Dimitropoulos v Capital Constructions Pty Ltd; Capital Constructions Pty Ltd v Dimitropoulos

NCAT Appeal Panel|2016-10-21

Introduction

These are appeals in respect of decisions of the Consumer and Commercial Division of the Tribunal concerning proceedings HB 14/44611 and HB 14/56781.
The first appeal is AP 16/32203. The appellants are Mr and Mrs Dimitropoulos (homeowners). The respondent is Capital Constructions Pty Ltd which trades as Vogue Homes (builder). The homeowners appeal against: 1. the decision of the Tribunal of 29 June 2016 ordering the homeowners to pay the builder the sum of $73,968.96: see Dimitropoulos v Capitol Constructions Pty Ltd; Capitol Constructions Pty Ltd v Dimitropoulos [2016] NSWCATCD 61 (the principal decision); and 2. the decision of the Tribunal of 15 December 2016, ordering the homeowners to pay the builder's costs as agreed or as assessed (the costs decision).
The second appeal is AP 17/24463. This is an appeal by the builder in relation to the principal decision.
In these reasons, we will refer to: 1. proceedings HB 14/44611 as the "homeowners' proceedings", 2. proceedings HB 14/56781 as "the builder's proceedings", and 3. the homeowners' proceedings and the builder's proceedings collectively as "the proceedings".

History of appeal proceedings

These appeals have had an unfortunate history.
The homeowners' appeal was originally filed on 6 July 2016. The appeal was filed in time. The Notice of Appeal was dated 6 July 2016. A second Notice of Appeal dated 18 July 2016 was filed on 19 July 2016. A third Notice of Appeal was dated and filed on 8 December 2016. A fourth Notice of Appeal was dated and filed 31 January 2017.
The fourth Notice of Appeal was entitled "Second Amended Notice of Appeal". It is this document which forms the basis of the homeowners' claims, subject to our comments below concerning the position adopted on the hearing of the appeal.
The builder's Notice of Appeal is dated 15 February 2017. It was apparently filed on 30 May 2017. It was filed out of time consequent upon directions made by the Appeal Panel following the hearing of the homeowners' appeal being adjourned on 21 October 2016. The builder asserts that leave is not required, having been granted leave to appeal out of time on 21 October 2016. However, it does not appear that time was extended at that time. Accordingly, we must determine this issue.
The homeowners' appeal was initially heard by an Appeal Panel constituted by Senior Member Harris SC and (the then) Senior Member Titterton (now Principal Member), on 21 October 2016. It is clear from the transcript that some time was spent at that hearing trying to identify precisely what issues the homeowners wished to raise in their appeal. The then Notice of Appeal did not, apparently, set out all of the claims which the homeowners wished to raise, Mr Dimitropoulos saying at the hearing "just disregard those and we'll work with the submissions".
The appeal was adjourned part heard. At that time, directions were made by the Appeal Panel which permitted the homeowners to file a Further Amended Notice of Appeal and submissions by 9 December 2016. The directions permitted the builder to file its own Notice of Appeal on or before 17 February 2017. The directions also included directions for Replies to Appeal to be filed.
The document entitled Second Further Amended Notice of Appeal (the fourth Notice of Appeal) is the document filed by the homeowners following the directions made.
The hearing was scheduled to resume on 19 April 2017. However, it was adjourned for hearing on 30 May 2017.
The hearing completed on 30 May 2017 and the Appeal Panel reserved its decision. In doing so, the Appeal Panel made directions which permitted the parties to file further written submissions.
Subsequently, Senior Member Harris SC became unavailable to complete the appeal. Consequently, the President of the Tribunal reconstituted the Appeal Panel pursuant to s 52(2)(a) of the Civil and Administrative Tribunal Act 2013 (NCAT Act), the members of the reconstituted Appeal Panel being Principal Member Harrowell and Principal Member Titterton. The reconstituted Appeal Panel obtained access to a transcript of the original appeal hearings held on 21 October 2016 and 30 May 2017.
The reconstituted Appeal Panel determined that it was appropriate for a further hearing. The proceedings were listed on 17 October 2017. However, again the hearing could not be completed within the allotted time and the matter was adjourned part heard until 27 October 2017. The hearing was completed on that date and the Appeal Panel reserved its decision.

Grounds of appeal and hearing of the appeal

In the Second Amended Notice of Appeal, the homeowners raise nine grounds of appeal. These grounds were, to some extent, modified by oral submissions.
The nine grounds were as follows: 1. Abandonment of contract - denial of procedural fairness. This issue was interconnected with the homeowners' claim that the Tribunal had erred in concluding that they had not validly terminated the contract by issuing notices under cl 33 of the contract; 2. Kitchen bench top - the obligation to construct a 40mm bench top was a fundamental condition which entitled the homeowners to terminate for substantial breach or repudiation. Further, the homeowners were, in any event, entitled to damages arising from the builder's expressed intention not to supply a conforming bench top; 3. Windows - the builder was not entitled to substitute "Wideline" brand windows and failed to supply either "Stegbar, Trend or Southern Star" brand windows as specified in the contract. There was no variation for the alternative brand and the failure to provide a conforming product constituted circumstances entitling the homeowners to terminate the contract. Further, the homeowners were, in any event, entitled to damages arising from the builder's expressed intention not to supply conforming windows; 4. Balcony ceiling - the ceiling was not constructed to the height specified in the contract. Having regard to the Tribunal's finding that the builder refused to install the ceiling at the required height, this conduct constituted circumstances entitling the homeowners to terminate the contract. In this regard, the homeowners said that the builder insisted upon a further variation if the ceiling height was to be adjusted from the height as constructed, that conduct being contrary to the terms agreed in the contract; 5. Unlicensed subcontractors - the homeowners said that the combined effect of ss 4 and 10 of the Home Building Act 1989 (NSW) (HB Act) meant that the Tribunal could not make an award in favour of the builder in respect of monies due to the builder under the contract in circumstances where the builder had engaged unlicensed subcontractors to undertake various building works; 6. Amount payable to the builder for work carried out - the homeowners asserted a denial of procedural fairness in that the Tribunal determined "a quantum meruit amount to the builder in circumstances that wasn't an issue pleaded or pressed in the proceedings". This ground related to ground (5) above, the homeowners asserting that the builder was unable to enforce the contract by reason of the matters raised in that ground. In addition, the homeowners said that the award of $88,537.91 identified in pars [158] and [169] of the Reasons of the Tribunal was "manifestly excessive" and there was no admissible evidence to establish the value of the work "other than what was calculated on a contractual basis"; 7. Unpaid credit variations - the homeowners asserted that in determining the entitlements of the parties the Tribunal failed to have regard to the fact that there were credit variations which had not been paid by the builder to the homeowners; 8. Variation 9 - the work under this variation was never carried out (a matter said to be agreed in the joint expert report) and the homeowners "received no value for payment made". Therefore, the award of interest found in [167] of the Reasons was inappropriate, particularly as there could be no entitlement to such payment until the works were completed; 9. Delay in completing building works and loss of rent - even if the contract was abandoned, as found by the Tribunal, there had been a breach of the statutory warranty in s 18B(1)(d) of HB Act (a warranty that the work would be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time) and cl 38.1(d) of the contract, and therefore the builder is "indebted for damages for the period of time it would have taken to reach practical completion" and "[so] long as the date for practical completion had passed, damages accrue": see homeowners' submissions dated 8 December 2016 at p 22.8.
The builder's Notice of Appeal essentially raised the following grounds.
First, the builder said that it was denied procedural fairness in connection with the Tribunal determining that the contract has been abandoned. In addition, in making the finding of abandonment, the builder said the Tribunal applied the wrong legal principle to the facts in determining that an inordinate period of time had elapsed from which it could be inferred the parties had abandoned the contract.
Secondly, the builder said the Tribunal applied the wrong legal principle to the facts when it determined at [109] of the Reasons that the builder never accepted, either by words or action, the homeowners' repudiation of the contract. Rather, the Tribunal should have concluded the contract was validly terminated. In addition the Tribunal was wrong in its determination that abandonment could be inferred from the length of time that had passed.
The builder asserted in its Notice of Appeal that the appropriate order was that the homeowners pay to the builder the sum of $83,280.96.
The parties provided written submissions and made oral submissions at the hearing of the appeal.
As had occurred at the earlier appeal hearings, at the hearing of the appeals by the reconstituted Appeal Panel on 17 October and 27 October 2017, Mr Dimitropoulos appeared and made submissions on behalf of himself and his wife. The homeowners had been represented by lawyers at the hearing at first instance. To assist the Appeal Panel understand the homeowners' contentions, Mr Dimitropoulos was asked during the hearing to provide a reconciliation of the contract claim and to clarify what issues he wished to raise and what documents he relied on.
On 17 October 2017, the issues which the homeowners identified included: 1. in connection with the finding of abandonment, that the homeowners had been denied procedural fairness and the amount finally determined in consequence of the abandonment conclusion was incorrect; 2. that the contract had been validly terminated in consequence of the notice of substantial breach which the homeowners had served on the builder and the subsequent notice of termination; 3. alternatively, that the contract had been repudiated, which repudiation had been accepted by the homeowners in serving the notice of termination. In making this submission, the homeowners accepted that the issue of repudiation (as opposed to termination under the contract) was not an issue raised at the original hearing. Despite this concession, it does appear an issue of anticipatory breach was raised at the hearing concerning the kitchen bench tops, a matter to which we will return below; 4. in relation to variations, the homeowners said some were not in writing and that the builder carried out those variations without authority. In addition, the homeowners said that various works had not been completed in accordance with the contract; 5. in relation to the award made by the Tribunal in favour of the homeowners in respect of defective work carried out prior to abandonment, the homeowners said that an amount of $2,979.84 should be allowed in respect of builder's margin and GST; 6. the homeowners also asserted claims for loss of rent and that the builder had carried out various works with unlicensed subcontractors.
The homeowners were not able to complete all the submissions on this day and there was not sufficient time for the builder to provide submissions in reply. However, at this time, the builder did indicate its position in relation to several of the issues raised by the homeowners as follows: 1. the builder asserted that the Tribunal failed to afford the parties an opportunity to be heard on the question of whether or not the contract had been abandoned. However, the builder submitted that if the Appeal Panel determined that the contract had been abandoned, the balance of the findings of the Tribunal should not be disturbed; 2. further, the builder said that if the Appeal Panel reached the conclusion that the builder had terminated the contract following the homeowners repudiation, the builder was entitled to claim for the work carried out and for loss of profit. However, the builder then said that it did not seek to claim loss of profit. All the builder sought was to be paid for work done. In this regard the builder accepted that the award made by the Tribunal dealt with this aspect of its claim; 3. consequently, the builder said that if the Appeal Panel accepted the contract had been abandoned or determined by the builder, no further orders needed to be made; 4. on the other hand, the builder accepted that if the Appeal Panel found the contract had been validly determined by the homeowners' notice of termination, then the proceedings would need to be remitted to determine damages.
When the hearing resumed on 27 October 2017, the Appeal Panel was concerned to ensure that the hearing concluded in the allotted time and that the builder was afforded sufficient time to provide submissions in reply, a substantial amount of the earlier hearings being taken up with submissions from the homeowners. The homeowners provided further submissions under the following four topics: 1. Sections 4 and 10 of the HB Act. In relation to s 4, the homeowners said that any subcontract which the builder entered into must be with people who are the holders of relevant licences. In this regard the homeowners identified air-conditioning, electrical and plumbing work which was specialist work requiring licensed subcontractors. The homeowners submitted that the builder was not entitled to damages or to enforce the contract because s 10 prevented recovery by a person who contravenes s 4; 2. Breach of Statutory Warranties. The oral submissions under this topic were difficult to understand. They in fact related to the claim for loss of rent, the Statutory Warranties issue being dealt with under the topic of Substantial Breach. The homeowners referred to the loss of rent claim, the liquidated damages clause and the decision of the Tribunal at [113]. There was a disagreement between the parties about whether any entitlement to liquidated damages had originally been raised. The homeowners referred to written submissions on this topic filed in the proceedings at first instance. It would appear from those written submissions, which were dated 20 November 2015, that the homeowners were asserting at [38]-[43] that they were entitled to claim loss of rent by reason of the failure of the builder to complete in a timely manner. Alternatively, they were asserting that they were entitled to damages for misleading and deceptive conduct, the builder having represented to them that they should "conservatively…. allow 7-8 months build time for a double storey" and also saying "[I]t may be less". That loss of rent claim was "based on an Appraisal from Argy Property". The amounts claimed were $4,650.00 for rent until 18 September 2014 and then rent from 18 September 2014 until the date of the hearing; 3. Substantial Breach. The homeowners said there were unauthorised variations, which were not in writing, in contravention of the HB Act. The failure to provide written variations and/or to have variations authorised constituted a substantial breach. 1. The homeowners also identified various works said not to be in compliance with the contract. These were the kitchen bench top (not 40mm), the change in the brand of windows (from one of the three nominated brands) and the balcony ceiling built to 2.4m (not the specified height of 2.6m). In relation to these three items, the homeowners contended that collectively they constituted a substantial breach. The homeowners also said that each of these defects amounted to a breach of the Statutory Warranties under s 18B of the HB Act, and that a breach of the Statutory Warranties itself constitutes a substantial breach within the meaning of cl 33 of the contract; 2. In relation to the kitchen bench tops, the homeowners said of this breach, the finding of the Tribunal at [91] that there was no intention to install a 40mm bench top supported the homeowners' submission that the builder was in substantial breach within the meaning of the contract; 1. Variation credits. The homeowners claimed an amount of $27,919.55 which they said were unpaid credits for variations. The homeowners contended the Tribunal failed to deal with this claim and the amount awarded should be adjusted by this sum.
In reply, the builder made the following submissions: 1. the builder accepted that an amount of $2,919.46 should be added to the homeowners claim in respect of builder's margin and GST, thereby reducing the amount payable to the builder; 2. the builder contended that if the contract was abandoned, it was entitled to retain progress claims which had become payable under the contract. In making this submission, the builder referred to cll 3.1, 15.2, 15.5, 15.6 and 17.6 of the contract. The builder also referred to the decision of Ipp JA in Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSWCA 248 (Brewarrina) at [74] and said that the parties retain their accrued rights; 3. in any event, the Tribunal had determined the value of the works completed under the contract up until abandonment and the Reasons given are sufficient to justify the conclusion reached. Consequently, no relevant error is shown; 4. In relation to the issue of procedural fairness, the builder did not suggest that the parties had had an opportunity to make submissions on the issue of abandonment. Indeed, the builder said that the proceedings at first instance were not approached on the basis of abandonment. However, the builder submitted that not all failures to afford procedural fairness give rise to an entitlement to a remedy; 5. the builder submitted that the issue of repudiation by the builder was not raised by the homeowners in the proceedings at first instance. If this had occurred, evidence would have been adduced by the builder in response. Consequently, the issue cannot be pursued on appeal. The builder relied on the decision of the High Court in Coulton v Holcombe (1986) 162 CLR; [1986] HCA 33; 6. otherwise, the builder said the only issue raised on its appeal concerns its acceptance of the homeowners' repudiation of the contract. In response to the Tribunal's finding at [109] the builder says that it communicated acceptance of the repudiation by commencement of legal proceedings and claiming damages; 7. in relation to the particular defects identified in the notice issued under the contract or about which complaint was made by the homeowners, the builder made the following submissions. In relation to the bench top, it was not then on-site and was not part of the breach notice. In relation to the brand of windows, the contract permitted the builder to provide substitute windows. In relation to the balcony ceiling height, this matter was capable of being rectified and was minor in nature; 8. in connection with the meaning of the expression "substantial", the builder submitted that it was necessary to have regard to the defect and the nature of the rectification work required in order to determine what was substantial. The issue was one of whether the building was uninhabitable or not capable of rectification; 9. lastly, the builder submitted that the proceedings had been continuing for a long time and should only be remitted for determination if the Appeal Panel found that the contract was properly terminated by the homeowners.

Consideration

The homeowners assert that their appeal raises questions of law. To the extent necessary, the homeowners also seek leave to appeal.
The language the homeowners used both in the Second Amended Notice of Appeal and in their submissions sought to characterise many of the complaints as questions of law. For example, rather than focusing on factual errors, the homeowners suggested the decision of the Tribunal was one which no reasonable decision maker could make.
The parties have identified the principles which are applicable to the grant of leave, including the provisions of s 80(2)(b) of the NCAT Act, Sch 4 cl 12 and the decisions in Collins v Urban [2014] NSWCATAP 17 and Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69. For present purposes, it is unhelpful to seek to dissect the particular grounds of the homeowners' appeal into matters which raise questions of law, for which there is a right of appeal, and grounds for which leave to appeal is required. Rather, we will deal with any grounds for which leave is required if necessary.
The grounds of appeal will be considered under the following headings: 1. abandonment/termination on notice for substantial breach (including alleged breaches in respect of time, windows, balcony ceiling height and kitchen bench tops); 2. unlicensed subcontracting; 3. amount payable to the builder for work carried out, unpaid credit variations and Variation 9 interest; 4. delay in completing building works and loss of rent; 5. homeowners' appeal on costs.

Abandonment/Termination on notice for substantial breach

It is common ground between the parties that the issue of abandonment was not raised by the parties nor were they afforded an opportunity to make submissions on this aspect at the original hearing.
This constitutes an error of law. However, what orders, if any, should be made in consequence of this error requires a consideration of both the circumstances in which the contract came to an end and the parties' competing contentions. The parties had an opportunity to provide submissions to the Appeal Panel on this aspect of the dispute, including the issue of abandonment.
From the homeowners' point of view, they said the contract was properly terminated by notice dated 2 September 2014, this notice being issued following the homeowners serving on the builder a notice under cl 33.3 of the contract asserting the builder was in substantial breach of the contract as provided in cl 33.1. The breach notice was dated 5 August 2014 served under cover of a letter dated 19 August 2014, the notice being "reissued" due to circumstances described above.
In support of their position, the homeowners say: 1. the Tribunal erred in failing to conclude that the provisions of the HB Act and Regulations and cl 43.3(b) of the contract imposed terms, the breach of which constituted a substantial breach within the meaning of cl 33; 2. separately, or collectively, the breaches concerning: 1. the failure to request extensions of time and/or request variations in writing; 2. the delay in completing the work; 3. the window brand being changed without a variation; 4. the balcony ceiling not being constructed to the correct height; and 5. the builder indicating after the notice of termination was served that it would not supply and install kitchen bench tops of 40mm thickness, each constituted a substantial breach entitling the homeowners to terminate the contract under cl 33; or 1. the conduct of the builder in the circumstances evinced an intention not to be bound by the contract, thereby entitling the homeowners to terminate the contract by reason of the builder's wrongful repudiation.
On this last aspect, that the homeowners terminated the contract in consequence of the builder's wrongful repudiation, other than the question of whether the kitchen bench top issue constituted an anticipatory breach, this matter cannot be pursued on appeal for the reasons submitted by the builder having regard to the principles referred to in Coulton at [7]-[8]. The homeowners accepted the issue was not raised in the original hearing and we accept this matter raises factual issues which could have been the subject of evidence and/or cross-examination at the original hearing.
On the other hand, the builder says that the notice of termination was wrongful and constituted a repudiation of the contract. The builder says that the repudiation was accepted and the contract thereby terminated. As stated above, the Tribunal found neither party had terminated the contract. Rather, the contract had been abandoned.
To resolve this ground of appeal it is necessary to consider each of these issues in turn.
First, we should deal with the homeowners' assertion that they validly terminated the contract by notice dated 2 September 2014.
The homeowners had issued two notices under cl 33.3 of the contract. The first had not been served as required by the contract, a matter not presently relevant to a determination of this appeal. The second notice was "reissued on 19 August 2014": Reasons at [11]. There is no dispute in this appeal that this notice was validly served on the builder. In this regard, the original notice was re-served under cover of separate letter on 19 August 2014 (breach notice). The breach notice was in the following terms (formal parts omitted): We refer to the site inspection with Julian Varndell and Spiro Dimitropoulos on Monday, 28 July 2014 and to the subsequent email correspondence from Julian on 28 July 2014, and Spiro's reply in response to Julian's email on Thursday, 31 July 2014. In accordance with clause 33.3 of the contract entered into between Spiro and Anna Dimitropoulos (owners) and Capital Constructions Pty Ltd T/A Vogue Homes (Vogue Homes) dated 2nd February 2013, Vogue Homes is hereby notified that it is in breach of the contract as of 28 July 2014 as to: 1. Failing to complete the building works and reach the stage of practical completion within 38 weeks after the site was handed over by the owners to Vogue Homes for construction of a double story brick veneer dwelling. The various Vogue Homes site supervisors since the date of handover to both Homes on 16 October 2013 have continually changed the date of practical completion with excuses of "being too busy on other sites" or "adverse weather" (without any supporting evidence to support this claim) as some (but not all) of their excuses. Pre-contractual representations were made by Vogue Homes that the construction of the home will be completed within 7-8 months as a conservative figure on which we essentially relied when we continued negotiations and entered into the contract. This is in breach (but not limited to) of Schedule 1, item 12 of the contract, clause 38.1 (d) of the contract, and section 18B(d) of the Home Building Act 1989 (HBA); 2. Failing to comply with the plans and specifications as to the ceiling height and finish of the front upstairs balcony which is in breach (but not limited to) the plans and specifications forming part of the contract, clauses 38.1 (a),(c),(d) of the contract, and Sections 9(3), 16F(3), 18B(a),(c),(d) of the HBA; 3. The floor in the gallery area of the first floor is uneven and has a substantial dip and also squeaks. This was first raised with Vogue Homes on 24 January 2014, however Vogue Homes has taken no steps to rectify the issue as at 28 July 2014, after several times it has been addressed with Cameron, Dean and now Julian as site supervisors for Vogue Homes after further inspections of the Site Property. The dip falls well outside the standard and tolerances that applies for uneven floors and the squeaks are defect. This is in breach of (but not limited to) clauses 38.1 (a),(c),(d) of the contract and Sections 18B(a),(c),(d) of the HBA; 4. The width of the garage walls are approximately 5650 mm. In accordance with clause 17 of the contract, a variation dated 15 February 2013 was requested by the owners, accepted by Vogue Homes with an amount in the sum of $5321.00 paid in full to increase the garage size to 5800 mm. The plans and specifications also indicate that the width of garage walls are to be built to 5800 mm. This issue has been raised on numerous occasions beginning from 27 November 2013, and also brought to Vogue Homes attention in a building report from Howard Ryan dated 13 June 2014 which Vogue Homes have received a copy. Vogue Homes have continually denied or ignored this issue. This is in breach of (but not limited to) clauses 38.1 (a),(c),(d) of the contract and Sections 18B(a),(c),(d), (f) of the HBA; 5. The kitchen window is a fixed window, but should be a sliding window as per the plans and specifications. The laundry window is a clear window, but should be translucent window as per variation 8.1 dated 3 December 2013. The ensuite window should be a clear window instead of translucent window as per variation 8.1 dated 8 December 2013. The sliding window in bedroom 2 slides in the wrong direction and contravenes the plans and specifications. The dining room aluminium frame window is bent and the window cannot open and close. The alfresco doors are scratched and the alfresco aluminium door frame is bent. These window issues were all brought to the attention of Dean Cody in March 2014 during a site inspection, however, nothing has been done to rectify these issues since March of this year. These window issues are breach of (but not limited to) clauses 38.1 (a),(c),(d) of the contract and Sections 18B(a),(c),(d), (f) of the HBA; 6. Clause 15 of the tender document forming part of the contract allows for Trend, Stegbar Southern Star windows and doors will be installed as per plans. Instead Vogue Homes installed Wideline windows and doors without notification or approval of the owners. This was previously addressed by email to James Chrissimos of Vogue Homes. We rely on the exact inclusions as stipulated in the contract. No variation was signed or dated by either party as required in accordance with clause 17 of the contract to depart from the brands stipulated in the contract and to install a cheaper and inferior brand/s. We have previously requested that the windows and doors are changed which Vogue Homes have refused to do. This is in breach of (but not limited to) Section 18 of the Australian Consumer Law, clauses 17 and 38.1(a),(c),(d) of the contract and Sections 18B(c) of the HBA; 7. The brick wall along the wall of the powder room and staircase is excessively overhanging the slab beyond the standard tolerances which was raised with Dean in March 2014. Vogue Homes has not rectified this issue. This is in breach of (but not limited to) clauses 38.1 (a),(c),(d) of the contract and Sections 18B(a),(c),(d), of the HBA; 8. The following matters are in breach (but not limited to) clauses 38.1 (a),(c),(d) of the contract and Sections 18B(a),(c),(d),(f) of the HBA, or in breach of the plans and specifications: External windows seal in upstairs void has lifted and brought to Dean's attention in March 2014 but not rectified; Window sill tracks are uncovered and not protected during whole construction process. Windows do not have storm-mould angles fitted; Window timber frames in bedrooms are chipped and need replacing which was brought to Dean's attention in March 2014 but not rectified; The brick mortar needs re--pointing at cracked for filled in several locations on both sides of building and back of building and in alfresco area and brought to Vogue Homes attention in previous emails and to Julian on 28 July 2014; Brickwork on western side of building are chipped and cracked and need replacing; Some bricks in alfresco area are uneven and not laid correctly and will need replacing and relaying and was brought to Vogue Homes attention upon receipt of Howard Ryan's report dated 13 June 2014; Both side boundary fences have mortar splattering all over them from bricklaying. The eastern side colour bond offence has spray-painting with builder markings. This has continually been brought to Vogue Homes attention and included in Howard Ryan's report dated 13 June 2014; House bricks have not been properly cleaned; Roof tile lead flashings have not been dressed down as required; Garage has exposed common bricks at back door (above) where more superior bricks (which were paid for) should have been laid; Slab has been chipped and edges of the alfresco area; Internal pipes are filled with construction residue; All gutters are dirty from construction dust/dirt/sand; Slab not level around fridge area in kitchen; No flashing installed under sliding door on front balcony; Rendering surrounding electrical box poorly finished; Render cracks near bedroom one window and sliding door, render poorly applied around upstairs balcony (has since been under coded for painting); Render has been damaged in front of media room and garage; Roof tiles cut unevenly above alfresco area-large gap between roof tile and gutter resulting in roof being exposed under roof tiles; No balcony floor waste installed; Installation bats not properly installed and not installed at all in several locations in roof; Holes in floor in bedroom 1 and 4 not filled in; Support beam in alfresco exposed and not covered or jet rocked; Two unnecessary punctured holes in the living room gyprock ceiling have not been filled; Paint splattering on front gutter above the garage and surrounding areas or render. 9. Subject to the above (but not limited to), clearly the nominated supervisor/s for Vogue Homes are in further breach of improper conduct in accordance with section 53 of the HBA whereby the works on the Site Property are not being properly supervised. Should the above breaches not be rectified within 10 business days of the date of this letter, both owners of the Site Property reserve the right to terminate the contract in accordance with clause 33.3(b) of the contract. Both Anna and I reserve all rights.
By undated letter apparently sent on 26 August 2014 (response letter), the builder responded in the following terms (formal parts omitted): In relation to the breach notice received by Courier on 19 August 2014 at … which also states was delivered by registered post on the 5 August 2014 but not received by our office. I must point out this dwelling is still under construction and some of the points raised are still to be addressed as the construction continues. 1. The contract was signed 2 February 2013, with the construction certificate being issued on the 18 April 2013, however due to the demolition not being complete or even commenced at this time the peg out survey was not done until 22 October 2013. This would mean that the initial delay was caused by yourselves. Estimates of construction time prior to commencement are exactly that and are not written into any contract. The time to reach practical completion in your contract is 38 weeks, in this time there has been the 5 weeks Christmas break plus one week for Easter. There has also been several weeks of rain delays, this is now being logged through our new software system as you are aware of having received delay notices. An explanation to these will follow in your email request. There has also been delay on your part through the time taken to sign off variations and the inspections from a private inspection company. The rainfall figures for November to August are included and show a total of 48 rain days, or 9.6 weeks, this does not include any drying time. This alone comes to 53.6 weeks. At this point of time we are not in breach of contract on this issue. 2. The ceiling height to the upstairs balcony is clearly shown on the front page of the CDC stamp plans as being in line with the eaves lining. There is no nomination of this height in any of the plans or specifications. The display home may be a different height however there are many differences from your plan to the display home, even the fact that your project has a top floor balcony to this areas where as the show home does not. There is no breach on this issue. 3. The floor to the gallery area has been affected by the weather on the joints, this is considered normal with particleboard sheet flooring. It is standard for all our projects to have the floor sanded after the roof has been installed and the sheet flooring is no longer affected by the weather. As for the squeaks, we also screw fix the sheet flooring after the floor sanding has been completed to eliminate any present of (sic) future squeaks. There is no breach on this issue as the project is still in construction. 4. The width of the garage measured on-site form (sic) the gyprock to the render of the 230 mm wall is 5635mm, this would give a total measurement from the stud wall to outside of the brickwork of 5895 mm. The measurement shown on the plans is 5800 mm from the stud wall to the inside of a 110 mm, single skin brick wall. The measurement shown on the plan is 5800 mm from the stud wall to the inside of a 110 mm, single skin brick wall. This would give a total measurement from the stud wall to the outside of brickwork of 5910 mm. This is a total difference of 15 mm which is inside tolerances. The actual overall width of the house is 12855 mm, on plan it is shown as 12850 mm. The difference on this issue is the plan shows a single skin 110 mm wall with 110 mm and 230 mm (to support steel) engaged piers. We have constructed in this manner as it is ascetically (sic) more pleasing, does not reduce the usable floor space of the garage and is more structurally sound. There is no breach on this issue more a difference in interpretation. 5. The window issues are currently in the window manufacturer's service log and will be attended to in due course. There is no breach on this issue as the project is still under construction. 6. The window have been supplied by one of our new suppliers Wideline Windows and Doors. This product is of equal quality to Stegbar and Trend Windows and is in fact we believe a higher quality to Southern Star, hence the reason we no longer obtain any of or (sic) Windows from Southern Star. Clause 55 of your signed tender on page 17 of 20 states "Vogue Homes reserves the right to change specifications, materials, brands, prices and suppliers without notice." No breach of contract on this issue. 7. Overhang to the bricks on the wall adjacent to the stairs and powder room is noted and will be rectified in due course and certification by a qualified engineer will be obtained. There is no breach on this issue as the project is still under construction. 8. All the items listed for this point our general construction issues and will be rectified in due course of the construction. There is no cause for an owner to have concerned for issues such as these when they have a licensed builder with qualified supervisors and licensed tradesman working on the project. 9. Vogue Homes employs qualified supervisors who are licensed builders to supervise all projects they have currently running. Unless you can provide evidence contrary to this it is unreasonable to state otherwise. 10. The further point raised via email regarding the stair handrail, this issue was an error in interpretation when ordering the stairs and will be rectified at no cost to the owner. There is no breach on this issue as the project is still under construction. As there are no breaches of contract as claimed by yourself in your breach notice received on 19th August Vogue Homes rejects any claims to have works rectified in 10 days and will attend to all these matters in due course of the construction and request that you or any or (sic) your representatives into the site and in doing so breach of (but not limited to) clause 11.3(c) on your behalf. As per clause 17 of the contract we request any further issued variations are attended to in 5 working days to prevent any further delays on your behalf.
Notwithstanding the builder's response dated 26 August 2014, the homeowners issued a termination notice dated 2 September 2014 (termination notice). This termination notice was in the following terms (formal parts omitted): We refer to our breach notice dated 5 August 2014 (Breach Notice), and all further email correspondence between both parties on 26 August 2014 and 27 August 2014 respectively. In accordance with our Breach Notice, Vogue Homes has failed or ignored to rectify all substantial breaches/non-compliance and defect issues and all other breaches/non-compliance and defect issues within the timeframe stipulated in accordance with clause 33.3 of the contract dated 2 February 2013 (Contract). Therefore, in accordance with clause 33.4 of the Contract, both Anna and I have elected to terminate the Contract effective today's date bringing an end to the Contract entered into between Anna and I with Vogue Homes. Further to (but not limited to) all other breaches/non-compliance and defect issues as set out in our Breach Notice, we confirm that Vogue Homes has: 1. Failed to comply with section 7B of the Home Building Act (HBA) whereby it failed to provide Anna and I a copy of the contract within the required timeframe under the HBA. The contract was signed and entered into on 2 February 2013 with a copy of the Contract provided to us by email on 12 February 2013 by Greg of Vogue Homes. Anna and I will be referring this breach for disciplinary action with the governing authorities and seeking the maximum penalty against Vogue Homes in accordance with Section 7B of the HB Act. 2. Failed to comply with section 92(2) of Home Building Act (HBA) whereby Vogue Homes failed to provide Anna and I with a copy of the Home Owners Warranty Insurance (HOWI) on 2 February 2013 at the time the Contract was signed and entered into by both parties. In fact, Vogue Homes only obtained HOWI for the Property on 25 February 2013, somewhat approximately 4 weeks after the signing of the Contract by both parties. Anna and I will be further referring this breach for disciplinary action with governing authorities and seeking the maximum penalty against Vogue Homes in accordance with further provisions of Section 92(2) of the HBA. 3. Failed to comply with Section 92(2) of Home Building Act (HBA) whereby Vogue Homes demanded and received payment for invoices 838, 957, 966, 1434, 1445 and 1695 prior to Anna and I receiving a copy of the HOWI. A copy of the HOWI was finally sent to Anna and I by email from James Chrissimos of Vogue Homes on 28 January 2014 after all the above invoices have been demanded and paid. Anna and I will be further referring this breach for disciplinary action with governing authorities and seeking the maximum penalty against Vogue Homes in accordance with further provisions of Section 92(2) of the HBA. 4. Failed to comply with GSTR 2019/1 of the GST Act 1999 by ignoring and rejecting our request in not providing us a breakdown of the electrical invoice (being over $1,000.00) within 28 days of our request made in writing on 10 July 2014 to Vogue Homes. Anna and I will be referring this matter and further written evidence to the Australian Tax Office for disciplinary action as they see fit. Both Anna and I as owners of the said Property, effective immediately, now take full and rightful possession of our said Property. After this notice is served on Vogue Homes, any attempt by Vogue Homes employees, representatives, tradespeople/contractors or any other person/s instructed by on behalf of Vogue Homes who gain unauthorised access to the said Property without our strict written approval/authority will be deemed to be trespassing and will have unlawfully entered onto the said Property. Further, any trespassers will be video recorded for any unlawful act and immediately referred to the police. Anna and I will further be seeking criminal charges against any trespassers instructed by or (sic) behalf of Vogue Homes and will seek that police charges are forwarded to the governing authority for the suspension/cancellation of the contractor's licence subject to those criminal charges. Any contractor's tools or equipment located on the said Property may be collected by the contractors by prior appointment with either Anna or I under guided supervision or our nominated person granting supervised access at a mutually agreed time and date (including Camden Hire equipment which Vogue Homes will be responsible for payment from termination until such time they collect their equipment by prior arrangement with us off the said Property). Further, we will be seeking from Vogue Homes copies of all suppliers tax invoices together with all compliance certificates, reports, warranties to be mailed to us all we will seek a Court Order Summons for all these documents. All suppliers invoices will be diligently reviewed and referred to the Australian Tax Office for cross-referencing with the suppliers and Vogue Homes quarterly BAS lodgements. We will further be seeking Affidavits and/or Statutory Declarations from other previous and more recent Vogue Home Customers who we have recently contacted and who have also confirmed that Vogue Homes have changed and utilised cheaper products and/or materials in their build in breach of the contract with Vogue Homes. Anna and I will recommend to them that they initiate and commence a damages claim against Vogue Homes for breach of the contract. Anna and I will be obtaining an independent builder's expert report detailing all breaches/non-compliant (sic) and defect issues and any other poor workmanship on the said Property and further costs for incomplete works. We will be taking action seeking those costs against Vogue Homes. Finally, going forward, Anna and I recommend Vogue Homes seek legal representation in relation to all current and previous matters we have addressed, however, that will be entirely up to Vogue Homes. For clarity and record purposes, we request all future correspondence from or on behalf of Vogue homes is communicated only in writing to us. We reserve all rights. (Emphasis as in original)
As is clear from the homeowners' correspondence, they were purporting to exercise a right to terminate the contract in accordance with cl 33. Clause 33 is in the following terms: 33.1 A substantial breach of this contract by the builder includes but is not limited to if the builder: (a) has its licence cancelled; (b) suspends the carrying out of the building works other than under Clause 32. 33.2 A substantial breach of this contract by the owner includes but is not limited to if the owner; (a) fails to pay any amount by the due date; (b) fails to give evidence of ability to pay as requested; (c) fails to establish and maintain a security account if requested; (d) interferes with or obstructs the progress of the building works; (e) fails to give or interferes with the builder's possession of the site; (f) fails to give an instruction or direction required within the time specified. 33.3 If a party is in substantial breach of this contract the other party may give the party in breach a written notice stating; (a) details of the breach; and (b) that, if the breach is not remedied within 10 working days, that party is entitled to end this contract. 33.4 If 10 working days have passed since the notice of default is given and the breach is not remedied then the party giving the notice of default may end this contract by giving a further written notice to that effect. 33.5 All notices to be given under this Clause must be given by registered post or personally.
Termination under cl 33 of the contract is a two-stage process. First, a written notice of substantial breach must be given under cl 33.3. The notice must state: 1. details of the breach; and 2. that, if the breach is not remedied within 10 working days, the party giving the notice is entitled to end the contract.
Secondly, if the identified breaches are not remedied and 10 working days have passed, the party giving the notice may terminate the contract by giving a further written notice. All notices must be given by registered post or personally.
Notice of breach may only be given by a homeowner in respect of a substantial breach by a builder. As set out above, cl 33.1 provides an inclusive definition of the word "substantial".
The critical questions in the present appeals are whether, having regard to the matters raised in the notice of breach, the builder's response and the facts as found by the Tribunal, the matters identified could properly be characterised as substantial breaches within the meaning of cl 33 and whether the builder had in fact breached the contract in the manner claimed.
In this regard, we note that the fact that notice of a particular breach must be given, so as to enable its remedy in the 10 day period, suggests that breaches not specified in a notice of breach (whether or not known at the time the notice of breach is served) cannot be relied upon in support of a notice of termination subsequently issued under cl 33.3. This is because the clause contemplates an opportunity to remedy a breach before termination can be effected under cl 33 of the contract.
The expression "substantial breach" is not defined by the contract, other than by the inclusive definitions as found in cl 33.1 (substantial breach by builder) and 33.2 (substantial breach by homeowner) of the contract. However, the expression is to be construed in the context in which it is used and having regard to the terms of the whole of the contract. As Bathurst CJ said in Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 at [52]: The principles underlying the construction of written contracts are well established and it is not necessary to deal with them at length. A contract is to be construed by reference to what a reasonable person would understand by the language in which the parties have expressed their agreement having regard to the context in which the words appear and the purpose and object of the transaction.
It should also be remembered that cl 33 is a right to end the contract separate to rights at common law to terminate the contract. In this regard, the rights under the general law to terminate should not be regarded as excluded unless the contract manifests an explicit intention to do so: see eg Amann Aviation Pty Ltd v Commonwealth (1991) 100 ALR 267 at 300, Concutt v Worrell [2000] HCA 64; (2000) 75 ALJR 312 at [23], Progressive Mailing House Pty Ltd v Tabali Pty Ltd 157 CLR 17 at 30.
Those separate, common law rights to terminate were set out by the High Court in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61 (per Mason CJ and Gummow, Heydon and Crennan JJ at [44]) in the following terms (citations omitted): 44. …. The term repudiation is used in different senses. First, it may refer to conduct which evinces an unwillingness or an inability to render substantial performance of the contract. This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party's obligations. It may be termed renunciation. The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it. (In this case, we are not concerned with the issues that arise where the alleged repudiation takes the form of asserting an erroneous interpretation of the contract. Nor are we concerned with questions of inability as distinct from unwillingness.) Secondly, it may refer to any breach of contract which justifies termination by the other party. …. There may be cases where a failure to perform, even if not a breach of an essential term (as to which more will be said), manifests unwillingness or inability to perform in such circumstances that the other party is entitled to conclude that the contract will not be performed substantially according to its requirements. This overlapping between renunciation and failure of performance may appear conceptually untidy, but unwillingness or inability to perform a contract often is manifested most clearly by the conduct of a party when the time for performance arrives. In contractual renunciation, actions may speak louder than words. 45. In the past, some judges have used the word "repudiation" to mean termination, applying it, not to the conduct of the party in default, but to the conduct of the party relying upon such default. It would be better if this were avoided.
Their Honours explained the difference between essential terms which operated as conditions which, if breached, give rise to a right of termination and those conditions which, if breached, may give rise to a right of termination depending on the nature of the breach or breaches. At [47]-[51] they said: 47. For present purposes, there are two relevant circumstances in which a breach of contract by one party may entitle the other to terminate. The first is where the obligation with which there has been failure to comply has been agreed by the contracting parties to be essential. Such an obligation is sometimes described as a condition. In Australian law, a well-known exposition was that of Jordan CJ in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd who, in comparing conditions and warranties, employed language reflected in many statutory provisions. The widespread statutory adoption of the distinction between conditions and warranties, or essential and inessential terms, is an established part of the background against which the common law has developed. The Chief Justice of New South Wales said (references omitted): "... The question whether a term in a contract is a condition or a warranty, ie, an essential or a non-essential promise, depends upon the intention of the parties as appearing in or from the contract. The test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor. If the innocent party would not have entered into the contract unless assured of a strict and literal performance of the promise, he may in general treat himself as discharged upon any breach of the promise, however slight. If he contracted in reliance upon a substantial performance of the promise, any substantial breach will ordinarily justify a discharge. In some cases it is expressly provided that a particular promise is essential to the contract, eg, by a stipulation that it is the basis or of the essence of the contract; but in the absence of express provision the question is one of construction for the Court, when once the terms of contract have been ascertained. In general, Courts of common law have been more ready than Courts of Equity to regard promises as essential. This is in part due to the fact that Courts of common law are in the main concerned with ordinary commercial contracts in which it is common to find provisions which are intended to be strictly and literally performed. ..." 48. What Jordan CJ said as to substantial performance, and substantial breach, is now to be read in the light of later developments in the law. What is of immediate significance is his reference to the question he was addressing as one of construction of the contract. It is the common intention of the parties, expressed in the language of their contract, understood in the context of the relationship established by that contract and (in a case such as the present) the commercial purpose it served, that determines whether a term is "essential", so that any breach will justify termination. 49. The second relevant circumstance is where there has been a sufficiently serious breach of a non-essential term. In Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd, the English Court of Appeal was concerned with a stipulation as to seaworthiness in a charterparty. Breaches of such a stipulation could vary widely in importance. They could be trivial or serious. The Court of Appeal held that to the accepted distinction between "conditions" and "warranties", that is, between stipulations that were in their nature essential and others, there must be added a distinction, operative within the class of non-essential obligations, between breaches that are significantly serious to justify termination and other breaches. This was a recognition that, although as a matter of construction of a contract it may not be the case that any breach of a given term will entitle the other party to terminate, some breaches of such a term may do so. …". … 51. It may be true that this Court has yet to accept Hongkong Fir as an essential element in the grounds for decision in any particular case. However, in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd, Mason ACJ, Wilson, Brennan and Dawson JJ referred to Hongkong Fir with evident approval and said that the concept of the intermediate and innominate term brings a greater flexibility to the law of contract. With that in mind, it was entirely appropriate for Campbell J to proceed with an analysis of the facts in which Hongkong Fir was applied.
In its Reasons, the Tribunal appears to have merged these concepts when analysing whether the homeowners' purported termination of the contract under cl 33 was valid. Alternatively, the Tribunal has approached the homeowners' purported termination under cl 33 of the contract on the basis that the homeowners in fact sought to terminate the contract on the basis of an anticipatory breach and that the builder had repudiated the contract. Having considered Koompahtoo, the Tribunal said at [20]: Accordingly, the Tribunal must determine whether the builder was in substantial breach of the contract on the grounds articulated in the breach and termination notice and whether there has been a breach, serious breach or breach of an essential term on any other grounds.
In our view, this approach was in error for several reasons.
First, the meaning of the expression "substantial breach" and the entitlement to terminate on notice under the contract is not to be determined by reference to whether there has been a valid exercise of common law rights to terminate. The party seeking to terminate under the contract must comply with the requirements of the contract to effect such a termination. The expression "substantial breach" must be given a meaning consistent with the intention of the parties expressed in the contract, objectively determined, which may or may not conform with any common law concept entitling termination for repudiation or breach of an intermediate term: Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7 at [35]; (2014) 251 CLR 640.
Secondly, different facts may be relevant to determine what entitlement a party has to terminate a contract on these distinct legal bases.
Thirdly, where a right to terminate for repudiation or breach of an intermediate term arises at common law, an election to exercise a contractual right and affirm the contract may be inconsistent with a common law right to discharge the contract immediately. A party may have a reasonable time to make an election such that actions taken in the period are not taken to be acts of affirmation: Majik Markets Pty Ltd v Motor Repairs Pty Ltd (No.1) (1987) 10 NSWLR 49 at 54. However, a positive act of affirmation will prevent a party from relying upon earlier repudiatory conduct to terminate the contract.
A notice of substantial breach issued under cl 33.3, by its terms, requires the giver of the notice to specify the breach. The breach must be substantial. The recipient of the notice must rectify such breach within 10 days. That is, the receiver of the notice must perform the contract and rectify the past breach in the specified time. It is the failure to remedy the breach within the specified time which gives rise to an entitlement to terminate under cl 33.4. This is because the giver of the notice has decided not to treat the contract as repudiated and terminate the contract immediately if the breach otherwise constituted a sufficient basis to do so at common law.
In this regard we note that the homeowners said that they had not asserted in the proceedings before the Tribunal that they had accepted any repudiation of the contract by the builder and terminated the contract at common law by issuing the termination notice. Rather, they said they had claimed that the contract had been terminated following the exercise of their rights under cl 33 of the contract.
Consequently, it is necessary to determine what is the meaning of the expression "substantial breach" used in the contract and whether the homeowners had validly exercised their rights under cl 33.
Assistance in interpreting the expression "substantial breach" can be gained from various decisions of the State Supreme Courts.
In Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (formerly SC Land Richmond Pty Ltd) [2012] VSC 99, Dixon J was considering cl 44 of Australian Standard contract AS 2124-1992. This clause permitted termination for "substantial breach", defined by an "inclusive" definition similar to the present clause. At [447] his Honour said: I have already referred to cl 44.2, which states what the term 'substantial breach' includes. In Mazelow Pty Ltd v Herberton Shire Council the Queensland Court of Appeal considered the term, in the context of cl 44 of AS 2124-1992. MacPherson JA, with the other members of the court concurring, observed that: The expression "substantial breach" is widely and not exhaustively defined. By cl 44.7, it includes various acts or omissions some of which might in some circumstances amount to repudiate conduct by the Principal. However, none of those defined acts or omissions extend to a final and definitive refusal to perform the contract any further. In context, the court was distinguishing substantial breach from a breach that would justify common-law determination. The requirement of a substantial breach is not that high and, when read with cl 44.1, shows that the parties have agreed that the contractual right to terminate has expanded the common law rights that otherwise may be available. In each case there is no question that the nature of the breach can be substantial, having regard to the express provision of cl 44.2. As regards the place that the conduct in breach must reach on the continuum of trivial to repudiatory, the adjectival 'substantial', provides guidance. It requires that the conduct in breach be of real or actual significance in respect of the important qualities of the bargain. Trivial or inconsequential conduct will not suffice, but it is unnecessary to show conduct that 'goes to the root of the contract'. The consequences of the conduct must be material, or important, to the substance of the contract.
In the context of residential building work, Dixon J of the Supreme Court of Victoria also considered the meaning of "substantial breach" in Stojanovski v Australian Dream Homes [2015] VSC 404. There, the Court was considering cl 20 of the contract which was (relevantly) in the following terms: If the builder: -fails to proceed with the works with due diligence or in a confident manner; or -refuses or persistently neglects to remove or remedy defective work or improper Materials, so that by their refusal or persistent neglect the Works are adversely affected; or -refuses or persistently neglects to comply with this Contract (including the requirements of municipal or other authorities); or -is in substantial breach of this Contract; then the owner may give written notice by registered post to the Builder: -describing the breach or breaches of the Contract by the Builder; and -stating the owner's intention to terminate the Contract unless the Builder remedies the breach or breaches of this Contract within a period of fourteen (14) days after the Builder's receipt of the above notice.
At [45]-[49] his Honour said (citations omitted): 45. The word 'substantial' is protean, which no doubt explains the propensity for the drafters of standard form terms and conditions for building contracts to identify what breaches are to be regarded as substantial. It is not uncommon for building contracts to contain an inclusive definition of 'substantial breach'. However, the term 'substantial breach' is not defined in this contract. Neither party addressed the court as to the proper meaning of 'substantial breach'. 46. Its meaning in a variety of contexts has been considered by courts. 47 In Wong v Silkfield Pty Ltd, the High Court said that the term 'substantial' may have various shades of meaning. Having regard to the context, it may mean 'large or weighty' or 'real or of substance as distinct from ephemeral or nominal'. In that case, the meaning dictated by the statutory context was that 'substantial' did not indicate that which is 'large' or 'of special significance' or would 'have a major impact on the ... litigation' but, rather, was directed to issues which were 'real or of substance'. The court's reasoning permitted context to determine where on the continuum the intended meaning was to be found. 48. The term 'substantial' appears in s 9A of the Workers Compensation Act 1987 (NSW), in the context '... a worker's employment is not to be regarded as a substantial contributing factor to a worker's injury merely because of either or both of the following ...'. The word is employed to evaluate a notion of causation. In Dayton v Coles Supermarkets Pty Limited, the trial judge found that the worker's employment constituted a 'rather minor' factor in the aetiology of the worker's injury. Meagher JA opined that: many judges have spent a great deal of time and difficulty analysing and pondering the meaning of the word "substantial". But this word is a plain English word which is understood by anyone who is not a judge. Nor have the endless judicial lucubrations on the word contributed to anyone's understanding of it. And nobody in their senses would regard a cause which could be correctly categorised as very "minor" as "substantial". 49. By 2009, there were conflicting judgments of the NSW Court of Appeal about the proper construction of s 9A, and in Badawi v Nexon Asia Pacific Pty Limited trading as Commander Australia Pty Limited a five member bench of the Court of Appeal considered its proper construction. The majority stated: First, and perhaps most importantly, the word "substantial", must be given effect. It is a word of ordinary English meaning. It is a word of evaluative concept. The word substantial has been said to be not only susceptible of ambiguity, but also to be a word calculated to conceal a lack of precision. Which of the various possible shades of meaning the word bears is determined by the context: Here, the concept and purpose of the introduction of s 9A was to remove the possibility of compensation for injury with only a "remote or tenuous connection with work". This was the purpose the amendment: see the Second Reading Speech at [34] above. We would endorse the separate comments of Meagher JA and Davies AJA in Dayton v Coles Supermarket. As Meagher JA said, something which is minor is not substantial, or, as Davies AJA said, "substantial" as it appears in s 9A means "in a manner that is real and of substance" and does not apply where, as a matter of practical reality, the contribution of the employment to the injury was of, or had, "little substance". We agree with his Honour that it is not useful to search for or use other terms, such as "large", or "weighty", or by way of further example, other concepts such as "predominant". We consider that to do so may carry the vice of introducing concepts with different nuances from the words used by the legislature and which would take the meaning of the word beyond that needed to fulfil the purpose of the provision in its legislative context. In this respect, we prefer the views of Davies AJA in Dayton to the views in the extempore judgment in Bulga, which did not refer to Dayton and to the views of Mason P in Mercer. The words of the statute should be adhered to: "a substantial contributing factor". The "proper link" in the legislative context was a causal connection expressed by the words "a substantial contributing factor", meaning one that was real and of substance. Given the conflict in the existing authority (Mercer, Bulga and Dayton), we think it important to clarify this issue.
His Honour referred to the decision of Serong v Dependable Developments Pty Ltd [2009] VCAT 760 and then said at [51]-[53]: 51. I do not entirely agree with this passage, at least as a statement of the proper approach to construing this clause of the contract. By analogy with the cases that have construed the word 'substantial' in a statutory context, the proper approach to construing the term in the contract requires identifying the contractual context to assess the intended evaluative meaning of 'substantial' in connection with breach of the contract. 52. Although I agree that a substantial breach is one that is more than ephemeral or de minimis in its character, the concept and purpose of evaluating, and limiting, the kind of breach that enlivens the owner's right to serve a default notice is given context by reference to the terms of the contract as a whole. It is unhelpful to paraphrase the qualifying condition introduced by the word 'substantial' by using the phrase 'only really important breaches' because that is not the language. 53. In some applications of cl 20.1, but perhaps not where cl 10.1 is breached, that evaluative concept may be too narrow. Because the qualifier is applied to the phrase 'breach of this contract', the concept of 'substantial' could apply to a breach of any term of the contract, across the range of the differing obligations cast on the builder by the contract. In that context, its protean quality serves a purpose and the precise meaning intended by the use of the word will be revealed by the nature of the breach. Whether a breach of the contract is a substantial breach is a question of fact and the answer to the legal question what was intended by 'substantial' is that the nature and the consequences of the breach must satisfy that description and, in the present context, be ample or considerable or important.
His Honour then continued at [56]: 56. The proper approach in determining whether the builder was in substantial breach of the contract requires that the court should first identify the term or terms breached, and the breach must then be evaluated by considering its nature and the consequences of the breach. Here, the term in question was cl 10.1, in particular the requirement that the works be carried out in a proper and workmanlike manner. About that obligation, it should be noted that the builder has agreed by cl 10.1 to carry out, as opposed to complete, the works to a particular standard. It is irrelevant that the builder may later complete the works to the requisite standard because the obligation under consideration is to carry out the works in a proper and workmanlike manner. The contractual term reflects an important statutory warranty, incorporated by legislation intended to provide protection to owner. That the works are carried out in a proper and workmanlike manner will ordinarily be fundamental to the owner and failure to do so is what is contemplated as enlivening the power to serve a default notice.
Thereafter, as his Honour points out, it is necessary to evaluate the particular breach to determine if it is in fact substantial.
These conclusions were affirmed by the Court of Appeal in Australian Dream Homes Pty Ltd v Stojanovski [2016] VSCA 133 at [44] and following.
Similarly, when considering whether there was a substantial breach within the meaning of cl 33 of the contract to carry out residential building work with due diligence (in that case a requirement of cl 38 of the contract and s 18B of the HB Act), McColl JA in Hometeam Constructions Pty Ltd v McCauley [2005] NSWCA 303 accepted that: 1. breach of the time obligation would be established by "a failure to carry out a reasonable amount of work by a given time; … measured by reference to all the work to be performed under the Contract or, in absolute terms, by reference to a lack of activity on site over a significant period that could not be satisfactorily explained": at [181]; 2. the onus of establishing the breach was on the party issuing the notice: at [166]-[167]; and 3. the particular failure must be substantial: at [165].
In this regard, the obligation to carry out work with due diligence is a relative term, a substantial breach of which will depend on what is a reasonable time in the circumstances and in the context of the contract as a whole: Hometeam at [177]-[179]. "Administrative neglect" in failing to claim extensions of time or to make proper claims for variations may not affect the enquiry about whether the work was being performed with due diligence: Hometeam at [194].
It is in this context the homeowners' claims of substantial breach must be analysed.

Breach of obligations under HB Act and Regulations

In the present case, the effect of the homeowners' primary submission is that any breach of an obligation arising under the HB Act, including any failure to give a requisite notice in respect of a variation or request for extension of time, is itself a breach of a condition in the contract which entitles the party not in default to exercise rights under cl 33 of the contract.
In this regard we note the HB Act provides that: 1. statutory warranties under s 18B are implied into the contract; 2. the plans and specifications for the work, including variations to those plans and specifications are taken to form part of the contract: Sch 2 Part 1 of the HB Act, (formerly Sch 2 Part 1 of the Home Building Regulation 2004 (NSW) of the HB Act); 3. variations, including changes to the plans and specifications must be in writing, signed by each party: ss 7 and 7E and Sch 2 Part 1 of the HB Act; 4. any works must comply with the Building Code of Australia and all other relevant codes, standards and specifications for such work under any law and/or as required by any relevant development consent: s 18B(1)(c) and Sch 2 Part 1 of the HB Act.
There is a number of problems with this submission.
First, the expression "substantial breach" recognises that not all breaches of contract will entitle the party not in default to end the contract under cl 33. For example, while s 18B(1)(d) (previously 18B(d)) requires work to be done "with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time", not all breaches of this condition would constitute a "substantial breach": Hometeam at [165]. Similarly, not all breaches of the other statutory warranties could be regarded as substantial, the issue being one of degree when considered in the context of the contract as a whole: cf Stojanovski (set out above)
Secondly, the circumstances set out in the inclusive definition in cl 33.1 suggest that "substantial breach" relates to circumstances in which a builder may be incapable of performing its obligations (for example no longer licensed and therefore not lawfully entitled to carry out residential building work) or whether the builder has suspended the carrying out of work other than in accordance with the contract. Similarly, cl 33.2 suggests the conduct of a homeowner that would entitle a builder to terminate the contract under clause 33 only arises where significant obligations under the contract have not been met, for instance the homeowner not demonstrating a capacity to pay and/or not paying amounts due under the contract by the due date or the homeowner interfering with the builder's performance of the contract by not giving possession of the site and/or not giving instructions to the builder to permit all necessary work to be undertaken on a timely basis. This language is inconsistent with an interpretation that any breach of a statutory warranty or other breach of the HB Act, regardless of how significant, is a substantial breach within the meaning of cl 33 of the contract.
Thirdly, in relation to the issue of timeliness, the contract does not make time of the essence. There is an entitlement to request extensions of time as well as for the payment for loss or damage suffered in consequence of delay caused by either party. Late completion does not, of itself, entitle the homeowners to immediately terminate the contract. The analysis in Hometeam at [165] as to the operation of the statutory warranty relating to due diligence in the HB Act is consistent with this view.
Further, unlike some commercial contracts, there is no power for the homeowners in this contract to give directions to the builder to immediately rectify such breaches upon discovery. Rather, the overarching obligation on the builder is to bring the work to practical completion within the time specified in the contract.
Fourthly, insofar as the complaints made by the homeowners relate to breach of the statutory warranties found in s 18B of the HB Act, and other terms which the HB Act mandates must be part of the contract, these are not expressed to be conditions or conditions precedent, the non-performance of which constitutes a breach of an essential term. Otherwise, there is no statutory right allowing termination for any breach, regardless of how serious it is. It could not be suggested that any defective work, no matter how insignificant, would amount to a substantial breach.
Fifthly, in relation to the obligation for variations and/or requests for extensions of time to be in writing, again failure to do so may constitute a breach of contract: cf Hometeam at [194] where a failure to formally request an extension of time was not determinative of the issue of whether a builder had failed to proceed with due diligence. However, more is required in order to establish whether such a breach is substantial.
We also note that while notice is required concerning variations and extensions of time, the failure to give written notice in a specified time does not operate to prevent notice being given subsequently. For example, cl 9.1 provides an entitlement to extensions of time in the specified circumstances, such as wet weather or anything done or not done by the homeowners. While notice is required to be given by the builder to the homeowners under cl 9.2, the late provision of notice is not expressed by the contract to be a bar to the entitlement given by cl 9.1.
Sixthly, the contract, when considered as a whole, does not contemplate that the fact of multiple breaches of itself will constitute a "substantial breach". In the present case, the contract was for the construction of residential premises at a cost of $442,689.53. The time to reach practical completion was 38 weeks. Practical completion is defined in cl 1.1 to mean: when the building works are complete except for minor omissions and defects that do not prevent the building works from being reasonably capable of being used for their usual purpose.
Upon practical completion the homeowner may recover damages for defective work in consequence of non-conformance with the plans and specifications. Until then, the homeowners' claims are usually limited to delay damages while the builder remains in possession of the works: see Brewarrina at [68] or a claim for a work order: see Little v J & K Homes Pty Ltd [2017] NSWCATAP 84.
Otherwise, the defects liability period enables rectification of defects after practical completion within the time specified: see cl 29.
That is not to suggest that particular breaches in some circumstances, or a series of breaches considered collectively, cannot amount to a substantial breach within the meaning of cl 33. However, to constitute a relevant breach to enliven cl 33, the breach must be one defined in cl 33 or otherwise a breach that demonstrates the builder is unwilling, unable or has failed to perform its obligations under the contract and that such unwillingness, inability or failure is substantial in the context of the performance of the whole of the contract and what the homeowners contracted to receive.
It follows that this ground of appeal fails.

Do the individual breaches, separately or collectively, constitute a substantial breach?

The homeowners say that the obligations imposed by cl 43 are conditions of the contract, the breach of which entitles them to terminate the contract under cl 33. Clause 43 provides: Clause 43. Mandatory Conditions 43.1 To the extent required by the Home Building Act and subject to subclause 43.2, the building works will comply with: (a) the Building Code of Australia (to the extent required under the Environmental Planning and Assessment Act 1979, including any regulation or other instrument made under that Act); (b) all other relevant codes, standards and specifications that the building works are required to comply with under any law; and (c) the conditions of any relevant development consent or complying development certificate. … 43.3 To the extent required by the Home Building Act: (a) all plans and specifications for the building works including any variations to those plans and specifications form part of this contract; (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.
Clause 43.2, which relates to designs done by others, is not presently relevant.
These provisions are those required by s 7E of the HB Act and Sch 2 Part 1 of the HB Act. While they are described in the contract as "mandatory conditions", s 7E provides "a contract must include (and is taken to include) each of the terms …". The question is whether or not they are essential conditions in the contract of the type described by Jordan CJ in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 63, referred to in Koompahtoo (set out above), breach of which entitles the other party to terminate the contract.
In our view, cl 43 is not a condition or an essential term, the breach of which entitles a party to terminate the contract. Therefore, a breach of the requirements in that clause would not, of itself, amount to a substantial breach of the contract to which cl 33 applies.
Our reasons are as follows: 1. the clause heading "Mandatory Conditions" is not part of the contract and cannot be used in its interpretation: see cl 1.2 of the contract. Further, the word "mandatory" in the present case means no more than that the HB Act requires these terms be included in contracts to which the schedule applies; 2. the contract does not expressly provide that any breach of cl 43 by the builder entitles the homeowners to terminate the contract. Rather, when considering the right to terminate, the degree of non-conformance is to be dealt with in the context of determining whether or not the particular breach is "substantial" within the meaning of cl 33. Whether a defect is substantial is a question of fact: Stojanovski at [53]; 3. the clause is not otherwise a term of the contract which goes "so directly to the substance of the contract or was so 'essential to its very nature that its performance may fairly be considered by the other party as a substantial failure to perform the contract at all'": Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd [1938] 61 CLR 283 per Latham CJ at 302. 4. the clause obliges the builder to comply with the plans and specifications and other building requirements and laws and requires variations to the plans and specifications to be in writing signed by the parties. However, it is self-evident that the degree of non-compliance with the obligations imposed by this clause could vary greatly. For instance, non-compliance could range from a minor scratch on a bench top, or a minor deviation in tolerances required in the construction of elements of premises, to the failure to construct a major element of the building in accordance with an appropriate design. In respect of minor non-conformance, it could not be suggested that such a defect amounted to a "substantial breach" of the contract; 5. while a particular breach or breaches of the clause may constitute grounds to terminate the contract at common law, it is the nature and extent of such breaches which will determine whether a right to terminate accrues in consequence of the breach.
The Tribunal examined each of the alleged breaches raised in the breach notice and found that individually, and collectively, the breaches were not substantial. In the appeal, the homeowners challenge the conclusions in relation to time, the windows, the height of the balcony ceiling and the thickness of the kitchen bench top. We will examine these in turn.

Time

In the breach notice the homeowners asserted that the builder had "failed to complete the works and reach the stage of practical completion within 38 weeks after the site was handed over". In the response letter, the builder said it was entitled to various extensions of time and that the builder was not in breach of the contract at the time the breach notice was issued.
The Tribunal dealt with this issue at [21] and following.
At [30] the Tribunal found that the time for completion, prior to consideration of any entitlement to an extension of time, was 1 August 2014. The Tribunal also found that, although not claimed, events had occurred that entitled the builder to claim for an extension of time, these events including a shutdown over Christmas as well as rain which had delayed the works.
The Tribunal then said at [33]: Time was not of (the) essence in the contract. Having considered the evidence on this point, the Tribunal is not satisfied that even taking into consideration the fact that it may have taken a further four months to complete that it would amount to a substantial or serious breach and the Tribunal does not find that it would have been valid grounds on which to terminate the contract.
In determining whether or not the builder was in substantial breach, the approach taken by the Tribunal in considering any entitlement the builder may have had to an extension of time, even if not then the subject of a claim, is an approach consistent with: 1. what the Court of Appeal said in Hometeam concerning whether there has been a breach of the time obligations in respect of performance under the contract; and 2. our interpretation of cl 9 of the contract, namely that there is no bar under the contract to claiming an extension of time even if the requirements of cl 9.2 are not met.
While the Tribunal did not make express findings concerning the prospective date for practical completion on the assumption that an appropriate request for extension of time were made, a fair reading of the Reasons indicates that the Tribunal had regard to the builder's evidence concerning extensions of time for inclement weather, the Christmas and Easter breaks, and 7 days arising from an electrical variation requested by the homeowner: see [22] of the Reasons. From a review of para [1] of the response letter, there was evidence before the Tribunal that the delays (other than in respect of the electrical variation) were at least 9.6 weeks for wet weather, 5 weeks for the Christmas break and one week for Easter, a total of 15.6 weeks. This period, together with the one week for the electrical variations, totalled 16.6 weeks. At [31], the Tribunal also accepted the evidence of Mr Cody, any employee of the builder, that completion of the work would have taken another 4 months.
At [32]-[33] the Tribunal accepted that the builder was entitled to extensions of time, even if not the subject of a formal claim at that time, and found that there was no "substantial or serious breach" of the time obligations.
Having regard to the above, the homeowners have not demonstrated any error in the conclusion of the Tribunal and have not established that the builder was in substantial breach of its obligations concerning the time to complete the work. Accordingly, this ground of appeal fails.

Windows

This ground of appeal relates to the builder changing the brand of windows which were supplied and installed in the residential premises. The homeowners contend that the builder failed to provide a written variation and there was no evidence that the brand of windows specified in the contract was unavailable.
The homeowners relied on the provisions of s 7E and Part 1 of Sch 2 of the HB Act together with s 25(1)(d) and (g) of the Australian Consumer Law (NSW) (ACL) and said these provisions rendered illegal cl 55 of the Tender which permitted the builder to vary the brand of windows to those specified.
The homeowners contended that the supply of the Wideline windows was, in the circumstances, a substantial breach of the contract. The homeowners referred to various decisions of the Civil and Administrative Tribunal of Victoria as well as the Consumer Trader and Tenancy Tribunal of New South Wales (CTTT) in support of their position. They also said they had written to the builder about this issue by email dated 31 July 2014. That email, which concerned a meeting that had apparently taken place on 28 July 2014, was in response to an email from the builder and said at point 3: 3. Wide line windows-This has been sorted out with you by James at an earlier date. As far as I am concerned this issue is resolved and no further action is required. Not agreed - The contract stipulates that the windows and doors will be either Stegbar, Trend Southern Star. No Wide's line or anything else. Let there be no illusions that I agreed to anything else other than what the contract states with James or anyone else. At no time were there any representations made before I entered into the contract that the products or brands will be changed. In any event, in accordance with clause17.1 of the contract, it clearly states that "a variation must be in writing and signed by or on behalf of each party to this contract. Either the owner or the builder may ask for the variation". In this case, no variation was sought, signed or agreed to. To suggest or act otherwise will be viewed as deliberate and deceptive conduct in breach of Section 18B of the Home Building Act, in breach of the contract terms, in breach of section 18 of the Australian Consumer Law, and finally, in further breach of any trust I have in Vogue Homes. In summary, Wideline windows are not agreed or accepted by me (if any doubt had continued to remain with regards to this point) and the windows and doors should be the brand stipulated in the contract, and nothing else. Replacement will be at Vogue Homes' cost. (Emphasis as in original)
The Tribunal dealt with the issue of whether the change in brand of the Windows constituted a substantial breach at [50]-[69].
The Tribunal: 1. accepted that the contract stipulated the type of windows to be installed [61], noted that cl 55 of the contract permitted a change in brands "without notice" [64], referred to cl 21 of the contract (which permits the builder to request a variation if materials are unavailable) [65]; and 2. found the builder had not provided a variation nor evidence that the brands of windows specified were not available [66].
The Tribunal said at [67]: Having considered the evidence on this point in its totality, the Tribunal does not find that the providing of an alternative brand of window is a substantial breach of the contract. The tender did specify that the builder had the right to change the brand. Mr Dimitropoulos believed that the Wideline was a lesser quality window, however there was no evidence to support that allegation. The homeowner's builder has allocated $35,000 for the windows to be removed and other brands to be installed. However, that costing is only on the basis that the current windows need to be removed and the new Windows installed, not because the Wideline windows were of a lesser quality or defective. The Tribunal is not satisfied that the installation of the Wideline windows as opposed to brand specified in the tender constitutes a substantial breach of contract.
At [68]-[69] the Tribunal then identified particular non-conformances and said: 68 In relation to the further defects in the Windows raised by the homeowner, those defects have been set out in the expert joint report agreed at the meeting on 6 May 2015. (i) The laundry window should be translucent and a clear window was installed. (ii) The ensuite window should be clear, and a translucent window was installed. (iii) The plans identified to the kitchen window as a sliding window. A fixed window was installed. (iv) The Bedroom 2 window opened in the wrong direction. (v) Item 42 identified a further defect in relation to an installation of the window. The cost of the replacement of the windows was agreed in the amount of $500.00. 69 Considering all those defects together the Tribunal also does not find that they would constitute a substantial or serious breach that would justify termination. Issues are always likely to arise in the building process and the Tribunal accepts the builder's submission that such 'defects' would ordinarily have been addressed prior to hand over and that they were only minor in nature and were identified by the builder as issues to be remedied. The Tribunal does not find that these issues constitute a substantial breach or justified termination.
In relation to reliance on the ACL, we do not accept the homeowners' submissions that there has been any relevant contravention of s 25. While it is clear from s 25 that a term permitting one party to vary the terms of the contract (s 25(d)) or a term that permits one party (but not the other) to unilaterally vary the characteristics of goods and services to be supplied (s 25(g)) may be a kind of term which is unfair, such a term is not void unless there is a finding that the term is in fact unfair within the meaning of s 24 of the ACL.
It is not clear whether this issue was originally raised at the hearing. If not, the principles in Coulton would again prevent this issue being raised on appeal. In any event, in this appeal, the homeowners have not pointed to any factual matters that would suggest the particular term in the present case is unfair. In this regard, we note that the Tender in clause 15 provided as follows: 15. WINDOWS & SLIDING or STACKER DOORS The Vogue Homes Standard inclusions, listed below, have been assumed unless stated otherwise. Trend, Stegbar or Southern Star aluminium windows with locks will be installed as per plans. Trend, Stegbar or Southern Star stacker or sliding aluminium doors will be installed as per plans. The colours will be selected and advised by the owner. Obscure glass will be used in all wet areas except for the laundry.
The section referring to "non-standard items" was left blank in the Tender.
It is obvious from the above that the particular brand of window had not been pre-agreed between the parties. Rather, the Tender contemplates one of three brands would be selected, the windows and other fitments to be of aluminium materials and installed "as per plans".
In these circumstances, there is no basis to conclude that a term permitting variation of the brand was unfair.
In any event, in our view cl 55 of the Tender does not operate in the way asserted by the homeowners.
Clause 55 regulates the tender process, the tender price, and when the parties will be bound in contract. Clause 55 provides as follows: 55. TENDER PRICE Any variations requested by the owner, after this tender is issued, will be additional to this price. Vogue Homes holds insurance and can provide copies of Contractors All Risk Insurance and insurance for Public Liability to the value of $10 million until the time of practical completion. This quoted tender price will hold firm for 30 days from the date of this tender. Important: This is not an offer and no binding contractual rights or liabilities will arise unless and until a formal Building Contract is entered into by both parties. Vogue Homes reserves the right to change specifications, materials, brands, prices and suppliers without notice. Should you have any further queries regarding this quotation, please do not hesitate to contact our office. We look forward to our association with you as we construct your new Vogue Home.
Clause 55 preserves to the builder the ability "to change specifications, materials, brands, prices and suppliers without notice" up until the contract is signed. That is, the clause operates so as to qualify the offer made in the Tender such that the builder is not bound by that offer, which may be changed by the builder up until a "formal Building Contract is entered into by both parties".
While the Tender ultimately formed part of the contract, once signed, the variation provisions provided in cl 17 of the standard conditions of the contract operated. In this regard cl 17.1 provides that "Either the owner or the builder may ask for a variation". The Tender itself confirms this position. On page 2 of 21 (above item 1 Site Preparation) the Tender says: Any changes made to inclusions after signing of this tender and the contract will be treated as variations to the tender and contract price.
It follows that cl 55 of the Tender which forms part of the contract does not contravene s 7E and Part 1 of Sch 2 of the HB Act or ss 25(1)(d) and (g) of the ACL.
However, it also follows that the builder does not have a unilateral right to vary the brand of windows from one of the three brands specified in the tender to another brand. Rather, the builder was entitled to apply for a variation if it wished to substitute a different brand of window for one of those specified in the contract.
One of the circumstances in which this could occur was if any material specified in the building works was unavailable. In this case the builder could ask the homeowners for a variation to substitute the use of similar material: see cl 20.1 of the contract. That is not presently the case and no suggestion was made by either party in the proceedings at first instance or in this appeal that none of the brands specified in the contract were available.
However, even in the absence of circumstances specified in cl 20.1, it was still open to the builder to request a variation under cl 17. As stated above, cl 17.1 expressly provides for this to occur.
The Tribunal found that no variation was requested. There is no challenge to that finding in the appeal. Nonetheless, at [67]-[69] set out above, the Tribunal found there was no substantial breach because: 1. the tender did specify that the builder had a right to change the brand; 2. the homeowners believed the Wideline brand was of inferior quality but there was no evidence to support this view; 3. the actual defects in the windows, insofar as they did not otherwise comply with the contract, were "issues… likely to arise in the building process … that … would ordinarily have been addressed prior to hand over" and that they were only minor in nature and were identified by the builder as issues to be remedied; and 4. the costing provided by the homeowners to support their claims was on the basis it was necessary to remove the Wideline windows supplied and replace them with a brand of window specified in the contract, not because the windows installed were of lesser quality or defective.
In reaching these conclusions, in our opinion the Tribunal incorrectly interpreted cl 55 of the contract. In this regard, as we stated above, there was no unilateral entitlement to vary the contract by substituting different brands to that specified. Rather, it was necessary for the builder to apply for a variation in circumstances where cl 20 operated or alternatively to request a variation under the general provisions of cl 17.
That has not occurred here.
In fact, the builder has executed works contrary to the terms of the specification in circumstances where no request for variation had been made. It was not entitled to do so. There is no evidence that the homeowners were aware of this change and allowed the works to be executed using the different brand and complained afterwards. The evidence is that they raised this matter in the notice of breach, there having been earlier email correspondence on the topic.
In our view, the builder's response letter is relevant to the question of whether the breach was substantial. As recorded above, the builder's reply was not to request a variation, but rather to assert at point 6 of the builder's response that it had a right to change the brand "without notice" and that no breach of contract had occurred. This response was incorrect.
Also relevant was the fact that there was no evidence that the Wideline brand was inferior. Indeed, the builder says in the builder's response letter that Wideline is "a higher quality" to the specified Southern Star brand and "equal quality to Stegbar and Trend Windows". There was no evidence to which we have been referred that would suggest this statement is not correct. Further, if it is correct, then this may provide a proper basis for the builder requesting a variation to the brand of windows from Southern Star to Wideline on the basis no additional cost was claimed.
When these matters are taken into account together with those other facts identified by the Tribunal, in our view the substitution of the brand of windows could not be said to be a substantial breach in the present case.
As Dixon J explained above, "substantial" is a protean term. In this regard we accept that the legal meaning it should be given in this contract must have regard to "the nature and the consequences of the breach" which must satisfy the requirements of "substantial".
The present breaches led to a brand of window being installed where there was no agreement in writing to vary the contract. There were defects in the particular windows supplied, which the builder acknowledged at point 5 of the builder's response and confirmed were with the window manufacturer and would be "attended to in due course". The Tribunal found the defects were minor. This finding was not challenged. Further, while the homeowners had asserted in the breach notice that the Wideline brand was "cheaper and inferior", as we said above, no evidence has been provided to prove this fact.
Rather, it would seem that the main complaint is that there has been an unauthorised change.
While the fact of breach is a prerequisite to issue a notice of breach, the actual complaint for which a notice of breach is served must be analysed in the context of a right to terminate for substantial breach and the requirements of the contract.
In the present case, no brand was selected by the homeowner or nominated as a required supply item in the contract. Rather, the contract contemplated that the builder would select the brand from a range which it nominated. That is, the homeowners were leaving it to the builder to decide what particular brand of window would be installed from a nominated range.
The homeowners have not suggested that one particular brand of window should have been supplied or that they would have asked for a particular brand to be supplied from the nominated list. No evidence was identified to indicate such had occurred. Rather, the complaint is simply that there was "no variation … signed or dated by either party" and that the homeowners wanted "the exact inclusions stipulated in the contract" despite the contract providing for one of three alternative brands: see para 6 of the termination notice. Insofar as the homeowners suggested in the notice of breach that the Wideline brand was cheaper and inferior, the builder had responded to this matter and explained this was not the case. The homeowners did not reply to the builder's response and, as we have said, did not subsequently seek to adduce evidence to prove the Wideline brand was inferior.
The correspondence between the parties clearly shows that there has been a breakdown of the relationship and the manner in which the parties communicated with each other. However, these facts cannot distract from the relevant question, namely whether the particular breach identified in the notice of breach is substantial within the meaning of cl 33 of the contract.
While there are defects to be rectified as found by the Tribunal, the supply of the Wideline windows could not be said to be a substantial breach of the builder's overall obligations under the contract to provide windows and doors that met the physical and performance requirements of the contract. Likewise, departure from one of three nominated brands could not be said to be a substantial breach in this case.
Accordingly, we are not satisfied that the supply of the Wideline brand without a variation approved in writing constitutes a substantial breach or that the Tribunal made any error in rejecting the claim of substantial breach.

Balcony ceiling height

The Tribunal found that the balcony ceiling heights had not been constructed in accordance with the plans and contract and made an award of $3,410.00 in favour of the homeowners being the cost to rectify this defect: at [74].
The Tribunal rejected the homeowners' claim that this breach was substantial. The Tribunal found at [72] that particular heights had been agreed and paid for as a variation of $5,831.00. At [75] the Tribunal said: Given the amount to rectify, the Tribunal is not of the view that this would have been a substantial or serious breach of the contract and agrees with the builder that it was a matter that could have been remedied during the defect period. Accordingly, the Tribunal does not find that this would have been a valid ground for the homeowners to terminate the contract.
The Tribunal reached this conclusion having rejected the builder's argument that the ceiling level depicted in the drawings only referred to the internal habitable areas and having concluded that the outside balcony area should be of a height of 2440mm: Reasons at [74]. That is, the Tribunal resolved a dispute concerning the proper construction of the drawings adversely to the builder but found the particular breach was capable of rectification and was not otherwise "substantial or serious". We note the argument of the builder as to the proper interpretation of the drawings was that advanced in par [2] of the builder's response letter.
In our opinion, the fact that the builder is wrong in its interpretation of plans and specifications and therefore denies an obligation to carry out rectification work is not, of itself, sufficient to establish that there is a substantial breach in the present case. Rather, the nature and consequences of the breach need to be considered in the context of the contract as a whole.
It is clear from the Tribunal's Reasons that it analysed the particular breach, found it was capable of rectification at relatively minimal cost, and made an appropriate award. In these circumstances, we are not satisfied the particular breach is substantial within the meaning of the contract. Accordingly, this ground of appeal fails.

Kitchen Bench top

There was no dispute in this appeal that the kitchen bench top issue was not identified as a breach in the breach notice.
The Tribunal dealt with this issue by considering whether or not there had been a valid termination having regard to the principles in Koompahtoo to which we have referred above.
The Tribunal found that the contract required the supply of 40mm kitchen bench tops. The Tribunal also accepted that, on 19 August 2014, the homeowners had been told by the manufacturer of the kitchen that the builder would not agree to 40mm bench tops despite what had been agreed in the Tender: at [91].
The Tribunal continued at [91]: … The Tribunal also accepts that Mr Cameron McAllister (a witness for the builder) in his statement of 3 March 2015 confirmed that the builder did not intend to provide 40 mm bench tops because he believed that the Builder had complied with the specifications in the signed tender which formed part of the contract. That statement was made some 6 months after termination.
At [91] the Tribunal then said of this issue: Mr Dimitropoulos did not raise it in the detailed email that he sent on 27 August 2014 regarding the kitchen invoice and replying to the builder's reply in his breach notice. The homeowners also did not raise it in the termination notice of 2 September 2014, although they did raise other issues that they had not previously raised in the breach notice such as issues in relation to GST. It was not such a concern to the homeowners to include in the termination notice, even though the subcontractor had advised Mr Dimitropoulos on 19 August 2014 that the builder would not be providing the 40 mm benchtop.
Consequently, the Tribunal was not satisfied that the conduct of the builder evinced an intention no longer to be bound by the contract or to perform the contract in a manner substantially inconsistent with its terms. Further, the Tribunal was not satisfied that the conduct of the builder "amounts to a serious breach that would have warranted lawful termination of the contract by the homeowners."
In our view, the homeowners were not entitled to rely on the kitchen bench top issue to terminate the contract under cl 33. This is because no notice of breach had been served as required by cl 33.3. Clearly, on the facts as found by the Tribunal, this was a matter of which the homeowners had notice. They did not take any action to exercise any right which might have been available. In these circumstances, it is difficult to see how the homeowners could assert they had validly terminated the contract for a particular breach about which they knew in the absence of any positive action under the contract to do so.
Accordingly, we do not accept that the notice of termination under cl 33 of the contract operated in any manner to bring the contract to an end by reason of a breach of the obligation to supply 40mm kitchen bench tops.
The other way in which the Tribunal dealt with this claim was to consider whether or not the contract had been properly terminated in consequence of an anticipatory breach. Any breach was anticipatory because the time to supply and install the kitchen bench tops had not yet arrived and they had not, at the time of the termination notice, been supplied.
This was considered by the Tribunal at [87] and following. At [91] the Tribunal concluded that the builder's conduct did not evince "unwillingness or an inability to render substantial performance of the contract". This finding was made because the kitchen bench top issue was "only a small part of the contract" and therefore there was no "serious breach that would have warranted lawful termination of the contract by the homeowners".
In reaching this conclusion, the Tribunal referred to various decisions of the High Court, including Sunbird Plaza Pty Ltd v Maloney and Another [1987-1988] 166 CLR 245; [1988] HCA 11 (Sunbird). In Sunbird at 280, Gaudron J said: To justify termination by a party to his contractual obligations by reference to an anticipatory breach constituted by an inability to perform if not known or relied upon at the time, it is necessary to establish, not only that up until the point of termination the terminating party was ready, willing and able to perform the contract on his part, but also that at that time the other party was wholly and finally disabled from performing its contractual obligations when the time for performance, so far as it is of the essence, should arrive. That total disability must be proved "in fact and not in supposition" - per Devlin J in Citari.
As we have identified above, it is doubtful from the evidence in this case that the homeowners were purporting to terminate the contract for repudiation, whether arising from an anticipatory breach or otherwise. Be that as it may, having regard to the facts as found at the point of the alleged termination, namely the point the termination notice was served, there seems no reason to conclude that the builder had indicated an intention to eschew any future performance of the contract nor to conclude that the builder was wholly and finally disabled from performing the contract when the time arose. In this regard, at the point of termination, the kitchen bench tops were not due for instalment. Rather, the homeowners' complaint in the present appeal is that at the time the contract was being terminated the builder had told its subcontractor that it would not authorise the manufacturer of the 40mm bench top.
As the Tribunal found, the homeowners did not take any action in relation to the communication which they had received from the subcontractor. The homeowners did not raise the issue in the termination notice or in correspondence with the builder immediately prior to the issue of the notice. The Tribunal also concluded that the conduct of the builder did not, in any event, substantially deprive the homeowners of the benefit of the contract as a whole: cf Koompahtoo at [44] set out above.
Having regard to these findings of fact, which were open to the Tribunal on the evidence identified, we see no error in rejecting the homeowners' claim that the contract had been properly terminated by reason of repudiatory conduct in connection with the kitchen bench tops.
Taking all of these matters together, again we are not satisfied any error of the Tribunal has been demonstrated. As stated above, determining what is a substantial breach is a question of fact. The Tribunal found against the homeowners. Leave is required to appeal such a decision and we are not satisfied that "the evidence in its totality preponderates so strongly against the conclusion found by the Tribunal" that leave should be given: Collins at [77(2)].
Accordingly, we refuse leave and dismiss this aspect of the appeal.

Termination by builder

The question remains whether the contract was terminated by the builder or did it come to an end by reason of abandonment?
Having determined that the termination by the homeowners was unlawful, the Tribunal considered whether the builder had accepted the homeowners' repudiation of the contract and exercised the right to terminate the contract. At [94] the Tribunal said that it was necessary for the builder to communicate to the homeowners that it accepted the repudiation and terminated the contract. The Tribunal referred to the decision of the Court of Appeal of the Supreme Court of New South Wales in Ryder and Anr v Frohlich and Anr [2004] NSWCA 472 per McColl JA.
The need to make an election to accept the repudiation and terminate the contract is clear: see eg Majik at [54]. As to the manner in which the election can be made, in Ryder McColl JA said at [116]-[120]. 116. That anticipatory breach was ineffective to terminate the partnership agreement unless accepted by Mr Frohlich. A long line of authority establishes that an innocent party confronted with repudiatory conduct which includes anticipatory breach amounting to repudiation may accept the repudiation and elect to terminate the contract: Heyman v Darwins Limited, above, at 399; Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; (1954) 90 CLR 235 at 250 per Kitto J, at 261 per Taylor J; Holland v Wiltshire, above; Foran v Wight, above, per Mason CJ at 407; per Brennan J at 421; per Dawson J at 441; see also Chitty which, when dealing with "anticipatory breach" (at para 25 - 020) in the section dealing with "Renunciation", states that the injured party may elect to accept the renunciation and treat it "as discharging him from further performance". 117. Where the innocent party proposes to "accept the repudiation", that acceptance is manifested by "so acting as to make plain that in view of the wrongful action of the party who has repudiated, he claims to treat the contract as at an end": Heyman v Darwins Limited, above, at 361 per Viscount Simon LC. The innocent party does not have to recite a mantra such as "I accept your repudiation" or the like to communicate acceptance of the termination. 118. In Lakshmijit v Sherani [1974] AC 605 at 616, Lord Cross, delivering the judgment of Lord Diplock, Viscount Dilhorne and himself, said: "No particular form of communication is needed. It is sufficient if the vendor makes it unequivocally clear to the purchaser that he is treating the agreement as being at an end: see Car & Universal Finance Co Limited v Caldwell [1965] 1 QB 525." 119. As McHugh JA (as his Honour then was) explained in Wood Factory Pty Limited v Kiritos Pty Limited, above, at 146, it is not even necessary that the defaulting party receive direct notification from the person rescinding. Thus in Holland v Wiltshire, above, at 416, Dixon CJ said that the vendor's "election to treat the contract as discharged by the purchasers' breach was sufficiently manifested by his proceeding to advertise the property for sale and by his selling of it". These propositions were accepted recently in Karacominakis v Big Country Developments Pty Limited [2000] NSWCA 313 at [155]; [2001] ANZ ConvR 513; [2001] ANZ ConvR 577, where Giles JA (with whom Handley and Stein JJA agreed) said: "It is not necessary that the communication of acceptance of a repudiation be in those terms, or by direct notification. Words or conduct may communicate acceptance if they are consistent only with electing to terminate the contract (Sargent v AFL Developments Pty Limited (1974) 131 CLR 634 at 646) and it is enough to make the election manifest to the relevant party (Wood Factory Pty Limited v Kiritos Pty Limited) … ". 120. The question of whether the innocent party has elected to terminate is determined objectively. It is "an effect which the law annexes to conduct which should be justifiable only if an election had been made one way or the other … ": Tropical Traders Limited v Goonan [1964] HCA 20; (1964) 111 CLR 41 at 55.
It is clear from her Honour's reasons at [119] that a direct communication to the defaulting party is not necessary to accept a repudiation and terminate the contract. Rather, conduct may sufficiently communicate the election to terminate the contract.
At [95] and following, the Tribunal identified the evidence concerning the conduct of the parties after the homeowners had repudiated the contract by issuing the termination notice. The evidence included the following: 1. by email dated 3 September 2014, Mr Harvey, the construction manager for the builder had sent an email stating: We wish to inform you that we will be commencing action in the CTTT immediately regarding this matter and the site is now on hold and must not be entered by you or any of your representatives until a resolve (sic) is obtained. (Reasons at [98].) 1. a further email was sent by Mr Harvey indicating the site was "on hold", that the homeowners should not enter the site without a representative from the builder, and "any attempts to do so will be treated as trespassing and reported to the authorities and further action will be taken": Reasons at [100]; 2. Mr Dimitropoulos attempted to access the site on 5 September 2014, Mr Vardell for the builder giving evidence that he attended the site to lock the security fence and secure the house: Reasons at [102]; 3. Mr Dimitropoulos gave evidence that what in fact happened on 5 September was that Mr Harvey demanded access to the site which was refused by Mr Dimitropoulos: Reasons at [104]; 4. the builder subsequently sent an email indicating that the builder had returned to site to reinstate locks and signage that had been removed, then the issues between the parties "should be taken up during the arbitration at the CTTT hearing" and that the builder would "not be ordering any trades on-site until this matter is resolved as the site is now on hold": Reasons at [105]. 5. Mr Dimitropoulos sent an email on 6 September 2014 indicating the builder should not enter the property unless he has an order of the Supreme Court and that a claim would be made for destruction of locks and theft of chains from the security fences: Reasons at [106];
Then, relevantly, at [107]-[108] the Tribunal recorded the following evidence: 107. In an email dated 17 September 2014, from Mr Harvey to Mr Dimitropolous, Mr Harvey advised that that further to a meeting on 15 September 2014, he would be attending to removing the site fence, site toilet and void protection and further states; These items have been off hired and need to be picked up by our suppliers and we do not expect to be hindered in our works by you or any of your representatives. As you previously said at this site meeting you were not going to allow this happen, if needed we will have the authorities involved to allow his work to be carried out. We must also advise you of the need to reinstate this at your own cost to ensure the site complies with WHS standards. 108. Mr Dimitropolous replied allowing the removal of the site fence and site toilets, but not the void protection until the keys to the front door, laundry, internal garage door were handed over. It appears from paragraph 2.9 of Mr Harvey's affidavit dated 3 March 2015, that the void protection had not been removed as of that date.
Having also referred at [95] to an affidavit of Mr Chrissimos, a representative of the builder, dated 3 March 2015 which stated the builder had accepted the wrongful repudiation by the homeowners, the Tribunal continued at [109]-[110]: 109. All of those actions are not consistent with the builder accepting repudiation, including the email of 17 September 2014, which seems to relate to the hiring off by suppliers rather than an acceptance of the repudiation. The Tribunal finds that the actions and words of the builder demonstrate that the builder was under the belief that the homeowners had wrongfully terminated the contract and that the contract was still on foot. They never accepted the repudiation, either by words or by actions. 110. It also appears that as of 17 September 2014, neither party took any other active steps to terminate the contract or accept the repudiation.
Then, having again referred to the decision in Ryder, the Tribunal found the contract had been abandoned. At [112] the Tribunal said: 112. The Tribunal finds that there was after 17 September 2014 an inordinate length of time elapsing during in which neither party has attempted to perform, or called upon the other party to perform, the contract between them. On 9 September the homeowner commenced proceedings in the Tribunal and the builder subsequently made an application. While it was not submitted by either party that the contract was still on foot, the Tribunal finds that in the context of the circumstances of this particular case that by 24 November 2014, when the builder commenced proceedings, both parties had abandoned the contract.
That is, the Tribunal concluded that the conduct of the builder was inconsistent with it having accepted the repudiation by the homeowners and that an inordinate period of time had passed in which neither party had sought to perform the contract.
In our view, the Tribunal was in error in reaching this conclusion. Our reasons are as follows.
Where a contractual right is being exercised on notice, a party, who has a right accruing to them in consequence of the other party's conduct, is to be given a reasonable opportunity to consider what action should be taken in light of what has occurred.
In Presmist Pty Ltd v Turner Corporation Pty Ltd (1993) 30 NSWLR 478, Cole J (as he then was) said at 483-484: The Court of Appeal have decided, by majority, that the power contained in a clause such as cl 42 must be exercised reasonably both in relation to the giving of a notice to show cause, and in the consideration given by the contract whether the notice purporting to show cause does so: Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 261-263 per Priestley JA, Hanley JA (at 279); compare Meagher JA (at 275). It must follow that the contractor must be given a reasonable opportunity to consider whether the notice purporting to show cause reasonably does so. Giving to the contract a construction consistent with business efficacy, and the over-riding purpose of the contract to which Priestley JA refers (at 257-258), the parties must have contemplated at the date of execution of the contract that, whilst the contractor was exercising his obligation reasonably to consider whether the notice showing cause did so, the parties would continue with their performance of the contract and its normal administration. It follows that for such period as may be regarded as a reasonable for the contractor to consider the notice purporting to show cause, the contractor is entitled to give such usual directions in the performance of the contract as may be necessary or appropriate and the sub-contractor is obliged to continue with the proper performance of the contract works. The consequence is that the mere giving of a direction to perform work under the contract by the contractor does not itself constitute waiver of the rights conferred by cl 42 during the reasonable period of consideration by the contractor whether the notice did show reasonable cause why the powers should not be exercised, and secondly, whilst the contractor considered whether, even if the notice did not show such cause, the powers under cl 42 should be exercised.
This is consistent with what Young J (as he then was) said in Majik at 54C that: The time for making an election will not arise until a reasonable time has elapsed for the matter to be properly considered: see eg Tropical Traders Ltd v Goonan (1964) 111 CLR 41 and Sargent v ASL Development Ltd (1974) 131 CLR 634.
It follows that the act of securing the site, maintaining signage and otherwise not delivering up possession of the site immediately following repudiation by the homeowners did not constitute an election nor should this conduct be construed as an active affirmation of the contract.
However, what is relevant is what occurred after this time.
First, the homeowners sought to retake possession of the site and, it would appear that at some time between 3 September 2014 and 17 September 2014, changed the locks on the premises, removed the signage, and sought to exclude the builder. The builder in turn retaliated by again changing the locks and replacing the signage and indicating that issues concerning the contract would be resolved by way of application in the CTTT.
Secondly, there is no dispute that both parties, in their proceedings in the Tribunal, asserted that the contract had been terminated. In this regard, the homeowners' proceedings were commenced on 9 September 2014 and the builder's proceedings were commenced on 24 November 2014: see Reasons at [112].
Thirdly, and most significantly, on 17 September 2014, the builder informed the homeowners that it was removing site fencing, toilets and void protections and that the homeowners were to "reinstate this at (their cost) to ensure the site complies with WHS standards": Reasons at [107].
In our view, the conduct of the builder in returning possession of the site to the homeowners and subsequently commencing proceedings on the basis that the contract was terminated by the builder in consequence of the homeowners' repudiation, can only be seen as an election to accept the repudiation and terminate the contract.
In our view, the redelivery of the site and the conduct of the builder when seen in this light could not be seen as a delay in taking any steps under the contract for an "inordinate length of time" so as to give rise to abandonment. As is evident from the facts recorded by the Tribunal in its reasons, the builder effectively redelivered the site to the homeowner approximately fifteen days after the homeowners' repudiation. Thereafter, the only right exercised by the builder was on the basis that the contract had been validly terminated by it.
Pursuant to cl 11 of the contract, the owner is to give the builder exclusive possession of the site to carry out the building works, the obligation to return possession to the homeowners arising on practical completion. Returning possession of the site to the homeowners is inconsistent with the builder intending to continue to perform the contract and, in the circumstances of this case, could not be seen as the failure to take any action whatsoever in consequence of what had occurred.
It follows that, in our view, the Tribunal was incorrect to conclude the contract had been abandoned. Rather the contract was validly terminated by the builder following the repudiation of the contract by the homeowners. This occurred on or about 17 September 2014 and was subsequently confirmed by the commencement of the builder's proceedings.
In reaching this conclusion, we should note that the builder expressly stated to the Appeal Panel that it was not seeking damages for loss of profits or consequential damages. Rather, its only claim was to be paid the amounts to which it was entitled under the contract up to termination. This fact is relevant to the orders which we propose to make in disposing of this appeal.

Unlicensed subcontractors

The homeowners say the builder is not entitled to make any claim under the contract.
The homeowners rely on an assertion that the builder contracted with unlicensed subcontractors, including those carrying out specialist work within the meaning of the HB Act, to support their submission that the builder was not entitled to enforce its contractual rights against the homeowners.
Having set out the provisions of ss 4 and 10, the Tribunal concluded that while s 4 may prohibit the head contractor from subcontracting with a person who is not relevantly licensed, s 10 does not, by its terms, operate to prevent a licensed head contractor (in this case the builder) from enforcing their contractual rights with their principal (in this case the homeowners): Reasons at [152].
Section 10 provides: 10 Enforceability of contracts and other rights (1) A person who contracts to do any residential building work, or any specialist work, and who so contracts: (a) in contravention of section 4 (Unlicensed contracting), or (b) under a contract to which the requirements of section 7 apply that is not in writing or that does not have sufficient description of the work to which it relates (not being a contract entered into in the circumstances described in section 6 (2)), or (c) in contravention of any other provision of this Act or the regulations that is prescribed for the purposes of this paragraph, is not entitled to damages or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, and the contract is unenforceable by the person who contracted to do the work. However, the person is liable for damages and subject to any other remedy in respect of a breach of the contract committed by the person. (2), (3) (Repealed) (4) This section does not affect the liability of the person for an offence against a provision of or made under this or any other Act.
In our view, s 10 is directed to preventing a party who contracts to do work for another person and who 1. is unlicensed at the time the contract is entered into; or 2. does not have a contract complying with the requirements of s 10(1)(b), from being able to enforce that contract against that other person.
It does not render unenforceable a contract between a homeowner and a builder who is licensed to contract to carry out particular work from enforcing that contract in the event the builder subsequently contravenes s 4(2) of the HB Act by subcontracting work to a person who is not the holder of a contract or licence to do work of that kind.
There are a number of reasons for this conclusion.
First, the language of the section refers to the person who contracts "to do" the work being prevented from enforcing the contract. In the present case, it is the builder who, under its contract, has agreed "to do any residential building work". In its context, s 10 is directed to preventing a person who does not hold a relevant contractor licence at the time the contract is entered into from being able to enforce a contract because that person has contravened s 4(1). If that contractor subsequently loses their licence, they may be in breach of the contract but the contract is not thereby rendered unenforceable. Again, that is because they did not contract to do the work in contravention of s 4(1) although the subsequent loss of licence may prevent that contractor from doing the work by reason, for example, of s 12 of the HB Act.
Secondly, in the case of a contract between a contractor and a subcontractor, the person who contracts "to do any residential building work" is the subcontractor. Consequently, in respect of the subcontract, it is the subcontractor to which the provisions of s 10 apply.
Thirdly, the language of the section is directed to the circumstances which existed at the time a contract was entered into. There is nothing in the HB Act that prevents the holder of a contractor licence contracting to carry out all work in the construction or renovation of residential premises, including specialist work, even if it was necessary for the contractor to subcontract specialist work because that person might otherwise be restricted from doing that work by reason, for example, of ss 14 and 15 of the HB Act. In this regard, there is a distinction between who does the work and who may be permitted to contract to do work, there being no provision in the legislation that prevents the holder of a contractor's licence contracting to undertake all work in connection with the construction of a dwelling, whether or not it includes specialist work.
Fourthly, the language of s 4(2) is in terms that prevent a builder "who has contracted with another person" (in this case the homeowners) from subcontracting "that work (or any part of that work)" to another person unless that other person is the holder of an appropriate license. That is, s 4(2) operates where there is an existing contract to prevent unlicensed subcontracting of the whole or part of that work. It follows that even if such a contravention subsequently occurs, it could not be said, in connection with the contract entered into between the contractor and the homeowner, that the contractor "so contracts (with the homeowner) in contravention of s 4" within the meaning of s 10. That is, there is no relevant contravention at the time the builder enters the contract with the homeowners.
Fifthly, the construction proposed by the homeowners would render the builder's contract with the homeowners unenforceable if, for example, they contracted with a licenced subcontractor who subsequently lost their licence.
It follows, in our opinion, that on the proper construction of s 10 of the HB Act, the Tribunal was correct to conclude that any subsequent contravention of s 4(2) of the HB Act by the builder did not prevent the builder from enforcing its contract with the homeowners in the present case.
Finally, we note that the homeowners contended that the Tribunal in fact found that the builder had contracted with subcontractors who were unlicensed. In the notice of appeal, the homeowners refer to [152] of the Reasons as recording this finding. A review of this paragraph of the Reasons shows that the Tribunal made no findings about whether or not there had in fact been a contravention of s 4(2). The homeowners did not otherwise contend in the appeal that a finding of fact should be made as to such contraventions.
It follows that even if we are wrong in our construction of the HB Act, no relevant contravention is established so as to render the contract unenforceable at the suit of the builder.
In the circumstances, this ground of appeal should be dismissed.

Amount payable to the builder for work carried out, unpaid credit variations and Variation 9 interest

The Tribunal reached the following conclusions at [169]-[171]: 169 Amount owing to the builder: Outstanding amounts for work completed: $88,537.91 Outstanding variation: $2919.46 Interest: $676.76 Total amount owing to builder $92,134.04 170 Amount owing to the homeowner Total amount of defects: $9312.00 Credits for variations to the homeowner: $8853.08 Total amount owing to the homeowner $18,165.08 171 The total amount owing by the homeowner to the builder is $73,968.96
Having concluded that the contract had come to an end, the Tribunal was required to determine what amounts, if any, should be awarded in favour of each party. The Tribunal was required to determine the value of the works completed and the amount payable for such work under the contract (including variations), the reasonable cost of rectifying any defective work and the amounts which had in fact been paid by the homeowners to the builder. In the case of the builder's claim, the Tribunal was also required to determine whether any progress claims had been paid late and, if so, to determine what amount should be awarded in respect of interest.
In respect of the claims for variations, as can be seen from the homeowners' submissions, they say they should be refunded any money paid for variations which were not carried out and that the Tribunal was required to have regard to any unpaid credit variations in determining the amount due under the contract for the works completed.
Having considered the progress claims that had been made at [153] and following, and having concluded in respect of payment claim 4 that it had been made prematurely, the Tribunal undertook an exercise of assessing the total value of the works actually completed. At [158] the Tribunal estimated that "approximately 80%" of the work under the contract was complete, such assessment having regard to the fact that "stage 4 of the works was not entirely complete (and) sufficient work from stage 5 had been completed". The Tribunal then determined that, having regard to the actual amount paid by the homeowners, an amount of $88,537.91 was outstanding for the completed work.
While this amount equated to the invoice for progress claim 4 (which had been issued but not paid) it seems clear from the Reasons that the amount assessed took into account the fact that some works were not complete for stage 4 and that some works had been completed for stage 5. In this regard, the Tribunal, at [158], referred to the expert evidence of Mr Palombo who had assessed the actual amount of building work which had been carried out at 80%. The Tribunal then said in the last sentence of [158]: Accordingly, the Tribunal is satisfied that the amount in invoice 4 properly reflects the amount for outstanding works up until the contract came to an end and that the builder is entitled to that amount.
If the Tribunal was assessing the amount of the original contract sum that remained unpaid, on the basis that 80% of the work was complete, this conclusion was in error. As recorded at [5], the builder was only asserting progress claim 4 in the amount of $88,537.91 remained outstanding: see Schedule of Progress Payments in the contract. That would suggest that progress claims 1, 1A, 2 and 3 had been paid. These amounts represented 63% of the original contract sum. Consequently, allowing the full amount of progress claim 4 in the sum of $88,537.91, which represented 20% of the original contract sum, meant that the Tribunal was determining that 83% of the contract work to which the original contract sum related had been completed.
The fact the Tribunal was assessing 80% of the original contract work as being complete is supported by the fact that the Tribunal separately dealt with unpaid variations and variation credits to which the homeowners were entitled, a matter to which we will return below.
However, it is clear the Tribunal proceeded on the basis of the assessment of Mr Palombo that 80% of the works was completed.
Mr Polombo's evidence was as follows: 256. On the basis of my visual inspection, I consider that the work generally has been executed in a good and tradesmanlike manner, notwithstanding minor adjustments that are required to all building projects. 257. It is my opinion that the building work is 80% completed.
In this regard, it appears from par [58] and following of Mr Polombo's report that he was assessing the completion of all contract works, including variations, not just the works that made up the original contract sum of $442,689.53: see eg par [64].
If this is correct, necessarily any calculation of the unpaid contract sum by the Tribunal must have taken into account the amounts paid by the homeowners, including in respect of variations paid for even if not ultimately carried out. In addition, this calculation must have taken into account the valuation of any variations which added to or decreased the scope of work to be completed under the contract so as to derive an adjusted contract sum to which the 80% amount assessed by Mr Polombo could be applied.
However, as recorded above, the Tribunal separately allowed for variations, being a sum of $2,919.46 for an unpaid variation in favour of the builder and an allowance of $8,853.08 in favour of the homeowners for variation credits. In this regard the Tribunal reviewed particular variations and the claims made in relation to those matters at [139]-[143] and allowed "credits for variations to the homeowners".
The homeowners were asked by the Appeal Panel to provide a contract reconciliation and explain what amount they say was the value of work actually completed and what amounts were actually paid so as to assist the Appeal Panel in understanding how the position of the homeowners related to that found by the Tribunal. That process was unsatisfactory and little or no assistance was provided to the Appeal Panel by the homeowners in this regard. Rather, it was clear from the submissions made that the homeowners simply asserted the Tribunal was in error in awarding the amount it did.
A review of the Tribunal's Reasons does not allow us to determine whether or not the award made by the Tribunal was appropriate in the circumstances. No findings were made as to what was the adjusted contract sum nor do the Tribunal's Reasons specify the amount to which the 80% assessment of completed works has been applied. As we stated above, one would expect this amount includes all variations including the additional variation for which the Tribunal allowed an amount of $2,919.46 and the variations separately allowed as "credits" to the homeowner. The appropriateness of taking into account these allowances has not been explained in the context of how the Tribunal otherwise assessed the value of the works actually completed and the amount found to be outstanding to the builder. No findings were made as to the total amount paid by the homeowners to the builder. Rather, all that has been provided is a net amount, being the sum which the Tribunal says was the unpaid amount of the work completed together with adjustments in respect of variations.
Finally, if 80% assessment by Mr Palombo was only of the original contract works this amount should have been applied to the original contract sum of $442,689.53, being an amount of $354,151.62. The homeowners said to the Appeal Panel in their "reconciliation" document prepared at our request that they had paid $305,119.60. Subject to any separate adjustments for variations, this would mean that the unpaid contract sum was $49,032.02, not $88,537.91 being the amount allowed. On the other hand, if the amount derived was in respect of the contract as a whole, no adjustments for variations should be allowed.
Either way, it appears there is an error in the amount awarded in favour of the builder in respect of the work actually completed.
Regardless of the approach taken, the Tribunal was required to determine the cost of rectification of any defective work and make an allowance for that sum. The Reasons indicate that those works which were completed in a defective state were assessed and the reasonable cost of rectifying defects was determined to $9,312.00. The Tribunal dealt with the individual defects at [117]-[138]. No error has been established in relation to these conclusions.
The Tribunal explained at [164]-[167] how it calculated interest. Interest is payable in respect of progress payments properly claimed and not paid by the due date. At [167] the Tribunal found that Variation 9 was "properly issued" and was due and payable. Interest was awarded from 15 July 2014. In this regard, cl 16.1 of the contract provides: The builder may charge the owner interest at the rate stated in Item 10 of Schedule 1 from the day on which the amount falls due to be paid to the builder up to and including the day that amount is paid.
The rate specified in Item 10 is 12%. The Tribunal found that at [164] that "(a)ccording to clause 15.5 payments must be made 5 days after the claim is made". Clause 15 relates to Progress Payments.
Clause 17.6 of the contract provides: The price of the variation is due and payable at the next progress payment after it is carried out unless a different time is agreed.
Variation 9 was signed by the parties and dated 1 July 2014. The variation totalled $5,838.92. It provided for payment as follows: • 50% to be paid up front $2,919.46 • Remainder 50% to be added to the next applicable progress claim $2,919.46
Progress Payments must be made in accordance with the Progress Payment Schedule, at the stages specified in Schedule 2. In this regard cl 15 of the contract provides: 15.2 The owner must pay the contract price progressively as claimed by the builder. 15.3 The builder must give the owner a written claim for progress payment for the substantial completion of each stage.
"Stage" means "any of the stages described in Schedule 2" of the contract.
That is, Progress Payments may only be made upon substantial completion of each stage specified in Schedule 2 and, pursuant to cl 17.6, unless otherwise specified, the price of a variation is "due and payable" when the next progress payment is payable.
In respect of Variation 9, 50% was "to be paid upfront". The balance was to be "added to the next applicable progress claim". That is, in accordance with cl 17.6, it was due and payable "at the next progress payment after it is carried out".
The next progress payment claimed after Variation 9 was agreed was progress payment 4. This was made on 20 August 2014, progress payment 3 having been made on 15 April 2014 (and apparently paid). However, the Tribunal found progress payment 4 was not properly claimed because there had not been substantial completion of the work for this stage. That is, progress payment 4 was invalid and was not then due and payable. That finding was not challenged.
In these circumstances, the balance of the price of the variation was not due and payable because the time to make the next progress claim had not then arrived.
The homeowners also asserted the variation was not in fact complete. Whether or not this is correct in our view the amount was not, in any event, due and payable having regard to the operation of cl 17.6 and the findings of the Tribunal regarding progress payment 4. Therefore, no interest would be payable under cl 16.1.
It follows that the appeal in relation to interest on Variation 9 succeeds and the Tribunal was in error in allowing the sum of $676.67 for interest.
Having regard to what we have set out above, the Reasons do not allow us to assess whether or not the award actually made was correct. In these circumstances, there was an error of law as the Reasons are inadequate and this aspect of the appeal should be remitted for redetermination. In reaching this conclusion, we should not be taken as deciding that the amount actually awarded was inappropriate. However, to the extent that the Tribunal on remittal determines any errors were made, such errors will be able to be corrected.
In making this reassessment, the Tribunal should bring to account the sum of $9,312.00, being the allowance for defects but not the amount of $676.67, being interest in respect of Variation 9.
Finally, we note the builder claims it is entitled to recover unpaid progress claims and retain progress claims made when a contract is terminated.
We disagree.
Clause 15.6(a) makes clear that progress claims are "on account only". It follows that, upon termination, any payments made must be brought to account and deducted from the amount due to the builder. Upon termination, the builder is entitled to recover the value of the work actually performed (less any deduction for defective work) and any other amounts to which the builder is otherwise entitled. Amounts to which the builder would also be entitled include interest on progress claims unpaid or paid late, such interest being payable pursuant to cl 16.1 of the contract and loss of profits in respect to work not carried out where the builder has validly terminated the contract. Any amount paid by way of progress payments in excess of what is due to the builder is to be refunded to the homeowners.

Delay in completing building works and loss of rent

As we indicated above, the homeowners were unsuccessful on this aspect of the appeal, the Tribunal having made findings concerning the date for completion and rejected the claim that there was any relevant delay which would entitle the homeowners to claim liquidated damages or loss of rent.
In these circumstances, this aspect of the appeal is dismissed.

Homeowners' appeal on costs

The homeowners were required to pay the builder's costs of the proceedings at first instance.
The homeowners challenge the order on the basis they contend for a different outcome on the substantive decision. They have been unsuccessful on these grounds other than the assessment of the amount which is due to the builder. That matter is to be re-determined for the reasons set out above.
Otherwise, the substance of the homeowners' submissions in contending for a different costs order is to point to factual matters and to say that the Tribunal should exercise its discretion differently. This requires the homeowners to demonstrate an error of the type in House v The King [1936] HCA 40; (1936) 55 CLR 499.
Here, the homeowners identify matters concerning the builder's conduct of the proceedings, including compliance with Tribunal directions. Also, the homeowners point to various issues and the relative success of the parties. Lastly, the homeowners say there were no special circumstances warranting an order for costs and therefore the decision was not fair and equitable.
None of the matters identified amount to a miscarriage of discretion of the type identified in House v The King. As to the submissions that the Tribunal could only make an award of costs in this case if special circumstances are established, r 38 applies for the reasons stated by the Tribunal in the costs decision at [4] and there is a general discretion to award costs. The requirement of s 60 of the NCAT Act to establish special circumstances does not apply. Therefore, no error is shown.
However, it is clear that the award for costs was, in part, based on the success of the parties and the amount of the award made in favour of the builder.
It is conceivable that if this award substantially changed that a different award for costs might be appropriate. In these circumstances we should set aside the costs order which can, to the extent necessary, be re-determined by the Tribunal at the same time the amount of the award is reconsidered.

Conclusion

We have found that the contract was validly terminated by the builder. Who terminated the contract, and the circumstances in which it came to an end, has always been in dispute, as has the amount due to the builder. While the builder's Notice of Appeal was filed out of time, having regard to what has occurred, time should be extended to permit the appeal as the grounds raised are interrelated with the homeowners' grounds. No prejudice arises from this.
Having regard to the concession made by the builder that it does not seek to claim loss of profits in the event we determined it had validly terminated the contract, all that is necessary to do is to set aside order 1, being the award of $73,968.96, and remit the proceedings to the Tribunal as originally constituted to re-determine this issue in accordance with these reasons. That is, the only question on remittal is what amount, if any, the builder may be entitled to recover for work performed but not loss of profits. The adjustment for GST and margin, referred to at [34(5)] and [37(1)] above, should also be dealt with as part of the redetermination. The Tribunal may determine whether this matter can be determined without a further hearing on the evidence previously provided or may make such directions as it considers necessary to finalise the matter.
In respect of costs, each party has had some success. In these circumstances, our preliminary view is that each party should pay their own costs. We will make this order, subject to either party making an appropriate application for a contrary order.

Orders

The Appeal Panel makes the following orders: 1. The time to file appeal AP 17/24463 is extended to 30 May 2017. 2. To the extent necessary, each party has leave to appeal and both appeals are allowed in part. 3. Order 1, made on 29 June 2016, is set aside and the proceedings are remitted to the Tribunal as originally constituted to determine what, if any, amount is payable to Capital Construction Pty Ltd in consequence of it terminating the contract with Spiro and Anna Dimitropoulos, such assessment to be limited to the amounts due to the builder up to termination of the contract and to exclude any claim for loss of profits. 4. Order 1, made on 15 December 2016, is set aside and the question of costs is to be re-determined in the proceedings on remittal pursuant to order 2. 5. Save as provided above, both appeals are otherwise dismissed. 6. Subject to order 7, each party is to pay their own costs. 7. In the event that either party contends for a different costs order, the following directions apply: 1. The applicant for costs (costs applicant) must file and serve any application within 7 days after these orders. 2. The respondent to the costs application must file and serve evidence and submissions in reply 14 days from the date of these orders. 3. The costs applicant must file and serve any submissions in response within 21 days from the date of these orders. 4. Upon filing an application in accordance with order 7(a), order 6 will cease to have effect. 5. Submissions must include submissions concerning whether an order should be made under s 50(2) of the Civil and Administrative Tribunal Act 2013 dispensing with a hearing. 1. Any money paid in to the Tribunal as a condition of the stay granted by the Appeal Panel in favour of Spiro and Anna Dimitropoulos is to be paid out in such manner as the Tribunal, on remittal, determines is appropriate.

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: 27 April 2018

Home Building Regulation 2004(NSW)

Coulton v Holcombe (1986) 162 CLR; [1986] HCA 33 Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (formerly SC Land Richmond Pty Ltd) [2012] VSC 99 Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7 at [35]; (2014) 251 CLR 640 Hometeam Constructions Pty Ltd v McCauley [2005] NSWCA 303 House v The King [1936] HCA 40; (1936) 55 CLR 499 John Prendergast & Vanessa Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61 Little v J & K Homes Pty Ltd [2017] NSWCATAP 84 Majik Markets Pty Ltd v Motor Repairs Pty Ltd (No.1) (1987) 10 NSWLR 49 Presmist Pty Ltd v Turner Corporation Pty Ltd (1992) 30 NSWLR 478 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 Ryder and Anr v Frohlich and Anr [2004] NSWCA 472 Stojanovski v Australian Dream Homes [2015] VSC 404 Sunbird Plaza Pty Ltd v Maloney and Another [1987-1988] 166 CLR 245; [1988] HCA 11 Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 63 Texts Cited: Nil Category: Principal judgment Parties: AP 16/31203 Spiro Dimitropoulos (First Appellant) Anna Dimitropoulos (Second Appellant) Capital Constructions Pty Ltd (Respondent)

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