This determination concerns a preliminary issue, which is whether the respondent owner's termination of the contract was wrongful. The impact of the determination on the issue of damages is also considered.

1. Under s 124 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic), the Tribunal declares that the respondent wrongfully terminated the contract he made with the applicant on or about 27 September 2018 ('the contract').
2. In assessing the cost of rectifying defects in the work performed by the applicant under the contract or in completing the works under the contract, the costs are to be assessed on the basis of what the rectification work or the completion work (as the case requires) would have been to the applicant at the time of termination of the contract in June 2019.

1. Nerwa Constructions Pty Ltd (ACN: 146 593 222) ('the builder') is a company operated by Mr Nisho Kasho, a registered domestic builder unlimited. Mr Kasho is a director of the builder and may be regarded as its controller or 'moving mind'.
2. On 27 September 2018, the builder entered in to a major domestic building contract ('the contract') with Mr Ayad Koka for the construction of a home at Mr Koka's property in Craigieburn.[1] The builder initiated this proceeding in 2019 to recover damages for breach of the contract. One of the claims made by the builder is that Mr Koka has not paid the fixing stage claim of $90,750, which was invoiced on 8 April 2019. The builder also seeks interest and costs.
3. Mr Koka defends the claim, and has made a counterclaim. He contends that he has lawfully terminated the contract and that the builder is liable to him for substantial damages in respect of defective and incomplete work. In addition, he also seeks interest and costs.

1. The final hearing began before me on 14 August 2023, and continued on 15, 16, 17, 18 and 28 August 2023. The hearing is not concluded, as the parties are yet to present expert evidence concerning the cost of rectifying defects and completing the works.

1. In Tabcorp Holdings Ltd v Bowen Investments Pty Ltd[2], the High Court reaffirmed the 'ruling principle' that the measure of damage at common law for breach of contract was that stated by Parke B in Robinson v Harmon as follows:

The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.[3]

1. The damages to which the owner, Mr Koka, will be entitled to in respect of defects and incomplete works at common law will be affected by the answer to the question of whether he has wrongfully terminated the contract. If Mr Koka has acted properly in bringing the contract to an end, then under the usual rule for the recovery of damages for breach of contract, Mr Koka will be entitled to recover the cost of having the works rectified or completed by another contractor, although he will have to allow to the builder a credit in respect of the unpaid balance of the contract sum.
2. On the other hand, if Mr Koka has acted wrongfully in terminating the contract, he will be liable to the builder for damages. The builder will be entitled be put in the same position as it would have been had the contract been completed. Accordingly, provided the builder can demonstrate that it would have been ready and willing to return to the site, the builder will be able to recover the profit it would have made in respect of the unperformed portion of the contract had the contract been completed. The profit can be determined by identifying the unpaid balance of the adjusted contract sum, and then subtracting the notional cost to the builder of returning to the site to rectify defects and to complete the works, assessed as at the time of termination.
3. It is the notional cost to the builder that is relevant here, because Mr Koka - if he had not wrongfully terminated the contract - would have been able to recover no greater benefit, in respect of defective and incomplete work, than if he had not wrongfully terminated the contract. That benefit is the right to have had the builder return to the site to rectify the defective work and to complete the work, at the builder's cost.
4. The position at common law is echoed in the contract itself. One of the effects of the termination of the contract by the owner was that the builder was prevented from returning to the site to rectify defects and complete the works. If it is held that the contract has been wrongfully terminated, clause 19.4 of the contract will come to the aid of the builder. It provides:

19.4 If the Owner without reasonable cause does not allow the Builder the opportunity to return to the Land to make good and rectify any defects or does not provide reasonable access to the Builder to allow the Builder to do so, the Builder will only be liable to the Owner for the cost which the Builder would have incurred had the Builder been permitted to rectify the defect.

1. Because of the criticality of determining whether the contract had been lawfully terminated by Mr Koka, I suggested to the parties, and ultimately directed, that I should determine this issue as a preliminary question.
2. The parties were directed to exchange submissions on the lawfulness of the termination of the contract by 12 September 2023. Mr Koka met this deadline, but the builder did not. The builder was given a brief extension of time until 18 September 2023, in which to complete its submissions, but also missed this deadline also. However, as the builder only missed the extended deadline by a matter of hours, it would be unreasonable to disregard the builder's submissions.

1. In order to give context to what follows, it is useful to set out a brief chronology, as follows:

(a) although the contract was executed on 27 September 2018, work could not begin straight away because the building permit was not issued until 15 October 2018.[4]

(b) Mr Koka paid the builder that the deposit due under the contract in October 2018.[5]

(c) A progress claim in relation to the base stage was issued on or about 9 November 2018 and was paid within about 10 days.

(d) The frame stage invoice was issued on or about 4 December 2018 and this was paid within about a week.

(e) Or about 15 January 2019, the builder issued an invoice in relation to the lock-up stage. This was paid within nine days. [6]

(f) Or about 8 April 2019, the builder rendered an invoice in relation to the fixing stage in the sum of $90,750. Mr Koka failed to make payment.

THE OWNER'S POWER TERMINATE UNDER THE CONTRACT

1. The owner's power to terminate the contract is to be found in clause 20, which provides as follows:

20.1 Owner's right to serve notice of intention to terminate Contract

• fails to produce to the Owner a copy of the relevant insurance policy or certificate of currency setting out details of currency setting out details of the required insurance under the Building Act 1993, as required by Clause 5; OR
• fails to proceed with the Works with due diligence or in a competent manner; OR
• unreasonably suspends the carrying out of the Works; OR
• refuses or persistently neglects to remove or remedy defective work or improper Materials, so that by the refusal or persisstent neglect the Works are adversly affected; OR
• refuses or persistently neglects to comply with this Contract (including the requirements of municipal or other authorities); OR
• is unable or unwilling to complete the Works or abandons the Contract; OR
• is in substantial breach of this Contact;

the Owner may give written notice by registered post to the Builder:

• describing the breach or breaches of the Contract by the Builder; AND
• stating the Owner's intention to terminate the Contract unless the Builder remedies the breach or breaches of this Contract within a period of fourteen (14) Days after the Builder's receipt of the above notice.

20.2 If Builder fails to remedy breach Owner may terminate Contract

If the Builder fails to remedy the breach or breaches of this Contract as stated in any notice served by the Owner under Clause 20.1 THEN the Owner may, without prejudice to any other rights or remedies, give further written notice by registered post to the Builder immediately terminating this Contract.

20.3 Owner may not terminate Contract in certain circumstances

The Owner may not terminate this Contract unreasonably or vexatiously or if the Owner is in substantial breach of this Contract.

CIRCUMSTANCES IN WHICH THE CONTRACT WAS TERMINATED

1. On 28 May 2019, Mr Koka, through his then solicitors Hughes Legal, served on the builder a notice of intention to terminate the contract[7] ('the notice of intention to terminate'). The notice of intention to terminate was in the form of a letter which clearly identified the contract, and referred to the builder's tax invoice dated 8 April 2019 issued in respect of the fixing stage ('the Fixing Stage Invoice'), an inspection report prepared by Darbecca Pty Ltd dated 1 May 2019 ('the First Darbecca Report') and to previous correspondence passing between the parties in relation to the contract and Mr Koka's property. Relevantly, the letter proceeded as follows:

We understand that Nerwa issued the Fixing Stage Invoice to Mr Koka on or around 8 April 2019 (being the date of the invoice). We further understand that Nerwa is refusing to continue with the Works until Mr Koka has paid the Fixing Stage Invoice. It is Mr Koka's position that the Works performed by Nerwa at the Property, pursuant to the Contract, have not reached the fixing stage (or one of the earlier stages of construction provided under the Contract and section 40(1) of the Domestic Building Contracts Act 1995 (Vic)) because they are either incomplete or defective. To that end, Mr Koka refers to and relies on the Darbecca Report, which details some of the defective and incomplete Works that exist in the Property. By reason of the above, it is Mr Koka's position that Nerwa:

(e) had no entitlement to issue the Fixing Stage Invoice because the Works were incomplete or defective;

(f) has failed to diligently progress the Works;

(g) has unreasonably suspended the Works;

(h) has refused or persistently neglected to remedy the defective work so that, by its refusal or persistent neglect, the Works are adversely affected; or

(i) is unwilling to complete the Works.

Accordingly, unless Nerwa remedies the breaches of the Contract within 14 days, it is Mr Koka's Intention to terminate the Contract.

1. On or about 10 June 2019, the builder responded to the notice of intention to terminate through the solicitors then acting for him, Non-Stop Legal.[8] The builder raised a number of matters in response to Mr Koka's notice of intention to terminate, which are summarised as follows.

(a) Mr Koka confirmed the fixing stage had been completed via text message sent to the builder on the 11 April 2019 and the builder, relying on this advice, continued with the final stages of the works;

(b) Mr Koka had changed the building plans on a number of occasions, and details were given;

(c) On 24 April 2019, Mr Koka contacted the builder and asked for all works to be ceased until further notice;

(d) All items detailed in the First Darbecca Report had been attended to, save for the fireplace and walls, doors and plumbing which were changed by Mr Koka;

(e) The building permit had been issued on 16 October 2018, not 1 October 2018;

(f) Mr Koka was responsible for a delay in the building works as engineering approval was required to add an extra 200mm step down in the garage;

(g) Mr Koka had breached the contract on many occasions by inviting family, friends and children to the site;

(h) Mr Koka had requested that subcontractors cease and change the scope of their works without the knowledge of the builder;

(i) The builder was entitled to suspend the works pursuant to clause 16.1 of the contract;

(j) Mr Koka had yet to pay for the fixing stage despite all requirements having been met;

(k) Mr Koka had not yet made payment for all the changes he had requested;

(l) The builder was entitled to extensions of time in relation to delays caused to the building works due to Mr Koka changing his mind and Mr Koka's "independent works" causing further delays.

1. Mr Koka was clearly not persuaded by the builder's response of 10 June 2019. On 21 June 2019, his lawyers wrote to the builder's lawyers,[9] acknowledging the response, but asserting that it remained the position that the builder:

(a) had no entitlement to issue the fixing stage invoice because the works were incomplete or defective;

(b) had failed to diligently progress the works;

(c) had unreasonably suspended the works;

(d) had refused or persistently neglected to remedy the defective work so that, by its refusal or persistent neglect, the works were adversely affected; and/or

(e) was and remained unwilling to complete the Works.

As the builder had not remedied the breaches of the contract identified in the notice of intention to terminate within 14 days, Mr Koka terminated the contract. The letter went on to revoke the licence granted to the builder under clause 7.2 of the contract to enter the property, with immediate effect.

WAS THE TERMINATION OF THE CONTRACT WRONGFUL?

1. The builder's written submissions regarding the lawfulness of the termination of the contract broadly follow the owner's contentions (a)-(e) above. Importantly, the builder raises a new issue, namely that the termination was wrongful because the notice of intention to terminate was invalid because it had been issued unreasonably. I now address the builder's submissions in turn.

1. The starting point of this discussion is the definition of 'fixing stage' contained in s 40(1) of the Domestic Building Contracts Act 1995 ('DBC Act'), which provides:

"fixing stage" means the stage when all internal cladding, architraves, skirting, doors, built-in shelves, baths, basins, troughs, sinks, cabinets and cupboards of a home are fitted and fixed in position.

1. A leading case on the issue of when works can be regarded as complete is the decision of the Court of Appeal in Victoria in Cardona v Brown ('Cardona').[10] The case concerned the question of whether a builder was entitled to be paid a lock-up stage progress claim he had rendered in circumstances where he had not put external doors on a garage. Tate JA, with whom the other members of the Court agreed, considered the operation of the definition of domestic building contained in s 5 of the DBC Act and concluded that as the plans called for the construction of the garage in conjunction with the construction of the house, the house had not reached lock-up stage because the garage could not be locked.[11] Tate JA stated, citing at Hudson's Building and Engineering Contracts (Sweet and Maxwell, 12th ed, 2010), para 3-076, that "It is necessary for there to be 'effective and satisfactory completion of the required stage ... [as] a condition of any instalment payment'".[12] However, Tate JA went on to note that "trivial failures, or failures borne of impracticalities, do not preclude effective and satisfactory completion..."[13]
2. On the basis of Cardona, I consider that the builder will be entitled to be paid the fixing stage progress claim even if there are defects in the fixing stage works or those works are incomplete, provided the failures are either trivial or failures resulting from some impracticality.
3. I emphasise that the builder in the present case was only contending that the works had reached the fixing stage, not that they had been finally completed. For reasons which will be discussed shortly, Mr Koka appears to have some confusion about this. But even if the builder had been contending that final completion had been achieved, there may been some leeway concerning defects and incomplete work. In this connection, I note that Anderson J, sitting as a Vice President of the Tribunal in Metricon Homes Pty Ltd v To (No.2),[14] had to determine the question of whether a final payment was due under a domestic building contract. Anderson J said, at [308]-[309]:

In the present case, the processes in the building contract anticipate the likelihood of defective and incomplete work being found during the processes, and the possibility of differences of opinion between the builder and the owner about what is defective or incomplete work.

However, protections are provided. So long as the owner complies with their responsibilities under the processes, the builder must rectify the defects identified by the owner and the final claim is not payable until 7 business days after the builder gives notice that it has completed the listed defective or incomplete work. Further, neither party, by following the processes, concedes conclusiveness of, or admits the description of, the listed works. These matters do, therefore, anticipate that the processes themselves may give rise to disputes or leave some matters unresolved, even if the processes are followed.

The builder's submissions regarding the fixing stage payment

1. The builder's position regarding the fixing stage payment is explained by Mr Kasho in his witness statement, which he adopted on the first day of the hearing.[15] Mr Kasho deposes, at [42]-[43]:

By 7 April 2019, everything for the fixing stage was finished except the toilets(Ayad had changed it three times) and some other basins he had agreed to bring. I had arranged for the plumber to attend site to install the remaining bathroom fixings, but Ayad didn't bring the rest of fittings. As a consequence, I paid the plumber in full as he sent three plumbers on Monday 7 April 2019 to finish all the works.

On 8 April 2019, I submitted a claim for the fixing stage of the works, as the fixing stage was effectively complete (but for items Ayad had prevented me from installing by failing to provide the required fixings).

1. The issues with the toilet were the subject of oral evidence at the hearing. For instance, under examination, Mr Kasho was asked about the controversy relating to the fixing stage. He answered that there are only two issues. One of them was the toilet in the master bedroom ensuite. Mr Koka wanted one type, which he bought, and then he changed his mind before it was installed. The second toilet he bought had a cistern which was to be installed inside the wall. However, it could not be put inside the wall because the wall was load-bearing at the place where the toilet was to go. And so, Mr Koka had to get a third toilet.[16] There was also an issue with one of the basins in the master bedroom ensuite.[17] If it had not been for the toilet and the basin, the plumber could have completed the fixing a week or two before the fixing stage claim was issued.[18]
2. Mr Kasho was re-examined about these matters on the third day the hearing. The evidence he gave was consistent with the evidence he had given previously. For instance, when he was asked what was happening at around the time the fixing stage was invoiced, he answered:

The toilet, as I said was changed three times by Mr Koka changing his mind. So the toilet wasn't there to be put.[19]

1. Later, when pressed to explain how many times he had installed the toilet, Mr Kasho confirmed that the plumber had been there twice. On one of these occasions, the plumber had agreed to stop because Mr Koka wanted a different style of toilet where the cistern was within the wall, and the first toilet brought to site could not be fitted within the studs.[20] The toilet affected was the toilet in the master bedroom.[21] It had still not been installed at the time that the builder had left the site.[22] Mr Kasho confirmed that had a toilet been provided that was suitable for the frame that had been constructed, he could have been finished at least two weeks before.[23]

1. I accept the builder's evidence that the specified toilet had been properly fixed before Mr Koka changed his mind and directed that a new toilet be installed in the master bedroom ensuite. This evidence was not challenged by Mr Koka. Mr Koka's merely challenged the relevance of this evidence, saying "Our problem was the defects. It's not the toilet."[24]
2. I find that in so far as the toilet in the master bedroom ensuite was concerned, the works had been carried out and completed in accordance with the plans and specifications. The fact that Mr Koka later changed the specification for the toilet was not a matter that disentitled the builder from claiming the fixing stage payment, if the fixing stage works had otherwise been completed.

1. The basin in issue is in the main bathroom.[25] A problem arose because the bath was changed in size after plumbing for the mixers had been put inside the walls.[26] A larger bath was installed which required a shift of 100 mm to one side.[27] Two basins had already been installed more than a week before the fixing stage.[28] The builders plumber did not rectify the basins because Mr Koka sent him a message asking him to stop work.[29]
2. This evidence was not challenged by Mr Koka. On the contrary, when he was asked whether, after a new, larger bathtub had been selected, the placement of the basins in the bathroom had become an issue, he agreed that this had caused delay.[30]

1. As with the toilet in the ensuite, I am of the view that once the basins had been properly fixed on the first occasion, they ceased to be an impediment to the issuing of the fixing stage progress claim. The fact that the owner changed the bath and that this necessitated the movement of one basin does not alter the position. I find against Mr Koka in respect of this issue also.

Was the builder not entitled to submit a fixing stage invoice because of defects in the works?

1. These findings dispose of Mr Koka's argument that the builder should not have submitted a fixing stage invoice because the fixing stage works were not complete. However, the notice of intention to terminate makes it clear that there was a second limb to the argument that the fixing stage invoice should not have been submitted, namely that the works were defective.
2. In contending that there were defects in the works at the time the fixing stage invoice was issued, Mr Koka relies on the First Darbecca Report. This report was prepared by Mr Patrick Kerr of Darbecca, who inspected the property at Mr Koka's request on 1 May 2019 for the purposes of "a general home inspection".[31] Mr Kerr set out a schedule of defects which he observed at his inspection, including the following:

(a) the vapour barrier had been allowed to fall below the finished ground level ('FGL');

(b) downpipes had been installed to most of the gutter pops, but some had come away from the pops or had been removed by trades, and some of the downpipes did not have the stormwater point available as yet;

(c) no articulation joints have been provided to the front face of the dwelling;

(d) the water lead in enter the dwelling at the base of the brick wall did not follow the recommended method of installation through the slab footing, exiting within the perimeter timber wall frame;

(e) there were areas around the dwelling with a non-compliant slope toward the slabs footing;

(f) perpends failed to meet the minimum requirements mandated by AS 3700 which calls for 10 mm, but allows maximums of 20 mm and minimums of 5 mm;

(g) there were some voids and numerous small holes in the finished faces of the mortar joints around the house and garage;

(h) there were numerous areas of the brickwork around the dwelling where mortar smears were evident;

(i) most of the articulation or control joints in the dwelling had non-compressive material (mortar) still in the joints;

(j) all external power points must be sealed to the top and sides of the connection to the brickwork, as per AS 3000, clause 1.7.1;

(k) the weep holes on the dwelling appear to have excess mortar to a number of areas;

(l) the dwelling's down pipe installation breaches the requirement of AS 3500.3 that a downpipe cannot be installed within 100 mm of an electrical cable;

(m) the builder is using black plastic flashing as a DPC;

(n) internal corners (of brickwork) were constructed with unnecessary straight joins;

(o) there are open concrete voids to the slab edge, showing exposed reinforcement bars;

(p) the brick overhang to the dwelling needs to be supported, as the BCA, part 3.2.2.7 calls for a maximum overhang of 15 mm and all areas exceeding 15 mm must be reworked and supported in accordance with AS 2870 prior to handover;

(q) the brickwork has a small number of bricks that are chipped in excess of a reasonable level;

(r) the Colorbond down pipes, fascia and gutter to the dwelling have been damaged during construction;

(s) a large number of roof tiles are sitting proud of the other tiles;

(t) the gutters all need to be fully cleaned;

(u) the valley iron tiles have not been cut straight as required by AS 2050, part 3.6;

(v) the dwelling is not watertight as flashings, infill panels over windows and cladding over the porch have not been installed:

(w) the fascia to the dwelling has damage to the coating;

(x) the roof tiles to the dwelling are presenting with damaged chipped sections which require cleaning or replacement prior to handover;

(y) the boundary garage wall will need to be reworked to include fire protection;

(z) The metal transfer flashings around the dwelling are showing fall backwards towards the wall frames;

(aa) all of the perimeter window and door architraves need to be gapped to the plaster as per the energy rating requirements and NCC 3.12.3.3;

(bb) all cabinet door margins and drawer fronts need to be reworked to ensure that all are aligned;

(cc) the shower wastes are presenting with an amount of builder's waste which must be removed to comply with AS 3500.2, part 4.3.1(g) before commissioning of the site;

(dd) there are a number of areas in the home that exceed the allowance of 4 mm tolerance over 2 mm;

(ee) the bath has been used as an on-site rubbish bin during construction and the internal surface will have to be polished to remove any scratches or indentations;

(ff) as per AS 3958.1, the cutting of tiles must be smooth and of an even width and some tiles will need to be reworked;

(gg) some of the bottom window reveals are too wide and present with significant fall back towards the window;

(hh) the insulation in the ceiling has not been completed and requires installation in accordance with AS 3999;

(ii) the approved plans showed a step down between the dwelling and the garage of 86 mm, but on site the step down is in excess of 300 mm;

(jj) associated rework will be required due to the additional site cut and step down to the garage and the builder must provide an engineer's design for waterproofing and drainage of the garage boundary wall;

(kk) a window in the corner of the master bedroom was not fitted in accordance with the plans;

(ll) a cavity sliding door to the pantry is missing;

(mm) there is a defect in the double wall in the bathroom;

(nn) the master bedroom doors are the wrong way around;

(oo) the spacing of the bathroom sinks requires correction;

(pp) the fireplace exhaust is in an incorrect location.

1. In my view, even if it is assumed for the purposes of argument that each of the alleged 42 defects actually exists,[32] they do not necessarily mean that it was unlawful for the builder to issue an invoice for the fixing stage. There are two reasons for this. The first is that it is not apparent that any of the defects identified in the First Darbecca Report related to the fixing stage. Mr Kasho makes this point in his witness statement,[33] noting that the author noted in his introduction to the report:

I was instructed to inspect the client's new home to write a report as to the overall installation of all items required to construct a new home to completion stage.[34]

1. Mr Kasho submits that the First Darbecca Report 'listed a number of minor issues, that were unrelated to whether or not the fixing stage was complete."[35]
2. I accept this submission, noting that it was not contended by Mr Koka in his submissions on termination that the First Darbecca Report did list defects relevant to the fixing stage.
3. The second reason is related. The unpaid progress claim related to the fixing stage, not completion. The builder was not representing that the works were complete. To paraphrase the test articulated in Cardona,[36] the builder had until handover to complete the works and rectify any defects which were not merely trivial or caused by some impracticality, Accordingly, I find that the existence of defects or incomplete works at the time that the fixing stage invoice was issued does not of itself mean that the fixing stage invoice was invalid.

Did the builder fail to diligently progress the Works?

1. Mr Koka's submission on this point is straightforward. The completion date under the contract was 19 April 2019. The notice of intention to terminate was served on or about 28 May 2019, and at that stage the works were not complete.
2. The builder in its submissions on termination addresses this issue, asserting that there was insufficient evidence that it had "failed to diligently progress the works".[37] It noted that the original building permit had been issued on 15 October 2018,[38] that the agreed construction period was 200 days[39] and that there had been many changes to the works. The fixing stage had been reached by 8 April 2019 and only the completion stage remained. The contract itself contemplates that the time for completion can be extended, in clause 15.[40] The possible bases upon which the time for completion can be extended include variations and any act, default or omission on the part of the owner.[41] In respect of the last matter, it is common ground between the parties that there were many variations, and it is Mr Kasho's contention that a number of the variations had an impact on the time required to complete the contract.[42]
3. I accept the builder's submission that there is insufficient evidence that it failed to diligently progress the works. All that Mr Koka has done in his submissions on this point is to recite the basic facts about when the works were due to start and when they were due to be completed. He has not undertaken any analysis of the impact of variations on the construction program. In these circumstances, I find against Mr Koka in respect of his allegation that the builder had breached the contract by failing to diligently progress the works.

Did the builder unreasonably suspend the works?

1. Mr Kasho's response to this allegation is that he did not suspend the works. I do not accept this.
2. In early April 2019, Mr Koka "insisted that because it was his house no one could stop him from coming to site and directing trades to perform works."[43] It was on 11 April 2019, after Mr Kasho went to site and discovered that Mr Koka had once again been instructing his trades and requesting changes, that Kasho sent an email at 1:10pm to Mr Koka advising Mr Koka that he had to stop interfering with the work.[44] He followed up with a further email at 1:26pm, the substance of which was that after Mr Kasho had asked Mr Koka in the morning by telephone and by text not to go to the site, he had gone to the site and stopped the carpenter from doing the handles for the theatre room. Mr Kasho advised "I think this is enough and I will stop the work."[45] In my view, this is a clear declaration by Mr Kasho that the works had been suspended.
3. However, this suspension did not amount to a breach of the contract because of the operation of clause 16.1 of the contract, which deals with the builder's entitlement to suspend the works. One of the bases upon which the builder can suspend the works under clause 16.1 is where the owner "obstructs, interferes with or hinders the carrying out of the Works, including giving any directions to the Builder's workers or subcontractors..."
4. Mr Koka does not expressly assert that the builder suspended the works because the fixing stage invoice was not paid. However, if this was established to be a cause of suspension, it would not have made the suspension unlawful. Under clause 16.1 of the contract, one of the bases upon which the builder can suspend the works is where the owner has indicated to the builder that the owner is unable or unwilling to make any payment required under the contract, or is late in making any payment to the builder required by the contract.[46]
5. In any event, whatever its cause, the builder's suspension of the works was short lived. Mr Kasho deposes in his witness statement, at [56] that he provided a copy of "Ayad's report" (which I understand to be the First Darbecca Report) to his subcontractors and asked them to look at the issues raised. He said that he received a number of text messages from the subcontractors confirming they had either inspected the property or would do so shortly. Mr Kasho deposes, at [57], that on 15 May 2019, he confirmed to Mr Koka by email that he would complete the works "as per the plans and specifications".[47] This evidence is consistent with the content of an email sent by Mr Kasho to Mr Koka on 13 May 2019, in which he confirmed that he would fix any defect in the property.[48]
6. Mr Koka himself appears to have suspended the works when he advised in a text message sent on 24 April 2019:

Good morning happy easter please stop don't do nothing in the house until I'll Bring the inspector call me when you have spare time please thank you. (Sic).[49]

1. Mr Kasho referred to this communication in his solicitors' letter of 10 June 2019, when he sought to show cause why Mr Koka should not act on his notice of intention to terminate.[50]
2. For all these reasons, I find that Mr Koka cannot lawfully rely on any suspension of the works by the builder as a basis for terminating the contract.

Did the builder refuse or persistently neglect to remedy any defective work so that, by that refusal or persistent neglect, the works were adversely affected and/or was the builder unwilling and remained unwilling to complete the works?

1. The defects Mr Koka was relying on were not individually set out in the notice of intention to terminate. Mr Koka submits that this is unnecessary, on the basis that the documents referred to in the notice were "incorporated" into the notice.[51] In adopting this position, Mr Koka relies on Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 3) ('Dura')[52] in which Dixon J in the Supreme Court of Victoria had to consider the legal requirement for a show cause notice given under clause 44 of AS 2124-1992. Clause 44.3(b) mandates a requirement that the principal (as the owner is referred to under that contract) specify the alleged substantial breach.
2. Dixon J explained that clause 44 notice under AS 2124-1992 had to be carefully considered in the context of the show cause procedure established by the contract. At [385]-[386] he explained:

Under AS 2124-1992 on substantial breach by the contractor, the principal is not entitled by the contract to immediately elect to terminate the contract or take the work out of the hands of the contractor. The right to take either course of action does not automatically follow failure to rectify the breach after the service of a notice. The contractor has the opportunity to influence the principal's choice about its response to its substantial breach by showing reasonable cause to the notice that the principal had served. The process affords to the contactor an opportunity to show cause why the principal should not exercise those rights at all.

Clause 44 does not contemplate that the contractor's response needs to be to rectify the breach that is the subject of the notice. The clause is primarily concerned with future performance, not rectification. AS 2124-1992 requires that the principal name expressly, or mention definitely, the alleged substantial breach. It does not require that the principal detail or particularise each matter constituting the default. The response expected is not necessarily an activity-based response, remediation within the time permitted, not less than 7 days. The clause contemplates that the notice will require the contractor's response in writing, at a place nominated by the notice and by a time and date specified by the notice. The process of showing cause under cl 44 requires communication, not necessarily just rectification.

1. In Dura, Dixon J discussed the issue of whether a notice to show cause must be self-contained, or may incorporate by reference material which was not actually served. Dixon J referred to the Queensland Supreme Court case of Re White Industries (Qld) Pty Ltd ('White Industries')[53] in which this issue had been raised but not decided. In White Industries, the principal contended that regard could be had to the communications that had preceded the notice of intention to terminate in order to obtain the necessary detail of the principal's complaints.
2. Dura concerned the AS 2124-1992 form of contract whereas White Industries was a case that involved the JCCB 1995 form of contract. As Dixon J observed in Dura, at [394], JCCB 1995 was materially different to AS 2124-1992 and:

it permitted the principal to serve a notice that it intended to determine the employment of the builder under the agreement unless the substantial breach specified in the notice was remedied in terms consistent with the contract within 10 days. The contract provided that the principal's notice specify and detail the default relied upon.

1. Dixon J contrasted that case with the case before him, stating, at [397]:

Here, the drafter of the notice has sought directly to provide details of the substantial breach by specific reference to other documents. It is not a requirement for validity that the notice be completely accurate in every particular. What is required is to convey what is amiss for the purposes of showing cause. While it might be prudent to annex or otherwise provide copies of documents that provide the particulars of the substantial breach, in my view incorporation of documents, properly identified by reference in the notice, is sufficient to unequivocally convey what the principal considers to be amiss and provide the opportunity intended by the contract for the contractor to show cause.

1. Bearing that point squarely in mind, I now turn to the following passage appearing in the judgment of Byrne J in White Industries:

Plainly the requirement imposed by cl. 12. 01 that the notice must not only "specify" but also "detail the default relied on" was intended to ensure that the builder was adequately informed of the allegations of breach of contract made by the proprietor. It is only if the notice descends to such particularity that the builder could avail himself of the opportunity cl. 12.02 provides to remedy the default "in terms consistent with this Agreement" and avoid the proprietor's determining the contract, with all the serious consequences that step involves. Considerations of this sort mean that a notice is not effective as a cl. 12.01 notice unless the detail of the default is clearly identified. So the notice must be "unequivocal in order to convey what was amiss", ....[54]

1. Byrne J in White Industries held that the notice given by the principal's architect did not set out the necessary detail of the principal's complaints. His Honour went on to consider a submission made on behalf of the principal that the sufficiency of the notice could be established by having regard to communications between the principal and the builder. Byrne J held:

The present notice does not clearly identify any document or other matter that might provide the detail the notice itself ignores. As it happens, the administration of this contract involved a substantial. number of complaints and disputes to which the general words of the letter might relate: ... Cl. 12.01 does not envisage that the builder can be required to pick and choose among unidentified site instructions, minutes of site meetings or conversations to which the letter could be referring. That letter is therefore not a notice which meets the requirements of cl. 12.01. Accordingly, it could not support the attempt in late September, 1989 to terminate the contract.

1. The present case concerns not a contract in the form of AS 2124-1992, but a contract in the form of Master Builders Victoria HC-7(2018). One of the bases upon which an owner can serve a notice of intention to determine the contract, clause 20.1, is where the builder "refuses or persistently neglects to removal of any defective work or improper Materials, so that by the refusal or persistent neglect the Works are adversely affected." Clause 20.2 of HC-7 (2018) provides that if the builder fails to remedy the breach or breaches of the contract as stated in the notice served under clause 20.1 within 14 days, then the owner may, without prejudice to any other right or remedy, give written notice to the builder immediately terminating the contract.
2. The termination procedure and notice established by the HC-7 (2018) form of contract, accordingly, is similar in that contained in JCCB 1995, which is summarised in [51] above. It follows, in my view, that in the face of the disparity of views between Dixon J in Dura and Byrne J in White Industries as to the degree of detail required to be contained in the notice of intention to determine the contract, it is appropriate to follow the approach of Byrne J in White Industries.
3. It is established by Dura that was legitimate for Mr Koka to endeavour to particularise the complaints concerning the defects upon which he based his notice of intention to terminate by incorporating by reference the First Darbecca Report. The question remaining is whether that report sufficiently detailed the relevant defects. I find that it clearly did not.
4. The first reason for this finding is that the First Darbecca Report opens with the statement that the author has been instructed to inspect Mr Koka's new home "to write a report as to the overall installation of all items required to construct a new home to completion stage". In my view, once Mr Kasho read that introduction, he would have been entitled to input the report to one side because it was not, on its face, a report concerning defects concerning the fixing stage. I acknowledge that the author of the report, Mr Patrick Kerr, highlighted that the defects were observed at a fixing inspection on 1 May 2019.[55] However, in my view that statement does not alter the nature of the report, which was explained in the introduction to the report.
5. The second reason why I consider that the First Darbecca Report cannot be said to have sufficiently detailed for the builder's benefit the defects which must be fixed before the fixing stage can be regarded as completed, is this. The report identified many defects, some of which were trivial, and some of which were stated to be defects which must be fixed by completion. Just as in White Industries, Byrne J held that Cl. 12.01 of JCCB 1995 "does not envisage that the builder can be required to pick and choose among unidentified site instructions, minutes of site meetings or conversations to which the letter could be referring", I consider that clause 20.1 of HC-7(2018) does not contemplate a builder having to peruse a defects report which is 54 pages long and which refers to at least 42 defects, none of which are expressly stated to relate to the fixing stage, in order to ascertain what defects it must fix within 14 days in order to avoid termination of the contract.
6. Accordingly, I find that insofar as the notice of intention was based on the incorporation by reference of the First Darbecca Report, the notice was invalid.

Was the builder unwilling to complete the works?

1. I have found above that the builder did suspend the work by reason of Mr Koka's interference with the trades, but I have also found that this suspension was not indefinite. It cannot be inferred from that temporary suspension that the builder would not have been prepared to complete the work. Nor did Mr Koka's failure to pay the fixing stage invoice lead to a refusal on the part of the builder to continue with the works. As has been observed at [44] above, the builder committed to completing the works in accordance with the plans and specifications on 13 May, and again on 15 May 2019. For these reasons, I find that Mr Koka's assertion that the builder was unwilling to complete the works cannot be sustained.

Did Mr Koka act unreasonably in issuing the notice of intention to terminate?

1. The builder in its written submissions relies on the New South Wales case of Renard Constructions (ME) Pty Ltd v Minister for Public Works[56] as authority for the proposition that where an owner issues a "show cause" termination notice under a construction contract, the owner must act reasonably.
2. It is not necessary for me to explore this contention, because clause 20.3 the contract expressly provides:

The Owner may not terminate this Contract unreasonably or vexatiously or is the Owner is a substantial breach of this Contract.[57]

1. The builder contends that Mr Koka was acting unreasonably in issuing the notice of intention to terminate. Having regard to the findings set out above, I think there is much in that argument. But I do not rest my determination on that point alone.

Was Mr Koka himself in substantial breach of the contract at the time he issued the notice of intention to terminate?

1. In my view, the issue of whether the termination of the contract was unlawful it put beyond doubt by reason of the fact that at the time the notice of intention to terminate the contract was issued, Mr Koka was in substantial breach of the contract. I say this because Mr Koka consistently demonstrated that he did not understand the nature of the contract he had entered into. For instance, Mr Koka was so keen to get on with the works that soon after the building permit was issued on 15 October 2018[58] Mr Koka directed Kings Excavation to undertake the site cut.[59] (This is not disputed: Mr Koka's in his witness statement agreed that he had paid $7,000 in cash directly to the earthworks contractor).[60] Mr Koka often went to the site and complained about things not being finished.[61] Mr Koka confirms that he "kept identifying defects in the construction process..."[62] Mr Koka made numerous changes to the contract, including ordering a fireplace when there was no fireplace in the contract specifications,[63] changing the bath in the master bedroom ensuite,[64] changing the air recycling area in the hallway, changing the kitchen pantry and adding additional bulkheads above the kitchen area,[65] changing the painting specification,[66] changing the kitchen cabinetry,[67] ordering waterfall stone for the kitchen bench,[68] and changing the tiling specification.[69]
2. In these circumstances, I find that it was Mr Koka's failure to observe the contract he had signed with the builder that places Mr Koka in the position where he himself was in breach of the contract at the time he purportedly terminated it. I acknowledge that some of the breaches when looked at individually, such as directing a tradesman to perform a variation to the works without consulting Mr Kasho, might be classified as trivial. However, Mr Koka's view that he could come to the house and direct the trades at any time[70] and his insistence on continuing to do this even after he had been asked in writing not to do so,[71] constrains me to find that the breaches, when looked at cumulatively, were substantial.
3. For this reason, I find that when Mr Koka relied on the notice of intention to terminate, he himself was in substantial breach of the contract. He cannot rely on the notice of intention to terminate in order to bring the contract to an end, and the termination effected by Mr Koka in June 2019 was accordingly wrongful.

Relevance of this finding on the assessment of damages

1. As noted above at [7]-[8], there is a significant monetary consequence to this finding that the termination was wrongful.
2. I will make declarations accordingly.

[1] The address has been withheld for privacy reasons.

[2] (2009) 83 ALJR 390; [2009] HCA 8, [13].

[3] [1848] EngR 135; (1848) 1 Exch 850 at 855 [154 ER 363 at 365].

[5] Mr Kasho in his witness statement, at [18], says this occurred on 30 October 2018, not on 1 October 2018 as alleged.

[6] The lock-up stage invoice dated 15 January 2019 is endorsed "Paid on 24/01/2019". See TB 647.

[10] [2012] VSCA 174.

[14] [2023] VCAT 912.

[16] Transcript ('TS') 14 August 2023 (14/8), (page) 89: (lines) 1-90:2.

[20] TS 16/8, 14: 19-2; 15: 7-11; 15: 15-19.

[26] TS 14/8, 94: 7-12; TS 16/8, 17: 29-18: 12.

[27] TS 16/8, 18: 11-12; and 18: 20-23.

[31] First Darbecca Report, TB 866, at Summary, page 2.

[32] This is contestable, as the builder disputes some of the defects.

[34] First Darbecca Report, under "Client Brief", TB 867.

[37] Builder's submissions on termination, [13].

[41] See the contract, at [15.1], TB 1733.

[42] An example of a notice of delay arising from variations is to be found in an email sent by Mr Kasho to Mr Koka on 17 January 2019, TB 638

[51] Mr Koka's submissions on termination, [13].

[52] [2012] VSC 99.

[53] Dixon J used (1991) 7 BCL 200 as the citation for White Industries. The case is also reported at [1990] QSC 010.

[59] Kasho witness statement, [38(b)], [14].

[61] In his witness statement, at [37] Mr Kasho says that Mr Koka "started going to site every day before going to work and complaining about things not being finished yet."

[63] Kasho witness statement, [38(a)]; contract specification, TB 537 at "HEATING AND COOLING, TB 540.

[65] Kasho witness statement, [38(c)].

[67] Ibid, [38(e)]; see also the letter at TB 670 from the kitchen cabinet maker Selwan Putrus dated 8 September 2021, confirming that Mr Ayad (Koka) had come to his factory and asked him to do a new design which was different to that on the architectural plans.

[68] Kasho witness statement, [38(f)].