Velstra & Anor v Stoka Homes Pty Ltd t/as Regal Homes & Anor [2004] ACTSC 56 (2 July 2004)

Last Updated: 16 September 2004

LEONARD JOHN VELSTRA and ALISON ELIZABETH VELSTRA v STOKA HOMES PTY LIMITED t/as REGAL HOMES and DONALD EDWARD JACOBS [2004] ACTSC 56 (2 July 2004)

APPEAL - contract - building contract - residential house - burst hot water pipe - whether faulty workmanship.

APPEAL - breach of building contract - breach of warranties - whether hot water part "fit for purpose".

Building Act 1972, s 62

Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298

State of New South Wales v Thomas [2004] NSWCA 52

ON APPEAL FROM THE MAGISTRATES COURT

No SCA 81 of 2003

Judge: Connolly J

Supreme Court of the ACT

Date: 2 July 2004

IN THE SUPREME COURT OF THE )

) No SCA 81 of 2003

AUSTRALIAN CAPITAL TERRITORY )

ON APPEAL FROM THE MAGISTRATES COURT

BETWEEN: LEONARD JOHN VELSTRA and ALISON ELIZABETH VELSTRA

Appellants

AND: STOKA HOMES PTY LIMITED

(ACN 008 058 231) t/as REGAL HOMES

First Respondent

AND: DONALD EDWARD JACOBS

Second Respondent

ORDER

Judge: Connolly J

Date: 2 July 2004

Place: Canberra

THE COURT ORDERS THAT:

1. The appeal be dismissed with costs.

1. This is an appeal from a decision of Magistrate Madden of 2 December 2003, which dismissed the plaintiffs'/appellants' claims against the builder of their residential house in respect of a burst hot water pipe. The appellants entered into a contract with the first respondent, Stoka Homes, in March 1999 to build a single-storey four bedroom house on land situated in Dunlop in the Australian Capital Territory. During the construction of the premises Mr Jacobs, the second respondent, was engaged as a sub-contractor to perform certain plumbing services. The appellants moved into the house in August 1999.

2. The claim arises from an incident that occurred over the Easter weekend in 2000. The learned Magistrate described the incident in his reasons as follows (AB 7) -

On Good Friday (22 April 2000) of the Easter long weekend the hot water pipe in the ceiling of the ensuite bathroom of the master bedroom burst. The Velstras observed water gushing out of the roof of the ensuite. The walk-in wardrobes were damp with moisture from the water flow. In the 4^th bedroom water was coming through the light fittings and the ducted heating vent. The walls adjacent to bedrooms 1 and 4 and the walk-in robes were bowed. This significant incident occurred 8 months after occupancy was permitted and approved. The relevant hot water piping and union was in all likelihood installed and completed in a period of time earlier than when the occupancy was ultimately exercised.

3. The damage was eventually repaired, and the appellants brought an action against the builder and plumber for the cost of the repairs, being agreed at $8,637.84 plus interest. The action was unsuccessful, the Magistrate concluding (AB 13) that -

The evidence is such that what happened to the Velstra home was a most unfortunate circumstance. The evidence of both plumbers satisfies me, on the balance of probabilities, that the real problem was the quality of the product. I am not satisfied it was negligent or poor workmanship or a breach of the warranties.

4. The learned Magistrate dismissed the plaintiffs' claims against the builder and the plumber. The plaintiffs appeal to this Court against the finding in respect of the builder, but not the plumber.

5. The grounds of the appeal are broadly that the Magistrate erred in finding that there had not been faulty workmanship, and further that if indeed the cause of the flooding was a fault in a pipe fitting, then the action should have succeeded on the basis of the pleading that the builder was in breach of contract and negligent in "failing to ensure that a hot water union was fit for the purpose for which it was installed" as pleaded in paras 7 and 8 of the claim (AB 15).

Was there evidence of poor workmanship?

6. Mr Jacobs gave evidence that he had been a plumber for 30 years and a regular sub- contractor to the first respondent for some 12 years (AB 56). He said that he installed the hot water system in the appellants' house, using a Hepworth Polybutylene plumbing system, which he said was the system that he generally used for new homes, and had previously installed in some "300 odd" homes (AB 57). He said that he installed it in this house in accordance with the manufacturer's specifications (AB 57). He said that after installing such a system it was his practice to test the system at a pressure of 2,100 kilopascals for a period of seven to eight hours (AB 62). He said that the manufacturer's recommendation was to test the product at 1,500 kilopascals for 30 minutes (AB 63). He said that he adopted the longer and higher pressure testing because he had experienced failures at joints occurring after about one hour. He explained that there were about 45 joints in an average house. He said (AB 65) -

We have had failures up to an hour later. That's why we instigated our own testing procedure above what the manufacturer states. They state 30 minutes, but we've had them fail after 30 minutes. So we felt that we should continue to test it for a longer period, just to make sure.

7. He further explained that a further seven to eight hour hot water test was run while he was engaged in the process of fitting the ducted heating system in the house. He said (AB 67) -

... because it takes us a full 8 hours to install a ducted heating system with gas we were able to pump up the plumbing system for a further 8 hours, just to - just for peace of mind for ourselves.

8. Mr Jacobs said that he could offer no explanation as to why a system that had withstood such testing could fail eight months later (AB 70).

9. In cross-examination Mr Jacobs conceded that he had no specific memory of who put the pipes together in this house (AB 73) and conceded that sometimes his apprentices did the work. He specifically denied that it was possible that whoever put the pipes together did not push them in hard enough (AB 75).

10. Mr Brian Waugh was a plumber who gave evidence in the plaintiffs' case before the Magistrate. He also has some 30 years experience (AB 40), but said that he had only used the type of piping system used in this house on one complete house and on some small extensions (AB 40). He said that there are no problems with the system when it is correctly installed (AB 40). He was the plumber who effected the repairs at the appellants' home. He described the nature of the problem, which was that the pipe separated from a joint (AB 42).

11. Mr Waugh said in his evidence that he did not know why this pipe system came apart. He said (AB 42) -

I've only known one instance it's come out, in a house in Banks. And the other instance is one of my installations, where I put my own together and turned the water on and didn't check my joints, but then it blew straight away ...

12. He offered the opinion that the reason the joint failed in this case was because it was "poorly put together" (AB 46), but conceded in cross-examination that if pressure testing had been undertaken at "2100 kpa for seven hours and no leaks were shown, you've indicated that that to you would indicate that the system was put together properly".

13. Mr Waugh did however maintain that it was possible that a system might fail after eight months even when there had been a pressure test (AB 49) if the system had been put together with no sleeve so that it could slowly slide out. He could not say, however, whether the sleeve was there or not in the joint that failed (AB 49).

14. It seems to me that the Magistrate was correct in concluding that the plaintiffs had not established, on the balance of probabilities, that the joint failed due to poor workmanship. Both Mr Jacobs and Mr Waugh were experienced plumbers, although Mr Jacobs had greater experience in this type of system. He gave evidence, which was not challenged, that he had tested the system under high pressure for a period of seven to eight hours, well in excess of the manufacturer's recommended testing procedures, in order to determine that all the joints were sound. It is common ground that this testing did not show any fault, and Mr Waugh conceded that successfully passing such a pressure test "would indicate that the system was put together properly".

15. Mr Jacobs could not explain how a system that had passed such a test could fail eight months later.

16. The only explanation Mr Waugh could give as to how a system could fail eight months after passing such a test was if the joint was installed without a sleeve, which could allow the pipe to slowly work loose. Even accepting this as a possible scenario, Mr Waugh, who was the plumber who repaired the problem, and so was the only witness to have seen the failed joint, could not say whether or not the sleeve was present in the joint that failed. It would not be open on this evidence for the Magistrate to have found on the balance of probabilities that the pipe failed due to failure to correctly install the sleeve within the joint, being the only possible reason Mr Waugh said that could explain the later failure, but Mr Waugh, who observed the failure, could not say whether the sleeve was there or not.

17. There was evidence that Mr Waugh gave the fitting to the appellants, and that photographs were taken (AB 34), but neither the fitting nor photographs were tendered in the plaintiffs' case. Even without recourse to the adverse inference that could properly be drawn from this (Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298), it is for the plaintiff to prove the assertion of poor workmanship, and both Mr Jacobs and Mr Waugh agreed that a system that has been pressure tested for seven hours is a system that has been properly installed. Mr Waugh offered one explanation as to how a system that survived a pressure test could fail after only eight months due to faulty workmanship, being a scenario where a sleeve had not been installed in the joint allowing it to slowly work loose. Mr Waugh was the plumber who repaired the pipes and who saw the original joint, but he could not say whether the sleeve was there or not. On this evidence, the appellants have simply failed to establish a case of poor workmanship.

Was an unexplained failure of a part negligence or breach of contract?

18. The Magistrate formed the view that there was an unexplained defect in the part which caused the flooding. He said in his reasons (AB 12-13) -

The evidence, based on what the two plumbers stated in their evidence, was simply that the problem was really the quality of the part being fit for the purpose designed. The two plumbers in effect agreed with each other that the product failed usually at the testing stage. The evidence, on the balance of probabilities, does not attribute poor quality workmanship to the flooding of the ensuite and the other rooms but rather a defective product. The plumbers, in my view, were consensus ad idem on this issue.

Mr Waugh had even spoken to the suppliers about the defective hot water union. It was an unexplained failure after at least eight months of use. There was no inspection or examination of the defective product. The pipe was not produced in evidence by the plaintiffs. Simply put, the Court had no precise direct evidence of the cause for the failure.

19. The appellants argue that if the Magistrate was correct in holding, as he did in his reasons, that "the evidence of both plumbers satisfies me, on the balance of probabilities, that the real problem was the quality of the product" (AB 13), then this should lead to a judgment in their favour on the basis that they had pleaded as a particular both of negligence and breach of contract a failure to ensure that a hot water union was fit for the purpose for which it was installed.

20. It seems to me, however, that this misunderstands the nature of a claim based on fitness for purpose. Mr Jacobs gave evidence that he had installed this type of equipment on "300 odd" houses, and that it was suitable for the purpose for which it was used (AB 57). Mr Waugh, although not having installed this type of unit on many houses, agreed that there was no problem with this type of system when correctly installed (AB 40), and that the product is suitable for usual hot water usage (AB 51).

21. It seems to me that, on the evidence in this case, the pipe and fittings used by Mr Jacobs for this installation were fit for residential hot water systems. It may be that there was some hidden flaw in the construction of a particular unit, but this is only conjecture and speculation. Mr Waugh, the only person who inspected the pipe at the joint that failed, could not give evidence as to the mechanism for the failure. The only evidence here is that these were suitable components for use in a residential hot water service.

22. To the extent that the appellants were seeking to establish a case against the builder and the plumber for failing to detect some concealed latent defect in the joint, they have not properly pleaded their case or produced evidence to support such a claim. Counsel for the appellants indicated that they may wish to invoke the rarely used inherent power to amend a pleading on appeal (State of New South Wales v Thomas [2004] NSWCA 52), but in the end did not seek to do so. It seems to me that, even if they had been able to argue successfully that the pleadings should be amended, such a claim would be bound to fail for lack of evidence. The Magistrate, it seems to me, was correct in saying in effect that this was an unfortunate accident, and that we really do not know what happened to cause the pipe system to fail. Mr Waugh can say that the pipe came apart at the joint, but he cannot say why. If it was the joint that failed, there is no evidence as to the nature or cause of the failure and, although Mr Waugh said that he gave the part to the owners and Mrs Velstra said that an insurance assessor took a photograph of the part, neither the part nor a photograph of the part was in evidence before the Magistrate. Any case, however elegantly pleaded, based on a claim that an inherent defect in a part caused loss, would need to prove, on the balance of probabilities, what the inherent fault in the part was, and how the defendants, be it the builder or the plumber, should have identified the fault. There was no evidence of either the nature of the fault or how it should have been recognised.

23. The Magistrate, it seems to me, correctly dismissed the claim against the builder and the plumber on the basis that the plaintiffs had not established a claim based on poor workmanship, and that the claim based on the use of a product not fit for the purpose was not made out. It follows that the Magistrate was correct in finding that there was no breach of the warranties included in s 62 of the Building Act 1972, which were set out in his judgment at (AB 12). The relevant warranties are -

(b) that the work has been or will be carried out in a proper and workmanlike way and in accordance with the plans approved for the work by the building controller; and

(c) that good and proper materials for the work have been or will be used in carrying out the work; and

(e) if the owner of the land where the work is being or is to be carried out is not the builder, and the owner expressly makes known to the builder, or a servant or agent of the builder, the particular purpose for which the work is required, or the result that the owner desires to be achieved by the work, so as to show that the owner is relying on the builder's skill and judgment - that the work and any material used in carrying out the work is or will be reasonably fit for that purpose or of such a nature and quality that they might reasonably be expected to achieve that result.

24. It seems to me that the Magistrate was correct in holding that, on the evidence before him, there was no breach of the warranties.

25. The Magistrate rightly held that the plaintiffs had not made out their case against the first defendant. The appeal should be dismissed, with costs.

I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Connolly.

Associate:

Date: 2 July 2004

Counsel for the appellants: Mr S Hausfeld

Solicitor for the appellants: Hunt & Hunt

Counsel for the first respondent: Mr W Arthur

Solicitor for the first respondent: Higgins Solicitors

Counsel for the second respondent: Mr B Meagher

Counsel for the second respondent: Wood Fussell Solicitors

Date of hearing: 4 June 2004

Date of judgment: 2 July 2004