Kore v Intelligent Building Pty Ltd

[2025] NSWDC 297

District Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Kore v Intelligent Building Pty Ltd [2025] NSWDC 297

Hearing dates:

10 March 2025 – 12 March 2025, 21 May 2025

Date of orders:

08 August 2025

Decision date:

08 August 2025

Jurisdiction:

Civil

Before:

Weber SC DCJ

Decision:

See [90] below

Catchwords:

BUILDING AND CONSTRUCTION – Breach of residential building contract – Delay – Where building was to be completed within a specified time period – Defective works – Where both parties claim to have validly terminated building contract – Whether monies awarded under an Adjudicator’s Determination and registered as a judgment debt can be recovered pursuant to s 32 of the Building and Construction Industry Security of Payment Act 1999 (NSW) – Consequential loss incurred from renting alternative accommodation – Correct measure of damages for breach of building contract – Whether sole director of building company is necessarily liable under the Design and Building Practitioners Act 2020 (NSW)

Legislation Cited:

Building and Construction Industry Security of Payment Act 1999 (NSW) s 32

Civil Procedure Act 2005 (NSW) s 100

Design and Building Practitioners Act 2020 (NSW) ss 36, 37

Home Building Act 1989 (NSW) ss 92, 94, 96

Cases Cited:

Barber v Oracle (NSW) Pty Ltd [2019] NSWSC 1370

Ceerose Pty Ltd v Building Products Australia Pty Ltd [2015] NSWSC 1886

Mangano v Amescorp Pty Ltd [2024] NSWDC 195

Sargent v ASL Developments Ltd (1974) 131 CLR 634

The Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2022] NSWSC 659

United Australia Ltd v Barclays Bank Ltd [1941] AC 1

Category:

Principal judgment

Parties:

Nishant Kore (First Plaintiff)
Divya Kore (Second Plaintiff)
Intelligent Building Pty Ltd (First Defendant)
Andrew Hanna (Second Defendant)
John Hanna (Third Defendant)
Eman Shonoda (Fourth Defendant)

Representation:

Solicitors:
Adelstein Solicitors (Plaintiffs)

In Person:
J Hanna (First and Third Defendants)
A Hanna (Second Defendant)
E Shonoda (Fourth Defendant)

File Number(s):

2023/00321282

Publication restriction:

None

Judgment

Introduction

1. These proceedings concern a dispute arising out of a home building contract. The subject of the contract was a two-storey home at Schofields (the ‘Contract’).

2. The Contract was in a standard form NSW Residential Building Contract for New Dwellings as published by the Housing Industry Association ('HIA'). It contained no special conditions, and as such it prescribed a 26-week period for completion (subject to valid extensions of time).

3. The parties to the Contract were the plaintiffs, who are husband and wife, and the first defendant (‘IB’). Also joined in the proceedings were the second, third and fourth defendants. The third defendant (‘JH’) is an experienced engineer who, on any view of it, was supervising the construction work undertaken pursuant to the Contract by IB. The fourth defendant (‘ES’) is the wife of JH and is the sole director of IB. She played no part in the actual construction work, including any supervision thereof. The second defendant (‘AH’) is the son of JH and ES. He was a 20% shareholder in IB but held no executive or other position of any nature in IB. Indeed, he was in full-time employment with a third party. His only involvement in the Contract came as a result of agreeing to help his father with a progress claim.

4. The plaintiffs allege that the second to fourth defendants are liable pursuant to the provisions of s 37 of the Design and Building Practitioners Act 2020 (NSW) (‘DBP Act’). JH accepts that he is so liable. There is a contest as to whether, in the circumstances, ES and AH can be held to be liable under the Act.

5. The defendants were originally legally represented. Unfortunately, they saw fit to terminate the retainer of their solicitors, and at the hearing each natural person defendant appeared in person and, in reality, IB was represented by JH. Given the legal and factual issues which arose in the proceedings, the decision of the defendants to do so has made the determination of the proceedings a much more difficult exercise than it should have been. Significantly, in my view, legal propositions put forward by the plaintiffs were not adequately addressed by the defendants and, similarly, certain factual matters were not properly addressed by either the adducing of evidence or appropriate cross-examination.

6. I have attempted to determine the proceedings while ensuring that the Court is not led to misapply legal principles but, beyond that, I was constantly conscious of the inability of a trial judge to be seen to assist the defendants beyond that which is basal and appropriate.

Termination of the Contract

7. On 24 June 2023, the plaintiffs served on IB a notice of substantial breach pursuant to the provisions of clause 27.3 of the Contract. That notice particularised IB’s alleged failure to carry out and complete construction works as required and within the time specified. It required steps to be undertaken to remedy the breach within 10 days. No such remedial steps were undertaken by IB.

8. On 11 July 2023, the plaintiffs served on IB a notice of termination pursuant to clause 27.4 of the Contract. They also gave notice of termination pursuant to their common law rights to terminate for failure to complete within a reasonable time.

9. On 24 July 2023, IB, in turn, purported to issue a notice of termination. There is thus a dispute as to which party succeeded in terminating the Contract. However, on any view of it, the Contract was at an end on either 11 July 2023 or 24 July 2023.

10. The defendants’ submission, as I understood it, was that the plaintiffs were themselves in default under the Contract due to non-payment of a progress claim, and, accordingly, were not in a position to terminate. I shall return to this issue later in these reasons.

The Defects Dispute

11. A further issue which arose in the proceedings was whether IB undertook the building work the subject of the Contract in a defective manner. The plaintiffs have adduced expert evidence on this issue, however, amongst this matter’s peculiarities is the fact that a large number of the so-called defects upon which the plaintiffs rely were in fact variations of the Contract, consented to by them. Thus, the issue in relation to the alleged defects is, in many respects, whether a variation inconsistent with the architectural plans the subject of the Contract, but undertaken with the consent of the owners, can be said to constitute a defect.

Progress Claim Three

12. A further issue arising in the proceedings concerns Progress Claim Three (‘PC3’). On or about 6 March 2023, IB served on the plaintiffs PC3. The plaintiffs failed to respond to that claim and did not participate in the adjudication of the claim which occurred thereafter. The adjudication process resulted in a determination in relation to PC3 in favour of IB in the sum of $86,925.00. The adjudication sum, which was increased to account for interest and court fees, was then registered by IB as a judgment of the Local Court at Blacktown. The plaintiffs paid the adjudged sum into Court, however, the plaintiffs now seek repayment of that sum, which remains in Court. The plaintiffs make this claim on what I understood to be two bases, namely:

1. That IB was not entitled to make the progress claims as it had not placed insurance for the works as required pursuant to s 92 of the Home Building Act 1989 (NSW) (‘HBA’); and

2. In any event, IB was not entitled to serve PC3 as it had not achieved lock up stage, which was a condition precedent to the exercise of power to serve PC3.

Consequential Loss Claim

13. Finally, there was a claim for consequential loss in respect of rent. This was rent which was paid by the plaintiffs in the period between the time at which the construction was due to be completed, and the time which they moved into the premises. The plaintiffs claim the relevant periods of loss as 4 February 2022 to 12 August 2022 at a rate of $490.00 per week, and 13 August 2022 to 10 October 2023 at $500.00 per week, totalling $17,720.00. At the end of the day, the quantum of that claim was not put in issue, rather the only issue was whether the sum is recoverable as consequential loss.

The PC3 Issue

14. As I have above indicated, on 6 March 2023, IB served upon the plaintiffs PC3. The claim was in the sum of $94,200.00. Pursuant to Schedule 2 of the Contract, the claim the subject of PC3 could only be made if the project had achieved ‘lock up stage’. Lockup stage is defined therein as ‘[b]rickwork and roofing complete’.

15. On or about 3 May 2023, IB obtained an adjudication determination in relation to PC3 in the sum of $86,925.00 (inclusive of GST). This adjudication was served on the plaintiffs, who failed to make payments in relation thereto. As a result, on 12 May 2023, IB caused the Adjudicator’s Determination to be registered as a judgment of the Local Court at Blacktown. The Judgment Debt was $94,742.55, comprised of the adjudication amount plus interest and filing fees.

16. The plaintiffs paid into Court the sum of $94,742.55, and then a further $2,552.18 claimed by the defendants for additional interest and filing fees, for a total amount of $97,294.73. The payment remains in Court.

17. In these proceedings, the plaintiffs seek repayment of this sum paid into Court pursuant to the Judgment Debt. It seems clear that, pursuant to s 32 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (‘SOPA’), such a payment can, in appropriate circumstances, be claimed or, if appropriate, the sum can be accounted for in any judicial disposition of a dispute in relation to the Contract. This appears to be so even if, as here, a Judgment Debt remains undisturbed.

18. Section 32 of SOPA is in the following terms:

32   Effect of Part on civil proceedings

(1) Subject to section 34, nothing in this Part affects any right that a party to a construction Contract—

(a)  may have under the Contract, or

(b)  may have under Part 2 in respect of the Contract, or

(c)  may have apart from this Act in respect of anything done or omitted to be done under the Contract.

(2)  Nothing done under or for the purposes of this Part affects any civil proceedings arising under a construction Contract, whether under this Part or otherwise, except as provided by subsection (3).

(3)  In any proceedings before a court or tribunal in relation to any matter arising under a construction Contract, the court or tribunal—

(a)  must allow for any amount paid to a party to the Contract under or for the purposes of this Part in any order or award it makes in those proceedings, and

(b)  may make such orders as it considers appropriate for the restitution of any amount so paid, and such other orders as it considers appropriate, having regard to its decision in those proceedings.

19. Relevantly, in Ceerose Pty Ltd v Building Products Australia Pty Ltd [2015] NSWSC 1886, Beech-Jones J stated the following in relation to s 32:

[10] In light of the manner in which the proceedings proceeded before the Local Court it is appropriate to describe the scope of s 32 of the Security of Payment Act. The scope and purpose of the Security of Payment Act was described by McDougall J in Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190; 78 NSWLR 393 (“Chase Oyster”) at [110] as follows:

“The Building and Construction Industry Security of Payment Act 1999 (NSW) (the Security of Payment Act) seeks to ensure, among other things, that those who perform construction work pursuant to construction contracts have enforceable rights to progress payments. The statutory mechanisms for achieving that aim include a number of elements. There is a statutory right to progress payments despite any contractual provision to the contrary. In the event of disagreement, there is a statutory mechanism, called adjudication, for the interim determination of entitlements to progress payments.”

[11] The relevant statutory provisions, their interactions with each other and their effect on the parties' rights are described in the judgment of McDougall J in Chase Oyster at [184]-[198] and [207]-[210], which I will not repeat. One issue in the Local Court concerned the scope of s 32 of the Security of Payment Act which McDougall J described as providing that, apart from s 34, “the Security of Payment Act has no effect on rights under the contract, or on any civil proceedings arising under the contract” (Chase Oyster at [198]). Section 32 provides:

[…]

[12] In John Holland Pty Ltd v Roads and Traffic Authority of New South Wales [2006] NSWSC 874; 66 NSWLR 624 (“John Holland”) at [33] McDougall J described the role of s 32 as follows:

“I do not think that it is correct to speak of s 32 as creating a restitutionary right. Its place in the scheme of the Act is to reinforce the interim nature of adjudication determinations, and to provide that parties' legal rights (as decided by a court or tribunal) are given full effect notwithstanding what may have been determined by an adjudicator and what may have been done in pursuance of, or obedience to, that determination.”

[13] This description of the scope of s 32 was accepted and expanded upon by the Court of Appeal in John Holland Pty Ltd v Roads and Traffic Authority of New South Wales [2007] NSWCA 140 at [45]-[46] as follows:

“[45]  The respondent cannot oppose a payment claim, or if there is a judgment upon filing an adjudication certificate cannot seek to impugn the judgment, in reliance on matters arising under the contract, so rights under the contract are preserved and can be otherwise asserted. The statutory liability established by an adjudicator’s determination can be challenged only on limited grounds: Brodyn Pty Ltd v Davenport (2004). So it is open to the respondent (or the claimant – an adjudicator’s determination may be adverse to a claimant) to contend in a final working out of the contractual mechanisms or in other proceedings for a result different from that determined by the adjudicator. Statutory liability otherwise than that established by an adjudicator’s determination is also not final, and either party may in the course of a final determination contend for a different result, see s 32(1) and (2). Section 32(3)(a) then states the obvious, that there must be allowance in any other proceedings for an amount which has been paid. Section 32(3)(b) may be unnecessary, because an order in the other proceedings that the claimant pay money to the respondent will have the effect of restitution; however, it does enable an order for restitutionary interest and, if there has been a judgment upon filing an adjudication certificate, an order contrary to the judgment: as was said by Handley JA in Falgat Construction Pty Ltd v Equity Australia Corporation Pty Ltd (2005) 62 NSWLR 385 at [21] –

‘Finally, s 3(b) makes a judgment entered under s 25 on an adjudication certificate provisional only, both in what it grants and in what it refuses. A builder can pursue a claim in the courts although it was rejected by the adjudicator and the proprietor may challenge the builder's right to the amount awarded by the adjudicator and obtain restitution of any amount it has overpaid.’

[46] Thus the RTA (and John Holland) remained entitled to assert and enforce their rights under the contract. That included, in the RTA’s case, to contend as to the Spoil monies that John Holland was to be paid for the excavation work in Cut 4 under Pay Item R 42P15.1, or was not to be paid for it at all; as to the Latent Condition monies that there was not a latent condition; and as to the Detonator Dump monies that the Superintendent’s certification of the claim had been correct. The contractual mechanisms for working out the parties’ rights under the contract still operated, and had to be followed – the adjudicated claims were only part of the contractual tapestry. In giving effect to the contractual mechanisms there would have to be allowance for the amounts paid, quite apart from s 32(3)(a). If it came to proceedings (including arbitration under the ‘arbitration process’ in the contract), the parties’ rights under the contract would again be worked out with allowance as recognised in s 32(3)(a), and perhaps orders as contemplated by s 32(3)(b) although there could be an order that John Holland pay money to the RTA without the necessity to call it an order for restitution of money paid under or for the purposes of the Act.”

[14] Thus s 32(3)(b) does not confer or grant jurisdiction on a court to hear a claim that it is otherwise not empowered to. However the provision confirms that, a court having determined such a claim, then the existence of either an adjudication certificate or a judgment based on such a certificate does not represent an impediment to that court granting relief that reflects the final rights of the parties that it has determined. This can be of particular importance in the case of inferior courts. Thus, for example, in hearing a proceeding that involves or constitutes a matter “arising under a construction contract”, s 32(3)(b) confirms that the Local Court is not impeded from ordering the repayment of funds previously paid under, say, a judgment of the District Court obtained as a consequence of the registration of an adjudication certificate as a judgment debt under s 25 of the Security of Payment Act.

20. Thus, as Beech-Jones and McDougall JJ explain, if the plaintiffs’ case on PC3 is accepted then, in my view, they are entitled to have the judgment sum taken into account in the determination of damages.

21. As I have earlier indicated, the plaintiffs’ case on the PC3 issue is that IB was not entitled to issue PC3, and was thus not entitled to either the adjudication or to obtain the judgment based on PC3. The plaintiffs’ case in this regard rests on two bases, being:

1. That, in fact, the project had not achieved lock up stage by the time of the issue of PC3. As I have earlier indicated, this was the milestone which was required to be achieved before such a claim could be made (see Schedule 2 of the Contract); and

2. The fact that the job was only insured for $220,000, whereas the Contract price was $314,000. The plaintiff’s submission in this regard progressed that, by not obtaining insurance for the full Contract price, IB breached ss 92(2) and 96(1) of the HBA, and that, as a consequence of s 94(1), IB was not entitled to make a claim for damages or enforce any rights under the Contract (the ‘Insurance Issue’).

Conclusion on Termination

22. As I have previously indicated, IB’s case on the plaintiffs’ termination of the Contract was that they were not entitled to terminate the Contract as they were themselves in breach. IB alleged that this breach was constituted by the plaintiffs’ failure to pay PC3.

23. As I have now determined that PC3 was invalidly served, and no moneys were payable pursuant to it, it follows that IB’s case on the plaintiff’s termination of the Contract must fail.

24. I thus find that the plaintiffs validly terminated the Contract, as they assert.

The Delay Issue

25. As I have earlier indicated, the plaintiffs terminated the Contract due to the failure of IB to complete within the contractually mandated 26 weeks.

26. IB says that it served notices seeking extensions of time. The only extension of time claim which appeared potentially relevant to consider was an extension of time claim which related to a period in which Blacktown Council delayed various approvals (CB 584). The plaintiffs say that IB cannot rely on this delay as the Council’s stop work order was the consequence of its own default.

27. I do not consider that I have to determine the issue raised by the defendants, as the extension of time claim, which related to the period 1 April 2022 to 29 August 2022, was not served as required by clause 19 of the Contract. JH says that he served the extension of time claim by hand on both Mr Kore and Mr Rogan. Both deny being so served, and neither were cross-examined on the issue. In the circumstances, I feel compelled to accept their evidence.

25. Moreover, the evidence of JH on the alleged service of the notice in cross-examination was very equivocal. Relevantly, his evidence in cross-examination was as follows (T 116. 5-37):

Q. This particular document you issued. Is that right?

A. Yes.

Q. How did you provide it to Mr and Mrs Kore?

A. Email or letters or posts. I can't remember. I can't recall.

Q. You don't know?

A. I can't recall for - paperwork is not my--

Q. Yes. In your affidavit - I'll just try and find the paragraph - I think you indicated, if you go to paragraph 31, which is at page 483 of your affidavit--

A. What does it say?

Q. It says:

“Between 22 December 2021 and 20 December 2022 I recall that various delay events were experienced by the company in relation to the completion of the works. In that regard, during the course of the contract, I submitted extension of time claims under the contract to Mr Kore or to his agent, Mr Rogan, and the following documents were provided by hand.”

A. It could be true, whether hand or by..(not transcribable)..Parramatta address.

Q. But your affidavit swears it was done by hand. Is that your best recollection or you don't know?

A. The best, the best--

Q. I don't want to take it--

A. --the best recollection, it was Nick Rogan was chasing money off me and possibly I gave it to him, and he is your friend. You can double-check with him.

29. I should add that, even if the extension of time claim was served as JH asserts, it was not served validly as it was not served until 29 August 2022, that is to say, nearly five months after the Council’s stop work order which commenced on 1 April 2022. An extension of time claim must be served within 10 days after the builder becomes aware of both the cause and extent of the delay (Contract, clause 19.2). JH’s explanation for the delay in serving the extension claim was that he was unaware of the lifting of the Council’s stop work order until about the time that he made the claim (T 113. 14-19).

30. I do not accept this argument. The parties to the Contract clearly contemplated that at the time of the giving of a notice of an extension of time, the precise length of the delay may not be apparent. Most of the non-exhaustive list of probable causes of delay pursuant to clause 19.1 of the Contract are of that nature. The parties must be taken to have accepted that it may be necessary to estimate a predicted delay.

31. For IB to effectively issue its claim ex post facto is to deprive the owner of important rights to challenge the alleged extension of time when the events which underlie the delay were first known (see clause 19.3).

32. An analysis of clause 19, however, is probably unnecessary as I accept the evidence of Mr Kore and Mr Rogan and find that the lengthy extension claim was never served.

The Insurance Issue

33. The Insurance Issue raised factual issues which, as the evidence proceeded, became increasingly murky. This murkiness was not in any way satisfactorily clarified by the evidence in chief of the parties or the cross-examination thereon. JH stated that, in fact, IB was undertaking the job for $220,000 and not the contractually nominated cost of $314,000. He informed ES of this, and asked her to arrange insurance accordingly. This evidence, in turn, led to the reading of an affidavit by Mr Nick Rogan, who gave evidence of making cash payments to IB on behalf of the plaintiffs. He was unable, however, to provide bank records verifying his evidence. He says that this inability arose out of a change of bank and loss of bank records.

34. There was, however, some objective evidence suggesting that the cost of the build was indeed $200,000 plus GST (see DX-1). Further, there is an email exchange between JH and Mr Rogan, in which it was said that the cost of the build was $200,000 plus GST. Further in that exchange, Mr Rogan suggested that any monies received by IB over and above the said $200,000 plus GST should be paid to a company controlled by him (see DX-2). DX-2 also possibly suggests that the lender for the project may have been misled to believe that the full Contract price was $314,000, whereas the true Contract price was $220,000.

35. Adding to the overall lack of clarity on the Insurance Issue, it must be noted that, in their defence, the defendants admit that the Contract price was $314,000. In the circumstances of the manner in which the issue was addressed by the parties, I do not believe that it is either necessary nor desirable for me to descend into the mare’s nest of the issue as to the true Contract price, and thus into the Insurance Issue. I take this view as, in my opinion, it is preferable as I can avoid this task, and thus avoid the need to possibly make findings which would be deleterious to the credit of certain witnesses. I believe that this approach is open to me as the plaintiffs’ second argument as to why IB was not entitled to make the PC3 claim (see [12(2)] herein) is unimpeachable.

36. As I have indicated, IB’s entitlement to make PC3 only arose if the project had achieved lock up stage. At the time of making PC3, the project had palpably not achieved that stage. This was made pellucidly clear by the expert report of Mr Mario Bournelis, who was called by the plaintiffs, in his report of 22 August 2023 (PX-1). In that report, he opined that as late as the time of his inspection, being 7 August 2023, lock up stage was yet to be achieved. Mr Bournelis was not cross-examined on his opinion, which I accept. Accordingly, I find that IB had no entitlement to issue PC3, nor was it entitled to the adjudication concerning PC3, nor was it entitled to have that adjudication registered as judgment of the Local Court.

37. Accordingly, the plaintiffs shall have the sum the subject of the judgment and payment into Court taken into account in the final assessment of damages.

The Deposit

38. During the hearing, IB sought to put in issue whether the full deposit of $31,400 was paid by the plaintiffs. IB appeared to suggest that the deposit paid was only $7,000. This issue involved further allegations of cash payments and was, in many respects, reminiscent of the arguments concerning the Insurance Issue. Consistent with my approach to what I have described as the ‘mare’s nest’ of the facts said to underlie the Insurance Issue, I will decide that issue on the basis of the pleadings.

39. The plaintiffs pleaded that they paid the deposit in full (SOC [4]). This is admitted in the defence (at [4]). I should add that the defendants were legally represented at the time, and the defence was prepared by their legal representatives.

40. JH, at trial, attempted to say that the solicitors who prepared the defence did so in error when they admitted that the deposit was paid in full. It is important to note, however, that the defendants’ former solicitor was not called to give evidence of his ‘mistake’. It should also be noted that all four defendants verified the defence.

41. Finally, I should note that IB sent to the plaintiffs an email on 5 September 2021, in which it is stated, ‘I will be sending you tonight a receipt of deposit of $31,400 to give to your bank’ (CB 604). This provides potential evidence that the defence was not prepared in error, but rather that the deposit was paid by the plaintiffs in full.

42. I so find that the plaintiffs did in fact pay the full deposit amount to the defendants.

Alleged Defects

43. The plaintiffs asserted that they are entitled to damages in respect of 13 items which they allege constitute defects. In summary, these were particularised by the plaintiffs as follows (SOC [26]):

1. Window installed to the front elevation and the front door not located as required under the architectural plans and as approved by Blacktown Council.

1. Estimated cost to rectify - $4,900.00.

2. Laundry. Failure to install an external door as required under the architectural plans and as approved by Blacktown Council, and in breach of special conditions to the Contract which require construction as per approved plans and specifications.

1. Estimated cost to rectify - $3,090.00.

3. Windows. The first defendant installed sliding windows contrary to architectural plans (which require awning windows).

1. Estimated cost to rectify - $14,420.00.

4. Family room ground floor concrete slab has been poured at the one level, despite the plans requiring a step down between hallway and family room.

1. Estimated cost to rectify - $6,500.00.

5. Rear patio. The first defendant has built the rear wall in contravention of the architectural plans and has not installed the rear sliding door in the centre of the rear patio as required under the plans. As a consequence, there is no room available to install a barbecue to the left of the sliding door and as indicated on the architectural plans.

1. Estimated cost to rectify - $3,090.00.

6. First floor beams and flooring sheets have been left exposed to the elements for more than twelve months without protection, allowing the beams to warp. It will be necessary to install additional beams to ensure the structural integrity of the first floor structure. Furthermore, the structural ply flooring boards have no supports at the joins to the underside, allowing the boards to flex and depress when walked on. Floorboard sheets should be butted on top of the beams for full support. To do this, it will be necessary to remove the first floor wall frame structure, remove floor sheets, and then reinstate sheets once secured to the floor beams.

1. Estimated cost to rectify - $10,240.00.

7. Kitchen. The first defendant has erected an engaged brick pier to the kitchen wall where no such pier is indicated in the architectural or structural engineering plans.

1. Estimated cost to rectify - $140.00.

8. Entry door. The timber frame structure and, in particular, the top plates above the front door entry are fractured and require replacement.

1. Estimated cost to rectify - covered in item 1 above.

9. Parallel flange channels. Incorrect parallel flange channels have been ordered and installed to support the lower roof section. The channels protrude past the internal walls on the first floor by 95mm. The integrity of the roof structure is called into question. It will require rectification and a structural engineer’s approval as to cutting back the oversized metal channels. ln constructing the parallel flange channels as it has, the first defendant failed to comply with the Contract conditions regarding construction as per approved plans and specifications.

1. Estimated cost to rectify - $6,480.00.

10. Damage to adjacent property at 78 Farmland Drive Schofields. The first defendant installed the lower roof at an incorrect height and secured the structure onto the external wall of the adjacent dwelling. The section was subsequently removed and reinstated, but in carrying out that process the first defendant has caused damage and scoring to the adjacent property. This requires remediation in the nature of patching, sanding and re-rendering of the entire side wall of the neighbouring property. The first defendant failed to comply with the Contract conditions regarding construction as per approved plans and specifications.

1. Estimated cost to rectify - $5,180.00.

11. Bedroom three nib wall. The architectural plans require that the nib wall be 903mm wide. The first defendant has constructed the wall 300mm wide.

1. Estimated cost to rectify - $5,400.00.

12. Roofing. The corrugated roof sheets are not turned down at the ends to enable discharge into the guttering on the upper and lower roof sheets.

1. Estimated cost to rectify - $560.00.

13. Allowance for rubbish removal off site.

1. Estimated cost to rectify - $2,260.00.

44. The plaintiffs relied on expert evidence from a builder and a quantity surveyor, whilst the defendants did not adduce any expert evidence. The plaintiffs’ experts were also not required for cross-examination.

45. As I have earlier indicated, this aspect of the matter was unusual insofar as most of the alleged defects upon which the plaintiffs rely were in fact variations to the plans, which had been agreed between the plaintiffs and IB. Mr Bournelis, for the plaintiffs, accepted the obvious, namely, that a contractual variation by consent did not constitute a defect (T 161. 31-43). The plaintiffs, however, pursue this claim in respect of so-called defects based upon non-compliance by IB with contractual terms requiring the recording of variations in writing (Contract, clause 18).

46. I do not consider that the plaintiffs’ submission in relation to this issue reflects well on the plaintiffs, nor do I consider it to be correct. It seems to me that, when the variations were agreed between the owner and the builder, the plaintiffs could have insisted that IB comply with the strict contractual terms regarding the recording in writing of variations, but they did not.

47. Consequently, it appears to me that when the variations were discussed and agreed informally, the plaintiffs were put to their election. They could have either relied on their strict legal rights, and required strict compliance with contractual terms regarding the recording of variations, or they could have elected to allow the matter to remain the subject of informal, though binding, agreement between them.

48. The plaintiffs must be taken to have elected to follow the second course and, as a consequence of this election, cannot now be heard to insist on their strict legal rights to the recording of agreed variations in writing (United Australia Ltd v Barclays Bank Ltd [1941] AC 1 at 30; Sargent v ASL Developments Ltd (1974) 131 CLR 634).

49. The plaintiffs’ informal consent to the alleged defects disposes of items 1 to 5 referred to above.

50. Item 6 is an alleged defect referable to the warping of timber work due to exposure to the elements. I do not consider the plaintiffs have made good this defect claim. I take this view as, in my view, the plaintiffs have not established a causal link between the claim and any breach by IB. On the plaintiffs’ case, the Contract was brought to an end on 11 July 2023. Thereafter, IB had no capacity to protect the timber work from the elements. The task of protecting the timber work thus became the task of the plaintiffs or their agents. In my view, the plaintiffs have not established that the water ingress damage occurred prior to the Contract being terminated by them, and have similarly failed to establish that the warping was in any way attributable to the acts and omissions of IB.

51. Item 7 is in a different category. This item concerns the decision of IB to brace a lengthy wall. The plaintiffs’ expert accepted that the wall as depicted in the architectural plans may well have failed if the remedial works undertaken by IB were not undertaken (T 169. 10). Mr Bournelis accepted that, in reality, it was the plans which were defective in this regard, not IB’s workmanship. As such, I do not consider this item has been established as a defect.

52. Item 9 was not put in dispute by the defendants and should be allowed in the sum of $6,480.00.

53. Defect items 8, and 10 to 12 were not the subject of cross-examination of either the plaintiffs nor their experts. As such, these defects remain undisputed and should be allowed. I note, however, that defect 8 was not separately quantified by the plaintiffs but, rather, was pleaded as forming part of defect 1. As I have not allowed defect item 1, I do not award any damages for defect 8.

54. Finally, the plaintiffs seek damages on account of the alleged failure of the plaintiffs to remove rubbish from the site (defect item 13). I do not consider this sum is recoverable as a defect. The plaintiffs claim the sum of $2,260.00. This sum was not disputed by the defendants. It seems to me, however, that the plaintiffs’ claim for damages to bring the project to completion will necessarily involve removal of rubbish and, as such, for the plaintiffs to seek damages for this item as a defect would be to double compensate the plaintiffs. I would, as a consequence, not allow it.

Summary of Defects Claim

55. As a consequence of the foregoing, the plaintiffs are entitled to damages on account of defects in the sum of $17,620.00. To this sum, it is appropriate to apply uplifts of a builder’s margin of 30%, GST at 10%, and Home Warranty Insurance at 1.9%. These uplifts increase the total damages on account of defects to $25,002.78.

The Plaintiffs’ Claim for Consequential Loss

56. The plaintiffs were required to rent accommodation as they were unable to occupy and reside in the premises the subject of the Contract as they had planned. The plaintiffs’ evidence is that they rented accommodation at Hassell Street Parramatta for the period 4 February 2022 to 12 August 2022 at $490 per week, and for the period 13 August 2022 to 10 October 2023 at a slightly higher weekly rental rate of $500 per week. The plaintiffs claim the sum of $17,720.00 by way of consequential loss for this head of damage.

57. This claim was disputed by the defendants in their defence, where they say that any such consequential loss was not in the reasonable contemplation of the parties when they entered into the Contract. I do not accept this to be so where the defendants entered into a contract to construct a dwelling which both parties knew was intended to be the primary residence of the plaintiffs and which they were well aware was required to be completed within 26 weeks.

58. As such, in my view, the plaintiffs are entitled to an order for damages in the above sum of $17,720.00 pursuant to this head of damage.

Damages on Account of Completing the Construction

59. In support of this claim, the plaintiffs relied on two experts; Mr Bournelis, a builder, and Mr Cohen, a quantity surveyor. As I have earlier indicated, the defendants adduced no expert evidence, and neither of the plaintiffs’ experts were required for cross-examination.

60. Mr Bournelis expressed the view that the cost to complete the project was $408,894.20. Mr Cohen, on the other hand, was of the view that the cost to bring the Contract to completion was $472,092.00. In the circumstances, I consider it appropriate to quantify the head of damage conservatively, and will consequently quantify that loss in the sum of $408,894.20.

The Correct Approach to Quantification of the Plaintiffs’ Loss

61. Initially, the plaintiffs sought to quantify this head of damage as being simply the cost to complete. I did not consider that to be the correct approach to damages in this case. I took this view, as a simple reliance on the cost to complete fails to take into account the fact that, in the present case, the plaintiffs have not paid IB the full Contract price.

62. The correct approach to quantification of damages in relation to this head of damage is, in my view, as explained by Ball J in Barber v Oracle (NSW) Pty Ltd [2019] NSWSC 1370, where at [20], his Honour stated:

That leaves the amount overpaid by the plaintiffs plus accommodation costs. In my opinion, the simplest way to take account of the amount overpaid by the plaintiffs in this case is to add the total amount they have paid the defendant to the total amount they have paid, or will be required to pay, to complete the work and rectify defects and deduct the Contract sum from that total. The difference represents the additional amount the plaintiffs will have to pay to obtain a dwelling which the defendant Contracted to build for them for $3.1 million plus the costs of variations.

63. Adopting that approach, the plaintiffs’ damages are to be calculated by adding the cost to complete and rectify defects, together with the amount paid to the defendants, from which total the Contract price should be taken.

64. In addition, damages on account of consequential loss for rent should also be added.

The Claims against the Defendants other than IB

65. The plaintiffs seek judgment jointly and severally against all defendants. They do so reliant upon the statutory extension of duty of care contained in ss 36 and 37 of the DBP Act.

66. Section 37 is in the following terms:

37 Extension of duty of care

(1) A person who carries out construction work has a duty to exercise reasonable care to avoid economic loss caused by defects—

(a) in or related to a building for which the work is done, and

(b) arising from the construction work.

(2) The duty of care is owed to each owner of the land in relation to which the construction work is carried out and to each subsequent owner of the land.

(3) A person to whom the duty of care is owed is entitled to damages for the breach of the duty as if the duty were a duty established by the common law.

(4) The duty of care is owed to an owner whether or not the construction work was carried out—

(a) under a contract or other arrangement entered into with the owner or another person, or

(b) otherwise than under a contract or arrangement.

67. Section 36 defines ‘construction work’ as follows:

construction work means any of the following—

(a) building work,

(b) the preparation of regulated designs and other designs for building work,

(c) the manufacture or supply of a building product used for building work,

(d) supervising, coordinating, project managing or otherwise having substantive control over the carrying out of any work referred to in paragraph (a), (b) or (c).

68. JH accepts that he is potentially liable to the plaintiffs pursuant to these provisions. That concession is an appropriate one, as the evidence made clear. He was in fact the nominated supervisor of the works.

The Position of AH and ES

69. AH and ES dispute that they have any liability to the plaintiffs pursuant to the provisions of the DBP Act.

The Position of AH

70. AH had a 20% interest in the shareholding of IB, but did not hold a position on IB’s board. He was also not an employee of IB. Rather, AH was employed on a full-time basis by a third-party company as a contracts administrator in the building industry.

71. AH’s involvement in the matter was limited to participation in the lodging of the SOPA adjudication in relation to PC3. He also assisted in an administrative fashion in relation to the Contract from time-to-time. None of AH’s activities involved the actual undertaking of building work pursuant to the Contract.

72. In my view, the plaintiffs’ claim against AH is misplaced. I am of the view that the oversight of the SOPA claim does not constitute ‘construction work’ for the purposes of s 36 of the DBP Act and thus could not possibly enliven a duty as envisaged by s 37. The same can be said of the other administrative tasks which he performed. The conducting of a SOPA claim to recover monies allegedly owed in accordance with lawful processes in no way satisfies any of the legislative criteria outlined in s 36. Such work, and other administrative work, is not building work, preparation of designs, or manufacturing or supply of building products, nor any level of supervision or substantial control over the carrying out of any of the work referred to in sub-ss 36(a)-(c).

73. In my opinion, on any view of the legislation, I do not consider that AH’s conduct of providing advice to JH and ES in relation to contract administration was such to constitute supervision, coordination, or project management, or otherwise that he had substantive control over the building work or other construction work.

74. Accordingly, I dismiss the proceedings against AH.

The Position of ES

75. ES was the sole director of IB but held no executive position in the company. She did not hold a builder’s license. She was, in fact, an accountant in the full-time employ of a third-party. Her evidence was that the extent of her involvement in IB’s affairs was mostly limited to administrative tasks.

76. In support of its contention that ES was undertaking construction work for the purposes of the DBP Act, the plaintiffs relied heavily on the fact that ES was the sole director of IB. In that regard, the plaintiffs relied upon the judgment of Newlinds SC DCJ in Mangano v Amescorp Pty Ltd [2024] NSWDC 195 (‘Mangano’). Newlinds SC DCJ in Mangano, in turn, relied upon the decision of Stevenson J in The Owners – Strata Plan No 84674 v Pafburn Pty Ltd [2022] NSWSC 659 (‘Pafburn’).

77. Pafburn was an interlocutory decision in which Stevenson J was concerned with an application to amend the proceedings to join another defendant reliant on ss 36 and 37 of the DBP Act. His Honour stated:

[25] […] A person could have “substantive control over the carrying out of” work notwithstanding the fact, at any particular moment in time, the person was not actually doing anything to cause that control to be exercised; provided the person had the ability and the power to control how the work was carried out.

78. His Honour went on to conclude:

[26] In those circumstances, in my opinion, it is sufficient to enliven the definition to establish that the person was in a position where it was able to so control how the work was carried out. That would be a question of fact in each case. […]

(My emphasis)

79. What is clear from Stevenson J’s judgment is that recourse to the base fact that someone is a sole director of a company will not necessarily result in liability pursuant to ss 36 and 37. Thus, the extent of control of the person concerned will be a question of fact not resolved simply by reference to directorship status. In Mangano, Newlinds SC DCJ also did not rely solely on the fact that the relevant director (Mr Raad) was the sole director of the company concerned. Rather, his Honour came to the conclusion that the director had relevant control for a series of reasons extending beyond the mere fact of Mr Raad being a sole director.

80. His Honour ruled:

[102] I have concluded that in the circumstances of James Raad’s directorship of the builder, the fact that he was the nominated supervisor under the HBA, and on his own evidence, considered himself responsible for the supervision of employees of the builder (being at least the site supervisor, Richard Raad, and his work in attending site on a reasonably regular basis) that he was engaged in construction work within the meaning of s 36 of the DBPA. […]

81. As both Newlinds SC DCJ in Mangano and Stevenson J in Pafburn were at pains to point out, establishing whether a person was in fact in a position to control building works which were carried out involves a question of fact in each case.

82. In my view, the plaintiffs seek to suggest that ES was capable of controlling the works carried out by reference solely to her position as the director of IB. I do not consider that approach to be the correct one. Whilst another person who was a sole director might, as a matter of fact, be capable of controlling the manner in which building works were carried out, ES in this case definitely did not have such power. She had no building experience and seemed to undertake tasks on the company’s behalf at the direction of her husband.

83. ES explained her role in IB’s affairs and her husband’s role in the following manner:

7. My role as the Director of the Company includes, amongst other things, the following:

a. Managing the finances of the Company to ensure that the Company budgets as required to complete projects;

b. Issuing invoices on behalf of the Company and assisting with the recovery of unpaid accounts;

c. Attending to customer telephone enquiries and general day to day customer service duties;

d. Attending to obtaining the required insurances and certificates as required by the Company;

e. Attending to record keeping, online lodgements and general administration tasks as required by the Company in relation to, amongst other things, the registration of the Company with the Australian Securities and Investment Commission and also the obligations of the Company with the Australian Taxation Office; and

f. Managing employees of the Company as required and assisting with the engagement and management of subcontractors and consultants on behalf of the Company as required.

8. The Company is a family operated business. In that regard, my husband and the third defendant, Mr John Hanna, Is a qualified engineer who I am aware has extensive experience in the building and construction Industry.

9. I have authorised, Mr John Harma to attend and manage all works under construction for the Company and attend all project sites as required.

10. Mr John Hanna is the main point of contact between the Company, owners, subcontractors and consultants, if they have any queries In relation to the completion of a project.

84. It can be thus seen from the foregoing that ES’s role was limited to administrative functions, and did not extend to matters of construction in respect of which she had no expertise. Rather, in respect of construction matters, she deferred to her husband.

85. I thus find that, in reality, ES did not have the ability and power to control the construction work and, as such, do not consider that she has any liability for the acts and omissions of IB pursuant to the provisions of the DBP Act.

Conclusion

86. There should be judgment and verdict for the plaintiffs against IB and JH in the sum of $360,511.71, calculated as follows:

1. Cost to complete – $408,894.20; plus

2. Cost to rectify defects (including uplifts) – $25,002.78; plus

3. Amount paid to the defendants (including sums paid into Court in respect of PC3) – $222,894.73; plus

4. Consequential loss – $17,720.00;

5. Total = $674,511.71; less

6. Contract price – $314,000.00; totals

7. Amount owing = $360,511.71.

87. As this calculation of the plaintiffs’ damages gives the plaintiffs the benefit of the sum paid into Court at the Local Court at Blacktown pursuant to the adjudication following the lodgement of PC3, that sum should be released to IB from the Local Court, and I direct the plaintiffs to take such steps as are necessary on their behalf to achieve the release of those funds to IB.

88. There should be judgment and verdict for ES and AH against the plaintiff. Costs should follow the event.

89. IB and JH should pay the costs of the plaintiffs otherwise than in respect of the claim against AH and ES.

Orders

90. The Court Orders:

1. that there be judgment and verdict for the plaintiffs against the first and third defendants in the sum of $360,511.71.

2. interest thereon at the rates pertaining from time to time pursuant to s 100 of the Civil Procedure Act 2005 (NSW).

3. that the plaintiffs take such steps as are necessary on their behalf to achieve the release of monies paid into the Local Court at Blacktown in respect of what the first defendant asserted to be Progress Claim 3 issued under the Contract the subject of these proceedings.

4. that the first and third defendants pay the plaintiffs’ costs.

5. that there be judgment and verdict for the second and fourth defendants against the plaintiffs.

6. that the plaintiffs pay the second and fourth defendants’ costs.

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Amendments

13 August 2025 - Paragraph [12] amended.

Decision last updated: 13 August 2025