Lionel Smith v John Emmery

CONTRACT 6The parties entered a written contract on 15 April 2010 for renovations to the home owner's property for a price of $120,000.00. 7Clause 5 of the Contract provides" "The contractor must commence the work within __working days from The date of this contract; or If the approval of the local council or other statutory authority has still to be obtained for the work, the date of written notification of that approval; or If the consent of the lending authority is required, the date of written notification of consent that the work may proceed Whichever is the latest." There is no stipulation of the number of days - this was left blank by the parties. The contract was not subject to finance and no notification was obtained from the local council. 8Clause 6 provided that the time for completion was 20 weeks from the date the work is due to commence as referred to in Clause 5. 9Clause 24 provides for suspension of work by the builder "If the homeowner, without reasonable and substantial cause: Denies the contractor access to the site so as to prevent the work from proceeding, or otherwise prevents the contractor from carrying on the work the contractor may without prejudice to any other rights under the contract, suspend the works by giving written notice to the owner in accordance with clause 38 specifying the reason." No written notice was given in accordance with this clause. 10Clause 25 provides the circumstances in which the contract may be ended and the procedure. In this case the home owner has raised issues with (a) Failure to proceed diligently with the work, and (b) Fails to remedy defective work "The home owner may notify the builder that unless the default is remedied in 10 days the owner will terminate the contract. If the work is not remedied after the request then the owner may terminate by giving written notice." No notice to comply was given nor any written termination under Clause 25. The margin note to the contract clause provides: "The consequences for wrongfully ending the contract may be serious and you should seek independent advice if you are not sure of your right to do so." 11Clause 3 provides it is a general condition of the contract that the builder will comply with all relevant Australian standards, laws and the requirements of the relevant local council... 12Clause 9 provides The contractor warrants that: (a)the work will be performed in a proper and workmanlike manner... (c) The work will be done in accordance with and will comply with, the home building act or any other law (d)) 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

WHETHER BREACHES OCCURRED 13The home owner contends the builder breached the contract and statutory warranties by: (a)Charging for items he should have paid for himself and overcharging for materials. (b)Using old gyprock, absence of proper lintel stud support on the sliding door, failing to obtain insurance, undertaking electrical work without a licence and moving an air conditioner. (c)Charging for hours he did not do to enable him to earn elsewhere. (d)Creating a safety hazard by building a step. (e)Completing the whole job in one rather than in stages to avoid disruption. (f)Delaying the work. (g)Hiring a labourer. (h)In all probability asking for more money as the building neared completion. 14Further the home owner contends there were building deficiencies justifying ending the contract under clause 2 quality of construction and clause 3 general conditions of contract (i)Bulging warped walls. (j)Nails popping out of plasterboard. (k)warped skirtings. (l)crooked wardrobes. (m)electric wires left exposed. (n)unnecessary pulling down the entire western all of the house. (o)air conditioner leaking through the roof. (p)putting in a step dangerous to children. (q)putting in a step at all. (r)carrying out electrical work for which he was unqualified. 15For each of these claims the owner relied on evidence from Mr Harry Jacobs the rectifying builder. The builder, Mr Emmery, did not call any independent evidence to counter that of Mr Jacobs and relied on his own evidence. Mr Jacobs is a qualified licensed builder for in excess of 28 years. He undertook his apprenticeship, clerk of works qualifications and study in Albury. Prior to that he was a carpenter. 16Mr Jacobs impressed as a qualified, experienced credible witness who was prepared to vary his opinion when presented with differing facts. He was present in person and was cross-examined. By contrast the builder was inflexible and at times non responsive to the questions asked. Where the evidence of the owner conflicts with that of Mr Jacobs I prefer the evidence of Mr Jacobs. (a)charging 17The home owner raised with the builder anomalies regarding his accounts, receipts and expenses. The home owner was asked to pay $12,000.00 towards the building costs. This was in accord with provisions in the contract for deposit and first instalment payment. Although the expenditure may be relevant to any claim by the builder on a quantum meruit basis the manner in which the builder applied the sums paid to him pursuant to a fixed price contract is a matter for him. He is not required to account to the home owner in the manner expected by the home owner and his family when the contract is for a fixed price. Ms Tanuvasa (the owner's daughter) gave evidence of paint tins ¼ full and yet no painting had commenced on the job and a schedule being prepared by her mother Ms Gray querying amounts such as payment to Housing Industry Authority of $195.00, charge for a circular saw and quantities of gyprock too excessive to be used on this job. 18This became one of the motivating factors as to why the contract was terminated. The owner gave evidence that "This is another reason when I worked out it was going to be $80,000 wages out of $120,000(it) didn't leave much for the house" On the evidence this claim has not been established as a breach. (b)(i) Using old gyprock 19The owner gave evidence that old and new gyprock was used on the walls. The builder conceded the owner was right and he had plaster replaced on the west facing wall. Mr. Jacobs's evidence was that on his inspection "The bedrooms were clad with a mixture of old and new gyprock. The cladding was not adequately fixed with minimal gluing and nailing and one could already see nails popping out through the basecoat of the gyprock which indicated significant movement." This has been established as a breach of performing work in a proper and workmanlike manner. (ii)Absence of lintel stud support on sliding door 20Mr Jacobs gave evidence that "A new sliding door had been installed on the east side of the premises. This had been installed in an extremely unsatisfactory manner and had to be removed, framework redone and reinstalled. The lintel supporting the roof load was supported by 25mm packing fixed to the support stud. The packing continued down the support stud and the sliding door was fixed to this packing, This caused wall to shake and door to rattle when walking on internal flooring. This would certainly not have passed a required building inspection. The lintels should have been checked into double support studs on either side of sliding and was not undertaken in a proper and workmanlike manner." The builder disagreed and stated the lintel supporting the roof load was not supported by packing. The builder was not convincing when confronted by the photographic evidence. The Tribunal finds on the evidence that this represents a breach of the contract to perform work in a proper and workmanlike manner. (iii) Failing to obtain insurance 21The failure to obtain Home warranty insurance represents an offence under the Home Building Act and is considered below. (iv) Undertaking electrical work without a licence 22The builder agreed he did the electrical lights. Mr Jacobs's evidence was:-"Wires were left protruding from the wall and ceiling spaces in the lounge (which was unclad at the time) and which could have been hazardous..." The way in which the work was undertaken on the evidence was not in a proper and workmanlike manner. (v) Moving an air conditioner 23Ms Tanuvasa gave evidence and produced a photo depicting the builder doing air conditioning work. The wires are visible pulled down and switchboard removed to where the duct enters the roof where Mr Emmery's hands are located in the photo. The builder denied moving the air conditioner. This work was carried out by the builder and was not on the evidence undertaken by the builder in a proper and workmanlike manner. (c) Charging for work he did not do, 24This appears to be a reference to the home owner's assessment of the hours charged compared to time spent on the job. As it was a fixed price contract the owner was not being charged on an hourly rate basis. It may be relevant to any claim by the builder on a quantum meruit basis. I refer to paragraph (a) above. The claim has not been established as a breach. (d) (p) and (q) building a hazardous step 25Ms Tanuvasa gave evidence of the construction of a step which it was contended by the home owner was dangerous for children. In re-examination the builder stated there was no reference on the plan to a need for clearance on the subfloor nor was there a reference to a step anywhere on the plan. The builder stated- no step but underside footing to bearer needed to be 400mm. Mr Jacobs statement noted "There was a step constructed on the new bedroom doorway, raising the floor approximately 120mm high. Supposedly Lionel (the builder) was told that the new floor to the extension had to be raised in accordance to Council requirements. However, my enquiries with the council and subsequent inspections, made no mention of the floor being raised as long as adequate clearance was given to the sub-floor structure." 26Ms Tanuvasa gave evidence that the builder had said it was in a flood zone so the new extension had to be built higher. According to the owner Mr Jenkinson from Albury City Council came out and ordered it be removed as it was dangerous. Mr Jacobs gave evidence that he didn't have to excavate. He removed a bit of soil. Council inspected and there was sufficient clearance. The inclusion of a step was not in accord with the plan and the distance required for clearance to the sub-floor structure was achieved by MrJacobs removing some soil. The creation of the step was in breach of the contract as on the evidence it was not in accord with the plan and not constructed in a proper and workmanlike manner. (e) Completing the whole job in one rather than in stages to avoid disruption 27Mr Jacobs states following his inspection: " It looked as if someone had simply walked off the street, taken to the home with a hammer and knocked out walls and built structures in a haphazard manner without much consideration given to how the job should be constructed as a whole taking into account the clients general living, comfort and safety considering they were going to be living in the premises while extensions were being done". Mr Jacobs commented it is natural for a registered experienced builder to plan works to minimise disruption by building the extension first allowing the family to remain in their own home as long as practically possible. Although this is demonstrably not good building practice for an owner in residence renovation contract the owner has not established a breach of contract for this item. (f) Delaying the work 28The owner gave evidence that the builder would turn up on occasional Sundays 1 or 2 o'clock and work till 5. He should have been further in to the job than what he was because he was not turning up to work. He had started on the 2 bedrooms. He had other employment which he didn't tell me- he was working on the railway. 29The owner gave evidence that he asked him (the builder) how long (is the) job going to take and he asked for an extension of time (12 months) to do the house. I said we have to go another year ? The owner was asked when the conversation took place and he couldn't recall. On this aspect of his evidence I do not accept the owner's evidence in the witness box as although he made written statements this conversation was never raised in any of them. The building work commenced on 26 July 2010 and only 2 rooms had received attention by the end of August 2010. Although the work was slow the owner has not established a breach of the requirement that the builder diligently proceed at this early stage of the work. (g) Hiring a labourer 30The owner has failed to establish how this represents a breach. (h) In all probability asking for more money as the building neared completion 31It is Mr Jacob's opinion that he could not see how the build could have been completed for the contract sum of $120,000.00. However it is speculative whether the builder would have asked for a greater sum. This has not been established as a breach. (i) Bulging warped walls 32The home owner and Ms Tanuvasa gave evidence that the wall had bows. The builder agreed that (the) gyprock was curvy. Mr Jacobs gave evidence that "The framing was a mixture of new and old. There had been no attempt to remove the gyprock and straighten the walls between bedrooms subsequently the walls were extremely bowed and very noticeable with a 25mm round over the length of a 3 metre straight edge." This is clearly a breach of the requirement that work be undertaken in a proper and workmanlike manner and complying with quality of construction. (j) Nails popping out of plasterboard 33Ms Tanuvasa gave evidence of this. The builder agreed this had occurred. I refer to the evidence of Mr Jacobs in *b) (i) above.The manner of construction was not in accord with the contract as it was not performed in a proper and workmanlike manner. (k) warped skirtings 34The builder agreed the skirting boards were warped. This represents a breach on the evidence as the work was not performed in a proper and workmanlike manner. (l) crooked wardrobes 35The owner gave evidence that instead of studs straight up and down one had a two inch difference from top to bottom. Ms Tanuvasa referred to the crooked wardrobe in her evidence. Mr Jacobs gave evidence that "The old hallway walls were removed and the new plan involved forming new robes of the existing outside walls. These nib walls which formed the robes were 20mm out of plumb and required removing and redoing. "This represents a breach on the evidence as it was not undertaken in a proper and workmanlike manner. (m) electric wires left exposed 36The owner gave evidence that electrical work had to be redone as the builder was not licensed and the work was on the evidence defective. See (b) (iv) above. (n) unnecessary pulling down the entire western wall of the house 37The orientation of the wall is variously described by the parties as western and northern but it is clear that the wall is the wall adjoining the driveway. The home owner in cross examination denied knowledge of a document filed with his application which referred to "including widen driveway". He explained he had literacy issues and his ex-wife assisted in preparation of his documents, He agreed he told her about the history of what had happened. When asked if she typed the document where would she have got the info from he said "Not from me...At no time did I ask to widen driveway or lift the floors." It was put to him that he was told by the builder in February 2010 that the driveway needed to be widened. Mr Smith responded by saying if he got permits he would have known (it was) not 3.6m (width needed). It was the owner's case that this issue was only raised with him in July 2010. 38Ms Tanuvasa gave evidence that we had no idea about the widening of driveway. We didn't want to pay to have part of the house removed. The builder assured us he would move the hall down which would make the room wider again. According to her the builder said it was a Council requirement. We didn't want it. He said we had no choice if we wanted the unit we had to widen the driveway and bring the house down 600mm 39The builder gave evidence that it was two bedrooms it was dual occupancy even though less than 60 square metres it was a dual occupancy. He agreed to a question that if it (the proposed granny flat) was greater than 60 square metres that a wider driveway was required. It was put to the builder -what is your response to Council (being) happy to allow (the) driveway as it was. He replied only act on info given at the time by Council. 40Mr Jacobs's evidence was he knew of no reason why an extension at the rear of the house, even if a self-contained space would require a larger driveway. He enquired of council and was advised that "only if it was intended to have a separate "granny" flat over 60 square metres would there be a requirement for an increased width of a driveway. At no time was it Mr Smith's intention to build anything but a small granny flat < 60 square metres." Mr Jacob's opinion was that a builder would have advised the owner about options. He believed no new wall would have been required and it was a complete waste of work to demolish the entire north boundary wall and build a new wall. 41Mr Jacobs subsequently obtained a complying development certificate from Albury City Council for plans with the wall reinstated to original position and including a granny flat to be completed at a later stage on the plan. The builder produced a handwritten note alleged to have been provided to him by a Mr Craig McPartland from Albury City Council with the words "Access 3.6m wide" noted on it. The Tribunal places no weight on the scribbled note in this form and no-one from Albury City Council or the alleged author of the note was called to give evidence by the builder. 42The builder observed that widening was part of the application for Development signed by the owner. There is some difference in the recollection of MsTanuvasa and the owner of the conversations but I am satisfied that the owner relied on the builder to ensure that the plans complied with Council requirements and that the information provided to them by the builder was he had no alternative but to demolish the entire boundary wall of the house to widen the driveway. 43No development consent was obtained by the builder. He has not established that the widening of the driveway was required. The rectifying builder obtained approval for a granny flat at rear without the need to narrow the structure of the existing house. The builder in his statement contends" the extension of the driveway(in width) was necessary in order for appropriate access to be provided for the proposed flat and in circumstances where the size of the flat had not been determined." And further "The need for the driveway to be extended related to the fact that the proposed flat was likely to be two bedrooms..." The granny flat included in Mr Jacobs plans had two bedrooms and was issued with a complying development certificate on 28 October 2010 without any widening of the driveway. 44Further in any event the work undertaken on the new wall was defective on the evidence. Mr Jacobs's states:- "There was a need for 4 new windows in the new bedroom renovations, three on the north side and one on the far west wall of the extension. They had no lintels above the north side windows, which in the new frames required that. These would have become the exterior load bearing walls of the house had the driveway been widened." He notes further defects with the bedroom walls and windows: - "as with the new bedroom walls this framing was weak and the studs unsoundly done, The internal wall studs were inadequately fixed that one could simply pull out the studs with one hand. The rear window lintel on the eastern wall was not supported by complete stud work. The stud had been cut in half, fixed to the window frame with a block joining the two halves." Mr Jacobs's statement of 29 October 2012 provides: "The new walls built in the bedrooms and lounge, which were to be load bearing walls, were constructed on insufficient piers, measuring approximately 300mm x300mm x250 deep. Obviously these were not inspected by a building surveyor initially, as they would have been deemed totally inadequate to deal with the roof load." The evidence establishes that the work in constructing a new external wall and associated windows was not performed in a proper and workmanlike manner and the rectification undertaken by Mr Jacobs was reasonable on the evidence. (o) Air conditioner leaking through the roof 45The owner gave evidence that the builder moved the air conditioner from the hallway. It was put to Ms Tanuvasa the builder hadn't touched the air conditioner. She responded by indicating that the wall that the on/off switch was located was completely removed as the wall was moved in to make the room wider. See the evidence of Mr Jacobs in (b) (v) above. (p) Putting in a step dangerous to children. (q) Putting in a step at all. 46See (d) above. (r) Carrying out electrical work for which he was unqualified 47Ms Tanuvasa was asked who did the electrical requirements for the lights She said she came home and the builder was still putting the covers over the lights and wires were sticking out from power points which he finished off and put the brace on. See (b) (iv) above

WHETHER BREACHES OF CONDITIONS, WARRANTIES OR INTERMEDIATE TERMS 48The High Court in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61 dealt with the classification of contractual terms for the purpose of determining the consequences of a breach. Although neither legal representative referred the Tribunal to any legal authorities the owner's submissions allude to "fundamental requirement" about the contract being legal, also there is a reference to "reason for the discharge went to many other matters..." It is clear that the remedies for breach depend on the classification of the terms breached. 49In order to determine how a term is to be characterised. the Tribunal must consider the contract between the parties. The Court in Koompahtoo found the breaches were of intermediate terms. The breaches of the joint venture in that case were significant over the entire period of the joint venture, the breaches were in a number of respects gross, and their consequences were serious. 50The conduct of the parties here was that the builder was initially willing to perform the work and the owner was willing to pay for the work. The breaches in the main can be characterised as relating to the quality of the work. The contract provided a mechanism for notification of defects and an opportunity to rectify. 51The Tribunal is satisfied that the owner terminated the contract based on receiving unsatisfactory assurances about insurance and approval of plans by Council from the builder, poor workmanship and shoddy paperwork. These were the bases referred to by the owner close to the events when he complained to Fair Trading in November 2010. The consequences of the builder being unlicensed, proceeding prior to issue of a complying development certificate and absence of insurance are set out in the Home Building Act but the statutory illegality doesn't render the contract void between the parties. 52The poor workmanship is stipulated as a warranty matter in Clause 9 and overlaps with the general contractual clauses re quality in Clauses 2 and 3.The owner expects a contract will be performed on time, on budget, according to the plans and without defect. In this case the owner works as a driver and has limited literacy. At the time he signed the agreement he was accompanied by his daughter Ms Tanuvasa. It would appear there was scant regard paid to page 2 of the Fair Trading contract which sets out a checklist for owners entering building contracts and contains yes/no options which have not been filled in regarding important information concerning the contract. Notwithstanding this the owner has signed on the next page an acknowledgement that he has received a copy of the Consumer Building Guide, read and understood it and completed the checklist and answered yes to all items on it. 53The owner honestly and firmly believed that the conduct of the builder entitled him to terminate the contract. Carefully considering the terms regarding workmanship in the light of the content of the contract viewed in the context of the entire commercial relationship between the parties the Tribunal finds the parties have not agreed these terms to be essential in contrast to what occurred in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd. It is not the case that the owner would not have entered the agreement unless assured of strict and literal performance of the terms found to have been breached. The Tribunal has considered whether the breaches found to exist amount to breaches of intermediate terms because if so even if the term was not a condition this may entitle the owner to terminate validly. The conduct of the builder in failing to undertake the work- at a relatively early stage in the construction process (in cost terms 10% through the contract) - free from defect was not so serious a breach as to entitle the owner to terminate the contract 54The owner relied upon other factors as well which were found not to constitute breach including tardiness, overcharging in a fixed price contract, and an imbalance between labour and materials components resulting in speculation of an insufficient sum being allowed for materials. The owner is entitled to rely on any other breaches which existed that would justify termination whether or not they were aware of it at the time. Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979)14 CLR 596 at 611. 55The owner's counsel submitted-"It is a fundamental term of the building contract not to unnecessarily advise the proprietor to pull out one side of the house. Every such breach of the builder's fundamental duty under the contract may result in immediate termination." Counsel has not indicated which term he is relying upon as being breached in this instance. It is possible by express provision in the contract to make a term a condition as the High Court found in Gumland Property Holdings Pty Limited v Duffy Bros Fruit Market (Campbelltown) Pty Limited [2008] HCA 10.This has not occurred in this case. Nor has it been argued before the Tribunal that there was a misrepresentation. It seems more likely that in purporting to classify this as a condition to adopt Mr Justice Kirby's words in Koompahtoo at 25 "...demands the drawing of inferences as to the parties reactions to contingencies that in fact might (and usually would) have never been anticipated". 56In submissions in reply the final submission from the owner is "But it was his proceeding to build illegally and never obtain compliancy certificate which was, in itself, enough for this contract to be terminated forthwith at the applicant's discretion". 57The aspect of illegality has been dealt with at para 21 above, Secondly the failure to obtain a complying development certificate is covered in the contract clause 17- the builder must unless obtained before the contract promptly apply for all approvals of the work. An application was made and according to Albury City Council letter dated 8 March further information was required of the builder set out in seven numbered paragraphs. There was no detailed evidence of what the builder had done prior to termination to comply with any requirements of the Council. The builder denies receiving the letter from Albury City Council. 58Clause 17 provides a remedy for breach for the owner: "If the contractor is required to obtain approvals before starting work under this contract and all necessary approvals have not been obtained within 60 business days of the date of this contact, either party may terminate the contract by notifying the other party in writing at the expiry of the 60 business day period." The clause also provides for adjusting the rights of the parties in the event of termination under this clause. Each of these situations: building illegally and failing to obtain a compliance certificate provided entitled the owner to exercise his rights under the contract which he did not do. The Tribunal is not satisfied on the evidence that any of these breaches represents breaches of a condition or intermediate term of the contract entitling the owner to terminate.

LICENCE 59The Registry undertook a Licence search (1) of the builder on 25 October 2010 which showed that his Licence had a condition "only for contracts not requiring home warranty insurance" between 17 April 2001 and 16 April 2012. 60A further Licence search (2) undertaken on 3 January 2012 shows two infringement notices were issued for: "Do unlicensed building work s 12 Home Building Act" which from the description in the penalty Notice issued on 21 October 2010 relates to this building project and "Do work under contract without insurance s 92(1) (a) Home Building Act". The period for the condition on the licence had altered to 17 April 2001 to 30 September 2010 in the second search. 61The builder submitted a Licence search (3) dated 26 August 2013 and recounts in his statement dated 4 November 2013 "On 18 August 2010 the condition which was on my building licence that I was entitled to undertake work with respect to contracts not requiring home warranty insurance was lifted." The period for the condition on this Licence search (3) had altered to 17 April 2001 to 18 August 2010 in the search. It was retrospectively altered sometime between Licence searches 2 and 3. This doesn't alter the fact that the licence to undertake work was restricted to contracts not requiring home warranty insurance at the time of the commencement of work and entering the contract. It was not as stated by the builder lifted on 18 August 2010 but the condition on his licence was lifted retrospectively. 62The evidence from the builder on this point was evasive even when shown a printout of his Licence with the condition only for contracts not requiring home warranty insurance he obtusely replied:" I am a licensed builder. "And he was asked specifically about the time of entering the contract and he replied "At that time also I was entitled to build any build any amount no limitation." It was put "The restriction was there when you signed the contract you did not have a full building licence you couldn't build above the amount of $12,000." The builder replied again "I was licensed was licensed to carry out work." He was asked "Was your licence restricted?" he replied "I was licensed." The builder entered a contract to undertake work on 15/4/10 for the price of $120,000 without the appropriate licence and commenced work without the appropriate licence. He was asked:-You did know it was illegal to begin building without a complying development certificate. The builder stated "At the time it was minor renovation to existing building."

INSURANCE 63The question to be considered is whether the builder is precluded from making a claim for payment for unpaid work under the Home Building Act 1989. Under the Act builders and other persons doing residential building work are required to be licensed to do that work (see ss 4 and 12).Failure to comply with this requirement renders the builder unable to sue for the unpaid work under the contract. (s 10) 64The builder has provided annexed to a statement of 4 November 2013 a letter from HIA a letter of eligibility for home warranty insurance. The letter states: "THIS CERTIFICATE OF ELIGIBILITY IS NOT TO BE USED AS A CERTIFICATE OF INSURANCE UNDER THE HOME BUILDING ACT.HOME OWNERS ARE NOT COVERED AS A RESULT OF THIS CERTIFICATE OF ELIGIBILITY AND SEPARATE CERTIFICATES OF INSURANCE ARE REQUIRED IN RESPECT OF INDIVIDUAL BUILDING WORKS" 65In his statement of 4 November 2013 the builder states:- "On 19 August 2010 I obtained a policy of insurance for the period 18 August 2010 to 18 August 2011 through Aon Risk Services Australia Limited. The receipt with respect to this policy of insurance is Annexure "C" to my statement of 1 August 2011." 66The builder's statement dated 1 August 2011 in fact has no Annexure "C" attached at all. The statement refers to 2 documents being annexed. One of these is stated to be a copy of the contract between himself and Mr Smith (para 8) (which is attached and has no annexure identification letter) and the other is stated to be a copy of an invoice NOT a RECEIPT (and is not attached). Para 12 of the statement of 1 August 2011 is as follows:- "On 18 August 2010 I received an invoice with respect to home warranty insurance for the period 18 August 2010 to 18 August 2011. Annexed hereto is a copy of the invoice. The invoice was subsequently paid and the certificate of insurance issued." (Italics added). 67The builder's undated supplementary statement filed on 14 September 2011 Para 7 states:- "Annexed to this statement and marked "C" is a copy of the insurance certificate from QBE and invoice with respect to that insurance cover". The builder's undated supplementary statement in fact has a Tax Invoice No I5538586 dated 19 August 2010 from Aon Services Australia Limited for Class: "QBE WARRANTY ELIGIB". It has a generic PAID stamp on the document. There is no insurance certificate forming part of the annexure and it is not clear that the Invoice relates to home warranty insurance for this contract or at all. The sum is stated to be for $195.00 which is not consistent with premium for contract value in the Premium chart provided by the builder (document E4). 68The builder has not provided a copy of a certificate of insurance under the Home Building Act. The evidence submitted does not support his assertion that a policy was obtained by him for the work the subject of his contract with the owner under the Home Building Act. There is no evidence of the builder obtaining necessary insurance before commencing work, during the work or after termination. 69Whether the builder is entitled to make a quantum meruit claim for this work must be considered in light of the fact that the work was not insured. The failure to take out home warranty insurance is set out in section 94 Home Building Act.- 94 Effect of failure to insure residential building work (1) If a contract of insurance required by section 92 is not in force, in the name of the person who contracted to do the work, in relation to any residential building work done under a contract (the uninsured work), the contractor who did the work: (a) is not entitled to damages, or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, in relation to that work, and (b) Is not entitled to recover money in respect of that work under any other right of action (including a quantum meruit). (1A) Despite section 92 (2) and subsection (1), if a court or tribunal considers it just and equitable, the contractor, despite the absence of the required contract of insurance, is entitled to recover money in respect of that work on a quantum meruit basis. (1B) A contractor who applies to a court or tribunal for a remedy under this section, or who is awarded money under this section, is not guilty of an offence under section 92 (2) by virtue only of that fact. (1C) without limiting the factors that a court or tribunal may consider in deciding what is just and equitable under subsection (1A): (a) In relation to any contract-the court or tribunal may have regard to the impact on the resale price of the property if no contract of insurance is provided, and (b) In relation only to a contract entered into before 30 July 1999-the court or tribunal is not to be limited by the fact that the required contract of insurance was not obtained until after the date of the contract. (2) However, the contractor remains liable for damages and subject to any other remedy in respect of any breach of the contract committed by the contractor. (3) Residential building work that is uninsured work at the time the work is done ceases to be uninsured work for the purposes of this section if the required contract of insurance for the work is subsequently obtained. 70It was not in dispute that the owner had, on request of the builder, paid the builder a $6,000.00 deposit which was to include statutory insurance required under s 92. It was not disputed that the builder failed to obtain the insurance or to provide to the owner a copy of the certificate of insurance as required by s 92. The evidence of the owner was that when asked about the insurance the builder said he didn't have it on him , that it would take about three weeks for the insurance certificate to be sent out and later that he couldn't account for his earnings over the last three years.. 71To determine the circumstances in which the Tribunal would find it just and equitable to permit a claim in quantum meruit for work undertaken, the Tribunal is guided by the decision of the Supreme Court in Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprises Pty Ltd [2004] NSWSC 273 and Pender v Robwenphi Pty Ltd [2008] NSWSC 1144. The Court in Eddy Lau said: "49 The present context is one in which the court is called upon to say whether it is "just and equitable" that a quantum meruit sum be awarded for work done. The quantum meruit sum itself will, of its nature, reflect a fair remuneration, having regard to the extent of the work actually done. That is of the essence of a quantum meruit: see Pavey & Matthews Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 at p.262 per Deane J. The inquiry directed by the statute is therefore, in effect, whether the surrounding circumstances are such that it is just and equitable.... The Act is concerned with factors influencing a decision whether, in the particular circumstances in which the court finds the parties, it is fair that one receive the quantum meruit sum and the other pay it. It is to those circumstances that I now turn." 72The effect of s 94(1), implicit in the quote above, is to remove any right by a builder to a claim in quantum meruit (even if otherwise meritorious) if the necessary insurance is not in place. Section 94(1A) reinstates the right in circumstances where it is "just and equitable" to do so. 73The circumstances are that the builder was aware of the requirement for insurance and requested the initial deposit from the owner in part to pay for the insurance. 74To that end the builder requested payment for insurance before commencing work, but rather than purchasing the necessary insurance he simply retained the sum paid and dishonestly advised the owner and his daughter that the certificate would take about three weeks to be sent out when asked about its existence. 75The purpose of the insurance, to provide protection for the owner in the event of any insolvency, death or disappearance of the builder means the failure to obtain it at all is significant. Ignorance or oversight is in a different category to here where the conduct was wilful and deliberate. I am not satisfied the builder in the circumstances to be deserving of recovery of a quantum meruit on the basis that it was just and equitable to be so entitled.

TERMINATION 76Termination has not been effected in accordance with the contract with written notice. The question to be determined is whether there was a valid termination at common law. There is conflict between the parties as to what was said by whom and when. 77The owner's evidence is that on 28 August 2010 he said "If you can't (do) what you are told John you may as well fuck off". (I) can't have you doing what you want all the time. That's when he (the builder) pulled out the paper. He recounts that the builder had a document that he requested him to sign voiding the contract and making a new agreement for the owner to be owner builder and engage the builder to undertake the work from then on. The owner refused to sign. 78I accept that the builder attended the meeting on 28 August 2010 intending to seek agreement from the owner to become an owner builder and that he would continue to work as contractor. Although the conversation is denied by the builder the Tribunal accepts the account from Ms Tanuvasa of the builder attending and putting forward such a proposal which was rejected by the owner. The builder's evidence is inconsistent with his own document headed "28/8/10 David Street Job 3" which I am satisfied he provided to the owner which states: "Meeting with Lionel (owner) to end contract and enter new agreement as of this day that Lionel will be owner/builder and hourly rate for me will be now $40.00 per hour". The builder's offer to work on a novated contract with the owner being owner builder indicated a lack of preparedness to continue to carry out the existing contract. This approach by the builder did not result in a termination of the contract and substitution with his new proposal. 79Over the next week the Diary of Ms Tanuvasa note the builder attended for a couple of hours on two days, was sick for a few days and started work on 7 September to fix problems, walls straighten, remove step and on 9 September he was asked to leave by Ms Tanuvasa. 80The following day 10 September it is noted "Dad rang John not happy with work John not listening to what needs to be fixed John sacked." The owner's evidence in his statement of 2 May 2011 is that he spoke to the builder on the phone to the following effect: "What the fuck is going on. I wanted you to come back and fix up the problems but you haven't done anything (I) asked you to do. He said but I've already fixed them up. I said what are you talking about, you haven't taken the step out, you haven't fixed the walls. You haven't fucken done anything, fuck off don't come back". 81Termination requires unequivocal words or conduct evincing an intention to terminate Bergco v Boyles [1971] VR 321.In this case there were several occasions where dissatisfaction was expressed but it was only on 10 September that the words became unequivocal. The Tribunal finds that on 10 September 2010 the owner repudiated the contract by directing the builder not to return to the site. Circumstances did not exist at that time which justified a unilateral termination. The breaches found to exist did not deprive the owner of the substantial benefit of the contract. The breaches were neither of conditions or intermediate terms. 82It is common ground that no further work was undertaken by the builder. On 20 September 2010 the builder's contractor collected and signed for the removal of tools and equipment from the site. Prior to that according to the document headed "David Street Job " lodged with the application the builder claimed his equipment was being held by the owner. However, there was no indication by unequivocal action or words by the builder electing to accept the repudiation. The builder must establish he accepted the repudiation to bring the contract to an end. There is insufficient evidence to determine whether the builder accepted repudiation or not as in the case of Visscher v The Honourable President Justice Giudice [2009] HCA 34. 83The objective evidence does manifest an intention that neither party intended the contract should be further performed. The builder did not indicate he was ready and able to perform on the evidence. Neither party corresponded with the other. The builder retrieved his equipment. The owner for his part took alternate steps to have another builder inspect the work. This was also in the background of a growing level of distrust evident in the parties production of receipts, schedules of work undertaken to date etc. and the builder's earlier attempt to terminate the agreement on 28 August 2010 and have the owner take over as owner builder. The Tribunal is satisfied that the conduct viewed objectively shows that neither party had any intention to perform the contract after 10 September 2010. On 14 October 2010 the owner lodged an application for compensation.

ASSESSMENT OF DAMAGES 84Irrespective of the rights and wrongs of termination the owner is entitled to damages for any defects in workmanship or materials as opposed to incomplete work. In this case the owner's contractual claims are limited to the breaches he asserts of the warranties implied by the Act s 18B rather than the difference between the contract price of the work contracted for and the cost of making the work conform to the contract. 85The owner has not established the claim for demolition and construction costs of the entire alterations of $42,094.00 being the difference between $162,094.00 Mr Jacobs quote and the contract sum of $120,000.00. 86The owner also claims the sum of $12,000.00 paid to the builder be refunded. The Tribunal finds the owner is entitled to recover the sum paid to the builder of $12,000.00 as the evidence is clear from Mr Jacobs statement dated 29 October 2012 with no independent evidence from the builder that the work undertaken by the builder "...was sub-standard, unnecessary and had to be removed and rebuilt to an acceptable standard". 87The builder has presented evidence of a claim relying on the owner's records of hours spent at work of $13,173.54 less home warranty insurance $1,455.08 and $616.00.The builder contends he is entitled to recover the cost of work undertaken by him notwithstanding home warranty insurance was not in place at the time when that work was undertaken. The amount claimed for work is $11,102.46 which is less than the amount of $12,000.00 which the parties agree has been paid. No further sum is owed and the claim on a just and equitable basis has not been established. The home owner received no real benefit for the work. 88The owner relies on a document dated 29 March 2011 headed "Breakdown of costs to restore bedrooms and front lounge room to original size in the sum of $16,195.00. This excludes any external cladding and only relates to inside of three rooms. In submissions the builder queried whether some items would have been incurred in any event as part of the project but submitted no independent supporting evidence and Mr Jacobs was not challenged on this breakup of costs in cross examination. The Tribunal has also considered the photos annexed to Mr Jacobs statement taken on 10 September 2010 which support his statement. Mr Jacobs was cross-examined about his estimate figures for the whole job and acquitted himself well. I am satisfied on the evidence of Mr Jacobs that the builder's work and the defects referred to above required rectification and the cost of remedying it was reasonable at $16,195.00. 89This sum is approximately 10% of the entire job quoted ($162,094.00) just as the figure claimed by the builder is approximately 10% of his contract price of $120,000.00. I am satisfied on the evidence that the document dated 29 March 2011 relates to these three rooms only lounge and 2 bedrooms (described on both the plans of the builder and Mr Jacobs as bedrooms 2 and 3) and do not include an additional bedroom on the opposite side of the house. 90The Tribunal is satisfied on the balance of probabilities that the reasonable cost in remedying the breaches is $16,195 and the owner is entitled to a refund of $12,000.00. The builder has not established a claim for work performed. The builder is to pay the owner the sum of $28,195.00 within 21 days of the date of this order. J Lynch General Member Civil and Administrative Tribunal of New South Wales 6 May 2014

APPLICANT'S DOCUMENTS:-

1. Application and Annexures to application filed 18/10/10 (a) Letter Fair trading to Mr Smith 14/10/10 (b) Receipt 163175 (c) First Invoice David Street Job (d) Invoice 3094705 10/8/10 from Grant's Operations Pty Ltd to Emmery Constructions and renovations (e) Invoice 3093291 4/8/10 from Grant's Operations Pty Ltd to Emmery Constructions and renovations (f) Invoice 3092313 31/7/10 from Grant's Operations to Emery Constructions and Renovations (g) Housing Industry Association Tax Invoice/Receipt to John Emmery (h) Invoice 3092163 30/7/10 from Grant's Operations Pty Ltd to Emery Constructions and Renovation (i) Invoice 3092158 30/7/10 from Grant's operations PtyLtd to Emmery constructions and Renovation (j) Invoice 3092121 30/7/10 from Grant's operations Pty Ltd to Emmery Construction and Renovation (k) David Street photocopy of various receipts Bunnings etc (l) Alteration to 1st invoice David Street job (3 pages) (m) Invoice 3097058 20/8/10 Grant's Operations Pty Ltd to Emmery constructions and Renovation (n) Receipt from Lavington paint centre 20/8/10 and customer copy bank flexicard (o) Receipt Lavington Plastr Linings Pty Ltd 20/8/10 to emery Constructions (p) Photocopy of various invoices Bunnings etc (q) Invoice 3091847 29/7/10 from Grant's Operations Pty Ltd to Emery Constructions and Renovation (r) Keating Plasterers Invoice 10068141 12/8/10 Bill to customer ref John Emmery (s) Photocopy of receipts from Bunnings (t) Bristol Paint and Decorate Albury Invoice 32899007340 6/8/10 (u) David street job 2 (v) Invoice 3097978 24/8/10 Grant's Operations Pty Ltd to Emmery Constructions and Renovations (w) Invoice 3097708 23/8/10 Grant's Operations Pty Ltd to Emmery Constructions and Renovations (x) Invoice 3097802 23/8/10 Grant's Operations Pty Ltd to Emmery Construction and Renovation (y) Invoice 3094903 11/8/10 Grant's Operations Pty Ltd to Emmery Construction and Renovation (z) Photocopy of various receipts from Bunnings (aa) David Street Job 3 (2 pages) (ab) Invoice 3097058 20/8/10 Grant's Operations Pty Ltd to Emmery Construction and Renovation (ac) Keating Plasterers Invoice 10068328 Bill to customer ref John Emmery (ad) Wunderbar Aluminium products statement 31/8/10 to emery Construction and renovation (ae) Plasterer Invoice Ben Heather (af) Wunderbar Auminium Products invoice D14541 27/8/10 to Emmery Construction and Renovation (ag) Quote Wunderbar Aluminium Products no 45,142 12/7/10 (ah) Removal of Items from 843 David street 20/9/10 (ai) OWNERS SUMMARY (5 pages) spreadsheets of wages purchases and charges (aj) Home Building Contract (23 pages) and photocopy of Builder's Licence card (ak) Owner Builder Permit issued 5.10/10 for Lionel Smith
2. Documents filed on 2/10/10 by applicant (a) Statement of applicant (10 pages) Appendices 1-3 previously submitted in 1 above (b) Quote Jacobs Builders 15/10/10 Appendix 4 (c) September 2010 statement of applicant (2 pages) Appendix 5 (d) Fair trading correspondence (3 pages) Appendix 6 (e) Email warren Jenkinson to Ms. Tanuvasa 23/11/10 and copy letter Warren Jenkinson to Albury Fair Trading Centre 19/10/10 Appendix 7 (f) Plans (2 pages)
3. Documents provided at 11/11/10 hearing by applicant (a) David Street Job 4 10/11/10 (b) Events document
4. Documents filed by Slater and Gordon for applicant 14/2/11 Some documents previously submitted in 1 above 9a) Letter Jacobs Builders to Lionel Smith dated 26/9/10 plus 4 pages estimates
5. Documents filed on 27/6/11 by applicant (a) Statement Lionel Smith dated 2 May 2011 (9 pages) (b) Statement Stacey Tanuvasa dated 2 May 2011 (10 pages)
6. Documents filed on 25th August 2011 by applicant (a) letter Albury City Council to Lionel Smith dared 23 /8/11 (b) Letter NSW Fair Trading to Lionel Smith dated 30/6/11 and copy register (2 pages) (c) Letter to whom it may concern from Jacobs Builders undated and Breakup of costs dated 28/3/11 (2 Pages) (d) Points of Claim (1 page)
7. Documents provided by applicant (a) Folder with photocopied extracts from Diary between 3/5/10 and 10/9/10 (b) Original Diary for 2010 (c) Copy of Home Building Act 1989
8. Documents filed by Huggins McIntyre on behalf of applicant 14/5/12 (a) Letter from CBA to Mr Smith dated 29/4/10 (b) Letter from Finance Express addressed to CBA dated 5/5/10 (c) CBA Bank statement 28/6/10 to 30/7/10 (d) Statement Stacey Tanuvasa undated (7 pages) (e) Result online licence check section 120 HBA (2 pages)
9. Document filed 1/11/12 by Huggins McIntyre solicitors for applicant (a) Statement of Harry Jacobs 29/10/12 with 8 annexures
10. Documents tendered at hearing on "J1" Photo dated 10/9/10 "J2" Photo taken 10/9/10 "J3" Copy contract between Lionel Smith and Jarry Jacobs "J4" Photo dated 10/9/10 "J5" Photo dated 10/9/10 "J6" Copy Plans Practical Building Solutions
11. Documents filed by Huggins Solicitors on 28/3/13 for the applicant (a) Letter dated 7/3/13 Huggins McIntyre to Robb and Associates (b) Statement of Lionel Smith dated 14/2/13 with estimate document and letter dated 4/3/13 from Jacobs Builders attached to statement (c) Set of Photographs (d) Copy letter dated 22/3/13 addressed to Robb and associates and 8 enclosures referred to in that letter
12. Set of photos numbered and captioned 1-34 submitted by Huggins McIntyre for applicant 7/11/13
13. Applicant's Points of submission filed 15/1/14
14. Applicant's written Submission 13/2/14 (14 pages) Applicant's written submission on costs 13/2/14 (6 pages)
15. Applicant's reply to respondent's submissions filed 17/3/14 (6 pages)

RESPONDENT'S DOCUMENTS

1. Document filed by respondent 8/12/10 Plan and attached handwritten calculations/notes
2. Document filed by Robb and Associates for respondent 3/8/11 (a) Statement of John Emmery dated 1/8/11
3. Document filed by Robb and Associates on 14/9/11 (a) Supplementary statement of John Emmery undated
4. Document filed by Robb and Associates on 10/4/12 (a) Schedule of materials and expences (3 pages) (b) invoices and receipts (29 pages)
5. Document filed by Robb and Associates for respondent on 31/10/12 (a)Statement of John Emmery undated in response to Tanuvasa statement
6. Document filed by Robb and Associates on 26/11/12 (a) Statement of John Emmery dated 26/11/12
7. Documents tendered at hearing (a) Copy licence search E1 (b) Copy Proposed addition and renovations Plan and Not issued Complying development certificate MFI 2 (c) Memo 11/10/10 from Warren Jenkinson to Michael Keys with handwritten note (2 pages) E2 (d) Email from Warren Jenkinson to Melanie Nemeth 19/11/10 E3 (e) Copy Builders Warranty Premium Chart E4 (f) Copy 4 photos E5 step dated 10/9/10 (g) Copy photo E6 (h) Copy Photo E7 (i) Handwritten notes headed labour from 15/8/10 to 7/9/10 E8 (j) Copy ITEM B Licence search MFI A
8. Documents filed by Robb and Associates 6/11/13 (a) Further statement of John Emmery dated 4 November 2013 and annexures
9. Documents tendered by Robb and Associates for respondent from Subpoened material from Albury City Council (a) Letter from Albury City Council to CTTT 20/12/10 (b) Copy application for Complying Development Cert and associated plans (c) Letter Albury City Council to John Emmery (d) Memo from Janae Holland to Michael Keys with comments and copies of photos (e) Copy report from Lionel Smith (f) Copy Owner Builder Permit and Home Warranty Insurance for Lionel Smith (g) Copy Memo 11/10/10Jenkinson to Keys (see 7© above (h) Copy letter to Mr Emmery from John Mulvey dated 20/10/10 with penalty infringement notice (i) Letter from John Emmery to John Mulvey dated 3/11/10 (j) Notes from meeting Michael Keys in memo form (k) Letter Michael Keys to john Emmery dated 10/11/10 (l) Email Warren Jenkinson to Melanie Nemeth 19/11/10 (m) Complying Development certificate 28/10/10 Jacobs Builders (n) Documents submitted with application for replacement complying development certificate
10. Documents tendered by Robb and Associates from subpoenaed documents from Harry Jacobs (a) Letter 4/3/13 from Mr Jacobs to Mr Smith (b) statement of account dated 3/4/13 (c) Tax Invoices dated 11/11/10,13/12/10,24/1/11,7/2/11,18/7/11,1/8/12,29/8/11,31/10/11,8/12/11,16/1/12,29/2/12,4/4/12,18/6/12,1/11/12,31/12/12 (d) Copies of deposit receipts 11/11/10,16/12/10,11/2/11,11/4/11,29/8/11 and 3/1/133 (e) 3 documents entitled "Smith Job'
11. Documents tendered by Robb and Associates from subpoenaed documents from Lionel Smith (a) Commonwealth bank statements in the name of Lionel Smith and his daughter for the period 30/10/10 to 31/1/11 and 1/2/11 to 30/4/11
12. Documents tendered by Robb and Associates from subpoenaed material from Commonwealth Bank (a) Copies of documents and statements in regards to any loans and advances made to Lionel Douglas Smith of 843 David Street Albury
13. Documents tendered by Robb and Associates from Subpoened material from Harry Jacobs (a) List of Accounts for Materials and subcontractors for Lionel Smith job with copies of invoices/accounts referred to in the list (b) Further documents produced by Mr Jacobs in October 2013 (i) Letter 8th October 2013 enclosing and listing documents (ii) Invoices and Accounts (iii) Time records (iv) bank documentation re payments
14. Document filed by Robb and associates for respondent 28/11/12 Statement of John Emmery dated 26/11/12
15. Respondent's Outline of Submission filed 23/1/14
16. Respondent's submissions filed 11/3/14 (16 pages) I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 July 2014