Brooks v Gannon Constructions Pty Limited

[2017] NSWCATCD 12

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Brooks v Gannon Constructions Pty Limited [2017] NSWCATCD 12

Hearing dates:

19, 20, 21 September 2016(Final submissions received 4 November 2016)

Decision date:

02 March 2017

Jurisdiction:

Consumer and Commercial Division

Before:

T Simon, Senior Member

Decision:

1 The respondent is to pay the applicant the sum of $105,836.57 immediately.

2 In the event that either party intends to make further submissions in relation to costs, the applicant is to provide any documents and submissions to the respondent and the Tribunal, either in person or by post by 15 March 2017.

3 The respondent is to provide any documents and submissions in relation to costs to the applicant and the Tribunal, either in person or by post on 30 March 2017.

4 The issue of costs will be decided on the papers. In the event that the parties wish to be heard in person they must advise the Tribunal on or before 30 March 2017. If no further submissions are received the Tribunal will proceed to make a decision on the papers.

Catchwords:

Home Building, statutory warranty, defences, s18F, preferred outcome, s 48 MA

Legislation Cited:

Home Building Act 1989 (NSW)
Home Building Regulation 2014 (NSW)
Home Building Regulation 2004 (NSW)

Cases Cited:

Bauchet v Mirage Pools Pty Ltd (2001) NSWSC 201
Maiolo v Frank Chiarelli and Anor (2016) NSWCATAP 81
Pham v Broadview Windows Pty Ltd
Pastrovic & Co Pty Ltd v Farrington [2011] NSWDC 94
& Ors [2009] NSWCTTT 375
The Craftsmen Restoration and Renovations v Thomas Boland, Thomas Boland v The Craftsmen Restoration and Renovations [2008]

Category:

Principal judgment

Parties:

Christopher Brooks (applicant homeowner)
Gannon Constructions Pty Limited (respondent builder)

Representation:

Counsel:
E Chrysostomou - for the applicant

  Solicitors:
Mills Oakley Lawyers – for the applicant
G Crisp of Crafers Law – for the respondent

File Number(s):

HB 15/64567

Publication restriction:

Nil

Reasons for the Decision

The Application

1. For ease of reference the applicant shall be referred to as the homeowner and the respondent as the builder.

2. The initial application was made by the homeowner on 1 December 2015 seeking $289,050.92 for defective works which they alleged amounted to a breach of statutory warranty. That amount was revised as a result of the expert’s joint report and by the time the matter came before the Tribunal for hearing the amount claimed was less than what was initially claimed.

3. The respondent by way of defence is claiming set off against the amount claimed for variations amounting to $192,966.40.

Jurisdiction of the Tribunal

4. It is not in dispute that the parties contracted in writing on 7 February 2013. The contract names Mr Michael Gannon in his individual capacity as the builder. Mr Gannon is the sole director of the respondent Corporation. The issue was raised at the outset of the hearing and both parties agreed that the contracting parties were always intended to be the applicant and Gannon Constructions Pty Ltd. The licence number noted on the contract and the Home Warranty Insurance certificate were in the name of the Corporation and the Tribunal finds that the contracting parties were always intended to be Christopher Brooks and Gannon Constructions Pty Ltd.

5. The claim made by the homeowner is for breach of statutory warranty. There is some issue relating to whether the builder is within time to bring its defence (by way of equitable set-off) and that shall be dealt with separately. However, the Tribunal finds that the parties contracted for residential building works on 7 February 2013 as defined in section 3 of Home Building Act 1989 (NSW) (HBA). The Tribunal is satisfied that the application involves a building claim as defined by s 48A of the HBA. The Tribunal is also satisfied that the claim has been made within time and that it has jurisdiction to determine the building claims pursuant to section 48K of the HBA.

The Evidence

6. The Tribunal had before it the following:

1. Five folders containing each party's lay and expert evidence (Exhibit 1)

2. A joint report of the experts dated 15 September 2016 (Exhibit 2)

3. A letter from Geoff Mcvey dated 28 February 2013 (Exhibit 3)

4. Agreed joint costing of the experts (Exhibit 4)

5. Agreed joint scope of works of the experts (Exhibit 5)

6. Letter from CCS Legal dated 25 June 2015 (Exhibit 6)

7. Letter from Mills Oakley Lawyers dated 5 August 2015 (Exhibit 7)

7. Closing submissions were received from both parties as follows:

1. On 20 September 2016 the Tribunal received a schedule of agreed items

2. On 10 October 2016 the Tribunal received submissions from the homeowners

3. On 21 October 2016 the Tribunal received submissions from the builder.

4. On 4 November 2016 the Tribunal received further submissions from the homeowners.

8. The Tribunal in coming to its decision has considered all exhibits (subject to objections), the oral evidence of the parties given at the hearing and all the submissions that were provided to it.

The Applicants Claim for Breach of Statutory Warranty

9. The applicant has made a claim for breach of statutory warranty. There are a number of defects for which liability, scope of works and quantum have been agreed between the parties. They are contained in the table provided at Exhibit 4. Four items remain in dispute and shall be dealt with in turn below.

The Exposed Structural Steel

10. Both parties agreed that this was a defect. The builder denied liability for the defects. The parties agree on the method of rectification, the scope of works and quantum if the Tribunal finds that the builder is liable for repair of the defect.

11. The homeowner initially made submissions that although the engineering specifications were not initially contained in the contract, they subsequently formed part of the contract and item 41 of the Engineering Specifications required that all steel work was to be “hot dipped galvanised.”

12. The homeowner later made submissions that in any case it is unnecessary to determine if Mr McVey's engineering specifications for hot dip galvanised steel formed part of the contract. They state that the experts have agreed to what is required to satisfy the requirements of the BCA (or NCC). They state that the real issue in dispute is whether the respondent is liable for the defects in the steel structure as a result of breaches of the statutory warranties.

13. The builder’s defence is that the builder complied with its obligations under the contract and that none of the methods such as galvanisation had been specified in the plans or design. The builder makes submissions that the engineering specifications were never signed by the parties and never formed part of the contract.

14. The builder relies on clause 1 of the contract between the parties which states:

The documents listed below also form part of this contract and must be attached

The section where the specifications are to be listed is struck out and the works “as signed” is handwritten.

15. The builder also relies on clause 2(2)(a) of the contract for its defence. The clause relevantly states:

All work done under this contract will comply with:

1. (a) the Building Code of Australia (to the extent required under the

Environmental Planning and Assessment Act 1979 (including any

regulation or other instrument made under that Act);

(b) all other relevant codes, standards and specifications that the

work is required to comply with under any law, and

(c) the conditions of any relevant development consent or complying

development certificate.

(d) any construction certificate and any other requirement of the relevant local council and any other statutory authority who approval or consent is required with respect to the work.

2. This contract may limit the liability of the contractor for a failure to comply with subclause(1) if the failure relates solely to:

(a) a design or specification prepared by or on behalf of the owner

(but not by or on behalf of the contractor), or

(b) a design or specification required by the owner, if the contractor

has advised the owner in writing that the design or specification

contravenes (1)

16. The builder makes submissions that clause 2(2)(a) of the contract provides a defence where the defective work relates solely to design or specification prepared by or on behalf of the owner.

Section 18F Defence

17. The builder did not seek to rely on the defence contained in s 18F of the HBA. The builder made submissions that the defence contained in s 18F did not take away the builder’s rights to rely on a contractual defence and that if that was the intention of the legislation then it would require clear language that it was the legislative intent. The builder submits that the necessary clear words do not appear in s18F and that properly construed, the words of s 18F of the HBA mean that other defences remain available.

18. S18F as it applied at the time (and applies to this matter) stated:

In proceedings for a breach of a statutory warranty, it is a defence for the defendant to prove that the deficiencies of which the plaintiff complains arise from instructions given by the person for whom the work was done contrary to the advice in writing of the defendant or person who did the work.

19. It is the builder’s submission that s18F does not provide the only defence for a builder. There are some cases that deal with this issue.

20. Pham v Broadview Windows Pty Ltd & Ors [2009] NSWCTTT 375 involved an application by a homeowner who had employed a project manager. The project manager had given instructions on behalf of the homeowner for the respondent window installer to install the windows without flashings. The window installer had never been responsible for installing the flashings. In the case Senior Member Durie relevantly stated in relation to s 18F:

The first point to notice is that the provision is merely “a defence”. It does not say that it is a defence if, and only if, the builder proves that the deficiencies arise from instructions given contrary to written advice. This is in contrast to such provisions as the Act ss. 4, 5, 12, 13 and 94. A comparison with s.94 (prior to the ameliorating effect of s.94A) is useful. A failure to have insurance was a complete defence to a debt recovery action – see e.g. Australasian Concrete Services v Multiplex Constructions [1999] NSWSC 1140. It has been said that the result was draconian, but was the result intended by Parliament - Casa Maria v Trend Properties [1998] NSWCA 53. Parliament could equally have provided that this defence only operated in instances where the written advice had been given.

Mr Sirtes seeks to avoid the consequences of such a result by submitting that it ought to have been apparent to Winstall that any installation without a sub-sill flashing would “derogate from the warranties impose by section 18B”. This submission, to my mind, overlooks 2 matters. The first is that it was never Winstall’s responsibility to install these flashings. The second is, of course, that the submission is circular.

21. While the Tribunal decision may indicate that the s18F is “a defence”, ultimately the applicant in that case failed and the case was dismissed, not because the respondent in that case had some defence, but rather because the flashings were never in their scope of works to begin with.

22. The explanatory memorandum to the Bill when the s18F defence first introduced as part of the Building Services Corporation Legislation Amendment Act 1996 (NSW) stated:

Proposed section 18F provides a defence to a breach of statutory warranty if the defendant shows that the relevant deficiencies arose from the instructions of the person for whom the work was done after contrary written advice by the defendant or person who did the work.

23. In the Supreme Court decision of The Craftsmen Restoration and Renovations v Thomas Boland, Thomas Boland v The Craftsmen Restoration and Renovations [2008] NSWSC 660, Howie J stated:

95   Although it is unnecessary for this Court to decide the issue, it seems to me that there is a legislative intention that the warranties and defences available are to be only those set out in the Act. The builder argued that the defence in s 18F was only one defence available. But I find it impossible to accept that, if the defence provided to a statutory warranty does not apply because the builder has not done what was required to engage the defence, the builder can look to some other non-statutory defence that does not have such a precondition.

96   The builder argued that he installed the windows at the express instruction of the architect and that it was obliged to comply with that instruction under the contract notwithstanding the builder’s view, orally expressed to the architect, that the windows were defective. It was submitted that “contractual compliance with an Architect’s instructions in the face of reasonable objection by a Builder is within the contemplation of section 18F”. I do not accept that submission. The builder could, and should, have raised those concerns in writing with the architect. The defence would then have applied. It seems clear to me that the defence is limited in order to avoid the very contest that arose in this case: a dispute as to whether the builder gave advice against the work it was required to carry out. By not giving advice in writing the statutory defence did not apply. There is no justification to read the defence wider than it is stated or to read some other defence into the Act.

97   In my opinion, if the windows were defective, the builder was in breach of the statutory warranty in respect of them so far as the owners were concerned. The builder would have to look to Trend for any compensation for the breach of any warranty that it gave in selling the windows to the builder.

24. It is noted and the builder raises that the statements made in that case are obiter. The builder makes submissions that the defence contained in s18F is intended to exclude other defences, but that the field it is intended to cover is much smaller than was considered in The Craftsmen Restoration and Renovations v Thomas Boland, Thomas Boland v The Craftsmen Restoration and Renovations. They refer as an example to where the builder orally gave advice contrary to the instructions given by the owner (rather than in writing as required by the statutory defence). The builder makes submissions that in those circumstances it may be that a defence cannot be raised under the contract, because the legislative intention was to require the advice to be in writing. In that sense the section 18F defence may 'exclude' other very similar defences. However, the builder makes a distinction between the s 18F defence and the contractual defence and regards them as different.

25. In the case of Pastrovic & Co Pty Ltd v Farrington [2011] NSWDC 94, His Honour stated:

I agree with the submission that, as a party to the contract, the builder only has the defence in section 18F. This provides that, in proceedings for breach of a statutory warranty, there is defence if the builder proves that the deficiencies about which the owner complains arise from instructions given by the person for whom the work was done and contrary to the advice in writing of the builder who did the work.

26. While it is obiter, the Tribunal adopts the approach in The Craftsmen Restoration and Renovations v Thomas Boland, Thomas Boland v The Craftsmen Restoration and Renovations [2008] NSWSC 660 and in Pastrovic & Co Pty Ltd v Farrington. The HBA regulates residential home building. It also regulates licensing in relation to builders and a builder is on notice that the defence in relation to a breach of statutory warranty is within the contemplation of s18F of the HBA. The Tribunal is not satisfied that in relation to a course of action which is for breach of statutory warranty that the builder can rely on a contractual defence. The situation may be different if the cause of action was in contract, however this is a claim for breach of statutory warranty and the cause of action arises out of statute and so the defence also arises as set out by the statute. Accordingly, the Tribunal finds that if the homeowner establishes that the works were within the scope and there is a breach of statutory warranty, then the only defence available to the builder is that contained in s18F. While not expressly conceded, it is clear from the builder’s submissions that the builder would not be able to establish a defence under s18F as the builder did not provide evidence of giving any warning in writing about the steel.

27. The Tribunals also notes that there have been amendments to s18F since the parties contracted which are not applicable in this case. Those amendments extend the defence for builders who reasonably rely on instructions given by a person who is a relevant professional acting for the person for whom the work was contracted to be done. While not determinative of whether section 18F is the only defence for a breach of statutory warranty, the amendment of the section for the section to extend to such a scenario is consistent with the finding that it was the intention that s18F be the only defence for breach of statutory warranty.

Was there a breach of statutory warranty in relation to the steel beams?

28. The builder was required pursuant to s 18B of the HBA (as it was at the time) to comply with the following statutory warranties.

The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work:

(a) a warranty that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract,

(b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new,

(c) a warranty that the work will be done in accordance with, and will comply with, this or any other law,

(d) a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time,

(e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling,

(f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder’s or person’s skill and judgment.

29. The builder makes submissions that the engineer certified that the structural steel complied with the contractual requirements and the BCA and that he cannot now say that the works were non-compliant. The builder’s submissions focus on the fact that they are entitled to rely on the contractual defence.

30. The builder denies that what he has provided is not fit for purpose and a breach of statutory warranty. Mr Greg Beard, the expert for the builder provided two reports. In the first report of Mr Beard stated in relation to the structural steel;

"It is my opinion that this is not a building defect issue under warranty of workmanship carried out by the builder and that the specified materials were inadequate for use in the operating environment."

31. In the second report Mr Beard maintained his position as set out in his first report and stated more particularly that the “the architectural specifications did not specify an appropriate product." In the report dated 13 May 2016, Mr Beard, also stated:

It is my opinion that although the coating system was applied as specified, it is inadequate for use in this environment due to the proximity of the property to the ocean, within 1 km from breaking surf. As such, rectification is required and both AS2312 and the BCA permits the use of several coating systems in this instance, such as inset paint coating, without the need for full disassembly and galvanising on site.

32. The property is nearby to the sea and is in a “severe” area. The relevant applicable standards as contained in the National Construction Code state:

P2.1 Structural stability and resistance to actions

A building or structure, during construction and use, with appropriate degrees of reliability, must—

(i) perform adequately under all reasonably expected design actions; and

(ii) withstand extreme or frequently repeated design actions; and

(iii) be designed to sustain local damage, with the structural system as a whole remaining stable and not being damaged to an extent disproportionate to the original local damage; and

(iv) avoid causing damage to other properties,

by resisting the actions to which it may reasonably be expected to be subjected.

….

3.4.4.4 Corrosion protection

Structural steel members that are not built into a masonry wall must be protected against corrosion in accordance with Table 3.4.4.2.

….

Table 3.4.4.2 PROTECTIVE COATINGS FOR STEELWORK ENVIRONMENT   LOCATION   MINIMUM PROTECTIVE COATING

General structural steel members

SEVERE

Within 1 km from breaking surf or within 100m of salt water not subject to breaking surf or heavy industrial areas   

INTERNAL   

Option 1.   2 coats alkyd primer

Option 2.   2 coats alkyd gloss

EXTERNAL   

Option 1.   Inorganic zinc primer plus 2 coats vinyl gloss finishing coats

Option 2.   Hot dip galvanise 300 g/m2

Option 3.   Hot dip galvanise 100 g/m2 min plus—

(a) 2 coats solvent based vinyl primer; or

(b) 2 coats vinyl gloss or alkyd.

33. The parties agree that the property is located within 1km of the sea. The builder’s expert, Mr Beard, conceded that the coating system which was applied was inadequate for use in this environment due to the proximity of the property to the ocean. Without a defence in writing, it is not enough for the builder simply to state that he applied the coating as specified. The Tribunal finds on the evidence that this is a defect which amounts to a breach of statutory warranty because the builder has not complied with the relevant code

34. In any case, if the Tribunal is wrong in relation to the coverage of the s18F defence, and a contractual defence is available, the Tribunal is not satisfied that the builder has made out the contractual defence in any case.    The Tribunal does not find that the failure related to the 'specification' prepared by the architect or any other person. The 'external finishes schedule' only referred to the finish of the external steel beams and does not refer to the preparation of the steel which is contained in the specification of the works of the steel structure. The external finishes schedule included a general note that the schedule was to be read in conjunction with the architectural and consultant drawing and specifications.

35. The builder claims to have relied on the statement of Mr Tang and the finishes schedule when he painted the Dulux quit rust and a second and third coat with Dulux weather shield. The report of Mr Beard's dated 13 May 2016 stated that he had been 'advised' that the architect 'specified' the painting system due to the 'success of a similar system on another property in close proximity to the beach'. Under cross-examination Mr Tang did not recollect that the conversation occurred, although he accepted that he may have spoken to Mr Gannon about the beams.

36. In the case of Bauchet v Mirage Pools Pty Ltd (2001) NSWSC 201 the Court stated:

87   Mirage is a skilled and experienced builder of swimming pools, otherwise it would not be in the business holding a licence to that effect. It is not necessary for a consumer contracting work from any skilled contractor, to know the intimate workings of how that skilled worker carries out a business. It is not necessary for a person seeking to have panel work done on a car or someone seeking to have work done on an electrical appliance or air conditioning unit or a hairstyling, to instruct the skilled worker as to how that work is to be carried out.

88   Failure to specifically contract in writing that pavers should be sealed did not become part of the contract by written inclusion, but arises from the obligation of the contractor to carry out the work in terms of the express condition about that work being carried out in a "good, substantial and workmanlike manner", and that the work and materials should be reasonably fit. The purpose of the construction of retaining walls is to retain water, not to allow water to seep through. The contract does not set out in detail the obligations as to whether drainage or sealing is part of the contract. That obligation arises out of the express contractual obligations in the contract.

89   I do not consider that it was open to the parties to impose an obligation on Mirage by the conversation with the supervisor, Ken, but His Worship's finding that that conversation took place, can only lead to the inference that the sealing of the pavers as an issue had been brought to the attention of the Mirage employee. The obligation to seal those pavers is part of the obligation of Mirage to carry out work that will be reasonably fit for the specified purpose. Unsealed pavers over excavated soil is clearly something which Mirage would be aware is a requirement to prevent seepage through the pavers.

37. Similarly, in this case the builder should have been aware of a matter as important as corrosion protection in close proximity to the ocean. In the circumstances, the Tribunal finds that the builder has breached s18B the HBA and in particular that what the builder has provided is not fit for purpose in respect of the steel structure and that he has breached the statutory warranty. The Tribunal finds no defence pursuant to s18F of the contract and if relevant finds that the builder has not made out a contractual defence either.

Other Defective Works in Dispute (agreed cost to rectify $10,564.29)

38. This part of the dispute relates to liability in respect of items 16, 26 and 31 as they are numbered in the Scott Schedule between the parties.

Item 16 – Western Red Cedar Balustrade (agreed cost to rectify $4,455)

39. Mr Foster, an expert for the homeowner, in his report dated 30 November 2015, states that the Western Red Cedar slats are light and flimsy and not capable of resisting the force of a person leaning on them from falling against the barrier and are non-compliant.

40. The builder makes submissions that the Western Red Cedar balustrades was built on homeowner’s instructions and in accordance with Mr Tang's design. In evidence Mr Gannon agreed that he had suggested that the balustrade be done with cedar, but that he did not design it.

41. Again the builder makes submissions that pursuant to clause 2(2)(a) of the contract provides a defence as he followed specifications and it is not liable to rectify the balustrade.

42. Mr Beard in his report dated 13 May 2016 primarily finds that this is not a defect because it is built in accordance with the specifications that were provided. He reaches the conclusion for that reason that the builder should not have to rectify the works. However, he does recommend an upgrade so that the timber vertical balustrade system complies with the BCA.

43. The Tribunal finds that there has been a breach of statutory warranty as the materials are not fit for the purpose of a balustrade and on both experts evidence they do not meet the Australian standard. The builder has n defence pursuant to s18F.

44. The Tribunal does not regard the contractual defence as being enough to provide a defence to this item. But even if it was, the Tribunal is not satisfied that a contractual defence has been made out. In particular the Tribunal prefers the evidence that was given by Mr Brooks in his statement dated 30 June 2016 at paragraphs 80 to 83. The Tribunal finds that his version is consistent with the emails he has provided. The Tribunal finds that the timber option in relation to the stairs was actually suggested by the builder in an email on 13 December 2013 and it was the builder who provided advice on an alternative design which involved the removal of the wires and installation of vertical timber in 'spotted gum or cedar'.

45. The Tribunal finds that even if a contractual defence was open to the builder (and the Tribunal does not believe it is) that the builder has made out the defence.

Item 36 - Roof void works (agreed cost $4,455)

46. Both experts agreed that the roof void was not completed. Mr Beard’s evidence at the hearing was consistent with Mr Gannon's claim that the roof void was not completed in accordance with the contract and that alternate and additional works were undertaken by Gannon.

47. In cross examination Mr Gannon explained that initially there was meant to be floor space and it was not approved by Council and that there was a subsequent variation. He stated that the parties agreed to make the whole roof space a storage space. The homeowner denied that he agreed to such a variation. The Tribunal finds that the evidence of the builder is self-serving and prefers the evidence of the homeowner on this point and allows the amount.

The Builder’s claim for variations ($197,000)

48. The builder claims an equitable set off in relation to forty variations. The variations were not in writing and any allowance for the variation would need to be allowed in quantum meruit.

49. The homeowner states that the builder had not previously sought to claim any of the variation prior to his swearing of his statement dated 20 June 2016. The first time the homeowner became aware of the variations referred to in the builder’s statement. The applicant replies in detail to each of the claimed variations in his statement dated 30 June 2016.

50. The builder made submissions that Mr Gannon was not used to being in a court environment and had never given evidence before and that he became incredibly distressed by being called "a liar" and "making things up". They make submissions that the cross examination process left Mr Gannon disheartened as he felt the process was unfair and he felt trapped and it affected the quality of his evidence. They also make the submissions that the Tribunal is an inappropriate forum for the use of bullying and belligerent tactics in cross-examination. The Tribunal is not of the view that Mr Gannon was bullied in cross-examination.

51. The builder also claims that there is documentary evidence to corroborate the builder’s variations claim. They refer for example to an sms messages that passed between Mr Brooks and Mr Gannon about Mr Gannon coordinating trades which were engaged directly by Mr Brooks and a text message from Mr Brooks to Mr Gannon saying "Thanks for the 'clean up' ...".

52. The builder makes submissions that it is clear from the evidence that the homeowner received the benefit of additional works undertaken by the builder at its expense and that the works undertaken make it unjust for the homeowner to retain the benefit of the works without the allowance of the variations to the builder.

53. The builder also explains that the Amended Variations Schedule was created in response to the proceedings commenced by the homeowner because there was an agreement that the homeowner would not seek rectification of defective works if the builder did not claim the additional variation works.

54. The builder makes submissions that the builder is not a lawyer and did not keep contemporaneous notes of the variation works undertaken after the information had been transferred to the Amended Variations Schedule and that no adverse inference should be drawn from that.

55. Mr Gannon stated that he did not obtain separate invoices from trades or prepare invoices for them because he was continually told by Mr Brooks to "leave it to the end" and because Mr Gannon was "not great on paperwork". The builder makes submissions that the fact that his variation claim was not raised until after the homeowners made his claim supports the position that the parties agreed that homeowner would not pursue rectification of his defects if the builder did not seek payment for the variation works and that it was only when the homeowner reneged on the agreement that Gannon raised the unpaid variation works.

Decision on Variations

56. The Tribunal does not find that the builders evidence became inconsistent and evasive simply because he is inexperienced and was badgered. Other than the sms message in relation to the trades and a sms message acknowledging a clean-up there is no other evidence in writing that independently corroborates his variations claims, that is, despite the parties communicating by email throughout the project.

57. The Tribunal finds that the parties agreed to a 'Process for Variations' to minimise issues or disagreements. The Tribunal does not accept that despite agreeing to that process the builder goes on to undertake variations that fell outside this process.

58. The Tribunal finds that the builders spread sheet of variations attached to his statement annexed at 'Exhibit H' was created some time after the alleged variations and in response to the legal proceedings .

59. Mr Gannon stated that he created the spread sheet from 'notes’, the notes were called for and could not be produced and he claimed that he threw them away after he prepared the spread sheet. The Tribunal rejects that evidence and finds it to be self-serving.

60. The builders estimation of times relating to the variations is therefore unsupported. Further, when questioned in relation to the extra amounts being claimed for the plasterer and painter, the builder stated that there was no separate invoice for the alleged unpaid variations. Mr Gannon changed his evidence on the carport, but this was based on the fact that he subsequently realised that this had formed part of the contract.

61. Also, there was no reference to the significant variations claim of the builder in initial correspondence from his solicitor at the time and prior to these proceedings being commenced (exhibit 6) and there is no reference to the agreement for the variations being forgone in lieu of the homeowner abandoning his claim for defects.

62. The builder has failed to demonstrate his variations claim. Further, even if the Tribunal had accepted the variations, there is no independent evidence of what represents the fair value of the work done. The Tribunal is not satisfied in the circumstances that the builder has made out his claim in quantum meruit and his claim for equitable set off is dismissed.

Section 48MA

63. 63    Section 48MA of the Act provides:

A court or tribunal determining a building claim involving an allegation of defective residential building work or specialist work by a party to the proceedings (the "responsible party”) is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.

64. The Tribunal accepts that it does not have to order the preferred outcome, however it is up to the homeowner to rebut the presumption. The assessment about whether the preferred outcome should be ordered is an objective one and the Tribunal must weigh up the factors in each case and make the decision accordingly.

65. The homeowner opposed a rectification order on the following grounds:

1. The builder has demonstrated an unwillingness to rectify the steel structure defect and the western cedar and rear balcony balustrade as required by a rectification order made by Fair Trading on 14 May 2015.

2. Even those items contained in the rectification order which the builder was willing to rectify were not rectified and the builder did not comply with the rectification order.

3. The defects are extensive.

4. The relationship of the parties has broken down.

5. The homeowner said he 'would be sick in the stomach' if the he had to come back to his house to do the rectification works.

6. The homeowner has lost confidence in the builders ability to do the work.

7. Mr Gannon stated that the situation had left a bad taste in his mouth. He said whether he was asked to pay damages or do the rectification works, 'both would not be an ideal outcome and both would suck’.

8. Mr Gannon said that the whole situation had left him with no money, broke, and forced to sell his house and that he lost $50,000 on the job.

9. Mr Gannon agreed that the job was significant and would take a long time to complete. The homeowner submits that he has serious doubts as to the builder has the financial capacity to complete the job and the means to do it.

10. The builder is aggrieved by the proceedings and lacks the necessary mindset to undertake the works in a workmanlike manner and there is a real risk of the matter being relisted and further delays and costs being incurred.

66. The builder’s position was that he should be allowed to return to complete the works and that the presumption contained in s 48MA of the HBA has not been rebutted by the homeowner.

67. They builder claims a work order should be made for the following reasons:

1. The builder has previously rectified defects to the homeowner’s satisfaction and all retention monies were returned to him. Mr Gannon stated in evidence that he always fixed defects and never left a bad taste for clients.

2. Mr Gannon indicated a willingness to rectify the defective works for Mr Brooks and refers to the letter from him to Mr Brooks dated 25 June 2015 in which he agreed to rectify 27 of the 30 items in the rectification order.

3. The reason why the defective works contained in the rectification order were not rectified by agreement was because of the commencement of these proceedings.

4. Given the size of the project the defects now complained of by the homeowner are not significant and the majority consist of matters such as the underside of doors not being painted.

5. It would be a rare case that the Tribunal were to find that the parties' relationship was not strained and that is insufficient to justify a monetary order. The builder refers to the case of Maiolo v Chiarelli [2016) NSWCATAP 81 where the Appeal Panel ordered rectification by the builder despite there being "considerable animosity between the parties".

6. The builder submits that Mr Brooks evidence that he would "feel crook in the stomach" if the builder was to do the rectification is contrived so that Mr Brooks can obtain a monetary order.

7. In relation to Mr Gannon's evidence that being ordered to pay someone money or undertake rectification works "would suck”, the builder makes submissions that is not unusual given that Mr Gannon does not believe he is liable for the defective works in dispute.

8. In relation to the financial pressure, the builder makes submissions that if the homeowner has concerns regarding the builder being under financial pressure it would seem a rectification order would be preferable as it would be cheaper for the builder to do the work himself, than to pay for another builder to do the work.

9. In relation to the allegation that the builder may not undertake the rectification works in a workmanlike manner due to feeling aggrieved by the proceedings, it is the builder’s submissions that he is more likely to take care to ensure the works are done well so as to avoid further disputes and further costs being incurred.

Decision on the Preferred Outcome

68. In relation to the preferred outcome, each case is decided on its facts. In Maiolo v Frank Chiarelli and Anor, the relief sought by the homeowner included an order that the kitchen installer properly installs a kitchen or alternatively that the homeowner has the moneys repaid for the installation. An order was made for the installer to install the kitchen. The kitchen installer failed to install the kitchen by the required time and the proceedings were 'renewed' by the homeowner. Orders were then made for the payment of monies to the homeowner in the 'renewed proceedings'. The kitchen installer appealed on the grounds of a breach of procedural fairness. The appeal was upheld having regard to the facts of that case and an order consistent with the preferred outcome contained in s48MA was made.

68. In that case the parties had reached agreement that the kitchen installer should install the kitchen and there was no evidence of any resistance from the kitchen installer. The kitchen installer only sought to vary the time for compliance with the installation order. The Appeal Panel accepted there was animosity between the parties, but not to the point that the homeowner would be physically indisposed if the kitchen installer returned to the site. There was no issue as the financial capacity of the installer to undertake the work or otherwise.

69. The Tribunal in this case is not satisfied that the homeowners statement that he would feel 'crook in the stomach' is objectively a reason not to order rectification. There is no doubt that he does not want the builder back on site. However, other matters do lead the Tribunal to find that the presumption has been rebutted and a work order, in accordance with the preferred outcome should not be made in this matter. While the builder is a corporation, Mr Gannon made it clear that that the whole situation has left him personally with no money and broke. He stated that he has had to sell his house. The builder has agreed to fix some of the items previously, but they were the more minor items, then the ones he has been found liable for in this decision. This decision has made findings against the builder on the “big ticket” items including the steel. He has also been wholly unsuccessful on his variations claim. Given Mr Gannon’s statement about his financial circumstances the Tribunal is satisfied that the corporation would most likely not have the necessary resources to comply with a work order. Weighing all the circumstances of this case, the Tribunal is not satisfied to make a work order and instead the Tribunal makes a money order in accordance with s 48O of the HBA.

70. The Tribunal has made provision for any further submissions on costs.

Orders

72. The Tribunal has arrived at its calculations as follows:

• Amount between the parties inclusive of preliminaries and GST $34,272.57

• Items in dispute (liability found and quantum agreed):       $10,564.29

• Structural Steel (liability found and quantum agreed):       $61,000.00

Total amount owing to homeowner            $105,836.57

73. The orders are made accordingly.

T Simon

Senior Member

Civil and Administrative Tribunal of New South Wales

2 March 2017

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 19 April 2017