Gray v Unique Building and Construction Services Pty Ltd; Unique Building and Construction Services Pty Ltd v Gray

Gray v Unique Building and Construction Services Pty Ltd; Unique Building and Construction Services Pty Ltd v Gray - [2023] NSWCATCD 155 - NSWCATCD 2023 case summary — Zoe

[4]

Hearing

The owners were self-represented while the builder's father and son directors spoke on its behalf. It was indicated that the three stages of the hearing would be (1) the identification of the documents upon which the parties wished to rely, (2) any cross-examination, and (3) closing submissions, to indicate what it was contended should be the outcome of the proceedings and why.
As the amount the owners claimed they had paid differed from the amount which the builder claimed had been received, the hearing was concluded on 24 August 2023, but the parties were granted leave to lodge, by email, copies of any bank statements upon which they wished to rely on that issue prior to 10 am the following day. It was indicated that, if the Tribunal had any questions arising from any documents so provided, it would reconvene the hearing, by telephone, within the following two hours, ie before 12 noon..
The owners submitted copies of five pages of bank statements under cover of an email sent by Mrs Gray at 7.58 am on 25 August 2023 and the builder did not contest that the amounts for which the owners contended had been paid.
The builder did not send any bank statements, only an email at 9.30 am that day from Mr M Babekuhl, the body of which read as follows: Re Claire and Rodney Gray's payment of $47,009.06 A revision of our Bank Statements shows that payment for PC and PS items was made in March 2022 That was a clerical error on my behalf that needs to be adjusted. Unique's claim - $623,996.74 (sic - should have been .75) Payment deducted - $47,009.06 Adjusted payment claim - $576,987.06 (sic - should have been .69) We apologise for this error and request these costs be considered in Claire and Rodney Gray's claim. We also request that all other costs supported in our documents in Folders 1-8 detailing costs for the benefit of Claire and Rodney be considered on a Quantum Meruit basis and the terms and conditions of the "Home Building Contract for work over $20,000.
It is convenient to here note that the request for the builder's additional quantum meruit claim to be considered by the Tribunal is rejected as it was not made until after the conclusion of the hearing and it would be procedurally unfair to allow one party to add a claim after a hearing, after the opportunity to tender evidence and make submissions had passed, since that would deprive the other party of any opportunity to respond to that claim.
There was ample opportunity for the builder to add a quantum meruit claim at any time after the owners' application was lodged on 20 April 2023, and after the builder's cross-application was lodged on 2 July 2023. No explanation was provided for the lateness of the quantum meruit claim.
Documents admitted as evidence were as follows: Exhibit A Owners' documents (one folder), received on 19 June 2023 Exhibit B Builder's documents (eight folders), received on 9 August 2023 Exhibit C Builder's documents (14 pages), received on 20 July 2023 Exhibit D Owner's documents (71 pages), received on 18 August 2023 Exhibit E Owners' bank statements (5 pages), received on 25 August 2023
The emails sent on 25 August 2023 were not admitted as evidence but were marked for identification: the owners' email as MFI 1 and the builder's email as MFI 2.
There was no cross-examination. It therefore only remained to provide an opportunity for closing submissions. The sequence of owners then builder then owners in reply was followed so that each party was able to speak not only in support of their case but also in response to the case of the other party. Those oral submissions are summarised below.

[8]

Owners' submissions

The owners said they wished to achieve the handover of their property without having to pay for any invoices or variations, for which they were not liable, and sought damages for costs that had incurred due to the conduct of the builder. It was said they did not understand what the cross-application was about and that they had been waiting for more than two years for their new home.
It was contended by the owners that they had been unable to conduct a final inspection, that they had been denied access to the premises, and that there had been a dispute in relation to variations. They referred to the contract with the builder (A7, ie from page 7 in Exhibit A) and to an agreement to pay an additional amount of $150,000 to the builder (A51-52).
In relation to variations, it was said that the owners sent an email to the builder regarding the procedure for variations because of discrepancies. The owners' case was that such variations needed to be agreed and signed prior to work commencing which did not happen. It was noted that there are prime cost (PC) items and provisional sum (PS) claims which are in dispute, as is the builder's invoice for $623,996.75 (D54), dated 15 July 2023, sent after the filing of the owners' application on 20 April 2023 and after the filing of the builder's cross-application on 2 July 2023.
The owners also sought to recover from the builder (1) $935 for the cost of a consultant (A97), (2) $7,370 in relation to carpet (A104), (3) $3,500 in relation to a tiler (A73), (4) $3,690 in relation to balustrades (A118), plus (5) rent up to 19 June 2023 and since 19 June 2023 (A109-117). They suggest that any money owed to them by the builder should be deducted from the final payment of $50,000 due under the payment schedule in the agreement.
While an occupation certificate had been issued, it was suggested that, in relation to the plumbing, the owners only had a statutory declaration issued by the builder. The owners also sought clarification on the question of the hourly rate charged by the builder: $85 in a 20 August 2021 invoice (A143), $95 in a 16 May 2022 invoice (A145), and $136 in a 29 August 2022 invoice (A148).

[9]

Builder's submissions

The builder's case was that it was entitled to be paid a further $623,996.74, as set out in an invoice dated 15 July 2023 (B2/137-142, ie pages 137 to 142 in the second folder of Exhibit B) and a covering letter (B5/83).
It was suggested the amount claimed was the result of the agreed stage payments, variations, amounts referable to PC and PS items, "additional costs", and "accrued PAYG, super and GST". However, it was indicated that the builder was willing to accept an amount of $500,000 (the limit of the Tribunal's jurisdiction) in respect of that claim.
Reference was made to a submission (B2), to the agreement (B12-17) which was said to have been cancelled (B3-4), to clause 26 of the contract (B2/60), to documents said to illustrate trying to negotiate a variation with the owners (B4/156-169), and to a loan said to have been taken out in relation to this project (B1/10). It was said that the core issues are variations and actual costs, and reference was made to the documents at B3/53, B6/40-44, B8/31, B3/121-122, B3/198, and B4/207-208.
In response to the matters raised by the owners, it was said: (1) that the documents at B8/72-73 related to labour, (2) that $27,241.69 was paid by the builder to the owners for PC and PS items, (3) that the document at B6/108, which was a 6 February 2023 invoice for a labour charge, showed that the hourly rate of $85 plus GST did not change, (4) that the property was not handed over because the final payment was not made, (5) the original contract was still on foot, (6) that there was no remaining issue in relation to the plumbing work because an occupation certificate had been issued to the owners with the contended result that any relevant issues had been considered by the certifier, (7) clause 15 of the contract (B2/154) applied, (8) records of inspections had been provided (B2/87-92), and (9) that a performance review had been conducted (B2/29-66) which included the subject site (B2/39-66). Reference was also made to the words in italics, after the word "Warning" on the first page of the contract (B2/32).

[11]

Consideration - application of the owners

It is desirable to first prepare a chronology of relevant events, but not every event. That chronology is set out in Appendix A.
Next, it is necessary to consider the relevant contractual provisions. Before doing so it must be observed that the relevant contract document (A7 or B2/29) was in a standard form, being the NSW Fair Trading's "Home building contract for work over $20,000". Although such a contract is sometimes referred to as a fixed price contract, it is better referred to as a lump sum contract because it specifies a dollar amount as the contract price. Subject to provisions summarised below, under such a contract, the risk of increased costs rests with the builder, unlike a costs plus contract where the owners bears that burden.
The preliminary pages of the contract document contained the following words: The contract price may increase in accordance with the contract terms. This is because not all costs can be absolutely determined at the outset although the contractor is obliged to make reasonable estimates given known conditions. The reasons for possible increases include: * Increases in taxes, eg GST (Clause 3) * Provisional Sums (Clause 10) * Prime Cost Items (Clause 11) * Variations and price adjustments including those due to unforeseen matters or required by council (Clause 13) * Interest on overdue payments (Cause 14) * Boundary Survey (clause 20).
The following clauses in the contract requiring consideration in these proceedings: 1. Clause 5 required commencement of the work within 40 days of the last three specified events: the date of the contract, the date of council approval, and the consent of the owners' lending authority. 2. Clause 6 provides an opportunity to set a time for completion "within ___ calendar weeks" but the space for specifying the number of calendar weeks was left blank. 3. Clause 7 provided a facility for the builder to claim an extension of time.
Clause 8, headed "Completion of work", was in the following terms: The work will be complete when the contractor has finished the work in accordance with the contract documents and any variations, there are no omissions or defects that prevent the work from being reasonably capable of being used for its intended purpose, any damage of the kind referred to in Clause 19 has been repaired, and all rubbish and surplus material has been removed from the site. When the contractor believes the work is complete, the contractor must notify the owner in writing certifying that the work has been completed in accordance with this contract. Within 10 business days of receipt of written notice from the contractor, the owner must advise the contractor in writing of any items of work the owner considers to be incomplete or defective. If the owner does not so notify the contractor, the work will be taken to be complete. The contractor must complete any outstanding work promptly and again notify the owner in writing. Unless the owner notifies the contractor in writing that any item is still incomplete or defective, within a further 10 business days from the receipt of notification from the contractor, the work will be taken to be complete. Should there be any dispute between the parties as to whether work has been completed, it must be dealt with in accordance with the dispute resolution procedure (Clause 27).
Clause 10 dealt with provisional sum (PS) items as follows (emphasis original): The contract price includes the items of work set out in the provisional sums schedule for which the contractor cannot give a definite price. The provisional sums schedule set out the amount allowed for each item of work, including GST. The contractor warrants that the provisional sums allowed have been estimated with reasonable care and skill, and in the light of information necessary and available at the date of this contract and taking into account such factors as a competent and experienced contractor should have taken into account in estimating provisional sums. The contractor must offer to the owner or the owner's representative the opportunity, with adequate written notice, to be present at the site during the performance of any work included in the provisional sum schedule in order to verify the actual cost of the work. The contractor does not have to delay the work is the owner in unable to attend at the time the work is to be performed. If the actual cost to the contractor is greater than the provisional sum allowed, the excess amount together with the contractor's margin of 15% on the excess, to cover overheads, supervision and profit shall be added to the contract price, along with the additional GST. If the actual cost to the contractor is less than the provisional sum allowed, the contract price will be reduced by the difference between the provisional sum allowed and the actual cost. Any such addition or deduction will be taken into account in the next progress payment or as agreed between the parties. The contractor must provide a copy of any relevant invoices, receipts or other document evidencing the actual cost of the work included in the provisional sums schedule at the time payment is requested.
The table in the schedule within clause 10 was completed in handwriting, included changes that were not initialled, and a total of $178,299.99. However, a copy of page 2 of a six-page document headed "Renovation quote" was included in the contract documents and the provisional sum items listed on that page have amounts which, when added, total $178,300. That amount matches the amount of $162,090.90 shown in that renovation quote, when GST is added. Accordingly, it is sufficiently clear the PS items were as follows: Certifier $2,000 Home warranty insurance $2,000 BCRP $1,800 Electrician rough in/fit off of white plastic downlights and white GPO's & switches $10,000 Plumbing rough in and fit off $10,000 32m2 waterproofing $5,000 Crane hire $5,000 Scaffold $7,000 Top coat of painting $10,500 Supply and install flooring $27,000 Supply and install kitchen $30,000 Supply and install water tank and pump $5,000 Supply and install concrete stairs $7,000 Supply and install timber stairs/ deck stairs $6,000 Supply and install internal stairs $15,000 Supply and install 4/robes $4,000 Fit out WIW $2,000 Fit our Linen $2,000 Supply and install 2/600 wide awnings $3,000 Supply and install 1/1.8h privacy screen $2,000 Supply and install garage door $7,000 Blinds $15,000

[12]

Clause 11, which governed prime cost (PC) items, is quoted below: The contract price includes the items specified in the prime cost items schedule which the owner has not selected at the date of this contract and for which the contractor cannot give a definite price. The amounts allowed are for the cost of each item, including GST. The installation of prime cost items and connection to services, unless otherwise specified is included in the contract price. The contractor warrants that the prime cost items have been estimated with reasonable care and skill, and in the light of information necessary and available at the date of this contract and taking into account such factors as a competent and experienced contractor should have taken into account in estimating the likelihood of such items being required and their likely cost. The owner must select each item in conjunction with advice from the contractor with sufficient time so as to not cause any delay to the work. The contractor must give the owner adequate written notice as to when the selection of each item is required in order to avoid any delays. If the actual cost to the contractor is greater than the prime cost amount allowed, the excess amount together with the contractor's margin of ___% on the excess, to cover overheads, supervision and profit shall be added to the contract price, along with the additional GST. If the actual cost to the contractor is less than the amount allowed, the contract price will be reduced by the difference between the amount allowed and the actual cost. The contractor must provide a copy of any relevant invoices, receipts or other document evidencing the purchase price of the item at the time payment is requested. If the contractor purchases a prime cost item, any discount for prompt payment will be allowed in favour of the contractor. All written warranties for such items must be given to the owner on completion of the work and must be enforceable by the owner.
Here, it must be observed that, in the contract, the schedule was left blank other than the inclusion of a handwritten total of $29,409.90. However, that page in the contract was followed by copies of pages 2 and 3 of the six-page renovation quote.
Page 2 specified three items and a cost of $9,100 while page 3 specified 12 items with a total cost of $19,400. The total of those amounts is $28,500. As the amount shown in the contract is close to $910 above that amount, it appears that the amount of $9,100 shown in the renovation quote was GST inclusive and should have, like the other totals for PS and PC items, been exclusive of GST. Hence, the amount of $28,500 is adopted tor PC items because that is the amount, inclusive of GST, that was specified for each item. As a result, the PC items were as follows: CSD pockets $600 External doors, jambs, handles $2,500 Internal doors, jambs, handled $6,000 25m2 floor tiles ($50/m2) $1,250 60m2 wall tiles ($6q0/m2) $3,600 Toilets $1,450 Vanities $1,650 Shower screens $2,650 Laundry tub $1,250 Bath tub $1,650 Tumbler taps $1,850 Shower heads $1,250 Toilet roll holders $900 Towel rails $950 Hand towel rings $950

[14]

There are two unusual features of that schedule. First, the extent to which payments precede the work in that the owners are required to pay $323,179.98 before the construction of their new house commences. Secondly, the fact that the progress payments do not add to the total contract price of $555,489.96. Presumably, the intention of that schedule of progress payments is that the balance of $72,309.98 (ie $555,489.96 less $483,179.98) would have been payable upon completion of the work but for the agreement.
Clause 13, with dealt with variations, read as set out below (emphasis original), omitting the final section, which deals with the right to terminate which does not arise in these proceedings: The work done or materials used under this contract may be varied: * at the request of the owner, or * at the request of the contractor, if the necessity for the variation is due to the fault of the contractor the owner will not be liable for any increase in the contract price, or * due to such other matters that could not be reasonably be expected to be foreseen by an experienced, competent and skilled contractor for the completion of the work at the date of the contract, or * due to a requirement of a council or other statutory authority relating to the work, if the date of the contract such requirement could not be reasonably foreseen by the contractor. Procedure for variations Before commencing work on a variation, the contractor must provide to the owner a notice in writing containing as description of the work and the price (including separate disclosure of GST and the component of the price attributable to any consequential increase in the cost of the building cover contract entered into by the contractor in respect of the work to be done under this contract). If not otherwise specified the price will be taken to include the contractor's margin for overheads, supervision and profit. The notice must then be signed and dated by both parties to constitute acceptance. If the time for completion will be delayed by the variation the contractor must include in the notice an estimate of the additional time required. Any extension of time must comply with Clause 7. The requirement for variations to be in writing does not apply where, if the work were not to be done promptly there is likely to be a hazard to the health or safety of any person or to the public or to be damage to property and the work could not be done promptly if the variation had to be put in writing before commencing the work. Variations shall be subject to the overall conditions of this contract. Adjustment of contract price The contract price may be adjusted as a consequence of: (a) variations to the work or materials agreed in accordance with this Clause 13; and (b) any variation to the cost of the building cover contract entered into by the contractor in respect of the work done under this contract. The cost of deletion from the contract will be deducted from the contract price. The price of any variation specified in the notice signed and dated by botgh parties will be added to the contract price. Any adjustment to the contract price will be taken into account at the time of the next progress payment or paid as agreed by the parties.
Clause 14, which is set out below, is titled "Time for payments": When the contractor gives the owner a written claim for a progress payment or other amount due under the contract, the owner must pay, unless the owner notified the contractor in the manner stated below, the amount of the claim within 5 business days of receipt of the claim (which must be not less than 5 business days). However, the preceding sentence is subject to any contrary term or condition specified in Clause 12. If the owner disagrees that the contractor is entitled to be paid a progress claim or other amount under the contract, the owner must notify the contractor within 5 business days of receiving the claim setting out the reasons for that disagreement. If there is any dispute between the parties relating to a payment under the contract it must be resolved according to the dispute resolution procedure set out in Clause 27. If the owner fails to pay the amount of a claim in full by the due date and fails to give notice disputing the claim to the contractor, interest at the current bank rate (as defined in Clause 30) will be payable to the contractor on the amount outstanding for the period overdue. However, if the owner gives notice of a dispute in accordance with the dispute resolution clause (Clause 27), interest at the current bank rate will only be payable if the dispute is resolved in favour of the contractor and shall be calculated from the time when payment would have otherwise been due.
It is convenient to here note that in clause 30 the following words appear: the current bank rate is the Commonwealth Bank Overdraft Index Rate as published from time to time plus 2% per annum.
It is also necessary to quote clause 15, which covers final payment: When the work is complete, in accordance with Clause 8 the owner must pay the amount remaining unpaid under the contract. Payment must be made in the manner specified in Clause 14. If the amount is not paid, interest in accordance with Clause 14 applies. On receipt of the final payment, the contractor must hand over to the owner all guarantees, instruction manuals and the like unless already provided and all keys relating to the work, together with any certification or approval which may have been provided by any public authority relating to the work.
Clause 27 set out a dispute resolution procedure.
What has been referred to as the agreement (A51-52) also requires consideration. After the parties met on site on 8 August 2022 the builder sent a letter dated 29 August 2022 (A46) which indicated that topics discussed at that meeting included (1) PC and PS items, (2) actual costs, (3) additional labour and materials, (4) delays, and (5) job progress to completion. The first and fourth of those five topics are matters which were the subject of provisions in the contract in that there were clauses which governed how the builder could have claimed an additional amount for either a PC or PS items or make a claim for delay.
However, the second and third of those five topics are matters for which the builder bore the risk since, under a lump sum contract, the builder bears the risk if the actual cost of labour and materials exceed the builder's estimates, upon which its tender/contract price was based. The fifth item is consistent with a discussion of how the building work could be progressed to completion.
The invoice that was issued with that 29 August 2022 letter, numbered 78, set out the basis upon which that amount of $165,277.94 was claimed. The components of that amount, as set out in that invoice, were as follows: Construction $31,198.00 Additional site costs inc gst Tax and superannuation $67,824.00 Additional tax and superannuation incl gst Construction $15,033.00 Additional costs incurred during initial demolition and construction to inclement weather inc gst Construction $6,732.00 Additional labour costs incurred outside of initial contract period due to inclement weather inc gst Construction $44,490.94 Outstanding balance of PC and PS items to be paid ($13,875.69 - overdue for payment)

[15]

The first four of those five amounts are matters for which the builder bore responsibility under the contract, unless it was able to rely on a contractual provision which entitled it to a price increase. The last over those five amounts does entitle the builder to make a claim under the contract. But it appears that, despite claiming to have paid $44,490.94 for PC and PS items, it was only suggesting that $13,875.69 was unpaid. Curiously, there is no reference to any invoice for that amount. In short, no basis has been established for the builder to be entitled to any of that claimed amount of $165,277.94.
The owners' case was that the builder stopped work without being entitled to do so while the builder's case was that the work stopped due to a failure on the part of the owners to pay an invoice. It is not necessary to decide which of those contentions is correct because of the agreement that was reached.
In its letter dated 29 August 2022, the builder suggested it required to be paid $165,277.94 "before work recommences". The events of August 2022 could have required a consideration of whether the owners were in breach of the contract or whether the builder repudiated the contract. However, it is sufficient to record that the parties chose to negotiate a way for the work to continue.
Those negotiations led to a letter dated 24 October 2022 from the builder, addressed to the owners, the body of which read as follows: Additional construction costs to completion and issue of Occupation Certificate: Final increase of $150,000. There will be no further charges in the construction process as this stage has been completed. The additional payment schedule has been set out to pay trades for outstanding work, actual costs for materials above allowances and actual cost of labour above allowances. All payments will be made in accordance with Industry Security of Payment Regulation 2020 (NSW) - Security of Payment Laws. The following costs are to be removed from the contract price as the cost of these items were used to cover construction costs:  Concrete stairs  Blinds  Laundry tub  Towel rails  Widening of front driveway to be supped for concrete slab for water tanks under new addition
A week later, on 31 October 2022, the builder provided a payment schedule: Initial payment $25,000.00 Payment for variations completed and will ensure recommencement of the build. To be paid once the following is completed: * Undercoat completed and garage door installed Payment 2 $40,000.00 * Fix out and timber floor laid * Kitchen installed * Internal painting completed * Plumbing, electrical and carpentry fit-out completed To be paid once the following is completed: Payment 3 $35,000.00 * Clients walk through and defects rectified * Documents submitted to Certifier for Occupation Certificate Final Payment $50,000.00 To be paid [once] Occupation Certificate is approved by Building Certifier.

[16]

Both owners signed that payment schedule, which was on the builder's letterhead, signed by one if its directors.
The question which arises is whether the legal effect of that payment schedule (ie the agreement) was to: (1) replace the contract, (2) be an agreement additional to the contract, or (3) vary that contract.
Plainly, the payment schedule was insufficient to constitute a contract which replaced the very detailed, standard form contract which the parties agreed would govern the building work before that work commenced. Further, there is no wording in that page, dated 31 October 2022 and signed by the owners on 1 November 2022, that suggests that page was either intended or agreed to replace that contract.
The idea that the page containing a payment schedule was an additional contract, such that both the contract and the agreement operated from 1 November 2022, appears to be the contention of the builder because its letter dated 6 June 2023 to the owners (A136) suggested that the agreement was "cancelled, null and void, defunct and no longer acknowledged by us" and went on to say: "We now rely solely on the terms and conditions of that Home Building Contract signed by both of you on 17th December 2020".
That contention is rejected as there is nothing in either the letter dated 24 October 2022, which preceded the agreement, or in the agreement to suggest that agreement was to operate as a second, additional contract. Applying what is commonly referred to as the objective theory of contract, it is clear the agreement was an agreed variation of the contract, and not a separate contract that could be added on 1 November 2022 and cancelled on 6 June 2023.
It is therefore necessary to consider how the agreement altered the contract between the parties. The Tribunal considers the agreement varied the contract in the following respects.
First, the agreement capped the remaining amount payable by the owners to the builder at $150,000. That is clear from both the payment schedule (A52) and the letter dated 24 October 2022 (A51) which included the words: "There will be no further charges in the construction process as this stage has been completed."
It is instructive to consider what was the position as to the payments that had been made at the time of the agreement. Although the contract price was $555,489.96 (A13), as noted earlier, the contract (A25) only specified progress payments of (1) $3,179.98 as a deposit, (2) $160,000 once a contract was signed, (3) $160,000 once demolition was complete, (4) $160,000 at lock up stage, leaving a balance of $72,309.98. By the time the Payment Schedule dated 31 October 2022 was signed by the owners on 1 November 2022, the owners had paid each of those four amounts (ie $3,179.987 plus three amounts of $160,000) plus $11,173.34 for variations not contested, and $47,009.68 for PC and PS items (the total amount paid was $541,363.01). It was at that time that the parties agreed that the owners were to pay an amount of $150,000 so that the building work would be completed.
Secondly, the agreement specified that the additional amount of $150,000 would be payable in four instalments and specified when each of those instalments would be payable. The last instalment, being the amount of $50,000 referred to as the "Final Payment", was said to become payable once the "Occupation Certificate is approved by the Building Certifier".
Those last quoted words differ from the position created by clause 15 of the contract, headed "Final Payment" (quoted above). The first sentence of that clause specified that "When the work is complete in accordance with Clause 8 the owner must pay the remaining amount unpaid under the contract." The Tribunal considers the effect of the agreement was to make the final payment due not when the work is complete in accordance with Clause 8 of the contract but when the Occupation Certificate is approved by the Building Certifier.
Thirdly, the agreement operated to close off any claims for PC or PS items because (1) the letter dated 29 August 2022 (A46) records that PC and PS items were discussed at the site meeting held on 8 August 2022 and described an amount of $215,000 as the "Estimate of total costs to completion and issue of Occupation Certificate", (2) the letter dated 24 October 2022 (A51), after referring to the additional amount of $150,000, said "There will be no further charges in the construction process as this stage has been completed", (3) the agreement did not contain any suggestion that there would be any additional amount payable in respect of either PC or PS items.
There was no witness statement, statutory declaration, or affidavit from either of the owners. The directors of the builder each provided a statutory declaration which did no more than suggest that the documents provided in support of the builder's claims were accurate. As a result, the outcome of these applications is based on documents. Of course, the objective theory of contract means that it is not the subjective views or intentions of either the owner or the builder but the outward manifestation of those intentions which are relevant. Accordingly, the Tribunal considers the preferable approach is to give priority to contemporaneous documents, which carry greater weight than documents prepared for the purpose of litigation, and to base conclusions on contemporary materials, objectively established facts, and the apparent logic of events, consistent with what McHugh J said in Fox v Percy [2003] HCA 22 at [30]-[31].
Before dealing with the each of the claims made by the parties, it is noted that it was made clear to the parties early in the hearing that it was not sufficient to simply tender a large volume of documents and then expect the Tribunal to find the relevant documents. Further, that words such as "it's all in there" are not sufficient because, metaphorically speaking, a party cannot expect the Tribunal to find the needles in their documentary haystack. The party bearing the onus of proof is required to establish its case and an opportunity was provided for each party to make submissions as to what it was contended should be the outcome in relation to each claim and why. That includes a need to identify the documents relevant to each claim, which may be by reference to schedules provided in the party's documents that facilitate reference to the relevant pages.
The claims made by the applicants may be summarised as follows, and will be referred to as Claims 1 to 15: 1. They are not liable to pay the amount of $2,520 for invoice number 137 dated 24 February 2023 (A89) which was a claim for interest. 2. They are not liable to pay the amount of $7,518.71 for invoice number 150 dated 8 March 2023 (A54), based on variations 1, 2 and 3. 3. They are not liable to pay the amount of $1,795.20 for invoice number 151 dated 14 March 2023 (A64), based on a consultant's non-compliant attire. 4. They are not liable to pay the amount of $17,308.42 for invoice number 155 dated 27 March 2023 (A72), based on variations 4, 5, 6 and 7. 5. They are not liable to pay the amount of $15,000 included in invoice number 160 dated 26 April 2023 (A87), said to be a charge for interest. 6. They are not liable to pay the amount of $24,441 for invoice number 168 dated 26 April 2023 (A88), said to be for three weeks' overheads. 7. The owners accepted they were liable to pay the fourth and final amount of $50,000, in accordance with the agreement they signed on 1 November 2022. However, they raised the issue of whether they were obliged to pay that amount when it was claimed by the owners. 8. A claim of $935 for reimbursement of the cost of a building inspector. 9. A claim for $7,370 in relation to carpets. 10. A claim for $3,500 in relation to tiling. 11. A claim for $3,690 in relation to balustrades. 12. A claim for rent paid due to the failure to hand over the property. 13. The absence of a compliance certificate from the plumber. 14. The builder's failure to provide the owners with the keys. 15. The owners also raised the question of the rates charged by the builder which were said to have changed.

[23]

Claim 7

The owners' case in relation to the final payment of $50,000, set out in the agreement, was that the builder is not entitled to that amount because there is incomplete work and because they have not completed a final inspection of the property. However, that agreement made that amount payable when the "Occupation Certificate is approved…". The occupation certificate was issued to the owners on 5 April 2023 (A108). Clause 14 of the contract required them to pay that amount within five business days which means that amount was payable not later than 12 April 2023 and the builder is entitled to interest on $50,000 from that date, in accordance with the contract.
The applicable interest rate was defined in the contract, as indicated above. While neither party appears to have included any document to suggest what is that interest rate (1) it is readily ascertainable, (2) it cannot be disputed, and (3) the s 38(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act) provides that the Tribunal is not bound by the rules or evidence and may, subject to the rules of natural justice, inform itself as it thinks fit. As the Commonwealth Bank Overdraft Index Rate is 11.68%, the builder is entitled to interest on $50,000 at the rate of 13.68% from and including 13 April 2023 up to and including 3 October 2023, which is 174 days. Hence, in addition to the amount of $50,000, the builder is entitled to interest of $3,260.71.
For the sake of completeness, in relation to incomplete work, the owners cannot make a claim based on incomplete work while the contract is still on foot: Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSWCA 248. However, the effect of these proceedings will be to bring the contract to an end since the obligations of both parties will have been finalised by the orders made.
As to the lack of inspection, intended to enable the owners to identify any defects, it is noted that the owners have not made any claim based on defective work in these proceedings. That is important because the HBA does not permit multiple attempts to enforce any statutory warranty provided by s18B.
Accordingly, for the avoidance of doubt, the Tribunal records that no claim by the owners in respect of either incomplete work or defective work has been considered in these proceedings.

[25]

Claim 9

This was a claim for $7,370 in relation to carpets. The owners' documents relevant to this claim are copies of an invoice from a flooring supplier (A104) and a 25 July 2022 email to the builder (A100). Those documents establish a cost of $6,440 for carpet and $930 for the installer, charged to the owners. Those documents also serve to indicate that the builder was aware of the owners' choice in relation to that carpet at that time. There was also reference to a 27 January 2023 email (A103) which reveals that the builder was told that the carpet was ready for installation. It is noted that variation #5 (A77), considered and rejected in Claim 4 above, related to the supply and installation of carpet.
The owners' case was said to be (A4) that the builder should reimburse then for the cost of the carpet and the cost of laying the carpet on the basis that there is no need for the builder to do that work because it will be done by someone else. It is difficult to discern the basis for this claim which appears to be made on the basis that the owners will incur a cost of $7,370 for carpet which was covered by the allowance for PS items which included an allowance of $27,000 for "supply and install flooring".
There are two reasons why this claim must be rejected. First, since the owners have not shown that their cost of $7,370 fell within that $27,000 allowance for flooring. The only document which may shed light on this issue is the claim for variation #5 (A77) which suggested that an additional amount of $4,150 (plus a fixed administration charge of $300 and a 15% margin) was payable in relation to carpet.
Secondly, since the effect of the 1 November 2023 agreement was to 'rule a line' under PC and PS items by specifying $150,000 as the only additional amount which the owners were required to pay the builder. It must follow that, just as that agreement prevents the builder from making a claim for additional money for a PS item such as flooring, that agreement also prevents the owners from seeking a refund in relation to a PS item.

[29]

Claim 13

Next, there is a claim based on the failure to provide a compliance certificate from the plumber. On 5 April 2023 Mrs Grey advised Mr M Babekuhl, by email (A90), that the local council had advised that "no plumbing inspections had been done on our property and that the licensed plumber had contacted them to advise he had not signed compliance documents". The reply from Mr M Babekuhl (A90) suggested: "Well not only has that been done as discussed. Your [Occupation Certificate] being processed and a satisfactory (sic) has been given." While the latter sentence appears to be correct, since an Occupation Certificate was issued on 5 April 2023, the former statement is contradicted by the statutory declaration of Mr M Babekuhl (A92), the body of which said: The sewer & sanitary plumbing diagrams submitted to CD Certification are accurate and take full responsibility for the work during the warranty period at [address]. Plumbwide Plumbing Services was unable to signoff on works at the required time due to personal health issues.
That contradiction arises because Mr M Babvekuhl's email suggests the licensed plumber's sign-off has been done while the statutory declaration suggests a reason why that was not done.
In the contract, Clause 17, headed "Approvals" required the builder to "apply for and obtain, at its expense, all approvals required from any public authority to occupy and use the completed work". As the Occupation Certificate has been provided to the owners, there appears to have been compliance with that requirement. The second paragraph of Clause 15 (quoted in full above), required the contractor to hand over documents "on receipt of final payment", which has not yet occurred.
Neither in their evidence nor in their submissions did the owners identify either a statutory or contractual requirement to provide a certificate from the plumber prior to the final payment being made. Accordingly, this claim fails because any obligation to provide a plumbing certificate to the owners has not yet arisen, with the result that this claim appears to be premature.
The Tribunal considers (1) the statutory declaration is an insufficient substitute for a certificate from the plumber, (2) the reason for not providing that certificate is deficient and only provides a temporary explanation, (3) as an Occupation Certificate has been issued, the absence of a certificate from the plumber will not prevent the owners from occupation once the final payment is made.
If what Mr M Babekuhl said in his statutory declaration (A92) is accurate then it should be possible to obtain and provide a plumbing certificate to the owners and it would be open to the owners, if no such certificate is provided, to make such a claim if they can establish a statutory or contractual entitlement to the provision of a plumbing certificate to them.
Accordingly, the Tribunal rejects this claim but that will not prevent the owners from making a similar claim in future, should they so decide. The quickest and cheapest solution for both parties would be for the builder to obtain a compliance certificate from the plumber and provide it to the owners.

[33]

Consideration - cross-application, ie application of the builder

After the words "Total amount claimed" in the cross-application, an amount of $50 was specified. However, in stark contrast to that amount, at the hearing the builder's case was that it was entitled to be paid a further amount of $623,996.74, as set out in a six-page invoice dated 15 July 2023 (B2/137-142). The components of that amount were as follows, and will be referred to as Components 1 to 8: 1. "Construction" - $439,802.86. 2. "Materials list" - "$0.00" 3. "Prime cost items" - $11,598.28. 4. "Provisional sum items" - $259,634.86. 5. "Prime cost items" - $23,471.98. 6. "Prime cost items" - $26,011.85. 7. "Standard inclusions" - $22,727.27. 8. "Additional work" - $328,152.94.
The way in which the builder arrived at the amount claimed, namely $623,996.75, was set out on page 5 of the invoice (B2/141). From the $1,111,400.04 total of those eight components, the builder deducted $544,130.27, giving a contended unpaid balance of $567,269.77. Curiously, GST of $56,726.98 was added to that balance to give a total amount alleged to be owing of $623,996.75. However, in MFI 2 it was conceded that a further amount of $47,009.06 was paid by the owners and the balance said to be owing was said to be $576,987.06 (obviously calculated as $623,996.75 less $47,009.06 but with an arithmetic error as the number of cents should have been 69).
It must be observed that the 15 July 2023 invoice was sent by the builder to the owners after the owners lodged their application, after the directions hearing for that application, after a notice of hearing was issued for that application, and after the builder had lodged a cross-application. As a result, it is not a pre-litigation document.
The first issue which requires consideration is what is the legal basis for the builder's claim for $623,996.75, now adjusted down to $587,987.69, in addition to the amount of $641,363.01 already received from the owners by the builder.
It appears that the builder's case is based on the proposition that the 1 November 2022 agreement has been cancelled with the contended outcome that the legal relationship between the parties is now governed solely by the contract, which is said to be still on foot.
Even if the suggestion that the 1 November 2022 agreement was no longer effective is correct, with the result that it is only necessary to consider the contract, the builder has not identified any basis upon which is can claim the amount now sought because: (1) the builder has not sought to terminate the contract, (2) crucially, the contract does not provide an entitlement for the builder to now claim all of its incurred costs, as was indicated in its 15 July 2023 letter (B5/83), less the amount paid, (3) the only breach to upon which the builder can rely is the failure to make the final payment, and (4) the remedy for that breach is interest on the unpaid amount.
The analysis which the Tribunal considers correct is as follows: (1) the 1 November 2022 agreement amended the contract, (2) the only breach of that contract by the owners is the failure to make the final payment of $50,000, (3) the remedy for such a breach is damages, and (4) the builder's damages are the interest on that unpaid amount, being an amount calculated and included under the hearing of the owner's application. However, for the sake of completeness, the Tribunal considers each of the components of the claim made in the builder's invoice numbered 179 and dated 15 July 2023 (B 2/137-142).

[40]

Component 8

The final component was "Additional work" for which an amount of $328,152.94 was claimed. It is instructive to set out the details provided under this heading: This charge is for additional work that was not originally quoted on: Contract carpenters $98931.63 Ancillaries $38199.13 Re level first floor of existing house 2/trades 4 days $10200 labour only Install VJ panel to front entry 1/trade 4 days $5100 Minimum charge for 2 trades after gas delivery had to be rescheduled $1800 Weekly charge for unnecessary cancellation of progress payment $8147.00 Prospa business loan taken out to recover clients (sic) final selection. Payout figure $60286.17 Accrued taxes and super $138,304.00
The claim for almost $100,000 for contract carpenters appears to be an amount for which the builder, not the owners, bears responsibility. The amount of almost $40,000 claimed for "Ancillaries" is not particularised. The third and fourth items have an implicit hourly rate of almost $160. Any suggestion that the owners should be found liable to pay $1,800 because a "gas delivery" had to be rescheduled cannot be considered reasonable even if there was a basis for such a claim. Further, a charge of more than $8,000 for overheads is plainly not recoverable. No basis has been established for the owners to be responsible to repay the builder's business loan of more than $60,000. The claim for "Accrued taxes and super" is an amount which is the builder's responsibility unless there is a tax increase which creates an entitlement to increase the contract price under Clause 3.
Even assuming, in favour of the builder, that there were supporting documents in the eight folders for each of the above amounts, no entitlement to make such claims has been established. The listed amounts are costs which the builder was required to bear under the contract (which was a lump sum contract) unless and until the builder, who bears the onus of proof in relation to its claims, can point to a provision in the contract which permits the amount claimed to be passed on to the owners. The claims made under Component 8 are rejected.
For the sake of completeness, the Tribunal records that evidence of (1) house prices in Forresters Beach, (2) the builder's overheads, (3) the builder's business loan, (4) amounts the builder owed to the Australian Taxation Office, and (5) references and performance reviews were not relevant to the issues raised in these proceedings.

[43]

Costs

In the NCAT Act, the effect of s 60 is that each party is to bear their own costs unless there are special circumstances which warrant an order for costs.
However, s 35 of that Act operates to make s 60 subject to r 38 of the Civil and Administrative Tribunal Rules 2014 (NSW) which enables costs to be awarded for proceedings in this Division of the Tribunal if the amount claimed or in dispute exceeds $30,000.
When r 38 applies there is a general discretion to award costs and it is well established, by decisions such as News v Cotes [2019] NSWCATAP 186, Bonita v Shen [2016] NSWCATAP 159 and Thompson v Chapman [2016] NSWCATAP 6, that: (1) the starting point is that the usual order for costs should be in favour of the successful party, (2) the award is not to punish the unsuccessful party but to compensate the successful party for the costs incurred in the proceedings, and (3) departure from the usual order is permissible if the circumstances favour that course of action.
Simply stated, when r 38 applies it is not necessary to establish special circumstances and the usual order is that costs follow the event (ie follow the outcome of the case) unless there is disentitling behaviour by the successful party, such as the unreasonable rejection of a settlement offer by the party seeking costs: Latoudis v Casey [1990] HCA 59, Oshlak v Richmond River Council [1998] HCA 11.
However, it is clear from the decision of the High Court in Cachia v Hanes [1994] HCA 14 that unrepresented litigants are not entitled to recover for the time they spend on legal proceedings.
In this instance, it would appear the only costs the owners could claim is the application fee of $289.15. Likewise, the builder's costs only costs appear to be the application fee of $58.23, presumably less than the amount paid by the owners because the cross-application only specified an amount claimed of $50.
As to the application, the event (ie outcome) is that the owners are required to pay money to the builder. In those circumstances, the owners are not entitled to an order for costs and the builder has not incurred any costs in relation to the application.
As the cross-application has been dismissed, the builder is not entitled to an order for costs and the owners have not incurred any costs in relation to the cross-application.
In these circumstances, the appropriate orders to make in relation to costs is that there be no order as to costs in relation to both the owners' application and the builder's cross-application.

[47]

Appendix A Chronology Date Description Reference 17 Dec 20 Contract signed - contract price $555.489.96 A7, B2/29 23 Jun 21 Building work commenced B2/1 05 Jul 21 Owners paid $3,179.98 Not disputed 07 Jul 21 Owners paid $2,309.98 E1 19 Jul 21 Owners paid $157,690.02 E2 29 Jul 21 The owners vacated the site and began renting A5 20 Aug 21 Builder issued invoice #29 for $232,309.98 A140-144 26 Aug 21 Owners paid $160,000.00 E2 09 Mar 22 Owners paid $160,000.01 E3 15 Mar 22 Owners paid $47,009.68 for PC and PS items E3 16 May 22 Builder issued invoice #68 for $11,173.34 A145-146 26 May 22 Owners paid $11,173.34, a total paid of $541,363.01 E3 13 Jul 22 Owners provided builder a copy of their tile order A74-76 25 Jul 22 Owners advised builder as to their carpet order A100 08 Aug 22 The parties met on site A46 25 Aug 22 Builder sent email, giving notice of suspension of work, based on unpaid invoice #70 B3/181 29 Aug 22 Builder's letter said additional cost to complete of $215,000, that $165,277.94 had to be paid before work recommences, as set out in invoice #78 A47-49 01 Sep 22 Owner's email disputed validity of invoice #70 B4/1 08 Sep 22 Owners sent letter to builder, alleging breaches of the HBA and disputing the builder's right to suspend work D8 20 Oct 22 Owners' letter said variations need to be signed and agreed before work is undertaken A53 24 Oct 22 Builder's letter said "Final increase $150,000" A51 31 Oct 22 Builder sent payment schedule for that amount A52 01 Nov 22 Owners signed schedule (the agreement) A52 23 Nov 22 Owners paid $25,000 E4 27 Jan 23 Owners advised builder carpet ready for installation A103 10 Feb 23 Owners paid $40,000 E5 19 Feb 23 Builder issued variations #1, #2, and #3 and email A56-58, 63 19 Feb 23 Builder told owners not to give notice to estate agent A139 24 Feb 23 Emails exchanged re variation A59-62 24 Feb 23 Builder issued invoice #137 for $2,520.00 A89

[48]

Date Description 01 Mar 23 Emails exchanged in relation to carpet 08 Mar 23 M Babekuhl signed stat. dec. re plumbing work 08 Mar 23 Builder issued invoice #150 for $7,618.71 08-21 Mar Emails exchanged re walk through 9 Mar 23 Owners paid $935 to their building inspector 14 Mar 23 Builder issued invoice #151 for $1,795.20 22 Mar 23 Builder's email said work completed, 22 Mar 23 First of emails, up to 20 Apr 23, re completion 26 Mar 23 Builder issued variations #4, #5, #6 and #7 27 Mar 23 Builder issued invoice #155 for $17,308.42 27 Mar 23 Owners disputed variations #4-7 and invoice #151 05 Apr 23 Emails re plumber not signing compliance document 05 Apr 23 Occupation certificate issued to owners 05 Apr 23 Owners raised lack of gas compliance certificate 05 Apr 23 Builder issued invoice #160 for $64,999.99 05 Apr 23 Builder issued invoice #160 for $49,999.99 10 Apr 23 First of nine recent receipts re 03 Apr 23 - 05 Jun 23 11 Apr 23 The owners paid $35,000, giving total of $641,363.01 13 Apr 23 Owners sought final inspection before paying invoice 20 Apr 23 Owners lodged an application with 26 Apr 23 Builder issued invoice #168 for $24,441.00 02 May 23 Gas compliance certificate provided 31 May 23 Builder alleged unauthorised site access by owners 06 Jun 23 Builder purports to cancel agreement 09 Jun 23 First directions hearing conducted 16 Jun 23 Notice of hearing issued for the applicatio 02 Jul 23 Builder lodged a cross-application 06 Jul 23 Notice of hearing issued for the cross-appl 15 Jul 23 Builder's letter to owners said 15 Jul 23 Builder issued invoice #179 for $623,996.75 21 Jul 23 Second directions hearing conducted Reference A105 A92 A54 A65-71,98-99 A97 A64 attached photos A81-86 A126-135 A73, 77-79 A72 A80 A90 A108 A123 A87 A119 A109-117 A5 A120 the Tribunal A88 A124 A138 A136 by the Tribunal n with the Tribunal ication it would be seeking all costs associated with the building work B5/83 B2/137-142 by the Tribunal

At a glance

Court

Decision date

Source

Judgment (49 paragraphs)

Legislation Cited (4)

Cases Cited (9)