Jennifer Spencer and Ricardo Spencer v T M Building Consultants Pty Ltd (HB 12/07020) T M Building Consultants Pty Ltd v Jennifer Spencer and Ricardo Spencer (HB 13/40263)
[2014] NSWCATCD 113
•27 June 2014
NSW Civil and Administrative Tribunal
New South Wales
Medium Neutral Citation: Jennifer Spencer and Ricardo Spencer v T M Building Consultants Pty Ltd (HB 12/07020) T M Building Consultants Pty Ltd v Jennifer Spencer and Ricardo Spencer (HB 13/40263) [2014] NSWCATCD 113 Hearing dates: 19 May 2014, and reserved for decision on the papers Decision date: 27 June 2014 Before: Jeffery Smith, Senior Member Decision: 1. Pursuant to the NCAT Act Schedule 1 and the provisions of the CTTT Acts 34(1), an order is made dispensing with a hearing in both matters.
2. TM Building Consultants Pty Ltd shall pay Jennifer Spencer and Ricardo Spencer, jointly, the sum of $196,818.72 immediately.
3. If the parties are unable to agree on the issue of costs they may each file a short written submission on that issue only within 21 days of the date of these orders.
4. If any party seeks a hearing on the issue of costs, a request in writing to the Divisional Registrar must be made within 21 days of the date of these orders.
Catchwords: Hearing on the papers Legislation Cited: Civil and Administrative Tribunal Act 2013 (NCAT Act)
Home Building Act 1989 (HBA)
Consumer, Trader and Tenancy Tribunal Act 2001 (CTTT Act)Cases Cited: Bellgrove v Eldridge [1954] HCA 36, Tabcorp Holdings Ltd v Bowen Investments Pty. Ltd. [2009] HCA 8,
McDougall v ACCA Constructions Pty. Ltd [2011]NSWCTTT 360,
Robinson v Harmon [1848] 154 All ER 363, Scott Carver Pt. Ltd v SAS Trustee Corporation [2005]NSWCA 462,
Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305,
Pavey & Matthews v Paul [1987] HCA 5Category: Principal judgment Parties: Jennifer and Ricardo Spencer (the home-owners),
T M Building Consultants Pty Ltd (the builder)Representation: Mr Bland of counsel, instructed by Strathfield Law for the homeowners
Mr Klooster of counsel, instructed by A.C. Lawyers for the builder
File Number(s): HB 12/07020 HB 13/40263
reasons for decision
APPLICATION
Application HB 12/07020 was filed by the home-owners in the Consumer, Trader and Tenancy Tribunal (CTTT) on 8 February 2012. The application initially sought orders for payment of $15,000.00 in respect of unspecified incomplete and/or defective residential building work and for relief of payment of the sum of $35,947.00 allegedly owed under a contract for residential building work.
The matter proceeded to a number of directions hearings in the CTTT and on 29 July 2013 the builder filed a cross claim (HB 13/40263) seeking orders for payment in the sum of $23,320.25 for works performed pursuant to a contract for residential building work.
The two matters proceeded together but had not been heard and determined by 1 January 2014 when the CTTT was abolished. Accordingly the two applications proceeded before the New South Wales Civil and Administrative Tribunal (NCAT) pursuant to the transitional provisions of the NCAT Act Schedule 1.
Both applications were listed for hearing before NCAT on 19, 20 and 21 May 2014.
Pursuant to directions made by the CTTT on 5 December 2013 and amended by NCAT on 22 January 2014 the parties filed an agreed bundle of documents intended to deal with all issues in both applications, together with an index for the bundle.
On the morning of 19 May 2014 the parties' legal representatives agreed that following an opportunity for both parties to file written submissions the matters could be determined "on the papers" and without the need for cross-examination of witnesses.
The CTTT Act s 34(1) provides that the Tribunal may determine an application without a hearing if satisfied, and the parties agree, that the issues for determination can be adequately determined in the absence of the parties by considering the documents filed.
Having perused the joint bundle of documents filed by the parties and after receiving further written submissions filed on behalf of the parties I am satisfied that these two applications are cases in which a hearing may be dispensed with. The parties' legal representatives agreed to that course of action.
ADJOURNMENT
The applications were adjourned by consent for a reserved decision to be made "on the papers" following receipt of the submissions in accordance with the Tribunal's directions.
JURISDICTION
There was no dispute between the parties that the contract was for the performance by the builder of residential building work as defined under the HBA s 3 for the home-owners, and accordingly I am satisfied the Tribunal has jurisdiction pursuant to the HBA s 48K to hear and determine the applications.
ISSUES
When and in what circumstances did the contract terminate.
Whether the work was incomplete or defective and if so, whether the home-owners are entitled to damages in respect of those defects and incomplete works.
Whether the proposed remediation of allegedly defective works is a reasonable course to adopt.
Whether the builder is owed a sum as a quantum meruit for work performed for the home-owners.
APPLICANT'S CASE
The home-owners' case was that the parties had entered into a contract on or about 20 April 2010 for alterations and additions to their residential property at Bronte for the agreed sum of $233,200.00 and that work had commenced on 21 April 2010.
The contract period was 26 weeks and, after allowing the builder an extension of time in respect of an amendment to the development consent, the completion date should have been 21 December 2010.
Work ceased on 16 October 2011 when the builder abandoned the site.
A dispute erupted between the parties about incomplete work and payment for amounts allegedly outstanding under the contract.
Following complaints in December 2011 to the builder by the home-owners in respect of alleged defects in the building work, in respect of which the builder declined to take any action, the home-owners had complained to the Office of Fair Trading. Following inspections of the works there had been rectification orders made with which the builder has not complied.
The home-owners sought orders for compensation in respect of allegedly defective and incomplete work, consequential damages arising from the need to vacate the premises whilst remedial work is conducted, costs and relief of any further payment to the builder. The total sum claimed by the owners as set out in the report of John Worthington and Associates dated 31 August 2012 was $482,579.71.
The extent of the alleged building defects is such that it is likely to be more cost effective to demolish all of the works undertaken by the builder and reconstruct. The defects fall into four broad areas,
Water penetration and leaks,
Works not in accordance with the BCA (generally room sizes which are non-compliant),
Structural issues associated with alleged failure to properly coat structural steel and to construct in accordance with engineering drawings,
Incomplete works due to abandonment of the works by the builder.
The parties' experts agreed in conclave that the value of the defective works (subject to the issue of liability in some instances) is $222,454.00. Reliance was placed on the principles set out in Bellgrove v Eldridge [1954] HCA 36 at para 5 (Bellgrove), for the proposition that demolition of the subject works and re-building may be justified.
"But the work necessary to remedy defects in a building and so produce conformity with the plans and specifications may, and frequently will, require the removal or demolition of some part of the structure. And it is obvious that the necessary remedial work may call for the removal or demolition of a more or less substantial part of the building. Indeed - and such was held to be the position in the present case - there may well be cases where the only practicable method of producing conformity with plans and specifications is by demolishing the whole of the building and erecting another in its place. In none of these cases is anything more done than that work which is required to achieve conformity and the cost of the work, whether it be necessary to replace only a small part, or a substantial part, or, indeed, the whole of the building is, subject to the qualification which we have already mentioned and to which we shall refer, together with any appropriate consequential damages, the extent of the building owner's loss. (at p618)"
It was the homeowners' submission that "the overall damage as well as the noncompliance with planning and building requirements and failure to construct structural supports" justified demolition and reconstruction as the most cost effective resolution. The application of a sum by the experts in conclave to the cost of a "s 96" application to vary the planning consent is not acceptance by the home-owners that such an application, if made, will cure the defects. The home-owners seek the cost of rectification of their house.
The builder's expert in conclave expressed reservations as to the liability of the builder in regard to some of the defects claimed, which was answered in the owners' written submission on the basis that there was no evidence to suggest that any of the works had not been performed by it.
In reply to the builder's cross claim it was the home-owners' position that they did not contest those aspects of the builder's claim for which they had requested the work be done and for which they received value. The first variation (for $195,000.00) was agreed by the parties and the correct value of the work performed pursuant to that variation is $194,688.00.
In regard to the other "variations" claimed by the builder, the home-owners' denied any liability as they were not variations in accordance with the contract and no quantum meruit claim was made in respect of them. They were therefore precluded by operation of the HBA.
It was not disputed that during construction certain variations were agreed by the parties but none of those complied with the contract or the HBA. However, not all of that work was performed by the builder and remains incomplete. The proper way to value that work is by quantum meruit, but the builder's only evidence on that issue is the (self-serving) invoices of which all but the last has been paid.
If the Tribunal accepts the home-owners' argument that the works should be demolished, there is no need to consider the contract adjustment based on the additional works.
The home-owners claimed that far from owing the builder anything further, the builder had over charged the owners or owed a credit in respect of several items. A reconciliation of payments was prepared by the home-owners which alleged that the builder owed the owners $10,582.00.
Reliance was placed on the decision of the High Court in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8 (Tabcorp) for the proposition that the correct measure of the damages to which the homeowners are entitled is not to be calculated on diminution in value of the property arising from a breach (in that case a breach of covenant under a lease) but should reflect the actual cost of restoration including any consequential loss of rent. The decision re-iterated the rule at common law set-down in Robinson v Harmon [1848] 154 All ER, 365 (Robinson) for determining the measure of damage for breach of contract.
The rule of common law is, that where a person sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.
The home-owners relied on their filed documents which included
Points of Claim and Points of Defence to the builder's cross claim,
Affidavit of Jennifer Spencer, 13 May 2013
Reports of Monteith Building Consultancy Services, 30 August 2012 and 11 November 2013,
Report of The Coatings Consultancy, Dr Stuart Bayliss, 30 August 2012,
Reports of John Worthington & Associates 31 August 2012 and 3 September 2012,
Report of S J Dixon & Associates Survey 28 August 2012
The expert evidence relied on by the home-owners is consistent in regard to the nature and extent and the value to be placed on the defects. There are rooms that cannot be made to comply with the BCA, the plans or specifications. Structural steel is exposed to salt air and is not properly coated to protect it from corrosion. The steel supporting structure to the ground floor has not been provided (despite having been certified) and the water-proofing continues to fail. The collective view of the home-owners' experts was that the defects present warrant the demolition of the works and their re-construction.
Reliance was placed by the home-owners on the decision of the High Court in Dasreef Pty Ltd v Hawchar [2011] HCA 21 and on the decision of the New South Wales Court of Appeal in Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305 (Makita) in regard to the weight to be given to the expert evidence of Mr Whitton, for the builder.
Doubt was cast on the credit of the evidence of Mr Macri (director of the building company) based on the certification provided by him that the works had been carried out in accordance with the BCA, were in accord with the plans and specifications and were defect free.
RESPONDENT'S CASE
The builder generally agreed with the home-owners in respect of the nature and terms of the contract and its commencement.
The builder claimed that prior to entering into the contract on 20 April 2010 it had performed "preparation works" consisting of preparation for engineering certification of existing stormwater drainage, for which it sought payment.
Further the builder sought payment in respect of seven "variations" to the contracted works. The first of the variations was said to be entirely in writing and was for the agreed sum of $195,000. The second and third variations were oral agreements entered into between the parties based on requests made by the home-owners, Variations 4, 5, 6 and 7 were said to be partly in writing and partly oral.
The builder's claim was then calculated by adding the variations to the contract sum, deducting the sum paid by the home-owners and making an allowance for incomplete work. The resulting claim by the builder was for $23,320.25 or such other amount as is reasonable by way of a quantum meruit.
In response to the home-owners' application the builder's submission was that the works were considerably delayed by wet weather, the home-owner's lodgement of two development applications for additional work and by the owners' requests for performance of additional works. In the period July 2010 to October 2010 no work was done whilst awaiting the outcome of a development application made by the owners.
Following approval of the development application and discussions with the owners, the builder provided a quotation in the sum of $195,000.00 for additional work, which it described as "quotation variations No 1".
On acceptance of the quotation for variation and payment of a further $60,000, the builder had prepared a document dated 1 December 2010 intended to summarise the financial position of the parties. That document showed the balance outstanding at that time to be $173,200.00.
The builder denied the contract terminated by abandonment of the works and claimed all work (except the front fence for which the owners had made a development application) was complete by 16 October 2011.
The builder denied that any of the work was defective or that the owners had lawfully terminated the contract and were entitled to completion costs.
The respondent relied on its filed documents which included:
Points of Defence to the home-owners' claim and Points of Claim in respect of the cross claim,
Affidavits of Tony Macri, director of the building company, 25 July 2013 and 4 December 2013,
Report of Integrated Consultancy Group, 31 October 2012,
Report of Beencke Consulting, 8 February 2013
In addition reliance was placed on
Joint Scott schedule following conclave of experts on 20 November 2013 and the Joint Memorandum of Experts dated 20 November 2013,
Record of second conclave of experts 9-11 December 2013.
The builder's written submission conveniently set out a schedule of the applicant's claim following concessions and withdrawals made by the home-owners' experts at conclave. That schedule identified 25 issues for which the home-owners' claim was, in total, $339,298.16. The submission then explained the builder's position in respect of each of the 25 items with reference to the evidence relied on by the builder.
In regard to the very substantial issue relating to ceiling height it was the builder's position that the owners were in breach of clause 6.1 of the contract in having provided contract documents that were inaccurate and which contained ambiguities. Those inconsistencies had led to the ceiling heights being constructed as per the comments made by the builder's expert at para 4.1.5 of his report.
In regard to the issue of ceiling height the builder's written submission set out the matters for determination by the Tribunal.
It was submitted that in order to determine the ceiling height to be defective it would be necessary to have evidence that a certifier would not certify the ceilings by reference to the BCA 3.8.2. In this regard reliance was placed on a decision of the CTTT in McDougall v ACCA Constructions Pty Ltd (Home Building) [2011] NSWCTTT 360. No such evidence was provided. Further, it was the builder's submission that an adverse inference must be drawn against the home-owners in this regard due to their refusal (following exchange of correspondence between the respective solicitors) to apply for such certification.
No loss of amenity of the subject areas was alleged by the home-owners.
Further, the builder's submission was that if the home-owners were successful in their claim in respect of the ceiling height, the test of whether the proposed method of rectification was reasonable should be applied. Reference was made to Bellgrove and Tabcorp and to the application of those principles in South Parklands Hockey and Tennis Centre Inc. v Brown Falkiner Group Pty. Ltd. and Scott Carver Pty. Ltd. v SAS Trustee Corporation (Scott Carver), for which no references were provided.
However, having referred to the authorities on which the builder relied it is clear their effect is that in determining the issue of whether or not the proposed method of achieving contract compliance is "reasonable" (as required in the Bellgrove test) consideration must be given to the issue of whether the remedial work is out of all proportion to the benefit to be obtained.
In the current circumstances, the home-owners themselves had never complained about the ceiling height and there was no suggestion of any loss of amenity. There was no evidence that a private certifier would not certify the heights and therefore the sum claimed ($145,000.00) was not a reasonable method of achieving contract compliance.
If the builder was found liable on this issue it was conceded that the cost to the owners of obtaining private certification would be $5,000.00.
In regard to the additional works for which the builder sought payment, it was conceded by the home-owners that "variation 1" is correctly valued at $194,688.00, "variation 2" was agreed at $10,040 and has been paid and that "variation 4" has also been agreed and paid. It was conceded by the builder that it had the burden of proof in regard to the other additional works and that claim was made for payment on a quantum meruit basis.
The builder's written submissions re-calculated the sum allegedly owed to the builder based on the contract price plus the "value of variations" less the sum paid by the owners to arrive at a figure of $32,304.50. After adjustment for the sum conceded by the builder in regard to outstanding issues claimed by the owners, the sum owed to the builder was said to be $30,434.50.
ADDITIONAL DOCUMENTS
The parties filed an agreed bundle of 31 documents, some of which are mentioned above and which also included
Scott schedule and estimates prepared for use at conclave, 20 November 2013,
Joint memorandum of conclave, 20 November 2013,
Record of conclave, 9, 10 and 11 December 2013,
Summary of conclave prepared by Tony Beencke, 18 December 2013,
A number of documents produced under summons.
TERMINATION OF THE CONTRACT
The issue of when and in what circumstances the contract terminated is of relevance because part of the home-owners' claim is for cost to complete.
On the home-owners' evidence the builder abandoned the site on 16 October 2011. On the builders' evidence the work was completed by that date, with the exception of the front fence.
Unfortunately there is a paucity of evidence and submission to support either version.
The evidence has shown, and the builder's expert agrees, that there were very significant building defects that required rectification before the work could be regarded as having reached practical completion. Those defects are still in existence and the builder has resisted requests for their rectification.
The evidence is that by December 2011 the parties were in dispute about unpaid sums and rectification of defects. The Office of Fair Trading became involved and rectification orders were made in March 2012, including orders for completion of the front fence. The home-owners' complain that work was never done.
For these reasons I am satisfied it is more likely than not that the contract terminated on or about 16 October 2011 by the builder abandoning the site.
THE OWNERS' CLAIM
In dealing with each item claimed by the home-owners I have adopted the numbering in the third column of the record of conclave conducted 9-11 December 2013.
The expert witnesses' evidence
The home-owners made extensive submission relating to the admissibility of evidence under the Evidence Act and provided High Court authority dealing with the issue.
These matters were determined by NCAT pursuant to the transitional provisions of the NCAT Act and as such the law under the CTTT Act is the relevant law to adopt. The CTTT Act s 28(2) (now repealed) provided
2) The Tribunal is not bound by the rules of evidence and may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of procedural fairness
Hence, there is no relevance to the home-owners' submission on admissibility of the expert evidence of Mr Whitton. However, the home-owners are on somewhat stronger ground in their reliance on the principles set out in Makita.
The home-owners sought to impugn the value of Mr Whitton's report on the basis of lack of town planning credentials and provided a table of instances within the Whitton report which were said to be outside his expertise or of no assistance to a finding of fact.
These are matters that could have been put to Mr Whitton in cross examination, an opportunity that was abandoned by the home-owners.
I note that Mr Whitton included acknowledgement that he had read and was bound by the Tribunal's code of conduct for expert witnesses. I make no finding that Mr Whitton's evidence should not be accepted on its face as the opinion of an expert able to give evidence in the Tribunal.
Item 5, ceiling height
The evidence of Mr Montieth in his report of 30 August 2012 refers to the Council approved drawings and to the fact that the ceiling height on the first floor and the mezzanine levels to not comply with those drawings. Mr Montieth concluded that the builder had made an error in his setting out which had resulted in the building not being compliant with the BCA or the plans.
Mr Whitton, in his report of 31 October 2012 made reference to Mr Montieth's findings. Mr Whitton disagreed with Mr Montieth in regard to the builder having set out his work incorrectly and in respect of both the ceiling height to the mezzanine and to the first floor, attributed the cause to lie with errors in the architectural drawings that would have always precluded the builder from achieving the desired ceiling heights.
Mr Whitton, at para 4.1.5.20 of his report stated that
"whilst the contractor has not strictly satisfied the Deemed-to-Satisfy Provisions of the BCA, the as-built in my opinion is closer to achieving compliance than could have been achieved should the architectural plans have been followed exactly."
The basis for that opinion is to be found in the preceding paragraph where Mr Whitton relies on the dictionary definition of an "attic" in an attempt to re-define the area in question. The plans make no mention of an attic and refer to a "mezzanine" area. I consider that it is disingenuous of Mr Whitton to misrepresent the nature of the area in question in order to make a finding of BCA compliance.
I do not accept that re-naming the mezzanine area as an attic makes the ceiling height compliant with the BCA.
Accepting for the purpose of analysis Mr Whitton's argument in regard to the cause of the non-compliance with the contract documents. If the builder had been faced with an error or ambiguity in the plans provided by the owners he was not entitled simply to rely on the warranty as to suitability of the plans provided by clause 6.1 of the contract, as was submitted. The contract further provides at clause 6.2 a protocol for resolving ambiguities in the plans. There is no evidence, and it was not suggested by the builder, that it followed that protocol.
The home-owners relied on the statutory warranties afforded by the builder pursuant to the HBA.
Those warranties are set out at s 18B,
18B Warranties as to residential building work
The following warranties by the holder of a contractor licence, or a person required to hold a contractor licence before entering into a contract, are implied in every contract to do residential building work:
(a) a warranty that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract,
(b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new,
(c) a warranty that the work will be done in accordance with, and will comply with, this or any other law,
(d) a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time,
(e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling,
(f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder's or person's skill and judgment.
Hence for the above reasons, irrespective of whether the cause of the non-compliant ceiling height lies with an error in the plans or in the builder's failure to set out the work correctly, I am satisfied that the builder is liable pursuant to the warranty provided by the HBA s 18B(a) for any departure in the work from the plans and is further liable pursuant to the warranty provided by s 18B(c) for any failure to meet the requirements under the BCA.
Measure of damage for ceiling height departure
Both parties have relied on the decided cases in regard to the correct measure of damage. Both have referred me to a number of cases the essence of which may be summarised by the following propositions
1. For breach of contract the correct measure of damage is that sum which will place the innocent party in the position he would have been in had the contract been performed (Robinson),
2. Diminution in value is not the appropriate measure of damage (Tabcorp/ Bellgrove),
3. The proposed remedial work must be both necessary and a reasonable course to adopt (Bellgrove),
4. The cost of remedying the defect must not be "out of proportion" to the contractual objective (Scott Carver)
The owners' evidence is that it is only by reconstruction at a cost of $145,000.00 that contract compliance can be achieved. Further, if the reconstruction is carried out it will allow the building of the planter boxes, which are currently not provided, in accordance with the plans. The builder's expert did not dispute that the sum of $145,000.00 is a reasonable amount to pay for the work if the owners are entitled to have it done.
The builder's argument is that the home-owners have occupied the area in question since completion of the work without complaint regarding loss of amenity and have refused to apply for an occupation certificate due to concerns that if successful it may impact on their damages claim. The home-owners' claim should be limited to $10.00 for loss of amenity or $5,000.00 for the cost of obtaining certification of the work.
With respect to the builder's argument, the dispute is not about loss of amenity or whether an occupation certificate will issue. The dispute relates to breach of contract. The starting point is that the home-owners are entitled to the cost of contract compliance (Robinson). The contract provided for ceilings of a particular height which were not provided. In this case the ceiling height deficiency, if I can call it that, varies from about 193mm to 340mm. Even at the lower end of that scale the variation is a very significant one.
The home-owners have contracted for a not overly generous ceiling height of about 2.4m. That height is now diminished by a varying and disputed but nevertheless, a significant amount. The only evidence about how the problem can be remediated is that it must be demolished and re-built.
I am satisfied in the circumstances that it is entirely reasonable to adopt the only course of action proposed by the experts that will rectify the ceiling height.
I am satisfied therefore that the home-owners are entitled to be compensated in the sum of $145,000.00 in respect of the ceiling height issue.
Item 1(a)
The cost of the ceiling repair to the first floor deck area was agreed by the experts as being covered by the findings and orders in relation to the ceiling height issue (item 5).
The second issue under 1(a) relating to water entry through the mezzanine balcony membrane was not covered by item 5 and was not agreed by the experts. Based on the change of position of the builder's expert in relation to water ingress problems that he had not previously been able to identify and the fact that both Montieth and Worthington were in agreement I am satisfied this defect exists and that the reasonable cost of its rectification is $4,466.19.
Item 1(b)
This item was agreed as to quantum but the builder's expert explained that the vent pipe in question was part of an existing bathroom and was not the builder's work. No allowance is made for this item.
Item 1(c)
It was acknowledged by the home-owners' experts that this item was included by any finding of liability and orders relating to item 5.
Item 3
I am satisfied that the contract called for a newly constructed concrete block fence and that the builder simply added three courses to an existing fence. The builders' expert reply on this issue was unintelligible without further information. I allow the agreed sum of $1,030.00.
Item 4A
I accept that Dr Bayliss, the home-owners' expert relied on in regard to the coating issue has particular expertise not shared by the other expert witnesses. Dr Bayliss' opinion was that the steel beams had not been appropriately galvanised and were in breach of the plans and specifications for exposed steelwork. That was not (as submitted in the Whitton report) an assertion of Dr Bayliss. It was an opinion based on established expertise and with reasons given.
On the other hand, Mr Whitton made some assumptions to re-but that opinion. He assumed that the structural engineer had inspected and approved the steel and he also assumed that the approval given was correct.
Mr Whitton was on stronger ground when he used his own expertise to counter the Bayliss argument relating to exposure of the steel to salt air. However, Mr Whitton did acknowledge the existence of what he referred to as "surface corrosion" in several locations.
I am satisfied that if properly coated in accordance with the specification the steel would not be showing signs of corrosion at such an early stage.
However, the experts agreed that if item 5 was allowed then the remedial methodology would provide for rectification of the steel.
Items 4B and 4C
The experts agreed on the sum of $9,600.00 for painting, if the builder was found liable for it.
Mr Whitton's report complained that in respect of this issue the report of Mr Montieth of 30 August 2012 was "too vague", a criticism with which I agree. There does seem to be some acknowledgement that some painting was patchy. However, the specific areas of poor painting and the nature and extent of the deficiencies are not clearly set out by Mr Montieth. It is true, as noted by Mr Whitton, that some of the work was existing painting and some was not related to work carried out by the builder. In order to recover generally for this item there would need to be much more detail. However, it is noted that the experts agreed on $100.00 for patching of barges, $220.00 for cleaning of drips, a further $100.00 for a paint blister in the kitchen and $940.00 for texture coating of the laundry walls.
I allow the sum of $1,360.00 in total for these items.
Item 6
The home-owners experts acknowledged that the cost of rectification of this issue was included if item 5 was allowed.
Item 7
The experts agreed both as to liability and quantum in the sum of $350.00.
Item 8
This item related to the kitchen floor which Mr Montieth found to have unacceptable gaps between the kickboard and the floor and where end joints are not tight. The gaps required filling but no evidence as to the cost of that work (in isolation from the replacement of floorboards) was provided.
In addition, Mr Montieth opined that there was need for replacement of the new floorboards where they did not match the profile of existing boards.
Mr Whitton provided photographs of the area in question which was generally of an agreeable appearance. I am not satisfied on the evidence that the new boards being of a different profile to the original boards remaining in situ amounted to a breach of contract. Nor is there any evidence that the work was not carried out in a proper and workmanlike manner.
No allowance is made for this item.
Item 9
There is a degree of uncertainty in the evidence relating to the rectification of the damaged kitchen. It is true, as submitted by the builder, that a dilapidation report in regard to the condition of the existing kitchen prior to commencement by the builder is not in evidence. Further, the home-owners' evidence as to quantum is based on a "new for old" assessment of damages without regard to the potential for betterment. Also, part of the quantum relates to replacement of the granite bench-top, which may or may not be necessary.
In addition it is common ground that the damage is the subject of an insurance claim. It would appear to be appropriate to deal with it as such.
Item 10
It is not disputed that the vehicle stand and nature strip do not comply with the development approval by Council in that the builder has used concrete instead of "permeable material". It is proposed to remove the concrete and re-lay turf at a cost (agreed) of $4,763.00.
The builder's evidence is that the home-owners requested a variation and indicated they would seek a s 96 variation to the development consent, which has not eventuated.
No variation in writing signed by the parties and complying with the obligations under the HBA or the contract was provided to substantiate that assertion. I am not satisfied any variation was agreed and allow the sum claimed.
Item 11
The report of Mr Montieth is that the timber deck at the rear has been constructed without a step as indicated on the approved plans. The home-owners have since tiled the deck and the tiles fit tightly under the sliding aluminium door sil and water ponds.
It is not disputed that the home-owners added the tiles to the surface of the timber deck without previously raising any issue relating to the absent step.
It may well be that the builder is in breach in regard to not providing the step. However, the entire loss relating to that breach has been occasioned by the home-owners tiling the deck. There was no suggestion in the contract documents that the deck would be tiled and the builder was not put on notice of the defect and given any opportunity to rectify it before the tiling took place.
In any event, it would appear that the issues now complained of relate to poor tiling rather than any absence of a step.
No allowance is made for this item.
Item 12
The home-owners' expert acknowledged that this item relating to the structural steel is covered by any finding and orders made in regard to item 5.
Item 13
This part of the home-owners' claim relates to incomplete works. As I am satisfied that the contract terminated by the builder's abandonment of the site on or about 16 October 2011 the home-owners are entitled to the cost to complete. The expert evidence is not clear and would have benefitted by cross-examination. Doing the best I can with the evidence I allow the sum of $5,515.00 which was conceded as appropriate "if found".
Item 14
Items 14.1, 14.2, 14.3, 14.5, 14.8 and 14.9 were withdrawn. Item 14.7 was dealt with under the painting issues.
In regard to the metal planter boxes it is not disputed by the experts that they were not provided. However, the builder claims that the home-owners agreed to a variation to remove the planter boxes.
Although reference was made in this regard to the affidavit of Mr Macri I was unable to find any reference in his affidavit to such an agreement.
In any event, once again there was no variation in writing and signed by the parties as required under the HBA and the contract. I therefore do not accept that the builder was not under an obligation to provide the metal planter boxes.
The builder's submission complained that the costing provided by the home-owners' expert made no allowance for provisional sums provided for under the contract. I have perused the contract provided at Tab 20 of the agreed bundle of documents and am unable to find any reference to a provisional sum.
The agreement was for metal planters, not lightweight, granosite finished boxes as suggested by the builder's expert.
I therefore allow the sum claimed by the home-owners being $14,907.53 for item 14.4 and the additional sum of $30.00 for item 14.6.
New item, leak to mezzanine south wall
The experts agreed in conclave both as to liability and cost in the sum of $1,200.00. The builder's written submission that the quantum for this item was agreed to be $350.00 is not supported by the record of conclave.
However, it was acknowledged by the home-owners' expert that remedial methodology for item 5 will cover this scope of work.
New item, work to front verandah not done
Neither the home-owners' nor the builder's experts provided clear evidence in regard to this issue. On the evidence available I am not satisfied the home-owners have established liability or quantum.
New item, vacating premises to allow for remedial work and rental of alternate premises
Although the extensive work contemplated by item 5 (and other ancillary works) will allow the maintenance of kitchen, bathroom and bedroom facilities I am satisfied that the works will be major and will be a substantial disruption to the living standards of the occupants whilst the work progresses.
The builder's expert did not dispute the quantum for removal costs. I allow $4,000.00. However, in regard to the cost of rental accommodation the home-owners' expert Mr Worthington provided no evidence to support his assertion that the cost of alternate accommodation would be $3,500.00 per week.
On the other hand the builders' expert agreed to $18,000.00, if found.
On that basis, I allow the sum of $18,000.00.
Summary of home-owners' claim
For the above reasons I am satisfied the home-owners are entitled to damages in the sum of $199,421.72.
THE BUILDER'S CLAIM
The builder's claim was for payment of the sum of $23, 320.25. That sum was calculated using the contract sum, an allowance for incomplete work and an allowance for the payments made and a value placed on the variations.
However, the sum allegedly owed to the builder changed in the builder's written submissions to $32,304.50 to be set-off against a small amount conceded in the home-owners' claim.
The builder's claim generally relates to seven variations. None of those variations was in a form required under the HBA or the contract. That is, they were not in writing and signed by the parties. Even variation No 1 in the sum of $195,000.00, although in writing, was not signed by the parties.
Hence, the builder's claim could only succeed in relation to those variations as a quantum meruit pursuant to the provisions of the HBA s 10 and the principles set out in Pavey & Matthews Pty. Ltd. v Paul [1987] HCA 5 (Pavey & Matthews). So much was not disputed by the builder.
It was the home-owners' submission that they did not contest payment for those works which they requested and which were received. In regard to the balance of the claim by the builder, the home-owners' position was that it was subject to proof of the proper quantum meruit value of the work performed.
The home-owners' submissions effectively did not put the builder to its obligation of proof in regard to every issue raised by the builder because some of the variations were conceded.
Plans and Stormwater (pre-contract)
This item was not conceded by the home-owners. It was not a variation under the contract because it related to pre-contract work. Nevertheless, I am satisfied the work was requested by the home-owners. The home-owners allege that it was a gift, which I find to be somewhat disingenuous. However, there is no evidence that a price was discussed and the builder's expert evidence in relation to quantum (Beencke report) was based on the builder's documents and not the expert's opinion.
No amount is allowed in respect of this item.
Variations 1, 2 and 4
The home-owners concede that they are liable for these variations and say that they have been paid in full. It is not possible to reconcile the payments for the variations with the schedule of amounts allegedly still owing. However, the builder does not deny that variations 1, 2 and 4 were paid and it is clear that some substantial payment was made for variations.
No additional payment is allowed in respect of the quantum meruit claim for variations 1, 2 and 4.
Variation 3
The builder's evidence is that additional work was requested by the home-owners relating to a glass panel around the bathtub, frameless glass balustrades and an additional window and an estimated price was given for those items.
The home-owners did not deny that conversation or that they have had the benefit of the additional work. The home owners did not dispute the value placed on the works by the builder and the sums actually charged by the builder are comparable to, or less than, the indicative prices given by the builder in conversation with the owners. The Points of Defence relating to some of these items being otherwise paid is not supported by the evidence.
I allow the sums of $738.00 for the glass panel, $1,500.00 for the glass balustrade and $2,200.00 for the window plus $500.00 for scaffolding. In total I allow the sum of $4,938.00 as a quantum meruit for variation 3.
Variations 5, 6 and 7
The builder claimed the sum of $15,746.50 as a quantum meruit for variation 5, $3,230.00 for variation 6 and $3,795.00 for variation 7.
The builder's affidavit on these issues is unintelligible without further elucidation. The builder's Points of Claim are inconsistent with the builder's evidence. The Points of Claim state that the work, the subject of variations 5, 6 and 7 was carried out after the builder claims to have left the site with all work (save the front fence) having been completed.
The builder's expert (Beencke) does identify that additional works was carried out. However, those items of extra work were identified from the builders' documents and were costed on that basis. The report is not evidence of the works having been requested by the owners and having been done in accordance with the requests nor is it evidence of the value placed on the work by Mr Beencke.
It appears that additional work was requested from time to time by the owners. However, from the material provided it is now not possible to determine what additional work was done, whether each item of additional work was agreed by the owners in the expectation that they would be charged for it or the value of the resultant work to the owners. That is, on each of variations 5, 6 and 7 the builder has failed to establish a quantum meruit.
Conversely, as the builder has been unable to reconcile the sums charged with the work carried out and the resultant value of work done, it would appear that the allowances made by the builder for work not carried out should not apply.
The sum of $2,335.00 should be deducted, as agreed by the parties, from the additional sum found to be owing.
The net result is that the home-owners owe the builder the sum of $2,603.00 for variations performed as a quantum meruit.
CONCLUSION
Setting the above sum off against the sum owed by the builder I am satisfied that the builder should now pay the home-owners the sum of $196,818.72.
COSTS
The issue of costs was touched on in the home-owners' written submissions but the builder has not had any opportunity to address the issue at this time.
I have therefore made directions intended to deal with the issue of costs.
Further submissions
On 19 May 2014 when both matters were adjourned for a decision on the papers, the parties were directed to file and serve written submissions by 2 June 2014. Leave was granted for the parties to file and serve short submissions in reply by 10 June 2014.
On 12 June 2014 and on request of the builder's legal representatives the period of time for filing submissions was extended to 10 June 2014 and leave for short submissions in reply was extended to 17 June 2014.
The home-owners' submissions were filed on 10 June 2014 and the builder's submission was filed (late) on 13 June 2014.
No further submission and no further request for an extension of time was received and accordingly the above decision was prepared on 23 and 24 June 2014.
Following completion of the above decision I was handed by the Registry a further submission headed "Applicants Jennifer and Ricardo Spencer's submission in reply".
That submission had been filed with the Registrar on 20 June 2014.
A covering letter complained that a sealed copy of the builder's submission had not been served on the home-owners at all and sought consideration of the submission in reply.
The home-owner's submission in reply is out of time. However, it is noted the builder's submission was also late. I have read the home-owners' submission in reply and I am satisfied that there is nothing in it that would persuade me to amend the above decision in any way.
J Smith
Senior Member
Civil and Administrative Tribunal of New South Wales
27 June 2014
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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
Decision last updated: 04 September 2014
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