1. Work commenced on 2 March 2009 and continued until 16 July 2009 when the Builder purported to suspend work. Thereafter correspondence ensued between the parties and their solicitors following which the Owners purported to terminate the Contract. They then had the work completed by another builder.
2. During the progress of the work, some of the requests by the Builder for information and delivery of materials were not met on time. In addition, the Owners claimed the right to select suppliers and sub-contractors and in some instances, entered into contracts directly with them. They purported to unilaterally remove some parts of the work from the scope of the Contract. There were also numerous variations. Mr Varasdi claimed that all of these factors caused considerable disruption to the course of the work and that is apparent from the evidence.
3. As the relationship between the parties became more strained there were more and more arguments between them. These were gone into extensively during the hearing and so I should deal with them but in most instances they have no wider significance. Matters finally came to a head when the Owners refused to provide further information or sign variations as requested by the Builder. The Builder then suspended work.

1. In this proceeding the Builder claimed damages of $97,430.00 together with interest and costs. The Owners, who represented themselves during the interlocutory stages, counterclaimed for "damages greater than $257,216.36 together with interest and costs".

1. The matter came before me for hearing on 22 November 2010 with 10 days allocated. Mr Squirrell of Counsel represented the Builder and Mr Fink of Counsel represented the Owners.
2. I heard evidence from Mr and Mrs Varasdi and from each of the Owners. In addition, expert evidence was given on behalf of the Builder by Mr Tony Croucher, a building expert, and on behalf of the Owners, by Mr Kosa, an architect and by Mr Pavey, a quantity surveyor. Due to the unavailability of Mr Pavey the hearing had to be adjourned. It was resumed on 14 December 2010 when the expert evidence was concluded.
3. I did not form an unfavourable view of any of the witnesses. I think they all attempted to give honest evidence although their views on many matters were diametrically opposed.

1. It is apparent that the Owners, as lay people, have little understanding of matters to do with building. They seem to have fundamentally misunderstood their role as owners, which is to allow the Builder to get on with the job. I think that is the likely explanation for their extraordinarily high level of interference with the work and lack of co-operation with the Builder. There were too many items left unselected at the time the Contract was entered into. Both sides are to blame for that. This required the Builder to ask the Owners to make many selections.
2. In addition, there were four pages annexed to the Contract which the Owners misinterpreted. I can understand that these four additional pages, which came from the architect's documentation, might have caused them, as lay people, to believe that they were entitled to interfere to the extent that they did but they had no such entitlement to interfere. For the reasons given below I prefer the interpretation of these four pages that was urged upon me by Mr Squirrell on behalf of the Builder.
3. As a consequence, I find that there was a high degree of unjustified interference by the Owners with the work and the scheduling of the work. The Owners became increasingly suspicious of the Builder and the relationship between them and Mr Varasdi became very strained indeed.
4. For a project that was long in the planning, it is remarkable that the Owners had not made decisions about many aspects of the job until the work was well under way. For example, they complained that they could not make a decision about the paint colours because the blue tarpaulins protecting the windows cast a blue light on the interior walls yet they could have decided on the colours before the work started.
5. Ultimately, the Owners refused to supply tiles of the correct dimensions for the Builder to lay and refused to vary the Contract to provide for the laying of the tiles that they had supplied, making it impossible for the work to proceed in that respect. When the Builder asked for further information in regard to the joinery, instead of both sides sitting down and sorting out exactly what was required, they argued as to whether any further information was necessary.
6. The Owners asked the Builder to quote on the supply of doors and said they would provide a photograph of what they wanted. Despite many requests they did not supply a photograph and no quotation was given. They nonetheless blamed the Builder for that, saying that Mr Varasdi should have known what a bi-fold door and a French door looked like and that it was unnecessary to provide a photograph. It is trite that there ar many variations of bi-fold and French doors.
7. I find that the Builder was justified in suspending the work and that the Owners were not entitled to terminate the Contract as they purported to do. I also find that by acting in the way they did the Owners repudiated the Contract and that the Builder accepted the repudiation and brought the Contract to an end.
8. The one issue upon which the Owners should succeed is in regard to the windows. It is clear from the Contractual documents that the windows to be supplied by the Builder, apart from the fixed sash windows, were to be double hung casement windows with weights and cords. They were to be made of cedar or kiln dried hardwood. That is a traditional window seen in most older houses in Melbourne but they are expensive and not made by the Builder's window supplier.
9. The Builder misrepresented to the Owners that the jamb-liner windows that it proposed to supply were as specified in the Contract. That was not so. They were a much cheaper substitute. Ultimately, double hung counterbalance casement windows were sourced by the Owners from Canterbury Windows and the Builder, quite wrongly, imposed the additional cost on the Owners. This is dealt with in more detail below.
10. The reasons for these findings follow.

1. These are four pages taken from the original tender document. The first ("Annexure 1") is headed "Schedule of Fittings" and commences with the words "The Builder shall allow for the receipt and installation of the following fittings and fixtures to be supplied by the Owners". There follows a list of appliances and fittings that the Owners were to supply and the Builder was to install. Quite obviously, the Builder would not be able to install them until such time as the Owners supplied them.
2. The second page ("Annexure 2") is entitled "Schedule of Monetary Items - Prime Cost Sums". Under the heading this page commences with the words:

"SUPPLY AND INSTALL ITEMS: The following items shall be allowed in the Builder's price for the items listed below, being items requiring further documentation as for Nominated Sub-Contractors:"

A list of items then follows. With one exception, a monetary sum is specified next to each item, which is said to be inclusive of GST for the supply and installation. Next to the item "alarm alterations" there is no figure in the money column. Instead, there are the words: "Owner supplies".

1. The Owners interpreted the opening words of Annexure 2 as meaning that they were entitled to nominate the sub-contractors for these prime cost items. That is not what the page says. The heading states that this is a list of Prime Cost items. The opening words say that the items listed are to be allowed for in the Builder's price. It adds that the items require further documentation "as for Nominated Sub-contractors." The ordinary or natural meaning of the words "...as for..." is "...the same as..." or "...as would be in the case of". However, there is no provision anywhere in the Contract, whether on this page or anywhere else, for the Owners to nominate sub-contractors.
2. Annexure 2 was taken from another set of proposed contract documents which might have contained provision for the nomination of sub-contractors but this Contract does not. The words "...nominated sub-contractors..." are not appropriate to the form of contract used and so they are surplusage. Despite Mr Fink's valiant attempt to persuade me to the contrary I think that Annexure 2 does no more than set out what the prime cost sums are.
3. The third page ("Annexure 3") commences with the following words:

"SUPPLY AND DELIVER ITEMS: The following items shall be allowed in the Builder's price for the items listed below, being items requiring further documentation for supply only as for nominated suppliers; the Builder shall allow for the cost of all fixing of these items:".

There follows a list of items including door and window hardware, hinges, locks and handles and cupboard knobs, lights, towel rails and various toiletry accessories, tiles, certain fixtures and fittings and a pair of new front doors. Next to each item are the words "Owner supplies", except for the new front doors, where a figure of $1,000.00 is specified.

1. Again, there is no provision anywhere in the Contract, whether on Annexure 3 or elsewhere, to the effect that the Owners are entitled to "nominate" the suppliers. Rather, they are to supply the actual items. The words "...nominated suppliers..." are not appropriate to the form of contract used and so they are surplusage.
2. I interpret Annexure 3 to mean that the Owners are to supply all the things listed and the Builder is to allow for the cost of fixing them. In regard to the new front doors the Builder is also to allow an amount of $1,000.00 in its price to purchase the doors as well as the cost of fixing them.
3. The fourth and final page ("Annexure 4") is headed "Schedule of Monetary Items - Separate Contractors" and commences with the words:

"EXTENT: In accordance with the contract, the Builder is hereby notified that the proprietor will engage separate Contractors as set out in the schedule:

1. I interpret Annexure 4 as meaning that landscaping; carpet, blinds and curtains are to be done by contractors to be engaged separately by the Owners. There is no provision that those contractors will have access to the House while the Builder is carrying out the Contract works. However, by their nature they would be able to be done after the Builder had left the site.

1. Clause 36 of the Contract provides that, where the Owners are to select any item for a prime cost item or a provisional sum item they must make the selection within 7 days of receiving a written request from the Builder to do so. At the Owners' request a Special Condition 5 was inserted in the Contract as follows:

"All prime cost items shall be selected by the owners by the date as specified by the builder. The builder to provide reasonable notice to the owners".

1. On 9 March 2009 the Builder sent to the Owners an email, the opening words of which were:

"Please find detailed below a schedule outlining proposed installation date or supply date for prime cost and provisional sum items.

For example with the first item, you are required to supply the Builder with taps/toilet/shower fixtures by 15 April 2009".

There follows a list of 9 items next to each of which is what is described as a "supply/installation date".

1. In many instances the information requested was not supplied by the Owners by the date specified. They complained that, since Mr Fois worked full time, he only had Saturday mornings in which to obtain the necessary information. Mr Fois also asserted in evidence that, as the job progressed, the times would necessarily change.
2. The Owners misunderstood the nature of their contractual obligation in this regard. By "reasonable notice" in Special Condition 5 is meant a reasonable time in which to obtain the information. It is not for the Owners to say that the Builder does not require the information by the date that it specifies. Under Clause 36 of the Contract the Builder is entitled to make its own decision as to the date by which the information is to be supplied. It is the Builder's responsibility to complete the work on time and the Builder's right to schedule and co-ordinate the work as it sees fit. It was not for the Owners to decide that the Builder did not need the information requested by the date it had specified. So long as the date specified by the Builder allowed reasonable notice to the Owners so that they would have sufficient time to reasonably obtain the information then they are in breach of the Contract if they have not provided it by the date specified. In this regard I prefer Mr Squirrell's interpretation of the provisions referred to.
3. In each case several weeks notice was given. I find the notice to have been reasonable..
4. By letter dated 18 June enclosing Notices of Extension of Time, the Builder complained that information requested from the Owners was not being supplied on time or was incomplete

1. There were numerous variations. The procedure for variations is set out in Clause 26 of the Contract. By that clause, either the Owners or the Builder may ask for the work to be varied.
2. If the Owners request the variation and the Builder does not believe that it will require any variation to any permit or add more than 2% to the original Contract price or cause any delay it may carry out the variation. Otherwise, the Builder must give to the Owners within a reasonable time a notice setting out what effect the variation would have on the building works, the cost of the variation and, if the variation is expected to result in any delay to the works, the Builder's estimate of such delay.
3. A similar notice has to be given if the Builder is requesting a variation. The purpose of providing the estimates of delay is not to extend the Contract period but rather, to allow the Owners to assess whether they wish to proceed with the variation by warning them of the possible consequences. The procedure for extending any Contract period is set out in Clause 37. That clause requires the Builder to give the Owners a written notice informing them of the extension of time claimed. The notice must state the cause and extent of delay. If the Owners wish to dispute the claim for extra time they must give the Builder a written notice of dispute within 7 days.
4. The estimates of delay contained in the notices of variation add up to a substantial number of days, but the actual extensions of time claimed which the Owners did not dispute total only 15 days. Claims for a further 48 days were disputed by the Owners in time. Simply allowing the 15 days that are not disputed brings the end of the construction period to 12 October 2009. By that time the works were suspended. As will be apparent, it is unnecessary to consider whether the other 48 days claimed should be allowed. I note that Mr Croucher thought that those further claims appeared excessive.
5. There was a dispute between the experts as to whether the Builder was on track to finish the work on time. Since the Owners have wrongly terminated the Contract the Builder was not given the chance to complete and so this argument could only relate to whether the Builder was carrying out the work with reasonable diligence. Mr Croucher believed that the Builder could have finished in time. Mr Pavey said in his report that to do so the Builder would have needed to speed up somewhat but he ignores the fact that time is suspended for the period of suspension and so the Builder had an extra 48 days. In any case, I should assume for these purposes that the Owners would cease interfering with the Builder's scheduling and performance. I prefer Mr Croucher's view.

1. By Clause 48 of the Contract the Builder is authorised to engage sub-contractors and by Clause 30 the Owners are prohibited from making an enquiry or directing the Builder's work or sub-contractors.
2. Clause 36.7 states:

"The Builder must give the owner a copy of any invoice, receipt or other document that shows the cost to the Builder of any prime cost item or labour and materials that relates to a provisional sum item as soon as practicable after receiving the same."

The Owners relied upon this clause in support of their claim that they had the right to be consulted as to the appointment of subcontractors and also the right to determine whether a particular sub-contractor should be engaged. The clause does not provide them with any such rights.

1. An invoice, receipt or other document showing the cost to the Builder is a document evidencing what the Builder has paid. The Owners would require such a document in order to satisfy themselves that the prime cost or provisional sum figure had been exceeded and the Builder was entitled to charge the extra. The presence of this Clause does not indicate that the Builder is to provide quotations from potential suppliers to the Owners before engaging them nor does it confer upon the Owners the right to determine which sub-contractors shall be engaged or which suppliers the Builder uses. Those are matters for the Builder.
2. By letter dated 18 June the Builder noted that the Owners wanted to obtain several quotes from different suppliers before making a decision. The letter asked them to be mindful of the strict time frame the Builder had in which to do the work and that it was being hampered from progressing the work due to the Owners' delays in obtaining quotes and finishing selections. This letter enclosed the Extension of Time claims.

1. The Contract (Clause 38.0) provided that the Builder had exclusive possession of the site. There was a limited right of the Owners to enter the site to inspect the work at reasonable times and with reasonable prior notice provided that by doing so the work was not delayed or interfered with (Clause 38.1). They were not allowed on the site for any other purpose.
2. The Owners had moved into other accommodation during the carrying out of the works but required access to the garage where they had items stored and in order to feed their cat. There was a side gate which was kept locked and the garage had an electrically operated door. Mr Varasdi claimed that Mr Fois had a key to the side gate. He also said that he removed a padlock to one of the gates at Mr Fois' request. The garage door could only be opened electrically. Mr Varasdi said that this was because Mr Fois had lost his key but a photograph supports Mr Fois' evidence that the internal lock mechanism was missing. I cannot understand why it was not simply replaced. It would have been a small cost and avoided a great deal of argument.
3. Extensive rewiring was taking place in the house and the electricity was cut off by the electrician on 13 March. Mr Fois complained to Mr Varasdi that he could no longer open the garage door electrically. Access to the garage was arranged through the House until a temporary power supply was set up which was later disconnected at the direction of Energy Safe Victoria. There is a dispute as to whether or not that was the fault of the Builder's electrician..
4. Mr Fois also complains about access being denied to him for the purpose of him obtaining a quotation for the heating and cooling. Details are provided below. At that time heating and cooling were within the Builder's scope of works and it was for the Builder to engage the contractor. In any case, there is insufficient evidence for me to say that Mr Varasdi's conduct was unreasonable.
5. After heating and cooling was taken out of the Contract access to the contractor was denied on the date Mr Fois wanted it. I am unable to assess the reasonableness or otherwise of this. If the Owners are to undertake parts of the work themselves they need to work around the site availability with the Builder. It was Mr Varasdi who was running the site and although he would have to allow them reasonable access to have done any work which the Owners had to do concurrently with the Builder's work, he was the one to decide when that work should be fitted in. On the occasion Mr Fois specified, he gave Mr Varasdi one day's notice that he wanted to visit the site with the contractor to discuss the roughing in of the heating and cooling. On that day a Worksafe officer visited the site and made an adverse report of a number of safety issues. The officer informed Mr Fois that he could not enter the site without Mr Varasdi's permission. That was correct. It was a construction site. The officer instructed Mr Varasdi to keep the House locked.
6. I am satisfied that the Owners were very frequently on site. They have complained about other occasions when they were not allowed access when they wanted it. What these complaints overlook is that the Builder had control of the site and the Owners had no right under the terms of the Contract to be there whenever they chose.

1. In its 9 March email, the Builder specified and requested that the Owners provide paint colours by 1 July 2009. Since that was more than three months after the date of the request the notice was reasonable and the Owners were required to comply with it.
2. By separate letters dated 9 June the Builder again requested a full colour schedule and the render colour by 1 July.
3. On 1 July 2009 the Owners emailed the Builder to say what the colour of the external render would be. However, later on the same day they sent a further email stating that they had selected a range of possible colour schemes for the interior and would need to view those colours once plastering was completed. They said that finalisation of the exterior colour scheme (which included the render) would be contingent upon the colour scheme selected for the interior. That was directly after having sent an email specifying what the render colour would be. The Builder responded by email on 2 July stating that the windows had to be painted in order to allow the removal of the protective covers. It also informed the Owners that the quotation for the painting was marginally less than the prime cost figure.
4. Mr Fois' response to this email is an example of the attitude adopted by the Owners throughout. It is as follows.

You've not provided reasonable notice of these costs. Furthermore, at last week's site meeting you did not mention painting works were to commence Monday 6 July 2006, and this is simply unacceptable.

At this stage we cannot accept your cost on painting works on the following basis:

• You have not provided us with us with your painter's quote for our consideration, nor disclosed who this painter is
• The cost appears to be excessive given that you previously indicated to us that the pc sum allowance of $30,000.00 was well in excess of what the actual cost would be. It beggars belief that your total cost of works is now so close to this pc allowance amount.
• You have not afforded us adequate opportunity to review the cost of these works.
• We have not given you any authority to appoint or use your painter. As you are fully aware the Contract allows us to nominate a supplier of all pc items (including painting works).
• You have not supplied us with the cost differential of the pre primed MDF skirting boards and architraves. (The Contract allows for KDHW). This was requested of you at the last site meeting 27/6/09.
• We understand we have rights to seek a comparison quote for the painting works which we may exercise.

Without the above we are unable to give you authority to proceed with your chosen or preferred supplier.

1. The email indicates the extent of the misunderstanding of the Owners as to their rights and obligations under the Contract. They had no right to interfere in the Builder's choice of painter or say when painting would commence. Those were matters for the Builder to determine and it was not for the Owners to say that such date as the Builder might select was "unacceptable". It was also not for the Owners to "review the costs of these works".
2. Notwithstanding that it was not required to do so, the Builder provided a quote from the painter to the Owners the following day and Mr Fois confirmed that he was "okay" with the painter priming the windows on Monday 6 July. The colour selection was finally provided on 10 July for the exterior of the House.
3. According to the Builder, no internal colour selection was ever provided. The Owners said that it had been given orally but that seems unlikely because the parties were on very bad terms by then and communications were in writing. I prefer the Builder's evidence that no such selection was made.

1. The specifications set out the dimensions of the various areas to be tiled and provided that the type of tile was to be advised by the Owners. There was provision in the form of Specification for further details about the tiles to be provided but those parts were left uncompleted. However Annexure 3 states that the Owners will supply tiles having the dimension 600mm x 300mm and the Builder will allow the cost of fixing those tiles in its price. Mr Varasdi said that the price that he obtained from his tiler was to fix tiles having those dimensions.
2. By the 9 March email, the Builder specified 15 June as the date by which tiles were to be supplied. That allowed the Owners more than three months in which to source the tiles and so was more than reasonable notice.
3. On 4 June the Builder sent a letter to the Owners stating that samples of the tiles to be used were to be provided by 15 June and the tiles to be laid were to be supplied by 10 July. The letter specified the size of the tiles to be supplied as per the Contract (600mm x 300mm).
4. On 11 June the Owners asked what quantities were required. The areas to be tiled are given in the specifications but there had been some variations. The Owners say that quantities were advised by the Builder on 26 June. Mr Varasdi suggested that it was "earlier' but gives no date.
5. On 18 June Mrs Fois provided samples of tiles. They were larger than the size specified and were warped. Mr Varasdi told her that the tiles were not satisfactory and that if they selected larger tiles there would be an additional cost.
6. On 29 June Mr Fois brought further samples of tiles to the site. These tiles were also oversize although Mr Fois did not say that they were and Mr Varasdi did not measure them at the time. As a consequence, Mr Varasdi did not tell Mr Fois on that occasion that they were oversize or that laying them would be more expensive. The same day Mrs Fois sent an email to the Builder stating the dimensions of the tiles (350mm x 350mm for the wall tiles in the laundry and 350mm x 700mm for the other areas) and saying that the tiles had been ordered by the Owners that day.
7. The Builder obtained a quotation from its tiler, dated 1 July 2009, to lay the tiles and raised a variation for the extra cost because the tiles were larger (Variation 38). According to Mr Varasdi's evidence, it is more expensive to lay larger tiles because they require more surface preparation and levelling than smaller tiles. They are also more difficult to cut around objects. Because they are more difficult to lay the Builder's tiler charged more. There is no contrary expert evidence and so I accept this evidence.
8. In a letter of 8 July the Owners advised that the tiles would be delivered early the following week. The following day Mr Varasdi advised the Owners of the extra laying cost and prepared a variation (Variation 38) claiming it. According to Mt Varasdi's evidence, Mr Fois told him that Mrs Fois would sign the variation the following day but when he gave it to her on 10 July 2009 she refused to sign it.
9. In their letter dated 13 July 2009 the Owners complained that Mr Varasdi had not told them, at the time they brought the sample to him that there would be any extra laying cost and that they ordered the tiles on the understanding that there would be no extra laying cost. The letter concludes with a statement that additional laying costs for the tiles were not warranted.
10. On 14 July they sent a further letter saying that the tiles would be delivered the following day.
11. In a letter to the Builder's solicitors dated 30 July 2009 the Owners' solicitors referred to Variation 38 and stated that the Builders "claim for additional time and costs for laying the tiles is not reasonable and is rejected". Variation 38 was not a claim for either extra time or extra cost. It was simply a document under Clause 26 of the Contract.
12. It is not to the point whether or not the Owners think that Mr Varasdi should have warned them about the extra laying cost before the tiles were ordered. He had previously told them that the larger tiles that they were then considering would cost more to lay on account of their size. They then ordered other tiles knowing that they were larger than those specified in the Contract without confirming with Mr Varasdi whether or not there would be any additional laying charge. He did not represent to them that if they ordered these other tiles there would be no extra cost. Had he done so, and if the Owners had then ordered the tiles on the faith of that representation, the Builder would have been estopped from claiming a variation. But there was no such representation.
13. Since the extra cost was relatively small the Builder could have given effect to it without a written variation under Clause 26 but it was not obliged to do so and, since the Owners had made it clear that they would not pay the extra cost for the larger tiles to be laid , it is unsurprising that it did not do so and would not do so without a written variation. Without an agreement to vary the Contract, the Builder had to lay the tiles as per the Contract documents.
14. The real question is whether the Builder was asked to perform different work from what was required by the Contract, and it was. The Contract required the Builder to lay tiles of a given dimension and the Owners, by supplying tiles of a different size and requiring them to be laid, requested the Builder to perform different work. In order to do so the Builder would incur an additional cost and so the Builder was entitled to a variation. Because the Owners refused to sign the variation they were not entitled to it and so the work had to proceed in accordance with the Contract. The Owners were required to supply the tiles of the size the Contract specified. From their insistence that the tiles that they had supplied be laid it is clear that they were not willing to supply those tiles for the Builder to lay. Accordingly, the work could not proceed because there were no tiles of the required size supplied.

1. The Owners requested that the downstairs en-suite be rebuilt. This involved demolition of an existing toilet between the existing en-suite and a bathroom and a reconfiguration of both en-suite and powder room. Simple plans were prepared by the architect. A later version was signed on 13 March but the final plan was not provided until 24 April. The work was then carried out. The Owners' complaints of how this was done ignores three factors
2. First, there was a shower to be constructed against the existing wall in the en-suite. This required the floor to be cut out to receive the base for the shower recess. The wall was not positioned over a joist and so it had to be reconstructed so that it would not be resting on floorboards cantilevered off the next joist.
3. Secondly, directly above the wall between the new ensuite and bathroom was an upstairs toilet. According to the expert evidence the best place in which to run the waste from this toilet was directly downwards and within the downstairs wall between the ensuite and bathroom. The only other alternative was to be run it out through the external wall and down the outside of the House facing the street which was, according to the evidence, not desired. In order to fit the sewer pipe between the two sheets of plaster of this stud wall the Builder built out the studs from 90mls to 135mls, thus making a thicker wall. In order to do this and maintain the dimensions of the en-suite, the internal face of the reconstructed wall of the new bathroom was moved closer to a window architrave.
4. Thirdly, the en suite was dimensioned in the architect's plan and those were the dimensions that the Builder was required to work to. In order to reconstruct the wall so that it would be supported and would accommodate the sewer pipe, the internal face of the plaster on the powder room side of the wall was closer to the architrave of the powder room window than it had been before.
5. The Owners complained that this change in position was not shown on the plans and now claim that it is a defect. It is not. The en suite has been constructed to the correct dimensions, the wall had to be the width that it is and consequently, the internal face of the powder room wall is in the position in which it has to be. That this should be an issue is a measure of the unreasonable attitude sometimes taken by the Owners throughout this proceeding.
6. The other issue with the en suite is the price of the Variation to carry out the work. The Owners say that this was two and a half times what Mr Varasdi had initially estimated based upon the initial preliminary sketch. The variation (Variation 18) was nonetheless signed by the Owners and the Builder's expert, Mr Croucher said that the price was reasonable. It does appear that there was extra work.

1. Apart from a number of fixed sash windows, the Contract required the Builder to provide double hung sash windows with weights and cords. The plans also required the window fabricator to be approved prior to fabrication.
2. On 15 March 2009 the Builder sent an email to the Owners, the first two paragraphs of which are as follows:

"We plan to submit the windows order this Tuesday (17/4/3) in order to avoid a 15% price rise and secure the delivery of the windows by the scheduled installation date. The windows are as specified by your architect except will be made from primed treated pine as previously discussed with Mark. You will recall treated pine has been recommended over cedar to provide you with longer wearing windows.

Please confirm by email that you are happy for us to proceed with the order". (Emphasis added)

1. Contrary to what is stated in this email the windows (other than the fixed sash windows) that the Builder ordered from its supplier, Racecourse Windows, were not double hung sash windows with weights and cords but were double hung windows with jamb liners, which are much cheaper windows. Mr Varasdi said in his witness statement that he priced the job using treated pine windows from Racecourse Windows. If that is so he did not read the Contract documents with sufficient care which is surprising for an experienced builder. The Owners responded by asking what the cost difference would be between cedar and treated pine.
2. On 17 March Mr Fois emailed back to the Builder denying any agreement to accept pine but agreeing to "split the cost of your error" provided that the windows would have a hardwood base. It would appear from this email that Mr Fois believed that the treated pine windows would be an additional cost but I am unsure what he meant. In the meantime, the Builder had agreed to order cedar windows and to bear "the additional cost" itself.
3. A variation (Variation 10) was prepared to change the timber of the windows from treated pine to cedar. A second variation (Variation 11) was prepared to replace an existing downstairs window in Bedroom 2 with a pine window. Although they were both dated 18 March it would seem that they were signed at the meeting on 20 March.
4. Variation 10 did not alter the mechanism the windows were to have, so the Builder was still required to supply windows in accordance with the Contract. Mrs Fois wrote on Variation 11 the words "white jamb runners". She said that she was under pressure from the Builder to do so.
5. On the following day, 21 March Mr Fois rang Mr Varasdi and told him that the architect's drawings required western red cedar or KD hardwood windows with double hung weights and cords. Mr Fois demanded a weight and cord system. Mr Varasdi told Mr Fois that his manufacturer did not build windows with that system and that the Owners were aware of that because they had been to the Racecourse Windows showroom and discussed the windows at length with the owner of that business. According to Mr Varasdi, Mr Fois denied looking at the window mechanism and said that he only went there to see the types of timber used. Since that seems to have been the purpose of the Owners' visit that is likely to be true.
6. Whether his supplier manufactured windows of that type was not to the point. That was what the Builder had contracted to supply, yet it is clear from this conversation that Mr Varasdi was not willing to supply windows in accordance with the Contract.
7. Following this conversation the Owners approached Canterbury Windows and obtained a quote for counter balance sash windows. These are windows where the counter weight of each window is not a concealed weight but the weight of the other window. They do not have weights and cords, and so they are still cheaper than what the Contract required, but they are closer to weight and cord windows than the jamb liner windows that the Builder proposed to supply.
8. On 24 April 2009 the Owners asked the Builder to proceed with the ordering of the windows from Canterbury Windows as per the quote and to order them in KD hardwood. The total price of the windows was $14,420.00. Mr Varasdio refused and insisted that if the Owners wanted windows from Canterbury Windows, where the Builder did not have an account, they would have to pay for them themselves. The Builder then raised another variation (Variation 16) in order to provide for the windows to be supplied by Canterbury Windows.
9. The end result of all this is that the Owners received windows of a lesser quality and cost than was required by the Contract. The Builder's justification for this is that they signed the first variations (Variations 10 and 11), agreeing to accept pine windows, and that Mrs Fois had written the words "jamb liners" on Variation 11.
10. I find that the Owners' agreement to vary the windows was directed not to the mechanism of the window but rather to the material from which they were to be made, namely pine instead of cedar. There was no agreement to vary the mechanism. The words "jamb liners" relate only to the replacement window downstairs.
11. After misrepresenting to the Owners that the windows that would be supplied by Racecourse Windows would be as stipulated by the architect and in accordance with the Contract the Builder then refused to supply the windows required. When the Owners offered to agree to what can only be described as a second best option, and one very favourable to the Builder, the Builder insisted that they could not have those windows unless they signed another variation involving them paying more money. It is apparent from the variation that the Builder prepared that the jamb liner windows were less than half the price of the Canterbury windows.
12. I am satisfied that the Owners only signed Variation 16 in order to avoid a threatened serious breach by the Builder of the Contract namely, the installation of lesser windows that were not in accordance with the Contract documents. It is quite clear from the Builder's attitude towards variations throughout the construction period that, if the Owners had not signed the variation document, the lesser windows would have been installed.. The Owners were forced by the Builder's conduct to pay an additional $6,610.00 that they should not have had to pay. In these circumstances it would be unconscionable to allow the Builder to rely upon Variation 16 and the excess of $6,610.00 must be repaid to the Owners.

1. The staircase was explicitly excluded from the Contract because Mr Varasdi believed that the design was defective. It was contemplated that it would be brought into the scope of works by a variation but on the face of the Contract, the work was to be done without a staircase.
2. According to Mr Varasdi, his understanding was that the Owners were to go back to the Architect and have the design for the staircase corrected and there would then have been a variation to put it back into the Contract. However he acknowledged that there was no discussion as to who was to build the staircase or when it would be constricted.
3. The Contract provided for the construction of a balustrade which could only be built after the staircase had been installed. What that meant was that, in the absence of a variation, the Owners would have to construct the staircase during the carrying out of the works so that the Builder could then construct the balustrade. I do not accept the Builder's view that, because Annexure 4 did not mention the staircase the Owners were not entitled to do that part of the work. It is not within the scope of works and so it is not something the Builder has contracted to do. Mr Varsadi said in evidence that the excluded items could have been done after had had left the site but the staircase would have to have been constructed during the course of the works so that the Builder could fit the balustrade. It was assumed by Mr Varasdi that the staircase would be added later as a variation but that never occurred.
4. At a site meeting on 15 May the Builder asked for details of the staircase the Owners wanted. The Owners told Mr Varasdi that he did not need to know those details. In the absence of a variation that was correct but the Builder would need to know when it was to be installed in order to coordinate the installation with its own work. It would also need to know the dimensions so that it could construct the stairwell to the same size.
5. On 18 May the Owners advised the Builder that a particular supplier had been engaged by them to construct and install the staircase. According to the emails between the Owners and the supplier, they also engaged it to construct the balustrade. That was a prime cost item and within the scope of works. The Owners had no right to engage another company to construct the balustrade.
6. According to Mr Varasdi, on 21 May the Owners asked for the Builder to construct the staircase in order that it would be covered by his domestic building insurance but they changed their minds when it was pointed out to them that the Builder's margin would apply to the work. He said that they argued with him as to whether a margin should be applied, since they had done all the work in sourcing the supplier.
7. According to Mr Varasdi, he asked Mrs Fois what the requirements of the staircase manufacturer were, whether the walls should be plastered and the floorboards laid, and when the manufacturer wanted to install the staircase. He said that she told him that she had no idea. I think that is information Mr Varasdi could and should have obtained from the manufacturer.
8. The contract that the Owners finally entered into with the staircase manufacturer included the balustrade. I accept Mr Varasdi's evidence that this was done without his knowledge or authority. However he then agreed to delete the balustrade from the scope of works. That was done by Variation 26 dated 22 May 2009.

1. An issue has been raised about whether the House had reached lock up stage, notwithstanding that the lock up stage was claimed by the Builder and paid by the Owners.
2. As to the meaning of "lock up" stage, Mr Squirrell referred me to the following passage from the Tribunal's decision in Brown v. Cardona [2009] VCAT 910 where McNamara DP said (at para. 82):

"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 builder's 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 expressed by Mr Setford that a structure could have reached lock-up stage if secured by door fixed not by a lock but merely by a bent nail. If I regard the definition of lock-up stage from its very name as necessarily importing some concept that the structure has been locked, this does not in my view carry us the distance of requiring the structure to be impregnable except via access through a locked door."

1. At the time of the lock up claim there was an opening in the kitchen floor of approximately 600mm2 which had been cut for access purposes. It was kept covered when access was not required. Despite having paid the claim, the Owners now say that, because of this access hole in the floor, the building was not at lock up.
2. That was not the opinion of the building experts. Further, the fact that further openings were made in the floor later after the lock up was achieved, claimed and paid for did not mean that lock up had not been reached at an earlier stage.

1. Another issue was raised in regard to the Builder having billed for the frame stage the day before the frame was passed. According to Mr Varasdi he prepared the bill in anticipation of an inspection on 4 May but it was rescheduled for the following day, 5 May, when the frame was passed. The bill was withdrawn and reissued after the frame was passed. Nothing arises from this.

1. The mechanical services are described in Annexure 2 as being "single phase reverse cycle air-conditioning to first floor, alteration to ground floor ductwork as required". The Prime cost figure was $8,000. The specifications required the central heating and cooling units to be "as advised by Owners". Clause 36 therefore applied and the Owners were required to provide information as to their requirements within 7 days of request.
2. The Owners were required by the 9 March email to supply details of the supplier or installer by 30 April. That was more than seven weeks notice. I think that was a sufficient time in which to find suitable central heating and cooling units.
3. Under the terms of the Contract it was only for the Owners to say what they required, not source the supplier, but that is what they wanted to do. In any case, it would not have been possible for the Builder to source a supplier until the Owners had advised what it was that they required.
4. Mr Varasdi said that he sought a quotation form a supplier but was informed by the Owners on about 17 April 2009 that they did not want his help in sourcing the contractor. The Owners obtained a quote from a supplier 20 April but thought it was too expensive. The information the Builder had requested was not provided by 30 April.
5. The Owners arranged for two other suppliers to quote on 7 May but access to the site was not available. Access was rearranged for 12 and 18 May. On 13 May the Builder informed the Owners that plastering was to start in three weeks time and that the details of the supplier of mechanical services were required by 20 May.
6. On 15 May the Owners advised the Builder by letter that the 30 April date was "redundant" and that they expected to be able to supply the information by 22 May.
7. On 21 May the Owners sent the Builder an e-mail stating that a particular company had been engaged by them to undertake the heating and cooling work. They should not have done so because the mechanical Services was within the Builder's scope of works. The Builder would have been within its rights to proceed with the works itself and ignore what the Owners had done.
8. By letter dated 25 May the Builder informed the Owners that it would agree to exclude the mechanical services from the Contract if the Owners signed a variation (Variation 25) and that the prime cost allowance of $8,000 would then be credited to them. Other conditions of this agreement were that the contractor should contact the Builder and that the Owners would provide the Builder with drawings, details of the contractor's insurance and certain other information. That was supplied.

1. By Schedule 1, the existing Hot Water Service was to be retained downstairs but the Owners were to supply a new Hot Water Service to be installed on the first floor outside the bathroom. No time for delivery was mentioned in the email of 9 March but on 13 May the Builder wrote to the Owners requesting that it be delivered within 7 days.
2. According to Mr Varasdi, on 15 May the Owners requested that a new Hot Water Service be installed instead for the whole house. He requested a variation. A variation (Variation 27) was prepared but the Owners did not sign it because they were considering whether they would supply the new Hot Water Service and have the Builder's plumber install it. On 25 May the Builder complained that the Variation had not been signed and threatened to proceed with the plumbing works as per the Contract documents. It is unclear what then happened about this.

1. There was an alarm installed in the house. By Annexure 2 the Owners were to "supply" alarm alterations. I interpret that to mean that they will be responsible to have the alarm altered. Hence, the alarm alterations were not within the scope of works of the Builder under the Contract. The Contract did not say how that was to be integrated with the work of the Builder but by letter of 5 May the Owners told the Builder they had engaged a security company to do that work and said that it would "...need access to the premises before plastering occurs".
2. Mr Varasdi agreed in evidence said that it had to be done before the plastering and that it needed to be co-ordinated with his work. He had submitted a quote but it was not accepted by the Owners. By letter dated 15 May the Owners notified the Builder of the identity of the contractor they had engaged for the alarm alterations. Variation 23, which purported to take the Alarm alterations out of the Contract, was unnecessary.

1. One of the items to be supplied by the Owners according to Schedule 1 was a steel bath. By letter dated 11 June the Builder requested that the bath be delivered by 23 June. That allowed 11 days which was plenty of time in which to deliver a bath. The bath that was delivered was not steel. The Builder altered the frame it had constructed to receive it but did not install it. Although this was raised during the hearing as an issue it does not go anywhere.

1. The Owners requested the Builder to provide a quotation to replace the rear doors of the house with bi-fold doors. Under the Contract, those doors were to remain. A quotation was given and a variation was raised by the Builder (Variation 21). The Owners did not accept the quote and told the Builder they would have the doors installed by the manufacturer.
2. On 22 May a variation (Variation 24) was signed which provided that the Builder would remove the existing rear doors and install a new lintel and architraves.

1. Stone bench tops to the kitchen, en-suite and bath were required to be supplied and installed by the Builder. The prime cost for these was $12,000 as per Annexure 2. In the Project Specifications the details of all cabinet work including bench tops are to be advised by the Owners (page 21). The Builder would be unable to supply the bench tops until the Owners advised what they wanted. Clause 36 therefore applied and the Owners were required to provide information as to their requirements within 7 days of request. By the 9 March email, the Owners were required to supply details by 20 July. That was more than four months notice and so it was a reasonable requirement.
2. A dispute arose because the Owners wanted a stone waterfall on the kitchen bench. They considered this to be part of the bench top and so included in the prime cost allowance. The Builder said it was not part of the bench top but additional work and required a variation.
3. Mr Squirrell pointed out that, in the Architects drawings showing the waterfall, it is described as "additional stone waterfall side to bench". It is obviously a side to the bench and not a top but in reality the waterfall was to be an extension of the bench top, made from the same stone. It was to reach from the top of the bench down to the floor on each side. It would obviously have to be made together with the bench top by the same sub-contractor and fitted at the same time. It is quite unrealistic to regard it any differently from the bench top.
4. However the issue was whether the incorporation of the waterfall in the design of the kitchen necessitated a variation. The answer must be that anything that is to be built that is not in the Contract drawings or documents will, strictly, require a variation. The drawing incorporating the waterfall is dated June 2009 which is well after the Contract.

1. The kitchen joinery prime cost figure is specified in Annexure 2 as being $12,000. In the Project Specifications the details are to be advised by the Owners (page 21). The Builder would be unable to order the joinery until the Owners advised what they wanted. By Clause 36 the Owners were required to provide information as to their requirements within 7 days of request.
2. By the 9 March email, the Owners were required to supply "details" and the supplier was to be engaged "minimum six weeks" prior to the estimated installation date of 22 June. That requirement would allow the Owners about six weeks to ascertain what they wanted and so it was a reasonable requirement.
3. The Owners provided Kitchen layout plans including location of appliances on 10 May but said that cabinet details were yet to be finalized. Mr Varasdi said that this was the first time that he was told that the kitchen layout was to be changed. The Owners say that they had told him at the beginning that they would be changing the layout. Nothing turns upon who I believe in this regard. It was essential that the final layout be determined early enough, not only to allow the plumbing rough in but to allow the preparation of a variation.
4. By letter dated 4 June the Builder asked for details of the layout and design of the cabinet work within 7 days. By a separate letter bearing the same date it also required technical specifications for the built in hot plate, range hood, flue, refrigerator and other appliances. That information would also be needed by the cabinet maker.
5. In response to these requests, on 11 June the Owners provided the names and model numbers of the selected fittings. They agreed to provide the technical specifications the following day. They also provided what they said was the final layout and design of the kitchen, laundry and bathrooms and requested a quote for the kitchen as altered.
6. On the following day, 12 June, Mr Varasdi complained to the Owners that the drawings were incomplete in that they did not specify all the required finishes and listed multiple options for the finishes.
7. On 15 June Mrs Fois wrote to the Builder, complaining that the Builder had decided to engage Sussex Kitchens "...despite no authorisation from us". She asserted, incorrectly, that the Owners were entitled to nominate and select a supplier and said that they would source their own quote from another manufacturer. On that day they sought a quotation from Fairmont Kitchens which they received the following day and from another supplier, which they received on 18 June.
8. On 19 June the Owners wrote to the Builder complaining that it had not provided them with a quote from its cabinet maker, Sussex Kitchens and requiring such a quotation to be provided by later that day (19 June) if they were to consider engaging them.
9. By letter dated 22 June the Owners advised that they had visited Sussex Kitchens showroom the previous Saturday and that they would be happy to receive a quote from them.
10. It was not for the Owners to obtain quotes from different suppliers and decide who should be engaged. The choice of supplier was a decision to be made by the Builder, not by them. All they needed to do was say what they wanted.
11. The prices quoted by Sussex Cabinets were emailed to the Owners on 29 June. However on 1 July the Owners advised the Builder by a letter left in Mr Varasdi's letter box that they had decided to nominate Fairmont Cabinets for the manufacture and installation of the cabinets. It would have been open to the Builder to ignore this letter and proceed with Sussex Kitchens if it wished, but it did not do so.
12. I can understand the Owners' frustration if they can obtain quotations from other suppliers and not a quotation from the Builder. However before any work could be done in regard to a change to the kitchen, a variation would have to be raised, specifying clearly how the scope of work was to be altered. In the absence of a variation, the Builder was required to proceed in accordance with the existing Contract documents.
13. According to Mr Varasdi, the design of the laundry was changed and not finalised by 3 July when the Owners advised him that they had chosen a cabinet maker. Amended drawings were received on 2 July and a variation (Variation 40) for the extra work was prepared on 2 July and signed on 9 July.
14. More changes were made on 10 July in conversations on site between Mrs Fois and the cabinet maker. The en-suite vanity was made narrower and the mirror in the upstairs bathroom was reduced in height from 2.4 metres to 2.1 metres. This latter change occurred after the overhead bulkhead had been constructed and plastered and so the bulkhead would need to be boxed out to fill in the gap. Mr Varasdi said that when he explained to Mrs Fois that this would require a variation to box in the empty space she became "quite angry". He said that she wanted it done but would not pay for the change. She instructed the cabinet maker to proceed with the change to the mirror. It was not for her to give instructions to the Builder's sub-contractor nor were the Owners entitled to a change in the cabinetry without a documented variation.
15. Apart from the extra work involved in extending the bulkhead, since the cabinet work was within the scope of works and the Owners had also ordered the stone bench tops from the cabinet maker, the prices for these needed to be ascertained because both were Prime Cost items. In addition, since the Builder was to be responsible for the cabinet work, even though the Owners had dealt directly with the cabinet maker in determining what they wanted, final drawings had to be made of what the Builder was to provide.
16. In a letter dated 13 July to the Owners, the Builder said:

"I understand that you are in the final stages of finalising your requirements with Ian and that by today, you will be able to confirm your acceptance of job details and final drawings as prepared by Fairmont Cabinets.

Once I receive the final documentation from Fairmont Cabinets, I will be able to finalise documentation for you signature and thus allowing the order to be confirmed and the moneys paid.

I hope that you are able to finalise your joinery/kitchen requirements today allowing us to finally move forward on this overdue item."

1. Mr Fois wrote back the following day saying that all "major" kitchen cabinetry details had been confirmed with the cabinet maker before 1 July and that "only minor fine tuning" has occurred following the cabinet maker's measuring of the site. He said that it was "unclear why any further documentation" was required to be signed by them. Precisely what changes were made is unclear but any changes to the scope of works would be a variation that would have to be documented. The thickness of the benches and the finish of the cupboards had not been decided upon. The Owners expected the Builder to obtain quotes for the various options. That would be possible but no variation could be prepared until it was known precisely what the variation was to be.
2. However on the same day, 13 July, Fairmont Cabinets sent a quote to the Builder bearing the signature of the Owners. I cannot see why a variation could not have been prepared by the Builder on the strength of that.
3. Apart from documentation, the Owners wanted to supply handles and had not decided upon what they wanted. I accept Mr Squirrell's submission that joinery handles are part of the joinery and that they do not come within the description in Annexure 3 of door and cupboard hinges. Nevertheless, that should not have held up preparation of a variation.
4. The cabinet maker required payment of a deposit but at this stage, no variation had been prepared and signed by the parties so it was not open for the Builder to proceed with construction of the kitchen as altered. That variation was attached to the notice of suspension. It said that the cost was dependant on further information but does not say what, although some details are specified in Mrs Varasdi's witness statement.

1. On 16 July the Builder decided to suspend work until the issues about variations and the supply of information were resolved.
2. Suspension by the Builder is dealt with in Clause 38 of the Contract, which provides as follows:

"38.00 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
• is in breach of this Contract.

38.1 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.

38.2 The date on which the building works are to be completed is changed and extended to cover the period of suspension".

1. In order for the mechanics of this clause to work it would be essential for the notice in writing to set out each of the breaches relied upon, otherwise the Owners could not know what they had to do in order to remedy the breach and allow work to resume.
2. The notice of suspension of works was sent by registered post. It gave the reasons as: "For the reasons stated in the attached letter". That letter reads as follows:

"Pursuant to clause 26 and its relevant parts, "the Builder must not give effect to any variation unless the owner gives the Builder a signed consent to or request for the variation".

Pursuant to clause 37, the building period will be extended for as long as the building works delayed due to your failure to sign and return the variations requested by you as a result of:

(a) selection of larger tiles

(b) selection of a smaller mirror cabinet

(c) selection of a laundry stone bench top and kitchen stone waterfall

(d) your decision to require and supply cabinetry handles.

Pursuant to clause 38, the building works are suspended pending receipt by us of each of the four separate variation documents attached.

The building works will commence within 21 days after, pursuant to clause 38.1, the receipt of the last four documents signed by you.

If you do not sign and return the four variations within 7 days pursuant to Clause 26.5, your requests for the variations will be deemed withdrawn and as a consequence:

(a) the larger tiles will not be laid

(b) the bulk head above the smaller mirror cabinet will remain open

(c) the laundry stone bench top nor the kitchen waterfall will be included in the joinery order; and

(d) the Builder will select the cabinetry handles.

You are in breach of Clause 36 because you have refused and continue to refuse to supply prime cost and provisional sum items within 7 days of receiving the written request from the Builder.

The items are available for selection. You have refused to provide written selections - by signing and returning the attached variations you will be making the selections and authorising the variations.

Your continual failure to sign the variations and return them is an indication that you do not intend to be bound by the Contract and is a repudiation of the Contract and that breach of the Contract entitles us to suspend the building works and claim delayed damages until you rectify that breach of Contract.

Please forward the signed variations as a matter of urgency".

1. Mr Fink submitted that in order to be valid the Notice of Suspension must specify the breach and it should be reasonable intelligible to the Owners. I think that is right. However, although any failure by the Builder to comply with Clause 38.1 will be a breach of the Contract it does not affect the validity of the suspension itself. That is because it is not the notice that suspends the Contract. The notice is given after the Contract has been suspended. In considering whether the Contract has been validly suspended, the question is whether the grounds for suspension are made out.
2. The failure of the Owners to sign variations was not a breach of the Contract. If an owner fails to sign a variation it has the consequences set out in the contract, which are that the work which is the subject of the variation is not carried out and the contract is not varied. The failure of the Owners to sign was also not an indication that they did not intend to be bound by the Contract. It was simply an indication that they did not want the variation. Further, since the variation forms were only included with the letter, the complaint cannot be that the Owners did not sign them at some earlier time.
3. Similarly, the selection of larger tiles, a smaller mirror cabinet or a laundry stone bench top and kitchen stone waterfall are not in themselves breaches, nor is the Owners' insistence on supplying cabinetry handles.
4. The other breach alleged in the notice is a breach of Clause 36, in that the Owners had refused and continued to refuse to supply prime cost and provisional sum items within 7 days of receiving the written request from the Builder. Such a refusal may amount to a breach. As to past refusals, the breach had already occurred. As to the alleged continuing refusal the Builder is asking that the selections be made and suggests that this be done by "making the selections and signing the variations".
5. On a fair reading, the notice complains that the work cannot proceed for the reasons given in the letter. I find that the Builder could not proceed because:
   • (a) the tiling could not be done because tiles of the size required were not delivered and were not going to be delivered. Strictly, the Contract did not allow the Builder to lay tiles of any other size. The work had to be in accordance with the Contract documents;
   • (b) the Owners have selected a smaller mirror cabinet which will require extra work to cover the area that would have been covered by the larger cabinet. A variation for the extra cost was included in the letter but the Owners had already refused to sign any variation with respect to those costs;
   • (c) the Owners selected a laundry stone bench and a kitchen stone waterfall as part of the joinery order;
   • (d) the Owners insisted on acquiring and supplying the cabinetry handles.
6. The first of these was a breach. By Annexure 3 the Owners were to supply tiles of the size specified. If Clause 36 applies, the tiles were to be supplied within 7 days of request. They were not. Although the tiles are not a prime cost or provisional sum item within Clause 36, it would be an implied term of the Contract that the tiles be supplied within a reasonable time. Instead of doing that, the Owners refused to supply the tiles and were continuing their refusal at the time the Notice of Suspension was served. The Builder therefore had a ground for suspending work.
7. The other three were reasons why perhaps the work should not have proceeded until those matters were clarified but they were not breaches. If variations are not signed, the work specified in them is not done.

1. In response to the Builder's notice of suspension, the Owners' solicitors sent a letter to the Builder referring to the Notice of Suspension and suggesting that it was unlawful. The letter then alleges that:
   • (e) the Owners had not given genuine consent to the variations and extensions of time - presumably the ones they had signed. I am not satisfied there was any coercion apart from the windows, where there certainly was.
   • (f) there had been undue pressure on the Owners to agree to and sign variations and extension of time claims. The variation claims were not extension of time claims. In any case, this allegation is not established, apart from the windows;
   • (g) the Builder has failed to provide reasonable access to the property to the Owners. That was not supported by the evidence.

The letter concluded by suggesting a meeting to resolve matters.

1. On 17 August, the Owners' solicitors sent to the Builder a document entitled "Notice of Intention to Terminate the Contract", purporting to be under Clause 46.3 of the Contract. That Clause provides (Where relevant) as follows:

"46.1 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 38;

................................................................................

• Is otherwise in substantial breach of this Contract.

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

• Specifying the substantial breach;

• Requiring the substantial breach to be remedied within 10 days after the notice is received by the Bulder; and

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

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

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

1. As to the meaning to be given to the term "substantial breach", Mr Squirrell referred me to the Tribunal's decision in Serong v. Dependable Developments Pty Ltd [ 2009] VCAT 760, where McNamara DP said (at para78):

"His Honour's analysis refers to a number of interpretations which have been applied to the word substantial over the years in different contexts. In broad terms the two strands of meaning are on the one hand 'of substance as distinct from ephemeral or nominal'. If applied in the present context this would mean that any breach going beyond the de minimis would be a substantial breach. The view which I think was espoused by Mr Gurr, counsel for the Serongs and the view adopted by Viscount Simon in the case referred to by Deane J in the passage quoted above, namely 'considerable, solid or big' in the context of a building contract would mean that only really important breaches would count. In my view, in the context of a building contract, the latter meaning is the one which should be given to the word 'substantial' or the phrase 'substantial breach'."

1. The breaches alleged in the notice in the present case were as follows:
   • (a) Refusing or neglecting to comply with the Contract by:
   • (i) Failure to provide access. This is not borne out on the evidence. The Owners had, and exercised, extensive access to the property;
   • (ii) Varying the Contract by constructing the wall between the en-suite and powder room in the wrong place without following the procedure for variations. For the reasons given, this wall was constructed where it had to be in accordance with the architect's plans;
   • (iii) Underestimating the cost of the variation of the powder room alteration by saying that it would cost $3,000 whereas it ultimately cost $7,889.00. This is not supported by the evidence. The initial figure referred to was said by Mr Varasdi at the time to be a rough guess to assist the Owners to have some idea of the scale of costs involved, based upon a preliminary sketch. The plans were not final and the full extent of the work could not have been known;
   • (iv) Demanding that the Owners pay for the windows before completion of lock up. For the reasons given, those demands should not have been made and it was a breach. However it was not a subsisting breach that would be capable of remedy at the time the notice was served. The Owners had received the windows they wanted. The only issue was whether they should receive a credit for the money they had been required to pay;
   • (v) Claiming lock up when the stage had not been reached. That was not established, but in any case, the stage was paid by the Owners;
   • (vi) Demanding that Fairmont Cabinets prepare shop drawings for the work. That was not a breach;.
   • (b) Unreasonably suspending the work. The Builder was entitled to suspend work and it was not unreasonable for it to have done so;
   • (c) Failing to proceed with the work with due diligence or in a competent manner. That is not borne out by the evidence. I am satisfied that the work was competently carried out and that the Builder was on track to complete on time. This is further dealt with below.
2. Accordingly, the Owners had no grounds upon which to give this notice. Further, by refusing to supply tiles in accordance with the Contract for the Builder to lay the Owners had rendered it impossible for the Builder to complete the work in accordance with the Contract. I think that was a substantial breach. Being in substantial breach of the Contract it was not open to the Owners to terminate it pursuant to Clause 46 (see Clause 46.4).
3. The Builder's solicitors responded to the notice, suggesting that it was invalid and inviting the Owners' solicitors to withdraw it. By a subsequent letter they declined to do so.
4. On 3 September the Owners' solicitors served what purported to be a Notice of Termination upon the Builder and its solicitors and from that time the Builder was excluded from the site. The grounds expressed in the notice are the failure of the Builder to remedy the breaches alleged in the first notice. No other ground for termination is stated.

1. On the first day of the hearing I allowed the Owners to amend their counterclaim to allege that the Builder had repudiated the Contract by:
   • (a) suspending the work;
   • (b) removing its portable toilet on or before 25 August 2009; and
   • (c) ceasing work on or about 14 July 2009.
2. The Owners purported to accept the alleged repudiation by a letter sent by their solicitors on 3 September 2009, withdrawing the Builder's licence to occupy the site and by them changing the locks the same day.
3. I have found that the Builder was entitled to suspend work. It is argued that by removing the toilet the Builder indicated that it had no intention of returning to the site. The removal of the toilet is equivocal. It was removed some weeks after service of the Notice of Suspension and there is no reason why the Builder should leave its portable toilet on site while it waited to see whether the Owners would deliver the correct tiles or sign the variation to allow those that had been delivered to be laid. Mr Varasdi said that he was paying rental on the toilet and it did not look as though the dispute was going to be resolved quickly. He said that because the Builder only does one job at a time he had no other job to go to so it was not feasible not to go back to the site. As to the third ground, having suspended work the Builder is entitled to cease working on the site during the period of suspension.
4. I am not satisfied that the Builder repudiated the Contract on any of the grounds suggested. In addition, on 19 August, the Builder issued these proceedings seeking (inter alia) the appointment of a Special Referee to sort out the differences between the Builder and the Owners until completion of the building works or the termination of the Contract. That is inconsistent with the notion that the Builder was not intending to be bound by the Contract.
5. It is unnecessary to consider Mr Squirrell's submission that, by serving the Notice of Intention to Terminate under the Contract, which in effect required the Builder to resume work, with knowledge of the alleged acts of repudiation (a) and (b) above, the Owners had elected to affirm the Contract at least in regard to those.

1. By purporting to determine the Contract when it was not entitled to do so, by their conduct in interfering continually with the work and rendering it impossible for the Builder to carry out the work in accordance with the Contract documents, by taking possession of the site, excluding the Builder, and having the work completed by someone else, the Owners have repudiated the Contract. That repudiation was accepted by the Builder in paragraph 27 of its Points of Claim and the Contract thereupon came to an end.
2. I turn now to the remedies of the parties following termination.

1. These were listed by Mr Kosa in his report, although no figures are given as to the cost of rectification.
   • (i) Broken roofing tiles.

The photographs show numerous broken tiles. Although Mr Varasdi said that he was not aware of any broken tiles I am satisfied that these are likely to have occurred when the Builder's workmen were walking on the roof. Replacement of broken tiles is required but there appear to have been plenty of additional tiles on site. I accept Mr Croucher's evidence that the lower roof has not been re-tiled because the rendering had not been done. The delay in the rendering was the fault of the Owners for delay in choosing the render colour. Since the Contract is terminated and the completion of the lower roof is not being allowed to the Builder, the Owners are entitled to the cost of replacing the broken tiles with other tiles on site but not for the completion of the roof. Replacement of broken tiles has not been priced as a separate item but I will allow $200.00.

According to the label on one of the boards, these were to be undercoated and painted with two coats of paint within four weeks. They could not be painted until the Owners made up their minds about the colours they wanted. Mr Croucher said that the boards had been pre-primed, which would give short term protection and no deterioration of the boards was evident. I am not satisfied that there has been any breach and there is no proof of any loss or damage in any case.

Mr Kosa said that they should have been installed before the roof was tiled. Mr Croucher disagreed and said that downpipes are usually put on after rendering and brick cleaning, which had not been done. Whenever they should be installed, this is incomplete work, not a defect.

(iv) Dutch gables do not have an overhanging eave.

Mr Kosa said, correctly, that a notation on the plans provided that the new roof should match the existing roof. However a section of the roof in the plans shows quite clearly that there are to be no overhanging eaves. The notation on the plan is ambiguous. It might be intended to refer to general style. There is no specific reference to an eave overhang. However the section in the plan is clear and unambiguous. I accept Mr Croucher's evidence that the plans do not show any overhang and that the Builder has built it according to the plans.

Mr Kosa said there were no flashings to certain windows that he photographed. Mr Croucher agreed that those windows needed to be flashed and that this was incomplete work. He pointed out that, because of the overhanging eaves, no upper flashing was required and Mr Kosa agreed. I accept Mr Croucher's costing of $330.00 to flash the windows.

(vi) Cova wall panels not installed correctly

Mr Kosa listed a number of criticisms about the installation. One of these relates to a lower section of panelling having been replaced with blue board. There was a lengthy explanation given about this by Mr Varasdi. In essence, the upper floor had to be constructed square and the area of the House on which it was to be constructed was not square. He had to alter the framing to take up the difference. He then had insufficient space to accommodate the thickness of Cova panels in this position and so replaced them with blue board. His explanation appeared to satisfy the experts and the House has been completed by the new builder without interfering with this solution. Accordingly, I find no defect in regard to the blue board. As to the other criticisms, none of them is disputed. However neither expert was able to say that these matters would not have been done by the Builder if it had been allowed to finish the work. As a result, I find that they are items of incomplete work

This was a part of the wall that had to be bricked up. The mortar did not match the existing and has since been coloured by the replacement builder using "Naw Kaw", a product commonly used for the purpose. Mr Croucher says that it is incomplete work. Since the brick work had not even been cleaned down, the time for colour matching had not arrived so I agree that it is more accurately described as incomplete work. I will allow Mr Croucher's assessment of $130.00 to clean the brickwork but the colour must also be matched. There is no evidence as to the cost of that. I will allow $100.00.

(viii) Window in Bedroom 2 is too small and not flashed

The photograph shows a gap between the outer face of the window and the rear face of the outer skin of brickwork which Mr Kosa said was too large to be covered by a wind mould. Mr Varasdi said that he was awaiting specially machined wind moulds so in that respect, it would be incomplete work. However Mr Kosa also pointed out that the window does not match the other windows. Mr Croucher said that Variation 11, which added this window to the scope of works, does not say that the window must match the existing windows. That is true, but the notations on the plan referred to indicate an intention to achieve an appearance to match the existing House. Further, the very fact that the window is too narrow to bridge the brick cavity suggests that this is not what the parties would have intended by the variation. I think it was an implied term of the variation that the window to be supplied pursuant to it would reasonably match the rest of the project. It does not. Mr Kosa said that putting on an oversized flashing will not achieve a satisfactory result and I accept that evidence. According to Mr Croucher, the sill had also not been finished and it was the Builder's intention to flash it at that time. As to head flashing, both experts agreed that it would not be required. I have no evidence as to what it would cost to replace the window that has been supplied with one that would be a reasonable match. The best I can to do is to disallow the amount of this variation (Variation 11) because the Builder did not do what was required by it. The amount of the variation was $1,810.00, including GST.

Mr Kosa points out the absence of trimmers and connections between the framing to the gable end to the brick wall and the frame behind. The brick wall also needed to be built up. This is a part of the job that would require to be scaffolded. There is some partially completed framing to the gable end shown in Mr Kosa's photograph in regard to this item. I accept Mr Crouncher's view that the matters that he refers to are items of incomplete work. I will allow Mr Croucher's figure of $220.00 to build up the brick wall.

Wall panels between the rear doors have not been installed. The experts agreed that it was not within the scope of the Contract. I think that is right..

There is no flashing to the gable end of the chimney. Mr Croucher agreed but said at first that only caulking was required. He then agreed with Mr Kosa that a small flashing should be installed. I will allow Mr Croucher's figure of $95.00 to provide and install the flashing.

This was agreed between the experts. Although Mr Varasdi said that his subcontractor always uses the fibreglass tape that has been used, it seems that paper tape is required. The existing tape will need to be removed and the joins will need to be re-taped. I will allow Mr Croucher's figure of $420.00 to do that.

This was agreed. It is defective rather than incomplete work because the bats are there. They need to be straightened and I will allow Mr Croucher's figure of $55.00 for that.

(xiv) Plaster damage Consequential damage in house from broken tiles

The photographs show clear evidence of water penetration. Mr Varasdi said that there was no such evidence when he was on site and that he would have attended to it if there had been. Although the Owners have wrongly terminated the Contract and cannot now complain that the work is incomplete, I am satisfied on Mr Kosa's evidence that the leakage is due to broken tiles on the roof, caused by the Builder's workmen. I am also satisfied that, although the Builder did not get the opportunity to finish the lower roof, it ought to have replaced any tiles that its workmen broke in the meantime as soon as the breakage occurred. This claim for a defect is therefore made out. The areas concerned will need some minor repair and repainting. Mr Croucher allowed only $280.00 to do that.

The experts disagreed in their reports as to whether the plans show this wall to be moved. It appears that different versions of the drawings show the "existing" wall in different positions. Mr Kosa said that there used to be a reasonable gap to the window architrave and now there isn't. I have dealt with this issue in detail above. The plans are ambiguous but in the end, in order to maintain the dimensions of the en-suite as per the architect's drawings and allow for the passage of the sewer pipe down the wall, the wall had to be moved to its present position. Mr Kosa acknowledged that the only other place in which to run the sewer pipe was down the outside wall, since there was insufficient fall to allow it to run between the floor and the ceiling. I also note that when the Owners took over the project they did not alter the position of this wall. I find no defect.

1. Where a contract is determined by the acceptance by one party of a repudiation of the contract by the other, it is not determined ab initio (see: McDonald v. Dennys Lascelles Ltd (1933) CLR 457 at 476-477 per Dixon J.). Accrued rights are not divested and the innocent party is entitled to keep what he has already and seek damages for any further loss that he has suffered arising from the breach.
2. Since I have found that the Owners wrongfully terminated the Contract, the actual cost of completion is not relevant. What I have to determine is what the Builder should be paid for what it has done.

1. I have had great difficulty reconciling Mr Croucher's evidence with that of Mr Pavey because they did not directly relate to one another. Mr Pavey was not there when the other experts gave concurrent evidence. He is a Quantity Surveyor and, as such, an expert in the costing of building work. His evidence would have been of much greater importance if I had found in favour of the Owners on the critical issue of termination. As to defects he did not determine himself whether any particular defect existed. Rather, he relied upon Mr Kosa's report. Further, he also seems to have accepted the costing of these defects by the replacement builder, who did not give evidence.
2. Mr Pavey questioned why it was that the Contract provided for 65% of the contract price to be paid by completion of lock up. That is the normal proportion payable by lock up under a domestic building contract to build all stages of a house (see s.40(2) Domestic Building Contracts Act 1995) but even if I were to accept his suggestion that it should have been some lesser sum it is the proportion that the parties agreed upon. Both frame and lock up stages were achieved and the Builder has been paid for them. They were accrued rights and are not disturbed by the termination.
3. Mr Pavey has valued the incomplete work which would have been highly relevant if I were assessing damages in favour of the Owners. What I have to do is value what the Builder has done, not what it has not done.
4. Since the Contract has been wrongfully terminated the Builder is entitled to be paid for what it has done following lock up. It is not able to complete the next stage and submit a progress claim for the work that it has done since lock up. What stage beyond lock up had the work reached?
5. According to Mr Croucher, it is always difficult to assess the stage of construction reached in any renovation project because work is often done out of sequence compared with a new construction. However, he assessed the work done by the Builder that was beyond lock up together with the variations at $97,371.50, less credits to the Owners which he assessed at $1,492.50. The resulting balance according to his assessment was therefore $95,879.00. His general comment as to the quality of the Builder's work was that it was very good.
6. In more detail, Mr Croucher reconciliation of work since lock up was as follows:

Less Plastering and Plumbing in variations $ 6,808.80

1. Mr Varasdi challenged the assessment of Mr Croucher in two respects. He said that I should not allow a credit for plastering on Variation 18. He said that the plastering was already included in the Contract price. I do not accept that evidence. The Contract price did not include rebuilding the wall between the en suite and the powder room. It was a new wall and it was plastered. It was therefore included in the variation. He also says that the plumbing work claimed in Variation 18 was extra work. As I read Mr Croucher's report his methodology was to allow the whole of the plumbing and plaster and then deduct those included in the variations. I cannot safely interfere with his methodology. When Mr Varasdi's comments were put to Mr Croucher he acknowledged that Mr Varasdi was the person who prepare the variations but said that he could not make an assessment based upon his statement.
2. Mr Varasdi also said that there were two invoices totalling $1,795.66 that were not provided to Mr Croucher. In assessing the value of work done, whether and to what extent an amount set out in an invoice should be allowed is a matter of expert opinion. I am not an expert and so I am not able to say that those invoices should be allowed in addition to Mr Croucher's figures.
3. From Mr Croucher's figure I will deduct the following:

1. The Builder claims damages with respect to the Builder's margin lost on parts of the work contracted directly with the suppliers In regard to mechanical services, the parties signed a variation (Variation 25) expressly excluding that from the scope of works with an agreed credit to the Contract price, so that claim is not maintainable. The same applies to the margin on the balustrade (Variation 26). Any claim for a margin should have been included in that variation. It was not. The claim for a loss of the margin on the cabinet work is not maintainable as such, because an expense in excess of the prime cost allowance was not actually incurred by the Builder. The Contract came to an end without the Builder ever having purchased any cabinet work. What the Builder is entitled to is damages for breach of contract. Loss of profit on the remainder of the Contract that the Builder was not able to perform is recoverable as part of that but the quantification of the damage is a matter of expert evidence and the claim was not put or proven in that way.
2. The Builder claims the value of materials on site, namely copper piping which Mr Varasdi says was worth $1,090.00, roofing tiles which he says were worth $2,700.00 and a fire place and timber mantle which he says was worth $1,300.00. The Owners dispute these values. I have no independent valuation and if I were to allow anything for these I would have to take into account the cost to the Builder of removing all other demolished material from the site that had no value. This part of the claim fails for lack of evidence.
3. The Builder also claims interest. By Clause 34, the Contract rate of twenty per cent applies where the Owners have failed to pay a Progress Payment of the Final Payment. There has been no such failure. However interest may be allowed under s.53 of the Domestic Building Contacts Act 1995 and the Penalty Interest Rates Act 1983 on the amount payable to the Builder for its work. The Builder has been out of pocket for this money and the Owners have had the benefit of it. It is therefore appropriate to make an order for the payment of interest.
4. When the amount of $11,750.00 is deducted from Mr Croucher's figure of $95,879.00 the balance becomes $84,129.00. I calculate interest on that sum from the date of the Points of Claim, 22 December 2009, which is when the first claim for a monetary sum was made. At the statutory rates of 10% before 1 February 2010 and 10.5% thereafter, that amounts to $10,359.39.

1. There will be an order that the Owner pay the Builder $84,129.00 plus $10,359.39 interest, making together the sum of $94,488.39. I will reserve the question of costs for further argument.