Robert John O'Neall and Margaret Marie O'Neall v Barra Rosa Pty Ltd and Elringtons (A Firm) [1989] ACTSC 19 (27 April 1989)

SUPREME COURT OF THE ACT

ROBERT JOHN O'NEALL and MARGARET MARIE O'NEALL v. BARRA ROSA PTY LTD
and ELRINGTONS (a firm)
S.C. No. 2057 of 1986
Sale of Land

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Miles C.J.(1)

CATCHWORDS

Sale of Land - agreement to sell land and construct dwelling house - implied term for house to be built in good and workmanlike manner and of good and proper materials - defects - failure to comply with default notice - whether buyer entitled to terminate.

Contract - damages - assessment.

Perry v. Sharon Development Co. Ltd (1937) 4 All ER 390

Photo Production Ltd. v. Securicor Transport Ltd [1980] UKHL 2; (1980) AC 827

Gates v. City Mutual Life Assurance Society Limited [1986] HCA 3; (1985-1986) 160 CLR 1 at 12

HEARING

CANBERRA
27:4:1989

Counsel for the plaintiffs Mr. T. Johnstone

Solicitors for the plaintiffs Crossin Power Haslem

Counsel for the defendant Mr. T. Higgins, Q.C.

Mr. H. Marshall

Solicitors for the defendant Elringtons

ORDER

The contract be terminated in terms of para (1) of the statement of claim.

The deposit and interest be returned in terms of paragraph (2) of the statement of claim.

There be judgment for the plaintiffs in the sum of $5,500.00.

The first defendant pay the plaintiffs' costs on the full Supreme Court scale.

There be liberty to apply with regard to the exact terminology of these orders, and generally.

DECISION

This case arises out of a contract for the sale of land (more precisely, the sale of a leasehold interest in land), according to the terms of which the first defendant, the seller, agreed to construct a house for the plaintiff buyers. The statement of claim seeks a declaration that the plaintiffs validly terminated the agreement for sale, an order that the plaintiffs "recover the deposit" paid to the second defendant as stakeholder and an order that the first defendant pay damages and interest. The second defendant has taken no active steps in the proceedings. The first defendant (whom I shall call simply the defendant) by counterclaim seeks a declaration that the agreement was repudiated by the plaintiffs and the defendant claims the deposit together with damages and interest. Counsel for the plaintiffs has submitted that this is an important case for new home buyers in Canberra. That may or may not be so as the contract consists not only of the printed standard conditions but also additional conditions which may not be in common use. In any event it is important to try to understand the exact nature of the issues. Settled principles which apply to contracts for the sale of land on the one hand and to building contracts on the other do not necessarily fit easily into the present case.

2. There was a substantial body of evidence on matters of detail and counsel submitted helpful and lengthy written submissions on fact and law. In the end, however, I think that the issues on both aspects may be stated succinctly.

3. The contract between the parties is in the standard form of the Agreement for Sale (Crown Leasehold) in use in the Australian Capital Territory and was made on 18 October 1985. It contains a number of Special Conditions as well as the standard provisions. The plaintiffs agreed to buy as joint tenants the unexpired residue of the Crown Lease of Block 2 Section 3 at McKellar, known as 25 Burns Circuit, McKellar. The schedule to the Agreement provided for a purchase price of $145,215, a deposit of $14,521 to be paid to the stakeholder and for the balance of $130,694 to be paid "on completion". Item 14 of the schedule provided that the date for completion was to be "seven days after the date of approval of finance or date of certificate of compliance whichever is the later."

4. Clause 14 of the conditions of sale is in the following terms:

"14. Final Certificates
(1) Where the Crown Lease contains a building
and development covenant the Seller shall
hand over to the Buyer or his solicitor on
completion
(a) a certificate as to fitness for
occupancy and use or a certificate of
completion (herein severally called the
"Final Certificate") issued pursuant to
the Building Ordinance in respect of
the improvements to which the building
and development covenant applies, and
(b) a certificate issued by or on behalf of
the Minister certifying compliance for
the purposes of the City Area Leases
Ordinance 1936 with the building and
development covenant (herein called the
"Certificate of Lease Compliance").
(2) Except in respect of any unauthorised
improvements disclosed in Schedule Item 11,
the Seller shall also hand over on
completion a certificate as to fitness for
occupancy and use in respect of such of the
improvements and alterations or additions
made to the improvements as require that
certificate in order to comply with the
Building Ordinance."

5. Clause 15 of the conditions of sale set out in the Agreement for Sale is in the following terms:

"15. New premises
Where the Crown Lease contains a building and
development covenant which has not been complied
with at the date this agreement is made the
Seller agrees that in order to procure the issue
of the Final Certificate and the Certificate of
Lease Compliance referred to in clause 14, he
will at his own expense prior to completion of
this agreement and as soon as practicable
(1) complete the construction of the improvements
in a good and workmanlike manner substantially
in accordance with the plans and
specifications now approved by the Building
Controller under the Building Ordinance and
(2) do perform and complete all such other acts,
matters and things as may be necessary to
satisfy the Minister that the building and
development covenant has been complied
with."

6. The Building Ordinance referred to in clause 15 is defined in clause 1 as the Building Ordinance 1972. The Building Controller is no doubt the Building Controller appointed under the Building Ordinance.

7. It is common ground that no question arose in the present case relating to approval of finance, and hence the date for completion, according to item 14 of the Schedule, was seven days after the date of the "certificate of compliance". It is also common ground that the "certificate of compliance" referred to in item 14 is the "Certificate of Lease Compliance" referred to in clauses 14 and 15 of the conditions of sale.

8. It is also common ground that the Crown lease over the land in question contained a covenant that the lessee would commence the erection of a dwelling within six months from the date of commencement of the lease (the date of commencement being 30 July 1984) and further that the lessee would within twelve months from the date of the commencement of the lease or within such further time as may be approved complete the erection of the building in accordance with plans and specifications approved by the Commonwealth.

9. Special Conditions 1-5 dealt with the construction of the building and related matters. In particular Special Condition 1 provided as follows:

"1.The Seller shall pursuant to Clause 15
hereof erect a dwelling and
(a) shall include in the dwelling the basic
features and inclusions setforth in
Schedule B hereto and
(b) apart from defects or faults due to
natural shrinkage of timbers the Seller
will make good at its own expense any
defects or faults in the construction
of the said dwelling which appear
within a period of ninety days from
either the date of settlement or the
date of possession whichever is the
sooner and which are due to defective
or improper materials or bad
workmanship and are notified to the
Seller by the Buyer in writing within
that period.
The Seller will make good such defects, if
any:
(a) if such defects are in or concerning
(i) electricity supplies or distribution
(ii) sewerage or drainage
(iii) any portion of the building the fault
or defect in which could or might lead
to damage to any of the Buyer's
chattels in the said dwelling and/or
could restrict or interfere with the
proper use and enjoyment of the said
dwelling as the home of the Buyer.
The Seller will make good the same as is
reasonably possible after receiving such
notice aforesaid; and
(b) in the case of any other defects or
faults the Seller will make good the
same within ninety days of such notice."

10. The effect of clauses 14 and 15 together with special condition 1 is that prior to completion of the agreement for sale the seller is to complete the construction of the building in a good and workmanlike manner substantially in accordance with the plans and specifications approved by the Building Controller, do all such things as may be necessary to satisfy the Minister that the building and development covenant has been complied with and hand over to the buyer on completion a final certificate issued under the Building Ordinance and a certificate of lease compliance issued by the Minister.

11. Notices to complete and default notices are provided for in clause 19 of the agreement for sale as follows:

"19 Notice to Complete and Default Notice
(1) Where
(a) a date for completion is set out in or
becomes ascertained under Schedule Item
14 and
(b) completion is not effected in
accordance with sub-clause 2(3)
either party may at any time after such date for
completion give to the other party a notice in
writing to complete this agreement ("notice to
complete")
(2) A notice to complete shall
(a) appoint a time during business hours
and a date being not less than 14 days
after the service of the notice
(excluding the date of service) within
which and a place in the Territory at
which to complete this agreement and
(b) state that it is given pursuant to this
clause.
(3) Notwithstanding any rule of law or equity to
the contrary a party is entitled to give a
notice to complete if
(a) at the time the notice is given he is
not in default under this agreement and
(b) at the time completion is due he is
ready willing and able to complete or
could do so but for some default or
omission of the other party.
(4) Upon service of a notice to complete the
period of time therein limited for
completion shall be an essential term of
this agreement.
(5) Where one party is in default in the
observance or performance of any obligation
on him under or by virtue of this agreement
(other than failure to complete) the other
party may at any time thereafter give to the
party in default a notice in writing to
rectify the default ("default notice").
(6) A default notice shall
(a) specify the default and call upon the
party to rectify the default within a
period being not less than 7 days after
the service of the notice (excluding
the date of service) and
(b) state that it is given pursuant to this
clause.
(7) Notwithstanding any rule of law or equity to
the contrary a party is entitled to give a
default notice if at the time the notice is
given he is not in default under this
agreement.
(8) Upon service of a default notice the period
of time therein limited to rectify the
specified default shall be an essential term
of this agreement.
(9) Where one party does not comply with the
terms of an effective default notice or
notice to complete served by the other under
this clause then the provisions of clause 20
shall apply.
(10)The party serving a notice under this clause
may at the request or with the consent of
the other party extend the term of the
notice for one or more specifically stated
periods of time and thereupon the term of
the notice shall be deemed to expire on the
last day of such extended period or periods
and the notice shall operate as though this
clause stipulated such extended period of
notice in lieu of that stated above and time
shall be essential accordingly."

12. The rights of the parties to terminate the agreement are provided for in clause 20 of the conditions of sale as follows:

20. Termination of Agreement
Buyer in default
(1) Subject to the provisions of clause 19, if
the buyer defaults in the observance or
performance of any obligation imposed on him
under or by virtue of this agreement the
Seller may forfeit the deposit paid by the
Buyer, except so much of it as exceeds 10%
of the Total Purchase Price, the Seller may
terminate this agreement and thereafter may
either -
(a) sue the Buyer for breach of contract, or
(b) resell the Crown Lease and Goods (if
any) as owner.
(2) In the event that the Seller elects to
resell pursuant to paragraph (1)(b) the
deficiency (if any) arising on such resale
and all expenses of and incidental to such
resale or attempted resale and the Buyer's
default shall be recoverable by the Seller
from the Buyer as liquidated damages
provided that proceedings for the recovery
thereof be commenced within 12 months of the
termination of this agreement.
(3) The Seller may retain any money paid by the
Buyer on account of the sale, other than the
deposit forfeited under this clause, as
security for any damages liquidated or
otherwise awarded to him for the Buyer's
default provided that proceedings for
recovery of such damages are commenced
within 12 months of the termination of this
agreement.
(4) If the Seller terminates the agreement under
this clause the Seller or his solicitor may
notify the Stakeholder in writing
accordingly and the Stakeholder shall
thereupon be authorised to pay the deposit
forfeited under this clause to the Seller or
his solicitor as stated in that notice.
Seller in default
(5) Subject to the provisions of clause 19, if
the Seller defaults in the observance or
performance of any obligation imposed on him
under or by virtue of this agreement the
Buyer may elect either -
(a) to enforce against the Seller without
any further or other notice under this
agreement such rights and remedies as
may be available to the Buyer or
(b) to terminate this agreement and without
prejudice to any right of the Buyer to
damages, to give notice in writing to
the Seller and the Stakeholder forthwith
to repay to the Buyer any deposit
and any money paid on account of the
Total Purchase Price but on compliance
with that notice the Buyer shall no
longer be entitled to any right to
specific performance of this agreement
and shall return forthwith all papers
in his possession on belonging to the
Seller."

13. The statement of claim alleges that by 17 July 1986 the defendant had failed or neglected to comply with an implied term of the agreement that the house would be built in a good and workmanlike manner and of good and proper materials, that the plaintiffs had in accordance with clause 19 of the agreement served a default notice and that the defendant had failed to comply with that default notice thereby entitling the plaintiffs to terminate the agreement under clause 20 and to claim the relief sought.

14. The defence, in effect, simply denied the failure to comply with the terms of the agreement as alleged. In its counterclaim the defendant made the positive assertion that the house had been erected "substantially in accordance with approved plans and specifications and the terms of the said agreement". The defendant alleged that the plaintiffs were not entitled to terminate the agreement and that the notice of termination amounted to a repudiation on the part of the plaintiffs, entitling the defendant to the relief sought in the counterclaim.

15. I turn now to the facts.

16. Work on the erection commenced in accordance with the agreement after the permit was issued on 28 October 1985. On 29 May 1986 a certificate of occupancy issued and on 2 June 1986 a certificate of compliance issued. However, prior to the issue of these certificates complaints had been made by the plaintiffs and on their behalf about the alleged failure of the defendant to construct the building in accordance with the proper standard and with the plans and specifications. A list of "house defects, errors, etc." was sent by the plaintiffs' solicitors to the defendant's solicitors with a letter dated 16 June 1986 and the letter noted that the defendant had agreed to attend to "a substantial portion of the works specified" in the list and was considering a reduction in price.

17. On 2 July 1986 the defendant's solicitors replied to this letter by serving on the plaintiffs' solicitors a notice to complete the purchase on or before 18 July 1986. On the same day the plaintiffs' solicitors wrote to the defendant's solicitors stating that "our clients instruct that until the necessary work has been completed they do not intend to settle." The letters presumably crossed in the mail because on 8 July 1986 the plaintiffs' solicitors wrote to the defendant's solicitors formally rejecting the notice to complete on the ground that the seller "has failed to complete the construction of the dwelling in a good and workmanlike manner" which they claimed was "an obligation imposed on it pursuant to an implied term of the said Agreement for Sale".

18. On 16 July 1986 the plaintiffs' solicitors served upon the defendant's solicitors a default notice pursuant to clause 19 of the agreement for sale. At the same time they claimed that the defendant had no capacity to serve a notice to complete when it was in breach of its obligations under the agreement. The default notice required the seller "to rectify the defaults specified in the annexure hereto within the period of not less than four (4) months after the service of this notice (excluding the date of service)". The default notice set out twenty-four items of alleged defects and faulty workmanship.

19. By 24 November 1986 the defendant had carried out work on some of the alleged defects set out in the plaintiffs' default notice. However, the plaintiffs did not regard it as satisfactory and on 24 November 1986 their solicitors wrote to the defendant's solicitors purporting to terminate the agreement pursuant to clause 20(5). On 27 November 1986 the defendant's solicitors served a second notice to complete requiring completion by 3 pm on 12 December 1986 (apparently having waived the first notice to complete). On 6 February 1987 the defendant's solicitors notified the plaintiffs' solicitors that the defendant terminated the agreement because of the plaintiffs' failure to complete the purchase. Soon after that the defendant sold the land to a third party.

20. On 14 November 1987 the plaintiffs' solicitors served notice upon the defendant's solicitors that if the termination of 24 November 1986 was held to be ineffective then the plaintiffs terminated the agreement upon the ground that the defendant had repudiated the agreement by selling the property to a third party.

21. A threshhold issue in the case is whether the defendants complied with the obligation to build the house in a good and workmanlike manner and with good and proper materials. It is important to bear in mind that the plaintiffs allege that the obligation arises from an implied term in the agreement. That there was such an implied term was not admitted in the defence filed. However, no argument was put to deny that such an obligation existed and the implication of such a term in a building contract can hardly be doubted: see Perry v. Sharon Development Co. Ltd (1937) 4 All ER 390. However, it should be noted that the obligation imposed by such an implied term is not necessarily identical with the obligation under clause 15 of the agreement for sale. The obligation under clause 15 is an express obligation to complete the building "in a good and workmanlike manner substantially in accordance with the plans and specifications now approved by the Building Controller". Furthermore, according to the provisions of clause 15 the seller accepts that obligation "in order to procure the issue of the final certificate and the certificate of lease compliance". What effect the issue of the final certificate and the certificate of lease has on the buyer's rights under clause 15(1) was not argued by counsel and I leave that question out of consideration.

22. Senior counsel for the defendant submitted that the issue of proper workmanship is to be decided by considering whether or not the improvements were constructed in conformity with clause 15 of the contract. This however is not the way in which the plaintiffs' claim was pleaded or argued. As I have already emphasised, the plaintiffs' claim rests upon an implied term to construct the dwelling in a good workmanlike manner and with sound and proper materials. In any event, I do not think that clause 15 entitles the defendant to claim that the plaintiffs are bound to complete the sale so long as the defendant has complied only substantially with the obligation to build the house in a proper and workmanlike manner. The obligation imposed by clause 15 relates both to the standard of workmanship and to the extent of compliance with the plans and specifications or as counsel for the plaintiffs put it, the "how" and the "what". The standard required is that the building be constructed in a good and workmanlike manner. That standard is unqualified. Contrast the extent to which the construction of the building is to be in accordance with the plans and specifications is qualified: it is sufficient that the construction be "substantially" in accordance with the plans and specifications. In other words, whilst there is room for some departure from the plans and specifications relating to what is to be built, there is no room for departure from the standard of the good and workmanlike manner in which the construction is to be carried out.

23. The plaintiffs' complaints about the alleged poor quality of workmanship were for the purposes of the hearing set out in a Scott Schedule and the defendant furnished comments on each item in the Schedule. Evidence on these matters was given by Ms. Tonique Bolt and Mr. D.S. McLagan, both architects and each engaged for the purposes of the case by the plaintiffs and defendant respectively. In the end there was not a great deal of difference in their evidence on particular matters. On the whole Ms. Bolt thought the defects in question were more serious than did Mr. McLagan. Mr. McLagan thought that generally speaking the standard of workmanship was appropriate to the price being charged. In my view, that bears only marginally on the question of whether the items in question met the appropriate standard of proper workmanship and the precise issue of how the price fixed or affected the standard was not raised on the pleadings. Mr. McLagan also expressed the view that many of the complaints of the plaintiffs could be dealt with by relatively minor and inexpensive remedial steps. That view was used to support the argument of defendant's counsel that the defects did not amount to substantial non-compliance or would be remedied after completion in accordance with clause 1 of the Special Conditions. Paradoxically, however, they support the contention on the part of the plaintiffs that the defendant has not shown why it failed to comply with the default notice.

24. I do not propose to discuss in detail the evidence relating to the items on the Scott Schedule. I set out my findings in relation to each item.

1. Insufficient slope of bricks on window sills
Although the defendant initially failed to carry out
this work according to a proper standard, the fault
was rectified by July 1986.
2. Incorrect slope of concrete slab in garage
The defendant failed to provide for sufficient slope
or fall in the garage to ensure that water drained
away. The defect can be rectified, although probably
not permanently, by a thin topping of concrete. This
represents a failure by the defendant to do the work
according to proper standards of workmanship.
3, 13. Ineffective or unsightly flashing on western wall
The original flashing was not sufficiently wide and
allowed water penetration. The replacement flashing
prevents this occurring but has been allowed to
"crinkle" when placed in position resulting in an
unsightly appearance. It could be replaced yet again
and if correctly done would not be so obviously
unsightly. This is a failure by the defendant to
achieve the proper standard.
4, 14. Incorrect positioning of windows in billiard room
What the defendant did was to install windows of
slightly different dimensions, a substantial non-compliance
with the plans and specifications and not a
case of poor workmanship.
5. Chipped and cracked tiles on roof
Some defective tiles have been replaced but others
remain. The defendant has failed to meet the proper
standard.
6. Cracked mortar grouting
This has been replaced but the replacement grouting is
obvious and does not match the rest of the grouting, a
failure to meet the proper standard.
7. Intermediate pier in garage not bonded effectively
This pier was not provided for on the plan and
represents a variation to the original contract. I am
not satisfied that the quality of workmanship is in
question.
8, 9. Gaps around garage door and brickwork abutting windows
This is brought about by the rough edges of the
plaintiffs' choice of brickwork (imitation sandstocks)
and choice of recessed horizontal mortar joints. In
the absence of informing the plaintiffs of the effect
of their choice in this respect, I think that a proper
standard of workmanship required the defendant to fill
the joints where these gaps occurred. The default was
capable of being remedied.
10. Size of beam in billiard room
This is not a defect in workmanship and, in my view,
the beam is substantially in accordance with plans and
specifications.
11. Excessive mortar in gable
Too minor to constitute a default within clause 19(5).
12. Contrasting mortar work and placement of tiles on sill
of bay window
This work is not perfect but the imperfections are
cosmetic only and not sufficiently serious to
constitute a default.
15. Gap above sliding door to family room
The gap between the top of the door and the brickwork
ranges from 2mm to 5 mm which is a minor breach. The
defendant has tried to remedy the defect by placing a
strip of timber over the gap but has not done so
effectively. This constitutes a minor breach, but a
breach nonetheless.
16. Inconsistent quad in billiard room
A minor breach, capable of being remedied.
17. Scratches on top of kitchen bench
This constitutes poor workmanship but the cost of
rectification is out of all proportion to its
seriousness. I do not think that it is a default
reasonably capable of being rectified within clause
19(5).
18. Unmatched plastering at top of stairs See 17.
19. Protruding nail in window sill of bedroom
Too trivial to warrant consideration.
20. Shower base to ensuite
The shower base which was installed was of a different
colour than that ordered by the plaintiffs. This
caused mismatching with the tiles and other fittings,
a matter which caused the plaintiffs major concern.
However, this does not constitute poor workmanship and
does not fall within the scope of the plaintiffs'
claim as pleaded.

26. To summarise the above, whilst there are several items which do not go to support the plaintiffs' allegations of poor workmanship, there are several that do and these entitled the plaintiffs to give the default notice under clause 19. Failure by the defendant to remedy the defaults entitled the plaintiffs to terminate the contract under clause 20. Because the defendant was in breach, the defendant was not entitled to serve the notice to complete.

27. The present case is to be contrasted with the situation in Tarling & Another v. Mogdon Investments Pty. Ltd. (11 September 1986, Supreme Court of the ACT) upon which the defendant sought to rely. That was a case in which the plaintiffs relied not upon an implied term but upon the express provisions of clause 15. Furthermore, in that case there was no question of poor workmanship. The complaint was that two of the rooms of the house were slightly smaller than provided for in the building plans and the decision turned on the question whether there had or had not been substantial compliance with the plans.

28. The defendant places further reliance upon the provisions for rectification of defects in special condition 1 of the present agreement for sale (which I shall call the maintenance claim). The provision is that apart from defects or faults due to natural shrinkage of timbers, the seller will rectify defects or faults in construction which appear within ninety days from the date of settlement or the date of possession (whichever is the sooner) and which are due to defective or improper materials or bad workmanship and are notified to the seller by the buyer in writing within that period. As I understand the argument, it is submitted that the buyer's right to performance in a good and workmanlike manner is subject to the right of the seller to remedy defects within the ninety day period.

29. The maintenance clause regulates the rights of the buyer and the seller in relation to certain defects in the seller's performance, that is those defects which appear in the ninety day period after settlement or going into possession. It says nothing about the rights of the parties in relation to defects which constitute a breach by the seller and which are apparent before settlement. It may give the seller the protection from the ordinary consequences of liability for breach of contract in respect of defects appearing after completion or possession, but it is not necessary to pass an opinion on that aspect because this case is concerned with defects which arose before settlement and upon which the buyer relies for giving the default notice under clause 19. In my view, the maintenance clause does not affect the rights of the parties in respect of pre-settlement breach by the seller in failing to construct the building in a sound and workmanlike manner, and in particular the right of the buyer to give notice under clause 19 is not reduced in any way.

30. If the argument presented on behalf of the seller is correct, the logical consequence is that (apart from cases of so-called fundamental breach) the buyer can never be entitled to refuse to complete the purchase because of the poor quality of the building work: all the buyer can do is complete the purchase, give notice in writing within ninety days and in the event of failure to remedy the defect then sue for damages. In my view, the so-called maintenance clause does not have the radical effect contended for.

31. It was also put that the case for the plaintiffs, if accepted, means that any error or defect in workmanship, no matter how trivial, will entitle the buyer to serve a default notice in accordance with clause 19 and that failure to rectify the defaults notified will entitle the buyer to exercise his rights under clause 20, including the right to terminate the agreement and, without prejudice to any right to damages, to claim repayment of the deposit.

32. In my view, there are two answers to this submission. One is that it is always within the capacity of the parties to a contract to elevate what is initially an unimportant term (breach of which would not give a right to terminate) to a term which is of the essence. A term relating to time for completion of a contract for sale of land is perhaps the most familiar example, but the principle is not limited to such contracts or to terms as to time. In the contract in this case the parties have agreed that the failure by one party to perform any obligation apart from the obligation to complete the contract entitles the other party to give a default notice and in accordance with clause 19(8) the period of time limited to rectify the specified default shall be an essential term of the agreement: see Photo Production Ltd. v. Securicor Transport Ltd [1980] UKHL 2; (1980) AC 827.

33. The other answer is, I think, that the seller can hardly claim to be entitled not to comply with a default notice if the breach is trivial. The more trivial the breach the easier it is for the seller to rectify it. Arguably, there may be situations where a trivial breach requires grossly disproportionate time and cost for rectification, but again arguably such situations lie outside the contemplation of clause 19, and in any event there is no such situation in the present case. Accordingly, the plaintiff was entitled to give the default notice of 16 July 1986, the defendant did not rectify a number of the defaults specified, the plaintiff was entitled to terminate the agreement and upon such termination the plaintiff became entitled to repayment of the deposit.

34. Clause 20(5) gives the buyer the right to terminate and reclaim the deposit "without prejudice to any right of the Buyer to damages". Counsel for the defendant argued that "if the defendants chose to terminate the contract that right to damages dies with it" but the submission is clearly in the face of the terms of Clause 20(5) and I hold that the normal principle applies that the defendant is liable for the damages that flow from the breach and are within the reasonable contemplation of the parties.

35. A plaintiff "is entitled to damages for loss of bargain (expectation loss) and damage suffered, including expenditure incurred, in reliance on the contract (reliance loss)": Gates v. City Mutual Life Assurance Society Limited [1986] HCA 3; (1985-1986) 160 CLR 1 at 12.

36. The evidence and argument on these matters was not very conclusive but I find on the probabilities that the plaintiffs paid their bank a sum of $2,100 being a commitment fee for a proposed loan which in the end they did not take up. It appears that the commitment fee was (and is) payable each quarter, at $300 per quarter. In my view, once the plaintiffs terminated the contract they should have mitigated their loss by releasing the bank from the commitment. They did not endeavour to do so. The defendant should not be liable for any commitment fee beyond 24 November 1986. It appears that the plaintiffs paid or were liable to pay the bank at that stage $600 only in commitment fees and they will be awarded that sum. The plaintiffs paid their solicitors $2,170.35 for legal costs and disbursements associated with the agreement and upon the basis that those costs are in no way referable to the present action, that will be awarded also. They claim $500 which they paid the defendant for the plans. The plans are their plans as I understand it and they still have them. I decline to include the cost of plans in the award. They paid architects $545 for inspections and reports prior to terminating the contract. That will be included as will the cost of insuring the house in the course of construction, namely $80.25. They also claim fares and expenses associated with visiting hardware suppliers and the like. I will include a modest sum for that component and also for general damages claimed for disappointment over loss of bargain and the like. In the case of contracts of this nature, there are the human and emotional aspects of being frustrated from building a home of one's own according to one's choice. That is a real enough matter but one for which the Court should be careful not to overcompensate the plaintiffs. I round out the damages in all to $5,000. Interest is claimed. The deposit is attracting interest and that aspect will be covered by an appropriate order addressed to the second defendant. The damages are modest and not all damage was sustained at the same time and, as a discretionary matter, I think that a modest sum in lieu of interest should be awarded. I fix that sum at $500. I make a declaration as to termination of the contract in terms of para (1) of the statement of claim, and an order for return of deposit and interest in terms of paragraph (2) of the statement of claim. I give liberty to the plaintiff to enter judgment for damages and interest in the sum of $5,500.00 and I order the defendant to pay the plaintiffs' costs on the full Supreme Court scale. Liberty to apply with regard to the exact terminology of these orders, and generally.