Dierikx v Merrick

Evidence

1. The documents upon which the parties wished to rely have been marked as exhibits: Exhibit A for the applicants' two folders documents (the second containing the expert evidence) and Exhibit R for the respondents' documents. Documents marked for identification were the written submissions of the applicants (MFI 1) and the respondents (MFI 2) plus some pages which contained weather records (MFI 3).

Jurisdiction

1. As these proceeding relate to residential building work, the definition of "building goods or services" in section 48A of the HBA is satisfied. As these proceedings involve a claim for the payment of a specified sum of money, they involve a "building claim" within the meaning given to those words by section 48A of the HBA.
2. The subject building work was carried out as a result of a contract made in March 2018 and these proceedings were commenced in December 2019. Thus, they have clearly been commenced within time. The amount claimed exceeds the lower limit of $5,000 set by clause 2(3)(a) of the HBA and clause 12 of the Home Building Regulation 2014 and is below the upper limit of $500,000 set out in section 48K of the HBA. Accordingly, the Tribunal has jurisdiction under the HBA.

The relevant law

1. Subsection 18B(1) of the HBA provides the following statutory warranties in relation to residential building work: (a) a warranty that the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract, (b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new, (c) a warranty that the work will be done in accordance with, and will comply with, this and any other law, (d) a warranty that the work will be done with due diligence and within the time stipulated in the contract or, if no time is stipulated, within a reasonable time, (e) a warranty that, if the work consists of the construction of a dwelling, the marking or alternations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling, (f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes know to the holder of the contractor licence or person required to hold a contractor's licence, or another person with express or apparent authority to enter into or vary any contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires that work to achieve, so as to show that the owner relies on the holder's or person's skill or judgment.
2. Subject to sections 18BA and 18F, set out below, any breach of those warranties entitles the owner to make a claim for damages. When measuring damages, the fundamental principle, as stated by the High Court in Haines v Bendall [1991] HCA 15, is that "the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been if the contract had been performed". However, that principle is subject to the qualification that both the method of rectification and the cost of rectification must be reasonable: Bellgrove v Eldridge [1954] HCA 36.
3. Subsection 18BA(1), which imposes a duty on anyone who has the benefit of a statutory provided by section 18B, provides: Breach of a statutory warranty implied in a contract constitutes a breach of contract and accordingly: 1. a party to the contract who suffers loss arising from the breach has a duty to mitigate their loss, and 2. the onus of establishing a failure to mitigate loss is on the party alleging the failure.
4. Section 18F, which provides defences to a breach of the section 18B(1) warranties, is set out below: 1. In proceedings for a breach of a statutory warranty, it is a defence for the defendant to prove that the deficiencies of which the plaintiff complains arise from: 1. instructions given by the person for whom the work was contracted to be done contrary to the advice of the defendant or person who did the work, being advice given in writing before the work was done, or 2. reasonable reliance by the defendant on instructions given by a person who is a relevant professional acting for the person for whom the work was contracted to be done and who is independent of the defendant, being instructions given in writing before the work was done or confirmed in writing after the work was done. 1. A relevant professional is independent of the defendant if the relevant professional was not engaged by the defendant to provide any service or do any work for the defendant in connection with the residential building work concerned. 2. A relevant professional is not independent of the defendant if it is established that the relevant professional: 1. was engaged on the basis of a recommendation or referral of the defendant to act for the person for whom the work was contracted to be done, or 2. is, or was within 3 years before the relevant instructions were given, a close associate of the defendant. 1. In this section, relevant professional means a person who: represents himself or herself to be an architect, engineer or surveyor, or 1. represents himself or herself to have expert or specialised qualifications or knowledge in respect of residential building work or any particular aspect of residential building work, or 2. represents himself or herself to be engaged in a profession or to possess a qualification that is recognised by the regulations as qualifying a person as a relevant professional.

Contract

1. The contract was in the form of the Housing Industry Association (HIA) for a NSW Residential Building Contract for New Dwellings, edition 7. Provisions in that contract relevant to these proceedings are set out below when dealing with each of the issues to which those provisions relate.

Consideration

1. It is convenient to deal with the evidence and submissions on an issue-by-issue basis before setting out the Tribunal's decision on that issue and the reasons for that decision.

With whom did the applicants contract?

1. The aspects of the evidence to which the applicants referred in support of the claim that their contract was with the first respondent (Ty Merrick) and not the second respondent (Ty Merrick Building Pty Ltd) may be summarised as follows: 1. The name on the front of the contract is "Ty Merrick". 2. His name is also on "Schedule 1. Particulars of Contract". 3. The address for the builder is Mr Merrick's residential address and not the registered office for the company (A1/22, ie page 22 of the first volume of Exhibit A) although it is to be noted that Mr Merrick's residential address is listed as the company's principal place of business. 4. The "signature block" at R3/125 (ie page 125 behind tab 3 in Exhibit R) contains the name and signature of Mr Merrick and the instructions for the when the builder is a company have not been followed. 5. The building licence shown in the contract, 152527C, is Mr Merrick's (A25). 6. The company does not hold any building licence. 7. The certificate of insurance contained Mr Merrick's name alongside the words "Work to be carried out by" and his building licence number (R3/122) 8. Mr Dierikx's affidavit evidence was that Mr Merrick never mentioned the company name prior to him entering into the contract (A51 at [15]) and that was never challenged during his cross-examination. 9. Mr Merrick's trade insurance is in his personal name (A162). 10. The letterhead on which the quotes were provided (R3/65 and R3/85) does not contain the name of the company. 11. Those quotes contained the ABN for both Mr Merrick and the company. 12. There was an invoice dated 05 February 2018 (R3/83) that bore the name of the company and another invoice date for the payment of the 10% deposit (R96) that also bore the name of the company.
2. For the respondents, reference was made to the following evidence: 1. The contract contained the ABN of the company. 2. Invoices were issued to the applicants in the name of the company. 3. All trade invoices were issued to the company, not Mr Merick. 4. Mr Merrick is the sole director and secretary of the company. 5. Mr Merrick claimed in his affidavit (R3/3 at [12(c)]) to have "advised that I own the building company" but that claim is of less weight as it is not in the form of direct speech, noting that the affidavit was prepared by a lawyer.
3. The submissions for the applicants referred to the decisions in BH Constructions Pty Ltd v Kapeller [2019] NSWSC 1086 (Kapeller) and AAD Build Pty Ltd v Garside [2015] NSWWCATCD 7 (Garside) while the submissions for the respondents, in addition to Kapeller, referred to Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 (Pethybridge), Capello v Hammond & Simonds Pty Ltd [2020] NSWSC 1021 (Capello), Harold R Finger & Co Pty Ltd v Karellas Investments Pty Ltd [2015] NSWSC 354 (HRF), Lederberger v Mediterranean Olives Financial Pty Ltd [2012] VSC 262 (Lederberger) and Goncalves v Bora Developments Pty Ltd [2020] NSWCTAP 9 (Goncalves). It is noted that a number of those decisions refer to and quote passages from Air Tahiti Nui Pty Ltd v McKenzie (2009) 77 NSWLR 299 (Air Tahiti).
4. Relevant to these proceedings, what the above cases establish may be summarised in the following propositions: 1. The identity of a contracting party must be determined on an objective basis by examining and construing relevant documents in the factual matrix in which they were created and ascertaining between whom the parties objectively intended to contract (AAD at [52], following Air Tahiti and Lederbereger at [19]). 2. As a result, what one of the parties intended (ie subjective intention) is not determinative (AAD at [55]). 3. Where a contract is wholly in writing, unless an exception to the parole evidence rule applies, post-contract evidence should not be considered (Kapeller at [69] and [97], Goncalves at [54]). 4. It is relevant to consider whether an ACN was part of the communications that led to the contract (Pethybridge 56]). 5. The Tribunal is entitled to presume that parties to a contract sought to comply with the law (Kapeller at [112-115]). 6. The obligations created by section 18B of the HBA apply by reference to who was the building according to the contract, not according who holds/held the building licence (Capello at [89]).
5. Apply those principles to the evidence, the address shown on the contract is equivocal, being both the residential address of Mr Merrick and the principal place of business of the respondent. There does not appear to be any evidence that Mr Merrick's trade insurance was raised during the pre-contract period.
6. The fact that the quotes contained the ABN for both Mr Merrick and the company is of less moment since one of those numbers is so small as to be almost illegible. Even if only the larger ABN is considered, that does not directly identify the company since it is necessary to look up the ABN in order to ascertain that it is the ABN of the company with the result that, while the ABN provides strong evidence of the intention of the respondent, it is only a factor to be taken into consideration in any objective analysis.
7. The fact that invoices were issued to the company is not considered relevant as that is post-contractual conduct. The fact that post-contract invoices were issued to the owners by the company is likewise not relevant. As to the two pre-contract invoices, while they may be said to show the subjective intention of the respondents, they are not determinative and cannot be considered any higher than matters to be taken into consideration. The fact that Mr is the sole director and secretary of the company is, of itself, of little weight unless that was communicated to the applicants and the evidence of that lacks the weight it may have had if there had been evidence of relevant conversations in direct speech. The fact that the contract contained the ABN of the company is a relevant consideration.
8. As a result, the aspects which provide support for the respondents' contention that the contract was between the applicants are (1) the pre-contract invoices bearing the name of the company and (2) the contract containing the ABN of the company.
9. However, in any objective consideration of intention, those matters which can be taken to point towards the applicants contracting with the company are far outweighed by (1) the name of Mr Merrick appearing more than once in the contract, (2) the name of the company not appearing in the contract and the contract being signed on a basis that is not only consistent with Mr Merrick being the contracting party but also gives no indication of the company being a party to the contract, (3) the insurance certificate containing Mr Merrick's name and his licence number, (4) the fact that the same licence number is set out in the contract, (5) the letterhead on which the quotes were provided does not contain the name of the company.
10. Since the documentary evidence clearly favours the applicants' contention that their contract was with Mr Merrick, it would require strong evidence from relevant witnesses to 'tip the scales' in favour of the respondents' contention that the applicants' contract was with the company. The fact that Mr Merrick's evidence on this point is of less weight and the failure to test the clear evidence of Mr Dierikx that Mr Merrick never mentioned the company in both his affidavits (A51 at [15] and A152 at [4]) fall short of what is required.
11. Support for the conclusion of the Tribunal that the building contact was between the applicants and Mr Merrick is to be found in the fact that such an outcome complies with the provisions of the HBA in two respects: first, the requirement in section 92 for building work to be insured by the builder; secondly, the section 4 requirement for a builder to be licensed. The evidence does show that Mr Merrick holds such a licence but does not show that the company holds such a licence. Put another way, to attribute to Mr Merrick that he was using his company to contract to undertake building work is to attribute to him that he is deliberately breaching the HBA.
12. In view of the finding that the building contract was between the applicants and Mr Merrick, the Tribunal proceeds to consider each of the remaining issues on the basis that the building contract dated 09 March 2018 was between the applicants and the first respondent.

The repudiation/termination allegations

1. Three matters were advanced in support of an allegation that the applicants repudiated the contract: first, their conduct in November 2018; secondly, emails sent in March and May of 2019; thirdly, the failure to pay an invoice dated 07 September 2018. Dealing with those in turn.

November 2018 conduct

1. The first respondent's evidence was that on 24 or 25 November 2018 the applicants "came into early possession of the site" without either the first respondent's consent or an occupation certificate from the local council (R3/14 at [87]) and that on 26 November 2018 the applicants left to go on an overseas holiday (R3/14 at [88]).
2. Although Mr Merrick's affidavit contained a suggestion that he received a text message from the applicants on 26 September 2018, no copy of any such message was provided. That affidavit went on to suggest he "verbally advised them" they could not move into the site but there was no indication of when any such conversation occurred, where it occurred, who was present or what was said with the result that such evidence lacks weight. This topic was raised with Mr Merrick at the conclusion of his cross-examination from which it is noted that he continued to work on site after the applicants moved in.
3. The affidavit of Mr Dierikx sets out, in direct speech, a conversation he says he had with Mr Merrick around 09 November 2018 in which Mr Merrick agreed to permit the applicants to "move on site and live between the camper trailer and the shed". That evidence was not challenged in cross-examination.
4. As between the unchallenged direct speech evidence of Mr Dierikx and the evidence of Mr Merrick which lacks details, the Tribunal prefers the evidence of Mr Dierikx and finds that there was a conversation in which the first respondent approved the occupation of the premises by the applicants but that finding does not finalise this issue because the approval was not in writing.
5. The Tribunal notes that while any breach by a party to a contract gives the other party a right to claim damages, the common law right to terminate a contract requires: (1) a breach of an essential term of the contract, or (2) a significant breach of an intermediate term or (3) repudiation of the contract by the other party: Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61.
6. Did the applicants' conduct, in not obtaining written approval, amount to repudiation of the contract? At common law, it is difficult to see how the conduct of the applicants could be said to amount to its repudiation as they clearly intended for the builder to continue with the work with the result that their conduct cannot be said to evince an intention to no longer be bound by the contract. However, clause 26 of the contract deemed such conduct to be a substantial breach by providing as follows: If the owner: (a) enters into occupation of the site or any part of the site; (b) takes control of the building works or the site; (c) prevents or inhibits the builder from carrying out the building works, without the builder's written consent, the owner commits a substantial breach of this contract entitling the builder to elect to either: (d) treat the owner's actions as a repudiation of the contract and accept that repudiation; or (e) do either of the following: (i) suspend the carrying out of the building works under Clause 25; (ii) give the owner notice of default under clause 27.
7. As to paragraphs (a), (b) and (c), the fact that the applicants entered into part of the site is sufficient to give the first respondent rights under paragraph (d) or paragraph (e). It is clear, from the evidence that the first respondent did not either suspend the work or give notice of default. Since paragraph (e) is not applicable, it is only necessary to consider paragraph (d) which gave the first respondent the right to "elect to … treat the owner's actions as a repudiation and accept that repudiation".
8. An election to affirm a contract may be inferred from conduct which is consistent only with the continued existence of the contract, such as its continued performance: Carr v J A Berriman Pty Ltd [1953] HCA 31. In this case, it is clear that the first respondent was never excluded from the site by the applicants and that, by continuing with the building work after the applicants moved on site, the first respondent elected not to treat the applicants' conduct as repudiation.
9. The affidavit of Mr Merrick (R3/17 at [105]) said no more than "On 14 February 2020 I served notice on the Home Owners pursuant to clause 26.1(a)-(c) of the Contract." It is noted that the use of the word "pursuant" suggests those words were drafted by a lawyer and that documents were annexed in support of what appeared in paragraphs [102] and [106] of the affidavit. Regardless of whether its omission was accidental or intentional, that document does not appear to have been included in the evidence.
10. Had a copy of the document been provided to the Tribunal, it would have become clear whether that notice was sent by the first respondent or the second respondent. If that document was sent by the second respondent, then it was not sent by a party to the contract.
11. In the respondents' written submissions, it was contended that there was acceptance of the applicants' conduct in November 2018 as repudiation of the contract because "On 14 February 2020 the Respondents wrote a letter to the Home Owners and sent the letter by registered post to their home address". The use of the word "Respondents" does not clarify which respondent sent the notice. Those written submissions set out, in two paragraphs, what was said to be the contents of that letter.
12. Even if it accepted that written notice was given on 14 February 2020, and even if it is assumed that notice was given by the first respondent, and that the contents were as suggested in the written submissions, that purported acceptance of repudiation came well after completion of the work and almost three months after these proceedings were commenced.
13. An election whether to affirm a contract or terminate it cannot be unreasonably delayed: Government of Japan v Global Air Leasing Pty Ltd [2003] QSC 221. In this case the purported election to terminate the contract was well after any reasonable period for the builder to make an election whether to continue with the contract or to terminate it.
14. On this aspect of the proceedings, the Tribunal makes the following findings: 1. On or about 25 November 2018 the applicants entered into possession of part of the site. 2. That conduct amounted to a substantial breach only by reason of clause 26. 3. The builder did not then suspend the work under clause 25. 4. That builder did not give notice of default under clause 27 at that time. 5. The builder elected to continue with the work. 6. The builder was not excluded from the site by the applicants. 7. The evidence does not establish that the first respondent gave notice under clause 27 on 14 February 2020. 8. Even if such notice was given, it was of no effect since an election had already been made not to repudiate the contract. 9. Even if such notice was given, it was not given within a reasonable period after the conduct on which it was based. 10. Although amounting to a breach of the contract by reason of clause 26, the conduct of the applicants did not cause any damage to the builder. 11. The builder has not made any claim for such damage. 12. There is no evidence to support a claim for any such damage.
15. Since the effect of termination of a contract as a consequence of repudiation is to leave in place the rights and obligations of the parties up to the date of termination but to relieve them of any obligation for future performance (McDonald v Dennys Lascelles Ltd [1933] HCA 25 and Mann v Paterson Constructions Pty Ltd [2019] HCA 32), any claim for defective work prior to that termination is not affected but such termination would impact on a claim for incomplete work since the obligation to complete would come to an end at the date of termination. Accordingly, the suggestion that the contract was termination by a written notice sent on 14 February 2020, shortly after this litigation was commenced, appears to be a lawyer-driven attempt to avoid liability for incomplete work.

March and May 2019 emails

1. The respondents' written submissions refer to the 20 March 2019 email from Mr Dierikx to Mr Merrick and quotes word from two sentences in that email which suggest a desire to compile a list of defects and withhold further payment until the work has been completed. Reference was also made to a 13 May 2019 email from the Mr Dierikx to Mr Merrick and one paragraph from that lengthy email was quoted.
2. On the basis of that evidence, it was suggested the applicants had not given the builder an opportunity to address the incomplete works, "that they asserted that TMB Pty Ltd were not entitled to be paid for their work done" and that they had unilaterally declared themselves to no longer be bound by the contract.
3. It was submitted that the question the Tribunal should ask is "Would the Builder have rectified the incomplete works under the Contract, but for the Home Owners repudiation of the Contract?" and that such a question should be answered in the affirmative.
4. In order to accurately assess what occurred on 20 March 2019, it is necessary to read both the email from Mr Merrick and the reply to it. In his 11.35am email to Mr Dierikx, Mr Merrick said: All scope of works [has] now been completed in your new home. All defects are per your list have also been addressed and completed. We understand the issue with the tiles in the [C]oolgardie room, after a discussion with Scott we are prepared to have the issue fixed, however we need to wait for the plumber to install the down pipes[.]. [U]nfortunately this has nothing to do with us as you are using your own plumber. Once the plumber has sorted out the plumbing we can most certainly come out and fix the tiles. As per contract all building work has been completed there for the final invoice must [be] paid as soon as possible as it is way overdue. Please forward the monies into our nominated bank account as stated on the invoice. I have attached another copy for your records. Please note as per this email there is 10% late fee each week invoice is paid late. If you have any concerns please call me.
5. The same day reply at 8.35pm from Mr Dierikx disputed that the work was completed and that all the defects had been addressed. This email included a sensible suggestion that a building inspector compile a "full and final list of defects", indicated that payment of the final invoice would be withheld and concluded by saying: "For the purpose of clarity and accurate recording of facts, please conduct all replies/correspondences by email from this point forward."
6. It is difficult to now accept a suggestion now that the Mr Dierikx's email dated 20 March 2019 prevented the completion of the work when Mr Merrick asserted earlier that day that the work was complete. From a consideration of the entire contents of those emails, the highest that can be said for the first respondent is that the applicants were withholding final payment until defective work was rectified and Mr Merrick agreed to complete work which Mr Dierikx claimed was incomplete.
7. As a result, the answer to the question "Would the Builder have rectified the incomplete works under the Contract, but for the Home Owners repudiation of the Contract?" is, by reference to the contemporaneous documents, that the builder would not have rectified the incomplete work but would have asserted that the works are not incomplete. It is noted that Mr Merrick's evidence does not appear to include any response to the 20 March 2019 email from Mr Dierikx.
8. Turning to the 13 May 2019 email, reading the entire email and not just the portion quoted in the respondents' submissions, it is clear that this email was sent after Fair Trading had become involved and in the context of a dispute over whether work was incomplete or defective.
9. It is clear, from both the 20 March 2020 and 13 May 2020 emails, that the applicants were alleging there had been a breach of contract, ie a failure to complete work and defective work, and were not paying any further amount as a set-off to the cost of completion and rectification - as is now the case.
10. The words quoted in the respondents' submissions, plainly not drafted by a lawyer: "Therefore we insist the contract be cancelled (meaning you will not be receiving final payment)" are plainly doing no more than indicating that no further payment will be made because of the alleged cost of completion and rectification. Those words do not, as was submitted for the respondents, "clearly evince an intention to no longer be bound by the Contract": they clearly evince an intention to enforce rights under the contract in respect of defects which were listed in the first three pages of that 13 May 2020 email.
11. As was noted in the respondents' written submissions, Cohen v Zanzoul trading as Uniq Building Group [2020] NSWSC 592 at [105] makes it clear that "repudiation by the promisor does not terminate the obligations under the contract. Determination of the contract only happens when the promisee decides to terminate performance by accepting repudiation." (citations omitted)
12. Even if it could be said that the words of the 13 May 2020 email amounted to repudiation of the contract, no evidence was provided of any election to accept that repudiation and terminate the contract. In fact, having regard to the nature and extent of the defects alleged in that email, its wording is more consistent with the applicants terminating the contract based on the refusal to complete and rectify the work amounting to a repudiation of the contract by the first respondent.

September 2018 invoice

1. The respondents' written submissions also contended that failure to pay "account #125" (R3/213), which was an invoice dated 07 September 2018 for $12,212.00 with a description of "Complete job", amounted to repudiation. However, it is difficult to see how a failure to pay one invoice involves a breach sufficient to constitute repudiation and, even if it did, there is no evidence that there was acceptance of that repudiation. As a result, this claim, which was referred to as the "alternate repudiation", is also rejected.
2. In closing submissions, it was suggested that the applicants repudiated the contract in that they refused to let the builder carry out repairs, but that submission was not accompanied by a reference to any evidence of either the builder offering to undertake repairs or the applicants' refusal of such a request. Nor was there any reference to evidence whereby there was an acceptance of such alleged repudiation.
3. Thus, the Tribunal does not consider any of the respondents' allegations in relation to repudiation and termination have been established. As a result, it is necessary to consider the applicants' allegations of work said to have been either incomplete or defective.

Was there incomplete or defective work?

1. It is convenient to assess the evidence and submissions in relation to each of the defects, both as to liability and quantum, before considering two further allegations: first, that a section 18F defence applies to some of those items; secondly, that there was a failure on the part of the applicants to mitigate their loss.
2. The applicants' expert witnesses were Mr Moroney (a building consultant) Mr Frost (a structural engineer) and Mr Macansh (a quantity surveyor). The respondents' expert was Mr Shepherd (a building consultant). On 12 January 2021 all four experts signed a Joint Report which became part of the first volume of Exhibit A. All four experts were present during the hearing for an hour in the morning when their views were tested by cross-examination which covered items 1, 4, 7, 9, 10, 11 and 13.
3. There are portions of the affidavits of Mr Dierikx and Mr Merrick, along with documents annexed to those affidavits, which also go to the issues raised in relation to these items. The Tribunal was also provided with submissions from both parties: written submissions prior to the hearing and oral submissions on the afternoon of the day of the hearing.

Item 1

1. The two external timber staircases, one with four treads on the southern side and the other with six treads on the northern side, did not comply with the National Construction Code (NCC) in that the tread lengths averaged between 210mm and 220mm which is less than the specified minimum of 240mm. The NCC is a uniform set of technical provisions for the design, construction and performance of buildings throughout Australia and is given the force of law in New South Wales by the Environment Planning and Assessment Act 1979. The respondent's expert conceded this was a defect. This work involved clear breaches of paragraphs (a), (c) and (f) since the work was not done with due care and skill, does not comply with the NCC and is not fit for purpose.
2. In the Joint Report, the difference between the suggested costs of rectification of $5,643.00 and $1,180.22 is that Mr Shepherd makes no allowance to remove and replace the concrete pier pads. Mr Moroney suggested the tread width averaged between 210mm and 220mm which would suggest reconstruction would extend the point of attachment to the concrete pier by between 80mm and 120mm for the staircase with four treads and between 120mm and 150mm for the staircase with six treads. Mr Shepherd suggests the extra length would be 88mm and 132mm respectively on a concrete pad with a 400mm diameter.
3. The cross-examination raised the question of whether a replacement stair kit from Bunnings should be used, despite the fact that none of the four experts suggested that. Further, no evidence was led as to what the cost of that would be. As a result, the cross-examination on this item did not assist the Tribunal.
4. A consideration of the photo of the northern entrance steps (A2/11) does not support the view that the concrete pads could accommodate an attachment 88mm further from the house. The photo of the southern entrance steps (A2/12) suggests the right-hand side pad would not need to be replaced but the left-hand side would if the point of attachment was extended by 132mm. On that basis the Tribunal allows for the replacement of three, rather than four, concrete pads.
5. The difference between $5,643.00 and $1,180.22 is $4,462.78 and ¾ of that difference is $3,347.08. Adding that to $1,180.22 gives $4,527.30 as the amount the Tribunal considers to be a reasonable cost of rectification for item 1.

Item 2

1. The Joint Report recorded that this item, relating to bearers exposed to the weather, was covered by Item 14.

Item 3

1. The Joint Report recorded that this item, which related to Coolgardie room flashings, was agreed at $2,337.08.

Item 4

1. This item also relates to the Coolgardie room. The first aspect that needs to be considered is whether this area is to be treated as an external area (for which the applicants contend) or as in internal area (which is the respondents' case). The plans showed this room as an external area but Mr Merrick evidence on this point (R3/15 at [93(a)]) was as follows: The Coolgardie Room was not initially waterproofed as I was advised by the Home Owners that this room was going to be enclosed and not exposed to the elements. It was always the Home Owners intention to enclose the room with windows and screens. This was also my understanding based on photos provided by the Home Owners. I [annex] hereto and [mark] "TM27" a copy of a photo displayed on the Harkaway website.
2. There are a number of deficiencies in that evidence: first, it does not indicate when the alleged advice was given; secondly, it does not indicate whether that advice was given orally or in writing; thirdly, if in writing, no copy of the document was provided; fourthly, if orally, there is no indication of where the conversation occurred; fifthly, there is no indication of to whom Mr Merrick spoke, and sixthly, there is no indication of what was said. Seventhly, Mr Merrick's suggestion as to what was "always the Home Owners intention" has no probative force. Eighthly, if Mr Merrick's understanding was, as he suggests, based on photos provided by the owners then no such photos were annexed to his affidavits. Ninthly, merely annexing a copy of a photo displayed on the Harkaway website (R217) without any indication of when the website was viewed does not add to the case against the applicants on this point. It is noted that Mr Merrick conceded during cross-examination that the photo annexed to his affidavit (R217) was not obtained from the applicants.
3. The conversation alleged by Mr Merrick was denied in the affidavit of Mr Dierikx (A1/157 at [53]) who denied both any such conversation and the provision of any such photograph.
4. That being the evidence, the Tribunal is not satisfied that the allegation against the applicants has been established. Further, even if the alleged conversation occurred, that would constitute a variation to the contract and clause 18.2 of the contract (R3/134) provided: If the owner asks for a variation, the builder must reply in writing as soon as is reasonable. (emphasis added)
5. In the margin of the contract, alongside clause 18.2, there appear the words "Refer to Clause 40 for mandatory conditions". Within Clause 40 (R3/142), headed "Mandatory Conditions", there appear the following words at Clause 40.3(b): any agreement to vary this contract, or to vary the plans and specifications for the building works, must be in writing and signed by the parties."
6. Accordingly, even if there was a conversation of the kind alleged against the applicants, such a conversation was not sufficient to vary the contract and thereby change the obligation of the builder in relation to the Coolgardie Room. As a result, Mr Shepherd's opinion that there is no defect cannot be sustained and the Tribunal accepts Mr Moroney's opinion that the lack of waterproofing constitutes a defect which involves a failure to comply with the NCC and applicable Australian standards and this breaches of paragraphs (a) and (c) of section 18B(1) of the HBA.
7. The issue of liability having been determined, and since it is not contested that the area in question was not waterproofed, it remains to consider the cost of rectification: the applicants' contending for $44,241.00 and Mr Shepherd suggesting $21,752.01.
8. Mr Moroney set out his recommended scope of works which Mr Macansh quantified at $44,241.00. In his oral evidence, Mr Macansh indicated that his costing was based on an area of 56 square metres which he obtained from the plans. In his report (R2/16-17), Mr Shepherd (1) accepts that particle board should not have been used, (2) suggests the BCA and Australian Standards to not require waterproofing for this area, and (3) maintains it is sufficient for the substrate to be water resistant. From the oral evidence, it appears that Mr Shepherd's calculations were based on an area of 48 square metres.
9. By reason of the evidence of Mr Moroney, which referred to the relevant provisions of the NCC and Australian Standards, which evidence was not challenged in cross-examination, the Tribunal does not accept the opinion of Mr Shepherd that water resistant is sufficient. The area of 56 square metres is accepted as it was based on the plans and no basis was asserted in support of any lesser area. There was no effective challenge to either the scope of works suggested by Mr Moroney or the costing of that scope of works by Mr Macansh. For those reasons, the Tribunal accepts the applicants' expert evidence an considers a reasonable cost of rectification for this item to be $44,241.00.

Item 5

1. The Joint Report recorded that this item, which related to stormwater drainage, was withdrawn.

Item 6

1. The Joint Report recorded that this item, which related to toe installation of window awnings, was agreed at $1,919.91.

Item 7

1. This item relates to the positioning of the decorative corbels which are clearly set out at different spacings, evident from the photo in Mr Moroney's report (A36). Mr Moroney noted that these corbels were poorly set out and did not comply with the approved plans and manufacturer's specifications. He suggested all corbels need to be removed and replaced. His evidence included a scope of works and a costing for that work of $4,326.00 was provided by Mr Macansh.
2. Mr Shepherd suggests there is no breach of the Building Code of Australia (BCA) or Australian Standards. There is a suggestion that the applicants must have been satisfied with the corbels, since they painted them, and that the overall appearance is good. He agrees that the corbels are at different setbacks from a corner and suggests the addition of a corbel at three external corners to address that. On that basis, his suggested cost of rectification is $1,679.62.
3. Mr Moroney was cross-examined on this item at the hearing. His evidence was that the corbels are supposed to be spaced 600mm apart, but they are "all over the shop". It was put to him that he had not measured the distance between the corbels to which he replied that he did not need to do that. Reference to the photos (A36, R2/23-24) confirms that.
4. The Tribunal accepts that the placement of the decorative corbels was not done with due care and skill and thus involves a breach of section 18B(1)(a) of the HBA. It is also clear that the method of rectification suggested by Mr Shepherd will not adequately address this issue. The scope of work and its costing appear reasonable and were not challenged during cross-examination. Accordingly, the Tribunal considers a reasonable cost of rectification for the item to be $4,326.00.

Item 8

1. The Joint Report recorded that this item, which related to the living room bay windows being out of vertical alignment, was agreed at $1,785.00.

Item 9

1. This item relates to the fact that the weatherboards were affixed with exposed nails rather than with concealed fixings as indicated in the Harkaway Homes construction manual which specifies a method whereby a locking tab at the back of the weatherboard enables nails to be placed at the top of each weatherboard which is then concealed by the weatherboard above. This system results in self-levelling construction, saves time and creates a finish free of any exposed nail heads.
2. The focus of cross-examination was whether the Harkaway Homes manual took precedence over the BCA or whether the method set out in the manual was a performance-based solution. However, it is not necessary to have a breach of the BCA in order to have a breach of subsection 18B(1). Paragraph (a) of that subsection is met when either building work is not done with due care and skill or is not done in accordance with the plans and specifications set out in the contract.
3. Even if it could be said that the Harkaway Homes manual was not part of the plans and specifications set out in the contract, the builder's work was not done with due care and skill in that the builder was constructing a Harkaway Homes "kit home" and failed to build in accordance with the clear instruction in the manual with the result that the Tribunal finds that there was a breach of section 18B(1)(a).
4. Mr Shepherd suggests that the rectification method proposed by Mr Moroney is out of proportion because this item involves only an aesthetic issue which he maintains is "not obvious when viewed from the Fair Trading usual viewing position" but does not give any evidence of what is that usual viewing position. Mr Moroney describes the outcome of the method of affixation of the weatherboards as "unsightly" and provides a photo in support of his view (A2/44).
5. The Tribunal is not satisfied that painting over the nails would be a satisfactory solution as it would only lessen the visibility of the nails which would not have been there if the instruction in the Harkaway Home manual had been followed. It is noted, from the affidavit of Mr Merrick (R3/10 at [66] that he had used this product previously and that he claims to have had a discussion with Mr Dierikx after the weatherboards were affixed. Mr Merrick should have known how to install the weatherboards by reason of his previous use of them and, if he considered there were reasons to nail them in a visible manner, he could and should have discussed that with Mr Dierikx before and not after he did that work.
6. The Tribunal is satisfied that the outcome is unsightly in a significant respect and that the proposed method of rectification is reasonable. Mr Moroney's scope of work, when costed by Mr Macansh, produced a figure of $40,830 as the cost of rectification (noting that the figure of $40,380 in the Joint Report is a typographical error). Mr Shepherd suggested a reduction of 50% of the $5,572 cost of painting due to areas currently not painted and that reduction appears reasonable. As a result, the Tribunal assesses $38,044.00 as the cost of rectification for this item.

Item 10

1. The installation of a combustion wood heater gave rise to this item and the evidence of the parties is summarised below.
2. In his affidavit (A1/60 at [80-81]), Mr Dierikx says that, when he became concerned the specified insulation material may not have been installed, he consulted photos taken during the work (A1/147-148) which seemed to show the fireplace sitting on bare timber floorboards. He went on to say that he has since had the fireplace inspected and rectified at a cost of $1,500 (excluding GST) which was said to have revealed that there was "some 6mm villa board beneath the fire box, however the installation was not to recommendations and the tiles in front of the fireplace did not extend out far enough". The invoice of Mr Fragar (A1/150) only says "Removal of installed fire, Reinstall to safety standard & repair hearth to standard." Mr Moroney's report suggested a failure to install a 12mm cement fibre sheeting required by the relevant installation specification. At the hearing, Mr Moroney conceded that he did not inspect the fireplace while it was exposed and that his opinion was based on the photos provided to him.
3. Mr Merrick says he installed two 6mm thick sheets of fibre cement sheeting (R3/14 at [89(b)]) and that he could have advised the applicants what was done if they had asked him. He suggested that the invoiced amount reflects removal of gyprock sheeting and replacing it after it was seen that the fireplace was compliant whereas a small inspection hole would have been cheaper and sufficient method of inspection. Mr Shepherd suggested that the invoice only reflects an inspection that could have been conducted for $150 instead of $1,500.
4. Mr Dierikx's evidence appears to include his suggestion of what Mr Fragar found and that is of lesser weight than observation evidence of Mr Fragar. The invoice of Mr Fragar does not suggest any defect and the photos do not provide a clear indication of what was done. Mr Dierikx's suggestion that 6mm villa board was found beneath the fireplace supports Mr Merrick's evidence that two 6mm thick sheets were used. That being the position, the applicants, who bear the onus of proof, have not satisfied the Tribunal that this item involves a defect.
5. While Mr Shepherd appears to have conceded an amount of $150 for an inspection, even that amount is not allowed for three reasons: first, if there is no defect then there is no basis for an award of damages; secondly, there is no evidence that Mr Dierikx asked Mr Merrick what was done before engaging Mr Fragar; thirdly, a $150 cost of inspection (if incurred) would have been a cost of the proceedings. The Tribunal does not allow any amount for this item.

Item 11

1. In the Joint Report, for this item, it was noted that the experts agreed that the front facing of the sink cupboard was out of alignment and that there were scratches on the cupboards.
2. For the applicants, Mr Moroney suggested (A2/52 at [157]): "The kitchen dishwasher & Benchtop will need to be removed & new side panels and front face panels installed so that the finish is to be manufacturer's requirements". Mr Macansh costed that work at $5,190 (A2/322).
3. The response of Mr Shepherd (R2/32-34) was that the cost of rectification was excessive as there were only two small pieces of infill trim that needs to be removed and replaced and his suggested cost of rectification was $1,077.53. He also questioned whether the scratch to the dishwasher occurred before or after the applicants taking possession.
4. There does not appear to be any evidence on that last point, from the applicants, who bear the onus of proof. The Tribunal considers the cost of rectification proposed for the applicants to be excessive and that a reasonable cost of rectification for this item to be the amount suggested by Mr Shepherd, namely $1,077.53.

Item 12

1. The Joint Report recorded that this item, which related to the rangehood exhaust ducting being incomplete, was agreed at $300.00.

Item 13

1. Both experts agree that the tiles in the en suite shower do not have sufficient fall, that water pools and that there is lipping in the tiles. The dispute is as to the cost of rectification.
2. Mr Macansh, costing the scope of work prepared by Mr Moroney (A2/56), suggests an amount of $3,070 (A2/323). Mr Shepherd suggests $1,032.33 (R2/37). The difference between those amounts arises because Mr Shepherd considers only four floor tiles need to be removed and replaced, without damaging waterproofing, while Mr Moroney's scope of work involves removing all floor tiles in the shower and the first row of wall tiles.
3. The Tribunal is not satisfied either that four floor tiles can be removed and replaced without compromising the waterproofing or that those four floor tiles can be removed and replaced with the wall tiles remaining in place. The response to Mr Shepherd's views by Mr Moroney (A2/132-133) is accepted. As a result, the reasonable cost of rectification for this item is considered to be $3,070.00.

Item 14

1. In relation to each of items 14 to 20, the experts agree there is a defect and agree on the scope of work that is required but do not agree on the cost of rectification. These items require a consideration of the report of Mr Frost for the applicants and the response from Mr Shepherd. There were no written or oral submissions provided to the Tribunal by either party in relation to these items.
2. The rectification cost for Item 14, as set out in Mr Frost's report A2/290-291 and A2/302-305, totalled $14,970. However, in the Joint Report the competing amounts were $4,561.00 for the applicants and $3,590.81 for Mr Shepherd. As (1) no explanation was provided for the reduction in the amount suggested for the applicants, (2) the amount of $3,590.81 suggested by Mr Shepherd was not challenged, and (3) the bold type in the Joint Report (The total length of bearer to be covered is 31m) matches the 31m show at line 14 in Mr Shepherd's costing (R2/45), the Tribunal adopts that amount and finds the reasonable rectification cost for this item to be $3,590.81.

Item 15

1. This item relates to the sub-floor bracing. The competing amounts in the Joint Report are $2,927.00 (originally $3,147.00) and $1,221.48. It appears, from a comparison of the details in the reports of Mr Frost and Mr Shepherd, that the difference between those amounts is attributable to Mr Frost allowing for work to be done to confirm all the connections which work has been included on the costings of Mr Macansh.
2. The Tribunal considers the applicants are entitled to recover for work required to rectify a defect and not for work intended to confirm matters. As a result, the Tribunal considers a reasonable amount to allow for this item is $1,221.48.

Item 16

1. This item relates to an allegation of inadequate support of the floor bearers beneath the bay window in bedroom 1. There is agreement that one extra bearer should be installed. The suggested rectification costs are $675.00 and $486.97. It appears to the Tribunal that the description of the work by Mr Shepherd is minimal and the more detailed description provided by Mr Macansh following the scope of work prepared by Mr Frost is preferred. As a result, the Tribunal determines that the appropriate amount for this item is $675.00.

Item 17

1. As a result of a revision in the number of lineal metres from 124 to 135, Mr Shepherd agrees with the amount suggested in the applicant's case with the consequence that the agreed cost of rectification, as shown in the Joint Report, is $2,449.96.

Item 18

1. The Joint Report recorded that this item, which related to the shear capacity of a bearer on the verandah, was agreed at $163.80.

Item 19

1. The Joint Report recorded that this item, which also raised another shear capacity issue in relation to the verandah, was agreed at $389.00

Item 20

1. This item, which involves the eccentric loading on sub-floor posts by the bearers of the Coolgardie Room floor, is an agreed defect. Again, the $16,316 cost originally suggested by Mr Macansh became $3,928 by the time of the Joint Report and that amount compares to $1,943 suggested by Mr Shepherd.
2. Simply stated, the method suggested by the applicants' experts involved the provision of temporary support, removing the existing sub-floor posts and then fixing sub-floor posts in accordance with the manufacturer's instructions. Mr Shepherd's method of rectification was to simply install additional posts next to the existing posts and the Joint Report recorded agreement with that method.
3. By reason of (1) no explanation being provided for the amount of $3,928 now suggested for the applicants, (2) the method of rectification proposed by Mr Shepherd having been agreed, and (3) the amount of $1,943.00 suggested by Mr Shepherd not being challenged in cross-examination, the Tribunal adopts that amount and finds the reasonable rectification cost for this item to be $1,943.00.

Item 21

1. The Joint Report recorded that this item, which related to a roof beam in the Coolgardie room, was agreed at $90.00.

Item 22

1. This defect relates to the east-facing carport which, after being completed in December 2018 collapsed a year later, at about 3.30pm on Saturday 07 December 2019.
2. Mr Dierikx's affidavit that, when the carport collapsed, one motor vehicle was written off and the other required significant repairs. He said it was necessary to pay for a crane to lift debris so the cars could be removed. Omitting questions directed to insurance claims for damaged vehicles, it became clear in cross-examination that Mr Dierikx was home when the carport collapsed. It was suggested his insurance claim said the wind affected the collapse, but no such documents became evidence in the proceedings. It was put to Mr Dierikx that the strongest wind speed was a 50 km/h gust at 12.53pm and that, at 3pm, there was a wind from the west at 22 km/h. It was not put to Mr Dierikx that there was a vehicular impact with the carport or that such an impact caused its collapse.
3. In his affidavit, Mr Merrick's maintained that the carport was built in accordance with the plans supplied by the applicants and using the materials supplied by Hunter Frames & Trusses.
4. Mr Moroney's opinion (A2/76-77) was that the causes of that collapse were (1) the wrong external timber was used, (2) the vertical posts were not installed in accordance with the approved plans, (3) those vertical posts have excessive notches to support the roof beams and there are no bolt connections between the posts and the beans, and (4) the cross-bracing timber was of deficient quality and was insufficiently attached to the posts by nails. His report contained a scope of works (R2/92-93) and an estimated costing, excluding allowances and GST, of $44,757 (R94-96). Mr Frost also prepared a detailed costing which totalled $46,791.40 on the same basis.
5. By the time Mr Shepherd conducted his inspection, some demolition work had occurred although original post supports were in place. After noting that supports at the rear were bent towards the rear of the carport "whilst others were bent in a different direction", he suggested that raised a question of whether the collapse was caused by a motor vehicle impact and said he could not accept that it was only a builder's defect that caused the collapse (R2/62). He also noted that the eight concrete piers would only require three cubic metres of concrete, not six as suggested by Mr Moroney and Mr Frost. Mr Shepherd suggested cost of rebuilding was $25,729.89 (R2/63-64).
6. In the Joint Report, it is recorded that a site inspection revealed that the post had not been embedded in the piers and therefore would have required cross-bracing. It was agreed that what was built was not as shown on the plans. During the hearing, there was no cross-examination of any expert in relation to the collapse of the garage.
7. The applicants' written submissions did not deal with this item. In relation to the carport, the respondents' written submissions suggested: "There is some issue arising from the insurance documents, which suggest that its failure may have been as a result of an impact, with a vehicle. On this basis the Tribunal needs to be careful finding the builder was the at fault for the collapse".
8. The oral submissions for the applicants contended that the assertions of wind and motor vehicle impact as causes should be rejected as there was no evidence to support either of those suggested causes. It was also noted that the experts had agreed the carport was not built according to the plans.
9. The oral submissions for the respondents suggested that the fact that there were photos showing motor vehicles touching the bracing provided support for the suggestion that motor vehicle impact was a cause and that there was significant wind on the day the carport collapsed. On that basis, it was submitted the builder's work was not the cause of the collapse of the carport.
10. In the photos which form part of Mr Moroney's second report, dated 15 February 2020, there are two photos of vehicles in the carport with timber that appears to be touching those vehicles (A2/85 and A2/87). However, on the basis of photos alone that leaves two possibilities: either the vehicle came into contact with the timber or the timber came into contact with the vehicle. To find that vehicular impact caused or contributed to the collapse of the carport would be the elevate a hypothesis to a finding despite that hypothesis not having been put to Mr Merrick. On the basis of the evidence before the Tribunal, no such finding is warranted.
11. Although wind records were marked for identification, they never became part of the evidence other than a single page that appeared in the applicants' documents immediately after the Joint Report. That page suggests a maximum gust of 41 km/h on Saturday 07 December 2019 and a wind speed of 6 km/h at 3pm that day. That page does suggest higher wind gusts during the previous week, notably a high of 78 km/h on the previous Monday.
12. The proposition that the collapse of the carport should be attributed to a 50kph gust some three hours beforehand is difficult to accept and a properly constructed carport should be able to withstand winds of that strength. The suggestion that 22 kph winds from the west at 3pm played a part overlooks the evidence that the carport is sheltered from westerly winds by a mountain.
13. Even if it could be said that the wind on the day on question played a role in the collapse of the carport, that cannot be said to be the cause since a properly constructed carport should have withstood such winds. As a result, the damage that occurred when the carport collapsed was caused by its construction.
14. There is detailed evidence from Mr Moroney as to the cause of the collapse which was not challenged by experienced counsel. Further, the Joint Report reveals agreement that the posts were not embedded in the piers and that the carport was not constructed in accordance with the plans. The Tribunal accepts the carport's collapse was caused by the four matters outlined by Mr Moroney and that there was a breach of the statutory warranty provided by paragraph (a) of subsection 18B(1) in that the builder failed to use due care and skill and did not build in accordance with the plans.
15. Support for that view may be found in the photos which formed part of Mr Moroney's report at A2/84-91. Those photos clearly show sub-standard affixation and timber failures consistent with a failure to embed posts in piers and a lack of cross-bracing. It is noted that the carport collapsed three metres from its original position (R2/83 at [53]).
16. Moving from liability to quantum, the Tribunal was not assisted by the lack of cross-examination of the experts on this issue and the absence of submissions addressing quantum. However, it is clear from cases such as Gallagher v Masters Installation Pty Ltd [2017] NSWCATAP 117; Pacorp Holdings Pty Ltd v Waller [2017] NSWCATAP 167 that, where precision is not possible, the Tribunal must do the best it can with the available evidence.
17. Separate costings prepared by two experts, Mr Moroney and Mr Frost, gave similar figures in their reports: $44,757.00 and $46,791.40 respectively. Mr Shepherd did make at criticism of those figures, notably his suggestion that the number of cubic metres of concrete required for piers was three and not six. Matters such as that, and the fact that the contract excluded painting, may well explain why, after those amounts were the subject of scrutiny at a meeting of the experts, the amount for which the applicants contended was reduced to $34,991.20.
18. It is noted that the costing of Mr Moroney included matters such as preliminaries, including insurance, need to be removed since those aspects are added subsequently on an overall basis. It is also noted that the contract excluded painting. Such adjustments may well be the reasons for the reduction of the amount of $44,757 in Mr Moroney's report to the amount of $34,991.20 for which he and Mr Frist contended in the Joint Report.
19. Mr Shepherd's suggested cost of rectification of $25,729.89 was detailed in his report (R2/63-64). It is noted that he did not include the cost of a crane to remove the existing debris for which Mr Moroney and Mr Frost allowed $1,600 and $1,740 respectively. Adding $1,600 to his estimate gives $27,329.89.
20. Doing the best that it can with the available evidence, the Tribunal adopts the figure for which Mr Frost contended in the Joint Report on the basis that, as a quantity surveyor, he is a costing specialist and since the amount for which he contends is supported by a second expert who is a building consultant. Accordingly, the Tribunal considers the reasonable cost of rectification for Item 22 is $34,991.20.

Additional submissions

1. The written submissions for the respondents raised five additional matters in relation to quantum which are considered below: 1. There was some duplication of amounts for preliminaries included in the costs of Mr Moroney and Mr Frost on an item-by-item basis. That has been addressed by the Joint Report and the Tribunal considering each item devoid of allowances, GST and insurance then making a single addition to the total. 2. Painting was included for some items but was excluded under the contract. This is a matter that could and should have been raised by Mr Shepherd during the meeting of the experts which resulted in the Joint Report. It does appear that painting was excluded from Item 22. If painting occurred post-construction and remedial work requires re-painting, it would be appropriate to include an allowance for painting. There was no cross-examination of the experts on this issue. 3. The stormwater item (Item 5) has been withdrawn. 4. Mr Shepherd's suggestion Mr Moroney's amounts are overstated was addressed in the preparation of the Joint Report as can be seen from amounts contended for the applicants in the Joint Report being lower than suggested by Mr Moroney in his report. 5. The non-specific contention that "some items" identified by Mr Moroney and Mr Frost are not contrary to Australian Standards or the BCA was a matter for consideration at the meeting of the experts which resulted in the Joint Report. The issue raised in relation to Item 9 has been addressed above.

Allowances

1. The Joint Report outlines Mr Frost's report suggestions of additional percentage allowances of 10.3% for preliminaries, 20% for overheads and profit and 6% for professional fees before adding 10% for GST. Mr Shepherd's position is that a reasonable allowance for all those matters is 30%, rejecting preliminaries as all relevant works have been included in the costings and professional fees on the basis that the applicants' expert engineer has already prepare a scope of work for each item.
2. The Tribunal commonly encounters figures of 20% for overheads and profit for new work and 25% for rectification work. There would be some preliminaries required but Mr Shepherd's 30% allowance is considered sufficient to cover those matters. As a result, any assessment of a final amount would need to add an allowance of 30% followed by 10% for GST.

Insurance

1. An amount of $1,666 was included in the Joint Report for Homeowners Warranty Insurance which was said to have been obtained "As per HBCF iCare insurance estimator". Obviously, such an allowance would only be required if the outcome of these proceedings is a money order rather than a work order.
2. It is noted that the amount of $1,666 shown for insurance in the column of the Joint Report referable to the applicants appears to be 1% of the total amount for which Mr Moroney and Mr Frost contended (without allowances and GST). On that basis, if a money order is made, an amount should be awarded for insurance equal to 1% of the amount allowed.

Section 18F defence

1. The Points of Defence contained an unparticularised allegation that: "The Home Owners acted contrary to the advice of TMB Pty Ltd, the Builder or a person who did work, pursuant to section 18F of the Home Building Act 1989". The respondents written submissions referred to items 3, 6, 7, 11, 12, 13, 14 and 22 in relation to this defence.
2. Item 3 related to flashings in the region of the Coolgardie Room. It was suggested the product supplied by Harkaway Homes was not the product the builder typically uses. It was suggested in submissions, without any reference to the evidence, that the builder advised the applicants of that and recommended the applicants provide instructions as to a variation of the contract in relation to the flashings which verbal advice the applicants did not accept.
3. This does not fit within subsection 18F(1) as there was no suggestion of any instructions being given in writing and no instructions given by either the applicants or a relevant professional.
4. Item 6 related to three external window awnings on the southern side of the house that were said to have been incorrectly installed. The section 18F defence cannot be based on paragraph (a) of subsection 18F(1) as there was no instruction given in writing. As to paragraph (b), it is suggested that the awning placement was constructed in accordance with the Harkaway Homes construction manual. Mr Merrick's affidavit (R3/9 at [58]) contained a suggestion that the window and awning placement was in accordance with that manual and reference was made to page 27 of the manual (R3/59). That page contains window details and includes the following words: "Note: Canopy over doorway - Ensure canopy is at appropriate height".
5. Even if it can be said that Harkaway Homes meets the test of a relevant professional, as defined in subsection 18F(4), the unchallenged evidence of Mr Moroney is that "the external timber framed awnings & roof sheets above the window frames are incorrectly installed as shown in the plans". Further, from what appears in the Joint Report, it appears Mr Shepherd has agreed with that as there is an agreed cost of rectification. Support for that view is to be found in the third report of Mr Moroney (A2/123) which suggests that Mr Shepherd agreed with him. As between the evidence of Mr Merrick that he followed the Harkaway Homes manual and Mr Moroney's evidence, as an expert witness with an obligation of impartiality by reason of the Tribunal's Code of Conduct, that the awnings were not installed as shown in the plans, the Tribunal prefers the evidence of the independent expert, Mr Moroney, with the result that there is no section 18F defence for this item.
6. As to Item 7, it was submitted that the decorative corbels were fixed in accordance with the Harkaway Homes manual and that verbal advice was sought from Harkaway as to the placement of the corbels. As verbal advice does not qualify for section 18F protection, it is only necessary to consider the suggested compliance with the manual. Again, the evidence of Mr Moroney was that the decorative corbels were not installed according to the plans and specifications and, although Mr Merrick's affidavit referred to page 7 of the manual, that page does not appear to contain anything in relation to the spacing of the decorative corbels.
7. As to Item 11, it was suggested that: "The kitchen was installed in accordance with the Bunnings Plans". However, this claim related to scratched facings and a panel that was out of vertical alignment. There was nothing in the Bunnings plans (R3/183-204) that would provide a section 18F defence for this item.
8. As to Item 12, this was a claim for incomplete work and section 18F only applies to a breach of a statutory warranty provided by section 18B.
9. As to Item 13, this defect relates to an inadequate fall and lippage in the tiles which are workmanship issues. The submissions allege verbal advice from the applicants which is not covered by section 18F as there is nothing in writing.
10. As to Item 14, the respondents' submissions refer to this item twice. The second reference does not fall within section 18F as what is there referred to is verbal advice.
11. The first reference to this item asserts that the timber floor bearers were constructed in accordance with the plans, but this defect does not relate to the construction or installation of those bearers but the failure to treat those bearers. In his report, Mr Shepherd said: "I have been asked to assume that the bearers, were to be painted and then have decorative slats or similar fixed over the bearers in order to screen of the open subfloor, by the owners." Mr Merrick asserts such a conversation in his affidavit (R3/18 at [49]). That alleged conversation was denied by Mr Dierikx (A1/154 at [19]). There was no cross-examination on this issue. With such competing evidence, the Tribunal is unable to find that Mr Merrick has established that the alleged conversation occurred. However, even if that conversation occurred, that would only provide verbal support for what the builder did and section 18F requires instructions to have been "given in writing".
12. Item 22 relates to the collapsed carport. The expert evidence clearly establishes that the carport was not constructed in accordance with the plans and manual from Harkaway Homes. In the Joint Report at Item 22, in the column for Mr Shepherd's comments, there appear the words: "It was also agreed this is not what was shown on the plans." That joint opinion of the experts precludes a section 18F defence in relation to this item.
13. As a result, no section 18F defence has been established.

Failure to mitigate

1. Paragraph 2(a) in the Points of Defence asserted: "There is a clear failure on the part of the Home Owners to mitigate their loss as required by section 18BA of the Home Building Act 1989 (NSW) and the Home Owners conduct amounts to contributory negligence." Again, no particulars were provided.
2. A number of allegations were made under this heading. The first was a claim by Mr Merrick that he told "the Home Owners" to cover the ends of the bearers. Such a conversation is alleged in Mr Merrick's affidavit (R3/8 at [49]) but was denied by Mr Dierikx (A1/154 at [19]). There was no cross-examination on this topic. Mr Merrick's evidence does not indicate when or where the alleged conversation occurred. The Tribunal, being left with one witness alleging a conversation, another witness denying it and no cross-examination, is unable to find that the respondents have established that this conversation occurred.
3. The second allegation was that Mr Merrick advised that the flashings were not what he normally used, suggested a superior product be used and was told the applicants could not afford that product. The written submissions did not include a reference to any evidence. The conversation alleged in Mr Merrick's affidavit (R3/15 at [95]) was denied by Mr Dierikx (A1/157 at [52]). Again, there was no cross-examination on this topic. Again, the Tribunal is unable to find that this conversation occurred.
4. The third allegation related to the Coolgardie room and the respondents' evidence on this aspect has already been considered in relation to Item 4. The additional aspect raised in relation to mitigation is the offer to re-lay the tiles and reliance was placed on the 20 March 2019 email from Mr Merrick which made such an offer (R3/219). However, as previously indicated, that email was sent in reply to an email from Mr Dierikx earlier that day in which the problem of "grout failing and many tiles lifting in various areas after only a couple of months" and re-laying the tiles without addressing the waterproofing issue, which was contested up to the hearing, would not have resolved the cause of the problem.
5. The submissions went on to suggest that the failure of the Coolgardie room was due to plumbing works which were excluded from the contract. However, as noted when considering the Item 4 defect claim, the problem was the lack of waterproofing by the builder and not defective plumbing work.
6. There was also a submission that the applicants supplied Mr Merrick with a list of items to address and that, after they had been addressed, he was told the list was not complete. The documents provided to the Tribunal as annexures to Mr Merrick's affidavit (R3/219-231) suggest the following sequence: 1. On 20 March 2019 at 11.36am Mr Merrick suggested that the work was complete and that all defects had been addressed. 2. On 20 March 2019 at 8.35pm Mr Dierikx disputed that, suggested a building inspector be used to prepare a full and final list of defects, withheld payment of the final invoice and requested any further communications be in writing. 3. There was no response from Mr Merrick. 4. On 20 May 2019 Mr Dierikx sent an email as a result of reporting the matter to Fair Trading and engaging an independent building exert.
7. The evidence does not support a finding that there was a failure on the part of the owners to mitigate their loss. It was reasonable for the applicants to have suggested, on 20 March 2019, that a building inspector be used to identify a "full and final list of defects".
8. As to the suggestion in the respondents' written submissions that, after defects had been addressed, the applicants said words to the effect "The list you were given was not the complete list", it should be noted that Mr Dierikx's 20 March 2019 email (R3/222) began with the following words in response to the first paragraph of Mr Merrick's email earlier that day: All works have definitely NOT been completed. The list you were given was not the complete list as was discussed with you at the time I gave it to you… (emphasis original)
9. The suggestion that there was discussion when the list was provided to indicate that it was not complete was not (1) contested in any subsequent email, (2) addressed in Mr Merick's affidavit, or (3) challenged in cross-examination of Mr Dierikx. This aspect of the respondents' submissions does not advance the claim there was a failure to mitigate on the part of the applicants whose conduct appears to have been reasonable.
10. The evidence does not warrant a finding that the builder was not given a reasonable opportunity to address work that was either incomplete or defective and, accordingly, does not require any quantification.

Contributory negligence

1. It was also submitted for the respondents that "the Home Owners conduct amounts to contributory negligence and there is a clear failure to mitigate as required by s18F (sic) of the Act. The Respondents submit that this should reduce the Home Owners claim for damages by at least 40% and as much as 60%". Since the failure to mitigate is found in section 18BA, the Tribunal notes that the earlier consideration of both section 18BA and the section 18F defence did not result in any finding in favour of the respondents which would provide a basis for this claim. Further, it was not indicated why the suggested reduction should be between 40% and 60%.
2. It was also submitted that "it is for the Applicants to show that they should not be found to be in breach of s 18BA(1) of the Act". That submission runs contrary to section 18BA(1) which provides, in paragraph (b) that "the onus of establishing a failure to mitigate loss is on the party alleging the failure", ie the respondents.

Section 48MA, ie work order or money order?

1. Neither the written nor oral submissions for the respondents appear to have specifically addressed the question of whether there should be a work order or a money order. Indeed, neither the Point of Defence nor the orders sought by Mr Merrick in paragraph [116] of his affidavit include a work order.
2. Section 48MA of the HBA provides: "A Court or Tribunal determining a building claim involving an allegation of defective residential work or specialist work, by a party to the proceedings, is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome."
3. Galdona v Peacock [2017] NSWCATAP 64 noted that section 48MA provided for a preferred outcome, not a mandatory outcome. That case suggests that a work order would not be appropriate where: 1. The relationship between the parties has broken down. 2. The builder has not acknowledged a poor standard of work. 3. There are reservations as to the ability of the builder to rectify the work with due care and skill.
4. In the present case, the Tribunal is satisfied, from the documents and other evidence, that the relationship of the parties has broken down to the point where a work order would be likely to cause more problems than it solved. Secondly, the defects alleged by the applicants have been strongly contested by the respondents and it is difficult to expect a builder to repair something which the builder does not accept is a defect. Thirdly, the evidence of Mr Moroney in relation to the carport, including the photos contained in his report, do not provide comfort to the Tribunal that a work order should be made. Fourthly, there is an absence of evidence and submissions to suggest a willingness to comply with a work order.
5. As a result, the Tribunal considers the statutory preference provided by section 48MA has been displaced and that a money order is the appropriate outcome in this instance.

What amount is recoverable by the applicants?

1. The position in relation to the claims made by the applicants is summarised in the following table: Item Amount Remarks

1 4,527.30 Defect - proved 2 Included in Item 14 3 2,337.08 Defect - agreed 4 44,241.00 Defect - proved 5 Withdrawn 6 1,919.91 Defect - agreed 7 4,326.00 Defect - proved 8 1,785.00 Defect - agreed 9 38,044.00 Defect - proved 10 Not proved 11 1,077.53 Defect - proved 12 300.00 Incomplete - agreed 13 3,070.00 Defect - proved 14 3,590.81 Defect - proved 15 1,221.48 Defect - proved 16 675.00 Defect - proved 17 2,449.96 Defect - agreed 18 163.80 Defect - agreed 19 389.00 Defect - agreed 20 1,943.00 Defect - proved 21 90.00 Defect - agreed 22 34,991.20 Defect - proved 147,142.07 Add 30% 44,142.62 Allowance 191,284.69 Add 10% 19,128.47 GST Insurance 1,471.42 1% of $147,142.07 Total $211,884.58

1. The applicants also sought reimbursement of items that were particularised in paragraph 89 of Mr Dierikx's affidavit. It is noted that the total of $43,831 there claimed was reduced in the applicants' outline submissions (MFI 1), provided prior to the hearing, to $9,864. Components of that claim, which did not appear to have been addressed during either the hearing or in submissions, are as follows: 1. Extra rental of temporary fence - $2,550. 2. Extra cladding - $450. 3. Rubbish removal - $608. 4. Crane costs to remove collapsed carport - $1,716. 5. Extra rent - $2,940. 6. Car repairs from collapsed carport - $800.
2. There were no documents provided in relation to (1), (2) or (5) above. Further, in relation to (3) and (4) above, an amount was included by Mr Macansh in Item 22 for the cost of a crane and rubbish removal. As to (6), cross-examination revealed that one of the two damaged cars was owned by Maxxia Pty Ltd (not a party to these proceedings), was a leased car and that the insurance claim was subject to an $800 excess. There was no other evidence or documents in relation to this claim. In these circumstances, the applicants have failed to prove they are entitled to any amount additional to the $211,884.58 calculated above. It remains to consider the position in relation to the set-off claim.

What amount is payable by the applicants?

1. The Points of Defence indicated that the second respondent (Ty Merrick Building Pty Ltd) sought payment of its invoice numbered 125 for $13,433.20 (inclusive of GST) plus interest (said to be under clause 34 of the contract), "the profit it would have made on the remainder of the contract works", and costs pursuant to section 60 of the Civil and Administrative Tribunal Act 2013 (the CATA).
2. There are a number of points that need to be made in relation to those claims. First, there was no cross-application with the result that the only relief that can be obtained in these proceedings is by way of a set-off. Secondly, that there was no claim made by the first respondent (Ty Merrick). Thirdly, clause 34 relates to debt collection costs and it is clause 33 that deals with interest on late payments. Fourthly, there was no evidence to indicate what profit would have been made on the remainder of the works. Fifthly, Mr Merrick claimed in his 20 March 2019 email that the work was complete with the result that the only amount which remained due was the amount of the final invoice. Sixthly, the applicants claimed more than $30,000 with the result that the relevant provision as to costs in this instance is Rule 38 of the Civil and Administrative Tribunal Rules 2014.
3. As the Tribunal has found that the contract was between the applicants and the first respondent, strictly speaking, there has been no final claim by Mr Merrick. The claim for the balance of the contract price could be considered on a quantum meruit basis, in which case the amount payable under the contract would provide a ceiling for the amount recoverable: Mann v Paterson Constructions Pty Ltd [2019] HCA 32. However, the respondents did not provide any evidence of the work done or materials supplied in support of the amount claimed in that invoice.
4. Having regard to the guiding principle which underpins the work of the Tribunal, namely "to facilitate the just, quick and cheap resolution of the real issues in the proceedings", set out in section 36 of the CATA, the Tribunal treats the claim for $13,433.20 as if the invoice were issued by the first respondent. That approach is also supported by the fact failing to take that amount into account would unjustly enrich the applicants to the extent of that amount. Further, Bellgrove v Eldridge [1954] HCA 36 suggests that an assessment of damages in a building claim should take into consideration any unpaid balance of the contract price. To like effect, the basic principle set out in Haines v Bendall [1991] HCA 15 is that the applicants should be put in the same position as if the contract had been completely performed in a defect-free manner and that requires the amount of the damages to take into consideration the unpaid balance of $13,433.20.
5. Clause 33 of the contract provided for interest to be paid "at the rate stated in Item 12 of Schedule 1". However, Item 12 in Schedule 1 reads: "Interest on late payments is 0%". Accordingly, no amount is added for interest.
6. It is convenient to here note that an oral submission was made that clause 3.1 of the contract required the applicants to pay the contract price, that clause 17.1 required the payment of the deposit, that clause 17.5 required payment within 5 days. However, clause 17.6 reads: Other than in relation to the final progress claim: (a) payment of a progress claim is on account only; and (b) the owner has no right of set-off.
7. As the amount now sought was the final progress claim, the applicants do have a right of set-off and were entitled to withhold that payment and have it set off against their claim for damages.
8. In these circumstances, the Tribunal reduces the amount of $211,884.58 by $13,433.20 with the result that the net amount that is payable by the first respondent to the applicants is $198,451.38.

Costs

1. There was also an oral submission made that clause 34 of the contract entitled the recovery of debt collection costs. Since the contract was between the applicants and the first respondent, that provision could only benefit the first respondent, but it is preferable to deal with all issues going to costs at the same time.
2. The applicants sought an order for costs and the respondents' written submissions expressed a desire to be heard on the question of costs. The orders made will cater for the provision of written submissions in relation to costs and

Orders

1. For the reasons indicated above, the orders that will be made are as follows: 1. The first respondent is to pay the applicants $198,451.38 immediately. 2. Any application for costs is to be made by written submissions to be filed and served on or before Wednesday 03 March 2021. 3. Any submissions in response are to be filed and served on or before Wednesday 17 March 2021. 4. Any submissions made in compliance with order 2 or order 3 are to address the question of whether costs can be considered on the papers, ie without the need for a further hearing.

I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 30 March 2022