Bibbo v Nikou & Delatex Pty Ltd (as trustee for the Guiseppe Giovanni Scuteri Family Trust)

[2011] SADC 166

District Court of South Australia

(Civil)

BIBBO v NIKOU & DELATEX PTY LTD (AS TRUSTEE FOR THE GUISEPPE GIOVANNI SCUTERI FAMILY TRUST)

[2011] SADC 166

Judgment of His Honour Judge Beazley

27 October 2011

CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - PERFORMANCE OF WORK - REMEDIES FOR BREACH OF CONTRACT - DAMAGES - OTHER MATTERS

Claim by plaintiff builder to recover unpaid progress claims, and the balance of builders fees in the sum of $71,292.55 from the defendants jointly and severally for work done pursuant to a cost plus building contract for the construction of two three-storey dwellings - plaintiff asserts that practical completion was achieved in respect of one of the dwellings - the meaning of practical completion - the defendants assert that the plaintiff breached the contract by delay; by exceeding the alleged agreed construction price; and by defective workmanship - counterclaim by the defendants against the plaintiff for alleged defective building work - the defendants in breach of contract by failing to pay the plaintiff's outstanding claims - defendants counterclaim the total sum of $457,454.12.

TERMINATION

The defendants terminated the contract on 13 July 2003 - construction of clauses 16.1 and 18 of the contract - the defendants prevented by their own breach of contract from terminating for the alleged default of the plaintiff - the plaintiff excluded from the building site - the effect of this upon the assessment of the plaintiff's claims and the quantum of the defendants' counterclaim - the plaintiff entitled to payment in full of his claims and interest - the assessment of the defendants' damages is on the basis of the cost to the plaintiff rather than the cost to the defendants of rectifying defective building work as opposed to incomplete work.

Held: The plaintiff entitled to judgment in full for his claim together with interest at 10% per annum totalling $137,283.83. The defendants are entitled to judgment on their counter-claim in the sum of $73,000 and interest thereon.

Building Work Contractors Act 1995 (SA) s 32; 6 DCR 224(2), referred to.
Kane Constructions Pty Ltd v Sopov [2005] VSC 237; Wren v Emmett Contractors Pty Ltd (1969) 43 ALJR 213; Savril Contractors Ltd v Bank of New Zealand (2004) NZCA 4; Browne v Dunn (1829) 57 ER 909; Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation (1983) 1 NSWLR 1; Manly Council v Bryne [2004] NSWCA 123; Holland v Wiltshire (1954) 90 CLR 409; Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; Mancorp Pty Ltd v Baulderstone Pty Ltd (1993) 60 SASR 120; Carr v JA Berriman Pty Ltd (1953) 89 CLR 327; McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457; Western Farmers Ltd v Commonwealth Agricultural Service Engineers (1935) 54 CLR 361; Dawnays v FC Minter [1997] 1 WRL 1205; Tramways Advertising Pty Ltd v Luna Park (NSW) Pty Ltd (1938) 38 SR (NSW) 632; Sarah Constructions Pty Ltd v Phillips (2007) SADC 137 ; Queensland University of Technology v Project Constructions (Aust) Pty Ltd (In Liquidation) [2002] QCA 224; Novawest Contracting Pty Ltd v Taras Nominees Pty Ltd [1998] VSC 205; BMD Major Projects Pty Ltd v Victorian Urban Developments Authority [2007] VSC 409; Dr Cesare v Deluxe Motors Pty Ltd (1996) 67 SASR 28; U I International Pty Ltd v Interworks Architects Pty Ltd [2007] QCA at [98]; Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2010] NSWSC 1073; Johnson v Perez (1988) 166 CLR 351; Gagner Pty Ltd v Canturi Corporation Pty Ltd [2009] NSWCA 413; Bellgrove v Eldridge (1954) 90 CLR 613; South Parklands v Brown Falconer (2004) 88 SASR 65; Westpoint Management Limited v Chocolate Factory Apartments Ltd (2007) NSWCA 53; Unique Building Pty Ltd v Brown (2010) SASC 106; Cassidy v Ingwirda Construction Co (2) (1968) QdR 159; Abigroup Contractors Pty Ltd v River Street Developments Pty Ltd [2005] VSC 425; Walter Construction Group Ltd v Walker Corporation Ltd [2001] NSWSC 283, considered.

BIBBO v NIKOU & DELATEX PTY LTD (AS TRUSTEE FOR THE GUISEPPE GIOVANNI SCUTERI FAMILY TRUST)
[2011] SADC 166

Introduction

1. This action arises out of the construction of two semi detached, three storey dwellings, ideally positioned with uninterrupted coastal views, on land situated at 421 and 421A Esplanade, Henley Beach, (“421” and “421A” respectively) between 11 July 2001 and 13 July 2003.

2. On or about 11 July 2001 Salvatore Bibbo (the plaintiff), a licensed builder, entered into a single written agreement (“the contract”) for the construction of the subject dwellings, with Don Nikou (“the first defendant”) as owner of 421A, and Delatex Pty Ltd (as trustee for the Guiseppe Giovanni Scuteri Family Trust) (“the second defendant”), as owner of 421.

3. The contract was terminated by the defendants on 13 July 2003. 

4. There are many unusual aspects to these proceedings which have had a long and vexed history.  These include the delay of nearly 7 years between the date of termination, and the trial; and the unfortunate state of the pleadings and the Scott Schedules.  However most unusual is that despite both dwellings having been constructed, effectively simultaneously, using the same subcontractors, suppliers and methodology, 421A has been continuously occupied since December 2002, whereas 421 has never been occupied, nor indeed maintained over the many years since the date of termination.

5. The plaintiff on the one hand, and the defendants on the other, have entrenched adverse views as to the propriety of the respective conduct of the other and this has coloured the way in which the litigation has been conducted.  The plaintiff sincerely believes that the contract was terminated solely because the defendants were financially incapable of meeting the cost of completion.  The defendants sincerely believe that the plaintiff was incapable of completing the work in a proper and workmanlike manner on time and within their own estimate of cost.

6. The plaintiff’s claim is for the sum of $71,292.55 being the balance of monies allegedly due to him, as at the date of termination, together with interest at 10% per annum pursuant to the terms of the contract. The defendants counterclaim the sum of $457, 454.12, being the total of the items of allegedly defective work detailed in the voluminous revised Scott Schedules filed by the parties.[1] 

   [1]    Revised Scott Schedules FDN 78; and FDN 79.

   Pleadings and procedural matters

7. I do not propose to set out the pleadings in any detail.  I have however assessed the evidence and the issues in this case in the light of those pleadings.[2] When the hearing commenced, the pleadings were in a state of flux. The defendants sought leave to file additional pleadings.  The plaintiff objected citing the principles consistent with AON Risk Services Aust Pty Ltd v Australian National University.[3]  In the interests of justice the defendants were granted leave to file a “Rejoinder to the Further Amended Reply and Amended Defence to Counterclaim”.  It did not cause the trial to be delayed. That pleading was principally directed to the question as to whether “Practical Completion” as defined in the contract, had been reached in respect of 421A prior to the date of termination. 

   [2]    Contrast Exhibit P1 Vol 2 p 311

   [3] (2009) 239 CLR 175

8. The plaintiff filed a Surrejoinder to that Rejoinder, in which he asserted that the contract was modified so that “Practical Completion” could apply to an individual dwelling, in the subject case, 421A.  He pleaded in the alternative that the defendants were estopped from denying that the maintenance period for 421A commenced when tenants entered into occupation of it.

9. The Scott Schedules prepared by the parties were amended from time to time. There was unfortunately a great deal of confusion caused by the initial preparation of those schedules. From time to time the experts had difficulties in accurately identifying a particular dwelling, with the respective numbers being interchanged.[4]

   [4]    T. p894 - 896

10. This problem was exacerbated in the case of the expert witnesses called by the defendants, as one of them was engaged to identify alleged defective work, while another was engaged to cost the work identified by the other.[5]  It was not, at all times, clear that they were ad idem as to what rectification work was required so as to comply with the terms of the contract.

    [5]    See P. Jankovic, T. p907, 909, 914, 915

11. These difficulties adversely impacted upon the examination and cross-examination of witnesses.

12. Voluminous documents including the two tender books were eventually admitted into evidence after initial objections had been taken to their admissibility.  Despite this, the parties each complained about alleged failures to comply with obligations as to discovery.  At the commencement of the trial all issues were in dispute including the quantum of each of the plaintiff’s progress claims.

13. During the trial however the defendants abandoned their assertion that the plaintiff had overcharged them in respect of the individual progress claims[6], and also abandoned that part of their counterclaim with respect to damages for stress and inconvenience[7].

    [6]    See Amended Defence paragraph 6.3

    [7]    See Counterclaim, paragraph 15.4

14. Some expert reports were produced by the defendants very late in the trial process. In particular an additional report was obtained from the forensic engineer Mr Goldfinch, and dated 26 October 2009.[8] Some of the matters addressed in that report related to events which had occurred after the plaintiff had completed his evidence.  The plaintiff was not cross-examined about them.  In light of my ultimate findings in this case, little turns upon those matters, and the plaintiff was not prejudiced by its late production.

    [8]    Ex D.19

15. Shortly before trial, another contractor, Paul Arevalo, had been engaged to undertake alleged remedial work to level one of 421. The reasonableness of that work, and the costs associated with it were significant “new” issues. In the event, in consequence of a proper concession made by counsel for the defendants, the plaintiff was not prejudiced by that evidence.

    The principal issues

16. There remained a myriad of issues raised by the parties in these proceedings.  I have considered all of the submissions by both counsel. I have not felt the need to traverse some of those issues because of my ultimate findings.  Had I traversed them all, these reasons would have been more prolix than they are already.  When the issues were ultimately distilled in the final address, the principal issues were identified as follows:

17. What was the legal basis for the termination of the contract by the defendants?

    §Was it based upon alleged breach of contract by the plaintiff?

    §Did the plaintiff have accrued rights to receive, in full, payment for the progress claims submitted by him to the defendants prior to termination.

    §Were the defendants in breach of contract for failing to pay the progress claims prior to and at the time of termination?

    §What are the consequences, of termination pursuant to the terms of the contract?

    ·Whether there is any merit in the defence of the defendants to the plaintiffs claim for unpaid progress claims and fees.

    ·Whether practical completion, as defined in the contract, was achieved, and if so, when?

    ·Whether the plaintiff breached the terms of the contract by alleged defective building work, and is thereby liable to the defendants on their counterclaim for:

    ·    The alleged ingress of water into the respective dwellings, and

    ·    The balance of the items of alleged defective work in those voluminous Scott Schedules.

    ·    Whether it is reasonable for the alleged rectification work to be undertaken in light of the delays which have taken place, and the transfer of ownership of 421 prior to trial.

    The contract dated 11 July 2001

18. The contract is in the standard form (C.P. 1999) of a “Cost Plus Project – Plain English Contract” issued by the Master Builders Association.[9]

    [9]    Exhibit P1 Vol 1 p.16

19. At all times the defendants have treated the contract as one project as between them, with the first defendant, being the principal point of contact with the plaintiff, and authorised to act on behalf of the defendants.[10]

    [10] See the evidence of Mr Nikou, T.p692; and Mr Scuteri, T.p1337.

20. Relevantly it provided that:

    ·The plaintiff must carry out the work “in accordance with the contract documents in a regular and workman like manner, using suitable materials”.

    ·The plaintiff may sub-contract any part of the work, however he remains “responsible for doing everything he said he would in this contract”.

    ·The defendants may supply materials to be included in the works, however they “must have responsibility for any defects which may arise from these materials being unsuitable for the purpose intended”. Various work was expressed to be “undertaken or organised by the owner and does not form part of the contract”.[11]

    [11] See Building Schedule. Ex P1, Vol 1, Page 41.

    ·The plaintiff is obliged to pay workers and sub-contractors - “regularly and on time”.

    ·The plaintiff will submit progress claims at intervals of 28 days, and the defendants shall pay such progress claims within seven days.  In the event of late payments, the defendants would incur interest at 10 per cent per annum, until paid.

    ·In the event the defendants did not pay the plaintiff at the agreed times, the plaintiff became entitled to suspend work until he was paid.

    ·Pursuant to clause 16.1 thereof, the defendants could cancel the contract or “stop the works at any time for any reason but must notify the plaintiff in writing of their wishes in such regard …the plaintiff, on receipt of such notice shall stop the works and submit a final account statement”.

    ·Pursuant to clause 18.2 thereof, upon cancellation of the contract, the defendants were obliged to pay the plaintiff within 7 days:

    ·    the actual cost of the works as at the date of cancellation.

    ·    the cost of materials ordered by the plaintiff and which he was obliged to accept.

    ·    the reasonable cost of the removal of items from the site.

    ·The contract defined “the date for practical completion” as being the date “when the work is largely finished and ready to use and/or occupy”.  It provided however that in the event of cancellation of the contract:

    ·    if the defendants take possession and / or use part of the work without the written consent of the plaintiff, the work shall be deemed to be practically complete on the date such possession is taken or use occurs.

    ·    The work is the responsibility of the owner from the date of practical completion.

    ·A maintenance period of 13 weeks would commence on practical completion, and obliged the defendants to tell the plaintiff of all defects and faults.  It further obliged the defendants to give the plaintiff reasonable access during working hours to undertake any work in the maintenance period.

    ·In the event that the plaintiff did not fix the defects or faults identified by the defendants within 30 days the defendants, after giving reasonable notice in writing, the plaintiff may engage another contractor to fix those faults at the expense of the plaintiff.

    Overview

21. I set out the following events, in a chronological form, and which reflect my findings of fact upon issues in respect of which there was little or no dispute:

22. The first defendant had met the sole director of the second defendant, Joe Scuteri, in early 1999, and they agreed to enter into a “joint venture” to develop the subject land. The defendants engaged an architect, Mr Peter Martin, to draw plans and specifications, and to obtain the appropriate planning and development approvals.  The defendants considered various proposals by builders.

23. In mid to late 2000, the plaintiff was approached by Mr Martin, to ascertain whether he would consider undertaking the subject building work. The first defendant told the plaintiff that Mr Martin would be engaged by them as project manager.[12]

    [12] See Mr Nikou, T.p.698

24. The work was to be undertaken in accordance with the drawings and specifications provided by the defendants to the plaintiff.  About 6 months prior to entering into the contract, the plaintiff was provided with 44 pages of drawings prepared by Peter Martin and dated September 1999.[13] The plaintiff complains that there was insufficient detail in those drawings.

    [13] Exhibit P4

25. Between the months of March 2001 and July 2001, various meetings occurred, principally between the plaintiff and the first defendant. 

26. Following the execution of the contract, on 11 July 2001 the first defendant told the plaintiff that Mr Martin would not be retained as project manager.  He directed the plaintiff to implement a process whereby the plaintiff would be required to collate invoices from sub-contractors and submit a progress claim invoice in duplicate for his approval on behalf of both defendants.

27. The terms of the contract permitted the plaintiff to engage subcontractors to undertake the building work. The plaintiff was engaged to construct the subject dwellings on a cost plus basis,[14] whereby the plaintiff, as the builder, would pay the actual cost of the work and materials to subcontractors and suppliers, and recover it from the defendants by progress payments. Instead of the remuneration being fixed as a percentage of those costs, the contract provided that the plaintiff would be paid a “builders fee” of $25,000. 

    [14] See Clause 7 of the contract. Contrast these terms with those in Wren v Emmett Contractors Pty Ltd (1969) 43 ALJR 213, and Vizzari Builders Pty Ltd v Misale [2011] SADC 86

28. Claims for progress payments were to be submitted at intervals of 28 days, and paid by the defendants within 7 days.

29. The defendants were obliged to pay the builders fee, effectively by monthly instalments commencing on or before 25 April 2001 (that is, prior to the execution of the contract on 11 July 2001) pursuant to Annexure “A” to the contract.

30. Certain categories of work were excluded from the contract as work to be undertaken or organised by the defendants.[15]  In addition, during the course of the construction, other work was directly organised from time to time by the defendants.  In consequence air conditioning, timber flooring, carpet installation, some painting and some water proofing work was undertaken by contractors either nominated by or alternatively engaged by the defendants. 

    [15] See the items listed in Exhibit P1, Vol 1, pp 64-65; and Mr Nikou, T. p699

31. Prior to the commencement of the work, the contract was varied. The defendants accepted the recommendation of the plaintiff to use tilt up solid concrete walls in lieu of brick or brick veneer as detailed in the specifications.[16]  The defendants directed the plaintiff to alter the balcony sizes of, at least, the respective second floors of both dwellings. Its purpose was to push out the northern and southern walls, so as to increase the bedroom size.

    [16] T. p75-77; and T. p695

32. There is no doubt that the defendants had also agreed to a recommendation that aluminium windows and sliding doors be employed in lieu of the specified bi-fold doors on the western side of both dwellings, facing the foreshore. Both the plaintiff and the first defendant deposed to the basis for that recommendation being the well known risk of ingress of water into coastal dwellings. It was agreed between them that “commercial grade” glass be employed.[17] While both witnesses thought that this latter variation was made on the recommendation of the plaintiff, it is probable, from the documents tendered by the defendants, that the decision to substitute the windows and sliding doors was made by the architect, Mr Martin.  Nothing turns upon that matter however.

    [17] T. p695

1. The defendants assert that, in addition to the express terms of the contract, there were partly oral and partly implied terms, including those, disputed by the plaintiff, that the cost of each dwelling would not exceed the sum of $325,000;[18] and that the building work would be completed within 6 months,[19] of the footings being laid; and that the defendants could retain 10% of the cost of the project.[20]

   [18] See Counterclaim of the defendants paragraphs 5.2.1 and 5.2.2

   [19] T. p 202

   [20] T. p735

2. The plaintiff adamantly denies these assertions.

3. The work proceeded in July 2001, and the various stages of development were documented in the invoices rendered by the plaintiff, and confirmed in the bundle of photographs, particularly from 21 September 2001 to 8 June 2002.[21]

   [21] See Exhibit P20

4. The first progress claim totalling $51,764 including the management fee instalment was submitted on 26 July 2001 and paid in full on 6 August 2001.

5. Work continued unabated with payments of subsequent progress claims being made by the defendants in the respective sums of $74,800 on 6 September 2001; $59,620 on 31 October 2001; $61,359.62 on 4 December 2001; $29,600 on 24 December 2001; and $57,554 on 1 February 2001.

6. In the month of February 2002, Distinctive Aluminium Services commenced the installation of the aluminium windows, and sliding doors. It rendered the first of its invoices in the sum of $88,000.00 on 20 February 2002 to the plaintiff.  It rendered further invoices in the respective sums of $7,194.00 and $7,788.00 on 16 April 2002.

7. The progress claim issued by the plaintiff on 28 February 2002 totalling $142,608 was met with a payment of only $111,304 on 5 March 2002, leaving a debit of $31,304.  No complaint was made as to the quality of the work, nor the quantum of any progress claim at that time.

8. Soon after the windows and sliding doors were fitted, the second defendant advertised 421 for sale.  The first defendant, a real estate agent, described it as a “stunning seaside duplex”.[22]

   [22] T. p.703

9. In late February and March 2002 the plaintiff noted that when the windows were installed in each of the dwellings there were “problems” with water leaking from the aluminium frames, and doors.

10. On or about 9 April 2002, the defendants’ progress payments remained in arrears, albeit that the quantum of those arrears had been reduced. The first defendant requested the plaintiff to slow down the progress of the building work until his refinancing arrangements had been approved.  The work continued in respect of both dwellings at a slower pace.

11. In April and May 2002, following heavy rain, ingress of water was observed on all levels of both dwellings. Distinctive Aluminium Services employees attended to check the window seals, and for additional silicon to be applied.

12. On 8 June 2002 Mr Nikou took photographs disclosing, inter alia, water staining on the floorboards of 421.

13. The plaintiff submitted further progress claims in the sums of $70,020 on 3 April 2002; $36,535 on 7 May 2002; $26,886.94 on 6 June 2002; $37,862.08 on 4 July 2002; $30,941.40 on 7 August 2002 and $100,404 on 7 September 2002; and payments by the defendants had reduced the arrears as at that last date to a sum of approximately $16,000.

14. The plaintiff directed Distinctive Aluminium Services to remove the windows on the western side of the dwelling at 421 and for the trays to be checked for leaks.  The plaintiff decided to create a step or fall at the point of the screen doors to overcome the perceived problem that the tiled balconies were level with the internal floors in each dwelling, causing water to gather at that point.

15. This work included the removal of some tiles and screeding, and the insertion of circular drains on the balcony.

16. In the second half of 2002 the defendants became concerned about the progress of the work, and the ingress of water from the western side balconies.[23]

    [23] Mr Scuteri T. p1334

17. Some of the windows on the western side of 421 were removed and work, including the addition of silicon, was undertaken by Distinctive Aluminium Services.

18. On or about 30 October 2002 the defendants engaged a building consultant, Gunnar Erbsland, to advise them about the problem of water entering 421A by means of the aluminium windows and sliding doors on the western side of the dwelling. He had noted that “this problem has been evident for four months and several attempts made to rectify, without success”.[24]

    [24] Exhibit P1, Vol 2, Page 200.

19. At or about this time the plaintiff installed gutter drains to assist in dispersing the water from the balconies.

20. In about November 2002, the first defendant had requested the plaintiff to expedite the work on 421A , in preference to 421.  In late December 2002, he sought from the plaintiff, and obtained possession of 421A so as to enable him to furnish it, and to lease it to tenants. 

21. The plaintiff submitted a progress claim in the sum of $59,770.65 on 18 November 2002.  At that time the defendants were in arrears in the approximate sum of $33,000.

22. On or about 15 December 2002 the first defendant took possession of the dwelling at 421A so that it could be let out to the tenants Robert Hendrie and Cheryl Hendrie. 

23. From about late December 2002 both defendants discussed with the plaintiff the progress of the work, the cost of the same, and the problems of water ingress.  Joe Scuteri, the director of the second defendant, had previously been less available because of his employment.  He now attended 421 on a weekly to fortnightly basis.[25]  He provided lists to the plaintiff of items which required attention.[26]

    [25] T. p 1335

    [26] See Exhibit D33

24. In or about January 2003 the tenants in 421A complained that water had penetrated the first and second floors from the sliding doors, and that they were required to place towels at those doors.  The first defendant complained that the drains installed outside those doors did not assist in taking the water away.

25. The plaintiff conceded that the water ingress problems identified by the tenants in 421A, have not been rectified.

26. By no later than 7 February 2003, both defendants had determined to pay neither the arrears then owing to the plaintiff nor any additional progress claims. 

27. Accordingly the plaintiff asserts that at that time he was entitled to suspend the performance of any further work. There is no doubt that the pace of work by the plaintiff did slow down at this time.

28. In April 2003 a meeting took place between the plaintiff, the first defendant and Joe Scuteri.  The latter two became agitated and demanded that the plaintiff deliver a product consistent with his obligations as a builder, or be sued.

29. On 28 May 2003 the defendants, through their then solicitors, engaged a building consultant, Don Dalby “to identify defects in the building and advise how they should be rectified”.[27] Amongst the matters explained by those solicitors was that the dwelling, by inference 421A, was “now 95% completed”.

    [27] Letter 28/5/03 - Exhibit P27.

30. By report dated 6 June 2003 Mr Dalby identified some 35 alleged defects,  and opined that the aluminium windows and doors on the western side of the building remained a source of water leaks into the inside room.[28]

    [28] Exhibit P1, Vol 2, Page 197.

31. The contract was terminated by the defendants by letter from their solicitors dated 13 July 2003. 

32. The letter did not detail the reasons for such termination, merely stating:

    We confirm that we act for Delatex Pty and Don Nikou with regard to the properties at 421 Esplanade, Henley Beach.

    Pursuant to Clause 16 of the Agreement we hereby cancel this contract effective forthwith.

    Our client has changed the locks to the property and you may collect any tools or materials belonging to you by prior arrangements with Mr Nikou.

33. As can be seen the defendants purported to terminate pursuant to clause 16 of the contract. The exercise of the right to terminate pursuant to that clause did not depend upon fault by either party.  The plaintiff was obliged pursuant to that clause, to stop the works, and submit a final account, and did so.

34. On 21 July 2003 the first defendant engaged the building consultant Martin Stuart-Skinner to inspect both subject dwellings.  He prepared a report dated 6 August 2003 in which he listed alleged defects and incomplete work estimated to cost $50,000 in respect of 421, and $30,000 in respect of 421A.

35. Since termination Mr Scuteri has attended 421 on relatively few occasions, mainly to seek opinions from builders as to how to rectify the alleged defects.[29]

    [29] T. p1336

36. On 9 October 2003 the plaintiff issued a notice of demand against the defendants jointly claiming the sum of $77,321.09.

37. On 23 October 2003 the plaintiff instituted the within proceedings.

38. On 19 December 2003 a “final building inspection” was purportedly carried out by a Development Officer of the Charles Sturt Council. By letter dated 6 January 2004 to the first defendant, he pointed to the need for a written statement of completion from the building contractor, and directed attention to the stairs and balustrades.

39. On or about 6 February 2004 the first defendant engaged the building consultant Peter Jankovic to inspect both subject dwellings.  He took some 137 photographs and prepared a report dated 26 March 2004, detailing alleged defects and incomplete work in respect of each dwelling albeit with some confusion as to the identification of each dwelling.

40. Between April and June 2004, a licensed builder, Carlo Petris, prepared an estimate of the cost to undertake what he concluded was the necessary remedial work to overcome the defects identified by Mr Jankovic.[30]

    [30] T. 1201 - 1204

41. 421A has been occupied since late December 2002, initially by tenants, and at all times subsequently by the first defendant and his partner. The first defendant has attempted to sell 421A, albeit that at that time, little or none of the work recommended by Mr Jankovic had been undertaken.[31]

    [31] T. 877

42. At no stage prior to termination had possession of 421 been sought by the second defendant. 

43. On 10 July 2004 the second defendant transferred the title to 421 to Miriam Scuteri, the wife of Joe Scuteri, the sole director of the second defendant. It has not been the subject of any maintenance, and, save for some recent alleged remedial work, 421, inexplicably, has stood idle since the date of termination. 

44. On 4 August 2005 the first defendant engaged the Civil Engineer John Goldfinch to inspect the aluminium window assemblies at 421. Mr Goldfinch prepared a report dated 23 November 2005.

45. On 4 April 2007 Mr Erbsland prepared another report, however on this occasion, it was provided at the request of the plaintiff.

46. On 1 August 2007 the parties attended an on-site inspection where moisture recordings were taken by Mr Goldfinch.

47. On 3 December 2008 the aluminium window frames on the first level of 421 were removed and dismantled by a contractor engaged on behalf of the new owner, Mrs Scuteri.  The plaintiff complained that he had not been given notice of that work.

48. In early May 2009 the first defendant, on behalf of Mrs Scuteri, engaged Paul Arevalo, who held only a Restricted Builders Licence, to again dismantle the window frames; remove the glass; remove the sub-sills, jackhammer the tiles and screed from the balcony, waterproof the area, and construct a plinth. He rendered an invoice for $15,000 and has been paid the sum of $10,000.[32] That sum was paid by Mrs Scuteri and not by either of the defendants. It cannot therefore be claimed by either defendant as monies incurred by them in rectifying any alleged defective work.

    [32] See Arevalo, T. p1297-1303, Ex D40

    General observations

49. The subject proceedings were instituted on 23 October 2003. 

50. The resolution of the disputes between the parties has been made all the more difficult due to the passage of time – some eight years since the building work had commenced.  This delay, understandably, had affected the memory of most witnesses.  In the absence of any contemporaneous documents all of the witnesses had difficulty in identifying the dates when water ingress had been allegedly observed by them, when payments had been made, and when discussions between them had occurred.[33]

    [33] See T. p 1354 and 1360

51. In Savril Contractors Ltd v Bank of New Zealand[34] the Court of Appeal noted research to the effect that:

    A fair judicial decision is unlikely by the time ten years has passed after the occurrence of the events on which a claim is based due to the deterioration of the evidence of the true facts … at this point adjudication will as likely result in a judicial remedy for a claimant with a spurious claim as one with a meritorious claim.

    [34] (2004) NZCA 4 at (18).

52. It is common ground that as at the month of July 2002, the defendants, or at least one of them, had failed to pay in full the progress payments then due to the plaintiff.  There was some confusion as to whether it was the first defendant who had fallen into arrears in consequence of financial difficulties.  While the first defendant conceded that there was a short period of time when he had sought to refinance I am satisfied that the subject shortfall was that of the second defendant.[35]  Save for any questions of credit, and in particular the reliability of accounts given by the witnesses, as both defendants were jointly and severally liable to the plaintiff pursuant to the contact, nothing turns upon which defendant was in default. 

    [35] See T. p 1357, 1380

53. Some of the expert building consultants were being asked to express opinions upon the state of window and sliding door frames many years after they had been installed, removed, and reinstated. Over several years the defendants had engaged other consultants who had recommended alternative methods of rectifying what they perceived to be defects in the building work. As I have already noted, from about December 2008, a decision was finally taken to commence some alleged remedial work to level one of 421. 

54. I will refer to the reliability of each of the witnesses later in these reasons, however there were various examples of witnesses deposing to events, indeed events arguably to their detriment, which are inconsistent with contemporaneous documents.  The long delays in this case have undoubtedly affected adversely the reliability of the principal witnesses Salvatore Bibbo; Don Nikou and Guiseppe Scuteri.

55. The delays and the ever escalating costs of rectification identified by Mr Petris on behalf of the defendants, undoubtedly constrained the plaintiff in his assessment of the merits of the defendants’ proposed remedial work, and the quantum of the defendants’ counter claims.

56. During that long intervening period before the commencement of the trial the expert building consultant Don Dalby, who had on 29 May 2003 inspected the subject dwellings and had provided a list of alleged defects, had unfortunately died; and one other witness had undergone bypass surgery.[36]

    [36] See Mr Giordano T. p 614

57. As is apparent from the length of these reasons, the course adopted by the parties has obliged the Court to resolve many minor issues.

    Witnesses

58. Before turning to the facts relevant to the issues between the parties it is appropriate I say something about the principal witnesses. They were respectively the plaintiff Salvatore Bibbo; the managing director of Distinctive Aluminium Services, Wayne Claughton; the first defendant Don Nikou; and the director of the second defendant Joe Scuteri. 

59. Mr Scuteri and Mr Nikou were both cross-examined by the plaintiff as to their respective failures to undertake any of the rectification work identified as far back in time as Mr Dalby’s report. They both may have been overwhelmed by the quantum of the items of rectification identified by Mr Jankovic and Mr Petris.

60. I will refer first to Mr Scuteri, as he had a lesser involvement than the first defendant in the day to day contact with the plaintiff until late December 2002. I was favourably impressed by Mr Scuteri as a witness of truth. I formed the impression that he is somewhat of a perfectionist who lost patience with the management practices of the plaintiff. It may be that he had unrealistic expectations as to the standard of work, and blames the plaintiff for the inability to sell 421 at an early stage.  However he carefully considered the questions put to him, and did his best to answer them without any embellishment.

61. Counsel for the defendants was highly critical of the evidence of Mr Claughton.  Indeed he submitted that his evidence with respect to some of the rectification works undertaken in respect of the windows in 421 was “a combination of both fabrication and poor memory”.

62. I do not accept the submission that Mr Claughton fabricated any of his evidence.  He gave evidence of a highly technical nature having been presented with circumstances which he had not previously confronted.  These involved the window frames being unable to cope with the water inundation caused by a myriad of factors, in particular that there was an insufficient fall from the inside rooms to the balcony.  In my opinion he did his best to recount his attempts to modify the frames to meet the problem.

63. It is appropriate to refer briefly to the plaintiff Mr Bibbo and the first defendant Mr Nikou together in general terms.

64. Counsel for the defendants was highly critical of Mr Bibbo’s evidence in his final address.  He provided separate written submissions in which he detailed topics upon which he submitted that the plaintiff ought not be accepted.[37] I do not propose to detail those submissions. Relevantly, in essence, he submitted that Mr Bibbo had deliberately downplayed the problems of water ingress, and denied initially, that he had previously met, yet alone, engaged Mr Erbsland himself.  He submitted that he had deliberately and falsely elevated the effect of the first defendant’s refinancing arrangements, so that it appeared that the defendants were unable to pay the costs of the construction. 

    [37] See Submissions 12/3/10

65. Counsel for the plaintiff was highly critical of the evidence of Mr Nikou, particularly with respect to his evidence on certain topics including an asserted maximum price; a date for completion and whether there was a 10% retention.

66. As I have already noted, both witnesses were significantly adversely affected by the long delay between the date of termination on 13 July 2003, and the date of trial. 

67. I have no doubt that that long delay has caused each of them to reconstruct some of what they respectively deposed to having occurred between 2001 and 2003.  In my opinion each of them also fell into the error of giving evidence as to their subjective intentions rather than depose to what was objectively the subject of agreement.[38]

    [38] See Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [35]

68. I generally accept that both witnesses for the most part did their best to accurately recall and depose to the evidence relevant to the issues in the trial.  However I repeat that it became clear to me that there were entrenched views on both sides and that these views coloured their evidence and affected the reliability of the evidence that these witnesses gave. 

69. In each case however there were some matters which caused me to reflect upon the credibility as well as the reliability of Mr Bibbo and Mr Nikou. The plaintiff said that the first defendant had told him that his tenants did not want to be disturbed and that it would be inconvenient to permit him access to rectify the water ingress problems in January 2002.  I do not accept his evidence in that respect.  I infer that Mr Nikou was acutely embarrassed that the tenants, who were his clients, faced water ingress. I find that other sub-contractors regularly attended at 421A. I find that Mr Nikou wanted the problem of water ingress quickly resolved.  I infer that Mr Bibbo was reluctant to undertake any such work because he wasn’t being paid.

70. As to the first defendant there were two inter-related matters. Those involved whether the first defendant had said that he would pay the plaintiff’s outstanding claims if he proceeded to expeditiously complete 421A before late December 2002.  I have no doubt that he did make that proposal to the plaintiff.  It caused the plaintiff to expedite the work.  The second issue relates to his evidence as to an alleged right of the defendants to retain 10% of the cost of the works.  I will refer to that latter matter, later in these reasons.

1. I mention briefly the other witnesses called by the parties who gave oral evidence.  Although both counsel were critical in some respects of the accuracy of the evidence of some of the “lay” witnesses, in my opinion these criticisms were generally related to peripheral issues.

2. I turn to the expert witnesses.  Counsel for the plaintiff was critical of some of the evidence of the building consultants Mr Jankovic, and Mr Petris. He contrasted certain comments made by Mr Jankovic in his final report, with the terms of his draft report.[39]  I do not need to address those criticisms.  In my opinion each of the experts gave an honest account of the opinions held by them.

   [39] Ex. P28

3. The difficulty confronting the court is that some of the opinions had, in my view, been formed on an incorrect premise as I will explain, when discussing the Scott Schedules. No expert evidence was called as to the valuation of the respective dwellings.

4. In addition to Mr Claughton the plaintiff also called oral evidence from:

   ·Constantinos Kikianis, a construction supervisor, attended an on-site inspection of the subject dwellings on 1 August 2007; and gave evidence as to alleged moisture readings and the state of the respective dwellings at that time. 

   ·Walter Mesiti, a retired solicitor, also attended the on-site inspection on 1 August 2007 and gave evidence as to his observations of the subject dwellings on that day, and as to an earlier meeting between the plaintiff and Mr Erbsland in or about April 2007. 

   ·Reparato Giordano who was a certified building surveyor, who gave evidence as to the alleged defects asserted by the defendants in the Scott Schedule, and as to the long term effects of alleged failures to maintain such dwellings. 

5. The defendants called oral evidence from:

   ·Peter Jankovic an expert building consultant, Gunnar Erbsland a general licensed builder, and John Charles Goldfinch an expert civil engineer each of whom provided reports as to the state of the respective dwellings at various times.

   ·Carlo Petris a registered builder.

   ·Soula Giannakis the partner of Mr Nikou who gave evidence as to difficulties encountered by her in residing at 421A during the last five year period.

   ·Martin Stuart-Skinner a building surveyor who attended an inspection of the subject dwellings in the month of July 2003 and subsequently prepared a report.

   ·Cheryl and Robert Hendrie who each gave evidence of their occupation of 421A as tenants from about December 2002, and as to the difficulties confronted by them.

   ·Paul Arevalo the holder of a Restricted Builders licence who had been engaged to undertake alleged rectification work in 421 in 2009.

   Submissions as to Browne v Dunn[40], and Jones v Dunkel[41]

   [40] (1829) 57 ER 909

   [41] (1959) 101 CLR 298

6. The plaintiff complained that various matters, including the efficacy of the work undertaken by Mr Arevalo in 421, were not put to him by the defendants during the trial.[42]  The rule in Browne v Dunn[43] is an important rule of practice.  It is essentially one of fairness, as was explained in Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation.[44]  I am not satisfied that any unfairness has arisen, in reality in the way the trial evolved.  Ultimately in light of my findings as to credit, nothing turns upon any asserted failure to comply with the rule in Browne v Dunn.

   [42] See T 1342

   [43] (1829) 57 ER 909

   [44] (1983) 1 NSWLR 1

7. The plaintiff referred to the failure of the defendants to call Mrs Scuteri to give evidence about the delay in undertaking any rectification work in 421 until 2009.

8. The defendants complained about the alleged failure of the plaintiff to call as witnesses Trevor Dodd, Merv Haines and Peter Doherty, each of whom had been employed by Distinctive Aluminium Services at the relevant time. Each counsel asserted that a Jones v Dunkel[45] inference ought be drawn against the other party.  The general rule is that the unexplained failure by a party to give evidence, to call witnesses, or to tender documents, may – not must – in appropriate circumstances, where it is natural for the particular party to call such evidence, lead to an inference that the uncalled evidence would not have assisted that party’s case.[46]

   [45] (1959) 101 CLR 298

   [46] Manly Council v Byrne [2004] NSWCA 123.

9. I do not draw any inference against the defendants for the failure to call Mrs Scuteri.  In my opinion she could not have added anything more than was addressed by the witness Joe Scuteri.

10. The defendants submitted that the three employees of Distinctive Aluminium Services ought to have been called, because they could have given evidence about rectification work undertaken by Distinctive in the nature of additional silicone and the position of a stand. The managing director, Wayne Claughton had given evidence about the events which had occurred some 7 years previously.

11. He had no detailed records to assist his memory.  He was cross-examined at length by the defendants. I do not, in these circumstances draw any inference against the plaintiff to the effect that some other employee of Distinctive Aluminium Services might have recalled after all that time something which could be adverse to the plaintiff’s case.

    Issues of water ingress

12. It is convenient to now determine the issues relating to the ingress of water into both dwellings.  These become the most significant issues in the trial. They involved the question as to whether in consequence of the plaintiff’s allegedly defective building work, both dwellings had suffered significantly from the ingress of water, in particular from windows and sliding doors installed at the western side of both dwellings, which face the coast, and the inevitable adverse weather during winter.

13. The plaintiff asserts that prior to termination, additional remediation work had been undertaken in 421, which had resolved the problem of water ingress.  While conceding that water ingress continues in 421A,[47] he asserts that he was denied access to 421A and has thereby been denied the opportunity to oblige Distinctive Aluminium Services to undertake the same rectification work in that latter dwelling.

    [47] T. p1287

14. The defendants deny that water ingress has been rectified in either dwelling.

15. Prima facie, the facts of this case produce the rather odd situation wherein 421A, which has had no additional remediation work undertaken, has been continuously occupied since December 2002; yet by contrast, 421, which has received additional remediation work, has never been occupied.

16. There is no dispute that 421A has suffered from the ingress of water since the windows and screens were installed in February 2002. The plaintiff did not challenge the witnesses called by the defendants on this topic.

17. The tenants, Mr and Mrs Hendrie, described the entry of water in various parts of the dwelling during their 6 months tenancy ending in August 2003.

18. They deposed to water entering the dwelling in the first floor family room and top floor bedroom whenever it rained.  That water entered from the screen doors and windows on the western side of the building. The ceiling in the family room also leaked.  They were obliged to place towels around the windows and sliding doors to soak up the water.

19. The first defendant’s partner, Soula Giannakis, has resided at 421A since about 2004. She described the water entering through the windows on the western side, on all levels, constantly during winter. She has been obliged to place towels on the floor. She said that the degree of water ingress increases with the intensity of the storm, and on one occasion had travelled down the stairs leading from the first level to the ground floor. Drips of water have also been observed on the ledges on other windows.  She is obliged to lift the carpet on the top floor to dry it out and prevent mould.

20. She deposed to observing water in the toilet area on the first level, and significant water ingress through the exposed air conditioning duct in the ceiling on level one.

21. On any view the ingress of water in 421A is and has at all relevant times been substantial.

22. The major dispute was whether the plaintiff and Distinctive Aluminium Services had rectified the ingress of water in 421. This issue is not at all clear cut.  Because 421 has not been occupied there has been less of an opportunity for eye witness accounts of water entering that dwelling.

23. The defendants called evidence from various witnesses of their occasional attendances at 421, and invited that the court to infer that certain water marks were caused by ongoing problems with water entering from the western frontage.

24. The plaintiff called witnesses who deposed to their respective attendance on one occasion on 1 August 2007 when readings disclosed moisture at the western end of 421A, but disclosed that it was dry at the same end of 421.

25. It is unfortunately necessary to briefly summarise some of the evidence relevant to 421.

26. The plaintiff conceded that soon after the aluminium windows and sliding doors were installed by Distinctive Aluminium Services in February 2002, the western facing windows on all levels in both units commenced to leak. He described the main problem as wind driven water being blown from the coast which was so strong that on occasions the sliding doors could not open.  Accordingly the water could not drain properly from the tray of the aluminium frames, and started to enter the dwellings. He said that commercial strength windows had been supplied so as to ensure that there was no problem with wind pressure or velocity. He said that there were various attempts to resolve the problem of the ingress of water particularly in respect of 421. On each occasion he arranged for representatives of Distinctive Aluminium Services to attend and to check the windows for leaks.  Despite the windows being removed from the western side of 421 and additional silicone being applied, these attempts were not entirely successful.  He turned his attention to the tiling on the balcony on each of levels 1 and 2 of both dwellings which were at a similar level to the inside floor of each of the rooms. This had the consequence of water gathering outside the sliding doors and overwhelming the aluminium frames. 

27. He was faced with various possible means of overcoming the problem which included the removal of some tiles and screed so that there was a step-down from the screen door to the balcony; a building up of the balcony near the screen door so as to force the water away from the door or alternatively constructing a channel in front of the sliding door covered by a grate which would remove the excess water from the balcony.  He chose the last alternative. It involved the removal of some tiles and screeding and the insertion of circular drains on the balcony.  Subsequently gutter drains were also installed.  It is clear from the evidence of the expert witnesses that this was, prima facie, an appropriate method of overcoming the problem.

28. Subsequently Distinctive Aluminium Services used additional silicone to build up the holding capacity of the frames in 421.

29. He said that he explained to the first defendant that he stood ready and willing to undertake the same work in respect of 421A. He conceded that he was aware that the tenants were having difficulty with water coming into 421A whenever it rained. He was asked to comment upon the report by Mr Dalby of 6 June 2003 in which it was asserted that the windows and doors still remain a source of leaks.  Mr Dalby had opined that the channel installed by the plaintiff did not have sufficient falls incorporated into its design to take the water away; that the tiles of the balcony were not flush with the channel; and that the grate over the channel was not level. Mr Dalby had recommended that the channel be removed and replaced with one with larger falls within the channel itself and could direct the water in two directions. The plaintiff denied that there was any such problem with the channels save that he criticised the defendants for not having maintained them. The plaintiff was adamant that the work which they had performed, had rectified the problem of water ingress from the balconies in level 421. He explained that he had checked them on a number of occasions following heavy rain and storms and that there was no leak coming through those windows.  On one occasion he had entered Unit 421 with Mr Nikou and had observed some evidence of water ingress on the floor boards.  He said that that water had come from a nail hole to the fascia of the building and it entered the building from the ceiling on the northern side.  He attended to that problem by fixing the hole and said that there was no further such leakage. The plaintiff was critical of the method employed by Mr Jankovic in 2004 of spraying water at the windows saying that spraying water at an angle was entirely inappropriate because the windows were not designed to work in those circumstances. 

30. He said that he attended an onsite inspection with others on 1 August 2007 at which time the engineer Mr Goldfinch conducted moisture tests.  He said those moisture tests made it clear that with the exception of an unrelated door at the eastern side of the first level of 421 the moisture readings taken on both levels of 421 were dry while the same tests performed on levels 1 and 2 of 421A disclosed moisture.[48] 

    [48] Ex P.9

31. Walter Mesite, a retired solicitor gave evidence principally as to the attendance of various persons including himself at the subject premises on 1 August 2007.  He described 421 as being in a state of abandonment with “a lot of dust on the floors, undisturbed dust, more footprints, footsteps from everybody walking in there.  There was dust on the windows and on the walls”. He said it had been raining intermittently that day but he could not see any sign of moisture in 421. He said there was “no wetness, no stains, no mould, no bubbling on the gyprock. It was perfect, normal”.  He confirmed the evidence of the plaintiff with as to the outcome of the moisture tests undertaken by Mr Goldfinch. He again explained that in relation to 421 there were newspapers, leaves, sand and a lot of rubbish indicating that it had not been maintained at all.

32. I accept unreservedly Mr Mesite’s evidence on these matters.

33. Constantinos Kikianis explained that he had also been asked to attend at the subject premises on 1 August 2007.  He had been involved in residential property development for many years. He could recall it been overcast on that day however he could not remember if there had been any rain. He also described the dust on the floor and windows of 421. He said he remembered some water on the floor just inside the entry door but did not see any water on either of the other two floors.  He observed Mr Goldfinch to take moisture readings.  He said that he did not notice any smell which would indicate mustiness or moisture.  He said that it appeared to him that 421 had not been maintained.

34. Wayne Claughton as the managing director of Distinctive Aluminium Services had been involved in the fabrication, supply and fitting of aluminium windows since 1989.  He produced a model frame of the type installed at 421 and 421A respectively.[49] He explained that he installed commercial standard windows as beachfront properties were notorious for water ingress due to the salt, the sea spray, and wind velocities and pressures. He employed the highest level of anodising, and said that those windows are inherently good at keeping water out.  When he was first made aware of the water ingress he attended at the site and noticed that the tilers had caused the outside balcony to be level with the floors inside.  On occasion he had noticed, on level 2 of 421A, that the window was about 35 to 40mms under water.  He said that the pressure of the rain being forced across the balcony floor towards the sliding door resulted in the water being trapped. He said that no window was designed to accommodate that quantity of water. Even after the tiles at the sliding door had been removed and drains installed, he still noticed some leakage through the columns during heavy rain. He arranged for the column claddings to be removed to ensure that everything was satisfactory. He otherwise confirmed the evidence of the plaintiff.  He explained that by using silicone he had increased the standard 12mm capacity of the frames to about 20 to 25mm capacity. He explained that the last remedial work which was undertaken would probably have been over a two-day period. He kept no records of the work which was performed as he did not intend to charge for that work.  He explained that he had been called by the plaintiff to attend at 421A after the tenant had noticed some leaks coming from the sliding door on the highest level. He said that when he arrived the carpet had already been pulled away, and there were obvious signs of moisture at the columns again which appeared identical to the problem that had previously existed in 421.  He had not been asked to perform the same remedial work in respect of 421A.

    [49] Ex P.17

35. He had anticipated doing the same work as in 421 for no cost, namely removing the windows, upgrading them so as to cope with more water and undertaking wet glazing of the glass in 421A. He said that he believed those measures would solve the problem. 

36. He explained that he also attended the onsite meeting on 1 August 2007 while moisture readings were taken.  He did not notice any water in 421 at that time.  He said 421 was “terrible, it was very, very grubby.  I don’t think anyone had touched it since we left some 5 or 6 years earlier”. He had told the plaintiff in an email on 12 September 2007[50] that the cause of the problem was water being driven into the base of the window, over the grate and drains installed by the plaintiff. He had recommended that they wet-glaze or silicon-seal the windows preventing the ingress of any water no matter the conditions.  He had suggested that the sliding door units be provided with new aluminium angles to the outside base, with the view of stopping or at least disrupting the wind pressures that drive water into the drainage slots. He had again confirmed that his company stood ready to start the works immediately should all the parties agree.

    [50] Ex P.25

37. Joe Scuteri explained that he had been present at 421 on no more than 10 occasions since the termination of the contract on 13 July 2003. He said[51] in chief that on occasions when it rained, he had observed dampness, and further encroachment of moisture into the floor boards.  He explained that when he use to attend the unit more regularly he observed damp areas which were basically water, even after the installation of the drains on the balconies. In cross-examination he said that he couldn’t recall being physically in attendance at 421 when it had been raining. He said that over the years the water staining had increasingly encroached into the floor boards.  He said that he had attended at 421A on various occasions and had observed the first defendant and his partner place towels on the floor to absorb the water. 

    [51] T.1336

38. The first defendant Mr Nikou explained that he had observed water entering both properties on all levels soon after the windows had been installed in February 2002. He said that after work was undertaken the problem slowed somewhat but water still continued to enter.  He described it as water coming in through the ground floor western windows, and the first and second floor western, northern and eastern windows in 421.  In 421A it was mainly from the western windows on all levels.  He said that he had discussions with the plaintiff and also Mr Claughton about the ingress of water, and as he was concerned about it, he took photographs from 8^th June 2002.[52] 

    [52] Ex D20

39. He said that because of the ongoing problem in relation to water ingress he sought a report from Gunnar Erbsland who had explained that the balcony level was either higher than or at least level with the floor boards inside the respective dwellings so that water would gather at the sliding doors.  His recollection is that the drains and grates were installed in October or November of 2002.

1. Soula Giannakis said that since 2004, she had observed patches of water and water marks in levels 1 and 2 of 421. She observed that those marks had increased in size during her visits to 421, which had occurred, on average, about once every two months.

2. The building consultant, Martin Stuart-Skinner had inspected both dwellings on 21 July 2003.

3. He observed water marks extending a considerable distance into the rooms.  He had difficulty in recalling his observations after such a long delay, and relied upon his report of 6 August 2003.

4. He explained that the tiled balconies had poor falls and minimal drainage even after the insertion of the drains. 

5. The building consultant Peter Jankovic, inspected both dwellings on four occasions in February and March 2004. He did not directly witness any water ingress caused by rain, but relied upon statements from the first defendant. He said water tended to pond on the balconies and did not drain properly. He was critical of the quality of the drains installed by the plaintiff.  Mr Jankovic said that he spray tested the window frames in February 2004 and the windows leaked.  He was cross-examined about a draft of his report dated 3 March 2004.[53]  That report recorded that when he did that test,[54] the windows did not leak.  Despite the fact that Mr Jankovic’s notes, made at the time, recorded no leaks, he said that his recollection of that event, five years later was that they did leak.  I find that Mr Jankovic was mistaken about his recollection.

   [53] Exhibit P28

   [54] T. p1020

6. I will not refer to the evidence of Mr Giordano who first inspected the dwellings much later, on 10 October 2008.

7. The Engineer, Mr Goldfinch, first inspected the dwellings on 15 August 2005.  He observed salt residue and water straining at the western levels.

8. He also observed “little step down between the internal floor level and the tiled balcony level”.

9. He noted that in some places the stainless steel grate stood “proud” of the tiles therefore preventing the proper collection of excess water. There was little or no fall to enable the drain to properly work. He believed that the work undertaken by the plaintiff and Mr Claughton had assisted in partially preventing wind driven rain from ponding on the balcony in front of the aluminium window frames.

10. He had not been given a copy of the moisture readings that he had taken in both dwellings on 1 August 2007, and could not dispute the evidence of the plaintiff and Ms Mesite as to those readings.

11. On 3 December 2008 he had attended 421 when, in the absence of Mr Bibbo and Mr Claughton, the window frames, at level one of the western elevation, were removed.

12. He had observed water in the aluminium z-flashing tray and water staining in the vicinity.  He took photographs of some of the staining.

13. He recommended completely waterproofing the outside so that moisture cannot get inside the extruded aluminium sections.[55] He described this as “fish tanking”.  He suggested the use of a marine grade sealant called Sikaflex 11 FC; which made the work easier and a “little bit cheaper”.  He conceded that a “scruff plate” was readily available at hardware stores and fitted for $300.

    [55] T. p1077-1078

14. He conceded in cross-examination that he had attended the site on 8 occasions but had not observed water physically entering until September 2009.

15. Mr Goldfinch maintained that despite this, he remained of the opinion that water had continued to enter the premises causing dampness. He said that the windows on the northern elevation had not been fitted with the necessary hoods to prevent penetration by stormwater. 

16. Paul Arevalo attended level one of 421 in May 2009.  The windows on the western side were dismantled.  He said that he “could feel the dampness, a lot of moisture underneath the sub-sill”.

17. He made a recommendation to alter the existing frames and to construct a new concrete plinth 100mm high across the western elevation balcony.

    Conclusions as to water ingress

18. I accept the evidence of the plaintiff, Ms Mesite, Mr Claughton and Mr Kikianis that, on 1 August 2007, the moisture readings at the western level of 421 were dry, and that this was in direct contrast to 421A.  However I agree with the submission of counsel for the defendants that evidence of one day is of little value. I accept Mr Goldfinch’s evidence that the best way to assess such moisture level would be on a day when it was raining.

19. I give little weight to the observations of Mr Goldfinch and Mr Arevalo as to the state of the windows in 421 in December 2008 and May 2009. Many years had passed since the windows had been installed. No maintenance had been undertaken in 421. It was clearly established that unless the aluminium frames were properly cleaned and maintained, then salt and sand would adversely impact upon them.  The windows had been removed on at least two occasions prior to May 2009.

20. I am conscious of the fact that 421 has at all times remained unoccupied.  It is not surprising that there have been so few direct sightings of water ingress. I am left with inferences to be drawn from established facts.  I am conscious that the defendants carry the burden of proof on this 421 issue.

21. I have had regard to all of the evidence including the photographs taken since 8 June 2002; the few observations of water ingress; the number of observations as to the increase in the water marks; and the emails between Mr Claughton and the plaintiff in 2007. I am satisfied that water ingress to a minor level has continued from the windows, on the western elevation, on level one and level two of 421.

22. I have no doubt that until about December 2008 the entry of water was indeed minor. One might speculate that any increase in water ingress was caused by the combination of the window removal in December 2008, and the absence of any maintenance over the six year period, since they were installed. 

23. I will discuss the work reasonably required to rectify each dwelling later in these reasons.

    Termination of the contract

24. The defendants, in the letter from their solicitor, dated 13 July 2003, expressly purported to terminate the contract pursuant to clause 16.1 of the contract.

25. I repeat that that clause provided that:

    The owner may cancel the contract/stop the works at any time for any reason but must notify the builder in writing of his wishes in such regard.  The builder, on receipt of such notice, shall stop the works and submit a final account statement.

26. It is possible to construe that clause in various ways.  It may be construed as a no fault right to terminate – that is that no default need be alleged; and either party may simply give a notice, in writing, of termination. It may also be construed as a right to terminate for “any reason” which would include the right to terminate for a breach of contract by the other party.

27. For the reasons which follow it doesn’t matter how that clause is to be construed.

28. It is settled law that a clause, expressly giving a party the right to terminate a contract, will not be treated as the exclusive right to terminate, but merely an additional right, to those rights to terminate at common law.[56]  The contract did not, on its face, exclude the right of a party to terminate for breach by the other party. That right to terminate for breach was open at common law to either party.[57]

    [56] Holland v Wilsthire (1954) 90 CLR 409, and Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17

    [57] Mancorp Pty Ltd v Baulderstone Pty Ltd (1993) 60 SASR 120

29. If the defendants had terminated the contract upon the purported basis that the plaintiff had breached the contract by defective building work; and the defendants were lawfully justified in doing so, then the cost to rectify the relevant defective building work would be assessed as damages against the plaintiff at whatever was the reasonable cost to the defendants. (my emphasis)  In respect of such quantum, the defendants rely upon the assessments of Mr Jankovic and Mr Petris contained in the revised Scott Schedules.

30. If, however, the defendants had wrongfully terminated the contract, then the cost of any such defective work would be assessed against the plaintiff on the basis of what it would have cost the plaintiff to do that work. (my emphasis)

31. The significance of this distinction in the subject case is obvious.

32. In respect of what was minor defective work, as opposed to incomplete work, the plaintiff would have simply called upon the relevant sub-contractor to rectify the work in the maintenance period at the cost of the sub-contractor. Any incomplete work would fall outside the scope of any claim for damages. This was not a fixed price contract, and the defendants would have been obliged to pay the plaintiff the cost of completing any incomplete work. 

33. Save for the cost of any items for which the plaintiff was directly responsible and which could not be sheeted home to sub-contractors or suppliers, then in the event of a wrongful termination by the defendants, there would have been little cost to the plaintiff. 

34. If the defendants did not purport to terminate the contract for the alleged breach of contract by the plaintiff but did so, without alleging default, pursuant to the terms of the contract, then the consequences provided by the contract, for such a termination, in clause 18 would flow.

35. Neither counsel addressed at length the legal basis for the termination by the defendants.

36. It is important to reflect upon the respective positions of the parties in the months before 13 July 2003.  The first defendant had obtained possession of 421A in December 2002.  Mr Scuteri was providing lists to the plaintiff of work that he required to be completed in 421. The plaintiff had been paid none of his progress claims from about February 2003. The personal views of the defendants, although not conveyed to the plaintiff, can be gleaned from the letter forwarded by their solicitors to Mr Dalby on 28 May 2003.  They asserted that the plaintiff was in breach of contract in some four respects.

37. In their Amended Defence the defendants pleaded that the plaintiff had breached the terms of the contract, alleging, inter alia, a failure to rectify the list of defects identified by Mr Dalby on 6 June 2003; and the list of defects which had only subsequently been identified by Mr Jankovic on or about 26 March 2004.

38. The difficulty confronting the defendants, on 13 July 2003, in terminating for breach of contract by the plaintiff, is that they themselves were in breach of contract for having failed to pay within 7 days the progress claims submitted by the plaintiff pursuant to the contract. They had been in breach well before Mr Dalby had been engaged by them.

39. Although it is often a vexed question as to whether a breach by a party may be an impediment to termination,[58] there can be no doubt that, in the subject case, the failure of the defendants to pay the progress claims prevented them at law from purporting to terminate the contract for the alleged defaults of the plaintiff.

    [58] Carter - Breach of Contract, 2nd Ed, paragraphs 1033 - 1037

40. Had the defendants purported to terminate on the basis that the plaintiff was in default, in my opinion, the defendants’ purported termination would have constituted a wrongful repudiation of the contract.[59]

    [59] See Carr v JA Berriman Pty Ltd (1953) 89 CLR 327

41. I infer that because the defendants were themselves in breach, they, on the proper advice of their solicitors, elected to terminate the contract without providing any reasons pursuant to clause 16.1 of the contract.

    The effect of termination

42. The consequences of the termination pursuant to clause 16.1, are detailed in clause 18 of the contract. The defendants were contractually obliged to pay to the plaintiff within 7 days, inter alia, the actual cost of the works as at the date of cancellation.  Clause 18 also provided that if the defendants took possession, of the dwellings, which they undoubtedly did, “the work shall be deemed to be practically complete on the day such possession is taken …and the work is the responsibility of the [defendants] from the date of practical completion”.[60] (my emphasis)

    [60] Sub-clauses 18.3 and 18.4, Exhibit P1, Vol 1, p.28

43. Accordingly pursuant to clauses 12 and 18 of the contract, the plaintiff’s rights to payment in full of the progress payments, and builder’s fee outstanding at the date of termination, had accrued to him unconditionally.  In addition, and significantly, the building work in respect of both dwellings was deemed to be practically complete on 13 July 2003. (my emphasis)

44. Any such rights which had accrued unconditionally prior to termination, whether they be for damages for breach of contract[61] or for payments due to a party are not divested by the termination of the contract.[62]

    [61] Even if the party was not innocent.  See McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457, and Hong Kong FIR Shipping Co Ltd v Kawaski Kisen Kaisha Ltd (1962) 2 QB 26

    [62] See Carter, Breach of Contract, 2nd Ed paragraphs 1207-1209 and Western Farmers Ltd v Commonwealth Agricultural Service Engineers (1935) 54 CLR 361

45. In the subject case the defendants were obliged to pay in full, the progress payments and builder’s fees outstanding at the date of termination.  In Dawnays v FC Minter[63], Lord Denning said:

    Every business man knows the reason why interim certificates are issued and why they have to be honoured.  It is so that the sub-contractor can have the money in hand to get on with his work and the further work he has to do…he cannot go on unless he is paid for what he does as he does it.  An interim certificate is to be regarded virtually as cash, like a bill of exchange.  It must be honoured.  Payment must not be withheld on account of cross-claims whether good or bad – except so far as the contract specifically provides.

    [63] [1997] 1 WRL 1205 at 1209

46. In consequence of the deemed “practical completion” having occurred on 13 July 2003 pursuant to clause 18 of the contract, a maintenance period of 13 weeks commenced on that day.

47. The defendants were obliged to tell the plaintiff of all defects and faults; and to give him reasonable access to do that work.  If the plaintiff did not fix those defects or faults within 30 days, the defendants, after having given reasonable notice to him, could have engaged others to do the work at the expense of the plaintiff.

48. The plaintiff was excluded from the site on 13 July 2003.  He was absolved from the obligation to bring his sub-contractors to the site to rectify any defective building work. He could not have obliged them to attend the site and meet their obligation to perform any rectification work at his expense.

49. I would respectfully adopt the analysis of the court in Sarah Constructions Pty Ltd v Phillips,[64] in that respect.

    [64] [1997] 1 WRL 1205 at 1209

    Practical Completion

50. Counsel for the plaintiff, Mr Ross Smith, submitted that notwithstanding the events of 13 July 2003, I ought find that, in respect of 421A, “practical completion” was achieved on 15 December 2002 when possession of the dwelling was taken by the first defendant. He asserts that in any event practical completion is an inevitable conclusion from the undisputed evidence that the first defendant has continued in occupation without any remedial work having been undertaken since termination on 13 July 2003.

51. Pursuant to clause 20 of the contract the maintenance period of 13 weeks commences on the date of practical completion and the defendants are there upon obliged to tell the builder of all of the defects and other faults which appeared on that date.

52. This period of 13 weeks is vital in respect of the subject cost plus type of contract.  The plaintiff is able during that time to ensure that his sub-contractors will attend to rectify their defective building work at their cost, or complete building work at the cost of the defendants.

53. If the relevant date is 15 December 2002 as asserted by the plaintiff, then the items identified by Mr Dalby in his report of 6 June 2003; and by Mr Stuart-Skinner in his report of 6 August 2003 fall well outside the 13 week period.

54. Mr Ross-Smith, referred to the direction from the first defendant that possession be given in respect of 421A.

55. He submitted that the effect of that direction was that the contract was varied to provide for “sectional or portional” practical completion of 421A.

56. In the alternative he submitted that in consequence of the first defendant so directing the early completion of 421A and promising to pay any outstanding progress payments, the defendants ought be estopped from denying that the contract had been varied so as to provide for sectional practical completion.

57. Counsel for the defendants Mr Britton submitted that this was a complete contract for the construction of both dwellings, and could not, and indeed was not severed.

58. In my opinion the subject contract fell within the class of contract of which was capable of variation so as to be treated as severable into “an agglomeration of entire parts”.[65]

    [65] See Glanville Williams "Partial performance of entire contracts" 37 LQR 373 at 373; Tramways Advertising Pty Ltd v Luna Park (NSW) Pty Ltd (1938) 38 SR (NSW) 632; and The Hansa Nord (1976) QB 44

59. Here the dwellings were separately owned, and the effect of the work in November and December 2002 was consistent with such severance.

60. However I do not need, in the event, to resolve this issue, because in my opinion, 421A had not been practically completed, as defined, on 15 December 2002.

61. In respect of 421A there was no deemed practical completion pursuant to clause 18 of the contract on 15 December 2002.  That would only have occurred if the first defendant had taken possession without the consent of the plaintiff.  I do not accept that either the plaintiff or the first defendant subjectively believed that practical completion had occurred, and that it was necessary for a list of defects to be prepared. 

62. True it was that the work had been completed in 421A to a stage where possession could be taken by the first defendant, and the tenants did in fact occupy the dwelling for many months, before it was continuously occupied by the first defendant.

63. The definition of “practical completion” is when the work is largely finished, and ready to use and/or occupy.

64. In my opinion it is an objective test as to whether 421A was ready to use and/or occupy.  Although the first defendant and his tenants did in fact enter into occupation, it does not follow that 421A was ready to use/or occupy. There were personal reasons for their respective entries into occupation.

65. The fact remains that at the time possession was taken, all parties including the plaintiff and the first defendant were well aware that 421A was not adequately weather proofed.

66. As I have said the evidence of the tenants Mr & Mrs Hendrie was not challenged by the plaintiff. 

67. I refer to the comments of Mr Goldfinch in his report of 22 November 2005,[66] (albeit with respect to 421), that this failure to adequately waterproof, breaches the requirements of the Building Code of Australia.

    [66] Ex P1, Vol 2 p.210

68. I accept that it is not necessary for a building to be defect free before practical completion.[67]

    [67] See Walter Construction Group Ltd v Walter Corporation Ltd [2001] NSWSC 283

69. However, in my opinion the lack of adequate weather proofing is so significant that it precludes a finding that practical completion was achieved in 421A on 15 December 2002.[68]

    [68] In a different definition, see Sarah Constructions Pty Ltd v Phillips

    Conclusion as to practical completion

70. Accordingly I conclude that practical completion was not achieved in respect of 421A on 15 December 2002.  Indeed I find for the above reasons that practical completion is deemed to have occurred in respect of both dwellings on 13 July 2003.

    The plaintiff’s claim

71. I turn now to whether the plaintiff is entitled to judgment for the progress payments and fees outstanding as at the date of termination together with interest at the rate of 10% per annum over the many years since 13 July 2003.

1. Before I deal specifically with each of the alleged defects, there are some matters that I need to address.

2. The court was given little assistance from the parties as to the reasonableness of any alleged rectification work and the assessment of the cost of such work.

3. The defendants had engaged Mr Jankovic to detail the list of defects. He did so in his report dated 26 March 2004.  They engaged Mr Petris to assess that report “in regards to methodology and costings, and provide a quotation for the repairs”.[92] (my emphasis)

   [92] T. p1210

4. I am not at all critical of Mr Jankovic in having compiled the list of “defects”.  He was not asked to turn his mind to the nature of the defects, and in particular, whether they were incomplete items; whether they were the type of minor defects which would have been attended to by sub-contractors.  He simply went about the task of itemising everything necessary to “complete” the dwellings.  He was not asked to directly consider whether any suggested rectification work was reasonable, or whether it was a practical method in the circumstances.  In consequence the court was faced with a massive Scott Schedule.  It should have been plain to those instructing Mr Jankovic that there were a large number of “incomplete” items.  In item 59 of FDN 78, in respect of 421, the alleged defects included: “The hot water service is yet to be installed or has been installed and has been removed”. The cost to “rectify” that “defect” was $1,425.

5. He certainly was not asked to consider the cost of the work.

6. Indeed when he appeared at the trial he had not even seen the costings detailed in the report of Mr Petris.[93]  It was apparent during his evidence that he disavowed some of the matters raised by Mr Petris.  On the significant matter of water ingress from the level one and two balconies, Mr Jankovic was critical of the drains installed by the plaintiff.  He described them as too small and therefore a job half done.  He speculated that it may be necessary to remove the aluminium frames.[94]

   [93] T. p897

   [94] T. p911 - 912

7. Mr Petris however took that to mean that the tiles, balastrait and substrate should be removed and that the frames could not be reinstated. Mr Jankovic made it clear that they were not his words nor his recommendation.

8. Despite his qualifications as a builder, I do not accept that Mr Petris had the necessary expertise to comment upon the capacity of the aluminium frames installed at the subject dwellings.

9. I have no doubt that Mr Petris is a highly experienced estimator.  However, in my opinion, there was an air of uncertainty about his costings, such that some of them were neither reasonable nor practical.

10. In my opinion these difficulties were a direct result of the fact that Mr Petris was not asked to turn his mind to whether it was reasonable to do the work referred to in Mr Jankovic’s report.

11. I have already concluded that the date for assessment is 26 March 2004 and not 2009.  In addition I have found that the defendants’ damages, if any, are limited to that which it would have cost the plaintiff for the work to be done. 

12. Mr Petris fixed the cost of an appropriate person to do the work as $45 per hour in 2004.

13. He then proceeded to calculate the number of man hours to do the work, to which he added a builder’s margin of 20% together with GST.  On some of the major items he had nominated a provisional cost.

14. Mr Petris was not asked to determine the cost to the plaintiff of the work.  I have no doubt that the cost of engaging other contractors to rectify any proven building defects would clearly be more expensive than if the work was at the plaintiff’s cost.[95]

    [95] Brooking on Building Contracts, 4th ed, p154

15. This is because the work would have been performed without the added 20% margin, or because, during the maintenance period, at least, his sub-contractors would have rectified the minor defects.  They may have been compelled to undertake rectification of the more major defects at their cost or at least partly their cost.

16. Mr Petris had not been informed that some of the work had been performed by contractors engaged by the defendants, and which fell outside the scope of the contract.  When the revised Scott Schedules were filed the defendants deleted some 49 items which apparently fell within that category.  I have already noted the confusion caused by the incorrect numbering of the dwellings in the reports, including the initial reports of Mr Petris.[96] When he gave his evidence, that confusion continued.[97] Mr Petris did not turn his mind to whether the condition of an item may have been caused by poor maintenance by the defendants. He simply costed the items contained in the Jankovic report.

    [96] Exhibit D 37

    [97] T. p1186

17. I will set out some examples of unreasonableness.  Mr Petris was asked about his costing, when “the defect” was that the front door handle of 421A was not parallel with the door jamb.  The rectification work was, somewhat oddly, that the front solid door ought be replaced, with an allowance of 18 hours or two and a half days for one man to do that job.[98]  He allowed four days to treat rust in the garage; 37 hours to rectify the ground floor toilet; and 10 days for one man to take the unreasonable step of demolishing the existing floor tiles surrounding the washing machine space in the laundry.

    [98] See FDN 79 - item 12

18. He was asked about many other items including four days to realign the entry wall to 421, and 10 days to straighten a toilet wall without regard to the reasonableness of those tasks.

19. Mr Giordano provided the plaintiff’s responses to the Scott Schedules.  He was also highly qualified as a building surveyor.

20. He had inspected the dwellings on 10 October 2008, however his opinions were restricted to 421A, as he had regarded 421 as being only 70% complete.  There were also some difficulties caused by the approach taken by Mr Giordano.  He had not read the reports of the experts, Mr Goldfinch, Mr Dalby, or Mr Stuart-Skinner.  He was clearly mistaken about the question of water ingress in 421A.

21. However much of what he had to say generally about the reasonableness of some of the proposed rectification work was plainly correct.  He was critical of the delay in the production of the Jankovic report because it fell outside the 13 week maintenance period.  He explained that it was not uncommon for cracks to appear in buildings such as the subject dwellings within one month.

22. He explained that it would be unreasonable to knock down a room because of some poor alignment, unless it adversely impacted upon the practical use of the room.

23. I turn now to consider the alleged defects in more detail.

    The alleged defects

    ·water ingress

24. There is no doubt that the construction of the balconies on levels one and two of each dwelling constitutes defective building work.  It ought to have been obvious to the plaintiff that unless there was a step down to the balcony, then water would collect at the aluminium windows and screen doors.

25. While the plaintiff chose an appropriate method to rectify the problem by the creation of the drains on each balcony, in my opinion he did not make them big enough nor provide a sufficient fall in the channels to carry the water away.

26. This was the unanimous view of the experts, including Wayne Claughton; Gunnar Erbsland in October 2002; Don Dalby on 29 May 2003, Martin Stuart-Skinner on 21 July 2003; Peter Jankovic on 26 March 2004, John Goldfinch on 23 November 2005 and Paul Arevalo in May 2009.

27. Rather than rectify the problem by further structural work, the plaintiff worked with Mr Claughton to attempt to improve the capacity of the aluminium windows.  It was not entirely successful as I have found. I have no doubt that had the drains been correctly installed, the windows would have accommodated the severe weather conditions and there would have been no water ingress

    ·method of rectification

28. Mr Dalby recommended that the drains be replaced with one constructed with larger falls within the channel; “a 1:8 fall, and with falls directing water in two directions – one to the currently constructed outlet, and a second to an outlet connected to the other floor grate in the balcony”.[99]  He also recommended reviewing the aluminium sill sections.

    [99] Ex P1, Vol 2, p 199

29. I infer that Mr Stuart-Skinner had recommended a similar method in July 2003,[100] although he explained that it would be necessary for all the balcony tiles to be replaced.  He had estimated the cost of all of the work in his report including a significant number of unrelated items, that might be said to be incomplete work, rather than defective work to be $50,000 for 421, and $30,000 for 421A.

    [100] Ex P1, Vol2, p210

30. I infer that Mr Jankovic would have approved of this method.

31. In examination in chief he said:[101]

    So while the method was probably amicable the material used probably wasn’t really suitable.  In regards to repairing it to get fall in the grate, there are a couple of ways of doing that.  If you can’t cut into the concrete, because the concrete has reinforcing 20mm lower, then the way would be to build up the grate to form a fall and you could do that by using a bitumenised product. There are products available, so you could build it up say 10mm one end to nothing at the other end where the ambit is.  So there are ways of fixing that without the grate itself.

    [101] T. p911

32. This latter approach would not involve the removal of tiles, balastrait and substrate.

33. He also thought that the additional work to the window frames recommended by Mr Claughton on 12 September 2007 was a reasonable approach.[102]

    [102] Ex P25; T p1024

34. It also may be inferred that Mr Goldfinch would have approved of this method at least in 2005 on the basis that it also involved the fishtanking of the external windows and sealing the gaps with an appropriate marine grade seal.[103]

    [103] Ex P1, Vol 2, p317

35. I briefly mention Mr Arevalo.

36. He was the holder of a Restricted Builders Licence who in 2009 removed the aluminium windows and doors in level one of 421, jackhammered the tiles and screed on the balcony and constructed a concrete plinth.  There were two employees and it took one day to construct the plinth.

37. He had quoted $165,000 to do the same work on each of the three levels in each of the two dwellings – effectively $27,500 per level.  Notwithstanding that his method was approved by Mr Goldfinch I do not accept that it was reasonable nor even necessary.  I note that counsel for the defendants elected to proceed on the Jankovic/Petris method rather than that of Mr Arevalo.

38. Mr Petris had initially costed the water ingress work on 421A at $29,380 at 2004 rates.  After builder’s margin and GST it totalled $38,781.60.  He subsequently corrected it to include an additional $16,000 for the replacement windows on the second floor,[104] increasing the cost to $59,901.60.  By contrast the total cost in 421 was $58,951.20.  In addition, on each floor Mr Petris allowed a provisional cost of $9,500 for the removal of tiles balastrait and substrate.

    [104] Annexure B. costings

39. There are a number of difficulties with Mr Petris’ costings.  His recommendations were not supported by Mr Jankovic.[105] I repeat that I do not accept that Mr Petris had the necessary expertise to make those recommendations. In any event I do not regard them as reasonable.

    [105] T. p1206

40. In addition, in my opinion, Mr Petris did not appreciate that Distinctive Aluminium Services had already installed the highest standard “coastal” windows.  I also find that he was wrong when he opined that once a frame was removed it was necessary for a whole new frame to be manufactured and installed.

    Conclusion as to the water ingress

41. In my opinion the work recommended by Mr Dalby and others was both reasonable and appropriate at the time.  I accept that it represents the reasonable cost of rectification at the time.

42. I will later discuss whether it is reasonable for the defendants to undertake that work now, so many years after the termination of the contract.

43. I have reflected upon 421 because of the minor level of water ingress.  However had the correct channels been provided there would have been less sand and other debris collected in the drains.  In my opinion the same sum should be allowed for each of them.

44. The difficulty is in fixing a quantum for that work as at 2004.

45. I have been able to obtain some assistance from the 2004 costings of Mr Petris, albeit that those costings covered far more extensive work, and work performed by another builder.  Counsel for the plaintiff was justifiably critical of the dearth of material to assist in this assessment.  I simply must do the best that I can with the information available.  In accept that on these items, it is the plaintiff and not his subcontractors who was responsible.  However the associated costs of the window treatments would have been absorbed by Distinctive Aluminium Services.

46. Allowing for the fact that the aluminium frames do not have to be replaced and that there would be no builder’s margin if the work was done at the plaintiff’s cost, I assess the cost at $16,500 inclusive of GST for each of 421A and 421 – being a total of $33,000.

    The balance of the items in the revised Scott Schedules

47. I turn then to the remaining items in the revised Scott Schedules – FDN 78 in respect of 421 and FDN 79 in respect of 421A.

48. I have already explained that even once the items relating to the water ingress at the aluminium doors and windows have been deleted, there remains a large number of alleged “defects”.

49. I do not propose to detail each of those items for obvious reasons.

50. In FDN 78, in respect of 421 there are numerous examples of minutia such as $55 to fill a gap in the front door with sealant in item 13.  Similarly in FDN 79, in respect of 421A the minutia includes $97.50 to “rectify” an alleged poorly finished gate latch in item 2.

51. At the other end of the scale are items such as the previously mentioned recommended demolition of the floor tiles surrounding the laundry washing machine in item 139, for a cost of $3,950.

52. On the face of it, that latter recommendation is entirely disproportionate to the end to be obtained.

53. I have already expressed my criticisms of the way in which the Scott Schedules were prepared.  The authors did not turn their mind, to the question of whether the recommended work was reasonable or not. There was a dearth of evidence led on that question.  It was treated almost as an all or nothing exercise.  I make it clear I have considered each and every item in each Scott Schedule.  In so far as an item represents incomplete work I have excluded it as not being a “defect”.  Where it was the work of those employed by the defendants including the painter it has been excluded.  Insofar as there are minor defect items which would have been attended to by the sub-contractors during the maintenance period at their own cost I have also excluded them. 

54. Another unfortunate aspect is that in respect of some items one cost has been ascribed to include a number of items, only some of which may be “defects”.

55. In considering these categories I have generally accepted the description of the work by the plaintiff in respect of 421 as contained in FDN 78.  In respect of FDN 79 I have generally have accepted the evidence of Mr Giordano that most of the  minor matters represent work that was incomplete; work commissioned directly by the defendants or maintenance items, where indicated in the Scott Schedule.

56. In respect of 421A the only items which could be described as falling within the relevant category of “defective work” are the following: items 6, 13, 15, 20, 21, 25, 26,  33, 39, 43, 51, 53, 69, 71, 73, 79, 80, 96, 111, 114, 129, 130, 139, 153, 154, 156, 163, 172, 173,  174, 176, 186, 190, 197, 202, 203, 211,  215 and 231.

57. In respect of 421 the only such items are: items 5, 6, 16, 17, 21, 28, 33, 48, 51, 53, 55, 56, 57, 66, 67, 73, 78, 85, 90, 96, 97, 102, 108, 110, 111, 112, 119, 125, 129, 133, 134, 135, 136, 137, 138, 139, 140, 144, 145, 146, 147, 155, 156, 159, 160, 163, 167, 168, 169, 173, 177, 178, 179, 180, 182, 184, 188, 189, 192, 194, 196, 197, 199, 200, 202, 203 and 206.

58. I do not however accept that some of these recommendations are reasonable or practical.  I have had also to consider what would have been the cost to the plaintiff.

59. I have done my best to assess the cost of the reasonable and practical methods of rectifying the true “defects” as at 2004 at the cost to the plaintiff.  I can do no more than apply a broad brush approach to this task.  While that may be unfair to the parties, the court has been left in that position because of the way the evidence was presented. I assess the cost at a rounded up $40,000 inclusive of GST but without a builder’s margin.

    Is it reasonable for the rectification work to be done?

60. The plaintiff submits that it is not reasonable for that work to be done.

61. He refers to 3 major factors as follows:

    §that too many years have passed, and implicitly the defendants are content with their premises.

    §that there would be a betterment because years later the defendants would possess better or newer dwellings.

    §that 421 has been long sold to Miriam Scuteri.

62. I do not accept that those submissions have the effect that it would be unreasonable for the rectification work to be done.

63. It is true that many years have passed.  However this was work that was identified in 2004.  While none of the work has been done it does no follow that either defendant is content with that position.  It does not, in my opinion, alter their entitlement to an award of damages.

64. As to the question of betterment I readily accept that there ought be some deduction if the defendants had had a reasonable choice.  However these defendants have been left with those defects since 2003.  It cannot be said that they will have a better or newer building.[106] It does not matter that the first defendant had attempted to sell 421A previously.

    [106] Keating on Constuction Contracts at 8-037

65. In respect of 421 it has remained in its vacant state at all times.

66. As to the transfer to Mrs Scuteri, counsel for the plaintiff referred to the fact that until 2009 no maintenance had occurred in 421.  He stressed that the transfer to Mrs Scuteri had the appearance of the defendants awaiting the completion of the litigation in order to sell the property.

67. It is trite that the mere fact that, an asset is sold by the owner, and which is in need of rectification because of a party’s breach of contract, does not preclude the recovery of the costs of rectification.  See De Cesare v Deluxe Motors Pty Ltd (1996) 67 SASR 28, UI International Pty Ltd v Interworks Architects Pty Ltd (2007) QCA 402, Westpoint Management Limited v Chocolate Factory Apartments Ltd (2007) NSWCA 253, Unique Building Pty Ltd v Brown (2010) SASC 106 and Gagner Pty Ltd v Canturi Corp Pty Ltd (2009) 262 ALR 691.

68. These matters were recently considered by the Full Court in Unique Building Pty Ltd v Brown (2010) SASC 106 where the Court said:

    The Court does not ordinarily require of a plaintiff that money awarded for breach of contract be applied directly to the loss which is the subject of the damages. Damages are compensatory but it is a matter for the plaintiff whether the money received as damages is in fact spent on remedying the particular loss for which it is awarded. Thus in De Cesare, the plaintiff was able to receive damages for rectification of building defects notwithstanding that the plaintiff had no intention to perform works rectifying the damage and had in fact sold the property and so was actually in no position to perform such works. Doyle CJ explained:[66]

    The award of such amount is not conditional upon the [plaintiff] having first done the necessary work, upon the [plaintiff] undertaking to the court to do so or upon the [plaintiff] proving that the [plaintiff] will do so.

    However this is not to say that intention is never relevant. The Chief Justice in De Cesare referred to the following quote from Tito v Waddell (No 2)[67] where Megarry VC described a qualification to the general rule discussed above (at 332):

    [I]f the plaintiff has suffered little or no monetary loss in the reduction of value of his land, and he has no intention of applying any damages towards carrying out the work contracted for, or its equivalent, I cannot see why he should recover the cost of doing work which will never be done. It would be a mere pretence to say that this cost was a loss and so should be recoverable as damages.

    A similar approach can be observed in the case of Ruxley Electronics and Construction Ltd v Forsyth (“Ruxley”),[68] a case to which Doyle CJ referred with approval in De Cesare. In Ruxley, the defendant built a swimming pool on the plaintiff’s land but erroneously built it one and a half feet shallower than the depth for which they had contracted. In determining that rectification damages were not appropriate, the House of Lords considered it relevant that the plaintiff had no intention to rebuild the pool. However, Lord Jauncey explained that there was a quite restricted relevance for intention in determining the appropriate measure of damages:[69]

    The appellant argued that the cost of reinstatement should only be allowed as damages where there was shown to be an intention on the part of the aggrieved party to carry out the work. Having already decided that the appeal should be allowed I no longer find it necessary to reach a conclusion on this matter. However, I should emphasise that in the normal case the court has no concern with the use to which a plaintiff puts an award of damages for a loss which has been established. Thus irreparable damage to an article as a result of a breach of contract will entitle the owner to recover the value of the article irrespective of whether he intends to replace it with a similar one or to spend the money on something else. Intention, or lack of it, to reinstate can have relevance only to reasonableness and hence to the extent of the loss which has been sustained. Once that loss has been established intention as to the subsequent use of the damages ceases to be relevant.

1. In UI International Pty Ltd v Interworks Architects Pty Ltd (2007) QCA 402, in a comprehensive review of the authorities, the Court of Appeal (Qld), concluded that if the sale, as a supervening event meant that the rectification work cannot be carried out then it could hardly be found that the rectification work is reasonable in order to achieve the contractual objective. The court said that, “if the sale of a property to a contented purchaser meant that the claimants did not think and the purchaser did not think, that the rectification work was necessary, then it may well be unreasonable to carry out the rectification work”.

2. In the present case in my opinion, nothing turns upon the transfer of title to 421 from the second defendant to Mrs Scuteri. It was simply a transfer to a family member. It is apparent that Mrs Scuteri does believe the work is necessary because in 2009 she expended $10,000 as part payment of the rectification work recommended by Mr Arevalo.

   Conclusion

3. In light of the above reasons the plaintiff is entitled to judgment on his claim in the sum of $137,283.83 inclusive of interest.

4. The defendants are entitled to judgment on the counterclaim in the sum of $73,000, together with interest.       

5. I will hear the parties as to the interest payable upon the defendant’s judgment sum and the question of costs.

6. I will also hear the parties as to the form of orders to be made in light of these reasons, and in particular whether separate judgments ought be entered or only one judgment for the plaintiff less the amount ordered on the counterclaim pursuant to 6 DCR 224(2).[107]

   [107] Kane Constructions Pty Ltd v Sopov (No2) [2005] VSC 492; and Ray Laurence Constructions Pty Ltd v Nolks [2010] NTSC 37