Dimitropoulos v Capitol Constructions Pty Ltd; Capitol Constructions Pty Ltd v Dimitropoulos

Dimitropoulos v Capitol Constructions Pty Ltd; Capitol Constructions Pty Ltd v Dimitropoulos - [2016] NSWCATCD 61 - NSWCATCD 2015 case summary — Zoe

[5]

Termination of the Contract

The primary issue for determination in these proceedings is whether the notice of termination issued by the homeowner on 2 September 2014 was effective to terminate the contract. That finding is important to determining whether the homeowner is entitled to certain damages claimed.
On 5 August 2014 the homeowners issued to the builder a 'breach notice' pursuant to clause 33.3 of the contract. The breach notice identified various grounds on which the homeowners asserted there was a "substantial breach" of the contract by the builder. The notice was reissued on 19 August 2014 as Australia Post sent the breach notice of 5 August 2014 to the wrong post office.
On 26 August 2014, the builder acknowledged the homeowners breach notice and addressed in some detail the points raised. The builder denied they were in breach of the contract and sought payment for outstanding variations.
On 2 September 2014 the homeowners issued a termination notice to the builder. The notice was issued on the grounds that that the builder had failed to rectify breaches and comply with the contract as detailed in the breach notice dated 5 August 2014. The homeowners also raised other grounds for breach.
The builder alleges that the homeowners wrongfully terminated the contract and that the homeowners had in fact repudiated the contract with the builder. They also contend that the builder accepted that repudiation.
Clause 33 of the HIA contract between the parties relevantly states: 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 …. 33.3 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.
The Tribunal finds that the applicant initially sent the breach notice on 5 August 2014 by registered post. In that regard the applicant has provided a registered post lodgement receipt. The Tribunal is also satisfied that the breach notice was initially sent to the wrong post office for collection and that Mr Dimitropoulos subsequently re-issued the breach notice by courier on 19 August 2014 and the breach notice was given to the builder personally. The Tribunal is also satisfied from the evidence that a termination notice was given to the builder on 2 September 2014, being more than 10 days after the breach notice was re-issued on 19 August 2014.
The breach notice relied on by the homeowners was broadly issued on a number of grounds. 1. That the builder had failed to reach practical completion by the date in the contract. 2. The builder failed to construct the upstairs front balcony area in accordance with the plans, namely in respect of the ceiling height and the finish. 3. The floor in the gallery was uneven and had a substantial dip and was squeaking. 4. Certain doors windows were not provided in accordance with the contract. 5. A brick wall was excessively overhanging. 6. Issues in relation to the brickwork and mortar. 7. Various issues relating to cleaning. 8. Failure to provide flashing in certain places 9. Issues with the slab in the alfresco area and around the kitchen fridge area. 10. Issues with the rendering 11. Issues with the roof tiles 12. Insulation bats not installed properly. 13. Holes in certain areas and a support beam not covered in the alfresco area. 14. Failure to properly supervise the works.
The question for determination by the Tribunal is whether the builder was in substantial breach of the contract at the time the contract was terminated by the homeowners. Further, consistent with the decision in Concut v Worrell [2000] HCA 64; (2000) 75 ALJ R 312, the formal process of termination of a contract is not an exclusive means of termination. Their Honours, Gleeson CJ, Gaudron and Gummow JJ said at paragraph 23: … an express provision for termination for breach in certain circumstances may be regarded as designed to augment rather than to restrict or remove the rights at common law which a party otherwise would have had on breach[19]. In identifying the intention of clauses dealing with termination for breach of a contract it is necessary to keep in mind that 'clear words are needed to rebut the presumption that a contracting party does not intend to abandon any remedies for breach of contract arising by operation of law' -Srocznia Gdanska SA v Latvian Shipping Co [1998] UKHL 9; [1998) 1 WLR 574 at
In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115 the majority judgment of Gleeson CJ and Gummow, Heydon and Crennan JJ also supports the proposition that a breach of contract by one party may entitle the other party to terminate for an essential breach and where the breach of the essential term is sufficiently serious (par [47] - [49]).
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 a breach of an essential term on any other grounds.

[6]

Time

Point 1 of the of the breach notice dated 5 August 2014 clearly identified that one of the grounds that the homeowners was serving the notice on was that the builder had failed to reach practical completion within 38 weeks after the site was handed over. Further that they were in breach of 38.1(d) of the contract and s 18B(d) of the HBA.
It was not in dispute that at the date the homeowners issued the termination notice, the works had not reached practical completion as defined in the contract. The builder's evidence was that it was entitled to extensions of time for inclement weather, the Christmas and Easter breaks and seven days for the electrical variation requested by the homeowner. The builder also made submissions that time was not of the essence under the contract and that the builder was not entitled to terminate for any failure of the builder to reach practical completion.
Clause 38 (1) (d) of the contract states that (d) the building works will be done with due diligence and within the time stipulated in this contract, or if no time is stipulated, within a reasonable time;
The contract between the parties states at schedule 1 item 12; The building works must reach the stage of practical completion no more than: 38 weeks …after the contract period (clause 8) commences, subject to clause 9.
The contract was dated 2 February 2013. Clause 8 refers to when the builder is to commence the works: 8.1 The builder is to commence the building works within 20 working days after the day that: (a) the builder receives all necessary building permits and planning approvals for the building works to commence; or (b) the owner satisfies all of the requirements of Clause 4, whichever is later. The contract period commences on the date the builder is obliged to commence the building works under sub-clause 8.1.
Clause 9 of the contract dealt with delays and the process in relation to seeking extensions of time.
On 23 April 2013 the builder sent an email to the homeowners attaching the approved plans and complying development certificate. In the same email the builder sought confirmation of the demolition date. Mr Dimitropoulos responded in an email dated 23 April 2013 that they were giving their tenant a 90-day notice of termination and that theu would need to wait until the tenant found alternative accommodation. In an email from Mr Dimitropoulos to the builder on 16 October 2013, Mr Dimitropolous confirmed that the property was demolished and ready for the building process to begin. In his affidavit dated 22 January 2015, Mr Rodney Harvey stated: Construction work commenced on the property on 8 November 2013.
While clause 8.1 refers to the commencement date being 20 working days after the date that the builder received the necessary building permits and planning approvals, in this case it was clearly the responsibility of the homeowners to demolish the residence. The Tribunal finds that the builder was required to commence the works within 20 days after 16 October 2013 when the homeowners demolished the house. In that regard the commencement date under the contract was 8 November 2013 and the builder had 38 weeks from that date to reach practical completion.
In his affidavit dated 3 March 2015, James Chrissimos, a director of the respondent relevantly states the following at par 7: The Owners were responsible for the demolition of an existing house on the subject property prior to the builder being able to commence work on the construction of a new home for the Owners. In around mid-October 2013 the Owners had demolished the house and the Builder had retained a Surveyor to carry out a peg out survey prior to construction work being commenced on or around 8 November 2013. The Contract time for construction is 38 working weeks. Without an extension of time I calculate this date to expire on 1 August 2014.
The Tribunal finds that calculation is correct.
In relation to the time issue, the Tribunal is not satisfied that at the time the notice was issued that the builder was in substantial breach. 38 weeks from 8 November 2013 ended on 1 August 2014. Mr Dean Cody, an employee of the builder stated that completion of the building works would have taken another 4 months. The homeowner stated that this was on top of the 10.5 months it had taken from commencement of the building works being in excess of 14 months.
While a claim was not made by the builder in accordance with the contract for extensions of time for delay, the Tribunal finds that at least in relation to the industry shutdown over Christmas, the builder would have been entitled to make a claim under the contract. Further, the builder did provide some evidence in relation to rain during the period.
Time was not of 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.

[7]

The garage walls

In his affidavit dated 20 October 2014, Mr Dimitropoulos states that on 14 February 2013 he requested a variation for the garage to be increased by 300mm's long and wide.
In an email dated 15 February 2013, the builder forwarded to Mr Dimitropoulos new plans which had been sent by Paul Merano of 'Definitive Drafting' and which relevantly stated: Revised construction plans with Spiro's requested changes as below; - 300 mm added to garage, media, porch and balcony (total addition 4.74m2 ….
A tax invoice was also issued by the builder to the homeowners for the variation dated 15 February 2013 stating: "To increase the garage 300 m, consequently increasing the home to 4.74m2 over all. Total $5,321"
On 27 November 2013, Mr Dimitropoulos emailed the builder and stated that he had conducted an on-site inspection and feared that the garage size was incorrect. In a further email dated 19 January 2014, Mr Dimitropoulos again confirmed to the builder that during the on-site inspection on 26 November 2013 he had raised the issue of the garage dimensions and that the actual garage dimensions do not correspond with the dimensions as per the plan and that he was seeking rectification within 10 days.
In an email dated 12 March 2014, Mr Chrissimos for the builder stated to Mr Dimitropoulos stated: I've just had it measured on site yet again, and you are incorrect. The current measurement on site is well within the 50 mm tolerances.
Mr Dimitropoulos replied by return email: … I stand by the fact that the width is 140mm short of 5800mm as per the plan.
On 2 June 2014 Mr Chrissimos sent an email to Mr Dimitropoulos confirming that he would measure the garage after gyprock, but maintained that the measurements were correct. Mr Dimitropoulos stated that Mr Chrissimos had previously agreed to meet with him after the scaffolding was taken down.
The homeowners provided a "Property New Construction Frame Inspection" report from Mr Howard Ryan dated 13 June 2014. After inspecting the frame Mr Ryan concluded that the measurement of the width of the garage was 5,650 mm instead of 5,800 mm and that it did not comply with the plans.
In a further email to the builder dated 31 July 2014, Mr Dimitropoulos again raised the issue of the garage and stated that the builder was in breach of the contract and the statutory warranties of the HBA.
Mr Dimitropoulos then raised the garage issues in the breach notice of 5 August 2014
The builder made submissions that although the breach notice made reference to the variation and the width of the garage, the two were not related. They state that the width never changed from the contract drawing (Rev E) through to the final post-contract version (Rev 4). The builder made submissions that Mr Dimitropoulos had misunderstood the variation and he had only approved an extension of the depth of the garage side of the dwelling by 300mm.
The builder made submissions that in any event, the width of the garage was 140mm short of the 5800mm depicted in the contract drawing and that it was only short by that amount because rather than constructing a "single skin" wall using a single standard brick of 110mm width on the external garage wall, as depicted in the drawings, the builder had constructed a "double skin" rendered wall. They contend that by using the full brick in construction the builder had provided a superior and structurally stronger wall.
The builder made submissions that there was no loss of amenity, and no loss of the ground floor space of the garage and that the measurement is the same as the measurement would be if the wall had been constructed as per the plan - to the face of the engaged piers. They contend that as constructed, the wall does not in fact encroach upon the floor space of the garage beyond what is shown on the plans and that the alleged breach could not constitute a fundamental breach of the contract.
The builder makes submissions that bricks could be saw cut to return the wall to the single-brick as depicted in the contract drawings, but that in any case the wall is not defective and does not prevent the house from being used for its intended purpose.
On the second day of hearing of the matter it became apparent that the party's experts simply had different measurements of the wall. The experts were ordered to attend a joint conclave and provide a joint measurement of the walls. A joint report was provided dated 29 May 2016 and the experts agreed to the following: 1. The measurement of the width of the garage is 5.660m. 2. The measurement is the same as the measurement would be if the wall had been constructed as per the plan - to the face of the engaged piers. 3. The outside wall as nominated on the plan is in the correct location i.e. by calculation: 5.660m + 130mm for the thickness of the internal wall + render etc. 4. It is standard industry practice in a single leaf external garage wall with a window that the window is held in place with engaged piers and a solid wall constructed between the piers to "tidy up" the wall and the trimming around the window. 5. It is standard practice to provide a header or soldier course of brickwork at floor level to finish the base of the wall-to-floor junction. 6. The piers, as shown on the plan, are 450mm x 120mm with an additional pier (350mm x 350mm) to provide support for the structural beam. 7. The external wall of the garage is a load bearing wall (supporting the roof). 8. The wall plate for the roof requires holding down straps at no more than 1200mm centres. 9. The wall, as constructed, does not encroach on the floor space of the garage beyond that shown on the plans. 10. The wall, as constructed, is a stronger and more aesthetically pleasing wall than that shown on the plan. 11. There is no loss evident in relation to the "as constructed" wall as opposed to that shown on the plan".
Having considered the joint statement of the experts and the evidence of the parties, the Tribunal finds that the wall is 140mm short and 5,660 mm instead of 5800mm. However the Tribunal finds that the difference is not enough to justify a finding that the builder was in substantial breach or serious breach and it is not a breach of an essential term of the contract. In accordance with the joint expert report, the wall as constructed does not encroach on the floor space of the garage beyond the plans, it is stronger and more aesthetically pleasing than that shown on the plan and there is no loss established in relation to the "as constructed" wall as opposed to what is on the plan. Accordingly, the Tribunal does not find this to be a valid grounds termination by the homeowners.

[8]

The Windows

The parties are in agreement that the construction tender numbered 152/2012, Revision A, dated 21 December 2012 was part of the contract agreement.
At point 15 the tender document relevantly states: 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 the plans. Trend, Stegbar or Southern Star stacker or sliding aluminium doors will be installed as per the plans. ….
In his report dated 16 June 2014, the homeowner's expert Mr Ryan states that Wideline windows and doors had been provided.
In an email sent to the builder on 24 June 2014, Mr Dimitropoulos advised the builder that he had been provided with the Wideline brand windows which he believed to be a cheaper option. He also advised that there were four incorrect windows that either opened the wrong way, were fixed when they should be open, translucent when they should be clear or clear when they should be translucent.
In an email dated 28 July 2014 Mr Julian Varndell, a supervisor of the builder, confirmed to Mr Dimitropoulos in relation to the Wideline 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.
In a reply email dated 31 July 2014, Mr Dimitropoulos disagreed that the issue was resolved.
The homeowner refers to the case of Elachi v Five Star Aluminium Pty Ltd (Home Building) [2006] NSWCTTT 415 to support its submission that a change of window brand by the contractor constitutes a breach of the contract.
In the builders response to the breach notice that had been issued by the homeowners he addressed the Wideline issue on the basis that clause 55 of the signed tender states: Vogue Homes reserves the right to change specifications, materials, brands, prices and suppliers without notice.
The homeowner also raised other issues in relation to the windows. In relation to the other window issues the builder stated at point 5 of his letter: they are currently in the window manufacturers service log and will be attended to "in due course".
The builder relied on the expert report of Mr Palombo dated 17 January 2015 that the Wideline products met the performance requirements of the BCA and have been manufactured in accordance with the relevant Australian Standards (par 489).
The builder stated that the only issue with the windows was the requirement to replace one window that had been incorrectly installed arising from an error of the supplier and that the replacement window was already on site as at August 2014 and that there were arrangements already in place in August 2014 to replace the window. They make submissions that it would have been a 'defect' that would ordinarily be addressed prior to handover and that it was only minor in nature and that the experts jointly put the cost of rectification at $500.
The Tribunal finds that the contract did stipulate the type of windows to be installed and that instead Wideline windows were provided.
In his report dated 13 June 2014, Mr Ryan, the homeowners experts states in relation to the windows: "Wideline" window and doors have been provided, however the contract states different! Builder to clarify the change to the intended proucts as shown below!
Mr Palombo in his report dated 17 January 2015 states at paragraphs 488 -489: 488. It is my belief that Wideline are a reputable window/door manufacturer with the company being located in NSW. 489. Whilst I agree that the windows installed were not manufactured by either Trend, Stegbar or Southern Star, it is my opinion that the Wideline doors meet the performance requirements of the BCA and have been manufactured in accordance with the applicable Australian Standards.
In the tender attached to the contract at clause 55 it states that the builder has the "right to change specifications, materials, brands prices and suppliers without notice":
Clause 21 of the contract states: 20. If any material specified to be used in the building works is unavailable when required by the builder, the builder may ask the owner for a variation to substitute the use of similar material.
The builder provided no variation and no evidence was provided that the windows as specified in the contract were not available.
Having considered the evidence on this point in its totality, the Tribunal does not find that the providing of the 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 alleged 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 new windows installed, not because the Wideline windows were of a lesser quality ot defective. The Tribunal is not satisfied that the installation of the Wideline windows as opposed to the brands specified in the tender constitutes a substantial breach of the contract.
In relation to the further defects in the windows raised by the homeowner, those defects have been set out in the experts joint report agreed at a meeting on 6 March 2015. 1. The laundry window should be translucent and a clear window was installed. 2. The ensuite window should be clear, and a translucent window was installed. 3. The plans identified the kitchen window as a sliding window. A fixed window was installed. 4. The Bedroom 2 window opened in the wrong direction 5. 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.
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 builders submissions that such 'defects' would ordinarily have been addressed prior to handover and that they was 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.

[9]

The Upstairs Balcony

In an email dated 26 October 2012, prior to the parties contracting, Mr Dimitropoulos agreed to wanting to proceed with the builder and wanting to discuss increased ceiling heights on both levels.
At paragraph 8 of his affidavit dated 20 October 2014, Mr Dimitropoulos states that on 24 November 2012, Mr and Mrs Dimitropoulos attended an appointment with the builder's representative, Mr Greg Mcalister at the builder's display home and that on 26 November 2012 the builder confirmed by email that the facade would be a "Manor structured facade but modified."
The homeowners make submissions that taken together the following documents, which have been provided, establish: 1. The approved architectural plans show the first floor ceiling height as 2,440 mm across each end of the front and back of the building and make no reference to a lower balcony ceiling height of 2,165 mm. 2. The builder's specification contained in the tender documents attached to the contract state that the first floor ceilings heights would be 2,400 mm. 3. The previous tender management document produced by Vogue Homes dated 28 November 2012 stated that the ceiling heights would be 3000mm to ground floor and 2400mm to first floor with the homeowners paying $5,831.00 for the inclusion. The tender document also stated that 3000mm ceiling to the ground floor and 2400mm to the first floor will be fitted as a non-standard item. 4. In an email dated 31 July 2016 from Mr Dimitropoulos to the builder he raised the issue of the balcony ceiling. The builder responded that the balcony had be constructed 'as per the 3d elevation at the discretion of the supervisor.'
The builder makes submissions that the finished ceiling level and finished floor levels depicted on Plan 00- 068-7 (revision E) referred only to the internal habitable areas. They also state that in any case this would be a minor defect if found and could be addressed before handover, or during the defects liability period. They state that even if it was a defect it would not have prevented the Owners from occupying the dwelling and using it for its intended purpose within the meaning of practical completion.
The Tribunal rejects the builders submissions that the finished ceiling level and finished floor levels depicted on Plan 00- 068-7 (revision E) referred only to the internal habitable areas. Whilst the dimensions concerning the finished ceiling level and finished floor level in the plans related to the internal habitable areas, there is no indication on the plans that the balcony ceiling height should be anything other than 2440mm. The Tribunal finds that the builder has not constructed the balcony in accordance with the plans and contract and the homeowners have not received what they contracted for. The applicant's expert has allowed $3,410.00 to rectify the defect.
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.

[11]

The Kitchen Bench top

The kitchen bench top was not included as a matter in the breach notice. However, consistent with the principals in In Concut v Worrell and Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited, the homeowner would not be prevented from relying on it as a ground even if it was not included in the breach notice. However, the breach needs to amount to a breach of an essential term of the contract or a serious breach.
In email correspondence from the builder to the homeowners dated 30 November 2012, prior to the parties entering the contract, the builder confirmed that 40 mm stone would be included in the contract.
In an earlier tender management document produced by Vogue Homes dated 28 November 2012 it was stated that the bench tops were to be installed in the walk in-pantry (WIP) and kitchen were to be 40mm stone bench tops.
In the tender document that ultimately formed part of the contract it stated: 40mm stone will be applied to the benchtops and waterfall edges
It is also noted the kitchen plans All benchtops to be 40mm stone as per contract
At paragraph 114 of his affidavit dated 20 October 2014, Mr Dimitropoulos, states that on 19 August 2014, Mark Morlin from the kitchen manufacturer/installer informed him that the builder was not agreeing to 40mm benchtops.
Mr Cameron McAlister in his statement dated 3 March 2015 confirmed in relation to the benchtops The Builder complied with the specifications in the signed Tender/Contract. The builder did not agree to install 40mm benchtops.
The builder relies on the fact that the bench top matter was not included as one of the grounds of breach in the homeowners Breach Notice. They make submissions that the Tribunal should disregard the homeowner's submissions on this issue. The homeowners' makes submissions that it could not have been included in the first breach notice issued on 5 August 2014 because that was before the homeowner became aware that the builder had no intention of installing 40mm stone bench tops. The homeowners make further submissions that the builder's insistence in refusing to install the 40mm stone bench tops is an anticipatory breach.
At point 13 of the pleadings in the second amended home building claim of the homeowners dated 8 April 2015, the homeowner has clearly stated that they intended to rely on anticipatory breaches in relation to the building contract.
In submissions in reply, the homeowner referred to the principle of anticipatory breach as set out by Justice Devlin in Universal Cargo Carriers Corp. v Citati [1957] 2 QB 401 in which Lord Devlin stated: Anticipatory breach means simply that a party is in breach from the moment that his actual breach becomes inevitable. Since the reason/or the rule is that a party is allowed to anticipate an inevitable event and is not obliged to wait till it happens, it must follow that the breach which he anticipates is of just the same character as the breach which would actually have occurred if he had waited. "
They also relied on the statement of Justice Diplock in Afovos Shipping v Pagnan [1983] 1 WLR 195 (HL),37 wrote: The doctrine of anticipatory breach is but a species of the genus repudiation and applies only to fundamental breach. If one party to a contract states expressly or by implication to the other party in advance that he will not be able to perform a particular primary obligation on his part under the contract when the time for performance arrives, the question whether the other party may elect to treat the statement as a repudiation depends on whether the threatened non-performance would have the effect of depriving that other party of substantially the whole benefit which ii was the intention of the parties that he should obtain from the primary obligations of the parties under the contract then remaining unperformed. If it would not have that effect there is no repudiation, and the other party cannot elect to put an end to such primary obligations remaining to be performed. The non performance threatened must itself satisfy the criteria of a fundamental breach.
In the case of National Engineering Pty Limited v Chilco Enterprises Pty Limited t/as Trojan Contracting [2001] NSWCA 291, Acting Justice Ipp stated: 49 Repudiation of a contract may be regarded as an anticipatory breach entitling the innocent party to terminate the contract: Laurinda Pty Limited v Capalaba Park Shopping Centre Pty Limited per Brennan J at 641-644; Sunbird Plaza Pty Limited v Maloney (1988) 166 CLR 245 per Mason CJ at 262, per Gaudron J at 278-279. In addition, a party may terminate a contract for anticipatory breach where, at the point of termination, "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" per Gaudron J (at 280) in Sunbird Plaza Pty Limited v Maloney (see also Mason CJ at 262). As her Honour went on to remark: "That total disability must be proved 'in fact and not in supposition'. - per Devlin J in Universal Cargo Carrier Corporation v Citati [1957] 2 QB 401 at 450".
In the judgement of Gleeson CJ, Gummow, Heydon and Crennan JJ in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115 at par [44], repudiation and anticipatory breach were also dealt with: 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. ... 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. (footnotes and citations omitted)
The Tribunal finds from the tender and the kitchen plans that the parties had agreed to 40mm benchtops. The Tribunal accepts that the manufacturer of the kitchen Mark Morlin had advised that homeowner that Vogue Homes would not agree to 40mm benchtops despite what was agreed to in the tender manager. The Tribunal also accepts that Mr Cameron McAlister in his statement of 3 March 2015 confirmed that the builder did not intend to provide 40mm benchtops 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. However, the Tribunal does not find that the builder's conduct evinces unwillingness or an inability to render substantial performance of the contract. The kitchen benchtops were only a small part of the contract. After 19 August 2014, the homeowners never put the issue of the benchtop to the builder himself. That is despite his conversation with the sub-contractor in which they allege they were advised the builder would not agree to 40mm benchtops. Mr Dimitropolous did not raise it in the detailed email that he sent on 27 August 2014 regarding the kitchen invoice and replying to the builders reply to 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 Dimitropolous on 19 August 2014 that the builder would not be providing the 40mm benchtop. The Tribunal is not satisfied the conduct of the builder in relation to the benchtops evinces an intention to no longer to be bound by the contract or to fulfil it in a manner substantially inconsistent with the its obligations. The Tribunal is not satisfied that there was unwillingness or inability to perform a contract by the builder and the Tribunal does not find that this amounts to a serious breach that would have warranted lawful termination of the contract by the homeowners.

[13]

Acceptance of Repudiation by the Builder

Having found that the termination was unlawful, it was open to the builder to accept such purported termination as a repudiation of the contract. However, the builder needed to demonstrate having accepted the repudiation. On that basis the builder would be entitled to be compensated for damages resulting from the loss of such bargain as a consequence of the homeowners' wrongful repudiation.
Such acceptance must be communicated to the other party in order for the contract to come to an end. While no particular form of communication is required the acceptance of the alleged repudiatory conduct must be clear. See Ryder and Anor v Frohlich and Anor (2004] NSWCA 472.
In his affidavit of 3 March 2015, Mr James Chrissimos for the builder statedthe following at par 9. The builder was not in breach of the Contract and accordingly the notice issued by the Owners were premature and excepted by the builder as a wrongful repudiation of the contract.
The builder did not accept the purported repudiation by the homeowners in writing. However, the repudiation only need be communicated to the homeowners. It is clear that the word "excepted" in Mr Chrissimos's affidavit is a typographical error and should read, "accepted". While there was no notice provided to the homeowners in correspondence from the builder alleging that the homeowners had repudiated the contract, there are no details provided as to how the builder communicated that he had accepted the repudiation.
The builders conduct after the purported termination is inconsistent with him having accepted the repudiation. The builder acknowledged receipt of the breach notice and disputed it.
In an email dated 3 September 2014, from Rodney Harvey, a construction manager for the builder, to the homeowners, he acknowledged receipt of the termination notice and stated: 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 is obtained. The site will be secured and the dwelling locked and any attempt to gain access will be reported to the authorities as trespassing and action will be taken. ….
That email is not consistent with an acceptance of the repudiation.
In a further email sent by Rodney Harvey to the homeowners expert, Howard Ryan, he stated: We would like to inform you that the site at 11 High St Kogarah for Mr and Mrs Dimitropolous is now on hold due to the owner issuing us with a termination notice and Vogue Homes lodging action with CTTT As you have previously done reports for Mr & Mrs Dimitropolous we envisage he will be contacting you in the furture to do further reports. As this site is on hold and in dispute we inform you not to enter site without representation of Vogue Homes and any attempts to do so will be treated as trespassing and reported to the authorities and further action will be taken. ….
In his affidavit dated 20 October 2014, Mr Dimitropolous stated at paragraph 128 that although Howard Ryan had advised him that he had received the email from Rodney Harvey, he attended the site, but did not conduct the site inspection as Mr Dimitropolous had arranged.
It appears that on 5 September 2014, Mr Dimitropolous attempted to access the site. In his affidavit dated 22 January 2015, Mr Julian Vardell who was a site supervisor of the builder, relevantly stated at paragraph 12 of his affidavit: On the 5th September 2014, I remember receiving instruction from my manager Rod Harvey to secure the site. I understood from speaking with Mr Harvey that the Builder had received a letter from Spiro indicating that the Owners wanted to rescind the Contract. I remember going to the site and locking the security fence and securing the house…..
In his affidavit dated 20 October 2014, Mr Dimitropolous stated at paragraph 129 that a verbal altercation happened on site with Julian and Rodney.
In his further affidavit of 8 April 2015, Mr Dimitropolous relevantly stated at paragraph 56: …although I admit that a scuffle did take place on 3 September 2014 between us and this matter was addressed by police. Julian repeatedly returned to the site defying instructions from Kogarah police not to return to the site. Despite that he claimed it was the last time he was on site, he returned to the site with Rodney Harvey on the 5th September 2014 demanding access which was refused. After the scuffle that took place in the 3rd September 2014, Julian's claim that he feared for his safety is not plausible given that he had the audacity to return back to the site 2 days later with Rodney demanding access after the contract had been terminated and after the police had told him not to attend the property. Their actions were unconscionable and relentless in their efforts to intimidate me. Julian repeatedly trespassed on both my property and my neighbours property without our consent until I arranged for the locks to be changed and denied him further access. Photos showing him trespassing onto both my and my neighbours property were filed as evidence.
Following that event, Mr Harvey sent an email to Mr Dimitropolous stating that he had attended the site with Mr Varndell to reinstate locks and signage that had been removed and that he had called police to notify them of the action. The email also stated: We feel we should also inform you that your claims of breach are refuted indefinitely and these matter should be taken up during arbitration at the CTTT hearing that we have lodged for. All authorities have now been informed of this situation and will be regular inspecting the site to check that any person or person are authorised and on Vogue Homes trade register and will all appropriate documents and insurances present within our office. Please not we will not be ordering any trades to site until this matter is resolved as the site is now on hold. ….
On 6 September, Mr Dimitropolous sent an email to Mr Harvey stating that he was not to enter the property unless he had an order of the Supreme Court and also advising that the applicants would be making claims for the builder's destruction of the locks and theft of chains from the security fences.
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.
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.
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.
It also appears that as of 17 September 2014, neither party took any other active steps to terminate the contract or accept the repudiation.
However the Tribunal finds that ultimately both parties have abandoned the contract. The circumstances in which abandonment occurs are stated by McColl JA in Ryder and Anor v Frohlich and Anor [2004] NSWCA 472 where her honour said: "135. Where it is plain from the conduct of parties to a contract that neither intends that the contract should be further performed the parties will be regarded as having so conduct themselves as to abandon or abrogate the contract: DTR Nominees Pty Ltd v Mona Homes Pty Ltd ... [1978] HCA 1 2; 1 38 CLR 423 at 434 ...; Summers v The Commonwealth ... [1918] HC/\ 33; 25 CLR 1 44 at 1 51- 1 52 ... The inference of abandonment will be drawn where "an 'inordinate' length of time has been allowed to elapse, during which neither party has attempted to perform, or call upon the other to perform, a contract made between them ... What is really inferred in such a case is that the contract had been discharged by agreement, each party being entitled to assume from a long -continued ignoring of the contract on both sides that ... 'The matter is off altogether"'.Fitzgerald v Masters... [1 956] HCA 53; 95 CLR 420 at 432...
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.
Accordingly, the Tribunal finds that the homeowners are not entitled to claim amounts for completion costs and loss of rent. Nor is the builder entitled to claim for loss of profits.
The consequences of abandonment are helpfully summarised in Zeman v Bollard [2015] NSWCATCD 13; Where a contract is abandonment, an issue arises as to whether the abandonment is prospective or whether the parties intend any accrued rights should also be forgone. In the present case the issue does not arise as the parties have agreed the amount payable if abandonment is found. In any event, it is clear from the fact that each party commenced proceedings that the parties did not intend for accrued rights to be forgone. The Tribunal is satisfied that abandonment did not prevent either party from enforcing their accrued rights up to when the contract was abandoned.
Similarly, in this case the fact that the both parties commenced proceedings is indicative of that the parties did not intend for accrued rights to be forgone.
Accordingly, the Tribunal is satisfied that the applicant is entitled to claim defects for breach of statutory warranty. Section 48MA which was inserted into the HBA for a work order to be the preferred outcome does not apply in this case, as the application was commenced prior to the amendment of the HBA. The joint Scotts Schedule of the experts of 6 March 2015 helpfully identifies issues in relation to incomplete works and defects.

[34]

Findings on homeowners claims for credit for variations not performed

The homeowners claim a refund of variations paid totalling $20,679.71. They claim the builder did not carry out the variation works. The homeowners rely on the fact that the builder in relation to such expenditure has produced no evidence.
Paragraph 25 of the homeowners "Second Amended Home Building Claim" lists the variations that have been paid, but to which the homeowners allege the builder has provided no corresponding supporting invoices or other documentation. They are variations 3, 4, 6 and 9, together with a claim for $3,125 for additional piers. They total $17,294.96.
Clause 17 of the Contract states the following in relation to variations: 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 a variation. 17.2 If the owner asks for a variation, the builder must reply in writing as soon as is reasonable. 17.3 The reply is to be either: (a) a signed written offer to carry out the variation detailing: (i) the work required to carry out the variation; (ii) the price of the variation; and (iii) any extension of time to the contract period as a result of carrying out the variation; or (b) a refusal to carry out the variation. The builder does not have to give any reasons for refusing to carry out a variation. 17.4 If the owner does not give to the builder signed written acceptance of the builders offer within 5 working days of the builder giving the reply, the builders offer is deemed to be withdrawn. 17.5 If the price of a variation is not agreed prior to it being carried out that price includes: (a) the deduction of the reasonable cost of all deletions from the building works; and (b) the addition of the total cost of all extra work plus the builders margin applied to that cost. 17.6 The price of a variation is due and payable at the next progress payment after it is carried out unless a different time is agreed. 17.7 The owner must not unreasonably withhold consent to any variation which is required for the building works to comply with the law or a requirement of any statutory or other authority. 17.8 The owner acknowledges that the colour and grain of timber, granite and other natural materials can vary. The builder is to use reasonable endeavours to match the colour or grain of any sample selected by the owner but is under no liability if there is a difference and such difference is not a variation.
Having considered the variations, the parties evidence this point and in particular section 17.5 in relation to variations, the Tribunal finds the following in relation to each variation: 1. Refund of variation for Invoice 1445 for additional piers for an amount of $3,125.50. The invoice is dated 27 November 2013. The homeowner states that the amount is not outstanding because there are no outstanding invoices corresponding with the works. Tax Invoice 1445 very clearly identifies the amount as having been for additional piers and at the time the invoice was paid in full. The Tribunal is satisfied that the invoice was properly issued under the contract and the amounts were clearly put to the homeowners as a variation owing at the time. The fact that no corresponding invoices are produced now does not mean that the amounts are not owing under the contract. The Tribunal finds that they were agreed by the parties when the payment was made. The Tribunal does not find this to be a credit. 2. Part refund for variation 3 in the amount of $118.00. The homeowner claims an invoice from Definitive Drafting shows that the actual cost of the variation to the builder was $110.00. However, clause 17.5 (b) of the contract only applies when the variation is not agreed prior to it being carried out. Variation 3 for the works dated 12 April 2013 was signed by both homeowners and agreed for an amount of $250.00. It is clear that the cost was agreed between the parties and the homeowners paid it. The Tribunal does not find this to be a credit as claimed by the homeowner. 3. Refund of Variation 4 totalling $10,950.00. Again the homeowners state that this variation should be refunded, as there is no evidence of its cost from the builder. It relates to the raising of the slab and spoil importation. Again a variation has been provided and signed by the homeowners on 22 April 2013. The cost was agreed between the parties and the homeowners paid it. The Tribunal does not find this to be a credit as claimed by the homeowner. 4. Refund of Variation 6. The homeowners again claim that the cost of this variation has not been substantiated. A variation has been provided and signed by the homeowners on 11 June 2013. The cost was agreed between the parties and the homeowners paid it. The Tribunal does not find this to be a credit as claimed by the homeowner. 5. Refund of Variation 9. This variation relates to electrical costs. It totals $5,838.92 and only half the amount, being $2,919.46 has been paid. The applicant is seeking the half that he has paid and the builder is seeking the balance. A variation has been provided and signed by the homeowners on 1 July 2014. The cost was agreed between the parties and the homeowners paid it. The Tribunal does not find this to be a credit as claimed by the homeowner. This issue and the balance of the variation has been dealt with in more detail as part of the builders claim below.

[37]

The Builders Claim

The builder claims for unpaid progress claims of $88,537.91 and unpaid variations of $3,069.46 under the contract. They also claim plus interest in the sum of $408.01 and continuing to the date of judgment.
The homeowners object to the claim on the basis that the builder is prohibited from recovering its monies because it has engaged unlicensed subcontractors. The builder regards this as a belated defence even though the issue of unlicensed subcontractors was raised in the amended home building claim dated 8 April 2015. While the issues in relation to unlicensed sub-contractors was not initially raised as an issue in defence of the requirement to pay outstanding invoices, the builder was given the opportunity to put on any evidence showing that the sub-contractors are licensed and to address the issue in submissions. Accordingly the Tribunal is satisfied that the builder has been given the opportunity to respond to the issue.
The homeowners rely on matter raised in ss 4(2), 4(3) and 10 of the HBA.
As at the date of the contract, section 4 of the HBA states: A person must not contract to do: (a) any residential building work, or (b) any specialist work, except as or on behalf of an individual, partnership or corporation that is the holder of a contractor licence authorising its holder to contract to do that work. (2) The holder of a contractor licence who has contracted to do any residential building work must not contract with another person for the other person to do the work (or any part of the work)for the holder unless the other person is the holder of a contractor licence to do work of that kind. (3) The holder of a contractor licence must not contract with another person for the other person to do any work (or part of any work)for the holder for which insurance is required under this Act unless the other person is the holder of a contractor licence to do work of that kind.
Section 10 of the HBA relevantly states: (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 …. (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.
Section 4(2) does require a head contractor to contract with a licensed subcontractor. Section 4 is a penal provision and does not give rise to a course of action for homeowners. However, as a matter of construction, when section 10 of the HBA refers to the "person who contracts", it refers to that contract in respect of which the conduct was carried out in contravention of section 4. In other words, section 10 prevents an unlicensed head contractor who contracts with homeowners from making a claim under the contract and being entitled to damages. Section 10 also prohibits a subcontractor from making a claim against a head contractor if the subcontractor was unlicensed. However, section 10 does not extend to prevent a licensed head contractor from making a claim against a homeowner, even if it is found that the subcontractors he employed were unlicensed. In this case there is no dispute that at the time the parties contracted the builder was licensed and continued to be licensed during the time of the contract. The Tribunal does not find that the builder would not be entitled to make a claim under the contract on that basis.

[38]

Progress Claim 4

The builder is claiming what is progress claim 4 in the contract for an amount of $88,537.91. The invoice was issued on 20 August 2014. In the progress payment schedule it notes that the invoice is issued at the stage that the kitchen is installed and fit out complete. The schedule allows for two further progress payments, $66,403.43 for progress payment 5 for the stage that is 'fully tiled and half painted' and progress payment 6 is the final payment for $8,853.79 for practical completion.
The homeowners contest payment of the invoice for $88,537.91 on the basis that it was premature and the installation of the kitchen and fix out complete was premature. The kitchen had not been installed and the fix out was incomplete. In that regard they rely on the expert report of Mr Ryan dated 8 October 2014. They also refer to the affidavit of Mr Rodney Harvey dated 3 March 2015. At par 2.6 Mr Harvey relevantly states the following: …. At the meeting I remember a discussion about the progress claim. I agree the kitchen was not installed and the fix out was only about 1/3 complete. I said: Although the kitchen and fix out is not complete we have completed the tiling which more than covers the cost of the incomplete items. The reason why we havn't installed the kitchen is because you havn't signed the kitchen plans.
Mr Palombo also notes at par 361 of his report dated 17 January 2015 that the internal fitout was incomplete.
The Tribunal finds from the evidence that the progress payment 4 was issued prematurely and that the works had not reached the stage of fix out or the kitchen installation. However, in his report date 17 January 2015, Mr Palumbo has very clearly set out the works that have been completed. At page 15 of his report he states; 256. On the basis of my visual inspection, I consider that the work generally has been executed in a good and trades manlike manner, notwithstanding minor adjustments that are required in all building projects. 257. It is my opinion that the building work is approximately 80% complete.
In a similar case relating to abandonment, Owners Corporation Strata Plan 70762 v L & C Platt Constructions Pty Ltd [2014] NSWCATCD 8, the Tribunal found In any event, in my view on an objective analysis of the facts the parties intended that the respondent would be entitled to payment for work performed and the applicant was obliged to pay for such work if properly performed. In addition the applicant was entitled to a return of the deposit and excess or to have those two amounts set off against the respondent's outstanding invoices. In other respects the Building Contract was "off altogether" (to use the phrase of Rowlatt J in Pearl Mill Co Ltd v Ivy Tannery Co Ltd [1919] IKB78).
Similarly in this case the Tribunal finds that on an objective analysis of the facts the parties intended that that the builder is entitled to payment for work performed and that the applicant was obliged to pay for such work if properly performed up until when the contract was abandoned. The progress payment schedule contained at page 5 of the building contract indicates the percentage amounts next to each stage. The end of stage 4 brings the stages up to a total 83%. Photographs also show tiling has been done in the premises. Stage five relates to the premises being fully tiled and half painted. Given Mr Palumbo's and Mr Harvey's evidence, and on the best evidence before it, the Tribunal is satisfied that when progress payment 4 was provided to the homeowners, although stage 4 was not entirely completed, sufficient work from stage 5 had been complete which meant that the works together were approximately 80% complete. 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.

At a glance

Court

Decision date

Source

Judgment (42 paragraphs)

Legislation Cited (3)

Cases Cited (11)

Cited By (2)