M & M Building Pty Ltd v Keith

NCAT Appeal Panel|2016-08-23

REASONS FOR DECISION

On 30 July 2014 Duncan and Emma Keith (the home owners) entered into a Master Builders BC4 contract with M & M Building Pty Ltd (the builder) for the extension and renovation of their home at Seaforth. The contract shows that the price was $287,409.57 inclusive of GST, the proposed date for commencement was 7 July 2014 and the number of days to carry out the work was 90.
The contract referred to plans and specifications prepared by the George Group of architects which in turn referred to structural drawings prepared by Civil and Structural Engineering Design Services Pty Ltd.
Work did not commence until around 21 July 2014 and under the terms of the contract it was due for completion by 4 November 2014. The Tribunal Member found that by February 2015 there was a considerable part of the work that was not completed and that the home owners sought the assistance of the Office of Fair Trading.
On 17 April 2015 Mr Chris Nicolson, a building inspector, issued to the builder a rectification order made under s 48E of the Home Building Act 1989 (the Act). The notice required the builder to complete the contracted work and agreed variations to a proper and workmanlike manner in accordance with the plans and specifications. The date by which the rectification order was to be complied with was 7 June 2015.
Emma Keith was described as the complainant in the rectification order. The order set out two conditions which the complainant had to comply with before the builder was required to comply with the rectification order. They were to provide reasonable access to the site and pay progress payments as they became due. The order also stated that it would cease to have effect if the matter giving rise to the order became the subject of a building claim before the Tribunal before 7 June 2015. The Tribunal Member made a finding that the builder did not complete the work in accordance with the rectification order and abandoned the contract.
On 4 May 2015 the home owners filed a Home Building application in the Tribunal. The orders sought in the application were that the builder do work or services as stated in the application to the approximate value of $200,000; the builder deliver, return or replace specified goods to the approximate value of $2,800; the home owners did not have to pay the amount of $31,911.64 and the builder pay an amount of $8,740. The total value of the claim was stated to be $243,451.64.

Notice of Appeal

In the notice of appeal the builder sought an order that it complete the incomplete work and rectify any defective work. It also sought an order that the home owners pay it the sum of $13,516.
The grounds of appeal set out what were alleged to be errors of law. It also sought leave to appeal on the basis that the decision would not be fair and equitable if the home owners were permitted to assert common law repudiation and termination in the absence of the builder being able to rely upon the further material in the attached statement of a Mr Ross Proud and evidence in respect of extension of time. It was also claimed that new evidence was now available that was not reasonably available at the time of the hearing. This was said to be an attached statement of Mr Ross Proud.
In written submissions dated 29 July 2016 it was submitted on behalf of the home owners that the appellant had raised 8 issues in the appeal. The builder appears to have accepted that those 8 issues were the issues raised by the builder in the appeal, and we adopt them as issues for determination on appeal. They are as follows: Issue 1: Whether the Builder was entitled to extensions of time for the completion of the works (paragraphs 26 - 29 of the Appellant's Submissions); Issue 2: Whether the Builder validly suspended the building contract in May 2015 (paragraphs 30 - 46 of the Appellant's Submissions); Issue 3: Whether the Keiths validly exercised their right to terminate the building contract based on the Builder's repudiation of its contractual obligations (paragraphs 7 - 25 of the Appellant's Submissions); Issue 4: Whether the Tribunal was correct in making various findings in relation to specific defects set out in the Scott Schedule (paragraphs 63 - 96); Issue 5: Whether the Keiths and the Builder agreed certain variations (paragraphs 47 - 62 of the Appellant's Submissions); Issue 6: Whether the Tribunal erred in failing to take into account amounts paid in respect of provisional sum items (paragraph 102 of the Appellant's Submissions); Issue 7: Whether the Tribunal erred in not ordering that the various defects be rectified by the Builder, having regard to section 48MA of the Home Building Act 1989 (NSW) (paragraphs 97 - 98 of the Appellant's Submissions); Issue 8: Whether the Tribunal erred in making a finding about the drawings that would apply (paragraphs 99 - 100 of the Appellant's Submissions).

Did the home owners terminate the contract?

It is convenient to deal with the third of these issues now. The home owners' submissions to the Appeal Panel were to the effect that they terminated the contract pursuant to the terms of the contract and that they also terminated the contract by accepting the builder's repudiation brought about because the builder failed to carry out the work with due diligence and within the time stipulated by the contract (see pars 29 - 41 of the submissions dated 29 July 2016).
The builder's submissions to the Appeal Panel were to the effect that the purported terminations of the contract by the home owners, whether pursuant to the contract or at common law, were invalid because of the failure of the home owners to comply with clauses 26, 27 and 28 of the contract.
Clauses 26 - 30 of the contract are as follows: 26. Dispute Resolution Notify the other party of matters in dispute If any dispute or difference (a dispute) concerning this Agreement or work arises between the Owner and the Builder then the party saying there is a dispute must give the other written notice of the dispute. Parties must meet and seek to resolve dispute Within ten (10) business days after the giving of such a notice the parties must confer at least once to attempt to resolve the dispute or to agree on methods of resolving the dispute by other means such as mediation, expert determination or arbitration. At any such conference each party must be represented by someone having authority to settle the dispute. Any agreement reached at the above meeting should be recorded in writing and a copy kept by both parties. An agreement may be relied upon as an addendum to this contract and used as a response to any subsequent action or inaction by a party to this agreement. In the absence of such a meeting a party is not entitled to terminate the contract whether pursuant to Clauses 28 or 29 or otherwise. However, if a party refuses to attend the meeting the other party can rely on it's willingness to attend as satisfying the holding of the meeting and thereby proceed pursuant to Clause 28 or 29 as appropriate. 27. Details Required To Support Notices Under Contract or to Substantiate a Dispute With regard to any notice issued by a party pursuant to or which relies upon Clauses 26, 28 or 29 the said notice must accurately set out the matters giving rise to the issuing of the notice. Any notice which merely recites the words or intent of Clause 26, 28 or 29 without proper details will not be a valid notice. Further, any document which exists and is relied upon to support the position put forward in any of the above notices must also be served with the notice. A failure to do so will mean the notice served will be of no effect as a notice. 28. Determination by the Owner (a) If the Builder is in default in any of the following respects, namely: (i) if he commits an act of bankruptcy or executes a Deed of Assignment or Deed of Arrangement or makes an assignment of his estate for the benefit of his creditors or enters into a composition or other arrangement with creditors or being a company enters into liquidation whether voluntary or compulsory (except for the purpose of reconstruction); or (ii) if he fails to proceed with the works with due diligence or in a competent manner with regard to the circumstances of the contract works; or if without reasonable cause he wholly suspends the carrying out of the works before Practical Completion; or (iii) if he refuses or persistently neglects - (A) to comply with the requirements of Clause 12 of these conditions; or (B) to remove or remedy defective work or improper materials, so that by the refusal or persistent neglect the works are materially affected; or (iv) if he states that he is unable or unwilling to complete the works or abandons the Contract; AND if, in the case of any default that is capable of remedy, the default continues for twenty five (25) days after notice in writing has been given to the Builder specifying the default and stating the Owner's intention of determining the Builder's employment, THEN the Owner may, without prejudice to any other rights or remedies, by notice served as allowed by Clause 30, determine the employment of the Builder under this Contract. (b) In the event that the Owner determines the employment of the Builder in accordance with Sub-Clause (a) of this Clause, the Owner may engage another Builder to carry out the works and the following provisions are to apply:- 1. if the reasonable cost of the works exceeds that which would have been otherwise payable under this Contract, then the amount of that excess may be recovered as a debt by the Builder to the Owner. 2. if the reasonable cost of the works is less than that which would have been otherwise payable under this Contract, then the difference will be a debt payable by the Owner to the Builder. 3. In the event that the Owner engages another Builder to complete the work under this contract and pursuant to the Owner's right to terminate then any claim under Sub-Clause (b) (i) above is restricted to work which is the same as required under this contract. 29. Determination by the Builder If the Owner is in default in any of the following respects, namely: if he refuses the Builder access to the site at any time after commencement of the works; or if he fails to provide evidence of title satisfactory to the Builder as required by Clause 2 within ten (10) days of the execution of this Contract; or if he fails to produce evidence of his capacity to pay the Contract Sum satisfactory to the Builder as required by Clause 2 within ten (10) days of the execution of this Contract; or if he fails to pay the Builder any progress payment within ten (10) days of a written request; or within the period stated in Item 5 of Schedule 2, whichever is the later; or if he fails to pay the deposit required by Clause 18; or if he commits an act of bankruptcy or executes a Deed of Assignment or Deed of Arrangement or enters into a composition or other arrangement with his creditors, or being a company enters into liquidation whether compulsory or voluntary (except for the purpose of reconstruction), AND, if in the case of any such default that is capable of remedy, the default continues for ten (10) days after notice in writing specifying the same and stating the Builder's intention of determining its employment has been given to the Owner, THEN the Builder may without prejudice to any other rights or remedies, by notice served pursuant to Clause 30 determine his employment under this Contract. 30. Service of Notices - parties need to confirm delivery All notices (and other documents) will be deemed to have been given, received or served:- if delivered to the other party at the relevant address in the Contract or the address last communicated in writing to the person giving the notice; and will be effected on the earliest date of:- actual receipt; or confirmation of actual and correct transmission of a fax dealing with the matter. However a notice or other document which under the contract requires service can not be given, received or served by mail or e-mail unless service as per (b) above is impossible. This is done to ensure that the parties actually receive the notice and or documents.
Emma Keith gave evidence that on 24 February 2015 she filed a complaint with the Department of Fair Trading about the project.
The emails comprised in exhibit 3 show that on 30 March 2015 Emma Keith emailed to a Mr Nicolson a table listing what she claimed to be the outstanding work and defective work. On 7 April 2015 a Mr Mowbray emailed Mr Nicolson thanking him for "sending the list of complaints through. I have attached some basic responses to this email." Mr Mowbray was the General Manager of the builder. Attached to his email was the table that Emma Keith had prepared but with comments inserted, apparently by Mr Mowbray.
Mr Nicolson scheduled a "site inspection and dispute resolution meeting" for 7 April and on that day Emma Keith met Mr Nicolson and Mr Mowbray and that dispute resolution meeting was held. Mr Nicolson had been appointed by the Commissioner for Fair Trading under s48D of the Act. That section enabled the Secretary to appoint an employee of the Office of Finance and Services to investigate any matter that had given rise to a building dispute.
It is the home owners' submission that the table listing the outstanding work and defective work forwarded by Emma Keith to Mr Nicolson, which Mr Nicolson then forwarded to Mr Mowbray, was written notice of the dispute for the purpose of clause 26 of the contract.
On 17 April 2015 Mr Nicholson issued to the builder and Mrs Keith a rectification order which ordered the builder to attend to the items set out in the schedule attached to the rectification order. The schedule required the Builder to complete the contracted work and agreed variations to a proper and workmanlike manner in accordance with the plans and specifications. It also stated that the date by which the rectification order was to be complied with was 7 June 2015. The order set out conditions which were that Mrs Keith was to comply with the following conditions before the builder was required to comply with the rectification order: (a) provide reasonable access to the site; and (b) pay progress payments as they became due.
The rectification order also stated that it would cease to have effect if the matter giving rise to the rectification order became the subject of a building claim before the NSW Civil and Administrative Tribunal before the date set out for the builder's compliance with the rectification order.
On 29 April 2015 the home owners sent an email to Mr Mowbray, Mr Nicolson and a Mr Blair who was a director of the builder. The email was in the following terms: Further to the recent on site mediation and rectification order in relation to (the home at Seaforth). We are issuing the following notices - Notice of Dispute under clause 26 (the on site meeting with Christopher Nicolson on 2nd April was the meeting for resolution attended by authorised representatives of M & M Building and Emma and Duncan Keith). Notice of Default under clause 28 (a) (ii). M & M Building is in default of the terms of the contract and this (sic) if this is not remedied we intend to terminate.
On 10 August 2015 the home owners sent an email to Mr Marc Hutchings. Mr Hutchings signed the points of cross claim on behalf of the builder which were dated 27 August 2015 and received by the Tribunal on 10 December 2015. The email was as follows: KEITH v M & M BUILDING, MOWBRAY AND BLAIR HB 15/31711 We refer to the Building Contract between us and our client, M & M Building Pty Ltd. On 29 April 2015, we issued a notice of default under clause 28 (a) of the Building Contract. A copy of that notice is enclosed. Your client's default has continued for more than 25 days since that notice. Pursuant to clause 28 (a), we now determine the employment of the Builder under the Building Contract. For the avoidance of doubt, the breaches that are the reasons for our termination of the Building Contract are: (a) the Builder not proceeding with the works with due diligence; (b) the Builder not proceeding with the works in a competent manner; (c) the Builder wholly suspending the carrying out of works before Practical Completion, without reasonable cause; and (d) refusing and neglecting to remove or remedy defective works. A copy of this letter will be emailed to Mr Mowbray's email address and posted to the Company's address in Young as well as sent to you.

Builder's submissions on termination

The builder relied upon the statement made by Mason J in Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 30 that it was open to the parties by their contract to regulate the exercise of the common law right to determine for repudiation or fundamental breach.
The builder submitted that the parties had included in the contract a provision regulating any common law right of termination by inserting the mandatory meeting provision after the notice referred to in clause 26 and that this was not observed. It was submitted that the result was that the purported termination on 10 August 2015 was invalid.
The builder submitted that the Tribunal Member made errors of law which included the following: 1. Finding that reliance by the builder on the Progressive Mailing House case was misplaced: 2. Finding that clause 26 could not be relied upon by the builder; 3. Finding that the meeting with Mr Nicolson satisfied the requirement of clause 26 to hold a meeting; and 4. Ruling that the contract was validly terminated at common law.
The builder made submissions to the effect that: 1. The words "or otherwise" in clause 26 must encompass a termination purporting to be based on repudiation under common law; 2. Clause 26 required the meeting to be held after the notice of dispute; 3. The statement referred to above by Mason J was supported by statements made in Carter's Breach of Contract, 2011, at [10 -07], one of which was: "a promisee who has not complied with an express right of termination cannot invoke a common law right governed by the same requirements"; and 4. The parties included in clause 26 a provision which regulated the common law right of termination and this provision for the holding of a meeting was not observed. As a result the purported termination, whether at common law or pursuant to the contract, was invalid.

Home owners' submissions on termination pursuant to the contract

The home owners submitted that they were entitled to terminate the contract pursuant to clause 28 on two bases. First the notice under clause 26 was provided to the builder in the form of the the table prepared by Mrs Keith which she forwarded to Mr Nicolson. It was submitted that that table listed the various matters outstanding, as required by clause 27, and that the parties met, in respect of that document on 7 April as required by clause 26. It was submitted that by the email of 29 April the home owners informed the builder of their intention to terminate the contract if items in the table were not addressed.
The Appeal Panel does not accept this submission. We are of the view that the email of 29 April did not inform the builder of the intentions of the home owners to terminate the contract if items in the table were not addressed. The email did not refer expressly or implicitly to the table nor did it expressly or implicitly inform the builder of the intentions of the home owners to terminate the contract if the items in the table were not addressed.
The second basis relied upon by the home owners was that the email of 29 April was sufficient notice for the purposes of clause 26 and clause 28 (a) (ii). It was said that this was so because in the email of 29 April the rectification order, which was referred to in that email, referred to the table that had been the subject of the meeting on 7 April. It was said that that table set out the various matters of dispute between the parties.
The Appeal Panel does not agree with this submission. In our view the rectification order did not refer to the table. The table included what was alleged by the home owners to be outstanding work and defective work. The rectification order appears to be a standard form of document. Part of the schedule to the rectification order required the builder to complete the items listed under the heading "Incomplete Work" and to rectify the items listed under the heading "Defective Work". The schedule then had a heading "Incomplete Work" and under that heading it stated: "Complete the contracted work and agreed variations to a proper and workmanlike manner in accordance with the plans and specifications." There were no other headings so that there was no rectification order made in respect of any alleged defective work.
It was submitted that for those above reasons the Tribunal Member should have concluded that the notice dated 29 April 2015 "accurately set out the matters giving rise to the issuing of the notice" as required by clause 26 of the contract. It is clear that this was meant to be a reference to clause 27.
It was submitted that where the parties had very recently met in relation to the matters the subject of the 29 April email, clause 26 did not require a further meeting. For that reason it was submitted that the Appeal Panel should conclude that the meeting required by clause 26 had taken place. On either of these bases it was said that it could be seen that the requirements of clause 28 (a) were met and that the 10 August notice of termination was a valid termination under the contract.
The Appeal Panel is of the view that the notification heading in clause 26 and the paragraph which follows it require that the party alleging there is a dispute must give to the other party written notice of the dispute.
We are of the view that the table prepared by Mrs Keith which she forwarded to Mr Nicolson, was not notice given by the home owners to the builder of a dispute. It was merely a document given to Mr Nicolson which listed outstanding works and defective works alleged by the home owners to exist in the building work which had been carried out by the builder.
For the above reasons we are of the view that the contract was not terminated by the home owners in accordance with the contract.
Clause 28 of this form of contract does not give an owner a right to terminate the contract. Clause 28 gives an owner a right to determine the employment of the builder. This is not a right to terminate the contract (see Minion v Graystone Pty Ltd [1990] 1 QldR 157 at 158/45 - 159/3 which refers to the two rights given to Graystone and 163/33 - 164/12 and in particular 163/37 - 40).
Clauses 26 and 27 impose requirements which must be satisfied before an owner can terminate but there is no clause in the contract which gives the owner a right to terminate. It follows that clause 28 has no application to questions concerning termination at common law.
Even if, contrary to what we have found, clause 28 did provide a right of termination, the 29 April email was not a valid notice under clause 28. It did not comply with the requirements of clause 27 because it did not give proper details of the failure referred to in clause 28 (a) (ii). It follows that the 29 April email was not a valid notice under the contract.

Home owners' submissions on termination at common law

It was submitted by the home owners that the Tribunal Member was correct in making findings that: (a) the builder's failure to carry out work with due diligence and within the time stipulated by the contract was a repudiation of the contract; and (b) the letter of 10 August 2015 was sufficient to advise the builder unequivocally that the home owners terminated the contract because the builder failed to proceed with due diligence.
The home owners agree that parties to a contract may choose to regulate the exercise of the common law right to terminate a contract for repudiation but it was submitted that that was not what the parties did in this contract.
The home owners relied upon statements in Wallace-Smith v Thiess Infraco (Swanston) Pty Ltd (2005) 218 ALR 1 at [61] - [62] as to how clauses restricting or barring termination are to be construed and in particular the statement that "clear words are needed to rebut the presumption that a contracting party does not intend to abandon any remedies for breach of contract arising by operation of law."
The home owners took issue with the builder's submission that the words "or otherwise" in clause 26 of the contract, was a reference to the home owners' right to terminate the contract for breach according to common law principles. The home owners submitted that that was not appropriate and that a specific reference to a party's right to terminate for repudiation would be required in order for the Tribunal to find that those rights were also to be restricted by the process contained in clause 26.
It was submitted that in any event the conditions of clause 26 were satisfied by the table prepared by Emma Keith, by Mr Mowbray completing the details in that table and by the parties meeting on 7 April in an effort to resolve the dispute. It was submitted that in those circumstances it could not be suggested that the requirements of clause 26 had not been complied with.
The home owners relied upon a decision of Kennedy v Collings Constructions Company Pty Ltd (1989) 7 BCL 25 to support the Tribunal Member's finding that the notice of termination was sufficient to advise the builder unequivocally of the termination of the contract by the home owners and reasons for that termination. It was submitted that the general principle is that a party may exercise its common law rights by way of a letter that does not explicitly refer to those rights so long as the language amounts to an acceptance of the builder's repudiation of the contract, so as to bring the contract to an end. It was submitted that that principle reflected a more general principle applicable to the termination of contracts on different grounds. Reliance was placed upon the statement made by Mason CJ in Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 262: a termination of a contract may be justified by reference to any ground that was valid at the time of termination, even though it was not relied on at the time and even though the ground actually relied on was found to be without substance.
For those reasons it was submitted that the termination letter of 10 August was sufficient for the home owners to validly exercise their right to terminate the contract on the basis of their common law rights.
The Appeal Panel is of the view that the object of clause 26 is to bring about a situation whereby the parties resolve their dispute without the necessity for litigation. The Appeal Panel is of the view that the object of clause 27 is to ensure that the precise matter of complaint is brought to the attention of the builder by the home owner. This is turn will result in clarifying the matters in dispute. This is the context in which the two clauses appear and when they are read in the light of the contract as a whole it can be seen that the words "or otherwise" include termination as a result of acceptance of a repudiation. Clause 26 does not mean that the contracting parties intend to abandon any remedies for breach of contract arising by operation of law. All that the clause does is to attempt to bring about a resolution of the dispute. If the parties cannot agree on a resolution or agree on a method of resolution, their common law rights are not affected.
The requirement that the party saying there is a dispute, must give the other party written notice of the dispute and the requirement to hold a meeting are not an abandonment of the right to accept a repudiation and terminate the contract. They are merely requirements that must be fulfilled before the party can exercise their right to terminate for repudiation.
The Appeal Panel is therefore of the view that the home owners did not terminate the contract at common law and that the Tribunal Member erred in concluding that the home owners validly terminated the contract at common law.

Denial of procedural fairness

The builder's submission that it was not afforded procedural fairness by reason of the home owners being permitted to argue termination on a common law basis should be rejected for the following reasons.
First, the builder's points of cross-claim pleaded: "On 10 August 2015 by letter to the Builder and Builder's solicitors, the Owners attempted to terminate the building contract." The home owners' points of defence pleaded: "Admit paragraph 10 and says that the letter dated 10 August 2015 terminated the contract."
Nowhere in the pleadings did the home owners suggest that the termination of the contract was on the basis of contractual right to termination only.
Secondly, when the matter was raised by the Tribunal Member, no suggestion of prejudice was raised by the builder's legal representative. That representative took up the opportunity to ask Mrs Keith further questions on the topic but did not identify any matters of prejudice or difficulty. None was referred to in the builder's written submissions before the Tribunal Member.
Thirdly, the builder contended that it may have obtained further information and evidence to meet a case based on common law termination. However there was no suggestion what that further information may have been and the contention should be rejected.
If the builder was not in a position to properly present its case on common law termination, it could have and should have sought an adjournment or sought to file further evidence on that question. It did not do so. The Appeal Panel therefore rejects the submissions of the builder that it was not afforded procedural fairness.

Consequence of the findings on termination

The Tribunal Member made findings that the work carried out by the builder was incomplete and defective. These were findings that the builder had breached the contract. As a result of those breaches the home owners suffered loss and the Tribunal Member made findings as to the cost of completing the work and the cost of rectification of the defects.
Although the contract is still on foot, that is not a reason to alter the orders for payment made by the Tribunal Member in favour of the home owners, provided the Tribunal Member's findings on the quantum of the losses are soundly based (see Contract Law in Australia 6th edition, J.W. Carter at [35 - 02] where the learned author states that except in one situation, a plaintiff need not prove the exercise of a right to terminate the performance of a contract in order to claim damages for breach. The one exception referred to is the case of anticipatory breach where termination is necessary to complete the plaintiff's cause of action. The breaches here were not anticipatory breaches. An anticipatory breach occurs when, prior to the time appointed for performance by the promissor, the promisee justifiably terminates the performance of the contract - see Contract Law in Australia, 6th edition, J. W. Carter at [29 - 01].

Disputes on incomplete or defective work

There were 12 items in dispute and the Appeal Panel will now deal with each of them.

Item 1, original garage floor slab

An engineer engaged by each of the parties jointly inspected the garage floor slab and determined that there was some cracking of the concrete over-lay. There was no agreement the cracking was only 1mm, but the home owners' expert engineer agreed that it was less than 5mm. That expert was of the opinion that the over-lay was a structural element of the floor and that the engineer ought to have investigated the adequacy of the old slab. The builder's expert engineer assumed that had been done by Mr Proud, but there was no evidence from Mr Proud as to the structural adequacy of the underlying slab. The builder was building on what had been previously a garage floor.
The Tribunal Member was satisfied that the structural adequacy of the old garage floor had not been established and that upgrading that area to habitable space by overlaying the concrete slab required engineering certification. The Tribunal Member was satisfied that the burden was upon the builder to establish that the structure, as built, met all engineering standards for structural adequacy. That had not been done and rectification would be required.
The evidence of the home owners expert was that the cost to replace this area would be $69,882.78, whilst the builder's expert accepted that the rectification cost was $44,463.03 on an 'if found' basis. However, the builder's expert did not include the cost of timber floors, windows and tiling in his cost estimate.
The Tribunal Member therefore accepted the costing of the home owners' expert as the most accurate measure of the remedial cost and he allowed the sum of $69,882.78.
The builder submitted that there had been no forensic examination of the true position by the home owners or their experts and this resulted in a defect being held to exist based on an opinion without verification as to the true position. It was submitted that this incorrectly reversed the onus of establishing a defect, and in doing so, amounted to an error of law.
The home owners seek to answer this submission and to explain the reference to the burden being upon the builder. It was submitted that when the Tribunal Member referred to that burden, it was apparent that this was in light of both experts finding that there was cracking in the garage floor. It was submitted that the Tribunal Member's finding about the cracking was based on the expert evidence and was a finding that there was, prima facie, a defect. It was submitted that the Tribunal Member's conclusion (referred to in par 63 above) was that the builder had not put forward evidence that would address that prima facie finding.
The Appeal Panel does not accept this submission. The finding that the over-lay was a structural element of the floor does not mean that prima facie the over-lay is defective. Furthermore, the fact that there is no engineering certification, does not mean that the area is defective. Even if the over-lay was a structural element of the floor and even if an engineer ought to have investigated the adequacy of the old slab, it does not follow that prima facie the area is defective.
In respect of this claim the home owners were seeking an order that the builder pay to them $69,882.78. The fact that there was some cracking in the concrete over-lay was not evidence that the area was structurally inadequate. The fact that the home owners' expert was of the opinion that the over-lay was a structural element of the floor and that the engineer ought to have investigated the adequacy of the old slab, but did not express an opinion that the area had to be replaced, appears to indicate that that expert did not hold an opinion on whether the area had to be replaced. Otherwise he would have expressed that opinion.
The home owners' submissions do not appear to dispute that they bear the onus of proving that the area must be replaced. The reference to the prima facie finding supports that conclusion, it being argued that they have discharged that onus with the prima facie finding.
The Appeal Panel does not accept this argument. The fact that the structural adequacy of the old garage floor had not been established and that upgrading that area to habitable space by overlaying the concrete slab required engineering certification, is also not evidence that the area is structurally unsound.
In order to obtain an order for the cost of replacement, as sought by the homeowners, the onus was upon the home owners to prove that the area was structurally unsound. The Appeal Panel is of the view that this was not established by the evidence. It therefore follows that the order for the payment of $421,960.69 must be reduced by $69,882.78.

Item 2, floor framework

The Tribunal Member made findings that: 1. although the steel framework was done contrary to the contractual requirements, the home owners acquiesced in the change to steel; 2. despite the change from timber frame to steel frame there was no change to the fact that the George Group specifications remained part of the contractual documents. Those specifications required that all exposed steel "is to be fully hot dipped galvanised."; and 3. it was not disputed by the experts that the steel supplied was not galvanised and that it was rusting.
The builder's initial written submissions included a submission that the Tribunal incorrectly construed the contract in ruling that it was agreed that the steel framework was to be fully hot dipped galvanised. However in its further submissions in reply the builder appears to have clarified those submissions by submitting that: 1. the Tribunal Member erred in law in construing the building contract and the relevant Australian Building Code Standards in ruling that the footwork had to be demolished on account of it being left exposed to the elements. It was submitted that if the builder had been allowed to complete the work under the contract, that would not have been the situation; and 2. the specifications referred to in the building contract and any relevant Australian Building Code Standard only required galvanising of "exposed" steelwork; not steelwork that would have been enclosed.
The George Group specification was one of the contract documents and it stated that all exposed steelwork was to be fully hot dipped galvanised. The Tribunal Member found that the fact of the matter was that the work was never completed by the builder, "it was left exposed to the elements and is showing signs of serious deterioration which requires correction."
In those circumstances the Appeal Panel is of the view that the Tribunal Member was correct to hold the builder liable for the cost of rectifying the damage caused by the fact that the exposed steelwork was not fully hot dipped galvanised. There was no ground of appeal nor submission made which disputed the quantum of the costs of rectification awarded by the Tribunal Member.

Item 3, wall framework and bracing

The Tribunal Member recorded in his reasons for decision that the home owner's experts (engineer and builder) both gave evidence that the walls were inadequately braced. He also stated that despite the opinion of the builder's expert (Mr Matley) that engineering certification could demonstrate that adequate bracing was in place, that certification was not in evidence. The Tribunal Member stated that he accepted that the walls were not adequately braced.
The Tribunal Member made a finding that under cross examination, Mr Hall described the scope of the necessary remedial work and gave clear reasons for the need to remove the cladding and correct the bracing. He also found that the scope of the work described as being necessary by Mr Hall was both understandable and under cross examination not disputed by Mr Matley. The Tribunal Member allowed the sum of $55,652.38 as estimated by Mr Madden on the basis of the scope suggested by Mr Hall as the more accurate measure of rectification of the bracing.
The builder made the following submissions: 1. the incorrect reversal of the onus of proof gave rise to an error of law in relation to the bracing issue; 2. a simple forensic examination would reveal that more than adequate bracing was in place; and 3. to clarify the position and avoid miscarriage of justice, leave was sought to admit the statements of Mr Proud dated 6 June and 13 July 2016.
The Appeal Panel is of the view that there was no incorrect reversal of the onus of proof. In his reasons, the Tribunal Member explicitly accepted the evidence of the home owners' experts that the walls were inadequately braced, as he was entitled to do.
The notice of appeal attached a statement of Mr Ross Proud and indicated that the builder would seek to produce this document to the Tribunal as significant new evidence which was now available that was not reasonably available at the time of the hearing. It was stated in the notice of appeal: Mr Proud's certifications and evidence relating to extensions of time were given to previous legal representatives but, it appears, thus far, were not lodged or adduced. The position in respect of Mr Proud may have been on account of his health issues or too (sic) avoid an argument as to two experts in the engineering arena.
The statement attached to the notice of appeal was dated 6 June 2016. The final paragraph of that statement was as follows: In the latter half of 2015 I experienced serious health problems over many months in the form of prostate cancer - being my second bout of cancer - which necessitated an operation on 20 December 2015. I am still in the process of recuperating from the operation e.g., I am still having to go to the toilet approximately every 20 minutes. I have also subsequently had to undergo an operation on my jaw and most recently, an eye operation.
The gravity of Mr Proud's health problems can be accepted but Mr Proud did not state in his statement that he was too ill to make a statement concerning the issues between the parties nor that he was too ill to give evidence before the Tribunal Member. Attached to the statement were copies of what were said to be certifications issued by Mr Proud in relation to the renovation and extension work at the house. Those certifications were dated 27 May 2011 (intended to be 27 May 2015) and four dated 6 July 2015. No attempt was made to tender those certifications before the Tribunal Member.
The notice of appeal in effect sought leave to appeal on the basis that the decision would not be fair and equitable if the home owners were permitted to assert defects in the absence of Mr Proud's evidence.
As the proceedings were in the Consumer and Commercial Division, sch 4 clause 8 of the Civil and Administrative Tribunal Act 2013 (the NCAT Act) is applicable and it imposed limitations on internal appeals against Consumer and Commercial Division decisions. The Appeal Panel may relevantly only grant leave under s 80 (2) (b) of the NCAT Act where it is satisfied that the appellant may have suffered a substantial miscarriage of justice because (a) the decision of the Tribunal under appeal was not fair and equitable or (b) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
The Appeal Panel is of the view that it cannot be said that because Mr Proud did not give evidence, the decision was not fair and equitable. No evidence was given that Mr Proud was not able to give evidence and the notice of appeal raises the possibility that the decision not to call Mr Proud was a tactical one to enhance the builder's prospects of success.
The Appeal Panel is also of the view that evidence from Mr Proud is not new evidence which has arisen, as it is not evidence that was not reasonably available at the time of the hearing. Each of the certifications was made in 2015, well before the commencement of the hearing in the Tribunal on 30 March 2016. The evidence which Mr Proud might be able to give was evidence that was not new evidence. It arose during the carrying out of the work by the builder. That work concluded in 2015.
The Appeal Panel is therefore of the view that it cannot be said that the builder may have suffered a substantial miscarriage of justice because the decision of the Tribunal was not fair and equitable nor because significant new evidence has arisen.
Paragraph 97 of the Tribunal Member's reasons for decision was part of his reasons which dealt with item 3, wall framework and bracing. That paragraph was in the following terms: Mr Hall gave evidence of the scope of proposed installation of windows and doors with which Mr Mately agreed. The cost of installation, based on Mr Hall's proposed scope and prepared by Mr Madden was $49,779.16. I allow that sum together with the sum of $4,390.45 to correct the supporting of the attic flooring for which engineering certification was not provided.
The Appeal Panel has been provided with a joint expert report signed by Mr Mately and Mr Hall. We have not been provided with any transcript of evidence or statements which might have been given or made by them. One of the matters dealt with in the joint expert report concerned the wall framework and bracing. Part of that section of the report dealt with wall framework - windows and doors and it recorded that Mr Mately and Mr Hall agreed that all windows and doors to the new work were not installed.
Neither party drew to our attention any particular matter that was submitted to be relevant to whether the Tribunal Member had reversed the onus of proof in the findings he made in par 97 of his reasons for decision.
There was no challenge in the notice of appeal nor in the submissions of the builder as to the quantum of the amount allowed in par 97. The statement in the joint expert report that Mr Mately and Mr Hall agreed that all windows and doors to the new work were not installed when taken with the first sentence of par 97, appears to indicate that there was no dispute between the parties that the windows and doors had to be installed.
The builder has the onus of convincing the Appeal Panel that the Tribunal Member made an error of law, if that is what is alleged in relation to par 97. The builder has not brought to the Appeal Panel's attention any matter which satisfies the Appeal Panel that the Tribunal Member reversed the onus of proof in the statements he made in par 97.

Item 4, roof construction

The Tribunal Member's reasons for decision actually dealt with roof construction and insulation in this item.
The builder submitted that: 1. There was an incorrect reversal of onus of proof; 2. A simple forensic examination would reveal that more than adequate bracing was in place; and 3. To avoid a miscarriage of justice, leave was sought to admit statements of Mr Proud dated 6 June and 13 July 2016.
In par 99 of his reasons for decision, the Tribunal Member stated that there was insufficient evidence to conclude that the roof was structurally inadequate. In par 102, the Tribunal Member stated that he accepted that the missing guttering, boxed gutter, downpipe and flashings were incomplete work. He also stated that Mr Mately agreed that should those items be determined as incomplete work, the cost of providing them was $7,643.08. The Tribunal Member allowed that sum.
The Appeal Panel is of the view that there is nothing stated in par 102 or any of the other paragraphs dealing with roof construction, to suggest that the Tribunal Member incorrectly reversed the onus of proof when he accepted that the missing guttering, box gutter, downpipe and flashings were incomplete work. Nothing has been brought to the Appeal Panel's attention which would support a conclusion that there was an incorrect reversal of the onus of proof.
In par 103 of his reasons, the Tribunal Member stated: In regard to the metal roofing it was Mr Hall's opinion that there was no insulation provided. Mr Mately's response was that he had been told by the builder that the insulation was provided. There was no evidence from the builder to support that proposition and I therefore accept Mr Hall's opinion that it was not provided. I allow the sum of $13,569.72 for that item.
That finding does not indicate a reversal of the onus of proof. The Tribunal Member accepted the opinion of Mr Hall.
One of the submissions made on behalf of the builder was that a simple forensic examination would show that the insulation was in place. The evidence relied upon for that submission was a paragraph in a statement made by Mr Proud dated 13 July 2016. Leave was sought to tender the evidence of Mr Proud in order to avoid a miscarriage of justice.
The Appeal Panel is of the view that leave should not be granted for the same reasons given above when dealing with item 3.
If a simple forensic examination would show that the insulation was in place, evidence of that fact could have been given by Mr Mately. He did not give that evidence and this is another reason why leave should not be granted to lead evidence from Mr Proud.

Item 5, the decking

The Tribunal Member made a finding that the building experts of the parties both agreed that the method of affixing the decking was defective and had caused significant damage to the decking timbers. Those experts also agreed on the appropriate method of rectification being replacement of the timbers and fixing by screwing rather than nails. The Tribunal Member allowed the sum of $13,180.37 as suggested by Mr Madden as the most accurate costing of the remedial work.
The builder submitted that it should be permitted to rectify the decking issues. One of the builder's grounds of appeal was that the Tribunal Member erred in law in failing to give reasons in respect of the non-application of s48MA of the Act.
Section 48MA of the Act is in these terms: A court or tribunal determining a building claim involving an allegation of defective residential work or specialist work by a party to the proceedings (the "responsible party") is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.
The builder also submitted that the duty to mitigate by giving a builder a reasonable opportunity to rectify defects was also relevant to this issue and referred the Appeal Panel to the decision in The Owners - Strata Plan No 76674 v Di Blasio Constructions Pty Ltd [2014] NSWSC 1067.
Submissions were also made on behalf of the builder that the Tribunal Member's decision in not allowing the builder to rectify any defects and complete the incomplete works had resulted in the automatic suspension of its licence pursuant to s42A of the Act, an event which it was submitted, impacted on the builder's ability to generate income and prejudicing the company director and associated licensee Mr Blair, and his ability to provide for his family. It was further submitted that if orders had been made for the builder to rectify work rather than pay money, the builder would have been able to undertake the work with home warranty insurance under the Act covering the work.
It was submitted on behalf of the home owners that the submission that the Tribunal Member should have provided reasons for not allowing the builder to remedy the defective work it had carried out was an entirely new submission. It was said that at no point during the hearing did the builder suggest that it should rectify any defective work. Rather, the builder's submissions in respect of rectification dealt only with the cost of rectification. No submission in reply took issue with these submissions. It was said that the Tribunal Member was not asked by the builder to make such an order and for that reason alone the builder's contention should be rejected.
Another submission made on behalf of the home owners was that they resisted a work order under s48MA because the builder was not able to carry out work to remedy defects because its licence was subject to a condition that prevented it from doing so.
The builder's response was that it had obtained a certificate of insurance at the commencement of the project in 2014. However that does not appear to be an answer. The question is whether the builder was licenced to do the work. The builder appears to have been licensed until 9 August 2014. It appears to have been unlicensed between 10 August 2014 and 8 February 2015. It was reissued with a licence from 9 February 2015 to 8 February 2016 and apparently later reissued with a license from 9 February 2015 to 8 February 2017, but on the condition that it was licensed only for contracts not requiring insurance under the Home Building Compensation Fund. The contract between the parties required insurance under that Fund. The builder was therefore not licensed after 9 August 2014 to carry out work necessary to complete the contract or rectify defects in work carried out by it under the contract.
The Appeal Panel is of the view that as the builder was not the holder of a contractor licence which authorises it to contract to do the work the subject of the orders which will be made by the Appeal Panel for the payment of money to the home owners, it was not appropriate for the Tribunal Member to apply the principle mentioned in s 48MA of the Act.
The Appeal Panel is also of the view that as the builder was not licensed to carry out this completion and rectification work, any alleged duty to mitigate by giving the builder a reasonable opportunity to rectify defects, is not applicable.
In those circumstances it is unnecessary for the Appeal Panel to make a ruling on the other submissions made by the home owners on this issue.
The Appeal Panel is therefore of the view that the builder should not be permitted to rectify the defective work in the decking issues.

Item 6, sewer gully and drainage

The Tribunal Member made the following findings: 106 Again Mr Hall's opinion is called into question by Mr Mately on the basis that he has been advised by the builder that Sydney Water has inspected and certified all external drainage. However, no evidence was provided to support those assertions. Mr Mowbray did not provide evidence on that issue and the certificate from Sydney Water is not in evidence. 107 I accept Mr Hall's opinion in relation to the drainage. I accept that rectification is required and allow the sum of $7,353.49.
The submission made on behalf of the builder was that the Tribunal Member erred in law in his determination in relation to the sewer gully and drainage by incorrectly ruling that the responsibility for obtaining the relevant certification lay with the home owners given that the terms of the contract placed that responsibility on the home owners.
The Appeal Panel is of the view that the builder's submission should be rejected. The Tribunal Member did not find that the responsibility for obtaining the relevant certification lay with the builder. Mr Hall's opinion in relation to the drainage was challenged but the Tribunal Member accepted Mr Hall's opinion. The Tribunal Member pointed out that the challenge made by Mr Mately to Mr Hall's opinion was based on what he had been advised by the builder. All that the Tribunal Member pointed out was that there was no evidence provided by the builder to support those assertions by Mr Mately. He also pointed out that the certificate from Sydney Water was not in evidence. The Tribunal Member did not rule that the responsibility for obtaining the relevant certification lay with the builder. The question of who had the responsibility to obtain any certificate from Sydney Water was not in issue on this item. What was in issue was whether Mr Hall's opinion should be accepted. There was no error of law in relation to this item.

Item 7, brick work

The parties agreed that there were defects in the brick work. The Tribunal Member made a finding that the sum allowed by Mr Madden allowed for correction of some work and replacement of some damaged bricks. The Tribunal Member allowed the sum of $1,615.77 based on that scope.
The builder submitted that it should be permitted to rectify the brick work. For the reasons given above in relation to item 5, the Appeal Panel is of the view that it was not appropriate for the Tribunal Member to apply the principle mentioned in s48MA of the Act. The Appeal Panel is also of the view that for the reasons given above concerning item 5, the duty to mitigate was not applicable.

Item 8, chimney

The Tribunal Member made findings that the essence of Mr Hall's concern about the chimney was that it had been constructed without adequate structural support and that the Q Panel provided was, in Mr Hall's expert opinion, not structural and required adequate framework for support. The Tribunal Member also found that Mr Mately did not provide any opinion on that issue or other issues raised by Mr Hall in relation to the chimney but relied on the builder's instruction that the Q Panels were structurally sound but Mr Mowbray's opinion was not provided elsewhere, and, would, in any event, not be that of an independent expert. The Tribunal Member stated that he was satisfied on the only expert evidence on this point that the chimney had been constructed without proper structural support and will require remediation in the manner suggested by Mr Hall. The sum allowed by the Tribunal Member was $8,019.36.
The submissions made on behalf of the builder were that the Tribunal Member had erred in making the ruling without requiring a forensic assessment and had incorrectly placed the onus of proof on the builder. Leave was sought to admit the statements of Mr Proud of 6 June and 13 July 2016. It was submitted that an examination would reveal there to be no defect.
The Appeal Panel is of the view that the Tribunal Member did not place the onus of proof on the builder. He accepted the evidence given by Mr Hall. The Appeal Panel is of the view that there was no question of law involved. The builder could have carried out a forensic assessment and led that evidence if it so desired. The Appeal Panel refuses leave to admit the statements of Mr Proud for the reasons given previously.

Item 9, main bedroom

The Tribunal Member made a finding that there was no dispute between the experts that the work relating to the main bathroom remained incomplete. He found that the difference in costing was minor and allowed the sum claimed of $16,611.38.
The builder submitted that it should be permitted to complete the work. For the reasons given above in relation to similar issues, the Appeal Panel is of the view that it was not appropriate for the Tribunal Member to apply the principle mentioned in s48MA of the Act and that the duty to mitigate was not applicable.

Item 11, stairs

The Tribunal Member made findings accepting the evidence of Mr Hall that there were significant defects in the stairs as constructed. His concern related to the material used for construction of the supporting structure, the evidence of screws penetrating the structure and the variation in height of the risers of the finished stairs. It is clear that he did not accept Mr Mately's evidence. He accepted the home owners' evidence that the stairs as built were not compliant with the contract and would require demolition and reconstruction at a cost of $21,182.82.
The builder initially submitted that the decision involved an error of law and that it should be permitted to complete the stairs so as to comply with the contract. In their submissions in reply, the home owners pointed out that the alleged error of law was not described and submitted that there was no such error. The builder's reply to those submissions said nothing about the alleged error of law but repeated that the builder should be permitted to complete the stairs so that they comply with the contract.
For the reasons given above on other items concerning the submission that the builder should be permitted to complete the work, the Appeal Panel rejects that submission.

Item 12, kitchen, laundry and other incomplete work

The Tribunal Member made a finding that there was no dispute by the parties' experts that the work remained incomplete. The Tribunal Member accepted Mr Madden's opinion of the cost to complete of $58,332.26. Mr Mately's costing was $75,761.56. As Mr Madden's costings had generally been accepted on other items, the Tribunal Member accepted his costings on this item.
The submission made on behalf of the builder was that the work was incomplete and the builder should be permitted to complete it.
For the reasons given above on similar submissions, that submission is not accepted by the Appeal Panel.
We will now complete these reasons for decision by dealing with the six remaining issues.

Was the builder entitled to an extension of time

This question would have been relevant had it been necessary for the Appeal Panel to give further consideration to the question whether the home owners terminated the contract. We have decided that the home owners did not terminate the contract and as a result this question is irrelevant.
The Tribunal Member made a finding that there was no evidence of the builder having notified the home owners in writing of any cause for delay or any stated extension of time for completion as required by clause 11 of the contract other than the claim for an extension based on the builder's need to obtain legal advice. The Tribunal Member stated that he was not satisfied there was any entitlement under the contract to an extension for that purpose.
The builder submitted that in his reasons for decision, the Tribunal Member had no regard to clause 11 (d) of the contract and that this resulted in an error of law. Even if that is so, it is irrelevant.
Clause 11 of the contract made provision for the builder to receive a fair and reasonable extension of time if the progress of the works were delayed for any of the reasons set out in that clause.
Clauses 11 (b) and (c) made provision for the builder to notify the home owners in writing of any matters which caused delay within a reasonable time of becoming aware of their occurrence. Should the home owners not dissent in writing, from such a notification within 5 days, the construction period would be extended by the period claimed in the notification. If the period claimed by the builder was disputed by the home owners, in writing, and within 5 days, then the issue would be referred to an independent third party for determination unless the period was otherwise agreed by the parties.
Clause 11 (d) stated that delay in notifying or a failure to notify a delay would not of itself prohibit an extension of time provided the matter which was claimed to cause delay was shown to cause delay to the works.
The home owners submitted that it was unsurprising that clause 11 (d) was not referred to by the Tribunal Member in his reasons for decision because it was not referred to in the builder's written submissions to the Tribunal Member. We also note that those written submissions did not deal with the question whether the builder was entitled to an extension of time.
In the above circumstances we are of the view that it is inappropriate for us to make any further findings in relation to clause 11 (d) of the contract.

Did the builder validly suspend the contract in May 2015

The builder submitted that work on the site was formally suspended pursuant to "Article 20 (c)" by letter from the builder dated 25 May 2015 due to the home owners' alleged failure to make payments on invoices. The Tribunal Member made findings that it was clause 21 of the contract that dealt with the builder's rights to suspend work for non-payment and not clause 20 (c) and hence it was found that the notice of suspension was not validly issued under the terms of the contract. The builder disputed those findings.
The Tribunal Member referred to the fact that the letter dated 25 May 2015 referred to invoice EDK021 of 10 December 2014 in the sum of $6,600 as being outstanding but attached a schedule which showed that a number of other invoices amounting in all to $20,739.25 remained unpaid. The Tribunal Member held that even if the notice of suspension were validly issued pursuant to clause 21, it would not have been possible for the home owners to know, by reference to that notice, how much they must pay to have the suspension of works lifted.
Mrs Keith gave evidence that the invoice of 10 December 2014 was for a sum of $6,600 for supply of windows. The Tribunal Member found that the windows had not been provided and a substantial part of their cost had already been paid by the home owners. He found that the home owners therefore considered that further payment was not due at that time. He also found that Mr Mowbray's evidence was that there had been a delay in ordering and delivery of the windows due to a cash flow problem being experienced by the builder.
The Tribunal Member found that the builder had not established that the home owners were in breach of their payment obligations under clause 20 and he was therefore not satisfied that the builder was entitled to issue a notice of suspension under clause 21 of the contract. The Tribunal Member was also satisfied that the notice issued by the letter of 25 May 2015 referred to an incorrect clause of the contract and was not issued in accordance with the contract and was thus of no force or effect.
The Tribunal Member also found that the fact that a tax invoice for $6,600 had been sent to the home owners and remained unpaid, which was acknowledged by the home owners, did not necessarily mean that the sum was owed.
Even if the Tribunal Member fell into error in concluding that the letter dated 25 May 2015 was not validly issued under the terms of the contract because it purported to be based on clause 20 (c) instead of clause 21, the Tribunal Member was not satisfied that the builder had established that the home owners were in breach of their payment obligations under clause 20. It followed that the builder was not entitled to issue a notice of suspension under clause 21, as the Tribunal Member found.
The builder submitted that the purported termination of contract by the home owners was invalid and amounted to a repudiation of the contract which was accepted by the builder.
The Tribunal Member found there was no evidence that the builder had accepted the alleged repudiation and terminated the contract. The Appeal Panel agrees with that finding. The submissions of the builder must also fail because the builder did not give the notice required by clause 26 and no meeting, required by that clause, was held. The giving of the notice and the holding of the meeting would have been required in order for the builder to prove a termination of the contract whether under the contract or at common law.

Provisional sum items

As part of the process of calculating the amount to be ordered to be paid by the builder to the home owners, the Tribunal Member stated: The correct method of determining whether any amount remains owing under the contract is simply to add to, or subtract from, the contract sum any variations made in accordance with the contract and deduct that figure from the payments actually made.
In its written submissions filed 15 July 2016 the builder submitted that the Tribunal Member erred at law by failing to take into account amounts paid by the builder in respect of provisional sum items in its determination of the amount payable under the contract by the home owners. Those submissions included a footnote to the schedule of provisional sum increases in "SM8 Vol A at p194." SM8 is an exhibit to a statement made by Mr Shaun Mowbray dated 23 November 2015. Paragraph 15 of that statement says: "exhibited and marked SM8 in the Respondent's Bundle of Documents is a Schedule of Provisional Sum increases as prepared by me."
SM8 comprises one page. It has a number of column heading entries across the top of the page which include "Allowance", "Estimated charge to date" and "Estimated total to complete".
In the builder's submissions dated 22 August 2016 the following submissions were made: 81. The Respondents own affidavits included evidence in relation to provisional sums. 82. For example, the first affidavit of Mrs Keith sworn 24 August 2015 referred to an exhibited email and tables reflecting the Appellant's position in relation to provisional sums which are contained in exhibit EK -1 to that affidavit. 83. Provisional sum items were selected by the Respondents and any increases over the amounts provisionally allowed are to be added to the contract price pursuant to clause 18 (d) of the contract. To disregard such amounts entails an error of law.
The reference to clause 18 (d) of the contract appears to be in error. It appears that it was intended to refer to clause 15 (d), and we interpret it in that way. Clause 15 deals with prime cost items and provisional sum work and clause 15 (d) is in the following terms: In the event that the total amount expended in respect of such sums exceeds the amount included in the Contract Price, the excess amount exclusive of GST, together with the percentage on the excess specified in item 4 of Schedule 2, is to be added to the Contract Price. The price adjustment arising is to be properly adjusted to ensure that the correct amount of GST is paid by the Owner.
There is a footnote to par 82 in these terms: "See [119] of the affidavit in vol A at item 6 (pp 31 - 52) and pages 160 - 163 and 253 of EK- 1."
The affidavit in volume A at item 6 is an affidavit by Mrs Keith dated 24 August 2015. Paragraph 119 of that affidavit is in the following terms: On page 253 of EK-1 is a table which I understand to reflect the Builder's position on the provisional sums that are likely to be payable under the contract. That table (which came with a letter of 26 May 2015) had changed significantly from the previous list that Shaun had sent on 26 November 2014 (pages 160 - 163 of the EK-1).
The table at EK- 1 is a copy of the exhibit SM8.
The document at pages 160 - 161 is a copy of an email from Mr Mowbray dated 26 November 2014. It deals with amounts of money in connection with the building work. It refers to provisional sums and variations. It includes the following: I now have had a chance to look through the figures on your project. I am in complete agreement with your figures you have supplied on this project, so as of our last communication we have attributed from your payments the amount of $272,300 which equates to 95% of the original contract lump sum, I have also listed a summary of where we think the provisional sums will end up with +'s and -'s which after these will probably increase the lump sum of the contract by $18,000 approximately, this represents just over a 6% increase in the main contract which is all to do with increased scope and quality, so this would leave a remainder on the main contract to pay of about $32,000.
The email was two pages long and it dealt with many matters other than provisional sums. The penultimate paragraph returned to provisional sums and it stated: "This is a net increase on all provisional sums $18,439.80."
The documents at pages 162 and 163 may be a list of attachments to that email. Those pages list 30 attachments. The first of which is described as "Provisional Sums list" and the other 29 are described as "Variation Quote".
In their submissions dated 29 July 2016 the home owners submitted that nowhere in the builder's submissions before the Tribunal Member were there any submissions about provisional sum items. It was submitted that par 102 of the builder's submissions (filed 15 July 2016) provided no analysis of any error in respect of provisional sums. It was submitted that the builder's appeal should be dismissed.
Those written submissions of the home owners referred the Appeal Panel by way of footnote, to the builder's submissions before the Tribunal Member. They were at folder D tab 30 and there does not appear to be any reference to provisional sums in those submissions. The builder's submissions in reply dated 22 August 2016 did not dispute the statement that nowhere in the builder's submissions was there any submission about provisional sum items.
Furthermore the builder's written submissions to the Appeal Panel did not direct our attention to any evidence given on behalf of the builder which was directed to proving that there were provisional cost items and the amounts of those items.
In those circumstances it has not been shown to the Appeal Panel that that type of evidence was brought before the Tribunal Member.
Furthermore the exhibit SM8 only records estimated provisional sums. Even if provisional sums were expended, the Appeal Panel cannot conclude from the evidence that has been brought to our attention what those sums were. It follows that the Appeal Panel is unable to identify error on the part of the Tribunal Member in omitting from the amount calculated as being payable by the home owners under the contract any amounts which exceeded the provisional sums.

Did the Tribunal Member err in making a finding about the drawings that would apply

The Tribunal Member made findings that: 1. The contract required the builder to construct the works in accordance with the plans provided by Civil and Structural Engineering Design Services Pty Ltd. 2. The builder, without proper authority varied the contract to the construction method set out in the engineering plans provided by R E Proud and Associates Pty Ltd. 3. As the home owners had acknowledged that there had been some preliminary discussion of the potential to vary the engineering plans and because the home owners had seen the steel arrive on site and be installed and because they raised no objection with the builder, the home owners acquiesced in the change. 4. The home owners' acquiescence was further supported by the agreement made at the time of the discussions with the inspector from the Office of Fair Trading to accept the certification provided by Proud and Associates on the basis that the builder would pay their fee.
The home owners submitted that the Tribunal Member made an error of law because either: 1. The evidence referred to in pars 162 (c) and (d) above was not sufficient to justify the conclusion that the home owners acquiesced in the change to the contract drawings; or 2. Any acquiescence was insufficient to amount to any recognised changes to the legal relations between the home owners and the builder.
The home owners further submitted that despite the builder varying the construction method to that set out in the engineering plans provided by R E Proud and Associates without showing those plans to the home owners, the Tribunal Member concluded that the home owners acquiesced in that change based only on: 1. A preliminary discussion of the possibility of changing methods. 2. The fact that the home owners saw some steel arrive on site and 3. The home owners later agreed to accept a certification provided by R E Proud and Associates.
It was submitted that none of those matters was sufficient to establish either agreement by the home owners to the contractual change or some form of estoppel.
It was submitted that, had the Tribunal Member not made that finding, he would have found that it was necessary to demolish the house and rebuild to the Civil and Structural Engineering Design drawings and that the main consequence of that would have been that the home owners would have been entitled to amounts necessary to rebuild the roof which were not allowed by the Tribunal Member. The amount not allowed was $5,062.07.
The builder submitted that the Tribunal Member did not err. It relied upon the three matters referred to in par 164 above and the following three facts: 1. The home owners paid for the steel; 2. The home owners must have observed the steel being constructed on the site; 3. In his affidavit dated 24 August 2015 Mr Keith recounted the following conversation: At some time in around July or August 2014, I had a conversation with Shaun Mowbray with words to the following effect: Mowbray: it may be easier if we use steel rather than brick footings. Duncan: I don't care, as long as it's signed off by a structural engineer and a certifier.
Estoppel can take different forms, one of which is estoppel by representation, which prevents a person who, by a representation of fact, has led another to alter his position, from denying that the fact is as represented (Discount and Finance Limited v Gehrig's NSW Wines Limited (1940) 40 SR (NSW) 598 at 602 - 3).
The Appeal Panel is of the view that the facts disclosed above did amount to a representation by the home owners that they acquiesced in the change of the plans.

Did the parties agree on certain variations

The Tribunal Member recorded that the home owners agreed that a variation in the sum of $3,023.32 should be added to the contract sum. That figure was based on a review by Mr Hall of the claimed variations and a determination of whether they were agreed, whether the work was done and whether the work formed part of the contracted works or not.
The Tribunal Member noted that, when Mr Mately was giving concurrent evidence he acknowledged that some of the variations for which payment was sought formed work that was included under the contract and some of the work for which a variation was claimed had not been performed at all.
The Tribunal Member stated that he was not satisfied that the evidence from either Mr Mately or from Mr Hall was sufficient to determine the issue of variations. The Tribunal Member stated that clause 14 (c) of the contract provided that variations agreed to by the builder were to be put in writing and signed by the owner and the builder. He stated that was also a requirement of the Act s6 (1) (b) and s7 (2). He stated that he had not been taken in the evidence to any variation that complied with those provisions. The Tribunal Member stated that s10 of the Act provided that a person who entered into a contract to which the requirements of s7 applied that was not in writing was not entitled to enforce any remedy in respect of a breach by the other party. Thus, a builder could not enforce payment by the owner under the contract for work done pursuant to an agreed variation that did not comply with s7.
The Tribunal Member then found that on the evidence the builder was not entitled as a result of the operation of s10 of the Act, to pursue any claim for any of the variations. However, as the home owners conceded the sum of $3,023.32, he was satisfied that sum should be added to the contract price.
The builder submitted that the Tribunal Member erred in his rulings on clause 14 (c) of the contract and ss6 (1) (b), 7 (2) and 10 of the Act regarding the requirement for variations to be in writing and signed by the owner or the owners' agent.
The builder relied upon what was said by Pembroke J in Kavia Holdings Pty Ltd v Suntrack Holdings Pty Ltd [2011] NSWSC 716 and Harrison J in Stuart v Hishon [2013] NSWSC 766 submitting that the home owners' approval of or agreement to variations by email was binding on them as a matter of law.
Neither of those cases dealt with clause 14 (c) of the BC4 form of contract nor did they deal with the above sections of the Act. It was submitted that Pembroke J held that an email satisfied an "in writing" and "signing" requirement. Pembroke J at [32] stated that the question was a mundane one of construction. His Honour said that the primary requirement was that the notice (which was a notice to exercise an option for a lease) be in writing and that a particular email satisfied that requirement. However at [34] his Honour said that he considered the requirement for signing to be facultative and that he did not regard the clause dealing with the notice as requiring that all notices must be signed.
Even if it be accepted that an email from the home owners can be said to be an email signed by the home owners, the builder's submissions did not direct the Appeal Panel to any contract signed by both parties which showed agreement as to a variation and the cost of the variation. The emails sent by Mrs Keith to the builder providing lists of agreed variations, are not contracts and were not signed by the builder. They therefore complied neither with section 7 of the Act nor with clause 14 (c) of the contract. Clause 14 (c) relevantly provided: (i)If the Builder agrees to undertake a variation requested or required by the Owner, the variation is to be detailed in writing and signed by the Owner (or the Owner's agent) and the Builder. Documents detailing the variation, including as appropriate, amended drawings or specifications, become contract documents.
In Xu v Jinhong Design and Constructions Pty Ltd [2011] NSWCA 277 at [105] Macfarlan JA, with whom Basten JA agreed, held that s6 (1) (b) of the Act clearly indicated that the requirement of writing imposed by s7 applied to variations of the ambit of the residential building work. His Honour stated that the breadth of the operation of s 6 (1) (b) was indicated by the fact that it was expressed to apply to the variation of "any such undertaking to do residential building work … or the way in which any such work was to be done" and not simply to the variation of the contract under which such undertaking was given.
The home owners disputed the submissions made by the builder concerning variations and submitted that nowhere in the builder's submissions before the Tribunal Member did the builder seek to draw attention to the documents to which it now sought to refer. Further it was submitted that the builder had made no attempt to identify the variations said to have been agreed, the amounts of those variations or the evidence which would establish whether the work described by that variation was carried out.
It was further submitted that had the Tribunal Member been taken to the material and been satisfied that there was an agreed "variation", the following questions remained: 1. Whether the work described by that variation was within the original contract scope (so was not, properly a variation); and 2. Whether the variation had been carried out. 3. Inferentially if was submitted that those questions had not been answered favourably for the builder.
For the reasons set out above and in particular in pars 178 and 179, the Appeal Panel rejects the builder's claims for variations.

Builder's cross claim

The Tribunal Member gave consideration to the builder's cross claim for payment of $13,516 allegedly outstanding under the contract. Part of that $13,516 included the $6,600 which the home owners agreed was unpaid. This meant that if the Tribunal Member erred in law on this aspect of the dispute, the builder had the onus of proving to the Appeal Panel that the difference of $6,916 or part thereof was owing by the home owners.
The Tribunal Member stated that there was no logic to the builder's claim for the payment of this $13,516. He stated that the builder alleged that it was owed that sum for unpaid tax invoices and said that the tax invoices were not in evidence.
The builder submitted that the tax invoices were attached to a statement by Mr Mowbray dated 23 November 2015. Paragraph 14 of that statement exhibited and "marked as 'SM7' in the builder's bundle of documents, a number of invoices issued to the Applicants in respect of the Respondent's claims for payments." Nothing further was said in that statement to prove that the amounts claimed in those invoices were payable by the home owners. The builder did not direct the attention of the Appeal Panel to any evidence which proved that the amounts claimed in those invoices were payable by the home owners to the builder pursuant to the contract.
The builder's cross claim identified seven tax invoices which made up this claim of $13,516. They were the seven invoices in exhibit SM7.As we have mentioned, one of those tax invoices was for the above sum of $6,600. The other six tax invoices described the claims as follows: Tax invoice ED K022 Execution of extra works as per clause 14 items (a) 1 and (a) 3. General manager's cost to respond to unfounded HOW claim and allegations. Charges as per gazetted rates with MBA $4,422. Tax invoice ED K023 Time spent to date refuting allegations of defective workmanship. Meeting with DOFT building inspector and client to go through same. Charges as per gazetted rates with MBA $1,452. Tax invoice ED K024 Extra work for attaching temporary weather proofing due to storm. Not in quoted works $139.15. Tax invoice ED K025 To go through all receipts and costs on contract as requested in DOFT meeting with clients and Chris Nicolson to come up with current PS costs and expected future costs PS costs. To look at client's disputes on already approved variations and respond. To issue new variations as a result of this extra work. Charges as per gazetted rates $6,509. Tax invoice ED K026 Pick up timber initially left for firewood as per client's request. Timber now removed as per client's revised request $287.75. Tax invoice ED K027A Additional premium for extension of construction insurance policy for works at [Seaforth]. Extension of policy required due to variations, weather and suspension of contract due to non-payment $706.10.
No submissions were addressed to the Appeal Panel to show how or why the amounts in those invoices were payable by the home owners. The Appeal Panel is not convinced that any of the amounts claimed are payable under the contract and it rejects the builder's claims for these amounts.
The Tribunal Member noted that the builder's cross claim was for payment of $13,516 alleged to be outstanding under the contract including interest plus unspecified damages relating to the alleged wrongful termination of the contract by the home owners. The Tribunal Member stated that the claim for damages fell away in light of his decision that the home owners validly terminated the contract at common law on 10 August 2015.
The Tribunal Member also noted that the builder's representative advised, when questioned at the hearing, that no claim was made by the builder based on a quantum meruit. The Tribunal Member stated that hence the builder's claim was to be limited to a claim for variations made pursuant to the contract and in accordance with the Act plus any sum outstanding under the contract and any interest payable on that sum pursuant to the terms of the contract.
The Tribunal Member stated that the home owners acknowledged that the tax invoice in the sum of $6,600 dated 10 December 2014 remained unpaid but, as indicated above, that did not necessarily mean that the sum was owed.

Summary

The builder has succeeded as to the sum of $69,882.78 in respect of item 1, original garage floor slab. Otherwise the builder has failed on its other arguments and claims.

Orders 1. The appeal is allowed in part in the sum of $69,882.78. 2. Otherwise the appeal is dismissed and the appellant is ordered to pay the respondents the sum of $352,077.91 in substitution for the order for the payment of $421,960.69 made by the Tribunal on 6 May 2016. 3. The question of costs is reserved. If either party seeks an order for costs then they should file and serve written submissions as follows: the respondents to file and serve their written submissions on or before 14 days after the publication of these reasons. The appellant to file and serve its written submissions within 14 days after receipt of the respondents' written submissions. 4. If submissions are filed and served, they should address the question whether pursuant to s50 (2) of the Civil and Administrative Tribunal Act the Appeal Panel should dispense with a hearing on the question of costs.

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: 28 April 2017

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Judgment (29 paragraphs)

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