Crosby & Browning v Narellan Pools Fraser Coast [2013] QCAT 509

CITATION: Crosby & Browning v Narellan Pools Fraser Coast [2013] QCAT 509 PARTIES: Ms Anne Crosby and Mr Colin Browning (Applicants) v Narellan Pools Pty Ltd and GC Hodges Investments Pty Ltd trading as Narellan Pools Fraser Coast (Respondents) APPLICATION NUMBER: BDL343–12 MATTER TYPE: Building matters HEARING DATE: 9 August 2013 HEARD AT: Bundaberg DECISION OF: John Milburn, Member DELIVERED ON: 21 October 2013 DELIVERED AT: Hervey Bay ORDERS MADE: 1. Narellan Pools Pty Ltd and GC Hodges Investments Pty Ltd trading as Narellan Pools Fraser Coast are jointly and severally ordered to pay to Anne Crosby and Colin Browning the sum of $25,000. CATCHWORDS: Swimming pool defects - liability of franchisor and franchisee - damages or replacement - breach of contract - breach of statutory obligations - limitation periods - ongoing structural warranty - liability of pool manufacturer - measure of damages APPEARANCES and REPRESENTATION (if any): APPLICANT: Ms Anne Crosby and Mr Colin Browning RESPONDENT: Narellan Pools Pty Ltd represented by Mr Chris Meyer, chairman GC Hodges Investments Pty Ltd trading as Narellan Pools Fraser Coast represented by Mr Gary Hodges, director -- 1 of 9 -- 2 REASONS FOR DECISION [1] Narellan Pools Pty Ltd is a pool manufacturer and franchisor. Narellan Pools Fraser Coast is a franchisee of Narellan Pools Pty Ltd. On 2 September 2009, Ms Crosby and Mr Browning entered into a contract with Narellan Pools Fraser Coast for the supply and installation of a Narellan Pools swimming pool. The contract price was $39,200. [2] Narellan Pools Fraser Coast ordered the manufacture of a swimming pool from Narellan Pools Pty Ltd in order to fulfil the requirements of the contract with Ms Crosby and Mr Browning. [3] The swimming pool was delivered to the subject site early in November 2009 and installed by Narellan Pools Fraser Coast. Handover [4] At handover on 10 December 2009, Ms Crosby and Mr Browning completed the following documents: a) handover certificate; b) manufacturers exclusive warranty and warranty card; c) customer feedback form; and d) handwritten notes itemising two concerns: i) beach area ‘bounce’; ii) Zodiac cleaning system ‘poppers’. [5] At handover Ms Crosby verbally raised concerns regarding cracks in the swimming pool (also referred to as ‘fractures’ or ‘crazing’). The pool was not clean and visibility was impaired. Mr Enders, representing Narellan Pools Fraser Coast, acknowledged the concern and said he would raise this issue and the issues referred to in the handwritten notes with his principal, Mr Gary Hodges of Narellan Pools Fraser Coast, for further investigation. [6] Mr Hodges later categorised the fractures as cosmetic only. He said the warranty as to structure was not affected. Issues [7] During the hearing the tribunal considered issues relating to: a) cracks (‘fractures’ or ‘crazing’); b) the existence of ‘bounce’ in the beach area of the swimming pool (also referred to as ‘drumminess’– being a reference to its sound and ‘trampoline effect’ – being a reference to its feel); and c) an ineffective cleaning system. [8] The most important issue for consideration was the cracks. -- 2 of 9 -- 3 The Applicants’ claim [9] In their application Ms Crosby and Mr Browning sought removal and replacement of the pool and making good the subject site. The original claim was later substituted for a claim which involved, as an alternative, a claim to monetary compensation in the sum of $58,897 for rectification of the defective pool and associated works and an award for actual expenditure. At the hearing, the applicants revised their claim for monetary compensation by requesting consideration the tribunal for an overall award in the sum of approximately $96,000. The Respondents’ response [10] The tribunal was disappointed to note that no formal response was prepared by either respondent nor did either respondent provide an outline of evidence, statement or written submission before the hearing1. The evidence [11] Mr Rick Drew was called by the applicants. Mr Drew is a licensed building certifier and he made reference to his written report dated 5 April 2013. [12] Mr Drew stated2 that ‘if the foundation material in which the pool is located is highly or extremely reactive and the pool was not constructed in accordance with the provisions provided by Showers Engineering, the constant movement would have a major impact on a fibreglass swimming pool. The result would be a progressive negative impact on the aesthetics of the pool and possibly complete failure at some stage in the future’. [13] No soil test was undertaken prior to construction of the pool. Mr Drew said that in his view the pool should never have been the subject of certification without the undertaking of the soil test. He would not have approved the pool without such a test. He made reference to the engineer’s specification where there were two types of construction methods appropriate for a pool of this nature with the type of construction dependent upon the soil test findings. In his opinion the certifier in this instance had not followed appropriate protocol. Mr Drew concludes that there was therefore an invalid approval. [14] In his evidence Mr Drew referred to Australian Standard Classification AS2870 which deals with residential slabs. His evidence was that such standards as are referred to in the document must be adhered to in all constructions, including construction of swimming pools. He was not satisfied that was the case in this instance. [15] Ms Crosby and Mr Browning called Mr Keith Gill, Bundaberg Fibreglass Services, in relation to the alleged cause and long-term effect of the gel 1 This was in remedied in part by provision of an outline of argument by Narellan Pools Pty Ltd and GC Hodges Investments Pty Ltd trading as Narellan Pools Fraser Coast on the 21st day after the hearing; provided at the invitation of the tribunal. 2 at page 2. -- 3 of 9 -- 4 coat fractures. In his handwritten report, dated 15 March 2013, Mr Gill said that ‘the stress cracks on the bottom of the pool are extensive. From the position, direction of travel and shape of them, it is apparent that they were caused by excessive air pressure being applied to release the pool from the mould in manufacture. If left untreated, over time water can enter the fibreglass laminate and affect the structural integrity of the pool. To repair this pool with this finish is impossible and in my opinion should be replaced’. [16] During the course of cross-examination Mr Gill conceded that the fractures may have been caused by reason or reasons other than during the course of the manufacturing process. Mr Gill suggested that the cracks seemed to be getting worse. [17] When pressed during cross examination, Mr Gill suggested that an estimated cost of rectification of the gel coat would be in the order of up to $10,000. This rectification process would involve the reapplying of gel coat to the affected areas. He concluded the ‘remedied’ product would be a swimming pool with a poor finish. [18] Despite this remedial task being within his field of expertise Mr Gill said that it was a remedial task he would not wish to undertake himself. He could, at best, produce a substandard finish. [19] The respondents called Mr Peter Stollery. Mr Stollery, an expert funded by Narellan Pools Pty Ltd, inspected the pool on 5 June 2012. Mr Stollery then prepared a written report which was sent to the respondents. The tribunal was not afforded the opportunity to consider the written report and therefore concludes that the content would not have been advantageous to the interests of the respondents. During the hearing Mr Stollery said that he undertook a thorough investigation of the swimming pool. Mr Stollery provided a short statement dated 14 May 2013 prepared for the hearing. In his statement he says that he observed considerable crazing in the gel coat surface and he listened to the concerns of the customers in relation to the drumming sound of the beach area. He concluded by saying the sound is common with the Rockpool design. [20] In evidence Mr Stollery suggested the crazing was cosmetic only and does not affect the structural integrity of the pool. He concluded that it is not advisable to repair the cracks as it would not be possible to obtain a perfect colour match. He stated that the cover plate of the pool filter had to be replaced. [21] Mr Browning provided evidence through his written material that he was a party to a conversation with Mr Gary Hodges in April 2010 when Mr Hodges stated that ‘the cracks in the pool were caused when the pool was removed from the mould’. This statement was not contradicted by Mr Hodges. [22] The respondents called Mr Shane Dallison, an employee of Narellan Pools Pty Ltd. Mr Dallison provided a statutory declaration dated -- 4 of 9 -- 5 16 May 2013 and in it he attests to undertaking discussions with the applicants as representatives of the pool builder and in the course of doing so acknowledged crazing around the radius of the pool, the existence of the drumming sound of the Rockpool Beach and offered a monetary sum to the customers to leave the pool in an ‘as is’ condition. [23] He indicated that repair was possible but if it was repaired it would be noticeable. The crazing he said was the worst he had ever seen. [24] Surprisingly and most disappointingly Mr Hodges chose not to file a response, written statement or written submissions for the benefit of the tribunal prior to the hearing. [25] One might have expected him to do so particularly given certain allegations that the clients were not happy with his response to their requests for resolution of their complaints. I refer to an e-mail from Narellan Pools Pty Ltd (former) employee Monica Abarca3 to Karen Latta4 where, in reference to a complaint by Mrs Anne Crosby, she says that ‘she is not happy with Gary from NP Hervey Bay especially due to his attitude from the last visit, very unpleasant. She is not happy with the $6000 Zodiac pool cleaning system where Gary has been advising that someone from Zodiac is coming to check for the last 7 – 8 months and still has not appeared. Not happy with the controller as it blew up’. [26] Mr Hodges was not impressive as a witness. He was clearly dismissive of the concerns of the customer in many ways. Whilst I do accept he spent a considerable period of time on site investigating the problem it appears that little has been done by way of remedial action to assist. Indeed, part of his response to the clients’ concerns was clearly inappropriate. In response to concerns raised regarding the ineffective Zodiac cleaning system Mr Hodges was prepared to simply refer the customers to the manufacturer without accepting any responsibility whatsoever for the product he supplied to the customers. I find this approach completely inadequate and inappropriate. There has been ample opportunity already for the problems associated with the pool cleaning system to be remedied. [27] Under cross-examination Mr Meyer, managing director of Narellan Pools Pty Ltd, indicated that in his view it was not necessary to take someone to inspect the pool as per the direction5 previously made by Senior Member Richard Oliver, Queensland Civil and Administrative Tribunal. Findings [28] The incidental use of the swimming pool in question is not an acceptance of the product which would preclude Mr Browning and Ms Crosby from pursuing the current action. 3 Monica Abarca was at the time employed by the franchisor as franchise customer support specialist/receptionist Narellan Pools Pty Ltd. 4 Another employee of Narellan Pools Pty Ltd by e-mail dated 23 May 2012. 5 direction 10 April 2013. -- 5 of 9 -- 6 [29] The tribunal is not satisfied that the pool is fit for purpose or of merchantable quality. The swimming pool has defects which after nearly four years since installation have not been rectified. The defects are substantial by any reckoning and the evidence suggests clearly that at best the remedial work could only bring the pool up to a less than adequate standard. [30] The respondents maintained that the defects could be remedied. Neither respondent called a witness able to state that he or she was ready, willing and able to remedy the work. Mr Gill, despite his expertise in the area, gave evidence that the damage to the pool was so substantial he would not attempt to repair it. All the evidence shows the pool is damaged through cracking and at very best it could be repaired but never returned to an as new state. Even if it could be repaired, the repair work would result in an inadequate product for the consumers. [31] There is no contact between Ms Crosby and Mr Browning as customers and Narellan Pools Pty Ltd. Their contract was with Narellan Pools Fraser Coast. They did however respond to advertising material produced by Narellan Pools Pty Ltd and were induced to enter into a contract with the franchisee based on the representations made by the franchisor. [32] According to its advertising material Narellan Pools Pty Ltd ‘have grown to become Australia's leading manufacturer of technologically advanced fibreglass dash reinforced resin swimming pools, supplying and installing throughout Australia and beyond’6, ‘Narellan Pools (has) a large state of the art manufacturing plant …’7. The mission statement of the company states that ‘we are committed to excellence in all aspects of our business. We build quality swimming pools for families to enjoy the many generations and we aim to create a warm, welcoming surrounding for… customers’8. [33] In my view, it is not necessary for me to determine whether the fractures were caused during the manufacturing process or the handling of the swimming pool prior to installation. All that matters is that the pool is fractured and that the fractures have not been remedied and cannot be adequately remedied. I find the pool cleaning system is in need of remedy and that the drumminess/trampoline effect in the rock pool area is less than satisfactory. [34] It is not necessary for the tribunal to determine whether the problems associated with the gel coat fractures do or would affect the integrity of the swimming school pool structure. The problems associated with the swimming pool are not minor. The tribunal concludes that there are a number of substantial problems with the pool and that these include cracking, problems associated with the pool cleaning system and the trampoline effect associated with Rockpool Beach. The product failure is 6 Undated advertising pamphlet. 7 Ibid. 8 Ibid. -- 6 of 9 -- 7 properly categorised as a major failure. The swimming pool cannot easily or adequately be remedied to make it fit for purpose. I find the pool supplied was not acceptable in appearance and finish and free from defects. I find the consumers have been reasonable in their approach to the issue. No reasonable consumer would have purchased the swimming pool if they had known about the problems associated with it. [35] The tribunal concludes that the pool was not properly certified and approved from the outset. [36] As to the liability of Narellan Pools Pty Ltd, the Trade Practices Act 1974 (Cth) is relevant to these proceedings. Specifically, statutory obligations were imposed upon manufacturers pursuant to part of Part V Division 2A which deals with actions against manufacturers and importers of goods. I find that a swimming pool fits within the definition of ‘goods’.9 The legislation provides a remedy for consumers which would have the effect of imposing liability upon both the manufacturer and supplier of goods. The legislation provides an entitlement for a consumer to sue the manufacturer directly. The action must however be brought in time and in this case that has occurred, albeit only just, in relation to the action against the manufacturer. An action under Division 2A may be commenced within 3 years after the day on which the cause of action accrues. Ms Crosby and Mr Browning identified potential issues associated with the manufacturer at handover on 10 December 200910. Their application is dated 12 November 2012 and was accepted into the tribunal on 16 November 2012. [37] Further, Narellan Pools Pty Ltd is liable to the applicants by recourse to the manufacturer's exclusive warranty. [38] I conclude that Narellan Pools Fraser Coast has not performed in accordance with its obligations under the contract it signed with its customers and both Narellan Pools Fraser Coast and Narellan Pools Pty Ltd have failed to comply with their statutory obligations under consumer law. [39] It is the finding of the tribunal that both Narellan Pools Pty Ltd and GC Hodges Investments Pty Ltd trading as Narellan Pools Fraser Coast are liable to Ms Crosby and Mr Browning to rectify the problems associated with their swimming pool or to replace the swimming pool or compensate them appropriately. It is the finding of the tribunal that it is appropriate to order both defendants compensate the applicants. Narellan Pools Fraser Coast has through its own conduct effectively removed rectification as reasonable, viable or appropriate remedy. That being the case, the liability attaching to Narellan Pools Pty Ltd must be dealt with in the same way. 9 Trade Practices Act 1974 (Cth) section 74G. 10 In their application, the applicants state that the defect was first noticed on 12/10/2009. I am satisfied this was a typographical error as all the evidence suggests that the date of the cracks were first noticed was at handover on 10/12/2009. -- 7 of 9 -- 8 [40] In my view is not appropriate to order remedial work is to be undertaken to the swimming pool. In my view it is appropriate to compensate the applicants by monetary payment. In part, I do so because the applicants have been extraordinarily patient in waiting for something to be done. The applicants originally sought a remedied rectification but later in the proceedings sought compensation in lieu. In my view Narellan Pools Fraser Coast, in particular, has exhibited unsatisfactory conduct in dealing with its customers in this instance. At this late stage, the respondents should not be afforded an opportunity to replace the swimming pool and make good any damage caused as result. [41] In any event, I am not satisfied that the remedial work in relation to the cracking issue would be successful. [42] Ms Crosby and Mr Browning had indicated that they intend to remove and replace the swimming pool. The tribunal acknowledges that a considerable amount of work is required to replace the swimming pool. It is anticipated that such work11 would include: a) gaining access to the site; b) pumping out the water in the pool; c) digging and cutting pipes; d) using a jackhammer to remove pavers; e) excavate around the pool area; f) using a crane to attach to the pool to remove it; g) flooding the outside area; h) trying to remove the pool; and i) once removed, replacing the pool. [43] I am not satisfied however the current problems associated with the swimming pool are of sufficiently great concern at the present time to warrant the immediate removal and replacement of it. This leads to a conclusion that the consequence of failure by the supplier and manufacturer is that the consumer may seek compensation for reduction in the value of the goods below the price paid for them. It is for the tribunal to determine the appropriate measure of damages in this case. Some measure of caution needs to be exercised in drawing analogies with the traditional common-law measures of damages in tort and contract12. [44] The applicants have requested consideration for payment of considerable out-of-pocket expenses and recompense for their own time, based on hourly rates. The tribunal will not make an order to compensate the applicants’ personal loss of time. It is a factor however that the tribunal is entitled to consider if making a global damages award. The applicants were not legally represented and, in my view, it is not appropriate for them 11 by reference to the evidence of Mr Rod Enders. 12 The Australian Consumer Law, SG Coroners, at page 513. -- 8 of 9 -- 9 to receive a costs order as such. I am however persuaded that they should be reimbursed for certain expenditure, on a global basis. [45] In my view, it is appropriate to compensate the applicants by monetary payment. The respondents should not be afforded an opportunity to replace the swimming pool and make good any damage caused as result. The consumer should not suffer a situation where the pool is subject to remedial action only to find that the remedial action itself is a failure. [46] The structural integrity of the pool is at risk but at this time it is intact. If the structure fails the applicants may claim against the structural warranty provided to them by the respondents. [47] The measure of damages must be calculated and adapted so as to most fairly compensate13. In this jurisdiction, tribunal has a broad discretion and it seems to me that it is appropriate to compensate in a way which justly provides a reflection of truly how much worse off the applicants are now as result of the conduct of the respondents than would have otherwise been the case. Accordingly, I am not minded to recompense Ms Crosby and Mr Browning entirely for the cost of the pool cost, the cost of removal of the pool, their time, and their expenses. After all, they still have a pool which can be used and which may result in an increase in the value of their property. No evidence was produced to the tribunal as to whether the swimming pool in its current position might increase the value of the applicants’ property or make it more desirable if they choose to sell it. As a result, I need to impose a subjective judgement based upon all the circumstances. The applicants have waited a long time for some form of justice. They have been forced to expend much time and effort in pursuit of this claim. I have concluded that a fair figure of compensation to the applicants is the sum of $25,000 and I order that this amount be paid by Narellan Pools and/or Narellan Pools Fraser Coast who I find jointly and severally liable. [48] Narellan Pools Pty Ltd and GC Hodges Investments Pty Ltd trading as Narellan Pools Fraser Coast are jointly and severally ordered to pay to Anne Crosby and Colin Browning the sum of $25,000. 13 Henville v Wacker (2001) 206 CLR 459 (McHugh J). -- 9 of 9 --