Helu v Yuan[2023] QCATA 12

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL

REASONS FOR DECISION

1. [1]
   The applicant/appellant (Mr Helu) constructed a swimming pool for the respondent (Mr Yuan). Mr Yuan said that the building work undertaken by Mr Helu was defective and that, inter alia, the pool as constructed was smaller than as specified in the building contract.
2. [2]
   On 3 March 2021, the Tribunal ordered that Mr Helu pay to Mr Yuan $59,010.00 for damages for breach of contract plus costs.^[1] The Tribunal dismissed Mr Helu’s counter-application.
3. [3]
   Mr Helu appeals the decision of the Tribunal.

The decision below

4. [4]
   The learned member found:

   1. (a)
      Mr Yuan was entitled to have the works performed as required by the contract;^[2]
   2. (b)
      Evidence of an oral variation to the building contract in respect of the size of the pool and inclusion of heating was inadmissible;^[3]
   3. (c)
      Mr Helu failed to:

      1. undertake the works with due care and skill;
      2. complete the works to a proper standard or at all;
      3. supply and use materials in accordance with their specifications or otherwise fit for their purpose;^[4]
   4. (d)
      the cost of rectifying the defective building works, which rectification work was necessary and reasonable, was $59,000.00;^[5]
   5. (e)
      Mr Yuan was entitled to liquidated damages in the amount of $10.00;^[6]
   6. (f)
      As the works were not completed by the due date under the contract, Mr Helu was not entitled to the final PC payment of $6,000.00.^[7]

The grounds of appeal

5. [5]
   Mr Helu relies upon six grounds of appeal:

   1. (a)
      Ground 1 and Ground 3 – the tribunal erred in finding that the parties had not agreed to vary the contract and that evidence of discussions between the parties was inadmissible;
   2. (b)
      Ground 2 – the tribunal erred in its finding as to the quantum of the costs of rectification work;
   3. (c)
      Ground 4 – the tribunal erred in applying the Domestic Building Contracts Act 2000 (Qld) when considering the issue of contractual variations;
   4. (d)
      Ground 5 – the tribunal erred in failing to take into consideration the entitlement of Mr Helu to recover on a quantum meruit basis for the work completed;
   5. (e)
      Ground 6 – the tribunal erred in finding that it was necessary and reasonable for the pool to be demolished and rebuilt.

Appeals – the statutory framework

6. [6]
   A party to a proceeding may appeal a decision of the tribunal.^[8] An appeal on a question of law is as of right. To appeal a question of fact or mixed law and fact, the leave of the appeal tribunal is required.^[9] The principles governing the granting of leave to appeal are well established: there is a reasonably arguable case of error in the primary decision; there is a prospect that the applicant will obtain substantive relief; leave is necessary to correct a substantial injustice caused by error; and that there is a question of general importance upon which further argument and a decision of the Appeal Tribunal would be to the public advantage.^[10]
7. [7]
   In deciding an appeal on a question of law only, the appeal tribunal may confirm or amend the decision, set aside the decision and substitute its own decision or set aside the decision and return the matter to the tribunal below for reconsideration.^[11] The appeal tribunal may only substitute its own decision if the determination of the question of law decides the appeal in its entirety in favour of the appellant.^[12]
8. [8]
   In deciding an appeal on a question of fact or mixed law and fact, subject to leave to appeal being granted, the appeal must be decided by way of rehearing.^[13] In deciding the appeal the appeal tribunal may confirm or amend the decision, set aside the decision and substitute its own decision or set aside the decision and return the matter to the tribunal below for reconsideration.^[14]

Consideration

9. [9]
   Noting the distinction between appeals on questions of law and appeals on questions of fact and mixed law and fact, it is necessary to identify whether each of the particular grounds of appeal raises a question of law or a question of fact or mixed law and fact. This in turn determines the way in which the appeal must be decided. Generally speaking, the appropriate approach is to first determine whether the appeal is required to be decided by way of rehearing. If so, then in the course of the rehearing the other grounds of appeal should be considered. In giving reasons for the disposition of the appeal the Appeal Tribunal is not required to discuss distinctly each of the questions raised by an appellant if the reasons sufficiently explain how the Appeal Tribunal reaches its conclusion.
10. [10]
    Directions were made following the hearing of the appeal for the parties to file submissions addressing whether the appeal should be decided pursuant to s 146 (appeal on a question of law) or s 147 (appeal on a question of fact or mixed law and fact) of the Queensland Civil and Administrative Tribunal Act 2009 (Qld). 
11. [11]
    Before proceeding to consider the grounds of appeal it is necessary to revisit the circumstances in which the dispute between the parties arose.

The background to the dispute

12. [12]
    On 21 December 2018 the parties entered into a QBCC standard form, level 2 renovation extension and repair contract for the construction of a swimming pool and spa.
13. [13]
    The contract was for a fixed price of $46,000.00. There were no prime cost items or provisional sums. The contract works were described as ‘building new swimming pool as per drawing with spa, four led light and water feature’. The completion period was 60 days from commencement. Progress payments were required at each of 5 stages. The contract provided for the payment of liquidated damages of $1.00 per day. The contract documents included the plans, specifications and foundations data. The plans were in evidence.^[15]
14. [14]
    In addition to the contract for the construction of the swimming pool, the parties entered into two further contracts in respect of additional building works.^[16] These additional works were not relevant to the dispute that subsequently arose between the parties.
15. [15]
    Both parties filed statements of evidence in the proceeding below and gave evidence at the hearing. Mr Yuan relied upon the evidence of three independent contractors who appeared at the hearing. None of these witnesses provided statements of evidence however all three had provided quotes in various forms in respect of proposed remedial works and, in the case of one of the witnesses, a report regarding the construction of the pool and spa and rectification work.

What was the evidence about the size of the pool? 

16. [16]
    Mr Yuan filed three statements of evidence. Mr Yuan’s evidence was that at the time he signed the contract the plans and specifications were not attached to the contract.
17. [17]
    In his initial statement, Mr Yuan said that the pool should have been 4 metres wide and 8.5 metres long and that, as constructed, the pool was only 3.7 metres wide. In his second statement, Mr Yuan again said that the pool as constructed was 3.7 metres wide and that the ‘borders’ of the pool and spa were 35 centimetres wide and not 30 centimetres wide ‘as promised’.
18. [18]
    Mr Yuan relied upon a report prepared by Mr Shane D’Alessandro, a licensed builder. Mr D’Alessandro opined that the pool and spa, as constructed, did not accord with the plans. He stated that the pool had been built 220 millimetres narrower than as shown on the plans. The internal water dimension of the pool should have been 3.4 metres wide, however as constructed the internal water dimension was 3.18 metres. Mr D’Alessandro opined that the spa had been built 760 millimetres narrower than as shown on the plans. The internal water width dimension of the spa should have been 2 metres wide, however as constructed the internal width water dimension was 1.24 metres. 
19. [19]
    Mr D’Alessandro’s evidence regarding the size of the pool and spa is not appealed. 

What was the evidence about the contract and the purported variation?

20. [20]
    The contract schedule was in evidence.^[17] The standard terms and conditions were not. Mr Yuan’s evidence was that the plans and specifications were not attached to the contract when he signed it. Mr Yuan said that he was later provided with a copy of the plans by Mr Helu. This was prior to the building works commencing. Mr Helu did not give evidence to the contrary. As I have earlier noted, the plans were in evidence.
21. [21]
    Mr Yuan’s evidence was that approximately 3 weeks after the building works commenced, and after the concrete had been poured into the pool frame, he inspected the pool shell and measured the dimensions. It was at this time, said Mr Yuan, that he discovered the discrepancy between the size of the pool and spa as constructed and the plans. Mr Yuan’s evidence was that he met with Mr Helu on site 3 days later.
22. [22]
    Mr Yuan’s evidence was that at the meeting Mr Helu conceded that the pool dimensions were different to the plans and that Mr Helu would compensate Mr Yuan ‘by proportion of which the pool and spa were smaller.’^[18] Mr Yuan’s evidence was that he said nothing to Mr Helu about continuing with the build as he trusted Mr Helu, nor did he explicitly agree to Mr Helu’s proposal regarding the payment of compensation. Mr Helu’s evidence, while largely according with Mr Yuan’s, differed in one significant respect. Mr Helu said that Mr Yuan specifically instructed him to continue with the build notwithstanding the size issue and that Mr Helu attributed the error to the steel fixer.^[19] Mr Yuan’s evidence in response was to deny Mr Helu’s assertions. Mr Yuan’s evidence was that Mr Helu had admitted that he should have supervised the steel fixer more closely.^[20]

Leave to appeal

23. [23]
    It was not contentious in the proceeding below, or in this appeal, that Mr Yuan had paid to Mr Helu the contract price save and except for the practical completion payment of $6,000.00. Counsel for Mr Yuan conceded at the appeal hearing that the parties had litigated the matter and conducted themselves below on the basis that the works had reached practical completion. The learned member found however that, as the works had not been completed by the ‘due date’, Mr Helu was not entitled to the final payment. It is, with respect, difficult to understand just what the learned member meant by this finding. In any event, counsel for Mr Yuan conceded at the appeal hearing that the learned member should have taken into consideration, in assessing Mr Yuan’s entitlement to damages, the balance payable to Mr Helu under the contract. 
24. [24]
    The learned member erred in failing to take into consideration, in assessing Mr Yuan’s entitlement to damages, the balance of $6,000.00 payable under the contract. In claiming damages, Mr Yuan was required to give Mr Helu credit for the unpaid balance of the contract price.^[21] The error by the learned member in the assessment of Mr Yuan’s entitlement to damages is one of mixed law and fact. As this aspect of the decision is attended by error, leave to appeal is necessary to correct a substantial injustice to Mr Helu caused by that error.^[22]

Rehearing

25. [25]
    In Harrison & Anor v Meehan^[23] the Appeal Tribunal stated:

An appeal by way of rehearing under s 147 of the QCAT Act is not a rehearing de novo. The Appeal Tribunal must make its own determination on the material before the Tribunal below (supplemented, if necessary by additional evidence if permitted under s 147(2)) with due respect for the findings of fact of the primary Tribunal, and due consideration of the advantages enjoyed by it.

In rehearing the matter we have adopted the learned member’s primary findings of fact other than where those findings have been challenged in these appeals or where there is some doubt as to the findings made. We have otherwise formed our own views on the evidence consistently with the principles applicable in appeals by way of rehearing on the record of proceedings before a primary tribunal.

26. [26]
    I will now proceed to rehear the matter.
27. [27]
    Before proceeding to consider the question of damages, I will make some observations about an issue that arose during the course of the appeal hearing. Mr Yuan purported to terminate the contract by email on 3 June 2019.^[24] The learned member made no reference to the issue of termination in the reasons. Neither party was in a position at the appeal hearing to make meaningful submissions on the issue.
28. [28]
    The email communication from Mr Yuan to Mr Helu purporting to terminate the contract was not in evidence. There is no evidence regarding the basis upon which the contract was terminated, whether the termination was in accordance with the provisions of the contract, or whether the termination was in exercise of Mr Yuan’s preserved common law rights. The evidence suggests that, other than an issue with the operation of the pool heater, the works had been completed at the time Mr Yuan purported to terminate the contract. In the absence of any cogent evidence, including the standard terms and conditions of the contract, I am unable to make any findings about the purported termination or what may flow from it.
29. [29]
    What seems clear from the evidence is that the pool construction works had been completed by 3 June 2019 subject to the issues relating to the pool and spa size and what appear to be ongoing issues relating to a water heater. In respect of the latter issue, the learned member found that the contract did not require Mr Helu to supply and install a heater.^[25] That finding is not appealed.
30. [30]
    In this appeal Mr Helu’s solicitor submitted that the learned member was not required to determine whether the parties had agreed to vary the contract in respect of the size of the pool and spa. Mr Helu’s solicitor submitted that there was no suggestion that Mr Yuan had agreed to the construction of a smaller pool. Mr Helu’s solicitor also submitted that the evidence below did not support a finding that Mr Yuan was estopped from relying on Mr Helu’s contractual breach in failing to construct the pool and spa in accordance with the plans. Mr Helu’s solicitor further submitted that the evidence below did not support a finding that Mr Yuan had waived his rights to seek damages. Accordingly, I do not propose to consider further whether the contract had been varied in relation to the size of the pool and spa or whether Mr Yuan is estopped from claiming, or otherwise waived his right to claim, damages arising out of the failure by Mr Helu to build the pool and spa in accordance with the contractual stipulations.
31. [31]
    It is also necessary, before proceeding to rehear the matter, to address the parties’ submissions regarding whether additional evidence should be permitted.
32. [32]
    Mr Helu says that he should be permitted to rely upon additional evidence in the form of the terms and conditions forming the standard form QBCC level 2 Renovation, Extension and Repair Contract, the Homeowners Booklet and blank version of the contract schedule.  Mr Helu says that the full contract terms were available at the hearing below ‘but that the question/issue (was) never raised’ (I will refer to this as the contract evidence). Mr Helu also seeks to rely upon further evidence which he describes as ‘along the lines of cost difference or value of what was supplied v the pool contracted, and resulting square meter rates’ (I will refer to this as the quantum evidence).
33. [33]
    Mr Yuan opposes the admission of any additional evidence. 
34. [34]
    Section 147(2) of the QCAT provides that an appeal on a question of fact or mixed law and fact must be decided by way of rehearing, with or without the hearing of additional evidence as decided by the Appeal Tribunal. The term ‘additional evidence’ is not defined. Additional evidence may be new evidence in the sense that it was evidence existing at the time of the original hearing and which could have been discovered with reasonable diligence or it may be fresh evidence in the sense that the evidence came into existence after the original hearing.
35. [35]
    In Queensland Vedic Cultural Centre Pty Ltd v Lal^[26] the QCAT Appeal Tribunal considered the meaning of ‘additional evidence’ in the context of the appeal provisions in the QCAT Act appeal and stated:

[31] The reason why the Appeal Tribunal is able to admit additional evidence is to avoid a miscarriage of justice. It is well understood however, that if the evidence would have been available with reasonable diligence at the time of the hearing then there is no miscarriage of justice for it not to be considered.

…

[35] It can be seen that (the QCAT Act) reopening provisions closely reflect the common law principles which are relevant to appeals as set out above. Paragraph (b) of the definition of reopening ground reflects the requirement that the evidence was not available with reasonable diligence at the time of the hearing and admission of the additional evidence is required to avoid a miscarriage of justice. Section 139(4)(b) reflect the requirement that a reopening will ‘effectively or conveniently’ deal with the reopening ground. An example of where it is probably not effective or convenient to do that is where the tribunal has made an assessment of uncertain future events as explained in Mulholland v Mitchell.

[36] The affinity of the appeal and reopening provisions can also be seen from the way they interact in the QCAT legislation. An application to reopen and an application to appeal or for leave to appeal cannot both continue at the same time.

[37] It is also provided that the Appeal Tribunal can convert an application to appeal or for leave to appeal into an application to reopen if it discloses a reopening ground more effectively or conveniently dealt with in this way. In practice, appeals are often converted to reopening applications in this way – but inevitably some appeals which could have been converted will be missed, or there may be appeals like this one which include other grounds of appeal which cannot be dealt with as an application to reopen.

[38] It is clear that for the sake of consistency, when hearing an appeal in which there is an application to admit additional evidence, the Appeal Tribunal is guided by the statutory provisions applying to reopening applications.

[39] When considering whether the Appeal Tribunal can effectively or conveniently deal with the admission of the additional evidence, it would be noted that the Appeal Tribunal may either hear the evidence and allow the appeal on that basis, amending the decision or substituting its own, or it can remit the matter to the tribunal for consideration. In deciding what to do, the Appeal Tribunal would recognise that the appeal jurisdiction is not generally the proper forum to receive evidence on disputed facts, so it will often be the case that if the additional evidence is admitted it would result in remission of the matter back to the tribunal for rehearing.

36. [36]
    I agree generally with the approach in Queensland Vedic Cultural Centre Pty Ltd v Lal. While the Appeal Tribunal has an overriding discretion to permit additional evidence in order to prevent a miscarriage of justice, the fact that the evidence may of itself have had an important impact on the result at first instance does not mean that in every case such evidence will be permitted to be adduced in a rehearing. The Appeal Tribunal will consider a range of factors including the factors usually considered in an application to adduce new evidence on appeal. One of these factors is whether the evidence, with reasonable diligence, could have been obtained at the time of the original hearing. As the Appeal Tribunal observed in Queensland Vedic Cultural Centre Pty Ltd v Lal, if the evidence could have been obtained by the party seeking to rely upon it, then it is difficult to see how not permitting the evidence in the appeal will result in a miscarriage of justice. Parties are responsible for the conduct of their own case and should present it at one time and not in a piecemeal fashion. Accordingly, unless the interests of justice demand it, additional evidence should not be permitted upon a rehearing.
37. [37]
    Dealing first with the contract evidence, this is clearly evidence that was available at the time of the first hearing. No explanation is offered by Mr Helu about why he did not adduce the evidence, apart from his submission that the absence of the evidence was ‘never raised’. This is hardly a compelling argument. In the absence of an explanation that the evidence was not available at the time of the original hearing, I infer that it was. I am not persuaded that the interests of justice require Mr Helu to be permitted to rely upon the contract evidence. Turning to the quantum evidence, it seems reasonably clear from Mr Helu’s submissions that the evidence has not yet been obtained. Such evidence may be admissible upon a reconsideration if the Appeal Tribunal remits a matter. In a rehearing there is no basis to permit additional evidence that is yet to be obtained.  
38. [38]
    I turn now to the assessment of damages.
39. [39]
    Mr Yuan says that the pool and spa should be demolished and rebuilt and that doing so is both necessary and reasonable. Mr D’Alessandro’s evidence, which I will refer to later in these reasons, is that the cost of rectification work is $59,000.00.
40. [40]
    In the counter-application Mr Helu claims the final progress payment of $6,000.00 and an additional amount of $1,500.00 in respect of equipment which Mr Helu said the parties agreed would be supplied by Mr Helu.
41. [41]
    While the standard terms and conditions were not in evidence, there are implied into every regulated building contract the warranties set out in schedule 1B of the Queensland Building and Constitution Commission Act 1991 (Qld) (QBCC Act). It is not contentious that the contract entered into by the parties is a level 2 regulated contract. Mr Helu warranted that:

    1. (a)
       The works would be carried out in an appropriate and skilful way and with reasonable care and skill;^[27]
    2. (b)
       The works would be carried out in accordance with the plans and specifications.^[28]
42. [42]
    Accepting the evidence of Mr D’Alessandro, I find that the swimming pool, as constructed, is 220 millimetres narrower than as shown on the plans. I find that the internal water dimension of the pool should have been 3.4 metres wide, however as constructed the internal water dimension is 3.18 metres. I find that the spa, as constructed, is 760 millimetres narrower than as shown on the plans. I find that the internal water width dimension of the spa should have been 2 metres wide, however as constructed the internal width water dimension is 1.24 metres.
43. [43]
    I find that, in breach of the implied warranties, the swimming pool and spa were not constructed in accordance with the plans. I find that the works were not undertaken by Mr Helu in an appropriate and skilful way and with reasonable care and skill as a result of the failure by Mr Helu to construct the pool and spa in accordance with the contract. As a consequence of Mr Helu’s breach, Mr Yuan is entitled to damages.
44. [44]
    The learned member said the following in relation to the assessment of damages:

Mr Yuan’s experts were direct and straightforward when giving their evidence. Without any independent expert evidence to the contrary, the Tribunal is satisfied to accept the independent expert findings that the costs to rectify and complete the pool and spa are directly attributable to Mr Helu failing to ensure the work was performed with due care and skill, failing to ensure the work was completed to a proper standard or at all and supplying and using materials not in accordance with their specifications or otherwise fit for their purpose. 

Mr Yuan is entitled to damages to restore him to the position he would have been in, if Mr Helu had complied with these essential terms. This is the amount required to rectify any defective work and the costs to complete. Based on the evidence of Mr D’Alessandro, the Tribunal is satisfied the above costs of $59,000.00 to rectify and complete the work are necessary and reasonable. 

Because the Tribunal is not satisfied that heating was included in the contract, the Tribunal does not allow the claim for heating of $8,500.00.

45. [45]
    In his appeal submissions Mr Yuan says that the learned member erred in finding that the supply and installation of a heater did not form part of the contract. The finding by the learned member that the claim for heating equipment was not allowed on the basis that it did not form part of the contract was not appealed by Mr Yuan.
46. [46]
    In an appeal by way of rehearing the Appeal Tribunal is required to consider for itself the issues the learned member had to determine and the effect of the evidence heard below as appearing in the record of proceedings.^[29] In a rehearing, the powers of the appellate tribunal may be exercised only where the appellant can demonstrate that the order under appeal is the result of some legal, factual or discretionary error.^[30] Accordingly it is necessary for me to consider afresh whether Mr Helu was contractually obligated to install a functioning heater for the spa.
47. [47]
    Mr Yuan’s written evidence about the heater evolved. The initial written evidence of Mr Yuan was that on 7 May 2019 he raised with Mr Helu the issue of the type of heater to be installed in the spa. Mr Yuan’s evidence was that on 20 May 2019, Mr Helu installed the heater in the spa. Mr Yuan gave further written evidence that in April or May 2019 he learned that the spa was not heated and was told by Mr Helu that the spa was not heated. Mr Yuan said that he told Mr Helu his expectation was that the spa would be heated and, after further discussions between the parties, Mr Helu installed the heater. Mr Yuan however said that the heater was inadequate to heat the spa.
48. [48]
    Mr Helu’s written evidence was that Mr Yuan did not want a heater and it was therefore not included in the contract. Mr Helu’s evidence was that he subsequently agreed to install a heater at no cost to Mr Yuan as a good faith gesture.
49. [49]
    At the hearing below, Mr Yuan sought to amend his claim to include a claim for $8,500 for the cost of upgrading the heater.
50. [50]
    At the hearing Mr Yuan gave the following evidence about the heater:

Member:  Did (the contract) include heater?

Mr Yuan: We didn’t specifically talk about this, but he didn’t said it’s excluded. As normal, like, layperson we thought the heater was included for the spa.

51. [51]
    The contract makes no mention of the supply and installation of a heater as part of the scope of works.
52. [52]
    I find that the contract did not require Mr Helu to supply and install a heater for the spa. In his evidence, Mr Yuan conceded that the supply and installation of a heater did not form part of the contract. I am not satisfied that there was any agreement to vary the contract to include the heater. It is implausible that Mr Helu would have agreed to such a variation without a corresponding adjustment in the contract price. I find that Mr Helu agreed in or about May 2019 to install a spa heater as a good faith gesture, probably as a result of the issues that had arisen in relation to the size of the pool and spa.
53. [53]
    Mr Yuan is entitled to the cost of the rectification work to bring the swimming pool and spa into conformity with the requirements of the building contract. This is subject to the qualification that the rectification works be necessary and reasonable.^[31] In Tabcorp Holdings Ltd v Bowen Investments Pty Ltd the High Court stated:

The Tenant stressed that in Bellgrove v Eldridge this Court pointed out that there was a qualification to the rule it stated in regard to damages recoverable by a building owner for the breach of a building contract. "The qualification ... is that, not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt." The example which the Court gave of unreasonableness was the following:

"No one would doubt that where pursuant to a building contract calling for the erection of a house with cement rendered external walls of second-hand bricks, the builder has constructed the walls of new bricks of first quality the owner would not be entitled to the cost of demolishing the walls and re-erecting them in second-hand bricks."

That tends to indicate that the test of "unreasonableness" is only to be satisfied by fairly exceptional circumstances. The example given by the Court aligns closely with what Oliver J said in Radford v De Froberville, that is, that the diminution in value measure of damages will only apply where the innocent party is "merely using a technical breach to secure an uncovenanted profit." It is also important to note that the "reasonableness" exception was not found to exist in Bellgrove v Eldridge. Nothing in the reasoning in that case suggested that where the reasoning is applied to the present circumstances, the course which the Landlord proposed is unnecessary or unreasonable.^[32]

54. [54]
    In Ruxley Electronics and Construction Ltd v Forsyth^[33] Lord Jauncey, referring to Bellgrove v Eldridge, stated:

Damages are designed to compensate for an established loss and not to provide gratuitous benefit to an aggrieved party, from which it follows that the reasonableness of an award of damages is to be linked directly to the loss sustained. If it is unreasonable in a particular case to award the cost of reinstatement it must be because the loss sustained does not extend to the need to reinstate. A failure to achieve the precise contractual objective does not necessarily result in the loss which is occasioned by a total failure.

55. [55]
    What is necessary and reasonable is a question of fact. In Stone v Chappel^[34] Doyle JA stated:

In my view, while the “unreasonableness” qualification may well form part of the inquiry into whether the plaintiff has in truth suffered loss (measured by the claimed cost of replacement), it goes further than this. It represents a limit or controlling factor upon the preparedness of the law of contract to protect and give effect to the plaintiff’s interest in the performance of the contract. It may be that it is a limit founded merely in pragmatism. To the extent that it is founded upon some competing concern or rationale based upon principle or policy, that principle or policy has not been expressly identified in the Australian case law.

The references in the authorities to the irrecoverability of rectification costs that are out of proportion to the benefit to be gained by the plaintiff have led one commentator to suggest that the unreasonableness qualification may be seen as a resolution of the need to balance the primacy to be afforded to the plaintiff’s performance interest (as reflected in the maxim pacta sunt servanda^[35]), against the fairness of the burden to be imposed on the defaulting party. Under this approach it will be relevant to consider the proportionality between the rectification cost sought to be imposed upon the defendant and the benefit to be obtained by the plaintiff through the rectification work. The latter will include consideration of the triviality or otherwise of the defendant’s departure from the contractual standard or objective. It has also been suggested that if the unreasonableness restriction is one justified in part by reference to the unfairness of the burden to be imposed upon the defendant, then it may be that this will also permit consideration of the nature or quality of the defendant’s breach. If the defendant’s breach was intentional, sharp, cynical, profit-driven or opportunistic, then it would be more difficult for the defendant to satisfy a court that the burden sought to be imposed upon it was unreasonable.

56. [56]
    Doyle JA identified the following factors as relevant in determining the reasonableness of claimed rectification costs:

    1. (a)
       Identify the benefit bargained for;
    2. (b)
       Identify the extent to which the defendant has, despite departure from the contractual standard, nevertheless achieved the contractual objective, and hence provided the plaintiff with the benefit he or she bargained for;
    3. (c)
       Is there a lack of proportionality between the proposed work and cost, and the benefit to be achieved by the plaintiff through this work;
    4. (d)
       Does the plaintiff intend, and have the ability to, carry out the rectification work.

57. [57]
    Mr Helu says that the learned member, in assessing damages, failed to consider the function of damages and slavishly applied a single method of damages calculation without any substantive or reasonable assessment of the loss sustained. Applying the method of calculation of damages adopted by the trial judge in Ruxley, Mr Helu says that the appropriate outcome is that Mr Yuan’s damages should be assessed in the amount of $6,000 and, offsetting the final payment outstanding to Mr Helu, the matter resolved on the basis that neither party is required to pay any amount.
58. [58]
    Mr Helu relies upon two matters said to be relevant considerations in deciding whether the rectification work claimed by Mr Yuan is reasonable and necessary:

    1. (a)
       The disproportionality between, on the one hand, the difference in the cost to Mr Helu of actually carrying out the work and what it would have cost him had he complied with the contract, and on the other, the cost claimed by Mr Yuan for rectification; and
    2. (b)
       The conduct of Mr Yuan subsequent to the issue with the size of the pool and spa being identified.
59. [59]
    In the proceeding below Mr Helu relied upon two tax invoices rendered by sub-contractors he had engaged to build the pool and spa. At the hearing, Mr Helu said the following about this evidence:

It’s just evidence what’s the size the swimming pool short of 220 mil. We can estimate on what materials and everything cost less – is less than $400 for the construction.^[36]

60. [60]
    Mr Helu subsequently clarified the relevance of the documents:

So for us to build the pool pretty much like we work out a size and we – we know the quote. For this particular case is the width – the width we short 220 mil – 220 mil. This document support how much what’s …

…

And – and they – they can support for the – for the pool it short 220 mil. For the total cost is short is only less than $400. They claim too much and [indistinct] as well.^[37]

61. [61]
    In his appeal submissions, Mr Helu says that the evidence below was that the difference between the actual cost of construction of the pool and spa and what it would have cost him to complete had the contract been complied with, was minimal. As a starting proposition I do not accept the submission that the evidence sought to be relied upon by Mr Helu is relevant to the determination of the reasonableness of the proposed rectification work. The sub-contractors who prepared the tax invoices relied upon by Mr Helu did not give evidence. Indeed, it is difficult to know what to make of the invoices. What the invoices are not, is evidence of the difference between the as constructed pool and spa and what it would have cost to build the pool and spa in accordance with the plans. Secondly, Mr Helu cites no authority in support of the difference in cost submission. There is nothing in Bellgrove v Eldridge or Tabcorp Holdings Ltd v Bowen Investments Pty Ltd^[38] to support such a proposition. Indeed, in Tabcorp the High Court stated that the test of unreasonableness as referred to in Bellgrove is only to be satisfied by fairly exceptional circumstances.

62. [62]
    Mr Helu also relies upon the conduct of Mr Yuan, after the discrepancy in the size of the pool and spa was first identified, as relevant to whether the claimed rectification works are reasonable.  Mr Helu says that Mr Yuan’s election to have Mr Helu proceed with the build is directly relevant in assessing the reasonable cost to Mr Yuan flowing from the breach of contract. Mr Helu says that it is ‘totally inconceivable’ that a court might award damages for the full cost of demolition and rebuilding the pool when Mr Yuan had agreed to accept compensation for the breach.
63. [63]
    Mr Yuan’s evidence under cross-examination was that after he identified the pool size discrepancy Mr Helu told him that he would compensate Mr Yuan for the size difference.^[39] Mr Yuan’s evidence was that he had not instructed Mr Helu to proceed with the build.^[40] Mr Yuan said that he and Mr Helu had agreed that Mr Yuan would be compensated for the smaller pool size.^[41] Mr Yuan gave the following evidence:

At first we did agree that you will compensate me, but on the basis of the percentage, but later in the end you only say you will give me several hundred of Australian dollars. I don’t think that’s the right percentage

…

So in terms of the swimming pool, the outside measurement is smaller. The inside measurement is smaller. The spa is smaller. So at that time I concluded that at least 10 per cent.^[42]

64. [64]
    In evidence below was a series of electronic communications between the parties in Mandarin with an English translation. These communications are of no assistance in clarifying what took place between the parties at the time the pool size discrepancy was identified and raised by Mr Yuan with Mr Helu.
65. [65]
    What is clear from the evidence is that the amount of compensation proposed by Mr Helu was never stated or agreed nor was any precise mechanism for the calculation of the proposed compensation agreed.

66. [66]
    What is also clear from the evidence is that Mr Helu had the opportunity, at the time the discrepancy in the size of the pool and spa was identified, to either rectify the defect at his own cost or agree upon a variation of the contract with Mr Yuan. Mr Helu did neither. He cannot now rely upon this failure to avoid the consequences of his breach.
67. [67]
    Mr Yuan relied upon the evidence of three independent contractors, Shane D’Alessandro, Patrick Fajarda and Mark Ellison. I have referred earlier in these reasons to the evidence of Mr D’Alessandro.
68. [68]
    Mr D’Alessandro opined that the construction of the pool and the discrepancy between the plans and the as constructed pool ‘far exceeded any acceptable tolerances and is unacceptable.’ Mr D’Alessandro’s criticism of the spa was expressed in more forceful terms. He considered the incorrect width of the spa to be ‘a massive error and one that heavily impacts the usability of the spa’. Mr D’Alessandro was of the opinion that the plans showed a 5 to 6 person spa, and that what had been constructed was a 2 to 3 person spa.^[43]
69. [69]
    Mr Ellison’s evidence was confined to the issue of the pool heater which is not relevant in this appeal.
70. [70]
    On the issue of the useability of the pool, Mr Yuan was cross examined about this issue at the hearing below:

Mr Helu: … After do you use the pool? After you still using the pool, nor not?

Mr Yuan: Just once, just the one incident and then my foot got sprained and even injured my skin so ever since then I haven’t used the pool.

Mr Helu: So the pool still functional, or not?

Mr Yuan: Functional or not, the size of the swimming pool. Also it’s still leaking.

71. [71]
    I do not understand Mr Yuan’s evidence to be that he injured his foot as a result of any discrepancy in the size of the pool or spa. I understand the effect of Mr Yuan’s evidence, which was limited to the swimming pool (as opposed to, or in addition to, the spa) to be that he accepted the pool was functional.
72. [72]
    A swimming pool and spa in a domestic building context undoubtedly has both functional and aesthetic or amenity objectives underpinning it. The as constructed swimming pool, while departing from the plans to the extent that it is 22 centimetres narrower than required by the contract, does not represent a significant departure. In terms of the water surface area of the pool, the reduction in width results in a (approximately) 6.5% reduction in such area. As such, the pool as constructed achieves, at least to a significant extent, the contractual objective in relation to the size of the pool. There is no evidence that the swimming pool is not functional. The evidence of Mr Fajarda was that the pool is structurally sound.
73. [73]
    The spa, on the other hand, is significantly smaller than as required by the contract and represents a significant departure from the plans. I accept the evidence of Mr D’Alessandro that the width of the spa is an error that heavily impacts the useability of the spa. Mr Fajarda’s evidence in relation to the spa was: ‘I don’t believe it’s a useable area as a pool builder. That’s not what I call a spa in my opinion.’^[44] The effect of Mr D’Alessandro’s evidence, which I accept, is that the spa was reduced from a 5 to 6 person spa as designed, to a 2 to 3 person spa as constructed. I accept the evidence of Mr D’Alessandro on the issue of the functionality of the spa. I find that the spa can be used, however by a much reduced number of people. I prefer the evidence of Mr D’Alessandro on this issue over Mr Fajarda. The spa may be useable, however in terms of the water surface area of the spa, the reduction in width has the result that the spa has an almost 40% reduced water surface area. On any view, this is a very significant departure from the contractual requirements. Although no direct evidence was led on the issue, I am prepared to accept that, in the context of a significant pool build as this was, the spa was integral to the design and functionality of the completed structure. I am also prepared to accept that a spa performs a particular function quite different to that of a pool and is often used by multiple persons at any one time in a social setting. I accept that the as constructed spa has not achieved the required contractual objective.
74. [74]
    Mr D’Alessandro’s evidence was that the spa and one wall of the pool were required to be demolished to enable works to be undertaken to increase the size of the spa and the width of the pool. The cost of these works was, in the opinion of Mr D’Alessandro, $59,000.00.
75. [75]
    Mr Fajarda’s evidence was that further works should not be undertaken to increase the width of the pool. Mr Fajarda was however of the view that the spa could be removed and replaced with a larger spa.^[45] The cost of these works was, in the opinion of Mr Fajarda, $31,282.63.
76. [76]
    I have concluded that the reduced size of the swimming pool, while constituting a contractual breach, does not represent a significant departure from the contract nor does it impact the useability of the pool. Accordingly, I do not consider it necessary and reasonable for works to be undertaken as recommended by Mr D’Alessandro to demolish one wall of the pool and reconstruct the pool to the correct width.
77. [77]
    I have concluded that the reduced size of the spa, which constitutes a contractual breach, represents a significant departure from the contract and significantly impacts the useability of the spa. The spa is a structure which, as designed, could be used by up to 6 persons. As constructed the spa can be used by half this number. In addition the spa as constructed has a water surface area 40% less than required by the contract.
78. [78]
    Taking into consideration the use for which the spa is designed and the reduced amenity it provides, and the significant overall reduction in size of the spa, I am satisfied that it is both reasonable and necessary for remedial works to be undertaken as recommended by Mr Fajarda to increase the size of the spa. I accept the evidence of Mr Fajarda that the spa be reconstructed in accordance with the quote provided by Mr Fajarda in the amount of $31,282.63.
79. [79]
    I turn now to the issue of the balance payable to Mr Helu under the contract. It is not contentious that Mr Yuan did not pay the practical completion payment in the amount of $6,000.00. Mr Helu also claims that a further amount of $1,500.00 is payable by Mr Yuan in respect of ‘equipment’.
80. [80]
    The evidence regarding the claim for $1,500.00 is relatively scant. The first mention of the claim is in Mr Helu’s response and counter-application in which Mr Helu seeks an order that Mr Yuan pay, inter alia, an amount of $1,500.00 ‘for the equipment they agreed’. The claim is not otherwise particularised. In his written statement of evidence below, Mr Helu states that Mr Yuan owes him $1,500.00 but, again, no particulars are provided. At the hearing Mr Helu cross-examined Mr Yuan about the issue. Mr Yuan’s evidence was that his wife discussed with Mr Helu an issue relating to the additional equipment relating to saltwater treatment although it must be observed the evidence is about the actual equipment is far from clear. Mr Yuan’s evidence was that Mr Helu was ‘supposed to give us a valuation form, but he didn’t provide that.’^[46] Mr Yuan stated, ‘In fact, I do accept that in the beginning my wife asked for this equipment, but later she said she didn’t want it any more, but you told – he told us he already bought it, purchased the equipment, but at that stage you could just not install that equipment.’^[47]
81. [81]
    As I have earlier observed, the standard terms and conditions of the contract were not in evidence. It is therefore not possible to make any findings as to what the contract had to say about variations. The QBCC Act no longer constrains recovery by a building contractor of amounts for variation work in the absence of compliance with the requirements for variations set out in the Act. Doing the best I can with the limited available evidence, I find that the parties verbally agreed to vary the contract, such variation being the supply of additional equipment relating to saltwater treatment for an agreed amount of $1,500.00. As I have noted, Mr Yuan conceded this in his evidence. I accept Mr Helu’s evidence that he acted upon the agreed variation and purchased the additional equipment. I find that Mr Helu is entitled to recover the agreed amount of $1,500.00.
82. [82]
    Taking into consideration my finding in relation to the final stage payment, I find that the balance payable by Mr Yuan to Mr Helu under the contract is $7,500.00.
83. [83]
    Mr Yuan is entitled to recover the cost of rectification in accordance with the evidence of Mr Fajarda in the amount of $31,282.63 less the balance payable under the contract of $7,500.00, being an amount of $23,782.63.

Conclusion and orders

84. [84]
    Leave to appeal is granted. The appeal is allowed. Order 1 of the decision of the Tribunal made 3 March 2021 is set aside. Paul Helu must pay to Honwen Yuan $23,782.63 within 28 days of the date of this decision.
85. [85]
    I will make directions for the parties to file and exchange submissions on costs.