the builder and relied upon by Asset, identified the cost of underpinning as $31,763 exclusive of GST. The plaintiff adopted this figure.

37. The report of Mr Tingcombe, a structural engineer, was obtained by the plaintiff in July 2017. His report made the following points:

(i) He initially inspected the site in March 2015.

(ii) The site involved both cut and fill.

(iii) He would have expected that there was either adequate compaction of the fill or installation of some form of support under the slab using bored piers or similar.

(iv) The report of Mr Murray identified fill material at the test locations was extremely loose and unsuitable for supporting any structural loads.

(v) The plans that form part of the building approval prepared by ANH Engineers refer to the use of concrete piers if the fill is uncontrolled fill under the slab.

(vi) The maximum depth of cut or fill appears to be in the order of 500mm. He would have expected to be able to view records of compaction testing or certification or records of slab preparation or inspections prior to the placement of concrete. A normal course during construction with a cut and fill would be that the prepared subgrade be inspected by either the design engineer or the certifier and the record of these inspections retained by the builder.

(vii) His subsequent inspection in July 2017 showed "there were no visible signs of any deterioration of the structure since my initial inspection in March 2015. There were no tell-tale signs of settlement cracking in any of the walls or exposed slabs in the garage".

The issue regarding cut/fill is still unknown but based on my initial investigation and the recent inspection there is no evidence to suggest the structure has deteriorated nor is behaving abnormally or that there have been significant settlements that has led to structural defects.

39. Mr Murtagh, a structural engineer, provided a report to the builder in 2018 which was tendered by Asset. He also gave oral evidence. His opinions may be summarised as follows:

(i) There was very limited cracking on the external face brick walls.

(ii) Settlement of the slab/masonry walls was not detected to any significant degree. The age of the construction at the inspection date, namely, approximately five years provided some confidence as to future performance and he did not expect the condition of the building to change significantly in the future.

(iii) He observed the over sailing of bricks beyond the edge of the slab. He also identified that in some places temporary brick packing used to support the wet brickwork was still present. His opinion was that the structural stud wall would restrain the brickwork adequately even after packing bricks at the base were removed and that a simple slab extension could be added for aesthetic purposes if necessary.

(iv) The slab was in excellent condition.

(v) The low fill compaction was not surprising as heavy compaction would have caused distress in the nearby retaining wall.

(vi) There should be no concern about the lack of moisture sealing where the driveway connects with the garage because the garage is a non-habitable space.

6.1. My inspection of the structure after 5 years since construction has detected only minor defects in the façade. Most homes of this type would exhibit similar minor defects 5 years after construction from my experience.

6.2. The structural system used was reviewed and its satisfactory performance was found to be justified in design terms. A major factor was the choice of the waffle pod raft slab with reserves of stiffness and strength.

...

6.4. Rectification of non-structurally significant items such as ceiling batons and overhang issues can be dealt with in a cost-effective manner.

41. Unsurprisingly, in light of these comments, he agreed with the report of Mr Tingcombe that the structure had not deteriorated and was not behaving abnormally.

42. I accept the evidence of Mr Murray that the level of compaction of the fill fell below that which was required by the relevant Australian Standard. I also accept the evidence of Mr Tingcombe and Mr Murtagh that there have been and are unlikely to be any structural consequences of significance of that failure. That is because the waffle pod slab has performed well over a period in which any consequences of the inadequate compaction are likely to have manifested themselves. Therefore, while the breach has been established, no rectification is necessary and hence no damage has arisen from breach.

(c) Failure to install a moisture barrier contrary to clause 5.5.2 of AS 2870-2011

43. Mr Davies identified that three areas of external slab were not isolated by appropriate damp proofing material from the ground. This was said to be contrary to clause 5.5.2 of AS 2870-2011. This provided, relevantly, that a concrete member must be isolated from "the aggressive soil or groundwater by a damp proof membrane..." There was no evidence that the soil on the premises was "aggressive soil" within the meaning of this clause. There was, however, nothing to contradict the proposition that a moisture barrier was required to be installed to protect the slab from groundwater and I accept Mr Davies' evidence.

44. Mr Davies said that the affected areas of concrete needed to be removed and replaced with concrete that had a moisture barrier installed. This expert opinion was not contradicted and I accept it. These areas included areas also affected by the next identified defect, the absence of moisture barriers between external slabs and the waffle pod slab.

(d) Failure to install moisture barrier between external slabs and waffle pod slab

45. Mr Davies identified the requirements of the BCA for moisture barriers between an external area of concrete paving and the house slab. Such a moisture barrier was required to prevent moisture entering the slab and rising within it. He identified four locations where the waffle pod slab adjoined areas of concrete where there was no moisture barrier installed and that this was contrary to the BCA. He said that the failure to install a moisture barrier reflected poor skill, supervision and a lack of knowledge of AS 28702011. Rectification involved removal of the relevant slab and reinstallation with a moisture barrier.

46. The rectification method proposed was that the external slab outside the laundry, the alfresco area and the area at the rear of the garage needed to be removed and replaced with a slab that included a moisture barrier.

47. This expert opinion was not contradicted and I accept it.

(f) Infill slab contrary to the BCA and/or suppliers recommendations

48. The infill slabs are the areas of concrete slab external to the waffle pod slab, that is, the concrete path outside the laundry, the alfresco area and the area to the rear of the garage. This particular was not the subject of any submissions which identified matters going beyond those which are addressed at (c) and (d) above.

(e) Perpends too large and/or inadequately or incompletely damp proofed

(g) Failure to install adequate damp course

(h) Poor brickwork

49. These three particulars, which all relate to the quality of the brickwork, may be dealt with together.

50. There were a variety of aspects of the brickwork which were identified by Mr Davies as being defective.

51. At the internal corner between the kitchen and the garage brickwork was unengaged, that is the two brick walls were not built so that the bricks interlocked. Further, at that corner the rows of bricks on the two perpendicular walls were misaligned. Mr Davies' evidence was that the construction of this brickwork was not done in a proper and skilful manner contrary to s 42(1)(c) of the Act.

52. Mr Davies' evidence was that under the BCA a damp proof course was required to be installed between the internal stud frame and the external face of the brick wall. The use of a raked joint in which some of the mortar is removed after the bricks are laid to provide a small recess in the mortar run means that the damp proof course would be visible on the outside of the brickwork. The damp proof course would also be visible in the weep holes. If the damp proof course does not extend to the external face of the wall it allows moisture and water into the brickwork. Mr Davies identified that on each of the lengths of wall the damp proof course was not visible. His report also provides an example of a weep hole at which the extent of the damp proof course can be seen and it is clearly some distance back from the external face of the brickwork and placed in a manner which would allow water to drain into the extrusion hole within the brick below.

53. His report also identified an area on the western side of the building where there were no weep holes, no damp proof course visible and moisture affecting the lower levels of the bricks.

54. He identified that a number of the weep holes were obstructed by loose mortar and should have been cleaned out.

55. He identified that the brickwork was of poor quality, in particular the mortar beds and vertical mortar joints varied in width in a manner that he described as "overall of poor quality and slipshod".

56. He identified a number of areas where the bricks had "over sailed" the edge of the slab. He identified three portions of wall at the rear of the house where brickwork did not over sail the slab to any significant degree, but in all other locations the brickwork did over sail the slab. He expressed the opinion that in the circumstances, because the slab was engineer designed with a built-in tolerance for small variations, over sailing of brickwork should not occur. He identified a number of areas where the over sailing exceeded the maximum 15mm permitted by the BCA and the Guide to Standards and Tolerances.

57. His evidence was that the appropriate rectification measure was to demolish the brickwork and rebuild it with an approved damp proof course and in a manner that remedied the other defects. This expert opinion was not contradicted and I accept it.

58. The approved plans show that the wall of the garage is on the eastern boundary of the block. Immediately adjacent on the adjoining block is another dwelling which also has a wall on that boundary. The approved plans show separate walls for the two buildings which are independent of each other. They show that each independent wall is of approximately the same height above the ground and because the ground level on the two blocks is different, the walls end at different heights. The evidence of Mr Davies was that what had been constructed on the boundary was not two independent walls but instead a double brick party wall which was inconsistent with the approved plans. It appears also to be a different shape to that shown on the approved plan, although the plaintiff did not appear to take a point about that.

59. In cross-examination Mr Collins agreed that there was no reference to a party wall in the approved plans and that it was not intended that a party wall be constructed. He was uncertain about whether the plans showed two separate walls. He agreed that the construction of a party wall was contrary to the approved plans.

60. The approved plans for the premises show at the front of the house two nib walls which extend beyond the corner bedroom which is immediately adjoining the front door of the house. These appear to be aesthetic rather than structural elements of the house and form part of the architectural façade of the bedroom which is a significant feature of the south façade of the building, that is, the façade of the building that is viewed from the road. Footings for those nib walls are shown on the "Waffle Pod Slab Layout" which is one of the plans approved as part of the building approval. The walls are also shown on the approved floor plan and on the approved elevations which show the south façade elevation. The foundations are also shown to have been laid for these walls on the survey plan of the slab foundations prepared by a surveyor on 21 February 2013 following the request for such a plan in the slab stage inspection certificate and the presheet stage inspection certificate.

61. The evidence of Mr Davies was that these nib walls had not been built. That fact was uncontroversial. Mr Davies also expressed the opinion, based upon some photographs that were taken during the course of construction, that no foundations had been laid for the nib walls. Those photographs do not show any extension of the waffle pod slab to support the nib walls. However, the survey plan subsequently prepared does show footings in the area where the nib walls should have been constructed. Given that strip footings may have been poured for the nib walls after completion of the waffle pod slab, I prefer the evidence in the survey diagram to the inference drawn by Mr Davies from the photographs which were provided to him. This does not affect the conclusion that because the nib walls were not constructed, the building as constructed did not comply with the approved plans.

What was the contractual duty of the certifier?

62. The plaintiff alleged in her pleading, and the second defendant admitted, that as a result of the second defendant's appointment as certifier and the payment by the plaintiff, a contract was formed between the plaintiff and the second defendant which contained an implied term that Asset would carry out the certification work with all due care and skill.

63. Counsel for Asset submitted, correctly, that, having regard to the absence of terms on the document appointing the certifier, the content of the requirement to exercise reasonable care and skill must be determined having regard to the provisions of the Building Act.

64. Certifiers are appointed by an owner of land: s 19. Certifiers then issue building approvals under the Act: s 28. The certifier controls when building work commences and thereby ensures that a building approval has been issued for the building work and a builder who is licensed has been engaged to do the work: s 37. The Act and a regulation made under the Act prescribe stages of building work: s 43; Building (General) Regulation 2008 (ACT), s 33. The three prescribed stages are, in lay terms, the slab stage, the presheet stage and upon completion of the building work. At each of those stages the certifier is required to be satisfied on reasonable grounds that the building work that has been carried out complies with the requirements in s 42 of the Act. Those requirements include that the building work is in accordance with the approved plans and has been carried out in a proper and skilful way. If the certifier cannot be so satisfied then no certificate that the work complies may be given and the builder may not proceed further: ss 44(2), 43(3). If the certifier does not give a certificate then the certifier must give directions to the builder that are reasonable and appropriate for achieving compliance with the requirements of s 42.

65. The requirements of s 42, which are picked up by s 44, are "necessary to promote good practice in doing building work so as it is consistent with reasonable public expectations of builders and to protect public confidence in the standards of that work": Explanatory Statement, Building Bill 2003 (ACT), at 17. The prohibition upon proceeding past a defined stage in the construction process without certification of compliance is clearly designed to ensure that where the requirements in s 42 have not been complied with that non-compliance is remedied before the building work proceeds further. By this means, the legislation aims to ensure that defective work is remedied at an early stage and the interests of owners are thereby protected.

66. The most relevant statutory provisions are ss 42, 43 and 44 of the Act and s 33 of the Building (General) Regulation. The provisions of the Act at the relevant time were as follows:

Requirements for carrying out building work
- (1) Building work must not be carried out except in accordance with the following requirements:
  - (a) the materials used in the building work must comply with the standards under the building code for the materials in buildings of the kind being built or altered;
  - (b) the way the materials are used in the building work must comply with their acceptable use under the building code for buildings of the kind being built or altered;
  - (c) the building work must be carried out in a proper and skilful way;

Note The considerations to be taken into account to decide when work is carried out in a proper and skilful way may be prescribed under the regulations (see s (2)).

(d) building work must be carried out -

(i) in accordance with approved plans; or

(ii) if the building work involves handling asbestos or disturbing friable asbestos - in accordance with approved plans that comply with this Act in relation to the asbestos;

(e) for building work required to be done only by a licensed builder -

(i) the building work must be carried out by or under the supervision of the builder mentioned in the building commencement notice; and

(ii) the builder's licence must authorise the doing of the building work;

(f) the building licensee in charge of the building work must take -

(i) all the safety precautions stated in or with the application for the building approval; and

(ii) any other safety precaution that a certifier or building inspector may require the building licensee to take under section 46.

(2) The regulations may prescribe considerations to be taken into account to decide whether building work is carried out in a proper and skilful way.

(b) for building work done beyond a stage in contravention of this section -

(i) when further building work is exempted from subsection (2) or (3) to allow building work to proceed beyond the stage; and

(ii) how the building work may proceed beyond the stage.

Example of regulations with s 43 (3)

A regulation under section 43 (1) (a) prescribes that a stage of building work is completion of the structural framework before the placement of any internal lining (the structural framework stage). A licensee in charge of building a house completes the structural framework for the house, but attaches plasterboard sheets to the inside of the wall frames without giving the certifier for the work notice that the structural framework is complete. The certifier has not inspected the work or given written permission for the work to proceed, so the licensee has contravened section 43 (3).

If the licensee does further building work on the house, that work would be beyond the structural framework stage.

A regulation under section 43 (1) (b) may prescribe to the effect that -

(a) further building work is exempt if the further work is to undo all or part of the building work that was done beyond the stage, so that the certifier can inspect the building work for the stage (and give permission for building work to proceed beyond the stage); and

(b) the building work may proceed if it is otherwise done in accordance with the Act.

Under the possible regulation, if all or some of the plasterboard sheets are removed so that the certifier can inspect the structural framework, and the sheets are removed in accordance with the Act, the removal of the sheets would not contravene section 43 (3).

Note An example is part of the Act, is not exhaustive and may extend, but does not limit, the meaning of the provision in which it appears (see Legislation Act, s 126 and s 132).

(2) A building licensee in charge of building work must not do building work above dampcourse level (other than further building work exempted under subsection (1) (b)) unless -

(i) a plan (a survey plan) signed by a registered surveyor stating the position of the building in relation to the boundaries of the parcel of land where the building is to be erected and stating the level that the floor or floors of the building will have in relation to a level stated in the approved plans; or

(ii) another document prescribed under the regulations; and

(b) the certifier is satisfied that the position of the building and the level of the floor or floors are in accordance with -

(A) an advice mentioned in section 27 (1) (b) (i);

(B) an approval or consent mentioned in section 27 (1) (b) (iii).

(3) A building licensee in charge of building work that has reached a stage must not do building work beyond the stage (other than further building work exempted under subsection (1) (b)) unless -

(a) the licensee has given to the certifier notice that the stage has been reached; and

(b) the certifier has inspected the building work and given written permission for the work to proceed.

(4) If a building licensee in charge of building work is required under section 44 (6) to conduct a test, the licensee must, as soon as practicable after the test is completed, give the person who made the requirement the written results of the test.

(5) An offence against this section is a strict liability offence.

(1) If a certifier receives a notice under section 43 (3) (a) for building work, the certifier must inspect the building work as soon as practicable.

(2) On, or as soon as practicable (but in any case within 2 working days), after inspection, the certifier must -

(a) if satisfied on reasonable grounds that the building work does not comply with section 42 (Requirements for carrying out building work), give the building licensee in charge of the building work written notice that -

(ii) includes directions that are reasonable and appropriate for achieving compliance; and

(iii) states the date that the noncompliance came to the certifier's attention; or

(b) if satisfied on reasonable grounds that building work complies with section 42 - certify that the work complies and give the certificate to the building licensee in charge of the building work.

(3) A certifier commits an offence if the certifier contravenes subsection (1) or (2).

(4) An offence against subsection (3) is a strict liability offence.

(5) A certifier must certify that building work complies with section 42 and give the certificate to the building licensee in charge of the building work if the certifier -

(a) has given a notice mentioned in subsection (2) (a) to the licensee; and

(i) the building licensee in charge of the building work has done what is reasonable and appropriate to achieve compliance (even if what is done is not in accordance with the directions in the notice); and

(ii) the building work otherwise complies with section 42; and

(6) A certifier may, by written notice, require the building licensee in charge of the building work to conduct, on the materials used or to be used in the work, on the structure of the building, or in relation to anything else connected with the work, the tests stated in the notice.

Stages of building work - Act, s 43 (1) (a)

Note The Act, s 43 (2) requires certain things to be done before building work proceeds beyond the dampcourse level of a building.

(a) completion of excavation, placement of formwork and placement of steel reinforcing for the footings before any concrete for the footings is poured; and

(b) for a class 1, class 10a or class 10b building -

(i) completion of the structural framework before the placement of any internal lining; and

(ii) completion of placement of formwork, and placement of steel reinforcing, for any reinforced concrete member before any concrete for the member is poured; and

(i) completion of any structural framework stated by the certifier in the relevant building approval, before the placement of any internal lining; and

(ii) completion of the placement of formwork and steel reinforcing for any reinforced concrete member stated by the certifier in the relevant building approval, before any concrete for the member is poured; and

(d) completion of the building work approved in the relevant building approval.

68. There are three matters of relevance to note about these provisions.

69. First, s 42(2) permits regulations to prescribe considerations to be taken into account in deciding whether building work is carried out in a proper and skilful way. This is not an exclusive provision which would permit the regulations to prescribe all of the considerations to be taken into account. Relevant in this case is that ss 31-32 of the Building (General) Regulation provide that regard may be had to whether the work is in accordance with any relevant rules or guidelines published by Standards Australia: s 31(b) and whether or not work meets reasonable minimum industry standards including those defined in the Guide to Standards and Tolerances 2007: ss 32(1)(b) and (2). Mr Davies had regard to both relevant Australian Standards as well as the Guide to Standards and Tolerances 2007 in the preparation of his report.

70. Second, the expression "on reasonable grounds" in s 44 of the Act imports an objective test: George v Rockett [1990] HCA 26; (1990) 170 CLR 104. In the joint judgment, the Court said (at 112):

When a statute prescribes that there must be "reasonable grounds" for a state of mind - including suspicion and belief - it requires the existence of facts which are sufficient to induce that state of mind in a reasonable person.

Satisfaction is a state of mind of similar intensity to that of belief although it is more apt to describe a situation in which some evaluative process has been undertaken. Therefore, consistently with George v Rockett, in order for a certifier to be satisfied on reasonable grounds of the matters referred to in s 42, facts must be demonstrated to exist which would induce that state of satisfaction in a reasonable certifier. What would induce a state of satisfaction in a reasonable certifier must be assessed in the context of the statutory regime in the Act and the function that a certifier performs.

71. Third, the provisions of ss 42 and 44 are clear enough to exclude any implied qualification upon their terms that might arise from the existence of alternative remedies available to an owner for whom a builder had constructed defective work. Counsel for Asset submitted that Asset's duty was not to detect defective work and that it was not the certifier's role to protect an owner from negligent building work because the protection that an owner obtained was in the statutory warranties set out in s 88 of the Act. In my view, the existence of statutory warranties in the owner's contract with the builder and the possibility that an owner may have remedies against parties other than the certifier do not qualify the obligations on a certifier under s 44 and hence do not qualify the contractual obligation upon the certifier to exercise due care and skill when providing certification services.

72. Consideration of this issue involves two sub-issues:

(a) What was the approach that Mr Collins took to his role as certifier?

(b) Which, if any, defects would a certifier who was complying with his statutory and contractual obligations have identified?

a) What was the approach that Mr Collins took to his role as certifier?

73. In his affidavit Mr Collins described his usual practice when conducting a slab stage inspection of a class 1a building. He said that attended the buildings on site and satisfied himself of the correct address for the works by looking at the survey pegs for block details. He took out the engineering plans and checked that the slab preparation including the situation and size of footings, steel reinforcement, the overlapping and tying of reinforcement, and placement of vapour barrier and polystyrene blocks matched that shown on the engineering plans. He checked that the vapour barrier was correctly lapped and taped in accordance with the plans and that the waffles were to the depth shown on the plans. He looked to see if the pods were deep enough to hold the load and checked their depth against the plans. If there was a cut on site, he checked to make sure it was not affecting drainage. In relation to a slab and footing inspection where fill material was present, he said:

I walk around the reinforcement and stamp my feet into the ground. If I see or feel any softness in the ground of 10-20mm when doing so, I assume that the ground has not been properly compacted and require the builder to provide evidence that the fill has been compacted to the level required by the plans or advise that concrete could not be poured until the compaction was rectified.

74. He also checked that toilets, onsite notices and construction safety fencing were correctly placed. He spoke to the builder and ascertained that the floor levels of the slab once poured would be the same level as shown on the plan. He would instruct the builder about any information that was required for the next inspection stage. If his visual inspection indicated any "visually obvious deviation from the plans, or the Building Act or Building Code of Australia", he would issue the builder with a stop work notice and provide instructions on how to rectify the issue. So far as limitations on his inspection were concerned, he said: "My slab inspections are limited to a visual inspection of the areas that are accessible to me. I do not move or interfere with building work when conducting any inspection under the Building Act."

75. He said that in this case he followed his usual practice and "satisfied myself that the slab preparation did not display any significant deviations from the engineering plans I had with me". He therefore issued the slab stage certificate.

76. The reports of the engineers demonstrate that the fill under the slab was inadequate. The evidence does not demonstrate where or how Mr Collins' stamp test could have been conducted having regard to the photographic evidence which shows that at the time of inspection polystyrene and wire mesh covered the area upon which the slab was to be poured. In any event, having regard to the engineering evidence about the quality of the fill and the absence of any evidence that would support the proposition that Mr Collins' stamp test provided a reasonable basis for a conclusion that the fill was appropriately compacted, I conclude that he did not have reasonable grounds for being satisfied that the building at that stage complied with the requirements of s 42. However, for the reasons given above at [32]-[42], the breach of duty has not given rise to any damage and it is unnecessary to consider this issue further.

77. Mr Collins' evidence about what he did at the pre-sheet inspection is of more significance. At this point all of the brick walls had been constructed. As a consequence, the defects in the construction of those walls were able to be observed. Mr Collins' evidence about his usual practice was that he would:

(i) walk around the site to check drainage both on the site and adjoining properties to ensure there was no stormwater buildup;

(ii) look at the slab survey report to verify the slab had been correctly placed;

(iii) take out his plans and walk around the outside of the building looking at doors and windows to ensure they were placed as marked on the plans;

(iv) look at the roof to see that the house had the correct number of storeys and that the roof appeared to have been built in accordance with the plans;

(v) go inside the house and look at the roof frames and trusses, to see that they were placed in accordance with the plans and correctly fastened to each other on the floor slab and to make sure they appear to be properly braced;

(vi) go back outside and check the weep holes are properly placed and clear;

(vii) look at the windows to see that flashings have been installed;

(viii) if he saw anything that looked like a substantial deviation from the plans or the Building Act issue a notice to the builder to stop work; and

(ix) if it appeared that the work inspected had been done in accordance with the plans and the Building Act then issue a certificate to the builder which may note any additional requirements to be carried out by the builder before the final inspection.

78. At the point of issuing the pre-sheet certificate, he noted that he still had not received the slab survey report for the works and hence noted "DPC needed". In his oral evidence he clarified that this was intended to be a reference to the damp proof course survey rather than indicating that a damp proof course needed to be installed.

79. As to his approach to the quality of the work, he said:

When conducting a pre-sheet inspection, I look at those areas of building work to be certified that are visible and accessible to me, and search for any visually obvious deviations from the plans or applicable standards, or matters that could affect the structural soundness of the building. I do not look for minor defects, nor do I check the aesthetic appearance of the building work or quality of work.

(Emphasis added.)

80. He retreated somewhat from this in his oral evidence. In cross-examination he agreed that he did not make comment on the quality of the work. However he did not accept that the reference in the Act to the work being conducted in a proper and skilful manner denoted quality. He said: "Because quality of the work could or proper and skilful manner could be [sic] that the house was built in accordance with the Building Code which is what I check and it was built in accordance with the building approval and it was built by a licensed builder who has got licensed subcontractors and tradespeople carrying out the work". This approach involves a clear failure to comply with his duty under the Building Act as "aesthetic appearance" and "quality of work" are each matters which may be required by the "proper and skilful" performance of the work. Further, his approach involves undue deference to the builder. It indicates an approach which confines the certification process to compliance with the BCA and the approved prior plans and, when it comes to any question of the performance of the work in a "proper and skilful way", deference to the fact that the builder and subcontractors are licensed.

81. In oral evidence he said that at the pre-sheet inspection he noticed that contrary to the approved plans, the nib walls were missing and that he knew at least by the time of receiving the surveyor's report on about 25 February 2013 that the wall constructed between the dwellings was a party wall and that such a wall was not on the approved plans. His evidence was that he did not discuss these variations from the approved plans with anyone and did not notify anyone of the departures from the approved plans.

82. So far as deviations from the plans were concerned the effect of his evidence was:

(i) he was not concerned about deviations from the plan because he couldn't "second-guess" what agreement had been reached between builder and client to depart from the plans; and

(ii) any departure from the plans would still involve the house being built "substantially in accordance with" the approved plans and, if not, would be rectified by requiring amended plans to be prepared prior to the application for a certificate of occupancy.

83. So far as the former issue was concerned, he did not perceive that it was his role to question departures from the approved plans because his function was not to "secondguess" what variations to the plans might have been discussed and approved as between builder and owner. That was the case even though there was no evidence before him that any departure from the approved plans had been discussed with the owner, let alone approved. Such an approach was manifestly inconsistent with his obligations under s 44 of the Act and under the contract with the plaintiff. While it might be the case that a certifier would not breach the certifier's contractual duty if the certifier was to permit a building project to proceed past a particular stage if the certifier had available reliable evidence that an amendment had been approved by the owner and that the owner would approve the revision of the building approval so as to regularise the variation, that was not the situation in the present case.

84. Rather, the approach was that departures from the approved plans, if they meant that the building was not "substantially in accordance with" the approved plans, would have to be regularised prior to the making of an application for a certificate of occupancy. That could only be achieved if the owner approved the amendment of the plans so as to authorise the departure from the approved plans. Such an approach was manifestly inconsistent with a certifier's duty. The effect of adopting this approach was to allow construction which departed from the approved plans to continue without notice to the builder or owner up until the point where a certificate of occupancy was to be applied for and only then to put the owner in the position of being asked to approve departures from the approved plans or face the necessity of insisting on costly and disruptive work to remedy the departures which would necessarily further delay the completion of the building.

85. Compounding this error, Mr Collins took a remarkably robust view as to the extent of departure that was permitted from the approved plans which could still be characterised as being "substantially in accordance" with them. That was significant because he was able to apply for a certificate of occupancy if he was satisfied on reasonable grounds that the building had been completed "substantially in accordance with" the approved plans. Notwithstanding the requirement in s 44(2)(b) that requires him to be satisfied that the building work was carried out "in accordance with the approved plans", he appeared to proceed on the basis that he was entitled to certify each stage if the building work was at that stage "substantially in accordance with" the approved plans. That is inconsistent with the language of s 42(1)(d)(i). Even though the certificate of occupancy provisions do recognise that in the real world building work may depart in minor respects from the approved plans and hence contains the "substantially in accordance with" provision, that latitude is not incorporated in s 42(1)(d)(i). Whilst certification is a real-world activity where perfection is often absent, it is not open to read the "substantially in accordance with" qualification into other provisions so as to permit significant departures from the approved plans. The erroneous nature of Mr Collins' approach to the extent of departure from the approved plans is illustrated by the answer that he gave in cross-examination when it was suggested that the house was built was in contravention of the approved plans:

The house is built was almost identical to the approved plans. It was a single storey, it wasn't a tyre factory being built. It was a single storey house.

86. So far as the final stage approval that was given, Mr Collins said that, as usual, his practice was to:

(i) take out his plans and walk around the outside of the house with the plans to check that what had been built mirrored the plans, using his tape measure to make sure the buildings dimensions matched the survey report;

(ii) look at the drainage and earth around the house to see if there was any buildup of water;

(iii) look at the gutters and downpipes to confirm that they were in the right place and had been connected;

(iv) look at weep holes in the walls and if he saw any blocked weep holes, ask the builder to clear them;

(v) go inside the house and see that the layout mirrored the plan;

(vi) look at the lights and see that they were installed in accordance with the plan;

(vii) check the waste and floor level drains to see that they were in the right place and at the correct height to ensure proper drainage;

(viii) check for smoke detectors;

(ix) look at the internal walls for any cracking more noticeable than hairline cracks;

(x) check the finished floor levels to ensure they were as required by the plans and identify any slippery areas or trip hazards; and

(xi) push on the windows to make sure that they open and shut properly.

87. His evidence was that at the conclusion of the final inspection he was satisfied that the building works complied with s 42 of the Act and hence issued the final certificate to the builder. The approach articulated in cross-examination was that he would address variations from the approved plans at the stage where a certificate of occupancy was to be applied for.

88. He said that he only looked at areas that were "visible and accessible to" him and that aside from pushing on the windows, he did not interfere with the works during the inspection. It is notable that in his evidence he made no reference to any checks done as to the quality of the work that he observed so as to ensure that it was done in a "proper and skilful way". His evidence is consistent with not having seen that as part of his role and deferring to the fact that the builder and subcontractors were licensed.

89. On Mr Collins' evidence the departures from the approved plans involving the nib walls and the party wall were matters which he recognised at the pre-sheet stage but, because of his approach to such departures, did nothing about and did not notify the owner.

90. As to the balance of the defects identified at [32]-[61] above, each of those defects was a defect which was or ought to have been obvious to a certifier who was carrying out his role as a certifier with due care and skill. Each was evident by examining the exterior of the building work without any need to uncover, expose or otherwise interfere with materials that had already been put in place. In failing to identify them as defects Mr Collins caused Asset to breach its contractual duty to the plaintiff. Further, his satisfaction at the pre-sheet stage that the building works complied with s 42 of the Act was not based on reasonable grounds and a certifier exercising due care and skill would not have reached the conclusion that the building works complied with s 42. I identify the presheet stage as being the significant stage because the uncompacted fill at the slab stage has not been productive of any damage and the foundations for the nib wall, if not constructed at the slab stage, were subsequently constructed as indicated on the surveyor's plan.

91. For the same reasons as given for the pre-sheet stage, at the final stage Mr Collins caused Asset to breach its contractual duty to the plaintiff.

92. Counsel for Asset put a submission based upon some of the oral evidence of Mr Davies that the implied term required a certifier to take an "overall view" of the work at each stage inspection and to exercise professional judgment as to whether there were visual "cues" that would prompt further investigation. He submitted that this allowed for a divergence of opinion between certifiers as to what constituted a "cue" and hence that the certifiers task cannot be reduced to an exact science. While it is correct that, in common with any judgment based upon specialised knowledge or experience, there is some room for differing opinions, in the context of work done on a residential dwelling, if a certifier is performing the function required by s 44 the scope for differences of opinion will be relatively narrow. That is a combination of the fact that any state of satisfaction under s 44 must be based upon reasonable grounds and that the existence of the BCA, Australian Standards and the Guide to Standards and Tolerances all tend to confine the scope for different conclusions to be reached. It is certainly not a case where a broad discretionary decision is to be made about which reasonable minds might differ. Rather, it is a statutory test which must be determined on reasonable grounds in relation to which many if not most of the requirements will be governed by accepted standards.

93. Finally, I note that Asset did not attempt to place any reliance upon the fine print on the standard form used for each stage certificate which appeared under the heading "SCOPE & LIMITATIONS OF OF THIS INSPECTION CERTIFICATE". It is therefore unnecessary to determine the relationship between the statements on the certificate and the statutory obligations of the certifier.

b) Which, if any, defects would a certifier who was complying with his statutory and contractual obligations have identified?

94. Had Mr Collins performed the duties of a certifier with reasonable care and skill then, relevantly, following the pre-sheet and final stage inspections no certificate would have been given under s 44(2)(b). For the reasons given above, the approach that he took to the task of certification was inconsistent with his duties under the Act and hence under the contract. Had he performed his statutory and contractual duty then he would have identified the defects that Mr Davies did and could not have had reasonable grounds for being satisfied that the work complied with s 42. As a consequence, he would have been obliged to give written notice to the builder under s 44(2)(a). I am satisfied that had he given written notice to the builder, the builder would not have contravened s 43(3) and hence the building work would have stopped until the builder was able to obtain a certificate under s 44(5) by remedying the defects that have been proved by the plaintiff.

What are the damages flowing from the breach of contract?

95. Addressing this issue involves addressing four sub-issues:

(a) Is the cost of remedying the defects causally related to a breach of duty by the certifier in issuing the stage certificates?

(b) Are damages arising from the cost of remedying defects too remote to be recoverable?

(c) What is the cost of rectifying the relevant defects?

(d) Can the plaintiff recover damages for loss of rent?

(a) Is the cost of remedying the defects causally related to a breach of duty by the certifier in issuing the stage certificates?

96. Asset submitted that it was significant that the plaintiff's pleadings did not allege as a breach of contract a failure to give directions to the builder to remedy the work in question. This was said to be significant because Asset submitted that there was no causal link between the damage suffered by the plaintiff as a result of defective work by the builder and the giving of a certificate at an inspection stage that permitted the work to proceed. Asset submitted that by the time the inspection had occurred, the defect was already built into the construction. It submitted that the damage had occurred before any breach and hence the damage was not a causally related consequence of the breach. It submitted that in those circumstances the only damages that could be said to have arisen from the giving of the certificate were any increased costs for which the plaintiff would be required to expend as a result of the continuation of the building beyond that stage. In other words, the damages would be limited to the increased costs of rectification because the work was allowed to continue rather than the whole of the costs of rectification. Asset then submitted that the case run by the plaintiff did not prove those increased costs because the plaintiff had assumed that the whole of the cost of remedying the defect was recoverable.

97. I do not accept the submission of the defendant as it fails to properly characterise the relevant breach. The submissions focus on the breach by the builder in carrying out building work other than in accordance with the approved plans or other than in a "proper and skilful way". If that breach is focused upon, then it is true that the damage is suffered prior to the issuing of each relevant certificate. However, for the purposes of the cause of action against the certifier, the relevant breach is that of the certifier by failing to carry out the s 44 function with due care and skill. The damage that arises is because the certifier has failed to exercise the undoubted power, and in the present case the obligation, to decline to issue a certificate which would allow the work to proceed. Because of the regulatory function of the certifier and the criminal penalties imposed upon builders who proceed without certification, the scheme is such that any builder who wishes to proceed with the building must remedy the defects or departures from the approved plans which are identified by the certifier at the relevant inspection stage. Therefore, in the context of the statutory scheme of the Act, it can be said that the failure by the certifier to exercise the regulatory role under the Act with due care and skill caused the plaintiff to end up with a building that has passed its final inspection stage in a form which incorporates defects and departures from the approved plans.

98. More particularly, I am satisfied that had the builder been given written notices of the defects pursuant to s 44(2)(a) following the pre-sheet and final stage inspections, the builder would have remedied those defects in order to obtain a certificate under s 44(5). As a consequence, I am satisfied that but for the breach of duty by the certifier, the plaintiff would not have suffered loss, namely, the costs of remedying the defects which would not have occurred had the certifier done his job to the contractual standard. In the present case the "but for" test is appropriate, but bearing in mind what was said in Alexander v Cambridge Credit Corp (1987) 9 NSWLR 310, I am also satisfied that as a matter of common sense the breach of duty by the certifier was a cause of the loss.

99. The damages are limited to the damages relating to those defects which would not have occurred had the certifier done his job to the contractual standard. There can be a difference between the damages for which a builder is liable as a result of a breach of a building contract and the damages for which a certifier is liable by reason of failing to reach the contractual standard in the performance of the duties of a certifier. That is because a certifier may not be required to detect every defect which amounts to a breach of the building contract. However in the present case for the reasons I have given above none of the relevant defects fall into that category.

(b) Are damages arising from the cost of remedying defects too remote to be recoverable?

100. Asset submitted that the claim for defects fell outside both the first and second limbs of Hadley v Baxendale [1854] EngR 296; (1854) 9 Exch 341 at 354; 156 ER 145 at 151. The first limb is that the loss in issue must flow "according to the usual course of things" from the defendant's breach. The second limb, as explained in C Czarnikow Ltd v Koufos [1969] 1 AC 350 at 385, is that on the information available to the defendant when the contract was made, a reasonable person in the defendant's position would have realised that such a loss was sufficiently likely to result from the breach that it is proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.

101. In my view, the losses in the present case are very clearly within the scope of the limbs of the rule in Hadley v Baxendale. Like Gibbs J in Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454 at 472, I consider that "it is immaterial whether it comes within the first part of the rule of the second or indeed whether both are applicable". So far as the first is concerned, having regard to the regulatory scheme, damages arising from defective work or work that departed from the approved plans is damage that would flow in the usual course of things from a failure by a certifier in performing the certifier's function of stage inspections with due care and skill. That is because in the usual course of things, defects or departures from plans would be remedied by the builder if due care and skill was exercised at the inspection stage but may not be if the stage certificates are given in circumstances where there are defects or departures from the approved plans which would have been detected by the exercise of due care and skill.

102. So far as the second limb is concerned, a reasonable certifier (that is, one with a proper understanding of the certifier's statutory functions and contractual obligations) would have realised that losses of the type suffered by the plaintiff were sufficiently likely to result from a breach of contract in relation to certification services that it was proper to hold that such losses flowed naturally from the breach or should be within the certifier's contemplation.

103. In so far as this was really another way of putting the argument that damages could not be recovered because the building defects were in place prior to each relevant inspection stage, I do not accept that because as was pointed out at [97] the argument incorrectly focuses on the breach of duty of the builder rather than a breach of duty of the certifier.

(c) What is the cost of rectifying the relevant defects?

104. Expert reports by quantity surveyors were tendered by each side. Mr Jason Shepheard had prepared a report at the request of the solicitors for the plaintiff. Mr Feng had prepared a report for the solicitors for the builder and this was relied upon by Asset. Relevantly, those reports costed the remedial measures identified in the report of Mr Davies. Mr Feng also costed the underpinning of foundations recommended as a remediation measure by Mr Murray.

105. The areas relevant to the plaintiff's claim that were costed in the reports were based on the matters addressed in Mr Davies' report and were as follows:

(a) unapproved structures (party wall);

(b) missing walls and footings;

(c) waffle pod slab;

(d) damp proof course;

(e) weep holes;

(f) moisture barrier on ground;

(g) moisture barrier in between slab and concrete;

(h) brick articulation;

(i) perpends and mortar;

(j) over sailing brickwork;

(k) width of cavity and location of load-bearing wall;

(l) professional fees associated with the repairs; and

(m) waste removal associated with the repairs.

106. Item (k) above appeared to be within the particularised complaint relating to the construction of brickwork because the width of the cavity was too great in four different locations as a result of either over sailing or the brickwork being out of plumb.

107. I have found above that each of the costed matters referred to in the above list is a matter in relation to which damage is recoverable, the only exception being the construction of the nib wall footings: see [61] above.

108. While, for reasons which were unexplained, the quantity surveyors had not been required to confer with each other prior to getting in the witness box, after a short adjournment during which they conferred with each other, the scope of any difference of opinion between them as to rectification costs was radically narrowed. The cost arrived at by Mr Shepheard was $204,139. The cost arrived at by Mr Feng was $164,531. This gave a difference of $39,608.

109. Ultimately, the quantity surveyors agreed with the proposition that the extent of the differences in their costing were such that they were both within the range of costs that might be charged by reasonable builders costing the rectification exercise. Neither party demurred from the proposition that it would be a reasonable approach for the court to adopt a midpoint between their revised costings and adopt that as the cost of rectification.

Hyblewski v Bellerive Homes Pty Ltd [2019] ACTSC 44

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (229 paragraphs)

Hyblewski v Bellerive Homes Pty Ltd [2019] ACTSC 44 (1 March 2019)

Parties

Legislation Cited (2)

Cases Cited (6)

Cited By (1)