This application was filed in the Home Building Division of the Consumer, Trader and Tenancy Tribunal on 27 November 2013. That Tribunal was abolished from 1 January 2014 and the application proceeded in the Civil and Administrative Tribunal pursuant to the transitional provisions of the Civil and Administrative Tribunal Act 2013, Schedule 1.
The application was listed for directions on a number of occasions. On 11 February 2014 directions were made for the parties to file and serve Points of Claim and Points of Defence together with documentary material to be relied upon. At the next directions hearing on 8 April 2014 Mr Fred Randell was joined as second applicant and Mr Jackson Hemi Love was joined as second respondent. Directions were made to extend the time for provision of documentary material and leave for the parties to be legally represented was granted.
At the next directions hearing conducted on 4 July 2014 the applicants had fully prepared their documentary material in the form of witness statements, expert evidence, Scott schedule and submissions. The respondents were given an extension of time to file and serve a reply to the Scott schedule and all expert and lay evidence in reply.
At a further directions hearing on 12 August 2014 the respondents did not appear and had failed to comply with directions except to the extent that Points of Defence and a short (undated) statement from the first respondent had been filed on 12 and 29 May 2014, respectively.
On 12 September 2014 the matter came before a Senior Member for directions. The parties appeared by telephone. At that time the hearing date of 9 October 2014 was confirmed and the respondents were again granted an extension of time (until 25 September 2014) to file and serve their evidence.
On 7 October 2014 the first respondent made written request to vacate the hearing on 9 October 2104 based on his claimed medical incapacity to attend the hearing. A medical certificate was provided. The adjournment was refused on the basis that it provided very late notice to the applicants, was prejudicial to the applicants who had to travel from Dubbo to the hearing and because there are two respondents in partnership and no explanation was given as to why the other partner could not attend and represent both. The respondents were advised that they could raise the issue of adjournment for further consideration at the hearing.
A further written request for adjournment was received on the morning of the hearing. There was no appearance of the respondents. The applicants opposed the adjournment.
The adjournment application was refused. Again there was no explanation for the non-attendance of the second respondent. The applicant had travelled from Dubbo to attend the hearing and was accompanied by her expert witness and was represented by counsel.
There was no serious attempt by the respondents to prepare for the hearing despite repeated directions of the Tribunal to do so from 11 February 2014. Perfunctory preparation had been done in May 2014 but there was no further attempt to prepare for the hearing despite repeated opportunities. Additionally, the respondents had failed to comply with a costs order made by the Tribunal on 12 August 2014.
Taking these matters into consideration and the fact that it was a large claim filed almost a year ago it was considered that the obvious prejudice to the applicants of an adjournment could not be re-dressed. Accordingly the application for adjournment was refused.
In view of the application made by the respondents to adjourn the matter it was clear that the respondents had been served with notice of the hearing. For the above reasons it was considered that the justice of the case required that the matter proceed in the absence of the respondents.
The application originally sought orders for compensation in the sum of $165,000.00 in respect of allegedly incomplete and defective residential building work. Amended Points of Claim were filed on 4 July 2014 and with supporting documents filed at that time the application was amended to seek orders in the total sum of $143,789.25
[2]
JURISDICTION
I am satisfied, and it is not disputed, that the parties entered into a contract on or about 31 January 2013 for the supply of residential building work in the form of a renovation and extension to the applicants' home.
Accordingly the Tribunal has jurisdiction to hear and determine the application pursuant to the Consumer, Trader and Tenancy Tribunal Act 2001 s 21 and Schedule 1 and the Home Building Act 1989 s 48K and the transitional provisions of the Civil and Administrative Tribunal Act 2013, Schedule 1.
[3]
ISSUES
The issues raised by the application were
Who were the parties to the building contract,
How and in what circumstances was the contract terminated,
Whether the work was performed in accordance with the contract and the statutory warranties provided under the Home Building Act 1989, s 18B and if not, whether the applicants are entitled to be compensated in damages and the quantum of damage suffered by the applicants,
Whether variations to the contracted work performed by the builder were done in accordance with the contract and the Home Building Act and, to the extent of any failure in that regard, whether the applicants are entitled to a refund of any sum paid for variations.
[4]
THE EVIDENCE
The applicants provided three written statements together with many hundreds of pages of supporting documents, an expert report prepared by a building consultant, a short written submission and a schedule setting out the loss suffered for which compensation was claimed. The bundles of documents filed and served by the applicants and relied on by the applicants were tendered and identified as exhibits 1, 2 and 3.
In addition the applicants' expert adopted his report on affirmation (with one correction). The first applicant also confirmed her three written statements on affirmation and made minor corrections.
The respondents' evidence consisted of Points of Defence which, apart from admitting the contract and noting the contract price including GST, denied without any attempt at explanation, almost the entirety of the applicants' claim. The respondents also provided a statement, apparently signed by the first respondent, which in part responded to the applicants' first written statement.
[5]
FACTS
The respondents were not present at the hearing and did not formally put any evidence before the Tribunal. Nevertheless the two documents already mentioned were filed and served on the applicants. The applicants addressed their response to the denials contained in those documents and I have therefore considered them as if they were formally tendered.
Because the applicants' evidence was given on affirmation and because the applicants' representative and the applicants' written evidence went to considerable lengths to identify the errors in the respondents' submission and supported the propositions being put by the applicants by careful and detailed cross reference to corroborating documents and because the applicants, where they had previously been in error were prepared to concede and correct those errors, I have throughout preferred the evidence of the applicants.
[6]
The contract and the parties to it
I am satisfied on the evidence presented that the applicants entered into a Master Builders Association "short form residential building contract" on or about 31 January 2013. The scope of the proposed works was extensive and included renovations to an existing ground floor, first floor and attic with a rear extension. The contract referred to a scope of works set out in a document dated 10 January 2013. The contract was signed by Brett Love and the builder was named in the contract as "Brett Love T/as New Love Attics and Roof Conversions". I am further satisfied from an ASIC search that the owners of the business name "New Love Attics and Roof Conversions" are Brett Anthony Love and Jackson Hemi Love.
I am therefore satisfied that the parties to the contract were the applicants and both respondents. I shall refer to the parties as "the home owners" and "the builders".
[7]
The contract price
The contract specified the contract sum to be $202,729 without specifying that the sum was exclusive of GST. However, schedule 4 of the contract set out the progress payments and identified the contract sum to be $223,001.90, inclusive of GST. The applicants did not contest that the contract sum was $223,001.90.
[8]
Termination of the contract
I am satisfied that work commenced on 4 February 2013 and progressed until about July 2013, after which little if any work was done. The parties appear to have initially had a good working relationship despite some delays in the latter part of 2012 in getting the project started.
On or about 22 February 2013 the owners first made a complaint to the builder in relation to the quality of the window frames. Their dissatisfaction on that issue was again discussed in March 2013 and again in May 2013.
The contract contemplated that the work would be completed by 4 July 2013 with provision for extensions of time. No evidence was provided that the builder sought any extension of time. By July 2013 the owners had become concerned with lack of progress on the job and with unauthorised variations. Their concern regarding the unreasonable delay in completing the work was expressed in a letter from their solicitors to the builder dated 12 September 2013.
By November 2013 the applicants had become frustrated with the builders' lack of activity on the job and on 13 November 2012 served a default notice in accordance with cl 13 of the contract. The notice cited the fact that the builder had unreasonably stopped work, had failed to proceed with expedition and had failed to reasonably comply with written notice to rectify defects. As there was no response to that notice from the builder and no further work was done, the applicants served a notice of termination of the contract on 21 February 2014.
I am therefore satisfied that the contract was validly terminated by the applicants on 21 February 2014.
[9]
Agreed deductions and amounts paid
During the course of the works and before termination of the contract the parties held discussions and exchanged e-mails and text messages in relation to reducing the scope of the contracted work. On the evidence provided I am satisfied the parties agreed to excise from the contract work to the value of $19,629.50.
I am satisfied that the owners have paid the builders $172,198.10 in respect of the contracted works. In addition the owners have paid the builders a further sum in respect of variations claimed by the builders which is referred to below.
[10]
Defects and incomplete work
Expert evidence was provided in the form of a report by Mr Tony Ransley of Tyrrells Property Inspections. Mr Ransley carried out an inspection of the subject works on 25 November 2013 and prepared his report in January 2014. Mr Ransley provided evidence of his expertise and experience and acknowledged his obligations under the Tribunal's code of conduct for expert witnesses. Mr Ransley adopted his report on affirmation and was available to be cross examined on his report.
I accept Mr Ransley's report as expert evidence and I am satisfied he is properly qualified to express the opinions therein.
Based on the expert evidence I am satisfied that the subject work as performed by the builder was defective and that the reasonable cost to rectify the defects is $59,083.00. I am further satisfied that as at the date of termination the contracted work was incomplete and that the cost to complete is $104, 649.00.
[11]
Variations
During the course of the work the builders claimed payment for variations in the total sum of $17,730. Part of the claim was in the form of an invoice dated 22 May 2013 in the sum of $4,391.35. Other claims were made in the form of a schedule attached to an e-mail sent to the applicants on 9 July 2013. Whilst it was conceded by the applicants that some of the variations had been discussed and an amount of payment agreed between the parties after the work was completed, none had been approved as required by clause 8 of the contract.
Despite the failure of the builders to prepare written variations and have them approved before the work was done the applicants paid the builders the total sum of $15, 268.05 for variations. Accordingly the applicants sought a refund of that amount but were prepared to concede that the builders were entitled to a quantum meruit in respect of those variations for which agreement was given. The report of Mr Ransley valued the quantum meruit at $7,992.55.
[12]
Additional costs incurred by the owners
During the course of construction the builder sought an alternate method of construction of a back patio and requested engineering specification for the proposed change. The applicants incurred the additional cost of engineering opinion in the sum of $984 paid to Aspect Project Management.
I am satisfied the builder did not do the work in accordance with plans and engineering detail provided at the time of entering into the contract and did not do the work in accordance with the additional engineering detail requested. The payment was made by the owners as a result of the breach by the builder. I am therefore satisfied the owners are entitled to recover that sum as damages.
Further, in order to identify and quantify the defective and incomplete work and to provide an opinion on the value of claimed variations it was necessary for the owners to engage the services of Mr Ransley to prepare a report. The cost of doing so was $5,434 and that sum was incurred by the owners prior to the granting by the Tribunal of leave for the parties to be legally represented. As it is likely that sum cannot be included in any costs order, I am satisfied nevertheless that the owners are entitled to compensation in that sum.
[13]
APPLICATION OF RELEVANT LAW
The applicants' representative was asked to make submissions on the issue of whether the owners are entitled to a refund of the sum paid in part payment for the variations claimed by the builders ($15,268.05).
The applicants' submission was that the payments were made under a mistake of law as there was no legal obligation on the owners, pursuant to the contract, to make the payment. As such, it was the applicants' submission that they are entitled to a refund of that sum based on the principle referred to in David Securities Pty. Ltd. v Commonwealth Bank of Australia Ltd. [1992]HCA 48. Relying on that decision it was the applicants' position that because the request for payment and the payments themselves were made well after the performance of the work, any payment by the owners had not caused the builder to "change his position".
I am satisfied that submission is correct. The contract (cl 8) required that any variations to the work were to be recorded in writing and signed by the parties. That obligation is no more than is required by the Home Building Act s 7.
The fact of the matter is that none of the variations, whether they were agreed or not, was in writing and signed by the parties. As such the Home Building Act 1989 s 10 precludes any claim under the contract for payment for the variations.
To the extent that the owners made payments (amounting to $15,268.05) those payments were made under a mistake of law for which the owners are prima facie entitled to a refund. The High Court decision in David Securities does not assist the builder because the claims (and part payments) made in the way that they were, after the event, did not cause the builder to change his position.
I am satisfied therefore that the owners are entitled to a refund of the sum paid for variations being $15,268.05.
Despite the fact that there is no cross claim on foot by the builder seeking any payment for work done (or otherwise) the owners conceded that they had agreed to some of the variations being performed. Based on the expert opinion of Mr Ransley I am satisfied the value of that work for which the owners conceded they were liable for payment is $7,992.55.
The Home Building Act 1989 provides for certain warranties to be implied into the building contract. Those warranties are set out at s 18B of the Act.
18B Warranties as to residential building work
The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work:
(a) a warranty that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract,
(b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new,
(c) a warranty that the work will be done in accordance with, and will comply with, this or any other law,
(d) a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time,
(e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling,
(f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder's or person's skill and judgment.
Based on my finding of fact that the work was defective and that it was to a very large extent incomplete at the time of termination, I am satisfied that the builders are in breach of their obligations under s 18B, specifically 18B(a) and (d).
[14]
CONCLUSION
The homeowners are entitled to be compensated in damages as found above, calculated as follows
Reasonable cost to rectify defective work $59,083.00
cost to complete 104,649.00
Total 163,732.00
[15]
From the above sum must be deducted the amount remaining in the contract. That is, the contract price minus the amounts paid. ($223,001.90 - $172,198.10 = $50,803.80)
Hence, applicants are entitled to $112,928.20
[16]
In addition to the above sum the applicants are entitled to the agreed deductions from the contract price ($19,629.50), the payments made to Aspect Project Management and Tyrrells Property Inspections ($984 and $5434) and a refund of the sum paid under mistake of law ($15,268.05) giving a total entitlement of $154,243.75.
However, the applicants conceded they should pay a quantum meruit to the builders in the sum of $7,992.55 which reduces the above amount to $146,251.20.
It is noted there is a difference of $2,461.95 from the sum set out in the applicants' schedule of claim. This is the difference between the variations charged by the builder and the payments made for variations by the owners and arises because there was never any legal obligation to make the payment and no sum has been conceded in respect of it.
[17]
COSTS
This matter is determined pursuant to the transitional provisions of the Civil and Administrative Act 2013 Schedule 1 as if the provisions of the Consumer Trader and Tenancy Tribunal Act still apply.
The applicants' submission correctly pointed out that pursuant to The CTTT Act s 53 and the CTTT Regulations cl 20(4) the Tribunal has the discretion to award costs.
The submission also relied on the principle set out in Rowland v Composition Construction Pty. Ltd. [2014]NSWCATCD 32 to the effect that
"…the purpose of making a costs order is to provide compensation to the party in whose favour the order is made for the expense the party has been put to in prosecuting or defending legal proceedings. In general terms, a party who is successful is entitled to an order for costs in its favour, subject to certain limited exceptions…"
The applicants have been entirely successful in this application. They have been put to considerable legal expense in pursuing the claim and in the cost of their expert attending the hearing today (which was not taken into account in calculating the damages).
I am satisfied the applicants are entitled to their costs, which if not agreed, should be assessed on the ordinary basis.
Jeffery Smith
Senior Member
Civil and Administrative Tribunal of New South Wales
15 October 2014
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: 20 February 2015
Parties
Applicant/Plaintiff:
Mandi Randell and Fred Randell
Respondent/Defendant:
Brett Anthony Love and Jackson Hemi Love both trading as "New Love Attics and Roof Conversions"