Sydbuilt Projects Pty Ltd v Verge Developments Pty Ltd

Category: Principal judgment

Parties: Sydbuilt Projects Pty Ltd (Plaintiff/Cross-Defendant)
Verge Developments Pty Ltd (First Defendant/Cross-Claimant)
Dewanto Dhanu (Second Defendant)

Representation: Counsel:
A Hopkins (Defendants/Cross-Claimants)
Solicitors:
J Cameron Lawyers (Plaintiff/Cross-Defendant)
Brander Smith McKnight Lawyers (Defendants/Cross-Claimants)

File Number(s): 2023/00041181

Publication restriction: Nil

JUDGMENT

1. Verge Developments Pty Ltd (“Verge”), the first defendant, owned land in Manly Vale (“the site”).

2. Mr Dewanto Dhanu is and has been at all material times a director of Verge.

3. Sydbuilt Projects Pty Ltd (“Sydbuilt”), the plaintiff, is a licenced contractor, and at all material times held Contractor licence - builder number 244844C under the Home Building Act 1989 (NSW) (“the HBA”).

4. Sydbuilt and Mr Dhanu entered into a residential building contract on 19 September 2018 for the construction by Sydbuilt of “New construction for townhouses complete with basement parking” on the site (“the 2018 contract”).

5. Subsequently, on 18 February 2019, a residential building contract was entered into between Sydbuilt and Verge for “Demolition works, construction of Multi-Dwelling Housing with basement and strata subdivision” on the site (“the contract”). Both contracts provided for the building of four townhouses with basement parking on the site.

6. Although there is no evidence that the first contract has been terminated, all of the parties in this matter proceeded as though the contract had superseded the 2018 contract and relied entirely on the contract. The plaintiff does not sue on the 2018 contract and the defendant does not rely on it, so I will disregard it.

7. These proceedings began in the Local Court by the filing of a statement of claim on 7 February 2023 and were transferred to the District Court on the application of Verge. Verge has filed a cross-claim.

Sydbuilt’s statement of claim

8. Sydbuilt sues on the contract.

9. It is alleged, in the statement of claim, that Sydbuilt carried out the residential building work in accordance with the contract and achieved practical completion either on 18 September 2021 or, alternatively, on 28 September 2021 when either the first or second defendant took possession of the site.

10. On 28 September 2021, Sydbuilt served a payment claim (Invoice 1033) requesting payment for “for the balance of the contract sum, being $73,061.59” (statement of claim clause 24). In Invoice 1033, the description of the amount charged is “Final retention claim as per contract” (CB p 445).

11. Sydbuilt pleads that any defects notified to it by the defendants were rectified prior to 23 December 2021.

12. Sydbuilt issued a demand for payment to the defendants on 8 February 2022.

13. The defendants have not paid Sydbuilt in response to Invoice 1033.

14. Sydbuilt claims payment and interest under the contract.

Verge and Mr Dhanu’s defence

15. The defendants plead that Verge alone is the contracting party, and that Mr Dhanu, in his dealings with Sydbuilt, was acting solely on behalf of Verge. It is pleaded that Mr Dhanu is not a party to the contract.

16. In the defence, the defendants say that, on 29 March 2019, Sydbuilt and Verge entered in to a “Builder Tri-partite Deed” with St George Bank (“the bank”), which was providing finance to Verge (“the tripartite deed”). It is pleaded that it was a term of the tripartite deed that the provisions of the tripartite deed “apply and prevail according to their terms over the terms of the Building Contract” (clause 2.1(d)). “Building Contract” is defined in the tripartite deed to mean the contract. Further, the tripartite deed says that, in the event of any inconsistency between the terms of the tripartite deed and the contract, the tripartite deed takes precedence (clause 16.12).

17. The defence says, in clause 7(d)(vi):

The Plaintiff (Builder) and the First Defendant (Owner) agree to vary the Contract as follows:

…

Amend Schedule 4 by deleting the words “Builders Security – 10% of each progress claim is withheld by bank until 5% in total” and replacing the same with “Builder’s Security – Builder’s Security will be in the form of retention monies, being 10% of each progress claim withheld up to the amount equal to 5% of the Contract Price. The parties acknowledge and agree that 2.5% of the retention monies will be released to the Plaintiff (Builder) on the Date for practical completion as defined in clause 22(a) of the Contract (Practical Completion) and the remaining 2.5% of the retention monies will be released to the Plaintiff (Builder) within 28 days of the date the defects liability period as defined in item 7 of Schedule 2 and clause 24(a) of the Contract (Defects Liability Period) expires”.

(clause 17.1(d));

18. It is pleaded, in the defence, that any obligation to pay Sydbuilt under the contract, including retention monies, is subject to the provisions of the tripartite deed.

19. It is further pleaded that Verge has paid Sydbuilt $2,849,401.41 under the contract. The balance of the contract price is $73,061.59, being the remaining 2.5% of the retention monies to be released to Sydbuilt within 28 days of the date the defects liability period expires. The following is pleaded in the defence:

24d. The Plaintiff was not entitled to submit a payment claim and/or request for payment or otherwise a release of those retention monies totalling $73,061.59 to the Plaintiff as of 28 September 2021, including on the basis that:

i. The Defects Liability Period had not commenced and/or expired;

ii. The period of 28 days of the date the Defects Liability Period expired (if any) had not commenced and/or lapsed;

20. It is pleaded that the tripartite deed required the plaintiff to give the mortgagee (i.e. the bank) a copy of any notice of contract default and/or a copy of any notice purporting to exercise any right or remedy the plaintiff may have as a result of the occurrence of a contract default. More detailed provisions with respect to notice are pleaded.

21. The defence pleads:

24.f. The submission of the payment claim by the Plaintiff was the purported exercise of a right or remedy in respect of a Contract Default (to the extent that the occurrence or non-occurrence of payment under that submitted payment claim would [either immediately or with the giving of notice, lapse of time or fulfilment of some other condition] enable the Plaintiff to exercise any other enforcement right, power or remedy against the First Defendant);

g. The Plaintiff did not comply with its obligations under clauses 4 and 5.1 of the Tri-partite Deed including giving mandatory notices to the Mortgagee prior to proceeding with purportedly exercising a right or remedy under the Contract and/or the Tri-partite Deed;

h. In the circumstance pleaded above, no obligation was or has been imposed on the First Defendant to make any payment under the payment claim submitted on 28 September 2021.

22. The allegation that the plaintiff has rectified defects in the building work is denied in the defence.

23. It is pleaded in the defence, at clause 34, that Verge relied upon the alleged promise by Sydbuilt in the tripartite deed that it would not exercise any right, remedy or cause of action in respect of any contract default without first giving the mortgagee notice in writing. It is pleaded that the allegations by Sydbuilt in the statement of claim are contrary to clauses 4, 5.1 and 16.7 of the tripartite deed and, on account of Verge’s reliance on those clauses, Sydbuilt is estopped from asserting any right, remedy or cause of action with respect to the non-payment of the retention sum, being an asserted contract default.

24. “Liquidated damages and/or debts arising and payable by the plaintiff pursuant to clause 10(c) of the contract” and any other debt payable by the plaintiff are claimed in the defence as a set-off against any damages awarded to the plaintiff. The cross-claim is also sought to be set off against any amount awarded to the plaintiff.

Verge’s amended statement of cross-claim

25. Verge’s amended cross-claim (“the cross-claim”), filed on 29 June 2024, makes claims under the tripartite deed and the contract.

26. In the cross-claim, it is pleaded that Verge obtained finance from the bank to fund the project, partly under the tripartite deed, and that Sydbuilt knew this. Further, that Sydbuilt knew that Verge intended to sell, for profit, each of the lots and townhouses when the project arrived at practical completion.

27. Verge alleges that there “were, and are defects, deficiencies, faults and otherwise non-compliance in the Works done… by the Cross-defendant…”. The alleged defects are set out in a table in paragraph 13 of the cross-claim.

28. It is alleged that the defects are not in conformity with the plans and specifications which form part of the contract, statutory warranties, the Building Code of Australia or other codes.

29. It is alleged that Sydbuilt has not addressed the rectification of the defects, despite requests made by Verge.

30. Verge claims loss or damage arising from the alleged breaches.

31. Verge also claims loss or damage arising from an alleged delay in the achievement of practical completion of the building works.

32. Verge alleges that statutory warranties set out in the HBA are implied into the tripartite deed as well as the contract, and claims loss or damage under the tripartite deed on the same basis as in relation to the contract.

Sydbuilt’s defence to the amended statement of cross-claim

33. Sydbuilt admits that the statutory warranties in the HBA are implied into the contract. Sydbuilt says that the cross-claims have not been brought within the time frame provided for in s 18E of the HBA and further says that the cross-claims are void pursuant to s 18G of the HBA.

34. Sydbuilt denies that the HBA statutory warranties are implied into the tripartite deed.

35. Sydbuilt denies the allegations of defects in the building work. Further, Sydbuilt pleads that the HBA provides that proceedings must be brought within the warranty period provided for, which is six years in the case of a major defect and two years in any other case. Sydbuilt pleads that the defects alleged are not major defects within the meaning of s 18E of the HBA. The cross-claim is outside of the two year timeframe provided for in the HBA.

36. Further, Sydbuilt pleads that Verge sold and transferred each of the dwellings to purchasers in 2020. The purchasers thereby acquired rights under the statutory warranties pursuant to s 18D(1A) of the HBA. The purchasers have enforced those rights in relation to the statutory warranties in respect of the defects claimed by Verge. Verge therefore has no remaining rights under the statutory warranties.

37. Sydbuilt denies that practical completion of the building work was delayed and denies that any entitlement to payment on account of delay arose under the contract.

38. Sydbuilt denies that Verge has suffered any loss or damage.

Evidence

39. Sydbuilt relied upon the evidence of Mr David Tambasco, including his affidavit of 5 March 2024 and the exhibits A1 to A27 to that affidavit. Sydbuilt also relied upon the expert report of Mr George Zakos, a building consultant of Prominet Group Consultancy Pty Ltd and the joint report of the building experts.

40. Verge relied upon an affidavit of Mr Dhanu of 7 May 2024, and the documents in Exhibit DD-1 to that affidavit. Verge also relied upon the expert report of Stewart Bullivant, a building consultant, of Bullivant & Associates Pty Ltd dated 14 May 2024 (“the Bullivant Report”) and the joint report of the building experts.

41. Sydbuilt bears the burden of proof on the balance of probabilities in relation to the claim.

42. Verge bears the burden of proof on the balance of probabilities in relation to the cross-claim.

The claim for the retention payment

43. The contract, in Schedule 4, which is headed “Special Conditions” provides, in part:

- Builder’s Security – 10% of each progress claim is withheld by bank until 5% is held in total.

44. The contract provides, in clause 23:

23. Payment on Practical Completion

(a) When Practical Completion is achieved, the Builder is entitled to and must receive the unpaid balance of the Contract price or sum together with any other monies which are payable in connection with this Contract.

(b) The amount due under this Clause must be paid to the Builder within two (2) days of a written request or invoice for payment due because practical completion has been reached. This request is to give brief, accurate particulars of the claim.

(c) Should the Builder not receive from the Owner any payment or part of any payment on Practical Completion by the due date the Builder is entitled to interest at the rate specified in Schedule 2 item 4(e).

(d) The Owner is not entitled to take possession of the works nor receive the keys and any certificates until payment to the Builder of all monies due under this Contract has been made.

(e) The Builder, at the Owner’s cost is entitled to and required to take all actions to secure the property so as to prevent entry, other than by normal means, prior to final payment being made.

45. There is no provision in the contract for the payment of the retention amount to anyone other than the builder.

46. Under clause 22 of the contract, relevantly, practical completion is the stage when the works are complete, except for minor omissions and defects which do not prevent the works from being reasonably fit for their intended use, or upon the taking of possession of the works by the owner or a tenant or their employees without the written deed of the builder.

47. It is not disputed that Sydbuilt gave Verge notice under clause 22(c) of the contract that practical completion had been reached on 18 September 2020 (see CB p 487).

48. Clause 22(d) of the contract provides:

22(d) Within five (5) days after the service of notice of Practical Completion the Owner must give to the Builder a written list of all those things (if any) required by this Contract to be done to achieve Practical Completion. The Builder is to as soon as possible do all those things necessary for Practical Completion and give to the Owner notice in writing on completion of such things.

(e) In the event of the Owner not complying with the provisions of Clause 22(d), the works will be deemed to have reached Practical Completion.

49. Verge did not provide Sydbuilt with a written list of things required to be done to achieve practical completion under clause 22(e) of the contract. Practical completion was therefore achieved on 23 September 2020.

50. Verge took possession of the property on 28 September 2020 when keys were provided to the real estate agent for the property who, in turn, provided them to the tenants of the new townhouses (Mr Tambasco’s affidavit clause 20).

51. On 20 October 2020, Sydbuilt claimed the first (2.5%) tranche of the retention sum. It was paid.

52. Under clause 24 of the contract, the defects liability period began upon practical completion. The defects liability period expired on 18 September 2021.

53. On 2 October 2020, Sydbuilt received from Verge an email which attached defects registers with respect to two of the townhouses (see Exhibit A14 to Mr Tambasco’s affidavit). On 9 October 2020 Sydbuilt received a further report with respect to defects (see Exhibit A15 to Mr Tambasco’s affidavit).

54. Mr Tambasco says, in his affidavit:

25. The plaintiff carried out rectification works to the property between 9 October 2020 to about mid December 2020 on the items claimed in the reports and defects registers.

26. The plaintiff also carried out various rectification works from time to time during the defects liability period.

55. Mr Tambasco exhibited to his affidavit an email and two reports from Mr Francis, the quantity surveyor engaged by the bank (see Exhibit A16 to Mr Tambasco’s affidavit).

56. On 23 December 2021, Sydbuilt sent an email to Verge saying, in effect, that all defective work had been remedied. The invoice for the retention amount, dated 28 September 2021, was provided once more as an attachment to the email. Payment was requested within one week “as per terms of contract”. The email said, “Anything beyond this will result in accumulation of interest on late payment as per terms on invoice”.

57. Verge did not make any payment in respect of the invoice.

58. A further statement of account was sent by Sydbuilt to Verge on 8 February 2022, seeking payment of the outstanding $73,061.59 (Exhibit A18 to Mr Tambasco’s affidavit). No payment was made in response to the statement of account.

59. In opposing Sydbuilt’s claim for the retention amount in these proceedings, Verge relied on the following portion of clause 5.1 of the tripartite deed:

5. Termination, Suspension and Remediation

5.1 Restriction on Builders’ rights

Notwithstanding anything contained in the Building Contract and except to the extent that may be prohibited under the Building and Construction Industry Security of Payment Act 1999 (New South Wales) the Builder must not:

…

(d) (cause of action): exercise any right, remedy or cause of action in respect of any Contract Default,

unless:

(e) (notice given): the Builder first gives the Mortgagee the notice in writing of contemplated action at least twenty-one (21) business days prior to the Builder exercising any such action;

(f) (contract defaults): there is a Contract Default; and

…

60. The term “Contract Default” is defined in clause 1.1 of the tripartite deed as follows:

“Contract Default” means in respect of the Building Contract:

(a) any event of default or breach (however defined or whether defined or otherwise) under the Building Contract by or in relation to the Borrower: and

(b) any other event, however described and of whatever nature, the occurrence or non-occurrence of which would (either immediately or with the giving of notice, lapse of time or fulfilment of some other condition) enable the Builder to terminate, rescind, accept repudiation of or suspend performance of the Building Contract or exercise any other enforcement right, power or remedy against the Borrower.

61. The contract, in Schedule 2, Item 3, provided:

3. Delay Costs – Reimbursement of costs for delay

(a) Payable by Builder Refer to Clause 10(c) $ 0.00 per calendar week

(b) Payable by Owner Clause 11(f) $ 0.00 per calendar week

62. The tripartite deed, in clause 17.1(a), varies item 3(a) of the contract to delete $ 0.00 and replace it with $1,000.00. Clause 17.1(d) of the tripartite deed says:

17.1 Variations

The Builder and Owner agree to vary the Building Contract as follows:

…

(d) Amend Schedule 4 by deleting the words “Builders Security – 10% of each progress claim is withheld by bank until 5% is held in total” and replacing the same with “Builder’s Security – Builder’s Security will be the form of retention monies, being 10% of each progress claim withheld up to the amount equal to 5% of the Contract Price. The parties acknowledge and agree that 2.5% of the retention monies will be released to the Builder on the Date for Practical Completion and the remaining 2.5% of the retention monies will be released to the Builder within 28 days of the date the defects liability period expires”; …

63. Verge argued that the purpose of clause 17.1(d) was to provide for a sum of money to act as “security from issues that might arise” for the benefit of Verge. Verge further argued, in its written submissions:

It follows that the contractual intention behind the Builder’s Security is to allow the retention amount to be withheld if the Developer is of the view that there are defects or other claims that justify the Developer having recourse to the security, as is the case here. In other words the retention would be released one year after practical completion, assuming all was well.

64. Verge further argued that clause 5.1 of the tripartite deed prevented Sydbuilt from invoicing Verge for the retention amount because, it was asserted, Sydbuilt did not notify the bank under clause 5.1(d).

65. Sydbuilt, in its written submissions, pointed out that the amendment to the contract made by the tripartite deed did not introduce any mechanism by which Verge could have recourse to or retain any part of the retention amount. The amendment provided only for the release of the retention amount to Sydbuilt; half of it on the date for practical completion, and the other half within 28 days of the date the defects liability period expires. It was submitted that the amended contract imposes an obligation upon the defendants to release the retention amount, with or without demand.

66. Sydbuilt further submitted that clause 5.1(d) of the tripartite deed says that Verge must not exercise any right, remedy or cause of action in respect of any contract default without notice to the mortgagee. A request for payment is not the exercise of a right, remedy or cause of action, contrary to what is pleaded in clause 24(f) of the defence (see [21] above).

67. It was submitted that clause 5 of the tripartite deed, which is entitled ‘Termination, Suspension and Remediation’ did not have any impact on the debt or the payment claim or otherwise prevent Sydbuilt from taking enforcement action. Neither the tripartite deed nor the contract provides an alternative resolution regime to litigation and does not seek to oust the jurisdiction of the Court to entertain the proceedings.

68. There was no requirement in the tripartite deed or the contract for Sydbuilt to give the bank notice 21 days prior to making each payment claim.

69. It was further argued that any such requirement, had it been expressed, would have been void under s 34 of the Building and Construction Industry Security of Payments Act 1999 (NSW), which provides:

34 No contracting out

(1) The provisions of this Act have effect despite any provision to the contrary in any contract.

(2) A provision of any agreement (whether in writing or not)—

(a) under which the operation of this Act is, or is purported to be, excluded, modified or restricted (or that has the effect of excluding, modifying or restricting the operation of this Act), or

(b) that may reasonably be construed as an attempt to deter a person from taking action under this Act,

is void.

70. In his affidavit, Mr Tambasco says that Mr Sam Francis, a quantity surveyor engaged by the bank, was present at a meeting on site on 17 September 2020. On 22 September 2020, Mr Francis provided, by email, the final reports in relation to the project, including a monthly progress valuation report which says that the project is 100% complete (Exhibit A16 to Mr Tambasco’s affidavit). The report authorises the release of the first tranche of the retention amount (see CB p 564).

71. The following part of Mr Tambasco’s evidence in cross-examination was relied on by Sydbuilt (T 9 April 2025 p 23):

HOPKINS

Q. What I might do to make it a bit easier is I’ll just refer to your affidavit specifically. In your affidavit, and you can look at this if you want, this is in court book 1 at page 306, from paragraph 28 onwards you talk about emails that you sent to the defendant asking for the retention fund to be paid--

A. Yep.

Q. --correct?

A. Yes.

Q. With those emails or with those demands you never at that time in relation to this retention fund served any notice on St George Bank, did you?

A. We - from memory we did.

Q. That’s not included in your affidavit anywhere?

A. it might have been forgotten.

72. It is asserted, on behalf of Verge, that Sydbuilt did not give notice to the bank. No evidence has been provided to support that assertion. The only evidence before me as to whether the bank was given notice is the evidence of Mr Tambasco, which is to the effect that, to the best of his memory, the bank was informed of the request for payment. I accept Mr Tambasco’s evidence.

73. Verge has not proven, on the balance of probabilities, that Sydbuilt failed to give notice to the bank under clause 5.1(d) of the tripartite deed. Verge’s contention that Sydbuilt was prevented, by clause 5.1(d) of the tripartite deed, from claiming the retention amount from Verge, or from issuing these proceedings, fails. The factual basis for the argument advanced has not been established, on the evidence.

74. The principles to be applied in the interpretation of the contract and the tripartite deed are the principles set out in Realestate.com.au Pty Ltd v Hardingham and Others; RP Data Pty Ltd v Hardingham and Others [2022] HCA 39 (‘Hardingham’) by Gordon J at [43]-[44]:

Principles

43 The rights and liabilities of parties under a contract – whether oral, in writing, or partly oral and partly in writing – are determined objectively. The concern is “not with the real intentions of the parties, but with the outward manifestations of those intentions”. As this Court said in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd:

It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean.

And where the contract is commercial, it is necessary to ask what reasonable persons engaged in the respective businesses of the parties would have understood the words and conduct to mean.

44 As this Court held in Toll, a person who signs a contractual document conveys a representation to a reasonable reader of that document that the person has read and approved its terms or is willing to take the chance of being bound by its contents. If the document on its face appears to be a complete contract, it will contain the whole of the contractual terms. Extrinsic evidence cannot be adduced to subtract from, add to, vary or contradict those terms, except in limited circumstances. And a term will be implied only if, among other things, it is necessary to make the contract work.

75. Verge’s argument, set out above at [63], that the tripartite deed should be interpreted as preventing the payment of the retention amount to Sydbuilt within 28 days of the expiry of the defects liability period if Verge “is of the view that there are defects or other claims that justify the Developer having recourse to the security” must fail. The plain words of the tripartite deed, in clause 17.1(d), which varied Schedule 4 of the contract, read objectively, plainly say that Sydbuilt is entitled to be paid the retention amount within 28 days of the defects liability period. There is nothing in the tripartite deed or the contract which supports Verge’s interpretation.

76. It is unnecessary to consider whether the contract, as amended by the tripartite deed, would have been void under s 34 of the Building and Construction Industry Security of Payments Act 1999 (NSW) as the interpretation argued for by Verge is not tenable.

77. Verge has been liable to pay Sydbuilt the remaining retention amount sum of $73,061.59 since 16 October 2021, which is 28 days after the end of the defects liability period on 18 September 2021.

Verge’s cross-claim

78. In its cross-claim, Verge set out 12 kinds of alleged defects in the building work. All were the subject of evidence except for the allegation of water damage in the north-eastern corner of a first floor bathroom, so that claim will not be the subject of any findings or determination (see item 13 in the table on p 21 of the cross-claim).

79. It was claimed that the alleged defects constituted breaches of the contract, including the statutory warranties implied into that contract under the HBA.

80. In paragraph 20 of the cross-claim, it was alleged that other contractors were engaged by Verge to address some of the defects, and the cost, to Verge, of those contractors, was claimed.

81. It was further alleged that Sydbuilt was in breach of contract in that it delayed practical completion of the building works. It was alleged that the contract provided for practical completion to be achieved on 25 April 2020, but that it was not achieved until 23 December 2020.

The delay cross-claim

82. The contract provides, in Schedule 2, for a date of commencement of 25 February 2019 and a completion date of 25 April 2020 for the building works the subject of the contract.

83. The contract, in clause 11, provides for a mechanism by which Sydbuilt could obtain an extension of the time to be taken for the completion of the building works. It is not disputed that Sydbuilt issued a series of notices under clause 11, between 3 May 2019 and 27 July 2020, which had the effect of extending the completion date under the contract. There is a dispute as to the extent to which the completion date was extended. Verge says that it was extended by 68 working days, which makes the new completion date 29 July 2020. Sydbuilt agrees that the notices under clause 11 of the contract extended the completion date to 29 July 2020. However, Sydbuilt points to the PCG Monthly Report for August – September 2020, a report of Mr Francis, the quantity surveyor tasked to oversee and report on aspects of the project (see CB p 586). In his August – September 2020 monthly report, Mr Francis records, on p 24 (CB p 609), in an “Extension of Time Register”, that 25 days of delay for “Other Delays for project” and 21 days of delay for “Total Weather Delays for project” were “Approved” for August – September 2020. Mr Francis’ report further records (CB p 609):

84. Programme PC Date: 18th September 2020 (As per PC letter issued by builder)

85. Programme OC Date: 18th November 2020 (Subject to PCA requirements)

86. Sydbuilt, reasonably, relied upon Mr Francis’ report as a representation that the bank and Verge approved an extension of the practical completion of the building works to 18 September 2020. Mr Francis’ report was given to the bank and to Verge, and no indication was ever given to Sydbuilt that it was required to do anything further to secure this extension.

87. In his “Monthly Progress Report #11”, dated 12 October 2020, following an inspection of the building work, Mr Francis said (CB p 561):

As at the 17th September 2020 the project’s % of works complete to date is … 100%

86. On the basis of Mr Francis’ reports, the extended date for the practical completion of the building works was 18 September 2020, and that was achieved.

87. Verge resumed possession of the land on 28 September 2020 (see Mr Tambasco’s affidavit paragraph 20, CB p 306).

88. The contract provides, in clause 22:

22. Practical Completion

(a) Practical completion is that stage when:

(i) the works are complete except for minor omissions and defects which do not prevent the works from being reasonably fit for their intended use; or

(ii) where Schedule 2 item 9 is relevant, the purpose or result stated therein being achieved subject to an exception for minor omissions and defects which do not prevent the reasonable achievement of the outcome listed at Schedule 2 item 9.

(b) For the purposes of this Clause the works that need to be completed to achieve Practical Completion do not include:

(i) the results of any labour or materials which are to be or were supplied of fixed by the Owner or work done or to be done by the Owner; or

(ii) the provision of any certificates required to obtain an occupation certificate unless the Builder is the party who is to obtain the occupation certificate.

In this contract unless stated otherwise as a special condition it is not the Builder**’s** obligation to obtain an occupation certificate.

89. Verge relied on Schedule 4 of the contract, which says, in part:

Note Practical Completion – the provision of the Final Occupation Certificate is required in order for the Builder to attain PC. Occupation Certificate verifies that the Principal Certifying Authority (can be Council or private certified) is satisfied that the building is suitable to occupy or and satisfies the relevant requirements of the BCA.

90. The tripartite deed, in clause 17.1(a), amended clause 3(a) of Schedule 2 to the contract so that it read:

3. Delay Costs – Reimbursement of costs for delay

(a) Payable by Builder Refer to clause 10(c) $1,000.00

91. The contract provided, in clause 10(c):

(c)(i) If the Builder fails to bring the works to Practical Completion by the Date for Practical Completion calculated in accordance with Schedule 2 item 3(a), extended as provided for in Clause 11, then the Builder is to pay or allow to the Owner by way of agreed pre-estimated general and liquidated damages, a sum calculated at the rate stated in Schedule 2 item 3(a).

(ii) This amount will be applied to the period from the day after the Date for Practical Completion under the contract until the date Practical Completion has been achieved in accordance with Clause 22**.** Refer to Clause 22.

(iii) Any amount payable under this clause cannot be deducted from any payment until such time as the actual date of practical completion has been determined.

(iv) If ‘nil’ is inserted or no amount is specified at Schedule 2 item 3(a) then it is agreed that no damages are payable in relation to the time to complete the works. Any amount inserted must reflect the actual cost of the delay to the Owner.

92. Mr Tambasco provided the Site Meeting Minutes of 17 September 2020 as Exhibit A8 to his affidavit (CB p 456). Both Mr Tambasco and Mr Dhanu were present at the meeting, with others. The minutes record, among other things, the following:

…We note the following is outstanding (refer email received 7/10/20 from Steve Georges of SydBuilt):

a. Item 6 – Submission of a Compliance Statement from the site appointed Mechanical Engineer confirming all mechanical exhaust systems installed to the Basement Carpark comply with the relevant requirements of AS1669 Part 2.

b. Item 7 – Submission of a Title Search for the subject allotment, confirming registration of the required Restriction of Use of land and Positive Covenant, as required by Consent Conditions 42, 43, 45, 48, 49, 50, 58 & 59, for

i. Stormwater Detention system and ongoing maintenance.

ii. Waste Services.

Please note: The above installed systems are required to be accompanied by works-as-executed (as built) details and appropriate Compliance Statements issued by appropriately qualified persons.

c. Item 12 – Submission of a completed and signed Fire Safety Certificate listing all required and installed Fire Safety Measures, accompanied by appropriate Installation Compliance Certificates from appropriately qualified persons as required by Consent Condition 54 – Tom to review draft Certificate.

d. Item 14 – Submission of a completed Form 3 Certificate from a practising Geotechnical Engineer confirming compliance with all recommendations contained within Geotechnical Assessment Report, reference no. 29996Z, prepared by JK Geotechnics dated December 2016.

93. It was Mr Tambasco’s evidence that he provided the Compliance Statement referred to in Item 6 on 22 October 2020.

94. Mr Tambasco said that the title registration work in Item 7 was the responsibility of the owner, Verge. It was not part of the contract. An email of 7 October 2020 from the building certifier to Mr Tambasco says that the following item has not yet been provided to the building certifier (among other things) (CB p 460):

Item 7 - Submission of a Title Search for the subject allotment, confirming registration of the required Restriction of Use of land and Positive Covenant, as required by Consent Conditions 42, 43, 45, 48, 49, 50, 58 & 59, for

-Stormwater Detention system and ongoing maintenance.

-Waste Services.

95. An email sent on 23 October 2020 from the building certifier to Mr Dhanu, which was copied to Mr Georges of Sydbuilt, said, in part (CB p 481 – 482):

Can you please send through a copy of the Title Search which confirms that the attached documents have been lodged with the Lands Registry Office.

All development consent items need to be satisfied and therefore an Interim OC is not possible.

I confirm that we are waiting for the following items:

-Item 7 – Title Search

…

96. Mr Tambasco also said that Verge was responsible for the work in Item 12. Verge provided the Fire Safety Certificate on 22 October 2020.

97. Sydbuilt provided the Form 3 Certificate in Item 14 on 28 October 2020.

98. Occupation Certificate number 2017/5947A for the project issued on 3 November 2020. Between 16 December 2020 and 18 January 2021, settlement in relation to the contracts for the sale of each of the four apartments occurred, and the purchasers took possession.

99. Verge argues, in effect, that the words in Schedule 4, set out at [89], above mean that the builder, Sydbuilt, is to be deemed not to have achieved practical completion unless and until the final Occupation Certificate has been issued. Further, the effect of Verge’s argument is that Sydbuilt is to be held liable to Verge for damages at the rate of $1,000.00 per day under Schedule 2 clause 3(a) of the contract from the date of practical completion, as defined under clause 22 of the contract, until the date of issue of the final Occupation Certificate.

100. Applying the principles of the interpretation of contracts in Hardingham set out above at [74], it is necessary to ask what reasonable persons engaged in the business of developing land for residential purposes and building houses would understand the meaning of the contract, as amended by the tripartite deed, to mean in relation to what circumstances must exist before the builder would be liable to the developer for a penalty for delay under clause 3(c) of Schedule 2.

101. A series of documents, many of which are referred to above at [92] to [97], is required to be submitted to the building certifier before a final Occupation Certificate can be issued. As is obvious from the minutes and correspondence referred to above, the builder is not responsible for all of the documents which must be submitted. The developer, for example, was responsible for Item 7.

102. Clause 10(c) of the contract does not refer to Schedule 4. Clause 10(c)(ii) does, however, refer to “the date Practical Completion has been achieved in accordance with Clause 22. Refer to Clause 22*”*. Clause 10(c) was not amended by the tripartite deed.

103. A reasonable developer and builder would read the contract, as amended by the tripartite deed, to mean that, for the purpose of assessing whether damages are payable by the builder to the developer on account of a delay in completing the building works, the definition of “Practical Completion” in clause 22 is to be applied. There is no reference to Schedule 4 in clause 10 of the contract.

104. Practical completion under clause 22 of the contract was achieved by Sydbuilt, as I have said, on 18 September 2020 (see [82] – [84] above). Given the extensions claimed by Sydbuilt, and allowed by Verge, which are set out at [83] above, the practical completion date required under the contract was 18 September 2020. No delay costs are therefore payable by Sydbuilt. Verge’s claim for liquidated damages under the contract fails, and so does Verge’s claim for damages under the principles in Hungerfords v Walker (1989) 171 CLR 125.

105. I note that Item 7, the title search, which Verge was required to provide to the building certifier, had not been provided by 23 October 2020. The final Occupation Certificate was issued on 3 November 2020, so the title search must have been provided by Verge at some point between 23 October 2020 and 3 November 2020. There is no evidence of when it was provided. On the evidence before me, I could not find that Verge suffered loss on account of any delay occasioned by Sydbuilt.

The defects/breach cross-claim

106. Verge claims that it is entitled to damages with respect to alleged defects referred to as Item 2 to Item 12 in the cross-claim (CB p 51 – 59).

107. The HBA provides, in s 18E:

18E Proceedings for breach of warranty

(1) Proceedings for a breach of a statutory warranty must be commenced in accordance with the following provisions—

(a) proceedings must be commenced before the end of the warranty period for the breach,

(b) the warranty period is 6 years for a breach that results in a major defect in residential building work or 2 years in any other case,

(c) the warranty period starts on completion of the work to which it relates (but this does not prevent proceedings from being commenced before completion of the work),

(d) if the work is not completed, the warranty period starts on—

(i) the date the contract is terminated, or

(ii) if the contract is not terminated—the date on which work under the contract ceased, or

(iii) if the contract is not terminated and work under the contract was not commenced—the date of the contract,

(e) if the breach of warranty becomes apparent within the last 6 months of the warranty period, proceedings may be commenced within a further 6 months after the end of the warranty period,

(f) a breach of warranty becomes apparent when any person entitled to the benefit of the warranty first becomes aware (or ought reasonably to have become aware) of the breach.

108. The date on which practical completion of the building work was achieved was 18 September 2020. Verge’s first cross-claim was filed on 9 May 2024, two years, seven months and twenty-one days after practical completion. Any claim for a breach of a statutory warranty imposed by s 18B of the HBA (“statutory warranty”), which resulted in a defect in the building work which was not a “major defect” under the HBA, is out of time under s 18E(1) of the HBA.

109. “Major defect” is defined in s 18E(4) of the HBA:

(4) In this section—

major defect means—

(a) a defect in a major element of a building that is attributable to defective design, defective or faulty workmanship, defective materials, or a failure to comply with the structural performance requirements of the National Construction Code (or any combination of these), and that causes, or is likely to cause—

(i) the inability to inhabit or use the building (or part of the building) for its intended purpose, or

(ii) the destruction of the building or any part of the building, or

(iii) a threat of collapse of the building or any part of the building, or

(b) a defect of a kind that is prescribed by the regulations as a major defect, or

(c) the use of a building product (within the meaning of the Building Products (Safety) Act 2017) in contravention of that Act.

…

major element of a building means—

(a) an internal or external load-bearing component of a building that is essential to the stability of the building, or any part of it (including but not limited to foundations and footings, floors, walls, roofs, columns and beams), or

(b) a fire safety system, or

(c) waterproofing, or

(d) any other element that is prescribed by the regulations as a major element of a building.

110. The Limitation Act 1969 (NSW) provides, in s 7(a):

7 Other limitations

Nothing in this Act—

(a) applies to an action or arbitration for which a limitation period is fixed by or under an enactment other than this Act or by or under an Imperial enactment (not being an enactment or an Imperial enactment repealed or omitted by this Act), …

111. Sydbuilt cited Onslow v Cullen [2022] NSWSC 1257 (‘Onslow’) and argued that the effect of s 7(a) of the Limitation Act 1969 (NSW) is that if the defect items claimed by Verge are properly characterised as breaches of statutory warranty, then the limitation periods in s 18E of the HBA apply, and the Limitation Act 1969 (NSW) limitation periods do not apply. Verge argued that Onslow was wrongly decided on that point, and, in the alternative, that the contract did not simply duplicate the statutory warranties, so that there was scope for proceedings to be brought against Sydbuilt beyond the time limits in s 18E of the HBA. I do not agree with the submission that Onslow was wrongly decided, and I reject that submission. In any event, I am bound by the decision in Onslow. I will address the balance of Verge’s argument.

112. The contract, in clause 1(b), provides that the builder warrants that the building work will be performed in compliance with the statutory warranties, which are set out.

113. In Onslow, Adamson J said, in relation to a home building contract which also set out the statutory warranties:

53. In the present case, the owners argued, and the Court below found, that the owners’ claim was not one for breach of a statutory warranty, but rather a claim for breach of contract. Thus, it is necessary, for the purposes of ground 1 to examine this proposition to assess whether such a distinction is maintainable in the present case.

54. It was common ground that, if cl 39 had not been included in the contract, the owners had a claim against the builder for breach of statutory warranty (under s 18B) but that their right to commence proceedings had become statute-barred by the time they in fact commenced proceedings either in NCAT or in the Court below: (s 18E).

55. Section 7(2)(f) of the Act required that the statutory warranties (defined as a warranty established by Part 2C) be included in the contract. If her Honour’s construction were correct, it would mean that a builder who complied with s 7(2)(f) by expressly including the warranties implied by s 18B into the contract would be in a worse position than a builder who was party to a contract which did not contain warranties in its written form. On her Honour’s construction, a builder who had not included the warranties would be entitled to rely on s 18E but one who had would not be.

56. It is important to read the contract in light of the Act. Clause 39 of the contract is plainly designed to comply with s 7(2)(f) and replicate the warranties in s 18B. The prefatory words of the clause, “[t]o the extent required by the [Act], the builder warrants that” (emphasis added) are, in my view significant because the warranties in sub-clauses (a)-(f) are given subject to the rider in the prefatory words. Thus, the objective intention of the parties is that the warranties are given only in so far as they are required by the Act. The Act requires only warranties in respect of non-major works that are enforceable for two years. In these circumstances, the builder ought not to be taken to have given wider warranties than those which the Act implied into the contract.

57. If there is any ambiguity in cl 39, regard can be had to the surrounding circumstances: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352 (Mason J); [1982] HCA 24. Such surrounding circumstances include matters known to both parties at the time the contract was entered into. In the present case, such matters included the Consumer Building Guide which was Attachment B to the contract which said in part, of the statutory warranties (in s 18B):

“These warranties are time-limited: legal proceedings to enforce them must be commenced within 2 years for all defects and 6 years for ‘major defects’.”

58. Nor is there a sensible distinction in these circumstances between an action for “breach of statutory warranty” and an action for “breach of contract”. A warranty is merely a term of a contract, which is neither a condition (any breach of which will entitle the injured party to terminate), nor an innominate or intermediate term (a fundamental breach of which will entitle the injured party to terminate), breach of which will not entitle a party to terminate: see the summary of principles in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; [2007] HCA 61 at [47]–[53] (Gleeson CJ, Gummow, Heydon and Crennan JJ) and the discussion in John Carter, Carter on Contract (7th ed, 2018, LexisNexis) at Ch 14 “Classification of Terms”. A statutory warranty is a term which is implied, by legislation, into a contract, irrespective of the intentions of the parties. It thereby becomes a term of the contract between the parties. In the present case, the warranties in cl 39 did not lose their character as statutory warranties merely by having been expressed in the contract document. As referred to above, s 7(2)(e) required that they be included in the contract.

59. Further, s 18G makes it clear that the parties cannot exclude the statutory warranty “to remove the rights of a person” and any provision which purports to do so, is void. It is significant that s 18G refers to “rights of a person”. The word “person” in this context includes not only the owners but also the builder. The owners have a right to the benefit of the statutory warranties in terms but the builder has the right not to be sued in respect of non-major defects after the two year period has elapsed. That “person” ought be construed in this way derives some support from the use of the different expression “person entitled to the benefit of a statutory warranty under this Act” in s 18D(1). The owners might reasonably be thought to be the persons entitled to the benefit of a statutory warranty but “person”, without that qualification in s 18G, includes not only the owners but also the builder.

60. While it may be accurate to describe Part 2C of the Act as “consumer protection legislation”, this description is unhelpful. The legislature has inserted into contracts to do residential building work the warranties in s 18B(1), subject to the limitation in s 18E that proceedings for breach of them must be commenced within 2 years.

114. Sydbuilt argued that the time limits in s 18E of the HBA apply to the contract, which is very similar, in its relevant terms, to the contract in Onslow.

115. Verge argued that those of the defects which are the subject of the cross-claim and are not major defects were not caught by the time limit in s 18E(1) HBA. The witnesses referred to defects which are not major defects under the HBA as “minor defects”, and I will do likewise.

116. Verge argued that the contract, which is based on the Master Builders Association 2018 proforma contract, contains obligations which go beyond the statutory warranties. I note that the obligations relied on are obligations included in compliance with s 7E of the HBA and Schedule 2, Part 1 of the HBA, which provides:

Part 1 Contracts to do residential building work

1 Plans and specifications

(1) All plans and specifications for work to be done under this contract, including any variations to those plans and specifications, are taken to form part of this contract.

(2) Any agreement to vary this contract, or to vary the plans and specifications for work to be done under this contract, must be in writing signed by or on behalf of each party to this contract.

(3) This clause only applies to a contract to which section 7AA (Consumer information) of the Home Building Act 1989 applies.

2 Quality of construction

(1) All work done under this contract will comply with—

(a) the Building Code of Australia (to the extent required under the Environmental Planning and Assessment Act 1979, including any regulation or other instrument made under that Act), and

(b) all other relevant codes, standards and specifications that the work is required to comply with under any law, and

(c) the conditions of any relevant development consent or complying development certificate.

(2) Despite subclause (1), this contract may limit the liability of the contractor for a failure to comply with subclause (1) if the failure relates solely to—

(a) a design or specification prepared by or on behalf of the owner (but not by or on behalf of the contractor), or

(b) a design or specification required by the owner, if the contractor has advised the owner in writing that the design or specification contravenes subclause (1).

The provisions in the contract mirror Schedule 2, Part 1.

117. The terms set out in Schedule 2, Part 1, were also part of the contract considered in Onslow.

118. For the same reasons as the reasons set out in Onslow, I determine that the time limits under s 18E of the HBA apply to the claim in so far as it relies upon the obligations set out in clause 1(b) of the contract because those obligations reflect the statutory warranties in s 18B of the HBA, as required by s 7(2)(f) of the HBA. The time limits in s 18E of the HBA only apply to proceedings for a breach of statutory warranty.

119. Verge pleaded, in its cross-claim, alleged breaches of the tripartite deed in addition to the alleged breaches of the contract.

120. Verge relied upon clause 3(a) of the tripartite deed, which provides:

3. Builder’s Undertakings

Except to the extent that may be prohibited under the Building and Construction Industry Security of Payment Act 1999 (New South Wales) the Builder agrees:

(a) (perform): to duly and punctually perform and observe its obligations under the Building Contract and must not cease doing so unless permitted by this Deed;

…

121. Verge argued, in effect, that, in the event that Sydbuilt were to be found to have failed “to duly and punctually perform and observe its obligations under the Building Contract”, Sydbuilt would be in breach of clause 3(a) of the tripartite deed, and proceedings for that breach would not be subject to the time limits in s 18E of the HBA, because a breach of clause 3(a) is not a breach of a statutory warranty implied by the HBA.

122. Verge also pleaded, in its cross-claim, that the statutory warranties in s 18B of the HBA were implied into the tripartite deed, and, further, that the implied terms provided for under s 7E of the HBA were implied into the tripartite deed (clauses 7 and 8, cross-claim). This, presumably, is on the basis that the tripartite agreement, by virtue of the obligation in clause 3(a), is “a contract to do residential building work” within the meaning of s 18B(1) of the HBA (see also s 6 of the HBA)

123. The Interpretation Act 1987 (NSW) provides, in s 6:

6 Definitions to be read in context

Definitions that occur in an Act or instrument apply to the construction of the Act or instrument except in so far as the context or subject-matter otherwise indicates or requires.

124. The HBA, in s 7(1), sets out the requirements for a contract, which are that it “must be in writing and be dated and signed by or on behalf of each of the parties to it”. These requirements are not the requirements of a deed, which is required, under s 38(1) of the Conveyancing Act 1919 (NSW) to “be signed as well as sealed, and shall be attested by at least one witness not being a party to the deed”.

125. The HBA, in s 7(2)(e) also says that a contract must contain “the contract price if known”, which implies that there is to be a contract price. In other words, it is implicit that a contract to do residential building work will involve the promise to give consideration in exchange for the promise to do building work. The contract is to have the elements that form a contemporary contract at common law.

126. I do not consider that it was intended that the HBA apply to a deed, even where the deed includes a promise to perform building work. The statutory warranties in s 18B of the HBA are not implied into the tripartite deed.

127. If a breach of the undertaking in clause 3(a) of the tripartite deed is proven against Sydbuilt in relation to a defect which is not major, the time limit prescribed in s 18E of the HBA will not apply to the proceedings for that breach. The limitation provided for in s 16 of the Limitation Act 1969 (NSW) in relation to “an action on a cause of action founded on a deed” is twelve years, and that is the applicable limitation period for a breach of the tripartite deed.

Items of allegedly defective work in the cross-claim

Item 2

128. The claim under Item 2 in the cross-claim narrowed in the course of the hearing.

129. I will deal with each of the surviving aspects of Item 2, as set out in Verge’s written submissions.

Efflorescence

130. It is alleged that efflorescence is visible to the tile grout joints to all four ground floor, front tiled terrace areas.

131. Efflorescence is “the formation of a powdery deposit on the surface of brickwork, rock or other material as a result of loss of moisture on exposure to air” (Oxford Learner’s Dictionary).

132. In the photographs taken by Mr Zakos and included in his report of 13 March 2025, a minor amount of efflorescence is visible. Mr Zakos, in his report, said, in effect, that the amount of efflorescence present is consistent with the age of the building, and constitutes a maintenance issue and not a building defect. Mr Zakos quoted from AS3598.1.Appendix C – Cleaning and Maintenance, which says:

C2.2 Efflorescence

Efflorescence usually appears as a white powder on the surface of the tile or joints. It is caused by liquid water carrying soluble salts from below the tile to the surface. When the water evaporates it leaves a powdery residue. If the installation is new, the residue can usually be removed by sweeping or vacuuming the powder away. If soluble salts are cleaned using water or acidic cleaning solutions, some of the salt will dissolve, be reabsorbed and may reappear as efflorescence. Should the problem be persistent seek professional advice regarding continual moisture problems.

Some deposits may react with carbon dioxide forming insoluble compounds that adhere tenaciously to the tile and adjoining surfaces.

133. Mr Zakos said that he did not observe any efflorescence that would cause or constitute loss to the owners or occupiers. His view was that the issue was one of maintenance.

134. I take into account the photographs in Mr Bullivant’s report of 14 May 2024 at CB pp 95 – 96, 154 and 157 – 159.

135. I take into account Mr Bullivant’s view, expressed in the course of giving concurrent evidence with Mr Zakos, that salt-laden air in a location near the coast (such as the site) could leave a salt residue when tiles have an inadequate fall to avoid ponding. I note that Mr Bullivant agreed, in cross-examination, that efflorescence, by itself, is not a major defect, though he believes that it is a defect (T p 40).

136. The pattern of efflorescence on the tiles is not consistent with an issue connected to ponding and salt air. It is minor and localised. I prefer the evidence of Mr Zakos on this point. The presence of such efflorescence is not, in itself, on this site, a building defect, and neither is it evidence, on the material before me, of a building defect. It is not a breach of the terms implied into the contract from Schedule 2 of the HBA. On the evidence, it is likely that it is a temporary condition which can be addressed by maintenance.

Ponding on the four front terraces

137. In his report, Mr Bullivant says (CB p 95):

The ponding of water is present to all four front terrace areas.

Areas of negative falls to the floor tiling, back towards the external northern walls to all four front terrace areas has been achieved. It is causing a loss of amenity and safety hazard.

138. Mr Bullivant’s report did not identify the precise areas which he believed to be subject to ponding. The photographs in his report beside the text regarding this issue showed wet outdoor tiles, but those photographs were taken directly after water testing, so their value as evidence of ponding are negligible (T p 41).

139. In cross-examination, Mr Bullivant elaborated that, on his inspection of the property on 30 April 2024, he measured the extent of ponding by placing a 5-cent piece in one or more areas where the tiles were wet and observed that it was covered by water (T p 41 – 42). This test is not mentioned in his report. When the experts visited the property together, this test could not be repeated in circumstances where it had been raining for three days. The depth of water to be found at places on the outdoor tiles was up to 0.55mm. Mr Zakos said that the water was not ponded, but was residual rainwater (Joint Report CB p 2149). Mr Bullivant agreed that such water, kept in place by surface tension, would not constitute a defect. He maintained his position that there was ponding.

140. As to the alleged negative falls, Mr Bullivant said, in the joint report (CB p 2149):

Areas of negative falls to the floor tiling, back towards the external northern walls to all four front terrace areas has been achieved. It is causing a loss of amenity and safety hazard.

141. Mr Zakos included, in his report, a copy of the stormwater drainage drawing which shows the location of the floor wastes (drains) in the area which Mr Bullivant believes has a negative fall. Mr Zakos has illustrated, with blue arrows, the falls necessary to direct surface water to the floor drains. Mr Zakos says that the floor tiling has been built in accordance with the stormwater drawings (CB p 252).

142. In cross-examination, Mr Bullivant agreed that the floor wastes had been installed in accordance with the stormwater drawings, but he thought that there were negative falls to the tiling along the two courses of floor tiles situated between the floor waste and the external wall of the building.

143. In the concurrent evidence, Mr Zakos said (T p 45 – 46):

…in terms of the slope of the tiles … I measured the tiles. I put spirit levels on the tiles. And those photographs are in my report. What … I observed is that the tiles slope from the outside toward the drain and then the tiles up against the building slope from the building to the drain as well. So it almost forms like a V, a channel. And that’s really the only way that tiling could work, because if it didn’t as Mr Bullivant said, the water would go up against the building. My observations and measurement showed that’s what the builder had built, and there was that channel there.

…

The, the tiling code basically says that the water must find its way to the drain eventually. There’s no time limit. The 25 minute issue that Mr Bullivant raised regarding the length of ponding, there is no time limit in any code, in any standard. It just says that the water shall not pond save for residual water remaining due to surface tension. And that’s what we have here in this instance because these are outside tiles. They’re a little bit rougher in terms of wanting to describe it because of foot traffic and so forth. So there’s more surface tension on these tiles. I haven’t measured the surface tension by that’s my experience with outside tiles.

144. In the joint report, Mr Zakos says, in relation to the allegations of negative falls and ponding, that there is no defect, in his opinion (CB p 2149).

145. I prefer Mr Zakos’ evidence on this issue to Mr Bullivant’s. The photographs do not establish that water is ponding. The spirit level test described and photographed by Mr Zakos is instructive. The tests conducted by Mr Bullivant were of his own devising, involved the application of water to the area and the use of an arbitrary time limit for the dispersal of that water. The ponding Mr Bullivant thought he saw was not duplicated at the joint inspection by the experts.

146. The plaintiff has not established that there is an issue with ponding or negative falls to the floor of the front terraces.

147. I reject Mr Bullivant’s concern that there is ponding which creates a risk of slipping. This has not been established on the evidence.

148. In the joint report, Mr Bullivant says (CB p 2149):

The perimeter skirting tiles affixed to the external northern walls and to the northern slab’s perimeter edges to across all four units [in] the terrace areas are drummy and or delaminating and poorly finished in to the four terrace areas.

149. In the joint report, Mr Zakos says that, at the joint inspection of the property by the experts, together they counted eleven skirting tiles and eleven slab edge tiles which required re-fixing. Mr Zakos also said that he and Mr Bullivant agreed that 50% of the leading edge of the tiled terrace has become drummy and ought to be removed and replaced. The new tiles should be a different colour from the tiles that will remain, and will form a border. Photograph GZ9 of Appendix B to the joint report shows the row of tiles to be replaced (CB p 2180).

150. Mr Zakos costed the work as follows (CB p 2149):

Labour 24 hours x $83/hr = $1,992.00

Materials (tiles, glue etc) = $ 750.00

Total, exclusive of on-costs = $2,742.00

151. Mr Zakos pointed out that the problem with the tiles is that they are drummy, which indicates that they have already separated from the underlying screed, making damage to the waterproofing membrane, which sits under the screed, unlikely when the tiles are removed.

152. Both experts agreed that the drummy tiles were not a major defect under the HBA.

153. Mr Bullivant did not cost this work separately, but included the costing in a much greater scope of works which replaced all of the tiles on all four terraces, among other things.

154. Mr Bullivant originally claimed that no waterproofing membrane had been installed under the tiles, but he conceded that this was disproved by photographs in Mr Zakos’ report showing the installation of the waterproofing membrane in the relevant location.

155. I prefer Mr Zakos’ evidence with respect to Item 2. Mr Bullivant’s view is based on very limited evidence and some assumptions which have not been verified.

156. The fact of the drummy tiles implies that the tiling was not performed with due care and skill with respect to the two sets of eleven tiles in question. This is a breach of clause 3(a) of the tripartite deed. It is also a breach of clause 1(b)(i) of the contract, but it is a minor breach, so the claim for breach of the contract is outside of the time limit set by s 18E of the HBA.

157. I will award damages of $2,742.00 to the cross-claimant in relation to this breach of clause 3(a) of the tripartite deed.

Item 3 – Northern front of Complex Elevation– Planter boxes, landscaped areas

158. The experts agree that there is water ingress to the basement from the area above the storage spaces.

159. Mr Bullivant says, both in his report and in the joint report (CB pp 100 and 2151):

A flood test was commenced to the Northern planter box adjacent to Terrace Unit #1 and this was prematurely stopped when water ingress was observed to the basement storage beneath it and also rainfall had just commenced which then continued intermittently for the balance of the inspection of the complex.

Waterproofing failure is occurring to the plantar boxes and landscaping areas #2 & 3.

The ingress of water is visible to the soffits, perimeter walls and floors to the basement storage area to Units 1 – 4 and to along the perimeter walls to the basement area.

The physical flowing/running of moisture down the face of the walls and pooling of water onto the basement floor slabs beneath, from the soffits, perimeter walls and floors to the basement storage areas to Units 1 – 4 and to the balance of the walls to the basement was observed.

160. Mr Zakos says, in the joint report (CB p 2151):

1. The areas in question are storage areas for bicycles and not affected P2.2.2 of the BCA.

2. There is no evidence provided by Mr Bullivant to confirm that any water entering the storage area is from the planter boxes. It is noted that Mr Bullivant Report states that a flood test was attempted but had to be aborted due to rain intervention. I strongly suggest that because of the rain intervention, Mr Bullivant’s observation could be as a result of the rain, wetting other areas of the external works and allowing the water to enter the storage areas. I note that I did not observe any cracking to the planter box walls to suggest that the walls had moved thereby creating a failure in the walls and or membrane to allow water existing the planter [sic].

3. I note that there are no photographs in Mr Bullivant’s Report of the allegation that water was entering the storage areas as a result of the flood test. Considering this issue is a major defect, and he allegedly observed water entry, the absence of any photographic evidence is unfortunate.

4. In my opinion any water entry into the Storage areas is at the junction of the stairs/pathways with the external walls of the planter boxes. There is no evidence to suggest or confirm that the water entry is emanating form the planter boxes of the OSD [on-site detention] tank.

161. Mr Bullivant undertook some testing on site, which involved flooding at least one and possibly all four planter boxes. He also placed a hose in the landscaped area on top of the on-site detention tank. His evidence was inconsistent as to the precise extent of his testing, as, in his report, he said that he stopped testing when it began to rain. His evidence during concurrent evidence was difficult to follow. He was unable to say how many planter boxes he tested, though he seemed to suggest, contrary to his report, that it was more than one and possibly all of them. He was clear, though, that, in his opinion, water was leaking from the area of the planter boxes into the storage area below. In saying that he conducted a “flood test” of the planter boxes, and the landscaped area, I take him to mean that water overtopped the sides of the planter boxes. It was also, on one of his accounts, raining. I cannot find, on the evidence, that water is travelling from the inside of the planter boxes to the basement. It is also possible that the water is travelling to the basement from the junctions of the storage area walls and ceiling.

162. Mr Zakos did not do any testing. He relied on the marks from earlier testing undertaken by the builder using blue dye, the remnants of which showed that the water was escaping from an area near the planter boxes. The testing by the builder, which is described in Mr Tambasco’s affidavit, preceded an attempt to address the leaks by grout injecting from underneath in the storage areas, sealing the junctions of the walls to the soffit of the paths and stairs underneath to all affected areas. The testing showed that the grout injecting had not solved the problem.

163. Mr Bullivant, in his report and the joint report, set out a scope of works to address the water ingress to the storage and bicycle storage area. His scope of works included the removal and disposal of all landscaping elements, including the planter boxes and the area over the on-site detention tank. The waterproofing to the perimeter walls and floor surfaces of the landscaping areas would be “scabbled off”. A new stormwater draining to the landscaped areas, connected to the existing stormwater system would be installed “where required”. A structural engineer and a hydraulic engineer would be engaged to inspect the external northern and western external areas and design a suitable engineered solution. The engineers would prepare cost estimates once the engineering “details” were confirmed. New landscaping elements would then be reinstalled. Affected surfaces would be rendered and repainted. Mr Bullivant gave a global estimate of $60,282.00, which was not broken down.

164. Mr Bullivant was unable to say if the water was coming solely from the planter boxes.

165. In the course of the concurrent evidence, Mr Zakos said that he believed that the water was coming through the joints between the path and the planter box walls, and the landscape walls. Mr Zakos said (T p 79):

Well, what led me to that conclusion was when I looked at the storage areas the exact mirror of what was above the perimeter of the storage areas was the outline of the pathways and the stairs upstairs. And so when I went upstairs on the outside and I had a look, already there had been some sealant attempted there. Now, that sealant had separated so that’s allowed a gap. That allows water to get through. So that to me is more likely the, the scenario for me as to why the water’s getting into the storage areas.

166. In his report, Mr Zakos costed a scope of works to address the water ingress to the storage and bicycle storage areas. The scope of works included the cleaning of the walls, floors and ceiling affected by the water ingress, the application of a Sika product (which is equivalent to an external grade flexible sealant) to the junction of the storage area walls and ceilings, the conducting of a water test from above to confirm water tightness, the cleaning of the floors, and the supply and laying of a cementitious based screed to fall from the perimeter walls of the storage area to the entry point of the storage area, to drain into the perimeter drain of the car park immediately outside the storage area, with the drain cut in if required and connected to the existing drain. Mr Zakos provided a detailed costing (CB p 261) of $10,529.00. In the joint report, Mr Zakos added to his scope of works the re-sealing of all of the stairways and pathways costed at $3,656.00. The total cost of Mr Zakos’ proposed remedial work is $14,185.00 (CB p 2151). In his report, Mr Zakos recommends the addition of preliminaries at 11% and builder’s overhead and profit at 20%. Mr Zakos’ scope of work for Item 3 was intended to address the issues raised in Item 4 and 5 as well. All of these items relate to water ingress into the basement.

167. The burden of proof is on the cross-claimant with respect to the alleged breaches. Mr Bullivant was unable to identify the cause of the water ingress to the basement (T p 69). Although no specific failure to perform the building work with care and skill, or unsuitability of materials has been established, the ingress of water indicates that the area above the storage and bicycle storage area is not watertight.

168. The burden of proving the loss claimed is also on the cross-claimant.

169. Mr Bullivant has provided an open-ended costing of $60,282.00 for Item 3, contingent upon the future recommendations of a structural and hydraulic engineer, which he has done his best to predict by way of costing. It is, however, necessarily an ambit claim, given the work which Mr Bullivant says two engineers need to do before the scope of works is arrived at. The degree of uncertainty on which this costing is predicated makes it an unsuitable basis for an award of damages. It is, essentially, speculative. The cause of the water ingress has not been identified, and the scope of the remediation works is contingent upon two engineers devising a scope of works. I cannot be satisfied, on the balance of probabilities, that the sum arrived at by Mr Bullivant would be fair compensation for the loss on a Bellgrove v Eldridge [1954] 90 CLR 613 (‘Bellgrove’) basis.

170. Mr Zakos has stated his opinion as to why the water is entering the basement and has committed to a proposed solution for the water ingress into the basement, which he has costed at $14,185.00 plus preliminaries and builder’s overhead and profit. In these circumstances, I accept Mr Zakos’ opinion as to the likely cause of the water ingress, and I accept his solution and his costing as the appropriate basis for an award of damages in relation to Item 3.

Item 4 – External entry stairs and landings

171. This item also relates to the ingress of water to the basement.

172. Mr Bullivant was unable to say whether the cause of the water ingress was the planter boxes on the terrace level or the stairs (T p 72 and Mr Bullivant’s report CB p 106). The effects noted by Mr Bullivant of water ingress in the basement are the same as the effects he noted for Item 4. Items 3 and 4 relate to the same impact on the building.

173. Once again, Mr Bullivant suggested engineering input into the solution to the issue. Mr Bullivant provided an estimate of $30,355.00 for “Indicative Unconfirmed Scope of repairs to allow for cost estimates to be prepared. Final costings to be provided once final Engineering details are confirmed” (CB p 106). Mr Bullivant set out the steps that he thought might be recommended, subject to confirmation by engineers. Again, for the same reasons as set out at [169], this is not a satisfactory basis upon which to make an award of damages.

174. Mr Zakos pointed out that Item 4 relates to the same water entry problem as Item 3. Mr Zakos said that, in his opinion, the works that he recommended for Item 3 would resolve the issues set out in Item 4, which are the same issues (see CB p 2153, the joint report).

175. I accept Mr Zakos’ evidence. No further expenditure has been shown to be required under Item 4. The work the subject of the costing in relation to Item 3 includes the work to address Item 4.

Item 5 – Basement

176. Mr Bullivant asserted, in his report, that “nil complying slab/isolation joint details have been installed to the perimeter basement and internal walls to the individual Terrace Units Storage areas in accordance with Elegant Engineering Drawing 1 0 1 S20 B details”. He also said, “Nil complying waterproofing has been installed to the concrete floor slabs and adjacent supporting Dincel, rendered Masonry and RC walls to the basement”. Mr Bullivant further said that the existing drain in the basement along the northern wall did not drain to the stormwater system.

177. The basis upon which Mr Bullivant asserts that “Nil complying slab/isolation Joint details have been installed” is unclear. Mr Bullivant clearly knows that isolation joints were installed, because his recommended remedial works include the grinding or raking out of the existing joints and the supply and installation of “new external grade sealant to the isolation joints” (CB p 113). There is, however, no evidence that the existing joints have failed. There is no evidence of a defect. Mr Bullivant does not say why he thinks that the isolation joints are “not complying”, and what he means by that.

178. The basis for Mr Bullivant’s assertions concerning waterproofing have not been elaborated. There is no evidence of any failure concerning the concrete floor slabs and walls to the basement.

179. Mr Bullivant suggests the engagement of a hydraulic engineer and a structural engineer to “design a suitable Engineered solution” (CB p 113). He then suggests an “Indicative Unconfirmed scope of repairs to allow for cost estimates to be prepared. Final costings to be provided once final Engineering details are confirmed”. Mr Bullivant’s indicative unconfirmed scope of repairs involves (in brief summary) replacing the sealant in the isolation joints, to the floor and walls to the storage areas, “supply and install a negative waterproofing system to the perimeter walls and soffit” of the storage areas, supply and install cementitious flooring to create a fall to the floor to new “individually grated poly channel drains installed across the entry areas into the four storage areas”, removal of part of the concrete floor to install new “poly channel strip drain units” to be concreted in and connected to the grated stormwater drainage sump, treatment of the new trench with sealant, new poly-channel units, “new external grade waterproofing system” and extension of the soffit drainage gutter (CB p 113 – 114). The costing was $56,166.00.

180. For the same reasons as I have set out above at [169], an “indicative, unconfirmed” scope of repairs, with a recommendation that two engineers devise a scope of works in the future is not a proper basis for an award of damages.

181. Mr Zakos allowed for the cutting of a further drain to the existing stormwater system in his recommended works for Item 3 (see [163], above). Mr Zakos described the drainage works as follows, in his report (see CB p 260):

79.4 Clean the floor and supply and lay a cementitious based screed that falls from the perimeter walls of the storage area to the entry point of the storage area, which then drains into the perimeter drain of the car park which is immediately outside the storage area. Cut in drain if required and connect to the existing.

182. Mr Bullivant’s approach to the water leaking into the basement, which is the subject of Items 3, 4 and 5, has been to devise and recommend a scope of works to address every possible cause he can conceive of and to make each of those recommendations subject to the advice and scope of works to be agreed in the future between a hydraulic engineer and a structural engineer. This approach has been of limited value in arriving at findings as to the cause of the leak. This approach also does not provide an adequate basis upon which to assess damages.

183. I accept Mr Zakos’ evidence as to the cause of the issue the subject of Items 3, 4 and 5 and I accept that the scope of works he recommends is a suitable basis for an award of damages.

184. The defects identified by Mr Zakos, being the failure of the sealant and the need for an extended drain in the basement, are not major defects under the HBA. They are minor works, and therefore beyond the time limit in s 18E of the HBA. The works costed for Item 3 include works to address Item 5. The failure of the sealant and the failure to provide a pathway for water out of the basement are breaches of clause 3(a) of the tripartite deed.

185. The question of whether Verge is likely to suffer a loss is finely balanced. However, the water ingress into the basement is an issue for which a solution is actively being sought, it appears, and Verge is being put to expense because it is under pressure from the current owners of the units to solve the problem.

186. Damages of $14,185.00 plus preliminaries of 8% ($1,134.80) and builders overhead and profit of 14% ($2,447.97), giving a total of $17,767.77, will be awarded in respect of Items 3,4 and 5, taken together.

Item 6 – Double glazing

187. Variation 006, dated 14 January 2020 (CB p 325), said “Change all Window to Double Glazed” [sic]. This has been taken to relate to all four units. Variation 006 also provided for a series of other variations to the building works under the contract in addition to the double glazing. A single price was given for all of the variations together. No break-down was given.

188. Mr Tambasco agreed that not all of the windows were double glazed. He said, in evidence, in summary, that in all of the four units the “non-habitable rooms”, being the wet areas and the hallways, had VLam Hush glass 10.38 installed. Mr Tambasco said that Hush glass is better than the lowest grade of double glazing. Mr Tambasco said that the decision to use the Hush glass in the non-habitable rooms was made after a conversation with Verge about cost saving (T p 31).

189. Verge sold Unit 2 to purchasers in December 2020 or January 2021. The purchasers asked for all of the windows of Unit 2 to be double glazed, and Sydbuilt arranged for that work to be done, and it was done (see Mr Tambasco’s affidavit at CB p 309).

190. The contract, as varied, provides for double glazing. Mr Tambasco’s evidence about the conversation which led to the substitution of Hush glass for some of the windows does not go so far as to demonstrate that Verge agreed to further vary the requirement in Variation 006 that the windows be double glazed. The failure to comply with the variation is a breach of the contract.

191. Verge is entitled to be placed in the position it would have been in had the contract been performed (Bellgrove).

192. There is no evidence that Verge has suffered any loss as a result of the failure to double glaze some of the windows in Units 1, 3 and 4. All of the units have been sold by Verge and there is no evidence that the contract price of any of them was adversely affected by the failure to double glaze the windows in the wet areas and hallways. There is no evidence to support the inference in paragraph 20.c. of the cross-claim that the price paid for Variation 006 did not reflect the value of the work performed by Sydbuilt under that variation.

193. No loss of any kind has been demonstrated by Verge on account of Item 6.

Item 7 – Shower sets – Units 1 to 4

194. The contract, in schedule 2, clause 11, in the Table of Allowances for Prime Cost Items, says, under “Description of Each Prime Cost Item” “as per Fitting and Finishes Schedules Issue A 26/04/2018/Tender”.

195. The contract, in clause 2A Joint Responsibilities of the Builder and Owner says, in part:

The contract sum will be affected by the impact of choices made and work done under the provisional sum and prime cost allowances as well as the various other matters listed on the page 1 warning as to matters which may change the contract price.

The Parties agree that:

(a) they will conduct regular meetings in order to:

(i) review the work done and money paid under the contract;

(ii) review the work to be done and the amount payable for such work; and

(iii) make decisions and choices regarding work under the contract covered by “allowances” (see Schedule 2 item 11) and required by variations (see Clause 14) so that the work to be paid for by the Owner is consistent with the Owner’s capacity to pay.

(b) any adjustments to the work to be done under the contract are to be recorded in writing and signed by both parties. If such adjustment comprises a variation under Clause 14, the variation should be valued under that clause and the contract price adjusted accordingly.

(c) they will act co-operatively and in a manner which progresses the works.

…

196. The contract, in clause 15(b) says:

(b) Where prime cost or provisional sum items are included in the contract price and works, the Owner must furnish to the Builder written directions regarding the selection and supply of the work and or goods represented by such sums in sufficient time to ensure that no delay is occasioned in the progress of the works. The Builder should make any request for information about such work or goods in reasonable time and in writing.

197. The contract, in clause 9(a), (b) and (c) says:

9(a) The Builder will obtain and use materials which comply with the requirements of this Contract.

(b) The Builder is entitled to rely on material required to carry out the work to be readily available. If, for reasons beyond the control of the Builder, materials are hard to get or delay will be experienced because the material required is hard to get or unavailable, then the Builder is entitled to an extension of time. Refer to Clause 11(a)(xii).

(c) If any material specified to be used in the works cannot be obtained or can only be obtained with an unreasonable period of delay, the Builder will seek instructions concerning substitutes to be used. Any price difference will be deemed to be a variation pursuant to Clause 14. Refer to Clause 14.

198. Mr Tambasco gave evidence that certain Parisi items were unavailable for the months around the time they were required in the timing of the building work. Sydbuilt verbally communicated the unavailability of these items to Verge and further communicated the intention to substitute items of the same brand and calibre. This was done.

199. Mr Bullivant estimates a cost of $4,336.00 for the replacement of the shower sets in each unit (CB p 180). There is no allegation that they are inadequate in any way. There is no suggestion that they are not of the same calibre as the shower sets Mr Bullivant says they should be replaced with.

200. Given that the units have been sold by Verge, with settlement occurring between 16 December 2020 and 18 January 2021, with no evidence that the contract price was affected by the fixtures in the bathrooms, including the shower rail sets, there is no evidence that Verge has suffered loss of any kind.

Item 8 – Pendant light Unit 1

201. Mr Bullivant said, in his report, that construction drawing J140 – CD 201 shows a pendant light unit to be supplied and installed over the kitchen island bench unit in Unit 1. He costs a light and the work to install it at $2,734.00.

202. Sydbuilt, in its written submission, points out that the schedule of finishes (CB p 967) refers to a “Kitchen Pendant Light TBC”. I take it that TBC is an acronym for “to be confirmed”.

203. The pendant lights are a prime sum item and clauses 2A and 15(b) of the contract apply (see [197], above).

204. There is no evidence of Verge ever notifying Sydbuilt of the light to be supplied and installed over the kitchen bench. I have not been taken to any correspondence or defect notice regarding the absence of a light at that location. Nor is there any evidence of the present owners of the unit seeking to have a light installed at that location. Sydbuilt’s case is that no pendant light was ever specified by Verge for the kitchen.

205. Mr Bullivant relied on s 18B(1)(a) and (c) of the HBA to say that the absence of the pendant was a breach of statutory warranties. However, the pendant light was shown on the plan but not specified in the specification, so a breach of s 18B(1)(a) has not been established. No argument has been advanced as to how, in these circumstances, the absence of the pendant light could be in breach of s 18B(1)(c) of the HBA.

206. I do not consider the absence of the pendant light to be a defect under the HBA.

207. In any event, again, given that Verge sold the units between 16 December 2020 and 18 January 2021, and there is no evidence of the purchasers or anyone else being concerned about lighting in the kitchen, Verge has not established a loss under Bellgrove.

Item 9 – Ground floor WC Unit 2

208. Mr Bullivant said that construction drawings J140 – CD005 & CD302 show a wall hung vanity basin and cabinet unit with two drawers on the wall immediately opposite the entry door into the powder room/laundry in Unit 2 (CB p 122). A 600mm wide two door mirrored vanity wall cabinet is shown on the same drawings and has not been installed. Mr Bullivant thought that the colour of some of the wall and floor tiles was from two different batches, and theorised that the plumbing and drainage for the vanity may have been roughed in and removed and the area then tiled over.

209. Mr Bullivant’s photographs 4 and 11 (CB p 122), show the space in question, which is between a toilet and a European laundry, including a laundry tub.

210. Mr Tambasco, in his affidavit, said that the architectural drawings were provided to Sydbuilt, and Sydbuilt and Verge subsequently, together, arranged for hydraulic drawings to be prepared (CB p 310). At this point, hydraulic stack risers were added to the laundry, which had the effect that there was insufficient space to accommodate the opening of the laundry door and the space required to open the door of the washing machine if a basin was installed. The defendant agreed to dispense with the basin, and for the area to be tiled. This work was done.

211. The absence of the basin and cabinet is not a defect, but a necessary work-around, on the instructions of Verge, to accommodate the inconsistency between the architectural plans and the hydraulic plans. It would not be possible to remedy in the manner suggested by Mr Bullivant without interfering with the functioning of the space, particularly the laundry. I reject Mr Bullivant’s opinion as to the quality of the tiling. It appears to be within the range of work performed in a proper of workmanlike manner.

212. I reject Mr Bullivant’s opinion that this is a defect. I do not consider it to be a breach of s 18B(1)(a) or (c) of the HBA.

213. I reject the allegation that this is a breach of contract. Verge agreed to the work-around.

214. I note Mr Tambasco’s evidence that a company related to Verge, called Verge Interiors, was contracted to produce the joinery for the project and was thus well aware of the situation with the powder room/laundry in Unit 2 (CB p 310).

Item 10 – Pendant light Unit 2

215. Item 10 relates to a pendant light for Unit 2 in the same circumstances as for Unit 1 in Item 8.

216. The same considerations apply as set out in [201] to [207], above. For the reasons set out in those paragraphs, I do not consider that Verge has established an entitlement to damages with respect to Item 10.

Item 11 – Ground floor WC Unit 3

217. Item 11 relates to a bathroom vanity for Unit 3 in the same circumstances as for Unit 2 in Item 9. The relevant photographs in Mr Bullivant’s report are on CB p 123. The same considerations apply as set out in [208] to [214], above. For the reasons set out in those paragraphs, I do not consider that Verge has established an entitlement to damages with respect to Item 11.

Item 12 – Pendant light Unit 3

218. Item 12 relates to a pendant light for Unit 3 in the same circumstances as for Unit 1 in Item 8 and Unit 2 in Item 10.

219. The same considerations apply as set out in [201] to [207], above. For the reasons set out in those paragraphs, I do not consider that Verge has established an entitlement to damages with respect to Item 12.

Western retaining wall

220. In his report, Mr Bullivant said that Sydbuilt constructed a retaining wall between the northern end of the western basement external stairs and the northern basement riser stack (CB p 126). He said that the wall is approximately “1000mm high x 2400mm long”. Mr Bullivant said “Nil agg drainage line of geotech fabric has been installed to along the western face of the constructed retaining wall. Gaps are visible between the sleepers”.

221. Mr Tambasco said, in his affidavit, at paragraph 41 (CB p 308):

The plaintiff had originally communicated to the defendant that an issue existed in this area, which would require a retaining wall on 6th December 2019, that was not indicated on any of the project drawings. At the time of 3rd February 2020 the defendant had still not come to a decision on addressing this issue. No final answer was provided by the defendant. At time of final inspection by the geotechnical engineer, the engineer advised that a retaining wall was required to be built. The plaintiff advised the defendant of this, and organised quotes on their behalf for the structural design, along with the works themselves. The works were completed by the plaintiff, and the geotechnical engineer provided their compliance certificate. This is exhibited at A24. …

222. It is unclear on what basis Mr Bullivant says that there is no agricultural drain behind the retaining wall. An agricultural drain would usually be installed at the bottom of the wall with soil around it. Geotechnical fabric would also not necessarily be visible in a completed retaining wall. Mr Bullivant was not present on the site when the retaining wall was constructed. On the basis of the evidence before me, I cannot find, on the balance of probabilities, that an agricultural drain and/or geotechnical fabric have not been installed. Mr Bullivant’s photograph shows that there is a gap under the bottom edge of the uppermost sleeper of the retaining wall, but it is not clear that this poses any risk of compromising the functioning of the wall.

223. In any event, it does not appear that this was work performed under the contract. It seems that a collateral contract might have arisen in relation to this work.

224. Verge has not proven, to the requisite standard, that there is any breach of the contract in relation to the western retaining wall.

Sewer Connection

225. In his report, Mr Bullivant refers to an invoice from Joseph Plumbing for $5,830.00 for the connection of the sewer for the property from the north-east corner of the block. He says “In my opinion this is a Note only. Reason for my Opinion: There in no Breach of the Home Building Act 1989 Section 18B”. He said that “Nil additional works are required to be carried out” (CB p 126).

226. Mr Tambasco, in his affidavit (paragraph 39), addressed an allegation, which he believed was made in the defence, that illegal main sewer works and connection works had been performed by Sydbuilt. He denied the allegation. Mr Tambasco said that Sydbuilt was not engaged under the contract to carry out such works. Mr Tambasco said that Sydbuilt advised Verge that the sewer line was broken and required immediate repair for sanitary reasons. Sydbuilt obtained a quote for that repair, and Verge approved the quote, and the work was done by a third party.

227. No breach of the contract by Sydbuilt arises, on the evidence, from either of these references to work concerning the sewer.

Total damages

228. The total of the damages to be awarded on the cross-claim is $21,509.77 ($2,742.00 + $18,767.77).

Summary and conclusion

The claim

229. The plaintiff has established an entitlement to be paid the retention monies withheld under the contract as amended by the tripartite deed. The amount of the retention monies which have yet to be paid to the plaintiff is $73,061.59. The defendant has been liable to pay this amount the plaintiff since 16 October 2021.

The cross-claim

230. The defendant has established an entitlement to damages in the sum of $21,509.77.

Set-off

231. The defendant, in the amended defence, paragraphs 35 and 36, seeks to set off the damages awarded under the cross-claim against the amount awarded under the claim.

232. I will hear the parties as to the form of the orders which are to issue, particularly in relation to the suggestion of a set off and the issue of interest.

233. I will also hear the parties as to costs.

**********