MERLOTTI and JANSEN - [2021] WASAT 19

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL
CITATION:   MERLOTTI and JANSEN [2021] WASAT 19
MEMBER:   MS P LE MIERE, MEMBER
MR P MARSHALL, SESSIONAL MEMBER

HEARD:   25 AND 26 NOVEMBER 2020
DELIVERED          :   12 FEBRUARY 2021
FILE NO/S:   CC 512 of 2020
CC 1037 of 2020

BETWEEN: SIMONE MERLOTTI
First Applicant
LOLITA MERLOTTI
Second Applicant
AND
MATTHEW JANSEN
Respondent

Catchwords:

Building services - Breach of contract - Justification of HBWC order - Claim for progress payments - Assessment of work completed - Faulty workmanship - Turns on its own facts

Legislation:

Building Services (Complaint Resolution and Administration) Act 2011 (WA), s 5(1), s 5(2), s 11, s 36, s 36(1)(b), s 38, s 41, s 41(4)(b)(11), s 43, s 44, s 44(2)

Result:

CC 512 of 2020
Building Remedy Order made

CC 1037 OF 2020
HBWC made for progress payments
HBWC refused in respect of contract claim

Representation:

Counsel:

First Applicant	:	Ms J Moffat
Second Applicant	:	Ms J Moffat
Respondent	:	Mr T Coyle

Solicitors:

First Applicant	:	Petherick Cottrell Lawyers
Second Applicant	:	Petherick Cottrell Lawyers
Respondent	:	McAuliffe Legal

Case(s) referred to in decision(s):

Nil

REASONS FOR DECISION OF THE TRIBUNAL:

Introduction

This decision relates to two applications CC 512 of 2020 and CC 1037 of 2020. The first matter CC 512 of 2020 concerns allegations by Mr Simone Merlotti and Ms Lolita Merlotti (owners) regarding the building service provided by Mr Matthew Jansen (builder) not being carried out in a proper and proficient manner or being faulty or unsatisfactory (workmanship claim).
The second matter CC 1037 /2020 concerns two claims by the builder arising out of the contract entered into by the owners and the builder to build a house the subject of the workmanship claim. The first claim is in respect of a claim for wrongful termination of the contract by the owners (contract claim). The second concerns a claim for monies, owed pursuant to the contract for work completed to the time of the termination of the contract (progress payment claim).
The matters were heard together pursuant to orders made by the Tribunal on 29 September 2020 whereby proceedings CC 512 of 2020 and CC 1037 of 2020 were to remain as separate proceedings but to be heard and determined together and that evidence in one proceeding was to be evidence in the other proceeding.

Background

In 2018 the owners engaged AK Homes to build a house for them at their property in Bridgetown (house). AK homes completed the foundations and some wall framing of the house before they went into liquidation. At this time the owners were living in a shed located on the property near the house.
On 25 April 2019 the owners and builder signed a building contract with 'Blackwood Valley Building Matt Jansen' (contract). The original contract price was for the sum of $235,922.50: Exhibit 1, pages 151 to 162.
We understand that Blackwood Valley Building is a business name used by the builder. There is no dispute that the builder is the person responsible for carrying out the regulated building service the subject of these proceedings.
In about early March 2019 the builder commenced securing some sections of the existing wall framing and (it is alleged by the owners) commenced building new wall framing.
It is not disputed that the last time the builder carried out any building work on the house was on or about 21 June 2019.
The contract claim is a dispute between the parties as to whether the contract was unlawfully terminated by the owners.
At the commencement of the proceedings it was a little unclear as to what was in dispute in respect of the workmanship claim. However, during the course of the proceeding the issues did become clearer. The builder (through his counsel in his closing submissions) confirmed he did not dispute that remedial work was required. In some instances the scope of works was disputed and in most cases it was the cost of the remedial work that was in dispute.

Legislative framework

The proceedings in CC 521 of 2020 and CC 1037 of 2020 were commenced by referral from the Building Commissioner under s 11 of the Building Services (Complaint Resolution and Administration) Act2011 (WA) (BSCRA Act). In these reasons, unless otherwise specified, any reference to legislative provisions or to 'the Act' is a reference to the BSCRA Act.
CC 512 of 2020 relates to the owners' workmanship claim.
Section 5(1) of the Act relevantly provides that:
[A] person may make a complaint to the Building Commissioner about a regulated building service not being carried out in a proper and proficient manner or being faulty or unsatisfactory.
There is no dispute in this case that the construction of the owners' house involved the provision of a 'regulated building service'.
A referral to the Tribunal by the Building Commissioner under s 11 with respect to a claim regarding workmanship may be dealt with by the Tribunal under s 38.
Pursuant to s 38 the Tribunal may:
(1)If the Building Commissioner refers a building service complaint to the State Administrative Tribunal, the Tribunal may
(a)if the Tribunal is satisfied that the regulated building service that is the subject of the building service complaint has not been carried out in a proper and proficient manner or is faulty or unsatisfactory, deal with the building service complaint by making a building remedy order; or
(b)otherwise, decline to make a building remedy order.
(2)The State Administrative Tribunal cannot make a building remedy order requiring a respondent who is not a registered building services provider
(a)to do any work of a value estimated by the Tribunal to exceed the prescribed amount; or
(b)to pay any amount exceeding the prescribed amount,
unless
(c)the order is made in respect of a building service that has been carried out by the respondent in contravention of the Building Services (Registration) Act 2011 section 7; or
(d)the respondent consents to the order being made.
(3)Unless a greater amount is prescribed by the regulations, in subsection (2) the prescribed amount is $500 000.
(4)Nothing in this section prevents a building service complaint from being dealt with through a compulsory conference or mediation process under the State Administrative Tribunal Act 2004.
Section 36 of Act provides that:
(1)A building remedy order consists of one of the following
(a)an order that a person who carried out a regulated building service remedy the building service as specified in the order;
(b)an order that a person who carried out a regulated building service pay to an aggrieved person such costs of remedying the building service as the Building Commissioner or State Administrative Tribunal, as the case requires, considers reasonable and specifies in the order;
(c)an order that a person who carried out a regulated building service pay to an aggrieved person a sum of money specified in the order to compensate the aggrieved person for the failure to carry out the building service in a proper and proficient manner or for faulty or unsatisfactory building work.
(2)A building remedy order may require that the order be complied with within a time specified in the order.
(3)A person who is not a building service contractor may arrange for a building service to be carried out for the purpose of compliance by that person with a building remedy order referred to in subsection (1)(a) despite the Building Services (Registration) Act 2011 section 7.
The following provisions relate to claims by a builder under a contract.
Section 5(2) of the Act relevantly provides that:
An owner or builder under a home building work contract may make a complaint to the Building Commissioner about a matter referred to in the Home Building Contracts Act 1991 section 17 or 20 or Schedule 1 clause 5.
Section 43 of the Act provides:
(1)If the Building Commissioner refers a HBWC complaint to the State Administrative Tribunal, the Tribunal may
(a)if satisfied that the order is justified, make a HBWC remedy order; or
(b)otherwise, decline to make the order[.]
Section 41 of the Act provides:
(1)In this section
specified means specified in the HBWC order.
(2)A HBWC remedy order in respect of a complaint by an owner or builder under a home building work contract referred to in the Home Building Contracts Act 1991 section 17 (other than a complaint about a breach of section 15 of that Act) consists of one or more of the following
…
(b)an order that a person pay a specified amount payable under the contract;
…
(d)an order that a person pay specified compensation for loss or damage
(i)caused by any breach of the contract or of a provision of the Home Building Contracts Act 1991 Part 2; or
(ii)referred to in the Home Building Contracts Act 1991 Schedule 1;
…
…
(4)A HBWC remedy order in respect of a complaint by an owner or builder under a home building work contract referred to in the Home Building Contracts Act 1991 section 20 consists of
…
(b)an order providing for specified payment to the builder in respect of
(i)any materials supplied by the builder; or
(ii)any home building work or other services performed by the builder; or
(iii)costs, including overhead expenses and loss of profit, incurred by the builder,
under or in relation to the contract[.]
Pursuant to s 44 of the Act the Tribunal may:
(1)In this section
responsible adjudicator means
…
(b)in the case of a HBWC complaint that has been referred to the State Administrative Tribunal, the Tribunal.
(2)At any time before a HBWC remedy order is made in respect of a HBWC complaint, the responsible adjudicator may, if the responsible adjudicator considers it just and expedient to do so, order an amount of money to be paid to the responsible adjudicator by either the owner or the builder or by both of them[.]
In respect of the contract claim and the progress payment claim the onus is on the builder to satisfy the Tribunal that an order under s 44(2) is justified. The standard of proof is that we must be satisfied on the balance of probabilities, that is, that it is more likely than not that the owners breached the contract by wrongfully terminating the contract and/or are liable to pay for work completed under the contract as alleged.

Issues

•Did the owners breach the contract by not permitting the builder to complete the works?
•If the answer is in the affirmative is the Tribunal satisfied a HBWC order is justified and if so what is the specified compensation the Tribunal should order the owners to pay for loss or damage caused by the breach?
•Did the builder carry out work until he ceased working on the house further to the contract? If the answer is in the affirmative what is the specified amount payable under the contract?
•What is the scope of works to remedy the building service not carried out in a proper and proficient manner or was faulty or unsatisfactory and what is the reasonable cost of those works?

The facts

Contract claim

On or about 19 January 2019 the owners allege they provided written authorisation to the builder to assist him to obtain a building permit and to liaise on their behalf with the Shire of Bridgetown to get the necessary approvals to build the house: Exhibit 1, page 191.
The owners on or about the same time say they provided the builder with drawings they had from the AK Homes, including specifications. They also allege they asked the builder:
•to add extra back decking;
•to change scissor trusts to expose rafters to the living area master bedroom and both verandas; and
•to provide them with drawings and specifications for the construction of the roof of the house.
They allege they never received any additional drawings or specifications from the builder in respect of these matters.
There is disagreement between the parties as to whose responsibility it was to obtain the building permit but it is not disputed that the builder did not have a valid building permit at any time he was carrying out the regulated building service.
It is not disputed by the parties that by 8 April 2020 the builder had commenced work on site. (The owners claim he commenced earlier but for the determination of the matters in dispute we do not consider the start date of any particular relevance.)
On 25 April 2019 the parties entered into the contract. The builder, on behalf of the owners obtained Home Indemnity Insurance in respect of the contract.
On 1 May 2019 the builder issued an invoice for the deposit/first progress payment invoice in the sum of $14,155.35 and the owners paid it on that day: Exhibit 1, page 291.
Also on 1 May 2019, the builder issued a statement showing the stages the progress payments were due in accordance with the contract: Exhibit 1, pages 43 and 291.
In late May 2019 the owners say they expressed concern to the builder about the lack of scaffolding and that planks on trestles or ladders were being used instead. The parties both agreed the system that was used is that shown on page 111 of Exhibit 1. The owners say their concerns regarding safety continued throughout June 2020.
On 6 June 2019 the builder issued a tax invoice for the first progress payment in the sum of $29,000 that he alleged represented completion of 100% of the wall framing and 50% of the roof framing.
From about 21 June 2019 no further work was performed by the builder. At about that time he informed the owners that he would not be on site for about two weeks because he had another job to go to.
On 7 July 2019 Mr Meliotti sent a text message to the builder expressing the hope that the builder would come back the following day to finish the rest of the roof.
The builder responded on 8 July 2019 saying he was unwell and he had sent his 'guys' elsewhere that day but would be there 'ASAP'. The builder says that by 8 July 2019 the roof was watertight but further work need to be done to complete it: Exhibit 1, witness statement of builder page X para 8.
On 9 July 2019 the builder text messaged Mr Merlotti saying he would be on site at about mid-morning the following day for the whole of the day: Exhibit 1, pages XXVII to XXVIII.
Mr Merlotti says in response to this message he telephoned the builder and told him he was going to obtain a building report because he was worried about various matters on site.
On 10 July 2019 at 6.05 am Mr Merlotti messaged the builder Exhibit 1, page XXVIII:
Do not worry coming this morning,We just want to see the report first. We let you know something ASAP!!!
At 7.49 am on that day the builder responded:
No worries. I shall wait to hear from you and to move forward resolving this soon. Have a good day.
On 12 July 2019 at 9.30 am Mr Merlotti messaged the builder as follows:
Early next week the building inspection report should be ready. Since then nothing will be allowed to come in including the windows. Simon[e] and Lolita.
The builder responded:
Ok thankyou.
The builder's evidence on this point is not clear. At one point in crossexamination he denied that Mr Merlotti had said he was obtaining a report from a registered builder because of concerns he had with the builder's work and said the only issue that had been raised by the owners was one relating to anticon: ts 48, 26 November 2020.
It was accepted by the parties that the report Mr Merlotti was referring to in the text messages was the Independent Building Inspections compiled by Mr James Barker dated 22 July 2019: Exhibit 1, pages 141 to 142 (Report).
In crossexamination the builder admitted that there was a lot of talk about the Report, that he had been told by the owners of defective items and that the owners had concerns: ts 212, 26 November 2020.
The builder suggested, when it was put to him by the Tribunal, that he had given inconsistent evidence in relation to his knowledge of the concerns of the owners, he attempted to explain his inconsistent evidence by saying that before he got the Report he did not know what was in the Report and that was why he said he only knew about the anticon issue: ts 212, 26 November 2020.
The builder alleges that on 16 July 2019 when he attended the house and spoke with the owners he was threatened by Mr Merlotti and that he was so concerned about the threats that he reported the matter to the police.
On 18 July 2019 Mr Merlotti says (in his witness statement Exhibit 1, page 1 para 17) he personally handed the Report to the builder and asked him to come up with a plan of action to fix the defects listed in the Report. He also says that the builder said he was having a break and would contact the owners when he returned.
Mr Merlotti also said he received the final Report and invoice from Mr Barker (inferentially) on that day. The Tribunal notes there is only the one report and that is the Report – which is dated 22 July 2019.
The builder in answer to a question as to whether he had been asked to prepare a plan of action to address the matters raised in the Report said he had been asked to prepare a plan and that is what he did: ts 59, 26 November 2020.
On 24 July 2019 the builder's legal representative wrote to the owners seeking a negotiated settlement because 'there is little prospect of the contract proceeding without further acrimony': Exhibit 1, page 90.
The builder in his witness statement (Exhibit 1, page XIII) says the contract had never been formally terminated by the owners but it was clear they did not wish him to proceed with the contract.
On 28 August 2019 the owners filed a Notice of Proposed Complaint with the Building Commissioner.
The builder says he had been excluded from the site and therefore on 11 September 2019 issued the second invoice for $71,707.73 being for the cost of work completed to July 2019 under the contract.
On 4 October 2019 the builder's legal representative wrote to the owners again.
On 31 January 2020 the owners lodged a complaint with the Building Commissioner.
On 23 April 2020 the Building Commissioner informed the parties the matter would be referred to the Tribunal.
By letter dated 3 August 2020 the builder lodged a complaint with the Building Commissioner alleging breach of the contract and payment for work completed pursuant to the contract.
Evidence was led by the builder as to the profit he would have made if the contract had continued and he had completed building the house.

Progress payment claim

The builder is claiming from the owners the cost of work that he says had been completed up to July 2019 when he ceased work. He calculates that sum to be $71,707.73 (Exhibit 1, page 293) made up of the following amounts:
Roof framing 90%  $16,000
Roof plumbing 85%   $29,750
Internal linings 15%   $4,500
Window fabrication 90%   $19,507.40
The contract showed that the following progress payments were scheduled:
Deposit   $14,155.35
Wall framing  $9,000
Roof framing  $40,000
Roof plumbing  $35,000
Lock up  $25,000
Internal linings  $30,000
Second Fix  $25,000
Complete/
Provisional Sum   $57,767.15
Total  $235,922.50
There is no line item for windows.
On or about 10 October 2020 an assessment of the works completed up to July 2019 was obtained by the builder from Mr Chad Kessner: Exhibit 1, page XXXI to XXXII (Kessner assessment).
Mr Kessner found that 100% of the wall framing had been completed.
Mr Kessner opined that the roof framing costs should be calculated on the basis of 50% labour and 50% materials. He assessed that all the materials had been delivered to site and that two thirds of the roof framing had been completed.
With regard to roof plumbing Mr Kessner considered the cost of this item should be allocated 60% for materials and 40% for labour and that about 30% of the work was completed.

With respect to the amount claimed for internal lining Mr Kessner considered that only 10% of this work had been completed.
The builder after some discussion, confirmed at the hearing that he did not dispute the Kessner assessment and accepted it as an accurate assessment of the amount of work he had completed.

Windows

The builder gave evidence that:
•he (or Mr Merlotti) had ordered the windows;
•the windows had been fabricated and were sitting in storage: ts 179, 26 November 2020; and
•the windows had not been delivered to site because of a) the breakdown in the relationship with the owners who had told him not to have them delivered and b) the subsequent ending of the contract.
When the Tribunal brought to the attention of the builder that there was no invoice for windows or any evidence from the window manufacturer that the windows had been fabricated, he produced (on the next day of the hearing) a document he said was an invoice dated 4 June 2020: Exhibit 4 and ts 131-132, 180, 26 November 2020.
The builder did not explain where the window claim fitted into the progress payment schedule in the contract: ts 134, 153, 26 November 2020.
His counsel provided an explanation about how the 4 June 2020 invoice came about or how he thought it came about: ts 160161, 26 November 2020.
The builder claimed he obtained quotes for the windows following a discussion between himself, the glazier and Mr Merlotti.
The builder alleged he sent an email to the glazier in June 2020 asking him 'to make the invoice [for the windows] active so I could seek payment for it': ts 179 26 November 2020.

Workmanship claim

There are 14 items of complaint alleging the building work in respect of the construction of the roof and walls was not carried out by the builder in a proper and proficient manner or was faculty or unsatisfactory.
A joint expert report dated 18 June 2020 (Exhibit 1, pages 76 to 83) was prepared by Mr Peter Suckling the engineer engaged by the owners, and Mr Toby Pateman an engineer engaged by the builder (experts' joint report). They also gave concurrent oral evidence by telephone.
There was some discussion at the commencement of the hearing as to whether the builder disputed liability for the defects and/or whether he sought to resile from the experts' joint report.
The builder maintained at hearing that some of the defects in the workmanship were not due to faulty workmanship but rather as a result of work not being finished.
In closing the builder's counsel conceded this was not relevant to our determination as to whether the work was faulty and the builder did not maintain that further work meant the work was proper or proficient or not unsatisfactory: ts 71, 26 November 2020.
Counsel confirmed the builder's position, that he accepted the building work in respect of the items of complaint was not proper or proficient or was faulty or unsatisfactory and the issue for the Tribunal to determine was confined to the scope of the remedial works and the cost of those works.
In their experts' joint report the experts set out the proposed scope of work for the 14 complaint items. The experts' joint report accepted that all the complaint items required remedial work. Both experts in the experts' joint report and in their oral evidence agreed that complaint items 1 to 3 and 5 require remedial work and inferentially were not carried out in a proper and proficient manner or were faulty or unsatisfactory. They also agreed on the scope of the work necessary.
Some of the complaint items in the experts' joint report, namely complaint items 4, 6 and 14 had the comment 'Work in progress' attached to them.
At hearing when asked about complaint item 4, Mr Pateman (who identified the comment as being his only) confirmed that when he inspected the house, complaint item 4 required further work to make it compliant. The reason he added the comment was because he considered the additional work that he and Mr Suckling agreed needed to be done, was considered 'finishing off work': ts 5555, 25 November 2010.
The remedial work required for complaint items 1 to 6 was agreed.
The remedial work recommended by the experts for complaint items 7 to 14 was dealt with together as it was interrelated.
The main distinction in the views of the experts in respect of complaint items 7 to 14 in the experts' joint report was as to the scope of works, specifically, as to whether a number of roof sheets needed to be replaced or all of the roof sheeting.
At hearing Mr Pateman explained that he considered not all of the roof sheeting needed to be removed and replaced to install the anticon above the raked ceiling as the anticon insulation could be installed using a different methodology.
He agreed that the methodology he suggested would leave the owners with a different aesthetic effect in the areas where there are exposed rafters but considered it a possible methodology.
Mr Pateman opined that if the roof sheeting needed to be removed to install the anticon together with other sheets that needed to be removed to resolve other issues then approximately 50% of the roof sheeting would need to be replaced: ts 64, 25 November 2020.
Mr Suckling disagreed as he considered Mr Pateman underestimated the number of roof sheets that would need to removed and listed other areas that needed the roof sheeting to be removed and replaced.
On considering what Mr Suckling had to say Mr Pateman conceded 50% was probably a little low and agreed that Mr Suckling's estimate of 70% was reasonable: ts 65, 25 November 2020.

Costings

The main areas of dispute in respect of all complaint items was in respect of the cost of the remedial work. The experts largely agreeing on the scope of works.
Mr Barker and Mr Kessner gave oral evidence jointly by telephone in respect of costs.
Mr Barker said he had been to site and assessed what would need to be done and then had his supervisor actually draw up the quote.
The hourly rate he paid his tradesperson is $65 per hour and he charged for travel to and from the job site.
Mr Kessner told the Tribunal how he worked out his costings including the number of hours he had allowed for each job item. He said he paid his tradespersons $55 per hour and would not charge travel time as he lives close by.
Mr Barker agreed the rate for a tradesperson was between $55 and $65 per hour: ts 108, 25 November 2020.
Mr Kessner's costings are set out in his quote in Exhibit 1, pages 15 and 16. Mr Barker's costings are set out in his quote in Exhibit 1, pages 285 and 286. They confirmed at hearing they considered the quotes were reasonable and each individual complaint item costing did not include GST.

Complaint item 1

The owners' expert Mr Barker quoted $2,450. The builder's expert Mr Kessner quoted $430.00.
Mr Barker explained his quote and gave evidence about all the factors that would need to be taken into account to enable the agreed remedial works to be carried out.
This included the removal of the underfloor sheeting and the installation of blocking: ts 71, 25 November 2020.
Mr Kessner as set out in his quote allowed for the installation of 14 by 125 millimetres long bugle head screws. His quote only allowed for the installation of screws and not the removal of any sheeting or addition of any blocking which he agreed would be required: ts 72, 25 November 2020.

Complaint item 2

Mr Barker's costing for this complaint item was $2,300. Mr Kessner costed the complaint item at $483.10.
In explaining their differing costings Mr Kessner explained that he had only considered what it would cost to do the things specifically outlined in the last line of the experts' joint report (ts 79, 25 November 2020), that is to:
[B]lock down to lintel with 90 times 45 stud section and strapped down as per (indistinct) [detail] or on engineering documentation.
Mr Barker included what it would cost to do the things required to be done. He said he based his assessment on what needed to be done on 40 years' experience in the industry. He said his costings took into account what a builder would need to do to carry out the stiffening of plates as outlined in the experts' description of the problem and the required solution. He referenced the need to install extra studs, extra window support and all the trimming necessary: ts 79, 25 November 2020.
Mr Kessner confirmed he had not costed those items that Mr Barker considered necessary to achieve the result required in the experts' joint report that is the installation of extra studs, extra window support and all the trimming necessary.

Complaint item 3

Mr Barker's costing for this complaint item was $1,850. Mr Kessner costed it at $1,256.51.
The cost experts agreed the time required to complete the remedial work would be about 16 hours.
Mr Barker said his quote was site specific (ts 81, 25 November 2020) however it is the Tribunal's understanding that Mr Kessner also inspected the site.

Complaint item 4

Mr Barker's quote for this complaint item is $960 and Mr Kessner's is $356.36.
At hearing both experts agreed the difference in the costings was due to the different ways they would approach the matter. They agreed both approaches would produce the same result. They agreed that the way proposed by Mr Kessner was simply a cheaper way of doing it. Mr Barker did not suggest that the cheaper way was an inferior way.

Complaint item 5

There was only a $38 difference in the costings between the experts on this complaint item. They provided no additional oral evidence to that set out in their written quotes.

Complaint item 6

Mr Barker's costing was $800 and Mr Kessner's was $490.25. Other than the different rates for tradespersons and travel time allowed for by Mr Barker no explanation was offered by the experts for the difference in their written quotes.

Complaint items 7 to 14

Mr Barker costed these complaint items at $24,000 and Mr Kessner at $12,221.74. The experts agreed the reason for the significant difference in their costings was that Mr Barker had allowed for all roof sheeting to be replaced and new roof sheeting to be installed. Mr Kessner only allowed for a small number of roof sheets to be replaced.
Mr Kessner confirmed (ts 88, 25 November 2020) that he had not quoted for the work necessary to install the anticon as recommended by Mr Suckling but rather from underneath the roof as proposed by Mr Pateman.
Mr Kessner did not allow for scaffolding in his quote. Mr Barker allowed $9,000.
Mr Kessner said he had not included a builder's margin which he said would need to be added to the total of the individual items before adding the GST. He said his margin was 15%: ts 89, 25 November 2020.
Mr Barker had added a builder's margin of 25% to the total of his quote. It was put to Mr Kessner that in the Tribunal's experience 25% was a more common margin. He said that he was only a small builder and that's why he only charged 15% and a bigger organisation like Mr Barker's would likely charge 25% or higher: ts 96, 25 November 2020.
Mr Barker's quote for the total of all the complaint items to be completed was $73,500. When questioned about the total Mr Barker agreed it was possible that a builder's margin had been added in twice by mistake: ts 94, 25 November 2020.

Consideration

Contract dispute

It is the Tribunal's understanding that the builder maintains he only became aware the owners were seeking a report from another registered builder on the quality of his work when he was provided with a copy of the Report.
However the text messages sent by the parties on 10 and 12 July 2019 show that the builder knew by 10 July 2019 that the owners had commissioned the Report on the work the builder had done to date. That is because at no time did the builder ask what Report Mr Merlotti was talking about or question what the owners were waiting for.
On 16 July 2019 when the parties met, the builder claims serious threats of harm were made against him by Mr Merlotti. The nature and detail of the threats sought to be brought out in oral evidence by the builder were not included in his witness statement.
No references to these threats were made in the builder's legal representative's letter of 24 July 2019 to the owners (24 July 2019 letter): Exhibit 1, pages 90-91.
Given the serious nature of the alleged threats made by Mr Merlotti we are perplexed that:
•no record of the report to the police has been provided to the Tribunal by the builder;
•there is no allegation the complaint of the threats were followed up or any investigation conducted by the police; and
•no explanation was provided as to why the report of the threats was not followed up by the police or why the police's failure to carry out an investigation was not reported to the relevant authorities.
For all of the above reasons we are unable to be satisfied as to the extent of any threats made by Mr Merlotti but accept that harsh words were exchanged.
The threats alleged by the builder, on his own evidence were not to the effect that he should not return to the site but rather that the builder's workmanship was substandard and that the threats related to not satisfactorily resolving the issues, that is come up with a plan to resolve the faulty workmanship.
The words of the text message on 10 July 2019 from Mr Merlotti to the builder state that he did not wish the builder to return to site until he had the Report. It is not until the commencement of this proceeding that we could find any statement from the owners that the builder would not be allowed to return to site.
The builder conceded that he had been asked by the owners to prepare a plan of action to address the concerns outlined in the Report. This counters para 19 of witness statement Exhibit I, page XIII where he says it was clear from the owners' actions they did not wish him to proceed with the contract.
The 24 July 2019 letter also contradicts his assertion that he believed the owners had terminated the contract.
Additionally, the claim that the alleged threats made on 16 July 2019 were to the effect that the builder would not be permitted to continue with the contract and, constituted an unlawful termination of the contract, is inconsistent with the owners asking the builder for a plan to rectify the faulty work when the builder was handed the Report by the owners some two days later.
When the builder was pressed in crossexamination as to whether he provided a plan he did not answer directly but said:
… I didn't – I didn't know exactly then and there what to do. That's why the next day I seek legal advice[.]
ts 211, 26 November 2020
Following that advice, the 24 July 2019 letter was sent by the builder's lawyer: Exhibit 1, page 90. That letter did not refer to the builder believing the owners had breached the contract or had unlawfully terminated the contract or simply that the builder accepted the termination of the contract. Rather the letter sought a negotiated settlement.
Indeed, if the alleged threats played any significant role in the builder's belief that the owners had terminated the contract we would have expected the 24 July 2019 letter to clearly allege the contract had been repudiated and specifically reference the threats of harm to the builder as evidence of the unlawful termination of the contract by the owners.
Instead the 24 July 2019 letter talks about a negotiated settlement 'to bring the contract to an end'. The letter was written by a lawyer who we can assume understood the difference between a contract being at an end by one party's actions that is a repudiation of the contract, and the desire of a party or both parties to end a contract because of a dispute between them.
It is not until 4 October 2019 (4 October 2019 letter) that the builder's legal representative writes to the owners alleging the owners have repudiated the contract. The 4 October 2019 letter relies upon events that occurred prior to the 24 July 2019 letter as evidence of the owners' repudiation of the contract. The Tribunal considers it relevant that the 4 October 2019 letter was sent after the owners had sent the builder a Notice of Proposed Complaint.
It is also clear from the 4 October 2019 letter that the owners had asked the builder to carry out remediation works. Again this is inconsistent with the owners having unilaterally terminated the contract.
The 24 July 2019 letter is inconsistent with the builder believing at that time that the contract had come to an end by the actions of the owners, which is that they had unilaterally terminated the contract.
In further support of the builder's allegation that the owners had unilaterally terminated the contract he says he was prevented from entering the site to work on the house as the gate to the house was locked.
The owners denied the gate was locked and said it could not be locked. We note that it was not put in crossexamination to either Mr Merlotti or Ms Merlotti that there were bolts or latches on the gate as described by the builder in his evidence.
The builder's own evidence was that when he came to collect the Report the gate was closed; he does not say locked (ts 187, 26 November 2020). He goes on to say he was told not to enter by Mr Merlotti but also mentions that there was another vehicle there. Mr Merlotti says it belonged to a neighbour who was visiting.
Prior to collecting the Report the builder said on 16 July 2019 when he spoke to Mr Merlotti on site he had noticed the gate open and entered the site: ts 33, 26 November 2020.
On another occasion the builder says he noted the gate was open and he entered the site to 'grab' some materials and spoke to Ms Merlotti. Again the conversation he said he had with Ms Merlotti was not put to her in crossexamination.
For all of the above reasons we are not satisfied that the owners unlawfully terminated the contract either by their words or actions.
Had the Tribunal determined the owners had unlawfully terminated the contract we would not have made a HBWC order as we do not consider a HBWC is justified having regard to, among other things:
(a)the nature of the faulty or unsatisfactory work the builder admits to; and
(b)the builder's actions generally - not turning up to the building site when expected, being absent from site for significant periods and poor safety protocols.

Progress payment claim

To determine the builder's claim on the basis of work completed it is necessary to consider what portion of the stages in the contract he has claimed for have been reached.

Wall framing - $9,000

The builder claimed he had completed all of the roof framing. The Kessner assessment confirmed this to be correct. It is not disputed that the owners have paid this in full.

Roof framing

Of the $40,000 (under the contract) claimed for roof framing the Kessner assessment found that of the $40,000, 50% should be allocated for materials and 50% for labour.
Mr Kessner opined that two thirds or 66% of the work has been completed and that all the materials had been provided.
We find that of the $40,000 due under the contract for the roof framing $20,000 should be allocated to materials and $20,000 for labour.
We find that all the material had been provided to the owners and that the owners should pay for these materials, that is $20,000.
We find the builder has completed 66% of the roof framing and that he is entitled to be paid for the work he has done under the contract being $13,200.
We find the total amount the builder is entitled to under the contract is $20,000 for materials and $13,200 for labour being a total of $33,200.
The first progress payment paid by the owners included $20,000 towards the roof framing thus leaving a balance owing of $13,200.

Roof plumbing

Mr Kessner addressed roof plumbing under two headings roof plumbing and roof sheeting. No oral evidence was given by him in respect of this issue. In his report he talks about the percentage of roof plumbing being at 85% or higher.

We find that the builder completed 85% of the work for the roof plumbing.
The amount the builder could claim under the contract if he completed 100% of the roof plumbing was $35,000.
We find the builder is entitled to a payment of $29,750. No payment has been made.
Wall lining
The amount the builder is entitled to under the contract on completion of the wall linings is $30,000. Mr Kessner says only 10% has been completed.
We find the builder is entitled to $3,000 for the work he has completed in respect of the wall linings. No payment has been made.

Windows

The builder did not explain where the window claim fitted into the progress payment schedule in the contract: ts 134, 25 November 2020 and ts 153, 26 November 2020.
His counsel provided an explanation about how the invoice dated 4 June 2020 came about or how he thought it came about: ts 160-161, 26 November 2020.
The builder claimed he obtained quotes for the windows following a discussion between himself, the glazier and Mr Merlotti. The quotes were not provided to the Tribunal ts 178, 26 November 2020. This alleged discussion was not put to Mr Merlotti when he gave evidence: ts 179, 26 November 2020.
The builder alleged he sent an email to the glazier in June 2020 asking him 'to make the invoice [for the windows] active so I could seek payment for it': ts 179, 26 November 2020.
This email was not provided to the Tribunal nor an explanation as to why it was not.
There is no written communication between the builder and the window fabricator about the storage of these windows how they should be stored - what space in the fabricator premises they might be taking up or if the fabricator could use them for any other order.
The email the builder alleges he sent to the glazier in June 2020 asking him for an invoice was not produced to the Tribunal. The 4 June 2020 invoice (Exhibit 4) was not produced until the second day of the hearing. The glazier was not called to give evidence although counsel for the builder did suggest the Tribunal could telephone the glazier.
The Tribunal does not consider it credible that a small business as described by the builder would fabricate windows for an entire house to the value of $18,658 and store them for 12 months without seeking payment or at the very least enquiring about when payment would be made.
Further if we were to accept the evidence of the builder we would have to accept that the manufacturer did not at any time during the last 18 months demand payment or indeed send any type of written communication enquiring about payment.
The 4 June 2020 invoice itself (Exhibit 4) does not say the windows have been fabricated and stored awaiting delivery. All the Tribunal has by way of evidence that any money will be required to be paid by the builder to the window fabricator is the builder's uncollaborated oral evidence.
The Tribunal is not satisfied on the balance of probabilities that the windows have been fabricated or that there is an outstanding liability by the builder to the fabricator for payment of the windows.
We find the builder has completed works in accordance with the claims under the contract for progress payments to the value of $73,950 and of this amount the owners have paid $29,000.
We find the outstanding balance owed by the owners to the builder for work completed under the contract is $44,950.

Workmanship claim

Some of the complaint items in the experts' joint report, namely complaint items 4, 6 and 14 had the comment 'Work in progress' attached to them. For the reasons below we have had no regard to the comment 'Work in progress'.
At hearing when asked about complaint item 4, Mr Pateman said the reason he added the comment was because he considered the additional work that he and Mr Suckling agreed needed to be done as being 'finishing off work': ts 5055, 25 November 2020.
The builder at times during the hearing said that some of the defects in the workmanship were not due to faulty workmanship but rather were a result of work not being finished.
In his closing address the builder's counsel conceded whether the work was finished or not was not relevant to our determination as to whether the work was not satisfactory: ts 71, 26 November 2020.
In respect of complaint items 1 to 6 the scope of work was agreed. The issue for determination in respect of items 1 to 6 was the cost of the remedial work.
Mr Barker said he had been to site and assessed what would need to be done. He then had his supervisor draw up the quote. By this we understood him to mean he had made all the calculations necessary to price the work and had his supervisor prepare the quote.
Although Mr Barker was not able to tell us at the time of the hearing how many hours had been allowed for each job item it was apparent that he had a firm understanding of what was required. He told the Tribunal he was taken somewhat by surprise at being called to give evidence as he had not expected to give evidence until the following day and had consequently, not had an opportunity to review the quote. (Counsel for the owners told the Tribunal they had arranged for Mr Barker to give evidence on the second day of the hearing): ts 71, 25 November 2020.
Mr Kessner was able to tell the Tribunal how he worked out his costings including the number of hours he had allowed for each job item. He said he paid his tradespersons $55 per hour and would not charge travel time as he lives close by.
Mr Barker agreed the rate for a tradesperson was between $55 and $65 per hour: ts 108, 25 November 2020.

Complaint item 1

Mr Barker allowed $2,450 for this complaint item and Mr Kessner allowed $430.
The experts agreed in their scope of works that what was required to remedy this item was the addition of extra screws in different locations, (totalling 14). The experts also referred to the need for the removal of underfloor sheets and the installation of additional blocking. Mr Kessner in his quote did not allow for this work.
We find that the quote provided by Mr Kessner did not include all the work necessary to remedy this item of complaint as identified in the experts' joint statement. For this reason we prefer the evidence of Mr Barker.
We find the reasonable cost of remedying this item of complaint is $2,450.

Complaint item 2

Mr Kessner did not dispute the extra items outlined by Mr Barker in his costing schedule namely the installation of extra studs, extra window support and the trimming items were necessary.
We accept Mr Barker's evidence that what he had costed was the work described in the experts' joint report because the extra items he mentioned would be required to be installed to carry out the described works.
We find the reasonable cost for the remedial work for this item is $2,300.

Complaint item 3

Mr Barker and Mr Kessner provided different costings for this complaint item but agreed the time taken would be about 16 hours.
Allowing for the different rates ($880 at $55 per hour and $1,040 at $65 per hour) does not account for the $594 difference between the experts.
Mr Barker said his quote was site specific (ts 81, 25 November 2020) however it is the Tribunal's understanding that Mr Kessner also inspected the site. Absent more information as to the difference in the amounts we consider we should allow for the cheaper quote.
We find the reasonable cost of remedial work for this complaint item is $1,256.51.

Complain item 4

Mr Barker's quote for this complaint item is $960 and Mr Kessner $356.36.
At hearing they both agreed the different ways they would approach the matter would produce the same result. They agreed that the way proposed by Mr Kessner was a cheaper way of doing it.
Mr Barker did not suggest that the cheaper way was an inferior way.
We find the reasonable cost of the remedial work for this item is $356.36.

Complaint item 5

The difference in the experts' costings is $38.
We find the reasonable cost of remedying this complaint item is the lesser amount being $262.12

Complaint item 6

Mr Barkers costing was $800 and Mr Kessner $490.25 other than that the expert said they paid their tradespersons different rates and Mr Barker allowed for travel time there was no explanation offered for the difference in their quotes.
The difference in rates the experts have allowed for the tradespersons does not explain the difference in the costings.
Absent an explanation for the more expensive costing we accept the costing provided by Mr Kessner.
We find the reasonable cost of remedying this item of complaint is $490.25.

Complaint items 7 to 14

Mr Barker costed these complaint items at $24,000 and Mr Kessner at $12,221.74. The experts agreed the reason for significant difference in their costings was that Mr Barker had allowed for all the roof sheets to be removed and new roof sheeting to be installed. Mr Kessner only allowed for a small number of roof sheets to be replaced.
Mr Kessner confirmed that he had not quoted for the work necessary to install the anticon insulation as recommended by Mr Suckling but rather from underneath the roof as proposed by Mr Pateman. If it was possible to install the insulation from below the ceiling then it would not be necessary to remove and replace most of the roof sheeting: ts 88, 25 November 2020.
Mr Pateman agreed his method would provide a different look than the one you would get if the insulation was installed in the manner it should have been installed that is under the roof sheeting but above the ceiling.
The purpose of ordering remediation work is to put the owner(s) in a position they would have been had the work been carried out correctly. To install the anticon from below and thus avoid the need to remove the roof sheeting the owners would be left with a different aesthetic outcome than would have been achieved had the anticon been installed correctly.
We find that allowance should be made for all of the roof sheeting to be replaced as allowed for by Mr Barker to ensure the insulation could be installed in a proper and proficient manner.
We find the reasonable cost of the remedial works for these complaint items is $24,000.

Additional costs

The parties confirmed that the amounts they allowed did not include a builder's margin. A builder's margin is the percentage added to the cost price of a building project and covers all of the business running costs including the profit for the builder.
We consider it appropriate to allow a builder's margin as a builder will need to be employed to manage and coordinate the carrying out of work that needs to be done.
We accept that a small builder may charge a smaller margin as Mr Kessner says he does: ts 96, 25 November 2020. Mr Barker charges a rate of 25%. Mr Kessner agreed that a building company such as Mr Barker would likely charge 25% or higher.
When the Tribunal put to Mr Kessner that in its experience 25% was a more common margin, he did not demur from this.
The owners have now had unfortunate experiences with two builders and we do not consider they should be restricted to employing a small builder to carry out the remedial work.
We find a reasonable sum to allow for a builder's margin is 25%.
In the experts' joint report the experts agreed that scaffolding was necessary.
Mr Barker allowed $9,000. Mr Kessner thought that cost sounded reasonable: ts 90, 25 November 2020.

Conclusion

Contract claim

We are not satisfied that an order for breach of contract is justified and decline to make a HBWC order.

Progress payment claim

We are satisfied that a HBWC order should be made in respect of the claim for work completed pursuant to the contract.
The value of the work completed we have found to be $73,950. The owners have paid $23,000.
We find the owners are liable to pay to the builder the sum of $44,950.

Workmanship claim

We found the reasonable cost of remedying the following items of complaint to be:
Complaint item 1         $430
Complaint item 2         $2,450
Complaint item 3         $1,256.51
Complaint item 4         $356.36
Complaint item 5          $262.12
Complaint item 6         $490
Complaint items 7 to 14             $24,000
$29,244.99
We also found that an amount of $9,000 for scaffolding should be allowed and a rate of 25% of the total of the costs allowed for a builder's margin which (rounded) is $9,561 being a total of $47,806.
To the total we add GST which is $4,780 being a total of $52,586.
We find the money owed by the builder to the owners to remedy the regulated building service not carried out in a proper and proficient manner or is faulty or unsatisfactory should be offset against the money owed by the owners to the builder for the work completed.
There will be an order the builder pay the owners $7,636.

Orders

CC 1037 of 2020

The Tribunal orders:

1. The Tribunal declines to make a HBWC order in respect of the claim for breach of contract and the claim is dismissed.
2. Pursuant to s 41(4)(b)(ii) of the Building Services (Complaint Resolution and Administration) Act 2011 (WA) the respondents are to pay to the applicant the sum of $44,950.
3. The said $44,950 is to be offset against the amount found to be paid by Mr Mathew Jensen to Mr Simone Merlotti and Ms Lolita Merlotti in CC 512 of 2020.

CC 512 of 2020

The Tribunal orders:

1. Pursuant to s 36(1) (b) of the Building Services (Complaint Resolution and Administration) Act 2011 (WA) the respondent is to pay the applicants the sum of $53,402.82.
2. The said $53,402.82 is offset against the amount found to be paid by Mr Simone Merlotti and Ms Lolita Merlotti to Mr Mathew Jensen in CC 1037 of 2020.
3. Within 21 days of this order the respondent, Mr Mathew Jensen pay Mr Simone Merlotti and Ms Lolita Merlotti the outstanding balance after offsetting amounts owed by the respondent to the applicants in CC 1037 of 2020 being the sum of $7,636 within 21 days of the date of this order.

I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
MS P LE MIERE, MEMBER
12 FEBRUARY 2021