Supreme Court New South Wales Medium Neutral Citation: Drake v Wahoo Pools Pty Ltd (No 2) [2015] NSWSC 536 Hearing dates: 19 February 2015 Decision date: 12 May 2015 Jurisdiction: Common Law Before: Button J Decision: (1) The appeal of the plaintiff is dismissed Catchwords: APPEAL – appeal from decision of Local Court Magistrate pursuant to ss 39 and 40 of the Local Court Act 2007 (NSW) – contract to build swimming pool – whether purported errors are errors of fact or errors of mixed fact and law – whether leave should be granted Legislation Cited: Home Building Regulation 2004 (NSW), reg 71 Local Court Act 2007 (NSW), ss 39, 40 Trade Practices Act 1974 (Cth), s 75B Cases Cited: Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321 Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 Waterford v The Commonwealth [1987] HCA 25; (1987) 163 CLR 54 Category: Principal judgment Parties: Marianne Drake (Plaintiff) Wahoo Pools Pty Ltd (First Defendant) Adam John Rubagotti (Second Defendant) Representation: Counsel: M Galvin (Plaintiff) Solicitors: Gadens Lawyers (Plaintiff) File Number(s): 2014/193080 Decision under appeal Court or tribunal: Local Court of New South Wales Jurisdiction: Civil Date of Decision: 3 June 2014 Before: Grahame LCM File Number(s): 2012/255779 Judgment Introduction 1. Before the court is an appeal brought pursuant to ss 39 and 40 of the Local Court Act 2007 (NSW). The plaintiff, Ms Drake (who was also the plaintiff in the Local Court) contends that there are errors of law contained in the judgment of her Honour Magistrate Grahame of 3 June 2014. She contends in the alternative that, if there be errors upon which she relies that in truth should be characterised as errors of mixed fact and law, she should be granted leave to rely upon them in the appeal. 2. In a separate judgment that I delivered on the day of the hearing, I explained why I considered it appropriate to proceed ex parte and in the absence of the first and second defendants. 3. The material placed before me was voluminous, though I hasten to add not inappropriately so. It included the pleadings at first instance, the complete transcript of a hearing that extended over four days in the Local Court, copies of the affidavits that constituted the examination-in-chief of the witnesses, copies of all of the documentary exhibits that were tendered in those proceedings, and copies of the written submissions provided to her Honour by the parties. Despite the extent of that material, counsel for the plaintiff before me was able, by the end of the hearing, to refine the real grounds upon which he relied to a point of admirable concision. As a result, I can also be concise. Background 1. Ms Drake entered into an agreement with the first defendant, Wahoo Pools Pty Ltd, to have a pool built at her home on the northern beaches of Sydney. The second defendant, Mr Adam John Rubagotti, was the guiding mind of Wahoo Pools. The project was beset with delays and problems, and Ms Drake was left with a pool that she regarded as very unsatisfactory. She commenced proceedings in the Local Court. Her claim was that the pool needed to be demolished in its entirety and replaced, and that that would cost something beyond $100,000. Nevertheless, she was content with the jurisdictional limit of that court. 2. The plaintiff proceeded against the defendants by way of a number of causes of action. As against Wahoo Pools, she claimed that there had been a breach of contract, including with regard to warranties implied by statute. She also claimed that Wahoo Pools had been negligent. Finally, she claimed that Wahoo Pools had engaged in false and misleading conduct, that claim being based upon s 75B of the Trade Practices Act 1974 (Cth) (since repealed). 3. As against Mr Rubagotti, the claim was pleaded as follows. The plaintiff claimed that Mr Rubagotti made a series of representations which were false or misleading, including the failure to inform the plaintiff of license limitations that existed in relation to Wahoo Pools. It was said that these representations were made for the purpose of enticing Ms Drake into a contract. 4. The plaintiff also sued in negligence, claiming that Mr Rubagotti owed her a duty of care by virtue of his position as the nominated supervisor of Wahoo Pools. She submitted that Mr Rubagotti had breached his duty by failing to supervise the construction of the pool and to ensure that the pool was being built in accordance with the pertinent plans and specifications. 5. Her Honour was required to resolve a number of questions of fact, and to make credibility findings. That was because no comprehensive written contract had been executed. Rather, the claim of Ms Drake was that the contract was partly written and partly oral, and included a number of conversations of which there was no written note. The position of Mr Rubagotti was that, whilst he accepted that a contract had come into existence to build the pool, he disputed a number of factual contentions of the plaintiff. For instance, his position was that the plaintiff was never given a firm completion date. 6. A central dispute between the parties at first instance was as follows. The position of Ms Drake was that the pool was to be built in accordance with some plans that had been created by Mr McKee, an engineer experienced in pool construction. Her contention was that, not only was the pool not built in specific accordance with those plans, but indeed no engineer was engaged at all. The contrasting position of Mr Rubagotti was that Mr McKee's drawings had never been incorporated into a term of the contract. The judgment at first instance 1. In a judgment that I respectfully consider to be detailed, comprehensive and cogent, her Honour determined the credibility questions that underpinned the circumstances surrounding the formation of the contract. Some, but not all, were determined in favour of Ms Drake. Her Honour came to the view that a particular document that was a quotation reflected the terms of the contract upon which the parties had agreed. That quote (which became Exhibit 2 at first instance, and appears at pages 436 and 441 of Exhibit OK-2 of the affidavit of Ms Drake of 18 March 2013 that was read by counsel for the plaintiff before me) refers to the provision of plans and engineering drawings "by others". It also refers to the formation of walls and coping areas, the placement of steel, and the spraying of concrete "in accordance with engineer's detail". 2. Her Honour construed those references as not being to the specific plans that the engineer Mr McKee had drawn up. Rather, her Honour construed them as referring to plans of an engineer in a generic sense, but not in a specific one. Her Honour gave reasons, founded in the document itself and in the surrounding circumstances, for doing so, as can be seen from the following extract from the judgment: [29] Leaving aside, the issue of whether or not there was specific discussion about a single or double layer of reinforcement at that time, it is impossible to accept, given the changes Marianne Drake requested that the drawing themselves formed part of the latter agreement between the parties. The drawing are in significant respects contrary to what she asked Wahoo pools to build. If they were provided, they were provided for background or information as a discussion point. I accept Mr Rubagotti's evidence that he made no agreement at that stage to build the pool according to her engineer's specific design and that many of the details relating to the pool's construction remained open. [30] It is noteworthy that in the relevant written quote against the heading "pool description" are the words "Concrete lap pool with glass wall and windows as per drawings provided". This must mean the drawings drawn or adjusted by Mrs Drake herself, rather than any direct reference to Mr McKee's drawing, which show no such detail. The reference to "plans and drawings" merely notes "Development application plans and engineering drawings and inspections will be provided by others". No name is mentioned. [31] In this Court's view the work needed to be carried out "in accordance with engineer's detail" as per the quote, but it was by no means a settled term that it must be carried out according to Mr McKee's design. In his evidence Mr Rubagotti said, he considered the term to mean "an engineer's detail" and while he initially thought the engineer would be Mr McKee, some time later he settled on consulting Ted Bennett. His evidence (at T 5/11/13 p73.15) that "I did have a verbal agreement with Marianne that she had Mr McKee who had a design" does not import Mr Mckee's drawing into the contract eventually made. It rather signals an intention at that time to use that engineer, which is quite a different thing. I accept he had expressed his concern about engineers who were not pool specialists and that the matter was left somewhat open. … [47] Mrs Drake made a contract which included terms which should have guaranteed aspects of the work were completed according to an engineer's detail. As I have said, it did not have to be Mr McKee, but it had to be properly supervised by an engineer. This means more than Mr Rubagotti doing things in a way he thought Mr Bennett would approve of and inviting him in for one cursory inspection. 1. In short, her Honour determined that it was a term of the contract that Wahoo Pools would build the pool in accordance with the plans of an engineer, not the engineer for which Ms Drake contended. On that basis, because no engineer was used at all, her Honour found that breach of contract by the first defendant had been established by the plaintiff. 2. Again, having analysed whether the elements of the tort of negligence had been established against the first and second defendants on the balance of probabilities, her Honour found in favour of the plaintiff on that cause of action as well. 3. As for the pleaded claims pursuant to the Trade Practices Act, her Honour found that, for reasons arising from the evidence rather than any legal principle, that claim had not been made out. 4. In short, it can be seen that the plaintiff succeeded in the Local Court by way of two causes of action: breach of contract against Wahoo Pools, and the tort of negligence against Wahoo Pools and Mr Rubagotti. But with regard to breach of contract at least, the submission before me of counsel for the plaintiff was that, although that decision was correct, it was founded on wrong reasoning. In particular, it was said that it was an error for her Honour to have found that construction of the pool in compliance with the plans prepared by Mr McKee was not a term of the contract into which Ms Drake and Wahoo Pools had entered. 5. Two causes of action having been established, her Honour turned to the question of measure of damages. The relevant portion of the judgment is at [67] – [80]. In a nutshell, the contention of the plaintiff was that, as I have said, the swimming pool was so defective as to require its demolition and complete replacement. That contention was founded, at least partially, on the preceding controversy to which I have referred; namely, whether the pool needed to be in conformity with the plans of Mr McKee. Because the plaintiff submitted that it did, its failure so to conform was part of the argument why it needed to be entirely demolished. 6. The position of the defendants at first instance was that, even if it be the case that one or more of the claims of the plaintiff were established, and even if it be the case that the pool was indeed defective, complete demolition was not required. Rather, founded upon the evidence of experts, the defendants submitted that remedial work could be done that would be far cheaper than demolition. 7. The result of that dispute was that her Honour received detailed expert opinion evidence from both parties about the state of the pool and what needed to be done to remedy it. That evidence was provided through detailed reports and also from the witness box. 8. Again, I consider that her Honour engaged in a comprehensive and thorough analysis of the competing expert evidence about what should and could be done to fix the pool. Ultimately, her Honour determined that it would be sufficient for the pool to be repaired, and not completely demolished and replaced. As a result, her Honour ordered damages in a sum far less than that for which the plaintiff contended. Judgment was entered for the plaintiff in the sum of $11,266.24. Subsequently, costs in a limited amount were also ordered in favour of the plaintiff. Submissions before me 1. The contentions of the plaintiff before me may be summarised as follows. 2. First, the learned Magistrate fell into error in the construction of the contract. It was wrong for her Honour to find that the plans prepared by Mr McKee did not form part of the terms of the contract. Either that constitutes an error of law, with regard to which there is an appeal as of right, or it constitutes an error of mixed fact and law, with regard to which there is an appeal by leave. In the circumstances of this case, it was said that leave should be granted. 3. Secondly, that error led to erroneously inadequate damages. If the Magistrate had correctly found that an essential term of the contract was compliance with the plans of Mr McKee, her Honour would have appreciated that demolition was the only appropriate recompense. As well as that, the Magistrate was unwittingly taken to a version of a regulation that had nothing to do with the issue requiring resolution. Again, it was said that this ground constituted either a pure error of law, or a mixed error of fact and law, with regard to which leave should be granted. 4. To expand upon that latter submission, counsel for the plaintiff submitted before me that a regulation was relied upon by the defendants at first instance that in truth was inapposite. That is because, without having pleaded it or provided notice of it, the lawyer for the defendants provided her Honour with a version of reg 71 of the Home Building Regulation 2004 (NSW) (the Regulation). Counsel for the plaintiff explained that, although he appeared at first instance, he was not in a position to check the correctness of the version of the Regulation that was supplied and relied upon by his opponent, because he had been taken by surprise. 5. It was said before me that the Regulation in truth came into that form well after the pertinent date. To the extent that the irrelevant version of the Regulation had informed her Honour's judgment with regard to the measure of damages, that constituted an error of law. It was said that it can be seen that the Regulation played a role in assessment of the evidence of the expert witnesses from the sentence that appears at [76]: "I note that no expert could point to a 'structural defect' as understood pursuant to regulation 71 of the Home Building Regulation 2004". 6. Finally, counsel for the plaintiff made it clear that he was not mounting a "no evidence" submission, either about the terms of the contract or about the measure of damages. Nor was any complaint about the rejection of the claims based upon the Trade Practices Act maintained by the end of the hearing of the appeal. Determination 1. The relevant provisions of the Local Court Act are as follows: 39 Appeals as of right (1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law. … 40 Appeals requiring leave (1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court on a ground that involves a question of mixed law and fact may appeal to the Supreme Court but only by leave of the Supreme Court. … 1. Turning to the first contention, because of the length of the analysis of the question of the events surrounding the formation of the contract contained in the judgment, it is not practical for me to provide the whole of it. But I think it can be said that, on a fair reading, the judgment is a resolution of a large number of contested questions of fact and credibility. To express that another way, her Honour was determining what had been said when, by whom, and to whom, as between Ms Drake and Mr Rubagotti. 2. Those matters are findings of fact, and are not amenable to appeal pursuant to the appeal-creating provisions: see Waterford v The Commonwealth [1987] HCA 25; (1987) 163 CLR 54, 77 (Brennan J); Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321, 356 (Mason CJ). 3. On the other hand, I approach the exercise of construction as being the determination of the legal effect of a contract. Accordingly, I proceed on the basis that the plaintiff has an appeal as of right about that topic. 4. But to my mind the passage in the judgment that construes the document does not reveal any error of law. Counsel for the plaintiff did not submit before me that there is an error of legal principle in the analysis. In accordance with established principle, her Honour used material intrinsic and extrinsic to the document to determine the ambiguity that arose within it: see Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337, 348 (Mason J). 5. It follows that the appeal cannot be upheld with regard to the factual findings surrounding the formation of the contract. Nor should it be upheld with regard to the approach at law to the construction of the written portion of the contract. 6. Turning to the second contention, the evaluation of the competing expert evidence about the appropriate measure of damages was a question of fact, and is therefore not amenable to appeal. 7. With regard to the Regulation, I accept (not having heard, of course, from a contradictor) the assurance of counsel for the plaintiff that the Regulation placed before her Honour was inapposite, in that it post-dated the events in question. I am therefore prepared to approach the matter on the basis that the question of damages was a question of mixed fact and law, and that there was an error with regard to the latter component. 8. But I cannot accept that the passing reference in the judgment to that part of the case for the defendants on damages should mean that leave should be granted and that the appeal must be allowed. I say that even though I accept that the sum that is the subject of the appeal is substantial, in itself a factor that argues in favour of leave being granted. To be weighed against that is the fact that the reference to the Regulation formed only a tiny part of the analysis of her Honour of the expert evidence. Indeed, it was a short sentence in an analysis of the question of damages that extended to 14 paragraphs. I do not accept that, if her Honour was led into error in making that reference, the whole of the finding about damages must be quashed and remitted. That is because the vast majority of the judgment about damages focuses upon an assessment of the competing expert evidence, not upon the Regulation. I refuse leave to appeal on this ground that involves a question of mixed law and fact. 9. It follows that, despite the able submissions of counsel for the plaintiff, I do not consider that the appeal should be upheld on any basis. 10. In light of the way that the appeal proceeded, I consider that it is appropriate that I make no order as to costs. Orders 1. The appeal of the plaintiff is dismissed. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 12 May 2015