Cavric Pty Ltd t/a Cavalier Homes Mackay v Cameron [2010] QCATA 90

CITATION: Cavric Pty Ltd t/a Cavalier Homes Mackay v Cameron [2010] QCATA 90 PARTIES: Cavric Pty Ltd t/a Cavalier Homes Mackay (Applicant/Appellant) v Jennifer May Cameron (Respondent) APPLICATION NUMBER: APL077-10 MATTER TYPE: Appeals HEARING DATE: 16 July 2010 HEARD AT: Brisbane DECISION OF: Justice Alan Wilson, President Kerrie O’Callaghan, Senior Member DELIVERED ON: 13 December 2010 DELIVERED AT: Brisbane ORDERS MADE: 1. Grant leave to appeal and allow the appeal. 2. In lieu of the order made in the Tribunal, order that Cavric Pty Ltd trading As Cavalier Homes Mackay pay Jennifer May Cameron $30,231 for damages and $1,849 for interest; and, that Cavric Pty Ltd pay Ms Cameron’s costs of the proceedings before the Tribunal assessed on the basis of 60% of the lower District Court Scale of Costs. CATCHWORDS: DOMESTIC BUILDING DISPUTE – QUANTUM OF DAMAGES – LOSS – BETTERMENT – where contractor breached building contract and contract terminated – where homeowner hired other builders to build house at an increased cost – where Tribunal awarded damages for loss of increased costs to build other house – whether homeowner suffered actual loss – whether Tribunal considered principles of ‘betterment’ – whether Tribunal erred in its approach to award of damages DOMESTIC BUILDING DISPUTE – QUANTUM -- 1 of 10 -- 2 OF DAMAGES – INTEREST – where Tribunal made findings about future costs of interest – where interest which would have been paid on loan to construct house was deducted from damages for loss of rental – whether any evidence about future costs of interest or future use of house – whether error of law and fact JURISDICTION – COST-AMOUNT – Queensland Civil and Administrative Tribunal Act 2009, ss 142(2)(b), 149 – MEANING AND EFFECT – where appellant seeks to appeal amount of costs order – where cost orders can only be appealed to the Queensland Court of Appeal – whether appellant can appeal costs order to QCAT appeals tribunal Haines v Bendall [1991] 172 CLR 60 Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313 Queensland Civil and Administrative Tribunal Act 2009, ss 142(2)(b), 142(3)(b), 149 APPEARANCES and REPRESENTATION (if any): APPELLANT: S.D. Anderson of Counsel instructed by Macrossan and Amiet Solicitors RESPONDENT: C.M. Muir of Counsel instructed by McKays Solicitors REASONS FOR DECISION President: [1] In this matter the Appeal tribunal was comprised of QCAT Senior Member Kerrie O’Callaghan and me. I have had the advantage of reading her reasons in draft. I agree with them, and with the orders she proposes. Senior Member Kerrie O’Callaghan: [2] This proceeding arises out of a building contract between the appellant Cavalier Homes and Mrs Cameron under which Cavalier agreed to construct a house for her, on land she owned. Building never commenced; rather, Cavalier unilaterally returned Mrs Cameron’s deposit of $12,750.00 to her, and she subsequently terminated the contract. [3] Following termination Mrs Cameron engaged another builder, Peter Thorne Builders (‘Thorne’) to construct a house on the land. It cost Mrs -- 2 of 10 -- 3 Cameron $42,945.00 more to construct this house than the price under her contract with Cavalier. [4] Mrs Cameron sought damages from Cavalier for: (a) loss of rental income (on the basis that Cavalier knew Mrs Cameron intended to use the property as an investment property); and (b) loss of capital (being the additional cost of $42,945.00 to have the house built by Thorne). [5] Cavalier’s defence was that the contract had been terminated by agreement between the parties, whereafter the deposit was returned; and, Mrs Cameron was not entitled to any damages. In the alternative, Cavalier argued if there was no agreement to terminate then Mrs Cameron could only recover damages caused by the breach. [6] In relation to the loss of capital they argued that the increase in cost was as a result of the Thorne house being a superior product, so no loss was suffered as a consequence of the breach. [7] As to the loss of rental, whilst it was agreed between the parties that if damages were to be awarded there had been a loss of rental of $500.00 per week for 57 weeks, Cavalier argued that Mrs Cameron was not entitled to the gross rental claimed. It contended that any award for lost rental had to be reduced by associated costs, including interest on the monies borrowed to pay for the construction. [8] The learned Member found that the contract had not been terminated by agreement, that Cavalier had breached the contract by failing to build the house, and that Mrs Cameron was entitled to damages. [9] He awarded damages under the two heads claimed: firstly, he awarded damages for loss of rental in the sum of $16,286.00, a figure arrived at by deducting, from the agreed gross rental of $28,500.00, the cost of landlord’s insurance of $594.72, and interest saved by the delay in the sum of $2,806.00. [10] Cavalier argued that a further $18,812.36 should have been deducted because, if construction had proceeded under its contract, Mrs Cameron on her own evidence would have had to pay that amount in interest on the money she planned to borrow. [11] For Mrs Cameron, it was contended that interest should not be deducted because the delay in construction meant that there was simply a delay in the payment of the interest. It was not a saving. [12] The learned Member accepted that argument, to a degree. He observed that it was unknown how long Mrs Cameron would have to pay interest on the loan, and to what extent. He referred to the situation as one where he should assess damages using a ‘broad axe’ approach, and he deducted a further $8,812.00 from the damages for lost rent. In doing this, he gave a credit of $10,000.00 for the future interest cost. -- 3 of 10 -- 4 [13] Damages were also awarded for loss of capital. The learned Member accepted that Mrs Cameron had suffered loss, being the additional cost of building the Thorne house. He found that she had acted reasonably in contracting to construct a house, which was as similar as she could reasonably find, to the original Cavalier house. He also found that Mrs Cameron had chosen to have certain extras in the Thorne house namely higher ceilings, additional paving, tiling in the garage and turf to the yard and that the cost of these items ($19,000.00 cost) should not be borne by Cavalier. He awarded $23,945.00 damages being the additional cost of the Thorne house, less these extras. [14] The appellant raised 3 grounds of appeal: 1. The Tribunal erred in finding that Mrs Cameron had suffered damages to the extent of $23,945.00 as a result of having a ‘Thorne Home’. Mrs Cameron had purchased a home of greater value and therefore suffered no loss. 2. The Tribunal erred in awarding $16,286.00 for loss of rental because: (a) it amounts to double compensation – Mrs Cameron only lost $6,286.47 because that is the net amount she would have earned had Cavalier built the house; and (b) there was no evidence to support the findings of what the future interest position would be. 3. The Tribunal erred in ordering Cavalier to pay 60% of the applicant’s cost because: (a) Mrs Cameron should only have been successful in less than 10% of her claim; (b) costs should have followed the event, with each party paying a percentage of the other’s costs. [15] With respect to the first ground, Cavalier had argued before the Member that Mrs Cameron should not have been compensated at all, because she suffered no loss. The submission was based on evidence given at the hearing by a Mr Darren Palmer, on behalf of Cavalier. He is a certified valuer. Mr Palmer was provided with the two building contracts (the Cavalier contract and the Thorne contract) and briefed by Cavalier to provide an assessment as to the variances in the two (2) contract values. [16] In a written report Mr Palmer considered the Thorne residence superior because of 12 additional features, which he nominated. His opinion was that these variances in the Thorne home warranted a higher contract price, in the vicinity of $40,000.00. In his oral evidence Mr Palmer gave further details about the proportion of the total increase cost for each additional feature. [17] Cavalier argued that Mrs Cameron had chosen some of these additions and, even if that was not so, any increase in the cost of the home was the result of her purchasing a superior product which incorporated these items. -- 4 of 10 -- 5 [18] Both parties accepted that the starting point for the principles governing the assessment of damages was that discussed in Haines v Bendall1: The settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured parties should receive compensation in the sum which, so far as money can do, would put that party in the same position as he or she would have been if the contract had been performed or the tort not committed. [19] In submissions on her behalf Mrs Cameron raised the issue of the extent to which any ‘betterment’ to her position should be taken into account in assessing appropriate damages. She referred to cases where it was necessary to repair or replace a chattel and there were practical difficulties in obtaining an exact replacement for the chattel which was damaged or destroyed. In those circumstances the question which arose was whether some deduction from the replacement cost was to be allowed for any ‘betterment’ to the plaintiff. [20] Mrs Cameron submitted that the relevant cases establish that there are some circumstances in which it is appropriate for a deduction for betterment to be made. The primary cases, she submitted, are ones of ‘extravagance’ where the plaintiff unreasonably chose a course which resulted in betterment. [21] Mrs Cameron contended that, on the evidence, it was clear that she had acted promptly and reasonably in engaging Thorne, who had provided the cheapest of 3 or 4 quotes. Even if the Thorne house was in some respects superior no allowance should, she argued, be made for any betterment because she had acted reasonably and was only placed in the position of needing to engage another builder because Cavalier had breached her contract with it. [22] The learned Member found that, of the additional items referred to in Mr Palmer’s report, Mrs Cameron had indeed requested certain extras namely increased ceiling heights, tiling in the garage, turf, and additional paving. [23] In his comprehensive reasons he then analysed the proposition of ‘betterment’ and the cases referred to by Mrs Cameron, and concluded that the evidentiary burden of establishing betterment fell upon Cavalier. [24] He made specific findings that Mrs Cameron had suffered loss in outlaying extra cost for the Thorne house, and had acted reasonably in contracting to obtain a replacement house which was as similar as possible to the original home to be built by Cavalier. He concluded that it was not possible, by reason of copyright considerations, to get exactly the same home with exactly the same floor area, so the fact that the living and garage areas were slightly bigger in the Thorne house did not mean that she had acted unreasonably. 1 [1991] 172 CLR 60 at 63. -- 5 of 10 -- 6 [25] He also found, however, that there should be a deduction for the extras which Mrs Cameron chose to add to the Thorne home – ceiling variances, garage tiling, extra paths and turf. He accepted Mr Palmer’s evidence as to the value of these extras, which amounted to $19,000, and found that Mrs Cameron was entitled to recover damages of $23,945 being the difference between the contract price of the Thorne house and the contract price of the Cavalier house, less that $19,000.00. [26] Cavalier argued, here, that the purpose of compensatory damages is to put the plaintiff as far as possible in the same position as she would have been, had the contract not been breached. Its submissions were that losses should be identified by reference to the position of the plaintiff, after the defendant’s breach. Mrs Cameron did not, Cavalier argues, prove any loss with respect to her contract to construct the Thorne home. In her pleadings she had said, Cavalier pointed out, that the increase in cost was a result of the increase in construction costs but, in truth, she had no evidence of this. Against that, Mr Palmer’s evidence was that there had been no increase in construction costs and the increase in the cost of the Thorne home was simply a result of superior features. [27] Cavalier also argued that Mrs Cameron had purchased an asset which could be valued, and sold, unlike the ‘replacement’ cases. In Cavalier’s submission the home is not like a ‘widget’, which has a replacement cost, but without any corresponding increase in resale value. Therefore, it was argued, in the absence of any actual loss the Member erred in awarding any damages at all. [28] In oral submissions Counsel for Cavalier stressed that the increased cost of the Thorne home meant Mrs Cameron would have increased equity because of an eventual increased value and, hence, sale price. In making these submissions Counsel relied on Mr Palmer’s oral evidence. There was nothing in his written report which concluded that there was an increase in equity because of increase in value of the house. [29] Mrs Cameron, in written submissions from Counsel on her behalf, submitted that under the ordinary principles of compensatory damages she had clearly suffered a loss. If the first contract had been performed by Cavalier, then she would not have had to enter into the second contract. Her loss arises as a result of having to expend extra capital, namely the increase in price from the first contract to the second. This loss was fairly and reasonably incurred by her and arose directly from Cavalier’s breach of contract. [30] She submitted that the Member was correct in accepting that she had no other reasonable choice but to enter into another contract to build what had not been built and was, therefore, entitled to the additional cost. [31] In oral submissions Counsel for Mrs Cameron submitted that, at the hearing, the Member took the appropriate approach on the evidence before him: in particular, if there was ‘betterment’, then the Member took that into account in reducing the amount of damages by the sums he -- 6 of 10 -- 7 found (on the basis of Mr Palmer’s evidence) to be the cost of the extras which Mrs Cameron chose to include in the Thorne house. [32] Counsel for Mrs Cameron was asked about Cavalier’s proposition that there was no loss because Mrs Cameron had purchased an asset which could be valued, and sold, rather than a widget which has a replacement cost without any prospect of a corresponding increase in value. She made the point that there in fact had been no valuation evidence, and the Member correctly concluded that if she did have a better house it was only to the extent of the additions – the cost of which he then, of course, deducted. [33] The submission that Mrs Cameron suffered no loss is incorrect. The evidence is plain that Mrs Cameron, to obtain what Cavalier had promised (a house), had to expend extra capital. There is no apparent error in the learned Member’s conclusion that she had no other reasonable choice but to engage Thorne to build a home as similar as she could reasonably obtain. [34] Nor is this a case in which any ‘betterment’ necessarily tells in the defaulting builder’s favour. The decision referred to by the learned Member is relevant, and to the point: as Shelden JA said in the Hyder Consulting (Australia) Pty Ltd v Wilhelmsen Agency Pty Ltd2 ; In my opinion, if a defendant negligently damages or destroys the plaintiff’s property and there is no evidence that the plaintiff had any reasonable choice other than to replace or repair what had been damaged or destroyed, the cost of replacing it or repair, provided it is not extravagant, is recoverable in damages. [35] The Tribunal Member was correct in looking at the loss, and then determining whether or not it was appropriate to reduce the damages by any benefit obtained by Mrs Cameron. He was correct in determining that she had no choice but to engage another builder. She did her best to obtain the cheapest quote, and it was not possible to obtain the exact house. In those circumstances, there is no error in the Member’s approach of reducing the amount of damages by the cost of extras which Mrs Cameron chose to include in the Thorne house. [36] On appeal Cavalier enhanced its original submission that the house was superior because it had extra items worth a certain value. It was argued that the actual market value of the property was greater, and therefore Mrs Cameron had an increased equity on resale; but that finding was not, realistically, open on the evidence before the Member: Mr Palmer was not briefed to value the property; he did make comments in oral evidence that the Thorne house would have a greater resale value, but he was not briefed to value the property for resale purposes. [37] At the appeal hearing Counsel for Cavalier quite properly conceded that he did not perform a valuation, but only drove by the outside of the house. 2 [2001] NSWCA 313. -- 7 of 10 -- 8 His attention, for the purposes of his report, had been focussed on the variance in cost, and which extra items were attributable to that cost. [38] In respect of this ground, then, on the evidence available to him the learned Member made no error of fact or law and the appeal ought to be dismissed. [39] With respect to the second ground, Cavalier argues that the Tribunal erred in awarding $16,286.00 for loss of rental. It was submitted that the Tribunal should have reduced the gross total loss of rent by the total interest that Mrs Cameron would have had to pay during the time she was earning rental income, had the Cavalier house been built. [40] The learned Member accepted that the gross rental was not an appropriate award of damages, and that it should be reduced by outlays like landlord’s insurance. [41] He also accepted, to some extent, the argument made for Mrs Cameron that the interest she would have paid should not be deducted because there was a future loss on Mrs Cameron’s part. He accepted there was a delay in paying off the interest on the loan to build the house, and that loss of payment of interest may arise at some time in the future. He projected the interest cost of the income, and gave a credit of $10,000.00 for future interest costs. [42] Cavalier argued that the Member erred in considering a future loss of interest and submitted that there was no evidence put forward upon which the finding could be based. The correct approach, Cavalier contends, would have been for the Member to consider the actual loss incurred and then to have simply reduced the award of damages by the interest payments Mrs Cameron would have had to pay, had the house been built. [43] In oral submissions Counsel for Cavalier expanded on this point and pointed out that, in the absence of evidence such as what Mrs Cameron was going to do with the property in the future, whether she was going to sell it, rent it, live in it and whether she had an interest only or principle interest loan, the Tribunal had made findings that were speculative. [44] Mrs Cameron argued that the correct approach would have been not to deduct any interest because, ultimately, she would not be better off – there was simply a delay in the payment of interest; but, if any interest was to be deducted then the Tribunal Member did his best by assessing the current value of future costs, and this was a reasonable amount by which to have adjusted the claim. [45] Cavalier pointed out there had been no cross appeal and in those circumstances the appropriate order was for the full deduction to be taken on the damages awarded for loss of rental. -- 8 of 10 -- 9 [46] The appropriate award of damages, accepted by the Tribunal, was the actual loss. Logically this must be reduced by the actual amount of interest that would have been paid during the relevant period. [47] The Tribunal Member erred, with respect, in making a finding about future costs of interest when there was no evidence about that, or the future use of the house, upon which to make that finding. He also erred by failing to reduce this claim by the interest figure. [48] At paragraphs [51] - [55] the learned Member set out calculations which show that, setting aside his incorrect deduction but subtracting the correct figure for interest costs had the house been built, the award under this head should have been $6,286. His failure to make this deduction is a mistake of both fact, and law, for which leave to appeal should be granted. The appeal should be allowed to the extent that figure is substituted for the amount of $16,286 allowed in the Member’s decision. [49] The third ground of appeal relates to the Tribunal’s order as to costs. [50] The Tribunal Member ordered that, on the basis that Cavalier was partially successful in its defence, it should pay only 60% of Mrs Cameron’s costs, assessed on the District Court scale. [51] It is apparently accepted by Cavalier that the Member did not err in making a costs order in Mrs Cameron’s favour but it is contended, rather, that he should have ordered Cavalier pay a smaller proportion of her costs. [52] The order was made, as the learned Member explained in his Reasons, under the legislation preceding the QCAT Act and the former provisions about costs apply: Owen v Adams Group [2010] QCAT 10. [53] Mrs Cameron’s submissions referred to s 142(2)(b) of the Queensland Civil and Administrative Tribunal Act 2009 (QCAT Act) and contend that there is no basis to appeal a ‘cost-amount decision’ in QCAT’s appeal jurisdiction. Section 142(2)(b) says, unequivocally, that a party to a proceeding cannot appeal a ‘cost-amount decision’ to the appeal Tribunal. A cost-amount decision is defined in Schedule 3 of the QCAT Act to mean a decision of the tribunal ‘… about the amount of costs fixed or assessed under s 107’. [54] Section 107 provides that if the tribunal makes a costs order, it must fix the costs if possible; if it does not do so, it may make an order requiring that costs be assessed ‘under the rules’, and may order that the costs must be ‘…assessed by reference to a scale applying under the rules applying to a court’. That is what the learned Member ordered here. A decision of that kind can only be appealed to the Court of Appeal, with leave: s 149. [55] Section 142(3)(b) provides, however, that ‘costs order’ can be appealed to the Appeal Tribunal with leave. That term is also defined in the -- 9 of 10 -- 10 Schedule, to mean ‘…an order awarding costs’. It is this section under which Cavalier seeks to proceed. [56] Cavalier is not seeking to appeal the making of the costs order, but to appeal the amount – a process against which s 142(2)(b) turns its face. Even if that were not so, this is not a case in which the discretion to grant leave would be attracted: the learned Member’s reasons for his costs decision are careful and considered, and no error in his reasoning is apparent. [57] For the sake of completeness, that conclusion is not altered by the change in the sum of damages Mrs Cameron will receive under this appeal decision which will be, of course, some $10,000 less than the Member allowed. The Member’s reasons adopt a ‘pro rata’ basis, apparently measuring success against the total number of issues in dispute, and reflecting the conclusion in a percentage. The altered result should not impinge on the percent figure he adopted, because the costs associated with proving different issues are not significantly altered by the different outcome here. [58] The appeal on this ground is dismissed. [59] The sum awarded by the learned Member was comprised of $16,286 for lost rent and $23,945 for the additional cost for the Thorne house – a total of $40,431. For the reasons explored earlier, the first figure should be reduced to $6,286 and the total award for damages to $30,231. The learned Member’s interest calculations are unaffected by this change. The final judgment should, then, be for $30,231 and $1,849 for interest. The appeal should be allowed, and those figures substituted for the award in the learned Member’s reasons. -- 10 of 10 --