Harkin v Renaissance Parquet Pty Ltd (Civil Claims) [2013]

VCAT 1013 (17 June 2013)

Last Updated: 1 July 2013

VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL

CIVIL CLAIMS LIST VCAT REFERENCE: C7809/2011

CATCHWORDS

Contract for the supply and installation of a hardwood floor to be a feature in a renovated house written contract prepared by supplier containing detailed conditions width and length of boards specified contract requires variations to be agreed in writing before undertaken respondent installs non-complying boards suppliers allegation that contract orally varied rejected breach of contract damages Bellgrove v Eldridge, Ruxley Electronics & Construction Ltd v Forsyth .

APPLICANT: Colleen Harkin

RESPONDENT: Renaissance Parquet Pty Ltd (ACN: 137 807 624)

WHERE HELD: Melbourne

BEFORE: Deputy President I. Lulham

HEARING TYPE: Civil Claims Hearing

DATE OF HEARING: 4, 5 & 6 February 2013, 18 & 19 March 2013 & 7 May 2013

DATE OF ORDER: 17 June 2013

DATE OF REASONS: 17 June 2013

CITATION: Harkin v Renaissance Parquet Pty Ltd (Civil Claims) [2013] VCAT 1013

ORDERS

1. The respondent shall pay the applicant $21,435.00.

2. Costs reserved.

I. Lulham

Deputy President

APPEARANCES:

For the Applicant: Mr. S. Ryan of Counsel

For the Respondent: Mr.M.S.R. Clarke of Counsel

REASONS

Introduction

1. Proceedings C7809/2011 and C637/2012 are a claim and counterclaim arising from the supply and installation of a timber floor by Renaissance Parquet Pty Ltd at Ms Harkins house, pursuant to a contract. Significantly, the floor was to be a feature of the house, which Ms Harkin was renovating. The house had an existing timber floor at the front on stumps, and the new rooms on the rear were on a concrete slab. The new floor was to be a polished timber floor throughout the hall, kitchen and an open plan living area, in French Oak. The grade of oak was Classic which is described in Renaissances spec sheets as having rustic mixed knots, rift and heart and sap included. The boards were to be 220 mm wide, which are considerably wider than standard floorboards and are perceived to be luxurious. The appearance of the floor was, accordingly, of great importance. The floor could be distinguished, for example, from one which was to be carpeted, or situated in a storage room or laundry.

2. In C7809/2011 Ms Harkin sues Renaissance for damages. After abandoning aspects of her claim on the first day of the hearing, she claims $29,355.00, being the cost she incurred in removing and replacing Renaissances floor.

3. In C637/2012 Renaissance claims $6,020.00 as the balance due under the contract.

4. The proceedings were the subject of several directions hearings and a compulsory conference. As the parties were unable to reach a settlement a hearing was scheduled based on the estimated duration given by the parties practitioners. Regrettably that estimate was most inaccurate and in the event 5 hearing days were required, spread between February and May 2013. It is imperative that parties practitioners give accurate estimates of hearing duration.

5. The outcome of the proceedings turns on the question of whether the floor supplied and installed by Renaissance complied with the parties contract. Ms Harkin submits that it did not in three fundamental respects:

(a) that the boards were not Classic Grade French Oak Flooring consistent with a sample chosen by Ms Harkin at Renaissances premises;

(b) that the boards were not 2.4 metres in length or, properly understood, up to 2.4 metres in length as specified; and

6. Renaissance concedes that the boards were not 2.4 metres in length or 220mm wide as required by the contract as originally expressed, but says that the contract was varied and that it is not in breach.

7. Ms Harkin also submits that the manner in which the boards were laid was defective, in three respects:

(a) that instead of the boards being laid east to west in the kitchen and open plan living area (so that the boards would run in the direction of the house from front to back) it was laid north to south , across the house. Ms Harkins complaint here is that it is aesthetically wrong to lay boards across a house, and that doing so increased the need for expansion joints in the floor which in fact were not laid;

(b) that not all of the boards were adequately supported by battens at their ends, which allowed the affected boards to move; and

8. Renaissance says that Ms Harkin agreed to the floorboards being laid north to south.

9. As to the alleged lack of support, movement and clusters, Renaissance emphasises that it had not finished laying the floor when the parties contract was terminated. The boards had been affixed to the battens and sanding was to commence. Renaissance says that it would have noticed any movement in boards when it sanded them, and would have rectified it. Renaissance also says that because the boards were to be stained before coating, the clusters would not have been noticeable.

10. Having heard the evidence I have concluded that at the time of the parties dealings, Ms Harkin was far more acquainted with written contracts and what might be called business communication than was Renaissance 􀀀 s director Mr Hans Unger. Renaissance seems to have approached the transaction as if its only obligation was to supply and lay a floor, without proper regard to its contractual obligations. Accordingly whilst Ms Harkin wrote some emails which were objectively of great significance under the contract, the alleged variation upon which Renaissance relies was said to be wholly oral, and was not even mentioned in writing until the parties had fallen into dispute. Similarly, whilst Ms Harkin may have considered some of her emails to be merely direct, Renaissance seems to have seen them as being self serving, unreasonable or offensive, and to have justified Renaissances conduct in relation to the contract.

11. I heard evidence from the following witnesses:

For Ms Harkin

Coleen Harkin herself

Joshua John Triplett

Jeff Richardson

For Renaissance

Hans Unger

Darren William Correlan

Vu Dang, a sub contractor of Renaissance

Alan Dunne, a registered builder who had performed the renovation work at Ms Harkins house

Michael Jones

12. I also received a Tribunal Book prepared by the parties legal practitioners; a bound book of emails between the parties which supplemented part of the Tribunal Book; and other exhibits. At the end of the hearing Counsel for both parties filed written submissions.

13. Because the hearing ran for so long, with both parties cross-examining the witnesses at great length, there was literally a lot of evidence to consider. It was necessary to consider the extensive email communications between the parties, which recorded the negotiations leading to the contract, and the developments leading to the dispute.

14. I have concluded that Renaissance did not supply the flooring that was required under the contract. It supplied Classic Grade French Oak, but not in boards of 220 mm width, and not in lengths of up to 2.4 metres. Instead it supplied boards of random widths, none as wide as 220 mm. Because the length of a floorboard is a positive attribute, I conclude that the words up to 2.4 metres do not mean that any length will do as long as it does not exceed 2.4 metres. Instead, they mean that the boards would be approximately 2.4 metres long. Renaissance did not supply any boards of approximately 2.4 metres in length.

15. Because the floor was to be a feature of the house, these two aspects of noncompliance are serious breaches of the contract. Ms Harkins is entitled to damages.

16. Ms Harkins agreed to the boards being laid north to south. Further, having heard the competing evidence on this point, I do not find that it is inherently wrong, or unworkmanlike, to lay floor boards across a house. I would dismiss this part of Ms Harkins claim. Had it been the only alleged defect, Renaissance would have succeeded in the proceeding.

17. The alleged lack of support, movement and clusters are less clear. Had they been the only alleged defects, I may have been persuaded that Renaissance would have repaired the lack of support before completion, and that the clusters were not such as to establish that the floorboards had not been laid in a workmanlike manner. However, Renaissances clear failure to supply boards 220 mm wide and up to 2.4 metres long renders these alleged defects irrelevant.

18. In considering how damages are to be assessed, I have of course considered Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613. As Renaissance also submitted that the oak flooring which it supplied was a high grade product, superior to the engineered flooring that Ms Harkins installed to replace it, I have also considered Ruxley Electronics and Construction Ltd v Forsyth [1995] 3 WLR 118. I note in passing that well after the date for the parties to have filed and exchanged their written submissions, Ms Harkins lawyers faxed in a copy of a VCAT case[1]. I do not approve of this. Conduct of this kind may necessitate the calling of another hearing to allow further submissions, which could warrant an order for costs. In any event the VCAT case was a finding on its facts and I have not been persuaded by it.

The contract

19. The contract was partly written, partly oral and partly to be implied. The written component, a letter from Renaissance to Ms Harkin dated 15 July 2011 (the contractual letter) and Renaissances Terms of Work are by far the most important element. The oral component was essentially concerned with the choice of the stain with which the timber boards would be coloured, which is irrelevant, as the work did not proceed that far. The implied terms mainly affect Renaissance, as they required it to do its work in a proper and workmanlike manner.

20. The contractual letter and Terms of Work were signed by Ms Harkin on 28 July 2011 by way of acceptance, and the Terms were also signed by Mr Unger.

21. Because Renaissance alleges that the contract was varied orally, it is necessary to set out the written terms of the contract, and the way in which the contract was negotiated, in some detail. I will quote the relevant portions of documents as I set out the chronology of events.

22. I also record that Renaissance mills the French Oak floorboards from timber that it imports. In some of his emails Mr Unger uses the word stock to mean milled boards, whereas it seems that Ms Harkin who had no background knowledge in how floorboards are manufactured - did not understand stock to be distinct from raw timber.

23. Ms Harkin visited several showrooms in June 2011 and was aware of the difference between engineered floors, and natural timber floors. She also knew that the widths of floorboards varied, but she did not know the actual widths commonly used by suppliers. She visited Renaissances premises on 22 June 2011 and Mr Unger showed her a range of samples including wide French Oak boards. By this time Ms Harkin also had some samples from other suppliers, at widths of between 150 mm and 300 mm. She decided after meeting Mr Unger that she wanted boards which were 220 mm wide.

24. There is a dispute between the parties about the samples received by Ms Harkin, which is relevant to the alleged variation of the contract. Ms Harkin says that she was given a sample on 22 June 2011.

25. On 22 June 2011 Ms Harkin sent Mr Unger an email requesting a quote. She included in the email a floor plan of the house. Mr Unger replied by email on 23 June 2011 stating that he would need to do a formal site measure in order to confirm, but that his rough breakdown was $29,445.00 for the floor plus $15,800.00 to lay plywood sheets under the floorboards. Ms Harkin replied on 23 June 2011, saying that she could not afford Renaissances price. She said that her budget was between $27,000.00 and $30,000.00, saying, I can do your boards, but not your ply.

26. Mr Unger replied by email on 23 June 2011 that if 15 mm plywood battens were used instead of plywood sheets, the cost of the entire floor installation would be $32,240.00. Battens, of course, are narrow strips cut from plywood sheets. 27. On 24 June 2011, Mr Unger, replying to an enquiry about the difference in performance between a floor on plywood sheets and a floor on battens, said, To install the flooring and site colour that you saw with oil would reduce the price to $29,300 + all up [2]. Boards would be installed pre sanded and be lightly sanded. Cheaper still would be for us to install and you get another contractor to finish, this would save $5750.00 from our account, I am sure you could save about $2000.00 by doing this. This would depend on the site measure.

28. On 27 June 2011, Mr Unger emailed Ms Harkin, saying that while he preferred plywood sheets, battens could be used. He wrote:

To maintain your budget we know of others that will stain and finish for less than we do. If cost is important this is an option. Unfortunately my finishing costs are high due to process and I can't avoid them. $29,300 plus GST on battens, stained oil finish similar to the colour you saw in our showroom. 4 weeks lead time for stock to arrive from France, 1 week for machining. Please let me know and I will complete a site measure, prepare a formal offer and sample.

29. On 27 June 2011 Ms Harkin emailed Mr Unger asking some specific questions about Mr Ungers email. She said she needed to know the thickness of battens as compared to ply sheeting, because she needed to consider their effect on the height of the finished floor, which had to meet the under side of the doors. She said, are you sure this solution [ie, battens ] will be great?. She said she would be reluctant to buy the flooring from Renaissance but have another contractor lay it, because if the result was unsatisfactory the layer would blame Renaissance and I have had that problem before. It was clear that Ms Harkin was negotiating a contract with great care, and seeking to identify issues and reach express agreement on them in the contract.

30. On 30 June 2011, Mr Unger emailed Ms Harkin, saying:

Before I quote I want to make sure the time frame. We would not be able to start until mid August. Our timber is in France and we are loading a container this week, it will sail 7 July and land 35 days later. Please confirm this is ok.

31. It goes without saying that 35 days is longer than 4 weeks lead time. If one reads this email literally, Mr Unger was representing that the raw timber would land on 11 August 2011, if there were no shipping delays, but then some time would be spent clearing the timber through Customs, and one week would be needed for machining.

32. On 12 July 2011 Mr Unger emailed Ms Harkin, saying that he had met her builders on site, and recommended that battens be used on the concrete slab, but that in the old part of the house the floorboards be directly installed over the existing timber floor. He wrote:

Time frame is good, we have 220 mm wide board in the next container. It has a good mixture of lengths and grain. Rebecca will send through terms of work and payment request tomorrow.

33. On 15 July 2011 Rebecca Brown of Renaissance emailed Ms Harkin the letter of offer and Terms of Work. Included in the email was a full set of the invoices intended to be issued for the entire job, which was a way of advising Ms Harkin of the staged payments that would be required. Invoice 963 was for the deposit of $7,325.00 + GST and Ms Brown wrote:

To confirm your order for the next shipment we will require you to sign and return the Letter of Offer, Terms of Work and also make payment of the deposit (invoice 963) as soon as possible.

34. Invoices 964 (for materials landing) and 965 (for materials milling) included the words, Due on completion of stage. That is, Ms Harkin was not required to pay in advance before Renaissance would allocate some of the imported raw timber for milling for Ms Harkin, or before it would mill that timber. Similarly, invoices 966, 967 and 968 (for progress payment for subfloor installation, flooring installation and final finishing respectively) also included the words, Due on completion of stage.

35. As the ship had sailed on 7 July 2011, in its email of 15 July 2011 Renaissance was talking about allocating some of the raw timber for milling for Ms Harkin. Ms Harkin paid $7,325.00 of the deposit on 20 July 2011, but not the GST of $732.50 [3]. On 26 July 2011 Ms Brown emailed Ms Harkin to the effect that her sample was available for collection.

36. Mr Unger gave evidence that Ms Harkin inspected a sample on 26 July 2011, and that she also saw some photographs of a job which Renaissance had performed at a house in Kooyong, which appeared in a real estate agents sales brochure for that house. The photographs are quite impressive but the photograph of the kitchen, on which Mr Unger placed some emphasis, had been taken with a wide angle lense which distorts the appearance of the boards. The photographs could not convey to a consumer that the boards in the photograph were not of a consistent width. Ms Harkin denied having seen a sample on 26 July 2011. She gave evidence that she had seen some samples on 23 June 2011 and had decided then to choose wide boards. Subsequently she decided to buy 220mm wide boards. She did not see any samples between 12 July 2011 and when she signed the contract, but when she delivered the signed contract to Renaissances premises on 28 July 2011 she was given some colour samples, one light and one dark, and was told that she could make her final colour selection quite late. Ms Harkin says that she was allowed to retain the colour samples for use while she was selecting other colours for the renovation.

37. On 28 July 2011 the parties signed the contract, comprising the letter and Terms. It is notable that Renaissance drafted its conditions of contract and that Ms Harkin agreed to them without amendment. The documents described the floorboards which Renaissance would supply; did not set out a start date or finish date; in several respects sought to limit Renaissances liability; and required that any variations ... be made in writing prior.

38. The relevant portions of the letter and terms are as follows:

The contractual letter:

We (Renaissance) are pleased to make the following offer for supply and installation of French Oak flooring as specified for the above address.

The works include:

Board in between entry, hall, dining, kitchen and family room, 220 mm wide in length of up to 2.4 m, classic grade as per sample.

• French Oak flooring with bevel

• Installed directly to existing flooring and battens on concrete section.

• Concrete to be sealed

• Flooring to be secret nailed and glued to battens

• Flooring to be pre-sanded prior to installation

• Protected after installation with cardboard only

• Final finishing and staining on site

Cost $29,300.00 plus GST.

Price is valid for 7 days.

All offers are as per Renaissances standard Terms of Work. If you wish to proceed with this offer please sign and return ... so that we may prepare samples for your acceptance. Samples remain the property of Renaissance unless otherwise agreed, samples are available for viewing at our factory.

39. One can see the discrepancy between saying ... classic grade as per sample which connotes that the sample has already been seen by Ms Harkin, with saying so that we may prepare samples for your acceptance which connotes an anticipated event.

Nevertheless the specification of 220 mm wide, in length of up to 2.4 metres and classic grade are clearly stated.

The Terms of Work

Clause 1.4 Site Finishing Works

(After stating that the floor had to be properly maintained before completion) Use of floors will be deemed acceptance of floors only when both parties meet on site, inspect the finished floor and the client signs a letter of acceptance and Client agrees others will not have access or use of floor until this time. This is not applicable to pre-finished flooring or wax/oil finish.

Clause 1.6 Work Flow

Renaissance price works on the expectation that we will be given a clean run when completing works. This is to say that we expect access to relevant areas, no unrelated materials or impediments to be in our work areas, site to be clearly accessible and works to be able to be completed in a continuous flow. Should Renaissance be required to return to complete works that were unable to be completed due to incorrect information provided or access being restricted we reserve the right to charge this labour as a variation. Any decisions regarding overall site programming by the client are at their discretion and we are not responsible for the delays that this may bring to our work.

Clause 2.1 Grading

A timber-grading schedule is available upon request. Each timber has different grading rules and each job may be supplied a different mixed grade for aesthetic or cost reasons.

2.2 Variations

Timber is a natural product and accordingly variations within colour and grain may occur.

2.3 Properties of timber

Any requirement by Client regarding grain and knotting must be specified prior to our prices being submitted.

3 Finishing

3.1 Colour

Colour matching to be made from an accurate reference point supplied by the Client. The sample is included; additional samples will be charged accordingly. Samples are to be returned and retained by us. Samples remain our property unless agreed in writing by us. The colour must be confirmed prior to installation works commencing. All samples are to be produced by Renaissance at its Moorabbin factory. Application of sealer is acceptance of floor colour.

3.3 Finishing Characteristics

Each finish has its own properties and benefits. It is the owner's decision to choose a particular finish based on their needs and requirements. We do not warrant the surface properties, durability or lightfastness. Full information will be provided prior to any coating works commencing.

4 Sampling

4.1 Possession

All samples created will remain the property of Renaissance unless expressly written otherwise.

4.2 Characteristics

Once Renaissance have generated a sample it must be understood and accepted that the sample has been produced as close as possible to the techniques we would use on the whole floor, but it is also likely variation may exist between the piece of wood used on the sample, the machinery used on the sample and the time difference between the sample being produced and the floor being finished may result in variation between the two.

6 Milestones & Payments

After each milestone is reached, the Client has the right to inspect works prior to payment, within a reasonable time. After inspection or acceptance of works, payments will be due accordingly.

We do not accept any rejection of work post approval unless agreed to by us.

6.1 Delayed payments

(After stating that a client could ask permission to make a late payment ) If payment is not received by due date, a 48 hour grace period will be given in order for the client to make good their payment. If payment is not received within this grace period of 48 hours a preliminary stop works notice will be issued.

6.2 Overdue Accounts

Renaissance payment claims are made under the Building and Construction Industry Security of Payment Act 2002. Overdue payments will jeopardise continuing works and Administration Fees for late payments will be charged at overdraft rates. If payment is not received by due date, a 48 hour grace period will be given in order for the client to make good their payment. If payment is not received within this grace period of 48 hours a preliminary stop works notice will be issued. Works cancelled with outstanding payments and or no notice will have a prepared statement for works and all costs and Renaissance reserves the right to interest, loss of profit and collection costs.

9. Contract Terms

Contracts must be agreed and signed prior to works commencing. Works must be completed within four months of installation unless agreed [4].

9.2 Cancellation

Termination of works by client will only be considered when termination notice has been received by Renaissance. Reasons for termination must be clear and not conflict with any other terms of work agreed by the client. For a termination notice to be successful all works must be paid up to date and warranties waived if client agrees to engage other trades. Completion of works listed by other trades without a termination notice will be considered as a cancellation and result in full payment of contract unless prior agreement is made in writing from Renaissance.

No cancellation accepted unless agreed in writing by Renaissance.

9.7 Systems Used

Renaissance is under no obligation to provide information regarding systems or techniques used to produce works. Products used by us will be declared to the client for the purpose of maintenance and repairs where it does not breach our trade secrets.

9.8 Variations

Any variations of contract or site instructions must be made in writing prior.

10.6 Delayed / Restricted access

Should Renaissance attend site and find that the site is not at a stage for works to commence or other trades will impede our progress the client will be contacted to make arrangements for Renaissance to be rebooked or trades to be moved on allowing us clear work flow. Please refer to section 1.6 of the Terms of Work.

13 Warranty

13.3 Warranty works

Renaissance will not guarantee incomplete works. Full warranty shall apply to bevelled or domed face parque fixed directly with glued to chipboard without plywood. Warranty works will be undertaken once repairs are identified their causes isolated. A works schedule will be prepared for acceptance by the client prior to repairs commencing. Contract to be paid in full for warranty to stand. Warranty does not cover any other costs outside of our flooring rectification works.

40. Renaissance was the author of these Terms, and the contra proferentum rule requires that any ambiguity be read against Renaissance. Clause 6 was consistent with the post-dated invoices that Renaissance had given Ms Harkin, in that it entitled her to pay after work had been performed and accepted. Clause 9.2 does not exclude the normal contractual principles applying to termination of contracts for breach. Clause 9.8 required variations to be made (sic) in writing prior, and whilst Renaissance may have thought that this protected it from clients who sought to vary the contract, the clause also applies to variations sought by Renaissance.

41. On 30 August 2011, Mr Unger emailed Ms Harkin, stating that when he met the builder on around 23 August 2011, the builder wanted Renaissance to start the subfloor preparation in around four weeks, and so based on the builder's advice Mr Unger was considering starting in the second week of September.

42. Ms Harkin says that Renaissance was to begin work on 14 September 2011, but that she had to put Renaissance off because her builder was slow. On 10 September 2011 Ms Harkin emailed Mr Unger that the builder had more work to do and that, its still a few weeks away for you. In the same email Ms Harkin said, Can I get your expertise and assistance in addressing the floor levels please?, which is a reference to the fact that the levels of the floors in the old part of the house and the slab in the extension were different, which would have to be taken into account in order to achieve a level floor surface.

43. Mr Unger replied by email on 15 September 2011 that:

You are on a really tight budget for your works, it was the only way of meeting your budget. I do not have any room to do any extras other than get it (sic) and out with the installation and finishing. Happy to help with the levelling once we are on site, and can work out the cost when we are there.

44. On 21 September 2011 Ms Brown of Renaissance emailed Ms Harkin, asking her to confirm the progress of the building works and when she would be expecting to have the site ready for Renaissances attendance. On 22 September 2011 Mr Unger sent a similar email to Ms Harkin, advising her that we are in the ugly time of the year and need to allow time. On 25 September 2011 Mr Unger emailed Ms Harkin that, We really need to get a timeframe to your works. We have solid bookings through October that can not be shifted. Please confirm when you will be ready and a time for finishing.

We will confirm availability asap. If you fall behind the builder must be aware we can't shuffle jobs and he has to be on time.

45. These emails of 30 August 2011, 21, 22 and 25 September 2011 are consistent with the contract as recorded in Renaissances letter and clauses 1.6 and 10.6 of the Terms of Work. The contract did not bind the parties to specific commencement or completion dates, and under clause 1.6 Ms Harkin bore the risk of delay caused by her omission to give Renaissance a clean run of the site. It was prudent for Renaissance to remind Ms Harkin that the busy time of year was approaching.

46. On 29 September 2011 Ms Harkin emailed Mr Unger that Renaissance could start from Monday 10th October 2011. When Ms Harkin says start, she refers to Renaissance being given access to the site. However Renaissance had not milled the raw timber at this stage, so when it uses the word start it refers to milling the raw timber. On 30 September 2011 Mr Unger emailed Ms Harkin that he thought it would be the first week of November as Renaissance was full until then. I will confirm shortly a definite date.

47. On 11 October 2011 Mr Unger emailed that, At the moment it would be the third week of November for preparation to start. The other jobs are ready and firm.

48. Ms Harkin emailed 11 October 2011, Third week? What happened to first week? Then on 17 October 2011 Ms Harkin emailed Mr Unger, asserting that she had called every day, and sometimes twice a day, and emailed for over a week, but was yet to hear back from anyone. She also asserted that her husband had been phoning as well to no avail. Mr Unger denies that Ms Harkin made so many calls. It would seem that Ms Harkin was seeking to put pressure on Mr Unger, but that she had little power under the contract. Because there was no agreed commencement date under the contract, Renaissance was able to commence at a reasonable time. Ms Harkin would have known that Renaissance had other customers. The first week of November may not have been a reasonable commencement date.

49. On 17 October 2011 Mr Unger sent 2 emails to Ms Harkin. In one he said that Renaissance had provided a cost (based on) ordinary hours installation. If the workers are required to operate on weekends then I will request a rate schedule 􀀀 to take account of the overtime that Renaissance would have to pay.

50. The second email is important. Mr Unger wrote:

I have had a look at the site and will send Vu (Dang, a sub contractor) to re inspect tomorrow.

The two issues I have at the moment are time and stock. Your price allowed for classic grade materials and also ordinary hours for work. As you were not ready and we had no dates the stock was not manufactured in preparation for the start and no time was allowed.

Manufacturing is full until first week November to run your stock. I do have select grade in long lengths, but this would add $35 per square metre for materials difference. My physical difference is $27 per square metre plus GST.

I have asked the installers to work overtime and they could start at the end of the week sealing the concrete and preparation. I would estimate the hours difference for the preparation as 14 for grind and sealing, 30 for the subfloor and up to 75 for the installation. These figures will be capped at $13.50 per hour and for these hours. You must understand we are under an EBA and do not allow hours in excess of 38 unless negotiated with the workers and consented.

If we have to be on site within two weeks it will have to be done over two weekends and would be an increase to the original contract.

51. Seen in the context of clause 9.8 of the Terms of Work, this email was part of a negotiation of a variation. First, Renaissance must be aware of its own Terms of Work, so that when Mr Unger used the expression If we have to be on site within two weeks he cannot have meant that Renaissance was literally obliged to be on site within two weeks.

He seems to have adopted an artificial tone of urgency to justify offering a different grade of stock as a means of accelerating the completion of the job. Secondly, Renaissance sought additional labour charges for faster installation. It simply called on Ms Harkin to reply, because any variation had to be agreed in writing before it was carried out.

52. Probably for bargaining purposes, Ms Harkin somewhat conveniently overlooked the inconvenience that her builders delay had caused to Renaissance and pressed for an early start to the installation. In relation to the possibility of substituting materials she made her position very clear in her email to Mr Unger dated 18 October 2011:

I do not understand your statement that you do not have stock or have not manufactured the stock. We paid you in July to secure the raw material shipment. And you have known since then that this job had to be done. ... It cannot be the case that you have failed for almost 3 months to process the materials that you knew were for installation from September or October.

53. Ms Harkin was in no position to make this assertion, though, because she does not know whether it is appropriate to mill timber months before installation, or whether it is better to do so immediately before installation.

54. For some reason Renaissance persisted in trying to sell Ms Harkin a different product. Ms Brown of Renaissance sent Ms Harkin an email on 18 October 2011:

Your stock is in raw stage and cannot be processed until first week of November. Stock you purchased is classic grade, which is a feature product. This was done to meet your price objective. The stock we have available now is a premium grade oak, free of all knots and longer lengths. The stock I am offering you is from another customer who is also delayed and I can replace before their works start.

55. Ms Harkin replied on 18 October 2011, seeking confirmation that installation of the flooring she had ordered would take one week and could commence in the second week of November. She wrote, Alternatively if you want to supply the premium stock that you have, at the classic price quoted we will pay the extra labour cost for a faster installation. This was a straight forward negotiation, with Ms Harkin seeking to receive a higher grade timber at no cost. Renaissance was entitled to decline.

56. Mr Unger replied on 19 October 2011 that he would not supply the suggested premium stock at the classic price. He said that Renaissance could process your stock that is, mill the Classic Grade timber that Ms Harkin had ordered in the first week of November. Ms Brown also emailed Ms Harkin on 19 October 2011, that We need confirmation of your acceptance for the additional labour costs and the additional cost to upgrade materials. That is, that if Ms Harkin now wanted Premium, and not Classic, Grade she would have to pay for it.

57. It would seem that Mr Unger and Ms Brown were not coordinating their communications. Ms Harkin emailed Ms Brown that she and Mr Unger had been talking at cross purposes, and emailed Mr Unger on 19 October 2011 to hold Renaissance to the contract. She sent a copy of the email to admin, which was the email address from which Ms Browns emails had been emanating:

I understand that you are not taking up our offer of assistance with labour in order to do the job earlier with stock you already have to hand. I confirm your commitment to process our material the first week of November ...

58. This could have been the end of the negotiation about Renaissance supplying Premium Grade timber.

59. However on 19 October 2011 Ms Brown emailed Ms Harkin. This email contained photographs of select grading and classic grading French oak, and contained this text:

Im not sure if it has been made clear in the correspondence from (Mr Unger) what the difference is between your ordered materials and the materials he was (sic) available immediately, so I thought I would clarify if there was any misunderstanding. Between Classic grade (which was ordered) and Select grade there is a difference in appearance I have attached our spec sheets of both for your reference. The select grade is normally $45 per sq metre more than the classic grade. This select grade timber which (Mr Unger) offered at a discounted rate of an additional $27 per sq metre is almost a $2,500 + GST reduction.

... (We) offer the select grade materials which we have in stock now at $2,500 + GST instead of the previously offered $3,645 + GST (Mr Unger) will not be returning to the office until Friday morning. I will be able to confirm a start date with him, knowing that you will go back to the original work schedule.

60. Ms Harkin gave evidence that she couldn’t believe it when she received Ms Browns email. Again Ms Harkin emailed Mr Unger to hold Renaissance to the contract. In her email to Mr Unger, copied in to admin, on 20 October 2011 Ms Harkin said, firmly:

We have a contract with you to supply materials as specified, for the price quoted. ... I could go on at length about deposits, securing stock, .. etc etc But to keep matters very clear; where we are now at, is that you have said in emails and over the phone that you will complete the milling on the first week of November and install on the second week. ...We are confirming that in accordance with your email to me on 30 September, our job will start Wednesday November 3 and that the total job (milling and installation) will take two weeks.

61. Ms Harkin exaggerated in this email. The assertion that the job would start on 3 November 2011 was not in accordance with Mr Ungers email of 30 September 2011. Nor had Renaissance promised that milling and installation would take two weeks. However, Ms Harkin declined the offer of Select grade, and held Renaissance to supply boards in Classic Grade, 220 mm wide, in lengths of up to 2.4 metres.

62. Ms Brown replied on 24 October 2011, Im waiting to hear back from Hans (Unger) / Ron regarding schedules. I should hear from either tomorrow.

63. Ms Harkin instructed solicitors to write to Renaissance. Mr Unger emailed those solicitors on 26 October 2011 that Renaissance had only indicated when it would start which he said was the third week of November but that Renaissance was not under any contractual date obligations ... we operate on a first come basis and would have completed works at the first booking if they (had been) ready. Ms Brown then emailed the solicitors a copy of the contract.

64. On 8 November 2011 Ms Brown emailed Ms Harkin, stating that Renaissance had not received confirmation from Ms Harkins solicitors, and that it currently requires payment of invoices 963 (balance of deposit), 964 (landing of materials) and 965 (milling of materials). She also asked that Ms Harkin inspect and sign off on a sample. She concluded:

We have a different pigmenting method to propose at this viewing which may save up to 5 days site time at the finishing stage (no additional costs associated).

65. Renaissance was not entitled to payment of invoices 964 and 965. Those invoices were due for payment on completion of (the) stage to which they applied. There had been no variation of the contract on the subject of payment. Either Renaissance did not understand its own contract, or it was seeking to create an entitlement to delay work by putting itself in the position of asserting that it did not have to start work until Ms Harkin paid these invoices. At least Renaissances proposal to use a different pigmenting method was not dressed up as a method which Renaissance was entitled to use.

66. Very early on 9 November 2011, Ms Harkin emailed Mr Unger, to the effect that Renaissance had not merely indicated a start date. She also said she would pay the invoices, but that payment had not been requested before. The promise of payment was a concession by Ms Harkin.

67. Ms Harkin gave evidence that she attended Renaissances premises on 9 November 2011, expecting to look at a colour sample. She met two female employees who did not give their names. They said that a start date had not been set. They showed Ms Harkin a pre-finished floor, which would not be sanded and stained on site. Ms Harkin said firmly that she did not wish to select such a product, and she demanded to see Mr Unger. A male employee directed Ms Harkin into the factory area to see Mr Unger, but then the female employees told Ms Harkin to leave before they called the police.

68. Possibly these employees had a legitimate concern about occupational health and safety, but this was a farcical failure of customer relations at the end of which Ms Harkin was exasperated, shouting obscenities while threatening to sue.

69. Renaissance made a file note of sorts on 9 November 2011, by recording in an internal email to Ron Jenkins [5], that Ms Harkin had not made a colour selection.

70. On 10 November 2011 Renaissance was arranging to send a sample to Ms Harkins solicitors, so she could view it there. Ms Harkin gave evidence that she never saw that sample.

71. On 10 November 2011 Ms Brown emailed Ms Harkins solicitors, saying:

(Ms Harkin) already has a colour sample of a site-stain finish, what we are providing is a factory finish which is more expensive but will speed her site time up. We will not be charging extra for this ... the only thing we ask, is if (Ms Harkin) accepts the factory finished timber that she pays 50% of the finishing invoice (invoice 968). Ms Brown also set out a suggested timetable for works.

72. Given Ms Harkins clearly expressed desire that Renaissance supply what it had contracted to supply, this offer of factory finished timber is surprising. In any event, on 10 November 2011 Ms Harkins solicitors replied, confirming that Ms Harkin chose site finished boards and not factory finished timber, making arrangements for a sample to be supplied, and confirming Ms Browns advice that installation would commence on Monday 14 November 2011, be installed by Wednesday 16 November 2011, that 5 or so days would then pass to allow the floor to cure, and that then finishing of the floor would be attended to. Ms Harkin paid the balance of the deposit, and invoices 964 and 965. Again, she was not obliged under the contract to pay invoices 964 and 965 until the stages to which they applied had been completed.

73. On 10 and 11 November 2011 the parties exchanged emails about whether the boards should be run east to west or north to south. Mr Unger recommended the latter and Ms Harkin accepted that recommendation, saying by email on 11 November 2011, I will (nervously) take your advice and run north south. This was not a variation because the contract did not specify the direction of the boards. It was however an express agreement that Renaissance would run the boards north to south.

74. On 11 November 2011 Ms Harkin attended Renaissances factory and made payment by EFT.

75. On 14 November 2011 Ms Brown emailed Ms Harkin invoice 966 and 1058, the latter being for the additional labour charge for weekend work.

76. On 15 November 2011 Ms Harkin emailed Ms Brown that she had seen the floor yesterday running north to south and that it looked great.

77. However on 16 November 2011 Ms Harkin emailed that to her eye the boards looked rather pedestrian in their width, which had prompted her to measure the boards and that she was horrified to find that not one board was 220 mm wide. She suspected that there were alternative boards of 180 mm and 200 mm in width, and that they were all rather short and not 2.4 metres long. She concluded, We obviously have a problem. Please respond as a matter of priority.

78. Mr Unger replied by email on 16 November 2011, and this is where the alleged variation appears. He wrote:

Boards are up to 2.4 m long, but with classic grade they need to be cut due to knots and splits. As we discussed previously, we were going to vary the width, up to 3 sizes, but when we decided to install north south the floor it would not be effective. Please recall this conversation and confirm that it is accepted. Otherwise I have no choice but to pull workers from the site until this is resolved.

79. Again, Ms Harkin was exasperated. She emailed in reply in 16 November 2011:

Hans there has NEVER been any discussion to reduce the width of the boards. And any such suggestion would NOT have been approved. I refer to attached email from Renaissance where it was suggested to run north south. This is the ONLY communication on the matter. Also regarding length if you can’t deliver 2.4 board in classic grade then don’t quote them. It is in the contract and you are now saying you actually can’t do that. What you have installed is NOT what we have a contract for. It beggars belief to be honest ... For some reason, you have tried on several occasions to give me something other than what I have a Contract for and now you have actually installed something different to what we have a contract for. You need to stop work.

80. On 16 November 2011 Ms Brown replied. She began by saying that Mr Unger was on leave until 21 November 2011, at which time he would be leaving for Europe for 1.5 weeks. She then said:

When you collected your colour sample, you were shown images of a completed floor (in Kooyong [6]), a mixture of two widths; your floor is no different in appearance to this; both of which have variable widths. You were in agreement with Hans of which I recall; that this is the look you were after.

The installation was completed at which time you were present every day, you inspected the finished product yesterday and no questions have been raised over the last 4 days whilst materials have been on site and installation being in progress.

81. Ms Brown then requested a post dated cheque to cover the next invoice.

82. Ms Harkin replied in a lengthy email, setting out the many inaccuracies in Ms Browns email. She concluded by stating that she rejected the out of spec product you have installed and she demanded that the situation be rectified. She put Renaissance on notice that she was prepared to take legal proceedings.

83. Ms Harkin stopped the payment on an EFT to Renaissance, and issued her VCAT proceeding C7809/2011.

84. When Mr Unger gave evidence in chief he said the following about the variation to the contract. After Ms Harkin instructed Renaissance to lay the floorboards north to south on 11 November 2011, she came to Renaissances factory with the samples which Renaissance had sent her lawyers. She arrived at about 11.00am, without an appointment.

Mr Unger took Ms Harkin to the area where stock is kept, and together they saw two pallets of timber which was cut and ready for installation. Mr Unger took the two samples from Ms Harkin, and laid out 6 to 8 boards to show Ms Harkin the variable widths of the boards, and how the ends of boards would be clustered. Ms Harkin was happy with this demonstration, and had no issues. Ms Harkin selected a colour which Renaissance calls site stain.

85. On the following Friday, Renaissance ground the concrete slab and vacuumed the dust, sanded the timber floor as necessary and checked the levels, then applied the membrane. Mr Unger was at the house for 90 minutes on the Friday, and did not see Ms Harkin. Renaissance was expecting to coat the floorboards on site on the next Thursday. Accordingly on Tuesday 15 November 2011 Renaissance sought payment of invoices.

Ms Harkin paid by EFT but then it received Ms Harkins email of 16 November 2011 telling Renaissance to stop work.

86. When Mr Unger gave evidence in cross examination he said that Renaissance justifiably marketed itself as a high end supplier, and that Ms Harkin wanted a particular look at a particular price. The aesthetic appearance of Renaissances finished product was paramount, although peoples tastes differ and are subjective. In Mr Ungers experience the width of floorboards is more important to customers than their length. The contractual letter and the Terms of Work cover the essential elements of the type of floor and the width length and grade of boards. If any of those elements were changed it would be a variation of the contract. Subsequently he said that there was no written variation in relation to the width of the boards. Mr Unger elected not to record the variation in writing because he considered the variation from 220 mm wide boards to random width boards to be a minimal variation, not a substantial change and a marginal difference.

87. Further, he regarded Ms Harkin as erratic. She would agree to something, but then change her mind. When asked, though, whether those characteristics made it all the more prudent for Renaissance to record the variation in writing, Mr Unger had no answer.

88. Mr Unger said that the raw timber boards which were allocated to Ms Harkins job were 235 mm wide and up to 2.5 metres long, which allows boards to be machined at 220 mm wide and up to 2.4 metres long. This is what Mr Unger expected to be achieved when he wrote the contractual letter. He expected 60% - 70% of the boards to be around 2.4 metres long. He did not disclose any such percentage to Ms Harkin.

89. Mr Unger refined his evidence somewhat later in cross examination, saying that Ms Harkin had wanted random length boards, from the moment she saw the photographs of the Kooyong property in July 2011.

90. Mr Unger conceded that the contract was varied in writing insofar as Ms Harkin agreed to pay an additional labour charge to have the installation expedited. He did not concede that it was unusual for the variation to the width of the boards not to have been recorded in writing.

91. Mr Unger said that Renaissance had not machined the raw timber which had been allocated to Ms Harkin by 12 September 2011, because Mr Unger had met her builder on site and been told about the builders programming of work, and because Ms Harkin had not paid for the stock by then. Later, in mid October 2011, Mr Unger had another meeting with the builder which Ms Harkin attended.

92. The reason why Renaissance sent its email of 19 October 2011, containing the offer of Premium floor boards, after receiving Ms Harkins email of that date stating that she confirm(ed Renaissances ) commitment to process our material the first week of November ... was that Ms Harkin had telephoned Ms Brown of Renaissance after sending her email, asking Renaissance what it could do to start sooner. Ms Brown did not attend the hearing and Mr Unger had no written record of this conversation. Mr Unger said that Ms Harkin was in Bali when it took place.

93. As to Ms Harkins email of 20 October 2011, which commences with, We have a contract with you to supply materials as specified, for the price quoted. ... , this reflected that throughout the job Ms Harkin would change her mind.

94. Mr Unger conceded that none of the parties emails prior to 16 November 2011 confirmed any change to the width or length of the floor boards which were to be installed.

95. Similarly, Mr Unger gave evidence that prior to Ms Harkin attending Renaissances factory unannounced on 11 November 2011, there had been no discussion about changing the width or length of the floorboards. When their discussion began, Mr Unger was unsure whether he was to use the stock which had been allocated to Ms Harkins job the raw timber 235 mm wide and up to 2.5 metres long, which was sitting in racks, or the alternative stock that had been offered on 19 October 2011.

96. Mr Unger said that he concluded that no matter what documents Ms Harkin might sign, Renaissance would only have a firm agreement about materials with her when she paid her money. Because Ms Harkin paid some money after seeing some boards laid out on the floor, it amounted to her consenting to the supply of random width boards, which did not need to be recorded in a written variation. Mr Unger said that Ms Harkin had signed three boards by way of acceptance or confirmation of her agreement to being supplied random width boards, although Mr Unger could not find them. Mr Unger conceded and regretted that he had not mentioned this in his correspondence after the dispute arose on 16 November 2011, but said that Ms Harkin would have denied whatever Mr Unger might have written anyway.

97. Mr Unger said the three boards which Ms Harkin signed were of different widths.

98. Mr Unger pulled down about 15 boards, from the two types of stock which Ms Harkin could select, and laid them on the floor. He demonstrated that they were of random widths. Mr Unger also had 220 mm wide boards, but Ms Harkin agreed that Renaissance was to supply the boards that Mr Unger had just laid out on the floor.

99. Mr Unger noted that Ms Harkin had been calm and reasonable in this meeting on 11 November 2011, but furious on 16 November 2011 after seeing the random width boards installed. He said that this was indicative of her erratic behaviour.

100. I am unable to accept Mr Ungers version of events, that there was an unwritten variation to the contract under which Renaissance supplied random width boards. The evidence establishes beyond doubt that from the time the contract was negotiated, Ms Harkin wanted 220 mm wide boards. This was recorded in writing, in the contractual letter which Mr Unger drafted. The Terms of Work state that variations must be in writing. Mr Unger acknowledges that customers consider the width of boards to be important. Mr Unger says that Ms Harkin is a difficult customer prone to changing her mind. The emails before and after the dispute crystallised on 16 November 2011 do not record a variation. In the face of these matters, it is more likely than not that there was no written variation because there was no variation at all. I am unable to accept that there was an oral variation.

101. On the other hand, Ms Harkins evidence was consistent and logical. She knew what she wanted. In numerous emails she sought to raise issues so that specific agreement could be made on them and set out in the contract. She regarded 220 mm wide boards to be essential. It is inconceivable that Ms Harkin would orally vary the contract, to move from 220 mm wide boards to random width boards, after exercising such care in her written communications.

102. I conclude that Renaissance breached the contract by supplying floorboards which were not 220 mm wide.

The consequences of Renaissances failure to supply 220 mm wide boards

103. The well known case of Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613, began as a claim by a builder for money due under a building contract. Ms Eldridge, the proprietor, counterclaimed for damages on the basis that the mortar supplied was substantially different from that specified, and that it caused the building to be unstable.

At trial the builder lost his case, and damages were awarded to the proprietor. The issue before the High Court in the appeal was the assessment of damages awarded to the proprietor.

104. The trial judge found that the building could not be rectified, because the weakness in the mortar could cause the building to collapse. He held that the proprietor was entitled to have her contract fulfilled that is, that she was entitled to receive what she had contracted for and if the contract was not fulfilled, then damages. The trial judge assessed damages as the cost of demolishing the building and erecting a new one which complied with the specifications.

105. Of course, this case does not stand for the proposition that damages in every case of building defects are to be assessed as the cost of demolition and replacement. In the last part of the quote below the High Court said that the situation in Bellgrove v Eldridge was straightforward because the weakness in the mortar made demolition necessary, and made repair impossible.

106. The High Court, in a unanimous judgment, said this ( I have added the emphasis in italics) :

In the present case, the respondent was entitled to have a building erected upon her land in accordance with the contract and the plans and specifications which formed part of it, and her damage is the loss which she has sustained by the failure of the appellant to perform his obligation to her . This loss cannot be measured by comparing the value of the building which has been erected with the value it would have borne if erected in accordance with the contract; her loss can, prima facie, be measured only by ascertaining the amount required to rectify the defects complained of and so give to her the equivalent of a building of her land which is substantially in accordance with the contract. One or two illustrations are sufficient to show that the prima facie rule for assessing damages for a breach of warranty upon the sale of goods has no application to the present case. Departures from the plans and specifications forming part of a contract for the erection of a building may result in the completion of a building which, whilst differing in some particulars from that contracted for, is no less valuable. For instance, particular rooms in such a building may be finished in one colour instead of quite a different colour as specified. Is the owner in these circumstances without a remedy? In our opinion he is not; he is entitled to the reasonable cost of rectifying the departure or defect so far as that is possible . Subject to a qualification to which we shall refer presently the rule is, we think, correctly stated in Hudson on Building Contracts, 7th ed. (1946), p. 343. "The measure of the damages recoverable by the building owner for the breach of a building contract is, it is submitted, the difference between the contract price of the work or building contracted for and the cost of making the work or building conform to the contract, with the addition, in most cases, of the amount of profits or earnings lost by the breach". Ample support for this proposition is to be found in Thornton v. Place [1832] EngR 767; (1832) 1 M & Rob 218 (174 ER 74) ; Chapel v. Hickes [1833] EngR 95; (1833) 2 C & M 214 (149 ER 738) and H. Dakin & Co. Ltd. v. Lee (1916) 1 KB 566 . (See also Pearson-Burleigh Ltd. v. Pioneer Grain Co. (1933) 1 DLR 714 and cf. Forrest v. Scottish County Investment Co. Ltd. (1915) SC 115 and Hardwick v. Lincoln (1946) NZLR 309 ). But the work necessary to remedy defects in a building and so produce conformity with the plans and specifications may, and frequently will, require the removal or demolition of some part of the structure . And it is obvious that the necessary remedial work may call for the removal or demolition of a more or less substantial part of the building. Indeed – and such was held to be the position in the present case - there may well be cases where the only practicable method of producing conformity with plans and specifications is by demolishing the whole of the building and erecting another in its place. In none of these cases is anything more done than that work which is required to achieve conformity and the cost of the work, whether it be necessary to replace only a small part, or a substantial part, or, indeed, the whole of the building is, subject to the qualification which we have already mentioned and to which we shall refer, together with any appropriate consequential damages, the extent of the building owner's loss.

The qualification, however, to which this rule is subject is that, not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt. 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. In such circumstances the work of demolition and re-erection would be quite unreasonable or it would, to use a term current in the United States, constitute "economic waste". (See Restatement of the Law of Contracts, (1932) par. 346). We prefer, however, to think that the building owner's right to undertake remedial works at the expense of a builder is not subject to any limit other than is to be found in the expressions "necessary" and "reasonable", for the expression "economic waste" appears to us to go too far and would deny to a building owner the right to demolish a structure which, though satisfactory as a structure of a particular type, is quite different in character from that called for by the contract. Many examples may, of course, be given of remedial work, which though necessary to produce conformity would not constitute a reasonable method of dealing with the situation and in such cases the true measure of the building owner's loss will be the diminution in value, if any, produced by the departure from the plans and specifications or by the defective workmanship or materials .

As to what remedial work is both "necessary" and "reasonable" in any particular case is a question of fact. But the question whether demolition and re-erection is a reasonable method of remedying defects does not arise when defective foundations seriously threaten the stability of a house and when the threat can be removed only by such a course. That work, in such circumstances, is obviously reasonable and in our opinion, may be undertaken at the expense of the builder.

107. Assuming that the lack of support from the battens in some areas would have been rectified, and that the clusters would have been acceptable because of the stain, so that the only breach was Renaissances failure to supply boards 220 mm wide and up to 2.4 metres long, the principle in Bellgrove v Eldridge would entitle Ms Harkin to the cost of demolition and replacement of the floor. Ms Harkins complaint is not akin to being entitled to cement rendered external walls of second-hand bricks, (but receiving) new bricks of first quality. On the contrary, because the floor was to be a feature of the house, the better analogy is that of the rooms ... finished in one colour instead of quite a different colour as specified (where) the owner ... is entitled to the reasonable cost of rectifying the departure or defect so far as that is possible.

108. In Ruxley Electronics and Construction Ltd v Forsyth [1995] 3 WLR 118 the House of Lords considered a case in which a builder which had contracted to build a swimming pool for a home to a depth, in the old language, of 7 feet 6 inches, had built it only 6 feet deep. The trial judge made five main findings: (a) the pool as constructed was perfectly safe to dive into; (b) there was no evidence that the shortfall in depth had decreased the value of the pool; (c) the only practicable method of achieving a pool of the required depth would be to demolish the existing pool and reconstruct a new one at a cost of 21,560.00 pounds; (d) he was not satisfied that the proprietor Mr Forsyth, the respondent, intended to build a new pool at such a cost; and (e) such cost would be wholly disproportionate to the disadvantage of having a pool of a depth of only 6 feet as opposed to 7 feet 6 inches and it would therefore be unreasonable to carry out the works. The trial judge found that the respondent was entitled to damages for loss of amenity in the sum of 2,500.00 pounds.

109. The finding in (d) is interesting. In this VCAT case, Ms Harkin has torn up and replaced the floor. I suspect that not many applicants would have been so bold. Having done so, the possibility that she would take an award of damages but not spend it does not arise. That said, in Bellgrove v Eldridge the High Court considered the possibility of Ms Eldridge doing so to be quite immaterial and ... but one variation of a feature which so often presents itself in the assessment of damages in cases where they must be assessed once and for all[7]. In Ruxley Electronics and Construction Ltd v Forsyth Mr Forsyth had not reconstructed his swimming pool, but undertook to spend any damages awarded to him in doing so; Lloyd LJ said that the undertaking made no difference He cannot be allowed to create a loss which does not exist in order to punish the defendants for their breach of contract. The basic rule of damages ... is that they are compensatory not punitive.

110. The question arises whether, if the only breach was Renaissances failure to supply boards 220 mm wide and up to 2.4 metres long, Ms Harkin would be only entitled to damages for loss of amenity even though she has replaced the floor. Could it be said that Renaissances floor was still so good that Ms Harkin􀀀s loss of her wide and long boards was similar to the loss of some extra depth from a deep swimming pool?

111. Jauncey LJ considered Bellgrove v Eldridge to fit within a line of cases, in the United Kingdom and the USA, which dealt with the question of reasonableness in the context of reinstatement. He said Damages are designed to compensate for an established loss and not to provide a gratuitous benefit to the 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. This was recognised by the High Court of Australia in the passage in Bellgrove v Eldridge cited above where it was stated that the cost of reinstatement work subject to the qualification of reasonableness was the extent of the loss, thereby treating reasonableness as a factor to be considered in determining what was that loss rather than, as the respondents argued, merely a factor in determining which of two alternative remedies were appropriate for a loss once established. ...

What constitutes the aggrieved partys loss is in every case a question of fact and degree. Where the contract breaker has entirely failed to achieve the contractual objective it may not be difficult to conclude that the loss is the necessary cost of achieving that objective. Thus if a building is constructed so defectively that it is of no use for its designed purpose the owner may have little difficulty in establishing that his loss is the necessary cost of reconstructing. Furthermore, in taking reasonableness into account in determining the extent of loss it is reasonableness in relation to the particular contract and not at large. Accordingly, if I contracted for the erection of a folly in my garden which shortly thereafter suffered a total collapse it would be irrelevant to the determination of my loss to argue that the erection of such a folly which contributed nothing to the value of my house was a crazy thing to do...

However, where the contractual objective has been achieved to a substantial extent the position may be very different.

It was submitted that where the objective of a building contract involved satisfaction of a personal preference the only measure of damages available for a breach involving failure to achieve such satisfaction was the cost of reinstatement. In my view this is not the case. Personal preference may well be a factor in reasonableness and hence in determining what loss has been suffered but it cannot per se be determinative of what that loss is. My Lords, the trial judge found that it would be unreasonable to incur the cost of demolishing the existing pool and building a new and deeper one. In so doing he implicitly recognised that the respondent's loss did not extend to the cost of reinstatement. He was, in my view, entirely justified in reaching that conclusion.

112. Mustill LJ found that the builder was seeking to argue that there were only two alternative measure of damages the full cost of reinstatement and the depreciation in value of the house and that where the building defects were minor rather than structural, if the home owner could not prove that the value had depreciated he or she should receive no damages. Mustill LJ considered this argument to be fallacious, because it would make the builders promise to achieve a particular result for the owner to be illusory. If that was the law, the average householder would say there must be something wrong with the law; there are many situations in which a homeowner may want to make their house suit their tastes, rather than seeking to increase the value of the house. His Lordship said (emphasis added)

There are not two alternative measures of damage , at opposite poles, but only one: namely the loss truly suffered by the promisee . In some cases the loss cannot be fairly measured except by reference to the full cost of repairing the deficiency in performance. In others, and in particular those where the contract is designed to fulfil a purely commercial purpose, the loss will very often consist only of the monetary detriment brought about by the breach of contract. But these remedies are not exhaustive , for the law must cater for those occasions where the value of the promise to the promisee exceeds the financial enhancement of his position which full performance will secure. This excess, often referred to in the literature as the 'consumer surplus' (see eg the valuable discussion by Harris, Ogus and Phillips, 'Contract Remedies and the Consumer Surplus' (1979) 95 LQR 581) is usually incapable of precise valuation in terms of money, exactly because it represents a personal, subjective and non-monetary gain. Nevertheless, where it exists the law should recognise it and compensate the promisee if the misperformance takes it away . The lurid bathroom tiles, or the grotesque folly instanced in argument by my noble and learned friend Lord Keith of Kinkel, may be so discordant with general taste that in purely economic terms the builder may be said to do the employer a favour by failing to install them. But this is too narrow and materialistic a view of the transaction . Neither the contractor nor the court has the right to substitute for the employer's individual expectation of performance a criterion derived from what ordinary people would regard as sensible. As my Lords have shown, the test of reasonableness plays a central part in determining the basis of recovery, and will indeed be decisive in a case such as the present when the cost of reinstatement would be wholly disproportionate to the non-monetary loss suffered by the employer. But it would be equally unreasonable to deny all recovery for such a loss. The amount may be small, and since it cannot be quantified directly there may be room for difference of opinion about what it should be. But in several fields the judges are well accustomed to putting figures to intangibles, and I see no reason why the imprecision of the exercise should be a barrier, if that is what fairness demands.

My Lords, once this is recognised, the puzzling and paradoxical feature of this case, that it seems to involve a contest of absurdities, simply falls away. There is no need to remedy the injustice of awarding too little by unjustly awarding far too much. The judgment of the trial judge acknowledges that the employer has suffered a true loss and expresses it in terms of money. Since there is no longer any issue about the amount of the award, as distinct from the principle, I would simply restore his judgment by allowing the appeal.

113. Lloyd LJ also considered Bellgrove v Eldridge to fit within the authorities on reasonableness in the context of damages. After summarising the case he said Once again one finds the court emphasising the central importance of reasonableness in selecting the appropriate measure of damages. If reinstatement is not the reasonable way of dealing with the situation, then diminution in value, if any, is the true measure of the plaintiff's loss. If there is no diminution in value, the plaintiff has suffered no loss. His damages will be nominal.

114. The facts in Ruxley are unusual. The lost 18 inches from the bottom of a deep swimming pool were of no use, and in that sense Mr Forsyth had lost nothing; nor did he intend to reconstruct the pool. The examples given by their Lordships, of hideous follies and lurid tiles, are in the realm of useless, theoretical losses. Ms Harkin is not in that position. She has not lost, for example, wide floorboards which she was going to cover in carpet. She lost a feature of her house. She was entitled to hold Renaissance to its contract, and is entitled to substantial damages.

Assessment of damages

115. In her submissions Ms Harkin put her damages as follows:

Sums paid to Renaissance $24,310.00

Sum paid to remove and replace the floor $29,355.00

Sub total $53,665.00

Less original contract price $32,230.00

Loss and damage $21,435.00

116. I accept this calculation as the proper measure of damages.

117. Ms Harkin also produced evidence on how much could have been spent in rectifying the floor, had it not been replaced, which was to the effect that it would have cost more to rectify than to replace. Renaissance denied these claims and put competing evidence. The issue is however irrelevant; the floor has been replaced and I have found that Ms Harkin was entitled to replace it given Renaissances failure to supply boards of the contracted width and length.

118. Renaissance, having failed to comply with the contract and having stopped work after Ms Harkins email of 16 November 2011, is not entitled to payment of the $6,020.00 claimed as the balance due under the contract.

119. In the circumstances I will make orders in favour of Ms Harkin in C7809/2011 and dismissing Renaissances claim in C637/2012, and I will reserve costs.

I. Lulham

Deputy President

17 June 2013

[1] Nguyen v Nguyen [2013] VCAT 790

[2] $29,300 + means $29,300 + GST, being $32,230.00, in essence the same sum stated in Mr Ungers email of 23 June 2011

[3] Ms Harkin had paid most of the deposit before the parties signed the contract. Renaissance accepted the part payment and waived its right to argue that the contract was not formed when the parties signed on 28 July 2011 because the balance of the deposit was outstanding. Ms Harkin paid the last $732.50 of the deposit in November 2011.

[4] In quoting clause 9 of the Terms of Work, I have not added the emphasis.

[5] Mr Jenkins does not exist. Renaissance created an email address in the name Ron Jenkins, Commercial Manager, to create some breathing space when confronted with difficult customers, and to add some gravitas when chasing payment of overdue accounts. It is a device which enables a small business to relieve its senior staff from being too accessible to others.

[6] The estate agents brochure

[7] [1954] HCA 36; [1954] 90 CLR 613 at 620