Chuang v New Legend Global Developments Pty Ltd

[2017] NSWCATCD 101

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Chuang v New Legend Global Developments Pty Ltd [2017] NSWCATCD 101

Hearing dates:

4 October 2017

Date of orders:

20 November 2017

Decision date:

20 November 2017

Jurisdiction:

Consumer and Commercial Division

Before:

P French, General Member

Decision:

1. The applicant is granted leave to be legally represented at this final hearing of the matter.

 

2. Pursuant to section 48O(1)(a) of the Home Building Act 1989 the respondent, New Legend Global Developments Pty Ltd, (redacted) is to pay the applicant, Pi-Feng Chuang, (redacted) the sum of $41,994.45 immediately.

 

3. Pursuant to section 48O(1)(b) of the Home Building Act 1989 the Tribunal orders that $50,000.00 in project management fees payable to the respondent and/or Mr Kuan-Shen Shih under the terms of the home building contract is not due or owing.

 

4. Pursuant to Rule 38 of the Civil and Administrative Tribunal Rules 2014 the respondent, New Legend Global Developments Pty Ltd, (redacted) is to pay the applicant, Pi-Feng Chuang, (redacted) the sum of $3,080.00 immediately, being the costs of her expert report.

5. Pursuant to Rule 38 of the Civil and Administrative Tribunal Rules 2014 the respondent, New Legend Global Developments Pty Ltd, (redacted) is otherwise to pay the applicant, Pi-Feng Chuang, her costs of the proceeding as agreed or as assessed on the ordinary basis pursuant to the provisions of the Legal Profession Uniform Law Application Act 2014.

Catchwords:

HOME BUILDING – claim by a homebuilder for compensation from a builder for costs of rectifying incomplete and defective home building works; claim by a homebuilder for refund of project management fees paid to a builder in circumstances where the building works were incomplete and defective – claim that the builder engaged in misleading and deceptive conduct – homebuilder’s entitlement to compensation established on the evidence – homebuilder’s entitlement to a refund of project management fees not established on the evidence - homebuilder’s entitlement to relief from payment of project management fee established on the evidence

 

PRACTICE & PROCEDURE – application for leave to be represented – where the applicant does not speak English – where the quantum of the claim exceeds $80,000.00 – where there is a degree of legal complexity in the proceedings – where leave has been granted to both parties to be represented in the proceedings in the interlocutory stages – leave granted

  COSTS – homebuilder’s claim for costs of production of an expert report – homebuilder’s claim for costs of the proceedings on an indemnity basis – principles to be applied – costs awarded on the ordinary basis

Legislation Cited:

Australian Consumer Law (NSW): ss 18, 236
Building Code of Australia
Civil and Administrative Tribunal Act 2013: ss 36; 45; 60
Civil and Administrative Tribunal Rules 2014: rr 35; 38
Environmental Planning and Assessment Act 1979: Division 3, Part 4
Fair Trading Act 1989: ss 28; 70; 74
Home Building Act 1989: ss 4; 5; 6; 7; 7A; 7B; 7F; 7AA; 8A; 12; 13; 17; 18; 18B; 18BA; 18E; 48A; 48K; 48KI; 48MA; 48O; Schedule 1
Home Building Regulation 2014: rr 8; 9; 12; Schedule 1; Schedule 3

Cases Cited:

ACCC v Dukermaster Pty Limited (2009) FCA 682
Allplastics Engineering Pty Ltd [2006] NSWCA 33
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Degman Pty Ltd (in Liq) v Wright (no.2) [1983] 2 NSWLR 354
Harrison v Schipp [2001] NSWCA 12
Ingot Capital Investment v Macquarie Equity Capital Markets Ltd (No.7) (2008) 65 ACSR 324
Smith v Sydney West Area Health Service (No 2) [2009] NSWCA 62
Leichhardt Municipal Council v Green [2004] NSWCA 341
L’Estrange v Gracob [1934] 2 KB 394
Mead v Watson (2005) 23 ACLC 718
Ng v Chong NSWSC 385
Oshlack v Richmond River Council (1998) 193 CLR 72
Prestige Auto Centre Pty Ltd v Apurva Mishra [2014] NSWCATAP 81
Stedman v Kennedy [2016] NSWCATAP 193
Toll (FGCT) Pty Limited v Alphapharm 219 CLR 165
Waterman v Gerling Australia Insurance Co Pty Ltd (No.2) [2005] NSWSC 1111
Williams v Lewer [1974] 2 NSWLR 91

Texts Cited:

NSW Civil and Administrative Tribunal, Consumer and Commercial Division, Guideline, Representation, August 2017
NSW Civil and Administrative Tribunal, Procedural Direction 3, Expert Witnesses

Category:

Principal judgment

Parties:

Pi-Feng Chuang (Applicant)
New Legend Global Development Pty Ltd (Respondent)

Representation:

Mr Atel Singh, Solicitor, for the Applicant
No Appearance for the Respondent

File Number(s):

HB 16/52496

Publication restriction:

Nil

REASONS FOR DECISION

Introduction

1. This is an application by Ms Pi-Feng Chuang (the homebuilder) for an order from the Tribunal pursuant to section 48O(1)(a) of the Home Building Act 1989 (HB Act) that would require New Legend Developments Pty Ltd (the builder) to pay her $80,327.79 constituted by $46,994.45 in compensation for the costs of rectifying alleged incomplete and defective building works (building works), and $33,333.34 by way of the refund of project management fees paid by the homebuilder to the builder in respect of the building works. The homebuilder also applies for an order pursuant to rule 38 of the Civil and Administrative Tribunal Rules 2014 (NCAT Rules) for an order that would require the builder to pay her costs of the proceedings on an indemnity basis. This application was made to the Tribunal on 30 November 2016.

2. For the reasons that are set out following, the Tribunal has decided to make an order pursuant to sub-section 48O(1)(a) of the HB Act that will require the builder to pay the homebuilder the sum of $41,994.45 in compensation for the costs of rectification of incomplete and defective building works. The Tribunal has also determined that the homebuilder is entitled to an order that the builder pay her costs of the proceedings as agreed or assessed on the ordinary basis, including the costs of the expert report she obtained in order to prove her case in the amount of $3,080.00. The terms of the home building contract required the homebuilder to pay the builder (or Mr Kuan-Shen Shih) $50,000.00 to project manage the building works. The evidence does not establish that the homebuilder paid the builder any amount towards its project management fees during the period the building contract was on foot. However, for the sake of completeness, the Tribunal has made an order that clarifies that the builder is not entitled to claim any of this amount from the homebuilder.

Procedural history

3. The homebuilder’s application was filed under cover of letter of her solicitors, Adams Partners Lawyers, on 30 November 2016. The application was first listed before the Tribunal for directions on 7 February 2017. Upon receipt of the Notice of that hearing, the builder’s firm of solicitors, Fielding Robinson Lawyers, notified the Tribunal that it sought leave to represent the builder in the proceedings. This resulted in the Registrar referring the matter to a Senior Member of the Tribunal, in Chambers, to determine if leave would be granted for the parties to be legally represented. On 3 February 2017, the Tribunal granted leave to both parties to be legally represented at the forthcoming directions hearing only.

4. Mr Singh, solicitor, attended the directions hearing on 7 February 2017 on behalf of the homebuilder. An agent of the builder’s solicitors, whose name is not recorded on the Tribunal’s file, attended on behalf of the builder. Before the case was called, it appears that the Tribunal provided the parties with the opportunity to attempt to resolve the dispute co-operatively in conciliation. Those efforts were not successful.

5. When the parties returned to the hearing room, the Tribunal adjourned the proceedings to a further directions hearing and gave directions for the filing and exchange of Points of Claim and Points of Defence in the lead up to that hearing. The homebuilder complied with the Tribunal’s order for the filing and exchange of Points of Claim. The builder did not comply with the Tribunal’s orders for the filing and exchange of Points of Defence.

6. The matter was next listed for directions on 18 April 2017. Mr Singh, solicitor, again attended that hearing on behalf of the homebuilder. There was no appearance by or on behalf of the Respondent. At the hearing on 18 April 2017, the Tribunal adjourned the proceedings to a further directions hearing and gave directions for the filing and exchange of documentary evidence in the lead up to the that next hearing. The homebuilder complied with the directions for the filing of her documentary evidence. The builder has not responded to the direction that it do so.

7. Prior to that hearing, on 22 March 2017, Mr Singh contacted the Registrar via email to advise that the homebuilder had not been served with Points of Defence. He also notified the Registrar that he had been advised by Fielding Robinson Lawyers on 21 February 2017 that that firm no longer acted for the builder. This latter fact was subsequently confirmed by the Registrar in a telephone call with Fielding Robinson Lawyers and a related email exchange on 20 April 2017. Fielding Robinson Lawyers also advised the Registrar that that firm was unable to provide a forwarding address for the builder.

8. The matter next came before the Tribunal on 27 June 2017. Mr Singh attended that hearing on behalf of the homebuilder. There was again no appearance by or on behalf of the builder. The Tribunal adjourned the proceeding for a special fixture hearing and gave final directions for the conduct of the case to hearing. These directions included a direction that the time for the builder’s compliance with the orders for the filing and exchange of its evidence be extended to 25 July 2017, and that the parties, not later than seven days prior to the hearing, file a statement of facts and issues in contention, and an outline of submissions (including, if relevant, submissions in relation to the preferred outcome under s 48MA of the HB Act). The homebuilder has partially complied with these directions. The builder has not responded to these directions.

9. The proceedings were listed for a Special Fixture hearing on 4 October 2017. Mr Singh, solicitor, attended the hearing with and on behalf of the homebuilder and sought leave to represent her at the final hearing. There was no appearance of or on behalf of the builder. The case was called twice in the foyer after the appointed time for the hearing prior to the hearing being commenced.

Application for leave to be legally represented

10. It was apparent from a review of the Tribunal’s file records that while leave had been granted previously for the parties to be legally represented in the interlocutory stages of the proceeding, leave had not been granted for the homebuilder to be represented at the final hearing. As noted above, Mr Singh attended the hearing with the intention of appearing for the homebuilder. I determined that leave should be granted for him to do so.

11. Section 45 of the Civil and Administrative Tribunal Act 2013 (NCAT Act) provides that the usual rule in proceedings before the Tribunal is that each party has the carriage of its own case and is not entitled to be represented by any person (sub-section 45(1)(a)). However, the Tribunal is conferred with discretion to grant leave to a party to be represented, including by an Australian legal practitioner (sub-section 45(1)(b)). These provisions are subject to exceptions, but those exceptions do not apply in this case.

12. The Tribunal has developed a Guideline to be applied in the determination of requests by a party to be represented in a proceeding in the Consumer and Commercial Division (“Representation”). Paragraph 11 of that Guideline sets out the circumstances in which the Tribunal would usually permit a party to be represented, especially by an Australian Legal Practitioner. Those circumstances relevantly include:

1. if the proceeding are in the Home Building List and involve a claim or dispute for more than $30,000;

2. if another party in the proceedings is, or is to be represented by, an Australian legal practitioner;

3. ...

4. ...

5. ...

6. if the Tribunal is of the opinion that the party would be placed at a disadvantage if not represented at the hearing; and

7. if the Tribunal is of the opinion that representation should be permitted due to the likelihood that complex issues of law or fact will arise in the proceedings.

13. The exercise of the discretion must also apply the “guiding principle” to be applied in all aspects of the Tribunal’s practice and procedure contained in section 36 of the NCAT Act, which is “to facilitate the just, quick and cheap resolution of the real issues in the proceedings.” In this respect there must be some basis to warrant the exercise of the discretion having regard to the guiding principle, but it is not necessary for the applicant to establish that there are “special circumstances” warranting the exercise of the discretion: Stedman v Kennedy [2016] NSWCATAP 193.

14. In brief, in this case, I was satisfied that it was in the interests of justice for leave to be granted to the homebuilder to be legally represented at the final hearing because she is a person who is unable to speak, read or understand English very well (see paragraph 2 of her Statement dated 16 May 2017). She requires the assistance of a Mandarin interpreter to interpret the proceedings to her. I am satisfied on this basis that the homebuilder would be at a significant disadvantage if leave were not to be granted for her to be legally represented. She would have difficulty presenting her case to the Tribunal through an interpreter and this would also unduly extend the time necessary to finalise the hearing.

15. I also took into account that the quantum of the homebuilder’s claim is more than $80,000.00, which significantly exceeds the threshold contained in paragraph 11(a) of the Tribunal’s Guideline on Representation. I was also satisfied that at least one element of the homebuilder’s claim involves a degree of legal complexity beyond the usual case in relation to which the Tribunal would benefit from legal argument. In this respect, as will emerge below, the homebuilder contends that the builder engaged in misleading and deceptive conduct and in pursuing this claim she relies upon section 18 of the Australian Consumer Law (NSW) (ACL) in addition to the provisions of the HB Act.

16. Finally, I note that in the course of the proceedings to date the builder has applied for, and was granted, leave to be legally represented. The builder subsequently withdrew its instructions from its legal representatives for reasons unknown to the Tribunal. However, it is clear the builder had the capacity to instruct solicitors and did so. There is therefore no issue of relative party capability that would militate against the exercise of discretion to grant leave to the homebuilder to be legally represented. I also note that at no stage in the proceedings up to the final hearing did the builder object to the homebuilder being legally represented in the proceedings.

Evidence before the Tribunal

17. The homebuilder’s documentary evidence before the Tribunal is contained in two volumes. The first is in the form of a sworn statement given by Ms Chuang, dated 16 May 2017, to which is annexed various documents upon which she relies, including the Preliminary Agreement with the builder, the Building Contract with the Builder, and an Expert Report provided by Mr Mark Irvine who is a Builder’s Consultant employed by Tyrrells Property Inspections Pty Ltd. The second volume is bundle of documents. These documents are a re-presentation of the documents annexed to Ms Chuang’s sworn statement dated 16 May 2017 with some additions that set out correspondence between the parties in relation to the termination of the Building Contract. These volumes were marked Exhibits A1 and A2 respectively. Mr Singh also handed up three additional documents in the course of the hearing with leave, being a copy of the builder’s licence history (marked Exhibit A3), a copy of a current ASIC company search for the builder (marked Exhibit A4), and a copy of an invoice to the homebuilder rendered by Tyrrells Property Inspections Pty Ltd in relation to the preparation of the expert report provided by Mr Irvine (marked Exhibit A5).

18. The other material before the Tribunal submitted on behalf of the homebuilder are her Points of Claim and an Outline of Submissions. Ms Chuang gave short oral evidence under oath affirming the contents of her statement and its truth. Mr Irvine gave short oral evidence under affirmation affirming the contents of his expert report and its truth.

19. Mr Irvine’s expert report is prepared in accordance with the Tribunal’s Procedural Direction 3, Expert Witnesses. He states in his report that he has read and agrees to be bound by the Experts Code of Conduct contained in that Direction.

20. As noted above, the builder did not file Points of Defence, nor did the builder respond to the Tribunal’s directions for the filing of documentary evidence and submissions. No-one appeared on behalf of the builder at the hearing to give evidence or make submissions. The hearing was therefore conducted on the basis of the uncontested evidence of the homebuilder.

Ex-parte hearing

21. The Tribunal’s file contained a copy of the Notice of the Hearing which had been sent to the builder’s Registered Address as that address appeared on the ASIC company search dated 3 October 2017, which was handed up in the course of the hearing (Exhibit A5). The ASIC company search also confirmed that the builder remained a registered company as at 3 October 2017. The Tribunal’s hearing Notice had not been returned to the Tribunal unopened. In the absence of any evidence to the contrary, the Tribunal assumes that the builder had received the Notice of hearing but had made a decision not to participate.

22. Rule 35 of the NCAT Rules provides that proceedings in the Consumer and Commercial Division may be conducted in the absence of a party if the Tribunal is satisfied that Notice of the hearing has been served on that party and that justice requires that the matter be dealt with in the absence of that party. In this case it is clear that the builder was aware of the application, had initially instructed solicitors to appear for it in relation to the claim, then withdrew those instructions, and thereafter failed to respond to any of the Tribunal’s directions for the conduct of the matter to hearing. Once an applicant regularly invokes the jurisdiction of the Tribunal to determine a claim, a respondent cannot avoid that claim by refusing or failing to participate in the proceedings. On this basis the Tribunal was satisfied that justice required that the application be heard and determined in the absence of the builder.

Material facts

23. The material facts to emerge from the evidence may be summarised as follows:

23.1 The respondent builder is an Australian Proprietary Company, limited by shares, which was first registered on 19 March 2013. The company’s sole director and secretary is Kuan-Shen Shih. As noted above, the company remains registered at the date of the hearing. Its registered address and principal place of business is Deception Bay in Queensland;

23.2 The builder held a NSW Builders Licence during the period 22 April 2014 to 21 April 2017. For the whole of this period the licence was subject to two conditions: “limits apply to BCA Class 2, Max 2000 sqm, Type C Construction Only” and “only for contracts not requiring home warranty insurance”;

23.3 In 2014 the homebuilder purchased a block of land at Caddens in NSW with a view to constructing a dwelling on it. She also appears to have secured finance, limited to $400,000.00, to construct the dwelling;

23.4 At some time in 2014 (the date not being in evidence), the homebuilder entered into a Preliminary Agreement with the builder for the construction of a dwelling on the homebuilder’s land (building works);

23.5 All dealings with the homebuilder on behalf of the builder were conducted by Mr Kuan-Shen Shih, who the homebuilder knows and refers to as Ken Shih. Ms Chuang gave evidence that Mr Shih and his family were at the time family friends. They remained friends up until mid-April 2015 after which relations broke down due to the delay and cost escalations in the building works (as to which see following). Up until that date, when he was in Sydney working on the building site, Mr Shih would usually stay with Ms Chuang at her home;

23.6 Ms Chuang believes that Mr Shih is a qualified architect. She says that she engaged the Builder to carry out the building works on the understanding, and in the expectation, that Mr Shih would design the dwelling, which is what happened in fact;

23.7 The evidence establishes that Mr Shih does not hold any NSW contractor’s license. He does hold a Queensland Building Designer’s Licence. That licence has been active since 10 February 2016. It was suspended then cancelled during the period 6 March 2009 to 10 February 2016 due to his failure to provide professional indemnity insurance information to the Queensland Building and Construction Commission. Mr Shih was also temporarily excluded from holding the licence during the period 3 August 2010 to 3 August 2015 because he was a director, secretary or influential person at the relevant time for the liquidation of another company, Architorior Design & Development Pty Ltd;

23.8 The Preliminary Agreement is written in Chinese. A copy of the original Preliminary Agreement in Chinese and a certified translation of that document performed by NAATI accredited translator is in evidence. I am satisfied that the translated document complies with the Tribunal’s requirements for such a translation and that I am entitled to rely upon that translation: Prestige Auto Centre Pty Ltd v Apurva Mishra [2014] NSWCATAP 81 [at 33 – 34].

23.9 The key terms of the Preliminary Agreement are extracted below:

New Legend Global Development

Preliminary Agreement

Sister Pi-Feng, hello!

Thank you for giving us the opportunity to provide services to you. After this period of assessment and evaluation, as we understand your funds are limited, we expect the total cost for the project of $400,000 (the GST will be confirmed with the accountant) will reach the stage when people can move in straightaway.

Both parties shall, by way of reimbursement for the actual expenditure, limit the total materials cost within $350,000. Ken will charge the project management fee of $50,000.

The application of trade-off of $400,000 shall be adjusted at the follow-up stage.

Payment methods:

The company shall charge $10,000 for the early stage operation (including the costs required for drafting, application to the COUNCIL, the insurance and sundry expenses for the early stage of the project. Receipts and records are required for all the expenses).

At the completion of the assessment of each stage, the amounts required of the stage shall be remitted to the NEW LEGEND GLOBAL company account for workers’ depositions and payments at the completion of the work. The project management fees shall be paid in 5 stages to KEN and 10,000 dollars shall be paid at each stage as follows:

1. When the contract is signed;    2. When the groundwork is completed;

3. When building shell is completed; 4. When Cabinets and wardrobes are installed; 5. When the work is completed.

To make sure both parties come to an agreement and to avoid disputes at the follow-up work and payment, we need your confirmation again.

The contents are as follows:

1. New Legend Global Development Pty Ltd shall provide architectural design for free General costs are $15,000 +GST (including two amendments to the draft).

2. The architectural design shall include the following:

• Double garage

• Big open space (including family styles lounge room, kitchen and dining room)

• Study

• Small entertainment room

• Laundry and public toilet

• Master suite + 1 suite + two-way-entry suite = 2 rooms

• Worship hall (4m x 7m)

• Small multi-functional space upstairs

• Outdoor kitchen facilities design

3.  After the design, KEN shall make the selection; for parts of the kitchen, the ceramic tiles shall be black, white and cream-coloured in general; for the kitchen drawers, it will be confirmed with sister Pi Feng in due time.

4. The lawn, fence, driveway and landscaping are not included in the total costs of the project. KEN shall assist by providing opinions, getting quotes and work supervision.

Throughout the project, KEN shall provide supervision and skill guidance, and limit the project within your budget while providing quality assurance.

The above are the most honest prices and services that we provide to you.

As all the factories will stop operations in mid-November, we plan to complete the outer walls of the building before it, so that we can continue with the indoor work during the two to three months holiday period, so we can complete your new house as soon as possible.

We have professional architects and experienced decorators to work with the supervision, so you can rest assured with the quality.

Hope you can make the decision at your earliest convenience so that we can prepare the contract for you.

….

23.10 On 3 September 2014 the parties entered into a Building Contract. The Building Contract is a standard form Master Builders Association of NSW Residential Building Contract Cost Plus (December 2012). However, the homebuilder contends that Mr Shih only provided her with 10 pages of that contract. It is only those pages that are in evidence. In her statement dated 16 May 2017, the homebuilder states that at the time she did not know that the copy of the contract provided to her was incomplete (at paragraph 7);

23.11 Those pages of the contract provided to the homebuilder are a 1 page warning that the contract sum is not known at the date of the contract; a 2 page summary of the agreement and particulars of contract; a 1 page statutory owners checklist and questions; a 1 page signature page; a 3 page schedule 1 that sets out the costs of the works which are payable by the owner or at the direction of the builder; a 2 page schedule 3 which sets out the work and documents detailing the contract work; and a 1 page schedule 4 which sets out special conditions onto which is handwritten a payment schedule;

23.12 The Building Contract was presented to the homebuilder in English. The homebuilder signed the Building Contract without being able to read it in English or having it translated into Chinese prior to doing so. She contends that she did so because she was told by Mr Shih, and believed, that the Building Contract reflected the terms of the Preliminary Agreement. In this respect, in her statement of 16 May 2017, the homebuilder recounts in English a summary of the conversation she had with Mr Shih at the time she signed the Building Contract. She states that Mr Shish represented to her that the contract was based on the preliminary agreement she had signed previously (at paragraph 6);

23.13 The terms of the Building Contract signed by the parties are in two key respects materially different from those set out in the Preliminary Agreement. The Preliminary Agreement was based on a fixed price of $350,000 for the construction of the dwelling, whereas the Building Contract is a cost plus estimate provided on the basis that the contract sum or amount to be paid by the homebuilder is not known as at the date of the contract. The Preliminary Agreement stipulates that the progress payments are to be paid at the completion of each stage of work, whereas the Building Contract stipulates that the progress payments are to be made at the commencement of each stage of work;

23.14 The Building Contract provides that the dwelling was to be completed by the builder to “lock-up stage.” What constitutes “lock up stage” does not appear to be defined in the Building Contract. However, some insight is provided in the annotations included on schedule 3 of the Building Contract which describes the work to be completed as follows:

New house as per approval plan. Lanscape (sic) not include

New Legend Global Developments P/L is responsible to carry out the building work to lock up stage.

Owners responsible for the Internal Carpentry Fit-out with the contractor recommended by Owner;

23.15 As noted above, schedule 4 of the Building Contract (Special Conditions) sets out the progress payment schedule. It states as follows:

Payment schedule as below

1. Deposit: 5%            Total: 100%

2. Slab stage: 25%            amount: $350,000

3. Frame stage: 35%

4. Lock-up stage: 30%

5. Completion stage: 5%

The owner agree to pay the above fee to the builder before each stage commence.

Builder will collect all invoices to owner at the end and return the balance to the owner if there is any; likewise if any variations due to change or upgrade the materials by the owner, owner will be responsible of the exceed amount.

Paid by owner $20,000 4/9/14

1. 5% pay by owner of 4/9/14 $17,500

2. 25% pay by owner AT 8/10/14 $87,500

3. 35% pay by owner at $122,500

4. 30% pay by owner at    $105,000

5. 5% pay by owner at    $17,500

23.16 The evidence before the Tribunal, which is principally in the form of bank statements showing funds transfers from the homebuilder to the builder’s account, establishes that the homebuilder has to date paid the builder $345,000 in respect of the building works. In this respect the homebuilder paid the builder $1000.00 on the signing of the Preliminary Agreement and a further $19,000.00 shortly thereafter which is receipted by the builder in schedule 3 of the Building Contract as a $20,000.00 payment received on 4 September 2014; she then made a further payment of $17,500.00 on the signing of the Building Contract which is also receipted by the builder in schedule 3 as a payment made on 4 September 2014 in respect of stage 1 of the building works; on 8 October 2014 the homebuilder paid the builder $87,500.00 which is receipted by the builder in schedule 3 as a payment made on that date in respect of stage 2 of the building works; on 3 November 2014 the homebuilder paid the builder $100,000.00; on 17 November 2014 she paid the builder $10,000.00; on 18 November she paid the builder a further $10,000.00; and on 9 March 2015 the homebuilder paid the builder a further $100,000.00;

23.17 Nowhere in the Building Contract (insofar as this is before the Tribunal) is there any term that deals with a construction timetable or which stipulates or estimates a completion date for the building work. However, the Preliminary Agreement appears to contemplate that the slab, frame and exterior walls and roof of the dwelling would be completed by mid-November 2014 and the interior fitout would be completed within 3 months after that, which logically suggests a completion date at the end of February 2015;

23.18 It appears that the building works commenced on or about 10 October 2014 with the marking out and excavation of the site for the dwelling. It appears that a concrete slab was poured at the end of October 2014. It appears that a site perimeter fence was erected on or about 19 November 2014. Although not entirely clear on the evidence, it would appear that the frame of the dwelling was constructed in or about the end of November 2014;

23.19 It appears that the builder did not carry out any significant work after November 2014. By the end of February 2015 the builder had not carried out work for at least three months and the building works were seriously delayed from the homebuilder’s point of view. This resulted in the homebuilder flying to Brisbane with her daughter on 1 March 2015 to meet Mr Shih to discuss the delay. It appears this meeting was also attended by Mr Shih’s father, Mr Hou-Ming Shih, who had no formal role with the builder company, but was (at least at that time) a family friend of the homebuilder;

23.20 The homebuilder says in her statement dated 16 May 2017 that in the course of this meeting Mr Ken Shih blamed her for the delay, claiming that she owed him a progress payment of $100,000.00. No previous request for such a payment had apparently been made. The homebuilder denied that she owed such a payment and initially refused it on the basis that she had made payments totalling $245,000.00 up to that point and, from her viewpoint, there was little to show for it;

23.21 The outcome of the meeting was that Mr Hou-Ming Shih agreed to travel to Sydney to inspect the building works. This occurred on 8 March 2015. In the course of that inspection, the homebuilder says in her statement of 16 May 2016 (at paragraph 21) that Mr Hou-Ming Shih “guaranteed” her that the building works would be completed if she made the payment of $100,000.00 demanded by the builder. The homeowner says that, on the basis of that guarantee and her friendship with Mr Hou-Mind Shih, she agreed to transfer $100,000.00 to the builder’s account. She did so on 9 March 2015;

23.22 The Preliminary Agreement stipulates that the builder will be responsible for obtaining all necessary approvals and certifications for the building works in consideration of the project management fee payable by the homebuilder;

23.23 In her statement, the homebuilder recounts hearsay told to her by her daughter in or about the end of October 2014 which is to the effect that Mr Shih had received a fine from Penrith City Council for commencing the building work without a construction approval having been given. She also recounts hearsay told to her about that time by her daughter that Mr Shih had received a warning from Penrith City Council that he could not continue the building works without constructing a site fence;

23.24 In January 2015, the homebuilder received a Statement of Cover from the NSW Home Building Compensation Fund in respect of the building works. The issue date for that statement is 27 January 2015 and the declared contract price it states is $350,000.00. By letter dated 5 February 2015 the homebuilder was notified by Building Code Certifications Pty Ltd that it had issued a Complying Development Certificate in relation to the building works, and had accepted to role of Principal Certifying Authority in relation to the works. Attached to that letter was an inspection schedule for the building works;

23.25 In or about February 2015, the homebuilder says that she was told by Mr Shih that he had received a warning from Penrith City Council about soil eroding from the building site following heavy rain. He asked for help in cleaning the eroded soil, which she says she gave him;

23.26 After the homebuilder made the $100,000.00 payment on 9 March 2017 the building works were to have resumed in accordance with the agreement reached by the homebuilder and Mr Hou-Ming Shi on 8 March 2015. However, that did not occur. The homebuilder says that at some time in March 2016 she had a conversation with Mr Ken Shih in which he told her that the building work could not proceed because he could not obtain certification of the building frame. She says that Mr Shih told her he was being “picked on” by the certifier and that if she did not change the certifier to Penrith City Council, she would “need to face the consequences”;

23.27 The substance of the dispute between the builder and the certifier appears in an email exchange between them dated 25 March 2017. In that exchange the certifier states:

As advised yesterday, the steel framework for the dwelling at Clementine Terrace is a one off specific design which does not fully comprise of traditional framing elements.

In particular the details provided do not provide clear advice regarding connection and tie down requirements for the framework.

It is appropriate that the assessment of the constructed framework be carried out by someone with experience in this style of construction, in particular a Structural Engineer and preferably the Engineer involved with the design.

Please arrange for a suitably qualified and experienced Engineer to carry out that inspection and provide a report on his/her findings to me.

…

23.28   The builder forwarded that email to the supplier of the frames, Go Steel Building Products Pty Ltd asking for its assistance in responding to the certifier. A representative of Go Steel responded to Ms Shih’s request as follows:

I don’t know why this guy can’t approve the frame, we have done nothing different for any other frames that we supply and do not have any issues.

Anyway, I can arrange for our engineer to go up to the site and sign off on it but he is going to charge me about $1,000 as it will take him the best part of a day in travel and time on site. If you are happy for me to arrange this I will call him and see when he can do it. I can also guarantee that he will sign off on it without any issues and you will be able to keep moving forward with the project.

It appears that Mr Shih took no immediate action in relation to this advice;

23.29 On 2 April 2015 Mr Shih responded to an email from the homebuilder complaining about the delay, again requesting her to change the certifier to Penrith City Council on the basis that the current certifier was being “unreasonable”. In that email Mr Shih also states that if the homebuilder fails to do this he will ask Go Steel’s engineer to inspect the frame and provide a report as requested by the certifier. I note at this point that the email exchanges between the homebuilder and Mr Shih are in Chinese. They have been translated into English for the purpose of these proceedings, but not by a NATTI accredited translator. In these circumstances it is not appropriate that I rely upon the emails on any issue that is determinative of the proceedings. However that does not arise in this case;

23.30 At some time in early April 2015, apparently between 2 and 6 April 2015, the homebuilder and her son Mr Jimmy Chuang met with Mr Ken Shih and his brother (whose name does not appear in the evidence) to discuss the building works. It appears that at that meeting Mr Chuang insisted on the homebuilder’s behalf that Mr Shih provide a completion date for the works, a budget report in writing, and supply a copy of all pages of the Building Contract. It appears Mr Shih refused these requests. This led to an acrimonious exchange that then resulted in a breakdown in civil relations between the homebuilder and Mr Shih;

23.31 On 6 April 2015, the homebuilder responded to Mr Shih’s email of 2 April 2017 declining to change the certifier on the basis that there was no guarantee that any new certifier would be prepared to certify the frame without an engineer’s report certifying its structural integrity. In that email she pleads with Mr Shih to finish the work stating that it has been delayed for a long time and that she is stressed by paying interest every month. On 7 April 2015, Mr Shih responded to the homebuilder (relevantly) as follows:

If you change certifier last week, then next week should already changed, I don’t really know what you are waiting for? … I can’t guarantee is because I’m not the one whos doing the examine, what makes me to make this promise,

But I told you if we change then it would be the person from council, and you even don’t trust council then I can’t do anything. If you don’t want to change certifier with his unreasonable requirement means you just have to keep paying the engineer, and I can’t promise what will it be next, that is why I want to change, PCA it is up to you, not my problem. To remain the current certifier of cause what ever he requests is your responsibility to pay all fees, that is your decision. However if you follow the contract, I have text you, you only paid $100000, the rest of $2500 I haven’t received. You afraid of signing paper and I’m also afraid of not receiving money. So that just follow the contract as jimmy said. Please pay the rest of the payment.

23.32 On 11 April 2015, the homebuilder responded to Mr Shih’s email as follows:

Although you said changing certifier but the problem still remain, you are the architect, you designed the house, if you can’t guarantee yourself, what happens after we change to the council and they also raise the same problem? Because of your designed is not a traditional house, so you need to explain to the certifier so he could understand, isn’t this right?

And you said I still need to pay $25000, didn’t I paid you more than $340000 only few thousand left. …

23.33 The builder did not carry out any further work on the dwelling up to early June 2015. In late May 2015, after making her own inquiries, the homebuilder retained a structural engineer to inspect the frame. That inspection was carried out and a Construction Compliance Certificate was issued with respect to the frame on 2 June 2015. The homebuilder provided a copy of the certificate to Mr Shih on or about that date. In her statement she recounts part of a conversation she had with him at that time. She claims that Mr Shih said words to the effect that: “[f]rom now on, you go ahead and contact the Certifiers. Leave me out of it, I won’t have further progress until I have heard from certifier himself.”

23.34 However, immediately afterwards, the builder did recommence the building work by sending tradesmen to undertake the construction of the exterior and interior walls of the dwelling. The homebuilder contends that, to the best of her knowledge, Mr Shih did not attend the site again. In or about mid-June 2015 the building works again ceased. The homebuilder says that she made repeated attempts to contact Mr Shih to try to find out the reason for the further delay and when the building works would recommence but she did not receive any response;

23.35 On 3 July 2015 Mr Shih emailed the homebuilder to request a further payment of $25,000.00 towards the costs of construction. This email (relevantly) states:

Windows now is under making, will be delivered next month, I’ve contact BCRP and their architect about process. Please don’t phone me again asking about process, is not making any help. Also, 3rd stage I should received $122500 but I only received 120000 still need $2500. 4th stage I should received $105000 but I only received $100000 still need $5000. 5th stage is $17500

17500+5000+2500=25000

Please pay $25000 when windows arrives then I’ll start organise the exterior walls and settlement.

23.36   The home builder replied to this email on the same day stating the following:

You told me without payment you can’t order materials. I paid you 4moths (sic) ago, and you only just now ordering windows, when you ask about payment I never delay, and now you have delayed the job for this long, the floor now has exposed to the weather and damaged it’s your responsibility. You told me materials you are going to import from Taiwan, but now it’s from China, what happens if something goes wrong?

How much I have paid you, can you please written down the details. Ken do you know because of your delayed, I need to pay $1500 of interest of my loan monthly, are you going to make me broke? Shouldn’t you give me a settlement date?

23.37   Mr Shih replied to this email by return as follows:

1. I have emailed you at March telling you to change the certifier, I even prepared all these paper works, but because you don’t want to change, not me delaying the job. And the certificate you emailed me, I have forwarded to him, and still he hasn’t reply me, he only replied to you, so no matter what I can’t continue the work. So if you trust him this much then you go tell him to reply me.

2. You made the payment but not completed, you can go check on your bank statement, and as I told you I need to receive money first to start every stage, this was written on the contract too.

3. And really it’s you and especially Jimmy’s attitude, made this situation like this, don’t blame, he thought he knows everything, want to follow the contract then that what I’m doing. All my action and process are legible and follow the regulation.

4. Because you guys are being unreasonable, ruthless and immeasurable so don’t blame me lacking of justice. I can only say there’s a difference in both our understanding.

23.38 The homebuilder refused to make the $25,000.00 payment demanded by Mr Shih. As a consequence, building works did not recommence;

23.39 On 17 October 2015 the builder again demanded the homebuilder make a payment of $25,000.00 on threat of ceasing work on the construction of the dwelling. The homebuilder again refused to make this further payment. The builder did not recommence work;

23.40 In or about the end of November 2015 the homebuilder made a complaint about the builder to NSW Fair Trading. This resulted in an investigation being opened. The investigating officer arranged to meet the homebuilder and Mr Jimmy Chuang and a representative of the builder at the building site on 17 December 2015. The representative of the builder did not appear at that meeting. After inspecting the works, the inspector advised the homebuilder that he intended to close the complaint file and refer the contractual and financial issues in dispute to the Tribunal for determination;

23.41  On 19 May 2016 the homebuilder, by her solicitors, issued the builder with a Notice of Default on the Building Contract which required the builder to complete the building work within ten business days of the date of the Notice, otherwise she would terminate the contract in accordance with clause 26 of the contract. I note that a page of the Building Contract containing clause 26 is not in evidence. That page was apparently not one of the pages the homebuilder says she received from the builder. The homebuilder therefore appears to rely upon the clause from the Standard Form Master Builders Association Cost Plus Contract as being incorporated into the Building Contract. The particulars of the default alleged are stated in the Notice as follows:

…

1. The property remains incomplete as at 16 May 2016;

2. The Builder has breached the Contract

(a) Particulars – pursuant to clause 26(a) of The Contract:

• Failed to proceed with the works with due diligence or in a competent manner with regard to circumstances of the contract works;

• Failed to complete the works within reasonable time. 

(b) Particulars – pursuant to clause 26(b) of The Contract:

• Has carried out misleading and deceptive conduct in respect of changing the Terms or what was agreed in the Preliminary Agreement (in Chinese) (“Chinese Contract”) to what terms were stated as in The Contract;

• Entered into The Contract at the time there was a condition “ONLY FOR CONTRACTS NOT REQUIRUNG HOME WARRANTY INSURANCE” on its building license (number 269586C);

• Entered into The Contract without having in place Home Building Compensation Fund (“HBCF”);

• Commenced construction work without a Construction Certificate.

23.42 After receiving that Notice, Mr Shih sent an email directly to the homebuilder dated 25 May 2017 which states as follows:

Hi:

According to the contract. The owner need to pay the stage payment before we commence the work.

This is because it’s a Cost Plus Contract and we don’t want to have any risk of debt.

On April 2015, I replied an email and ask for full payment of third stage payments because they only parts but not full. So legally, I was not breaching the contract.

I start again the building on 2015 November because my parents ask me to, she said “some one will not appreciate of what you do no matter how hard you tried. They don’t even care, they just think about themselves and want to take advantage of you.”

I listened, that’s why I engage a Carpenter try to finish the rest of the lock up stage.

But now you hire a solicitor and I think we should work with the legal way according to the contract.

Attachments are the invoice I paid in advance.

So now, I am asking the attached variation to invoice be paid before I keep moving on to finish the final part of lock up stage

The invoice need to be paid in 7 days.

I am doing everything legally according to the contract and I am not breaching the contract.

All the invoice expense for the first two stages I had shown you before and invoice were kept.

I will engage a solicitor to reply when I go back to Australia.

During these time all the scaffold fee on site and other expenses will be on your bill.

I won’t keep moving to complete the last part of the lock up stage unless I receive the full payments of above invoice.

Attached to the email are three invoices rendered on the builder by Johnnos Building Services Pty Ltd, dated 12 November 2015, 31 January 2016 and 18 May 2016, which total $92,625.50

23.43 By letter dated 31 May 2016, the homebuilder’s solicitor responded to Mr Shih’s email. That response included a request for the provision of the following information immediately:

1. An up-to-date detailed budget report with supporting documents.

2. A detailed payment schedule which describes what each stage includes;

3. Advise what is the Variation, as stated in your email, and details of when and who requested it;

4. Provide details for “VARIATIONS ON ITEMS NOT UP TO STANDARD”, as per your attached invoice number 1145;

5. A building schedule with expected completion dates.

The letter also warned the builder that it had not issued any Default Notice to the homebuilder and in those circumstances its cessation of work was a breach of the Building Contract. The letter also states that the builder’s statement “I won’t keep moving to complete the last part of the lock up stage unless I receive the full payments of above invoice” may be taken to be a repudiation of the contract.

23.44 It appears that sometime in late May or early June 2016 the builder appointed a solicitor to act for it in relation to the dispute. There was some communication between the parties solicitors in June 2016 which is not in evidence. On 6 July 2016 the homebuilder’s solicitor wrote to the builder’s solicitors noting that they had not received any reply in respect of the issues raised in the Notice of Default and that they had not received a budget report as requested. The letter also noted that the builder had recently removed all the scaffolding from the building site without carrying out any further work. The letter put the builder’s solicitors on notice that in the absence of any reply by close of business on 11 July 2016 the homebuilder would accept the builder’s silence, and the removal of the scaffolding, as the builder’s repudiation of the contract;

23.45 The homebuilder’s solicitors received no response to their letter of 6 July 2016. On 11 August 2016 the homebuilder, through her solicitors, issued the Builder with a Notice of Termination of the Building Contract on the grounds set out in the Notice of Default, effective on that date. The Notice of Termination was sent to the builder directly and to its solicitors;

23.46 The homeb contends that at no stage during the building works did she request any variation to the terms of the Building Contract. She contends that in spite of her understanding that she was not required to make progress payments until each stage of work was completed, she made payments each time they were requested by Mr Shih because she trusted him and wanted the work completed;

23.47 The homebuilder has submitted into evidence an expert report prepared by Mr Mark Irvine dated 27 April 2017. Mr Irvine is a pest and building consultant working with Tyrells Property Inspections Pty Ltd. In his Curriculum Vitae, which is appended to his report, Mr Irvine describes himself as having over 30 years professional, practical, supervisory and professional experience in all facets of residential, industrial and commercial construction. As already noted, Mr Irvine states in his report that the report has been prepared in accordance with the NCAT Procedural Direction 3, including the Expert Code of Conduct;

23.48 Mr Irvine attended the building site and conducted on inspection on 27 April 2017. Mr Irvine’s key findings and conclusions based on that inspection are extracted below:

[at 4] …

1.5    As a result of my investigations I conclude the Works contains defects, which arise as a consequence of the Respondent failing to conduct the Works in a proper and workmanlike manner or in accordance with provisions of applicable codes and standards.

1.6   I conclude the

1.6.1 defects amount to breaches of the warranty provisions set out in Part 2C Section 18(b) of the Home Building Act 1989

1.6.2   incomplete works exist which breaches the agreement between the parties.

1.7   I estimate a reasonable cost to rectify the defects would be $46,994.45

[at 7]

9.0 Analysis

…

Non-compliance with AS20147 Windows in buildings & AS 2904 DPC and flashings

9.3   Flashings not installed to heads and sills on openings in claddings eg windows and external door openings

9.4   Sarking materials fitted behind claddings are not an approved flashing material. Flashing materials impervious preventing moisture movement to parts of the building requiring protection. Sarking is an impervious (sic)

Non-compliance with AS3500.5 National plumbing and drainage

9.5   On site box gutters are supported by truss top cords at 900mm spacings. Support is required at max 750mm intervals, stop ends and rainheads

Defective louvre window installation

9.6   Study north and south louvre window panels installed upside down which will shed water to interior surfaces contravening BCA Performance requirement P2.2.2

Incomplete works

9.7    Works required to complete lock up include:

9.7.1   Parapet wall cappings and roof cover flashings incomplete around perimeter walls which has lead to leaking around perimeter interior surfaces. Flashings and cappings need to be installed to weatherproof interior surfaces.

9.7.2   Laundry and pantry external door not fitted to external walls. Garage interior door not fitted to enable living areas to be locked up

9.7.3   Study east window not fitted into existing opening. Flashings and cappings need to be installed to weatherproof interior surfaces.

[at Appendix B Schedule of Alleged Defects]

Note: columns 3, 5 and 6 omitted

No	Location/ description	Observation/cause	General Rectification Measures/estimates
1	Windows and external doors	Defects in construction which are not in accord with AS2047-1999 Windows in buildings – selection and installation include: • Approved flashings not fitted to window and external door frames and openings in claddings (polystyrene and blue board) Defects in construction which are not in accord with AS2904 – 1995 Damp Proof courses and flashings Part 4.5 Flashings • Impervious barrier not built in to prevent moisture movement to any part of the building requiring protection Sarking has been used as flashing material but is a vapour permeable material	Removal and refitting of aluminium windows and doors in accord with BCA, AS & manufacturer’s requirements. The work will require: Removal of windows/exterior doors and fibre cement sheeting around exposed window and door frames. Add metal trim for future cladding refix. Extend flashing 100mm past window and door heads. Fix off approved flashings to window sill/reveals. Provide threshold flashing below external door units and full length windows. Refit windows and doors. Dress flashings Refix removed polystyrene and fibre cement sheeting. Seal cladding too window/door frames Reapply finish coating to appropriate break point
2	Roof exterior parapet wall cappings and flashings not installed	Incomplete roof cover works resulting in leaks around perimeter walls – 75 lin m The building is not weatherproof. Perimeter parapet wall flashings	Fit zincalum flashing materials on parapet walls to match existing roof cover colour. Ensure bends are moulded over profile sheeting.
3	Incomplete support below box gutters	Defects in construction and installation of lower metal roof, which is not in accord with AS3500.5; 200 National Plumbing and Drainage, Domestic Installation Part 5.5.9.4 Box gutter support systems shall be either – (b) discontinuous, where the support brackets extend across the sole width of the gutter and are located at stop ends, rainheads and intervals not greater than 750mm, or are located in accordance with manufacturers instructions Trusses spaced approx. 900 apart	Fit metal battens across from perimeter wall frame to parapet wall frame in between truss top cords, at stop ends and adjacent outlets
4	Install missing window study east	Study window not fitted into existing opening	Measure existing opening. Manufacture matching window profile in accordance with the original plans and on site finishes. Install in accordance with current requirements.
5	Louvre window panels installed upside down study north and south windows	Defects in construction/set out of window louvres will allow water to penetrate to interior surfaces	Remove louvre panels from north and south windows. Install louvre sets to match existing frames designed to shed water to exterior surfaces
6	Install missing external door sets	Laundry and pantry external doors not fitted into external walls. Garage interior door not fitted to enable living areas to be locked up	Install door jambs, flashings and doors to close off existing openings.

23.49 Mr Irvine’s report estimates that the costs of completing the incomplete works identified is $23,888.61 and the cost of rectifying the defective works identified is $23,105.84, being a total of $46,994.45, which is itemized in a Scott Schedule set out at Appendix H of his report. The Scott Schedule includes the homebuilder’s estimates only due the builder’s failure to participate in the proceeding:

Item	Comments	Estimate of loss
1	Site preliminaries – set up 2 storey scaffold for 4 weeks for access to rectify defects =+ site clean Scaffolding fixed hire per week x 4. 2 storey scaffold. Scaffolding – deliver, erect, dismantle and pick up. Site clean – domestic, small bin Total Contingency margin 5% Professional fees 10% Contractors margin 20% Total GST Total	$4848.00 $3490.80 $377.19 $8715.99 $435.70 $915.16 $2013.30 $12080.15 $1208.01 $13,288.16
2	Carpenter to provide intermediate support to underside box gutters Labour x 8 hours (30 battens) x $54.94 Total Contingency margin 5% Professional fees 10% Contractors margin 20% Total GST Total	$439.52 $21.97 $46.14 $101.52 $609.15 $60.91 $670.06
3	Carpenter – cut out polystyrene sheet approx. 150mm around aluminium windows and exposed door frames. Install head and sill flashings. Reinstate polystyrene flashings. Labour 2 men x 8 days. 128 hours x $54.94 Total Contingency margin 5% Professional fees 10% Contractors margin 20% Total GST Total	$7032.32 $351.61 $738.39 $1624.46 $9746.78 $974.67 $10,721.45
4	Carpenter – unscrew blue board sheeting. Install head and sill flashings. Refix blue board sheeting 2 men x 2 days. 32 hours x $54.94 Total Contingency margin 5% Professional fees 10% Contractors margin 20% Total GST Total	$1758.08 $87.90 $184.59 $406.11 $2436.68 $243.66 $2680.34
5	Install parapet wall capping and roof flashings – supply and fit Rate 75 lin m x 17.41 Total Contingency margin 5% Professional fees 10% Contractors margin 20% Total GST Total	$1305.75 $65.28 $137.10 $301.62 $1809.75 $180.97 $1990.72
6	Windows – remove and replace upside down louvre panels in study room 2 x window panels x $409.09 Total Contingency margin 5% Professional fees 10% Contractors margin 20% Total GST Total	$818.18 $40.90 $85.90 $188.99 $1133.97 $113.40 $1247.37
7	No item 7
8	Windows – supply and fit missing study window east Total Contingency margin 5% Professional fees 10% Contractors margin 20% Total GST Total	$1445.85 $72.29 $151.81 $333.99 $2003.94 $200.39 $2204.33
9	External doors – supply and fit laundry, pantry and garage interior doors for lock up stage 3 x 1230.26 Total Contingency margin 5% Professional fees 10% Contractors margin 20% Total GST Total	$3690.78 $184.53 $387.53 $426.28 $4689.12 $468.91 $5158.03
10	Polystyrene coating overlay to patched surfaces around external windows and doors 70 sqm x $84.65 Total Contingency margin 5% Professional fees 10% Contractors margin 20% Total GST Total	$5925.50 $296.27 $622.17 $1368.78 $8212.72 $821.27 $9033.99

23.50 The Preliminary Agreement provides that the $50,000.00 Project Management Fee is to be paid to the builder in 5 stages in the amount of $10,000.00, being on the date the contract was signed, when the ground work is completed, when the building shell is completed, when the cabinets and wardrobes are installed, and when the work is completed. As outlined at paragraph 23.14 to 23.16 above the homebuilder’s payments do not strictly follow the payment schedule agreed. However, it is clear that as at the date the Building Contract was terminated the homeowner had paid $345,000.00 in respect of the building works. The evidence does not establish that any additional amount had been made towards the builder’s project management fees at any time during the period the contract was on foot.

Jurisdiction

24. I am satisfied that I have jurisdiction to deal with this application under section 48K of the HB Act. The claim is a “building claim” as that term is defined in sub-section 48A(1)(a) of the HB Act in that it is a claim for a specified sum of money that arises from a supply of building goods and services by the builder to the homebuilder.

25. The work involved is “residential building work” as that term is defined in Schedule 1 sub-sections 2(1)(a) of the HB Act in that it was work involved in the construction of a dwelling.

26. The reasonable market value of the work was $400,000.00 which exceeds the minimum threshold of $5,000.00 for a building claim set by Schedule 1 Clause 2(3)(a) of the HB Act and Regulation 12 of the Home Building Regulation 2014 (HB Regulation), and the claim is less than the $500,000.00 prescribed limit imposed by sub-section 48K(1) of the HB Act on the Tribunal’s order making power.

27. The application has been made to the Tribunal within the three year time period specified by section 48K(3) of the HB Act and within the 2 year time period specified by section 18E for proceedings that involve a claim for a breach of a statutory warranty, which relevantly to this case, is within two years of the termination of the building contract (sub-section 18E(1)(d)(i) of the HB Act).

Applicable law

28. Sub-section 4(1) of the HB Act provides that a person must not contract to do any residential building work except as, or on behalf of an individual, partnership or corporation that is the holder of a contractor licence authorising its holder to contract to do so. It is an offence to do so.

29. Sub-section 5(1) of the HB Act provides, relevantly, that an individual or an officer of a corporation must not represent that the individual or corporation is prepared to do residential building work, or any specialist work, if the individual or corporation is not the holder of a contractor licence authorising its holder to contract to do that work. Sub-section 5(2) provides, relevantly, that a person must not represent that an individual or corporation is prepared to do any residential building work if the person knows that the individual or corporation is not the holder of a contractor license authorising its holder to contract to do that work. In both instances it is an offence to do so.

30. Section 12 of the HB Act relevantly provides that an individual must not do any residential building work, or specialist work, except as, or as an officer of a corporation that is the holder of a contractor license authorising its holder to contract to do that work or as an employee of the holder of such a contractor licence or permit. It is an offence to do so.

31. Section 13 of the HB Act relevantly provides that an individual must do any residential building work except as the holder of an endorsed contractor license or a supervisor or tradesperson certificate authorising its holder to do that work or under the supervision, and subject to the direction, of the holder of an endorsed contractor licence or supervisor certificate authorising its holder to supervise that work. It is an offence to do so.

32. Sub-section 17(1) of the HB Act provides, relevantly, that a person must not represent that an individual or corporation is the holder of a contractor licence, knowing that the individual or corporation is not the holder of a contractor licence, or that the person or corporation is the holder of a contractor licence authorising its holder to do residential building work, or specialist work, knowing that the individual or corporation is not the holder of an appropriate license. Sub-section 17(2) provides that a person must not represent that the person or any other person is the holder of a supervisor or tradesperson certificate, knowing that the person or other person is not the holder of an appropriate certificate. In either case, it is an offence to do so. Sub-section 17(3) provides that a contractor license or certificate is “appropriate” only if it authorises its holder to contract to do, or authorises its holder to do, the work that is the subject of the representation. In this respect, sub-section 18(1) of the HB Act relevantly provides that it makes no difference whether such a representation is express of implied.

33. Sections 6 to 7E of the HB Act sets out the requirements for contracts for residential building works and specialist works. Sub-section 6(1) provides, in effect, that it is only a person who holds a contractor license that is entitled to enter into a contract to carry out residential building works. Section 7 applies to contracts where the contract price exceeds the amount prescribed by the HB Regulation, which in this case is $5,000.00 because the contract was entered into prior to 1 March 2016 (Regulation 5(1)(a) of the HB Regulation)” ss 7(1A). It is an offence to fail to comply with sections 7 and 7E: section 7A.

34. Sub-section 7(1) provides that the contract must be in writing and be dated and signed by or on behalf of each of the parties to it. Subsection 7(2) provides that the contract must contain:

1. the names of the parties, including the name of the holder of the contractor licence shown on the contractor licence, and

2. the number of the contactor licence, and

3. a sufficient description of the work to which the contract relates, and

4. any plans and specifications for the work, and

5. the contract price if known, and

6. any statutory warranties applicable to the work, and

7. in the case of a contract to do residential building work – a conspicuous statement setting out the cooling-off period that applies to the contract because of section 7BA, and

8. in the case of a contract to do residential building work (other than a construction contract to which the Building and Construction Industry Security of Payments Act 1999) applies) – details of any progress payments payable under the contract, and

9. in the case of a contract to do residential building work – a statement that the contract may be terminated in the circumstances provided by the general law and that this does not prevent the parties agreeing to additional circumstances in which the contract may be terminated, and

10. any other matter prescribed by the regulations for inclusion in the contract.

35. Sub-section 7(3) provides that the contract must comply with any requirements of the regulations. In this case the contract was made prior to 1 March 2015. It was therefore required by Regulation 8(a) to include the checklist set out in schedule 1 of the Regulation, which is in the following terms:

CHECKLIST

1	Does the contractor hold a current contractor  licence?	Yes □	No □
2	Does the licence cover the type of work included in the contract?	Yes □	No □
3	Is the name and number on the contractor's licence the same as on the contract?	Yes □	No □
4	Is the work to be undertaken covered in the contract, drawings or specification?	Yes □	No □
5	Does the contract clearly state a contract price or contain a warning that the contract price is not known?	Yes □	No □
6	If the contract price may be varied, is there a warning and an explanation about how it may be varied?	Yes □	No □
7	Are you aware of the cooling-off provisions relating to the contract?	Yes □	No □
8	Is the deposit within the legal limit? The limit is 10% for work costing $20,000 or less or 5% for work costing more than $20,000.	Yes □	No □
9	Is the procedure for variations understood?	Yes □	No □
10	Are you aware of who is to obtain any council or other approval for the work?	Yes □	No □
11	Do you understand that the contractor must have a policy of insurance under the Home Building Compensation Fund and provide you with a certificate of insurance before receiving any money under the contract (including a deposit) or before doing any work for more than $20,000?	Yes □	No □
12	Has the contractor given you a document that explains the operation of the HomeBuilding Act 1989and the procedures for the resolution of contract and insurance disputes?	Yes □	No □

SIGNATURES

Do not sign this contract unless you have read and understand the clauses as well as the notes and explanations contained in the contract and this document. If you have answered "no" to any question in the checklist, you may not be ready to sign the contract. Both the contractor and the owner should retain an identical signed copy of the contract including the drawings, specifications and other attached documents. Make sure that you initial all attached documents and any amendments or deletions to the contract.

SIGNED COPY OF CONTRACT

Under the Home Building Act1989 a signed copy of the contract must be given to the owner within 5 working days after the contract is entered into.

HOME BUILDING COMPENSATION FUND

The contractor must provide the owner with a certificate of insurance under the Home Building Compensation Fund (for work over $20,000) before commencement of work and before demanding or receiving any payment.

OWNERS ACKNOWLEDGEMENT

I/We have been given a copy of the Consumer Building Guide and I/we have read and understand it. 

I/We have completed the checklist and answered " Yes " to all items on it.

Note : Where the owner is a company or partnership or the contract is to be signed by an authorised agent of the owner, the capacity of the person signing the contract, eg director, must be inserted.

Signature Name [print] Capacity [print]

Signature Name [print] Capacity [print]

36. Section 7E of the HB Act as it was in force in September 2014 when the contract was made also required the contract to incorporate the conditions required by Regulation 9(a) of the HB Regulation which are set out in Part 1 of Schedule 3 of the Regulation. Part 1 of Schedule 3 is in the following terms:

Part 1 - Contracts to do residential building work

1 PLANS AND SPECIFICATIONS

(1)    All plans and specifications for work to be done under this contract, including any variations to those plans and specifications, are taken to form part of this contract.

(2)    Any agreement to vary this contract, or to vary the plans and specifications for work to be done under this contract, must be in writing signed by or on behalf of each party to this contract.

(3)    This clause does not apply:

(a)    if the contract concerned is subordinate to a principal contract to do residential building work (for example, if the contract concerned is a contract between a licensed builder and a licensed subcontractor), or

(b)    if the contract concerned is made between a licensed builder doing work on premises that the licensed builder owns and a licensed trade contractor, or

(c)    if the contract concerned is for the doing of specialist work that is not also residential building work, or

(d)    to a contract for residential building work entered into between the holder of acontractor licence and a developer who is taken under section 3A (1) of the Act to be a developer who does the work, or

(e)    to a contract for residential building work that is required to be completed urgently so as to rectify a hazard, or potential hazard, to the health or safety of persons or to prevent substantial damage to property.

2 QUALITY OF CONSTRUCTION

(1)    All work done under this contract will comply with:

(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), and

(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.

(2)    Despite subclause (1), 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 subclause (1).

37. Section 7AA requires the holder of a contractor licence to give the other party to the contract consumer information prescribed by the Secretary that explains the operation of the HB Act and the procedure for the resolution of disputes under the contract and for the resolution of disputes relating to insurance. It is an offence to fail to do so. Section 7B requires the holder of a contractor license to give the other party to the contract a signed copy of the contract in the form in which it was made not later than 5 clear business days after entering into a contract. It is an offence to fail to do so.

38. Section 8A sets out the maximum progress payments that may be claimed by a builder under a home building contract, other than in relation to small jobs. However, it is not applicable in this case, as it only applies to contracts entered into after 1 March 2015.

39. Section 18B of HB Act sets out the warranties that are implied into every contract for residential home building work carried out a the holder of a contractor license, or as is relevant in this case, a person required to hold a contractor license before entering into such a contract:

18B Warranties as to residential building work

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

(a)    a warranty that the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract,

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

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

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

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

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

(2) The statutory warranties implied by this section are not limited to a contract to do residential building work for an owner of land and are also implied in a contract under which a person (the "principal contractor" ) who has contracted to do residential building work contracts with another person (a "subcontractor" to the principal contractor) for the subcontractor to do the work (or any part of the work) for the principal contractor.

40. Section18BA of the HB Act sets out the duties of a person who has the benefit of a statutory warranty provided in section 18B of that Act. Relevantly, a party to the contract who suffers loss arising from the breach has a duty to mitigate their loss, and they must make reasonable efforts to ensure that a person against whom the warranty can be enforced is given notice in writing of the breach within 6 months after the breach becomes apparent. The person must not unreasonably refuse a person who is in breach of the statutory warranty such access to the residential building work concerned as that person may reasonably require for the purpose of or in connection with rectifying the breach. If a failure to comply with these duties is established in proceedings before the tribunal concerning a breach of a statutory warranty, the failure is a matter that the court or tribunal may take into account, or in the case of a failure to comply with the duty to allow reasonable access, that the tribunal must take into account.

41. Section 18F of the HB Act sets out certain defences that are available to a respondent to a claim for breach of a statutory warranty. Relevantly, pursuant to sub-section 18(F)(1), it is a defence for the builder to prove that the deficiencies that the Homeowner complains about arise from instructions given by the homebuilder to the builder in writing before the work was done. It is also a defence that the builder placed reasonable reliance on instructions given by a relevant professional acting for the homebuilder who is independent of the builder where such instructions are given in writing before the work was done or confirmed in writing after the work was done.

42. Section 48MA of the HB Act provides that when the Tribunal determines a building claim involving an allegation of defective residential building work by a party to the proceedings it is to have regard to the principle that rectification of the defective work by that party is the preferred outcome.

43. Section 92 of the HB Act provides that a person must not do residential building work under a contract unless a contract of insurance that complies with the HB Act is in force in relation to the building works, and a certificate of insurance evidencing the contract of insurance has been provided to the other party to the contract. It also provides that a person must not demand or receive payment under a contract for residential building work (whether as a deposit or other payment and whether or not work under the contract has commenced) from the other party unless a contract of insurance that complies with the HB Act is in force in relation to the building works, and a certificate of insurance evidencing the contract of insurance has been provided to the other party to the contract. In both cases it is an offence to do.

44. Sub-section 74(3) of the Fair Trading Act 1987 (FT Act) confers jurisdiction on the Tribunal to consider if a person has suffered loss or damage because of the conduct of another person due to a contravention of that person of Chapter 2 or 3 of the Australian Consumer Law (ACL), provided the contravention is relevantly connected with New South Wales and that the claim arises in the context of another claim which is properly before the Tribunal. Sub-section 74(3) is engaged in this case, because the application before the Tribunal is a building claim brought under section 48KI of the HB Act.

45. The ACL is a national law that, relevantly, provides a number of ‘protections’ for consumers in consumer transactions. This includes, relevantly to this case, in section 18 of the ACL, a general protection against misleading and deceptive conduct by a person in trade or commerce. Pursuant to section 28 of the FT Act the ACL also forms part of the law of NSW.

46. Sub-section 70(2) of the FT Act provides that certain remedies available under the ACL apply to a contravention of the ACL in NSW in the same way that they do under the national law. These include, relevantly to this case, the remedy of compensation for damage provided in section 236 of the ACL (which is in Part 5.2 Division 3 of the ACL (see subsection 70(2)(b) of the FT Act)). In other words, briefly stated and relevantly to this case, if a person engages in misleading and deceptive conduct in trade or commerce in contravention of section 18 of the ACL, and a consumer of those goods or services suffers damage or loss as a result of that conduct, the consumer may be entitled to be compensated by that person for that damage and loss.

Consideration

47. Having regard to the homebuilder’s causes of action, the material facts and the applicable law, the questions the Tribunal must pose and answer to determine the outcome of this proceeding are:

1. are the building works in issue in these proceedings residential building works to which the HB Act applies?

2. in carrying out the building works, did the builder fail to comply with one or more of the warranties implied into the contract for the building works set out in section 18B of the HB Act?

3. in contracting for and carrying out the building works, did the builder engage in misleading and deceptive conduct contrary to section 18 of the ACL?

4. if the builder’s failure to comply with the 18B warranties is established, has the homebuilder taken reasonable steps to mitigate any damage and loss arising from this failure, as required by section 18BA of the HB Act?

5. does any aspect of the builder’s failure to comply with the section 18B warranties, if any, arise from instructions given by the homebuilder or a professional acting for the homebuilder in writing prior to the work being carried out?

6. if a failure by the builder to comply with the section 18B warranties is established, what remedy is the homebuilder entitled to, taking into account the principle that rectification of the building works by a Builder is the preferred outcome?

7. If the builder is found to have engaged in misleading and deceptive conduct contrary to section 18 of the ACL what further remedy, if any, is the homebuilder entitled to?

Does the HB apply to the building works in issue?

48. This issue has already been dealt with in the context of the Tribunal’s jurisdiction to deal with these applications. I am satisfied that the application concerns residential building works to which the HB Act applies.

49. Two implications of this finding are that the builder was required to have a person with a builder’s licence carry out that work, and the warranties that apply to residential building work set out in section 18B of the HB Act apply to the building work on the basis that the builder is “a person required to hold a contractor license before entering into a contract” (sub-section 18B(1) of the HB Act).

Builder’s compliance with the section 18B warranties

50. The warranties contained in sub-sections 18B(1)(a), (c) and (d) of the HB Act are engaged this this case. They imply into the building contract that subsisted between the parties warranties that the building work would be carried out with due care and skill and in accordance with the plans and specifications set out in the contract, that the work would be done in accordance with, and would comply with, the HB Act or any other law, and that the work would be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time. The evidence establishes conclusively that the builder breached each of these warranties.

51. The homebuilder’s expert evidence establishes that on the date the contract was terminated, the builder had abandoned the building works leaving them incomplete and in several respects defective. The contract required the builder to complete the dwelling to “lock-up stage.” It did not do so. Substantial work was still required before the dwelling was sealed from the elements. The roof exterior parapet wall cappings and flashing were not installed. The study window was not fitted. The external doors of the laundry, pantry and the interior door of the garage were not fitted preventing the dwelling from being locked up. The site was abandoned with building detritus remaining over the site. This was not cleaned away as required by the building contract. The windows and exterior doors were defective in their construction being non-compliant with AS2047-1999 Windows in buildings – selection and installation and AS2904 – 1995 Damp proof courses and flashings Part 4.5 Flashings. The construction of the box gutters was defective in that it did not comply with AS 3500.5: 2000 National Plumbing and Drainage, Domestic Installation. The louvre window panels were installed upside down in both windows in the study.

52. At the time it contracted with the homebuilder to carry out the building works, the builder did not hold a NSW Builder’s licence that entitled it to do so. It was only entitled to enter into a building contract that did not require home warranty insurance. Nor did Mr Shih hold any license that entitled him to carry out residential building work. The builder thus failed to comply with sections 4, 5, 6, 12, 13, and 17 of the HB Act. The building contract that was provided by the builder to the homebuilder was fragmentary. In providing the contract to the homebuilder in this form the builder failed to comply with sections 7, 7AA, 7B, and 7E of the HB Act, and the regulations made pursuant to these sections. The builder was required to take out home building insurance in relation to the building works. However, at the time the builder commenced the building works in October 2014 a contract of insurance in respect of those works was not in place. The works were not insured until 27 January 2015. Additionally, the builder had received a deposit and progress payments totalling $245,000.00 prior to obtaining home building insurance in relation to the works and providing the homebuilder with a certificate of insurance. In both respects the builder failed to comply with section 92 of the HB Act. It is also clear on the evidence that the builder commenced the works in October 2014 without having first obtained a Complying Development Certificate issued under Division 3 of Part 4 of the Environmental Planning and Assessment Act 1979. Also, as I have found above, the building works in several respects also failed to comply with the requirements of the Building Code of Australia. I am therefore comfortably satisfied that the builder failed to carry out the building works in accordance with the requirements of the HB Act and other relevant laws.

53. As best it can be ascertained on the available evidence, the building contract between the parties provided that the frame and exterior dwelling would be completed by the end of November 2014, and the interior by the end of February 2015. As I have found, the building works remained incomplete when the contract was terminated on 11 August 2016. At that point no work had been carried out since June 2015. The evidence also establishes that at several points between November 2014 and June 2015 work ceased inexplicably, or due to the builder’s failure to obtain necessary construction approvals. I am thus satisfied that the building work was not carried out with due diligence within the time stipulated by the contract or within a reasonable time.

Did the builder engage in misleading and deceptive conduct contrary to section 18 of the ACL?

54. In ACCC v Dukermaster Pty Limited (2009) FCA 682 Gordon J set out the principles to be applied in determining if conduct constitutes misleading and deceptive conduct:

• the “conduct” in the circumstances, must lead, or be capable of leading a person into error;

• the error or misconception must be caused by the conduct of the person, not other circumstances for which the person is not responsible;

• to mislead and deceive, there must be a real and not remote chance that the conduct will mislead;

• the conduct must be considered in context and not in isolation; and

• the test is an objective one which a Court (or Tribunal) must determine for itself.

55. Applying these principles to the facts in this case, I am satisfied that the builder engaged in misleading and deceptive conduct towards the homebuilder in three ways. First, the builder misled and deceived the homebuilder into believing it was capable of entering into a contract to carry out the building works, when in fact it did not hold, and no person associated with it held, a NSW Builder’s licence that entitled it to do so. That conduct led directly to the homebuilder entering into a contract with the builder to carry out the building works to her detriment.

56. Second, the builder, by its Mr Kuan-Shen Shih, misled and deceived the homebuilder into signing the building contract on 3 September 2014 by falsely representing to her that the contract was on the same terms as the Preliminary Agreement in respect of it being for a fixed price of $350,000.00 plus $50,000.00 in project management fees, and required progress payments to be made on the completion of each stage of work. The evidence establishes that the homebuilder had limited funds and placed particular reliance on those terms of the Preliminary Agreement. At the time he presented the building contract to the homebuilder for signature, Mr Shih knew, or ought to have known, that the homebuilder could not read English and would not be able to ascertain that its terms were materially different from those stated in the Preliminary Agreement. He thus sought to take advantage of her lack of English literacy to fundamentally alter the terms on which the building works would be carried out.

57. Third, the builder, by its Mr Kuan-Shen Shih, failed and then refused to provide the homebuilder with a complete copy of the building contract she signed. The homebuilder was thus deprived of the opportunity to properly understand the terms of that contract, particularly with respect to any obligations it may have contained in relation to the commencement and completion dates for the phases of work to be undertaken, the scope and content of each phase of work, and the triggers for progress payments. The builder also failed and then refused to provide the homebuilder with budget reports as the building works progressed. The homebuilder was thus deprived of the opportunity to properly ascertain if progress payments demanded by the builder were in fact due according to the terms of the contract and of monitoring her expenditure under the contract according to the work carried out. This caused the homebuilder to make progress payments to the builder apparently in advance of them falling due, to her detriment. That detriment was the expenditure of almost all of her available funds ($345,000.00) without the building works being completed in the context of escalating demands for further payments from the builder of up to $92,625.50, without any assurance that this would be all that was required to complete the works.

Homeowner’s obligation to mitigate her damage and loss

58. It is clear on the evidence that the homebuilder has at all material times been diligent in bringing her complaints about the delay in the building works to the builder’s attention, and in demanding performance of the builder’s contractual obligations. The homebuilder issued the builder with a Notice of Default on the building contract on 20 May 2016 which demanded that the builder return and complete building works within 10 days. The builder failed to do so then or at any time up to 8 November 2016 when the contract was terminated. No part of the homebuilder’s damage and loss arises from her failure to give the builder notice of her complaints, or from a refusal to permit the builder to rectify the incomplete and defective building works.

Are either of the section 18F defences available to the builder?

59. The builder has not participated in these proceedings and has not raised any defence in reliance upon section 18F.

What remedy is the homebuilder entitled to, taking into account the principle that rectification of the building works by a builder is the preferred outcome?

60. The homebuilder seeks an order from the Tribunal that would require the builder to pay her compensation in the amount of $46,994.45 being the estimated cost of completing the incomplete building works and rectifying the defective works. She also seeks an order that would require the builder to refund to her $33,333.34 in “overpaid” project management fees which she claims have been paid as a component of the progress payments she made to the builder.

61. There are two difficulties with the homebuilder’s claim.

62. First, on her own evidence the building works were to be completed to lock-up stage for the fixed contract price of $350,000.00. The evidence establishes that the homebuilder has paid the builder $345,000.00 towards that work with $5,000.00 remaining unpaid. The homebuilder’s estimated cost of completing the building works to lock-up stage (including rectifying the defective elements in the works to date) is $46,994.45. It follows that the measure of the homebuilder’s loss is $41,994.45 which is the amount it will take to complete the works without the homebuilder bearing any additional cost beyond the $350,000.00 she contracted for. I will make an order to that effect.

63. Second, there is no evidence that the homebuilder has paid any amount towards the builder (or Mr Shih) for project management fees at any material time for the dispute. The evidence establishes that all amounts paid by the homebuilder were applied to the building works. The order for compensation for the cost of completing and rectifying these works will result in the homebuilder receiving fair value for the $345,000.00 she paid towards those works. The homebuilder has not made any other payment attributable to the $50,000.00 project management fee she contracted to pay the builder that would entitle her to a refund of such payments. If I were to accede to this element of the homebuilder’s claim, she would be in a better position than that she is entitled to be in that she would not have paid any amount towards the $50,000.00 project management fee, and she would be “refunded” $33,333.34 in respect of that fee. This element of the homebuilder’s claim must therefore be dismissed.

64. However, I am satisfied that the builder’s conduct (and that of Mr Shih) in breaching the section 18B warranties and in engaging in misleading and deceptive conduct, disentitles it to any project management fee. The appropriate order for me to make in these circumstances is an order that the $50,000.00 project management fee is not due or payable.

65. Section 48MA of the HB Act requires the Tribunal to have regard to the principle that rectification of defective work by a builder is the preferred outcome in a dispute about incomplete and defective building works. However, this principle has no application in this case. The builder does not have a license to carry out residential building work. The Tribunal cannot order the builder to carry out work that would result in a contravention of the HB Act. Moreover, it is clear that the builder has abandoned the work. It has not participated in the proceeding and it has made no submission that it ought to be permitted to complete and rectify the building works.

66. The builder has not participated in the proceedings, and has thus not raised a defence based upon the “Cost Plus” terms of the building contract signed by the homebuilder as distinct from the “fixed-price” terms of the Preliminary Agreement. Nevertheless, as the compensation order I make holds the builder to the fixed-price term of the Preliminary Agreement in spite of the terms of the building contract, it is appropriate that I explain my reasons for doing so.

67. Ordinarily, parties are bound by the terms of the written contracts they sign and those terms are to be construed objectively. In L’Estrange v Gracob [1934] 2 KB 394 [at 403], Scrutton LJ restated the general principle as follows: “[w]hen a document containing contractual terms is signed, then, in the absence of fraud, or I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not.” In Toll (FGCT) Pty Limited v Alphapharm 219 CLR 165 the High Court explained [at 40] that contracts are to be construed objectively:

It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.

68.  In this case, however, it is clear that the homebuilder was induced to enter into the “Cost Plus” building contract by Mr Shih’s misleading and deceptive representations to effect that the terms of the contract with respect to the contract price and progress payments were the same as those set out in the Preliminary Agreement. In this respect Mr Shih took advantage of the fact that the homebuilder was not literate in English. Applying the principle in L’Estrange I am satisfied that Mr Shih’s misrepresentations entitle the homebuilder to rely upon the fixed price terms of the Preliminary Agreement she made with the builder prior to the building contract being signed.

What further remedy, if any, is the homebuilder entitled to, due to the builder’s misleading and deceptive conduct?

69. The orders I propose to make as outlined above are sufficient to do justice between the parties on the application before me. No further order is necessary based on the builder’s contravention of section 18 of the ACL.

Costs

70. The homebuilder seeks an order from the Tribunal that will require the builder to pay her costs of the proceeding on an indemnity basis. The costs claimed by the homeowner include the costs of Mr Irvine’s expert report, which is $3080.00.

71. This rule is subject to exceptions, including the circumstances specified in Rule 38(2)(b) of the Civil and Administrative Tribunal Rules 2014 (NCAT Rules), which provides the Tribunal with discretion to make a costs order where the amount claimed or in dispute in the proceedings is more than $30,000.00. That is the case in these proceedings. The homebuilder’s application is a claim for $80,327.79 in relation to which she has succeeded in establishing an entitlement to $41,994.45 in compensation, and to relief from payment of $50.000.00.

72. Rule 38 confers an unfettered discretion on the Tribunal to make an award of costs, but that discretion must be exercised on a principled basis: Smith v Sydney West Area Health Service (No 2) [2009] NSWCA 62 [at 11]. It must be exercised judicially and “according to rules of reason and justice, not according to private opinion … or even benevolence … or sympathy: Williams v Lewer [1974] 2 NSWLR 91 [at 95]. In this respect, the general rule is that “costs follow the event.” A successful party has a reasonable expectation of being awarded costs against the unsuccessful party: Oshlack v Richmond River Council (1998) 193 CLR 72 [at 67 and 134]. The purpose of a costs order is to compensate the person in whose favour it is made, not to punish the person against whom the order is made: Allplastics Engineering Pty Ltd [2006] NSWCA 33 [at 34]. The onus lies on the losing party to establish a basis for any departure from the usual rule: Waterman v Gerling Australia Insurance Co Pty Ltd (No.2) [2005] NSWSC 1111 [at 10].

73. The Tribunal’s power to award indemnity costs is unfettered but it must also be exercised judicially (Mead v Watson (2005) 23 ACLC 718 [at 8]). Exercise of the discretion must be the subject of careful reasoning (Degman Pty Ltd (in Liq) v Wright (no.2) [1983] 2 NSWLR 354), and caution should be exercised in making such an award: Leichhardt Municipal Council v Green [2004] NSWCA 341; Ng v Chong NSWSC 385 at [13]. There is no fixed rule or rationale as to when the discretion might be exercised (Harrison v Schipp [2001] NSWCA 12 [at 139]. However, it requires a “sufficient or unusual feature” (Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 [at233-234], or some “relevant delinquency”: Oshlack. This does not mean moral delinquency, or some ethical shortcoming, but “delinquency” bearing a relevant relation to the conduct of the case: Ingot Capital Investment v Macquarie Equity Capital Markets Ltd (No.7) (2008) 65 ACSR 324 [at 24].

70. I am satisfied that the cost of the expert report is a cost of, or incidental to the proceedings and that I should exercise the discretion conferred by under Rule 38(2)(b) of the NCAT Rules to order the builder to pay the homeowner the cost she incurred in obtaining this report. The builder put the homeowner to the proof of her claim. Proof of the claim required complex technical evidence to be adduced by the homebuilder from a person with relevant expertise to be considered by the Tribunal. I am satisfied that there was little or no prospect of the homebuilder being able to prove her claim without Mr Irvine’s expert evidence. These are circumstances that warrant the exercise of the discretion to award costs.

71. In relation to the remainder of the homebuilder’s claim for costs, she submits that she is entitled to costs on an indemnity basis because: (i) the builder has been deceptive and misleading since, and at the time, of the inception of the contract; (ii) the builder failed to adequately respond to the Notice of Default; (iii) the builder failed to provide a budget report pursuant to the contract; (iv) the builder failed to participate and defend this claim by the owner; (v) the builder has not provided any evidence in reply; and, (vi) the owner has incurred legal expenses to prosecute her claim properly though the Tribunal.

72. Having regard to the principles I must apply in the exercise of discretion to award costs outlined above I am satisfied that the homebuilder is entitled to an order that will require the builder to pay her remaining costs on the ordinary basis. In this respect as the successful party the homebuilder has a reasonable expectation of receiving her costs. She has conducted the proceedings efficiently and in accordance with the Tribunal’s directions and she has not otherwise engaged in any disentitling conduct. The builder has not sought to make any case for any alternative position as to costs.

73. The homebuilder has not established any relevant basis upon which an order for indemnity costs might be awarded. This is not a case where a more favourable offer of settlement has been made and the builder has continued to defend the proceedings in spite of that offer. It is not a case where the builder has engaged in conduct in the course of the proceedings that has caused serious delay and inconvenience to the homebuilder or which is otherwise scandalous or an abuse of process. The builder has simply failed to defend the proceedings in any way. If anything, this has reduced the homebuilder’s costs of the proceeding rather than increased them. An award of indemnity costs remains compensatory not punitive. The homebuilder’s submissions in support of an indemnity costs order invite the Tribunal to pass moral judgement on the builder for its conduct towards the applicant and to punish it for that conduct. The law requires the Tribunal to refuse that invitation.

Conclusion

78. It follows from these reasons that the homebuilder is entitled to an order from the Tribunal pursuant to sub-section 48O(1)(a) of the HB Act that will require the builder to pay her $41,994.45 in compensation being the cost of rectifying the incomplete and defective building work. She is also entitled to an order pursuant to sub-section 48O(1)(b) of the HB Act that declares that she does not owe the builder any amount of the $50,000.00 project management fee. The builder must pay the homebuilder’s costs of the proceeding assessed on the ordinary basis, including the costs of her expert report.

P French

General Member

Civil and Administrative Tribunal of New South Wales

20 November 2017

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: 13 March 2018