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[2014] NSWCATCD 192
NCAT Consumer and Commercial
2014-03-31
Original judgment source is linked above.
AN OVERVIEW OF THE PARTIES' DISPUTES 1These Reasons are given in respect of two applications under the Home Building Act 1989 NSW (the "HB Act"). 2The first application lodged on 28 March 2013 is brought by the home owner, Mr Affan, who was, and is, at all material times, the registered proprietor of residential premises at Marayong New South Wales (the "property"). 3During 2011 and 2012, a building contractor company, Fabiani Constructions Pty Ltd (the "builder"), carried out residential building work at the property. At all material times, the builder held a current contractor licence under the HB Act. 4The other application lodged on 12 July 2013 is brought by the builder who initially sought $8,869.00 (Points of Claim; paragraph 6(a)) but now seeks to recover an amount of up to $8,294.00 from the home owner. Such amount, on the builder's case, is the unpaid balance of the contract price as between the parties after adjustment for variations at the home owner's request. The nature and extent of any variations to the parties' contract are controversial matters, including whether there has been compliance with the statutory requirements as to the form and content of contracts for residential building work. Those requirements are set out in s 7, s 7B and s 7E of the HB Act, and also in the Home Building Regulation 2004 (the "HB Regulation"): see particularly, reg 11A, reg 12 and reg 13, and the Conditions in Part 1 of Schedule 2 and the Checklist in Schedule 3. These matters are considered below by reference to the parties' evidence and documents. 5In the home owner's application, Mr Affan, claims damages against the builder for breach of contract including the statutory warranties under s 18B of the HB Act. The home owner's case is that the work carried out by the builder at the property was not completed in accordance with the contract, that the works as performed by the builder were defective and not carried out in a proper and workmanlike manner, and that the materials as supplied and used by the builder were not new or otherwise were not suitable for the purpose for which they were used. In consequence thereof, the home owner contends that he has suffered loss or damage in an amounts including establishment costs, insurances and GST of more than $73,000.00 comprising the cost of rectification/remedial measures as outlined in a Scott Schedule attached to the reports of Mr Greg Beard (the "Beard Report") together with the home owner's out of pocket expenses including the cost of obtaining the Beard Report. 6There are up to 17 items in the home owner's claim as referred to in the Scott Schedule attached to the Beard Report. These items are contested by the builder whether on the grounds of quantum or liability or both. In this regard the builder relies on the evidence of Mr Edward Brincat who also provided an expert report (the "Brincat report"). 7Accordingly, the matters of fact and law in dispute between the home owner and the builder, respectively, may be stated as follows:
THE TRIBUNAL'S JURISDICTION TO HEAR BOTH APPLICATIONS 8The Tribunal is satisfied the parties' disputes relate to "residential building work" within the meaning of the HB Act. 9Both applications were brought within the time required under the HB Act. 10In respect of residential building work, the Tribunal has jurisdiction to hear and determine any "building claim" (see s 48A of the HB Act) brought before it in which the amount claimed does not exceed $500,000.00: s 48K(1)of the HB Act. 11Neither the home owner's claim nor the builder's claim exceed $500,000.00, and the nature of both applications otherwise fall within the definition of "building claim" as defined in s 48A of the HB Act. 12Accordingly the Tribunal has jurisdiction to hear and determine both applications.
APPEARANCES, EVIDENCE & SUBMISSIONS, AND CONCILIATION 13The home owner and the builder were each legally represented during the two days of the formal hearing. The representation was pursuant to leave of the Tribunal; in the case of the home owner, leave was given by order made on 9 July 2013, and in the case of the builder, leave was given by order made on 19 August 2013 (in fact, following lodgment of the builder's cross application). 14It is to be noted that the Tribunal has a continuing obligation to promote resolution processes: see s 37 of the Civil and Administrative Tribunal Act 2013 (the "NCAT Act"). The resolution processes include conciliation. Consistent with the obligation under s 37 of the NCAT Act, on 31 March 2014, the first day of the formal hearing, I promoted further conciliation to the parties. Given the nature of their respective cases and also the differences of opinion between the experts as regards up to 17 items of defective or incomplete work in the home owner's case, I was concerned to ensure that the parties were afforded every opportunity to resolve, or at least narrow, the issues in dispute. Indeed it was tolerably clear to me that a compromise between the parties would have to be a necessary and effective means of saving time expense and further inconvenience to the parties as well as managing their risk of taking the matters in dispute to a formal hearing; that is, the risk of obtaining an outcome by determination of the Tribunal which was less favourable than might otherwise have been negotiated between themselves during conciliation processes. However, notwithstanding the best efforts of the conciliator on 31 March 2014, it became apparent that further conciliation was of little assistance to the parties. The home owner and the builder each sought that their respective applications be heard and determined by the Tribunal. 15Before the commencement of the formal hearing, the parties had provided written material to the Tribunal in accordance with prior procedural directions. The written material included the home owner's bundle of documents (see letter dated 18 June 2013 to the Tribunal). The bundle contained documents marked A to N (inclusive) such as the Home Building Contract (in a form approved by Fair Trading NSW) completed and signed by the parties, a chronology prepared by the home owner's legal representatives, invoices, quotes and other relevant correspondence. There was also a witness statement of the builder's sole director Mr Fabiani dated 19 August 2013 (which referred to the home owner's bundle of documents and also annexed other copy documents), an affidavit of Mr Affan sworn 11 October 2013, as well as the reports of Mr Beard and Mr Brincat with photographs. The reports comply with the Expert Witness Code of Conduct. 16Mr Affan and Mr Fabiani each gave sworn oral evidence at the formal hearing which was subject to cross examination by the other party's legal representative. There were competing versions of relevant facts matters and circumstances particularly as to the scope of the contractual works at the property and the agreed variations. 17Determining some of the disputed factual matters as between Mr Affan and Mr Fabiani meant that I had to assess and evaluate competing versions of the relevant events in 2011 and 2012, and then decide the reliability of the evidence of each party in the light of the demeanour of Mr Affan and Mr Fabiani, respectively, as witnesses, the credibility of their answers when addressing questions of the Tribunal or the cross examining legal representative for the other party, and the extent to which contemporaneous documents (particularly, the annexures or documents exhibited to the statement of Mr Fabiani and the affidavit of Mr Affan) substantiate or detract from one or other party's version of events. 18The experts, Mr Beard and Mr Brincat, also gave their oral evidence together so that the Tribunal and the parties' representatives could put questions to each of them as regards the items in dispute. This enabled me to make determinations as to the reliability of the opinions expressed by each expert and in the (many) instances where the experts could not agree, the weight I should give to one expert's opinion relative to the other expert's opinion. 19The parties' legal representatives were also permitted to supplement their respective cases with oral submissions during the hearing and further written submissions following the hearing dated 20 June 2014 and 8 August 2014 (in the case of the builder) and dated 11 July 2014 and 1 August 2014 (in the case of the home owner). 20I have reached this decision following due and careful consideration of all of the evidence presented and the submissions made by the parties before, during and after the formal hearing.
THE SCOPE OF THE CONTRACT WORKS & THE CLAIMS FOR VARIATIONS 21On or about 4 July 2011, the home owner received via facsimile from the builder, a Quotation (two pages) handwritten by Mr Fabiani: see Home Owner's Bundle, Tab O; see also document 3 annexed to Mr Fabiani's statement. This Quotation totalling $53,700.00 refers to three (3) components of work: the construction of a new bedroom with walk in robe and en-suite ($33,000.00), the construction of a deck of Merbel hardwood timber ($4,200.00) and the construction of a concrete driveway ($16,500.00). Page 2 of the Quotation also refers to various 'Inclusions' such as: "Bricks to match as close as possible to existing" and "roof tiles - to match as close as possible". 22On or about 5 July 2011, the builder provided another (handwritten) Quotation to the home owner. Such Quotation is document 1 in Mr Fabiani's statement (with 'clouded' blue pen marking of parts on the right hand margin of the page and at the foot of the page), and it is also within Tab B of the home owner's bundle (but without any blue pen marking). I am satisfied that the Quotation evidences handwriting of the builder for an amount of $62,700.00, comprising four (4) items of work: the new bedroom with walk in robe and en-suite ($33,700.00), the deck ($4,200.00), the concrete driveway ($16,500.00) and a deck in the front of the house ($9,000.00), and then further handwriting of the builder (for the purposes of identification, the 'clouded' parts on document 1 in Mr Fabiani's statement) in respect of 'adjustments', a 'credit' of $4,500.00, an addition written as: "Build New Kitchen $15,600.00", and an 'adjusted' total of $58,200.00. 23I accept the evidence of Mr Fabiani that although the Quotation bears date 5 July 2011, the 'clouded' parts (marked on document 1 of his statement dated 19 August 2011) were in fact written by him at a later time. 24In or about July 2011, the parties signed and completed a Home Building Contract (the "Contract"). The document (within Tab B of the home owner's bundle) bears the date 5 July 2011. Mr Affan and Mr Fabiani gave diverging evidence as to when the Contract was executed: in the case of the builder, the Contract was made on 5 July 2011; and in the case of the home owner, the Contract was made about a week later. However, regardless of its date of execution, it is clear that the Contract evidences these matters:
NO FORMAL TERMINATION OF CONTRACT BY HOME OWNER 42As a preliminary issue (i.e. before consideration of the expert evidence and the items of defective work in the Scott Schedule), the builder contended that the home owner was not entitled to make a claim at all for defective work because, at the time his application was lodged, the Contract was still on foot. In this regard the builder relied upon the authority of Brewarrina Shire Council v Beckhaus Civil [2005] NSWCA 248. In essence, the builder argued that the home owner cannot bring a claim for damages for any defective works because there was no formal termination of the Contract. 43It is relevant to note that the building owner in Brewarrina Shire Council was the local council and further that the contract in that case was for the construction of levee banks to protect the far north-western New South Wales town of Brewarrina from inundation during the Barwon river floods. The NSW Court of Appeal accepted that while work under a contract is in a contractor's possession, an owner suffers no loss by reason of defective and incomplete work; the work not being in the owner's possession, does "not at that stage form part of its patrimony": Brewarrina Shire Council [2005] NSWCA 248 at [68]. 44Although Brewarrina Shire Council may be cited as authority for the proposition that a claim for damages for defective and/or incomplete work cannot be maintained while a building contract is still on foot, the Tribunal must be careful as to the application of that proposition in the context of the home owner's claim in these proceedings. As indicated, the facts of Brewarrina Shire Council did not involve residential building work so the Court of Appeal was not required to apply the HB Act to those facts. The home owner's case in these proceedings is for breach of the statutory warranties. It is a cause of action brought under s 18E of the HB Act. Relevantly, s 18E(1)(a) requires proceedings for breach of the statutory warranties to be commenced before the end of the warranty period for the breach and s 18E(1)(d) provides when the warranty period starts. In fact s 18E(1)(d) does not require that a contract is terminated in order for the warranty period to start; it expressly provides in subsections 18E(1)(d)((ii) and 18E(1)(d)(iii) for circumstances where a contract has not been terminated, i.e. the date on which work under a contract ceased or where work under a contract was not commenced, the date of the contract. 45I cannot accept the builder's submission that the home owner's case is incompetent, applying the principles of Brewarrina Shire Council to the facts of the home owner's application. This is because it inevitably follows from such acceptance that the warranty period under s 18E of the HB Act cannot begin to run until the Contract is terminated. In my opinion, that is wholly inconsistent with the relevant legislation as it applies to the home owner's claim. The builder's submission also reflects an argument that is at odds with the legislature's purpose of limiting claims under the HB Act to a finite warranty period. If the HB Act intended to limit claims for defective building work to claims under contracts which had been terminated then it would have done so under s 18E or s 48K. 46In any event the Tribunal's acceptance that the principles of Brewarrina Shire Council could apply to the home owner's claim under the HB Act still requires a finding that in the events which occurred, the Contract remained on foot when the home owner lodged his application on 28 March 2013. The question of when a contract may have been abandoned was considered in Ryder v Frohlich [2004] NSWCA 472 where McColl JA observed at [135] - [137]: "Where it is plain from the conduct of parties to a contract that neither intends that the contract should be further performed the parties will be regarded as having so conducted themselves as to abandon or abrogate the contract: DTR Nominees Pty Limited v Mona Homes Pty Limited [1978] HCA 12; (1978) 138 CLR 423 at 434 (per Stephen, Mason and Jacobs JJ with whom Aickin J agreed); Summers v The Commonwealth [1918] HCA 33; (1918) 25 CLR 144 at 151 - 152 per Isaacs J. The inference of abandonment will be drawn where "an 'inordinate' length of time has been allowed to elapse, during which neither party has attempted to perform, or called upon the other to perform, a contract made between them ... What is really inferred in such a case is that the contract has been discharged by agreement, each party being entitled to assume from a long-continued ignoring of the contract on both sides that ... 'the matter is off altogether' ": Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420 at 432 per Dixon CJ and Fullagar J. Whether there is abandonment or abrogation of a contract is a matter of fact to be inferred from an objective assessment of the conduct of the parties: see CIC Insurance Limited v Bankstown Football Club Limited (1995) 8 ANZ Ins Cas 61 - 232 per Kirby P; Wallera Pty Limited v CGM Investments Pty Limited [2003] FCAFC 279 at [2] per Ryan J, at [30] - [32] per Kiefel J; at [57] per Gyles J; Marminta Pty Limited v French [2003] QCA 541 at [22] per Jerrard JA, Williams JA and Philippides J agreeing. The underlying premise of the abandonment cases is that a period of time elapses during which neither party to the contract manifests any intention to perform the contract, leading to the inference that the contract has been abandoned. It is clear that the question whether an "inordinate length of time has been allowed to elapse" is relative. In DTR Nominees Pty Limited v Mona Homes Pty Limited the High Court was prepared to infer abandonment after a period of less than five months had elapsed during which neither party took any steps to perform the contract. In Fitzgerald v Masters it was held that a contract for the sale of land had not been abandoned even though proceedings for its specific performance were not commenced until 26 years after its execution." I find it is plain from the conduct of the parties in these proceedings that the Contract was abandoned by them on, or sometime shortly after, 28 June 2012, when the builder demanded (with a threat of legal action) payment of a final amount and the disputed variations, and the home owner subsequently responded by demanding completion of some works alleged to have been defective or incomplete and also threatened legal action. There is no evidence that the builder returned to the property to carry out residential building work following the letter of demand dated 28 June 2012 although it did participate in mediations with the home owner arranged by the Office of Fair Trading on 5 November 2012 and 12 March 2013, respectively. Indeed, on 12 March 2013, the Office of Fair Trading Inspector noted that the home owner did not want the builder back on the property and that the home owner was advised to take the dispute to be determined in the Tribunal. 47Given those findings on the preliminary issue I must proceed to determine the home owner's claim for defective or incomplete works as itemised in the Scott Schedule.
EXPERT EVIDENCE AS TO THE BUILDER'S DEFECTIVE WORKS 48The Beard report and the Brincat report for the home owner and the builder, respectively, were in evidence as was the Scott Schedule listing up to 17 items (Items 9.1 to 9.17) of alleged defective works. Each expert acknowledged that he had read the Expert Witness Code of Conduct and had agreed to be bound by it. 49In addition to their reports, both experts gave oral evidence together in joint session (colloquially referred to as 'hot tubbing'). As well as answering questions from the Tribunal, they were each questioned by the opposing party's legal representative. 50It is fair to say that the expert evidence (both written and oral) was in many respects diametrically opposed on aspects of liability and with regard to cost estimates for Items 9.1 to 9.17 in the Scott Schedule. 51Before addressing the particular items in the Scott Schedule, it is apt for me to make some general observations as regards the reliability of each expert's evidence and its probative value. 52Mr Brincat was a most impressive witness who carried into effect his overriding duty to assist the Tribunal on matters relevant to his skills, knowledge and experience. I found that his answers to questions from the Tribunal and from the opposing counsel on the particular issues in the Scott Schedule were forthright and direct and that they manifested his knowledge and experience in evaluating and assessing issues which bear upon allegations that residential building works are defective or incomplete. I am satisfied that where appropriate to do so he made concessions as regards issues of liability and quantum on particular items and that he exhibited a willingness to give answers that may have been adverse to the builder's case. 53Mr Beard was an honest witness, who did his best to assist the Tribunal on issues of quantum and liability. There were occasions, however, when Mr Beard appeared unprepared for a relevant question and not always cognisant of, or fully understanding, the real issues in dispute between the parties. There were also instances (for example, when answering questions in connection with the claim regarding roof guttering) where Mr Beard seemed more concerned in being an advocate in the home owner's case than being an independent witness with a brief to assist the Tribunal in determining the matters in dispute between the parties relevant to his knowledge skills and experience. 54For the foregoing reasons I found Mr Brincat's evidence more reliable or of greater assistance to the Tribunal than the evidence of Mr Beard. In making my determination on issues of liability and quantum for the particular items in the Scott Schedule, I have, therefore, placed more weight upon the opinions given by Mr Brincat.
Item 9.1 - Kitchen Door to External 55The home owner claims that he is entitled to a new kitchen door with locks and glass window because the kitchen door installed by the builder is second-hand and defective. The home owner relies on the evidence of Mr Beard who says the kitchen door is defective because it is second-hand and does not have a locking mechanism. The home owner also relies on the statutory warranty for residential building work contained in s 18B(b) of the HB Act which provides that all materials supplied by the builder are to 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". 56Mr Brincat concurred that the kitchen door is second-hand but noted if the builder's version of events is accepted, that the builder should only have to pay for the cost ($165.00 for materials and labour) of completing the installation of hardware to the glass door. The builder's case (see paragraph 16 of Mr Fabiani's statement) is that the door was a variation to the building contract (this is not in dispute), that the amount agreed ($300.00) reflected the (cheaper) price of a second-hand door, and that the door fixtures and hardware were not supplied because the home owner wanted to engage his own locksmith and pay the locksmith to install suitable hardware. 57The builder submits an agreement that the kitchen door was to be second-hand is evidenced by the home owner's letter and attachments (Documents 1 and 2) to the builder dated 30 July 2012; in particular, the attachment which is Document 2, where the home owner requested from the builder confirmation of payment for the '2nd hand aluminium door and frames'. On the other hand, the home owner's legal representative (see Written Submissions dated 11 July 2014, paragraphs 21 - 23 & 172 - 178) submits that little weight can be placed on any 'shortcomings' of the home owner in his correspondence as he was unrepresented at the time and unaware of his rights as a consumer under the HB Act and further that s18B(b) of the HB Act applies regardless of any agreement that the door would be second-hand because the statutory warranty requires that the builder supply new materials unless the fact the materials are not new is specified in writing. 58In my opinion, the correspondence of 30 July 2012 does carry weight in the Tribunal's enquiry as to the matters in dispute. It is a record written by the home owner and it is certainly more contemporaneous with the disputed events than the written and oral evidence now given at the formal hearing by the home owner. I am therefore satisfied on the evidence that the home owner requested a cheaper door, that the parties settled on a variation under which a (cheaper) second-hand door was to be supplied, and that it was further agreed the builder would not have to install hardware (including a lock) because the home owner said he would engage his own locksmith. 59Moreover I am not persuaded by the argument that s 18B(b) of the HB Act must apply regardless of any prior agreement that the door would be second-hand. In circumstances where I have found there was an agreement to supply a second-hand door, I do not construe the words 'unless otherwise stated in the contract' in s 18B(b) as mandating an additional requirement that the builder specify in writing that the door is not new. 60I accept Mr Brincat's evidence that the reasonable cost to complete the installation of the door hardware to the glass door is $165.00. That is the amount which I allow on the home owner's claim for this item. I will deal with the matters of an appropriate builder's margin and the addition of GST when I have made determinations on all the items in the Scott Schedule.
Item 9.2 - Shower Screen 61The home owner says the builder installed a shower screen which was not new and therefore requires removal and replacement with new screens at a cost of up to $1,120.00 for materials and labour. Mr Beard also gave evidence that the ceiling of the shower in the en-suite leaks because of inadequate tiled roofing which requires repair at a cost (labour and materials) of up to $1,500.00. 62I am satisfied on the builder's evidence including Mr Brincat's report that the shower screen was new when installed. The home owner also asserted in his evidence that the shower screen was leaking water into the main en-suite area. On the other hand, Mr Brincat gave evidence, which I accept, that when he ran the shower during his inspection he did not observe any water escaping. The Tribunal is satisfied that there is no defect in the shower screen. 63As to the issue regarding the shower ceiling, Mr Brincat observed water stains to the ceiling of the en-suite but was satisfied that it was not recent water damage. Further Mr Brincat did not observe that the ceiling itself was wet on inspection. He then viewed the roof tiles from outside the en-suite bathroom. While no reason was apparent why water would enter the ceiling space, he recommends some attention to the roof ridges directly above the IXL in the en-suite to ensure roof ridges at the bedding do not leak. This may be achieved with a silicate application to waterproof the ridged bedding and then re-paint the water stained ceiling at a cost (labour and materials) of no more than $53.00. The Tribunal accepts Mr Brincat's evidence in this regard as to a defect consequent upon the water stains in the ceiling and finds the amount payable to the home owner is no more than $53.00.
Item 9.3 - Kitchen Window 64The home owner's case (supported by Mr Beard's evidence) is that the kitchen window supplied by the builder is defective and not functional because it is the incorrect size for the width of the wall. This distorts the window frame as it is not adequately supported. Mr Beard also says the window is not waterproof as its flashing can be breached by water. The builder's work in this regard, it is said, is in breach of the statutory warranties and the Building Code of Australia 2011 (BCA). Mr Beard says that the window has to be removed and replaced with a new aluminium sliding window at a cost (materials and labour) of up to $1,200.00. 65Mr Brincat agrees that the kitchen window is defective and incomplete but he does not accept that the window must be removed and replaced with a new window. He also disagrees with Mr Beard as regards the flashing. He found no visible signs of water entry into the dwelling on his inspection. From his observation the flashing and weepholes installed by the builder are in accordance with the BCA. Mr Brincat concurs with the Office of Fair Trading (OFT) Inspector (Report of Mr Stephen Maber dated 23 April 2013) that the defect in the window is addressed by a 'minor adjustment'. Mr Brincat puts forward an adjustment by way of external aluminium storm moulds at the side and their adjustment to ensure proper operation of the sliding window at a cost (labour and materials) of no more than $93.00. 66The Tribunal is not persuaded on the evidence that it is necessary or reasonable to remove and replace the window at a cost of up to $1,200.00. I prefer Mr Brincat's proposal to rectify the defect and find that the reasonable cost of installing the storm moulds is $93.00.
Item 9.4 - Electrical Fittings 67The home owner's allegation, supported by Mr Beard's report, is that the builder supplied power outlets and switch points which were not new. The amount claimed is Mr Beard's estimate of the costs (labour and materials) of replacing six power outlets and four lighting points which is $700.00. 68However, I am not satisfied on the evidence that the home owner has established on the balance of probabilities that all electrical fittings installed by the builder were not new. With the exception of a power outlet located in the kitchen area adjacent to the back door I find that any deterioration now present in the electrical fittings is more likely attributable to wear and tear. 69In respect of the one power outlet adjacent to the back door which was not new, I accept Mr Brincat's estimate of no more than $22.00 as the cost of its replacement and allow that amount on this item of the home owner's claim.
Item 9.5 - Kitchen Roof 70The builder's allegation (advanced by Mr Beard in his report) is that the builder has supplied and installed a sheet metal roof which is not new, and that its design is inadequate because there is insufficient waterproofing and connection from the new roof to the old roof so that there is water ingress into the original building ceiling. Mr Beard says that the removal, disposal and replacement of the sheet roofing are necessary at a cost of up to $6,500.00. 71On the other hand, the evidence of Mr Fabiani on behalf of the builder is that the kitchen roof sheeting is new but the colour was changed to match the existing roof, and that there is nothing wrong with the sheeting. 72Mr Brincat during his inspection on 9 July 2013 was unable to detect whether the roof sheeting was new or otherwise. This is unremarkable given the lapse in time between installation and Mr Brincat's inspection; it is noted also that the more contemporaneous OFT report observes that: 'the kitchen roof did appear to be new'. I am not satisfied on the evidence before the Tribunal that the home owner has established on the balance of probabilities that the roof sheeting was not new. 73Moreover I accept Mr Brincat's evidence that to the extent there is any defect in the sheeting it is manifested in minor water entry to the bulkhead between the old kitchen and the new kitchen area (that is, at the old exterior wall location), and that this can be rectified by reshaping and folding the flashing under the roof tiles and applying silicone at an estimated cost of $100.00. Accordingly I allow $100.00 only on this item of the home owner's claim.
Item 9.6 - Kitchen Painting 74The home owner seeks an amount of $1,500.00 (Mr Beard's estimate) for the application of two coats of internal acrylic paint on the walls and ceiling of the kitchen area (36 square metres) because the painting is blotchy, has visible brush marks and is translucent. 75On the other hand, the builder (supported by Mr Brincat's evidence) accepts there is one wall (the main kitchen wall backing onto the new kitchen) that requires a further coat of paint at an estimated cost of $130.00. 76I am not satisfied that the home owner has demonstrated on the balance of probabilities that the other areas require any further coats of paint. I accept Mr Brincat's estimate and find that the home owner is entitled to an amount of $130.00 on this item.
Item 9.7 - Roof guttering 77The home owner's allegation is that the builder supplied and installed roof guttering which is not new (scratches, dents and faded paint) and that there are many areas of corrosion (rust marks). Mr Beard says the roof guttering requires removal and replacement with new materials. 78Both experts agreed that a four metre section of guttering near the kitchen area is not new and needs replacement. Mr Brincat whose evidence I accept, found that the balance of the guttering to the extension was new. 79In his report Mr Beard assessed the cost of replacement guttering at $3,500.00. When asked to elucidate the basis of calculation of that amount Mr Beard sought to re-consider his position during an adjournment break and then after the break reduced his estimate to $2,100.00; however, when pressed for the components of his revised assessment, the calculation changed again and did not appear to equate to the revised assessment. He included an amount of $200.00 for 'access to roof' and a component for 'manufacture gutter and downpipe' in the amount of $600.00. Yet neither of these components bear upon the real cost of replacement guttering for the four metre section near the kitchen area. It is difficult to understand why roof access is required in circumstances where guttering can be accessed by climbing a ladder and it is inexplicable the manufacture costs include downpipe when there is no downpipe in the relevant section of guttering. 80I find that Mr Beard's estimate of the cost of replacing the four metre section of guttering is unreliable and that I should accept Mr Brincat's estimate of the cost of replacing the relevant section. Accordingly I allow $280.00 as the rectification cost on this item.
Item 9.8 - Kitchen Step and Footing 81This item in the home owner's case relates to allegedly incomplete work. Mr Beard estimates works to complete the kitchen step will be $850.00 and works to rebuild the footing will be $2,361.00. The essence of the claim goes to the issue of the scope of contractual works. As the home owner puts it in his affidavit sworn 11 October 2013: "Since it was new kitchen I expected everything to be new including fixtures and fittings." 82In this regard, I accept the builder's evidence that any kitchen step and footing was not part of the scope of contractual works. In fact there was originally going to be a rear deck as part of the contractual works but as indicated earlier the deck was omitted and construction of a kitchen space was substituted. 83I am not satisfied that the home owner has established on the balance of probabilities any entitlement to this claim.
Item 9.9 - En-suite vanity 84The allegation is that the builder provided and installed a vanity in the en-suite bathroom which was not new and of incorrect dimensions. There is also a chip in the vanity unit. Mr Beard states in his report that the vanity colour has yellowed which is consistent with an old and previously used unit and that the dimensions of the unit are not in accordance with the plans. In the circumstances, the home owner submits that rectification by way of replacement of the vanity unit is required at a cost (materials and labour) of up to $2,500.00. 85The builder gave evidence that the en-suite vanity was new when installed. That evidence was not challenged during cross examination. Any colouring observed by Mr Beard at the time of his inspection (several years after installation) does not support a conclusion that the vanity was not new when installed. Such colouring is more likely than not consistent with use by the home owner in the intervening period. Further the builder states that any inconsistency of the dimensions of the vanity with the plans is attributable to the home owner's actions in directing the plumber to move the vanity so that a 1200 mm vanity would not have worked in the space given the pull out drawer. 86As regards the chip on the vanity, I find that replacing the vanity with a new unit in circumstances where the chip is relatively minor would be totally out of proportion with the nature of the defect. It was not suggested that Mr Brincat's method of rectification would not work. Accordingly, I accept Mr Brincat's evidence that it would cost $100.00 to repair the chip on the vanity and I allow that amount only on the home owner's claim for this item.
Item 9.10 - En-suite window 87The home owner has raised the same issue in respect of this item as was raised for the kitchen window (Item 9.3). It is said that the window supplied and installed by the builder is the incorrect size for the width of the wall, that the window does not function because the frame is distorted due to inadequate support, and that it is not weatherproof because the flashing can be breached by water. Mr Beard recommends removal and replacement with a new aluminium sliding window at a cost (labour and materials) of $1,200.00. 88Mr Brincat agrees that the en-suite window is incomplete but gave evidence that it did not require replacement with a new window. As for the kitchen window Mr Brincat recommends the installation of storm moulds to stem water ingress at a cost of $70.00. 89I prefer Mr Brincat's method of rectification and accept $70.00 as the reasonable cost for rectification of this item.
Item 9.11 - Bedroom Door 90The experts agreed to allow $100.00 for this item.
Item 9.12 - Sub-floor Ventilation and Flashing 91The allegation against the builder is that sub-floor ventilation vents have not been provided at the frequency or area required by the BCA and that the flashing has also been installed at different levels and is not continuous. Mr Beard says additional sub-floor ventilation is required and repairs to the flashing at a cost (labour and materials) of up to $4,500.00. 92Mr Brincat found no damage with the flashings and therefore rejects there is any defect. He agrees that additional subfloor ventilation is required but does not accept Mr Beard's scope of rectification works. In Mr Brincat's opinion, six (6) brick vents should be installed for correct cross flow ventilation at a cost of $510.00. 93Beyond Mr Beard's assertions, I am not satisfied there is cogent evidence to substantiate that there is any defect with the flashing and further I find that there is no evidence of any damage to the home owner's residence arising from installation of the flashing. 94As to additional subfloor ventilation, I prefer Mr Brincat's scope of rectification works. His evidence was not seriously challenged by the home owner. I allow $510.00 as the reasonable rectification cost for this item.
Item 9.13 - Kitchen Door Frame 95Both experts agreed that the kitchen door frame requires sealing. In this regard the builder says it is an item of incomplete work because the builder suspended works pending payment by the home owner. 96The contest between the experts is whether eight (8) hours at a cost of $650.00 or one (1) hour at a cost of $70.00 would be required to complete the sealing. 97I am satisfied that this item is in substance a claim for incomplete work. I am not satisfied that it is a defect which requires an extensive scope of works (up to one day) to rectify. I prefer Mr Brincat's estimate of the time and cost. I therefore allow $70.00 as the reasonable cost of rectification on this item.
Item 9.14 - Tiled Roof of Bedroom 4 98The home owner's first submission is that because the roof tiles are not new materials, the Tribunal must find there has been a breach of the warranty set out in s 18B(b) of the HB Act. In this regard there is no dispute the builder sourced and installed second hand roof tiles. 99The builder says there is no contravention of s 18B(b) because the Contract 'otherwise stated'; specifically, the contract plans stated: 'selected tile roofing to match existing'. Mr Fabiani on behalf of the builder gave evidence that the tiles were delivered to the site several weeks before they were laid on the roof. The home owner did not raise any issue about the materials and when he submitted a list of defects to Mr Stephen Maber of Fair Trading NSW (on 23 April 2013) there is no mention of roof tiles. This conduct is entirely consistent with there being an agreement for second hand tiles to be sourced to match existing tiles. I accept the builder's evidence and find that there was no contravention of s 18B(b) of the HB Act. 100The home owner further submits that the roof tiling is defective because the tiles have not been adequately painted and water penetrates the roof into the en-suite ceiling. Mr Beard says the roof tiles require removal and replacement with new tiles at a cost (labour, materials and disposal of old tiles) of up to $10,450.00. I prefer Mr Brincat's evidence that there was no defect as alleged by Mr Beard. Further, Mr Brincat was not seriously challenged on his evidence that sourcing the second hand tiles and then painting them to match existing tiles (as required by the Contract) would in fact have been more expensive than new tiles. I prefer Mr Brincat's evidence and therefore make no allowance to the home owner on this item.
Item 9.15 - Rubbish Removal 101The experts agreed to allow $150.00 for this item.
Item 9.16 - Kitchen Joinery 102The home owner claims an amount of up to $16,000.00. This is not an item of defective work; it is an item of incomplete work based on the assumption that kitchen cabinetry and joinery were within an agreed scope of works. However, the builder maintains, and Mr Fabiani was not challenged on this in his cross examination, that it was not within the agreed scope of works to install kitchen cabinetry to the kitchen area. I accept the builder's evidence that the scope of works under the variation was to build the shell of the room that would house the home owner's kitchen. The price agreed for the variation was $15,600.00. Such price was calculated at 12 square metres (that is, room size dimensions of four metres by three metres) at $1,300.00 per square metre. I accept Mr Brincat's evidence that this was a relatively modest price for a building structure of such dimensions. 103The home owner did not refer to the builder's alleged failure to install kitchen cabinetry and joinery in his complaint to Fair Trading NSW in 2013. The home owner's representative submits that the home owner's failure to be more specific about his complaints to Fair Trading NSW during April 2013 is explained by the fact that the home owner was not legally represented at the time and that he lacked knowledge of his consumer rights under the HB Act. While I accept such facts and circumstances might have been the case at the time, I am not persuaded that they have the effect that I must disregard the home owner's conduct in 2013. All facts matters and circumstances (including evidence as to the home owner's state of mind at the time of the residential building work or shortly thereafter) are relevant to Tribunal's enquiry as to the parties' agreement. Significantly, there is no evidence of any discussion between the parties as to a type of cabinet or cupboard to be installed from which I infer there was no agreement on kitchen cabinetry. Further I am satisfied that regardless of the home owner's knowledge (or lack of knowledge) of his legal rights, he could and should have complained to Fair Trading NSW about any lack of cabinetry if he truly believed the builder's price of $15,600.00 included kitchen cabinets and cupboards. That he did not complain is conduct entirely consistent with there being no agreement that the builder would install kitchen cabinetry. 104The Tribunal finds there can be no allowance for incomplete work on this item.
Item 9.17 - Floor is incomplete 105The home owner claims an amount of up o $4,500.00 for kitchen flooring. This is not an item of defective work; it is an item of incomplete work based on the assumption that floor coverings and fit out for the new kitchen area the subject of the agreed variation of $15,600.00 was within an agreed scope of works. 106If there had been an agreement to include floor coverings within the $15,600.00, then I would expect there to have been some discussion between the parties as to the type of floor coverings (whether tiles, vinyl, or carpet) for the kitchen area. There is no evidence of any discussion in or to that effect. 107I accept the builder's evidence, which was not challenged during cross examination of Mr Fabiani that floor coverings and fit out for the new kitchen area were not within any agreed scope of works. The Tribunal finds there can be no allowance for incomplete work on this item.
Allowance of Margin and addition of GST on Scott Schedule items 108The findings on the Scott Schedule items as outlined above mean that the allowances (exclusive of GST and any Builder's margin) total $1,843.00. 109Mr Brincat gave evidence that the items allowed in his calculations (totalling $1,843.00) are relatively minor completion defects, and in the circumstances it is not necessary to make any further allowances for establishment costs, insurance expenses and other preliminaries. He considers that adding a 15% margin to the total cost of necessary works will suffice. I accept Mr Brincat's evidence in this regard and note an allowance for margin on the Scott Schedule items I have allowed of $276.45. 110Accordingly, the Tribunal finds that the home owner's entitlement to damages in respect of defective and incomplete items (inclusive of GST and Builder's margin) is $2,331.40.
FINAL ORDERS (INCLUDING COSTS) 111I have already determined that the builder cannot have a 'final claim' on the Contract in the amount of $2,900.00. However, I left open consideration of the builder's claims regarding variations for the kitchen extension and the balance of the variations to the laundry and bathroom en-suite in amounts of $4,000.00 and $1,969.00, respectively. The HB Act and HB Regulation provisions earlier outlined preclude the builder from recovering such amounts on a contractual basis, with the consequence that the builder must look to the law of unjust enrichment (i.e. quantum meruit) in pursuing recovery against the home owner of its (disputed) variations totalling $5,969.00. In essence, given the lack of compliance with the statutory requirements, the builder's claim in HB 13/37204 must rest or fall as a claim in restitution or, put another way, as a claim for the 'fair value of the work': Pavey & Matthews v Paul (1987) 162 CLR 221 and cannot be based on the existence of an implied contract: Lumbers v W Cook Builders Pty Ltd (2008) 232 CLR 635. 112The Tribunal's consideration as to whether, and if so, in what amount, the builder's claim on the variations is allowed on a quantum meruit basis, is relevant to the final orders to be made in both Files, because an equitable set off of one claim against the other claim must arise in the circumstances: AWA v Exicom (1990) 19 NSWLR 705. 113For the variations to the laundry and the bathroom en-suite it is not clear whether the variation claimed is $1,969.00, or a lesser amount of $1,394.00, to take account of the fact that the builder reduced its claim by $575.00 but did not clarify whether the reduction relates to this variation, the other variation for the kitchen extension or to the 'final claim' on the Contract. There is a further difficulty in that the home owner has already paid in January 2012 an amount of $3,000.00 for variations in respect of the laundry main bedroom and en-suite. It appears when one compares the relevant documents that items 9, 10, 12 and 19 (totalling $525.00) in the disputed variation are the only new items. It also appears that there has been some duplication of claims. In the circumstances and also given the uncertainty as regards whether the total amount claimed on this variation is in fact a lesser amount of $1,394.00, I cannot be satisfied that this variation evidences any claim for 'fair value of work' within Pavey & Matthews principles. Accordingly the claim on this disputed variation (whether for $1,969.00 or a lesser amount) is rejected in full. 114The claim on the kitchen extension variation is contained, in and evidenced by, a document bearing date 28 May 2012, which is Document 7 attached to Mr Fabiani's statement. I accept the builder's evidence that the variation was requested by the home owner and that work was done pursuant to such request. However, the Tribunal must take into account that no receipts for materials purchased or machinery hired or time sheets for labour carried out at the home owner's request have not been put into evidence by the builder. This circumstance and the other matters referred to below mean I cannot accept all items claimed on this variation. Document 7 lists 11 items totalling $4,000.00. Item 10 ($1,559.00) refers to demolition works; however, I am not satisfied that such works were in addition to the other contractual works including construction of the bedroom. There is also no evidence to substantiate that item 11 ($240.00) for '120 bricks taken by client $2 each' is factually correct and that it amounts to a variation to the contractual works. Further I am not satisfied that item 1 ($225.00) for 'install insulation', item 7 ($75.00) for 'pick up glass door' and item 8 ($75.00) for 'pick up door jam' have not already been paid for by the home owner in respect of earlier agreed variations. In those circumstances, I do not allow items 1, 7, 8, 10 and 11. In respect of the remaining items 2, 3, 4, 5, 6 and 9 (in amounts totalling the sum of $1,826.00) the Tribunal allows such amounts as commensurate with fair value of work for such items. 115Accordingly the Tribunal allows $1,826.00 on the builder's claims on the disputed variations with the consequence on a set off of the competing claims that the home owner is entitled to $505.40. 116The home owner's claim for costs is refused. Even though it is arguable that Rule 38 of the Civil and Administrative Tribunal Rules 2014 applies because the amount claimed by the home owner exceeded $30,000.00, the Tribunal's power to award costs is discretionary and I choose not to do so because the home owner's claim for damages has been substantially unsuccessful. Further I find that there are no special circumstances which warrant the making of any costs' orders. As is the intent of s 60 of the NCAT Act, each party is to bear their own costs of the proceedings. D Charles General Member Civil and Administrative Tribunal of New South Wales 2 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: 10 December 2014
[2003] QCA 541
(1987) 162 CLR 221
(2008) 232 CLR 635
(1978) 138 CLR 423
(1918) 25 CLR 144
(1956) 95 CLR 420
(1990) 19 NSWLR 705