Wheeler & Anor v Ecroplot Pty Ltd

Wheeler & Anor v Ecroplot Pty Ltd - [2010] NSWCA 61 - NSWCA 2010 case summary — Zoe

[15]

Nature of case and conclusions 4 In September 2002 Mr and Mrs Wheeler ("the appellants") contracted with the respondent building company to have a home built for them on land which they had acquired at Wagga Wagga. The home was completed in March 2003 but by late 2003 some cracks appeared in the walls and some doors were found not to be opening and closing properly. These problems increased over the following couple of years during which time investigations and some limited repairs were undertaken. On 28 February 2007, the appellants commenced the present proceedings alleging breaches by the respondent of the relevant building contract and claiming rectification costs. 5 In a lengthy judgment of 1 May 2009, S J Gibb DCJ found that whilst the respondent builder had committed breaches of contract in using too much land fill and in failing to embed the footings far enough into the natural soil, the loss which the appellants suffered was not causally related to those breaches. As a result, she directed that judgment be entered in favour of the respondent. 6 On their appeal, the appellants' contentions, as ultimately refined, were that the observed damage had been caused by the excessive land fill breach found by the primary judge and by a further breach by the respondent builder in allowing the fill to dry out before the concrete slab of the home was laid. The primary judge's finding of a breach in the former respect was not challenged by the respondent and in my view a breach in the latter respect was made out on the evidence. Further, I consider that the evidence established that the latter breach materially contributed to the damage that was suffered. 7 As it was ultimately pressed, the appellants' claim for damages was in the sum of $127,649.64 comprising rectification costs of $113,124.64 and relocation costs of $14,525. I have concluded that the need for relocation was not established and that an amount of $5,900, relating to some of the claimed rectification costs, should be deducted from the appellants' damages. The primary component of the balance of the rectification costs claimed was the cost of underpinning to embed the footings into the natural soil to the depth required by the contract (see [5] above, and [18] below, as to the breach found in this respect). The appellants did not contend that the observed damage was caused by the breach as to the footings but asserted that they were entitled to have footings embedded to the contractual depth to attempt to ensure the stability of their home. I have concluded that they were so entitled and that it is reasonable for the appellants to incur the cost of underpinning to rectify the respondent's breach. As a result, the appeal should be allowed and an award of damages in the amount of $107,224.64 should be made.

[18]

The damage to the home 12 The respondent's principal expert witness was Mr Linton Speechley, a Geotechnical Engineer employed by Jeffery and Katauskas Pty Ltd. He gave his opinion as to internal cracking upon the basis of photographs that appeared in two earlier reports of other experts, one prepared on behalf of the appellants and one on behalf of the respondent. His inspection of the premises, which was external only, indicated that the external cracking and, by implication, other damage remained as described in the two earlier reports. 13 One of the earlier reports was that prepared for the appellants by Mr John Worthington of John Worthington and Associates Pty Ltd. Mr Worthington described, in terms which can be regarded, at least now, as uncontentious, defects in the home including the following: (a) He observed cracking in both external and internal walls which had been caused by the movement of the residence. He said that this "movement has caused tension forces in the walls with the cracks opening up. These cracks appear in non-structural parts of the residence such as the plaster board walls … and the external skin of the concrete block external wall …"; and (b) He observed that there were "gaps between windows and brick work abutting the windows combined with … doors that will not close because the door does not 'fit' into the door jamb". 14 The other report referred to by Mr Speechley was that of Mr Philip Xeros of Xeros Kendall, Consulting Engineers. He had been the design structural engineer involved in the preparation of the plans and specifications for the house. As well, he subsequently made observations as to the problems which emerged and prepared reports that were tendered by the respondent. His report dated 9 July 2007 said that "both the northeast and southeast corners of the building are relatively higher than the centre of the rear and the remainder of the house". He went on to say: "[s]ite investigations carried out by Civil Test Albury Wodonga indicate that the external footings are founded into natural material and also that the soils are 'are in a wetter condition than is desirable to carry the footing loads and will have swelled'. Therefore this indicates that the northeast and southeast corners have risen relative to the rest of the house causing the cracking and deformation with the building. This is due to the excessive moisture around these areas, which has occurred since the building was constructed. This type of phenomena is common with buildings constructed during dry periods as the house slab is laid over an area which is relatively dry and then once the house is constructed gardens and lawns are established around the perimeter with the subsequent wetting up of this area. This can lead to the swelling of the perimeter soils and the lifting of the foundations. This dampness was not present when the original soil classification was carried out by Aitken and Rowe Testing Laboratories report dated 16 January 2002. In this report the site was classified as a standard 'MD' and the footing have been designed for this classification which has been [confirmed] by Mr Kennard in report section 8. We also note, from comments in Mr Kennards report, that … the subsequent report by Aitken and Rowe dated the 15 th March 2005 found that the edge beams are founded into natural soil and that the soils are now 'generally wet soils around the perimeter of the residence but drier soils about the middle of the rear wall'. Mr Kennard also goes on to state that this indicates a heaving on both sides of the residence and lesser heaving under the centre rear wall. These findings agree with our own investigations and do not support the suggestion that there is settlement due to fill. There is definitely not settlement to the N/E and S/E corner further confirmed by the drain pipe support bracket which has been dragged up by the house relative to the in ground pipe. The site has obviously become too wet and this has affected the dwelling".

[21]

The cause of the cracking and deformation 19 As to the cause of the cracking and deformation of the house, the judge said (I have lettered the paragraphs for ease of subsequent reference): "(a) The defendant's geotechnical engineer, Mr Speechley, explained the significance of the direction/nature of the movement of the slab. Relevantly, it heaved; not subsided as it would have if the problem were ill-founded footings. On Mr Speechley's analysis, the foundations move because the underlying soil moves (gets wet, then heaves) and thus moves the fill and the foundations. Mr Speechley opined (in exhibit 5) that: 9.1 From my review of the documents provided and my site inspection, I believe that the movement and cracking in the structure is primarily related to the heaving of the fill material, with some additional heaving from the underlying natural reactive clayey soils. I say this as the majority of cracking in the structure occurs over the eastern portion of the site (and more particularly in the rear eastern rooms) where the fill has been placed. However there is also evidence from the Worthington Survey in September 2007 that some heave of the floor slab may also have occurred on the northern side of the kitchen where fill depths would be expected to be significantly less. 9.2 In my opinion the most likely cause of the cracking and distress in the residence is primarily a result of heaving of the clayey fill materials and probably also the underlying reactive clay soils. It appears very unlikely that any significant movement has occurred as a result of settlement of the external or internal stiffening beams. (b) In cross-examination, in the light of the plaintiff's geotechnical opinion (by Mr Cheenikal of Coffey's engineering), Mr Speechley's focus moved to the underlying soils: Q. If I take you to 9.1, which is across the page at page 93. You say there, 'I believe that the movement and cracking in the structure is primarily related to the heaving of the fill material.' That's right? A. That's correct. Q. That's your opinion? A. My opinion [h]as changed slightly to that since I've read the Coffey's information. … HER HONOUR Q. What is your opinion now? A. My opinion is still that the fill has heaved. However, the Coffey's information showed that the reactivity of the fill is not - it's not that reactive and, therefore, yes, I think the fill has heaved. However, I also think that the heaving from the underlying natural soils has probably more - has added more than what I implied in that statement. (c) The plaintiffs accepted that opinion: LOUGHNAN: … the evidence according to Mr Speechley that it's been heaving of the fill that has caused the distress in the slab and we have no problem with that, your Honour. … (d) Mr Speechley opined that the fill heaved: but not that the heave started in the fill. Mr Speechley's opinion was that the fill rose with (in effect rode upon) the underlying soils in which the heave originated. In its context, Mr Speechley's opinion was inconsistent with the contention that the fill was causative, rather than a factor in the mix where moisture is causative and the fill effectively surfed upon an underlying heave; with the moisture rising from the underlying soils (having entered at depth beneath the fill) rather than descending from the fill. (e) Mr Speechley explained that phenomena occurring in the underlying natural soils (moisture ingress causing heaving in the underlying soils) both permitted moisture to enter the fill and caused the movement in the fill: A. Most of the movement has occurred at that end - the eastern end - of the residence where the fill is, yes. Q. And you say, so far as the front western portion, there are no significant movements and that's on page 92? A. That's correct, Q. Doesn't that suggest to you, Mr Speechley, that there is a problem with the fill placed by the defendant? A. Well, not necessarily. It could be, yes. I mean, it would indicate that the fill has some effect on the movements. … A. No, I'm still saying it is the fill, but for a soil to move, if it's going to heave up, it will only heave up if it gets wet; if it wets up, so if that fill is in place, in a dry condition, it can wet up and heave. If it's not very reactive, it won't heave as much, and if the underlying soils also get wet, they will heave as well. Q. Why would it move at the back, but not at the front, or at the east, but not at the west, depending on which way we're doing this? A. It may depend on the moisture. It'll move if there's a change in moisture, so if there was more of a change in moisture at the rear than at the front, it will move at the rear, and not at the front. (f) Mr Speechley was consistent in that opinion, explaining the various ways that the movement reflected the ingress of water at depth (significantly lower [than] both where the footings should have been placed and where they were placed), which had caused the underlying soils to swell so [as] to push up the footings and the fill, and in turn the slab" (Judgment pp 4-6).

[26]

(a) The moisture content of the site at the start of the construction is unknown. Mr Cheenikal assumed (page 237 of exhibit A) that the soil was dry before construction started: 9.2.11 Refer to point 8.34 [of Mr Speechley's report, exhibit 9]. As noted in the point, the building pad was left for 6 to 7 weeks during the period September to October 2002 (6 to 7 weeks period). I agree that the building pad could have significantly dried out during this period. A contractor should provide adequate cover for the fill or cut platform by spreading topsoil or providing other cover to maintain the soil moisture of the building platform. The builder should also moisture condition the near surface soils and then re-compact the surface immediately prior to the construction of slab and footings. I understand that this procedure was not followed in the site and the footings and slab were constructed on top of the dry loose soils. I consider that it is likely that the dry fill materials absorbed moisture during the following winter wet season until it reached equilibrium moisture conditions. This could have caused the uplift of the dwelling, predominantly in the fill area. The natural soils on the western cut area may have been less impacted by the soil moisture variation due to factors such as permeability. (b) Both Mr Cheenikal and Mr Speechley (exhibit 5), who did have that history, assumed that the pad was substantially dry when construction started: 8.3.4 … There is no data on what condition the soils were in just prior to pouring the slab. It is possible that they may have been quite dry if there had been no rain for some time. Mr Wheeler states in Point 12 of his Affidavit that he inspected the block on or about 25 September and the building pad had been completed. I have checked the rainfall records provided to me by the Bureau of Meteorology from their registered Station Number 72150 (a copy of the rainfall records from January 2002 to 14 March 2008 is attached as Appendix D). The rainfall records show that there was very little rainfall from 26 September 2002 through to 24 November 2002 (a period of more than 8 weeks). There were only four days where rainfall was recorded and these rainfalls were all less than 0.5mm. Therefore we suspect that the building pad had probably dried out significantly during the 6 to 7 week period. (c) Mr Carter explained (in exhibit 6) that after preparation the site was left for a period whilst they were awaiting approvals to begin construction: 20 After the 2 days of watering the site was given time to consolidate in accordance with my usual practice. In this case I believe it was left to consolidate for 6 to 7 weeks whilst we waited for the construction certificate to issue. That certificate was issued by WWCC on 21 October 2002. (d) In the ordinary course of things, the site might be expected to dry out in that period, as was assumed by both Mr Cheenikal and Mr Speechley. However, the plaintiff's evidence raised doubts about the degree to which the site had dried out before construction. The plaintiffs' witness, Mr Livingstone Jones (page 76 of exhibit A), confirmed that the site was watered using a sprinkler; and that Mr Carter drove his vehicle on the site. The watering was sufficient to cause Mr Carter to bog his vehicle on the site. According to Mr Livingstone Jones (page 76 of exhibit A), 'a short time later' [than] Mr Carter bogged his vehicle on the site, Mr Livingstone Jones observed that the 'house slab had been poured and finished' and Mr Livingstone Jones recalled 'thinking that this was strange as it was only several days earlier that Mr Carter had bogged his car on the block.' (e) Mr Cheenikal was not told that the site had been watered, and said that this was something he would have taken into account in forming his opinions. Mr Cheenikal opined that water ingress had caused the heave, and that the dryness of the soil at construction was thus causal, saying (page 233 of exhibit A) that: 9.2.11 … I consider that it is likely that the dry fill materials absorbed moisture during the following winter wet season until it reached equilibrium moisture conditions. This could have caused the uplift of the dwelling predominantly in the fill area. The natural soils on the western cut area may have been less impacted by the soil moisture variation due to factors such as permeability. (f) Mr Cheenikal's opinion was offered (page 237-238 of exhibit A) on the basis that: 9.2.11 … the building pad was left for 6 to 7 weeks during the period September to October 2002 (6 to 7 weeks period). I agree that the building pad could have significantly dried out during this period. A contractor should provide adequate cover for the fill or cut platform by spreading topsoil or providing other cover to maintain the soil moisture of the building platform. The builder should also moisture condition the near surface soils and then re-compact the surface immediately prior to the construction of slab and footings. I understand that this procedure was not followed in the site and the footings and slab were constructed on top of the dry loose soils … (g) The significance of Mr Livingstone Jones' observations about site watering and a bogged vehicle were not explored in the evidence. They do little more than make it difficult to form any view about the degree to which the site had dried out between site preparation and start of construction, and add confusion. (h) The plaintiffs' case is that the construction site had dried out. However, Mr Livingstone Jones says that 'only several days' before the slab was poured, the soil was 'very soft and wet' (page 76 of exhibit A). If that (unchallenged) recollection/opinion be right, doubt must attend the assumption that the site had dried out before the slab was poured. That has implication for expert opinion rested upon that assumption, as said in Makita (Australia) Pty Ltd v Sprowles [[2001] NSWCA 305; (2001) 52 NSWLR 705]. 64 The basal principle is that what an expert gives is an opinion based on facts. Because of that, the expert must either prove by admissible means the facts on which the opinion is based, or state explicitly the assumptions as to fact on which the opinion is based. If other admissible evidence establishes that the matters assumed are 'sufficiently like' the matters established 'to render the opinion of the expert of any value', even though they may not correspond 'with complete precision', the opinion will be admissible and material: … One of the reasons why the facts proved must correlate to some degree with those assumed is that the expert's conclusion must have some rational relationship with the facts proved. (i) Mr Speechley identified the complexity when shown Mr Livingstone Jones' affidavit: A. Well, what it says is what the vehicle got bogged. I'm not quite sure what bogged means, whether it was bogged as in it went down, or whether, you know, wheels are spinning. So I don't really know there. What it does tell me about, [paragraph] four [of Mr Livingstone Jones' affidavit, page 76 of exhibit A], is that quite possibly the fill soils weren't dry just before the slab was laid. (j) Mr Speechley explained that certain tests might permit opinions to be formed to ascertain the effect upon the construction of the moisture content at the time of construction, but that he had not done these: [HER HONOUR ?]: At the end of the day, Mr Loughnan I think is going to submit that if it had been done right, X would have happened. What actually happened was Y happened and the difference is the problem. HER HONOUR: Is that a short way of putting it, Mr Loughnan? LOUGHNAN: There will be many submissions, but that's a fair one to make, your Honour. HER HONOUR Q: How do I know what the gap was? A. I'm not sure, to be honest. It's a difficult concept, because there's a lot of factors involved, and the easiest way is to look at a ratio type of thing. We could look at the moisture contents of the actual soils, which we have moisture content data from Aitken Rowe. We could look at the liquid limit and the plastic limit, which is approximately equal to that optimum moisture content, and we could do it on a ratio type basis. But it would involve a lot of looking at the various samples and so forth. Q. You've not done that? A. I haven't done that, no. Q. Is it in Mr Coffey's report? A. I don't think so. (k) Mr Cheenikal did not undertake testing of the requisite type. The significance of the moisture content or degree of drying out of the construction site remains conjecture, as does the actual moisture content at the relevant time; but the cross-examination of Mr Speechley was inconsistent with Mr Cheenikal's assumption that the site had dried out before construction: Q. Let me put it this way, Mr Speechley. If this is true, if this vehicle got bogged several days before the slab was laid, shouldn't that have sent off some warning bells for the defendant in this case? A. Well, yeah, if it was bogged and it sunk down into the ground, I agree, it would have been indicative of the soil's being wet and probably poorly compacted. (l) Mr Kennard noted that the slab might have settled if it was too moist (page 93 of exhibit A): - The site has reportedly been prepared by constant watering and then left to consolidate for 6 to 7 weeks. In item 8.3.4 it is suspected that the building pad had probably dried out significantly during the 6 to 7 week period. If the pad had not dried out, and subsequently dried out after pouring of the slab, then settlement would almost certainly have occurred. (m) However, the slab has not settled (putting aside differential settlement). It heaved" (Judgment pp 71-3).

[27]

Quantification of damages 24 Lest it be found that she was in error as to the existence of a causally relevant breach of contract, the primary judge undertook a hypothetical assessment of damages, which was as follows. 25 First, she found that moisture conditions in the vicinity of the house were stabilised by the respondent's work in 2005 in repairing broken plumbing and draining around the house (Judgment p 87). 26 Secondly, as to underpinning, she said: "I find no need 'to protect against further settlement on the fill.' That has not happened thus far. What has happened is that faulty plumbing has been repaired, the slab settled (back but not down) to a degree after heaving, and movement slowed to the point that surveys some time apart detect no change. I find no need for underpinning, deep or otherwise. There is no need for any associated demolition, reconstruction or temporary relocation. If I had found a causal nexus (which I do not), no damages would have been awarded in that respect" (Judgment p 89). 27 As to visual damage, the judge took the view that Australian Standard AS2870 contemplated that the owner, rather than the builder, would be responsible for repairing cracking or other defects of a minor nature (Judgment p 89). However, putting that point aside and assuming that the builder was liable for all repairs, her Honour found that the cost of cosmetic repairs was in the order of $5,900 and the cost of various other steps, including relaying of paths, adjusting site levels, fixing plumbing leaks and associated builder's margin, amounted to another $5,900. However she said that she doubted that, even if she were wrong as to the existence of a causal relationship between the breaches which she found and the bulk of the damages claimed by the appellants, the causal relationship extended to the latter group of items (Judgment p 90). 28 As the judge did not find that any underpinning was necessary, she found that the property was fit for occupation and that the appellants did not have any entitlement to relocation costs. 29 As to a claim in respect of diminution in value of the property, the judge said: "The starting point for any quantification of diminution in value is the cost of rectification works. However, I accept Mr Egan's opinion (in exhibit 8), that such works sound in the effect upon the value in mysterious ways, and on a fair valuation would have an effect that should be quantified, inclusive of profit and risk allowance, in the sum of $25,000. Taking a rather broad brush, if a causal relationship were found but not such as to found any nexus with the cost of relaying paths, adjusting site levels and fixing plumbing leaks and the associated builder's margin, it would seem that the estimate of diminution in value should be halved to $12,500. Had I found a causally related breach of contract, and diminution of value provide[d] the proper measure, I would have found the measure of damages by way of diminution of value in the sum of $25,000 (or perhaps $12,500). However, having regard to that said in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd, that may not be an appropriate course" (Judgment p 94). 30 The reference to Tabcorp Holdings was to Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272, which indicates that ordinarily the cost of rectification, rather than diminution in value, is the appropriate measure of damages in a case such as the present. 31 The judge's conclusion as to quantum was expressed as follows: "Had I found a causally related breach of contract, which I do not, I would have found the measure of damages to be the sum of $11,800, conscious that the better view may be $5,900, or if a valuation based claim be available, $25,000 (or perhaps $12,500)" (Judgment p 95).

[29]

Heaving or swelling of the fill material 35 Mr Speechley's expert evidence on behalf of the respondent, which the primary judge accepted and which the appellants do not challenge on the appeal, was that the damage to the house was "primarily related to the heaving of the fill material, with some additional heaving from the underlying natural reactive clayey soils" (Report paragraph 9.1 quoted in [19] above). Mr Speechley made it clear in his Report that the heaving (or, in lay terms, swelling) of the fill occurred because it was in a relatively dry state when the slab was poured and that it heaved when it subsequently became moist: "9.3 In my opinion the clayey fill and natural clayey soils were probably in a relatively dry state when the slab was poured. The rainfall records indicate a relatively dry period during the 6-7 weeks that the building platform was left prior to pouring the building slab. In addition I believe that the site classification would have been at least at the upper end of the M-D range (if not into the Class H-D range) and therefore since the slab is designed on the basis of a Class M-D site, cracking in the structure would be more likely with extremes of wetting (such as may occur with leaking pipes, overwatering or other moisture influences) and drying of the soils. 9.4 I do not believe that there is any clear evidence of where the moisture in the soils to cause the heaving (or swelling) has originated from. However I believe that there are a number of potential sources and any or all of these could have been responsible …". 36 Mr Speechley went on to identify three possible sources of the moisture, namely, a watering system on the property, leaking storm water or sewer pipes, or a local geological feature. The issues raised on this appeal do not require determination of, or indeed any consideration of, the source of the post-construction moisture. 37 With only a minor qualification, Mr Speechley adhered to these views in his cross-examination, which was quoted by the primary judge and is set out in [19] above. The qualification was expressed as follows: "My opinion is still that the fill has heaved. However, the Coffey's information showed that the reactivity of the fill is not - it's not that reactive and, therefore, yes, I think the fill has heaved. However, I also think that the heaving from the underlying natural soils has probably more - has added more than what I implied in that statement [that is, a statement in his report]" (Transcript p 377). 38 The primary judge was in error in the passages quoted in [19(a)] and [(d)] above in concluding that "[o]n Mr Speechley's analysis the foundations move[d] because the underlying soil move[d] ([got] wet, then heave[d]) and thus move[d] the fill and the foundations" and that "Mr Speechley's opinion was that the fill rose with (in effect rode upon) the underlying soils in which the heave originated". On the contrary, Mr Speechley made it clear in the passages from his Report and cross-examination quoted in [19] above that the primary damage to the house was the heaving of the fill itself, as a result of the fill becoming wet. The swelling of the underlying soils was indicated in his Report to be only a secondary factor (the damage was "primarily related to the heaving of the fill material, with some additional heaving from the underlying … soils", Report paragraph 9.1). There was no significant departure from this in his cross-examination. He said then that he still considered that the fill had heaved but that the heaving of the underlying natural soils "has added more than what [he] implied in" his report (that is, the heaving of the underlying natural soils had more of a causative effect than Mr Speechley implied in the Report). This qualification did not mean that Mr Speechley no longer said that the damage was primarily caused by the swelling of the fill. 39 The judge's error was repeated at a number of points in her judgment including in her statement that Mr Speechley "was consistent in" holding an opinion that the ingress of water "had caused the underlying soils to swell so [as] to push up the footings and the fill, and in turn the slab" (see the end of [19(f)] above). 40 The respondent submitted that the cause of the damage which was suffered should be regarded as being what the respondent said was the abnormal moisture level that came to exist at the site after construction finished. Whilst the ingress of moisture clearly played a significant role in what occurred, it is not consistent with Mr Speechley's evidence (or the other expert evidence) to regard it as the sole link in the chain of causation. The clear import of the evidence of Mr Speechley, when taken with that of Mr Cheenikal, was that the primary cause of the damage was the dryness of the fill at the time that the slab was laid (because it was so dry it was able to absorb a significant amount of the moisture which came to be present on the site, with the result that the fill swelled). It is clear from their evidence that the fill would not have heaved, so as to cause the damage to the house, if it had been at the proper moisture level at the time that the slab was laid. Support for this conclusion can be obtained from the fact that, notwithstanding that the high moisture levels which came to exist across the site after construction were substantially uniform (as to which see [41] - [43] below), the natural soils under the front of the house did not heave so as to cause any damage to that part of the house, whereas the fill under the back part did.

[30]

The uniformity of moisture levels 41 The respondent relied upon the evidence of Mr Speechley, quoted at the end of paragraph [19(e)] above, to support a submission that, when Mr Speechley's evidence was taken as a whole, the effect of it was not as I have described it above. The respondent said that Mr Speechley had effectively indicated that the fill may have heaved or swelled, when the soil in the unfilled area under the front of the house did not, because there may have been greater ingress of moisture into the fill than into the natural soils under the front (or in fact there may have been no ingress into those natural soils at the front at all). In other words, it was suggested that there may have been a differential ingress of moisture rather than a situation in which the fill soils were more vulnerable to heaving than the natural soils at the front due to the dryness of the fill. 42 This submission cannot be accepted because, in the evidence relied upon, Mr Speechley was speaking hypothetically ("if there was more of a change in moisture at the rear than at the front" (emphasis added)) and his own evidence was that the moisture content of the soils "across the site" was "reasonably uniform although on the south-eastern corner … you could say the lower soils are marginally wetter" (Transcript p 405). Mr Speechley derived that information from a report of Aitken Rowe Testing Laboratories of 15 March 2005, which was tendered by the appellants. 43 Why then the fill at the rear of the house heaved when the natural soils at the front did not heave (or did not heave significantly) was not made clear by Mr Speechley's evidence. An obvious possibility is that although, at the time of construction, the natural soils at the front of the building pad (the "cut" of the "cut and fill") may have been relatively dry like the fill, nevertheless they may have contained more moisture than the fill, such that they had less potential to swell in response to a subsequent ingress of moisture in and around the house than did the fill. However, that is not an issue which needs to be resolved because Mr Speechley made clear his opinion that the fill heaved and that it did so because it dried out before the slab was laid.

[31]

Whether the builder should have ensured that the fill did not dry out 44 The primary judge's reasoning on this topic is quoted at [23] above. 45 In (a) of this extract, the judge quoted paragraph 9.2.11 from a report of Mr Cheenikal of 21 July 2008, which indicated that the respondent builder had not conformed to proper practice if he had allowed the pad to dry out before the slab was laid. Although Mr Cheenikal was cross-examined at length on other topics, his views in paragraph 9.2.11 were not challenged. Furthermore, Mr Speechley prepared a report which commented, paragraph by paragraph, on this report of Mr Cheenikal but Mr Speechley made no response to paragraph 9.2.11. That report of Mr Speechley was marked as a draft but was tendered in evidence without objection (Transcript p 415). 46 Mr Speechley said that if the fill had been at "its basically optimum moisture content … it wouldn't have swollen as much as if it was dry" (Transcript p 386). His oral evidence in cross-examination was consistent with (although not covering the whole ground of) the views expressed by Mr Cheenikal: "Q. You refer to the fact that the building platform was left prior to pouring the building slab for a period of six to seven weeks, and that the rainfall records indicate that that was a relatively dry period. A. Yes, that's correct. Q. It was the defendant who left the building platform to dry out for that period. Do you accept that? A. Yes, that's accepted. Q. His responsibility under the ordinary contract between a builder and a residential home owner [was] to control the site. A. Yes. Q. If he had not done that; if he had not left the site for that period of six to seven weeks, in a period of hot, dry weather, and had he watered the soils to an optimum soil condition immediately before laying the footings and the slab, they wouldn't have been dry at the time that the footings and slab were laid, would they? A. If he'd have poured that straight away, and he put moisture condition in the soils, that's correct, yes. Q. But he didn't do that. A. Not from the information I have, no. Q. When dry soils absorb water, they swell. That's right, isn't it? A. That's right. 47 There was thus evidence before her Honour from the principal expert witness on each side pointing strongly towards responsibility of the builder for a swelling of the fill upon which the concrete slab was laid in the event that the fill was dry at the time the slab was laid. 48 Further, it was apparent from Mr Carter's evidence in cross-examination that he did not leave the site for six to seven weeks for any purpose related to the enhancement of the construction. When it was suggested to him that there was no need to let the pad consolidate after its preparation, he answered: "No, I could have worked on it straight away. Well, after it dried out a bit so we could work on it. We couldn't work on it straight away because the certificate to start from the Council wasn't issued" (Transcript p 472). 49 Reliance was placed by the respondent upon the following paragraph in Mr Speechley's report: "9.7 From the information provided to me and my site observations, I am of the opinion that the actions of Mr Wayne Carter (The Builder) in regards to placement and compaction of the fill, and footing construction, have not significantly contributed to the cause of the cracking in the structure". 50 In my view, this paragraph is dealing, as it says, with issues as to "placement" and "compaction" of the fill and as to "footing construction", all of which were the subject of discussion by Mr Speechley earlier in his Report. Taken in the context in which it appears in the Report, the paragraph should not in my view be regarded as expressing any view as to who was or was not responsible for the fill drying out. It was the drying out that Mr Speechley clearly regarded as the, or at least a cause, of the damage to the home (Report paragraphs 9.3 and 9.4 quoted in [35] above). Responsibility for the drying out is a topic with which he did not expressly deal in his first Report. However, the fact that Mr Speechley did not in his second report cavil with Mr Cheenikal's view that the drying out was the responsibility of the builder (see [45] above) and also his answers in cross-examination (see [46] above) are indications that Mr Speechley shared that view. 51 In any event, once one has concluded that the cause of the damage was the fill drying out and that the builder was in control of the site at relevant times, the step of sheeting home responsibility for the damage to the builder is a small one. In the context of these propositions being put to him, Mr Speechley agreed in cross-examination that the builder's "responsibility under the ordinary contract between a builder and a residential home owner [was] to control the site" (see [46] above) and implicitly accepted that the builder in this case was therefore at fault in what occurred.

[32]

Did the fill dry out? 52 As to whether the fill was dry at the time the concrete slab was laid, the following matters are relevant. 53 First, Mr Speechley recorded in his Report that he had been asked to assume that the site had been "left for a period of approximately 6 - 7 weeks to consolidate" after the compacting of the fill had occurred and the filled area had subsequently been watered for a further two days (Report paragraph 5.1d)(v)). This assumption can be taken to have been reflective of what occurred at the site because the client on whose behalf instructions were given to Mr Speechley was the respondent builder itself and, as Mr Speechley indicated in the cross-examination quoted above (see [46]), the builder was at the relevant time in control of the site. 54 Secondly, Mr Speechley made his own inquiries as to rainfall in the relevant period and found that there had been very little rain (Report paragraph 8.3.4 quoted in [23(b)] above). 55 Thirdly, Mr Carter gave evidence on behalf of the respondent builder in the terms quoted in [23(c)] above. His evidence was inconsistent with any watering having occurred in the six to seven weeks before the slab was laid and, taken with Mr Speechley's evidence as to the absence of rainfall, was a powerful indication that the pad was dry at the time the slab was laid. 56 It is apparent from paragraphs (d) and (g) to (i) of her Honour's judgment on this topic (see [23] above) that the evidence of Mr Livingstone Jones was the reason why the judge declined to find that the pad had dried out by the time the slab was laid. 57 Mr Livingstone Jones' affidavit formed part of the appellants' tender bundle. There was no cross-examination of him. He said that he was a fencer engaged "in approximately September 2002 … to construct fences at the rear of vacant house blocks" of which the subject block was one. The substantive portion of his affidavit was in the following terms: "3. Whilst I was working at the site erecting fencing I observed Wayne Carter drive onto the house block. I had previously observed that the block was watered down using a sprinkler. On this occasion Mr Carter bogged his vehicle on the foundation site and myself and a fellow worker, Mr Burgess assisted him by towing him out. 4. A short time later I noticed that the house slab had been poured and was finished. I recall thinking that this was strange as it was only several days earlier that Mr Carter had bogged his car on the block. 5. I noticed when assisting Mr Carter that the soil was very soft and wet". 58 A number of matters should be noted in relation to this evidence:

[35]

(c) Bearing in mind Mr Carter's evidence and the absence of significant rain in the relevant period (a fact demonstrated by Mr Speechley's evidence), the soil could only have been "very soft and wet", as Mr Livingstone Jones described in paragraph 5 of his affidavit, at the time the foundation pad was being prepared, not when the slab was about to be laid. 59 Mr Carter specifically denied in cross-examination that after the "six or seven week period [he] again brought [his] vehicle upon the site and it got bogged" and that he "got bogged on the site a few days before [he] laid the slab" (Transcript p 473). As the cross-examination proceeded, he came to put his response upon the basis of a lack of recollection of that occurring, although when asked by the judge whether an incident such as suggested occurred "a short time before the house slab was poured", he replied rhetorically: "Why would the slab be wet?" (Transcript p 473-474). 60 In paragraph (d) of her judgment on this topic (see [23] above), the judge referred to Mr Livingstone Jones' evidence as having "raised doubts about the degree to which the site had dried out before construction". In paragraph (g), she said that Mr Livingstone Jones' observations "do little more than make it difficult to form any view about the degree to which the site had dried out between site preparation and start of construction, and [in fact] add confusion". 61 In my view, her Honour was in error in not finding that at least that part of the pad which the fill constituted had dried out by the time the concrete slab was laid. The evidence referred to in [23] above strongly indicated that the fill, at least, was dry at the time the slab was laid. Whilst Mr Livingstone Jones' evidence constituted some evidence to the contrary, because he said that it was "only several days" prior to the slab being poured that Mr Carter had bogged his car, there was a substantial risk, indeed probability, of Mr Livingstone Jones being mistaken as to the timing of what occurred. 62 In these circumstances, the judge had to consider the conflicting evidence and form a view as to whether the appellants had, on the balance of probabilities, proved that the pad was dry at the time the slab was poured. She should have concluded that they had. Of particular importance in this respect was the fact that Mr Carter was in control of the site and could have been expected to remember the procedure he adopted, particularly when it was not long after the completion of construction that the damage to, and deformation of, the house commenced to occur and was brought to his attention. 63 On the other hand, Mr Livingstone Jones was a casual observer who was, for all that it appears from the evidence, recalling for the first time in July 2008 an incident which had occurred almost six years earlier. The aspect of his recollection under scrutiny was his recollection of the interval of time between certain events. Recollections can easily be in error in such circumstances. 64 It was not in my view correct for her Honour to refrain from finding that the pad had dried out before the slab was laid because Mr Livingstone Jones' evidence "raised doubts" (see [23(d)]) or because in her Honour's view the result of that evidence was that "doubt must attend" that question (see [23(h)]). It was not incumbent upon the appellants to prove their case beyond doubt. In my view they proved it, as they needed to, on the balance of probabilities. Her Honour's views on this issue were not founded on any favourable finding as to Mr Livingstone Jones' credit (he not having been cross-examined). It is therefore open to this Court to substitute its own view (see Fox v Percy [2003] HCA 22; (2003) 214 CLR 118), as it should do. 65 In paragraphs (j) and (k) (see [23] above), the judge appeared to treat as a factor against acceptance of the appellants' contention that the fill had dried out by the time of construction that there were "certain tests [which] might permit opinions to be formed to ascertain the effect upon the construction of the moisture content at the time of construction" but that these had not been done. However, there was no reason for the appellants to do such tests at the time of construction as they had no reason to anticipate the cracking and deformation which subsequently occurred. If such tests were to be done at all at that time, one would have expected that the respondent builder have done them to check that the moisture content of the fill was appropriate before pouring the slab. The fact that tests might have been, and were not, done later (when problems had emerged) was a neutral factor as either party could have caused them to be done. 66 The judge also weighed against the appellants' contention that the fill had dried out in a manner which constituted a breach of the contract, the question put on behalf of the appellants in the cross-examination of Mr Speechley quoted in paragraph [23(k)]. That was a hypothetical question suggesting that if Mr Carter's vehicle had been bogged several days before the slab had been laid, "warning bells" would have been set off for the builder. The question simply indicated, as one would expect, that the appellants were exploring the possibilities as to the state of the foundation pad at the time the concrete slab was poured, and the consequences of those possibilities, in circumstances where they had no certain knowledge of the site's then condition. They did not have such knowledge of the site because it had been in the control of the respondent and not of themselves. Exploration of the alternative possibility that the site was too wet did not prevent the appellants contending, as her Honour clearly recognised that they did, that at the relevant time "the construction site had dried out" (see the first sentence of paragraph (h) of the judgment on this topic: [23] above). 67 Paragraphs (l) and (m) of her Honour's judgment on this topic do not assist the respondent on the present issue as they are directed to the hypothesis explored, but not made good, that the pad may have been too moist when the slab was laid. On the contrary, as I have said, the evidence indicated that it was too dry.

[45]

Underpinning 74 The major difference between the parties on the question of damages was whether the appellants should be awarded the cost of "underpinning", that is, the construction of footings that descend 300 mm into the natural soil beneath the fill, as the contract required. The failure of the respondent builder to so construct the footings was found by the primary judge to be a breach of contract (see [18] above). The footings constructed were embedded only, at most, 100 mm into the natural soil. 75 Although there are broadly expressed paragraphs both in the Notice of Appeal and in their written submissions, the appellants did not make a specific case in those documents that the judge's finding that this breach was not a cause of the observed damage to the house was erroneous. The respondent pointed this out in its written submissions (at [5]) and the appellants did not contradict that point in their submissions in reply or seek to put such a case. As a result, it should be concluded that there was no challenge to the judge's finding that this breach of the respondent was not causally related to the deformation and cracking of the house which had been observed. 76 Nevertheless, the appellants claimed that they were entitled to the cost of underpinning because what was built for them by the respondent departed in that respect from the contract between them and that underpinning to the contractual standard was a reasonable step for them to undertake to rectify that departure. I agree that the appellants have suffered loss as a result of the breach and are entitled to damages reflecting the cost of underpinning to bring the depth of the footings to the contractually required depth. Commonsense and an examination of the detailed specifications prepared by Xeros Kendall, Consulting Engineers, in respect of the depth of the footings and many other aspects of the footings, fill and concrete slab, indicate that the primary purpose of the specifications was to assist in achieving stability of the appellants' home. This is confirmed by reference to Australian Standard AS2870-1996 upon which the Xeros Kendall specifications were based. The Standard's purpose is described within it as follows: "The purpose of this Standard is to establish performance requirements and specific designs for footing systems for foundation conditions commonly found in Australia and to provide guidance on the design of footing systems by engineering principles. Although a wide range of conditions is covered, this Standard places particular emphasis on the design for reactive clay sites susceptible to significant ground movement due to moisture changes" (Standard p 2). 77 The appellants' position is that they have a home which, in the respect under consideration, does not conform with the stability-related requirements considered appropriate by the consulting engineer acting in relation to the construction of the dwelling, or by the relevant Australian Standard. Their claim being in contract, the amount of the damages to which they are entitled is the sum of money necessary to be paid to them to put them in the position that they would have been in if the contract had been performed. I see no reason why in the circumstances of this case the cost of underpinning should not be regarded as the reasonable measure of damages to which the appellants are entitled as a result of the breach in question. I say this notwithstanding that, having considered the character of the natural soils under the fill, Mr Speechley expressed the view that he did "not expect that the strength of the founding soils would be inadequate even with the [footings not being placed as far into the natural soils as the contract required]" (Report paragraph 8.4.4). The existence of such an expectation on the part of one expert does not render it unreasonable for a party to seek to achieve what he or she has bargained for so as to make the house more stable. This is especially so when other experts gave evidence that the underpinning was the appropriate step to take for the purpose of rectification. 78 I also reach this conclusion notwithstanding that Mr Speechley said that "[u]nderpinning may create additional problems" and that he believed "underpinning is a very expensive option that has the potential to be ineffective" (Report paragraph 10.2). The possibility of "additional problems" is one which the appellants will have to consider when deciding whether to undertake the work but it is not in my view one which should deter the Court from awarding to the appellants the cost of achieving the contractual standard when other experts have advised that that course is appropriate. Likewise, the fact that in his view the underpinning may be "very expensive" and has the "potential to be ineffective" are not matters upon which the respondent can rely to deny the appellants the benefit of their bargain. Whether the cost involved is disproportionately high is a matter for the Court. Further, Mr Speechley's alternative is "to control the moisture condition around the residence" but such control may not be possible, for example if heavy and extended rainfall occurs. In fact, Mr Speechley contemplated that taking his suggested course would leave open the possibility that "significant movements" of the home might still occur (Report paragraphs 10.3 - 10.5). 79 The reasonableness of the appellants' position is emphasised by the fact that the respondent constructed for the appellants a home which has its rear portion resting upon fill which exceeds the contractually permitted depth. That contractual requirement had its origin in Australian Standard AS2870 and, as pointed out in [76] above, can be inferred to have been one of the requirements designed to promote the stability of the relevant structure. Whilst the excessive fill was not found to have played any significant role in the cracking and deformation which occurred, the Australian Standard limitation on the amount of fill, and therefore the limitation in the contractual specification, can be assumed to have been important for stability purposes. An award to the appellants of the damages which they claim in respect of the "dryness-of-fill" breach will not enable them to correct the "excessive fill" departure from the contractual specification. It is not surprising in these circumstances that they should seek to have a third, more readily and reasonably achievable, measure to improve the stability of their home (that is, the underpinning) undertaken when they are entitled to have that measure undertaken to correct yet another departure (that is, as to the inadequate embedding of footings) from contractual requirements. 80 These conclusions conform with the principle to be derived from Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613 that in the case of a building contract such as the present the prima facie measure of damages is the "amount required to rectify the defects complained of and so give to [the plaintiff] the equivalent of a building on [his or her] land which is substantially in accordance with the contract" (at 617 per Dixon CJ, Webb and Taylor JJ). A qualification to that principle was stated in Bellgrove to the effect that "not only must the work undertaken be necessary to produce conformity [with the contract], but that also, it must be a reasonable course to adopt" (at 618). 81 In Tabcorp Holdings Ltd v Bowen Investments Pty Ltd the High Court commented in relation to this qualification that the example given in Bellgrove of a situation where rectification would be unreasonable "tends to indicate that the test of 'unreasonableness' is only to be satisfied by fairly exceptional circumstances" (at [17]). Another example of unreasonableness is a situation where the cost of the "proposed rectification is out of all proportion to the benefit to be obtained" (Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2006] NSWCA 361 at [82] - [88] citing South Parklands Hockey & Tennis Centre Inc v Brown Falkiner Group Pty Ltd [2004] SASC 81 at [90]; see also: Westpoint Management Ltd v Chocolate Factory Apartments Ltd [2007] NSWCA 253; Kirkby v Coote [2006] QCA 61; Gagner Pty Ltd v Canturi Corporation Pty Ltd [2009] NSWCA 413; (2009) 262 ALR 691; and Building Insurers' Guarantee Corporation v The Owners - Strata Plan No 57504 [2010] NSWCA 23). There is in my view no such radical disproportion in this case, nor any other factor, which would lead to the appellants' desire to have their home accord with the contractual standard concerning footings being regarded as unreasonable in the relevant sense.

At a glance

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Before

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Judgment (54 paragraphs)

Parties

Cases Cited (15)

Cited By (36)