Thallon Mole Group Pty Ltd v Morton; Morton v Thallon Mole Group Pty Ltd [2023] QCA 250

Andrew Orford  |  Sarah Cahill  |  Jarryd Cox

Key takeout

This case demonstrates the critical importance of complying with contractual obligations and establishing strict project protocols for effective contract administration.  Exercising diligence by following contractual requirements markedly reduces the risk of disputes arising.  If a dispute is unavoidable, maintaining appropriate records and documentation can drastically improve a party’s odds of succeeding in proving its case (or disproving the other side’s case). 

This case is also a reminder that a party must seek to put its best case and evidence forward at the hearing of a matter at first instance. The ability to appeal a trial judge’s decision is not guaranteed.

Facts

In 2016, Louise Morton (owner) and Thallon Mole Group Pty Ltd (builder) entered into a contract for the construction of a residence in Holland Park (contract).  Construction began in early 2017 but faced challenges due to issues with the unavailability of two ‘Schucco’ sliding glass doors.  The relationship between owner and builder deteriorated, leading to the owner’s refusal to pay outstanding progress claims in early 2019, expressing concerns about an incorrect reduction in the contract price due to issues with the Schucco doors and other defective work.  On 8 April 2019, the builder gave notice of anticipated practical completion and issued its final payment claim.  On 10 April 2019, the owner terminated the contract.  

The owner initiated legal proceedings, claiming amounts owed, while the builder counterclaimed for damages.  At first instance the District Court ruled in favour of owner, determining that practical completion was not achieved by 8 April 2019.  Following that decision, both parties sought leave to appeal.

Builder’s grounds of Appeal

Thallon submitted that the District Court erred in:

1. Finding that the timber floor installation was defective, and awarding damages to Morton in respect of rectification works.
2. Deciding that Morton was entitled to interest on the entire sum assessed for those rectification works.
3. Its interpretation that Thallon was not given approval in respect of cabinetry variations, dismissing its quantum meruit claim.

Owner’s grounds of Appeal

Morton submitted that the District Court erred in:

1. Awarding a deduction of only $115k from the contract price for the Schucco doors;
2. Finding that the owern was entitled to only 5% of the overall amount claimed for residual labour costs.
3. Deciding that a notional unpaid balance of the contract price needed to be deducted from the amount awarded on her counter-claim.
4. Awarding damages for rectification of the pool balustrade.
5. Not awarding damages for rectification works undertaken on a leaking box gutter.
6. Awarding only half of the costs for rectification of the internal ceiling as damages.
7. Not awarding damages for rectifying copper cladding.

Decision

The Court of Appeal concluded that neither party successfully established a ground of appeal.

Builder’s Case: All grounds of appeal

Once it was accepted that the flooring was not laid in accordance with contractual requirements or industry standards, the Court of Appeal found that awarding an amount for rectification with interest was a reasonable finding.  The District Court’s dismissal of the builder’s quantum meruit claim was also justified, as the evidence provided a valid basis for the District Court to be unsatisfied that approval of the cabinetry variation was given.

Owner’s Case: Ground 1 – Schucco Doors

The contract did not contain any agreed rates or prices for the Schucco doors, instead, the contract required valuation using reasonable rates and prices.  The Court of Appeal upheld the District Court’s ruling that $115k was a reasonable rate for the Schucco doors, and considered that no further deductions were available to the owner.

Owner’s Case: Ground 2 – residual labour costs

Morton submitted that she was entitled to at least 60% of the residual labour costs.  The court rejected this, upholding the District Court’s decision awarding 5% of the residual labour costs to Morton, on the basis that no detailed records had been kept concerning the labourers and their assignments to specific defects.  

Owner’s Case: Ground 4 – pool balustrade variation

Morton claimed that she was entitled to damages for rectification works as a result of the builder’s variations to the pool balustrade.  The pool balustrade was built on spigots, which was not in accordance with the contract, and work was undertaken without the contractually required written approval from Morton.  The builder submitted that it received verbal direction by Morton’s architect to construct the balustrade on spigots, arguing that Morton was therefore estopped from relying on the breach.  The general rule is that where a party sustains loss due to the construction of a building that is not in accordance with contractual specifications, that party is prima facie entitled to the amount required to rectify the defects, provided the reinstatement is a reasonable course to adopt.  The Court of Appeal upheld the District Court’s decision in respect of this claim, disallowing costs to Morton.  This decision was made on the basis that reinstatement was not a reasonable course to adopt, as the variation had an engineering purpose to resolve a drainage issue, and the reinstatement would likely cause that drainage issue.  

In respect of the remaining grounds of appeal:

• The third ground of appeal was not pressed.
• There was insufficient evidence was provided to substantiate the claims in respect of grounds 5 – 7.