Warburton v County Construction

Supreme Court of NSW|2022-06-17|Before: Black J

erts v Jandson Pty Ltd (Homebuilding) [2011] NSWCTT 105 - Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47 - Qantas Airways Ltd v Gubbins (1992) 28 NSWLR 26 - SAMM Property Holdings Pty Ltd v Shaye Properties Pty Ltd [2017] NSWCA 132 - Sheldon v McBeath (1993) Aust Torts Reports 81-209 - Sutcliffe v Chippendale & Edmonson (A Firm) [1971] 18 BLR 149 - The Owners - Strata Plan 6511 v Meriton Apartments Pty Ltd [2016] NSWSC 909 - The Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612 - Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 - UBS AG v Tyne as Trustee of the Argot Trust (2018) 265 CLR 77; [2018] HCA 45 Category: Principal judgment Parties: Mark Warburton (First Plaintiff/First Cross-Defendant) Jacqueline Warburton (Second Plaintiff/Second Cross-Defendant) County Construction (NSW) Pty Ltd (First Defendant/Cross-Claimant) Robert Daryl Hart (Second Defendant) Representation: Counsel: F Hicks SC/B Anderson (Plaintiffs/Cross-Defendants) M Klooster/F Clark (Defendants/Cross-Claimant)

Nature of the proceedings, factual background and chronology

By Amended Statement of Claim filed on 28 October 2021 ("ASC"), the Plaintiffs, Mr Mark Warburton ("MW") and Mrs Jacqueline Warburton ("JW") claim damages against the First Defendant, County Construction (NSW) Pty Ltd ("County") and further relief, including rectification of an agreement dated 27 February 2017 ("Second Agreement") by altering cl 6.2 of that agreement to delete specified words. Mr and Mrs Warburton did not press a further pleaded claim against the Second Defendant, Mr Robert Hart, at the hearing.
By a First Cross-Claim Statement of Cross-Claim filed on 22 October 2019, County in turn claims specified amounts against Mr and Mrs Warburton. It now only presses a narrower claim for $12,222.23, said to be an unpaid part of the amount of $110,000 payable to County under the Second Agreement. Alternatively, they claim an amount alleged to be payable if the Contract remained on foot after February 2017. By their Defence to the Cross-Claim filed on 19 December 2019, Mr and Mrs Warburton do not admit County's entitlement to the amounts claimed in paragraphs 9 and 10 of the Cross-Claim, deny County's entitlement to payment of $12,222.23 as claimed in paragraph 11 of the Cross-Claim, and contend that they are liable to set-off the damages and other amounts claimed by them against the payment of that amount. The parties reached agreement as to that matter.
Turning now to the factual background to the proceedings, it is common ground that Mr and Mrs Warburton are registered proprietors of a property situated in Mosman, NSW (ASC [1]; Defence [1]). The residential building works at the property were the subject of a development application approved under the Environmental Planning and Assessment Act 1979 (NSW) ("EPA Act") dated 19 September 2012, given by Mosman Council as the relevant statutory authority which, relevantly, required installation of an on-site rainwater re-use system for on-site detention and that all works be carried out in accordance with the requirements of the Building Code of Australia ("BCA").
On 23 September 2015, County Constructions submitted a tender for proposed demolition and construction works at the property with two alternative options with pricings of $3.5 or $4.9 million (JW 6.8.20 [7], Ex J6 2006 - 2020).
On 30 October 2015, Mr and Mrs Warburton and County entered into a written costs plus contract ("Contract") for County to undertake building work comprising the demolition of an existing dwelling and the construction of a new residence at that property ("project") for a then estimated value of $3,500,000 (ASC [5]; Defence [5]; JW 6.8.20 [15]; Ex J6 2031-2069). It is common ground that the relevant building work was residential building work for the purposes of the Home Building Act 1989 (NSW) ("HBA") (ASC [6]; Defence [6]).
The Contract provided for an estimated cost of works of $3,500,000 (Ex J6, 2033) but identified a number of matters that would give rise to adjustments in that amount, including any discrepancy in drawings and specifications, and whether the work actually done was different to the work contemplated at the time of signing the Contract, for example, because of details provided or choices made after the Contract. The Contract incorporated a specification dated 26 August 2015 prepared by Mr Vitale, an architect then engaged by Mr and Mrs Warburton, and development consent plans. County was required to provide a certificate of insurance under the Home Building Compensation Fund, which remained in place after entry into the Second Agreement, and schedule 1 of the Contract set out costs payable by the Owner and provided for a builder's mark-up of 9% of the costs of the work. Clause 1 of the Conditions of Contract set out County's responsibilities and cl 1(b) contained warranties that substantially correspond to those contained in s 18B of the HBA. By contrast with the position which I will find below in respect of the Second Agreement, those warranties plainly applied to the work then being undertaken by County, namely to complete the construction work in accordance with the drawings and as described in the specification, as adjusted under the Contract. The Contract also required, by cl 1(d) of the Conditions of Contract, that work under the Contract comply with the BCA to the extent required under the EPA Act, including any regulation or instrument made under that Act; all other relevant codes, standards and specifications, with which the work was required to comply under any law; and the conditions of any relevant development consent or complying development consent. Clause 2 dealt with the owner's responsibilities. Under cl 9 of the Contract, County was required to obtain and use materials which complied with the requirements of the Contract. Clause 17 provided for payment by the owner to the builder of the costs of works and schedule 3 listed a number of documents identifying the scope of the work. Plainly, County's obligations under the Contract were later narrowed by the Second Agreement, which I address below, so far as many of them were directed to work undertaken by a builder, as distinct from the narrower obligation of management and supervision of the project assumed by County under cl 2.1 of the Second Agreement, which I address below.
On 11 November 2015, County obtained a contract of insurance for works at the contract price (JW 6.8.20 [17]; Ex J6, 2078) and, on 13 November 2015, an amended development application approval was issued and a construction certificate was issued (JW 6.8.20, [19]; Ex J6, 2079). County commenced carrying out the building works in about December 2015 (ASC [7]; Defence [7]).
Areas of disagreement then arose between the parties, although there is a contest between the parties as to the outer scope of that disagreement (ASC [8]; Defence [8]). The then architect and contract administrator, Mr Vitale, gave notice that he would no longer act as contract administrator on 24 June 2016 (Ex J6, 2283-2284).
In mid-August 2016, Mrs Warburton made inquiries with County about product warranties for windows and insurance required under the HBA (Ex J6, additional tender). I will address County's reliance on that matter below.
Mr and Mrs Warburton engaged Mr Brincat as a consultant in respect of the project in early September 2016 (JW 6.820 [79]; Brincat 1.9.20 [4]-[5]; Ex J6 2488-2491) and, by his email dated 11 September 2016 (Ex J6, 2488), Mr Warburton advised Mr Hart that: "In order to improve the administration of the project from our end, to reduce our stress levels and to hopefully see a smoother process, we have appointed Edward (Ted) Brincat from Auspro Building Services P/L to administer the contact pursuant to the 'Special Conditions to Enable Architect Administration of BC4 Contract', clause 4(c)." That clause provided for an architect to administer the Contract as "the disclosed agent of the Owner" and authorised that architect to provide instructions to the builder concerning variations to the work and undertake other steps in respect of the project (Ex J6, 2051). None of the parties then raised any concern that Mr Brincat was not an architect for the purposes of that clause.
By an email dated 13 September 2016 (Ex J6, 2490), Mr Brincat advised Mr Hart that he had been "appointed to administer the contract between the parties" and requested that he be referred to as the "superintendent" replacing the previous administrator, Mr Vitale, who was then the architect on the project. By an email dated 27 September 2016 (Ex J6, 2637), Mr Brincat objected to County contacting suppliers engaged by Mr and Mrs Warburton without his permission and advised County's employee to "ensure you seek permission from me in the future if you need to contact any of the client suppliers etc".
On 21 September 2016, Mrs Warburton made an inquiry with County about efflorescence on an area of brickwork (Ex J6, 2633). I will address County's reliance on that email below.
On 10 October 2016, Mr Brincat advised Mrs Warburton that he was concerned about "construction on the run and decision-making on the run", observed that this is a "recipe for disaster and significant cost blowouts in the future" and recommended that the job be suspended for a month to obtain fixed price quotations from suppliers and contractors and to assess claims made to date (Ex J6, additional tender). That did not occur. By an email dated 11 October 2016 (Ex J6, additional tender), Mr Vitale, the architect then engaged on the project for Mr and Mrs Warburton, sought to set a process for any further design changes in respect of the project. Mr Vitale subsequently withdrew from the project.
By an email dated 25 November 2016, Mr Hart requested Mr and Mrs Warburton to make an advance payment of $110,000 to assist County in meeting its financial obligations (Ex J6, 3461), which they made (Ex J6, 3465). Mr Hart responded (Ex J6, 3466) to the advance payment stating that "We won't let you down I promise thx Rob". That was a generous approach on Mr and Mrs Warburton's part, which regrettably can have no impact on the outcome of the legal issues in these proceedings.
By an email dated 7 December 2016, Mr Hart emailed Mr Brincat (Ex J6, 3467) that: "… I hope it is apparent to everybody that we are committed to the clients, you and the outcome … Happy to sit down and talk dollars when I spoke to the client I think the bill was circa $40k but id [sic] also like to chat about how we move forward, I would like to discuss a fixed fee with you taking into account your fees etc as I think [Mrs Warburton] will want to pay many of the trades direct, we may be able to get her some better deals if we get her to pay direct and more frequently than builders." Mr and Mrs Warburton submit, in closing submissions, that there is no suggestion here that the arrangement would change the obligations of County in relation to completion of the work. While that is so, the effect of the Second Agreement must be determined on its proper construction, where there is no application for rectification of it, other than in respect of a release which I address below.
On 14 December 2016, by its payment claim 12, County acknowledged and identified a substantial credit due to Mr and Mrs Warburton (Ex J6 3474-3476)
In early February 2017, a meeting took place between Mr Hart and the Mr and Mrs Warburton at which, inter alia, reconciliation issues were discussed (JW 6.8.20 [140]; MW 29.9.21 [55]). On Mr and Mrs Warburton's account, Mr Hart there suggested that: "Moving forward I think it would work better that you pay the trades direct. Also if they are paid earlier we can get you a discount and I can approach trades and ask for this. We are committed to finishing the job and maybe we can agree then on a fixed fee for County to finish the job and you pay the trades direct." He also indicated that: "Ok, we will come back to you with a formal proposal. We will pay for Ted's cost. From a cash flow perspective, it would assist us if you could pay the trades directly and we can then finish everything off. At present, we are not in a position to fund everything up front."
Mr Hicks submits, in closing submissions, that there was no suggestion at this meeting that Mr and Mrs Warburton would become "owner/builders" or that the existing arrangements for performance of the works would be changed. That may be a fair characterisation of the meeting, but it also contemplated that County would put a "formal proposal;" and the effect of the Second Agreement must be determined on its proper construction, as I have noted above, and it plainly redefined the scope of County's obligations by cl 2.1 of the Second Agreement which I address below.
By an email dated 4 February 2017 (Ex J6, 3688), Mr Hart also advised Mr Brincat of his commitment to the project and his positive view of Mrs Warburton, as follows: "We are and always have been 100% committed to the [p]roject the clients and you, this will not change. I agree with you re [Mrs Warburton] her work rate is phenomenal, I have never worked with a client like her. I feel a very strong sense of personal commitment to her. … " It may be unlikely that Mr Brincat would have taken the extravagant rhetoric of that statement at face value, and the second part of the second sentence is not necessarily a compliment, given the views he later expressed, as noted in paragraph 26 below. Mr Hart also there addressed the difference between an earlier option of a "lightweight structure with lower levels of finish at $3.5 million" and a "heavyweight structure with a high level of finish at just under $5 million", presumably in explanation of the increased cost of the project, and noted that he was not aware of the pricing of trades that Mrs Warburton had directly engaged. He addressed the question of program and put a proposal toward payment of a portion of Mr Brincat's costs. The attitude to Mrs Warburton expressed in that email is not consistent with the concerns which Mr Hart now identifies as reasons for the release sought in the Second Agreement.
By a further email dated 5 February 2017 (Ex J6, 3690), Mr Brincat expressed a more negative view of the position in respect of delay and indicated that the owners had not had a "good experience" with the project. By his email response dated 6 February 2017 (Ex J6, 3694), Mr Hart again referred to alternate costings of the project, and noted that County could not forecast costs where Mrs Warburton was obtaining quotes directly and not providing it with information as to those costs. He indicated his disagreement with Mr Brincat as to the delays in the trades and advised that: "… I now spend more time on this job than all others combined which shows you that it is my personal mission to have this [p]roject complete to the highest standard. There will be no compromise on quality and the clients will be able to go away and relax in the full knowledge that we will be completed on time and to the highest standard."
Mr Hart was cross-examined as to that proposition which did not recognise the prospect that County's ability to control the quality of construction would be compromised, where its role would be restricted to management and supervision under the Second Agreement and Mr and Mrs Warburton would choose contractors and pay them directly. However, that prospect must have been obvious to Mr Brincat, then acting as Mr and Mrs Warburton's agent, given his experience in building projects.
Further correspondence between Mr Brincat and Mr Hart followed, addressing the proposed terms of the Second Agreement. By an email dated 11 February 2017 (Ex J6, 3706) Mr Brincat referred to his previous meeting with Mr Hart, suggested that County pay Mr Brincat's fees "to right a lot of wrongs that have occurred on this [p]roject"; noted a commitment by Mr Hart to be "on site and hands on every day and whatever is required to get the proposal back on track and completed by 16 July 2017", and referred to a proposal that County forego its margin of 15% (including supervision, a labourer, overheads administration etc) and accept a fixed fee to cover the foreman, labourer and some administrative costs. He also observed that: "The [p]roject is starting to get momentum but as seen in emails and as discussed at length, I have grave concerns that [the site foreman] is in over his head and he needs for you to be overseeing every part of the construction of this very detailed and quality home. I have no issues with [the site foreman]. He is a very hard working young man but he needs experience[d] people around him to learn about detail and forward planning. …"
Mr Brincat then adopted an aggressive approach in an email dated 12 February 2017 to Mr Hart (Ex J6, 3723) which observed that if Mrs Warburton and Mr Brincat were not "looking over your supervisor, basic construction issues would have been constructed incorrectly" and went on to observe that: "I am more than happy to advise the owners of you[r] view of the works and let them to decide as to whether you are to complete the works but if I was to be asked, I would terminate your services at lockup and then complete the project without you, still saving your margin etc. Your reputation would be at risk and future jobs on the North Shore not looking very favourably. … If you are terminated at lock up there would be a strong likelihood of litigation to recover the costs and damages up to until that date. …" Mr Brincat there referred to County's "failure to properly administer and construct the works" [emphasis added]. He denied, in cross-examination, that that email indicated a concern that there were defects in the works. I am unable to see that an allegation of a failure properly to construct the works can have any other meaning, and I reject Mr Brincat's evidence in that regard.
By an email dated 13 February 2017 (Ex J6, 3724), Mr Hart advised Mr Brincat that County was prepared to change its cost-plus margin to a fixed fee of $110,000 inclusive of GST to complete the project; that he agreed to pay Mr Brincat's fees of $75,000 inclusive of GST at the end of the project; and that that proposal was "subject to a mutual deed of release".
Later on 13 February 2017 (Ex J6, 3732), Mr Brincat circulated a draft deed which limited the scope of County's future work on the project, altered the payment arrangements and included a mutual release in connection with the matters described in Recital E. That appears to have been intended to refer to Recital D in that draft, which referred to the accounting of the cost-plus charges by County and the project being late. Recital E referred to payment of the costs of the project by the owners directly, with County to receive a fixed sum for the completion of the works. Mr Brincat initially sent that draft deed to Mr and Mrs Warburton and subsequently to Mr Hart on that date (Ex J6, 3741). This appears to have been the origin of the Second Agreement.
By an email dated 14 February 2017 (Ex J6, 3741), Mr Hart sent his solicitor, Mr Tim Somerville, Mr Brincat's draft deed of release and explained his perspective on the project, in strikingly different terms to what he had said to Mr and Mrs Warburton, as follows: "We have a costs-plus build in Mosman that is starting to become a bit of nightmare. The architects were relived back in June last year. The designer quit soon after and all consultants bar us have left the clients. They hired a building consultant in September who is extremely outspoken and who is quickly making this a battle. We did have some accounting issues late last year and since our attention was b[r]ought to these, we have since rectified all errors. Now, with the job growing based on design changes - not because of us - the clients are obviously trying to save costs and Ted Brincat, the consultant, has put this Deed together because of this. Overall it has become a total nightmare with nightmare clients and nightmare consultant. I don't care about the money, I need to close the door really tight and make sure they can't come back at me. I need you to look at this quickly please."
By his response dated 14 February 2017 (Ex J6, 3746), Mr Somerville then drew Mr Hart's attention to the fact that the proposed Second Agreement would be an agreement to carry out "residential building work" within the meaning of the HBA, because the definition of that term in Sch 1 of the HBA included work involved in "co-ordinating or supervising" work in constructing or altering a dwelling. He drew attention to the requirements under the HBA in respect of the agreement, and it appears those requirements were satisfied in respect of the Second Agreement. Mr Somerville also drew attention to the limited scope of the release in Mr Brincat's draft of that agreement, which he read as directed to the matters referred to in Recital E, namely the "accounts not being correct". Mr Somerville observed that: "I would have thought you would want a more general release than this. You cannot obtain a release from your obligations under the [HBA], such as the obligations to carry out the work in a proper and workmanlike manner. However, I would have thought you would want a release relating to any claim relating to any previous payment to you, or made by the owners to any third party at your direction."
On 16 February 2017, Mr Somerville, the solicitor acting for County, forwarded a revised draft of the Second Agreement to Mr Brincat for review (Ex J6, 3798). His email noted that: "I'm sorry it has become so verbose. However, I took the view that, under section 6 of the [HBA], the agreement needs to comply with the relevant provisions of the [HBA], which I have included. Of course, at the time of signing, the agreement will have to have complete schedules attached, including the plans and specifications, the Consumer Building Guide and our client's insurance". The attached deed included mutual releases in the form included in the final version of the Second Agreement.
On 18 February 2017, Mr Brincat responded to Mr Hart identifying "one major issue" with the revised draft of the Second Agreement relating to the reconciliation of three project claims (Ex J6, 3798).
On 27 February 2017, County forwarded the Second Agreement, signed by County but not yet by Mr and Mrs Warburton, to Mr Brincat (Ex J6, 3895). The recitals to that Agreement recorded that: "D A dispute arose between the Warburtons and the Builder regarding allegations relating to the accounting under the Original Contract and allegations that the project referred to in the Original Contract was taking longer than it should have taken. E. By way of settlement of such dispute, the Parties have agreed that, as from 13 February 2017 that the costs of the project will be paid by the Warburtons directly and the Builder will receive a fixed sum for the completion of the work and as set and defined by this agreement. F. Edward Brincat has been engaged by the Warburtons to act as superintendent of the [p]roject."
Clause 2 of the Second Agreement substantially narrowed the scope of County's work, providing that: "2.1 The Builder shall carry out all the work reasonably necessary to manage and supervise the completion of the Project in accordance with the Plans and Specifications, by providing the following personnel from the date of this Agreement until the Practical Completion Date: 2.1.1 a fulltime supervisor, being Luke Lubrano; 2.1.2 a fulltime labourer; 2.1.3 a project manager, being Robert Hart; and 2.1.4 such office staff as is reasonably necessary to supervise the paperwork relating to the Project. 2.2 The Builder shall have no responsibility for the cost of completing the Project, other than for the provision of the personnel referred to in clause 2.1. Warburtons shall be responsible for all of the other costs of completing the Project, including paying subcontractors and paying for materials." [emphasis added] That clause had the effect that County was no longer required to construct the project, but instead to carry out the work "reasonably necessary" to "manage and supervise" its completion and to provide the specified staff, with the construction work implicitly to be completed by subcontractors. The term "Plans and Specifications" in that clause was defined as the Plans and Specifications set out in schedule 4 of the Second Agreement. It is common ground that those plans and specifications differed to those contained in the Contract.
Clause 3 of the Second Agreement provided for County's remuneration, with Mr and Mrs Warburton to pay County the amount of $110,000 inclusive of GST, by six equal monthly instalments from 28 February 2017, and County to pay $75,000 inclusive of GST in consideration of Mr Brincat's services as superintendent of the project; within 7 days after the Practical Completion Date (as defined). Clause 4.1 referred to a certificate of insurance contained in Sch 1 of the HBA.
Clause 6 of the Second Agreement contained mutual releases, which were in relevantly the same form so far as releases were given in favour of County and Mr and Mrs Warburton. Clause 6.2 provided that: "The Warburtons and each of them release and forever discharge [County] from all and any claims, suits, demands, actions and legal or other proceedings including damages for defamation, pain and suffering, which they may have or but for this Deed may have had against [County] in respect of or in connection with any event which has occurred prior to the date of this agreement, including the matters referred to in Recital D above." Clause 6.3 provided that the releases did not apply to any right to enforce the provisions of the Second Agreement or any event occurring after the date of that Agreement.
Clause 8, headed "Statutory Warranties by the Builder", recorded warranties provided by County to Mr and Mrs Warburton. Clause 8.1.1 provided a warranty that the Work (as defined) would be done with due care and skill and in accordance with Plans and Specifications, but, as I noted above, that warranty referred to the work to be carried out by County pursuant to cl 2.1 of the Agreement, which was relevantly to manage and supervise the completion of the project and provide the relevant personnel until Practical Completion, not itself to construct the project after the date of the Second Agreement. Clause 8.1.2 was a warranty as to any materials supplied by County, but there is no complaint as to any such materials. Clause 8.1.3 - 8.1.4 were each limited to the way in which the Work would be done. Clause 8.1.5 was wider, so far as it warranted that the Work "will result, to the extent of the Work conducted, in a dwelling that is reasonably fit for occupation as a dwelling." Clause 8.1.6 was in turn a warranty as to fitness of the Work and materials used in it, but that was also limited by the narrower scope of work to be performed by County under the Second Agreement. The schedules to the Second Agreement included the Home Building Compensation Fund Insurance Certificate obtained when the Contract was made, the Consumer Building Guide, the Consumer Building Guide checklist and further plans and specifications for the works, which differed from those attached to the Contract.
By an email dated 27 February 2017, Mr Brincat sought Mr Hart's confirmation that retentions held by County for trades and suppliers would be County's responsibility to pay when and where required, and Mr Hart provided that confirmation (Ex J6, 4046). Mr Brincat then sent the Second Agreement signed by County to Mr and Mrs Warburton for signature (Ex J6, 4044); Mrs Warburton asked him several questions as to payment arrangements under that agreement (Ex J6, 4070); and, on 5 March 2017, Mr Brincat returned pages of the Second Agreement signed by Mr and Mrs Warburton to Mr Hart, excluding the attached plans which had not been signed by Mr and Mrs Warburton but recognised by them as being part of the agreement (Ex J6, 4199). Although that agreement was dated 27 February 2017, I accept that it did not take effect until Mr and Mrs Warburton (through Mr Brincat) communicated their acceptance of County's offer (made by County by providing a signed version of the Agreement to Mr Brincat) to County on 5 March 2017. Both the narrowing of the scope of County's work and the release under that agreement therefore took effect, not on 27 February 2017, but from 5 March 2017.
Mr Brincat's evidence is that, at the date of the Second Agreement, all demolition, underpinning and bulk excavation works were complete (Brincat 30.5.22 [14(a)-(c)]); the shell of the pool and its concrete surrounds were complete (Brincat 30.5.22 [14(e)]); all structural steelwork was complete (Brincat 30.5.22 [13(h)]); all internal stormwater and sewerage pipes had been completed, other than for rough-in to the ground floor and first floor bathrooms, connection to the rainwater tanks and sewerage pipework to the basins (Brincat 30.5.22 [14(i)-(k)]); and the roof, other than for roof sheeting to the garage and roofing to the front entry was complete (Brincat 30.5.22 [14(g)]). The extent to which work was complete is relevant in two respects. Work which was complete prior to the Second Agreement would have the benefit of the wider release for which County contends if, contrary to my view, that release extended to building defects; and work completed after that date would be subject only to the narrower obligations of management and supervision assumed by County under the Second Agreement.
The property appears to have reached practical completion in about August 2017. About that time, issues also arose in respect of claims from unpaid trades engaged by Mr and Mrs Warburton (Ex J6, 5380).
On 30 September 2017, Mrs Warburton sent emails to Mr Banning of Central Coast Shop Fronts Pty Ltd ("CCSF") regarding the windows (Ex J6, 5785) and to Mr Hart regarding a lack of pressure in taps (JW 6.8.20 [432]; Ex J6, 5784). On 1 October 2017, Mrs Warburton sent a further email to County regarding concerns with the pool works (JW 6.8.20 [567]). A certificate of compliance for plumbing, stormwater system and gas was issued by the plumbing contractor on 9 October 2017; an interim occupation certificate was issued on 19 October 2017; and Mr and Mrs Warburton moved into the property in October 2017 (ASC [11], Defence [11]).
An initial defects list (Ex J6, 6070-6072; T71-72) was prepared on or about 19 October 2017 by Mr Brincat, and it was then planned that the painter would return to touch up paint work after other trades has carried out rectification work. Mr Klooster points out, and I accept, that a reference in that list to the need to remove blue tape from the window in the upstairs laundry suggests that protective steps were taken to protect the frame from paint, at least in that location, although that finding perhaps does not go very far (Ex J6, 6065, T72). The defects then identified in respect of paint and other substances on window frames were, as Mr Klooster points out, significantly more limited than those for which Mr and Mrs Warburton now contend.
Mrs Warburton prepared a second defects list on 1 November 2017 (Ex J6, 6130-6138) which is detailed, but also identifies a smaller list of paint and substances on window frames and scratches to window frames than that for which Mr and Mrs Warburton now contend. On 1 November 2017, Mr Brincat sent emails to Mr Hart regarding plumbing issues (Ex J6, 6129; 6139-6140) and, on 5 November 2017, Mrs Warburton sent a further email to County regarding plumbing defects (JW 6.8.20 [444]). On 7 November 2017, Mr Samuels of County emailed Mr Azar of Mickemouse Painting, the painting firm, with a list of defects (Ex J6, 6182).
In February 2018, further correspondence took place in respect of invoices that had not been paid by Mr and Mrs Warburton (Ex J6, 6337ff) and, in particular, there was a dispute as to whether Mr and Mrs Warburton would pay the painter for work done in addressing damage caused by other trades, until those other trades had been backcharged and accepted liability for the costs incurred.
A further defects list was prepared by the Department of Fair Trading ("Fair Trading") on 25 May 2018 (Ex J6, 6401-6416), although one would expect that list to reflect some wear and tear, where it was prepared after Mr and Mrs Warburton had been living in the property for about 15 months. Fair Trading then made a rectification order against County (JW 6.8.20 [743]; MW 29.9.21 [82]; Ex J6, 6400-6408). The parties did not contend that order bound the Court in determining this claim, and it is, regrettably, plain that Fair Trading paid no or no adequate attention to the limited scope of County's responsibilities under the Second Agreement in making that order.
Mr and Mrs Warburton commenced proceedings in the New South Wales Civil and Administrative Tribunal on 25 June 2018 and the proceedings were then transferred to the District Court. It appears the proceedings were commenced within the period specified in s 18E of the HBA for both major and non-major defects.
It is plain that, even by August 2018, the painter had not been paid amounts due in respect of previous works, although several sub-contractors had agreed that they could be backcharged for the costs of painting work arising from defects in their work. By that time, several third party contractors had also made clear they would not return to repair defects until their outstanding accounts were paid. By an email dated 15 August 2018 (Ex J6, 6572), County noted, inter alia, that the painter was seeking acknowledgement that Mr and Mrs Warburton would honour his final bill of about $6,000 once he completed the rectification works and Mrs Warburton responded that: "All payments due and payable will be honoured. County still has not verified that the trades being backcharged are aware and they all acknowledge that they will accept the backcharges. This has been requested on numerous occasions. County to provide." Plainly, that response left open the question which payments Mrs Warburton considered were "due and payable". Mrs Warburton then also took the position that she and Mr Warburton did not have to pay contractors' outstanding accounts until defects were rectified and verified by the Department of Fair Trading (Ex J6, 6573). As I will note below, Mr and Mrs Warburton's obligations under cl 2.2 of the Second Agreement had no such limitation.
Correspondence as to defects, including difficulties with a sliding door in the dining room, continued at least into September 2018 (Ex J1, 6623).
In early February 2020, there was an entry of water into the property (JW 6.8.20 [729]-[737]). In March 2020, there was sewage spillage into the shower and floor in an upstairs bathrooms (JW 6.8.20 [489]; Ex J6, 6669-6671) and, in late July 2020, a plumbing firm was engaged to undertake emergency plumbing works (JW 11.2.22 [3]; Ex J6, 6682).

Lay and expert evidence

Both parties initially relied on voluminous expert evidence, significant parts of which did not appear to be relevant to any matters in dispute in issue in the proceedings. The parties ultimately read limited parts of those affidavits, narrowed to relevant materials, at the hearing.
Mr and Mrs Warburton relied on two affidavits of Mr Brincat, a building consultant and civil engineer engaged by them from about September 2016, dated 1 September 2020 and 29 September 2021. In his first affidavit, Mr Brincat referred (Brincat 1.9.20 [4]) to an initial conversation in which Mrs Warburton indicated a concern as to the manner in which she and Mr Warburton were being charged for work in respect of the project. He also referred to a meeting with Mr Hart on 8 February 2017, at which Mr Hart agreed that the job had been "mishandled" (Brincat 1.9.20 [39]) and that the foreman on the site had been inexperienced and needed guidance. Mr Hart also indicated that County did not care if it "made no money on the job" and "wanted to do right thing", and offered a proposal for a reduced flat fee, a contribution to Mr Brincat's fees, and a "change of contract" which was to be drawn up by Mr Brincat on behalf of Mr and Mrs Warburton. Mr Brincat there characterises the position as that County was to be paid a fixed fee of $110,000 "to complete the job" or "complete the project" (Brincat 1.9.20 [40], [41]). That characterisation is plainly inconsistent with the draft agreement prepared by Mr Brincat and the Second Agreement that was executed by Mr and Mrs Warburton and County, which significantly narrowed the scope of County's responsibilities, to management and supervision as distinct from construction, at the same time that it fixed the fee payable to County.
By his second affidavit dated 29 September 2021, Mr Brincat referred (Brincat 29.9.21 [19]-[20]) to correspondence with Mr Hart, explaining concerns which he had as to aspects of the installation of the spa, pool and cover, at a time that County's responsibility had been limited to management and supervision and the pool and spa was being constructed by a third party contractor, albeit one in which County appears at one point to have had an interest. Mr Brincat's evidence is that he did not have instructions from Mr and Mrs Warburton about providing any release in respect of any defects in County's work, at the time of entry into the Second Agreement (Brincat 29.9.21, [159]). I note, however, that Mr Brincat had been appointed as their agent in respect of the project and acted on their behalf in initially drafting and negotiating the Second Agreement and, in any event, they executed that Second Agreement. Mr Brincat's evidence is that he did not discuss defects in County's work at the property with Mr Hart or anyone on County's behalf at the time of entry into the Second Agreement, or with Mr and Mrs Warburton and that the dispute at that time concerned "only the overcharging" by County (Brincat 29.9.21 [161]-[162]). I bear in mind that the discussions to which I referred above extended to the wider proposition that the job was "mishandled" and included reference to the inexperience of the foreman on the site. Mr Brincat asserts that the basis on which he negotiated the Second Agreement "required County to remain responsible for any defects in its work at the Property", but that question must be determined as a matter of construction of the Second Agreement, and not by reference to Mr Brincat's understanding of what it achieved (Brincat 29.9.21 [163]). Mr Brincat also referred to the attachment of the Home Owners Warranty Insurance Certificate to the Second Agreement (Brincat 29.9.21 [164]), which is explicable by the fact that County was continuing to undertake supervision and management works in respect of the project, and does not support Mr Brincat's asserted understanding that "County was responsible for defects in any of its work carried out at the Property". Mr Brincat also refers to photographs of work undertaken in March, May and August 2017 and to the inspection undertaken by Fair Trading in May 2018 and to the rectification order made by Fair Trading to which I referred above (Brincat 29.9.21 [165]-[167], [196]ff).
By a third affidavit dated 30 May 2022, Mr Brincat responded to aspects of Mr Hart's affidavit dated 17 May 2022, to which I refer below. He outlined the process by which copies of the draft Second Agreement were provided to Mr and Mrs Warburton and the final Second Agreement was signed by them. He addressed the question of work which had been completed prior to the Second Agreement, and noted that significant aspects of the installation of internal stormwater and sewerage pipes were not complete as at the date of the Second Agreement; installation of hot and cold water pipework was not complete as at the date of the Second Agreement; rainwater tanks were not connected or tested or working as at the date of the Second Agreement; electrical cabling work in the house was not completed by the Second Agreement, and the installation of ground floor windows and doors was not complete by the date of the Second Agreement. That evidence is adverse to Mr and Mrs Warburton's interests, so far as County's obligations were narrowed by the Second Agreement.
Mr Brincat was cross-examined. Some aspects of Mr Brincat's evidence were implausible, including his denial (T42) that he had formed the view early in his engagement that the construction process was being undertaken "on the run" or that numerous design changes were occurring, where that is apparent from contemporaneous correspondence. His evidence (at T51) that his reference, in his email dated 12 February 2017 (to which I referred above) to a concern as to County's ability to "construct the works" was limited to the cost and time of construction, and not the quality of construction, reflected a narrow, but not impossible, reading of those words. Mr Brincat was at times, argumentative and defensive, and I approach his evidence with a degree of caution.
Mr Brincat was cross-examined to seek to establish that Mr and Mrs Warburton, or at least he (as their agent) was on notice of issues which may have given rise to defects in the work undertaken by County, prior to the entry into the Second Agreement. Those included the inexperience and lack of knowledge, as to some matters, of the foreman who County originally appointed to the project (T36). Mr Brincat indicated those matters did not cause concern, because the project manager, implicitly Mr Hart, would be overseeing the works and assisting and directing his employees, although he also acknowledged that the foreman was not appropriate for the project, because of its detail and complexity (T36) and his later evidence was that the foreman had ability but also "needed guidance" (T49). Although Mr Brincat's cross-examination demonstrated that there was plainly a potential issue as to the foreman's experience, which at least raised a risk that work might be undertaken inefficiently, it did not seem to me to indicate that there was any real recognition, as at February or March 2017, of any substantial risk of defects in the work undertaken to date, and Mr Hart's evidence (to which I refer below) supports that conclusion. Mr Brincat was also cross-examined as to the photos which had been taken of work at site, to seek to establish that they were taken to show whether the works were defective. Mr Brincat responded that those photos were directed to documenting the status of the work, as distinct from defects (T40). While Mr Brincat and Mrs Warburton took numerous photos of that work, that is readily explicable by the then concerns as to delays and overcharging, and does not give rise to any inference that there were then recognised defects in the work.
Mr Brincat was cross-examined as to the circumstances in which he prepared the initial draft of the document that became the Second Agreement and consulted with Mr and Mrs Warburton as to the terms of that agreement and as to the execution of that agreement (T48ff). His evidence was that he formed the view that the scope of the release in his original draft of that agreement and in the further draft prepared by County's solicitors was "similar", and he accepted that he formed that view without any encouragement from County (T56). Mr Brincat was also cross-examined as to the delay after the execution of the Second Agreement by Mr and Mrs Warburton, after he had sent it to them, and its return to him on or about 28 February 2017; his attendance at the site on 1 March 2017, at which he took multiple photographs; and his then returning the executed Second Agreement to County on 5 March 2017 (T65). His evidence is that he could not recall the extent of any discussions he had about the Second Agreement with Mr and Mrs Warburton in that period, although he accepted that it was likely that he had such discussions (T66). Mr Brincat was not cross-examined as to the whether the narrowing of County's obligations under the Second Agreement, which he had negotiated with County on Mr and Mrs Warburton's behalf, was disadvantageous to Mr and Mrs Warburton and I reach no finding as to that question, although that possibility plainly arises from the findings that I reach below.
Mr Brincat was also cross-examined as to the extent of communications received from Mrs Warburton (T67), with the implication that she was a demanding client, and as to the fact that some subcontractors were paid directly by Mr and Mrs Warburton, from February 2017 and after the entry into the Second Agreement. He acknowledged that, on one weekend, Mrs Warburton had sent over 30 emails to County although his evidence was that that was not a typical exchange between Mr and Mrs Warburton and County (T68). He a was also cross-examined as to Mr and Mrs Warburton's withholding payment of contractors in the latter part of the project, and as to the difficulties which the painting contractor encountered in being paid for that work, where Mr and Mrs Warburton sought to have those costs backcharged to other subcontractors (T75ff). Mr Brincat also accepted that his position, in early February 2018, was that he was not prepared to make payments to contractors until works had been rectified (T76); plainly, that approach exposed Mr and Mrs Warburton to the risk that contractors would take the view (as some did) that they were not prepared to undertake rectification work if they had not been paid amounts that were already due and payable to them.
Mr and Mrs Warburton also relied on the affidavit of Mr Warburton dated 29 September 2021, which was in relatively narrow scope, and only parts of which were read. Mr Warburton referred to the execution of the Contract; to the fact that he was working fulltime during the works at the property and was, obviously enough, unable to be on site "all the time"; and indicated the nature of his involvement, which appears to have been less extensive than Mrs Warburton's (MW 29.9.21 [14]-[16]). He refers to the engagement of Mr Brincat to act as contract administrator in September 2016 and to the concern as to whether he and Mrs Warburton were being charged correctly by County at that time; and to his advice on 11 September 2016 to Mr Hart of Mr Brincat's engagement and the contractual basis on which that engagement took place (MW 29.9.21 [43], [45]).
Mr Warburton also refers to the identification, in about mid-December 2016, of the fact, which now appears to have been common ground, that Mr and Mrs Warburton had overpaid an amount of about $428,700 at that point, being an overcharge for County's labour of about $196,000; an overcharge by third parties of nearly $58,000 and the amount of the deposit of $175,000 (MW 29.9.21 [48]). Mr Warburton also refers to a meeting between himself, Mrs Warburton and Mr Hart in early February 2017, at which Mr Hart apologised for accounting errors and the three of them discussed the mechanism for payment of trades and of a fixed fee, and of payment of Mr Brincat's costs by County (MW 29.9.21 [55]).
Mr Warburton referred to the receipt of the draft Second Agreement from County (MW 29.9.21 [57]). That evidence is plainly in error, since the first draft of that agreement had been prepared by Mr Brincat and the drafts of that agreement were provided by County or its solicitors to Mr Brincat, and then by Mr Brincat to Mr and Mrs Warburton. Mr Warburton indicated that he never had discussions with Mr Brincat, Mr Hart or anyone from County about giving County a release in relation to defects before signing the Second Agreement, and that he would not have signed that Agreement if he knew that Mrs Warburton or he were giving County any release in relation to defects (MW 29.9.21 [57]). I will return to questions of construction of the Second Agreement below. I note, at that this point, that evidence as to Mr and Mrs Warburton's subjective intentions is of less assistance where they had appointed Mr Brincat as their agent for relevant purposes, and left him to negotiate the Second Agreement which they signed. Mr Warburton's evidence, which can go no further than his understanding, was that defects were "not an issue at this time" and "only arose after the works were completed" (MW 29.9.21 [57]).
Mr Warburton's evidence is also that he would never have agreed to manage the project or the subcontractors, and the Second Agreement did not provide for that to occur, so far as it left the responsibility for supervision and management with County (MW 29.9.21 [60]-[61]). The difficulty for Mr and Mrs Warburton, which will arise below, is that the Second Agreement removed construction responsibilities from County, and limited their responsibility to management and supervision of the project. Mr Warburton also refers to issues which he identified in respect of the pool and spa in about November 2017 (MW 29.9.21 [76], [78]) and refers to a complaint to Fair Trading made in May 2018, as to which Fair Trading expressed certain views and issued a rectification order (MW 29.9.21 [79]ff). As I have noted above, the content of that order does not bind the Court in determining these matters on the evidence before it, and it is apparent that Fair Trading paid no attention to the scope of County's contractual obligations under the Second Agreement in making that order.
Mr Warburton was briefly cross-examined briefly, and had a limited recollection of some matters, which is understandable given the passage of time. He readily acknowledged that he and Mrs Warburton could have obtained legal advice as to the Second Agreement if they wished to do so, and his evidence was that he, Mrs Warburton and Mr Brincat had discussed that Agreement and its purpose (T83). He fairly accepted that he did not rely on advice provided by Mr Brincat with respect to the execution of that Agreement (T84).
The Plaintiffs rely on the more extensive evidence of Mrs Warburton, in five affidavits dated 6 August 2020, 29 September 2021, 11 February 2022, 6 May 2022 and 27 May 2022, although large parts of those affidavits were not relevant to the matters in issue in the proceedings, and narrower portions of those affidavits were read at the hearing.
By her first affidavit dated 6 August 2020, Mrs Warburton referred to the initial engagement of an architect in respect of the project, who subsequently withdrew from the project and was not replaced, and to a tender received from County in September 2015 (JW 6.8.20 [5]-[7]). She referred to the execution of the Contract and to the insurance policy obtained by County reflecting an initial contract price of $3,500,000 and to the issue of a construction certificate and other documents in relation to the project (JW 6.8.20 [15], [17]). Mrs Warburton referred to the subsequent engagement of Mr Brincat, as a result of concerns as to the accounting for the project, and to the subsequent meeting between her, Mr Warburton and Mr Hart in February 2017, prior to the entry into the Second Agreement, and to correspondence from Mr Brincat concerning drafts of that Agreement and its execution (JW 6.8.20 [140]ff]). Mrs Warburton also gave evidence of her subjective understanding of the Second Agreement, which I admitted so far as a rectification claim was brought in respect of that Agreement (JW 6.8.20 [154]).
Mrs Warburton there addressed the identification of concerns as to defects in plumbing work, from September 2017 onwards, and correspondence concerning those defects, continuing through until March 2019, with a further difficulty arising in March 2020 (JW 6.8.20 [432]-[489]). She also referred to correspondence in respect of defects in the swimming pool during April 2016, correspondence as to concrete finishes in June 2017, and further correspondence concerning defects with the pool, and surrounding decking and addressing other matters from August 2017 (JW 6.8.20 [498]). Mrs Warburton refers to water entry into the property in February 2020 and to a rectification order issued by Fair Trading (JW 6.8.20 [729]). I have referred above to the limited relevance of that order in these proceedings.
By her second affidavit dated 29 September 2021, only a small part of which was read, Mrs Warburton again addresses her intent in respect of the Second Agreement, in evidence of subjective intention which I admitted where a rectification claim was brought, as follows (JW 29.9.21 [214]): "The February 2017 Agreement only arose as a result of the change in payment terms at the request of Mr Hart so as to assist County in meeting their financial obligations Mark and I were asked to pay contractors direct. We did not have any discussions about defects at that time or beforehand as the works were far from complete as at February 2017. I was not asked to provide a release in respect of any defects in County's work."
It may be that this was Mrs Warburton's subjective intention in respect of the Second Agreement, but it is not consistent with the circumstances in which that Agreement was negotiated by Mr Brincat. In negotiating that Agreement, Mr Brincat had made criticisms of the quality of the level of experience of County's foreman on the site, and his suggestion that the foreman was inexperienced and not up to the job plainly carried an implication that the work may have been done inadequately, giving rise to a risk of defects; and the proposition that Mrs Warburton was not asked to provide a release in respect of any defects in County's works must be qualified by the fact that Mr and Mrs Warburton then signed the Second Agreement in the form provided to them by Mr Brincat.
Mrs Warburton also gives evidence of an issue with the performance of the dining room sliding door (JW 29.9.21 [277]); criticises the manner in which the pool cover operates (JW 29.9.21 [390]); refers to the installation of the spa between June and July 2017, after the entry into the Second Agreement (JW 29.9.21 [409]); refers to a comment made by a contractor as to whether timber decking would be required to be maintained or oiled on a regular basis (JW 29.9.21 [422]); refers to a comment made by a contractor as to the poor finish of outdoor stairs (JW 29.9.21 [437]); contends that water is penetrating the wall of the barbeque (JW 29.9.21 [442]); gives evidence that the control panel, light and speakers for the spa cannot be accessed since they are under the pool deck (JW 29.9.21 [445]); and also addresses the payment of an invoice (JW29.9.21 [457]-[460]).
By her third affidavit dated 11 February 2022, Mrs Warburton refers to the engagement of a plumbing firm to do emergency plumbing works in July 2020. By her fourth affidavit dated 6 May 2022, Mrs Warburton refers back to her third affidavit and says that the ceiling linings and finish services removed to access plumbing works were not reinstated, By her fifth affidavit dated 27 May 2022, Mrs Warburton repeats her earlier evidence that she did not discuss defects with County at the time of entry into the Second Agreement (JW 27.5.22 [15]). Mrs Warburton denies that concreting, with the exception of the concrete driveway, was complete prior to the date of the Second Agreement, and her evidence is that the basement topping slab and stairs, external front door stairs, front balcony and living room topping slab were not complete by February 2017; there was outstanding blockwork to the barbeque area and landscaping as at the date of the Second Agreement; brickwork was still being carried out internally as at that date; and the common brickwork has not commenced on the garage as at March 2017. Her evidence is also that plumbing works were still taking place at the property after the date of the Second Agreement, and the garage was not built at that stage that included a kitchenette and roof drainage; the rough-in for the hot water system had not been installed as at that date; the hot water system was not installed as at 31 July 2017; the rainwater tanks were also not installed by the date of the Second Agreement; most of the electrical work was not completed at the house by the date of the Second Agreement; and the ground floor windows and doors were not installed by the date of the Second Agreement. Mrs Warburton's evidence is also that the air-conditioning works were not completed by the date of the Second Agreement (Warburton 27.5.22 [20]). This evidence is largely adverse to Mr and Mrs Warburton's case, so far as the responsibilities of County were narrowed by the terms of the Second Agreement.
Mrs Warburton was cross-examined and accepted that construction drawings were still being prepared for the project in the period up to October 2016 (T103). She did not recall a number of matters, including the discussion with Mr Brincat as to whether works should cease for a period in October 2016, although that is also understandable given the passage of time. Her evidence was that she had not formed the view that the foreman on the site was inexperienced by February 2017, although that was not entirely consistent with her observation in email correspondence at that time that he seemed "a little green" to her (T105). She accepted that she would have read the Second Agreement when it was sent to her, although not that she read it "carefully", and acknowledged that she would have understood that it was an important document and that she had the ability to seek legal advice about it (T106). She referred to discussions with Mr Brincat as to that document, although she fairly accepted that she did not rely on him for legal advice as to that document, where he was not legally qualified, although she had relied on him to accurately convey its content (T107). She also accepted that she formed her view as to the operation of the Second Agreement from her own reading of it and from Mr Brincat (T108) and, it follows, not from anything County or Mr Hart had communicated to her.
Mrs Warburton was also cross-examined as to the non-payment of trades in the latter part of the project, while issues as to alleged defects in the work were being addressed; her evidence was that many trades had been fully paid (T110) but plainly some were not. Her evidence was that payments were made to contractors in the reconciliation period after practical completion but, to the extent that questions of non-payment continued until September 2018, her position was then that payments would not be made where defective works existed on a "large scale", although some payments were made in that period" (T111).
Mr and Mrs Warburton also read the affidavit dated 22 September 2021 of Mr Tom Kowalczuk, a director of a business that supplies and instals glass, who referred to the supervision of his work on site and to the way in which his invoice was addressed. An affidavit dated 23 September 2021 of Mr Danny Canal, an air conditioning contractor; an affidavit dated 23 September 2021 of Mr Michael Luciani, a tiler; and an affidavit dated 24 September 2021 of Mr Carlos Soares, a director of a company which undertakes rendering, addressed similar matters. By his affidavit dated 31 March 2022, Mr Philip Banning, formerly the general manager of CCSF, which installed windows and doors at the project, gave evidence as to how work was done and invoices issued. He was briefly cross-examined, although his evidence was of limited assistance where he had not attended the site until works were "just about complete" when he met Mr Hart on site to go through a defects list in about mid-2017 (T118).
The Defendants read a small part of the affidavit dated 7 May 2021 of Mr Robert Hart, a director of County. Mr Hart refers to his background in the building industry, in which he has worked for approximately 28 years, almost exclusively in residential construction. Mr Hart refers to the Contract and to the commencement of the project in December 2015, and the entry into the Second Agreement. Mr Hart refers to a quotation provided by CCSF to resolve a difficulty in opening the living room sliding door, by removing the doors, shaving a few millimetres from them and reinstalling them, at a cost of $1,639.00 including GST (Hart 7.5.21 [103]).
By a second affidavit dated 19 May 2022, Mr Hart led evidence of correspondence with his solicitor, waving legal professional privilege in respect of that correspondence, in respect of the Second Agreement, which was admissible to establish County's subjective intention where the Plaintiffs brought a rectification claim. Mr Hart also exhibited a program of the works that were finalised and in progress as at 1 February 2017, which is relevant to determining the nature of the work undertaken after the Second Agreement was executed. Mr Hart referred to an email sent by Mrs Warburton, in August 2016, regarding the warranty period for claiming for defective windows and an email dated 19 September 2016 from Mrs Warburton regarding "efflorescence" forming on the brickwork which are relevant to whether defects had been claimed at the time the release in the Second Agreement was given. Mr Hart also led evidence as to his concerns in late 2017, prior to the entry into the Second Agreement, which was admissible as to County's subjective intention where a rectification claim was brought, and he referred to the meeting with Mr Brincat concerning the entry into the Second Agreement.
Mr Hart was cross-examined as to the circumstances of Mr Brincat's engagement and the overcharge by County which had been identified at that time, and readily conceded the facts relating to that overcharge. He was also cross-examined as to his email dated 6 February 2017 to Mr Brincat, referring to his strong personal commitment to Mrs Warburton, to which I referred above, and to his meeting with Mr Brincat to discuss accounting issues in the project and the offer that he had made at that time (T174-175). He accepted that the substance of the dispute at that time related to accounting for the project (T176). He was also cross-examined as to the drawings attached to the Second Agreement, and acknowledged that those drawings would ordinarily call up engineering drawings in relation to matters such as stormwater details (T180). He was also cross-examined as to the rectification order made by the Department of Fair Trade to which I have referred above (T181-182) and his position was that the order related partly to defective work and partly to incomplete work, which was a matter between the relevant contractor and Mr and Mrs Warburton (T182).
Mr Hart maintained the position in cross-examination that the Second Agreement released County for defects and any breaches of the statutory warranties under the HBA that arose from events prior to February 2017, and that he had contemplated that there would be such a release in respect of any such defects (T183). He accepted that there was no mention in the correspondence with Mr Brincat at that time that County would no longer be liable for defects in the works performed to date and that he was not then aware of any defects in those works (T184). He also accepted that, where works were in the process of being completed, it would then not have been possible to determine whether there were any defects in the completed works (T185). He accepted that earlier communications had repeated his and County's commitment to completion on time and to the highest standard, but contended that position was changed by the Second Agreement and that the quality of the project would subsequently depend on the contractors that were selected, implicitly by Mr and Mrs Warburton (T185). He cogently explained (T187) the difference in the position, before and after the Second Agreement, as follows: "Once the [Second Agreement] was signed, I lost control, or County lost control of the contractors that could be appointed, and our regular contractors, who we use, project in, project out, were not selected on the basis of cost, and we were left to supervise and manage contractors who, in my opinion, were not up to the quality of the work and had not performed that quality of work previously." It seems to me that that evidence highlights the difference between a builder's overall responsibility for the completion of a project, using subcontractors which it would ordinarily choose and retain, and a narrower supervision and management obligation, where contractors are chosen and retained by the client. I return to issues associated with that difference below.
Mr Hart nonetheless accepted that, at the time the Second Agreement was signed, he intended that County would complete the work to the highest standard, without compromise on quality (T188). He then gave a somewhat more qualified answer as to whether it remained his intention, as and from the Second Agreement, in performing the work of management and supervision under the Second Agreement, to achieve completion of the project to the highest standard, as follows: "Yes. When - in - in the normal course of construction, when we have our contractors and architect, who[se] documenting changes, and we're left alone to do what we specialise in, we could have done that, absolutely, and we could have finished probably before that time." That answer implicitly drew attention to differences between that normal course, and the position which arose in this case, where Mr and Mrs Warburton chose a number of the contractors to be used in the project and the architect had withdrawn as result of the difficulties with design changes to which I referred above.
The Defendants also read the affidavit of Ms Mariarosa Caccamo dated 7 May 2021, which referred to her involvement with contract administration work on the project from about October 2015 to February 2016 and from October 2016 to the completion of the project. Ms Caccamo referred to meeting Mrs Warburton and providing quotations from subcontractors to her, and to discussions of monthly progress claims, in the course of the project. Ms Caccamo also referred to the nature of landscaping defects claimed by Mr and Mrs Warburton as at 31 July 2018 and to emails sent to subcontractors who worked on the project, identifying alleged defects which were relevant to their work on the project. Ms Caccamo also referred to work she had done to identify any charge-back to relevant contractors, in respect of defects in painting as a result of their work, and referred to an email she had sent to Mrs Warburton suggesting that the charge-backs be deducted against amounts that Mrs Warburton had not paid the relevant contractors. She referred to her working fulltime at the site from early August 2018 to coordinate contractors to rectify alleged defects. She exhibited an email dated 2 June 2017 from the site supervisor, Mr Lubrano, to Mrs Warburton providing a warning concerning the manner in which the designers had specified that the floor waste for the terrace should be constructed, and noted a risk of pooling of water if the terrace was constructed in that way, and to Mr Brincat's instruction to proceed in that manner. Ms Caccamo was not cross-examined.
The Defendants also read the affidavit dated 7 May 2021 of Mr Julien Roy, a landscape architect, who is involved with swimming pool construction through Land Forms Pty Ltd ("Land Forms"), of which he and Mr Hart were each 50% shareholders until 2018 and in which he is now the sole shareholder. He refers to the entry into an agreement for the design of landscaping and a swimming pool for the home on 28 September 2015. He refers to his invoice for work carried out pursuant to the agreement and to the initial estimate for landscaping work and construction of the swimming pool and spa, and to Mr and Mrs Warburton's acceptance of a reduced quote for those works. He describes the form of swimming pool covers which are available, either floating on the surface of the water of suspended above the water, and he refers to emails and drawings concerning the form of pool cover that was used. His evidence is that the pool cover was installed by its manufacturer or distributor, Remco Australia Pty Ltd ("Remco"), rather than by Land Forms and to a confirmation received from Remco in response to Mr and Mrs Warburton's complaints about the height of the swimming pool cover. Mr Roy also responds to complaints made as to the operation of the pool cover.
Mr Roy also addresses the plan prepared and emailed to Mrs Warburton, in relation to the installation of a fibreglass spa and further emails concerning that matter, which identified options to resolve the difficulty of the location of the control panel of the spa, including moving the control panel or installing a wireless control. Mr Roy also gives evidence as to the fact that the timber deck had not been oiled when he visited the property in September 2020. He also refers to his recommendation to address imperfections in the surface of steps installed by Land Forms. Mr Roy's evidence is that the barbeque bench was poured and finished in polished off-form concrete and he also refers to approval of a quotation to lay additional ground covers between stepping stones instead of lawn as originally planned. Mr Roy also refers to an instruction given by Mr Brincat to proceed with a suggested resolution of a complaint as to the concrete finish on steps. Mr Roy was not cross-examined.
Mr and Mrs Warburton tendered a report (Ex P2) and supplementary report (Ex P3) of Mr Laurie, and County tendered a report and supplementary report of Mr Brown in respect of hydraulic matters (Ex D1); Mr Laurie and Mr Brown in turn prepared a joint report (J1), and they gave helpful and constructive concurrent evidence, in which the areas of agreement between them somewhat expanded. Mr Laurie had attended the site and conducted the investigations reflected in his report in June 2020 and Mr Brown did not do so until March 2021 (T149) and that difference in the time of their inspections explained some differences in their observations. I will address their evidence below in dealing with the hydraulic defects for which Mr and Mrs Warburton contend. Mr Laurie and Mr Brown also recorded their observations from an attendance at the property after they had given concurrent evidence, in a further report (Ex J7).
Mr and Mrs Warburton tendered the report of Mr Zakos (Ex P4) and County tendered the report of Mr Nesbitt as to building defects, and Mr Zakos and Mr Nesbitt also prepared a joint report (Ex J2) and gave oral concurrent evidence. Mr Zakos and Mr Nesbitt undertook a further inspection of the property on 14 June 2022, after their concurrent evidence was complete, and delivered a further report (Ex J3), which was in a somewhat abbreviated form, and did not draw express conclusions as to the implications of what they had observed for their evidence. I will return to their observations in dealing with particular issues below and also address a wider difficulty that arises from the lack of conclusions from them below. I have had regard to that evidence, although it is not necessary to summarise it in detail, and I address the relevant issues below.

The effect of entry into the Second Agreement

I now turn to several of the issues in the proceedings. I have had the benefit of very detailed written submissions, and briefer oral submissions, although the changes in Mr and Mrs Warburton's position at the point of written reply submissions have given rise to the difficulties noted below. I have had careful regard to those submissions, even when I did not find it necessary to summarise or specifically address them, which would not have been feasible given their volume and detail. In particular, I have not considered it necessary to summarise Mr Hicks' reply submissions at length, to the extent that they address material that had already been raised in chief, although I have identified matters may have been first raised in reply above. I have had regard to the entirety of those submissions, even where I do not summarise them. I have also had regard to, but need not separately address, Mr Hicks paragraph by paragraph response to aspects of Mr Klooster's submissions, in reaching conclusions as to those submissions above.
It will be convenient to address Mr and Mrs Warburton's claim by reference to the case set out in the Amended Statement of Claim and County's response to it, although I will also address other issues which arose in the course of submissions below. Mr and Mrs Warburton contend (ASC [9]) that the Second Agreement "varied their Contract" but omit reference to County's amended scope of work under cl 2.1 of that agreement in pleading that variation. County denies that the Second Agreement constituted a variation of the existing Contract and, not surprisingly, deny that Mr and Mrs Warburton's identification of its terms (omitting that reference to cl 2.1) accurately set out its terms.
In his opening written submissions, Mr Hicks, who appears with Ms Anderson for Mr and Mrs Warburton, submitted that County's obligations in relation to the statutory warranties and the Contract (so far as it relates to the quality and standard of works required in relation to the Contract, plans and specifications) were not impacted by the entry into Second Agreement. I do not accept that submission for the reasons noted below. In closing submissions, Mr Hicks submits that the Second Agreement was a variation to the Contract and "both remained on foot", implicitly operating concurrently. He points out that the Second Agreement contains no express statement that it replaces the Contract and does not include an "entire agreement" clause. He submits that this "supports the proposition that it was a variation to the contract". I am not persuaded of that proposition, at least if it is intended to suggest that the Contract and the Second Agreement could continue concurrently, where they contained inconsistent obligations and no mechanism to resolve the inconsistency between them. I return to that matter below.
Mr Hicks also points to cl 10.3 of the Second Agreement, which records that there is no agreement between the parties relating to variations under that Agreement. It is not apparent, and Mr Hicks does not explain, how that clause supports an inference, which he seeks to draw from it, that the Contract was still on foot. Mr Hicks also submits that various things would have been done if the residential building works were to be undertaken by the owners as "owner/builder", including revising insurance requirements. That submission also does not seem to me to support any inference that the Contract remained on foot, where an arrangement where County undertook to "carry out all the work reasonably necessary to manage and supervise the completion of the [p]roject" in accordance with specified Plans and Specifications, and third party contractors performed the works, which would not necessarily be an "owner/builder" arrangement in any common sense.
Mr Hicks in turn submits that: "As and from the Second Agreement, and pursuant to the Contract, the builder remained responsible for the residential building works and for bringing those works to completion pursuant to the statutory warranties and the plans and specifications." That proposition depends on the concurrent operation of the Contract and the Second Agreement, although the concept of "responsibility" which it adopts is plainly not directed to carrying out the building works, since cl 2.1 of the Second Agreement made clear that County would not do so. For the reasons noted below, it seems to me that the Contract and the Second Agreement were not capable of operating concurrently and did not do so. Mr Hicks goes further to contend that: "There is no rational basis to conclude that the Second Agreement brought the Contract to an end."
It is settled law that a subsequent agreement may operate to vary or instead replace an original agreement. As the plurality explained in Commissioner of Taxation (Cth) v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520; [2000] HCA 35 at [22]-[24]: "[22] When the parties to an existing contract enter into a further contract by which they vary the original contract, then, by hypothesis, they have made two contracts. For one reason or another, it may be material to determine whether the effect of the second contract is to bring an end to the first contract and replace it with the second, or whether the effect is to leave the first contract standing, subject to the alteration. For example, something may turn upon the place, or the time, or the form, of the contract, and it may therefore be necessary to decide whether the original contract subsists. … [23] In Tallerman & Co Pty Ltd v Nathan's Merchandise (Vict) Pty Ltd Taylor J said: It is firmly established by a long line of cases … that the parties to an agreement may vary some of its terms by a subsequent agreement. They may, of course, rescind the earlier agreement altogether, and this may be done either expressly or by implication, but the determining factor must always be the intention of the parties as disclosed by the later agreement. [24] That passage was cited with approval by Wilson and Dawson JJ in Dan v Barclays Australia Ltd. It accords with principle and with authority." [citations omitted] Those passages were approved by the Court of Appeal in Australia City Properties Management Pty Ltd v Owners - Strata Plan No 65111 [2021] NSWCA 162 at [334] (Bathurst CJ with whom Payne and McCallum JJA agreed). Here the question is therefore whether the intention of the parties, objectively construed and as disclosed by the Second Agreement, was to vary the obligations under the Contract or to instead rescind the Contract and replace it with the Second Agreement.
It seems to me that County's obligations were plainly impacted by the restriction of the scope of its work under cl 2.1 of the Second Agreement, and its obligations in relation to the plans and specifications attached to the Contract were affected by the replacement of those documents by the different plans and specifications attached to the Second Agreement. Third party contractors then undertook particular areas of works after the Second Agreement, where County's responsibility was limited to carrying out the work "reasonably necessary to manage and supervise" the project's completion in accordance with specified plans and specifications, by providing specified personnel until practical completion.
It also seems clear to me that the Contract and the Second Agreement did not operate concurrently, but successively, from the date the Second Agreement took effect. The most obvious reason for that conclusion is that they were inconsistent as to significant matters, namely the scope of County's obligations, the manner of retention of third party contractors and the payment arrangements; but there was no provision to deal with the inconsistency that existed if they operated concurrently, by providing that the obligations in the Second Agreement prevailed over the obligations in the Contract. By contrast, the parties had expressly provided in cl 2.4 of the Second Agreement for the risk of inconsistency between those instruments that did operate concurrently, namely the Second Agreement, the Plans and the Specifications, by providing that the Second Agreement would prevail. It seems to me inconceivable that the parties would not also have there addressed the substantial inconsistency between the Contract and the Second Agreement, which was an obvious fact and not merely a risk, had the two had concurrent operation after the execution of the Second Agreement.
Even if, contrary to my view, the Second Agreement varied the Contract, rather than replacing it, it also seems to me plain that it narrowed the scope of County's obligations to those set out in cl 2.1 of the Second Agreement. No other view seems to me to be open, since cl 2.1 of the Second Agreement would be, at best, superfluous and at worst inconsistent, if County continued to have the wider obligations imposed under the Contract, which contemplated that it would construct, rather than do the work "reasonably necessary" to "manage and supervise" the completion of the Contract.
Mr Hicks also submitted, in his opening written submissions, that the hydraulic plans attached to the Second Agreement were "concept only" and required County to resolve matters on site with its plumbing contractor, although it was not clear how this proposition arose in Mr and Mrs Warburton's pleaded case . I do not accept that submission, since I cannot assume, without evidence, that the scope of management and supervision responsibilities conferred on County under cl 2.1 of the Second Agreement extended that far in relation to the plumbing contractor or other contractors. Mr Hicks also submitted that the hydraulic plans could not be relied on without reference to the engineering plans, and the engineering plans were incorporated into the Second Agreement. I also do not accept that submission, where it is not apparent that the Second Agreement imposed any obligation on County to determine questions of construction detail in respect of construction works which were no longer allocated to it, but would of necessity be undertaken by particular contractors where its obligation was limited to management and supervision.
Mr and Mrs Warburton alternatively contend, and the Defendants deny, that the Second Agreement was a contract for the performance by County of the balance of the works under the Contract that were outstanding as at 21 February 2017 (ASC [10], Defence [10]). That contention is not sustainable, given the narrowed scope of the continuing role of County under the Second Agreement.
In reply, Mr Hicks developed an arguably new case that the amendments made by the Second Agreement were void, to the extent that they narrowed County's obligations in the future, by reason of s 18G of the HBA. That case was not pleaded, where Mr and Mrs Warburton had relied on that section only in answer to the release in the Second Agreement. Even if that case could be raised in that way, where that would deprive County of any opportunity to be heard in respect of it, and of procedural fairness, I would not accept it. There is no reason to read s 18G of the HBA as preventing an amendment to a building contract that narrows a builder's obligations in the future, because the owner's needs have changed or, conceivably, they do not wish to engage the builder in future for works which the owner can no longer afford. The Second Agreement, so far as it preserved Mr and Mrs Warburton's rights in respect of previous construction work done by County (as I have held) but narrowed the scope of County's obligations in the future, did not "restrict or remove the rights of a person in respect of any statutory warranty", but only define the scope of County's obligations in the future.
Mr Hicks put a further submissions in reply that, if the Second Agreement narrowed County's obligations (as I have found it did), then there was no contract for the performance of residential building works as required by the HBA, and the residential building works were not insured as required by the HBA. So far as these are also new contentions, there being raised in this way would again deprive County of any opportunity to be heard in respect of it, and of procedural fairness. In any event, these submissions do not assist Mr and Mrs Warburton, because there is no pleaded case of breach of the HBA in that respect, and no identified consequences of such a breach. In reply, Mr Hicks also advances several new arguments as to the effect of the Second Agreement, relying on the proposition that Mr and Mrs Warburton had no contract with any trade contractor. I do not consider it necessary to address that argument. It depends on a premise, which is not established, that Mr and Mrs Warburton in fact had no contact with any trade contractor. The fact that County did not press its allegation that such contracts existed does not mean the negative, that such contracts did not exist. No question as to claims between Mr and Mrs Warburton and trade contractors arises in these proceedings, not least because trade contractors were not joined as party to the proceedings, even where significant aspects of the defects on which Mr and Mrs Warburton rely arose from their work. Finally, that submission also appears to be raised in support of the unpleaded claim that any narrowing of County's obligation under the Second Agreement is void by reason of s 18G of the HBA, which I have not accepted.

Mr and Mrs Warburton's claim under s 18B of the HBA and under the Second Agreement

Mr and Mrs Warburton contend (ASC [12]) that, by s 18B of the HBA, they are entitled to the benefit of statutory warranties implied into the Contract and the Second Agreement. That section of the HBA relevantly provides that: "(1) The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work-- (a) a warranty that the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract, (b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new, (c) a warranty that the work will be done in accordance with, and will comply with, this or any other law, (d) a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time, (e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling, (f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder's or person's skill and judgment. (2) The statutory warranties implied by this section are not limited to a contract to do residential building work for an owner of land and are also implied in a contract under which a person (the "principal contractor") who has contracted to do residential building work contracts with another person (a "subcontractor" to the principal contractor) for the subcontractor to do the work (or any part of the work) for the principal contractor.
The Defendants point out that the relevant statutory warranties were also expressly set out in both the Contract and the Second Agreement (Defence [12]). There is no dispute that these warranties applied in respect of the work that County had contracted to do, which was in the nature of "residential building work" as defined, but that emphasises the significance of identifying that work, as defined by the Contract and then by the Second Agreement. It seems to me that the statutory warranties in respect of County's work under the Second Agreement cannot extend beyond the scope of the work that County was required to perform under that Agreement. That much is clear where each warranty in cl 8.1 of the Second Agreement was given by reference to "the Work", which was in turn defined by reference to County's limited obligations under cl 2.1 of the Second Agreement.
Mr Hicks, in his opening written submissions, submitted that the schedules to the Second Agreement made clear that County was performing the whole of the Works under the Second Agreement. I do not accept that submission, which is plainly inconsistent with the limited scope of the obligations imposed on County under cl 2.1 of the Second Agreement. Although the parties directed some attention to whether Mr and Mrs Warburton or County retained particular contractors after the date of the Second Agreement, it is not necessary to address that question in any detail, because the answer to it is not capable of expanding the scope of the obligations undertaken by County under that clause.
Mr and Mrs Warburton also contend and County denies (ASC [13], Defence [13]) that the Works (as defined): "did not conform to the requirements of one or more of the statutory warranties and, because of those breaches, were defective." The term "Works" is defined in the Amended Statement of Claim (at [6]) as the building work involved in the project. That definition is much wider than the definition of "Works" In the Second Agreement, which was limited by reference to County's obligations under cl 2.1 of the Agreement. This paragraph is particularised by reference to a schedule to a rectification order issued by Fair Trading on 25 May 2018, to which I referred above, (although the parties did not contend the findings of Fair Trading were binding on the Court), and by reference to expert reports, to which I have referred above and to a schedule which was (in amended form) marked "MFI 1A" and which I will review in some detail below.
Mr and Mrs Warburton then contend (ASC [14]) that: "[County] is liable to [Mr and Mrs Warburton] for the cost of repairing and rectifying the defective Works, and for loss and damage suffered by [Mr and Mrs Warburton] by reason of the failure to carry out the Works in conformity with the statutory warranties." It will again be necessary to distinguish between the position before and after the Second Agreement took effect in that respect, and it is also necessary to have regard to the particular defects to which Mr and Mrs Warburton refer, which I address below.
Mr and Mrs Warburton initially relied only on the implied warranties arising from the HBA, although they raised express warranties in cl 8.1 of the Second Agreement in their reply, to which I refer below. This claim proceeds on the premise that, even after County's obligations were limited to the obligation to "carry out all the work reasonably necessary to manage and supervise the completion of the [p]roject" under cl 2.1 of the Second Agreement, compliance with the statutory warranties is to be tested against the result of the building work undertaken by third party contractors from late February or March 2017, rather than against the work of management and supervision which County had contracted to undertake. I do not accept that premise.
Mr Hicks fairly accepted in his opening oral submissions that the statutory warranties under the HBA, in respect of County's work undertaken under the Second Agreement, would apply in respect of the scope of the work undertaken, although he contended that there was no "material difference" in respect of the scope of that work from its obligations under the Contract (T11). I cannot accept that submission where, as I noted above, County assumed responsibility for the construction work generally under the Contract, although it engaged a number of contractors in respect of that work. By contrast, the obligation assumed by County under the Second Agreement was, as I also noted above, to do the work "reasonably necessary to manage and supervise the completion of the [p]roject in accordance with the Plans and Specifications", by providing the specified personnel from the date of that Agreement until Practical Completion.
Mr Hicks also submitted, in opening, that County breached the Second Agreement by leaving the supervision and management of the works to a person who was not sufficiently qualified or experienced to perform the role required under the Second Agreement. Putting aside the fact that allegation was not part of Mr and Mrs Warburton's pleaded case, I do not accept that submission. There was no expert evidence to establish the qualifications which would be required of a supervisor in the somewhat unusual circumstances of the Second Agreement, still less to establish that any failure of the supervisor's qualifications had any link with the defects in work actually performed by third party contractors after the date of the Second Agreement.
Mr Hicks alternatively contended (T12) that, if works were defective, there had "necessarily" been a failure of management and supervision. I also do not accept that proposition, where that will depend on what, if anything, the work "reasonably necessary" in respect of the management and supervision obligation would have required County to do in respect of the particular works that are said to be defective. It is neither self-evident, nor logically necessary, that adequate supervision, provided across a range of trades working at various times on the completion of the project from February or March 2017, could prevent defects in the detail of the work. No doubt, some work may be so fundamental that an obligation to do work "reasonably necessary to manage and supervise the completion of the [p]roject in accordance with the Plans and Specifications" would necessarily extend to them; other work may be of a less significant character and outside the scope of such an obligation or be of a technical character that would be left to the relevant contractor. It seems to me that the nature of the work that might fall in either category is a matter of evidence, and neither self-evident nor a matter for judicial intuition. There is no evidence to establish either the extent of supervision and management that was "reasonably necessary", or how it would have been applied to the particular work undertaken by contractors, or how it would have prevented particular defects on which Mr and Mrs Warburton now rely.
Mr Hicks submits, in closing submissions that at the point of the Second Agreement, County: "was still the licensed builder and, at law, performing the whole of the residential building works pursuant to the [HBA], the insurance under the [HBA], the EPA Act, and the approved D[evelopment] A[pplication] by which the residential building works [sic]." [emphasis added] I am unable to accept that submission. The scope of County's obligations was to be determined by the construction of the Second Agreement and, as the evidence plainly establishes that the bulk of work was not undertaken by County following the Second Agreement but by third party contractors, and they are identified by the Plaintiffs in indicating the defects in their work, so the proposition that County was "performing" (in any sense of undertaking) "the whole" of the residential building work is simply incorrect. Mr Hicks submits that it was also reasonable for the owners to rely on representations of Mr Hart prior to the entry into the Second Agreement. I accept that proposition, but it leads nowhere, where Mr and Mrs Warburton bring no claim for rectification of the Second Agreement, other than in respect of the release that I address below.
Mr Hicks submits that County supervised and managed the works after the Second Agreement was made and, at least to that extent, there is no contest that it complied with its obligation to "carry out all the work reasonably necessary to manage and supervise the completion of the [p]roject" in accordance with specified Plans and Specifications under cl 2.1 of the Second Agreement. Both parties point to evidence called by several contractors, including Messrs Kowalczuk, Canal, Luciani, Soares and Banning, whose evidence I addressed above, all of whom gave evidence that their work was in fact managed and supervised by a representative of County, who was on site everyday observing and inspecting the works being performed and managing trades. By an email dated 22 May 2017 (Ex J6, 4622), County in turn stated that it would be supervising the painter on site "as we do with all contractors". Mr and Mrs Warburton's case is therefore not that County was not managing and supervising the project, but that the manner in which it did so was inadequate. However, that highlights the difficulty that, in order to determine whether supervision is inadequate, one would ordinarily need first to identify what would constitute adequate supervision, and that would almost inevitably be a matter of evidence, at least in a complex project where any exercise of supervision will require decisions as to what is supervised, and how it is supervised.
Mr Hicks submits that there is no evidence that County was "unable to manage or supervise" the works after the Second Agreement was made, because its personnel were precluded from attending the property, observing the works or giving directions as to the performance of the works. That proposition is, with respect, a distraction, because County does not suggest that it was prevented from managing or supervising the residential building works. It instead contends that the Plaintiffs have not established that it failed to do so adequately, in respect of the particular defects for which they contend. Mr Hicks also submits that there is no evidence that County's instructions were rejected or disobeyed by any contractor or that any contractor refused to perform works under County's management and supervision or that any contractor "covered up" works it had performed to prevent County from inspecting that work.
Mr Hicks points to the fact that County has not called evidence from two individuals who had supervisory responsibilities on the site, and not led evidence of Mr Hart as to any events that prevented County managing and supervising the works. He refers to the application of the principle in Blatch v Archer (1774) 1 Cowp 63; 98 ER 969 in negligence cases, as summarised by Dixon J in Hampton Court Ltd v Crookes (1957) 97 CLR 367 at 371; [1957] HCA 28. That principle does not assist Mr and Mrs Warburton, where the need for the Plaintiff to offer "some evidence of negligence" recognising that "slight evidence" may be enough in a particular case, and the proposition that the evidence should be weighed according to the power of the party to produce it, does not displace the need to establish the content of a duty to "carry out all the work reasonably necessary to manage and supervise the completion of the [p]roject", if a breach of that duty is alleged. Where County's duty was limited in that way, from the date of Second Agreement, it is not correct to say, as Mr Hicks does, that: "It is reasonable to conclude, in the absence of any evidence of the kind that [County] could have adduced, that the defects have arisen as a consequence of [County's] breaches of the Contract and/or the Second Agreement." That proposition is not correct in respect of the Contract, because it did not have concurrent operation with the Second Agreement, as I have noted above; and it is not correct, in reference to the ultimate quality of the works, because it is reasonable to conclude that, self-evidently, the defects in those works have arisen as a consequence of the third party contractor's failure to undertake the work adequately; and, whether there was also a breach of County's obligation to "carry out all the work reasonably necessary to manage and supervise the completion of the [p]roject" in accordance with specified Plans and Specifications under cl 2.1 of the Second Agreement is a much more complex question.
While I accept that an inference would ordinarily follow that the evidence of the supervisors would not assist County in demonstrating the adequacy of its supervision and management generally or in respect of the particular defects, that inference would only assist the Plaintiffs if they had established an evidentiary basis for any failure on County's part to "carry out all the work reasonably necessary to manage and supervise the completion of the [p]roject" in accordance with specified Plans and Specifications, as distinct from proving only the fact of defects in work undertaken by third party contractors. Little turns on that inference where the Plaintiffs have not established what should have reasonably be done in order to comply with County's duty of management and supervision, to allow an evidentiary basis for the Court to determine the content of that duty, and whether it had been breached. The absence of evidence from the Defendants in that regard cannot fill that gap.
Mr Hicks also submits that there were defects in the work undertaken and I accept that broad proposition, where the rectification order issued by Fair Trading (Ex J6, 6400) provides at least some evidence of that matter, the Plaintiffs have tendered video records and photographs of water ingress into the premises (Ex P1 and MFI 4) and the experts find defects in the work. However, that submission is the start, not the end, of the inquiry whether any breach of County's obligation to "carry out all the work reasonably necessary to manage and supervise the completion of the [p]roject" in accordance with specified Plans and Specifications, as distinct from the work done by third party contractors, was causative of those defects.
Mr Hicks alternatively relies on County's obligation to "carry out all the work reasonably necessary to manage and supervise the completion of the [p]roject" in accordance with the Plans and Specifications to seek to incorporate the statutory warranties in the Second Agreement, and he also refers to the warranties given under cl 8 of the Second Agreement, to assert that: "Accordingly, as and from 27 February 2017, [County] remained responsible for the residential building works as completed and was liable to the [Mr and Mrs Warburton] in relation to breaches of the statutory warranties." That proposition has the obvious difficulty that, as I note below, both the statutory warranties and the express warranties under cl 8 of the Second Agreement were directed to the work which County was obliged to undertake under the Second Agreement, which was itself limited to carrying out the work reasonably necessary to manage and supervise the completion of the project, and did not extend to the outcome of work performed by third party contractors.
Mr Hicks in turn refers to several cases in which Courts have reached findings, on the particular facts and by reference to the evidence before them, as to the scope of a supervisory obligation. He refers to Sutcliffe v Chippendale & Edmonson (A Firm) [1971] 18 BLR 149, where Stabb J stated: "[T]he building owner is entitled to expect his architect so to administer the contract and supervise the work, as to ensure, as far as is reasonably possible, that the quality of work matches up to the standard contemplated."
He also refers to Sheldon v McBeath (1993) Aust Torts Reports 81-209, where Handley JA stated that "the duty of supervision must be performed progressively and at critical stages of the building works. He refers to an observation of Barwick CJ in Florida Hotels Pty Ltd v Mayo (1965) 113 CLR 588 at 593 ("Florida Hotels"), that: "There can be no doubt that due skill and care in this case required [the respondents] to supervise the work done in preparation for the pouring of concrete to form these slabs … the respondents were bound to take reasonable steps to ensure that they inspected the formwork and the placed the reinforcement before concrete was poured and the work was covered up. They do not satisfy this be relying on the workmen whose work they were employed to supervise…"
He also refers to Windeyer J's observation in that case that: "An architect employed to supervise the construction of a building must bring a proper degree of skill to his task and exercise reasonable care in its performance … whether he be engaged to supervise the work of an independent contractor or of the building owner's servants the obligation of a supervising architect is the same. He must exercise reasonable care in carrying out the duty he has undertaken."
Mr Hicks also notes that Windeyer J there quoted Lord Ordinary, Lord Kyllachy in James v Simon (1899) 1 F (Ct of Sess) 1211 who said: "I cannot assent to the suggestion that an architect undertaking and being handsomely paid for supervision, the limit of his duty is to pay occasional visits at longer or shorter intervals to the work, and paying, those visits to assume that all is right which he does not observe to be wrong…speaking generally, his obligation is, so far as reasonably possible, to see that the work is duly and properly executed, and whether he has failed in that duty in any particular case is a question of circumstances, and a question not for his professional brethren but for the Court."
First, I largely read these observations in the case law as recording the findings which the Court has reached in the particular cases, and not as expressing principles of law that can be applied without an evidentiary basis for their application, where what is required to "carry out all the work reasonably necessary to manage and supervise the completion of [a] [p]roject", in particular circumstances, will be a question of fact. Second, there may be some defects that are so significant that little evidence may be required to find a breach of a duty to supervise, and Florida Hotels may be an example of such a case. However, that does not support the extended proposition which Mr Hicks seeks to draw from that decision that, because due care and skill required the supervisor in that case to supervise a concrete pour, where a failure to do so would have potentially catastrophic consequences, an obligation to "carry out all the work reasonably necessary to manage and supervise the completion of [a] [p]roject" extends to ensuring that all works undertaken by third parties are not defective and is self-evidently breached if any, or some, such works are defective. Obviously, as a matter of practicality, a supervisory role is likely to require a degree of focus on what is more important, since the costs of supervising every step taken by every subcontractor in every stage of a complex project would likely be ruinous. Third, the proposition to which Windeyer J referred in Florida Hotels, that the question of breach of a duty of care is a matter for the Court, is familiar, but does not displace the need for evidence. As I observed in the course of submissions, the question whether a doctor has breached his or her duty of reasonable care is a matter for the Court and not a matter for the medical profession, but that does not follow that Courts regularly decide medical negligence cases without expert medical evidence to inform them of what that duty might require to be done in particular circumstances.
I should also recognise that, in the law of negligence, the Courts have recognised that the extent to which a contractor will supervise the work of a competent subcontractor may vary, even where the contractor has engaged that subcontractor, as distinct from the position here where Mr and Mrs Warburton frequently directly engaged subcontractors rather than County doing so. In D & F Estates Ltd v Church Commissioners for England [1989] 1 AC 177, in dealing with the question of a head contractor's liability in negligence for the conduct of a subcontractor, Lord Bridge of Harwich observed (at 209, with the other members of the House of Lords agreeing) that: "If the fact of employing a contractor does not involve the assumption of any such duty [to a third party] by the employer, then one who has himself contracted to erect a building assumes no such liability when he employs an apparently competent independent sub-contractor to carry out part of the work for him. The main contractor may, in the interests of the proper discharge for his own contractual obligations, exercise a greater or lesser degree of supervision over the work done by the sub-contractor. If in the course of supervision the main contractor in fact comes to know that the sub-contractor's work is being done in a defective and foreseeably dangerous way and if he condones that negligence on the part of the sub-contractor, he will no doubt make himself potentially liable for the consequences as a joint tortfeasor. … In so far as the former decision [an unreported decision of Judge Edgar Fay Q.C. in Queensway Discount Warehouses v. Graylaw Properties Ltd., 19 February 1982] relied on any general principle of law that a main contractor is liable to a third party who suffers damage from the negligently defective work done by his sub-contractor, I can only say, as already indicated, that I can find no basis in law to support any such principle." [emphasis added] That decision was in turn noted, as authority as to the extent of a head contractor's liability of negligence for conduct of its subcontractor, in Metropolitan Fire and Emergency Services Board v Yarra City Council (2015) 214 LGERA 1; [2015] VSC 773 at [283]-[285].
Mr Klooster faintly submitted for County that the appointment of the relevant personnel would be enough to comply with its obligation under cl 2.1 of the Second Agreement. I do not accept that submission. With greater substance, Mr Klooster submits that the terms of the Second Agreement do not impose an obligation on County to build anything, but to "manage and supervise"; that the Plans and Specifications referred to in schedule 4 of the Second Agreement are different to and narrower than those included in the Contract; the entire suite of contract drawings are not to be included by reference; the obligation of management and supervision does not extend beyond the date of practical completion, in October 2017; and the obligations imposed on County are limited by reference to the defined term "Project". Mr Klooster submits that the obligations on County under the Contract did not remain in place after entry into the 2017 Agreement, where the obligation to execute and complete construction works under the Contract is substituted by the reference to the defined term "Project" in the Second Agreement; a contention that County was obliged to "execute and complete" the construction of the house under the Second Agreement is inconsistent with the express terms of cll 2.1 and 2.2 of the Second Agreement; if the Contract remained on foot, cll 2.1 and 2.2 of the Second Agreement would have no work to do, and the scope of work defined in the Second Agreement would not be operative; and the continuance of insurance under Pt 6 of the HBA is not material, both because of the insurance requirements under the HBA and because County was expressly required to continue to maintain that insurance under the Second Agreement. Mr Klooster also submits that, so far as the statutory warranties are implied into the Second Agreement, they attach only to County's limited obligations under that Agreement.
Mr Klooster submits, with some force, that Mr and Mrs Warburton's pleaded case was that the Second Agreement included an ongoing obligation to demolish the previous building and construct the new dwelling, and the language of the Second Agreement does not include that obligation. Mr Klooster also points out, correctly, that the breaches of obligation which were identified by Mr and Mrs Warburton were directed to defective workmanship, and works wholly or largely undertaken by third party contractors, rather than any failure to manage and supervise by County. Mr Klooster also submits that Mr and Mrs Warburton's case, in substance, assumed that proof of defective workmanship (I interpolate, largely undertaken by third party contractors) was proof of a failure to manage and supervise by County. I accept that the case was largely put by Mr and Mrs Warburton on that basis, possibly relying on the contention, which I have not accepted, that County's wider obligations under the Contract subsisted in parallel to its narrower obligations under the Second Agreement. Mr Klooster also submits that a breach of a duty to supervise must be pleaded and particularised: QBE Insurance Australia Ltd v Stewart [2009] NSWCA 66 at [60]. I accept that such a breach was neither pleaded nor particularised here, although I do not decide the case on that basis. The parties here conducted the case on the basis that the narrower obligations of management and supervision were also in issue and I will determine it on that basis.
Mr Klooster also submits that the distinction between the construction obligations imposed on County under the Contract, and the management and supervision obligation under the Second Agreement, is contemplated by the HBA, which itself distinguishes between the activities of construction and supervision, and imposes different licensing requirements in respect of those activities. Mr Hicks in turn addresses, in reply, the scope of the licensing regime for contractors and supervisors under the HBA, which was also addressed by Mr Klooster in its submissions in chief. It is not necessary to address that matter further, since it is at best peripheral to the issues that I have to decide.
Mr Klooster also points to the absence of evidence that County was in breach of its obligations to manage and supervise the Works after the entry into the Second Agreement, implicitly excluding the inference which the owners seek to draw from the fact of defects in third party contractors' works. He points out that the only evidence as to the performance of those obligations, found in the evidence of sub-contractors called by Mr and Mrs Warburton, was that County in fact managed and supervised their work, at least in a general sense, and I have referred to that evidence and to Mr and Mrs Warburton's reliance on it above.
In submissions in reply, Mr Hicks emphasises Mr Somerville's advice to County that it was not possible to contract out of the HBA and that County was and would remain liable for breaches of the statutory warranties. It does not follow, however, that County was liable, after the date of the Second Agreement, for any breach of the statutory warranties in respect of work which it had not undertaken to do and which was in fact to be done by third party contractors.
For the reasons indicated above in dealing with Counsel's submissions, and that further reasons noted in dealing with particular defects below, neither a breach of the statutory warranties nor a breach of the contractual warranties in the Second Agreement is established. Several defects were established so far as work was done under the Contract and before the Second Agreement took effect, likely on 5 March 2017.

County's response to the relief claimed - whether the work was defective

The Defendants plead (Defence [14]) a comprehensive series of defences to the relief claimed by Mrs and Mrs Warburton in paragraph 14 of the Amended Statement of Claim. First, they raise several defences which relate to the scope of their obligations under the Second Agreement. They deny (Defence [14(a)]) that County (presumably, as distinct from third party contractors) carried out defective work under the Contract. I have addressed that issue in dealing with the particular defects for which Mr and Mrs Warburton contend above.

County's response to the relief claimed - release under the Second Agreement

Second, the Defendants contend (Defence [14(b)] that if (which they deny), County carried out defective work under the Contract, its liability was released by the terms of the Second Agreement by way of accord and satisfaction.
County relies on Mrs Warburton's inquiry as to product warranties in mid-August 2016 to suggest she was then concerned about defects in the work. I do not accept that submission; the inquiry seems to me, in its context, to be directed to whether she would be in a better position, in respect of warranties, by contracting directly with CCSF rather than with County. County also relies on Mrs Warburton's email of 21 September 2016 concerning efflorescence on an area of the brickwork to contend that Mr and Mrs Warburton were then conscious of defects in the work, but does not seem to me to be sufficiently material to support that inference. County also relies on Mr Brincat's email of 15 February 2017 (Ex J6, 3723) referring to a failure properly to construct the works, to which I referred above, as indicating a consciousness of defects in the works. I do not accept that submission. It seems to me that the position there put was part of an aggressive email, seeking to persuade County to accept Mr and Mrs Warburton's terms for the Second Agreement, and is not sufficient to indicate a consciousness of any material defects in the work, although I have also not accepted Mr Brincat's oral evidence seeking to explain away that language above (T49-50). County also relies on the focus on retentions, prior to and in negotiations of the Second Agreement, as indicating a consciousness of defects. I also do not accept that submission, where the possibility of defects always exists in a construction contract, and retention arrangements are a prudent means of dealing with it, which will generally be addressed in construction contracts whether or not defects then exist or will ultimately emerge.
Mr Klooster also refers to well-established principles of construction of written agreements, referring to Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]. He submits that the release in the Second Agreement operates in respect of any event that has occurred prior to the date of its execution and the only constraints on the release are that it is "in connection with" an event "which has occurred prior to the date of" the Second Agreement. Mr Klooster initially submitted that County gave up more than $2.5 million in revenue that would have been paid under the original Contract, and that is relevant to the scope of the release given; however, a focus on revenue does not assist where County would also have incurred the costs of construction prior to the Second Agreement and its profit would likely not have exceeded its builder's margin. The effect of the Second Agreement was that County gave up its builder's margin on work to be undertaken in the future, to the extent that it exceeded the fixed fee it was to receive under the Second Agreement, but assumed a narrower obligation and a narrower risk in doing so. Mr Klooster also accepts that the decision in Grant v John Grant & Sons (1954) 91 CLR 112 ("Grant") permits an investigation of the circumstances, including the actual intention of the parties, to determine whether enforcement of the general words of a release would be against conscience, referring to the Owners Corporation of Strata Plan 61390 v Multiplex Corporate Agency Pty Ltd (No 2) [2012] NSWSC 322 at [29]. He submits that principle has no rule to play, because the release in cl 6.2 extends to unknown claims and there is nothing to suggest that County took advantage of any non-awareness of Mr and Mrs Warburton as to the existence and likelihood of defects in the work.
Mr Klooster submits, and I accept, that the language "or but for this Deed may have had against the builder" in the terms of the release is sufficiently broad to include claims that were then unknown; compare Wright v Lemon as Executor of the Estate of Michael John Maynard Wright (No 2) [2021] WASC 159 at 806. However, I do not accept his further submission that that conclusion is the end of the inquiry as to the proper operation of the release. I also do not accept his submission that Mr and Mrs Warburton, or Mr Brincat, or indeed Mr Hart, were then aware of defects of any materiality, given the findings which I have reached in dealing with the relevant evidence above.
Mr Hicks responds, in opening submissions, that Mr and Mrs Warburton released County under the Second Agreement only from liability in respect of "its breaches and overcharging" and County released them from any claims for Works performed prior to that Agreement. Mr Hicks refers to Bank of Credit & Commerce International SA (in liq) v Ali [No 1] [2002] 1 AC 251, and to Lord Bingham's observation that: "… there is a long and in my view salutary line of authority [which] shows that, in the absence of clear language, the court will be very slow to infer that a party intended to surrender rights and claims of which he was unaware and could not have been aware."
He also refers to Grant above, where the Court stated that: "The question is whether upon a proper interpretation of the deed the general release clause should be restrained to matters in dispute within the meaning of these recitals. The question depends primarily on the application of the prima facie canon of construction qualifying the general words of a release by reference to particular matters which recitals show to be the occasion of the instrument. But it is also affected by the general tenor of the deed. It is unnecessary to say more about the canon of construction or to discuss further the contents of the deed. As to the first all that remains is to apply the principle that prima facie the release should be read as confined to the matters forming the subject of the disputes which the deed recites. As to the second, such indications as can be found in the provisions of the deed point rather in the same direction. The detailed character of the terms of settlement, the careful readjustment of rights, the specific reference to the debt of HC Grant and his wife and its discharge and the particularity of the allocation of things and contracts between the companies do not favour the view that a general release was intended going outside the actual area of dispute."
Mr Hicks in turn refers to Qantas Airways Ltd v Gubbins (1992) 28 NSWLR 26, where Gleeson CJ and Handley JA referred to Grant and stated that it: "…sets out the principles by reference to which a court will decide whether a general release will be held to cover a particular dispute. The rule is that the general words of a release will, in an appropriate case, be read down to conform to the contemplation of the parties at the time the release was executed."
In Amaca Pty Ltd formerly known as James Hardie & Coy Pty Ltd v CSR Ltd [2001] NSWSC 324, Bergin J (as her Honour then was) considered a question whether a widely framed release in a partnership dissolution deed extended to releasing liability for claims regarding asbestos. Her Honour observed (at [97]-[98]) that: "In considering the surrounding circumstances on this aspect of the matter I am applying the approach of giving to the Deed the meaning which ought reasonably be ascribed to the words having due regard to the purpose of the contract and the circumstances in which it was made. It is these circumstances and purpose which convince me that the words, although apparently broad enough on one view of them to include the claim in these proceedings, do not in fact include it. I am satisfied that in the context of the Deed, the partners relationship at the time and the surrounding circumstances, the terms of the Release do not include the claim of the type in these proceedings."
In Karam v ANZ Banking Group Ltd [2001] NSWSC 709, at [406], Santow J in turn identified the general principles applicable to construing releases or purported releases, observing that: "(2) In order for the Court to give effect to what in an objective sense the contracting parties intended, it is clear that a party may agree to release claims or rights of which it is unaware and of which it could not be aware, provided clear language is used to make plain that that is its intention: see Salkeld v Vernon (1758) 1 Eden 64 at 28 ER 608 per Lord Keeper Henley. (3) Consistent with this emphasis on intention, general words in a release are limited to what was specifically in the contemplation of the parties at the time when the release was given: Grant v John Grant and Sons (1954) 91 CLR 112 per Dixon CJ, Fullagar, Kitto and Taylor JJ; Iletrait Pty Ltd v McInnes (NSWCA, 17 April 1997, unreported) per Priestley JA with whom Grove AJA and Handley JA agreed). (4) Although there are no special rules of construction, such as a contra proferentem requirement, in the absence of clear language courts have been slow to infer that a party intended to surrender rights and claims of which it was unaware and could not have been aware: BCCL v Ali [2001] 1 All ER 961 at 966 per Lord Bingham, (contrast Lord Nicholls in BCCL v Ali (supra) at 971-972 who was of the view that for the purposes of construction a general release is simply a term in the contract). (5) Although each release should be considered against its own matrix of facts, an example of this line of "cautionary principle" (Lord Bingham's phrase) is the frequently cited judgment of the High Court of Australia in Grant v John Grant & Sons Pty Ltd (supra), where Dixon CJ, Fullagar, Kitto and Taylor JJ (at 125) referred with approval to the proposition put by Sir Frederick Pollock in his Principles of Contract (Stevens: London, 1950) 13th ed at 412, that "in equity a release shall not be construed as applying to something of which the party executing it was ignorant." … (8) Most recently in this Court in Amaca Pty Ltd formerly known as James Hardie & Coy Pty Ltd v CSR Ltd [above], Bergin J adopted the principles of construction broadly as outlined above, including the "cautionary principle" and taking into account the purpose of the contract and the circumstances in which made".
Mr Hicks also refers in closing submissions, in respect of the construction of the releases, to the general principles for the construction of contract terms summarised in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at 656-657.
Mr Hicks submits that, in respect of defects or non-conformities in the residential building works as performed as at 27 February 2017, there was no communication or knowledge of their existence; the evidence does not disclose that any person or party was aware of any defective or non-conforming work; and the residential building works were then substantially incomplete. He submits that there is no evidence that the parties intended that any release would be given to County for any extant defective work or any consequent breach(es) of the HBA. He submits that, as at the date of the Second Agreement, Mr and Mrs Warburton could not have known about the existence of any defects in the Works, and County has not led evidence to suggest that it was aware of any defects or non-conformities in the works at that time. Mr Hicks also addressed a principle, which he described as "temporal disconformity", depending on the proposition that County had the opportunity and obligation to rectify any defects by the time the works were complete. It is not necessary to address that question, given the conclusions I reach on other grounds below.
On balance, I accept that the releases given in the Second Agreement did not extend to the quality of works or defects in works undertaken prior to that agreement, where there is limited reference to that matter in prior correspondence between the parties and no reference to that matter in the recitals to the Second Agreement. However, little turns on that finding, where Mr and Mrs Warburton do not seek to establish, on the balance of probabilities, that any defects that are in issue arose from work undertaken prior to the Second Agreement, as distinct from work that "may" have been undertaken prior to that date.

Mr and Mrs Warburton's other responses to the release - rectification, unilateral mistake and s 18 of the HBA

The Defendants reliance on the release given by Mr and Mrs Warburton under the Second Agreement in turn prompted a claim for rectification and other claims by Mr and Mrs Warburton.
Mr and Mrs Warburton contend that if the Court finds that, on its proper construction, cl 6.2 of the Second Agreement released County from liability to them for breaches of the statutory warranties contained in s 18B of the HBA (which is denied), then they seek an order for rectification of that agreement (ASC [24]). They plead, at some length, their actual intention in entering into the Second Agreement and County's actual intention in entering into that Agreement, and they plead (ASC [27]) that a release of County from liability for any claim in respect of breaches of the statutory warranties under the HBA does not reflect that actual intention and agreement of the parties in respect of the Second Agreement. They claim that the Second Agreement should be rectified to exclude the words "or in connection with any event which has occurred prior to the date of this Agreement including" in cl 6.2 of the Second Agreement.
Mr Hicks refers to Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 350; [1973] HCA 23, where Mason J (as his Honour then was) observed that the purpose of the remedy is to make the instrument conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately; and that an antecedent agreement is not essential to the grant of relief by way of rectification, which may be granted in cases in which the instrument sought to be rectified constitutes the only agreement between the parties, but does not reflect their common intention. He also draws attention to the Einstein J's review of the case law in P Ward Civil Engineering Pty Ltd v Civil and Civic Pty Ltd [1999] NSWSC 727 at [409]-[421] and submits, relying on Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47 at [32] and [103], and that rectification is available where there is a common mistake, so as to make an instrument conform to a concluded antecedent agreement or to a continuing concurrent intention of the parties to the instrument.
In closing submissions, Mr Hicks identifies conversations and exchanges of emails between the parties, from October 2016 until mid-February 2017, concerning the scope of the agreement which became the proposed Second Agreement, and emphasises that the parties did not have discussions about alleged breaches of the statutory warranties in that period, as a matter that would support a claim for rectification to narrow the scope of the release. He submits that the breaches of the statutory warranties were not the subject matter of the dispute that the parties sought to resolve by the Second Agreement. I have referred to the relevant communications and emails above, and I accept that there was no specific reference to the release of defects in that period, which is a matter to which I have had regard in finding that the release has a narrower operation, on its proper construction.
Mr Klooster in turn submits that an action in rectification requires proof of the parties' common intention, and that, relevantly, cl 6.2 of the Second Agreement did not correctly record that common intention: Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 at [451]-[461]. Mr Klooster also accepts that Mr and Mrs Warburton's claim in rectification permits the Court to have regard to the parties' subjective intention, as opposed to their objective intention relevant to contract formation and construction: SAMM Property Holdings Pty Ltd v Shaye Properties Pty Ltd [2017] NSWCA 132. He submits that rectification is not available, where the evidence does not establish a common intention as to the scope of the release in the Second Agreement, where at least County intended that it would have wide effect. Mr Klooster also points out that Mr Hart squarely rejected, in cross-examination, the proposition that it was not in his contemplation that County would be relieved or released of its obligations with respect to defects or breaches of the statutory warranties by the release in the Second Agreement (T183). His evidence in cross-examination is corroborated by contemporaneous correspondence between Mr Hart and County's solicitor, Mr Somerville. In particular, Mr Hart's instructions to Mr Somerville on 14 February 2017 (Ex J6, 3741), to which I have referred above, made clear that a comprehensive release was sought.
It is not necessary to address this claim, where I have held that the Second Agreement did not release County from liability in respect of breach of any such warranties. However, I note that there seems to be little prospect that Mr and Mrs Warburton could establish their rectification claim, where it seems plain that at least County sought a wide release in the relevant circumstances, and there was no common intention that the Second Agreement should confer only the narrower release for which Mr and Mrs Warburton contend, and to which I have held it was limited.
Mr and Mrs Warburton alternatively plead (ASC [29]ff) a case of unilateral mistake. Mr Klooster points out there is no pleading and no evidence that County, through Mr Hart, had knowledge of any mistaken belief of Mr and Mrs Warburton, or proceeded to take advantage of it, or contributed to any such mistaken belief on the part of Mr and Mrs Warburton. He points out that Mr Brincat assisted Mr and Mrs Warburton in negotiating and finalising the terms of the Second Agreement, but they did not seek legal advice in respect of that Agreement. It is not necessary to determine this claim, for the same reason that it is not necessary to determine the rectification claim, However, I do note that there seems to be little prospect that Mr and Mrs Warburton could establish unilateral mistake, where there is no evidentiary basis for a finding that County contributed to any error by Mr and Mrs Warburton as to the scope of the release if, contrary to the finding that I have reached, that error existed.
By their Amended Reply, Mr and Mrs Warburton also contended that the release, if it had the wider construction for which County contends, would be void by reason of s 18G of the HBA, which provides that: "A provision of an agreement or other instrument that purports to restrict or remove the rights of a person in respect of any statutory warranty is void."
Mr Klooster refers to the limited caselaw which has considered the effect of s 18G of the HBA, including Cappello v Hammond and Simonds NSW Pty Ltd [2020] NSWSC 1021 at [31]; The Owners - Strata Plan 6511 v Meriton Apartments Pty Ltd [2016] NSWSC 909 at [12]; and, most relevantly although not binding on me, Roberts v Jandson Pty Ltd (Homebuilding) [2011] NSWCTTT 105, which held that the release of a right to enforce a claim for breach of statutory warranties under s 18B was not void by reason of s 18G of the HBA. Mr Klooster submits that that section does not prevent parties from agreeing to settle an action to enforce a statutory warranties claim and that a party may choose not to enforce the statutory rights given by the HBA and contract not to do so. It is by no means clear to me that the Second Agreement had such a character, particularly where any dispute as to defects in the work undertaken by County had not then developed to the point that any such defects were known or identified. However, it is not necessary to decide that matter, where I have held that the release given in the Second Agreement had a narrower scope in any event. Mr Klooster submits, and I also accept, that s 18E of the HBA does not assist Mr and Mrs Warburton, since they had not enforced any claim for defects at the time the Second Agreement was entered, and no question of further enforcement of such a claim arises.

County's other responses to the relief claimed

Third, the Defendants contend (Defence [14(c)]) that the obligations of Mr and Mrs Warburton and County under the Contract do not apply to building work carried out after the parties entered into the Second Agreement, and I have accepted that contention above, at least so far as the Second Agreement narrowed the range of County's obligations. Fourth, the Defendants rely (Defence 14(d)-(e)] on cl 2.1 of the Second Agreement for the contention that County's role on February 2017 was limited to carrying out the work "reasonably necessary to manage and supervise" the project's completion in accordance with specified Plans and Specifications, by providing specified personnel, and that it was not liable for building work carried out after the date of the Second Agreement, which did not relate to managing and supervising the completion of the project. I have largely accepted that contention above.
Fifth, County contends (Defence [14(g)]) that it is not liable for any failure by contractors to complete work as a result of Mr and Mrs Warburton failing to pay money due to them. That defence was relied on in respect of the work of several contractors. The Plaintiffs respond to this defence by the robust submission that: "It cannot reasonably be suggested, in any circumstances, that an owner or a principal should have to pay for work that is defective before it can be expected that rectification will occur. This assertion defies the law, common sense and human nature."
Putting aside wider questions as to human nature, which I do not think it necessary to determine, it seems to me that this proposition is plainly wrong. First, the Second Agreement imposed an obligation on Mr and Mrs Warburton to pay the contractors and did not defer the time for payment until the work was "defect free", and there can be no suggestion that there was any total failure of consideration in the contractors' work that would displace that obligation. Second, as a matter of fact, whatever the practical desirability of Mr and Mrs Warburton taking the course they did, it had the consequence, in fact, that County's efforts to manage and supervise the rectification of defects were frustrated, because contractors which had not been paid substantial amounts refused to undertake additional rectification works until the amounts due to them were paid. It seems to me that that matter displaced any breach of an obligation to carry out all the work reasonably necessary to manage and supervise the project's completion in accordance with specified Plans and Specifications, in respect of those matters. It also displaced causation, since any breach was not then causative of the failure to rectify defects, which were not rectified because Mr and Mrs Warburton declined to pay the relevant trades.
Mr Hicks also advances the surprising proposition that, as a matter of law, there is no basis that a person is entitled to the agreed payment if they have done "less than" what it was agreed would be provided. That proposition, with respect, does not recognise the limits to the defence of total failure of consideration, and it is not surprising that he cites no authority to support that proposition. Mr Hicks also submits that, in the context of inadequate or defective work, "the withholding of payment is the only commercial leverage that an innocent party has". It is not necessary to assess the correctness of that matter, as a proposition of practicality; it is sufficient to note, that a party who takes that course will also likely assume the risks associated with it, which are well illustrated here, where third party contractors refused to return to site to rectify defects when that approach had been taken.
Mr Hicks also relies, in submissions in reply, on Mrs Warburton's evidence that representatives of Fair Trading had advised that Mr and Mrs Warburton did not need to pay for "incomplete or defective works". Assuming, without deciding, that advice was given, it was plainly incorrect, which was not surprising where Fair Trading does not appear to have paid any attention to the terms of the Second Agreement, and its inspectors were hopefully not holding themselves out as legal advisors to Mr and Mrs Warburton, where there is no reason to think that they had professional qualifications which would permit them to undertake that role.
I find this defence is established in respect of the defects claimed identified in MFI 1A items G28, G30 and G37 (so far as waterproofing issues are raised in respect of landscaping) and I address the relevant facts in dealing with those matters below.

Issues raised by Mr and Mrs Warburton's Reply filed 7 March 2022

By their Reply, Mr and Mrs Warburton in turn plead that the management and supervision of the completion of the project in accordance with the Plans and Specifications "necessarily requires rectification or remediation of non-conforming work" (as defined). I do not accept that proposition. It is not self-evident that a person responsible for project management or project supervision guarantees the adequate performance of work by the contractors that undertake it, still less that it undertakes an obligation to rectify or remediate any inadequate work performed by those contractors.
Mr and Mrs Warburton also rely, in reply, on cl 8.1 of the Second Agreement, by which County gave warranties with respect to the Work (as defined). However, the Work conducted by County under the Second Agreement was limited to the management and supervision of the completion of the project, and did not amount to a guarantee as to the work undertaken by contractors from February or March 2017. The statutory warranties under the HBA in turn did not extend beyond the scope of the work which County undertook under the Second Agreement.

Some general observations as to the defect claims, an attempted shift in Mr and Mrs Warburton's case and a late amendment application that was not pressed

Mr and Mrs Warburton rely on a schedule of defects (MFI 1, subsequently updated as MFI 1A) which reflects expert evidence led in the proceedings to identify the relevant defects. Mr Hicks, in closing submissions, provides a comprehensive and helpful summary of the relevant defects, which I have closely reviewed, but will not seek to repeat. I will, however, address the broad scope of the expert evidence below, so far as it is necessary to do so to determine whether a breach of County's contractual obligation under cl 2.1 of the Second Agreement or the statutory warranties can be established in respect of the relevant works, to the extent that they occurred after that agreement took effect, or under the Contract in those cases where work had been done while it remained the operative source of County's obligations. Mr Klooster in turn submits, and I accept, that Mr and Mrs Warburton bear the onus of establishing the existence of the defects for which they contend and that the rectification work for which they contend is necessary to produce conformity with the Contract and that the expenditure of money on the proposed rectification is reasonable: The Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612 at [249]. Importantly, in order to establish a breach of the Contract or the Second Agreement respectively, they must establish that a particular defect arose from work within the scope of the Contract undertaken prior to early March 2017, or fell within the scope of the Second Agreement, so that the narrower obligations under that Agreement were applicable to it. It will be necessary, in dealing with the many defects for which Mr and Mrs Warburton contend, to distinguish between those which Mr and Mrs Warburton initially contended "may have" arisen from work done prior to the entry into the Second Agreement (which they initially contended occurred on 27 February 2017 and County initially contended occurred on 5 March 2017) and those which Mr and Mrs Warburton initially accepted arose from work done after entry into the Second Agreement. I also address the expert evidence led by the parties in respect of hydraulic defects, general building defects and quantum.
The structure of Mr and Mrs Warburton's case in respect of the hydraulic defects which I address below, and the general defects to which I will then turn, is generally to identify a defect with a third party contractor's work and then to assert, without supporting evidence, that that must have involved a breach of the Contact, the Second Agreement or the relevant statutory warranties, without addressing the scope of County's management and supervision obligations under the Second Agreement or how they applied to any particular defect in a contractor's work. I do not accept the proposition that any defect in any contractor's work necessarily establishes a breach of County's contractual obligations or any relevant contractual or statutory warranty under the HBA. That proposition is particularly unpersuasive in respect of the Second Agreement, where County's obligations were limited to management and supervision of the completion of the project under cl 2.1 of that Agreement.
Mr and Mrs Warburton led no evidence to establish the steps that County should have taken to comply with its obligation of supervision or management under cl 2.1 of the Second Agreement, in respect of the project generally or particular works undertaken by contractors, or to establish that any breach of that obligation had any connection with any of the defects in work undertaken by the several contractors on the project after the entry into the Second Agreement. There were also differences in view between the hydraulic and building experts called by Mr and Mrs Warburton and by County as to the underlying facts in respect of the asserted defects and as to the extent to which the relevant defects existed. All of those experts were experienced and credible witnesses, who appeared to be doing their best to assist the Court although they held different views. It is plainly not self-evident that County, in managing and supervising the project after the date of the Second Agreement, should or could have identified defects in work undertaken by contractors, still less that it should or could have required contractors to correct them, where, even after detailed investigations, the expert witnesses disagree as to the existence and scope of those defects.
As I noted above, the express warranties under cl 8.1 of the Second Agreement and the corresponding statutory warranties under the HBA are largely limited to the scope of Count's work under that agreement, and could not expand the expressly agreed scope of County's management and supervision obligation under that agreement: compare Oikos Constructions Pty Ltd v Oston [2020] NSWCA 358 at [83]. The widest of those warranties required that the property be a dwelling that was reasonably fit for occupation as a dwelling. Mr Hicks fairly accepted in closing submissions that it was not suggested that warranty was breached, and that concession was rightly made where the identified defects, separately or together, did not have the consequence that the property did not have that character, where an occupation certificate was issued and Mr and Mrs Warburton have lived in it for several years. I recognise that this and other defects may well be a disappointment to them, particularly give the costs of the works, but I was not taken to any authority that the content of this warranty escalates to require something more than that the dwelling is reasonably fit for occupation, even if the works are expensive or the owners' expectations are particularly (and possibly justifiably) demanding. I will not repeat that conclusion in respect of each of the defects that I address below, although I reach it in respect of each of them.
I have also borne in mind that the fact that a relatively large number of defects have been identified increases the prospect that County's obligation to "carry out all the work reasonably necessary to manage and supervise the completion of the [p]roject" in accordance with the specified Plans and Specifications under cl 2.1 of the Second Agreement and the relevant contractual and statutory warranties might have been breached. However, it does not seem to me that that proposition takes Mr and Mrs Warburton very far, because there are genuine disputes as to whether several of these matters amount to defects, and I find below that there is no basis to prefer Mr Laurie's and Mr Zakos' evidence led by Mr and Mrs Warburton to Mr Brown's and Mr Nesbitt's evidence led by County; County's obligations of supervision and management would also have extended to other matters, across the construction of a relatively complex building, as to which no defects are alleged, as well as to the areas in which defects are alleged; and the fact that it is more likely that a duty of supervision was breached, if there are more rather than less defects in the ultimate result, does not assist in determining, absent adequate expert or other evidence, what ought to have been done in managing and supervising the project in respect of the particular areas in which breaches are alleged, or which defects arise from any breach of County's management and supervision obligations under cl 2.1 of the HBA or give rise to a breach of the relevant contractual and statutory warranties under the HBA.
To put that another way, I cannot simply assume that some or many defects could not occur in areas of specialist contractors' works, although County had in fact carried out all the work reasonably necessary to manage and supervise the project's completion in accordance with specified Plans and Specifications under cl 2.1 of the Second Agreement; or find, without evidence, that any particular defect in particular contractor's work must have arisen from a failure of management or supervision, or breached a contractual or statutory warranty to the scope of County's work (as distinct from the contractor's work) under the Second Agreement.
I should now address a radical shift in Mr and Mrs Warburton's case which they initially sought to make in Annexure B to their reply submissions (MFI 11) after the hearing had concluded, but ultimately did not press. Mr and Mrs Warburton's case initially, and throughout the hearing, was that only several defects related to work performed before the execution of the Second Agreement, and in respect of those several defects, Mr and Mrs Warburton initially went no further than to suggest that the relevant work "may" have been initially performed prior to that date which would not be sufficient to establish that proposition on the balance of probabilities. This issue was addressed in Mr and Mrs Warburton's opening (T16-T17) where Mr Hicks identified the work they contended may have been done by the date of the Second Agreement, which they then contended had taken effect on 27 February 2017. I there sought clarification of the case put by Mr and Mrs Warburton as to when work was done, although Mr and Mrs Warburton may have been then focussing on the impact of the release in the Second Agreement on which County relied in formulating that case. I set out the exchange at some length because of the importance of this issue and Mr and Mrs Warburton's later attempt radically to reshape that case in reply, as follows: "HIS HONOUR: And one question I was going to ask you is where in the schedule of defects are there defects which are said to have arisen from work prior to [27] February 2017 [when Mr and Mrs Warburton contended the Second Agreement took effect], which would raise the issue you just addressed [as to the scope of the release in the Second Agreement]? HICKS: Where we have indicated, for example, in item H2, your Honour will see in the fourth column "contractor" and "work performed". … HICKS: So, for example, in H2 we have indicated that the work may have been initially performed prior to 27 February, but we need to clarify that because the invoices by which we derive that information are not always entirely clear. And the other thing we would submit in due course is that, whereas there may be some parts of, say, the sanitary drainage system, which were untaken prior to February 2017, the whole of the system was not completed as at that time. So, I would have to accept, for example, that much of the external drainage and pipes were laid prior to February 2017. But that was an incomplete system because they had not been connected to the drainage points, both within the house and externally, which was intended to operate as a system as a whole. HIS HONOUR: Yes. But a question of whether a release can release defects for earlier work, is only going to arise once we identify the earlier work which is said to be defective. … HIS HONOUR: So, there's H2 and H3. Are there any others? HICKS: H4. H17, H18. … HICKS: Those are the only works on our case, in respects of the hydraulics, undertaken, clearly, prior to February 2017. In respect of the "G" which stands for "General", can I refer to G29. … HICKS: Item G31, we've said most work was performed after February 2017. I think there were one or two of the external aluminium window and door frames that may have been installed prior to that date, but I'll seek to get some detailed instructions as to what those are. … HICKS: G34. I would have to accept that Item 1 "swimming pool defects" concerns the location of what's described as a "skimmer box". Now, that is part of a concrete pour, that is made for the pool. And my understanding is that concrete pour did occur in 2016. But the rest of the swimming pool work was done later. And that is it. … On our case, and on our evidence, all the rest of the items occurred after February 2017, or the relevant date of the deed." [emphasis added]
Mr and Mrs Warburton sought to radically shift their case in written reply submissions, after the hearing had been completed, by first accepting County's contention that the Second Agreement did not take effect until 5 March 2017 rather than on 27 February 2017, then identifying many new contentions that items of work were done prior to 5 March 2017, and for the first time identifying evidence and making submissions in support of those contentions. The radical character of that shift can be illustrated simply. Mr and Mrs Warburton's case, as summarised above by Mr Hicks in opening, was that eight items of work (MFI 1A H2, H3, H4, H7, H18, G29, a small part of G31 and one item in G34) had been undertaken before the Second Agreement and all other work had been done after that agreement took effect. By their written submissions in reply, after the hearing had completed, they sought to shift that position, purportedly in response to County's response to their case in chief, to contend that some fourteen items of work (MFI 1A, H1, H5-H10, H16, H20-H21, H23-H24, G26, G28 and other items in G34) in addition to the eight items noted above in their case in chief, were now to be treated as work done before the Second Agreement rather than, as they had contended throughout the hearing, as work done after the Second Agreement.
On 29 June 2022, my Associate advised the parties, at my request, that: "His Honour has reviewed the [Plaintiffs written reply submissions] and notes that his preliminary view is that a significant part of the material in Annexure B is not properly in reply, at least if it is intended to reverse the position summarised by Mr Hicks in the Plaintiffs' opening at T17, namely that Items other than H2, H3, H4, H17-H18, possibly part of G31, and G34 (the skimmer box) were performed after the date of the Second Agreement.1 His Honour may well decline to address submissions of that character, to the extent they are first raised in reply in respect of issues that are necessarily part of the Plaintiffs' case in chief, where the Defendants will not have had a proper opportunity to respond to them. His Honour has asked me to seek confirmation, by 4pm tomorrow, whether the Plaintiffs seek leave to reopen in respect of Annexure B, and, if so, you should in support by that time, and his Honour will then list that application for directions or hearing. If not, his Honour will, obviously enough, determine the matter on the basis that no such application is made."
On 30 June 2022, Mr and Mrs Warburton served and sent to my Associate a notice of motion which sought leave to rely on Annexure B to their reply submissions and an order that the Defendants by given leave to reply to Mr and Mrs Warburton's reply submissions. That application was supported by an affidavit of their solicitor, Mr William Costis, dated 30 June 2022 (which was ultimately not read) which sought to characterise these matters as a response to the Defendants' closing submissions. They were not, in substance, for the reasons that I will note below. My Associate, at my request, then advised that the application would be listed for directions or hearing on 5 July 2022, when it proceeded to hearing at a time convenient to Counsel, and also noted that: "His Honour has also asked me to note that it is not entirely clear to him that the motion squarely raises the relevant issue, which is not really whether the Plaintiffs can rely on the written submissions and Annexure B, which his Honour has already received, but whether they can do so in a way that makes, in reply and after the hearing has closed, a substantial change in the basis of their case from that put in chief so that their case is (1) 7 items of work fall within the scope of the contract and the balance within the scope of the Second Agreement (as put in chief) and (2) 21 items fall within the scope of the contract and the balance within the scope of the Second Agreement (as put in reply); and how the Defendants respond to a case put in that way, even if they had the opportunity to do so after the hearing was complete, or how the Court determines it. His Honour expects that he will hear the parties as to that issue in dealing with the motion."
Shortly before that motion was listed for hearing, Mr Hicks advised my Associate that Mr and Mrs Warburton did not seek to proceed with it and, when the matter was then dealt with in open Court, they advised that the Court should disregard Annexure B to their reply submissions. I will proceed on that basis. However, I consider I should also indicate why I would likely not have permitted reliance on Annexure B, and the amendment to Mr and Mrs Warburton's case which was involved in it, had the application been pressed.
I have no doubt that Mr and Mrs Warburton's reliance on Annexure B to their reply submissions, although not characterised as such, would in substance have been an application to amend their case in chief and I would have approached it by reference to the well-established principles applicable to such an application. The reason why reliance on that Annexure had that character can simply be demonstrated. I recognise that, in the Construction List, as in the Commercial List, the List Statement and List Response are not pleadings in the strict sense, and a pragmatic view must be taken of the case as it develops through the List Statement, the List Response, and the evidence as it is served: Icon Co (NSW) Pty Ltd v The Owners - Strata Plan No. 97315 [2022] NSWCA 114 at [12]. Had Mr and Mrs Warburton properly identified the material facts on which they relied in their case in chief, at opening and throughout the hearing in their Commercial List Statement, which they did not, they would have at least identified the dates and circumstances in which the eight items of work comprised in MFI 1A H2, H3, H4, H7, H18, G29, a small part of G31 and one item in G34 were done, and by whom they were done, and that work occurred prior to the Second Agreement and was governed by the Contract. They would also have identified the dates and circumstances in which all remaining items of work were done, and by whom they were done, and that work occurred after the Second Agreement and was governed by the Second Agreement or (as they contend) the Contract as operating in parallel to or as varied by the Second Agreement. The amendment made by Annexure B to their reply submissions, to the identification of material facts which should have but did not exist in the Commercial List Statement, would have increased the eight items that fall in the first category to 21 items; decreased the items that fall in the second category by 14 items, and amended the identification of material facts which ought to have occurred in respect of those items to indicate, for the first time, the fact that they were contended to have occurred prior to (reversing the previous claim that they occurred after) the Second Agreement.
With that background, the principles that are applicable to amendment applications are well-established, and this would not have been the first late amendment application that the Courts have considered, although it may have been one of the latest. I have here partly drawn on my summary of those principles in Re Graziers Pastoral Pty Limited [2021] NSWSC 1680 at [8]ff, where I declined such an application made shortly before, rather than after the completion of, a similarly complex hearing. Had the application been pressed, I would have been required to exercise my discretion whether to allow the amendment having regard to ss 56-58, 60 and 64 of the Civil Procedure Act 2005 (NSW). In particular, s 58 of the Civil Procedure Act requires the Court to have regard to the dictates of justice when considering an order for, inter alia, the amendment of a document, and requires the Court to have regard to the provisions of ss 56 and 57 of the Act. Section 56 identifies the overriding purpose of the just, quick and cheap resolution of the real issues in dispute, and s 57 requires proceedings to be managed having regard, inter alia, to their just determination. Section 64 relevantly provides that, at any stage of the proceedings, the Court may order that leave be granted to a party to amend any document in them and, subject to s 58, all necessary amendments are to be made for the purpose of determining the real issues raised by the proceedings and avoiding multiplicity of proceedings.
I would have had regard to the case law including Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; (2009) 258 ALR 14; [2009] HCA 27 ("Aon") which emphasised the significance of delay not only for particular proceedings, but for the Court system generally. The High Court there recognised, in the context of an amendment application, that a costs order cannot be treated as an automatic solution for failures to comply with case management requirements and also pointed to the strain imposed on litigants and the cost to the community of late amendment applications. In their joint judgment, five members of the Court observed (at [98]) that: "Speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings. This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed upon re-pleading, when delay and cost are taken into account. The Rule's reference to the need to minimise costs implies that an order for costs may not always provide sufficient compensation and therefore achieve a just resolution. It cannot therefore be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs."
The joint judgment also observed (at [113]) that: "In the past it has been left largely to the parties to prepare for trial and to seek the court's assistance as required. Those times are long gone. The allocation of power, between litigants and the courts arises from tradition and from principle and policy. It is recognised by the courts that the resolution of disputes serves the public as a whole, not merely the parties to the proceedings."
I would also have had regard to the reference to those principles in Dymocks Book Arcade Pty Ltd v Capral Ltd [2011] NSWSC 1423 at [5]-[10], where the Court again referred to the relevance both of the nature of the amendments and their importance to the Plaintiffs on the one hand, and prejudice to the Defendants on the other. A unanimous High Court in turn summarised the holding in Aon in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303; [2013] HCA 46. The High Court there observed (at [51]) that: "In Aon Risk Services Australia Ltd v Australian National University , it was pointed out that case management is an accepted aspect of the system of civil justice administered by the courts in Australia. It had been recognised some time ago by courts in the common law world that a different approach was required to tackle the problems of delay and cost in the litigation process. Speed and efficiency, in the sense of minimum delay and expense, are essential to a just resolution of proceedings. The achievement of a just but timely and cost-effective resolution of a dispute has effects not only upon the parties to the dispute but upon the court and other litigants. The [Aon decision] … confirmed as correct an approach to interlocutory proceedings which has regard to the wider objects of the administration of justice."
The Court also there observed (at [56]-[57]) that: "The evident intention and the expectation of the C[ivil] P[rocedure] A[ct] is that the court use these broad powers to facilitate the overriding purpose. Parties continue to have the right to bring, pursue and defend proceedings in the court, but the conduct of those proceedings is firmly in the hands of the court. It is the duty of the parties and their lawyers to assist the court in furthering the overriding purpose. That purpose may require a more robust and proactive approach on the part of the courts. Unduly technical and costly disputes about non-essential issues are clearly to be avoided. However, the powers of the court are not at large and are not to be exercised according to a judge's individualistic idea of what is fair in a given circumstance. Rather, the dictates of justice referred to in s 58 require that in determining what directions or orders to make in the conduct of the proceedings, regard is to be had in the first place to how the overriding purpose of the C[ivil] P[rocedure] A[ct] can be furthered, together with other relevant matters, including those referred to in s 58(2). The focus is upon facilitating a just, quick and cheap resolution of the real issues in the proceedings, although not at all costs. The terms of the C[ivil] P[rocedure] A[ct] assume that its purpose, to a large extent, will coincide with the dictates of justice."
Subsequently, in UBS AG v Tyne as Trustee of the Argot Trust (2018) 265 CLR 77; [2018] HCA 45, in dealing with a different question, the plurality of the High Court referred to Aon and noted (at [38]) that: "As the joint reasons in Aon Risk Services Australia Ltd v Australian National University explain, the 'just resolution' of a dispute is to be understood in light of the purposes and objectives of provisions such as s 37M of the [Federal Court Act]. Integral to a 'just resolution' is the minimisation of delay and expense. These considerations inform the rejection in Aon of the claimed 'right' of a party to amend its pleading at a late stage in the litigation in order to raise an arguable claim. The point is made that a party has a right to bring proceedings but that choices are made respecting what claims are made and how they are framed. Their Honours speak of the just resolution of the dispute in terms of the parties having a sufficient opportunity to identify the issues that they seek to agitate."
Had the application been pressed, I would have had regard to the dictates of justice in respect of the amendment that was, in substance, sought to be made by Annexure B to the Plaintiffs' reply submissions, including the fact that the amendment was potentially important to them where they had not led evidence to establish the content of County's obligations of management and supervision under the Second Agreement, and would have involved a substantial change in their case against the Defendants which may have operated to their advantage. I would have recognised that that advantage to the Plaintiffs would involve a corresponding detriment to the Defendants of being required to address a radically changed case, after all the evidence has been led and the oral hearing was complete, and to face the risk that the proceedings would be determined by reference to a substantially different case to that which they defended. I would have borne in mind the detriment to the three natural persons who are party to the proceedings of prolonging the existing delays and further increasing the already substantial costs that must have been incurred in these long-running proceedings, although I would have inferred that Mr and Mrs Warburton were prepared to bear that detriment given the advantage they presumably perceived from the amendment. I would have had regard to the fact that Mr Costis' evidence explained, in a limited way, the factual analysis he undertook after the hearing was completed to respond to the Defendants' closing submissions, but that did not explain why that analysis was not undertaken earlier where these matters were an essential part of the Plaintiffs' case in chief.
Had the application been pressed, I would likely have found that there would be a significant prejudice from the amendments to the Defendants, so far as they would be exposed to the costs and potential disadvantage of responding to a radically different case, by submissions made when it would be too late to change their conduct of the case to date; and their proper expectation that the case they defended, and not a different case, would be decided would be frustrated. I would have also borne in mind that several steps might potentially be taken to mitigate the detriment of that course to the Defendants, including an order for costs. However, that would not have avoided the detriment to the Defendants of defending one case and then facing judgment on a substantially different one. I would also have recognised that, as the High Court emphasised in Aon, an order for costs is not always a solution in late amendment applications. Had the application been pressed, I am inclined to think that, balancing these factors, and recognising the importance of the amendment to the Plaintiffs, it would not have been consistent with the just, quick and cheap resolution of the matters in dispute, or more fundamentally with the just resolution of these proceedings, to impose the prejudice arising from this amendment on the Defendants, at this late stage, and after the oral hearing had concluded. Accordingly, I would likely not have granted leave to Mr and Mrs Warburton to rely on Annexure B to their reply submissions, so far as it amounted to an implied amendment of the Plaintiffs' case in chief. On that basis, Mr and Mrs Warburton's decision not to press the application was likely well founded. Mr Hicks accepted that, where that application was not pressed, I should disregard Annexure B to Mr and Mrs Warburton's reply submissions and two references to it in those submissions and I have now done so.

The alleged hydraulic defects

I now turn to address the hydraulic defects alleged by Mr and Mrs Warburton, largely relating to plumbing work, and following the structure of their case in chief. I first address the alleged hydraulic defects as to which Mr and Mrs Warburton initially contended that the works "may have" been completed prior to the Second Agreement. First, Mr and Mrs Warburton contended that plumbing works performed by a contractor, Civic Plumbing, "may have" been initially performed prior to that Agreement and were defective so far as a sanitary drainage system incorporated a boundary trap not provided with a low level vent (MFI 1A, item H2). County accepted, in closing submissions, that this work was done prior to 5 March 2017, when the Second Agreement took effect. The parties, by an Agreed Statement of Facts dated 8 July 2022, then recorded their agreement that this work was completed before the Second Agreement was made and I proceed on that basis. The hydraulic experts retained by Mr and Mrs Warburton and by County, Mr Laurie and Mr Brown respectively, agree as to this matter, which it appears was rectified by the date that Mr Brown undertook his inspection at the property. I accept that a breach of the contractual and the statutory warranties under the HBA is established in respect of this matter, where the work was done while the Contract rather than the Second Agreement was in effect.
The second defect initially identified by Mr and Mrs Warburton (MFI 1A, item H3) in this category relates to plumbing works that they contend "may have" been initially performed prior to 27 February 2017 in respect of a sanitary drainage system, which they contend was not provided with an overflow relief gully. County also accepts, in closing submissions, that this work was done prior to 5 March 2017, when the Second Agreement took effect. The parties, by an Agreed Statement of Facts dated 8 July 2022, also recorded their agreement that this work was completed before the Second Agreement was made and I proceed on that basis. The hydraulic experts agree that an installation defect was present in this respect and that necessary works have now been completed to address it. I also accept that a breach of the contractual and the statutory warranties under the HBA is established in respect of this matter, where the work was done while the Contract rather than the Second Agreement was in effect.
The third defect initially identified by Mr and Mrs Warburton in this category also relates to plumbing works that they contended "may have" been performed prior to 27 February 2017 (MFI 1A, item H4) relating to inground sanitary drainage pipework, which is said to have internal projections, pipe deformations and to lack a continuous positive gradient. County also accepted, in closing submissions, that this work was done prior to 5 March 2017, when the Second Agreement took effect. The parties, by an Agreed Statement of Facts dated 8 July 2022, confirmed their agreement that this work was completed before the Second Agreement was made and I proceed on that basis. Mr Laurie and Mr Brown disagree as to whether an installation defect was present and whether repair works need to be undertaken; they disagree whether the relevant pipe should have been cleaned before it was inspected by CCTV to identify any defects; and Mr Brown considers that the asserted defects are minor in nature and that there has been no adequate measurement of the grade on the pipe to demonstrate any defect in it. In concurrent evidence, Mr Brown accepted that there were some defects in the pipe but disagreed that it had been shown that there was a lack of an adequate gradient in the pipeline, and Mr Laurie maintained his view that there was a negative gradient in the pipeline (T144). Mr Laurie's evidence was that about 12 metres of pipe would need to be replaced; Mr Brown considered that was not necessary, where he did not consider the gradient on the pipe was inadequate and other issues could be addressed by pipe relining (T146). Mr Brown's evidence was that he could not form a reliable conclusion as to the gradient of the pipe from the CCTV footage arising from Mr Laurie's investigations (T146), and Mr Klooster emphasises the continuing difference of opinion between Mr Laurie and Mr Brown as to whether a reliable inference that the pipe does not have sufficient gradient can be drawn from the CCTV footage. The expert reports and their concurrent evidence do not provide any basis on which to prefer Mr Laurie's evidence to Mr Brown's evidence in this regard and, for that reason, I do not find that this defect is established on the balance of probabilities. Had a defect been established, I would have held that it gave rise to a breach of the contractual and the statutory warranties under the HBA, where the work was done while the Contract rather than the Second Agreement was in effect.
Mr and Mrs Warburton also identify defects in the property's stormwater drainage system (MFI 1A, item H13). In closing submissions, Mr and Mrs Warburton at least left open the possibility that that this work was done prior to the entry into the Second Agreement, and County submitted that this work was done prior to 5 March 2017, when the Second Agreement took effect. The parties, by an Agreed Statement of Facts dated 8 July 2022, recorded their agreement that this work was completed before the Second Agreement was made and I proceed on that basis. The hydraulic experts agree that there was an installation defect in relation to a reflex valve in a stormwater line, and more widely in respect of pipework issues, but disagree as to the reasonable and necessary scope of rectification works. In concurrent evidence concerning this and another defect (MFI 1A, item H18), both considered that defects in the pipework needed to be corrected, although Mr Brown considered that a more limited repair or remediation was required and Mr Laurie considered that complete replacement would be more cost effective (T162). Mr Klooster submits that the narrower repair supported by Mr Brown, should be preferred to the wider repair for which Mr Laurie contended, and Mr Hicks contended for the inverse position. That seems to me to be a question as to which minds may reasonably differ, and it may be that the Plaintiffs have not established that Mr Laurie's scope of works should be established on that basis. I accept that a breach of the contractual or statutory warranties under the HBA is established in respect of this matter, where the work was done while the Contract rather than the Second Agreement was in effect. I will return to what is to be done with this issue below.
Mr and Mrs Warburton also identify a defect as to the size and capacity of the rainwater tanks overflow pipework (MFI 1A, item H17) and contend that works "may have" been initially performed in 2016. The hydraulic experts agree as to the scope of the defect and the scope of rectification. Mr and Mrs Warburton also contend that a defect exists in respect of provision for roof rainwater runoff to be conveyed to rainwater tanks (MFI 1A, item H18) and that this work "may have" been initially performed in 2016. The hydraulic experts agree that the stormwater rainwater collection contains at least some defects, although Mr Laurie considers that investigations to date have established that the system is inadequate, whereas Mr Brown considers that further investigation is required. In concurrent evidence, they both considered that defects in the pipework needed to be corrected, although Mr Brown considered that a more limited repair or remediation was required and Mr Laurie considered that complete replacement would be more cost effective (T162). That may be a question as to which minds may reasonably differ, and it is not necessary to resolve it given the conclusions that I have reached on other grounds. I am also not satisfied that a breach of County's obligations under the Contract or the Second Agreement has been established in respect of these matters.
My finding that County's liability for these matters has not been established does not mean that Mr and Mrs Warburton had no recourse for any defect in respect of the work. They may well have had such recourse against the plumber which undertook the works, Civic Plumbing, but they did not join Civic Plumbing as party to the proceedings or seek to establish any liability on its part, notwithstanding the number of defects that were alleged to have arisen from its work.
I now turn to hydraulic defects identified by Mr and Mrs Warburton for the period from February or March 2017, when County was subject to the narrower obligations of management and supervision arising under cl 2.1 of the Second Agreement and its statutory obligations under the HBA would apply in respect of that narrowed scope of work. First, Mr and Mrs Warburton identified a defect (MFI 1A, item H1) arising because sewer gases from the sanitary drainage system are permeating into the building, in the ground floor powder room, master on-suite and two other on-suites, which they initially contended arose from work undertaken by Civic Plumbing in the period to October 2017. As I noted above, they did not press their attempt in reply to shift their position put during the trial that this work was done after the Second Agreement, to contend instead that this work was done pursuant to invoices issued by Civic Plumbing in August and September 2016. The hydraulic experts are now agreed as to this issue. However, there is no expert or other evidence as to what would have been done to "carry out all the work reasonably necessary to manage and supervise the completion of the [p]roject" in accordance with the specified Plans and Specifications, in respect of works undertaken by a plumbing contractor in particular parts of the property, when County's obligations were limited by cl 2.1 of the Second Agreement. I am unable to find, without such evidence, that the scope of County's supervision and management obligation under that Agreement extended to intervention in the manner in which this work was undertaken by the plumbing contractor. It has therefore not been established that County breached either its obligations under cl 2.1 of the Second Agreement or the contractual or statutory warranties under the HBA in respect of the performance of those obligations in respect of this item.
The next issue identified by Mr and Mrs Warburton in respect of plumbing work performed after the Second Agreement (MFI 1A, item H5) relates to a contention that a suspended sanitary drainage pipe work in the ceiling void above the main kitchen and butler's pantry hallway was not provided with the required minimum gradient and has an internal projection. As I noted above, they also did not press their attempt in reply to shift their position put during the trial that this work was done after entry into the Second Agreement to contend that it was done prior to the Second Agreement although possibly not invoiced by that time. The hydraulic experts agree that a defect existed at the time of installation, but necessary repair works were completed between Mr Laurie's and Mr Brown's site inspections, and that defect has now been addressed to their satisfaction. Again, without expert or other evidence as to the content of accepted or appropriate industry practice in respect of supervision and management in respect of a plumbing contractor, I cannot conclude that County's management and supervision obligations under cl 2.1 of the Second Agreement extended to requiring County to determine whether that contractor installed each sanitary drainage pipe with the appropriate minimum gradient, and it is plainly not self-evident that a management or supervision obligation required intervention in each contractor's work, or the plumbing contractor's work, to that level of detail. A breach of cl 2.1 of the Second Agreement or any associated contractual or statutory warranty under the HPA is again not established in respect of this issue.
The next issue identified by Mr and Mrs Warburton in respect of plumbing work performed after the Second Agreement (MFI 1A, item H6) relates to a claim that a swimming pool backwash is connected to a floor waste gully located in the pool plant room. Again, Mr and Mrs Warburton did not press their attempt to shift their position in reply to contend that this work was done prior to the Second Agreement. Mr Laurie considers that connection to a gully is insufficient, although his oral evidence suggested this conclusion depended on a strict and possibly somewhat legalistic construction of the relevant standards, rather than any functional difficulty with the connection. Mr Brown disagrees with Mr Laurie's construction of the standard, observes that the pool backwash was operating without issue during his inspection and considers the relevant connection complies with the applicable standard. Perhaps oddly, Mr Laurie and Mr Brown disagreed, in concurrent evidence, as to whether the relevant connection was found in a plant room or in a bathroom; Mr Brown maintained his view that the pump discharge was connected to a gully in accordance with the relevant standard; and Mr Laurie accepted, in answer to a question from me, that the present fixture was operating properly, although he did not consider it complied with the definitions in the relevant standard (T148). It was common ground that no rectification of that issue was required, apart from any non-compliance with the definitional elements of that standard (T149). It is not necessary to address the difference between the experts in this respect, because it is not self-evident that, and there was no evidence that, County's obligation of management or supervision under cl 2.1 of the Second Agreement, or any associated contractual statutory warranties, extended to resolving contested questions of construction of the applicable standards as to connections for swimming pools, or intervening to correct an approach adopted by the plumbing contractor which Mr Brown considers was appropriate, although Mr Laurie takes a different view. A breach of County's obligations under the Second Agreement and the contractual and statutory warranties under the HBA is not established.
Mr and Mrs Warburton identify a defect (MFI 1A, item H7) that an inspection opening was not provided to a common discharge pipe, in a services duct in the butler's pantry at ground level, which they contend failed to comply with applicable standards. Mr and Mrs Warburton again did not press their attempt to shift their position in reply to contend that this work was done prior to the Second Agreement. The hydraulic experts agree that a defect was present, but the necessary repair works were completed between Mr Laurie's and Mr Brown's site inspections, and that issue has now been addressed to their satisfaction. For the same reasons as I have indicated in respect of MFI 1A item H5 above, I am unable to conclude, without expert or other evidence as to the content of accepted or appropriate industry practice in respect of supervision and management of plumbing contractors, that those obligations, or any contractual or statutory warranties under the HBA, extended to requiring its intervention in the plumbing contractor's work in respect of the installation of inspection ducts whether in this area or generally.
Mr and Mrs Warburton also identify a defect (MFI 1A, item H8) that air admittance valves have not been installed in the proper locations in the master ensuite and ensuite 1. Mr and Mrs Warburton also did not press their attempt to shift their position in reply to contend that this work was done prior to the Second Agreement. County no longer presses a factual issue as to this item, and the hydraulic experts reached agreement about it on that basis. For the same reasons as I have indicated in respect of MFI 1A item H5 above, I cannot find, without expert or other evidence as to the content of accepted or appropriate industry practice in respect of supervision and management of plumbing contractors, that a defect in the plumbing contractor's work in this area establishes, without more, a contravention of County's supervision and management obligation under the Second Agreement or any associated contractual or statutory warranty under the HBA.
Next, Mr and Mrs Warburton contend that ensuite showers have not been provided with fixture traps and correctly sized outlets (MFI 1A, item H9) and again note that the work was performed by Civic Plumbing in the period to October 2017, and that internal drainage works were performed in March 2017. Mr and Mrs Warburton again did not press their attempt to shift their position in reply to contend that this work was done prior to the Second Agreement. The experts do not agree as to the existence of the defect or that repair works need to be undertaken, although it appeared that a degree of consensus was reached in their concurrent evidence that larger pipes should be installed and the existing grates could then remain (T153-154). Mr Klooster points to the common ground that the pipes are defective, the disagreement as to whether the grates were defective, and submits that Mr Laurie's scope of works is required for the master bedroom, but Mr Brown's narrower scope of works is required for other areas. Again, without expert or other evidence as to the content of accepted or appropriate industry practice in respect of supervision and management of plumbing contractors, I am unable to find that those obligations or any contractual or statutory warranty under the HBA was breached by any failure to intervene in the plumbing contractor's work in respect of this matter.
Next, Mr and Mrs Warburton contend (MFI 1A, item H10) that the branch drain for the steam ovens was connected to a vertical section of vented sanitary drainage and was not connected by a 50mm trap and 65mm waste and that installation failed to comply with the relevant standard. They again note that the work was performed by Civic Plumbing in the period to October 2017, and that internal drainage works were performed in March 2017. Mr and Mrs Warburton did not press their attempt to shift their position in reply to contend that this work was done prior to the Second Agreement. The hydraulic experts, Mr Laurie and Mr Brown, initially disagreed as to whether a defect was present. In concurrent evidence, Mr Laurie accepted the rectification work had been undertaken to stop any leakage, and appeared to be working, but considered the steam ovens were not properly connected. His and Mr Brown's evidence also indicated a disagreement as to what they had observed at site (T157-158) although Mr Laurie considered that the installation would not be compliant in any event (T159). It appears that the experts had now reached common ground as to the rectification which was required, if any rectification is required (T160). In their further report (Ex J7), Mr Laurie and Mr Brown agreed that the branch line conducted to the steam ovens was 50mm in size as identified in Mr Laurie's report. Mr Klooster accepts that the earlier factual disagreement between the experts as to whether a branch line completed to the steam oven was 50mm in size or 65mm in size has been resolved, and the experts now agree that branch line is 50mm in size.
For the same reasons as noted above in respect of earlier defects, I cannot conclude without expert or other evidence as to the content of accepted or appropriate industry practice in respect of supervision and management of plumbing contractors, that County breached either cl 2.1 of the Second Agreement or the contractual or statutory warranties in respect of this work. I am unable to address Mr Klooster's further submission that this work was carried out by a third party contractor, after completion of the project and indeed after proceedings had commenced, absent a sufficiently identified evidentiary basis for that submission. I accept that, if that were so, it would not be apparent why County would be liable for any defect in that third party's work.
Mr and Mrs Warburton also contend that an inspection opening has not been provided to a branch drain connecting a water closet for maintenance purposes, in a bathroom located adjacent to the pool in the rear yard, and that fails to comply with the requisite standard (MFI 1A, H11). Mr and Mrs Warburton also did not press their attempt to shift their position in reply to contend that this work was done prior to the Second Agreement. I again cannot accept that submission, also for the reasons noted above. The hydraulic experts disagree as to whether that defect is present and whether repair works need to be undertaken, and they appear to disagree as to the adequacy of the current location of an inspection opening in the drainage line below the pool deck. It is not necessary to resolve that debate, because it is not self-evident and there is no evidence that County's obligation of management and supervision under cl 2.1 of the Second Agreement would have required it to engage with an issue of this character, where compliance with the standard is disputable, or to intervene with the plumbing contractor's work in that regard. No breach of that obligation or any contractual or statutory warranty under the HBA is established,
Next, Mr and Mrs Warburton contend that a reflux valve to protect the lower ground level from sewer discharge cannot be serviced or maintained from the finished surface level, and that does not comply with relevant standards (MFI 1A, item H12). Mr and Mrs Warburton did not press their attempt to shift their position in reply to contend that this work was done prior to the Second Agreement. I again cannot accept that submission, again for the reasons noted above. The hydraulic experts agree that an installation defect is present and as to the scope of repair works. For the reasons noted above, without evidence to support a finding that this matter involves a breach of County's obligations under cl 2.1 of the Second Agreement or the contractual or statutory warranties, as distinct from the plumbing contractor's obligations, I cannot find that breach to be established.
Mr and Mrs Warburton identify an issue as to the location of outlets from the trench drain on a level 1 balcony, adjacent to the yoga room, and the hydraulic experts agree that an installation defect is present and that repair works need to be undertaken (MFI 1A, item H14). An issue was also identified in respect of the absence of an overflow provision, to operate if the stormwater system was blocked, in an external balcony adjacent to the "yoga room" (MFI 1, item H15). The parties, by an Agreed Statement of Facts dated 8 July 2022, recorded their agreement that the work in these items was completed after the Second Agreement was made and I proceed on that basis. The hydraulic experts agree that a defect is present and that repair works need to be undertaken, and that this would be remedied concurrently with any remedy of building defects in that area. However, without expert or other evidence as to the content of accepted or appropriate industry practice in respect of supervision and management in respect of a plumbing contractor, I am not persuaded that the existence of the identified defects, without more, establishes a breach of County's obligations under the Second Agreement or any contractual statutory warranties under the HBA in that regard. No doubt, the fact of those defects may have established a claim against the plumbing contractor, had it been joined as party to the proceedings.
Mr and Mrs Warburton contend that an unsealed and redundant open-ended stormwater pipe is present in the lower ground level plenum void which may permit internal surcharge of stormwater into the building, and the hydraulic experts agree that an installation defect is present and as to the scope of the repair works that should be undertaken (MFI 1A, item H16). Mr and Mrs Warburton again did not press their attempt to shift their position in reply to contend that this work was done prior to the Second Agreement. Absent expert or other evidence as to the content of accepted or appropriate industry practice in respect of supervision and management in respect of a plumbing contractor, I cannot conclude that County's obligations under cl 2.1 of the Second Agreement or the relevant contractual or statutory warranties were breached. I have addressed Mr and Mrs Warburton's claims in MFI 1A items H17 and H18 above, so far as they relate to works which appear to have been undertaken, or partly undertaken, prior to the entry into the Second Agreement.
Mr and Mrs Warburton also identify defects relating to the absence of an isolation valve for a rainwater controller adjacent to the rainwater tanks and to issues as to the ability to remove and maintain the rainwater reuse pump (MFI 1A, items H19 and H20). The parties, by their Agreed Statement of Facts dated 8 July 2022, recorded their agreement that the work relating to item H19 was completed after the Second Agreement was made and I proceed on that basis. Mr and Mrs Warburton also did not press their attempt to shift their position that work in respect of item H20 was done after entry into the Second Agreement, in reply, to contend that this work was done prior to the Second Agreement. The hydraulic experts are agreed that installation defects are established as to these items and as to the scope of necessary repairs. For the reasons noted above, I cannot find a breach of County's obligations under cl 2.1 of the Second Agreement or a breach of the contractual or statutory warranties in respect of these items.
The experts also agree as to an installation defect and the need for repair works as to an issue regarding the rainwater supply pipe (MFI 1A, item H21). Mr and Mrs Warburton also did not press their attempt to shift their position put during the trial, that this work was done after entry into the Second Agreement, in reply to contend that it was done prior to the Second Agreement. Also for the reasons noted above, I cannot find a breach of County's obligations under cl 2.1 of the Second Agreement or a breach of the contractual or statutory warranties in respect of this item.
There is some common ground that defects exist and repair works are needed in respect of the hot water system installed at the property (MFI 1A, item H22). The parties, by their Agreed Statement of Facts dated 8 July 2022, recorded their agreement that this work was completed after the Second Agreement was made and I proceed on that basis. The hydraulic experts are agreed that defects are present and that repair works are needed in respect of the hot water system installed at the property (MFI 1A, item H22), although they disagree as to the scope of works required to remediate the identified defects. In concurrent evidence, the hydraulic experts agreed as to the time delay in delivery of hot water, but disagreed as to the number of fixtures that could be operated at the same time, although they had a similar view as to the scope of remediation if necessary (T166). Mr Klooster accepts that the existence of the defect and scope of rectification as to this item is now agreed, following the inspection on 15 June 2022. The hydraulic experts' concurrent evidence indicates that there is a real question as to whether this issue arises because the design of the hot water system required the input of a specialist hydraulic engineer in order to ensure adequate performance. Without expert or other evidence as to the content of accepted or appropriate industry practice in respect of supervision and management in respect of this matter, I cannot conclude that County's management or supervision obligation under cl 2.1 of the Second Agreement, or any relevant contractual statutory warranty, was breached by County, where there is no suggestion it had contracted to provide advice of that specialist character.
Mr and Mrs Warburton did not press their attempt to shift their position in reply in respect of the claims made in MFI 1A, items H23 and H24, concerning the installation of the eaves gutters to the main dwelling and damage to roof sheeting respectively, in written reply submissions made after the hearing had concluded. The hydraulic experts are also agreed as to defects and as to the scope of rectification in respect of items H23 and H24, although they are in disagreement as to the rectification works required in respect of the latter issue. The experts' report of their further attendance at the property after they gave concurrent evidence (Ex J7) indicates that they were unable to measure the flow rate from showers or any subsequent decrease in flow under test conditions, and found the flow from the laundry tub mixer while both showers were operating to be adequate. However, they found that the flow rate was less than that specified by the Australian Standard when the butler pantry sink mixer, ground floor laundry sink mixer and ground floor powder room basin outlet were operating at the same time, but are still not in agreement that the minimum flow rates required from the outlets has not been achieved. They now agree that the 20mm flow and return hot water circuit is inadequate for the property, and Mr Brown considers that at 25mm hot water flow and return service, as proposed in Civic Plumbing's quotation, would have been adequate. For the reasons noted above, I cannot find a breach of County's obligations in respect of these matters.

The alleged general defects

I now turn to the "general defects" identified by Mr and Mrs Warburton. Mr and Mrs Warburton here contend that an alleged defect as to concrete finishes arose from works that "may have" been performed prior to February 2017 and some part of work relating to aluminium windows and door frames "may have" been performed before February 2017 and they contend that all other works occurred after February 2017. That is a matter of some significance, given the narrowed scope of County's obligations under the Second Agreement, and the fact that Mr and Mrs Warburton do not lead expert evidence to establish any failure by County to comply with its narrower obligations of supervision and management under the Second Agreement or the statutory warranties under the HBA in respect of County's performance of those obligations.
I first address work which Mr and Mrs Warburton contend "may have" been undertaken before the Second Agreement commenced. Mr and Mrs Warburton identify a dispute as to the level of concrete finishes (MFI 1A, item G29) and contend that this work "may [have] be[en]" undertaken prior to February 2017, and County accepts in closing submissions that the work was "in part" undertaken prior to 5 March 2017, although it was not apparent that the evidence establishes the extent of the work done prior to that date. The parties, by an Agreed Statement of Facts dated 8 July 2022, recorded their agreement that this work was completed before the Second Agreement was made and I proceed on that basis. The experts disagree as to whether this work is defective, and Mr Zakos' view that the finish is inadequate depends upon an inference as to the required grade of finish which is not made express in earlier drawings, and a proposition that is not established on the evidence that the highest possible grade of finish can be achieved other than by prefabricated concrete. Mr Zakos' position is arguable, but that does not establish a breach on the balance of probabilities, and Mr Nesbitt does not express a concluded view as to whether the concrete finishes are defective, where the performance of structural concrete is outside his area of expertise. In their report as to their further attendance at the property on 14 June 2022 (Ex J3), Mr Zakos and Mr Nesbitt identified further observations as to this item, including discolouration and other matters in concrete finishes to outdoor terraces being the western and eastern walls and concrete slab soffit; hairline cracks less than 1mm in the basement terrace concrete soffit; and discolouration in other matters in the western concrete wall adjacent to the front pathway, but drew no evaluative conclusions from those observations. On balance, I am not persuaded that this breach has been established, where Mr Zakos' view depends on the matters noted above that are arguable but not established on the balance of probabilities .
I now turn to work that Mr and Mrs Warburton initially contended was undertaken from late February or March 2017, when County was subject to narrower obligations under cl 2.1 of the Second Agreement rather than the wider obligations under the Contract. Mrs and Mrs Warburton identify numerous matters said to constitute defects in respect of roof cladding and gutters (MFI 1A, item G25). Mr and Mrs Warburton accepted, throughout the hearing, that it was likely that this work was done after the entry into the Second Agreement (which they initially dated as late February 2017), although they point to the fact that the roofing contract was between County and Combined Roofing and invoices were issued by Combined Roofing to County. Mr and Mrs Warburton did not press their attempt to shift their position put during the trial, in reply, to contend that this work was done prior to the Second Agreement. This work would fall within the scope of County's narrower management and supervision obligations under cl 2.1 of the Second Agreement, rather than its wider obligations under the Contract.
The first matter relates to dents in the roofing. There is no evidence as to when those dents arose or who caused them, and the experts' evidence deals with the extend of those dents as at August 2020 rather than the position when building works were completed. Mr Zakos gives no attention to whether the existence of such dents, whenever they arose, had any connection with any failure of management or supervision by County in respect of the completion of the project, and Mr Nisbett's position is that the debts are minor and do not require rectification. Neither a breach of County's management and supervision obligations under cl 2.1 of the Second Agreement, or of its statutory warranties under the HBA in respect of the limited scope of that work, has been established in this regard.
Second, Mr and Mrs Warburton refer to the existence of "swarf" which will contribute to corrosion on the roof, although there is again no evidence as to when it arose or what caused it, and there is a significant disagreement between Mr Zakos and Mr Nesbitt as to whether the appropriate remedy is to replace relevant parts of the roof sheeting and stormwater system or only to clean the swarf from the surface to prevent any future damage. Third, Mr and Mrs Warburton refer to the existence of touch-up paint on the roof, although there is no evidence of when or by whom it was applied. It is not established that either the contractor which installed the roof, still less that County, applied that touch up paint. The experts disagree as to whether the appropriate remedy would be the removal and replacement of roof sheeting, or merely the removal of the touch-up paint, but it would only be necessary to determine that question if the relevant breach had been established. I am again unable to find, without evidence as to what ought to have been done by County in this respect, that these matters give rise to any breach of County's management and supervision obligations under cl 2.1 of the Second Agreement or any associated warranties under the HBA.
Fourth, Mr and Mrs Warburton contend that a relatively small "flat" section of the roof has an insufficient fall. Mr Zakos and Mr Nesbitt disagree as to whether that is the case, as a matter of fact, and there is no basis to prefer Mr Zakos' evidence to Mr Nesbitt's evidence in that respect. Where that question of fact is disputable, even after investigation by experts, there is no basis to find that County breached its management and supervision obligation under cl 2.1 of the Second Agreement or any associated statutory warranties under the HBA in this respect. Fifth, Mr and Mrs Warburton identify an issue as to whether the specified gutters were defective, which depends on a question as to the interpretation of drawings, and the experts disagree on whether any non-compliance requires replacement of the gutters, and as to which Mr Nesbitt considers the opinion of a hydraulic engineer is required. Sixth, there is an issue in respect of skylight flashing, as to which Mr Zakos and Mr Nesbitt also disagree as to whether the installation of the skylight flashing is defective, and whether rectification would require the removal of the roof sheeting and stormwater system. There is again no basis to prefer Mr Zakos' view to Mr Nesbitt's view as to these matters and, where the existence of any defect is disputable, there is no basis to find that County's not intervening in the contractor's work, even if it had power to do so, gave rise to a breach of its management and supervision obligation under cl 2.1 of the Second Agreement or the statutory warranties in respect of the scope of that management and supervision work.
Seventh, Mr Zakos expresses the view that County has not installed downpipes in required locations, and Mr Nesbitt agrees that a downpipe should be installed and connected to the gutter and existing stormwater system in the northeast corner of the yoga terrace. There is no suggestion that County was obliged to, or did, install the relevant downpipes under the Second Agreement, still less that it installed it or them in the wrong position, where the work was done by a contractor and Mr and Mrs Warburton do not seek to establish that it was done prior to the entry into the Second Agreement and the restriction of the scope of County's obligations by that agreement. Mr Zakos accepted, in concurrent evidence, that there may be reasons why a contractor would properly alter the location of the downpipe, and it has not been established that any failure by County to interfere with the contractor's work in this respect involved a failure of its supervision and management obligation under cl 2.1 of the Second Agreement or any associated statutory warranty.
Next, Mr and Mrs Warburton point to an issue as to weatherproofing on the "yoga terrace" which is said to have given rise to water penetration and water damage (MFI 1A, item G26). Mr and Mrs Warburton did not press their attempt to shift their position in reply to contend that this work was done prior to the Second Agreement. The existence of a defect is agreed between Mr Zakos and Mr Nesbitt, although there is a disagreement as to the scope of any necessary rectification, and particularly as to whether the tiles and screed could be removed to address this issue without damaging the waterproofing membrane so as to require its replacement. Mr Zakos and Mr Nesbitt's further report (Ex J3) observed, in respect of this issue, that the western half of dining room plasterboard ceiling was sagging when they again inspected it on 14 June 2022, but that no water staining was evident, and they observed a crack adjacent to the curtain track ceiling of the dining room door. They did not seek to identify any implications of those observations. I am unable to find, without expert or other evidence as to the content of accepted or appropriate industry practice in respect of supervision and management in respect of this matter, that this defect could have been identified or avoided by adequate supervision or project management by County, or that County had the power to require the tiling contractor to address it. A breach of County's obligations under cl 2.1 of the Second Agreement, and a breach of the statutory warranties under the HBA, is not established.
Mr and Mrs Warburton also contend that a defect exists in respect of metal balustrades to the terraces (MFI 1A, item G27). The parties, by their Agreed Statement of Facts dated 8 July 2022, recorded their agreement that this work was completed after the Second Agreement was made and I proceed on that basis. This work therefore fell within the scope of County's narrower obligations under cl 2.1 of the Second Agreement. The existence of the defect and scope of rectification is agreed between Mr Zakos and Mr Nesbitt. I accept that the relevant defect may have given rise to claims against the contractor, which has not been joined as party to the proceedings, but there is no expert or other evidence that it should been identified or addressed by County in undertaking a supervision or management obligation under cl 2.1 of the Second Agreement. I am unable, without such evidence, to find a breach of County's obligations under the Second Agreement or the statutory warranties under the HBA in respect of the scope of County's work in this regard.
Mr and Mrs Warburton identify a suggested defect in the master terrace rock garden (MFI 1A, item G28). A contractor, Smithy's Contracting, performed the waterproofing works in the area, and Mr and Mrs Warburton initially accepted that this work was performed in March 2017, likely after the Second Agreement had narrowed County's obligations. Mr and Mrs Warburton did not press their attempt to shift their position put during the trial, in reply, to contend that this work was done prior to the Second Agreement, in October or November 2016. It is common ground between the experts that a waterproofing defect exists, although they disagree as to what steps would be necessary in order to identify a rectification process, and as to whether the existing waterproofing membrane requires replacement in full or merely cleaning and extension to cover the front hob and face edge. It is not necessary to determine that disagreement, where the evidence does not establish that any defect arises from any failure of County in respect of its management or supervision obligations under cl 2.1 of the Second Agreement or breaches the associated statutory warranties under the HBA.
I also find that County's defence (Defence [14(g)]) that it is not liable for any failure by contractors to complete work as a result of Mr and Mrs Warburton failing to pay money due to them is established in respect of this item. Mr Klooster points to the fact that a substantial amount was unpaid to the waterproofing contractor, Smithy's Contracting, as at 4 July 2018 (Ex J6, 6474-6475); that Smithy's Contracting then declined to return to site while it was unpaid to rectify defects, and County communicated that position to Mr and Mrs Warburton on 14 August 2018 (Ex J6, 6572); and that Mr and Mrs Warburton then maintained the position that they would not pay for works until the defects are rectified and that was verified by Fair Trading (Ex J6, 6572). I accept that position was in breach of Mr and Mrs Warburton's obligations under cl 2.2 of the Second Agreement and, more significantly, it prevented County from complying with any continuing management and supervision obligation, so far as rectification of waterproofing works in the master terrace rock garden were concerned. Even apart from the findings I have reached as to wider issues, Mr and Mrs Warburton's claim in respect of this matter would fail.
I have addressed Mr and Mrs Warburtons' claim in respect of MFI 1A item 29 above. Mr and Mrs Warburton also identify a suggested defect (MFI 1A, item G30) concerning poor finishes and damage of internal plasterboard and painting. The parties, by their Agreed Statement of Facts dated 8 July 2022, also recorded their agreement that this work was completed after the Second Agreement was made and I proceed on that basis. This work therefore falls within the narrower scope of County's obligations under the Second Agreement, and accept that they were performed by a contractor, Gypson Interiors, although they contend that contractor issued its invoices to County. The experts are agreed that there is defective plasterboard in one bedroom, but the extent of defects is otherwise disputed. In their report as to their attendance at the property on 14 June 2022 (Ex J3), Mr Zakos and Mr Nesbitt again observed that there was damage to paint and plasterboard in several areas, but did not reach a common position as to other defects, and Mr Nesbitt emphasised the fact that these observations were being made five years after occupation of the property by Mr and Mrs Warburton.
The expert evidence is here directed to the extent of defects in the work as at August 2020 or later, well after practical completion of the project in the second half of 2017, and does not provide any basis for determining the condition of the work at the date it was completed. I am not persuaded that a breach of County's supervision and management obligation under cl 2.1 of the Second Agreement or any statutory warranty under the HBA in respect of that obligation has been established as to this matter, without expert or other evidence as to the content of accepted or appropriate industry practice in respect of supervision and management in respect of this matter. It is therefore not necessary to determine the dispute between the experts as to the extent of rectification that is required as to this matter.
I also find that County's defence (Defence [14(g)]) that it is not liable for any failure by contractors to complete work as a result of Mr and Mrs Warburton failing to pay money due to them is established in respect of this item. I find that County was prevented from complying with its management and supervision obligations, in respect of the rectification of defects, by Mr and Mrs Warburton's failure to pay the painting sub-contractor, Mickemouse, or to give clear confirmation that payment would be made once events were rectified, and by their maintaining the position that no payment need be made until all defects were rectified and verified by Fair Trading (Ex J6, 6344, 6533-6537, 6538, 6561-6562, 6557-6558, 6568). Mr and Mrs Warburton's claims in respect of these items would fail, as far as they are attributable to painting defects, for the same reason that their claims in respect of rectification work that Smithy's Contracting failed to perform because it was unpaid failed. I do not accept that defence is established in respect of external windows and doors, where it is not apparent that any damage to powdercoated surfaces could have been corrected by a painting contractor.
Mr and Mrs Warburton identify a defect (MFI 1A, item G31) concerning external aluminium windows and doorframes, which partly relates to the operation of the doors and partly to damage by paint overspray and "speckles" and scratches to the powder-coated finish. Mr and Mrs Warburton initially accepted that windows and doors were installed by a contractor, CCSF, and that most of the work was performed after February 2017, so County's obligations were in the narrower form that arose under the Second Agreement. They did not press their attempt to shift their position put during the trial, in reply, to contend that this work was done prior to the Second Agreement. The experts agree that there is a defect in the function of the stacker doors to the living room and dining room and the basement games room door. Mr Zakos considers that replacement of the doors is required, in reliance on the scratches and paint and render product over aluminium frames, whereas Mr Nesbitt considers those defects could be addressed by dismantling the stacker door units and reducing their size on site, and then reassembling them, and by cleaning paint and render from the external doorframe for the basement games room door. In their report as to their further observations of the property on 14 June 2022 (Ex J3), Mr Zakos and Mr Nesbitt observed that there were paint spots and overrun on external aluminium doorframe styles and a door header at three locations and commented on a "crevice" left in powder coating after a paint speckle was removed by Mr Nesbitt with his fingernail. They also observed matters as to the garage roller door and other matters, and agreed that paint overruns, scratches and other matters were observable from a distance of 1.5 meters. They also referred, without elaboration or reaching any conclusion, to two alternative methods of rectification in respect of those matters.
I cannot find that County breached a duty of supervision and management under cl 2.1 of the Second Agreement or the relevant statutory obligations in respect of the installation of the doors, absent adequate evidence as to what should have been done by County in this respect, where Mr and Mrs Warburton had selected CCSF to perform that installation and it is not apparent, without that evidence, how County could or should have interfered with CCSF's performance of its role. I am also not persuaded that County breached a duty of supervision or management or statutory obligations under the HBA in respect of scratches or paint or render on the doors, where there is no evidence that County's duty of management and supervision required County it to address those scratches or remove that paint and render product at the conclusion of the project, rather than for CCSF or the render contractor or painter to do so, or leaving it to Mr and Mrs Warburton to organise a thorough clean at the conclusion of the works, as the evidence indicates is common practice in respect of building works.
Mr and Mrs Warburton identify a defect (MFI 1A, item G32) concerning damage by paint overspray and speckles in respect of face brickwork, and Mr and Mrs Warburton attribute that damage to the painting contractor, Mickemouse. The parties, by their Agreed Statement of Facts dated 8 July 2022, recorded their agreement that this work was completed after the Second Agreement was made and I proceed on that basis. Mr Zakos and Mr Nesbitt agree that the brickwork should be cleaned, although they disagree as to whether a light acid or soap and water should be used for that cleaning. It is not necessary to resolve that question, where County's obligations in respect of management and supervision of the project under cl 2.1 of the Second Agreement did not impose upon it any obligation to clean the brickwork at the completion of the works, which was a matter for the painting contractor or Mr and Mrs Warburton.
Mr and Mrs Warburton also point to a defect (MFI 1A, item G33) concerning light fittings, where Mr and Mrs Warburton contend that downlights are not flush and that there are other inconsistencies in the lighting. Mr and Mrs Warburton accept that lighting work was undertaken by a contractor, Innuku, which they submit was a contractor to County. The parties, by their Agreed Statement of Facts dated 8 July 2022, recorded their agreement that this work was completed after the Second Agreement was made and I proceed on that basis, so that County's narrower obligations under the Second Agreement therefore apply. I accept that these matters may have given rise to a claim against Innuku, had it been joined as party to the proceedings. It may be that I could find, without expert or other evidence as to the content of accepted or appropriate industry practice in respect of supervision and management in respect of this matter, that County's management and supervision obligation under cl 2.1 of the Second Agreement would have required it to identify this issue and raise it with Innuku, and that its not doing so (if it did not do so) would have breached the warranties under the HBA in respect of the scope of its work. There is no evidence that Innuku would have accepted that the defects existed, had they been raised with it, or whether it would have rectified them, and County did not guarantee other contractors' performance under the Second Agreement. Even if a breach was established, it does not seem to me to give rise an obligation on County to rectify defects in Innuku's work, where it is not shown that performance of its management and supervision obligations would have avoided or brought about rectification of those defects.
Mr and Mrs Warburton also raise a multitude of suggested defects in relation to the swimming pool (MFI 1A, item G34). There is some complexity in the claim in respect of swimming pool defects, where Mr Hicks contends that defects relating to the location of the skimmer box, the dividing wall between the bench seat and pool shadow, and the installation of the spa are consequential on the concrete pour of the pool shell which occurred in May 2016, and County's obligations were governed by the Contract rather than the Second Agreement. However, the parties appeared to accept at the hearing that at least the dividing wall was laid before the Second Agreement was made, and the parties, by the Agreed Statement of Facts dated 8 July 2022, also recorded their agreement that the slimmer box was completed before the Second Agreement was made and I proceed on that basis.
A further difficulty arises because Mr Zakos appears to have relied, when addressing the defects, on documentation issued in 2016 in respect of a quote by Land Forms which was not accepted by Mr and Mrs Warburton, rather than on the different and less expensive quote which was ultimately accepted by them at a later date. Mr Zakos' focus on the earlier drawings in turn obscures the question of the extent to which any difficulties have arisen from later changes in the scope of the pool design or pool work. It is ultimately not necessary to address these difficulties, given the wider difficulties to which I refer below.
Mr and Mrs Warburton initially accepted that a contractor, Land Forms, was engaged in respect of the swimming pool, and that the works were largely done in July 2017. It appears that an issue as to the location of the skimmer box is an exception, because that arose from pouring the concrete shell of the pool prior to the date of the Second Agreement, and I have noted the parties agreement as to that matter above. Other than in respect of the location of the skimmer box, County's obligations were therefore narrowed to the obligation of supervision and management under cl 2.1 of the Second Agreement in respect of these matters. I have referred to the affidavit evidence led by Mr Roy of Land Form in respect of this work above. Mr and Mrs Warburton's claim that the skimmer box for the pool is in an incorrect location depends on inferences to be drawn from earlier drawings and appears to be inconsistent with the information contained in Land Forms' quote for the relevant works. I am not persuaded that any breach of the Contract, so far as the parties now agree that the work was done prior to the entry into the Second Agreement, is established in this respect.
Mr and Mrs Warburton also point to an additional defect in the swimming pool, that a dividing wall has been constructed between the bench seat and the pool shallows, and it appears this took place in May 2016, prior to the entry into the Second Agreement, although it was not addressed by parties' Agreed Statement of Facts dated 8 July 2022. It is common ground that this defect exists and I am satisfied that a breach of the Contract and statutory warranties is established in that regard.
Mr and Mrs Warburton also point to several "deficiencies" that are alleged to have arisen in respect of the installation of the pool cover, and Mr Zakos addressed that matter in his evidence, although it emerged that he had no experience in installing the brand and type of pool cover that Mr and Mrs Warburton had chosen and, it seems to me, no basis on which to determine whether these matters were deficiencies in the installation of the pool cover or simply the characteristics of that brand and type of pool cover, which necessarily followed from Mr and Mrs Warburton's choice of that brand and type of pool cover. Mr and Mrs Warburton did not press their attempt to shift their position, in reply, to contend that this work was done prior to the Second Agreement. I am not persuaded that the relevant defects arise from a construction defect, still less from a breach by County of any duty of management or supervision under cl 2.1 of the Second Agreement, as distinct from the performance characteristics of that pool cover.
Mr and Mrs Warburton also refer to missing grout, chipped tiles and hardwood staining to the tiles, although the evidence does not establish when or how those defects arose or by whom they were caused. They may or may not have given rise to claims against the relevant contractors, but I am not persuaded that they establish a claim against County in respect of its narrower duty of supervision and management under cl 2.1 of the Second Agreement or the relevant statutory warranties. Mr and Mrs Warburton also contend that the fibreglass spa control panel has been installed such that it cannot be accessed without difficulty. That contention seems to me to misstate the nature of the difficulty, because the control panel was an integral part of the fibreglass spa, Mr Roy's evidence establishes that its location was dictated by the need to install that spa in a manner that allowed access to its access panel. It seems to me that this difficulty arose from the choice of that spa, where it was to be installed adjacent to a concrete pool and timber decking, which dictated the manner of its installation, and I have referred above to Mr Roy's evidence as to steps which were available, but not taken by Mr and Mrs Warburton, to mitigate that difficulty. I am not persuaded that a breach of the Contract, in respect of pouring of the shell of the spa prior to March 2017, or a duty of supervision and management by County or any statutory warranty has been established in that respect.
A defect in respect of termite protection (MFI 1A, item G35) is now not pressed. Mr and Mrs Warburton also identify a defect in respect of external render (MFI 1A, item G36) and contend that there are no expansion joints on the north and east elevations of the first floor, that there is cracking to planter boxes, and that there are several other defects. Mr and Mrs Warburton accept that this work was undertaken by a contractor, Lisbon Rendering. The parties, by their Agreed Statement of Facts dated 8 July 2022, recorded their agreement that this work was completed after the Second Agreement was made and I proceed on that basis. It follows that County is only subject to the narrower obligations arising under the Second Agreement in that respect. Mr Zakos and Mr Nesbitt agree as to the scope of the defect and as to the appropriate rectification, although neither address the steps which should have been taken by County to perform any supervision or management obligation in respect of this matter, or how the performance of those steps would have impacted upon the ultimate quality of the render work undertaken by Lisbon Rendering. I will assume, without deciding, that it might be open to find, even without expert or other evidence as to the content of accepted or appropriate industry practice in respect of supervision and management in respect of this matter, that adequate supervision and management would at least have identified a lack of expansion joints on the first floor, although the question whether and what expansion joints were required may have been open to dispute. It is not apparent, in any event, what would have occurred had County, having identified that matter, drawn it to the attention of Lisbon Rendering, which had undertaken the relevant work. While this matter might have given rise to a claim against Lisbon Rendering, which was also not joined as party to the proceedings, I am not persuaded that a claim against County is established in this respect.
Mr and Mrs Warburton also point to suggested defects in landscaping works undertaken by Land Forms (MFI 1A, item G37) and point out that Land Forms' invoices were issued to County and then by County to Mr and Mrs Warburton from June 2017 to completion in respect of this work. The parties, by their Agreed Statement of Facts dated 8 July 2022, recorded their agreement that this work was completed after the Second Agreement was made and I proceed on that basis. Mr and Mrs Warburton identify criticisms including water retention in the treads on the front porch steps, questions as to the basement terrace steps and outdoor stairs, allegations of a poor finish and cracking and moisture on the concrete barbeque area. They also point to floor tiles removed but not replaced, although the evidence as to when those floor tiles were removed and by whom is unclear. Mr Zakos and Mr Nesbitt agree that there is a defect as to the porch steps and agree as to the method of rectification; they disagree as to whether any issue as to the outdoor stairs will be rectified when any issue as to the porch stairs is rectified; they also disagree as to the extent of any defect in respect of cracks in the outdoor stairs, and as to whether they should be rebuilt; and they agree as to a defect in respect of the tiles to the outdoor barbeque area and as to the method of rectification of that defect, but not as to any question as to moisture and efflorescence to the concrete barbeque area. Again, it is not self-evident that a defect in the quality of the work performed by a contractor, Land Forms, establishes a breach of County's management and supervision obligations under cl 2.1 of the Second Agreement or of the statutory warranties, which it seems to me would be a matter for expert evidence as to the scope of that duty and what would or would not have been undertaken by a project supervisor and manager in performing it in the relevant circumstances.
I am not persuaded that the relevant breach of the Second Agreement or the relevant statutory contractual warranties under the HBA is established, and it is therefore not necessary to determine any question as to the scope of rectification work. Mr and Mrs Warburton's claim, so far as waterproofing issues are raised in respect of landscaping, would also fail by reason of their non-payment of Smithy's Contracting, so that it declined to return to site, for the same reasons as their claim in respect of MFI 1A, item G28, which I have addressed above.
Mr and Mrs Warburton identify a defect in respect of missing air conditioning grill vents (MFI IA, item G38) and contend the relevant work was undertaken by an air conditioning contractor, New Edge, which was engaged by County. The parties, by their Agreed Statement of Facts dated 8 July 2022, recorded their agreement that this work was completed after the Second Agreement was made and I proceed on that basis. It follows that County owed the narrower obligations under the Second Agreement in respect of this work. Mr Zakos and Mr Nesbitt have agreed the defect and agreed the scope of rectification. I will assume, without deciding, that the air conditioning grills were not installed at the completion of the work, and that adequate supervision and management by County would have identified that matter. It is not, however, apparent whether County identifying that defect would have caused it to be remedied by New Edge, and County did not guarantee New Edge's work by the terms of the Second Agreement . While this matter may have given rise to a claim against New Edge, which is again not party to the proceedings, it is not apparent that any breach of the duty of supervision and management by County in this respect gives rise to a basis for County to be required to bear the costs of rectification of deficiencies in New Edge's work.
Mr and Mrs Warburton advance allegations of poor finish in the garage and basement terrace slabs (MFI 1A, item G39) which they initially accepted were constructed by a contractor, Tony Sarkis Contracting, in work done after February 2017. Mr and Mrs Warburton did not press their attempt to shift their position put during the trial, in reply, to contend that this work was done prior to the Second Agreement. I proceed on the basis that County was again subject to the narrower obligations under cl 2.1 of the Second Agreement in respect of this work. Mr Zakos and Mr Nesbitt disagree as to whether a defect is established, and Mr Nesbitt expresses the view that the crack width is less than 1.0mm, there has been no change in slab level and there is no evidence of moisture and the cracking does not require rectification under Australian Standard AS2870. There is no basis to prefer Mr Zakos' position to Mr Nesbitt's position in that respect and, in any event, there is no evidence that appropriate supervision and management of the project by County would have identified cracks of this character, which partly depends on when they developed, or that identification of those cracks at any earlier point would have led Tony Sarkis Contracting to remedy them, particularly where there is at least an arguable case that are not properly treated as defects. No basis for an order for compensation against County is established in respect of this matter.
Mr and Mrs Warburton identify an issue as to polished concrete in respect of an outdoor terrace (MFI 1A, item G40), which Mr and Mrs Warburton accept was installed by a contractor, Norcrete Group. The parties, by their Agreed Statement of Facts dated 8 July 2022, recorded their agreement that this work was completed after the Second Agreement was made and I proceed on that basis. It follows that County again owed the narrower obligations under cl 2.1 of the Second Agreement in that respect. Mr Zakos and Mr Nesbitt are agreed as to the scope of the relevant defect and agreed as to the scope of rectification. Again, absent adequate evidence, I cannot find that the defect in the ultimate quality of the work undertaken by Norcrete Group establishes a defect in supervision or management by County, without evidence as to what should have been undertaken by a person with supervisory or management responsibility in respect of the relevant works. The basis for the claim against County, as distinct from Norcrete Group, in respect of this matter is not established.
Mr and Mrs Warburton also point to defects in electrical works (MFI 1A, item G41) and accept that this work was undertaken by Innuku, a contractor, although they contend that County engaged that contractor. The parties, by their Agreed Statement of Facts dated 8 July 2022, recorded their agreement that this work was completed after the Second Agreement was made and I proceed on that basis. Mr Zakos maintains that the work is defective; Mr Nesbitt accepts that the electrical work appears to be incomplete, although observing that it is a matter outside his expertise, and advising that an electrician should be engaged to complete the work. For the reasons which I have addressed above in respect of other issues, I am not able to conclude, without expert or other evidence as to the content of accepted or appropriate industry practice in respect of supervision and management of electrical contractors, that a deficiency in the ultimate quality of the work performed by Innuku is sufficient, in itself, to establish a breach of the narrower duty of management and supervision owed by County under the cl 2.1 of the Second Agreement or the corresponding contractual or statutory warranties under the HBA.
I have held that County is liable in respect of several aspects of the work done before the Second Agreement took effect (items H2, H3, H13 and G34, in respect of the dividing wall only) as to which it had assumed the wider obligations under the Contract, and the statutory warranties had wider effect, and that liability is not released by the release in the Second Agreement. I will allow the parties an opportunity to reach agreement as to the quantification or works relating to those items, or make further submissions, given the difficulties as to the expert quantification evidence, to which I refer below. Mr and Mrs Warburton have otherwise not established their claims for breach of the Contract, the Second Agreement or the statutory warranties against County.

Matters that cannot presently be determined

I would ordinarily now proceed to determine the issues as to the disputed scope of defects, rectification works, their disputed costs and damages, as to which I have not found County's liability was established, against the contingency of an appeal, although those questions do not arise on the findings I have reached above. However, it is likely not possible, and it is certainly not practical, now to do so, rather than to deal with those matters on remittal from any successful appeal. First, the experts' positions continued to change until the last day of the hearing, and those changes and their implications were neither fully nor clearly integrated into any final position. I do not say that critically where it resulted from further attendances at site and attempts to narrow their differences. To allow these questions to be determined, I would first have to direct the parties to provide an updated joint report as to the matters as to which the experts now agree and disagree, updated for their changes in position, and then updated quantification reports. There is no utility in doing so where it will make no difference to the result at first instance and may make no difference on any appeal, particularly if the Court of Appeal accepts the view I have formed as to matters of construction and the absence of evidence as to the content of County's obligations.
Second, there is presently no basis to generally prefer the expert witnesses of one party over the other as to the hydraulic and building issues on which consensus had not been reached, where each is experienced and credible and, given the nature of the issues, their differing views are largely based on the application of their experience to reach difference results. This could be addressed in a not particularly satisfying way by reference to the onus of proof, by generally adopting the narrower scope of work conceded by County or not ordering work where there was no such concession, in the many cases where I could not conclude, on the balance of probabilities, that the wider scope preferred of work by Mr Laurie or Mr Zakos should be adopted in preference to Mr Brown's or Mr Nisbett's views, where both are reasonably open. A second possibility would be now to appoint a court-appointed expert, with appropriate expertise, to express a view as to the matters on which the parties' experts differ. There is no reason to think the parties would wish to incur the costs of the latter course, or that there is any utility in it, where it will make no difference to the result at first instance and possibly no difference to the result on any appeal for the reasons noted above.
Third, and most fundamentally, it is impossible to determine the question of the quantum of rectification costs and the amount of any damages on the quantification evidence as it stands. As counsel acknowledge, the joint quantification reports quantify rectification costs on the basis that I accept one or other of the hydraulic and building expert reports in its entirety and without modification as to each issue, although there are multiple disagreements between the quantification experts as to the costs of remedial work even on that basis. The quantification reports do not allow costs to be determined unless I make a binary choice of that kind as to each issue. It is plain that I could not proceed in that way, unless I simply determine that the there is no basis to prefer the expert evidence called by Mr and Mrs Warburton to that called by County as noted above, where several issues have sub-issues and raise questions of degree, and the result as to particular issues will also depend on which of the two approaches noted in the second point above was adopted. Once one of those approaches was taken and the many issues and sub-issues as to the scope of rectification works were determined, further quantification reports would then need to be prepared on that basis or this issue would need to be referred to a referee. It is again unlikely that the parties would wish to go to the costs of preparing those reports now or a reference now, after they had incurred any costs associated with the second step above, where the result will again make no difference at first instance and may make no difference on appeal for the reasons noted above.
For these reasons, these issues cannot be determined now, against the contingency of appeal, and may need to be addressed on a remittal in the event of a successful appeal. Although the costs of doing may well likely then be (as they would now also be) disproportionate to the amounts in issue, at least they would not then be wasted in their entirety.

Mr and Mrs Warburton's monetary claim

Mr and Mrs Warburton also contend and County implicitly accepts that, in breach of the Second Agreement, County failed to pay Mr and Mrs Warburton an amount of $75,000 (ASC [15], Defence [15]). County contends that it is entitled to set-off that amount against the monies referred to in its Cross-Claim in the proceedings. It appears that there is no real dispute that, after setting off the amount claimed by County against the amount due to Mr and Mrs Warburton, an amount of $62,777.77 is due by County to Mr and Mrs Warburton. There should be judgment for Mr and Mrs Warburton against County in that amount.

Orders

For these reasons, Mr and Mrs Warburton's claim against County in respect of three defects and one aspect of a fourth and their money claim, which occupied little time at the hearing, have succeeded, and the large part of their claim will be dismissed, after issues as to the quantification of damages relating to these several defects are agreed or are resolved. As I noted above, Mr and Mrs Warburton did not press their claim against Mr Hart at the hearing, and the proceedings will be dismissed as against him. My preliminary view is that, in these circumstances, Mr and Mrs Warburton's limited success, in respect of a much larger and longer case, means that they must pay County's and Mr Hart's costs of the proceedings as agreed or as assessed. However, I will give the parties an opportunity to be heard in that regard.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 July 2022

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