Ashell Homes Constructions Pty Ltd v Kobus [2022] ACTSC 323

Ashell Homes Constructions Pty Ltd v Kobus [2022] ACTSC 323 | Case summary | Zoe

By amended defence and counterclaim dated 19 March 2021, the defendants allege that the plaintiff failed to construct the townhouses in accordance with the Contract and the plans, with the breaches being so fundamental that, on their case, Ashell Homes repudiated the Contract. They allege they accepted the repudiation by sending an email to that effect on 22 December 2018 and the Contract came to an end from that date.
The defendants alleged that left them with a project that was only partially complete. The defendants plead that they had to engage a subsequent builder to complete the project. That cost them an additional sum above the Contract price and they claim that sum (plus interest) against the plaintiff in damages for breach of contract. At the commencement of the hearing of the counterclaim, $144,544.51 was sought. However, following the evidence that was adduced, the figure claimed was reduced to $72,711.01.
In response to those allegations, Ashell Homes asserted that none of the complaints raised by the defendants amounted to a material or fundamental breach of the Contract that gave rise to a right to terminate the Contract in December 2018. Further, for each of those complaints, the defendants did not comply with the notice of breach provisions in the Contract. As a consequence, the defendants did not give the plaintiff an opportunity to remedy the matters complained of. However, although the plaintiff complained about the defendants “storing up” their grievances, it did not go as far as to plead an alternative defence of waiver or election.
The counterclaim originally raised claims in negligence and misleading and deceptive conduct and sought relief against Mr John Ivo Cobanov, a licensed builder and the sole director and secretary of Ashell Homes. During the hearing, the negligence and misleading and deceptive conduct claims were abandoned, and those causes of action were formally dismissed with costs on the third day of hearing (8 December 2021).

… Clause 12 Progress Payments 1. The builder must give the owner a written claim for each progress payment on completion of each stage set out in Item 13 of Schedule 1. 2. The owner must make progress payments on completion of each of the stages set out in Item 13 of Schedule 1. 3. …If Part B in Item 13 of Schedule 1 is completed then that will apply. 4. Payments must be made by the owner within 5 days after receiving a progress claim from the builder. 5. If the owner does not make a progress payment or any payment after it becomes due, the builder is entitled: (a) to interest on the unpaid amount, at the rate set out … (b) to suspend the building works … … Clause 25 Ending the Contract 1. If the owner breaches the contract the builder may suspend the building works and must notify the owner of the breach in writing by certified mail or personal service. 2. The builder may end the contract if: (a) 10 days have passed since the builder gave notice of the breach; (b) the owner is still in breach of the contract; and (c) the builder notifies the owner in writing by certified mail or personal service that the contract is at an end. 3. If the owner disputes the builder’s notice before the contract is ended, the owner must notify the builder in writing by certified mail or personal service. The builder may suspend the building works and the dispute must be taken to dispute resolution (see Clause 26). 4. If the builder breaches the contract, the owner must notify the builder of the breach in writing by certified mail or personal service. 5. The owner may end the contract if: (a) 10 days have passed since the owner gave notice of the breach; (b) the builder is still in breach of the contract; and (c) the owner notifies the builder in writing by certified mail or personal service that the contract is at an end. 6. If the builder disputes the owner’s notice before the contract is ended, the builder must notify the owner in writing by certified mail or personal service. The builder may suspend the building works and the dispute must be taken to dispute resolution (see Clause 26). 7. The owner or the builder may also end the contract by written agreement or by sending the other written notice by certified mail or personal service: (a) if the other becomes bankrupt or goes into liquidation; (b) if an automatic variation makes the contract price rise by more than 10 percent; or (c) if planning or building approvals cannot be obtained within the time specified in Clause 7. 8. If the contract is ended by the builder, then the owner may pay as a debt due and payable to the builder: (a) the cost of the building works to date; (b) the cost of any materials on the site or already ordered from suppliers; (c) the cost of leaving the site; (d) the builder’s margin, applied to the total of (a) plus (b) plus (c); (e) default interest on any unpaid monies under clause 12.5(a); and (f) all other costs and losses incurred by the builder as a consequence of this contract being ended. 9. Nothing in this clause prejudices the right of a party to recover damages or to exercise any other right or remedy against the other party for a breach (including repudiatory breach) of the contract. Clause 26 Dispute Resolution 1. If there is a dispute between the owner and the builder, either one must promptly give the other written notice of the dispute. 2. Disputes must be resolved according to Territory laws that govern the resolution of building disputes. 3. The owner and the builder must meet within 7 days to discuss the matters in dispute and attempt to resolve them by negotiation, mediation or other agreed method.

Second, that construction is consistent with the lack of clear words to rebut the presumption that a contracting party does not intend to abandon any remedies for breach arising by operation of law, which was discussed in Concut v Worrell at [23]. What was said in Eden v Leed applies here with greater force, by virtue of the words of clause 25.9. Not only are there no clear words excluding a right of termination without notice for repudiatory breach, but there is an express preservation of such a right. The opening words of clause 25.9 are that “nothing in this clause prejudices the right”. To then construe the Contract as requiring compliance with contractual notice requirements before a right to terminate for repudiatory breach can be exercised would be to impose on the right a restraint that does not exist at common law – in other words, a prejudice to the right. The construction for which the plaintiff contended is thus at odds with the words of 25.9 and is not to be preferred.
The parties drew attention to the case of Tan Hung Nguyen & Anor v Luxury Design Homes Pty Ltd & 2 Ors [2004] NSWCA 178 (Nguyen v Luxury Design Homes). That case involved a contract between an owner and a builder for the construction of a home. The contract included provisions for the ending of the contract by the owner, namely clause 24 of the contract in question, the terms of which are set out in the judgments of Hodgson JA and Einstein J at [2] and [74] respectively. There was a broad scheme setting out what constituted a default of the builder or contractor and providing for the owner to give written notice “if such default can be remedied” for the contractor to remedy the defect within a specified period or the owner would end the contract. If the contractor did not comply with the owner’s request within the time allowed, “or if the default cannot be remedied,” the owner was permitted to end the contract. There was then a regime for what was to happen in terms of fixtures and fittings, the cost of completion and entitlements to payment.
One of the issues concerned whether the contractual provision in question excluded the common law rights to relief for repudiatory conduct. In that case, the NSW Court of Appeal held that it did. However, the clause of the contract under consideration was markedly different from the words here. For present purposes, it suffices to state two key differences (there are others):

The first and perhaps the most significant conduct where it was alleged the plaintiff departed from the plans in the Contract concerned the footings and slab. A comparison exercise between the engineering plans in evidence, which formed part of the Contract, and what was constructed by Ashell Homes, demonstrated that there were substantial departures.
The engineering plans had a design of a raft slab on internal beams and a grid footing system. The engineering design required the slab and footings to be poured forming one part. The purpose of such a design was to tie the slab to the footings. One of the reasons that was done was because of the soil classification for the Site, which was described as ‘M’ class. It suffices to observe that different soil classifications have different reactivities and require different structural designs.
Mr Cobanov accepted that Ashell Homes did not build the footings and the slab in the manner described by the engineering plans. He used a brick structure for the footings and he did not pour the slab and footings so that they formed one part. His evidence was that “my trade is concrete and I’ve been doing it for 40 years”. He said, “I’ve done it a better way”.
He was asked whether he consulted the structural engineer who prepared the drawings before he undertook this aspect of the project his way. He said, “I attempted to talk to the engineers, but they weren’t responsive”. I take from that response that he did not in fact consult the engineer. Mr Cobanov then agreed that in the absence of speaking to the structural engineer, he did not stop the work.
Mr Cobanov’s evidence at this point was to the effect that he later consulted a different engineer from the one engaged by the defendants and whose design had been approved. That engineer was one with whom he had worked numerous times before. The engineer engaged by the plaintiff apparently signed off on reclassifying the soil, which then enabled the engineering plans to be amended to bring them into line with what had been done at the Site. How the soil was able to be reclassified, and whether that was appropriate, was not explained. There was certainly no suggestion that the earlier classification had been in error.
In any event, the evidence of Ms Elleway, who was the defendant more directly involved with the building works, was that neither she nor Mr Kobus knew at the time the work was undertaken that the slab and footings had been poured in a substantially different way from the engineering design that had been approved. I accept that evidence.
Mr Cobanov’s evidence was that “we were all on the same page”. It may have been that the defendants were in agreement that the plans had to be amended to bring them into conformity with what had occurred after the slab had been poured, but there is nothing to suggest that Mr Cobanov sought any consent to amend the plans from either the defendants, their engineer or the certifier before he decided to carry out the works according to what he perceived as a “better way”, rather than carrying out the works in accordance with what the Contract required.

There was an excavation plan in evidence. It was self-evidently the plan for how the Site was to be excavated and where retaining walls were to be constructed. The excavation plan then fed into the drainage requirements. The evidence established that drainage was to be installed either prior to or shortly after the construction of the slab and footings.
It was put to Mr Cobanov that with regard to Unit 1, he excavated underneath the dwelling further than what the plans indicated (that is, he over-excavated). Mr Cobanov did not expressly concede that had occurred but answered “whatever the plans shows, that shows but when the ground is there, I follow the ground.”
He was taken to the area on the plans beneath the front door of Unit 1 and it was suggested to him that the wall in that location was designed to function as a retaining wall. Mr Cobanov denied that he had re-designed the plans in that area, but he also challenged the design itself twice, saying there was no need for it to be a retaining wall because in his view, the natural ground was no more than a metre and there was no pressure in that area.
Mr Cobanov was asked whether he consulted the architect at any time in relation to any discrepancy between what was depicted on the plan and the area on the Site. His evidence was that “there was no need to”.
It was clear from the photos that the work that was done by the plaintiff did not accord with what was depicted on the plans. The defendants submitted that the plaintiff caused a large and unapproved slab to be constructed, which rested on natural and unretained ground, without amendment or approval.
I have inferred from Mr Cobanov’s evidence that he knew the building works in that location did not accord with the plans, whether it was because of over excavating or simply that the natural ground level did not match what the plans indicated. Drawing together his evidence, he was not concerned about the works complying with the excavation levels and the retaining wall design in the plans or checking with the architects in the event of a discrepancy because he had formed the view that the retaining wall on the plan was unnecessary.
Elsewhere in Mr Cobanov’s evidence he was asked about excavating further north than what the excavation plan provided in respect of all of the walls on the eastern unit by about a metre and a half. He accepted that he did excavate in a manner that created a higher cut than what was provided for by the excavation plan. Part of his evidence in that regard was as follows:

The next matter relied upon concerned the use of timber where steel was required on the approved plans. The Court was taken through the plans in particular detail, and it was demonstrated by reference to the photographs also in evidence, where the various steel beams were meant to be installed and where timber had been used instead. It is unnecessary to repeat the exercise in these reasons because Mr Cobanov agreed that many of the steel beams were not installed as part of the structure required to support the upper level.
His explanation was that he intended to “stitch” in the steel later. He said that the project had not got to the appropriate stage yet for that to occur. However, the evidence disclosed that the construction had reached the point where the plaintiff was building the upper floor at a time when there was only a timber member underneath instead of the steel required. Mr Cobanov’s response was “we can put the steel in anytime”.
The defendants submitted that this explanation was implausible and I agree, for two reasons. First, there is no reason why the plaintiff would incur the extra cost in materials and time and essentially do the work twice, installing timber members first, then constructing the upper floor before returning to install the steel in the lower floor, particularly when his evidence was that the steel was already on the Site. Second, the problem was identified by Mr Sullivan, who had previously visited the Site to conduct training in relation to using the Smart SIPS panels. He was later shown photographs of the progress and raised the non-compliance, returning to the Site during August 2018.
If it was the case that the proper construction of the project using the SIPS panels allowed for steel to be inserted at a later point in the build, then Mr Sullivan would not have been so concerned about what he observed as to raise it, but in any event, Mr Cobanov would have explained his position to Mr Sullivan when it was raised.
Instead, what occurred was that Mr Sullivan saw that there was steel missing from the construction and raised it with Mr Cobanov. Mr Cobanov then asked if there was an alternative. Mr Sullivan explained that there was no alternative and that it must be used where he had specified it in the design. Mr Cobanov then complied by inserting the requisite steel beams.
The more probable inference to draw from the evidence is what the defendants submitted, namely that the plaintiff had sought to avoid the cost of using the steel, without consulting either the defendants, Mr Sullivan or Nsient Consulting Engineers. (f) Failure to install SIPS in accordance with approved design
The defendants have pointed to other examples where the work that was undertaken was defective in a significant way. One instance concerns the SIPS themselves, which were required to be constructed in a particular sequence (hence the training conducted by Mr Sullivan). That was important because the SIPS have channels for wooden members around all sides and need to be installed in a continuous row for support. The defendants argued that the SIPS were not installed pursuant to the prescribed method, were damaged in places, and had gaps that affected the insulating properties of the panels. I accept the photographs in evidence established that to be the case. However, in light of the other evidence discussed above, what would otherwise have been a material defect carries less significance. Although it evinces shoddy workmanship and a lack of care consistent with a lack of attention to complying with an approved plan or manufacturer’s method, the evidence on this point is not a defect or non-compliance where it can be said that the plaintiff deliberately engaged in conduct that was inconsistent with its contractual obligations.

The terms of the Contract provided for instalment or progress payments on the completion of each stage as set out at [19] and [22] above. The evidence established that the plaintiff did not issue payment claims that accorded with the terms of the Contract at any time.
Ground Slab stage: The invoice for the Ground Slab stage was issued on 3 May 2018. The slab was only poured on 5 May 2018. However, the Ground Slab Stage required that the footings be poured, the stumps, piers or columns be complete, the internal and external drainage be complete, and the floor slab be poured.
Due to the deliberate choice to disregard the plans, the footings and slab had not been poured in accordance with the Contract. The drainage was also not complete. I find that the invoice for the stage was issued before the plaintiff was entitled to issue it. At the time the invoice was issued – and, having regard to Mr Cobanov’s evidence that he deliberately poured the slab and footings in what he considered to be a better way, rather than what was approved – the plaintiff knew that the work that had been done both did not comply with the Contract and was separately incomplete.
The defendants’ evidence was that the invoice was paid on 18 May 2018, at a time when the defendants were unaware there may be any issue with the slab not being installed in accordance with the approved plans.
First Floor stage: The First Floor stage required that the ground floor SIPS be installed and that the bearers and joists be complete. The invoice for this stage was issued on 2 July 2018. The photographs in evidence establish that as at 3 July 2018, work had only just commenced on the SIPS. By 9 July 2018, there were no bearers and joists and on 13 August 2018, the steel uprights discussed above had not been inserted. I accept that the invoice was issued before the plaintiff was entitled to issue it and that the plaintiff knew the First Floor Stage was not complete when it was issued on 2 July 2018.
Again, the defendants paid the invoice for the First Floor stage on 13 July 2018. On the chronology that has emerged from the evidence given, that was at a time before they knew about any issue with the steel beams not being inserted where it was required.
SIPS stage: In relation to the invoices for the SIPS stage, again, the plaintiff did not comply with its contractual obligations. First, the plaintiff split the stage into two progress payments. There was no lawful justification for doing so (that is, there were no circumstances justifying partial payment during a stage, such as those in special condition 15(e) of the special conditions above).
Second, the plaintiff had not completed the stage when either of the invoices were issued, on 27 July 2018 and 28 September 2018 respectively. That particular stage required the trusses to be complete. Although Mr Cobanov said he believed the trusses had been installed, Mr Cobanov gave evidence that there were no SIPS installed on the gables. His evidence was that he knew the SIPS had to be installed on the gables but he had no plans for those and was yet to discuss the matter with the defendants. He therefore formed the view that what he was supposed to install, had been installed.
I reject that aspect of Mr Cobanov’s evidence. The only person responsible for installing the SIPS under the Contract was the plaintiff. To the extent that the work was incomplete because Mr Cobanov was yet to discuss the installation of the SIPS in a particular area with the defendants, the fact remained that the work was incomplete and no entitlement to either invoice issued in respect of the SIPS stage had arisen. The photographs in evidence clearly demonstrated that the work required to be completed at the SIPS stage was not complete as at 22 December 2018 (when the relevant photographs were taken).
Requirement to pay roofing contractor before completion of Lock Up stage: Ms Elleway deposed to having a conversation on or around 20 October 2018 with Mr Cobanov. He rang her and told her he did not have sufficient funds to continue to progress the build and that she would need to pay him upfront if she wanted to progress on the build. Ms Elleway’s evidence is that she told Mr Cobanov, “that’s not OK”, and that he responded with words to the effect of, “it is what it is”.
The defendants decided to tell Mr Cobanov that they would pay suppliers direct for goods in order to progress, but that they would not pay Ashell homes with any progress payments ‘up front’. I accept that a conversation to the effect of that deposed occurred. The evidence is consistent with such a conversation occurring, and the defendants agreeing to paying suppliers direct up front. Mr Cobonov sent the roof trusses invoice to Ms Elleway via text message for her to pay on 22 October 2018. It was paid directly by the defendants.
In November 2018, Mr Cobanov told Ms Elleway that he was “having trouble getting hold of the roofer” (Mr Murray). Unbeknownst to the defendants, Mr Murray had communicated to Mr Cobanov that he would not attend the Site because he had not yet been paid for another job that he had completed for Mr Cobanov.
The defendants then also dealt directly with Mr Murray in order to secure his attendance at the Site in an attempt to have a roof installed by Christmas. Work commenced on the roof on 8 December 2018. While the roofing work was still being completed, Mr Murray emailed the defendants his invoice on 12 December 2018.
Lock Up stage: In that context, it must have been particularly galling for the defendants to receive the invoice for the Lock Up stage from the plaintiff on 12 December 2018, for $210,000. At the time the invoice was received, the evidence shows that the defendants had paid a total of $62,300 directly to the sub-contractors and suppliers for exterior cladding and roofing services. No deduction had been made for the amounts that the defendants had agreed to pay to contractors directly.
In relation to the timing of the invoice issued for the Lock Up Stage, Mr Cobanov’s evidence was that he issued it on 12 December 2018 “in anticipation of achieving lock up by Christmas”. That evidence confirms that the plaintiff knew two things: (a) it could only issue an instalment stage invoice when work for the stage was complete, and (b) it had not completed the work at the time the invoice was issued but anticipated that to be the case within a fortnight.
Mr Cobanov ultimately accepted (in the face of photos showing blue sky where a roof should have been), that at the time the invoice for the lock up stage was issued, lock up had not been achieved. The lock up stage also expressly included in it the requirement for the concrete baths to be installed at the Site. In a Pythonesque exchange with counsel, Mr Cobanov was cross-examined about the failure to install the bath, which was of a sunken design with a step into it. Mr Cobanov was shown a photograph of the bath that he claimed to have installed. It was sitting on the ground, with the side where there was a step into the bath next to a window, obviously facing the wrong way from that which would enable a person to step into the bath. There was no supporting frame and the bath was not connected to any plumbing. Accepting the general caution as to what inferences may be drawn from photographs, on no view could it be reasonably inferred that the bath had been installed, as opposed to simply resting on the ground in the general location of where it was to be located in the bathroom area of the dwelling. The exchange with counsel was as follows:

The plaintiff submitted that a number of the matters above cannot, either alone or together, be taken to constitute a repudiation, that the defendants were aware of many of the breaches but allowed the Contract to continue until 22 December 2018, and that where an issue was identified by or for the defendants, it was remedied.
If it is necessary to make such a finding, in my view, the intentional and significant departure from the footings and slab design without approval by a qualified structural engineer or consultation with the defendants was a breach that by itself evinced an intention sufficient to constitute repudiation as understood through the authorities to which reference has already been made. I would also have made the same finding in relation to the failure to use the materials required by the engineering plans and the issuing of the progress invoice for the Lock Up stage. However, it is not necessary to make any specific finding about a particular breach, because there is a separate finding below about the effect of the conduct taken as whole.
Before addressing the conduct in its entirety, I will deal with the submission that breaches were remedied when identified. The plaintiff relied on two examples. The first was the use of structural steel, where the plaintiff inserted the steel after the breach was pointed out. The second example concerned the slab defects discussed above, where the ‘rectification’ was not that the slab and footing defects were redone to comply with the plans, but that the plans were amended and ultimately approved after the non-compliances were discovered.
The logic of the argument seems to be either that the subsequent rectification or remedy indicates a lack of intention to depart from the Contract, or that there can be no finding of repudiation where the conduct that constitutes a breach had belatedly been rectified or ultimately, the plaintiff had achieved contractual compliance.
In my view, such a submission as to the inference to draw from the evidence in this case misses the point entirely. It was not for the plaintiff to undertake the building of the townhouses on the basis that Mr Cobanov was free to depart from the plans any time he thought it appropriate to do so, and if an issue were later identified, the plaintiff would rectify the departure if it was not too late to do so, or otherwise amend the plans to make them consistent with what had been built. What was required was that the plaintiff comply with the plans which formed part of the Contract.
Mr Cobanov was taken in his evidence to each of the matters where a departure had occurred and which have been referred to above. At no point in the evidence did Mr Cobanov say that any departure was inadvertent or mistaken, so as to give rise to an inference that he did in fact intend to comply with the terms of the Contract. That includes the issuing of invoices according to the obligation to complete the stage first, as set out in the Contract. Instead, what Mr Cobanov said was effectively that he knew what the Contract required, and he deliberately chose a different course for the various reasons set out above, such as a view that he knew a better way, or that he wanted to build according to how he had always built based on his experience, or because he thought issuing an invoice before the contractual entitlement to do so was justified because the stage was close to completion.
To use a simplistic contractual example, if a person contracts with a dressmaker at a bridal boutique to have a wedding dress made out of ivory silk, it is highly unlikely that the person making the dress would consider themselves at liberty under the contract to use calico and dye the dress purple, simply because the dressmaker had 40 years’ experience and they thought it looked better, or coincidentally it was cheaper to use calico instead of silk, or because that is the type of dress the dress maker at the store had always made in the past. Such conduct would be repudiatory because it manifested an intention to fundamentally depart from what had been ordered by the customer. The repudiation is not ameliorated by the dressmaker consulting the purchaser after the purple calico wedding dress had been made, so that time had marched on to the point where the purchaser had no choice but to work with the decision of the dressmaker and try to bring the dress into line with the original concept before an imminent wedding.
Scale that example up to the time and expense of constructing two houses, and the importance of the contractual obligation to build according to the plans (even though the builder knows a different or ‘better' way from 40 years’ experience), to seek approval where an alternative construction method or material was being considered, and to avoid amending plans on the fly by at the very least consulting the owner before the work was carried out, should be obvious.
The plaintiff argued that the defendants stored up their grievances, and that they should have invoked the notice of breach clause earlier to permit rectification. In evidence, Mr Cobanov made repeated references to the defendants being aware of what was going on due to regular visits to the Site and their involvement in amending the plans. Some examples of those comments have been set out above. The argument was pressed in closing submissions, where it was suggested that there was an obligation on the defendants to notify the plaintiff earlier about matters they viewed as being in breach of the Contract, instead of allowing the building project to continue.
That argument may be dealt with briefly. The complete answer to it is that election and/or waiver has not been pleaded.
Moreover, it need hardly be said that evidence that the defendants were aware after the event that the plaintiff had undertaken an aspect of the construction in a manner that resulted in a departure from the approved plans is not a substitute for consulting the defendants before the departure occurred in the first place.
The approach taken by the plaintiff deprived the defendants of any opportunity to consult with those who had the expertise to know whether Mr Cobanov’s desire to do the construction “how he had always done it” made any appreciable difference to the structure of the design or the plans that had been approved.
Assuming without deciding that at least Ms Elleway was aware of a non-compliance after the event, and that the defendants were involved in signing documents required to amend the plans on more than one occasion, that awareness and assistance in bringing about a compliant building on the Site did not excuse the plaintiff’s contractual obligation to build according to the plans in the first place.
A separate substantive answer to such an argument is also to be found in Fullagar J’s comment in Carr v Berriman set out above, namely that a decision not to take action on a known breach does not deprive the breach of all significance. When one breach occurs, it might be that the other party gives the defaulter the benefit of a doubt. When multiple breaches occur, the combination of the conduct may make the party’s intention clear. That is what I accept occurred in this case.
I also accept the defendants’ submission that with breaches such as the failure to construct the slab and footings in accordance with the approved plans, by the time the defendants understood what had occurred, it was obvious that the build had gone beyond the point of rectification. Ms Elleway’s evidence was the issuing of a breach notice was pointless in those circumstances.
As counsel for the defendants submitted, it is the simple fact that there was a cavalier approach to the plans and the invoicing requirements under the Contract. When each of the matters set out above is combined, the evidence on behalf of the plaintiff was not that Mr Cobanov was making a genuine attempt to build according to the plans. Rather, because of his 40 years’ experience in the industry, he felt at liberty to depart from the plans any time he perceived there to be a “better way”. Mr Cobanov dealt with the numerous non-compliances by either rectifying them when he was effectively caught out and the project had not progressed beyond a point of rectification, or by retrospectively amending the plans where it was too late. Such conduct occurred from the very beginning of the project when the footings and slab were poured. It permeated the entirety of the work undertaken by the plaintiff up to 12 December 2018 when the invoice for the lock up stage was issued in the absence of lock up being achieved.
The combined conduct of the plaintiff thus leads to an overwhelming inference that the plaintiff evinced an intention to comply with the Contract only when it suited the plaintiff to do so. The Contract was not taken seriously except when it suited the plaintiff to rely upon it, such as the issuing of a breach notice when the defendants dealt directly with the roofing contractor in the circumstances set out above. The reasonable person in the position of the defendants was entitled to conclude that the Contract had not, and would not, be performed substantially according to its requirements
Accordingly, taking the conduct of the plaintiff from April to December as a whole, I find that the plaintiff by its conduct, as at 22 December 2018, Ashell Homes had repudiated the Contract. The defendants were entitled to accept that repudiation and bring the Contract to an end from that date. The failure to comply with the dispute resolution clauses in the Contract
A separate argument was raised that the defendants were obliged to comply with the dispute resolution clauses contained in the Contract, before terminating it on 22 December 2018. A similar issue was dealt with in Mazelow at [12]-[16]. The terms of the clause in question there were not identical, but the reasoning is of assistance insofar as it grappled with a requirement to resolve disputes before the contract may be brought to an end. What was held there (at [13]) was that the dispute resolution clause under consideration did not require the contract to continue while the dispute was addressed, where the contract had been brought to an end by an election by one party to accept a repudiation by the other. The same may be said of the words of the clauses under consideration here.
The words of Special Condition 11 in the present Contract were that “In the event that there is a dispute of the quality of work or payment between the Owners and the Builder, the dispute may be referred to an expert for resolution by a Notice of Dispute”.
First, the clause is permissive, and there is no reason why the word “may” in the context here would be construed as being mandatory. Second, the dispute here was whether the builder had repudiated the Contract. It was not a dispute of a kind to which Special Condition 11 applied.
That leaves the potential operation of clause 26 of the Contract, the precise terms of which are set out at [22] above. In essence, if there is a dispute, either party must promptly give the other written notice of the dispute, resolve the dispute according to ACT laws and meet within seven days to discuss and attempt to resolve the dispute through negotiation, mediation, or other agreed method.
In that regard, the same reasoning as that set out above in relation to clause 25 of the Contract applies. The whole premise of clause 26 of the Contract is that there is still a contract on foot. The content of the obligation under that clause involves a similar procedure to the regime in clause 25 of providing notice of a breach with an opportunity to dispute the notice. At the point where one party has terminated for repudiation and the dispute is whether the termination was lawful, it would be pointless to go through the motions of giving notice and attempting to resolve the dispute.
Further and in any event, the terms of clause 26 do not either expressly or impliedly exclude the right to termination for repudiation, which is not conditional upon any notice being provided to the party who is alleged to have repudiated.
Having found that the termination by the defendants for repudiation was lawful, the consequence is that as at 22 December 2018, all obligations under the Contract, including any obligation to notify the builder of a dispute and to meet within 7 days to attempt to resolve it, also ceased.

The finding that termination of the Contract validly occurred on 22 December 2018 means that the plaintiff’s purported termination letter on 21 January 2019 had no effect.
As to the claim for monies owing under the Contract in accordance with its terms, clause 25.8 of the Contract only applied where the builder terminated the contract. The plaintiff was not entitled to recovery of any amounts pursuant to that clause. The plaintiff otherwise has no cause of action for damages arising out of the termination itself.
That leaves for consideration whether any right to payment for work done had accrued up to 22 December 2018, when the Contract was terminated. On the findings above, as the defendants submitted, the plaintiff was not entitled to an instalment payment even for the Ground Slab Stage because of the fundamental defect in how the slab was constructed.
However, the defendants did not seek any repayment of the progress payments that they had already made. Following Maples Winterview Pty Ltd v Liu & Anor [2015] ACTSC 58 at [157], it may be that the plaintiff was also not entitled to any subsequent instalment payment under the Contract. Because of the position adopted by the defendants, it is unnecessary to consider the issue further.
Similarly, the plaintiff’s submission that the $314,344 already paid by the defendants might have been credited to the amounts owed under clause 25.8 will be addressed briefly and only for completeness. The submission falls away because clause 25.8 has no application, however there may have been an alternative foundation for the payments.
It has been held that in circumstances where no contractual entitlement to be paid has arisen for stages that are yet to be completed, a claim in restitution on the basis of quantum meruit for work done may still be available: Mann v Paterson at [176] per Nettle, Gordon and Edelman JJ. Applying that authority, I accept that the monies paid may have been properly based in quantum meruit and the plaintiff did plead (in its reply) an entitlement to offset any monies already paid for work done for the benefit of the defendants. Again, as the defendants did not dispute nor seek to recover the past payments, and no other claim for unjust enrichment arises on the pleadings here, no further consideration is required.

In Kuwait Airways Corporation v Iraqi Airways Company (Nos 4 and 5) [2002] UKHL 19 (Kuwait Airways), Lord Nicholls of Birkenhead stated at [39]-[42] (emphasis added):
Conversion of goods can occur in so many different circumstances that framing a precise definition of universal application is well nigh impossible. In general, the basic features of the tort are threefold. First, the defendant's conduct was inconsistent with the rights of the owner (or other person entitled to possession). Second, the conduct was deliberate, not accidental. Third, the conduct was so extensive an encroachment on the rights of the owner as to exclude him from use and possession of the goods. The contrast is with lesser acts of interference. If these cause damage they may give rise to claims for trespass or in negligence, but they do not constitute conversion. … 41. Whether the owner is excluded from possession may sometimes depend upon whether the wrongdoer exercised dominion over the goods. Then the intention with which acts were done may be material. The ferryman who turned the plaintiff's horses off the Birkenhead to Liverpool ferry was guilty of conversion if he intended to exercise dominion over them, but not otherwise: see Fouldes v Willoughby (1841) 8 M & W 540. 42. Similarly, mere unauthorised retention of another's goods is not conversion of them. Mere possession of another's goods without title is not necessarily inconsistent with the rights of the owner. To constitute conversion detention must be adverse to the owner, excluding him from the goods. It must be accompanied by an intention to keep the goods. Whether the existence of this intention can properly be inferred depends on the circumstances of the case. A demand and refusal to deliver up the goods are the usual way of proving an intention to keep goods adverse to the owner, but this is not the only way.
As to intention, whilst the defendant’s conduct must be deliberate, it need not be with the specific intent to deprive the plaintiff of their rights in respect of the property: ACN 116 746 859 (formerly known as Palermo Seafoods Pty Ltd) v Lunapas Pty Ltd [2017] NSWSC 1583 per Slattery J at [108] (Palermo Seafoods).
Mistake on the part of the defendant is irrelevant – if the conduct constituting the interference with the goods is deliberate, it will be conversion even, “though the doer may not know of or intend to challenge the property or possession of the true owner”: Caxton Publishing Co Ltd v Sutherland Publishing Co [1939] AC 178 at 202 (Caxton v Sutherland).
As to extent of interference with the rights of the owner, the mere detention or handling of a plaintiff’s goods will not necessarily amount to conversion by a defendant: Palermo Seafoods at [111]. To constitute conversion, the defendant’s conduct must deprive the plaintiff of their dominion over the goods, amounting to an interference with their ownership: Joule Ltd v Poole (1924) 24 SR (NSW) 387 (Joule v Poole) at 390 per Street ACJ. There may be cases where the defendant, “though not in actual possession, uses such force or contrivance as to interfere entirely with the dominion of the true owner”: England v Cowley (1873) LR 8 Ex 126 (Exch) per Pollock B at 128 (England v Cowley). In other cases, conversion will be established where goods are unjustifiably detained after demand is made for their return: Pratten v Pratten [2005] QCA 213 at [60]-[61].
To understand the operation of the above principles of conversion in relation to any particular goods, it is necessary to understand the commercial arrangements in question, in their practical and real commercial context: Bunnings Group Ltd v CHEP Australia Ltd [2011] NSWCA 342; 82 NSWLR 420 (Bunnings v CHEP) per Allsop P at [3].

[111] But although a demand is one way of establishing conversion when goods are in the possession of the defendant, it is not the only way. The mere detention or the mere handling of a plaintiff's goods will not necessarily amount to conversion by a defendant. But once the degree of use amounts to employing the goods as if they were owned, then a conversion is established. That point can be reached without any subjective intention to convert the goods. Such a conversion could be demonstrated, for example, by wearing the plaintiff's jewellery (Petre v Heneage (1701) 12 Mod Rep 519; 88 ER 1491) or locking up the plaintiff's tools or stock, so the plaintiff cannot use them, without lawful excuse (Upton & Anor v TVW Enterprises (1985) ATPR 40-611 ("Upton"). [112] If a refusal to return goods after demand by a person who does not know of the plaintiff's title and has bona fide doubt as to the title of the goods, detention for a reasonable time may be justified in order to clear up the doubt and will not amount to conversion: Craig v Marsh [1935] NSWStRp 25; (1935) 35 SR (NSW) 323. [113] The decision in Upton reflects many factual similarities with the present case and assists to a degree in the analysis at hand. In Upton a tenant was locked out of shopping centre premises but the tenant’s goods were moved to another location. No formal written demand for the goods was made. But the Court was satisfied that oral demands for return of the goods had been made. The landlord permitted some items of stock to be recovered. But the balance of the stock remained under the control of the landlord, which either declined, or failed, to re-deliver the stock to the tenant after the tenant’s oral request. The Court found that notwithstanding that the landlord had not otherwise demonstrated an intention to keep and use the stock as its own, by selling some of it or by otherwise dealing with it, the keeping of the stock with the intention to keep it in defiance of the plaintiff amounted to conversion by detention: Clayton v Le Roy [1911] 2 KB 1031 at 1052 and Upton at 46,943.

On 7 January 2019, the new builder, Mr Perrett of Envision Living, took over the project. The plaintiff’s scaffolding was clearly in use on the Site at that time. According to Mr Perrett, in late January 2019, the new scaffolding subcontractor, MPR Scaffolding, inspected the scaffolding on site and added some further components to render it more compliant. The scaffolding remained in use on site until completion of the work requiring it. MPR Scaffolding then dismantled and stacked the scaffold, separating the “original equipment” and the “extra equipment”, before removing and storing all of it at a suppliers’ yard.
This account from Mr Perrett broadly corresponds with the statement made by the director of MPR Scaffolding, Mr Petar Josifoski, dated 21 September 2020. He explained that MPR Scaffolding assessed and then rectified the scaffolding on the Site over the period late January and early February 2019. Reference was made to work undertaken on 15 February 2019 where MPR Scaffolding “rebuilt the scaffold that had been dismantled”. This is also consistent with Mr Cobanov’s evidence that he had been disassembling sections of the scaffolding on 9 and 10 February 2019.
On 8 March 2019, the plaintiff issued to the defendants a notice of debt due and payable which included amounts for the removal of scaffolding and tools and the cost for scaffolding hire.
On 1 April 2019, the “right hand side of the job” was dismantled, according to the letter in evidence from MPR Scaffolding. The remainder of the scaffolding was dismantled on 11 April 2019. All materials were then removed from the Site and stored in a yard in Fyshwick.
Ms Elleway’s evidence was that she asked Mr Perrett to advise Mr Cobanov where his scaffolding was. The time frame regarding that instruction is unclear except that it was made after the dismantling and removal of the scaffolding from site. I have pieced that evidence together with the statement of the director of MPR Scaffolding, who said that he received a phone call from someone six to eight months later, regarding the scaffolding that was taken from Site. The director advised this person that they could collect their gear from a yard in Fyshwick but that they would need to pay storage and transport fees first.
On 19 July 2019, an amended notice of debt due and payable was issued by the plaintiff. It included invoices 50 and 51, which quantified and itemised the cost for the unreturned scaffolding (by way of allocating a hire cost for the scaffolding per week) and the cost for the unreturned tools. It is probable that the receipt of the invoice on 19 July 2019 prompted Ms Elleway to request Mr Perrett to tell Mr Cobanov where the scaffolding was.
None of the items referred to in the invoices have been returned.

Calling the police and then WorkSafe ACT on 9 February 2019 so as to have Mr Cobanov removed or barred from the Site, and the retrieval of the plaintiff’s property halted, can aptly be characterised as using, “such force or contrivance as to interfere entirely with the dominion of the true owner”: England v Cowley at 128. As the plaintiff submitted, the defendants’ conduct on 9 February 2019 crystallised the conversion. Up until that point, the property on the Site could perhaps be characterised as being merely detained or handled (to use the language of Palermo Seafoods at [111]) by the defendants but without the requisite interference with the goods. Whilst the defendants had communicated a belief that the scaffolding and fencing should remain on Site until finished with, they arguably had not taken any positive steps to actually exclude the plaintiff from the Site before 9 February 2019.
However, once Mr Cobanov made it clear that he would be collecting the property and Ms Elleway took positive steps to obstruct that from happening, the defendants were intending to deprive the plaintiff of dominion over its property, by excluding it from possession and use. Applying Joule v Poole at 390, that amounts to the requisite interference with the plaintiff’s ownership.
To the extent that the defendants argued the plaintiff had an opportunity to recover its belongings on 9 and 10 February 2019, I disagree. The situation is analogous to that which existed in Palermo Seafoods (at [132]), in that the plaintiff was entitled to be able to calmly sort through what was at the Site to retrieve and remove the entirety of that which it owned. The plaintiff had indicated it would take from 9-12 February for that to occur.
Even if an opportunity were given, it would have been insufficient, because on 11 February 2019 when the interim protection order was sought and granted, the plaintiff’s property undoubtedly remained at the Site. The plaintiff was still entitled to possession and use of its property after whatever conditional short window of opportunity provided by the defendants had expired.
Ms Elleway says she knew that the property ultimately belonged to the plaintiff and did not intend for the property to never be returned (as evidenced by her initial offer to arrange a time to attend Site). It is important to distinguish between doing something deliberately and desiring the end result. The intention with which conversion is concerned is directed to the former; it does not matter that Ms Elleway did not have a specific intent to deprive the plaintiff of their rights in respect of the property: Palermo Seafoods at [108]. Even though Ms Elleway did not dispute that the plaintiff was the true owner, her conduct was deliberate, and from 9 February 2019, it constituted a complete interference with the plaintiff’s right to possession: see Caxton v Sutherland at 202.
The defendants were also mistaken in believing that it was permissible for them to retain the plaintiff’s scaffolding on Site, even if its removal from Site caused a safety issue. To the extent that the defendants had any right to the use of the scaffolding while the plaintiff was undertaking work on Site, that right was a contractual one, and it ceased upon the ending of the Contract. The continued use of another’s goods is a clear act of dominion inconsistent with the owner’s title: Palermo at [129], as is unjustifiable detention of goods after demand is made for their return: Pratten at [60]- ]61]. That is precisely what occurred here. If the consequence for the defendants was that upon removal of the plaintiff’s scaffolding, the Site would not be safe, that was an issue for the subsequent builder to immediately rectify, either by hiring or providing its own scaffolding. The safety concern the defendants had about the Site if the plaintiff’s scaffolding were removed did not provide any justification for them to retain and use the plaintiff’s property until mid-April 2019 and then to remove it from Site and leave it to the plaintiff to trace and recover the property at its own expense. Ultimately, the defendants failed to deliver to the plaintiff that which they had possessed and used.
Accordingly, while I accept that the defendants may not have meant to permanently deprive the plaintiff of its property, they have misunderstood the effect of their conduct while the project was being completed. The elements of conversion are plainly met.
The plaintiff claimed the cost of replacing the tools, equipment, and scaffolding, and the interest that has accrued.
The evidence supporting the claim for scaffolding was two invoices, where the plaintiff has charged the defendants a weekly scaffold hire fee of $418 and a dismantling fee. Part of the explanation was that the plaintiff lost the benefit of using the scaffolding on other sites and would have had to hire it. There is a detailed discussion of whether to approach the question of damages on a compensatory or restitutionary basis in Bunnings v CHEP at [178]-[186] per Allsop P and [194]-[205] per Giles JA (Macfarlan JA agreeing with Allsop P). It suffices to record here that I consider it appropriate to allow the hiring fee, applying the authority of Strand Electric and Engineering Co Ltd v Brisford Entertainments Ltd [1952] 2 QB 246, as considered in detail in Bunnings v CHEP and applied at [182] and [199].
As there was no real challenge to the amounts claimed or the foundation for those amounts, I have accepted what was claimed as the measure of the loss, namely: (a) Tools and equipment: $36,785.09

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