H Build Pty Ltd v Nixon - [2018] NSWCATCD 20

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation: H Build Pty Ltd v Nixon [2018] NSWCATCD 20
Hearing dates: 13 December 2017
Date of orders: 07 May 2018
Decision date: 07 May 2018
Jurisdiction: Consumer and Commercial Division
Before: Ian Bailey AM SC
Decision:
(1)   In HB 17/08049 the homeowner is to pay to the builder $199,639.36 immediately.

(2)   HB 17/19441 is dismissed.

(3)   Any Application concerning costs in proceedings HB 17/08049 and HB 17/19441 is to file in the Tribunal along with evidence in support of the Application and Submissions on or before 28 May 2018

(4)   Any Response to the Application is to be filed in the Tribunal along with evidence in support and Submissions on or before 18 June 2018
(5)   The Submissions are to address whether the Application should be determined on the papers.
Catchwords: Home Building; Cost-Plus contract; variations, implied terms; repudiation; termination under the contract and at common law
Legislation Cited: Home Building Act 1989
Cases Cited: Shevill v Builder’s Licensing Board (1982) 149 CLR 620
Impact Funds management Pty Ltd v Roy Morgan Research Ltd [2016] VSC 221
Reveille Independent Llc v Anotech International (UK) Ltd [2016] EWCA Civ 443.
Texts Cited: Dorter & Sharkey, Building and Construction Contracts in Australia, paragraph [12.30]
Category: Principal judgment
Parties: HBuild Pty Ltd - Applicant / Cross Respondent
Megan Nixon – Respondent / Cross Applicant
Representation:
Counsel:
B Le Plastrier for Applicant / Cross Respondent

M Galvin for Respondents / Cross Applicants

Solicitors:
Fielding Robinson for Applicant / Cross Respondent
Dentons for Respondent / Cross Applicants

File Number(s): HB 17/08049 and HB 17/19441
Publication restriction: Unrestricted

reasons for decision

These proceedings concern claims by a builder and a homeowner arising from a contract for residential building work comprising alterations and additions to an existing single storey semi-detached dwelling in North Sydney.
In both proceedings the homeowner, at various times and in numerous documents, has been referred to as both Megan Nixon and her husband Bruce Nixon. The homeowner party to the contract was Megan Nixon as the registered owner of the property. Tribunal sought confirmation from the parties as to the status of Bruce Nixon in the proceedings and received a response from the builder, but not from the homeowner. The Tribunal concludes that whilst Bruce Nixon participated in the relevant events which occurred, this was not in the capacity as a party to the contract or as the homeowner. The Tribunal accepts that as the husband of the homeowner he was able to give instructions on her behalf. For the sake of consistency references taken from documents which refer to “the homeowners” should be understood as only referring to Megan Nixon.
In HB 17/08049, the Applicant builder, HBuild Pty Ltd, (builder) claims an amount of $155,471.01 for unpaid progress claims for work performed under the Cost-Plus contract. The application was filed on 19 February 2017.
The homeowner, apart from defending the builder’s application, on 23 April 2017 filed a cross application, HB 17/19441, claiming that the contract was terminated under the contract in reliance upon breaches by the builder and claimed damages based on the cost to complete and rectification of defects in the work performed. Alternatively the termination is said to have been effected at common law on the basis that the breaches by the builder amounted to a repudiation which was accepted by the homeowner.
The builder‘s application includes a claim that the contract was terminated following the purported termination by the respondent homeowner, Megan Nixon (homeowner). As a consequence the builder claims to be entitled to a separately determined remuneration on a quantum meruit basis as an alternative to the claim under the contract.
Clearly the principal issues to be determined in these proceedings are those involved in the termination of the contract. Those issues will need to be considered in the context of the terms of the contract and the events which preceded the homeowner’s action. The application of the relevant terms of the contract to the facts as found will then be addressed.

The Contract

The contract is based upon the MBA Cost Plus Residential Conditions, (Conditions), architectural drawings and specification prepared by an architect Sarah Blacker (the architect) and structural engineering drawings prepared by Greg Zaccone (engineer) of GZ Consulting Engineers. There were no hydraulic engineering drawings included in the contract documents.
The option in Schedule 2(g) to the contract, of appointing a contract administrator was not adopted; however it is clear from the evidence that both the architect and the engineer were substantially engaged in the process of finalising and resolving issues associated with the incomplete design, and with the introduction of amendments to the work to be performed. Their participation in this process is addressed in the course of the overall analysis of the evidence.
The Tribunal notes that having regard to their significant contribution to the problems which emerged it is surprising that the architect and the engineer did not give evidence. The Tribunal nevertheless does not draw any adverse inference from the absence of their evidence.

Conditions

The Tribunal understands that the legal issues should be considered with due regard to the Conditions under the contract as a whole. The following paragraphs refer to provisions which are relevant to those considerations. In Appendix A to this decision there are extracts of the relevant terms of the contract.
Page 3 in the contract sets out a warning, for the purposes of the Home Building Act 1989 (the HB Act), directed to the homeowner, particularly identifying the factors which will influence the actual amount to be paid. The terms of the warning are set out in page 1 of Appendix A.
The second last bullet point in the warning is pertinent to the consideration of the events which unfolded during the performance of the work.
The formal agreement is set out in page 8 of the contract and is in terms set out in page 2 of Appendix A. The provisions of Clause 3 (i) to (iii) of the agreement are relevant to the issues in these proceeding.
Schedule 1 of the contract is set out at pages 3 and 4 of Appendix A.
The case for the homeowner includes reliance upon Part D of Schedule 1 and the terms as to the provisions as to the Budget Reports, see clause 1 (e) and (f), see page 5 of Appendix A. The words in the Note at the end of Part D of Schedule 1, and several other terms of the Conditions make it clear that there are a range of factors which will impact upon the amount to be paid. The Tribunal considers that the homeowner could, or should, have understood that the three matters referred to in the Note at the end of Part D of Schedule 1, and elsewhere in the Conditions, were within her control and that she would need advice from the architect and engineer when and if decisions were made which affected any of those factors.
The formal Conditions of Contract commence at page 13 in the contract and include relevant provisions Clauses 1, 2, 2A, 3 and 4, see pages 5 to 7 of Appendix A.
The Joint Obligations in Clause 2A are of particular relevance to the issues in these proceedings. It seems to the Tribunal that the homeowner’s role in the performance of these responsibilities would necessarily have involved reliance upon advice from the architect and engineer. Further the role of the engineer and the architect in the events which occurred was significant, particularly as to the generation of the additional works and amendments, for which they, to varying degrees, were responsible. Neither the architect nor the engineer gave evidence.
Clause 11 addresses delay, extensions of time for delay and delay costs, see page 8 of Appendix A.
Clause 13 and 14 are significant elements of the legal considerations in these proceedings and are set out on page 8 and 9 of Appendix A.
The terms of subclause 14(d) are of particular significance in relation to the claim by the homeowners.
The terms of Clause 17 dealing with payment, see pages 9 and 10 of Appendix A, are also critical.
Clause 26 of the Conditions deals with termination by the homeowners, see pages 11 and 12 of Appendix A, and is relied upon by her in her contention that the procedure adopted by her was a valid exercise of those provisions:
The last provision of the Conditions referred to is Clause 30, Estimate for Owner, which is at page 11 of Appendix A.

Consideration of Cost-Plus Contracts - Generally

As noted at [32] the HB Act contains provisions which relate to cost-plus contracts.
The cost-plus contract form has several characteristics which differentiate it from conventional lump sum contracts.
The most important feature is that the builder is remunerated on the basis of the actual cost incurred in the performance of the work required, (the Cost of Works) plus a lump sum fee, or an agreed percentage applied to the Cost of Works for the administration by the builder of the work performed. This means that the total amount payable is not known at the commencement of the work. A typical warning about this characteristic is set out at page 1 of Appendix A to this decision.
In some respects the amount paid to the builder is capped to what it costs and any overhead or profit is also limited to the lump sum, or percentage fee.
The next important characteristic is that the extent or character of the work to be performed may be amended by the owner by giving instructions to the builder to perform new, or different work under the contract. Consistently with the basis for remuneration for the performance of the original work, any additional or different work is remunerated on the same basis.
Although referred to as a ‘variation’ the additional or different work performed following an instruction to the builder to carry out the work under a cost-plus contract is more correctly described as an instruction to change the extent or character of the work required. The delivery of a written instruction to the builder by the owner, or by an agent or representative of the owner, to execute particular work which differs from that required under the contract is entirely consistent with the legal concept of a cost-plus contract. There is no agreement required on the part of the builder who must carry out the work as instructed. It follows that the calculation of the cost of the work which the builder has been instructed to perform should be made under the same process for the assessment of the cost of the work under the contract which the parties have agreed.
A significant aspect of cost-plus contracts is the recognition of the role of architects and engineers who, as representatives of the owners, prepare the original contract drawings, specifications and design. They are also authorised to give instructions, in that capacity, to increase or vary the work to be performed. The legal basis for this authority is that of an agent.
Such contracts may also recognise that a ‘conventional’ variation might be agreed as between the owner and the builder. A variation under a home building contract based on an agreement is different to a ‘variation’ generated by an instruction to change the scope or character of the work under a cost-plus the contract. Such variations, based upon an agreement, will generally involve changes which involve a choice by the owner as to whether to instruct the builder to proceed.

Application of the Home Building Act

Contracts for residential building work are regulated by the Home Building Act 1989 (the HB Act). The HB Act includes specific provisions in relation to cost-plus contracts. The first is section7(5) which prescribes the inclusion of a warning as contained in the contract. Section 8A(b) is the statutory equivalent of clause 17 (d) of the contract. Schedule 2 Part 1 clause (1)(2) is likewise the equivalent requirement in clause 1(c)(ii) of the contract that agreements to vary the contract are to be in writing.
As explained at [29] the contract differentiates between agreements to vary the contract as opposed to the introduction of changes to the extent or character of the work required by instructions to the builder.
The homeowner in these proceedings contends that the builder is in breach of certain provisions of the HB Act.
The Tribunal considers that it is appropriate to deal with the application of the HB Act initially on the basis of relevant conclusions by the Tribunal in later sections of this decision. The more complex legal issues involved require a sequenced legal analysis.
Apart from general allegations as to breaches of statutory warranties pursuant to section 18B of the HB Act which are addressed at [275], the homeowner relies upon certain provisions of the HB Act dealing with variations, progress claims and Budget Reports as referred to in the contract.
As to variations it is contended that the builder was in breach of sections 6(1), 7(1), 7A 7E and clause 1(2) of Part 1 of Schedule 2 of the HB Act because the variations were not in writing and signed by the parties and that the claims are not enforceable pursuant to sections 7A and 10(1) of the HB Act.
For the reasons set out at [156] to [161] the Tribunal concludes that the provisions of subclauses 14 (a), (b) and (d) permit the homeowner and the Owners representatives, the architect and the engineer, to give instructions to the builder in writing, or to supply post contractual drawings, either of which alters the work to be done under the contract. The Tribunal considers that it is appropriate that the consequential amended works are treated as, and the amount payable be assessed as, work under the contract. The instruction given, or the amended drawing supplied, to the builder, establishes a ‘variation’ and obliges the builder to proceed. This process is entirely different to the concept of a negotiated or agreed variation to a contract.
The Tribunal at [162] to ]167] concluded that the provisions of subclause 14(c) of the contract apply to variations implemented as a result of an agreement between the builder and the homeowner and involves an alternative means by which variations can be made to the work under the contract.
The homeowner also contends that the builder was in breach of section 8A(2)(b) of the HBA in that progress claims were not supported by invoices receipts or other documents as may be reasonably necessary to support the progress claim K.
The Tribunal understands that the homeowners have maintained that they have a right to challenge the completeness or accuracy of the progress claims. The Tribunal considered the terms of Clause 17 of the contract at [186] to [197]. The Tribunal concluded that there was no express term of the contract which, in contrast to other standard form cost-plus contracts, permitted a challenge or review of a progress claim. In any event the builder has provided evidence which satisfies the Tribunal that the progress claims were made in accordance with subclause 17 (d) of the contract, see [191] and [322]. The homeowner’s assertions in this respect are not supported by evidence which proves the essential element in the contention, being that the documents provided did not “as far as possible” support the claims.

Points of Claim and Defence

In the builder’s application HB 17/08049 the Amended Points of Claim includes:

(i)   in paragraphs 1 to 6 sets out a claim based on a failure to pay, an unpaid amount of $155,471.01 The homeowners had paid $90,000 against claims of $245,425.19.
(ii)   in paragraphs 7 and 8 sets out obligations and breaches by the homeowners.
(iii)   in paragraphs 9 and 10 reference is made to the notice of termination dated 4 November 2016 which is contended was made without a proper basis, as such was a repudiation accepted by the builder and claims as a result, in paragraphs 11 and 12, loss and damage.
(iv)   in paragraphs 13 and 14 sets out the a contention of estoppel based on a joint assumption as to communications about variations.
(v)   in paragraph 15 sets out an alternative restitutionary claim for payment of a fair remuneration for the work performed .

In HB 17/08049 the homeowners’ Amended Points of Defence includes:

(i)   admits paragraphs 1, 2and 3, and refers to terms of the contract as to variations being in writing, the form and content of claims for payment and the provision of a budget report in writing.
(ii)   admits that $90,000.00 had been paid and denies the remainder of paragraph 4.
(iii) in response to 4 and 5 sets out in paragraph 4 (a) to (k) an extensive series of breaches of the contract and the Home Building Act in relation to the form and content of progress payment claims.
(iv)   in the alternative, an allegation that builder over claimed and the claims were unreasonable and excessive.
(v)   denies paragraph 6 and repeats paragraph 4 (a) to (k).
(vi)   admits paragraph 7 but says clause 3(a) of the contract is inconsistent with the HBA and unenforceable to extent of inconsistency.
(vii)   denies paragraph 8 and in response to paragraph 9 repeats paragraph 4(a) to (k) and alleges an invalid suspension of work. Refers to termination events starting with breach notice. Further in the alternative, the failure to remedy the defaults amounted to a repudiation.
(viii)   denies paragraph 10, as to paragraph 11 repeats 4 (a) to (k) plus failure to mitigate and denies paragraph 12 repeating paragraph 11.
(ix) denies 13 and contends estoppel not available due to s 7A, 7E(1), 8A and 10 of HBA.
(x)   denies 14 and contends quantum meruit misconceived, and denies 15 and refers to entitlement to set-off.

In HB 17/19441 the homeowners application, the Points of Claim include:

(i)   paragraphs 1 to 3 recite procedural issues.
(ii)   paragraph 4 refers to the contract documentation and paragraph 5 refers to the requirement of writing in the contract and the HBA, to the necessity for documents supporting progress claims and to the requirement for a written monthly budget report.
(iii)   paragraph 6 pleads a breach of contract by demanding payment of progress claims which were not properly supported and included claims for non-compliant variations.
(iv)   paragraph 7 pleads a further breach by way of asserting that money was due for progress claims and non-compliant variations and invalidly suspending the Works.
(v)   paragraph 8 refers to a default notice under clause 26(a) of the contract and in paragraph 9 contends that the defaults were not remedied and the homeowners terminated the contract on 4 November 2016.
(vi)   paragraph 10 raises an alternative basis for termination that the failure to remedy the defaults evinced an intention not to be bound, as such a repudiation accepted by the homeowners.
(vii)   paragraphs 11 and 12 alleges breaches of statutory warranties and claims rectification costs, and paragraph 13 summarises the damages as being the cost to complete, defects rectification costs, loss of amenity, costs and interest.

In HB 17/19441 the builders Amended Points of Defence includes:

(i)   admits paragraph 1, 2 and 3 but disputes the right of the Second Cross Applicant to bring the application.
(ii)   in response to paragraph 4 admits the entry into the contract and otherwise does not admit.
(iii)   in response to paragraph 5 refers to the terms of the contract and l
(iv)    in response to paragraph 6:
(a)   denies demands for progress payments, repeats paragraph 5 of the Amended Points of Claim in HB 17/08049, contends that the progress claims were supported by documents as reasonably necessary, and even if they did not the obligation to pay under clause 17(a) of the contract remained,
(b)   repeats paragraph 13 of the Amended Points of Claim, and

(c) repeats paragraph 14 of the Amended Points of Claim’

(v)   in response to paragraph 7
(a)   repeats paragraph 6,
(b)   denies that the contract was improperly suspended.

(vi)   in response to paragraph 8 admits receipt of the notice and as to the allegations:
(a)   denies failing to proceed as required, and specifically;
denies failing to comply with regime for extensions and says that the whole of the delay arose during a valid suspension. Repeats paragraph 6 denies a failure to mitigate and repeats paragraph 7(b) denies failing to prepare monthly budget report, and says it did
(b)   refers to and repeats paragraph 7
(c)   denies being unable or unwilling to complete the works, and
(d)   denies that the demand that the builder remedy defaults had a proper basis, in particular:
that the amount to be paid be adjusted to $50,904.96
that fixed price quotes be obtained from subcontractors for all works
that the builder return to work and complete according to an agreed schedule accounting for the original date for completion.
that the builder undertake a costs reporting process over and above that required under the contract
that practical completion be achieved within 12 weeks of the notice, and
repeated the response in paragraph 6 (a) to (c)
(e)   denies that it was oblige to remedy the alleged defaults

(vii)   denies paragraph 9 and refers to the response in paragraph 8 and
(a)   denies the defaults in the notice or that it was obliged to remedy those defaults
(b)   denies that termination on 4 November 2016 was valid.
(c)   says that the purported termination evinced an intention not to be bound and was a repudiation, and
(d)   the repudiation was accepted and contract terminated on November 2016

(viii)   in response to paragraph 10 repeats paragraphs 8 & 9
(ix) in response to paragraph 11 repeats the terms of the contract and admits s18B of the HBA.
(x)    denies paragraph 12 and that the homeowners are entitled to the relief in paragraph 13
(xi)   in paragraph 14 pleads entitlement to set off
(xii)   contends homeowners not entitled to relief because did not give an opportunity to rectify defects and breaches of HBA.

The Tribunal notes that a central element in the homeowner’s case, in both proceedings, is the implication of a term which was addressed during submissions and was articulated in writing in paragraph 14 of the homeowners submissions dated 13 December 2017 as:

Implicit in any increase in the cost of works is the requirement for review of the work to be done and the costs thought to be payable for that work.

It is understood that the term is propounded because there is no express term to this effect. The Tribunal addresses this issue when consideration is given to the interpretation of clauses 14 and 17. Whilst proceedings in the Tribunal do not require strict pleading, the identification of an implied term which is central to a party’s case ought to be more fully identified.

Issues to be addressed

The Tribunal considers that the appropriate sequence in which the many complex issues should be addressed are:

1. The application of the Home Building Act 1989, see [32] to [41].

2.   Assessment of whether the items of work set out in the ‘variation’ estimates V1, V2 and V3 involve variations to the work to be performed.

2.   Consideration of the contractual terms as to variations and conclusions as to compliance and entitlement.

3.   Consideration of the terms as to progress claims and payment and conclusions as the parties actions.

4.   Consideration of the terms of the contract dealing with the provision of Budget Reports and conclusions as to compliance.

5.   Consideration of the circumstances of the suspension from either May or September 2016 and conclusions as to the consequences.

6.   Assessment of whether the builder was on breach as alleged in the clause 26 notice, or at common law.

7.   Assessment of whether the homeowners were in breach and conclusions as to the consequences.

8.   Consideration and conclusions on the issue of termination under the contract and at common law as asserted by the parties.

9,   Consideration of delay, extensions of time and delay costs.

10.   Assessment of damages.

Evidence

The evidence by way of Affidavits filed by both parties and the Exhibits to them whilst initially focussed on the separate applications to some extent addressed issues which are relevant to both proceedings. The following list of Affidavits and Exhibits is in the sequence of material filed by each of the parties. There were a total of approximately 1,400 pages in the Exhibits to the affidavits.

Evidence for Builder:

B1.   Affidavit of Rory Steinle-Davies dated 6 April 2017
Refers to Exhibit HB 1 pages 1 to 681
B2.   Affidavit of Rory Steinle-Davies of 4 August 2017
Refers to Exhibits HB 1 and HB 2 pages 1 to 26
B3.   Affidavit of Rory Steinle-Davies of 24 August 2017
Refers to Exhibits HB 1, HB 2 and HB 3 pages 1 to 482
B4.   Report of Helga Maynier, MBM dated 24 August 2017
B5.   Report of Warwick Mcgregor dated 12 October 2017 pages 1 to 37
B6.   Report of Helga Maynier, MBM dated 4 December 2017
The Conclave Report

Evidence for Homeowner

H1    Affidavit of Megan Nixon dated 21 May 2017 Refers to Exhibit MN 1 pages 1 to 184 and to Exhibit HB 1
H2.     Affidavit of Megan Nixon dated 9 June 2017
Refers to Exhibit MN 1 and MN 2 pages 1 to 184 and to Exhibit HB 1
H3   Affidavit of Megan Nixon dated 13 October 2017
Refers to Exhibit MN 1 and MN 2 pages 1 to 184 and to Exhibits HB 1, HB 2 and HB 3
H3.    Report of Tim Sherwood (Building Help) dated 12 July 2017 pages 1 to 53
H4.   Report of Tim Sherwood (Building Help) dated 4 December 2017 8 pages

Relevant Sequence of Events

Before considering the sequence of events which occurred and making relevant findings, the Tribunal considers that it is appropriate to note a number of factors which the Tribunal concludes, on the basis of all the evidence, were to a considerable degree the causes of, or contributed substantially to the problems which emerged and which are addressed in these proceedings.

Role of the architect and engineer

The first aspect is the fact that although the contract contemplated the appointment of a contract administrator this was not done. The homeowner decided that rather than appoint the architect, Sarah Blacker, as the contract administrator that Megan Nixon would “oversee” the contract. Having regard to the approach taken by the homeowner in the course of the “overseeing” role, and the clear misconceptions associated with that approach, it would seem that she did not have the benefit of competent professional advice in undertaking this role.
Notwithstanding the absence of an independent contact administrator, the architect Sarah Blacker (architect) and the engineer Greg Zaccone (engineer) were engaged by the homeowner to continue to advise upon design and construction issues. They, as the parties who prepared the drawings on which the contract was based, each of them remained under the contract as an “Owners’ representative”, see pages 8 & 9 of Appendix A. They also had a significant role in providing instructions to the builder in the form of emails and in the supply of amended drawings. As explained at [152] to [161] these instructions and amended drawings established ‘variations’ under the contract.
The contract contemplated that the architect and the engineer would issue instructions to the builder as to the work to be carried out for the homeowner, or would supply additional drawings which changed the extent or character of the work under the contract, and accordingly the amount which the homeowner were required to pay under the contract.
The role and responsibility of building professionals in such circumstances to provide advice to the homeowner is a factor which the Tribunal considers is of some importance. There is however no evidence tendered by the homeowner to indicate whether or not the architect and engineer provided any advice whatsoever as to the consequences of the numerous amendments and design refinements which were introduced by them.

Provisional Allowances

The second factor is that the estimated cost of construction was $443,179.00 (inc GST) and included $112,100 (inc GST), of provisional allowances, (ie 25% of the estimated total cost) which were to be subject to adjustment after the details of the work actually required was determined by the homeowner.
One critical aspect of the uncertain work covered by provisional allowances was the hydraulic design for which no documentation had been prepared prior to the commencement of construction, or formed part of the contract. The builder had included a “provisional” amount in the cost plan for hydraulic works. The engagement of a hydraulic consultant is a step a competent architect would recognise as necessary. The consequences of this absent advice and the problems which arose is relevant to a number of issues. The reason why this aspect of design was not considered necessary is unclear, as it ought to have been apparent. The assertion by the homeowner that in some way the builder was responsible for this problem is misconceived.
Other elements within the provisional sums in the Cost Plan were based on the detail in the drawings and specifications at the time the Cost Plan was prepared. One example is the single flight of stairs which was not detailed in the drawings. The builder allowed a provisional amount of $5,000. There is no evidence that this allowance was in any way insufficient. The design when completed was a quite complex design the tendered price for which was $14,280.

Engineering Assumption as to foundations

The next factor is that the structural engineering design of the extensions assumed that the footings for the extension could be located on rock foundations. The relevant note on engineering drawing S-02 required confirmation by the engineer of the suitability of the rock foundations when found. As noted at [74] & [75] no geotechnical investigation was conducted by, or on behalf of, the homeowner prior to the work commencing. The builder logically relied upon this assumption when calculating the initial Cost Plan.
The homeowner seems to suggest in her evidence that the builder should have assumed that the engineer’s assumption was wrong and the consequent problems which arose were attributable to the builder; the first of many misconceptions.
Clause 13 of the contract, see page 8 of Appendix A, contains a warranty on the part of the homeowner that the site is suitable for, and able to support the works, see page 8 of Appendix A to this decision. The consequence is that there is no basis for the homeowner’s contention that the builder was in some respect responsible to conclude that the engineer’s assumption was incorrect. If it was so obvious that a builder should reach such a conclusion, one could ask how manifestly obvious would it have been to an engineer. This is one of many instances where the homeowner seeks to attribute fault to the builder when the conditions of the contract and the application of logic would suggest otherwise.

Incomplete design and documentation

Further, on the basis of all the evidence the Tribunal concludes that the architectural and structural engineering drawings included in the contract, particularly the former, were not complete and did not represent what it was that the homeowner wished to have built. The particular changes and substantial difficulties caused thereby are referred to in following sections of this decision.
The contract contains two important warranties on the part of the homeowner. The first concerns a warranty as to the suitability of the site, see [60].
The second is a warranty under Clause 3 (a) as to the accuracy and correctness of the drawings and/or specifications, see page 7 of Appendix A. Under this warranty the homeowner assumed responsibility for the adequacy or otherwise of the documents included under the contract. In these proceedings the Tribunal has concluded that the deficiencies within, and the on-going process of design development and amendment of the design, is the primary cause of the difficulties which arose.
The Tribunal accepts that the homeowner wished to make an extension and alterations to an existing single storey semi-detached residence in North Sydney. For this purpose she engaged an architect and a structural engineer, no doubt with the reasonable expectation that the architectural and engineering documentation would be completed to a standard which reflected the majority of the necessary work to complete all that they wished to have built. As explained in the following considerations that expectation was misplaced.
The above factors, combined with what appears to the Tribunal to have been misconceptions by the homeowner as to the consequence of the engineer and architect issuing drawings and written instructions to change substantial parts of the work, are the real cause of the problems which emerged.
The Tribunal in order to assess the impact of the factor identified at [61] has carefully considered the documents under the contract and the extensive refinements and amendments which were made. The evidence by the builder in Ex B1 and B2 as to this aspect has been taken into account.
The starting point is the issue of how complete should the documentation be. The Tribunal considers that it is entirely appropriate to accept that the responsibility of a design professional is to ensure that before documentation is issued “for construction” the documentation should be substantially complete. If the documents are incomplete and require significant ongoing refinement, completion and the amendment of them, then they will cause the incurring of additional cost and delay which may be debilitating for the owners.
The project in this case was a modest extension and alterations to a single storey semi-detached residence. The task of preparing and completing the documentation before construction ought not to have been difficult. In this instance the evidence of the builder at paragraph 16 and 17 of Exhibit B1 as to the extent of post-commencement refinement was:

16 There were many architectural drawings provided to HBuild during the project associated with V1, V2, and V3 ……For the purposes of this affidavit I have prepared a table outlining each of those drawings which is at pages 91 to 93 of HB1. There were more than 100 architectural drawings in total.
17 For the purposes of this affidavit, I have coded the architectural drawings in the upper corner of each document to reference them back to the table. …..As is evident from the table there are up to four versions of each drawing.

In the course of considering the sequence of events the Tribunal often refers to the amendments introduced by the architect. The Tribunal concludes that the architectural drawings under the contract were seriously deficient. The project involved a limited extension to, and alteration of, a small semi-detached dwelling. Only 18 architectural drawings were included in the contract and yet over 100 architectural drawings were required during the performance of the work, including multiple amendments of many drawings. The Tribunal considers that this fact alone is clear evidence of the deficiency. The consequent lack of co-ordination with the structural engineering drawings exacerbated the deficiency.

Commencement of Work

Work on the site commenced on 4 April 2016. The first instruction to the builder from the engineer was received on the 4 April 2016 to the effect that the demolition of the existing roof structure could only be undertaken using hand tools and no machinery. This meant that the work was more labour intensive and logically more costly than might have been expected. One could reasonably assume that this consequence would be something about which the homeowner would have been advised by the engineer.
The initial work undertaken after demolition was to carry out excavations at the rear of the property to identify, or locate, the rock assumed to be existing. The level anticipated for rock, and the extent of excavation, depicted on the engineering and architectural drawings was only approximately a few hundred millimetres. The builder was instructed to excavate in order to locate rock.
The builder emailed the homeowner on 6 April 2016 advising that no bedrock had been found and suggesting that a site meeting should be conducted (see page 223 of HB3).
The builder was instructed to continue to excavate to locate the rock and concluded that rock was not located within 2.4 metres of ground level. It was, or ought to have been, obvious to the homeowner, and those advising her, that the investigative excavations were clearly not part of the work contemplated by the contract. In the circumstances this fact is something the professionals advising the homeowner would and should have advised her about.
Following a site meeting, the engineer agreed to arrange for a geotechnical engineer to carry out an inspection. It is surprising that no pre-construction investigation was conducted. There is nothing in the contract that requires the builder to assume anything in this respect beyond what is shown in the contract drawings. The homeowner’s evidence as to what she “knew” about the existence of fill rather than rock below ground level appears not to have been conveyed to the engineer who logically needed to be informed.
The geotechnical engineering report was provided to the builder on 22 April 2016 and amended structural engineering drawings were issued by the engineer on 25 April 2016. This aspect of the work was the first which the builder was to undertake. The instruction to the builder and the amended drawings were also provided to the homeowner and her husband. There is no evidence of any discussion between the engineer and the homeowner as to why the amendments were necessary.

First engineering amendments

The delivery of the amended engineering drawings by email from the engineer on 25 April 2016 which listed the amendments, was clearly a “written instruction from the …Owner’s representative” or “the supply of …post contract drawings” as referred to in the Note at the end of clause 14(a), see page 8-9 of Appendix A. As such the amendments involved the establishment of a ‘variation’. Further the changes were not introduced by the builder as the homeowner contends.
The amendments were identified as applying to both the ground floor rear extension, see drawing S-02, page 223 in HB 1, and to the framing for the first floor, see drawing S03, page 224 in HB 1. A careful examination of these drawings, assisted by the marking up on the noted pages, discloses a quite substantial degree of amendment.
It seems to the Tribunal that these examples, along with other changes which were made within the first few weeks of work, indicate that the structural engineering design as depicted in the contract drawings was clearly incomplete, at least. The extent of the refinements and amendments to structural engineering drawings numbered S-02 ground floor and S-03 first floor, from the contract version at pages 48 and 49 of HB 1, to the initial amendments of 25 April 2016 at pages 223 and 224 of HB 1, and the additional refinement of a new detail 3 on drawing 2.03 providing for the “Chamfer Detail”, see [91] & [105], are clear evidence of that fact. The extensive evidence of the builder as to how the problems were identified, solutions sought and the frequent refinement of the details of work required, reinforce that conclusion.
The Tribunal concludes that the suggestion by the homeowner that the changes to the structural engineering details were instigated or caused by the builder is clearly misconceived, see [128] to [131].
The problem caused by the amendment of the structural engineering design was compounded by the extensive refinements to, and prolonged completion of the architectural design.

The builder has identified, at paragraph 20 of Ex B1, the work required by the amendments to the structural engineering drawings involved in the 25 April 2016 instructions from the engineer as involving the following:

5 concrete piers down to rock including reinforcement cages;

Cantilevered concrete footing for new nib fire wall;

Additional reinforcement to thickenings;

Revised floor joist sizing from 45mm to 63mm LVL;

Revised floor joist spacing from 450cts to 350mm cts;

Removal of timber in existing brick, brickwork and grout;

Additional bolt added for WP1 to allow for condition of existing masonry.

Additional steel plates to B1 to bear on single skin of masonry.

Early advice about design development and amendments

Apart from the changes which were made to the structural engineering design of the footings, there were a number of other changes which were being made, particularly to the architectural drawings. The minutes of meeting No.1 dated 15 April 2016 identified six items of change which were to be addressed by a section 96 application to the Council to amend the development consent. The minutes indicate that the architectural drawings were in the process of substantial change. For this to be occurring less than two weeks after the commencement of construction is confirmation that the architectural and engineering documentation included in the contract could best be described as aspirational rather than definitive.
As with the investigative excavation, it should have been absolutely obvious to the homeowner, and those advising her, that the substantial amendments identified in the email and structural engineering drawings issued on 25 April 2016 involved work which was not contemplated as being necessary under the contract, including bored piers and substantial reinforced concrete footing sections. Further the Tribunal considers that the architect and the engineer had a professional duty to advise the homeowner as to why the amendments were necessary and what the consequences were. This may have required a degree of apology, however there is nothing in the evidence to indicate whether any advice was given.
The structural engineering drawings issued on 25 April 2016 also included the construction of a bored concrete pier to be installed as a support for the “new stair stringer”. There were at this stage no details of what this “new” item involved.

Progress Claim 1

On 13 May 2016 the builder submitted progress claim 1 which included the estimated costings for the additional works to the footings in a document referred to as V1. Such advice could only have been given as part of the builder’s obligation to provide Budget Reports, see [202] to [243]. As explained at [164] there was no expectation or obligation upon the builder to provide an estimation of the cost before proceeding with amendments introduced in instructions from, or amended drawings issued, by the architect or the engineer.
As noted at [71] and [83], the Tribunal considers that it ought to have been abundantly clear to the homeowner, and those advising her, that the additional work in the investigative excavations and the additional work in the modified structural engineering design including bored piers and reinforced concrete footings was work which was not contemplated by the contract.
The itemised estimate of the costing of the work dated 13 May 2016 (see page 229 of H1) identified the estimated costs at $22,845.20. The photographs at pages 372 to 383 of HB 1 show the extent of work. The document referred to as V1, possibly unnecessarily, included space for execution by the homeowner and the builder. For reasons referred to at [127] to [132] the homeowner did not execute the variation document.

On-going amendment of work under the contract.

The introduction of further individual amendments to the contract documents and the advice of possible changes continued. The sequence of some of these events is illustrated by the following events.
At a Meeting on 11 April 2016 the homeowner gave an instruction that the front stone wall was to be rebuilt. A design was to be provided by the homeowner. This instruction was noted in Item 1.3 of the minutes of the meeting, see page 669 of HB 1. The reason for this change to the work under the contract was that the existing sewer, under the side path of the residence was made of old clay pipes and needed to be replaced. The instruction was to the effect that the stone wall be rebuilt rather than excavating the side paths to access the sewer and put at risk the support of the existing old masonry wall. The builder was instructed that the existing sewer pipes were to be lined in-situ.
Next on 11 May 2016 the engineer delivered a detail for a new 10mm steel cleat connection to a beam alongside the stair opening, the TJ1 detail.
Then came the instruction from the engineer, also on 11 May 2016 to fabricate and install 19 new 1 metre long fabricated connections, “the Chamfer Detail”, see drawing S-03, page 306 in HB1. This work was necessary to remedy an “ambiguity” between the architectural and engineering drawings. The work was made necessary because the contract drawings required that in the same location the 240mm deep ceiling joists and 150mm rafters were to be supported on the same 100mm wide wall plate.
The Tribunal, having carefully considered what was contemplated under the contract architectural and engineering drawing in this location, concludes that some additional engineering detail was, or should have been, easily identified before construction work commenced. It ought to have been obvious to the homeowner, and those advising her that the additional work was necessary to correct an error in the documents and as such was not part of the work contemplated under the contract documents.
Another instruction was given by the engineer on 25 May 2016, to install a steel RHS beam to support the highlight window. There had been no detail of the work required in this location. This seems to have been necessary solely because the architect had not completed the details for the construction of the highlight window work in this location. Although the instruction was given there remained doubt as to whether the architect intended to also suspend a sliding door from the beam.
Part of the amendments introduced in the 25 April 2016 engineering drawings was the introduction of a cantilevered footing to support a nib wall which was to provide fire protection for the neighbouring property. The original documents did not include this wall, notwithstanding that the necessity to provide fire protection in the location should have been obvious. The construction detail for the construction of a fire rated nib wall was eventually confirmed by the homeowner by email dated 16 May 2016 as being brick. Again the Tribunal concludes that it was, or should have been obvious to the homeowner, and those advising her, that the work involved was necessary solely because of the late resolution of the design and as such clearly not part of the work contemplated under the contract.
Although it is not easily identified on the original drawings, it was proposed that the inner wall on the first floor level as part of the party wall was to be a lightweight timber framed wall. The builder’s cost plan had allowed for a light weight timber wall. The builder asked the homeowner as to what was required and was informed:

“This wall is going to be brick. This is a concession to my neighbour even after explaining the cost, acoustic properties and the reduced wall thickness in using a single timber wall between existing buildings.”

On 8 May 2016 the homeowner issued instructions to the builder to proceed with the new brickwork to the part wall including the following:

NB – we will NOT be applying for a s96 for landscaping, steps, deck, lightweight party wall system.
The brick party wall seems like the most practical to avoid s96 and keep moving and we can offer this to the neighbours as a concession, also we would not be gaining the benefits expected of some battening and plasterboard required anyway. The brick party wall is already approved and we have the engineering for this so will proceed as approved.
We do not want to trigger more anxiety with neighbours as we are meeting with then on Wednesday or Thursday – just say you are waiting on instructions from us.

This instruction was referred to in a number of emails from the homeowner which, the Tribunal accepts as being written recognition and confirmation of the oral instruction, see pages 303, 556, and 578 of HB1
The additional cost of the work involved, described as a concession, clearly involved work of a nature which was not as contemplated under contract and as such the instruction itself comprised the establishment of a ‘variation’ under the contract, see clause 14(a).

Introduction of box gutter design.

The contract documentation did not provide any detail whatsoever of how the first floor roof drainage was to be addressed, apart from a note on architectural drawing number A.4.06 “ box gutter, refer hydraulic engineers details for size”. The drawing seems to assume a box gutter no deeper than the thickness of the battens under the roof sheeting. This would be impossible. The architect was asked, but could not provide a solution, apart from suggesting the installation of an external gutter which would require an amendment to the development consent, see email at page 571 of HB 1.
As noted elsewhere in this decision no consideration had been given in the contract documentation to any aspect of hydraulic drainage design. The hydraulic drawings for the stormwater drainage of the roof were not provided until 3 July 2016. The issue of what might be installed as a box gutter was raised by the homeowner with the builder who was asked to design a box gutter and provide advice as to the costs. The homeowner, as in many instances, seems to attribute the absence of an hydraulic design to the builder.
The builder prepared a sketch which included a suggested modification of the roof framing and costings for galvanised and stainless steel gutters. By email dated 7 June 2016 the homeowner advised that the engineer would provide a detail of the roof framing and the box gutter and advised that the box gutter would be made from stainless steel (cost $2,200 for the gutter).
As with all other items referred to it was, or should have been obvious to the homeowner, and those advising her, that what was being proposed by way of a stainless steel box gutter, and the amendment of the roof framing to accommodate it, was work that was not contemplated under the contract. Further it ought to have been obvious that the late introduction of a stainless steel box gutter and the redesigned roof framing would cause delay and additional costs. The issuing of instructions for this work, established a ‘variation’ under subclauses 14(a) and (b).

Additional light fittings

Amendments were made to the architectural drawings, including amendments to the location and type of light fittings in various locations. The supply of these amended drawings involved the establishment of a ‘variation’.

Progress Claim 2 – including V2

On 15 June 2016 the builder delivered Progress Claim 2, see pages 234 to 302 of HB 1 to the homeowner which included at page 237 estimates of the cost of the ‘variations’ arising from the circumstances in [88] to [103] above which is referred to a V2.. The email which attached the claim included the following:

Based on the information to date there is still no box gutter design? What do you wish to happen in this area!
As instructed HBuild has installed piers down to bed rock, approximately one weeks additional work. As instructed, HBuild has continued the parting wall up in brickwork to roof height, approximately two weeks additional work..
Additionally, we have now received our third bathroom design and also the third revision on steel for this project.
This designing as we are going is affecting both time and costs for the project. The rest of the construction process has been disrupted severely by these changes in design. It is a dynamic process but lack of responsibility by your design team creating an ad-hoc process is leaving many areas still unresolved.

There were 10 Items in V2. Item 1 was the estimated cost of fabricating and installing the 19 “Chamfer details” on the 240mm deep first floor ceiling beams, see [91], in which the Tribunal considered this item. The Tribunal concludes that the instruction by the engineer on 11 May 2016 and the delivery of amended drawings issued on 14 June 2016 established a ‘variation’. The builder included advice as to the estimated cost in V2.
Item 2 concerned the estimated cost of the galvanised steel RHS beam, see [93], which was introduced by the email instruction from the engineer, the clear establishment of a ‘variation’.
Item 3 concerned an estimate for an allocation of additional disposal and tip fees incurred as a consequence of the additional works involved in the other ‘variation’ works under V2. The Tribunal accepts that it is reasonable to expect that such ancillary costs might be associated with building variations introduced by instructions and amended drawings. This is of course in the context of providing advice in a Budget Report of the estimated cost of ‘variations’. The amount paid by the homeowner for established ‘variations’ is only assessed by reference to the actual Cost of Works.
Item 4 relates to the change to the front garden walls to be carried out at the direction of the homeowner, such directions being acknowledged in writing, see [89]. This is one item that would have involved some costs estimated under Item 3.
Item 5 involves an estimate of the costs of building the fire-rated nib wall over two stories. This item was introduced initially under the 25 April 2016 structural amendment drawings and subsequent written confirmation that the wall was to be brick, see [94]. The amended drawing established a ‘variation’.
Item 6 concerns the estimated cost of building a leaf of masonry to the party wall between the residence and the neighbouring semi-detached residence rather that the contractual lightweight timber wall. See [95] to [98]. Again this clearly involves a ‘variation’ established by the homeowner’s instruction and subsequent confirmation in writing.
Item 7 includes the estimate of the cost associated with the late detailing and amendment to the timber frame to accommodate a stainless steel box gutter. There can be no doubt that this item, initiated by the homeowner, involves the establishment of a ‘variation’.
Item 8 concerns an estimate of the cost to supply and install additional light fittings included in the process of design development by the architect. This item epitomises what is involved in the process of the builder providing estimates of the additional cost of ‘variations’ as part of Budget Reports, as opposed to the process under which a calculation is made of the actual cost incurred in the performance of the work under the contract including ‘variations’. In this instance the builder, due to circumstance, did not supply light fittings and has not claimed payment for them.
The misdirected attack by the homeowner upon the estimates by the builder for ‘variation’ work has permeated the course of work under the contract and these proceedings.
Item 9 and the challenge to it exemplifies the above noted misconceptions. The builder, as it was required to do as part of Budget Reports, gave advice in the form of estimates of the extra costs to perform the additional work, but nevertheless was only ever entitled to be paid the Cost of Works incurred. The allowance, in Item 9, for the additional cost of a carpenter as a result of the scope of work to be constructed under the contract, being increased by the ‘variations’ listed in V2 is logical. Clearly extra labour would be required. The estimate by the builder is a simple acknowledgement of the consequence of the problems explained by the builder in the email of 15 June 2016, see [104].
The estimates set out in V2 were provided to the homeowner on 15 June 2016 along with progress claim 2.

Further engineering amendments

Further structural engineering details were introduced in a further amended version of drawing S-03 dated 14 June 2016. The additional work was associated with the final detailing of the roof frame design, including the new stainless steel box gutter, and included:

4 Additional 90 X 90 hardwood posts

2 additional steel beams 150 PCF

Additional timber blocking to steel beam flanges and roof batons.

Steel windows

In mid-June 2016 the homeowner provided to the builder a quotation for the supply of three steel framed fire rated windows and instructed the builder to place an order with the supplier, Holland Fire Doors. The cost of these three windows was over $11,000. The contract only provided for powder coated aluminium windows in the relevant locations. The builder obtained a revised quotation accounting for the actual construction of the openings and placed the order. See HB 1 pages 634 to 640. Timber reveals were needed to achieve the required fire-rating as the particular windows did not bridge the cavity in the brickwork. Both elements involved work which was not contemplated by the contract documents.
On 28 May 2016 the homeowner instructed the builder to recess a hot water unit rather than placing it in the pathway. See pages 630 to 633 of HB 1. This was included as Item 5 in V3. The builder complied with the instruction.

Progress Claim 3 including V3.

On 4 July 2016 the builder delivered progress claim 3 to the homeowner, see pages 308 to 355 of HB 1. At page 323 of HB1 in V3 the builder provided estimates and costings for the additional work included. As with the estimates for changes to the work in V1 and V2 provision was made for execution by the homeowner and the builder.
There were 5 items included in V3. Item 1 concerned the instruction from the engineer to construct additional steel beams required to support the new stainless steel box gutter.
Item 2 included the structural engineering amendments to the roof frame, see [116]. Item 3 was for the additional cost of the supply and installation of fire-rated steel windows, rather than the powder coated aluminium windows included under the contract. An abundantly obvious ‘variation’ to the work required to be performed under the contract established by the instruction to proceed.
Likewise Item 4 involving the additional timber reveals was a clear example of work which was necessary but which differed from what was identified under the contract.
Item 5 concerned the cost of recessing a hot water unit. As with all other ‘variations’ a quite clear item of additional or different work required under an instruction from the homeowner.
The estimates of the cost of the additional work referred to at [116] to [118], were delivered to the homeowner on 4 July 2016 in V3.
The builder did not supply and install the timber reveals under item 4 in V3 and accordingly was not entitled to be paid for that work. The steel windows were ordered and supplied but not delivered to the site.

Homeowner’s position as to ‘variations’

The homeowner in these proceedings disputes that the items of additional or amended work included in V1, V2 and V3 constitute additional work under the contract. This is despite there being no evidence supporting the proposition that somewhere in the contract documents the work was identified or could have been assumed to be there.
The homeowner also asserts that the builder is not entitled to receive payment because the ‘variations’ were not in writing and signed by the homeowner.
Further in paragraph 11 of Exhibit H1 the homeowner states that the builder:

“.. requested numerous changes to the architectural and engineering documentation as the Works progressed.

In paragraph 13 of Exhibit H1 the homeowner states:

“The alleged variations in documents V1, V2, and V3 were all requested and driven by Rory and Huw, with the exception of Item 5 of V3 which was the recessed hot water unit that was requested by me. Rory and Huw requested all the other items in V1, V2 and V3 to increase the scope of Works under the Contract

In relation to all of V1, V2 and V3 the homeowner states:

“I did not approve or sign document….”

At paragraph of Ex H3 in response to an affidavit by the builder in relation to the provision of amended drawings and instructions to make changes on the homeowner’s behalf, the homeowner states:

“I say that the revised structural drawings were organised at the request of the builder.”

There is no evidence that the homeowner at any time prior to the termination of the contract said anything to the builder indicating that she would not sign the documents and would not pay for the ‘variations’ for the reasons expressed in [128] to [131] or that the documents had not been signed by her.
The homeowner did request that the builder provide supporting documentation in relation the progress claim 1 delivered on 13 May 2016 and the items in V1. She did not however assert that the additional work involved in V1 was work contemplated under the contract.
There is on the other hand extensive evidence that proves that the homeowner knew that substantial changes were being made to the work to be performed under the contract, and that there were additional costs to be paid.
The homeowner engaged a consultant, Tim Sherwood, who provided alternative estimations of the items in V1. The consultant, in his advice did not assert that any of the items did not involve additional work. The report of Mr Sherwood in these proceedings, Ex H3, dated 12 July 2017 also does not suggest that any of the items in V1, V2, and V3 do not involve additional or amended work which altered the work to be performed under the contract.
The Tribunal is troubled by the misconceptions disclosed in the homeowner’s evidence set out above at [128] to [131]. It is further of concern that they seem to have been articulated for the first time in the Affidavits served in these proceedings.
The Tribunal considers that competent architectural, engineering and building professionals would, and should, have advised the homeowner as to why the extensive amendments and refinements were being made by them and what the consequences were for the homeowner. The principal consequence was that the work involved in ‘variations’ established by instructions became work under the contract and were treated, and paid for, as such. Another consequence was that if the builder did provide estimates of the costs of ‘variations’ they were not “quotations” which, under a lump sum contract might be accepted and the amount thereof added to the contract sum. There is no evidence as to any advice from the architect and the engineer.
The Tribunal further considers that on a straightforward reading of the relevant terms of the contract a reasonably articulate non-professional person could not have drawn from the terms of the contract the interpretation propounded by the homeowner, see clause 14 at page 8-9 of Appendix A..

Conclusion as to V1, V2 and V3.

The Tribunal concludes that the homeowner knew, or ought to have known, that each and every change instigated by the engineer, the architect and herself, included in V1, V2 and V3 was a ‘variation’ established under clause 14 (a) and (b) of the contact and further knew that additional costs had been and would be incurred by the builder and would be part of the Cost of Works and payable by her.
The issue of concern is that the homeowner did not sign the documents V1, V2 or V3. The Tribunal, in the light of the conclusions at [139], has to consider and determine what actually occurred in relation to the acceptance by the homeowner of the ‘variations’.
The issue is important because the homeowner in these proceedings relies upon the absence of her signature to avoid her obligation to pay the Cost of Works associated with the established ‘variations’. That is having failed and apparently refused to execute an unnecessary acknowledgement of the established ‘variations’ when she knew that the builder had, and would, incur substantial costs she wishes to take advantage of that conduct.
An unmeritorious position to say the least.

Waiver of right to rely on signature by the homeowner

The builder submits that clause 14(c) and Schedule 2, Part 1, clause 1(2) of the HB Act are for the benefit of the builder because they give certainty both in terms of the work to be performed and in the terms of the capacity of the homeowner to pay for the varied work.
Further the fact that a variation was not signed by the homeowner does not negate the existence of an agreement between the parties in relation to the variation. Because clause 14(c) is for the builder’s benefit, it is for the builder to waive its requirements there being no non-waiver clause in the contract. Reference is made to Reveille Independent Llc v Anotech International (UK) Ltd [2016] EWCA Civ 443.
The submission is based upon the proposition that the requirement for a variation under an agreement to be in writing and signed by both parties is for the benefit of the builder. The Tribunal considers that the statutory and contractual requirement for a variation initiated by agreement, is not solely for the benefit of the builder. The contractual and legislative unenforceability by the builder, of an agreement for a variation that is not in writing signed by both parties suggests that the requirement is for the benefit of the owner.
The Tribunal accepts that there may be circumstances where it could be shown that the owner should be found to have waived the right to the benefit of the provisions, particularly if an element of unconscionability was present. For example when the owner deliberately avoided providing a signature in order to gain a benefit. Such situations are however more often addressed by the raising of a conventional estoppel.
The Tribunal is reluctant to find that the absence of a signature by the owner could be regarded as a waiver on the part of a builder.

Builder‘s Estoppel Submission

The builder further submits that the process of establishing a ‘variation’ by means of instructions in writing by an Owners representative or the supply of amending drawings can and should be distinguished from an independent agreement between the builder and the homeowner to vary the work under the contract..
The builder also relies upon an estoppel arising from the common understanding as to the procedural informality which would and did apply to the introduction or instructions for changes to the work required. .
The Tribunal for the reasons explained at [152] to [161], accepts the submissions of the builder as to interpretation and application of clause 14, in particular as to the distinction between the contractual and legislative requirements for variations initiated under an agreement, and a change established by an instruction to the builder to the perform additional or different to that required under the contract
Accordingly there is no necessity to consider whether there was a common understanding between the parties which effected a conventional estoppel.

Consideration – Variations

The provisions of clause 14 are set out at pages 8-9 of Appendix A.

Interpretation of Clause 14

There are two means by which variations are addressed in clause 14. The first, in subclauses 14(a) and (b), is the establishment of a ‘variation’ partly by a process of agency. An Owner or an Owner’s representative may give written instructions to the builder, or the builder may be supplied with amending documents. In these circumstances the agency and the instruction authenticates the Owner’s desire or need to vary the work under the contract. There is no necessity for evidence of the owner’s consent by a signature because the Owner is entitled to give instructions under clause 14(a), and the Owner’s representative has authority as the owner’s agent to instruct a change. There is no agreement required for the ‘variation’ to be established.
The critical aspect of this clause is the section at the end of subclause (a) which refers to a ‘variation’ being established by:

written instructions from the Owner or the Owner’s representative.. or
the supply to the builder of post contract details such as drawings
which alters the work done, the work to be done or requires adjustments to an existing situation or the work which was otherwise expected to be done.

The Owner’s representative is the party who caused the contract drawings to be created (eg. Architect, Building Designer). The structural engineering drawings S-01, S-02, S-03, S-04 and S-05 all dated 16 January 2016 were prepared by GZ consulting engineers (engineer). The architectural drawings 1.00, 2.00, 2.01, 3.00, 4.01, 4.05, 4.06. 6.05, 6.10, 6.21, 6.25, 6.30, 6.31, 6.32, 6.35, 8.00, 8.01, 8.02 (18 drawings) were all prepared by the architect.

Variation “established” by instructions

The provisions of clause 14 make it clear that if the builder is instructed to carry out work ,or is supplied with drawings which alter the work in the various ways set out in clause 14 (a) then a ‘variation’ is established. If the meaning of the word “establish” was uncertain, which the Tribunal does not accept that it is, then the Macquarie Dictionary definition might assist providing as it does:

“to show to be valid or well grounded; prove” or
“to set up or bring about”

Clause 1 (c) of the contract, see page 5 of Appendix A to this decision, states that the scope of work under the contract is defined by the whole of the plans and specifications including any changes made to those documents. This is consistent with the notion that work ordered under an instruction or amended drawing is part of the work under the contract and not a conventional variation made under an agreement.
Clause 1(c)(ii) of the contract and the legislative equivalent in Schedule 2, Part 1 clause (2), applies only to an agreement between the owner and the builder to vary the contract, the plans etc,.
The fundamental characteristic of a cost – plus contract is that a ‘variation’ occurs when an alteration is made to the work contemplated under the contract. Such a ‘variation’ is different in character to a variation created by agreement between the owner and the builder, as occurs under a fixed price contract. A ‘variation’ under a cost plus contract once established simply adds to the work to be performed under the contact.
The provisions of clause 14 (d) make it clear that there is no expectation or requirement that there be an agreement as to the cost of a ‘variation’ established by a written instruction because the work required under the ‘variation’ is to be executed as if it was work to be performed under the contract and valued as such. The builder is obliged to perform the work and the homeowner pays what it actually costs.
The Tribunal considers that the Owner’ representatives who initiate ‘variations’ by instructions to the builder have a duty to advise the Owner of the consequences of their instructions. There is no evidence as to whether any advice was given. The Tribunal considers that having regard to the express terms of subclauses 14 (a) and (b) the builder could reasonably assume that such advise had been provide.

Variations by agreement

A difference is drawn for variations concluded by an agreement between the owner and the builder, which is addressed in subclause 14 (c).
Clause 14 (c) deals with a separate and more conventional approach to variations which occurs when the owner and the builder reach an agreement independently from a ‘variation’ established under the process in subclauses 14 (a) and (b).
There is no express provision in clause 14 (a) or (b) that requires that of an estimate of the possible cost of a ‘variation’ be provided by the builder. The ‘variation’ process is completed when the builder consents to carry out the extra work, usually by proceeding with the work, as the builder did in this instance. The requirement to advise as to possible costs is only addressed elsewhere in the contract under the provision of Budget Reports.
A further distinction between the two methods is illustrated by the fact that for a ‘variation’ “established” by a written instruction or amending drawing the definition of the actual varied work is as disclosed in the instruction or drawing. A variation by agreement on the other hand must detail in writing what is involved. This requirement ensures that there is some precision in a written definition of the work which might not be detailed in drawings.
The absence of any procedure for valuing a variation by agreement under subclause 14 (c) indicates that under this cost plus contract the valuation of all variation work occurs under the same process of valuing the Cost of Work under the contract. This is a significant provision which makes it clear that a variation concluded under an agreement, whilst being defined, and the agreement evidenced by signatures there is no requirement that the agreement include the amount to be paid. Subclause 14 (d) requires that any such variation is valued as work under the contract.
Significantly there is no obligation upon the builder under the contract to provide an estimate of the possible costs for ‘variations’. The only like obligation is that in clauses 1 (e) and (f) dealing with Budget reports, see [202] to 243].

Comparison between the two means by which “variations” occur

The Tribunal considers that having regard to the importance of the different means for the introduction of variations some consideration should be given to other differences between the two approaches.
Many instructions by Owner’s representatives, usually, as in this matter, the architect and engineer, will concern work which is necessary and about which there is no option as to whether the work should proceed. Once the instruction is given, or the amending drawing is issued, the builder must proceed with the changed work, or at least cannot unreasonably refuse to do so.
The homeowner in these proceedings contends that notwithstanding that an instruction in writing has been given, or an amending drawing has been issued, the effect of which is an instruction to proceed with the work, there remains some discretion or right of review on the part of the homeowner as to whether the work should be performed.
Such a proposition is clearly contrary to the express terms of clause 14 as explained in the preceding paragraphs. The homeowner contends that such a right arises under an implied term to the affect that the builder must provide a quotation or an estimate for a ‘variation’ which arises from an instruction from the homeowner or the architect or engineer as an Owner’s representative.
The contention goes further and maintains that under the undefined implied term the homeowner must consent to the work proceeding under a ‘variation’ established by an instruction from the architect or engineer to change the work under the contract, or by the delivery by them of amending drawings. The Tribunal rejects this contention.
The express terms of clause 14 are entirely inconsistent with such an implied term.
The law in relation to the implication of a term under a contract includes a condition that a term cannot be implied if it is contrary to the express terms of the contract.
The Tribunal concludes that no such term should be implied.
The primary causes of the need to amend the work required as explained at [59] and [61] to [69] were matters for which the architect or the engineer were responsible. In most instances, there was no option for the homeowner other than to proceed. The architect and the engineer as the instigators of the changes would be expected to advise the homeowner accordingly.
A significant consideration in these proceedings is that virtually all of the ‘variations’ in these proceedings arose in circumstances where there was no question as to whether the work involved was optional. The amendments primarily arose as a consequence of erroneous assumptions on which the design was based, or an incomplete design of some part of the work which once completed defined what was required. The disappointment on the part of the homeowner about the increase in costs due to such ‘variations’ is understandable but none of such ‘variations’ arose as a result of an agreement.
In many respects the builder was nothing more than the bearer of bad tidings, and definitely not the source of the problem.
The submission by the homeowner that the builder has some implied obligation, before proceeding with work that it has been instructed to perform, to provide a ”price” for that performance is nonsense. There is no space for an agreement for the performance of work which the builder has been instructed to perform.
The undoubted targets for criticism by the homeowner of the cost involved in the post contract changes arising from incorrect assumptions in the design and the changes arising from the process of completing the design are those responsible for the design. The homeowner’s assertions that there is some implied obligation upon the builder to perform some form of a rescue mission in these circumstances is without any legal foundation.
The contract recognises in subclause 14 (c) that there may be variations, the performance of which is optional, in the sense that the homeowner has a choice as to whether to proceed with the change or not. An example might be to change a selection of a finish from tiles to marble. In these circumstances the decision to proceed might be conditioned upon a choice made by the homeowner on the basis of advice as to the consequences of the choice from those engaged to advise and an estimate of the possible cost by the builder.
There will, as occurred in this matter, be changes made to complete errors or incorrect assumptions in the design, and additional work which is necessary because the design was incomplete. In a sense there is no choice as to whether or not to proceed with the work involved because it is necessary to complete what is required.
Having regard to the relevant characteristic of this cost-plus contract, as explained, the Tribunal concludes that the items in V1, V2, and V3 can be categorised as follows:

A - Changes about which there was no option as to whether to proceed:
Changes arising from incorrect design assumptions:
V1, Items 1, 2, 3, and 7. V2, Items 1, 5.
Changes arising from incomplete design or incomplete scope of work:
V1, Items 4 and 6. V2, Items 2, 7, and 8. V3, Items 1 and 2
Incidental necessary additional work:
V1, Items 5, 8 and 9. V2, Items 3, 9 and 10
B - Changes where homeowner might have had an option as to proceeding. Changes initiated by homeowner instructions
V2, Item 4 and 6. V3 Items 3, 4 and 5

The Tribunal concludes that for virtually all items in V1, V2, and V3 the issuing of the instructions by the architect, the engineer, and the supply by them of amending drawings, the builder was required to proceed without providing an estimate of the possible costs for the work concerned.
Further the few ‘variations’ which arose under written instructions from the homeowner to the builder were also variations which were established under subclauses 14 (a) and (b) and were not variations to which subclause 14 (c) applied.

Consideration – Payment

Clause 17 of the contract deals with payment and is set out at pages 9-10 of Appendix A to this decision. The Cost of the Works is defined in Part A of Schedule 1 to the contract, set out at page 3 of Appendix A to this decision.
The fundamental basis of a cost-plus contract is that the homeowner is obliged to pay the cost to perform the work which is required under the contract. Payment must be made under progress payments for the cost incurred in a particular period.

Consideration – Termination 5 CONCLUSION

The terms of the Notice of Default included allegations of breach and required remedies which were not based upon the terms of the contract.
The builder was not in breach of contract in the manner alleged by the homeowner in the particulars and required remedies in the Notice.
The homeowner was accordingly not entitled to terminate the contract in reliance upon clause 26 of the contract.
The issuing of the Notice of Termination by the homeowner dated 4 November 2016 constituted a repudiation of the contract by the homeowner.
Further the builder was not in breach of the contract as alleged by the homeowner and accordingly had not repudiated the contract.
The homeowner was not entitled to terminate the contract at common law.
The contract was terminated by the notice of termination dated 8 November 2016, delivered by the builder to the homeowner.

Consideration – Termination 6 Consequences

The builder claims that as a consequence of the termination by its acceptance of the homeowners repudiation it is entitled, in the alternative to its claim under the contract for payment of unpaid progress claims along with interest, to elect to pursue a claim in quantum meruit.
The builder also claims an amount for lost profit which it would have received under the terminated contract.
The homeowner disputes the builder’s claimed entitlement to an assessment based on a quantum meruit. That is a reasonable sum for the value of the work performed.
The contract in this instance was a cost-plus contract. Under the contract the builder is entitled to receive the Cost of Works as defined in Schedule 1 along with a fee based on a percentage of the value of the work performed, the percentage being 10%. The fee is to cover the cost of administration of the contract by the builder, overhead and profit. The fixing of a percentage is presumably calculated to provide a reasonable return to the builder for the activities other than the direct Cost of Works.
The Tribunal considers that the method of remuneration of the builder under a cost-plus contract, equates reasonably closely with what could be described as reasonable remuneration for the work performed. This is so because the only element of risk for the contractor is in the cost of the work for which the fee is paid. Assuming that the fee is set to ensure a reasonable recovery for the work involved then the overall equivalence can be understood.
The Tribunal concludes that the builder is entitled to receive what should have been paid in accordance with the contract along with interest under the terms of the contract rather than by means of an assessment under a quantum meruit. The builder is also entitled to recover an amount assessed as the profit which might have been generated had the contract not been terminated.

Assessment of Damages

The amount included in the progress claims is the amount of the Cost of Works performed in the period since the last progress claim. It does not include the estimated value of any ‘variation’ established by an instruction to the builder. The progress claims only include the Cost of Works associated with the work under the contract including work added to the contractual scope of work by ‘variations’.
The focus upon the amounts suggested, in estimates, as being possibly incurred as part of the Cost of Works has been misplaced.
There is no evidence that the amounts included in the progress claims were other than in accordance with the contract, and the Tribunal concluded, see [191] that the amounts claim were as required under subclause 17 (d). The homeowners have not identified a single amount which ought not have been included.
The builders contractual claim is based firstly on the amount claimed in Progress Claim 10 dated 15 November 2016, seven days after the date of termination. The amount claimed for the project to date was $245,471.01, and allowing for payments of $90,000.01 the amount due was $155,471.01.
The claim included an amount for interest on the unpaid claims, delay costs for 17.5 weeks and the fee or builder’s margin of 10%.
Pursuant to subclause 17(e) payment was to be made within 5 days of submission, that is by 20 November 2016 and interest pursuant to clause (e) in Schedule 2 was 15% pa.
The builder also claims for profit that the completion of the project would have generated for the builder. The calculation of lost profits is a task often undertaken by forensic accountants and is not without some difficulty.
The Tribunal does not accept that the amount of lost profit should be based upon the amounts paid under the contract with the completing contractor.
The profit for the builder would be a proportion of the fee of 10% of the Cost of Works and could be based on the most recent estimated cost to complete. The Tribunal understands that the most recent estimated cost to complete was set out in the Cost Assessment dated 6 October 2016 of $490,469.83.
The Builders margin/fee, if the project was completed within that estimated total, would be in the order of $50,000. In Progress Claim 10 the amount for the builders margin/fee was approximately $20,000. Accordingly if the above assumptions were fulfilled the total amount receivable would be approximately $30,000. Assuming that the profit component in the builder’s margin/fee was 15% the possible profit derived from completing the project would be Less than $5,000.00. The history of this project up until termination suggests that the ultimate Cost of Works would be considerably more than that estimated in October and the potential profit might increase.
The Tribunal considers that an allowance of $5,000 for lost profit would be reasonable in all the circumstances.
The amount for lost profit should be added to the amount payable as at 20 November 2016 is $155,471.00 + $5,000 = $160,471.00
The calculation of interest from 20 November 2016 to 30 April 2018 is

20.11.16 to 7.05.18 – 59 days.
Interest on $160,471.01 at 15% pa = $24,070.65
$24,070.65 / 365 = $65.94
594 x $65.94 = $38,970.54

The builder is entitled to $160,471.00

Interest under contract rate $39,168.36
$199,639.36

Orders

In HB 17/08049 the homeowner is to pay to the builder $199,639.36 immediately.
HB 17/19441 is dismissed.
Any Application concerning costs in proceedings HB 17/08049 and HB 17/19441 is to file in the Tribunal along with evidence in support of the Application and Submissions on or before 28 May 2018
Any Response to the Application is to be filed in the Tribunal along with evidence in support and Submissions on or before 18 June 2018
The Submissions are to address whether the Application should be determined on the papers.

Ian Bailey AM SC

Senior Member

Civil and Administrative Tribunal of New South Wales

7 May 2018

**********

Appendix A to the Decision of the Tribunal in HB 17/08049 and HB 17 19441
WARNING
FOR THE PURPOSE OF THE HOME BUILDING ACT 1989
The Contract Sum or the amount to be paid by the Owner is not known as at the date of contract
The amount of money payable to the Builder by the Owner is dependent upon the costs incurred by or payable by the Builder in carrying out work under the Contract.
(Owner to Initial)
Any figure nominated or stated below is only an estimate and is provided specifically subject to the terms of Clause 30.
(Owner to Initial)
$443,179.00……
Estimated Cost of Works and Fees (incl of GST) pursuant to Schedule 1 Parts A and B
The amount to be paid by the Owner is and will be determined by reference to the contract and the work done by the Builder. This will be influenced by and subject to adjustment by reason of such things as:
Discrepancy in Drawings and Specification; Refer to Clause 4.
Availability of Materials, Refer to Clause 9.
Delays and Extensions of time; Refer to Schedule 1 Part B (a)(iii) and Clause 11.
Compliance with Requirements of Local and Other Authorities; Refer to Clause 12.
Site Investigations, Refer to Clause 13.
Variations to the works; Refer to Clause 14.
Insurance responsibilities, Refer to Clause 16.
Interest on Late Payments, Refer to Clauses 17(g) and 21(c).
Impact of GST, Refer to Schedule 1, Part C and Clause 18.
Suspension of works; Refer to Clause 19.
Costs of the works as set out in the Contract; Refer to Schedule 1.
Payment of Costs and/or Fees payable to the Builder; Refer to Schedule 1 and Clause 17.
The work actually done being different to the work contemplated at the time of signing the contract. For example cost differences arising from details provided or choices made after the contract is signed.
Correction of Defects to work, other than new work undertaken wholly by the Builder. The Builder is to correct defects to its work at its own cost. Refer to Clauses 20 and 22.

This is page 1 of the contract, it specifically forms part of the contract document.
Owner ………..………..Builder……………...
IT IS AGREED THAT:
Please note that this part is to be manually completed by hand when contract is printed
(1)   The Builder will subject to the contract terms and conditions, for the cost of the works (see Schedule 1, Part A) plus the fees payable under the contract (see Schedule 1, Part B), properly treated for GST complete the works shown upon the Drawings and described in the Specification. The works may be adjusted under the contract.
(2)   The Owner will pay to the Builder the cost of the works plus the fee payable under the contract and the GST consequences of the work, at the times and in the manner required by the contract.
(3)   (i)   The Owner acknowledges and understands that the total cost of the works, including the fee payable to the Builder and the GST payable on the works is not known or ascertainable as at the date of this contract.
(ii)   The Owner acknowledges and understands that the work done and completed and the materials used directly affect the question of costs payable by the Owner.
(iii)   The Owner has read and understood the warning as to Cost Plus Contracts, which appears at the front of this document.
(iv)   The Owner is liable to pay for the proper consequences of the tax commonly known as the GST referable to the work carried out by the Builder under this contract.

The parties sign below, this twenty fourth day of March 2016 to confirm their acceptance of this agreement.
SIGNED BY THE OWNER(S):…………………(sgn)
SIGNED BY THE BUILDER:…………………...(sgn)
SCHEDULE 1
[refer Clause 17 of the Contract]
PART A – Cost of Works which are Payable by the Owner or at the direction of the Builder
The Cost of Works which are payable by the Owner include:
(a)   Wages and other entitlements payable to the Builder’s employees or payable by reason of such employment relevant to the works. For example – wage, superannuation (Builder’s workers compensation insurance, long service leave, redundancy and any other statutory or industrial entitlement,. See Schedule 2 Item (a) for specific agree rates for some employees.
(b)   Costs for the individual Builder or Builder’s director (or that of site supervisor) carrying out work , including administrative work, under the contract at the rate specified, being $80.00 per hour. If no rate is specified the rate to be relied upon will be that detailed in the most current Master Builder Association of NSW charge out schedule for the classification of carpenter unless otherwise agreed.
(c)   The cost of having a service provided or a task done in order to have the works carried out, monitored, reviewed, certified and or approved. For example – surveyor’s fees, engineer’s fees, council fees, insurance cost or any other cost, fee expense paid or payable because of the work.
(d)   The cost of all work carried out by trade contractors engaged by the Builder to carry out work at the work site or in relation to the works. This cost is conclusively evidenced by an invoice or statement of costs from the trade contractor.
(e)   Cost of all goods and materials ordered and/or paid for by the Builder necessary to carry out the works.
(f)   The cost of hiring equipment necessary to enable the Builder to carry out the works.
(g)   The cost as nominated at Schedule 2(b), for the use of the plant and equipment which is already owned by the Builder or which is acquired by the Builder to carry out work.
(h)   The cost of correcting, modifying or changing work already completed, which is changed by reason of a variation by the Owner, or which is defective for reasons other than due to materials provided by the Builder or the workmanship of the Builder.
(i)   The cost of complying with any site specific issues as to safety, pollution and or water disposal, as directed by a relevant Authority or the Owner or the Owner’s agents.
(j)   Any other cost or expense which the Builder is liable for and/or incurs by reason of the Builder carrying out work pursuant to this contract including but not limited to, insurance costs and materials owned by the Builder.

PART B - Fees
[Choose the appropriate alternative for sub paragraph (a)]
(a) COST OF WORKS PLUS PERCENTAGE BASIS – (Alternative 1)
The Owner will pay to the Builder the Cost of Works as determined pursuant to Schedule 1 Part A, together with an additional fee equal to 10% of the Cost of Works and those items referred to in Sub-Clause 17(c)(ii). This fee is to be applied to a sum covering the Cost of Works which is determined on a GST exclusive basis. See also Clause 14(a) which may become applicable.

………………
PART D – Budget Report to be Provided
Pursuant to Clause 1(e) and (f) of the Contract the Builder is to provide a budget report. The budget report should be provided on the:
(i)   1 day of the calendar month; or
(ii)   when requested by the Owner but not more than once per fortnight / month.
Please refer to Clause 1(e) and (f) of the contract.
Note: this is to make the parties aware of the impact that:
(i)   the work done;
(ii)   choices made; and
(iii)   things discovered or addressed during the construction works
have on the amount to be paid by the Owner.
See also Clause 2A which requires the parties to meet when a conflict between the cost of the work (being the work done plus the work still to be done) and the capacity to pay arises or becomes apparent.

Conditions of Contract
1. Responsibilities of Builder and Results of Construction
(a) the Builder will, subject to these Conditions and the contract work details in Schedule 3, execute and complete the works required by the contract.
(b) Statutory Warranties for Residential Building Work Pursuant to s18B of the Home Building Act 1989 (the “Act”) the Builder warrants that:-

Plans and Specifications
(c) (i) All plans and specifications for work to be done under this Contract, including
any variations to those plans and specifications, are taken to form part of this Contract.
(ii) Any agreement to vary this Contract, or to vary the plans and specifications for work to be done under this Contract, must be in writing signed by or on behalf of each party to this Contract.
(iii) This clause only applies to a contract to which section 7AA (Consumer Information) of the Home Building Act 1989 applies.

Budget Reports to be Provided
(e)   The Builder will regularly provide to the Owner a written report on the cost of the works. This will be known as the budget report. If no specific period is agreed by the parties then a budget report will be done once per calendar month. See Schedule 1 Part D where a date for providing the Budget report can be agreed. The budget report is to be provided no later than five (5) days after this date.
(f)   The budget report will include:
(i)   details of the work done, costs known and moneys paid or payable as at the date identified in the budget report
(ii)   a summary of work being performed and still to be performed;
(iii)   details of work about which the Owner needs to provide instructions in order to allow the works to proceed; and
(iv)   a revised estimated total cost of works.
The estimate above will be based on the Builder’s knowledge at the time the budget report is done. The Builder is to use reasonable care in preparing the budget report. However the revised estimated total cost of works provided in the budget report is not a lump sum or guaranteed amount and is subject to the impact of the costs and the fees payable or incurred under the contract. Refer to Clause 30 also.

2.   Owner’s Responsibilities Concerning the Works – Pre Construction & During Construction
The Owner must …
(c)   make payment as required by the contract within the period required by the contract. This includes directing any lending Authority to make payment direct to the Builder.
(d)   provide written instructions to the Builder, where required, in a timely and proper manner so as to avoid delay to the works. This specifically relates to variations, directions and instructions in relation to work under the contract.
Owner’s Duty to provide full terms of approval to Builder
(g)
(i)   ensure that the Builder receives all terms and conditions of any approval by an Authority which affects or is relevant to the works. This should be done prior to signing the contract. If not it may cause the amount money to be paid by the Owner to change.
(ii)   if the Drawings and Specification are lodged by the Builder this duty will bemet only if the Builder collects the approval documents from the Authority.

2A.   Joint Responsibilities of the Builder and Owner
The Parties acknowledge the fact that:
(i)   the amount payable by the Owner under this contract is not as at the date of the contract known.
(ii)   the total amount payable under the contract will not necessarily be ascertainable during the course of the contract; and
(iii)   the amount to be paid by the Owner is the result of the costs incurred by the Builder, the Builder’s fee or return and the impact of the GST on the work done.

The parties agree in order to manage this situation that:
(a)   they will conduct regular meetings in order to:
(i)   review the work done and costs incurred;
(ii)   review the work to be done and the costs thought to be payable for such work; and
(iii)   make decisions and choices regarding work under the contract so that the work to be paid for by the Owner is consistent with the Owner’s capacity to pay.

(b) they will, in the event that there is a conflict between the costs of the work as set out in the budget report and the Owner capacity to pay, adjust the work to be done so that the conflict is eliminated and as such the work to be done is worn for which the Owner has the capacity to pay.

The adjustment to the work is to be recorded in writing and signed by both parties and treated as a variation under Clause 14.
(c)   they will act co-operatively and in a manner which progresses the works.
(d)   either party may require a meeting to be held within five (5) days of a written request for a meeting. Both parties must attend such a meeting. The party calling the meeting will identify issues to be covered at the meeting.
The Builder will provide a report on the matters raised at the meeting within a reasonable time but no later than ten (10) business days after the meeting.
(e)   for the purpose of improved certainty the scope of work to be completed by the Builder is limited to that work for which the (b)Schedule 3 requires that the party responsible for having the drawings and or specification prepared be identified. If that detail is left blank it will be concluded that the Owner has made or can make and does make payment. Consequently any work which is not able to be paid for by the Owner will be eliminated from the work to be carried out by the Builder.

3.   Contract Documentation
(a)   the party that provides the drawings and/or specification warrants their accuracy and correctness including compliance with Clause 1(c) as applicable. As of the date of the contract, the documents detailing the work to be carried out by the Builder are listed in Schedule 3.
Contract Represents Entire Agreement.
(d)   Apart from any terms implied by Statute, the whole of the terms, conditions and warranties of this Contract are set out in the Contract, drawings and specification (as set out in Schedule 3) and will not and are not in any way varied or affected by reference to any prior negotiations, stipulations or agreement, whether written or verbal.

4.   Discrepancies and Ambiguities
(a)   Should there be any discrepancy or ambiguity in the contract documents the following order of precedence is to be employed to resolve the same:
(i)   this Agreement and Conditions including any Special Conditions;
(ii)   drawings to a larger scale;
(iii)   other drawings;
(iv)   the specification

(b) The Builder must notify the Owner in writing of any discrepancy or ambiguity in the contract documents and request instructions on how to proceed. This should be done as soon as practicable to allow the Owner to respond.
(c) The Owner must give written instructions within five (5) days of receiving the above notice. If the Owner does not then the Builder may proceed with the work on the basis of the interpretation in accordance with Sub-Clause (a) above.

11.   Delays and Extensions of Time
(a)   Should the progress of the works be delayed by any of the following causes or conditions resulting from them:
(i)   variations;
(ii)    suspension of the works under Clause 19;
….
(v)   any act, default or omission on the part of the Owner including, but not limited to, providing instructions, making payment or doing a thing necessary to allow the works to proceed including signing instructions concerning variations;
…..
(vii)    an instruction by the Owner to stop the works;
…..
(x)   inclement weather or the affect of weather on site access or site safety;
…..
then in any such case the builder must receive a fair and reasonable extension of time to the Construction Period.

(b)   (i)   the Builder must notify the Owner in writing od the matters which cause delay within a reasonable time of becoming aware
…..
(d)   delay in notifying or failure to notify to Owner of delay …..will not of itself prohibit an extension of time….provided the cause is shown to cause delay to the work
…..
(f)   If delay results from clause 11(a) (i), (ii), (iv) or (vii) then the Cost of Works is ….adjusted to include an amount calculated to cover the cost or expense of delay .amount

13. The Site is Presumed Suitable for and able to Support the Works
(a) The Owner warrants that the site and or any existing structure will support and allow the works to be carried out. This is the basis upon which the Builder has agreed to do the work.

14.   Variations – Changes to Scope of Works Post Contract Date
(a)   The works as initially understood at the time of contracting may be varied by:
(i)   the execution of additional work;
(ii)   changes in the character or quality of any material or work;
(iii)   change in the levels, lines, positions or dimensions of any part of the works.
(iv)   deletions or omission from the works.

For the sake of clarity a variation is established by:
written instructions from the Owner or the Owner’s representative; and or
the supply to the Builder of post contract details such as drawings; and or
the discovery of an otherwise unknown or latent condition,
which alters the work done, the work to be done or requires adjustments to an existing situation or the work which was otherwise expected to be done.
Accordingly a variation may for example result from such things as a request from the Owner, a choice made by the Owner, dealing with latent conditions and complying with the requirements of an Authority.
(b)   The Builder is not obliged to vary the Contract or carry out any extra work unless he consents, which consent is not to be unreasonably withheld.
(c)   (i)   If the Builder agrees to undertake a variation by the Owner, the variation isto be detailed in writing and signed by the Owner (or the Owner’s agent) and the Builder. Documents detailing the variation, including as appropriate, amended drawings or specifications, become contract documents.
(ii)   The Builder may require, prior to the execution of any variation, that the Owner produce evidence, satisfactory to the Builder, of the Owner’s capacity to pay for the variation.

(d) the cost of all work arising from any such variation is a cost of the works payable by the Owner and is to be valued and paid for as such.

17.   Payment
(a)   The Owner must pay to the Builder the Cost of Works as set out in Schedule 1 Part A; and
(i)   the fee set out in Schedule 1 Part B;
(ii)   the percentage referred to in Schedule 1 Part B based on:
(1)   the Cost of Works as set out in Schedule 1 Part A;
(2)   the cost of any goods and/or materials purchased by the Owner if those goods and/or materials are to be installed by the Builder; and
(3)   the cost of any subcontractor engaged by the Owner if the Builder is requested and/or agrees to supervise that subcontractor.
For the purposes of (2) and (3) above, the Owner is to supply the Builder with copies of all invoices for that subcontractor and/or supplier.
(iii)   GST, Refer to Clause 18.

(b)   The above amounts must be paid to the Builder in accordance with the timetable set out in Schedule 1 Part B.
(c)   A claim for payment by the Builder is to identify –
(i)   the period during which work was carried out and the work for which payment is required;
(ii)   the Cost of Works for works performed in this period;
(iii)   a brief description of any variations relative to the initial scope of work under the contract;
(iv)   the fees payable under Schedule 1 Part B; and
(v)   GST.
The Cost of Works determined by the above is to be a figure initially exclusive of any GST component. The amount determined by the above processes will be subject to GST pursuant to Clause 18. (This is to avoid compounding the GST or to ensure the GST is only charged once on the aspects or components used to establish the cost of the work and the Builder’s fee).

(d)   All claims for payment of Costs of Works should be evidenced as far as possible by supporting copies of documents such as clean copies of invoices, receipts and account documents.
(e)   Payment is to be made within the period stated in Schedule 1 Part B point (c). If no period is stated, then the payment must be made within five (5) days of the date the claim was submitted to the Owner.
(f)   Should the Builder not receive from the Owner payment of or any part of a payment by the due date, the Builder will be entitled to interest on the overdue amount at the rate specified at Schedule 2 point (e). The Builder may also suspend further work pursuant to Clause 19, if the Owner fails to pay for work under this contract.

19.   Suspension of Work
(a)   Should the Owner:-
i)   fail to pay or cause to be paid any payment or any part thereof including an amount for GST within the time required by Schedule 1 Part B point (c);
ii)   fail to confirm in writing instructions regarding an Owner requested variation or a required variation to the works;
iii)   fail to provide written instructions in a manner and time so as to reasonably avoid delay to the progress of works;
iv)   fail to comply with the requirements of Clause 2 (b);
v)   cause independent sub-contractors to attend the site address without the Builder’s consent;
THEN the Builder may, without prejudice to its right to determine this Contract, suspend the works.
Suspension pursuant to this clause will act as a bar to any claim for damages, compensation or offset by the Owner against the Builder which relates to the period of suspension or consequence of such suspension.

(b) The Builder is to give notice in writing of any suspension under this clause to the Owner.
(c) Should the Owner direct the Builder to not proceed with the works then, without prejudice to the Builder’s right to terminate this Contract tor to claim delay costs pursuant to Clause 11(a), the Contract is automatically suspended.

26.   Termination by the Owner
(a)   The Builder is in default of this Contract if the Builder:
(i)   commits an act of insolvency; or
(ii)   fails to proceed with the works with due diligence or in a competent manner with regard to the circumstances of the contract works;
(iii)   without reasonable cause he wrongfully suspends the carrying out of the works before Practical Completion; or
(iv)   refused or persistently neglects –
(a)   to comply with the requirements of Clause 12 of these conditions; or
(b)   to remove or remedy defective work or improper materials, so that by the refusal or persistent neglect the works are materially affected; or
(v)   states that is unable or unwilling to complete the works or abandons the Contract;
AND if,
In the case of any default that is capable of remedy, the default continues for twenty five (25) days after notice in writing has been given to the Builder specifying the default and stating the Owner’s intention of terminating this Contract, THEN the Owner may, without prejudice to any other rights or remedies, by notice served as allowed by Clause 29 terminate this Contract.

(b) The Owner may terminate this Contract in the circumstances provided by the general law however this does not prevent the Owner and Builder from agreeing to additional circumstances in which the contract may be terminated.
(c) In the event that the Owner terminates this Contract in accordance with Sub-Clause 26(a) of this clause, the Owner may engage another Builder to carry out the works.

30. Estimate for Owner
If an estimation of the total amount that will become payable by the Owner under this Contract is or has been made either before or after the date of the Contract THEN such estimation will be or will have been made on the basis of the information, as to the detailed and complete nature and extent of the works, then available to the Builder. However the estimation will not be of any contractual significance whatever between the parties or deemed to be a representation innocent or otherwise as to the amount or approximate amount that will become payable by the Owner. This clause also applies to the budget report referred to in Clause 1(e).

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: 05 September 2018

Medium Neutral Citation:	H Build Pty Ltd v Nixon [2018] NSWCATCD 20
Hearing dates:	13 December 2017
Date of orders:	07 May 2018
Decision date:	07 May 2018
Jurisdiction:	Consumer and Commercial Division
Before:	Ian Bailey AM SC
Decision:	(1) In HB 17/08049 the homeowner is to pay to the builder $199,639.36 immediately. (2) HB 17/19441 is dismissed. (3) Any Application concerning costs in proceedings HB 17/08049 and HB 17/19441 is to file in the Tribunal along with evidence in support of the Application and Submissions on or before 28 May 2018 (4) Any Response to the Application is to be filed in the Tribunal along with evidence in support and Submissions on or before 18 June 2018 (5) The Submissions are to address whether the Application should be determined on the papers.
Catchwords:	Home Building; Cost-Plus contract; variations, implied terms; repudiation; termination under the contract and at common law
Legislation Cited:	Home Building Act 1989
Cases Cited:	Shevill v Builder’s Licensing Board (1982) 149 CLR 620 Impact Funds management Pty Ltd v Roy Morgan Research Ltd [2016] VSC 221 Reveille Independent Llc v Anotech International (UK) Ltd [2016] EWCA Civ 443.
Texts Cited:	Dorter & Sharkey, Building and Construction Contracts in Australia, paragraph [12.30]
Category:	Principal judgment
Parties:	HBuild Pty Ltd - Applicant / Cross Respondent Megan Nixon – Respondent / Cross Applicant
Representation:	Counsel: B Le Plastrier for Applicant / Cross Respondent M Galvin for Respondents / Cross Applicants Solicitors: Fielding Robinson for Applicant / Cross Respondent Dentons for Respondent / Cross Applicants
File Number(s):	HB 17/08049 and HB 17/19441
Publication restriction:	Unrestricted