Hooper v Metricon Homes Pty Ltd [2014] VCAT 277

In Hooper v Metricon Homes, a house was built on a poorly built slab and foundation, causing the house to exhibit serious movement. The Tribunal awarded damages for demolition and rebuilding of the house.

The facts

An owner contracted a builder to build a house, and the builder engaged an engineer to prepare the slab design. When built, the house exhibited serious movement, including doors jamming and cracking, large variations in floor levels and large variations in ceiling heights. The owner sued the engineer and the builder. The owner alleged that the engineer arrived at an inadequate design in breach of its duty of care to the owner, and the builder did not build the slab in accordance with the design or proper workmanship in breach of the implied warranties in the Domestic Building Contracts Act 1995 (Vic) (the “DBCA”).

Subcontractor duty of care and causation

The engineer argued that no duty of care was owed because the owner was not vulnerable to it by reason of the protections of the implied warranties in the DBCA. The Tribunal disagreed. Referring to Moorabool Shire Council v. Taitapanui [2006] VSCA 30 the Tribunal noted that there was nothing in the DBCA to suggest that the warranties replaced a duty of care otherwise owed by a subcontractor to an owner ([121] to [126]). Also, the Tribunal considered that the owner was vulnerable to the engineer so as to attract a duty of care ([127]).

The Tribunal considered that the engineer breached its duty of care to the owner by reason of the engineer’s failure to carry out adequate computations for the slab ([129]). However, the Tribunal considered that the plan designed by the engineer was adequate in any event. As such, the Tribunal held that any damage was not caused by the engineer’s breach of duty of care ([210]).

Demolition v rectification v diminution

The Tribunal found that the builder failed to construct the slab in accordance with the engineering plans and that it failed to adequately compact the fill material upon which the slab was constructed. By reason of this the Tribunal held that the builder breached the implied warranties in s8 DBCA ([172]). The question was what relief should be granted.

The Tribunal referred to the principle in Bellgrove v Eldridge (1954) 90 CLR 613 that the measure of damages for defective workmanship by a builder is prima facie the amount required to rectify the defects complained of, and so give to the owner the equivalent of a building on the owner’s land that is substantially in accordance with the contract, provided that is a reasonable course to adopt.

The Tribunal noted the extensive damage to the building, and preferred the evidence of the owner’s expert who said that the slab has not stabilised and will never stabilise. Because it was unstable, ongoing repairs would be required. The Tribunal held that a house performing in that way is not what the builder contracted to build ([219]). The Tribunal held that because the slab cannot be rendered stable then the only way of achieving that is by demolishing the house and re-erecting it on a stable foundation ([220]).

There was an argument that damages for diminution of value should be awarded instead of demolition. The Tribunal formed the view the diminution in value would be $196,000 ([231]). The Tribunal held that demolition and-rebuilding would be the only way to give the owner the building it contracted for, and this was not unreasonable ([234]). The Tribunal awarded the owner damages for the cost of demolition and re-construction ($264,784), damages for loss of rental during demolition and re-construction ($15,600) and loss of rental ($9,205).

Discussion

Often owners are reluctant to claim against subcontractors because of a concern that there is no duty of care owed by the subcontractor to the owner. The presence of the implied warranties in domestic building matters means that an owner has protection; however, Hooper has made it clear that despite this the owner is still considered vulnerable to particular subcontractors.

Also, it is important to look at the issue of causation. Here, the engineer was found to have breached its duty of care by failing to carry out proper calculations and computations, and yet the plan was still considered adequate. This is where the role of the expert is critical to evaluate the extent to which the design led to the issues exhibited in the structure.

Finally, the Tribunal preferred demolition to diminution of value, because this gives the owner what it contracted to buy, and it was not an unreasonable course to adopt. Because of the severity of this outcome, Hooper will serve as a serious warning to builders and engineers that the Tribunal will come down on them like a ton of bricks if they fail to pay attention to the slab.

It is understood that an application for leave to appeal has been filed.