Sayar v Al Shafi ; Al Shafii v Sayar

NCAT Consumer and Commercial|2021-11-25

td [1985] 2 NSWLR 105 Texts Cited: Nil Category: Principal judgment Parties: Mohammad Sayar (Applicant/Cross-respondent) Sam Al Shafii (Respondent/Cross-applicant) Representation: Counsel: S Cairns (Applicant/Cross-respondent) P Lonergan (Respondent/Cross-applicant)

Solicitors: JurisAustralia Lawyers (Applicant/Cross-respondent) Kammoun Sukari Lawyers (Respondent/Cross-applicant) File Number(s): HB 20/46920, HB 21/06250 Publication restriction: Nil

Outline

These applications arise from residential building work carried out on a site at Merrylands. That work was carried out pursuant to a contract in the NSW Fair Trading form headed "Home Building Contract for work over $20,000" dated 28 August 2019. The contract price was $550,000, plus GST, for the construction of duplex style units.

History of the proceedings

On 9 November 2020 the owner lodged on application against the builder, claiming an amount equal to the Tribunal's jurisdictional limit of $500,000 based on alleged breaches of the statutory warranties provided by s 18B of the Home Building Act 1989 (HBA). No particulars were provided of either the alleged breaches or the amount claimed. However, in a document lodged prior to the first directions hearing, counsel for the owner indicated that the owner relied on the report of Mr Cavallo dated 11 December 2019 in relation to the defects claim. The amount claimed was $330,007.20: $171,000 for $255,000 having been paid in respect of work said to only have a reasonable value of $84,000, plus $159,007.20 in respect of rectification costs.
At the first directions hearing on 19 January 2021, orders were made for amended Points of Claim to be filed and served by 10 February 2021 with any cross-application and Points of Defence to be filed and served by 17 February 2021.
On 10 February 2021 a cross-application was filed which set out the orders sought by the builder against the owner as follows: 1. As at the date of termination the [owner] was indebted to and is liable to pay the [builder]: a. Variations ??? $144,450.00 b. Deposits and Materials $257,000 c. Lost Profits $98,000 2. The [builder] seeks a monetary order for $499,450.00 3. Monetary order for delay and interest.
At the second directions hearing on 18 March 2021, orders were made for the provision of a Scott schedule by 15 April 2021, its completion by 13 May 2021 and the provision of the evidence upon which the parties wished to rely by 15 April 2021. No such schedule was finalised prior to the hearing.
A week later, on 25 March 2021, to those orders was added an order for access to be provided on 72 hours' notice.
The third directions hearing was held on 25 May 2021. The builder was given an extension of time to 20 July 2021 on the basis that "no further extensions will be granted" and orders were made with a view to enable both the application and cross-application to be heard without the need for a further directions hearing.
On 18 June 2021 the parties were advised that the applications had been listed for hearing on 25 and 26 November 2021. On 1 November 2021 the Tribunal's President declined an application for an in-person hearing.
On 25 November 2021 the late service of documents meant that only the lay evidence of the owner could be dealt with, and the second day of the hearing was not able to be conducted until 27 April 2022 when again there was late service of documents. The orders made on 25 November 2021 included the provision of a Joint Reports from the parties' experts by 23 December 2021in respect of (1) building defects, and (2) quantum.
It transpired that the view was taken that the second of those Joint Reports should await finalisation of the first, which was never properly finalised: the owner's claim being that the builder's expert was not cooperating; the builder claiming that the owner's expert would not sign the Joint Report until the builder's expert had signed the proposed report after which he would add his comments and sign that report.
That situation did not reflect well on either the experts or the solicitors as non-compliance by 23 December 2021 should have caused either of the solicitors to advise the Tribunal so that the applications could be relisted for directions to enable the problems to be addressed. When the parties and/or their lawyers fail to comply with the directions of the Tribunal, despite the obligation imposed by s 36(3) of the Civil and Administrative Tribunal Act 2013 (CATA), it does more than add time and cost to the proceedings: it makes it difficult for the Tribunal to conduct the hearing in a procedurally fair manner to not only allow claims to be made but also to enable those claims to be defended.

Hearing

At the hearing, which was conducted using audio-visual link (AVL) facilities and telephone lines due to the COVID-19 pandemic, the builder was represented by Mr Cairns and Mr Lonergan spoke on behalf of the owner.
The documents that were admitted as evidence or marked for identification at the hearing were as follows: Exhibit A Joint Tender Bundle, comprising pages 1-612 in two volumes (including pleadings and evidence, both lay and expert) Exhibit B Joint Report as to building defects dated 22 April 2022 (only signed by Mr Cavallo, the owner's expert) Exhibit C Owner's evidence in response to report of builder's quantity surveyor (being pages 97-101 of documents provided under cover of a 28 March 2022 email from the builder's solicitor) MFI 1 Builder's closing submissions dated 20 April 2022
The owner and his son (Saleh Sayar) were cross-examined on the first hearing day. On the second hearing day, there was cross-examination of (1) the building defects experts (Mr Cavallo for the owner and Mr Drexler for the builder), (2) the experts as to quantum (Mr Mehdinezhad for the builder and Mr Cavallo for the owner), and (3) the builder. Mr Fajaloun, who was not cross-examined, provided an affidavit for the builder. Closing addresses concluded the hearing on that second day.

Jurisdiction

It is clear these proceeding relate to residential building work, that the definition of "building goods or services" in section 48A of the HBA is satisfied. As these proceedings involve a claim by the owner for an amount of money, they involve a "building claim" within the meaning given to those words by section 48A of the HBA.
As the subject building work continued until late in 2019, the application was lodged on 9 November 2020 and the cross-application on 10 February 2021, they have been commenced within time. The amount claimed exceeds the lower limit of $5,000 set by clause 2(3)(a) of the HBA and clause 12 of the Home Building Regulation 2014 and is below the upper limit of $500,000 set out in section 48K of the HBA. Accordingly, the Tribunal has jurisdiction under the HBA.

Relevant law

In the HBA, s 18B(1) contains the following statutory warranties in relation to residential building work and clause 9 of the contract mirrors the wording of those warranties: (a) a warranty that the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract, (b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new, (c) a warranty that the work will be done in accordance with, and will comply with, this and any other law, (d) a warranty that the work will be done with due diligence and within the time stipulated in the contract or, if no time is stipulated, within a reasonable time, (e) a warranty that, if the work consists of the construction of a dwelling, the marking or alternations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling, (f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes know to the holder of the contractor licence or person required to hold a contractor's licence, or another person with express or apparent authority to enter into or vary any contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires that work to achieve, so as to show that the owner relies on the holder's or person's skill or judgment.
It is also necessary to note that s 48MA of the HBA provides: A court or tribunal determining a build claim involving an allegation of defective residential building work or specialist work by a party to the proceedings (the responsible party) is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.
Prior decisions which have considered those words assist in its consideration in this case.
Galdona v Peacock [2017] NSWCATAP 64 is an Appeal Panel decision which noted that s 48MA provided for a preferred outcome, not a mandatory outcome. That case suggested that a work order would not be appropriate where (1) the relationship between the parties has broken down, (2) the builder has not acknowledged a poor standard of work, and/or (3) there are reservations as to the ability of the builder to rectify the work with due care and skill. However, those categories cannot be regarded as confining the operation of s 48MA since the test to be applied is not that decision, but the words of the statute set out above.
Kurmond Homes Pty Ltd v Marsden [2018] NSWCATAP 23 at [32] suggests s 48MA operates as a preference rather than a right and only operates to prevent unreasonable refusal by the owners to prevent the builder from carrying out rectification work.
It is clear the Tribunal is required to weigh up the factors in each case and make an evidence-based decision: Brooks v Gannon Constructions Pty Limited [2017] NSWCATCD 12 at [64].
If a money order is to be made, such as by reason of a breach of contract, the assessment of the amount payable must be determined by reference to the fundamental principle that the party affected by the breach should be put in the same position as if the breach had not occurred: Haines v Bendall [1991] HCA 15 (Haines). It is also necessary to note that, where there has been defective work, the rectification method must be both necessary and reasonable and the rectification cost must be reasonable: Bellgrove v Eldridge [1954] HCA 36 (Bellgrove).
Since the evidence in these proceedings includes expert evidence, the practical effect of which is that opinion evidence can be given, decisions such as Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305 (Makita) make it clear that, for such evidence to be accepted, the following considerations apply: (1) The expert's opinion must clearly indicate the facts upon which it is based. (2) Those facts must be proved so there is a factual basis for the opinion. (3) The reasons or the process of reasoning for the opinion must be disclosed. (4) Any opinion must fall within the qualifications and experience of the expert.

Owner's lay evidence

The owner, in his single page statement, unsigned and undated, indicated that, due to his poor English, he had delegated authority to his son to attend to matters relating to the subject building work, including checking progress, making payments and liaising with the builder. He also said his son consulted with him regularly and that he "entrusted full confidence in him for making decisions in respect of construction works".
Noteworthy matters arising from cross-examination were the evidence that the owner received a quote from the builder for $16,000 for work which he obtained a separate quote for $8,000 which was accepted, said to have been with the permission of the builder. Those amounts appear to relate to the removal of asbestos.
He denied that the builder showed him asbestos remnants on 7 December 2019 when he and his son met with the builder on site. When taken to text messages sent to him by the builder on the afternoon of 10 December 2019 about asbestos, the owner accepted that his reply related to his dissatisfaction with payments made compared to the work which had been done.
The owner accepted that on 5 January 2020 he told the builder to speak to his lawyer instead of him but denied telling the builder not to return to the site.
Further, the owner denied ever receiving the invoice for $5,445 in relation to the removal of the asbestos. However, it is to be noted that the owner's Notice of Dispute referred to that invoice.
Although the owner denied being on site on 11 December 2019, being the day when his expert (Mr Cavallo) conducted an inspection, his attention was drawn to a text message in which the builder said that if he did not leave the site then the Police would be called. It was noted the report of Mr Cavallo, dated 11 December 2019, was not provided when letters dated 19 December 2019 or 22 January 2020 were sent by the owner's solicitor to the builder and that it was not until a letter dated 18 February 2020, which attached a Notice of Dispute, that a copy of that report was provided to the builder.
The owner denied that the expert report of Mr Cavallo on building defects was being used as an excuse to terminate the contract. He accepted that, as at 11 December 2019, he had made up his mind to terminate the contract. However, he denied ever changing the locks to prevent the builder from accessing the site. He also claimed that he had asked other contractors to quote on the cost to finish the work but said they would not take on the job because the owner did not have the relevant certificates.
In re-examination, when asked to indicate the reasons for deciding to terminate the building contract, the owner said he found out that the builder was not paying the wages of the carpenter and was causing problems with his neighbour.
Saleh Sayar recalled the events which led to the building contract being signed and a $55,000 deposit being paid, followed by $70,000 for ground works, $60,000 to start the ground floor bricklaying, $60,000 to start the carpentry work on the first floor on the same day, and $40,000 for the ground floor carpentry. It is noted that the total of those amounts is $285,000. There was also a suggestion that a further $35,000 was sought to finish the slab. He annexed documents which suggested a total of $235,000 was paid. However, it does not appear to be in dispute that $255,000 was paid.
It was Mr Sayar's evidence that, on 6 December 2019, the builder told him that Safework had inspected the site and found an asbestos fence, which he had invoiced $16,500 to remove, and that work on the site was stopped until that issue was addressed. He said he organised an asbestos removalist to do that work and that he was given an asbestos removal certificate which he provided to Adrian, the builder's site supervisor. He said he had taken photos and a video when the asbestos was removed but they were not tendered.
In his statement, Mr Sayar said the builder called him around midnight, asking him to attend the site as there was asbestos still there. He said he replied that all the asbestos had been removed and he had a supporting certificate. He said that when he contacted Adrian the next morning, to ask for the contact number for the SafeWork officer, Adrian threatened him with a fine of $2,500 per day if work on the asbestos was stopped. Mr Sayar suggested that, when he contacted the neighbour, he was told they had called SafeWork because bricks were being thrown onto the neighbour's property and were damaging the fence. Having been provided with the contact details, Mr Sayar claimed that there were no fines imposed and that the notice was given due to the dangerous height of the scaffolding. It was suggested that when Mr Sayar emailed the builder and Adrian he was threatened and that was a reason why legal advice was sought.
The result was said to be that a report from Mr Cavallo was obtained and served, and that the builder was told that if the defects were not fixed then the owner would not be making any further payments. When there was no response, the sequence of notices that led to the termination notice ensued.
It was alleged that "multiple builders" would not work on the site as there were no engineering certificates for the work that had been completed.
Mr Sayar's evidence was that he called the private certifier, seeking certificates for the piers and slab, and was told that a certificate for the slab could be provided but not for the piers as they had not been inspected.
Apart from multiple instances of hearsay evidence, ie what Mr Sayar maintains someone told him, there were few documents annexed or otherwise linked to the statement: only pages A25-32 (ie pages 25 to 32 in Exhibit A) which contained copies of documents said to be invoices numbered 1 to 5, 7 and 9. All but invoice 7 were issued by Adrian, who was described as "Company Director" and each suggested payments had been made in cash. The provision of only those seven supporting documents was despite Mr Sayar suggesting, in his statement, on A24 at [33]: I have photos, text messages, voice recordings, building reports, videos and emails that show the sloppy work of the [builder] as an evidence (sic) to produce in the Tribunal hearing.
In cross-examination, it was accepted that the owner provided the plans and that the certifier was chosen by the owner but it was denied it was the owner's responsibility to obtain certification for the slab, footings and piers.
The reasons for seeking legal advice, according to Mr Sayar, were: 1. he suggested that the saw a carpenter moving timber from the site and that the carpenter said the builder had not paid him, 2. the variations charged by the builder, 3. a threat made by Adrian that if he did not pay then he would snap Mr Sayar's neck, and 4. defective work.
It was Mr Sayar's evidence that he started looking for legal advice on 10 December 2019 and that Mr Cavallo visited the site the next day. Mr Sayar was definite that he did not have a lawyer prior to that inspection but Mr Cavallo's first report (A34) was dated 11 December 2019 as was the letter of instruction he received from a solicitor (A75). Mr Sayar suggested those dates may be wrong but later conceded he may be wrong about those dates.
Mr Sayar suggested that he obtained permission from Adrian to use his contractor to remove the asbestos and said there was a text message showing that. However, despite a call being made for that message to be produced, but that was not done.

Builder's lay evidence

The builder provided an affidavit dated18 November 2021. In that affidavit, A184 at [9], he suggested Mr Sayar snr indicated, in a conversation shortly prior to the contract being signed, that he had arranged for both demolition and a certifier. The builder went on to suggest that, between September and November in 2019, he carried out what he described as ground works, on ground slab works, ground floor carpentry works, ground floor brick laying works, installation of first floor carpentry works, and initiation of roof installation works. He provided copies of eight invoices for a total amount of $255,000 which he said had been paid.
It was the builder's evidence that those works were certified by the certifier. No certificates were annexed. Instead, three pages of text messages (A272-274) suggests that (1) the builder sent the certifier a video in relation to the footings on 16 September 2019 to which the certifier replied: "I am happy with that. Please make sure base of trench is clean before you pour concrete", (2) the builder sent the certifier eleven photographs in relation to the slab to which the certifier replied: "Everything perfect but corner bars are missing in this photo". The Tribunal notes that, when the certifier asked for an additional photo, the builder replied that the concrete had already been poured to which the certifier responded by saying: "No problem I trust you".
The builder suggested that the existing metal fences were old and had both dents and marks. He said that small amount of cement splashed onto those fences during his work, but it was his intention to clean the fences when the work was completed.
The sequence of events for which the builder contended, from 12 November 2019, may be summarised as follows: 13 Nov 19 WorkCover inspector issued first Improvement Notice (A276), requiring sealing broken asbestos panels with paint and removing that asbestos sheeting by 27 Nov 19. 14 Nov 19 Remedial work undertaken. 03 Dec 19 WorkCover inspector issued second Improvement Notice (A279), requiring removal broken pieces of asbestos or at least sealing them with paint (until the neighbours agreed for the fence to be removed) by 10 Dec 19. 04 Dec 19 Builder issued variation for $14,300 to owner for proposed work. 05 Dec 19 Mr Hussein advised the builder that the owner rejected that variation as he would replace the boundary fence. 06 Dec 19 Mr Hussein advised the builder the fence had been replaced. 7 Dec 19 The builder attended site, told the owner of need for fence to be removed, sleepers installed then reinstall the fence. 08 Dec 19 Mr Hussein told builder asbestos clearance certificate received. 09 Dec 19 Mr Hussein advised the builder that neighbour had found asbestos near the fence. The builder rang owner then left a text message. Upon arriving at the site, the neighbour showed him pieces of asbestos, photos were taken (A291-295). Text messages (A297) suggest asbestos was buried in the soil in a bag and that scaffolding had been moved and was now on the neighbour's property. At 4pm, having been unable to speak with the owner, the builder arranged for the removal of the asbestos which required soil removal. The builder spoke to the owner at 6pm who rejected that the fence contractor had done anything wrong and said he sent an email to the owner at 8.30pm (A301) but a typed wording, not the email, was provided. 10 Dec 19 Builder informed more asbestos found and sought to speak with the owner who replied: "I'm currently in the stages of legal advice on how payments should be made". The builder claimed to have sent an email (A308), with an invoice for the $5,445 variation attached (A309), but only a typed document was provided. 13 Dec 19 The scaffolder is said to have advised the builder of a warning received from WorkCover in relation to the scaffolding in the region of the new fence which did not have a retaining wall. The builder tried to contact the owner, without success. 14 Dec 19 Builder undertook removal of 100mm of soil on the boundary, installed timber sleepers to retain solid around the fence, and replaced the scaffolding which had been removed. The builder claims to have then sent an invoice for $24,200 (A317) under cover of an email (A316) but only a typed document was provided. 19 Dec 19 After trying to contact the owner between 14 and 18 Dec 19, having only been able to speak to him once, being told to talk to the owner's lawyer, being told not to do further work, and being told the owner would not pay him any further money, the builder received a letter from the owner's lawyer, suggesting work had not been carried out in a proper manner. 24 Dec 19 The builder arranged for timber which had been left on site to be removed at a cost of $3,300. 25 Dec 19 An invoice for a variation which included that amount was provided by the builder to the owner (A322). 03 Jan 20 Another builder advised the builder that the owner had asked him to quote for completing the work covered by the contract. 05 Jan 20 During a telephone conversation with the builder, the owner said he had changed the locks and had arranged for another builder to complete the building work to which the builder claims to have replied: "The contract is terminated". 08 Jan 20 Builder attended the site to confirm the locks had been changed. 22 Jan 20 Owner's lawyer sent a letter (A326) which proposed that the parties agree the contract price was $550,000 plus GST and "That the Builder issue complying Tax Invoices for the amounts already paid by the Owner and for all future payment requests". 22 Jan 20 A second letter from that lawyer (A327) denied the builder was entitled to be paid for any variations or delay costs, suggested the builder was not entitled to deny the owner access to the site, suggested: "The works have been mutually suspended", and claimed "You are still responsible for the site. The Owner has not taken possession. Do you say you have left the site?" 18 Feb 20 Another letter from the owner's lawyer (A331) sought confirmation of the contract price and amounts already paid. 18 Feb 20 A second letter from that lawyer (A333) sought to obtain agreement to an amended schedule of payments. 18 Feb 20 A third letter from that lawyer (A335) served a notice of dispute which referred to an 11 December 2019 report from Mr Cavallo and disputed the builder's entitlement to variations 2 to 5. 26 Feb 20 Notice of Default (A385) was issued by the owner's lawyer. 17 Mar 20 Notice of Termination (A388) was issued by the owner's lawyer, but that notice did not specify the reason for that termination.
The builder's affidavit went on to suggest that the remaining work under the contract totalled $289,000 (inclusive of GST) and that he would have completed that work at a cost of $143,730, leaving a lost profit of $145,270. Quotations were provided in support of that amount for remaining work.
The builder was cross-examined. He confirmed that he was claiming the $3,300 cost of removing the timber and not the $19,000 cost of that timber. However, despite a call for any document relating to that $3,300 cost, no document was produced. It was also revealed that the builder had only been licensed for about two years at the time of this building work. He claimed that the certifier inspected and approved the piers. The builder claimed he only needed a certificate for the piers after and not before pouring the piers. He suggested the certifier sends the certificate to the owner and said he never asked for any such certificate.
Likewise, for the slab, the builder claimed he only need approval and not a certificate before the slab was poured. The builder maintained that it was his job to make sure the work complies, when the certifier approves that work he can go ahead, and the certificate is the a matter for the owner.
The variation claim for asbestos removal was said to have been an emergency variation which did not, for that reason, need to be in writing. Although the builder claimed to have a receipt for what was paid in respect of scaffolding, again a call did not result in any document(s) being produced. The builder denied that the value of the work done, for which he had been paid $255,000, was "more like $125,000".
Mr Fajaloun, who said he is a carpenter, provided an affidavit in which he indicated that, early in January 2020, he spoke with the builder who told him: "I am not sure what is happening right now. I will need to talk to the owner. I'll call you back." Mr Fajaloun said that a few days later, when he spoke again with the builder, he was told by the builder that the contract which is the subject of these proceedings had been terminated. This witness was not cross-examined.
Mr Ali Hussein was said by the builder to be his "business partner". Although he was referred to in the builder's affidavit, no evidence was provided by him,
Adrian (no surname provided) was said by Mr Sayar jnr to be the builder's site supervisor. Unless this is a reference to Mr Hussein, there was no reference to either "Adrian" or a "site supervisor" in the builder's affidavit and this was not pursued in cross-examination.

Expert evidence - defects

The owner relied on the reports of Mr Cavallo dated 11 December 2019 (A34), 11 December 2020 (A80), and 8 November 2021. The first of those reports referred to items said to constitute defective work and set out an estimate of the value of the work done. There was a calculation of the cost to rectify defective works which suggested a total of $122,840 for "brickwork defects", despite the components not adding to that figure, and showed $400 for the cost of two cleaners working for 8 hours at $50 per hour which actually amounts to $800. After suggesting $5,000, $4,740, and $4,000 for the next three of the four items, the total was said to be $84,000.
Not surprisingly, the second report amended the suggested cost of rectification of defective work. The suggested cost for the first item was correctly totalled at $106,720. The amounts for the remaining three items were unchanged. While the total of $84,000 remained unchanged, additions were made for profit and overhead (20%) and GST (10%). However, again the arithmetic was faulty: (1) showing $24,092 as 20% of $84,000, and (2) adding $84,000 and $24,092 to give $144,552. To the incorrect total of $144,552 was added GST to give $159,007.20.
The third report suggested additional defects and set out a "demolition cost estimate". Curiously, this third report added a claim for rental loss of $218,400 (152 weeks at $1,400) despite no such claim being included in the Points of Claim, Mr Cavallo having no expertise in this field, and no supporting documents or other evidence being provided.
The builder relied on the report of Mr Drexler dated 16 November 2021 (A420) and his supplementary report dated 23 November 2021 (A590). The former report responded to the first and second reports of Mr Cavallo while the latter responded to the third report of Mr Cavallo.
The expert evidence in relation to the alleged building defects is considered below.

Expert evidence - quantum

The builder relied on the report of a quantity surveyor, Mr Mehdinezhad dated 18 November 2021 (A453), which was shortly prior to the first hearing day. It was admitted into evidence as it was responding to evidence of the owner and the delay in the second hearing day provided the owner with time to consider that report, which contained an assessment of the value of both the work completed and the variations claimed by the builder.
The owner indicated at that first hearing day that he would be relying on Mr Cavallo to respond to the evidence of Mr Mehdinezhad for the builder. That was to be accommodated by the order made for the preparation of a Joint Report which did not occur. As a result, on the second hearing day, the owner was permitted to rely on pages 97 to 101 of the 101 pages of documents submitted belatedly by the builder's solicitor under cover of an email dated 28 March 2022 despite no order having been made to permit supplementary evidence.
The expert evidence in relation to quantum is also considered below.

Owner's submissions

It was contended that the builder did not validly terminate the contract due to non-payment of variations as his suggested termination was neither written nor signed.
After referring to the alleged defective work, it was suggested that, as to the slab and footings, even if there was no defect there was nothing worth salvaging because without proper certification the owner was unable to obtain an occupation certificate. It was noted that the builder's case was that it was the owner's responsibility to obtain the necessary certificates. Further, that the builder was inexperienced and that the relevant certificates were not provided because the engineer/certifier was not contacted.
The builder's suggestion that the asbestos removal was urgent was disputed, noting that the Improvement Notice contained a time frame for the work to be done with provided an opportunity for the builder to comply with the procedure set out in the contract for variations.
In relation to the builder's claim for loss of profits, it was submitted that the contract was terminated by the owner, the builder's purported termination was not valid, that the builder had failed to provide the requisite certificates, and that there were unsigned variations. It was noted that the effect of the builder's evidence was that there would be a 100% mark-up on the remaining work since he suggested the work remaining had a contract value of $289,000 but he could have completed that work for $145,270 (both figures inclusive of GST) which was said to be unrealistic and not supported by the contract.

Builder's submissions

The builder's submissions were both written (MFI 1) and oral. In the written submissions, lodged after the first but prior to the second hearing day, it was contended that the builder had completed stages 2 to 5 of the ten stages set out in the contract (stage 1 being the deposit) and that the materials for stages 6 and 8 had been purchased and that work partially completed. It was said that invoices for $255,000 had been issued and paid but that an amount of $25,500 (being the GST on those amounts) was unpaid.
Any suggestion that the builder is only entitled to a reasonable amount for the work done was contested as was the suggestion that the value of the work that was done was $84,000.
It was asserted that the builder's right to payment for the deposit and the completed stages was unaffected and that those amounts totalled $260,000 (plus GST) and that the builder was entitled to be paid on a quantum meruit basis for stages 6 and 8, which were not completed.
Reliance was placed on clause 13 of the contract in relation to the claims for the first two variations, being amounts which total $29,645 (ie $5,445 and $24,200). After referring to the history of what was said to have occurred in relation to the asbestos, it was contended that the required work had to be undertaken promptly (including because the builder could be found liable for any impact of airborne asbestos) which could not be done if that variation had to be put in writing. In relation to the removal of timber, the claim was put on a quantum meruit basis.
On the issue of termination, the builder's case was that the notices issued by the owner's solicitor were of no effect because the builder had terminated the contract on 5 January 2020 by accepting the owner's repudiation of the contract.
Alternatively, reliance was placed on the builder attending the site on 8 January 2020 and finding the locks had been changed by the owner. It was contended that the builder validly terminated the contract, even if his election following repudiation was not communicated to the owner, by reason of the builder's conduct indicating his election to terminate.
It was submitted that the builder was entitled to recover (1) $25,500 for unpaid work, (2) $32,945 for variations, and (3) $145,720 for loss of profits.
As to the owner's defects claim, it was said that there were issues of who is liable for the defects that exist, and mitigation of loss, notably the failure to protect the timber frame from deterioration due to exposure to the weather.
The oral submissions for the builder reiterated the submission that the owner had decided to terminate but was seeking an expert report to justify his position. It was noted that, when Mr Cavallo first attended the site, on 11 December 2019, there was no issue with the timber frame at that time.
As to the defects claim, it was said that the "big issue" was the absence of certificates for piers and footings. The builder's case was that there was no requirement for the builder to obtain certificates and that the owner failed to lead any evidence as to why certificates were not obtained.
Submissions were made in relation to each of the items alleged to involve defective work, which items are considered below. After referring to Mr Cavallo's inclusion of a claim for lost rent, it was submitted that the evidence of Mr Drexler should be preferred.
As to the loss of profit claim, it was noted there was no cross-examination of the builder as to his mark-up and submitted that it was common to "back end" profit. An alternative loss of profits claim was that, since Mr Cavallo suggested a building margin of 20% for profit and overheads, it would be reasonable to allow the builder 20% of the contract price for that claim.

Consideration

In determining this application, the Tribunal has considered the entirety of the documents admitted as evidence and the submissions. These reasons focus on the material central to the issues but, to the extent that any evidence or a submission is not referred to, it should not be assumed that evidence or submissions has been ignored. That approach is consistent with what was said by Allsop P in Mitchell v Cullingral Pty Ltd [2012] NSWCA 389 at [2]: [A] judge may, in dealing with large bodies of evidence, be forced to economise in expressions and approach in order to be coherent in resolving the overall controversy. The need for coherent and tolerably workable reasons sometimes requires a truncation of reference and expression. Judgement writing should not become a process that is oppressive and produces unnecessary prolixity. Not every piece of evidence must be referred to. That said, central controversies put up for resolution by the parties must be dealt with. The competing evidence directed or relevant to such controversies must be analysed or resolved …
Assessment of lay witnesses. The owner's denial that the builder showed him asbestos remnants on 7 December 2019 was unconvincing, his suggestion he never received invoices for variations is contradicted by the Notice of Dispute referring to such an invoice, and he gave many non-responsive answers.
Mr Sayar jnr, the owner's son, provided a statement in which he appears to suggest that a total of $285,00 was paid, not $255,000. His suggestion that a notice issued by the SafeWork officer related to scaffolding is not borne out by the evidence. He was plainly incorrect in suggesting that no lawyer had been retained by the time Mr Cavallo inspected the site on 11 December 2019 since Mr Cavallo's first report includes a letter from the owner's solicitor dated that day. Mr Sayar jnr suggested he had a variety of documents to produce at the hearing (A24 at [33]) but that did not occur.
The builder provided typed documents, suggested to be emails, rather than copies of the emails. He claimed to have documents but, when a call was made for those documents to be produced, there was no response.
For those reasons, the Tribunal does not consider the evidence of any of the three lay witnesses to be reliable which makes the assessment of the lay evidence more difficult. Greater weight has been placed on admissions against interest during the cross-examination of the lay witnesses. Normally, unreliable lay evidence would result in the Tribunal's focus shifting to contemporaneous documents but both parties claimed to have documents that were not included in the evidence. As a result, it must be recognised that the Tribunal has been forced to decide this case based not on the documents which exist but on the documents which are in evidence.
Termination. Dimitropoulos v Capital Constructions Pty Ltd [2018] NSWCATAP 100 at [60], and the cases referred to in that decision, establish there is a right to terminate at common law in addition to the right to terminate provided by the terms of the contract and that the common law right to terminate should not be regarded as excluded unless the contract manifests an explicit intention to do so.
Neither clause 25 of the contract, headed "Termination of contract by owner", nor clause 26 of the contract, headed "Termination of contract by contractor", excluded the common law right to terminate.
Clause 25 provided a mechanism for termination of the contract by the owner if the contractor:  is unable or unwilling to complete the work or abandons the work  suspends the work before completion without reasonable cause  becomes bankrupt …  fails to proceed diligently with the work  fails to remedy the defective work or remove fault or unsuitable materials, or  without reasonable cause, fails to comply with an order or direction of a public authority with respect to defective or incomplete work, which would substantially affect the quality and/or progress of the work.
While the owner followed the procedure set out in the contract, namely Notice of Dispute then Notice of Default then Notice of Termination, none of the above six reasons applied. As a result, although the owner followed the procedure for termination under the contract, he did not have a right to terminate under that contract. Accordingly, the position of the owner must be considered by reference to the common law right of termination.
Clause 26 provided a mechanism for termination of the contract by the builder if the owner:  fails to provide satisfactory evidence of title to the land and capacity to pay the contract price including any variations (see Clause 5)  fails to pay a progress payment or other amount due under the contract (see Clause 4)  becomes bankrupt …  denies access to the site to the contractor, the contractor's employees or sub-contractors so as to prevent ther work from proceedings (see Clause 19)  fails to perform any work or supply materials as specified in Clause 16 which prevents the contractor from continuing with the work under the contract or otherwise obstructs the contractor from performing the work  fails to rectify a cause of suspension under Clause 24 within the time specified in Clause 24, or  without the consent of the contractor prior to completion of the work enters into occupation or otherwise obstructs the contractor from performing the work.
If the evidence that the owner denied the builder access to the site and refused to make payments is accepted, the builder had a right to terminate under the contract.
However, the builder did not follow the procedure set out in the contract, namely Notice of Dispute then Notice of Default then Notice of Termination. As a result, although the builder appears to have had a right to terminate under the contract, he did not follow the procedure for termination under that contract. Accordingly, the position of the builder must also be considered by reference to the common law right of termination.
The position as to termination at common law may be summarised by saying that a contract may be terminated: 1. if there is a breach of an essential term of the contract (Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61 (Koompahtoo) at [48], Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632), 2. if there is a significant breach of an intermediate term (Koompahtoo at [51]-[55]), or 3. if the contract is repudiated by a party evincing a clear intention to not be bound by that contract (Koompahtoo at [44], Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23).
The Tribunal makes the following findings of fact relevant to the issue of termination at common law: 1. On or before 8 December 2019, the owner's contractor, who was being paid to remove asbestos from the site, buried a bag of asbestos in the soil and did not remove all the asbestos. 2. On 9 December 2019, when the presence of asbestos was found, the builder took steps to have it removed. 3. On 10 December 2019 the builder sent the owner a variation invoice for the removal of asbestos and ceased work, saying: "Work will not commence until payment is received". The owner advised the builder he was seeking legal advice as to how payments should be made. 4. On 11 December 2010 Mr Cavallo inspected the site and, by this time, the owner had made up his mind to terminate the contract. 5. On 18 December 2019 the owner's solicitor sent a letter, alleging he had failed to "carry out the Building Works in a proper manner". 6. On 19 December 2019 the owner's solicitor told the builder not to do further work and suggested he would not be paid any further money. 7. Early in January 2020 the owner contacted other builders, asking them to provide a quotation for finishing the work. 8. On 3 January 2020 the builder became aware the owner had done that. 9. On 5 January 2020, during a telephone conversation between the owner and the builder, the builder indicated that the contract was terminated, and the owner told the builder to speak with his solicitor. 10. When told by his lawyer that the builder had gone, the owner installed a new fence. 11. On 22 January 2020 the owner's solicitor sent a letter to the builder (A327) which suggested the builder was not entitled to the claimed variations and suggested the builder was still responsible for the site. 12. On 18 February 2020 the owner's solicitor issue a Notice of Dispute (A336) which referred to the 11 December 2019 report of Mr Cavallo, variations 2 to 5, and the late payment or delay costs referred to in the builder's 10 December 2019 email (A308). 13. On 17 March 2020 the owner's solicitor issued a Notice of Termination (A388) which did not provide any reason for termination.
The suggestion in the 22 January 2020 letter from the owner's solicitor (A327) that "The works have been mutually suspended" is not borne out by the evidence as there is nothing to suggest the builder agreed to a suspension of the work. The position was that on 10 December 2019 the builder indicated to the owner that he refused to carry out further work until he was paid and on 19 December the owner's solicitor told the builder not to do further work and that the builder would not be paid. As a result, the work had ceased but not by agreement between the parties.
The reasons advanced by the owner for deciding to terminate the contract varied. First, in re-examination the owner suggested the reasons were (1) that he found out that the builder was not paying the wages of the carpenter and (2) that he was causing problems with the owner's neighbour. Neither of those reasons is supported by the evidence and, even if they were, they do not provide a sufficient basis for termination.
The reasons for termination advanced by Mr Sayar jnr, to whom the owner said he delegated authority, were (1) he saw the carpenter removing timber from the site and that the carpenter said the builder had not paid him, (2) variations charged by the builder, (3) a threat made by "Adrian" to snap Mr Sayar's neck, and (4) defective work.
The first of those four reasons did not entitle the owner to terminate the contract as it was a matter as between the builder and his carpenter. Secondly, a dispute as to a variation cannot be regarded as either a breach of an essential term or a significant breach of an intermediate term. The third is a matter that was not raised in the witness statements and lacks probative force as it was not mentioned until cross-examination. The fourth reason was the alleged defective work based on Mr Cavallo's 11 December 2019 report.
Based on the Tribunal's consideration of the allegations contained in that report (set out below), that report did not provide a sufficient basis for termination. Indeed, it was not until the Notice of Dispute (A336), sent under cover of a letter dated 18 February 2020, more than two months after the date of the inspection, that there was a reference to that report and that letter did no more than call for the builder to "review and reply" to that report.
From the evidence, the owner had clearly decided, by 10 December 2019, that he wished to terminate the contract and then sought to find a basis for doing so. The Tribunal is not satisfied that the owner was entitled to terminate the contract.
Was the builder entitled to terminate the contract? It could be said that the 19 December 2019 conversation between the owner's solicitor and the builder amount to repudiation in that the builder was told not to do further work and that he would not be paid. But, as indicated earlier, the lay evidence is not considered reliable. However, it is not necessary to decide that issue because, during his cross-examination, the owner admitted contacting other contractors early in January 2020, seeking to have them complete the work covered by the contract. That conduct was clearly a repudiation of the owner's contract with the builder which gave the builder a right to terminate that contract. The Tribunal is satisfied that, during a conversation between the builder and the owner on 5 January 2020, the builder communicated his decision to treat the contract as having been terminated, noting that the unchallenged evidence of Mr Fajaloun provides support for that conclusion.
As the builder's written submissions noted, Sargent v ASL Developments Ltd [1974] HCA 40 and the discussion of that case by McHugh JA (as he then was) in Wood Factory Pty Ltd v Kiritos Pty Ltd [1985] 2 NSWLR 105 at 146, suggest direct communication of the election is not necessary provided the conduct was such as to make known the exercise of the election to terminate.
Thus, even if it could be said that the builder did not communicate his decision on 5 January 2020, the conduct of the builder thereafter was sufficient as it left no doubt that he had elected to terminate the contract. It is noted that, towards the end of his cross-examination, the owner indicated that when his lawyer told him that the builder had moved away from the site, he put up a new fence.
As the Tribunal has found that the builder validly terminated the contract, it is necessary to assessed what damages may be reasonably be considered to have resulted. Plainly the builder suffered a loss of profit. However, his claim based on the unpaid contract sum less the suggestion cost of completion is not considered reliable as it depended on his evidence, which is not considered reliable, and invoices from people who did not provide witness statements. There is no expert evidence for the builder on this issue.
An alternative basis was put in closing submissions for the builder of a 20% profit margin and that accords with the percentage which the experts agreed in their joint report should be applied. On the basis that the contract price of $605,000 (including GST) included a 20% profit margin, that profit margin would be $100,833 (since $100,833 is 20% of $504,167 and the total of those amounts is $605,000).
While there was a submission that the profit should be regarded as accruing at the "back end" of the contract, the reality is that any profit accrues over the course of the work, although the actual amount is not known until the end of the project. By reference to the ten stages of work set out in clause 12 of the contract (A224), the builder had completed five stages which carried amounts totalling $260,000 out of $550,000 with stages totalling $290,000 remaining.
As a result, the Tribunal considers a reasonable assessment of the builder's lost profit to be $53,167 ($100,833 x 290,000/550,000).
In the event the owner was found to have validly terminated the contract when the building work was incomplete, the measure of the owner's loss (leaving aside any question of defective work) would be the cost to complete less the balance of the contract price. In this case, the owner provided no evidence of the cost to complete. The only such evidence is that of the builder who suggested a cost to complete of $143,730. The balance of the contract price was $295,000 plus GST (ie $550,000 less $255,000, plus GST).
As a result, even if the owner validly terminated the contract, the available evidence does not support any claim for damages by the owner.
Contract-based claims. Decisions such as McDonald v Denny Lascelles Ltd [1933] HCA 25; 48 CLR 457 (McDonald) at 476-7 and Mann v Paterson Pty Ltd [2019] HCA 32 (Mann) at [176], make it clear that the rights and obligations under a contract up to the point of termination are not lost by that termination as only subsequent rights and obligations are extinguished by the contract coming to an end. Accordingly, the builder's entitlement to progress payments was not lost and there is no basis for an assessment of an amount to be refunded by comparing the amount paid with the value of the completed work. Accordingly, the owner's claim for $171,000 ($255,000 minus $84,000) fails and it is not necessary to assess the value of the completed work as at the date of termination.
Turning to the builder's claim for $25,500. The printed contract wording provided for the price to be inclusive of GST but a handwritten alteration crossed out the word "including" and wrote "Exclude". While that handwritten alteration was not initialled, the 20 January 2020 letter from the owner's solicitor (A326) and the schedule signed by the owner (A332) that accompanied the 18 February 2020 letter from the owner's solicitor (A331) make it clear that the parties understood the contract price to be $550,000 plus GST, ie $605,000, in accordance with the handwritten amendment.
Clause 4 of the contract (A219) specified the deposit to be $55,000 without any reference to GST. Clause 12 set out progress payments for ten stages of the work with the words "including GST" appearing underneath the heading "Amount". However, it appears that whoever altered the contract price to be exclusive of GST failed to make a similar change in clause 4 or clause 12. In particular, the page headed "Amended Schedule" (A334), signed by the owner, makes it clear that the words "including GST" in clause 12 should have been amended to read "excluding GST".
The result is that the builder invoiced, and the owner paid, amounts for items 1 to 5 which totalled $255,000, but that amount should have been $25,500 higher by reason of GST. Thus, applying what was said in McDonald and Mann, the builder is entitled to be paid a further $25,500 under the contract in respect of work completed prior to termination.
Variation claims. Three amounts, totalling $32,945, were sought by the builder under this heading: (1) $5,445 for the removal of asbestos, (2) $24,200 for soil removal and work on a fence, and (3) $3,300 for the disposal of timber.
Removal of asbestos. After the WorkCover inspector issued a second improvement notice on 3 December 2019 (A279), requiring the removal of pieces of asbestos by 10 December 2019, the builder issued an invoice for proposed work the next day, ie 4 December 2019. However, the owner had the work done and provided a clearance certificate on 8 December 2019. A contemporaneous text message and photo (A297) warrants a finding that a bag containing asbestos was buried in the soil and that it was found on 9 December 2019, the day before the due date for compliance.
The Tribunal is satisfied that attempts were made by the builder to contact the owner and that the removal of that asbestos was urgent. As a result, the procedure for variations set out in clause 13 of the contract (A225) did not apply because that clause included the following words: The requirement for variations to be in writing does not apply where, if work were not to be done promptly, there is likely to be a hazard to the health or safety of any person or to the public or to be damage to the property and the work could not be done promptly if the variation had to be put in writing before commencing the work.
Variation #2 is the heading on the relevant invoice for $5,445 (A309). Its components were (1) $2,700 for the removal cost, which was supported by an invoice (for $3,000 which appears to include GST), plus (2) $1,600 for site supervision, (3) a $650 claim for use of a temporary fence and concrete blocks, and (4) 10% for GST.
The Tribunal agrees with the builder's quantity surveyor (A556 at [40]) that the $650 claim is double counting. As a result, this variation is allowed in the amount of $4,300 ($2,700 plus $1,600) plus GST which is $4,730.
Soil removal and work on fence. Variation #3 is the heading on the relevant invoice for $24,200 (A317). That variation was issued after the work to which it related was done. The evidence does not satisfy the Tribunal there was any urgency attending this work such as would entitle the builder to not follow the procedure set out in clause 23.
When a party is unable to make a claim based on a contract, including when there is a failure to comply with legislation which requires that contract to be in writing, that party may be able to recover a reasonable amount for work done and materials supplied. The decision of the High Court in Pavey & Matthews Pty Ltd v Paul [1987] HCA 5 makes it clear that the basis for that claim, called a quantum meruit, is that it would be unjust to allow the other party to be enriched by obtaining a benefit but not having to pay for it.
By reason of the failure to comply with clause 23, the builder is only entitled to recover on a quantum meruit basis. His quantity surveyor assessed the value of this work at $6,600 (A559 at [45]) which evidence the Tribunal accepts.
Disposal of timber. Variation #4 is the heading on the relevant invoice for $28,600 (A322). Of that amount only the claim for $3,300 for the cost of disposal of timber is pressed.
This amount arises from the builder being told by the owner not to do further work. The builder's quantity surveyor assessed this variation and suggested an amount of $3,000 plus GST was reasonable (A5612 at [51]). Mr Cavallo agreed with that amount on an "if found" basis (C101, last line).
The Tribunal considers this claim involved a variation since it was a consequence of the owner telling the builder not to proceed with the work. Alternatively, this amount could be claimed as damages arising from the owner's repudiation of the contract. An amount of $3,300 is allowed.
The Tribunal notes that the total amount allowed in respect of the three variation claims is $14,630 ($4,730, $6,600 and $3,300).
Section 48MA. Neither counsel suggested a work order and the Tribunal is satisfied, from the lay evidence, that the relationship between the owner and the builder is irretrievably broken. Any work order would be highly likely to result in a renewal application for a money order. As a result, it is necessary to determine both liability and quantum in relation to allegations of defective work.
Defects claim. The items raised under this heading were (1) brickwork defects, under the headings damp proof course, expansion joints, and weepholes, (2) pest control, (3) concrete slab, (4) damaged fences, (5) timber frame. To those items must be added the absence of certificates for both the piers and footings, and the slab.
It is convenient to here note that the Tribunal considers, in the event of a conflict between the evidence of Mr Cavallo and the evidence of Mr Drexler, the evidence of Mr Drexler should be preferred for the following reasons. 1. The inclusion of a claim for lost rent suggests Mr Cavallo was providing a report as an advocate for the owner rather than as an expert whose primary duty was to assist the Tribunal, noting his evidence in cross-examination that the owner asked him to include that claim. 2. The reports of Mr Cavallo reveal a lack of the reasoning which is necessary to provide a basis for his opinions, notably in relation to why demolition is required. 3. Likewise, there is a lack of explanation of how Mr Cavallo obtained the amounts he suggested. 4. Mr Cavallo referred to and relied on superseded Australian Standards and provisions in the BCA. 5. The numerous arithmetical errors in the calculations of Mr Cavallo. 6. Portions of the report of Mr Cavallo appears to be a word-processed document which has not been checked for accuracy and applicability, such as at A86 where he suggests "failure of the waterproofing Roof area" despite there being no roof.
Damp proof course. Mr Cavallo noted that the damp proof course was not visible at the face of the brick wall. He did not accept the rectification method proposed by Mr Drexler but contended for demolition and rebuild by reason of this and other items. In the joint report, Mr Cavallo did not accept the method of rectification proposed by Mr Drexler and his oral evidence was that cutting into the mortar would damage the flashing. If demolition was not considered warranted, he favoured chemical injection at a suggested cost of $18,000.
Mr Drexler accepted that the damp proof course, although installed in the correct locations, did not extend to the face of the brickwork, as required by AS773.2, but was 10 mm inside, as could be seen at the weepholes. He contended that what was done was common and would not cause any adverse effect and suggested rectification would cost $1,180.
The Tribunal finds: 1. the damp proof course does not extend to the face of the brickwork, 2. there has been a failure to do work with due care and skill and a failure to comply with an applicable Australian standard, 3. there has been a breach of s 18B(1)(a), 4. demolition is neither necessary nor reasonable if this item is considered in isolation, 5. the method of rectification proposed by Mr Drexler is reasonable, and 6. the $1,180 cost of rectification suggested by Mr Drexler is reasonable.
Expansion joints. Mr Cavallo's report noted the absence of expansion joints in the brickwork, contrary to the Building Code of Australia (BCA) but did not specify how many such joints were said to be missing. He did not provide an estimated cost of rectification by reason of his opinion that demolition and replacement were required.
Mr Drexler accepted this was a defect. He proposed rectification by cutting a 20mm gap along the joint between the bricks with an angle grinder and filling the gap with a flexible sealant. His report outline labour and materials costing $118 for the "party wall" between the two units. In the joint report, he allowed for four such expansion joints to be added.
The Tribunal finds: 1. expansion joints were not installed, 2. there has been a failure to do work with due care and skill and a failure to comply with the BCA, 3. there has been a breach of s 18B(1)(a) and s 18B (1)(c) since the BCA has the force of law via the Environmental Planning and Assessment Regulation, 4. considered in isolation, demolition is neither necessary nor reasonable, 5. the method of rectification proposed by Mr Drexler is reasonable, and 6. the $472 cost of rectification suggested by Mr Drexler is reasonable.
Weepholes. In his report and in the joint report, Mr Cavallo said no more than state an opinion that the weepholes are at the wrong height. As such, that opinion lacks reason(s) and a factual foundation.
Mr Drexler, in his report, said he observed the weepholes, included photos of them, noted that Mr Cavallo had not provided either details or photos in support of his opinion, referred to the relevant provision of the BCA, and expressed the view that the weepholes have been installed in accordance with the BCA.
In the joint report, Mr Cavallo said: "Refer to photos in Annex B. And earlier reports clearly displaying non-compliance." The addition of photos to a joint report is a belated way of seeking to provide evidence that should have been provided previously. However, while those photos are accompanied by descriptions, none of those descriptions refer to weepholes.
As it is the owner who is alleging defective work, the owner bears the onus of proof. This alleged defect has not been proved. Thus, there is no cost of rectification, and this aspect does not add to the owner's case for demolition.
Pest control. In his report, Mr Cavallo said that, at the time of his inspection, a termite barrier was not installed. In respect of this item, he included photos of two locations were concrete appears to have been added to the slab, as originally poured.
Mr Drexler said he observed that a termite barrier had been installed and provided two supporting photos and a termite certificate.
In the joint report, Mr Cavallo repeated what appeared in his report and included a suggested cost of "Up to 90m = $4,000". The comments he included in the joint report suggested that the termite barrier was not visible in all areas and that where the slab has been extended, there is no separate certification to confirm those areas had been adequately treated. Again, Mr Cavallo sought to add to his evidence by including photos as an annexure to the joint report. He sought to add further evidence by suggesting a price for the installation of a chemical injection barrier by indicating the name of the person, his mobile phone number, and a price of $3,500 plus GST. However, that figure did not indicate to what area that price related.
The fact that a termite barrier cannot be seen in every relevant area does not mean it is not there. The certificate dated 17 November 2019 that was provided (A503) supports the view that a termite protection barrier was installed. There are two areas identified by Mr Cavallo's photos as additions to the slab but there is no evidence as to whether that work was carried out before or after the certificate was provided. Given the date of the certificate, it seems likely they were added before but there is no evidence on that aspect which was not raised in cross-examination of the builder.
Again, the owner has failed to prove this item, there is no cost of rectification, and it provides no support for the owner's case that demolition is required.
Concrete slab. Mr Cavallo's report referred to two sections which had been added to the concrete slab and to a gap under a timber frame which suggested the slab was not level. However, he did not set out any process of reasoning for his opinion that there had been a breach of the duty imposed by s 18B(1)(a) to carry out work with due care and skill. Hs suggested rectification work was repair of the slab in the two areas shown in his photos and levelling of the slab in the region of that timber frame.
When cross-examined, Mr Cavallo said he had checked with the owner who had said he believed there were multiple mistakes in the slab. That lay evidence was neither given by the owner nor included in Mr Cavallo's report.
As Mr Drexler observed, there are no regulations regarding the extension of a concrete slab and there no evidence was provided that the slab was defective. He suggested the gap between the slab and the timber frame was incomplete work due to the builder having not filled the gap with a non-shrink grout. The cost to carry out that work was said to be $95 for labour and materials. If that gap was the result of the slab not being level, then Mr Cavallo failed to provide details of either what area was involved or how much out of level the slab was. Significantly, Mr Drexler was not cross-examined in relation to this item.
The Tribunal is not satisfied that this alleged defect has been proved: the evidence of Mr Cavallo on this item falls short of what is required of an expert by decisions such as Makita, referred to above, and the unchallenged evidence of Mr Drexler is that there is no defect.
Damaged fences. Mr Cavallo's description of this item was "The side Boundary fences [plural] have be damaged with concrete and Mortar sprayed all over them. Sections are dented, damaged and on a lean." However, his description of the location was "The Right side Boundary fence. [singular]". He suggested another breach of s 18B(1)(a) of the HBA and included three photos. His suggested rectification was to remove and replace damaged and stained panels and reinstall the top rail. It was not until the joint report that Mr Cavallo provided an estimated cost of rectification. In that joint report, Mr Cavallo suggested a cost of rectification of $4,000 without any indication of how he arrived at that figure.
Mr Drexler observed cement on the metal fence and dents. He suggested the builder instructed him they were present when he commenced work. However, the builder did not provide such evidence. He suggested rectification by cleaning the cement off the fence at an estimated cost of $600. In his oral evidence, Mr Drexler suggested that a light acid wash would remove the cement.
The Tribunal is not satisfied that the owner, who bears the onus of proof, has established anything more than the cement and mortar dust were caused by the builder. The evidence of Mr Drexler as to rectification is preferred. As a result, this breach of s 18B(1)(a) warrants an award of $600.
It is important to here note that the alleged defects dealt with so far are those brought to the attention of the owner and his solicitor in December 2019. As indicted earlier, those defects are no considered sufficient to warrant termination of the contract by the owner. Even when considered collectively, the Tribunal is not satisfied that these defects are such as to warrant demolition. It was only subsequently that the timber frame, considered below, became an additional issue.
Timber frame. This aspect of the work was addressed in the third report of Mr Cavallo (A122), dated 8 November 2021, and the second report of Mr Drexler (A590), dated 23 November 2021 - both shortly prior to the first hearing day. The timber frame was item 5 in the joint report, where it was titled "Defective timber frame". Both experts agreed that there is some deterioration in the timber frame. The difference between the experts was that Mr Cavallo suggested that the warranty of the timber frame had been lost and that demolition and reconstruction was required while Mr Drexler suggested the "overwhelming majority of the timber frame is intact and in satisfactory condition". Mr Drexler suggested that damaged timber and rusting nails could be repaired at a cost of $1,320.
The evidence of Mr Drexler is preferred to that of Mr Cavallo for the reasons already indicated. As to the method of rectification, the Tribunal is not satisfied that demolition is either necessary or reasonable and the estimated cost of rectification of Mr Drexler is accepted.
However, there is also a liability issue in relation to this item which was not included in the 11 December 2019 report of Mr Cavallo. It follows, and the Tribunal finds, that the deterioration of the timber frame occurred post-termination and was not the result of defective work by the builder.
There are two reasons why the Tribunal considers the owner is not entitled to any recovery in respect of this item. Had the owner validly terminated the contract then he might be able to assert that the deterioration of the frame formed part of the damage he suffered. Since the Tribunal has determined that the builder validly terminated the contract, the owner is not entitled to recover this loss. That is the first reason why this claimed has been rejected. The second is that, even if it was found that the owner had validly terminated the contract, the owner would be under a duty to mitigate his loss. The Tribunal considers he failed to do so.
It is well established that a party, such as the owner in this case, suffering loss is under a duty to act reasonably to mitigate that loss. The onus is on the other party, the builder in this case, to show the owner acted unreasonably (TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd [1963] HCA 57) although what is required should not be set too high (Banco de Portugal v Waterlow and Sons [1932] AC 452 at 506). Where there has been a failure to mitigate loss, the damages recoverable will be reduced to what would have been the case had the owner acted reasonably (Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 at [187])
In this case, any deterioration in the timber frame occurred during a time (1) when the site was under the control of the owner, not the builder, (2) when the owner had the benefit of legal advice, and (3) when the owner had the benefit of advice from a building expert whose 11 December 2019 report referred to waterproofing the roof area (A86). Mr Cavallo accepted, during his cross-examination, that the timber frame could have been covered by a tarpaulin. Such circumstances warrant a finding that the owner failed to mitigate his loss in relation to the timber frame.
Certificates. The third report of Mr Cavallo (at A138) alleged that "Mandatory critical inspections were not undertaken on the slab construction". During the hearing, the question was raised of the situation in relation to the certificates from the certifier for (1) the slab, and (2) piers and footings.
The builder sought to contend that, since the owner chose the certifier, obtaining the certificates was the owner's responsibility. Page 25 of the contract (A236) contains the following paragraph: Approvals To help your building project go smoothly: * check with your local council or accredited priv ate certifier on approvals your building work needs * engage a building certifier. This is your responsibility, not the builder's.
Clause 17 of the contract, headed "Approvals" (A228), suggests it is for the builder to obtain any necessary approvals. Closing submissions for the builder suggested this requirement was confined to water and gas, ie utilities, but that contention is rejected as the words of clause 17 cover "all approvals required from any public authority to occupy and use the completed work."
There was no dispute in this case that the owner chose the certifier. However, the Tribunal does not accept it was the responsibility of the owner to obtain the required certificates: it is the responsibility of the builder to obtain all the certificates required before for an Occupation Certificate can be obtained.
In this case, the evidence of Mr Sayar jnr (A23 at [30]), albeit hearsay, was that the certifier willing to issue a certificate for the slab. It was claimed, in that paragraph, that the certifier said he would not issue a certificate for the piers because he was not called to inspect or check the piers.
On the other hand, the evidence of the builder was that he called the certifier and obtained his approval. Accompanying his statement were a video of 31 seconds' duration in relation to the footing and photos in relation to the slab, sent as text messages to the certifier (A272). The video was accompanied by a message containing the address of the site, followed by the words "Footings" then "Concrete at 11". The reply was "I am happy with that" followed by "Please make sure base of trench is clean before you pour concrete".
The builder's evidence suggests the certifier, chose by the owner, was content to give his approval based on videos and photos and did not insist on inspection before work was carried out. While that is less than ideal, it is not something for which the builder is to blame.
The Tribunal prefers the contemporaneous documents to the hearsay evidence of Mr Sayar jnr. Accordingly, as to the process of inspection, approval and certification, the evidence favours the view that inspection for the footings and piers was by way of the provision of a video and that approval was given. As such, it is difficult to see why a certificate would not be issued by the certifier.
That being the evidence, this claim against the builder fails. There is no adequate evidence in the owner's case to warrant a conclusion that the absence of a certificate for the piers and footings would justify demolition and reconstruction. Nor was there any evidence of the cost of obtaining a certificate for the piers and footings if there was no inspection or approval.
The owner has failed to prove his case on this issue.
Summary. The Tribunal has determined that the owner has only established defective work in relation to the damp proof course ($1,180), the expansion joints ($472), and the fence ($600) for which the reasonable cost of rectification is $2,252. As it was agreed by the experts hat a builder's margin of 20% should be added, which increases $2,252 by $450.40 to give $2,702.40. Adding 10% for GST increases that amount to $2,972.64 which is rounded to $2,973.

Costs

As the amounts claimed or in dispute exceed $30,000, the orders will cater for written submissions as to costs. Leave will be granted for those submissions to be lodged electronically. They should include an indication as to whether it is agreed costs should be determined on the papers.

Orders

For the reasons indicated above, the following orders are made: In the proceedings HB 20/46920: 1. Sam Al Shafii is to pay Mohammad Sayar $2,973 within 14 days. 2. The Tribunal notes that the net outcome of this application and the related proceedings (HB 21/06250) is that Mohammad Sayar is to pay Sam Al Shafii $90,324 within 14 days. 3. Any submissions as to the costs of this application are to be included in the submissions as to costs made in those related proceedings. In the proceedings HB 21/06250: 1. Mohammad Sayar is to pay Sam Al Shafii $93,297 within 14 days. 2. The Tribunal notes that the net outcome of this application and the related proceedings (HB 20/46920) is that Mohammad Sayar is to pay the Sam Al Shafii $90,324 within 14 days. 3. Any submissions and evidence upon which Sam Al Shafii wishes to rely in relation to costs are to be filed and served by 13 June 2022. 4. Any submissions and evidence upon which Mohammad Sayar wishes to rely in relation to costs are to be filed and served by 27 June 2022. 5. Any submissions in reply are to be filed and served by 4 July 2022. 6. Any submissions on costs are to indicate whether the party agrees that costs can be determined on the papers, ie without a further hearing. 7. Leave is granted for any submissions on the question of costs to be lodged electronically.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 July 2022

At a glance

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Judgment (17 paragraphs)

Legislation Cited (2)

Cases Cited (16)