Pennisi v Queensland Building and Construction Commission & Anor [2026] QCAT 101

Allen v Queensland Building and Construction Commission [2023] QCATA 66

Concut Pty Ltd v Worrell [2000] HCA 64

Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1961] EWCA Civ 7; [1962] 2 QB 26

Jones v Dunkel [1959] HCA 8

Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115

Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1988) 166 CLR 623

Mazelow Pty Ltd v Herberton Shire Council [2002] QCA 119

McMonagle v Queensland Building Services Authority [2011] QCAT 410

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37

Mousa v Vukobratich Enterprises Pty Ltd [2019] QSC 49

Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17

Richards & Anor v Queensland Building and Construction Commission & Anor [2019] QCAT 189

Serong v Dependable Developments Pty Ltd [2009] VCAT 760

Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359

Stojanovski v Australian Dream Homes Pty Ltd [2015] VSC 404

Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632

Wallace-Smith v Thiess Infraco (Swanston) Pty Ltd [2005] FCAFC 49

J Hastie and J Patty of counsel instructed by Mills Oakley Solicitors

R Ensby of Gadens Solicitors for Queensland Building and Construction Commission

L Tassal of counsel instructed by McInnes Wilson Solicitors for Klinge Constructions and Developments Pty Ltd

[1] On or about 21 December 2017 Mr. and Mrs. Pennisi, the Applicants, entered into a contract (the Contract) with the Second Respondent, Klinge Construction and Development Pty Ltd, hereafter referred to as 'the Builder' to carry out substantial renovations to their house in Charlton Street, Hamilton. Daniel Klinge ("Klinge") was a director of the Builder. The Contract price was $949,048.41.

[2] Irrespective of the outcome of the proceedings the experience has been disastrous for both parties in stress, time and costs. At the time of hearing the house had still not been completed. Work commenced on or about 24 November 2017 and ceased on 14 December 2018 when the Builder was asked to leave the site.

[3] The matter was heard over six days, with extensive evidence from lay witnesses and numerous experts in building, engineering, and surveying. We have had the benefit of reviewing voluminous documentary evidence, hearing oral testimony, and observing the demeanour of witnesses under cross-examination.

[4] Although this has all the hallmarks of a building dispute the proceedings are by way of review and arise in this way.

[5] On 14 March 2019, the Applicants lodged a complaint and Non-Completion Claim Form with the First Respondent the Queensland Building and Construction Commission ("QBCC") under the statutory home warranty insurance.

[6] Resolution of that complaint required the QBCC to determine whether the Applicants validly terminated the Contract with the Builder, on 13 December 2018.

[7] If the termination was valid, the Applicants were entitled to claim under the statutory insurance scheme administered by the QBCC.

[8] The QBCC issued a decision on 7 August 2019 disallowing the insurance claim on the basis that the Applicants had not validly terminated the Contract.

[9] On 6 September 2019, the Applicants applied for an internal review of the QBCC decision. The QBCC issued a Decision Notice dated 2 October 2019 which also disallowed the insurance claim on the basis that the Applicants did not validly terminate the Contract in accordance with the QBCC Regulations.

[10] In each decision, the QBCC determined, variously, in respect of the 24 Breach Notices, that:

(a) the matters described in the Breach Notices did not constitute "Substantial Breaches" as required by the Contract; or

(b) the complaints described in the Breach Notices could have been rectified within the time prescribed by the Contract; or

(c) there was insufficient evidence of a "Substantial Breach" of the Contract; or

(d) the Breach Notices could not be relied upon as they did not afford the Builder the prescribed 10 business days to rectify the alleged breaches before the Applicants attempted to terminate the Contract.

[11] It is submitted on behalf of the Builder that since the QBCC's first decision in August 2019, the Applicants have sought to recast and reformulate the factual and legal bases on which they purported to terminate the Contract, including by reference to the various ways in which a Contract may be terminated under the common law and a suite of new alleged defects and omissions in the works.

[12] It submits that only the second (retaining wall encroachment) and fifth (slab certificate) bases were identified in the 24 Breach Notices issued prior to termination. The balance of the complaints (or alleged bases for termination) were devised and communicated to the Builder after the Applicants purported to terminate the Contract.

[13] After the Applicants applied to QCAT dated 30 October 2019, QCAT on 20 January 2020 invited the QBCC to reconsider its decision. Further information was supplied by the parties concerning the completeness or otherwise of the frame works and whether the Frame Stage invoice had been issued prematurely or not. The Applicants had not relied on this alleged ground when issuing the Notice of Termination on 13 December 2018 and had relied on the 24 letters with headings "Defect Notice" and "Notice of Intention to Terminate the Contract". The QBCC issued a notice of Reconsideration of Decision on 26 February 2020 and confirmed the Decision Notice dated 2 October 2019.

[14] Subsequently, the Applicants applied to QCAT for this external review.

[15] By section 19 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) ("QCAT Act") the Tribunal must decide the review in accordance with the QCAT Act and the Queensland Building and Construction Commission Act 1991 (Qld) hereafter referred to as the 'QBCC Act'. The Tribunal has all the functions of the decision maker.

[16] By section 20 of the QCAT Act the review is a fresh hearing on the merits. The purpose of the review is to reach the correct and preferable decision.

[17] Section 24 of the QCAT Act provides that the Orders that can be made by the Tribunal upon review are:

(a) the decision is confirmed; or

(b) the decision is set aside and substituted with the Tribunal's own decision; or

(c) the decision is set aside and the matter returned to the Commission to reconsider the decision with directions the Tribunal considers appropriate

[18] Work commenced in December 2017. The building work involved raising an existing Queenslander home and constructing a new ground floor beneath it.

[19] In October 2018, Mr. Pennisi, who has legal qualifications[1] and experience in building disputes, began to take an increasingly adversarial approach to the project. The evidence shows he was contemplating litigation from at least this time.

[20] On 29 October 2018, the Builder issued a Frame Stage invoice. The Applicants objected. The Builder withdrew/suspended that invoice pending further progress.

[21] Between 23 and 30 November 2018 - a period of only eight days - the Applicants issued 24 separate breach notices. Fifteen of these have since been abandoned or not pressed at the hearing.

[22] On 6 December 2018, the Builder re-issued the Frame Stage invoice, supported by a Form 16 from an RPEQ engineer certifying compliance.

[23] Payment was due on this invoice by 13 December 2018, being seven days after issue pursuant to clause 11.6 of the Contract.

[24] On the same day payment was due - 13 December 2018 - the Applicants issued a notice of termination relying upon Clause 20.2 of the Contract (failure to remedy Substantial Breach). They did not, at that time, rely upon 'repudiation' or common law rights.

[25] On 14 December 2018, the Builder, faced with non-payment of an invoice properly due and purported termination of the Contract, exercised its right to suspend works pursuant to clause 16.1 of the Contract.[2]

[26] Despite the purported repudiatory conduct by the Applicants the Builder remained ready willing and able to perform its obligations under the Contract.[3]

[27] On 29 December 2020 the Applicant engaged Liona Constructions Pty Ltd ("Liona Constructions") to continue with the construction of the dwelling.

[28] In October 2021 Liona Constructions commenced work removing the framing and investigating the slab construction, which was subsequently demolished.

[29] The Applicants entered into a Master Builders Queensland Residential Building Contract - Level 2 dated 21 December 2017[4] with the Builder for renovation and extension works to a dwelling for the Contract price of $949,048.41.[5]

[30] The Contract provided that method B was elected for the progress payment of Designated Stages. There were seven stages with allocated stage payments. The Contract provided for staged payments at designated milestones. Importantly, each stage was defined as being reached when specified works were complete "apart from minor defects or minor omissions."

[31] The Contract contained a comprehensive termination regime in clause 20.

[32] Clause 1 of the General Conditions defined "Base Stage" and "Frame Stage" as being reached when specified works were complete "apart from minor defects or minor omissions." This phrase appears in every stage definition. The relevant stages were:

Base Stage - means that stage of the Works when, apart from minor defects or minor omissions:

• for a home with a concrete floor, other than a suspended concrete slab floor, the floor is finished.

Frame Stage - means that stage of the Works when, apart from minor defects or minor omissions, the building's frame is finished;

Other terms were defined as follows

Plans - means the plans, drawings and designs relating to the Works described in Part C of the Appendix;

Specifications - means the specifications relating to the Works described in Part C of the Appendix;

Substantial Breach - means a party's failure or refusal to perform a substantial obligation under this Contract ...;

Works - means the whole of the work to be carried out by the Contractor under this Contract, a description of which is contained in Item 5 of the Schedule, and includes variations to the Works.

[33] Clause 10.1 imposed warranties on the Builder regarding how works were to be carried out.

CONTRACTORS WARRANTIES

10.1 Warranties relating to the carrying out of the Works

The Contractor warrants that the Contractor will carry out the Works:

(a) in an appropriate and skilful way;

(b) with reasonable care and skill;

(c) in accordance with the Plans and Specifications;

(d) with reasonable diligence; and

(e) in accordance with all relevant laws and legal requirements including, for example, the Building Act 1975.

OWNERS RIGHT TO TERMINATE CONTRACT

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

If the Contractor:

(a) fails to proceed with the Works with due diligence or in a competent manner;

(b) unlawfully suspends the carrying out of the Works;

(c) refuses or persistently neglects to remove or remedy defective work or improper materials so that the progress of the Works is significantly, adversely affected;

(d) is unable to complete the Works;

(e) fails to effect or maintain any insurance policy required by this Contract; or

(f) is otherwise in Substantial Breach of this Contract,

the Owner may give a written notice to the Contractor by hand, registered post or facsimile transmission:

(g) describing each alleged Substantial Breach of this Contract by the Contractor; and

(h) stating the Owner's intention to terminate this Contract unless the Contractor remedies the alleged Substantial Breach or Breaches within ten (10) Business Days after receiving the Owner's notice.

20.2 If Contractor fails to remedy Substantial Breach, Owner may terminate Contract

If the Contractor fails to remedy the Substantial Breach or Breaches set out in a notice given to it by the Owner in accordance with Clause 20.1 within the time stated in that notice, the Owner may, without prejudice to any other rights or remedies, terminate this Contract by further written notice to the Contractor provided that such a notice of termination must not be given unreasonably or vexatiously and, if so given, then such purported notice of termination is void, and of no force and effect.

20.3 Owner may not terminate Contract in certain circumstances

The Owner may not terminate this Contract if the Owner is in Substantial Breach of this Contract.

[35] Plans, specification and foundation data documents were all supplied by the Applicants.[6] The Applicants were responsible for obtaining Building Approval.[7]

[36] ADG Engineers (Aust) Pty Ltd ("ADG") were engaged by the homeowners.

[37] Critically, clauses 17.5, 17.6, 17.10, and 19.1-19.3 established a comprehensive regime for dealing with defects:

(a) Defects liability period of 12 months after practical completion (clause 19.1);

(b) Final inspection at practical completion to identify defects (clause 17.5);

(c) Contractor must remedy agreed defects within stated times (clause 17.6);

(d) Contractor must rectify defects during this period (clause 19.3).

[38] This defects regime assumed that defects would exist during construction and would be rectified according to the agreed timetable, not immediately upon discovery. Clause 17 speaks of 'minor defects and omissions' whereas clause 19 speaks only of 'defects'.

[39] Clause 20 provided the termination mechanism.

[40] ADG provided drawings and advice to the Applicants prior to and at the commencement of the Contract. No one from ADG gave evidence at the hearing. However, it is necessary to make some observations about their involvement.

[41] Mr. Pennisi gave evidence that:[8]

(a) there was no contract in place between the Applicants and ADG;

(b) ADG were not charging Mr. Pennisi for the work they did on the project and only started being paid when ADG started preparing reports in late 2018 (which was after the builder left the site);

(c) ADG were carrying out works as a 'gesture of good faith' to Hutchinson Builders or to Mr. Pennisi (who worked at Hutchinson Builders) as they did a significant amount of work with Hutchinson Builders;

(d) the Applicants engaged ADG on the above basis because the Applicants wished to save money;[9]

(e) ADG's offices were adjacent to the building where Mr. Pennisi worked;

(f) ADG were apparently engaged by the Applicants to carry out inspections and issue certificates.[10]

[42] The Applicants submit that "ADG were engaged by the homeowners with the expectation that they would attend the site to perform routine inspections, and to issue Form 16s."[11]

[43] The Applicants submit that despite there being liaison between ADG and the Builder throughout the course of the project, the issue by ADG of the Form 16 for the ground floor slab (which would have certified the compliance of the constructed slab) did not occur. This was disputed by the Builder as dealings were direct and indirect, and when indirect they were through Mr. Pennisi.[12] However, the Builder did arrange for other 'competent' persons, with whom the homeowner had no association, to certify particular works.

[44] It is unclear why that occurred given that all parties proceeded on the basis that ADG would provide such certification. This is an issue as no Form 16 was provided by ADG for the slab.

[45] It is noted that the Contract contained no term that:

(a) ADG was to attend site to conduct inspections of the Works; or

(b) The Builder was permitted to engage a 'competent person' only from ADG to sign off a stage or aspect of the Works.

[46] On behalf of the Builder, it is submitted that ADG has a great deal to answer for the problems encountered by the Applicants in relation to the concrete slab. In particular:

(a) their designs were described by the structural engineering experts as:

(i) "very poor" and "difficult to interpret";[13]

(ii) having "shortcomings";[14]

(iii) being over-engineered in terms of reinforcement;[15]

(iv) a "poorly designed raft slab";[16]

(v) being unsuitable for the original soil test;[17]

(b) ADG were apparently inspecting works as they progressed to confirm compliance with the design intent, including by issuing Site Inspection Reports;[18]

(c) ADG inspected the site prior to the main ground slab concrete pour;[19]

(d) ADG issued a Site Inspection Report in respect of the main concrete pour to the Builder which listed items of work to be carried out prior to the concrete being placed;[20]

(e) ADG gave Klinge verbal direction and approval to pour the concrete slab;[21]

(f) for an unexplained reason, despite inspecting the footings and ground floor slab before the concrete pour and giving Klinge verbal approval to pour, the Applicants have apparently not received from ADG a Form 16 certificate in relation to the concrete slab (although Mr. Klinge believes the Form 16 was issued to the Applicants[22]);

(g) ADG refused to come to site to inspect the frame when requested by Klinge;[23]

(h) ADG ceased having any involvement in the project, and their designs were abandoned, once the Applicants engaged a new builder and new engineer.[24]

[47] We reiterate that no one was called to give evidence on behalf of ADG so the firm has not been given an opportunity to respond to these allegations. In accord with the rule in Jones v Dunkel[25] we can infer that ADG's testimony would not assist the Applicants.

[48] The Applicants engaged another builder, Liona Constructions, to demolish and reconstruct the slab and footings consistent with the redesign by Mr. Rebibou of Booth Engineers.

[49] In October 2021, it was discovered that the steel column encapsulation above the concrete piers and below the slab was found to be inadequate. In issue was how many columns were affected.

[50] The following gave evidence in the hearing. Mr. Marcello Pennisi, Ms. Georgina Pennisi, Mr. Daniel Klinge, and Mr. Cameron Marcom.

[51] Mr. Pennisi was experienced in handling disputes arising in non-residential building and construction contracts for his employer, Hutchinson Builders. That experience and his legal qualifications influenced his approach to this project, not always to his advantage.[26]

[52] Mr. Pennisi was combative and argumentative when giving his evidence. We formed the opinion that he was a person used to getting his own way on issues. It was clear that he was contemplating litigation from at least October 2018, before most of the alleged breaches occurred.

[53] It was submitted on behalf of the Builder that during his evidence Mr. Pennisi:

(a) Repeatedly made legal submissions rather than answering questions;

(b) Was evasive on key points;[27]

(c) Strangely, made repeated references to "people sitting in the gallery" in what could be perceived as an attempt to intimidate the Builder's employees;[28]

(d) 5,196 page witness statement (with documentation) contained extensive material which was struck out as inadmissible legal submissions.[29]

(e) Stated that although he wanted the relationship with the engineer to be independent he was evasive about the close relationship between Hutchinson Builders and ADG;[30]

(f) Was evasive about his role in managing the contracts and directing changes;

(g) Could not adequately explain his decision to engage his own surveyor to enter neighbouring properties and "dig down a foot" to check for encroachments - an unusual practice suggesting a determination to find issues.

[54] There is merit in the above submissions. We treat Mr. Pennisi's evidence with some caution. Where it conflicts with other evidence, we generally prefer that other evidence. His approach to this project was coloured by his experience in the construction industry and legal background and his apparent preparations from October 2018[31] onwards to pursue litigation.[32]

[55] It was submitted on behalf of the Builder that Ms. Pennisi's written evidence (comprising 1,600 pages) bore a striking resemblance to her husband's style and approach, despite her lack of legal qualifications. Much of it was also struck out as inadmissible. During her testimony, Ms. Pennisi:

(a) Attempted to minimize her actual involvement in the project, despite documentary evidence showing detailed engagement;

(b) Was evasive when confronted with documents showing her directions regarding design changes;

(c) Could not adequately explain the unusual length and legal tone of her statement.

[57] Mr. Klinge made certain admissions during cross-examination, but it was submitted that the admissions must be understood in context:

(a) He admitted that at the time work ceased in December 2018, certain works remained incomplete - but this was entirely consistent with the contract's provision for "minor defects or minor omissions" at stage completion;

(b) He could not explain why ADG had not issued a Form 16 for the ground level slab and he could not recall for sure whether the items in the ADG Site Inspection Report for the ground slab had been carried out;

(c) He admitted retaining wall issues existed but explained the Builder was actively rectifying them when the Applicants terminated;

(d) He explained his understanding of when payments became due, which while perhaps not aligned with the Applicants' interpretation, was reasonable and made in good faith.

[58] It was submitted by the Builder that Mr. Klinge demonstrated a builder's practical approach: identifying issues, working to rectify them, and expecting to be paid for completed stages while continuing work.

[59] Mr. Marcom was called by the Applicants to give evidence about the alleged pier encapsulation issues discovered in 2021. His evidence should be viewed with some caution because Liona Constructions, for whom he worked, was responsible, in part, for the decision to demolish some of the Builder's work. Relevantly:

(a) Liona Constructions was engaged by the Applicants to continue with the construction.

(b) Liona Constructions removed sections of the ground floor slab to expose plumbing/drainage and in the process discovered that at least 13 piers lacked[33] full encapsulation of the steel columns.

(c) Liona Constructions with Booth Engineers (who replaced ADG) recommended demolition;

(d) Liona Constructions was paid to demolish the Builder's work and replace it;

(e) Liona Constructions therefore had a vested interest in finding that the original work was defective and needed replacement;

(f) The work Mr. Marcom described occurred years after the Builder left site, during which time other contractors had access;

(g) If it is found the encapsulation is a defect that can be rectified readily enough, then the decision to demolish and replace the slab would be questionable in terms of it being solely based on the encapsulation issue.

[60] We heard from three engineering experts: Structural engineers John Graham Van de Hoef (called by the First Respondent), Stephane Jacques Rebibou (called by the Applicants) and James Thomas (called by the Second Respondent).

[61] Mr. Thomas is an experienced engineer who provided careful evidence. While the Applicants criticized him for not having recently reviewed his reports before the first day of testimony, he rectified this overnight and returned the next day with clear, considered opinions. His ultimate opinions were well-reasoned. Mr. Thomas inspected the structure on 11 February 2021 and was able to describe the state of the structure as constructed by the Builder.[34]

[62] The Applicants sought to criticize Mr. Thomas for providing additional photographs on the final day of hearing. However, these photographs (taken during his 2021 site inspection) showed alternative bracing that explained matters that had been in dispute. There is no evidence of impropriety, Mr. Thomas explained he had taken these photographs during his inspection and provided them when their relevance became clear during the hearing.

[63] Importantly, Mr. Thomas ultimately agreed with the other experts on key technical matters while providing valuable context about industry practice and what is realistically achievable during construction.

[64] Mr. Van de Hoef gave technically very detailed evidence. However, his evidence must be assessed recognizing:

(a) His opinions about the seriousness of certain issues were at times coloured by a theoretical academic approach rather than practical construction reality;

(b) He agreed with Mr. Thomas on many technical points during the hot-tub conclave.

[65] Mr. Rebibou similarly gave detailed technical evidence.

[66] Where the experts agreed, we accept their agreed evidence. Where they disagreed, we have carefully assessed their reasoning, and we generally prefer the evidence that recognizes the practical realities of construction and the Contract's express provision for "minor defects or minor omissions" at stages.

[67] Mr. Smith gave evidence for the Second Respondent. The Applicants sought to criticize him for describing the case as a "tragedy" and suggesting emotional involvement. However, in context, his comment reflected an experienced builder's frustration at seeing a project that could have been completed successfully turned into costly litigation. His substantive technical evidence was sound.

[68] Mr. Carpenter gave evidence for the Applicants. His evidence tended to reflect the Applicants' perspective

[69] Mr. Barrett gave useful evidence based on contemporaneous inspection reports. However, his reports must be read carefully, they identified issues for follow-up, not necessarily substantial breaches of contract.

[70] Mr. Ninnes was engaged by the Applicants. Significantly, the Applicants had instructed him to enter neighbouring properties and take thorough steps to investigate for encroachments, including "digging down a foot." This suggests the Applicants were specifically seeking to find issues.

[71] Mr. Cutler, while not attending site, provided useful opinions based on Mr. Ninnes' measurements and his extensive experience. His evidence that encroachments of 13mm would be within acceptable tolerance for this type of construction is important and reflects industry reality.

[72] Mr. Parsons was the surveyor originally engaged to work on the project. He issued a Form 16 certifying boundary compliance. The Applicants did not call him to give evidence, and we draw an inference that his evidence would not have assisted the Applicants' case.

[73] Mr. Leahy gave straightforward evidence about his requirements for issuing certificates.

[74] The critical question is, did the parties intend clause 20 of the building Contract to be the exclusive mechanism for termination (at least during the currency of the works), or did they intend it merely to supplement common law rights? Submissions by the Applicant affirmed its common law right whereas the builder submitted that Clause 20 prevailed.

[75] The starting point are the principles of contractual construction stated by the High Court in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37:

(a) Rights and liabilities are determined objectively by reference to the contract's text, context, and purpose;

(b) The necessary enquiry requires consideration of the language used by the parties in the contract;

(c) Construction assumes parties intended to produce a commercial result and avoid commercial inconvenience or nonsense.

[76] The decision of the High Court in Shepherd v Felt & Textiles of Australia Ltd[35] stands as authority for the general proposition that a termination of a contract may be justified by reference to any ground that was valid at the time of termination, even though it was not relied on at the time and even though the ground actually relied on is found to be without substance. It should be noted that that decision related to an employment contract and although it has been considered in building contracts the latter involves other considerations.

[77] In Concut Pty Ltd v Worrell [2000] HCA 64, the High Court stated:

In Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd, Hope JA identified contracts between master and servant as a typical class of contract in which terms will be implied by law. Such terms apply in the absence of an expression of contrary intention by the parties. In discerning that intention, regard should be had to 'the familiar principle of construction that clear words are needed to rebut the presumption that a contracting party does not intend to abandon any remedies for breach of the contract arising by operation of law'. Thus, an express provision for termination for breach in certain circumstances may be regarded as designed to augment rather than to restrict or remove the rights at common law which a party otherwise would have had on breach.

[78] This principle is that express termination provisions should be regarded as augmenting, not restricting, common law rights unless clear contrary intention appears. We will now consider whether such intention existed.

[79] It is submitted on behalf of the Builder that the corollary of this principle, stated in Progressive Mailing House Pty Ltd v Tabali Pty Ltd,[36] is that parties can contract to limit or exclude common law rights if that intention is sufficiently clear from the contract.

[80] In Mazelow Pty Ltd v Herberton Shire Council,[37] the Queensland Court of Appeal considered a building contract with a clause stating termination was "without prejudice to any other rights or remedies." The Court held this did not necessarily preserve all common law rights - the question depends on construction of the contract as a whole.

[81] In cases involving comprehensive contractual regimes, courts have found that the contract does limit common law rights. For example, in Wallace-Smith v Thiess Infraco (Swanston) Pty Ltd,[38] the Full Federal Court held that a comprehensive dispute resolution regime in a contract excluded common law rights to terminate for repudiation until that regime was exhausted.

[82] It is submitted on behalf of the Builder that several features of clause 20 suggest the parties intended it as a comprehensive code:

(a) Clause 20 is titled "Termination" without any qualifier. It does not say "Additional Termination Rights" or "Contractual Termination Rights." The heading suggests comprehensiveness.

(b) Clause 20.1 contains a comprehensive list of grounds for termination, ranging from specific circumstances (failing to proceed with due diligence, unlawful suspension) to the catch-all "otherwise in Substantial Breach." If the parties intended this to merely supplement common law rights, why specify these grounds at all? The logical inference is that these grounds were intended to define the circumstances in which termination during construction was available.

(c) Clause 20.1 imposes a mandatory process: written notice describing the breach and stating intention to terminate unless remedied within 10 business days. This process is incompatible with immediate common law termination for repudiation, which requires no notice period.

(d) Clause 20.2 contains the critical prohibition: termination notice "must not be given unreasonably or vexatiously and, if so given, then such purported notice of termination is void." This suggests the parties intended clause 20 to control termination during the works, with a reasonableness safeguard to prevent abuse.

(e) The Contract contains extensive provisions dealing with defects (clauses 17 and 19). These demonstrate the parties anticipated defects would arise and would be dealt with according to the contractual timetable, not by immediate termination.

(f) The phrase "without prejudice to any other rights or remedies" in clause 20.2 can be construed as referring to:

(i) Rights and remedies under the Contract (such as claims for damages); or

(ii) Rights and remedies after the Contract terminates (such as rights to sue for losses); or

(iii) Rights to terminate on grounds outside clause 20 (such as frustration or statutory grounds).

[83] This construction is consistent with the commercial purpose of the contract. Building projects involve iterative work with inevitable defects during construction. A builder must be able to proceed with confidence that payment will be made at designated stages and that the owner cannot terminate arbitrarily. The clause 20 regime provides certainty with specified grounds, notice period, opportunity to remedy, and a reasonableness safeguard.

[84] The Builder submits that the Tribunal does not need to definitively resolve whether clause 20 is a complete code, because even if common law rights remain available, the Applicants have failed to establish grounds for termination.

[85] Despite these valiant efforts of Counsel for the Builder to suggest that Clause 20 is the only basis that the Contract can be determined by the Owner we are of the opinion that Clause 20 does not in clear terms state that common law remedies are not available.

[86] The proposition that a termination code in a contract being the binding mechanism was rejected by Henry J in Mousa v Vukobratich Enterprises Pty Ltd[39] although no authority was cited. His Honour said:

[194] Counsel for Mr Vukobratich emphasised the contract's clause 20.1 conferred a means by which Mousa could give notice of an intention to terminate should the company not remedy its breaches within 10 days. He relied on that clause to argue the breaches of warranty were not of such seriousness as to justify termination. It was also submitted the existence of clause 20.1 meant the company was given a "right" to a clause 20.1 notice and the opportunity to remedy or mitigate before termination. Clause 20.1 conferred no such right on the company. Nor did its existence suggest breaches of the kind alluded to in clause 20.1, which included if the company was "in substantial breach", could not be of such a character as to justify termination without first being given a chance to rectify.

[87] The decision was followed by Member Howe in Richards & Anor v Queensland Building and Construction Commission & Anor.[40]

[88] The Applicants submit that the decision stands for the proposition that regardless as to whether or not a notice to remedy breach and subsequent termination notice was valid and effective pursuant to the grounds relied on in the notice, an applicant homeowner is entitled under general law to terminate a contract consequent on the repudiation of the contract by the counterparty builder claiming payment for a stage and maintaining that erroneous claim through to termination. So much is clear from the text which appears in clause 20.2: "the Owner may, without prejudice to any other rights or remedies, terminate this Contract ..."

It is unnecessary to descend into an analysis of whether the breach here was of an essential or non-essential term for, as was explained by the High Court in Koompahtoo Local Aboriginal Land Council v Sampine Pty Ltd [41] even a breach of a non-essential term may justify termination if sufficiently serious. The High Court there referred to Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1961] EWCA Civ 7; [1962] 2 QB 26 where it was noted breaches of a stipulation as to seaworthiness could vary widely in importance. The same may be said of breaches of appropriate care and skill in building a dwelling. In the present case those breaches were very serious.

[90] The majority (Gleeson CJ, Gummow, Heydon and Crennan JJ.) in the High Court decision of in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (supra) determined that there were two relevant circumstances in which a breach of contract by one party may entitle the other to terminate. The first is where the obligation with which there has been failure to comply has been agreed by the contracting parties to be essential. Usually described as a condition of the contract. The second is where there has been a sufficiently serious breach of a non-essential term as was developed in Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd.[42]

[91] In relation to the first circumstance, it is necessary to identify whether the term is a condition or a warranty. The Court referred to the decision of Jordan CJ in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd[43] where the Chief Justice said:

In considering the legal consequences flowing from a breach of contract, it is necessary to remember that (i) the breach may extend to all or to some only of the promises of the defaulting party, (ii) the promises broken may be important or unimportant, (iii) the breach of any particular promise may be substantial or trivial, (iv) the breach may occur or be discovered (a) when the innocent party has not yet performed any or some of the promises on his part, or after he has performed them all, and (b) when the innocent party has received no performance from the defaulting party, or has received performance in whole or in part; and to remember also that the resultant rights of the innocent party and the nature of the remedies available to him may depend upon some or all of these matters.

The nature of the promise broken is one of the most important of the matters. If it is a condition that is broken, i.e., an essential promise, the innocent party, when he becomes aware of the breach, has ordinarily the right at his option either to treat himself as discharged from the contract and to recover damages for loss of the contract, or else to keep the contract on foot and recover damages for the particular breach. If it is a warranty that is broken, i.e., a non-essential promise, only the latter alternative is available to the innocent party: in that case he cannot of course obtain damages for loss of the contract.

[92] A term that requires a builder to exercise skill and care in carrying out work under the contract is, generally, considered a warranty and not a condition. If the breach is so serious to fall within the Hongkong Fir Shipping Co case then it may justify repudiation. We do not think that is the case here.

[93] If common law termination rights remain available the test for repudiation is well established.

[94] In Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd,[44] the High Court stated (per Deane and Dawson JJ):

Lord Wright's oft-quoted admonition that 'repudiation of a contract is a serious matter, not to be lightly found or inferred' is, no doubt, a wise one.

[95] Repudiation requires conduct that conveys to a reasonable person an unwillingness or inability to render substantial performance, or an intention to fulfill the contract only in a manner substantially inconsistent with obligations.

[96] The test is objective, but the conduct must be assessed in context. In a building contract context, the existence of defects during construction does not, without more, constitute repudiation. Otherwise, every defect would allow termination, rendering the "minor defects or minor omissions" language meaningless.

[97] The contract defines "Substantial Breach" as "a party's failure or refusal to perform a substantial obligation under this Contract (such as, for example, the Owner's failure to make payment on time)."

[98] The Applicants also rely upon breaches of Clause 10 of the Contract which we have referred to above but for convenience repeat here:

CONTRACTORS WARRANTIES

10.1 Warranties relating to the carrying out of the Works

The Contractor warrants that the Contractor will carry out the Works:

(a) in an appropriate and skilful way;

(b) with reasonable care and skill;

(c) in accordance with the Plans and Specifications;

(d) with reasonable diligence; and

(e) in accordance with all relevant laws and legal requirements including, for example, the Building Act 1975.

[99] That same warranties are found in part 3 of schedule 1B of the Queensland Building and Construction Commission Act 1991 (Qld) and are implied into the contract.

[100] Counsel for the Applicants submit that the Builder in adherence to his obligations under clause 10 and his statutory obligations should have carried out the work free from defects and omissions in the first place without the necessity to rely upon a later opportunity of rectifying the work such as during the defects liability period.

[101] The Applicants referred to Stojanovski v Australian Dream Homes Pty Ltd:[45]

The proper approach in determining whether the builder was in substantial breach of the contract requires that the court should first identify the term or terms breached, and the breach must then be evaluated by considering its nature and the consequences of the breach. Here, the term in question was cl 10.1, in particular the requirement that the works be carried out in a proper and workmanlike manner. About that obligation, it should be noted that the builder has agreed by cl 10.1 to carry out, as opposed to complete, the works to a particular standard. It is irrelevant that the builder may later complete the works to the requisite standard because the obligation under consideration is to carry out the works in a proper and workmanlike manner. The contractual term reflects an important statutory warranty, incorporated by legislation intended to provide protection to owner. That the works are carried out in a proper and workmanlike manner will ordinarily be fundamental to the owner and failure to do so is what is contemplated as enlivening the power to serve a default notice.

[102] In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (supra) the majority of the High Court described the test, paraphrased here as:

The test for repudiation of a contract is, relevantly, conduct evincing an intention to fulfill the party's contract only in a manner substantially inconsistent with the party's obligations, so as to convey to a reasonable person in the situation of the other party, renunciation of a fundamental obligation under the contract.

[103] The Applicants submit that the failure of the Builder to rectify defects in this case is similar to the constellation of defects in Mousa. That is not the case, Mousa can be distinguished. Judicial Member McGill in Allen v Queensland Building and Construction Commission[46] illustrated the difference when he said:

[245] ... In that matter (Mousa) the builder was found to have repudiated the contract by an inability to perform. A large number of individual defects, found to be the fault of the builder, were identified in the decision. The major ones were inadequate waterproofing of retaining walls leading to water seepage (rectification cost estimated at $223,642), inadequate undercroft retaining walls (rectification cost $42,268), groundwater collection at undercroft (rectification costs $19,511), extensive water penetration of external doors and windows (rectification cost $160,000 if the doors and windows can be reused), extensive problems in the roof construction (rectification costs $116,000), inadequate structural support for the atrium glass wall (rectification costs $22,500), cracking of the concrete pool (rectification costs $21,195), spalling of a blockwork wall (rectification cost $18,500), ceiling height lower than specified in the contract (rectification costs $44,348) and poor external painting (rectification costs $65,494). There were a further eighteen more minor defects, and the total cost of rectification of all defects was found to be $818,227 plus GST.

[246] The cost of completing the construction of that house as required by the contract was found to be $1,145,661.67, not including rectification costs, although there was a deduction of $575,130.62 as the unpaid balance of the contract amount. The original contract sum was $2,100,000, and there were found to be a number of variations for which an additional $180,758.51 was allowed.

[247] In Mousa the owners terminated for repudiation in December 2015, and that entitlement was upheld by his Honour. The owners relied on the defects, and on unjustified claims for variations, non-compliant progress claims and unfounded claims for sundries. The evidence was that the builder sought payment of various amounts from time to time, not related to the scheme for payment under the contract. But repudiation was found on the basis of the extensive defects providing "overwhelming evidence of repudiation", showing that the construction was beyond the builder's competence.

[104] As observed by Judicial Member McGill repudiation in building cases is something not lightly found, and where the owners rely on defects in the work constructed, they must collectively amount to something a good deal more serious than just the usual collection of defects and deficiencies which might easily occur in connection with the construction of any dwelling.

[105] It is the Applicants' case that it is of fundamental importance to an owner that the Builder carry out the works in a proper and workmanlike manner. The Builder's response is that this must be balanced against the equally fundamental principle that building is an iterative process. Hence we must consider the nature and seriousness of the alleged defects and incomplete works.

[106] As Judicial Member McGill acknowledged, judicial notice can be taken of "the nature of the building process, the frequency of the incidence of work that does not meet the requisite standard and the frequency of disputes about standards of workmanship."

[107] The parties to this Contract clearly contemplated this reality by including "apart from minor defects or minor omissions" in every stage definition.

[108] The Contract also included a comprehensive defects regime (clauses 17 and 19). The parties agreed that:

(a) Minor defects could exist at each stage;

(b) The Builder would be entitled to payment despite minor defects;

(c) The owner was required to pay despite minor defects;

(d) The Builder would rectify minor defects during the defects liability period;

(e) Only defects that "unreasonably affect occupation" would require earlier rectification.

[109] The terms "minor defects or minor omissions" are not defined in the Contract. In McMonagle v Queensland Building Services Authority[47] Member Stilgoe (as she then was) after being informed that despite extensive research no reported decisions on the point had been found, resorted to the dictionary meanings. The Shorter Oxford English Dictionary defines minor as being "lesser or comparatively small as opposed to major". The Macquarie Concise Dictionary refers to minor as being "lesser as in size, extent or importance". Ultimately, it is a question of fact based on the context in which the term is used.

[110] In this contractual context, a "substantial breach" must be something significant that goes beyond the inevitable defects and omissions contemplated by clauses 1, 17, and 19.

[111] In Serong v Dependable Developments Pty Ltd,[48] the Victorian Civil and Administrative Tribunal (in a building contract case with similar terms) stated:

His Honour's analysis refers to a number of interpretations which have been applied to the word substantial over the years in different contexts. In broad terms the two strands of meaning are on the one hand "of substance as distinct from ephemeral or nominal". If applied in the present context this would mean that any breach going beyond the de minimis would be a substantial breach. The view which I think was espoused by Mr Gurr, counsel for the Serongs and the view adopted by Viscount Simon in the case referred to by Deane J in the passage quoted above, namely "considerable, solid or big" in the context of a building contract would mean that only really important breaches would count. In my view, in the context of a building contract, the [substantial breach meaning] is the one which should be given to the word 'substantial' or the phrase 'substantial breach'.

Experience sitting in the Domestic Building List and a reading of judgments in building disputes demonstrates that building is a complex process and this complexity and human frailty mean that defects in a structure are common and sometimes, at least on a temporary basis, unavoidable... Given that it is difficult to avoid some defects and that the process of rectification may take some time it seems inherently unlikely that a standard form building contract prepared by a builders' association... would intend to leave a builder at risk of contract cancellation for failure to rectify within 14 days of a notice any defect which was more than ephemeral or de minimis.

[112] In Stojanovski v Australian Dream Homes Pty Ltd[49] John Dixon J did not entirely agree with that passage. His Honour said:

1. Although I agree that a substantial breach is one that is more than ephemeral or de minimis in its character, the concept and purpose of evaluating, and limiting, the kind of breach that enlivens the owner's right to serve a default notice is given context by reference to the terms of the contract as a whole. It is unhelpful to paraphrase the qualifying condition introduced by the word 'substantial' by using the phrase 'only really important breaches' because that is not the language.
2. In some applications of cl 20.1, but perhaps not where cl 10.1 is breached, that evaluative concept may be too narrow. Because the qualifier is applied to the phrase 'breach of this contract', the concept of 'substantial' could apply to a breach of any term of the contract, across the range of the differing obligations cast on the builder by the contract. In that context, its protean quality serves a purpose and the precise meaning intended by the use of the word will be revealed by the nature of the breach. Whether a breach of the contract is a substantial breach is a question of fact and the answer to the legal question what was intended by 'substantial ' is that the nature and the consequences of the breach must satisfy that description and, in the present context, be ample or considerable or important.

[113] We agree that the Contract must be construed recognizing the practical realities of construction. For the reasons set out below, we consider, based on the above authorities, that the defects and incomplete work detailed do not provide a basis for termination of the Contract, they were capable of being rectified and, if not, would form a basis for a claim for damages

[114] Clause 20.2 contains a critical safeguard: "such a notice of termination must not be given unreasonably or vexatiously and, if so given, then such purported notice of termination is void, and of no force and effect." This is a mandatory requirement. A termination given unreasonably or vexatiously is void - it has no legal effect.

[115] What constitutes "unreasonable" or "vexatious"? These are ordinary English words to be given their natural meaning in context. "Unreasonable" means not reasonable in the circumstances - lacking sound judgment or good sense. "Vexatious" means lacking reasonable or probable cause, designed to harass or annoy, or instituted maliciously or in bad faith. [50]

[116] In Stojanovski at [65]-[72], Dixon J held that the proper question is "whether the owner acted unreasonably in serving the termination notice when they did", having regard to all circumstances including the parties' conduct after service of the default notice.

(a) The nature and seriousness of alleged breaches;

(b) Whether breaches were genuine or manufactured;

(c) The time given for rectification;

(d) Whether the Builder was given realistic opportunity to remedy;

(e) The Builder's response and conduct;

(f) The owner's conduct and motivation;

(g) The timing of termination;

(h) The overall context of the parties' relationship.

[118] Evidence of pre-planned litigation, adversarial conduct designed to find issues rather than facilitate construction, and termination timed to coincide with payment due dates can all support a finding of vexatious termination.

[119] Before addressing the alleged grounds for termination, it is necessary to address clause 20.3, which provides:

Owner not entitled to terminate this Contract under Clause 20.2... if... Owner is in Substantial Breach of this Contract.

[120] This is a critical disentitling provision. If the Applicants were in substantial breach at the time they purported to terminate, their termination is ineffective regardless of the Builder's conduct.

[121] We find that payment was due for the Frame Stage invoice issued on 6 December 2018.

(a) A Form 16 was issued by Mr. Stebbing, an RPEQ engineer, certifying compliance with the structural engineering requirements;

(b) Expert engineering witness Mr. Thomas specifically considered the documentation and also made a site inspection sometime after but when the work by the Builder was observable. He stated in his expert report[51] that the frame was complete by at least 13 December 2018 and most likely by 4 December 2018.

(c) The evidence by the expert engineers and the expert building consultants was to the effect that there were remaining items that were either non-structural elements not required at Frame Stage or minor defects/omissions expressly permitted by the Contract. We discuss these non-completion items in detail below as Issue 3 of the six issues claimed by the Applicant as justifications for termination.

(d) The structural frame was complete other than minor defects and omissions.

[123] Mr. Klinge's evidence was that he understood Frame Stage to be reached when a Form 16 was obtained certifying structural compliance. While the Applicants dispute this interpretation, Mr. Klinge's understanding was reasonable and made in good faith.

[124] More importantly, the Contract definition must be applied recognizing:

(a) "Frame Stage" means "the building's frame is finished" (not all elements of the building);

(b) "Apart from minor defects or minor omissions" allows for incomplete or imperfect work;

(c) Non-structural elements may not be required at Frame Stage if they relate to later stages (per Stojanovski principle regarding built-in cabinets).

[125] The Applicants rely on detailed evidence from Mr. Carpenter about allegedly incomplete elements. However, much of this evidence conflates structural and non-structural elements, and fails to properly apply the "minor defects or minor omissions" exception.

[126] We find that Frame Stage had been reached by 6 December 2018 within the proper construction of the Contract.

[127] Payment was therefore due seven days after the invoice issued on 13 December 2018.

[128] The Applicants did not pay the Frame Stage invoice. Payment was due on 13 December 2018 - the same day they issued their termination notice.

[129] The failure to make payment when contractually due is expressly referenced in the Contract under the definition of "Substantial Breach": "a party's failure or refusal to perform a substantial obligation under this Contract (such as, for example, the Owner's failure to make payment on time)."

[130] Payment obligations are fundamental to building contracts. A builder performs work at significant cost and relies on stage payments for cash flow to continue the project and meet obligations to subcontractors and suppliers.

[131] By failing to pay the Frame Stage invoice when due, and by instead terminating the Contract on the payment due date, the Applicants were themselves in substantial breach.

[132] Clause 20.3 therefore disentitled them from terminating under clause 20.2.

[133] This finding alone is sufficient to dispose of the Applicants' claim. However, we will address the alleged grounds for termination in any event.

[134] The Applicants in their submissions identified six issues claimed to justify termination. Each they submitted was sufficient to justify termination.

(a) The Builder failed to fully encapsulate the steel posts supporting the structure in concrete. Despite the plans requiring them to be encapsulated to support the integrity of the stiffened raft slab, they were not. (Issue 1)

(b) The retaining walls to the northern and southern boundaries of the site were encroaching over those boundaries. (Issue 2)

(c) The Builder submitted the frame stage progress claim on 6 December 2018 in circumstances where the frame of the house was incomplete and defective. (Issue 3)

(d) The Builder repudiated the Contract when it suspended works and demobilised from the site on or around 14 December 2018. (Issue 4)

(e) The Form 16 for engineering inspection of the concrete footings and slab was not provided by the Builder (Issue 5)

(f) There was a 'constellation' of other defects and poor workmanship which, taken together, demonstrated that the Builder was unwilling to comply with its obligations under the Contract, including the implied warranties contained in clause. (Issue 6)

[135] The Respondents addressed these six issues.

[136] The Builder submitted that regardless of the alleged existence of the six issues, the Applicants did not adhere to Clause 20 of the Contract in terms of the procedure for notifying breaches followed by termination.

[137] The QBCC submitted that it agreed that the six issues were the relevant issues.

Issue 1 - The Builder failed to fully encapsulate steel posts with concrete

[138] The Applicants' complaints about the way in which the slab was constructed is now a moot point given that the slab has since been demolished and has been replaced with a completely different design including slab footings, prepared by Mr. Rebibou of Booth Engineering. We have already referred to the alleged deficiencies in ADG's design of the slab.

[139] This issue was discovered in October 2021[52] in the course of works in regard to the plumbing installation.

[140] It has been described as a failure to encapsulate steel columns with concrete and also described as a gap between the underside of the concrete slab and the upper surface of the concrete pier. Correspondence and termination of the Contract had occurred in November and December 2018[53] and this issue was not raised at that time. It was a defect or omission discovered later. The builder had no opportunity to inspect, verify, or rectify.

[141] The firm evidence on the extent of the issue comes from Mr. Marcom who carried out the works to remove a portion of the slab and gave evidence that at least 13 columns/piers were affected.[54]

[142] There was discussion[55] by the engineer witnesses concerning how many columns were constructed in this way. Mr. Thomas advised[56] that the steel columns located on the edge of the slab could not be surrounded by concrete and would have an exposed steel surface and should not be counted. Mr. Rebibou noted that there was no design detail on the ADG plans for a post at the edge of the slab.[57] Mr. van der Hoef stated[58] that he knew of two column locations where there was a gap between the pier and the slab.

[143] Mr. Klinge's evidence was, at the time of demobilising from the site in December 2018, that he did not know that the piers were not fully encapsulated in concrete. He did not know why this had occurred.12

(a) there was no awareness of lack of encapsulation and gap because by that time, the footings were covered by the slab and not visible, although the Builder admitted that columns located at the slab edge would probably reveal their lack of encapsulation later when further work was carried out and the edge of the slab became observable. Mr Klinge went on to say[59] that at this time, he probably would have investigated the interior columns too;[60]

(b) if the lack of encapsulation had been identified whilst carrying out works, remediation work would involve cutting up parts of the slab to provide access to place concrete.14 Mr Klinge stated that this work was not significant. He also stated that he would have involved the structural engineer in the process.6[61]

(c) if the parts of the slab that had to be cut had parts of the frame sitting on top of them, it may have been necessary to remove those parts of the frame. Mr Klinge said that this work was not significant;15 and

(d) prior to Klinge placing this concrete slab, ADG inspected and provided the Site Inspection Report for the slab and footings dated 16 July 2018.[62] This ADG inspection report pre-dated the pouring of the slab and hence did not provide any indication that ADG considered, at that time, that the piers were not fully encapsulated in concrete.[63]

[145] The plans were prepared for the site by the Applicants' engineers ADG with reference to a geotechnical report prepared by Douglas Partners.

[146] The Builder submits that the ADG report had carried out an inspection and had approved the works before the concrete pour.

[147] Considerable time was devoted to this issue by the evidence in the hearing of the three expert structural engineers. The evidence extended the issue of the lack of encapsulation/the gap somewhat - namely to the nature of the ground below the slab and to the lack of concrete cover to reinforcement of the edge beam of the slab.

[148] It was agreed that ADG was arranged by the owner to provide the structural design plans. In particular, the piers, footings and slab were depicted on ADG plans SK-2, SK-2.1 and SK-2.2.

[149] Plan SK-2.1 included Section DD which depicted a concrete pier of 450mm diameter whose depth varied depending on the requirement for the pier to extend a minimum depth into clay - a requirement contained in a note on Section DD. The steel columns were embedded into the concrete of the pier.

[150] The early works contractor who raised the house had constructed these concrete piers and steel columns[64] where the new pier and columns supported the house at its raised level. After some time elapsed, the Builder had prepared the ground slab for the concrete placement. Prior to placing this concrete, ADG inspected and provided the Site Inspection Report. The structural experts Mr. Thomas and Mr. van de Hoef agreed[65] that if the Builder complied with the six items that were listed on the ADG Site Inspection Report, then a "follow through with a Form 16" would be expected.[66] Both experts agreed that the Form 16 would be provided "post pour", namely after the concrete slab and footings had been constructed. The process where the Form 16 was to be provided later was discussed again by the expert engineers[67] where the three engineers agreed that a Form 16 can result in later problems if the administration by the engineer of works required for the Form 16 is not carried out thoroughly.

[151] The fourth item on the ADG Site Inspection Report was "Cleanout of all rubbish, dirt and debris from footings/slab prior to pouring". Due to the time elapsed and various construction activities, debris had accumulated on the upper surface of the concrete pier around the steel column where it extended into the concrete pier.[68]

[152] Some footings were not cleaned out prior to placing the slab concrete and the result was a gap between the top of the concrete pier and the underside of the slab beam.[69] This situation was shown in the Rebibou Supplementary Report.[70] The effect was that rather than the steel column being completely encased in concrete when below ground as in the ADG plan SK-2.1 Section DD, there was now a length of steel column that was not encased. Hence there was a gap in the concrete between the underside of the slab and the top of the pier.

[153] The engineers agreed that a Form 16 would need to be produced for the slab and footings.[71] Otherwise, there could not be an overall completion certificate from the building certifier for the dwelling.

[154] Mr. Van der Hoef[72] and Mr. Rebibou[73] stated that an engineer would not issue the Form 16 if the engineer was aware that the gap existed, namely that the concrete did not extend from the underside of the slab down to the top of the pier. However, both engineers strongly stated that the engineer who issued the Form 16 may not be aware that this gap existed unless it was brought to the engineer's attention. The two engineer witnesses initially, and joined by Mr. Thomas later, explained[74] how engineers inspect the work prior to concrete placement and then do not stay to witness the concrete being placed.

[155] It seemed to be agreed by the three expert engineers that there was a probability that ADG may have proceeded with issuing a Form 16 on an inference that the items on the inspection report notified to the builder had been rectified.[75] It was then discussed that it was a mystery why the Form 16 had not actually been issued and whether it was the builder's or owner's responsibility to follow up ADG. The evidence indicated that the owner had engaged the engineer and was paying the engineer, and it would be expected under these circumstances that the engineer would follow up with the owner.[76]

[156] If the engineer such as ADG required evidence after the slab had been constructed, that the rubble had been cleaned out and there was no gap of concrete between the slab and the top of the pier, then the builder could provide this information.[77] Techniques were discussed such as X-Ray of the concrete and drilling of small test holes into the area of concrete of concern.[78] Where a gap was discovered, it was discussed by the experts that rectification solutions existed for the builder and these solutions were readily achievable.[79] Evidence from the builder concerning these solutions stated that if rectification work was required, that an engineer would be consulted for the appropriate solution and the work carried out accordingly.[80]

[157] Mr. Van der Hoef and Mr. Rebibou agreed that it was probable that an investigation would be required in order to provide the Form 16.[81] The engineer witnesses all agreed that there could be rectification works retrospectively to fill in the gap in the concrete. Mr. Rebibou was the structural engineer for design of the later works after the Builder departed and Mr. Rebibou's firm designed a completely new slab and the slab constructed by the Builder was removed. Mr. Rebibou did not state whether this was a necessary solution and Mr. Thomas stated[82] that a case by case consideration would take place and Mr. van der Hoef stated[83] that rectification would be based on detailed consideration in respect of requirements of the building code. Mr. Klinge stated that this investigation would cause appropriate rectification work to be undertaken by the builder.[84]

[158] Mr. van der Hoef elaborated[85] on a rectification technique for the gap. He was asked[86] about details of the rectification method and stated likely dimensions of concrete removal and so on. Mr. Rebibou agreed and added further detail.[87] Mr. van der Hoef and Mr. Rebibou were asked further details of the rectification method by Mr. Hastie[88] and provided details including a rectification method if the soil under the slab was found to be unsatisfactory.[89] Mr. Thomas agreed in general.[90]

[159] The engineers agreed that the upper floor of the house was supported by the steel posts and if some wall frame of the ground floor needed to be removed in order to allow rectification of the slab then this was possible.[91]

[160] There was considerable discussion by the engineer witnesses concerning the effect of this gap, both in terms of corrosion exposure and the effect on the structure.

Lack of Encapsulation and Exposure to Corrosion

[161] Exposure of the steel and the potential for future corrosion was discussed with Mr. Thomas downplaying the potential of corrosion[92] but Mr. van der Hoef stating that it is an issue when considered against the standards required by the QBCC. [93] Mr. van der Hoef stated[94] that it would be expected that the contractor who raised the house and installed the steel posts would have also provided the corrosion coating to the steel columns using a product such as Ormonoid.[95] Mr. Rebibou agreed[96] and stated that there were other coatings available. It appeared that the issue of the coating may not have been important for an engineer considering issue of a Form 16[97] although Mr. van der Hoef disagreed somewhat with Mr. Rebibou. The engineers did not agree whether there was a lack of corrosion protection to the exposed steel column and whether it would be a structural defect[98] but agreed that this issue was overshadowed by the existence of the gap,[99] that a Form 16 would be required and its provision would probably require proof of correct construction.[100] If concrete was present and there was no gap, the inspecting engineer who was to issue a Form 16 would not consider whether the coating of the steel was missing because the encapsulating concrete would provide the corrosion protection.

[162] There was agreement by the engineer witnesses[101] that a Form 16 would quote the Australian Standard AS 2870 and it requires durability of the structure, namely encapsulation of the steel column along with sufficient concrete cover to the reinforcement within the slab.

[163] The expert engineers gave extensive evidence about their opinion on the design philosophy for the slab by ADG. The relevance of this design philosophy concerned whether the gap was a significant structural defect.

[164] In terms of the effect of the gap on the structure, the engineer witnesses did not give a clear conclusion although they gave evidence[102] that there could be some vertical movement of the slab that would be independent of the columns and the upper floor, and they agreed it needed to be rectified. The engineer witnesses agreed that the design by ADG had weaknesses, mainly in addressing the type and strength of the underlying ground.[103]

[165] Eventually the engineers agreed that the slab was hybrid in its design (meaning that the slab was designed as a raft but also as a slab that was supported by piers). A raft slab can move up and down with ground movement. However, the design on SK-2.1 depicted the slab being directly supported by the piers. The engineers agreed that the consequence of the gap between the slab and the pier was that the slab might have vertical movement independent of the pier and columns (which were supporting the upper floor). There was then considerable discussion by the expert engineers about the ground conditions below the slab and in what manner ADG had carried out the structural design to suit these conditions. Evidence from the builder was inconclusive about how well ground preparation was carried out.[104] Whatever ground preparation had occurred existed at the time that ADG made the site inspection on 16 July 2018, and ADG had not included ground preparation in the Site Inspection Report inferring that there was no concern by ADG. Mr. Thomas was strongly of the view that ADG would have considered the condition of the ground.[105]

[166] Member Corrigan asked the engineer witnesses specifically[106] given their views about the structural design, whether the gap was a defect that needed rectification. The evidence was roundabout, but the engineers agreed that although the slab was a raft slab but also that it was tied to the footings and, given the unknown condition of the underlying soil, that this tie of the slab to the footings was necessary.[107] The engineers agreed that the rectification method for the concrete gap could also include the ground condition that was encountered[108] if it transpired that the ground under the slab was unsatisfactory.

[167] We summarise the situation as follows. If proof was required for the Form 16 by ADG or another engineer, that the footings had been cleaned out (and hence no gap existed in the concrete), then the Builder would have had to carry out necessary investigations and consequential rectification. On the other hand, if ADG had issued the Form 16 on the inference that the Builder had satisfactorily completed the items on the Site Inspection Report, then the gap in the concrete would have remained. If subsequently there was structural movement due to this gap, an investigation at that time would identify the gap. The required procedure then would be a complaint by the owner to the QBCC which would have caused a Direction to Rectify Notice by the QBCC to the builder. The statutory warranty period for such a notice of a structural defect is six and a half years after completion of construction. Hence, whether or not the gap was discovered prior to the Form 16, there was a defined process to rectify the gap as a building defect.

[168] The defect of insufficient concrete cover to reinforcement of edge beams was discussed by the expert engineers. There are several incidences of cover that is below the required standard, and the engineers did not come to a clear agreement on the extent[109] although Mr van der Hoef demonstrated a well thought probable situation.[110] He then went on to describe the solution and conclude that rectification work would be a "localised affair".[111]

[169] We are satisfied that the Builder had failed to ensure that all the steel posts (piers) that were located beneath the slab were encapsulated in concrete, in accordance with engineering plans. It was disputed whether all 13 were so affected. On balance the evidence of Marcon is clear and we believe all 13 were affected.

[170] The Applicants submit that this is a failing and the issue alone provided a valid basis for the termination of the Contract.

[171] We are of the opinion that the decision by Booth Engineers and the Applicants to change ADG's hybrid raft slab design with their own design of the slab was not because of this defect issue but for other reasons.

[172] There is no explanation for the absence of the Form 16. It appears clear that ADG was responsible for issuing the Form 16 but had failed to do so. Similarly, it did not provide a Form 16 in respect of the Frame Stage.

[173] As the Applicants submit that, until a Form 16 was provided, the practical consequence was that the home could never be deemed habitable. It follows that the certifier would not be able to give his final certificate until satisfied that the requirements for the Base Stage had been satisfactorily completed. The experts agreed that some form of investigation would have had to have been conducted if ADG or another engineer required it to provide a Form 16.

[174] In those circumstances, we are of the opinion that the Applicants' claim that this was a substantial breach that justified termination of the Contract fails because:

(a) At best the failure to encapsulate the piers amounted to a breach of a warranty and not a condition of the Contract;

(b) It did not amount to a substantial breach of the Contract to entitle termination of the Contract;

(c) It was a defect that the Builder was capable of rectifying;

(d) That opportunity to rectify was lost as the slab was demolished;

(e) The Applicants may have been entitled to damages if the breach had caused damage but is not the case as the slab was the demolished because of issues of design and other reasons.

Issue 2 - Encroachment by retaining walls to the northern and southern boundaries of the site

[175] The owner had sent the builder 13 breach notices dated 23 November 2018, four breach notices on 29 November 2018 and seven breach notices on 30 November 2018 (a total of 24 breach items). This issue was subject to breach notices issued by the Applicants.

[176] The issue was that the boundary wall encroached onto the northern neighbour by up to 25cm.[112]

[177] This notice[113] was the same as that for the northern boundary except in relation to the southern boundary. There, the encroachments were up to 23cm over.[114]

[178] Mr. Pennisi's evidence was that the retaining wall on the southern boundary was still, in late 2024, encroaching onto the southern neighbour.[115] He said there are a number of options available in terms of rectification work, including to enter the neighbouring property to cut back the encroachments, to reach a settlement with the neighbour or to obtain a registered easement.[116]

[179] The Builder says the footing concrete overspill was a result of the Builder being threatened with a Supreme Court injunction by the Applicants' lawyers. Had that not occurred, and had the Applicants not purported to terminate the Contract on 13 December 2018, that overspill would not exist (in the same way it was cleaned up on the northern boundary by the Builder).

[180] The Builder submits that the 13mm encroachment is a matter upon which the Tribunal should rely on the independent expert opinions of Mr Cutler: "trifling".

[181] The retaining wall remains in situ despite other works having been demolished.

[182] The issue was the failure to set back the retaining wall to accommodate subsoil drainage without encroaching onto the neighbouring properties (as contemplated by plan SK-10).

[183] It appears to have been agreed[117] that, after some rectification work by the builder, the extent of encroachment of retaining walls was:

(a) footing concrete overspill on the southern boundary;

(b) 13mm encroachment of the masonry retaining wall on the northern boundary.

[184] The concrete footing at the north boundary had encroached by up to 250mm[118] but the Builder had cut it back and the result for the north boundary was that the face of the wall was over the boundary by up to 13mm in two places.[119] The retaining wall at the south boundary is correctly inside the boundary but its concrete footing is over the boundary by 85mm-230mm.[120]

[185] The design structural engineer for the Applicants, ADG, had provided a design plan of the retaining walls and had made an inspection of the site at the time of construction of concrete footings of the house slab and the retaining walls and had not noted any issues.

[186] Julian Parsons of Site Surveys Pty Ltd issued a Form 16 Inspection Certificate noted "As-Constructed Retaining Wall" dated 30 October 2018. When queried about the existence of the encroachments by surveyor Ninnes, Parsons had responded to Ninnes that Parsons would not change his Form 16 Certificate.[121]

[187] In terms of the encroachment of the retaining wall itself, namely the portion that is above ground and visible (as distinct from the concrete footing which is below ground), the survey experts in the witness box discussed at length the accuracy of any survey due to factors such as instrument error and what tolerance acceptability can be adopted. Mr. Cutler accepted up to 20mm, Mr. Ninnes up to 10mm.

[188] The agreed encroachment of 13mm of the above-ground wall component is acceptable in the context of this evidence.[122]

[189] In the evidence, there was some doubt by the survey experts about acceptability of encroachment of the below-ground concrete footing. Mr. Ninnes and Mr. Cutler indicated[123] that excavation as part of survey was not usual. Also, the neighbour had not required the encroachment to be removed. [124]

[190] The Builder was engaged in trimming the concrete footing of the northern boundary when the Contract was terminated by the owner. The conclusion is that the operation to trim the footing was practical and achievable and could have continued to the southern boundary.

[191] The encroachment of 13mm of the above-ground wall is insignificant. The encroachment of the below-ground footing does not have its status as a defect established but if required, the encroachment could readily have been removed.

[192] The encroachments do not amount to a substantial breach.

Issue 3 - base and frame stages were incomplete and defective when the progress claim was issued by the Builder

[193] On the proper construction of the Contract, the Builder was, having regard to clauses 1 and 11.6, only permitted to make a claim for payment when:

(a) base stage, when the floor was finished; and

(b) frame stage, when building's frame was finished, apart from minor defects or minor omissions.

[194] Some of the 24 breach notices related to frame works. The Applicants maintain that the frame stage invoice was submitted invalidly because the frame was incomplete and defective, the claim for payment was not bona fide, and its issue and demand for payment was a repudiation of the Contract by the Builder and on this basis the Applicants were entitled to terminate. The Applicants submit that none of the stages had, in fact, been finished, and so the Builder was, as at the date of termination, in repudiation of its fundamental obligations under the Contract to only claim payment at the completion of the stages, and not before.

[195] It is agreed that on 6 December 2018, the Builder sent the Applicants an invoice for the Frame Stage. A structural engineer, Mr. Stebbing of NGS Structural Engineers, had issued a Form 16 for the frame stage dated 4 December 2018.[125]

[196] The Contract Appendix Part D stated[126] that the third stage progress payment was "Frame Stage/1st Frame Certificate".

[197] The evidence concerning the frame stage was presented as follows:

(a) The frame stage was certified by a competent person.

(b) The competent person, Mr. Stebbing, was a Registered Professional Engineer who was not the same engineer or same engineering firm ADG that had carried out design. Mr. Stebbing was arranged by the Builder. The Form 16 Inspection for the frame was issued and dated 4 December 2018 by Mr. Stebbing two days prior to the issue on 6 December 2018 of the invoice for the frame stage by the Builder. Previously on 22 November 2018, Mr. Stebbing had issued a Form 16 for work described as "200mm Extension Concrete Slab and Masonry Wall to Garage" and hence he had a previous involvement on the project in inspection and certification.

(c) Evidence from an expert building certifier Mr. Leahy was, that provided Mr. Stebbing was a RPEQ, there was no reason why he could not inspect and issue a valid Form 16. The Building Regulation 2021 (Qld) Part 6 does not require a competent person to be the same person who carried out design or previous inspections.

(d) Mr. Leahy stated in evidence and in his report that an Inspection Certificate by a RPEQ (Mr. Leahy termed it "F16") indicates compliance. A Form 16 is issued in accordance with section 53(1)(b) of the Building Regulation 2021 (Qld), namely the Form 16 is a Certificate of Inspection which means that the inspecting person is satisfied all relevant aspects of the stage have been completed and comply with the building development approval for the work.

(e) The expert witness engineers were similarly asked by Mr. Ensby, appearing for the Commission, about the consequence of issue of a Form 16. Mr. van der Hoef stated that the purpose of the Form 16 was for the certifier of the whole project in terms of the building approval and Mr. Rebibou stated that the form is for the purpose of informing the certifier and any qualifications on the Form 16 need to be relevant to the requirements of the certifier. Mr. Rebibou stated that if the certifier accepts the Form 16, then it follows that the certificate is "valid".

(f) No evidence was provided of the Form 16 not being able to be accepted by a certifier. The provision of a Form 16 for the frame is compelling evidence that the frame was complete except for minor omissions and minor defects.

[198] Evidence was given concerning some items allegedly incomplete and defective and these items are discussed in the following section.

[199] In regard to defects and incomplete work in the frame, the Builder's Closing Submission Annexure A referred to the items and numbering making use of the item naming and numbering that were contained in the joint expert report ("JER") of the building defect experts (Messrs Smith, O'Shannessy and Carpenter). The list commences on the third page of the JER Schedule.

[200] Cross referencing is noted below to Appendix 1 that was attached to the Notice of Termination of Contract from the owner to the Builder. The items and our findings are referred to below.

(a) Item 1 in the JER - Roof at the Entry Portico (also described in submissions as "Garage Roof"; item not listed in Appendix 1 that was attached to the Notice of Termination of Contract) - the Applicants allege that it was not constructed as per the issued plan but the Builder submitted that it was amended due to the design having the effect that the location of the roof downpipe would be located such as to not impede the view from a window and the change was discussed and agreed verbally with the Applicants. The evidence indicates that there was no defective workmanship, only that the construction did not comply with the plan. Mr. Smith and Mr. O'Shannessy stated that it was not a defect but a "contractual matter" which we understood to mean that a variation to the issued design was in play. Mr. Carpenter said in any event it was minor. There is no suggestion that the altered roof would not be fully constructed and would not carry out its role when completed. This item is not a defect or omission to the frame that prevents the frame invoice.

(b) Items 2 and 3 in the JER - Wall frame at the window at the front of the house and at the rear of the garage (Item 4 of Appendix 1 that was attached to the Notice of Termination of Contract) - evidence was given that this framing was omitted so that access was possible for building materials. Mr. Carpenter stated this for the window and garage wall, and Mr. Smith and Mr. O'Shannessy also stated this for the garage wall and that the non-completion of the window framing was minor work only. There was no other ready access to the rear of the house for larger materials and equipment, particularly for pool construction, other than through the garage with the rear wall removed. Engineers Mr. Thomas and Mr. Rebibou agreed that the structural design intent was satisfactory with the frame removed but agreed that it would have been prudent for the inspecting engineer to have noted this on the Form 16 certificate. The latter does not mean a significant defect or omission. These items are not defects or omissions to the frame that prevent the frame invoice.

(c) Item 4 in the JER - strapping to east wall bedroom 1 (item not listed in Appendix 1 that was attached to the Notice of Termination of Contract). The building defect experts agreed that the strapping was incomplete. However, O'Shannessy states that it is unclear from the drawings whether the strapping was required and they, he and Mr. Smith, referred the item to an engineer. The engineers gave evidence on the issue. Mr. van der Hoef stated that the strapping appeared to be provided as a routine procedure by the subcontractor who lifted the old house and that these straps had not been completed. Mr. Thomas stated that the area that would be restrained by the straps was very small and the existing tie downs of the old house structure would probably be sufficient. Mr. van der Hoef stated that on the basis of probability the historical tie-down would not be sufficient and new straps would be required. This issue between the two engineers was not concluded. Mr. Thomas was directly asked by Member Corrigan whether the straps were required for the frame to be complete, and Mr. Thomas was firm in his reply that they were not required and Mr Rebibou agreed. Further discussion with Mr. van der Hoef did not fully reconcile this issue. The advice of Mr. Thomas is pertinent - he stated that the load is "extremely small". Hence, due to the small nature of this omission, whether or not it was required for the frame, this item is not a defect or omission to the frame that prevents the frame invoice.

(d) Item 5 in the JER - Rafters End Cut (Item 9 of Appendix 1 that was attached to the Notice of Termination of Contract) - there is a discrepancy on the plans where one plan depicts a plumb end cut to the rafter whereas another plan contains a note stating that the new rafters are to be end cut to match existing rafters which are end cut on an angle. In evidence, Mr. Pennisi appeared to agree that the Builder had cut the rafter to match the existing. There is no suggestion that the rafters would not be fully constructed and would not carry out their role when completed regardless of the shape that was cut to the end. This item is not relevant to the strength and performance of the structural frame. Rather, this issue is a "contractual matter" which we understood to mean that it is a visual consideration only. If rework was required, Mr. Carpenter stated it could have been carried out during normal construction. This item is not a defect or omission to the frame that prevents the frame invoice.

(e) Items 6 and 7 in the JER - Ceiling Battens to Upper Floor and Ground Floor (items not listed in Appendix 1 that was attached to the Notice of Termination of Contract) - it is agreed that the ceiling battens were not installed. The Applicants submitted that ceiling battens are part of the frame stage. Mr. Smith noted that ceiling battens were to consist of suspended metal battens which were not part of framing. Mr. O'Shannessy is not equivocal and refers the item to an engineer. Mr. Carpenter considered the ceiling framing to be framing and takes issue with the comment by the other experts to refer the item to the engineer. Mr Klinge's evidence explained that he could select a ceiling system if he wished that had its own proprietary batten system (the system quoted was Rondo) and in this case the subcontractor for ceiling sheeting would also install the ceiling battens and this would happen after the frame stage was completed. When the engineers gave evidence, Mr. Rebibou stated that ceiling battens were not framing because they were not part of the structural plans and hence were not part of the inspection for the framing stage. Mr. van der Hoef agreed. These items are not defects or omissions to the frame that prevent the frame invoice.

(f) Item 8 in the JER - Garage cabinets, also called garage store (item not listed in Appendix 1 that was attached to the Notice of Termination of Contract) - the Applicants submitted that these were part of the frame stage. Mr. Klinge gave evidence that the framing in question was for the cabinets in the garage and he would arrange a subcontractor to install these as a complete item. Mr. Smith stated the same as Mr. Klinge, namely that the framing required was only for the cabinetry and could be installed later. For the same reason as stated by Mr. Rebibou in the previous paragraph, the garage cabinets were not part of the structural plans and hence were not part of the inspection for the framing stage. This item is not a defect or omission to the frame that prevents the frame invoice from being issued.

(g) Item 9 in the JER - Not excavating the pool (item 8 in Appendix 1 that was attached to the Notice of Termination of Contract) - the building certifier experts agreed that pool works are not part of the frame stage. Smith and O'Shannessy agree that the timing of pool construction is not stated in the Contract and the builder could choose the time of construction. Carpenter states that a builder exercising good care and skill would install the pool structure prior to constructing the garage but Carpenter does not state that the pool is part of the frame. This item is not a defect or omission to the frame that prevents the frame invoice.

(h) Item 10 in the JER - Upstairs bathroom wall framing (item 6 in Appendix 1 that was attached to the Notice of Termination of Contract). Klinge gave evidence that the plans of the upstairs existing walls, as provided by the owner, were not correct and changes to the plans were required. An exchange of emails between Mr. Fairman on behalf of the Builder and Mrs. Pennisi agreed changes to the bathroom walls, and the extra work became Variation 16. Smith and O'Shannessy agree that the work could have been done in the normal course of construction and its completeness was tied to the contractual status of the variation. Hence, this item is not a defect or omission to the frame that prevents the frame invoice.

(i) Item 11 in the JER - Bedroom 4 ply bracing missing. Ply bracing installation is required for the frame to be complete. Mr. Thomas had carried out an inspection of the dwelling. Three sections of bracing were required, and it was agreed that one section (called "X1") was missing. Mr. Thomas stated that he had photos and acknowledged that the X1 bracing was missing but stated that it is common to substitute bracing locations and on his inspection, he did not note any "deficiency in bracing". The engineers agreed that issue of the Form 16 for the frame would require that all bracing had been installed. Mr. van der Hoef appeared to agree with Mr. Thomas that whilst bracing is critical there are alternatives. It appears that it is common for relocations and substitutions of ply bracing locations. Also, a Form 16 was issued (by Stebbing) and on the balance of the evidence, the bracing in Bedroom 4 was satisfactory and not a significant omission or defect.

(j) Item 12 in the JER - nailing of ply in Bedroom 2 - it was agreed that the ply bracing panel was not fixed but Mr. Thomas explained that its location coincided with an electrical switchboard which was the reason for not fixing it. However, substitute bracing was provided at other locations in Bedroom 2 which satisfied the bracing requirement. Mr. van der Hoef agreed with the proviso that the design plan of bracing would be referred to by the engineer. Mr. Thomas explained that he did not have the bracing plan when he inspected but based the extent on his experience at what was reasonable. This item is not a defect or omission.

(k) Item 13 in the JER - additional bolts to timber bearers. In evidence, Mr. Carpenter said this was a minor omission and would take "one hour" to correct. This item is not a significant omission or defect.

(l) Item 14 in the JER - connection detail to alfresco extension framing. The building defect experts said this item was withdrawn.

(m) Item 15 in the JER - wall frame to north wall of playroom and south wall of guest bedroom - overhanging bottom plate. Mr. Carpenter said that the QBCC tolerance limit was 15mm and if the overhang was greater, solutions were readily available such as bolting an angle to the slab edge before external wall cladding. This item is not a significant omission or defect.

(n) Item 16 in the JER - drainage pipe for pantry sink in incorrect position - the building defect experts agreed that the position was incorrect but noted that ready solutions existed such as offset plumbing where the pipe was hidden in the bottom shelf of the cabinetry. This item is not a significant omission or defect.

(o) Items 17 and 19 in the JER - garage slab - the slab was extended and there was a joint in the slab as a result known as a "cold joint". The building defect experts agreed that such a joint is a potential termite risk, but solutions are available. This item is not a significant omission or defect.

(p) Items 18 and 24 in the JER - junction of north blockwork wall with eastern timber framed wall - a joint has not been installed. The building defect experts agreed that the work was incomplete and minor and stated that completion would take two carpenters one hour. This item is not a significant omission or defect.

(q) Item 30 in the JER - staircase (item 19 in Appendix 1 that was attached to the Notice of Termination of Contract). Klinge gave evidence that the plan for dimensions of the staircase did not match the existing wall on the upper floor, which was a requirement. Hence changes were required to the layout. This item is not a significant omission or defect.

[201] In regard to defects and incomplete work in the frame, all items were minor and did not prevent issue of the Form 16 or the progress claim for the frame stage.

Issue 4 - Whether the Builder repudiated the Contract on about 14 December 2018 by allegedly suspending works

[202] It follows from above that the Builder was able to issue the invoice for the frame stage, mainly because a Form 16 for the frame had been issued. It is not the case that there were substantial incomplete works and defects in the frame that should have prevented the issue of the Form 16 or would have caused the frame invoice to be improper.

[203] The failure by an owner to make a payment on time was a substantial breach of the Contract and gave rise to a right to suspend the performance of works.[127]

[204] It was established that the invoice became overdue for payment and enlivened the ability under the Contract for the Builder to suspend work until paid.

[205] It follows that there was no repudiation by the Builder for suspending works.

Issue 5 - Whether the slab and footings were completed and whether the absence of the Form 16 was a serious breach

[206] It was not in dispute that the Contract provided that plans, the specification, the foundation data and the Building Approval would be provided by the owner (Items 7 and 14 in the schedule of the building Contract).[128]

[207] The building permit was obtained by the Applicants (from private certifier DTS).[129] There was no requirement in the Contract for the Builder to obtain the completion certificate and, accordingly, it was reasonable for the Builder to assume that the owner would be responsible for liaising with the private certifier for the completion certificate.

[208] The Applicants selected the structural design engineer, namely ADG, and made the arrangements for the supply of the service by ADG. The structural plans were provided by ADG along with the Form 15 - Compliance Certificate for the Building Design (dated 14 November 2016, signed by James O'Brien of ADG).[130]

[209] Evidence was given by the experts concerning the important procedure to obtain a Form 16 inspection certificate from an engineer for the preparation of the ground and the footings and slab.

[210] ADG provided the Site Inspection Report for the slab and footings dated 16 July 2018.[131] The structural experts Mr. Thomas and Mr. van de Hoef agreed[132] that if the builder complies with the six items that were listed on the ADG Site Inspection Report, then a "follow through with a Form 16" would be expected. Both experts agreed that the Form 16 would be provided "post pour", namely after the concrete slab and footings had been constructed.

[211] It was reasonable for the Builder to act upon the issue of the ADG Site Inspection Report because it foreshadowed that the Form 16 would be issued (which would have been issued after the slab was poured anyway) and the Builder would not have known that a Form 16 may not be issued subsequently by ADG. The administrative arrangement for ADG was with the owner, the Builder would not have been aware of this arrangement. The expert engineers discussed this situation as being typical and Mr. Rebibou added that the relationship with the engineer would be determined by "who's paying the bill".[133] Where the Builder did liaise with ADG, it was for arrangements of a practical nature of attending site.[134]

[212] Mr. Pennisi was asked about the provision of the Form 16 and had no explanation or recollection specifically about its issue or why it was apparently missing.[135] Given that he would be liaising with the private certifier at completion of construction for a completion certificate, this is surprising because the Form 16 for the slab and footings would be a necessary document needed for the completion certificate.

[213] Mr. Leahy stated[136] that the usual procedure for a certifier was to wait until the end of the project and expect then to be given all the necessary certificates that had been carried out at various stages of progress of the project.

[214] It was reasonable for the Builder to proceed with construction of the slab and footings after receiving the ADG Site Inspection Report and the absence of the Form 16 was not a serious breach and was not a breach at all by the Builder.

Issue 6 - Whether the alleged constellation of defects was sufficient to demonstrate unwillingness by the Builder to comply with obligations under the Contract

[215] The Applicants refer to the alleged large degree of defects as a "constellation", namely such a body of defects as to demonstrate repudiation by the builder.

[216] Alleged defects and incomplete work in the frame and in structural works have been discussed above. This sixth issue concerns other defects. In Appendix 1 of the Notice of Termination of the Contract dated 13 December 2018, these other defects were as follows:

(a) Pool works - the allegation is that the Builder did not progress the pool works in accordance with the program. The mechanism in the Contract for alleged lack of progress is in Clauses 18 (liquidated Damages) and 24 (Delay Costs) rather than initiate a contract termination.

(b) Asbestos Removal - the description in Appendix 1 is that administrative process for recording asbestos has not been followed by the Builder. There are mechanisms in the Contract to address this issue rather than initiate a contract termination.

(c) Daniel Klinge's involvement - There are mechanisms in the Contract to address this issue rather than initiate a contract termination.

(d) Commencement Notice - There are mechanisms in the Contract to address this issue rather than initiate a contract termination.

(e) Insurance - There are mechanisms in the Contract to address this issue rather than initiate a contract termination.

(f) 85mm front wall overhang - this is a building defect and there are mechanisms in the Contract to address this issue rather than initiate a contract termination.

(g) Access for house inspector - withdrawn.

(h) Tree drip line - there are mechanisms in the Contract to address this issue rather than initiate a contract termination.

(i) Provisional Sum Warranty - there are mechanisms in the Contract to address this issue rather than initiate a contract termination.

[217] The defects other than structural defects, in the Sixth Issue, are minor and in all cases there are mechanisms in the Contract to address this issue rather than initiate a contract termination.

[218] The Contract's defects regime (clauses 17 and 19) demonstrates the parties clearly contemplated:

(a) Works would be completed at practical completion;

(b) Defects would be identified at the inspection at this time;

(c) The Builder would have opportunity to rectify further defects during the defects liability period;

(d) The owner could not terminate for defects during construction if they fell within "minor defects or minor omissions" or were routine in nature.

[219] We find that the Applicants' approach of purporting to terminate the Contract during construction based on defects and omissions that should have been addressed through procedures described in the Contract, was contrary to this contractual scheme.

[220] Building contracts must be construed recognizing industry realities. As acknowledged in Stojanovski and Serong, defects during construction are common and inevitable. The defects and incomplete work did not give rise to a situation as in Mousa. The Contract provided a mechanism for dealing with them. That mechanism was not immediate termination but continued performance with rectification at appropriate stages.

[221] The Builder performed substantial work on this project and is entitled to payment. The Applicants' wrongful termination has resulted in:

(a) Non-payment for completed Frame Stage work;

(b) The Builder being excluded from completing the project;

(c) Damage to the Builder's reputation.

[222] This is the "tragedy" Mr. Smith referenced - a project that could have been successfully completed but was turned into costly litigation due to the Applicants' adversarial approach.

[223] We find that the Contract was not validly terminated for multiple independent reasons already given.

(a) The application is dismissed.

(b) The decisions of the First Respondent on 7 August 2019 and 2 October 2019 are affirmed.

(c) The Respondents each are to file and serve submissions in relation to costs, if any, by close of business 27 March 2026.

(d) The Applicants to file and serve their response in relation to costs, if any, by close of business 10 April 2025.

[11] Applicants Closing Submissions, [27].

[18] TS 1-132, per Mr. Rebibou; Trial Bundle pages 1676, 2018, 2359, 2405,

[19] TS 1-134, 1-135, per Mr. Van de Hoef; Exhibit 4.

[25] [1959] HCA 8.

[34] Report by Thomas Section 5, 8521 of Bundle.

[36] [1985] HCA 14; (1985) 157 CLR 17.

[37] [2002] QCA 119.

[38] [2005] FCAFC 49.

[39] [2019] QSC 49 ("Mousa").

[40] [2019] QCAT 189.

[41] [2007] HCA 61; (2007) 233 CLR 115.

[42] [1961] EWCA Civ 7; [1962] 2 QB 26.

[43] (1938) 38 SR (NSW) 632, 641-2.

[44] [1989] HCA 23; (1988) 166 CLR 623.

[45] [2015] VSC 404.

[46] [2023] QCATA 66.

[48] [2009] VCAT 760, [78]-[79] ("Serong").

[49] [2015] VSC 404 ("Stojanovski").

[53] Applicants' Closing Submission paragraph 68; Second Respondent's Closing Submission paragraph 89.

[54] Ex 14 Marcom Statement paragraph 11(b).

[56] Supplementary Report by Thomas dated 16 March 2022, Section 6.

[65] TS 1-171; Second Respondent's Closing Submission paragraphs 180-186.

[70] Supplementary Report by Rebibou dated 8 August 2024, lower sketch page 3.

[74] TS 1-162, 1 and 1-169, 24 - 1-170,15

[91] TS 1-197, 40 - 1-199, 34 and 1-201,1-31.

[117] Second Respondent's Closing Submission paragraph 108.

[118] Applicants' Closing Submission paragraph 123.

[119] Applicants' Closing Submission paragraph 128, letter by Walter Ninnes, Statewide Survey Group 16 Sept 2020 - TB p 7360.

[120] Ninnes' survey of September 2020, Applicants' Closing Submission paragraph 146.

[121] Letter by Walter Ninnes, Statewide Survey Group 16 Sept 2020, part a) 7th paragraph - TB pg 7360.

[123] TS 7-31; Second Respondent's Closing Submission paragraphs 127 and 128.

[124] Second Respondent's Closing Submission paragraph 131.

[132] TS 1-171; Second Respondent's Closing Submission paragraphs 180-186.

[135] TS 2-114 - 115; Second Respondent's Closing Submission paragraph 188.