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[2013] WASAT 207
State Administrative Tribunal (WA)
2013-12-23
Original judgment source is linked above.
CITATION : WALDRON and AFRA CONSTRUCTION PTY LTD
FILE NO/S : CC 124 of 2013 consolidated with CC 572 of 2013
'Proper and proficient' Defects in construction Non-compliance with building licence conditions and Building Code of Australia Breaches of contract in construction work Failure to supply and install materials contractually obliged to supply and install Remediation Removal and replacement of all aluminium window and sliding door frames Findings on cost of remediation Credit for balance of contract price in assessment of cost of remedial work Delay in completion of construction to practical completion Assessment of loss and damage being loss of rental income Lack of evidence of other benefit - Applicants' costs of proceedings Respondent's conduct and respondent's representative's conduct of proceedings Respondent's contentions lacking factual merit and foundation
Home Building Contracts Act 1991 (WA), s 3, s 17, Pt 2
National Rental Affordability Scheme Regulations 2008 (Cth), reg 16(b)(ii)
The applicants contracted with the respondent to construct a home unit on a strata lot. The respondent failed to construct the home unit in accordance with the contractual specification and addenda thereto. The respondent failed to comply with the building licence obligation to construct in accordance with the Building Code of Australia, and installed window and sliding door frames and glazing that did not comply with AS 2047 as required by the Building Code of Australia. The sliding door frames and windows were scratched, drilled through and many did not operate fully or lock because of the defective installation (not plumb and square). The respondent failed to complete the construction of the home unit within the contractual time allowed. The respondent's contention that the defects were minor defects and omissions was rejected on the evidence. The remedial work required was extensive and would, when undertaken, put the applicants in the position of the home unit being constructed to hand over and fully complete. The Tribunal set off the unpaid balance of the contract against the remedial costs found by the Tribunal to be reasonable. The respondent's claim for breach of contract and non-payment of the practical completion stage of construction was dismissed, as the home unit was not constructed to the practical completion stage. The Tribunal awarded the applicants' loss and damage (loss of rental income) caused by the respondent's breach of contract in failing to construct the home unit to the practical completion stage within the contractual time allowed. The Tribunal allowed the applicants' expert costs of the proceedings.
Hadley v Baxendale [1854] EWHC Exch J70
Hoskins and Daniel Vinci T/As D'Vinci Contracting [2011] WASAT 188
Thumolano and AFRA Construction Pty Ltd [2013] WASAT 181
Thumolano and AFRA Construction Pty Ltd [2013] WASAT 189
Thumolano and AFRA Constructions Pty Ltd [2013] WASAT 17
Ventura v Svirac [1961] WAR 63
Young & Marten Ltd v McManus Childs Ltd [1969] 1 AC 454
1 On 5 September 2012 Mr Philip Waldron and Mrs Suzanne Waldron (applicants) lodged a complaint with the Building Commissioner of Western Australia (Commission) concerning the construction of a strata home unit on Lot 2, No 15 Ferguson Street, Falcon by Afra Constructions Pty Ltd (respondent). The applicants' complaint comprises Matter No CC 124 of 2013.
2 The complaint identified three 'items/locations/clauses' in issue.
3 The first is titled 'Building of home inspection'. The description heading is 'multiple issues in quality of workmanship'. This item of complaint comprises the application made by the applicants, pursuant to s 5(1) of the Building Services (Complaint Resolution and Administration) Act 2011 (WA) (BSCRA Act), that the regulated building service provided by the respondent was not carried out in a proper and proficient manner or is faulty or unsatisfactory. The applicants rely upon the report by Mr John Douglas, registered building service provider (builder), trading as Exclusive Residence, to support their claim that the construction of their home unit is not proper and proficient and is faulty and unsatisfactory. This complaint comprises a list of subcomplaint items.
4 The second complaint listed in the complaint form is headed 'Payment compensation' and the description of this claim is 'seven months overdue', 'more than $10,000 out of pocket'. This item of complaint is one that is made pursuant to s 5(2) of the BSCRA Act, being a complaint about a matter referred to in s 17 of the Home Building Contracts Act 1991 (WA) (HBC Act), being a breach of contract.
5 The third complaint referred to on the complaint form is identified as 'Payment of invoice'. The description of this item is a reference to 'return trip to inspect property due to failure in keeping agreed appointment time'. This complaint item is concerned with the cost that the applicants incurred when they arranged for their expert, Mr Douglas, to attend site to meet with a representative of the respondent to inspect complaint item 1, and subitems thereof, at a time agreed with the respondent, but which meeting the respondent's representative did not attend. The Tribunal views this item as a claim for the cost of the expert's time, thrown away by reason of the respondent's failure to attend at the agreed time to undertake the inspection. Such application falls for consideration pursuant to s 87 of the State Administrative Tribunal Act 2004 (WA) (SAT Act) and s 49 of the BSCRA Act.
6 On 13 March 2013 the respondent made an application to the Commission pursuant to s 5(2) of the BSCRA Act for a breach of the contract by the applicants. The respondent claims to be entitled to the practical completion stage payment ($5,040 including GST), and interest at 20% on that sum, from 9 September 2012 as invoiced (Exhibit 1, page 531). This is referred to as the respondent's application and comprises Matter No CC 572 of 2013.
7 Following the hearing and prior to making the final order, the Tribunal shall make an order to consolidate the applicants' application in Matter No CC 124 of 2013 with the respondent's application in Matter No CC 572 of 2013, with CC 124 of 2013 being the lead matter.
8 By letter dated 24 January 2013 the Commission informed the parties that the Commission accepted the applicants' complaints pursuant to s 7 of the BSCRA Act, had completed an investigation, had made a decision on 'how best to progress this complaint' and had decided to exercise the power granted to the Commission pursuant to s 11(1)(d) of the BSCRA Act to refer the complaint to the Tribunal for resolution. With that referral the original Commission's file was provided to the Tribunal on or about 25 January 2013. The applicants' complaint falls within the Tribunal's original jurisdiction.
9 On 8 May 2013 the Commission referred the respondent's complaint to the Tribunal pursuant to s 11(1)(d) of the BSCRA Act and provided a copy of the Commission's file to the Tribunal. The respondent's complaint also falls within the Tribunal's original jurisdiction.
The applicants' complaints, the respondent's response and the evidence
Complaint item 1 and the subitems generally: s 5(1) of the BSCRA Act
10 The applicants relied upon the expert evidence of Mr Douglas. Mr Douglas wrote his first report on 16 August 2012 which formed the basis of the complaint to the Commission. On 21 February 2013 Mr Douglas revised his opinion after further inspections and prepared a revised and updated report on that date. This report is the version upon which the applicants relied at the hearing of the application. A copy of this report was filed in the Tribunal on 23 April 2013 and served on the respondent on 21 April 2013 (Exhibit 1, page 281). On 21 April 2013 the applicants also filed in the Tribunal and served on the respondent a Scott Schedule for each complaint item and subitem, and the costs of the remedial work for complaint item 1 and each sub-item, and the cost of the remedial work reasonably required (Exhibit 1, pages 283 and 284). The total claimed by the applicants in respect of complaint item 1 is $29,597.82 including GST.
11 Each complaint 1 sub-item is referred to in Mr Douglas' report (Exhibit 1, pages 486 and 543) and the costs associated with the remedial work for each item are referred to in the Scott Schedule. The quotations and invoices sourced by Mr Douglas to undertake the remedial work are attached to the applicants' letter dated 21 April 2013 and comprise pages 468 to 485 of Exhibit 1.
12 Before considering each item, the Tribunal must first consider the provision of s 5 of the BSCRA Act, which provides:
Making a complaint about a building service or home building work contract matter
(1) Subject to the regulations, a person may make a complaint to the Building Commissioner about a regulated building service not being carried out in a proper and proficient manner or being faulty or unsatisfactory.
(2) An owner or builder under a home building work contract may make a complaint to the Building Commissioner about a matter referred to in the Home Building Contracts Act 1991 section 17 or 20 or Schedule 1 clause 5.
13 Prior to 29 August 2011 and the enactment of the BSCRA Act, s 12A(1) and s 12A(1a) of the Builders' Registration Act 1939 (WA) (BR Act) had provided for claims to be made to the former Building Disputes Tribunal where building work was not carried out in a proper and workmanlike manner, in that it was faulty and unsatisfactory (s 12A(1) of the BR Act) and also where it was not faulty or unsatisfactory (s 12A(1a) of the BR Act).
14 In short, a party who claimed a breach of contract or instruction was entitled to claim that the work was not carried out in a proper and workmanlike manner even where the resultant structure was defect free (s 12A(1a) of the BR Act. Although the standard has altered from 'proper and workmanlike' in s 12A(1) and s 12A(1a) of the BR Act, the Tribunal concludes that the provisions of s 5(1) of the Act shall permit a claim for a failure to comply with the contractual drawings, specifications and instructions.
15 As to the new phrase 'proper and proficient', the Tribunal concludes:
1. well advanced or expert in any art, science, or subject; skilled. ... 2. an expert
The definition of proficient in the Oxford English Dictionary (online) is:
1. A person with advanced skill or knowledge; an expert in a particular field[.]
Subitems 6, 33, 34, 40, 42 and 45: aluminium window and sliding door frames, glazing and flyscreens to doors and windows generally
16 The Tribunal notes that of the most expensive and difficult subitems to remedy are sub-items 6, 33, 34, 40, 42 and 45 which concern the aluminium window and sliding door frames, the glazing and the flyscreens to doors and windows. It is alleged that the majority of the window/sliding door frames are drilled through (items 6, 33 and 42) or are damaged (item 45). Further, it is alleged that the window frames are out of square and out of plumb (items 34 and 40) and, in the evidence of Mr Douglas, a number do not lock probably because they are out of square and out of plumb. Further, the flyscreens for a number of windows are out of square probably because the windows are out of square. Although some of the complaint items might be remedied by piecemeal replacement or the supply and install of additional aluminium angles, those methods of remediation will not remedy all of the defects, and the windows and sliding door frames should be removed and replaced because of the widespread faults.
17 In evidence, Mr Douglas stated the following further matters arose from his investigation of the complaints:
18 The contract specification refers to the addenda for the specific selection for the glazed sliding doors and the windows (Exhibits 5 and 6, page 4 of the addenda, and page 31 of the specification to the contract; Exhibit 1, page 387). Clause 1(a) of the contract provides that the respondent was obliged to construct the home in accordance with the specification and the addenda, as well as the plans and preprinted and handwritten terms of the contract. This obligation is additional to the obligation imposed by the building licence to build in accordance with the BCA (point 1(b) of building licence 6082216, dated 3 June 2011 (Exhibit 7)). The addenda to the contract provides that the respondent was obliged to construct the home using glazed doors and windows (and frames) manufactured by reference to the brands Jason, Dowell or Affinity. Mr Fred Afrasiabi (director), for the respondent, conceded during the course of the hearing before the Tribunal that the glazed doors and windows were products from China and were not manufactured by Jason, Dowell or Affinity.
19 Through Mr Fred Afrasiabi, the respondent contended that the respondent had not agreed to the contract specifications and addenda thereto, notwithstanding their inclusion in the contract bundles (Exhibits 5 and 6). Mr Fred Afrasiabi said that the specifications were not signed by the respondent's director Mr Mal Afrasiabi - and were objected to by Mr Mal Afrasiabi in discussions with representatives of the Yaran Property Group. The Tribunal notes that the Yaran Property Group was the seller of the land upon which the applicants' home unit is constructed, and also arranged for the contract to be executed by the applicants after it had been executed by Mr Mal Afrasiabi on behalf of the respondent. The respondent, through Mr Fred Afrasiabi, conceded that the applicants had executed the whole of the contract which annexed the plans, specifications (including energy rating compliance details) and addenda. Mr Fred Afrasiabi gave hearsay evidence that Mr Mal Afrasiabi had executed the HIA preprinted part of the contract and the schedule, but did not agree to the specifications and addenda included in the bundle that comprises the contract (applicants' version, see Exhibit 5; respondent's version, see Exhibit 6), notwithstanding that the respondent's version of the contract at Exhibit 6 includes all of the same plans, specifications and addenda as the applicants' version in Exhibit 5. He stated that representatives of the Yaran Property Group bundled together the HIA preprinted part of the contract, the schedule and the specification, addenda, and plans, and presented them to the applicants for execution without the respondent's agreement. Mr Fred Afrasiabi also made a hearsay statement that Mr Mal Afrasiabi informed representatives of the Yaran Property Group that the respondent would construct the applicants' home unit to the respondent's specification and not to 'Yaran's' specification. The respondent therefore asserts that the respondent is not bound by the specification and addenda included in the contract in Exhibits 5 and 6.
20 The Tribunal rejects this evidence and the contention that the respondent is not bound by the specification and addenda, and that those documents did not form part of the contract between the parties. The respondent, through its agent, the Yaran Property Group, compiled the contract documents for execution by the applicants. Either the Yaran Property Group was expressly authorised to include the specification and addenda in the contract bundle for execution by the applicants or such action was within their apparent authority. In either case, the respondent is bound by the actions of its agent, and the contract documents include the specification and addenda found in Exhibits 5 and 6 and the respondent was contractually obliged to construct in accordance with the same.
21 The respondent has not produced the alleged respondent's specification and has not identified how it differs from the specification and addenda included in Exhibits 5 and 6. Further, the respondent's specification cannot override the respondent's obligation to comply with the conditions of the building licence (Exhibit 8), one of which is to comply with the BCA (see below). The frames, doors and glazing do not meet the BCA standard (see below). Further, the respondent took no action to contact the applicants to rectify the contract, and Mr Fred Afrasiabi's repeated insistence that discussion with representatives of the Yaran Property Group constituted dealings with the applicants is wholly unsubstantiated and rejected by the Tribunal. There is no evidence to suggest that the respondent informed the applicants that it had not agreed to the specification and addenda as bound in the contract signed by the applicants (Exhibits 5 and 6).
22 Further, during the course of the hearing, Mr Fred Afrasiabi stated that he had made a decision during construction of the applicants' home unit that the respondent would not comply with the contract specification and addenda included in Exhibits 5 and 6 because he anticipated that the respondent's profit margin was going to be lower than originally calculated. This statement is not consistent with the respondent considering itself free to decide what glazing, window and door frames to supply.
23 Generally, the Tribunal found Mr Fred Afrasiabi to be an unreliable witness and, as a representative, was disruptive to the proceedings. On behalf of the respondent he consistently failed to comply with the Tribunal's orders and very few of the documents on the Tribunal's file were filed by the respondent. No alternative specification was provided and no witnesses from the Yaran Property Group were called to attest to these events. Mr Mal Afrasiabi did not give evidence.
24 Accordingly, the Tribunal finds that the respondent was bound to supply window and sliding doors manufactured by Jason, Dowel or Affinity, and further finds that it did not do so and has breached the contract, which breach is a failure to perform the construction in a proper and proficient manner.
25 Further, the Tribunal accepts all of the evidence of Mr Douglas as to the failure of the respondent to construct the windows plumb and true, and that the same do not lock. The Tribunal further accepts Mr Douglas' evidence that the door frames are damaged and do not allow for one sliding door to lock. He stated that at least three windows could not be locked at all. A number do not open because they are 10 to 25 millimetres out of square and out of plumb. Mr Douglas stated than the windows were so out of plumb and out of square that when he tried to open the sliding windows they hit the plastered reveal on the inside of the house and would not open fully. He also stated that for a home to be at the lockup stage (the stage before practical completion), the windows and doors had to be lockable, and these were not lockable for the most part.
26 The Tribunal notes that Mr Fred Afrasiabi maintained that the work required to cause the doors and windows to lock was limited to minor adjustments to the same with a screwdriver. Mr Fred Afrasiabi crossexamined Mr Douglas on this issue and Mr Douglas rejected Mr Afrasiabi's contention. The Tribunal does not accept the respondent's contentions because:
27 The Tribunal considers that the doors and windows that do not lock fully, and do not open and operate fully, require substantial remediation, and, further, because the frames are damaged and scratched and do not meet the BCA standard, they must be removed and replaced. It is not sufficient in all the circumstances simply to mask the drill holes and scratches.
28 Further, the Tribunal notes that the energy efficiency rating obtained by the assessor and certifier for the home (which energy rating is essential in an application for a building licence), was calculated using Dowell windows and doors (Exhibit 1, pages 447 455). The home unit as constructed cannot meet the BCA requirement for a 6 star energy efficiency rating (upon which basis the building licence was granted) having used frames and windows/doors that are not of proven equal rating to Dowell (Exhibit 7, building licence standard condition 24).
29 The Tribunal also notes that compliance with Australian Standards (AS) AS 2047 is the mandatory minimum specification for windows and doors used in Australia and it includes a reference to Glass Standard AS 1288. The building licence was granted on the condition that the home unit was constructed in accordance with the BCA. At point 3.0, section 3.6.0 of the BCA, performance requirements (point 2.1 and point 2.2.2) are satisfied if windows are designed and constructed in accordance with AS 2047.
30 All windows and doors for homes must have a performance label which confirms that they are certified to comply with AS 2047 which should be fixed to the door and window to ensure compliance with AS 2047 (see section 8 of AS 2047). Mr Douglas gave evidence that he could not identify the performance level or the manufacturer on the frames or glass. He gave evidence that he suspected the frames and glass had been imported from China and did not carry certification to comply with AS 2047. The respondent produced a printoff certification (Exhibit 9) which related to the glass only. Mr Fred Afrasiabi admitted that the frames and glass were imported from China to save costs, but insisted they met all Australian Standards required by the BCA. The Tribunal provided the respondent ample opportunity to provide proof of that compliance in the directional orders and during the hearing. The copy of an electronically stored 'certification' for the glazing (Exhibit 8) carries little weight and does not refer to AS 2047 or AS 1288. The provenance of the alleged glazing certification was not proved nor was there any attempt to prove the same. In any event, it has no relevance to the certification of the frames.
31 The Tribunal finds that in breach of the contract, the building licence and the BCA, the respondent supplied noncertified frames and glazing in the aluminium sliding doors and windows to the home unit and thereby failed to carry out the building service in a proper and proficient manner, and that the same is faulty and unsatisfactory as provided in s 5(1) of the BSCRA Act. Further, for the reasons referred to, the same were not compliant with the terms of the contract, were installed poorly and are for the most part inoperable and were damaged during installation. For these reasons as well, the Tribunal concludes that the respondent failed to carry out the building service in a proper and proficient manner and that the same is faulty and unsatisfactory for the purpose of s 5(1) of the BSCRA Act.
32 Mr Douglas has identified the trades required to attend and perform services and supply materials necessary to remove and replace the window and door frames, which total $5,898 including GST. Mr Douglas has obtained a quotation from Jay Vee Windows (Exhibit 1, page 485) and has assessed that quote, as a registered builder with experience in operating his own building business, as being reasonable. The Tribunal accepts Mr Douglas' experience qualifies him to assess the likely cost of the remedial work.
33 Mr Douglas gave evidence that, generally, construction remained more difficult and costly in the Mandurah region on account of the travelling that Perth metropolitan trades and suppliers had to undertake to perform the remedial work. He also gave evidence that his estimate of costs, where possible, used local Mandurah trades and suppliers to minimise the costs, but that largely the trades and suppliers were from beyond the Mandurah area. The Tribunal has viewed the plans and notes two glazed sliding doors and frames and seven windows and frames that require replacing so that the home unit is compliant with the contract and the building licence. This will require the removal of each frame, the propping of the openings, the installation of the new frames, re-rendering and replastering the inevitable cracks to the exterior render and internal plaster, and repainting internally and externally where damage occurs by the removal of the frames. This is substantial remedial work, during which the home unit would not be suitable for its intended purpose of occupation as a dwelling because of the extent and nature of the work and because it is impossible to lock up the home unit until after completion of the same.
34 The Tribunal accepts Mr Douglas' evidence on the extent and cost of the remedial work to rectify sub-items 6, 33, 34, 40, 42 and 45. The Tribunal finds that Mr Douglas' costs and the remedial work referred to above comprise the reasonable remedial work required. Anything else is to cut across and cut down the applicants' contractual rights and the standards of compliance required by the building licence and the BCA. The applicants' contractual rights must be given significant weight when assessing the reasonable remedial work and costs, as must the regulatory requirements imposed by the City of Mandurah in granting the building licence. The Tribunal shall include in its final order an allowance of $5,698 in respect of subitems 6, 33, 34, 40, 42 and 45 referred to in the table below. In addition, the Tribunal shall allow the cost of making good the damage, and the need for re-rendering and replastering, and painting internally and externally. These costs will be considered in relation to other subitems referred to in the table below.
35 Further, as a result of the remedial work required in respect of subitems 6, 33, 34, 40, 42 and 45 alone, as found by the Tribunal, the home unit construction has not achieved practical completion. The defects and the remedial work for these sub-items alone are much more than minor defects and omissions (clause 19 of the contract). This conclusion is relevant to the respondent's claim for payment of the 'practical completion' stage payment and interest. For this reason, the Tribunal shall dismiss the respondent's claim (see below).
36 As to the following items, the Tribunal generally accepts the evidence of Mr Douglas as to whether the work is proper and proficient, faulty or unsatisfactory, the remedial work required, and the costs of the remedial work as identified in the following table save for the qualifications referred to below.
Drain pipe to be extended, currently 400mm above G/L
There is no cutlery drawer infill installed to kitchen cabinet, raw timber edges will require laminating to the overhead cabinets, door handles are missing, plumbing cut-outs internally need laminating and vermin proofing
Kitchen pantry cabinet has a 10mm gap between floor tiles and the laminated end panel of the pantry need extending or beading
External store doors are de-laminating and require replacement
Entry door and seal, the threshold of the RP4 door seal has haps 3-4mm both sides of the rebates
Paint is evident on window frames, tiled areas and floor tiles, needs a complete reclean, home is very dirty
Vertical blinds to the WC and activity room do not operate
Project Suprvision [sic] including travel & Builders Margin (25%) - Schedule trades, produce and send purchase orders, issue agreements, received, process and pay invoices
No locks installed on electrical and gas box lid covers
Bathroom Floor Tile next to Vanity has been grouted with incorrect colour
Excess silicone needs removing from the Kitchen Tiles and stone Bench top
Kitchen/Meals floor tiles are missing grout where they are abut the aluminium door frames
Couch grass needs removal from all garden beds and paving
Eaves require another coat of paint and dirt and render removed
Walls, barge boards and eaves require touch-ups, external pipework on hot water system and power box require painting
Drain pipe requires painting to match external wall colour
Ceiling has had only one coat of paint, requires re-painting
External Store doors are de-laminating and need re-painting
External walls have gaps where barge boards meet the walls
Downpipe has paint drips evident and require removal
Bedroom 1 robe ceiling cornice patch needs rectification and skirting needs completion and repainting
Multi-use room skirting has gaps up to 5mm between skirting and floor tiling
Study/living walls require patching and re-painting
External paving is uneven and has not had edging installed correctly, there is no edging provided to driveway
Threshold under store doors has had metal strip installed over cored bricks is 300mm too short, internal store paving requires sand grouting
Carport paving incomplete, has uneven gaps and irregular height differences
Internal walls, extremely rough require re-rendering
There is a large crack where the gutter adjoins the wall
IO pipe to front yard has no trafficable lid installed
Plumbing is protruding outside the cabinet damaged metal base
Kitchen hotplate has no gas supply and cannot be tested
Bedroom 1 robe doors do not operate and robe walls are built 90mm out of square, install gyprock bulkhead to match wall 90mm out of square
Flashings are bowed, must be fixed so they are straight and plumb, in line with barge boards
Fascia is marked requires either painting or replacing
Security door frame is bowed, mitres are opening up and gaps around the door range from 8mm to 0mm
Study/living security screen is not operating and can be lifted open externally, also has a large hole to the head of the frame
Where the laundry plumbing is protruding into tiles, they will require rectification
Majority of the windows have unnecessary holes drilled in the aluminium frames, required replacement or angles fitted.
Bedroom 1 window flyscreen is not fitted correctly and 10mm out
Multi-use room window is built out of square. Flyscreen is bent and damaged, window latch is broken and screws fastening it to the frame have been stripped
Study/living sliding door has the incorrect colour lock and can be lifted externally
Kitchen/meals sliding door has damage to the external frame
37 The respondent did not produce any evidence other than in relation to the frames and glazing referred to. The Tribunal found Mr Douglas to be a careful witness and not prone to exaggeration. As stated, the Tribunal accepts his qualifications and finds that he is an experienced builder. There was no useful cross-examination of Mr Douglas and he did not resile from his opinion and was not shown to be incorrect or unreasonable in respect of any of the opinion evidence he gave the Tribunal. The Tribunal accepts his evidence of what he saw when he inspected the home unit and accepts his evidence of opinion that the allowed items of work were not proficient, faulty and unsatisfactory. The Tribunal also accepts the evidence he produced of quotations for the necessary remedial work and his assessment that the itemised costs he has provided are in his opinion the reasonable costs of the necessary and reasonable remedial work.
38 As to the following sub-items, the Tribunal finds further as follows:
39 The Tribunal finds that the work to be undertaken is extensive and requires expert coordination. Unlike the position in Thumolano and AFRA Construction Pty Ltd [2013] WASAT 189 (Thumolano 3) where the costs of a registered builder's supervision was not allowed (because the ambit of the work was very limited and uncomplicated), the Tribunal finds that it is reasonable, and in fact necessary, for the applicants to engage a supervising builder to undertake the task of scheduling all of the work and materials required to remediate the respondent's failures as identified herein. Mr Douglas has allowed a margin of 25% of cost which for many years has been a commonly used margin in construction. The Tribunal is aware that in remedial work cases or renovations, the margin builders charge is often greater than 25% to reflect the difficulty and unforeseeable difficulties that may arise during the remediation of the respondent's defective work. The Tribunal finds that the margin applied by Mr Douglas is reasonable and it is necessary for the work to be scheduled and supervised by a registered builder. As the Tribunal has dismissed some items, the Tribunal has recalculated the 25% margin on the cost of the labour and material as found above to be $5,287.41 including GST. The margin has been calculated on the GST exclusive price as follows:
40 The Tribunal therefor finds that the cost of the remedial work is $29,025.75 ($23,220.60 + $5,805.15).
41 The cost of the remedial work as found by the Tribunal will place the applicants in the position whereby they can attend to the work to complete the home unit's construction to handover. The applicants concede that at handover they would be obliged to pay the sum of $5,040 and $4,480 (totalling $9,520), being the practical completion stage and the handover instalments of the contract price. As such, the Tribunal cannot ignore that the applicants would be unjustifiably enriched if they were to receive payment of the amount necessary to complete the construction of the home unit to handover without a credit for the sum that would be due under the contract at handover. As a general rule, a proprietor who seeks to recover the cost of completing the works must give credit for any unpaid balance (Ventura v Svirac [1961] WAR 63) (Ventura). For this reason, the Tribunal shall credit $9,520 against the sums allowed in this proceeding in respect of complaint 1. The Tribunal shall make a final building remedy order pursuant to s 36(1)(b) of the BSCRA Act in the sum of $29,025.75 - $9,520, totalling $19,505.75.
Complaint item 2 applicants' claim for loss and damage caused by delay in completion
42 This complaint is made pursuant to s 5(2) of the BSCRA Act and s 17 of the HBC Act, being one in respect of which a building remedy order (s 36 of the BSCRA Act) may not be made. The contract is a home building contract within the meaning of that term as defined in s 3 of the HBC Act, it being a contract for the construction of a dwelling and does not exceed $500,000 (contract price is $112,000). The Tribunal may make a home building work contract order as defined by s 41 of the BSCRA Act in the event of a referral of a complaint made pursuant to s 5(2) of the BSCRA Act (see s 11(1)(d), s 41 and s 43 of the BSCRA Act). On 20 August 2012 the applicants briefly outlined how they calculated the value of their breach of contract (delay claim) against the respondent (Exhibit 1, page 218):
... as to date (20/8/12) we have paid the mortgage to this property with no income from rent this has accumulated to over $10,000 of out of pocket expenses (during this 7 month delay).
43 The applicants provided copies of their bank statements for the mortgage; local municipal council rates; strata levy notice for payment of levies; water rates notice; and water charges notice (Exhibit 1, pages 219 230) in support of the costs incurred. On 5 December 2012, and while this dispute was still before the Building Commissioner, the respondent filed a response to the applicants' claim (Exhibit 1, page 238). The respondent asserted that the applicants' cost of holding the property was not caused by any alleged breach of contract.
44 By the time of the final hearing, the applicants had moved from the position that they were entitled to recover the expenses of holding the property (which costs they would have incurred regardless of whether the respondent had breached the contract) to the position that they were entitled to recover their loss of rental income from the date on which the home unit should have been completed their loss expectation.
45 The respondent denies any breach of contract. Paragraphs 4 to 9 and paragraphs 20 to 35 of the respondent's response relate to an argument that the respondent's contract with the applicants was interconnected with all other contracts between the respondent and each other owner of the balance of the 16 proposed strata home units to be constructed on individual lots at No 15 Ferguson Street, Falcon as part of the strata development. Further, the respondent raises the issue that the developer, Yaran Property Group, as owners of certain lots and as developers from whom the individual owners (including the applicants) purchased the individual strata-survey lots, and who introduced the respondent (as the builder) to the individual owners of the lots, was responsible for delays in the completion of construction of the applicants' home unit and any such delays were not the responsibility of the respondent.
46 At the final hearing, Mr Fred Afrasiabi did not give evidence of any of the facts to support this contention. He made various assertions from the party table during the hearing that this should be the Tribunal's conclusion. At pages 44 212 of Exhibit 1 is a copy of the applicants' original contract with the respondent. At the final hearing, the applicants provided the original contract between the parties and the respondent (Exhibit 5), which is consistent with the copy at pages 44 212 of Exhibit 1, and the respondent also produced what Mr Afrasiabi asserted was the original contract between the parties (Exhibit 6), which varied in one material respect (referred to below) from that at pages 44 212 of Exhibits 1 and 5.
47 The respondent's contention that it was not in breach of the contract between the parties because the promise to complete the construction of the home unit for the applicants was conditional on, or connected to, the construction and completion of all 16 home units simultaneously, and all of the common property, was advanced in Thumolano and AFRA Constructions Pty Ltd [2013] WASAT 17 (Thumulano 1) and was rejected by the Tribunal as it was then constituted. The Tribunal, as presently constituted, has reviewed that contention, the submissions made and the allegations made in the respondent's response in this proceeding, and rejects the contention in this proceeding as there is no support for such a contention in the contract between the parties, or in the evidence at all. It may be that the directors of the respondent considered that the construction of all 16 units was financially interrelated, but such consideration was not documented in the contract between the applicants and the respondent, and there is no support for such a construction arising from any of the evidence of the background and surrounding circumstances. Such considerations are therefore not material to the terms of the contract between the applicants and the respondent.
48 Further, at paragraph 20 of the respondent's response, it is contended:
It is also Afracon's position that the 'land' referred to in item 9(a) of the Schedule is the Property (being all 16 units), not the site of the [Applicants'] strata Lot.
49 Consistent with the Tribunal's conclusion in Thumulano 1, the Tribunal rejects this contention and, in any event, concludes that it is irrelevant as the applicant does not claim a breach of the term requiring the respondent to commence construction as provided for in the contract, but claims a breach of the term concerning the date on which the respondent is contractually obliged to complete the construction of the home unit. The contract between the parties provides in clause 9(a) of the Schedule that the work is to commence 'upon settlement of land'. The applicants do not claim a breach of that clause. They claim a breach of clause 9(b) and item 9(h) of the contract, which provide for completion '8 months from commencement on site'.
50 In clause 1(a) of the contract 'land' is referred to as 'the land and existing improvements described in item 3 of the Schedule to the contract thereafter referred to as ''the site'''. The site in item 3 of the Schedule is referred to as being Lot 114 on Diagram 7044 and being the whole of the land comprised in Certificate of Title 1767 Folio 271. As at the date of the execution of the contract, 6 April 2011, the property upon which the applicants' home unit was to be constructed was part of Lot 114 on Diagram 7044. The Tribunal also notes that the front cover of the contract records the building contract as relating to 'Lot 2', No 15 Ferguson Street. Further, the Tribunal notes that clause 3(a)(i) of the contract provides that 'the Owner [the applicants] has title to and is entitled to build on the Site'.
51 At the time of execution of the contract the applicants did not have title to any part of Lot 114 on Diagram 7044 in Certificate of Title 1767 Folio 271. The respondent was aware from the front page of the contract bundle (Exhibits 5 and 6) that the applicants were to be the owners of Lot 2 of the proposed subdivision, which had not taken place as at the date of the contract. There was never any suggestion nor was it contemplated that the applicants would own and be entitled to build upon the whole of Lot 114 on Diagram 7044, nor was it intended that the applicants warranted that they could and were entitled to build on the whole of Lot 114 on Diagram 7044. That is why the commencement date is identified in the Schedule to the contract as 'upon settlement of land'.
52 Read as a whole, the Tribunal concludes that the reference to the 'land' in clause 1(a) of the contract, and item 3 and 9(a) of the Schedule to the contract is a reference to proposed Lot 2, No 15 Ferguson Street. The Tribunal rejects the respondent's contention that the reference to the 'land' in item 9(a) of the Schedule to the contract is a reference to all of the proposed lots of the subdivided land at No 15 Ferguson Street.
53 Settlement of the sale of the property in question, being Lot 2, took place on 23 June 2011 (Exhibit 1, page 520). The building licence was granted prior to settlement on 3 June 2011 (see respondent's submission at paragraph 15, page 240 of Exhibit 1; Exhibit 8).
54 In paragraph 19 of the respondent's response (Exhibit 1, page 240), the respondent asserts:
In any event, the time for commencement identified in clause 9(a) of the Contract is subject to the owner (i.e. the Applicant[s]) complying with the conditions set out in clause 2(a).
55 For the reasons referred to above, this contention is not relevant to the applicants' breach of the term of the contract, that the respondent was to have achieved the practical completion stage of construction of the home unit as provided for by item 9(b) of the Schedule to the contract and clause 9(b) of the contract. In any event, there is no evidence of any alleged breach or noncompliance with clause 2(a) of the contract.
56 In paragraph 11 of the respondent's response (Exhibit 1, page 240) it is alleged:
Item 9(b) of the Schedule states that the Time to complete works is '8 months from commencement on site' which qualifies what would otherwise be the time for completion.
57 Clause 9(b) of the contract is concerned with the contractual completion date and the contractual extension of the completion date for the construction of the home unit and provides:
Subject to this Contract the Builder shall complete the Works (bring the Works to Practical Completion Clause 19(a)) by the time specified in Item 9(b) of the Schedule. The Builder is entitled to an extension to the time for completion of the Works due to delay from a cause beyond the Builder's sole control including: (Tribunal's emphasis)
(i) any of the following events which affect directly or indirectly access to or the condition of the Site or the Works or any person engaged on or material employed in or to be employed in or in relation to the Works, namely: acts of God, fire, explosion, earthquake, civil commotion, theft or acts of vandalism, flooding, inclement weather, strikes, industrial action, lockouts or holidays granted in accordance with industrial awards, vehicle accidents, unavailability of labour, vehicles or equipment or permits required;
(ii) any alterations to the Works;
(iii) any instruction or delay in instruction by or any omission of the Owner;
(iv) any deliberate and substantial prevention of or interference with the Works or the progress thereof caused by the Owner;
(v) any delay in the supplies of materials or transport or labour;
(vi) any dispute with or proceeding being taken or threatened by adjoining or neighbouring owners concerning the continuation or variation of delivery to or completion of the Works upon the Site;
(vii) any cessation of work pursuant to Clause 7(e)(ii);
(viii) any delay caused by the Owner providing materials, goods or work;
(ix) any delay in the commencement of or continuance with the Works, caused by or resulting from an order or Tribunal, the Registrar, a mediator, an arbitrator or a Court; or
(x) any delay caused by proper investigation of any of the above by the Builder or the Owner.
58 The Schedule to the contract at item 9(b) identifies the time for completion as being '8 months from commencement on site'; that is, eight months from actual commencement on site.
59 The Tribunal concludes that eight months from the time of the commencement on site is the date on which the respondent was obliged to have achieved practical completion of the applicants' home unit as provided for by clauses 9(b) and 9(c) of the contract and item 9(b) of the Schedule to the contract. There is no alternative to this, save as expressly provided for in the contract by a valid extension of time pursuant to clause 9(b) of the contract. The reference to 'what would otherwise be the time for completion' in the respondent's submission is not clear and was not clarified by any submissions made or any evidence led at the final hearing.
60 The question of fact arises: when was the date on which the respondent commenced on site?
61 Mrs Waldron gave evidence, consistently with the documents, that:
62 The applicants assert that the respondent commenced construction well before 20 July 2011 but did not identify the date when the respondent actually commenced construction on site. The applicants implicitly asserted that because settlement of Lot 2 took place after the issue of the building licence, the respondent commenced construction on site on or after 24 June 2011. This date of commencement is consistent with the respondent having achieved the 'slab down' stage of construction by 20 July 2011. The Tribunal accepts the applicants' submission and infers that the respondent commenced construction on site on or shortly after 24 June 2011. Upon that basis the respondent was contractually obliged to have achieved practical completion of the construction of the home unit by 25 February 2012, and the Tribunal so finds.
63 Paragraph 12 of the respondent's response states:
In any event the time for completion excludes weekends, XMS holidays, Easter break, Public Holidays, rainy days according to the Australian Bureau of Meteorology statistics and Storm damages in June 2012.
64 The defined term 'working days' in clause 26 of the contract applies where the parties have agreed to identify the commencement date and the completion date of the work, pursuant to clause 9(a) and 9(b) of the contract and items 9(a) and 9(b) of the Schedule to the contract, in days as units of time. The term 'working days' has no application where the parties have expressly agreed a different unit of time to that of 'days' or 'working days' for the commencement and completion of construction of the home unit.
65 In this case, the parties have expressly agreed that the respondent was obliged to construct the home unit to the stage of practical completion eight months from the date of commencement of construction on site. Whilst 'months' is not defined in the contract, the Tribunal concludes its ordinary meaning of calendar month applies. For that reason the Tribunal has calculated the date contractual for completion as being 25 February 2012.
66 Therefore, the Tribunal rejects the contention referred to in paragraph 12 of the respondent's response concerning weekends. As to Christmas and Easter holidays, and public holidays generally, the Tribunal again rejects this submission for the reasons referred to above. Clause 26 of the contract excludes public holidays only where the commencement date and the completion date is calculated by reference to a number of days from a particular date or event.
67 As to 'rainy days' and storm damage in 2012, the Tribunal rejects the respondent's submission. Rain and storm damage are not of themselves a basis for an extension of time. Rain is neither an act of God, nor is it, of itself, inclement weather. At no time has the respondent identified, either in its response or in the evidence, any particular period of rain, storm or storm damage during the period of construction. Further, the respondent is not entitled to simply refer to an event or state that falls within clauses 9(b)(i) 9(b)(x) of the contract, so as to extend the contractual date of practical completion. The respondent must also establish that that event or state caused a delay in the construction. If the construction of the home unit was not in fact delayed by the inclement weather, act of God or other identified event in clauses 9(b)(i) 9(b)(x) of the contract, it is not a relevant event for the purposes of determining whether the time for practical completion was contractually capable of extension from that identified in item 9(b) of the Schedule to the contract.
68 Further, and finally, in order for the respondent to succeed in a contention that time for practical completion has been extended pursuant to clause 9(b) of the contract, the builder is obliged to issue a notice to the owner within 20 days of the event or state that occurs within clauses 9(b)(i) 9(b)(x) of the contract, pursuant to clause 9(c) of the contract, which provides:
The Builder shall give to the Owner a notice of any extension of time to which the Builder is entitled within TWENTY (20) working days of the Builder being aware of both the cause and the extent of the delay.
69 Without the respondent having issued a notice of extension of time to the applicant as prescribed by clause 9(c) of the contract, a relevant event causing delay is not to be taken into account in calculating the contractual time to achieve the practical completion stage of construction of the home unit. In this particular case, there is no evidence that the respondent issued any notices of events causing or relating to a delay within the prescribed time, or at all. The respondent therefore could not ever rely on any of the factors referred to in paragraph 12 of its response in this proceeding.
70 It is common cause that the construction of the home unit was not completed to the practical completion stage as at 25 February 2012 and, in the Tribunal's view, was not completed to the stage of practical completion as at the date of the hearing because of the failures and omissions in construction complained of and found by the Tribunal referred to under complaint 1.
71 The applicants claim the following loss and damage (Exhibit 1, page 284):
72 The loss of rental income from the rent of the home unit is a loss within the first limb of Hadley v Baxendale [1854] EWHC Exch J70 (Hadley v Baxendale).
73 Mr Fred Afrasiabi conceded that the respondent was aware prior to execution of the contract that the applicants intended to lease the home unit and was aware that the applicants intended to claim the benefit of the NRAS. The loss of the benefit payable pursuant to the NRAS is a matter that falls within the second limb of Hadley v Baxendale, and to recover this limb of loss, the applicant must establish that the respondent had peculiar or special knowledge of the applicants' entitlement to claim the NRAS benefit.
74 As to the loss of rent, the Tribunal notes that clause 10(a) of the contract provides that the owner is entitled to possession of the property upon payment of all monies following the practical completion stage. The period allowed for the owner to pay all monies owed under the contract is 10 days. The Tribunal concluded that the earliest that the applicants would have been able to lease the property is 7 March 2012. To the date of this decision, this amounts to 653 days.
75 The Tribunal is satisfied that the home unit, if completed, would have had a market rent of $220 per week as opined by the applicants' valuer in his letter dated 9 October 2012 (Exhibit 1, page 507). The applicants did not call their valuer but the respondent did not take issue with the valuer's opinion. The applicants were obliged to lease the property for 20% below market (National Rental Affordability Scheme Regulations 2008 (Cth), reg 16(b)(ii)), which is a sum of $176 per week. The applicants contended that they would have leased the home unit for $176 per week. The Tribunal therefor calculates, and finds, that the applicants have suffered a loss of rental income caused directly by the respondent's breach of its contractual obligation to complete the home to practical completion by 25 February 2012, as follows:
76 The applicants will continue to suffer a loss of $23.19 per day (net of the leasing agent's management fee) until the home unit is at practical completion.
77 As to the applicants' claim for loss of the NRAS benefit, the applicants produced a printout of the NRAS incentives for the NRAS years (1 May to 30 April) ending 30 April 2011, 30 April 2012 and 30 April 2013. The National Rental Affordability Scheme Act 2008 (Cth) (NRAS Act) provides that the NRAS incentive period is a 10 year period from 1 July 2008 to 30 June 2018 (s 3 of the NRAS Act). The annual incentive, or a pro rata share thereof, is payable to the owner of a relevant property where it has been approved as an NRAS lettable property and is rented to an approved tenant in the NRAS year (s 5 and s 7 of the NRAS Act). Assuming that the home unit were to be approved under the NRAS, had the applicants' home unit been completed on 25 February 2012, and had the applicants taken possession 10 days later upon payment of the final payment and rented continuously thereafter to a NRAS approved tenant, then the applicants would have been entitled to the following benefits pursuant to the NRAS:
78 This totals the sum of $17,274.99. The respondent was aware that the applicants intended to claim the NRAS incentive and that the home unit was to be constructed for NRAS compliance.
79 However, there is no evidence at all that the home unit was or would be compliant with all NRAS regulations, would have been approved for the NRAS benefit, or would have been leased by an NRAS tenant. Whilst this may have been the intent, there is no evidence to support the finding that the applicants would have received, or had already received, approval of their home unit for participation in the NRAS so as to be eligible to receive the NRAS benefit. The applicants have not proved they would have received the NRAS benefit from 7 March 2012 but for the respondent's breach of contract.
80 The Tribunal is satisfied that the applicants' loss caused by the respondent's breach of contract in failing to complete the construction of the home until to practical completion is the sum of $15,142.91 (loss of rent).
81 Accordingly, the Tribunal shall make a final order that the respondent shall pay to the applicants the sum of $15,142.90 in addition to any other sum awarded by the Tribunal.
82 The principles applicable to an order for costs under s 49 of the BSCRA Act were considered by the Tribunal in Hoskins and Daniel Vinci T/As D'Vinci Contracting [2011] WASAT 188.
83 The applicants' complaint to the Commission included, as complaint item 3, the costs thrown away by reason of the respondent's representative failing to attend site to meet with the applicants' expert, Mr Douglas, at a time that had been agreed. The amount claimed was $330. The applicants' email to the respondent dated 20 August 2012 (Exhibit 1, page 8) identifies the argument supporting that claim. At the date of the hearing, the applicant claimed costs of Mr Douglas' expert fees, including his various attendances and preparation of a revised report concerning the sub-items of complaint 1 and the costs of the reasonable remedial work required. The claimed amount is $6,105 inclusive of the sum of $330 referred to above (see Exhibit 1, page 468). At the date of the application, the applicants sought the respondent to undertake the remedial work pursuant to an order made under s 36(1)(a) of the BSCRA Act. Since that date, the applicants moved to claim the cost of the remedial work pursuant to s 36(1)(b) of the BSCRA Act and an award of damages pursuant to s 41 and s 43 of the BSCRA Act.
84 In the Tribunal's view, that change in position is justified by:
85 The Tribunal concludes that the respondent's position has been one of defiance and delay against the weight of all of the evidence at all times in this proceeding. The conduct of the respondent's representative, Mr Fred Afrasiabi, during the final hearing was both discourteous and disrespectful of the Tribunal's functions and authority and the applicants' right to bring the proceeding and have it heard on the merits. Mr Afrasiabi interjected during the course of evidence by Mr Douglas, shouted at the Tribunal, delayed the sitting of the Tribunal at various stages during the two final hearing days and repeatedly failed to produce documents which the respondent sought to rely upon. As stated in these reasons, Mr Fred Afrasiabi was not a reliable witness at all, and as a representative he did not assist in the speedy resolution of this dispute by the Tribunal. In light of these comments, the Tribunal finds that it was reasonable for the applicants to depart from a claim for the work to be done to a claim for the cost of the work to be done. The Tribunal considers that an order compelling the respondent to undertake remedial work pursuant to s 36(1)(a) of the BSCRA Act would have been futile, as the respondent had no intention of performing any order for remedial work. Further, such an order would likely lead to further proceedings pursuant to s 55 of the BSCRA Act.
86 The Tribunal considers that the cost of Mr Douglas' attendance, and all of his costs of attendances at site, inspection, preparation of his initial report and subsequent report including costing the remedial work in this proceeding should be paid by the respondent. The Tribunal finds the respondent conducted the proceedings unreasonably and caused the applicants to incur considerable costs in pursuing their justified claims. For these reasons, the Tribunal shall order that the respondent pay to the applicants the cost of their expert fees in the sum of $6,105 as claimed and as invoiced by Mr Douglas (Exhibit 1, page 468).
87 The respondent's complaint is premised upon a finding or conclusion by the Tribunal that the construction of the home unit was at practical completion as at 9 September 2012, when the invoice dated 9 September 2012 was issued by the respondent for $5,040 including GST. For the reasons referred to above, the respondent has not constructed the home unit to the practical completion stage. It follows that the applicants were not obliged to pay the practical completion stage payment on 9 September 2012, or interest of 20% thereon, and the respondent's application is dismissed. The Tribunal has, however, set off against the sum assessed as payable in respect of the applicants' complaint 1, the balance of the contract price (Ventura).
88 As to the respondent's claim for interest, it is dismissed, as the home unit was not at practical completion on 9 September 2012. Further, the respondent tendered Exhibit 6, said by the respondent to be the final original contract between the parties. Exhibit differs from Exhibit 5 (the applicants' tendered final contract) at item 8 of the Schedule which in Exhibit 5 is blank and in Exhibit 6 refers to '20%' in handwriting. Mr Fred Afrasiabi's evidence on this issue was most unreliable, and varied between an assertion that the rate of 20% was what the respondent intended to include in the contract to an assertion that the rate of 20% was what the respondent would have agreed to. In neither case is the Tribunal satisfied that the terms of the contract between the parties entitled the respondent to receive, and obliged the applicants to pay, 20% on any instalment sum. It was not agreed to by the applicants, and for this reason as well, the respondent's application for interest is dismissed.
89 For the reasons referred to above, the Tribunal shall order that the sums of $19,505.75, $15,142.91 and $6,105 be paid to the applicants within the period of a calendar month (being 24 January 2014). For the reasons referred to above, the Tribunal shall dismiss the respondent's complaint.
I certify that this and the preceding [89] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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