Howell v Talevski

Are the proceedings out of time?

1. Mrs Howell commenced these proceedings in the New South Wales Civil and Administrative Tribunal on 17 July 2018. The proceedings were later transferred to this Court.
2. As at the date of the Building Contract, 26 May 2007, s 18E was, relevantly, in the following terms: "18E Proceedings for breach of warranties (1) Proceedings for a breach of a statutory warranty must be commenced within 7 years after: (a) the completion of the work to which it relates, or (b) if the work is not completed: (i) the date for completion of the work specified or determined in accordance with the contract, or (ii) if there is no such date, the date of the contract."
3. It is common ground that the amendment made to s 18E by the Home Building Amendment Act 2011 (No 52) (NSW) ("HBAA"), which took effect on 25 October 2011, did not have retrospective effect.
4. As the proceedings were commenced on 17 July 2018, they were commenced within the seven year period referred to in s 18E unless that period started to run on or prior to 16 July 2011.

Section 18E(1)(a) - seven years after "the completion of the work"

1. The HBAA also introduced a new s 3B which, relevantly, is in the following terms: "(1) The completion of residential building work occurs on the date that the work is complete within the meaning of the contract under which the work was done. (2) If the contract does not provide for when work is complete (or there is no contract), the completion of residential building work occurs on practical completion of the work, which is when the work is completed except for any omissions or defects that do not prevent the work from being reasonably capable of being used for its intended purpose." (Emphasis in original.)
2. It is common ground that the amendment of the HBA to include s 3B did have retrospective effect.
3. The effect of the retrospective enactment of s 3B(1) was to deem that "completion of residential building work" would occur on the date that the work was complete "within the meaning of the contract under which the work was done".
4. Its effect, [2] so far as concerns s 18E(1)(a), is that proceedings for breach of a statutory warranty must be commenced within seven years after: "The date to which the work [to which the {the proceedings for breach of a statutory warranty} relates] is complete within the meaning of the contract under which the work was done."
5. Section 18E(1)(a) is directed to circumstances where the work, the subject of the claim for breach of statutory warranty, is complete. The question posed is whether the proceedings were commenced within seven years after "the completion of the work" to which the claim relates; that is, having regard to the effect of s 3B(1), completion within the meaning of the Building Contract.
6. Clause 8 of the General Conditions provided, relevantly: "The work will be complete when the contractor has finished the work in accordance with the contract documents and any variations, it is free of apparent defects … 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."
7. The effect of this clause was that the work was not complete until Mr Talevski had, first, finished the work in accordance with the contract documents and any variations and, second, the work was free of apparent defects.
8. It is common ground that the work performed by Mr Talevski was not free of apparent defects.
9. Accordingly, the effect of cl 8 of the General Conditions is that the work under the Building Contract was not complete, at least immediately prior to Mr and Mrs Howell serving the notice of termination on 9 November 2012.
10. That is Mrs Howell's case.
11. Thus, Mr Hicks SC and Ms Anderson, who appeared for Mrs Howell, said in closing written submissions: "…the works were never 'complete' having regard to the requirements of cl.8 [of the General Conditions]. At no time were the works finished in accordance with the contract documents and free from apparent defects. Further, no notification of completion was given by the Builder in 2009, or at all, under cl.8."
12. Mr and Mrs Howell terminated the Building Contract on 9 November 2012 under cl 25 of the General Conditions. There is no dispute before me as to the effectiveness of that notice of termination.
13. The effect of the service of that notice was that Mr Talevski was relieved of any further obligation to perform work under the Building Contract. [3]
14. However, I do not accept that it follows that, for the purposes of s 3B(1) of the HBA, as incorporated into s 18E(1)(a) of the HBA, the work under the Building Contract was thereby rendered complete.
15. Thus, I do not accept the following submission made by Mr Hicks SC and Ms Anderson: "By the notice of termination, the Contract was terminated. The Contract was ended and the works were 'complete' as far as the Builder and the Contract were concerned. The[re] was no further obligation on the Builder or pursuant to the Contract to perform work. While the project itself may have been incomplete, 'within the meaning of the contract under which the work was done' the work was complete as there was no further obligation, capacity or ability to perform the work." (Emphasis in original.)
16. That submission proceeds upon the basis of Mr Hicks' and Ms Anderson's earlier submission that: "In this case, the Contract contained two provisions which relevantly stipulated when the works were 'complete' - cl.8 and cl.25".
17. Clause 8 of the General Conditions governed the completion of work.
18. Clause 25 dealt with termination but had nothing to say as to when work under the Building Contract was complete. Indeed, the concluding clause of 25 made clear that termination of the Building Contract did not necessarily bespeak completion of the work. Thus, that clause read: "Until completion of the work the contractor will not be entitled to any further payment under this contract. However, nothing contained in this clause may take away any right the contractor may have to payment under the dispute resolution procedure in Clause 27".
19. Nor do I accept Mr Hicks' and Ms Anderson's submission that: "Upon the proper construction of s 3B(1), where there is a termination of a contract then the work is complete 'within the meaning of the contract under which the work was done'. The termination is relevant and effective in a similar way as to the operation of cl.25 of the Contract". (Emphasis in original.)
20. The question of whether work under the Building Contract was complete when Mr and Mrs Howell terminated on 9 November 2012 is a matter of construction of the Building Contract itself, not of s 3B(1). And cl 8 of the General Conditions of the Building Contract governs that question.
21. Mrs Howell's case is that, by reason of cl 8 of the General Conditions, the work under the Building Contract was not complete immediately prior to the termination of the Building Contract on 9 November 2012. I accept that submission. But the fact of termination of the Building Contract, and the consequential discharge of Mr Talevski from his obligations to perform under it, did not have the effect of rendering complete the work hitherto not complete.
22. Accordingly, my opinion is that s 18E(1)(a) of the HBA has no application to the question of whether or not Mrs Howell's proceedings have been brought in time.
23. The question must be determined by reference to s 18E(1)(b).

Section 18E(1)(b)(i)

1. As the work was not complete when the Building Contract was terminated on 9 November 2012, by reason of s 18E(1)(b), the seven year period within which proceedings for breach of statutory warranty were to be commenced ran from the date for completion of the work "specified or determined" in accordance with the Building Contract.
2. Section 3B(1) of the HBA dealt only with the question of when "completion of residential building work" occurred and thus had no implications for the operation of s 18E(1)(b)(ii).
3. The "date for completion of the work" that was "specified" in the Building Contract was "32 calendar weeks from the date the work is due to commence". [4]
4. The General Conditions contain provision for extensions of time. [5]
5. Between 24 August 2007 and 27 November 2008, Mr Talevski made written requests for extensions of time. Mrs Howell said in her first affidavit: "The total number of days requested by [Mr Talevski] in his extension of time requests … amounted to 228 days on my calculation. If these 228 working days is added to the period of time under the Contract for [Mr Talevski] to complete the construction, this would adjust the completion date from approximately April 2008 to approximately February 2009".
6. Mr Bland, who appeared for Mr Talevski, submitted that the work was not complete when the Building Contract was terminated. It followed, Mr Bland submitted, that the proceedings were out of time for the purposes of s 18E(1)(b) because they were not commenced within seven years of the date for completion of the work "specified or determined" by the Building Contract.
7. This was not the basis on which Mr Talevski appeared to assert, in his List Response, that the proceedings were of time. In his List Response, Mr Talevski appeared to make the opposite assertion and to contend that the basis on which the proceedings were out of time was because the relevant work was complete by 2009; and that time ran from 2009 for that reason. A limitation defence such as is available under s 18E must be pleaded to be effective. It does not extinguish the jurisdiction of the court to entertain the plaintiff's claim. [6] That is because such a provision as s18E bars the remedy, not the right [7] and "it is always left to an individual to choose whether to forgo the right conferred by statute" [8] and thus waive that right. [9]
8. However that may be, it was open to the parties to vary the contract. The General Conditions specified that any variation must be "in writing signed by each party". [10]
9. There are numerous communications between Mr and Mrs Howell and Mr Talevski showing that, despite the differences that arose between them, they agreed that the date for completion of the work would be extended well beyond April 2009.
10. Thus: 1. on 25 June 2011, Mr Talevski wrote to Mrs Howell's son, Edward: "Once again, I have no problem in finishing my work … [m]y ultimate aim is to fulfil my requirements of our agreement and help as much as I can wherever I can within my Scope of Works. Your indecisions and procrastinations on this matter are continuing to significantly delay this project." 1. on 2 July 2011, Mr Talevski wrote to Mr and Mrs Howell: "Yes, it is true that I have other projects, but under no circumstances will I redirect any funds to your project. It is contractual suicide. I have suffered financial losses on this project amounting to the hundreds of thousands of dollars. Your request is unethical. I have discussed the water proofing to death. I will not deal with it anymore. I have no greater wish in my life now, than to see the end of my responsibilities on this project as outlined in the 'summary of Building Works' dated 26th May 2007. I am willing to outline a simple two month plan that will see you substantially complete your project and make it ready for occupation. It all hinges on your ability and willingness to move forward." 1. on 6 May 2012, Mr Talevski wrote to Mr and Mrs Howell: "Well guess what, I am firing on all cylinders, [I] have no intention of going bankrupt and you are stuck with me. As I have said on many occasions, my greatest wish is and has been from day one to finish your house. It has been a total embarrassment. I refuse to undertake one building activity at a time. I cannot work at your pace and the never-ending changes and interferences. I need all the information to be provided upfront, I want to tackle the project my way, spend two to three weeks and complete my contractual obligations." 1. on 17 May 2012, Mr and Mrs Howell replied: "At this juncture, [w]e think it is wise to put aside the blame game and concentrate on taking sensible measures to catch up on 18 months of lost time. In your e-mail you have expressed that you have intentions to carry out your contractual obligations. We would like to focus on moving forward and having these items you raised and the entire construction project satisfactorily completed." 1. on 22 May 2012, Mr Edward Howell, on behalf of Mr and Mrs Howell, wrote to Mr Talevski: "Despite many attempts to reason with you and implore you to finish work on...Cabramatta Rd, it has now been over 3 months since any work was carried out. Your letters indicate that you have an intention to carry on with your work, but there has been no action to support these claims … We believe a reasonable amount of time to carry out your contractual obligations on the house is three weeks from the date of this letter. We expect that you will complete them or make reasonable steps towards doing so. If within this period of time you fail to meet these commitments we will consider our contract with you void and will be seeking damages to compensate and complete these works." 1. on 27 June 2012, Mr Talevski wrote to Mr and Mrs Howell seeking information in relation to a number of matters including: the colour, shape and make of the garage door; the colour of downpipes; the balustrades for external and internal stairs; and the "light fittings to complete the job". . The Court Book contains a copy of what purports to be Mr and Mrs Howell's 8 August 2012 reply to Mr Talevski's letter. Mr Talevski vigorously denied in cross-examination receiving that reply. However, the larger point is that on 27 June 2012 he was seeking information concerning matters necessary to complete the work.
11. These communications had the effect that the Building Contract was varied to extend the date for completion of the work. It is not clear to what date, precisely, the parties extended that date, although Mr Talevski was last on the site in late August 2012. What is clear is that the parties agreed to extend the date for completion beyond July 2011, such that the proceedings were commenced within seven years of that date, and thus within time.

Defective and incomplete work

1. There is some measure of agreement as to the extent to which there were defects in the work performed by Mr Talevski and the extent to which work was incomplete.
2. There is also agreement as to the cost of rectifying the alleged defects and of completing outstanding work.
3. In relation to the matters that remained in dispute, I directed the parties to prepare a schedule in the nature of a Scott Schedule setting out the competing contentions, particulars of the evidence relied upon and making provision for my decision.
4. The parties prepared a schedule in response to that direction and I have completed the schedule with my conclusions in relation to the outstanding amounts. That schedule is an attachment to these reasons.(Schedule of Defects in Dispute)

Failure to mitigate

1. In closing submissions, Mr Bland submitted that Mrs Howell had failed to mitigate her loss and submitted that: "[Mrs Howell] was required throughout the build to provide certain items and information to [Mr Talevski] so that he could proceed with the project and complete the work, however there were countless delays by [Mrs Howell]. [Mr Talevski] had written numerous letters to [Mrs Howell] requesting items and information to be supplied on time, she failed to do so, however she clearly understood the requirement of supplying items and information on time …".
2. Mr Bland then referred to a number of passages in his cross-examination of Mrs Howell.
3. However, Mr Bland did not attempt to develop the submission to explain how Mrs Howell's alleged conduct would affect her entitlement to recover damages for defective and incomplete work the subject of her claim.
4. For example, Mr Bland did not attempt to develop a submission showing that the project would have been completed earlier had Mrs Howell provided the "items and information" to which Mr Bland referred to "on time" or to show that, but for these matters, Mr Talevski would have completed the work without the defects that I have found.
5. In the result, I am not able to reach any conclusion as to Mr Bland's submissions on this point.

Rent claim

1. Mr Talevski was aware that the Building Contract was for a duplex and that Mr and Mrs Howell intended to live in one apartment and rent out the other.
2. Thus, for example, in April 2007, Mrs Howell said to him: "Our plan is to build a duplex. We will live in one unit and will rent out the other one to help pay down the mortgage".
3. A result of Mr Talevski's failure to complete the work called for by the Building Contract is that Mrs Howell has not been able to rent out the apartment that she is not living in.
4. I am satisfied that such loss of rent flows ordinarily and naturally from the breach of the Building Contract that Mrs Howell has established [11] and that such loss is recoverable.
5. Mrs Howell adduced expert evidence that the reasonable rent that would have been recoverable for the relevant unit was $1,400 per week.
6. In closing, Mr Hicks and Ms Anderson submitted: "[Mrs Howell] claims for loss of rent for the value of 1 duplex from the date of termination (9 November 2012) for 37 weeks, being the reasonable period for the rectification works to be performed".
7. Mrs Howell also made the following two further claims: 1. costs incurred by Mrs Howell to make the property habitable immediately following termination - $26,090.50; 2. incidental costs being rent or moving costs when the rectification works are performed - $56,968.57.
8. Mr Hicks and Ms Anderson did not seek to develop any of these claims, and the latter was subject to the somewhat cryptic qualification that it was "subject to the findings of McDougall J in Scripture Union Children's Special Service Mission v Prime Industrial Pty Ltd. [12]
9. If these claims are to be pressed, I will require further assistance to understand how they can be justified on the evidence.

Conclusion

1. The parties should confer and agree on what further steps are necessary to resolve the issues that have arisen between the parties.
2. I will list the matter for directions at 9.30 am on a date convenient to counsel.
3. Counsel should confer and agree on an appropriate date and let my Associate know.

Endnotes

1. Statutory references hereafter are to the Home Building Act 1989 (NSW), unless otherwise stated.
2. Adopting brackets, thus "[ ]" and "{ }", to incorporate the relevant wording.
3. For example, McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476-477; [1933] HCA 25 (Dixon J); J D Heydon, Heydon on Contract (2019, Thomson Reuters) at [24.470].
4. Clause 6 of the General Conditions.
5. Clause 7 of the General Conditions.
6. For example, The Owners-Strata Plan 89005 v Stromer [2021] NSWSC 853 at [49] (Williams J).
7. As recently reiterated by the High Court in Price v Spoor [2021] HCA 20 at [5]-[10] (Kiefel CJ and Edelman J), [40]-[41] (Gageler and Gordon JJ) and [52], [78]-[79] and [87] (Steward J);
8. At [41] (Gageler and Gordon JJ).
9. For example, Commonwealth v Verwayen (1990) 170 CLR 394; [1990] HCA 39 at 405-406 (Mason CJ) and 426 (Brennan J).
10. Clause 1.
11. See Hadley v Baxendale (1854) 2 CLR 517; [1843-60] All ER Rep 461 at 466.
12. [2005] NSWSC 736.

Amendments 08 September 2021 - Coversheet amendments to case title and case citation. Typographical errors at [32] and [49] corrected. 09 September 2021 - Typographical error in [50] changed. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 September 2021