The NSW Court of Appeal has handed down its decision in Walker Group Constructions v Tzaneros Investments [2017] NSWCA 27. The plaintiff claimed damages from Walker Group Constructions alleging defective concrete paving. Once the pavement was laid, cracks began to develop, and as a result, some concrete slabs had to be repaired.  Sometime later the plaintiff carried out further rectification whereby old slabs were replaced with reinforced concrete slabs. That cost was claimed from the defendant. The defendants argued that the rectification works undertaken by the plaintiff would result in betterment.

At first instance, The New South Wales Supreme Court held that it was not appropriate to make a discount for betterment, a view which the Court of Appeal shared. The court focused on the two circumstances enunciated in Tyco Australia Ltd Pty v Optus Networks Pty Ltd [2004] NSWCA 333 in which an allowance for betterment would be made:

1. when a plaintiff chose to acquire a more valuable asset than that which had to be replaced; for less expenditure it could have acquired an asset which would have been as satisfactory as that replaced.  The defendant did not point to any other method of repair of the pavement which would cost less than the solution proposed and within conformity with the contract.
    
2. when the plaintiff may have to give credit if there is a benefit which is not remote in time or speculative and can be quantified. The Court held that as the pavement had a minimum design time of 20 years, a pavement properly designed to the specification would not be expected to be unusable immediately on the expiration of such a period. The future benefit to be obtained by the proposed pavement was therefore speculative.

The court emphasised that even where the defendant can show a benefit that is not speculative, care should be taken in applying a discount as it could result in the defendant’s breach requiring a plaintiff to pay for capital expenditure, which it would otherwise be unwilling or perhaps financially unable to undertake.

This decision will hopefully provide more certainty around when discounts for betterment apply.