Hartley v McRae

NCAT Consumer and Commercial|2018-03-22

oducts Pty. Ltd. v. Hutcherson Bros. Pty. Ltd (1972) 127 CLR 253 Update Constructions Pty Ltd v Roseville Childcare Centre Pty Ltd (1990) 20 NSWLR 251 Category: Principal judgment Parties: Applicant: Janette Hartley and Terry Hartley Respondent: Greg McRae Representation: Solicitors: S + P Lawyers, Ballina for the applicants Baker Mannering & Hart for the respondent File Number(s): HB 16/54314 & HB 17/37291 Publication restriction: Nil

Reasons for Decision

These proceedings arise out of work carried out by the respondent pursuant to a building contract entered into by the parties on or about 4 June 2014.
The applicants claim is for defective work in the sum of $66,716.43 as itemised on 10 May 2017. In opening the applicants' case their counsel stated that their claim was for: 1. Defects - $61,000.00; 2. Supply of contract items - $10,000.00; 3. Prime Cost items - $20,000.00; and 4. Amount spent on rectification of defects - $7,342.32.

The contract

The parties entered into a building contract dated 3 June 2014 prepared by the builder. Clause 3 set out the statutory warranties referred to in section 18B of the Act, as they were as at June 2014.

Section 48MA of the Home Building Act

There is a dispute between the parties about whether a work order ought to be made requiring the builder to rectify the defective work that has been conceded as well as any disputed defective work that I may find in the owners favour. In considering a work order I am required to consider section 48MA of the Act which states: 'A court or tribunal determining a building claim involving an allegation of defective residential building work or specialist work by a party to the proceedings (the responsible party) is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.'
The owner's written submissions refer to some relevant authorities which consider section 48MA.
The owners seek a money order to be made in their favour under section 48O1(a) of the Act, while the builder seeks a work order under section 48O(1)(c) of the Act.
The reasons that the owners seek a money order are set out in their written submissions and relate in the main to the fact they assert that the builder has not been prompt or attentive in the rectification of defective work and that some rectification work that he carried out was ineffective or to use another term, failed.
The owners also point to the fact that the works were completed in February 2015 and the builder's final progress claim was paid then. This supports an inference that despite the works being complete in February 2015, defective work remained an issue for at least 2 years 8 months thereafter since, on 3 November 2017 the builder's expert conceded at the conclave of that date that there was defective work which required rectification.
The owners submit that the relationship between the parties has broken down and that there is a concern on their part about the builder's ability to attend to rectification work with due care and skill.
The owners' evidence indicates that they noticed a number of defects following practical completion and their taking possession of the residence. They confirm that the builder attended at the residence on 16 February 2016 to inspect defective items notified during the defects liability period. The owners' evidence is sufficient for me to find that the builder was attentive and co-operative during the February defects inspection. The owners' evidence is also sufficient to support a finding that the builder's tradesmen attended the residence in March 2015 to attend to the rectification of some but not all building defects.
The owners evidence paints a picture of them discovering more defective work and the builder attending the residence to deal with the issues they raised, in some cases arranging for supplier's to carry out repairs and in other cases having his tradesmen carry out rectification work. The owners also state that the builder became difficult to contact as from April 2015 and they dealt direct with suppliers in connection with defect issues. However the owners' evidence also establishes that the builder was still involved in the rectification of defects in June 2015. In July 2015 the owners sent the builder another defects list and their evidence is that the builder and his workmen attended the residence to rectify the defects that the owners had identified.
The builder's submissions state that there is no evidence of it failing to comply with a Tribunal order, or to suggest that it will not comply with a work order. There are further submissions about the ability of the Tribunal to frame a work order to avoid delay and the financial consequences of a money order, suggesting that such an order will attract costs which would be avoided if there was to be a work order.
I have had regard to the builder's affidavit sworn 28 August 2017 in which he states that the building works were practically completed on 20 January 2015. He states that on 16 February 2015 he attended to defects liability issues raised by the owners and further that he responded to a number of issues raised by the owners.
He states that generally speaking that he responded to the complaints raised by the owners in a timely and reasonable manner. In relation to certain items the builder states that he will attend to rectification of those items at his own cost.
Having regard to the evidence that I have referred to above, I am unable to reach a conclusion that the builder has been unwilling to attend to rectification of defects or has made it a practice to ignore the owners and their communications regarding defects and issues arising out of defective work.
While I accept that the owners are dismayed and concerned about the number of defect items that remain outstanding, I can find no basis for finding that the builder is unwilling to rectify defective work or lacks the requisite ability to perform the necessary work with due care and skill. As a result I find that there is no reason which would or should prevent me from implementing the principle referred to in section 48MA of the Act, namely that the rectification of defective work by the builder is the preferred outcome.

The defective work claim

The owners submit that the builder concedes that they are entitled to $9,045.80 in relation to admitted defects, in reliance on the conclave that took place on 15 November 2017.
The builder's submissions refer to the conclave that took place on 15 November 2017, to the scott schedule that was before the experts at the conclave and to the agreements recorded at the conclave. The Memorandum of Conclave dated 15 November 2017 is in evidence in exhibit A.
The builder's submissions properly state that items 2, 5, 6, 7, 8, 9, 10, 11 and 12 were conceded at the conclave. I would add that the Memorandum of Conclave also confirms that.
The scott schedule relevant to defective work is set out in the Memorandum of Conclave dated 15 November 2017. It contains 15 items. I will deal with each of the items that have not been agreed by the experts.

Item 1, Preliminaries - amount claimed $2,500.00

The owners rely on the evidence of Mr Nowlan who states in a scott schedule he prepared that the preliminaries relates to provision of construction works insurance, site establishment and long services levy. The builder's expert Mr Oke simply denied this amount in his response to the scott schedule.
The builder's submissions state that in cross examination Mr Nowlan stated that the amount of $2,500.00 was a guess and that in certain circumstances there would be no site establishment costs and no need for Homeowners Warranty Insurance. Mr Nowlan did however state that there would a small site establishment expense in connection with the driveway drainage. Properly the builder's submissions also state that Mr Oke for the builder conceded that if there was to be one rectification contractor, it was likely that there would be some preliminaries. Mr Oke stated that there could be some preliminaries depending on the scale of the rectification work.
I find on the evidence of the experts that the question of whether preliminaries will be incurred and charged will depend upon the rectification work to be undertaken.
Since I have decided that I will make a work order there is no need for further consideration of the owners claim for preliminaries, since the builder will be responsible for paying for the necessary preliminaries associated with any defects rectification work that I may order him to carry out.

Item 3, Installation of ceiling fans

I find that the fans in issue were supplied by the owners and installed by the builder. During the defects liability period the owners stated to the builder that the fans were noisy and wobbling from side to side. The owners' evidence is that the ceiling fans were not attended to when the builder carried out defect rectification work.
The owners expert stated in connection with this item: 'The inspection noted that the pitch of the blades appeared to be at an angle which created turbulence and a noise level greater than that normally experienced in operating ceiling fans'
The builder's expert without giving reasons, except to point out that the fans are owner supplied items, denies that the builder is liable for this item.
In order to be successful in claiming damages for a breach of section 18B(1) of the Act it will be necessary for the owners to establish the facts that support an opinion that the builder breached the particular sub-section of section 18B(1) of the Act, or the equivalent express clause of the contract that is relied on. In Deacon v National Strategic Constructions Pty Ltd; National Strategic Constructions Pty Ltd v Deacon [2017] NSWCATAP 185 an Appeal Panel approved of what I stated in MacFayden and Anor v G Tadrosse [2014] NSWCATCD 194 at [46], namely: 'Evidence that work does not comply with the Building Code of Australia would establish a basis for a finding that sub section 18B(c) of the Act has been breached. Evidence of the details in which work does not comply with the contractual plans and specifications would form the basis for a finding that sub section 18B(a) of the Act has been breached. Evidence of work not being carried out in a proper and workmanlike manner would in my view involve identification of the work in question, a statement of how the expert would expect it to be carried out in in a proper and workmanlike manner and then identification of the factors which establish that the way in which the work has been carried out falls short of it being carried out in a proper and workmanlike manner. Evidence of this nature, if accepted, would form the basis for a finding that sub section 18B(a) of the Act has been breached'
The owners evidence in connection with this item falls short of providing probative evidence that the builder breached section 18B(1) of the Act in installing the fans. The owners have established that they are dissatisfied with the operation of the fans. However that is not sufficient to establish a breach of section 18B(1) of the Act.
In its reply submissions the owners state that because of various things stated by the builder, liability should attach to him in connection with this item. I find that the statement attributed to the builder was not an admission of liability or responsibility in connection with this item.
This item of the owners claim is rejected.

Item 4, Installation of vinyl plank tiles

Mr Nowlan states that the vinyl floor planks have not been installed in accordance with manufacturer's specifications which gives rise to the following issues: 1. gaps between boards; 2. joints in boards; 3. absence of expansion joints to perimeter of floor system; 4. deviations in the floor surface; and 5. physical damage to floor surface.
Mr Nowlan's report elaborates on the above faults in the installation of the vinyl floor planks. He further states that in his opinion it will be necessary to remove and replace the vinyl floor system installed by the builder.
The builder's evidence in connection with this scott schedule item was provided by Mr Oke and Mr Irvine. Mr Irvine is a qualified floor installer.
In cross examination Mr Oke conceded that the vinyl flooring was a new product and that he is not expert in it. He stated that the person who he was with, which I find was Mr Irvine, was the person inspecting the floor. Mr Irving conceded that he did not inspect the entire residence and that he had no experience with the vinyl product used in the residence.
In In Dasreef Pty Ltd v Hawchar [2011] HCA 21 at [37] the plurality stated: 'It should be unnecessary, but it is nonetheless important, to emphasise that what was said by Gleeson CJ in HG (and later by Heydon JA in the Court of Appeal in Makita (Australia) Pty Ltd v Sprowles) is to be read with one basic proposition at the forefront of consideration. The admissibility of opinion evidence is to be determined by application of the requirements of the Evidence Act rather than by any attempt to parse and analyse particular statements in decided cases divorced from the context in which those statements were made. Accepting that to be so, it remains useful to record that it is ordinarily the case, as Heydon JA said in Makitathat "the expert's evidence must explain how the field of 'specialised knowledge' in which the witness is expert by reason of 'training, study or experience', and on which the opinion is 'wholly or substantially based', applies to the facts assumed or observed so as to produce the opinion propounded". The way in which s 79(1) is drafted necessarily makes the description of these requirements very long. But that is not to say that the requirements cannot be met in many, perhaps most, cases very quickly and easily. That a specialist medical practitioner expressing a diagnostic opinion in his or her relevant field of specialisation is applying "specialised knowledge" based on his or her "training, study or experience", being an opinion "wholly or substantially based" on that "specialised knowledge", will require little explicit articulation or amplification once the witness has described his or her qualifications and experience, and has identified the subject matter about which the opinion is proffered.'
While I am not bound by the rules of evidence, I will nonetheless, in accordance with what is said in the passage extracted above, only accept opinion evidence where a witness possesses 'specialised knowledge' by reason of 'training, study or experience' such as to enable the witness to give the opinion set out in his report.
Given that Mr Oke has stated that he is not expert in the vinyl flooring product the subject of this defect item, I will have no regard to his opinion evidence as to whether it was properly installed by the builder. I will have regard to his evidence so far as it relates to observations on the state of the floor or measurements he took or assessed in connection with the floor.
Mr Oke's evidence confirms the following issues: 1. gaps between boards; 2. gaps to end-joints in boards; and 3. deviations in the floor surface.
Mr Oke raised an issue of what he described as a faint discolouration to the ground floor leisure area which he stated was consistent with a spilled liquid. Be this as it may be, the owners allegation of breach of the statutory warranties is made on the basis of the matters raised by Mr Nowlan which do not include a faint discolouration to the ground floor leisure area. If the builder did not install the vinyl floor planks in a proper and workmanlike manner in breach of section 18B(1)(a) of the Act, the fact that the owners may have spilled liquid on them does not in my view absolve the builder for responsibility for the breach. Mr Irvine also raised the issues of stains in a room which had a vinyl floor. There is nothing in his evidence on this issue that causes me to reach a finding any different to what I have stated in this paragraph.
Mr Irvine concludes his evidence by stating that: 'To my observation the vinyl flooring has been laid in accordance with proper standards, except for 7 vinyl planks which were cut short and which I am informed by the builder and verily believe he has agreed to replace. To my observation the vinyl flooring has been laid in accordance to the Australian standards'
As I have stated above Mr Irvine conceded that he did not inspect the entire residence and that he had no experience with the vinyl product used in the residence. In addition he does not identify the Australian standard or the proper standards to which he refers. For these reasons I am not persuaded by his evidence that the vinyl flooring has been laid in accordance with the undisclosed proper standards to which he refers.
I accept Mr Nowlan's evidence which is in part confirmed by Mr Oke's factual observations and will make a work order in the owners favour in connection with this item.

Item 13, Water entry to ground floor living area.

The owners' submissions state that this claim item was agreed at the hearing. The builder's submits that the need for rectification work is conceded in relation to this issue, but there is no agreement about the cost of rectification or the necessary work for the rectification of the defect. In reply the owners state that they understand that the builder's concession was similar to its other concessions. In other words that it was unqualified.
I have listened to the recording of the hearing and find that in opening its case, counsel for the builder did concede that there was a need for the rectification of the defect, but qualified that concession in the way that is stated in his submissions on behalf of the builder.
Mr Nowlan for the owners states that photographs he was shown indicate the presence of water on the surface of the vinyl flooring adjacent to the ground floor living area sliding door. The owners' evidence does not contain copies of the photographs referred to by Mr Nowlan. Nor does it refer to water on the surface of the vinyl flooring adjacent to the door.
Mr Nowlan concludes from what he has been told and shown, that the builder has failed to comply with Performance Requirement P2.2.2 of Building Code of Australia Volume 2 and clause 4.7.3 of AS 3700. He concludes by stating that to remedy the defect it will be necessary to remove the brickwork above the sliding door, rectify the flashings and reinstate the brickwork.
Mr Oke for the builder notes that Mr Nowlan has not identified any investigation about the cause of water ingress, but has based his proposal for rectification work on advice from the owners. Nonetheless he notes that the builder agreed with the necessity of rectifying this issue at his own expense.
The conclave scott schedule indicates that Mr Oke did not concede this item as being a defect.
Based on the builder's concession in the opening of its case and Mr Oke's noting that the builder agrees with the necessity of rectifying this issue at his own expense, I will make a finding that the builder has admitted that there is water present on the surface of the vinyl flooring adjacent to the ground floor living area sliding door and that has arisen because of a breach of section 18B(a) of the Act.
The parties did not cross examine the experts regarding scott schedule item 13 and what would be the most appropriate scope of rectification work. The only evidence that there is regarding the rectification methodology is that provided by Mr Nowlan, namely removal of the brickwork above the sliding door, rectification of the flashings and reinstatement of the brickwork.
I will find in the owners' favour in connection with this scott schedule item and make a work order on the basis of Mr Nowlan's scope of work.

Item 14 Driveway apron - stormwater drainage.

Mr Nowlan's supplementary report dated 4 May 2017 deals with this issue. It relies on a letter dated 4 April 2017 from a firm of plumbers which stated: 'We inspected premises at 8 Higgins Place Cumbalum on 17 March 2017 with camera & found drainage to driveway stormwater pit is holding water due to backfall. We recommend re-falling drainage when driveway is lifted'
Mr Nowlan's report states that he inspected the premises and on his inspection noted that: 1. the floor level of the residence was below the road level; 2. the entry driveway apron falls from the road level toward the dwelling; 3. surface water from the driveway would fall back towards the residence; and 4. the entry to the garages of the residence have been provided with a stormwater grated drain, as shown on exhibit 1, which convey water from the driveway to the underground stormwater drainage system.
Mr Nowlan states that based on further advice from the plumbers, the drainage line connected to the grated drains, presumably the garage stormwater grated drains, runs in a southerly direction and from the camera observations is partially crushed some 5 - 8 metres from the inlet. (Mr Nowlan does not identify the inlet or where it is). Mr Nowlan reports that the plumber also observes that that the line contains backfall indicating that the water in the pipe is required to run uphill.
It can be seen that the basis for Mr Nowlan's report is based on a 2 sentence letter from the plumber as well as further non written advice from the plumber.
Based on this material as well as his own observations Mr Nowlan states that in his opinion the stormwater drainage line, I assume from the garage stormwater grated drains to the underground stormwater drainage system, was not installed in accordance with AS3500.3 because the fall is inadequate. Mr Nowlan calculates the rectification cost to be $7,627.74, which cost is inclusive of the removal and replacement of the concrete driveway slab. This cost is not broken down into the component parts referred to by Mr Nowlan.
Mr Oke for the builder states in his report that in his assessment the section of damaged pipe is most likely in the lawn area and not covered by the concrete pavement. He also states, without disclosing the basis for so asserting, that it is permissible to have a water charged stormwater line which often occurs for water storage tanks. He also points out that the owners do not raise the issue of the stormwater backing up and overflowing the grated drains which is an indication that the stormwater line is adequately performing its intended role. He also suggests that the machinery used in the owners landscaping works caused the damage to the piping and the negative fall.
Finally Mr Oke states that the estimate of cost by Mr Nowlan should not include the cost of the removal and replacement of the concrete driveway slab on the basis of his opinion that the damaged piping is mostly beyond the concrete driveway slab.
I should state that I regard Mr Nowlan's report as not being particularly persuasive because of its reliance on the plumber's information, including its 2 sentence letter and other verbal advice. Mr Nowlan has not done any investigative work. In particular Mr Nowlan does not explain the significance of his observation that the floor level of the residence was below the road level and if it was, whether or not that was contemplated by the contract drawings. Similarly Mr Nowlan does not state the degree to which the entry driveway apron falls from the road level toward the dwelling and how much surface water from the driveway would fall back towards the residence. Critically, Mr Nowlan does not state the degree to which water from the driveway falling back towards the residence, would in any event be collected by the grated drains situated in front of the garages as shown in exhibit 1.
So far as the allegedly damaged pipe is concerned, Mr Nowlan states that the damaged area is some 5 - 8 metres from the outlet. Where the outlet might be or its precise location is not addressed by Mr Nowlan in his report. This is an important issue since Mr Nowlan's rectification methodology requires the removal and replacement of the driveway concrete slab.
I have considered Mr Nowlan's evidence in cross examination. He stated that the 'driveway stormwater pit' as referred to in the plumber's letter attached to his report was adjacent to the pot plant shown on exhibit 1. From that evidence it I find that the driveway stormwater pit is underneath the right hand side concrete driveway of the residence. Mr Nowlan also stated that the crushed pipe and the outlet was to the right of the planter box shown on exhibit 1 and the backfilled area goes back to the planter box.
In cross examination Mr Oke agreed that a 1:100 fall was required and that if the drainage lines were constructed with backfall that indicates that there was no due care and skill in the work. Mr Oke agreed that if there is backfall it needs to be fixed.
Based on the evidence and the reasons in the preceding paragraphs, I am satisfied on the balance of probabilities that the drainage line to the driveway stormwater pit is holding water due to backfill and that the drainage line needs to be rectified. I am not persuaded that the drainage line and the outlet is crushed or damaged as asserted by Mr Nowlan on the hearsay basis stated in the penultimate paragraph of page 1 of his 4 May 2017 letter. I find based on Mr Nowlan's evidence during cross examination that the backfilled area goes from the right hand edge of the concrete entrance way as shown on exhibit 1 back to the planter box on the right hand side of the double garage.
I will make a work order for the rectification of the relevant work in connection with this item of the owners' claim.

Item 15, Siting of Dwelling. Amount claimed $13,088.25

The owners rely on Mr Nowlan's 28 June and 27 September 2017 reports.
This claim is in three parts. First a claim relating to the North elevation relating to the ramp the builder constructed at the rear of the garage. The owners state that the contract drawings showed that the ground surface level at the rear of the residence would be raised to the height of the garage door opening. The owners' case is that the works have not been carried out in accordance with the approved plans.
Secondly, there is a claim in relation to the fill in the rear yard.
The third aspect of the claim relates the southern elevation. Mr Nowlan states that in his opinion the site was over excavated with the result that the owners were then responsible for retaining the excavated areas which would have not been necessary had the builder not over excavated.

Northern elevation

Mr Nowlan's 28 June 2017 letter states in relation to the Northern Elevation issue that the elevations drawing indicates that the panel lift door at the rear of the garage is at or about ground level. He further states that residence as constructed resulted in the finished floor of the garage being some 560 mm above ground level and that the builder installed a concrete ramp from the rear of the garage to the rear yard area. In his 27 September 2017 report Mr Nowlan stated that the relevant drawing, sheet 6 of 6, indicated that the ground surface level would be raised to the height of the of the rear of the garage door opening and that was not done by the builder.
The builder's expert Mr Oke in his report dated 22 August 2017 states that there was an agreement between the parties regarding this area. He states what was built by the builder is consistent with the plans in providing a ramped access to the rear of the garage.
Mrs Hartley refers to this area at paragraph 36 of her affidavit dated 10 May 2017 at paragraph 36 in which she stated that the builder offered to build a ramp. The builder has not responded to this evidence and gives no evidence in relation to this item of the owners claim.
The owners' evidence does not indicate that there was an express rejection by her regarding the builder's suggestion regarding the treatment of the rear of the garage area. I would also add that the relevant drawing sheet 6 of 6 provides no details as to levels. This together with the tender exclusion of earthworks/landscaping indicates that the builder offered something in addition to what he was required to construct in order to satisfy the owners concerns about the treatment of the area at the rear of the garage door. As a consequence I find that the owners agreed or accepted the ramp at the rear of the garage door, and the issue arose for the first time on 28 June when raised by the owners' expert. The owners make no mention of this item in paragraph 144 of Mrs Hartley's affidavit which details defective work. In addition I find that the owners were content to allow the builder to construct the ramp at the rear of the garage and did not demand or require any other treatment to that area. In those circumstances I find that it would be unjust now to allow the owners to adopt an inconsistent position to the one that they adopted at the relevant time.
I reject the owners claim relating to the Northern elevation relating to the ramp the builder constructed at the rear of the garage.

Fill in the rear yard

This item of claim arises from Mr Nowlan's 28 June 2017 letter. As above, the owners make no mention of this item in paragraph 144 of Mrs Hartley's affidavit which details defective work.
This item of claim is based on Mr Nowlan's evidence that the owners have been put to additional expense in the construction of retaining walls in the rear yard area to deal with fill excavated on site by the builder. Mr Nowlan states that the owners instructed him that the builder did not consult them to provide an option for off-site disposal. Mr Nowlan states that the owner has incurred additional costs in the construction of retaining walls in excess of the landscaping allowance. The claim has been put as follows: 'Due to the contractor failing to advise the owner of the options available in removing the excess soil, the owner has been required to undertake substantial retaining works which may have been avoided should the soil have been removed from the site. It is also my opinion that the over excavation of the building platform during bulk excavation works has resulted in additional soil and as a consequence increasing the retaining height and length of the retained material'
In his 27 September 2017 report Mr Nowlan repeats the assertion that the owners were not provided with the option for the removal of the soil from the site and as such bore the cost of retaining the fill on the site.
Before considering this item of claim, it is necessary in my view to understand what the contract provided in connection with material excavated from the site in the course of construction the Works, as that term is defined in the building contract. Clause 22 deals with the 'Site'. Clauses 22.04 and 22.05 state: 'The Contractor shall remove on completion all the materials referred to in Clause 11.02 but any fill, landscaping, or additional council requirements with regard to site drainage, retaining walls or rectification will be at the Proprietors crossed. The contractor will not remove from the Site any excess soil from excavation unless necessary and will then be at the Proprietors cost.'
As stated above the builder's tender excluded earthworks/landscaping with the result that the owners were responsible for that work.
This item of claim rests upon an assumption that the builder was obliged to provide the owners with an option for the removal of the soil from the site. The source of this obligation has not been identified. I find that the contract contained no requirement for the builder to provide advice to the owners about what they should do regarding excess soil from excavation and the cost consequences associated with their options. Clause 3 of the contract does not contain such an obligation.
If the owners chose to have fill or excess soil from excavation removed from the site, the contract stated that would be at their cost. It follows I find that the issue of removing fill or excess soil from the site, or not doing that and constructing retaining walls (as part of earthworks/landscaping) in the rear yard area was something that the owners were responsible for planning, implementing and paying for.
I reject this item of claim on the basis that the owners have not identified a term, condition or warranty in the contract which the builder has breached in connection with this item of their claim.

Southern Elevation

Mr Nowlan states that in his opinion the builder over excavated the site and the owners were then responsible for retaining the excavated areas.
In the NSW Court of Appeal decision of Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705. Heydon JA makes it clear that a reasoning process is to be stated by an expert when giving opinion evidence. In the course of his judgement, commencing at paragraph 80, Heydon JA referred to a number of decisions of Anderson J. in the Supreme Court of Western Australia. In Pownall v Conlon Management Pty Ltd (1995) 12 WAR 370 at 389-90 his Honour Anderson J. stated: 'Expert opinion is to be judged like any other evidence. It must be comprehensible and reach conclusions that are rationally based. The process of inference that leads to the conclusions must be stated or revealed in a way that enables the conclusions to be tested and a judgment made about the reliability of them.'
Mr Nowlan's evidence in his reports of 28 June and 27 September 2017 just does not provide a reasoning process that supports a finding that the builder over excavated the site. It was within Mr Nowlan's power to give a reasoned and coherent explanation of the basis for his opinion with references to the evidence and the specific areas of the site on which the residence is constructed to support his opinion. However he did not do that. Instead he stated his opinion by way of a conclusion that the builder over excavated the site during bulk excavation works. The builder has produced a surveyor's report which states that 'the Finished Surface Levels for various locations around the as-built building as shown on' the surveyor's sketch 'are on the same Datum as the original site Contour & Detail survey'. This un-contradicted evidence would indicate that the site was not over excavated.
I reject this aspect of the claim on the basis that I am not persuaded by Mr Nowlan's evidence that the site was over excavated.
I will allow the parties 21 days from the date of these Reasons for Decision to bring in consent work orders that deal with the items previously agreed and those items where I have found in the owners' favour on defective work. The consent order should desirably contain a description of the defective work item with a concise scope of the rectification work required. The orders should have a date by which the rectification work must commence and a completion date.

Prime cost items.

In their written submissions the owners state that the contract includes a heading titled 'SPECIFICATION OF INCLUSIONS' where PC Items are referred to. Unhelpfully there is no page reference to where such a specification may be found in the evidence. The builder's tender dated 3 June 2014 does refer to the PC items as referred to in the parties' submissions. By reason of the Building Contract Agreement which formed part of the contract the builder's tender formed part of the Building Contract Agreement and as such was a contract document. Clause 26.02 of the Conditions of Contract was said to address Provisional Sums. However the Conditions of Contract in evidence do not include any clause or provision dealing with provisional sums or prime cost items. In addition the contract does not state the monetary amount attributed to the PC Items either individually or collectively.
This is I find a deplorable state of affairs at least in connection with PC items and how they were to be administered under the contract. The builder submits that this claim is shrouded in uncertainty, without conceding that the cause for that is his own failure to prepare this aspect of the contract in a competent manner.
The builder submits that there should be terms implied and that the Tribunal should allow the claim in so far as the builder has admitted to it. I find that the builder has on that submission conceded liability for this claim, although his submissions fail to state the amount conceded.
The builder has admitted in paragraph 17.17 of his 28 August 2017 affidavit that he allowed the sum of $11,347.59 for PC Items although there is no evidence that he told the owners about this at the relevant time, or that this amount was stated in the contract.
At paragraph 53 of their submissions the owners state that they paid for PC inclusions in the sum of $20,276.30 and the builder must reimburse them to the extent that they are reasonable. Then they submit that the builder agreed that he was indebted to them for an amount of $11,345.99 with the inference that if they were not successful in recovering $20,276.30, then they should recover $11,345.99 as conceded in cross examination.
In Tuta Products Pty. Ltd. v. Hutcherson Bros. Pty. Ltd (1972) 127 CLR 253 Stephen J stated at [12]: 'It would, I think, require a most clearly expressed provision, not to be found in the present set of documents, to overcome the inference that when a proprietor requires a builder to accept his estimate of the cost of an item by including p.c. items as a mandatory part of the tender, those p.c. amounts, which are only estimates made for the purpose of convenience, are inherently subject to adjustment when the true cost, over which the builder has no more control than he had over estimated cost, emerges in due course'
Although that quote refers to the situation in which the an owner requires PC items, I can see no reason why the same principles should not apply in a situation where the builder includes the PC items as part of the tender and also as part of the contract price. I would imply a term into the contract that the owners are liable to pay for PC items, the cost of which would be adjusted by taking the actual cost of the PC items and deducting therefrom the contractual PC item allowance. If after such deduction there is a positive balance the owners are obliged to pay such balance to the builder. Alternatively if after such deduction there is a negative balance, the builder is obliged to pay such negative balance to the owners or to allow them a credit for such negative balance.
I find that the contract price of $401,400.00 included the allowance (undisclosed) by the builder for PC Items. I find that the tender makes that clear by the words used by the builder: 'please note my Tender Sum includes'
The tender went on to refer to a number of items including the PC items.
The adjustment referred to by Stephen J. as referred to above would I find ordinarily be effected by taking the actual amount spent on PC items and then deducting from that amount the allowance made in the contract for the PC items.
The owners' evidence is that they, not the builder purchased the PC items at a cost of $20,276.30. I accept that evidence. If the owners claim is that the builder should pay them that amount, I reject such a claim as being misconceived. The contract was that the owners would always be liable to pay for PC items, as adjusted.
I find that the PC Item adjustment to the Contract Price should have been $20,276.30 - $11,347.59 = $8,928.71 in the builder's favour in circumstances where the builder had supplied all of the prime cost items.
However given that the parties departed from the contractual arrangement by agreeing that the owners would purchase the PC items, such an adjustment is not appropriate. Nonetheless the owners were entitled to the benefit of the allowance for PC items stated, belatedly, by the builder in cross examination to be $11,345.99, referring to an invoice sent in 2017.
I will make an order for that amount in the owners' favour.

The builder's quantum meruit claim - HB 16/54314

The builder has claimed the sum of $10,337.00 for work done and materials supplied. He admits that the variations which are the basis of his claim were not in writing.
The contract at clause 25 states in part: 'A variation form is to be completed by the contractor and duly signed and paid for by the proprietor before any changes will be carried out.'
I find that this contractual provision requires variations to be documented and signed by the owners before the work the subject of the variation is to be performed.
The builder bases his claim for variations on the authority of Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221. However in his written submissions the builder has overlooked the following passage from Deane J's judgment at [13] 'Indeed, if there was a valid and enforceable agreement governing the claimant's right to compensation, there would be neither occasion nor legal justification for the law to superimpose or impute an obligation or promise to pay a reasonable remuneration. The quasi-contractual obligation to pay fair and just compensation for a benefit which has been accepted will only arise in a case where there is no applicable genuine agreement or where such an agreement is frustrated, avoided or unenforceable. In such a case, it is the very fact that there is no genuine agreement or that the genuine agreement is frustrated, avoided or unenforceable that provides the occasion for (and part of the circumstances giving rise to) the imposition by the law of the obligation to make restitution.'
In Goodacre v Trinder Alpine Constructions Pty Ltd [2013] NSWCCT 124 (approved and adopted by the Appeal Panel in the recent case of Nayak v Rockwall Constructions Pty Ltd [2017] NSWCATAP 18 at [30]) the Tribunal Member stated: The required elements [for a successful quantum meruit claim] are as submitted by both parties, the conditions set out in Liebe [i.e. Liebe v Molloy (1906) 4 CLR 347], subject to proof of 'fair value' or the 'quantum meruit value' of the work done by the builder. They are therefore, once Charbel dicta is considered [Charbel v Tanne (Home Building) [2010] NSWCTTT 453], the five components that must be complied with by the builder ... before it can recover with respect to its long-delayed variation claim: (a) the subject building work fell outside the requirements of the contract, specifications, and other included documents (b) the owner had actual knowledge of the variations as they were being done (c) that the owner knew that they were outside the contract (d) the owner knew that the builder expected to be paid for the work as a variation to the contract; and further (e) the builder had provided evidence that the amount claimed was fair value for the non-compliant work.
The decision in in Goodacre v Trinder Alpine Constructions Pty Ltd followed and applied the High Court decision in Liebe v Molloy (1906) 4 CLR which was concerned with a claim for variations which were not documented in accordance with the terms of the contract that the parties had signed.
In Pavey & Matthews Pty Ltd v Paul the Court's decision in Liebe v Molloy was not referred to, no doubt because the facts in issue in Pavey did not bear upon the question of recovery for variations not approved in writing as required by the contract.
Liebe v Molloy was followed by the Court of Appeal in Update Constructions Pty Ltd v Roseville Childcare Centre Pty Ltd (1990) 20 NSWLR 251 in connection with variation claims made by the appellant contractor. In that case the question was whether the work claimed was within the contractual scope of work. I would also add that Priestley JA stated at p257 in a footnote: 'I know of no cases (except possibly in one area of the law) where an existing enforceable contract covers governs specific relations between two parties and yet one has recovered against the other in respect of a matter governed by the contract, on the basis of quantum meruit, quasi contract, or restitution.'
Liebe v Molloy was also referred to and applied by the Court of Appeal in Trimis v Mina [199] NSWCA 140 a case in which, among other things, the appellant was pursuing a claim for variations which had also not been documented in accordance with the contractual provisions.
The decision in Liebe v Molloy was based upon an implied contract, a notion which was rejected by the High Court some 70 years later in Pavey & Matthews Pty Ltd v Paul. In Update Constructions Pty Ltd v Roseville Childcare Centre Pty Ltd, Priestley JA stated at 272: 'One point which seems to me to be basic to the decision in Liebe is that if the work claimed for had been work required by the contract to be done, then the builder could not recover for it, because he had not complied with the contractual requirements. If however the work was work which the builder was not required to do by the contract ("outside the contract" in the words of the High Court) then, if certain further facts were found, the builder could recover. It may be that the basis of such recovery would these days be referred to ideas of restitution rather than implied contract. The point of substance for present purposes, seems to me to be that facts of a certain kind result in liability. If all the facts of the necessary kind were present in the instant case then I think that the same result should follow as was indicated in Liebe.'
These authorities were in part referred to by the owners in their submissions but not by the builder. In addition the owners have referred to the Appeal Panel's decision in Rekrut and Scott v Champion Homes Sales Pty Ltd; Champion Homes Sales Pty Ltd v Rekrut and Scott [2017] NSWCATAP 187 where the Appeal Panel at [191] accepted that variations not signed and accepted by the owners might be recoverable on a quantum meruit basis. The Appeal Panel stated: 'Even if Variation 10 was not signed and accepted by the owners that would not, however, be an end of the matter. The amount charged might be recoverable on a quantum meruit basis. See Liebe v Molloy [1906] HCA 67; (1906) 4 CLR 347 at 353-4, Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251 at 272, 274, Lumbers v W Cook Builders Pty Ltd [2008] HCA 27; (2008) 232 CLR 635 at [83] - [85]. This was not, however, considered by the Tribunal and no findings of fact necessary to determine such a claim were made.'
At [235] and [238] of Rekrut, the Appeal Panel stated in connection with another of the builder's claims in that case: 'A claim under the contract was not available as the structural steel was excluded from the contract and Variation 12 was not accepted by the owners. In these circumstances, contrary to the owners' contention, the builder may have been entitled to claim for the supply of the structural steel on a quantum meruit basis. If the builder was to recover on a quantum meruit basis, however, it had to establish its entitlement by reference to the principles established in Liebe v Molloy [1906] HCA 67; (1906) 4 CLR 347 at 353-4 and Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251 at 272, 274.' 'Having reached the conclusion that it did, the Tribunal did not, understandably, go on to consider whether the builder was entitled to recover on a quantum meruit basis. If it had, the Tribunal would have been required to consider relevant questions including, for example, whether the owners: (1) had actual knowledge of the extra works, in this case the provision of the structural steel, as they were being done; (2) knew that the provision of structural steel was outside the contract; (3) knew that the builder expected to be paid for them as extras, see Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251 at 272 and the other authorities referred to in Dorter and Sharkey, Building and Construction Contracts in Australia, 2nd Ed (looseleaf service) (Lawbook Co. Sydney), at [8.160].'
It is my view that the builder's variation claims should be decided in accordance with accepted authority, extracts of which have been set out above. I will deal with each of the builder's variation claims in turn having regard to the evidence and to the builder's cross examination of Mrs Hartley.
The builder states in his evidence that he completed the building works in mid-January 2015 but that he sent the owners an invoice for variations on 8 August 2017.
As regards variations, the builder states that the owners made a number of variations and that he takes a pragmatic approach to variations. In her evidence Mrs Hartley states at paragraph 54 that the owners requested the 8 variations which are referred to therein. In cross examination Mrs Hartley agreed that the owners knew that the 8 matters in paragraph 54 were variations and that the owners were required to pay for that work. To the extent that any of the variations referred to in paragraph 54 of her affidavit have been raised by the builder in his claim, I will find by reason of Mrs Hartley's evidence that the owners concede that they are required to pay for the variation work.
The builder has not given evidence in relation to the variations for which he claims, that the owners: 1. had actual knowledge of the extra works as they were being done; 2. knew that the provision of the extra work was outside the contract; and 3. knew that the builder expected to be paid for the extra work outside the contract.
Despite the builder's failure to give evidence in relation to the matters referred to in the previous paragraph, the evidence of Mrs Hartley in relation to the 8 items to which she refers is sufficient for me to find in the builder's favour on those items.
As regards the experts joint scott schedule on variations, I do not regard myself bound by their agreements. I do not accept that the Tribunal's function of determining the builder's variation claim was delegated to them or that they considered any of the relevant matters which require consideration in order to determine whether or not there is a legal basis for the builder's claim.

Tiles, Amount claimed - $6,425.10

The evidence in connection with this alleged variation is stated in paragraph 38 of Mrs Hartley's affidavit that the tiling to the balcony arose because of the owners complaint about the quality of the work that the builder had done. In cross examination, the builder conceded that Mrs Hartley's evidence in paragraph 38 'may have occurred'. I regard this concession to be significant despite the fact that at other times in the cross examination the builder asserted that this work was a variation. In addition the builder agreed that when he did this particular work that he didn't tell the owners that the work was a variation.
Mrs Hartley states at paragraph 54 of her affidavit that the owners requested a variation for 'Tile the balcony and patio surfaces'. As stated in cross examination Mrs Hartley agreed that the owners knew that they were required to pay for the variation work that she had identified in paragraph 54 of her affidavit.
I will find by reason of Mrs Hartley's concession as referred to, that the owners concede that they are required to pay for the tiling variation work.
I will find in the builder's favour in the sum of $6,425.10.

Electrical, Amount claimed - $4,212.69

The builder's evidence in relation to this alleged variation rests on his 6 August 2017 tax invoice where he claims $4,212.69 for variations. The documentary support for this variation is found in a document attached to his invoice from Platinum Electricians dated 13 January 2015 which claims $4,212.69.
Mrs Hartley states at paragraph 54 of her affidavit that the owners requested a variation for 'Extra power points'. As stated Mrs Hartley admitted that the owners knew that they had to pay for this work.
The Platinum Electricians invoice claims for a number of items which are not broken up. There are however 25 power points claimed being DG and SP power outlets.
The experts have agreed this item. I do not consider myself bound by their agreement primarily because I have no confidence that they applied the reasoning necessary to ascertain or consider what is required to establish a quantum meruit claim for undocumented variations where there exists an enforceable contract. Also and importantly there is no indication that the experts had any regard to paragraph 54 of Mrs Hartley's affidavit. They certainly did not have the benefit of her evidence in cross examination. In my view the experts' acceptance of this amount goes substantially beyond what the owners knew that they were asking to be done as additional work for which they knew they had to pay.
The builder has not strictly proved the amount for this variation because there is no separate costing for power points. However in my view there is enough evidence for me to make an order in the builder's favour on the basis of the Platinum Electricians invoice. Therefore doing the best I can I will award the builder $1,500.00 for power points.
In Aerial Advertising Co v Batchelors Peas Ltd (Manchester) [1938] 2 All ER 788, where the loss suffered could not have been proved with precision. Atkinson J. awarded three hundred pounds as all he could allow on an absolutely safe basis, saying that it was undoubtedly too little, but that the plaintiff could have called better evidence if it had wanted a larger figure. The same may be said in connection with this variation.
I will make an order in the builder's favour in the sum of $1,500.00 in connection with this item.

Laundry overheads, Amount claimed - $530.00

The owners concede this amount by reason of paragraph 54 of Mrs Hartley's statement. I will make an order in the builder's favour in the sum of $530.00 in connection with this item.

Bookshelf, Amount claimed - $413.50

Apart from the builder's 6 August 2017 tax invoice there is no evidence to support this item of claim. There is no evidence from the builder of the type referred to in [122] in support of this variation. By reason of a lack of appropriate evidence in support of this item, I reject this aspect of the builder's variation claim.

Plaster cut-outs Stairwell, Amount claimed $263.50

Mrs Hartley's evidence does not refer to this work. There is no evidence from the builder of the type referred to in [122] in support of this variation. By reason of a lack of appropriate evidence in support of this item, I reject this aspect of the builder's variation claim.

Timber -look panel lift in the garage, Amount claimed $562.75

At paragraph 54.3 of her statement Mrs Hartley agreed that the owners requested this variation.
I will find in the builder's favour in this amount based on Mrs Hartley's evidence in her affidavit and during cross examination, as referred to above.

Footing rear driveway, Amount claimed - $820.26

Apart from the builder's 6 August 2017 tax invoice there is no evidence to support this item of claim. The claim is rejected.

Brickwork to concrete ramp, Amount claimed $927.65

Apart from the builder's 6 August 2017 tax invoice there is no evidence to support this item of claim. The claim is rejected.

Concrete paths and rear driveway, Amount claimed - $1,468.00

At paragraph 54.4 of her statement Mrs Hartley agreed that the owners requested this variation.
The amount claimed in connection with this item is contained in a poorly photocopied tax invoice from the builder dated 6 August 2017 which claims the sum of $1,468.00 for this work.
I will find in the builder's favour in this amount based on Mrs Hartley's evidence in her affidavit and during cross examination, as referred to above.
The total of variations found in the builder's favour is ($6,425.10 + $1,500.00 + $530.00 + $562.75 +$1,468.00)= $10,485.85.

Margin and GST

The builder has claimed a 20% margin and GST on the variation work. The parties' experts have agreed that a 20% margin is acceptable. Based on this agreement I will allow a 20% margin on the variations which I have found in the builder's favour and then apply a 10% GST to the total.
I find that the total amount for variations with 20% for margin and with GST included is $13,841.32.

Final orders

In relation to the owners claim I will allow the parties to file consent work orders to deal with the items of defective work previously agreed between them and the findings in these Reasons regarding defective work. I will also make an order in the owners' favour in connection with PC Items.
In connection with the builder's variation claim, I will make an order that the owners must pay the builder the sum of $13,841.32 immediately being in connection with the following variations:

Costs

The parties have leave to bring an application for costs.
Any costs application must be lodged in the Tribunal and served on the costs respondent within 14 days of the date of this order either attaching or referring to the documents relied upon in support of the application.
The costs respondent will have 14 days after the date it receives the application to lodge in the Tribunal and serve on the costs applicant its submissions, if any, in response to the cost applicant's costs application, such submissions either attaching or referring to the documents relied upon.
The cost applicant will have 14 days after the date it receives the cost respondent's submissions to lodge in the Tribunal and serve on the costs respondent its submissions, if any, in reply, such submissions either attaching or referring to the documents relied upon.
The parties must state in their submissions whether or not they consent to the costs application being determined on the basis of the parties written submissions and attached documents, if any, without the need for a hearing
Subject to the parties' submissions, the Tribunal will determine any costs application on the basis of the papers lodged in the Tribunal. D. Goldstein Senior Member Civil and Administrative Tribunal of New South Wales 20 July 2018

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: 18 October 2018

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