1. Under s 124 of the Victorian Civil and Administrative Tribunal Act 1988 (Vic) (the 'VCAT Act') I declare that:

(a) the builder had not completed the contractual scope of works by 9 September 2020;

(b) the purported occupancy permit issued by the RBS on 9 September 2020 was not a valid occupancy permit;

(c) Special Condition 6 of the contract is unenforceable;

(d) the owners did not have to pay the final claim within 14 days of the issue of the occupancy permit;

(e) the builders notice of completion dated 9 September 2020 was not a valid notice of completion the purposes of clause 36 of the contract; and

(f) the owners validly terminated the contract on 30 April 2021.

1. The respondent must pay to the applicants damages in the sum of 196,800.
2. The respondent's counterclaim is dismissed.
3. The applicant have liberty to make a claim for interest within 60 days.
4. Both parties have liberty to make applications for costs and reimbursement of fees within 60 days.
5. Any application for interest, costs or reimbursement of fees must be referred by the Principal Registrar to Senior Member Edquist who will make orders regarding the disposition of those applications.

Mr Nicholas Phillpott of Counsel, instructed by Mr Daniel Oldham, solicitor, on all days of the hearing save for the morning of the final day when he was temporarily replaced by Ms E King.

Mr Dominic Cafari instructed by Mr Jeremy Johnson, solicitor

1. Ana Maria Troise and her husband Luciano Troise ('the owners') bought a property in Tamarind Crescent, Werribee with a view to eventually developing it as part of their retirement strategy. They had plans prepared for the construction of three two-storey units and obtained a planning permit for their proposed development from Wyndham City Council. They arranged a construction loan with a credit cooperative and on or about 19 August 2018 entered into a major domestic building contracts with Blue Key Properties Pty Ltd (ACN 165 014 960) ('the builder'), which had a contract price of $812,000.00 inclusive of GST.

1. An occupancy permit[1] was issued by the relevant building surveyor ('RBS'), Acme Building Consultants Pty Ltd ('Acme'), on 9 September 2020. On the same day, the builder issued an invoice for the completion stage to the owners in the sum of $81,200.00. The owners, having sent to the builder a report into each of the three units listing defects and works required for completion prepared by an architect/building consultant, declined to pay the completion stage invoice.

1. The stand-off between the owners and the builder about completion continued for months. This was not without consequence. While the contract was still on foot, unit 3 was broken into and vandals caused extensive damage. The owners contend that the builder is liable for this damage, as the builder was still in control of the site.
2. The owners ultimately brought the contract to an end on 30 April 2021, asserting the contract had been terminated under its terms, alternatively, at common law by accepting the builder's repudiation of the contract.

1. After the owners had possession of the units, they embarked on a program of defect rectification and completion. However, they proceeded slowly. Mr Troise carried out some of the work, including painting, himself. He also managed some trades including a tiler who rectified the level of tiled floors in two of the units. Ultimately, the owners engaged Icon Homes Pty Ltd ('Icon') to carry out some of the rectification and completion work. It was only about 14 months after the termination of the contract that the owners considered that they were in a position to put the first of the units on the rental market. Unit 1 was first rented on 25 May 2022, unit 2 on 11 July 2022, and unit 3 on 20 September 2022.

1. The owners have come to the Tribunal seeking damages from the builder. They seek damages for breaches of some of the warranties created by s 8 of the Domestic Building Contracts Act 1995 (Vic) ('DBC Act'), completion costs, rectification of damage by vandals to unit 3, agreed or liquidated damages and a credit in relation to two variations. They also seek a declaration that they validly terminated the contract and seek general damages in respect of other losses, including losses arising out of the delay in leasing the three units, and the cost of re-establishing the site boundary by the owners' cadastral surveyor.
2. Prior to the hearing, the owners were pressing their claim for damages supported by the evidence of Mr Salvatore Mammone and two cost experts, Mr Peter Schmiedel and Mr Tom O'Dowd. Mr Mammone is an architect and building consultant who carried out the pre-handover inspections of the three units referred to above. The owners submit that Mr Mammone had identified defective work and incomplete work in each of the units and they rely on Mr Mammone's three reports to underpin their argument that the contracted scope of works had not been completed at the time the builder contended that completion had been reached.
3. However, Mr Mammone did not cost the rectification completion works he opined were necessary. The owners, in their pleading, indicated that in making their claim for damages they relied on the evidence of Mr Schmiedel, who had been instructed to prepare a series of reports costing the rectification of defects and the completion of the contracted scope of work identified by Mr Mammone. They also relied on the evidence of Mr Tom O'Dowd in respect of the costing of a credit they sought in relation to a variation in respect of a change in the design of the foundations.

• 9 The importance the owners placed on Mr Schmiedel's evidence can be appreciated from the updated particulars of loss and damage they filed on the second day of the hearing. This document indicated that the owners sought the cost of rectifying defective works identified by Mr Mammone broken down into two categories. The most important of these categories related to defects identified by Mr Mammone which had not been rectified by the time of the hearing. The claim came to $443,812.00.[2]

1. The other, much smaller, category related to defects which had been rectified by the owners after the termination of the contract. The sum claimed was $29,171.31. This sum was derived from sums paid to Icon in respect of items identified in an Icon invoice of 23 February 2022. In addition, sums paid to T & A Carpets, and MPM Tiling Services Pty Ltd ('MPM Tiling') were claimed.

1. The builder issued a completion stage invoice on 9 September 2020. It contends that the completion stage invoice constitutes the final claim under the contract and, because the owners did not closely follow the procedure for notifying defects within the time limited by the contract, the invoice has become due and payable. Alternatively, the builder contends that under special condition 6 of the contract, the final claim became payable within 14 days of the issue of the occupancy permit.

1. The final hearing began before me on Monday 23 September 2024. It continued on 24 September, 25 September and up to lunchtime on 26 September. The hearing resumed on Monday 30 September and continued on 1 October and 2 October 2024. It concluded late on 2 October 2024, after the parties made oral submissions. The respondent was directed to file and serve submissions concerning some alleged double allowances for damages. I reserved my decision.
2. Although the hearing was completed within the allocated seven days, it cannot be said that the hearing was uneventful. When he opened the owners' case, Mr Phillpott sought and received leave to tender a third witness statement from Mrs Troise which exhibited 69 documents. As the hearing progressed, it became clear that the key new documents were documents relating to the involvement of Icon in the rectification and completion of units 1 and 2, and in the rectification of the vandal damage to unit 3.
3. The significance of the new evidence from Icon became apparent during the early days of the hearing, as it became clear that the owners were, in the alternative to Mr Schmiedel's evidence, going to rely on the actual cost of rectifying a number of defects in units 1 and 2 and the vandal damage to unit 3 established by Icon's quotations and invoices. This represented a pivot in the manner in which they were presenting in their case.

1. One very unusual feature of the case was the attitude that the applicants took to the issue of whether there should be a view of the site. It is commonplace in long building cases conducted in the Tribunal's Building Property List for there to be a view. Usually, the applicant is the party most keen that the presiding member should see the site. For this reason, I was surprised when Mr Phillpott, on behalf of the owners, suggested that the view would be of no assistance to the Tribunal on the basis that many of the defects had been rectified. It was the builder who insisted that a view would be useful.
2. In my long experience as a building lawyer before coming to the Tribunal, and in the 10 years in which I have been sitting as a Member of the Tribunal, I have found, as a rule, that a view is very useful. When the view took place on the morning of the second day of the hearing, it was clear that this case created no exception to that rule.
3. Upon visiting the site, it became glaringly obvious why the owners were keen for me not to see the three units. This was because of the relatively good state of the brickwork. Rectification of the external brickwork over the three units -which had at the date of the inspection not been performed-had been costed by the owners' expert Mr Schmiedel at $49,200.00. The brickwork was the largest single category of defect. It was also the defect in respect of which the views of the respective experts were most divergent. In this connection, I note that Mr Schmiedel had assessed the cost of labour to rectify the brickwork in unit 1 at $10,400.00, based on an assessment of 160 hours at $65 per hour. The allowance for replacement of bricks and materials such as sand, cement and lime, inclusive of delivery, was $6,000.00. The total for unit 1 accordingly was $16,400.00.[3] In contrast, the builder's expert, Mr Osborne, had assessed the cost of rectifying the brickwork in unit 1 at $2,637.50.
4. Mr Schmiedel had, curiously, also assessed the cost to rectify the brickwork in unit 2 at $16,400.00. Mr Osborne's assessment was $85 in total. Mr Schmiedel's assessment of the cost to rectify the brickwork in unit 3 was also $10,400.00. Mr Osborne's assessment for this unit was $3,051.25. It was clear from Mr Schmiedel's costings that he was contemplating the wholesale replacement of thousands of bricks. It was also clear from viewing the brickwork at the site that the brickwork was largely satisfactory, although, there were some blemishes. In these circumstances, it was obvious that Mr Osborne's respective assessments for the three units, which had been based on identification of specific defects in individual bricks and perpends, were much more accurate than Mr Schmiedel's global assessments.

1. A critical point in the hearing was reached on the fifth day when Mr Schmiedel was in the witness box. In what Mr Phillpott conceded was "a gold standard cross examination", Mr Cafari destroyed Mr Schmiedel's credibility as an expert witness. Mr Cafari demonstrated that Mr Schmiedel had exceeded his brief, which was to cost defects and completion items identified by Mr Mammone,[4] by costing defects which Mr Schmiedel had himself identified. Mr Cafari also demonstrated that Mr Schmiedel had provided an unsupportable assessment of the cost of rectifying the brickwork and had grossly exaggerated the cost of other items including cutting up and removing concrete. It is not necessary to go into further detail concerning issues in Mr Schmiedel's evidence as Mr Phillpott completely capitulated and stated that the owners would abandon Mr Schmiedel's costings. In respect of defects and vandal damaged work that had been rectified by Icon, it was indicated that the owners would seek to recover damages in respect of rectification based on the Icon documents. In respect of defects which had been identified by Mr Mammone and been conceded as existing by the builder's expert Mr Osborne, they would adopt Mr Osborne's costings. In this way, the pivot in the manner in which the case was being presented, which had become apparent at the opening, became a complete volte-face.
2. This change of position on the part of the owners greatly simplified my task in assessing damages for some of the defects. However, because the change of position came so late in the hearing, it did not shorten the hearing, except after the sixth day.

1. Before I proceed, it is appropriate that I clarify my view about the status of Mr Osborne's expert evidence. Mr Cafari, for the builder, said that once the owners abandoned reliance upon Mr Schmiedel's evidence and indicated that they would adopt Mr Osborne's costings, Mr Osborne became their expert witness. I do not accept that is the case. What I think is clear is that the owners indicated that were accepting that Mr Osborne had properly discharged his duties arising under the Tribunal's practice note concerning expert evidence, PNVCAT 2. Relevantly, this meant that it was accepted that Mr Osborne was meeting his respective obligations under paragraphs 8, 9, and 10 of PNVCAT 2, namely:
   1. An expert witness has a paramount duty to the Tribunal and not to the party retaining the expert.
   2. An expert witness has an overriding duty to assist the Tribunal on matters relevant to the expert's expertise.
   3. An expert witness is not an advocate for a party to a proceeding.

1. Before turning to the issues in the case, I set out below some key dates extracted from a chronology which the parties tabled as an agreed document:

Owners obtain engineering drawings for the project from Beattie Consultant Engineers.[6]

Owners pay builder a part-payment deposit in the amount of $2,000.[8]

Builder commences demolition works at the Property.[10]

PM Kennedy prepares a Plan of Survey for the Property.[11]

Building permit for the project is issued.[12]

Builder sends the Owners a "Welcome Letter".[13]

Talcon Consulting Engineers prepares new engineering drawings.[14]

RBS approves a variation to the Building Permit for, inter alia, the new engineering drawings.

Building Inspection Record for the bored piers - approved.[15]

Meeting between the parties to discuss windows.[16]

Building Inspection Record for the ground floor frame issued - not approved.[17]

Second Building Inspection Record for the ground floor frame issued - not approved.[18]

Third Building Inspection Record for the ground floor frame issued - not approved.[19]

Written Direction to Fix issued by the RBS to the builder.[20]

Second Written Direction to Fix issued by the RBS to the Builder.[21]

Fourth Building Inspection Record for the ground floor frame issued - not approved.[22]

Fifth Building Inspection Record for the ground floor frame issued - approved.[23]

Boundary pegs at the Property removed.[24]

The Owners engaged PM Kennedy to carry out a re-establishment survey.[25]

First Building Inspection Report for the final inspection issued - not approved.[26]

Third Written Direction to Fix issued by the RBS to the builder.[27]

Builder issues invoice for $81,200.00 to the owners for the completion stage.[29]

Owners inspect the property with Mr Mammone.[30]

Owners obtain 3 reports from Inspect Direct Pty Ltd (Mr Mammone's company).[31]

Owners provide the builder with the reports from Inspect Direct Pty Ltd.[32]

Owners file an application with the DBDRV.[33]

Building Order for Minor Work issued to the owners.[34]

DBDRV issues a Certificate of Conciliation - Dispute Not Suitable.[35]

Owners serve a Notice of Intention to Terminate.[36]

Builder responds to the Notice of Intention to Terminate.[37]

Owners respond to the builder's response letter.[38]

Builder further responds to the owners' letter.[39]

Owners serve a Notice of Termination.[40]

1. In their outline of opening submissions filed before the hearing, the owners indicated that they were making claims in respect of defective building works, vandalism of the property, credits for variations, delay and termination. It is convenient deal with the issue of termination first, because the question of the legality of the termination is relevant to the assessment of damages for defective building work and completion works.

1. In Tabcorp Holdings Ltd v Bowen Investments Pty Ltd,[41] the High Court reaffirmed the 'ruling principle', that the measure of damage at common law for breach of contract was that stated by Parke B in Robinson v Harmon as follows:

The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.[42]

1. The damages to which the owners will be entitled in respect of defects and incomplete works at common law will be affected by the answer to the question of whether they lawfully terminated the contract. If they acted properly in bringing the contract to an end then, under the usual rule for the recovery of damages for breach of contract, they will be entitled to recover the cost of having the works rectified or completed by another contractor, although they will have to allow to the builder a credit in respect of the unpaid balance of the contract sum.
2. On the other hand, if the owners acted wrongfully in terminating the contract, they will be liable to the builder for damages. The builder will be entitled to be put in the same position as it would have been had the contract been completed. Accordingly, provided the builder can demonstrate that it would have been ready and willing to return to the site, the builder will be able to recover the profit it would have made in respect of the unperformed portion of the contracted scope of works had the contract been completed.

The legality of termination of the contract by the owners

1. It is common ground between the parties that the owners' lawyers issued a notice of breach of the contract under clause 43.1 of the contract on 31 March 2021 advising that the owners intended to bring the contract to an end.[43]
2. The notice referred to defects in the works, incomplete works, delay in completion of the works and to a change in the design of the slab. The notice also stated that unless the builder remedied the breaches within 10 calendar days it was the intention of the owners to terminate the contract. The notice also asserted that the builder had repudiated the contract and reserved the rights of the owners concerning that issue.
3. The builder responded through its lawyer in a letter dated 9 April 2021.[44] The principal point made in the letter was that it was the owners who were in substantial breach of the contract as they had failed or refused to pay the "final claim" within 14 days of the issue of the certificate of occupancy, as was required by special condition 6 of the contract. Alternatively, final payment was deemed to have become due and payable because the builder had given notice of completion pursuant to clause 36 of the contract, and no inspection of the works had taken place within 7 days.
4. The owners' lawyers responded to the builder's lawyer on 13 April 2021[45] and endeavoured to rebut the builder's argument based on clause 36 of the contract. The owners contended that the builder had not included a notice of completion when demanding the final payment and, accordingly, the procedure set out in the contract had not been followed. It was contended that the owners had given the builder a list of defects in the form of the three "pre-handover" inspection reports prepared by Mr Mammone dated 22 September 2020. The builder was required to attend to these works to achieve completion. It was noted that the builder refused to meet with the owners despite the involvement of Domestic Building Dispute Resolution Victoria ('DBDRV'). The notice of intention to terminate the contract if the builder did not respond in seven days was confirmed.
5. The builder's lawyer responded outside the seven days, on 22 April 2021.[46] The builder's argument that the owners were obligated to pay the final claim under special condition 6 of the contract was restated. It was confirmed that once the final payment had been made the builder would provide the keys to the owners.
6. On 30 April 2021, the owners' lawyer issued a notice of termination.[47] This notice was expressed to be given under clause 43 of the contract, alternatively, at common law upon the builder's repudiation of the contract.

1. The owners' central argument is that completion was not achieved on 9 September 2020 when the builder purportedly issued its letter of completion, because the occupancy permit upon which the builder relies was conditional and was not a valid occupancy permit. The owners say that this means that one of preconditions for the engagement of the procedure for completion of the works set out in clause 36 of the contract had not been achieved.
2. Clause 36 of the contract deals with final inspection. Clause 36.0 provides:

When the Builder considers that the Building Works have reached Completion the Builder is to give to the Owner:

• a Notice of Completion; and
• the Final Claim.

1. The works required an occupancy permit under the Building Act 1993 (Vic). ('Building Act') This being the case, clause 36.1 relevantly went on to provide:

Notwithstanding any other provision of this Contract, the Builder must not demand Final Payment until after the Builder has given to the Owner...a copy of the occupancy permit.

1. The owner's argument is centred on the fact that the occupancy permit contains a heading "Conditions to which this Permit is subject." Under this heading, the following condition is set out:

Occupancy is subject to the following conditions-

All appliances and services to be fitted off and commissioned prior to occupation.

1. The owner's primary contention is that the certificate of occupancy is a nullity.
2. The owners rely on the Tribunal's decision in Barbour v Australian Elegant Homes Pty Ltd[48] ('Barbour'). In that case an issue arose as to the validity of a report issued by the relevant building surveyor concerning the frame stage, which contained the words "Approved-subject to." Senior Member Kirton, as her Honour then was, held at [70] that the frame stage approval had not been given. One of the findings made underpinning that conclusion, at [73], was that SM Kirton did not accept that Part 4 of the Building Act allowed for either conditional or unconditional stage approvals. She went on to note that s 40(1) of the DBC Act also did not allow such a distinction. A stage is either complete, or it is not.
3. I note, with respect, that this approach is consistent with that adopted by the Court of Appeal in Cardona v Brown.[49]
4. Mr Cafari, on behalf of the builder, submitted that Barbour could be distinguished because it was concerned with a stage inspection. I accept that this was the case, but I consider the distinction to be immaterial.
5. Although the owners did not identify any legislative provision which proscribes the issuing of a conditional occupancy permit, I consider that the process that the RBS must follow when issuing an occupancy permit effectively precludes the issuing of a conditional permit of this nature. The point is that until the appliances are commissioned, that is to say, fitted-off and tested, it is hard to see how the RBS could properly have formed the view that the premises were fit for occupation. The reason for this is that the required electrical and plumbing certificates covering commissioning could not be issued by the respective trades until after commissioning. It may be that the builder's electrician and the plumber did respectively certify their work up to the point prior to installation and commissioning of the appliances and services. However, until the appliances and services had been installed and certificates covering commissioning had been issued, it is hard to understand how the RBS could have been satisfied that the works had been properly completed and the premises were safe for occupation.
6. For this reason, I reject the builder's contention that the certificate of occupancy was valid because it permitted the owners to move in once they had fitted off and commissioned all appliances and services. This contention may have been consistent with the owners' decision to rely on the occupancy permit issued by the RBS on 9 September 2020 when they moved in after having engaged Icon to complete the necessary installation and commissioning. However, the contention is not consistent with an RBS's obligations regarding the issuing of an occupancy permit. It is also inconsistent with the actual wording of the condition contained in the occupancy permit, which is to the effect that there can be no occupation until the appliances and services have been commissioned.
7. For these reasons, I will declare under s 124 of the VCAT Act that the purported occupancy permit issued by the RBS on 9 September 2020 was not a valid occupancy permit.
8. It follows that the builder was not entitled under clause 36.1 of the contract to demand final payment.

1. The owners' secondary argument concerning completion is that irrespective of whether a valid occupancy permit was issued, the works were incomplete as at 9 September 2020, which is the date upon which the builder issued a letter enclosing an invoice for "the final stage" along with a copy of the occupancy permit.[50] This is the date that the builder submits that the completion process established by clause 36 of the contract became enlivened.
2. The owners rely on the three reports prepared by Mr Mammone which the builder received on 25 September 2020. The builder's argument in response was not based on any attempt to rebut the evidence of Mr Mammone, but to rely upon the fact that the RBS had prior to issuing the certificate of occupancy conducted a successful final inspection on 27 August 2020.
3. I regard this argument is misconceived because a relevant building surveyor is not responsible for ensuring strict compliance with the terms of a building contract. The responsibility of a relevant building surveyor under the Building Act is to ensure compliance with all relevant laws including the National Construction Code ('NCC'). When a relevant building surveyor confirms in respect of any works that the NCC has been complied with, he is not certifying that the contractual plans and specifications had been fulfilled in every respect.
4. In my view, the question of whether completion had been achieved turns on the terms of the contract. The definition clause of the contract (clause 1) provides:

'Completion' means that the Building Works to be carried out under the Contract have been completed in accordance with the Plans and Specifications set out in the Contract.

1. The particulars of contract record that there were three sheets of plans that were prepared and supplied by the owners and four sheets of engineers designs prepared by Beattie Consulting Engineers ('Beattie') for the owners. The specifications were stated to include 10 pages that were prepared and supplied by the builder.
2. Mr Mammone inspected unit 1 on 21 September 2020 and issued a report in respect of the unit on the following day.[51] Mr Mammone identified a number of defects and several items of incomplete work. The items of incomplete work included the fly screens that had not been installed, the appliances that had not been installed, and the water meter that had not been installed.[52] As the unit 1 works had not been completed in accordance with the plans and specifications, I find that they were not completed by the builder in accordance with the contract.
3. Mr Mammone inspected unit 2 on 21 September 2020 and issued his report on 22 September 2020.[53] As with Unit 1, the fly screens had not been installed, the appliances had not been installed and the water meter had not been installed.[54] As with Unit 1, I find that unit 2 had not been completed by the builder.
4. Mr Mammone also inspected unit 3 on 21 September 2020 and issued a report on 22 September 2020.[55] Again, he recorded that the fly screens had not been installed, the appliances had not been installed and the water meter had not been installed.[56] As with the other units, I find that the work had not been completed by the builder.
5. Any one of my findings concerning non-completion of unit 1, unit 2 or unit 3 must lead to a finding that the builder had not completed the contractual scope of works by 9 September 2020. I will make a declaration accordingly. I will also declare that the builder's notice of completion, which was in the form of the letter sent by Ms Bianca Ferri to Mrs Troise on 9 September 2020, was not a valid notice of completion under clause 36 of the contract.

1. The contract contained a number of special conditions in Schedule 4. They included Special Condition 6, which relevantly provided:

The Owner shall have 14 days to make the final payment after the certificate of Occupancy has been issued from the authority.

1. The builder submits that as the occupancy permit was issued on 9 September 2020, payment of the final claim was due on 23 September 2020.
2. The owners counter this submission by pointing out that payment of the final claim is governed not only by the terms of the contract but also by the DBC Act. They highlight that s 40 of the DBC Act governs limits on progress payments. Relevantly, s 40(2) stipulates a set of caps (expressed in percentages of the contract price) which a builder can demand, recover or retain under a major domestic building contract in respect of the completion of specific stages of the works. Section 40(3) of the DBC Act then provides:

In respect of the case of a major domestic building contract that is not listed in the Table in s 40 ( 2) a builder must not demand or receive any amount or instalment that is not directly related to the progress of the building work being carried out under the contract.

1. Of relevance to the present case is that s 40(4) of the DBC Act provides that "Subsections (2) and (3) do not apply if the parties to a contract agree that it is not to apply and do so in the manner set out in the regulations."
2. As the building permit for the works was issued on 21 March 2019, the relevant edition of the applicable regulations is the Domestic Building Contract Regulations 2017 ('the DBC Regulations 2017').
3. Regulation 13 of the DBC Regulations 2017 provides:

(1) For the purposes of section 40(4) of the Act, when parties to a major domestic building contract agree that section 40(2) and (3) of the Act do not apply to that contract, the manner of agreement is to include in the major domestic building contract -

(a) a warning in the form of Form 1 in Schedule 1, which is signed by the building owner before the building owner signs the major domestic building contract; and

(b) a clause in the form of Form 2 in Schedule 1, which is signed by the building owner and the builder before they sign the major domestic building contract.

1. Reference to Schedule 1 of the DBC Regulations 2017 sets out a warning to the owner which includes the following paragraphs:

WARNING TO OWNER - CHANGE OF LEGAL RIGHTS

Under section 40 of the Domestic Building Contracts Act 1995 (the Act ) a builder cannot, under a major domestic building contract, charge more than a fixed percentage of the total contract price at the completion of each stage of building a home.

The Act also allows the parties to a major domestic building contract to agree in writing to change the stages and the percentage of the contract price to be paid at the completion of each stage.

1. Having made these introductory points, I now turn to the evidence concerning what the owners and the builder agreed concerning progress payments. When the contract was executed, it included a schedule in the form required by the DBC Regulations 2017 varying the payments that could be demanded on the completion of specific stages which were different from those from those stipulated in s 40(2) of the DBC Act.
2. Mrs Troise, in her third witness statement, deposed that the schedule was replaced after the works got underway on the insistence of her financier. It is not disputed by the builder that the new schedule applied. The relevant sums recoverable in respect of the stages of the contract under the amended table were as follows:

1. The owners made payments in accordance with the amended table up to and including the fixing payment of $203,000. The final claim issued on 9 September 2020 was the first invoice which the owners refused to pay.
2. The remaining dispute between the parties concerning termination centres on whether payment of the final claim became mandatory for the owners 14 days after the issue of the occupancy permit, as provided by Special Condition 6. The owners dispute that the final claim is payable, submitting that even though the schedule of payments due in respect of particular stages of the work has been altered in the form allowed by the DBC Regulations 2017, each progress payment becomes due and payable only "after completion" of the relevant stage. In aid of this submission, they highlight that even under the amended stage payment regime agreed to by the parties, the final payment was not payable until the works had been completed. I accept this submission, as it is consistent with s 40 of the Act.
3. The owners go on to say that in so far as the builder insists that Special Condition 6 purports to make it obligatory for the owners to pay the final pay within 14 days of the issue of the occupancy permit, Special Condition 6 must be struck down under s 132(1)(a) of the DBC Act as it is contrary to the DBC Act, alternatively it purports to vary or exclude a provision of the DBC Act.
4. I accept this further submission and will, pursuant to s124 of the VCAT Act, declare that Special Condition 6 of the contract is unenforceable. It follows that the owners did not have to pay the final claim within 14 days of the issue of the occupancy permit.

Summary in relation to the issue of legality of the termination of the contract

1. For all these reasons I will declare that the builder's notice of completion, which was in the form of an email from builder's representative Ms Bianca Ferri to Mrs Troise dated 9 September 2020, was not a valid notice of completion the purposes of clause 36.
2. I will also declare that the owners validly terminated the contract on 30 April 2021.
3. By way of completeness I note that the builder's solicitor, in his letter of 9 April 2021, had argued that the owners were in substantial breach of contract because they did not carry out an inspection within seven days of completion of the work. I also note that this particular submission was inconsistent with the manner in which the builder opened its case, as it was then argued that the "walk-through" of the site by the owners within seven days of the notice of completion did constitute a final inspection, and this triggered an obligation on the owners to give the builder a written list of all known defects and incomplete work under clause 37.0. My finding that the notice of completion of 9 September 2020 was not a not a valid notice means that the procedure for completion contemplated by clause 36 of the contract was not properly enlivened. It follows that the builder's argument that the final claim was accordingly deemed to be payable by reason of the non-observance of the provisions of clause 36 and clause 37 is unsustainable.
4. Now that the issue of termination of contract has been dealt with, it is convenient to turn to the owners' other claims.

Liability of the builder for damage to the works caused by vandals

1. One of the major claims made by the owners is a claim for damages for the rectification of damage caused to unit 3 by vandals. The claim is put on the basis that the damage occurred after the builder had stopped work in September 2020 but before the date of termination of the contract, 30 April 2021. The owners submit that during this period the builder still had control of the site and legal responsibility for the protection of the works.
2. It is clear from the exchange of correspondence between the parties after the owners issued their notice of intention to determine the contract that the builder took the position that the contract was still on foot. There is accordingly no issue that up to the termination of the contract on 30 April 2021 the contract remained in force.
3. This being the case, the risk sharing matrix embedded contract continued to operate. Of particular relevance is clause 20.0, which provides:

• must insure in the names of the Builder, the Owner and the Lending Body (as stated in the Particulars of Contract), against liability for physical loss, destruction or damage to the Building Works and the goods and materials on the Land as described in the Contract Documents; and
• must indemnify the Owner in respect of and insure against liability for personal injury, death, property loss or damage arising out of the Building Works.

1. The works under the contract remain at the risk of the builder until possession passes. This is clear from clause 20.1 which provides:

The builder must maintain the insurance from the date the Owner gives the Builder Possession of the Land under clause 25 to the earlier of:

• the date that the Owner takes Possession of the Land or any part of the Land;
• the date the Builder hands over Possession of the Land.

1. It follows, in my view, that the builder held the risk in the works up to and including the date the contract was terminated. Accordingly, I find that the builder is liable to the owners in respect of the cost of rectifying the damage caused by vandals prior to the date of termination of the contract.
2. I now turn to an assessment of those damages.

DAMAGES FOR COST OF RECTIFYING CAUSED BY VANDALS

Assessment of damages in respect of Vandal damage

1. Mrs Troise deposes in her primary witness statement, starting at [152], that in early March 2021 she and her husband received a letter from Wyndham City Council enclosing a building order for minor work in relation to the vacant townhouses and garages because they had been vandalised.[57] The building order directed the owners to secure all damaged external doors to the premises and to the garages to prevent unauthorised access, and to replace the side and rear boundary fences adjacent to the council reserve. The owners instructed their lawyers to respond to the council's letter. In May 2021, the owners paid for the construction of temporary fencing at the premises in accordance with the order.
2. The owners make a claim in respect of the cost of rectifying vandal damage and also the cost of complying with the council's work order. The claim is put on three bases. The first or primary claim is quantified at $72,932.45. The items comprising this claim are set out in Annexure B of the owners updated particulars of loss and damage dated 24 September 2024. There are a number of individual invoices claimed which relate to emergency fencing, the installation of spy cameras, the removal of rubbish, cutting new keys and other expenses. Most of the items, however, relate to items allegedly fixed by Icon. In this regard, reliance is placed on Icon's quotation of 5 April 2022 which was for $63,600 plus GST.[58] This quotation related to the completion of the work in unit 3 including the rectification of vandal damage.
3. The owners seek, as a fallback, damages in respect of vandal damage as assessed by Mr Schmiedel in his expert dated 18 July 2021.[59] The assessment was in the sum of $46,457. In addition to that sum, they seek a loading of 15% to compensate for inflation from July 2021 (the date of Mr Schmiedel's assessment) and October 2024 (being the date of the hearing). The adjustment in monetary terms sought is $6,968.55.
4. The owners have a third position, which was put forward no doubt because the owners themselves had disowned Mr Schmiedel's evidence. This is that if the Tribunal is not disposed to adopt either of the first two approaches, it should adopt the costing of the rectification of the vandal damage identified by Mr Schmiedel which had been prepared by Mr Osborne. These costings were set out in a supplementary report dated 22 September 2024 which was handed up at the start of the hearing. Mr Osborne's costing of the vandal damage was $26,196.50.
5. An overview of the damage caused by vandals is provided by Mr Schmiedel in his report of 18 July 2021 which he completed following an inspection on 10 July 2021.[60] His observations are summarised at [1.2] as follows;
   • significant damage to the plaster walls internally
   • significant damage to the windows
   • significant damage to bathroom sanitary (items)
   • significant damage to fencing and removal of a fence
   • significant soilage of carpets
   • significant damage to internal doors and external doors
6. Mr Schmiedel underpinned his observations with 33 photographs. On the basis of his report, I find that there was significant damage to the premises caused by vandals of the nature described by him.
7. Mr Schmiedel's report is of enduring utility because it is the only expert report available which describes the extent of the damage caused by vandals.
8. However, insofar as the owners seek to rely on Mr Schmiedel's costings regarding the rectification of the damage caused by vandals, they must fail. This is because Mr Schmiedel as an expert witness in this case was thoroughly discredited in the cross examination conducted by Mr Cafari in respect of the damages claimed in relation to unit 1 and unit 2.
9. It accordingly becomes necessary to consider the owners' primary position, which is that they can rely on the quotation of Icon dated 5 April 2022 in respect of the cost of rectifying the vandal damage.

Consideration of the Icon quotation of 5 April 2022

1. In relying upon the Icon quotation of 5 April 2022, the owners place great store on Hyder Consulting (Australia) P/L v Wilh Wilhelmsen Agency P/L & Anor[61] ('Hyder'). In that case, Hyder had been engaged to carry out redevelopment work at a property. The redevelopment included a new area of pavement. Hyder and another party were held liable for damages suffered by the claimant which was apportioned by the trial judge on a 50-50 basis between them. For present purposes, the relevance of the decision is that the trial judge had qualified damages as to the cost of rectification assessed by reference to tenders obtained before the rectification work was carried out. This assessment was substantially more than the actual cost of repair. During the appeal it was submitted that the trial judge should have assessed damages based on the actual cost of repair. In respect of this issue, Meagher JA observed that "It seems almost too simplistic to point out the actual cost was an impeccable alternative method of calculating cost."
2. If the correct principle is expressed in such absolute terms, then the owners would be entitled to rely on the Icon quotation. However, Giles JA express the principle in a more nuanced matter, at [99] of his judgment , as follows:

But if the rectification work has been carried out and the actual cost is known, that provides sound evidence of the reasonable cost and should ordinarily provide the basis for damages.

1. I propose to adopt the approach of Giles JA, on the basis that evidence which otherwise appears "impeccable" can sometimes be demonstrated to be otherwise.
2. That is the case here.
3. Reference to the Icon quotation of 5 April 2022 indicates that the following prices were given in respect of the following items of work:
   • all plumbing works as per plumber's quote: $15,500 allocated 60% ($9,300) to unfinished works and 40% ($6,200) to vandal damage rectification;
   • all electrical connections required e.g. oven connection and missing external power points: $3,600 allocated 50% ($1,800) to unfinished work and 50% ($1,800) to vandal damage rectification;
   • supply and install one air-conditioner per unit (unfinished work): $3,400;
   • supply of Baumatic kitchen appliances including dishwasher (unfinished work): $3,500;
   • replacement of all broken windows (vandal damage): $4,800;
   • supply of water tank pumps with mains change over (unfinished work): $800;
   • supply and install damaged garage door and two internal doors (vandal damage): $1,600;
   • remove and replace all damaged plaster in unit ready for paint (vandal damage): $11,000;
   • supply new plaster/vinyl doors to all wardrobes (vandal damage): $3,200;
   • replace benchtop in ensuite and re-tile splashback (vandal damage) $2,300;
   • supply new wall mirror in ensuite (vandal damage): $500;
   • adjust and rectify all joinery items (completion): no price expressly allowed; and
   • builder's margin: $13,400.
4. Painting, cleaning and rubbish removal were expressly excluded.
5. The total of all the prices listed above without builder's margin is $50,200. With builder's margin of $13,400 (but without GST) the total comes to $63,600.
6. It is to be inferred that Mr and Mrs Troise thought this figure was reasonable, because it was established by production of their bank statements that they had paid Icon for this and another invoice to a value of about $160,000.
7. When the Icon quotation for work required to unit 3 is partitioned into items of completion work and items of rectification of vandal damage, the rectification of vandal damage is to be found in the following items:

supply and install damaged garage door and two internal doors:

remove and replace all damaged plaster in unit ready for paint:

supply new plaster/vinyl doors to all wardrobes (vandal damage):

replace benchtop in ensuite and re-tile splashback (vandal damage)

1. The margin claimed by Icon to perform works valued at $50,200 is $13,400 which I calculate to be a margin of 27%. Given that Mr Osborne in his costings allowed for contingency of 10% and a margin of 30%, I find Icon's allowance for margin in this quotation to be reasonable.
2. To Icon's subtotal for the rectification of vandal damage of $31,400, it is appropriate to add Icon's margin of 27%. This calculates to be $8,478. The total allowance for vandal damage rectification appearing in the Icon invoice is accordingly $39,878, exclusive of GST. With GST, the total is $43,865.80.
3. This figure contrasts sharply with Mr Osborne's total allowance inclusive of contingency, margin and GST of $26,196.50. The contrast is even more marked because Mr Osborne included a base allowance (exclusive of contingency, margin and GST) for painting of $3,040.
4. Clearly there is significant tension between the amounts charged by Icon for some items and the allowances made by Mr Osborne for those items. The most important item in dollar terms is the repair of the damaged plaster. For removing and replacing all damaged plaster prior to painting, Icon quoted a base amount of $11,000. This compares sharply with Mr Osborne's allowance of $2,280. The difference can be explained because Mr Osborne allowed only for patching damaged plaster panels, not for wholesale replacement of damaged panels. Mr Schmiedel opined that it was necessary for wholesale replacement of the vandalised panels to occur, but I place no value on his opinion. However, I place considerable weight on the fact that Mr and Mrs Troise were satisfied that wholesale replacement was required and were prepared to pay for this. On the issue of plastering, I accept Icon's figure.
5. However, in relation to other items I am not prepared to accept Icon's costings. For instance, in relation to allegedly vandalised plumbing work, Icon invoiced 40% of $15,500, or $6,200. No detail was given as to what was covered by this significant sum. No plumber was called to give details of the plumbing work carried out, nor was anyone from Icon called to endeavour to cover this gap. No plumbing certificate was provided even though a pump was connected, a gas stove was connected and a dishwasher was installed. There was some external work too concerning the downpipes. Mr Osborne's assessment was that five hours work might have been justified, which at $95 per hour for a plumber would have resulted in a cost of $475.
6. The electrical work was quoted at $3,600 of which 50% was attributed to vandal damage. No details of the vandal damage were given in the quotation and the electrician who performed the work was not called. And no one from Icon was called to explain the nature of the vandalised electrical equipment.
7. Mr Osborne also queried the need for replace the benchtop in the ensuite and re-tile the splashback and to supply a new wall mirror in the ensuite.
8. In these circumstances, and taking into account the owners' acknowledgement of the valuer Mr Osborne's expert evidence, I am not disposed to award damages in respect of the rectification of vandal damage on the basis of the Icon quotation 5 April 2022 other than in respect of the removal and replacement of the damaged plaster.
9. Mr Osborne's assessment in respect of the vandal damage identified by Mr Schmiedel was $26,196.50 inclusive of margin and GST. The allowance for removal and replacement of plaster embedded within that figure was $2,280. This is to be adjusted to $11,000, which means that the total assessment of damages is to be increased by $8,720. To this increase of $8,720, Icon's margin of 27%, namely $2,354.40, is to be added. This yields a figure of $11,074.40. To this sum, GST of 10% must be added. This yields a total adjustment of $12,181.84, which I will round to $12,182.
10. I find that the adjusted allowance for damages in respect of the vandal damage identified by Mr Schmiedel is ($26,196.50+ $12,182 =) $38,378.50.
11. Mrs Troise deposed that she and her husband hired a bin to remove all the vandalised material from unit 3. In her first witness statement, at [170], Mrs Troise said that the bin hirer cost was $448. Mrs Troise later, at [182] refers to a further bin hire. Mr Osborne allowed a total of $850 for the hire of a bin, and I will accept $850 as the figure paid by the owners for bin hire.
12. Mrs Troise deposed that $881.50 was paid to T & A Carpets in respect of carpets soiled by the Vandals in unit 3 which necessitated replacement of the carpet in both bedrooms. Mr Osborne was prepared to allow a base amount of $251 for the cleaning of the carpets. Given that Mrs Troise was prepared to pay for new carpet, I accept her figure and will allow a base figure of $881.50 for the carpet. In respect of this item, Mr Osborne's costing should be adjusted upwards by $630.50. He has allowed a contingency of 10% and a margin of 30%. The respective adjustments are $63.05 and $189.15. When they are added, a new total of $882.70 is calculated. GST of 10% on the adjustment of $882.70 is to be added, giving a final adjustment of $970.97 which I will round to $971. I will allow this sum for the replacement of the vandal damaged carpet.
13. The total adjustment to Osborne's assessment bearing these matters in mind is $40,199.50, comprising:
    • Mr Osborne's original costing-$26,106.50
    • adjustment for replacement of plaster using Icon's figure-$12,182
    • bin hire-$850
    • new carpet -$971 This is the sum I will allow to the owners in respect of vandal damage.

I allow $40,199.50 rounded up to $40,200 to the owners in respect of vandal damage.

1. The points of tension between the parties are:
   1. the number of days in the contract for the completion of the works;
   2. when agreed damages began to run; and
   3. when agreed damages ceased to run.

Period in which the works were to be completed

1. The time for completion of the contract works was stated in item 1 of schedule 1 of the contract. This provided that the building period includes 315 days of actual building work comprising the following estimates for delays:
   • inclement weather and the effect of inclement weather 10 days;
   • weekends, public holidays, rostered days off and other foreseeable breaks in the continuity of the work 15 days;
   • other days that are reasonable having regard to the nature of the building works zero days.

As the building period is noted as meaning the total of the days of actual building work and the estimate for delays, the building period is established to be 340 days.

Establishing the date when agreed damages began to run

1. The owners' entitlement to agreed damages arises under clause 40. Clause 40.0 provides:

If the Building Works have not reached Completion by the end of the Building Period the Owner is entitled to agreed damages in the sum set out in Item 9 of Schedule 1 for each week after the end of the Building Period to and including the earlier of:

• the date the Building Works reach Completion;
• the date this Contract is ended; and
• the date the Owner takes Possession of the Land or any part of the Land.

1. In order to establish the date agreed damages begin to run it is necessary to establish the end of the Building Period. In the definitions clause in the contract, clause 1, "Building Period" is defined to mean: "the building construction time estimated by the Builder to carry out the Building Works as stated in Item 1 of Schedule 1, subject to Clause 34."
2. It has been established above, at [108], that the time for completion referred to in item 1 of schedule is 340 days.
3. Clause 34 of the contract allows the builder to claim an extension of time so that the Building Period is extended. Allowable causes for extensions of time include variations, inclement weather resulting in delay longer than that allowed for in schedule 1, disputes with neighbours, civil commotion or industrial action, anything done or not done by the owners or any other cause that is beyond the builder's direct control.
4. If the builder wished to claim an extension of time, it would have been necessary under clause 34.1 of the contract for the builder to have given to the owners written notice stating the cause and the claimed extent of the delay. There was no evidence that this occurred, and the builder made no submission that it was entitled to an extension of time.
5. It follows, and I find, that the end of the building period under the contract falls on the date which is 340 days after commencement of the works.

1. The contract was executed on 19 August 2018, but this was not the date upon which the builder was obligated to start work. Clause 10 provides:

10.0 Commencement must occur within 21 Days after the Builder receives:

• the essential information from the Owner (refer to Clause 13);
• all necessary building permits and planning approvals (refer to cl. 19; and
• payment of the deposit under Clause 9.

1. At the hearing, the attention of the parties was focused on the issuing of all relevant building permits and planning approvals. The builder's submission was that as it could not begin work without a building permit having been issued by reason of the operation of s 16(1) of the Building Act, and as a building permit for the works was not issued by the RBS, Dino Molinaro, until 21 March 2019, that must be the date from which the 21 days within which the works had to start were to be counted. The builder referred to a so-called "welcome letter" which had been issued to the owners on 5 April 2019 to support their submission that 21 March 2019 was the date the counting of days was to start.
2. The owners strongly disputed this submission. They highlighted that under this particular contract, demolition of the existing house on the site constituted part of the work. In the contract, an allowance of $40,600 representing 5% of the contract price had been allowed for demolition and site cleaning. During the course of the hearing the builder discovered an email which Mrs Troise had sent to Bianca Ferri at the builder's office dated 27 November 2018 confirming her husband's authority for Expert Demolition Pty Ltd and its agents or contractors to demolish the existing dwelling at the site. That email attached an application for a building permit which had been made by the owners to John Daniels, of Diverse Building Surveyors.
3. A separate building permit for demolition must have been issued because the builder began demolition on-site in or about December 2018. I accordingly accept the owners submission that the building work began in or about December 2018.
4. There is some dispute about the day that demolition actually started. Mr Phillpott on behalf of the builder suggested the Tribunal should adopt 1 December 2018, but he conceded that that was "a guess".
5. Given that the owners are seeking damages which are to be determined in part by reference to days counted from the start of the works, is regrettable that the owners did not create a record of the date upon which protective fencing and signage were established in order to get the demolition process underway.
6. The builder invoiced the demolition stage payment on 17 December 2018. Moreover, the cadastral surveyor PM Kennedy Land Surveyor ('PM Kennedy') issued a fresh survey on 17 December 2018. The work must have been completed at this point. Working back from 17 December 2018, and allowing a generous two weeks for demolition and site clearing, I fix 3 December 2018 as the date for commencement of the demolition.
7. It follows that I must find that the end of the building period was 8 November 2019.

1. Agreed damages run from the day after the end of the building period, namely 9 November 2019, until the earliest of:
   • the date by which the work was completed;
   • the end of the contract; or
   • the date the owners took possession.
2. The first option can be put to one side because the work was not completed by the builder. The parties had competing views as to which of the remaining options applied. The builder's submission was that:

(a) the final claim had been issued on 9 September 2020;

(b) payment of the final invoice is required within 14 days of the issue of the certificate of occupancy under Special Condition 6;

(c) if the final claim had been paid on time the owners would have received the keys; and

(d) accordingly the owners are deemed to have taken position on 23 September 2020.

1. I reject the builder' submission. As I have found that the purported occupancy permit issued by the RBS on 9 September 2020 was not a valid occupancy permit, special condition 6 of the contract is unenforceable and the owners did not have to pay the final claim within 14 days of the issue of the occupancy permit. It follows that the owners are not deemed to have taken possession of the land on 23 September 2020, or indeed on any other date prior to termination of the contract.
2. The builder's submission was that agreed damages continue up until the date the contract was ended. I accept this submission on the basis that until the contract was terminated its terms remained operative.
3. I accordingly find that agreed damages began to run on 9 November 2019 and ceased to run on 30 April 2021. I calculate this period as 76 weeks and 5 days.
4. Agreed damages run under item 1 of schedule 1 of the contract at $750 per week. I calculate the applicable agreed damages as $57,000 for 76 weeks and a further $535.71 for five days. The rounded up total is $57,536.

1. The owners make a claim for damages for delay other than for agreed or liquidated damages. As established, the claim for agreed damages ran under the contract to the date of termination. The second claim for damages for delay is made on the basis that the owners submit that they suffered consequential loss in the nature of lost rental income because of the delay in renting out the three units.
2. The claim for lost rental is summarised in the owners' updated particulars of loss and damage as follows:

Unit 1- $20,055.60 being $360 a week for the period 1 May 2021- 25 May 2022 (55.71 weeks)

Unit 2- $22,474.80 being $360 per week for the period 1 May 2021 -11 July 2022 (52.43 weeks);

Unit 3- $26,125.20, being $360 per week for the period 1 May 202-20 September 2022 (72.57 weeks).

1. Mrs Troise gave evidence about this claim in her primary witness statement, from [195]. The claim for $350 per week is based on a comparative market analysis provided to the owners by their real estate agent P. Di Natale.
2. The claim in respect of unit 1 is based on the fact that a residential rental agreement was not signed until 25 May 2022. A residential rental agreement was signed in respect of unit 2 on 11 July 2022. On 27 September 2022, the owners signed a residential rental agreement for unit 3.
3. The builder disputes the claim for lost rental on two bases. First, it is submitted that the owners' entitlement to damages for delay on the project is capped by the entitlement to agreed or liquidated damages. However, no authorities were put forward in support of this submission, and the matter was not argued in any detail. I make no ruling on the point as it is not necessary to do so.
4. The builder's fallback position is that the rental claim cannot be pressed because the owners failed to mitigate their loss. The central point made by Mr Cafari in support of this argument was that it took the owners more than a year after they took possession of the site by terminating the contract to rent the first unit, 15 months to rent the second unit and 18 months to rent the third unit.
5. I am attracted by the builder's argument about lack of mitigation. The project became stalled in September 2019 when the builder served its purported notice of completion and the final claim. The owners refused to pay the final claim and the builder would not hand over the keys. A stand-off developed.
6. The builder did not take any steps to terminate the contract. It will pay a price for its inaction because, as established above, it remained in control of the site and under the regime of risk allocation under the contract it must bear the cost of rectifying the damage caused by vandals to the contract works in the period up to the termination of the contract.
7. The owners also took no steps to terminate the contract until early 2021. I have held that the contract was validly terminated by the owners on the basis of its notice of breach of the contract under clause 43.1 of the contract on 31 March 2021. Some of the bases of termination available to the owners in early 2021 including defects in the works, incomplete works and delay in completion of the works became available to the owners once the contracted date of completion of 8 November 2019[62] had passed.
8. It can be appreciated that the owners might have been reluctant to take the drastic step of terminating the contract as soon as the opportunity arose, but when it became clear that the builder was not going to complete the project, the owners had to make a choice. They could either tolerate the situation, or take control by terminating the contract and doing the necessary work in order to take occupation. It is to be remembered that the owners believed that they had an occupancy permit which enabled them to move in once the appliances had been installed and the services had been commissioned. In this connection, I note that the evidence was that the owners relied on the conditional occupancy permit issued by the RBS and did not apply for a separate occupancy permit after Icon had completed the works. Moreover, the owners cannot claim that they did not have the money to perform the limited scope of work required to enable them to take possession. They had withheld the final claim for $81,200, and accordingly they had ample funds to do the work required to enable them to take occupation and then to carry out a very substantial program of defect rectification.
9. If the owners had done this, all the units could have been rented promptly, including unit 3. Unit 3 would not have become subject to vandal damage and the extraordinary delay in getting it to the rental market would have been avoided.
10. For this reason, I find against the owners in relation to their claim for consequential loss in respect of delay in renting the three units after the termination of the contract on 30 April 2021.
11. If the owners had moved promptly to terminate the contract after 8 November 2019, it might have been open for them to make a claim for loss of rental in the period after termination in which the owners installed the missing appliances and commissioned the services and then carried out rectification defects to the extent necessary to put the units on the rental market. However, the case was not put on this basis and no evidence was given as to what the relevant period might have been. As the claim is hypothetical, it need not be discussed further.

1. There is a separate limb of the claim for consequential loss which is not apparent from the owners' updated particulars of loss and damage. This is apparent from Mrs Troise's primary witness statement, from [201]. She deposes:

There were a number of defective works that began [to] emerge which Luciano and I discovered following the post inspection reports. These defects became apparent after the units at the Premises became tenanted. Luciano and I reached out to P. Di Natale Real Estate to have these defects rectified by their assigned contractors.

1. Mrs Troise gave a number of instances where work was carried out by contractors engaged by the managing agents and the cost was set off against rental which otherwise would have been received by the owners. In her witness statement, Mrs Troise, at [216], indicated that she and her husband claimed a credit for these items together with the claim for loss of rent. The total amount claimed is $82,800. It seems that these claims are not pressed at the hearing, because the claim for consequential loss outlined in the owners' final claim included only the claim for loss of rental, which totalled $68,655.60.
2. However, because the position was not made entirely clear at the hearing, I set out below my reasons for dismissing the further claims for deductions from the rental.

1. The first claim made in this regard relates to steam cleaning of carpet in unit 3 apparently damaged by water. The invoice for this work was rendered in August 2022.[63] It was for $75 and was set off by the managing agent against rental received. This was prior to the date that unit 3 was rented which was 27 September 2022.[64] Accordingly, is not a consequential loss claim made following a complaint from a tenant. Rather, it is a claim for damages for rectification of water damage caused by a building defect.
2. The issue for the owners is that the defect was not discussed at the hearing. It is said to arise from damage to a ceiling caused by long nails protruding between the upstairs floor and downstairs ceiling which penetrated pipework.[65] It is not be established of the defect was caused by the builder or by a subsequent contractor. Accordingly, this claim must be dismissed.

1. Mrs Troise deposed hat she received an email for the managing agent advising that Hassle Free Plumbing and been assigned a job at Unit 1. An invoice was received from that firm in the sum of $440 on or about 18 October 2022. The amount was paid by the agent are deducted from the October rental. The detail provided was that a sewerage blockage been cleared.[66]
2. No evidence was given by anyone with personal knowledge of the situation as to the nature of the sewerage blockage and there is no basis upon which I can assess whether the builder should be required to pay for its clearing. This claim is dismissed.

1. Mrs Troise stated that she was informed by the managing agent in late October 2022 that the McQueen Group had been assigned a job at unit 3. In November she and her husband received an email from the managing agent enclosing photographs taken by the McQueen Group in relation to plaster repairs performed at unit 3 together with a tax invoice from the McQueen Group in the sum of $418 for plumbing works completed at that unit. The work involved repairing a water leak. This sum was deducted from the rental received in November by the managing agent.[67]
2. As there was no evidence from anyone involved in the repair as to the nature of the leak or how it had been caused, there is no basis to attach liability for the invoice to the builder.

1. Mrs Troise deposed that in November 2022 she received a quotation from the McQueen Group via the managing agent for the supply and installation of new plasterboard infill and plaster works in the bedroom ceiling of unit 3 in the sum of $825. In January 2023, the owners received a tax invoice from the managing agent in the sum of $825 for plaster and painting in unit 3. This was deducted from rental income.[68] Was no evidence regarding the nature of the damage to the plaster that had to be repaired or the cause of the damage. There is no basis to assign liability for the repairs to the builder. This claim is dismissed.

Repair to leaking laundry sink in unit 2 in January 2023

1. The evidence in respect of this matter was that $330 had been deducted from the January 2023 rental statement by the managing agent to pay for the repairs to a leaking laundry sink carried out in unit 2 by Hassle Free Plumbing.[69] Was no evidence about the cause of the leak or why the builder should be ordered to pay for the repair. This claim is dismissed.

1. The owners were invoiced $165 by Multiflow Pty Ltd for repairing a burst water main at the front of the property.[70] There was no evidence as to what caused the burst or why the builder should pay for it. This claim is dismissed.

1. This case is unusual in that it is not the builder who is seeking payment for variations, but the owners who are seeking credits in respect of two matters. The first is a change in the design of the slab. The second is a change in the configuration of some of the windows.
2. The slab was designed by the owners' engineer, Beattie, as a suspended slab on piers. During the course of the works, the builder changed the design of the slab and erected a waffle slab. The builder had the new slab designed by another engineer, Talcon Consulting Engineers Pty Ltd ('Talcon'). Talcon duly provided certification of the new design to the RBS. There is no issue about the integrity of the changed slab. The owners' concern is that they were not consulted about the change of design and that they have not been given a credit in respect of the saving to the builder arising from the change to the design.
3. Mrs Troise's position about not being properly consulted is supported by the documentary evidence. The builder did not document the proposed change in design as required by s 37 of the DBC Act in circumstances where the builder sought to change the plans. In her witness statement, Mrs Troise deposed that after she and her husband noticed the foundations appeared different to what they had expected because of the number of piers observable she came to realise that the builder had changed the foundation plan.
4. Mrs Troise exhibited to her witness statement a set of minutes of a meeting she had with Mr Misogtes, the builder's director, on 27 June 2019 to discuss the new foundation design and a change in the design of nine windows.[71] In the minutes, Mr Misogtes is recorded as explaining that the Beattie design for the foundations was changed because the plumbing pipes would have clashed with the piers.
5. The owners seek a credit in relation to the saving to the builder arising from the change in the foundation design. They rely on an expert report prepared by Mr Tom O'Dowd dated 21 May 2020.[72] Mr O'Dowd prepared a desk top report, and confirmed that he did not visit the site. His methodology was to analyse the respective designs prepared by Beattie and Talcon, take off the quantities for both designs and price them. He costed the Beattie design at $126,325 inclusive of GST, contingency and builder's margin. His costing of the Talcon was $112,827.50 on the same basis. The difference between the two costings is $13,497.50. This is the sum which the owners seek.
6. The builder was clearly not concerned about the accuracy of Mr O'Dowd's costing, as Mr Cafari consented to his report to being tendered, and did not insist that Mr O'Dowd be called for cross examination. The builder did not tender any expert evidence in opposition to Mr O'Dowd's costings and Mr Cafari in his final submissions acknowledged that he was not in a position to challenge them.
7. However, I am not disposed to make an award of $13,497.50 to the owners because I am not satisfied that this is a fair representation of the benefit to the builder. I note from the minutes of the meeting held with the builder of 27 June 2019 that Mr Misogtes indicated that he would be "wearing the 'cost' ($2000) of the change" on the basis that there would be no credit given to the owners. This must be a reference to the cost of having Talcon redesign the foundations.
8. I must do that which is fair and I consider that it would be unfair to award to the owners a credit which exceeded the net benefit to the builder of changing the design. I will deduct $2,000 from Mr O'Dowd's costing of $13,497.50, and The claim for a variation in relation to windows
9. Mrs Troise in her witness statement, at [57] complains of the builder failed to provide a variation notice with respect to a change in the design of windows. She provided no details there, but in the minutes of the meeting with the builder on 27 June 2019 it is recorded that 9 windows were reduced in size from 2400mm to 2000mm.
10. The builder is recorded as explaining that this change in window design arose because of a need to go to more than one manufacturer. The minutes also indicate that the builder was not prepared to offer a credit because the variation in price was small or non-existent.
11. The owners priced the credit they seek on the basis of quotations for different sized windows. They seek a credit of $600 for each of the 9 windows, a total of $5,400.
12. I do not accept the owners' claim for a credit of $5,400 for two reasons. The first is that under cross examination, Mrs Troise acknowledged that the costing for the smaller windows did not take into account that they would be double glazed. The inference was that her costing was too low.
13. The second reason I reject the owners claim' is that even if the costing evidence is accurate, $5,400 does not represent the net benefit to the builder of changing the design of the windows, because it overlooks the fact that it is more expensive for a builder to create a wall than to put in a window. Accordingly, I am not satisfied that there was a net benefit to the builder arising from the change of the design of the windows. I reject the owners' claim in respect of this item.

1. Mrs Troise gave evidence in her primary witness statement about the claim the owners make for damages in respect of the cost of re-surveying the site.[73] The background is that the owners paid to have a plan of survey for the site prepared in December 2018 by PM Kennedy. Boundary pegs were placed by PM Kennedy.
2. The owners' complaint is that in or around May 2020 boundary pegs were removed by the builder. As a result, the location of the boundaries of the site-which were required for the erection of the boundary fence-were lost. The builder told the owners to engage PM Kennedy again to re-establish the site boundary. According to Mrs Troise's evidence, the builder would not accept any liability for the removal of the pegs.
3. The owners received a quotation from PM Kennedy for work on or about 25 May 2020. The quote was accepted about three days later. At some point after this, the site was resurveyed. An invoice was issued on or about 24 August 2020.[74]
4. The cost of the re-survey claimed is $1,320. This value is based on a quotation received from PM Kennedy in an email dated 25 May 2020.[75] This is the sum which the owners seek.
5. I consider that the owners' claim for the cost of the second survey must fail for two separate reasons. The first is that at the hearing there was evidence that PM Kennedy attached at least two of the boundary survey pegs to fence posts in the pre-existing timber fence. When that fence was removed as part of the works, it was inevitable that those boundary pegs would be displaced. Accordingly, I consider that the builder was justified in refusing to pay for the re-establishment of the boundary.
6. The second reason is in a letter issued by PM Kennedy 24 August 2020[76] under which that firm provided its invoice, it was explained PM Kennedy had visited the site, located the "as cons will tructed" development and prepared a plan of subdivision for the property based on the existing site conditions. The letter also included an owners' consent form and relevant attachments to enable the owners to lodge an application for approval of the plan of subdivision with the local council. The invoice attached to this letter was $4,326.98 inclusive of GST.
7. Mrs Troise was asked about this at the hearing. From the cross-examination it was clear that there was a need to have the site re-surveyed in order to create the plan of subdivision. The owners needed the plan of subdivision, and were prepared to pay for its preparation. It became clear that what Mrs Troise was seeking to do was to recover from the builder the cost of the first stage, namely having the site re-surveyed. This is, no doubt, why she had asked PM Kennedy for an indication of the cost of an updated title re-establishment survey, which she received the form of the email of 27 May 2020.
8. In my view, there is no basis upon which the owners can pass back to the builder the cost of the re-surveying of the site which they had to incur in any event in order to have the plan of subdivision created.
9. For these reasons, the claim for damages in respect of the cost of the resurveying of the site is dismissed.

1. There is no dispute between the parties that the warranties created via s8 of the DBC Act, which are replicated in clause 11 of the contract, apply.
2. The owners rely on the three expert reports of Mr Salvatore Mammone, all of which are dated 22 September 2020 in respect of defective and incomplete works.[77] The owners further rely on the expert report of Mr Robert Quick dated 9 June 2021 in respect of defective plumbing works.[78]
3. The quantum claimed in respect of proven defective works falls into two categories. A limited number of defects have been rectified by the owners, and the sums claimed in respect of those items are derived from some Icon invoices.
4. Where the works have not been rectified, the owners no longer rely on the expert opinion of their costing expert Mr Schmiedel. As noted, after Mr Schmiedel's evidence had been effectively been discredited by Mr Cafari's "gold standard" cross examination, the owners indicated that they were abandoning Mr Schmiedel's costings and in respect of defects identified by Mr Mammone or Mr Quick and accepted by Mr Osborne, they would accept the costings of Mr Osborne.
5. Mr Osborne prepared five reports.[79] The builder relies on him in respect of all matters relating to defective works and quantification of damages.

• 182 On the day after the owners indicated that they would no longer be relying upon Mr Schmiedel, in the course of his final submissions, Mr Phillpott handed up a document described as an aide memoire ('Mr Phillpott's aide memoire') redefining the owners' claims. In this document, the claim for unrectified defects in the 3 units identified by Mr Mammone and accepted by Mr Osborne was reduced to $83,345.49. The cost to rectify plumbing defects identified by Mr Quick and accepted by Mr Osborne was confirmed to be $10,487. A claim for inflation of 3% on each of the above figures for the period between August 2023 and October 2024 was claimed, quantified at $2,814.98. The total of these figures is $96,647.47. This compares starkly with the owners' claim for unrectified items of $443,812[80] based on Mr Schmiedel's costings, which was referred to at [9].

1. As noted above, the final articulation of the owners' claim for unrectified items of defective work identified by Mr Mammone but accepted by Mr Osborne, contained in Mr Phillpott's aide memoire, was $83,345.49. This figure comprised the following amounts:
   1. $33,841.11 for defects in unit 1 costed by Mr Osborne in his report dated 17 July 2023;[81]
   2. $18,014.25 for defects in unit 2 costed by Mr Osborne in his report dated 17 July 2023;[82]
   3. $24,317.25 defects in unit 3 costed by Mr Osborne in his report dated 17 July 2023;[83] and
   4. $7,172.88 for updates and omissions across the units identified by Mr Osborne in notes handed up during the course of the hearing ('the 1314 Notes').
2. I discuss these amounts in turn.

Unrectified defects in unit 1 costed by Mr Osborne in his report dated 17 July 2023

1. Mr Osborne's report concerning unrectified defects in unit 1 is 180 pages long.[84] It is not necessary to discuss his findings concerning defects in detail, because the owners' claim for damages in respect of unrectified defects is limited to those accepted by Mr Osborne. Accordingly, it is not necessary to resolve any difference between Mr Osborne's view about any particular defect and that of any other expert witness.
2. The total assessment of the cost to rectify unrectified defects in unit 1 is $33,841.11. Mr Osbourne broke the figure down into the following components:[85]

1. In the pages following this table, Mr Osborne set out in detail how he had arrived at the individual figures, applying the appropriate hourly rate for labour and allowances for materials, and then adding 10% for contingencies, 30% for margin and 10% for GST.
2. It is not necessary to discuss any of these matters in detail because, subject to adjustments made by Mr Osborne himself in respect of oversights relating to a limited number of issues-which are reflected in the 1314 Notes-and subject to an adjustment for inflation, all of Mr Osborne's figures have been accepted by the owners.
3. The builder, of course, did not seek to challenge its own expert's findings. It follows that I am constrained to except Mr Osborne's costing in respect of unrectified defects in unit 1, assessed at $33,841.11.

Unrectified defects in unit 2 costed by Mr Osborne in his report dated 17 July 2023

1. Mr Osborne's report concerning acknowledged but unrectified defects in unit 2 is 98 pages long.[86] His assessment of the cost of rectification of $18,014.25 is broken down into the following components:[87]

1. As the owners accept Mr Osborne's costing's, I accept the cost of rectifying unrectified defects in unit 2 as assessed by Mr Osborne at $18,014.25

Unrectified defects in unit 3 costed by Mr Osborne in his report dated #17 July 2023

1. Mr Osbourne's report concerning acknowledged defects in unit 3 runs for 64 pages.[88] He accepted for that a number of the defects identified by Mr Mammone still remained and assessed the cost of repair of those unrectified defects at $23,492.25. The breakdown of this figure is as follows:[89]

1. As was the case with the unrectified defects in units 1 and 2 which were accepted as existing by Mr Osborne, I accept Mr Osborne's costing of the unrectified defects in unit 3 and will allow the owners damages under this heading of $23,492.25.

1. During the hearing, Mr Cafari handed up a set of notes prepared by Mr Osborne which was said to include costings omitted from Mr Osbourne's reports which ought to have been included. The notes were reviewed during the course of the hearing. The owners calculate the value of these adjustments at $7,172.88, and no challenge to this figure was made the builder at the hearing. I accept the adjustment of $7,172.88 and add this to the assessment of damages in respect of unrectified defects across the 3 units.
2. When this adjustment of $7,172.88 is added to the total figure for unit 1 of $33,841.11, the total figure for unit 2 of $18,014.25 and the total figure for unit 3 of $23,492.25, a total of $82,520.49 is calculated.

Cost of rectifying defective plumbing works identified by Mr Quick and accepted by Mr Osborne.

1. Mr Quick prepared an expert report for the owners dated 9 June 2021.[90] Mr Quick is extremely experienced as a plumber. According to his CV, he has been licensed for 55 years. He has been a plumbing consultant since 2005, and has frequently appeared as an expert at the Tribunal.
2. In his report, Mr Quick identified some defects in the units. One of these was that the main stormwater drain that was serving the rear of the property on the western side was holding a substantial amount of water. He suggested that it lacked grade, and would have to be removed and re-laid with a minimum grade of 1:100. He also identified a stormwater pipe that had been damaged beneath the concrete on the eastern side of the property. On the western side of the units he found a downpipe that had not been properly connected and he noted other minor defects with downpipe installation.
3. Mr Osborne is a domestic building consultant who is a retired registered building practitioner. He does not purport to qualify as an expert plumbing witness. The defects were all accepted by Mr Osborne in his report of 26 June 2023.[91] Accordingly, I am in a position where I must accept the existence of all the defects identified by Mr Quick, save for the stormwater drain. My concern about the stormwater drain defect arises for the following reason.
4. Mr Cafari, in cross-examination of Mr Quick, established that Mr Quick had gone to the site to prepare his report without the benefit of the drainage plan prepared by the owners consulting engineer, Beattie. Mr Cafari sought to extract a concession from Mr Quick that his opinion that there had been a block in the stormwater drain was incorrect because Mr Quick did not understand the design of the stormwater drain system and that there was both a charged stormwater drain and an uncharged drain. Mr Quick was firm in his response. He said that he understood the difference between a charged stormwater drain and an uncharted stormwater drain and he did not resile from his opinion.
5. As Mr Quick's view was not challenged by any other expert evidence, I accept his opinion that the stormwater drain is defective.
6. It follows that all the plumbing defects identified by Mr Quick have been established.
7. The owners in their final submissions indicated that they were happy to accept Mr Osbourne's costing of the plumbing defects of $10,487. I would have been prepared to accept this figure but it has been superseded. Almost all of the plumbing defects appear to have been rectified by the owners through Icon using the services of a plumber named Aquafix Plumbing Pty Ltd ('Aquafix'). Certainly, as noted below, Aquafix has dealt the downpipe's, cleaning the sewer drain and installing the ORG grate.
8. The remaining major item identified by Mr Osborne was relaying the stormwater drain. For this he identified a cost of $8,013.00 inclusive of contingency of 10%, margin of 30% and GST of 10%. I accept this assessment.
9. When this $8,013.00 is added to the total damages assessed in respect of un-rectified defects in units 1, 2 and 3 of $82,520.49, a sum total of $90,533.49 is calculated.

1. Mr Osborne's costings for each unit had been calculated in July 2023. He was asked at the hearing what allowance he would make for inflation between that time and September 2024 when the hearing was conducted. He opined that 3% would be an appropriate adjustment. I accept this evidence.
2. Applying a factor of 3% for inflation to a base figure of $90,533.49 yields a figure of $2,716.00. When this is added to the base, the inflation adjusted figure is $93,249.49.
3. I will award a rounded up figure of $93,250 to the owners in respect of unrectified defects in the three units identified by Mr. Mammone and accepted by Mr Osborne as existing.

1. Mr Phillpott, in his aide memoire, confirmed that the owners were seeking damages in respect of defects identified by Mr Mammone and Mr Quick which had been rectified. The total sum claimed was $24,204.48, which was broken down in Annexure A of the owners' updated particulars of loss and damage dated 24 September 2024. The defects referred to included the following plumbing defects:

• downpipes not connected to stormwater drains;
• first floor rain heads installed too low; and
• gas line protruding from the wall requires a metal shroud.

• overflow belief grates not complete at ground level;
• gas line protruding from the wall requires a metal shroud; and
• stormwater drainage build up that requires cleaning.

1. The owners contend that it is appropriate to adopt as the cost of the rectification of the plumbing defects the costs which the owners were charged by Icon. In this connection, reliance is placed by the owners on a tax invoice rendered by Icon dated 23 February 2022, which was exhibited to Mrs Troise's third witness statement. I consider it appropriate to consider this invoice in the context of the quotation from Icon which preceded it, dated 3 November 2021.

1. Two versions of Icon's quotation of 3 November 2021 were tendered by Mrs Troise. One was costed, and the other one was not. The quotation began "...please find enclosed our scope of works as required to complete the unit 1 & 2 at No 24 Tamarind Cres Werribee". The quoted scope of works included "All plumbing works as per Plumbers quote." The price given for the plumbing works was $13,000.
2. Part of the relevant plumber's quotation was also exhibited to Mrs Troise's third witness statement. It was from Aquafix. Regrettably the second page was not included, and so it is not possible to confirm from the document itself the price quoted for the plumbing work.

1. Aquafix quoted for a scope of work in unit 1 including the rectification of defects and completion works.
2. The rectification work in unit 1 included:
   • connection of a pump to pipework and water tank;
   • running the charged stormwater pipe from the downpipe to the water tank;
   • cutting back overflows above the rain head; and
   • bleeding water from the gas pipe and testing for leaks.

1. Aquafix also quoted for rectification of defects and completion works in unit 2. For unit 2, the rectification work included:
   • connecting a pump to pipework and water tank;
   • cutting back overflows above the rain head;
   • bleeding water from the gas pipe and testing for leaks;
   • investigating a leak underneath the upstairs veranda;
   • extending a pipe from the ORG (Overflow Relief Gully) to a tap; and
   • clearing debris from the stormwater drain with a waterjet and in inserting camera as necessary.
2. It is to be noted that no mention was made in the Aquafix quotation of the rectification of the stormwater drain by relaying it.
3. There was only one defect in respect of which any indication was given as to price. This item was the clearance of the stormwater drain. The precise wording of the quotation was "Clear stormwater drains with water jetter to clear debris and camera drains as necessary (approx. one day allowed for)".
4. As noted, the Aquafix quotation is primarily concerned with completion works rather than rectification defects. The value of the quotation was presumably $13,000, as this is the figure referred to in Icon's quotation of 3 November 2021 which refers to an unnamed plumber's quotation. As noted, with the exception of water jetting the drain, Aquafix did not assign any particular dollar value to any of the items of work, and this makes it impossible to work out what the actual cost of the other work performed by Aquafix was in relation to defect rectification in either unit 1 or unit 2.
5. In these circumstances, it is necessary to adopt a formulaic approach. At the hearing I was invited to accept the assumption that Aquafix's total quotation of $13,000 should be apportioned $3,900 as to defect rectification and $9,100 as to completion work. I am prepared to proceed on this basis and will allow to the owners $3,900 in respect of rectification plumbing defects in unit 1 and 2.

1. It is necessary to determine an appropriate margin to be applied to the base costs incurred by Icon. This is because the quotation of 3 November 2021 allowed for $43,450 of actual work in units 1 and 2 plus margin of $16,000 for each of the units, a total of $75,450. Margin of ($16,000+$16,000=) said $32,000 on base works $43,450 represents a margin of 73.6%. Such a margin is manifestly unreasonable.
2. In his final submission, Mr Phillpott conceded that if I found the margin charged by Icon was unreasonable, I could substitute a reasonable margin such as that disclosed by Icon's quotation in respect of the completion of unit 3 dated 5 April 2022. The margin disclosed in this invoice was $13,400 out of a total of $63,600. This meant that the base work to which the margin was applied was valued at $50,200. A margin of $13,400 on base works of $50,200 represents a margin of 27%.
3. I note that a margin of 27% compares very favourably with Mr Osborne's allowances of 10% for consistency and 30% for margin. I note that Icon made no allowance for contingency, but as Mr Osborne had been prepared to allow 30% margin on rectification work, I will apply that margin.

Addition of margin to the allowance for rectification plumbing work by Icon

1. Applying a margin of 30% to the allowance for rectification of plumbing work in units 1 and 2 by Icon assessed at $3,900 yields a subtotal of $5,070. GST of $507 is to be added, yielding a grand total of $5,577. I will allow this figure.

Claims made by the owners for rectification of the balcony and consequential water damage

1. The existence of this water damage is not in doubt. Mr Quick, for instance, referred to it in his report.[92] Mr Mammone also mentioned the issue, and opined that a detailed inspection revealed that the balcony above had been incorrectly graded and that water staining on the balcony indicated the water was ponding on the surface.[93]
2. The owners seek damages in respect of the cost of rectifying the balcony including removing and replacing the tiles, waterproofing and then screeding the balcony, supplying and installing a new waste, supplying and installing new tiles, reinstalling the glass balustrade and then caulking all tile junctions.
3. The owners seek $14,803.48, which is a figure derived by applying to a base cost of $7,750 a multiplier of 1.736478711 to account for margin ('owners' margin multiplier').
4. In addition, the owners seek compensation in respect of consequential damage including removal and replacement of the water damaged ceiling in the bedroom, assessed at $4,755.30. This figure was derived by applying to a base figure of $2,500 the owners' margin multiplier.
5. Furthermore, the owners seek compensation for the removal and replacement of water damaged skirting boards, calculated at $573.04 by applying the owners' margin multiplier to a base figure of $300.
6. Accordingly, the total claim by the owners in respect of rectification of the balcony and the consequential damage is $20,131.82 inclusive of margin and GST.

1. I accept these claims in principle, but reject the owners' quantification of them. The first basis on which I reject the quantification is Mr Osborne's opinion. Mr Osborne was critical of Mr Schiedel's estimate of $12,270 as the cost of rectifying the balcony, describing it as "illogical" and that the time allowed for labour was "excessive".[94] I mention this because Mr Schmiedel's estimate was less than the gross amount of $14,803.48 claimed by the owners for the balcony. The owners' figure of $14,803.48 is clearly unsupportable based on their own (albeit discredited) expert's evidence.
2. The owners' claims in respect of the balcony and consequential losses caused by water are also inconsistent with Icon's invoice of 23 February 2022.[95] In this document, it is made clear that over and above Icon's initial quotation of $67,200, a further sum of $8,250 exclusive of GST has been claimed in respect of extra work. This extra work included all the rectification work to the balcony referred to above, together with removal of all plaster ceiling cornices to the unit 2 bedroom, the removal and replacement of mouldy wall plaster, the removal and replacement of water damaged skirting boards and architraves and the supply and installation of a new solid core door lock to the rear of the garage. In short, the extra work covers the balcony and the consequential damage to the bedroom below, as well as a new pedestrian door to the garage.
3. In assessing damages in respect of the balcony repair and the consequential water damage, I note that Mr Osborne referred to Icon's actual costing of $7,750 to rectify the balcony without adverse comment.[96] This figure was derived from Icon's quotation of 3 November 2021 in respect of the completion of units 1 and 2 but is also reflected in a second Icon invoice of 23 February 2022.[97]
4. I accept Icon's price of $8,250 plus GST to rectify the balcony, the ceiling and the water damaged cornices, walls, skirting boards and architraves and the addition of a new door to the garage. On the basis the door represented $250 of the total, I assess the rectification of the balcony and the consequential damage to the bedroom below at $8,000, exclusive of margin and GST.

Addition of margin to the allowance for rectification of the balcony and consequential damage

1. To this figure of $8,000, margin of 30% or $2,400 must be added. This yields a subtotal of $10,400. GST of $1,040 is to be added yielding a final total of $11,440. I will allow this figure in respect of rectification of the balcony and the damage caused by leaking from the balcony.

1. Another claim made by the owners in respect of loss consequential upon leaking from the balcony was for the replacement of the carpet in the bedroom.
2. Mrs Troise gave evidence that the owners paid an invoice from T & A Carpets in the sum of $250 for replacement of carpet in a unit 2 bedroom due to damage from the leaking balcony. I accept this claim and will allow $250 to the owners for it.

1. Mrs Troise gave evidence that she paid $1,320 to MPM Tiling in respect of re-tiling parts of unit 1 and unit 2.[98] I accept this claim and will award $1,320 to the owners in respect of it.

1. Mrs Troise exhibited an invoice from Icon for painting of $14,080, which she deposed had been paid in cash. Mr Phillpott submitted that although there was no documentary proof that this invoice had been paid, I should accept Mrs Troise's word that it had been. I am not prepared to accept this submission. It was established by the production of bank statements that the owners had paid Icon's invoice in relation to the rectification of unit 3 and paid other invoices to a total of $160,000 approximately. In circumstances where the owners have established a pattern of payment by electronic transfer, there is a clear question as to whether I should accept that a cash payment was also made. A further issue is that with her third witness statement Mrs Troise exhibited copies of text messages which emphasise that her lawyers needed information for the legal case she was considering. In these circumstances, I find it particularly surprising that a documentary trail regarding payment was not established. Finally, I note that no witness from Icon was called to verify that payment was made for the painting. I draw no adverse inference against the owners in respect of this, but highlight that I do not have the benefit of any evidence from Icon at all concerning this case. On balance, I do not accept that $14,080 was paid in cash for the painting, and I do not allow any damages for this item.

Summary of awards in relation to rectify the defects

1. I have made the following allowances for damages above in respect of the following claims:
   • at [208], unrectified defects in units 1, 2 & 3 including plumbing and adjustment for inflation: $93,250;
   • at [223], rectification of plumbing work in units 1 and 2 by Icon: $5,577;
   • at [234], rectification of the balcony and the damage caused by leaking from the balcony: $11,440;
   • at [236], replacement of carpet $250;
   • at [237], retiling in units 1 & 2: $1,320;

1. As noted, Aquafix quoted for both the rectification of defects and the completion of works in unit 1. The following completion items were allowed for:
   • the supply and installation of a hot water service;
   • installation of a gas hot plate;
   • installation of a range hood with flue through the roof;
   • checking of all plumbing fixtures;
   • connecting the gas meter;
   • installing the dishwasher;
   • installing a cap on the sewer riser; and
   • installing shower rails.

1. Aquafix also quoted for completion works as well as rectification of defects in unit 2. The following completion items were allowed for:
   • the supply and installation of a hot water service;
   • installation of a gas hot plate;
   • installation of a range hood with flue through the roof;
   • checking of all plumbing fixtures;
   • connecting the gas meter;
   • installing the dishwasher; and
   • installing shower rails.
2. The owners seek damages for completion costs as set out in Annexure C in their updated particulars of loss and damage dated 24 September 2024. In relation to the completion of plumbing works in 1 and 2, the owners seek to recover the amount charged to them by Icon in respect of the completion work of Aquafix adjusted by the application of the owners' margin multiplier. As $3,900 of Aquafix's costs have been notionally assigned to rectification, the amount notionally assigned to completion is $9,100.
3. The builder urged me at the hearing to find that the amounts charged by Aquafix were inflated. Mr Osborne gave evidence that a figure of $4,550 for each of unit 1 and unit 2 to install appliances, connect the gas line and check the plumbing was excessive. He said he would allow eight hours plumbing work at $95 an hour, a total of $760 per unit. The difficulty the builder faces in making this submission, however, is that Mr Osborne is not a qualified plumber and I am not prepared to place the same premium on his opinion regarding plumbing matters as I have been in respect of building matters generally. From the Aquafix quotation, it is clear that that firm was much more involved in completion than Mr Osborne opined was necessary. The owners have presented evidence that they paid Icon in respect of its completion invoice that included Aquafix's invoice. As the owners have paid for completion of plumbing work I am prepared, in the absence of any opposing expert evidence, to accept the price they paid as evidence of the reasonable cost of completion of plumbing items. I will award $9,100 plus margin of 30% plus GST to the owners for this item.

1. A number of other claim for completion are made by the owners.

1. The first of these is a claim for $250 in respect of keys for the properties because the builder refused to hand them over. The owners tendered an invoice from Global Locksmiths dated 10 May 2021, which I note is 10 days after the date of termination of the contract. The claim flows naturally and directly from the builder's breach of contract and I will allow the claim. $250 is awarded to the owners for this item.

1. The owners rely on Icon's quotation of 3 November 2021 to make a claim for $2,600 for all electrical connections required. To this base figure, they propose to apply the owners' margin multiplier.
2. At the hearing Mr Osborne opined that this was not a fair and reasonable figure having regard to the limited further electrical work to be performed in each unit. In each kitchen the wiring had been completed and all that had to be done when electrical items were installed was for them to be plugged in-hence they were referred to in the industry as "plug & play".
3. He suggested an allowance of two hours for each unit. At $95 per hour, $190 was suggested as appropriate for each unit. I accept this allowance. The total award will be $380 plus margin of 30% plus GST.

Supply and install air-conditioning units in unit 1 and 2.

1. The owners claim $6,300 for this work subject to the application of the owners margin multiplier. The figure of $6,300 is derived from Icon's tax invoice dated 23 February 2022 which related to the completion of items at units 1 and 2.[99]
2. Although no one from Icon attended to give evidence and although the air-conditioning technician did not attend either, Mr Osborne had no issue with this figure and I will allow it. $6,300 plus margin plus GST will be awarded.

Supply and install kitchen appliances in units 1 and 2

1. The owners seek $7,000 plus margin and GST for this item. The figure of $7,000 is extracted from the Icon tax invoice of 23 February 2022 as the cost of supplying Baumatic kitchen appliances including a dishwasher.
2. Mr Osborne was critical of this figure. He had researched Baumatic kitchen appliances online and established that a "builder's package" involving four items was available for a discounted figure of $1,900. At the hearing he suggested $2,000 per unit was an appropriate allowance for kitchen appliances.
3. I accept Mr Osborne's expert opinion and will allow $2,000 plus margin plus GST for the supply of the kitchen appliances in each of the units.
4. For the installation of each of four items in each unit I will allow $95 an hour. This will add another $380 to the allowance for each unit. The total award for each unit accordingly will be $2,380. $4,760 plus margin plus GST will be allowed for the two units.

1. Mrs Troise deposed in her primary witness statement, at [221], that the building contract included two components for the NBN. One was external, and one was internal. External installation was completed but not the internal installation. The owners only became aware of this when tenants moved in. NBN was engaged to set up each unit internally. The relevant invoice from NBN dated 11 April 2022 was tendered, and I accept the figure of $1,800. No margin or GST will be applied, as the owners contracted directly with NBN.

Extra sectional door handsets and servicing of garage doors

1. Mrs Troise deposed in her primary witness statement, at [222], that the garage doors were not operating properly. This had been discovered by Icon as they checked the premises to ensure functionality. Also, the builder had not handed over any remote keys for the operation of the garages. The owners contracted with Automatic Entry Pty Ltd for extra sectional door handsets and for the provision of remote controls for the garage doors to be provided to tenants. The relevant invoice dated 30 March 2022 was tendered. I will allow $1,166 for this item. No margin is to be added.

1. The owners claim $9,300 plus margin in respect of incomplete plumbing works in unit 3. They rely on Icon's quotation of 5 April 2022.[100] The figure of $9,300 was derived by partitioning a quotation from Aquafix in respect of all plumbing works for unit 3 of $15,500 into unfinished work -60% or $9,300 and rectification of vandal damage -40%, or $6,200. The scope of works contended to be worth $9,300 included:
   • supplying and installing a hot water service;
   • connecting the rain head to mains pump;
   • installing gas hot plates;
   • installing a range hood with a flue through the roof;
   • checking all plumbing fixtures for correct operation;
   • cutting back overflows above rain heads;
   • bleeding water out of gas pipe work and test for leaks;
   • connecting gas metre to pipework;
   • installing dishwasher;
   • installing shower rails;
   • supplying and installing two basin mixer taps, one toilet suite, one sink mixer tap, one laundry mixer and three plugs and washers; and
   • relocating washing machine points closer to the washing machine.
2. At the hearing, Mr Osborne was very critical of Icon's figures, opining that they had no relationship to reality. He gave evidence of the work to be completed in unit 3 included connecting the dishwasher, installing the gas hot plate, connecting to the water main pump, and the rectification of a downpipe. He said connecting the dishwasher would take between 10 and 30 minutes, connecting the water pump 45 minutes, and rectifying the downpipe would take two hours. All up he would allow no more than five hours. At $95 an hour he calculated allowance of $475.
3. It appears that Mr Osborne has not made any allowance for many of the items listed above. Given that the owners have paid for the plumbing work carried out by Aquafix by paying Icon for the completion of unit 3, I am prepared to make an award based on Icons figure of $9,300. Margin plus GST is to be added.

1. The owners claim a proportion of the $3,600 plus margin quoted by Icon for the completion of electrical connections and installation of missing external power points in unit 3. Icon had proposed apportionment of 50% for completion work and 50% for the rectification of vandal damage.
2. Mr Osborne was critical of the figure for completion, noting that the electrical appliances in the kitchen were "plug & play" i.e., only needed to be plugged in, not wired in by an electrician.
3. He proposed an assessment based on two hours of work by an electrician at $95 an hour, a total of $190. No one from Icon nor from the electrical firm involved came to give evidence and I accept Mr Osborne's assessment. I will award $190 plus margin for this item.

Supply and install an air-conditioning unit in unit 3

1. The owners claim $3,400 for this item, plus margin. The figure is extracted from the Icon quotation of 5 April 2022.
2. Mr Osborne commented on the figure at the hearing. He observed that although no air-conditioning unit had been installed, the external pipework had been installed. All that was required was for the unit to be connected. A small unit of 2.5 Kw would be satisfactory. He would allow $2,100 for supply and installation, as rough-in and been done.
3. Although I accept Mr Osborne's view that the figure of $3,400 is high, I will allow it on the basis that it was reasonable for Icon to allow for contingency in respect of the item because it was taking on the work of another builder. I will allow $3,400 plus margin plus GST for this item.

Supply and install kitchen appliances in unit 3

1. The owners claim $3,500 plus margin for this item. The figure is extracted from the Icon quotation dated 5 April 2022.
2. Mr Osborne's evidence about his research concerning the availability of the Baumatic builder's set of kitchen appliances has been referred to above. He suggested an allowance of $2,000 per unit. I will allow this figure for the supply of the Baumatic appliances to unit 3. For the installation of each of four items I will allow $95 an hour. This will add have another $380 to the allowance. The total award accordingly will be $2,380. Margin plus GST is to be added.

Supply water tank pumps with mains change over

1. The owners claim $800 plus margin in respect of this item. The figure is extracted from the Icon quotation of 5 April 2022. I will allow this total with GST.

1. The owners make a claim for $235 in respect of an invoice rendered by Global Locksmiths dated 5 July 2022 which was tendered. On its face, the invoice is for rekeying of locks on site and making keys to the windows. It is clearly not a replication of the first invoice from Global Locksmiths which was rendered in May 2021. I will allow $235 for the invoice. No margin is to be added.

Replace top downpipe offset in units 2 and 3 and install flashing in units 1 and 3

1. In her primary witness statement Mrs Troise, at [224], deposes that Icon instructed Aquafix to replace a top downpipe offset on unit 3 and install flashing on the wall above the box gutter to direct water into the rain head. Mrs Troise gave evidence of the hearing that it was arranged for this work to be contacted directly between the owners and Aquafix so that Icon would not be involved and accordingly would not charge a margin.
2. The relevant invoice from Aquafix dated 18 July 2022 was rendered. It was for $1,127. This sum will be allowed. No margin is to be added.

Summary of completion items on which margin and GST is to be allowed

1. Completion of plumbing items: $9,100 Electrical works in unit 1 and 2.
2. Electrical connections $380 plus margin of 30% plus GST.

Supply and install air-conditioning units in unit 1 and 2: $6,300

Supply and install kitchen appliances in units 1 and 2: $4,760

Supply and install an air-conditioning unit in unit: $3,400

Supply and install kitchen appliances in unit 3: $2,380

Supply water tank pumps with mains change over: $800

1. To this sum total of $36,610, I will add 30%, for the reason explained above. The margin is $10,983. The total is $47,593.
2. GST must be a to this figure. The addition of a further $4,756.30 creates a total of $52,353.30 which I will round down to $52,350.

Extra sectional door handsets and servicing of garage doors: $1,166

Replace top downpipe offset and install flashing: $1,127

1. The total award for completion items is $52,323.70 plus $4,578, a total of $56,928.

1. I have allowed the following amounts in respect of the following items to the owners:
   • vandal damage: $40,200, at [112];
   • agreed damages: $57,536**,** at [128];
   • delay claim post termination :$nil, at [141];
   • further claims for consequential loss: $nil, [143]-[154];
   • foundation design credit: $11,500, at [162];
   • window change credit: $nil, at [167];
   • resurvey claim:$nil, at [176];
   • defects:$111,837, at [244];
   • completion items: $56,928, at [275].

1. I have found above that the owners had terminated the contract.[101] It follows from the explanation I gave at [30] that the damages to which the owners are entitled in respect of defects and incomplete works at common law will be affected by this finding. As the owners lawfully terminated the contract then, under the usual rule for the recovery of damages for breach of contract, they will be entitled to recover the cost of having the works rectified or completed by another contractor, although they will have to allow to the builder a credit in respect of the unpaid balance of the contract sum.
2. For this reason, the owners must give credit to the contractor $81,200. This reduces the damages to which the owners are entitled from $278,001 down to $196,801, which I will round to $196,800. I will award this sum to the owners.

1. The owners will have liberty to make a claim for interest. Having regard to the date of publication of this award after the Christmas break, the owners will have 60 days in which to make their application.

1. It is possible that both parties will rely all offers made. Both parties will have liberty to make applications for costs and reimbursement of fees within 60 days.

[2] These costs were costs assessed by Mr Schmiedel in his expert report dated 24 August 2021, TB 458 at 460.

[4] Mr Schmiedel's report of 24 August 2021, [15], TB 459.