1. The respondent must pay to the applicants $28,913.81.

2. Any application for costs and/or reimbursement of any fees paid to the Tribunal must be made in writing to the Tribunal (and copy to the other party) by 29 November 2021.

3. Any response to an application for costs and/or reimbursement of any fees paid to the Tribunal must be made in writing to the Tribunal (and copy to the other party) by 6 December 2021.

4. In the absence of any objection, any application for costs and/or reimbursement of any fees paid to the Tribunal will be determined 'on the papers'; namely, based on the parties' written submissions alone.

5. I direct the principal registrar to direct any application for costs to Member Horan.

6. If no application for costs has been made by 13 December 2021, the Tribunal makes no order as to costs.

Ms Lu, in person, with the assistance of Catherine Bei Hong Zhang, interpreter (Mandarin)

Mr Tang, in person, with the assistance of Catherine Bei Hong Zhang, interpreter (Mandarin)

1. Under a building contract dated 14 May 2018 (Contract), the applicants (Owners) engaged the respondent (Metricon) to construct a two-storey residential dwelling at the Owners' property located at 12 Sartre Court, Glen Waverley, Victoria (Works) for a contract price of $707,019.00 (GST inclusive). Under the Contract, Metricon also prepared the plans and specifications. Metricon engaged Perfect Timber Floors (PTF) to supply and install the engineered timber flooring on the ground floor of the house.

2. The Owners claim that the timber flooring on the ground floor is defective and, accordingly, Metricon is liable to them for damages totalling $155,413.20.

3. The hearing of this proceeding was held before me on 13 August 2021. The Owners appeared in person. In support of their claim, they called an expert in timber flooring, Mr Nicholas Barnes of Timber Floor Reports.

4. Mr Marcou of Counsel represented Metricon. Mr Marcou called lay evidence from Mr Daniel Casamento, managing director of PTF, and evidence from two experts in timber flooring: Mr Joshua Triplett of the Australasian Timber Flooring Association, and Mr Brett Scarpella, director of Loba Australasia Pty Ltd.[1]

5. The hearing was able to be completed within the one day as allocated, and an adjournment to a future date was avoided, primarily due to: the expert witnesses giving evidence concurrently; professional assistance from Ms Zhang as interpreter for the Owners; and various concessions given by Mr Marcou on behalf of Metricon during the course of the hearing.

6. After the parties had given evidence, and after hearing submissions, I advised the parties that I would reserve my decision and deliver written reasons.

7. The Owners allege that the flooring is uneven and unacceptable because the ends of some of the ground floor timber floorboards are protruding above the level of the flooring; namely, they are peaking.

8. The second applicant, Mr Tang, also alleged that the flooring emitted a hollow sound when kicked and this indicated that the flooring was suffering from major problems. However the Owners did not pursue these allegations at the hearing.

9. The Owners' claim in the sum of $155,413.20 comprises:

1. $145,444.20 for the cost of replacing the timber flooring as referred to in a Quotation from ANT Renovations dated 4 November 2020; and
2. $8,000.00 for 8 weeks' accommodation while the flooring is replaced.

1. accepted that peaking has occurred to some of the floorboards on the ground floor of the dwelling;
2. denied responsibility for any poor workmanship, any defect in the flooring product, and any defective installation;

1. said that the peaking was caused by increased moisture in the floorboards because, over the winter period, the Owners failed to occupy the dwelling when they took possession in June 2019, allowed the dwelling to remain vacant until October 2019, and thereby failed to maintain the dwelling at a reasonable temperature during those winter months; and

1. while maintaining a denial of liability, said that:
   1. the quantum of the Owners' claim was excessive;
   2. the peaking did not require full removal and replacement of all the floorboards on the ground floor. It can be remedied by re-sanding, re-staining and re-coating the floorboards (including caulking removal and replacement) throughout the ground floor of the dwelling, as well as any required glue injection and replacement of a few boards as required;
   3. re-sanding, re-staining and re-coating the floorboards will cost $13,428.80 as reflected in a quotation from PTF dated 19 November 2020 (PTF Re-sanding Quotation);
   4. however, if the Owners are correct, and all the flooring should be replaced, then the cost of replacement is reflected in a PFT quotation dated 21 June 2021 in the sum of $52,991.62 (PTF Replacement Quotation), together with the cost of exclusions referred to in that quotation (such as removal and re-installation of skirtings); and
   5. the Owners failed to mitigate their loss by rejecting Metricon's offer, in about August 2019, for PTF to re-sand and re-stain the flooring. Metricon argued that, had the Owners accepted the offer, the flooring could have been re-sanded and re-stained without the need for alternative accommodation and removal of furniture.

11. For convenience, I will refer to the work described in the PTF Re-sanding Quotation as 're-sanding and re-staining'.

12. Essentially, the Owners allege that Metricon breached the terms of the Contract by supplying and installing defective flooring on the ground floor of their house.

13. As the Contract is a 'major domestic building contract' as that term is contemplated under the Domestic Building Contracts Act 1995 (DBCA), the primary legal basis for this claim is alleged breaches of the statutory warranties contained in section 8 of the DBCA that form part of every domestic building contract.

14. Relevantly, the question is whether Metricon breached its warranties that:

1. the work will be carried out in a proper and workmanlike manner (clause 8(a)); and
2. the work will be carried out with reasonable care and skill (clause 8(d)).

15. All experts agreed that some of the engineered timber floorboards on the ground floor of the house were peaking, and that this constituted building work that required rectification. However, the experts disagreed about the cause of the defective floorboards.

16. The Owners' expert, Mr Barnes, took the view that the probable cause of the peaking was poor installation of the flooring when PTF's employees and/or agents knocked the timber ends against each other.

17. Metricon's experts, Messrs Triplett and Scarpella, rejected this view. In his report, Mr Triplett identified two 'main factors' that caused the peaking:

1. moisture in some floorboards, which arose because the Owners failed either to occupy the premises when they took possession in June 2019 or, alternatively, failed to heat the house during the period from June to October 2019 while the house remained vacant; and
2. the continuous board length along the hallway, causing greater pressure on end-joints.[2]

18. To determine liability, I do not need to decide which expert opinion is to be preferred.

19. If Mr Barnes is correct, then Metricon breached its warranty that the work would be carried out in a proper and workmanlike manner.

20. If Messrs Triplett and Scarpella are correct then, for the reasons given below, Metricon breached its warranty that the work would be carried out with reasonable care and skill.

21. The term 'work' as used in subsection 8(d) of the DBCA, refers to 'domestic building work' as referred to in section 5 of the DBCA that is not excluded work as described in section 6.[3] Not only does this include work for the construction of a home but also any preparation of plans or specifications for the carrying out of that work.[4] Accordingly, Metricon's warranty under section 8(d) of the DBCA included a warranty that the plans and specifications that it produced would be prepared with reasonable care and skill.

22. Also, when a builder carries out building work (particularly where it is also responsible for design), the duty to do so with reasonable care and skill carries with it a duty to warn the person who engaged it to do the work, upon the builder becoming aware of a risk of an adverse outcome.[5]

23. A key element of Metricon's defence was an allegation that the Owners caused the failure of the floorboards by leaving the house vacant between June and October 2019.

24. Mr Triplett gave evidence that peaking at the end of the floorboards is not uncommon and is 'a well known concern' when, upon completion, a dwelling is left unheated over winter months. That is, the risk of peaking is well known to people in the flooring, if not the construction, industry.

25. There was no evidence before me to indicate that the Owners knew of the risk before they discovered the peaking problems and notified Metricon about the issue.

26. Metricon called no evidence to establish that:

1. the Owners possessed such knowledge when they took possession of the premises in June 2019;
2. the Owners had been warned, either by way of a warning contained in the specifications that formed part of the Contract or otherwise, about the risk to the floorboards if the house was left vacant during the winter period;

1. Metricon and/or PTF provided any manuals or other instructional material to the Owners that would have drawn to the Owners' attention the need to maintain a reasonable temperature in the house while it remained vacant; and/or

1. Metricon offered to provide heating equipment to the Owners after they took possession of the premises in order to protect the floorboards especially as it appears that Metricon knew that, in about mid 2019, the air conditioning system was not working.

27. Mr Tang gave uncontested evidence that the heating/cooling system was not operating in July/August 2019 and that Metricon fixed the system about 6 months later.

28. Accordingly, if Metricon's experts are correct about the cause of the peaking to the floorboards, I am satisfied that Metricon breached its warranty that the work would be carried out with reasonable care and skill, including a duty to warn the Owners of the inherent risk that by leaving the house unoccupied and unheated during the winter of 2019, the timber flooring could suffer from peaking at the end of some floorboards.

29. In its defence, Metricon asserts that the Owners failed to mitigate their loss by rejecting Metricon's offer to re-sand and re-stain the flooring, which it made in August 2019 before they occupied the house. Metricon argued that, had the Owners accepted the offer, the Owners would not have incurred the cost of alternative accommodation and removal of furniture.

31. A claimant is not entitled to recover an amount that exceeds the loss which, in all the circumstances, it would have suffered if it had taken reasonable steps to avoid or minimise that loss. The Courts have said that the standard of reasonable conduct on the part of a claimant is not a high one because the respondent is a wrongdoer.[6]

32. In my view, the Owners acted reasonably in refusing to accept Metricon's proposal made on 12 August 2019 to re-sand and re-stain the floor. On the evidence before me, the representatives from Metricon and PTF who put that proposal to Mr Tang did so on a 'take it or leave it' basis. Particularly, given Mr Tang's concerns at the time that the flooring might not have been glued down either in part or at all (because the flooring emitted a hollow sound when kicked), it was reasonable for the Owners to reject that offer at that time. It was not until the Owners had obtained advice from Mr Barnes, which appears to have occurred in about October 2020, were they in a position sensibly to assess the merits of such a proposal.

What damages are the Owners entitled to recover?

33. The 'ruling principle' is that, where a person suffers loss because of a breach of contract, that person is to be placed in the same position as if the contract had been performed.[7]

34. In claims involving defective building work, this is usually assessed by ascertaining the cost to rectify those defects, provided that the rectification work:

1. is necessary to produce conformity with the terms of the contract; and
2. is a reasonable course to adopt in all the circumstances.[8]

35. Clearly, by removing and replacing all the floorboards on the ground floor, as contended for by the Owners, the flooring would conform with the requirement that there be no peaking in that flooring. However, is that work necessary and reasonable?

36. Both the Owners' expert, Mr Barnes, and Metricon's experts, Messrs Triplett and Scarpella, agreed that the flooring could be rectified by re-sanding and re-staining. The difference between them was Mr Barnes' opinion that this approach was unacceptable because it would diminish the life of the flooring.

37. I find that re-sanding and re-staining is an appropriate remedy, and therefore that the Owners should not be entitled to the cost of full removal and replacement of the timber flooring on the ground floor. For the reasons outlined below, re-sanding and re-staining is in my view a reasonable method of addressing the peaking at the end of some of the floorboards in some of the rooms on the ground floor of the house, provided that the Owners are also compensated for the diminished life of the timber flooring system.

38. In Clarendon Homes Vic Pty Ltd v Zalega[9], Senior Member Walker usefully summarised the various principles that apply when considering whether proposed rectification work is reasonable:

'In considering whether it would be unreasonable to award the cost of rectification, the tribunal should consider all the circumstances of the case before it. The nature and significance of the breach should be looked at in terms of the bargain the parties had and the relative importance of the breach within the context of the contract as a whole. The decision in Ruxley[10] suggests that account can be taken of the following matters at least:

1. Whether and to what extent the work, although not in conformity with the contract, is nonetheless serviceable;
2. Whether and to what extent the defect has affected the value of the work or the building as a whole;
3. The cost of rectification, the proportion that the breach bears to the cost of rectification and whether the cost of rectification would be wholly disproportionate to the real damage suffered by reason of it;
4. The likelihood that, if rectification cost is awarded, the sum so ordered will actually be spent on rectification. Obviously, a successful plaintiff can spend his damages as he sees fit but this may be a useful indicator of whether the amount sought is greater than the real loss suffered.

Quite obviously, this list is by no means exhaustive...'

39. First, neither party, nor their experts, suggested that the peaking of the timber flooring caused a danger to the safety of users of the floor (such as a tripping hazard), nor that the peaking resulted in any loss of functionality. Mr Barnes appears to have accepted the Owners' view that the primary effect of the peaking floorboards was that it produced 'a poor visual appearance'.[11] Accordingly, I find that the peaking of the flooring does not involve any serviceability issues. It is essentially an aesthetic problem.

40. Secondly, no evidence was led to suggest that the problem with the flooring affected the overall value of the premises.

41. Thirdly, Mr Triplett gave evidence, which I accept, that:

1. no appreciable end peaking could be observed in the ground floor bedroom, walk-in-robes and parts of the pantry;
2. only some minor, subdued peaking could be seen in the lounge and study areas;

1. moderate end peaking occurred in the dining and kitchen areas and part of the pantry; and

1. the most pronounced end peaking occurred in the entry and hallway which contained the longest lengths of flooring.[12]

42. In my view, the cost of a full replacement of the floorboards on the ground floor is disproportionate to the nature and extent of the peaking that occurred at the longitudinal ends of some floorboards in some areas of the house.

43. On the facts of this case, I find that full replacement of the floorboards is neither a necessary nor a reasonable method of rectification.

44. Metricon's experts opined that the floorboards could be rectified by means of re-sanding and re-staining, as well as the replacement of up to 10 floorboards.

45. Mr Casamento gave evidence that he approved the PTF Re-sanding Quotation in the sum of $13,428.80 (GST inclusive) covering the cost of removing caulking, re-sanding and re-staining the whole floor, then replacing the caulking. The quotation includes the cost of replacing up to 10 floorboards if required. Mr Casamento stated that the quotation was based upon retail prices and he estimated that the work would take about 5 to 6 days to complete.

46. The Owners did not provide any evidence as to the cost to re-sand and re-stain the flooring. Accordingly, in the absence of any evidence to the contrary, I find that the appropriate cost to rectify the floorboards is the amount of the PTF Re-sanding Quotation.

47. Mr Barnes said that, by re-sanding and re-staining the timber lengths that suffered from peaking, the life of the flooring would be reduced. Mr Trippett responded that, in his view, the floor was likely to have sufficient thickness to allow for re-sanding and re-staining. However, in areas containing more pronounced peaking, the floorboards could be replaced.

48. Having heard this evidence, on balance, I find that the measure of the Owners' loss should include an allowance for the diminution in the value of the flooring that will occur by reason of the re-sanding and re-staining that is required to remedy the peaking to some of the floorboards, particularly given that the peaking occurred soon after completion of the installation of the flooring.

49. No direct evidence was adduced at the hearing as to the diminution in value of the flooring. However, in determining the appropriate amount of compensation it is well settled that 'mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can'.[13]

50. Here, evidence provided at the hearing of the cost to remove and replace the flooring can be applied in assessing the value of flooring as originally installed. Mr Casamento referred to a quotation from PTF, which he approved, for the complete removal and replacement of the flooring, totalling $52,991.62 (GST inclusive). From this quotation, the amount of $32,956.22 (GST inclusive) appears to relate to the installation of the flooring.[14] Particularly given that PTF installed the flooring in the first instance, this amount fairly equates to the initial cost to install the timber flooring.

51. The Owners did not call a representative of ANT Renovations to give evidence, and so Metricon did not have the opportunity to conduct cross-examination regarding the ANT Renovations quote. For this reason, on balance, I prefer the evidence of Mr Casamento on this issue.

52. Mr Barnes stated that the longevity of a timber floor is always variable. Nevertheless, he said that an 8-year life is an appropriate allowance. He stated that timber flooring should be able to receive 2 to 3 re-sands in its lifetime. However, if the flooring is re-sanded and re-stained in order to remedy the peaking problem, then the flooring is likely to require total removal and replacement at the time when the next re-sanding would otherwise have been sufficient. This reflects between about 66% and 75% reduction in the life of the flooring. On that basis, I will allow a 70% reduction in the life of the flooring by reason of the early re-sanding; namely, an allowance of $23,069.35.

53. Reasonably substantial deductions should then be made from that amount, given:

1. on the evidence of Mr Triplett referred to above, that no appreciable peaking was manifest in some parts of the timber flooring, other parts showed only subdued peaking, and moderate peaking could be seen in some other areas. Accordingly, in some parts, re-sanding may have minimal effect upon the life of the flooring;
2. the re-sanding and re-staining option includes an allowance for the replacement of about 10 floorboards, which may remedy the worst occasions of peaking in the entry and hallway areas; and

1. the usual vicissitudes in the life of the floor.

54. In order to allow for these matters, I propose to make a deduction of 40% from the above allowance of $23,069.35. Accordingly, I will make an allowance for the diminution in the value of the flooring of $13,841.61.

55. Limited evidence is before me regarding an appropriate allowance for accommodation and storage of furniture, based upon a finding that the appropriate form of rectification is to re-sand and re-stain the flooring:

1. in his evidence, Mr Casamento estimated that this work was likely to take 5 to 6 days to complete; and
2. Metricon relied upon the PTF Replacement Quotation which included an allowance of $6,944 plus GST for 8 weeks of accommodation, and an allowance of $750 plus GST for furniture removal.

56. The Owners' claim for accommodation costs was not supported by any evidence before me. At the hearing, the Owners sought to rely upon a quotation from 'Airbnb' for the cost of accommodation of 4 guests while the flooring was removed and replaced. However, I accepted Metricon's objection to the late production of this quotation on the ground that Metricon had been prevented from having the opportunity to consider the quotation and obtain its own responsive evidence prior to the hearing.

57. In relying upon the PTF Replacement Quotation, Metricon accepted the rates for accommodation contained in that quotation. An allowance of $6,944 for 8 weeks equates to a rate of $124 per day (plus GST). Allowing a period of 6 days for re-sanding and re-staining to the timber flooring on the ground floor of the dwelling, the cost of accommodation is therefore $744.00 plus GST; namely, $818.40 inclusive of GST. I suspect that the rate per day, for 6 days' accommodation, is probably higher than $124 (plus GST). However, the evidence before me only supports this allowance.

58. The PTF Replacement Quotation also includes an allowance of $750.00 plus GST for furniture removal. I will allow that sum for the cost of removal and return of the furniture for the purpose of re-sanding and re-staining; namely, the sum of $825.00 inclusive of GST.

59. I will therefore order that Metricon pay the Owners the sum of $28,913.81 comprising: the cost to re-sand and re-stain ($13,428.80), diminution in the life of the flooring ($13,841.61), accommodation for 6 days ($818.40) and furniture removal ($825.00).

[1] Mr Scarpella acknowledged that his company supplies flooring adhesives and finishes to PTF and so, is not fully independent.

[2] Triplett report dated 18 November 2020, p 13.

[3] DBCA, s 3.

[5] Equitable Debenture Assets Corporation Ltd v William Moss Group Ltd (1984) 2 Con LR 1 at 30-31 per Judge Newey QC, referred to in Julian Bailey, Construction Law (third edition) at [14.17].

[6] NRMA Ltd and Ors v Morgan and Ors [1999] NSWSC 407 at [1289] per Giles J.

[7] Robinson v Harman [1848] EngR 135; (1848) 1 Exch 850 at 850 [154 ER 363 at 365], cited with approval in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272 at [13].

[8] Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613 at 617-618.

[9] (Domestic Building) [2010] VCAT 1202 at [165(d)].

[10] Ruxley Electronics and Construction Ltd v Forsyth [1994] 1 WLR 650 (footnote added).

[11] Barnes report dated 20 October 2020, p 7.

[12] Triplett report dated 18 November 2020, p 3.

[13] Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 at 83 per Mason CJ and Dawson J.

[14] Excluding items in the quotation relating to floor removal, plumber removing and reinstalling appliances, removing caulking, accommodation and furniture removal.