Jeffcott v Da Vesi Construction Group Pty Ltd - [2024] ACTSC 366

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title:	Jeffcott v Davesi Construction Group Pty Ltd
Citation:	[2024] ACTSC 366
Hearing Dates:	4 September 2023 – 6 September 2023, 13 September 2023, 23 October 2023, 18 July 2024 (written submissions), 25 July 2024 (written submissions)
Decision Date:	15 November 2024
Before:	Baker J
Decision:	See [208]
Catchwords:	CIVIL LAW – BUILDING AND CONSTRUCTION – breach of contract – Building Contract and Project Management Agreement entered into at same time – allegations of agency and sham not pressed – whether contracts inconsistent – defects in construction of residential building – whether delay in practical completion – alleged lock out from property – damages incurred owing to delay in completing property – rectification of defects – whether evidence of valid insurance policy
Legislation Cited:	Building Act 2004 (ACT), ss 25, 42, 88 Home Building Act1989 (NSW), ss 18B(1)(d), 18G
Cases Cited:	Adapt Constructions v Whittaker and Luff [2015] ACTSC 188 Baese Pty Ltd v RA Bracken Building Pty Ltd (1990) 6 BCL 137 Cappello v Hammond & Simonds NSW Pty Ltd [2020] NSWSC 1021 Cappello v Hammond & Simonds NSW Pty Ltd [2021] NSWCA 57 Carbone v Fowler Homes Pty Ltd; Carbone v Fowler Homes Pty Ltd [2024] NSWCA 192 Hannigam v Inghams Enterprises Pty Ltd [2021] NSWSC 641 J-Corp Pty Ltd v Mladenis [2009] WASCA 157; 26 BCL 106 Jones v Dunkel [1959] HCA 8; 101 CLR 298 New Cap Reinsurance Corporation Ltd (In Liq) v Daya [2010] NSWSC 1226 Oxford (NSW) Pty Ltd v KR Properties Global Pty Ltd t/as AK Properties Group ABN 62 971 068 965 [2023] NSWSC 343 Taylor v Johnson [1983] HCA 5; 151 CLR 422 Temloc Ltd v Errill Properties Ltd (1987) 39 BLR 30 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165
Texts Cited:	JD Heydon, Heydon on Contract (Law Book Company, 2019)
Parties:	Mark Jeffcott ( Plaintiff) Davesi Construction Group Pty Ltd ( Defendant)
Representation:	Counsel J Foley ( Plaintiff) R Markham ( Defendant)
Solicitors Chamberlains Law ( Plaintiff) Adero Law ( Defendant)
File Number:	SC 532 of 2021

BAKER J:

Introduction

1․In 2017, the plaintiff and Ms Clare Steve purchased a property in Griffith, with the intent of jointly constructing a duplex apartment, consisting of two dwellings, one of which would be occupied by the plaintiff and his wife, the other of which would be occupied by Ms Steve, and her husband, Mr Anthony Steve. The plaintiff and Mr Steve were close friends, having worked together for many years. Mr Steve told the plaintiff that he knew a builder who could build the duplex. That builder was Mr Stevanovic, the owner and director of the defendant.
2․On 24 August 2017, the plaintiff and Ms Steve entered into a Project Management Agreement for Residential and Commercial Works in the ACT (Project Management Agreement) with the defendant. On the same day, the same parties also entered into an ACT Home Building Contract (the Building Contract). Both agreements utilised standard form contracts issued by the Master Builders Association of the Australian Capital Territory (ACT).
3․In the Project Management Agreement, Ms Steve and the plaintiff appointed the defendant as the Project Manager of the building project. The parties agreed that the defendant would be paid 10% of the total cost of the project. In contrast, in the Building Contract, the defendant agreed to build “the works” for a total cost of $2 million. The parties had different understandings as to the purpose and effects of these two contracts. As discussed further below, neither party’s understanding accorded with the terms of the contracts.
4․The parties also engaged in complicated financial dealings. On first impression, those dealings suggested that the Building Contract may have been a sham, potentially to obtain finance for either or both of the plaintiffs or Ms Steve.
5․The plaintiff denied this to be the case, contending that both agreements were in force at all relevant times. Although the defendant submitted that the Building Contract was a sham in the written outline of submissions that it filed shortly before the commencement of the hearing, this allegation was not pleaded in the defence. Mr Markham, who appeared for the defendant, declined an opportunity to seek leave to amend the defence, and informed the Court that the defendant preferred to proceed on the contention that, as a result of irreconcilable inconsistencies in the terms of the agreements, the Project Management Agreement should be construed as operating in “substitution” for the Building Contract. In the alternative, Mr Markham contended that any particular clauses in the Project Management Agreement should “override” any inconsistent clauses in the Building Contract.
6․It is clear from the evidence that there was also a lack of shared understanding concerning Mr Steve’s role in the project. As outlined below, Mr Stevanovic (the owner and director of the defendant) understood that Mr Steve was the plaintiff’s agent. However, the plaintiff had not authorised Mr Steve to be his agent. Although agency was pleaded in the defence, this allegation was also withdrawn by Mr Markham on behalf of the defendant during the course of the hearing.
7․In view of the complexity of the arrangements that had been entered into, it is perhaps unsurprising that the relationship between the plaintiff, Mr Steve and the defendant broke down. In late 2020 and early 2021, there were disputes between the plaintiff and the defendant concerning the amount owing to achieve practical completion, and whether any interest was payable by the plaintiff in respect of any unpaid amounts.
8․After payment of the interest alleged to be owing under protest, the plaintiff ultimately received possession of his apartment.
9․When he gained possession of the apartment, the plaintiff became concerned about a number of aspects of the building works. He obtained an expert report, which stated that the works suffered from a number of defects, including hail damage which the property had sustained during a storm in January 2020.
10․On 10 December 2021, the plaintiff filed a Statement of Claim in these proceedings, seeking damages in respect of:
(a)The interest payments which he had paid under protest;
(b)The cost of obtaining inspections with respect to the defects in the property and the cost of rectifying those defects; and
(c)Loss which was incurred as a consequence of the builder’s delay in practical completion; and/or as a result of the defendant depriving him of possession of the property for interest that was not properly payable; and/or as a result of plaintiff not being able to occupy the property because of defects in the build, namely rental payments for the period that the plaintiff was not able to occupy the property.

11․The defendant denied that it is liable to pay any damages to the plaintiff. In particular, the defendant contended that:
(a)The interest charged by the defendant was properly payable under the Project Management Agreement;
(b)Any defects were the responsibility of the plaintiff who, via Mr Steve, had engaged subcontractors to perform the relevant works;
(c)As the defendant did not breach any operative clause concerning the time for practical completion, and as any defects were not the responsibility of the defendant, the defendant is not liable for any of the plaintiff’s rental payments; and
(d)The defendant is also not liable for the plaintiff’s rental payments because none of the alleged defects prevented the plaintiff from occupying the property and/ or the plaintiff did not act reasonably when rectifying those defects.

12․For the reasons outlined below, I have found that:
(a)The interest charged by the defendant was not properly payable under either the Project Management Agreement or the Building Contract. The defendant must repay the interest which the plaintiff paid under protest, together with interest on that amount;
(b)The defendant is liable under the Building Contract for various defects in the works;
(c)The defendant is liable under the Building Contract for lost rent occasioned by its failure to achieve practical completion of the works by the date specified in that contract.

Factual findings

Agreed chronology

13․At the conclusion of the evidence, I requested that the parties prepare a joint chronology, indicating which facts were agreed between them.
14․In his written submissions, Mr Foley, who appeared as counsel for the plaintiff, set out a series of facts which he understood to be uncontested (the agreed facts). In his oral submissions on 13 September 2023, Mr Markham confirmed that those facts were not disputed. In addition to these agreed facts, there were other matters that were not the subject of dispute (the undisputed facts).
15․Set out chronologically, the agreed facts and the undisputed facts were as follows:[1]
[1]Items (a), (d) and (h) – (u) and (w) – (y) were set out in the agreed facts document referred to at [14] above. Although items (b), (c), (e) - (g), (j) and (v) were not contained in that document, they were not the subject of any factual dispute in the hearing.
(a)The plaintiff is a registered proprietor of the property at 13 Mitchell Street, Griffith in the Australian Capital Territory (Property). A duplex was constructed on the Property, comprising of 2 self-contained residences. The plaintiff (and his wife) are the occupiers of one of those residences, sometimes referred to as ‘Unit 1’ or ‘13A Mitchell Street’.
(b)Between 2015 and 2017, the plaintiff and Mr Steve had discussions about constructing a duplex apartment, with the plaintiff and his wife to occupy one apartment, and Mr Steve to own the other. For a large part of this time, the plaintiff and his wife were living overseas.
(c)In June 2017, plans for the building works were submitted to ACT Planning & Land Authority.
(d)On 24 August 2017, the plaintiff and the defendant (and another owner of the Property) entered into an ACT Home Building Contract (Building Contract). On 24 August 2017, the defendant and the plaintiff (and another owner of the Property) also entered into a Project Management Agreement for Residential and Commercial Works in the ACT (PM Agreement).
(e)On 3 October 2017, engineering plans were issued by Pierre Dragh Consulting Engineers.
(f)Between 4 October and 26 October 2017, architectural plans were issued by Paul Tilse Architects.
(g)In early November 2017, the defendant received a notice of conditional development approval.
(h)On 20 November 2017,[2] the defendant purported to issue a default notice under both the Building Contract and the PM Agreement (Purported Default Notice). The defendant served a copy of this notice upon Mr Steve, but not upon the plaintiff. (As discussed below, the defendant now concedes that Mr Steve was not authorised to accept service of the notice on behalf of the plaintiff.)
[2]The agreed facts erroneously stated that this notice was dated 24 November 2017. Nothing turns on this apparent typographical error.
(i)On 18 January 2018, Anthony Steve (Mr Steve), being the husband of the co-owner of the Property, signed a further copy of the PM Agreement and purported to “reinstate” the PM Agreement as between the defendant, the plaintiff and the co-owner. The plaintiff did not sign and was not given a copy of the “reinstated” Project Management Agreement.
(j)On 19 January 2018, a Building Commencement Notice was issued with respect to the property.
(k)On 10 June 2020, the defendant purported to issue a document styled as a notice of practical completion (Purported Notice of Practical Completion). It is not in dispute that the defendant did not give a copy of the Purported Notice of Practical Completion to the plaintiff.
(l)In November 2020, Ms Steve took possession of her part of the Property and moved into that part of the Property.
(m)On 16 November 2020, the defendant issued a spreadsheet to the plaintiff which stated that the total cost to the plaintiff of completing construction of the property would be $60,822.84 (the November spreadsheet).
(n)On 27 November 2020, the plaintiff paid to the defendant (through Mr Steve) $55,000.
(o)On 19 December 2020, the defendant erected fencing around the plaintiff’s residence only, which fencing was secured with padlocks.
(p)On 10 February 2021, the plaintiff paid a further $12,513.35 to the defendant (through Ms Steve).
(q)On 11 February 2021, the defendant formally acknowledged that all amounts (excluding interest) had been paid by the plaintiff and issued an invoice to the plaintiff for the sum of $13,659.66, which the defendant asserted was owing by the plaintiff to the defendant on account of interest under the PM Agreement (the Interest Invoice). The Interest Invoice issued by the defendant:
(i)     asserted that an invoice had been issued by the defendant to the plaintiff for the sum of $67,513.35 on 7 October 2020;[3]
[3]The reference to 7 October 2020 appears to be a typographical error. The Interest Invoice stated that the previous invoice was issued on 9 October 2020.
(ii)    claimed interest on the sum of $67,513.35 from 14 October 2020 to 25 November 2020 calculated at 10% per month;[4] and
[4]The reference to 14 October 2020 appears to be a typographical error. The Interest Invoice referred to the payment terms as “7 days”. The date 7 days after 9 October 2020 (see fn 3 above) was 16 October 2020.This period accords with the “42 days” of “default” specified in the Interest Invoice.
(iii)   claimed interest on the sum of $12,513.35 (being the sum of $67,513.65 less the $55,000 paid by the plaintiff to the defendant on 27 November 2020) from 27 November 2020 to 7 February 2021 (being the date upon which the defendant received a further $12,513.35 from the plaintiff).

(r)On 24 February 2021, the plaintiff:
(i) formally, through his solicitors, disputed his liability for the interest claimed by the defendant; and
(ii) paid to the defendant (through Mr Steve) a further $1,138.30 on account of interest, on a reserved rights basis.

(s)On 15 April 2021, the defendant wrote to the plaintiff stating that the Property was “securely locked up on or about the 19^th of December 2020” and that the property would “remain this way until [the plaintiff] resolve[d] the notice of default for failure to pay monies owed and interest”.
(t)On 28 June 2021, the defendant wrote to the plaintiff stating that the amount of interest owing by the plaintiff to the defendant was $20,005.65.
(u)On 5 July 2021:
(i) the plaintiff paid the sum of $20,005.65 to the defendant in satisfaction of the defendant’s claim for interest, on a reserve rights basis; and
(ii) the defendant wrote to the plaintiff stating that “immediate access and possession will be granted at 5:00pm today” (emphasis added).

(v)The plaintiff was given possession of the property on 5 July 2021, after paying the sum referred to in [15(u)] above.
(w)On 23 September 2021, the plaintiff provided the defendant with a schedule of what the defendant contended were defects with respect to the construction of the plaintiff’s residence.
(x)On 10 December 2021, the plaintiff commenced these proceedings.
(y)On 21 March 2022, the plaintiff (by his solicitors) requested that the defendant provide the plaintiff with copies of any documents relating to an insurance claim made by the defendant. The defendant did not respond to this request.

16․On the basis of the parties’ concessions, and on the evidence before the Court, I find that each of the above facts have been proved on the balance of probabilities.

Financial arrangements

17․Although there were communications between the plaintiff and Westpac about the possibility of finance in the initial stages of the build, finance was not received by the plaintiff until early 2019, when the plaintiff sought finance from Westpac Banking Corporation (Westpac) in the form of a “construction loan”.
18․As the plaintiff did not have a copy of the Building Contract or the Project Management Agreement to apply for this loan at that time, he requested a copy of both documents from Mr Steve. The plaintiff gave evidence that his mortgage broker submitted an application for a loan on the plaintiff’s behalf to Westpac, which included a copy of the Building Contract that Mr Steve had given him. The loan was approved by Westpac on 12 July 2019.
19․Both the plaintiff and Mr Stevanovic gave evidence of unusual financial arrangements between the parties. The plaintiff said that the defendant would receive money from Westpac, and give some of it back to Mr Steve. The plaintiff then received some of that money back from the defendant via Mr Steve. The plaintiff would then transfer that money back to Mr Steve for the purpose of “paying the next transfer of money to the builder”. In cross-examination, the plaintiff described the arrangement in the following terms:
… The invoices were submitted and the builder did receive the money. The builder, for some unbeknownst reason to me then transferred money back through Anthony Steve, who transferred it to me, and then in bits I transferred it back to the builder. I don’t know. I didn’t question it. Probably should have.
…
I am assuming Mr Steve got money back from the builder and transferred it back to the builder.

20․Mr Stevanovic gave evidence to similar effect. He described the arrangement as “bizarre”, explaining:
This is where the whole confusing arrangements was of me getting paid by the bank, me then refunding money, they then refunding money to one another, and then that money coming back to me to pay their contractors or to pay my contractors or to pay expenses on the building site. So consequently, I would be paying the majority of these things that contractors were expecting me to pay them because, for argument's sake, they'd given me money previously to pay their contractors. So when works got completed, I'd pay that contractor if let's say the representative said it's ready to pay, and I had the money instead of them paying it. So it was just a - I know it sounds bizarre but that was just the arrangement we had in regards to paying these things and ticking the box that that item was complete.

The role of Mr Steve

21․The parties had entirely different understandings as to Mr Steve’s involvement in the construction of the duplex. The plaintiff gave evidence that he informed Mr Steve that there were to be no “commercials” between them. He had the understanding that the defendant was solely responsible for the work to be performed. In contrast, Mr Stevanovic gave evidence that he understood that Mr Steve was acting as the plaintiff’s agent.
22․Although the defendant pleaded in its defence that Mr Steve was the plaintiff’s agent, at the conclusion of the evidence, Mr Markham withdrew this allegation, and accepted that there was no evidence from which agency (including ostensible agency) could be inferred. As a result, it was accepted that various documents that were served on, and signed by, Mr Steve during the course of the works were not validly served on the plaintiff and hence had no legal effect as against the plaintiff. These included the default notice (referred to at [15(h)] above), the “reinstated” Project Management Agreement (referred to at [15(i)] above) and the Notice of Practical Completion (referred to at [15(k)] above).

23․Mr Steve was not called by either party in these proceedings. At the commencement of the hearing, Mr Markham submitted that the plaintiff should have called Mr Steve, but nonetheless foreshadowed that he would be making an application to call Mr Steve “to narrowly respond to certain affidavit material” that had been adduced by the plaintiff and was contained in the Court Book. He indicated that he would make the application after the plaintiff’s cross-examination had concluded.
24․During the course of the hearing, the defendant obtained an affidavit from Mr Steve which was served on the plaintiff. However, following oral argument relating to the scope of Mr Steve’s proposed evidence, Mr Markham indicated that he would not press various paragraphs of Mr Steve’s proposed affidavit, provided that the plaintiff conceded that there would be no contention that an adverse inference should be drawn against the defendant for failing to call Mr Steve in relation to the inclusions list in the Building Contract or in relation to invoices which had been sent under the contract. Mr Markham maintained that adverse inferences should be drawn against the plaintiff for failing to call Mr Steve in respect of various other issues in the proceedings.
25․An affidavit of Mr Steve was filed by the defendant on 7 September 2023. This affidavit stated that, during the course of building the duplex, Mr Steve prepared tax receipts for himself and Ms Steve on the defendant’s letterhead.[5] Neither party sought to adduce further evidence from Mr Steve.
[5]Although the plaintiff indicated that there was no objection to the filing of the affidavit in these terms, it does not appear that this affidavit was formally read after it was filed. The evidence in the affidavit, if accepted, would not alter any of the findings that I have made. In these circumstances, nothing turns on the defendant’s failure to formally read the affidavit.
26․The plaintiff’s counsel accepted that no adverse inference should be drawn against the defendant for failing to call Mr Steve in relation to the inclusions list in the Building Contract or the invoices sent under the contract dated 24 August 2017 and 7 December 2018.
27․Mr Steve would have been an essential witness for various issues that were ultimately not pressed by the defendant (such as whether Mr Steve was an agent of the plaintiff). However, for the reasons outlined below, the resolution of the remaining issues depends upon the proper construction of the contract(s) that were in force an assessment of the alleged defects in the property. Mr Steve’s evidence could not assist either party in determining either of those issues. In those circumstances, it has not been necessary to determine whether an adverse inference should be drawn against either party for failing to call Mr Steve: Jones v Dunkel [1959] HCA 8; 101 CLR 298.

Overview of the issues for determination

Issues withdrawn by the defence

28․As can be seen from the above, the background to the present proceedings is complex and multifaceted. Determination of the factual issues in dispute has been further complicated by the changing nature of the defence case. Specifically, a number of critical issues which were pleaded in the defence and/or initially advanced on behalf of the defendant were ultimately withdrawn or conceded. As an understanding of the issues that are in dispute between the parties is shaped to some degree by the issues that are not in dispute between the parties, it is convenient to briefly set out the matters that are no longer in dispute, before moving to a consideration of the issues that remain for determination.
29․As initially filed, the defence pleaded that:
(a)Mr Steve was appointed as an agent of the plaintiff under the Building Contract;
(b)The Building Contract and the Project Management Agreement entered into on 24 August 2017 were terminated by both parties on 4 December 2017; and
(c)The Project Management Agreement (but not the Building Contract) was reinstated by the parties. (The defence that was filed alleged that the Project Management Agreement was reinstated on 18 January 2018.)

30․However, Mr Markham ultimately conceded that the evidence did not establish that Mr Steve was the plaintiff’s agent. It follows that it is not open to this Court to find that the Building Contract and the Project Management Agreement were terminated by both parties on 4 December 2017. As the Project Management Agreement was not terminated at law, the issue of whether the Project Management Agreement was “reinstated” also falls away. Rather, it is now common ground that the Project Management Agreement remained operative at all times.
31․In his written outline of submissions filed in advance of the hearing of the proceedings, Mr Markham contended that the Building Contract was “a sham”, which had been entered into solely for the purpose of obtaining finance from Westpac Bank Corporation. However, in its filed defence, the defendant did not plead that the Building Contract was a sham. Rather, the defence expressly admitted that the Building Contract “operated” from 24 August 2017 to 4 December 2017.
32․An allegation that a contract entered into is a “sham” is a serious allegation, which, if alleged, must be expressly pleaded: New Cap Reinsurance Corporation Ltd (In Liq) v Daya [2010] NSWSC 1226 at [32]. O the first day of the hearing, I offered the defendant an opportunity to consider whether it wished to seek leave to amend the defence to plead that the Building Contract was not operative because it was a sham. Mr Markham declined to seek that leave. Rather, he submitted that there were fundamental inconsistencies between the terms of the Project Management Agreement and the Building Contract, and further, that the Project Management Agreement should be preferred to the Building Contract, either as a whole, or in respect of any of those inconsistencies. Although these contentions were also not expressly pleaded in the defence, the plaintiff did not submit that any lack of clarity in the defence in this respect gave rise to any prejudice against him. Both parties made full submissions on these issues, which are addressed below.
33․In his written outline of submissions, Mr Markham also foreshadowed that if the plaintiff sought to rely on the terms of the Building Contract, the defendant would seek the “full amount” of the fees payable under the Building Contract “either by way of a cross claim or by way of a subsequent claim”. However, no cross-claim was ultimately filed.
34․At the conclusion of the proceedings, Mr Markham referred to the decision in Hannigam v Inghams Enterprises Pty Ltd [2021] NSWSC 641, which considered whether an Anshun estoppel applied in secondary proceedings seeking enforcement of damages under a contract which had been determined to be on foot in earlier proceedings. Mr Markham requested that the Court refrain from making findings which are not strictly required in the currently proceedings. However, he also appeared to seek declarations from the Court regarding which contracts (or which parts of each contract) were in force, apparently for the purpose of preserving the defendant’s ability to commence later proceedings for payment under the relevant contract. As I indicated to the parties at the hearing, the possible application of an Anshun estoppel in any future proceedings is not an issue that arises for my consideration in the present proceedings.

Issues that remain for determination

35․The issues that remain for determination can ultimately be grouped into the four claims for damages raised on behalf of the plaintiff, namely:
(a)Whether the defendant is liable to repay the interest paid by the plaintiff under protest;
(b)Whether the defendant is liable to pay damages in respect of any delay in achieving practical completion of the property; and
(c)Whether the defendant is liable to pay damages for locking the plaintiff out of the property or otherwise denying the plaintiff possession of the property; and
(d)Whether the defendant is liable to pay damages in respect of alleged defects in the property.

36․These ultimate issues in turn require resolution of the following questions:
(i)Which agreements were in force at all relevant times? (The Project Management Agreement and/or the Building Contract?)
(ii)If both agreements were in force, were the agreements, or any of their terms, inconsistent? Which term(s) should prevail in the event of any inconsistency?
(iii)In respect of issue (a), was the defendant entitled to claim interest under any agreement(s) found to be in force under question (i) above? If the defendant was entitled to claim interest, what was the rate of interest that the defendant was entitled to claim?
(iv)In respect of issue (b), were there defects in the property? If so, were those defects within the scope of any agreement(s) found to be in force under question (i) above? Insofar as any defect was covered by insurance, does that insurance affect any liability of the defendant for damages with respect to that defect?
(v)In respect of issue (c) above, did the defendant breach any term requiring that practical completion be achieved by a particular date? If so, what damages flow from that breach?
(vi)In respect of issue (d) above, did the defendant lock the plaintiff out of the premises or otherwise deny the plaintiff possession of the property? If so, was the defendant entitled to do so? (This question overlaps with question (c) above insofar as the defendant claimed a right to deny the plaintiff possession of the property as a result of the plaintiff’s failure to pay interest.) If the defendant was not entitled to deny the plaintiff possession of the property, what if any, damages should flow from this conduct?

37․Each of these issues are addressed below.

Which agreement(s) were in force?

38․The first issue that arises for determination is which agreement or agreements were in force at the relevant times.
39․The plaintiff gave evidence that he understood that the Building Contract was intended to be a “guardrail”, which would limit the maximum amount that could be spent on the build. He said that in discussions that he had with Mr Steve it was “implied” that the build would come in “well under” the $2 million stated in the Building Contract (of which the plaintiff’s share was $1 million). The plaintiff also said that he understood that the Building Contract “was also going to be required to seek financing from a bank to fund the remainder of the build”. It may be noted that the plaintiff’s understanding of the effect of the Building Contract did not accord with the text of that agreement.
40․In contrast, the defendant’s case was that the Building Contract was never operative, because the Project Management Agreement operated in “substitution” for that contract. (In this respect, it may be noted that the defendant’s case did not accord with the defence that was filed on behalf of the defendant, which pleaded that both agreements were “operative” from 24 August 2017 until 4 December 2017, with both agreements having terminated as a result of the defendant sending the “Notice of Default” to Mr Steve on 20 November 2017.)
41․Mr Foley submitted that the Project Management Agreement and the Building Contract were both in force from the date that they were signed. Mr Foley acknowledged that it was “unusual” for a Project Management Agreement to be entered into at the same time as a Building Contract where the project manager and the builder was one and the same entity, but submitted that it was open to the parties to do so. Mr Foley denied that there was any “wholesale” inconsistency between the two agreements. Specifically, he contended that the Building Contract required the defendant to build the property, whereas the Project Management Agreement required the defendant to manage the whole of the project (which “[did not] include actually building anything”).
42․Although Mr Markham did not press his original contention that the Building Contract was a sham, he submitted that the Project Management Agreement should nonetheless properly be seen as operating “in substitution” for the Building Contract. He also submitted that there had been no “meeting of the minds” in the creation of the Building Contract.
43․I do not accept either of the defendant’s contentions. The Building Contract is a written agreement which was signed by both parties. In circumstances where the contention that this agreement was a sham was not pressed, it is difficult to see any basis upon which it could be concluded that the Building Contract was inoperative as a whole. It does not matter that Mr Stevanovic may have subjectively intended that the Project Management Agreement alone should govern the relations between the parties, or that the plaintiff may have had a misunderstanding about the legal effect of the Building Contract. It is the intention of the parties as expressed in the agreement that is crucial. In the absence of any contention of sham, misrepresentation, fraud or the like, evidence of the parties’ actual intention is not relevant: JD Heydon, Heydon on Contract (Law Book Company, 2019) at [8.170] – [8.240], citing Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at [40] – [43]; see also Taylor v Johnson [1983] HCA 5; 151 CLR 422 at 429 – 433.
44․Further, it is difficult to see how an agreement could be said to operate “in substitution” for another agreement entered into by the parties at the same time. Again, in the absence of a contention that the Building Contract was a sham, the agreements must be construed on the basis that the parties intended that both agreements operate in tandem.
45․The parties agreed that, if the two agreements were wholly inconsistent, it would be necessary to decide which agreement must prevail. However, in the present case, the two agreements were not wholly inconsistent. Rather, as Mr Foley submitted, the Project Management Agreement may be construed as providing for a regime under which the parties agreed that the defendant would project manage the whole of the build project, for a 10% fee; whereas in the Building Contract, the parties agreed that the defendant would build the duplex for a fixed fee.
46․The entering into of two such agreements may have been highly unusual. In particular, it may be asked why the plaintiff would agree to pay the defendant for managing its own build of the property? However, it is not for the Court to question the wisdom of the parties in entering into the two agreements. As the two agreements can stand together, the Court must proceed on the basis that both are operative.
47․This conclusion does not preclude a finding that particular clauses in the agreements are inconsistent. I will address whether there are inconsistencies in individual clauses in the two agreements when considering the application of those clauses in respect of the particular claims of damage.
48․The final observation to be made concerning the Building Contract is that there was no evidence that any invoices were ever issued by the defendant under this contract. This is, no doubt, because Mr Stevanovic believed that he had terminated this contract via Mr Steve whom he (erroneously) believed to be the plaintiff’s agent. As no invoices were ever issued by the defendant under this contract, the plaintiff has not had any occasion to pay any amount owing under this contract. Specifically, cl 23(b) of the Building Contract required the defendant to give the plaintiff a written claim for each progress payment claim and cl 23(c) only required the plaintiff to pay a “progress payment claim” within 7 days of the claim having been served upon him. Similarly, on final completion, the plaintiff was only obliged to pay the defendant the unpaid balance of the contract sum within 7 days of a claim for final payment.

Interest

49․On 11 February 2021 (the February 2021 invoice), the defendant issued an invoice to the plaintiff (Invoice 1327) which sought “interest on overdue payment”. The invoice dated 11 February 2021 stated as follows:

Description

Total Ex GST

Job Address: 13A Mitchell Street

·    Interest on overdue payment

-     Invoice date: 9 October 2020

-     Payment terms: 7 days (Clause 20 (b) - Schedule 10)

-     Invoice amount: $67,513.35

-     Interest on overdue payment: 10% per month (Clause 31 - Schedule 20)

-     Days in default:42 days at $55,000.00 (payment received 27 November 2020)

-     Days in default: 117 days at $12,513.35 (payment received 10 February 2021)

$7,594.52

$4,823.35

GST EX TOTAL

$12,417.87

GST

$1,241.79

GST INC TOTAL

$13,659.66

50․The invoice dated 9 October 2020 (the October 2020 invoice) was not in evidence in the proceedings before me. In his affidavit dated 16 August 2022, the plaintiff asserted that he had never received an invoice dated 9 October 2020. This assertion was not challenged in cross-examination. In cross-examination, the defendant “could not answer” whether he issued any invoice to the plaintiff of that date. Other than speculating that a 10% project management fee may have been an explanation for part of the interest claim, the defendant was not able to provide any further information about what was contained in the 9 October 2020 invoice that was said to give rise to the interest claimed by the defendant in the February 2021 invoice.
51․The defendant submitted that the plaintiff had failed to demonstrate that the interest set out in the February 2021 invoice was not properly charged. In contrast, the plaintiff submitted that the evidence as to how interest was calculated was “entirely in the knowledge of the defendant”, and that the defendant’s unwillingness, or inability, to explain the basis upon which the interest was charged “gives rise to an adverse inference that no such explanation is available”.
52․The plaintiff further submitted that the Court may draw inferences about the basis upon which the interest was claimed from the spreadsheet that the defendant sent to the plaintiff in November 2020.
53․As noted at [15(m)] above, on 16 November 2020, the defendant sent an email to the plaintiff attaching a spreadsheet which was said to show “the remaining expenditure needed to finish [the property]” (“the November spreadsheet”). The email explained that:
… the spreadsheet is close in representing the exact figures as the remaining invoices have now come in and firmer estimates have been received from trades.

54․The spreadsheet provided as follows:

Description	Cost	Column1
Malplas (windows)	$ 17,375.07
Concrete balance	$ 27,830.00
Concrete Sealing	$ 2,500.00
Keith (paving)	$ 12,000.00
Foster Heating (hydonics)	$ 18,000.00
Plumber balance (inc external grates etc)	$ 26,500.00
Capital Home Electrical (Cooling)	$ 8,100.00
Green claddings	$ 4,400.00
Roller doors	$ 8,646.00
Front landscaping for Strata only	$ 15,000.00
Extra electrical (pools etc)	$ 1,000.00
Pool cleaning (Keith)	$ 2,000.00
Storm water pit	$ 1,200.00
Downpipes final	$ 2,000.00
Painter final	$ 3,000.00
Tiler final	$ 2,000.00
BA fees	$ 11,600.00
Units Plan	$ 4,400.00
Units title assessor (UTAR)	$ 2,000.00
UTAR valuation	$ 440.00
Registration fees and Body Corporate steup [sic] (TBC)	$ 3,000.00
Workers comp insurance	$ 3,360.00
Remaining to finish	$ 176,351.07
Total Expenditure to date	$ 1,603,223.52
Payments	$ 1,657,928.90
Funds remaining	$ 54,705.38
Total Shortfall	$ 121,645.69
Clare and Anthony half share (This amount has been transferred)	$ 60,822.84
Slad and Mark half share	$ 60,822.84

55․The email continued that if “the required funds” were not received by close of business on 27 November 2020, the defendant intended to place an official “STOP WORKS” notice on the site, withdraw the builder’s licence and take action to recover costs.
56․The total amount claimed in the spreadsheet was $60,822.84. The amount said to have been charged in the October 2020 invoice was $67,513.35. In the absence of any evidence adduced by the defendant as to the calculation of interest (evidence that was entirely within the knowledge of the defendant), and given the temporal proximity in time between the October 2020 invoice and the November spreadsheet, I am satisfied that the amounts claimed in that invoice must have related to substantially the same claims that were set out in the November spreadsheet. The difference of $6,690.51 in the amounts claimed is explained in the reference in the email to “firmer estimates” being received from subcontractors. The defendant (who presumably issued the 9 October 2020 invoice) did not adduce any evidence to suggest otherwise.
57․It is then necessary to consider whether the defendant was entitled to charge interest relating to the amounts claimed in the November spreadsheet.
58․I did not understand the defendant to claim that interest was payable under the Building Contract. Mr Stevanovic did not believe that the Building Contract was in force at the time that the February 2021 invoice was sent (as noted above, he erroneously believed that this contract had been terminated by all parties in November 2017). It follows that the February 2021 invoice must have been issued under the Project Management Agreement. The nature of the claims made in the November spreadsheet (in particular, for matters that were not within the scope of the Building Contract, such as pool cleaning and electrics) support this conclusion.
59․Accordingly, the interest claimed by the defendant could only have been payable under the Project Management Agreement. Clause 31 of the Project Management Agreement permitted the defendant to claim interest as follows:
Should the Principal fail to pay any amount owing to the Project Manager within the time specified in this agreement then the Project Manager is entitled to interest at the rate specified in Schedule 20 (but if nothing is specified then at the rate of 2% per month) calculated from the time the amount owing should properly have been paid until payment occurs.

60․Schedule 20 specified an amount of “10%” in respect of “interest on overdue payments”. It did not specify whether that rate was per month or per annum.
61․In cross-examination, Mr Stevanovic acknowledged that the November spreadsheet included a “mixture of amounts”, some of which were estimates of amounts which the defendant had been invoiced by contractors in relation to the works, some of which were estimates provided to the defendant for works to be performed but not yet provided by contractors, and some of which were amounts which would become payable in the near future to third parties.
62․The spreadsheet did not make clear which amounts had been paid (and if so, when, or by whom), or which amounts were said to be owing (and if so when such amounts were to become payable). Nonetheless, it is clear from the November spreadsheet, and the email to which it was attached, that the total amount claimed in the spreadsheet ($60,822.84) incorporated at least some costs which had not yet been incurred by the defendant.
63․In his closing submissions, Mr Markham conceded that the defendant was not entitled to charge interest on the following items in the November spreadsheet:
(vii)BA Fees  $11,600
(viii)Units Plan  $4,400
(ix)Units Title Assessor (UTAR)  $2,000
(x)Registration fees and body corporation set up (TBC)            $3,000

64․Mr Markham initially also conceded that the fee for Workers Compensation ($3,360) could not attract interest, but then immediately withdrew that concession, noting that this claim may have related to workers compensation for the builder’s employees (in which event he submitted that interest was recoverable).
65․Mr Markham explained that the concessions in respect of the BA fees, units plan, UTAR and registration plans were made on the basis that it was accepted that these amounts were not properly payable by the defendant under the Project Management Agreement. However, he maintained that interest was payable in respect of the remainder of the amounts claimed in the November 2020 spreadsheet, whether or not those amounts had in fact been paid by the defendant. He submitted that it was not an element of an “amount owing” under cl 31 that the Project Manager first incur a direct cost.
66․I do not accept this submission. Clause 31 of the Project Management Agreement only permitted the defendant to claim interest in respect of a failure to pay “any amount owing to the Project Manager within the time specified in this agreement”.
67․Clause 20 of the Project Management Agreement relevantly provided as follows concerning payments to be made by the principal to the Project Manager:
20. Budgeted Costs and Progress Payments
(a)The Project Manager will submit to the Principal at the frequency and date specified in Schedule 9 (or if nothing is specified, then once a month), a statement of costs, Construction Programme and Cost Plan for the project during that period showing separately:
(i)The sums payable to Contractors, Consultants and Professional Service Providers and the time for payment of each claim;
(ii)An itemised list of the costs of the project and time for payment of each claim;
(iii)Costs of the project incurred by the Project Manager in relation to Clause 15(f);
(iv)The fees due to the Project Manager; and
(v)Any variation to the Cost Plan; and
(vi)Any variation to the Construction Programme.

(b)After the Project Manager has submitted the costs, the Principal must:
(i)Make payments direct to the Contractors, Consultants, Professional Service Providers and Creditors for claims referred to in paragraphs (a) (i) and (ii) within the time stated in Schedule 10; and
(ii)Pay the Project Manager the fees referred to in paragraph (a) (iii) and (iv) above within the time stated in Schedule 10.

68․Schedule 10 provided:
Schedule 10
The number of days for payment of Project Costs incurred by the Project Manger in accordance with Clause 15(f) and fees.
7 days

69․As can be seen from the above, cl 20 only requires the Principal to pay the Project Manager the fees that are due to the Project Manager and the “costs of the project incurred by the Project Manager in relation to clause 15(f)”.
70․None of the amounts claimed in the November 2020 spreadsheet related to any “fees due to the Project Manager”.
71․Clause 15(f) provided that the Project Manager was responsible for “arrang[ing] for the provision of all necessary plant, materials and labour to complete those parts of the works which have not been undertaken by a Contractor or the Licensee”. The defendant did not contend that any of the amounts claimed in the November 2020 spreadsheet concerned costs that fell within this clause. Rather, Mr Markham appeared to submit that a more generous interpretation should be given to the phrase “amounts owing” so as to ensure that the Project Manager would be pre-paid for any payments which it intended to make to subcontractors.
72․There is no basis to construe the Project Management Agreement in this manner. The Project Management Agreement set up a regime under which the Project Manager would enter into agreements with subcontractors as an agent for the Principal. By cl 8 of the Project Management Agreement, the Principal appointed the Project Manager as “his agent for the purpose of providing the project management services referred to in Parts C, D and E of this agreement”. Significantly, cl 8(b) further stated that “The Project Manager must enter into Consultancy Agreements with Professional Service Providers and contracts as the agent of the Principal” (emphasis added). The agreement did not authorise the Project Manager to enter into contracts with subcontractors in its own right.
73․In other words, the Project Management Agreement did not require the plaintiff to repay the defendant (as Project Manager) for payments made to subcontractors because the Project Management Agreement did not authorise the defendant to pay subcontractors in its own right in the first place. Payments to subcontractors were to be made directly by the plaintiff as the Principal. Accordingly, if the defendant had paid any subcontractors directly, it did so outside of the regime authorised by the Project Management Agreement. If the defendant did so, it could not then invoke the interest provision within that Agreement in respect of those payments.
74․Further to the above, under the Project Management Agreement, the Principal only became liable to pay the amounts specified in cl 15(f) (that is, the cost of necessary plant, materials and labour to complete those parts of the works which have not been undertaken by a Contractor or the Licensee”) where those costs had been “incurred” by the Project Manager.
75․There is no evidence that any of the amounts claimed in the November spreadsheet had in fact been paid, or incurred, by the defendant. As noted above, Mr Stevanovic acknowledged in cross-examination that the November spreadsheet included some amounts which related to estimates for works that had not yet been performed by contractors.
76․The provision for interest in cl 31 of the Project Management Agreement is clear. It authorises interest to be charged only where the Principal fails to pay the Property Manager an “amount owing to the Project Manager within the time specified in this agreement”. Clause 20 was the only clause in the Project Management Agreement which required the Principal to pay an amount to the Project Manager within a specified time. Clause 20 only required the Principal to pay the Project Manager its fees and any costs under cl 15(f). There is no evidence that the plaintiff owed the defendant any money for fees or costs under cl 15(f) at any time after October 2020.
77․The plaintiff has demonstrated that he was not liable to pay any interest to the defendant at any time after October 2020. It follows that the plaintiff is entitled to be repaid the interest that he paid under protest, namely $21,143.95.
78․The plaintiff is also entitled to interest on the amount that was paid under protest, namely $4,542.54.

Damages for delay arising from the failure to meet the date for practical completion

Issues for determination

79․The plaintiff also seeks damages arising from a failure of the defendant to meet the date for practical completion. This claim raises the following issues:
(a)Did the defendant breach a clause of either contract by failing to achieve practical completion by a specified date? Ito answer this question, it is necessary to determine:
(i)What was the date for practical completion under each contract?
(ii)When was practical completion achieved?

(b)If the defendant did breach one or both contracts by failing to achieve practical completion by a specified date, is the plaintiff entitled to damages with respect to that breach?

Did the defendant breach a clause of either contract by failing to achieve practical completion by a specified date?

The Project Management Agreement

80․Clause 25 and Schedule 2 of the Project Management Agreement together prescribed a “target completion date” of 22 January 2022. However, no clause in that agreement warranted that the works would be completed on or before that date.

The Building Contract

81․Clause 10 of the Building Contract provided as follows concerning the Date for Practical Completion:
10. Date for Practical Completion and Liquidated Damages
(a) The Builder will reach Practical Completion by the Date for Practical Completion as specified in item A10 of Appendix A, unless that time is extended under Clause 15.

82․Clause 25 of the Building Contract relevantly defined “practical completion” as being achieved “when the Works are complete except for minor omissions and/or minor Defects which do not prevent the Works from being reasonably fit for occupation or use by the Owner”. Any labour or materials which were to be supplied or fixed by the Owner were excluded.
83․Item A10 of Appendix A stated that the “Date for Practical Completion” was “22 January 2020 unless extended under Clause 15 or Clause 24”.
84․Clause 15 applied where the works were delayed by various matters outside of the control of the builder (such as inclement weather, industrial disputes, and defaults on the part of the owner). Clause 24 of the Building Contract provided that where an owner, without reasonable cause, failed to pay any progress payment in full within the time specified, the builder may, without affecting its right to end the contract, suspend the works. However, written notice was required for either clause to be enlivened: cl 15(b) and cl 24(b). As no such notices were ever served on the plaintiff, neither clause could operate to extend the time for practical completion.[6] It follows that cl 10 had the effect that the date for practical completion in the Building Contract was 22 January 2020.
[6]It does not appear that a Time Variation Notice was ever served on Mr Steve. In any event however, as Mr Steve was not the plaintiff’s agent, any service on Mr Steve would not have constituted valid service under cl 15(b) or cl 24 of the Building Contract.
85․The defendant contended that cl 10 was inconsistent with item A13 of the Schedule to the Building Contract. Item A13 of the Building Contract provided as follows:
A13 Construction Period
The Builder has made reasonable allowances and the Construction Period is 880 Days after the anticipated commencement date unless time is extended under clause 15.

86․The anticipated commencement date specified in item A9 of the Schedule to the Building Contract was 24 August 2017. The date 880 calendar days after 24 August 2017 was also 22 January 2020. However, as the Building Contract defined a “day” to exclude public holidays and weekends, the “construction period” ended on 3 March 2021.
87․Nothing turns on this apparent inconsistency. The operative clause for practical completion in the Building Contract was cl 10, which required practical completion to be achieved by the date specified in item A10 of that contract. Item A13 of Schedule 1 is a definitional provision, which was only relevant where the builder served a written Time Variation Notice under cl 15 (cl 15(b) of the Building Contract provided that the Time Variation Notice was to identify the extended Construction Period and the extended Date for Practical Completion). As no such notice was validly served on the plaintiff, this clause was not enlivened. Accordingly, cl 10 of the Building Contract required the defendant to achieve practical completion on or before 22 January 2020.
88․There is no inconsistency between cl 10 of the Building Contract and the Project Management Agreement. As noted above, the Project Management Agreement prescribed a “target completion date” of 22 January 2020, which is identical to the date for Practical Completion prescribed in the Building Contract (albeit that the Project Management Agreement did not warrant that the project would be completed on that date).

Is the plaintiff entitled to damages for the defendant’s failure to meet the date for practical completion?

Introduction

89․For the reasons outlined above, the practical completion date in the Building Contract and the target completion date in the Project Management Agreement were each 22 January 2020. The plaintiff’s apartment within the duplex was not completed by that date.
90․Clause 25 of the Project Management Agreement enabled the Project Manager to seek additional fees where there was an authorised variation to the contract, or where there was delay arising from other specified matters. However, as noted above, there is no provision in that contract which warranted that the building works would conclude by that date, or any other date. Accordingly, there could be no claim for damages arising from delay under this contract.
91․In contrast, in cl 10 of the Building Contract, the defendant did warrant that it would reach practical completion by 22 January 2020. As noted above, that clause stated that the builder “will reach Practical Completion by the Date for Practical Completion”.
92․Clauses 10(b) and 10(c) then provided as follows concerning liquidated damages:
b) If the Builder defaults under sub-clause 10(a) Liquidated Damages for that default is a sum calculated using the rate in Item A17 of Appendix A for the period from the Date for Practical Completion (or any extended date) until Practical Completion is achieved under Clause 25.
c) Those Liquidated Damages may be deducted from any money which becomes payable to the Builder by the Owner and any shortfall may be recovered by the Owner.
93․Item A17 of Schedule 1 stated as follows:
A17 Liquidated Damages
Rate for Liquidated Damages per week: $ -----------

94․At the initial hearing of these proceedings, neither party drew the Court’s attention to this clause or made any submissions concerning its effect. Given the potential significance of the rate for liquidated damages being ‘struck through’, the parties were afforded an opportunity to provide written submissions on this issue.
95․In those written submissions, Mr Foley submitted that the drawing of a horizontal line in the space for the “rate for liquidated damages” should not be construed as precluding the plaintiff from claiming any damages in the event of a failure to reach practical completion by the date specified. Rather, he contended that, on a proper construction of the Building Contract, cl 10(b) and item A17 should be read as precluding any claim by the plaintiff for liquidated damages but not as precluding any claim by the plaintiff for common law damages. In support of this contention, the plaintiff’s counsel relied on the decision of Burns J in Adapt Constructions v Whittaker and Luff [2015] ACTSC 188 at [66] – [78] and of Stevenson J in Oxford (NSW) Pty Ltd v KR Properties Global Pty Ltd t/as AK Properties Group ABN 62 971 068 965 [2023] NSWSC 343 at [304] – [312].
96․In the alternative, Mr Foley contended that if cl 10 should be read as excluding the plaintiff’s right to claim damages for delay, that clause would be rendered void by ss 25 and 88 of the Building Act 2004 (ACT).[7] In this respect, he cited the decision of Ball J in Cappello v Hammond & Simonds NSW Pty Ltd [2020] NSWSC 1021 at [24] – [32].[8]
[7]Section 25 of the Building Act provides that a provision in a contract or agreement is void if it purports to limit or modify the operation of Pt 3 of the Act. Section 88 of the Building Act, which is not contained in Pt 3 of the Act, contains various statutory warranties, including that “if the contract does not state a date by which, or a period within which, the work is to be completed—that the work will be carried out with reasonable promptness”: s 88(d) of the Building Act.
[8]This aspect of the decision was not disturbed on appeal: Cappello v Hammond & Simonds NSW Pty Ltd [2021] NSWCA 57 at [69].
97․In his submissions in reply, Mr Markham noted that cl A17 had been “struck out” rather than left blank. He contended that the effect of this notation was to “prove that the bargain struck by the parties was to not seek a remedy in damages”. He contended that, as a result, “all remedies to damages have been expressly contracted out of in the [Building Contract]”.

98․Mr Markham submitted that this construction was supported by (i) the need to read the Building Contract and the Project Management Agreement consistently together; (ii) the statement in the Building Contract that, apart from any implied terms, the Building Contract is “the entire agreement of the parties about its subject matter and supersedes all previous representations, arrangements, agreements… the parties acknowledge that they are not varied or affected by reference to any prior negotiations or agreements, whether written or oral”; and (iii) that the plaintiff did not positively provide, nor was it put to the defendant in evidence, that there was any ambiguity in the contracts which required recourse to any inferences with respect to damages.
99․In the alternative, Mr Markham submitted that the plaintiff had not established a right to common law damages because (i) the plaintiff had not pleaded an entitlement to common law damages; (ii) the plaintiff had not established that any breach was causative (in a “but for” sense) of damage; and/or (iii) although the Building Contract specified a commencement date of 24 August 2017, in fact, the commencement certificate was not granted until 19 January 2018, such that “a significant portion” of the delays in completion were the fault of the plaintiff, or at least, not the fault of the defendant. Mr Markham did not respond to the plaintiff’s alternative contention concerning the effect of ss 25 and 88 of the Building Act.

Authorities relating to contractual clauses that provide for nil liquidated damages

100․As Burns J observed in Adapt Constructions, a number of decisions have considered the proper construction of liquidated damages provisions which have been ‘effectively struck out’ of a contract. It is necessary to briefly address these decisions before turning to a consideration of the proper construction of the contracts in the present case.
101․The first decision considered by Burns J in Adapt was the decision of the United Kingdom Court of Appeal in Temloc Ltd v Errill Properties Ltd (1987) 39 BLR 30. The contract there in issue was one in which the respondent (Temloc) agreed to construct a shopping development for the appellant (Errill). A clause of that contract provided that if the project was not completed on time, liquidated damages were payable “at the rate stated in the Appendix”: Temloc at [35]. The appendix stated that “liquidated and ascertained damages” were to be awarded “at the rate of £nil”. Temloc contended that the effect of the appendix meant that no damages could be awarded for delay in the completion of the development. In contrast, Errill contended that the clause concerning liquidated damages should be excluded from the contract, such that it remained open to it to claim unliquidated damages for the delay. The primary judge found in favour of Temloc.
102․In dismissing an appeal against this decision by Errill, the Court of Appeal held that the liquidated damages clause was intended to be an exhaustive agreement as to damages for failure to complete the works on time. Accordingly, the Court held that Errill was precluded from seeking unliquidated damages for delay.
103․As Burns J further noted in Adapt at [74] – [79], a different conclusion was reached in respect of similar clauses in building contracts in by the Western Australian Court of Appeal in J-Corp Pty Ltd v Mladenis [2009] WASCA 157; 26 BCL 106 and by Giles J in Baese Pty Ltd v RA Bracken Building Pty Ltd (1990) 6 BCL 137.
104․The building contract in J-Corp provided that if the builder did not complete the works on time, “it shall be liable to pay the Proprietor liquidated damages at the rate of NIL DOLLARS ($00.00) per day”. The Court held that this clause did not stand in the way of the owner’s entitlement to claim unliquidated damages in the event that the work was not completed within the time specified in the contract.
105․Similarly, the decision in Baese concerned a building contract which specified a rate of “nil” dollars for liquidated damages. In finding for the owner, Giles J rejected an argument advanced by the builder that the effect of this clause was that the owner was not entitled to any damages resulting from a delay in construction.
106․The Court in J-Corp at [48] noted that whilst liquidated and unliquidated damages may be seen as “different forms of the same head of damage”, there are important differences in the means by which each form of damages may be recovered. Specifically, a liquidated damages provision relieves the owner of the difficulty and expense of proving actual damage occasioned by delay: Baese at 143; J-Corp at [7]. Both decisions found that the effect of the clause permitting “nil” liquidated damages did not preclude the owner from seeking unliquidated damages resulting from a delay in completion.
107․From the above decisions, Burns J distilled the following principles (Adapt at [79]):
(a)   the requirement in each case is to ascertain the intention of the parties to the agreement concerning damages for delay;
(b)   in ascertaining that intention, consideration may be given not only to the language of the agreement, but also to the surrounding circumstances known to the parties and the apparent purpose and object of the transaction. Temloc was a case where evidence was received of surrounding circumstances, being evidence of a course of dealings between the parties to the agreement which confirmed that the intention of the parties was that damages for late completion would not be available;
(c)   the vesting of a discretion in the proprietor to exercise a contractual right to claim liquidated damages may indicate that the parties did not intend the contractual right to liquidated damages to be the exclusive remedy for delay; conversely, a mandatory clause, in the sense of compelling the builder to pay regardless of any demand for payment by the principal, may indicate that the clause is intended to provide an exclusive remedy; and
(d)   in construing a contract which, on its face, provides for no liquidated damages for breach, an intention to exclude a right to common law damages must be expressed in clear and unambiguous terms.

108․Adapt concerned a liquidated damages clause, in which the rate of liquidated damages per week was left blank, in circumstances where the clause further provided “if nothing stated, Zero”.
109․Applying the principles set out above to the construction of this clause, Burns J held that the arbitrator had not erred in law in awarding damages for delay. In particular, his Honour held that the owners were entitled to damages for the builder’s breach of contract in failing to complete the works within the prescribed time: Adapt at [80].
110․The proper construction of a clause of a contract providing for little or no liquidated damages was recently considered by the New South Wales Court of Appeal in Carbone v Fowler Homes Pty Ltd; Carbone v Fowler Homes Pty Ltd [2024] NSWCA 192. As in the cases discussed above, Carbone concerned the proper construction of a liquidated damages clause in a Building Contract. However, in contrast to the clauses considered in the above decisions, the liquidated damages clause in Carbone specified a rate of $1 a day. Again, the builder’s contention was that the owners were limited to damages at a rate of $1 a day for delay in completion; whilst the owners contended that this clause did not impact their right to seek unliquidated damages for delay.
111․In finding for the owners, Leeming JA (with whom Ward P and Michelmore JA agreed) held that there was no substantive difference between a liquidated damages clause which provided for $1 a day and one which provided for liquidated damages of $0 (at [105]):
The point of a liquidated damages clause in a trifling amount, whether it be $0 or $1 per day, is that this is utterly negligible compared to the contract price, and for that reason the law treats the parties’ bargain carefully, requiring clear language before the entirety of a party’s basic right is treated as having been abrogated.

112․Justice Leeming held that the decision of the Western Australian Court of Appeal in J-Corp was indistinguishable and that he was “far from persuaded that there are compelling reasons not to follow it”: Carbone at [106]. His Honour also referred to the decision in Cappello v Hammond & Simonds NSW Pty Ltd, in which Ball J held that a clause in a home building contract which provided for liquidated damages of $1 per day, would, if construed as an exclusive remedy for damages for delay, restrict the rights of the person in respect of the statutory warranty conferred by s 18B(1)(d) of the Home Building Act1989 (NSW), such that it would be rendered void under s 18G of that Act (at [31]). His Honour agreed with Ball J’s finding that “the better interpretation of the liquidated damages clause is one that avoids that consequence”: Carbone at [101] and [106]. His Honour concluded (at [106]):
I see no reason for the clause in a HIA contract, which already contains a provision giving an automatic extension in favour of a builder for every day’s delay in making progress payments, and other provisions for delay outside its control, to leave an owner with a nominal return in circumstances where the builder fails to adhere to its promised timing and the owner can establish loss caused by the builder’s delay.

Determination

113․As outlined above, the approach of Burns J in Adapt is consistent with various decisions of intermediate appellate courts concerning clauses that provide for “trifling amounts” of liquidated damages. Importantly for present purposes, it is now recognised that, in construing a contract which, on its face, provides for no liquidated damages for breach of a clause requiring that practical completion be achieved by a specified date, “an intention to exclude a right to common law damages must be expressed in clear and unambiguous terms”: Adapt at [79].
114․Clause A17 does not express a clear and unambiguous intention to exclude the plaintiff’s right to common law damages. In particular,
(i)The drawing of a horizontal line in A17 is consistent with the parties having intended that no liquidated damages be claimable in the event of a failure to achieve practical completion, while still leaving the plaintiff with a right to claim unliquidated damages if the plaintiff could establish that the breach of the practical completion clause had resulted in actual damage. (Indeed, the drawing of a horizontal line is even more equivocal than the nil dollars and $1 clauses considered in the decisions discussed above.)
(ii)There is no evidence that there was any express agreement between the parties that no damages should be payable in the event of a failure to achieve practical completion, nor is there any indication in the contract itself that the plaintiff had foregone an entitlement to common law damages as a part of a broader bargain.
(iii)Clause 15 of the Building Contract protected the defendant in the event of delays which were outside of the builder’s control. That clause permitted the builder to unilaterally extend the time for practical completion by serving a written Time Variation Notice where there were delays arising from variations, suspensions (as a result of any failure to pay a progress payment); inclement weather; actual or threatened disputes with neighbours; industrial disputes; any act, default or omission on behalf of the owner; any delay by any authority in granting necessary consents or approvals; and “anything else beyond the control of the builder”: see similarly Carbone at [106], extracted at [112] above.
(iv)A construction of A17 which excluded the owner’s right to common law damages would leave the owner with no remedy under the contract for delay in practical completion, even where the builder’s delay was entirely unreasonable. There is a strong argument that such a construction would be inconsistent with the statutory warranty contained in s 88 of the Building Act.

115․The matters raised in the defendant’s written submissions do not demonstrate that cl 10 and A17 should be read as excluding the plaintiff’s right to common law damages:
(i)The existence of the Project Management Agreement does not affect the proper construction of the clauses of the Building Contract. As explained above, the two agreements are not inconsistent. The fact that the Project Management Agreement did not require the works to be completed by any specified date did not preclude the parties from separately agreeing in the Building Contract that the building component of those works was required to be completed by a specified date;
(ii)The statement in the Building Contract that, apart from any implied terms, the Building Contract contains “the entire agreement of the parties” says nothing about the plaintiff’s entitlement to common law damages for breach of that agreement;
(iii)It matters not that the plaintiff did not positively provide, nor put to the defendant in evidence that there was any ambiguity in the contracts which required recourse to any inferences with respect to damages. As noted at [43] above, the proper construction of the contract is to be determined objectively, and not by reference to the subjective intentions of the parties:

116․Accordingly, the plaintiff’s common law right to damages for breach of contract has not been excluded by cl 10 and A17 of the Building Contract.
117․It remains necessary to consider the defendant’s contention that the plaintiff has not demonstrated an entitlement to common law damages.
118․I reject the defendant’s contention that the plaintiff’s pleading was deficient. In his Statement of Claim, the plaintiff pleaded that the defendant had breached the clause of the Building Contract which required practical completion. The plaintiff claimed unliquidated damages for this breach. The plaintiff did not make a claim for liquidated damages. The plaintiff did not need to “distinguish” between a claim for liquidated damages and a claim for unliquidated damages, because no claim for liquidated damages under the contract was advanced. It may be noted that the defendant did not make any reference to clause A17 in its defence as an answer to the plaintiff’s claim for unliquidated damages.
119․I also reject the defendant’s contention that the plaintiff has not established the ‘but for’ test for causation of damage. It was a term of the contract that practical completion be achieved on or before 22 January 2020. Because practical completion was not achieved on the date specified, the plaintiff was not able to live in his property from that time. As a result of the defendant’s breach, the plaintiff was required to rent alternative accommodation. In these circumstances, the ‘but for’ test is readily satisfied. Understandably, the defendant did not argue that such damages were unforeseeable. The need to rent alternative premises is “precisely the sort of damage to be expected” from a delay in construction of a duplex which the defendant knew the plaintiff intended occupy as his home: see similarly Carbone at [78]ff.
120․The defendant’s final contention (namely, that the delay in practical completion was out of his control) should also be rejected. The Building Contract made provision for interruptions in the building works that were outside of the defendant’s control, particularly in respect of weather and delays in obtaining necessary approvals. As noted above, cl 15 enabled the defendant to extend the time for practical completion by issuing a Time Variation Notice. The defendant did not do so. In these circumstances, the fact that some aspects of the delay were outside of the defendant’s control is no answer to the plaintiff’s claim for damages for breach of contract.
121․The plaintiff’s claim for damages during this period was limited to $700 per week for rent. The defendant did not submit that $700 per week for rent of an apartment in Canberra was unreasonable. At a rate of $700 per week for the period from 22 January 2020 to 5 July 2021, when the plaintiff finally obtained possession of the property from the defendant (530 days), the total damages payable to the plaintiff for the defendant’s failure to achieve practical completion is $53,000. The plaintiff is also entitled to interest on this amount in the sum of $1,616.74.

The alternative claim for damages arising from the “lock out”

122․In the alternative to his claim for damages arising from the delay in practical completion, the plaintiff claimed damages for having been “locked out” of the property. Specifically, he alleged that, from 30 November 2019, the defendant denied him possession of the property because he had not paid interest on the amounts that had been earlier owing to the defendant. As I have concluded that the plaintiff is entitled to damages arising from the delay in practical completion, it is not necessary for me to determine this alternative claim.

Damages for defective works

Introduction

123․After the plaintiff obtained possession of the property on 5 July 2021, he commissioned Mr George Pudja, a consultant at Building Consultancy Company Peak Consulting Pty Ltd, to provide a report with respect to a number of concerns that he had with the property. Mr Pudja provided a report dated 20 September 2021, which identified a range of defects to the roof, exterior, and interior of the house. The report estimated that rectification of all of the defects identified would cost $161,564.04.
124․The defects claimed by the plaintiff in Schedule A to the Statement of Claim (filed on 10 December 2021) were as follows:

Item #

Defect

Estimated cost to rectify

1

Roof sheeting on both the upper and lower roofs have been extensively damaged.

The roof sheeting is not turned down along the end of the sheeting adjoining the gutter, roof sheeting crimped and evidence of redundant material debris, section of upper-level backtray shows negative falls.

Further defects will be particularised in expert evidence to be served by the plaintiff.

$56,501.28

Incl. 20% margin and 10% GST

2

The upper level colorbond wall cladding has been extensively damages [sic].

Visible cracking to the foam cladding on the first-floor level that is a potential source of bypass leakage.

Further defects will be particularised in expert evidence to be served by the plaintiff.

$12,334.48

Incl. 20% margin and 10% GST

3

Carport wall and soffit cladding are unfinished, presenting with exposed timber framing, lack of cladding and a general unfinished appearance.

Entry gate bolt fixings lack washer spacers and bolts and large gaps between the wall and gate frame with no spacers. Some screws used are not stainless steel.

Soffit linings at the front of the unit present with render splatter and additional cleaning and painting is required.

Gas hot water unit cover panels not painted.

$8,672.40

Incl. 20% margin and 10% GST

4

Electrical wiring in several external locations is incomplete.

This includes the carport, the entry gate security panel, the rear courtyard lighting, and the alfresco suspended heating lamps.

$8,382.00

Incl. 20% margin and 10% GST

5

The terminate chemical barrier reticulation system has one junction box adjacent to the central courtyard and dividing boundary wall, that is not connected.

The system appears to be incomplete, or the junction box is redundant.

Inspection by terminate chemical barrier installer, in order to determine what rectification works are required.

Unable to quantify at this stage.

6

The paving around the residence presents with excessive variation in gaps adjoining the exterior walls.

Grated drains around the yard are poorly fitted and require adjustment. One section presents with corrosion and replacement of this section of grate is required.

The boundary fence is missing post caps in some locations. Additional caps should be supplied and fitted for a uniform appearance.

$5,346.00

Incl. 20% margin and 10% GST

7

The concrete paving on the left side presents with inconsistent appearance in one area, that requires patching.

$864.60

Incl. 20% margin and 10% GST

8

The swimming pool not cleaned as required.

The front courtyard has building material waste stored that required additional cleaning and debris removal.

$2,560.80

Incl. 20% margin and 10% GST

9

Preliminary works required prior to internal remediation works being carried out (protection of floors and furnishings, along with storage and re-establishment of all on completion).

$4,752.00

Incl. 20% margin and 10% GST

10

The Hydronic heating system has not been commissioned properly and additional servicing is required along with supply of the operational manuals for the system. The central hub for hydronic valves is not accessible for inspection or servicing.

Obtain inspection by installer of hydronic heating system to determine necessary rectification works.

Not possible to quantify rectification costs at this stage.

11

Internal doors throughout the house have not been sealed along the top and bottom edges as required by manufacturers and industry standards and tolerances.

All the hinges have been painted over, which now presents with an inconsistent appearance to all the other door hardware, and these should be replaced with matching unpainted hinges.

$3,333.00

12

HRV (heat recovery ventilation) system makes excessive noise at the unit in the laundry when operating and induces a gurgling sound through the condensate discharge line connecting to the adjoining power room vanity unit drainage.

E$1,500.

13

Bathroom floor gradient falls 5mm/m at the door threshold and 0.0mm/m at the floor waste.

Minimum recommended falls are 10mm/m.

Additional testing required to determine appropriate rectification.

Not possible at this stage to quantify rectification costs

14

Data hub located under the internal stairs detached from the wall.

Locking mechanisms for kitchen awning window does not work.

$400

15

Ground floor slab does not have a burnished finish.

Excessive cracking also present in all rooms and the appearance of the floor is not acceptable as it is neither burnished nor honed in accordance with acceptable standards.

$48,858.48

Incl. 20% margin and 10% GST with respect to rectification of floors.

$6,758.00 with respect to consequential painting and cleaning works required following rectification of floors.

17

Cleaning works required following rectification work

$2,409.00

Incl. 20% margin and 10% GST

Did you instruct your solicitor to write to Vero?---So, yes.
Did you give instructions to convey to Vero that there was to be an acceptance in the amount of $40,000 in respect to the roof claims?---So I got a – I can't remember the exact date but I got an offer from Vero. It's not that long ago so I do remember it quite vividly, and I was of mind to accept that offer but I thought I'd better check with my legal team so I went back to my legal team and they said it wasn't wise to accept the claim and – because of the ongoing court proceedings so I haven't accepted the claim. I wanted to because it's quite a substantial amount of money.
You wanted to accept the insurance claim?---Well, sorry, I wanted to accept the insurance claim if it wasn't going to jeopardise my position in court.
What do you mean by jeopardise?---Well, as I said, it's three years on or four years on from the hail incident. I've received nothing until very recently so I wanted to make sure I wasn't doing the wrong thing by accepting it and I can't remember why but my legal team said it wasn't wise at this stage to accept it.

160․Clauses 21(c) and 21(d) of the Building Contract provided as follows concerning the “insurance responsibilities of both parties”:
c) Damage to Property (Contract Works Policy):
i) The Builder is liable for, and will insure against, liability for any damage to property, arising out of or in the course of the execution of the Works, which is due to negligence, omission or default of the Builder or a Subcontractor;
ii) As to loss or damage by fire, explosion, lightning and civil commotion, this sub-clause is to be read subject to sub-clauses 21(d) and 21(e).

d) Works
i) The Builder will take out insurance for the Works (the “Contract Works policy”)
ii) The Contract Works Policy will:
aa) be in the joint names of the Builder, the Owner and the Lending Authority (if any);
bb) be for loss or damage by fire, explosion, earthquake, lightning, storm, tempest, civil commotion, vandalism and impact by vehicle, to the full reinstatement value of the Works and for goods and materials supplies by the builder to the Site;
cc) state that the insurer waives all rights to which it might become entitled by subrogation against any insured.
e)Once a claim under a Contract Works Policy is settled, the Builder will diligently rebuild or repair the Works and replace or repair the materials destroyed or damaged. Settlement money will be paid into a bank chosen by the parties to an account in the joint names of the insured. The part of the money payable to the Builder will be paid to it out of the account by instalments as with normal progress payments.

161․Clause 14 of the Project Management Agreement governed the insurance requirements under that contract. Clause 14(c) provided as follows concerning project insurance:
The Project Manager will take out insurance of the project (the “Contract Works Policy”).
The contract works policy will:
i)be in the joint names of the Principal, Project Manager and the lending Authority (if any);
ii)be for loss or damage by fire, explosion, earthquake, lightning, storm, tempest, civil commotion, vandalism and impact by vehicle, to the full reinstatement value of the project;
iii)state the insurer waives all rights to which it might become entitled by subrogation against any insured.

162․Clause 14(e) of the Project Management Agreement required the Project Manager to “ensure that all Contractors have relevant and current insurances prior to their commencement on the Works”.
163․The defendant was in possession of the property at the time that the damage was occasioned by the hail storm. Prima facie, the defendant is liable for the rectification of that damage.
164․If there had been adequate evidence that the defendant had taken out insurance under which the plaintiff could fully recover for the damage occasioned by the hail storm, there may have been a question about whether it was appropriate for the plaintiff to instead make a claim for that damage under one or more of the contracts.
165․The evidence in the proceedings does not demonstrate that the defendant had taken out insurance in accordance with cl 21 of the Building Contract and cl 14 of the Project Management Agreement. It would have been a simple matter for the defendant to provide unequivocal evidence of the insurance arrangements which it asserts were in place. A request, or subpoena, to Vero could have avoided the need to assess the piecemeal evidence which was scattered throughout the oral evidence and the Court Book.
166․As noted above, the documents do not on their face demonstrate that the damage claimed was covered by insurance at the relevant time. I do not consider that the plaintiff’s evidence that he received a phone call from a person who indicated that Vero may be prepared to pay a sum of money which is less than the estimated cost of repairing damage is sufficient to demonstrate that the property was in fact fully covered by insurance for hail damage at the relevant time.
167․Accordingly, the plaintiff is entitled to damages for the cost of repairing the hail damage to the roof and for the damage to the wall cladding. If, despite the lack of evidence in the proceedings before me, it is in fact the case that the damage is covered by insurance, the defendant may be able to be reimbursed for all or some of these damages under the insurance policy.

The concrete floor

168․The plaintiff claimed that cracking in the concrete floor was a defect for which the defendant was liable. The defendant disputed that there was any defect in the concrete floor. Its contention was that the cracking was an aesthetic feature, which the plaintiff had requested.
169․In his supplementary expert report dated 5 July 2023, Mr Pudja expressed the opinion that “the finish to the ground floor slab is inconsistent and presents with excessive cracking”. He explained:
The ground floor slab was intended to have a burnished finish, which has proved unsuccessful and honing of the concrete surface was done in an attempt to salvage the appearance of the floor, which was also unsuccessful. Excessive cracking is also present in all rooms and the appearance of the floor is not acceptable as it is neither burnished nor honed in, in accordance with acceptable standards. An additional applied finish is now required to provide a uniform appearance and conceal cracking.

170․Under the heading “opinion”, Mr Pudja continued:
The finished appearance of the ground floor concrete slab does not meet the accepted industry standards for burnished or honed concrete floors.
Combined with excessive cracking in the ground floor slab throughout the residence, the current appearance is unacceptable.
The Hydronic heating has been commissioned and is functioning and, as predicted, cracking has continued to appear. The anticipated further shrinkage has occurred and now appears to have stabilised.
Therefore, I would recommend resealing all cracks and resurfacing the entire floor with a multi-layered Hyper flake Epoxy, to allow a continuity of the floor appearance and conceal the current burnished floor defects (or as selected).

171․Under the heading “substantiation of opinion”, Mr Pudja concluded:
The concrete floor slab is intended to be a feature, with minimal cracking. The level of cracking, gas, and voids visible from a normal viewing position is excessive and the inconsistent appearance does not match the descriptions of what is considered an acceptable appearance for burnished floors, honed floors, or any other polished concrete floor finish, which are described in CCAA Polished concrete floors Briefing Note, Dec 2006.
The architectural drawing indicates ‘Polished concrete floor’, the engineering drawings indicate the slab strength to be N32 for honed floor and N40 for burnished floor with SL81 mesh to top of slab. Verification of the execution of these specifications would be required to determine the source of the cracking.

172․In cross-examination, Mr Pudja was shown a copy of an email exchange between Mr Stevanovic and Mr Steve dated 29 November 2018. In the first email of the day, Mr Steve advised Mr Stevanovic that he had confirmed with the plaintiff and his wife that “they wanted the industrial look”.
173․In his reply, Mr Stevanovic expressed concern about whether the plaintiff’s wife “knows what she wants” and asked whether the designer had been briefed “on the industrial/ Warehouse look she’s after”. Mr Stevanovic said that the plaintiff’s wife had confused the concreters “[by] wanting a raw floor, then a polished floor then she said to them just leave it rough”. Mr Stevanovic said that he had told the plaintiff’s wife that the concreters “just need to do a good job and that she can decide when it’s getting polished how far to go with it exposing more or less aggregate”. He said “[t]hese last minute changes as the slab is about to get poured are frustrating”.
174․Later that day, Mr Steve sent an email which stated that the plaintiff’s brief to the designer was “for an industrial look but also a modern look”. He said that when he spoke to the plaintiff’s wife about the finish of the concrete floor “she was bouncing between finishes and even thinking about a raw look without sealer”. He said,
I told her this would make it almost impossible to clean and result in a lot of dust in the house and that it would need to be sealed. She then said she was happy with a clear sealer as long as she could see the raw concrete look and cracks like an old warehouse. So I am confused about the final look too.

175․Mr Pudja was cross-examined about the concrete floor at length. He maintained that the concrete floor was defective owing to extensive cracking, regardless of the instructions that had been provided.
176․The defendant did not adduce any expert evidence in response to Mr Pudja’s evidence. Rather, Mr Markham simply invited me to reject Mr Pudja’s opinion relating to the cracking of the concrete.
177․I accept Mr Pudja’s evidence that the cracking to the concrete floor was sufficiently extreme as to constitute a defect in the build. The plaintiff is entitled to the cost of repair of the concrete floor.

Whether work was defective or incomplete

178․The defendant invited the Court to draw a distinction between work which was defective and work which was simply incomplete. I do not accept this submission. As the plaintiff submitted:
(a)At the time that the defendant provided the keys to the plaintiff, the defendant did not notify the plaintiff that the works were incomplete.
(b)The plaintiff served notice of the defective and incomplete works shortly after obtaining possession of the property.
(c)Clause 27 of the Building Contract obliged the defendant to rectify defects and complete any incomplete works within 15 days of service of that notice.
(d)The defendant refused to rectify any defects or complete any incomplete works.

179․In these circumstances, I accept the plaintiff’s submission that any distinction between incomplete and defective work is “illusory”.

Quantification of damages relating to the roof defects

180․Mr Pudja identified the following roof defects:
(i)The upper and lower-level roof sheeting presented with extensive hail damage throughout, including flashing and capping sections.
(ii)The upper roof level roof sheeting has not been turned down along the end of the sheeting adjoining the futter, for a length of approximately 6m.
(iii)The roof sheeting also presented with crimping to some ribs and evidence of redundant building material debris, which require additional cleaning and disposal debris.
(iv)There are visible graphite pencil marks on some sections of capping and sheeting, which is not recommended under manufacturer’s guidelines and additional cleaning would be required.
(v)A section of upper-level back tray flashing presents with negative falls, which trap water and silt in the downstream corner and some adjustment in the falls is required to shed water correctly.
(vi)Downpipe spreaders are not design or fitted as recommended under AS 3500.3 and recognised AS/NZ standards and codes of practice.

181․For the reasons outlined above I have concluded that the defendant is liable for damages under the Building Contract for defects relating to the roof; that this liability extends to the hail damage to the roof; and that for the purposes of awarding damages, no distinction should be drawn between ‘defective’ and ‘incomplete’ work.
182․No other challenge was made to the plaintiff’s quantification of damages relating to the roof. In particular, the defendant did not challenge Mr Pudja’s estimation of the cost of rectifying these defects.
183․Accordingly, I will allow the defendant the full amount claimed for rectifying the roof defects, namely $59,790.50.

Quantification of remaining exterior related defects

184․Mr Pudja identified the following additional defects relating to the exterior of the property:
(i)The upper level colorbond wall cladding is also hail damaged and should have been replaced along with hail damaged roof sheeting under the builder’s construction works insurance.
(ii)There is visible cracking to the foam cladding on the first-floor level, along with excessive shrinkage cracking to the sealant between foam panels and masonry walls, which requires patching and repairs once the roof sheeting and flashings have been replaced. Please note: I observed that the lower-level walls are also clad in foam panels instead of the brick vaneer finish noted on the architectural plans. It is unclear if this change received formal approval and if not, amended drawings should be submitted to the building file.
(iii)The carport wall and soffit cladding are unfinished, presenting with exposed timber framing, lack of cladding and a general unfinished appearance, including missing cover trims for carport light.
(iv)Soffit linings on the front of the unit present with render splatter and additional cleaning and painting is needed. Additional painting is also needed to the gas hot water unit cover panels, which are currently not painted.
(v)Entry gate screws are Class 2 type, which is not appropriate for exterior use and should be replaced with Class 3 matching stainless steel screws.
(vi)The concrete paving on the left side presents with inconsistent appearance in one area, that requires patching.
(vii)A condensate discharge is uncontrolled and has created a slip hazard during winter conditions.
(viii)The boundary fence is missing fence post caps in some locations. Additional caps should be supplied and fitted for a uniform appearance.

185․Again, for the reasons outlined above I have concluded that the defendant is liable for damages under the Building Contract for defects relating to the wall cladding, including in relation to the carport walls; that this liability extends to hail damage to the wall cladding; and that for the purposes of awarding damages, no distinction should be drawn between “defective” and “incomplete” work. Accordingly, the plaintiff should be awarded damages for the cost of rectifying the defects identified at (i) – (iv) above. Again, the defendant did not challenge Mr Pudja’s estimation of the cost of rectifying these defects.
186․However, as items (v), (vi), (vii) and (viii) relate to defects concerning gates, fencing, paving and air conditioning, which are not within the scope of the works, the plaintiff will not be awarded damages for these defects. Accordingly, the plaintiff will not be awarded the full damages sought for the “exterior related defects” outlined in Mr Pudja’s supplementary report.
187․The total damages quantified by Mr Pudja for the exterior related defects was $26,901.88 (including 25% builder’s margin and 10% GST), comprised of the following:

Item

Cost

Carpenter – replacing upper level Colorbond wall, including securing fixtures, painting and cleaning of affected areas (labour and materials)

$10,685

Plasterer (supply and fix additional wall linings) (labour and materials)

$3,020

Painter (painting of eves and garage area and all unpainted exterior items such as downpipes and hot water covers) (labour and materials)

$4,400

Electrician (supply and fit missing cover trims to carport light fitting)

$105

Labourer (provide galvanised washers to front gate bolt fixing to eliminate gaps; supply and fit matching stainless steel

$145

Plumber (supply and fit PVC pipe to AC condensate discharge and connect to nearest downpipe)

$465

Concretor

$745

188․The estimated costs for the carpenter, plasterer and painter each relate to the repair of the wall cladding. Damages will be allowed for each of these costs. The remainder of the costs (electrician, labourer, plumber and concretor) relate to matters which are not within the scope of the Building Contract, and will not be allowed.
189․The total cost allowable for the remaining exterior defects will be $24,894.38 (including GST and 25% for builder’s margin).

Interior related defects

190․Mr Pudja identified the following additional defects relating to the interior of the property:
(i)The ground floor slab was intended to have a burnished finish, which has proved unsuccessful and honing of the concrete surface was done in an attempt to salvage the appearance of the floor, which was also unsuccessful. Excessive cracking is also present in all rooms and the appearance of the floor is not acceptable as it is neither burnished nor honed in, in accordance with acceptable standards. An additional applied finish is now required to provide a uniform appearance and conceal cracking.
(ii)The internal doors throughout the house have not been sealed along the top and bottom edges as required by manufacturers and industry standards and tolerances and all the hinges have been overpainted, which now presents with an inconsistent appearance to all the other door furniture, and these should be replaced with matching unpainted hinges.
(iii)The bathroom floor lacks gradient falls to the floor waste, although there is no obvious ill effect to date.
(iv)The kitchen awning window mechanism requires servicing or replacement as the locking function does not work.
(v)The alfresco sliding door lacks a vertical trim on one of the doors, that is visible to all others adjacent edges.
(vi)The entry door and side carport presents with gaps between the door seals and the door frame and this allows excessive air movement and the front door leaks when washed or during window driven rain.

191․Mr Pudja did not recommend repairs be made to the bathroom floor, which did not demonstrate any ill effects at present. The remaining “interior related defects” identified by Mr Pudja related to the windows and internal doors. For the reasons outlined above I have concluded that the defendant is liable for damages under the Building Contract for defects relating to the windows and internal doors in the property. I have also concluded that for the purposes of awarding damages, no distinction should be drawn between ‘defective’ and ‘incomplete’ work.
192․No other challenge was made to the plaintiff’s quantification of damages relating to the interior defects identified in the property. In particular, the defendant did not challenge Mr Pudja’s estimation of the cost of rectifying these defects. In these circumstances, the plaintiff should be awarded the full cost estimated by Mr Pudja in respect of the “interior related defects”, namely $74,743.62.

Owner’s expenses

193․In the final part of his report, Mr Pudja listed the expenses which the owner had incurred. These expenses, which totalled $18,144.20, included the following:

Type of work

Description

Cost

Class locksmiths

Locksmiths to change all locks at the property.

$675

All type electrical and data

Electrician to fix ‘earth’ the electrical works outside.

$1,884

Scenic living

Landscaper to complete the landscaping works to the outside of the property.

$8,197.20

DRE Plumbing and Gas fitting

Plumber to rectify issues with pipes and leakage

$869

Pristine Pools

Pristine Pool Canberra conducting cleaning and electrical works

$6,277

Gold Innovations

Electrician to repair a faulty oven and associated electrical works

$242

194․For the reasons outlined above, I have found that the landscaping (including outside electrical works), plumbing, kitchen appliances and the pool were not within the scope of the Building Contract. Accordingly, the defendant is not liable for these expenses.
195․The plaintiff claimed the cost of changing all of the locks at the property. He explained that, as a result of his relationship with the defendant having significantly deteriorated and Mr Stevanovic’s aggression, the plaintiff had safety concerns and concerns that Mr Stevanovic may access the property to cause damage. The plaintiff also added that, “in any event, [the defendant] did not provide a complete set of keys”. The plaintiff did not state which keys had not been provided; nor did he give any details of Mr Stevanovic’s alleged aggression.
196․It is clear that the relationship between the plaintiff and the defendant had broken down irrevocably by the time that possession of the property was returned to the plaintiff. However, other than the general assertion in the plaintiff’s affidavit, there was no evidence of any aggression on the part of Mr Stevanovic towards the plaintiff, or of any basis for concluding that Mr Stevanovic would unlawfully trespass upon, or damage the plaintiff’s property.
197․As outlined above, the defendant denied the plaintiff possession of the property because he alleged the plaintiff had not paid interest on the amounts that had been earlier owing to the defendant. The plaintiff’s counsel contended that the defendant’s claim for interest was so lacking in foundation that it should be concluded that he knew that that claim was deceitful. I have found that the defendant did not have a basis for claiming interest; however, I do not accept that Mr Stevanovic knew this to be the case. Rather, my assessment is that Mr Stevanovic had little to no understanding of the contracts that he had entered into, and that he honestly, but wrongly, believed that he had an entitlement to claim the interest charged.
198․At the time that the defendant gave possession of the property to the plaintiff, solicitors had been engaged, and there was no suggestion that the defendant, through Mr Stevanovic or any other person, would act with respect to the property other than via his legal representative.
199․In these circumstances, the plaintiff will not be awarded damages for the cost of changing the locks at the property.

Summary of damages to be awarded for defects

200․The total damages to be awarded in respect of defects in the property for which the defendant is responsible are as follows:

Defect

Damages awarded

Roof (hail damage and other defects)

$59,790.50

Wall cladding (hail damage)

$24,894.38 (including GST and 25% builders fee)

Interior related defects

$74,743.62

Total

$159,428.50

201․As these damages relate to work which is yet to be performed, interest is not payable on this amount.

Claim for damages arising from delay in occupation arising from defects

202․As noted above, the plaintiff obtained possession of the property on 5 July 2021. However, the plaintiff contended that the defects addressed above left him unable to occupy the property until 31 March 2022. He explained that he did not feel safe living in the house until the works were complete.
203․In response, the defendant reiterated its contention that it was not responsible for the rectifications. The defendant further submitted that none of the rectifications rendered the house uninhabitable. In the alternative, the plaintiff failed to act reasonably to obtain rectifications himself once he had possession after 5 July 2021.
204․For the reasons outlined above, I have found that there were a number of defects in the property which the defendant is liable in damages. However, Mr Pudja’s evidence was that those defects were not such as to render the property uninhabitable:
Did you in your inspection in September of 2021 identify any reason why practical completion and a certificate of occupancy should not have been issued? The short answer is no. So there are aspects that were incomplete, there were aspects that were slightly defective and non-compliant, but on the whole those items didn't really impact the overall amenity of the building or the use of the building as intended. There were questions about whether or not in-slab heating was functioning at the time. That's something I couldn't assess. I'm not really qualified to assess that. It would need an electrician. There was other aspects like the swimming pool, like - things like that that were not obviously complete and - but I didn't feel that - if you ask me that question, I don't - don't feel those aspects would prevent somebody from occupying the house.

205․I accept that the plaintiff was wary of the works following the complete breakdown of the relationship between the parties. It was reasonable for the plaintiff to have the works inspected for safety before he commenced occupying the property. However, the plaintiff had a duty to mitigate his damage. Two weeks is a reasonable period for the plaintiff to obtain expert assurance that the property was safe to live in.
206․Accordingly, the defendant is liable to pay $1,400 in damages for lost rent after the plaintiff obtained possession of the property.

Conclusion

207․The total amount of damages that will be awarded against the defendant is as follows:

Item

Damages

Interest

Repayment of wrongfully obtained interest

$21,143.95

$4,542.50

Damages incurred (rent) by reason of failure to achieve practical completion by date specified in the Building Contract

$53,000

$1,616.74

Repair of defective works

$159,428.5

N/A

Delay in occupation arising from defects

$1,400

N/A

TOTAL

$234,972.45

$6,159.24

TOTAL TO BE AWARDED

$241,131.69

Orders

208․For the above reasons, I make the following orders:
(1)Judgment is entered for the plaintiff in the sum of $241,131.69
(2)The defendant is to pay the plaintiff's costs.
(3)If either party notifies the Court within 7 days of the making of these orders that a different costs order is sought, order 2 is stayed until further order.

I certify that the preceding two hundred and eight [208] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Justice Baker

Associate:

Date: 15 November 2024

Item #	Defect	Estimated cost to rectify
1	Roof sheeting on both the upper and lower roofs have been extensively damaged. The roof sheeting is not turned down along the end of the sheeting adjoining the gutter, roof sheeting crimped and evidence of redundant material debris, section of upper-level backtray shows negative falls. Further defects will be particularised in expert evidence to be served by the plaintiff.	$56,501.28 Incl. 20% margin and 10% GST
2	The upper level colorbond wall cladding has been extensively damages [sic]. Visible cracking to the foam cladding on the first-floor level that is a potential source of bypass leakage. Further defects will be particularised in expert evidence to be served by the plaintiff.	$12,334.48 Incl. 20% margin and 10% GST
3	Carport wall and soffit cladding are unfinished, presenting with exposed timber framing, lack of cladding and a general unfinished appearance. Entry gate bolt fixings lack washer spacers and bolts and large gaps between the wall and gate frame with no spacers. Some screws used are not stainless steel. Soffit linings at the front of the unit present with render splatter and additional cleaning and painting is required. Gas hot water unit cover panels not painted.	$8,672.40 Incl. 20% margin and 10% GST
4	Electrical wiring in several external locations is incomplete. This includes the carport, the entry gate security panel, the rear courtyard lighting, and the alfresco suspended heating lamps.	$8,382.00 Incl. 20% margin and 10% GST
5	The terminate chemical barrier reticulation system has one junction box adjacent to the central courtyard and dividing boundary wall, that is not connected. The system appears to be incomplete, or the junction box is redundant.	Inspection by terminate chemical barrier installer, in order to determine what rectification works are required. Unable to quantify at this stage.
6	The paving around the residence presents with excessive variation in gaps adjoining the exterior walls. Grated drains around the yard are poorly fitted and require adjustment. One section presents with corrosion and replacement of this section of grate is required. The boundary fence is missing post caps in some locations. Additional caps should be supplied and fitted for a uniform appearance.	$5,346.00 Incl. 20% margin and 10% GST
7	The concrete paving on the left side presents with inconsistent appearance in one area, that requires patching.	$864.60 Incl. 20% margin and 10% GST
8	The swimming pool not cleaned as required. The front courtyard has building material waste stored that required additional cleaning and debris removal.	$2,560.80 Incl. 20% margin and 10% GST
9	Preliminary works required prior to internal remediation works being carried out (protection of floors and furnishings, along with storage and re-establishment of all on completion).	$4,752.00 Incl. 20% margin and 10% GST
10	The Hydronic heating system has not been commissioned properly and additional servicing is required along with supply of the operational manuals for the system. The central hub for hydronic valves is not accessible for inspection or servicing.	Obtain inspection by installer of hydronic heating system to determine necessary rectification works. Not possible to quantify rectification costs at this stage.
11	Internal doors throughout the house have not been sealed along the top and bottom edges as required by manufacturers and industry standards and tolerances. All the hinges have been painted over, which now presents with an inconsistent appearance to all the other door hardware, and these should be replaced with matching unpainted hinges.	$3,333.00
12	HRV (heat recovery ventilation) system makes excessive noise at the unit in the laundry when operating and induces a gurgling sound through the condensate discharge line connecting to the adjoining power room vanity unit drainage.	E$1,500.
13	Bathroom floor gradient falls 5mm/m at the door threshold and 0.0mm/m at the floor waste. Minimum recommended falls are 10mm/m.	Additional testing required to determine appropriate rectification. Not possible at this stage to quantify rectification costs
14	Data hub located under the internal stairs detached from the wall. Locking mechanisms for kitchen awning window does not work.	$400
15	Ground floor slab does not have a burnished finish. Excessive cracking also present in all rooms and the appearance of the floor is not acceptable as it is neither burnished nor honed in accordance with acceptable standards.	$48,858.48 Incl. 20% margin and 10% GST with respect to rectification of floors. $6,758.00 with respect to consequential painting and cleaning works required following rectification of floors.
17	Cleaning works required following rectification work	$2,409.00 Incl. 20% margin and 10% GST

Description	Total Ex GST
Job Address: 13A Mitchell Street · Interest on overdue payment - Invoice date: 9 October 2020 - Payment terms: 7 days (Clause 20 (b) - Schedule 10) - Invoice amount: $67,513.35 - Interest on overdue payment: 10% per month (Clause 31 - Schedule 20) - Days in default:42 days at $55,000.00 (payment received 27 November 2020) - Days in default: 117 days at $12,513.35 (payment received 10 February 2021)	$7,594.52 $4,823.35
GST EX TOTAL	$12,417.87
GST	$1,241.79
GST INC TOTAL	$13,659.66

Item	Cost
Carpenter – replacing upper level Colorbond wall, including securing fixtures, painting and cleaning of affected areas (labour and materials)	$10,685
Plasterer (supply and fix additional wall linings) (labour and materials)	$3,020
Painter (painting of eves and garage area and all unpainted exterior items such as downpipes and hot water covers) (labour and materials)	$4,400
Electrician (supply and fit missing cover trims to carport light fitting)	$105
Labourer (provide galvanised washers to front gate bolt fixing to eliminate gaps; supply and fit matching stainless steel	$145
Plumber (supply and fit PVC pipe to AC condensate discharge and connect to nearest downpipe)	$465
Concretor	$745

Type of work	Description	Cost
Class locksmiths	Locksmiths to change all locks at the property.	$675
All type electrical and data	Electrician to fix ‘earth’ the electrical works outside.	$1,884
Scenic living	Landscaper to complete the landscaping works to the outside of the property.	$8,197.20
DRE Plumbing and Gas fitting	Plumber to rectify issues with pipes and leakage	$869
Pristine Pools	Pristine Pool Canberra conducting cleaning and electrical works	$6,277
Gold Innovations	Electrician to repair a faulty oven and associated electrical works	$242

Defect	Damages awarded
Roof (hail damage and other defects)	$59,790.50
Wall cladding (hail damage)	$24,894.38 (including GST and 25% builders fee)
Interior related defects	$74,743.62
Total	$159,428.50

Item	Damages	Interest
Repayment of wrongfully obtained interest	$21,143.95	$4,542.50
Damages incurred (rent) by reason of failure to achieve practical completion by date specified in the Building Contract	$53,000	$1,616.74
Repair of defective works	$159,428.5	N/A
Delay in occupation arising from defects	$1,400	N/A
TOTAL	$234,972.45	$6,159.24
TOTAL TO BE AWARDED	$241,131.69