DCR Constructions (NSW) Pty Ltd t/as True Built v Matthews; Matthews v DCR Constructions (NSW) Pty Ltd t/as True Built

[2019] NSWCATCD 79

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

DCR Constructions (NSW) Pty Ltd t/as True Built v Matthews; Matthews v DCR Constructions (NSW) Pty Ltd t/as True Built [2019] NSWCATCD 79

Hearing dates:

25, 26 September 2018; 17,18 December 2018

Date of orders:

16 October 2019

Decision date:

16 October 2019

Jurisdiction:

Consumer and Commercial Division

Before:

G.J. Sarginson, Senior Member

Decision:

1. In Matter HB 17/31284, the application is dismissed.

2. In Matter HB 17/44021, DCR Constructions (NSW) Pty Ltd is to pay Gary Matthews the sum of $184,252.17 by 28 days from the date of this decision.

3. In both Matter HB 17/31284 and Matter HB 17/44021, DCR Constructions (NSW) Pty Ltd is to pay Gary Matthews costs of both proceedings as agreed or assessed on the basis set out in the legal costs legislation (as defined in s 3A of the Legal Profession Uniform Law Application Act 2014 (NSW).

4. Either party may make an application for an alternative costs order to order 3 above by written application filed with the Tribunal and served on the other party by 14 days from the date of this decision. If such an application is made, the Tribunal will issue directions to the parties regarding submissions. If no application is made, order 3 remains unchanged.

Catchwords:

BULDING AND CONSTRUCTION---Termination of contract---Which party lawfully terminated---Repudiation---Frustration---Defective work---Incomplete work---Assessment of appropriate remedy

Legislation Cited:

Australian Consumer Law 2010

Civil and Administrative Rules 2014 (NSW)

Home Building Act 1989 (NSW)

Cases Cited:

Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613

Champion Home Sales Pty Ltd v Bailey [2018] NSWCATAP 212

Cherry v Steele Park [2017] NSWCA 295

Clements v Murphy [2018] NSWCATAP 152

Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1163

DB Homes Australia Pty Ltd v Kes [2019] NSWCATAP 221

Hartley v McRae [2018] NSWCATCD 31

Liebe v Molloy [1906] HCA 67

Lumbers v W Cook Buildings Pty Ltd (in liq) (2008) 232 CLR 635

Mann v Paterson Construction Pty Ltd [2019] HCA 32

oOh! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd (2011) 32 VR 255

Oshlack v Richmond River Council [1993] HCA 11; (1993) 193 CLR 73

Petropoulos v CPD Holdings Pty Ltd t/as The Bathroom Exchange [2019] NSWSC 897

Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8 ;(2009) 236 CLR 272

Walton Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387

Wright v Foresight Constructions Pty Ltd [2011] NSWCA 327

Texts Cited:

Coggins, Davie, Earls and Evans; Understanding Construction Law; Lexis Nexis Butterworths 2016

Category:

Principal judgment

Parties:

Matter HB 17/31284

DCR Constructions (NSW) Pty Ltd t/as True Built (Applicant)

Gary Matthews (Respondent)

Matter HB 17/44021

Gary Matthews (Applicant)

DCR Constructions (NSW) Pty Ltd t/as True Built (Respondent)

Representation:

Counsel:

Mr A. Norrie (DCR Constructions (NSW) Pty Ltd)

Mr A. Di Francesco (Gary Matthews)

Solicitors:

Hall Partners (DCR Constructions (NSW) Pty Ltd)

Wood, Marshall, Williams (Gary Matthews)

File Number(s):

HB 17/31284; HB 17/44021

Publication restriction:

Nil

REASONS FOR DECISION

1. The dispute arises from a contract between the parties to perform residential building work at premises located at Elanora Heights, NSW. In this decision, DCR Constructions (NSW) Pty Ltd t/as True Built is referred to as “the builder” and Mr Matthews is referred to as “the homeowner”.

2. Mr Rose is the sole director of the builder and the majority of the relevant interactions regarding the contract and the building works occurred between Mr Rose and Mr Matthews. Ms Jarvis is the partner of Mr Matthews, but she was not a party to the written contract.

BACKGROUND

3. The factual background to the matter is summarised on the basis of documents contained in the affidavits the homeowner and Mr Rose.

4. On 17 May 2016, the builder had issued a written quotation in the sum of $371,800 (inclusive of GST). The quotation stated that “not included” in the quoted price were “excavation for garage; stone cladding; and concrete drive from boundary to street side”. There was a series of emails between Mr Matthews and Mr Rose in the period May 2016 to June 2016 as to what items were included and excluded from the quotation (Tab 6 affidavit of Mr Matthews dated 8 September 2017)

5. The parties entered into a written contract to perform residential building work dated 13 July 2016. The contract price was $386,420 subject to variations under Cl. 17 of the contract. The written contract did not identify any provisional sum or prime cost items (Sch 6 and Cl. 21 of the written contract). The residential building work relevantly involved a two story extension to the existing dwelling (‘the extension’); construction of a garage; and renovation works to the existing dwelling.

6. The homeowner remained in occupation during the residential building work, with the homeowner to remain in the existing dwelling until the extension was completed, and then to move into the extension whilst renovations to the main dwelling was completed. The homeowner had some experience with residential building work himself, operating a business as a “handyman” but was not a licenced owner builder in respect of construction of the additions and alteration to the residential premises.

7. The builder was relevantly licensed under the Home Building Act 1989 (NSW) (‘the HB Act’) to perform the work and took out home warranty insurance.

8. Under the written contract between the parties, the work was to reach practical completion within 26 weeks after commencement of the work, subject to extensions for delays under Cl 9 of the written contract.

9. Work commenced on or about 18 July 2016. Although there had been disputes between the parties regarding whether the work had been performed adequately and in a timely manner; and whether there had been agreement regarding a progress payment schedule that concomitantly led to disputes between the parties regarding whether or not the homeowner owed the builder monies for work that the builder had issued invoices for, the work continued until late April 2017.

10. In respect of progress payments, the written contract dated 13 July 2016 only contained a progress payment schedule in respect of construction of the garage. On or about 9 October 2016, Mr Rose gave Mr Matthews a written document that purported to be a progress payment schedule in respect of construction of the extension. Mr Matthews asserted in evidence that he did not agree to the progress payment schedule set out in the document dated 9 October 2016. According to Mr Matthews, he repeatedly requested a progress payment schedule, and was concerned throughout the building works that there would be an insufficient amount left under the fixed price contract to complete the renovation to the existing dwelling after the garage and the extension had been completed.

11. According to Mr Rose, he and Mr Matthews had further oral discussions regarding the progress payment schedule, and orally agreed to revise the figures in each of the 7 stages set out in the document (affidavit of Mr Rose dated 14 August 2017 para [14]). The handwritten schedule was created in late December 2016 or early January 2017, and then formed a (undated) written document (Tab 15 of Mr Matthews affidavit dated 8 September 2017) which was emailed to Mr Matthews on 3 January 2017.

12. The undated letter of the builder emailed to Mr Matthews on 3 January 2017 was referred to by Mr Matthews in his evidence as the “amended progress payment schedule”. Mr Matthews states the homeowner “proceeded on the basis of this version of the (amended) Progress Payment Schedule” (Matthews affidavit dated 8 September 2017 para [53]).

13. Between January 2017 and May 2017, there were further oral discussions and emails between the parties regarding disputes over what work had been performed by the builder; the cost of the work; and whether it was in accordance with the progress payment schedule that had been orally agreed to in late December 2016 or early January 2017.

14. The homeowner sent the builder a number of “status updates” which involved the homeowner setting out what Mr Matthews asserted had been paid in comparison to the work that was purportedly complete and incomplete. There was also an email exchange between Mr Matthews and Mr Rose on 5 and 8 January 2017 regarding the homeowner refusing to pay an invoice issued by the builder, and the homeowner responding that there was various defective and incomplete works (Tab 16 affidavit of Mr Matthews dated 8 September 2017).

15. During the course of the relationship between the homeowner and the builder, some invoices were disputed between the homeowner, and some invoices were not. Some payments were made in cash. Mr Matthews’ evidence was to the effect that he was pressured to pay invoices because Mr Rose had made it clear that he would suspend work unless invoices were paid. Mr Rose did not admit this, and that asserted that other than in respect of Invoice 163 (involving additional excavation work) Mr Matthews was prepared to pay invoices rendered during the build, until the relationship between the parties broke down.

16. However, it is clear on the evidence (including answers given in cross examination by Mr Rose-see T: 17/12/18 pp 26-35) that invoices were not issued strictly in accordance with any progress payment schedule, because (to use the phrase of Mr Rose) the construction process was “dynamic”.

17. According to Mr Rose, the reasons for not issuing invoices at the completion of each stage in accordance with an agreed progress payment schedule was that (i) the homeowners continued to reside in the house, and the builder had to ‘work around’ this by starting different stages of the work before a stage was completed; (ii) Mr Matthews decided to perform aspects of the work himself, such as the electrical rough out; and (iii) Mr Matthews and Mr Jarvis changed the scope of works and specifications during the build.

18. On 29 April 2017 Mr Rose was injured in a motor cycle accident. By that stage, the garage had been constructed and part of the two story extension had been completed, but there was incomplete work in respect of the two story extension and the renovation of the existing dwelling had not commenced.

19. On 23 May 2017, the builder sent an email to the homeowner purporting to be a “contract breach notice” under Cl. 33.2 (a) of the contract. The “contract breach notice” stated that the homeowner had not paid invoice No 163 in the amount of $6,776 dated 14 November 2016; and invoice No 174 in the amount of $26,000 dated 5 April 2017. The “contract breach notice” stated that the amounts must be paid within 10 working days or the builder reserved its right to end the contract under cl 33.4 of the written contract.

20. The homeowner responded with a “Notice of Dispute” dated 23 May 2017. The homeowner’s Notice of Dispute identifies various alleged breaches by the builder, but does not state when the homeowner seeks the breaches be rectified. In essence, the Notice of Dispute states:

1. The builder had told the homeowner it could not complete the work due to the motorcycle accident of Mr Rose;

2. The builder had not arranged for any other builder or tradesperson to complete the incomplete work, and had “no plan to do so”;

3. The work was “now 4 months behind schedule”;

4. The homeowner disputed that the builder was entitled to payment in respect of Invoice 163 (in respect of excavation) because the homeowner had not agreed to the work, and the work was due to “the builder’s error in achieving building code clearance for ground works for the excavation”.

5. The homeowner disputed that the builder was entitled to payment for Invoice No 174 because the work was not complete, and the homeowner had paid previous claims by the builder despite the work not being complete because the builder had “front ended” the contract by demanding payment for the majority of work at an early stage, which would leave insufficient funds to complete the work within the fixed price; and the builder was “holding payment for work not completed”;

6. The builder had failed to credit the homeowner for work that the parties had agreed that the homeowner would perform that fell within the scope of the written contract to perform residential building work. The amount of such credit is not identified by the homeowner, but the work is identified, being in respect of ceilings; balustrade along the deck of the upper floor of the extension; internal doors; inspection of a stormwater trench; and water tanks;

7. There was significant incomplete work and defective work.

21. The Notice of Dispute sets out the amounts that the homeowner stated he had paid the builder to date.

22. On 1 June 2017, the builder sent the homeowner an email stating that he had been incapacitated by his motorcycle accident which was not his fault, and requesting a further week to respond to the homeowners “concerns”.

23. On 7 June 2017, the builder issued (through its Solicitor) a letter purporting to terminate the contract. The letter sought payment of the following invoices:

1. Invoice No 163 “served” on 14 November 2016 in the amount of $6,160;

2. Invoice No 174 “served” on 5 April 2017 in the amount of $23,636.36;

3. Invoice 183 “served today” and dated 30 May 2017 in the sum of $3,670 (including $2,118.19 in “deductions”);

4. Invoice No 184 “served today” and dated 30 May 2017 in the amount of $1,134.

24. The letter also identified that the builder could not complete the contract due to the injuries sustained by Mr Rose in his motor cycle accident, and that the builder was relieved from further performance of the contract.

25. On 15 June 2017, the homeowner responded by letter to the builder’ Solicitors letter of 15 June 2017. In respect of Invoice No 163, the homeowner stated that the builder did not request or receive approval for the additional excavation work. In respect of Invoice No 174, the homeowner stated that the work was not complete, and the builder had been previously informed not to send invoices until all work paid for in advance was completed. In respect of Invoice No 183 and Invoice No 184, the homeowner stated that the work was incomplete.

26. The homeowner went on to state that there had been overpayments under the contract (i.e. the homeowner had paid in full for items that had not been completed); that the builder’s progress claims were invalid (because the work was not complete) and there were various defects in the work that had been performed. Such defects included:

1. The garden room ceiling height built to 2060mm; which was lower than the height of 2400 mm identified in the plans;

2. The internal length of the garage (5880 mm) was shorter than that specified on the plan (6100mm) so that “one of our cars cannot fit in the garage without impacting the current internal screen door opening or allowing reasonable access through the internal door);

3. No cavity wall between the garden room/garage and the internal staircase, despite a cavity wall being identified in the plans.

27. On 21 June 2017, the builder responded to the homeowner’s Notice of Dispute. The response was sent by the builder’s Solicitor. The content of the response can be relevantly summarised as follows:

1. The builder had been restricted in conducting work due to the homeowner’s occupation of the site, causing the builder to “work around” the homeowner and his family, which meant that stages of construction had not been completed before the builder was required to move onto a different stage. An example of this was construction of the new bathroom of the ground floor extension;

2. The motor cycle accident of Mr Rose made him “physically incapable of completing the construction work” and the builder was excused from performing any further work under the contract;

3. Any delay in completing work was caused by the homeowner’s occupation of the premises; and the homeowner instructing the builder to refrain from performing tasks so that the homeowner could personally undertake such works. The works identified included electrical work; cutting, forming and laying decking; waterproofing; painting; rendering; tiling; landscaping; and sourcing fit out items such as window frames;

4. The homeowner had unilaterally attempted to vary the contract by communicating directly with sub-contractors; had orally varied the contract and departed from the written plans by instructing the builder to construct a raked ceiling (which required the extension of an existing wall);

5. The homeowner’s assertion regarding incomplete work included some items that the parties had not agreed upon in regards to specifications, such as barge capping over “end gable roof south side”.

6. The letter of the builder’s Solicitors dated 21 June 2017 concluded by stating that the builder had “exercised” its right to terminate the contract on “grounds of non-payment” but the homeowner was liable to pay for works performed “prior to its termination”.

PROCEEDINGS IN THE TRIBUNAL

28. The builder commenced proceedings in the Tribunal on 13 July 2017 seeking payment of $37,580 which the builder asserts the homeowner owes under the provision of the written contract, or in the alternative on a quantum meruit basis prior to termination of the contract.

29. On 12 September 2017, the homeowner filed a cross application in the Tribunal. The homeowner sought orders that it not have to pay the builder any monies; and orders that relevantly included that the builder pay damages for the cost of rectifying defective work and the increased cost of completing incomplete work.

30. Proceedings in the Tribunal then involved various directions hearings until the matters were set down for a 3 day special fixture commencing on 25 September 2018. Direction had relevantly included the filing and serving of Points of Claim; Points of Defence; lay evidence; and expert evidence (including a joint expert report/Joint Scott Schedule). Both parties had filed and served reports by expert building consultants. The homeowner’s expert building consultant was Mr O’Donnell and the builder’s expert building consultant was Mr Wallace.

31. Prior to the hearing on 25 September 2018, Mr O’Donnell and Mr Wallace had conferred and prepared a Joint Scott Schedule, which set out their areas of agreement and disagreement.

32. On the morning of the hearing commencing 25 September 2018, and with only a few days’ notice to the homeowner, the builder sought to amend its pleadings to raise issues of estoppel and waiver. The homeowner opposed the late amendment. The Tribunal granted the builder leave to amend its pleadings, but on the basis that the expert evidence be heard and then the matter be part heard for the parties to file and serve amended pleadings and any further lay evidence necessary to deal with the factual issues forming the basis of the alleged estoppel and waiver. The Tribunal also made orders regarding Summons to Produce Documents that had been returnable at the hearing. The Tribunal directed that the majority of the lay evidence be heard at the next hearing, and made a costs order against the builder by reason of the adjournment. The Tribunal gave written reasons for its orders (such reasons dated 27 September 2018).

33. On 25 and 26 September 2018, the experts gave concurrent evidence and were questioned by the Tribunal and the parties. Mr Simms, a roofing contractor who had been engaged by the homeowner and performed work on the roof of the two story extension to the existing dwelling in about November 2017 and April 2018, also gave evidence and was cross examined.

34. The matter was the part heard until 17 and 18 December 2018. On such hearing days further lay witnesses gave evidence and were cross examined, relevantly being Mr Rose; Mr Beasley ( a plumber who had sub-contracted to the builder and been on site when excavation work was performed); Mr Mitchell (a homeowner for whom the builder had been performing work in September 2016 when he allegedly suffered a hand injury that formed the basis of a workers compensation claim): Mr Scott Duncan (who had sub-contracted with the builder to perform the excavation work the subject of the disputed Invoice No 163); the homeowner; and Ms Jarvis.

28. At the conclusion of the hearing on 18 December 2018, the Tribunal made directions for the parties to file and serve outlines of written submissions in support of their claims and in opposition to the other party’s claims. Submissions were eventually filed and served after extensions were granted, which has prolonged the completion of the decision in this matter.

29. The documentary evidence relied upon by both parties was copious. The Court Book the homeowner prepared prior to the first hearing date did not include any of the documentary evidence of the builder. The homeowner’s Court Book exceeded 850 pages. The builder did not file and serve its own Court Book (and the parties had not conferred and prepared a Joint Court Book or Joint Tender Bundle) but had filed and served a number of affidavits, including affidavits of Mr Rose that attached a large amount of documents. There were also additional documents tendered by both parties at the hearing.

30. The transcript of evidence that the parties had filed with the Tribunal in support of their written submissions exceeds 480 pages.

THE BUILDER’S CLAIM

38. The builder claims $37,580 in respect of Invoices Numbered 163, 174; 183; and 184, less the cost of rectifying existing defective work prior to the termination of the contract identified by its expert Mr Wallace in the amount of $4,989.99. The net amount claimed by the builder is $32,611.01.

39. The builder asserts that it lawfully terminated the contract.

40. The builder’s claim is brought under the written provisions of the contract; and in the alternative, on the principle of quantum meruit.

THE HOMEOWNER’S CLAIM

41. The homeowner’s claim is for damages for the cost of rectifying existing defective work and the increased cost of completing incomplete work. The homeowner’s claims are brought on the basis of breach of contract (including the implied statutory warranties in s 18B of the HB Act) and two causes of action under the Australian Consumer Law 2010 (‘the ACL’) being conduct which is misleading or deceptive or likely to mislead or deceive under s 18 of the ACL; and false and misleading representations under s 29 of the ACL.

42. The homeowner asserts that the builder repudiated the contract and it accepted the builder’s repudiation, and so lawfully terminated the contract.

43. The homeowner asserts that the original contract sum of $386,420 was reduced to $380,495 by reason of 11 items of either credit or oral variations (homeowner’s written submissions dated 20 March 2019 pp 18-20).

44. The homeowner claims that the cost of rectifying existing defective work will be either $131,683 (based on Mr O’Donnell’s assessment, which the homeowner relies upon) or $152,169.44 (based upon the homeowner’s assessment of purported “actual rectification costs”.

45. The homeowner claims that the evidence of Mr Matthews is that the homeowner paid the builder $260,447 and the evidence of Mr Rose was that the homeowner paid the builder $233,162 (a difference of $27,285). The homeowner submits that the builder did not keep accurate accounts for the cash payments received, and that the homeowner was not challenged on the amounts paid to the builder, so the Tribunal should find that the homeowner paid the builder $260,447.

46. In respect of the increased cost of completing incomplete work, the homeowner submits that the Tribunal should accept the evidence of Mr O’Donnell that the cost of completion are $174,008 and that the amount left under the contract to complete the work is $120,048. The difference between the two amounts is $53,960, which the homeowner submits is the increased cost to the homeowner of completing the work that the builder should have performed under the contract.

47. The homeowner submits that if Mr Rose’s evidence is accepted about the amount the homeowner paid the builder under the contract, then the damages for the increased cost of completing the work that the builder should have performed under the contract is $26,675.

48. Accordingly, the homeowner’s claim for damages (if Mr O’Donnell’s evidence is accepted) equates to $185,643 (leaving aside the homeowner’s self-assessed “actual” rectification costs).

49. In respect of the claims under the ACL, the written submissions of the homeowner identify the purported misleading and deceptive representations of the builder, but do not identify any separate and distinct losses caused by the alleged breaches in addition to the contractual claims for damages in respect of the cost of rectifying defective work, and the increased cost of completing incomplete work.

JURISDICTION OF THE TRIBUNAL

50. It is clear that the dispute involves residential building work within the meaning of the HB Act and its Regulations.

51. The builder’s claim was filed within 3 years of the date of the contract, and the Tribunal has jurisdiction under s 48K (8) of the HB Act.

52. The homeowner’s claim for breach of the implied statutory warranty under s 18B of the HB Act in respect of defective work that was performed by the builder was clearly brought within 2 years of the date on which the contract was terminated (irrespective of which party lawfully terminated the contract) and falls within the limitation period under s 48K (7) and 18E (1) of the HB Act, and it unnecessary for the Tribunal to distinguish between “major defects” and “non-major defects” under s 18E (4) of the HB Act.

53. The homeowner’s claim for damages for the increased cost of completing incomplete work was filed with the Tribunal within 3 years of the date on which building goods or services were supplied by the builder; or the specified date under the contract by which they were required to be supplied, and the Tribunal has jurisdiction in respect of this aspect of the claim under s 48K (3) and (4) of the HB Act. The homeowner’s ACL claim also falls within s 48K (3) and (4) of the HB Act.

54. Accordingly, the Tribunal has jurisdiction in respect of both the builder’s claim and the homeowner’s claim.

EVIDENCE OF THE PARTIES

55. As discussed previously, there was a copious amount of documentary evidence relied upon by both parties in the proceedings and admitted into evidence.

56. The primary lay evidence of the both parties was affidavits of the homeowner; Ms Jarvis; Mr Rose; Mr Duncan; Mr Beasley; and Mr Mitchell. The homeowner and Mr Rose filed and served multiple affidavits (including supplementary affidavits and affidavits in reply). The expert evidence was Mr O’Donnell and Mr Wallace.

57. Rather than attempting to summarised the evidence of each witness, the Tribunal will refer to the salient evidence of the respective parties and their witnesses in the context of the factual findings of the Tribunal on the following issues that are relevant to determination of the dispute:

1. Which party lawfully terminated the contract (including the issue of frustration)?

2. Is the builder entitled to the payments sought for work identified in its 4 invoices under contract or on a quantum meruit basis?

3. What is the defective work (if any) in breach of the statutory warranties under s 18B of the HB Act? If there is defective work, what is the appropriate method of rectification and cost of rectification?

4. If the homeowner lawfully terminated the contract, what is the increased cost of completing incomplete work?

5. In respect of rectifying any defective work, should a work order or a money order be made under s 48O of the HB Act (and considering the provisions of s 48MA of the HB Act)?

WHICH PARTY LAWFULLY TERMINATED THE CONTRACT?

58. The issue of which party lawfully terminated the contract is of key importance to the homeowner’s claim for the increased cost of completing incomplete work.

Did The Builder Lawfully Terminate Under the Provisions of the Contract?

59. If the builder lawfully terminated the contract (or the contract ended by reason of no fault of the builder, such as frustration) then the homeowner cannot be awarded damages for the increased cost of completing the work due to be performed by the builder under the contract. However, if the homeowner lawfully terminated the contract, the homeowner is entitled to damages for the increased cost of completing the work that was due to be performed by the builder under the contract:

60. A contract can be terminated by a party because the written provisions of the contract provide a method of termination (based on an established breach or breaches by the other party); or at common law because the other party has engaged in repudiatory conduct and the party has accepted the repudiation and terminated the contract.

61. A contract can lawfully end without any breach or repudiatory conduct because it has been frustrated.

62. The contractual provisions dealing with termination of the contract are contained in Clause 33 of the contract. Relevantly, that clause states that (at Cl. 33.1) a “substantial breach by the builder includes but is not limited to” the builder:

1. Having its license cancelled;

2. Suspending the carrying out of building works other than under Cl. 32.

63. Clause 32 of the contract states (at Cl. 32.1) that if the homeowner is in breach of the contract, the builder may suspend the carrying out of works; and must give the owner written notice of the suspension and details of the breach.

64. Clause 33.2 of the contract deals with substantial breach of the contract by the owner. Substantial breach is identified as:

1. Failure to pay any amount by the due date;

2. Failure to give evidence of ability to pay as requested;

3. Failure to establish and maintain a security account if requested;

4. Interference or obstruction with the progress of the building works;

5. Failure to give or interference with the builder’s possession of the site;

6. Failure to give an instruction or direction within the time specified.

65. Under cl 33.3 and 33.4 of the contract, the non-breaching party may give the other party a written notice of breach giving details of the breach and that, if the breach is not remedied within 10 working days, the non-breaching party by end the contract “by giving a further written notice to that effect”.

66. Under Cl. 36 of the contract, if the owner ends the contract under cl 33, the owner must complete the building works; keep records and invoices; and within 5 working days of practical completion, give the builder a written statement setting out the costs incurred, and all invoices and receipts. The builder is then liable to pay as a debt the difference between the unpaid balance of the contract price under the contract; and the amount the owner has paid to complete the work (i.e. the increased cost of completing the work).

67. Under Cl. 35 of the contract, if the builder ends the contract under Cl 12; Cl 33; or Cl 34, then, at the election of the builder, the owner must pay as a debt due and payable either:

1. The greater of the cost of or the market value of the building works to date including the cost of any materials on the site or already ordered from suppliers and the cost of quitting the site, less the amount already paid by the owner; or

2. Damages.

Was the Homeowner in ‘Substantial Breach’ Under Cl 33.2?

68. In its written submissions dated 8 April 2019, the builder’s Counsel submits that the builder relies upon the “notice of breach” dated 23 May 2017 and that as the homeowner had not rectified the breach within 10 working days, the builder terminated the contract by the letter dated 7 June 2017 (page 16 of the submissions).

69. The invoices relied upon in the builder’s notice of breach dated 23 May 2017 were Invoice No 163 dated 14 November 2016 in the sum of $6,776; and Invoice No 174 dated 5 April 2017 in the sum of $26,000.

70. The written submissions of the builder dated 8 April 2019 do not explain in detail how the homeowner was contractually obliged to pay Invoice No 163 and Invoice No 174 when demanded by the builder.

Invoice No 163-Was It Due and Payable Under the Provisions of the Contract?

71. Invoice No 163 dated 14 November 2016 describes the work as “extra cost of Scott Duncan chopping rock around the base for excavation”.

72. There was a significant divergence of evidence between Mr Matthews and Mr Rose as to whether (a) Mr Duncan had performed the “extra” work regarding excavation; (iii) whether the work was included in the scope of works under the fixed price contract (it not being in dispute that no written variation had been issued by the builder under Cl 17 of the contract); and (iii) whether Mr Matthews knew and approved of such work. Such evidence will be discussed in detail in the context of the builder’s claim for unpaid work (either under contract or on a quantum meruit basis).

73. However, before dealing with the evidentiary dispute, in the context of whether the builder had issued a valid notice of breach under the contract, the builder must establish that the builder had complied with the contractual provisions regarding the issue of invoices (i.e. that the homeowner was obliged to pay the invoice under the provisions of the contract).

74. Clause 15 of the written contract deals with payment of monies by the homeowner under the contract in regard to progress payments. Under Cl. 15.2, the homeowner must pay the builder “the contract price progressively as claimed by the builder”. Under Cl. 15.3, the builder must give the homeowner a written claim for a progress payment for the substantial completion of each stage.

75. Under Cl. 15.4, a progress claim is to state;

1. The amount claimed and not paid for the stages substantially completed;

2. The amount claimed and not paid for the contract price adjustments;

3. The amount claimed and not paid for variations; and

4. The sum of the above amounts.

76. The “progress payment schedule” identified at page 5 of the written contract only identifies 3 progress payments as follows:

“Garage-Footings , block walls: $18,440;

Garage-Slab, garage wall, and roof frame: $18,440

Garage-Complete: $18,440”

77. Mr Rose asserted (in an affidavit dated 14 August 2017) that the progress payment schedule “did not account for all the works contemplated by the contract” and “on or around 9 October 2016 I served [the homeowner] with an updated Progress Payment Schedule for the anticipated costs of the second stage of the constructions works which would extend the main house”. The builder’s “progress claim stage for the main house” dated 9 October 2016 identifies 7 stages as follows:

“1. At completion of ground floor bearers and joist, chipboard flooring installed and subfloor brickwork: $45,000

2. Ground floor walls built, stood and straightened, first floor beams, joists and flooring installed: $35,000

3. First Floor wall frames built, stood and straightened, roof frame built and braced: $45,000

4. Roofs and gutters installed: $40,000

5. Windows installed, weatherboards installed: $40,000

6. Plumbing rough in complete, plasterboard installed: $40,000

7. Timber deck frames and hand rail installed: $28,000

Total: $263,000

Remainder of contract amount will be invoiced as work is completed. Due to the nature of renovating the existing house while you live there”.

78. In respect of the “progress payment schedule” dated 9 October 2016, the evidence of Mr Matthews (affidavit 8 September 2017) was that he had pressed for a progress payment schedule from the builder since the commencement of works, and the document dated 9 October 2016 was personally handed to him by Mr Rose on site on or about 9 October 2016. Mr Matthews didn’t agree to the progress payment schedule, as “it only leaves $48,800 for the existing house renovation works” and Mr Matthews believed “at least $85,000” should be allocated to completion of the renovations to the existing house. According to Mr Matthews, the response of Mr Rose was “It will be OK, I will work it out”.

79. The oral agreement between the homeowner and the builder regarding progress payment stages is set out in the document emailed by Mr Rose to Mr Matthews on 3 January 2017. That document states as follows:

“Progress Claim Stage Main House

1) At completion of ground floor bearers and joists, chipboard flooring installed and sub-floor brickwork: $45,000

2) Ground floor walls built, stood and straightened, first floor beams, joists and flooring installed: $27,000

3) First floor wall frames built, stood straightened, roof frames built and braced: $40,000

4) Roof and gutters installed: $34,000

5) Windows installed, weatherboards installed: $24,000

6) Plumbing rough in complete, plasterboard installed: $36,000

7) Timber deck frames and handrails installed: $22,000

Total: $228,000

Remainder of the contract amount will be invoiced as work is complete due to the nature of renovating the existing house while you live there”.

80. There is no evidentiary dispute that Mr Rose gave Mr Matthews Invoice 163 on or about 14 November 2016 (affidavit of Mr Matthews dated 8 September 2017 paragraph 45). The evidence of Mr Rose was that he demanded payment for Invoice 163 during the course of the build. The evidence of Mr Matthews was that the builder did not actively demand payment until April 2017.

81. The progress payment schedule had not been signed by both parties, nor had there been any signed variation in accordance with the provisions of Cl 17 of the written contract (because no written variation had been given by the builder offering to carry out the variation and detailing the work and price to carry out the variation; nor had there been any variation document signed by both parties: Cl. 17.1; 17.3 (a); and 17.6 of the contract). However, the evidence of Mr Matthews was that he agreed to a revised progress payment schedule orally in late December 2016 or early January 2017, as evidenced by the document of the builder emailed on 3 January 2017.

82. The builder cannot rely upon the homeowner’s failure to pay Invoice 163 as a “substantial breach” under Cl. 33.2 of the contract, because the builder did not provide the homeowner with a written claim for a progress payment for the substantial completion of each stage in accordance with Cl. 15.3 and 15.4 of the contract.

83. Invoice 163 was not issued by the builder as part of the substantial completion of a stage of works as set out in the written contract dated 13 July 2016, because the progress stages referred to in the written contract have no applicability to the work performed in respect of Invoice 163.

84. In respect of the oral agreement between the parties in late December 2016 or early January 2017, Invoice 163 was not issued at the completion of stage 1 of the work identified it the progress payment schedule. It is clear on the evidence that as of 14 November 2016 (when, according to the evidence of Mr Matthews, and not relevantly disputed by Mr Rose, Mr Matthews was handed Invoice 163) not only had completion of ground floor bearers and joists, chipboard flooring installed, and sub-floor brickwork not been substantially completed, but the parties had not orally agreed at that stage as to a progress payment claim schedule.

85. Accordingly, Invoice 163 when issued does not comply with the manner in which progress payment claims were to be issued under Clause 15.3 and 15.4 (a) of the contract.

86. Further, the “chopping rock around the base” set out in Invoice 163 if it were to be claimed under contract could only be claimed as a variation in accordance with Cl. 17 of the written contract. Neither the quotations nor emails between the parties prior to the entry into the written contract, nor the scope of works under the written contract; nor any progress payment schedule agreed upon after entry into contract identified the scope of works to be exclusive of excavation. Rather, it is clear the agreed fixed price included excavation for footings.

87. Accordingly, for Invoice 163 to be payable under the contract between the parties, the builder was required to comply with the variation provisions of Cl. 17 of the contract, and to demand payment no earlier than after “completion of ground floor bearers and joists, chipboard flooring installed and sub-floor brickwork” (i.e. Stage 1) as set out in the progress payment schedule emailed to Mr Matthews on 3 January 2017. The builder failed to do so.

80. The builder also failed to issue the homeowner with any notice under Cl. 12.2 of the contract in respect of extra work arising from “hidden site conditions” including where “rock” is found at the site. The Tribunal also accepts from the evidence of Mr Matthews and photographs of the site that it was clear prior to the parties entering into the contract and the builder commencing work that the construction area was likely to involve excavation into rock.

81. The Tribunal does not accept that the reference in the progress payment schedule that was emailed by the builder to the homeowner on 3 January 2017 to the “remainder of the contract” being invoice “as work was completed due to the nature of renovating the existing house while you lived there” gave the builder a contractual right to simply issue any invoice at any stage of the build and for it to be payable under the contract.

82. Any such provision is clearly inconsistent with the written provisions of the written contract dated 13 July 2016 dealing with the manner in which progress payment claims were to be issued, and is also inconsistent with the earlier part of the document emailed on 3 January 2017 by the builder to the homeowner that set out progress payment completion stages.

83. In essence, leaving aside the issues of waiver and estoppel (which are considered separately) if the builder was seeking to rely on a purported oral contractual term that the builder could issue invoices outside the progress payment schedule stages that had been orally agreed to on or about 3 January 2017 and that the homeowner would be in substantial breach if payment was not made by 10 working days after a demand for payment, the builder must establish (i) that the contract had been orally varied in the manner asserted by the builder; and (ii) that there was a term allowing invoices to be demanded and payable outside the written progress payment schedule set out in the letter of the builder that was emailed to the homeowner on 3 January 2017.

84. In Wright v Foresight Constructions Pty Ltd [2011] NSWCA 327 (‘Wright’) the NSW Court of Appeal held that a verbal variation may vary the rights and obligations of the parties under a written contract, depending upon the facts and circumstances of the particular case. However, in Petropoulos v CPD Holdings Pty Ltd t/as The Bathroom Exchange [2019] NSWSC 897 (‘Petropoulos’), Harrison As J pointed out (at [182]-[186] that in Wright the relevant written contractual provision was that a variation “should” be in writing, which is different to a written provision (as was the case in the written contract dealt with in Petropoulos, and Cl. 17 of the written contract in this matter) that stipulates a variation “must be in writing and signed by on behalf of each party to the this contract”. Further, when assessing any purported term of a contract, and whether or not it had been varied, an objective approach must be taken: Cherry v Steele Park [2017] NSWCA 295 at [57]-[67].

85. The Tribunal is not satisfied that there was any effective oral variation of the written contract that the builder could issue invoices outside the progress payment schedule and that they would be payable by the homeowner. Such a construction is inconsistent with the written terms of the contract dated 13 July 2016, and the conduct of the parties during the course of construction. The Tribunal accepts the evidence of Mr Matthews (which was also supported by Ms Jarvis) that a progress payment schedule was repeatedly requested, and that the homeowner made clear to the builder that the homeowner was concerned that payments that had been made to the builder on receipt of various invoices did not correlate to the progress payment schedule that was orally agreed to by the homeowner on or about 3 January 2017.

86. The Tribunal is not satisfied that the builder has established that there was any agreement on or about 3 January 2017 that the builder could issue invoices generally under the contract, and they would become payable. Such an agreement would clearly be inconsistent with Cl. 15 and 17 of the written contract, and inconsistent with the setting out of progress payment stages in the letter emailed by the builder to the homeowner on 3 January 2017.

87. In Champion Home Sales Pty Ltd v Bailey [2018] NSWCATAP 212 (‘Bailey’), the Appeal Panel in the Tribunal held that there was no error by the Tribunal that no oral variation had occurred regarding a contractual provision that a builder “shall” commence work by a certain date, applying the principles in Wright.

88. The Tribunal is satisfied that, if the builder sought payment of an invoice that fell outside the scope of works or the manner in which the work was to be performed, any variation by the builder must comply with Cl. 17 of the contract. The builder failed to comply with Cl. 17 of the contract in respect of Invoice 163. Excavation work fell within the scope of works under the contract, and accordingly a written variation had to be issued in respect of Invoice 163. The builder also failed to comply with issuing the invoice in accordance with the orally agreed progress payment schedule on or about 3 January 2017.

89. In respect of the issue of invoices, the Tribunal will also consider (although it was not clearly argued by the builder, if at all) whether or not the work involved was a “variation” or a “contract price adjustment”. Clause 14 of the written contract dated 13 July 2016 deals with “contract price adjustments”

90. In Bailey, the Appeal Panel also stated that there was a difference between a provision of the contract dealing with variations, and a provision of the contract dealing with contract price adjustments. A variation is “an omission, addition or change to the building works or a change in the manner of carrying out the building works” (Bailey at [44] and the definition of “variation” in Cl 1 of the written contract dated 13 July 2016), while a contract price adjustment is an allowance for the builder to offset any escalation or reduction in the ancillary costs incurred in completing the scope of works, separate and distinct from changes to the scope of works or manner of carrying out the works (Bailey at [45]).

91. Under Cl. 14 of the written contract, a “contract price adjustment is due and payable at the next progress payment after it arises unless a different time is agreed”. Under Cl. 14.2 of the written contract, if there is a deletion to the building works or substitution of materials resulting in a contract price adjustment, the contract price will be adjusted at the progress payment of the stage where the building works would have been carried out, unless a different time is agreed in writing.

92. Invoice 163 is not a “contract price adjustment” because it involves “additional” excavation work, and excavation work to prepare for construction of the extension fell within the scope of works under the fixed price contract. In any event, the issue of Invoice 163 did not comply with Cl. 14.1 of the written contract as it was issued before completion of the relevant progress payment stage. In any event, even if the work fell within the definition of “contract price adjustments” under Cl. 14 and Cl. 1 of the written contract, the Tribunal is not satisfied that, assessed objectively, there was any agreement between the homeowner and the builder that the invoice was due and payable at a time other than after completion of a progress payment stage.

Conclusion-Was Invoice 163 Due and Payable Under the Contract and Was Failure to Pay Invoice 163 Within 10 Working Days of Demand for Payment a Substantial Breach of Contract?

101. Invoice 163 was not due and payable under the contract, so failure to make payment was not a substantial breach.

Invoice 174-Was It Due and Payable Under the Provisions of the Contract?

102. Invoice 174 was dated 5 April 2017 and was for “Plasterboard and installation”. The invoice totalled $26,000. According to Mr Rose, it was served on 5 April 2017 and was for “plasterboard and insulation works to the entirety of the two story extension (excluding where those walls connected to the existing house) pursuant to item 6 of the amended Progress Payment Schedule” (para 19 affidavit of Mr Rose dated 14 August 2017).

103. The homeowner asserted (homeowner’s written submissions dated 20 March 2019 pp6-7) that Invoice 174 was not due and payable under the provisions of the contract because:

1. Plasterboard had not been installed around the lintel bar and the kitchen of the ground floor extension; nor the top of the window or the wall next to the door with light switches; nor the “stairwell to be built”;

2. Fire rated double gyprock had not been completed downstairs in the extension;

3. The ‘teenage retreat’ floor frame was not yet installed;

4. Sound installation was not installed in have of the ceiling of bedroom 4 of the extension;

5. Plumbing rough had not been completed in the extension.

104. The homeowner relies upon the factual evidence of the homeowner and the expert evidence of Mr O’Donnell that the work in respect of Invoice 174 had not been completed at the date of issue of the invoice.

105. The builder submitted that work had been completed in respect of stage 6 of the “amended progress payment schedule” had been completed based on the opinion of its expert building consultant Mr Wallace, who stated in his report of 9 October 2017 that, when Invoice 174 was considered with an earlier invoice issued by the builder (Invoice 170) regarding plumbing rough in, the work in the amended progress payment schedule was “sufficiently” complete (builder’s written submissions dated 8 April 2019 p 4).

106. However, the builder’s submissions, nor the expert evidence of Mr Wallace, do not address the concessions made by Mr Rose in cross examination regarding whether or not the work set out in Invoice 174 was complete. At T: 17/12/18 at pp 30-40, the builder was cross examined on the issuing of invoices including Invoice 174. Mr Rose conceded that there was plasterboard and gyprocking work that had not been performed. He did not clearly concede that plumbing rough in work had not been completed. In respect of Invoice 174, the following exchange occurred, when Mr Rose was being questioned about invoice 183:

Mr Rose: “…The invoice 174 was outstanding at the time of my injury and when I chose-when the contract was terminated or it was being terminated then I looked at other parts of the project that at that stage of my injury had been completed, whether they were completed prior to my injury, but after 5 April, or before-or between 5 April and 29 April I can’t be certain of when they were don, but I would say they were-some of the work may have been started prior to invoice 174 being complete and some of the work wouldn’t have been completed till after that-before 29 April.

“Homeowner’s Counsel: So when you issued invoice 174 to Mr Matthews there was still work to be done to complete stage 6?

Mr Rose: Correct”

107. Further, Mr Rose’s evidence regarding the issuing of invoices was that invoices were not strictly issued in accordance with the “amended” progress payment schedule. At . T: 17/12/18 pp 35-36 the following evidence was given:

Homeowner’s Counsel: “Was it your understanding under the building contract that you could not invoice for a stage-sorry, for a variation until the next stage after the variation had been completed?

Mr Rose: I agree that’s what it says, but the way this contract was run was quite fluid with verbal instructions, cash payments and such.

Homeowner’s Counsel: When you say “quite fluid” you understood from January 2017 onwards that Mr Matthews was expecting to pay for invoices in accordance with the building contract?

Mr Rose: I expected Mr Matthews to pay for invoices for work completed and invoiced.

Homeowner’s Counsel: You understood that Mr Matthews expected he was to pay in accordance with the progress stages for the extension?

Mr Rose: Mr Matthews, being responsible for certain aspects of the project made it difficult to reach certain stages even though we had done sometimes 80 percent of the work to complete a stage, so therefore it wasn’t a viable way for a business to function unless….

Homeowner’s Counsel: Leaving aside what you wanted, from at least January 2017 onwards you understood that Mr Matthews wanted that you would invoice for the work in accordance with extension progress payment schedule, that’s so isn’t it?

Mr Rose: The very first invoice that Mr Matthews received outside the deposit was for a variation that was for a variation that was a verbal agreement, which is outside the contract agreement, so I would say Mr Matthews was happy to run the contract paying for work that was completed to that point”.

108. The evidence of Mr O’Donnell was that there was significant incomplete work, including work in respect of Invoice 174. The Tribunal accepts that evidence, as it is consistent with the evidence of Mr Matthews and the concessions made by Mr Rose during cross examination regarding whether work under Stage 6 had been substantially completed prior to the issue of Invoice 174.

109. The Tribunal accepts that there was incomplete work under the progress schedule and that the builder had issued invoices throughout the course of the construction that were not in accordance with the ‘amended progress payment schedule’ that the parties had agreed upon on or about 3 January 2017. Essentially the builder blames the homeowner for this state of affairs and defends it position by asserting that the homeowner was prepared to pay invoices that had not been issued in accordance with the amended progress payment schedule.

110. However, if the builder is relying upon the builder’s contractual rights to terminate the contract on the basis that an invoice for a progress payment stage has been issued and not paid, the builder must establish that it has complied with its contractual obligations regarding the performance of the work and the issuing of progress payment stage invoices.

111. The Tribunal is not satisfied that Stage 6 of the amended progress payment schedule had been substantially completed by the builder at the date of the issue of Invoice 174 and that accordingly failure to pay the invoice is not a substantial breach by the homeowner entitling the builder to terminate the contract.

Conclusion-Was Invoice 174 Payable Under the Provisions of the Contract?

112. No. Invoice 174 was not payable under the provisions of the contract when it was issued.

Can the Builder Still Rely on Failure to Pay Invoice 174 As A Substantial Breach By The Homeowner Under Cl 33 of the Contract By Reason of the Doctrines of Waiver or Estoppel?

113. The builder submits that the homeowner has waived his right to rely upon Cl. 15 of the written contract regarding the issue of progress payments, because the homeowner paid invoices during the course of the build without insisting the builder comply with Cl. 15 (i.e. invoices not be issued until completion of a progress stage). The builder points to a concession made by Mr Matthews in cross examination that he did not raise any non-compliance with Cl. 15 (T: 18/12/18 at p 179) and relies on the authority of Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1163 at [110].

114. The homeowner submits that although the homeowner did pay a number of invoices issued by the builder not in accordance with the amended progress payment schedule, Mr Matthews gave evidence that the builder had insisted on payment otherwise the builder would suspend work (affidavit of Mr Matthews dated 17 November 2018 attachment ‘J’) and in cross examination Mr Matthews stated as follows (T: 18/12/18 p 183):

“I complained that we didn’t have an agreed progress claim stage, all right, and that’s what I was paying against those. The fact that when I received them and they had to be amended, I tried to work with Dallas to keep a harmonious relationship on the site. In so doing, I paid invoices, but at the same time Dallas offered me discounts for cash payments as a part of his incentive for me to pay them, right? But at the same time, I was very direct in that those progress claim stages had to be sorted out, and I never got those progress payment claim stages sorted out until January. So all along the whole process is that we have invoices presented to me that were supposedly part of a progress claim stage that was never agreed to, and in addition to that, never had sufficient information in there for us to be able to make a proper decision or proper understanding of what was being built against each of the stages. I don’t know if that helps….What I did complain about was the fact that we didn’t have an agreed process claim stages, and he was issuing me invoices for something that wasn’t agreed”.

115. Further (although it is not referred to in the homeowner’s submissions), Mr Rose was cross examined about whether he pressured the homeowner to pay invoices or he would suspend works, and Mr Rose did not deny that he may have. The relevant evidence is as follows (T: 17/12/18 p 33):

Homeowner’s counsel: So when you say you were asking for part payments from the owner, what you mean by that is you were issuing invoices and demanding payment from the owner?

Mr Rose: I was issuing invoices for work that had been completed for stages requesting payment.

Homeowner’s counsel: And you were telling the owner that if he didn’t pay the invoices immediately you would stop working?

Mr Rose: I don’t recall that.

Homeowner’s counsel: When you say you don’t recall it, do you dispute it happening?

Mr Rose: I don’t dispute it happened. I don’t recall-I don’t recall saying that, but I’m not disputing it may have happened.”

116. In Petropoulos, the relevant authorities regarding waiver were set out at paras [160]-[162]:

In Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Marketing Pty Ltd(2013) 250 CLR 303 at [30], French CJ, Keifel, Bell, Gageler and Keane JJ said:

“According to its strict legal connotation, waiver is an intentional act done with knowledge whereby a person abandons a right (or privilege) by acting in a manner inconsistent with that right (or privilege). It may be express or implied.”

At [31], their Honours endorsed the explanation of waiver from Crainev Colonial Mutual Fire Insurance Company Ltd (1920) 28 CLR 305 (“Craine”) at 326, which was a case concerning waiver of a condition under a contract of insurance:

“‘Waiver’ is a doctrine…introduced by the law to prevent a man in certain circumstances from taking up two inconsistent positions… It is a conclusion of law when the necessary facts are established. It looks, however, chiefly to the conduct and position of the person who is said to have waived, in order to see whether he has ‘approbated’ so as to prevent him from ‘reprobating’.”

Waiver was also discussed by Gummow, Hayne and Keifel JJ in Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 (“Gardiner”) at [88]-[89] in the context of abandonment or renunciation of a contractual right. Their Honours also said at [52]:

“…it is clear that there are cases in which the word [waiver] has been used in senses other than those embraced by principles of election, estoppel or variation of contract. So, for example, waiver has been used in the sense of rescission where what has occurred is ‘an entire abandonment and dissolution of the contract’. It has been used in connection with a party not insisting upon a term of a contract which is identified as a term for that party’s sole benefit. And from time to time, ‘waiver’ has been used to describe some modification of the terms of a contract without the formalities, or consideration, necessary for an effective contractual variation.”

117. The Tribunal is not satisfied the homeowner waived his rights to rely upon the issue of invoices in accordance with the amended progress payment schedule that he had agreed to on or about 3 January 2017. There was no intentional act done with knowledge that the homeowner was abandoning his rights under Cl 15 of the written contract.

117. The Tribunal accepts the evidence of the homeowner that he was consistently making clear to the builder that he (i) wanted a progress payment schedule in respect of the work to construct the extension; and (ii) wanted the builder to issue invoices only when work was complete at the end of each progress stage. The Tribunal also accepts the evidence of the homeowner (that was not clearly denied by Mr Rose) that the builder had represented it would cease work if invoices were not paid when the builder rendered them, rather than at the end of completion of each progress stage of the work.

118. Further, the builder’s submission of the issue of waiver overlooks that there is no evidence that the homeowner waived any right to insist upon completion of the work that was set out in the invoice. As discussed previously, the Tribunal is satisfied that the work identified in stage 6 of the amended progress payment schedule was substantially complete.

119. The Tribunal is satisfied that the homeowner had not elected to waive contractual rights under Cl. 15 of the written contract.

120. The issue of estoppel was raised during the hearing by the builder, but was not elaborated upon in written submissions. For the sake of completeness, the Tribunal has considered whether the homeowner’s conduct in paying some invoices rendered by the builder during the course of the works that were served before completion of a progress stage for works constitutes estoppel. The Tribunal is satisfied that such conduct was not an unequivocal representation by the homeowner that it would pay all invoices issued by the builder whether or not they were issued in accordance with Cl 15 of the written contract, and do not constitute estoppel within the principles set out in Walton Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387.

Conclusion-Did the Builder Lawfully Terminate the Contract Under Cl 33 of the Contract For Non-Payment of Invoices 163 and 174?

122. The builder did not lawfully terminate the contract under the provisions of the written contract.

Was The Contract Terminated By Frustration?

123. Although the builder had not lawfully terminated the contract under the provisions of the contract, the contract may still have been lawfully terminated at common law by the builder if:

1. The contract was frustrated by reason of the injuries sustained by Mr Rose in his motor cycle accident;

2. The conduct of the homeowner was a repudiation of the contract, and the builder had accepted the repudiation.

124. The Tribunal will first deal with the issue of frustration.

125. The builder submits that the contract was “frustrated by reason of the impracticality of performance” as a result of Mr Rose being “unable to return to the premises following his motor vehicle accident on 29 April 2017. The builder relies upon medical reports, including by Dr Lam (23 June 2017) and Dr Davis (27 February 2018).

126. In oOh! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd (2011) 32 VR 255, the Victorian Court of Appeal (Nettle JA) stated as follows at 272 (applying principles from Notcutt v Universal Equipment Co (London) [1986] 1 WLR 641; and Codelfa Constructions Pty Ltd v State Rail Authority (NSW) 149 CLR 337:

“Consistently with Codelfa, I take the law to be that a contract is not frustrated unless a supervening event:

(a) Confounds a mistaken common assumption that some particular thing or state of affairs essential to the performance of the contract will continue to exist or be available, neither party undertaking responsibility in that regard; and

(b) In doing so has the effect that, without default of either party, a contractual obligation becomes incapable of being performed because the circumstances in which performance is called would render it a thing radically different form that which was undertaken by the contract…”

127. The homeowner submits that the contract was not frustrated by reason of the injuries sustained by Mr Rose in his motor cycle accident, because the builder could have taken measures to employ or engage another suitably licenced person to supervise and co-ordinate the building works under the contract. The homeowner submitted that the builder had not taken adequate measures in this regard, and had simply referred in evidence to contacting “a couple of builders”, but had not wanted any other person to be engaged because Mr Matthews was ‘difficult’ to deal with.

128. The evidenced of Mr Rose includes correspondence from the CTP insurer of the vehicle who collided with his motor cycle accepting that it’s insured was at fault for the accident.

129. The Tribunal accepts that the medical evidence demonstrates that Mr Rose suffered a fracture of the medial tibial condyle and dislocation of the right tibial plateau, together with an ACL tear and meniscus tear. Mr Rose was initially hospitalised at Mona Vale Hospital, and transferred to Royal North Shore Hospital where surgery was performed. He was released on 10 May 2017, and was on crutches for approximately 14 weeks. He was medically certified as unfit for work for a significant period of time. In reports of Dr Davis in reports of 27 February 2018 and 20 June 2018 states that Mr Rose has restricted ability to perform work including walking on uneven ground; climbing stairs or ladders; working at height; and squatting.

130. The Tribunal accepts that he was physically incapacitated for a period of time due to the motor vehicle accident and it would have been difficult in the period that Mr Rose was on crutches to perform any work involving physical labour. However, the Tribunal does not accept that, other than the period in which Mr Rose was hospitalised, there was a complete physical incapacity to organise and co-ordinate suitably licenced other persons to continue work under the contract between the homeowner and the builder.

131. Mr Rose accepts in his evidence that he could have issued a notice under Cl 9.1 of the written contract seeking an extension of time for the builder to compete the works under the contract, but did not do so because he believed the homeowner would not accept any extension in circumstances where the completion of the work under the written contract should have occurred by January 2017.

132. For the contract to be frustrated, the Tribunal must be satisfied that the injury to Mr Rose made a contractual obligation “incapable of being performed” because circumstances not due to any fault by the builder would render performance “a thing radically different from that which was undertaken by the contract.

133. The contemporaneous documentary evidence between the parties after Mr Rose’s motor cycle accident and the end of the contract (i.e. while the contract remained on foot) do not indicate that the builder was unable to take reasonable measures to continue performance of the contract, and the homeowner had not issued any breach notice by reason of the delay in completion of the work.

On 10 May 2017 Ms Jarvis had emailed Mr Rose as follows:

“Given the uncertain situation we are now in with you having broken your leg, I don’t feel comfortable paying any more invoices until we clearly understand, and have iron clad assurances on the following:

When and how you propose to complete all the outstanding items on the extension (and other related jobs) so that we can move across to the new part.

When and how you then propose to complete the renovation of the remainder of the house (so the house is finished) all within the existing contract price”

134. Mr Rose had responded by email the same date stating that he was still in hospital, and that he understood Ms Jarvis was feeling:

“…uneasy about how we will complete the project due to the accident but I have been working on an outcome on that”

135. Ms Jarvis then responded by email on 10 May 2017 stating that the homeowner only had “less than $50k remaining on the extension” and “a skinny amount in progress payments to complete the old part of the house”, that “I do not feel comfortable paying any more invoices until we have the plan in writing with the how, who and when”.

136. On 28 May 2017, after the builder had issued the “contract breach notice” dated 23 May 2017 regarding unpaid invoices, and Mr Matthews had responded with a “Notice of Dispute” dated 23 May 2017, Mr Matthews had emailed Mr Rose stating relevantly that “if you are unable to advise us of a way to complete the build in the near future within the agreed contract price then I intend to file a claim (sic) with the Department of Fair Trading”.

137. Mr Rose responded to the email dated 28 May 2017 on 1 June 2017 stating that he had suffered a “significant injury” and:

“…I hope to be in a position to answer your queries within a week and hopefully resolve this matter to our mutual satisfaction”.

138. On 21 June 2017, the builder’s Solicitor wrote to the homeowner purporting disputing that the builder was in breach and implying (although not clearly stating) that the builder was terminating the contract by reason of the homeowner’s failure to pay invoices. The builder’s Solicitor asserted in the letter that “in the alternative” the contract had been terminated by reason of Mr Rose’s injury.

139. The conduct of Mr Rose in emailing Ms Jarvis and Mr Matthews stating, in effect, he was working on a “solution” so the building works under the contract could continue is not consistent with the builder being “incapable” of continuing the work under the contract.

140. As the homeowner correctly submits, the contract was between the homeowner and DCR Constructions Pty Ltd, not between the homeowner and Mr Rose.

141. The Tribunal accepts the evidence of Mr Rose that he was the sole director of the company, and predominantly involved in supervising and co-ordinating work on behalf of the company.

142. The role and responsibilities of a builder under a contract to perform residential building work is not simply to physically perform the work itself, but to supervise and co-ordinate others to perform work. Mr Rose was not on site during all of the activities that occurred during the course of the build. Notably, during November 2016 Mr Rose went on holiday to Hawaii for 3 weeks and sub-contractors arranged by the builder continued to attend the site and perform work (affidavit of Mr Rose dated 6 October 2017 paras 174-179), which indicates that it was not essential that Mr Rose be physically present on site on all occasions when work was being done for the builder’s contractual obligations to be performed.

143. The contract was between the homeowner and the company, not Mr Rose personally, the obligation to compete the contract lay with the company.

144. As the homeowner correctly submits, DCR Constructions Pty Ltd could have taken measures to engage others to continue work under the contract. The evidence of Mr Rose in cross examination was that he had taken limited measures. The relevant evidence was (T:17/12/18 pp 106-107). The reference in the evidence to “Blake” was to a builder from JIBE Constructions who took over a contract that DCR Constructions Pty Ltd had to construct a granny flat at other residential, in circumstances where Mr Rose stated he was unable to complete work due to his motor cycle accident:

Homeowner’s Counsel: You could have asked Blake to carry on the job for DCR Constructions for Mr Matthews, couldn’t you?

Mr Rose: I didn’t have the confidence in Blake with dealing with someone like Mr Matthews on the job, no.

Homeowner’s Counsel: Leaving aside your comments about Mr Matthews, you agree don’t you that you could have asked Blake to subcontract to DCR to finish the Matthews project? Isn’t that right?

Mr Rose: I could have asked Blake or a lot of people, yes.

Homeowner’s Counsel: And these “a lot of other people” you could have asked, you didn’t ask any of them either, did you?

Mr Rose: No, I asked two-two other builders.

Homeowner’s Counsel: When you a say there was a lot of other people you could have asked?

Mr Rose: I mean, there’s a lot of other builder’s I could have asked.

Homeowner’s Counsel: Yes?

Mr Rose: But I didn’t ask them either.

Homeowner’s Counsel: How many builders could you have asked?

Mr Rose: Well, I know lots of builders. My social group is intermingled with builders.

Homeowner’s Counsel: Right, so?

Mr Rose: A number.

Homeowner’s Counsel: And most of those, you didn’t ask whether they could subcontract to take on Mr Matthews job, isn’t that right?

Mr Rose: That’s correct.

145. Earlier in cross examination, Mr Rose stated that he could have asked Mr Ryan Macedo, who had performed sub-contract work on the Matthews build to “finish the job”, but had not done so (T: 17/12/18 p 105). Mr Rose stated that he had “sounded out a lot of people” about completing the work under the contract, but “couldn’t tell you who all the different people were” (T: 17/12/18 p 105).

146. The Tribunal does not accept that the builder took reasonable measures to seek to engage other builders to perform any aspect of the work Mr Rose was unable to perform due to the injuries sustained in his motor cycle accident. Had the builder taken such measures and established that there was no other builder prepared to be engaged under the supervision and co-ordination of Mr Rose to complete the work under the contract, the builder would have had a stronger argument on the issue of frustration. However, the builder did not do so.

147. Further, there was evidence given by Mr Rose in cross examination that after his motor cycle accident he allowed Mr Macedo to use the builder’s account with a supplier at Johnson Brothers to perform work at a site where the builder had contracted to construct a granny flat, and Mr Macedo and Mr Duncan to use the builder’s account at Johnson Brothers in respect of construction of a granny flat at Mr Duncan’s premises, which the builder had contracted with Mr Duncan to perform, but Mr Macedo took over the work.

148. The builder submits that because Mr Rose was certified as medically unfit for work until 15 December 2017 by Dr Lam, and he had a claim against the CTP insurer of the vehicle who collided with his motor cycle, it would affect his right to compensation under the motor accidents legislation to return to work. However, as discussed previously, this did not prevent the builder from taking adequate measures to arrange for other builders to complete the work, or to continue to co-ordinate the work remaining under the contract even if Mr Rose personally was not sufficiently fit to attend the site, or could only attend the site for brief periods and undertake no physical work.

149. The builder submits that Mr Rose did engage replacement labour for a building contract performed by DCR Constructions Pty Ltd in November 2018, but as of May and June 2017 Mr Rose did not know that he could successfully make such a claim, and any such claim was subject to approval by the CTP insurer.

150. The Tribunal does not regard Mr Rose failing to seek approval for the cost of engaging replacement labour in the period between his motor cycle accident and the contract between the homeowner and the builder coming to an end as a reasonable measure he could have taken so that the contractual obligations could be performed. What is salient is that the builder could, on the evidence before the Tribunal, taken reasonable measures to engage another builder or additional labourers and sub-contractors so that work under the contract could continue, and failed to do so.

151. The builder submits that the homeowner also sought a replacement builder prior to the contract coming to an end (builder’s written submissions dated 8 April 2019 p 21). However, the key evidence on that issue was during the builder’s cross examination of Mr Matthews (T: 18/12/18 p 208):

“Builder’s Counsel: Sir, are you aware of Ms Jarvis making enquires with other builders after Mr Rose’s motor vehicle accident on 29 April 2017?

Mr Matthews: Yes I am.

Builder’s Counsel: Do you agree, sir, that these inquiries by Ms Jarvis, they commenced back in May of 2017?

Mr Matthews: I don’t know when she started.

Builder’s Counsel: Do you agree, sir, that these inquiries started shortly after you and Ms Jarvis became aware of Mr Rose’s situation following the motor vehicle accident?

Mr Matthews: They would have started after he advised us he wasn’t going to complete the job.

Builder’s Counsel: When do you say that was, sir?

Mr Matthews: He told me in a phone call that I had made to him. I can’t recall. But it was-he told me that he wasn’t going to complete the job to-a level of my standard and I should find another builder”.

152. The evidence of the homeowner was that enquires were made regarding a replacement builder after Mr Rose has told Mr Matthews that DCR Constructions Pty Ltd was not going to continue with the work. The reason given was that the builder wasn’t going to “complete the job” to Mr Matthews purported “standard”, not that the builder could not take measures to engage other builders to complete the work.

153. In such circumstances, where the builder had made clear it was not continuing with the work under the contract, the homeowner commencing enquires to find a replacement builder was not evidence that the contract was frustrated. Rather, it is the logical response of a homeowner being told by the builder that the builder did not intend to complete work under the contract, or find another builder to complete the work that DCR Constructions Pty Ltd was obliged to perform under the contract.

Conclusion-Was the Contract Frustrated?

154. The Tribunal is satisfied that the contract was not frustrated by reason of the injuries sustained by Mr Rose in his motor cycle accident on 29 April 2017.

The Issue of Repudiation

155. The homeowner does not assert that it terminated the contract under the provisions of the contract by issuing a breach notice and then a notice of termination. The homeowner’s position is that the builder repudiated the contract because it wrongfully asserted that the homeowner was in breach, and refused to continue to perform work under the contract. The homeowner’s position is that it accepted the repudiation by filing its cross application.

156. The relevant principles regarding repudiation were referred to by the Appeal Panel of the Tribunal in DB Homes Australia Pty Ltd v Kes [2019] NSWCATAP 221 at [45]-[46]:

“Repudiation of a contract occurs when a party breaches a fundamental or essential term of the contract; or there was a sufficiently serious breach of a non-essential term of the contract; or a party demonstrates an unwillingness or inability to render substantial performance of the contract and the innocent party elects to accept the repudiation and treat the contract as having ended: KoompahtooLocal Aboriginal Land Council & Anor vSanpinePty Ltd [2007] HCA 61; (2007) 233 CLR 115

As a general rule, wrongful termination of the performance of a contract, where a party has no legal right to do so, will constitute a repudiation of obligation because such an act indicates an absence of readiness or willingness on the part of the party who has wrongfully terminated to perform its obligations under the contract: Ogle vComboyuroInvestments Pty Ltd [1976] HCA 21; (1976) 136 CLR 444 at 453; Curnow Consulting Pty Ltd v JPD Media and Design Pty Ltd t/asDurieDesign[2017] NSWSC 1171 at [344].”

157. In its written submission dated 8 April 2019 (at p 16), the builder submits that its letter (sent by email) of 23 May 2017 was a notice of breach under the contract, and its letter (through its Solicitor) of 7 June 2017 was a notice of termination under the contract.

158. As discussed previously, the letter (sent by email) of the builder dated 23 May 2017 only referred to Invoices 163 and 174. For reasons expressed earlier, the Tribunal is satisfied the builder had no contractual right to claim payment of Invoice 163 and Invoice 174 under the contract at the time demand for payment was made.

159. The letter of the builder’s Solicitor dated 7 June 2017 refers to two further unpaid invoices: Invoice 183 in the sum of $3,670 and Invoice 184 in the sum of $1,134.

184. In assessing quantum meruit, the Tribunal must also consider how the claimed work fits within the contract of the parties as part of the consideration of the fair value of the work (Lumbers v W Cook Buildings Pty Ltd (in liq) (2008) 232 CLR 635 at 663). The Tribunal is not satisfied that the builder has established the fair value of the work, nor has it clearly been established that the homeowner had actual knowledge of the work when it was done and had agreed to the work as a variation.

Conclusion-The Builder’s Claim

194. The builder has failed to establish the claims in respect of Invoices 163, 174, 183 and 184 under contract or on principles of quantum meruit.

THE HOMEOWNERS CLAIM

195. As discussed previously, there are two components to the homeowner’s claim. The first component is for the increased cost of completing the work that should have been performed by the builder (i.e. the cost of performing the work that the builder was obliged to perform under the contract, less the amount that would have been payable to the builder). The second component is for breach of the statutory warranties implied into contracts to perform residential building work under s 18B of the HB Act.

196. The homeowner seeks an award of damages rather than an order that the builder perform work.

197. Both parties building experts gave evidence on the issues of completing incomplete work, and defects.

198. There are 29 items of allegedly defective and incomplete work set out in the Joint Scott Schedule, and referred to by the experts in their reports and joint evidence at hearing. Items 25-29 involve additional defects that were considered by Mr O’Donnell in a supplementary report after work had been engaged and performed by a roofing contractor to the roof. Items 25-29 also involve additional carpentry defects and conversion of water tanks.

199. Items 12-24 are incomplete work.

200. Item 1 involves preliminary costs to complete contract works. Items 2-10 are allegedly defective work. There is no Item 11.

201. In respect of defective work, the items that involve the most significant rectification works on the homeowner’s evidence are Items 2 and 3, in respect of which the homeowner submits that the garage and garden storage shed (which was constructed below the garage) require complete demolition and rebuilding.

202. The experts agree regarding overheads (10%); profit margin (15%) and GST (10%).

203. In respect of Items 4-10, there was some disagreement between the experts regarding whether work was defective in its current condition, or was incomplete. This is not surprising considering the work was performed out of kilter in comparison to the 7 stages agreed upon in the amended progress payment schedule. However, considering the findings on of the Tribunal that the builder had repudiated the contract, it makes no relevant difference if work performed by the builder was defective in its current condition, or defective because it had not been completed. The homeowner is still entitled to remedial orders regardless.

Incomplete Work

204. There was no significant difference between the opinions of Mr O’Donnell and Mr Wallace on the cost of completing incomplete work at Items 12-24 and the builder does not press the one minor disagreement between the experts regarding the cost to complete the “teenage retreat floor framing” (builder’s submissions dated 8 April 2019 pp 27-28).

205. The homeowner submits that Items 12-24 total $125,051 (homeowner’s submission dated 20 March 2019 p 18). However, Items 12-18 and 19-24 when calculated together (there being no relevant changes to the opinions of the experts on these items in joint evidence) are $9,444 plus $113,517 which totals $122,961.

206. The Tribunal is satisfied that the cost of completing incomplete work at Items 12-24 is $122,961 plus overheads; profit margin; and GST.

207. When overheads, profit margin and GST is added, the cost to complete incomplete work totals $171,100.24.

What Was the Remaining Amount to Be Paid Under the Contract Had the Builder Completed the Work?

208. As discussed previously, the agreed price in the written contract was $386,420.

209. The homeowner submits that during the course of the construction works there were oral and written variations by the homeowner and builder that changed the agreed price. In the builder’s written submissions dated 20 March 2019, there is a table set out referring to the evidence regarding each item in which the homeowner says the contract amount was altered, cross referenced to the evidence.

210. The Tribunal accepts the evidence of the homeowner on these changes, on the basis that it was supported by documents and contemporaneous evidence as compared to the slipshod manner in which the builder kept records of what had been agreed to during the course of the build.

211. The Tribunal is satisfied that, after credits and adjustments have been taken into account, the total amount that the homeowner would have paid the builder had the contract been completed was $380,495.

212. There was also a factual dispute between the parties as to how much the homeowner had paid the builder during the course of the building works. The evidence of the homeowner was that he had paid the builder $260,447. The builder’s evidence was that the homeowner had paid $233,162.

213. The homeowner’s evidence contained documents to support his assertion as to how much had been paid, including the cash payments. The Tribunal is not satisfied that the builder kept accurate records of what had been paid (and when it was paid) and accepts the evidence of the homeowner regarding the amount of payments made.

214. Accordingly the Tribunal is satisfied that the homeowner paid the builder $260,447. The difference between $260,447 and $380,495 is $120,048.

215. The amount of contractual damages for the cost of completing incomplete work is the difference between $171,100.24 and $120,048, being $51,052.24.

216. The Tribunal will, after discussion of the issue of defects, consider the appropriate remedy to the homeowner under s 48O of the HB Act.

Defective Work

217. Section 18B of the HB Act states as follows:

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.

218. In respect of s 18B of the HBA, the Appeal Panel of the Tribunal stated in Deacon v National Strategic Constructions Pty Ltd [2017] NSWCATAP 185 (‘Deacon’) at [46]:

“Although objective standards such as Australian Standards, the Building Code of Australia and the Guide are of significant relevance in establishing whether work has been performed in a proper and workmanlike manner (Wheeler vEcroplotPty Ltd [2010] NSWCA 61 at [10]), the absence of such evidence does not automatically mean a homeowner has failed to establish breach of statutory warranty. In our view, the relevant principle was succinctly stated by Senior Member Goldstein in GMacFaydenandAnorv GTadrosse [2014] NSWCATCD 194 at [46] as follows:

…[E]vidence that work does not comply with the Building Code of Australia would establish a basis for a finding that sub section 18B(c) of the Act has been breached. Evidence of the details in which work does not comply with the contractual plans and specifications would form the basis for a finding that sub section 18B(a) of the Act has been breached. Evidence of work not being carried out in a proper and workmanlike manner would in my view involve identification of the work in question, a statement of how the expert would expect it to be carried out in in a proper and workmanlike manner and then identification of the factors which establish that the way in which the work has been carried out falls short of it being carried out in a proper and workmanlike manner. Evidence of this nature, if accepted, would form the basis for a finding that sub section 18B(a) of the Act has been breached.”

219. Item 1 is the work and cost of preparing the site so that rectification and completion work can be performed. Mr O’Donnell asserts that work to prepare the site prior to commencement of any work to rectify defects and complete work will be required and the cost will be $3,606. Mr Wallace asserted that the site is already established, but agrees with the assessment of Mr O’Donnell on cost.

220. Considering the number of defects and incomplete work and their extent, the Tribunal is satisfied that preliminary work to prepare the site will be necessary, and the amount of $3,606 is appropriate.

221. Items 2 and 3 involve the garage and garage storage shed constructed beneath the garage. Mr O’Donnell relevantly asserts that the defects are (i) the garage does not comply with the plans, because it has been built 100mm too short (which the homeowner asserted prevents him from being able to park his Subaru Outback vehicle with a towbar in the garage); (ii) the garden storage area did not comply with the plans, because there had been insufficient excavation, leading to the ceiling being 300mm lower than what it should have been; and (iii) a brick cavity wall between the garden storage area and the adjoining existing house had not been constructed in accordance with the plans and the absence of such a wall affected the weatherproofing of the area and was non-compliant with Pt 2.2.2 of the National Construction Code.

222. Mr O’Donnell asserted that the only appropriate way to rectify the defects was to demolish and rebuild the relevant area.

223. In joint expert evidence, Mr Wallace referred to measures that could be taken to deal with the 100 mm shortfall on regarding the length of the garage that could be taken without complete demolition (T: 25/9/18 p 58-61) at a cost of $10,700 but this had not been dealt with in any detail in his report in chief.

224. Mr Wallace agreed that the length of the garage did not comply with the plans, but asserted there was no clear loss of amenity. Mr Wallace also agreed that the garden storage shed area had not been excavated to the depth on the plans, but was instructed by the builder that the homeowner orally agreed to this. Mr Wallace did not believe there was any significant loss of amenity by reason of the ‘lower’ ceiling. Mr Wallace agreed with the costings of Mr O’Donnell regarding the costs of demolition and rebuilding.

225. In regards to the depth of excavation of the area below the garden storage shed area, there was a significant divergence of evidence. The evidence of Mr Rose was that Mr Matthews was present during the excavation, and Mr Matthews had instructed the builder (Mr Duncan being the sub-contractor who performed the excavation under the supervision of Mr Rose) to stop excavating 300mm short of the required depth, because extra rock would need to be excavated taking a further 2 days and costing a further $2,000. Mr Duncan supported this version of events. Mr Duncan also stated in evidence that he was a friend of Mr Rose and had worked with him on a regular basis.

226. Mr Matthews denied that he was present and gave oral instructions for the excavation to stop before reaching the required depth under the plans. Rather, his evidence was that he told Mr Rose in September 2016 that the excavation did not look deep enough, and for Mr Rose to check this and fix it. According to Mr Matthews, Mr Rose told him the excavation was “fine”. According to Mr Matthews, in late September 2016 Mr Duncan told him the excavation did not go deep enough. Mr Duncan denied this.

227. Clearly, the versions of events given by the witnesses were completely opposed on the factual issue of whether or not Mr Matthews had given oral instructions to “stop digging”. However, even if Mr Rose and Mr Duncan’s version of events is accepted, there was insufficient evidence to accept on the balance of probabilities that Mr Matthews consented to the builder constructing the garden shed area in a manner that caused it to have a lower ceiling height, in departure from the plans.

228. There is no contemporaneous documentary evidence to support the builder’s version of events, such as a contemporaneous email or text message. Further, the builder did not obtain any written instructions to depart from the plans prior to the work for the construction of the garden shed area commencing, and if he had done so he could have raised this as a defence under s 18F (1) (a) of the HB Act.

229. The statutory warranties in s 18B of the HB Act make clear that it is the obligation of the builder to construct the premises in accordance with the plans and specifications. The builder failed to do this in respect of the garage dimensions; the garden shed area dimensions; and construction of the brick cavity wall. The builder failed to obtain written instructions from the homeowner prior to departing from the plans, not did the builder issue a written variation.

230. Finally, if it is necessary for the Tribunal to make findings as to the version of events it accepts in respect of this issue, it accepts Mr Matthews. Mr Matthews raised the issue of the dimensions of the garden room shed (also referred to in evidence as the “man cave”) and the length of the garage in an email to the builder on 8 January 2017. This is in the period during which the builder was performing work under the contract and before the relationship between the parties dissolved into discord. The fact that the homeowner raised a complaint in January 2017 is inconsistent with the homeowner having orally given instructions to the builder a few months earlier to “stop digging” the excavations.

231. Regarding the evidence and demeanour of the parties during evidence and cross examination, Mr Matthews’s evidence was consistent and logical. Mr Rose’s evidence contained inconsistencies and issues that went to his credit, including the retrospective changing of invoices; and his veracity regarding a workers compensation claim he had made involving a different work site, the relevant evidence being referred to in the written submissions of the homeowner dated 20 March 2019 at pp 25-27.

232. In respect of Items 2 and 3, the Tribunal accepts the evidence of Mr O’Donnell on the issue of defects; the appropriate method of rectification; and the cost of rectification.

233. Item 4 involves 3 damaged windows (Mr O’Donnell amending his evidence during joint expert evidence from 4 windows in his report to 3 windows). Mr Wallace accepted that there was one window damaged. The difference between the two experts regarding costs of rectification was $1,000 compared to $133. The Tribunal accepts the evidence of Mr O’Donnell in respect of this item.

234. Items 5 and 6 were agreed upon by the experts.

235. Items 7 and 8 involve the first floor deck joists. Mr O’Donnell states that both the north deck and south deck had insufficient packing and flashings installed; the ledger beam does not comply with the National Construction Code because it has not been fully installed into supporting brickwork and there is inadequate sarkings and flashings on the south deck that provides inadequate waterproofing and does not comply with Pt 2.2.2 of the National Construction Code.

236. Mr Wallace did not disagree with a number of the criticisms made by Mr O’Donnell, but was of the opinion the work was incomplete rather than defective, and the builder would have completed had the contract not been terminated.

237. As discussed previously, having found the builder repudiated the contract, it is not salient whether the work is incomplete or defective. The Tribunal is satisfied that the work in its current state is defective, and accepts the method of rectification and cost of rectification proposed by Mr O’Donnell.

238. Item 9 involves the floor frame and wall abutting the existing home. Mr O’Donnell states that the frame does not comply with the National Construction Code. Mr Wallace agrees with the Mr O’Donnell on this issue and the cost of rectification, but says the work is incomplete.

239. The Tribunal accepts the evidence of Mr O’Donnell on the issue of defect; the appropriate method of rectification and the cost of rectification in respect of Item 9.

240. Item 10 involves ridge capping; flashings and trays on the metal roof installed by the builder. Mr O’Donnell asserts that there was sheeting not adequately affixed; ridge capping not fitted in compliant manner; and trays in the roof ridge had not been turned upon to prevent driving rain, which was a problem considering the location of the premises in a high wind area. Mr O’Donnell asserted the roof was non-compliant with Part 2.2.2 of the National Construction Code, and a quotation obtained by the homeowner from Pro-Roofing and Guttering for $2,880 to rectify was appropriate.

241. Mr Wallace asserted that there were some minor issues regarding ridge capping, but the roof was generally adequate and waterproof.

242. The Tribunal accepts the evidence of Mr O’Donnell on the issue of defects; the appropriate method of rectification; and the cost of rectification on this item. On the evidence of both experts, there are clearly some defects with the roof, the issue is the extent of the defects. Mr O’Donnell expressed his views cogently and thoroughly, and the Tribunal accepts his evidence.

243. Items 25-29 arise from Mr O’Donnell’s supplementary report dated 2 July 2018 that Mr Wallace responded to in a supplementary report dated 3 August 2018. The alleged defects identified at Items 25-29 arise after the homeowner had engaged a remedial builder, and the remedial builder had either performed work or raised issues with the homeowner regarding additional defects.

244. Item 25 involves floors in bedroom 3 and the “retreat” area dropping due to load bearing walls not being adequately supported. The remedial builder installed additional bearers. Mr O’Donnell asserted the work was defective because bearers were cut short and cantilevered by the builder, which work was not performed with due care and skill. In the Joint Scott Schedule he stated the appropriate cost of rectification was $3,834 but revised this amount to $3,310 in joint expert evidence.

219. Mr Wallace believed the original work performed by the builder was in accordance with the engineer’s design and the engineer had provide a certificate of compliance.

220. The Tribunal accepts the evidence of Mr O’Donnell that the lack of adequate bearers caused the walls to drop, which constitutes defective work irrespective of the engineering plans. The Tribunal is satisfied that the rectification work performed by the remedial builder was appropriate to rectify the defect, and that the cost of rectification is $3,310.

221. Item 26 is the cost of the homeowner converting water tanks to be used as Onsite Detention Tanks (‘OSD’). The evidence of the homeowner was that he purchased the tanks upon advice of Mr Rose and Mr Rose changed the location of the tanks. The tanks could only be used as stormwater tanks and required modification. The evidence of Mr Rose was that the homeowner purchased the tanks upon his suggestion, with a view to them being modified.

222. The homeowner subsequently paid $1,745.36 to have the tanks modified to work as OSD tanks.

223. Mr O’Donnell asserts that the builder had not performed work with due care and skill due to the builder’s advice about the type of tanks to purchase and the location of the tanks. Mr Wallace said the work should have been a variation and was incomplete work.

224. The Tribunal accepts the evidence of Mr O’Donnell that the type of tank the builder advised to be purchased and their location was work performed without due care and skill, and that the homeowner incurred a further cost to have the tanks modified. The Tribunal is satisfied that $1,745.36 is appropriate for the cost of rectification.

225. Item 27 involves further roofing defects. The homeowner engaged Mr Simms of Pro Roofing and Guttering $2,440 to perform further roofing works. The homeowner’s evidence contained a report of Mr Simms attached to an affidavit by him. Mr O’Donnell reviewed the report of Mr Simms and the photographs provided, and asserted that the work was necessary to further ensure the roof was adequately waterproof due to its exposed location and prevailing winds. Mr Wallace accepted that there may be some further work required, and if so the appropriate cost was $755.

226. The Tribunal is satisfied on the evidence that there were further defects in respect of the roof sheeting and trays that affected the ability of the roof to be adequately waterproof; that the work performed by Pro Roofing and Guttering was appropriate; and $2,440 is an appropriate cost to rectify the defects.

227. Item 28 involves additional areas of carpentry, including the study/Cathedral ridge beam and floor joists supporting the ground floor bathroom. In essence, there is no disagreement between Mr O’Donnell and Mr Wallace on this issue. Mr O’Donnell believes the appropriate cost to rectify is $1,324.80. Mr Wallace rounded down the total cost to $1,300, but believed half was defective work and half incomplete work.

228. As discussed previously, the distinction between defective and incomplete work is no longer important. The Tribunal accepts that there was defective work in respect of Item 28, and the appropriate cost of rectification is $1,334.80.

229. Item 29 involves window flashings to 7 external windows. Mr O’Donnell inspected 4 of the 7 windows. He asserted that the builder had not installed Jamb flashings and Head flashings, but had only installed Sill flashings. According to Mr O’Donnell, under the Australian Window Association Aluminium door and window installation guide it was recommended that all 3 types of flashing be installed, and Mr O’Donnell asserted that this should have been “strictly adhered to” by the builder because the house was located in an area close to the sea with exposure to high winds. Mr O’Donnell assumed that if Jamb and Head flashings had not been installed on 4 windows, the remaining 3 windows would not have them installed. Mr O’Donnell stated that although the flashings may be adequately performing their function at the moment, there was an “inherent risk” of failing to adequately prevent water ingress in the future.

230. Mr Rose conceded in cross examination that only sill flashings were installed on the windows. He believed this was adequate.

231. Mr Wallace stated that the Australian Window Association installation guide was not part of Australian Standards or the National Construction Code, and the flashings on the external windows were adequate. However, in cross examination, Mr Wallace conceded that the lack of Jamb and Head flashings may, due to the location of the residential premises and its exposure to wind and rain, constitute a breach of Australian Standards.

232. The Tribunal is satisfied that all of the external windows lack Jamb flashing and Head flashing, and that due to the location of the residential premises that failure by the builder to install such flashings is a defect. The Tribunal accepts the evidence of Mr O’Donnell in this regard, and accepts the method of rectification and cost of rectification set out in his evidence.

Conclusion-Defective Work

259. The Tribunal accepts the defects; method of rectification; and cost of rectification in the evidence of Mr O’Donnell.

260. In respect of cost of rectification, the cost is $95,724, plus overheads; profit margin; and GST. The total cost of rectification is $133,199.93.

Appropriate Remedy for the Homeowner

261. Under s 48O of the HB Act, the Tribunal has a discretion that includes making an order that either the builder return to the site and rectify defects and perform work, including completion of incomplete work (a ‘work order’) or that the builder pay damages for the cost of rectification, under the well-established principles in Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613 (‘Bellgrove v Eldridge’).

262. Section 48 MA of the HBA states:

48MA   Rectification of defective work is preferred outcome in proceedings

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

263. The relevant principles applicable to s 48MA of the HBA were identified by the Appeal Panel in Kurmond Homes Pty Ltd v Marsden [2018] NSWCATAP 23 at [41]-[46] as follows:

“While not appropriate to seek to define all circumstances that might justify a court or tribunal making an order that departs from the preferred outcome, it is necessary to give some consideration to the nature of the obligation imposed on the court or tribunal by s 48MA.

First, the principle, by its terms, only applies “in determining a building claim involving an allegation of defective residential building work or specialist work”. It is not expressed to apply where, for example, the building claim only involves an allegation of incomplete residential building work or specialist work. That is not to suggest s 48O does not otherwise permit a work order in respect of work found to be incomplete.

Second, s 48MA is directed towards the remedy or “outcome” to be provided by the court or tribunal where a claimant establishes the responsible party has carried out defective residential building work or specialist work. In this sense, it is not properly described as a “presumption”. Rather, it is a remedy to be “preferred” to other forms of order which the court or tribunal might make.

Third, while s 48MA provides the court or tribunal “is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome”, the section does not mandate that a work order must be made in all cases. Further, the section does not confine the form of orders that may be made under s 48O, including an order that defective work be rectified by the responsible party engaging another person to carry out that work on behalf of the responsible party.

Fourth, the term “preferred” is not defined. The HB Act and Regulations do not specify circumstances in which the preferred outcome is not to be adopted. However, guidance as to the meaning of “preferred” and the circumstances that would justify an order for a different outcome is found in the second reading speech where the Minister for Fair Trading makes clear that the purpose of the amendment was to:

(1) prevent a homeowner from unreasonably refusing a builder access to a building site to rectify defective work;

(2) permit a builder to return to carry out necessary rectification work if they are willing; and

(3) support the timely and cost-effective resolution of disputes.

That is, in deciding what order should be made, a court or tribunal may consider whether there is a reasonable basis for any objection raised by the homeowner to the builder being permitted to rectify the defective work, the terms of any order, whether the builder is willing to return and whether such an order would support a timely and cost effective resolution of the dispute.”

264. In respect of s 48MA of the HB Act, the provision only applies to existing defects, not incomplete work: Clements v Murphy [2018] NSWCATAP 152.

265. The Tribunal is satisfied that a work order is not the preferred outcome in the circumstances of this matter in respect of rectifying defective work, and that an order for damages should be made for the following reasons:

1. The builder repudiated the contract with significant incomplete work;

2. The builder has not indicated in its evidence that it would be prepared to return to the property and rectify existing defects;

3. There is a very significant amount of incomplete work, and the relationship between the parties has broken down.

The defects and scope of works to rectify the defects necessary to produce conformity with the contract must be established; and the homeowner is entitled to damages for the cost of such rectification work, provided the work is necessary to produce conformity with the contract and a reasonable course to adopt. It will only be in “fairly exceptional circumstances” that a method of rectification will be held not to be a reasonable course to adopt: Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8 ;(2009) 236 CLR 272 at [15].

The Tribunal has set out previously its findings regarding defects; incomplete work; method of rectification and completion; and cost of rectification and completion. The Tribunal is satisfied that the method of rectification proposed by Mr O’Donnell is necessary to produce conformity with the contract and a reasonable course to adopt.

The Tribunal is satisfied that the appropriate remedial order is an order for damages. The amount is calculated as follows:

1. Increased cost of completing incomplete work: $51,052.24

2. Rectification of defective work: $133,199.93

3. Total: $184,252.17

266. The Tribunal makes no findings in respect of the homeowner’ ACL claim, as there would be no separate damages awarded for breach of the ACL in any event.

COSTS

267. The homeowner has succeeding in their proceedings and the builder has failed. The amount in dispute in the proceedings clearly exceeds $30,000, so by reason of Reg 38 of the Civil and Administrative Rules 2014 (NSW) the homeowner does not have to demonstrate ‘special circumstances’ to be awarded costs. The general rule is that costs follow the event, in that the successful party to proceedings is entitled to a costs order in its favour: Oshlack v Richmond River Council [1993] HCA 11; (1993) 193 CLR 73.

268. The parties have not yet been heard on the issue of costs. However, in the circumstances of this matter, the Tribunal is satisfied that the appropriate course of action is to make an order that the builder pay the homeowners costs as agreed or assessed on the ordinary basis. If either party seeks to vary that order, they may write to the other party and the Tribunal by 14 days from the date of this decision, and the Tribunal will then issue further orders and directions to deal with the issue of costs.

ORDERS

1. In Matter HB 17/31284 the proceedings are dismissed.

2. In Matter HB 17/44021 DCR Constructions (NSW) Pty Ltd t/as True Built is to pay Gary Matthews $184,252.17 by 28 days from the date of this decision.

3. In both Matter HB 17/31284 and HB 17/44021 DCR Constructions (NSW) Pty Ltd t/as True Built is to pay Gary Matthews costs of both proceedings as agreed or assessed on the basis set out in the legal costs legislation (as defined in s 3A of the Legal Profession Uniform Law Application Act 2014 (NSW).

4. If either party seeks to vary the costs order in order 3 above, the party is to write to the Tribunal and the other party by 14 days of the date of this decision to set out the alternative order(s) sought, and the Tribunal will make further orders and directions as appropriate.

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

Registrar

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: 16 June 2021