Hometeam Constructions Pty Ltd v McCauley - [2005] NSWCA 303

No judgment structure available for this case.

CITATION:
Hometeam Constructions Pty Ltd v McCauley [2005] NSWCA 303

HEARING DATE(S):
27 September 2004; 28 September 2004

JUDGMENT DATE:

7 September 2005

JUDGMENT OF:
Ipp JA at 1; Tobias JA at 2; McColl JA at 3

DECISION:
Statement of Claim; (1) Appeal allowed.; (2) Set aside the verdict for the respondent on the claim and all orders (including costs orders) made on the claim by Murrell DCJ on 18 June 2003.; (3) Verdict for the appellant on the claim.; (4) Remit the matter to Murrell DCJ to quantify the loss or damage suffered by the appellant and determine all questions of costs of the claim.; ; Amended Cross-Claim; (5) Set aside the verdict, judgment and orders made against the appellant on the cross-claim by Murrell DCJ on 18 June 2003.; (6) Verdict for the appellant on the cross-claim.; (7) Order the respondent to pay the appellant's costs of and incidental to the cross-claim.; Costs of Appeal; (8) Respondent to pay the appellant's costs of and incidental to the appeal.

CATCHWORDS:
BUILDING & ENGINEERING CONTRACTS - Notice of Default - whether Notice technically valid - construction - whether warranty to perform building works with due diligence and within the time stipulated in the contract imposed conjoint obligation - due diligence - breach of contract - onus of proof - works not completed by date set for practical completion - evidence of failure to perform building work with due diligence - explanation of period works took. (D)

LEGISLATION CITED:
Conveyancing Act 1881 (Imp)
Fair Trading Act 1987
Home Building Act 1989
Trade Practice Act 1974

CASES CITED:
Australian Development Corporation Pty Ltd v White Constructions (ACT) Pty Ltd (1996) 12 BCL 317
Brady v Group Lotus Car Cos plc [1987] 3 All ER 1050
Brenmar Building Co Pty Ltd v University of Newcastle (1999) 15 BCL 467
Etlis v New Age Constructions (NSW) Pty Ltd [2005] NSWCA 165
Fletcher v Nokes [1897] 1 Ch 271
Pauling v Mayor, Alderman & Burgesses of Borough of Dover (1855) 10 Exch 753; (1855) 156 ER 644
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
Greater London Council v Cleveland Bridge & Engineering Co Ltd (1986) 34 BLR 50
Hart v MacDonald [1910] HCA 13; (1910) 10 CLR 417
Hick v Raymond & Reid [1893] AC 22
Hobbs v Petersham Transport Co Pty Ltd [1971] HCA 26; (1971) 124 CLR 220
Hooker Constructions Pty Ltd v Chris's Engineering Contracting Co [1970] ALR 821
Hounslow London Borough Council v Twickenham Garden Developments Ltd [1971] Ch 233
Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749
Maynard v Goode [1926] HCA 4; (1926) 37 CLR 529
Minister for Public Works v Renard Constructions (ME) Pty Ltd (Supreme Court of New South Wales, unreported, 15 February 1989, BC8902548)
Re Stewardson Stubbs & Collett Pty Ltd & Bankstown Municipal Council [1965] NSWR 1671
State of New South Wales v Austeel Pty Ltd [2003] NSWCA 392
Watson v George [1953] HCA 41(1953) 89 CLR 409
Westminster Corporation v J Jarvis & Sons Ltd and Another [1970] 1 WLR 637
Hudson's Building and Engineering Contracts (11th Ed)

PARTIES:
Hometeam Constructions Pty Ltd (Appellant)
Fiona McCauley as Administrator for the Estate of the Late Luke McCauley (Respondent)

FILE NUMBER(S):
CA 40587/03

COUNSEL:
Mr M L D Einfeld QC/Mr A J L Ogborne (Appellant)
Ms E M Olsson SC (Respondent)

SOLICITORS:
Bruce & Stewart Commercial Practice (Appellant)
Deacons (Respondent)

LOWER COURT JURISDICTION:
District Court

LOWER COURT FILE NUMBER(S):
DC 10346/02

LOWER COURT JUDICIAL OFFICER:
Judge HG Murrell SC

CA 40587/03
DC 10346/02

IPP JA
TOBIAS JA
McCOLL JA
Wednesday, 7 September 2005

HOMETEAM CONSTRUCTIONS PTY LTD v Fiona McCAULEY as Administrator for the Estate of the Late Luke McCAULEY

Headnote

In July 1999 Hometeam Constructions Pty Ltd, the appellant, contracted with Mr McCauley to build a house on the site of a dwelling which had previously been substantially damaged by fire. The date for practical completion was late May 2000. The original contract works involved Hometeam using the foundations and existing walls of the old house. After parts of the old house were demolished, engineers advised that the existing foundations were not structurally adequate to support the new building. They advised that the foundation would have to be demolished and rebuilt (the “rectification work”). From about 6 months after the commencement of the works Mr McCauley complained about their slow progress. On 14 July 2000, Mr McCauley served a Notice of Default on Hometeam asserting it had failed to proceed with the building works “regularly and with due diligence and without delay”. On 8 August 2000 Mr McCauley terminated the Contract on the grounds that the appellant had “failed to remedy the default” specified in the Notice of Default.

Before the District Court the appellant sought to recover damages on the basis that Mr McCauley’s termination constituted repudiation of the Contract. Mr McCauley cross-claimed seeking to recover damages measured by the amount it had cost him to complete the house. A critical issue in the case was whether, at the time the Notice of Default was served, Hometeam had failed to undertake the building works with due diligence. Hometeam also challenged the technical validity of the Notice of Default and further asserted that, if it had been in breach of Contract as at 14 July 2000, it had remedied that breach by 8 August 2000. After the evidence in the case concluded Mrs McCauley was substituted as the defendant/cross claimant and is the respondent to the appeal.

Her Honour Judge Murrell SC held that the Notice of Default was valid, that Hometeam had not performed the works with due diligence and had failed to remedy the breach referred to in the Notice of Default. She awarded the respondent damages and interest. Hometeam appealed.

HELD per McColl JA (Ipp JA and Tobias JA agreeing) allowing the appeal:

1 The Notice of Default should be construed non-technically, in accordance with business common sense, fairly in its context; the question was how a reasonable recipient would understand it.

Pauling v Mayor, Alderman & Burgesses of Borough of Dover

Re Stewardson Stubbs & Collett Pty Ltd & Bankstown Municipal Council

Hounslow London Borough Council v Twickenham Garden Developments Ltd

Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd

Brenmar Building Co Limited v University of Newcastle

State of New South Wales v Austeel Pty Ltd

Etlis and Anor v New Age Constructions (NSW) Pty Ltd and Anor

Fletcher v Nokes

2 It was sufficient for the Notice of Default to assert that the appellant had failed to proceed with the building works with due diligence. A reasonable recipient of the Notice of Default with knowledge of the history of the works would have had no difficulty in understanding that it was informing the appellant it had not been proceeding with the works with the diligence required by the Contract.

3 The addition of the words “regularly” and “without delay” to the Notice, while surplusage, did not detract from the clear purport of the Notice.

4 On its proper construction, cl 38.1 (d) of the Contract, pursuant to which the appellant warranted that the building works would be done with due diligence and within the time stipulated by the Contract did not impose a conjoint obligation.

5 The onus of proving that the appellant was in substantial breach of the requirement to carry out the building works with due diligence lay on the respondent.

Watson v George

Hart v MacDonald

Hobbs v Petersham Transport Co Pty Ltd

6 Delay in progress during construction could amount to failure to perform the building works with due diligence if there was a failure to carry out a reasonable amount of work by a given time, measured by reference to all the work performed under the Contract or, in absolute terms, by reference to a lack of activity on the site over a significant period that could not be satisfactorily explained.

Hick v Raymond & Reid

Maynard v Goode

Westminster Corporation v J Jarvis & Sons Ltd and Another

Re Stewardson Stubbs & Collett Pty Ltd & Bankstown Municipal Council

Hooker Constructions v Chris Engineering Co

Hounslow London Borough Council v Twickenham Garden Developments Ltd

Greater London Council v Cleveland Bridge and Engineering Company Ltd

7 If facts established are capable of giving rise to an inference of lack of due diligence, the appellant may discharge any evidentiary onus that may pass to it, by explaining why the work progressed at that rate and adducing evidence which should be “sufficient…to turn the scale”.

Brady v Group Lotus Car Cos plc [1987] 3 All ER 1050; Hobbs v Petersham Transport Co Pty Ltd [1971] HCA 26; (1971) 124 CLR 220 referred to.

8 The primary judge erred in concluding that the appellant had failed to perform the works, including the rectification work, with due diligence.

9 The primary judge erred in concluding that the appellant was not performing the works with due diligence at the time the Notice of Termination was served.

Orders:

Statement of Claim

(1) Appeal allowed.

(2) Set aside the verdict for the respondent on the claim and all orders (including costs orders) made on the claim by Murrell DCJ on 18 June 2003.

(3) Verdict for the appellant on the claim.

(4) Remit the matter to Murrell DCJ to quantify the loss or damage suffered by the appellant and determine all questions of costs of the claim.

Amended Cross-Claim

(5) Set aside the verdict, judgment and orders made against the appellant on the cross-claim by Murrell DCJ on 18 June 2003.

(6) Verdict for the appellant on the cross-claim.

(7) Order the respondent to pay the appellant’s costs of and incidental to the cross-claim.

Costs of Appeal

INDEX

Para No

Introduction
3

Grounds of Appeal
8

Statement of the case
12

The Contract
25

The judgment below
38

Work commences
46

Mid September to mid October 1999 – a dispute emerges
47

Progress from mid October 1999
51

Hometeam ceases work over Christmas 1999
60

Work recommences in late January/February 2000
62

April/May 2000
72

Extension of time
79

The date for practical completion
86

Delays in May/June 2000
88

The Stegbar windows
96

Mr McCauley asserts breach of contract
101

The Notice of Default
106

Establishing absence of due diligence
116

Hometeam’s response to the Notice
119

The Notice of Default: technical validity
128

Technical validity: consideration
135

Establishing absence of due diligence
163

The parties’ approach to the due diligence issue
182

Were the works “done with due diligence”?
192

Time taken for original contract works
200

Photographs of 26 February 2000 and 22 March 2000
210

Certificate of structural adequacy
221

Claim of 7 March 2000
228

Completion of rectification work: conclusion
235

The suspended slab
236

The Stegbar windows
242

Time taken for original contract works: summary
251

Desultory pace
252

June – mid July
258

No increased work rate
261

Other excuses
264

Due diligence: conclusion
267

Entitlement to terminate the Contract
268

Entitlement to terminate: conclusion
277

Damages on the cross-claim
283

Orders
297

CA 40587/03
DC 10346/02

IPP JA
TOBIAS JA
McCOLL JA
Wednesday, 7 September 2005

HOMETEAM CONSTRUCTIONS PTY LTD v Fiona McCAULEY as Administrator for the Estate of the Late Luke McCAULEY

Judgment

1 IPP JA: I agree with McColl JA.

2 TOBIAS JA: I agree with McColl JA.

3 McCOLL JA:

Introduction

4 Hometeam Constructions Pty Ltd, the appellant (“Hometeam”) entered into a contract (the “Contract”) dated 30 July 1999 with Luke McCauley to build him a house in Mosman (the “Works”). The Contract provided that the home should be completed within 37 weeks after the “contract period” commenced. Hometeam commenced the Works on 9 August 1999. Taking into account a contractual extension to the 37 weeks of 5 weeks for the industry shutdown over December/January (cl 9.1(j)), the Works should, all things being equal, have reached practical completion in late May 2000.

5 On 14 July 2000 Mr McCauley served a Notice of Default on Hometeam complaining Hometeam had breached the Contract “in failing to proceed with the building works regularly and with due diligence and without delay”. The Notice advised that if the breach was not remedied within 10 working days Mr McCauley was entitled to end the Contract. On 8 August 2000 Mr McCauley served a further notice purporting to terminate the Contract (the “Notice of Termination”) on the basis that Hometeam had “failed to remedy the default” specified in the Notice of Default.

6 Hometeam sought to recover damages in the District Court from Mr McCauley on the basis that the termination amounted to a repudiation of the Contract. Mr McCauley cross-claimed alleging the termination was valid and seeking to recover damages, being the amount it had cost him to complete the construction of his house.

7 After the evidence in the proceedings concluded, Mr McCauley died in an accident. His wife was substituted as the defendant/cross-claimant and is the respondent to this appeal. She was successful before her Honour Judge Murrell SC.

Grounds of appeal

8 The grounds of appeal are numerous and, to a considerable extent, descend to the level of submissions. Stripped of that level of minutiae they amount to the following:

(a) The primary judge erred in holding the respondent was entitled to issue the Notice of Default;

(b) The primary judge erred in holding the appellant had failed to remedy the breach specified in the Notice of Default;

9 In the course of the hearing the appellant was given leave to add an additional ground of appeal dealing with the validity of the Notice of Default. Hometeam asserted the primary judge erred in failing to hold the Notice of Default was invalid on the following bases:

(a) It did not provide any or any adequate details of the breach alleged;

(b) It failed to identify any breach of cl 38.1(d) of the Contract in terms of a failure to exercise due diligence within a stipulated or reasonable time as required by that clause;

(c) Inclusion in the Notice of allegations of failure to proceed with the building works regularly, and failure to proceed without delay, did not afford details of a breach of cl 38.1(d), and were liable to create confusion in the mind of the reasonable recipient of the Notice as to its meaning and requirements.

10 The appellant contends that judgment ought to have been entered in its favour and the cross-claim should have been dismissed.

11 A ground of appeal that the “contract period” had not commenced within the meaning of cl 8.2 of the Contract was, in my view properly, not pursued by Mr Einfeld QC, who appeared for the appellant with Mr A Ogborne. The consequence of that ground of appeal being abandoned is that the “contract period” commenced on 9 August 1999, the day the Works commenced, as found by her Honour (at [169]).

Statement of the case

12 Hometeam commenced proceedings in the District Court against Mr McCauley alleging that the Notice of Termination constituted a repudiation of the agreement which Hometeam had accepted by leaving the Works. Hometeam claimed that Mr McCauley had breached the contract and sought to recover damages. Mr McCauley’s defence, so far as is relevant, denied he had repudiated the Contract.

13 Mr McCauley filed a cross-claim against both Hometeam and its principal, Mr Goulding, asserting, relevantly, that Hometeam had breached the Contract in failing to proceed with due diligence and without delay because the Works were not brought to practical completion by May 2000 and that at the time the Notice of Termination was served, the Works were approximately 12% complete. Mr McCauley sought to recover liquidated damages in respect of this breach. Mr McCauley also asserted that the Notice of Termination had validly terminated the Contract. He pleaded he had completed the Works using a different builder and sought to recover from Hometeam the amount he had spent in excess of the contract price completing the Works. Other claims were made in the cross-claim against both Hometeam and Mr Goulding, in particular, pursuant to s 52 of the Trade Practices Act 1974 (Cth) and s 42 of the Fair Trading Act 1987. The primary judge dismissed those claims. The respondent does not challenge that aspect of the judgment.

14 In its defence to the cross-claim, Hometeam denied that it had:

(a) failed to proceed with the Works with due diligence and without delay;

It admitted receiving the Notice of Termination, but denied that Notice had determined its employment. It denied Mr McCauley was entitled to recover the amount he had spent on completing the Works.

15 Although the Statement of Claim recited the Notice of Default, it did not dispute Mr McCauley’s entitlement to serve it. The cross-claim made no reference to the Notice of Default. However, the proceedings were clearly conducted on the basis that Mr McCauley’s entitlement to serve that Notice was the central issue. As much appears from the judgment where the primary judge, her Honour Judge Murrell SC recorded (at [5]):

“A critical issue in this case is whether Mr McCauley’s purported termination of the building agreement by a notice dated 8 August 2000 was a valid termination, or was a repudiation of the agreement which [Hometeam] was entitled to and did accept. In determining this issue, it is necessary to consider whether, prior to 14 July 2000 when Mr McCauley purported to issue a notice of default, [Hometeam] had failed to undertake the building works with due diligence and within the time stipulated in the Contract and whether, within the 10 working day period specified in the notice of remediation of the breach [Hometeam] did remedy the breach.”

16 Hometeam also challenged the technical validity of the Notice of Default before the primary judge. Again, that challenge was not pleaded.

17 The primary judge dismissed Hometeam’s claim and upheld the cross-claim. She found, in substance, that as at 14 July 2000 Hometeam had failed to undertake the Works with due diligence and, further that it had failed to remedy that breach by 8 August 2000. She awarded the respondent $286,491.58 in damages and interest as well as ordering the appellant to pay the respondent an amount of $2,671.23 and interest, in relation to a security deposit returned to the appellant by Mosman Council, apparently in error.

18 It is essential to an appreciation of the facts to understand that the original contract works essentially involved Hometeam building a new house for Mr McCauley while keeping the foundations and some of the external walls of the existing house so that the development could be classified as "additions and alterations" under the applicable council building code. All of the external walls of the existing house above the ground floor level had been founded on sandstone walls built up to the ground floor level from sandstone footings. With minor exceptions, the new house as first conceived (and approved by Council) was to be built on the existing sandstone footings and walls.

19 As events transpired it was determined after demolition that, in some cases, what had appeared to be solid sandstone walls were found to be brick walls with a sandstone veneer. This discovery was to lead to engineering advice that the existing foundation walls were not structurally adequate to support the proposed new building and that they would have to be demolished and rebuilt (the “rectification work”). The primary judge found (at [237], [242]) that the rectification work was an agreed variation.

20 The primary judge’s finding that Hometeam had not performed the Works with due diligence was based on two ultimate findings:

(a) that the rectification work took eight weeks (judgment [166] – [167]);

21 These ultimate findings were based on a number of intermediate findings almost all of which were challenged by the appellant.

22 The appellant contends that the time the rectification work took was the substantial reason the Works took longer than the time envisaged for practical completion and that the primary judge’s failure to appreciate the extent of the rectification work, as well as the stages the Works had reached at various times, led to her erroneously concluding it had failed to perform the Contract with due diligence.

23 The respondent argues that neither the original contract works nor the rectification work were performed with due diligence. She also challenged the extent to which, at various points in time, the work being undertaken was rectification work as opposed to original contract works.

24 In order to develop their respective positions the parties took the Court in great detail to the original engineering plans for the Works, to revised engineering plans and to photographs taken as the Works progressed. Both the primary judge and this Court were in the invidious position that these plans and photographs were not the subject of detailed evidence, whether as to what was happening on the building site at relevant times – Hometeam had had three site supervisors, none of whom was available to give evidence – or from any expert who opined as to what the Works – whether original or rectification – entailed, and at what rate it could reasonably have been expected that such works should progress.

The Contract

25 The Contract identified Mr McCauley as the “Owner” and Hometeam as the “Builder”. The contract price was $493,406. A deposit of $19,670, 5% of the contract price, was paid when the agreement was signed (cl 15.1).

26 The following definitions in cl 1.1 of the Contract should be noted:

“building works”

building works

owner

contract

contract documents

and including

variations

“contract period”

working

as extended by clause 9

variation

an … addition or change

27 Clause 12 in Schedule 1 provided:

Contract period

The building works must reach the stage of practical completion no more than 37 weeks after the contract period commences, subject to Clause 9.”

28 Clause 14 in Schedule 1 dealt with contract documents and identified, in addition to the general conditions, any special conditions, the plans and specifications, Tender No 1476c dated 28 July 1999, Mosman Council D/A Consent 8.1998.787.1 dated 11 May 1999 and Mosman Council Approved Plans as documents forming part of the contract.

29 Clause 9 relevantly provided:

“Clause 9. Delays and Extensions of Time

9.1 The builder is entitled to a reasonable extension of the contract period if the building works are delayed by the builder suspending the building works under Clause 32 or from a cause beyond the sole control of the builder including:

variation

…

owner

(j) the industry shutdown being a 5 week period commencing on or about 22 December in each year.

builder

owner

(a) the cause of the delay; and

working days

contract period

builder

working days

builder’s

owner

builder

(a) disputing the claim; and

(b) detailing the reasons why the claim is disputed …”

30 Clause 12 dealt with hidden site conditions. Relevantly cl 12.2.4 provided:

site

builder

ontract

ontract documents

and if the effect of that difference requires more or less work than that which a reasonable builder would have anticipated on the signing of this contract, then that work is deemed to be a variation.” (emphasis added)

31 Clause 15 dealt with progress payments. Clause 15.2 required Mr McCauley to pay the Contract price progressively as claimed by Hometeam. Clause 15.3 required Hometeam to give Mr McCauley a written claim for a progress payment for the substantial completion of each stage. A progress claim was required to state, among other matters, the amount claimed and not paid “for the stages substantially completed” (cl 15.4).

32 Schedule 2 to the Contract contained suggested stages for progress payments but advised that such stages were not binding and provided a table to be completed which was suitable for the particular works. That table had been completed. It relevantly provided:

Schedule of Progress Payments

Stage of Work

Amount	%
1.	Demolition	$24,670.00	( 5%)
2.	Concrete footings and slab poured	$83,880.00	(17%)
3.	Internal brickwork complete	$74,010.00	(15%)
4.	Frames and Trusses substantially erected	$98,681.00	(20%)
5.	Roof dry ridged	$74,010.00	(15%)
6.	Plasterboard lining substantially installed	$44,407.00	( 9%)
7.	Painting commenced	$44,407.00	( 9%)
8.	Final as per account	$24,671.00	( 5%)
TOTAL	$493,406.00	(100%)

33 Clause 17.1 provided that a variation occurred if the Contract deemed a variation (sub-cl (a)) or the builder and owner agreed in writing to a variation (sub-cl (b)). Clause 17.6 provided that the price of a variation was due and payable at the next progress payment after it was carried out unless a different time was agreed.

34 Clause 32.1 enabled the builder to suspend the carrying out of the Works if the owner was in breach of the contract.

35 Clause 33 provided:

“Clause 33. Ending the Contract – Breach

If a party is in substantial breach of this

contract

details of the breach

working days

contract

working days

ontract

33.3 All notices to be given under this Clause must be given by certified mail or personally.” (emphasis added)

36 Clause 38 relevantly provided:

Clause 38. Warranties

builder

…

building works

contract

37 Clause 40.1(b) provided that, unless otherwise stated in the Contract, a notice was deemed to be given, if it was posted by ordinary pre-paid mail to the other party’s last known address, on the day following the day it was posted.

The judgment below

38 Before the primary judge both parties accepted (see judgment at [203]) that the question whether the Works were proceeding with due diligence as at 14 July 2000 required an examination of the entire history of the Works “in order to put into context” what was occurring before the Notice of Default was served. This history was relevant both to the question whether, at the time the Notice was served, the appellant was in substantial breach of the Contract and, as will appear later in these reasons, to the question of the validity of the Notice.

39 Accordingly I set out the history of the Works, principally from the judgment below. I have included the primary judge’s headings to sections of the judgement as well as her findings of fact. I have also added references to some uncontroversial facts in order to maintain the contextual sequence. I have also identified briefly the appellant’s challenges to critical findings of fact.

40 On about 25 May 1998 Mr McCauley’s house at 12 Upper Spit Road, Mosman was substantially destroyed by fire. He received an insurance payment of approximately $500,000 in order to rebuild it. On about 27 June 1998 Mr and Mrs McCauley inspected Hometeam’s display at a building display village. On 3 July 1998 they met Mr Goulding, described as Hometeam’s “architect”. Mr McCauley explained that he wanted to demolish his old house and build a new house at least as big as the old one. Prior to the plans for the new house being drawn up, there was a conversation between the McCauleys and Mr Goulding concerning whether the existing sandstone on the home could be used as a foundation and/or a feature. The primary judge accepted (at [22]) that the tenor of the discussion was that the existing sandstone would be used as a foundation as well as a feature.

41 In early September 1998, following discussions with Mosman Council, Mr Goulding informed Mr McCauley that if the existing foundations and some external walls were used, the development could be classified as “alterations and additions”. This would mean Mr McCauley could maintain the setback and, possibly, the height of his former residence. This would enable him to exceed the current building envelope restriction for a new residence and maximise his water views.

42 On 23 October 1998 Mr McCauley instructed Hometeam to prepare, inter alia, building plans and specifications for the construction of the new home and to submit a Development Application and Building Application to appropriate authorities for their approval. The development application was lodged with Mosman Council in December 1998. It described the development as involving partial demolition and as being alterations and additions to an existing building. The plans which were submitted with the development application noted in reference to the footings:

“Engineer to inspect and certify existing footings and walls.”

43 The plans showed new strip footings in some areas where additions to the original footprint of the house were being made. The plans also allowed for the construction of a new garage and rumpus room.

44 Mosman Council gave Development Approval on 11 May 1999. The conditions of consent included a prohibition on removing or altering the sandstone foundations without the Council’s prior consent. The approval also required a Certificate of Adequacy, prepared by a practising Structural Engineer to be submitted to the Council during the construction period verifying the structural adequacy of the existing construction to carry the proposed loads. Another condition required structural engineer’s details of, in effect, the foundations to be submitted to the Council and approved before work was commenced.

45 In May 1999 Hometeam’s engineers, Donovan Associates, advised Hometeam that the structural adequacy of the existing footings and brick walls would be confirmed after demolition and before construction commenced. Mr Goulding said he informed Mr McCauley of this at the time. The primary judge held that Mr McCauley did not appreciate the effect of this advice. She concluded (at [45]) that it was not until late 1999 that Mr McCauley appreciated “that there may be a real issue concerning the suitability of the existing sandstone foundations”.

Work commences

46 On 15 July 1999 Mosman Council issued a construction certificate in respect of the Works. Demolition work on the house commenced on 11 August 1999 which the primary judge found (at [86]) was complete to ground floor level by mid-September 1999. The primary judge concluded (at [82], ([89]) that there was no delay in relation to the commencement of the Works and that the McCauleys had no cause for complaint prior to completion of the demolition.

Mid September to mid October 1999 – a dispute emerges

47 On 20 September 1999, following an inspection of the foundations, Donovan Associates reported to Hometeam that the existing stone footings and walls were not structurally adequate to support the new loads “of the proposed extension”. They recommended that the existing stone walls and footings be demolished and the stone walls be rebuilt on new concrete levelling strip footings with reinforcements bearing on rock (see [98]). A copy of this report was provided to Mr McCauley.

48 The primary judge found (at [101]) that by 22 September 1999 Mr McCauley was aware that the existing sandstone foundations would probably not support the Works. Mr Goulding recommended that another engineer’s opinion on the structural adequacy of the stonework be obtained. That second opinion, given on 11 October 1999 by an engineer nominated by Mr McCauley, Mr McKean, advised that the existing sandstone should be not be used as load bearing masonry because of its uncertain quality and strength and the uncertainty of the founding material.

49 The primary judge noted that there was no expert evidence confirming that all the work on the site had to stop pending rectification of the sandstone foundations. She acknowledged, however, that rectification would “obviously have had to occur before any work could be undertaken on top of the foundations” (at [106]).

50 It appears that Mr McCauley accepted that no work could be done on the affected part of the site pending receipt of the second opinion about the structural adequacy of the existing foundations. Thus he agreed that from the time that demolition was completed until mid October 1999 nothing could be done on that part of the site affected by the unstable foundations (see judgment at [106]). The primary judge clearly accepted that evidence as, in due course, she held (at [166]) that this was a period of “delay” occasioned by the rectification work.

Progress from mid October 1999

51 An important component of the primary judge’s calculation that the rectification work took 8 weeks was her conclusion that there was an unexplained delay in the works from mid October until the end of November 1999.

52 After the second engineering opinion was obtained, Mr Goulding and Mr McCauley agreed that the best solution to the problem of inadequate foundations was to relay the existing sandstone on new concrete levelling strip footings bearing on rock.

53 In late 1999 Mrs McCauley (who visited the site almost daily) asked Mr Goulding why no work was occurring. He informed her that bricklayers and stonemasons were hard to source at the time. She also said he explained that there was a shortage of bricks (at [108]). After referring to this evidence, the primary judge observed (at [109]), “otherwise, there is little explanation for lack of activity on the site in the period mid October/late November 1999”. In due course (at [166]) her Honour excluded this period from that taken by the rectification work.

54 The appellant criticises the finding that there was no excuse for the delay in October – November 1999, principally on the basis that it takes no account of the fact that during this period the engineers were revising the engineering drawings.

55 The primary judge also held ([122]) that at this stage the McCauleys were principally concerned with the responsibility for paying for relaying the stonework and other claimed variations.

56 In late 1999 a dispute emerged between Hometeam and Mr McCauley substantially as to whether the rectification work constituted variations. From at least that time the relationship between the parties was clearly acrimonious.

57 On 22 November 1999 Mr McCauley wrote to Mr Goulding. After referring to some building details, he commented that he was looking forward “to seeing some construction activity on the site this week”.

58 In early December Mr Goulding advised Mr McCauley of additional costs amounting to $62,240. He sought written confirmation of acceptance of the costs of what he described as “variations” (see [115]). The variations principally consisted of the new footings and rectification of the existing stonework foundations. By letter dated 8 December 1999, Mr McCauley contended these items were not variations. He maintained (see [120]) that rectification of structural inadequacy was included in the original tender price. The primary judge found (at [121]) that from 8 December 1999 there was a “clear dispute as to who was liable for the cost of rectifying the stone block work and in relation to other claim variations”.

59 By 30 November, according to the parties’ agreed chronology, revised engineering plans for new concrete strip footings and slab had been prepared. Those plans were amended again in February 2000. They showed that all the foundations were to be set on new strip footings. This differed from the original plans which had contemplated that the foundations of the original home would support the new building.

Hometeam ceases work over Christmas 1999

60 On 22 December 1999 Hometeam suspended works pursuant to cl 32 of the Contract because Mr McCauley had rejected the price for the variations. While the primary judge questioned whether Hometeam was entitled to invoke cl 32, she noted (at [124]) that, in any event, the contract period was suspended for the five weeks from 22 December 1999 to about 24 January 2000, being the industry shutdown over Christmas (cl 9.1(j)), so that there was no relevant delay in construction at that time.

61 On 24 December 1999 Mr McCauley wrote to Hometeam. For present purposes it is necessary only to record that he asked Hometeam “to immediately recommence construction of the Works and bring the dwelling to practical completion by the date for practical completion”. He suggested a meeting to seek to reach “a sensible solution” in relation, it appears, to Hometeam’s invocation of cl 32.

Work recommences in late January/February 2000

62 Following a meeting on or about 19 January between Mr McCauley and Mr Goulding, work on the site recommenced, the primary judge found (at [132]), at least by 7 February 2000, with the resumption of stonework rectification. By 9 February 2000, as I have noted, the revised engineering plans in relation to the footings had been revised again.

63 The primary judge found (at [143]) that work proceeded on the site from late January to 9 February 2000 but that no work was undertaken from 9 February to 21 February because Mr McCauley would not unreservedly accept the claim Hometeam had made in relation to variations. The primary judge found that the “delay” was not justified as Hometeam had not followed the Contract procedure in relation to obtaining consent to variations and making a written claim detailing the extension claimed. I assume the “delay” to which her Honour referred was the period of 12 days between 9 – 21 February 2000. Her Honour also found (at [143]) that it was not justifiable to halt all works during periods when (according to Mr Goulding) variations had been agreed or were the subject of ongoing negotiations.

64 This period 9 – 21 February 2000, was the second period the primary judge (at [166]) excluded from that taken by the rectification work.

65 The primary judge then undertook an analysis of the evidence which led her to conclude (at [213]) that the rectification work was complete by 7 March 2000.

66 Mr McCauley took photographs of the work as it progressed. The photographs were attached to his statement as photographs of the house taken on the date shown on the photograph, but with no other explanation of what they were said to depict. The primary judge made findings about photographs taken on 26 February 2000 and 22 March 2000. The appellant challenges those findings. It contends that the primary judge’s interpretations were erroneous and led her into error as to the rate of progress of the Works. The first finding was:

“[144] Photographs taken on 26 February 2000 show that a substantial amount of earth works have been undertaken prior to that time and that some work has been done on sandstone blocks with some new brickwork being constructed on top of sandstone blockworks. The brickwork was in the basement area of the new residence. Mr Barker, [Hometeam’s] quantity surveyor, notes that a photograph dated 26 February 2000 shows ‘demolition completed and some foundation works taking place’, indicating ‘substantial pre-construction delays’.”

67 She noted, (at [145]), Mr Goulding’s evidence that concreting and site clearing work commenced in February 2000 and that a concreter was working on basement footings in the first three days of March.

68 On 7 March 2000 Hometeam served progress claim 2 for $20,000 in relation to concrete footings and for variations 2 to 7 totalling $64,214. Mr McCauley refused to pay the $20,000 on the basis that that sum was only due when both the concrete footings and slab had been poured. He accepted that the concrete footings had been poured but, as at 18 March 2000, maintained that the sum was not payable until the concrete slab had also been poured. He paid variations 2 to 5 which totalled $29,300.

69 The primary judge, in due course (at [213]) concluded that the rectification work was completed by 7 March, apparently because of the service of progress claim 2. The appellant says her Honour was not entitled to draw that inference.

70 The primary judge’s interpretation of photographs dated 22 March 2000 was:

“[147] Photographs taken on 22 March 2000 show that, by that stage, substantial brickwork had been constructed on sandstone or concrete footings. Concrete footings are visible in the photographs but no concrete slab is visible. Obviously, work had been undertaken on the footings prior to the issue of an engineer’s certificate.”

71 The reference in her Honour’s interpretation of the 22 March 2000 photographs to work having been done “prior to the issue of an engineer’s certificate” appears to be a reference to a certificate of structural adequacy which Hometeam had said in its letter of 17 September 1999 it required before it could proceed with the works.

April/May 2000

72 On 29 April 2000 Hometeam wrote to Mr McCauley referring to its 17 September 1999 letter and advising that a certificate of structural adequacy had been received for the rectification of the external stonework walls of the basement and sub-floor. The letter then stated:

“We hereby give notice of commencement of contract as of the 17th April 2000 pursuant to Clause 8 … Alternatively, we claim a reasonable extension of time to the contract period pursuant to Clause 9 of the contract because of the need to obtain the Certificate of Structural Adequacy.”

73 Mr McCauley disputed Hometeam’s claim that the Contract commenced on 17 April 2000 and asserted that it had commenced on 9 August 1999. At this stage he also disputed the claim for an extension of time, even though he had not disputed the necessity for that extension when it was flagged in Hometeam’s 17 September 1999 letter.

74 Hometeam received a quote to pour the concrete strip footings and the ground floor slab on about 21 December 1999. Mr McCauley accepted that quote by letter dated 20 February 2000.

75 The primary judge found that part of the ground floor slab was poured between 16 and 21 April 2000. Mr Goulding said that it was always going to be necessary to pour the slab in two sections (see [151]). On about 1 May 2000 bricklayers began work on parts of the ground floor slab which had been poured. It appears that the brickwork to the areas known as the garage and rumpus room was completed between 24 May and 24 June 2000 (see [153]).

76 Mr McCauley responded on 2 May 2000. While he appears to have accepted the claim was payable he complained about “the lack of progress in building my house” pointing out that “in the nine months since the contract was signed you still don’t have a ground floor complete”. Hometeam responded to that letter on 18 May 2000 advising (inter alia) that it was also “extremely disappointed with the lack of progress, due to the demolition and rectification of the stonework” and pointing out “both of these are outside the contract time”.

77 The primary judge rejected ([156] – [157], [161]) Hometeam’s contention that the Contract did not commence until 17 April 2000 when the certificate of structural adequacy was received. She also found that there was no evidence that work was actually delayed because Hometeam was awaiting the certificate of structural adequacy. She found that substantial brickwork had been constructed on top of the footings the subject of the certificate prior to its issue (at [150]). This appears to have been a finding based on her interpretation of the 26 February and 22 March photographs.

78 As I have already observed the latter finding is the subject of substantial challenge by the appellant.

Extension of time

79 At this stage of her judgment the primary judge dealt with Hometeam’s contention that, assuming the Contract commenced in August 1999, an extension of time operated from mid-September 1999 to 29 April 2000. Hometeam relied upon several grounds for this claim. First, that there was an owner-requested variation (cl 9.1) and a cl 9.2 extension claim constituted by its letters of 17 September 1999 and 29 April 2000. Secondly, it argued there was a deemed variation pursuant to cl 12.4 because of unknown site conditions. Thirdly, it relied on a cl 9.1 extension resulting from “a cause beyond the sole control of the builder”, being the inadequacy of the sandstone foundations.

80 The respondent resisted this claim on a number of bases the most significant of which was (at [164]) that:

“… photographs demonstrated that brick work was being placed on stone footings by February/March 2000 and that the main slab was poured on the new sub-floor brick work by 21 April. Mr McCauley paid for the work associated with rectification of stonework following the claim on 7 March, indicating that the work was done prior to that time and any delay between 7 March and 17 April was unrelated to the need to rectify stonework.”

81 The primary judge found that if one compared the apparent rate at which work was progressing in the period late January to mid April 2000 with the apparent rate of progress in the period mid April to late June 2000, “no substantial difference” could be detected. She held (at [165]) that with the exception of the demolition period in August/September 1999, work always proceeded at a desultory pace. She concluded:

“[166] It is reasonable to regard the periods mid September to mid October (when a decision regarding rectification was being considered), late November to Christmas 1999, late January to 9 February (when stonework rectification was apparently being undertaken) and (possibly) 21 February to 7 March (when further rectification may have been undertaken) as periods during which [there] may have been delay occasioned by rectification work, but otherwise foundation rectification would seem to provide no excuse for the delays which occurred between mid September 1999 and mid April 2000.

[167] … a maximum period of about 8 weeks could be due to the need for foundation rectification.

[168] … the claim for an extension of time which HTC made on 29 April was properly rejected …”

82 Her Honour’s finding that with the exception of the demolition period in August/September 1999, work always proceeded at a desultory pace, formed the second basis upon which she ultimately concluded (at [206]) Mr McCauley was entitled to issue the Notice of Default.

83 Although her Honour did not expressly find that Hometeam was entitled to a cl 9 extension of time of eight weeks due to the rectification work, it is apparent when one comes to her determination of the date for practical completion (see [169]) as well as her identification of the bases upon which she concluded Mr McCauley was entitled to serve the Notice of Default (at [206]) that this was, in fact, her conclusion.

84 It is relevant, therefore, to note the following. First, at this stage of her judgment the primary judge had identified two periods of “delay” for which there was “no excuse”. Secondly, the appellant criticises her Honour’s calculation of the period taken by the rectification work as failing to take account of two matters. The first was that the rectification work required the revised engineering plans which were not completed, in the first instance, until 30 November 1999. Accordingly, Hometeam contended her Honour ought to have allowed the 6 or so weeks from mid-October to the end of November 1999 as part of the rectification work. The second was that in the period 9 – 21 February 2000 Mr McCauley was refusing to accept the rectification work constituted a variation to the Contract. Hometeam submitted it was entitled not to continue to work pending resolution of that dispute.

85 While there may be some argument about the appellant’s challenge to the second finding, its submissions concerning the first, and more substantial, period, have force.

The date for practical completion

86 The primary judge next identified the date for practical completion. She concluded (at [169]) that as the Contract had commenced on 9 August 1999, allowing for the 5 week industry shutdown over Christmas 1999, and the 8 week period she had held could be due to the rectification work, “the 37 week Contract period was due to expire 2 weeks before the Contract was terminated”.

87 I note that if one accepts the appellant’s submission that her Honour ought also to have included the period for the revision of the engineering plans and the two weeks of the variations dispute in February 2000, the date for practical completion was some 6 weeks or so after its termination.

Delays in May/June 2000

88 The primary judge then went on to deal with what she captioned “Delays in May/June 2000”.

89 It is apparent that it was from that period that the parties’ relationship which, by this stage, might be said to have been fragile at best, substantially deteriorated.

90 On 22 May 2000 Hometeam wrote to the McCauleys apologising for building delays which were said to flow from a “building boom resulting in a shortage of supplies and tradespeople”. The primary judge noted (at [170]) “no detail was given as to the efforts … [Hometeam] had made to address shortages”.

91 On 24 May 2000 the suspended slab was poured. Mr Goulding said that the engineer, Donovan & Associates, advised that it could not be loaded for 28 days. On 5 June 2000 Hometeam wrote to Mr McCauley advising that there needed to be a contract extension to allow for the 28 days. Mr McCauley rejected that claim. The primary judge found (at [172]) that there was no evidence to indicate that work could not have been done elsewhere on the site during the 28 day period.

92 I note that the appellant challenges this finding on the basis that there was no evidence Hometeam could have been working elsewhere.

93 On 8 June 2000 Mr McCauley wrote to Hometeam disputing the assertion in its 22 May letter concerning building delays. Mr McCauley said he believed “the delays experienced on the construction of my property have nothing to do with the general building industry, shortages of materials or labour”. He advised he was “most distressed that there has been no activity on the site for over two weeks”. He asserted:

Home Building Act

94 Mr Goulding said Hometeam had difficulty locating a formworker to do work required before brickwork could commence. However, Mr McCauley located a formworker, obtained a quote from him which was apparently accepted and the formwork commenced on 19 June 2000. It took three or four days. In such circumstances the primary judge found (at [176]) that it was not easy to accept Hometeam’s contention that it had difficulty locating a formworker. This finding is relevant to the third basis on which the primary judge concluded (at [206]) that Mr McCauley was entitled to issue the Notice of Default.

95 Hometeam argued that the Works were progressing slowly because of pressure on the building industry associated with the imminent Olympic Games in Sydney. The primary judge held (at [179]):

“There is no reliable evidence that, in fact, building industry pressure associated with the Olympic Games was the reason that work progressed slowly from May 2000 or … at any other time”.

The Stegbar windows

96 The events surrounding the delivery of the windows for the house formed part of the fifth basis upon which the primary judge concluded (at [206]) that Mr McCauley was entitled to issue the Notice of Default.

97 At the commencement of the contract Mr McCauley had selected Stegbar windows. Hometeam ordered them on 10 April 2000. They were late in arriving. Hometeam notified Mr McCauley of that delay on 30 June 2000 and said good building practice meant bricklaying could not commence until the windows arrived.

98 The primary judge accepted (at [185]) that Hometeam’s decision to await delivery of the windows before bricking around them would have been reasonable. The primary judge also considered that the slightly late delivery of the windows would have had little if any effect on the progress of the Works. She also appears to have concluded (at [186]) their late delivery could not have prevented other work being done. Again, I note, the appellant’s submission there was no evidence of what other work could have been done.

99 The primary judge held (at [183]) that the necessity to wait for the windows to be delivered before bricking around them “would not have prevented other brickwork being undertaken, leaving appropriate space for windows and their surrounds”.

100 On 15 June 2000 Mr McCauley wrote to Hometeam noting he was disappointed “there is still no activity on my house; however I understand that construction will commence … by the end of this week …”. The primary judge found (at [187]) that Mr McCauley’s letter “did not prompt any increase in the rate at which work was being undertaken”.

Mr McCauley asserts breach of contract

101 On 28 June 2000 Mr McCauley sent Hometeam a letter asserting it was in breach of the Contract “by failing to undertake the building works with due diligence and within the contract period”. The letter warned that if Hometeam did not remedy the breach within 10 days Mr McCauley would “be forced to exercise my rights”.

102 According to the primary judge (at [189]) Hometeam’s response was to state that Mr McCauley had not signed several variation authorities. This is not strictly correct. On 30 June 2000 Mr Goulding responded, drawing Mr McCauley’s attention to his letter of 5 June 2000 advising that due to the necessity for the concrete to cure for 28 days, Hometeam “would not be commencing work until after 21 June”. He advised bricklayers were booked to commence on 29 or 30 June. He said “good building practice” necessitated that the bricklayers not commence brickwork unless the windows were on site. He attached a letter from Stegbar advising the window order could not be fulfilled until after 7 July and said the bricklayers could commence after the downstairs windows were delivered. The letter claimed an extension to the Contract under cl 9.1(h) from 26 June until the windows arrived.

103 On 5 July 2000 Mr McCauley responded. It is unnecessary to set out the detail of this letter. It is sufficient to note that he stressed that Hometeam “should recommence work immediately”.

104 The primary judge (at [192]) interpreted photographs annexed to Mr McCauley’s statement as demonstrating that it was “not apparent that any work was done in the period 2 to 8 July”. In the period 8 – 13 July 2000 she concluded there was some removal of formwork and delivery of some windows but “stacks of bricks remained in the same location”. Mr Barker, a quantity surveyor called by Hometeam, commented that “the photographs showed that the ground slab was completed by 12 June and that from 12 June to 13 July the brickwork ‘barely changed’”. The primary judge concluded (at [193]) “very little work was undertaken between 12 June and 13 July”.

105 On 14 July Hometeam wrote to Mr McCauley enclosing a letter from Stegbar which advised that delivery of the windows had been “further delayed until 12 July 2000”.

The Notice of Default

106 On the same day Mr McCauley sent the Notice of Default by certified mail. While the Notice was received by Hometeam on 20 July, the primary judge concluded (at [197]), having regard to cll 33.2 and 40.1(b) of the contract, that it was given by 17 July 2000 and accordingly, the 10 working days for Hometeam to remedy the breach alleged (assuming the Notice’s validity) expired on 31 July 2000.

107 The Notice stated that it was given pursuant to cl 33.1 of the Contract, recited the agreement to undertake the Works, set out cll 33.1 and 38.1(d), then continued:

DETAILS OF BREACH

regularly and

and without delay

TAKE NOTE

:

The italicised words did not appear in cl 38.1(d).

108 On receiving the Notice, Mr Goulding wrote to Mr McCauley on 24 July disputing its validity on a number of bases. These included a complaint that the Notice:

“… does not specify what is meant by the words ‘regularly’, ‘due diligence’ or ‘without delay’ and therefore does not provide to me (or a Court for that matter) any guidance so as to know what you allege what must be done to not be in breach.”

“… to the extent I understand your notice, the alleged breach has been remedied. If it has not been remedied, please let me know.”

109 It does not appear from the parties’ agreed chronology whether Mr McCauley responded to this letter other than by issuing the Notice of Termination on 8 August 2000.

110 The primary judge recorded (at [198]) that Hometeam submitted the Notice was invalid because cl 38.1(d), which it asserted had been breached, required the Works to be “done with due diligence and within the time stipulated in the contract …”, whereas the Notice only referred to failure to proceed with “due diligence”. It also “imported the expressions ‘regularly’ and ‘without delay’ which were not to be found in clause 38.1(d)”. She also mentioned the matters Mr Goulding raised in his letter of 24 July concerning the insufficiency of particulars of breach.

111 The primary judge referred to Brownie J’s statement in Renard Constructions (ME) Pty Limited v The Minister for Public Works (Supreme Court of New South Wales, unreported, 15 February 1989, BC8902548 at 17) to the effect that such a notice needed to direct the builder’s mind “to what was said to be amiss”. She held (at [200]) “the Notice did not need to accurately spell out particulars of the default in question” and that “the Court should not take an overly technical approach to such notices”.

112 The primary judge noted (at [201]) “it was not disputed that [the Default Notice] was sufficient to put [Hometeam] on notice regarding the default about which complaint was made”.

113 During the hearing of the appeal the Court was informed by Mr Einfeld that his junior, Mr Ogborne, who appeared at the trial, said he had not made such a concession. Ms Olsson SC, who appeared for the respondent both at trial and on appeal, accepted there had been argument before the primary judge concerning the sufficiency of the Notice’s identification of the alleged breach.

114 The primary judge identified the default the subject of the Default Notice as being “failure to proceed with due diligence” and continued:

“[202] It is my view that, while the notice of 14 July did not specifically complain of a failure to complete within the time stipulated, a failure to progress works at a rate which would enable completion within the time stipulated would, at least, be evidence supporting the contention that [Hometeam] had failed to progress the works with due diligence.”

115 The primary judge did not expressly reject Hometeam’s challenge to the technical validity of the Notice. That finding must, in my view, be inferred from paragraphs ([200] and [202]).

Establishing absence of due diligence

116 The primary judge said (at [203]) that “regardless of when the Contract commenced or when the Works were due to be completed” the question whether Mr McCauley was entitled to issue the Notice of Default turned upon whether the Works were proceeding with due diligence immediately before it was issued.

117 The respondent’s case (see [204]) was that Hometeam’s “lack of due diligence in the period immediately before 14 July was consistent with its desultory performance for the entire period from mid October 1999”.

118 The primary judge held (at [206]) that Mr McCauley was entitled to issue the Default Notice for the following reasons (numbers added):

“1. Allowing for delays associated with stonework rectification, up to 14 July approximately 30% (less than one third of) the original contract works had been done … but the works had taken 27 weeks (more than two thirds of the time stipulated in the Contract).

2. The works had always proceeded at a desultory pace.

3. Almost no work was done during the period June to mid July, except for some formwork which Mr McCauley himself had organised.

4. There had been no response to Mr McCauley’s letters of 15 or 28 June by way of an increase in the rate at which work was being undertaken.

5. There was reliance by Hometeam on a variety of excuses (late delivery of the Stegbar windows, the need for a security account, the Olympic Games) but no evidence was produced (either at the time or at the hearing) to support the proposition that any such matter provided a real reason for a substantial delay.”

Hometeam’s response to the Notice

119 Having concluded Mr McCauley was entitled to issue the Notice of Default, the primary judge considered whether Hometeam had remedied the breach to which it referred.

120 The Notice gave Hometeam 10 working days to remedy the breach. As I have noted that period expired on 31 July.

121 The primary judge found (at [208]) that in order to remedy the default, it was essential that Hometeam should have begun “to work in a diligent manner”. She also said, however, that absent the “clearest display of diligent conduct, it would have been highly advisable to provide a programme for completion, thereby demonstrating a commitment to proceed diligently which went beyond a 10 day burst of activity”.

122 The primary judge referred (at [210]) to Mrs McCauley’s evidence that some work was done in the period 15 – 25 July and that she could not identify a particular delay during that period. However, her Honour appears to have preferred her interpretation of photographs taken on 15, 21, 22 and 29 July 2000 as supporting the conclusion “there was little, if any change in the work which had been done on site during that period”. She concluded (at [211] – [214]) that the work done during that period merely comprised taking delivery of some windows, restacking some bricks on the site and propping a number of windows into position on a temporary basis.

123 Her Honour then said:

“[213] In fact, if one takes into account the periods 9 August to mid September (5 weeks), time lost in November for no apparent reason (say, 2 weeks), approximately 2 weeks of unexplained activity in February 2000 and the period from 7 March (by which time I infer that rectification work was complete), then (excluding the Christmas break and time lost in connection with rectification) the works had occupied approximately 27 weeks up to 14 July and 29 weeks up to 31 July.”

124 The primary judge accepted (at [209]) that it was relevant to consider building work undertaken beyond 31 July as providing some evidence of Hometeam’s intention to work diligently and to put into context the work done during the 10 days specified in the Notice. In this respect she concluded (at [215]) that the photographs showed that between 29 July and 7 August 2000 “a reasonably significant amount of further brickwork was undertaken on the site”. However, she also found that there “was no evidence of any other work having being undertaken apart from the sudden short burst of brickwork”.

125 I interpolate to note the appellant’s contention that at this stage the contract required it to be carrying out bricking work, that a period of 8 or so days (between service of the Notice of Default and its expiry) allowed for little more than a “short burst of activity” and, further, that there was no evidence it should have been carrying out other work.

126 The primary judge found (at [217]) that Hometeam’s response to the Default Notice was inadequate in that it had not begun to work in a diligent manner in the period 17 – 31 July or 17 July – 7 August nor had it demonstrated an intention to work in that manner by providing a programme for completion. She held (at [220]) that Hometeam had failed to remedy the breach identified in the Notice of Default and that the Notice of Termination effectively terminated the Contract.

127 Having held that Mr McCauley was entitled to terminate the Contract the primary judge assessed the damages to which Mrs McCauley was entitled on the cross-claim at $240,385 plus interest.

The Notice of Default: technical validity

128 It will be recalled that pursuant to cl 38.1(d) the appellant relevantly warranted that “the building works will be done with due diligence and within the time stipulated in this contract, or if no time is stipulated, within a reasonable time” and that cl 33.1(a) provided that if a party was in substantial breach of the Contract the other party might give the party in breach a written notice stating details of the breach. The operative part of the Notice of Default complained:

DETAILS OF BREACH

129 The appellant submitted that the Notice of Default was invalid because it failed to provide “details of the breach”, as required by clause 33.1(a). It argued that the Notice must identify with precision the nature of the asserted breach in order that it could accept or deny the breach, and determine whether, and if so by what means, it might be remedied. It relied on Fletcher v Nokes [1897] 1 Ch 271 at 274.

130 Rather than comply with this obligation, the appellant complained, the Notice of Default merely identified cl 38.1(d) of the Contract and asserted a failure to proceed with the building works “with due diligence”. The appellant contended the Notice of Default made it “quite impossible for any reasonable builder in the position of Hometeam to consider and determine what steps were required to be taken to remedy the asserted breach”.

131 Next, the appellant submitted that cl 38.1(d) imposed a conjoint obligation, i.e. “with due diligence and within the time stipulated ...”. It argued the use of the conjunction objectively denoted the intention of the parties that there could be no breach of cl 38.1(d) unless the Works were undertaken both with an absence of due diligence and beyond the contractual time stipulation. This, it contended, reflected the proposition that an absence of due diligence which would not extend the contractual time stipulation would not be productive of damage to the owner so that, viewed objectively, a breach of both requirements was necessary before the procedure preparatory to terminating the Contract could be put in train. Accordingly, it argued, because the Notice of Default identified no time stipulation which had been exceeded, nor referred to any other aspect of the work which had not been undertaken with due diligence, it was, for this reason too, invalid.

132 Finally the appellant complained that the inclusion of the assertion of the words “regularly” and “without delay” which did not appear in cl 38.1(d) were not merely surplusage but were such as to make the Notice apt to confuse the objective recipient in the appellant’s position.

133 The respondent submitted that the Notice of Default was valid. She relied upon the following statement in Hudson's Building and Engineering Contracts, (11th Ed, paragraph 12.033) concerning common contractual determination clauses which require written notice in one form or another at the time of determination of the contract (footnote included):

Re Stewardson Stubbs & Collett Pty Ltd & Bankstown Municipal Council

134 The respondent also argued that cl 38.1(d) did not impose a conjoint obligation as to do so would render the obligation of "due diligence" otiose. The respondent submitted that if the appellant's construction was taken to its logical conclusion, a builder could fail to carry out any work on a site until the expiration of the contract period with impunity.

Technical validity: consideration

135 I would add to the respondent’s reference to paragraph 12.033 in Hudson’s the following passage:

“(b) Contents of notice

and particularly where continuation of the default is made a condition of any second notice), but further detail, particularly in regard to a generalised ground like due diligence, will not usually be called for.

136 Hudson’s paragraphs 12.033 and 12.034 reflect decisions stretching back to Pauling v Mayor, Alderman & Burgesses of Borough of Dover (1855) 10 Exch 53; (1855) 156 ER 644, in which courts have held that a notice claiming a breach of a term of a building contract requiring the builder to “proceed with the Works with reasonable diligence ….”, or not substantially different, was valid where it identified the default by repeating the words of the condition allegedly breached. In Pauling the plaintiff, an engineer, contracted to execute certain works, inter alia, “with due expedition”. The plaintiff was given a notice requiring him to proceed with the works “with due expedition”. Baron Parke said (at 646) that where:

“… the objection of the engineer is that the work in general is done in a negligent and sluggish manner … [i]t is, sufficient for him to give a general notice of this description. He tells the plaintiff he is proceeding in a negligent and slow manner, and requires him to do the work better, and with more expedition. Such a notice is good.”

137 In Re Stewardson Stubbs & Collett Pty Ltd & Bankstown Municipal Council [1965] NSWR 1671 Moffitt J (as he then was) considered cl 19(a)(2) in a building contract which said that default occurred if, inter alia:

“(2) [The builder] fails to proceed with the works with reasonable diligence …”

138 Clause 19 entitled the proprietor to terminate the contract if the builder continued the default for 14 days after being given “a notice … specifying the default”. Moffitt J said (at 1675) that the question whether the notice was proper “should be determined from the practical viewpoint by asking whether commercial persons such as a builder would understand clearly that it was a notice under cl 19(a)”.

139 His Honour held (at 1675) the notice sufficiently complied with cl 19(a)(2). He said, (at 1675 – 1676):

But each case will depend on its own circumstances as to whether in order to specify the default there must be added some particulars such as will identify the particular breach alleged

140 The respondent submitted that the closest form of wording analogous to that in cl 33.1 was found in the E5b Australian Building Contract considered by this court in Brenmar Building Co Limited v University of Newcastle reported in (1999) 15 BCL 467 although it was decided in 1977. In that case cl 22(a) of a building contract provided:

…

(ii) if he fails to proceed with the works with reasonable diligence or in a competent manner …

then ... the Architect may send to him … a written notice specifying the default and stating the intention of the Proprietor to determine the employment of the Builder and if the Builder fails to remedy such default in a bona fide manner within 14 days after receipt of such notice, then the Proprietor may ... determine the employment of the Builder …”

141 The University issued a notice to Brenmar in the following terms:

within the terms of item (ii) of the above mentioned clause the Proprietor intends to determine the employment of the Builder within 14 days after receipt of this notice if the Builder fails to proceed with the works with reasonable diligence or in a competent manner.”

142 At first instance Meares J declared the notice was invalid because it failed, in substance, to specify the default in such a fashion as to give the builder a practical opportunity to remedy the defect claimed. On appeal, the University accepted (at 468) that cl 22(a)(ii) gave the proprietor two grounds on which to give a notice, a failure to proceed with the works with reasonable diligence and a failure to proceed with the works competently. In allowing the University's appeal and holding that the notice was sufficient to comply with cl 22(a)(ii), Hutley JA said (at 468 – 469):

“The contention of the builder was that much greater specification was required. There being no particularisation of the ways in which he failed to perform the work in a competent manner, he did not know, it was said, what was required of him. He did not know how he could rectify the failure to perform in a competent manner. I would not have thought that this would extricate him from his difficulties because the fact that he is ignorant of what is required under this limb would not, in my opinion, have protected him, assuming that it can ultimately be established in an arbitration that he did not proceed with the works with reasonable diligence and had failed to rectify this default after 14 days notice.

However both authority and commonsense, in my opinion, fully support the view that to inform a builder that he has not been proceeding with the general task that he has been given - not with a particular item - in a competent manner or with reasonable diligence is sufficient specification

143 Glass and Samuels JJA concurred. Samuels JA added that, in his view, cl 22(a)(ii) was not primarily concerned with rectification but with future performance. He referred to Moffitt J’s statement in Re Stewardson Stubbs & Collett Pty Ltd & Bankstown Municipal Council (at 1673) that, in substance, if a clause like cl 22(a)(ii) required the specification of “a lengthy list of specific defects, it would certainly prove quite impossible to remedy a great many of them within the 14 days permitted by the clause”. His Honour then said that the defaults upon which the operation of cl 22(a)(ii) hinged were broadly expressed and were (at 470):

“… really intended to describe the builder's general approach to his work and to attract a requirement that his performance should satisfy the descriptions both of reasonable diligence and competence … The default, however, is not, to my mind, the detailed manifestation of lack of diligence or of competence in the inadequate condition of or delay in particular work but the state of lack of diligence or of incompetence . Hence it is sufficient to identify such a default by reference only to those characteristics without condescending to greater particularity.” (emphasis added)

247 The appellant submitted that there was no evidence to contradict Mr Goulding’s evidence that the approach the appellant had taken to await the delivery of the windows before undertaking brickwork was, in the circumstances, good building practice. It argued once that evidence was accepted, the conclusion followed that the period awaiting the delivery of the windows was not a relevant “delay”.

248 The respondent submitted the primary judge did not err in her findings with respect to the Stegbar windows. She relied on two complaints concerning the time the windows were ordered and delay in booking the bricklayers but these did not feature in the primary judge’s reasons and can be set aside. Next, she argued that that the primary judge correctly concluded that the delay in the delivery of the windows was not significant in the totality of the job and that it was not necessary for the windows to be delivered before the brickwork could commence and it was not necessary for the windows to be delivered before the brickwork around the window openings could be constructed. She submitted the primary judge was entitled to accept Mr Martin’s evidence on this point.

249 In my view the appellant’s submissions should be accepted. The appellant’s evidence that it was good building practice to wait for the windows before undertaking brickwork was not challenged. It was the explanation given for the delay immediately prior to the issue of the Notice of Default. In the absence of any cross-examination to suggest this explanation was unreasonable, it was not open to her Honour to conclude that another method should have been employed. Further, to the extent Mr Martin said there were “plenty of jobs” that could have been done pending arrival of the windows, this evidence did not descend to any level of specificity and could not, in my view, found a conclusion of absence of due diligence.

250 Although I accept that, in the scheme of things, the 2 – 3 weeks of delay occasioned by the late delivery of the windows may not have been of great significance in the primary judge’s ultimate conclusion concerning due diligence, nevertheless to the extent that they formed any basis for that conclusion, they were erroneous.

Time taken for original contract works: summary

251 The appellant submitted that when allowance was made for delays to the original contract works associated with the rectification work from 17 September 1999 to 17 April 2000 (i.e. 31 weeks, including the Christmas shutdown), the curing of the suspended slab (4 weeks) and the late delivery of the Stegbar windows (3 weeks), the original contract works had taken at most 11 weeks up to 14 July 2000 (i.e. 49 weeks from 9 August 1999 to 14 July 2000 less 31 weeks, less 4 weeks, less 3 weeks equals 11 weeks), not the 27 weeks found by the primary judge. That meant that approximately 30% of the original contract works had been done in approximately 30% of the time stipulated in the Contract (i.e. 11 weeks as a percentage of 37 weeks).

Desultory pace (judgment [206] para 2)

252 The appellant next challenged the primary judge’s finding that Mr McCauley was entitled to issue the Notice of Default because “the works had always proceeded at a desultory pace”. The appellant contended that that conclusion was erroneous both generally, and particularly if its submission that by 14 July 2000 approximately 30% of the contract works had been undertaken in about 30% of the time stipulated in the Contract was accepted.

253 The primary judge had founded her conclusion that the Works proceeded at a desultory pace (at [165]) on the proposition that “if one compared the apparent rate at which work was progressing in the period late January to mid April 2000 with the apparent rate of progress in the period mid April to late June 2000, no substantial difference could be detected”. The appellant submitted that her Honour’s reasoning provided no more than a comparison of rates of progress in various periods of time.

254 In my view this finding ultimately stood or fell by reference to the findings which were made, or ought to have been made, concerning the performance of particular stages of the work. It cannot, in the circumstances of this case, amount to an independent finding of lack of due diligence.

255 The closest the evidence came to an assertion that the overall period the work had taken was such as might attract a “desultory pace” finding was Mr Martin’s statement that the work he saw when he inspected the site in about early August 2000 having regard to his experience and “excluding rain or unusual delays … should have taken about 10 weeks to reach that stage”. The respondent relies on this evidence as part of her case that the appellant had failed to perform the Works with due diligence.

256 It does not appear that the primary judge relied upon this evidence as she observed (at [212]) that the 10 week period “did not take into account work on the sandstone foundations (which Mr Martin could not observe) or delays caused by unforeseen circumstances”. It is apparent that her Honour concluded, properly in my view, that Mr Martin’s evidence in this respect could be given little, if any, weight. It was expressed in the most general of terms and paid no regard to the particular circumstances of the site, not least the necessity to undertake the rectification work.

257 In my view the errors which the appellant has established attending the primary judge’s findings concerning the progress of the Works lead to the conclusion that she erred in finding that the respondent had established that “the works had always proceeded at a desultory pace” – at least insofar as such a finding might independently support an entitlement to issue the Notice of Default.

June - mid July (judgment [206] para 3)

258 The third reason given by the primary judge as justifying the Notice of Default was that almost no work was done in the period June to mid July, except for some formwork. While the appellant accepted it was “largely true” that little brickwork was done in that period, it submitted this was because brickwork could not be laid on the suspended slab from about 24 May 2000 to about 22 June 2000 while it was curing and that the Stegbar windows were not delivered until 20 July 2000. It pointed out that the only other brickwork (i.e. on the garage slab) which had been completed by 10 June and other work that could have been done (formwork and pouring of the terrace slab) was done during this period.

259 The appellant contended the primary judge’s conclusion that Hometeam was not doing the work diligently failed to take into account work which was done and the delays associated with the suspended slab and the Stegbar windows. Finally it argued there was no evidence that other work could have been done during this period.

260 The appellant’s submission must be accepted in the absence of evidence from the respondent about what work she contended the appellant should have been doing during this period and that there was no reason why that work was not being done.

No increased work rate (judgment [206] para 4)

261 The appellant challenged the primary judge’s conclusion that there was no response to Mr McCauley's letters of 15 or 28 June by way of an increase in the rate at which work was being undertaken. It submitted, in essence, that this proposition missed the point. It pointed out “there clearly was a response to those letters, by way of an explanation that the delivery of the Stegbar windows had been delayed and that it was not good building practice to commence the brickwork before the Stegbar windows had been delivered”. This is correct. As I earlier explained, Mr Goulding wrote to Mr McCauley on 30 June 2000 drawing his attention to his letter of 5 June 2000, detailing among other matters the problem with the delayed arrival of the Stegbar windows and claiming an extension to the Contract under cl 9.1(h) from 26 June until the windows arrived.

262 As I have already held (see [249]) that the appellant was entitled to wait for the windows to arrive before commencing brickwork, it follows that there could have been no increase in the work rate until they arrived.

263 The appellant’s submission must be accepted.

Other excuses (judgment [206] para 5)

264 Finally the appellant criticised the primary judge’s finding that it had relied on “a variety of excuses” but had produced no evidence to support the proposition that any such matter provided a real reason for substantial delay.

265 It contended it had adduced evidence relating to two of the three “variety of excuses” to which her Honour referred: that there were shortages of materials which led to work having to be stopped on site and the late delivery of the Stegbar windows. In particular it submitted the late delivery of the Stegbar windows was a genuine reason for not continuing with the brickwork and not merely an excuse because the brickwork re-commenced on the windows being delivered.

266 It is sufficient to note that the appellant has established a reason for the delay in undertaking brickwork caused by the late delivery of the Stegbar windows. It is not necessary, in my view, to explore the factual basis for the other “excuses” to which the primary judge referred.

Due diligence: conclusion

267 The appellant’s submission that the primary judge’s reasons for finding that as at 14 July 2000 Hometeam was in breach of the cl 38.1(d) obligation to carry out the Works with due diligence were erroneous must be accepted.

Entitlement to terminate the Contract

268 This conclusion makes the question concerning the correctness of the primary judge’s finding that Mr McCauley was entitled to terminate the Contract academic. However, I will deal with it briefly.

269 The appellant submitted that even if Mr McCauley was entitled to give Hometeam the Notice of Default, the primary judge erred in holding that the Notice of Termination effectively terminated the Contract.

270 It contended there were a series of errors in the approach taken by the primary judge to the termination issue. Again, I do not consider it necessary to consider all the matters upon which the appellant relied. The appellant complained her Honour erred in considering that the question whether Mr McCauley was entitled to give the Notice of Termination under cl 33.2 of the Contract was to be determined by finding whether the breach was remedied by 31 July 2000 (when 10 working days had passed since the notice of default had been given) rather than by determining whether the breach was remedied by 8 August 2000 (when the Notice of Termination was given). Although it accepted that the primary judge took into account building work done beyond the 10 working day period, it contended she erroneously confined its relevance to determining whether Hometeam had remedied the breach by the end of the 10 working day period.

271 The appellant contended that if the primary judge had considered whether Hometeam had remedied the breach as at 8 August 2000, not as at 31 July 2000, having regard to her finding that a reasonably significant amount of brickwork was undertaken on the site between 29 July and 7 August 2000, she would have found that it was doing the building works with due diligence as at 8 August 2000.

272 The appellant submitted the primary judge seemed largely to have ignored the evidence which demonstrated that Hometeam was proceeding with due diligence on the expiry of ten days after the giving of the Notice of Default and from then until the Notice of Termination was given, including the following:

(a) that it commenced work immediately on the delivery of the Stegbar windows and, significantly, before it received the default notice on 20 July 2000 in that it had carpenters and bricklayers on site doing brickwork and propping up the windows that had been delivered on 12 or 13 July 2000.

(b) that the Stegbar windows delivered on 12 or 13 July had been positioned and partially bricked in by 15 July, so that the works then awaited the delivery of further windows. The remainder of the Stegbar windows were not delivered until about 20 July 2000, and photographs showed them as being propped and bricked into position between 22 and 29 July.

273 The appellant also criticised the primary judge’s finding that while a reasonably significant amount of further brickwork was done between 29 July and 7 August, there was no evidence of any other work having been done apart from this "sudden short burst of brickwork". It submitted that that finding was erroneous in that:

(i) there was not only no evidence that Hometeam should have been doing any other work apart from brickwork, but Mr Martin, the respondent’s builder, gave evidence that the brickwork done by the appellant between 29 July and 7 August was appropriate work to move the building forward;

274 Finally the appellant challenged the primary judge’s conclusion that it should have provided Mr McCauley with a program for completion in order “to communicate an intention to work diligently”. It is sufficient, in this respect to note that the Contract did not require a program for completion. In addition, the primary judge had accepted (at [81]) Mr Martin’s evidence that a construction program was "a waste of time".

275 The respondent contended that it was unnecessary to decide any question as to the construction of cl 33.2 to determine whether the appellant’s conduct as at August as opposed to 31 July was relevant to whether it had remedied the breach because the primary judge had, in fact, considered the appellant’s conduct up until 8 August 2000. In this respect the respondent contended there had been no appreciable change to the situation of the Stegbar windows between photographs taken on 29 July and some taken on 7 August 2000 “although some additional brickwork is evident” and that the primary judge had been entitled to take the view “that apart from the sudden short burst of brickwork”, there was no evidence of any other work being done.

276 Finally the respondent contended there was nothing in the appellant’s conduct which warranted a finding that it had remedied the breach referred to in the Notice of Default. The respondent submitted that it was a matter for the primary judge to consider whether, in the circumstances, the default has been rectified. In so doing, she contended, the primary judge was entitled to consider the surrounding circumstances, including the defaulting party's earlier conduct as well as matters indicative of its future intention. She relied upon Brenmar Building Co Limited v University of Newcastle where Glass JA said (at 470):

“[the clause] is not primarily concerned with rectification but rather with future performance ... [They] are really intended to describe the builder's general approach to his work …"

Entitlement to terminate: conclusion

277 It is difficult, in my view, to sustain the primary judge’s conclusion that, the respondent had demonstrated that the appellant had not remedied any lack of due diligence.

278 First, it should be noted that Mrs McCauley gave evidence that during the period 15 – 25 July she was not complaining of lack of activity and, to her observation, the work was progressing properly.

279 The primary judge does not explain why she preferred her interpretation of photographs for the period 15 – 29 July as the basis for concluding that the appellant had not begun to work in a diligent manner in that period to Mrs McCauley’s evidence that, for at least 10 days of this period, work was proceeding properly.

280 Further, as the appellant submits, it is difficult to understand why the primary judge concluded that the “10 day burst of activity” which she accepted took place between 29 July and 7 August 2000 when “a reasonably significant amount of further brickwork was undertaken” did not demonstrate that the appellant was working in a diligent manner. As the appellant submitted, undertaking brickwork was, at this stage, the next step in the Works and, further, in the 8 or so days from 29 July little more could be undertaken than what would appear to be a “sudden short burst of brickwork”.

281 The question whether the appellant produced a programme for completion of the Works was factually irrelevant. It was not a contractual obligation, and was "a waste of time" according to Mr Martin. Assuming evidence of the appellant’s intention to perform in the future was relevant to the question whether it had remedied any breach that intention was sufficiently manifest, in my view, in the work it undertook after the Notice of Default was served.

282 In my view the primary judge erred in concluding that Mr McCauley was entitled to serve the Notice of Termination.

Damages on the cross-claim

283 The final ground of appeal concerns the damages the primary judge awarded the respondent.

284 In order to determine the damages to which the respondent was entitled on the cross-claim it was necessary for the primary judge first to determine the percentage of the Works which were complete at the date of the termination of the Contract. Although, having regard to my conclusion that the appeal against the primary judge’s finding in the respondent’s favour on the cross-claim should be set aside renders issues of damages academic, it is appropriate to consider the appellant’s complaints under this heading in case the matter goes further.

285 The appellant contended that there were four errors in the primary judge’s assessment of damages. Two of those (a claim for rent and a claim for liquidated damages) turned on the appellant’s abandoned argument that the contract period had not commenced to run and can be set aside.

286 The other two complaints are that the primary judge erred:

(a) in failing to deduct the amount of 5% from the calculation of the value of works completed at the time the appellant left the site;

287 The primary judge’s approach to the calculation of damages on the cross-claim (which the appellant did not challenge) was that the respondent was entitled to recover the total amount paid in relation to completion of the Works (payments to the appellant plus reasonable costs to complete plus GST on the reasonable costs) less the adjusted contract sum (the original contract sum plus the value of variations). Determining the “reasonable costs to complete” depended, in the first instance, on determining what work had been completed as at 8 August 2000.

288 Before the primary judge the appellant submitted (see [233]) that the Schedule of Progress Payments provided a guide as to the percentage of the Works completed at the date it left the site. It argued that 27% of the progress payments had been paid, being the 5% deposit and 22% on the first two progress claims. It also submitted that if Mr Goulding’s evidence was accepted it was only 7 days away from issuing progress claim 3 which would have rendered the respondent liable to a further 15% of the total sum payable under the Contract. It must have discounted the total percentage of 42% because her Honour recorded (at [233]) that the appellant argued the Schedule of Progress Payments suggested at least 35% of the Works had been completed by 8 August.

289 While the primary judge accepted the appellant’s approach to estimating the percentage of works completed, she held (at [234]) it incorrectly took into account the 5% deposit paid in respect of tasks undertaken prior to the practical commencement of building work. Accordingly, she concluded that about 30% had been completed by 8 August 2000.

290 If the appellant succeeds in the first challenge to her Honour’s assessment of damages on the cross-claim, the consequence is to increase the notional value of the Works completed as at 8 August 2000 and correspondingly reduce by the amount of the 5% deposit of $19,670, the damages awarded to the respondent.

291 The respondent accepted that the quantity surveyors assessed the value of works completed when the appellant left the site as one means of assessing the time taken to perform the Works. However, the respondent contended that the actual value of works performed at the time the appellant left was not considered in the assessment of damages. That is incorrect. Her Honour’s calculation of the damages on the cross-claim (at [277]) includes an assessment of what it would reasonably cost to complete the Works. That calculation depended upon determining what works were completed, at the time the appellant left the site in order to determine what was outstanding.

292 The respondent did not challenge the proposition that the deposit represented an allowance for preliminary works.

293 The appellant’s written submissions asserted that both parties’ quantity surveyors considered that it was “proper and usual costing practice” to make an allowance for the cost of preliminary work (such as site establishment) before demolition and that such an allowance should have been made in the present case. No reference was given to the experts’ evidence in this respect. The appellant also submitted that as the deposit was not refunded on the completion of the Works, it was properly to be considered as payment for work done, not merely as an earnest for performance.

294 The primary judge did not explain why it was incorrect to take into account the 5% deposit.

295 In the light of the appellant’s submission concerning the experts’ common position in relation to an allowance for preliminary work, I would hold that the primary judge ought to have taken into account the 5% deposit in determining the percentage of work completed as at 8 August 2000.

296 The final complaint concerning the primary judge’s preference for Mr Deeks’ evidence can be dealt with briefly. Both experts gave evidence by way of report and were called and cross-examined. Her Honour analysed their competing evidence and accepted the submissions made by the respondent for preferring Mr Deeks’ evidence to that of Mr Barker. Her Honour’s decision as to which of the experts she accepted was clearly open to her. In my view the appellant has not established that she erred in this respect.

Orders

297 The respondent did not contest the proposition that if the appeal was successful so that Mr McCauley had not been entitled to issue the Notices of Default and Termination, his conduct constituted repudiation of the Contract which would have entitled the appellant to a verdict on its claim.

298 The following orders should be made:

Statement of Claim

(1) Appeal allowed.

(2) Set aside the verdict for the respondent on the claim and all orders (including costs orders) made on the claim by Murrell DCJ on 18 June 2003.

(3) Verdict for the appellant on the claim.

(4) Remit the matter to Murrell DCJ to quantify the loss or damage suffered by the appellant and determine all questions of costs of the claim.

Amended Cross-Claim

(5) Set aside the verdict, judgment and orders made against the appellant on the cross-claim by Murrell DCJ on 18 June 2003.
(6) Verdict for the appellant on the cross-claim.

(7) Order the respondent to pay the appellant’s costs of and incidental to the cross-claim.

Costs of Appeal

(8) Respondent to pay the appellant’s costs of and incidental to the appeal.

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Citations

Hometeam Constructions Pty Ltd v McCauley [2005] NSWCA 303

Most Recent Citation

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Cases Cited

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CITATION:	Hometeam Constructions Pty Ltd v McCauley [2005] NSWCA 303
HEARING DATE(S):	27 September 2004; 28 September 2004
JUDGMENT DATE:	7 September 2005
JUDGMENT OF:	Ipp JA at 1; Tobias JA at 2; McColl JA at 3
DECISION:	Statement of Claim; (1) Appeal allowed.; (2) Set aside the verdict for the respondent on the claim and all orders (including costs orders) made on the claim by Murrell DCJ on 18 June 2003.; (3) Verdict for the appellant on the claim.; (4) Remit the matter to Murrell DCJ to quantify the loss or damage suffered by the appellant and determine all questions of costs of the claim.; ; Amended Cross-Claim; (5) Set aside the verdict, judgment and orders made against the appellant on the cross-claim by Murrell DCJ on 18 June 2003.; (6) Verdict for the appellant on the cross-claim.; (7) Order the respondent to pay the appellant's costs of and incidental to the cross-claim.; Costs of Appeal; (8) Respondent to pay the appellant's costs of and incidental to the appeal.

CATCHWORDS:	BUILDING & ENGINEERING CONTRACTS - Notice of Default - whether Notice technically valid - construction - whether warranty to perform building works with due diligence and within the time stipulated in the contract imposed conjoint obligation - due diligence - breach of contract - onus of proof - works not completed by date set for practical completion - evidence of failure to perform building work with due diligence - explanation of period works took. (D)
LEGISLATION CITED:	Conveyancing Act 1881 (Imp) Fair Trading Act 1987 Home Building Act 1989 Trade Practice Act 1974
CASES CITED:	Australian Development Corporation Pty Ltd v White Constructions (ACT) Pty Ltd (1996) 12 BCL 317 Brady v Group Lotus Car Cos plc [1987] 3 All ER 1050 Brenmar Building Co Pty Ltd v University of Newcastle (1999) 15 BCL 467 Etlis v New Age Constructions (NSW) Pty Ltd [2005] NSWCA 165 Fletcher v Nokes [1897] 1 Ch 271 Pauling v Mayor, Alderman & Burgesses of Borough of Dover (1855) 10 Exch 753; (1855) 156 ER 644 Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 Greater London Council v Cleveland Bridge & Engineering Co Ltd (1986) 34 BLR 50 Hart v MacDonald [1910] HCA 13; (1910) 10 CLR 417 Hick v Raymond & Reid [1893] AC 22 Hobbs v Petersham Transport Co Pty Ltd [1971] HCA 26; (1971) 124 CLR 220 Hooker Constructions Pty Ltd v Chris's Engineering Contracting Co [1970] ALR 821 Hounslow London Borough Council v Twickenham Garden Developments Ltd [1971] Ch 233 Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 Maynard v Goode [1926] HCA 4; (1926) 37 CLR 529 Minister for Public Works v Renard Constructions (ME) Pty Ltd (Supreme Court of New South Wales, unreported, 15 February 1989, BC8902548) Re Stewardson Stubbs & Collett Pty Ltd & Bankstown Municipal Council [1965] NSWR 1671 State of New South Wales v Austeel Pty Ltd [2003] NSWCA 392 Watson v George [1953] HCA 41(1953) 89 CLR 409 Westminster Corporation v J Jarvis & Sons Ltd and Another [1970] 1 WLR 637 Hudson's Building and Engineering Contracts (11th Ed)
PARTIES:	Hometeam Constructions Pty Ltd (Appellant) Fiona McCauley as Administrator for the Estate of the Late Luke McCauley (Respondent)
FILE NUMBER(S):	CA 40587/03
COUNSEL:	Mr M L D Einfeld QC/Mr A J L Ogborne (Appellant) Ms E M Olsson SC (Respondent)
SOLICITORS:	Bruce & Stewart Commercial Practice (Appellant) Deacons (Respondent)

LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	DC 10346/02
LOWER COURT JUDICIAL OFFICER:	Judge HG Murrell SC

INDEX	Para No
Introduction	3
Grounds of Appeal	8
Statement of the case	12
The Contract	25
The judgment below	38
Work commences	46
Mid September to mid October 1999 – a dispute emerges	47
Progress from mid October 1999	51
Hometeam ceases work over Christmas 1999	60
Work recommences in late January/February 2000	62
April/May 2000	72
Extension of time	79
The date for practical completion	86
Delays in May/June 2000	88
The Stegbar windows	96
Mr McCauley asserts breach of contract	101
The Notice of Default	106
Establishing absence of due diligence	116
Hometeam’s response to the Notice	119
The Notice of Default: technical validity	128
Technical validity: consideration	135
Establishing absence of due diligence	163
The parties’ approach to the due diligence issue	182
Were the works “done with due diligence”?	192
Time taken for original contract works	200
Photographs of 26 February 2000 and 22 March 2000	210
Certificate of structural adequacy	221
Claim of 7 March 2000	228
Completion of rectification work: conclusion	235
The suspended slab	236
The Stegbar windows	242
Time taken for original contract works: summary	251
Desultory pace	252
June – mid July	258
No increased work rate	261
Other excuses	264
Due diligence: conclusion	267
Entitlement to terminate the Contract	268
Entitlement to terminate: conclusion	277
Damages on the cross-claim	283
Orders	297