Murphy v Zubkrycki & Anor - [2020] NSWDC 538 - NSWDC 2020 case summary — Zoe

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Murphy v Zubkrycki & Anor

[2020] NSWDC 538

District Court of NSW|2020-09-10

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Source facts

Court

District Court of NSW

Decision date

2020-09-10

Source

Original judgment source is linked above.

Judgment (26 paragraphs)

[1]

INTRODUCTION

The defendants are partners in a building and construction business which was licensed to perform residential building work. The first defendant was the nominated supervisor and carried a builder's license. The secondary defendant performed a more subsidiary role. I will refer to the first defendant henceforth as 'the Builder'. In December 2014, the defendants purchased a vacant property situated in Castle Hill (the 'Property') from a developer as part of a sub-division. They became the registered owners of that property in March 2015, and in June 2015 they obtained development consent to construct a dwelling on that land. They proceeded to construct the dwelling.
Subsequent to that construction, on 21 February 2016, the defendants entered a contract to sell the Property to the plaintiff (the 'Owner') for the sale price of $1.865m. An occupation certificate was issued in relation to that dwelling. Completion occurred in April 2016.
By her statement of claim filed on 7 June 2019, the Owner brings a claim for damages against the defendants for breach of the statutory warranties implied under ss 18B and 18C of the Home Building Act 1989 (NSW) (the 'Act') arising from the construction of the dwelling. In this regard, she invokes those warranties on the basis of her entitlement, as successor in title, to the benefit of those warranties. She alleges that the construction works that were performed breached the implied warranties and were defective. In her pleading, she contended that the defects were apparent in the side retaining wall, the rear retaining wall and the window in the main living area, but at trial, her case was narrowed to that of the defective construction of the side retaining wall.

[2]

[3]

The issues as narrowed

During his Opening, Counsel for the Owner indicated that the claims in respect to defects concerning the rear retaining wall and window were abandoned. Further, he accepted that if the Builder did not build the side retaining wall, the defendants would not be responsible for the rectification costs for replacing it. The Owner claimed damages for rectification costs for the sum of $167,000 and also an award for distress and loss of amenity.
Counsel for the defendants opened his clients' case accepting that the retaining wall had collapsed. Further, he did not dispute that if the Builder had constructed the wall, then its collapse was the result of breach of one or more of the pleaded implied statutory warranties. But the defendants' case was that the Builder did not build the wall, that their case was supported by contemporaneous documents and, also, by the circumstance that it would have been unlawful for him to have done so. If that was not accepted, then the rectification works carried out exceeded what was reasonable and necessary and, in particular, in view of a proposal that had been provided to the Owner. The rectification work that was performed constituted a 'betterment' for which the defendants were entitled to a credit. The defendants further raise a legal question whether if the Builder did perform the work, it was not as part of the residential work to build the dwelling and therefore the implied statutory warranties did not apply.
The issues identified by the parties are: 1. who built the side retaining wall; 2. who is responsible for the rectification costs; 3. whether the scope of actual rectification works performed was reasonable and necessary; 4. the quantum of rectification costs; and 5. whether, in addition to rectification costs, the Owner is also entitled to damages for distress and loss of amenity.
I flagged with Counsel after the parties' Counsel's opening addresses that to the extent that there was disagreement as to quantum of rectification costs, whether that particular issue should be the subject of referral.

[5]

Mr Milne's evidence

Mr Richard Milne is the registered proprietor of premises at Castle Hill which shares a boundary with the Property. He has owned his premises since September 2002.
Mr Milne deposed that prior to construction works being undertaken by the Builder, there was a rock wall and a row of trees along the boundary between his property and the Property. Part of that rock wall had been removed by the developer to allow for the construction of a private road. This was months before December 2014.
Mr Milne deposed that the construction of the dwelling on the subject property was undertaken by the Builder. He had contact with the Builder in early 2015 in relation to the removal of the tree. Mr Milne was challenged about this evidence under cross-examination but he adhered to this. It was suggested that the first conversation that Mr Milne had with the Builder only occurred in June 2015 and that Mr Milne had confused the Builder with someone else. Mr Milne flatly rejected that proposition.
Subsequently, Mr Milne deposed that he had observed the Builder working on the retaining wall. Under cross-examination, he recalled that this probably occurred in January 2015. This involved the removal of the rock wall between his premises and the Property. He also observed him building a wooden retaining wall on about the boundary. The construction of the retaining wall took less than a week. He also observed that after the retaining wall had been constructed, the Builder used machinery to level his site; which included placing backfill behind the retaining wall. In relation to these works, Mr Milne did not notice anyone else being involved. Mr Milne was challenged on this evidence as to what the Builder had done but he adhered to his evidence. It was suggested that the Builder had only said in Mr Milne's presence that he would be willing to oversee the rectification works. Mr Milne also recalled him saying that he would pay for the wall as well.
He recalled multiple conversations with the Builder during these works. He recalled that the mechanical equipment that was used was sizable and he recalled that the Builder did the work himself.
Mr Milne recalled that in March 2017, following a number of days of heavy rain, the wooden retaining wall failed.
Mr Milne also deposed to being privy to a number of conversations between the Builder and the Owner in which, on more than one occasion, the Builder said words the effect that he would organise the restoration, get quotes and ensure that the work was done properly.
A letter written by Mr Milne dated 4 October 2017 (Exhibit B, p 309) was annexed to Ms Murphy's affidavit. Mr Milne was not challenged as to its authenticity or content. The letter contained two material assertions: first, that he saw the Builder build the retaining wall. Secondly, the letter referred to an annexed photo. Inexplicably, the photo was not attached to the letter in the annexure in Ms Murphy's evidence. At any rate, the second point was that, according to Mr Milne, the developer had left the rock wall, and a row of trees along the boundary, but the Builder had removed all the trees along the boundary, the remaining sections of the rock wall and then installed the (now failed) retaining wall.

[6]

Ms Murphy's evidence

Ms Murphy swore two affidavits, being those of 26 November 2019 (the primary affidavit) and 1 September 2020. The second dealt with costs of rectifications and may presently be put to one side.
The Owner entered into occupation of the Property on or about 1 May 2016. Her evidence was substantially directed to establishing what the Builder subsequently did after the collapse of the wall.
She said that after returning from an overseas trip in March 2017, she was informed by the gardener, Mr Daniel Wilson, that the retaining wall between the Property and the adjoining property (owned by Mr Milne) had collapsed. She says that after having been alerted to this information she observed broken and detached pipes, and sewage spelling out of broken pipes. She said that she saw the retaining wall had collapsed onto Mr Milne's property, pulling up and breaking the sewage and stormwater pipes. She took a number of photographs of the collapsed retaining wall on or about 23 March 2017.
The Owner sent a text message (at 12:32 pm) to the Builder (she had not met and did not deal with the second defendant), which contained a photograph and stated underneath: "The retaining wall has failed Chris… Storm water pipes disconnected… Can u come over asap… This needs to be fixed urgently".
The Owner deposed to the Builder attending the Property at about 10:45am and affecting temporary repairs to the plumbing to stop the sewerage running into the debris from the collapsed wall. The Builder promised to return to the property with an excavator to remove the surplus fill and start fixing the collapsed wall, however he did not do so.
The Owner deposed that the Builder returned to the Property at the end of last week of March 2017 and had indicated to her that he did not build the wall, but rather, had said that the developer of the land had built it before he had bought the land. In response to this, the Owner indicated that she did not care who built the wall but it was the Builder's responsibility to make sure that it was structurally sound. She asserted that he was responsible for fixing it. She then showed him the laundry which had been flooded.
They then went outside to look at the area near the laundry at which time, the Owner recalled, her neighbour (Bina) approached them both. She deposed that the Builder explained that the laundry had flooded and the builder of the adjacent property had not put enough drainage on his side of the retaining wall on that side of Bina's home.
The Owner asserts that the retaining wall on the side of the adjoining home, where the laundry was situated, was of identical construction, in materials, to the retaining wall that had collapsed.
In about the middle of April 2017, after the Owner had unsuccessfully made a claim on her house insurance policy, the Owner received a report from the firm Stubbs Cruickshank Consultants. Thereafter, she had a conversation with the Builder in which she deposed to him saying that he did not have the money to fix the defects.
The Owner deposed to a range of communications with the Builder over the following months in which he promised to undertake rectification works, but this was all to no avail.
It was put to Ms Murphy, but she denied, that the Builder had merely 'assisted' her to bring an insurance claim and with the DA process required to replace the retaining wall.
In July 2017, the Builder informed her that he had received engineer's drawings. She identified those as being the drawings included in the Builder's affidavit (Exhibit B, pp 17-18). Contrary to his evidence, she said she was not supplied with the Art of Growing Landscape quote dated 10 August 2017. That quote appeared to be directed to the Builder's email address.
Eventually, she deposed she had to arrange for the replacement of the collapsed wall and to that end she engaged the firm JC Concrete Services Pty Ltd ('J C Concrete'). She accepted that she had not passed that quote on to the Builder.
It was put to the Owner, but disputed by her, that the Builder did not indicate, in July 2017, that he would undertake building works whilst she travelled overseas for a month. She also maintained her evidence that he said he would obtain quotes.
The Owner received a quote from Invision Landscape Design dated 6 August 2017 indicating the amount of $139,854 in relation to the removal and disposal of the existing retaining wall, the removal and disposal of the existing pavers, and the installation of a new treated pine sleeper retaining wall.

[7]

Mr Zubrycki's evidence

Mr Zubrycki prepared two affidavits. The second was responsive to the Owner's evidence on rectification costs so may be put to one side.
The Builder deposed that at the time that he and his wife purchased the subject property on 1 December 2014, there was a stone wall running along half the length of the adjoining premises. This was, he deposed, of concern to him since he had previously asked the vendor's agent that the lot would be graded and completely flat.
It was put to the Builder that by the time he exchanged contract for the purchase of the Property on 1 December 2014, the developer had finished the work. The Builder maintained that there were still signs of work to be done. He accepted, however, that the rock wall had been removed so as to permit a roadway entrance.
It was put to the Builder that he built the subject retaining wall in January 2015. It was suggested that he was receiving mail from the address for the Property from that date. It was also suggested that from December 2014, he effectively had possession of the site, had known what type of dwelling he wanted and was keen to construct a dwelling as quickly as possible so that he would be in a position to re-sell the Property and take advantage of the market. Whilst the Builder accepted that he did not want to 'muck around', he did not accept that he had possession since December 2014. At any rate, the Builder did accept that the retaining wall was not in place as at December 2014. He did not accept that, as at December 2014, he was bent upon a quick re-sale. This evidence was later to be in some conflict with the evidence of Mrs Zubrycki.
The Builder denied that he built the side retaining wall in January 2015 in haste and with the mindset of maximizing the block, and that all the developer had done was to deliver a flat block of land. He denied carrying out works that he knew were illegal.
It was put to the Builder that he had several conversations with Mr Milne from the time he and his wife exchanged contracts in December 2014 and through January 2015, including about taking out a tree. The Builder denied having conversations with Mr Milne at the time.
The Builder deposed that, on 1 March 2015, he attended the Property and noticed an excavator machine on the land. He said that he could see a wall been placed on the boundary between the Property and the adjoining premises (owned by Mr Milne). He also observed a timber retaining wall being built along the entire boundary between the two properties and that the site have been levelled. These observations were made prior to completion of the sale of the Property to himself and his partner.
A photograph of the site was taken and annexed to the Builder's primary affidavit (Exhibit B, Vol 1, p 13). The photo itself bore the inscription "1 March 2015 8:11am", but following objection, the photograph was admitted subject to the restriction that the date and time inserted was not admissible to prove the truth of that particular recording.
In April and May 2015, the Builder and his wife commenced preliminary works for the proposed instructions of the new dwelling on the subject property. Approval for the construction was received in about the middle of May 2015, works commenced in or around June 2015 and the construction of the dwelling was completed by February 2016. It was on 21 February 2016 that the defendants entered the contract for sale with the Owner.
At about that time, on 24 January 2016 a letter was sent to the Council purporting to be written and signed by Mr Milne (Exhibit B, p 335). It concerned the side boundary fence. The content of the letter was not material to the events subject of this proceeding, save for the circumstance that Mr Milne disavowed any knowledge of the letter. Indeed, Mr Milne said that he disagreed with its contents and that he did not sign the letter.
The Builder was referred to this letter in cross-examination. He accepted that he did not speak to Mr Milne about the letter, but only had referred to an exchange with Mr Milne's son. He accepted that he had drafted the content of the letter and recalled that the letter (purportedly signed by Mr Milne) was returned to him to be forwarded to the Council.
The Builder accepted, under cross-examination, that as the qualified builder and nominated supervisor for the works, he was responsible for complying with not only the terms of the development consent, but also applicable regulations and the BCA. He accepted he was aware of the terms of the development consent.
The Builder deposed to receiving a text message and telephone call from the Owner on 17 March 2017, concerning the collapsed timber retaining wall between the property and the adjoining premises. It was suggested to him in cross-examination that the Owner had explained that the tree had been removed and that the retaining wall was in danger of collapsing. He partially responded to this by saying that he did not recall her referring to a danger of it collapsing.
The thrust of his evidence was that a large Chinese elm tree had been removed after he and his partner had sold the property to the Owner, and that when the Builder returned to the property he saw that the gutters were almost fully blocked with leaves, and he also found large amounts of compaction of the tree leaves within the storm water drainage system. He deposed to informing the Owner that he did not build the retaining wall and that the developer had built wall prior to his and his partner's purchase of the land.
Under cross-examination, the Builder was referred to a photo of the area sent to him at about 12:32pm on 23 March 2017. He did not dispute receiving it. It was suggested that when he received a call from the Owner he had said to her that "this is the call I didn't want to get." He denied saying those words.
He deposed to 'assisting' the Owner in relation to the repair of the wall. This was demonstrated when he contacted his engineer, Mr Rick McCarthy of Residential Engineering, to see if the latter could provide a design for the retaining wall. He deposed to a difference of view as to whether the retaining wall should be replaced by something similar or something different. He also deposed to assisting the Owner in obtaining a couple of quotes for the replacement of the wall.
It was put to the Builder in cross-examination that he had assumed a responsibility to rectify the works and understood that he was responsible. The Builder denied this. He only engaged in further communications since he wanted to help and that this was limited to being a 'project manager' of the rectification works.
It was put to the Builder that he had indicated a willingness to undertake the rectification work, but that this had changed once it became apparent that he could not get the money to do the work. To this, the Builder explained that it was not uncommon for a 'project manager' to make payments on behalf of a client and then obtain reimbursement through a progress payment.
The Builder was referred to a text message of 20 April 2017 (Exhibit B, Vol 1, p 297). Despite apparently clear contextual indications that the message was sent by him to the Owner, the Builder appeared strangely reluctant to acknowledge the text. In it he appeared to promise the Owner that he would submit a DA in relation to the rectification work. This, he said, was consistent with his role as a mere project manager. He, after all, was a plumber. He was referred to another text message of 2 May 2017 (Exhibit B, Vol 1, p 302) in which he indicated that he was waiting to receive quotes from contractors.
The Builder gave evidence that he obtained quotes for the replacement of the retaining wall. One of those was from 'Art of Growing Landscaping'. He did not in terms say that he supplied these to the Owner. It was put to the Builder that he did not supply them.
It was generally suggested that the Builder indicated that he would rectify the works but that this changed once he thought the potential expense and he realized that he could not afford it. He was referred to one text message he sent which had foreshadowed a possible need for him to get an overdraft should he not be in a position to finance the works from the proceeds of the sale of another property. It was suggested that he would never have had to obtain an overdraft if he had not intended to perform the works. The Builder disputed these propositions: small businesses commonly obtain overdraft facilities, the Builder said.
The Builder deposed to being surprised when he received a letter of demand from the Owner on 16 September 2017.
He did not regard himself as being responsible for the alleged failure but deposed to being sympathetic to the Owner's situation and he had further offered his services as a plumber to reduce the scope of the rectification works.

[10]

Mr O'Mara

Mr Greg O'Mara is a building consultant. He gave evidence for multiple purposes, including the reasonableness of the 'Art of Growing quote' which the Builder said he supplied to the Owner.
On the present question, he opined that the retaining wall was constructed prior to 3 February 2015. He partly reasoned this view (referred to at paragraph 8.1.5.3 of his report) on the basis that the complying development certificate of 24 June 2015, which followed after the subdivision, did not refer to the construction of a retaining wall. To the contrary, architectural drawings referred to an 'Existing Retaining Wall'. That suggested that the no work had been carried out following the subdivision dated 3 February 2015. That being so, he surmised that the retaining wall and site levelling was carried out by the developer of the subdivision.
The principal documents which Mr O'Mara referred to comprised, firstly, an architectural drawing for the construction of the dwelling (drawing S136, Exhibit B, Vol 1, p 179) referred to an 'Existing Retaining Wall'. On its face it purported to be dated 'Dec 2014', however the version in evidence before the Court was that which appeared to be the version referred to in the Complying Certificate issued on 24 June 2015. Later, during the time when evidence was given by the experts concurrently, Mr Joannides, the Owner's expert, opined that it was not uncommon for drawings to show items that had not been built.
This drawing was reproduced in the contract for the sale between the Builder (and Mrs Zubrycki) and the Owner.
A drawing prepared by the engineering firm 'Storm Civil Engineering Solutions' (drawing S3) dated 19 May 2014 indicated a proposal to construct a mass rock retaining wall. Details of the rock retaining wall were set out in drawing S9.
Mr O'Mara was questioned about his assumptions for this opinion. He accepted that his opinion derived from documents produced on the Council's file and instructions supplied to him. He could not exclude the possibility that someone other than the developer, including the Builder, built the wall.

[12]

The defendants' submissions

The defendants rely upon contemporaneous documents, and say that the accounts of Mr and Mrs Zubrycki, and Mr Iezza, were more consistent with what those documents disclosed than the Owner's case, which was heavily reliant upon Mr Milne's evidence.
In relation to the documents, the defendants cited the engineering documents that were part of the subdivision, including the construction of a mass rock wall. Although it did not strictly accord with the plan, Mr O'Mara's evidence was to the effect that a treated pine sleeper retaining wall had been constructed. The plans indicated that the developers were responsible for the construction of the retaining wall. Events in September and November 2014, which established that the land was being levelled, was consistent with the developers doing the work. On 1 March 2015, when the Builder took a photo, the subdivision showed a retaining a wall and there was security fencing. Further, until completion of the contract with the developers, which occurred on 10 March 2015, the Builder could not lawfully access the site. As at March 2015, there were no approvals or consent documents created in April and May 2015 which indicated that a retaining wall was already in place by that time. They could not have lawfully undertaken the works until 24 June 2015.
The defendants contend that Mr Milne's evidence, that the developer had completed its works in November 2014 and that the Builder undertook further works in January 2015, conflicted with the above evidence and must necessarily have been unreliable. Further, a finding that the Builder did undertake works prior to completion of the purchase in March 2015 necessarily imputed unlawful conduct to the Builder. This was a serious allegation and particularly in circumstances where it would also have entailed the consequence that the developer would have allowed the retaining wall to be constructed prior to completion, given the potential penalty to the developer if the works were undertaken contrary to the plans for the subdivision. The Owner did not call the developer to say that such consent was given to the Builder to erect the wall prior to completion.
The Builder's evidence about the photo he took on 1 March 2015 (showing the retaining wall and the ringed security fence) may have been challenged, but no attempt was made by the Owner to prove that it was anything but authentic. It was supported by Mr Iezza's evidence to the effect that he attended the site around March 2015 and attested to the security fence and impeded access. That evidence was unshaken. Further, Mrs Zubrycki's evidence that no money was budgeted to complete a retaining wall was consistent with that not being part of the approved works.
Further, whatever was conveyed by the texts which the Builder sent to the Owner after the wall's collapse, the Court could not simply reason from any proposal by him to pay for rectification that he had in fact built the wall. The Owner had accepted that he had declared in March 2017 that he had not built the collapsed wall. He was merely offering to project manage the rebuilding of the wall and to assist the Owner with her insurance claim.

[14]

Credit

I considered that Ms Murphy was both credible and reliable; if somewhat agitated when Mr Zubrycki's version of conversations was put to her in cross-examination. She was careful in her answers and appeared to listen intently.
I also found that Mr Milne was both credible and reliable. He was precise in his recollections and was unshaken under cross-examination.
I did not find Mr Zubrycki to be a satisfactory witness. Very often he gave non-responsive answers which verged on being argumentative. At certain points, I felt he was anxious to advance explanations with a consciousness of advancing his own interests. When confronted with certain text messages, he gave implausible evidence disclaiming that they were his, or that he had seen them. When it came to the subject of renovation works and his account of his role, I perceived that he was engaging in reconstruction. An example of his engaging in reconstruction occurred with the photograph which, in his affidavit, he identified as having taken at 8:11am on 1 March 2015. When he was challenged on that evidence, and when it was suggested that his phone could not have generated that date and time inscription, he weakly stated that he was only "going by what I have."
Unconvincingly, he sought to minimize his expertise as a sort of part-time builder and that his main expertise was in plumbing.
Further, I do not accept his evidence about the letter to Hornsby Council dated 24 January 2016. I do, however, accept Mr Milne's evidence about it. That being so, the only explanation (absent the extremely improbable possibility that Mr Milne's son signed it for him without his father's knowledge) was that Mr Zubrycki had somehow procured a forgery of the signature. This was plainly discreditable conduct.
For all of the above reasons, unless corroborated by the evidence of other witnesses or consistent with objectively provable facts, I do not accept his evidence at face value.
Mrs Zubrycki and Mr Iezza both struck me as being honest witnesses.

[15]

Factual findings

It should be apparent that in the central factual conflict between the evidence of Mr Zubrycki and Mr Milne, I generally would prefer Mr Milne's evidence. In the specific context, his evidence of the retaining wall being built in early 2015 (what was later clarified as January 2015) is plausible. The timing of its being built in January (and at least prior to 10 March 2015) was supported by other witnesses. His identification that it was built by the Builder was also plausible. Plainly, he knew the Builder. There was no 'constitutional' defect in the reliability of his recollection. Although he swore his affidavit in February 2020, at least 5 years after the subject event, there were in fact, a combination of events which were likely to leave a distinctive impression: it was not only the circumstance that he recalled the Builder installing the retaining wall, but that this event occurred in combination with his removal of trees and the removal of the rock wall, extending a third to half the way down his driveway. Having removed one, plainly there was reason for the Builder to erect another. These were no ordinary events for a neighbour in Mr Milne's circumstances. Further, Mr Milne had actually written a reference in October 2017 indicating that he had seen the Builder construct the wall, in circumstances where he had removed trees and the remaining section on a wall on his property before constructing the now failed wall (Exhibit B, p 309). This was consistent with his affidavit evidence. The written reference also indicated that the retaining wall had not been built by at least 7 December 2014. The Builder accepted in his evidence that the retaining wall had not been in place in December 2014. Mr Milne was not challenged on the correctness of any part of that letter under cross-examination. Mr Milne's evidence was powerful.
Secondly, though he said that he had verbally disclaimed responsibility for having built the wall to the Owner (although see my next point below), the Builder's actions in 2017 spoke louder than his words. I agree with the submission advanced on the Owner's behalf that a 'project manager' (the expression he devised under cross-examination but not deployed by him in the Builder's affidavit) does not ordinarily offer to pay for, or personally raise loan finance for the purpose of financing such rectification costs. This aspect of the Builder's evidence was especially implausible. The evidence of the Builder's actions went well beyond the characterisation of his acting gratuitously to vaguely 'assist' the Owner because he felt sorry for her. This conduct after the collapse of the wall was another powerful indication that it was the Builder who built the wall.
Thirdly, noting my general preference for her evidence over the Builder, I find also that the Builder did say to the Owner that "this is the call I did not want to get". That statement, viewed in context of his responding to the Owner's reference to the collapsed wall, which preceded the statement, was an implied admission that he built the wall.
I will now address the main points advanced on the Builder's behalf in his defence.
First, the photograph which the Builder identified as being taken on 1 March 2015, and the evidence of Mr Iezza, which spoke of a security fence being present in that month is not incontrovertible evidence against the possibility of the retaining wall being performed in January 2015. The fence in the Builder's photograph did not appear to be all encompassing in the region where the retaining wall would have been exposed. In other words, even if I was to accept the photograph of 1 March 2015 as authentic and if I was to accept Mr Iezza's evidence of his site visit, I do not find that their evidence precludes a finding that the Builder constructed the wall prior to completion on 10 March 2015. Further, contrary to the Builder's evidence, I find that it would have been unlikely that he would have exchanged contracts with the developer if the latter had not substantially completed the construction works.
Secondly, as was submitted by Counsel for the Owner, the knowledge and involvement of the developer in what this Builder did prior to completion was not the subject of evidence and cannot be the subject of speculation.
This raised a broader point. By his Defence, the Builder denied that he constructed the side retaining wall. It has always been his case that the developer built it. The Builder and the Owner agree that in 2017, after it had collapsed, the Builder had declared to the Owner that the wall was built by the developer. Strictly speaking, the Builder should have pleaded in his Defence that the developer built the wall (as per the requirements of rule 14.14 of the Uniform Civil Procedure Rules 2005 (NSW)). This, however, is a matter more of form than of substance in the circumstances of the case. The point is that on the substance of his Defence, an evidentiary onus fell upon the Builder to establish that the developer built the wall.
To discharge that onus, aside from giving evidence himself denying that he built the wall, the Builder also adduced evidence to prove that the developer was responsible for building the wall. From this he asked the Court to draw the inference that the developer built it, without calling the developer to testify to that fact. However, in my view, when considering the evidence in the case as a whole, the responsibility for building the wall is not conclusive in circumstances where, as Mr O'Mara accepted, it was possible that someone else other than the developer built it. It might, for example, have been built by a sub-contractor (subject to Mrs Zubrycki's evidence, considered below). It might also have been Mr Zubrycki, himself a licensed builder. The latter possibility is accentuated where, as the Owner argued, the Builder had a motive to get the task of completing the wall along with the construction of works on the Property expeditiously, so as to be able to effect a re-sale for profit, which was, Mrs Zubrycki accepted, the predominant purpose of her and her husband's purchase of the Property.
I do not consider that I can draw an adverse inference against the Builder for failing to call the developer to give evidence simply because it was the Builder's case that the developer constructed the wall. This was because, aside from the Builder's own evidence, there were documents which, as the Owner's counsel submitted, plainly indicated the developer's responsibility in that regard and it may be difficult to say that the developer could have been in the Builder's 'camp'. Nevertheless, an evidentiary vacuum remained, as to whether irrespective of its responsibility, the developer did in fact construct the wall. This vacuum could have been filled by the Builder in a way that might have been to his clear forensic advantage. There was no explanation why or how that evidentiary vacuum could not have been filled by the party who would benefit from calling it. In such circumstances, I consider it is appropriate that inferences available to support the Owner's case from the matters referred to in paragraphs 101-103, above, can be more confidently drawn where the developer, who would have been able to say whether in fact he built the wall, was not called [1] .
Even if I am wrong on the last point, the Court is not in a position to treat with submissions along the line that the developer would not likely have been ignorant of the construction of the retaining wall in January 2015 and/or would not have knowingly permitted that retaining wall to be performed at a time prior to completion of its contract with the Builder and when the Builder would have been uninsured and therefore engaged in illegal works.
Thirdly, I do not attach any real weight to the circumstance that one of the engineering drawings, depicting the developer's responsibility to construct a retaining wall or even the presence of an existing retaining wall, was included within the documents annexed to the contract for sale to the Owner. At the time of the contract of sale with the Owner, there was no doubt that a side retaining wall had already been erected. There was no occasion for the Owner to consider who was responsible for erecting it.
Fourthly, the evidence of Mrs Zubrycki assisted the Builder, but only to a very limited degree. I certainly accept that she was confident in her capacity to monitor costs, but in my view she was at least partially reliant upon information supplied to her by her husband, the Builder, and more than she was willing to acknowledge. She was employed as a nurse at the hospital. When asked in her evidence about her role in the construction works, it appeared to me to be less extensive than she depicted it in her affidavit: she referred in her evidence to the assistance she rendered with the book-keeping and the choice of paints and colours. She accepted under cross-examination that she did not attend the site "a lot". She said her budget did not allow for incurring expenditure on a contractor to erect a retaining wall. But she did not say that her husband was incapable of engaging in that work himself and, although she had the opportunity to consider it, she did not respond in her affidavit to Mr Milne's affidavit evidence (from February 2020) that this is what her husband had in fact done.
Fifthly, I acknowledge Counsel for the defendants' submission that to find that the Builder engaged in the work would also require a finding to be made that he did so whilst uninsured and therefore engaged in unlawful works for the purpose of s 96 of the Act. However, the allegation that the Owner was required to prove, to the requisite standard, was that the Builder constructed the retaining wall as part of its case that the Owner was entitled to damages for breach of statutory warranties to which she was a beneficiary. That itself is not an inherently grave allegation. It was, in other words, unnecessary for the Owner to plead and prove that the Builder committed a statutory offence. What the Builder is referring to is the grave consequence of a finding that he built the wall. But when assessing the probabilities of the occurrence of a factual finding, the gravity of the consequences flowing from a particular finding turns in large measure upon the Builder's perception that his conduct might carry those consequences. There is little or no evidence of the Builder's perception of the consequences of what might flow from building the wall; or, for that matter, any real evidence of his past background as a builder and his subjective awareness of provisions such as s 96. Had he given evidence to that effect, he might have been challenged under cross-examination.
As noted in the section on credit, I found that the Builder had procured a letter not written by Mr Milne and containing an apparently forged signature which appeared in the Council's records. The nature of that conduct is not, in nature, inconsistent with a Builder proceeding to do a work whilst uninsured and therefore illegally. Both instances of conduct show a preparedness to cut corners in order to achieve a desired result. At any rate, even if I am wrong in the comparison, I am prepared to accept that the grave consequence of the finding means that I must exercise care in evaluating this aspect of the evidence in light of the whole of the evidence and the ultimate question of whether the owner has made out her case on the balance of probabilities.
Weighing, as I have, the totality of the evidence, including the fact of the developer's responsibility for building the retaining wall, on the balance of probabilities, I find that the Builder constructed the retaining wall.

[16]

Responsibility for rectification costs

The Owner relies upon s 18C(1) of the Home Building Act. By that provision: "A person who is the immediate successor in title to an owner-builder, a holder of a contractor licence, a former holder or a developer who has done residential building work on land is entitled to the benefit of the statutory warranties as if the owner-builder, holder, former holder or developer were required to hold a contractor licence and had done the work under a contract with that successor in title to do the work."
It is not disputed that the Owner is entitled to the benefit of such statutory warranties in s 18B as subsist.
But by his pleading the Builder contends that the warranties only run in relation to residential building work. The erection of a side retaining wall in this case was not, the defendants pleaded in their Defence, 'residential building work' within the meaning of Schedule 1, clause 2 of the Act, which defined the expression, in a complex fashion, by reference to a general definition (sub-cl 2(1)), followed by specific inclusions (sub-cl 2(2)) and then exclusions (sub-cl 2(3)) and qualifications to exclusions (sub-cll 2(4)-(6)). The general definition in sub-clause 2(1) is in the following terms: "residential building work" means any work involved in, or involved in co-ordinating or supervising any work involved in-- (a) the construction of a dwelling, or (b) the making of alterations or additions to a dwelling, or (c) the repairing, renovation, decoration or protective treatment of a dwelling."
"Dwelling" is defined in cl 3 of the same Schedule. It is not disputed that the house that was built by the Builders on the Property satisfied this definition.
During his closing address, Counsel for the Builder altered position and accepted that if I found that the Builder had constructed the retaining wall, then the Court would find that it constituted 'residential building work'. I consider that this concession was fairly made. This was so notwithstanding that, on the findings I have made, the construction of the wall occurred in January 2015, even though the work was then uninsured and consequently illegal. For the construction of the wall to be 'involved', within the plain and ordinary meaning of that term, in the construction of a dwelling, it is sufficient that it is implicated in the construction of a dwelling. Put another way, the question is whether the construction of the side retaining wall would have been done without (or 'but for') the construction of a dwelling (or the other possibilities set out in the clause). It does not matter, for this purpose, that the (legal) construction of the dwelling was to follow, in sequence, the (illegal) construction of the wall. There is no temporal requirement in the clause and there is no suggestion that the work has to be lawful. The exclusion in cl 2(3)(f) is not engaged since, as at January 2015, the defendants (as a partnership) were a licensed contractor (license number 243263C).
In my opinion, having found that the Builder constructed the retaining wall, it would not have been constructed otherwise than for the purpose of the construction of the dwelling and accordingly it falls within sub-clause 2(1)(a). It was 'residential building work'.

[19]

Expert evidence

The Owner did not call evidence as to the reasonableness or necessity for the rectification work that was actually carried out. Her expert, Mr Joannides' evidence was directed to the causes of the collapsed wall. The Builder did call some expert evidence.
In his first report, Mr Keighran (at paragraph 12.3) opined that it would have been possible to reinstate the damaged section of the log retaining wall and demolish and reconstruct only the timber plank wall, to a properly engineered design. It would not, however, have significantly increased the cost overall by replacing the two walls with one high wall, as Residential Drawings had designed.
The Builder also relied upon supplementary expert evidence from Mr Keighran (4 September 2020) and Mr O'Mara (9 September 2020) in relation to the rectification works undertaken. There was no evidence in response concerning the electrical or plumbing works associated with the replacement of the retaining wall.
That supplementary evidence was prepared after the Owner had belatedly served her second affidavit (1 September 2020) and was admitted without objection by the Owner.
Mr Keighran opined (paragraph 5.5-5.6) that the newly constructed wall was contrary to certain details in structural engineering drawings which the Builder had procured from the firm 'Residential Engineering' in or about July 2017; especially in the sense that the walers were concrete, rather than timber, and stacked with vertical, rather than horizontal, width.
Mr O'Mara said he was also asked to opine on whether the construction accorded with the drawings of the Residential Engineering, or with the works the subject of the Art of Growing Landscaping quote which the Builder had obtained on 10 August 2017 (which the Owner had said she had not been supplied with).
Mr O'Mara interpreted the J C Concrete reference to installing a 'new retaining wall in concrete panels as to Aussie concrete products' by reference to a standardised retaining wall system applicable to walls up to a set retained soil height. He was unable to carry out a cost evaluation exercise viz a viz the cost of installing a steel post and pre-cast concrete sleeper/waler retaining structure in comparison with installing the treated pine retaining wall improvements. This, he considered, amounted to an unjustified 'betterment' in the construction of the wall.
Neither expert was challenged on their evidence when they gave evidence concurrently.

[22]

Findings on scope of works

I find, firstly, that the electrical and plumbing works performed were reasonable and necessary. There was no suggestion that they were not.
The Owner is entitled to receive costs of rectification that would, effectively, have put her in the position as if the Builder had constructed the retaining wall in a proper and workmanlike manner. This was one of the warranties that were breached. But another warranty that was breached was that it be performed in accordance with plans and specifications. The only plans and specifications about the wall in evidence were those in respect to which the developer had a responsibility for constructing.
The Bellgrove test posits that actual rectification costs are the basic measure of damages but that is qualified in the sense that the costs are necessarily incurred to bring about conformity with the contract and that the works undertaken are a reasonable course to adopt to bring that result about. The Builder has gone into evidence that puts into play those (two) qualifications. The Owner did not adduce evidence to contest that those qualifications arose.
A difficulty for the Court is that the parties' arguments were directed to the reasonableness of the works not by reference to the plans and specifications of the retaining wall that the developer agreed to construct, but by reference to (a) the engineering drawings which the Builder procured only after the wall collapsed in July 2017; and (b) the works described in, and ultimately carried out in accordance with, a quote from J C Concrete dated February 2019.
There was no direct evidence that those engineering drawings from July 2017 substantially corresponded with what the developer was required to do. Nevertheless, it has not been suggested by the Owner that the engineering drawings supplied to her in July 2017 were not appropriate to bring about the result that a side retaining wall could be constructed that was proximate to what the developer was supposed to construct. It was not suggested that the works proposed in those drawings would provide a 'doubtful remedy' of the kind discussed in Bellgrove (at 620). I find that they were proffered at a time (in July 2017) when the Builder still expected that he had, or would obtain the capacity to meet the cost of those works being performed. The affidavit evidence of both the Owner and the Builder showed that certainly up to July 2017, they were co-operating to rectify the wall. There was no expert evidence adduced by the Owner to indicate that the engineering drawings of July 2017 would not have substantially corresponded with what the developer was required to do under the contract. This is not a case, in other words, where the Owner had no reasonable choice but to repair the works in the manner indicated by the J C Concrete quote.
As Mr O'Mara remarked in his supplementary report, there was no reference in the J C Concrete quote to any structural design. Further, that expert could not locate any literature to support the retaining wall system similar to that which was implemented.
I do not accept the submission that it was not unreasonable for the Owner to reject what was offered simply because the Builder did not accept responsibility for having constructed the wall. There was, in fact, no evidence from the Owner as to why she did not proceed with the 2017 engineering drawings as the basis for the rectification works. But even if she had rejected them on the basis that her Counsel submitted that she had, her position would have represented a subjective response by the Owner that paid no regard to the objective merits of the drawings.
Neither of the Builder's experts contends that the work actually undertaken did not bring the work into proximate compliance with the developer's responsibility. Mr O'Mara's point was that the works led to an actual improvement and, to the extent that there was improvement, the Builder should be credited with the 'betterment' of the wall.
That being so, the Court is presented with two prima facie reasonable alternatives to the works. In such circumstances, the principles I have referred to suggest that the Court should endeavour to choose that which most closely achieves the contractual objective. In my opinion, if one thing is clear, it was not necessary to conform to the contractual objective that concrete walers were to be applied to the wall, as was done. That was out of proportion to what was intended in the developer's promise to the Builder.
I prefer the view of Mr O'Mara, as expressed in paragraph 4.3 (substantially based upon the reasoning in paragraph 6.2.3) of his supplementary report, which was not challenged in cross-examination, which compared the merits of the works described in the J C Concrete quote and those the July 2017 engineering drawings. As I have said, there was no expert evidence adduced on the Owner's behalf that the works performed by J C Concrete were reasonable and necessary. The Owner did not give evidence, for example, that she acted on the advice of an engineer that the J C Concrete quote was necessary to bring the requirements for the wall into line with what the developer contracted to do. In the face of Mr O'Mara's evidence, the Court is not prepared to accept that the works carried out were necessary and reasonable on the basis of the mere tender of the J C Concrete quote; particularly in circumstances concerning the Owner's (unexplained) rejection of the engineering drawings of July 2017.
I find that the scope of the building works for the replacement of the retaining wall should be in accordance with those engineering drawings of July 2017. To reiterate, the scope of the incidental electrical and plumbing work actually carried out are reasonable and necessary.

[23]

Consequences of findings on scope of works

In the light of these findings on the scope of works, there is a question as to the continued utility of a referral.
As I have noted, the Owner did not adduce evidence to support the necessity and reasonableness of the works actually undertaken. The Court has now found that the design drawings for repairs identified in the July 2017 would have been more appropriate than those of J C Concrete. Mr O'Mara has given evidence that in his view, the minimum value of the work to undertake the works in the Residential Engineering drawings was $81,580.09; which incorporated margin and overheads and GST. The Owner did not challenge that figure. Indeed, she only served evidence on the quantum of costs one week before the commencement of the hearing, contrary to what now appears to be an extant direction that leave was required from the Court to serve any additional evidence after March 2020. The Builder did not, however, object to the late service of that evidence so long as he was permitted by the Owner to rely upon the supplementary evidence of Mr O'Mara and Mr Keighran; which he was.
It follows that, at the time the hearing commenced, only one side had evidence to quantify the costs of the works which the Court has now found to be necessary and reasonable.
On one view, the Court could, in the light of this procedural sequence, make an order for the costs of rectification works to encapsulate Mr O'Mara's opinion, added to the cost of the electrical and plumbing works which I have found to be reasonable. The Owner, represented at all times by Counsel and solicitors, had full opportunity to serve her evidence on the costs of rectification, including evidence to meet the contingency, which has now arisen, that the Court might prefer the Builder's evidence as to the proper scope of the works; and that she simply assumed the risk. That the risk has materialised might suggest that she should be affixed with such evidence as there is - from Mr O'Mara - as to the quantum on rectification costs. Another advantage of proceeding in this way is to spare the parties the time and expense of further disputation. Although, of course, the quantum of the rectification costs for the appropriate scope of works is of high significance to the Owner and Builder, objectively, the sum for rectification costs is relatively small when compared to other building disputes that come before the Court.
However, I am also conscious that at an early stage of the trial, without any developed appreciation for the evidence on quantum of rectification costs, I indicated that my preference was to carve out the question of costs of rectification. In that way, it is possible that neither party pursued lines of inquiry and, unsurprisingly, Counsel for the Owner eschewed the opportunity to cross-examine Mr O'Mara on the reasonableness of his opinion as to rectification costs for the Residential Engineering drawings.
In the circumstances, I consider that it would be procedurally unfair to proceed to make findings on the costs of rectification without the referral process going ahead.
It may be that, upon due consideration, the parties may consider that it is in their mutual interests that Mr O'Mara's opinion should be accepted so that, effectively, the desirability of a referral is obviated. I encourage the parties and their legal representatives to confer to determine whether the referral should proceed.

[24]

Damages for distress and inconvenience

At the conclusion of her primary affidavit, the Owner deposed (at paragraph 44) to having been put to great inconvenience and distress in dealing with the collapse of the retaining wall (as well as other defects discovered which she eventually did not pursue at the hearing).
Leaving aside that conclusionary statement (which was not objected to), there were other indications in her evidence (see for example, paragraphs 16, 24-25, 27, 30) and her text messages suggestive of agitation and injured feelings; arising not only from her concern about damage to her own property, but also her apprehension of damage to Mr Milne's property and any prospective liability she may have for that. Her exasperation with her dealings with the Builder - and what she perceived as his excuses - was indicated also by a complaint she filed with the Office of Fair Trading (paragraph 39). Further, as I have noted, when she gave evidence, she appeared somewhat more agitated than was usual in my experience of claimants who claim they have suffered property damage.
Save for her claim of prospective loss or liability to Mr Milne, which was abandoned by the Owner during her Counsel's closing address, the Owner did not bring any claim under the tort of negligence against the Builder. Her claim is for breach of statutory warranties in respect of which she was a beneficiary.
In other words, her claim in respect to the anxiety, distress or inconvenience is to be considered in accordance with the principles applicable to claims for damages for breach of contract. Claims for anxiety, distress and inconvenience (or other injured feelings) arising from a breach of contract are exceptional. One of the exceptional categories recognised by the High Court in Baltic Shipping Co v Dillon (1993) 176 CLR 344 is where physical inconvenience has been suffered and, in that regard, for illustrative purposes, Mason CJ [4] specifically instanced (at 362-63) the situation where a plaintiff purchased property with defects not revealed in a surveyor's report and suffered vexation, distress and worry as a result [5] . That is analogous to the situation here. A further category is where a plaintiff sustained physical inconvenience as a result of the breach and subjective mental suffering relates to that physical inconvenience. The Owner does not, however, put her case on the basis of a further exceptional category, being that her injured feelings was associated with any actual physical injury she suffered as a result of the breach of warranty. If she had, then there would have been constraints upon recovery of damages for loss of that kind imposed by Part 2 of the Civil Liability Act 2002 (NSW) [6] .
Nevertheless, in my view, the injured feelings sustained by the Owner here fall within the former of the categories that I have referred to. Prior to Baltic Shipping, awards have been made in New South Wales Courts, albeit in actions for tort, in Brickhill v Cooke [1984] 3 NSWLR 396 and Campbelltown City Council v Mackay (1989) 15 NSWLR 501. But once the limitation upon recovery of that head of loss in contract is removed, there is no bar to recovery, subject to remoteness considerations, which the Builder did not suggest applied in this case.
Counsel for the defendants accepted that this head of damage was recoverable as a matter of law. He simply contended that it was not proven. As indicated, I reject that submission.
I would make allowance for the plaintiff for the sum of $5,000 for this head of damage.

[25]

SUMMARY & ORDERS

At this point, I summarise the findings that I have made in relation to the issues as follows: 1. it was the Builder who built the side retaining wall; 2. it is the defendants (in partnership) who are responsible for the costs of rectification of the side retaining wall; 3. I do not accept that the works described in the J C Concrete quotation of 7 February 2019 were necessary and reasonable in the requisite sense; 4. the plumbing and electrical works performed were necessary and reasonable; 5. the appropriate scope of the rectification works, to replace the wall, are as contained in the Residential Engineering drawings of July 2017; 6. if the parties continue to dispute the cost of rectification, then that matter is to be referred; and 7. the Owner is entitled to receive damages for the sum of $5,000 for vexation, distress and inconvenience associated with the breach of the implied statutory warranties.
The Court directs the parties, through their legal representatives, to confer with a view to attempting to resolve the outstanding question of costs of rectification, and any other remaining matters in dispute, by 9 October 2020. If agreement can be reached about all matters remaining in dispute (including the interest calculations and costs) of the proceedings, short minutes of order can be supplied to my Associate with orders to be made for disposal of the proceeding in chambers. The parties are to use the period allowed to consider, if necessary, appropriate persons to act as referee.
If the parties remain in dispute about the quantum of rectification costs, and/or other issues, by 16 October 2020 the plaintiff is to bring in, by supplying to my Associate, short minutes of order in conformity with these reasons, and to generally effectuate the referral, including the identity of the referee and other terms of the referral. The parties are also to supply short outlines of submissions (not exceeding 5 pages, excluding relevant attachments) as to the further appropriate orders or directions.
Liberty to apply is granted on 3 days' notice.

Murphy v Zubkrycki & Anor

At a glance

Court

Decision date

Source

Judgment (26 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (10)

Cited By (2)