Foresight Construction Pty Ltd v MRW Plumbing Group Pty Ltd; MRW Plumbing Group Pty Ltd v Foresight Construction Pty Ltd

NCAT Consumer and Commercial|2021-08-24

Background

On or about 11 March 2018 Foresight Construction Pty Ltd engaged MRW Plumbing Group to provide plumbing installations and services to a site at XXX - XXX Botany Road Botany. The contract price was a lump sum of $272,800.00, although a quotation bearing a date 28 March 2019 disclosed a quotation price of $272,800.00 plus GST representing a total cost of $300,080.00.
Schedule 3 of the contract document noted the construction was to commence from 11 March 2018 and to be completed by 1 December 2019.
Between August 2018 and 31 October 2019 MRW Plumbing Group Pty Ltd rendered accounts to Foresight Construction Pty Ltd, and under the terms of the contract Foresight was entitled to withhold no more that 5% retention of the total value of the contracted works. The retained amounts were liable to be released to MRW Plumbing Group 13 weeks after practical completion of the works. On 1 November 2019 Foresight Construction Pty Ltd issued a Notice of Termination purporting to terminate the contract between the parties. On 6 November 2019 the solicitors for MRW Plumbing Group Pty Ltd wrote to the applicant's solicitors disputing that the contract was terminated, and claiming that the respondent's conduct amounted to termination of the contract. The repudiation was accepted, and the contract was thereafter regarded as at an end between the parties.
Foresight Construction Pty Ltd initially commenced proceedings in the Tribunal seeking compensation for defective and incomplete work. A short time later MRW Plumbing Group Pty Ltd commenced proceedings in the Local Court seeking to recover retention payments. In August 2020 the proceedings commenced by MRW Plumbing Group Pty Ltd were transferred to the Tribunal by consent of the parties and both matters continued to be dealt with in the Tribunal.

Evidence and submissions of Foresight Construction Pty ltd

Although the applicant's initial claim was for a sum of $40,000.00 for rectification and completion of works, Mr De Marcellis, of Foresight Construction Pty Ltd, filed an outline of his claim, apparently in response to the directions of the Tribunal, on 27 August 2020. He noted that the respondent, MRW Plumbing Group Pty Ltd, was continually failing to fulfill its obligations under the contract and was not intending to rectify works and/or was failing to complete works in a compliant manner. He noted that MRW also failed to comply with terms of the termination notice under the contract and did not supply the applicant with the required certificates as required under the contract and as required in the letter of termination. He claimed that works on site were still continuing with the potential and risk of extra costs being incurred for rectification of the works undertaken by MRW.
Mr De Marcellis claimed the following relief:- 1. Claim of $142,485.26; 2. Interest not calculated; 3. Filing fees $547.18; 4. Solicitors' costs $53,337.96; 5. Subtotal $196,370.40 6. Less retentions held $15,004.00 Total $181,366.40
It was claimed that the sum of $142,485.26 was based on a comprehensive list of expenses incurred to rectify non-compliant and defective works performed by MRW Plumbing Group.
A further order was sought that the respondent, MRW Plumbing Group Pty Ltd performs its obligations under the contract and issues all certificates of compliance and warranties for works completed to date.
Reference was made to the contract documents including a copy of the contract, the terms and conditions and the personal contract guarantee, which required works to be undertaken at a total cost of $272,800.00 plus GST. It was claimed that work was undertaken between August 2018 and September 2019 and that invoices were received totalling $227,619.00 and that works were defective and non-complaint or incomplete. It was claimed that all invoices had been paid by the applicant to the respondent, less agreed retentions under the terms of the contract being 10% claim totalling 5% of the total contract value.
Mr De Marcellis alleged that the balance of monies claimed by the respondent totalling $24,971.50 related to further works in dispute as being incomplete, unapproved and/or defective invoices.
It was claimed that when a payment claim was made by the respondent in about September 2019 in a sum of $19,800.00 the applicant paid a sum of $9,000.00 as agreed between the parties allegedly acknowledging that various works claimed under the payment claim were deemed to be defective or incomplete.
It was submitted that around May 2019 issues arose as to workmanship of the respondent and onsite behaviour. Thereafter the respondent proceeded to attend and carry out works on the site, although it was claimed that defective and non-compliant works became more prevalent as a result of which Mr De Marcellis contacted the Department of Fair Trading. He continued in his outline to refer to defective work and to discussions between the parties by email as to whether work was defective, non-compliant or incomplete.
Mr De Marcellis relied on an expert report of Glenn Haig following an inspection on 23 September 2019 which was included with his evidence, as well as an inspection report related to fire rating and compliance works. He claimed that a quote had been accepted in the sum of $36,138.85 for costs to rectify the fire rating compliance and noted that on 13 October 2019 members of the defendant's (respondent's) family unlawfully entered the site and took photographs. It was claimed that they unlawfully entered the site again on 31 October and had failed to proceed with and/or rectify works in accordance with the contract.
On 1 November 2019 it was claimed that pursuant to Clause 15 of the contract Foresight Construction exercised its right to terminate the contract and as a result Mr De Marcellis claimed that the respondent was required to issue an accurate report to the applicant detailing the status of the job.
It was noted that solicitors for the respondent wrote to the applicant's solicitors disputing termination of the contract and deeming that it was a repudiation. On 7 November the applicant's solicitors responded to the respondent's solicitors rejecting the repudiation and deeming it to be invalid.
In December 2019 Storm Water Engineers alleged unsatisfactory storm water and sewerage works had been carried out by MRW Plumbing Group.
In a defence to the claim of MRW Plumbing Group Pty Ltd, Mr De Marcellis accepted that Foresight Construction was entitled to hold 10% at each progress claim until 5% retention was reached. He claimed that the retained amounts were to be held by Foresight Construction on account of defective or non-compliant works in accordance with s.13 of the contract.
In further defence of the claim Mr De Marcellis said that the list of payments was incomplete in the documents filed by MRW Plumbing and that the correct list included payments from 26 April 2018 through to 9 September 2019 totalled $98,069.50. He claimed that the further invoices were claims for works that were incomplete, non-compliant, defective or already claimed.
In dealing with the additional invoices, it was alleged that the claim 1577N related to works which had already been paid or works which were previously claimed, or works which were deemed to be incomplete or non-compliant. In that regard he referred to the preliminary report of Glenn Haig.
In relation to invoice 1577J he noted that MRW Plumbing was claiming for works which did not comply with certain Australian Standards and were defective.
In relation to invoice 1577J it was claimed that the payment claimed was not valid under the contract in that it did not include details of the value of the works done and did not contain a breakdown of the works claimed, including dates of works performed on site and photos of the works completed. He claimed further that the claim did not provide sufficient information in order for the respondent to adequately assess the stage of works and the value of the amount claimed.
In relation to invoice 1704 it was alleged that MRW Plumbing was claiming for costs to rectify its own defective work.
Finally, Mr De Marcellis claimed that since the filing of the respondent's claim the additional expenses had been incurred by Foresight Construction for rectification of defective and/or non-compliant works and that MRW Plumbing was liable to pay a further sum of $4,268.00 being a sum of $1,628.00 paid to A& M Plumbing Solutions and a sum of $2,640.00 paid to Amazar Contracting Services. It was claimed that these items should be added to the original claim of 18 December 2020.
Mr De Marcellis sought to rely on two expert reports, the first being a report of Glenn Haig dated 16 December 2020, but based upon an inspection undertaken on 23 September 2019, more than a month before MRW Plumbing Group had ceased work.
Mr Haig described his report as a preliminary hydraulic service installation review that had been made without access to, or consideration of the development consent conditions, the contract installation requirements, the construction issue, hydraulic design documentation or any correspondence or communication associated with the construction of the development. He noted that it was assumed that practical completion had not yet been achieved on the development and as such all defects identified with the hydraulic services installation would remain the responsibility of the building contractor and the hydraulic contractor. He assumed that the hydraulic services installation was incomplete and as such he was not able to identify or record works that he considered to be incomplete works in progress.
Although Mr Haig provided what he described as a defect schedule, he did not attempt to quantify any rectification costs for the purposes of a Scott Schedule, but he sought to rely on invoices provided by other contractors on the job.
The report provided by Fire Group through Mr Culic arose from an inspection dated 13 July 2020. He described the purpose of his report to identify incorrectly or unfinished passive fire safety systems concerning the plumbing work in the shop area, top garage and bottom garage at XXX -XXX Botany Road Botany. He claimed that he would provide a solution to each of the incorrect or unfinished systems, that he observed that his recommendations were open to discussion and may not be the final or only option to treat these penetrations in accordance with the Code. Again, no costing was provided for rectification of these claimed faults and there was no reference to compliance with the Experts Code of Conduct. No attempt was made to provide costing for any rectification works claimed to be necessary.
A Scott Schedule was apparently prepared by Mr De Marcellis on behalf of Foresight Construction Pty Ltd. It was not based upon expert determinations as to the cost of the rectification, but rather it appears to have been based upon accounts and receipts provided in various parts of Annexure A to the initial documents filed on behalf of Foresight Construction Pty Ltd. The Scott Schedule contains some eight items with the first five being apparently based on the report of Glen Haig from an inspection on 23 September 2019 and the sixth point being based upon the report of Fire Group, again with accounts annexured from the initial documentation filed by Mr De Marcellis.
The seventh and eighth points in the Scott Schedule relate to estimates in relation to hydraulic works and plumbing stack works and a notation is included indicating that figures have not been included in the overall outline of the claim for works as rectification works had not yet been performed.
It is noted that there has been no answer provided to the Scott Schedule by or on behalf of MRW Plumbing Group Pty Ltd, although Mr De Marcellis has provided an email chain in Annexure F to his paperwork between Mr De Marcellis and Mr Wier on behalf of MRW Plumbing. That email chain does not address items in the Scott Schedule in particular, but rather it seeks to address the 16 items contained in the final report of Mr Glenn Haig.
Mr De Marcellis also relied on three affidavits. The first dated 3 March 2021 wherein he indicated he believed the allegations of fact contained in Mr Wier's affidavit that had been agreed on by the respondent were true and those that were denied were untrue.
His second email dated 14 July 2021 addressed matters referred to by Mr Osmond Khanji in his affidavit dated 17 May 2021 relating to the reasons why the hearing on 3 May 2021 was ultimately adjourned.
In his third affidavit dated 20 July 2021 Mr De Marcellis acknowledged that he had received a Certificate of Compliance lodged by MRW Plumbing Group that said the he was not satisfied with the Certificate of Compliance due to the omission of a detailed description of work and insufficient details to describe the works which have been certified. He noted that he had no records of evidence of a final inspection taking place prior to the issue of Certificate of Compliance and he claims that the Certificate was issued, and the works were completed on 2 November 2019 after the issue of a letter of Termination on 1 November 2019. He described the Certificate of Competency as inadequate and unsatisfactory. It is noted that even if Mr De Marcellis does have the qualifications and experience to comment on these matters, he is the representative of a party which has an interest in the proceedings and his affidavit should be viewed in that context. It is noted that there is a lack of any final plumbing Expert Report issued as a result of an inspection after 1 November 2019.

Evidence and submissions of MRW Plumbing Group Pty Ltd

On 29 September 2020 MRW Plumbing Group Pty Ltd, through its solicitors, forwarded Points of Claim in respect of the subcontractor's crossclaim. A sum of $39,975.00 was claimed representing an order that the applicant pay the sum of $24,971.00 together with an order that the respondent pay the applicants a sum of $15,004.00, being retention payments under the contract which were now payable.
Reference was made to a trade contract dated 11 March 2018 for a total sum of $272,800.00 to complete the works. It was claimed that between August 2018 and 31 October 2019 MRW Plumbing Group Pty Ltd supplied and rendered services to the respondent builder.
Under the terms of the contract the builder was entitled to withhold no more than 5% retention of the total value of the contracted works and retain those amounts to be released to the contractor 13 weeks after practical completion.
MRW Plumbing Group contended that on payment of invoices between 13 December 2018 and 3 June 2019 retention payments of $15,004.00 were collected and held representing 5% of the total contract price.
In addition to the retention monies the subcontractor claimed a further sum of $24,971.00 relating to invoices levied on 17 June 2019, 3 August 2019 and 4 November 2019. These sums together represented the total amount of $39,975.00 in the claim brought by MRW Plumbing Group Pty Ltd.
It was noted that on 1 November 2019 the builders Foresight Construction Pty Ltd served a notice purporting to terminate the contract and on 6 November 2019 the solicitors for MRW Plumbing wrote to the solicitors then acting for the builder disputing that the contract was terminated and claiming that the respondent's conduct amounted to a repudiation of the contract which was accepted and as a result the contract was at an end.
On 29 September 2020, in accordance with directions, the solicitors for MRW Plumbing Group Pty Ltd filed Points of Defence in respect of the claim brought by the builder. It was agreed that the builder had failed to pay outstanding invoices 1704, 1577J and 1577N and the total sum of $24,971.00 but it was claimed that in relation to those invoices a sum of $9,000.00 had been paid.
The respondent MRW Plumbing Group denied any noncompliance to the fire rating and denied that noncompliant or defective work had been established by the evidence.
The respondent relied on an affidavit of Mitchell Weir dated 5 March 2021 in which he noted that he was a director of that company and he referred to "an outline of claim of the applicant Foresight Construction Pty Ltd" and he provided responses to all claims made in that document.
On 28 March 2018 Mr Weir provided a quotation setting out the scope of works with the costing of these works being the sum of $272,800.00 plus GST. He pointed out that a trade contract was dated 11 March 2018 between the parties and that between August 2018 and 31 October 2019 the respondent supplied and installed various works as set out in the scope of works which was also provided. He noted that the respondent MRW Plumbing was unable to complete the works as a result of the applicant hindering the respondent from completing those works. On 1 November 2019 Foresight Construction purported to terminate the contract which Mr Weir said was unlawful and unreasonable in the circumstances.
Mr Weir attached a schedule which included most of the invoices rendered in relation to retention monies. Those invoices totalled a sum of $93,258.00 in Mr Weir's Schedule.
Mr Weir then referred to unpaid invoices, being invoice 1704, invoice 1577J and invoice 1577N, payable between 17 June 2019 and 4 November 2019. The unpaid sum of those invoices was $24,971.00 and those invoices were attached as annexures to his affidavit.
Mr Weir noted that on 1 November 2019 he received a document claimed to be Notice of Termination and he requested his legal representative to forward a response to the legal representatives of the respondent. He claimed that by reason of the conduct of Foresight Construction Pty Ltd he suffered a further loss. He noted that he had not completed all the works but could otherwise have done so but for the conduct of the applicant. He claimed that the value of incomplete works was the difference between the total contract sum together with any variations less the amount invoiced to date.
Mr Weir referred to the report of Mr Glenn Haig and in particular to items H(1) to H(15) and he denied that such items were defects. He noted further in relation to incomplete works that the applicant was responsible for providing certain materials including storm water pumps, rain water hose taps and hot water systems. The failure to provide these documents had hindered his ability to complete the works and the associated infrastructure works.
Foresight Construction Pty Ltd, through Mr De Marcellis, prepared a Scott Schedule dated 23 December 2020. The document appears to have been prepared by Mr De Marcellis, relying in part on a report of Glenn Haig, in part on a report of Fire Group, but in general relying upon invoices or receipts for payment provided by alternate contractors to carry out works on the site. The estimates of loss had not been supported by expert reports and items 7 and 8 in the Scott Schedule appeared to be based on an estimate because rectification of works had not yet been performed.
MRW Plumbing Group Pty Ltd had not provided an expert report in this matter and had not attempted to complete the respondent's section of the Scott Schedule filed on 23 December 2020. The items in the schedule have in part been the subject of email comment in an exchange between Foresight Construction Pty Ltd through Mr De Marcellis and MRW Plumbing Group Pty Ltd on the part of Mr Weir. The crossclaim has otherwise been addressed in submissions from counsel for MRW Plumbing.
On 15 October 2019 Mr De Marcellis wrote to Mr Weir indicating that they intended to have Mt Glenn Haig come on site to check all noncompliant and defective work. He also noted there was no final completed hydrostatic testing that had been completed and this would need to be performed correctly due to many leaks that had been found while testing. On 19 October 2019 Mr Weir wrote to Mr De Marcellis noting that 22nd October would be fine for inspection, and indicated that ITP Reports would be given after everything was paid. He noted that everything was paid to date but that his lawyer had been notified to commence proceedings on the additional invoices. He provided summary comments in relation to items H (1) to H(16) noting that that H (1), (2) and (3) were fully completed along with H(9), (10), (15), and (16). He noted that there was no defects in matters H(5), H(6,) H(7), H(11) ,H(12) and he noted that in relation to H(4) there was no defect as he had installed IO on the drainage line throughout. In relation to H(8) he stated that the double check valve was to be installed at a later date at the front next to the water meter, and in relation to H(13) he noted it was not a defect and tests had been completed. The ITP has been written up and would be sent when the balance was paid. He made a similar comment in relation to H(14).
Mr De Marcellis sent a further email addressing these matters but his responses do not constitute expert evidence for the purposes of the proceedings.
Closing submissions on behalf of MRW Plumbing Group Pty Ltd were provided in accordance with directions on 9 September 2021. It is to be noted that Foresight Construction Pty Ltd was invited to provide final submissions in reply and, although they sought two extensions which were granted up to 4 October 2021, no submissions and no response to the claims were ever provided by Mr De Marcellis or anyone on behalf of Foresight Construction.
Mr Rizk of counsel noted by way of background that during the course of the hearing on 24 August 2021 the applicant confirmed that any contest on liability to repay the respondent plumber's claim was solely based on what was effectively a crossclaim alleging defective or incomplete works. He submitted that the applicant builder did not lead any evidence to suggest that any of the respondent's invoices which remain unpaid were directly linked to works that were specifically defective. Accordingly he argued that the respondent plumber was prima facie entitled to an order that the applicant pay the sum of $39,970.00 subject to any findings the Tribunal may make on the applicant's claim for defective and incomplete works.
Mr Rizk submitted that in relation to the attempt to terminate the contract on 1 November 2019, the validity of that Termination Notice was disputed but if that constituted repudiation of the contract by the applicant (which was accepted by the respondent on 6 November 2019) then both parties are entitled to present their claim on the basis that the rights which had already accrued as at the first date of the contract was purportedly terminated. He submitted that whether the applicant validly terminated the contract or not did not appear to affect the validity of either party's claims (see Cohen v Zanzoul t/as Unique Building Group [2020] NSWSC 592).
On the basis that the applicant may be intending to seek orders relating to compliance certificates which are apparently outstanding, Mr Rizk noted that a Compliance Certificate had already been lodged with Fair Trading for work done under the contract and the respondent plumber was currently unaware of the exact nature of issues being raised by the applicant. In such circumstances he noted that the respondent had instructed its legal representatives to contact the applicant to identify an resolve any issues in this regard without the need for intervention of the Tribunal and he confirmed that the respondent was willing to comply with any contractual and statutory obligations that it had to the applicant.
The Tribunal has not received any submissions on behalf of the applicant Foresight Construction Pty Ltd addressing this issue and the need for further submissions by Mr Rizk does not arise.
Mr Rizk of counsel submitted that the central issue in determination of the applicant's claim is whether the items which the applicant has claimed to be defective actually related to items of work that had been completed by the respondent and could be deemed to be defective. He pointed out that the applicant sought to recover damages in respect of new and additional works that the respondent did not ever attempt or complete (either because they were not included in the scope of works or contract, or because the contract was terminated before the work was due to be completed by the respondent).
It was pointed out that the respondent plumber was being paid in arears for work already completed, and accordingly to any work that was not completed or had not yet been commenced by the respondent was not work for which the respondent was paid. It was noted that the applicant had claimed that during the course of the hearing he had been invoiced for an approximate sum of $220,902.00 inclusive of GST, and on that basis the invoiced total was significantly less than the total sum of $300,080.00 inclusive of GST.
It was submitted that, consistent with the long line of authority, the applicant builder bears the onus of each element of the case for each particular item of work that is claimed to be defective, and the applicant must show:- 1. That the respondent did that item of work, 2. That the work was defective, and 3. That the applicant consequently suffered a loss, 4. The amount of any such loss.
In relation to the Scott Schedule, Mr Rizk pointed out that the Scott Schedule had been prepared by Mr De Marcellis on behalf of the applicant and not by an independent expert. It was contended that the applicant's comments in the Scott Schedule had been inserted by Mr De Marcellis himself and were not comments directly uplifted from an expert report or independent evidence. He noted there was no evidence to support Items 7 and 8 in the Scott Schedule relating to liability and quantum and he pointed out that the applicant had arbitrarily uplifted 40% on quantum of most of its claims as administrative costs.
It was argued in relation to the applicant's claim that the damages claimed were inclusive of GST and it was pointed out the GST should not be payable on a damages award made in circumstances where the claimant is eligible to receive an input tax credit in respect of its expenses (see Gogner Pty Ltd v Canturi Corporation Pty Ltd [2009] NSWCA 413).
Mr Rizk submitted that the only evidence to suggest defects was contained in a report of Mr Glenn Haig dated 16 December 2020, although it was significant to note that Mr Haig had based his observations for his report on an inspection undertaken on 13 September 2019 while the plumber was still working on the site. He was unable to comment on whether defects he had identified had been rectified by the time the respondent plumber had left the site. In cross-examination Mr Haig conceded that his report was not completed in accordance with the Experts Code of Conduct and that it did not take into account evidence that the respondent plumber had attended and remedied a number of matters of concern which had been identified by Mr Haig.
In addressing item 1 in the Scott Schedule it was submitted that the applicant builder bore the onus of proving the defects in the respondent's work and that the evidence was unsatisfactory. In addition, it was claimed that if the Tribunal was persuaded that it could award damages then the total sum would represent $9,294.24 excluding GST and not the sum of $13,350.61 claimed in the Scott Schedule. The invoices identified that sum as exclusive of GST and other margins.
In relation to item 2 of the Scott Schedule it was pointed out that the tax invoice relates to costing from Storm Water Engineers Pty Ltd in a sum of $1,200.00 exclusive of GST for mapping out the work completed by the respondent. There was no evidence relating to the defective work by the respondent. The invoice was for additional work which would have been required to be carried out by an engineer and not a plumber.
In relation to Item 3 of the Scott Schedule it was submitted that lagging of pipes was not part of the scope of works under the original contract and that the respondent plumber was never engaged to undertake lagging of pipes.
Invoices for that work provided from Quince Insulation totalled a sum of $2,708.70 (excluding GST) and it was claimed that if lagging was required to be carried out then the limit of the compensation would be $2,708.70 excluding GST.
In relation to Item 4 of the Scott Schedule, Mr Rizk of counsel noted that there was no evidence presented by the applicant to establish that this work was for rectification of work that was completed by the respondent and there was no evidence that the works related to works that were not installed competently. He submitted that the applicant builder has failed to provide the evidence to establish an entitlement to damages for the work.
Item 5 in the Scott Schedule related to sewerage and drainage being installed with incorrect falls and in a manner which was not compliant. The applicant relied on invoices from A&M Plumbing Solutions dated 1 June 2020. It was claimed that the applicant had not supplied any evidence to establish that any defects identified in the invoices provided relate to works that were carried out by the respondent as opposed to another plumber.
He submitted in the alternative that if the Tribunal was not persuaded by the respondent's submission, then it is argued in the alternative that the invoices should contain a discount. The invoice issued by A&M Plumbing Solutions contains line items for work to install a new trade waste line and a new boundary trap. He argued that it would be appropriate to reduce damages payable to $3,045.00 exclusive of GST.
The A&M Solutions invoices for $1,020.00 exclusive of GST did not identify any rectification work but appeared to relate to additional work carried out by A&M Plumbing solutions to complete work that had been previously partially completed.
The applicant provided invoices from Ace Gutters in a sum of $194.61, and Reece in a sum of $4,673.44 excluding GST. These items were of a generic nature and there was no evidence which demonstrated that all or any of the material was used for rectification work completed by the respondent. It was therefore submitted that those parts of the claim have not been made out.
Item 6 in the Scott Schedule is based upon a report of Fire Group which was invoiced in a total sum of $34,953.50. The work carried out by Fire Group is set out in more detail in the report of Mr Aleksandar Culic dated 28 August 2020. It was submitted that the installation of fire enclosures constituted a significant and costly exercise which was not included in the scope of works contained in the contract with the respondent. It was not a service that the respondent was contracted to provide to the applicant. It was pointed out that Mr Culic was not available to give evidence or be cross-examined during the course of the hearing and it was submitted that the Tribunal must rely on a review of the report to determine whether it can be satisfied by the applicant that the amounts invoiced by Fire Group related to rectification of defective work. The Fire Group invoices relate, among other things, to the supply and installation of a two hour fire rated E and M enclosure encasing shop penetrations. Fire Group was proposing the installation of a new enclosure and not the replacement or rectification of existing works.
It is submitted that the next item related to supply and installation of an enclosure encasing a shop penetration. The report clearly proposes the installation of a new system in place of a fire collar system. It was argued that the applicant has not demonstrated that the item related to rectification of defective work. The applicant's claim for damages for work by Fire Group on the shop penetration should be wholly rejected.
Two further items relating to installation of a two hour fire rated bulkhead cannot, it is submitted, relate to rectification works for fire rating work undertaken by the respondent plumber.
The fifth item in the report of Fire Group, including costings, contained some 32 separate items of work in respect of shop penetrations and ground floor carpark penetrations. Only parts of those items of work involved rectification. It has been submitted by Mr Rizk of counsel that the items that could potentially involve rectification relating to the installation of collars amount to a maximum of $1,354.60, which could potentially be regarded as rectification of defective work.
The final sum in the Fire Group report claimed a sum of $2,100.00 for preparation of a report which predominately includes additional work that has not yet been completed.
Items 7 and 8 are subject to a concession by the applicant that it did not have evidence to support these items. Mr Rizk submits that the applicant is therefore not entitled to any allowance for items 7 and 8 of the Scott Schedule.

Decision

On 13 March 2020 Foresight Construction Pty Ltd commenced proceedings (HB 20/12607) against MRW Plumbing Group Pty Ltd claiming, at that stage, compensation in the sum of $40,000.00 for the cost of rectifying defective and non compliant plumbing works. There were delays in the initial listing of the proceedings, apparently related to the payment of a filing fee, and the matter was listed for a Conciliation Hearing on 29 July 2020.
In about April 2020 MRW Plumbing Group Pty Ltd commenced proceedings in the Local Court against Foresight Constructins Pty Ltd seeking to recover retention monies under the contract along with unpaid invoices submitted by the applicant as a subcontractor to the respondent as the builder.
On 13 August 2020 both parties consented to the proceedings in the Local Court, being transferred to the Tribunal as HB 20/36334, and both matters were listed for hearing on 24 August 2021. Directions given on that date required the applicant in each matter to file written submissions by 8 September 2021 and the respondent to file and serve written submissions by 22 September 2021.
Submissions were filed in accordance with the timetable by MRW Plumbing Group Pty Ltd but the respondent Foresight Construction Pty Ltd did not file written submissions in accordance with the directions notwithstanding that they requested and obtained extensions of time to 30 September 2021 and further to 4 October 2021. No further application was made and no reasons were provided for the failure to submit final submissions in respect of each matter.
The Trade Contract between the parties was dated 11 March 2018 in respect of works to be undertaken at XXX - XXX Botany Road Botany, described as plumbing installations. The lump sum contract price was $272,800.00 and there was provision for retention monies to be released 13 weeks after the builder reached practical completion and thereafter 13 weeks after the issue of an Occupation Certificate.
The construction period was to commence on 11 March 2018 and was to be completed by 1 December 2019.
A general specification and Scope of Works provided by the parties was last updated on 6 September 2018 and the last updated description of the works to be carried out was dated 28 March 2019. That document was described as relating to "1577" and the subtotal costs were $272,800.00 together with GST $27,280.00 representing a total of $300,080.00.
The outline of the claim provided by Foresight Construction noted that MRW Plumbing Group rendered services under the contract commencing in August of 2018 and it claimed that the contract was terminated by the builder on 1 November 2019.
The related claim by MRW Plumbing Group sought a total payment of $39,975.00 made up of :- 1. An agreed retention sum under the contract of $15,004.00 which had been retained by Foresight Construction, together with 2. A sum of $24,971.00 relating to invoices 1704, 1577J and 1577N, which were outstanding invoices and progress claims in respect of the works undertaken by the respondent.
Having read the pleadings and material filed by both parties ,and having noted that during the course of the hearing on 24 August 2021, Foresight Construction Pty Ltd indicated that it was contesting liability to repay the respondent's claimed sum for retention monies and unpaid invoices on the basis that MRW Plumbing Group had carried out defective works and incomplete works. In the course of the hearing Foresight Construction did not seek to lead any evidence to suggest that the invoices issued by MRW Plumbing Group had already been paid. The Tribunal is accordingly satisfied on a prima facie basis that MRW Plumbing Group Pty Ltd is entitled to an order that the applicant pay a sum of $39,975.00 subject to amounts which may be established by Foresight Construction in matter No. HB 20/12607.
Although Foresight Construction Pty Ltd issued a Termination Notice dated 1 November 2020, the Tribunal is satisfied that on 6 November 2020 the solicitors then acting for MRW Plumbing Group Pty Ltd wrote to the solicitors then acting for Foresight Construction indicating that the Termination Notice was not valid but that MRW Plumbing Group accepted the Notice as a repudiation of the contract upon which it then sought to act.
Neither party has sought to address the issue of termination any further and the matter can properly be addressed on the basis that the contract came to an end on 1 November 2020 and no other consequential losses have been claimed in the evidence of the parties. In this regard the Tribunal accepts the submission of Mr Rizk of counsel that whether the applicant validly terminated the contract or not does not appear to affect the validity of either party's claims (see Cohen v Zanzoul t/as Uniq Building Group [20202] NSWSC 592).
It would appear that the issues required to be determined by the Tribunal in relation to the claim made by Foresight Construction are :- 1. Whether the applicant has established that any or the works by the respondent to that claim were defective; 2. If so, what damages if any is the applicant entitled to receive as compensation for the cost of rectifying defective work; 3. Whether any sum payable to the respondent can be offset against the applicant's claim.
Mr Rizk on behalf of the respondent MRW Plumbing Group has argued that the applicant has sought to recover damages in respect of new and additional works that the respondent never commenced or never completed, because those works were either not included in the scope of works, or because the contract was terminated before that work was due to be completed.
It seems clear that the respondent was paid in arrears for work already completed and accordingly to the extent that work was not completed (or not even started) the respondent would not have been paid and the applicant would not have been invoiced.
There is some real contention about the amount which has in fact been paid by Foresight Construction to MRW Plumbing Group and it is noted that :- 1. The applicant claimed that the respondent had previously invoiced the applicant for an approximate sum of $220,902.00 inclusive of GST, being a proportion of the contract sum of $300,080.00 inclusive of GST; 2. It was claimed during the hearing that the amount paid by the applicant to the respondent at the time when the contract was terminated was a sum of $176,843.50, and 3. In a defence filed in the proceedings commenced by MRW Plumbing Group, Mr De Marcellis acknowledged payments totalling $98,069.50 and provided invoices and evidence of payments for those amounts. He also conceded a retention sum of $15,004.00 and has not disputed a further sum of $24,971.00 on the further claim of MRW Plumbing subject to a cross claim for defective workmanship.
The total of those payments is a sum of $138,044.50 and item (c) appears to provide the most accurate indication of payments that have been made, acknowledged or conceded subject to defects. All of these claims of payment are significantly less than the contractual price of $272,800.00 for the completion of the plumbing works and accordingly the applicant, Foresight Construction Pty Ltd bears the onus of establishing those works which have in fact been completed because they are not otherwise covered by payments which have been made to date. Neither party has attempted to address the incomplete works on a basis of quantum meriut.
Foresight Construction relies upon a report of Mr Glenn Haig dated 16 December 2020 but which is based on an inspection undertaken on 23 September 2019, along with a report of Aleksandar Culic of Fire Group, dated 13 July 2020. He has also produced a report document dated 15 July 2020 from Fernando Orellana of Storm Water Engineers Pty Ltd. That document consists of almost half a page of dot points and it appears to relate to an inspection undertaken on 14 July 2020, after a lot of other work had been completed.
Mr Glenn Haig conceded in cross-examination that he had not returned to the site after September 2019 to look at any remedial works that had been undertaken by MRW Plumbing. He also conceded that he did not have contractual documentation, he did not have a copy of the plumbing contract or scope of works and that he was not aware of time lines and he was not aware when the plumber ceased work on the contract. He also conceded that the report was not fully prepared in accordance with the Code of Conduct.
In the passive fire inspection report, Fire Group was simply tasked to identify incorrectly or unfinished passive fire safety systems. It was designed to provide a report on incorrect or unfinished systems and recommendations based on approved test reports. It noted that recommendations in the document would be open to discussion and would not be the final or the only option to treat the penetrations. That report did not address the works required of MRW Plumbing Group under their contract and the inspection took place after works had been undertaken by A&M Plumbing solutions in May and June of 2020.
The report of Storm Water Engineers was also prepared after the other works had been undertaken, namely after 15 July 2020.
The claim of Foresight Construction for defective or incomplete work was said to be for an amount of $142,485.26 for rectification and completion together with filing fees of $547.18 and solicitors' costs of $53,337.96, representing a sub total of $196,370.40. That claim was then reduced by the retention sum agreed to be $15,004.00. In addressing the claim, the Tribunal does not allow filing fees and the sum of $547.18 must be excluded. It is also apparent that the solicitors' fees of $53,337.96 were never incurred in the present proceedings before the Tribunal or in the proceedings which were transferred from the Local Court. It follows that without the deduction of the retention sum the claim of Foresight Construction appears to be a sum of $142,485.26 which it is assumed relates purely to incomplete or defective works.
Although orders were made for filing of a Scott Schedule, and completion of that Scott Schedule by the other party, the Scott Schedule filed in the Tribunal by Foresight Construction on 23 December 2020 contains a total of 8 items, including two items which have not been the subject of any costing either from work allegedly undertaken by others or from quotes or reports by independent experts.
It follows that the remaining six claims in the Scott Schedule must be considered having regard to the reports on which they are based as well as evidence to establish that the items referred to were required under the contract with MRW Plumbing Group and were defective works. Foresight Construction was only obliged to pay for completed works at the time when the invoices were submitted.
It is appropriate to note that the Scott Schedule has been prepared on behalf of the applicant by Mr De Marcellis and not by an independent expert. The comments contained in the Scott Schedule appear to be comments again made by Mr De Marcellis rather than comments extracted from an Expert Report or independent evidence.
In assessing any loss for the purposes of a Scott Schedule the principles have been laid down by the Supreme Court in The Owners Strata Plan 80458 v TQM Design and Construct Pty Ltd [2018] NSWSC 1304 per Hammerschlag J at para [77] and by the Appeal Panel in Bailey v Plasterfix Australia Pty Ltd [2015] NSWCATAP140 at para [21].
The Tribunal notes that a review of the invoices relied upon by the applicant indicates that the applicant has included claims for damages that are inclusive of GST in the Scott Schedule. GST is not, however payable on a damages award made in circumstances where the claimant is eligible to receive an input tax credit in respect of its expenses (see Gagner Pty Ltd v Canturi Corporation Pty Ltd [2009] NSWCA 413 (supra). Records indicate that the applicant is registered for GST and it is assumed that the applicant is eligible to receive an input tax credit in respect of its expenses which are the subject of these proceedings (see Meriton Apartments Pty Ltd v the Owners Strata Plan 72381 (No. 2) [2016] NSWSC 189.

Scott Schedule Item 1

The applicant relies on the report of Mr Glenn Haig which was based on observations from 13 September 2019 while the respondent was still working on site.
The item relates to storm water works which it is alleged did not comply with the hydraulic storm water plans. It is claimed that the works were noncompliant and that leaks were found which needed to be rectified by others.
In his email exchanges with Mr De Marcellis, Mr Weir claimed that the storm water works had been completed. The Tribunal is satisfied that the defect in high level drainage services for the ground floor arises because the piping was installed with a 50mm diameter whereas AS 3500.2 - 2018 required piping to be of 65mm.
The quotes and materials upon which the builder has sought to rely in the Scott Schedule do not provide sufficient detail to satisfy the Tribunal that the costs claimed in relation to rectification of storm water and leaks has been quantified in a proper manner. The quotes from AMAZAR Contracting Services do not properly address the question of quantifying those defects set out in the report of Glenn Haig. It is noted that Mr Rizk on behalf of the plumber has conceded that if the Tribunal is not persuaded that the damages have been quantified then the maximum amount the Tribunal could award in this category is damages in a total sum of $9,294.24 excluding GST. The Tribunal is satisfied that rectification is necessary, but it is appropriate to only award the amount calculated or nominated by Mr Rizk of counsel.

Scott Schedule Item 2

The second item in the Scott Schedule refers to a tax invoice from Storm Water Engineers Pty Ltd for a sum of $1200.00 excluding GST for mapping out of work completed by the respondent. The applicant has failed to establish that this invoice is a necessary cost in relation to any claim against the respondent and works clearly were required to be undertaken by an engineer and not a plumber. Scott Schedule Item 2 has not been made out.

Scott Schedule Item 3

Although the Scott Schedule does not specifically relate to Items H(1) - H (16) in the report of Glenn Haig, it is noted that the lagging of pipes was not included in the Scope of Works and the respondent plumber was not ever contracted to provide this service. The invoices provided by the applicant in support of this item of work are from Quince Insulation in a total sum of $2,708.70 excluding GST but it relates to a supply of acoustic insulation rather than rectification of existing insulation. The applicant has not made out this claim as there is no evidence relating to the need to rectify lagging for insulation in the report of Mr Haig and he has not attempted to cost any of the items referred to in his report.

Scott Schedule Item 4

This item relates to installation of 20mm ball valves on the outlet side of water meters. It is not a matter referred to in the report of Glenn Haig and the tax invoice simply notes the words "as instructed X 18". This item has not been referred to or costed on the report of Glenn Haig and there is no evidence supplied by the applicant to establish that this work relates to a failure on the part of the plumbers to install these valves as a matter of compliance with the Scope of Works or with the Australian Standards. The Scott Schedule Item 4 has not been made out by the applicant.

Scott Schedule Item 5

Item 5 in the Scott Schedule relates to basement sewer and storm water lines which it is alleged have been installed with incorrect falls and incorrect pipe sizing.
The invoices of A&M Plumbing Solutions totalling $4,350.00 excluding GST are dated 1 June 2020 and appear to relate to work completed on or around that date. The invoices provided have been supplemented by handwritten notes from an unidentified person. They do not constitute evidence to establish the cost of any rectification works which may be relevant and arising from a report of Glenn Haig prepared following an inspection on 23 September 2019.
The extent to which storm water pipes and sewerage drainage pipes have been installed in a non-compliant manner is not properly explained in the report of Mr Haig and there is nothing to establish that materials which may have been necessary for this work are included with the applicant's list of materials purchased.
The applicant has failed to properly establish the cost of rectification, however the Tribunal is prepared to allow a discounted sum totalling $3,045.00 excluding GST which has been proposed by Mr Rizk.
A tax invoice from A&M Plumbing Solutions dated 11 June 2020 addresses a number of other items including reconnection of a 100 mm storm water line capped off by others. The total amount of $1,020.00 has not been proved to be work necessary to rectify any defective work from MRW Plumbing Group. Other works in that invoice appear to be new work and not rectification work. A note that materials used are all/part of invoice 2326 (in handwriting) does not serve to establish whether any part of the cost of rectification and it is merely a handwritten note from an unidentified person.
In the circumstances the Tribunal allows a sum of $3,045.00, which is the extent to which Mr Rizk of counsel is prepared to concede works may have been necessary.

Scott Schedule Item 6

This item appears to relate to a report carried out by Fire Group and dated 28 August 2020. Mr Rizk of counsel has pointed out that the installation of fire enclosures reflected in the invoices from Fire Group is a significant and costly exercise which was not included in the Scope of Works contained in the contract with MRW Plumbing Group.
The Scope of Works provided with the applicant's material is dated 28 March 2019. There appear to be only three references to works related to potential fire protection works namely: 1. Installation of fire penetration collars to female, male and disability toilet penetrations. 2. Installation of fire collars to main kitchen, laundry tub and floor waste;
The installation of fire enclosures as proposed in Fire Group invoices is a significant and costly exercise which was not included in the Scope of Works contained in the respondent's contract. It is also noted that Mr Culic was not available during the course of the hearing to be cross-examined and there is nothing to suggest that the works required to be done by MRW Plumbing Group went beyond that.
The Fire Group invoices identify 1. The supply and installation of two hour fire rated enclosure encasing in the sum of $21,060.00 2. (b) A three hour fire rated E&M enclosure encasing shop penetration $1847.00 3. (c) A two hour fire rated bulk head encasing penetration 5 $1,100.00 4. (d) Installation of a fire rated bulkhead encasing basement carpark penetration 4 $1,622.00 5. The remaining penetration installations representing a total of $7,224.50, which included 32 separate items of work carried out by Fire Group.
The Fire Group report does not specifically identify rectifications of work which has already been completed and there has been no costing provided to address any incorrect fire collar fitting other than to note that the proposed remedy is to build an E&M enclosure for the length of the pipe out of Promotect Board. This is something which was never in the Scope of Works for MRW Plumbing Group. Proposals which relate to the installation of an FC fire collar system must necessarily refer to incomplete works and not works which have been undertaken in an improper manner and in many instances the Fire Group report proposes three alternatives Namely:- 1. Performance solution from fire engineer 2. Removal and relocation of services 3. E&M enclosure from Promat for entire distance of pipe.
It is impossible to be satisfied that any of the works actually undertaken by Fire Group constituted rectification of faulty work in accordance the limited fire protections referred to in the Scope of Works.
The applicant Foresight Construction Pty Ltd has not seen fit to provide any estimate of costing necessary to rectify the works which were the incorrect use of a fire collar, and the applicant has accordingly failed to discharge its onus of proof to establish a loss under this item of the Scott Schedule.

Scott Schedule Items 7 and 8

At the time the Scott Schedule was prepared and filed on 23 December 2020 Foresight Construction simply claimed an estimate of $19,925.00 for item 7 based on references in a report of Glenn Haig which did not clearly define the defect in any event. It was noted that a figure had not been included as the rectification works had not yet been performed.
In relation to Item 8 in the Scott Schedule referred to plumbing stack work under commercial bathrooms but it did not provide any reference to a report which suggested that work was in fact defective. It was noted that once noncompliance notice had been received from the Department of Fair Trading it would be submitted and relied upon, but again no document has been filed estimating rectification costs, if any.
No document requiring compliance has been included in the applicant's submissions and at the hearing of the matter Mr De Marcellis conceded that he had not provided evidence of rectification costs in respect of items 7 and 8 in the Scott Schedule. The claim in respect of both of those matters must fail as the applicant has not provided any evidence to quantify his claim. The claim cannot and will not be deferred to some later dispute between the parties because it was incumbent upon the applicant Foresight Construction to provide evidence to support any claim it sought to make against the respondent in the present proceedings.
It is noted that in pursuing a claim for incomplete and defective works, Foresight Construction bears the onus of providing independent reports or other materials of an independent nature to establish not only the extent of any alleged defect, but also the assessed cost of rectification of those defects.
In the course of the hearing Mr De Marcellis gave evidence initially suggesting that all monies owing at the time had been paid. It was also claimed in the hearing that $176,843.50 had been paid, although no specific evidence was provided to establish that as a fact.
The most reliable estimate of the extent to which the contract works had been carried out is determined by the evidence of Mr De Marcellis that a total sum of $98,069.50 had been paid. This evidence is supported by the invoices he has provided. The retention sum of $15,004.00 is agreed between the parties and a further claim has been made by MRW Plumbing Group for $24,971.00 in unpaid invoices.
The total of all of those amounts is a sum of $138,044.50, which is less than the other estimates and represents a little more than half of the total contract price of $272,800.00 before GST. The applicant's claim for rectification and completion of the contact works was a total of $142,485.26, which brings the total cost to less than the $300,000.080 contract price.
The report of Glenn Haig does not establish the extent to which works had been carried out at the time when the plumbers ceased work on 1 November 2020, and there is no expert's estimate of rectification costs in any material provided by or on behalf of Foresight Construction. The items that have been allowed under the Scott Schedule have only been accepted on the basis that there is some evidence of work which was a noncompliant and there has been concessions made by counsel for the respondent to that claim MRW Plumbing Group.
The claim of Foresight Construction must otherwise fail because the applicant has been unable to establish a loss simply by producing the costs paid to other contractors to carry out works which again are not properly detailed.
The total claim established for defective work is a sum of $12,339.24.
It follows that in matter No. HB 20/12607 the respondent MRW Plumbing Group Pty Ltd is to pay the applicant Foresight Construction Pty Ltd a total sum of $12,339.24.
In matter No. HB 20/36334 the respondent Foresight Construction Pty Ltd is to pay the applicant MRW Plumbing Group Pty Ltd $39,975.00. It is appropriate to offset the monies payable by the respondent in matter No. HB 20/12607 against the monies payable by the respondent to the applicant in matter No. HB 20/36334, and accordingly the final balance of monies payable to MRW Plumbing Group Pty Ltd is a sum of $27,635.76.

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: 14 March 2022

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