Alexander & Anor v Gregoriou & Ors

[2010] NSWDC 15

CITATION:	Alexander & Anor v Gregoriou & Ors [2010] NSWDC 15
HEARING DATE(S):	19 - 22 October 2009 and 6 November 2009
JUDGMENT DATE:	22 February 2010
JURISDICTION:	Civil
JUDGMENT OF:	Hungerford ADCJ
DECISION:	(1) The first and second plaintiffs are entitled to a verdict against the second and third defendants on the claim in the amount of $34,335.62. (2) Liability of the second and third defendants to be apportioned between them on judgment in the amount of $17,167.81 for each. (3) The first defendant is entitled to a verdict against the first and second plaintiffs on the claim. (4) The cross-defendants on each of the three respective cross-claims are entitled to a verdict against the cross-claimants. (5) Parties to be heard on interest and costs before final orders are made.
CATCHWORDS:	BUILDING CONTRACTS - Oral contracts with project manager and builder by owners for performance of residential building work - Contractual relationship between parties - Respective obligations of project manager and builder - Unlicensed contractors - Failure to obtain home warranty insurance - Whether building contracts enforceable - Whether owners can recover from contractors monies already paid by them - Remuneration to which contractors entitled from owners for work done - Quantum meruit - Status of contractors' unpaid progress claims - Defective work - Cost of rectification work - Breach of contract - Breach of statutory warranties - Cross-claims for indemnity and/or contribution - Whether GST payable on award of damages - Proportionate liability
LEGISLATION CITED:	A New Tax System (Goods and Services Tax) Act 1999 (Cth), ss 9(5) and 10(4) Builders Licensing Act 1971, s 45 Civil Liability Act 2002, ss 34(1)(a), 34(2), 35(1) and Pt 4 Contracts Review Act 1980, s 7 Fair Trading Act 1987, s 42 Home Building Act 1989, ss 3(1), 4(1), 5(1), 5(2), 7(1), 7(2), 7AA(1), 7A, 10(1), 18B, 92(1)(b), 92(2)(a), 92(3), 94(1), 94(1A), 94(2), 94(3) and 120(4) Home Building Regulation 2004, cl 9(1)(g)(iii) Law Reform (Miscellaneous Provisions) Act 1946, s 5 Trade Practices Act 1974 (Cth), s 52
CASES CITED:	Brodyn Pty Ltd t/as Time Cost & Quality v Davenport [2004] NSWCA 394; (2004) 61 NSWLR 421 Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 273 Kalokerinos v HIA Insurance Services Pty Ltd [2004] NSWCA 312 Lee Gleeson Pty Ltd v Sterling Estates Pty Ltd (1991) 23 NSWLR 571 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 Pender v Robwenphi Pty Ltd [2008] NSWSC 1144 Trimtor Building Consultants Pty Ltd v Hilton [1983] 1 NSWLR 259 Walter Construction Group Ltd v Walker Corporation Ltd [2001] NSWSC 283 155 Yorke v Lucas (1985) 158 CLR 661
PARTIES:	Alice Alexander - First Plaintiff/First Cross-Defendant to First Cross-Claim John Alexander - Second Plaintiff/Second Cross-Defendant to First Cross-Claim Linda Andrea Gregoriou - First Defendant/Second Cross-Claimant to First Cross-Claim/First Cross-Claimant to Second Cross-Claim/First Cross-Defendant to Third Cross-Claim Linda Gregoriou Pty Limited - Second Defendant/First Cross-Claimant to First Cross-Claim/Second Cross-Claimant to Second Cross-Claim/Second Cross-Defendant to Third Cross-Claim All Sydney Builders Pty Limited - Third Defendant/Cross-Defendant to Second Cross-Claim/Cross-Claimant to Third Cross-Claim
FILE NUMBER(S):	1734 of 2007
COUNSEL:	Mr FC Corsaro SC for Plaintiffs/Cross-Defendants to First Cross-Claim Mr D Miller for First and Second Defendants/Cross-Claimants to First Cross-Claim/Cross-Claimants to Second Cross-Clain/Cross-Defendants to Third Cross-Claim Mr M Pesman for Third Defendant/Cross-Defendant to Second Cross-Claim/Cross-Claimant to Third Cross-Claim
SOLICITORS:	John de Mestre & Co for Plaintiffs/Cross-Defendants to First Cross-Claim Watson Mangioni Lawyers Pty Limited for First and Second Defendants/Cross-Claimants to First Cross-Claim/Cross-Claimants to Second Cross-Clain/Cross-Defendants to Third Cross-Claim John Carmody & Co for Third Defendant/Cross-Defendant to Second Cross-Claim/Cross-Claimant to Third Cross-Claim

JUDGMENT

1 The performance of renovation work to a residence at Robertson in the Southern Highlands of New South Wales resulted in the owners of the property being dissatisfied with the building work as a number of defects were found. Also, the cost of the work had escalated from the original figure estimated and the completion time was significantly longer than that first stated. The seeds of a building dispute were thereby sown.

2 The intention of the owners, whose usual residence was in Sydney, was to use the property, known as “Possumwood”, as a country retreat and to provide hospitality to their family and friends; for that purpose they considered certain improvements should be made to the house. The property was purchased in early-2006 at which time the owners had a preliminary discussion with an acquaintance to project manage the work, including obtaining an appropriate builder to do it. The arrangements so made were entirely oral with no written building contract. It transpired that neither the project manager nor, arguably, the builder had the relevant licence to do building work under the Home Building Act 1989 so that no home warranty insurance was in force in relation to the work. The owners sought recovery from the project manager and the builder of monies paid to them for the renovation work performed and damages to cover the cost of remedying the defects. For their part, the project manager and the builder each cross-claimed against the other and the project manager made a cross-claim against the owners. All claims were wholly resisted.

3 It has to be remarked at the outset that this case arose from circumstances in which all parties concerned approached the performance of the renovation work, indeed what work was precisely required, in a quite informal and relaxed way. The absence of a written building contract or even a schedule of works, together with some uncertainty about the nature of the contractual relationship between the respective parties, has not assisted in a resolution of the ultimate dispute which arose. I do not suggest that the parties did not intend to create legal relations between them – I think they did – only that their conduct was less than thorough in doing so.

4 The state of the evidence led, or more correctly what evidence was not led, also presented difficulties. For instance, apart from the two building experts, the only witness called in the case was one of the plaintiff owners but who to many questions about events and documents responded “I don’t recall”, “I don’t recall exactly”, “I might have seen it”, “we probably discussed it”, “I don’t know” or “I wasn’t aware”; she readily conceded on some matters that “my husband dealt with all this” and that the commercial terms of any agreement were discussed between the project manager and her husband – the other plaintiff owner but who did not give evidence – where it was he who attended to the financial arrangements and payment for work done. The defendants, the project manager and builder, did not give any evidence.

5 Be all that as it may, there was a considerable amount of documentary evidence in the proceedings but the real problem in the absence of much oral evidence was to assess that material in the context of the true relationship between the parties as to their respective legal responsibilities for what did or did not occur. The dispute is of not insignificant proportions where the owners’ total claim was for an amount of about $455,000 which was wholly opposed by the defendants. With the lack of direct evidence the defendants’ cross-claims must too be seen as at serious risk of failure.

Factual background to dispute

6 Possumwood was purchased by a married couple Alice Alexander and John Alexander, respectively the first and second plaintiffs, who became the registered proprietors on 31 March 2006 after exchange of the sale contract on 10 February 2006. The first defendant, Linda Andrea Gregoriou, was the principal and a director of Linda Gregoriou Pty Limited (the Gregoriou company), the second defendant, and she was also the managing director of FTB Group Pty Limited which was engaged in property development specialising in high quality, innovative urban redevelopment projects in the areas of development, architecture and urban design. She had over 20 years’ experience in the field. The third defendant, All Sydney Builders Pty Limited (ASB), was known to Ms Gregoriou and was engaged in building construction work.

7 It seems that Ms Gregoriou and Mr Alexander had been friends and acquaintances for many years before Mrs Alexander met her at a social function in 2004. Mrs Alexander was engaged as a freelance fashion and artistic photographer. Thereafter, they saw each other occasionally at functions in the company of mutual friends. By late-January or early-February 2006 the Alexanders had decided to purchase the subject property at Robertson and around that time Mrs Alexander, at dinner with friends at the home of Ms Gregoriou, told Ms Gregoriou of the purchase and of the intention to make some improvements to the property. Mrs Alexander deposed that the following discussion then took place:

“7 Ms Gregoriou became quite excited and animated saying things like:

‘I would love to do the job. That would be fantastic. I already have a great and reliable builder who I have worked with before, All Sydney Builders.’

8 …

9 In later discussions Ms Gregoriou said:

‘I don’t have a job at this stage. I am starting work at either Macquarie Bank or Babcock & Brown in July, and so have a few months spare to do the work. I will stay down in Robertson for a few days at a time to ensure the job is done. I will arrange a builder, structural engineer, and anyone else required to perform the works and will manage the works for you. I’ll get it done within 3 months.’

10 I said:

‘It has to be done by June. What happens if it isn’t done by then?’

11 Ms Gregoriou said:

‘You can get damages against the builder.’”

8 In February 2006, Mrs Alexander and Ms Gregoriou drove together to Possumwood in relation to the renovation work to be done and Mrs Alexander said she told Ms Gregoriou:

“ I do not like the three bathrooms. One of the bathrooms is to be converted into a steam room. I want wooden rather than carpet floors. I want the island removed from the kitchen and I want the barn converted into a studio.”

9 A few weeks after settlement of the purchase of the property on 31 March 2006, Mrs Alexander said she told Ms Gregoriou “we also want to have the cabinets removed from the kitchen.” They travelled together to the property on a few later occasions and visited some furnishing stores in the area. On one such occasion, Mrs Alexander said she met Dante De Grazia who was the principal of ASB.

10 In March 2006, Mrs Alexander said she told Ms Gregoriou “we have decided to give you the job”. It was common ground that nothing was put in writing to this effect, although Mrs Alexander said Ms Gregoriou then told her “we had a contract with the builder and if the work wasn’t finished within three months he would have had to pay $500 a week.” However, relevantly as to the terms of any agreement with Ms Gregoriou, Mrs Alexander gave this evidence:

“Q. Is it the case then that the practice was that the payment and processing of invoices was a matter that was dealt with by Ms Gregoriou with your husband or his secretary?
A. Yeah, all the payment was, yes, all the financial things were done with my husband.

Q. I think it's the case, isn't it, as you said in your affidavit, that in terms of the terms of any agreement, the commercial terms of any agreement, those were never matters that you discussed with Ms Gregoriou; those were matters that you left to your husband to deal with; is that correct?
A. Yes.

Q. And by that I mean commercial terms about payment and the like. What anyone's fees might be were not matters that you addressed with Ms Gregoriou; they were matters that your husband addressed with her to your understanding?
A. Mainly, yes.

Q. Let's just focus then on Ms Gregoriou's contract. You don't say, do you, that you negotiated with Ms Gregoriou the fee that she would be paid for carrying out works for you and your husband with respect to this property?
A. She discussed it first with John[Alexander], and then John and I discussed it and - but she first discussed it with John.

Q. So you agree with me that you personally did not discuss any matter of her fee with her, did you?
A. That's right.”

11 As to the actual renovation work to be performed, as outlined to Ms Gregoriou by Mrs Alexander in February 2006 as stated above, Mrs Alexander on testing under cross-examination agreed that the detail was not discussed. It was suggested to her that in the period February to 5 May 2006 the only building works she and her husband commissioned to be done were the renovation of the barn and the timber floors in the house – she said “I don’t know.” I again emphasise, neither Mr Alexander nor Ms Gregoriou gave evidence.

12 Then, as to the role of ASB as the builder, Mrs Alexander gave this evidence:

“Q. …You knew, didn't you, Mrs Alexander, at the beginning of May [2006] that you and your husband were contracting with All Sydney Builders to carry out this work for you for $147,000; correct?
A. Yes.

Q. …You've already agreed with me on two occasions that by 5 May 2006 you had a contract, you and your husband, with All Sydney Builders to carry out the renovations to the barn and the floor for $147,000?
A. Yes.

Q. You see I suggest to you that the only statement about price and scope of work that you or your husband had received from Ms Gregoriou up until 5 May 2006 was her passing on the email from the builder, do you agree with that?
A. Yes.

Q. You'd agree with me, wouldn't you, that none of the works that are set out in that $121,000(second quotation from builder dated 27 May 2006) are works that are referred to in the first quotation that I took you to a while ago; they're all new works from the date of the first quotation, aren't they?
A. Yes.
…

Q. And you and your husband, am I correct in understanding, decided to accept All Sydney Builders Pty Ltd quotation of 27 May (2006), quotation number two, to have that work done for $121,250; is that right?
A. I don't really that, but yeah, I don't recall exactly. No, I don't really (recall) that.
…

Q. …do you see that there's an email there from Ms Gregoriou to ‘All Sydney’ of 2 June(2006) at 3.14pm?
A. Yes.

Q. And you see that it says in the first sentence that this quote has been accepted?
A. Yes.

Q. Am I correct in understanding that what happened between the first and the second of June is that to your knowledge your husband verbally gave Ms Gregoriou approval for the second quotation?
A. Yes.

Q. And you understood, didn't you, that in doing that you and your husband were contracting with All Sydney Builders for it to carry out for you at your property the building works in its quotation of 27 May 2006 for the price set out in that quotation, correct?
A. Well, we never contracted directly with the builder but, yes. As I said, most of these things was done, my husband was dealing with Linda(Gregoriou) and then it was a financial thing so.

Q. Mrs Alexander, the two quotations that I've taken you to were addressed to you and your husband, weren't they?
A. Yes, yes.

Q. The two quotations that I've taken you to were passed on by Ms Gregoriou to your husband via his email, correct?
A. Yes.
…

Q. Both of you were aware of the fact of both of those quotations, weren't you?
A. Yes.

Q. And I want to suggest to you as you well knew your husband on behalf of yourself and him communicated to Ms Gregoriou your acceptance of All Sydney Builders' quotation that had been addressed to you, correct?
A. That would be my husband was the one to deal with all the financial matters and all this mail, that was my husband mainly was dealing with all of this, not me.

Q. What I want to suggest to you is that Ms Gregoriou was your agent?.
A. Yes.

Q. And that she passed on your and your husband's acceptance of the All Sydney Builders’ quote to All Sydney Builders on behalf of you and your husband, do you agree?
A. Yes.
…

Q. And to your knowledge none of the payments that were ever made by you or your husband to All Sydney Builders Pty Ltd went through Ms Gregoriou's accounts, rather they were all paid directly by you and your husband to the building company directly, correct?
A. I don't know. I don't know that. I don't know because I haven't – well, I haven't made the payment myself, so I don't know.
…

Q. Did your husband make all the payments?
A. Yes."

13 It was common ground that there was no written building contract between the parties. As to the work which Ms Gregoriou was to perform for the Alexanders, assistance may be obtained from the information provided on the invoices issued by her to them. The first such invoice dated 28 April 2006, for the month of April in the sum of $19,800 ($18,000 plus $1,800 GST) and which was addressed to Mr Alexander, stated:

“ For: The appointment of Linda Gregoriou Pty Ltd for the Project Management of Possumwood, Robertson, NSW

Tasks include:

Inspect the site and assess site conditions including measuring and drawing the existing building

Site inspections

Organisation of demolition works plus supervision

Liaising with client on a daily basis

Meet and liaise with architect, builder, hydraulics engineer and other required consultants

Supervision of construction work

Writing brief for the builders’ scope of work

Sourcing fittings and fixtures

Provide samples of finishes and fixtures

Sourcing soft furnishings

Providing all trade discounts to the clients

Contract supervision

Approval of invoices and progress claims

Obtain pricing and direct various contractors

Negotiating all prices and costs.

Note: this fee also includes work undertaken by Dale Jones-Evans Pty Ltd (architect) and all disbursements including interstate and overseas telephone calls, printing, photocopying and photography. It does not include fees for any other consultants or sub-contractors.”

14 The first quotation given by ASB was dated 3 May 2006 addressed to Ms Gregoriou and which showed Mr and Mrs Alexander as the clients. It specified a builder licence number of 175803C. The quotation was in the total amount of $147,840 ($134,400 plus $13,440 GST) and, as Mrs Alexander accepted in evidence, covered the conversion of the barn and timber flooring in the house. However, she did maintain the view that in a cost of $150,000 the steam room was to be completed also. In any event, Ms Gregoriou forwarded the quotation to Mr Alexander on 5 May 2006 and, apparently on approval by him, she instructed ASB to proceed. The work commenced on 8 May 2006 and, as the quotation stated, the barn was to be completed by 3 June 2006 (except as to the installation of metal windows, glazing and some painting) and the timber floors by 21 July 2006; liquidated damages for late completion were specified as $500 per working day.

15 The building work so commenced.

Progress of building work

16 Mrs Alexander and Ms Gregoriou visited the site together from time-to-time to inspect progress of the work. On one such visit on 22 May 2006, a file note made by Mr De Grazia of ASB stated they were “happy with the progress.” Even so, when Mrs Alexander was taken in cross-examination to many of the documents she was reluctant to indicate at any stage satisfaction with the work performed and not unusually pleaded she “didn’t know” or “probably” or “can’t remember the date”. However, she did agree that the fact invoices for progress claims made by ASB were paid within a few days, and that indeed was the pattern with the invoices from Ms Gregoriou, showed that both she and her husband were content with the works and the progress being made. Then, later, she relied on her non-involvement in the payments to say “I don’t know” about satisfaction with the work.

17 It has to be interposed that much of Mrs Alexander’s evidence in this respect was hesitant and very qualified in a protective manner of her position. That, coupled with the lack of oral evidence from any of the other parties, has meant more reliance than perhaps is usual on the various documents but where any inferences to draw from those documents makes one use caution. I do not propose to keep repeating this evidentiary difficulty but it is something foremost in my mind in determining this matter as satisfying the respective burden of proof on each party.

18 On 27 May 2006, ASB submitted a second quotation for building work at Possumwood to Ms Gregoriou in respect of additional works to those covered in the first quotation of 3 May 2006. Those additional works related to the TV room, kitchen, main and first floor bathrooms, laundry, first floor windows, internal doors and steam room. The amount was for $121,250 plus GST of $12,125, a total of $133,375 of which the steam room cost, which received a lot of attention in the proceedings, was by far the highest item at $54,890. Ms Gregoriou sought to discuss this quotation with Mr Alexander and on 2 June 2006 she advised ASB of its acceptance, including that Mr Alexander would inspect the site in the middle of the following week.

19 It was on 30 May 2006 that Ms Gregoriou submitted to Mr Alexander her second monthly claim for $19,800 which was promptly paid.

20 Mrs Alexander agreed that the second quotation accepted on 2 June 2006 was the first time a quotation had been received for the steam room but she maintained her initial position that the works were to be completed by the end of June 2006; and that was so even though the accepted quotation of 3 May 2006 for the timber floors was for their completion by 21 July 2006. Mrs Alexander acknowledged that she could not recall if any complaint was made about the failure in timing, as she understood it, and acknowledged also that as late as 19 July 2006 Mr Alexander was still discussing the design of the steam room with Ms Gregoriou. She responded that “I can’t recall. I have nothing to do , really, with the design of the steam room” so that, as she agreed, any complaints about the steam room in terms of its design or construction or time of construction were matters her husband would have to deal with.

21 Further, it seems that in late-June 2006 Mr Alexander had raised with Ms Gregoriou the desire to construct a car park over the water tank on the property. Again, Mrs Alexander was unaware of this, as she left it to her husband, although she did know that it was part of the work being done by Ms Gregoriou.

22 It was on 27 June 2006 that the third monthly claim was submitted by Ms Gregoriou to Mr Alexander for $19,800 which was promptly paid within three days. Again, Mrs Alexander admitted no complaint had been made to Ms Gregoriou at this stage about the work done or its timing but she added that “that doesn’t mean that we weren’t dissatisfied”.

23 Mrs Alexander agreed that the matters covered in the first quotation had been completed by ASB by June 2006 as to the barn and by 17 July 2006 as to the timber floors. Thus, the work performed during June and July was that covered by the second quotation but as to which no completion date had been specified. However, she expressed dissatisfaction because all of the work was, she said, but somewhat curiously, to have been completed by June 2006. Mrs Alexander annexed to her affidavit an email from Ms Gregoriou to Mr Alexander dated 27 June 2006, but as to which she had no recollection, in which a progress report was given concerning certain additional and new works as to the car park, windows in the TV room, upstairs loft windows, bathroom and new bath, bathroom tiles, drainage works in kitchen and bathroom to accommodate a stove and toilet and bathroom fittings and fixtures. In agreeing that no complaint had been made about the timing of this work, Mrs Alexander nevertheless maintained it should all have been done by June 2006. This evidence emerged:

"Q. … it is a nonsense, isn't it, for you to suggest that somehow or other Ms Gregoriou had an obligation to complete for you by the end of June works when those works had not even been set upon as an agreed scope of works?
A. As set upon because – they hadn't been set upon because obviously there was some delay, you know, because it wasn't discussed before.

Q. Ms Gregoriou, you would agree with me, could not go into your house and just do whatever she wanted, could she?
A. No, of course not.

Q. Ms Gregoriou, you would agree to me, had to provide to you quotations setting out what was going to be done and you had to consider and accept those quotations or not; correct?
A. Yes, correct, but she could have provided all information much before then.

Q. Why didn't you write to her once and complain?
A. I should have."

24 As progress claims were received from ASB for the work, from the first progress claim dated 27 May 2006, Mrs Alexander said that they were paid without demur because “we agreed to pay” even though dissatisfaction with the work, particularly the timing of its performance, existed. For instance, she said the steam room was not completed until December 2006.

25 However, in all of this, Ms Gregoriou sent an email to Mr Alexander on 21 July 2006, strangely entitled “works undertaken as of 21 August 2006 at Robertson”, in which a progress report for the works to the barn and house was given. The report itself proposed completion of the specified work by various dates from 26 July 2006 to 4 September 2006. No doubt Ms Gregoriou, Mr Alexander or Mr De Grazia could have explained this apparent anomaly in dates and actual progress of the works if they had been called to give evidence.

26 On 6 August 2006, Ms Gregoriou emailed Mr Alexander following her site visit the day before as to a list of variations for the builder, questions about Mr Alexander’s room, matters for Mrs Alexander to attend to as to finishes and furniture and tasks for herself to do. Although annexed to her affidavit, Mrs Alexander could not recall that email as it was probably given to her by her husband.

27 On 6 August 2006, Ms Gregoriou sent a fourth invoice for her work to Mr Alexander for $19,800. Although suggested this amount was not paid, Mrs Alexander did not know.

28 Apparently, from the documents annexed to Mrs Alexander’s affidavit, the type of steam room required by Mr Alexander had to have a three-phase electrical power connection which arose in mid-August 2006 and was the subject of emails between Ms Gregoriou and Mr Alexander through to October 2006. Although acknowledging it as a “a big problem”, Mrs Alexander said she had “nothing to do with this issue…it was dealt with between my husband,… and Ms Gregoriou”.

29 Annexed to Mrs Alexander’s affidavit were a number of emails from Ms Gregoriou to Mr Alexander, but about which Mrs Alexander could not assist, over the period September 2006 to January 2007 concerning various matters to complete the project and, in particular, seeking instructions as to the construction of the steam room. No written responses from Mr Alexander were provided.

30 It seems that Ms Gregoriou last visited Possumwood on 7 October 2006 following which she emailed Mr Alexander on 9 October 2006 of matters completed by ASB and items still outstanding as she continued to liaise with the builder. Thereafter, Mrs Alexander agreed it was she who attended the site for inspections and gave instructions to ASB so the work could be completed. She maintained her complaint that Ms Gregoriou failed to comply with the date for completion of the work as originally agreed as the end of June 2006, notwithstanding the time-scale for the works as stated above from the builder’s quotations and Mr Alexander’s requirements for the steam room which arose in mid-August 2006 – not to mention the additional work requested such as the car park – and explained the reason:

“Just that at the beginning of the project that was supposed to be finished all by June, and it hasn't. And so we – we accept it because the work had to be done and we accepted it. But that was on – like the steam room for example was supposed to be finished in June. It finished in December – December and January, and that was like six months later to the due date.”

31 In an email to Mr Alexander of 18 January 2007, Ms Gregoriou proposed a meeting with Mr De Grazia and Mrs Alexander in her Sydney office to “discuss every single item that was outstanding, who is responsible for it and the timing… room by room in detail… then meet once a week after that to make sure this job is completed and that there is a co-ordinated approach”. Thereupon, on 1 February 2007 Ms Gregoriou confirmed with Mrs Alexander and Mr De Grazia the work to be completed by 2 February 2007. It is therefore probable that practical completion of the works occurred around that date, in the absence of a document to that effect. However, on 15 February 2007 Ms Gregoriou sent to Mr Alexander a quotation from ASB for the construction of the car park on top of the water tank in the sum of $47,060 plus GST of $4,706, a total of $51,766.

32 Mrs Alexander deposed in her affidavit as to various items which she regarded as defective works. They covered items in the laundry, the power supply, steam room, a bathroom, barn studio, antique table for a sink, audio/visual equipment, windows and doors, kitchen and timber floors. They items concerned were reviewed by expert building consultants commissioned by the Alexanders and ASB.

Expert building evidence

33 David James Plaister of Plaister Consultancy Group Pty Limited, a specialist in dispute resolution in the building and construction industry, was engaged by the Alexanders to review the standard of workmanship as to the alleged defects and to comment on rectification work required and its likely cost. Mr Plaister inspected the subject site at Robertson on 7 August 2007 and 12 June 2008. In a report of 17 June 2008 he found a number of defects requiring rectification as specified for a remedial cost of $78, 122 (inclusive of GST). On 18 November 2008, Mr Plaister considered the failure to the in-floor heating to the downstairs bathroom and formed the view the likely cost to rectify it would be $10,196 (inclusive of GST). In a further report of 17 May 2009 Mr Plaister expressed an opinion as to whether there had been any overcharging for any items of the works and, if so, a reasonable charge for that item. He found such overcharging/over-certification in relation to the supply and installation of plasterboard and installation in the barn in the amount of $6,027.99 and an unfitted shower screen at a cost of $1,000 giving a total of $7,027.99 (inclusive of GST). Also in the report of 17 May 2009, Mr Plaister concluded, but after considering affidavits of Ms Gregoriou of 6 August 2008, of Mr Alexander of 14 November 2008 and of Mr De Grazia of 25 November 2008 – none of which were in evidence in the proceedings – that Ms Gregoriou “did not satisfy a number of responsibilities reasonably comprising the role of superintendent and supervisor of the works”. The absence of the stated evidence before the Court and the inability to test it must, it seems to me, materially affect any view expressed by Mr Plaister in this respect.

34 ASB relied on evidence from Peter Finnane, a building consultant, who inspected the house at Possumwood on 3 November 2008 and prepared two reports of 24 November 2008 and 4 December 2008. The first report reviewed Mr Plaister’s report of 17 June 2008 and found his estimated cost to rectify the defects of $78,122 (increased during Mr Plaister’s oral evidence to $82,122 to cover earlier omitted cost of $4,000 to replace waterproof membrane under tiles in the steam room) was “grossly excessive” and an appropriate amount would be $5,562.70 (inclusive of GST). In the second report as to the in-floor heating in which Mr Plaister assessed a rectification cost of $10,196, Mr Finnane considered an amount of $7,557.55 (inclusive of GST) would be the proper figure. It is to be noted that in relation to the second report, Mr Finnane acted upon instructions from ASB as to the floor slab being existing and that on installation the heating operated correctly on being fitted by a specialist sub-contractor; there was no such evidence before me and, therefore, Mr Finnane’s opinion on this aspect is to be seen as based only on assumed facts. Likewise, it seems Mr Plaister assumed, in considering that the floor should be removed and replaced, that an electrician had tested the in-floor cabling and found it to be defective – there was no evidence otherwise that that was so.

35 Mr Finnane in the 24 November 2008 report, from invoices issued by ASB to Ms Gregoriou, stated that an amount of $332,223.62 had been claimed of which $295,830.12 had been paid by the Alexanders, a difference still owing of $36,393.50. He added that building work commenced in May 2006 and was completed in February 2007. The builder, he said, performed the work as set out in the two quotations of 3 and 27 May 2006 and the other later works were done on a “do and charge” basis. There was no challenge to those facts in Mr Finnane’s cross-examination.

36 During the proceedings Mr Plaister and Mr Finnane conducted a conclave and produced a joint report on 20 October 2009 in relation to the alleged defective work and its cost to correct. Essentially, the joint report repeated the earlier separate reports but had the benefit of consolidating the respective views.

37 A review of the experts’ opinions as to the defects and the cost of remedial action will be dealt with later in these reasons.

The claims, defences and cross-claims

38 The claims: As against Ms Gregoriou, the Gregoriou company and ASB, the Alexanders claimed damages for breach of contract and in negligence; statutory counts were brought for misleading and deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth) and/or s 42 of the Fair Trading Act 1987; and an order was sought for the Alexanders to be indemnified by the Gregoriou interests in respect of any further claims made on them by ASB.

39 Orders were sought by the Alexanders against the Gregoriou interests pursuant to s 7 of the Contracts Review Act 1980 declaring void or varying the agreement between them concerning the monthly fees of $19,800 per month charged to them. However, at the hearing this claim was abandoned so that there is no need to consider it further. It is dismissed.

40 The agreement pleaded between the Alexanders and the Gregoriou interests was said to be oral, but evidence in writing by the invoices issued by Ms Gregoriou, and was made in February/March 2006 whereby she agreed to obtain a reliable, competent and licensed builder to carry out the renovation work to the house at Robertson for $150,000 with completion by the end of June 2006 on pain of default damages for any delay. Further, it was pleaded that the task of the Gregoriou interests was to design and prepare all necessary documentation for the builder to carry out the works, including managing the works for the Alexanders by staying in Robertson to supervise the builder and liaising with them and all consultants to ensure the works were properly performed. In so agreeing, it was said that the Gregoriou interests assumed a duty of care to the Alexanders.

41 ASB was said to have carried out the renovation work pursuant to some form of arrangement made by Ms Gregoriou under which arrangement Ms Gregoriou was understood to believe an oral contract was formed between the Alexanders and ASB for ASB to carry out the works. The works qualified as “residential building work” within the meaning of the Home Building Act and was evidenced in writing by the quotations given by ASB for the work. Although not admitting such arrangement was a contract for the works between the Alexanders and ASB, the Alexanders said that if it was then ASB was to carry out the works with reasonable care and so as to comply with the statutory warranties under s 18B of the Home Building Act. The Alexanders were owed by ASB a duty of care in so performing the work.

42 The Alexanders pleaded that Ms Gregoriou and/or the Gregoriou company failed to ensure the works were carried out under the contract arranged with ASB in that ASB was not qualified or licensed to carry out the works, the cost of the works exceeded the $150,000 as it was done on a “do and charge” basis rather than a lump sum amount and the works were not completed by the end of June 2006. Further, it was said that the Gregoriou interests did not adequately manage the work, which itself was “residential building work” under the Home Building Ac, in that Ms Gregoriou did not properly value the works, did not stay in Robertson to supervise the work of ASB so that it was defective and where neither Ms Gregoriou nor the Gregoriou company was licensed to do the work and was without home warranty insurance. In the result, the agreement was breached by Ms Gregoriou and/or the Gregoriou company; alternatively, there had been negligence in performing the work – the Alexanders suffered damage in the amounts of $59,400 paid to Ms Gregoriou and $295,830.12 paid to ASB which should be repaid and $36,393.50 potentially due to ASB from an unpaid invoice for which indemnity should be given. Compensation should be allowed also to cover the cost of remedying the defective work.

43 As to ASB, the Alexanders pleaded that the work done by it was defective and incomplete so that it breached the arrangement for the carrying out of the works and did so negligently as a result of which the Alexanders suffered the damage earlier stated.

44 The misrepresentation claims against all defendants were based on the facts that there was no contract in writing, no liquidated damages provision, no time limit for completion of the work, the cost claimed by the builder for the work was not fair and reasonable and all defendants had not complied with the mandatory requirements in the Home Building Act as to the performance of residential building work. The Alexanders pleaded reliance on Ms Gregoriou and/or the Gregoriou company for what was represented to them, particularly the failure to advise about the relevant provisions in the Home Building Act, and by which they made the agreement and paid monies under it.

45 The defences: In the defence, the Gregoriou interests either denied or did not admit the allegations made. However, they conceded that in about March 2006 the Gregoriou company entered into a contract with the Alexanders, as evidenced by the invoices to the Alexanders, under which $19,800 per month was payable to them by the Alexanders in connection with the specified services for the renovation work at the Robertson property. It was pleaded that such services were in fact provided. It was expressly not admitted that the work carried out by Ms Gregoriou and/or the Gregoriou company was “residential building work” but if it was within the definition in s 3(1) of the Home Building Act it was excluded by reason of cl 9(1)(g)(iii) of the Home Building Regulation 2004 as being only supervisory work; as such, there was no need for the contract to be in writing or for home warranty insurance or for a builder’s licence to be held.

46 In any event, the Gregoriou interests pleaded, despite the provisions in the Home Building Act, that the Gregoriou company was entitled to be paid for the services it provided to the Alexanders, and was paid, on a quantum meruit basis in that the Alexanders accepted the performed work; it was properly open for such monies paid to be retained otherwise the Alexanders would be unjustly enriched having received the benefit of the works performed. Similarly, it was pleaded that ASB was entitled to claim and be paid for the building work it did for the Alexanders.

47 Specifically, the Gregoriou interests alleged that the building works were performed by ASB at the request of the Alexanders.

48 Pursuant to Pt 4 of the Civil Liability Act 2002, it was pleaded that if any liability existed to the Alexanders for damages for economic loss, in contract or tort or otherwise, then such claims were apportionable between all defendants as concurrent wrongdoers. In the circumstances, it was pleaded by the Gregoriou interests that ASB was liable for all or substantially all of any loss claimed by the Alexanders so that they either had no liability or only negligible liability limited to no more than 10 per cent.

49 ASB denied any contract between it and the Alexanders and pleaded that there was a contract between the Alexanders and the Gregoriou interests for the performance of certain building work. At most, ASB said it entered into a sub-contract with the Gregoriou interests to perform particular works within the other contract as set out in its quotations, the invoices issued for the work and numerous directions from time-to-time given by Ms Gregoriou. The misrepresentations alleged against it were denied and the Alexanders placed no reliance on what it may have said. Specifically, ASB did not admit that the work it had done was “residential building work”. As to the work it performed, ASB admitted to “certain minor defects” (to the extent found by Mr Finnane) but it was, and always had been, willing and able to rectify those defects. Generally, ASB pleaded it was qualified and a fit and proper person to perform the works concerned. The relief claimed by the Alexanders was denied.

50 The cross-claims: Three cross-claims were filed in the proceeding. The first was by the Gregoriou interests against the Alexanders in which the Gregoriou company relied on the original agreement made with the Alexanders in March 2006 to pay $19,800 per month for the provision of certain services at Possumwood but as to which $19,800 remained unpaid in respect of the month of July 2006. That amount was due to it under the agreement or, in the alternative, on a quantum meruit basis. In the event ASB established a sub-contract with the Gregoriou interests and an entitlement therefrom as to monies from its unpaid progress claims of $36,393.50 against the Alexanders then the Alexanders should pay the Gregoriou interests those monies pursuant to the agreement or, alternatively, on a quantum meruit basis. The Alexanders resisted the cross-claim by a plea that Ms Gregoriou on or about 5 December 2006 agreed in writing to forfeit the claimed amount of $19,800 in consideration of the Alexanders foregoing, which they did, any claim for delay damages.

51 The second cross-claim was brought by the Gregoriou interests against ASB. In the event that the Alexanders established their claims against them, which was not admitted, they pleaded that any breaches of an agreement and of the statutory warranties occurred by reason of ASB’s actions thereby causing them to breach the agreement with the Alexanders resulting in the loss claimed. In that situation, the Gregoriou interests claimed ASB breached its sub-contract to them for which damages should be paid representing the loss incurred to the Alexanders; alternatively, ASB should indemnify them. Further counts were raised in this second cross-claim for contribution and indemnity from ASB, should the Alexanders succeed against the Gregoriou interests, by way of false and misleading conduct in representing that it was licensed to carry out the works contrary to s 52 of the Trade Practices Act, in negligence for contribution under s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 and as an apportionable claim under s 35 of the Civil Liability Act for at least 90 per cent of any damages payable to the Alexanders by the Gregoriou interests. In its defence, ASB either did not admit or denied the allegations and, in particular, pleaded it was a licensed builder and that the works were not residential building work within the meaning of the Home Building Act so as to attract the statutory warranties.

52 The third cross-claim by ASB against the Gregoriou interests was based on a breach of the sub-contract between them in which ASB alleged non-payment of certain progress claims for the building work in the amount of $36,393.50 and sought recovery; in the alternative, a quantum meruit was relied upon for the work done but not paid. The Gregoriou interests denied the claims made.

The issues

53 The respective parties pleaded their cases in a very comprehensive manner, it is well apparent, by taking every conceivable point. The arguments put at hearing were equally fulsome and extensive written submissions were helpfully provided by counsel. Nevertheless, on the facts as they developed from the evidence, the resolution of this seemingly complex matter may ultimately be seen as relatively straightforward. In determining this case the following principal issues arise –

(1) Contractual relationships between the parties.
(2) Obligations of the Gregoriou interests to the Alexanders.
(3) Obligations of ASB to the Alexanders.
(4) Effects of the Home Building Act.
(5) Remuneration to which the Gregoriou interests and ASB are entitled for work done by them.
(6) Defective work and cost of rectification.
(7) Cross-claims.
(8) Quantum of any loss to the Alexanders and, if so, by whom payable.

Contractual relationship between the parties

54 The opportunity for the Alexanders to renovate their recently acquired house at Robertson commenced in February/March 2006 when Ms Gregoriou offered to Mrs Alexander to become involved, as Ms Gregoriou said at the time, by proposing to “arrange a builder, structural engineer, and anyone else required to perform the works and will manage the works for you. I’ll get it done within 3 months”. It was common ground between these parties that such a contract was entered into but the real question was whether it was with Ms Gregoriou personally or the Gregoriou company. Counsel for the Alexanders, Mr FC Corsaro SC, put that the contract was with Ms Gregoriou personally, as to which there could be “no serious contention” because all of the dealing by Mrs Alexander had been with Ms Gregoriou and with no mention of the corporate entity. However, Mr D Miller of counsel for the Gregoriou interests submitted that the contract was with the Gregoriou company only as evidenced by the monthly invoices issued by it and paid by Mr Alexander.

55 It is true in this respect that the dealings between Mrs Alexander and Ms Gregoriou were without reference to the Gregoriou company. However, it is true also that the making of the actual agreement, on Mrs Alexander’s evidence, was left to Mr Alexander – the difficulty then is the absence of evidence from both Mr Alexander and Ms Gregoriou which adversely affects the submissions of both Mr Corsaro and Mr Miller. There was no evidence either from ASB as to who it was dealing with, either Ms Gregoriou personally or her on behalf of the Gregoriou company, in being asked to quote for the building work. It is necessary to look to other evidence, such as the all-important four invoices issued for $19,800 each for the months of April, May, June and July 2006. Those invoices, addressed to Mr Alexander, referred to “the appointment of Linda Gregoriou Pty Ltd for the Project Management of Possumwood, Robertson, NSW” and stated the amount owing to be paid to “Linda Gregoriou Pty Ltd” with its bank account details stated for that purpose. The first three invoices were so paid by Mr Alexander without any question. Mrs Alexander conceded in evidence that she left all financial matters to her husband so that there was no other evidence other than the invoices who the contracting party was.

56 I am satisfied that the detail on the invoices is determinative of this issue. I find, on a fine balance and not without some doubt, that the relevant contracting party with the Alexanders was Linda Gregoriou Pty Ltd. Ms Gregoriou personally was, therefore, not a party and is entitled to a verdict on the Alexanders claim; costs will be dealt with on hearing the parties but it may be imagined little or no extra costs were incurred on joining Ms Gregoriou as a party and, on the facts, it may be said there was reasonable uncertainty as to the identity of the true contracting party.

57 As the builder, it is plain from the evidence, ASB was engaged by Ms Gregoriou (it has to be added no doubt acting as a director of the Gregoriou company) to do the actual building work and about which there was no issue. The difference between the parties was whether ASB had a contract to do so with the Alexanders or with the Gregoriou company. It was clear that Ms Gregoriou was the person who arranged for ASB to quote for the works and there was no issue that it was the builder concerned who performed them. Mr Corsaro said that ASB was engaged by “Ms Gregoriou on behalf of the Alexanders”. Mr Miller similarly supported a building contract between the Alexanders and ASB; counsel denied any contract involving the Gregoriou interests for the performance of the actual building work. However, counsel for ASB, Mr M Pesman, took the position that the contract was between ASB and Ms Gregoriou which was consistent with ASB’s pleading in which it expressly denied any contract with the Alexanders. Even so, and no doubt as the case developed in the hearing and with the absence of evidence from Mr Alexander, Ms Gregoriou and Mr De Grazia, Mr Pesman finally added in submissions that “ASB at this stage makes no submissions in relation to the contractual issues… as it is unclear what is now said by the parties who actually formed the contract”. Mr Pesman then reaffirmed ASB’s concession that in constructing the works it was required to do so in a good and workmanlike manner so that the real issue was whether or not any of the works were defective – as will be seen from Mr Finnane’s evidence, counsel added that aside from some relatively minor matters (largely conceded by ASB) they were not.

58 I find that there was a contract for the renovation work at Possumwood and it was between the Alexanders and ASB. It is true the Alexanders were not directly involved in the contractual discussions which were carried out by Ms Gregoriou with, it would seem, Mr De Grazia of ASB. However, as Mrs Alexander agreed, Ms Gregoriou was acting for the Alexanders as their agent. As a result of these discussions, ASB submitted a quotation for certain work on 3 May 2006 showing the client as “John and Alice Alexander”, albeit for the attention of “Linda Gregoriou”, and that quotation was forwarded to Mr Alexander for approval on 5 May 2006; it was approved the same day and ASB was so informed – it was at that point, in my view, that the contractual relationship between the Alexanders and ASB was created. A further contract arose between them on acceptance by Mr Alexander on 2 June 2006 of ASB’s second quotation for further building work dated 27 May 2006. Thereafter, the documentation revealed additional work was required as discussed between Ms Gregoriou and Mr Alexander. For instance, on 6 August 2006 Ms Gregoriou emailed Mr Alexander about variations desired following a site visit the day before. The work required was done on a “do and charge” basis, and payment sought by ASB in its various progress claims as to which the first four were paid by the Alexanders; it was not until the unpaid fifth progress claim of 31 January 2007 and the sixth of 6 March 2007 when the Alexanders became dissatisfied with aspects of the work. Otherwise, it seems to me, ASB was proceeding under an agreement with the Alexanders through Ms Gregoriou as their agent to do this additional work required on a “do and charge” basis.

59 The finding of a contract, or perhaps more accurately a series of contracts, between the Alexanders and ASB for the performance of the actual building work means that there was no contractual relationship between Ms Gregoriou and ASB in this respect. At most, and pursuant to her agreement with the Alexanders, Ms Gregoriou acted on their behalf to obtain a builder and mange the project through the Gregoriou company. Once ASB offered to do the work in accordance with the quotations and the “do and charge” arrangements then the contractual relationship was between ASB and the Alexanders.

Obligations of the Gregoriou interests to the Alexanders

60 Ms Gregoriou personally had no obligations to the Alexanders. Her role was as a director of the Gregoriou company in acting for it in the performance of its contractual duties to the Alexanders.

61 The relevant contract, as I have said, was created in discussions between Ms Gregoriou and Mr Alexander after the initial discussions between her and Mrs Alexander in which, effectively in my view, she invited the Alexanders to offer her the job of acting as the project manager for the renovation work. The taking up of that proposal by the Alexanders, discussed in what Mrs Alexander referred to as the “original discussion” in February/March 2006, led to Ms Gregoriou and Mrs Alexander visiting Possumwood shortly thereafter when, as recited earlier, Mrs Alexander indicated what was to be done to the property as to the bathroom, steam room, timber floors and barn. That visit was before the Alexanders had settled the purchase of the property on 31 March 2006 after exchange of contracts on 10 February 2006. It has to be observed that the nature and extent of the renovations required were described at this time in general terms. However, before this visit, Ms Gregoriou allegedly told Mrs Alexander she could stay in Robertson to ensure the work was done within the three months, that is by the end of June 2006. There was no mention to Mrs Alexander in those discussions of the cost of the renovations and she told Ms Gregoriou to discuss fees with Mr Alexander; during cross-examination, Mrs Alexander said she understood the cost was to be $150,000.

62 Mr Corsaro, correctly I think, submitted that there could be no serious contention that Ms Gregoriou (it has to added on behalf of the Gregoriou company) was to project manage and supervise the building work. Senior counsel described, in principal respects, the agreed scope of works and other obligations in this way:

“29. …Mrs Alexander in her evidence made clear that the scope of works discussed with Ms Gregoriou and which she was retained to manage and supervise included: the renovation of the bathrooms, the construction of a sauna, new flooring, renovation of the barn, renovation of the kitchen and other works. Again no evidence was called from Ms Gregoriou contesting this.
…

34. In this case, the Alexanders and Ms Gregoriou discussed a scope of works. That scope was as identified in paragraph 29 above. Ms Gregoriou undertook that she would supervise the works, engage a builder and certify payments in a proper and professional manner. She undertook that the works would be completed within 3 months for a cost of $150,000. It was her responsibility to exercise reasonable care to ensure that those objectives were achieved.
…

42. It was a term of Ms Gregoriou’s retainer that she would spend several days a week on the site supervision [of] the works. In discussions following their conversation in late January or early February 2006, Ms Gregoriou said to Mrs Alexander ‘I will stay down in Robertson for a few days at a time to ensure the job is done’.

43. … However, the evidence discloses that Ms Gregoriou did not comply with this obligation.
…

45. The retainer also required Ms Gregoriou to supervise the works, to administer the building contract and to value and recommend payment in respect of the builder’s progress claims. This is in fact what Ms Gregoriou did; it is what her invoices seek payment for.

46. However, it is also clear that Ms Gregoriou did not have any regard to whether the works were properly completed or completed at all as claimed in progress claims….
…

48. Ms Gregoriou also seeks to avoid responsibility for claims by the builder after claim 3 because she says, ‘I was not on site after September 2006 and I was not involved.’…
…

51. Ms Gregoriou herself agreed that her obligations continued as the Alexanders submit, in her email to Mr Alexander of 6 August 2006. She there said:

‘Please find attached my last invoice. However as stated I will see this job through until its practical completion. I will continue to check all of Danny’s Progress claims and works as before. So don’t worry. Things will continue as normal!’
…

54. … However, by her own email of 9 October 2006, Ms Gregoriou said that she had performed a site visit on Saturday (7 October 2006).

55. Ms Gregoriou’s retainer, by necessary implication, included a term which required her to provide the agreed services with reasonable skill and care. It is clear that in the respects alleged by the Alexanders, Ms Gregoriou has not complied with this obligation. She performed some services for some time, but she did not do so in any way with the level of skill and care which the Alexanders were entitled to expect from a reasonably competent supervisor or project manager….”

63 The response of Mr Miller, after referring in quite some detail to the evidence of Mrs Alexander in both her affidavit and cross-examination, and particularly as to what was said in those “original discussions” in February/March 2006, described what he called an “ill-defined scope” of works as relating to conversion of one of the bathrooms into a steam room, replacement of carpet floors with wooden floors, removal of the island in the kitchen and conversion of the barn into a studio but without any precise detail of what was required and at what cost. Indeed, counsel emphasised that Mrs Alexander’s affidavit did not deal with any agreement as to the scope of the proposed works and as to the retainer of Ms Gregoriou to supervise or project manage such works the evidence of Mrs Alexander also fell “hopelessly short”. As Mr Miller posited, “if her evidence is to be accepted it is to accept the existence of an agreement without any defined scope of works, or even payment terms.”

64 It was admitted by the Gregoriou company that it entered into a contract with the Alexanders in about March 2006 for a term of three months to perform various services in connection with the proposed renovation work at Possumwood. The obligations under the contract were said to be as specified by the description contained in the invoices issued by it to Mr Alexander, which may shortly be described as project management, and otherwise the Gregoriou company had no obligations to the Alexanders. The Alexanders’ case, as is plain from Mr Corsaro’s submissions, was that the obligations extended to comprehend matters beyond the project management, such as to design and prepare all necessary documentation for the builder, to engage a reliable and competent licensed builder, to ensure the works were carried out by the end of June 2006 for a cost of $150,000 and Ms Gregoriou to stay in Robertson several days a week to supervise the work. The issue as to the obligations of the Gregoriou company revolved around the alleged duties beyond the project management as set out in the invoices and relied upon the evidence of Mrs Alexander. Of course, the work was to be done in a professional and reasonably competent manner.

65 The first thing to observe about Mrs Alexanders’ evidence is that she did not say Ms Gregoriou told her the proposed works would cost $150,000, only that that amount was mentioned by her in cross-examination as being told to her by Mr Alexander as to what Ms Gregoriou allegedly said to him. The next point which should be made is that much of Mrs Alexander’s recollection related to what was discussed with Ms Gregoriou at the so called “original discussions” in February/March 2006 but following which, as she admitted, the terms of any agreement were never discussed by her with Ms Gregoriou as they were matters, including fees and financial issues, which she left to her husband to deal with. Then, as to the extent of those discussions in February/March 2006 this evidence emerged from Mrs Alexander:

“Q. At that stage in late January or early February, you hadn't, had you, set in your own mind on the full list of works that you wanted done at the property?
A. Well, I had in a way in my mind because when I first saw the property, I knew what I didn't like and I knew what I wanted to change.

Q. You hadn't decided how you were going to change it precisely, had you, by the end of January?
A. Not precisely with each kind of particular item, but I knew exactly which room I wanted to change.

Q. The items that you wanted to change in February 2006 were the barn and the floors in the house, weren't they?
A. And the bathroom converted, one of the bathroom converted into steam room, and one part of the kitchen, yes.”

66 However, as recited earlier in these reasons, Mrs Alexander agreed that the first statement about price and scope of work received from Ms Gregoriou was her passing on ASB’s first quotation on 3 May 2006 and their acceptance of it on 5 May 2006. This quotation concerned the timber floors and barn conversion only. It was not until the second quotation of 27 May 2006, accepted by the Alexanders on 2 June 2006, that the steam room, the kitchen and certain other work was raised to be done. Also, the point is to be made that the initial building work apparently commenced on 8 May 2006 with, according to the first quotation, the barn to be completed by 3 June 2006 and the timber floors by 21 July 2006 – Mrs Alexander agreed that the times were met; in the second quotation no time for completion was mentioned. A further point is that the first quotation was for an amount of $147,840 and the second for $121,250 – the total is $119,090 more than the $150,000 spoken about by Mrs Alexander and yet each quotation was promptly accepted by Mr Alexander and the work proceeded.

67 Reference has been made earlier to aspects of Mrs Alexander’s evidence where, as to the work contracted to be performed by Ms Gregoriou, she variously could not recall, did not know or left it to her husband to deal with. Like the scope of works and financial matters, the agreement for the project management work was settled as between Mr Alexander and Ms Gregoriou but neither gave evidence; and that was so notwithstanding that both had sworn affidavits, which were served, but which were not read in the proceedings. The respective explanations given were that Mr Alexander’s evidence was only appropriate as a reply to Ms Gregoriou but then it was decided she would not be called because there was no need to do so on the case presented. A lacuna in the evidence was thereby created. Whatever one may think about those forensic decisions they are uniquely matters for the parties themselves and the Court is only able to deal with the evidentiary result. I am of the view that Mrs Alexander’s evidence did not establish the contractual obligations said to be owed by the Gregoriou interests to them.

68 The best available evidence in this respect, I am satisfied, is limited to the detail in the first invoice from the Gregoriou company dated 28 April 2006 for work performed in the month of April 2006, as repeated in the three later invoices for the months of May, June and July 2006. The project management work agreed to be performed by the Gregoriou company for the Alexanders at Possumwood is so identified as its contractual obligations to the Alexanders. I so find.

69 Mrs Alexander’s evidence did not really extend in relevant respects to the performance by Ms Gregoriou of the tasks to be done, only that she had failed to ensure the works were completed by June 2006 for $150,000 and had not stayed in Robertson to supervise the works from time-to-time, all matters found to be non-contractual in nature. Otherwise, it seems to me, a perusal of the documentary material disclosed regular communication by Ms Gregoriou to Mr Alexander about the progress of the works, comments on the progress claims by ASB, site visits (some with Mrs Alexander), dealings with an architect and other consultants, meetings with Mr De Grazia, attending to works variations required, selection of fittings, fixtures and furnishings, a plan to rectify defects and uncompleted work, progress reports on the work, attention to Mr Alexander’s requirements for the steam room design (including attending to associated electrical work for suitable power supply), installation of a new stove in the kitchen, discussions regarding landscaping (including a gate, pergola and a pavilion), stonemason’s work in the garden, construction of a car park and so on. Indeed, as late as February 2007, with a further review meeting on 8 February 2007, Ms Gregoriou, in conjunction with Mrs Alexander and Mr De Grazia, advised Mr Alexander of specified items to be rectified and completed at the site by 28 February 2007. Mr Alexander did not respond in writing to these very many emails from Ms Gregoriou, or at least there was nothing offered in evidence, and no written complaints were made. I am not satisfied it has been established by the Alexanders, as they must, that the obligations were not met.

70 The Alexanders complained that Ms Gregoriou, and hence the Gregoriou company, failed in her representations to them that the builder selected, ASB, was competent, qualified and properly licensed to do the building work. In the original discussions with Mrs Alexander, Ms Gregoriou allegedly said “I already have a great and reliable builder who I have worked with before, All Sydney Builders”. However, beyond that there was no evidence of the discussions between her and Mr Alexander about who the builder should be or whether and to what extent reliance was placed by the Alexanders on what Ms Gregoriou may have said. That is not sufficient, in my view, to base a misrepresentations claim under s 52 of the Trade Practices Act and/or s 42 of the Fair Trading Act; it is all too speculative. It is true that defects in the work performed by ASB emerged and from which this alleged failure by Ms Gregoriou was eventually based. But it is true also that defects in building work arise and they are rectified in the ordinary course. It is not as if the works performed by ASB, and supervised by Ms Gregoriou (the Gregoriou company), wholly or substantially failed. In fact the two expert building witnesses, as has been seen, were wide apart on the nature and extent of the defects from about $5,500, on the one hand, and $80,000, on the other. These misrepresentation claims must fail.

71 Misrepresentation and negligence claims were made also concerning the failure of Ms Gregoriou, the Gregoriou company and ASB to satisfy the requirement of the Home Building Act as to a contract in writing, the holding of a building licence and having home warranty insurance. This aspect will be dealt with later in dealing with the effects of the Home Building Act provisions.

72 I find that the contractual obligations owed by the Gregoriou company to the Alexanders were as set out in its invoices specifying the tasks involved. I find also that those tasks were performed and, subject to a consideration of the Home Building Act matters, such tasks have not been shown to have been performed in other than a professional and proper manner.

Obligations of ASB to the Alexanders

73 The duties of ASB under its contract with the Alexanders, oral as it was, may be dealt with quite shortly. The best evidence of them, indeed the only evidence in the proceedings, was that contained in the two accepted quotations from ASB of 3 May 2006 and 27 May 2006 and in the six progress claims made on the Alexanders on 27 May 2006, 27 June 2006, 31 July 2006 27 September 2006, 31 January 2007 and 6 March 2007. I accept those documents as disclosing the work agreed to be performed by ASB. Its obligations were to perform the work so stated in a good and workmanlike manner. There was no issue that the work was not done, other than as to minor matters concerning insulation and a shower screen, only that defects occurred.

74 Issues arose, as with the Gregoriou company, as to effect of the provisions of the Home Building Act. This will be separately dealt with.

Effects of the Home Building Act

75 As its long title indicates, the Home Building Act is “An act to make provision concerning the residential building industry….” Section 3(1) defines a “dwelling” as including “a building or portion of a building that is designed, constructed or adapted for use as a dwelling” and “residential building work” is defined to mean “any work involved in, or involved in co-ordinating or supervising any work involved in:.… (b) the making of alterations or additions to a dwelling, or (c) the repairing, renovation, decoration or protective treatment of a dwelling.” However, cl 9(1)(g)(iii) of the Home Building Regulation excludes from residential building work “the supervision only of residential building work…by any other person, if all the residential building work is being done or supervised by the holder of a contractor licence authorising its holder to contract to do that work…”.

76 The presently relevant provisions of the Home Building Act may be stated in summary form, as follows –

• A person must not contract to do any residential building work except as or on behalf of an individual, partnership or corporation that is the holder of a contractor licence authorising its holder to contract to do that work: s 4(1).
• An individual, a member of a partnership, an officer of a corporation or a corporation must not represent to do any residential building work if not the holder of a contractor licence to do that work: s 5(1).
• A person must not represent that an individual, partnership or corporation is prepared to do any residential building work if the person knows that the entity is not the holder of a contractor licence to do that work: s 5(2).
• A contract for residential building work must be in writing and be dated and signed by or on behalf of each party to it: s 7(1).
• A contract must contain specified particulars: s 7(2).
• A holder of a contractor licence must, before entering into the contract, give to the other party information as to the operation of the statute and the procedure for dispute resolution and for the resolution of disputes relating to insurance: s 7AA(1).
• A person must not contract to do work under a contract unless s 7 is complied with: s 7A.
• A person who contracts to do any residential building work in contravention of ss 4 or 7 is, by s 10(1):

“not entitled to damages or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, and the contract is unenforceable by the person who contracted to do the work. However, the person is liable for damages and subject to any other remedy in respect of a breach of the contract committed by the person.”
• Certain statutory warranties as to residential building work are implied in every contract to do such work, including as to the standard of the work, suitability of materials and the time within which the work is to be done: s 18B(a), (b) and (d).
• A person must not do residential building work under a contract unless a contract of insurance is in force in relation to the work in the name of the person who contracted to do it: s 92(1)(b).
• A person must not demand or receive a payment under a contract unless a contract of insurance is in force: s 92(2)(a).
• The insurance provisions do not apply if the contract price is not more than $5,000: s 92(3).
• If a contract of insurance is not in force as required by s 92 then s 94(1) provides that the contractor who did the work:

“(a) is not entitled to damages or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract,in relation to that work, and

(b) is not entitled to recover money in respect of that work under any other right of action (including a quantum meruit).”

• Despite ss 92 (2) and 94(1), if a court or tribunal considers it just and equitable the contractor is entitled to recover money in respect of the work on a quantum meruit basis: s 94(1A).
• The contractor remains liable for damages and subject to any other remedy in respect of any breach of the contract committed by the contractor: s 94(2).
• Residential building work that is uninsured work at the time the work is done ceases to be uninsured if the required insurance is subsequently obtained: s 94(3).

77 Much reliance was placed by the Alexanders on the Home Building Act provisions on the basis that the contracts here were for residential building work but where none were in writing, neither the Gregoriou interests nor ASB held a licence and there was no contract of insurance in force in breach of ss 4(1), 7(1) and 92(1). Mr Corsaro put the proposition that it followed that the Gregoriou interests and ASB had no enforceable claims against the Alexanders and were not entitled, by reason of ss 10(1) and 94(1), to retain the monies already paid to them for the work or to recover monies said to be still due for the work. The only exception, said senior counsel, was if the Gregoriou interests and ASB established it to be “just and equitable” in the circumstances for them to be able to do so as reasonable remuneration on a quantum meruit basis but there was no evidence from them to this effect. Further, senior counsel relied on s 5(1) and (2) as to the alleged implied misrepresentation supporting damages claims under s 52 of the Trade Practices Act and/or s 42 of the Fair Trading Act in respect of the licence requirements. Otherwise, senior counsel said ss 10(1) and 94(2) exposed the Gregoriou interests and ASB to a damages claim to enable the Alexanders to recover the cost of rectification work.

78 Both Mr Miller and Mr Pesman resisted Mr Corsaro’s approach. Mr Pesman submitted ASB was in fact licensed as a builder but conceded that the contract with the Alexanders was not in writing and a policy of insurance had not been obtained for the works. However, counsel relied on s 94(3) of the Home Building Act to enable ASB to retrospectively insure the works by giving an undertaking to the Court that it would do so thereby relieving itself of any adverse consequence from s 94(1). Reliance was placed on an “eligibility confirmation letter” dated 9 March 2006 from CGU Insurance Limited confirming ASB’s “eligibility”, it was not an insurance certificate, to purchase home warranty insurance; stated conditions limited non-structural dwelling improvements to a contract value of $75,000 and structural dwelling improvements to $800,000 – although perhaps not entirely clear, I understood the subject work at Possumwood to be non-structural. Even so, this insurance was not obtained by ASB and it is by no means clear that in the developed circumstances CGU would insure the subject work retrospectively. In any event, Mr Pesman repeated that ASB’s contract was with the Gregoriou interests, not the Alexanders, so that it was not liable to repay any monies to the Alexanders; it was entitled on its cross-claim to recover from the Gregoriou interests the monies unpaid to it from the fifth and sixth progress claims. Mr Pesman repeated also that the real issue in the case was whether ASB’s work was defective and said it was not or only to a minor extent. Otherwise, the Home Building Act had no operative effect on ASB’s position.

79 Mr Miller provided a most extensive submission on the Home Building Act issues and referred to relevant authorities. At the base of those submissions was that the project management by the Gregoriou interests was not, by reason of cl 9(1)(g)(iii) of the Home Building Regulation, “residential building work” because it was the supervision only of such work. It is to be interposed that Mr Corsaro simply dismissed this clause as being not applicable in the circumstances. Of course, if cl 9(1)(g)(iii) be operative here then the Gregoriou company would be relieved of any exposure to repay to the Alexanders the fees of $59,400 received from its three invoices. But Mr Miller had to contend with a claim, as pleaded, by the Alexanders for them to recover also from the Gregoriou interests the amount paid to the builder of $295,830.12 plus the unpaid amounts due to ASB from its fifth and sixth progress claims of $36,393.50. However, as it was ultimately argued for the Alexanders, the relief sought from the Gregoriou company was limited to the $59,400 (which is consistent with my findings on the contractual relationships) and the costs of the rectification work.

80 Therefore, the effect of the Home Building Act is to be seen as to the Gregoriou company in light of cl 9(1)(g)(iii) as to whether it was a supervisor only, but, if not, then whether it had to repay the monies it received having in mind ss 10(1) and 94(1). As to ASB the effect was to be seen in terms of ss 10(1) and 94(1) as to whether it could retain the monies it had received and could recover the amount on its unpaid progress claims.

81 It may be undoubted, in my view, that the contractual obligations assumed by the Gregoriou company were “residential building work” within the statute as “any work…involved in co-ordinating or supervising any work involved in:…(c) the …renovation…of a dwelling”. However, does the clause in the Home Building Regulation exclude it as being “supervision only” and where “all the residential building work is being done or supervised by the holder of a contractor licence”.

82 The first enquiry, therefore, must be as to the nature of the work performed by the Gregoriou company through Ms Gregoriou. “Supervision” in its ordinary meaning, I think, refers to directing a process of work or workers doing it overseeing or superintending something. Mr Plaister, in his report of 17 May 2009, said:

“It is my experience and I am of the view that within the Building and Construction Industry, the term supervision can reasonably be taken to mean a process and/or course of actions in which an appointed and/or authorised person manages agreed building and construction works (including managing the building contractor and/or sub-contractors) so as to cause said building and construction works to be carried out in accordance with the contract documents (original and/or as amended), accepted building practices and to present workmanlike and fit for purpose.”

83 Apart from the references in the tasks of the Gregoriou company to “supervision of construction work”, the task was also referred to in the proceedings as “project management”. Applying the ordinary meaning of “supervision”, which really is consistent with how Mr Plaister defined it, I find that the contracted work performed by the Gregoriou company was supervision only – there was no involvement in the performance of the actual building work itself. Clause 9(1)(g)(iii) is therefore engaged but otherwise was all of the work done or supervised by the holder of a contractor licence. Ms Gregoriou, it was admitted, did not herself have such a licence so that to obtain the benefit of an exclusion from the effects of the Home Building Act ASB or Mr De Grazia as its principal or someone else had to be shown by ASB to hold such a licence. A search of the licence register of the Office of Fair Trading on 27 June 2007 disclosed Mr De Grazia held a then current licence in respect of building work (including to supervise) from 3 February 1997 expiring on 5 March 2008 but, significantly, only for contracts not requiring home warranty insurance from 6 April 2004 to 5 March 2008. Of course, pursuant to s 92(3) insurance was required in this case as the contract was for a price greater than $5,000. There was no evidence of supervision performed by anyone else so that the question arises whether ASB was licensed and about which there was an issue.

84 A similar search on 22 January 2007 as to ASB’s status disclosed it was issued with a building licence on 1 July 2005 to expire on 1 July 2007 but subject to the condition as being “only for contracts not requiring home warranty insurance from 01/07/2005 to 30/06/2006.” Therefore, at the relevant times of the making of the first two contracts on 5 May 2006 and 2 June 2006 on acceptance of the quotations ASB did not hold a licence to enable it to so contract and to do the work. Thereafter, as to the “do and charge” contracts made after 30 June 2006 it was appropriately licensed. In any event, Mr Pesman sought to clarify the licence position by reliance on recent searches. On 20 October 2009 a search of the register confirmed the position as stated from the earlier search on 22 January 2007, including the restrictive condition. A further search the next day, 21 October 2009, showed ASB had a current builder licence from 1 July 2005 to expire 1 July 2012 but free from any restrictive licence conditions and with the notation “no records” for licence condition variations. Mr Pesman’s approach relied on s 120(4) of the Home Building Act which enables the register to be amended if the particulars shown are “false, erroneous, misleading or unfairly prejudicial to the interests of the holder.” But the evidence did not extend to cover those situations and no evidence from ASB, such as from Mr De Grazia, even tried to explain the apparent puzzle; a further search was not done. I am simply not satisfied that ASB made good its assertion that it was sufficiently licensed at relevant times and even though an unconditional licence number was quoted on its quotations and progress claims. I accept, which is consistent with the fact that ASB had no home warranty insurance, the searches made on 22 January 2007 and 20 October 2009.

112 Two aspects of any remedial work to the steam room are important. First, Mr Plaister calculated the area of tiling as 50 square meters whereas Mr Finnane would allow 39 square meters to cover the area; the builder originally ordered 66 square meters of tiles. Second, Mr Plaister said the waterproof membrane would have to be replaced at a cost of $4,000 but Mr Finnane did not agree; in this respect, however, the builder’s fifth progress claim stated the supply and fixing of a membrane as $4,300; if even sections of tiling are to be replaced it seems obvious so too would the membrane. These two aspects, I think, favour Mr Plaister’s approach.

113 From the evidence, the steam room was created from a converted bathroom. Its design and fitout were clearly most important features of the renovation work and expensive high quality tiles were used for the desired effect. I think the Alexanders were entitled to a finish in the steam room consistent with their desires.

114 Mr Miller opposed, as against the Gregoriou interests, any amount for the

steam room. Counsel emphasised that the work to the steam room was done in November/December 2006, a time after Ms Gregoriou ceased her involvement with the site. However, and although she may not have visited the site after October 2006, it is plain from the emails as cited earlier that she was still communicating with Mr Alexander about progress of the works, co-ordinating work and addressing defects, including for the steam room such as the power supply, up to February 2007. As Ms Gregoriou advised Mr Alexander in an email of 6 August 2006:

“Please find attached my last invoice. However as stated I will see this job through until its practical completion. I will continue to check all of Danny’s Progress Claims and work as before. So don’t worry. Things will continue as normal.”

115 Mr Pesman urged acceptance of Mr Finnane’s assessment for these defects as adequate but if tile replacement was found to be required then counsel suggested the proper figure was Mr Finnane’s $19,405 plus $4,000 for waterproofing. Mr Pesman acknowledged that the real difference between the experts related to the size of the steam room.

116 I prefer Mr Plaister’s approach to these items having in mind the obvious importance of the steam room to the Alexanders and the high quality finish required. The defects are manifest and, in my view, a feature of this nature when done should not be the subject of mere repair. The Alexanders are entitled to what they sought with the steam room. I will allow for items 3 to 9 the amount of $30,830.

117 Item 10 – Taps incorrectly fitted: Mr Plaister found that in the first floor bathroom the taps were incorrectly fitted – “hot” to “cold” and “cold” to “hot”. It was agreed between the experts that $50 would cover rectification and this will be allowed.

118 Item 11 – Barn floor: During the conversion of the barn to a photographic studio, a concrete slab was laid over the existing concrete floor. Mr Plaister found the slab was laid without proper support and has since cracked. It covers an area of 80 square meters. Surface cracking had developed over the entire surface from crazing to hairline to 1.0 mm wide; on his second inspection the cracking had increased by about 0.3 mm in width with concrete fragments breaking off at the edges of the cracks. However, Mr Plaister was unaware of the strength of concrete used or whether it was cured for a minimum of seven days after pouring; he was instructed no reinforcement was used. With the nature and extent of the cracking, Mr Plaister had the opinion that standard building practice had not been followed so that it required repairs. He suggested epoxy filling to the larger of the random cracking and covering the whole surface with a grey colour epoxy coating – the cost was estimated at $3,700. Mr Finnane observed cracking to the slab varying from hairline cracks to cracks 1.0 mm in width. However, he said he was informed by the builder that the owners did not want expansion joints or saw cuts in the slab which was the cause of the cracking. If it be found as a fact that the builder was responsible absent the instructions from the owners then Mr Finnane agreed with Mr Plaister’s remedy and the cost of $3,700.

119 In the absence of evidence supporting what Mr Finnane may have been told, I accept Mr Plaister’s view and will allow the agreed amount of $3,700 for this item.

120 Item 12 – Leaking under northern door: Mr Plaister observed during his site inspection that the external door to the ground floor bedroom had no sill under it to interface with the quarry tile threshold and a 10.0 mm gap existed between the underside of the door and the surface of the timber floor – hence, leaking into the room of water from outside weather. Mr Plaister considered it necessary to reconstruct the threshold with a stone slab and install a door seal with adjustments to the door. A reasonable cost to do this would be $1,710. Mr Finnane did not disagree with Mr Plaister’s identification of the problem but said the cost to remedy would be $500. However, the real issue here was whether it related to the work the builder was required to do – Mr Pesman and Mr Miller said not.

121 Mrs Alexander’s list of defects following work by the builder included an item “leaking under northern door”. There was no evidence otherwise from ASB to refute that. However, what work had to be done by the builder to the door was not stated but in the third and fourth progress claims from the builder the supply and installation of new doors appears. The photograph of these northern doors in Mr Plaister’s report would seem to confirm work had been done on them and to the sill. I accept Mr Plaister’s description of the fault and will allow $1,710 for it to be remedied.

122 Item 13 – Leaking windows in TV room: In her list of defects, Mrs Alexander included “leaking windows in the room which contains television (downstairs)”. Mr Plaister recorded staining on the internal sill area of the window on the western side consistent with water penetration and a reverse fall to the sill of the southern window to allow water to enter. Mr Finnane observed minor marks on the sills consistent with water penetration and observed that the builder had said he had fitted the windows concerned. However, Mr Finnane was not convinced incorrect fitting had caused the problem as other causes could have done so, such as condensation or cleaning the windows. If correction were needed, Mr Finnane said $650 would be appropriate to cover electric sanding of the external window sills rather than removal, planing and refitting of the windows, with the need to re-paint, as Mr Plaister recommended. I think Mr Finnane’s approach to be somewhat “band-aid” and the preferred course would be for the windows to be properly fitted. I will allow $2,300 for this item as Mr Plaister assessed.

123 Items 14 to 17 – Miscellaneous: Various minor defects in the nature of required adjustments to windows, doors and locks were noted but with no cost. The Alexanders did not pursue these claims.

124 Item 18 – Silicon seal to external kitchen window: Mrs Alexander noted this alleged defect in her list. Mr Plaister found stains on the painted timber surface of the window internally which was consistent with water penetration and considered the windows needed reglazing by removing, resealing and reinstalling. A cost to do so would be $2,550. Against that, Mr Finnane understood from the builder that the kitchen window was pre-existing and no joinery work was performed to it. However, Mr Finnane accepted the cost of $2,550 if Mr Plaister’s solution were to be adopted.

125 Although Mrs Alexander noted this item, Mr Plaister agreed in evidence that there was nothing in the quotations from ASB which referred to work to this window which was pre-existing. I add that there was no reference either in any of ASB’s progress claims to work on this window. I disallow the claim.

126 Item 19 – Ground floor bathroom basin: Nowhere in Mrs Alexander’s list of defects nor in her oral evidence was this alleged problem dealt with. At most, Mrs Alexander in her list under “Furniture” referred to “An antique table which the first defendant advised the plaintiffs would support a sink did not, causing the table to break”. In any event, Mr Plaister said he was instructed the project manager (Ms Gregoriou) caused the basin to be made to the wrong dimensions and a replacement basin was obtained at a cost of $2,618. Mr Finnane confirmed from the builder (Mr De Grazia) that a basin supplied by the owners was installed then replaced by another basin also supplied by the owners – this is consistent with detail on ASB’s fourth progress claim of 27 September 2006. The basis for this claim was simply not made out.

127 Underfloor heating to ground level bathroom: In a supplementary report dated 18 November 2008, Mr Plaister dealt with a problem regarding the failure of the in-floor heating to the downstairs bathroom in that it did not heat when turned on. Mr Plaister accepted that a qualified electrical contractor had inspected and tested the installation, as he was not so qualified, and established that the electrical current had not been interrupted to the in-floor cabling and that the fault had been identified to be in the cabling within the floor. On that basis, Mr Plaister formed the view that to correct the fault it would be necessary to demolish and remove the floor tiling, cement bed and cabling, prepare the floor, install the floor heat cabling and install new floor tiling. His estimated cost for that work was $6,080 plus miscellaneous, preliminaries, overheads and GST to give a total cost of $10,196. In his review of Mr Plaister’s opinion, Mr Finnane criticised the assumptions made and said problems with in-floor heating arose from a loose electrical connection, a faulty circuit breaker, a faulty thermostat or a damaged element in the cabling. He added that if Mr Plaister’s suggested solution be adopted the stated cost was excessive as it reasonably should be $4,325 plus preliminaries, etc to give a total cost of $7,557.55. Mr Finnane apparently spoke with a Patrick O’Farrell of Highlands Floor Heating who installed the system and understood any damage could be corrected without removing the entire floor tiling by using an infra-red camera to detect the fault, lift the tile concerned, repair the cable and fit a new tile.

128 Mr Plaister admitted in cross-examination he had not undertaken any testing and had assumed the problem was with the cabling but if it was something else then the floor tiles need not be lifted to the extent he suggested. There was no other evidence regarding this problem or even when it arose, although as it was in a supplementary report of November 2008 it presumably was well after the completion of the works.

129 Mr Miller colourfully submitted in resisting this claim that it was an “assumption laid upon assertion wrapped up in speculation and garnished with conjecture”. I am not sure I would so describe it, but certainly, in my view, the claim has not been established. For his part, Mr Pesman simply said it was unsupported by any evidence. I agree. The claim will not be allowed.

130 Over-certification re insulation in barn ceiling: An amount of $5,800 plus GST was claimed in respect of the supply and installation of insulation in the ceiling of the barn and which amount was paid to ASB on its second progress claim as certified by Ms Gregoriou. It was common ground that that work was not in fact completed so that, as Mr Pesman conceded, it should be to the credit of the Alexanders. Mr Miller agreed, but only that the re-payment should be from ASB not the Gregoriou company. I will allow $5,800 plus $580 for GST, a total of $6,380, for this item in favour of the Alexanders.

131 Over-certification re shower screen: In the fourth progress claim from ASB an amount was included concerning work to the first floor bathroom to supply and install a shower screen. The claim was certified as correct. However, it was ultimately common ground that the screen was not fitted and the certification was in error. Mr Plaister assessed the cost to now supply and fit the screen as $1,000. I will allow credit of $1,000 plus GST of $100, a total of $1,100, to the Alexanders for this item.

132 Miscellaneous, preliminaries, builder’s overhead and profits and supervision/contract administration: Based on Mr Plaister’s report, the Alexanders claimed for these aspects on the cost of the rectification work percentages respectively of 5, 10, 20 and 10. Mr Finnane said he would disallow any amount for miscellaneous as no such items had been identified; he agreed to the 10 per cent and 20 per cent respectively for preliminaries and builder’s overhead/profits; but he disagreed with 10 per cent for supervision/contract administration which he included in the preliminaries. Mr Miller did not address the issue and Mr Pesman followed Mr Finnane’s approach. Having in mind the relatively small cost of the rectification work in this case, I will apply Mr Finnane’s reasoning and allow 10 per cent for preliminaries and 20 per cent for builder’s overhead and profits.

133 Goods and Services Tax: Mr Miller submitted that the Alexanders claim for GST on account of the rectification costs should be rejected as being impermissible at law. Counsel relied on a Goods and Services Tax Ruling (GSTR 2001/4) of the Australian Taxation Office and on the decision of Hunter J in Walter Construction Group Ltd v Walker Corporation Ltd [2001] NSWSC 283 for the proposition that damages awarded by a court were not a “taxable supply” as defined in s 9(5) of the A New Tax System (Goods and Services Tax) Act 1999 (Cth). As Hunter J said in Walter Construction (at [479]):

“In my view, the imposition by the Court upon[the defendant] WCL to pay the judgment debt as ordered in these proceedings does not constitute a supply…”

134 Given that the payment of a judgment debt, in itself, does not constitute a supply for GST purposes, that is only, in my view, to beg the question to be decided by me which is – should GST be added to the cost of the rectification work as representing part of the overall loss sustained by the owners to reach the ultimate judgment amount? The question is not whether GST is payable on the resultant judgment sum so awarded as it was in Walter Construction . If it were otherwise then, it seems to me , the owners would be out-of-pocket for GST amounts payable by them to contractors later doing, or having done, the rectification work.

, like the other cases referred to in the ruling (at para 57), was concerned with a claim by a plaintiff builder for an indemnity from the defendant owner for any future liability the builder may have to pay GST on the judgment sum received for the performance of unpaid building work for the owner. No doubt the builder, as would be expected, included a GST component in the original charge made to the owner for the work. If GST be payable on the judgment sum then of course, there would be “double-dipping” in that respect and that was what Hunter J avoided; his Honour’s view was applied in the tax ruling where it was explained (at para 61):

“The payment, in money, of a judgment debt will not itself be a supply for GST purposes. It is excluded from being a supply under subsection 9-10(4).”

136 I would answer the question posed by me as “yes”. Therefore, a GST component will be included in calculating the loss sustained here by the Alexanders for the cost of the rectification work.

137 Summary: The cost of the rectification work to be allowed is $3,390 for items 1(a) and (b); $1,430 for item 1(d); $150 for item 2; $30,830 for items 3 to 9; $50 for item 10; $3,700 for item 11; $1,710 for item 12; and $2,300 for item 13 – the sub-total amount is $43,560. To that is to be added $4,356 for preliminaries and $9,583.20 for builder’s overhead and profits giving a sub-total amount of $57,499.20. To that is to be added GST of $5,749.92 giving a total amount for rectification costs of $63,249.12.

138 An amount of $7,480 for over-certification/uncompleted work is to be allowed.

139 The final total for rectification and over-certification/uncompleted work is $70,729.12.

Cross-claims

140 I have referred earlier to the three cross-claims and to the extent to which they fail and should therefore be dismissed. I only emphasise, in any event, that no evidence was given for any of the cross-claimants so success on them was not properly open. The cross-defendants should have a verdict against the respective cross-claimants on each of the cross-claims. I will hear the parties on costs but indicate, in the circumstances of the lack of evidence, that an appropriate order may be for each party to bear its own costs.

Quantum of any loss to the Alexanders and by whom payable

141 The building work at Possumwood resulted in defects requiring rectification. The Gregoriou company as the project manager and ASB as the builder had obligations under their respective contracts with the Alexanders and statutory warranties under s 18B of the Home Building Act to satisfy which, it will follow from my findings in these reasons, they did not satisfy. They are liable to compensate the Alexanders for the loss thereby suffered.

142 The cost of the rectification work and over-certification/uncompleted work has been assessed as $70,729.12. However, the Alexanders have not paid ASB an amount of $36,393.50 on its fifth and sixth progress claims and $19,800 to the Gregoriou company on its fourth invoice. That latter amount was not pursued and, in any event, Ms Gregoriou in a conversation with Mrs Alexander in late-October 2006 said she would forfeit the fee. Therefore, the status of the $36,393.50 due to ASB arises in the context of the loss actually incurred by the Alexanders for the defective work.

143 Mr Pesman submitted that ASB was entitled to recover that amount. Given that under the Home Building Act ASB is not entitled to enforce its claim in that respect, other than on a quantum meruit, I do not accept Mr Pesman’s submission to be correct. There was no issue that the work concerned had not been done and neither Mr Plaister nor Mr Finnane attended to whether the amounts charged for the work in this respect were unreasonable. Indeed, in dealing with the costs of rectification there seemed to be an acceptance of what was charged for work which related to their assessment of the cost to rectify such work. However, the fact remains that in many respects the rectification costs relate to work not originally paid for by the Alexanders. For instance, the steam room costs were contained in ASB’s unpaid fifth and sixth progress claims in the total amount of $26,455. The question therefore arises that if rectification costs are to be allowed what is the status of the unpaid monies in respect of the work originally done.

144 If this case had been one for the recovery by ASB of its unpaid invoices, in the absence of defective work done by it, I would have been favourably inclined to entertain the claim as a quantum meruit. After all, the work was performed on agreed terms and the Alexanders would have obtained the benefit of it so that unless such relief be granted the Alexanders would obtain a windfall of not insignificant proportions: see per Barrett J in Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 273 at [63]. Here, however, defective work occurred for which the Alexanders are to be compensated. If that be so, then, in my view, it seems only logical and fair that they in return give credit for the underpayment to ASB for the original work. I think Mr Miller stated a fair balance in this way:

“On any rational view of the evidence it is the plaintiffs who on a net position have to account for underpayments, not the other way around. It is anathema for the plaintiffs to submit that they can somehow take the benefit of a bundle of building (and other) works costing well in excess of $300,000, complain about a small part of those works, take as damages rectification costs on account of that small bundle, yet never be called to account for the balance owing at the very beginning.”

145 I respectfully agree. If it were not so then it would mean compensation would be obtained for the rectification of work that had never been paid for. That is not to allow damages for a “loss”.

146 Accordingly, I find that from the damages due to the Alexanders of $70,729.12 the amount of $36,393.50 should be deducted giving a net amount due to them of $34,335.62.

147 As to the distribution of liability between the Gregoriou company and ASB, Mr Miller submitted that the Alexanders claim was clearly an “apportionable claim” within the scope of Pt 4 – Proportionate Liability of the Civil Liability Act as a claim for economic loss or damage to property: see s 34(1)(a). I accept that both of those defendants are “concurrent wrongdoers” whose acts jointly caused the claimed loss: see s 34(2). The Gregoriou company did so in its capacity as the project manager or supervisor of the building works and ASB as the builder of them.

148 Mr Corsaro, perhaps understandably, saw no need to attend to this issue and Mr Pesman made no submission. Mr Miller, however, made a detailed submission to support a proposition that as “all the alleged defects…are at their heart…simple construction or building issues that fell primarily to the builder to avoid in the first place…that ASB is a concurrent wrongdoer in each instance and would be found to be liable for all (or at the least, 90%) of such damages”.

149 The Gregoriou company, through Ms Gregoriou, assumed the most important task in a building project of the supervisor of the works, including supervision of construction work and the approval of invoices and progress claims, and where she was to meet and liaise with the builder and other consultants. For its part, ASB performed the actual building work. In the carrying out of the work and in the performance of the services, however, it is difficult to apportion responsibility for what occurred in terms of the defects because neither Ms Gregoriou nor Mr De Grazia gave evidence. Reference to the documents in this respect and the endeavour to draw relevant inferences therefrom was largely conjecture.

150 Where an apportionable claim is involved then the liability of a defendant who is a concurrent wrongdoer is limited to an amount being the proportion of the damage claimed considered to be just having regard to the defendant’s responsibility for the damage and judgment may be given against the defendant for not more than that amount: see s 35(1).

151 In the circumstances, I find it to be only fair to apportion liability between the Gregoriou company and ASB equally, that is, $17,167.81 for each.

Interest

152 The Alexanders claimed interest on any award obtained. The parties are yet to be heard on this and they should be given that opportunity. In the meantime, I urge them to confer to attempt a resolution of this aspect.

Costs

153 All counsel asked to be heard on costs after a decision was given. Again, I earnestly suggest they confer.

Conclusion

154 For the foregoing reasons, I find –

(1) The first plaintiff (Mrs Alexander) and the second plaintiff (Mr Alexander) are entitled to a verdict against the second defendant (the Gregoriou company) and the third defendant (ASB) on the claim in the amount of $34,335.62.
(2) Liability of the second and third defendants to be apportioned between them in the amount of $17,167.81 for each.
(3) The first defendant (Ms Gregoriou) is entitled to a verdict against the first and second plaintiffs on the claim.
(4) The cross-defendants on each of the three respective cross-claims are entitled to a verdict against the cross-claimants.
(5) Parties to be heard on interest and costs before final orders are made.

155 The parties are directed to confer and to prepare short minutes of order to give effect to this decision, including as to interest and costs. The matter will be listed on a convenient date for a speaking to the minutes and the making of final orders.

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