Maloney v Blue Haven Pools South Pty Ltd

Findings

1. Many of the facts are not disputed and the Tribunal makes the following findings in respect of them: 1. The parties entered into a written contract on 7 January 2016. The contract provided that Blue Haven would construct an in-ground swimming pool at Ms Maloney's property in Tea Gardens, NSW. 2. The contract was in writing and provided that Blue Haven would complete the pool and associated works in accordance with the particulars and the terms set out in Part A and Part B of the contract for the contract price of $49,800.00, subject to variation of the price in certain defined circumstances. The contract included a warning as follows: WARNING NOTE: The contract price may change under the following standard conditions found in Part B: 2(b) incorrect property boundaries 2(e) cost of specific subsoil or substrata tests 8.1(d) design changes to meet site conditions 4(d) changes in Council fees 5 & 8.1 extra excavation 7.2 expedition of work to overcome delay 8.2(b) changes required to comply with Council requirements 8.5 & 12.5 provisional sums and prime costs 9 & 15(1)(d) variations or changes to the pool or site incurring costs 12.3 changes in quantities of work paid for at agreed rate 1. Part A schedule 3 to the contract set out rates to be used in valuing works not otherwise covered by the contract. At schedule S3.7 under the heading "Prime cost and provisional sums - allowance for work where a choice still has to be made" the words "Shoring and extra steel for sand " had been written. No figure appeared in the column "Prime costs or provisional sum allowed". 1. Schedule S3.9 was headed "Items which may not be included in contract work and price". 1. A manual alteration had been made to tick "included" rather than "excluded" next to items 7 and 8: Item 7 Formwork, backfilling and piering carried out below existing ground level, Item 8 Any work necessary to stabilise the site conditions encountered in excavating and/or necessary to allow construction to proceed or recommence. This includes or covers events and consequences such as excavation collapsing due to unstable soil and/or the consequences of weather conditions such as rain and storms, and the use of pumps/spear pumps for dewatering if required. 1. Clause 8.1 (e) provided: If design and construction methods change in order to provide structural integrity to the pool and to address site conditions uncovered by excavation and the cost of the pool increases by more than 35% of the contract price the Customer may, within 5 days of receipt of advice from the Builder of the cost implications of additional work, cancel the contract by written notice to the Builder. Cancellation of the contract will not affect the Customer's liability for payment of money owing as a result of the Builder's actual costs incurred including but not limited to site investigation, preparation of the plan, costs associated with the building approval application 1. Clause 8.5 provided (inter alia): (a) Where any work to be performed under the contract or any item to be used is of a nature that the cost cannot be determined until during the course of the work a provisional allowance may be included in the contract price. Such an allowance includes an amount for the acquisition of the appropriate item or the carrying out of the work and an amount for the Builder's overheads and profit. Such an allowance is referred to as a provisional sum or prime cost item. (b) All work or items covered by a provisional sum or prime cost are set out in Part A Schedule 3 Item S3.7. 1. Clause 9 dealt with variations and provided inter alia : (a)The Customer may order variations to the contract work or may be required due to a latent condition. The procedure to do this is set out in this clause. A variation is to be carried out by the Builder provided the work is required and its cost is agreed in writing. (f)Additional costs will be payable by the Customer if the Builder is required to pump water from the excavation, pool shell or pool where the presence of such water would otherwise cause delay or damage to the work. The extra cost payable by the Customer will be the costs incurred by the Builder. Water from rain, seepage or run off which affects the work being done or to be done is covered by this clause. 1. The contract defined latent condition as meaning "a matter or thing, including ground conditions, drainage or other matter not reasonably discoverable prior to the commencement of works" 1. AWL Engineering provided a report dated 24 June 2016 to Blue Haven. The report stated that the certifier had requested "engineering certification that the pool excavation does not affect the zone of influence of existing dwellings at Nos 7 and 9 Holbert Close". 1. The report stated that as the pool was to be excavated within the theoretical zone of influence of the adjoining residences, shoring would be required to be progressively installed as the excavation proceeded. The report detailed a method to be employed and concluded that if excavated in the manner proposed, the risk of collapse could be managed. 2. Excavation commenced on 6 July 2016 but ceased later that day when water inundated the excavation. Attempts were made on 7 July 2016 to shore and dewater the excavation without success. The excavation was backfilled. 3. Blue Haven obtained a quotation dated 19 October 2014 from Arbroearth Pty Ltd in the sum of $79,800.00 plus GST to install sheet piling for the full perimeter of the pool, to underpin the northeast corner of the building and to supply and install a dewatering system to enable excavation and installation of the pool. 4. On or about 7 November 2016 Blue Haven advised Ms Maloney by phone that it had a quotation for shoring in the sum of $79000. The quotation referred to was the quotation of Arbroearth referred to above. 5. The position of Ms Maloney, communicated to Blue Haven on numerous occasions up until her purported termination of the contract, was that she wanted the pool constructed in accordance with the contract on the basis that Blue Haven was responsible for the additional costs referred to in the Arbroearth quote. 6. The position of Blue Haven, communicated to Ms Maloney on numerous occasions up until Ms Maloney's purported termination of the contract, was that Blue Haven was prepared to construct the pool upon a satisfactory resolution of the dispute in respect of the additional charges which Blue Haven said were the responsibility of Ms Maloney. 7. During the hearing Blue Haven's representative Ms Martinez stated that Ms Maloney was liable for the costs of dewatering and sheet piling, but by late 2018 she would have been prepared to absorb those costs in order to settle the dispute. She continued to maintain that the cost of underpinning was not a cost for which Blue Haven was liable. 8. Temporary fencing was erected on about 7 July 2016 and remains in place. Ms Maloney was charged and paid for some of the resultant charges. 9. On 5 August 2018 at about 8.40 pm a representative of Blue Haven forced his way into Ms Maloney's home and placed a cheque in the sum of $15,000.00 on the table in the hallway. Ms Martinez gave evidence that the cheque represented the balance of monies paid by Ms Maloney under the contract, and not previously refunded to her. Ms Maloney did not accept the cheque and it was returned to the Bank following intervention by NSW Police. 10. By letter dated 19 September 2018 Ms Maloney stated that she was terminating the contract. 11. By letter dated 25 September 2018 Blue Haven stated that it was terminating the contract.

Expert evidence

1. The Tribunal had before it a number of expert opinions as follows: 1. Filed on behalf of Ms Maloney: 1. Report of Don Katauskas, Geotechnical engineer dated 1 September 2017. Mr Katauskas adopts the Tribunal's code of conduct. Part of his report addresses a statement apparently made by Blue Haven that Douglas Partners had indicated that the site could not be dewatered. No report of Douglas Partners has been provided at any time to substantiate this statement. Mr Katauskas states that the pool could be constructed if sheet piling and dewatering spear points were used. Mr Katauskas also states that in his view an experienced pool contractor would be required to take into account the subsurface conditions, being sandy soil and a relatively high water table. He states that shoring and support and dewatering of the excavation would need to be provided. 2. Report of Robert Herberston of Wellstructured Engineers dated 20 September 2018. Mr Herberston adopts the Tribunal's code of conduct. He agrees with the solution for stabilising the site recommended by Mr Katauskas. He sets out a comprehensive scope of work for construction of the pool. He concludes that underpinning of the foundations of adjoining residences is not a feasible option for a number of reasons, including that underpinning carries risks of damage to the underpinned structures and would be unlikely to be agreed upon by the adjoining owner. 1. Filed on behalf of Blue Haven: 1. Report of Damien Waring-Flood of AWL Engineering dated 2 June 2016. This report was obtained by Blue Haven before construction was commenced as a condition imposed by the certifier. It was not an expert report prepared for the purpose of these proceedings. It identifies that the excavation is within the zones of influence of the adjoining residences, and provides a construction method designed to allow the risk of collapse to be managed. It refers to shoring but does not mandate sheet piling. It states that excavation should cease and the engineer should be contacted if collapse occurs "such that the underside of the footings can be seen." 2. Report of EA Bennett of Civil & Structural Engineering Design Services Pty Ltd dated 23 May 2018. Mr Bennett does not adopt the Tribunal's code of conduct. He records information provided to him by Dave Stewart on behalf of Blue Haven and by Ms Maloney. He states that he is in general agreement with the findings of Mr Katauskas but goes on to report that Ms Maloney would be better served by negotiation. This is advice outside the expert's filed of expertise (being an engineer). He provides a list of mitigation strategies to address various issues. However his report does not provide any conclusion as to whether underpinning would be required ("screw piles for underpinning where necessary" and "alternate methodology such as permeation grouting should the silty soils be suitable for this new method"). His recommendations are recommendations for resolution of the dispute rather than expert opinion as to the issues to be determined and can be given little weight. 3. Report of Marek Blaszczakiewicz of Demlakian Strata & Remedial dated 24 October 2018. An objection to the tendering of the report was made by Ms Maloney at the commencement of the hearing. In any event, whilst Mr Blaszczakiewicz adopts the Tribunal's code of conduct, he provides a number of opinions in relation to the construction of the contract. This matter is the matter for determination by the Tribunal and not the task of the expert. In addition Mr Blaszczakiewicz incorrectly states that the work at item 8 in schedule S3.9 is marked as "excluded" when it is in fact marked as "included". The Tribunal places no weight on this report.
2. The Tribunal accepts that the experts are in agreement that, in order to mitigate the risk of collapse of the excavation during construction of the pool, installation of sheet piling and dewatering will be required. The Tribunal accepts the evidence of Mr Herberston that underpinning of the adjacent dwellings is not practicable. The Tribunal accepts the consensus of the experts that underpinning should not be necessary if the sheet piling is installed and the site dewatered in accordance with the experts' recommendations.

Issues for determination

1. The agreed facts and finding in respect of the expert evidence give rise to a number of legal issues: 1. Is the work required to install the sheet piling, and supply and install the dewatering system, included in the contract by virtue of the fact that a tick appears next to items 7 and 8 in schedule S3.9? 2. If so is the cost of that work included in the fixed price contract? 3. What is the effect of the inclusion of the words "shoring and extra steel for sand" in schedule S3.7? Do the provisions of clause 8.5 in respect of provisional sum allowances apply to those costs? 4. Do the provisions of clause 8.1 apply? If so, has Blue Haven given notice to Ms Maloney pursuant to that clause? 5. Is the work required due to a latent condition? If so, does clause 9 entitle Blue Haven to a variation? If not, does clause 9 (f) apply in any event? 6. Has Blue Haven repudiated the contract? If so: 1. Has Ms Maloney validly terminated the contract? 2. What damages is Ms Maloney entitled to? 1. If Blue Haven has not repudiated the contract, does Ms Maloney's termination amount to a repudiation of the contract by her? If so: 1. Has Blue Haven validly terminated the contract? 2. Is Blue Haven thereby released from performance of the contract?

Consideration

1. The High Court has enunciated the principle to be applied in interpreting a contract in Australian Broadcasting Commission v. Australasian Performing Right Association Ltd (1973) 129 CLR 99: It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, "even though the construction adopted is not the most obvious, or the most grammatically accurate", to use the words from earlier authority cited in Locke v. Dunlop (1888) 39 Ch D 387, at p 393 , which, although spoken in relation to a will, are applicable to the construction of written instruments generally; see also Bottomley's Case (1880) 16 Ch D 681, at p 686 . Further, it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument. Finally, the statement of Lord Wright in Hillas &Co. Ltd. v. Arcos Ltd. (1932) 147 LT 503, at p 514 , that the court should construe commercial contracts "fairly and broadly, without being too astute or subtle in finding defects", should not, in my opinion, be understood as limited to documents drawn by businessmen for themselves and without legal assistance (cf. Upper Hunter County District Council v. Australian Chilling and Freezing Co. Ltd. (1968) 118 CLR 429, at p 437 ). (at p110)
2. The Tribunal will apply these principles in the analysis and interpretation of the contract terms.

Is the work required to install the sheet piling, and supply and install the dewatering system included in the contract by virtue of the fact that a tick appears next to items 7 and 8 in schedule S3.9?

1. Item 7 and Item 8 are in broad terms. In particular Item 8 refers to "Any work necessary to stabilise the site conditions encountered in excavating". The work became necessary because of the excavation collapsing due to unstable soil (sand) and the clause specifically refers to the use of pumps/spear pumps for dewatering if required. The Tribunal is satisfied that the work required to install the sheet piling and to supply and install the dewatering system is work which comes within the ambit of Item 8 and is accordingly included in the contract.

If so is the cost of that work included in the fixed price contract?

1. The heading to the item states ""Items which may not be included in contract work and price". The items are stated to be included. It follows that the price of both is included in the fixed price contract.
2. It should be noted that the clause is a clause which deals with who is to take the risk in respect of the contingencies outlined. In altering the standard contract to make the items included the risk was shifted from Ms Maloney to Blue Haven. Whilst this was an alteration allegedly made at the request of Ms Maloney, it was agreed to by Blue Haven's representative who stated that he had assessed the risk and was satisfied that it was in order for the alteration to be made. The evidence disclosed that the representative was an experienced salesperson, and Blue Haven itself has many years of experience in constructing pools, including in the Tea Gardens area.

What is the effect of the inclusion of the words "shoring and extra steel for sand" in schedule S3.7? Do the provisions of clause 8.5 in respect of provisional sum allowances apply to those costs?

1. The contract contains a definition of prime cost items or provisional sums being amounts of money included in the contract as an estimate of cost. The definition states that if the actual cost is greater or less than the estimate, the contract price is adjusted. Whilst the words "Shoring and extra steel for sand" are included in schedule 3.7, no estimate is included. The Tribunal finds that in these circumstances, because no estimate of cost is included, the items do not fall within the definition of a provisional sum. In addition, the contract included a special condition that stated "Shoring and extra steel for sand included." The special conditions are said to prevail over any inconsistent terms in Part B. The Tribunal accordingly rejects Blue Haven's submission that the amounts are included as provisional allowances and finds that they are included in the fixed price.

Do the provisions of clause 8.1 apply? If so, has Blue Haven given notice to Ms Maloney pursuant to that clause?

1. It follows from the analysis above that the Builder is responsible for the additional costs both of sheet piling and dewatering. The price of the pool has not been increased. Clause 8.1 does not apply for this reason.
2. In any event no clear notice has ever been given by the Builder pursuant to clause 8.1. The additional costs anticipated by the Builder when the issue first arose included underpinning of the adjacent residences, an action which the expert evidence shows is not required.

Is the work required due to a latent condition? If so, does clause 9 entitle Blue Haven to a variation? If not, does clause 9 (f) apply in any event?

1. Blue Haven alleges that the actual conditions on the site, and in particular the high water table, were latent conditions such that, despite any other provision of the contract, Blue Haven was entitled to a variation pursuant to clause 9. Ms Maloney argues that this is not the case. She cites as authority the observation of the English Court of Appeal in Baxall Securities Limited v Sheard Walsh Partnership [2002] EWCA: "Certainly on the commercial context a defect would not be latent if it had reasonably been discoverable by the claimant with the benefit of such skilled third party advice as he might be expected to obtain."
2. Perhaps the best guide of what might have reasonably been discoverable is contained in the report of Damien Waring-Flood of AWL Engineering dated 2 June 2016. The Tribunal is satisfied that advice of this kind was the sort of skilled third party advice which Blue Haven might have been expected to obtain. The report identifies that the pool is to be excavated in sand, that the adjoining residences are within the zones of influence of the excavation, and refers to the fact that in these circumstances there is a risk of collapse of the excavation and impact upon the residences. However it concludes that the risk could be addressed by shoring and dewatering. The actual conditions which were encountered require steel sheet piling at a much greater expense. On the advice of AWL, which the Tribunal is satisfied is the type of advice which it would be reasonable to expect Blue Haven to obtain, Blue Haven would have anticipated shoring and dewatering, and indeed the cost of both was estimated in the contract price. The cost of sheet piling however was not estimated or included in Blue Haven's internal calculations. The conditions which resulted in the need for sheet piling were latent conditions.
3. However even though this was the case, Blue Haven is not entitled to a variation because the wording of Item 8 does not exclude work required because of a latent condition. It is clear that the standard contract anticipated that any work required to stabilise the site would be excluded from the price such that, if required because of a latent defect, the work required would be dealt with as a variation. By altering the standard contract to include that work, clause 9 does not apply because even if the work is required because of a latent defect, it falls within the description in the schedule and is included in the fixed price contract.

Has Blue Haven repudiated the contract? If so has Ms Maloney validly terminated the contract?

1. Repudiation is defined in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61 as: conduct which evinces an unwillingness or an inability to render substantial performance of the contract. This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party's obligations[5]. It may be termed renunciation[6]. The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it[7]
2. D.T R Nominees Pty. Ltd. v. Mona Homes Pty. Ltd (1978) 138 CLR 423 dealt with a situation which echoes the situation in this matter (at para 20): The relevant question therefore is whether the events which we have recounted evidence an intention on the part of the appellant to repudiate or renounce the contract or more precisely whether such an intention is to be inferred from those events. (at p431) 21. For the respondents it was submitted that such an intention should be inferred from the appellant's continued adherence to an incorrect interpretation of the contract. It was urged that the appellant, because it was acting on an erroneous view, was not willing to perform the contract according to its terms. No doubt there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms. But there are other cases in which a party, though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognize his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him.
3. The issue then is whether repudiation of the contract can be attributed to Blue Haven on the facts of this matter. This is a matter where the construction of the contract is the issue in dispute. The respondent refused to construct the pool unless Ms Maloney agreed to pay the additional costs, based upon its interpretation of the contract. There is no doubt that in all of the communications between the parties, Blue Haven was offering to build the pool but only on the basis of its interpretation of the contract. However Blue Haven has never stated that it would not build the pool if found to be liable for the additional costs. It has always stated that it will build the pool "in accordance with the contract." The Tribunal is not satisfied that this stance necessarily evinces an intention not to be bound by the contract. However, Blue Haven's actions in entering the applicant's home, without her consent, and placing a cheque in the hallway is unequivocal. There is no doubt that a reasonable person in Ms Maloney's position would conclude that by returning all monies paid under the contract Blue Haven no longer intended to be bound by the contract.
4. Whilst it was the evidence of Ms Martinez that in returning the contract monies she was doing no more than attempting to resolve these proceedings, it is clear that she was attempting to do so on the basis that the respondent's obligations under the contract were discharged. The Tribunal is satisfied that this amounted to repudiation of the contract. Ms Maloney was entitled to terminate, and has validly done so.

What damages in Ms Maloney entitled to?

1. Ms Maloney seeks damages in the sum of $182,332.23 made up as follows: 1. $89,838 being the cost of the Vision Pools quotation ($139638) less the contract price ($49800) 2. $69,580 being the cost of sheet piling works 3. $4260.39 being the cost of dewatering works 4. $15,620 being a refund of monies paid under the contract 5. $2320 being the damage bond paid to Great Lakes Council 6. $514 being the cost of the AWL report 7. $2199.84 being the cost of the temporary fencing
2. In respect of each claim: 1. $89,838 being the cost of the Vision Pools quotation ($139638) less the contract price ($49800) This claim is problematic. The Vision Pools quotation is almost three times the cost of the Blue Haven quotation. The applicant has provided only one quotation and there is no explanation as to why that is the case. Vision Pools cannot be said to be independent in that they stand to benefit from the decision in these proceedings, should they be awarded the contract to build the pool. The applicant submitted that the quotation was more expensive because Blue Haven operates with economies of scale. However there is no expert evidence to support that contention. In addition it appears that some charges which were not included in the Blue Haven contract (e.g. Council and certification costs, engineers inspections and reports) are included in the Vision Pools quote as provisional allowances, whilst others are included which were not included at all in the Blue Haven contract (e.g. 12 weeks of temporary fence hire). The applicant has the onus of proving what loss she suffers as a consequence of Blue Haven's repudiation of the contract. In respect of this head of damage, the Tribunal is not satisfied on the balance of probabilities that the sum claimed will be payable and disallows the claim. 1. $69,580 being the cost of sheet piling works, and 2. $4260.39 being the cost of dewatering works The Tribunal accepts these claims. The quantum is commensurate with the evidence otherwise before the Tribunal. 1. $15,620 being a refund of monies paid under the contract and 2. $2320 being the damage bond paid to Great Lakes Council and 3. $514 being the cost of the AWL report and 4. $2199.84 being the cost of the temporary fencing. The Tribunal is satisfied that the applicant is entitled to a refund of the amounts paid to date under the repudiated contract
3. The Tribunal accordingly orders that the respondent pay the applicant the sum of $94,494.23 as damages for repudiation of the contract.

Costs

1. The applicant has been successful in this claim. She should provide short submissions as to costs by 15 March 2019. Any submissions in reply should be made by 29 March 2019. The submissions of each party should address whether the decision as to costs can be made on the papers or whether a further hearing is required.

Orders 1. Blue Haven Pools South Pty Ltd is to pay Christine Maloney the sum of $94,494.23 on or before 22 March 2019. 2. Christine Maloney is to give to the respondent and the Tribunal submissions as to costs by 15 March 2019. 3. Blue Haven Pools South Pty Ltd is to give to the applicant and the Tribunal submissions in reply by 29 March 2019. 4. The submissions of each party should address whether the decision as to costs can be made on the papers or whether a further hearing is required.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 May 2019