Brice & Ors v Biruski

CATCHWORDS: BUILDING AND CONSTRUCTION - Extensive delays in completion of works - Assessment of damages - Cross claims for delay and valuations not supported by evidence - Extent of tortious liability

LEGISLATION CITED: Civil Liability Act 2002 Home Building Act 1989

Boucault Bay Co Ltd (in liquidation) v The Commonwealth (1927) 40 CLR 98 Cadoks Pty Ltd v Wallace Westley & Vigar Pty Ltd [2000] VSC 167 (10 May 2000) Day v O'Leary (1992) 57 SASR 206 CASES CITED: Falgat Constructions Pty Limited v Equity Australia Corporation Pty Limited [2006] NSWCA 259 (19 September 2006) Garraway Metal Pty Ltd v Comalco Aluminium Ltd 114 ALR 118 Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145 Koufos v Czarnikow Ltd [1969] 1 AC 350 Piggot Foundations Ltd v Shephard Construction Ltd 67 BLR 48

James Patrick Brice (First Plaintiff and First Cross Defendant) PARTIES: Catherine Ann Brice (Second Plaintiff and Second Cross Defendant) Vlado Biruski (Defendant and Cross Claimant)

FILE NUMBER(S): 2008/00314667 ; (Previously 312/08)

COUNSEL: Mr A D Justice (First and Second Plaintiffs) Mr N Allan (Defendant)

SOLICITORS: Chris Ryan Legal (First and Second Plaintiffs) Wiggins Cheffings Lawyers (Defendant)

1 James Patrick Brice, the first plaintiff, and Catherine Anne Brice, the second plaintiff, brought proceedings against Vlado Biruski, the defendant, claiming breach of contract and negligence in relation to the construction of two townhouses at 50 Railway Street, Merewether. One of those townhouses fronted Railway Street, the other fronted Margaret Street. They were therefore referred to in the proceedings as the Railway Street townhouse and the Margaret Street townhouse.

2 The parties entered into a building contract dated 14 March 2005i for the construction of the townhouses for a price of $616,400. The building contract was in the form published by the Master Builders' Association of New South Wales as BC4. It was completed with words that stated that the works were to be completed within 24 weeks and the completion date was 2 September 2005. The price and date for completion were subject to adjustment in accordance with the provisions of the building contract.

3 On 14 March 2005 the parties also signed a tripartite agreementii with Orix Australia Corporation Limited, the mortgagee of the property and the party funding the works. Of relevance to the dispute between the parties were the provisions of this agreement that were directed at the protection of the rights of Orix by requiring that its permission be obtained to any material variation of the terms of the building contract and imposing limits on the defendant's rights to suspend works under the building contract.

4 The works did not progress in accordance with the expectations of the first and second plaintiffs. Towards the end of 2005 the plaintiffs became dissatisfied with the rate of progress of the works, the standard of workmanship and the value of progress claims made by the defendant. On 28 March 2006 the defendant purported to exercise his right to suspend the works. Lawyers and professional consultants became involved as well as the Department of Fair Trading.

5 On 18 August 2006 a Deed of Variationiii was entered into between the plaintiffs, the defendant and Orix. The provisions of this deed will be considered in greater detail later in these Reasons. Its purpose was to provide a regime pursuant to which the defendant was to complete the works while the outstanding matters of dispute were deferred for later determination. The deed provided for the defendant to complete the works detailed in a schedule to the deed within six weeks of 18 August 2006 or by 29 September 2006.

6 On 10 October 2006 the plaintiffs issued a notice of terminationiv of the contract, claiming that the defendant failed to complete the works provided for in the deed of variation.

7 The plaintiffs claimed that the defendant was in breach of contract by: 1 Failing to complete the works within the period specified in the building contract; 2 Failing to complete the works within the period specified in the deed of variation; 3 Breaching the warranties provided for in the Home Building Act 1989 and in the building contract that required that: (a) the works be completed with due diligence; and (b) the works result in dwellings that were reasonably fit for occupation.

8 In the alternative the plaintiffs claimed that the defendant was in breach of his duty of care in failing to carry out the work under the building contract and the deed of variation with due diligence and in failing to provide dwellings that were reasonably fit for occupation.

9 In response the defendant denied any breach of contract. He pleaded that delays to completion of the works were the result of variations and extras to the works and failure by the plaintiffs, in particular the first plaintiff, to provide directions, information and assistance to the defendant to permit completion of the works.

10 The defendant claimed that he was entitled to but did not receive notice from the plaintiffs specifying defects in the works and providing him with an opportunity to rectify them as provided for in Clause 3.19 of the deed of variation.

11 The defendant claimed that, if it was found that variations and extras were not covered by the contract, they were compensable under a collateral agreement, the plaintiffs waived compliance with the relevant terms of the building contract or the deed of variation or they were estopped from denying the defendant a fair and reasonable extension of time to complete the works as varied.

12 A cross claim brought by the defendant sought damages arising out of the breaches of contract alleged against the plaintiffs.

14 The issues were: 1 Credit; 2 The date for practical completion of the works; 3 The extent to which the date for completion of the works was extended and the circumstances of any such extension; 3 The extent of any variations to the works entitling the defendant to additional payment; 4 The validity of the issue and service of the notice of termination of the contract and the deed of variation; 5 Whether the defendant was in breach of the contract or the deed of variation; 6 If so, the measure of damages to be awarded to the plaintiffs; 7 Whether the plaintiffs were in breach of the contract or the deed of variation; 8 If so, the measure of damages to be awarded to the defendant; 9 The determination of the party entitled to the retention fund.

15 The determination of the competing claims of the parties depended upon which of the first plaintiff or the defendant was to be believed. It was therefore necessary for me to consider matters of credit.

16 The first plaintiff's evidence was given in a straight forward and ordered manner. Documentation supporting his evidence was provided where it was available.

17 The defendant on the other hand demonstrated obvious difficulty in the course of cross examination. He was disadvantaged because of hearing impairment and because English was not his first language. My offer to allow him time to obtain an interpreter was declined.

18 In addition to these disadvantages, the defendant appeared to suffer markedly from impairment to his capacity to remember details of events, even when those details were available as prompts in documentation. He agreed that a number of the claims he made were wrong. It was apparent that he did not, as he claimed, go to Pymble to pay for tiles. Those tiles were purchased from a local supplier. There was no delay in the issue of instructions for or the ordering of bi-fold doors. The defendant conceded that he could have been confused about the dates of events concerning the bi-fold doors.

19 A notice to producev served on the defendant called for production of documents that were essential to establishing when the defendant, his employees or subcontractors were working on the site. These documents were not produced. I inferred that they would not have assisted the defendant in his claims.

20 Most significantly, the defendant provided affidavit evidence concerning his complaint that the works were delayed because of deficiencies in the drawings provided to him. Mr Elsley, an architect employed by Jackson Teece, prepared the drawings. The defendant said he met with Mr Elsley on three occasions. On the first occasion he alleged that he complained about lack of detail concerning bathroom and kitchen layouts and that Mr Elsley told him that he could not provide further details in the absence of funding from the first plaintiff. The defendant also claimed that, without architectural assistance, he was required to deal frequently with errors in the drawings.

21 Both the first plaintiff and Mr Elsley denied that the defendant complained on any occasion of lack of detail or inaccuracies in the drawings. The first plaintiff said that the defendant at no time asked for revisions to be made to the drawings. He said the defendant told him on a number of occasions that he paid little attention to the drawings and that he changed 80% of what appeared on them. When challenged about the veracity of this evidence, the first plaintiff insisted that he was telling the truth.

22 Mr Elsley deniedvi that he had any conversations in the terms alleged by the defendant. He recalled meeting with the defendant on site on only one occasion. He said that after this meeting he handed the file to the first plaintiff and expected to have no further involvement with the site. He did not remember that he met with the defendant on site on 8 August 2005 although the first plaintiff agreed that a meeting took place on that date. Mr Elsley was unable to locate a file note dealing with a meeting on that date.

23 Mr Elsley said he did not remember that the defendant sought his advice on the method of fixing the roof. He denied that he gave advice on structural matters. He said it was not his practice to do so, particularly where in this case the plaintiffs engaged a consulting engineer.

24 Mr Elsley conceded that in parts of his evidence he stated that he did not remember events rather than denying that they occurred but he provided logical and straight forward reasons for his belief that those events did not occur as claimed by the defendant.

25 I was persuaded that much of the evidence of the defendant was fabricated as a means of responding to the plaintiffs' claims and avoiding liability to them.

26 The result was that, where there was a conflict between the first plaintiff and the defendant, I preferred the evidence of the first plaintiff.

27 The building contract expressly provided for the works to be completed within 24 weeks or by 2 September 2005. It expressly provided that specific daysvii not included in the construction period were weekends and public holidays.

28 The deed of variation recited: (B) The BC-4 contract specified the Construction Period as commencing on the date of execution and expiring on 2 September 2005, being a period of 24 weeks. … (F) The Builder acknowledges that the Works to be performed under the BC-4 contract were not completed before 2 September 2005, … (G) The Builder acknowledges that the Owner has served upon the Builder a notice of intention to claim Delay Costs Payable by the Builder to the Owner as assessed from 2 September 2005 until possession of the Site is handed over to the Owner. … 2.6 Preservation of existing rights The expiration or termination of this Deed does not affect a right or remedy for breach that has accrued to a party before the expiration or termination date.

29 The defendant admitted in his defence that: 1 It was an express term of the building contract that he would bring the works to practical completion by 2 September 2005; and 2 It was an express term of the deed of variation that he would complete the works on or before 29 September 2006.

30 The defendant claimed in his cross claim that progress of the works was delayed by 31 weeks. He made no claim that indicated that the date for completion of the works was other than as stated in the building contract.

31 Nowhere in his affidavit material did the defendant suggest that the date for completion of the works provided for in the building contract was other than 2 September 2005.

32 The defendant wroteviii to the plaintiffs on 17 October 2005 setting out 12 reasons for the delay in completion of the works. He did not in this letter suggest that the date for completion was other than 2 September 2005. He agreed in cross examination that 17 October 2005 was six weeks after the date specified in the contract as the date for completion of the works.

33 After the plaintiffs closed their case the defendant sought to file an amended defence in which it was claimed that the date for completion of the works was extended to 29 September 2006. The application was rejected.

34 In submissions, the defendant put forward a further basis for arguing that the date for completion of the works was other than 2 September 2005.

35 Although this submission questioned the date for commencement of the works and therefore the date from which the construction period was to run, it was not disputed that the defendant in fact commenced the works on 14 March 2005, the date specified in the building contract as the Proposed Date for Commencement.

36 It was claimed, however, that that clause 32(b) of the contract excluded from the term day Saturdays, Sundays, rostered days off, public holidays, certain dates in the month of December of each calendar year and days specifically excluded from the construction period in item 6(c) of Schedule 2 to the building contract.

37 On this basis the defendant argued that the date provided for in the contract for completion of the works, even before the application of provisions dealing with extensions of time, was in fact 22 November 2005. This date was arrived at by calculating that 24 seven day weeks allowed for 168 days in which to complete the works and then excluding weekends from those 168 days.

39 It depended upon my accepting that the contract provided for weeks of seven days duration when it specifically did not. As already noted, weekends were very clearly excluded by clause 6(c) of the contract and by the standard clause 32(b).

40 To accept the conclusion urged by the defendant it would be necessary to restore weekends to the 24 weeks provided for in clause 6(b) and then withdraw them.

41 I considered that there was no warrant to take this course. I took into account in coming to this conclusion the following: 1 The express provision for completion on a date that was five days in excess of 24 five day weeks from the date of commencement. Those five days are accounted for by three public holidays and two rostered days off. 2 The defendant's letter of 17 October 2005 listed matters alleged to have caused delays in completion at a time when, on the argument raised at the hearing, the construction period had not expired. 3 The defendant acknowledged in the deed of variation that 2 September 2005 was the date for completion of the works. 4 The defendant admitted in his defence that 2 September 2005 was the date for completion of the works. 5 No evidence was placed before the Court on behalf of the defendant, either through his affidavit or oral evidence, that suggested that the date for completion of the works was other than 2 September 2005. 6 It was not put to the plaintiffs in cross examination that the date for completion of the works was other than 2 September 2005.

42 I find that the contractual date for practical completion of the works was 2 September 2005.

43 The contract provided for a fair and reasonable extension to the Construction Periodix to be granted to the defendant in the event that certain circumstances arose. The procedure for securing an extension of the construction period was provided for as follows:

11. Delays and Extensions of Time (a) S hould the progress of the works be delayed by any of the following causes or conditions resulting from them: (i) variations;

(iii) latent conditions affecting the site, the ability to carry out work or requiring work;

(iv) proceedings taken or threatened by, or disputes with adjoining or neighbouring Owners or residents;

(v) any act, default, delay or omission on the part of the Owner in providing instructions, making payment or doing a thing necessary to allow the works to proceed including signing instructions concerning variations;

(vi) civil commotion or industrial dispute affecting any of the trades employed upon the works or the manufacture or supply of materials for the works;

(vii) inclement weather or the affect of weather on site access or site safety;

(viii) delay by any local or other authority in granting any necessary consent or approval;

(ix) any other cause, thing or matter beyond the reasonable control of the Builder such as industry wide trade or material shortages, which affect the Builder's ability to do the work; then in any such case the Builder must receive a fair and reasonable extension of time to the Construction Period.

Builder to Advise of Matters Causing Delay (b) The Builder is to notify the Owner in writing of any matters which cause delay within a reasonable time of becoming aware of their occurrence, together with a stated time for extension of the Construction Period. (c) Should the Owner not dissent in writing from the notification within five (5) days, the Construction Period will be extended by the period claimed in the notification under Sub-Clause (b). (d) Delay in notifying or a failure to notify a delay will not of itself prohibit an extension of time provided the matter which is claimed to cause delay is shown to cause delay to the works. (e) The Builder must use his best endeavours to minimise any delay.

44 The contract therefore required that the following elements be met if a claim for an extension of the construction period was to be made: 1 Delay in the progress of the works as a result of the causes or conditions listed in clause 11(a); 2 Notice in writing given within a reasonable time after the builder became aware of the occurrence of matters causing delay; 3 A statement of the causes or conditions alleged to have caused delay; 4 A stated time for the extension of the construction period.

45 Some relief was provided to the defendant by clause 11(d) but this provision did not relieve him of the obligation of establishing that the progress of the works was delayed by causes or conditions listed in clause 11(a), or, in my view, relieve him of the requirement to state the time sought for extension of the construction period and to establish that he used his best endeavours to minimise any delay.

46 The defendant acknowledged that he made no claim for an extension of timex. He said that a claim was made through his former solicitors, Gillis Delaney, but although their letterxi of 10 July 2006 to Moray & Agnew, then acting on behalf of the plaintiffs, referred to an earlier letter dated 19 April 2006 that dealt with variations and delays, the letter of 19 April 2006 was not in evidence.

47 The defendant's letter of 17 October 2005 did provide notice to the plaintiffs that he claimed that the works were delayed for various reasons but that letter did not otherwise comply with the requirements of Clause 11. In any event, the defendant agreed that the first plaintiff disputed the claims made in this letter and refused to sign it.

48 There was therefore no evidence before the Court that indicated that the defendant notified the plaintiffs of the basis upon which it was claimed that the causes or conditions he relied upon at the hearing delayed the progress of the works; of the extension sought to the construction period; or that he used his best endeavours to minimise the delay.

49 The cross claimxii asserted that the works were delayed by 31 weeks and claimed the sum of $93,000 in respect of this alleged delay. It stated that particulars of this part of the cross claim would be provided by way of a Scott Schedule.

50 The plaintiffs on 24 November 2009 requestedxiii the supply of the Scott Schedule and further particulars of this part of the cross claim. The defendant's responsexiv was that the Scott Schedule would be served at least 14 days prior to the mediation hearing. There was no Scott Schedule in evidence and, according to the plaintiffs' submissions, none was ever supplied.

51 The only statement of any basis for calculation of the extent of the delays claimed by the defendant appeared in the submissions made on his behalf. The delays claimed in those submissions were: Inclement weather 27 days Variations and extras 12 days Failure to provide assistance 3 days Total 42 days

52 Applied to a completion date of 2 September 2005, if these claims were accepted, the construction period would be extended to 2 November 2005. I have made this calculation on the basis of a five day week and I allowed for one public holiday and 2 rostered days off during that period.

53 The defendant further argued that, if his claims for delay were accepted, he was responsible for damages suffered by the plaintiffs up to 22 March 2006 only because he validly suspended work under the contract on that date.

54 Bi-fold doors - 1 day, 5 hours: the defendant claimed that the plaintiff varied the work by replacing aluminium sliding doors to bi-fold doors. As a consequence he claimed that it was necessary to raise the concrete slab under the door frame to accommodate the track for the bi-fold doors for each townhouse. He claimed that the time involved in installing the bi-fold doors was greater than that required for the sliding doors.

55 In response the plaintiffs noted that the defendant initially claimed that the plaintiff delayed in providing him with instructions concerning the doors to be installed. They pointed out that this claim was abandoned in favour of the claim for delay for additional work after the defendant in cross examination was shown invoicesxv that established that the doors were ordered well before the date to which he claimed the first plaintiff delayed in providing instructions. On this basis, the plaintiffs submitted that the Court should have no confidence in the claim.

56 I accepted this submission and noted further that there was no evidence of how this change affected the progress of the works.

58 External Block Corners - 2 days: the first plaintiff authorisedxvi the construction of return side masonry walls at the front and rear of both townhouses. The defendant claimed that the extra time involved in this change was two days.

59 The plaintiff's response was that this variation was verbally authorised on 26 May 2005 and the defendant carried out the work on 27 May 2005 and 2 June 2005. In the circumstances he failed to demonstrate how this variation affected the progress of the works.

60 The defendant failed to produce documents referred to in the Notice to Produce that might have assisted in determining the extent to which this variation delayed the progress of the works. In the absence of this supporting material I was not prepared to accept that this variation delayed the progress of the works.

62 Margaret Street kitchen configuration - 4 hours: the defendant claimed that the plaintiff asked for the positions of the sink and cook top to be swapped from those shown on the drawings. As a result it was necessary to remove cupboards already installed, alter pipe work and replace cupboards.

63 It became apparent from cross examination that the reason for the changes was that frames and pipes were installed in positions other than those shown on the drawings. The plaintiffs relied upon a letterxvii from Cutting Edge Joinery as evidence of an independent third party that confirmed the mispositioning of these items. This was therefore not a change for which the plaintiffs were responsible.

64 Further there was again no demonstration of how this alleged delay affected the progress of the works.

66 Margaret Street storage/laundry - 4 hours: the defendant claimed that the first plaintiff instructed him to reduce the size of the laundry in order to increase the size of a storage area. He said this involved work on a new wall and an increase in the height of the floor slab.

67 The first plaintiff's response was that he knew nothing of this change and that the evidence concerning his instructions was a complete fabrication.

68 Once more there was no demonstration of how this alleged delay affected the progress of the works.

69 I preferred the evidence of the first plaintiff and rejected this claim.

70 The invisible bracket solution - 3 hours: the defendant claimed that the plans did not make provision for the method by which part of the roof was to be secured. The first plaintiff did not wish to use brackets because he wanted the fixings to be invisible. He directed the defendant to look at an address in Carrington for a guide as to how this might be done. The defendant claimed that, having looked at this address and other properties, he devised a method of fixing the roof that was invisible.

71 The plaintiffs' response was that this was work that might be expected of a builder of 45 years' experience, that the defendant was given instructions on the day on which the matter was raised and that it took him two weeks to work out what was ultimately a very simple solution. The plaintiffs' also pointed out that the defendant initially claimed two weeks delay for this item.

72 I did not accept that, without instruction, a builder could be expected to know how to provide the invisible fixing required by the plaintiffs. I did not consider it unreasonable to claim three hours to investigate and devise a solution. However, once more there was no demonstration of how this alleged delay affected the progress of the works.

74 Railway Street bathroom - cut and patch gyprock - 2 hours: the defendant claimed that it was necessary to reconfigure the placement of the fittings for this bathroom because the drawings were not to scale. As a result it was necessary to cut the gyprock in the ceiling and repatch it.

75 Mr Elsley, the architect responsible for the drawings, was called for cross examination on his affidavit but it was not put to him that the drawings were not correctly scaled. Further, as pointed out by the plaintiffs, the drawings provided for custom built vanities that could have been resized to deal with the shortcomings, if any, in the drawings.

76 The first plaintiff's evidence was that, when the issue was raised with him by the defendant, he told him to re-arrange the fittings to suit.

77 I preferred the evidence of the plaintiff and in the absence of demonstration of how this alleged delay affected the progress of the works, I rejected the claim.

78 Extend en-suite plumbing - 4.5 days: the defendant claimed that it was necessary to recall the plumber to extend water and waste pipes in the en-suite bathrooms and that he was unable to carry out other work in the en-suites while he was waiting for the plumber.

79 The first plaintiff's response was that this situation arose because the defendant did not comply with the contract and drawings that required custom built vanity units. He denied that he authorised any alteration to the drawings.

80 Further, a notice to produce was issued to the defendant requiring the production of documents evidencing the plumber's attendance as alleged. Nothing was produced in response.

81 In the absence of this material and evidence of how this alleged delay affected the progress of the works, I rejected this claim.

82 Relocate cabling and meter box - 1 day: the defendant claimed that it was necessary to move the meter box to the outside of the car ports because the first plaintiff altered the closing of the car ports from screen shutters to roller doors.

83 The first plaintiff denied that he authorised any change and that roller doors were installed by the defendant contrary to the provision made in the drawings.

84 I preferred the evidence of the first plaintiff and, in the absence of demonstration of how this alleged delay affected the progress of the works, I rejected this claim.

85 Travel to Pymble for pavers - 4 hours: the defendant claimed that the plaintiff instructed him to purchase paving from a shop at Pymble at which he held no account. For this reason he was required to travel to Pymble from Merewether to pay for the pavers. The defendant provided no details of this supplier and produced no invoice for the tiles for which he claimed to have paid.

86 The first plaintiff's response was that the pavers referred to were in fact supplied by Amber Tiles at Charlestown and delivered to the site.

87 I preferred the evidence of the first plaintiff and I rejected this claim.

88 Carrying pavers - 4 hours: the defendant claimed that the plaintiff altered the paving for the courtyards to Riverstone Ash tiles that were larger than those originally specified and weighed 40 kgs each. He engaged labourers to assist him to carry pavers from a palette on the Railway Street boundary to the Railway Street and the Margaret Street courtyards.

89 The plaintiffs' response was that the defendant would have been required to move the originally specified tiles. Further, they pointed out that the change to Riverstone Ash tiles was dealt with and paid for through progress payment 8xviii, dated 29 August 2006.

90 I preferred the evidence of the first plaintiff and, in the absence of demonstration of how this alleged delay affected the progress of the works, I rejected this claim.

91 Direction to look at roofs, Carrington - 4 hours: this claim appeared to duplicate that made in respect of the provision of invisible roof fixings. I rejected it.

92 Calculation of quantities and finishes - 2 hours: the defendant claimed that he was required to spend this time measuring floor areas to calculate quantities after he was provided with a schedule of finishes by the first plaintiff.

93 It was unclear on what basis this was claimed to fall into the category of failure to assist or how it affected the progress of the works.

95 Travel to Taylor's Beach - 2, 8, 4 and 2 hours: the defendant claimed that he was required to travel to Nelson Bay Tile House for tiles selected by the plaintiff from this supplier. He said he held no account with the supplier and therefore he was required to travel there to pay for them. He claimed that he was required to make several trips to the supplier in order to collect and transport the tiles to the building site.

96 In cross examination the defendant was challenged concerning the number of times upon which he was required to collect tiles from Taylors' Beach. At one stage he appeared to agree that some of the tiles were delivered.

97 In the light of this uncertainty and, in the absence of demonstration of how this alleged delay affected the progress of the works, I rejected this claim.

98 The defendant relied on dataxix provided by the Bureau of Meteorology that indicated the dates on which it rained at the building site up to 31 October 2005, the date upon which the roof was installed. He claimed the loss of 27 working days through inclement weather.

99 Examination of the records in evidence indicated that varying amounts of rain fell over the period from March 2005 to October 2005 and that it fell at some time in the 24 hours to 9 am on each day. The records did not indicate when, within that 24 hour period, the rain fell.

100 In the absence of evidence demonstrating that such delays as might have been caused by inclement weather in fact delayed the progress of the works, I was not in a position to accept this claim.

101 The defendant argued that the plaintiffs' rights to damages as a consequence of delay in completion of the works extended only to 22 March 2006. This was said to be the date upon which the defendant suspended work under the contract on the basis that the plaintiffs failed to pay the full amount of progress claim 7.

102 Clause 5 of Schedule 2 to the contract set out the method for payment for the works. It provided for a deposit to be paid in the sum of $15,000. The balance of the contract sum of $616,400 was to be paid within 5 working days of receipt of progress claims. Clause 5(e) provided for progress claims to be made on completion of specified stages of the works and in all cases in accordance with Clauses 18, 19, 20 and 23. Clause 5 did not specify the amounts to be paid on completion of those stages of the works.

103 Clause 20 of the contract dealt with payment. Its provisions concerning claims for progress payments were: (b) A progress payment claim by the Builder is to show: (i) The value of the contract work performed at the date of the claim; (ii) The value and brief description of any variations; (iii) Any other adjustments under the provisions of the Contract; (iv) The amount previously paid by the Owner other than a deposit. (Refer to clause 18); (v) The amount claimed by the Builder being the difference BETWEEN the total of paragraphs (i), (ii) and (iii) AND paragraph (iv); and (vi) The proper GST charge relevant to the works to which the claim relates.

104 The defendant issued progress claim 7xx on 28 February 2006 in the sum of $107,000. The progress claim did not show any of the information required by Clause 20(b) of the contract.

105 On 1 March 2006 the plaintiffs issued noticexxi to the defendant of their intention to claim liquidated damages to be deducted from the final progress claim for breach of contract by his failure to perform the works with due diligence and within the construction period.

106 The plaintiffs referred progress claim 7 to Muller Partnership, quantity surveyors, for assessment. Muller Partnership reportedxxii that, having inspected the site, spoken with the defendant and assessed the cost to complete the works they recommended payment for progress claim 7(a) in the sum of $29,054, inclusive of GST. Item 1 of the report stated: The claim is as agreed with Mr Vlado Biruski, the builder.

107 The defendant reissued progress claim 7xxiii on 10 March 2006 in the sum of $29,054. The plaintiffs paid this claim.

108 Muller Partnership reported that the defendant informed them that the revised date for practical completion of the works was 24 March 2006.

109 The defendant issued two notices of intentionxxiv to suspend of the works. One was dated 22 March 2006 and the other 28 March 2006.

110 Clause 21 of the contract provided for suspension of the works as follows: Suspension of Work (a) Should the Owner fail to :- i) pay or cause to be paid any payment or any part thereof including an amount for GST within the time required by Item 5 of Schedule 2; ii) confirm in writing instructions regarding an Owner requested or required variation to the works; or iii) provide instructions in a manner and time so as to reasonably avoid delay to the progress of the works; then the Builder may, without prejudice to his right to determine this Contract, suspend the works. The ability to suspend will also be available if the Owner fails to comply with Clause 2(b). Suspension pursuant to this clause will act as a bar to any claim for damages, compensation or offset by the Owner against the Builder which relates to the period of suspension or consequences of such suspension. … (b) Any period of suspension will automatically and as of right extend the construction period and by consequence the date for practical completion.

111 The notices stated: As you are aware, on 28 February 2006 I delivered to you a payment claim for work carried out for stage 7 of the contract works. This payment claim was made in compliance with the Contract and I have enclosed a copy of the invoice dated 28 February 2006 for your reference.

112 The documentation in evidence did not make clear what document was enclosed with the notice issued on 22 March 2006. Enclosed with the notice issued on 28 March 2006 was invoice no. 0343xxv dated 28 March 2006 for $77,946 for Outstanding progress payment No 7.

113 The notices demanded payment of $77,946 within 7 working days. In respect of the first notice the last date for payment was 29 March 2006 and of the second, 6 April 2006. Notwithstanding demand for payment within 7 working days, the defendant gave notice of intention to suspend the works immediately.

114 Questioned concerning the obvious anomalies in his conduct concerning progress claim 7, the defendant agreed that he withdrew the claim and re-issued it for $29,054 and that this sum was paid to him. This part of his conduct therefore appeared to confirm the statement in the Muller Partnership report that the defendant agreed with their assessment of the value of the claim.

115 The defendant also agreed that on 22 March 2006 he claimed $77,946 on an invoice that was withdrawn and in respect of which, at that time, nothing was owed.

116 He denied that the notices of suspension were issued as a means to promote a right to suspend the works and avoid the termination of the contract threatened by the plaintiffs on 1 March 2006 in circumstances were the works were not completed by 24 March 2006 in accordance with the advice given to Muller Partnership.

117 There were a number of grounds upon which the attempt to suspend the works failed.

118 The most obvious was that, having agreed with Muller Partnership concerning the value of the works carried out to the point of assessment of progress claim 7, the defendant withdrew the claim and reissued it in the sum of $29,054. At the time of issue of the two notices of suspension this amount had been paid and there was no unpaid invoice.

119 Further the contract did not specify lump sums to be paid on completion of certain stages of the works. Clause 20 of the contract set out clearly the basis upon which progress claims were to be calculated, namely by reference to the difference between amounts previously paid and the value of work performed at the date of the claim. There was no evidence that indicated that further work was done to the value of $107,000 at 28 February 2005 or to the value of $77,946 at 28 March 2006. It was not open to the defendant simply to issue a progress claim for any amount he wished to nominate.

120 There was evidence that strongly indicated that work to the value claimed by the defendant was not completed. Aside from the report of Muller Partnership, the report provided by the Department of Fair Tradingxxvi dated 27 May 2006, the defendant's solicitors' letterxxvii of 14 June 2006, the report of Davis Langdonxxviii dated 20 June 2006, and the Schedule of Worksxxix forming annexure A to the Deed of Variation of 18 August 2006, all supported the plaintiffs' claim that the defendant was not entitled to payment of $77,946 in March 2006.

121 Further, progress claim 7, either in its original or re-issued form, did not comply with the provisions of clause 21(b).

122 I find therefore that there was no valid contractual entitlement available to the defendant to suspend the works.

123 The cross claim sought payment of only one variation, being that related to the Riverstone Ash pavers. As already noted, it appeared that any additional cost to the defendant in laying these pavers was dealt with in progress claim 8xxx and was paid for.

124 On 10 October 2006 the plaintiffs issued a noticexxxi of immediate termination of the contract and the deed of variation.

125 The defendant claimed that the notice of termination was not validly served, that it was issued without any preliminary notice of intention to terminate and that he was not provided with an opportunity to remedy the default that was the basis for the termination.

126 The first plaintiff's evidence was that he served the notice on the defendant at the Margaret Street townhouse on 10 October 2005. The defendant agreed that he received the notice. His argument was that it was not served at the address for service of notices provided for in the deed of variation.

127 There were a number of problems with this argument. The first was that it was not pleaded. Further, while the deed of variation made provision for the form and method of delivery of notices, it did not nominate a particular address for service of either party.

128 In any event, Justice Hodgson provided some guidance to the approach to be taken where it was acknowledged that a notice was received, although not served in accordance with the requirements of a contract. In Falgat Constructions Pty Limited v Equity Australia Corporation Pty Limitedxxxii Hodgson J said: In my opinion it is clear that if a document has actually been received and come to the attention of a person to be served or provided with a document or of a person to deal with such document on behalf of a person or corporation to be served or provided with a document it does not matter whether or not any facultative regime has been complied with. (see Howship Holdings Pty Limited v Leslie (1996) 41 NSWLR 542; Mohamed v Farah (2004) NSWSC 482 at 42 to 44) In such a case there has been service provision and receipt.

129 I was not satisfied that the notice of termination was invalidly served or that, if invalidly served, it did not come to the notice of the defendant on the day upon which it was issued.

130 The deed of variation contained the following provisions: 3.1 Builder to Conduct Works 3.2 For the Term of this Deed the Builder will conduct with due diligence and in a proper and workmanlike manner, the Works and the works identified in the Schedule of Works to complete the construction of the two residential town houses free of Defects. … 3.16 End of Term At the end of the Term the Builder must have completed the works identified in the Schedule of Works to a standard equivalent to that of a reasonable builder performing the works with due diligence and in a proper and workmanlike manner. 3.17 Failure to Complete Works If the Builder fails to complete the works identified in the Schedule of Works within the Term to the standard specified above, and provided that the Builder's failure to complete the works was not caused by the Owner, the Lender or the Owner's Representatives, the Owner may immediately terminate the BC-4 Contract and this Deed by providing the builder with written notice giving reasons, stating that the BC-4 Contract and this Deed is terminated immediately; and: (A) The Builder must then immediately give the Owner possession of the Site; (B) The Owner will be entitled to withhold any further payment claimed by the Builder under the BC-4 Contract and this Deed until all claims by the Owner and the Builder have been resolved between themselves or as determined by a Court or Tribunal having jurisdiction to hear the claims being made; (C) The Builder will not be entitled to claim any interest on any amounts withheld under this clause in respect of Delay Costs Payable by the Builder to the Owner even where a resolution between the parties results in an agreement to pay the Builder any amount from the withheld amount, or a determination is made in the Builder's favour. 3.18 Suspension of Further Payments Where the Builder fails to complete the works identified in the Schedule of Works during the Term the Owner and the Lender will be entitled to suspend any further payments to the Builder under the BC-4 Contract and this Deed.

131 The Term referred to in these provisions was the period of six weeks commencing on 18 August 2006 and ending on 29 September 2006.

132 I noted that the deed of variation did not adopt the term practical completion. It provided to the plaintiffs a right of immediate termination if the works were not completed to the standard provided for and for immediate termination on service of notice.

133 The deed of variation was not a standard form of contract. It was negotiated by the parties through their legal representatives. I was therefore not prepared to read down its provisions and to find that, notwithstanding its clear terms, the defendant was to have an opportunity to redress the situation that existed at the end of the Term.

134 There was no doubt that the works were not completed by 29 September 2006 and that the defendant was aware of this. The letterxxxiii of the defendant's solicitor dated 28 September 2006, although stating that the works would be completed by 29 September 2006, proceeded to list of number of items that would not be completed by that date. It was suggested that a number of them were delayed by interference or delay on the part of the first plaintiff.

135 The responsexxxiv provided on behalf of the plaintiffs on 3 October 2006 denied these allegations and reminded the defendant of his obligations under the deed of variation. It stated that the plaintiffs were not prepared to extend the time for completion of the works and demanded that the defendant hand over the site and return the keys to the townhouses.

136 Although this approach was taken, the notice of termination was not issued until 10 October 2006, effectively allowing the defendant further time within which to complete the works.

137 The works were clearly not complete by 29 September 2006 or by 10 October 2006. Muller Partnership reportedxxxv that they assessed the cost to complete the works on 21 September 2006 at $60,499, excluding the cost of rectification of defects. The works were assessed to be 85% complete. In progress claim 11xxxvi, issued on 13 October 2006, the defendant allowed $9,496 for works he conceded were not completed.

138 I find that the notice of termination was validly served.

139 The defendant claimed that the plaintiffs breached the provisions of clause 3.19(b) of the deed of variation by failing to allow him the opportunity to rectify defects in the works within one month of notification. Clause 3.19 was directed at the manner in which a retention amount was to be disbursed after the works were completed and in the expectation that the works would be completed by 29 September 2006.

140 In this case, as already noted, the works were far from completion. There remained outstanding much more than defects in the works. The circumstances had not arisen for the application of the provisions of clause 3.19 of the deed of variation prior to the date upon which the notice of termination was issued.

141 I find that the notice of termination was validly issued.

142 My findings in respect of the issues already dealt with indicated that I was satisfied that the defendant failed to bring the works to practical completion within the period specified in the contract or to complete them within the period provided in the deed of variation.

143 The delay was gross and so far from the original date for completion that there was a clear breach of the defendant's obligations to perform the works with due diligence and within the construction period.

144 Defects in the work and in workmanship were identified at two stages in the construction period.

145 Prior to the negotiation of the deed of variation Mr Craig Hutchinson, Davis Langdon and the Department of Fair Trading identified the defects and outstanding works that were set out in detail in the schedule of works annexed to the deed. Mr Hutchinson prepared a further schedulexxxvii dated 13 October 2006. Many of the items referred to in this schedule were disputed by the defendant but a number were conceded.

146 I was satisfied from this material that the works were not carried out to the standard required.

147 I find that the defendant was in breach of contract and in breach of the deed of variation arising out of the delay in completion of the works, the failure to perform the works with due diligence and the failure to carry out the works to a reasonable standard.

ISSUE 6 - Assessment of the plaintiffs' damages claim

148 The plaintiffs claimxxxviii for damages encompassed three categories: the costs and expenses of completing the works; the costs and expenses incurred as a consequence of the delay in completion of the works; and the losses realised at the time of sale of the townhouses through the reduction in their market value.

149 No issue was taken by the defendant with the sum claimed as payment to Dowco Pty Limited to complete the works. The amount claimed is therefore allowed in the sum of $38,440.

150 The first plaintiff also claimed $930.25 for expenses incurred in rectification works. This claim was supported by invoicesxxxix and it was not challenged. The amount claimed is therefore allowed in the sum of $930.25.

151 The plaintiffs retained Mr Hutchinson in 2005. He provided the report upon which the schedule or works appended to the deed of variation was based and the report that was necessary to prepare a scope of work to be undertaken by the replacement builder. The defendant argued that the plaintiffs should be allowed to recover only the expenses incurred after termination of the deed of variation.

152 It was not made clear why those incurred prior to the deed of variation should be disallowed. The defendant was clearly in breach of the contract at that stage and the services provided by Mr Hutchinson were necessary to identify the work to be done for the purposes of the deed of variation.

153 The defendant also objected to the claim for the cost of Mr Hutchinson's supervision of the work carried out by the replacement builder. I considered it reasonable that a level of supervision be provided to a builder charged with the task of completing and rectifying the work of another builder.

154 The defendant did not dispute the quantum claimed in respect of Mr Hutchinson's fees and that amount is therefore allowed in the sum of $4,367.

155 The plaintiffs claimed $33,486.15 for legal fees paid for services provided to deal with disputes that arose during the currency of their contractual relationship with the defendant. The defendant resisted this claim, arguing that the plaintiffs failed to establish that the fees charged were reasonable and that they related to claims that were subsequently pursued by the plaintiffs.

156 I considered that defendant was required to do more than raise the issue of whether the fees were reasonable and that he was required to point to particular aspects of the fees claimed to be excessive.

157 However, on the material provided to support this claim, I was not in a position to determine the whether the fees were in fact paid for services that related to the disputes between the parties. Three tax invoicesxl of Moray & Agnew were in evidence. The invoices dated 30 August 2006 and 27 October 2006 made no reference to the defendant or any building dispute. The invoice dated 30 June 2007 was headed Building Dispute with Biruski but it contained no details of the legal services for which the fees were charged some 10 months after the contract and deed of variation were terminated.

158 In the circumstances, the claim for legal fees was not allowed.

Costs and expenses incurred as a consequence of the delay in completion of the works

159 The plaintiffs claimed interest payable to financiers, expenses of refinancing their loan arrangements, the penalty paid for early discharge of their loan arrangements and legal fees.

160 The certificate of occupancyxli of the townhouses was issued on 5 December 2006. The Railway Street townhouse was sold on 12 August 2008 and the Margaret Street townhouse was sold on 3 April 2009. Interest and borrowing expenses were claimed to 28 June 2008.

161 This part of the plaintiffs' claim raised the issues of whether they were limited to liquidated damages as compensation for the delays in completion of the works and the date to which their claim could properly extend.

162 The contract provided for the payment of liquidated damages at the rate of $200 per day, $1,400 per week and $5,617 per calendar month. The plaintiffs responded in two ways to the defendant's argument that they were limited to the recovery of these amounts.

163 They contended that liquidated damages were payable for the period between the date for practical completion and the date of final completion. In this case, the defendant never brought the works to practical completion and therefore no question of the calculation of liquidated damages arose. The second part of the plaintiffs' argument was that the contract and the deed of variation were terminated and therefore their provisions, including the provision relating to liquidated damages, no longer had effect so that damages were at large.

164 This was not a claim for damages for delay in bringing the works to practical completion. Rather it was a claim for damages for failure to complete the works. I did not accept that the defendant could call upon a provision of a contract that limited his liability when he did not fulfil the obligations imposed on him that entitled him to rely upon that limit.

165 I did not agree with the submissions provided on behalf of the defendant that this issue was decided by the High Court in Boucault Bay Co Ltd (in liquidation) v The Commonwealthxlii. In that case it was argued that forfeiture on termination of the contract of the security held by the Commonwealth would constitute a penalty. It was not argued in the current case that the liquidated damages provision constituted a penalty.

166 Piggot Foundations Ltd v Shephard Construction Ltdxliii was also distinguishable because the subcontractor in that case did in fact complete the works and there was no indication that the subcontract was terminated.

167 I was satisfied that the liquidated damages clause did not apply to the determination of the plaintiffs' claim for damages.

168 As to the date to which the defendant's liability for damages extended, the defendant's liability under the contract was to bring the works to practical completion, that is, to a stage where, subject to rectification of defects, the townhouses were reasonably fit for occupation. Under the deed of variation the defendant's obligation was to complete the works.

169 The certificate of occupancy dated 5 December 2006 suggested that this was the date upon which practical completion of the works was reached. The listing of the properties for sale in February 2007 suggested that this was the point at which the works were completed. I therefore find that the defendant was liable to the plaintiffs for the damages as a result of the delay at least until 31 January 2007.

170 I was concerned about the validity of a claim beyond this date.

171 The plaintiffs claimed that their intention had been to sell the townhouses upon completion of construction work and that they were unable to do so because of a downturn in the real estate market. They claimed costs and expenses incurred to 28 June 2008.

172 Both parties relied upon the principles established in Hadley v Baxendalexliv to support their arguments concerning the remoteness of the damages sought.

173 The plaintiffs argued that the defendant was a man of experience who knew, through the execution of the tri-partite agreement with Orix that the plaintiffs had secured development funding. They argued that he knew or ought to have known that two townhouses with a modern look were involved and that the plaintiffs intended to sell them to realise a capital gain.

174 I readily accepted that a builder in the defendant's position would appreciate that construction funding would be provided for a limited period in the expectation that on completion of the works some other form of financing, whether short or long term, might be involved. There was no direct evidence that the defendant was informed of the plaintiffs' intentions with regard to the townhouses and whether they were to be short or long term investments. I therefore did not accept that the defendant ought to have known that their immediate sale was intended when there were a number of options available to the plaintiffs.

175 I concluded that it could not reasonably be supposed to be in the contemplation of both parties that, if the contract was breached, the defendant would be exposed to ongoing holding charges beyond the date upon which the works were completed.

176 Should I be wrong in that conclusion, I was not in any event satisfied that the plaintiffs had made out the basis for such a claim.

177 It was not claimed that the delay in securing sales was the result of poor workmanship or the construction of townhouses to a standard lower than provided for in the contract. The first plaintiff's evidence was that they were listed for sale in February 2007 and that they were sold in response to the only offers made for them after that date.

178 There was no evidence of the steps taken to secure sales of the townhouses, whether they were listed with recognised real estate agents or whether any particular form of marketing campaign was implemented.

179 I allowed the claim for interest and financing expenses to 31 January 2007, the date upon which I considered the works were completed.

180 The proceedings will be adjourned to a date to be fixed to allow this part of the claim to be recalculated.

181 The Railway Street townhouse was sold in August 2008 for the sum of $510,000. The plaintiffs' expert valuer, Mr Cesta, valued this townhouse at $575,000 on 2 September 2005, $540,000 on 29 September 2006 and $535,000 on 25 February 2007. The plaintiffs claimed their loss on the Railway Street townhouse was $65,000.

182 The Margaret Street townhouse was sold in April 2009 for $472,000. Mr Cesta valued this townhouse at $555,000 on 2 September 2005, $525,000 on 29 September 2006 and $515,000 on 25 February 2007. The plaintiffs claimed their loss on the Margaret Street townhouse was $83,000.

183 Mr Cesta's valuation was undertaken by adopting the recognised method of considering the data provided by comparable sales at the relevant dates.

184 Mr Cesta in cross examination agreed that he found no sale that was directly comparable and that, to that extent, his data was limited. It was put to him that he did not take into account a number of considerations that might affect the value of the townhouses and that he worked only from sales figures. He pointed out that the considerations referred to were ultimately reflected in sales figures and that he was therefore confident that the data from which he worked was sufficient.

185 The valuation expert relied upon by the defendant, Mr Craine, did not criticise the method adopted by Mr Cesta. He took a different approach because, he said, having been unable to gain access to the interior of either townhouse he was unable to provide an opinion concerning their value.

186 Mr Craine investigated market trends. Although he statedxlv that he considered trends between 2 September 2005 and 25 February 2007, he concludedxlvi that property values increased between 2003 and 2007.

187 He considered sales in the years 2003, 2004, 2005, 2006, 2007, 2008 and 2009 to reach the conclusion that property values increased in the Merewether area between September 2005 and February 2007. He asserted that it was necessary to investigate sales outside the 2005 - 2007 in order to identify a trend.

188 Mr Craine agreed that his report did not identify differences or similarities between the townhouses and the properties to which he referred. He agreed that without this information his task was more difficult.

189 Mr Cesta was critical of Mr Craine's approach. In addition to the inclusion of comparable sales taken outside the applicable time frame, Mr Cesta did not accept that it was not possible to value the townhouses without inspection of their interiors. He said floor plans were available that gave some indication of their layouts. He also pointed out that Mr Craine relied on information provided by the Valuer-General that reflected the value of vacant land without regard to the specific characteristics of the parcels involved.

190 I regarded theses criticisms as valid and as a result I did not find the information provided by Mr Craine to be of assistance in determining the question of whether the value of the townhouses declined after September 2005 or September 2006.

191 Mr Cesta's valuations were undertaken in accordance with a recognised method of valuation and, although no directly comparable sale was available, they contained a thorough analysis of sales within the relevant market during the relevant periods. In the circumstances, I accepted his opinion of the decline in value of the townhouses.

192 This left for consideration the question of whether this head of damage was available to the plaintiffs. Their claims against the defendant were brought in contract and in tort. In order to qualify for damages of this kind for breach of contract the plaintiffs were required to establish that the claim fell within the principles established in Hadley v Baxendale. Their claim in tort was required to meet the principles contained in ss 5B-5E of the Civil Liability Act 2002.

193 The relevant principle was stated in Hadley v Baxendale in the following terms: Where two parties have made a contract which one of them has broken, the damages the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered arising naturally, that is, according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus know to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated.

But, on the other hand, if the special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. xlvii

194 These principles continue to govern the determination of the extent to which losses, alleged to have been the result of a breach of contract, can be recovered.

195 Many of the authorities to which I referred in considering this issue quoted the following the amplification of the rule in Hadley v Baxendale provided by Lord Reid in Koufos v Czarnikow Ltdxlviii I am satisfied that the court did not intend that every type of damage which was reasonably foreseeable by the parties when the contract was made should either be considered as arising naturally, ie, in the usual course of things, or be supposed to have been in the contemplation of the parties. Indeed the decision makes it clear that a type of damage which was plainly foreseeable as a real possibility but which would only occur in a small minority of cases cannot be regarded as arising in the usual course of things or be supposed to have been in the contemplation of the parties: the parties are not supposed to contemplate as grounds for the recovery of damage any type of loss or damage which on the knowledge available to the defendant would appear to him as only likely to occur in a small minority of cases.

196 The decline in value of an asset, particularly real property, during a period of delay resulting from a breach by a defendant has been considered in many prior decisions. It was clear from my reading of them that while they depended upon their own facts the universal consideration was the question of the extent to which the defendant, at the time the contract was entered into, was aware of the intentions of the plaintiff concerning the use and disposition of the property.

197 In decisions such as Day v O'Learyxlix, Cadoks Pty Ltd v Wallace Westley & Vigar Pty Ltdl and Garraway Metal Pty Ltd v Comalco Aluminium Ltdli the plaintiffs each failed to establish that they communicated those intentions to the defendants.

198 In this case, the plaintiffs purchased the land upon which the townhouses were constructed in September 2002. The first plaintiff stated that he provided the drawings for the townhouses to the defendant in March 2004. The contract for their construction was signed in March 2005. In no part of his evidence did the first plaintiff suggest that he communicated to the defendant his intention to sell the townhouses immediately upon the issue of the certificates of occupancy.

199 As to what was in the contemplation of the parties at the time the contract was entered into, the liquidated damages clause provided an indicator of the plaintiffs' estimate of the losses likely to be suffered in the event of delay in the execution of the works. The figures provided dealt with losses on a daily, weekly or monthly basis, suggesting that they were intended to compensate for interest payable on construction finance or loss of rental. They gave no indication that the plaintiffs intended the immediate sale of the townhouses and that capital losses would be suffered if the property market went into decline.

200 I was therefore not persuaded that the plaintiffs could recover on this head of damage for the breach by the defendant of the contract or the deed of variation.

201 The same problems faced the plaintiffs in dealing with their claim in tort. Notwithstanding the submissions of the defendant, I was satisfied that the defendant owed the plaintiffs a duty of care to undertake the works with due diligence and that his gross delay in completing the works amounted to a breach of that duty of care.

202 The question then was whether the breach of the duty of care was causative of the losses claimed by the plaintiffs as a result of the decline in the market value of the townhouses. In this respect, the following provisions of the Civil Liability Act 2002 apply: 5D General principles (1) A determination that negligence caused particular harm comprises the following elements: (a) that the negligence was a necessary condition of the occurrence of the harm ( factual causation ), and (b) that it is appropriate for the scope of the negligent person's liability to extend to the harm so caused ( scope of liability ). (2) In determining in an exceptional case, in accordance with established principles, whether negligence that cannot be established as a necessary condition of the occurrence of harm should be accepted as establishing factual causation, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party. (3) If it is relevant to the determination of factual causation to determine what the person who suffered harm would have done if the negligent person had not been negligent: (a) the matter is to be determined subjectively in the light of all relevant circumstances, subject to paragraph (b), and (b) any statement made by the person after suffering the harm about what he or she would have done is inadmissible except to the extent (if any) that the statement is against his or her interest. (4) For the purpose of determining the scope of liability, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party. 5E Onus of proof In determining liability for negligence, the plaintiff always bears the onus of proving, on the balance of probabilities, any fact relevant to the issue of causation.

203 In Cadoks Justice Ashley noted that the extent to which the plaintiff's intention was known to the defendant, in assessing damages in tort, was to be assessed at the date that the breach of duty occurred. In that case, Ashley J was satisfied that at that point in time the defendant was specifically on notice of the plaintiff's intention to sell land and that it could be inferred that he knew that the sale was to proceed in the near future to take advantage of land prices that were unsustainable. The result was that, if settlement of the purchase of the land by the plaintiff was delayed, the very obvious consequence would be that the plaintiff would be deprived of the opportunity to sell in a favourable market.

204 As already noted, in this case there was no evidence of what was communicated to the defendant concerning plaintiffs' long or short term intentions with regard to their investment in the townhouses. Although the volatility of the real estate market could be considered to be a matter of common knowledge, there was no evidence that it was generally known that the market was in decline in the Merewether area between 2005 and 2006 or that this decline was drawn to the defendant's attention.

205 These considerations, taken into account with the absence of evidence that the plaintiffs communicated their intentions with regard to the sale of the townhouses to the defendant, lead me to conclude that it was not established that it was appropriate for the scope of the defendant's liability to extend to the decline in the values of the townhouses during the period of delay in completion of the works.

206 The defendant did not pursue in evidence or submissions that part of his defence alleging collateral agreement, waiver and estoppel. I have therefore not considered them further.

207 The defendant cross claimed against the plaintiffs for one variation to the works, claimed in the sum of $11,660, the retention sum of $5,000, costs amounting to $9,300 for delays allegedly caused by the plaintiffs and the balance of the contract sum of $64,772.

208 The variation claimed in the cross claim related to the change to Riverstone Ash pavers. The sum claimed appeared to have been taken from a documentlii prepared by the plaintiffs in response to the defendant's claimliii for $8,860 for this extra work. The cross claim overlooked the requirement to deduct from $11,660 the sum quoted for laying the originally specified tiles. The variation assessed by the plaintiffs on this basis was $2,260.

209 In the absence of evidence to indicate that a reasonable figure for this extra work was more than the sum assessed by the plaintiffs, I assessed this part of the defendant's claim at $2,260.

210 The cross claim sought compensation for delays amounting to 31 weeks for failure to provide instructions, lack of specifications and inaccuracies in plans, changes to the plans and materials and requested variations. No claim for delay costs occasioned by inclement weather was pleaded in the cross claim. In respect of the balance of the alleged delays, the defendant was able only to provide submissions concerning delays totalling about 14 days. I have already dealt with these claims and rejected them.

211 This was not an arbitration proceeding where an arbitrator qualified in the appropriate field might be in a position to assess a fair and reasonable amount for delays when the defendant was not able to deal adequately with their quantification. Nor did the defendant request or suggest that I should embark on such an exercise. I was able to deal only with the evidence placed before me and this evidence did not provide a basis upon which any award of damages might be allowed in respect of the claimed delays.

212 The retention fund must necessarily be included in the balance of the contract sum.

213 Although it appeared that the defendant was paid for the cost of laying the Riverstone Ash pavers, the amount assessed as the extra cost to him of doing so must be added to the contract sum of $616,400, making a total payable under the contract, had it been fully performed, of $618,660, inclusive of the retention fund.

214 Of this sum the defendant has been paid $551,628, leaving a balance of $67,032.

215 He did not complete the works and the cost of completion must be set off against this amount.

216 Each party claimed the right to the sum of $5,000 held in the trust account of Moray & Agnew as a retention fund to be applied to the rectification of defects.

217 This amount was deducted from the first progress payment made to the defendant after the parties entered into the deed of variation.

218 I concluded that the fund must be dealt with as part of the contract price and that I could not make orders concerning its release until the quantum of damages due to the plaintiffs has been calculated. At that point it will be possible to determine whether any amount remains outstanding under the contract and payable to the defendant.

219 The proceedings are adjourned to a date to be fixed to allow for calculation of the damages to be paid to the plaintiffs, and to deal with issues of costs and interest.

i Exhibit 2, affidavit 1st plaintiff, 27.5.2009 ii Exhibit 4, affidavit 1st plaintiff, 27.5.2009 iii Exhibit 26, affidavit of 1st plaintiff, 27.5.2009 iv Exhibit 37, affidavit of 1st plaintiff, 27.5.2009 v Exhibit B vi Affidavit 10 September 2010 vii Building Contract, clause 6(c) viii Exhibit VB1 to defendant's affidavit 18.11.09, p 194 ix Clause 11 x Defendant's affidavit 18.11.09 [122] xi Exhibit 11, affidavit of 1st plaintiff, 27.5.2009 xii at [20] - [23] xiii Exhibit JPB-61, affidavit of 1st plaintiff, 10.9.2010 xiv Exhibit JPB-62, affidavit of 1st plaintiff, 10.9.2010 xv Defendant's affidavit 18.11.09, p 73, 75 and 78 xvi Defendant's affidavit 18.11.09, p 78 xvii Defendant's affidavit 18.11.09, p 149 xviii Exhibit 270, affidavit of 1st plaintiff, 27.5.2009 xix Plaintiff's tender bundle 2, item 12 xx Defendant's affidavit 18.11.09, p 213 xxi Exhibit 14, affidavit of 1st plaintiff, 27.5.2009 xxii Exhibit 20, affidavit of 1st plaintiff, 27.5.2009 xxiii Defendant's affidavit 18.11.09, p 269 xxiv Defendant's affidavit 18.11.09, ps 215 and 216 xxv Part Exhibit 19, affidavit of 1st plaintiff, 27.5.2009 xxvi Exhibit 19, affidavit of 1st plaintiff, 27.5.2009 xxvii Exhibit 23, affidavit of 1st plaintiff, 27.5.2009 xxviii Exhibit 22, affidavit of 1st plaintiff, 27.5.2009 xxix Exhibit 27, affidavit of 1st plaintiff, 27.5.2009 xxx Defendant's affidavit 18.11.09, p 270 xxxi Exhibit 37, affidavit of 1st plaintiff, 27.5.2009 xxxii [2006] NSWCA 259 (19 September 2006) at [58] xxxiii Exhibit 35, affidavit of 1st plaintiff, 27.5.2009 xxxiv Exhibit 36, affidavit of 1st plaintiff, 27.5.2009 xxxv Defendant's affidavit 18.11.09, p 275 xxxvi Defendant's affidavit 18.11.09, p 261 xxxvii Defendant's affidavit 18.11.09, Ps 296-303 xxxviii Exhibit E xxxix Exhibits 43-49, affidavit of 1st plaintiff, 27.5.2009 xl Exhibit 63, affidavit of 1st plaintiff, 10.9.2010 xli Exhibit 58, affidavit of 1st plaintiff, 10.9.2010 xlii (1927) 40 CLR 98 xliii 67 BLR 48 xliv (1854) 9 Ex 341; 156 ER 145 xlv Affidavit of Philip Craine, 30.8.210, pp8 xlvi Affidavit of Philip Craine, 30.8.210, pp16 xlvii (1854) 9 Ex 341 at 354; 156 ER 145 at 151 xlviii [1969] 1 AC 350 at 385 xlix (1992) 57 SASR 206 l [2000] VSC 167 (10 May 2000) li 114 ALR 118 lii Defendant's affidavit 18.11.09, p 200 liii Defendant's affidavit 18.11.09, p 198

23/12/2010 - I make orders in accordance with the Consent Orders signed and dated 17 December 2010.Adding paragraph 1A to read: Verdict and judgement for the cross claimant on the cross claim.The exhibits will be retained for 28 days or until further order. - Paragraph(s) 219

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.