Renbar Constructions Pty Ltd v Sader; Sader v Renbar Constructions Pty Ltd

Supreme Court of NSW|2022-02-17|Before: Stevenson J

Solicitors: New South Lawyers (Plaintiff/Cross-Defendant) Wilkinson Building & Construction Lawyers (Defendants/Cross-Claimant) File Number(s): 2019/00368077

Judgment

By a contract dated 1 July 2014, the plaintiff, Renbar Constructions Pty Ltd, contracted with the defendant, Dr Mark Sader, to demolish an existing structure on a property owned by Dr Sader at Connells Point, and to construct a new residence. [1]

The critical terms of the contract

Clause 2 dealt with the "Primary Obligations of the Parties" and provided: "2.1 The builder must carry out and complete the building works in accordance with this contract. 2.2 The owner must pay the price of the building works and other money that becomes payable under this contract in the manner and at the times stated in this contract." (Emphasis in original.)
"[P]rice of the building works" was defined to mean the total of the "cost of the building works" together with the "builder's fee" (10%).
Clause 13 dealt with "Progress Payments" and provided: "13.1 The owner must pay the price of the building works progressively as claimed by the builder, which shall include any deposit requested by the builder. 13.2 In order to be entitled to a progress payment, the builder must give the owner a written progress payment claim at the times specified in Schedule 4. 13.3 A progress payment claim is to include: (a) details of the cost of the building works for the building works carried out which relate to that claim; (b) the proportion of the builder's fee claimed; (c) details of any other moneys then due to the builder which are payable under this contract. 13.4 A progress payment claim is to be accompanied by such invoices, receipts or other written records or documents that may reasonably be expected to support the claim, and evidence the cost of the building works being claimed. 13.5 The owner must pay the amount stated in the progress payment claim within 5 working days of the builder giving the claim. 13.6 Unless the owner disputes: (a) the amount of a progress payment claim; or (b) that sufficient written evidence has accompanied the progress payment claim, by giving the builder a written notice detailing the dispute within 5 working days of receiving a progress payment claim, the owner will be deemed to have accepted the progress payment claim as the cost of materials, labour and other items provided by the builder which are the subject of the claim." (Emphasis in original.)
Schedule 4 to the contract (referred to in cl 13.2) provided that "the stages for when progress payment claims can be made by the builder" were "monthly for works completed".
The effect of cl 13.2, read with Schedule 4 was facultative; enabling, but not requiring Renbar to make monthly progress claims.
It is common ground that the Progress Claims 1 to 12 made by Renbar to Dr Sader during the course of construction did not comply with the requirements of cl 13 in that they did not include the details required by cl 13.3 and were not accompanied by invoices, receipts and other records, required by cl 13.4. Nonetheless, as I have set out, Dr Sader paid those progress claims.
The contract made no express provision concerning the nature of Renbar's rights in circumstances where it carried out the work called for by the contract but did not make a claim for a progress payment in accordance with the contract.
Dr Sader's case is that, in those circumstances, Renbar is not entitled to be paid for the work it performed, no matter its cost or value.
This raises questions as to the proper construction of the contract, and the extent to which the parties conducted themselves otherwise than in accordance with the black letter of the contract.
There are other terms of the contract which are relevant. I will deal with these below as they arise.

The course of events

As the following narration of events demonstrates, for many years after the contract was executed and the works commenced, Dr Sader did not insist that Renbar comply strictly with the terms of the contract. Nor did Renbar exercise rights available to it under the contract.
Although work commenced on the demolition of the existing residence on the site on 31 July 2014, apart from an invoice dated 13 June 2014 which was described as being for a "deposit-5% for estimated building works", Renbar did not render any progress claim until July 2015, when it made Progress Claims 1, 2, 3, 4 and 5 for a total $400,000.
As I have said, those progress claims did not comply with the requirements of cll 13.3 and 13.4.
Nonetheless, Dr Sader paid Renbar for these five progress claims.
Renbar did not make any further progress claims until June 2016, 11 months later, when it made Progress Claims 6, 7, 8 and 9 for a further $325,000.
Again, these progress claims did not comply with cll 13.3 and 13.4 of the contract. Nonetheless, Dr Sader paid them.
Renbar did not make any further progress claims until 2017. On 11 May 2017 it made Progress Claim 10 for $200,000 and on 11 August 2017 made Progress Claim 11 for $100,000. These progress claims also did not comply with the requirements of cll 13.3 and 13.4 of the contract. Nonetheless Dr Sader paid them.
One complaint Dr Sader makes in these proceedings is that Renbar did not keep him informed of the progressively increasing cost of the build. In that context, a factual dispute emerges.
The director of Renbar with whom Dr Sader was dealing was Mr Laval Francis.
In his diary from 12 August 2017, Mr Francis recorded an appointment at 12.20pm with Dr Sader "RE billing".
In his affidavit, Mr Francis gave this account of his meeting with Dr Sader that day: "On or around 12 August 2017 I met with [Dr Sader] at the Project to discuss the costs of the constructions work. I showed [Dr Sader] an expenses spreadsheet on my Apple Mac computer. A discussion took place between me and [Dr Sader] to the following effect: I said: This is where you are at. [Dr Sader] said: Where? I zoomed into the expenses spreadsheet and said: Here it is. You are at about $3.1 million. So, you owe me approximately $1.9 million. [Dr Sader] said: Really, still that much? I said: Yeah, you've only paid me $1.2 million. How much did you think your house would cost? Just take a look at the items that you picked. The joinery alone has costed you $300,000.00. The concrete works have costed you another $300,000.00. Just laying the polished concrete floor and not the supply of materials was $144,000.00. You knew all this. You're here every day. The pool that you picked was $125,000.00 and that is without the balustrades. [Dr Sader] said: I'm not saying anything. I actually appreciate you trusting me. I said: Mark, I trust you. You're my father's heart doctor. That's why I haven't put in a claim yet. [Dr Sader] said: I appreciate you trusting me. I have the funds. They are in a term deposit. Can you please get the paperwork to me so I can review it all? I said: Alright, no worries."
In his reply affidavit, Dr Sader denied this conversation.
In cross-examination Mr Hyde, who appeared for Dr Sader, put to Mr Francis that the conversation "simply did not happen".
Mr Francis replied: "I've got an email, after having that conversation with him".
Mr Hyde then said: "I haven't seen that email, but I call for production of it".
In fact, the email, which was sent by Dr Sader to Mr Francis on 13 August 2017, the day after the conversation to which Mr Francis deposed, was in the Court Book and was in these terms: "Thank you for finally tallying our costs. Yes I was surprised this was significantly more than your initial estimate of $2.2 million. Clearly, will need some time to go through all the detail, once the USB is provided, as this will be the first time any detail has been collated to match progress payments. As discussed will be looking at each individual category's initial quotes and variations received and approved, & also will try to work out on my own additional variations that have not been pre-approved but make sense. So please provide as much detail as possible upfront. There are a lot of details to go through, so some late nights coming my way. As discussed yesterday, to commemorate you finally collating invoices/costs for my review (only took 3 years for what should have been a monthly summary) have transferred $100K (12/8/17). [4] Please forward tax invoice and include this in the summary on the USB stick."
The email provides contemporaneous confirmation of the accuracy of Mr Francis's recollection. In the email Dr Sader expressed surprise that Mr Francis's "tallying our costs" was "significantly more than your initial estimate of $2.2 million"; consistently with Mr Francis's recollection of having told Dr Sader that "you are at about $3.1 million".
Dr Sader's reference to looking "at each individual category's initial quotes and variations received and approved" is also consistent with Mr Francis's recollection of having shown Dr Sader "an expenses spreadsheet".
For those reasons, I accept Mr Francis's account of the meeting.
Dr Sader also recorded that he would "need some time to go through all the detail, once the USB is provided".
I infer that this is a reference to Mr Francis having said that he would provide a USB stick to Dr Sader containing the information recorded on the spreadsheet that Mr Francis showed Dr Sader on 12 August 2017.
Mr Francis did not provide this detail to Dr Sader until February 2019, some 18 months later. In the meantime, work progressed without Renbar making any further claim for progress payment.
But by now, Dr Sader had a good idea of the likely final cost of the build.
On 23 January 2018 a final occupation certificate was issued.
On 8 February 2018 Dr Sader sent Mr Francis a "Building Defects Report" prepared by Mr George Drakakis from Building Defects Waterproofing Solutions Pty Ltd. The parties referred to this as the "BDW Report". The report identified various defects in the construction. I return to these below.
On 8 February 2018 Mr Francis wrote to Dr Sader saying that Renbar "will execute all defects under my strict supervision."
On 4 April 2018 Dr Sader wrote to Mr Francis: "I need closure on this project. Again you appear to disregard timelines or documentation and a 1 year project is incomplete and nearly 4 years".
On 6 April 2018 Mr Francis wrote to Dr Sader stating that "client handover booked for Friday 13th April."
Dr Sader replied: "Saturday 14 April would work better for me for handover".
"Handover" occurred on 14 April 2018. It is common ground that this represents the date of practical completion.
Clause 23 of the Contract made these provisions concerning practical completion: "23.1 The builder must give the owner a notice of practical completion at least 5 working days prior to practical completion being reached. 23.2 The notice of practical completion is to: (a) state the builder's assessment of the date of practical completion; (b) state the date and time for the owner to meet the builder on the site to carry out an inspection of the building works, and the builder's final progress payment claim is to be attached to the notice of practical completion. 23.3 The owner must meet the builder on the site for the inspection at the date and time stated by the builder in the notice of practical completion, or at a date and time otherwise agreed with the builder, and either: (a) pay the amount of the final progress payment claim; or (b) if the owner reasonably believes that the building works have not reached practical completion, promptly give the builder a written notice detailing anything to be done to reach practical completion." (Emphasis in original.)
Renbar did not give Dr Sader a "notice of practical completion" prior to 14 April 2018 and did not provide Dr Sader with a "final progress payment".
But Dr Sader did not complain about this omission at the time. Both Mr Francis, and thus Renbar, and Dr Sader, were content to achieve practical completion without observance of the requirements of cl 23.
On 15 April 2018 Dr Sader wrote to Mr Francis: "Thank you for handing over the house Saturday 1pm 14 April. I do note you will be performing some repairs over the coming week while the house is unfurnished and still have a set of keys & remote for access. Also, final payment and detailed invoicing is being finalised by yourself, and warranties." (Emphasis added.)
The passage I have emphasised provides further confirmation of the parties' agreement that the requirements of cl 23 concerning a "final progress payment claim" at practical completion not be complied with. However, despite Dr Sader's reference to invoicing "being finalised", Mr Francis agreed that he "did nothing about providing [Dr Sader] with detailed invoicing until six or seven months later".
On 31 January 2019 some 18 months after the 12 August 2017 conversation and 13 August 2017 email to which I have referred, Mr Francis sent Dr Sader an email with a Dropbox link to a "spreadsheet of expenses".
Mr Francis stated: "I need to get some money transferred urgently as I have a major tax bill I need to settle."
The Dropbox contained over 700 pages of invoices.
It also contained spreadsheets particularising the: 1. total amount expended by Renbar: $3,266,198.61; 2. amount paid to date by Dr Sader: $1,209,454; and 3. amount said to be due by Dr Sader to Renbar: $1,935,799.21.
Dr Sader replied a little over an hour later: "Thank you for the details provided. Will work through, especially as the first time since the contract commenced that any have been provided. What is the final payment claim amount inc GST? Are there Detailed initial quotes attached (inc specifications) and alternative quotes so I can compare to final invoices (or a link to these)?"
Dr Sader's reply shows that he saw the claim made by Renbar in Mr Francis's 31 January 2019 email as Renbar's "final" claim. He did not suggest that he would not pay this "final" claim once he had "worked through" its "details". It is obvious that Dr Sader understood that he was obliged to pay Renbar the cost of the construction, as properly calculated.
Two days later, Dr Sader wrote to Mr Francis. His email included: "The Final Claim of $1,935,799.21 brings the Cost Build in excess of $3.266 million. This significantly exceeds your estimates, the initial contract limit I asked you not to exceed of $2.2 million, The Home Warranty estimated Contract price of $1,650,000 and The Maximum Home Warranty Insurance for a single dwelling of $2,200,000 under which my residence was built. I have paid in excess of $1.2 million dollars in good faith despite Renbar Constructions inability to provide as part of any previous progress claim details of the cost of the building works for the building works carried out which relate to the claim … The building works significantly exceeded the 52 weeks per the Cost Plus Contract and has not been built within a reasonable time. At no point did Renbar Constructions provide a written notice of an entitlement to an extension of time, detailing either the extension of time or cause of delay. … Invoices have only now been provided more than 4 years after the Contract commenced despite my request for detailed invoices for over 4 years … … In the first instance … I intend to engage a Quantity Surveyor to review the Construction documentation provided to yourself and provide a detailed construction cost breakup to outline the costs for a contract builder to complete the works and ensure the invoiced amounts are in line with industry standards. … I look forward to finalising an accurate amount for The Final Claim payment and paying this in full as soon as this can be quantified more accurately and by agreement." (Emphasis added.)
Dr Sader agreed that his reference to the "Final Claim" in this email was to the claim made by Renbar as attached to Mr Francis's email of 31 January 2019.
Thus, Dr Sader's final paragraph anticipated a final "accurate" statement by Renbar of the amount owing for the project as a whole.
About an hour later on 2 February 2019 Mr Francis sent Dr Sader an email: "Following our phone conversation this email is to confirm, ● The Journal of expenses spreadsheet issued on the 31st January is only in draft format and pending finalisation only & when we have verified and confirmed all expenses. ● A progress payment of $500k is by no way a confirmation to the draft amount owned of $1,935,799.21. ● You will not be charged for any rectification works that have occurred during the course of construction. ● The HWI insurance certificate is a fee paid to the compensation fund and not insurance bought, therefore Renbar will be responsible for all rectification works under the warranty period. ● The defects listed below are accepted and will be repaired in a timely manner by Renbar. I hope this email gives you enough assurances that you feel comfortable to move forward together to finalising an accurate amount for The Final Claim payment." (Emphasis added.)
Neither Mr Francis nor Dr Sader, in their affidavits, gave an account of the telephone conversation to which Mr Francis referred in the opening words of this email.
As there is no evidence of Dr Sader disputing what Mr Francis stated in this email, I infer that his email sets out an accurate summary of what was discussed.
Mr Francis's reference, in the final sentence, to "the Final Claim" was obviously a reference to Renbar's claim for final payment for all of the work it had done on the project.
Later on 2 February 2019, Mr Francis sent Dr Sader a further Dropbox link "to access the quotes". A large number of quotations were included in the Dropbox.
The following day, 3 February 2019, Dr Sader wrote to Mr Francis: "I have checked all documentation you (Renbar Constructions) have provided to me in relation to quotes, variations that I had approved during the building process. Per our contract Renbar constructions entitlement to progress payments requires details as to what building works is being claimed. Noting you have received $1209454 inc GST to date, but have not assigned any work to these progress payments in any correspondence to me. A way forward to enable me to transfer additional money to you urgently as requested by you [is] a Progress Payment that would not compromise either party's right to dispute additional amounts owing, or rights to rectify repairs or monetary compensation for defects unrepaired, nor compensation for delays." (Emphasis added.)
Dr Sader attached to that email a spreadsheet setting out what he described as "Discrepancies between quotes approved [that is by Dr Sader] and amount invoiced" in relation to some 20 items.
Dr Sader's calculation was as follows: Invoiced amounts $1,690,432 Less quotes approved $1,209,454 Proposed payment $480,978

Dr Sader's email concluded: "Accordingly, I could then transfer an additional $480K Progress Payment ASAP (by EFT over several days). If you are agreeable to this, please provide written confirmation of the allocation of prior progress payments as above & … send me a new Progress payment invoice with allocations & I will start transferring the money."
In cross-examination Dr Sader said that the "additional $480K Progress Payment" was a payment that he felt he could "justify" at that time.
Later on the same day, 3 February 2019, Mr Francis caused Renbar to send to Dr Sader Progress Claim 12 for $480,978.
In his covering email Mr Francis said: "Attached is a progress claim amount of $480,978.00 this will be allocated towards the list of suppliers with approved quotes and amount invoiced".
It is clear neither Mr Francis nor Dr Sader regarded Progress Claim 12 as a final progress claim for the purposes of cl 23 of the contract.
As I have set out, cl 23 required that "the builder's final progress payment claim" be attached to the notice of practical completion. Practical completion took place on 14 April 2018. No notice of practical completion was then served nor was any final progress claim then served. Both parties were prepared to proceed on this basis.
It is plain from the passages in Mr Francis's email to Dr Sader of 2 February 2019, and Dr Sader's email to Mr Francis of 3 February 2019 which I have emphasised, that Dr Sader's proposal that he "transfer an additional $480K Progress Payment" was regarded by both men as being, in effect, on a "non admissions" basis and without prejudice to Renbar's entitlement to quantify accurately the cost of the work it had done and Dr Sader's right to insist that Renbar rectify any defects in construction.
As Mr Hyde accepted in closing submissions, Dr Sader understood at this time "that there was more to pay."
Indeed by their 2 February 2019 exchange of emails, Mr Francis and Dr Sader agreed that Renbar should serve a "Final Claim" once the information in the 31 January 2019 spreadsheets "can be quantified more accurately", to use Dr Sader's words, or once an "accurate amount for the Final Clam payment" could be "finalised", to use Mr Francis's words.
There is no suggestion in the evidence that, as is now sought to be put on behalf of Dr Sader by Mr Hyde, the parties considered that Progress Claim 12 was "the final claim" within Renbar's "remit" to make.
Dr Sader then engaged a quantity surveyor to provide an opinion as to the value of the work done by Renbar on the project.
On 14 March 2019 that quantity surveyor advised Dr Sader that, in his opinion, the "cost breakup" of the work done by Renbar was then $2,669,766.13, inclusive of a builder's margin.
At that time, the amount that Dr Sader had paid Renbar was $1,690,432: almost $1 million less than this figure.
On 23 April 2019 Renbar sent Dr Sader Progress Claim 13 in the sum of $219,652.
Mr Francis' covering email read: "Please find attached an invoice allocated against the structural cost of your house. It includes the concrete, steel, Dincel walling & bricks for your house. See attached spreadsheet. I need this urgently paid as I have commitments to address. Again as discussed on the 22nd March I am awaiting your assessment of my final claim so we can come to an amicable resolution. Your prompt attention to this matter would be greatly appreciated."
This email was evidently Mr Francis's response to Dr Sader's 3 February 2019 request for a "new Progress payment invoice with allocations". [5] It was not, as Mr Hyde suggested in his reply submissions, intended by either party to be "a further attempt to satisfy the requirements of clause 23 for final claims".
Mr Francis recorded, in this email, that on 22 March 2019 he had stated to Dr Sader that he was "awaiting your assessment of my final claim so we can come to an amicable resolution."
Neither Dr Sader nor Mr Francis, in their affidavits, gave an account of their 22 March 2019 conversation. In those circumstances, I see no reason to doubt that, in this email, Mr Francis accurately summarised what the two men had discussed on 22 March 2019.
Thus, the position, as at 23 April 2019, was that Dr Sader was to make an "assessment" of the claim that Mr Francis had, on behalf of Renbar, made on 31 January 2019. That was the "final claim" to which the men were directing their attention. That is consistent with the fact that Dr Sader had sought his own quantity surveying advice at around this time.
On 15 May 2019 Renbar sent Dr Sader Progress Claim 14, which was described as "Final Claim for building works" in the sum of $1,287,531.
In his covering email Mr Francis said: "Please find attached the final claim invoice allocated to the remaining cost for the construction of your house. Previously Progress Claims 1 to 12 were allocated towards invoices on your spreadsheet dated February 3rd. Progress Claim 13, which is currently overdue, is allocated against the structural cost of your house. It includes the concrete, steel, Dincel walling & bricks for your house. And the Final Claim covers the remaining contractor & supplier invoices, supervision time and builders margin."
Dr Sader replied the same day: "The Final Claim and Progress Claim 13 are both disputed. Both lack sufficient accompanying invoices, receipts, documents and other written records to support them. The Final Claim and Progress Claim 13 both have not been served within either (a) the period determined by or in accordance with the terms of the construction contract, or (b) the period of 12 months after the construction work to which the claim relates was last carried out (or the related goods and services to which the claim relates were last supplied)."
Dr Sader's reference here to the "Final Claim" was a reference to Progress Claim 14.
As I have set out, on 2 February 2019 Dr Sader said that he looked forward "to finalising an accurate amount for The Final Claim payment and paying this in full as soon as it can be quantified more accurately and by agreement". [6] On 3 February 2019 Dr Sader requested that Mr Francis send him "a new Progress payment invoice with allocations and I will start transferring the money". [7]
But now, for the first time, Dr Sader made the points that Progress Claims 13 and 14 were not accompanied by invoices, receipts and other like documents, and thus did not comply with the requirements of cll 13.3 and 13.4 of the contract, and had been rendered more than 52 weeks after the date of the contract.
This is despite the fact that, before me, Mr Hyde submitted that Dr Sader was "always" prepared to pay up to $2.2M under the contract. Evidently, that was as at May 2019, and is no longer Dr Sader's position.
On 4 May 2020, Dr Sader, through his solicitor, wrote to Renbar: "We are instructed that your company has to date failed [to] carry out works in relation to the rectification and completion of defective and incomplete works, and by reason of clause 31.1 is in serious breach of the contract by suspending the carrying out of the building works other than in accordance with clause 30 of the contract. Because of this our client hereby provides you with notice of a serious breach in accordance with clause 31.3 of the contract. Our client also gives further notice that if the breach is not remedied within 10 business days from the date of this letter our client will terminate the contract."
On 12 May 2020, Renbar, by its solicitor, replied, including: "We are instructed that Renbar Constructions Pty Ltd is ready, willing and able to rectify any defective works (if found) upon payment of its outstanding invoices. Our client expects to be afforded a reasonable opportunity to carry out those works (if required) at the appropriate time."
On 24 August 2020, Dr Sader, through his solicitor, purported to terminate the contract. Dr Sader's solicitor's letter included: "Our client disputes that the alleged invoices referred to in your solicitor's letter are outstanding, and that this is a basis for your company to not rectify the defective and incomplete expediently, noting again your company has been aware of the defective and incomplete works since at least 8 February 2018. TERMINATION OF THE CONTRACT Due to your company's continued failure to rectify the defective works, our client is left with no option but to now terminate the contract pursuant to clause 31.4 of the contract."
Clause 31 of the contract entitled either party to terminate the contract in the event of a "serious breach" of the contract.
Whether or not, as Dr Sader alleged, Renbar had engaged in a "serious breach" by reason of the defective or incomplete works, Renbar's delay in carrying out the works was obviously, itself, a serious breach of the contract. As I set out below, Renbar accepts, subject to any entitlement to extension, it was 76 weeks late in achieving practical completion. For the reasons I set out below, my conclusion is that it was in fact 141 weeks late in achieving practical completion. [8]
This was a serious breach of the contract entitling Dr Sader to terminate notwithstanding the fact that it was not the serious breach that he identified at the time. [9]
Thereafter, on 13 November 2020 Mr Francis sent Dr Sader Progress Claim 15 which was, in effect, a repetition of the claims made in Progress Claims 13 and 14 for a total of $1,575,767.
This progress claim did comply with the requirements of cll 13.3 and 13.4 of the contract as it contained, in a Dropbox link, all relevant invoices and other like documentation.
On 20 November 2020 Dr Sader, by his solicitor, wrote to Renbar disputing Dr Sader's obligation to pay the $1,575,767 the subject of Progress Claim 15.
As Progress Claim 15 was served after Dr Sader had terminated the contract, the question whether it was effective depends on whether Renbar had, at the time of termination, an accrued right to such payment. I return to this below.

The proper construction of the contract

Mr Hyde submitted that, on the proper construction of the contract, compliance with cl 13.2, when read with Schedule 4 was an essential precondition for Renbar's entitlement to be paid for the work done. That is, Mr Hyde submitted that as Renbar had not prior to termination of the contract served progress claims complying with the requirements of cl 13.2, it was not entitled to be paid for the work it had done; notwithstanding the evidence that the cost of that work was, inclusive of the 10% margin, some $3.2 million and some $1.5 million more than it has been paid by Dr Sader.
Mr Hyde accepted that this was a "harsh" result.
Indeed, it would be.
The starting point is cl 2.2 of the contract which, as I have set out, requires Dr Sader to pay the "price of the building works" (that is the cost of those works, together with the builder's margin) "in the manner and at the times stated in this contract".
Clause 13.1 "stated" that Dr Sader must pay the price of the building works "progressively as claimed by" Renbar.
However, there is nothing in cl 13 that obliged Renbar to make a progress claim. Rather, cl 13.2 stated that "in order to be entitled to a progress payment" Renbar was obliged to give written notice of an appropriate claim, which claim was to include the matters referred to in cl 13.3 and be accompanied by the invoices and other documents referred to in cl 13.4.
Correspondingly, as I have set out, Schedule 4 was facultative; allowing, but not requiring that any progress claim be made monthly.
The contract made no provision for Renbar's entitlements if Renbar did the work called for by the contract but: 1. did not serve any progress claims; or 2. served progress claims that did not comply with the requirements of cll 13.3 and 13.4.
There is thus a lacuna in the contract. The contract does not state "the manner" or the "times" in which Dr Sader was obliged to pay the price of the building works in those circumstances.
In Creative Building Services Pty Ltd v Jolene Investments Pty Ltd, [10] McDougall J considered a contract which had a clause imposing a payment obligation on the owner indistinguishable from cl 2.2 in the subject contract, and a progress payment clause that contained provisions indistinguishable from those in cll 13.3 and 13.4. However, unlike cl 13.2 in the present case, the equivalent clause in Creative Building Services did require the builder to make progress claims.
His Honour said: [11] "But to go further, and to say that a mechanism as to how payments are to be claimed and made has the further function of conditioning, precedentially, the entitlement to payment of the price as a whole seems to me to be putting far too high a burden on cl 13, either read on its own or in the context of the contract as a whole. It may be accepted that a failure to comply with the requirements of cl 13 would provide a proprietor with a defence to a claim for a particular progress payment. Thus, if the builder had taken the opportunity to sue for one or more of the unpaid progress claims that it rendered, the proprietor could have raised, by way of defence, failure to comply with (for example) cll 13.1 and 13.5. If, factually, those defences were made good, then the entitlement to the progress claim would be defeated. But it does not seem to me that this analysis applies when the claim is brought for the balance of the price, in circumstances where the works have been completed and where the unpaid cost of the works and the cost of rectification of defects have both been assessed. If it were otherwise, it would be necessary for the builder to resubmit (as already it has done) all the invoices, together with all their supporting documentation, and the insurance certificate. In circumstances where that would do no more than give an opportunity, which is now meaningless, to analyse the amount of the claim, it does not seem to me that the Court should construe clause 13, so as to impose that as an obligation to be satisfied before the now defined balance due is paid, unless the language is intractable. And for the reasons I have given, I do not think that it is. Thus, as a matter of construction of the contract, I do not think that the defence is made good."
I agree with his Honour's observations. Indeed, his Honour's reasoning, arguably, has more weight here because, unlike the builder in Creative Building Services, Renbar was not obliged to serve a progress claim.
In this case, faced with the lacuna to which I have referred, it must be an implied term of the contract that if Renbar carried out the work the subject of the contract but did not make progress claims which complied with the requirements of cl 13 (or did not make progress claims at all), then Dr Sader was nonetheless obliged to pay the price of the building works within a reasonable time of the work being done and of adequate particulars as to the work being provided.
Implication of a term in a contract by reference to what is necessary to give it business efficacy was described by Mason J in Codelfa [12] as an "exercise in interpretation though not an orthodox instance". [13] It is accepted in Australia that such implications are made when the conditions set out in BP Refinery [14] are satisfied. [15] Lord Simon of Glaisdale stated the now familiar requirements for implication of a term as: "[F]or a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract." [16]
Each condition must be assessed at the time the contract was made. [17]
A term requiring that Renbar should be paid for works carried out, particularly where the price of the work is not fixed, is both reasonable and equitable. It places no additional burden on the owner than that contained in cl 2 of the contract.
The contract could not operative effectively if the term were not implied, as it would leave the builder in the untenable position that it would not be paid for work it has completed at its own expense.
The posited term is capable of clear expression and is so obvious that it goes without saying. As Mr Klooster submitted, there is no suggestion that the builder was providing the works gratuitously.
Finally, nothing in the contract precludes the builder's entitlement to be paid other than by monthly progress payments. Nor does the operation of cl 13 discharge the owner's obligation under cl 2.2 to pay the price of the works carried out.
Thus, assuming that Renbar is unable to sue on Progress Claims 13 and 14 due to non-compliance with the requirements of cll 13.2 to 13.4 of the contract and that Renbar cannot sue on Progress Claim 15, despite its compliance, because the contract by that point had been validly terminated, the contract should be interpreted, in the sense described by Mason J, to imply a term to the effect I have described.
This has the consequence that, although, as I have discussed above, Dr Sader terminated the contract on 24 August 2020, Renbar had nonetheless accrued a right to be paid for the work properly completed by April 2018. This is, in effect, the contents of its Progress Claim 15.
The rationale for this is that the owner's obligation to pay the price of the completed building works arose or accrued upon those works being completed and that this obligation was not affected by the builder's non-compliance with cll 13.2 to 13.4 or termination or the contract. [18]
As I have said above, (although not relevant to the exercise of contract construction [19] ) this is in fact how Dr Sader and Mr Francis saw matters in their email exchanges in February 2019; Dr Sader evidently had a change of heart shortly thereafter.
During final oral submissions, much attention was directed to s 8A of the Home Building Act 1989 (NSW). [20] This was based on counsel's misapprehension that s 8A, although enacted after the date of the contract, applied retrospectively to it.
In that context, my attention was directed to observations of Leeming JA [21] in Cappello v Hammond & Simonds NSW Pty Ltd. [22]
Leeming JA said, albeit in obiter: [23] "The submission … [that compliance with the equivalent of cll 13.3 and 13.4 was an essential precondition to the builder's entitlement to be paid] [24] … is not without force. The construction of [those provisions] is plainly informed by s 8A(2)(b) of the Home Building Act, which provided as follows: 'A progress payment for residential building work under a contract to which this section applies is authorised only if it is one of the following kinds of authorised progress payments: … (b) a progress payment for labour and materials in respect of work already performed or costs already incurred (and which may include the addition of a margin), with provision for a claim for payment to be supported by such invoices, receipts or other documents as may be reasonably necessary to support the claim and with payment intervals fixed by the contract or on an 'as invoiced' basis.' Section 8A(4)(a) made it an offence (speaking generally) to demand or receive payment of a progress payment unless it was authorised under the section, while s 10(1)(c) denied an entitlement to damages or any other remedy if the contract was in contravention of, relevantly, s 8A. Those statutory provisions lend weight to the proposition that compliance with cll 15.4 and 15.5 was a precondition to the builder's entitlement to be paid. Not lightly would the standard form contract be construed so that it was in disconformity with the legislative regime. Further, although this Court was told that there were no decisions on point, there are dicta to that effect in the judgment of McDougall J (whose decisions in this area carry considerable weight) in relation to what appears to have been an earlier edition of the same standard form contract in Creative Building Services v Jolene Investments [2013] NSWSC 391 at [30]. However, for the reasons which follow, it is unnecessary for present purposes to express a concluded view on the construction of cl 15, which gives rise to issues not free from difficulty (including for example the effect of failing to attach details of all expenses)."
After judgment was reserved, my Tipstaff drew counsel's attention to the fact that the enactment of s 8A of the Home Building Act was not retrospective, and had no application to the present case.
Contrary to the submissions made by Mr Hyde after this matter was drawn to counsel's attention, I cannot see how Parliament's enactment of s 8A can throw any light on the proper construction of this contract.
It is therefore not necessary for me to engage with Leeming JA's observations, save to make the respectful observations that: 1. his Honour appears to have read McDougall J's reasons in Creative Building Services as being supportive of his Honour's tentative conclusion that compliance with equivalent provisions to cll 13.3 and 13.4 in this contract was a pre-condition to the builder's entitlement to be paid; whereas I read McDougall J's observations as having the opposite effect; and 2. it is by no means clear to me how s 10(1)(c) of the Home Building Act (which prevents a person who contracts to do residential building work in contravention of any provision of the Home Building Act from recovering damages or enforcing any remedy under the contract) has the consequence that his Honour tentatively embraced.

The total cost of the work

As I have set out above, Renbar's expert quantity surveyor, Mr Madden, opined that Renbar's total costs in relation to the project were $3,266,198.61 inclusive of its 10% margin.
Mr Madden said that he had conducted a "full verification" of Renbar's expenses but that, in relation to expenses totalling $34,922.17 he could not "identify the corresponding invoices".
Nonetheless, Mr Madden concluded that Renbar had incurred those expenses.
In those circumstances I see no reason to make any adjustment to Mr Madden's figures.
Dr Sader's building expert, Mr David Hall, provided an estimate of the "value of the construction" using the "Rawlinsons Construction Cost Guide, 2015 edition".
The Rawlinsons guide contains a range of suggested values, on a per square metre basis, for homes of particular descriptions in, relevantly, Sydney.
The limited use that can be put to the Rawlinsons guide is illustrated in this statement by Mr Hall: "They are a cost guide to give you an analysis of what you are likely to incur in your costs. It is recommended in Rawlinsons you not use that as your final costings, that you would do an individual breakdown if you were tendering on a project. What I've been asked to do is to provide an estimate of what it was my opinion this building would cost, and also a timeline."
Mr Hall adopted "the Rawlinsons rates for prestige residential" of $3,120 per square metre.
Adopting those rates Mr Hall arrived at a "total estimate" of $2,623,693 inclusive of GST.
As Mr Hall stated in his report, he was giving an estimate of the value of construction.
The relevant question is the cost of construction.
Further, unlike Mr Madden, Mr Hall did not carry out an independent detailed construction costs estimate using measurements obtained on site in addition to those on the relevant plans.
As I have set out above, Mr Madden opined that the value, as opposed to the cost, of the work performed by Renbar, was $3,504,290. Mr Madden said that he arrived at that figure after undertaking "an independent detailed construction cost estimate".
I am not persuaded that I should accept Mr Hall's evidence in preference to that of Mr Madden.

Conventional estoppel

In his Further Amended Technology & Construction List Response, Dr Sader contended that, in the circumstances I have outlined: "(f) Both [Renbar] and [Dr Sader] adopted the assumption that [Dr Sader was] entitled to know how much, and what work had been performed in a given period in connection with each progress payment claim and as expressly stated in the contract. (g) By reason of the express written terms of the contract in connection with payment claims there was a mutual assumption between [Renbar] and [Dr Sader] that sufficient written records would accompany each progress payment claim. … (m) The departure from the assumption as to how costs would be incurred and identified to [Dr Sader] during the construction phase has caused detriment to [Dr Sader] with an unexpected increase in cost of $1,575,767.00 inclusive of GST. (n) [Renbar] is estopped from any further claims."
In closing submissions, Mr Hyde developed the point as follows: "Dr Sader has pleaded a defence of conventional estoppel in that he has relied on the contract executed between himself and the Builder. He relied on the contractual terms as a whole but in particular those clauses that relate to payment. This was a cost-plus contract and critical to the arrangement was the cost of the building works. Dr Sader has been deprived of any real way of managing the costs and the Builder should be estopped from walking away from the contract and then without reasonable warning some 10 months later issue claims which went well beyond that was envisaged by both the Builder and Dr Sader."
It is true, as Mr Klooster accepted, that there was little "rhyme or reason" concerning the timing by Mr Francis of Renbar's claims for payment.
Nor is there any explanation in the evidence for the delay between Mr Francis's revelation to Dr Sader in August 2017 that "you are at about $3.1 million" and that "you owe me approximately $1.9 million" and his provision to Dr Sader on 31 January 2019 and 2 February 2019 of the spreadsheets and documents explaining the detail of the costs incurred.
However, the evidence does not justify the conclusion that Renbar and Dr Sader adopted the assumptions alleged.
Although Dr Sader regularly complained about Renbar's delay, he paid Progress Claims 1 to 11 notwithstanding the fact they were not supported by invoices and other requisite documents.
As I have set out above, Dr Sader actually suggested to Mr Francis that Renbar make Progress Claim 12.
And as Mr Francis told Dr Sader in August 2017 what the likely cost of construction was, and as the evidence of Mr Madden, which I have accepted, is that the value of the work exceeds its cost, I am unable to see what detriment Dr Sader has suffered by reason of Renbar's costs achieving the level that they did.
Dr Sader, and Mrs Sader, were actively involved the evolving decisions that were made concerning construction of their home. They must have understood that those decisions increased the cost of the works.
Their requirements had the result that Renbar incurred costs of $3.2 million on the project (inclusive of its 10% margin).
Mr Madden's evidence is that the value of the work carried out by Renbar exceeded that sum.
I see no basis in these circumstances for a conclusion that Renbar is estopped by reason of any of the circumstances that occurred during the construction of the project from "any further claim."

Dr Sader's loss caused by the delay

It is agreed that the delay from when practical completion should have been achieved, subject to any entitlement to an extension of time, was 141 weeks.
Clause 9.1 of the contract provided that Renbar was entitled to "a reasonable extension of the contract period" if the building works were delayed "from a cause, thing or matter beyond the sole control of the builder".
Clause 9.2 obliged Renbar to give Dr Sader written notice of its asserted entitlement to an extension of time.
However, cl 9.3 of the contract provided that: "A failure on the builder's part to comply with sub-clause 9.2 will not in itself affect the builder's entitlement to a reasonable extension of the contract period." (Emphasis in original.)
Renbar adduced evidence from an expert construction programmer, Mr Josh Carthew, who has opined that Renbar was entitled to a "reasonable extension" of 82 weeks.
However, Renbar did not, during the life of the contract seek any "extension of the contract period". Its first claim for an extension of time was made when it served Mr Carthew's report in December 2020, after the contract had been terminated and after these proceedings had been commenced. Mr Klooster did not suggest that Renbar had an accrued right to claim such an extension, and I cannot see how it did have such a right.
I therefore find that Renbar delayed achieving practical completion by the full 141 weeks.
During that period, Dr Sader incurred holding costs that Mr Klooster accepted were $820 per week.
Dr Sader also claims damages for the loss of opportunity to rent his existing property, also in Connells Point, during that period.
Dr Sader is entitled to consequential loss for Renbar's breach of contract if he is able to satisfy the familiar principles in Hadley v Baxendale [25] that such loss: 1. may fairly and reasonably be considered as arising naturally, that is in the ordinary course of things, from the breach; and 2. it may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of a breach of it.
The valuation experts engaged by both parties, Mr Mark Ellis for Renbar and Mr Simon Azar for Dr Sader, agree that the weekly rent for Dr Sader's property during the relevant period was $1,600 in 2015, $1,625 in 2016 and $1,600 in 2017 and 2018.
However, Mr Klooster submitted that Dr Sader was not entitled to damages for this loss of rent because there was no evidence that Mr Francis, and thus Renbar, was aware, prior to entering into the contract, that Dr Sader's had another property that was to be rented out once Dr Sader took possession of the subject property.
However, it must have been obvious to Mr Francis, and thus to Renbar, that if Renbar took longer than the contractually mandated 52 weeks to reach practical completion, Dr Sader would suffer loss either because he would have to secure alternative rental accommodation for himself and his family or, assuming he was in a position where he could retain his existing residence, he would be deprived of the opportunity of renting out that residence for the period beyond the 52 weeks.
In those circumstances, I find that Dr Sader is entitled to recover damages for loss of rent for the period of the delay.
In written submissions in reply, after judgment was reserved, Mr Klooster submitted, for the first time, that some discount on the resultant figure should be applied to reflect "the vicissitudes of life as a landlord". [26]
This matter was not raised during the hearing. Mr Klooster asked Dr Sader no questions about it. I am not, in those circumstances, prepared to entertain the submission.

Dr Sader's losses - defective work

It is common ground that Dr Sader has incurred costs of $27,759 rectifying defective building work.
It is also agreed there were a number of other defects in respect of which Renbar must pay Dr Sader a total $24,572.13.
Seven further alleged building defects require resolution.
I heard concurrent evidence from Mr Hall for Dr Sader, and Mr Finnane for Renbar about these defects.

Roof tile membrane

The roof tile membrane was damaged when Renbar installed solar panels on the roof. In closing submissions, Mr Klooster accepted that there was no evidence that when the bolts for the solar panels were fixed, the bolt fixings were waterproofed. Mr Hall expressed the opinion that it would cost $13,022.90 to rectify this problem. Mr Klooster accepted that the factual observation underlying Mr Finnane's competing conclusion that only $930 should be expended was not made out. I allow this item at the rate the subject of Mr Hall's opinion.

Protective covers for floors and decks

During the hearing it was agreed that it was necessary for Mr Hall and Mr Finnane to investigate this matter further. The parties have agreed that, if this defect is to be pressed, I may deal with this matter on the papers once Mr Hall's and Mr Finnane's further views are known.

Mark on toilet pan

It is common ground that a toilet has been damaged. There was disagreement as to whether the damage shown on a photograph was a scratch or a smear of clear lacquer. The mark appears to me to be a scratch. I allow this item at cost opined by Mr Hall, $1,140.

Paint and plasterboard finishes

In the BWD report, defective paintwork and plasterboard work was identified. Mr Hall and Mr Finnane disagreed as to whether any such problems remain. Mr Hall said that he had looked at the defective painting and agreed that most of the painting identified by BWD as being defective needed to be redone. Mr Hall also said that, so far as concerns plasterboard, there were "obvious imperfections".
On the other hand, Mr Finnane suggested that Mr Hall had not identified any particular paintwork or plasterboard that was defective and appeared to him to be relying upon what was said in the BWD report. However, before me, Mr Hall was clear that he had himself inspected the paint and plasterboard work and was satisfied that it needed to be rectified.
I allow this defect at the rates the subject of Mr Hall's opinions: $4,194 for the paintwork and $1,148 for the plasterboard work.

Overflow pipes

Dr Sader contends that overflow pipes have not been installed on a number of balconies as required by the relevant standards and that the existing drain grates are non-compliant. Mr Hall agreed that there was no sign of water ingress from the balconies and that he had done no testing to show that any water ingress was likely. Nonetheless, Mr Hall maintained that, in the absence of the requisite overflow pipes, there was a reasonable risk that internal flooding might occur. Renbar relied upon a text message sent by Dr Sader to Mr Francis on 16 February 2018 which, it was said, constituted an instruction not to install the overflow pipes. However, Dr Sader said the text message referred to overflow pipes at a different part of the home, and for which a different system was required. I see no reason to doubt this evidence. In these circumstances, I allow this item at the figure of $5,330 the subject of Mr Hall's opinion.

Ground floor powder room door

Mr Hall said that a door in the ground floor powder room had been left standing after painting and now had a bow with a slight twist. On the other hand, Mr Finnane said that he had inspected the door, had not found any bow and that the door opened and closed properly. I am not satisfied that this door needs to be replaced and do not allow this item.

Quantum meruit

In light of my conclusions as to Renbar's contractual entitlements, the question of Renbar's entitlement to a quantum meruit does not arise.

Insurance issue

The effect of s 94 of the Home Building Act is that if a Home Warranty Insurance policy required by s 92 of the Act is not in force at the relevant time the contractor who did the work is not entitled to damages or to enforce any remedy in respect of a breach of contract committed by the other party.
In this case, Renbar procured the issue of a Home Warranty Insurance policy on 5 June 2014.
The policy recited a "Declared Contract Price" of $1,650,000.
The Certificate of Eligibility stated, under the heading "Policy Schedule Details", that the "Maximum Contract Value of Any One Residential Job" was $2.2 million for a "single dwelling" and $1,650,000 for "alterations and additions structural".
In relation to that matter, Mr Hyde submitted: "The Builder knew when the $1.65M was exceeded and agrees that he did not revert to the insurer. The Builder also admitted that he provided a document to Dr Sader which clearly stated that he could not build in excess of $2.2M per dwelling. The Builder agreed that he did not provide this document with the contract documents. The Builder agreed that he did not approach the insurer to update it about the cost of the building works for Dr Sader. He further agreed that he did not inform the insurer that the works were at $3.2M."
However, Mr Hyde did not develop this submission or explain what consequences, so far concerns s 94 of the Home Building Act he contended followed. Indeed, in reply submissions, Mr Hyde appeared to accept that Renbar's entitlement to sue under the contract were unaffected by this matter.
The fact is that the requisite contract for insurance was in place.
I cannot see how, in those circumstances, the provisions of s 94 of the Act are engaged notwithstanding the matters accepted by Mr Francis, as recorded in Mr Hyde's submission.

Conclusion

For these reasons, my conclusion is that Renbar is entitled to be paid the unpaid balance of the total cost of works as found by Mr Madden.
However, from this must be deducted damages to which Dr Sader is entitled arising from the delay and the defective works.
The parties should confer and agree on the resultant figure and on the orders to be made to give effect to these reasons.
I will hear the parties as to costs. If there is a dispute, the parties should confer and agree on a timetable for written submissions on that question.

Endnotes

Dr Sader's wife, Mrs Sandra Sader, has since become a joint registered proprietor of the Connells Point property. She was not a party to the building contract. Nothing turns on this.
See [164]-[168] below.
Dr Sader's building expert, Mr David Hall, suggested a lower figure, to which I return below at [140]-[149].
This was Progress Claim 11.
See [71] above.
See [60] above.
See [71] above.
See [163]-[168] below.
See, for example, Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 at 370-371; [1931] HCA 21 (Rich J), at 373 (Starke J), at 377-378 (Dixon J, McTiernan J agreeing) and at 391 (Evatt J).
[2013] NSWSC 391.
At [29]-[32].
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; [1982] HCA 24.
Per Mason J at 345 (Stephen J agreeing at 344 and Wilson J agreeing at 392).
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266.
Codelfa at 347 per Mason J (in agreement, Stephen J at 344, Wilson J at 392 and Brennan J at 404).
At 282-283.
Bou-Simon v BGG Brokers LP [2018] EWCA Civ 1525 at [12].
McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476-7; [1933] HCA 25 (Dixon J; Rich and McTiernan JJ agreeing).
Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57 at [35] (Gummow, Hayne and Kiefel JJ).
It is common ground that the Home Building Act applied to the subject contract.
With whom Macfarlan and McCallum JJA agreed.
[2021] NSWCA 57.
At [33]-[36].
See [11] above.
(1854) 9 Exch 341 at 354; (1854) 156 ER 145 at 151.
Reference being made to the decision of Weber SC DCJ in Camuglia v Housman [2020] NSWDC 446 at [36]-[38]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 25 February 2022

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