1 I have had the advantage of reading in draft the reasons for judgment of Tate JA. I agree with her Honour that the appeal should be allowed for the reasons she gives.

2 Paul Cardona and Lauren Brownscombe ('the owners') entered into a building contract ('the contract') with Rod and Wendy Brown ('the builders') for the construction of their new home on land they owned. The contract was in the form of a standard 'Plain English' contract for domestic new homes, the Victorian 'New Homes Contract'.[1] It was for the construction of 'the Building Works' comprising a brick veneer dwelling to be built in accordance with the specifications and plans ('the plans') prepared by building consultants.[2] The plans indicated that the dwelling included a master suite, a study, lounge, a family and meals area, two additional bedrooms, a verandah for outdoor living, a garage at the right hand side of the house and a covered area at the left hand side. The house and the garage were to be covered by the one roof. The contract price (including the garage) was $245,245.00.

3 The owners and the builders agreed that the method of payment they would use was a series of progress payments in accordance with five separate stages: these being the base stage; frame stage; lock-up stage; fixing stage; and completion. These stages reflected those defined under the Domestic Building Contracts Act 1995 (Vic) ('the Act').

4 The builders made a claim for payment for the frame stage. The claim was

paid but later disputed. The builders made a later claim for payment for the lock-up stage. The owners refused to pay on two grounds: (1) the builders were not entitled to a payment for the lock-up stage when the frame stage had not been completed; and (2) in any event, the home had not yet reached the completion of the lock-up stage. The builders suspended works. The owners treated the builders' suspension of the works as a repudiation of the contract. They accepted the repudiation and brought the contract to an end.

5 The builders applied to the Victorian Civil and Administrative Tribunal ('VCAT') for damages and interest. VCAT upheld their claim.[3] In doing so, Deputy President Macnamara determined that a builder whose works satisfy the statutory definition of 'lock-up stage' is entitled to demand and recover payment for that stage without necessarily having first completed the 'frame stage'.[4] Demands for progress payments were not a matter of 'simple numerical progression'.[5] He also held that, in the circumstances, the lock-up stage had been completed.[6] The owners appealed to the trial division of the Supreme Court where their appeal was dismissed by Pagone J.[7] The owners now appeal to this Court.

6 There are two principal questions of law raised by this appeal:

(1) 'Does the entitlement of a builder to claim a progress payment for the completion of the 'lock-up stage' of a home depend upon the builder having first completed the 'frame stage' for that home, within the meaning of s 40(1) of the Act?';[8]

(2) 'In the circumstances, was it open for Pagone J to find that, in the circumstances, lock-up had been completed?'

7 In my opinion, question (1) should be answered 'yes' and question (2)

8 There were other consequential issues arising on the appeal relating to the builders' entitlement to suspend the works and the related question of which party repudiated the contract. The owners also argued that, even if the builders were entitled to suspend the works, they had done so prematurely in contravention of time limits imposed by the contract. I will deal with each of those issues in turn.

9 The contract utilised the definitions of the five stages of construction, as well as the percentage payments of the contract price due for each respective stage of the construction of a home, as set out in s 40(1) of the Act. Under s 40(4) of the Act the parties are permitted to contract out of the sequence provided for under the Act and modify the standard stages. They chose not to do so here.

10 Section 3 of the Act defined 'home' relevantly to mean 'any residential premises and includes any part of a commercial or industrial premises that is used as a residential premises'.

11 The definitions of the five stages of construction under s 40(1) are as follows:

(a) in the case of a home with a timber floor, the stage when the concrete footings for the floor are poured and the base brickwork is built to floor level;

(b) in the case of a home with a timber floor with no base brickwork, the stage when the stumps, piers or columns are completed;

(c) in the case of a home with a suspended concrete slab floor, the stage when the concrete floorings are poured;

(d) in the case of a home with a concrete floor, the stage when the floor is completed;

(e) in the case of a home for which the exterior walls and roof are constructed before the floor is constructed, the stage when the concrete footings are poured;

frame stage means the stage when a home's frame is completed and approved by a building surveyor;

lock-up stage means the stage when a home's external wall cladding and roof covering is fixed, the flooring is laid and external doors and external windows are fixed (even if those doors or windows are only temporary);

fixing stage means the stage when all internal cladding, architraves, skirting, doors, built-in shelves, baths, basins, troughs, sinks, cabinets and cupboards of a home are fitted and fixed in position.

12 Section 40(2) of the Act prohibits a builder from demanding more than the percentage of the contract price prescribed respectively for the completion of each of the five stages. It reads, relevantly:

A builder must not demand or recover or retain under a major domestic building contract[9] of a type listed in column 1 of the Table more than the percentage of the contract price listed in column 2 at the completion of a stage referred to in column 3.

--------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------

13 Schedule 3 to the contract adopted the percentages provided for under s 40(2) for a contract to build all stages. In determining the sums to be paid at each stage, the parties adopted Method 1 (the stages provided for under the Act) and not Method 2 (stages defined and agreed between the parties).

14 The 'Building Period', the time for completion of the home, was 300 days including an estimate of 30 days for delays due to inclement weather and 70 days for weekends, public holidays, rostered days off and other foreseeable breaks in the continuity of the work.[10]

15 The contract recognised the role of 'Lending Bodies'. A 'Lending Body' is defined[11] as 'a person or corporation which has agreed or agrees to make a loan to the Owner to enable the Owner to pay monies which become payable to the Builder under this Contract'. Clause 28 provided:

The Owner must notify the Builder in writing if and when the Lending Body will want to inspect the Building Works before making a Progress Payment. The Builder must do everything reasonable to assist the Lending Body to inspect the Building Works. This includes sending a notice that a stage has been completed to the Lending Body at the same time as one is sent to the Owner.

16 Under the contract the lending body was the Commonwealth Bank of Australia.

17 Clause 29 of the contract regulated the builders' capacity to make demands for progress payments:

The Builder must give the Owner a written claim for each Progress Payment when each stage has been completed, as set out in Schedule 3. The claim must set out each of the following:

• the amount paid or to be paid for the stage or stages completed to date;

• the amount paid or to be paid for, and details of, any variations made and other amounts paid or to be paid by the Owner under this Contract;

• payments that have already been made by the Owner; and

• the total claimed, taking into account the payments already made.

18 Clause 30 required payment of progress payment claims:

30.0 The Owner must pay the amount of a Progress Payment set out in Schedule 3 within the number of Days set out in Item 7 of Schedule 1 after both:

• the Owner has received a written claim for the Progress Payment.

30.1 If the Owner is getting finance from a Lending Body, the Owner must give the Lending Body an authority, while this Contract lasts, to make payment direct to the Builder of any amount the Owner agrees has become due under this Contract. The Owner must notify the Lending Body when each stage is completed and the payment is due.

19 The number of days set out in Item 7 of Schedule 1 was 14 days.

20 The suspension of building works was governed by cl 35 of the contract:

35.0 The Builder may suspend the Building Works if the Owner:

• does not make a Progress Payment that is due within 7 Days after it becomes due; or

35.1 If the Builder suspends the Building Works, the Builder must immediately give notice in writing by registered post to the Owner. The Owner must remedy the breach within 7 Days after receiving the notice. The Builder must recommence the Building Works within 21 Days after the Owner remedies the breach and gives notice of this to the Builder.

35.2 The date on which the Building Works are to be completed is changed and extended to cover the period of suspension.

21 The significance of cl 35 was underscored by the rights conferred on the owners to terminate the contract under cl 43:

43.0 If the Builder breaches (including repudiates) this Contract, nothing in this Clause prejudices the right of the Owner to recover damages or exercise any other right or remedy.

43.1 The Builder is in substantial breach of this Contract if the Builder:

• suspends the carrying out of the Building Works, otherwise than in accordance with Clause 35;

• has the Builder's licence cancelled or suspended; or

• is otherwise in substantial breach of this Contract.

43.2 If the Builder is in substantial breach of this Contract the Owner may give the Builder a written notice to remedy the breach:

• requiring the substantial breach to be remedied within 10 Days after the notice is received by the Builder; and

• stating that if the substantial breach is not remedied as required, the Owner intends to end this Contract.

43.3 If the Builder does not remedy the substantial breach stated in the notice to remedy the breach within 10 Days of receiving that notice, the Owner may end this Contract by giving a further written notice to that effect.

43.4 The Owner is not entitled to end this Contract under this Clause when the Owner is in substantial breach of this Contract.

22 The owners and the builders executed the contract on 8 March 2006. Mr Roger W Kidd, a private building surveyor, issued a building permit for the project dated 19 April 2006. Building work commenced in September 2006. The foundations were poured. By late November 2006 the foundation work, base brickwork and wall frames had been erected. On 6 November the builders delivered to the owners a progress claim certificate for the 'base stage' of the work. The Commonwealth Bank paid the claim on 16 November 2006.

23 The roof trusses were delivered on site by their manufacturer, Capeview Building Products ('Capeview'). The roof trusses formed part of the work of the frame stage. The owners were concerned with the quality of the timber used in the trusses and the number and size of the knots in the truss timber.

24 The builders requested an inspection by the building surveyor for approval of the frame stage. Approval by a building surveyor was necessary under the definition of 'framing stage' in s 40(1) of the Act, as adopted in the contract, before a demand could be made for a progress payment for the completion of the framing stage. The builders issued a progress claim certificate dated 4 December 2006 claiming $36,786.75 for the framing stage. The owners placed an endorsement on a copy of the claim certificate, 'happy with work completed', and forwarded this to the Commonwealth Bank, which advanced the amount of the claim as a payment direct to the builders under the owners' building loan. It is not in dispute that at the time the payment was made there had been no approval by a building surveyor of the home's frame. As Macnamara DP found,[12] the claim for the frame stage by the builder on 4 December 2006 was premature.

25 One of Mr Kidd's assistants, Mr Kevin Flett, inspected the frame on or about 14 December 2006. Mr Flett is not a qualified building surveyor but is a qualified engineer. He purported to give some sort of unwritten approval for the frame stage. On 18 December Ms Brownscombe visited the site and said she told Mr Brown that the trusses needed to be replaced.

26 Mr Kidd carried out an inspection in person on 17 January 2007.

27 On or about 23 January 2007 an on-site meeting was held to discuss whether the trusses needed to be removed and replaced. Mr Ashton, the State Engineering Manager of the company that designed the computer program for the manufacture of the trusses, Mitek Australia Limited, wrote in his report dated 31 January 2007:

Trusses GT2 and GT3 were held down with tie-down strap fixed to the side of studs. The original design called for 2 cyclone ties wrapped under the top plate. Additional hold down will be required.

It is observed that speed brace was not wrapped under the top plate in accordance with AS4440-2004. It is recommended that blocking be added in accordance with the End Fixing at Heel to Top Plate (alternative detail) in AS4440-2004.

28 On the basis of the report from Mitek, and without conducting a further inspection, Mr Kidd wrote on 12 February 2007 that:

Your builder has all reports and recently advised me that he had carefully read all reports and made all adjustments to the said areas of concern to satisfy the building regulations.

I now wish to advise that the overall frame for this project is approved.

29 The builders served a progress claim certificate dated 13 February 2007 for the lock-up stage for the sum of $85,835.75. The owners received the demand on 14 February 2007.

30 Mr Kidd carried out a further inspection of the site in person on 13 March 2007. His evidence before VCAT was that this revealed that all adjustments had been made to the roof trusses in accordance with the recommendation in the Mitek report. At the hearing of the appeal before this Court both the builders and the owners described the date of 13 March 2007 as the date the 'final approval' of the frame stage was given. By this date, however, the builders had suspended works.

31 On 23 February the owners inspected the site which they followed up with a letter to the builders dated 24 February 2007, headed 'lock-up stage payment'. They identified their concerns as follows:

3. Missing dividing wall frame [between lounge and family area].

We are writing to inform you that upon inspection of the building we have concluded that your request for payment has been sent through to us prematurely based on your failure to complete these tasks as per the contract specification. There are a number of issues that we have identified which need to be rectified before you submit another request for the lock-up stage progressive payment, which is then to be dated from the time that they have been completed.

32 The deficiencies identified included mention of the roof trusses:

Although you were notified of our dissatisfaction with the trusses prior to erecting the remaining trusses (only having erected five trusses at the time) you continued to install a product that we were and continue to be unhappy with.

...

We require that upon completion of these corrections we be advised, at which time we will again inspect the quality of the workmanship. If the quality of workmanship is that of a professional builder you can then submit your Progressive Payment account and accordingly we will instruct the bank to make the payment. We wish to reinforce to you that it is our $245,000 that is being spent on this home and we are the people who need to be satisfied.

33 The builders replied by letter dated 5 March 2007 seeking to address each of the issues raised. The letter also stated that none of the items referred to 'relate to the Progress Payment Schedule 3, Lock-up stage, page 10 of New Homes Contract' and therefore payment was due and payable. The builders enclosed a Notice of Suspension of Works dated 6 March 2007 stating that the grounds for suspension were that the owners 'had not made [the] progress payment of $85,835.75 [that] was due on 27 February 2007'.

34 The builders and owners each engaged solicitors.

35 The builders' solicitors corresponded with the owners' solicitors by letter dated 5 April 2007 asserting that the progress payment claim for the lock-up stage was validly made and not yet paid and was incurring interest from 28 February 2007. The letter concluded:

Needless to say that no further work will be carried out until this matter is resolved but my client remains willing and able to complete the Contract upon the remedy of the breaches set out herein.

36 The owners' solicitors responded by letter dated 26 April 2007 emphasising the need to repair the window frames and replace the door frame to the garage door with one that accorded with the specifications. The letter quoted the definition of lock-up stage and asserted that lock-up stage had not been completed as the roller doors to the garage had not been installed. This was in accordance with the primary position of the owners that the garage was part of the home:

As yet the builder has not installed the two roller doors or the two 820mm doors to the garage. Until these doors are installed the home has not reached the lock-up stage and consequently the builder is not entitled under Clause 29.0 of the building contract to make a claim for the lock-up stage payment.

37 The letter also asserted that, in any event, the demand for the owners to pay by 27 February was invalid as the owners had until 28 February to pay; that is, within 14 days of the stage being completed and notice of the claim being received (14 February 2007).[13] The letter disputed the builders' right to suspend the works on 6 March 2007:

Even if the works had reached the lock-up stage, the Builder would still be in breach of the Building Contract as he has suspended the works when he was not entitled to do so.

...

Clause 35.0 entitled the builder to suspend the works if the Owners do not make a progress payment within seven days after it becomes due. Consequently, if the progress payment was due, the Builder would not have been entitled to suspend the works until 8 March 2008. The builder pursuant to the Notice of Suspension of Works suspended the works on 6 March 2007, two days prior to when he would have been entitled to do so had the lock-up stage been completed.

38 That is, on the assumption that the progress payment claim for the lock-up stage was valid (which was disputed), it would not have been due for payment until 28 February 2007[14] and, under cl 35 of the contract, the builders would have had no entitlement to suspend works until seven days had elapsed, namely, 8 March 2007. The purported suspension of works on 6 March was premature as contrary to the terms of cl 35.

39 The builders did not issue a further Notice of Suspension of Works after being informed that the notice of 6 March was premature.

40 The letter of 26 April 2007 from the owners' solicitors continued:

Your client is in breach of the Building Contract by suspending the work. The Builder's claim against our clients cannot be justified. We suggest that the Builder should return to the site immediately and continue the works. Once lock-up stage has been completed and the required Progress Claim Certificate delivered to the Owners, they will then advise their lending body to make payment to the Builder as required by the Building Contract.

41 It was also asserted that the frame stage had not been completed; in particular, that the framing to support the timber decking on the covered area and the floor of both the front verandah and the rear deck areas had not been properly completed. A request was made that this work be completed before a further claim for a lock-up progress payment was made. The solicitors alleged that the claim for payment on the frame stage of 4 December 2006 was premature because at that stage there had been no approval given by a building surveyor.

42 The builders' solicitors responded on or about 11 May 2007, alleging that the builder was entitled to suspend works because the progress claim for lock-up stage was validly made and not paid by the owners. They denied that the garage was part of the home, and said that the fact that the doors to the garage had not been installed did not prevent completion of the lock-up stage. They reiterated that the builders remained ready willing and able to return to the site and to complete the works subject to the resolution of their outstanding demands.

43 The owners' solicitors replied that the owners would make the lock-up stage payment 'as soon as the dwelling is in fact at that stage'.

44 By letter dated 20 June 2007 the owners' solicitors alleged that the builders had repudiated the contract by: (1) requesting payment for the frame stage prematurely; (2) seeking payment for the lock-up stage prematurely; (3) wrongly suspending work; (4) refusing to return to the site and proceed with the works competently and diligently. The letter stated that the owners 'hereby accept your repudiation of the building contract' and that the builder's licence to attend the site was 'cancelled'.

45 On 3 July 2007 the builders filed an application at VCAT which commenced the proceeding.

46 Before VCAT the builders claimed damages and interest[15] and pleaded that by sending the letter of 24 February 2007 headed 'Lock-up payment' the owners breached the contract and evinced an intention to repudiate. The owners' letter of 20 June 2007 was asserted to be a further repudiation of the contract.

47 The owners' case was that the builder's claim for the frame stage progress payment made on 4 December 2006 was premature. They also argued that the demand for the lock-up stage on 14 February 2007 was premature because the frame stage had not by then been completed, by reason that the stud wall mentioned in their letter of 24 February 2007 (between the lounge and the family room) had not been completed; the bearers and floor joints to support timber decking on the covered area and deck to the family room had not been completed; and the rectification work to the trusses recommended by Mitek had not been inspected and approved by the building surveyor until 13 March 2007. Furthermore, the owners argued that the lock-up stage had not been completed because the roller doors had not been fitted to the garage. They claimed that the two premature requests for progress payments, the builders' suspension of the works, and their refusal to complete amounted to a repudiation of the contract which they accepted.

48 Capeview was joined as third respondent. On the first day of the hearing the matter was stood down for negotiations to occur, the result of which was an agreement between Capeview and the builders for Capeview to carry out the rectification work necessary to strengthen the trusses in accordance with the proposals of a consultant engineer.

49 As mentioned above, Macnamara DP took the view that the demand for the progress payment in respect of the frame stage on 4 December 2006 was premature. He found it unnecessary to determine whether the frame stage had been completed by the time the demand for the lock-up progress payment was made, on 14 February 2007,[16] because he considered that failure to attain frame stage does not necessarily entail failure to attain lock-up stage. He said:[17]

To take a practical example of the interaction of the various stages to completion referred to in Section 40 of the Domestic Building Contracts Act were a non-structural internal wall not framed up it is difficult to see how a structure could be regarded as having reached fixing stage because the 'internal cladding' in the form of the plaster boards to be attached to that wall would not have been fixed. They could not be fixed if the wall itself had not been framed up. [The owners'] submission however went beyond this sort of analysis. [They] saw the interaction between the various stages by analogy for instance to birthdays. A failure to attain one's 20th birthday necessarily entailed the conclusion that one had not attained one's 21st birthday. I reject that analysis. The stages have their own separate definitions which might or might not necessarily entail that one stage may not be attained until the completion of the previous stage. This is not a simple numerical progression.

50 Macnamara DP went on to say that whether lock-up stage had been completed was a matter that turned on the facts:[18]

Whether this structure has reached lock-up stage requires us to consider the words used in the definition in Section 40 of the Act. Clearly the external wall cladding and roof covering of a house could be fixed, its flooring laid and its external doors and windows fixed without for instance the construction of an internal non-structural wall or the construction of external bearers or external decking.

51 Macnamara DP accepted the builders' submission that the garage did not form part of the home, on the basis that a necessary pre-condition for the integration of a garage into a home would be the ability to access the home through the garage. That pre-condition did not exist in the present case. He rejected the view that lock-up stage could not be reached unless the home was secure:[19]

There is nothing in the definition of lock-up in the Act which requires a structure at lock-up stage to be impregnable nor on the face of it does an owner have any particular interest in having an impregnable structure at lock-up stage. The structure may and sometimes is used to store materials and prime cost items; but those materials and items are at that stage at the builders' risk not the owners' risk. The definition of lock-up stage appearing in the Act does not mention the concept of locking-up at all, hence there seems some plausibility in the view ... that a structure could have reached lock-up stage if secured by a door fixed not by a lock but merely by a bent nail.

52 He said further that lock-up stage may be reached even though someone could access the dwelling by unusual means:[20]

In ordinary speech an open air compound surrounded by say a 2.5m cyclone fence could quite properly be regarded as locked up if the gate to the compound was secured by a chain and padlock. It would not cease to be regarded as so locked because the compound might be capable of being accessed by someone climbing over the cyclone wire fence with the assistance of a ladder, by standing on a tall barrel or by scrambling up the face of the cyclone wire without any further assistance.

53 The Deputy President's reference to access being obtained through climbing over a fence was prompted by his rejection of the secondary way in which the owners put their claim that lock-up stage had not in fact been reached. The owners' secondary position was that, if the garage was not part of the home, the wall between the garage and the remainder of the house had to be treated as an external wall of the home. This wall had been completed only to ceiling level, and, in the absence of a ceiling, left the roof cavity exposed. The gable end of the wall was left open and was accessible from outside the home. Access to the roof cavity could be reached via a ladder and, once access was gained, this allowed access to the internal parts of the home.

54 By adopting the approach that lock-up stage did not require that the home was impregnable, nor did it require that all means of access be precluded, Macnamara DP rejected the owners' submission that the failure of the builders to have completed the wall between the garage and the remainder of the house had the effect that lock-up stage had not been completed. Rather, he found that 'this house had reached lock-up stage when the builder made his lock-up claim'.[21]

55 With respect to the date on which the builders suspended the works, he found that although the Notice of Suspension of Works was premature as contrary to the terms of cl 35, this was not a significant breach that would disentitle the builders from recovery:[22]

The scheme of the section (cl 35) is to give the builder an entitlement to suspend work if a progress payment is not made within seven days after it becomes due. The parties were agreed that subject to the issue as to whether lock-up stage had been attained or not the progress claim was payable on 28 February. Within seven days after it was due, unless payment was made by virtue of Clause 35.0 the builder was entitled to suspend work and was required forthwith to give notice by registered post to the owner. The effect seems to be that the builder suspended work one day prematurely or perhaps two days depending upon how one makes the calculation. [The builders] conceded that ... contrary to established principle, [they] failed to omit the first day of the relevant period from calculation. ... The result then is that the builder prematurely suspended work and prematurely served the notice. This would appear to constitute a breach of contract; but there is nothing in the language of Clause 35 that would have the consequence that if a builder wrongfully suspended work on day six he would be disabled from rightfully suspending work on day eight.

56 He concluded that the conceded breach of cl 35 was not material:[23]

Given that I have found that the builder was right in his view that lock-up stage had been attained and that he was entitled to payment of his lock-up stage claim and the owners were wrong in refusing to make that claim, it would be altogether artificial to say that since the builder was a day or two premature in his suspension the ultimate right which clearly accrued to him should be denied. At least in theory the owners might have a claim for damages for the premature suspension of work for say 24, 48 or 72 hours. There is no evidence which could assign any particular loss to that prematurity. In the circumstances I do not regard it as material.

57 Ultimately, Macnamara DP found that what caused the contract to break down was the owners' unjustified refusal to pay the claim for lock-up. The owners had repudiated the contract[24] and were liable to the builder for the lock-up claim, and interest at the contractual rate of 20 per cent per annum[25] until the termination of the contract (the date of the commencement of the proceeding before VCAT), and thereafter at the rate laid down in the Penalty Interest Rates Act 1983 (Vic). He also held the owners liable in damages for delay.

58 The owners appealed to the trial division of the Supreme Court.[26] Pagone J dismissed the appeal largely by adopting the reasoning of Macnamara DP. He noted the 'apparently sequential regime' provided for in the contract and the Act but held that the sequential progress of the construction did not entail that contractual claims to progress payments strictly had to reflect that sequence. He said:[27]

The scheme for progress payments under the building contract and the Act is intended to apply sequentially. It begins with an entitlement to make a claim for payment for the base stage and ends with the entitlement to make a claim for payment upon completion. Between these two stages the builder may make claims for progress payments upon completion of the frame stage, the lock-up stage and the fixing stage. Payments are contemplated to be progressive as each stage is completed, and each stage is identified in the sequential process from beginning to end of construction. That does not mean that the contractual entitlement to make a claim, and the corresponding contractual obligation to pay a claim, requires that an earlier stage in the sequence has first been completed, claimed for and paid. It may seem counter intuitive that a valid claim for lock-up can be made unless a valid claim has first been made for completion of the frame stage but (as the learned Deputy President correctly observed) the contractual entitlements have their separate definitions and should not be construed with an implied condition precedent which is not expressly stated.

59 He went on to say that a valid claim to a progress payment for lock-up stage depended only upon the satisfaction of the statutory criteria in the definition:[28]

Entitlement to make a claim for the lock-up stage progress payment depends upon whether the definition for payment of that stage has been satisfied and not whether some previous definition of a previous stage has been satisfied. As a matter of practical reality that will usually, if not always, mean that the frame stage will have been completed before a claim can validly be made for the lock-up stage, but an entitlement to make a claim for the lock-up stage will depend upon whether works have sufficiently progressed to satisfy the definition and not whether an earlier defined stage has been reached.

60 In considering whether the statutory criteria for lock-up stage had in fact been met in the circumstances of the case, Pagone J gave no consideration to the primary submission of the owners, namely, that the garage was part of the home and that it lacked external doors. He considered only the secondary position adopted by the owners, namely, that the wall between the master suite and garage had to be treated as an external wall and the area between its ceiling height and the roof line was left exposed. He noted that the plans did not provide for the roof cavity area to be sealed because eventually the wall between the master suite and garage would have a ceiling. He considered that achieving lock-up stage should not require a builder to do more than is required by the plans. He said:[29]

What the definition [of 'lock-up stage'] relevantly requires, however, is that the home's external wall cladding and roof covering be fixed. It does not require any greater security or completion. The fixing may perhaps be done by doors or windows which are only temporary but it does not require taking steps other than those required by the building plans. The relevant wall in this case constituting the external wall was that between the master suite and the garage. The plans did not contemplate any cladding above its ceiling height as found in the plans (and as constructed at the time the progress claim was made) to seal it off from what would ultimately be a continuous open cavity between home and garage. The fixing required by the definition was no more than required by the plans and in this case the plans were complied with at the time of the claim for the lock-up progress payment. I do not find error in this aspect of the learned Deputy President's reasoning or in his application of the construction of the definition of lock-up to the facts.

61 With respect to the suspension of the works, Pagone J noted that the builders accepted that an error had been made in the calculation of the time by which the lock-up stage progress claim would become payable. He considered, however, that it was unnecessary that there be strict compliance with cl 35:[30]

Clause 35 permitted the builder to suspend works if a progress payment was not made within 7 days after it became due or was in breach of the contract. Building contracts, like other commercial agreements, should be construed by reference to the commercial objectives to be achieved and a reasonable understanding of the parties. The condition upon which the builder was entitled to suspend works may not have been satisfied on 27 February 2007, but, for the purposes of this argument, was satisfied no later than two days later. The builders' entitlement thereby crystallised and there is no reason to deny the builders the entitlement which had then accrued. Clause 35.1 obliged the builder to give immediate notice by registered post to the owner giving the owner 7 days in which to remedy the breach. The purpose of this obligation is to put the owner on notice of the builder's position and to give the owner an opportunity to remedy a breach. In this case a notice was given (albeit one or two days too soon) and the owners plainly intended not to make a payment. No point was being taken by the owners at that stage that the notice was technically defective in the sense that it could only lawfully be given on either 28 February or 1 March 2007. The owners' position was quite different, namely, that the notice could not be given at all because no entitlement to pay had ever arisen because the progress payment claim for the lock-up stage had been premature.

62 Pagone J considered that the Notice of Suspension of Works, issued on 27 February 2007, satisfied the purpose for which cl 35 required that a notice be given: [31]

Clause 35.0 and 35.1 are not to be given a narrow or pedantic construction provided that what each is intended to achieve is satisfied on the facts of any case. Clause 35.0 is directed to enlivening a builder's ability to suspend works if a lawful entitlement to be paid is not received within the 7 days after it becomes due. That entitlement, on this part of the argument, was satisfied no later than 1 March 2007. Clause 35.1 is designed to give notice to the owner of the builder's position and to give the owner an opportunity to remedy any default. Its purpose was achieved in this case by the notice and the passage of time.

63 He determined that Macnamara DP was correct in concluding that the builders did not repudiate the contract as they remained ready, willing and able to complete the contract but that, eventually, the owners repudiated by their purported acceptance of what they erroneously asserted to be the builders' repudiation.

64 The owners relied on several grounds of appeal before this Court. The grounds asserted that Pagone J erred in three significant respects: (1) the finding that the entitlement of a builder to claim a progress payment for the completion of the 'lock-up stage' of a home does not depend upon the builder having first completed the 'frame stage' within the meaning of s 40(1) of the Act;[32] (2) the finding that, in the circumstances, lock-up stage had been completed, when it was not open to so find;[33] including Pagone J's failure to consider whether the garage was part of the home;[34] and (3) the construction of cl 35 of the contract which entitled the builders to suspend the works before the time provided elapsed,[35] resulting in the conclusion that the owners repudiated the contract.[36]

65 In resisting the appeal, the builders relied on the reasoning of Macnamara DP and, in turn, that of Pagone J.

66 It is convenient to consider the grounds of appeal in accordance with the order in which they were argued.

(1) Must the frame stage be completed before a builder is entitled to claim for the lock-up stage?

67 Pagone J was correct to observe that the scheme for progress payments under the contract and the Act is sequential. The Act and the contract acknowledge that the construction of a home will occur in stages and that a builder's entitlement to a percentage progress payment will be staged. This is made plain by Schedule 3 to the contract and by s 40(1) and s 40(2) of the Act. While the percentage entitlements prescribed in the Table under s 40(2) are not cumulative, the stages are set out in a progressive manner with the percentage entitlement increasing until lock-up stage is reached. (The fact that the completion of the lock-up stage brings with it an entitlement to the greatest percentage of the contract price also reflects the importance of reaching lock-up stage.)

68 There are multiple indicia in the Act and the contract that point to a builder's entitlement to make a claim for a progress payment being dependent upon a consecutive and incremental completion of each stage of construction. Collectively, those indicia confirm the proposition that it is the consecutive and incremental completion of the construction of the home which triggers the builders' staged entitlement to payment.

69 Clause 29 of the contract[37] not only requires that a builder give an owner a written claim for each progress payment when each stage has been completed 'as set out in Schedule 3', but also 'the amount paid or to be paid for the stage or stages completed to date'.[38] This not only suggests that the stages to be completed by a builder before a demand can be made for a progress payment are to mirror the progressive manner in which the stages are set out in Schedule 3, but also that when a demand is made, the builder will identify the earlier demands made for the preceding stages which have been completed. That is, one can infer that there is to be a successive undertaking of the building works. Most significantly, a written claim for a progress payment must also specify 'the total claimed, taking into account the payments already made'.[39] This suggests that each progress payment claim does not stand in isolation but is intended to take account of, in a cumulative fashion, the claims and payments already made. This requirement indicates that, while the particular percentage entitlements of the contract price prescribed in the Table under s 40(2) are not cumulative, a progress payment claim is to specify, in a cumulative way, the total amount demanded of the owner including the previous payments already made. This supports the proposition that the five stages of construction under the Act are not to be treated as labels with separate statutory criteria which can be satisfied independently of each other, as though one stage bore no relationship to another. Rather, they are triggers for a cumulative set of payments, each payment being expressed as a separate and fixed percentage of the contract price, but being made in a fashion which takes account of the payments already made, and thus the stages of construction which have already been completed. From this, the inference can be drawn that the regime of progress payments is more than sequential; the regime is to reflect the fact that the works are to progress consecutively through stages in the construction of a home.

70 Pagone J's reasons made no reference to the role of a 'Lending Body' under the contract nor to the entitlement a Lending Body has to receive a notice from the builder that a stage of construction has been completed. In accordance with cl 28,[40] a Lending Body is to receive a notice of the completion of a stage at the same time as the builder sends the notice to the owner. No doubt this is intended to facilitate the right the Lending Body has to inspect the building works before making a progress payment directly to the builder, in accordance with an authorisation from the owner to make such direct payments of any amount the owner agrees has become due.[41] The simultaneous receipt of the notice by the Lending Body confirms the importance of the requirements, under cl 29, that the notice specify 'the amount paid or to be paid for the stage or stages completed to date' and the 'total amounts claimed, taking into account the payments already made'.

71 The role that a Lending Body has under the contract underscores the need for predictability and certainty in the regime of progress payments to which a builder is entitled. It would be difficult to resist the inference that the expectation created in a Lending Body when it agrees to make a loan to the owner to pay monies that become payable under the contract is to make payments in accordance with the progressive completion of each stage as set out in Schedule 3. On this approach, the Lending Body here was aware that it must pay 10 per cent of the contract price on completion of the base stage, followed by a payment of 15 per cent on completion of the frame stage, an additional 35 per cent at the completion of Lock-up stage and a further 25 per cent at the completion of the fixing stage. The contract had a building period of 300 days, with a contract price of $245,245.00. It would thus have been possible for the Lending Body to make a reasonable calculation, in advance of construction, of roughly when each payment would be due, given its knowledge of the specifications and plans for the home. This would inform its calculation of the timing and quantum of the monies payable by it to the builders pursuant to the loan made to the owners. The ability to make an advance calculation depends upon a belief that the progress payments would become due in the order in which they are set out in Schedule 3. To permit a builder to make a progress claim for the completion of the lock-up stage in advance of the completion of the frame stage would disrupt the commercial expectations formed. With great respect to both Pagone J and to Macnamara DP, to accept a construction of s 40 of the Act which would permit that consequence would be to flout the commercial reality that the financing of the construction of new homes depends upon the predictability of the sequence of demands for payment.

72 This is not to say that the design of a home may not allow for the commencement of the construction of the lock-up stage before the completion of the frame stage. The point is, rather, that the progress payment regime provided for under s 40(2), if it is to provide the predictability, simplicity and practicality required to support commercial lending arrangements for domestic building contracts, is premised on an expectation that a progress payment claim for the completion of the lock-up stage will not occur before the frame stage has been completed. It remains the case that the parties are at liberty, if they so choose, to adopt a different method for payments to be made under the contract. If Method 1 is chosen, however, it stipulates the progressive sequence in which progress payments claims can be made.

73 In any event, in the circumstances of the case, there is considerable doubt as to whether the frame stage was completed when the demand was made for payment of the lock-up stage on 13 February 2007. The issuing of the progress claim certificate for the frame stage on 4 December 2006 was clearly premature, as the requirement under the definition of 'frame stage' for a home's frame to have been approved by a building surveyor was not met. At this time no verbal approval of any kind had been given, even by Mr Kidd's assistant (who was not in any case a qualified building surveyor). The later approval on 12 February 2007, while preceding by one day the progress claim certificate for the lock-up stage on 13 February 2007, was given by Mr Kidd in reliance upon what he had been told by the builders, and he gave it without conducting a further inspection since his earlier inspection of 17 January. Moreover, Mr Kidd gave his approval on 12 February 2007 in the knowledge that there had been deficiencies in the trusses that required rectification.

74 It is necessary for there to be 'effective and satisfactory completion of the required stage ... [as] a condition of any instalment payment'[42] and while trivial failures, or failures borne of impracticalities, do not preclude effective and satisfactory completion, it is noteworthy that the dispute in relation to the trusses was not resolved until the first day of the hearing before VCAT. That resolution involved work being done on the tresses to strengthen them in accordance with the recommendations of a consultant engineer. The 'final approval' was not given until Mr Kidd undertook a personal inspection on 13 March 2007.

75 The marred history of the progress payment claim for the frame stage does not permit any finding to be made with confidence that the frame stage had been completed by the time the progress payment claim was made for the lock-up stage on 14 February 2007. It is most likely that the frame stage had not been completed by 14 February 2007 either because there had not been effective and satisfactory completion of the home's frame (given the deficiencies in the roof trusses, a major structural component of the home) or because the approval given by the building surveyor on 13 February 2007 was deficient (as it was based on assurances from the builders of what they had read and what adjustments they had made and not upon a personal and independent inspection of the completion of the frame stage when, at least in the circumstances, this appeared necessary). Alternatively, the frame stage had not been completed by 14 February 2007 because the final approval was not given until 13 March 2007 which post-dated the claim for lock-up stage.

76 In any event, in my opinion, the claim for the lock-up stage fails; not only because on the date it was made the frame stage had not been completed, but also because at the time it was made the lock-up stage had not in fact been completed.

(2) Was it open for Pagone J to determine that lock-up stage had been completed?

77 The primary position of the owners, as mentioned above, was that the garage formed part of the home and the failure to install the roller doors, or other temporary doors, in the garage, left an open cavity from which the rest of the home could be accessed. Lock-up stage was not achieved because the external doors were not fixed as they needed to be to satisfy the statutory criteria under the definition of 'lock-up stage'.

78 In determining the question of whether the garage was part of the home, importance must be placed on the terms of the contract and, in particular, what the owners and builders were contracting for. As described at the outset of these reasons, the contract was for the builders to carry out 'the Building Works', comprising a 'brick veneer dwelling' to be built in accordance with the plans. As the dwelling was intended for residential use, it clearly met the definition of 'home' under s 3 of the Act, 'any residential premises'. The plans included 38 pages of specifications that were prepared and supplied by the builders and multiple sheets of plans and engineer's designs that were prepared by ADS Building Consultants. The plans of the dwelling included the construction of the garage. The contract price included the construction of the garage. The agreed staged payments were expressed as a percentage of the contract price. The price for the construction of the garage was not distinguished as a separate item from the construction of the house, nor did it have its own specific payment regime. On entering into the contract, what the parties were contracting for was the construction of a dwelling including the garage. The owners undertook the liability for progressive payments, expressed as a percentage of the contract price, measured against a staged progression in the construction of the dwelling. The 'dwelling' that was agreed between the parties to be constructed, the owners' new 'home', included the garage. This was not a matter of assessing how well integrated the garage was with the house, that is, whether the house was directly accessible from the garage without the need to walk onto the verandah, as Macnamara DP concluded. It was rather a matter of determining the scope of the works which was agreed between the builders and the owners.

79 It is unclear, on the approach adopted by Macnamara DP, when the builders would have an obligation to construct the garage. If the garage were not to be treated as part of the home, its construction would not form part of any of the five stages provided for under s 40(1) of the Act, as all of the five stages are defined by reference to the 'home'. In particular, on this approach, there would be no need for the builders to construct the garage at all to meet the definitions of 'frame stage' or 'lock-up stage'. Such a conclusion does not sit comfortably with the Act, the contract or the plans. The owners could thus incur a liability to pay all five progress payments, and 90 per cent of the contract price, without the garage having been commenced. This would run counter to a sensible commercial understanding of the contract, especially as the house and the garage were to be covered by one roof. On this approach, at best, the construction of the garage might be covered by the stage of general 'Completion' referred to in Schedule 3 to the contract, giving rise to an obligation to pay the final 10 per cent of the contract price, although it is more likely that this was intended to cover works to finalise the dwelling, not the construction of a different structure.

80 Section 5 of the Act lists the type of work to which the Act applies and, in doing so, makes mention of garages as well as driveways, workshops, and the like.[43] Section 5 provides:

(a) the erection or construction of a home, including -

(i) any associated work including, but not limited to, landscaping, paving and the erection or construction of any building or fixture associated with the home (such as retaining structures, driveways, fencing, garages, carports, workshops, swimming pools or spas); and

(ii) the provision of lighting, heating, ventilation, air conditioning, water supply, sewerage or drainage to the home or the property on which the home is, or is to be;

(b) the renovation, alteration, extension, improvement or repair of a home;

(c) any work such as landscaping, paving or the erection or construction of retaining structures, driveways, fencing, garages, workshops, swimming pools or spas that is to be carried out in conjunction with the renovation, alteration, extension, improvement or repair of a home;

(2) A reference to a home in subsection (1) includes a reference to any part of a home.

81 On one view, s 5 adopts a narrow construction of 'home' and treats garages, workshops, driveways and the like as work 'associated with the home' rather than part of the home itself. In particular, s 5(1)(a)(i) and s 5(1)(c) appear to distinguish between 'the home' and work associated with, or performed in conjunction with, the construction of the home. It may be that, in the context of s 5(1)(a)(i) and s 5(1)(c), the word 'home' has a narrow meaning, reflecting what might be better described as the 'house'. But this is because the purpose of s 5 is to ensure that not only the house, but also the associated work such as a garage, are treated as included within the erection and construction of the home to attract the application of the Act. Section 5 is intended to ensure that the rights and obligations of builders and owners created by the Act apply with respect to all parts of a home, including the construction of associated work such as garages. That is, the distinction made by s 5(1)(a)(i) and s 5(1)(c) is drawn for the purpose of ensuring that the Act applies not only to the house (or to the 'home' narrowly construed) but also to the associated work. In that context, the narrow meaning of 'home' is employed in s 5(1)(a) and s 5(1)(c) as an intermediate step in identifying how extensively the Act is to apply; it is employed to demonstrate that the Act applies beyond the 'home' narrowly understood.[44] The intention of the Act is to apply to 'the home', broadly construed as including associated work such as garages. This is supported by the wide statutory definition given by s 3 to 'home', namely, 'any residential premises'. The object of s 5(1)(a) is clearly to ensure that the erection or construction of a home is, for the purposes of the Act, to include associated work such as garages.

82 It is my opinion that here the garage formed part of the home. The failure of the builders to install either the roller doors specified in the plans, or temporary doors, left the home in a state where its external doors were not fixed. The dwelling did not satisfy the definition of 'lock-up stage' at the time the builders made their progress payment claim for completion of the lock-up stage on 13 February 2007.

83 Pagone J was in error in failing to consider whether the garage formed part of the home. Had he done so, he should have concluded that lock-up stage had not been reached when the demand was made for payment. In my view, it would not have been open for him to find that lock-up stage had been completed at the time the progress payment claim for lock-up stage was made.

84 Furthermore, the same result is reached even on the secondary position of the owners. If the garage did not form part of the home, it is necessary to regard the wall between the garage and the master suite as an external wall. On this approach, the garage as a structure is to be put wholly out of one's mind when determining whether the home's external wall cladding is fixed, as required by the definition. It was accepted by the builders that the cladding on this external wall had only been completed to ceiling height leaving the gabled roof cavity exposed. Putting to one side the question of whether lock-up stage carries an implication of security of access, a home where the external wall cladding is not fixed from the foundation to the roof does not satisfy the statutory definition.

85 Moreover, it is unlikely that the expression 'lock-up stage', as chosen by the Parliament under s 40, and as adopted by the parties to the contract, is no more than a label; the very expression conveys the achievement of some degree of security. Indeed, the reference in the definition of 'lock-up stage' to 'temporary doors or windows' suggests that there may be a need for interim works to be done for the purpose of ensuring that the home is completely enclosed. This suggests that some minor and temporary construction may indeed be required beyond the specifications in the plans. While the definition does not make reference to temporary external wall cladding, it remains the case that the cladding had to be fixed in some form over the entire wall between the master suite and the garage, from the foundation to the roof, before lock-up stage was completed.

86 In my opinion, on an analysis of the secondary position of the owners, it was not open for Pagone J to find that lock-up stage had been completed at the time the progress payment claim for lock-up stage was made.

(3) Were the builders entitled to suspend the works in the manner they did?

87 It follows from what has been said that the builders had no entitlement to a progress payment in respect of lock-up stage. Their suspension of the works, in response to the owners' refusal to pay for lock-up stage, was thus in breach of the contract. The owners were correct to accept the suspension of the works, in the circumstances, as a repudiation of the contract and were entitled at common law to bring the contract to an end.

88 However, if I am wrong in the conclusions I have expressed, it is necessary to consider the third issue raised by the owners, namely, that even if their refusal to pay the progress payment claim for the lock-up stage was unjustified, they were entitled to terminate the contract because the builders had acted in breach of cl 35 of the contract in two distinct respects, principally, by suspending the works before they were entitled to do so under cl 35.0 of the contract and, secondly, by issuing the Notice of Suspension of Works before they were entitled to do under cl 35.1 of the contract.

89 In accordance with cl 35.0, the builders' right to suspend the works depended upon a failure by the owners to make a progress payment that was due within seven days after it became due. The builders were required to give immediate notice to the owners of that suspension under cl 35.1. It was not in contest that the lock-up payment, even if justified, was not due for payment until 14 days after the progress payment claim was received, in accordance with Item 7 of Schedule 1 to the contract. As the progress payment claim was not received until 14 February 2007 this gave the owners until 28 February 2007 to make payment. The builders' right to suspend the works thus did not arise until 8 March, seven days having passed. Yet the builders prematurely suspended works on 6 March and issued the Notice of Suspension of Works on that date. The builders did not resume work after 6 March.

90 The approach adopted by both Macnamara DP and Pagone J was to acknowledge that the builders acted in breach of cl 35 but to treat the breach as trivial or immaterial, the consequence of which would not result in invalidity. In the absence of cl 43 of the contract, there may have been force in that conclusion. However, cl 43.1[45] stipulates two types of breach of contract that are to be treated as substantial breaches. Included amongst these is 'if the Builder ... suspends the carrying out of the Building Works, otherwise than in accordance with Clause 35'. The other substantial breach expressly provided for is if the builder has his licence cancelled or suspended. The suspension of building works is a significant step for a builder to take. A suspension carried out other than in conformity with cl 35 is treated by the contract as having the same level of seriousness as the cancellation or suspension of a builder's licence. In this instance, a suspension in response to a failure to make a progress payment without allowing seven days to elapse after payment is due is not in conformity with cl 35, and is therefore a substantial breach.

91 So too, cl 43.1 treats as significant the requirement to issue a Notice of Suspension of Works immediately. The notice has several important functions, one of which is to trigger the commencement of a time period of seven days during which the owner has an opportunity, and an obligation, to remedy the breach that prompted the suspension of the works. If remedied, the builder has another 21 days during which to recommence the works, and the duration of the building period is automatically extended by the number of days during which the works were suspended. Issuing a notice prematurely is not a mere technical deficiency. It reduces the period of time in which an owner has an opportunity to remedy a breach. The fact that here the owners never sought to remedy the alleged breach, because they denied (rightly, in my view) that the builders had reached lock-up stage, cannot compromise the rights conferred under the contract. The rights conferred under cl 35.1 upon an owner are important because a failure by an owner to remedy a breach in the required time could well be treated as a substantial breach, triggering the entitlement of a builder under cl 42 to bring the contract to an end, on notice.

92 At the hearing of the appeal, Senior Counsel for the owners emphasised that the builder did not issue a further Notice of Suspension of Works after being informed that the notice of 6 March was premature. In my view, a further notice would not have cured the relevant prematurity. The principal breach of contract relied on by the owners was the premature suspension of the works; that is, a suspension that was contrary to cl 35.0. A subsequent notice could not remedy the premature suspension of the works. The failure of a further notice may be relevant, however, if one adopted the analysis of Pagone J that the builders' right to suspend the works crystallised on 8 March. If the right to suspend did so crystallise, the builders had an obligation to give notice in writing to the owners immediately. This they did not do.

93 The significance of a builder acting inconsistently with cl 35 is confirmed by the terms of cl 43.2. Clause 43.2 permits an owner, in the event of a substantial breach, to give the builder a written notice to remedy the breach, specifying the substantial breach, requesting that the builder remedy the breach within ten days, and stating that if the breach is not remedied as required, the owner intends to end the contract. Clause 43.3 confers a right upon an owner to terminate the contract if the builder does not remedy the substantial breach identified in the notice within the allotted ten days.

94 Here, the owners' solicitors, by letter dated 26 April 2007, notified the builders that they were in breach of cl 35 by suspending the works before they were entitled to do so. The letter requested a remedy for the breach by proposing that the builders return to the site 'immediately and continue the works'. After completion of the lock-up stage, payment would then be made by the owners. The builders did not recommence the works.

95 However, the letter of 26 April 2007 did not conform to the requirements of cl 43.2 in that it did not give the builders ten days in which to recommence the works. Nor did the letter state that the owners intended to end the contract if the builders did not recommence the works within ten days. The tenor of the letter of 26 April 2007 was based on an assumption of a continuing contractual relationship in which various deficiencies in the construction of both the frame stage and the lock-up stage would need to be attended to.

96 The breaches relied upon, under this head of the argument, depended upon a failure by the builders to comply with time limits imposed under cl 35. Clause 43.1 makes it clear that a breach of those requirements is a substantial breach of the contract. However, reliance on such a substantial breach for the purpose of bringing the contract to an end under cl 43.3 requires an owner to comply with the requirements of 43.2. The owners did not so comply.

97 In any event, if the owners had been unjustified in refusing to pay the progress payment claim for the lock-up stage, they could not have relied upon cl 43 to terminate the contract on the basis that the builders had suspended the works otherwise than in accordance with cl 35 because their unjustified refusal would have placed them in substantial breach of the contract. Clause 43.4 precludes an owner from ending the contract under cl 43 when the owner is in substantial breach of the contract.

98 It follows that, on the assumption that the progress payment claim for the completion of the lock-up stage was valid, the owners were not justified in terminating the contract. As I have already found that the progress payment claim for the completion of the lock-up stage was not valid, this conclusion does not affect the finding that the owners were entitled to accept the builders' suspension of the works as a repudiation of the contract and, on this basis, to bring the contract to an end.

99 In my opinion, the builders were not entitled to a payment for the lock-up stage when the frame stage had not been completed. Furthermore, I consider that the lock-up stage was not completed at the time the builders made a progress payment claim for lock-up stage. The builders' suspension of the works, in response to the owners' refusal to pay for lock-up stage, was thus in breach of the contract. The owners were correct to accept the suspension of the works, in the circumstances, as a repudiation of the contract and were entitled to bring the contract to an end on 20 June 2007.

101 The owners have incurred completion costs for their home. These were incurred by the engagement of a new builder to carry out and complete the works. There will be a need for those actual costs incurred to be taken into account in determining any sum of money owing to the builders. The owners requested an opportunity to seek orders by consent with the builders. I consider that they should have that opportunity within a time-frame of 30 days. Failing the reaching

of consent orders, I propose that the proceeding be remitted to VCAT for the purpose of determining a reconciliation of the sums owing between the owners and the builders. Since Macnamara DP delivered his decision in this matter, he has been appointed a County Court Judge but remains eligible to hear matters at VCAT. I consider that, pursuant to s 148(8) of the VCAT Act, VCAT ought to be constituted by his Honour or such other member of VCAT as the President nominates, for the purpose of determining a reconciliation of the sums owing between the owners and the builders.

[1] Issued by the Housing Industry Association Limited.

[3] Brown v Cardona [2009] VCAT 910 (Unreported, Deputy President Macnamara, 26 May 2009) ('VCAT Reasons').

[7] Cardona v Brown [2010] VSC 368 ('Reasons').

[8] The terms of s 40(1) are set out in [11] below.

[9] The contract was a major domestic building contract because the contract price was worth more than $5000: see s 3 of the Act.

[13] In accordance with item 7 of Schedule 1 to the contract (see [19] above).

[15] As well as the cost of a variation for double glazing and additional work after lock-up.

[25] Item 8 of Schedule 1 to the contract.

[26] The appeal to the Supreme Court was brought pursuant to s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) ('the VCAT Act').

[33] Ground 2. (The owners clarified on the appeal that they were alleging that it was not open for Pagone J to find that lock-up had been completed.)

[36] Grounds 7 and 9. The remaining grounds (Grounds 1, 10, 11 and 12) were consequential upon the earlier grounds.

[37] See [17] above.

[38] The first bullet point under cl 29 (emphasis added).

[39] The last bullet point under cl 29 (emphasis added).

[40] See [15] above.

[42] Hudson's Building and Engineering Contracts (Sweet and Maxwell, 12th ed, 2010), para 3-076.

[43] See Winslow Constructions Pty Ltd v Mt Holden Estates Pty Ltd [2004] VSCA 159; (2004) 10 VR 435.

[44] In that context, the canon of statutory construction that the meaning of a word remains constant throughout an Act is displaced: Craig Williamson Pty Ltd v Barrowcliff [1915] VicLawRp 66; [1915] VLR 450, 452.

[45] The terms of cl 43.1, cl 43.2 and cl 43.3 are set out at [21] above.