1. The claim against the third respondent was struck out by order dated 2 October 2025.
2. The remaining respondents are the first and second respondents who in these orders, for convenience, are referred to as 'the respondents'.

1. Under s 124 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) ('the VCAT Act'), the Tribunal declares that the suspension of works under the contract by the applicant on 23 March 2022 was invalid.
2. Under s 124 of the VCAT Act, the Tribunal declares that:

(a) the applicant is not entitled to any extension of time in relation to the suspension of the works of 67 days, or at all;

(b) the applicant is entitled to an extension of time by consent of 14 days in respect of the COVID lockdown for the period 20 September 2021-4 October 2021;

(c) the applicant is entitled to an extension of time by consent of 5 days in respect of a delay arising from the upgrade of the doors requested by the respondents;

(d) the applicant is not entitled to an extension of time in relation to delays in delivery of timber for the project of five-weeks, or at all;

(e) the applicant is entitled to an extension of time of 14 days in relation to the requirement to drill through rock and associated engineering issues;

(f) as the initial contract completion date of the contract was 10 April 2022, the date for completion is extended to 13 May 2022.

1. Under s 124 of the VCAT Act, the Tribunal declares that:

(a) the respondents terminated the contract on 4 June 2022; and

(b) the termination was lawful.

1. Under s 124 of the VCAT Act, the Tribunal declares that by reason of the respondent's lawful termination of the contract, in assessing the cost of rectifying defects in the work performed by the applicant under the contract or in completing the works under the contract, the costs are to be assessed on the basis of what the rectification work or the completion work (as the case requires) would have been to the respondents at the time of termination of the contract in June 2022.

1. This case revolves around three individuals, Jack Hermez, a registered domestic builder, and two of his clients, Ediz Saydam and Daniella Tania Pino ('the owners'). The applicant in the case is Previan Property Group Pty Ltd (ACN 634 838 609) ('the builder') which is the corporate vehicle which Mr Hermez uses to operate his business.
2. The proceeding involves a dispute arising between the builder and the owners under a major domestic building contract dated 10 March 2021 ('the contract') to build a new double storey dwelling ('the house') on a block of land previously purchased by the owners in Greenvale, Victoria. The contract was terminated in June 2022. The builder seeks damages from the owners for breach of the contract. The owners have counterclaimed seeking damages from the builder in respect of the cost of rectification of defective workmanship and completion of the contract works and other consequential losses.
3. The matter came on for the final hearing before me on 29 September 2025 with an allowance of seven days. The builder was represented by Mr Hermez. The owners were represented by Mr J McIntyre of Counsel instructed by Ms F Lastrina, solicitor.
4. When the hearing began, the owners said that they had settled their dispute with the plumber who had been engaged by the builder for the project ATC Co Pty Ltd (ACN 653 839 911) as trustee for ATC Co Trust ('the plumber'). The plumber had been joined as third respondent at the request of the builder in February 2024.
5. The plumber sought leave to withdraw from the hearing. Initially Mr Hermez on behalf of the builder refused to consent on the basis that he understood his company was being held responsible for roof defects which he asserted were the responsibility of the plumber. On the second morning of the hearing, it was made plain by the owners that they were not going to pursue the builder for any further funding defect. On this basis Mr Hermez agreed that the plumber should be excused from the hearing. The claim against the plumber has been struck out.
6. The removal of the plumber from the proceeding simplified the hearing. Because all the plumbing issues had been resolved, the owners indicated that they would not be calling Mr Mark Newell, their plumbing expert. The owners, at the opening, indicated that they intended to call Mr Matt Nemett as a witness in relation to electrical issues. After I raised a number of issues about the form of Mr Nemett's witness statement, counsel for the owners said he would take instructions. On the morning of the second day of hearing Mr McIntyre indicated that the owners would not be pursuing any claim to and that Mr Nemett was not going to be called.
7. The hearing was also simplified when Mr Hermez indicated that the builder did not propose to call the expert who had provided a report on the builder's behalf, Mr William Pym. The owners counsel submitted that Mr Pym's report should be excluded. Bearing in mind a number of contentious aspects about Mr Pym's proposed evidence which were evident on the face of his report, I accepted this submission, and Mr Pym's report was excluded.
8. The upshot was that the only witness to be called on behalf of the builder was Mr Hermez.
9. The owners elected to rely only on the evidence of Mr Saydam. Ms Pino was not called. The owners' expert witnesses were limited to Mr Sig Romano and Mr Tom O'Dowd. Mr Romano had inspected the property of the owners shortly after the builder had presented its fixing stage progress claim in March 2022. Mr O'Dowd, being days later, to provide evidence of the existence of defects and incomplete works, and regarding the cost of rectification.
10. When the case opened, the owners were clearly pursuing damages for the cost of rectifying defective work and completion of the contract works based on the assessments prepared by Mr O'Dowd.
11. On the first day of the hearing, Mr Hermez took the stand and adopted a witness statement he had prepared.
12. On the morning of the second day of the hearing, it was necessary for Mr Hermez to go into the witness box again to adduce a number of documents which curiously had not been discovered. They included the architectural drawings and the structural drawings referred to in the building contract. Extensive cross examination of Mr Hermez followed, taking almost the whole day.
13. On the morning of the third day of the hearing, Mr Saydam gave evidence. After adopting his witness statement of 30 September 2024 and a responsive witness statement of 21 October 2024, he put into evidence a chronology of activities since the respondents had taken back possession of the property from the applicant in June 2022. It became clear from this document that Mr Saydam, in the capacity of owner builder, had been undertaking substantial rectification and completion works on the site. Because of this, the prospect arose that the owners could pursue damages based on actual costs of rectification and completion rather than on the theoretical cost of rectification and completion as assessed by Mr O'Dowd.
14. For this reason, orders for further discovery on the part of the owners became appropriate. Because the owners were to be directed to make further discovery and potentially change the basis upon which they pressed their counterclaim for damages, I ruled that it would be appropriate to adjourn the hearing before quantification of the counterclaim was determined. The adjournment would come after the conclusion of the evidence concerning the builder's claim for extension of time and the issues relating to the termination of the contract.
15. On the afternoon of the third day of the hearing Mr Romano was interposed to adopt the report he had prepared following his inspection after the fixing stage claim had been issued. He was cross examined by Mr Hermez.
16. On the morning of the fourth day of the hearing Mr Saydam produced another new document, which was identified as containing contemporaneous notes he had prepared of a meeting he and Ms Pino had held with Mr Hermez on 21 April 2022. In my view this document clearly should have been discovered in the usual way, well before the hearing. The explanation for the late introduction of the document into evidence given was that an assumption had been made that the document was privileged because it was provided by Mr Saydam to his lawyers for the purposes of the litigation.
17. The document was lengthy, and Mr Hermez declined to cross-examine Mr Saydam about it until he had been given ample time to do so. Ultimately the cross examination yielded no further information.
18. At the conclusion of the fourth day of the hearing, the hearing was brought to an end on the basis that it would resume at a later date. The Tribunal's orders effecting the adjournment recorded that it would, before the new hearing, deliver a determination concerning the following issues:

(a) the legality of the applicant's suspension of the works;

(b) the applicant's other claim for extension of time which were not accepted by the respondents; and

(c) the questions of who terminated the contract, and whether the termination was lawful.

THE LEGALITY OF THE APPLICANT'S SUSPENSION OF THE WORKS

1. To address this issue, it is necessary to summarise the early months of the project.
2. On 13 February 2021, the builder invoiced the owners for an initial deposit of $2,000.00 which was paid.
3. On 10 March 2021 the parties executed the contract, which was in the form of an HIA standard form (August 2017 edition) Victorian New Homes Contract. The plans and specifications are set out at pages 640-652 of the Tribunal Book.
4. The contract price was $430,260.00, and the building period was 270 days.
5. On 11 March 2021 the builder invoiced the owners for the balance of the deposit of $19,513.50 and this was paid within 7 days.
6. On 30 April 2021 the builder notified the owners of the first variation. This was the connection of the water metre. The cost was $76.22. Paperwork in connection of the variation was signed months later by the owners.
7. On 19 May 2021 the builder sent the owners a variation order for $575.50 in connection with changes requested by the owners to the contract plans. This was signed by the owners in due course.
8. On 12 July 2021 the builder submitted a variation order for $21,369.48 in respect of upgrades to the slab. This was accepted by the owners.
9. On 14 July 2021 the builder commenced the contract works.
10. On 16 July 2021 the builder issued to the owners a variation order for $770.00 in respect of site reestablishment,
11. At the time the works got underway, the domestic building industry in Victoria was still being affected by the COVID-19 pandemic. The pandemic affected the project in at least two ways, namely because of the scarcity of materials and lockdowns. These causes of delay are discussed below. Furthermore, progress on the site was not smooth, as the builder encountered unexpected rock. This led to both a claim for a variation for drilling through rock and associated costs of $13,160.40, and a claim for delay, which is discussed below.
12. On 4 November 2021, the builder sent the owners an invoice for $78,402.10, being the base stage progress claim. This was paid by the owners on 15 November 2021.
13. On 30 November 2021 the builder invoiced the owners $65,114.50 for the frame stage. This was paid within four days.
14. On 11 January 2022 the builder sent to the owners a variation order for additional electrical items in the sum of $6,679.17. This is accepted by the owners.
15. On 25 January 2022 the builder sent a variation order for $7,562.50 for cabinetry upgrades. This was accepted by the owners.
16. On 3 February 2022 the owners were invoiced $150,591.00 by the builder for the lock up stage. This was paid within a week.
17. This left only the lock-up stage payment of $150,591.00 and the fixing stage payment of $116,158.75 to come.
18. On 16 February 2022 the builder sent two variation orders to the owners. The first was for $1,031.25 and related to additional cabinetry changes. The second was for $515.80 and related to external door changes. Both variations were accepted by the owners.
19. On 7 March 2022 the builder sent to the owners a variation order for $8,350.70 in respect of an upgrade to the tiles. This was accepted by the owners on the next day. It is to be noted that this was the 13th variation submitted by the builder. All had been accepted by the owners.
20. In about early March 2022, a dispute developed between the builder and the owners regarding access to the site. The owners were keen to have a building consultant, Mr Luke Blackwood of Hawkeye Inspections, carry out an inspection. Mr Blackwood telephoned the builder to request access to the site, but was denied access. This caused the owners to consult their solicitors, who wrote to the builder on 4 March 2022 seeking, amongst other things, access for Mr Blackwood.
21. Despite this request from the owners' solicitors, access to the site was still denied by the builder.
22. On 23 March 2022, at 10:28am, the builder sent to the owners its fixing stage invoice for $116,158.75. As the contract gave the owners 14 days to pay each progress claim, the owners theoretically had until 6 April 2022 to make payment.
23. The builder sent an email with the fixing stage claim suggesting a 'site walk' with a request that the invoice be sent to the bank 'for payment'. In the email, the builder also suggested that there be a 'site walk' on the following Saturday.
24. The owners responded by email about three hours later, rejecting the idea of a site walk. They advised that they wanted to have a building inspection 'in order to verify the building works'. They advised that Mr Luke Blackwood, the proposed inspector, would be available on 28 March 2022. They went on to advise that they would not be authorising payment of the invoice until Mr Blackwood could conduct his building inspection and provide a report detailing any incomplete or defective building works required for the fixing stage.
25. At this point the owners went again to their solicitors, who at 2.51pm on 23 March 2022 sent an email to the builder insisting on their right to conduct a building inspection. Noted that their entitlement to conduct the building inspection was supported by the Domestic Building Contracts Act 1995 (Vic) ('DBC Act'). The email went on to advise until the owners had had an opportunity to properly inspect the works done to date in respect of the payment claim, the invoice should not be paid.
26. Mr Hermez responded to the owners' solicitor's email of 23 March 2022 less than 30 minutes later by providing comments at the end of each paragraph marked in blue font. Mr Hermez argued that the owners had no right to insist on an inspection by a building consultant is distinct from a walk-through by the owners and contended that they could inspect with a building consultant only at the end of the project. Critically, Mr Hermes advised:

As mentioned, if I don't receive an email by 4pm today stating the invoice will be paid, all work will be stopped immediately and the owners will be liable for late payment interest, delay damages and any other theft that may occur because us not being able to proceed with the work to complete the job.

1. Within 5 minutes, the owners solicitor sent an email to Mr Hermez confirming that the owners' position remained unaltered. A site inspection on 28 March 2021, with the owners nominated building inspector, was again demanded.
2. In less than 10 minutes, the owners had received the builder's response. Mr Hermez, by email sent at 3:33pm, confirmed that all works on the site had stopped from 3:30pm. Access to the site on 28 March 2021 was also denied.
3. The owners' solicitors wrote to Mr Hermes on 24 March 2022. The suspension of the works by the builder was confirmed. However, the legality of the suspension of the works under clause 35 of the contract was challenged, and the owners noted that if the basis of the suspension was non-payment of the progress claim, any breach of the contract was denied as payment was due only on 6 April 2022. The builder was warned that suspension of the building works other than in accordance with clause 35 would amount to a 'substantial breach' of the contract for the purposes of clause 43.1 of the contract. For the purposes of clause 43.2 of the contract, the owners required the substantial breach to be remedied within 14 days. If the substantial breach was not remedied within 10 days, the owners gave notice that they intended to end the contract.
4. The builder apparently relented and allowed the owners to inspect with their chosen building inspector on 29 March 2022.
5. In my view, this was appropriate, because s 19(1) of the DBC Act provides that a builder must permit the building owner (or a person authorised by the building owner) to have reasonable access to the building site and to view any part of the building works. It follows, in my view, that the owners were perfectly entitled to insist on having a building consultant accompany them on their site inspection. Not only does this accord with the DBC Act but also accords with what I understand to be common practice in the industry.
6. The building inspector who attended the inspection in March 2022 was not Mr Blackwood, but Mr Sig Romano. The explanation for this given by Mr Saydam, when he gave evidence at the hearing, was that Mr Blackwood had formed the view, after speaking on the telephone to Mr Hermez, that the project was 'broken' and Mr Blackwood no longer wished to be involved.
7. The owners on 11 April 2022, sent to the builder, Mr Romano's inspection report dated 29 March 2022 ('the Romano report') together with a separate list of additional issues identified at the inspection on 29 March 2022.
8. In my view, the Romano report is of critical importance to the case, because it constitutes an independent assessment of the state of the works at the time the fixing stage invoice was issued.
9. As Mr Hermez is a registered domestic builder, he must have been aware that by reason of s 40(3) of the DBC Act the builder was prohibited from demanding or receiving any amount or instalment that was not directly related to the progress of the building work being carried out under the contract. In other words, the fixing stage invoice could only be issued when the fixing stage was complete. This brings into focus the definition of 'fixing stage' found in s 40(1) of the DBC Act. This 'means the stage when all internal cladding, architraves, skirting, doors, built-in shelves, baths, basins, troughs, sinks, cabinets and cupboards of a home are fitted and fixed in position.'
10. Mr Romano's report identifies significant defects and incomplete works in the house. When he took the witness stand, Mr Hermez cross-examined Romano about these defects. Mr Romano accepted that a number of the defects were minor and did not require rectification to justify the issue of the fixing stage payment claim. Such defects included, for example, deficiencies in the brickwork, non-compliant vertical articulation joints in masonry veneer walls; defects in the first-floor render finishes, damage to a sliding door and a short kitchen window sill rubber. This list is not exhaustive.
11. Of critical importance were findings made by Mr Romano concerning the lack of waterproofing in the laundry and in the upstairs ensuite. In the laundry, Mr Romano observed that the laundry cabinetry had been installed prior to waterproofing. He opined that wall and floor junctions had not been completed at the rear of the cabinetry.
12. Mr Hermez gave evidence that he had fixed the cabinet prior to doing the waterproofing in order to qualify for the fixing stage payment. He said that this was normal in the industry and that the waterproofer could later undertake the necessary waterproofing around the penetrations in the wall behind the cabinet, by working inside the cabinet.
13. At the hearing, Mr Romano gave evidence that the house was placed on a slab and the wall of the laundry was constructed of water resistant plaster. He demonstrated that the fixing of the cabinet was premature as the fixing would cause a breach of AS 3740-2010 section 3.9 concerning perimeter flashing. At the hearing he confirmed that the method of construction was such that it fell under AS 3740-2010 section 3.9.1.1(e) Type 5. In this situation, perimeter flashing to wall/floor surfaces were required to be continuously sealed to the horizontal surface and have a vertical leg of a minimum of 25 m above the finished floor level, except across doorways, and the horizontal leg must have a minimum width of 50 mm. Clearly this could not be achieved if the cabinet was in place.
14. It follows that the cabinet in the bathroom had been fixed prematurely. In order to meet the minimum waterproofing standard mandated by AS 3740-2010, the cabinet would have to be removed and then reinstalled. For this reason, I find that the fixing stage payment claim should not have been issued.
15. A similar problem with waterproofing existed in the ensuite and in the bathroom upstairs. In both rooms the cabinets had been installed prior to the wet areas being waterproofed. A further problem existed in the bathroom, because the bath tub had also been installed prior to waterproofing. Mr Romano confirmed at the hearing that these wet areas are also subject to AS 3740-2010 section 9.1.1(e). For the reasons explained in relation to the laundry, I find that in the ensuite the vanity cabinet had been fixed in place prematurely. In the bathroom, I find that both the cabinet and the bath had been fixed prematurely.
16. The builder faced a further potential difficulty concerning the completion of the fixing stage according to Mr Romano's evidence. Mr Romano observed that some quad work remained to be completed. Mr Hermez acknowledged that ordinarily the quad ought to be fixed before the fixing stage payment claim could be made. However, he deposed that the clients had agreed that this could be deferred.
17. I do not think that it is open to a builder to reach an agreement to vary the definitions of the respective stages in the works contained in s 40 of the DBC Act. This is because s 132(1)(b) of the DBC Act renders void any term of an agreement that seeks to exclude, modify or restrict any right conferred by the DBC Act in relation to a domestic building contract. However, the owners did not rely on this argument in making submissions about the fixing stage payment and I make no formal finding about the matter because the builder was not given an opportunity to make submissions about it.
18. As I have found that the fixing stage payment should not have been issued, it follows that the builder had no right by reason of s 40 (3) of the DBC Act to issue the fixing stage payment claim.
19. As the fixing stage payment claim was issued unlawfully, there was no obligation on the owners to pay it. It follows that I must also find that the suspension of works by the builder on 23 March 2023 was unlawful.

THE CLAIMED 67 DAYS EXTENSION OF TIME BY REASON OF THE SUSPENSION OF THE WORK.

1. As the suspension of the work by the builder on 23 March 2022 was unlawful, the claim for extension of time of 67 days fails.

THE BUILDER'S OTHER CLAIMS FOR EXTENSIONS OF TIME

1. It is convenient to discuss the builder's other claims in the order in which they arose.
2. Before I do so, I confirm that I clearly have jurisdiction to consider extension of time claims and adjust the date for completion under the contract retrospectively. This is because under s 53(1) of the DBC Act the Tribunal may make any order it considers fair to resolve a domestic building dispute. Section 53(2) provides that without limiting this power, VCAT may do a range of other things, including, at (c) 'vary any term of a domestic building contract (including the completion date, the contract price, a provisional sum or the amount to be paid for any prime cost item)'.

Claim for extension of time in respect of delivery of timber

1. The builder claims a delay of 35 days in respect of delay which arose in the supply of timber for the project as a result of the COVID pandemic. The claim was not conceded by the owners.
2. It appears that the first mention of a delay in the delivery of timber was made in an email dated 21 June 2021. In this email, Mr Hermez indicated the work would start within three weeks. He said that it was 'all over the news,' that there was a shortage of timber in Australia but that he had be able to place an order and the timber would be received 'towards the end of September.'
3. Mr Hermez mentioned the potential delay arising from the delivery of timber, again, in an email to the owners on 24 June 2021. After confirming that the building permit and the stamped plans had been issued, Mr Hermez took the opportunity to confirm that the timber for the project had been delayed for 35 days because of the supply problem. The builder did not say that the project completion would be delayed. On the contrary, he advised, 'we should still finish within our timeframe allowed in the contract.' The potential delay was mentioned 'just in case.'
4. I am not satisfied that this claim is made out. In order to successfully make a claim for an extension of time, the builder will have to demonstrate that the delay had an impact on the critical path of related activities that had to be performed between the commencement of the works to their completion.
5. The first hurdle faced by the builder is that Mr Hermez identified the potential delay on 24 June 2021, which was 20 days before the actual start of the works. For this reason, the potential impact of the delay on the critical path of activities would, presumably, be reduced to 15 days.
6. The next issue is that the builder did not endeavour to illustrate that there had been any impact on the critical path of activities when the timber actually arrived on the site.
7. The timber would only be needed for the frame stage. This could only be constructed after the site had been excavated, the underground plumbing had been placed, preparations for the slab pour had been made and inspected by the relevant building surveyor ('RBS'), and the slab had been poured and cured.
8. The RBS sent the builder and the owners the result of the pier hole inspection on 10 September 2021. The pouring of the slab must have taken place after this. Given that the timber was expected late in September, it is extremely unlikely that the late arrival of timber at the point could have had an impact on the program of works.

1. By email dated 21 September 2021, the builder claimed an extension of time of two weeks by reason of a COVID lockdown for the period 20 September 2021 to 6 October 2021. The owners consented to this claim.
2. In my assessment, there are 16 days between 20 September 2021 and 6 October 2021, excluding the first day and including the last. Under clause 34.0 of the contract, the builder is entitled to an extension of time in the carrying out of the works if they are delayed due to any cause beyond the builder's direct control.
3. The builder contends that the initial completion date under the contract was 10 April 2022. I understand that the owners accept this date. Once an allowance of 16 days is added, the date for completion of the contract works is extended to 26 April 2022.

1. Even if the builder had demonstrated that the timber was late and might otherwise have affected the program for the works, it is to be remembered that as from 20 September 2021 the works had been closed down in any event by reason of a government ordered shutdown due to the COVID pandemic. The builder can only claim for one delay in any given period. As an extension of time has been granted in relation to the lockdown, there can be no prospect of the builder getting a further extension of time for a delay arising out of the shortage of timber, as this would have been co-extensive with the COVID lockdown.

1. The builder claims to be entitled to an extension of time of two weeks in relation to the requirement to drill through rock and associated engineering issues. This claim is not conceded by the owners.
2. On 3 September 2021, Mr Hermez emailed the owners regarding a delay which had arisen because, when boring the pier holes, the builder had hit rock. Mr Hermez advised that there had been communications between 'the inspector' (presumably the RBS), the engineer, the geotechnical investigator, and the concreter to identify a cause of action. The RBS directed the builder to drill through the rock. The builder advised the owners that there would be additional costs on top of the agreed plan for the bored piers as a new type of excavator would be required. The builder also advised that there would be a delay, although the extent of the delay could not be predicted.
3. Because the builder was seeking a variation, the builder had an obligation under s 37(1) of the DBC Act to give the owners a notice describing the variation, explaining why it was necessary, and stating its effect on the works, the estimated delay and the cost.
4. The builder partially discharged this obligation by sending to the owners a variation order (VO#5) on 18 September 2021, claiming $13,160.40 as the cost of the variation. Curiously, the builder stated that the days of delay claimed were '0.'
5. At the hearing, Mr Hermez explained that he had not claimed for any delay for the rock issue in VO#5 because he did not know the extent to which the works would be delayed. Mr Hermez remedied this in an email sent on 13 October 2021, in which he set out three claims for delay the builder was making.
6. In respect of the delay in boring the pier holes, Mr Hermez claimed one week for sorting out the way forward with the engineer and the RBS, and one week related to the actual digging of the bored piers.
7. I acknowledge that the builder can be criticised for not attempting to estimate the extent of the delay that would arise from rock when he submitted VO#5. However, I do not think this is vital to the builder's entitlement to claim a delay for the issue. This is because the builder on 3 September 2021, well before the variation works were performed, notified the owners that there might be a delay, and that the extent of the delay would be advised in due course.
8. I am satisfied that it was necessary for the builder to have stopped boring when unexpected rock was identified. Furthermore, I know from experience that it would have taken time for the builder to have briefed the RBS, the engineer, geotechnical technician, and the concreter about the problem and for relevant investigations to have been carried out and for recommendations to have been prepared and discussed. I am also satisfied that there would have been a delay while a special machine was hired and brought to the site and for the excavator to have cut through the rock, as the RBS required.
9. In these circumstances I am comfortably satisfied that the builder is entitled to a delay of two weeks by reason of the unexpected rock.
10. Under the terms of the contract, 'Days' are defined in clause 1 as 'calendar days.' There is no definition of 'Week' in the contract, but because of the definition of 'Day', I consider that a week's delay must be deemed to mean seven days. In other words, the builder is to receive an extension of time in respect of Saturday and Sunday in any week of delay.
11. Applying this logic, I will allow a further 14 days extension time to the builder in respect of the rock issue. This brings the adjusted date for completion forward from 26 April 2022 to 10 May 2022.

1. The builder claimed to be entitled to an extension of time of 5 days in respect of a delay arising from the upgrade of the doors requested by the owners. The claim for an extension of time was included in the variation order submitted by the builder in respect of the doors on 16 February 2022. The delay was conceded by the owners.
2. A further extension of time of 5 days brings the adjusted date for completion up to 15 May 2022.

The builder's contention that the owners are deemed to have accepted the 5 week timber delay.

1. At the hearing, Mr Hermez made a submission that the owners were deemed to have accepted all the claims he had made for an extension of time included in his email of 3 October 2021 by reason of the operation of clause 34.2 of the contract.
2. Before addressing the builder's argument, I observe that the email 3 October 2021 referred to three claims for extension of time. One of these related to the rock issue. I have found that this claim is to be allowed. The second claim related to the doors. This claim was conceded by the owners. The third claim related to the claim for 35 days extension of time arising from the delay in the supply of timber to the site. This is the claim in respect of which the builder must rely in his submission about the operation of clause 34.2 of the contract.
3. Clause 34.2 provides that where the builder has given the owners a notice of an extension of time, the owners must, if they intend to dispute the extension of time, give notice in writing to the builder with detailed reasons for the dispute, within 7 days of service of the builder's notice.
4. Mr Hermez's submission is straightforward. The owners did not dispute any of the three claims for extensions of time with 7 days of delivery of the notice of 3 October 2021, and so they were deemed to be allowed.
5. In my view, the builder's submission stands or falls on the issue of whether clause 34.2 of the contract is mandatory or directory. If it is mandatory, the clause must be complied with, and the builder wins the argument because the owners did not comply with the clause. If it is directory, then the owners will have merely failed to follow an administrative direction, and they will not have lost any substantive legal right by reason of their default
6. The clause employs a verb that supports a mandatory construction as the owners 'must' give a written notice of dispute of the extension of time within 7 days.
7. However, that is not the end of the analysis, as the language of the clause does not spell out any consequence for the owners if the notice of dispute is not given within time.
8. In my view, if clause 34.2 of the contract is construed as a mandatory provision, this could lead to an unfair and potentially absurd result. The builder's claim is for 35 days delay. For the reasons already given, the claim is not factually warranted. However, if it is deemed to be granted, then the owners may be prevented from claiming liquidated (or agreed) damages under clause 40 of the contract.
9. For these reasons, I find that clause 34.2 is to be construed as a directory clause. On this basis, I also find that the owners are not deemed to have accepted the builder's claim for the timber delay claim of 35 days.
10. Having set out these finding, I note that s 53(2) of the DBC Act provides that the Tribunal may do a range of other things, including at (e): 'declare void any unjust term of a domestic building contract, or otherwise vary a domestic building contract to avoid injustice.'
11. It was not argued before me that I could or should make an order under s 53(2) of the DBC Act amending clause 34.2 and accordingly the builder has not had a chance to make a submission on the point. For this reason, I merely note the provision, but make no order under it.

1. It remains to deal with the questions of when the contract was ended, by whom was it ended, and whether the termination was lawful.
2. After the site meeting on 21 April 2022 the parties remained in dispute. As noted, on 14 May 2022 the owners paid the fixing stage claim of $116,158.75. However, the builder did not resume work at the site.
3. Instead, the builder on 16 May 2022, sent a variation claim (VO#14) to the owners in respect of 5 separate claims, namely:

(a) interest for late payment of the fixing stage invoice calculated at $2,792.24 on the basis of a 5.5 week delay;

(b) delay damages at $500/week from 23 March 2022 to 14 May 2022, a total of 9.5 weeks $4,318.23

(c) renewal of Public Liability Insurance due to project delays $1,727.26

(d) an administrative fee to put the trades on hold of $318.18; and

(e) an administrative fee to get the trades to renew of $318.18.

1. The total was $9,474.09. The addition of GST of $947.41, took the total variation claim to $10,421.50.
2. The owners did not accept the variation and gave notice to this effect on within 3 hours of receipt of the builder's new variation claim.
3. The builder's response was both immediate and dramatic. On 18 May 2022 the builder sent a document titled End of Contract Notice under cover of a detailed letter. The notice alleged that the owners had breached the contract in the following ways (inter alia):

(a) clause 30 - failure to pay progress payments;

(b) clause 30.1 - failure by the owners to give the "Lending Body an authority

(c) clause 34.3 - the builder's right to an extension of time;

(d) clause 34.4 - failure to pay delay damages.

1. Understandably, the End of Contract Notice caused the owners to again consult their solicitors. On 2 June 2022 the solicitors sent a letter to the builder which disputed the validity of the Notice. Moreover, that letter advised that:

(a) the builder had repudiated the contract on the basis 'that it failed to proceed with the Building Works competently and diligently, suspended the Building Works unreasonably and finally has shown itself as unable or unwilling to complete the Building Works';

(b) the builder has failed to follow the procedure set out in clause 42 of the contract to end the contract, and this constituted a further repudiation of the contract;

(c) the builder is precluded under clause 42.3 of the contract from ending the contract while it is in substantial breach itself (noting that the builder has suspended works without basis and/or failed to proceed with the building works diligently and/or is unable or unwilling to complete the works);

(d) the fixing stage invoice has been paid;

(e) by serving the notice, the builder has itself repudiated the contract, and the owners accept that repudiation; and

(f) the owners otherwise reserve all rights to seek resultant loss and damage.

1. The High Court in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited('Koompahtoo') observed,[1] at [44]:

The term repudiation is used in different senses. First, it may refer to conduct which evinces an unwillingness or an inability to render substantial performance of the contract. This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party's obligations. It may be termed renunciation. The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it. ... Secondly, it may refer to any breach of contract which justifies termination by the other party. (Citations omitted)

1. The owners, through their solicitors' letter of 2 June 2022, asserted that the builder had repudiated the contract.
2. At the hearing, Mr Hermez insisted that when he served the End of Contract Notice he did not intend to end the contract, but merely to pressure the owners into disputed variation 14 and thereby facilitating the builder to return to work. I found this evidence to be surprising, as the builder's intention was clear from the heading of the notice, and the text of the notice, which began with the declaration that 'This letter is to confirm that the Building Contract dated 10/03/2021 has now come to an end'.
3. I suspect that Mr Hermez's evidence regarding his intention was a recent invention prompted by a concern that he had made an error in the manner in which he had set about terminating the contract.
4. Whatever Mr Hermez's intention was when he issued the End of Contract Notice, the effect of the notice is to be determined objectively. This apparent from the passage in Koompahtoo referred to above, and is made explicit in the following passage drawn from the judgement of Brennan J in Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd;[2]

Repudiation is not ascertained by an inquiry into the subjective state of mind of the party in default; it is to be found in the conduct, whether verbal or other, of the party in default which conveys to the other party the defaulting party's inability to perform the contract or promise or his intention not to perform it or to fulfil it only in a manner substantially inconsistent with his obligations and not in any other way.

1. Looking at the document objectively, there is no doubt that the intention of the builder, as expressed in the End of Contract Notice, was to bring the contract to an end.

1. The builder issued the End of Contract Notice possibly because it had formed the view that the owners were in breach of the contract and sought to rely upon the owners' breaches to summarily bring the contract to an end at common law. From a forensic point of view, this was a very risky strategy to adopt. There was another, more cautious, approach available to the builder.
2. The contract contains a mechanism under which the builder could have terminated, if the owners were in substantial breach, using a two-step process.
3. Clause 42.1 provides that substantial breaches of the contract include a failure to provide essential information under clause 13, a failure to pay a progress claim as required by clause 30 or taking possession of any part of the land upon which the house is being constructed without paying the final claim and without obtaining the builders prior consent. This list is not exhaustive. If the owners had committed a substantial breach of the contract, the builder could have issued a notice under clause 40.2 of the contract specifying the substantial breach and requiring it to be remedied within 10 days and notifying its intention to end the contract if the breach was not remedied in time.
4. If the owners did not remedy the substantial breach within 10 days, then by further notice in writing, the builder could have ended the contract.
5. If the builder had used this mechanism, there would have been benefits to both sides. From the builder's point of view, it could have avoided falling into error by issuing a notice of termination where one was not justified. From the owners' point of view, they would have been given the benefit of natural justice and they would have had a chance to convince the builder that there was no substantial breach. Alternatively, if there was a substantial breach, the owners would have had a chance to remedy it.
6. However, the builder did not employ the show cause mechanism created by clause 40 of the contract. Without notice, the builder issued a notice of termination. An immediate termination of the contract might have been justified at common law if the owners showed through their conduct or words an inability to perform the contract (for example, because they became bankrupt, or their funder became insolvent) or they abandoned the contract or evinced an intention not to perform it or be bound by its terms.
7. However, the builder did not issue the End of Contract Notice by reason of any fundamental breach of renunciation of the contract that would have justified the termination of the contract at common law. On its face, the primary reason for the issue of that notice was that the owners stated that they would not pay for the delay as demanded by the builder in VO#14.
8. The owners were entitled to say on the day that VO#14 was issued that they would not pay it. In the first place, even if the variation had to be paid, they had 14 days in which to pay it.
9. When they stated in their email of 16 May 2022, just hours after receiving VO#14, that they would not 'be signing any variation to do with interest payment or additional charges' they referred to the reasons they had previously given. They went on to point out that that questions of interest and damages for delay were dealt with at final payment stage. Critically they stated, 'The contract already provides for these matters and does not need to be varied'.
10. When they made this statement, the owners were not evincing an intention not to be bound by the terms of the contract but were declaring their intention to be bound by it. Their conduct was the opposite of repudiatory. It was confirmatory of the contract.
11. The builder's claim for interest either existed under the contract because the owners had been late in paying a valid progress claim, or it did not exist. In my view, because I have found that the fixing stage payment claim should not have been issued, interest did not run while it remained unpaid.
12. Similarly, the right to delay damages (or extension of time costs) either existed under the terms of the contract or it did not. As I have found that the builder had no right to suspend the works from 23 March 2022, the claim for delay damages must fail.
13. The claim for an extra insurance premium arising by reason of the suspension of the works must also fail as the suspension of the works was not warranted.
14. As the builder should not have suspended the works, the builder had no basis to arrange to put the trades off site and accordingly the claim for a variation for arranging this must fail. Of course, there is no justification for the builder to seek payment for arranging to get trades back to site when they should never have directed to leave the site in the first place.
15. For these reasons, I find that when the builder issued the End of Contract Notice, it was itself in substantial breach of the contract. It had no right to issue the End of Contract Notice, and when it did so it repudiated the contract.
16. The owners, when confronted with this repudiation, justifiably accepted the repudiation and brought the contract to an end by their solicitors' letter of 2 June 2022.
17. I accordingly conclude that the owners lawfully terminated the contract on 2 June 2022 when they accepted the builder's repudiation contained in the End of Contract Notice.

1. On 6 June 2022 the owners served a notice of intention to terminate the contract on the builder. This notice stated that the builder:

(a) has failed to complete the building works within the building period;

(b) it is unable or unwilling to complete the building works;

(c) alternatively, the builder is unable or unwilling to rectify and/or complete defective and incomplete works as asserted in the notice (and relies upon the report of Mr Romano);

(d) alternatively, the builder is in substantial breach of the contract because of service of the purported notice on 18 May 2022 in circumstances where the owners are not in default under the contract, there exists no basis upon which the builder can end the contract and has failed to follow the procedure set out at clause 42 of the contract; and

(e) the owners place the builder on notice that if the builder remains in breach for 10 days after the date of the notice, then it is the owners' intention to bring the contract to an end

1. On 17 June 2022, as the builder's alleged substantial breach had not been remedied, the owners served a notice of termination of the contract on the builder in accordance with clause 43 of the contract.
2. In my view both the owners' notice of intention to convert issued on 6 June 2022 in the purported notice of 17 June 2022 were of no effect. The contract had been effectively terminated by the owners' notice of 2 June 2022.

IMPACT ON THE ASSESSMENT OF DAMAGES ARISING FROM THE FINDING THAT THE OWNERS LAWFULLY TERMINTED THE CONTRACT.

1. In Tabcorp Holdings Ltd v Bowen Investments Pty Ltd,[3] the High Court reaffirmed the 'ruling principle' that the measure of damage at common law for breach of contract was that stated by Parke B in Robinson v Harmon[4] as follows:

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

1. The damages to which the owners will be entitled to in respect of defects and incomplete works at common law will be affected by the finding that they lawfully terminated the contract. As they acted properly in bringing the contract to an end, then under the usual rule for the recovery of damages for breach of contract, they will be entitled to recover the cost of having the works rectified or completed by another contractor, although they will have to allow to the builder a credit in respect of the unpaid balance of the contract sum.
2. This observation will be of relevance in the next phase of the hearing when the assessment of damages is undertaken.

[1] (2007) 233 CLR 115; [2007] HCA 61.

[2] (1989) 166 CLR 623; [1989] HCA 23, [14].

[3] [2009] HCA 8, [13].

[4] [1848] EngR 135; (1848) 1 Exch 850 at 855 [154 ER 363 at 365].