Bailey v Champion Homes Sales Pty Ltd

NCAT Consumer and Commercial|2017-09-14

REASONS FOR DECISION

The applicant owners and the respondent builder entered into a written home building contract on 20 June 2014 for the construction by the builder of two adjacent homes in Merrylands, New South Wales on land owned by the applicants.
Following practical completion of the homes on 14 March 2016, the male applicant owner complained of numerous defects in construction to the Office of Fair Trading. The respondent builder did not attend a site meeting with an officer from Fair Trading in July 2016 on the basis that the matters were unsuitable for being dealt with at a site meeting as they were contractual issues. In an email 21 July 2016 expressing this view, the managing director of the builder, who was the principal for the builder and gave the primary evidence for the builder in these proceedings, said in respect of one issue "If the owner is not satisfied he should take this matter to NCAT" and in relation to other issues "The owner can refer this to NCAT".

Relevant contract provisions

The contract was the 2012 HIA form of conditions and schedules for residential building contracts for new dwellings, with customised special conditions. Special condition (SC) 44.1 overrode the order of precedence in general condition (GC) 6.4 and provided that "in the event of any discrepancy between the documents forming part of this contract, the following order of precedence will apply: 1. These Special Conditions; 2. These General Conditions; 3. Variations; 4. Tender; 5. Specifications; 6. Copy of the plans; 7. Other documents." GC 6.2 stated that, if either party became aware of any error, ambiguity or inconsistency in or between the contract documents, that party must, within 2 working days of becoming aware, give the other party written notice detailing the problem.
SC 44.2 provided that, despite GC 8, the builder "shall commence building works within 30 working days after the owner satisfies the requirements of [GC] 4 and the following requirements": (a) receipt of statutory approvals; (b) receipt of "final plans, Tender amendments, variations, kitchen layout, Champion Homes Colours & Accessories Agreement all signed by the owner"; (c) if applicable, completion by the owner to the builder's satisfaction of any preparatory building work to enable the builder to commence building works. GC 4.1 required the owner within the initial period to give the builder certain documentation some of which overlapped with SC 44.2(a). The initial period was defined in item 15 of Sch 1 to be 14 days after issue of the construction certificate, which in fact had been issued in 2012 but the contract provisions were not altered in this respect to acknowledge the delayed start.
GC 4.2 (as amended by SC 52.3) provided that, if the owner failed to satisfy any of the matters in GC 4.1 within the initial period then the builder may end the contract by giving the owner a written notice at any time prior to physical commencement of the building works. GC 4.3 provided for payment of existing work, materials and margin. It was common ground that the matters in GC 4.1 had been satisfied.
The matters in dispute, discussed below, were within SC 44.2(b) and (c) or, according to the builder's case, if outside those provisions were nevertheless matters required to be completed or resolved before the commencement period for building works was triggered.
SC 44.3 stated "The building works and contract period will not commence until all of the above requirements and the requirements of [GC] 4 are satisfied by the owner."
SC 44.4 provided "If the time allowed in the Tender for building works to commence expires before all the Clauses and all the Special Conditions of this contract governing the commencement of building works are satisfied, the builder shall be entitled to vary the contract price by way of a contract price adjustment of 3.75% of the price shown in Schedule 1." The time allowed in the Tender dated 14 March 2014 was 60 days from tender date. In Tender Amendment No 1 the agreed position was 90 days from 4 June 2014, being 2 September 2014.
The following definitions in GC 1.1 are relevant to the above and to other matters in the proceedings: 'building works' means the building works to be carried out, completed and handed over to the owner in accordance with the contract as shown in the contract documents and including variations. 'contract documents' means the GC, SC, plans, specifications and other documents specified in item 14 of Sch 1. Item 14 specified the tender dated 14 March 2014, tender amendments, variations, the builder's "Homes Colours and Accessories Agreement", Attachments A and B to the contract (being the signed checklist and consumer building guide) and 'kitchen layout'. It was common ground that, at least at contract date (20 June 2014), the contract documents as defined included, in addition to those obvious from their naming, Tender Amendment Nov1 dated 2 June 2014, the plans provided by the male owner identified as "Job No SB12-1" and "Job No SB12-2" dated 15 August 2012 (being the plans identified in the builder's tender of 14 March 2014) and the complying development certificate issued 16 August 2012 including the engineering drawings commissioned by the male owner and dated 13 June 2012. "contract price adjustment" means "an amount that is added to or deducted from the contract price under this contract"; contract price means the amount stated in Sch 1 item 4(a) as changed by the contract. "contract period" means the number of calendar weeks or working days stated in item 12 in Sch 1 as extended by GC 9. Item 12 relevantly stated that the building works must reach the stage of practical completion no more than the number of weeks set out below after the contract period commences, subject to GC 9 and SC. The common position on the formula set out below was 57 weeks. "practical completion" means when the building works are complete except for minor omissions and defects "that do not prevent the building works from being reasonably capable of being used for their usual purpose". "variation" means "(a) an omission, addition or change to the building works; or (b) a change in the manner of carrying out the building works".
GC 17.1 stated that a variation "must be in writing and signed by or on behalf of each party to" the contract. There was no separate procedure governing contract price adjustments from the procedure in GC 17 applying to variations. SC 49.1 applied the same requirements for payment to variations and contract price adjustments and time extensions for non-payment.
GC 30.1 provided that, if the building works do not reach practical completion by the end of the contract period then the owner is entitled to liquidated damages in the amount specified in Sch 1 item 13 for each working day (which excluded weekends and public holidays) after the end of the contract period to and including the earlier of practical completion, ending of the contract or the owner taking possession of all or any part of the site. Item 13 specified $50 per working day calculated on a daily basis and said the amount represented "a genuine pre-estimate of the owners' loss or damage".
GC 38.1 contained the warranties set out in the Home Building Act 1989 (NSW) (HBA). They included (c): "the building works will be done in accordance with, and will comply with, the Home Building Act or any other law". Section 18B(e) implied the following non-excludable warranty by the builder into the contract: "a warranty that, if the work consists of the construction of a dwelling, … the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling". This was repeated in GC 38.1(e).
Other statutory warranties set out in GC 38.1 included: (a) the building works will be performed in a proper and workmanlike manner "and in accordance with the plans and the specifications attached to this contract"; (d) "the building works will be done with due diligence and within the time stipulated in this contract"; (f) the building works will be reasonably fit for purpose, which the male owner said was made known to the builder as rental investment properties.
GC 43.3 stated that, to the extent required by the HBA, all plans and specifications for the building works including variations to those documents formed part of the contract, and any agreement to vary the contract or those documents "must be in writing and signed by the parties". Neither party made any estoppel allegations in respect of alleged oral dealings.
SC 47.3 provided that a change from "M" classification engineer designed waffle pod slab to other soil classifications would be charged at $26 per square metre of the concrete slab area. SC 47.15 said that any additional costs incurred in changing from a waffle pod slab to any other type of slab construction would be charged at builder's cost plus builder's margin.
SC 47.5 provided that all requirements by the builder's engineer were deemed to be final, "any additional works required to satisfy these requirements will be charged to the Owner". SC 47.6 provided "If the architectural or engineering plans are supplied by the owner, the builder reserves the right to modify and re-draw such plans to suit the builder's work methods and to suit the requirements of the builder's engineer. These re-drawn plans will take precedence over any other plans".
GC 9.1 said the builder was entitled to a reasonable extension of the contract period if the building works were delayed from, among other causes beyond the sole control of tbe builder, "(c) adverse weather". SC 52.1 changed the definition in GC 1.1 of "adverse weather" to mean "any weather condition in which 5mm or more of rain have fallen, as measured and reported by a Bureau of Meteorology measuring station nearest the site". SC 52.2 substituted GC 9.3 to require the builder, when giving a notice of practical completion under GC 26, to give the owner particulars of any entitlement to an extension of the contract period, including the cause of delay and the extension of time and to provide, for the purposes of GC 9.1, a reasonable extension to mean two days' extension for each day of adverse weather to allow for drying out of the site. GC 9.1(j) included within extensions the "industry shutdown being a 5 week period commencing on or about 22 December in each year".
SC 53.2 provided, among other matters, that "Unless stated in writing, no provision has been made for: … (g) Any structural steel which is subject to engineering details. … (k) The cost of engineering detail and certificates, survey reports and certifications in respect of the building works".

Consideration of the individual claims

I turn now to each of the owners' claims as a matter of law and fact.
I point out that within the extensive material submitted by each party there was material that had no, or marginal, relevance to the matters in dispute. I have attributed weight accordingly.
I also record the parties' sensible agreement not to take comprehensive objections or to make comprehensive submissions where material from third parties was referred to indirectly (without calling that person), or was not directly challenged in reply evidence or a witness was not called. I have given material in these categories appropriate weight.

Claimed contract Price Adjustment No 3

The first disputed item was an amount of $30,082 paid to satisfy Contract Price Adjustment No 3 dated 17 August 2015. The document was not signed by the owners. The amount reflected a 3.75% increase in the contract price said to be justified by SC 44.4. The document set out various items said to be required to be done by SC 44.2(b) before the contractual time allowed for building works to commence expired, being 2 September 2014 as set out above. Building works were said in the document to have been commenced in early October 2014 even though the last of the items said to be required to be done was not done until late October and early November 2014 and only some of the items said to be required to be done fell between 2 September and early October 2014.
The correct interpretation of SC 44.2 to SC 44.4 is of relevance, not only to the price increase claimed, but also to the commencement date of the contract period under SC 44.3, which (with contractually valid GC 9 extensions) must be compared with the practical completion date of 14 March 2016 (effectively accepted by both parties) to determine other claims by the owners.
The owners' first ground of attack was on the contractual effectiveness of SC 44.4. The owners did not seek to make a case that the 3.75% flat rate increase, irrespective of the length of the delayed start to building works, was a penalty, or unconscientious, and could not make such a case without the opportunity for further evidence by both parties. Rather, the owners said that the flat rate 3.75% increase was not supported by consideration because the builder did nothing further to obtain the increase in the fixed contract price.
This would be a good argument if the increase had been sought to be imposed later for existing contracted work, as occurred in the case cited by the owners, Leon Holdings Pty Ltd v O'Donnell (2009) 25 VR 569; [2009] VSC 430 at [61]-[62]. However, the provision for a price increase formed part of the contract as originally entered into and was an integrated component of the bargain. It was therefore supported by the consideration moving from the builder for the obligations of the owners including this obligation.
Next, the owners, correctly in my view, submitted that the words in SC 44.4 "all the Clauses and all the Special Conditions of this contract governing the commencement of building works are satisfied" was governed in scope by SC 44.2 and what it incorporated by reference. Contrary to the builder's submission, SC 44.2 does not simply set the contract period; that work is done by only one aspect of SC 44.3. Rather, SC 44.2 ("Despite Clause 8 the builder shall commence") and one part of SC 44.3 ("The building works ... will not commence") impose an obligation on the builder to begin the building works once the requirements of those SCs are satisfied. Those requirements are stated in substantively the same terms in SC 44.2 ("after the owner satisfies the requirements of [GC] 4 and the following requirements [(a)-(c)"] and SC 44.3 ("until all of the above requirements and the requirements of [GC] 4 are satisfied by the owner").
Again contrary to the builder's submission, there is nothing in the language or context of SC 44.2 or SC 44.3 to change the usual mandatory meaning of "shall" and "will", which is appropriate language to impose an obligation to commence both the building works and the contract period.
It makes commercial sense that the builder's obligation to commence the building works is mandated by defined compliance or performance and also triggers the contract period in which those works are to be brought to practical completion.
In the light of the foregoing, it is clear that SC 44.2 and 44.3 specify exhaustively the contract provisions ("all the Clauses and all the Special Conditions" to use the language of SC 44.4) that govern the commencement of the building works. Accordingly, the builder is entitled to charge the 3.75% uplift only if those requirements are not fulfilled by the owners before the end of the mandated period. The only requirements in dispute, as previously stated, are aspects of SC 44.2(b) and (c), discussed below, on which I have resolved the disputes of fact and interpretation in favour of the owners. I therefore consider that there was no justification for the builder claiming the amount in Contract Price Adjustment No 3 from the owners.
The owners raised a further contractual bar to the effectiveness of Contract Price Adjustment 3, in that it was not signed by the owners. I consider this to be a good alternative basis for finding no justification for the builder's being entitled to claim or be paid the amount claimed in Contract Price Adjustment No 3. There is no basis for the suggestion that the owners acted unreasonably in not signing it, given the legitimate dispute over its meaning and operation described above, which I have found in any event in favour of the owners. The owners' claim about meaning and operation was raised immediately after the delayed service of the adjustment claim (almost a year after the alleged entitlement to the adjustment arose).
As set out above, GC 17.1 stated that a variation "must be in writing and signed by or on behalf of each party to" the contract. There was no separate procedure governing contract price adjustments from the procedure in GC 17 applying to variations. SC 49.1, which overrides GC 14.1 and 17.6, applied the same requirements for payment to variations and contract price adjustments; GC 14.2 described certain variations (deletions and substitutions) as resulting in a contract price adjustment. The definitions of the two terms were complementary: "variation" means "(a) an omission, addition or change to the building works; or (b) a change in the manner of carrying out the building works"; "contract price adjustment" means "an amount that is added to or deducted from the contract price under this contract".
In other words, variation was the terminology used in the contract to describe the actual change to the contracted building works or their actual manner of performance, whereas contract price adjustment in one of its operations described the effect on contract price of such an actual change; contract price adjustment also applied to the adjustment in SC 44.4 which operated before the variation regime, prior to crystallisation of the contract documents specified in SC 44.2. "Manner of carrying out the building works" necessarily encompasses the timing of performance since when something is done is an intrinsic characteristic of how something is done. Indeed, the entire justification for a time-based uplift as is found in SC 44.4 is that the (delayed) timing of commencement of building work and the contract period intrinsically affects the entire project work in terms of the cost of its components (labour and materials).
The overlapping and complementary nature of the two terms explains why they are treated with the same mechanism in SC 49.1 (which did not override GC 14.2 where the two are expressly linked) and why there is no separate procedural regime for contract price adjustments distinct from GC 17 and SC 49 for variations.

Satisfaction of SC 44.2 (b) before end of works commencement period

I turn now to why SC 44.2(b) had been satisfied before the end of the works commencement period ending 2 September 2014.
The prime contentious matters were receipt of "kitchen layout, Champion Homes Colours & Accessories Agreement all signed by the owner".
There is no basis for not accepting the male owner's evidence that he signed the Colours & Accessories Agreement (CAA) sent by the builder on both 22 and 24 July 2014.
That this was accepted by the builder as fulfilling the contractual requirement, so that the signed documents became contract documents, is implicit in the evidence of the principal of the builder and his relevant staff member who emailed the documents. It becomes explicit when that staff member referred to and treated the returned documents as final by communicating the release of the project for construction although a start date could not be specified by the builder. Accordingly, further changes were said to require a variation and the GC 6.2 procedure stated above was the correct procedure implicitly used to iron out inconsistencies or errors. The emails after the end of the works commencement period fall into this category. Re-signing of the complete document on each occasion was insisted upon by the staff member - this does not alter the contractual effect of the original signed documents. To the extent that these documents were required because the builder had not completed its changes to the contract plans, that is not the responsibility of the owners and is not to be used against them for the same reasons as explored below in relation to kitchen layout.
"Kitchen layout" was not defined. A kitchen layout was included in the plans sent to the builder by the male owner on 17 July 2014 and was also included in the wet area plan. "Layout" in its ordinary meaning is satisfied by a conceptual drawing that captures the main integers of what will later be detailed in plans for construction purposes The document sent in October 2014 belonged in the latter category. This is confirmed by the message on the October drawing which contrasts what is in the contract or tender with "this kitchen detail".
Even if the document provided by the builder in October 2014 was the relevant "kitchen layout" and the only document signed directly by the owners, it was provided by the builder only in October 2014 after the end of the works commencement period so far as other integers in SC 44.2 were concerned and the reason for the delay was unexplained. The builder told the male owner that the job had been "released to construction" on 12 September 2014. There is no evidence about what occurred to prompt or justify the staff member's comment on 25 September 2014 that the file was "on hold", the email to that effect was not in evidence and the staff member did not give evidence. An assertion by the principal of the builder is not sufficient in that context.
In any event, the builder is not allowed to benefit from its own unexplained delay which causes the other party not to perform within a stipulated time or in a stipulated manner, particularly when there is no mechanism for the other party to extend time of performance that assists or favours that party: New Zealand Shipping Co Ltd v Societe des Ateliers et Chantiers de France [1919] AC 1 at 6; Trollope & Colls v NW Metropolitan Regional Hospital Board [1973] 1 WLR 601 at 607 (quoting Lord Denning MR in the CA in the same proceedings) cited in Champion Home Sales PL v DCT Projects PL [2015] NSWSC 616 at [156]-[158]. Such conduct would also offend the implied term in all contracts that parties must co-operate with each other and not hinder the obtaining by the other of the contractual benefit (the latter being known often as the rule in Mackay v Dick (1881) 6 App Cas 251 at 263): Secured Income Real Estate (Aust) Ltd v St Martins Investments PL (1979) 144 CLR 596 at 607.
Other items said by the builder to justify Contract Price Adjustment No 3 because they were not done before 25 September 2014 are not expressly mentioned in that form in SC 44.2, namely, receipt of signed final structural engineering detail, signed "flooring selection" and completion of demolition and peg out survey.
The basis on which these are said to activate the price adjustment right is not comprehensively spelled out in the builder's case. Doing the best one can, if demolition is said to come within SC 44.2(c) then it was complete by 10 August 2014 and pegging out was not the owners' responsibility; it is not "preparatory building work to enable the builder to commence building works" but, rather, part of the contracted building works. Further, if final structural engineering detail is said to be "final plans" within SC 44.2(b) then it was provided before 2 September 2014 so far as the owners were concerned. As discussed below, it was the builder's engineer who altered the engineering requirements by adding structural steel, which was properly treated (subject to contest) as a variation. As mentioned earlier, clause 44 must operate harmoniously with the variations procedure; there must be a distinction between documents that are required to trigger the beginning of contract period and obligation to begin the contracted building works on the one hand and variations to those contract documents (governed by distinct contract procedures) on the other hand. For the same reason "variations" in SC 44.2(b) must be read down otherwise absurdity and contradiction would exist within the contract provisions. Finally, signed "flooring selection" does not feature at all in SC 44.2.
In its closing written submissions the builder gave a broad meaning to "final plans" - and, by implication or parallel reasoning, tender amendments and variations - that effectively required the contract period and works obligation to begin only once the builder's final plans were signed by the owner. The builder submitted this did not occur until at least 22 September 2014 and even then the builder's final plans (Revision "D") were not signed by the owner. Accordingly, the builder was entitled to Contract Price Adjustment No 1 of the 3.75% uplift.
This argument has already been dealt with. If it was correct, the builder had control of the process of developing final plans and could in effect control whether or not it received the uplift, which would be contrary to the implied terms discussed above. It would also create unworkable internal inconsistencies in the contract documents by not recognising the distinction between the original priced contract works and variations or price adjustments, some of which the owner was obliged to accept if, for instance, they were required by the builder's engineer or appropriately-demonstrated soil conditions.
Additionally, the builder's interpretation ignored the fact that it was prepared to accept the owners' plans subject to proper variation during the contract. It had priced the job on the basis of the owners' plans. It could not then re-draw those plans and in effect (if that took longer than the period contractually allowed, on the basis of the owners' plans, for the contract works to begin) gain an automatic price uplift without having to justify that uplift under the contract's variations requirements and procedure.

Failure to achieve practical completion within contract period

On the basis of the foregoing findings, what was required to satisfy SC 44.2 was done by the owners no later than 14 August 2014 when the demolition work was complete. The builder was obliged to commence the contracted building works within 20 working days, that is, by 11 September 2014, when the contract period commenced on the interpretation of the contract found above. It was common ground that the contract period was 57 weeks. Absent any contractually-permitted extensions of time, practical completion was required by 15 October 2015.
The builder claimed under GC 9.1(c) and (j) set out above, as varied in the case of GC 9.1(c) by a revised definition of adverse weather in SC 52.1 also set out above. Even accepting the builder's claim for extension under SC 46.1 for small periods of late payment, both rain and the 2015 Christmas shutdown from about 22 December 2015 were required to get the builder a contract period beyond the actual date of practical completion on 14 March 2016 which, as stated earlier, was effectively accepted at final hearing by both parties.
In relation to the builder's claim of 83 days for adverse weather, the only evidence was the rain measurements to satisfy the special definition of adverse weather and the owners' concession of 28 days' actual delay from adverse weather. The builder twice changed its claim for number of days for adverse weather between December 2015 and early March 2016.
Critical to this claim, there was no evidence of manner or length of actual delays caused by the events as is required by the opening words of GC 9.1 described above, let alone what a reasonable period of extension of contract period (co-extensive with or greater or less than the actual delay) would be. The opening words do not say that any extension is the same as the period of adverse weather or the 5 week industry Christmas shutdown. Rather, they say that the builder is entitled to a reasonable extension of the contract period if the works are delayed by nominated events such as adverse weather and the 5 week Christmas industry shutdown: compare Champion v DCT Projects cited above, [2015] NSWSC 616 at [162], [171]. Accordingly, there was no basis to invoke any extension of time provision and the contract period ended before practical completion on 14 March 2016.
The absence of proof is compounded by the failure to grapple in detailed evidence with how adverse weather actually affected work when the house was at "lock-up" with the roof on at 13 July 2015.
The builder first gave a notice of practical completion on 9 December 2015 without particulars, which is thereby defective. The builder abandoned in December 2015 the first notice and gave a further notice of practical completion on 7 March 2016 with particulars provided on 14 March 2016. The particulars simply mentioned the adverse weather days claimed by the builder and the 5 week Christmas industry shutdown which has already been said to be insufficient to satisfy an extension of the contract period to or beyond that date. The adverse weather days had increased. The date on which the contract period was alleged to have begun had moved from the date in December 2015 communications, without explanation.
Accordingly, the builder was in breach of the contract in failing to achieve practical completion before the end of the contract period and the applicant is entitled to loss caused by that breach.
The first category of loss is provided for in the delay payments provisions of the contract at $50 per working day or $250 per calendar week for 12.6 weeks (17 December 2015 to 14 March 2016), totalling $3,150. I do not find any effective challenge to the beginning and end dates of this calculation.
The builder knew through one of its representatives that the owners proposed to rent out the homes immediately on their completion. There was no restriction of the owners' damages to those provided for in the contractual delay payment provisions.
If practical completion had occurred within the contract period, lease up during January could have occurred. The owners' claim for rental from 1 February to 14 March 2016 (6 weeks) is accordingly reasonable. The uncontradicted evidence of rental value was $700 per week. The owners are entitled to damages on general law contractual damages principles of $4,200.

Claimed variation 9 for fill removal

There were only two invoices for fill removal in evidence.
The first dated 29 September 2014 was claimed by the builder in Tender Allowance 1 and in Variation No 2.
The second, dated 30 November 2014, was claimed in amended form in Variation No 7.
Variation No 9 appeared to claim again against the 30 November 2014 invoice without any clear evidence showing why a second bite of the cherry was justified. There was no clear chain from underlying invoices which justified a departure from the builder's correction to his sub-contractor's claimed amount which had been paid already in the earlier variations. The builder claimed Variation No 9 as a variation. It probably is more accurately described as a contract price adjustment but that, as said already, was governed by the requirements of GC 17. The deciding factor however, without need for more, is the absence of clear justifying evidence.
The owners accordingly are entitled to claim back the amount of Variation No 9 being $4,500.

Claimed variation 3 for stormwater/surface water line and pits

Surface water line and pits are shown on the owners' plan dated 19 May 2014 which was expressly incorporated into the contract works for the contract price by item 1 of Tender Amendment No 1 (a defined contract document as previously indicated). The fact that as built the item departs from the owners' plan does not, without more, indicate it was a variation the subject of proper claim by the builder. This is reinforced by the fact that the owners' engineer contradicted the builder's claims that the engineer was contacted and approved any change and that the engineer did not certify the 19 May 2014 plans. The work was already paid for in the contract price and certified, so there was no need for a variation except by reason of deviation from that design by the builder for no reason shown to justify the owners paying more for the deviation. Rather, it seems the builder did not follow the certified plan and required the extra work to achieve the same outcome because slabs had already been poured and prevented a return to the certified plan. The owners are entitled to be paid back what was paid being $3,164.

Claimed variation 5 for structural steel

Variation No 5 for $15,224 was said to be for "all structural steel required" and related crane hire and labour plus further work to conceal a portion of the structural portal frame.
The builder relies upon SC 53.2 which provides that, "[u]nless stated in writing, no provision has been made for: … (g) Any structural steel which is subject to engineering details". The builder said this covers all structural steel required for the houses and has included the total cost in the variation.
This simply could not be the case. On the literal wording of SC 53.2(g) the steel is that which is subjected to more details than in whatever engineering plans or specifications are part of the contract documents. That is, it covers extra steel which is later detailed.
That reading of SC 53.2(g) also is required by the contractual context. The engineering drawings provided by the owners showed the majority of the steel and were expressly made contract documents that defined the building works to be constructed for the contract price. A house cannot be built as a habitable dwelling, as required by the warranty in GC 38.1(e) which reproduces the statutory warranty, unless it has structural steel. Although it could be said that the warranty related to the end product, not the pricing inclusions on getting to the end product, that would not deal with the fact that the engineering drawings provided by the owner were contract documents.
It also would be an unusual situation where a primary structural component of the dwelling was excluded from the contract price, would have to be the subject of a variation or a contract price adjustment (governed by the same requirements in GC 17, as said above, including signature by the owners), yet was part of the original contracted works. Not only is that a strained interpretation when a more common-sense interpretation emerges. It also would be something that one would reasonably expect to have been expressly drawn to the owners' attention when an employee of the builder discussed the engineering drawings with the male owner when finalising what was and was not included in the tender that became a contract document, otherwise there would be misleading conduct as claimed by the owners in their alternative basis for the builder's liability.
The owners did not at final hearing dispute that the additional portal steel that was not in the owners' engineering plans but was required by the frame manufacturer and appeared in the final design as approved by the builder's engineer was a legitimate variation. In the absence of a separate quantification of those beams by the builder the owners did a quantities calculation and were prepared to accept $3,206.80 as the cost of those beams. This in itself was not challenged as a basis for apportionment. The owners are accordingly entitled to a refund from the paid variation of $12,018.
The owners did not make closing submissions to support the claim in MI2 for $810 for new stud work to conceal portion of the portal frame. It seems to me that this was ancillary to the variation accepted by the owners and the owners were right not to press that claim in closing submissions.

Claimed variation 11 for additional engineering work

$1,093 has been accepted by the owners for water authority certification. The balance of $5,596 appears to be the builder charging for matters which were not extras above the contractual works (peg out survey) or were not specified as to how they added to what the owner had provided within the contract documents or are for something (such as the pre-demolition geotech survey discussed below) which did not demonstrably add value (in the case of the geotech survey, for its timing as discussed below). Additionally (and without detracting from the foregoing reason which is sufficient), contrary to the builder's submission this is a variation or a price adjustment governed by GC 17, because it is expressly not included in the price for the contract works under SC 53.2(k). The builder claimed it under the heading "variation". The variation is unsigned by the owners contrary to GC 17 and it has not been established that the owners acted unreasonably in not signing. The engineering steel beam design charge of $550 plus margin could have been justified in part if allocated to the extra portal accepted by the owners, but it wasn't.

Claimed variation 12 for additional underground mains

Variation No 12 is for 21m of underground mains. The Tender (on page 2 under the heading "Connection of Authority Services") did not specify a lineal limit on conduit and wiring. The evidence does not allow me to determine that the amount claimed represents an addition to the contracted work to which the tender refers and, if so, by how much in terms of quantity and cost. The variation is not signed and it has not been established that it was unreasonable for the owners not to sign and thereby signify assent. The owners are entitled to be paid the $840 variation claim which has not been justified by the builder.

Claimed contract price adjustment 1 for additional piering

The only evidence that there was 147.7 lineal metres of piering, being 27 metres above the tender allowance, is handwritten annotations on a copy of the builder's tax invoice and the footing and slab plan. These are not explained or justified. Even if, as the builder says, the matter is not one of variation but of contract price adjustment, the same requirements apply as has been previously discussed. The owners are entitled to claim back the amount on the adjustment of $3,462.

Claimed contract price adjustment 2 for change from M to H slab

The claim relied upon a site classification in a geotechnical report that pre-dated demolition. The report's author fairly, and acting properly as an expert, confirmed in cross-examination what was said in the report, that soil conditions can change following demolition warranting further testing. There was no evidence of soil conditions post-demolition to justify the change. If there is the potential for demolition to change a classification of soil conditions, which is what the expert evidence suggests, that means the absence of a report after demolition to aid in classification is important.
Further, contrary to GC 12.2 the report was not attached to the claim. It was also not the subject of a variation and was not signed by the owners and it has not been shown that the owners were unreasonable in refusing to sign, thereby indicating consent.
The owners are justified in claiming back the $6,760 of the adjustment.

Damages claims for work not done by builder

It is not seriously in dispute on the objective evidence that the height and setback of the dwellings was not in accordance with the approved plans so the owners were required to pay $440 for re-certification. To the extent this was said to be justified by the change of slab, I have already found that the evidence was inadequate to justify charging the owners for that change and the same would apply to this charge.
It is also not seriously in dispute that the owners had to repair water damage caused by incomplete aprons on the lower roof section of each dwelling in the amount of $528.
The evidence provided by the owners and not successfully contradicted by assertion from the builder establishes that the cooktop was not installed in accordance with the instruction manual and relevant standard causing a cost of $5,700 to re-install properly and to replace the damaged glass splashback.
There was no relevant adverse determination by Fair Trading on these matters, let alone one that was binding on the owners when the builder refused to attend the site inspection. These were not matters of contractual interpretation which was the builder's asserted reason for not attending, a reason which also did not apply to aspects of some matters already discussed.

Basis of recovery by owners

Recovery of the damages claims is for breach of contract. If a payment made was unjustified then the claim for it is a breach of contract, for which damages sounds in the amount of the payment.
Recovery of price adjustments unsupported by contract provisions or a variation, and recovery of unjustified variations, is (as just said) a claim for damages for breach of contract (making an unjustified claim in breach of contract) or a claim in quasi-contract or restitution for money had and received.
The claim in money had and received can be on one of two relevant bases, duress or similar conduct not having been alleged. The first basis is under a mistake causing the payments, the mistake being one of mixed law and fact that the claims were evidenced and justified in law by the contract as the builder maintained and did not enter into negotiation about.
There is no indication that payments were made in any event without the owners seeking to press their rights or not caring about their rights, or in payment of a genuine compromise of a dispute, which is reinforced by the absence of signature of the owners on some of the relevant adjustment and variation claims and the owners' evidence about payment under protest described below.
Rather, the builder's claims were paid because of contract terms (spelled out in part on the builder's payment claims) which favoured the builder during resolution of any dispute, namely, extension of the contract period by non-payment and suspension of work, and possible imposition of interest, together with claims by the builder which were not negotiable so far as the builder was concerned despite the communication by the male owner that he was paying to avoid disruption of work but expressed his concerns, disagreement and protests.
In other words, payments were not made by the owners that were "voluntary" in the sense used by the majority of the High Court in David Securities PL v Commonwealth Bank of Australia (1992) 175 CLR 353, [1992] HCA 48 at 373-374, 378 (and cp areas of common ground accepted by Brennan J at 394-397); cp Hookway v Racing Victoria Ltd (2005) 13 VR 444, [2005] VSCA 310 at [21]-[22], [42]-[44]. Legal advice to the owners on the contract prior to its execution (put forward by the builder) is not the end of the matter, let alone when there is no evidence of advice on each specific payments claimed under the contract and the evidence was that advice received didn't change the payment, under protest and because of the factors already mentioned: Qld Alumina Ltd v Alinta DQP PL [2007] QCA 387 at [5]-[19], [68]-[72] (special leave refused).
The second basis of recovery which can be classified as in contract or restitution is for total failure of consideration. Each variation or adjustment was separate and distinct and the promised work or event said to be the subject of the variation or adjustment was, as found above, either not established or was within the existing scope of the contract works: Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516, [2001] HCA 68 at [13] et seq esp [21], [101] et seq, [194]-[199].
The builder's submissions, and case law cited in support, relied upon the absence of recovery by either party of monies owed or paid under oral variations where the Home Building Act requires writing. They are not relevant to the present situation where there were written but non-contractually-compliant and unjustified variations or price adjustments. It is a case of absence of proof of the right to the variation or price adjustment under the terms of the contract, not illegality.
Similarly, and contrary again to the builder's submission, if the variation or price adjustment is not compliant with or not proven to be justified by the contract terms then there is no benefit demonstrated to the owners, and no request by the owners, so as to resist recovery by the owners.

Orders

The owners are entitled to an order that the builder pay them the amount of their claim as finally submitted in MI2 less $810.

Costs

Given the size and complexity of the claim, and the interdependence of issues, there is no reason that costs would not follow the event.
I was provided by the owners' solicitor with a sealed envelope to open after determining the substantive claim. I have opened it at that point. It is, with respect, a well-reasoned Calderbank letter making (with reasoned support) an offer of $55,000 inclusive of costs open until the time for filing of the builder's evidence on 4 April 2017.
That letter is a powerful basis for awarding costs as agreed or assessed on an indemnity basis to the owner on and from 5 April 2017.

ORDER 1. Respondent to pay applicants $80,433 on or before 22 November 2017. 2. Respondent to pay applicants' costs of the proceedings as agreed or assessed on the ordinary basis to and including 4 April 2017 and on the indemnity basis on and from 5 April 2017.

Gregory Burton SC, FCIArb Senior Member Civil and Administrative Tribunal of NSW 15 November 2017 I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 January 2018

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