Alan Hayes v Paul McDermott
[2014] NSWCATCD 141
•25 July 2014
NSW Civil and Administrative Tribunal
New South Wales
Medium Neutral Citation: Alan Hayes v Paul McDermott [2014] NSWCATCD 141 Decision date: 25 July 2014 Before: J A Ringrose, General Member Decision: The respondent is to pay the applicant the sum of $7,963.00 within 30 days of the date of this Order.
Legislation Cited: Home Building Act 1989 s 18B Cases Cited: Bellgrove v Eldridge (1954) 90CLR 13
Hyder Consulting (Australia) Pty Limited v Walh Wilhlemson Agency Pty Limited (2001) NSWCA 313Category: Principal judgment Parties: Alan Hayes (applicant)
Paul McDermott (respondent)Representation: -
-
File Number(s): HB 13/35145 Publication restriction: Nil
reasons for decision
APPLICATION
On 26 October 2012 the respondent herein filed a statement of claim in the Local Court at Wyong seeking payment of a sum of $7,000.00 which he claimed to be the balance of monies owing under a contract for building works.
On 15 January 2013 the applicant herein filed a defence to the builders claim and on 30 January 2013 he filed a cross-claim in the Local Court at Wyong alleging a breach of s 18B warranty under the Home Building Act and claiming a sum of $14,150.00 for remedial work together with a sum of $63,000.00 for demolition and reconstruction of the works.
On 4 April 2013 the Local Court made directions for filing of evidence and pleadings and on 13 June 2013 the Court of its own motion transferred these proceedings, together with the related builders claim to the Tribunal.
The matter came before Senior Member Meadows on 14 August 2013 when Directions were made requiring the applicant to file all his evidence by 4 September 2013 and the respondent to file all his evidence by 25 September 2013. Leave was granted to the applicant to be legally represented and it was noted the parties were required to serve the evidence upon which they wished to rely in accordance with the timetable and evidence not served as directed may not be admitted at a Hearing.
On 23 October 2013 the matter was listed for Directions before Senior Member Goldstein where there was no appearance of the respondent builder and directions were made for the parties to attend at a conclave. The conclave took place on 21 January 2014 at 785 Dicksons Road, Dooralong and it was attended by experts on behalf of the applicant and the respondent along with Tribunal Member Ilett. Although some issues arose in relation to the Scott Schedule which was considered by the parties, it is noted that both of the experts signed off on the Scott Schedule and a report from Member Ilett noted that some 15 items were considered together with the question of builder's margin and GST.
The matter was then listed for further directions before Senior Member Thode on 12 March 2014 where directions were made that the builder (respondent) file witness statements by 19 March 2014 and the owner (applicant) file witness statements by 26 March 2014. An application for leave to file further expert evidence was refused. The matter was then listed for Hearing on 20 June 2014 at Gosford.
APPLICANT'S EVIDENCE
At the commencement of the applicant's case, Mr Finney, solicitor sought to rely upon a further expert report which was filed in the Tribunal on 11 June 2014. That report was prepared by a Mr Carl Snopek and it was described as a comparative market analysis of the applicant's property at 785 Dicksons Road, Durren Durren. Mr Snopek claimed to have read documents including the Scott Schedule, a report of Steven Leask dated 20 August 2013 and what was described as the Tony Ransley report. He concluded, apparently based on some 10 years' experience in selling properties in the area, that buyers would expect to see a reduction in price of at least $50,000.00 due to the defects which were noted on the property thereby reducing the value of the property from $750,000.00 down to $700,000.00.
It was noted in the application to admit further evidence that;
(a) When the matter was listed for directions in the Tribunal on 14 August 2013 the applicant was required to file all evidence including expert reports, witness statements and other documents by 9 September 2013. The Senior Member noted on that occasion that parties should be aware that evidence not served in accordance with the orders made may not be admitted at the Hearing of the matter.
(b) When the matter was listed before Senior Member Thode on 12 March 2014 she specifically refused an application for leave to file further expert evidence which was by that time out of time and after the conclusion of the conclave.
(c) The report which the applicant sought to rely upon related to an allegation that the value of the property has been diminished by $50,000.00 as a result of the failures by the builder to construct the extension in a proper and workmanlike manner. This specific allegation had never been made until the report Mr Snopek was filed in the Tribunal on 11 June 2014 and the respondent's builder had not been provided with an opportunity to answer that report.
Taking into account the foregoing matters, the application to rely on the further evidence was refused at the Hearing.
In a statement dated 10 May 2013 Mr Hayes indicated that he owned the property at 785 Dicksons Road, Dooralong (Durren Durren) with his wife and that during the course of 2011 they had decided to carry out extensions at the home creating a larger laundry, a utility room, a store room and a bathroom. He arranged for plans to be drawn up by a draftsman and in November 2011 he had discussions with Mr McDermott who had attended his property to place advertising in a local publication.
Mr McDermott was given a copy of the plans which had already been prepared and in January 2012 Mr Hayes told Mr McDermott that he had a brother who was a plumber and a son-in-law who was a licensed electrician and that he was also able to arrange a tiler.
A short time later Mr McDermott rang and offered to do the work for $20,000.00 but no written documentation was prepared. On 21 February 2012 Mr Hayes wrote to Mr McDermott confirming that he formally accepted a quote of $20,000.00 to carry out building works on his property at Dooralong and setting out what purported to be a scope of works. The letter noted that Mr McDermott had apparently agreed to;
bring all internal and external work as carried out by him to a finished state of completion, including the painting of internal and external walls and the supply of materials to do this as required.
ensure that all work carried out by him was in accordance with the plan and specifications and do all work in a good and workmanlike manner.
Although plans for the work have been produced no specifications other than those which are endorsed on the plan have been provided. Mr Hayes concluded that he was looking forward to Mr McDermott carrying out required work for the extension.
It would appear that Mr Hayes was responsible for overseeing the whole of the works and that he took out the requisite owner/builders permit. There is no doubt that he was responsible for the pouring of the concrete slab which occurred in early March 2012. It would appear that Mr McDermott started work on the extensions around the second week of March and it is claimed that he worked through until May but was unavailable to work thereafter until the latter part of June.
Mr McDermott was paid the sum of $5,000.00 on 4 April 2012 and a further sum of $5,000.00 on 8 May 2012. It is claimed that he did not return to work on the job between 14 May 2012 and 2 July 2012 when he requested a further $5,000.00.
On 8 July 2012 Mr Hayes wrote to Mr McDermott noting a number of issues which had come to his attention in respect of both internal and external work. He pointed out that in some respects the works did not comply with the council's building code or the Bushfire Regulations. In relation to internal finishes he noted some areas where work had not been completed in a proper and workmanlike manner and pointed out that the Wyong Shire Council had advised that the south western corner of the extension was 11mm out of plumb. His letter gave notice that the defective work was to be remedied and the balance of the construction work completed within a period of 4 weeks. Mr McDermott responded on the same day suggesting that the issues could be discussed on the following day and that they would or should be sorted out.
On 24 July 2012 Mr Hayes obtained a letter from the Complete Roofing Warehouse noting that the pitch on the small flap custom roof was less than 5 degrees and pointing out a number of other problems.
On 19 September 2012 Mr McDermott acknowledged receipt of a further $3,000.00 in payment but requested that a further $5,000.00 be paid on that date. On the same date Mr Hayes replied noting that he had already received a quotation from a qualified contractor for re-roofing the extension at a cost of $3,920.00 and pointing out that Mr McDermott was not licensed to carry out roofing work. He indicated that the cost of rectification to work would be charged to the balance of monies owing under the contract.
By way of reply Mr McDermott noted that he had been engaged by Mr Hayes as owner/builder and that he was only to work as a licensed carpenter. In response Mr Hayes indicated "...you led me to believe that you could carry out all work on my extension with the exception of plumbing, tiling and electrical work, and therefore you were engaged on the basis that you were licensed to carry out said work."
On 11 October 2012 Mr McDermott forwarded a modified invoice to Mr Hayes in which he deducted the sum of $3,920.00 from the $7,000.00 balance owing resulting in a final claim of $3,080.00.
Tax invoices for the roof repair work have been provided along with a paid tax invoice dated 3 December 2012 from Ian D Whiting, Building and Carpentry Maintenance, relating to internal remedial works, external remedial works, relining of soffits and the fitting of a new entrance door. The monies paid for these works totals $4,136.00.
The applicant attached a number of photographs to his initial statement and these have been considered as part of the evidence.
In a statutory declaration dated 11 October 2013 Mr Hayes addressed matters raised by Mr McDermott in his response to the claim and conceded that additional work involving the fitting of office windows and the fitting of manhole covers had been undertaken but noted that Mr McDermott had agreed that it would be done without additional charge. He attached a full set of plans to his declaration noting and pointed out that the removal of part of a wall was included in the original scope of works. He observed further that he would not allow Mr McDermott to return to the job because he had "ruined the previous doors by cutting it to fit the outer square jamb". It is clear from the plans that they were prepared for and at the request of Mr Hayes.
The applicant relied upon a report of Mr Stephen Leask of Sherlock Holmes Inspections dated 12 November 2012 together with a supplementary report dated 20 August 2013. The initial report contained a number of photographs indicating that the quality of construction was not considered to have been completed in a proper and workmanlike manner. It was noted that the roof had been replaced at a cost of $3,920.00 as Mr McDermott was not licensed to carry out that part of the work. Mr Leask then thereafter referred to a number of items designated in the report as 4.2 to 4.15 in which described the defects in the property although he did not address methods of rectification or costings.
The initial report concluded by noting that most of the walls were either out of square or out of plumb and some were both. It noted that the quality of the joinery was poor and there was inadequate support for some timbers. Mr Leask observed that the roof had already been replaced due to ingress of water as the previous material was incorrect for the purpose.
The report then went on in general terms to suggest that the walls had to be made square and plumb and that it was necessary to support the roof and move roof timbers. Mr Leask concluded that it would be easier and would result in the work being completed in a proper manner if the entire renovation was demolished and reconstructed. Mr Leask suggested that the northern wall was approximately 70mm out of square in its length and substantial work was necessary to realign it appropriately. He then concluded;
"This scenario is the same throughout this extension. The movement of one item results in the movement of every attached item which extends through the entire extension. In so doing this extension will be reduced down to the original slab anyway at one time and would then cost more in money and time to complete than a complete demolition and reconstruction."
He referred to a quotation for demolition and reconstruction from D. Whiting Building Company of $63,800.00 and stated that he agreed with the costs. He noted that some of the pc items could be saved and reused and windows and internal doors and other pc items had been excluded from their quote.
In his supplementary report of 20 August 2013 Mr Leask observed that the concrete slab which had been provided by Mr Hayes was checked for parallel to the main original structure and found to be 80mm out of line within a 3000mm distance. He noted that it was incumbent upon a prudent builder to check whether the works were to be parallel and square before starting construction. He then suggested that a builder should advise the owner of the difficulty of building a structure which was out of square but he noted that alternatives could have been suggested by the builder to the owner to combat the extension being out of square which included installation of a frame onto the slab reducing the size of rooms slightly or extension of the slab by filling the 80mm void by pinning the slab with a reinforcement bar and pouring concrete to ensure structural stability. A quotation was then provided of $7,775.00 to demolish the works including tip fees, thereafter a quote of $39,031.00 or $46,837.00 including builder's margin or a total of $51,520.92 including builder's margin of 20% and GST being the total cost of rebuilding the extension.
The cross claim filed in the Wyong Local Court claimed a sum of $12,179.00 inclusive of GST for rectification/remedial work together with the cost of a building assessors report in the sum of $1,980.00. There was a further claim that as a result of breach of statutory warranties it would be necessary to demolish and reconstruct the works at an estimated cost of $63,800.00.
By a letter dated 29 August 2013 the solicitors for the applicant forwarded documents which appear from the letter to have included a Scott Schedule. That document does not appear to have been received at that time although it has now been marked as exhibit A in the proceedings. The schedule clearly did not follow the 15 items contained in the report of Mr Leask dated 10 May 2013 but rather it appeared to have simply adopted in general terms the pricing contained in the initial cross claim without breakdowns for individual items. The total cost of rectification works contained in that Scott Schedule was a sum of $12,279.01, being $100.00 more than the amount claimed in the initial cross claim.
The final item in the Scott Schedule simply reads "demolition and reconstruction of works carried out by applicant/cross defendant, $61,783.92." The only description of works or reasons given are a notation simply saying;
"see Sherlock Holmes report dated 20 August 2013".
It would appear that the Scott Schedule marked as exhibit A was the only Scott Schedule document prepared by or on behalf of the applicant prior to the conclave on 21 January 2014.
Mr Leask, on behalf of the applicant attended a conclave with Mr Ransley on behalf of the respondent on 21 January 2014 and the experts, with the conclave member, considered the claim using a Scott Schedule document prepared by Mr Ransley. That document referred to each of the 15 items detailed in the report of Mr Leask and also addressed builder's margins and application of GST to the itemised cost of works. That Scott Schedule which was signed off by the experts at the conclusion of the conclave was marked as exhibit D in the proceedings.
On 12 March 2014 Mr Leask prepared a further Scott Schedule which included a claim for demolition and reconstruction of the works in itemised form. Mr Ransley was asked to respond to that document and he did so by 1 April 2014. The Scott Schedule prepared by Mr Leask in March of 2014 was marked as exhibit B in the proceedings and the same document with responses by Mr Ransley was marked as exhibit C.
Neither Mr Hayes nor Mr Leask were required for cross-examination by the applicant who appeared in person. Although Mr Finney sought to tender further photographs of the proceedings the tender was refused on the basis that both parties had been required to provide all evidence prior to 26 March 2014.
RESPONDENT'S EVIDENCE
Mr McDermott claimed that he was engaged as a carpenter to carry out work for Mr Hayes who was the nominated owner builder. He agreed that he quoted $20,000.00 although he suggested that his original quote was $22,000.00 and that he agreed to accept a lesser amount. He claimed that he had already agreed to deduct from his contract price the cost to rectify the roofing and he also conceded that he had forgotten to deduct a sum of $500.00 for the pest control barrier which was provided by Mr Hayes. He did however indicate he had done a lot of extra work which had not been quoted including fitting of windows to the office, replacing of posts and beams on the verandah with hardwood, fitting of ceiling vents in the bathroom, laundry, pantry and storeroom and putting wall vents inside and out of the storeroom pantry. He also claimed to have installed manholes into the ceiling and raised the floor in the pantry area. He suggested that the value of this work would have been $2,500.00 plus GST but that he did not charge the owner for any of it.
Mr McDermott claimed that he had done the work for which he had quoted and he had remedied defects apart from replacing a door.
Mr McDermott produced receipts which he said totalled $8,738.95 and stated that his hourly rate was $50.00 and he thought that the job would take about six weeks which at his hourly rate involved a sum of $12,000.00. He accordingly claimed that the value of the work exceeded the money he had claimed to complete the works.
In oral evidence Mr McDermott claimed that he had noted some problem with the slab being out of square and that he had spoken to Mr Hayes about this on or about 15 March 2012 as noted in the diary entry which he provided as part of his evidence. He claimed to have made Mr Hayes aware of options to square up the slab and make the size smaller but he was advised to simply keep on with the work as Mr Hayes wanted to get into the extensions by winter time. He claimed that some of the walls were out of plumb as a result of problems with his spirit level and he purchased a new spirit level on 31 July 2012.
Mr McDermott provided his own comments in relation to each of the 15 items referred to in the report of Mr Leask and his comments on each of the items contained in his statement have been taken into account for the purposes of determining this claim.
Mr McDermott criticised the observations of his expert in the conclave suggesting that if he paid a sum of $16,003.00 to Mr Hayes then that would involve him getting the benefit of a free extension, together with a bonus of $3,003.00.
It was noted that Mr Hayes had rectified some of the work which he claimed to be unacceptable prior to the conclave taking place and that Mr McDermott submitted that it would therefore be impossible to verify the claims and validate the costs involved.
In cross-examination Mr McDermott agreed that he had never provided a written quote and that he had simply worked out the price in a notebook. He produced his working sheets on cross-examination but Mr Finney did not attempt to cross-examine him on those worksheets.
Mr McDermott agreed that he did not provide a contract in writing as required by the Act but he indicated he was registered for GST and that he paid GST on monies received. He denied receiving the letter written by Mr Hayes on 21 February 2012 and he claimed that on his first day on the job he found that a wall was not parallel and he observed that other walls in the existing dwelling appeared to be out of square. He agreed that one wall in the storeroom was out of plumb but he claimed that he had corrected that before he finished on the job.
In relation to the issue of painting Mr McDermott said that he was not required to paint the works but having reviewed material produced to him he agreed that some painting may have been required. He conceded in cross-examination that a part wall in the kitchen area required removal although he had initially denied that he was required to remove part of a wall until the detail of the plans was bought to his attention.
The respondent relied upon a report of Tony Ransley of Tyrrells dated 22 October 2013. The report was prepared following an inspection of the property on 16 October 2013 and Mr Ransley noted it had been prepared in response to verbal instructions from Mr McDermott. In his report Mr Ransley stated that Mr McDermott was contracted to Alan Hayes who was the owner builder and that he was required to construct certain parts of an extension to an existing residence. Mr Ransley inspected the building work and reviewed the report prepared by Stephen Leask. He observed that certain rectification works had been undertaken since the publication of Mr Leask's initial report but he concluded that some defects were as a result of the concrete floor slab installed under the supervision of Mr Hayes but that other works were defective following building works undertaken by Mr McDermott. In the initial report the cost of rectification was estimated to be $2,831.00 and it was suggested that some further rectification costs might be required as a result of other defects in Mr McDermott's work.
It is noted that during the course of the inspection Mr Ivan Whiting, a carpenter working with Mr Hayes, assisted in explaining the problems to Mr Ransley.
Mr Ransley annexed a schedule of alleged defects to his report and that schedule referred by number to the defects contained in the report of Stephen Leask. Reference was made to some 15 defects and in paragraph 4.16 of the schedule Mr Ransley addressed the question of builder's margins and inclusion of GST. As there was no Scott Schedule in an appropriate form produced by or on behalf of the applicant the schedule prepared by Mr Ransley was used by both experts and Member Ilett to address all of the matters of concern at the conclave.
Following the completion of the conclave the experts were directed to file an amended Scott Schedule detailing the result of the conclave. The completed document was filed by Mr Ransley on behalf of the respondent on 1 April 2014 in accordance with directions. That document was noted as exhibit C in the proceedings and it included additional items 15A, 17, 18, 19 and 20. Item 20 referred to the rebuild work claimed in the schedule prepared by Mr Leask at a total cost of $61,783.92. Although the claim for a rebuild was broken down into a number of separate items Mr Ransley answers the claim by commenting that the item appeared to be an ambit claim which repeated items addressed at the conclave such as verandah posts, facade and barge boards and windows. He noted that other items appeared to be covered by the claim for roof repairs and accordingly no allowance should be made. It is significant to note that in the final amended schedule rectification work without demolition of existing structure remained was dealt with in items 3, 11 and 14 of the original schedule prepared by Mr Ransley. The comments indicate that rectification of the southern wall of the store room and the northern wall of the laundry was discussed in some detail at the conclave and the cost of those rectification works was agreed between the experts.
Although at the Hearing Mr Finney, on behalf of the applicant, suggested that parts of the final amended Scott Schedule prepared by Mr Leask had been omitted, it would appear that the itemised cost of demolition and rebuilding which covered some three pages, was the subject of comments made by Mr Ransley on the first of those three pages.
DECISION
This claim was heard together with matter number HB 13/35144 being a claim by the builder Paul McDermott for the balance of monies owing under the contract. The Reasons for Decision in the related matter and the Orders made therein are the subject of a separate determination but it is appropriate that any monies payable under the related claim be offset against the claim in this matter.
On 26 October 2012 the builder, Paul McDermott filed a statement of claim in the Local Court at Wyong seeking payment of the balance of monies owing under his contract with the applicant herein. Mr Hayes filed a cross claim in the Local Court proceedings on 30 January 2013 alleging that the building works were carried out between March and September 2012 and that the builder had failed to perform the work in accordance with the warranties provided pursuant to s 18B of the Home Building Act 1989. In the Local Court the applicant claimed for cost of rectification work in a total sum of $12,179.00 together with a cost of a building assessors report in a sum of $1,980.00 representing a total of $14,159.00. There was a further claim in the following terms;
"further, as a result of the breach of statutory warranties by the cross defendant the work that has been carried out by the cross defendant will be required to be demolished and reconstructed at an estimated cost of $63,800.00."
The claim included some 9 items and it appears to have been based upon quotations and/or receipts from Ivan D Whiting who apparently provided quotes and then carried out certain works for the applicant herein. There was an initial quotation for internal and external repairs in a sum of $3,060.00 plus GST. That quote was dated 22 October 2012 and on 3 December 2012 a tax invoice in the total sum of $4,136.00 was paid by the applicant for work described as external remedial work as quoted, internal remedial work as quoted, realigned soffits as discussed and fit a new entrance door. It would seem from the evidence produced that Mr Whiting undertook external remedial work and internal remedial work in accordance with his tax invoice prior to 3 December 2012.
There is no evidence before the Tribunal in relation to the claim for $2,500.00 set out in the cross-claim although it is noted that in the initial quote of Mr Whiting dated 22 October 2012 there was an item described as new renovation, remove wall adjacent to kitchen and to laundry to allow for kitchen extension, re-frame approximately 600mm back, gyprock and plaster, fit and finish 90mm coving to renovated area, repair/plaster disturbed surfaces. The cost of that work was described in the quote as $2,600.00 plus GST although there is no evidence that that work has ever been undertaken.
The applicant relies on a report of Mr Stephen Leask of Sherlock Holmes Inspections dated 12 November 2012. It would appear that Mr Leask inspected and photographed some defects in the work before any rectification was undertaken by Mr Whiting. He did refer to the roof repairs which had been undertaken at that stage by Complete Roofing Warehouse of Tuggerah at a cost of $3,920.00. Other items were not separately costed although in his conclusion Mr Leask expressed the opinion that most walls were either out of square or out of plumb, some were both and that the quality of joining was poor. He noted there was inadequate support for some timbers and suggested that it would involve a complete demolition and rebuilding of the property to rectify the defects. Mr Leask concluded that because components were interlocking and movement of one item would result in movement of every attached item then the entire extension should be demolished down to the slab and upon a complete demolition reconstruction should occur. He noted that Ivan Whiting had provided a quote of $63,800.00 to carry out that work and he agreed with that quote. It is significant to note that after the quote was provided Mr Whiting undertook, at the request of the applicant, the rectification work to which I have referred and which was included in the initial cross-claim documents.
The claims were transferred to the Tribunal on 13 June 2013 at the instigation of the Wyong Local Court. When the matter first came before the Tribunal on 14 August 2013 Senior Member Meadows directed that the applicant provide a copy of all documents including expert reports, witness statements and other documents by 4 September 2013. He then noted that there had been a previous direction of the Local Court requiring the applicant herein to file and serve his lay and expert evidence and a Scott Schedule before 9 May 2013.
The Scott Schedule which was filed in those proceedings and subsequently filed before the Tribunal was a document containing only 9 items of rectification which appeared to correspond with the actual cost paid for replacement of metal roof and for the internal and external rectification work undertaken by Mr Whiting.
On 29 August 2013 the solicitors for the applicant filed the statement of Alan Hayes dated 10 May 2013, a report of Sherlock Holmes dated 12 November 2012 together with a supplementary report dated 20 August 2013 along with a Scott Schedule. It is noted that although the report of Mr Leask from Sherlock Holmes referred to some 15 items, the Scott Schedule merely referred to the 9 items which had previously been contained in the cross-claim and referred to in the quote and a tax invoice from Mr Whiting.
When the matter was listed before the Tribunal again on 23 October 2013 it was referred to an expert conclave and parties were advised that it would be expected an expert should have prepared reports with a view as far as possible, to clarifying matters in dispute, reaching an agreement which narrowed the points of difference.
On 16 October 2013 Mr Tony Ransley of Tyrrells inspected the property at 785 Dicksons Road, Jillaby (Dooralong) and prepared a report dated 22 October 2013. In the absence of a Scott Schedule in proper form provided by the applicant Mr Ransley addressed each of the items referred to in the report of Mr Leask by noting the defect alleged and addressing comments and providing rectification costings. That document ultimately formed the basis upon which the expert's conclave was conducted on 21 January 2014.
The experts were directed to file a joint Scott Schedule by 5 February 2014 but the solicitors for the applicant sought an extension of time so that the issues could be further addressed by Mr Leask. The time for compliance was extended to 5 March 2014 but when the matter was next listed for directions on 12 March the timetable had still not been complied with. Senior Member Thode directed that a joint Scott Schedule be filed on or before 2 April 2014.
A further Scott Schedule document was then prepared by Mr Leask which included 5 further items numbered 15A, 17, 18, 19 and 20. Item 20 incorporated the full cost of demolishing the works and rebuilding.
Although the new document prepared by Mr Leask was a substantial departure from the document relied on by the experts at the conclave, Mr Ransley prepared a further document at an additional cost of $572.00 in which he responded to each of the items including the new item 20 relating to a complete demolition and rebuild. The response to that item by Mr Ransley was as follows:-
"this item appears to be an ambit claim repeating items which were addressed to the conclave, eg verandah posts, façade and barge boards and windows. The other items appear to be covered by the claim for roof repairs (see item 1 above), part of which was agreed at $659.00 and the remainder agreed at a repair cost of $2,082.00. It is clear that at the conclave the southern wall being out of plumb was addressed as item 3 in the Scott Schedule and the northern wall of the laundry being out of parallel measured an excess of 80mm was addressed as item 11. The cost of rectifying these defects was agreed as to quantum by the experts during the course of the conclave."
Items 15A, 17 and 18 in the amended Scott Schedule prepared by Mr Leask were items which had not been previously raised in expert's reports and items which were not raised or in any way discussed at the conclave. It is clear that Mr Ransley had not been given an opportunity to consider any of those items during his inspection of the property or during the conclave.
The new item 19 appears to be a repeat of item 13 in the Scott Schedule discussed at the conclave where agreement had been reached as to liability and quantum.
The present claim appears to seek costs of rectification together with costs of demolition and rebuilding of the works. It is clear that the applicant would not be entitled to recover both rectification costs and rebuilding costs. It would appear on the evidence that in November or December of 2012 the applicant engaged Mr Whiting to carry out rectification work at a total cost of $4,136.00 including GST and he had also arranged for the roof to be re-done at a total cost of $3,820.00. He now seeks to recover those costs as well as the cost of demolition of the works at a cost of $7,775.00 plus a 20% profit margin plus GST and rebuilding of the extensions at a cost of $39,031.00 plus 20% builder's margin plus GST representing a total sum of $61,783.92.
The material relied upon to support the claim for demolition and rebuilding is contained in the report of Mr Leask dated 12 November 2012. Unfortunately that report simply refers to most walls being either out of square or out of plumb and a notation that the quality of joinery is poor. Mr Leask did not consider it feasible to attempt to rectify the problem in the laundry which arose from a badly laid slab or the lack of plumb in the southern store room wall. He did however note in his report dated 20 August 2013 that it would have been possible to install the frame onto the slab reducing the size of the room slightly or extend the slab by filling an 80mm void by pinning the slab with reinforcement bars and pouring concrete to ensure structural stability. He regarded this as a preferred choice of rectification but noted that the room was presently out of square as is apparent in photographs annexed to his report.
The applicant's solicitor relies upon the decision of the High Court in Bellgrove v Eldridge (1954)90CLR13. In that case the High Court was required to consider the measure of damages for a breach of contract by a builder where the judge at first instance found that demolition and reconstruction was the appropriate remedy. The Court observed that where a plaintiff sues for damages for breach of warranty with respect to marketable commodities the loss cannot be measured by comparing the value of the building which has been erected with the value which it would have borne if erected in accordance with the contract. The loss can however be measured by ascertaining the amount required to rectify the defect complained of and so give the equivalent to a building on land which is substantially in accordance with the contract. The Court continued:-
"Subject to a qualification to which we shall refer presently, the rule is, we think, correctly stated in Hudson on Building Contracts 7th edition (1946) p343. "The measure of damages recoverable by a building owner for breach building contract is, it is submitted, the difference between the contract price of the work or building contracted for and the cost of making the work on the building conform to the contract..."
Having recognised that the work necessary to remedy defects in a building and so produce conformity with plans and specifications may, and frequently will, require the removal or demolition of some part of the structure. The court continued:-
"6. The qualification, however, to which this rule is subject is that, not only must the work undertaken be necessary to produce conformity but that also, it also must be a reasonable course to adopt. No one would doubt that where, pursuant to a building contract calling for the erection of a house with cement rendered external walls or second hand bricks, the builder has constructed the walls of new bricks of first quality, the owner would not be entitled to the cost of demolishing the walls and re-erecting them in second-hand bricks. In such circumstances the work of demolition and re-erection would be quite unreasonable or it would, to use a term current in the United States, constitute "economic waste" (see Restatement of Law of Contracts (1932) par 346). We prefer, however, to think that the building owners right to undertake remedial work at the expense of a builder is not subject to any limit other than is to be found in the expressions "necessary" and "reasonable"... The court then went on to note that what was both necessary and reasonable in any particular case remained a question of fact."
These principals have been regularly applied since that time. In Hyder Consulting (Australia) Pty Limited v Walh Wilhlemson Agency Pty Limited (2001) NSWCA 313 the Court noted that if reasonable measures of rectification had in fact been taken their actual cost was recoverable but if rectification had not yet occurred then the probable cost would be awarded.
Applying these principals to the present situation it is clear that the applicant has undertaken work to substantially rectify the defects about which he has complained and accordingly it is inappropriate to consider an award of damages representing the cost of demolition and reconstruction. It is therefore necessary to consider compensation on the basis of rectification works which have already been carried out and paid for together with any other rectification works which are found to be necessary on the basis of the evidence available.
The Scott Schedule adopted by the experts at the conclave in January 2014 comprised some 15 defect items with a total agreed quantum of $16,003.13. Two items namely items 9 and 12 were withdrawn because item 9 was a duplication of item 8 and item 12 was a duplication of item 11. Quantum was agreed between the experts in all items but the defect was disputed by the builder's expert in items 1a, 3 and 15. In each of the remaining items defect and quantum was accepted. The respondent disputed that he was liable for a number of items and his comments in relation then to have been taken into account in conjunction with the determinations of the experts at the conclave.
Item 1 in the schedule related to the custom metal roof over the store room and to defects in the other parts of the roof generally. It is noted that the applicant arranged for the roof to be re-done in a proper manner at a total cost of $3,920.00. Although part of this sum was disputed by Mr Ransley on behalf of the builder I am satisfied that the respondent agreed to offset the sum of $3,920.00 from the balance of his contract claim. Accordingly the whole of item 1 is allowed. Item 2 relating to the window installed on the east wall of the existing office without adequate flashing has been agreed as to the defect and the quantum in a sum of $100.00 and that amount is allowed for item 2.
Item 3 relates to the south wall of the store room being out of plumb by 12.3mm over a 2.4m span. The experts ultimately agreed at the conclave that the cost of rectification was $3,000.00 although Mr Ransley disputed that the defect would cause any loss. Mr McDermott conceded that the wall was out of plumb because he was having problems with his level and I am satisfied that the defect required rectification and accordingly the cost of $3,000.00 is allowed for this item.
Item 4 relating to the finish of joints between new cladding and brickwork has been accepted as a defect and a sum of $200.00 has been allowed.
Item 5 relating to flashing on an external window has been agreed as to defect and quantum in a sum of $100.00.
Item 6 relating to unsatisfactory joints to the façade and barge boards has been agreed between the experts as to defect and quantum in a sum of $650.00.
Item 7 relating to gaps to the tops of the verandah posts as agreed as to defect and as to quantum in a sum of $440.00.
Item 8 in relation to trimming of timbers which had not been property mitred and poorly scribed was agreed as a defect and the cost was agreed in the sum of $600.00.
Item 9 was withdrawn as it represented a duplication of item 8.
Item 10 relating to the external door to the laundry being installed out of square was agreed as to quantum and it was disputed by Mr Ransley on behalf of the respondent only on the basis that he could not tell whether rectification work had been required. I allow that claim in the sum of $250.00.
Item 11 related to the northern wall of the laundry being out of parallel by approximately 80mm in its length. The conclave report notes that the experts and the conclave member discussed this item at length and it was agreed ultimately that the reasonable cost of rectification would be $1,400.00.
Item 12 was withdrawn as it was a duplicate of item 11.
Item 13 related to doorways which had not been installed in a proper workmanlike manner requiring rectification of doors and frames. In that item the defect was agreed and the quantum was also agreed in the sum of $920.00.
Item 14 related to the inadequate finish of plaster work in some areas. The defect was agreed and the cost of rectification was accepted at $290.00.
Item 15 related to the cost of removal of part of the laundry wall as required by the contract. Quantum was agreed in the sum of $500.00 but Mr Ransley initially disputed this claim on the basis that rectification had already been undertaken and he did not know whether the work was included in the original contract. I am satisfied having heard the evidence of Mr McDermott that the removal of that part of the wall was required under the original contract and that it was shown on the plans submitted to him. The agreed cost of $500.00 is allowed for that item.
The Scott Schedule prepared by Mr Leask in about March of 2014 contained four additional items apart from item 20 which was the full cost of demolition and reconstruction. In view of my earlier determination it is not necessary to consider item 20.
Item 15A related to electrical and plumbing terminations and extensions. This item had never been raised in any expert report and no opportunity had been given to the respondent's experts to comment on it. It appears that the matter was not raised at the conclave and accordingly, although a claim of $450.00 is made for an estimated loss, no allowance should be made on this claim.
Item 17 related to internal and external painting. Although the original cross-claim included an amount for painting the issue of painting has not been the subject of an expert report and was not raised in the earlier Scott Schedule in any detailed way. The question of painting was not considered at the conclave and the respondent's expert has now been given an opportunity to consider the qualification of any painting claim. It would appear that the amount claimed simply represents a base sum which, when adjusted for builder's margin and GST comes to $1,100.00. There is no evidence on which that sum can be allowed and accordingly item 17 the claim for painting is not allowed.
Item 18 relates to the supply and fitting of an internal door between the laundry and the kitchen. Although this item has not been previously raised in an expert report I am satisfied that a door was installed at a cost of $165.00 inclusive of GST and builders margin and in due course that amount should be added to the applicants claim.
Item 19 relating to removal and replacement of sliding door frames at a total cost of $3,000.00 is another matter which is not the subject to the specific experts report. It would appear on the evidence that this item was discussed in conjunction with item 13 and any costings associated with this item are included in the costings agreed between the experts for item 13.
For the purpose of calculation of the costing the experts agreed that a builder's margin of 30% should be applied to all costings set out in the Scott Schedule that had been agreed and further that GST of 10% should thereafter be added.
It is noted that the claims included in the Scott Schedule appear to fall into four separate categories. Item 1 relates to the rectification of problems with the roof. This work was carried out by Complete Roofing Warehouse in October 2012. The total cost of that work including builder's margin and GST was paid by the applicant and the respondent has at all times agreed to offset this claim against monies owing under the contract. It is appropriate that a total sum of $3,820.00 should be allowed off the total claim for this item.
Items 2, 4, 5, 6, 7, 8, 10, 13 and 14 total $5,076.50 after a 30% builders margin has been applied together with GST. It is noted however that this work appears to have all been carried out by Mr Whiting in about November or December 2012 at a total cost of $4,136.00 and accordingly, although the experts may have agreed on what could be described as a reasonable cost, it is clear that they were never informed at the conclave that the work had been done by Mr Whiting at an actual cost which was lower than their assessed cost. In relation to the work done by Mr Whiting and included in those items of the Scott Schedule it is appropriate to allow a total sum of $4,136.00 rather than the assessed sum of $5,076.50.
The third category of items contained in the Scott Schedule comprises item 15 which relates to renovations to the existing laundry wall which was incomplete work. An allowance of $500.00 has been made for this item which represents a total of $715.00 including builder's margin of 30% and GST.
Items 3 and 11 in the Scott Schedule relate to the cost of rectification work assuming that the existing structure remains. These items total $4,400.00 which represents $6,292.00 after a 30% builder's margin and 10% GST are added.
The claims which have been made out on the evidence by the applicant are accordingly;
(a) cost of rectification of the roof undertaken by Complete Roofing Warehouse, $3,820.00.
(b) cost of rectification work referred to in items 2, 4, 5, 6, 7, 8, 10, 13 and 14 of the Scott Schedule which was completed by Mr Whiting at a total cost of $4,136.00 including builder's margin and GST.
(c) cost of incomplete work in the existing laundry representing item 15 in the Scott Schedule including builder's margin and GST, $715.00.
(d) cost of rectification work which is rendered necessary if the works were not demolished and rebuilt being items 3 and 11 in the Scott Schedule including builder's margin and GST, $6,292.00.
Items 9 and 12 have been withdrawn as items duplicated by other items in the Scott Schedule and items 15A, 17, 18 and 19 have been disallowed on the basis that they were not the subject of an expert report served in accordance with the Tribunal timetable, they were not considered at the conclave and no opportunity was given to the respondents expert to consider the claim.
The total claim which has been established by the applicant is accordingly a sum of $14,963.00 and subject to any monies owing by the applicant owner to the respondent builder that sum would be payable by the respondent to the applicant in the present case.
For reasons outlined in detail in the related claim HB 13/35144 the respondent is entitled to a sum of $7,000.00 representing the balance of monies owing for work carried out. It follows that the respondent is to pay the applicant a sum of $7,963.00 and that sum is payable within one month of the date of publication of these orders.
The monies ultimately recovered by the applicant in these proceedings does not exceed the sum of $10,000.00 and although leave was granted to the applicant herein to be legally represented the applicant's claim was never properly particularised in a Scott Schedule reflecting the evidence ultimately presented prior to the conclave. I am not satisfied in the circumstances that any order should be made for the applicant's costs in this matter.
J A Ringrose
General Member
Civil and Administrative Tribunal of New South Wales
25 July 2014
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
Decision last updated: 11 September 2014
0
0
1