Facts

On 6 September 2002, Mr and Mrs Wheeler (appellants) contracted with the building company Ecroplot (respondent) to have a home built for them. The contract was a standard form contract which contained a warranty given by the builder that “the building works will be performed in a proper and workmanlike manner and in accordance with the plans and specifications attached to this contract.”  The plans provided for the construction of a four bedroom home on a slope, using a “cut and fill”method, with the rear two-thirds of the house to be constructed over the fill. 

Site works commenced in September 2002 and the home was completed by March 2003, but by late July 2003 some cracks appeared in the walls and some doors were found not to be opening and closing properly. The problems increased over the following few years during which time investigations and some limited repairs were undertaken. On February 2007, the appellants commenced proceedings alleging breaches by the respondent of the building contract and claiming rectification costs.

The judgment at first instance

On 1 May 2009, S J Gibb DCJ found that whilst the respondent 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, judgment was in favour of the respondent.

Issues on appeal

On appeal, the appellants refined their arguments and claimed 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 in allowing the fill to dry out before the concrete slab of the home was laid. 

Judgment and reasons

Macfarlan JA (agreed with by Basten JA and McColl JA) found that in addition to the two breaches found by the primary judge, the appellants successfully made out that there had been a breach by the respondent in allowing the fill to dry out before the concrete slab of the home was laid. Further, the court considered that this breach materially contributed to the damage that was suffered. 

Putting aside the technical nature of the defects, the court looked at the longstanding position in Australia as to the appropriate measure of damages as set out in Bellgrove v Eldridge [ 1954 ] HCA 36. The court confirmed the principles of Bellgrove v Eldridge specifically that, for building contracts, 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 ] and “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].

In accordance with these principles, the appellants were awarded rectification costs of $107,224.64. The primary component of the rectification costs was the cost of underpinnings to embed the footings into the natural soil to the depth required by the contract. The appellants did not contend that the observed damage was caused by the breach as to the footings (as noted above this breach was found to have occurred by the primary judge in the first instance and agreed upon in the appeal), but asserted that they were entitled to have footings embedded to the contractual depth to ensure the stability of their home.  MacfarlanJA found they were so entitled to have their home accord with the contractual standard concerning footings and it was reasonable for the appellants to incur the cost of underpinnings to rectify the respondent’s breach. His Honour did not find that the appellants were entitled to damages for repairing or disguising visual damage or relocation costs.