Cubic Metre Pty Ltd v C & E Critharis Constructions Pty Ltd

Cubic Metre Pty Ltd, the plaintiff (the Contractor), and C & E Critharis Constructions Pty Ltd, the defendant (the Builder) seek leave to appeal, and cross-appeal, to challenge orders made in the Local Court arising out of a claim by the Builder for damages for alleged breach of contract by the Contractor. The breach was said to be that the sandstone supplied by the Contractor was unsuitable for use as cladding for a sea wall at the boundary of a residential waterfront property at Watsons Bay owned by Vaughan and Jacqui Blank (the Owner).

The proceedings in the Court below were commenced by statement of claim filed on 8 March 2018 (which was subsequently amended on 6 April 2018). The Builder’s claim was for the sum of $123,332, which it contended was the cost of rectifying the sandstone cladding on the stone wall. The proceedings were heard on 28 February 2019 and 1 March 2019. On 4 June 2019, Kennedy LCM ordered judgment for the Builder in the sum of $20,408.55, together with interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW). On 25 June 2019, the magistrate ordered the Contractor to pay the Builder’s costs.

In summary, the Contractor, in its appeal, alleges that the magistrate was in error in deciding the case on a basis which was not put by the Builder, failed to apply the principles of law relating to assessment of damages for breach of contract and failed to give sufficient reasons. The Contractor also contends that her Honour’s discretion as to costs miscarried because account was not taken of the substantial discrepancy between the amount claimed by the Builder ($123,332) and the amount awarded by her Honour ($20,408.55). The Builder, in its cross-appeal, alleges that her Honour ought to have awarded the sum claimed, being the cost of rectification, which amounted to the cost of replacing the cladding on the sea wall.

By further amended summons filed on 31 January 2020, the Contractor seeks an extension of time for appeal, and, if required, leave to appeal, against decisions of Kennedy LCM made on 4 June 2019 (the substantive orders) and 25 June 2019 (the costs order). The original summons was filed on 30 July 2019. By amended cross-summons filed on 20 December 2019, the Builder seeks an extension of time for leave to cross-appeal from the substantive orders. The Builder’s original cross-summons was filed on 1 October 2019.

The applicable time limit for commencement of proceedings for an appeal to this Court against an order of the Local Court is 28 days from the material date, being the date on which the decision from which the appeal is brought was pronounced or given: Uniform Civil Procedure Rules 2005 (NSW) (UCPR), rr 50.2 and 50.3. The parties agreed that each ought be granted an extension of time under UCPR, r 50.3(1)(c).

The facts germane to the proceedings in this Court are largely agreed or incontrovertible and are summarised below.

In June 2009, the Owner contracted with the Builder to construct a home at Watsons Bay on a costs plus basis (the Head Contract). The Builder’s margin was stipulated to be 10%.

Clause 2 of the Head Contract provided:

Clause 13 of the Head Contract relevantly provided:

Schedule 4 to the Head Contract, entitled “Progress Stages” provided:

Clause 18 of the Head Contract provided:

Clause 25 of the Head Contract provided for a defects liability period in the following terms:

Clause 32 of the Head Contract relevantly provided:

It was common ground that there were no specifications attached to the Head Contract.

The Head Contract contained special conditions which included the following:

For any breach discovered before the progress payment, the Owner was entitled to dispute the progress claim under cl 13.7. The Owner’s remedies for any breach by the Builder which was discovered after the progress payment had been made were limited to the following: the Owner could retain the retention money for a further 12 months (under the special condition) and call upon the Builder to rectify the works (clause 25) or the Owner could sue the Builder for breach of cl 32.1 of the Contract or for breach of statutory warranty under the Home Building Act 1989 (NSW). The Owner was obliged to release any retention monies after the receipt by the Owner of the final occupation certificate.

The Builder entered into a contract with the Contractor by a document executed on 13 April 2011 (the Sub-contract). The Sub-contract required the Contractor to supply and install sandstone for the whole property at a cost of $520 per square metre.

Clause 13 of the Sub-contract provided:

Special condition 21 of the Sub-contract provided:

It was an agreed fact in the Court below that during the period from 13 April 2011 until not later than 9 March 2012, the Contractor supplied and installed sandstone pursuant to the Sub-contract. The sandstone was used throughout the house and also as cladding for a sea wall. The sea wall itself was constructed by another contractor.

There was an issue in the Court below as to whether the Builder’s claim for damages at common law was time-barred. This issue turned on the date of last breach. The breach alleged was that the Contractor had supplied stone which was unfit for its purpose. The evidence established that the stone had been supplied in 2011. As the statement of claim was filed on 8 March 2018, the claim under the common law was statute-barred. However, as it was common ground that the claim under the Home Building Act was within time (there being an outer limit of seven years from the date of the contract), it is not necessary to address this question further, except in relation to what is referred to below as the Contractor’s notice of contention.

On 14 November 2012 the Builder notified the Contractor that the Owner had observed that the stone in the sea wall was deteriorating. There were negotiations between the Builder, Contractor and Owner after this time which did not result in any concluded agreement as to rectification. No rectification work has been done on the sea wall. The Owner continued to reside at the property at the time of the proceedings in the Court below.

In its claim in the Court below, the Builder relied on the warranty implied by s 18B(f), (now s 18B(1)(f)) of the Home Building Act). Section 18B of the Act relevantly provided:

The Builder also relied on special condition 21 of the Sub-contract (which is set out above) which required the materials used to be fit for their intended purpose. The difference between the provisions was material to the limitation defence since the limitation period for the claim under the contract was six years from breach and the limitation period for the claim for breach of warranty was, at that time, seven years after the completion of the work to which it related.

In order to address the grounds of appeal and cross-appeal it is necessary to examine the way the Builder put its case on damages in the Court below.

The Builder relevantly alleged in its amended statement of claim:

It can be seen that, although paragraph 12 of the pleading contained an unparticularised allegation of loss suffered as a result of the Owner withholding money, there were no particulars provided and no damages associated with that allegation included in the damages claimed in the amended statement of claim.

Further, it is also of significance that the breaches alleged were failure to supply sandstone which was fit for its intended purpose and failure to provide a specification. There was no allegation of any misrepresentation made by the Contractor as to the suitability of the sandstone.

In its defence, the Contractor denied that it was liable for damages to the Builder. Further, it alleged that the claim at common law was statute-barred because the six-year limitation period under the Limitation Act 1969 (NSW) had expired and, in relation to the alleged breach of s 18B(f) of the Home Building Act (being the supply of sandstone), the seven-year period under the Home Building Act had also expired.

When Mr Weaver, who appeared for the Builder in the Court below and in this Court, opened the case he said, at tr. 12.32-13.10:

There was no reference to any withholding monies in the opening and no submission that they were to be relied upon as constituting part of the claim for damages. Mr Weaver can be taken to have accepted that the Builder was not legally obliged to rectify the cladding on the sea wall.

In its case in chief, the Builder relied on the evidence of its principal, Elia Critharis. In his affidavit of 11 September 2018, he deposed as follows:

Mr Critharis did not address the question of damages in his second affidavit of 14 December 2018. In neither affidavit did Mr Critharis depose as to his intentions with respect to the wall. In particular, he did not depose that he intended to rectify the wall.

In cross-examination, Mr Critharis confirmed that each of the invoices rendered by the Contractor in respect of the stonework had been paid in full by the Owner. Mr Critharis admitted in cross-examination that he, meaning the Builder, had not done any further work on the property since 2012 and had not done any work on the sea wall at all (tr. 105.24-106.5).

Mr Barker, a quantity surveyor, gave evidence in a report dated 5 October 2018 in which he estimated the cost of replacing the sea wall, which totalled $123,332. This figure formed the basis of the Builder’s claim. The Builder accepted that, if successful, it would have to forego the excess over the $100,000 jurisdictional limit of the Local Court.

Mr Blank, one of the Owners, gave evidence in chief by affidavit but did not address the replacement of the stone wall. In cross-examination Mr Blank said that he had done no maintenance work at all on the sea wall, notwithstanding that he had noticed some deterioration in November 2012 (tr. 119.12-.25). Mr Blank gave evidence that there had been some negotiations with the Builder as a result of which a deed had been drafted and considered but that no deed had ever been signed and there was no agreement requiring the Builder to rectify the wall. Mr Blank agreed that there were no legal proceedings between the Owner and the Builder about the wall or at all (tr. 120.23-.26). In re-examination, Mr Blank said that he had waited for the wall to be repaired but that nothing had been done (tr. 122.17-.21).

At the conclusion of the hearing on 1 March 2019, her Honour made directions for written submissions.

The submissions of the parties in the Court below on the issue of damages are summarised or extracted below.

Mr Webster, who appeared on behalf of the Contractor in the Court below and in this Court, provided written submissions to the Court below dated 22 March 2019. He said, on the question of damages:

On the question of loss, the Contractor’s written submissions said as follows:

The Contractor also made detailed written submissions criticising the evidence of Mr Barker, the quantity surveyor called by the Builder. The Contractor concluded as follows:

In its written submissions dated 25 March 2019, the Builder said, on the question of damages:

In further written submissions dated 22 April 2019, said to be in reply, the Builder did not respond to the Contractor’s submissions on loss set out above and can, in those circumstances, be taken not to have pressed any alternative claim for withholding monies.

In further written submissions dated 24 April 2019, the Contractor did not specifically address any issue relating to damages.

Her Honour accepted the evidence of Mr Cass that the stone was not fit for the purpose for which it was being used, namely in the “wet zones” of the sea wall. On this basis, her Honour found that the Contractor was in breach of the Sub-contract and the statutory warranty. There is no challenge to these findings on either the appeal or the cross-appeal. They are only potentially relevant to the notice of contention (the grounds of which are set out in paragraphs 8-15 of the further amended summons).

Her Honour referred to the evidence of what would be required to rectify the wall and found that “total replacement is the appropriate method of rectification”.

Because of its importance to the appeal and the cross-appeal, I propose to extract her Honour’s findings on damages in full:

As referred to above, the Court below delivered reasons and made the substantive orders on 4 June 2019. The matter was listed before her Honour on 25 June 2019 for argument on costs.

The Builder sought indemnity costs on the basis of an offer to accept $20,000 which was contained in a letter dated 15 February 2018 which was expressed to be “without prejudice except as to costs”. In the alternative, it sought costs on the ordinary basis.

The Contractor submitted that the Builder’s claim had been for $112,000 (limited to $100,000 because of the limits on the Local Court’s jurisdiction) but that the Builder had, in effect, abandoned that claim on the first day of the hearing by accepting that it had no more than a moral obligation to rectify the wall. The Contractor further submitted that the judgment sum was only slightly more than the jurisdiction of the Small Claims Division. The Contractor submitted that the Builder had recovered only about 20% of its initial claim and that, accordingly, it ought not receive its costs. The Contractor relied on the principle of proportionality and referred the magistrate to Young v Kruger [2012] NSWSC 628 in support of a submission that there should be no order as to costs. The Contractor also submitted that the “offer” which the Builder had tendered in support of its application for indemnity costs had not been one which was capable of acceptance.

After a short adjournment, her Honour delivered reasons for making the costs order set out above. Her Honour rejected the Builder’s application for indemnity costs on the basis that the letter relied upon did not amount to an offer capable of acceptance and did not specify the time within which it would be open in any event. Her Honour referred to ss 60 and 98 of the Civil Procedure Act. Her Honour purported to apply the general rule that costs ought follow the event and made an order to that effect.

In respect of the substantive order, the Contractor relies on the following grounds of appeal:

In respect of the costs order, the Contractor relies on the following grounds of appeal:

In its amended summons, the Contractor added further grounds as follows:

As referred to above, the Contractor relies on grounds 8-13 as a notice of contention in response to the Builder’s cross-summons. The effect of this is that, if the Contractor is successful in its appeal and successful in defeating the cross-appeal, both of which relate to the amount of the judgment sum, it does not press the challenge to the findings of breach. Mr Webster submitted that this would be an “acceptable commercial outcome” for the Contractor. I understand him to accept that, at least commercially, a judgment in favour of the Builder for nominal damages with a costs order in favour of the Contractor, would be as good as judgment in favour of the Contractor with a costs order in favour of the Contractor.

The Builder relies on the following grounds of cross-appeal:

The Builder further claims that, if it succeeds on the cross-appeal, it ought be awarded costs of the proceedings in the Court below and in this Court on an indemnity basis.

The Contractor challenges the substantive order on the four grounds set out above. It is convenient to address ground 4 first since it challenges the legal and forensic basis for the finding on which the substantive order was based.

The starting point is the principle that the measure of damages for breach of contract is that sum of money that will put the wronged party in the same position, as far as money can do it, as it would have been in had the contract been performed: Robinson v Harman (1848) 1 Ex 850 at 855; (1848) 154 ER 363 at 365. This requires a comparison to be made between the current position of the wronged party (in this case, the Builder) and that party’s position had the contract been performed rather than breached. Had the Contractor performed the contract, the cladding on the stone wall would not have deteriorated to the extent that it did. The question is, accordingly: what loss has the Builder suffered as a result of the unsuitability of the sandstone supplied by the Contractor, that being the alleged breach?

Had the contract been performed, the Builder would have been entitled to be paid in full by the Owner for the work relating to the supply and installation of the sandstone and would have been obliged to pay the Contractor in full under the contract. As the Builder was the plaintiff in the Local Court, it bore the onus of proving that it was in a worse position, financially, as a consequence of the Contractor’s breach.

At first instance, the Builder claimed to be in a worse position as a result of the breach by reason of the moral obligation to replace the deficient cladding on the sea wall. It put its claim for damages squarely on the premise that it had an obligation to rectify the works and that the only reasonable way of rectifying them was to replace the sandstone cladding on the sea wall. This was the sole basis on which Mr Weaver opened the case. There was no alternative case put on the basis of the claim for the withholding payment. The Builder failed to establish its claim for the cost of rectification because no work had been done, there were no proceedings on foot between the Owner and the Builder, the breach by the Builder of the contract with the Owner was statute-barred and the Builder’s “moral” obligation to the Owner did not give rise to damages recoverable against the Contractor.

The only evidence of the withheld payment was that contained in paragraph 43 of Mr Critharis’s affidavit set out above. No documentary evidence was adduced in support of his statement. Mr Critharis was not cross-examined about it but he confirmed that all of his invoices to the Owner had been paid. Mr Blank was not asked about the withholding payment but confirmed that there were no legal proceedings between the Owner and the Builder.

It is an important aspect of the adversary system that a party is bound not only by its pleadings but also by the conduct of its counsel: R v Birks (1990) 19 NSWLR 677 at 683-684 (Gleeson CJ). The function of pleadings is to delineate the issues in the case and forms the basis for evidentiary rulings on relevance: Dare v Pulham (1982) 148 CLR 658 at 664 (Murphy, Wilson, Brennan, Deane and Dawson JJ); [1982] HCA 70; Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd (1990) 169 CLR 279 at 286 (Mason CJ and Gaudron J); [1990] HCA 11.

The opening is designed to indicate to the court the way in which the plaintiff puts its case and the way in which it hopes to prove the case, as well as to indicate to the opposing party, the case which is required to be met. The questioning of witnesses is also designed to achieve procedural fairness as are submissions, both those in writing and those given orally.

In the present case, although there was a reference in paragraph 12 of the amended statement of claim to the “Owners withholding monies”, the only loss particularised related to the cost of rectification. There was no alternative claim for the amount of monies alleged to have been withheld by the Owner. In Dare v Pulham, the High Court described the exception to the general principle that the parties are bound by the pleadings in the following terms at 664:

The Builder did not depart from its pleaded cause of action or particularised loss in the way it put its case in the Court below, except to the extent that the actual cost of rectification claimed was particularised at $87,000 in the pleading and a figure in the order of $123,000 in the expert evidence. The revision of the figure in that context fell within the exception in Dare v Pulham set out above.

Mr Weaver’s opening similarly was confined to the claim for the cost of rectification. Although he read the paragraph of Mr Critharis’s affidavit referred to above, he did not re-examine on the evidence given by Mr Critharis that he had been paid in full by the Owner for the work. Nor did he raise any issue with the Owner, who was called as a witness in the Builder’s case and who admitted that there were no proceedings between him and the Builder.

Mr Webster, in the Contractor’s submissions in chief, which happened to have been filed before Mr Weaver’s submissions, specifically (and presumably for more abundant caution) noted the absence of a case based on the withholding monies, to which Mr Weaver can be taken to have chosen not to respond. There was, even after Mr Webster drew the Court’s and the Builder’s attention to the lack of evidence or particularised claim for the withholding monies, no application for leave to amend to claim the withholding monies in the alternative.

What is set out above does not amount to a criticism of Mr Weaver, who can be taken to have acted on instructions to put the Builder’s claim for damages solely on the basis of the cost of rectification. There were several objectively demonstrable forensic reasons why the Builder might have chosen not to put the claim on the alternative basis. First, the claim for monies withheld was significantly less than the claim for the cost of rectification and, subject to the determination of costs, a judgment on that basis might be regarded as a Pyrrhic victory. Secondly, there would have been a significant issue whether monies withheld would fulfil the requirement that it not be too remote (this issue was raised by Mr Webster in his written submissions dated 22 March 2019). This issue is addressed further below.

For these reasons, the Court below was not entitled, as a matter of law, to find that the Builder, having failed to establish an entitlement to damages based on the cost of rectification, was nonetheless entitled to damages equivalent to the monies said to have been withheld, since this was not the way the Builder’s case had been put. It follows that ground 4 of the amended summons has been made out.

I should add for completeness that the requirement that a court determine a case within the framework of the parties’ dispute as delineated by the pleadings and the way the case has been conducted is not to say that a court is always bound to accept one party’s case or the other. However, a court is not entitled to assess damages on a basis which was outside the pleading or which was not traversed at the hearing, since this will almost inevitably amount to a denial of procedural fairness. Judges at times are required to assess damages on the basis of scant evidence (which can lead to the use of the prefatory words, “doing the best I can”) or uncertain bases, particularly in cases where the damages are difficult to assess: see, for example, McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 at 411–412 (Dixon and Fullagar JJ); [1951] HCA 79 (a contract for the recovery of an oil tanker which was not at the location specified in the contract) and Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 83 (Mason CJ and Dawson J), 102 (Brennan J), 119, 125-126 (Deane J) and 153 (Gaudron J); [1991] HCA 54 (a contract awarded by government tender when it could not be shown that the contract would be likely to be profitable but there was a real prospect that it would be extended). However, even in those cases, the plaintiff still bears the onus of showing the loss of something of value.

The present case presented no such difficulty. Having rejected the sole basis on which the Builder’s claim for damages was put, her Honour’s error was to proceed to assess damages on a basis which was neither pleaded nor particularised or part of the Builder’s case at first instance. Given that it was not part of the Builder’s case, her Honour did not receive the detailed assistance she might otherwise have received from counsel as to the legal principles which applied to the question whether such damages had been proved or were available in the present case (although, it must be said, these principles were referred to by Mr Webster in the Contractor’s submissions dated 22 March 2019).

I propose to turn to the second aspect of ground 4: whether the evidence adduced by the Builder was in any event sufficient, as a matter of law, to establish damages in the sum of the withholding monies and whether such damages were too remote to be recoverable. There are two aspects to the Contractor’s complaint in this Court: first, that the evidence adduced by the Builder at first instance was insufficient to establish that the alleged loss was caused by the breach; and, secondly, that the damages were in any event too remote.

I accept the Contractor’s submission that the evidence adduced by the Builder was insufficient to discharge the onus of proving an entitlement to damages based on the amount of the monies said to have been withheld. The Builder had been paid in full by the Owner (plus the added 10% margin) for all invoices rendered by the Contractor for the supply of sandstone and the stonework. Thus, the Contractor had established that the Owner had not retained any percentage of these invoices pursuant to the special condition set out above. This evidence tended to indicate that the Owner withheld money from the Builder as a result of some dissatisfaction with the work unrelated to the Contractor’s work. In these circumstances, it was not necessary for the Contractor to probe, in cross-examination of either or both of Mr Critharis or Mr Blank, the basis on which monies were withheld and what connection, if any, they had to the stone supplied or the work done by the Contractor since it bore no onus. The Contractor was entitled to leave the scant evidence of Mr Critharis on that issue alone: see Vidal v NRMA Insurance Ltd [2005] NSWCA 390 at [15] (Handley JA, Mason P and Brownie AJA agreeing). The evidence was insufficient to establish on what basis the monies had been withheld under the Head Contract or the extent to which the Builder was itself responsible for the withholding monies given its obligations to the Owner under the Head Contract. A consideration of the terms of the Head Contract and the Sub-contract does not lead to an inference that loss flowing to the Builder from its breach of the Head Contract (leading to monies being withheld by the Owner) would be recoverable from the Contractor. Indeed the Sub-contract expressly conferred rights on the Builder in respect of any breaches by the Contractor.

The requirement that the damages not be too remote is commonly referred to as the second limb of Hadley v Baxendale (1854) 9 Ex 341; (1854) 156 ER 145. The remoteness limitation has given rise to what was referred to by Brennan J in Baltic Shipping Company v Dillon (1993) 176 CLR 344 at 368; [1993] HCA 4 as the “merged principle”. This principle was articulated by Lord Reid in C Czarnikow Limited v Koufos [1969] 1 AC 350 (Czarnikow) at 385:

While the Contractor could reasonably expect that any deficiencies in its work would give rise either to a demand from the Builder that it make good any defects or to a claim by the Builder under cl 13 of the Sub-contract, it by no means followed that it was in the reasonable contemplation of the parties that the Contractor would be liable for any monies withheld by the Owner under its Head Contract with the Builder: see Ipp JA’s consideration of the distinction between reasonable foreseeability and being within the parties’ reasonable contemplation in Stuart Pty Limited v Condor Commercial Insulation Pty Limited [2006] NSWCA 334 at [107]-[123]. The determination of this issue in the Builder’s favour would require at least some evidence beyond that which Mr Critharis had given in his affidavit, to establish that it was not too remote and that it was a head of damages which can be taken to have been reasonably in the contemplation of the parties to the Sub-contract at the time it was entered into. No such evidence was adduced.

For the reasons given above, I do not consider that it was open to the Court below, as a matter of law, to assess damages on the basis of the withholding monies. The evidence was insufficient to discharge the Builder’s onus of satisfying the merged principle in Czarnikow set out above in respect of those withholding monies, which were plainly not a direct loss under the Builder’s contract with the Contractor but rather alleged to be a consequential loss under the Head Contract between the Owner and the Builder. Her Honour was in error in determining in [114] of her reasons that the loss was a “direct loss to the [Builder]”.

Although significant principles of law are engaged, the question raised by ground 4 is not solely a question of law but rather a question of mixed law and fact since there was some evidence to support the finding. Accordingly, leave to appeal is required under s 40(1) of the Local Court Act 2007 (NSW). I am satisfied that a grant of leave is warranted because of the importance of the legal principles and the errors established in her Honour’s approach: see Café Du Liban Pty Ltd v Bespoke Garage Pty Ltd [2017] NSWSC 779 at [4] (Beech-Jones J).

It follows that the Builder is not entitled to judgment in his favour in the amount of the withholding monies. However, having established breach of contract, the Builder is entitled to judgment, breach being the gist of the cause of action. Subject to the fate of the cross-summons, the Builder is entitled to no more than nominal damages as he has established no actual loss.

Since the judgment to which the costs order made by her Honour related must be set aside, the costs order, too, will fall away. The appropriate order for costs in the Court below, and whether such order ought be made by this Court or by the Court below on remitter will be considered after the cross-summons has been addressed.

In these circumstances, it is not necessary to address separately grounds 1 and 2 (which concern the adequacy of the magistrate’s reasons). Although grounds 1 and 2 do not require leave, sufficiency of reasons involving a question of law, (s 39 of the Local Court Act), it follows from what I have said in relation to ground 4 that the legal error was not so much in failing to explain the course taken but in making the finding itself.

Ground 3 (which concerns the onus of proof) does not strictly arise, having regard to my conclusion that ground 4 has been made out. In other words, it is not to the point whether the claim was established to the requisite standard and which party bore the onus, since her Honour was not entitled to make the finding, having regard to the way the Builder had put its case and the evidence before her Honour.

In these circumstances, it is also unnecessary to address the Contractor’s submission that the judgment sum was required to be reduced to make allowance for GST and therefore fell below $20,000, being the jurisdictional limit of the Small Claims Division of the Local Court.

As referred to above, the Builder seeks leave to cross-appeal against the rejection by the Court below of its claim for the cost of rectification.

The Builder argued that her Honour was in error in refusing the claim for the cost of rectification. Mr Weaver relied on legal principles established by authorities which he accepted that he had not raised in the Court below. A party is generally not entitled, on appeal, to make a different case than the one put below. In Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33 the plurality (Gibbs CJ, Wilson, Brennan and Dawson JJ) said at 7-8:

One of the authorities now relied on by the Builder in this Court, Bellgrove v Eldridge (1954) 90 CLR 613; [1954] HCA 36, was raised in the Court below by the Contractor in its submissions. The Builder did not respond to the Contractor’s submissions in this respect, thereby indicating that it did not rely on the stream of authority that included Bellgrove v Eldridge.

Her Honour’s reasons for rejecting the claim for damages based on the cost of rectification are contained in [115]-[121], which are extracted above. It appears to me that, although the argument put by the Builder in this court (based on Jones v Stroud District Council [1988] 1 All ER 5, referred to below) was not put in the Court below, the evidence adduced, and the authorities relied on, by the Contractor raised the issue squarely. Accordingly, I consider that the Builder is entitled to make submissions in this Court. However, if the Builder is successful on a point not taken in the Court below, the consequences for costs would need to be addressed.

The summary of evidence relevant to the appeal and the cross-appeal (but not to the notice of contention) shows that there was no evidence that the Builder was either obliged to, or intended to, rectify the wall. Indeed the evidence adduced was to the contrary. The Owner did not depose to any present expectation that the wall would be rectified by the Builder and he confirmed that there were no proceedings on foot between him and the Builder. It was common ground that any such proceedings would now be statute-barred. Indeed so much can be taken to have been accepted by the Builder since Mr Weaver opened the case on the basis that the Builder could not “in all good conscience” leave the wall as it was. The objective facts showed that the Builder had done precisely that for the period of over six years since November 2012 when the Owner first noticed the deterioration of the wall and 28 February 2019 when Mr Critharis gave his evidence.

Mr Weaver sought to overcome the lack of evidence which could assist the Builder on the issue of the prospects of his rectifying the wall by submitting that I ought draw the inference from the fact that there had been negotiations between the Owner and the Builder for the rectification of the wall that it would be rectified. Mr Weaver also submitted that I should infer that the Builder had obtained detailed costings for rectifying the wall, not merely for the purposes of the proceedings, but also because it intended to carry out the work. He also asked rhetorically: if there was “any suggestion or any thought in [Mr Blank’s] mind that this would not lead to a completion of the wall, you’d have to ask why he would bother to attend Court to give evidence in the proceedings”. Mr Weaver also sought to distinguish the subject property (a waterfront at Camp Cove) from “a single fibro bungalow in another part of Sydney” to support a submission that “this is a home where people aren’t going to put up with something that is half done”. I regard these matters as no more than speculation. They are insufficient to cast any doubt on the factual findings drawn by the Court below.

The more significant obstacle in the path of the Builder’s challenge to her Honour’s rejection of its claim for damages measured by reference to the cost of rectification was that it was based on the factual findings set out in [115]-[121] and, in particular, her Honour’s conclusion at [121]:

Even if this finding could be characterised as raising a question of mixed fact and law, and therefore susceptible to a grant of leave, it was plainly correct. The incontrovertible facts were that, at the time of the hearing, seven years after the completion of the head contract, no rectification work had either been done or requested. The Limitation Act period of six years had expired in relation to any relevant breach of either the Head Contract or the Sub-contract. The limitation period for any action by the Owner against the Builder pursuant to Part 2C of the Home Building Act for breach of a statutory warranty was seven years after the completion of the work to which it related: s 18E, as in force prior to the Home Building Amendment Act 2011 (NSW), which relevantly applied because of cl 109 of Schedule 4 to the Home Building Act. Accordingly, at the time Mr Blank gave his evidence on 28 February 2019, he had slightly more than a week to bring proceedings against the Builder for any damages for breach of a statutory warranty. He gave no evidence whatsoever that he had any intention of doing so. It would, in any event, appear that Mr Weaver accepted this to be the case, having regard to the way in which he opened the Builder’s case in the Court below.

I discern no error in her Honour’s approach which was entirely consistent with the authorities to which Mr Weaver referred this Court, to which I will now, for completeness, turn.

Mr Weaver relied on the following passage from Brooking on Building Contracts (5th ed, 2014, LexisNexis Butterworths) at [11.14]:

The principle, which derives from Jones v Stroud District Council, allows an owner of property to recover damages by reference to the cost of rectification of the property to bring it to the condition it would have been in had the contract not been breached, irrespective of whether the property has actually been rectified at the owner’s expense. Neil LJ said at 14:

Thus, there were two express riders to the principle: first, that the plaintiff must have a proprietary interest in the property in need of rectification by reason of the defendant’s breach; and, secondly, that the plaintiff has proved that the property “has been or will be repaired”.

In Alucraft Pty Ltd (in liquidation) v Grocon Ltd (No 2) [1996] 2 VR 386 (Alucraft v Grocon), the question arose as to the quantum of damages to be awarded to a contractor, Grocon, which had breached the head contract with the proprietor by reason of a breach by a sub-contractor, Alucraft, of the sub-contract. Grocon had sued Alucraft on a cross-claim and claimed the cost of rectifying Alucraft’s defective work. Alucraft argued that Grocon was not entitled to the cost of rectification since three years had elapsed since the work was done and there was no evidence that the proprietor was likely to take action. It submitted that to award damages to Grocon on that basis would be to put it in a better position than had there been no breach. In response, Grocon submitted that the appropriate measure of damages was the cost of rectification and that it was immaterial whether the rectification would be carried out. Grocon relied on authorities which included Bellgrove v Eldridge in which the builder sued for payment for the construction of a house. The owner cross-claimed for damages for breach on the basis that the house needed to be demolished and re-built in accordance with the plans and specifications. Smith J in Alucraft v Grocon distinguished Bellgrove v Eldridge on the basis that Grocon was not the proprietor and therefore had no proprietary interest in the finished product. His Honour said at 392:

His Honour proceeded to assess the damages for which Grocon was entitled to compensate it for Alucraft’s breach on the basis that it was “an extremely remote possibility that it [the proprietor] will now seek to have them rectified at Grocon’s cost” (399). As the only relevant bar to action by the proprietor was the Limitation of Actions Act 1958 (Vic) and the period had not yet expired, there was still a chance that the owner would require Grocon to rectify the default. Smith J assessed the cost of rectification at $35,000 and awarded the sum of $5,000 as compensation for the risk to which Grocon remained exposed that rectification would be required.

In Roman Catholic Trusts Corporation v Van Driel Ltd [2001] VSC 310, Hansen J approved of the following statement by Lord Griffiths in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 at 97; [1993] UKHL 4:

In Pourzand v Telstra Corp Ltd [2012] WASC 210 at [205], Edelman J referred to a qualification on the general requirement that the property must be owned by the plaintiff for the principle in Jones v Stroud District Council to apply as follows:

In the hypothetical example, the philanthropist had spent real money, the contract price, to get an actual result: the repair of the hall. The money required to put him in the position he would have been in had the contract been performed was, in that case, the cost of the repair of the hall. In the present case, the Builder had been paid in full for the work referable to the Contractors work on the wall. The Owner had not required him to rectify it and there was, as her Honour was entitled to find, no prospect that the Builder would actually rectify the wall or arrange for someone else to rectify it. Accordingly, the Builder failed to prove that he suffered loss or that his damages ought be measured by reference to the cost of rectification.

None of these cases, even had they been brought to her Honour’s attention, could, on proper analysis, have altered the result. I note that Mr Weaver accepted the correctness of Alucraft v Grocon which is consistent with the other authorities referred to.

Having considered the issue raised by grounds 1 and 1A of the cross-appeal in some detail, I am disposed to grant leave to the Builder to appeal pursuant to s 40(1) of the Local Court Act but otherwise dismiss the cross-summons.

It is, accordingly, unnecessary, for the reasons given above, to address the Contractor’s notice of contention. In particular, it is not necessary to address the contention that the Contractor could not, as a matter of logic, have been in breach of s 18B(1)(f) in circumstances where the Contract was entered into a couple of years before the Sub-contract, thereby making it impossible for the Owner to be relying on any expertise by the Contractor, the Contractor having not even been identified when the Contract was entered into: see Ashford Shire Council v Dependable Motors (1960) 104 CLR 139; [1960] HCA 87.

For the reasons given above, the substantive orders made by the Court below must be set aside, together with the costs orders made as a consequence of them. The Builder is nonetheless entitled to judgment on its claim since it established that the Contractor breached the contract. The Contractor’s challenge to this finding was limited to the notice of contention and therefore is not pressed and does not need to be determined. The Builder has failed to establish that it has suffered loss and therefore is entitled only to nominal damages to register the infraction of its legal right: Baume v Commonwealth (1906) 4 CLR 97 at 116–117 (Griffith CJ); [1906] HCA 92, following The Owners of the Steamship Mediana v The Owners, Masters and Crew of the Lightship Comet [1900] AC 113 at 116 (Lord Halsbury LC). The parties agreed that I should determine the appropriate costs order in the Local Court if I considered it to be appropriate to do so. Given the orders I propose to make, I consider that the only appropriate order in the Local Court would have been to order the Builder to pay the Contractor’s costs. Accordingly, that order will be made.

The Contractor has been wholly successful in these proceedings. In these circumstances, the application of the general rule in UCPR, r 42.1 that costs follow the event, would lead to an order that the Builder pay the Contractor’s costs of the proceedings in this Court. However, the parties indicated that they wished me to reserve the question of costs of these proceedings to provide them with an opportunity to address me on costs.

For the reasons given above, I make the following orders: