Spouses Allege Claims Damages Against Construction Company

Warburton v County Construction (NSW) Pty Ltd [2022] NSWSC 941 (15 July 2022)

The plaintiff homeowners initially contracted with the defendant builder for the construction of a residential home. The plaintiff alleges there are defects with the construction of the home. The Court, in resolving this dispute, relied upon the Civil Procedure Act 2005 (NSW).

Facts:

By Amended Statement of Claim filed on 28 October 2021 (“ASC”), the Plaintiffs, Mr. Mark Warburton (“MW”) and Mrs. Jacqueline Warburton (“JW”) claim damages against the First Defendant, County Construction (NSW) Pty Ltd (“County”) and further relief, including rectification of an agreement dated 27 February 2017 (“Second Agreement”) by altering cl 6.2 of that agreement to delete specific words.

Mr. and Mrs. Warburton did not press a further plea against the Second Defendant, Mr. Robert Hart, at the hearing. By a First Cross-Claim Statement of Cross-Claim filed on 22 October 2019, County in turn claims specified amounts against Mr. and Mrs. Warburton.  It now only pressed a narrower claim for $12,222.23, said to be an unpaid part of the amount of $110,000 payable to the County under the Second Agreement.  Alternatively, they claim an amount alleged to be payable if the Contract remained on foot after February 2017. 

By their Defence to the Cross-Claim filed on 19 December 2019, Mr. and Mrs. Warburton do not admit County’s entitlement to the amounts claimed in paragraphs 9 and 10 of the Cross-Claim, deny County’s entitlement to payment of $12,222.23 as claimed in paragraph 11 of the Cross-Claim, and contend that they are liable to set-off the damages and other amounts claimed by them against the payment of that amount.  Mr. and Mrs. Warburton are registered proprietors of a property situated in Mosman, NSW. 

The residential building works at the property were the subject of a development application approved under the Environmental Planning and Assessment Act 1979 (NSW) (“EPA Act”) dated 19 September 2012, given by Mosman Council which required installation of an on-site rainwater re-use system for on-site detention and that all works be carried out in accordance with the requirements of the Building Code of Australia (“BCA”).  On 23 September 2015, County Constructions submitted a tender for proposed demolition and construction works at the property with two alternative options with pricings of $3.5 or $4.9 million.

On 30 October 2015, Mr. and Mrs. Warburton and County entered into a written cost-plus contract (“Contract”) for County to undertake building work comprising the demolition of an existing dwelling and the construction of a new residence at that property (“project”) for a then estimated value of $3,500,000. The Contract provided for an estimated cost of works of $3,500,000.

County was required to provide a certificate of insurance under the Home Building Compensation Fund, which remained in place after entry into the Second Agreement, and schedule 1 of the Contract set out costs payable by the Owner and provided for a builder’s mark-up of 9% of the costs of the work.  Those warranties plainly applied to the work then being undertaken by County, namely to complete the construction work in accordance with the drawings and as described in the specification, as adjusted under the Contract.

On 11 November 2015, County obtained a contract of insurance for works at the contract price and, on 13 November 2015, an amended development application approval was issued and a construction certificate was issued. County commenced carrying out the building works in about December 2015.

Areas of disagreement then arose between the parties, although there is a contest between the parties as to the outer scope of that disagreement. The then architect and contract administrator, Mr. Vitale, gave notice that he would no longer act as contract administrator on 24 June 2016. 

Mr. Brincat was provided as an architect to administer the Contract as “the disclosed agent of the Owner” and he was authorised to provide instructions to the builder concerning variations to the work and undertake other steps in respect of the project. On 10 October 2016, Mr. Brincat advised Mrs. Warburton that he was concerned about “construction on the run and decision-making on the run”, observed that this is a “recipe for disaster and significant cost blowouts in the future” and recommended that the job be suspended for a month to obtain fixed price quotations from suppliers and contractors and to assess claims made to date.  Mr. Vitale, the architect then engaged on the project for Mr. and Mrs. Warburton, sought to set a process for any further design changes in respect of the project.  Mr. Vitale subsequently withdrew from the project.

Issues:

I. Whether defects resulted from a failure by the defendant to carry out all the work reasonably necessary to manage and supervise the completion of the works.

Applicable law: 

Civil Procedure Act 2005 (NSW) s 58 - requires the Court to have regard to the dictates of justice when considering an order for, inter alia, the amendment of a document.

Civil Procedure Act 2005 (NSW) s 64 - relevantly provides that, at any stage of the proceedings, the Court may order that leave be granted to a party to amend any document in them.

Amaca Pty Ltd formerly known as James Hardie & Coy Pty Ltd v CSR Ltd [2001] NSWSC 324 - Bergin J (as her Honour then was) considered a question whether a widely framed release in a partnership dissolution deed extended to releasing liability for claims regarding asbestos. 

Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; (2009) 258 ALR 14; [2009] HCA 27 - emphasised the significance of delay not only for particular proceedings, but for the Court system generally.

Commissioner of Taxation (Cth) v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520; [2000] HCA 35 - provides that when the parties to an existing contract enter into a further contract by which they vary the original contract, then, by hypothesis, they have made two contracts.

D & F Estates Ltd v Church Commissioners for England [1988] UKHL 4; [1989] 1 AC 177 - provides that "if the fact of employing a contractor does not involve the assumption of any such duty [to a third party] by the employer, then one who has himself contracted to erect a building assumes no such liability when he employs an apparently competent independent sub-contractor to carry out part of the work for him."

Dymocks Book Arcade Pty Ltd v Capral Ltd [2011] NSWSC 1423 - where the Court again referred to the relevance both of the nature of the amendments and their importance to the Plaintiffs on the one hand, and prejudice to the Defendants on the other.

Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303; [2013] HCA 46 - pointed out that case management is an accepted aspect of the system of civil justice administered by the courts in Australia.

Florida Hotels Pty Ltd v Mayo [1965] HCA 26; (1965) 113 CLR 588 - observed that "there can be no doubt that due skill and care in this case required [the respondents] to supervise the work done in preparation for the pouring of concrete to form these slabs ... the respondents were bound to take reasonable steps to ensure that they inspected the formwork and the placed the reinforcement before concrete was poured and the work was covered up."

Grant v John Grant & Sons Pty Ltd [1954] HCA 23; (1954) 91 CLR 112 - permits an investigation of the circumstances, including the actual intention of the parties, to determine whether enforcement of the general words of a release would be against conscience.

Icon Co (NSW) Pty Ltd v The Owners – Strata Plan No. 97315 [2022] NSWCA 114 - provides that the List Statement and List Response are not pleadings in the strict sense, and a pragmatic view must be taken of the case as it develops through the List Statement, the List Response, and the evidence as it is served.

Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336; [1973] HCA 23 - where Mason J (as his Honour then was) observed that the purpose of the remedy is to make the instrument conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately; and that an antecedent agreement is not essential to the grant of relief by way of rectification, which may be granted in cases in which the instrument sought to be rectified constitutes the only agreement between the parties, but does not reflect their common intention. 

Qantas Airways Ltd v Gubbins (1992) 28 NSWLR 26 - sets out the principles by reference to which a court will decide whether a general release will be held to cover a particular dispute. 

Sheldon v McBeath (1993) Aust Torts Reports 81-209 - Handley JA stated that “the duty of supervision must be performed progressively and at critical stages of the building works.

Sutcliffe v Chippendale & Edmonson (A Firm) [1971] 18 BLR 149 - held that "the building owner is entitled to expect his architect so to administer the contract and supervise the work, as to ensure, as far as is reasonably possible, that the quality of work matches up to the standard contemplated.”

Analysis:

As to the defects concerning damage by paint overspray and speckles in respect of face brickwork, Mr. and Mrs. Warburton attribute that damage to the painting contractor, Mickemouse, County’s obligations in respect of management and supervision of the project under cl 2.1 of the Second Agreement did not impose upon it any obligation to clean the brickwork at the completion of the works, which was a matter for the painting contractor or Mr. and Mrs. Warburton. 

Where Mr. and Mrs. Warburton contend that downlights are not flush and that there are other inconsistencies in the lighting, these matters may have given rise to a claim against Innuku, had it been joined as party to the proceedings. Mr. and Mrs. Warburton also point to suggested defects in landscaping works undertaken by Land Forms. However, it is not self-evident that a defect in the quality of the work performed by a contractor, Land Forms, establishes a breach of County’s management and supervision obligations under cl 2.1 of the Second Agreement or of the statutory warranties.  

Conclusion:

Mr. and Mrs. Warburton’s claim against County in respect of three defects and one aspect of a fourth and their money claim, which occupied little time at the hearing, have succeeded, and a large part of their claim will be dismissed, after issues as to the quantification of damages relating to these several defects are agreed or are resolved.  Mr. and Mrs. Warburton must pay County’s and Mr. Hart’s costs of the proceedings as agreed or as assessed.