Ferguson v Riviera Building & Construction Pty Ltd;; Riviera Building & Construction Pty Ltd v Ferguson

Judgment (57 paragraphs)

[1]

Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656; Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205; Paciocco v Australian and New Zealand Banking Group Ltd (2014) 309 ALR 249; Cedar Meats (Aust) Pty Ltd v Five Star Lamb Pty Ltd (2014) 45 VR 79; Build Environs Pty Ltd v Tali Engineering Pty Ltd [2013] SASC 84; Peter Turnbull & Co Pty Limited v Mundus Trading Cop (Australasia) Pty Limited (1954) 90 CLR 235; Toll (FGCT) Pty Ltd v Alpharpharm Pty Ltd (2004) 219 CLR 165; Concut Pty Ltd v Worrell (2000) 176 ALR 693; DCT Projects Pty Ltd v Champion Homes Sales Pty Ltd [2016] NSWCA 117; Shervill v Builders Licensing Board [1982] HCA 47; 149 CLR 620; Laurinda Pty Ltd v Capalaba Park hopping Centre Pty Ltd [1989] HCA 23; 166 CLR 623; Koompahtoo Local Aboriginal Land Council v Sanoine Pty Ltd [2007] HCA 61; 233 CLR 115; Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401; Gold Coast Oil Company Pty Ltd v Lee Properties Pty Ltd [1985] Qd R 416 Smith v Butler [1900] 1QB 694; Cornwall v Henson [1900] 2 Ch 298; Update Constructions Pty Limited v Rozelle Child Care Centre (1990) 20 NSWLR 251; Trimis v Mina [1998 NSWCA 140; Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd (1996) ATPR 41-522; Renard Constructions (ME) Pty Limted v Minster for Public Works (1992) 26 NSWLR 234; Brooks Robinson Pty Limited v Rothfield [1951] VLR 405; Iezzi Constructions Pty Limited v Watkins Pacific (Qld) Pty Limited [1995] 2 Qd R 350; Ettridge v Vermin Board of the District of Murray Bay [1928] SASR 124; ABB Constructions Pty Limited v Abigroup Contractors Pty Limited [2003] NSWCS 665; Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 273; Riverside Motors Pty Ltd v Abrahams [1945] VLR 53; Texts Cited: Brooking on Building Contracts (5th edition,2014) Category: Principal judgment Parties: In HB 14/60367: Applicant: Doug Ferguson Respondent: Riviera Building & Construction Pty Ltd In HB 15/33869: Applicant: Riviera Building & Construction Pty Ltd Respondent: Doug Ferguson Representation: Counsel: In HB 14/60367: Applicant Home Owner: D. Moujalli Respondent Builder: M. Auld

[2]

In HB 15/33869: Applicant Builder: M. Auld Respondent Home Owner: D. Moujalli

[3]

Solicitors: In HB 14/60367: Applicant: Maguire & McInerney Respondent: William Cotsis & Associates

[4]

In HB 15/33869: Applicant Builder: William Cotsis & Associates Respondent Home Owner: Maguire & McInerney File Number(s): HB 14/60367HB 15/33869 Publication restriction: Unrestricted

[5]

reasons for decision APPLICATIONS

In application HB 14/60367 filed with the Tribunal on 17 December 2014 the applicant home owner commenced proceedings against the respondent builder ("home owner's application").
In matter number HB 15/33869 filed with the Tribunal on 18 May 2015 the applicant builder commenced proceedings against the respondent home owner ("builder's application").
The applicant home owner in HB 14/60367 is the respondent in HB 15/33869 and the applicant builder in HB 15/33869 is the respondent in HB 14/60367.
Throughout this judgement the parties will be referred to respectively as builder and owner.
Both applications are heard together and the evidence of one application is to be the evidence of the other.
In the home owner's application the owner sought an order against the builder that it pay to him the amount of $81,763, being the amount the owner estimated it would cost to complete the incomplete building works.
In the builder's application it sought orders against the home owner that the home owner pay to the builder the amount of $163,622.98 plus interest and costs.

[6]

Legislative and jurisdictional considerations

S48KI (1) of the HBA provides that any person may apply to the Tribunal for determination of a building claim.
Pursuant to s 48K(1) of the HBA the Tribunal has jurisdiction to hear and determine any building claim brought before it in which the amount is less than $500,000.00.
The provisions of the section 18E (1) (a) and (b) of the HBA relevant at the time the contract was entered into provided that proceedings for a breach of statutory warranty must be commenced before the end of the warranty period. The warranty period relevant to this application is a period of six years for a breach that results in a major defect or two years in any other case after the completion of the work to which it relates.
Section 3B (3) of the HBA provides that it is presumed that practical completion of residential building work occurred, in the circumstances of this application, on the date on which the contractor last attended the site to carry out work, that is November 2015.
As to the matters now before the Tribunal, the Tribunal is satisfied that the claims are less than $500,000, the home owner has standing to bring his application, the respondent was and is a licensed contractor for the purposes of the HBA and has standing and the work carried out was residential building work for the purposes of the HBA.
The Tribunal is also satisfied on the evidence before it that the owner and the builder entered into a contract for the carrying out of residential building work being a two storey 4 bedroom addition and alteration to premises owned by the owner at Bawley Point in NSW on or about 8 March 2014 and the total contract sum was $330,000 inclusive of GST ("Contract").
It is uncontentious that the building work pursuant to the Contract commenced on or about 10 March 2014.
On 9 March 2015 the owner issued to the builder a notice of default pursuant to the Contract and on 27 March 2015 purported to issue a notice of termination.
The builder sought to terminate the Contract on 23 November 2015.
The Tribunal will consider in this judgement the date of termination of the Contract.
The owner's proceedings were brought in time as they were commenced within 6 years of the last building works being carried out on site.

[7]

Summary of Background

The owner and the builder entered into a standard form "Home Building Contract for Work Over $5,000" on 8 March 2014 for building work being for additions and renovations to an existing dwelling owned by the owner at Bawley Point for a price of $330,000 including GST.
The Contract provided for works to commence on 10 March 2014 and that they were to be completed within six (6) months of commencement, which is 10 September 2014.
The Contract provided for the owner to pay the builder the Contract price by instalments (called in the Contract "progress payments").
The building works commenced on 10 March 2014.
On 21 July 2014 the builder issued to the owner a claim for payment for Stage 6 (rear deck) and stage 7 (fix out) totalling $50,000.
A dispute arose between the builder and the owner about the works involved in stage 6 and 7 and whether those works had reached completion.
The dispute remained unresolved and continues to remain unresolved. The owner contends that he terminated the Contract pursuant to clause 25 of the Contract on 27 March 2015.
The builder contends that it terminated the Contract on 23 November 2015
The building works were not completed.

[8]

Owner's Claim

The owner's claim is now amended to be claims for: 1. Damages for defective, incomplete and non-complaint condition of the building works; 2. Identifying what works are necessary to complete the building and rectify the defects; 3. The owner's entitlement to damages for delay and completion of the works; 4. The effectiveness of the purported termination of the Contract.

[9]

Builders Claim

The builder's claim is now that as a result of the alleged repudiation of the Contract by the owner the builder suffered loss and is entitled to damages as follows: 1. Outstanding Contract payments $44,600.00; 2. Interest on outstanding payments of $9,856.49; 3. Variations of $25,999.50 (excluding margins); 4. Delay costs of $38,319.00; 5. Quantum Meruit of $213,660.43.

[10]

Evidence

The agreed bundle of documents filed by the parties in accordance with the Tribunal directions amounted to 2638 pages contained in 9 large lever arch folders. From that agreed bundle of documents the parties tendered those parts into evidence they relied upon.
The owner's evidence comprised: 1. The cross examined and sworn evidence of James Douglas Ferguson; 2. The cross examined and sworn evidence of Douglas Ferguson; 3. Exhibit 1-Affidavit of James Ferguson sworn 25 September 2015; 4. Exhibit 2-Affidavit of Doug Ferguson sworn 16 April 2015; 5. Exhibit 3-Affidavit of Doug Ferguson sworn 24 September 2015; 6. Exhibit 4-2014 Calendar 7. Exhibit 5-Expert report of Illawarra Building Appraisal Services authored by Andrew Connor ("Expert Connor") and dated 9 May 2015 ("Connor report 1"); 8. Exhibit 6-Expert supplementary report in regard to roofing damage following storm and alleged defects with roof of Illawarra Building Appraisal Services authored by Andrew Connor and dated 13 July 2015 ("Connor report 2") 9. Exhibit 7-Working Scott Schedule prepared for second conclave on 18 February 2016 10. Exhibit 8- Adjournment notes of Member Topolinsky dated 18 February 2016 11. Exhibit 9-Joint memorandum of Experts Conclave dated 18 February 2016 and signed by Expert Connor and Expert Brincat; 12. Exhibit 10-Minutes of conclave dated 19 November 2015 signed by Expert Connor and Expert Brincat; 13. Exhibit 11-Expert Quantity Surveyors report prepared by Taylor & Partners Quantity Surveying (Aust) Pty Ltd and authored by Peter Taylor ("QS Taylor") dated 19 November 2015 ("Taylor report");
The builders evidence comprised of: 1. The cross examined and sworn evidence of Michael James Jones, director of the builder; 2. Exhibit A-Affidavit of Michael James Jones sworn 13 August 2015; 3. Exhibit B-Exhibits to Affidavit of Michael James Jones sworn 13 August 2015; 4. Exhibit C- Affidavit of Michael James Jones sworn 3 September 2015; 5. Exhibit D- Exhibits to Affidavit of Michael James Jones sworn 3 September 2015; 6. Exhibit E- Affidavit of Michael James Jones sworn 10 February 2016; 7. Exhibit F-Expert report Number 1 of Auspro Building Services Pty Ltd authored by Edward Brincat ("Expert Brincat") and dated 28 June 2015 ("Bincat Report 1"); 8. Exhibit G- Expert report Number 2 of Auspro Building Services Pty Ltd authored by Edward Brincat and dated 4 August 2015 ("Brincat Report 2"); 9. Exhibit H- Expert report Number 3 of Auspro Building Services Pty Ltd authored by Edward Brincat and dated 3 September 2015 ("Brincat Report 3"); 10. Exhibit I-Interim Scott Schedule to be read in conjunction with expert report at Exhibit 5 containing costing based on Cordells to incomplete and carry remedial work to defective work (totalling $199,770.73); 11. Exhibit J- Minutes of Conclave dated 19 November 2015 signed by Expert Connor and Expert Brincat (repeating Exhibit 10) 12. Exhibit K-Expert Brincat's reply to Expert Connor's-minutes of Conclave signed by Expert Brincat dated 24 November 2015 13. Exhibit L-Expert Brincat's costing for defect item as agreed at Conclave dated 19 November 2015 (total if found $4,535.60); 14. Exhibit M- Expert report Number 5 of Auspro Building Services Pty Ltd authored by Edward Brincat and dated 11 February 2016 ("Brincat report 5"); 15. Exhibit N-Minutes of Conclave dated 19 November 2015 as signed by Expert Connor on 18 February 2016; 16. Exhibit 0- Conclave document dated 18 February 2016 (same as Exhibit 7); 17. Exhibit P-Scope of works extracted from Scott Schedule of Expert Connor at Conclave held on 18 February 2016; 18. Exhibit Q-Scott Schedule of Expert Connor with items tabulated.

[11]

Builder

The builder has made 2 submissions: 1. Submissions in chief filed 20 June 2016 in regard to the builder's claim HB15/33869; 2. Submissions in reply to owner's submissions filed 8 September 2016 in regard to the owner's claim HB14/60367.
The owner has made 2 submissions: 1. Submissions in chief filed on 24 June 2016 in regard to the owners claim HB14/60367; 2. Submissions in reply to the builder's submissions filed 19 September 2016 in regard to the builders claim in HB15/33869.

[12]

Issues

The multiple matrixes of issues in these applications will be dealt with in this judgement by the Tribunal as each issue is considered.

[13]

Reopening of builder's case

On 28 July 2016 the builder sought to reopen its case by the tender of further documents.
The owner objected to the builder's application.
The builder contends the documents sought to be tendered are relevant to the matters pleaded in the points of claim going to the termination of the Contract and that their omission from the evidence at the hearing was an oversight.
In support of the builder's application to reopen its case it cites the NSW Court of Appeal decision in Urban Transport of Authority of NSW v Nweiser (1992) 28 NSWLR 471. In that case the court held that the guiding principle for a court in determining whether to grant an application for leave to re-open is whether the interests of justice are better served by allowing, or by rejecting, the application. In Smith v New South Wales Bar Association (1992) 176 CLR 256 where the High Court found that where a case is reopened, the nature and extent of the review must depend on the error or omission which led to the application for re-opening. In the case of a factual error the extent of the review will vary depending on whether the error goes to the heart of the matter or whether the significance is confined to a discrete subsidiary issue.
The owner submits that he will be prejudiced if the further documents are admitted into evidence. As the case is closed the owner will have no opportunity to cross examine on the further documents. If the documents had been tendered at the hearing he would have undertaken extensive cross examination on them.
The builder submits that if the documents are allowed into evidence then the owner will have an opportunity to address the issues raised in the documents in his submissions.
The Tribunal has considered the material sought to be tendered by the builder. It is such that it assists the Tribunal in consideration of the issues, but does not significantly change the evidence before the Tribunal. On that basis to allow it to be relied upon after the close of the case does not bring about an alteration to the evidence adduced. Notwithstanding that the owner has not cross examined on the further evidence, there is no significant adverse impact on the owner's case by allowing it to be relied upon by the builder. As such, the interests of justice are better served by allowing the builders application and it can rely on the documents.

[14]

Witness Credit

In respect of the lay and expert witnesses the builder contends that the evidence of lay witnesses Mr Jones should be preferred to that of Mr Ferguson and of Mr James to Mr Ferguson.
The builder submits that: 1. Mr Jones gave honest and forthright answers to the questions he was asked. 2. Mr Ferguson gave equivocal evidence to important matters and made artificial distinctions where he thought such a distinction would benefit his case including his answers in regard to variations that he used language that he thought would make a legal distinction between agreeing to a variation and asking for option on how work was to be carried out. 3. Mr James Ferguson evidence was of little assistance as he had little recollection of the evidence that the owner sought o adduce from him.
The Tribunal has heard the evidence and formed its own assessment of the witnesses and where necessary applies the weight their respective evidence carries where due.

[15]

Consideration of experts' evidence

The builder contends that although the experts have agreed as to how to characterize the items in dispute, the scope and cost of the works necessary to rectify the works remains an issue to be determined by the Tribunal.
The builder submits that a review must be made of the documents identified as joint documents to determine what the genesis of those documents were: 1. Exhibit J was based on Appendix B to the Brincat report 1; 2. Appendix B was the base document considered by the experts at the first Conclave; 3. Member Topolinsky made notes on Appendix B and both Expert Connor and Expert Brincat signed a copy of the notated Appendix B; 4. That notated document became Exhibit J. 5. After the Conclave and Expert Connor retyped what is now Exhibit J and Expert Brincat then notated matters on the document that he felt were not agreed at the Conclave. That document is now Exhibit K. 6. Exhibit L is a list of items agreed to be defective as noted in Exhibit K and it is the document that was prepared by Exhibit L without contribution from Expert Connor being a result of the orders made on 26 November 2015 for the experts to each prepare a scope of works prior to the next Conclave. 7. Expert Connor did not prepare such a document as directed by the Tribunal prior to the second conclave. The failure by the owner to prepare a scope of works was the subject of a denial by the Tribunal of an application for an extension of time request by the owner on 8 February 2016, but the Tribunal left it open for a further application for leave to be made before the second Conclave on 18 February 2016. No such application was made by the owner. 8. Exhibit 10 is identical to Exhibit K except that: 1. It was hand annotated in the left hand margin during the second conclave; and 2. It was signed by Expert Connor on the bottom left margin. 1. Exhibit N is also identical to Exhibit 10 and Exhibit K except that it has been annotated by Expert Brincat beside the signature of Expert Connor on the first page noting that it was signed by him at the second Conclave. 2. Exhibit 7 was prepared by Expert Connor during the second Conclave and was his version of the scope of works and is unsigned by Expert Brincat as he requested during the Conclave to have an opportunity to review the documents, verified by Member Topolinsky's adjournment notes no being Exhibit 8. 3. Exhibit O is the same document as Exhibit 7: 1. Except that Expert Brincat's comments now appear in red print as a result of the discussions and his opinion of the required scope of works that took place at the second Conclave; and 2. Makes it clear that Expert Brincat's account that Exhibit 7 was prepared during the second Conclave by Expert Connor and attempted to introduce new and expanded scope material by Expert Connor to avoid the difficulty the owner was under as a result of failure to prepare a scope of works prior to the second Conclave. 1. Exhibit Q is based on Expert Connor's initial Scott Schedule, but has introduced a unique lettering system for each item, with the description for that column being referred to as the "sub item".

[16]

OWNER'S CLAIMS

The builder's work is defective, incomplete and non-compliant
Rectification and completion of the works
Legal principles

[17]

Owner's submissions

The owner contends that where a builder breaches a building contract, the owner is entitled to be compensated for the purpose of bringing the building works into conformity with the contract. This flows from the fundamental compensatory principle stated by the High Court in Haines v Bendall (1991) 172 CLR 60.
In Bellgrove v Eldridge (1954) 90 CLR 613 affirming Tabcorp the High Court set out the general compensatory principles in relation a claim for breach of a building contract in that: 1. Where a plaintiff is entitled to have a building constructed in accordance with a contract, the plaintiff's damage is the loss sustained by the failure to perform this obligation. The loss can be measured only by ascertaining the work which is reasonably necessary to complete the building and rectify the defects complained of so as to give the plaintiff the equivalent of a building which is substantially in accordance with the contract; 2. The work reasonably necessary to remedy defects in a building and so produce conformity with the contract may, and frequently will, require the removal or demolition of some part of the structure.
The owner submits that the principle in Bellgrove applies to breaches of Statutory Warranties because of the effect of section 18B implying Statutory Warranties within the Contract. Hammerschlag J in Bruno Pisano v Georgia Dandris (2104) 17 BPR 33,583; [2014] NSWSC 1070 (although appealed from, the principles were uncontested) summarised the principles in Bellgrove application to a claim for breach of the Statutory Warranties and also found: [66] there is no issue that the quantum of damages for breach of the warranties is the amount which is reasonable and necessary to: (a) remedy the work which has not been performed in a proper and workmanlike manner; (b) provide materials which are suitable for the purpose for which they are used; and (c) expend so as to result in a dwelling that is reasonably fit for occupation as a dwelling.
The owner further submits that the Tribunal has discretion to either award damages or order that rectification work be carried out. The owner is entitled to have the building conform to the contract.
In Tabcorp the High Court considering whether rectification works are reasonable and necessary to bring about conformity with the contract said that, "The qualification… is that, not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt…the test of "unreasonableness" is only to be satisfied by fairly exceptional circumstances."

[18]

Experts Conclave on completion and rectification works

The owner contends that if there is any controversy as to any difference between the record of scope of works to be completed and rectification of defects in Exhibits 9 and 10, the Tribunal should find that Exhibit 9 is Exhibit 10. Also noting that Member Topolinsky notes on 18 February 2016 say "Conclave concluded on 18/2/16. Rectification scope of works is agreed". To put the owner in the position in which he would have been had the builder performed the Statutory Warranties, the owner submits the Tribunal must order that the works referred to in Exhibit 10 should be carried out.

[19]

Defective Work

The owner submits in respect of his claim for defective work against the builder that substantial agreement has been reached on the items in respect of which the builder's work was in breach of the statutory warranties as set out in Exhibit J.
The builder largely agrees with the Scott Schedule (being the Schedule prepared by Expert Brincat being Annexure B to his first report (Exhibit J) as to the incomplete works and the defective works
The defective works identified in Exhibit J are items:
3-5, 7-10, 12-14, 16-31, 43, 44, 51-70, 90, 96-98, 111, 113, 115, 126, 127 and 129.
There is no agreement between the experts as to items now set out and the Tribunal will consider each parties' submission and make its determination in regard to each.

[20]

Wet area tiling

Items 3-5,7-10, 12-14, 16-31: 1. The experts are agreed that various wet area tiling are defective; 2. The disagreement between the experts is as to the extent that it is necessary demolish the work to rectify the work. Expert Connor says all of the area is to be demolished and replaced and Expert Brincat limits the area to be demolished. 3. The owner urges the Tribunal to accept Expert Connor's opinion for rectification. Expert Connor identifies no waterproofing by reference to photographs. The owner contends that if it had been waterproofed then the waterproofing would have been visible, 4. The Tribunal should infer from the builders failure to give evidence as to whether or how the waterproofing was installed that such evidence would not have assisted his case: Jones v Dunkel (1959) 101 CLR 298; 5. A building is not fit for occupation until an Occupancy Certificate can be issued. It is not a matter in dispute that in a class 1 building such as is being built, water proofing is a critical stage inspection for the purposes of the Environmental Planning and Assessment Act 1979. 6. The waterproofing critical stage inspection did not occur. 7. The owner urges the Tribunal to reject Expert Brincat's suggestion that the missed critical stage inspection can be cured by the builder giving a certificate as: 1. No certificate has been given by the Builder; 2. The builder has not given evidence that he is able or willing to give a certificate; 3. There is no evidence that Council is prepared to accept a certificate from the builder as a resolution to the missed waterproofing inspection. 4. There is a risk that the deficiencies identified in Expert Connors photographs will provide a reasonable basis for Council not accepting a certificate given by the builder; 5. The wet area defective tiling agreed by the experts are caused by the builder failing to carry out the works in a proper and workmanlike manner in breach of section 18B (a) of the HB. The failure to do the work without the critical stage inspection in breach of the Environmental Planning and Assessment Regulations 2000 will preclude the issue of an occupation certificate and therefore being a breach of section 18B(e) in that the building is not fit for occupation. 6. The scope of works propounded by expert Connor should be accepted by the Tribunal as the work to put the owner in the position he would have been in had the builder complied with the Statutory Warranties.

[21]

Head flashings

Items 46, 47, 48 and 49: 1. Expert Brincat considered these items as incomplete works and Expert Connor considered them as defective works. 2. The owner contends regardless of their status the builder breached the statutory warranties in their regard. 3. The builder submits that the head flashing referred to by Expert Connor as defective is a wrong conclusion and that Expert Brincat's finding is preferred who identified that: 1. The standard referred to by Expert Connor is for timber windows and the windows installed are aluminium; 2. The window manufacturers guide to installation does not require flashing above windows as depicted in photos 11 and 21; and 3. There is no evidence of leakage or water damage
For the reasons submitted by the builder, the Tribunal prefers Expert Brincat's determination and finds that these items are incomplete works.

[22]

Floor sheet step down

Item 50: 1. The step down from the internal floor to the front external balcony is approximately 30mm on Expert Connor's finding. The Australian Standard and Manufacturer recommends 100mm. Expert Connor regards the step down as a defect. 2. Expert Brincat considers this to be constructed as per drawing, although no drawings have been referenced in the evidence. 3. The builder contends that the owner supplied all drawings and gave a warranty as to the buildability of the drawings in clause 2(2)(a) of the Contract. 4. In the absence of a plan or drawing to reference the requirement for a 30mm step down the Tribunal is satisfied that a failure to comply with the Australian Standard and the Manufacturer requirements is sufficient to establish a breach of the statutory warranty (Wheeler v Ecroplot Pty Ltd [2010] NSWCA 61 at [10]). The Tribunal finds that item 50 is a defect. 5. QS Taylor, as the owner's expert witness, does not attribute a separate value to remedy the defect. 6. Expert Brincat regards as a technical defect and that no physical damage was observed due to the defect and does not regard the technical defect as needing to be remedied. 7. In the absence of evidence that the "technical defect" has caused a failure in the flooring system the Tribunal accepts that the performance provisions of the BCA Part 1 have been complied with and consequently do not require rectification. Further in accordance with Tabcorp Holdings Pty Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272 the rectification would be an unreasonable course to take. 8. The Tribunal makes no order as to rectification or damages as a result of the defect.

[23]

Owner

The experts agree and the evidence shows in regard to Item 62, the roofing screws, that: 1. Buildex zip 4 screws were used by the builder to affix the roofing sheets; 2. Zip 5 screws should have been used; and, 3. The only method of rectification is to replace the zip 4 screws with zip 5 screws
Expert Brincat does not dispute that zip 4 screws are not suitable for severe marine environments, but contends that as they are not failing they do not need to be replaced. The owner submits Expert Brincat gives no evidence to demonstrate that zip 4 screws will continue to perform in highly corrosive conditions created by severe marine environments.
The owner further submits there is no evidence on which the Tribunal could conclude that the rectification of the defect is "unreasonable" in light if the Tabcorp Holdings observations.
The owner is entitled to have the screws rectified by replacement and the Tribunal allows the quantum of the claim as costed by Expert Brincat and included in the total amount allowed..

[24]

Bugle fixing screws

Item 78-: 1. Both experts agreed that stainless steel bolts were to be installed to the rear balcony and not the bolts as used. The owner contends that regardless of whether this item is classified as incomplete or defective the builder has breached the statutory warranty. 2. The builder does not draw issue on the need to replace the bolts, but relies on Expert Brincat's costing of $140.00. 3. The Tribunal finds that the failure to use stainless steel bolts is defect and the builder is liable to replace the bolts. 4. In the absence of other evidence as to the cost of the bolts, the Tribunal orders that the builder compensate the owner in the amount of $140.00 for the cost of the supply of stainless steel bolts.

[25]

Stair width

Item 82: 1. The stairs to the rear balcony were specified and show on the plans to be 1310mm wide. Expert Connor contends they were built at 1065mm. Expert Brincat says they are 1100mm. In any case, they are constructed narrower than specified in the plans and as a result are in breach of section 18B(a) of the HBA. 2. This has been characterised as a contractual matter in Exhibit 10. The owner contends that the builder has breached the Statutory Warranties in respect of the upper deck stairs and the owner is entitled to have the work rectified to conform to the Contract. 3. Again, the owner relies on the Tabcorp Holdings to support its contention that there is evidence that the rectification of the stairs is not unreasonable. 4. The remedy to rectify would require demolition, removal and replacement. The builder contends that to do so would fall foul of the rule in Tabcorp Holdings Pty Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272 that is, to require the stairs to be demolished, removed and replaced would be an unreasonable course to adopt. 5. The tribunal notes Expert Brincat's opinion that there is "no loss of amenity for the stairs as constructed and in my opinion is a better construction to that drawn by the draftsman". 6. The Tribunal is satisfied that the stairs as constructed is a defect as they have failed to comply with the plans and specifications. However, the Tribunal accepts that the rule in Tabcorp should be invoked and that it is not appropriate to require the stairs to be demolished and replaced as to do so would be unreasonable.

[26]

Timber Floor architraves/skirting boards specified timber species

Item 116: 1. The specifications provide that "architraves-timber TBA (possibly Sydney blue gum)". 2. Expert Connor identifies that an inferior timber, pine, has been used. Expert Brincat states that the specification is non-specific as to the species of timber to be used. 3. The owner rejects Expert Brincat's interpretation and contends that it is based on a false premise that the parties did not mean anything by reference to Sydney blue gum in the specification. A reasonable person would interpret such a statement to mean that the species of timber to be used for the architraves would be Sydney blue gum or a species of timber of comparable quality. 4. The owner contends that by using inferior quality timber the builder has breached section 18B(a) by failing to carry out work in accordance with the specifications and failing to use suitable materials. 5. This has been characterised as a contractual matter in Exhibit 10. For the reason previously submitted by the owner, he contends that he is entitled to have the work completed in Sydney Blue Gum or a timber species of comparable quality. 6. The builder contends that although the owner submits that the grade of timber is deficient the standard 50mm profile has been exceeded and the builder installed 75mm profile instead. 7. The Tribunal does not find that the builder breached the statutory warranties in providing and using pine. 1. The skirting and architraves have been painted. The width of the timber is wider than that which was specified in the Contract. There is no evidence before the Tribunal that pine is an inferior grade of timber for use as skirting and architraves. 2. The Contract at best specifies that the timber species to be used is "to be advised". The addition of the words "(possibly Sydney Blue Gum") is not sufficiently descriptive to displace or qualify the words "TBA".

[27]

Garage Length

Item 128: 1. The plans, that are part of the Contract, specify that the internal length of the garage be 6200mm and that the external length be 6600mm. Expert Connor's measurement of the garage as built is that its overall length is 5750mm. 2. Expert Brincat disagrees and says in the Scott Schedule that the overall length is 6200mm and not the internal length. He contends that if the thickness of the walls makes the garage comply with the plans. He does not say he has measured the garage. 3. The plans speak for themselves. The internal measurement should have been 6200mm and the external should have been 6600mm. 4. The Tribunal is satisfied with the evidence of Expert Connor as the only evidence of the "as built" garage being measured. The Tribunal finds that the garage has not been built to plan and is a defect. 5. No value is attributed to the cost to rectify the garage by either expert or QS Taylor. QS Taylor adopts Expert Connors global estimate of rectification costs. The Tribunal does not have before it specific evidence of the cost to rectify this defect. 6. In the circumstances the rule in Tabcorp Holdings should apply and it is not reasonable to order the garage be demolished and replaced.

[28]

Roof Pitch

Expert Brincat accepts in his evidence that the roof pitch does not comply with the BCA. However, he justifies that breach of the BCA by saying that it should be allowed to remain as it matches the roof pitch of the existing roof, which in any case does not comply with the BCA. This is a design aspect of the alterations and additions to visually conform with the existing roof. The Tribunal finds no defect.

[29]

Front Doors

The specifications provide for the supply and the installation of double front doors. The door supplied by the builder does not comply with the specifications.
The Tribunal is satisfied that the door installed is in breach of the statutory warranty in that it is not in compliance with the plans and specifications and is therefore a defect.
Expert Connor assesses the cost to replace the front doors in the amount of $4,600.00. Expert Connor does not provide a calculation of how he arrives at the figure.
Expert Brincat assesses the cost to supply double solid core doors in the amount of $760.00 made up of materials of $400 and labour of 8hours at $80 per hour totalling $760.00.
The Tribunal allows the owner the amount of $760.00 which is included in the amount allowed for the defects claim.

[30]

Compensation for defects

Exhibit J sets out both Expert Brincat and Expert Connor estimate of the cost to remedy the defects. For the reasons given as to the preferred report to assist the Tribunal to determine the cost of making good the defects, the Tribunal accepts Expert Brincat's assessment in the amount of $5269.00

[31]

Incomplete work

The incomplete works identified in Exhibit J agreed by the experts are items:
1, 2, 32-42, 64, 71-77, 80, 81, 83-89, 93-95, 102-110, 118-122, 124, 125 and 130-132.
In respect of a number of incomplete works Expert Brincat opinion is that the reason for incompleteness is because the builder has been delayed by an act or omission by the owner, in particular items 32 and 33.
The owner contends that this is no answer or defence to the builder's breach to complete the work within the time permitted under the Contract. The Contract makes provision for the builder to request an extension of time if the owner causes delay. The builder did not invoke that procedure. Where a builder with a contractual right to extend time for completion because of an act or omission of the owner fails to exercise that right he cannot then say that he was prevented from completing the works on time: Turner Corporation Ltd (Receiver & Manager Appointed) v Austotel Pty Ltd (1994) 13 BCL 378 at 384. The only defences to a breach of a statutory warranty claim available to the builder are those in section 18F of the HBA (The Craftsmen Restoration & Renovations v Boland [2008] NSWSC 660) and neither apply in the circumstances
The owner contends that the Tribunal should find that the builder breached section 18B(d) of the HBA in failing to complete the work within the time stipulated in the Contract.
The builder submits that the owners claim ignores the informal approach by both parties abandoning the contractual mechanism. The evidence shows that the builder did request a 7 day extension of time granted by the owner and the owner volunteering, but not concluded, a further three week extension because of his failure to order the kitchen on time. The email exchange between the builder and the owner clearly show the builder was waiting for instructions before he could progress the building work.
The unchallenged evidence of Expert Brincat is that the contractual date for completion was "ongoing" as the owner failed to complete the work or provide instructions. See the reasons under the sub heading "Termination" below.
The Tribunal is not satisfied that the incomplete work is to be considered defective works. The circumstances are that the owner and the builder were in dispute. The Tribunal is satisfied that the builder could not obtain clear instructions from the owner at critical stages during the building work resulting in the works not being completed.

[32]

Owner

The preferred outcome of a dispute about a breach of Statutory Warranties is that the builder would have been that the builder be ordered to carry out the rectification work. The owner contends that is not available to the Tribunal as the provision introduced under section 48MA of the Act is for work carried out after 1 January 2015.
The owner relies on section 48O(1)(a) & (c) for a money order and or a work order.
The owner contends that the power to make a work order by the Tribunal is discretionary: Robert Symes & Anor v Mick Fabar Constructions Pty Ltd [2014] NSWCATCD 229. Such discretion should be exercised judicially with due consideration of the circumstances: see Adam Eftimoski v Mericon Homes Pty Ltd [2014] NSWCATCD 254.
The owner seeks a money order. In support of that application he submits:
The relationship between the parties has clearly broken down: Crichton & Bridle v Leighton [2009] NSWCTTT 157; 1. The scope of works to give effect to the rectification of defects set out in Exhibits J and 10 is substantial; 2. The builder has made no offer to rectify the defective works; 3. The rectification will involve the demolition of the wet area tiling; 4. The delay in completion of the building work has caused the owner considerable emotional stress at a time when it was his intention that his wife could spend her last remaining days before her death at the dwelling. That stress could be exacerbated by having to have further dealings with the builder through a work order. 5. The builder made misleading statements to NSW Fair Trading in relation to the balustrade that it was not part of the rear deck and that he was waiting on direction from the owner as to the type of balustrade to be installed as the owner had given that instruction to the builder six months earlier. 6. Some of the defects are of a serious nature, such as the critical stage water proofing inspection.
The Tribunal in consideration of whether an appropriate order is rectification or damages is not limited by a consideration of the time of when Section 48MA applies from. For the purpose of the owners application the Tribunal's discretion is unfettered except for proceedings commenced after after 1 January 2015 (see section 121(2) Sch 4 of the HBA) the preferred outcome is that a builder be ordered to carry out rectification work.

[33]

Owner's submissions

The owner submits that he gave notice of termination of the Contract to the builder on 27 March 2015 and that the Tribunal should find the termination as valid.
The owner submits: 1. He was entitled to terminate the Contract: 1. Pursuant to Clause 25 of the Contract; or 2. at common law for the builder's repudiation
Clause 25 of the Contract provided that: 1. if the builder among other things: 2. was unable or unwilling to complete the work or abandoned the work, 3. suspended the work before completion without reasonable cause, 4. failed to proceed diligently with the work, or 5. failed to remedy defective work,
the owner may, if such default can be remedied, notify the builder in writing that unless that default is remedied within 10 business days or such longer period as specified, the owner will terminate the Contract.
If the builder did not comply with the owner's request within the time allowed, the owner may terminate the contract by giving written notice to that effect to the builder. 1. In Concut Pty Ltd v Worrell (2000) 176 ALR 693 the majority of the High Court said: … regard should be had to "familiar principle of construction that clear words are needed to rebut the presumption that a contracting party does not intend to abandon any remedies for breach of the contract arising by operation of law". Thus, 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. 1. There is nothing in Clause 25 to indicate that the owner's common law rights for breach of contract are excluded. The use of the word "may" intended the rights under Clause 25 are to be augmented by the common law rather than such rights being the exclusive domain of the Contract. 2. The owner had rights at common law to terminate the Contract for the builder's repudiation in addition to the rights conferred by Clause 25. 3. The principles in relation to termination for repudiation at common law were summarised by the Court of Appeal in DCT Projects Pty Ltd v Champion Homes Sales Pty Ltd [2016] NSWCA 117 at [39]: [39] For the conduct of a party to constitute a renunciation of its contractual obligations it must be shown that the party is either unwilling or unable to perform its contractual obligations, that is, it has evinced an intention to no longer be bound by the contract, or stated that it intends to fulfil the contract only in a manner substantially inconsistent with its obligations and in no other way: Shervill v Builders Licensing Board [1982] HCA 47; 149 CLR 620 (Shervill) at 625-626 (Gibbs CJ); Laurinda Pty Ltd v Capalaba Park hopping Centre Pty Ltd [1989] HCA 23; 166 CLR 623 at 634, 647-648, 658; Koompahtoo Local Aboriginal Land Council v Sanoine Pty Ltd [2007] HCA 61; 233 CLR 115 (Koompahtoo) at [44]. Repudiation is a serious matter and is not lightly found or inferred: Shervill at 633 (WilsonJ) [40] Where inability to perform is declared the conduct amounts to a refusal to perform and the innocent party need not prove that the other party was actually unable to perform when the time for performance came: Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401 at 437. [41] A renunciation can be made either by words or conduct, provided it is clearly made: Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401 at 436. 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: Koompahtoo Local Aboriginal Land Council v Sanoine Pty Ltd [2007] HCA 61; 233 CLR 115 (Koompahtoo) at [44]; Laurinda Pty Ltd v Capalaba Park hopping Centre Pty Ltd at 659 (Deane and Dawson JJ) and 647 (Brennann J). 1. In relation to whether a party has evinced an intention to no longer be bound by a contract, Connolly J said in Gold Coast Oil Company Pty Ltd v Lee Properties Pty Ltd [1985] Qd R 416 at 420: This intention is to be judged from the acts of the party and is made out where a reasonable man would infer that party does not intend to take the contract seriously and that he is preferred to carry out his part of the contract only if and when or, as I have recently had occasion to say, if and as it suits him. When such an intention is shown, the innocent party is entitled to rescind.

[34]

Builder's submissions

The builder submits that the Contract came to an end either: 1. As a result of the owner's repudiation or unlawful termination of the Contract by:
On 24 February 2015, by filing his current points of claim seeking damages, being inconsistent with the owner keeping proceedings on foot, including prior to any notice of default being served by the owner 1. Commencement of these proceedings were inconsistent with the Contract remaining on foot, repudiated and unlawfully terminated: Smith v Butler [1900] 1QB 694; Cornwall v Henson [1900] 2 Ch 298. The builder remained ready, willing and able to carry out the Contract, but was prevented from doing so by the failure of the owner to provide instructions: Foran v Wright (1989) 168 CLR 385.
(b) On or about 27 March 2015, serving a Notice of Termination alleging the builder's default on the Contract, such defaults are denied by the builder; 1. The notices of default were served on 24 February 2015 after the filing of the points of claim and on 9 March 2015 after commencing proceedings with Fair Trading before the Fair Trading proceedings were resolved. 2. The builder claimed the notice was defective as the alleged breaches were not adequately specified notice of default alleged
(iii) Refusing access by requesting the return of the keys, accepted by the builder in returning the keys on 30 May 2015; and/or,
(iv) Failing to pay progress payments numbered 6 and 7, both issued on 21 July 2014, while the owner maintained a dispute about there being due and payable, in part or at all. 1. (c) Or where the Contract remained on foot, on the builder's termination: 1. By serving a notice of default on or about 28 October 2015; and, 2. Those defaults having not been remedied within the contractual allowance of 10 business days, by serving a notice of termination.
The time for completion became at large as the owner could not benefit from his own breach and insist on completion by the builder by the contractual date.
The period when the builder submits the completion of the works were at large, the owner contends that the builder repudiated the Contract by: 1. The owner's contention that the letter of 17 August 2014 from the builder repudiated the Contract which stated that "work at your property has ceased since our last email last week" as set out in his points of claim. Only to elect that the Contract remain on foot by his email tot eh builder the next day, 18 August 2014 where he writes "I urge you to reconsider your irrational approach and get on with this job without delay". 2. The builder rejected that letter as being repudiatory. 3. On 24 September2014 the owner wrote to the builder and said in that letter "You are required to fulfil your commitment of meeting contractual obligations and complete the project". 4. The builder contends that even if the letter of 17 August 2014 was repudiatory, the repudiation was not accepted by the owner and is no legal effect. "An unaccepted repudiation is a thing writ in water and of no value to anybody: it confers no legal rights of any sort or kind" Lord Justice Asquith in Howard v Pickford Tool Co.[195] 1 K.B. 417.

[35]

Owners further submissions

The owner submits: 1. That even if there was repudiatory default by the owner, there was no acceptance by the builder prior to the owner's termination of the Contract on 27 March 2015. The Contract can only be terminated if the owner's alleged repudiation was accepted by the builder and it was not. 2. The builder's allegations of the various dates that it says the Contract was repudiated by the owner, cannot be sustained. Once a contract is terminated it is brought to an end and there can be no further termination of it. 3. The owner issued a notice of default pursuant to clause 25 of the Contract on 9 March 2015. At that time the builder was almost six months past the completion date in the Contract of 17 September 2014. Such delay is evidence to support the contention that the builder was unable or unwilling to complete the works and proceed diligently with the work. The owner was justified in terminating the Contract.

[36]

Tribunal

The builder's contention that the commencement of the proceedings was inconsistent with the Contract remaining on foot is not accepted by the Tribunal. Even if such an action by the owner was repudiation it was not accepted by the builder and work continued on site by the builder.
For the Tribunal to find that the Termination of the Contract by the owner on 27 March 2015 it must first determine whether the Notice of Default was valid.
The Notice of Default of 9 March 2015 stipulated alleged breaches by the builder of the Contract which the builder responded to, in brackets after each alleged breach, as follows: 1. The builder did not provide a copy of the Home Owners Warranty Certificate, contrary to section 92 the HBA; (the certificate was supplied to the owner on 14 March 2014); 2. The builder was unwilling or unable to complete the work; (the builder was waiting on instructions from the owner as to various items that the owner needed to make a decision on); 3. The builder suspended the work before completion without reasonable cause; (the builder was waiting on instructions from the owner as to various items that the owner needed to make a decision on); 4. The builder has failed to proceed diligently with the work (the builder was waiting on instructions from the owner as to various items that the owner needed to make a decision on); 5. The builder has failed to remedy defective work and remove faulty or unsuitable materials (the builder had yet to be paid in full or in part for progress claims 6 and 7, at the time having been issued 8 months earlier). 6. The builder advised the owner that the purported notice of default was repudiatory and reserved all its rights in this regard.
Even if it were otherwise valid, the Notice does not particularise the alleged defaults with the particularity needed for the builder to be able to respond and remedy the alleged defaults except for the failure to provide the certificate in compliance with section 92 of the HBA. The Tribunal finds that the Notice was unfounded with no proper basis and of no legal consequence.
The Termination of the Contract by the owner based on the defective Notice of Default is not valid. The effect is that it is a repudiation of the Contract.
The builder contends that the owner was in breach of the Contract and on 28 October 2015 issued a notice under clause 26 of the Contract alleging breaches by the owner.

[37]

Owner'sLiquidated Damages and delay Legal Principles

It is well established that if a building contract is not completed by the due date then the owner becomes entitled to damages for loss caused by delay. By failing to complete by the due date under the contract the builder is depriving the owner of the use and benefit of the building: Walton v Illawarra (2012) 28 BCL 202; [2011] NSWSC 1188.
If the Contract provides for payment by the builder if the works are not completed in accordance with the Contract, then liquidated damages may be payable so long as the liquidated damages are a genuine pre-estimate of the loss and not a penalty.
The Courts have distinguished between a genuine pre-estimate of loss and a penalty with a test if the amount is "extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed the breach": Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 cited with approval by the High Court in Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656 …an agreed sum is only characterised as a penalty if it is out of all proportion to damage likely to be suffered as a result of breach…[and] Exceptions from that freedom of contract require good reasons to attract judicial intervention to set aside the bargains upon which parties of full capacity have agreed. That is why the law of penalties is, and is expressed to be, an exception from the general rule.
If a stipulated sum is penal, it will be enforceable to the extent that it will compensate the owner for loss suffered by the builder's failure to achieve completion by the time specified in the Contract: Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205.
In Paciocco v Australian and New Zealand Banking Group Ltd (2014) 309 ALR 249 and as cited with approval in Cedar Meats (Aust) Pty Ltd v Five Star Lamb Pty Ltd (2014) 45 VR 79, Gordon J summarised the position as: Put another way, the party harmed by the breach or the failure of the primary stipulation may only enforce the stipulation to the extent of the party's proved loss.
An owner may be disentitled from damages for loss caused by a builder's delay in achieving completion if the owner caused or contributed to the delay, sometimes referred to as the "prevention principle". The prevention principle was summarised by Blue J in Build Environs Pty Ltd v Tali Engineering Pty Ltd [2013] SASC 84, as: The following principles have been laid down by previous authorities. (i) A party generally cannot rely upon non-fulfilment of a condition the performance of which has been prevented by that party's own breach of contract. This principle applies to preclude an owner recovering liquidated damages for delay in the completion of the works by the contractor where that delay has been caused by an act or omission of the owner in breach of the contract ("prevention principle"). It is not entirely clear what is the juridical basis of the prevention principle. It may be that it is a term generally implied into contracts requiring cooperation between the parties. It may be that it is part of the principle of avoiding circuity of action otherwise due to damages to which the principal would otherwise have been entitled for breach of the contract being recoverable back by the contractor as damages arising from the principal's own breach of contract. It may be that it is a principle in its own right derived from notions of fairness and justice. (ii) Where a building contract contains a provision which gives to the contractor a right to an extension of time for delays caused by the principal's breach of contract, the prevention principle has no operation. (iii) If a contract imposes procedural limitations (such as time limits for seeking an extension of time), the imposition of those procedural limitations does not affect the negation of the prevention principle by the contractual provision entitling the contractor to an extension of time in accordance with Principle Two above.

[38]

Owner

The owner contends that in Toll (FGCT) Pty Ltd v Alpharpharm Pty Ltd (2004) 219 CLR 165 the High Court set out the principles to determining contractual rights and liabilities, What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement.
There is no contention that the Contract at clause 5 had a handwritten note that made the effect of the clause to be that the building work must commence on 10 March 2014. Clause 4 required the work to be completed 6 months from the date the work was due to commence. Clause 7 provides the only way for the time for completion to be amended. If the builder seeks to extend the time he must give notice to the owner in writing of the cause and estimated length of the delay within 10 business days of the occurrence of the event or cause of the variation. The word "must" imposes a mandatory or imperative obligation: Dennis v Australian Broadcasting Corporation [2008] NSWCA 37. Clause 9 requires the work to be carried out with due diligence.
A Special Condition of the Contract provides that if the builder fails to complete the work in the period allowed under the Contract then the owner will be entitled to $500 per week or part thereof until the works are completed. By agreement between the parties in an email exchange on 19 and 20 March 2014 the amount of damages under the Special Condition was increased to $580.00 per week.
The owner contends that he is entitled to liquidated damages from 20 March 2014 at the rate of $580 per week.
The owner submits that: 1. He had a contractual right to the building being completed by 17 September 2014 including the statutory warranty pursuant to section 18B(d). The experts agree that the work is incomplete to date. 2. He has been deprived of the benefit of the bargain he struck with the builder and deprived of the use of the building since 17 September 2014. As a result, he has had to pay rent for alternative accommodation and is entitled to be compensated for that loss caused by the builder to put himself in the position he would have been in had the builder performed his obligations under the contract: Williams v Pisano above. 3. The Contract provides that if there is a delay by the builder it will pay the owner $580 per week liquidated damages by way of compensation. The owner's evidence is that his actual loss is the rent he is paying in the amount of $550.00 per week. 4. There is no scope in the circumstances of the owner's application for the operation of the prevention principle. The builder's defence that the acts of the owner held up and delayed the works is denied by the owner. In any case if the builder could establish that it was delayed by events beyond its control this is not a defence, as the builder had a contractual right to extend time under clause 7 of the Contract. 5. Any acts or omission by the owner of which the builder now complains did not prevent the builder from exercising of the contractual obligations to seek extensions of time: Turner Corporation above. 6. Where a contract is terminated by acceptance of the builder's repudiation, the applicable principle is stated in Brooking on Building Contracts (5th edition,2014) as follows: Where the contract is determined by acceptance of a repudiation, liquidated damages which have become payable up to the time of the determination may be recovered, but thereafter the liability of the contractor for liquidated damages will cease, although the contractor will be liable for unliquidated damages. This is the consequence of the rule that the effect of the acceptance of the repudiation of a contract is to put an end to the contract so far as its future performance is concerned, leaving the repudiating party liable to an action for damages. 1. The owner contends that he is entitled to damages for the builder's delay in completing the works: 1. In the agreed amount of $580 per week from 17 September 2014 until 27 March 2015 (when the owner claims the Contract was terminated); and, 2. In the amount of $550 per week being the actual loss suffered from 17 September 2014 until the works are completed; 3. In the alternative, damages should be assessed at $550 per week being the actual loss suffered from 17 September 2014 until completion.

[39]

Builder

The builder contends that the owner has failed to take into account the issues: 1. That the parties abandoned the formal terms of the Contract with respect of delays and so the formal terms play no part; 2. By abandoning the formal terms, the contractual code for delaying with extensions of time was abandoned and so common law resume, including the applicability of the prevention principle; 3. Regardless of the prevention principle or otherwise, the owner was the cause of the builder's inability to complete the contractual works as where delay damages were to be awarded, it would have the effect of the owner being entitled to benefit from his own breach ; 4. The owner by repudiating the Contract in November 2015, even where that repudiation were not accepted (which it was), is not entitled to enforce any claim for delay damages: Peter Turnbull & Co Pty Limited v Mundus Trading Cop (Australasia) Pty Limited (1954) 90 CLR 235; 5. The owner was not at any time entitled to lawfully terminate the Contract for any purported breach by the builder; and 6. Where the contract was terminated by the builder, the owner is not entitled to delay damages
The builder submits that the owner is not entitled to damages for delay under the circumstances.

[40]

Tribunal

The Tribunal finds in this judgement that the builder terminated the contract on 23 November 2015.
It is well established at law that if the builder terminates the Contract then the owner is not entitled to damages for delay either under the Contract or under the common law.
The owners claim for delay damages is dismissed.

[41]

Builder

The builder has made the following progress claims under the Contract. In the table the Tribunal also includes how the builder calculates its alleged entitlement to interest: Progress Claim Amount($) Date claimed Date paid Days late for payment Interest per day ($) Interest Amount ($) 20/03/14 Deposit 16,500 08/03/14 ($100) 4 days on $100 and 6 days on $16,400 (4x 0.0178) + (6x2.92) 17.59 21/03/14 ($16400) 31/03/14 Demolition 35,000 19/03/14 ($20,000) 3 days on $20,000 + (3x3.56) +(12x2.67) 42.72 11/04/14 12 days on $15,000 ($15,000) Concrete 80,000 06/04/14 11/04/14 0 Framework 35,000 19/05/14 29/05/14 3 (3x18.00) 54.00 Lock up 100,000 19/05/14 29/05/14 3 (3x17.8) 53.40 Rear deck & Fix out 50,000 21/07/14 Unpaid 293@ 02/11/15 293x8.9 2,607.70 and cont. Variation for rocks 2887.50 06/04/14 Unpaid 393@ (393x0.51) 201.99 and cont. 02/11/15 Other Variations 28739.50 08/08/14 Unpaid 275@ (275x5.12) 1406.80 and cont 02/11/15 Totals $435,377 $4,384.20

[42]

The builder contends that it is entitled to be paid the unpaid amounts of the claims and interest in respect of late payments of the amounts due under the Contract in the amount of $44,600 ($50,000 less $5,400 allowance being the cost found by Expert Brincat to complete the incomplete works under the progress claims 6 and 7) plus interest.

[43]

Owner

The owner contends that there are no amounts due to the builder under the Contract.
The owner submits that: 1. Clause 12 of the Contract provided for progress payments upon completion of specified stages if the works. It also provided that a stage was complete when it was finished in accordance with the Contract documents and variations agreed to and was "free from apparent defects". 2. Stage 6 was described as the "rear deck" and stage 7 was described as the "fix out". 3. On 21 July 2014 the builder issued a claim for payment in respect of stage 6 and stage 7 in the amount of $50,000.00. 4. At the time of progress payment claim being submitted, the builder had not installed the balustrade as required by the approved plans. The balustrade remains uninstalled by the builder or at all. 5. The experts agree that the rear-deck and fix out are incomplete. 6. As the works for stage 6 and 7 are not complete the owner is not under a contractual obligation to pay for them.

[44]

Tribunal

The Tribunal has considered the evidence before it and the submissions of both parties in regard to the obligation to pay progress payments 6 and 7.
The evidence of both Expert Connor and Expert Brincat is that the works for both stages is incomplete. Clause 12 of the Contract specifically defines when works are complete and upon the works reaching such a stage of completeness the builder is entitled to issue a progress payment claim for that stage.
The Tribunal is satisfied that the claims made by the builder stages 6 and 7 were premature and as such the claims as presented were not due and payable. The Tribunal will consider whether the builder has an entitlement for payment for the works done, but not completed, in respect of the construction of the deck and the fix out as part of the builders quantum meruit claim.
The builder has failed to satisfy the Tribunal of an entitlement to an order for unpaid progress payments and interest under this head of claim

[45]

Builder's claim for Variations

The builder claims for variations allegedly carried out during the building works. It is noted that the points of claim dated 18 May 2015 and the amended points of claim dated 2 November 2015 filed and served by the builder do not plead a claim for variations.
The claim is for $25,999.50 plus margin and GST
The builder claims that it was instructed verbally in part and by email in part to carry out the variations listed in the above table. The owner contends that there was only one variation and that was excavation of rock.
The owner's evidence is that if he ever asked the builder to carry out other variations he did not do so "not according to the contract, not according to varying the contract, no" or alternatively the owner claims he only ever asked the builder for options to build things differently, that's not a variation". 'Despite those answers in cross examination, the owner admitted on being shown emails from him to the builder that he had instructed the builder to vary the works.
The builder says that the parties abandoned the implementation of the formal terms of the contract with respect to notices and instructions.
The owner instructed the variations, acquiesced in the builder carrying out the those works, being aware that the builder was incurring costs in carrying out the works and expected to be paid for those works. The owner is unjustly enriched by those works unless the Tribunal awards the value of those works to the builder: Update Constructions Pty Limited v Rozelle Child Care Centre (1990) 20 NSWLR 251.

[46]

Owner

The owner rejects the builders claim for variations as they were not authorised in writing as required by clause 13 of the Contract and submits that the builder has failed to demonstrate that any of the alleged variation work was "costlier to the builder than contractual performance or that the owner received benefit additional in value to that contracted for"; Trimis v Mina [1998 NSWCA 140.
Clause 13 sets out the procedure for making variations to the Contract. It requires: 1. Before commencing work on a variation, the builder must provide to the owner a notice in writing: 2. The notice must contain a "description of the work and the price"; and 3. The notice has to be signed and dated by both parties to constitute acceptance.
Mr Jones in cross examination accepted that with the exception of variation 1, he did not provide a notice under clause 13 in respect of any of the alleged variations.
As to the builder's submissions that the parties abandoned the terms of the Contract with respect to notices and instructions, the owner contends that such was: 1. Not pleaded in the builder's points of claim or case and the owner was not given notice of the contention. A claim cannot be answered until it is known: see Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd (1996) ATPR 41-522; 2. Any agreement to vary the Contract other than in writing signed by each party was precluded by clause 1 of the Contract; 3. Any agreement to vary the Contract other than in writing signed by each party was precluded by sections 6 (1) and 7 of the HBA; 4. The submission is contrary to evidence. The evidence is that the parties at all times intended to comply with the Contract and its provisions relating to issuing of notices, including: 1. 6 April 2014, the builder provided the owner with a variation document with work described and price claimed, confirmed by Mr Jones in cross examination that he understood that was what was required for variations to the Contract; 2. 6 April 2014, the builder prepared a notice claiming an extension of time; 3. 25 September 2014 the owner's email referring to the requirements of Clause 13 was not answered by the builder denying that the procedural requirements of Clause 13 no longer applied or at all. 1. The reliance by the builder on Update Constructions where no authorised variations were in writing as required by the contract does not assist the builder. The Court of Appeal in Trimis v Mina considered a builder's claim for variations not authorised in writing. After considering Update Constructions, the Court: The variations were not authorised in writing. There is no finding that the owners agreed to pay for the variations. That the variations were costlier to the builder than the contractual performance or that the owners received benefit additional in value to that contracted for. 1. The variations claimed by the builder were not authorised in writing and the builder has not established that any alleged variations were "costlier to the builder than contractual performance, or that the owner received benefit additional in value to that contracted for". 2. The email communication between the builder and the owner in relation to the variations reveal a pattern of the owner seeking information about the alleged variation work and the builder not being "forthcoming and even evasive with this information". The Tribunal cannot conclude that the owner knew that the alleged variations were outside the Contract and that the owner knew that the builder expected to be paid for the work as extras

[47]

Tribunal

There is a common thread woven throughout the evidence. That is, once the Contract was signed the owner and builder proceeded with a degree of informality and disregard for the terms of the Contract. Regardless, the Contract defined the relationship of the owner and the builder. The builder cannot have the benefit of the Contract on the one hand and dismiss its provisions where they contradict its claim on the other.
It is expected that a builder who has been granted the privilege of a contractor's licence under the HBA will have the skills in contract management to withstand the action and inaction of a seeming inexperienced home owner. The Contract require a variation of the terms of a Contract to be in writing. Neither party initiated such a variation.
The Tribunal is not satisfied that the parties abandoned the terms of the Contract as to notices and instructions. The terms of the Contract, amongst other things, provides a frame work under which variations are to be dealt with. After the first variation, the builder then subsequently chose to ignore the provisions of Clause 13. The claim by the builder that the parties abandoned the terms of the Contract is an argument of convenience to support its unsustainable claim for variations brought about by the builder failing to comply with the terms of the Contract.
The Tribunal notes that the claim for variations was not the subject of either a claim or particulars in the points of claim and appears to have been brought to the hearing as another issue overlooked in making the proceedings ready for hearing.
The Tribunal allows the claim for the first variation for rock invoiced on 6 April 2014, but unpaid in the amount of $2887.50 together with interest from the invoice date to the date of this judgement at $0.51 per day for 1067 days being $544.17.
The remainder of the claim by the builder for variations is dismissed.

[48]

Builder

The builder submits that the Contract prepared by the owner required that the owner carry out and complete certain works under the Contract including: 1. Clause 16: works and material to be supplied by the owner: Kitchen: benches, cupboards "are to be supplied and fitted by external contractor at owner expense, applicants to be owner supplied. Fencing, rumpus room and bedroom 3 floor coverings, blinds": 2. The specifications for the upper level, ground level and plumbing, fittings and fixtures provided for certain works to be completed by third parties; 3. Other specifications also provided for items to be separately quoted and completed and others remained to be advised at the time of the Contract. 4. The owner supplied tiles (delayed and contended to be wrong by the builder); 5. The owner failed to progress the work to fit out the kitchen. The owners evidence is that it was the joint intention of the owner and the builder that the builder would finish the work before the owner installed the kitchen. The builder rejects that evidence as it defies the good building practice in the evidence given by Expert Connor, who stated that the floor should be polished after the installation of the kitchen.
The breaches by the owner of his obligations under the Contract were: 1. Failure to supply the kitchen in a timely manner or at all; 2. Failure to attend meetings as requested by the builder to give instructions; 3. In respect of internal door fittings: 1. Failed to advise the builder of the door fittings to be used; 2. At some time before 14 July 2014 specified brushed stainless levers; 3. On 14 July 2014, the builder asked for further information on owners preferred door fittings; 4. On 17 July 2014, the builder advised the owner that the builder would drill 54mm holes in the doors to allow for door fittings; 5. On 20 July 2014, the owner wrote to the builder stating that he required level style door handles, please do not drill large holes; 6. On 24 July 2014, the builder advised the owner that it required the door handles to be able to finish the work or the builder would need to move to another job and return to fit the door handles once they were provided; 7. On 25 July 2014, the owner wrote to the builder repeating that he required "internal doors- all brushed stainless steel. Lever style for doors other than sliding…if you need more details please let me know near door installation". 8. On 8 August 2014, the builder wrote to the owner advising a price for the supply of the door handles and asks for a meeting with the owner. 9. On 24 September 2014, the owner wrote to the builder stating that "door handles and locks are your responsibility and are still not installed". 1. In respect of the finish to the rear balustrade: 1. The owner refused to pay the progress claim for the rear balustrade. The balustrade proposed by the owner was inconsistent with the building regulations. The builder proposed a compromise solution according to the owner's specifications it would be a variation. 2. A dispute arose as to whether the owner would accept the compromised solution balustrade in accordance with the owner's instructions or the balustrade as specified in the Contract, which was at that time being fabricated and waiting to be installed.

[49]

The builder contends that the owner breached the Contract by failing to provide instructions to the builder when requested and failed to progress the works that the owner had responsibility for under the Contract. Because of the owners delay the works were delayed by 416 days. The builder was entitled to extend the time for completion of the works until 27 March 2015. Owner

The owner denies that he caused all or any delay in the builder completing the works.
The time for completion of the Contract was 17 September 2014 on the owner's submission.
Clause 7 of the contract gave the builder a right to claim an extension of time to complete the work if the work was delayed by, amongst other things, any act or omission of the owner". The builder did not invoke the procedure set out in Clause 7 except for 7 days. The thrust of the builder's contention as to delay caused by the owner is that it was delayed by 416 working days.
The owner cites Turner Corporation Ltd (Receiver and Manager Appointed) v Austotel Pty Ltd (1994) 13 BCL 378 as authority for the contention that the builder having failed to claim extension of time under the Contract, the builder cannot now be heard to say that it was delayed in completing the works by the owner. Cole J observed: If the builder, having a right to claim an extension of time fails to do so, it cannot claim that the act of prevention which would have entitled it to an extension of time for Practical Completion results in its inability to complete by that time.
The owner contends that a chronological review of the relevant events demonstrates that the builder was not delayed by the owner. Importantly there was no mention by the builder of delay on the part of the owner between 18 August 2014 and 8 November 2014. The owner further contends that the reason for any delay was that the builder believed that he was entitled to its progress payments 6 and 7, which the owner contended were incomplete. It was only after these proceedings commenced that the builder raised the claim that the owner had delayed the completion of the works.
The owner submits that the evidence does not support the builders claim that the owner delayed the completion of the works. The builder failed to progress the works after 17 August 2014. Progress claims 6 and 7 had not been paid as the owner contended that the works were not complete. The owner contends that the builders claim for this head of claim should be dismissed.

[50]

Tribunal

The Tribunal is not satisfied on the evidence that the builder has complied with the contract in regard to seeking an extension of time to complete the building works under section 7 of the Contract. Although it invoked Clause 7 on one occasion it did not so again after it fell into dispute with the owner.
By invoking Clause 7 on one occasion the builder demonstrated that it was aware of the need to seek an extension of time under the Contract where circumstances were such that it was entitled to seek an extension and be granted it. If it then failed to follow the procedure under Clause 7 in regard to the owner's alleged defaults under the Contract it cannot claim an extension of time without compliance with Clause 7. The time for completion of the works was in accordance with the Contract, which is 17 September 2014.
For these reasons the builders claim for delay costs is dismissed.

[51]

Interest on overdue payments

The builder's claim for interest on overdue payments is considered and determined in respect of each head of claim.

[52]

Builder

The builder claims that as the owner repudiated and/ or unlawfully terminated the Contract, the builder is entitled to seek damages on the quantum meruit: (1992) 26 NSWLR 234; Brooks Robinson Pty Limited v Rothfield [1951] VLR 405; Iezzi Constructions Pty Limited v Watkins Pacific (Qld) Pty Limited [1995] 2 Qd R 350; Ettridge v Vermin Board of the District of Murray Bay [1928] SASR 124.
The measure of what is appropriate on an assessment of a builder's entitlement to a quantum meruit is not limited to the contract price of the works: Renard Constructions; and takes into account all of the circumstances of the case; ABB Constructions Pty Limited v Abigroup Contractors Pty Limited [2003] NSWCS 665.
The builder submits that in this case before the Tribunal: 1. The builder was retained by the owner to renovate the house on a contract and specifications prepared by the owner; 2. The owner on his own evidence, made a conscious effort to only seek "options" in correspondence with the builder which would plainly, by any reasonable person, be interpreted as a variation request; 3. That the owner variously repudiated and/ or unlawfully terminated the contract through his conduct; and 4. The quantum meruit claim of the builder is based on the invoices and costs he has actually incurred in carrying out works on the project
It is the builder's submission that it's office administration expenses were reviewed by Expert Brincat to assess if the margin it sought to apply to office expenses was fair. Expert Brincat includes those expenses to reflect his view that the builder's administrative expenses are at the lower end of the range.
As to the cost of items not fully consumed by the works, the builder contends that Expert Connor conceded that it is appropriate for a builder to recover the cost of reusable supplies on each job according to the life expectancy of the goods. The builder does not press all of such a claim, reducing it by $2,680.69.
The builder claims damages in the amount of $213,660.43 being the sum of the actual invoices and costs incurred by the builder in carrying the works, less the payments made by the owner

[53]

Owner

The owner contends that the builder cannot seek damages on a quantum meruit claim.
The builder cannot avail itself of the principle in Renard Constructions as:
The owner further contends that there was no repudiatory default by the owner. The owner promptly provided the builder with instructions and materials as requested by the builder. The failure of the builder to progress the works stemmed from the owner's refusal to pay the progress claims 6 and 7 and the alleged variations.
The owner submits that even if there was repudiatory default by the owner, there was no acceptance by the builder prior to the owner's termination of the Contract on 27 March 2015.
Even if the Tribunal concludes that the owner was not justified in terminating the Contract on 27 March 2015, the builder is still unable to make out a claim on the quantum meruit. The builder cannot be characterised as an innocent party within the Renard Constructions principle as: 1. The builder's work was defective and incomplete; 2. The builder failed to complete the works by the contractual time for completion of 17 September 2014; 3. The builder insisted on payment for stages 6 and 7 in circumstances where the stages were not complete; 4. The builders conduct was repudiatory for the reason previously set in in consideration of the issue of termination of the contract.
The owner contends that the builder's quantum meruit claim is misconceived because: 1. The assessment of the builders claim is not done in accordance with legal principle; 2. Expert Brincat's assessment of the quantum meruit claim is based on the costs incurred by the builder in carrying out the works. This approach is erroneous. In Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 273, Barrett J said: The real question in such a case goes to quantification of what Deane J described in Pavey & Matthews Ltd v Paul (above) at p 257 as "a reasonable remuneration or compensation for a benefit actually or constructively accepted". Regard must therefore be had to the work actually done and to its quality. A plaintiff's task in such a situation was described by O'Bryan and Martin JJ in Riverside Motors Pty Ltd v Abrahams [1945] VLR at p53: Moreover when the claim is not for an agreed price but upon a quantum meruit, in order to establish the value of the work done and the consequent reward to which he is entitled, the plaintiff must prove the exact nature of the work he has done. If he does not satisfy the Court that there have been no omissions from the work he has requested or he contracted to do, and that his work was in all respects skilfully done-how can he establish that the fair value of the work is what he claims? If, eg, at the end of this case the plaintiff failed to satisfy the learned trial judge that the bearings were in parallel and in alignment, or that they were so little out that no ill consequences would ensue, how can the value of its work be assessed? It is part of the plaintiff's proof on a quantum meruit to establish the value of the work. The quality of the work and matters such as its correspondence with specification and fitness for its intended purpose are thus elements of the process of valuation of work for quantum meruit purposes. 1. In Eddy Lau Constructions Barrett J said further that the onus is on the person claiming a quantum meruit sum to prove the value of the work done. 2. The experts agree that there are extensive defects and omissions in the builder's work. The Tribunal cannot be satisfied there are no defects or omissions in the builders work. Expert Brincat has made no allowance for the defects and incomplete works agreed by the experts and accordingly the builder cannot establish the fair value of the work done. 3. The builder's quantum meruit claim should be rejected.

[54]

Tribunal

The Tribunal has considered the evidence and the submissions of both parties in respect to the builders claim on the quantum meruit.
The builder claims that the owner has received the value of work supplied by the builder in the amount of $482,841.12 while the owner has paid $266,500 of the Contract price of $330,000. The builder claims $216,341.12 on the quantum meruit claim less the amount not pressed of $2,680.69. The total claim being $213,660.43.
The builders claim is misconceived. The Tribunal has found that the owner repudiated the Contract and the builder terminated. Notwithstanding that, the builders contention and reliance on Renard Constructions is misplaced.
The reliance on the actual cost of the building work by the builder less the progress payments by the owner is not a proper basis upon which to press a quantum meruit claim.
The builder was under a Contractual obligation to carry out the building works in accordance with the plans and specifications for the price of $330,000 including GST. The building works are incomplete and defective.
In Eddy Lau Constructions the Court made it quite clear that the principle is the real question in such a case goes to quantification of what is a reasonable remuneration or compensation for a benefit actually or constructively accepted having regard to the work actually done and to its quality.
The builder's only entitlement to a quantum meruit claim is in respect of the unpaid progress claims 6 and 7 issued prematurely before the works were complete.
Expert Brincat assesses the value of the incomplete works as $5,400. If deducted from the claims of $50,000 that amount is $44,600.00.
QS Taylor has prepared a costing based on information and the reports prepared by Expert Connor, but do not separately value the incomplete works with regard to the deck or fit out.
The Tribunal relies on Expert Brincat's evidence of the value of the incomplete works.
For the owner to have the benefit of $44,600 of materials and labour would unjustly enrich the owner.
The Tribunal allows the builder's claim for the value of the works included in progress claims 6 and 7 in the amount of $44,600.00 plus interest from 21 July 2014 until 6 March 2017, 961 days at $6.10 per day (5%) equalling $5,862.10.

[55]

Conclusion

In respect of the owners claim HB14/60367 the Tribunal orders in respect of each claim: 1. The owner's entitlement to damages for delay and completion of the works is dismissed; 2. The effective date of termination of the Contract was 23 November 2015. 3. The builder must pay to the owner the amount of $5269.00 being the amount of damages in respect to the defects
In respect of the builder's claim HB 15/33869 the Tribunal orders in respect of each claim: 1. The claim for variations is dismissed except for the first variation for rock and the owner is to pay to the builder the amount of $2887.50 together with interest of $544.17. 2. In respect of the quantum meruit claim the owner must pay to the builder the amount of $44,600.00 plus interest of $5,862.10. 3. The claim for delay costs is dismissed;

[56]

Costs

Any application for costs by a party is to be supported by evidence and submissions of no more than 3 pages in length and is to be filed with the Tribunal and served on the other party on or before 7 April 2017.
If there is no application made for costs by 7 April 2017 there will be no order as to costs.
Any evidence and submissions in response to an application for costs from the party opposing the application for costs is to be filed with the Tribunal and served on the other party on or before 5 May 2017.
The parties are to advise the Tribunal in their respective submission if they consent to the issue of costs being determined dealt with on the papers.
Alternatively the parties are to make submissions as to why such an order should not be made pursuant to section 50 of the Civil and Administrative Tribunal Act 2013. P. Boyce Senior Member NSW Civil and Administrative Tribunal 14 March 2017

[57]

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: 09 May 2017

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Judgment (57 paragraphs)

Cases Cited (29)