Kratz v East Coast Formwork & Concrete Pty Ltd

Kratz v East Coast Formwork & Concrete Pty Ltd - [2016] NSWCATCD 94 - NSWCATCD 2016 case summary — Zoe

The Contract

The trade contractor's submissions raise an issue regarding the parties to the contract.
The evidence in the proceedings and as submitted by the builder was that the the applicants, Frederick Kratz, and Christine Kratz were the owners of the land the subject of these proceedings. They were in the process of building a new dwelling on it. To do that Frederick Kratz held an owner/builder's licence under the Act. Mr Frederick Kratz engaged his son Michael Kratz who traded as a building contractor under the style or business name Plan2Build as a 'main builder'.
The contract between Mr Kratz and Plan2Build is not in evidence.
The contract the subject of these proceedings was between Michael Kratz and Fred Kratz described as principal contractors and East Coast Formwork & Concrete Pty Ltd described as a trade contractor.
Given the express terms of the contract I find that Christine Kratz has no cause of action against the trade contractor or the first and second respondents given that she was not a party to the contract. Her claim against them is dismissed.
The trade contractor next submits that because the Trade contract refers to a head contract, the logical conclusion to draw is that the head contract is between Mr Fred Kratz as owner and Michael Kratz trading as Plan2Build as builder so that the trade contract must be between Michael Kratz trading as Plan2Build and East Coast Formwork & Concrete Pty Ltd with the result that Mr Fred Kratz cannot be both a party to the head contract and a party to the trade contract.
The basis for this submission is clauses 16 and 19 of the Trade contract. Clause 16 deals with the situation if the head contract is ended. Clause 19 is the definitions clause which defines the 'head contract'.
The trade contractor also raises the issue 'that there is considerable uncertainty as to which of Fred or Michel are parties to the contract'.
I find on the basis of the documents in exhibit A, more particularly the trade contract, that Michael Katz did not sign the trade contract. There is only one signature for the 'Principal Contractor' at the foot of page 57 of exhibit A and I find that it is Mr Fred Katz's signature by comparing that signature with that on his affidavit. In addition Mr Fred Kratz makes it clear in his evidence that he signed the trade contract.
In contrast Mr Michael Kratz's evidence does not state that he signed the trade contract. He states that he was informed that the trade contractor had been engaged to do certain work leading me to find from this evidence that he was not aware that he was stated to be a party to the trade contract. If he knew that he was a party to the contract he would not need to be informed that the trade contractor had been engaged to do work. He would have known that fact from his knowledge of the existence of the trade contract.
I find that Mr Michael Kratz had no intention to enter into the trade contract, that he did not sign it and was not a party to it. As a result I find that Mr Michael Kratz has no cause of action against the respondents. His action against them is dismissed.
I will also consider the nature of the trade contract. It is clear that it relates to only a portion of the work required to construct Mr and Mrs Kratz's residence. Clauses 3 and 17(iii) of the trade contract make that clear. It also fits in with the fact that Mr Kratz had an owner builder's licence. He was at liberty to engage as many contractors as necessary to construct the residence. Although he described Michael Katz as the main contractor, the fact that he engaged the trade contractor to carry out the Scope of the Trade Works evidences the fact that the entirety of the works was not let to Michael Katz. The trade contract Scope of the Trade Works referred to work which was to be carried out early in the construction process being as best as can be deciphered from the poor quality photocopy of the trade contract in exhibit A as being 'Supply + Placement to Works Related to Footings, Ground Works, Excavation, Screw Piers and Suspended Works to Level 1 - In accordance to Quote dated 27 April 2014.'
The Trade Contract required the trade contractor to commence the Scope of the Trade Works on 5 May 2014 and to complete them by 31 July 2014 which date was stated to be an estimate only. The trade contractor was to execute the Scope of the Trade Works in accordance with the Project Trade Contract Conditions, in particular clauses 1 and 4. Payments under the trade contract were to be made in 4 stages which were identified and described on the front page of the Trade Contract.
I find that once the trade contractor had completed all of the work the subject of the 4 stages described and identified on the front page of the Trade Contract, it had completed the Scope of the Trade Works and its obligations to perform further work were at an end, subject to its defect liability obligations as set out in clause 5. I make this finding by way of the proper construction of the trade contract and in the absence of any condition in the Project Trade Contract Conditions dealing with completion of the Trade Works.
The trade contractor was obliged to remedy defects within the Defects Liability Period which was linked to practical completion of the head contract which on the facts of this case would have been when Mark Kratz had achieved practical completion of the works referred to in the contract that he had entered into with his parents Fred and Christine Katz.
I find that the subject matter of the trade contract concerned itself with residential building work as that term is defined in the Act. I do not think that there is any dispute about that. Section 18B of the Act implies warranties into every contract to do residential building work and, I find, were implied into the trade contract. At the time the trade contract was entered into, 5 May 2014, the warranties set out in section 18B of the Act were: '(a) a warranty that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract, (b) a warranty that all materials supplied by the holder or person 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) a warranty that the work will be done in accordance with, and will comply with, this or any other law, (d) a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time, (e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling, (f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder's or person's skill and judgment.'

[4]

Chronology

I will now set out a short chronology comprising the following findings of facts.
The trade contractor commenced work on or about 12 May 2014.
At all times Mr Michael Kratz was working on the site as the 'main builder'.
In or around August 2014 issues arose between the parties about the work being performed by the trade contractor.
On 8 October 2014 a serious dispute arose on site between the parties. The trade contractor wrote to the owner about that in an equivocal manner suggesting that it would not return to site and seeking a response from the owner at the same time.
On 30 October 2014 the trade contractor collected its scaffolding from the site.
On 5 November 2014 the owner sent the trade contractor a Notice of Default which set out a number of defective items of work. The Notice required the trade contractor to commence rectification work by 12 November and to complete the work by 19 November 2014. The Notice also stated that if the trade contractor didn't make an adequate response the owner would seek two alternative quotes to complete the works.
The trade contractor states that it didn't receive the Notice of Default. On that basis it didn't respond.
The owner obtained quotes in November and December 2014 for the carrying out of incomplete work and rectification of defective work. It also carried out some rectification work.
On 20 January 2015 the owner's solicitors wrote to the trade contractor stating that the letter was a notice of default under clause 13(a) of the trade contract.
The owner's solicitors identified substantial breaches of contract alleged against the trade contractor and stated that it was required to remedy the substantial breaches than seven days of the date the letter. The owner's solicitors further stated that if the trade contractor did not comply with the owners requirements to rectify by 27 January 2015 the owner might exercise his right to terminate the contract for cause in accordance with clause 15 of the trade contract. The owner's solicitors concluded by stating that in the interests of resolving the dispute and to avoid the cost of litigation, their client required the trade contract to resume the works in the near future in the time nominated by the owner and to rectify the breaches without delay.
The trade contractor replied to this correspondence on the 26 January 2015 stating that it was not in substantial breach of the contract. In addition the trade contractor stated that on 8 October 2014 it was told by the owner to leave the site and that it was not welcome back on the site.
On 6 February 2015 the owner's solicitors again wrote to the trade contractor enclosing an engineer's report regarding defects in concrete columns and the concrete beams. The owner's solicitors requested certain documentation from the trade contractor by Wednesday 11 February 2015.
On 19 February 2015 the trade contractor engaged a solicitor who wrote to the owners solicitors stating that the trade contractor denied that there had been substantial breaches of contract and further alleging that all work had been carried out in a proper and skilful manner up until the trade contractor was allegedly forced to leave the site on 8 October 2014.
The owner's solicitors responded on 20 February 2015 terminating the trade contract.

[6]

20 January 2015 Notice of Default

On 20 January 2015 the owner's solicitors wrote to the trade contractor stating that their letter was a notice of default under clause 13(a) of the trade contract.
Clause 13 of the Project Trade Contract Conditions dealt with the subject of default. It stated: 'A party is in default of this trade contract if it: (i)is in substantial breach of this trade contract; (ii)becomes insolvent, bankrupt or makes an assignment of that party's estate for the benefit of creditors; iii)makes an arrangement or composition with creditors; or (iv)being a company goes into liquidation.'
The owner's solicitors identified substantial breaches of contract alleged against the trade contractor and stated that it was required to remedy the substantial breaches within seven days of the date the letter.
The owner's solicitors referred to the provisions of the trade contract that they considered to be relevant and by implication breached by the trade contractor, namely: 1. Clause 1(a)(ii) requiring the trade contractor to carry out and complete the trade works in accordance with plans specifications and the law; 2. Clause 4(i) whereby the trade contractor warranted that the trade works would be carried out in a proper and skilful manner; 3. Clause 3(i) whereby the trade contractor was deemed to have accepted the base work as satisfactory; 4. Clause 6(i) whereby the trade contractor indemnified the owner against loss or damage to property including the trade works; 5. A provision not identified whereby the trade contractor was obliged to progress the works in a diligent and timely manner; and 6. Clause 2(a)(iii) whereby the trade contractor was not to leave any detail of the trade works unfinished.
The breaches of contract relied upon by the owner's solicitors were described in the following terms: 'We are instructed that the works are defective (including without limitation concrete columns and beams) in that they do not comply with Australian Standards AS 3600 (2009) - Concrete Structures, are incomplete and not performed to proper building and construction industry standards. Our client confirms that EFC has abandoned that works as it has not attended the property since 8 October 2014 or responded to any communication issued by our clients since that time.'
The owner's solicitors further stated that if the trade contractor did not comply with the owner's requirements to rectify by 27 January 2015 the owner might exercise his right to terminate the contract for cause in accordance with clause 15 of the trade contract. The owner's solicitors concluded by stating that in the interests of resolving the dispute and to avoid the cost of litigation, their client required the trade contract to resume the works in the near future in the time nominated by the owner and to rectify the breaches without delay.
I find as a fact that the trade contractor did not attend at the site after receipt of the 20 January 2015 letter. It did however reply to the letter on 26 January 2015 stating that it was not in substantial breach of the contract and that all work was carried out in a proper and skilful manner and that the owner had been happy with all work carried out on site. In addition the trade contractor stated that on 8 October 2014 it was told by the owner to leave the site and that it was not welcome back on the site.

[9]

Notice of termination

Clause 15 of the Project Trade Contract Conditions stated: 'If a party remains in default 3 working days after the other party has given it written notice requiring the default to be remedied then, without prejudice to any other rights or remedies, the other party may by giving a further written notice end this trade contract.'
The owner's solicitors responded on 20 February 2015 terminating the trade contract. The basis upon which the termination was founded was that the trade contractor had failed to carry out the contract works in accordance with the plans, specifications and the law, in a proper and skilful manner and failed to progress the works in a diligent and timely manner. In addition the owner's solicitors alleged that the trade contractor had failed to complete the works without leaving any detail of the contract works unfinished in breach of clause 2(a)(iii) and failed to rectify the breach or provide justification for the contract not being terminated within the time prescribed by the contract and finally had abandoned the contract works and the contract.
I find that the owner has clearly attempted to follow the contractual procedure in order to terminate the trade contract. The 20 January 2015 letter was given under clause 13 of the Trade contract which deals with default. Although the owner's solicitor's letters dated 20 February 2015 incorrectly refers to clause 14 of the trade contract which relates to suspension, I find that it was clear that the Notice of Termination was given under clause 15 of the trade contract which is headed 'Ending this Trade Contract'. I further find that the owner's Notice of Termination was not given at common law and does not purport to accept a repudiation of the trade contract by the trade contractor.
In order for the owner to initiate a notice under clause 15, it was necessary for the trade contractor to have been in substantial default. Clause15 is conditioned on a party being in default as provided for in clause 13 of the Project Trade Contract which has been set out above.
The grounds of default relied upon by the owner are extracted above and are repeated, namely that the trade works were: 1. defective (including without limitation concrete columns and beams) in that they did not comply with Australian Standards AS 3600 (2009) - Concrete Structures; 2. incomplete; and 3. not performed to proper building and construction industry standards.
There was also a complaint that the trade contractor had abandoned the trade works.
There being no suggestion that any of the grounds listed in clause 13(ii) - (iv) applied, the only ground available to the owner to give a default notice under clause 13 was that the trade contractor was in substantial breach of the trade contract in the respects which I have described. I find that the above matters were relied upon by the owner as being substantial breaches of the trade contract.

[11]

Defective work

The first matter relied upon by the owner was defective work including without limitation concrete columns and beams in that they did not comply with Australian Standards AS 3600 (2009) - Concrete Structures.
The terms of the contract referred to by the owner which could support breaches of the type raised were clauses 1(a)(ii) and clause 4(i). So far as clause 1(a)(ii) is concerned, I find that the trade contract did not refer to or include either plans or specifications. So far as the reference to the 'law' is concerned, I find that clause 1(a)(ii) referred to the warranties implied by section 18B of the Act to which I have referred. Clause 4(i) was a warranty regarding workmanship, similar if not identical to the warranty implied by section 18B(1)(a) of the Act.
I find that as a matter of construction of the trade contract that the owner did contract in reliance on substantial performance by the trade contractor of its obligations to carry out and complete the trade works in accordance with clauses 1(a)(ii) and 4(1). I find that it was natural that the owner would have contracted in reliance on substantial performance of the trade contractor carrying out the trade contract works in a proper and skilful manner. That was in my view a basic requirement of the trade contract.
I also find that there was a substantial breach of those obligations in the instances of the concrete columns and beams as referred to in the McKenzie Burridge & Associates Pty Ltd report which was provided to the trade contractor on 6 February 2015. The defects recorded in that report relating to concrete columns, were described as major defects. The defects in the concrete beams were stated to be outside dimensional tolerances by 1mm in one case, in another case by 19mm and in another case by 5mm. I find that the trade contractor was in substantial breach of clauses 1(a)(ii) and 4(1)b as regards the concrete columns because they were described as major defects. Find that the trade contractor was not in substantial breach of clauses 1(a)(ii) and 4(1) in connection with the concrete beams given that they are not described as major defects and in two instances were outside dimensional tolerances by small measurements. In addition the McKenzie Burridge & Associates Pty Ltd report stated that some of the deviation from plumb might be taken up in render thickness.

[12]

Incomplete work

The second matter was that the works were incomplete.
The terms of the contract referred to by the owner which could support breaches of the type raised were clause 2(a)(iii) and the provision not identified whereby the trade contractor was obliged to progress the works in a diligent and timely manner. I find that the trade contract contains no express term to that effect, although the term implied in section 18B(1)(d) of the Act is that the work will be done with due diligence.
The alleged breach is that the trade contract works were incomplete, which is a different matter to the time taken to complete them which is addressed by the term implied in section 18B(1)(d) of the Act.
I find that as a matter of construction of the trade contract, that owner did contract in reliance on substantial performance by the trade contractor of its obligation not to leave any detail of the trade works unfinished. This was also I find a basic requirement of the trade contract which would have been of a high level of importance to the owner. I find that the owner's reliance on this obligation cannot be considered in isolation and must be considered in conjunction with the obligation to finish or complete the work with the time agreed by the parties.
This may be demonstrated by the fact that the trade contractor would not be in substantial breach of 2(a)(iii) if at the time a clause 13 notice was issued, there was still ample time allowed to complete the necessary work.
The Trade Contract required the trade contractor to commence the Scope of the Trade Works on 5 May 2014 and to complete them by 31 July 2014. However the completion date of 31 July 2014 was stated to be an estimate. I find that the work continued to at least 8 October 2014 without any mention of a complaint from the owner that the Trade Works were incomplete, or perhaps more accurately, had not been completed within the time stated in the trade contract.
So far as the Trade Works were said to be incomplete, I have found that that in September or October 2014, the trade contractor's work had come to a standstill until the time came to do external paths and driveways. That being the case there is no evidence to establish that as at 20 January 2015 the time for the external paths and driveways to be constructed and completed had expired leading to the conclusion that the trade contractor was in breach of clause 2(a)(iii) of the trade contract.
I find that there is no evidence of a substantial breach of clause 2(a)(iii) of the trade contract.

[13]

Works not performed to proper building and construction industry standards

The third matter was that the works were not performed to proper building and construction industry standards.
There was no express term of the trade contract to this effect. This ground of breach may have been a replication of the allegation that there had been a failure to carry out trade works in a proper and skilful manner.
I find that this issue as raised in the owner's solicitor's letter of 20 January to be so general to be of little use. How such a matter could be understood, let alone acted upon by the trade contractor is difficult to see. It is no surprise that on 19 February 2015 the trade contractor's solicitor asked for a complete itemisation of what the owner claimed were the items to be remedied
In Yendex Pty Ltd v Prince Constructions Pty Ltd 5 BCL, 74 Moynihan J stated: 'I am content to approach the matter on the basis that the contractual provision which I have set out above required a notice which conveyed to a "commercial builder" what was said to be amiss so that he (in this case a subcontractor) could turn his mind to it and show cause as clause 41(a) contemplated. That seems to me a correct approach..… Such notice should be unequivocal in order to convey what was amiss so as to identify the default in respect of which cause was to be shown.'
Applying the above passage to this aspect of the owner's letter, I find that the letter was not a proper notice of default in this third aspect because the trade contractor was not told what was amiss so that it could remedy the matter complained of. In this regard there is no difference between a commercial builder or a residential builder or trade contractor. The essential element is that the notice should identify what was said to be amiss to identify the alleged default and in this case what work the trade contractor needed to do to remedy the situation.
For the reasons provided I find that the trade contractor was in substantial breach of the trade contract by reason of the fact that it had performed defective work in the construction of the concrete columns as referred to in the owner's solicitor's letter of 20 January 2015 and as further described in the report from McKenzie Burridge & Associates Pty Ltd which was provided to the builder on 6 February 2015. The trade contractor took no steps to remedy its breach of contract and I find did not return to the site to commence rectification work. By reason of the trade contractor's failure to take remedial action, I find that the owner was entitled to terminate the contract under clause 15 of the project Trade Contract Conditions and that it did so by its solicitor's letter dated 20 February 2015.

[15]

Was the owner entitled to claim for costs expended before termination of the trade contract ?

Paragraphs 19 - 34 the trade contractor's submission's, put shortly, state that the owner is not entitled to obtain an order for damages in its favour if the amounts it claims were expended before 20 February 2015, the date on which, I have found, the contract came to an end.
Authority in support of the trade contractor's proposition is found in Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSWCA 248 as referred to in its submissions, at paragraphs [53] - [69] which are set out below. '53 The notice of contention raises the question whether the Contract was terminated by mutual agreement. The Council long denied this proposition but, on the third day of the appeal, assented to it. Despite the Council's late acceptance of the proposition, the question remains relevant as it exposes a misconception by both parties in the way the issues were addressed at trial. The misconception was that the Council could claim damages from Beckhaus for defective and incomplete work while the work was still in Beckhaus' possession and while Beckhaus was still obliged (and entitled) to execute the work to practical completion. This misconception permeated the conduct of the case by all involved and complicated the identification of the true issues in the case. 54 The reason for the Council's stand is not hard to find. It lies in cl 35.6 of the General Conditions which provided: 'If [Beckhaus] fails to reach Practical Completion by the date for Practical Completion, [Beckhaus] shall be indebted to [the Council] for liquidated damages at the rate stated in the Annexure for every day after the Date for Practical Completion to and including the Date of Practical Completion or the date that the Contract is terminated under Clause 44, whichever first occurs." The Council wished to assert that the Contract remained on foot so as to enable it to make a large claim for liquidated damages. Thus, the Council believed that it was in its interests to contend that the Contract had not been terminated but, at the same time, to claim damages for defective and incomplete work. 55 It is helpful to identify Beckhaus' obligations to perform the work under the Contract, Beckhaus' rights to be paid for its work, and the Council's rights in respect of breaches of the Contract by Beckhaus. Once those obligations and rights are identified, consideration must be given as to whether there was an agreed termination and, if so, how they were affected by the agreed termination. 56 By cl 3.1 of the General Conditions, Beckhaus undertook to execute and complete the work under the Contract and the Council undertook to pay Beckhaus: "(a) for work for which the [Council] accepted a lump sum, the lump sum; (b) for work for which the [Council] accepted rates, the sum ascertained by multiplying the measured quantity of each section or item of work actually carried out under the contract by the rate accepted by the [council] for the section or item, adjusted by any additions or deductions made pursuant to the contract." Thus, by cl 3.1, the Council's obligation was to pay Beckhaus for the work executed and completed. 57 Clause 30.3 provided that, if the superintendent discovered material or work provided by Beckhaus that was not in accordance with the Contract, the superintendent might direct Beckhaus to remove the material from the site, to demolish the work, or to reconstruct, replace or correct the material or work. Thus, by cl 30.3, the Council was entitled to require Beckhaus to remedy defective work before the Council was obliged to pay for it. 58 Clause 35.2 provided that Beckhaus should execute the work under the Contract to the stage of practical completion by the date for practical completion. Beckhaus was obliged, on the date of practical completion, to give possession of the site and the work to the Council and, on that date, the Council was obliged to accept possession. 59 At least while the Contract endured, until practical completion was achieved Beckhaus had no obligation and no right to deliver the work to the Council and the Council had no right to take possession of the work. 60 The Contract provided that the date for practical completion of Separable Portion A was 20 weeks after "Date of Acceptance of Tender" and for Separable Portion B "10 weeks after commencement date for Separable Portion B". Mr Christie, who together with Ms Culkoff, appeared for the Council, accepted that the superintendent probably would have allowed extensions of time to the dates for practical completion until about March 2002. This is not a matter on which any concession was forthcoming from Beckhaus, but it may be accepted that the dates for practical completion were not earlier than March 2002. 61 By cl 37, the defects liability period commenced on the date of practical completion. In terms of cl 37, Beckhaus was obliged to rectify any defects or omissions in the work existing at practical completion. Prior to the fourteenth day after the expiration of the defects liability period, the superintendent could direct Beckhaus to rectify any omission or defect in the work existing at the date of practical completion or which became apparent prior to the expiration of the defects liability period. 62 Clause 42.1 provided for the payment of progress claims; it stated: "Payment of monies shall not be evidence of the value of work or an admission of liability or evidence that work has been executed satisfactorily but shall be a payment on account only ...." Thus, a payment of a progress claim was a payment on account. 63 Clause 44.1 provided: "If a party breaches or repudiates the Contract, nothing in Clause 44 shall prejudice the right of the other party to recover damages or exercise any other right." 64 Clause 44.5 provided that, should the Council take the work out of Beckhaus' hands, the Council should complete the work. Clause 44.6 provided: "When work taken out of the hands of [Beckhaus] under Clause 44.4(a) is completed the Superintendent shall ascertain the cost incurred by the [Council] in completing the work and shall issue a certificate to the [Council] and [Beckhaus] certifying the amount of that cost. If the cost incurred by the [Council in completing the work] is greater than the amount which would have been paid to [Beckhaus] if the work had been completed by [Beckhaus], the difference shall be a debt due from [Beckhaus] to the [Council]. If the cost incurred by the [Council] is less than the amount that would have been paid to [Beckhaus] if the work had been completed by [Beckhaus], the difference shall be a debt due to [Beckhaus] from the [Council]." 65 No provision of the Contract prevented the Council from suing Beckhaus for damages for breach of contract under common law; but that is not to say that, simply by reason of a failure, by the date for practical completion, to complete the work to the standard required, the Council would be entitled to damages for defective or incomplete work. 66 An important part of the Council's case at trial was that Beckhaus at no stage achieved practical completion of either Separable Portion A or B. Master Macready upheld this assertion and, for reasons that I later set out, I have come to the same conclusion. 67 Accordingly, as at the judgment date, the Council rightly denied that practical completion had been achieved. But, it continued - at that stage - to hold Beckhaus to its contractual obligations to perform the work. Thus, on the Council's contention, at the date of judgment, the work remained in Beckhaus' possession; the Council, in effect, having refused to accept possession. 68 While, on this assumption (the Contract still being on foot), the Council may have been entitled to claim damages for delay arising out of Beckhaus' failure to achieve practical completion by the date for practical completion, it could not sue Beckhaus for defective or incomplete work. As long as the Council maintained that the Contract was alive and had not been terminated, and held Beckhaus to its obligation to complete the work in accordance with the specification, on its contention the work remained lawfully in Beckhaus' possession. In other words, it was an inevitable incident of the Council's argument that the work had not been delivered to and accepted by the Council (Beckhaus - on the Council's argument - being in possession of and obliged to complete the work). While the work was in Beckhaus' possession, the Council suffered no loss by reason of defective or incomplete work; the work, not being in the Council's possession, did not at that stage form part of its patrimony. 69 This situation would have changed when the Contract was terminated. When that occurred, the work (in its defective and incomplete state) was handed over to the Council. At that stage, the Council suffered loss by being in possession of defective and incomplete work.'
In Brewarrina Shire Council v Beckhaus Civil Pty Ltd the contract that had been entered into was a complex engineering contract which incorporated the AS 2124 -1992 General Conditions of Contract. In these proceedings the trade contract entered into between the parties was the HIA Project Trade Contract containing 19 conditions. The two contracts are markedly different.
The owner's submissions address the trade contractor's submissions regarding Brewarrina Shire Council v Beckhaus Civil Pty Ltd. They state that the trade contractor's reliance on Brewarrina is misplaced and it is irrelevant whether the rectification work was done before or after formal termination of the contract because the trade contractor was in breach before the termination of the contract.
The owner's submissions in support of the proposition referred to above point out that the trade contractor was obliged to carry out the trade contract works at the reasonable times directed by the principal contractor. Clause 1(a)(iii) of the Trade Contract Conditions so provides. The owners submit that the trade contractor breached this obligation when it failed to comply with the owner's directions in October 2014 and afterwards although the directions referred to are not identified in the owner's submissions.
Be that as it may, the issue is whether the facts asserted entitled the owner to rectify defective work and complete uncompleted work when the trade contract was still on foot.
I find that the owner's reliance on Clause 1(a)(iii) of the Trade Contract Conditions is misplaced. The issue is not whether the trade contractor was obliged to carry out the trade contract works at the reasonable times directed by the principal contractor, in this case the owner. If the trade contractor did not do that, I find that the owner suffered no loss because the trade contractor had the opportunity to carry out the trade contract works at any time before completion was due.
In my view the first matter raised by the owner, namely the clause 1(a)(iii) submission, did not entitle him to carry out rectification work at the trade contractor's cost while the contract was still on foot. As stated in Brewarrina, with the necessary changes to the identity of the parties, 'At least while the Contract endured, until practical completion was achieved' the trade contractor 'had no obligation and no right to deliver the work to the' owner 'and the' owner 'had no right to take possession of the work'. Further, as stated 'No provision of the Contract prevented the' owner 'from suing' the trade contractor 'for damages for breach of contract under common law; but that is not to say that, simply by reason of a failure, by the date for practical completion, to complete the work to the standard required, the' owner 'would be entitled to damages for defective or incomplete work'.
The owner also refers to an express contractual provision, clause 5(b) allowing him to require the trade contractor to rectify non-conforming work. The owner submitted that a direction under this clause could be given before the defects liability period.
Clauses 5(b) and (c) of the Trade Contract stated: 'The principal contractor may direct the trade contractor to correct, remove or replace any non-conforming work before or during the defects liability period.' 'If the trade contractor does not comply with such a direction, the principal contractor may have that work carried out by others and the cost is a debt due and payable by the trade contractor to the principal contractor.'
I agree that clause 5(b) of the contract expressly provides that a direction may be given to the trade contractor before the commencement of the defects liability period requiring it to 'correct, remove or replace any non-conforming work'. Clause 5(b) does not relate to uncompleted work.
The word Direction is defined in the Shorter Oxford English Dictionary, Third Edition as the action or function of directing, aiming, guiding, instructing or administering; conduct; instruction; management, administration. It is also described as an instruction how to proceed, an order, a precept.

[16]

Were directions given under clause 5(b)?

As stated above, the directions relied upon are not identified in the owner's submissions. I find that no direction was given in October 2014 by the owner to the trade contractor under clause 5(b) of the trade contract. In particular I find that the conversation referred to by the owner at paragraph 30 of his 30 October 2013 affidavit did not contain a direction from the owner to the trade contractor to correct, remove or replace any non-conforming work, because the conversation as recalled by the owner did not exhibit any of the qualities of a direction as referred to in the preceding paragraph. In particular the owner did not instruct the trade contractor how to proceed. Nor did he give an order regarding the correction, removal or replacement of non-conforming work.
On 5 November 2014 the owner sent by email a Notice of Default to the builder which contained a long list of defective and incomplete work. The Notice stated that the owner required the builder to commence rectification work by 12 November and to complete that work by 19 November. A direction was also given in connection with uncompleted work.
The trade contractor denies ever having received the email communication being the owner's 5 November 2014 Notice of Default. The trade contract does not deal with the issue of how directions may be given and did not provide for service of notices or any other document by email or any other means.
In the section of these reasons titled 'Chronology' I have had regard to the communications between the parties that followed the owner's 5 November 2014 Notice of Default. I have found that the owner, apart from his 5 November 2014 Notice of Default, also gave the trade contractor a Notice of Default dated 20 January 2015.
I find that the owner's Notices of Default may be classified as directions for the purposes of clause 5(b) of the trade contract since they make it clear that the owner required or instructed the trade contractor to rectify identified items of non-conforming or defective work.

[17]

Was the 5 November 2014 Notice of Default actually given ?

Before considering the effect of the 5 November 2014 Notice of Default it is necessary to consider if it was actually given since that issue has been put into dispute by the trade contractor.
I would state at this point that the parties' submission do not specifically address this issue.
The issue for determination is whether the owner actually gave the trade contractor a direction by its 5 November 2014 Notice of Default to commence and complete rectification, such that he could be said to have complied with clause 5(b) of the trade contract. This issue arises because the trade contractor states that it did not receive the Notice of Default. In his affidavit Mr Papadoupolos states that he has no record of receiving the 5 November 2014 Notice of Default, despite the fact that the owner had his mailing address and mobile telephone number. He also states that he has searched for the email but was not able to find it. His evidence is that he then engaged a computer expert to try and find the document, but that the expert was unable to do so but raised the possibility the that the email had been sent to spam and then deleted because the email had been sent from a different address than previous emails.
I accept Mr Papadoupolos' evidence and find that the 5 November 2014 Notice of Default was not seen or received by the trade contractor.
As regards providing notices or directions by email, the Electronic Transactions Act 2000 is relevant. The objects of the legislation are stated to be: 'to provide a regulatory framework that: (a) recognises the importance of the information economy to the future economic and social prosperity of Australia, and (b) facilitates the use of electronic transactions, and (c) promotes business and community confidence in the use of electronic transactions, and (d) enables business and the community to use electronic communications in their dealings with government.'
In my view section 8(2) of the Electronic Transactions Act 2000 is relevant. That section states: 'If, under a law of this jurisdiction, a person is permitted to give information in writing, the person may give the information by means of an electronic communication, where: (a) at the time the information was given, it was reasonable to expect that the information would be readily accessible so as to be useable for subsequent reference, and (b) the person to whom the information is permitted to be given consents to the information being given by means of an electronic communication.'
In my view the sending of a direction under clause 5(b) of the trade contract would come within the definition of 'giving information' as contained in section 8(5). I also find that the definition of 'a law of this jurisdiction' is wide enough to apply to the contractual principles to be applied in the determination of the owner's building claim under the Act.
As there is no evidence of an agreement between the parties that directions under the contract or any other notifications under the contract may be given by email, there can be no findings under the Electronic Transactions Act 2000 regarding the time of dispatch or time of receipt of the emailed Notice of Default.
In Kavia Holdings Pty Limited v Suntrack Holdings Pty Limited [2011] NSWSC 716 Pembroke J dealt with the situation where it was alleged that an option to renew a lease had been provided by email. The lease did not provide for service of notices by email, but did contain a provision which dealt with the requirements relating to the giving of notices. Importantly, in Kavia Holdings Pty Limited, there was no allegation that the material email had not been received. Although he held that the email in question did not amount to a valid exercise of the option, Pembroke J held that the email was a proper notice under the lease and that: 'Any other conclusion would produce a capricious and commercially inconvenient result that might have wide-reaching and unintended consequences in modern day trade and commerce.'
In the circumstances of this case I do not think that such a conclusion may be made in connection with the owner's 5 November 2014 Notice of Default because of the fact that the trade contract did not provide for the way in which notices or direction might be given, and also because the trade contractor denies ever having received the email attaching the Notice of Dispute.
The issue remains whether a direction that did not come to the attention of the trade contractor is effective, given that the Electronic Transactions Act 2000 does not in my view deem or presume the email to be received.
In Howship Holdings P/L v Leslie and Anor 41 NSWLR, 542 at page 544 Young J. stated in connection with service: 'The ordinary meaning of "service" is personal service, and personal service merely means that the document in question must come to the notice of the person for whom it is intended. The means by which that person obtains the document are usually immaterial. This is clear in cases that have been considered good law over the centuries, including Hope v Hope [1854] EngR 805; (1852) 4 De GM & G 328; 43 ER 534, 539-540; Reg v Heron (1884) 10 VLR 314, 315; Pino v Prosser [1967] VicRp 107; [1967] VR 835, 838. Some of those cases were complicated by the requirement in the former statutes that a person serving initiating process had to endorse the initiating process, but the principle is clear from them.'
In my view similar notions should be applied to the giving of a direction under clause 5(b) of the trade contract. What is important is that the trade contractor actually receives the direction or that it comes to its notice, so that it is in a position to act on it and to comply with it. This is especially so since clause 5(c) of the trade contract allows the owner in the absence of compliance to have the work carried out by others, with the cost being a debt due by the trade contractor.
I find that the owner's Notice of Default dated 5 November 2014 was not a valid direction under clause 5(b) of the trade contract because the trade contractor did not receive it. Nor did it come to the trade contractor's notice until much later. I find that Mr Papadopoulos first became aware of it after 6 February 2015, according to his evidence in this regard which I accept. This finding is an example of the dangers that are associated with email communications in a contractual context in circumstances where the contract between the parties does not expressly provide for the giving of notices, instructions, directions and other communications by email or other means.

[19]

Rectification costs

Mr Oke of Northern Rivers Building Consulting Services Pty Ltd gave evidence on behalf of the owner in his reports dated 9 and 16 October 2015.
Mr Oke stated in his 9 October 2016 report that he had been engaged to peruse certain documentation and to provide a cost estimate. In his 16 October report he also stated that he had been asked to provide cost estimates.
He also prepared a Scott Schedule which listed defective and incomplete work with a total value of $171,618.98, excluding GST.
The owner explains the position in his submissions that he seeks the actual cost paid to Plan2Build for the rectification of defects and completion of work and relies on the report of Mr Oke as an objective comparative point for those costs. I find that reliance on the reports of Mr Oke will not be necessary if the rectification work has been carried out and the incomplete work has been completed. As stated by Meagher JA in Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd and Anor [2001] NSWCA 313, the actual costs incurred in carrying out work will be an 'impeccable' measure of cost.
The owner states that he paid the sum of $140,105.00 to Plan2Build, $10,564.84 to other contractors and $2,459.60 for waste removal. The evidence in support of these expenditures are contained within exhibit A.
The trade contractor's submissions state if I may summarise them, is that the costs claimed by the owner as compared to the amounts paid to Plan2Build 'do not stack up'. I would observe in passing that it would be helpful to have an accountant's report to substantiate such submissions. In these proceedings there are only source documents. I would also add that an explanation for the discrepancies that trade contractor's counsel seeks to point out may be explained by the fact that the owner has not paid Plan2Build all amounts invoiced.
The trade contractor submits that the total amount paid by the owner to Plan2Build in the period 16 July 2014 - 22 June 2015 totals $163,810.00, and further that the amount paid by the owner to Plan2Build in the period 16 July 2014 to 23 February 2015, 5 calendar days after the date the contract was terminated, was $76,602.00. It follows from the foregoing that $87,208.00 was paid by the owner to Plan2Build in the period 24 February 2015 - 22 June 2015 in connection with defective and incomplete work. Yet the owner claims that $140,105.00 was paid to Plan2Build.
Ultimately I do not find the trade contractor's submissions to be helpful.
The position regarding the cost of rectifying defects and completing uncompleted work is set out below.
Mr Fred Kratz in his affidavit of 20 January 2016 in exhibit A states in paragraph 26 that he annexes invoices received from Plan2Build for the rectification and completion of the trade contract scope of works. Annexure FK4 contains those invoices and they are identical to those contained in exhibit C. Those invoices total $140,105.00, the amount referred to in the owner's submissions.
The trade contractor's submissions state that caution should be exercised in connection with the Plan2Build invoices because of the evidence of Messrs F and M Kratz. I do not think that it is necessary at this point to say anything about the quality of either F Kratz's or M Kratz's evidence. As regards Mr Kratz annexing documentary records, I accept those documents and the evidence contained in them. I find that there is no reason not to believe that these invoices were actually rendered by Plan2Build to the owner. In addition Michael Katz stated when being cross examined that 'Fred paid me for East Coast mistakes'. It should also be said that it was put to Mr M. Katz that invoices were created later, and he denied that suggestion.
Mr M. Katz also agreed that an amount of $3,870.00 alleged to have been paid by the owner to Plan2Build did not relate to any issue that Plan2Build had issued to the owner in connection with the rectification and completion of the trade contract scope of works. Mr M. Katz agreed that the payment may have related to other work. This concession relates to paragraph 54 of Mr F Kratz's 30 October 2013 statement. However I do not consider the concession to be material since that paragraph has been superseded by paragraph 26 of his affidavit of 20 January 2016 and annexure FK4 which annexes invoices received from Plan2Build for the rectification and completion of the trade contract scope of works.
As a result I find that the owner received invoices to the value of $140,105.00 from Plan2Build in connection with the rectification and completion of the trade contract scope of works. I also find that based on annexure FK 22 to Mr F Kratz's 30 October 2013 statement that he paid $112,905.00 to Plan2Build for that work. This amount excludes the sum of $3,870.00 as referred to above
I have found that the owner gave an effective direction under clause 5(b) of the Trade Contract, in connection with defective work to columns and beams and is able to claim for the cost incurred in correcting that work after 27 January 2015.
Implementing that finding and based on the evidence that there is in the proceedings, I find that the owner is not entitled to recover for the following amounts which relate to invoices rendered by Plan2Build to the owner in connection with rectification work carried out before 27 January 2015. Tax Invoice date Amount 15/11/2014 $3,240.00 28/11/2014 $2,750.00 7/12/14 $3,800.00 13/12/14 $3,800.00 18/12/14 $3,800.00 22/12/14 $3,800.00 13/01/15 $1,150.00 Total $22,340.00

[22]

Remaining defect claims

I propose to deal with the owner's defect claims which are not dealt with above. There are 3 relevant invoices.
The owner's defects case is contained in the report prepared by McKenzie Burridge & Associates Report dated 10 September 2015. This report describes work carried out by the trade contractor which is said to be defective with reasons in support. As stated, Mr Oke prepared a scott schedule based on the defective work described in the McKenzie Burridge & Associates Report. These two documents state the owner's defects case. As I have stated, on the issue of quantum the owner relies on costs incurred rather than Mr Oke's estimate of costs
However before I proceed with the defect claims, it is necessary that I deal with the issue of the status of Mr Bruce the author of the McKenzie Burridge & Associates Report dated 10 September 2015 which deals with defective work on behalf of the owner.
The trade contractor submits that because McKenzie Burridge & Associates prepared the engineering plans for the works I should give less weight to Mr Bruce's evidence. I find that there is no reason to believe that Mr Bruce is not independent or that his report is not objective. In particular, I do not regard the fact that McKenzie Burridge & Associates prepared the engineering plans for the works should preclude me accepting Mr Bruce's evidence. I have read Mr Bruce's report and find it to be an objective report which states facts and opinions in a straightforward manner without a trace of advocacy on behalf of the owner. I find that Mr Bruce is an experienced expert engineer whose opinion evidence can be accepted by the Tribunal.
The first relevant invoice is dated 23 February 2015 and is in the sum of $4,136.00. The work involved is stated to be remove existing formwork in pool and re-set steps out. Cut concrete beam 0.080mm down that was placed by the trade contractor and jackhammer out to allow concrete pavement to sit on. Drill and epoxy new starter bars into existing contract to form up new steps.
This item of defective work corresponds with paragraph 4.13 in the McKenzie Burridge & Associates Report dated 10 September 2015. The author of the report Mr Bruce states that steps in the pool need to be rectified to allow for normal stair rise and going in accordance with the National Construction Code. He states that the rise in the two top stairs will exceed 220mm and the maximum rise is 190mm. The trade contractor's expert Mr Ware deals with quantum and does not contradict Mr Bruce's evidence. I accept Mr Bruce's un-contradicted evidence.
I will allow the amount claimed in connection with this item, $4,136.00 it being the actual cost invoiced for the carrying out of the work. I further find that the owner has paid for this work, based on page 117 of exhibit A.
The second invoice is dated 1 March 2015 and is in the sum of $4,136.00. The work involved was stated to be, form up steps and epoxy prime, supply concrete pump, concrete and labour to pour concrete pool steps, trowel finish and strip. Cut and grind column in bed 5 to make good. Remove yellow plugs in concrete beams as well as scaffold.
There is a problem with this invoice because it is not clear whether the work to which it refers is defective work or incomplete work.
It is not clear or indeed stated on behalf of the owner what if any item or paragraph in the McKenzie Burridge & Associates Report the work the subject of this invoice relates to, or which defect item in the scott schedule is being referred to. I have considered that the reference to 'Remove yellow plugs in concrete beams' may relate to item 4.18 of the McKenzie Burridge & Associates Report. However the work called for by that item requires grouting as well as removal. The invoice contains no reference to the grouting work.
The evidence does not establish that the work which is referred to in this invoice falls within the defective work described in the McKenzie Burridge & Associates Report. On that basis I find that the work the subject of the invoice dated 1 March 2015 was not defective work for which the trade contractor was responsible.
This invoice which is contained in exhibit C contains a notation that it refers to Item 4 of Mr Oke's Addendum report which deals with incomplete work.
The issue is whether this work is properly incomplete work.
Item 4 states construction of the steps within the swimming pool would comprise the following works, formwork to create five steps of decreasing length with bench seat, being double step width, across width of pool at second highest step level, placing and fixing of reinforcement steel, placing and finishing of concrete suitable for rendering and waterproofing by others concrete line pump hire. This work is different I find to the rectification of the steps referred to in the Plan2Build invoice dated 23 February 2015.
Mr Oke's Addendum report concerns itself with preparing cost estimates for what he describes as 'alleged incomplete concreting works' by the trade contractor. The report then refers to various items of incomplete work which Mr Oke has been instructed to cost as per a plan which is not identified or attached to his report.
The owner has made no attempt to establish by appropriate evidence that specific items of work which were contained in the Scope of the Trade Works had not been completed by the trade contractor. The owner's submissions state that the trade contractor has not filed evidence contradicting the work referred to as being incomplete work, or indeed contradicting Mr Oke's report, leading to the conclusion that the damages claimed for uncompleted work should be awarded on that basis.
It is true that the trade contractor's submissions say very little about the incomplete work and in particular whether the work alleged to be incomplete was actually incomplete.
I find this aspect of the owner's case to be unsatisfactory. Mr Oke's report in my view rests upon an assumption that has not been established by a person who has actual knowledge of the relevant facts. The assumption is that specific items of work referred to in paragraph 2 of Mr Oke's report formed part of the Scope of the Trade Works and was not completed by the trade contractor.
I find that it is for the owner to prove his case on the balance of probabilities. The relevant principles in relation to discharging the burden of proof in civil cases were recently summarised by the New South Wales Court of Appeal in Nguyen v Cosmopolitan Homes [2008] NSWCA 246 at [55] as follows: '(1) A finding that a fact exists (or existed) requires that the evidence induce, in the mind of the fact-finder, an actual persuasion that the fact does (or at the relevant time did) exist; (2) where on the whole of the evidence such a feeling of actual persuasion is induced, so that the fact-finder finds that the probabilities of the fact's existence are greater than the possibilities of its non-existence, the burden of proof on the balance of probabilities may be satisfied; (3) where circumstantial evidence is relied upon, it is not in general necessary that all reasonable hypotheses consistent with the non-existence of a fact, or inconsistent with its existence, be excluded before the fact can be found; and (4) a rational choice between competing hypotheses, informed by a sense of actual persuasion in favour of the choice made, will support a finding, on the balance of probabilities, as to the existence of the fact in issue.'
I find that the owner has not specifically established that the work referred to in the Plan2Build invoice dated 1 March 2015 in the sum of $4,136.00 related to incomplete work. No doubt the fact that the Scope of the Trade Works being couched in such a brief way has not assisted. However the Scope of the Trade Works does refer to the trade contractor's quote dated 27 April 2014 and in my view incorporates the content of that document.
I have had regard to the trade contractor's quote dated 27 April 2014 and find that there is nothing in that document which induces in my mind an actual persuasion that the work referred to in the Plan2Build invoice dated 1 March 2015 in the sum of $4,136.00 was included in the Scope of the Trade Works and on that basis is not and could not be incomplete work, unless by variation or additional work for which there is no evidence.
For the reasons expressed, I find that the owner is not entitled to recover from the Trade contractor the sum of $4,136.00 referred to in the Plan2Build invoice dated 1 March 2015.
The third invoice is dated 10 March 2015 and is in the sum of $4,136.00. The work involved was stated in the invoice to be run straight edges and string lines over all external tiled areas including alfresco area as concrete exceeded the tolerances in the ups and downs. Grind high points and fill low points with floor leveller. Cut and grind piers and beams in alfresco area to make good and plumb. Start fence set out.
As stated with the previous item, it is not clear or indeed stated on behalf of the owner what if any item or paragraph in the McKenzie Burridge & Associates Report the work the subject of this invoice relates to, or which defect item in the scott schedule is being referred to.
Exhibit C contains a copy of this invoice with an annotation 'Item not identifiable - No Comment'. I have had regard to the McKenzie Burridge & Associates Report and can find no reference in that report, which is essentially the owner's defects evidence, putting quantification to the one side, which relates to the subject matter referred in the Plan2Build invoice dated 10 March 2015. I have also had regard to the owner's scott schedule prepared by Mr Oke. There is no item in that scott schedule which is referable to the work described in the Plan2Build invoice dated 10 March 2015.
I find that there is no evidence to support the position that the work the subject of the Plan2Build invoice dated 10 March 2015 was defective work performed by the trade contractor in breach of the trade contract or the implied warranties contained in section 18B of the HBA. Nor have I been referred to any such evidence. For these reasons I find that the owner is not entitled to recover from the trade contractor the sum of $4,136.00 referred to in the Plan2Build invoice dated 10 March 2015.

[23]

Uncompleted work

The evidence in these proceedings persuades me and I find that when the trade contractor ceased carrying out the Scope of the Trade Works in October 2014 it had not completed that Scope and there was still work remaining to be done. At paragraph 33 of his 20 December 2015 affidavit Mr Papadopoulos states 'As EFC's works on FK' project had come to a standstill until the time came to begin the external paths and driveway, EFC continued working on another project'. This evidence establishes in my view that the Scope of the Trade Works was not fully completed by the trade contractor and supports the finding that I have made.
In the reasons which are set out above relating to the Plan2Build invoice dated 1 March 2015 I have explained the parties' positions in connection with uncompleted work. As stated, the owner has not provided evidence to identify the specific work in the Scope of the Trade Works he alleges the trade contractor did not complete. The owner's position is that since the trade contractor has not contradicted this aspect of his case, he is entitled to an order in his favour for the amount he has claimed.
I have stated that the description of the Scope of the Trade Works is brief and based on the trade contractor's quote. For the purposes of ascertaining whether any of the work referred to in the invoices which claim for uncompleted work were part of the Scope of the Trade Works, I find that the description of that Scope is of no assistance and that the trade contractor's quote is the only document that is of any assistance. As stated earlier in these reasons, the Scope of the Trade Works was: 'Supply + Placement to Works Related to Footings, Ground Works, Excavation, Screw Piers and Suspended Works to Level 1 - In accordance to Quote dated 27 April 2014.'
Based on the evidence that there is in the proceedings, namely the invoices that are at annexure FK4 of the owners 20 January 2016 affidavit, the amount invoiced for completion of uncompleted work may be identified as stated below. I have reviewed each invoice as against the Scope of the Trade Works paying particular regard to the trade contractor's quote dated 27 April work. My finding as to whether the work referred to in the invoice was included in the Scope of the Trade Works is in the left hand column. Tax Invoice date Amount Tribunal Finding 16/03/15 $4,136.00 - Path areas Included in Scope of the Trade Works 24/03/15 $6,000.00 - Steps in foyer Included in Scope of the Trade Works 29/03/15 $20,000.00 - Fence Footings Included in Scope of the Trade Works 14/05/15 $2,000.00 - work in area between pool and alfresco Not included in Scope of the Trade Works. 17/05/15 $23,000.00 - pour concrete in area between pool and alfresco Mr Oke was cross examined on this invoice. He stated when questioned that he 'couldn't relate the invoice which is at page 261 of exhibit A to the matter'. Given that Mr Oke prepared a report in support of the owner's uncompleted work case, which is the only evidence which specifically refers to items of uncompleted work, I am not persuaded that the work the subject of this invoice was part of the Scope of the Trade Works. 17/6/15 $3,600.00 - pressure clean exposed concrete area apply 2 coat sealer Included in Scope of the Trade Works 19/06/15 $20,000.00 - Form up and pour footpaths on western side of home entry steps Included in Scope of the Trade Works 28/06/15 $3,600.00 - place plastic, key joints and steel on western side of home and front of home pour concrete and trowel finish Not included in Scope of the Trade Works 29/06/15 $3,600.00 - pressure clean and acid exposed concrete area apply sealer Included in Scope of the Trade Works 17/7/15 $3,600.00 - pressure clean exposed concrete area and acid wash apply 2 coat sealer Included in Scope of the Trade Works TOTAL $89,536.00 $60,936.00

[26]

The claim under the Australian Consumer Law ('ACL')

The owner claims against the trade contractor and the first and second respondent under section 18 of the ACL. The essence of this claim is that the owner contracted with the trade contractor on the basis that it was appropriately licensed under the HBA to carry out the Scope of the Trade Works.
I have had regard to the evidence of Mr Kratz regarding the formation of the trade contract. I have also had regard to the evidence of Mr Papadopoulos regarding that same subject. Their evidence is consistent regarding the facts leading up to the signing of the contract and that the trade contractor provided two quotes. The first was dated 9 March 2014 and the second was dated 27 April 2014.
There is a dispute between them about the signing of the contract. However they both agree that they attended a site meeting on 7 May 2014. Mr Papadopoulos states that he filled out all necessary details and signed the contract on 7 May 2014 leaving it in the site office for signature by Mr Katz which took place on 26 May 2014. Mr Katz states that Mr Papadopoulos took the trade contract with him after the meeting on 7 May and did not return it filled out and signed until 26 May 2014. Mr Katz states that it was then that he signed the trade contract and gave Mr Papadopoulos a copy of it.
The trade contact is dated 5 May 2014.
I prefer the evidence of Mr Papadopoulos regarding the signature of the trade contact. I formed the view that he was an honest person who did his best to give a frank answer to every question that was put to him when he was being cross examined. I found Mr Kratz to be an unimpressive witness because I formed the impression that whenever he did not want to answer a question when being cross examined he stated that he could not recall. He did that on 31 occasions. If I am wrong to have taken such a view of Mr Kratz, his evidence nonetheless establishes that his recollection is very poor and for that reason I am hesitant to prefer his evidence over Mr Papadopoulos' evidence
I find that Mr Papadopoulos filled out all necessary details and signed the trade contract on 7 May 2014 leaving it in the site office for signature by Mr Katz which took place on 26 May 2014. I also find that the trade contractor commenced work on 12 May 2014.
Having regard to the evidence of the parties about what occurred leading up to the signing of the trade contract and the actual signing of the trade contract, there is I find no evidence that the owner was induced to contract with the trade contractor because of anything that was said or done by the trade contractor regarding its licensing status or position under the Act to carry out and complete the Scope of the Trade Works.
Insofar as Mr Katz stated at paragraph 21 of his 30 October 2015 affidavit that he: 'noticed that MP had completed all details on the Contract and had included the license details for ECFC. On this basis I was of the understanding that ECFC was properly licensed to perform the works and relied upon this in agreeing to engage ECFC for the job.'
I do not accept the evidence in the last quoted sentence at all.
I have found that the trade contract was signed on 7 May 2014 by the trade contractor and was signed by the owner on 24 May 2014. By then the trade contractor had commenced work. I find that the owner was happy to accept the trade contractor's quote dated 27 April 2014 and to choose the form of contract that he propose be used. I find that at that point of time, the issue of the trade contractor's license under the Act was not even mentioned. I find that when the trade contractor signed the trade contract and commenced work, the issue of the trade contractor's license under the Act was also not mentioned.
Given these factors, I also find that the trade contractor's license details had no significance at all in connection with the owner's signature of the trade contract when that occurred on 24 May 2014 and there was no reliance by the owner on those details.
Even if I am wrong about there being no reliance by the owner, the owner has not given any evidence of what he could and would have done but for the alleged representation given by the trade contractor. All that he does is state that he would not have engaged the trade contractor. He does not state what other options were open to him and what he would have done differently.
I have had regard to the following statements from Doepel & Associates Architects Pty Ltd v Hodgkinson [2008] WASCA 262. At paragraph 48, Martin CJ stated: 'The conventional principles applicable to cases of this kind are well established. They establish that a party who has been subjected to misleading and deceptive conduct or negligent misrepresentation is entitled to be put in the position in which he or she would have been but for the breach of statutory or common law duty (Gates v The City Mutual Life Assurance Society Ltd (1986) 160 CLR 1). So, where it is established as a fact that a different course of action would have been taken but for the breach of statutory and/or common law duty, the measure of damages is the sum required to put the innocent party, in this case Mr Hodgkinson, in the position in which he would have been but for the relevant breach of duty.' At paragraph 128, McLure JA stated: 'The better view seems to be that an unreasonable underestimation of the cost of construction will not ordinarily result in loss or damage if the owner received a building to the value of the construction costs unless there is a finding that the proprietors would have taken a different course to their financial advantage and that such damage was not too remote: Gates v The City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 13; Warwick Entertainment Centre Pty Ltd v Alpine Holdings Pty Ltd [2005] WASCA 174 [96].'
Both Martin CJ and McLure JA refer to Gates v The City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 in connection with the approach to be taken in connection with the assessment of damages for breach of provisions such as sections 18 of the ACL. At page 13 of that decision Mason J., Wilson J. and Dawson J. stated: 'Because the object of damages in tort is to place the plaintiff in the position in which he would have been but for the commission of the tort, it is necessary to determine what the plaintiff would have done had he not relied on the representation. If that reliance has deprived him of the opportunity of entering into a different contract for the purchase of goods on which he would have made a profit then he may recover that profit on the footing that it is part of the loss which he has suffered in consequence of altering his position under the inducement of the representation. This may well be so if the plaintiff can establish that he could and would have entered into the different contract and that it would have yielded the benefit claimed (cf. Esso Petroleum Co. Ltd. v. Mardon [1976] EWCA Civ 4; (1976) QB 801, at pp 820-821, 828-829; Doyle v. Olby (Ironmongers) Ltd., at p 167). The lost benefit is referable to opportunities foregone by reason of reliance on the misrepresentation. In this respect the measure of damages in tort begins to resemble the expectation element in the measure of damages in contract save that it is for the plaintiff to establish that he could and would have entered into the different contract. So in the present case if the appellant were able to establish that, but for his reliance on Mr Rainbird's representation, he could and would have entered into policies of insurance containing a disability clause of the kind represented by Mr Rainbird, he might then succeed in obtaining an award of damages equal to the benefits which would have been payable under such policies less the premiums paid or payable in respect of them.'
For the reasons provided I dismiss the owner's case against the trade contractor and the first and second respondents for misleading and deceptive conduct under section 18 of the ACL.

At a glance

Court

Decision date

Before

Source

Judgment (29 paragraphs)

Parties

Cases Cited (8)