SDL Project Solutions Pty Ltd v Kim; Kim v SDL Project Solutions Pty Ltd

NCAT Consumer and Commercial|2021-03-31

Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 22 Rekrut and Scott v Champion Homes Sales Pty Ltd [2017] NSWCATAP 187 Repfix Industries Pty Ltd v FBD Group [2020] NSWDC 514 Rice v JR and SD Farmer t/as Urban Bespoke Homes [2020] NSWCATAP 208; Robinson v Hindmarsh Construction Australia Pty Ltd [2021] NSWCATAP 51 Roude v Helwani [2020] NSWCA 310 Rudas and Andrassy v Eid [2021] NSWCATAP 4 Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 Sabouni v Revelop Building and Developments Pty Ltd [2021] NSWSC Suecha Pty Ltd v VSD Glass & Timber Pty Ltd [2020] NSWCATAP 170 Tabcorp Holdings Pty Ltd v Bowen Investments Pty Ltd [2009] HCA 8 [17]; (2009) 236 CLR 272 Thurston v Goway Travel Pty Limited [2020] NSWCATAP 140 Walker Group Constructions Pty Ltd v Tzaneros Investments Pty Ltd [2017] NSWCA 27 Woodward v Warwick Green Building Pty Ltd [2021] NSWCATAP 210 Texts Cited: Nil Category: Principal judgment Parties: Matter HB 20/32292: SDL Project Solutions Pty Ltd (Applicant) James Kim (Respondent)

Matter HB 20/42551: James Jong In Kim (Applicant) SDL Project Solutions Pty Ltd (Respondent) Representation: Counsel: M Maconachie (James Kim) D O'Connor (SDL Project Solutions Pty Ltd)

Solicitors: Fox & Staniland Lawyers (James Kim) Adams & Partners Lawyers (SDL Project Solutions Pty Ltd) File Number(s): HB 20/32292; HB 20/42551 Publication restriction: Nil

REASONS FOR DECISION

In this decision, any reference "the homeowner" is a reference to Mr Kim; and any reference to "the builder" is a reference to SDL Project Solutions Pty Ltd.
Ms Choi is the wife of Mr Kim. Mr Laphai is a director of the builder.
This is a residential building dispute involving construction of a duplex residential dwelling in a north-western suburb of Sydney NSW.
The building works involved demolishing an existing a single dwelling on land. That dwelling was occupied by Mr Kim's parents, who had lived there for approximately 20 years. The land was co-owned by Mr Kim.
The dispute involves a complex history of factual matters which it is necessary to detail.
On 17 January 2018, the parties entered into a written contract for the residential building works in the standard form contract of NSW Fair Trading.
The contract price was $1,093,607.50, subject to Variations (Clause 13 of the Contract); and adjustments for Provisional Sum items (Clause 10 of the contract). The written contract had a line crossing out Clause 11 (Prime Cost Items Schedule).
It is not in dispute in the proceedings that the homeowner made all payments to the builder for variations and progress payment stages other than the last progress payment stage ($109,360.73 being the amount identified in the contract as the final progress payment stage); and 3 invoices issued by the builder (for "delivery of PC items"; partial completion of a driveway; and the builder's "final invoice" for the amount the builder asserts it is owned for partial completion of the final progress payment stage of works).

Relevant Contractual Provisions

The Provisional Sums schedule under Clause 10 of the contract identified 8 items (Brick Supply; Joinery; Fixtures and Fittings; Appliances; Tile Supply; Floor Finishes; Lighting Supply and Landscaping) with a provisional sum for each item identified. The total cost of Provisional Sum items was $226,369.50.
Pursuant to Clause 10 of the contract, depending upon whether the cost of the Provisional Sum item exceeded or was less than the amount identified in the schedule, either the builder was to give a credit to the homeowner for the cost to the builder that was less than the amount identified for the item in the schedule; or the homeowner was to pay the amount that the item exceeded the amount in the schedule, plus 15% builder's margin and GST. Any such addition or deduction was to be taken into account at the next progress payment stage, "or as agreed between the parties". The contractor was to provide documentary evidence of the actual cost of the Provision Sum items "at the time payment is requested".
Pursuant to Clause 12 of the contract, there were 7 progress payment stages of work. Clause 10 includes the following words: Payment of a progress payment is not to be regarded as acceptance by the owner that the work has been completed satisfactorily or in accordance with the contract documents. If there is any bona fide dispute in relation to the quality of work done, the dispute must be dealt with in accordance with the dispute resolution procedure set out in Clause 27. In those circumstances, the dispute must be dealt with in accordance with the dispute resolution process set out in Clause 27. In those circumstances, the parties agree as follows: (a) the owner may withhold from the progress payment an amount estimated by the owner, acting reasonably, equal to the owner's estimate of the value of the disputed item. (b) the contractor must continue to carry out its obligations under this contract, pending resolution of the dispute.
Under Clause 6 of the contact, the works were to be completed within 50 weeks from the date of commencement of work (as defined in Clause 5) and any extension of time within Clause 7 of the contract.
Clause 8 of the contract defines when works are complete under the contract. In this matter, for reasons that will be discussed, works were not complete under the contract with a dispute between the parties as to whether the homeowner or the builder lawfully terminated the contract during the last progress payment stage.
Clause 13 of the contract deals with variations. Work to be done or materials used under the contract may be varied at the request of the owner; or the builder; or due to matters that could not have been foreseen by an experienced, competent and skilled builder at the date of the contract; or due to a requirement of a statutory authority or Council. If a variation was requested by the builder, the owner is not liable to pay if the necessity for the variation was due to fault of the builder.
Under Clause 13, the procedure for variation is that the builder "must" provide to the owner a notice in writing containing a description of the work and the price (including GST) before (emphasis added) commencing with the work. The notice "must" be signed and dated by both parties to constitute acceptance. The only exception to this is where work must be done promptly as there is a likely hazard to health or safety or damage to property and the work could not be done promptly if the variation had to be put in writing before commencing the work.
The importance of variations being in writing and signed by both parties before work has been performed was discussed in detail (although in the context of the standard form Master Builders Association BC 4 contract) in Paraiso v CBS Build Pty Ltd [2020] NSWSC 190 at [32]-[57] and [60]. Neither party referred to this decision in their submissions, nor the provisions of Sch. 2 Cl. 1 (2) of the HB Act (which stipulates that by reason of s 7E of the HB Act it is a term of all home building contracts that any agreement to vary the contract or vary the plans and specifications for work to be done under the contract must be in writing and signed by or on behalf of each party to the contract).
Clause 14 of the contract deals with the time for payments of progress payment claims (as distinct from Variations, which are dealt with in Clause 13 of the contract). It is unnecessary to further discuss Clause 14 at this point of the decision.
Clause 19 of the contract pertains to access to the site and materials handling. Relevantly, the builder must bear the costs of "delivery of materials to the work, handling of materials, removal and disposal form the site of rubbish, surplus materials, excavated material, vegetation and demolished or dismantled structures". Clause 19 further states: … The owner must allow the contractor, and any employee or sub-contractor of the contractor, to access the site during the currency of this contract. The owner or the owner's representative must communicate and deal with the contractor personally or with such person nominated by the contractor as the contractor's authorised representative. The owner must not give directions to the contractor's employees or sub-contractors.
Clause 24 of the contract deals with suspension of work. Pursuant to Clause 24 a builder may give the owner a written notice (as set out in Clause 23 of the contract) of a suspension of work by reason of the matters set out in Clause 24 of the contract (including, relevantly, the owner failing to provide satisfactory evidence of title; the owner failing to pay progress payments or the owner failing to give the builder or its subcontractors access to the site).
Clause 25 and 26 of the contract deal with termination of the contract (Clause 25 is termination by the owner; Clause 26 is termination by the builder). Neither clause, however, states that it is the exclusive method to terminate the contract. Consequently, even if a party has not complied with Clause 25 or 26, a party may terminate (discharge) the contract by electing to terminate upon the other party engaging in repudiatory conduct, rather than electing to keep the contract on foot (Dimitropoulos v Capital Constructions Pty Ltd; Capital Constructions Pty Ltd v Dimitropoulos [2018] NSWCATAP 100 at [60] and [67]).
Clause 27 of the contract deals with the manner of resolving disputes between the parties to the contract. Clause 27 will be discussed in detail later in the decision.

Performance of Works by the Builder and Disputation between the Parties

Work commenced on or about 27 April 2018, starting with demolition of the existing house. Excavation works and construction of the duplex dwelling followed afterwards.
Between about April 2018 and August 2018 the homeowner and Ms Choi sought that the builder significantly change the layout of one of the duplexes. This was to divide that duplex into various living quarters. According to Mr Laphai, the homeowner intended to use one of the duplexes as a "boarding house"/separate living quarters. The documents of each party contain extensive emails dealing with the change to the layout.
The homeowner does not dispute that the layout of one of the dwellings was changed after works commenced, although it was not clearly explored in evidence the purpose of doing so.
One example of the change to the layout is an email from Ms Choi to Mr Laphai dated 3 August 2018 (Court Book pp. 296-297) where Ms Choi instructed Mr Laphai to provide her with a "plan with all the prospective structures in it" and Ms Choi makes extensive comments about amending one of the contractual plans.
No issue was raised in the proceedings by either party whether or not local Council consent was required for the changes to the layout and prospective use of part of the premises.
Between about 16 January 2018 and 5 September 2019 there were communications between the homeowner and the builder on a 'WhatsApp' telephone group chat that had been established to facilitate communication.
There were also numerous oral and written communications (most by email and some by text message) between the homeowner; Ms Choi; and the builder during the period that work was occurring.
An issue in dispute in the proceedings is whether the homeowner and Ms Choi and the homeowner not only "introduced" contractors and tradespersons to the site (and the builder) to perform works; but additionally directly instructed the contractors regarding the performance of the works. In considering that issue, contemporaneous emails between the parties carry significant evidentiary weight.
Mr Laphai's evidence (pp. 86-87 Court Book) was that in late 2018 Ms Choi had requested a "budget" for items which were "not part of the provisional sum allowance in the contract in order to engage their own subcontractors".
Mr Laphai asserted that the homeowner and Ms Choi directed the builder to use various contractors, and "continued to instruct subcontractors directly". Mr Laphai asserted that in August 2019 Ms Choi "continued to make changes on site and gave "direct instructions" to tradespersons she and the homeowner had arranged to perform work on the site.
The homeowner and Ms Choi agreed that they had directed the builder to use various contractors, but denied that they had attended on site and gave contractors instructions as to how to perform works.
Rather, their evidence was that the contractors remained under the direction and control of the builder, and what they had done was to direct the builder to use certain contractors/tradespersons. The builder charged a profit margin under the contract at each progress payment stage for all works performed, including the works performed by the contractors that the homeowner and Ms Choi had 'introduced' to the site.
The evidence of the homeowner (p. 818 Court Book) was that at a meeting with the builder in December 2017 (months before the contract was signed) the homeowner stated he "knew" "various trades who could be used for the flooring, tiling and joinery work" and it was agreed that the homeowner would "nominate" such tradespersons on the basis that the builder would contract with them; pay them; co-ordinate the works; and would charge me the builder's margin.
The evidence of Ms Choi (p. 856 of the Court Book) was that the builder "used her as a middleman (sic)" to arrange for the joiner, tiler and waterproofer to go on site" and that the works performed by such tradesperson were under the direction and control of the builder.
The homeowner, Ms Choi, and Mr Laphai were cross examined on who engaged tradespersons and who directed them. This issue will be further discussed later in the decision in the context of the issue of repudiation.
However, it is abundantly clear from the contemporaneous emails between Ms Choi and the builder that in the period to September 2019 the homeowner and Ms Choi not only determined which tradespersons would be used to complete significant aspects of the work (tiling, joinery, flooring, and waterproofing) but also coordinated when such tradespersons would attend the site.
On 21 May 2019, Mr Laphai emailed Ms Choi a "schedule of works for your project". The email stated as follows: Hi Yoomin, Please find below schedule of works for your project. We have made plans to concurrently undertake the carpentry fit out, tiling and flooring works. As you have requested to engage your own subcontractors for tiling and flooring, they are NOT committing to our timeframe. Could you please advise their start and finish date for these two trades. The plan is Benson (SDL Supervisor) to be on site (while undertaking carpentry fit out) to manage these two trades. As you can appreciate, it is not feasible for us to make a plan for supervision of these trades if they are not committing to a program.
On 23 May 2019, Mr Laphai emailed Ms Choi as follows: Hi Yoomin, Further to your joint walkaround with your tiler and our supervisor Benson, the following issues were raised by your tiler regarding waterproofing works completed by his own waterproofer: Balcony angle on the Unit B requiring cutdown/removal All bathroom shower angles require cutdown The tiler and the waterproofer were arranged by yourself and Benson has explained to them both about each other requirements (sic) onsite on numerous times. Benson has further spoken to yourself this morning and agreed to undertake the following task Today (sic) in order to avoid further delay to our program as your waterproofer can not (sic) make it to site today (understandably these modifications should be done by the waterproofer on his own works): Balcony angle on the Unit B will be removed. Ground floor Unit A main toilet shower angle will be cut down for wheelchair access All other Bathroom (sic) shower angle will be left as currently installed with a stepdown in the tile within area Once the above is completed by SDL today: Waterproofer will come to site tomorrow to check on everything over again with Benson and touch up as necessary Tiler will start on site Saturday (not as promised Friday) but has assured Benson that he would still maintain the original duration of one week (Completion date 31/05) Lastly, could you please ask your flooring guy for a more accurate start and finish date so that we can make plan (sic) accordingly.
On 23 May 2019, Ms Choi responded to Mr Laphai's email as follows: Hi Seng, Thank you for clarifying everything on the email. The only thing I have not confirmed is the exact time the tiler can make it Friday as he is driving down from Gosford after work. I will confirm the time later today and let Benson know. I have also emphasised to Steve (flooring) that we are on a tight time frame and he understands. When the tiler finishes all internal tiling by Friday next week, Steve will start the following Monday. When do you expect the flooring to finish? So I can let Steve know.
Mr Laphai responded to Ms Choi's email as follows: Hi Yoomin, Thanks for your email. The tiler has confirmed with Benson that he cannot start tomorrow but will start Saturday 25/05 and finish next Friday 31/05. If the flooring can start on Monday 03/06 (say each unit 2-3 days) then we can start joinery and fitting and fixture work on the same week. Regards Seng
On 23 May 2019, Ms Choi responded as follows: Ok I will speak to Steve and let him know of our expected timeline. I went to see the house yesterday and it is coming along nicely…
Ms Choi sent a further email to Mr Laphai on 23 May 2019 as follows: Hi Seng, I have spoken to Steve and his estimate of timeframe for Epping is 5 days each house so a total of 10 days. Once unit is finished you can have the carpentry go in. Hope you are okay with that. Steve will start 3rd June (Monday). I have confirmed that joinery can start following Monday 10th of June. Please confirm if you are happy with this date. I have also asked all bathroom items to be delivered to site on 6 and 7th of June. I have asked Nelson to have the garage door installed by that date so it can be securely stored in the garage. Kind Regards Yoomin
On 23 May 2019 Mr Laphai responded to Ms Choi's email as follows: Hi Yoomin, Thanks, Can the joiner (James) please send through the shop drawings of everything he is supplying and installing so that we can make appropriate check and coordinate with other trades. Regards Seng
Between about mid-2019 and September 2019 the parties fell into dispute about various aspects of the building works.
In evidence, the homeowner and Ms Choi blame the builder for the disputes arising; and Mr Laphai blames the homeowner and Ms Choi.
Issues that gave rise to disputation include: 1. Whether particular work fell within the scope of work under the contract. 2. Works purportedly performed or engaged directly by the homeowner. 3. Whether valid variations had been issued by the builder. 4. The homeowner complaining that the builder had issued excessive and unreasonable variations, most of which the homeowner had paid in any event. 5. Mr Kim and Ms Choi allegedly attending site and directing contractors (whether engaged by Mr Kim and Ms Choi; or engaged by the builder). 6. Delays in the progress of works. 7. Removal of soil and spoil from the site. 8. A dispute about whether the builder was responsible for a mixer not being installed in one of the bathrooms of the premises, and who would be responsible for the cost of installing the mixer and re-performing tiling/plumbing/ and waterproofing works so this could occur. 9. The additional costs of constructing a driveway. 10. Gas and electricity being connected to the premises. The builder asserts this was the homeowner's responsibility because it was not included in the contractual scope of works, and the failure to do so was delaying completion of the works.
In July 2019, there was a dispute between the homeowner and the builder regarding the removal of soil from the site. Contemporaneous emails are set out at pp. 329-352 of the Court Book.
The builder had performed excavation work to install on-site detention tanks as part of the drainage system for the premises. There was a stockpile of soil and spoil from such works, and earlier excavation works. The builder suspected that the soil was contaminated, and obtained a quotation/proposal for a waste classification report (i.e. soil testing) from JK Environments, and provided it to the homeowner with a proposed variation to have the soil tested. The amount of soil/spoil and its position was also affecting the performance of other building works.
The homeowner refused to agree to have the soil tested and the proposed variation. The homeowner did not believe the soil was contaminated (or that there was a real risk of contamination) and did not accept the advice of the builder in this regard. In the early stages of the building works the builder had raised a variation (which the homeowner had paid for) in respect of asbestos contamination of soil, and the homeowner believed that the builder was trying to 'double charge' the homeowner. Under Clause 1 of the contract, "asbestos removal" was an excluded item that did not fall within the scope of works.
The homeowner directed the builder (which the builder agreed to) that he would arrange for removal of the soil/spoil from the site rather than pay for a variation. The homeowner arranged for trucks and bobcat to remove the soil/spoil, which occurred over a number of days. The homeowner also used an excavator sub-contractor of the builder to assist in the loading of soil/spoil. The homeowner then took the soil/spoil to an undisclosed location.
The builder, despite Mr Laphai's view that the soil may be contaminated (including potential asbestos contamination; that a soil contamination report was required; and despite having occupation and control of the site under the contract, allowed the homeowner to remove the soil/spoil. No Notice of Breach or Notice of Suspension of Works was issued by the builder to the homeowner under the contract in regard to the conduct of the homeowner in removing and disposing of potentially contaminated soil/spoil.
Rather, the builder continued works under the contract.
In late August 2019 there was a dispute between Ms Choi and the builder about the circumstances in which a wall mounted mixer tap was not installed in the basin for the main bathroom in 'Unit B' of the dwelling.
On 28 August 2019, Ms Choi sent an email to Mr Laphai (Court Book pp. 356-357) that referred to Ms Choi having attended "Domayne today" to "return the two faulty toilets and ask them about the missing plumbing part for the bathtub".
In respect of the wall unit mixer, Ms Choi asserts that "Benson" of the builder asked her at the start of April 2018 to have "all the plumbing items that are required for rough in stage ready", and that the wall mixer was "picked up on 15 April at the warehouse" by "Benson". Ms Choi complains that there was "no excuse" for the mixer not to have been fitted, and that the builder should take "full responsibility for the mistake that occurred".
Mr Laphai responded to this email on 28 August 2019 (pp. 355-356 Court Book) by stating that he "disagreed" the mixer not being installed was the builder's responsibility. Mr Laphai stated that the homeowner and Ms Choi had "signed off" the following stages "with multiple visits to the bathroom": "Rough in stage Plastering stage Waterproofing stage (engaged by Owner) Tiling stage (engaged by Owner)"
Mr Laphai stated that it was "only when I brought up that there is a spare mixer that you wanted wall mounted tap". The email of Mr Laphai concluded with the following: I am trying very hard to help with finishing your project with all the engineering issues with external works but it seems all one sided at the moment. Hopefully we can arrive at an amicable solution tomorrow as I am going backward on this project very quickly.
Ms Choi responded to this email on 28 August 2019 as follows: Questions for you to consider. 1. Have I supplied you with all the items that are required for the rough in stage? YES 2. When he picked up the mixer did Benson know where the mixer had to go? YES 3. Did he forgot (sic) to give this to the plumber? YES 4. Is it my responsibility as an owner to pick up the mistake during the stages you had mentioned? NO I cannot see anywhere in the contract that I am responsible for coordinating any of this work and remember I am not employed by you or getting paid by your company. I have introduced the tiler and waterproofer which has nothing to do with you forgetting to install the wall mixer… If I didn't pickup (sic) your mistake, I am sorry but you cannot put that responsibility or liability on me. You are the builder and I am your client. If you disagree with what I said in this email and I am being unreasonable we should both get a second opinion from a third party. First step in resolving this problem will be agreeing who is responsible for this mistake and then second step is to find a solution. I will not discuss solutions unless this is clarified. Once we know whose (sic) at fault then we will take about how we resolve the issue.
Mr Laphai responded to this email on 29 August 2019 as follows: Hi Yoomin, Thanks for your email. Please note of the following logic (sic) for finishes: You have sourced tiles and you have directly instructed the tiler which tiles go where. You have sourced joiner and you have ensured how it will be installed directly with him. You have sourced tapware and vanity and same logic applied here, yes (sic) I am a builder not a mind reader. I have allowed you to store your tiles and PC items in my warehouse for months at no charge. I have personally helped with delivery and even yesterday helped with returning the broken toilet. Your email seems to suggest somehow I am responsible for damage and missing parts. If you want a wall mounted tap for Unit B, let me know which type and I will cost up the removal of the tile (sic) and wall, waterproofing and installation of new tapware and retiling. Please also supply outstanding PC Items as listed below: …
Mr Laphai's email then listed a number of "left side" and "right side" fittings and fixtures that he had asserted had not been supplied by the homeowner and Ms Choi.
On 4 September 2019, there was a lengthy WhatsApp exchange between the homeowner and Mr Laphai (pp. 607-608 Court Book). The exchange started when the builder stated that the "council driveway" would cost "around $13-15k".
The homeowner responded by asserting, in substance, that the builder had been "ripping off" the homeowner by issuing variations for things that were in the scope of works under the contract, and things where the parties had agreed the homeowner could "save money" on Provisional Sum items by "bringing our friends like floor tiles and joinery". The homeowner stated, in substance, that the homeowner wanted the builder to complete the works without further variations; the homeowner was not going to 'do the builder's job for it' and after completion the homeowner would do any further works "myself".
Mr Laphai responded by stating that the builder had not issued unreasonable variations; the scope of works in the contract did not include "100 sq. m" of driveway; the driveway now sought to be constructed was addition work; and the builder had tried to "help" the homeowner and inform the homeowner of additional costs. The exchange concluded with Mr Laphai stating that he would send a variation notice for all additional works, and "only if approved I will proceed".
On 5 September 2019, the local Council emailed the builder about arranging for an inspection of the driveway works.
On 5 September 2019, the builder emailed the homeowner as follows in regard to the driveway works: James/Yoomin The cost to construct and coordinate with council for driveway outside property boundary is $15,000 plus GST. Please provide an approval prior to proceeding.
On 5 and 6 September 2019, Mr Laphai sent the homeowner two invoices. Invoice 80679 was for $220 for "delivery of PC items". Invoice 80680 was for $8,250 for "driveway outside boundary and layback (partially completed) work cancelled halfway".
On 6 September 2019 the homeowner emailed Mr Laphai in respect of the driveway as follows: Hi Seng, Please send me an invoice detailing the breakdown cost of $15,000. Also, please explain the scope of works included in the building contract of the external works. We need an explanation of why there are extra cost above what's in the contract.
On or about 9 September 2019 there was a site meeting between the homeowner and Mr Laphai. Like almost every factual issue in this dispute, their recollection of what was said at the meeting was in vehement disagreement. Both Mr Laphai and the homeowner were extensively cross examined about this meeting.
Mr Laphai's version of events was that the homeowner told him he wanted "no more variations" and that the builder had "two options". The first was to compete the work "without variations" and rectify defects. The second was that the homeowner would "talk to a third party"; get a "second opinion" and "get another builder to complete the work".
According to Mr Laphai, he said the builder could not complete the works until the homeowner had arranged for "gas and electricity mains to the property" and the builder had been requesting this for "six months". The builder said he would not complete the driveway "for nothing" and required "written approval". According to Mr Laphai, the homeowner told him he had chosen "option 2" and the homeowner would get a new builder to complete whilst complaining to NSW Fair Trading. According to Mr Laphai, the homeowner said the "contract is terminated" and for the builder to "leave the site".
Mr Laphai further asserts that the homeowner took possession of the site that day by preventing the builder from having access to keys and told Mr Laphai the builder could not access the site until "Fair Trading or a third party resolves the issues between us".
The homeowner's version of the conversation was that he told the builder that there should be "no more variations" because he was upset with the number of variations that had been issued during the course of the building works (but which the homeowner had paid in any event) which the homeowner believed fell within the scope of works under the contract or otherwise were 'unfairly' charged by the builder. The homeowner's version of events was that he told the builder that he and his wife wanted a "second opinion" from NSW Fair Trading on what works fell within the scope of works under the contract; the delay in completing the work; the builder being responsible for rectification of the bathroom in 'Unit B'; and whether the builder had issued valid variations. He denied that he told the builder that the contract was terminated. The homeowner denied that he had removed the key from the letterbox and took possession of the property.
According to the homeowner, the substance of the conversation was that he told the homeowner that he wanted the works to continue without further variations, and wanted NSW Fair Trading's intervention into the dispute, but did not seek to prevent the builder from having access to the site and end the contract with the builder.
On 9 September 2019 there was an email exchange between the parties after the site meeting.
At 2.24 pm Mr Laphai emailed the homeowner and Ms Choi stating that he had received "a few emails from both of you" on Friday 6 September 2019. He referred to an email of Ms Choi "recommending" the builder seek legal advice, sent at 7.01 pm. He then referred to an email of the homeowner sent at 9.49 pm, which Mr Laphai asserted put forward the "options" of: 1. The builder continuing the work "as per plan and contract price without any further variations". The homeowner referred to wanting the dwelling completed "as per plan" and obtaining an Occupation Certificate. The homeowner continued to complain that the builder had put the works "on hold" due to its "mistakes" and had claimed items as variations which were not part of the scope of works. 2. The second option was "a second opinion about the issues e.g. Department of Fair Trading and legal (sic)". As there had been "problem after problem" and the parties were not coming to "any sort of resolution", the homeowner would (if option 2 was chosen) "engage a private builder to go over and find any possible defects" and "seek a legal advice from our lawyer to go over the contract and all the variations paid till dated also (sic) the current ones on the table". The homeowner would "get a price for each variation paid "to be revisited" and "re-investigate" the duration of the build because it is taking "far too long".
On 9 September 2019 at 5.54 pm Ms Choi sent the following email to the Mr Laphai: Hi Seng, Thanks for getting back. Our previous email indicated two options for you to choose from. It was intended to move forward with the project. , not backwards and argue with the past… It seen (sic) little ambiguous which option you want to proceed with but this is my interpretation of your email. The variations you have requested are all within reasonable ground (sic) hence if we are not in agreement with you it needs to be taken further. It seems a little ambiguous which option you want to proceed with but this is my interpretation of your email. The variations we have been requested to pay (sic). Also due to the fact you have told us unless variation is agreed and paid you will not proceed with any work. We do not agree with most of the things on your email you have sent today so our only option is to get a third party opinion. We will be contacting fair trading (sic) and Ian Macpherson (our property lawyer) to go through the building contract and discuss the issues tomorrow. There will be no more discussions on who is responsible for the variations as this clearly has not narrowed our problem down. This will be hopefully resolved by a third party. At this stage, this seems to be the only option although it is unfortunate it had to end this way.
On 10 September 2019, Mr Laphai emailed Ms Choi in response as follows: Hi Yoomin, It is indeed unfortunate. You are putting words in my mouth again by stating that "unless variation is agreed and paid you will not proceed with any work". It's you and James who stated not to proceed with any works unless I have something in writing from one of you. Although you have given me verbal instructions to do the council driveway, I have stopped work due to your email below. I cannot proceed with any further fit off works as items you have bought and meant to be supplied are missing as per my email 06/09. I will forward below email to all my subcontractors so that they are aware of the status. Please let all your subcontractors (joiner, floorer, waterproofer, and tiler etc.) know of your intention. I await your response.
On 11 September 2019, the homeowner lodged an online complaint about the builder with NSW Fair Trading. The complaint relevantly stated as follows: Your complaint: Builder is Requesting (sic) variations for the items included in the contracted price for the new build. Not agreeing to the mistakes that their staff made during the process and asking owners to pay for the re build (sic) or putting variations to cover his cost. Stop working before the variations paid up front. Taking long time to complete the work. Blaming us as an owner that it is our responsibility to supervise their work. All the staff left the company that we have been engaged with the Principal (sic) of the company is denying responsibility and blaming previous staff and not accepting. … Desired outcome: Someone else to complete the work. …
On 11 September 2019, the builder sent the homeowner a tax invoice. The tax invoice contained the description "final invoice". The invoice contains no details of the work performed. The invoice simply contains an amount (based on the builder's estimate that 80% of the works pursuant to the final progress payment stage had been completed); less a Provisional Sum "credit-debit adjustment". There were document attached that set out the Provisional Sum adjustment. Those document identifies 4 items (Fixtures; Appliances; Tiles; Landscaping; Brick Supply; Joinery; and Floor Finishes) and what the builder purportedly spent on each of those items as compared to the allowances in Clause 10 of the contract.
The "final invoice" was for $36,330.76, being the amount the builder purportedly was owed in respect of the final progress payment stage ($79,535.09) with a credit for the adjustment for Provisional Sums under Clause 10 of the contract as assessed by the builder in favour of the homeowner ($46,507.13).
On 17 October 2019, the builder wrote to NSW Fair Trading to respond to the homeowner's complaint. The letter comprises 12 pages, including various photographs. That letter forms the basis of the response by NSW Fair Trading to the homeowner's compliant.
That letter does not state in substance that the homeowner had unreasonably terminated the contract or prevented the builder from returning to site. It makes no mention of such issues; even taking into account the fact that Mr Laphai is not a lawyer, and may not have understood the legal meaning of the words "termination" or "repudiation".
The builder's letter to NSW Fair Trading dated 17 October 2019 concludes with the following: SDL reserves the right to pass on all remobilisation, delay costs, and delay charges received from the subcontractors who has (sic) been working us (sic) to complete the project but cannot complete the works due (sic) the missing items which were bought and arranged by the Owner and also can not (sic) access the site due to half completed driveway. SDL states that it is continuing to suffer damages due to lack of cooperative behaviour of Mr Kim and hold Mr Kim liable for all costs and damages as a result of his conduct should the dispute be required to be brought before the NCAT (sic) for resolution. SDL looks forward to working with you to achieve an amicable outcomes (sic) to this dispute. Please do not hesitate to contact the undersigned with any queries regarding above submission.
The explanation given by Mr Laphai in cross examination was that he believed he was simply responding to the issues raised by NSW Fair Trading, and did not need to state that the homeowner had told him the contract was terminated; the homeowner had taken possession of the site and the homeowner was intending to engage a new builder to complete the works.
However, it is notable that not only did the builder not make any reference to the contract being at an end (in clear words or substance); but that the letter concluded by stating the builder would work with NSW Fair Trading to achieve "an amicable outcome". Although the letter referred to the builder reserving the right to claim damages against the homeowner due to his "conduct", it does not clearly state the builder regards the contract has having ended due to the "conduct" of the homeowner (and Ms Choi).
On 21 October 2019, Ms Harrold of NSW Fair Trading wrote to the homeowner in response to the complaint. The letter contains refers in detail to the position of the builder to the complaint after NSW Fair Trading had contacted Mr Laphai. It is useful to set out the letter in detail because it contemporaneously sets out many of the issues in dispute between the parties.
The letter stated as follows:
Mr Laphai requested "further evidence and clarification" on the following complaints by the homeowner: 1. The builder purportedly charging electrical allowances to cover temporary electricity and meters. 2. The builder purportedly charging for core fill in retaining walls. 3. An "internal door variation" that the homeowner disputed. 4. Gyprock cut out and architraves.
Mr Laphai responded to the other complaints of the homeowner as follows:
Additional bathroom fee. Mr Laphai stated that costs had been explained on site and the homeowner had agreed to pay the fee. The additional work included works should the homeowner wish to convert one of the dual duplexes into six individual self-contained units to include one disable toilet and service provisions for additional kitchens and bathrooms.
Tree removal. Mr Laphai stated that a written variation (VO3) included the breakdown in the cost prior to undertaking tree removal and the homeowner had approved the variation. The work was performed and paid for.
Extra concrete works. Mr Laphai stated that a written variation (VO9) included the breakdown in cost prior to the undertaking of the work and the homeowner had approved the variation. The work was performed and paid for.
Asbestos removal and certificate fee. Mr Laphai stated that a written variation (VO1) included the breakdown in cost prior to the undertaking of the work. The work was performed and paid for.
Additional work due to contaminated soil. Mr Laphai stated that the site had previously been backfilled with building materials including asbestos material and the homeowner was aware of this. Mr Laphai stated that such information was not provided to the builder and that during excavation the builder discovered a significant amount of building materials including a substantial amount of asbestos which was found buried on site. According to Mr Laphai, all the excavated soils were treated as asbestos contaminated soil which is excluded from the contract price.
Lifting of brick pavers on the Council strip and removal of soil and bricks from the site. Mr Laphai stated that the homeowner had removed the contaminated soil because the homeowner did not want to pay for a soil classification report or removal in accordance with environmental Regulations. Mr Laphai asserted the homeowner had been told by the builder that the builder accepted no liability for where the soil was being disposed of because no proper classification for the contaminated material excavated onsite.
Demand for upfront payment of $15,000 plus GST for driveway. Mr Laphai stated that the work to construct the driveway on Council property (16 meters long) had been approved by Ms Choi. Ms Choi requested an invoice for the driveway, which was provided by the builder. Mr Laphai stated that Mr Kim then instructed that no work was to be performed without a signed written variation. The builder had co-ordinated with the local Council; and the stormwater engineer for drainage requirements. The builder had performed excavation and set out works. However, the concrete pour was cancelled at the direction of the homeowner.
Purchase and charges for extra electrical appliances; vanity; bathroom fit outs in the sum of $37,000. Mr Laphai asserted that the builder had only received the invoices requested by the homeowner "last month" and "has had to backtrack and complete a stocktake of what has been installed and what items are missing". Mr Laphai stated he had attempted to "work out the issue of missing and broken items" with Ms Choi. Mr Laphai stated that the builder was never provided with a list of items that had been purchased by the homeowner; and some items purchased by the homeowner were "delivered to various locations" arranged by the homeowner. The locations included the site; the builder's warehouse; the joiner's warehouse and the supplier's warehouse. Some items allegedly paid for were missing.
Common wall installed in incorrect position. According to Mr Laphai, Ms Choi "requested the layout of the units (sic) to be changed to accommodate the boarding house style unit". Mr Laphai stated that the builder had "communicated that this will impact some of the structural systems of the house" but Ms Choi had "approved this".
Delay in completion of work. Mr Laphai stated the builder had attempted to work with the homeowner to complete works without delay, but "due to the site conditions and constraints, the driveway on the Council property must be poured first in order to provide a safe access to the properties (sic) for all workers". According to Mr Laphai, the lack of the driveway was "delaying any subcontractors coming back onsite for (sic) finishing the works".
Mr Laphai also told NSW Fair Trading that: 1. The joiner who the homeowner had engaged direct had "broke (sic) the cooktop". 2. The tiler who the homeowner had engaged direct had "wrongly cut out the fixture under the instruction" of the homeowner. 3. A "finished wall" had been "demolished under instruction" from the homeowner to "install an in-wall mixer" and the homeowner refused to pay for the wall "to be repaired". 4. There is "asbestos and contaminated soil on site" which the homeowner "promised in early September" would be removed. 5. The builder "reserved the right" to charge for storage of the homeowner's fittings and fixtures in its warehouse over a 6 month period. Mr Laphai stated "a tax invoice has been issued" by the builder which had not been paid by the homeowner. 6. The builder had completed works "which included external civil works, stormwater works and internal fit off (sic) works" in the amount of $79,535.09 plus GST. The builder had invoiced the homeowner for this amount and it had not been paid. 7. The builder had requested the homeowner to connect gas and electricity to both dwellings, which was "yet to be completed". Mr Laphai stated "the service cannot be fit off or commissioned without having the main connections to both units (sic)". 8. Ms Choi had "directly engaged and instructed contractors onsite to make changes" and Ms Choi had asserted that the builder would be required to "pay for those charges (sic)". 9. The builder had "completed a number of works free of charge in order to keep progress onsite". 10. The builder "reserved the right" to "pass on all remobilisation, delay costs and delay charges" because subcontractors could not complete the works due to the "missing items that were bought and arranged" by the homeowner and that subcontractors could not access the site due to the driveway not being completed.
The letter of NSW Fair Trading concludes in a standard way by informing the homeowner that the intervention of NSW Fair Trading had not achieved a resolution of the dispute, and the homeowner may obtain legal advice with the option of commencing proceedings in NCAT.
As of 9 September 2019, the builder had ceased to perform construction work. However, no Notice of Suspension of Work had been issued by the builder under the contract. No Notice of Breach had been issued by the builder. No formal letter or email had been written by the builder stating that the homeowner had unfairly or unreasonably terminated the contract, or had terminated the contract at all. No formal letter or email had been written by Mr Laphai stating that the homeowner had repudiated the contract and the builder had accepted the homeowner's repudiation.
After the complaint to NSW Fair Trading by the homeowner, there were discussions between Mr Kim and Mr Laphai about the builder resuming work.
On 25 October 2019 Mr Kim sent two emails to Mr Laphai that were, in substance, similar. The second email stated that the first email contained typographical errors and incomplete sentences. The second email included the following: Anyways, make it simple, I am sure you understand where I am coming from. Before it gets any worst (sic), I want you to think about resolving the issues and move on with our own lives. It is very depressing to see the house on hold especially when half of the duplex belongs to my parents. I want you to continue the work and complete the project. Moving forward please limit our involvement as it can create issues (Contacting Council, relevant authorities etc. etc.) No More Delays. You as a builder can finish as to the plan and complete without any alterations. As you said the project is in its final stage and there should not be any uncertainty of works as only the fit out works left on the job. I will wait for your response and hopefully we can resolve in most gentlemanly way and shake hands at the end. I just can't stand looking at the house unfinished and creating family issues.
Mr Laphai sent an email to Mr Kim on 29 October 2019 that attached a copy of the builder sent to NSW Fair Trading. The email stated as follows: Please thoroughly review attached response I have made to Fair Trading regarding your allegations and accusations. Please call me once you have done this and have all the responses to the issues that have been raised. As you are aware, I was personally on site daily from July trying to complete this project but the good momentum on progress we were having was halted due to: Threat of legal actions (sic) Threat of engaging a third party builder. Missing PC items to finish off the fitting off. Main service and connection delay. Complains (sic) and allegations to Fair Trading. Also as you appreciate, now that I have started on new projects, I need to fit you into schedule once we agreed on way (sic) to move forward. I will have to also speak to subcontractors to see their availability and happy to come back to finish off the job, etc. Look forward to hearing from you.
On or about 1 November 2019, Mr Kim and Mr Laphai met at the builder's office to discuss the builder completing the works. According to Mr Kim he and Mr Laphai agreed to "finish the project and move on" and that the builder would "try" to have the works completed by Christmas. Mr Kim asserts that he told Mr Laphai that if Ms Choi was "getting in the way" Mr Kim would "step in".
Mr Laphai asserts that at the meeting on 1 November 2019, the homeowner apologised to him for "terminating the contract" earlier, and said this was due to family problems. The homeowner denied that he said those words. Mr Laphai stated that at the meeting he needed "everything in writing" before the builder would complete the works; as well as the homeowner to deliver "PC items" and the homeowner to organise connection of the gas and electricity. According to Mr Laphai, the homeowner said he would ensure such matters were attended to.
In the period about 18-21 November 2019, the builder liaised with the gas and electricity providers for the site connection to be made. Emails between the homeowner and Mr Laphai on 22 November 2019 are contemporaneous evidence of what occurred (Court Book pp. 422-433)
On 22 November 2019, Mr Laphai emailed the homeowner as follows: James, I have helped you with Jemena (sic) for gas connection and DP's for electrical connection in the past few days; these are things that should have been done awhile ago. I will get back to you about the driveway. Please advise on our previous quotes (sic) submitted for: 1. Driveway 2. Make good of bathroom for unit a (sic) upstairs.
On 22 November 2019, the homeowner replied to this email as follows: Thank you Seng for helping us out for the Gas and DP. Yes it should have been done a while ago. For some reason they didn't come to us for connection. Only recently when I chased up they acted upon. Seng, as you do this day in day out, the procedure and your advise (sic) is very much appreciated saving us a lot of run around. One little phone call from you can save us months of waiting and run around. Even with gas, when jamena (sic) came asking me for connection, I didn't have any idea what to say and what to tell them. Yes I appreciate your quick phone call to them to tell then where and what to connect as you know exactly where things are and what work has done for them… (sic) Jemena (sic) could not connect yesterday as they were called in for urgent call out but same guy will come back really soon to do the connection and he did say it's all easy for him to connect after speaking to you. 1. With the driveway. You told me to leave it with you and you will come back to me with a discounted price as you allowed cross over in your lump sum. Wasn't (sic) that in our meeting..?? So, you were waiting for me…???? Let's make it clear. For driveway. Take off what you allowed as we have discussed the difference of price will be added onto our next progress payment schedule as the contract. You just advise me how much were are out of pocket as the and the work progresses. 2. With make good of bathroom in Unit A (sic). Upstairs. I am not 100% sure what has happened so let us work this out and also proceed. Let's have a talk about this soon when I find out what has happened. Regardless the work has to proceed and we work out the costing to be liable. You can't just leave it like that. Do the work add to the bill. If it is fault we have to pay, if it is the contractor's fault they pay. But regardless we have the work booked in to fix the problem. Let's talk next week about this. Can we meet on site on Monday and we go through one by one so we are on the same page. This way we both know what needs to be done and when. We go over one by one any future jobs on site and both make a note so don't repeat or go around in circle (sic) with petty things.
On about 25 November 2019, Mr Kim, Ms Choi and Mr Laphai attended the premises and performed a joint inspection. According to Mr Kim, this was to "see what needed to be done" to complete the works.
According to Mr Laphai (Court Book pp. 89-90) both Mr Kim and Ms Choi who told the builder that they had been using "friends" to do work on the property after Mr Laphai asked them "who has been working here?"
In both evidence in chief and cross examination, Mr Kim and Ms Choi denied that words were spoken by Mr Laphai that works had been performed at the site in the period between 9 September 2019 and 25 November 2019 at the direction and control of the homeowner and Ms Choi.
Cross examination of the homeowner and Ms Choi as to what works (if any) been done at the site in the period between 9 September 2019 and 25 November 2019 (as compared to works that had occurred in the period after 19 December 2019 and other issues purportedly discussed at the meeting) was brief and the answers vague. The cross examination of Mr Kim about what was said at the meeting is at (T:30/03/21 pp. 84-88).
On the issue of whether the homeowner and Ms Choi had engaged any building works on site in the period between 9 September 2019 and 25 November 2019 the following evidence was given by Mr Kim (T: 30/03/21 p 84): Builder's Counsel: And at that meeting specifically when Mr Laphai showed up he immediately made the observation that people had been working on the site. Do you accept that? Mr Kim: No Builder's Counsel: And that you said to him "Well, I've been using friends to finish off as much as possible". Do you recall saying that? Mr Kim: No
However, the following evidence was given by Ms Choi (T: 31/03/21 pp. 8-9): Builder's Counsel: So what I am saying to you is when did you recommence work to the property? Ms Choi: When? Builder's Counsel: Yes. Ms Choi: It would have been very-it will be March. Builder's Counsel: So in March and was there any work done before March? Ms Choi: Possibly yes. Builder's Counsel: What's the present state of the property, is the building work finished? Ms Choi: No, not completely, there are incomplete works still. Builder's Counsel: But is it more or less finished or is it just some finishing- Ms Choi: Yeah. Builder's Counsel:…work to do, yes? Ms Choi: Yeah, I mean these ones (sic) will be rendering and painting and yeah, things like that. Builder's Counsel: People are living in the property I assume. Ms Choi: Yes we are. Builder's Counsel: Do you recall which builders did-I understand you say that the builders had not entirely completed but to you know which builder it was that you and your husband engaged to complete the works? Ms Choi: Yes Pearce, Pearce and Son. Builder's Counsel: Sorry, what were they called? Ms Choi: Pearce and Son. Builder's Counsel: That was I assume you signed a construction contract with them? Ms Choi: No I don't remember signing a contract or anything. Builder's Counsel: Okay. Ms Choi: Yeah it was more like, it wasn't really-he wasn't engaged as a, like a, builder but he, he introduced us to things like if there was air-conditioning then he goes, yeah, you got to use this-and he did the landscaping and things like that. Builder's Counsel: But they were more or less the people who were bringing the job to completion for you? Ms Choi: Yeah, they were helping, helping, he was more of a family friend. Builder's Counsel: Before you purported to terminate the builder, you actually used not only family friends but members of your own family as sub-contractors, that's true isn't it. Ms Choi: No, what do you mean by that, I don't remember that at all.
Mr Laphai asserted that Mr Kim had the keys to the property, not the builder. Mr Laphai asserted that there was a dispute about the homeowner paying for builder's margin, because there was no need to pay a builder's margin if Mr Kim could direct subcontractors.
Mr Laphai asserts he told Mr Kim at the meeting on 25 or 26 November 2019 that one of the past "problems" was that the homeowner had instructed sub-contractors direct. Mr Laphai asserted that Ms Choi requested the builder send the homeowner an email stating that the builder was terminating the contract so that the homeowner could make an insurance claim. The builder refused. The meeting ended in acrimony, with Ms Choi leaving the meeting early.
Mr Laphai asserts that he told Mr Kim and Ms Choi that the builder would only recommence works if there was a written document with the parties agreeing on terms because the builder needed to know what works had been performed without its consent.
The homeowner and Ms Choi denied in cross examination that they requested the builder provide a letter so that they could make an insurance claim. Ms Choi agreed she was angry with the builder and left the meeting early; but that her husband had wanted the builder to return and complete the works.
In early December 2019, there was a further text message exchange between Mr Kim and Mr Laphai regarding work on site.
On 16 December 2019, Mr Kim enquired about the driveway. Mr Laphai responded by stating "you have not given me any written confirmation". Mr Kim replied "Written confirmation about the access…???" Mr Laphai responded "Written confirmation on variations". Mr Kim responded: "Were you waiting for me…?? All this time…okay. Will send you an email now… come on seng (sic)..you know how much I want to get the job moving. Now you (sic) telling me you been waiting for me…??"
The exchange on 16 December 2019 continued with Mr Kim stating he had "just sent an email to proceed" and complaining that Mr Laphai had been waiting for him and he wanted to "avoid this situation". Mr Laphai replied that Mr Kim had told him "from now on you want everything in writing".
The text message exchange on 16 December 2019 continued with Mr Kim enquiring what more Mr Laphai wanted in writing, because Mr Kim wanted "no more delays". Mr Kim also stated that the concreter had asked Mr Kim if Council inspections were complete in respect of the driveway, and Mr Kim further texted to say that he would give the concreter Mr Laphai's number to "call u (sic) direct and work it out with you".
The "written confirmation" regarding the driveway referred to in the text message exchange is an email from the Mr Kim to the builder dated 16 December 2019 that states as follows:
As discussed and agreed, please proceed with the driveway works asap (sic). $15000 + GST to be added onto our final progress payment at the end of the project. Practical completion. Thank you (sic) Please let me know asap if theres (sic) anything stopping you from progressing.
On 19 December 2019 there was a lengthy email exchange between Mr Kim and Mr Laphai. 3 emails were sent; 2 from Mr Kim and one from Mr Laphai.
The Tribunal sets out the email exchange in detail, because it is relevant to the position of the respective parties as to which party lawfully terminated the contract.
At 8.28 am on 19 December 2019, Mr Kim emailed Mr Laphai as follows: I tried to call you but no answer. After we set down (sic) at your office on 1st November to resume works at (address of premises) we have not seen any progress at all. Now we are into 7th week after we had our agreement to resume and you have made no effort to organise and line up any of the sub-contractors to complete the works. I have called Electrician, and Plumber and found that theres (sic) nothing stopping them from coming back to finish off the job. Only issue is that you owe them money for the work already done and paid out from our end. So excuse can't get the sub contractors back to finish the work does not apply as they are willing to come back finish (sic) the job. In my one phone call today could get them back, surely you could have done the same. I have confirmed that the plumber didn't get a single phone call from you about the job and you have told me that they don't want to come back. If it takes more than 6 weeks and made no phone call to them I am not sure how long you can sit on the job and give us a hard time. You are leaving me no option but to write you a formal letter from my solicitor (sic) to give you notice to resume in a reasonable time and if not you will be in breach of the contract and that the contract be terminated. This is the only way to finish the job. Its pity (sic) that I thought we had strong agreement to resume the works and complete the job asap and move on from this project.
Mr Laphai responded to that email at 8.50 am as follows: As discussed, your wife and you have been constantly threatening SDL of legal actions and also reporting SDL to fairtrading (sic) which has resulted in where we are. You have also been speaking out to people outside trying to smash SDL's reputation including our subcontractors. Given you have only given a formal approval to proceed with driveway on Monday, I await your further instructions to cancel the Contract. Please note that we will be issuing final claim for works completed to date from our last progress claim including any delays claim as a result of your actions.
Mr Kim sent a reply email at 1.06 pm. The email complained that the builder had taken possession "from Anzac day 2018" and the residential premises were incomplete. The email states that "all the progress payments and variations were paid up front". The email then continued: … Only in October I told you to stop work as variations I believe should be in the lump sum contract we have signed (sic). You were requesting variation after variations (sic) to be paid up front. On 1st of November, I have asked and we have agreed to resume the works. Putting everything behind us as the tribunal (sic) resolution will take a long time and we both lose out at the end. What delay..?? Why should I go out of my way contacting your sub contractors to come back to resume the work if you have already started working…?? You are delaying the work not us. I have urged you to come and finish but you could not given me a date after you have been sitting for 7 weeks. What assurance do we have that you come back…??? You could have simply booked a date with us so we know you are resuming and expect you to come back on the date you promised. Only response I got from you was that your trades don't want to come back and you have asked me to contact them direct and do the work. That to me is walking off the job. I have made one phone call to plumber and electrician and they were both waiting for your call to come back to the site so they can finish the job and get paid. Please don't say we are delaying you as I have been waiting for you to finish off the job. You are not delivering what you have promised and even now I just want the job to be finished. What delay have we caused…??? Only way I found to get you back on the job was to seek legal advise (sic). Where are the legal threats..?? For what..?? And why??? If you continue the job why do I need to call up your sub contractor to come back…??? Simply put Theres (sic) no delay from our end and theres (sic) no payment you can claim as you have been paid more than what you have done so far. We only have one last payment at the practical completion and you can see for yourself if you can claim for that.
On 19 December 2019 the homeowner's Solicitor then sent a Notice of Breach to the builder. The written notice set out various Clauses of the written contract (Clauses 3 (a); 6; 7; 9 (d); 21; and 24). The Notice stated that the homeowner was not in breach of the contract, having paid all progress payments due under the contract; and had paid variations in advance. The Notice stated that the homeowner had instructed that the builder was "indebted (sic) to our client" for approximately $37,000 "in relation to PC items that our client paid the suppliers for".
The Notice states that the homeowner had "instructed" the builder to "suspend" work while NSW Fair Trading was "investigating" the homeowner's complaint, and that on 1 November 2019 the homeowner had, at a meeting at the builder's office, "instructed you to proceed with the work".
The Notice states that the builder had told the homeowner it was unable to get sub-contractors to attend the site, but that "our client has spoken to some of the sub-contractors who have told the client they are willing to return to the site to complete the work".
The Notice states that the builder was in "default" of its obligations under the contract due to (a) "your apparent abandonment of the works"; (b) your suspension of the work without reasonable cause; and/or (c) your failure to proceed diligently with the work". The Notice states that the builder had until 12 noon on 13 January 2000 to "remedy the default be recommencing the work". If the words did not recommence, the homeowner "may terminate the contract or seek orders" from NCAT.
Mr Laphai responded to the Notice of Breach dated 19 December 2019 with an email to the homeowner's Solicitor dated 20 December 2019. The email stated as follows: … Thanks for your letter. As today is my last working day of the year, I will respond to your letter formally and in more details on my return in mid-January. Just a few things your client has misrepresented: A written formal approval to resume works only came through yesterday (see attached), this is after the meeting on (sic) early November agreed to have everything in writing. From late July to early this week, your client has approached a number of third party builders and subcontractors to complete works while tarnishing SDLs reputation. Essential services (gas and electricity) are yet to be connected by the Owners. Upfront payments are agreed by the Owners as they have previously refused to pay for additional works only after the works was (sic) completed and agreed upon. Some of PC items allegedly bought by the owners are damaged, unsuitable for bathroom layout and some are entirely missing from provided invoices. …
The email stated that 5 invoices were "outstanding"; being: Variation V 19 (Floor preparation); Variation V 29 (Electrical Main Both Units); "Delivery"; "Council driveway" and "Final invoice".
The email attached a copy of Mr Kim's email of 16 December 2019 regarding proceeding with the driveway works as the email being referred to by Mr Laphai as the written 'confirmation' for the builder to resume work.
On 13 January 2020, the builder sent the homeowner's Solicitor a 2.5 page letter responding to the homeowner's Notice of Breach.
The letter commences with the builder's "chronology" of events. Relevantly, that "chronology" states that on 9 September 2019 the owner had "terminated the contract" under Clause 25 of the contract by reason of "due to unable to meet the cost of variations. As the same time, your client has instructed SDL to cease all works on site and demobilise from site".
The builder's chronology continues by stating that on 16 September 2019 the builder issue a "final invoice" which "is still outstanding". The chronology continues to assert the following relevant events occurred: 1. 25 October 2019-homeowner requested a meeting. 2. 1 November 2019-Meeting occurred at the office of the builder. 3. 19 November 2019-Builder assisted homeowner to connect gas (not in builder's scope of works). 4. 26 November 2019-Meeting occurred on site to "go over issues with PC items supplied" by the homeowner (not in builder's scope of works). 5. 10 December 2019-Builder attended site with a gas installer (not in builder's scope of works). 6. 16 December 2019-Homeowner issued a "formal approval" to proceed with driveway variation. 7. 19 December 2019-Builder "received a letter stating the intention to terminate the contract" (sic). 8. 10 January 2020-Builder connected main power lines after "months of your client unable to establish connections".
The letter asserts that throughout the building works the homeowner had directly engaged sub-contractors; requested a change in the layout of the dwelling to accommodate 6 boarding house style units; and spoken to previous employees of the builder "to take over the project from SDL on numerous occasions".
The letter identifies works which the builder asserts as being "directly engaged/completed by your client" as: 1. Joinery works (Young Interiors being the contractor) 2. Tiling (PHS Contractors being the contractor). 3. Waterproofing (Pillar Tile being the contractor). 4. Flooring (Classic Construction and Development Pty Ltd being the contractor). 5. Tile supply. 6. Fitting and Fixture supply. 7. Appliance supply.
The letter goes on to make other allegations about the homeowner, including: 1. The homeowner changed the scope of works whist work was being performed and expected the builder to bear the cost. 2. The builder had performed some work free of charge so that the project could be completed. 3. The homeowner had contacted directly "most of the sub-contractors" during the works, including the electrician and plumber who were waiting on main power connection; gas connection and "PC items" to be finalised before they could attend site and perform work. 4. On 26 November 2019, while the builder was trying to explain "issues with PC items and driveway requirements", the homeowner had requested a letter that the builder had terminated the contract for the purpose of an insurance claim.
The letter of Mr Laphai asserted that the homeowner had "terminated" the contract in September 2019, and that Mr Kim had "apologised for terminating the contract" at the meeting on 1 November 2019.
The builder's letter of 13 January 2020 concludes as follows: SDL proposes the following steps in order to complete the project: Your client settle all SDL outstanding invoices and enter into a Deed of Acknowledgement (sic). Your client (sic) alleged debt of $37,000 will be paid based of (sic) items that are actually installed/suitable for installation. Your client's joiner will be paid once the works are approved by your client. SDL will devise a cost to complete and program after assessing works already completed on site by your client and/or third parties. SDL and your client will enter into a new contract based on the cost to complete and program of works (sic).
On 2 March 2020 the homeowner's Solicitor (being Kerin Benson Lawyers, who acted for the homeowner for a period between when Fox & Staniland Lawyers first acted and then subsequently acted for the homeowner) wrote to the builder with a letter which in substance was a Notice to Terminate the contract.
The letter disputed the assertions of the builder in the builder's letter of 13 January 2020. In respect of the unpaid invoices referred to by the builder, the letter states: 1. Variation 19-Floor preparation-builder had agreed by email of 30 June 2019 not to charge anything for floor preparation work. 2. Variation V 29-Electrical Main Both Units-the invoice was paid in full by the homeowner on 19 August 2019. 3. Invoice-080679 (Delivery)-under Clause 19 of the contract the builder was responsible for the cost of delivering materials to site. 4. Invoice-080683 (Council Driveway)-the work was not complete and the builder had no contractual right to payment in advance. 5. Invoice-080683 (Final Invoice)-the work was not complete and the builder had no contractual right to payment in advance.
The letter stated that it was the builder's practice to demand payment for variations in advance; the joiner was a sub-contractor to the builder, not the homeowner; and the homeowner had paid for fixtures and fittings as provisional sum items to which the builder was indebted to the homeowner.
The letter stated the builder had failed to recommence work by 12.00 pm on 13 January 2020 and the homeowner was terminating the contract.
On 2 March 2020 the builder's Solicitor wrote to the homeowner's Solicitor stating: 1. The Notice of Termination had not been served in accordance with Clause 28 of the contract. 2. The homeowner "terminated the contract" in or around 9 September 2019. 3. Prior to the meeting on 1 November 2019, the homeowner had taken possession of the property without the builder's consent. 4. Prior to the meeting on 1 November 2019 the homeowner had engaged persons direct to perform works, which evidenced an intention not to be bound by the contract. 5. At the "November 2019 meeting" the builder had agreed to recommence works subject to the builder's terms, which the homeowner had not complied with. 6. After the November 2019 meeting, the builder had performed works "outside the scope of works" in the contract, with "gas and electricity connections" identified. 7. The builder had "finalised" the work outside the scope of works in the contract on 10 January 2020. The builder had invoiced the homeowner for the electrical connection (which was part paid), but had not invoiced for the gas connections. 8. The homeowner owned the builder the following amounts: 1. Invoice 080683-$48,988.60 (being the "value of work done in Progress Claim 7 before the contract was terminated, less $35,000 for Prime Cost Items "allegedly" paid by the homeowner). 2. Invoice 080679-$220 (the cost of delivering of Prime Cost items to site by the builder after the builder had "allowed" the homeowner to store the items free of charge in the builder's warehouse). 3. Invoice 080680 (the value of work for an "improved (sic) variation"). 1. The owner terminated the contract "as early as September 2019" and if that was not correct, the homeowner repudiated the contract by entering into possession of the residence (taking keys from electrical box) without the builder's consent; suspended work without proper reason; and engaged other contractors from at least September 2019 to complete works set out in the contract. 2. The homeowner's letter of 2 March 2020 evidences the homeowner's repudiation of the contract, and the builder accepted that repudiation and terminates the contract.
On 24 July 2020, the builder commenced proceedings against the homeowner in Matter HB 20/32292.
On 6 October 2020, the homeowner filed a cross application against the builder.
Both applications were filed within the relevant limitation period in s 48K of the HB Act.
After interlocutory directions hearings, the matters were listed for hearing at the Tribunal on 30 March; 31 March; and 8 July 2021.
At the conclusion of the hearing, the decision was reserved, and the parties were provided a timetable for submissions. That timetable was extended at the request of the parties. Submissions closed on 3 September 2021. The Tribunal was provided a transcript of the hearing agreed by the parties.

BUILDER'S POINTS OF CLAIM

The builder's Points of Claim filed on 28 September 2020 claims payment of $57,458.60 for breach of contract in respect of the 3 unpaid invoices identified in the builder' Solicitors letter of 2 March 2020; or in the alternative on a quantum meruit basis.
Additionally, the builder claims "interest" and legal costs.
No claim for damages due to loss of profit was made.

HOMEOWNER'S POINTS OF CLAIM

The homeowner filed Points of Claim on 2 October 2020. The claim of the homeowner was further set out in detail in a written outline of submissions of the homeowner dated 30 March 2021.
The homeowner's claim is as follows: 1. Damages for the cost of rectifying existing defective work-$63,108.64 2. Damages for the cost of completing incomplete work-$205,264. 3. Consequential loss damages (cost of paying rent)-$41,800. 4. Reimbursement of a total of $20,072.50 in respect of monies paid by the homeowners directly to sub-contractors of the builder which the builder was contractually liable to pay. There were 4 items identified, being: (a) site fencing; (b) retaining walls; (c) "power"/electricity connection; and (d) sewer; water; gas rough ins and fit outs. 5. Reimbursement of monies in respect of adjustment of Provisional Sum items in favour of the homeowner-$88,259. 8 items were identified, being (a) brick supply; (b) joinery; (c) fixtures and fittings; (d) appliances; (e) tile supply; (f) floor finishes; (g) lighting supply; and (h) landscaping. 6. Costs
The submissions of the homeowner assert that if the Tribunal is not satisfied that an award for damages should be made in respect of incomplete and defective work, a work order under s 480 of the HB Act should be made against the builder.

DOCUMENTARY EVIDENCE OF THE PARTIES

The parties filed a Court Book prior to the hearing.
Relevantly, the Court Book contained the following documentary evidence:

Homeowner

Witness statements of Mr Kim dated 23 December 2020 and 12 February 2021.
Witness statements of Ms Choi dated 23 December 2020 and 12 February 2021.
Expert report of Mr Irvine, building consultant, dated 23 June 2020.
Supplementary expert report of Mr Irvine dated 18 December 2020.

Builder

Witness statement of Mr Laphai dated 16 December 2020 and 11 February 2021.
Expert report of Mr Palumbo, building consultant dated 17 December 2020 (referring to the cost of completing incomplete work).
Expert report of Mr Palumbo dated 20 January 2020 (responding to Mr Irvine's opinion on defective work as set out in the report of Mr Irvine dated 23 June 2020.
Expert report of Mr Palumbo dated 12 February 2021 (responding to Mr Irvine's supplementary report of 16 December 2020.

Both Parties

Joint Expert Report of Mr Irvine and Mr Palumbo dated 15 February 2021.

Which Party Lawfully Terminated the Contract?

The first issue for consideration is which party lawfully terminated the contract.
It is clear that the contract came to an end before the works reached the state of practical completion under the terms of the contract. Work on the site ended during the final progress payment stage.
If the homeowner lawfully terminated the contract on 2 March 2020, the homeowner may obtain damages for the increased cost of completing incomplete work under the contract (i.e. the amount in excess of the remaining amount which the homeowner was liable to pay the builder under the contract if the works were complete, subject to the discretion of the Tribunal to make a work order rather than an award of damages under s 48O of the HB Act).
However, if the builder lawfully terminated the contract by reason of the homeowner repudiating the contract and the builder accepting the repudiation on 2 March 2020 or earlier, then the homeowner cannot obtain any remedy for incomplete work.
The builder's position is that the homeowner repudiated the contract, and the builder accepted the homeowner's repudiation by way of its Solicitor's letter of 2 March 2020.
In DCT Projects Pty Limited v Champion Homes Sales Pty Limited [2016] NSWCA 117, the NSW Court of Appeal summarised the principles applicable to repudiation as follows at [39]-[42]: For the conduct of a party to constitute a renunciation of its contractual obligations it must be shown that the party is either unwilling or unable to perform its contractual obligations, that is, it has evinced an intention to no longer be bound by the contract, or stated that it intends to fulfil the contract only in a manner substantially inconsistent with its obligations and in no other way: Shevill v Builders Licensing Board [1982] HCA 47; 149 CLR 620 (Shevill) at 625-626 (Gibbs CJ); Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; 166 CLR 623 at 634, 647-648, 658; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; 233 CLR 115 (Koompahtoo) at [44]. Repudiation is a serious matter and is not to be lightly found or inferred: Shevill at 633 (Wilson J). Where inability to perform is declared the conduct amounts to a refusal to perform and the innocent party need not prove that the other party was actually unable to perform when the time for performance came: Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401 at 437. A renunciation can be made either by words or conduct, provided it is clearly made: Universal Cargo Carriers Corporation v Citati at 436. The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it: Koompahtoo at [44]; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd at 659 (Deane and Dawson JJ) and 647 (Brennan J). So far as factual inability to perform is concerned, what needs to be shown is that the party in question has become wholly and finally disabled from performing the essential terms of the contract altogether: Rawson v Hobbs [1961] HCA 72; 107 CLR 466 at 481; Almond Investors Ltd v Kualitree Nursery Pty Ltd [2011] NSWCA 198 at [62] (Bathurst CJ; Giles JA and Handley AJA agreeing). It is well accepted that factual inability must be proved "in fact and not in supposition": Universal Cargo Carriers Corporation v Citati at 450.
In DB Homes Australia v Kes [2019] NSWCATAP 221, the Appeal Panel stated at [46]-[47]: As a general rule, wrongful termination of the performance of a contract, where a party has no legal right to do so, will constitute a repudiation of obligation because such an act indicates an absence of readiness or willingness on the part of the party who has wrongfully terminated to perform its obligations under the contract: Ogle v Comboyuro Investments Pty Ltd [1976] HCA 21; (1976) 136 CLR 444 at 453; Curnow Consulting Pty Ltd v JPD Media and Design Pty Ltd t/as Durie Design [2017] NSWSC 1171 at [344]. It is axiomatic that to terminate a contract based on repudiatory conduct, the first step is to identify the specific purported repudiatory conduct of the other party…
The distinction between a right to terminate a contract for breach of an essential term; and repudiation of a contract, were articulated by the Appeal Panel of the Tribunal in CCS 251 Elizabeth St Pty Ltd v Hellenic Club Ltd [2021] NSWCATAP 279 at [77] and [98]-[101] as follows: Further, that evidence would only be relevant to the question of repudiation. In this regard it is important to emphasise that the issue of whether a party can legitimately terminate a contract for breach of an essential term is conceptually different from the issue of whether the party can terminate the contract due to repudiation of the contract by the other party. As the High Court emphasised in Koompahtoo Local Aboriginal Land Council v Sandpine Pty Ltd (2007) 233 CLR 115 at [44], the term "repudiation" has been used in different senses. In its broader sense, it refers to any breach of contract which justifies termination by the other party. However in its more precise articulation, repudiation refers to renunciation of the contract by a party. This is constituted by conduct which evinces an unwillingness or an inability to render substantial performance of the contract (see also DCT Projects Pty Ltd v Champion Homes Sales Pty Ltd [2016] NSWCA 117 at [39]). … Repudiation occurs when a party evinces an intention no longer to be bound by an agreement, or to fulfil it only in a manner substantially inconsistent with that party's obligations: Tabali at 33, Shevill at 625-6 and the other authorities referred to in Cheshire and Fifoot Law of Contract, 10th Australian Edition at 21.12. Repudiation may arise where there is an anticipatory breach if, prior to performance being due, a party manifests an inability or unwillingness to perform the contract at all or in substance: Foran v Wright (1989) 168 CLR 385 at 441. In this case, the other party may terminate forthwith: Cheshire and Fifoot at 21.13. Actual breach may also amount to repudiation whether or not the breach is of an essential term or condition: Cheshire and Fifoot at 21.14. As stated by the authors: Successive breaches may have a combined significance in determining whether repudiation has occurred. However, repeated failure to perform is not in itself enough to establish repudiation. Thus, consistently late payment of rent by the lessee plainly endeavouring to meet his obligations was held not to be repudiatory in Shevill v Builders Licensing Board. In Progressive Mailing House Pty Ltd v Tabali Pty Ltd, on the other hand, the lessee was not merely late in paying rent, but asserted the right not to pay it at all, and committed other breaches of lease; these factors added up to repudiation. Failure to perform an obligation on time may constitute repudiation even if performance on time was not agreed to be essential: see 21.20 The right to terminate following repudiation is separate to a right to terminate for breach of condition. Acceptance discharges the party not in default from further performance: Shevill at 626. Finally, an innocent party may support its termination of a contract by reference to conduct constituting breach which it had not relied on at the time of termination: Shepherd and Felt & Textiles of Australia Ltd [1931 HCA 21, 41 CLR 359 (Shepherd) at 377-8, referred to by Handley AJA in Sarker at [28].
It is not sufficient, however, that a party's conduct be repudiatory. The contract must be discharged by the other party accepting the repudiation and electing to terminate the contract rather than affirming the contract. If the innocent party does not accept the repudiation, the contract remains on foot.
In Rudas and Andrassy v Eid [2021] NSWCATAP 4, the Appeal Panel summarised the applicable principles regarding election to terminate as follows at [36]-[39]: There is no real issue as to the legal principles applicable to determine whether an innocent party to a contract has accepted the other party's repudiation and thereby terminated the contract. First, any communication or conduct which clearly and unequivocally conveys to the repudiating party that the aggrieved party is treating the contract as at an end is sufficient: see Vitol SA v Norelf Ltd [1996] AC 800; 3 All ER 193 at 200 per Lord Steyn, and cited with approval in Cooper v Kinsella [2011] NSWCA 45 at [70]. Secondly, where the innocent party has by conduct elected to treat the contract as at an end, it is sufficient that the fact of election comes to the repudiating party's attention. Thirdly, the commencement of proceedings and/or the service of an appropriate pleading, claiming relief on the basis of termination for breach or otherwise clearly conveying in such pleading that the aggrieved party is treating the contract as at an end can be regarded as communication of the innocent party's acceptance of repudiation and subsequent termination: Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSWCA 248 at [73]; Janos v Chama Motors Pty Ltd [2011] NSWCA 238 at [23]; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537. The commencement of proceedings and/or the service of an appropriate pleading can act as either the election to treat the contract as at an end, or the communication that the innocent party has by previous conduct elected to treat the contract as at an end.
Accordingly, the issues for consideration include: 1. Did the homeowner repudiate the contract? 2. If yes, did the builder accept the repudiation and if so, when? 3. If no, did the homeowner lawfully terminate the contract by issuing the Notice of Termination under the contract?
The builder's written submission raises a number of grounds upon which the builder asserts the homeowner repudiated the contract. The homeowner's submissions assert that a number of those grounds were not pleaded. The Tribunal accepts, however, that each ground of purported repudiatory conduct does not need to be individually pleaded in the builder's Points of Claim or Points of Defence to the homeowner's claim. It is sufficient that the issue of repudiation was clearly raised, and that the purported repudiatory conduct were clearly identified in the builder's submissions.
It is abundantly clear from the pleadings and the manner in which both parties ran their cases in the Tribunal that each party asserts the other party engaged in repudiatory conduct. The builder can raise grounds of purported repudiatory conduct that were not identified in contemporaneous correspondence between the parties or the pleadings in the Tribunal. There is no issue of any denial of procedural fairness to the homeowner in the Tribunal considering all of the grounds of repudiation raised by the builder in the builder's submissions.
The builder's submissions dated 10 August 2020 identify the purported repudiatory conduct of the homeowner as follows: 1. On 5 and 6 September 2019 the builder issued two "valid variations" under the contract. The variation in respect of the driveway had been "agreed orally and subsequently after work had commenced by email" (builder's submission dated 10 August 2020 p 3). 2. At the site meeting on 9 September 2019 the homeowner had told the builder he "didn't want further variations"; "the contract is now terminated"; "I will get another builder to complete the work"; and the homeowner said he would refer the dispute to NSW Fair Trading and his property lawyer. 3. The homeowner prevented the builder having access to the site on 9 September 2019 by removing the keys to the duplex dwelling that had been stored in the meter box. 4. The homeowner ending the contract was confirmed or evidenced by the email of Ms Choi to the builder on 9 September 2019 that it was "sad it had to end this way". 5. The events after 9 September 2019 were no more than negotiations for "terms for resumption of works". The builder accepted the homeowner's repudiation on 9 September 2019 by ceasing work and leaving the site (Dimitropoulos v Capital Constructions Pty Ltd [2018] NSWCATAP 100 at [187]-[188]) 6. The homeowner had engaged other contractors do to works between 9 September 2019 and the site meeting on 25 November 2019. 7. The homeowner did not comply with the dispute resolution Cl. 27 of the contract before contacting NSW Fair Trading. 8. The homeowner did not provided the builder with "tipping receipts" in respect of the homeowner removing contaminated soil/spoil from site, which put the builder in breach of Cl. 3 (a) of the contract. 9. The homeowner did not disclose to the builder that he "did not in fact own the property" and that he co-owned it with Ms Choi and his parents. 10. The homeowner did not pay for the driveway variation in breach of Clause 12 of the contract. 11. The homeowner and Ms Choi "interfered with the build by giving tradespersons direct instructions". 12. The homeowner engaged tradespersons to perform work on the site after the builder "left" the site despite the homeowner asserting the contract with the builder remained on foot.

Did the Homeowner Refuse to Pay Valid Variations and Tell the Builder In Substance The Contract Was At An End At The Meeting on 9 September 2019?

The homeowner did not refuse to pay valid variations under the contract at the meeting on 9 September 2019.
The first purported "variation" is Invoice 080679 for $220 for "delivery of PC items".
The contemporaneous documentary evidence surrounding this tax invoice is text messages on 4 September 2019 (Court Book p 367) where the it was indicated that "cash" for items to be delivered from the builder's warehouse would be paid, but when payment of cash was not able to occur, a text message from the homeowner states "Yoomin said to invoice her $200 + GST and she will send the money to you".
Invoice 08069 is not a valid variation under the contract. Clause 19 of the contract states the builder "must bear all costs involved in the delivery of materials for the work". The evidence does not establish that the items that were delivered fell outside the scope of works under the contract. Accordingly, the builder must bear the cost of delivery, irrespective of whether the builder allowed the homeowner to store fixtures and fittings in his warehouse; or whether the materials were being delivered direct from the supplier.
Further, the purported invoice is not a variation in accordance with Clause 13. There is no signed agreement by both parties before the items were delivered.
Accordingly, the homeowner was within his contractual rights to refuse to pay this invoice, and refusing to pay is not repudiatory conduct.
The second purported variation is Invoice 080680 for "driveway outside boundary and layback (partially completed but cancelled halfway).
This purported variation does not comply with Clause 13 of the contract. On the builder's own evidence, he had at most "oral agreement" with Ms Choi to construct the extended driveway. There was no signed written variation in accordance with the terms of Clause 13 before the builder commenced the layout and partial construction of the driveway.
Further, when the contemporaneous emails between the parties are examined, it was only on 5 September 2019 that the builder sent an email setting out the cost of the extended driveway and the homeowner had requested details of the cost and an explanation as to why such works were outside the scope of works under the contract.
As the variation had not been issued by the builder in accordance with Clause 13 of the contract, the homeowner was within his contractual rights to refuse to pay at the meeting on 9 September 2019. Further, there is no clear evidence that the homeowner had "cancelled" construction of the driveway prior to the issue of Invoice 080680.
Both the homeowner and Mr Laphai agree that at the meeting on 9 September 2019 the homeowner said he and Ms Choi wanted "no more variations". The homeowner's and Ms Choi's evidence was that they intended by the words "no more variations" the builder only issue variations in accordance with the contract, and that they had the right to decline any proposed variation by the builder.
However, as discussed previously, the words of the homeowner need to be assessed objectively. The words "no more variations" were clearly said at the meeting, and the contemporaneous emails refer to this as an "option" for the works to be completed.
The homeowner was within his contractual rights to tell the builder he wanted "no more variations". Clause 13 of the contract requires that there be written and signed variations before works commence (unless the works involve urgent matter involving health, safety, and property damage risks if the work is not done before a written and signed variation can be completed). The homeowner was within his contractual rights to tell the builder that he wanted the work to proceed with "no more variations" because either party could refused to agree to proposed variations by the other party before works were performed.
Considering the contemporaneous emails between the parties, the Tribunal is satisfied that the homeowner told Mr Laphai at the meeting on 9 September 2019 that the homeowner wanted the builder to complete works with "no more variations" and the homeowner was acting in accordance with his contractual rights in doing so.
The next issue raised by the builder in submissions is that the Tribunal should find that the homeowner told Mr Laphai that the "contract was terminated" and that the homeowner would "find another builder" to complete the works (including completing construction of the driveway).
The homeowner denied that he told the builder at the meeting that he was "ending" the contract and would engage another builder.
The Tribunal accepts the evidence of the homeowner that he did not tell Mr Laphai at the meeting on 9 September 2019 that he was "ending" the contract and was engaging another builder.
When assessed in the context of the contemporaneous emails between the parties and their actions, the evidence preponderates towards the homeowner's version of events regarding what was said at the meeting on 9 September 2019 in comparison to Mr Laphai's version of events.
The builder did not send any contemporaneous emails to the homeowner, or make any mention in his response to the NSW Fair Trading compliant that the homeowner had told him the contract had ended on 9 September 2019 and the homeowner was engaging another builder.
The Tribunal does not regard the builder sending a "final invoice" (which contained no covering letter) to the homeowner on 11 September 2019 as being consistent with the homeowner telling the builder that the contract was terminated and he was going to engage another builder on 9 September 2019.
The "final invoice" was sent after the homeowner had complained to NSW Fair Trading. However, if the invoice was a "final invoice" because the homeowner had told the builder the contract had ended and the homeowner was going to engage a new builder, it would be logical and consistent with reasonable commercial behaviour that a builder would state contemporaneously that that had occurred, and point to measures taken to cease occupation of the site by the builder (such as removing any tools and materials of the builder if they remained on site. Fencing had been removed by the builder in about August 2019).
The builder submissions place much weight upon the comment of Ms Choi in her email of 9 September 2019 concluding that it was "unfortunate it had to end this way"; the "outcome" sought in the written complaint to NSW Fair Trading by the homeowner on 11 September 2019 that "someone else complete the work"; and evidence given in cross examination that the homeowner "thought about" the possibility of engaging another builder on or about 9 September 2019.
As discussed previously, the evidence of the homeowner and Ms Choi was that in referring the matter to NSW Fair Trading they sought that NSW Fair Trading intervene and assist them to resolve the dispute with the builder; and that they only contemplated engaging a new builder if the dispute with their current builder could not be achieved.
When assessed objectively, the body of Ms Choi's email to the builder dated 9 September 2019 and the email to NSW Fair Trading dated 11 September 2019 do not establish that the homeowner intended to end the contract with the builder, or only fulfil the contract in a manner inconsistent with the homeowner's contractual obligations.
Rather, the words are consistent with the homeowner seeking that the contract remains on foot, with NSW Fair Trading providing its assistance to resolve the dispute between the homeowner and the builder. The reference to engaging "another builder" when viewed in the context of the body of the reference is consistent with an intention that the homeowner sought that NSW Fair Trading provide dispute resolution assistance; and if the dispute with the builder was not resolved the homeowner may engage another builder (subject to the provisions of the contract).
The Tribunal does not accept the evidence of Mr Laphai that the homeowner told him on 9 September 2019 that the contract was at an end; that the homeowner was going to get another builder to complete the work as of 9 September 2019 (rather than to perform works outside the scope of work under the contract after the builder had completed the remaining works "without variations"); or that the reference to "it ending this way" in the email of Ms Choi demonstrates repudiation of the contract.
Rather the Tribunal accepts the evidence of the homeowner that he told the builder on 9 September 2019 that he wanted the works to proceed but without further variations, and that he was referring the matter to NSW Fair Trading to have them intervene into the dispute for resolution, but with the contract remaining on foot.
The comment of Ms Choi in her email of 9 September 2019 about contacting her "property lawyer" is no more than a party to a contract informing the other party that they are seeking legal advice. That is not conduct that informs the other party that the contract is at an end or that the homeowner is refusing to perform its obligations under the contract (or perform them in a substantially inconsistent manner).
As discussed previously, the Tribunal is satisfied that the contemporaneous emails between the parties (and Ms Choi) and between the parties and NSW Fair Trading is consistent with the contract remaining on foot.
The builder's email to Ms Choi on 10 September 2019 is consistent with the builder having suspended work under the contract because the builder felt it unjustified that the homeowner had said he would complain to NSW Fair Trading and was querying the driveway variation; not that the homeowner had told him on 9 September 2019 that the contract had ended and the homeowner was engaging a new builder.
Mr Laphai's email of 17 October 2019 to NSW Fair Trading is also consistent with the contract remaining on foot because the Mr Laphai states to NSW Fair Trading that the builder is looking forward to "working with you to achieve an amicable outcome"; not a builder stating that it had been told on 9 September 2019 that the contract had come to an end and the homeowner was going to engage a new builder.
The next issue raised by the builder is that on 9 September 2019 the homeowner removed the keys from the meter box and took possession of the property.
As discussed previously, the homeowner and Ms Choi denied that this had occurred.
The Tribunal does not accept the evidence that the homeowner had removed the keys from the site and had, in effect, taken possession of the site on 9 September 2019.
Again, the contemporaneous emails make no reference to such an event occurring. If the keys had been removed and the homeowner had taken possession of the site, it would be logical and rational that Mr Laphai would have referred to this in contemporaneous email correspondence.
Further, on his own evidence, the builder accessed the site (or had access to it) in the period after 9 September 2019. The builder assisted the homeowner for gas and water connections to occur. Whether or not such works were outside the scope of works under the contract, the fact that the builder was able to engage in such conduct is consistent with the builder having unrestricted access to the site rather than the homeowner having taken possession of the site on 9 September 2019 for the purpose of engaging a new builder (or engaging other contractors to perform works).
The Tribunal is satisfied that the builder remained in possession of the site, in the sense that the builder continued to have unrestricted access to the site and was able to continue works in the period after 9 September 2019.
The Tribunal finds that the contract was not repudiated by the homeowner on 9 September 2019, and accordingly the builder did not "accept" repudiation and terminate the contract.
The Tribunal also does not accept that events after 9 September 2019 were merely the builder having discussions to negotiate "terms" upon which the builder would return to the site. Rather, the builder suspended work on 9 September 2019 without issuing a notice of suspension under the contract. The contract remained on foot and the builder remained under a contractual obligation to perform works to achieve completion of the final progress payment stage.
The discussions between the parties about the builder returning to the site did not form a new contract, nor constitute a variation of the terms of the existing written contract.

Did The Homeowner Engage Other Contractors to Perform Work In The Period Between 9 September 2019 and 25 November 2019?

The builder asserts that when he attended site on 25 November 2019 he saw that further works has been performed, and raised this with directly with Mr Kim.
The difficulty with the builder's submission that further works had occurred (and, accordingly that such conduct was repudiatory) is that there was no clear evidence from Mr Laphai identifying what were the "further works" that had occurred.
Mr Laphai's evidence in chief was simply that he said to Mr Kim "Who has been working here?" (Court Book p. 89) and "I discovered that a third party contactor was on site doing work without my consent" (Court Book p. 468).
Considering Mr Laphai had been on site regularly during the build, and the disputes between the parties that had escalated in the period between 9 September 2019 and 25 November 2019, there is no reason why Mr Laphai could not clearly identify what "further work" had occurred on site during that period that was not performed by the builder or the builder's sub-contractors. It is not sufficient for Mr Laphai to assert there were "further works" without identifying what such works were.
As discussed previously, Mr Kim denied that Mr Kim had said to him on 25 November 2019 that there had been further works engaged directly by the homeowner and/or Ms Choi in the period between 9 September 2019 and 25 November 2019; and denied that any such works had occurred. Mr Kim's evidence in chief was further work was done from March 2020 after the homeowner had terminated the contract (Court Book p. 820).
Although the builder submits that Mr Kim's responses to questions about further work being performed was vague and unpersuasive, the questions posed to Mr Kim about further works were in general terms, not focussed on exactly what further work had purportedly occurred in the period between 9 September 2019 and 25 November 2019.
The cross examination of Ms Choi also did not question her in any specific detail about what work had occurred between 9 September 2019 and 25 November 2019.
The cross examination of Mr Kim about further work occurring was focussed upon Mr Kim not identifying that he or Ms Choi had engaged further works after the builder left site in his affidavits (T: 30/03/20: p. 36-37), which Mr Kim conceded. On the issue of Mr Kim and Ms Choi engaging further works after the builder left site (and before the contract had ended) the cross examination was brief, and did not explore in detail exactly what works had occurred and when they had occurred. The most relevant exchange was as follows (T: 30/03/20 p. 35): Builder's Counsel: All right. Well, nevertheless you agree that you've entered into another contract with another builder to complete the works? Mr Kim: No, not actual builder, but, like, I , I've been searching for relevant people to finish off the job. I was mostly doing it myself if you put it that way, because I've been organising it. Builder's Counsel: Okay. And are you a licensed builder? Mr Kim: No.
Clearly, the homeowner and Ms Choi have engaged building works to complete the building works sufficient for them to move into the property.
However, Ms Choi's concession that it was "possible" works were engaged prior to the homeowner purporting to terminate the contract on 2 March 2020 is not sufficient for the Tribunal to be satisfied that the homeowner and/or Ms Choi engaged building works in the period between 9 September 2019 and 25 November 2019 in the face of their denial that they had engaged in such conduct and without any clear evidence that any such works had occurred.

Credit of Witnesses

The builder submits that the Tribunal should accept the evidence of Mr Laphai and reject the evidence of Mr Kim about every disputed oral conversation between them because Mr Kim "knowingly lied" to the Tribunal about the removal of suspected contaminated soil/spoil from the site in July 2019. The builder relies upon excerpts of cross examination of Mr Kim on this issue. The builder further submits that Ms Choi should not be accepted as a witness of credit because her answers were "rambling"; "vague"; and "non-responsive".
The homeowner submits that Mr Kim removing soil/spoil does not affect his credit, because there was no evidence that when the soil was removed it was contaminated. On the issue of credit of witnesses, the homeowner submits that the Tribunal should focus upon the contemporaneous emails and text messages between the parties.
It is clear that Mr Kim arranged removal of soil and spoil from site in July 2019 when the builder had identified to him that the builder suspected the soil was contaminated and should be tested; and in circumstances where there had previously been asbestos affected soil removed from the site by the builder.
The Tribunal does not accept that Mr Kim "knowingly lied" to the Tribunal about this issue. That is a serious allegation to make in submissions, and the evidence does not establish such a finding.
The conduct of both Mr Kim and Mr Laphai in respect of the soil/spoil removal in July 2019 is of no credit to either of them. The homeowner should not have arranged removal of soil/spoil that could have been contaminated. The builder, despite having occupation of the site under the contract and an obligation to comply with relevant health and safety statutory obligations was prepared to allow the homeowner to remove the soil/spoil from site. The builder could have refused access to the site; or issued either a Notice of Breach or Notice of Suspension of Works in response to the conduct of Mr Kim; or could have contemporaneously notified the local Council or the NSW Environment Protection Agency of what the homeowner proposed to do.
Mr Laphai did none of those things. Rather, it appears the builder was content to allow Mr Kim to remove the soil/spoil and affirm the contract when building works were proceeding and the builder was getting paid, but raise the issue only when the parties fell into dispute and the homeowner complained to NSW Fair Trading.
Further, during the course of the hearing, Mr Laphai thought it appropriate to send a text message to Mr Kim late in the afternoon of the first day of the hearing accusing Mr Kim of illegally disposing of contaminated soil and telling Mr Kim he would be "reporting this to the EPA (sic) with court transcripts" (T: 31/03/21 p. 107).
The fact that Mr Laphai would send such a text message during the course of a hearing and without any findings having been made by the Tribunal demonstrates, if nothing else, the depth of animosity that has arisen between the parties.
On the issue of credit, the evidence of Mr Kim; Ms Choi; and Mr Laphai was each laced with self-serving and inconsistent statements. Each of the witnesses appeared convinced of the righteousness of their respective positions.
In such circumstances, it is appropriate that the Tribunal place primary emphasis on the objective surrounding facts that are either undisputed or established by contemporaneous documents; the apparent logic of events; and the inherent probabilities and improbabilities of purported events (In the Matter of Hillsea Pty Limited [2019] NSWSC 1152 at [16]-[21] and the authorities referred to therein).

Did the Homeowner Comply With Clause 27 of the Contract Before Referring the Matter to NSW Fair Trading?

Clause 27 of the contract states that if there is a dispute between the parties; the party who considers there is a dispute must promptly give the other party written notice of the items of dispute. If the dispute is not resolved informally, the parties "may" confer with a third party to resolve the dispute. If the parties do not agree to confer with a third party; or if the dispute is not resolved following the assistance of a third party, the owner: …may notify Fair Trading that a building dispute exists and seek the assistance of Fair Trading to resolve the dispute.
Clause 27 also states that even if a dispute has arisen, both parties must continue to perform their obligations under the contract.
It is clear that in the immediate period leading to 11 September 2019 there was written correspondence setting out that there was a dispute about the performance and progress of the building works. There was a site meeting on 9 September 2019 that did not resolve the dispute.
Clause 27 of the contract does not state that an owner "must" refer a matter to a third party for dispute resolution before seeking the assistance of NSW Fair Trading. It states that the parties "may" confer with a third party.
The Tribunal does not regard the owner referring the dispute to NSW Fair Trading on 11 September 2019 as a breach of Clause 27 of the contract. Even if it was a breach in the sense that the homeowner did not formally ask the builder whether the builder wanted the dispute referred to a "mutually agreeable third party" before referring the matter to NSW Fair Trading, the breach is of such a minor nature that it is not repudiatory. The NSW Fair Trading "Consumer Facts Sheet" attached to the contract (Court Book pp. 522-523) identifies that if an owner is in dispute with the builder, NSW Fair Trading provides "free dispute resolution".
In any event, when the matter was referred to NSW Fair Trading (or in the immediate period before the dispute was referred by the homeowner) the builder never invoked Clause 27 to offer to have the dispute referred to a mutually agreed third party before NSW Fair Trading provided dispute resolution; and further the builder wrote to NSW Fair Trading stating that builder wanted to work "amicably" with NSW Fair Trading to resolve the dispute.
Pursuant to Clause 27, the builder was not relieved of his contractual obligation to continue work whilst there was a dispute between the parties.

Did The Homeowner Provide The Builder With Tipping Receipts Regarding the Disposal of Soil/Spoil?

Clearly the homeowner did not provide such receipts. However, there is no contractual provision on the homeowner to do so. The only contractual provision identified by the builder was Clause 3. However, that is a duty imposed on the builder to comply with Australian Standards; laws; the requirement of the local Council; and the requirements of statutory authorities.
If the builder has failed to comply with Clause 3, it is because the builder allowed access to the homeowner to the site for the homeowner to arrange and perform the removal soil/spoil. The builder cannot blame the homeowner for its own breach. In the alternative, if the homeowner "caused" the builder to breach Clause 3, the builder knowingly and unequivocally affirmed the contract; or in the alternative waived its rights to rely on any breach cause by the homeowner.

Did the Homeowner Disclose to the Builder He Was Only the Co-Owner of the Land?

The evidence of the homeowner was that he co-owned the land with Ms Choi and his parents (T: 30/03/21 p. 32). That evidence was supported by a land Title Search (Court Book p. 492).
There is no provision of the contract that states that all owners of land must be parties to the contract. It is sufficient that an "owner" identified in the contract is a co-owner of the land. Under Clause 20 of the contract, the builder is responsible to ensure that the work is carried out on the owner's land; and under Clause 26 a builder may issue a notice of default if the owner "fails to provide satisfactory evidence of title".
There is nothing to indicate the builder regarded that the homeowner had failed to provide satisfactory evidence of title, and the builder did not issue a notice of default on this issue under Clause 26 of the contract.
Irrespective of whether the homeowner "disclosed" to the builder he was not the sole owner of the land, he was entitled to contract with the builder as a co-owner and there is no breach of contract or repudiatory conduct of the homeowner in Ms Choi and Mr Kim's parents not being parties to the contract.

Homeowner's Conduct In Not Paying The Driveway Variation

The builder did not issue a variation in accordance with Clause 13 of the contract. In any event, the builder did not complete the driveway works, so even if there was a variation in accordance with Clause 13 of the contract, it was only payable "at the time of the next progress payment or paid as agreed between the parties".
Even if the variation had been issued in accordance with Clause 13 (which it was not) and the works completed (which they were not) payment would only have been due at the stage all of the works reached practical completion under Clause 12 of the contract. The works never reached practical completion. There was no agreement between the parties to pay for the driveway works other than in accordance with the terms of the contract.
Non-payment of the driveway variation is not repudiatory conduct.

Did the Homeowner (and/or Ms Choi) Engage and Direct Contractors to Perform Works?

Clause 19 of the contract relevantly states as follows: The owner or the owner's representative must communicate and deal with the contractor personally or with such person nominated by the contractor as the contractor's authorised representative. The owner must not give directions to the contractor's employees or sub-contractors.
The builder submits that the homeowner and Ms Choi engaged and directed tradespersons. As discussed previously, Mr Kim and Ms Choi assert that all they were doing (with the consent of the builder) was instructing the builder to use certain tradespersons (flooring, tiling, waterproofing, joinery) who remained under the supervision and control of the builder. They both deny that they "directed" the builder's sub-contractors in the performance of works.
Mr Kim; Ms Choi and Mr Laphai were all cross examined about the extent to which, if any, the homeowner and Ms Choi gave directions to tradespersons. It was not suggested in the builder's submissions (or clearly put to Mr Kim and Ms Choi) that they had paid contractors direct and had entered into contracts with tradespersons separate to their contract with the builder.
Much of the evidence on this issue at the hearing was self-serving, in the sense that the homeowner and Ms Choi sought to downplay their involvement, and Mr Laphai sought to amplify their involvement.
The Tribunal is satisfied that the following occurred, placing significant evidentiary weight upon the contemporaneous emails between the parties: 1. The homeowner and Ms Choi informed the builder that they would select the tradespersons who would perform the flooring; tiling; waterproofing; and joinery works. 2. The builder agreed to the homeowner and Ms Choi selecting such tradespersons. 3. The homeowner and Ms Choi co-ordinated when the tradespersons selected would attend the site and perform works; and the builder consented to this occurring with the builder and Ms Choi communicating so that the stages of work could proceed with both the tradespersons selected by the homeowner and Ms Choi; and other tradespersons selected by the builder. 4. The tradespersons selected by the homeowner and Ms Choi contracted with the builder, not the homeowner and Ms Choi. The builder was still involved in (and ultimately responsible for) co-ordinating and supervising the works of the tradespersons selected by the homeowner and Ms Choi. The builder charged (and was paid) a profit margin under the contract in respect of the progress payment stages that included flooring, tiling, waterproofing, and joinery works. 5. From time to time, Ms Choi attended site and discussed the nature of the works, including discussing tiling works with the tiler. The builder knew of and consented to this occurring.
However, the evidence regarding the involvement of the homeowner and Ms Choi in the performance of works by the tradespersons they had selected does not rise to the level of giving "directions" to the builder's sub-contractors regarding the performance of the works. Ultimately, the tradespersons introduced by the homeowner remained under the direction and control of the builder rather than the homeowner and/or Ms Choi.
Consequently, no breach of Clause 19 of the contract is established.
Even if the conduct of the homeowner (and Ms Choi in particular) was characterized as giving "directions" to the builder's sub-contractors, the builder clearly knew this was occurring and consented to it occurring.
Even if breach of Clause 19 was established, and such conduct was regarded as repudiatory, the Tribunal is satisfied that the conduct of the builder in allowing this to occur with the builder's knowledge and consent constitutes affirmation of the contract.

Did the Homeowner Engage Contractors to Perform Works To the Property Between 25 November 2019 and 2 March 2020

As discussed previously, 2 March 2020 is the date on which the homeowners purportedly terminate the contract in accordance with Clause 25.
The Tribunal has previously discussed in detail why it has found that the homeowner and/or did not engage works at the property in the period from 9 September 2019 to 25 November 2019.
The Tribunal is also not satisfied that the homeowner and/or Ms Choi engaged works direct in the period form 25 November 2019 to 2 March 2020.
The only evidence to infer that the homeowner had engaged contractors direct during this period (other than Ms Choi's concession that it was "possible" works had been engaged before 2 March 2020) was the email of Mr Kim to Mr Laphai on 19 December 2019 complaining about the builder not recommencing works.
That email refers to the homeowner having telephoned "the electrician" and "the plumber". However, there is nothing to indicate from that email or other evidence that the homeowner engaged the electrician or plumber direct to perform works. The email is consistent with the homeowner having telephoned the electrician and the plumber to enquire why the builder had not engaged them to attend the site and perform works, in circumstances where a reason that had been provided by the builder for not recommencing works in a timely manner after 25 November 2019 was that tradespersons were unavailable. That conduct does not breach the terms of the contract, or is otherwise repudiatory.
The Tribunal is satisfied that the homeowner did not engage tradespersons direct to perform work at the property in the period from 25 November 2019 to 2 March 2020.

Conclusion-The Issue of Repudiation

The Tribunal is satisfied that the homeowner did not repudiate the contract.

Did the Homeowner Lawfully Terminate the Contract?

The homeowner's Solicitor's letter of 19 December 2019 complies with the provisions of Clause 25 of the contract. It clearly identifies the breaches by the builder (in particular, the builder not completing work with due diligence under the contract and ceasing work without any contractual right to do so) and gives the builder until 12 noon on 13 January 2020 to recommence work. That complies with the contractual provision that the builder be given a minimum of 10 business days to rectify the breach.
The Tribunal is satisfied that the builder breached the contract because it failed to proceed diligently with the works. That is a ground of termination under Clause 25. The works remained incomplete well beyond the time period set out in Clauses 5 and 6 of the contract, and the builder had not sought any extension of time to justify the delay under Clause 7 of the contract.
The homeowner's Solicitors letter of 2 March 2020 validly terminates the contract by informing the builder that the contract is terminated.
Accordingly, the homeowner validly terminated the contract on 2 March 2020.

The Homeowner's Claims For Damages In Respect of Defective and Incomplete Work.

As was discussed in Llamas v Rockwall Constructions Pty Ltd; Rockwall Constructions Pty Ltd v Llamas [2019] NSWCATCD 75 at [41]-[57], "defective" and "incomplete" work are distinct issues, even though there may be a degree of overlap between them in circumstances where work is "defective" because a builder has not completed part of the work that the builder was obliged to have completed during a particular progress payment stage for which the builder has been paid for (in the context of a contract where works are done and paid for in progress payment stages).
"Incomplete" work is more accurately a description of work that was not undertaken or completed by a builder under a progress stage when the builder ceased works on the site.
In this matter, the parties respective building consultant experts have addressed in their reports and their joint expert conclave the issues of "defective" work and "incomplete work" separately.

Defective Work

Section 18B of the HB Act states: 18B Warranties as to residential building work (1) The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work - (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 or 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 making of alterations 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 known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary 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 the work to achieve, so as to show that the owner relies on the holder's or person's skill and judgment. (2) The statutory warranties implied by this section are not limited to a contract to do residential building work for an owner of land and are also implied in a contract under which a person (the principal contractor) who has contracted to do residential building work contracts with another person (a subcontractor to the principal contractor) for the subcontractor to do the work (or any part of the work) for the principal contractor.
The principles applicable to whether a breach of the statutory warranties in s 18B of the HB Act were summarised by the Appeal Panel of the Tribunal in Deacon v National Strategic Constructions Pty Ltd; National Strategic Constructions Pty Ltd v Deacon [2017] NSWCATAP 185 as follows (at [46]): Although objective standards such as Australian Standards, the Building Code of Australia and the Guide are of significant relevance in establishing whether work has been performed in a proper and workmanlike manner (Wheeler v Ecroplot Pty Ltd [2010] NSWCA 61 at [10]), the absence of such evidence does not automatically mean a homeowner has failed to establish breach of statutory warranty. In our view, the relevant principle was succinctly stated by Senior Member Goldstein in G MacFayden and Anor v G Tadrosse [2014] NSWCATCD 194 at [46] as follows: …[E]vidence that work does not comply with the Building Code of Australia would establish a basis for a finding that sub section 18B(c) of the Act has been breached. Evidence of the details in which work does not comply with the contractual plans and specifications would form the basis for a finding that sub section 18B(a) of the Act has been breached. Evidence of work not being carried out in a proper and workmanlike manner would in my view involve identification of the work in question, a statement of how the expert would expect it to be carried out in in a proper and workmanlike manner and then identification of the factors which establish that the way in which the work has been carried out falls short of it being carried out in a proper and workmanlike manner. Evidence of this nature, if accepted, would form the basis for a finding that sub section 18B(a) of the Act has been breached.
As was also set out in Deacon, the Tribunal when considering whether breach of s 18B of the HB Act has been established must consider and make findings in respect of: 1. Whether the owner has established on the balance of probabilities that works have not been performed in accordance with s 18B of the HB Act. 2. If a 'defect' (in the sense of failure to comply with s 18B of the HB Act) is established, what is the appropriate method to rectify that defect.
Additionally, in the context of determining whether damages or a work order is the appropriate remedy for defective work, the Tribunal must consider that an order that the builder rectify defective work is the "preferred outcome" under s 48MA of the HB Act.
The appropriate method to rectify is considered in the context of the nature and degree of the relevant defect (Deacon at [57]-[59]). The method of rectification is the work necessary to achieve compliance with the contract, provided that method is a reasonable course to adopt (Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613 at 617-618).
In Bellgrove v Eldridge at 606, Dixon CJ, Webb and Taylor JJ addressed the circumstances in which damages for rectification of defective works are an appropriate remedy as follows: "…not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt….Many examples may, of course, be given of remedial work, which though necessary to produce conformity would not constitute a reasonable method of dealing with the situation and in such cases the true measure of the building owner's loss will be the diminution in value, if any, produced by the departure from the plans and specifications or by the defective workmanship or materials. As to what remedial work is both "necessary" and "reasonable" in any particular case is a question of fact…"
In Tabcorp Holdings Pty Ltd v Bowen Investments Pty Ltd [2009] HCA 8 [17]; (2009) 236 CLR 272 the High Court held that the test for reasonableness outlined in Bellgrove v Eldridge: "…tends to indicate that the test that the test of 'unreasonableness' is only to be satisfied by fairly exceptional circumstances. The example given by the court aligns closely with what Oliver J said in Radford, that is, that the diminution in value measure of damages will only apply where the innocent party is 'merely using a technical breach to secure an uncovenanted profit'."
Further, when assessing whether the proposed method of rectification is reasonable, the Tribunal must consider whether the cost (i.e. the cost of the proposed method of rectification in the context of assessing damages for contractual breach) is "out of all proportion to the achievement of the contractual objective" of the particular contract (Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 ('Ruxley'); Walker Group Constructions Pty Ltd v Tzaneros Investments Pty Ltd [2017] NSWCA 27 at [186]-[187]; Wheeler & Anor v Ecroplot [2010] NSWCA 61 at [81]; Repfix Industries Pty Ltd v FBD Group [2020] NSWDC 514 at [174]-[179]).
The homeowner's expert building consultant Mr Irvine inspected the property on 3 March 2020 (i.e. the day after the homeowner lawfully terminated the contract); and such inspection forms the basis of his first report of 23 June 2020. Mr Irvine inspected the property on a second occasion on 16 December 2020; which forms the basis of his "supplementary" report dated 18 December 2020.
Mr Irvine's "supplementary" expert report only deals with purported additional defects in respect of a stormwater pit and stormwater dish drain. It does not make any comment upon what works have been performed at the property to complete building works in the period between 2 March 2020 and 16 December 2020. All other purported defects and incomplete work are dealt with in his first report.
The builder's expert Mr Palumbo inspected the property on 19 November 2020. That inspection forms the basis of his first expert report dated 17 December 2020. That report only deals with the issue of incomplete work; Mr Palumbo's opinion about the builder's "final claim" of $44,800.76; and Mr Palumbo's opinion on the defect items identified in Mr Irvine's first report.
Mr Palumbo inspected the property on a second occasion on 8 February 2021. That inspection forms the basis of his second expert report dated 12 February 2021. Mr Palumbo's second report contains his opinion on the issue of defects identified in Mr Irvine's supplementary report.
Both experts conferred and prepared a joint expert report. Both experts gave concurrent evidence at the hearing and were question on the issue of defective work.
Neither expert was cross examined on the issue of incomplete work, other than very brief questioning by the homeowner's Counsel to Mr Palumbo.
The homeowner's proceedings in the Tribunal were brought within 2 years of the date on which the builder last attended the site to perform work (other than remedy any defects that does not affect practical completion) under s 3B (3) (b) of the HB Act. Accordingly, it is unnecessary for the Tribunal to make any findings distinguishing between "major defects" and "non-major defects" for the purpose of the limitation period in s 18E of the HB Act.
The Tribunal deals with the defect items identified in the expert first Joint Scott Schedule as follows:

Item 1-Masonry

Mr Irvine in his first report divided this defect into 5 sub-issues. The primary issue is that Mr Irvine did not believe the masonry at the premises was sufficiently waterproof in accordance with Pt 2 2.2 of the Building Code of Australia; Australia Standards AS 3700 and AS 4773.2 and the manufacturers specification. The defect involved cavity flashings; weepholes; and threshold flashing.
Both experts agreed there was a defect in respect of Item 1 (a) involving the cavity flashing along the Unit A entry north wall; the appropriate method of rectification was to clear 1 perpend joint in brickwork at flashing level; and the cost of such work is $65.
It was agreed between the experts that there was a defect in respect of Item 1 (c) (cavity flashing to roof exterior above Unit A); the method of rectification and the cost of rectification ($1,200).
It was agreed between the experts that there was no defect in respect of Item 1 (e).
The issues of disagreement between the experts were Item 1 (b) and Item 1 (d).
In respect of Item 1 (b) (wall cavity flashing above Unit A study window) both experts agreed on the scope of works to rectify if the defect was found; and the cost of rectification ($1,100). The disagreement was whether there was any defect. In essence, Mr Irvine believed that water staining on the head of the window and moisture readings he had taken demonstrated that the flashing had failed; and Mr Palumbo did not believe based on his visual inspection that there was any water staining so there was no evidence the flashing had failed.
On the basis that Mr Irvine performed moisture testing and Mr Palumbo did not, the Tribunal accepts the evidence of Mr Irvine on this issue and is satisfied that there is a defect.
Item 1 (d) is whether the builder omitted to construct a flashing and weepholes in brickwork above Unit B entry door and study window. Mr Irvine believed that weepholes and a flashing had not been installed, and the appropriate method to rectify was to remove 2 courses of bricks and install new flashings at a cost of $1,331.
Mr Palumbo believed it was likely there was a flashing. He accepted that there was one weephole omitted, but all that was required to be done was to clear out one perpendicular joint in the brickwork. Mr Palumbo believed it was likely there was a flashing, and that even if it had been omitted it was unnecessary to install a flashing because there was a balcony covering the area.
Mr Irvine stated in oral evidence (T: 08/07/21 p. 45) that although "generally" it would be sufficient to give waterproofing protection that there was a balcony above; the location of the balcony meant that there was a higher risk of leaking, so it was appropriate that a flashing be installed in the brickwork above the window and door. Mr Palumbo (T: 08/07/21 p. 46) disagreed that rain could enter the area, but accepted that the balcony above was "not very deep". Neither expert performed any invasive testing as to whether flashings had been installed.
Considering Mr Palumbo's evidence that a weephole had been omitted and that the balcony above the area was "not very deep" the Tribunal accepts the evidence of Mr Irvine on the issue of defect; method of rectification and cost of rectification.
Based on the above findings, the cost of rectification of Item 1 is $2,596 (exclusive of builder's margin and GST which are issues that will be discussed separately).

Item 2-Ceiling Height of First Level of Unit A

At the joint expert conclave, both experts agreed "no further action is required".

Item 3-Kitchen Overhead Cupboard Unsightly Overlapping Window Glazing

Mr Irvine asserted in his first report that it was possible that the kitchen overhead cupboards in Unit A were "across the rear window glazing" because the area had not been constructed in accordance with the plans. The cost of modifying the kitchen cupboards was identified as $300.
Mr Palumbo did not agree the kitchen in Unit A had not been constructed in accordance with the plans; and asserted that he was asked to assume that the builder had been directed to modify the dimensions in any event. At the joint expert conclave, the experts stated that "it was agreed that this is a matter for evidence".
No questions were put to the experts about Item 3 at the hearing, and the homeowner's submissions do not assert Item 3 is a defect. There was no cross examination of the builder on whether the kitchen complied with the plans that formed part of the contract.
The Tribunal is not satisfied any defect has been proved in respect of Item 3.

Item 4-Balconies in Unit A and Unit B

Mr Irvine asserts that the balconies are non-compliant with Part 2.2 of the Building Code of Australia (relevantly, Australian Standard AS 4654.2) because the balconies are "leaking" and the waterproofing has "failed". According to Mr Irvine, he saw water staining and evidence of dampness in the areas below the balconies; and there were "high moisture readings". Mr Irvine also identified other defect issues pertaining to the balcony in Unit B, including no step-down from interior to exterior surfaces; no evidence that waterproofing membrane had been turned up at the face of brickwork of enclosing walls; weepholes partially blocked; weepholes not discharging over an upturned membrane; and threshold flashings or membrane termination not visible inside the sliding door.
Mr Irvine asserted that the appropriate method of rectification was to remove and replace the balconies with installation of strip drains at the door openings. Such work would involve the complete replacement of waterproofing membrane on each balcony.
Mr Irvine identified the cost of rectification as $16,104.
Mr Palumbo agreed there was a defect in respect of inadequate drainage from each balcony. However, he believed the appropriate method of rectification was to install a strip drain in each balcony at a total cost of $4.375. Mr Palumbo believed that such work could be performed with repair of the existing waterproofing membranes, and did not require the balconies to be removed and replaced. Mr Palumbo did not believe there was any inadequacies in respect of the existence of an adequate waterproofing membrane on each of the balconies; or that weepholes were inadequate (other than 2 weepholes needed to be cleaned out).
In cross examination, both experts maintained their position. Mr Irvine conceded that the installation of a strip drain on each balcony would cause the works to achieve compliance with the relevant Australian Standard. However, he did not agree that such works could be performed without there being a real risk that any repair to the existing waterproofing membrane would be inadequate; and it was appropriate to fully replace both waterproofing membranes.
The Tribunal is satisfied that both balconies are defective in breach of the statutory warranties in s 18B of the HB Act because they do not comply with Part 2.2 of the Building Code of Australia. The Tribunal is satisfied that the appropriate method of rectification involves installation of a strip drain on each balcony. However, the Tribunal accepts the evidence of Mr Irvine that to install strip drains would involve compromise of the waterproofing membrane, and that the appropriate method of rectification involves the complete replacement of the waterproofing membranes. The Tribunal accepts the evidence of Mr Irvine that 'patching' the existing waterproofing membrane on the respective balconies is not the usual or appropriate method to ensure that the defect is rectified and achieve an appropriate standard of waterproofing.

Item 5-Height of Balcony Balustrade in Unit A

Both experts agreed there is no current defect that requires rectification.

Item 6-Unit A-Overcut Tiles Below Bathroom Taps Unit A

Mr Irvine asserts that the bathroom had visible cut edges which would not be covered by tap flanges. Mr Irvine asserts the work does not comply with Australian Standard AS 3958.1. Mr Irvine opines that the appropriate method of rectification is to remove and replace the tiles at a cost of $170.
Mr Palumbo asserts that when he inspected the property the tap flanges had been installed and he did not see any defective tiles in the area.
The Tribunal accepts the evidence of Mr Irvine on this issue. The Tribunal is satisfied that the work was defective as at the date the builder left the site, rather than being incomplete.

Item 7-Architraves

Both experts agreed that the work was defective; the method of rectification; and the cost of rectification ($1,000).

Item 8-Bath in Unit B

Mr Irvine asserted that when he inspected the property on 3 March 2020 the hob tiles were built up on both sides in the bathroom to Unit B, meaning the bath could not be installed directly over the drainage outlet or satisfactorily tighten the connection to the bath drain. In essence, Mr Irvine believed the work had not been performed with due care and skill. Mr Irvine believed the front hob and tiles needed to be removed at a cost of $692.
Mr Palumbo stated that when he inspected the property approximately 9 months later, the bath had been installed. Accordingly, Mr Palumbo was of the view that if there had been defective work, it had been rectified. Mr Palumbo was not instructed to comment upon whether, if the bath was in the condition Mr Irvine asserted it was he inspected the property on 3 March 2020, the work was defective; or Mr Irvine's opinion on the method and cost of rectification.
The Tribunal is satisfied that the work was defective as of 3 March 2020 and accepts the opinion of Mr Irvine on the issue of defect; method of rectification and cost of rectification. The mere fact that defect that was extant at the date the contract was terminated has been rectified does not mean there was no defect. As Mr Palumbo was not asked to comment upon Mr Irvine's opinion regarding the method of rectification and the cost of rectification, that evidence is uncontested and there is no reason the Tribunal should not accept it.

Item 9-Vanity in Unit B

This item is closely associated with Item 8. When Mr Irvine inspected, no vanity had been installed. Mr Irvine believed because of the position of the bath hob, a vanity could not be installed that allowed the doors to open fully. Mr Irvine stated that not only did the hob need to be removed so the bath repositioned and the hob replaced, but that pipework needed to be relocated, lining patched; and waterproofing repaired so that the vanity could be positioned in a manner that allowed the doors to open fully.
Mr Irvine asserted that the cost of rectification was $500.
As in respect of Item 8, Mr Palumbo stated that when he inspected the property, the vanity had been installed.
For the same reasons as set out in respect of Item 8, the Tribunal accepts evidence of Mr Irvine on the issues of defective work, method of rectification; and cost of rectification.

Item 10-Sewer Gully

Mr Irvine stated that he was instructed by the homeowner that there had been a blockage of the sewer pipe when they used the pipe "during construction" and they instructed a tradesperson to remove the blockage.
However, Mr Irvine's opinion on defect was not the mere fact that the sewer pipe had been blocked. It was that the sewer gully was located above the floor level. According to Mr Irvine, the work did not comply with Australian Standard AS 3500 for plumbing and drainage, and the sewer gully needed to be relocated to a position below internal floor level for the work to be compliant with the standard. Mr Irvine identified the cost of such work as $2,800.
Mr Palumbo stated the sewer system was operative at the time of his inspection.
In cross examination, it was put to Mr Irvine that a builder would have "had to resolve before handing the property back" (T:08/07/21 p58). Mr Irvine agreed. The builder submitted that the work was "incomplete" rather than defective.
The mere fact that the sewer was blocked does not mean the work was defective. However, the Tribunal accepts the evidence of Mr Irvine that the position of the sewer gully was non-compliant with Australian Standard AS 3500. That is the relevant defect. The Tribunal accepts Mr Irvine's evidence on the issues of defect; method of rectification; and cost of rectification.

Contingencies; Site Establishment; Builder's Margin

Mr Irvine in his report identified that in respect of the cost of engaging a remedial builder there should be a contingency fee of 10%; an establishment fee of 15%; and a builder's margin of 20% each added to the cost of rectification.
Mr Palumbo asserted that fees for establishment costs and contingencies were unnecessary and extravagant, considering the small number of defects and relatively straightforward method of rectification. Mr Palumbo identified 20% as the appropriate builder's margin.
The Tribunal is satisfied that a contingency fee and site establishment fee are inappropriate, considering the number of defects and the scope of works to rectify.
The Tribunal is satisfied that only a builder's margin of 20% is appropriate (other than GST).
The Tribunal summarises the findings regarding cost of rectification of defective work in the First Joint Expert Scott Schedule as follows: ITEM-FIRST SCOTT SCHEDULE COST Item 1 $1,331 Item 2 Nil Item 3 Nil Item 4 $16,104 Item 5 Nil Item 6 $170 Item 7 $1,000 Item 8 $692 Item 9 $500 Item 10 $2,800 SUB TOTAL $22,597 Plus 20% builders margin $4,519.40 SUB TOTAL $27,116.40 Plus 10% GST $2,711.64 TOTAL $29,828.04

Second Joint Expert Scott Schedule-Stormwater Dish Drain; Stormwater Pit; and Water Tanks

Three defect items arise from Mr Irvine's supplementary report. Both experts commented upon the defects, and prepared a second Joint Scott Schedule.

Item 1-Concrete Stormwater Dish Drains Unit A

In his supplementary report (in particular, pp. 1103-1105 of the Court Book) Mr Irvine states that the stormwater dish drain located adjacent to the on-site stormwater detention tank was defective because: (a) it did not extend through to the driveway in accordance with the contractual plans; and (b) soil had compacted 100mm.
Additionally, the stormwater dish drain in the south east corner of the property was defective because it finished against the stormwater pit, and did not discharge into it. Mr Irvine noted that the stormwater pit had been "modified by the owner to drain surface water" but asserted the pit "was not installed in accordance with the contract documents".
Mr Irvine asserted that the two drains would have to be replaced to rectify the said defects, at a cost of $6,232.
Mr Palumbo agreed that there had been subsidence in the area. However, based on the builder's instructions and photographic evidence provided by the builder taken during the course of the building works, Mr Palumbo believed the drains had been installed at the correct level; and any subsidence issue was caused by the owner (a) removing the soil/spoil from the area in July 2019; and (b) the replacement soil which was performed by the homeowner after the builder had left the site not being adequately compacted.
Mr Palumbo in his second report only made brief reference the on-site detention tanks and stormwater pits.
Neither expert was cross examined to any significant extent in respect of this purported defect item.
The Tribunal is satisfied that the homeowner, rather than the builder, removed soil from the area, and subsequently replaced that soil after the builder had left the site. The Tribunal is not satisfied that any subsidence arises from defective work by the builder.
The Tribunal is satisfied that the stormwater dish drain located adjacent to the on-site stormwater detention tank is defective because it does not comply with contractual plans, as set out in the evidence of Mr Irvine. The Tribunal is satisfied that the appropriate method of rectification is to remove and replace the drain so that it is installed in accordance with the plans and specifications under the contract.
However, in respect of the stormwater dish drain in the south east corner of the property, the Tribunal is not satisfied a defect has been established, because the homeowner has performed modification of the stormwater pit and the soil subsidence issue has been caused or significantly contributed to by the actions of the homeowner, rather than the builder's initial construction of the drain.
Accordingly, in respect of the cost of rectification, the appropriate amount is $3,111.50; being 50% of the amount identified by Mr Irvine in his report.

Item 2-Unit A Stormwater Pit

Both experts agreed that the relocation of the pit was necessary and authorised by a Sydney Water representative and the original design engineer. Accordingly, this is not defective work.

Item 3-Signage on On-Site Detention Tanks

Both experts agreed this was defective work and the cost of rectification was $130.
In respect of the items in the Second Scott Schedule, the Tribunal summarises the cost of rectification as follows: ITEM-SECOND SCOTT SCHEDULE COST Item 1 $3,111.50 Item 2 Nil Item 3 $130 SUB-TOTAL $3,241.50 BUILDERS MARGIN (20%) $648.30 SUB-TOTAL $3,889.80 GST $388.98 TOTAL $4,278.78

Summary-Cost of Rectifying Defective Work

The cost of rectification of defective work is $29,828.04 + $4278.78=$34,106.82.
In the Second Joint Scott Schedule (p. 1410 of the Court Book) there is reference to "incomplete work" being items necessary to certify the on-site detention tanks. Mr Irvine quantifies the cost of such work as $2,453. Mr Palumbo asserts the work had been completed at the time of his inspection.
The Tribunal regards it appropriate to consider this item as part of the 'incomplete work' claim by the homeowner, rather than existing defective work. The issue of 'incomplete work' will be further considered later in this decision.

Section 48MA of the HB Act

By reason of s 48MA of the HB Act, the Tribunal must have regard to the principle that rectification of defective work by the responsible party is the preferred outcome.
Section 48MA of the HB Act applies to existing defective work by the builder, not incomplete work.
In Kurmond Homes Pty Ltd v Marsden [2018] NSWCATAP 23 at [41]-[46] the Appeal Panel stated as follows: While not appropriate to seek to define all circumstances that might justify a court or tribunal making an order that departs from the preferred outcome, it is necessary to give some consideration to the nature of the obligation imposed on the court or tribunal by s 48MA. First, the principle, by its terms, only applies "in determining a building claim involving an allegation of defective residential building work or specialist work". It is not expressed to apply where, for example, the building claim only involves an allegation of incomplete residential building work or specialist work. That is not to suggest s 48O does not otherwise permit a work order in respect of work found to be incomplete. Second, s 48MA is directed towards the remedy or "outcome" to be provided by the court or tribunal where a claimant establishes the responsible party has carried out defective residential building work or specialist work. In this sense, it is not properly described as a "presumption". Rather, it is a remedy to be "preferred" to other forms of order which the court or tribunal might make. Third, while s 48MA provides the court or tribunal "is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome", the section does not mandate that a work order must be made in all cases. Further, the section does not confine the form of orders that may be made under s 48O, including an order that defective work be rectified by the responsible party engaging another person to carry out that work on behalf of the responsible party. Fourth, the term "preferred" is not defined. The HB Act and Regulations do not specify circumstances in which the preferred outcome is not to be adopted. However, guidance as to the meaning of "preferred" and the circumstances that would justify an order for a different outcome is found in the second reading speech where the Minister for Fair Trading makes clear that the purpose of the amendment was to: (1) prevent a homeowner from unreasonably refusing a builder access to a building site to rectify defective work; (2) permit a builder to return to carry out necessary rectification work if they are willing; and (3) support the timely and cost-effective resolution of disputes. That is, in deciding what order should be made, a court or tribunal may consider whether there is a reasonable basis for any objection raised by the homeowner to the builder being permitted to rectify the defective work, the terms of any order, whether the builder is willing to return and whether such an order would support a timely and cost effective resolution of the dispute.
Whether the Tribunal departs from the "preferred outcome" that the builder who performed the defective work rectify it involves the exercise of discretion (Leung v Alexakis [2018] NSWCATAP 11 at [139]; Robinson v Hindmarsh Construction Australia Pty Ltd [2021] NSWCATAP 51 at [66]).
The Tribunal is satisfied that rectification of defective builder is not the preferred outcome. The builder breached the contract and the homeowner lawfully terminated the contract. The relationship between the builder and the homeowner has irretrievably broken down; including allegations made by the builder in submissions that the homeowner lied and intentionally misled the Tribunal; and Mr Laphai during the course of the hearing sending text messages to Mr Kim stating that Mr Laphai was going to report Mr Kim to the Environmental Protection Authority "with Court (sic) transcripts" (T:31/03/21 pp. 107-108).
In such circumstances, the Tribunal has no confidence any work order would be complied with by the builder and such an order in the circumstances of this matter would not support the timely and cost effective resolution of the dispute.

The Homeowner's Damages Claim For Incomplete Work

As discussed previously as the homeowner lawfully terminated the contract it is entitled to damages for the increased cost of completing incomplete work if it can establish damage and loss.
Mr Irvine in his report of 3 March 2020 identifies the cost of completing incomplete work as $202,810.57. The items and costings are set out a pp. 13-14 and 20-21 of his report (Court Book pp. 895-896 and 902-903).
Mr Irvine's assessment includes a 15% establishment and supervision fee; and an additional 20% builder's margin.
At the date of termination of the contract, the amount to be paid to complete the contract was $109,607.50. If the Tribunal accepts that Mr Irvine's assessment of the cost of completion is the appropriate measure of damages, then the completion damages would be $93,203.07 (being the cost to complete less the amount that the homeowner would have had to pay to complete under the contract had it not been terminated).
If the homeowner fails to establish that the cost of completion exceeds $109,607.50, the homeowner is not entitled to damages for the increased cost of completing work under the contract with the builder.
As discussed previously, Mr Irvine's assessment of the cost of competing incomplete work is contained in his first report, when he inspected the property the day after the homeowner terminated the contract.
Mr Irvine was not instructed to provide any revised assessment to take into account the works that the homeowner had performed at the property after 2 March 2020, even in circumstances where he was instructed to perform a further inspection on 16 December 2020. As discussed previously, the homeowner and Ms Choi provided no evidence of the costs they had expended to perform further works at the property, despite clearly performing a significant amount of work.
There was also no clear evidence of the date the homeowner and Ms Choi took occupation of the property. However, the homeowner' submissions on the issue of damages for rent costs incurred (which will be discussed later in the decision) identify the period to which such damages should be assessed as 25 April 2020 (presumably the date the homeowner took occupation).
Mr Palumbo, in his report of 17 December 2020 (Court Book pp. 1154-1196), based his report on a list of items that Mr Laphai had given him that Mr Laphai asserted was incomplete as at the date the builder was last on site. Mr Palumbo noted that during in his inspection almost all of this work had been completed.
Mr Palumbo, in assessing the cost of completing incomplete work simply took the list of purportedly incomplete items provided by Mr Laphai (which Mr Laphai had costed as being worth $20,005 to complete) and gave a brief opinion on each item on Mr Laphai's list. Using such a methodology, Mr Palumbo identified the cost of completion as $15,675.
At the joint expert conclave, Mr Irvine and Mr Palumbo simply "maintained their positions". Neither expert had been instructed to comment upon the assumptions and methodology of the other expert.
At the hearing, neither Counsel sought to question Mr Irvine or Mr Palumbo about their opinion on the issue of incomplete work.
The builder submits that homeowner has not proved the cost of completing incomplete work, because the homeowner has not provided any evidence of the amount that was spent by the homeowner for the works performed after 2 March 2020 and that the homeowners are only entitled to actual cost to complete in circumstances where they have engaged work, rather that the "theoretical" cost to complete assessed by Mr Irvine as of 2 March 2020. The builder relies on Hyder Consulting Australia Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd and Anor [2001] NSWCA 313 ('Hyder Consulting') at [18]-[19] per Meagher JA.
The builder submits that if the Tribunal awarded damages based on the theoretical cost to complete rather than the actual amount expended by the homeowner to achieve completion, the homeowner would be put in a better position than had the contract been performed, and obtain a 'windfall'.
The homeowner submits that Hyder Consulting is authority for the proposition that "actual cost" is not the only method of assessing damages, and it is within the discretion of the Tribunal to assess the cost to complete based upon Mr Irvine's opinion of the condition of the property as of 2 March 2020 irrespective of the subsequent amounts expended by the homeowner.
The homeowner submits that there is no "best evidence rule" in the Tribunal where rules of evidence don't apply; and that difficulty in assessing damages does not relieve a decision maker from doing its best in all the circumstances (Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 ('Amann Aviation')). The homeowner submits that the Tribunal should accept the opinion of Mr Irvine on the issue of the cost to complete works, irrespective of monies subsequently expended by the homeowner to complete such works.
The starting point for assessment of damages for breach of contract is the principle that damages are assessed to put the party in the position it would have been had the contract been performed. As Mason CJ and Dawson J stated in Amann Aviation at [80]-[82]: The general rule at common law, as stated by Parke B in Robinson v Harman, is 'that were a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, be placed in the same situation, with respect to damages, as if the contract had been performed… The corollary of the principle in Robinson v Harman is that a plaintiff is not entitled to, by the award of damages upon breach, to be placed in superior position to that which he or she would have been in had the contract been performed…
It is the homeowner who bears the onus of proving both the loss sustained by reason of the breach and the damages for the loss (Amman Aviation per Brennan J at [99]).
In Hyder Consulting Giles JA (with whom Sheller JA agreed) stated at paras [97]-[99] (in the context of the damages for the cost of rectifying existing defective work): 97 In Bellgrove v Eldridge the owner sued the builder for breach of contract in constructing a building with defective foundations. It was held that the measure of damages was not the diminution in the value of the building by reason of the defective foundations, but the cost of reasonable and necessary work to rectify the foundations plus consequential losses, and that in the particular case demolition and rebuilding was reasonable and necessary to provide a building in conformity with the contract. Theoretical cost versus actual cost was not in question. 98 The Court did say (at 620) - "It was suggested during the course of argument that if the respondent retains her present judgment and it is satisfied, she may or may not demolish the existing house and re-erect another. If she does not, it is said, she will still have a house together with the cost of erecting another one. To our mind this circumstance is quite immaterial and is but one variation of a feature which so often presents itself in the assessment of damages in cases where they must be assessed once and for all." 99 This does not mean that a theoretical reasonable cost is to be preferred over the actual cost where the actual cost is known and can be taken as the reasonable cost. If the rectification work has not been carried out, then a theoretical reasonable cost must be found and, because damages must be assessed once and for all, must be awarded even though the rectification work might not be carried out. (I have held that, if it is found that the rectification work will never be carried out, no damages should be awarded: see Central Coast Leagues Club Limited v Gosford City Council, 9 June 1998, unreported). But if the rectification work has been carried out and the actual cost is known, that provides sound evidence of the reasonable cost and should ordinarily provide the basis for damages.
Although Giles JA was referring to the cost of rectification, there is no conceptual difference to the application of this principle to the cost of completion. When works have been done to complete, and the actual cost is known to the homeowner, that should ordinarily form the basis for damages for the cost of completion. This is not inconsistent with the comments of Meagher JA at para [19] in Hyder Consulting.
The Tribunal is satisfied the appropriate basis for assessing any loss for the cost of completion in the circumstances of this matter involves consideration of the amount spent by the homeowner to complete. To disregard this, as the homeowner asserts, invites a situation where the Tribunal is not assessing damages on the basis of putting the homeowner in the position the homeowner should have been had the contract been performed.
There is no appropriate reason to assess damages on a different basis on the costs to complete. It is clear from the concessions made by the homeowner and Ms Choi in cross examination that they actively engaged contractors to complete the works at the property. In such circumstances, they must have known of the monies they expended to complete the works (or, on any view, the vast majority of the works). Both chose not to disclose this information in their evidence in chief.
This is not a situation where the homeowner has not yet had works to complete performed. In such a situation, the Tribunal assesses damages on the basis of the cost of completion (usually based upon expert evidence) and it is a matter for the homeowner as to how such monies are expended (or whether they are expended).
Further, this is not a situation where the Tribunal is construing the actions of the homeowner in the context of mitigation of loss (see, for a discussion of applicable principles, see Harold R Finger & Co Pty Ltd v Karellas Investments Pty Ltd [2016] NSWCA 123 at [221]-[247]) which was not an issue raised in submissions. Rather, performance of work to complete and the absence of evidence as to what monies were expended by the homeowner goes fundamentally to the issue of whether damage and loss have been established.
In respect of proof of loss, the relevant principles are set out by Black J in Sabouni v Revelop Building and Developments Pty Ltd [2021] NSWSC 31 as follows at [41]-[42]: The damages to which RBD is entitled, in respect of Mr Sabouni's breach of or repudiation of the Contract is the monetary sum which, so far as money can, represents "fair and adequate compensation for the loss or injury" which it sustained by reason of that breach or repudiation: Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 116 per Deane J. The Court must do the best it can to make a reliable assessment of damages, where damages are difficult to assess, including where a party has failed to lead the best evidence of damages: Commonwealth of Australia v Amann Aviation Pty Ltd above at 83, per Mason CJ and Dawson J, 125 per Deane J, 153 per Gaudron J. In Uszok v Henley Properties (NSW) Pty Ltd [2007] NSWCA 31 at [135], Beazley JA observed that: "Where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat the only remedy it provides for breach of contract, an award of damages….Such damages should not be nominal only, notwithstanding that the award may be difficult to assess…" (Citations omitted) On the other hand, the case law also recognises that damages must be proved with a degree of precision which reflects the proof that is reasonably available to the parties: State of New South Wales v Moss (2000) 54 NSWLR 536 at [72]; Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768 at [38]. In Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275 at 319, Pincus J noted that "if the evidence called on behalf of [the plaintiff] fails to provide any rational foundation for a proper estimate of damages, the Court should simply decline to make one". That approach was approved by Brooking J in JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 at 243 and by the Court of Appeal in Troulis v Vamvoukakis [1998] NSWCA 237 where Gleeson CJ observed that, where damages were susceptible of evidentiary proof, but there was an absence of raw material to which good sense may be applied, "[j]ustice does not dictate that … a figure should be plucked out of the air". That decision has been approved in subsequent cases, including McCrohan v Harith [2010] NSWCA 67 at [128], where McColl JA (with whom Campbell JA and Handley AJA agreed) held that an estimate of damages, in the nature of a "guess", should not be made where precise evidence of the damages suffered could have been adduced, but was not. I followed that decision in Re Hair Industrie Penrith Pty Ltd, Hair Industrie Merrylands Pty Ltd [2015] NSWSC 1578 at [20], on which I have drawn for the summary which appears above.
In this matter, the homeowner had not provided any evidence of the expenditure of the homeowner in performing work after 2 March 2020, despite the homeowner asserting that the works were significant due to the builder's purported failure to complete most of the final progress payment stage. The homeowner clearly had the ability and opportunity to provide such evidence. The failure to provide such evidence is not merely a "difficulty" in assessing loss; it goes to the heart of the issue of whether the cost to complete works is greater than the amount the homeowner would have had to pay the builder under the contract to compete the works had the contract been fully performed (i.e. whether actual loss has been proved).
The Tribunal is not satisfied the homeowner has proved that the cost to complete the works pursuant to the final progress payment stage under the contract is greater than the amount the homeowner would have had to pay the builder under the contract had the contract been fully performed.
The Tribunal did award damages for the cost of rectification of some small items of defective work where Mr Irvine had estimated the cost of rectification and the homeowner had engaged for the works to be done, without providing evidence of the actual cost. In that limited circumstance, the method of assessing the cost of rectification based on Mr Irvine's opinion, because the costs involved were small; and it is unlikely there would have been any significant difference between the 'theoretical' cost and the 'actual' cost.
However, that is a completely different situation to where the homeowner has undertaken significant completion works after Mr Irvine viewed the property on 2 March 2020 and has provided no evidence of the actual expenses incurred nor engaged Mr Irvine to provide a further report taking such expenditure into account.
Finally on this issue, the submission of the homeowner that the "best evidence rule" (sic) does not apply in the Tribunal because rules of evidence do not apply (which is clearly a reference to s 38 (3) of the Civil and Administrative Tribunal Act 2013 (NSW)) is misguided. It is well established that the Tribunal must apply legal principles in determining the proceedings before it. That includes the applicable legal principles dealing with damages for breach of contract.

Homeowner's Claim For Rent Expenses Incurred

The homeowner claims damages of $41,800 for rent expended by the homeowner for the period between 6 April 2019 (when the 50 week period for completion under the contract expired) and 25 April 2020 calculated at $760 per week.
When, or in the immediate period before, the contract was entered into, Mr Kim's parents lived in the house which was demolished for the purpose of constructing the duplex dwelling (T:30/03/21p33).
Mr Kim and Ms Choi lived in other premises, and had been renting those premises since 2012 (T:31/03/21 p17). The homeowner and Ms Choi did not notify the builder by email at or prior to the time the contract was entered into that they were renting premises; and that they intended to move into the property themselves upon completion (T: 31/03/21 p 17). Ms Choi conceded during cross examination that the builder may not have known they were renting (T: 31/03/21 p 17).
At its highest, the evidence of Mr Kim and Ms Choi was that they intended to move into the premises upon completion. However, there was insufficient evidence to establish that the builder was told that Mr Kim and Ms Choi were renting premises to reside in and intended to move into the property themselves immediately upon completion of the work before the contract was entered into.
Further, as discussed previously, after the contract was signed plans were amended to change the layout of one of the duplexes to include separate occupancy areas.
Under the well-established principle in Hadley v Baxendale (1854) 156 ER 145 ('Hadley v Baxendale'), damages can only be awarded for breach of contract if they are not too remote from the breach. The loss must be of a type that (1) arises naturally, that is in the usual course of things, from the breach; or (2) is of a type that may have reasonably have been supposed to be in the contemplation of both parties at the time they made the contract as the probable result of the breach.
In circumstances where Mr Kim and Ms Choi had been renting premises since 2012, rather than residing in the premises and moving out to rent premises whilst construction occurred, the Tribunal is not satisfied that the cost of renting premises after the date the work was due to be completed under the contract is a loss that arises naturally from the breach under the first limb of Hadley v Baxendale.
The Tribunal is not satisfied that that the loss is a type of loss that might reasonably have been supposed to be in the contemplation of both parties at the time they made the contract as the probable result of the breach. There is no sufficient evidence to satisfy the Tribunal that the builder knew, or should reasonably have known, at the time the contact was entered into that the homeowner was renting premises and intended to move into the premises the subject of the building contract immediately upon completion (and the upon the issue of an Occupation Certificate).
Accordingly, any loss is too remote from the builder's breach in failing to complete the contract within the stipulated time under the contract.

Homeowner's Claim for Credit for Provisional Sum Items

Clause 10 of the Contract deals with Provisional Sums, and has been discussed previously. Relevantly, for any Provisional Sum item set out in Clause 10, the builder must give the homeowner a credit for the amount that it costs the builder that is less than the amount set out in the schedule in Clause 10 and such an amount is to be taken into account "in the next progress payment or as agreed between the parties".
The builder must also provide invoices, receipts or other documents evidencing the actual cost of the work included in the provisional sums schedule at the time payment from the builder is requested.
It is clear that the builder did not credit the homeowner for provisional sum items during the progress payment stages that were paid. The builder purported to give a 'credit' of $46,507.13 in its "final invoice" for the incomplete final progress payment stage.
However, Clause 10 of the contract does not state that a builder must credit to the owner the full amount for Provisional Sums if the builder cannot provide invoices and receipts. Invoices and receipts are, however, the best evidence of amounts that have been incurred by the builder.
The Tribunal deals with the Provisional Sum items as follows:

Brickwork

The Provisional Sum amount is $56,100. There is no evidence the homeowner paid for any bricks. The duplex building was constructed of bricks, and the builder has clearly expended monies on the supply of bricks. Significant brickwork was performed at the property.
The builder did not provide in its evidence a copy of invoices for the cost of purchasing bricks. Rather, there were documents (Court Book pp. 479-480) where the builder created a table setting out the amount of bricks used and the cost of bricks. On the basis of this document, the builder asserts that the cost of supplying bricks was $44,347.83; and when builder's margin and GST were added the cost was $47,748.
In the 'breakdown of credits' document attached by the builder to its tax invoice dated 11 September 2019, the builder identifies the "total spent" on bricks as $52,521.29.
The builder's expert Mr Palumbo, despite being instructed to comment upon what works were incomplete and comment upon the builder's final progress payment claim, does not specifically address the issue of costs of bricks, other than to assert generally that the builder's final progress payment claim is reasonable. Mr Irvine was not instructed to address this issue. Neither expert was cross examined on the issue of the actual costs of Provisional Sum items.
The Tribunal is satisfied that the builder did expend monies on brick supply, despite the failure to provide invoices. Considering the amount of brickwork at the property, the Tribunal is satisfied that the cost of supplying bricks was $44,347.83. To this amount, GST should be added, but builder's margin, because Clause 10 is dealing with the actual cost of items in the Provisional Sums schedule, and under Clause 10 it is only when the actual cost to the builder exceeds the amount identified in the Provisional Sums Schedule that a "contractors margin" of 15% is to be added. That brings the total cost of brick supply to $48,782.
Further, the Tribunal is not satisfied that any incomplete works involve brickwork.
Accordingly, the homeowner is entitled to a contractual credit in its favour of $7,317.39 for brickwork under Clause 10 of the contract (being the amount of $56,100 less $48,782.61).

Joinery

The Provisional Sum amount for joinery is $62,150. The builder's 'Provisional Sum breakup" document (Court Book p 479) identifies the cost of joinery to the builder as $49,130.43 plus GST and builder's margin.
However, the invoices provided by the builder in evidence (Court Book pp. 787-790 total $48,400 inclusive of GST in respect of the actual cost to the builder.
The Tribunal is not satisfied there is any overlap between the Provisional Sum adjustment for joinery under Clause 10 of the contract, and any incomplete work.
The Tribunal is satisfied that the homeowner is entitled to a contractual credit in its favour for joinery under Clause 10 of the contract in the amount of $13,750 (being the amount of $62,150 less $48,400.

Fixtures and Fittings

The Provisional Sum amount is $22,000.
The evidence of Ms Choi was that she and the homeowner paid for all of the fittings and fixtures. The builder provided no evidence of invoices or receipts for payment of fittings and fixtures, and in cross examination the only fitting or fixture the builder identified was payment of a toilet in the sum of $181.82.
The builder's "Provisional Sum Break Up" (Court Book p 479) only referred to the amount of $181.82 as the amount expended by the builder on fittings and fixtures.
In the absence of any invoice or receipt for $181.82, the Tribunal does not allow this amount in favour of the builder.
The Tribunal is satisfied the homeowner and Ms Choi paid for all the fittings and fixtures.
The Tribunal is not satisfied there is any 'overlap' or 'double counting' between the Provisional Sum adjustment under Clause 10 of the contract and the issue of incomplete work.
Accordingly, the homeowner is entitled to a contractual credit in its favour of fixtures and fittings under Clause 10 of the contract in the amount of $22,000.

Appliances

The Provisional Sum amount for appliances is $22,000.
The evidence of Ms Choi was that she and the homeowner paid for all of the appliances. The builder provided no evidence that it has paid for any appliances; and in its "Provisional Sum Break Up" it does not identify any amount spent.
There is no evidence to indicate that there is any 'overlap' or 'double counting' between the cost of appliances (purchased by the homeowner and installed by the builder) and the issue of incomplete work.
The homeowner is entitled to a contractual credit in its favour of $22,000 for appliances under Clause 10 of the contract.

Tile Supply

The Provisional Sum amount in the contract for tile supply is $8,816.50.
The evidence of Ms Choi was that she and the homeowner paid for all the tiles installed. The evidence of the builder does not contradict this evidence, and the builder's 'Provisional Sum Break Up' does not identify any amount spent by the builder on the purchase of tiles. The invoices for tile supply in evidence (Court Book pp807-809) are addressed to Ms Choi, not the builder.
Again, there is no evidence to indicate any 'overlap' or 'double counting' between the actual cost of tile supply incurred whilst the contract was on foot, and the issue of incomplete work.
The homeowner is entitled to a contractual credit in its favour of $8,816.50 under Clause 10 of the contract.

Floor Finishes

The Provisional Sum amount in the contract for floor finishes is $33,000.
The invoices provided by the builder in respect of floor finishes total $28,137.50 inclusive of GST. Although the builder's 'Provisional Sum Break Up' document refers to the cost of floor finishes to the builder as $26,086.96, the Tribunal is satisfied that the correct figure is $28,137.50 inclusive of GST.
Again, there is no evidence to indicate any 'overlap' or 'double counting' between the actual cost incurred for floor finishes, and the issue of incomplete work.
The homeowner is entitled to contractual credit in its favour of $4,862.50 under Clause 10 of the contract for floor finishes.

Lighting Supply

The Provisional Sum amount in the contract for lighting supply is $5.500.
The submissions of the homeowner do not point to any evidence that the homeowner and/or Ms Choi paid for lighting supply.
The builder's evidence contained an invoice to the builder from BUI Electrical Services Pty Ltd for $20,839.50. That invoice refers to it "including light supply".
Although the invoice could have been expressed in greater detail, the Tribunal is satisfied that lighting was installed at the premises by the builder and is not satisfied that the cost of lighting supply was less than $5,500.
Accordingly, the homeowner is not entitled to a contractual adjustment in its favour under Clause 10 of the contract in respect of this item.

Landscaping

The Provisional Sum amount in the contract for landscaping is $16,830.
However, the builder ceased work on site before any landscaping work was performed. Landscaping is 'incomplete work'. It does not fall within Clause 10 of the contract in the circumstances of this matter as Clause 10 only applies to "actual costs" incurred by the builder. There was no "actual cost incurred" because the works had not reached the stage where landscaping was to be performed.
Accordingly, the homeowner is not entitled to a contractual credit under Clause 10 of the contract for landscaping.

Conclusion-Adjustments for Provisional Sums

The Tribunal is satisfied that the homeowners are entitled to a contractual credit in their favour under Clause 10 of the contract in the amount of $78,746.39.
As this amount has not been credited to the homeowner in breach of Clause 10 of the contract, the homeowner is entitled to an award of damages for this amount.
The builder submits that the homeowner did not provide any expert evidence on the issue of the 'value' of the Provisional Sums. However, that is not the issue. Clause 10 of the contract is straightforward, and simply requires assessment of the costs incurred by the builder in respect of each of the Provisional Sum items. The builder's submission on this issue is rejected.

Homeowner's Claim for 'Failure to Give Credit for Preliminaries'

As discussed previously, this is a claim for $20,752 by the homeowner for 4 items it submits that it has 'overpaid' for; or paid "effectively twice" (homeowner's submissions dated 2 September 2021 at p 13).
The homeowner has paid the builder for all of the items identified.
The items identified were fencing (the homeowner asserting that he had paid an invoice of $2,530 for site fencing despite it being within the scope of works under the contract); retaining walls (the homeowner asserting that the builder, had charged an amount based on an unsigned variation and an amount above the amount identified in a 'schedule of costs' in the contract; power connection (the homeowner asserting that the amount paid was within the scope of works under the contract; and within the 'schedule of costs'); and sewer, water and gas rough-ins and fit-outs (the homeowner asserting that the works fell within the scope of works under the contract).
The reference to the "schedule of works" is a document that was annexed to the written contract (Court Book at pp. 526-528 and 589-591) and formed part of the original quote provided by the builder. A modified version of that document was provide during the course of the building works, but that does not constituted any variation of the terms of the written contract.
As the 'schedule of works' was annexed to the signed written contract, it is a document that forms part of the contract. However, it does no override the other provisions of the contract. Assessed objectively, it is simply a breakdown of estimated costs for various works, but still within the provision of Clause 12 of the contract.
It is not a contractual provision that the builder must charge no more than the amounts identified in the schedule. The relevant contractual provisions remain the Clause 10 (Provisional Sums); Clause 12 (Progress Payments); and Clause 13 (Variations).
There are a number of difficulties with the homeowner's claim in respect of this issue.
Firstly, no cause of action was pleaded in the homeowner's Points of Claim. The only reference is to "overpayment" (Court Book pp. 78-79). The homeowner did not plead any breach of contract; or any other potential cause of action, such as monies paid under a mistake of fact or law; or misleading or deceptive conduct under s 18 of the Australian Consumer Law 2010.
Referring to "overpayment" is not a cause of action.
There was also no reference to a cause of action regarding this issue in the homeowner's Outline of Written Submissions filed and served in the period immediately prior to the commencement of the hearing.
When the Tribunal asked the homeowner to identify what cause of action it was relying on at the commencement of the hearing, the homeowner only identified payments made under a mistake of fact or law under the principles in David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353. It is closing submissions, the homeowner also referred to general restitutionary principles in Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 22.
Secondly, the evidence does not establish any cause of action based on payments made under a mistake of fact or law.
In Thurston v Goway Travel Pty Limited [2020] NSWCATAP 140, the Appeal Panel summarised the relevant principles as follows (at para [30]): 1. Recovery depends upon the enrichment of the defendant by one or more classes of 'qualifying' or 'vitiating' factors, such as mistake, duress, illegality, or failure of consideration by reason of which the enrichment of the defendant is treated by the law as unjust. 2. Unjust enrichment so identified gives rise to a prima facie obligation to make restitution. 3. The prima facie liability can be displaced by circumstances in which the law recognises would make an order for restitution unjust.
The circumstances in which it would be unjust to order reimbursement of monies paid under mistake are discussed by the High Court in Australian Financial Services and Leasing Pty Ltd v Hills Industries Limited [2014] HCA 14; (2014) 253 CLR 560. Receipt of a benefit or consideration for the payment may be sufficient it not to be unjust for the payee to retain payment; as may be a detrimental change of position.
The mere payment of money to a builder under a contract, even in circumstances where the builder has not complied with the terms of the contract such as issuing a variation in accordance with the contract prior to performing work, is not sufficient to constitute a mistake. More must be established for the Tribunal to be satisfied that a mistake of fact or law has occurred. Otherwise, any payment to a builder for building works could be retrospectively set aside on the basis of mistake because the homeowner retrospectively asserts that the payment should not have been made. The principles of unjust enrichment do not automatically extend to the retrospective revaluation of building works under a contract.
Both parties have dealt with the evidence and made submissions on the issue of whether there should be a retrospective 'credit' for the amounts paid. In particular, the builder's submissions that pertinently deal with the issue are at pp. 5-6 of its reply submissions dated 15 September 2021; and the homeowner's submission are at pp. 13-15.
The Tribunal is not satisfied the evidence establishes that the payments were made under a mistake.
Further, even if they were paid under a mistake, the Tribunal accepts the evidence of the builder that the items did not fall within the scope of works under the contract, and that the homeowner has received a benefit for the works. The builder's submissions on this issue are accepted by the Tribunal.
The homeowner's claim for 'failure to give credit for preliminaries' is dismissed.

Homeowner's Claim For Provision of Certifications By Tradespersons To Obtain an Occupation Certificate

The homeowner's Points of Claim did not seek an order for provision of services under s48O of the HB Act in respect of certificates by tradespersons (e.g. electricians; plumbers) so that the homeowner can obtain an Occupation Certificate for the dwelling.
The homeowner's Outline of Submissions prior to the hearing made no reference to such a claim.
During the hearing, the homeowner's Counsel made an oral submission that such an order was being sought. The builder's Counsel sought that if such a claim was being made, Amended Points of Claim should be filed although the builder's Counsel accepted that there was likely no prejudice if such an amendment was granted. No Amended Points of Claim were provided for filing.
Even if such a claim can be advanced on the basis of the principles in Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658 (and the Tribunal does not express a concluded view on this issue), the homeowner's evidence (both lay and expert evidence) does not clearly identify what trades certificates it asserts the builder is required to provide under the terms of the contract. The homeowner bears the onus of identifying such trades certificates.
It would be inappropriate in the circumstances of this matter for the Tribunal to make a general order that the builder provide "trades certificates". The onus is on the homeowner to identify the certificates it says the builder is contractually obliged to provide; and it has failed to do so.

The Builder's Claim For Quantum Meruit

As discussed previously, the builder cannot make a claim under contract in respect of the 3 invoices the subject of its claim for payment; as the builder has not complied with the provisions of the contract.
Accordingly, the builder's claim is in quantum meruit.
The builder's three invoices involve the following works: 1. Delivery of items. 2. Setting out/preparation works for the extended driveway. 3. Works under the final progress payment stage until the builder left the site.
No claim in quantum meruit can be made in respect of the cost of delivering items to site; as the Tribunal has previously found that this cost fell within the scope of works under the contract.
Quantum meruit claims arise where a builder has performed work under unenforceable provisions of a contract, and it would be unjust for the homeowner to retain the benefit of the work done without paying for the reasonable value of the work.
Relevant principles have been discussed in a plethora of decisions, including Suecha Pty Ltd v VSD Glass & Timber Pty Ltd [2020] NSWCATAP 170; Woodward v Warwick Green Building Pty Ltd [2021] NSWCATAP 210; Rekrut and Scott v Champion Homes Sales Pty Ltd [2017] NSWCATAP 187; Roude v Helwani [2020] NSWCA 310; Rice v JR and SD Farmer t/as Urban Bespoke Homes [2020] NSWCATAP 208; and Paraiso v CBS Build Pty Ltd [2020] NSWSC 190.
The principles can be summarised as follows: 1. If the quantum meruit claim involves an unenforceable variation, the builder must prove the homeowner had actual knowledge of the additional works; that the works were outside the contract; and the builder expected to be paid for the additional work. 2. In respect of all quantum meruit claims, the onus is on the builder to establish the reasonable value of the work that performed and accepted by the homeowner. This is a question of fact. Relevant evidence will include any invoices/receipts of the builder; time sheets of the builder; rates under the contract for labour and materials; and expert evidence that analyses the work actually performed and the reasonable cost of such work. 3. The amount recoverable in a quantum meruit claim cannot exceed the amount that would have been payable under the contract for that component of the work.
In respect of work done under the final progress payment stage, there is a vast difference between the evidence of the parties.
The homeowner asserts that very little work was performed by the builder under the final progress payment stage, as evidenced by the opinion of Mr Irvine in his first report on incomplete work.
The builder asserts that most of the work was performed (approximately 80%) under the final progress payment stage, as evidenced by the opinion of Mr Palumbo in his first report; which was based in part on the list of purportedly incomplete works given to Mr Palumbo by the builder; and Mr Palumbo's assertion that the builder's invoice dated 11 September 2019 for $99,418.86 (Invoice 80683) before any credits for Provisional Sum items was "owing under the contract (sic)".
In respect of the invoice that pertains to the final progress payment stage (Invoice 80683) the evidence provided by the builder to establish what work has been performed and the reasonable value of such work is manifestly inadequate.
The builder's invoice does not particularise the work that was actually performed by the builder; identify the labour rates charged; or the amount spent by the builder on materials. The documentary evidence of the builder also does not contain such documents sufficient for the Tribunal to be able to identify what work was done by the builder and the value of such work.
The evidence of Mr Palumbo on the value of the work performed by the builder during the last progress payment stage is also manifestly inadequate.
Mr Palumbo simply baldly asserts that "based on all the information provided" by the builder, the amount under the final invoice was owed. Although Mr Palumbo inspected the premises, works had been completed by the homeowner. However, there is no analysis by Mr Palumbo of any time sheets or work diaries of the builder; or any invoices for the cost of materials expended during the final progress payment stage.
The builder submits that Mr Palumbo's opinion on this issue was "unchallenged". However, the homeowner was not required to cross examine Mr Palumbo on the deficiencies in his opinion on Invoice 80683. The onus is on the builder to prove the reasonable value of the work performed, and the Tribunal is entitled to give no weight to an opinion of an expert that does not clearly and logically disclose the assumptions; documents; and methodology applied to form the opinion expressed.
The Tribunal is not satisfied the builder has proved the reasonable value of the works performed under the final progress payment stage before the builder left the site.
The same issue arises in respect of Invoice 80680 in respect of the costs for the partially completed extended driveway (i.e. the unenforceable variation claim). The Tribunal accepts that set out work was performed by the builder, but there was insufficient evidence by way of evidence of time spent; labour costs; and material costs to establish that the reasonable value of the work performed by the builder was $8,250.
Accordingly, it is unnecessary to make a factual finding as to whether or not the homeowner had actual knowledge of the additional works; that the works were outside the contract; and the builder expected to be paid for the additional work before the works were performed. At its highest, the evidence of the builder on this issue was that Ms Choi gave the builder "verbal approval" for the driveway works before works were performed.
Just as the homeowner failed to provide sufficient evidence to establish the cost of completing incomplete work, the builder has failed to provide sufficient evidence to establish the reasonable value of the works it performed in respect of the driveway and works under the final progress payment stage.
Accordingly, the builder's quantum meruit claim is dismissed.

The Issue of Costs

It is appropriate for the parties to make costs submissions after they have had the opportunity to consider the factual and legal findings made by the Tribunal.
The Tribunal makes orders to deal with the issue of costs, which are set out below.

Summary of Findings

The homeowner has succeeded on the issues of defective works and adjustment/credit under Clause 10 of the contract. The total amount is $112,853.21, calculated on the basis of $34,106.82 (defects) plus $78,746.39 (Provisional Sum item credits).
The builder's claim is dismissed. Accordingly, there is no set-off or separate order in favour of the builder.

ORDERS 1. In Matter HB 20/42551 SDL Project Solutions Pty Ltd is to pay James Jong In Kim the sum of $112,853.21 within 28 days of the date of this decision. 2. In Matter HB 20/32292, the application is dismissed. 3. The homeowner is to file and serve all costs submissions and documents by 14 days from the date of this decision. 4. The builder is to file and serve all costs submissions and documents by 28 days from the date of this decision. 5. The homeowner is to file and serve all costs submissions in reply by 35 days from the date of this decision. 6. The costs submissions are to include reference to whether or not the parties seek a further oral hearing on the issue of costs. The Tribunal may determine it appropriate to decide the issue of costs without further oral hearing pursuant to s 50 (2) of the Civil and Administrative Tribunal Act 2013 (NSW). 7. The costs documents and submissions are to be filed in hard copy with the Tribunal. 8. Both parties have leave to apply in writing to vary or extend the timetable for costs submissions and documents.

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: 14 March 2022

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