Icbudak v Symmetric Homes Pty Ltd (Building and Property) [2021] VCAT 1074

1. Order that the First Respondent pay to the Applicants $117,061.70.

2. The proceeding against the Second, Third and Fourth Respondents is struck out.

Mr N. Phillpott of Counsel and Mr B Reid of Counsel

1 The Applicants ("the Owners") are the owners of a large two-storey house in Craigieburn ("the House").

2 The first respondent ("the Builder") is a building company. Its director is a Mr Yorenc, who is a registered builder.

3 The fourth respondent ("Mrs Alinc") is Mr Yorenc's sister. The third and fourth respondents are husband-and-wife. The third respondent ("Mr Alinc") is also a registered builder. Mr Alinc and Mr Yorenc have carried out building work together in the past. The Second Respondent ("Alsa Constructions") is a building company controlled by Mr Alinc.

4 By a major domestic building contract dated 2 August 2010 ("the Contract"), the Builder agreed to construct the House for Mrs Alinc for a contract price, including GST, of $379,000.00, in accordance with the architectural plans and engineering designs described in the Contract.

5 A building permit for the construction was issued by the relevant building surveyor on 1 September 2010. In the Building Permit:

(b) Mr Alinc is named as being "the contact person" for the Builder;

(c) the cost of the building work is stated to be the contract price of $379,000.00;

(d) Mr Alinc is named in the building permit as the building practitioner who is to be engaged in the building work; and

6 Construction of the House was completed by 26 November 2010 when an occupancy permit was issued. The occupancy permit identifies the Builder as having built the House and the contact person is said to be Mr Alinc.

7 Following completion of the House, Mr and Mrs Alinc moved in and lived there for a little over two years.

8 By a contract of sale dated 12 February 2013, Mrs Alinc sold the House to the Owners.

9 After moving into the House, the Owners noticed a number of defects. They complained to Mr and Mrs Alinc and also to Mr Yorenc.

10 When the Owners complained to Mr Yorenc, he told them that they should pursue their complaints with Mr and Mrs Alinc who, he claimed, had carried out all of the work on the House following lock-up.

11 Over the ensuing years, various tradesmen and workers came to the House and carried out remedial works but the defects were not rectified to the Owners' satisfaction. Mr Icbudak said that he believed that some of these people were employed by Alsa Constructions.

12 This proceeding was commenced by the Owners of 1 August 2017 against the Builder and Alsa Constructions, claiming the cost of rectifying the alleged defects.

13 On 18 December 2017, the Tribunal, of its own motion, joined Mr Alinc as the Third Respondent to the proceeding.

14 On 11 September 2018, Mrs Alinc was joined as the Fourth Respondent on the application of the Owners. On 28 March 2019, the Tribunal on its own motion joined the Second Applicant as an applicant.

15 The matter was fixed for hearing on 17 March 2020, but that hearing date was vacated by order of the Tribunal made on 13 March 2020, because of the late filing by the Owners of the engineer's report upon which they now rely.

16 The matter came before me for hearing on 9 March 2021. The Owners appeared in person. Mr J. Grant of Counsel appeared on behalf of the Builder and Mr N. Phillpott of Counsel appeared on behalf of Alsa Constructions and the Third and Fourth Respondents.

17 During cross examination of the Owners, Mr Phillpott called for the production of video recordings of water leaking through the rear balcony that Mr Icbudak had referred to several times while giving his evidence. When these were produced and viewed by Counsel, Mr Phillpott sought an adjournment of the hearing to enable him to obtain instructions from his clients' expert witnesses in regard to what was shown in the video recordings.

18 Mr Grant supported the application, stating that the Builder might well want to engage its own experts in regard to what was shown.

19 I ruled that I would hear the rest of the lay evidence, conduct an on-site inspection of the House and then adjourn the hearing to 1 September 2021 with two days allocated, for the purpose of receiving expert evidence followed by oral submissions.

20 When the hearing resumed on 1 September 2021, Mr B. Reid of Counsel appeared for all Respondents in place of Mr Grant and Mr Phillpott. No application was made to further cross-examine Mr Icbudak in regard to the video recordings that had provoked the adjournment.

21 Concurrent evidence was given on 1 September 2021 by Mr Berkowicz, a Quantity Surveyor, on behalf of the Owners, and Mr Jeffery and Mr Grimes, also Quantity Surveyors, on behalf of the Respondents.

22 Whereas Mr Berkowicz stressed several times during his evidence that he was a Quantity Surveyor, both Mr Jeffrey and Mr Grimes claimed a wider expertise. It appears from Mr Jeffrey's resumé that he was a qualified carpenter in 1980 and that he has worked in project management and property management. It appears from Mr Grimes' resumé that, apart from his 13 years experience as a Quantity Surveyor, he has a diploma in Building and Construction.

23 The evidence of these three witnesses occupied the whole of the first hearing day and, on the following day, I heard the evidence of the Owners' engineer, Mr Liden.

24 The hearing extended into a third day, when Mr Icbudak and Mr Reid spoke to written submissions they had prepared.

25 The lay evidence was given in the form of witness statements and documents they had filed, which were verified by sworn evidence.

26 The lay evidence on behalf of the two Owners was contained in three documents that they had filed, amounting to 14 pages. There were two witness statements and a further document, which purported to be further Points of Claim but, by its nature, appeared to be a further witness statement.

27 The two Owners appeared by video link at the same time on the same mobile telephone. Mr Icbudak confirmed the correctness of the information in the documents that had been filed and gave almost all of the lay evidence upon which the Owners relied. Mrs Icbudak gave some evidence in support, but added little to her husband's evidence.

28 Since they were not present during the construction of the House, the evidence of the Owners was confined to the documents they had discovered, their observations of the various defects about which they had complained, the complaints that they made and the responses they had received to those complaints. Mr Icbudak also gave evidence as to his suspicions as to who was responsible for the construction and the defects.

"I do not know what private arrangements Fatma Alinc had with her husband in respect of the carrying out of any building works but there is no evidence of any signed documents between Fatma Alinc, her husband or Symmetric Homes."

30 He said that he first became aware that the House had been constructed by the Builder in mid July 2015, after going through some documents related to the purchase. He said that he made a number of attempts to call Mr Yorenc and in response, he was contacted by Mr Alinc, who asked him not to involve Mr Yorenc.

31 On 7 October 2016, Mr Icbudak sent an email to Mr Yorenc complaining about the defects and received the following reply from him:

"I'm not sure why you always saying you want to go with insurance regarding this issue. Warranty insurance doesn't work this way. The balcony was ripped out and redone again by the owner Taner after I handed over the property. As soon as someone touched the building warranty insurance will not cover it. So that's going to get rejected I could tell you that. I know for a fact that Taner did so many things to that balcony it won't be covered under the warranty. So your best bet would be to get in touch with Taner and resolve the issue as you bought the property from him. Thanks" (sic.)

32 Mr Icbudak was extensively cross-examined. Both Owners denied that they had seen any of the defects about which they complained when they inspected the House prior to its purchase. They said that they had at least two inspections, and possibly a third. The first inspection took place at night and there was at least one inspection during the daytime. They said that no defects in the House were pointed out to them before the purchase.

33 Apart from the occasional contribution from Mrs Icbudak, virtually all of the Owners' evidence was given by Mr Icbudak.

34 Mr Icbudak's gave his evidence in a measured way without overstatement, accepting my direction as to what was and what was not relevant. I found him to be a cooperative and a believable witness.

35 In contrast, the evidence of each of the three lay witnesses for the Respondents raises serious concerns.

36 Although all of the objective evidence clearly points to the House having been constructed by the Builder, the evidence of Mr Yorenc and Mr and Mrs Alinc was that the Builder only constructed it to lock-up stage and that, thereafter, construction was completed by Mrs Alinc as an owner-builder. I do not accept that evidence.

37 First, it is inconsistent with all of the relevant documents. There is no evidence whatsoever to support the partial construction allegation, apart from the oral evidence of these three persons. All of the documentation is against it. If what they said was true, there would have been some supporting documentation, but none was produced. They would also have committed a number of offences under the Building Act 1983 ("the Building Act").

38 Secondly, I am satisfied that all three of them gave some false evidence. The difficulty then is deciding what, if anything, was true in the evidence they gave. This is particularly so as the story shifted and changed as they gave their evidence.

39 Mr Yorenc said in his witness statement that his sister asked him to construct "...the structural stages of the building, including the slab, framing, roofing and external walls." He said that she told him that she thought that Mr Alinc "...did not have a lot of experience in building double storey from beginning to end...". He said that he agreed to do that work at cost.

40 The problem with that evidence is that the Contract that was then signed:

(a) was not confined to the structural stages but was for the whole of the construction; and

(b) did not specify that the work was to be done at cost.

41 Further, it appears from the Building Permit that the building practitioner who constructed the House for the Builder was Mr Alinc, not Mr Yorenc.

42 When I questioned Mr Yorenc about the Contract, his answers were as follows:

SENIOR MEMBER: And your company entered into a building contract, domestic building contract, with your sister, Fatma, to construct the house?

SENIOR MEMBER: The contract sets out the plans and the architectural and engineering drawings.

SENIOR MEMBER: And you were to construct or your company was to construct the house in accordance with those. Is that so?

SENIOR MEMBER: And there was a contract price agreed upon?

MR ICBUDAK: And that's set out in the contract?

SENIOR MEMBER: And that contract price was paid to you or your company.

SENIOR MEMBER: So, there was no deduction made for the contract price?

MR YORENC: Oh, there was a deduction made on works that were done by my sister.

SENIOR MEMBER: Now you know - - you've had a look at the copy of the contract. You're familiar with what it looks like?

SENIOR MEMBER: And then you see that there's a section of the contract which deals with works that are excluded from the contract?

SENIOR MEMBER: And that's just crossed through. There is nothing in there. Are you aware of that?

MR YORENC: Yeah, I am. The reason, I'll tell you the reason for that, because initially at the start when I did the contract my sister wanted help in terms of building it you know, and obviously I was trying to help my sister out, and they didn't know what works they were going to do for the construction of it, you know, plastering or painting so, we decided to save money. So, we basically decided this as we were going. It wasn't like at the start where they identified the contractors that they want to use themselves, and we said oh, we will work it out later. We said what do you want to do? I will give you a credit back, and we worked it as we went. That was the reason why we did notify it at the start of the building contract.

SENIOR MEMBER: I see. I thought you told me earlier that she paid you the contract price?

MR YORENC: No, she did, but I'm saying the reason why we didn't put it on the special condition, excluded items at the start is because we didn't know at the start what she wanted - - what she was going to be doing with the construction, it wasn't clear at the start.

SENIOR MEMBER: So, you didn't know how much of the work you would be doing and how much your sister would be doing?

MR YORENC: Yeah, I would definitely be doing it to lock-up, the structure side, and that's why she gave the work to me, because I had the experience to do that, but, you know, to the fit-off, all the fit-off, internal stuff, you know, the landscaping, I was aware that she wanted to do those part of the works, but it wasn't clear at the start so

SENIOR MEMBER: If you didn't know how much of the work you are going to be doing, how did you arrive at the contract price?

MR YORENC: No, I gave the contract price as a complete. And we do that. It's a standard procedure, even my clients now will agree, we give a complete price and halfway through the construction they might come up and say we want to do the floorboards ourself, and can you please work out what the amount is and give me a credit on that, and we do it, so - -"

SENIOR MEMBER: Did it ever occur to you Mr Yorenc the relevant building surveyor might think that because you're the builder according to the building permit and you're the builder - -

SENIOR MEMBER: Who applies for the occupancy permit, that the relevant building surveyor might think that you've done the lot?

MR YORENC: The relevant building surveyor might think, yeah, but we - - in terms of what the relevant building surveyor might think, is that what you're asking?

SENIOR MEMBER: Well, I mean, see, this is a regulated area and it's regulated in order to protect mainly consumers.

SENIOR MEMBER: So, you've got to be a registered builder to carry out domestic building work.

SENIOR MEMBER: So, you're presumably a domestic builder as the director of the company.

SENIOR MEMBER: And I think you said in your witness statement you were a DB-U?

SENIOR MEMBER: And so, your company can go ahead and build houses and it can get the relevant insurance.

SENIOR MEMBER: And everybody thinks or who is presumably involved thinks that's all very well because you've got a building company with a registered directed who is carrying out the work.

SENIOR MEMBER: If you're entering into contract with parties for the cost for the whole job, and then only doing part of the work, you don't think that somebody might get the wrong idea, and suspect that perhaps you did all the work yourself?

MR YORENC: No, look it's a very usual thing to happen. We do it all the time, you know, and like we have clients that are painters, they're not builders, and they want to do their own painting. We don't notify our building surveyor that the painting is done by the client. As long as there is an understanding between the client and the builder, they can't come back later on and say there's a defect on the paint, you know, there's a written confirmation via email or a variation or some sort of confirmation that we've done together and agreement and the building surveyor doesn't get involved in that. As long as the main, you know, the inspection of the path, the frame inspection, main inspection and the occupants, permits are all safe, that's all the building surveyor basically looks at, you know.

43 I find it difficult to believe that a registered builder would be so ignorant of the legal requirements as to give that evidence.

44 Mr Yorenc did not explain why, if Mr Alinc did not have sufficient experience to construct the House, the Building Permit referred to Mr Alinc as being the registered builder who was to be involved in the construction or why the Building Permit made no mention of Mr Yorenc.

45 When I asked him why he had applied for the Occupancy Permit as the builder when he claimed that he had not built the whole of the House, he said that it is very common for a builder to allow an owner to do part of the work in order to reduce the cost.

46 That evidence ignores the fact that, by s.25A of the Building Act 1993, the relevant building surveyor was required to be notified of any change of builder. As at the relevant time, that section stated (where relevant):

(1) If a building permit has been issued in respect of building work to be carried out by a building practitioner ............ and subsequently the engagement of the building practitioner .......... ends, that building practitioner .......... and the owner of the building or land in respect of which the permit is issued must, within 14 days after that engagement ends, each give the relevant building surveyor written notice of the ending of that engagement.

(2) If a building permit has been issued in respect of building work and subsequently a building practitioner .... is engaged to carry out the building work, the owner of the building or land in respect of which the permit is issued must, within 14 days after that engagement, give the relevant building surveyor written notice of the engagement including details of -

(a) the building practitioner's registration under this Act; or

........................................................................

(3) A builder who is engaged to carry out domestic building work after a building permit is issued in respect of the building work must, within 14 days after that engagement, give the relevant building surveyor written notice of the engagement including details of the required insurance by which the builder is covered.

There was no notice given, either by the Builder or Mrs Alinc to the Relevant Building Surveyor that the engagement of the Builder ended at lock-up.

47 Further, it was unlawful for Mrs Alinc to have carried out the work herself without a permit under s.25B of the Building Act, which provided (at the relevant time) as follows:

An owner of land or a building must not carry out domestic building work as builder on that land or in respect of that building if the cost of the work (estimated in accordance with section 201) is more than $12,000 unless the owner -

(a) has been issued with a certificate of consent for the work; or

(b) is a builder who is registered under Part 11; or

(c) is an architect who is registered under the Architects Act 1991; or

(e) is carrying out the work in accordance with an emergency order, a building notice or a building order made under Part 8.

48 There is no evidence that she applied for such a permit.

49 The Certificate of Insurance issued by QBE Insurance ("the Insurer") and dated 16 August 2010 states that:

(a) the builder is "Symmetric Homes Pty Ltd", the Builder;

50 The insurance certificate purports to cover all of the work but, under the Ministerial Order, it would cover only the work that the Builder carried out. There is no suggestion that the Builder ever notified the Insurer that it had not carried out part of the work.

51 The Occupancy Permit for the House was obtained by the Builder. It noted that the contact person for the Builder was Mr Alinc. There is no reference to Mrs Alinc being an owner-builder and no suggestion that the Builder was not still the builder of the House.

52 Mr Yorenc denied that the Builder performed rectification work, although, on his own evidence, at least some of the defective work, such as the foam cladding on the west elevation that became dislodged and required replacement, was done by the Builder.

53 Mr Yorenc was a most unimpressive witness whose evidence seemed to shift from time to time according to what he thought would suit his case. There are too many inconsistencies in his evidence for it to be truthful.

54 Mr Alinc said in his witness statement that the Builder was engaged to "...undertake the structural building works at cost price...." and he would undertake the remaining works as her husband. He did not explain why that was not the agreement that was documented.

55 He said that the Builder "...completed the Structural Works up to around lock-up stage..." and then handed the building over to Mrs Alinc to complete the remaining works in late October 2010.

56 He said that, in around late November 2010, Mrs Alinc asked the Builder to obtain an Occupancy Permit and they then moved into the House.

57 He said that it was then decided that, due to his wife's deteriorating health, they needed a smaller house and so they sold the House to the Owners.

"13. In or around 2015, Mr Icbudak contacted me to make a complaint about a leak in a balcony of the Property. I discussed the issue with my wife, and she requested that I return to the Property to rectify the leak.

14. I returned to the Property and replaced all the balcony tiles and reapplied the balcony waterproofing. I then discovered that the leak in the balcony was actually caused by the sliding door to the balcony and, accordingly, stopped the leaking by fixing the sliding door. Mr Icbudak confirmed that the leak had been fixed and, at the time, expressed no issue with the way in which I had fixed it."

59 When he gave evidence, he said that this account was not correct and that paragraph 14 should be removed. He said that, in fact, he reconstructed the balcony and replaced the tiles while he and his wife were still living in the House.

60 It is common enough for people to make mistakes when they prepare a witness statement. However, in this case he linked the repair to an initial complaint by the Owners, a discussion with his wife and a request by her for him to attend to the complaint. His account of that chain of events could not have come from his recollection because he now acknowledges that none of those things happened. What is said in his witness statement is simply untrue.

61 This was in the witness statement that was filed on his behalf. It was not his sworn evidence. Nevertheless, it was not corrected until he entered the witness box and it is reasonable to infer that those were the instructions that he gave to his solicitors.

62 In paragraph 17 of his witness statement, he said:

"17. I had several conversations with Mr Icbudak where I explained that the items that he was complaining of were not defects but were normal wear and tear on the Property. In addition, I told him on a number of occasions that Symmetric Homes had only undertaken the structural works on the Property and this is why my wife had asked me to return to the Property and undertake the rectification of the balcony leak and other minor defects that he had complained of. Mr Icbudak refused to accept this."

63 In the witness box he acknowledged that he did not "...return to the Property and undertake the rectification of the balcony." He did it while he was still living there. That must affect his credibility and raise the question, what other parts of his evidence are untrue?

64 Another concern is the explanation concerning why, since he was a registered builder, did he not build the House himself? He offered two reasons:

(a) In paragraph 6 of his witness statement, he said that "Symmetric Homes had more experience than me".

(b) In his oral evidence, he said that, at the time, he had built 10 or 15 houses, but he did not have the time to concentrate on building the House.

65 Neither explanation is consistent with the following facts:

(a) The Builder is described as the builder on the Building Permit;

(b) The contact person for the Builder named on the Building Permit, is Mr Alinc;

(c) The building practitioner named in the Building Permit as the person to be engaged in the building work is Mr Alinc;

(d) The Builder is named as the builder in the Occupancy Permit;

(e) The contact person for the Builder named in the Occupancy Permit is Mr Alinc;

(f) Neither Mr Yorenc nor his registration number are mentioned in the Building Permit or the Occupancy Permit;

(g) Mr Alinc agreed that he built the house next door at that time for another of his brothers-in-law. That is also a two-storey house and, from the photographs, has quite a complex roof structure. No reason was suggested why, if he had the ability to build that house, he did not have the ability to build the House.

66 These facts would suggest that, contrary to the sworn evidence of Mr and Mrs Alinc and Mr Yorenc, the building practitioner to be used by the Builder in the construction was Mr Alinc, not Mr Yorenc. If Mr Yorenc was the one with the experience, and Mr Alinc was the one without the experience, as the three of them would have me believe, that would not have been the case.

67 I am not satisfied that the reason why the Contract was entered into with the Builder and not with Alsa Constructions has been disclosed. However, I am satisfied that it was not because Mr Alinc lacked experience or that did not have the time to build the House. Moreover, since he was the building practitioner for the construction from the issue of the Building Permit, it is unlikely that there was any handover.

68 Since he was the building practitioner to carry out the construction for the Builder, there is no reason why the job would have been split in the way the Respondents' witnesses now claim.

69 When asked by Mr Icbudak whether he or Mrs Alinc had any receipts or invoices that would verify that they took over the work, he said that they did not, adding that he only kept records for seven years. These issues arose within the seven-year period. If what they said was true, I think that any corroborating evidence would have been retained.

70 I do not accept that Mr Alinc's evidence was truthful.

71 Mrs Alinc said that she had originally intended to engage her husband's company, the Second Respondent, to construct the House, but decided to ask her brother, Mr Yorenc, to undertake the structural work because Mr Alinc had only had his builder's licence for "for over a year".

72 When I asked her why she considered that her husband did not have sufficient experience to build the House when he had built other houses and was a registered builder, she said that that was not the only reason that she engaged the Builder.

73 When Mr Icbudak put to her in cross-examination that her husband had built the house next door, she said:

"It wasn't whether he was able to do it or not do it. Yes, he did have heaps of experience, and my brother did."

74 She said that her brother agreed that he would undertake the structural works "...up to around Lock Up Stage..." and that she would do the rest of the work herself.

75 She also said that her brother had agreed that she could pay for materials and trades and undertake whichever of the works she was able, in order to reduce the overall cost of the build. She did not say whether she did that, or what parts of the "structural works" she carried out herself to reduce the cost, nor did she say what credits she received from the Builder for the work and materials she supplied herself, although Mr Yorenc had suggested that there were credits. Such a vague arrangement would suggest the need for an accounting exercise to adjust what she spent against the contract price, but there was no evidence that such an exercise was even undertaken, much less documented.

76 She then acknowledged having entered into a major domestic building contract with the Builder to construct the whole of the House for a price that was intended to represent the cost of the whole House. She did not say why she did that, if the intention was that the Builder would only construct up to "around lockup stage", whatever that phrase meant.

77 She said that, in late October 2010, the Builder "...completed the structural works and handed the Property over to me to complete the remaining works.' She did not say with any precision what these remaining works were. If it was for any works beyond lock up stage, that was a substantial proportion of the construction that she claims to have done in only a month. If she did that, it was without a building permit.

"17. In or around 2015, Mr Icbudak contacted my husband complaining of alleged defects within the Property, primarily related to a leak which Mr Icbudak said was coming from the balcony. Accordingly, and in good faith, I asked my husband to return to the Property and rectify the leak. My husband returned to the Property and, thereafter, told me that he had rectified the balcony leak."

79 When she gave evidence, she said that this paragraph was "not correct", mirroring the same correction that her husband made. Since the work to the balcony was done while she was living in the House, I cannot see how she could ever have believed that it was correct. It was simply untrue.

80 As with her husband, this was in the witness statement that was filed on her behalf. It was not her sworn evidence. Nevertheless, it was not corrected until she entered the witness box and it is reasonable to infer that those were the instructions that she gave to her solicitors.

81 As stated above, in her oral evidence she said that the reason her husband did not build the House was not through lack of experience, as she had suggested in her witness statement, but because she was receiving medical treatment and he was concentrating on that. However, she acknowledged that he was building other houses at that time. Presumably he was able to concentrate on those. I note that that included the house next door.

82 When asked whether she had any receipts or invoices to show, to separate out what she claimed to have done from what the Builder did, she said:

"after lock-up I did the work, so some of the work scope was done by people who were friends, family, that were licensed tradesmen and because it was my first dream home some people just did it out of you know their own good will. Some we just bought the materials."

83 She said that she paid the tradesmen in cash. When I asked her to confirm that she had no invoices or receipts for the work, she said:

"I've moved out so many times I don't even - - I've - - I don't keep track of things, I throw them out"

84 When she sold the House to the Owners, she did not tell them that she had carried out any of the construction herself. If she had been an owner-builder, she could not have lawfully sold the House without complying with the requirements set out in the Building Act. The relevant parts of s.137B(2) at that time were as follows:

"A person who constructs a building must not enter into a contract to sell the building under which the purchaser will become entitled to possess the building (or to receive the rent and profits from the building) within the prescribed period unless -

(a) in the case of a person other than a registered building practitioner -

(i) the person has obtained a report on the building from a prescribed building practitioner that contains the matters that are required by the Minister by notice published in the Government Gazette; and

(ii) the person obtained the report not more than 6 months before the person enters into the contract to sell the building; and

(iii) the person has given a copy of the report to the intending purchaser; and

(b) the person is covered by the required insurance (if any); and

(c) the person has given the purchaser a certificate evidencing the existence of that insurance; and

(d) in the case of a contract for the sale of a home, the contract sets out the warranties implied into the contract by section 137C.

The "Prescribed period" at the time was 6 years and 6 months after issue of the occupancy permit, which in this case, was 26 November 2010. The contract of sale was signed on 12 February 2013.

(a) obtain the required report or give a copy of a report to the Owners;

(b) obtain the required insurance or give an insurance certificate to the Owners;

(c) include in the Contract of Sale the warranties implied into it by s.137C;

(d) inform the Owners that she had built any part of the House herself, if that had indeed been the case.

86 Consequently, the Owners would have had no cause to believe that the House had been constructed by any person other than the Builder.

87 No explanation for her conduct appears in either her witness statement or her oral evidence.

88 I am not satisfied that Mrs Alinc was a truthful or reliable witness.

89 The Owners' evidence was factual and substantially uncontested. Mr Yorenc and Mr and Mrs Alinc gave slightly different versions of a common story which are not only internally inconsistent but inconsistent with the available documentary evidence, which tells a different story. Given the reservations expressed above concerning credibility, I must prefer the documents to the story told by the Respondents' three witnesses.

90 There was no evidence produced by Mr or Mrs Alinc of them paying any tradesmen, no emails or other communications passing between either of them and any tradesmen, no documentation of the alleged "hand over", and certainly no communication between Mrs Alinc and the Relevant Building Surveyor to the effect that she had taken over the job.

91 Why the three of them are seeking to move responsibility for the defective work from the insured Builder to an uninsured woman with serious health issues and unknown financial resources does not appear from the evidence. However, this is protective legislation intended by Parliament to protect persons such as the Owners and it is not to be avoided by people making up a story like this without any objective evidence to support it.

92 I am satisfied that the Builder constructed the House, using the services of Mr Alinc as the registered building practitioner. That is what the documentary evidence establishes and I find that is what occurred.

93 As subsequent owners of the House, the Owners are entitled to the benefit of ss. 8 and 9 of the Domestic Building Contracts Act 1995, which, where relevant, are as follows:

"8. Implied warranties concerning all domestic building work

The following warranties about the work to be carried out under a domestic building contract are part of every domestic building contract -

(a) the builder warrants that the work will be carried out in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract;

(b) the builder warrants that all materials to be supplied by the builder for use in the work will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new;

(c) the builder warrants that the work will be carried out in accordance with, and will comply with, all laws and legal requirements including, without limiting the generality of this warranty, the Building Act 1993 and the regulations made under that Act [4] ;

(d) the builder warrants that the work will be carried out with reasonable care and skill and will be completed by the date (or within the period) specified by the contract;

(e) the builder warrants that if the work consists of the erection or construction of a home, or is work intended to renovate, alter, extend, improve or repair a home to a stage suitable for occupation, the home will be suitable for occupation at the time the work is completed;

......................................................................................................

In addition to the building owner who was a party to a domestic building contract, any person who is the owner for the time being of the building or land in respect of which the domestic building work was carried out under the contract may take proceedings for a breach of any of the warranties listed in section 8 as if that person was a party to the contract ."

94 Of the defects complained of, eight were identified in the report of Mr Liden and others were identified in an earlier report obtained by the Owners. The author of that report, Mr Elsaafin, was not called, but two of the defects he identified were acknowledged in Mr Jeffrey's report.

95 Mr Reid did not submit that I should ignore Mr Elsaafin's report, but said that I should give it little weight. Certainly, where the opinions in that report conflict with Mr Jeffrey's reports, I must prefer the latter, because that evidence was given on oath. Moreover, while Mr Jeffreys assessed a rectification cost for these defects, Mr Elsaafin, gave only a range. Mr Jeffreys acknowledged the existence of two of the defects identified by Mr Elsaafin that were not later included in Mr Liden's list, but said that the others were not defects. Since Mr Elsaafin was not called, I must prefer Mr Jeffrey's evidence.

96 The measure of damages for a breach of Contract is what it would cost to put the innocent parties into the position they would have been in if the breach had not occurred. In a much-quoted passage in Robinson v Harman [1848] EngR 135; (1848) 154 ER 363, Parke B said (at p.365):

"The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed."

97 I need to find, on the balance of probabilities, what it will cost the Owners to have the defects rectified to the standard required by the statutory warranties.

98 As to the cost of rectification, there was a substantial difference in approach between the Quantity Surveyors in regard to margin and preliminaries.

99 It is common in this Tribunal to calculate the cost of rectification on the basis of the base cost that will be incurred by the rectifying builder in sourcing the necessary materials and labour, adding on an allowance for contingencies where appropriate, and then adding on a builder's margin, which is commonly 30%,

100 Mr Berkowicz adopted a different approach, allowing a margin of only 15% and adding other allowances to take account of the builder's overheads, including recovery of a proportion of the cost of its office and managerial staff, as well as preliminaries, including a site survey, insurances, scaffolding, site clean and small tools and an engineering consultant. He also allowed a 10% contingency.

101 Mr Jeffreys allowed only a 20% margin for the rectifying builder, which is below what is commonly allowed in this Tribunal for rectification work. He costed all of Mr Liden's items, although he disputed that some were defects for which the Builder was responsible. Mr Grimes allowed the same margin as Mr Jeffreys but he costed only two of Mr Liden's items. Both allowed a contingency of 5%, compared with the 10% allowed by Mr Berkowicz.

102 Although Mr Reid was at pains to point out that the engineering design of the pillars supporting the rear balcony was defective, Mr Jeffreys made no allowance in his costing of the replacement of the balcony for engineering fees. He also made no allowance for the construction of the integrated footing system that Mr Liden said would be required.

103 Mr Reid submitted that I should find that Mr Berkowicz's costing was excessive. He suggested that a number of items, particularly the allowances for an engineer and for site supervision were doubled up. I think that this submission arises partly from a misreading of Mr Berkowicz's report. In the rectifying builder's costings and quotation, what he will be allowing for is not just for the staff who will be employed on this particular job, but also the staff back at the office whom he has to pay and all his office overheads. The quoting builder will have to take that into account, because he will have to quote a price that will not only return him a profit but also pay for the overheads that he has in running his business.

104 Mr Reid also submitted that I could not rely upon Mr Berkowicz's costings because they were not specifically based upon a recognized source, such as Rawlinson's or Cordell's construction costs guides, but were derived from Mr Berkowicz's own data base which had not been produced. Mr Berkowicz explained that the data base was built up for use within his practice as a Quantity Surveyor and that the charges and allowances were appropriate.

105 Mr Reid submitted, correctly, that the factual basis and assumptions upon which an expert opinion is given needs to be proven. However, that does not apply to the expert's body of knowledge or his tools. The formulae and algorithms of quantity surveyors are their tools of trade. I do not have the expertise to understand them or know how they should be applied. That is why one has expert witnesses. The expert, who has the expertise and understands it all, provides an opinion that the decision maker, who has no mastery of that body of knowledge, can rely upon.

106 I thought that Mr Berkowicz was an impressive witness who appeared to give his evidence in a measured and thoughtful way. He was not shaken in cross-examination. His expertise lies exclusively in quantity surveying, unlike Mr Jeffery and Mr Grimes, who are also general building consultants. Mr Reid submits that his assessment is too high, but I think that the margins used by Mr Jeffreys and Mr Grimes are much too low for rectification work, particularly for what appears to be difficult work that might command a premium. I have to choose which opinion to accept and I prefer the evidence of Mr Berkowicz, because I think that his assessment is more likely to represent the cost that will actually be incurred by the Owners in having this work rectified.

107 There are two sliding doors opening onto the rear balcony that have been damaged in the course of Mr Alinc's attempts at stopping the water ingress. Mr Jeffreys agreed they need to be replaced and assessed a base cost of $3,300.00.

108 There is a timber floorboard in the family room that is water damaged. Mr Jeffreys agreed that it needs to be replaced and assessed a base cost of $280.00.

109 Mr Liden said that the floor levels to the garage area, adjacent to the main door opening has minimal drainage fall of between 2mm-20mm entrance over the first metre from the door. He said that there was internal water damage to the skirting and bottom wall plate to both ends of the door opening and adjacent to the stair entrance. He said that, to address the defect, a surface strip drain needs to be installed to the northern perimeter of the garage, which is the garage entrance and connected to the lawful point of discharge.

110 Mr Jeffrey agreed that a surface strip drain should have been installed between the edge of the garage slab and the external paving, but said that he had been instructed by the Respondents that the external paving had been installed by Mrs Alinc. I do not accept that the House was partly constructed by Mrs Alinc and I am satisfied that this is a defect.

111 There are two parts of the costings on this item, one being the cost of

repairing the water damaged internal linings, and the other being the cost of the strip drain. Mr Berkowicz allowed $2,550.00 for plastering, repairing the damaged internal linings and painting, on the basis that was better to replace whole sheets of plaster than patch the walls. Mr Jeffreys allowed $600.00 to replace only the damaged parts of the plaster and made no allowance for painting in his report. He said in evidence that a further $750.00 should be added for painting. Overall, his costing for the internal linings was $2,100.00.

112 Mr Grimes allowed $1,375.00 for the walls and internal linings.

113 On this issue I prefer Mr Berkowicz's evidence. I do not believe that the Owners would be placed in the same position as if the breach had not occurred if they were left with patched walls.

114 As to the cost of installing the drain, Mr Berkowicz allowed $3,760.00 whereas Mr Jeffery allowed $1,940.00. Mr Grimes allowed $1,885.00. There are differences in the cost of connecting to the lawful point of discharge and in the cost of the drain itself. Mr Jeffery and Mr Grimes have allowed 14 and 16 hours labour respectively. Mr Berkowicz calculated it on a per-metre basis with an allowance of $1,000.00 for the connection.

115 I will allow Mr Jeffrey's figure, plus an additional two hours that Mr Grimes said would be needed for the installation, because I think it is likely that, even if it took 6 instead of 8 hours to connect the drain, a plumber would charge for a full day. At Mr Jeffrey's rate of $90.00 per hour, the figure becomes $2,120.00.

116 When that is added to Mr Berkowicz's allowance for the internal linings the total rectification cost becomes $4,670.00.

117 The front porch steps have subsided at the end furthest from the House. A small gap of about 5mm has opened up at the top to the steps where they join the front porch, but there has been no settlement at that end. Mr Liden said that this is probably because they have been dowelled into the front porch and the porch itself is supported on piers.

118 Mr Liden said that the steps should be replaced and put onto a proper footing.

119 The steps are shown in the Contract drawings and so I am satisfied that they were part of the Builder's scope of works.

120 However, it is clear from Mr Liden's evidence that the cause of the settlement is the drying effect of a tree in the nature strip a few metres away. He agreed with Mr Reid's suggestion that there was no engineering design for the steps.

121 There is no evidence that they are resting on a deficient footing. The problem seems to be that the design of the steps did not take the tree into account. Although I would have thought that the Builder would have noticed the tree, it was entitled to follow the plans.

122 I am not satisfied that this is a defect for which the Builder is responsible.

123 Concrete paths have been laid around the House. They were laid without a Caneite material to separate the concrete from the walls of the House and the downpipes and other penetrations. It also appears that the soil upon which they were laid has been built up and not compacted sufficiently, because the paths have settled and are now at an angle.

124 Although an aerial photograph in Mr Liden's report shows that this paving was installed at the time of construction, it does not appear in the Contract drawings and so, unless there was a variation, and there is no evidence of that, they were not within the Builder's scope of works.

125 Mr Liden said that the articulation joints in the polystyrene cladding have been omitted and/or incorrectly installed.

126 He said that vertical and horizontal control joints (including PVC starter channels) must allow tolerance for movement and must comply with the manufacturer's details.

127 In cross-examination, both he and Mr Berkowicz, acknowledged that they did not know the identity of the manufacturer. That information has not been disclosed by the Builder, despite an order for discovery having been made. Nevertheless, Mr Liden said that vertical joints should have been installed. A note on the engineering drawings states:

"REFER ARCHITECTURAL DRAWINGS FOR ARTICULATION JOINT LOCATIONS AT 5000 MAX CENTRES:"

128 Mr Reid suggested that the engineering drawings contemplated a brick outer cladding. That is not stated in the engineering drawings. It refers to "BRICK/VENEER" which is equivocal. However, Mr Liden said that the articulation joints were nonetheless required.

"From my inspection, I found that control joints had been installed as required by the manufacturer, however, a small crack had developed in one location less than 1 meter away from the installed articulation joint."

130 It was clear from his oral evidence that he did not know who the manufacturer was and so its "requirements" are unknown. Only the Builder is privy to such information and it has not been disclosed. What Mr Jeffery described as an articulation joint is a vertical line in the render shown in a photograph. It is impossible to say whether or not it is a properly formed articulation joint because no such evidence was given. If the render cracked only 1 metre away, it would not seem to have been effective.

"Given the age of the dwelling is in excess of 10 years old and only two minor cracks have been noted, in my opinion it is reasonable to assume the product installed has been installed in a manner that meets the manufacturer's requirements."

132 That is an unjustified assumption. First, there was evidence that a section of the cladding fell away on the western wall, and there is now a further allegation that it is falling off elsewhere. I refused to allow the Owners to add this latest complaint to their claim because it would have required an adjournment to allow the Builder to meet it, but it illustrates the danger of making assumptions as to the performance of the render, based upon its appearance on the day Mr Grimes was there.

133 Secondly, the issue is whether the work was carried out in a proper and workmanlike manner, and Mr Liden said that it was not. This is a structural issue, Mr Liden is an engineer and there is no contrary engineering evidence. I must therefore accept his evidence.

134 The Owners are entitled to be put into the position they would have been in if the articulation joints had been installed, unless that is an unreasonable course to adopt, and I do not find that it is unreasonable.

135 Mr Jeffery assessed a base cost of $1,550.00 to cut further articulation joints with an angle grinder and seal them. Mr Grimes allowed a base cost of $1,240.00 to repair the cracks in the render that he saw. That does not address the problem of the absence of articulation joints. Neither Mr Jeffery nor Mr Grimes addressed the problem identified by Mr Liden.

136 Mr Berkowickz assessed a base cost of $11,460.00 to install the required articulation joints and make good. Mr Reid submitted that I ought to discount that evidence because there were some articulation joints there. I am not satisfied that any proper articulation joints have been installed.

137 As stated above, I am not satisfied that the external paving was part of the Builder's scope of works and there is no evidence that it was done by the Builder under a variation.

138 The drainage relates to the concrete paving laid at the rear of the House. The plans show this part of the site to be lawn. I am not satisfied that concreting this area was part of the Builder's scope of works and there is no evidence that it was done by the Builder under a variation.

139 There is a central balcony that forms a walkway between the House and the studio above the garage. The Owners complain that water leaks through it when it rains. They said that the leaking is very substantial, and has poured out the penetrations for the light fittings, caused damage to the balcony and short-circuited the electricity.

140 Mr Jeffery said that he blocked off the drain and ran a hose on the balcony during his inspection and found that no water passed through. Mr Grimes did the same during his inspection with the same result. Although I accept their evidence about these tests, neither of them observed the balcony during extended rainfall.

141 It was put to Mr Icbudak in cross-examination that the balcony was not leaking to the extent that he claimed, but he maintained that it was, and said that he had kept a video recording of water leaking through that he made each time it rained. After he had referred to this video a number of times, Mr Phillpott called for its production and it was sent to both counsel and to me. Mr Reid submitted that I should not find that the video is in evidence but, even if it is not, I have Mr Icbudak's evidence of the extent of the leakages, that fact that he produced what he claimed was a video recording the extent of the problem taken over several years and that, after it had been called for and examined by counsel, no further suggestion was made to Mr Icbudak that the leaking had not occurred to the extent that he claimed or at all.

142 In addition, the Respondents have removed the soffit lining on the underside of the balcony and replaced the water damaged plaster with timber for part of its length and left the rest exposed. It is unlikely they would have done that for no reason.

143 I am satisfied that the balcony is leaking to the extent described by Mr Icbudak.

(a) there was only a 6mm stepdown from the House to the balcony at one end and from the studio over the garage to the balcony at the other end. The architectural plans required a 90mm stepdown from the House and a 190mm stepdown from the studio;

(b) instead of two drainage outlets as required by the plans, there was one drainage outlet in the southeast corner;

(c) particle board sheeting, which is primarily adopted for internal use, had been used as floor sheeting. He said that, apart from its external use, it has insufficient strength to withstand the live floor loading, He said that swelling of the material of 2-3mm was visible on sheet ends with previously cut and unsupported cut ends cantilevered over joists;

(d) Upper central balcony movement was apparent at all four corners;

(e) one of the supporting posts had twisted due, he said to the fact that it is mounted on a pad instead of a continuous footing extending from the House to the garage. He said that this was an engineering design issue.

145 Mr Liden said that the balcony needs to be demolished and rebuilt with a proper stepdown. There is no contrary engineering evidence.

146 Mr Reid submitted that the faulty design of the pad footing was a design fault and not the fault of the Builder. That is so, but the balcony was defectively constructed to start with, since it was built without the required stepdown. The evidence was that the purpose of the stepdown is to avoid water penetration.

147 Mr Reid submitted that the exact cause of the leaking had not been demonstrated, and the onus was upon the Owners to show precisely where the water was coming from. He said that until that was done. it was not reasonable to demolish and rebuild the balcony.

148 Although they bear the overall burden of proof, the Owners have established that water is pouring through the balcony in heavy rain and that attempts by the Respondents to prevent that happening have been unsuccessful. The Owners have provided engineering evidence that the balcony needs to be demolished. The evidentiary burden has shifted to the Builder to show that some lesser scope of works would prevent the water penetration and bring the work into compliance with the Contract. It has not done so.

149 Mr Reid suggested that the twisting of one of the supporting pillars referred to by Mr Liden might have caused the membrane to break. However, there is no evidence that that has occurred. There is nothing to indicate that the tiles on the balcony have moved, and they are laid directly above the membrane.

150 I am satisfied that the balcony needs to be rebuilt with a proper stepdown.

151 Mr Berkowicz assessed a base cost of $36,895.40 to demolish and rebuild the balcony. From that figure, there should be deducted $5,282.00 for the construction of the strip footing, which was not within the Builder's scope of works. The base cost then becomes $31,613.40. Mr Jeffery assessed a base cost of $29,400.00 for a similar scope of works. Comparing the two, I think that Mr Berkowicz's costing is more comprehensive.

152 Mr Grimes' costing of $16,915.00 does not contemplate rebuilding the balcony to the correct level.

153 The front balcony also has an inadequate stepdown. The plans required a 190mm stepdown. Mr Liden said that it had only a 14mm stepdown and that there were drainage issues evident. He said that the balcony should be demolished and rebuilt with a proper stepdown.

154 Mr Jeffery said that he thought that the demolition and reconstruction of the balcony could not be justified, although he thought that the grading of the tiles should be addressed. In support of his opinion, he said that there was no evidence of water penetration. That is not the case. There is water staining on the soffit underneath the balcony. The Owners also said that there had been water entering the doorway. Mr Jeffery pointed out, correctly, that the Balcony is largely covered, but I note that it is also on the second storey facing south. I cannot assume that because it is covered, it does not require the proper stepdown, particularly when there is evidence of water penetration.

155 The Owners are entitled to have the balcony built in accordance with the plans, unless that is an unreasonable course to adopt, and I am not satisfied that it is.

156 Mr Berkowicz assessed a base cost of $5,969.00. Mr Jeffrey assessed $4,320.00. Comparing the two assessments I think, again, that Mr Berkowicz's assessment is more comprehensive.

158 Th total base cost of the rectification works that I have allowed is $57,057.40, as follows:

159 That is less than the total base cost of $82,100.00, assessed by Mr Berkowicz for all of the work, including that which was not the responsibility of the Builder. Consequently, I should make a corresponding reduction in the margin and add-ons that he has allowed in his assessment.

160 The preliminaries figure of $27,030 will be reduced to $18,862.53 and the consulting fees and permit and authority fees, totalling $14,450.00, will be reduced to $10,083.74.

161 Consequently, the amount to be awarded will be $117,061.70, arrived at as follows:

Consulting fees and permit and authority fees $10,083.74

162 When I adjourned the hearing of this proceeding on 10 March 2021, I informed the parties that, because of my imminent retirement, any submissions on costs would also be heard when the hearing resumed.

163 The Owners provided some evidence of the costs that they have incurred, being legal fees, expert witnesses and Tribunal fees. Mr Reid has persuaded me that that it is not a practical course to deal with the Applicants' cost in this order, so I will reserve them.

164 The proceeding against the second, third and fourth respondents will be struck out. I was proposing to make no order as to their costs, because the only reason they are parties to this proceeding is that Mr and Mrs Alinc falsely claimed that they constructed part of the House and Alsa Constructions staff attended to some of the rectification work. However, it may be that Mr Reid wishes to make some submissions about that and I ought to give him the opportunity to do so, so those costs will be reserved as well.

165 There will be an order that the First Respondent pay to the Applicants $117,061.70. The proceeding against the second, third and fourth respondents will be struck out. Costs will be reserved.