Timothy Heath v Steele Associates Pty Ltd - [2015] NSWCATCD 8 - NSWCATCD 2014 case summary — Zoe

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Timothy Heath v Steele Associates Pty Ltd

[2015] NSWCATCD 8

NCAT Consumer and Commercial|2014-07-01

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At a glance

Source facts

Court

NCAT Consumer and Commercial

Decision date

2014-07-01

Catchwords

Statutory warranties Legislation Cited: Home Building Act 1989 Cases Cited: Craftsmen Restoration & Renovations Pty Ltd v Boland [2011] NSWCA 147
Bellgrove v Eldridge [1954] HCA 36
(1954) 90 CLR 613

Source

Original judgment source is linked above.

Catchwords

Statutory warranties Legislation Cited: Home Building Act 1989 Cases Cited: Craftsmen Restoration & Renovations Pty Ltd v Boland [2011] NSWCA 147Bellgrove v Eldridge [1954] HCA 36(1954) 90 CLR 613

Judgment (36 paragraphs)

[1]

Background facts not in dispute

The parties entered into a contract for residential building work for approximately $3.2 m for the construction of a residence and pool situated in Double Bay. By contract dated 14 August 2008 Timothy Heath (the owner) and Steele Associates Construction Pty Ltd (the builder) entered into a ABICSW 1 2000 Simple Works Contract. Bureau SRH Pty Limited was the nominated architect retained to administer the contract and the architect's representative was Simon Hansen (the architect).
Work on the project commenced in or about November 2008.
On 20 August 2010 the architect issues a Notice of Practical Completion.
On 15 August 2011 the owner signed a deed of novation.
The construction of the residence included a pool situated above the entrance to the residence and the pool floor consisted of three large glass panels. It is not in dispute between the parties that the pool sealant leaked and that the pool was drained in 2012 to avoid water damage to the residence. The parties were unable to agree as to the method of rectification required. On the builder's estimate the pool floor could be resealed with the glass panels in situ and at a cost of no more than $24,000.00. The owner maintained the glass panels needed to be removed, resealed and replaced at a cost of $214,000.00.

[2]

The procedural history

The builder commenced proceedings on 1 October 2013, seeking an order that the owner pay $48,000.00 as a debt accrued pursuant to the terms of the contract.
On 10 October 2013 the matter was listed for directions and the owner was ordered to file and serve any separate claim for defective work. On 22 October 2013 the owner filed his claim for defective work seeking an order for $230,000.00. Although the hearing form did not "tick" the appropriate box on the application form, it was clear from the running of the case and the evidence tendered that the unrepresented litigant sought an order for breach of statutory warranties.
The owner was ordered to file and serve his evidence on the defects claim by 3 December 2013.
The builder was ordered to file and serve evidence in support of its debt recovery claim by 19 November 2013.
The matters were subsequently listed together at 5 directions hearings between October 2013 and May 2014. At each directions hearings both parties sought and were granted extensions of time until a guillotine order was made on 21 March 2014 that no further adjournments would be granted and no further evidence was to be filed.
Each direction applied to both matter as was clearly set out in HB 13/55555. In May 2014 the matters were set down for a hearing for one day on 1 July 2014.
The owner disputes that his claim was heard on that day. The owner's claim was listed for hearing on 1 July 2014 and was the subject of a notice to this effect served on both parties dated 15 April 2014. On that day the parties were both asked if they required an adjournment, particularly to obtain legal representation. Both parties declined to bring an adjournment application and elected to press on with the hearing.
On 1 July 2014 both matters were heard and finalised. The bulk of the day was concerned with the owner's defects claim, all liability witnesses were present and the owner cross examined Mr Fitzsimmons, (one of the builder's expert witnesses) and the builder's director, Mr Steele. Both matters were finalised. The matter was adjourned part heard for a limited purpose only. The Tribunal allowed the homeowner, who was not legally represented, to reflect on his cross-examination and to apply to the Tribunal if he needed to re-open his cross examination to put further questions. This opportunity was clearly set out in directions but no application for further cross-examination was brought. The owner's evidence was thus closed, leaving his matter listed for submissions only.
At the end of the hearing the parties raised new issues concerning a deed of novation and a quantum meruit issue. During the adjournment period the builder was invited to seek advice on the quantum meruit issue and was given leave to file further evidence on that limited issue alone. The builder did not avail himself of that opportunity and thus the builder's evidence was also closed, leaving the matter to be relisted for submissions only.
The owner sought clarification of the orders from the Tribunal and the clarification was provided: 1. Pursuant to Section 63 of the Civil and Administrative Tribunal Act 2013, orders published on 1 July 2014 are amended as follows: 2. The orders made on 1 July 2014 HB 13/51291 are correct: 3. The applicant Mr Steele shall provide to the respondent and the Tribunal either in person or by post a copy of all documents (see note below) on which the applicant intends to rely on the quantum meruit issue, IF ANY, by 22 July 2014. 4. The respondent Mr Heath shall provide to the applicant and the Tribunal either in person or by post a copy of all documents (see note below) on which the respondent intends to rely a the adjourned hearing on the quantum meruit issue, IF ANY, by 12 August 2014. 5. The remainder of the orders made in HB 13/51291 remain as printed on 1 July 2014. 6. The orders made in 13/55555 are vacated.
The directions issued on 1 July 2014 speak for themselves. I am satisfied that the owner understood at the conclusion of the hearing the no further evidence was permitted (except on the quantum meruit issue). Indeed, the owner sought clarification on this issue in writing. On 18 August 2015 the parties were to return to either make submissions, or to be heard on the quantum meruit issue. As the builder filed no evidence on that issue, the owner filed no evidence in response thereto.
Without prior notification or leave from the Tribunal, the owner attended the hearing on 18 August with approximately 1000 pages of new evidence. The evidence was handed up and the new solicitor for the owner submitted that on the hearing on 1 July 2014 the evidence had not closed, the owner's case had not been heard, and the owner was entitled to tender further evidence in chief and essentially re- run his defects case with fresh evidence. The application was opposed by the builder. The Tribunal rejected the application to file and serve fresh evidence.
Due to the fact that the matters were commenced in 2013 the provisions of the Consumer Trader and Tenancy Tribunal Act 2001 apply.
Both parties were provided with written directions setting out the provisions of section 30 CTTT Act on 22 October 2013.
Having regard to the conduct of the owner at the 18 August 2014 hearing the Tribunal is satisfied that the application to file further evidence, was akin to a "trial by ambush". The newly retained solicitor's application to tender approximately 1000 pages of fresh evidence was clearly going to disadvantage the other side and the Tribunal. After a short adjournment the application was refused. Oral reasons for the decision to refuse the application to adduce fresh evidence were provided on 18 August 2014. The Tribunal then reserved its decision.
Written submissions from both sides were invited and closed. Due to the unforeseen untimely death of the builder's father the time for submissions was extended to 11 November 2014. The owner, without direction or leave from the Tribunal filed submissions in "reply" on 14 December 2014. All submissions have been considered.
Time to write was provided to the Tribunal on 30 and 31 December 2014.

[3]

THE OWNER'S CASE

Proceedings were commenced on 22 October 2013 in response to the builder's debt claim.
The owner sought damages in the sum of $230,000.00 for "multiple house defects, the largest which relate to pool glass and concrete; multiple other leaks; incomplete works; kitchen ladder."
The requested orders were that "the respondent make payment between $35,000.00 (minimum expected cost) and $132,000.00 (possible cost) if pool glass, preferred concrete sealant used and all pool equipment requires replacement be made to me in addition to the retained funds to compensate for past and expected costs of defect rectification in pool….That our termination notice should be ratified as legal and appropriate… That Steele Associates play no further role in the defect rectification and that the owners be free to choose alternative contractors."
Some of these orders have now been superseded as Mr Heath has since undertaken to repair the pool and the invoices for costs incurred to seal the pool in particular have been tendered.
Attached to the original application form was an 8 page document unsigned and undated from Mr Heath. The owner relied on the following documents: a series of photographs; 16 pages of double sided documents of various email correspondence attachments and evidence of a complaint made to the Department of Fair Trading; 13 double page documents in no apparent order attaching the deed of novation and some of the original contract drawings; IBS' (expert for the builder) report for remediation process; Architect's instruction AI91 issued by Bureau RSH (the architect) on 19 August 2013.
The documents relied upon at the hearing where slightly different but the Tribunal has taken into account all documents attached to the original application form and the documents tendered at the commencement of the hearing on 1 July 2014.
These documents were: Scott schedule filed 3 December 2014 setting out 8 defects claimed: 1. Pool concrete; 2. Pool glass seal; 3. Pool Glass; 4. Damage to pool equipment; 5. Damage to concrete bricks and render; 6. Skylight leak 7. Kitchen leaks x 3; 8. Rear Access Leak.; 11. Kitchen ladder (incomplete work); Items 9 and 10 referred to "contract dismissal" and "consultant costs" and did not refer to defective or incomplete work. The claim as pleaded and particularised was therefore limited to 8 defects and costs of the consultant's reports.
The owner's defects claim proceeded on the basis of the items particularised in the Scott schedule. The defective items had been clearly outlined from the time the case was commenced to the time of hearing and the owner was limited to his claim as particularised between October 2013 to July 2014.

[5]

Hyder Consulting Pty Ltd

Hyder Consulting Pty Ltd provided a series of comments, reports and opinions under the hand of Dr Richard Barnes, a qualified engineer with particular expertise in glass. I am satisfied he is qualified to give evidence based on his knowledge and expertise (hereinafter Hyder).
Dr Barnes did not attach an expert code of conduct. However, the rules of evidence do not apply and the requirement to attach an expert code of conduct is prescriptive rather than mandatory. All evidence sought to be relied upon by the owner was received by the Tribunal and the makers of the reports were available for cross-examination on the day of the hearing.
I note that Hyder was involved in the original design proposal for the pool and provided a specification drawing included in the original contract drawings setting out the mechanism for epoxy sealant. Hyder was asked to comment on the various repair methods for the glass pool panels.
A repair method was proposed by the architect Mr Hanson namely "the glass is temporarily lifted out of the pool and the old sealant completely removed. " Apparently this is the repair method subsequently undertaken by Mr Heath and he has incurred the cost of $108,790.00 (see submissions page 23).
Steele Associates (and its expert IBS) proposed leaving the glass in situ during the repair and parts of the original sealant left in place.
In a letter dated 11 October 2013 Hyder rejects both repair methods proposed by IBS and the builder and states that only complete removal of the glass would be sufficient to completely seal the glass. This was recommended as the most effective method permitting complete removal of the old sealant as a precursor for preparation of the glass and concrete faces to then allow the new epoxy to be applied.
The Hyder report of 28 November 2014 stated that the problem with the builder's solution is that the existing Sicaflex sealant cannot be cleaned completely of the glass and the concrete with the glass in situ. Hyder is critical of the IBS solution and stated they are not certain if the bond between the concrete surface sealant Epotech and the primary seal, MaxisilP (as suggested by IBS) can be confirmed and suggests further tests before the IBS solution may be adopted. In short, the Hyder report rejects the IBS and Steele repair methods as insufficient and uncertain.

[16]

Acity Pty Ltd

The Builder relies on the expert opinion of Mr Brett Davies, of Acity Pty Ltd Consultants of 10 May 2014."
In respect of item 1 in the scott schedule- the pool surface- it is the opinion of the builder's expert that 'there was no surface finish defect in the concrete surfaces of the pool at the time of my inspection that are the responsibility of the builder that require repair or rectification."
In respect of item 2 - pool glazing, it is Mr Davies' opinion that there is no evidence sufficient to substantiate there was water flanking around the sealant joint through the concrete. "On balance I am of the opinion that it is not likely that pool water was leaking by tracking around the sealant joint through the concrete. It is much more likely that leakage was caused by the failure of the sealant due to chemical attach by high concentrations of chlorine."
Importantly it is admitted by the builder through its expert at paragraph 108 that the seal failed and leaked. He also stated that "in all joint sealant replacement repairs the surfaces must be cleaned and be free of the old sealant material and any laitance… Access to the joints to carry out repairs is excellent and in my opinion it was not necessary to remove the glass to clean sealant out of the 10mm to 30mm joint between the galls and the vertical face of the concrete."
The cost for repairing the sealant in situ was estimated as $3,407. 00.
Item 3 - Pool Glass delamination. IBS could detect no delamination other than minor scratches within acceptable parameters and considered that these minor blemishes were not a defect within the meaning of the Act.
Item 4 - IBS does not comment on this item and it is noted that Mr Steele has admitted the replacement cost of the pool pump in the sum of $1,250.00.
Item 5 - Damage to concrete Bricks and Render. This refers to staining and bubbling of paintwork to concrete beams below the pool glass in the location where water was penetrating from the glass to the concrete joint. This is consequential damage and liability should attach to the liability to rectify the sealant joint. The cost of rectification is estimated as $2,040.00.
Item 6 - leak to the skylight. No defect is detected in the skylight and no method of rectification proposed. In short, the skylight did not leak, but water was coming through the rear door and tracking across the concrete slab to the location near the skylight. There is no detectable leak at the sky light.
Item 7 - Kitchen leaks x 3 - as per the time of inspection IBS was unable to detect a water leak of the sliding door or rangehood areas. Ms Heath indicated the leaks were not visible to her and had not been detected for a period of 10 months. As no leak was identified a breach of statutory warranty by the builder has not been established.
Item 8 - Rear access door leak. In respect of the water pooling on the concrete slab under the timber floor boards. It is the expert's opinion that the door without flashing and a frame, as per the architect's design allows no protection from the weather. No defective workmanship by the builder has been detected but in the event that he Tribunal finds the builder liable the rectification cost is estimated as $1,050.00 for installation of stainless steel weather strips.

[17]

DEED OF NOVATION

A deed of novation was entered into by the parties on 15 August 2011. The homeowner submitted that by virtue of the fact that the new entity (the respondent) was unlicensed and uninsured as at the date of novation, the respondent was unable to enforce any entitlements due to him under the contract, in particular, it was prevented from claiming the retention sum claimed.
Mr Heath, as a lay person was unable to advance the issue further and instead handed up a written advice from a firm of solicitors in the following terms:
"The deed of novation was between Steele Associates Construction Pty Limited "the old contractor" and Steele Associates Pty Limited "the New Contractor". The Deed of Novation (the Novation) sought to transfer all the existing rights, liabilities and obligations of the old contractor under the Building Contract to the New Contractor. The effect of the Deed of Novation is that in substance a building contract between Tim Heath and the New Contractor came into existence on the same terms as the original Building Contract.
The owner submitted that the new contractor is precluded from seeking refund of the Retention Money as the new contractor at the time of novation held a licence "only for contracts not requiring home warranty insurance…as a result of section 4 of the Home Building Act, the New Contractor will not be able to enforce the Deed of Novation."
Section 4 of the Act states that an unlicensed contractor is not entitled to damages or to enforce any other remedy in respect of a breach of the contract and the contract is unenforceable by the person who contracted the work. The unlicensed builder does remain liable for any damages in respect of any breach committed by the builder.
The builder submitted that the argument was misconceived. It is not in dispute that a contract over the sum of $12,000.00 must be entered into in writing (subsection 92(3) of the Act, see Regulation 70), or that insurance is required for contracts over $20,000.00. The builder maintains he required no licence or insurance as all that remained for him to do after the deed of novation was entered into was minor rectification work under the value of $12,000.00. Insurance for such work was not required and the builder submitted all provisions of the Home Building Act had been complied with.
I am not satisfied that the deed of novation has any bearing on the builder's claim.
The deed of novation is contained at paragraphs A, B and C assigning rights and liabilities to the new entity, Steele Associates. Under "Agreed Terms" the deed states as follows: "The parties acknowledge and agree that: … "the client will pay the New Contractor $120,936 in respect of the client's outstanding obligations under the contract".
I am satisfied that by executing the deed the owner undertook to pay the debt as then outstanding under the old contract plus an obligation to pay interest on any unpaid progress payments pursuant to clause N15 of the contract.
The debt owed by the owner to the builder was acknowledged as an outstanding obligation as at 15 August 2011 for work that had been completed more than a year before to the signing of the novation agreement and well after practical completion on 20 August 2010.
There is no issue that the obligations to pay $120,936.00 that had accrued as at 15 August 2011 had accrued as a result of residential building work performed by a properly licenced entity (the old contractor) that had complied with all licencing and insurance requirements under the Act.
Following the execution of the deed and the acknowledgment of the debt by the owner there is no further requirement upon the contractor to prove the value of the debt or his entitlement thereto. The owner by signing the deed has agreed to pay the stated amount.
Any further evidence on the value of the claim, on a quantum meruit basis or otherwise is not required. The amount owed is as stated pursuant to the terms of the deed of novation as agreed between the parties. Indeed the owner performed two thirds of its obligation under the agreed terms of the deed and paid $90,621.00 (see certificate of payment No 24). The builder claims the remaining $30,315 as a debt outstanding under the deed and both parties have misconstrued this amount as moneys retained pursuant to clause 2 of the contract (retention fund) rather than a debt owed pursuant to the deed.
The owners now, subsequent to entering the agreed terms of the deed and part performing them, wish to challenge the amount payable as they claim they are entitled to deduct reasonable rectification costs.
At the time the deed was entered into, or shortly before, the owners were not entitled under the contract to deduct monies for rectification costs unless they caused the architect to issue a certificate under clause C4 one of the contract. No such certificate was issued. The amount of the debt now claimed was not challenged by the owner before the deed was entered into and cannot be the subject of subsequent challenge. I am satisfied that the builder is entitled to the remainder of the debt plus interest as accrued in accordance with terms of the deed as "the client's outstanding obligation under the [old] contract." The fact that the builder may have the right to damages for breach of statutory warranty does not entitle the owner to withhold moneys owed to the builder pursuant to the deed.
I must briefly address whether the claim as brought by the builder is a building claim within the meaning of section 48A of the Act. I am satisfied that the builder's claim for payment of the "client's outstanding obligation" is a claim for payment for residential building work performed under the contract and that the Tribunal has jurisdiction to hear and determine the builder's claim for payment.

[18]

The Contractual Issues

I am of the view that the contractual issues as raised by the builder are an unnecessary distraction from what is essentially the owner's claim for damages for defective work pursuant to statutory warranties under section 18 B of the Act. For completeness I will briefly set out the builder's contractual argument.
The builder states that the homeowner repudiated the contract but it is not clear what the consequences are that are said to flow from this. In its written submissions it is stated that "the builder's attempt to rectify the work was reasonable. The owner's refusal to allow the work to take place, and then their termination of the contract was unreasonable given the costs to the builder were less than 1% of the costs the owner are now claiming for rectification by third parties. The owners failed to mitigate their loss, if they are entitled to any damages at all and their claim should be rejected."
As best as I am able I have summarised the contractual issues as follows:
It is claimed that the architect by its failure to properly administer the contract, particularly by failing to serve and amended architectural instruction No 91, deprived the builder from returning to site to undertake perfectly acceptable remedial work to the pool. The builder was therefore precluded from performing his preferred method of waterproofing the pool at a much cheaper rate. The homeowner has by its failure to allow the builder back on site failed to mitigate its losses and should be precluded from recovery of the full rectification cost now claimed.
Specific reference is made to the case of Turner Corporation Pty Ltd v Austotel Pty Ltd Cole J at [394] - [395]: "Once practical completion is achieved under the contract the defects liability period commences and the builder surrenders possession of the site to the Proprietor. Although the Proprietor retains possession of the site the Builder retains the right to enter upon the site to permit it to rectify notified defects and it has the obligation to rectify such notified defects within a reasonable time as directed by the Architect and in any event no later than a reasonable time after the expiration of the defects liability period. … If it fails to do so the Proprietor may, after a further notice from the Architect, have the notified defective or omitted works performed by others at the Builder's costs. Alternatively, by agreement, the omitted or defective works may be removed from the contract works with an appropriate monetary adjustment to the contract sum. A third alternative is that the Proprietor may be able to rely upon the default of the Builder to rectify the defective or incomplete works as a ground for terminating its employment under the contract and thereafter having the works completed by others at the Builder's cost pursuant to cl 12. However, if none of these three contractual powers is exercise the Builder may become entitled to a final certificate which will result in it being entitled to plead completion of performance of the Works in accordance with the terms of the agreement to the reasonable satisfaction of the architect."
It is submitted that the owners, having failed to use any contractual remedy in accordance with the requirements of the contract have denied the builder the right to rectify, failed to adhere to resolution procedures and failed to issue a Dispute Notice. Due to the owner's failure to adhere to the terms of the contract the builder is entitled to "plead completion of performance of the work" and the owner is not entitled to recover costs of third parties retained to perform rectification work.
I am not persuaded by this argument for the following reasons. The contract was completed on 14 August 2010 and a certificate of practical completion was issued by the Architect when the owners took possession of the premises. The defects liability period is shown in item 19 of schedule 1 and commenced on the date of practical completion for a period of 12 months or until it expired on 14 August 2011.
Clause M13 provides that "the architect cannot give the first instruction to correct an outstanding defect…. after the end of the defects liability period". On 20 November 2012, or more than a year after the defects liability period ended the builder received Architectural Instruction (AI90) pursuant section A7 of the contract in the following terms: "Please refer to the original contract drawing set particularly please refer to the drawing No 602 detail 08 and 09. Please reinstate the glass as per this detail using appropriate silicon. Please remove glass panels and defective silicon entirely. Grind back defective silicon that is bonded to the concrete rebate."
The architect's instruction was served significantly out of time and there is no evidence before the Tribunal that the parties had by agreement extended the defects liability period (see clause M12) as the Architect had not advised the contractor in writing that a further defects period of equal lengths to first defects liability period may run.
The Tribunal, in the absence of any evidence to the contrary is entitled to assume that the contract had been performed by about 14 August 2011 and that there was no longer any contractual right by the architect to serve an Architectural Instruction and that there was no further function by the Architect to be performed and no further obligation by the builder to comply with it.
On one view of the matter the contract was finalised by performance on or about 14 August 2011. The finalisation of the contract does not preclude the owner from enforcement of any action in respect of his statutory warranties.
Secondly, if I have erred and the contract was and remained on foot after 14 August 2011, the owner through the architect's failure to properly administer the contract, had not complied with its terms in any event. After receipt of the Architectural Instruction and in accordance with clause A8(1) the builder disputed the AI90 within 20 working days of receiving it.
The architect did not comply with the requirements of the contract and in particular failed to comply with clause A8(3): "the architect must assess a notice given under subclause A8.1 and give a written decision to the contractor and the owner within 10 working days. "This is a mandatory requirement under the contract and the Tribunal is satisfied on the evidence before it that the mandatory requirement was not complied with.
Thirdly, despite non-compliance with the terms of the contract, the Parties then sought to negotiated remedial works. I have considered whether the parties entered into a collateral contract for residential building work specific to rectification for the swimming pool. I am satisfied that the parties did not an agreement on 8 December 2012 to rectify the pool leak with the glass in situ. There was no agreement and no meeting of the mind of the parties but for a series of offers and counteroffers by the builder to replace the sealant with the glass in situ.
However, by 24 March 2013 the work as offered by the builder had not yet been completed. The owners complained that the builder was unwilling to return to repair and rectification as agreed on 8 December 2012. The builder was now pressing for an amended architectural instruction that the owners were unwilling to provide: "You are now pressuring us for 1. an architectural instruction for a method of rectification which in our architect's opinion is substandard and high risk of failure. 2. Pressuring us for retained funds."
On 8 April 2014 the owners wrote the following letter: "It has been 4 months since we agreed for you to try an alternative method of rectification proposed by you at your risk. …. Works have stopped and you have not replied to our letter of 24 March 2014. The pool has not been painted as you previously agreed to rectify the concrete defects and no new silicone has been placed in the glass concrete joints. … You wrote to us recently requesting retained funds before further work proceeds but in view of the major nature of the remaining defects it is not appropriate to release any further funds until your alternate method of leak rectification has been tested. You have been asking inappropriately for an architectural instruction for a method of repair that is your choice and not that of our architectural and engineering team. …. In view of the insufficient progress with these defects repairs we will now be seeking alternative contractors (sic)."
26 April 2014 the owners wrote the following: "We respond to your letter of 12 April 2014 (not included in the builder's documents). We allowed you an attempt to restore these specifications…. But you have failed to complete the remedial works in a reasonable time course and have stopped them altogether while raising new disputes over retention funds which were not mentioned at the time of our agreement."
In a letter dated 26 April 2014 the builder responds and complains that the architect was not administering the contract by failing to issue an Architectural Instruction that reflected the purported agreed repair method: "could you please confirm the arrangement with an instruction to supersede that attached instruction 90?" The architect responded: "I have not provided an (amended) instruction as I am unclear what Hyder (engineers) are recommending".
The builder submits the architects and owners refusal to amend AI90 was unreasonable: "it would have been foolish for Steele to attempt to proceed with works … It would have left us open to you deciding that "no" you didn't accept the solution once it was implemented and we'd be back in dispute". He offered to have the retention fund be held in a joint account. He suggested the "the retention fund be maintained for a period of three months from the filling of the pool".
The builder reminded the owner that the architect had failed his obligation under the contract and not provided an instruction.
On 10 October 2013 the owners sent a letter purportedly terminating the contract in view of "Steele's continued refusal to comply with reasonable architectural instructions."
The purported termination of the contract was not accepted. Under letter of 25 October 2013 the builder does not accept the termination claiming it is a wrongful repudiation of the contract because the architect failed to administer the contract and failed to comply with clause A8(3). The builder reserved its rights in respect of the wrongful breach.
For the reasons as set out above I am satisfied that the contract had been performed at this stage, or alternatively, I am satisfied that neither party complied with the terms of the contract. I accept that it was the agreement between the parties that the repair in situ would be permissible, but that the owners, on advice from the supervising architect wanted to wait a period of 12 months to sure that the repair method was successful before the remaining debt would be paid.

[19]

Comment

I find that the agreement in those terms was not accepted by Mr Steele, and that he wanted to affect the repairs on his terms, but also sought to negotiate a redraft and reissue of Architectural Instruction 90 and a release of the remaining money owed to him under the deed.
These terms were not accepted by the owner.
I cannot arrive at a finding that a binding agreement had been formed that would alter the terms of the contract or renegotiate the agreement under the deed. I am not satisfied that the parties negotiated a variation to the agreement in accordance with the contract. There was no meeting of the minds and the contract and the deed remained binding on both parties. Despite the failed attempt by both sides to negotiate a mutually acceptable repair method, the owner remained bound by its promise to execute the terms of the deed.
Even if I have erred and the owner repudiated the contract, repudiation does not disentitle the owner to claim damages for defects existing prior to repudiation and to which the owner is entitled under statutory warranty. The defects of which the owner complains clearly existed long before the parties attempted to terminate the agreement. The finding of repudiation may disentitle an owner to claim for incomplete work but that issue does not arise in the circumstances of this case.
In summary, the contractual issues are distraction. I am satisfied that the contract had run its course and by August 2011 the defect liability period had expired. The architectural instruction had no work to perform, and in my view the architect had no authority under the contract to serve an architectural instruction several years after the contract had been performed. The owner's claim for breach of statutory warranties however, was brought well within the seven year period permissible under the Home Building Act. Dr Barnes and Dr Jacobs each were retained for their peculiar expertise in glazing and sealant issues and I am satisfied that all methods of rectification were properly explored by Hyder and Jacobs. Their expertise was not challenged. The builder's method of rectification was rejected by both experts as the builder was unable to establish that the old sealant and the new sealant were able to bond satisfactorily to rule out new leaks. That is a reasonable conclusion to draw in light of all the evidence and it was therefore reasonable by the owner to adopt the more costly repair method.
Finally, I believe that the builder's argument as to mitigation must also fail. In light of the overwhelming evidence from Hyder and Jacob that the sealant had failed, or that the Hyder epoxy specifications had not been complied with, it was reasonable of the owners not to accept the IBS and Steele proposed rectification methods.

[20]

Statutory warranties

Having regard to Hyder and Jacob expert engineering reports, I am satisfied on the uncontested sworn evidence that the owner has proved non-compliance with the requirements of the contract that the builder has breached the warranties contained at section 18B of the Home Building Act and in particular that "the work was not performed in a proper and workmanlike manner and in accordance with the plans and specifications as set out in the contract."
I am persuaded by the independent expert reports and the opinion contained therein that the standard of workmanship was poor and that the failed epoxy sealant allowed for significant water ingress into the premises and that the owner shall be awarded the reasonable cost of rectification as claimed and supported by the invoices tendered in the proceedings.
In light of the findings above, the owner is entitled to the reasonable cost of correcting the defective work (Craftsmen Restoration & Renovations Pty Ltd v Boland [2011] NSWCA 147). The damages allowed must be necessary to produce conformity with the contract and also a reasonable course to adopt. (Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613). In light of the Jacob's opinion I am persuaded that it was reasonable to remove the glass to ensure complete removal of the epoxy sealant.
I am satisfied that the cost of rectification, in respect of those items where the breach by the builder has been established, are reasonable under the circumstances and I award $108,790 for actual costs incurred, as summarised in the Alumonde documents and supported by invoices for actual payments made to contractors retained to rectify water leaks.
I note that the original quote from Alumode stated $214,000.00 as the original rectification cost but that $108,790.00 was paid in the end as a lot of the glass could be reused. In the absence of any evidence to the contrary I am satisfied that the cost of rectification claimed in respect of the items is reasonable and make the award accordingly.
The owner claims he has incurred income tax on the amount and this amount must be deducted. As he was unable to provide to the Tribunal any evidence of taxes debts or charges incurred, the Tribunal is not inclined to deduct any amount from the amount due to the builder for "income tax incurred".

Timothy Heath v Steele Associates Pty Ltd

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Judgment (36 paragraphs)

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Cases Cited (3)

Cited By (1)