Ultra Developments Pty Ltd v Alison Bennett

reasons for decision APPLICATION 1.There are two applications before me which proceeded together with such evidence heard forming the basis for my determination in both matters. Firstly ,the application by Ultra Developments Pty Ltd (the builder), matter number HB 11/51950 wherein the builder claims the sum of $158,507.41 in respect of amounts payable under the terms of its contract with the homeowner dated 5 May 2010 as well as damages for alleged wrongful termination by the homeowner of that contract plus interest and costs. 2.The homeowner's cross application joins both the builder and the second cross respondent, a director of the builder, Darian Percy ("DP"). Particulars of the homeowner's claim are set out in her detailed Points of Claim dated 1 August 2012. Therein three areas of claim are set out against the builder and DP. Firstly, a false, misleading and deceptive conduct claim in which it was alleged essentially that the homeowner would not have undertaken the works but for the alleged false and misleading statements of DP as to the likely cost of the work. Secondly, a claim in respect of the alleged overcapitalisation of the property based on the difference between the contract price and the ultimate actual cost of carrying out the work, on the basis that such loss was a consequence of the homeowner's reliance on representations which were false. Thirdly, a claim for defective workmanship with respect to certain aspects of the work performed by the builder under the contract. The total amount for defect rectification claimed as set out in the Scott Schedule is $118,136.00. JURISDICTION 3.This Tribunal derives its jurisdiction in this matter under the Home Building Act 1989 ("HBA"). This dispute arises out of a contract to perform residential building work involving additions to and renovations to an existing premises. The amount in dispute in respect of such work is less than the $500,000.00 limit of this Tribunal. ISSUES 4.Whether the builder had the right under Clause 32 of the contract to suspend the work? 5.Whether the suspension of the work by the builder amounted to a repudiation of contract entitling the homeowner to terminate? 6.Whether non-payment of an invoice for costs incurred in respect of an oral variation non-compliant with Clause 17 of the contract can constitute a breach under Clause 33.2 (a) of the contract? 7.What is the proper contract adjustment reconciliation between the builder and the homeowner in the circumstances of this contract ending? 8.Whether the list of outstanding works as at the date the builder ceased at the site are determined to be defects or incomplete works? FACTUAL SUMMARY 9.Towards the end of 2009 the builder was invited by the homeowner to quote on the proposed alterations and additions to her home in Woodward Street Orange. It is noted that the homeowner was also the owner of an adjoining dwelling in Woodward Street from which she had been conducting her chiropractic practice. From the evidence including the photographs it seems that the subject premises is one of many fine examples of older federation style homes that exist in the township. 10.DP and the homeowner had met at the premises and discussed the project at which time a set of plans were provided to the builder. DP forwarded the plans to Wearflow Cost Consultant which company provided an estimate of costs in December 2009. 11.Although the homeowner had been undertaking her own enquiries as to the nature of fixtures and fittings that she wanted there was no form of specification or schedule of finishes made available to the builder for the purpose of quoting the project. 12.The builder provided an initial estimate of costs on 5 January 2010 and following further communications a further revision in early February 2010 in the sum of $771,000.00 inclusive of GST. The builder by email dated 17 March 2010 submitted what is referred to as a final quote for the sum of $728,500.00 inclusive of GST. 13.On 19 April 2010 Orange City Council approved the plans for the proposed renovations of the subject premises. 14.On 24 April 2010 the builder forwarded the draft contract being a HIA standard form with a contract price of $728,900.00. It is apparent from email correspondence dated 29 April 2010 that there were further discussions between DP and the homeowner on 28 April 2010 which resulted in changes to allowances for PC and Provisional Sums but the contract price was unchanged. The parties entered into the agreement on 5 May 2010 at the stated price on the contract of $728,900.00. 15.The project works commenced sometime shortly after the contract was signed in May 2010. 16.Works continued throughout 2010 and 2011 up until around July 2011 when the issues that led to the project coming to a halt developed. 17.It is apparent from the uncontested evidence of the site foreman Steve Grabham that because there was limited documentation such as a specification or a finishes schedule that the homeowner was actively involved in the decision making throughout the course of the works being conducted. This was done through regular weekly meetings with discussions taking place where the homeowner would indicate precisely what she wanted. This was often done with her providing magazine illustrations or video recordings of the type of outcomes she was trying to achieve 18.The evidence indicates that the homeowner was clear in her mind as to the level of finish and particular nature of detailing she wanted in order to achieve an outcome that was sympathetic to the original style of building and without appropriate documentation this would not have been possible without her significant input. Grabham's evidence suggests that the outcomes often times were achieved as they carried out the work with fixtures being tacked in position temporarily before final approval was obtained. 19.It is also relevant to note that the sequence of the works was adapted to suit the requirements of the homeowner. 20.The homeowner also had input into the appointment of a number of the subcontractors involved in the project. Some of them were removed from the contract and taken over directly by her in respect to the control of those contractors and the work for which they were responsible, from which one can reasonably conclude that generally it could be stated that the homeowner's involvement with the project was very much "hands on" along with the builder. 21.On 18 July 2011 the builder advised the homeowner that the forecast cost to complete the works was $144,000.00 and at this time there was only $31,000.00 remaining in the NAB loan facility which had been obtained to fund the project on the basis that the banks portion represented around 80 percent of the build cost. 22.The builder had issued two progress claims on 19 July 2011 being invoice numbers 750 and 751. The total outstanding under these two invoices was about $78,000.00. The homeowner made a part payment of $20,000.00 towards those invoices in or around early August 2011. 23.On 1 August 2011 the homeowner presented a list of purported defective /incomplete works and requested that these be rectified before the tiling invoice, namely invoice 750 could be paid. This list had been prepared by or at least with the assistance of her father in law Roger Karrasch. 24.At the request of NAB, following an inspection of the works by the bank officer Brendan Tink (BT) on 27 July 2011, it was recommended that the quantity surveyor Greg Sieb (the QS) be appointed to identify the progress and quality of the works completed and to assess what works remained outstanding. The QS carried out site inspection on 8 August 2011 and produced his report dated 16 August 2011 which report is in evidence at page 1513 of the joint bundle. 25.Also on 8 August 2011 the builder had its own building consultant Alec Rendell attend the site to assess the works and provide a report. 26.On 9 August 2011 the builder emailed the homeowner advising of its concerns regarding non-payment of invoices 750 and 751 within the period required by the contract .It further advised that unless payment was received by COB on the 10 August 2011 "we will reserve our rights to suspend the works pursuant to Clause 32 of the contract at our discretion and without further notice ...". 27.On 16 August 2011 the builder wrote to the homeowner advising that it regarded the homeowners' failure to pay the outstanding invoices as a substantial breach of the contract relying on the terms of Clause 15 and notified suspension of further work effective immediately pursuant to Clause 32. 28.On 2 September 2011 a letter was directed to the builder by the homeowners' solicitors Whitely Ironside and Shillington advising that certain conduct of the builder as set out in the letter amounted to a repudiation of the contract and that the homeowner accepted such a repudiation and forbad the builder any further access to the subject premises. It is noted that the conduct referred to as repudiatory did not include the subsequently alleged wrongful suspension of the works. THE BUILDERS LAY EVIDENCE 29.The evidence of DP is contained in his lengthy statement of 12 September 2012 the contents of which was adopted by him as true prior to cross examination by Mr Lloyd. 30.In cross examination DP conceded that he did not follow the requirements of Clause 17 of the contract as regards variations. He claimed that there was an informal procedure in place and that if the homeowner agreed either orally or by email to a variation that was enough. He said that the detail related to the variations was provided in the spreadsheets which were a summary of the projects costs up to their date of issue. So in effect he conceded that the variation costs were only notified in writing essentially after the variation works were completed. 31.DP was also questioned about the defects list which was provided by the homeowner on 1 August 2011, but he did not change his view that apart from a couple of items the entire list represented incomplete work that would have been completed in the normal course of the project were the builder not terminated and excluded from the site. 32.In relation to additional costs incurred in completing work out of sequence which was done at the request of the homeowner DP conceded that she was never advised that the "out of sequence" work would involve additional cost. 33.Mr Lloyd cross examined DP at length and repeatedly in relation to the use of the word "artificial" or "artificially" in various paragraphs of his statement and also in his detailed letter dated 31 August 2011, in reference to the reduction of the contract price to $728,900.00. Mr Lloyd was attacking DP's credibility in trying to establish that DP had actively facilitated the loan arrangement between the homeowner and her bank when he knew that the reduced price was artificial and set at that reduced level specifically to "dupe the bank". DP did not resile from his contention that the word artificial was used by him in his statement only with the benefit of hindsight. His evidence was clearly that at the time of the discussions with the homeowner prior to the signing of the contract when there was a request to reduce the contract sum on the basis that substantial reductions be made to PC and provisional cost allowances it was his belief that the revised allowances were achievable. He confirmed his evidence that it was the lavish spending by the homeowner to achieve the particular outcomes which subsequently led to the overrun on the contract sum. 34.Mr Lloyd also attempted to discredit DP in relation to plumbing invoices which purported to relate to 147 Woodward Street rather than the subject premises. However DP simply indicated that such reference was apparently a "typo" in his view as the plumber had done the work at the subject premises. 35.The other lay witnesses statements relied upon by the builder namely that of Janine Percy ("JP") of 5 September 2012 and Steve Grabham dated 5 and 12 September 2012 were tendered as part of the evidentiary bundle but these witnesses did not give oral evidence and were not required for cross examination. THE HOMEOWNERS LAY EVIDENCE 36.The three statements of the homeowner contained in volume 6 of the joint bundle are relied upon in her case and she was called and averred to the truth of those statements dated 23 May 2012 and 11 and 12 June 2012. The homeowner was then cross examined in relation to her evidence. 37.The homeowner's contention is that the contract price was fixed at $728,900.00 and that there were no alterations to the plans on which the builder had quoted. She contended that she did not think that the contract price would go up as much as it did and that the ultimate cost if the builder has to be paid all he is seeking would make it far too much. 38.Mr Young raised the issue of the kitchen which was subsequently illustrated in the Country Home Ideas magazine tendered as B Exh 3. The homeowner claims that the contract overrun of $35,000.00 on the kitchen was because the builders allowance for it of $25,000.00 had been inadequate. Mr Young sought to make the point that the lavishness of the kitchen as illustrated reflected the extent of the spend on it which the homeowner conceded was over $80,000.00 including the appliances. 39.The homeowner agreed that she had never insisted on strict compliance with the contract provisions with respect to variations. She conceded that she had accepted the spreadsheet arrangement whereby the builder had provided details on the spend for variations after the event .She claimed that prior to work being done amounts were never discussed and that she was not told amounts. 40.Mr Young raised the issue with the homeowner as to when financial concerns first arose suggesting that her email of 19 June 2011 at page 885 was the first documented indication but her response was that there were concerns with costs overruns earlier and she referred to Invoice 746 which was a provisional sum invoice dated 31 May 2011. Mr Young also put to her in a number of questions the evidence of financial issues discussed as set out in the statement of JP relating to a19 July 2011 meeting to which the homeowner indicated she had no recollection. She conceded having some recollection concerning the tiling that was discussed but when she was asked to look at the builder's minute of the meeting at page 889 she still said that she had no recall and stated "based on the document it is unclear." 41.Mr Young cross examined the homeowner further about email correspondence between the parties at pages 913 to 926 trying to get a concession from her that it was not the bank that was insisting on the list (prepared by Roger Karrasch her father in law) of outstanding defects / incomplete works, that was provided to the builder, but that it was the homeowner herself insisting that such identified works be completed before she could attend to payment of invoice 750 (the tiling Progress Payment invoice). The homeowner's responses to the line of questioning were rather more obstructive and evasive than helpful with many of the responses being a "no recall" answer. The conclusions that can reasonably be drawn from the actual correspondence are discussed below at 58.6, 58.7 and 58.8. 42.Mr Young further questioned the homeowner in relation documents produced under summons to NAB. These documents were tendered by Mr Young as B Exh 4. The homeowner however did not freely admit the obvious conclusions that can be drawn from any literal interpretation of such documents to which reference is made below at paragraph 58.7 and 58.8. 43.Questions were also put to her regarding the state of her finances around this time but she denied an inability to pay, indicating that there was money available but she just had to arrange for its release or otherwise to shuffle money around. She denied categorically the proposition put to her that at the time of the suspension of works in August 2011 "you (the homeowner) did not have sufficient funds to pay both the builder and other tradesmen that she might appoint directly to complete the work and when the builder refused you access to the premises you got very upset and decided that was the end". 44.In answer to questions from myself regarding the discussions leading to the reduction in the contract price from $786,000.00 to $728,000.00 the homeowner indicated that this was done because she wanted the contract price not to reflect the Reece plumbing quote for the bank as this amount was being funded by her directly. She indicated there were toing and froing discussions with figures prior to finalising this issue. THE EXPERT EVIDENCE 45.The reports of both Mr Dillon for the homeowner and Mr Rendell for the builder are in evidence as is the Conclave report and the Scott Schedule ("SS") signed off by each of them following the conclave. Both experts gave oral evidence together in joint session colloquially referred to as "hot tubbing" and they were each questioned by opposing counsel. 46.In relation to the meaning of classification D as described by the conclave member at Item 33 of the SS both experts agreed that it meant "there would be a cost to complete those items so marked with a D to a finished state" and that on the face of each item described from item 32 onwards in the SS it could not be said without further investigation that any such items were the subject of the contract or not. 47.Mr Dillon indicated that at the time of his inspection the work described in the items from 32 onwards had been completed by others and that his comments are based on the wording used in the various invoices in respect of the subject work. For example if an invoice used words such as "repair or fix" he would consider that a defect. Mr Rendell commented that there were some limitations with regard to such a process but in answer to a question from Mr Lloyd conceded that it would be reasonable to assume that invoices had been prepared accurately and honestly. 48.In answer to Mr Young, Mr Rendell confirmed that he had inspected the site and taken photos of the relevant items in August 2011 before Busy Bee and others had done the rectification / completion work and Mr Dillon conceded that he did not have this advantage having not seen the items prior to such work. 49.1. Mr Dillon in answer to Mr Young's question following an explanation as to his understanding of the different concepts, that is "defective" or "incomplete" work that based on his analysis of the term "incomplete" for the purpose of the items so described he explained as follows: 49.2. "If we assume that a contract had continued to its end it would have given the builder time to remedy anything you think was a defect, looked at on that basis it could be considered a defect only after he had had that time" The conclusion from this answer being that if the time was not afforded to the builder the work would have to be regarded as incomplete. 50. Both experts were in agreement in relation to the method of determining the labour rates to be used in costing the work in respect of any item and each agreed that the higher rate would apply if it was other than the contract builder performing the rectification but that the rate would be the lower one where the contract builder was involved in performing it. 51. As regards evidence given at the hearing by each of the experts with reference to particular items in the SS this will be referred to where relevant in the findings below in relation to quantum with respect to such items. 52. Mr Lloyd cross examined Mr Rendell in relation to the contract reconciliation document at page 31 of the bundle. It is noted that Mr Dillon was not involved in this aspect as he had not reported in relation to the reconciliation. 53. Mr Lloyd's first challenge was in relation to the basis for the figure in paragraph 4a of the reconciliation to which Rendell explained that he had used the information identified in the table at section 2.3 of his report as well as information from the builder. Mr Lloyd suggested the proper approach was through relevant invoices issued and Rendell agreed there were different ways this could be done properly. 54. Mr Lloyd highlighted a discrepancy with regard to the figure at paragraph 6a of the reconciliation which he asserted should have been 20% of $45,000.00 being the difference between the figures in paragraphs 4a and 2a. Mr Rendell could not explain this discrepancy but thought that it also included an allowance for a margin on the variations but in the witness box was unable to reconcile the figures even on that basis. 55. Mr Lloyd also queried Mr Rendell in relation to the seemingly low figure allowance for the cost to complete expressed in paragraph 9a having regard to the builder's suggested figure in the email of 18 July 2011 namely $144,000.00 and QS figure of $148,000.00. Mr Rendell explained that the difference related to the higher figures including work done but not yet invoiced whereas his figure in paragraph 9a of the reconciliation related only to work not done. 56. In answer to Mr Young, Mr Rendell explained that there was substantial work done which would have formed part of the final invoice amount yet to be billed that is the last PP which was to be an amount of around $36,000.00. He also indicated that the figure in his reconciliation that was comparable to the figure of the builder and the QS figure was his figure in paragraph 12 of the reconciliation namely $158,000.00. 57. Finally Mr Lloyd raised the issue of whether or not Mr Rendell had accounted for the cost of the kitchen which was a cost that the builder had credited back to the homeowner as this was to be work done and paid for by her. Mr Rendell thought that this was an amount covered in paragraph 14b of the reconciliation under "joinery" but this was not satisfactorily explained at the joint session on day 2 of the hearing. Mr Rendell was recalled in relation to this point on day 3 and explained the position indicating that the table on 101 of the bundle contained the figure of $33,171.00 and this figure was brought to account under paragraph 18 of the reconciliation as the difference between the that figure and the cost of the joinery of $25,000.00. Mr Rendell noted the reference at page 101 to "Joinery allowance refers to progress payment for deduction" as being the reference to the PP in respect of the tiling from which the kitchen allowance was deducted. FACTUAL ANALYSIS 58.1. The conclusions which can reasonably be drawn following scrutiny of all the documentation including statements correspondence and other relevant material and the oral testimony are as follows: 58.2. That each of the parties should have understood that the fixed price amount stipulated in the contract could only be achieved if the spend on PC items and Provisional Sums remained within the allowances stipulated in the contract. 58.3. Both parties understood that the amount agreed as the fixed price sum was agreed at that level more or less to suit the amount that it was known the NAB had agreed to fund and the homeowner was aware that the cost of the build should she choose to proceed with PC and Provisional Sum allowances above those stipulated would involve an escalation in the build cost which she personally would need to fund. 58.4. There was a certain level of informality in the manner in which the works proceeded in so far as agreement along the way in achieving the specific detail of the work having regard to the absence of any detailed specification or schedule of finishes. 58.5. Satisfying the requirements of the homeowner as to that specific detail required involved extra work by the builder some of which formed the basis for variations which were equally subject to an informal agreed arrangement not in accordance with the contract requirements as set out in Clause 17. Some of the additional time required of the builder such as that caused by agreeing to perform work out of sequence was never the subject of any specific arrangement nor even disclosed during the builder's involvement in the works. However to attribute overruns in the contract price as entirely attributable to the fault of the builder would require a finding that the homeowner did not require the attention to detail and the changes necessary to achieve it as contended by the builder. The evidence does not support such a conclusion. 58.6. Whether financial concerns / issues arose for the homeowner in May, June or July 2011 is not material. It is reasonable to assume that the homeowner did have cash flow problems from the following evidence: the tone of the letter from the homeowner's husband dated 19 June 2011; the assertions of JP at paragraphs 12 to 17 of her statement dated 5 September 2012; the detailed email from BT from NAB sent at 3.07pm on 29 July2011 which was corroboratory of the JP asserted statements attributed to the homeowner particularly relating to bank interest and the homeowner's email to BT on 2 August 2011. 58.7. The homeowner was advised by the NAB as evidenced by the various documents contained in B Exh 4 that on 29 July 2011 as per the BT email referred to above that it would be unable to pay Invoice 750 because it would fully draw the loan. The reason was clearly not as contended by the homeowner that NAB needed outstanding items completed before it would advance that payment. It is clear that even if the builder had rectified the list immediately on the 1 August 2011 when it was presented to him it would have made no difference to the bank's position regarding any further advance at that time. NAB's suggested way forward was to get a QS to value existing and on completion works to assess the possible basis for further funding to assist the homeowner. 58.8. Further in relation to the payment conditions asserted by the homeowner in relation to invoice 750, her email to the builder at 1.48pm on 1 August 2011 makes assertions entirely inconsistent with the NAB's position. BT's further email to the homeowner on 3 August 2011 clearly defines its position as regards the homeowners outstanding items list dated 1 August 2011 wherein it stated that the bank "was not in a position to endorse" the list when the homeowner had already advised the builder that the NAB had required such works to be completed before it could meet the outstanding PP. 58.9. On the challenge relating to the inclusion of the kitchen amount of $25,000.00 in the Rendell reconciliation the further evidence on day 3 from Mr Rendell establishes that it was excluded from the calculation as explained at paragraph 57 above. COUNSEL SUBMISSIONS 59.1. Mr Lloyd outlined the four issues needing to be determined as follows: 59.2. Did the builder have the right under Clause 32 of the contract to suspend the work or whether the act of doing so amounted to a repudiation of the contract. 59.3. What is the proper adjustment contract reconciliation that should be applied between the parties. 59.4. Whether the homeowners claim succeeds and if so in what sum. 59.5. Costs in relation to the abandoned claims. 60.1. Mr Lloyd argues in relation to the first issue that the builder had no right that it was permitted to exercise for non-payment of invoices 750 and 751. He submits that invoice 751 was a claim for variations none of which had been validly determined pursuant to Clause 17 of the contract. The basis for this submission is found in Section 10(1) of the Home Building Act 1989 (HBA) and Part 1 of Schedule 2 of the Home Building Regulation 2004 (HBR), the relevant parts of which provisions are as follows: 60.2. HBA 10 Enforceability of contracts and other rights (1) A person who contracts to do any residential building work, or any specialist work, and who so contracts: (b) under a contract to which the requirements of section 7 apply that is not in writing or that does not have sufficient description of the work to which it relates ...., is not entitled to damages or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, and the contract is unenforceable by the person who contracted to do the work. However, the person is liable for damages and subject to any other remedy in respect of a breach of the contract committed by the person. 60.3. HBR Schedule 2 Part 1 - Contracts to do residential building work 1 Plans and specifications (1) All plans and specifications for work to be done under this contract, including any variations to those plans and specifications, are taken to form part of this contract. (2) Any agreement to vary this contract, or to vary the plans and specifications for work to be done under this contract, must be in writing signed by or on behalf of each party to this contract. 61. Mr Lloyd has submitted that since there was non-compliance with respect to the variations in as much as there was no written agreement as required by the above Regulation with respect to them the builder would not be entitled to sue for them under the contract by virtue of Section 10(1)(b) of the HBA. In support of his contentions he relies on the authority in the decision of Wright v Foresight Constructions Pty Ltd [2011] NSWCA 327. 62. As regards invoice 750 Mr Lloyd submits that because there was a side agreement conceded by DP that the PP's could be split up into 11 payments rather than 6 as per the contract and there was no agreement in the contract giving such a right then it must be inferred that the builder must be relying on some oral agreement ... Additionally he submits that even the amount of invoice 750 had been orally agreed to be varied with respect to the allowance for the kitchen. On that basis such oral agreements would also be a variation not in writing which would render invoice 750 liable to the same fate under Section 10(1)(b) of the HBA . 63. Alternatively Mr Lloyd argues that even if the latter argument regarding invoice 750 was unsustainable since the builder's suspension notice relied on both invoices 750 and 751, the builder had no right to do so under the written contract and Wright V Foresight Constructions he argues provides that such was a wrongful exercise of a right that he did not have open to him. Mr Lloyd the relies on the decision in Botros v Freedom Homes Pty Ltd an unreported decision of the Queensland Court of Appeal which held that "a contracting party is not entitled unilaterally to impose on the other party the conditions of a kind for which there is no warrant of authority". He submits that the builder's insistence on payment of both invoices was without contractual authority or warrant and that is precisely what the decision in Botros has vetoed. 64. Whilst the latter bases without more argued Mr Lloyd were sufficient to establish justification for the termination of the contract he submitted that there was a further anticipated breach namely that the price was going to exceed that agreed in the contract significantly as advised by the builder in its email of 18 July 2011. There being no justification for such an amount over and above the contract price to be charged was submitted as entitling the homeowner to treat same as a substantial anticipatory breach . 65. The final basis upon which Mr Lloyd relies as a ground for termination is the number of defects identified in August 2011 most of which the builder failed to recognise as defects. This is one of the grounds nominated in the termination letter wherein it is asserted by the homeowner that elements of the work were so defective that they required to be completely redone. The failure to recognise such as defects given the support provided by Mr Dillon with respect to them constituted a breach which Mr Lloyd argues was also sufficient to ground the termination. 66. Mr Lloyd further submits that although the letter of termination of 2 September 2011 did not specify the grounds now relied upon the decision in Shepherd v Felt Textiles of Australia Ltd [1931] HCA 21 provided a clear well established authority for the proposition that a party will not be restricted to the grounds nominated on the question of whether termination was proper. 67. Mr Lloyd then moves onto the second issue and submits that the contract reconciliation provided by the QS at page 1513 should be preferred to that of Mr Rendell. He points to a number of issues with the Rendell reconciliation which he suggests render it inconsistent with the QS report and therefore submits that it should be rejected in its entirety. Mr Lloyd presented his own version of the reconciliation based on the categories and method adopted by Mr Rendell but with amendments to it based on the QS figures and making changes to categories with respect those issues the subject of challenge by him including the variations ( excluded because of Section 10 HBA argument); the unexplained margin in paragraph 6a of the Rendell version and the $25,000.00 for the kitchen the evidence in relation to which from Mr Rendell he submits should be rejected. 68. Mr Lloyd submits that his amended handwritten version of the reconciliation should be accepted which adopting his figures results in a substantial amount owing to the homeowner rather than the builder based on the Rendell methodology and that Mr Rendell's figure should be flatly rejected . 69. The final issue dealt with by Mr Lloyd was with respect to the defects as any costs submission was determined best postponed to subsequent to the determination of the substantive matter. In relation to the defects Mr Lloyd relies on the evidence of Mr Dillon as set out in detail in the Conclave version of the SS. It is submitted that on the basis that the repudiation issue is determined in the homeowner's favour for the reasons he has earlier outlined the proper figures that should be applied to any assessment of the rectification costs is the higher costs as indicated by Mr Dillon and that as from the date of repudiation by the builder once established all items not complete should be assessed as defects. Apart from the various concessions that were made during the hearing with respect to various items in the SS which remain in dispute it is submitted that the opinion of Mr Dillon should be preferred to that of Mr Rendell as to whether or not the particular item is established as a defect. THE BUILDERS SUBMISSIONS 70. Mr Young's submission firstly addresses the proceeding generally with respect to the evidence and the witness's demeanour and credibility. It is submitted both JP and Steve Grabham provided detailed statements and were available witnesses but were not required for cross examination so their evidence is uncontested. It should further be noted that that neither the homeowner's husband nor her father in law have given evidence. 71. It is submitted that DP was an open and honest witness who gave evidence freely without any evasion or loss of memory in contrast to the evidence of the homeowner who he asserts suffered from selective memory loss and Mr Young submits that on the question of credit she should not be believed except to the extent that her evidence is against her. 72. Mr Young submits that what really happened is that the builder carried out the works in accordance with the contract but that it ran over because the contract itself contemplated that it would do so through PC's, provisional sums and agreed variations. When this occurred and the builder did not get paid and it legally suspended the works and it was then terminated. 73.1. Mr Young has postulated two reasons for the homeowner refusing to pay the outstanding amounts to the builder: 73.2. She ran out of money and could not pay. 73.3. Secondly, she had consistently certified to the bank in her progress claim forms that there had been no changes to the contract price in circumstances where there clearly had been. She had then attempted unsuccessfully to get the bank to endorse her list of alleged defects as the reason for non-payment. 74. Mr Young submits that the builder's claim is a claim for general law damages or alternatively in quantum meruit based upon the proposition that there was an unlawful repudiation of the contract constituted by the homeowner's termination notice and her exclusion of the builder from the site. 75. Dealing firstly with the grounds nominated in the homeowner's termination notice Mr Young notes the first ground was abandoned. The second and third grounds relating to breaching implied terms of the contract and the duty owed to the homeowner with regard to estimates in relation to provisional sums were never raised during the proceedings. 76. As regards the final ground in the notice relating to an allegation that certain elements of the work were so defective that they had to be redone Mr Young says that even if the defects were established this ground is not made out for the following reasons. Essentially he maintains that the homeowner has not followed the provisions required by the contract for dealing with defects which it should have done. Mr Young has not provided specific detail as to those mechanisms in this contract. He Relies on the authority in a decision of Turner Corporation (Receiver and manager Apointed) v Austotel Pty Ltd NSWSC [1994] (unreported)...which held that contractual provisions had to be followed and by analogy the provisions of the contract herein must equally be applied. 77. Mr Lloyd then directs his attention to the main basis of the homeowner's alleged support for the termination which was argued at the hearing namely the claim that the suspension by the builder was invalid because neither invoice 750 or 751 were in fact due. He comments that the fact that this was not specified as a ground in the actual notice of termination letter dated 2 September 2011 implies that at the time those matters were not considered by the homeowner to be repudiatory. 78. It is nevertheless asserted on behalf of the builder that the invoices were in fact due and indeed that the homeowner had agreed to pay them but did not do so only after financial issues arose and her bank refused to make any further progress claim as it would have put the loan over the limit. He argues further that the part payment of $20,000.00 which the homeowner in her evidence conceded was a payment "in globo" relating to both invoices constitutes an admission that they were due and payable. 79. Mr Young asserts that there can be no dispute that the tiling invoice i.e. 750 was due as it was one of the PP's and the milestone had been reached. He noted that the content of invoices 751 was related to both variations and PC and provisional sum items. So on that basis he highlighted the distinction noting that the Clause 17 requirements for writing in the contract only related to variations and not PC's and provisional sums. 80. It is then further submitted by Mr Young that there was a course of conduct in relation to the variations. The various spreadsheets that were provided by the builder at regular intervals during the course of the works provided the homeowner with a full understanding as to the nature of the variations and the provisional sums. He argues that her evidence was very clear that she understood that this was the way things had been done and no one had any issue with it. Leaving aside the requirements of Section 10 HBA, this process was not a basis for non-payment under the contract and indeed he submitted that the homeowner was estopped from denying payment for those invoices on the basis that the contract was not followed. The fact that no objection to such a course of conduct had been raised right up until after the termination was argued as further support for an estoppel against the homeowner. 81. In relation to the homeowner's submission with regard to s 10 HBA and the support for the argument claimed to be derived from the decision in Wright v Foresight Constructions Pty Ltd, Mr Young argues that the fact that the variations were not in compliance with Clause 17 does not make the contract unenforceable and that the decision in Wright v Foresight does not say that a builder is not entitled to be paid for a variation that is not in writing in compliance with the contract provisions. Even if the authority does support the narrow position put by Mr Lloyd, Mr Young submits that "it does not say that the failure to pay a variation cannot be relied upon as a ground of default even if that variation is not in writing". 82. However Mr Young further argues that irrespective whether the variations are enforceable under the contract by reason of Section 10 HBA that does not affect the builder's rights under a quantum meruit He relies on the authority in Pavey and Matthews Pty Ltd v Paul [1987] HCA 5.. in support of a submission that if there is a basis for quantum meruit it is necessary to have regard to the rights of the parties in the circumstances of the contract to identify the amount that is fair and reasonable to pay and determine what is payable as if the contract had been in writing and had not fallen fowl of Section 10. 83. Mr Young finally addresses the challenge made by Mr Lloyd to the report and evidence of Mr Rendell. Firstly responding to the suggestion that the Rendell report was only responding to Mr Dillon's defects report he says that is simply not so and Mr Rendell confirmed this in giving evidence. Mr Young also refers to the confirmation of the brief at 6.2 and the heading on the reconciliation page itself at page 31 of the bundle as confirmation. 84. As regards Mr Lloyds assertion that the cost to complete in paragraph 9 of the reconciliation ought not be accepted having regard to the QS figure Mr Young relies on Mr Rendells explanation in evidence that at the time of the QS inspection and the builder's email of 18 July 2011, there was work that was done but not invoiced and that the figure his reconciliation that was the true comparable one was the final reconciliation figure at paragraph 12. 85. Mr Young indicated in relation to the QS report that it was admitted as a business record and it did not comply with the expert witness code, but that the decision not to cross examine the QS was made because it was not felt necessary and that the builder embraced the QS report. He then refers to the various aspects of the QS report which illustrate the difference in methodology with that of the Rendell reconciliation. In particular he notes the base cost to complete figure of $78,000.00 is simply the final progress payment figure not an actual measure of the completed works or works not completed. APPLICATION OF LEGAL PRINCIPLES TO THE FACTS 86. The central issue for determination in this matter is whether the suspension of the works by the builder was legally valid having regard to its validity being dependent on invoices 750 and 751 being properly outstanding. If the suspension notice is determined to be valid then the purported termination by the homeowner must be invalid in that the repudiation asserted to support the termination was not established on that ground. This also assumes of course that none of the other grounds argued to support it are established. Conversely if the suspension could not be supported because the subject invoices cannot be regarded as outstanding then the suspension by the builder would be wrongful as not compliant with Clause 32 and pursuant to Clause 33 of the contract would constitute a repudiation upon which the homeowner's termination notice would be properly supported . 87. The main contention of the homeowner is that invoice 751 related to variations which were not properly constituted in accordance with the strict terms of Clause 17 of the contract. More than half of the amount claimed in invoice 751 related to provisional sums to which the Clause 17 requirements of writing do not apply but the homeowner's contention makes no submission regarding the provisional sums component. 88. There is no evidence to support the variations the subject of invoice 751 being compliant with the requirements of Clause 17 of the contract. On that basis they are clearly caught by abovementioned provisions of the HBA and HBR , the effect of which being that the builder "is not entitled to damages or to enforce any other remedy" with respect to such variations which are in breach of the contract .What has been contended for the homeowner is that at least impliedly that the suspension of the work for non-payment of the invoices constitutes an attempt to enforce payment and such should presumably fall within the meaning of the words of Section 10(1)(a) "to enforce any other remedy". 89. The homeowner's submission seeks to rely on the decision of Wright v Foresight Constructions referenced above as authority for the proposition that the builder has no right at all to be paid for work done pursuant to an oral or non-compliant variation and makes no distinction between the enforcement of a payment and the entitlement to a payment. It is clear as pointed out by Mr Young in his submission that Pavey and Matthews Pty Ltd v Paul [1987] HCA 5 gives an entitlement to payment under an informal contract "for the fair value of the work..." 90. There has been no submission by either counsel on the meaning of the words "is not entitled to damages or to enforce any other remedy" but in context these words seemingly are suggestive of engagement in some legal process to enforce a payment. The decision in Wright v Foresight Constructions does not go as far as establishing authority to say that a builder must continue with project works where he has an entitlement to a payment, even though there may be no basis to sue for recovery of it under the contract but it may nonetheless have a right as expressed under Pavey and Matthews principles. I am not satisfied that suspension of works amounts to "enforcement of any other remedy" within the meaning of Section 10(1) of the HBA. Mr Lloyd has attempted in his submissions to expand the ambit of these words in suggesting the builder is "not entitled to exercise any right or remedy under the contract ..." but that expanded .meaning he seeks to impose cannot be sustained on a constructive view of the meaning of the precise words of this provision. 91. It has also been contended that the fact that the builder relied on both invoices 750 and 751 together in support of the suspension and that if one invoice fails the validity test the other must also fail with it because there was no warrant of authority to impose such a condition in respect of the two invoices and pursuant to the Botros decision that conduct would be held to be repudiatory. Whilst the reasoning in the Botros decision is not disputed it does not go as far as to establish that if two invoices are relied upon as a basis for a payment, one of which is valid and the other not, that further reliance on the valid invoice is precluded. The latter reasoning assumes that Mr Lloyd's contention is not established as to invoice 750 being rendered invalid because of an oral agreement to vary the amount of the relevant PP. On the latter point the contract clearly defines in Clause 1.1 that the term "variation" means, changes and the like to the "building works" which is also defined as meaning "the building works to be carried out completed and handed over". The latter description of a variation does not encompass such an oral change to the payment terms or amounts so as to render such a varied PP claim as was constituted by invoice 750 subject to be rendered invalid by Section 10(1) of the HBA. 92. As to the second ground contended on behalf of the homeowner to support the termination, namely that the builder's advice on 18 July 2011 that the contract sum was going to be substantially exceeded and this provided evidence of an anticipatory breach of the contract, this could only be sustained if the homeowner could establish what she contracted for was specifically defined at the outset and she was being required to pay an increased amount on the fixed price for precisely that which was specifically defined at the outset. The evidence falls far short of establishing this position and therefore this second ground does not satisfy the required standard of proof. 93. The third ground relied upon at the hearing which was also specified in the termination notice related to the alleged defects which existed prior to the termination being such as they required much of the work to be completely redone. Assuming the contract remained on foot and clearly at the relevant time it had only been suspended by the builder on the basis of the alleged non-payment, the homeowner's remedy to rectify defects was to follow the mechanisms set out in the contract .The decision in Austotel relied upon by the builder provides authority for its contention on this issue. The evidence does not establish that the homeowner followed any formal procedure that would satisfy the contractual requirements and accordingly this ground for termination also cannot succeed. 94. The contention on behalf the homeowner that termination of a contract can as a matter of law be justified on any ground available to it whether or not such a ground may have been specified at the time of termination is not disputed and it is accepted that the decision in the Felt Textiles case earlier mentioned supports this position. However that contention can only assist the homeowner if such previously unspecified grounds can be established as providing the legal basis required for the termination. In determining the matter the Tribunal has therefore considered and rejected all grounds upon which the homeowner has sought to rely to support the basis for the termination. DECISION ON LIABILITY 95. The decision in this matter has involved an analysis of evidence which has been conflicting in many instances. It is worth noting that Mr Young's summary at the outset of his submissions, referenced at paragraph 71 above, as to what should be concluded from the demeanour of parties to this dispute with respect to their credibility has some degree of persuasive force and I find that summary to be a reasonably accurate assessment of the position .I find that the inescapable view that is formed by close scrutiny of the B Exh 4 documents is that the homeowner did mislead the builder deliberately presumably with a view to buying time in order to sort out her cash flow problems which the evidence suggests existed even if only on a timing basis. The evidence supports the conclusion that there was a prior agreement to pay the outstanding invoices 750 and 751. It is not necessary to determine the precise reason for the homeowner's change of mind, nor whether the prior agreement created an estoppel with respect to them being claimable. 96. Having regard to the reasoning outlined in paragraphs 87 to 91 above wherein the contentions of the homeowner have been rejected in so far as the invalidity of the invoices is concerned, I find that they were outstanding and due to be paid even though less than half of the amount of invoice 751 relating to the variations could not have been the subject of any recovery action by the builder because of the HBA and HBR provisions. The builder nevertheless had an entitlement to be paid those amounts pursuant to the contract or otherwise with respect to the variations component. I find that the entitlement to a payment and a right to enforce a payment are not synonymous and that the suspension of the works by the builder because payments were outstanding to him was an action he could validly take under the contract, notwithstanding that he may have had no right to pursue recovery other than under quantum meruit. It must follow that the homeowners reliance on the suspension as a repudiation by the builder in such circumstances must fail. I find that homeowners conduct in purporting to terminate on that basis and subsequently excluding the builder from the site amounted to a breach of the contract on her part and the builder is entitled to the relief claimed by it to the extent that it has been reasonably established as is set out under Quantum below. The builder's claim under quantum meruit in respect to all the variations has not been not been sufficiently articulated with respect to enabling this Tribunal to determine on the basis of evidence that the amounts claimed equate to the "fair value of the work" in accordance with Pavey and Matthews principles. Therefore I am not satisfied that the builder has established an entitlement to the required standard of proof to all of the variations claimed on the basis of a quantum meruit and propose to find an entitlement only in respect invoices 715, 717 and 726 which have been conceded by the homeowner. The builder's rights in respect to recovery of all other variations are precluded by the HBA and HBR provisions earlier outlined. 97. It further follows that the cross application of the homeowner seeking damages from the builder for breach of contract must fail. The rights between the parties in so far as assessment of damages are concerned should have regard to the state of the works at the time the builder was wrongfully excluded from the site noting that much of what is claimed at that time by the homeowner to have been defective could not be so regarded if the contract were still in force and the builder was still on site. QUANTUM 98. The builders case is that the its proper measure of damage should be based Mr Rendell's contract reconciliation at page 31 of the bundle which determines an allowance of $158,000.00 in its favour. I am satisfied that the methodology of the reconciliation is appropriate, however there were challenges by Mr Lloyd to a number of the components some of which have not been satisfactorily explained so as to properly satisfy the onus of proof in respect of the entitlement. 99. Mr Lloyd has submitted that his own hand written reconciliation tendered, which adopts the same methodology as Mr Rendell's, in support of his submissions is a more accurate reflection of what a proper contract adjustment should be as at the relevant date. In his document he has essentially adopted the figures contained at 1521 of the bundle in the QS report. 100. The conclusion I have reached in relation to the QS figures is that they are merely mathematical calculations of the differences between the payments made and amounts left to be paid under the contract based upon the information obtained in the builder's project cost summary spreadsheets and do not reflect the actual value of the work performed or work left to complete at the date the builder left site. At page 1515 of the bundle the QS reports that "a detailed estimate or costs analysis has not been completed by this office". At page 1519 the report indicates in relation to variations the following statement: "The Appendix to this report attempts to summarise the anticipated final costs based on these changes, which broadly includes" ...". The latter remarks are suggestive of the QS report only seeking to provide an indicative figure for the bank. From close scrutiny of the document itself by way of example referring to item a on page 1521 of the bundle, the $78,840.00 figure noted is simply derived from subtracting the actual payments made from the adjusted contract value which is supportive of the conclusion I have reached. 101. Mr Rendell in his evidence specifically addressed the issue and confirmed that he had assessed the actual value of the work left to complete and I accept his evidence in preference to the QS figures. The weight that I have afforded to the QS report and the information it contained is less having regard to its admission as a business record as distinct from an expert report in compliance with the code of conduct. The onus was on the homeowner relying on this record to establish its efficacy. The builder simply accepted it for what it portrayed which as indicated was something quite different to the Rendell reconciliation in terms of figures and the fact that Mr Young made the decision that there was no advantage to be obtained from cross examining the QS cannot reflect adversely on the builder which was not seeking to rely on the QS report. However I do find that the QS report has been a useful account to provide a perspective on the Rendell reconciliation and it has been given consideration on that basis. 102.1. I have reached the decision in relation to final figure after making a number of adjustments to the Rendell reconciliation as follows: 102.2. The margin allowance in item 6a could not be explained satisfactorily by Mr Rendell at the hearing. I have allowed the margin on the difference between item 4a and 2a at $8,901.00 plus an amount of $4,636.00 for the margin on the conceded quantum meruit with respect to the variations. 102.3. The allowance in item 6c is reduced to $23,184.00 for the reasons stated above at paragraph 96 above. 102.4. The total addition for paragraph 6 is therefore reduced from $101,042.00 to $48,465.00. 102.5. The allowance in item 9a is the Rendell estimate of the costs to complete the works as identified by the builder. The builder as reported by the QS indicated that some minor additional costs could be expected and a contingency amount was allowed in the QS summary on that basis. I propose to include one contingency figure of $10,000.00 under this item on that basis. The total at item 9a is thus $16,714.00. 102.6. The last item in item 9c is amended to the figure of $15,383.00 having regard to the rectification costs determined as appropriate.as set out in the SS which is explained in the paragraphs following under the heading of "The Rectification Costs". The total of paragraph 9 is therefore $32,097.00. 103. The final figure is therefore calculated as follows in accordance with the Rendell reconciliation numbered paragraphs: Paragraph 5 $773,405.00 Paragraph 6 $ 48,465.00 Paragraph 7 $821,870.00 Minus Paragraph 9 $ 32,097.00 Minus Paragraph 11 $701,599.00 Balance Payable $ 88,174.00 THE RECTIFICATION COSTS 104. The conclave report and the attached SS in evidence has been reviewed in detail having regard to the evidence in relation to it from both experts as discussed above. Of the approximately 80 items in the SS the homeowner has withdrawn or conceded as incomplete work 28 of them. The builder argues in relation to the majority of the items particularly those above item 33 in the SS that this was all essentially incomplete rather than defective work or was otherwise not part of the builder's scope of works. Mr Dillon conceded some disadvantage in relation to those items having regard to the fact that all that work above item 33 had already been carried out by others at the time of his inspection and he made his assessment based on the information set out in the quotes and invoices from the relevant contractors. Having attempted to conduct the same exercise myself in relation to the documentation illustrates the pitfalls with this approach. 105. I have formed the view in relation to all items 33 and above that it mostly relates to completion work for which the builder would have been responsible as part of his contract and in respect of which it may have already received substantial payment. However all of the subtrade documentation does disclose some small element of work that is suggestive of repair rather than completion and I have allowed a figure of 10 % of the total claimed as defective namely $6,910.00. 106. As regards the items from 1 to 26 having regard to the evidence in relation to the particular items I have concluded that the homeowner has entitlements as regards the following items but noting that the figure allowed is on the basis of the cost to the builder rather than another contractor performing the work having regard to the finding that the homeowner's termination was wrongful . The items and allowances are as follows: Item 1 $ 225.00 Item 3 $1,209.00 Item 4 $2,572.00 Item 8 $ 122.00 Item 18 $ 785.00 Item 22 $2,500.00 Item 23 $1,034.00 Item 26 $ 26.00 Total $8,473.00 107. In relation to item 22 since no estimate was provided by the builder I have allowed a cost on the basis that it would cost the builder considerably less to rectify this problem than another contractor I find however that even though this is suggested to be an aesthetic matter with no functional significance in a home of this quality the homeowner was entitled to have the consistency of panelling she had requested. 108. Any items that have not been specifically mentioned in 1 to 26 were either not pressed, accepted by the homeowner as incomplete and therefore having no entitlement having regard to the finding on liability with respect to wrongful termination or simply rejected on the basis that the evidence did not satisfy the onus to establish them as defects. 109. The total allowance for rectification works in respect of all items is $15,383.00 being the sum of the figures in paragraphs 105 and 106 above. INTEREST 110. The builder presses a claim for interest at the rate of 18 % pursuant to Clause 16.1 of the contract. Clause 16.1 states: "The builder may charge the owner interest at the rate stated in item 10 of Schedule 1 (in this case 18%) from the day on which an amount falls due to be paid up to and including the day the amount is paid." 111. The interest can only run on that basis with respect to the outstanding invoices and only on amounts that were actually due. The component of the outstanding invoices that relate to amounts which could only be due on the basis of a quantum meruit including the conceded amount which has been accounted for in the reconciliation cannot attract interest pursuant to the terms of the contract. 112. The amount due and outstanding on invoices 750 and 751 excluding any amount for variations is $65,442.00 from which has to be deducted the sum of $20,000.00 which was paid towards those invoices. The builder is therefore entitled to interest at the schedule rate on $45,442.00 from 1 August 2011 to date until payment which represents approximately $22,500.00 up to the date of this determination. N Correy Senior Member Civil and Administrative Tribunal of New South Wales 1 May 2014 I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar