Morrison v Moss - [2019] NSWDC 746

District Court

New South Wales

Medium Neutral Citation: Morrison v Moss & Anor [2019] NSWDC 746
Hearing dates: 16 – 19 September, 5 – 6 December 2019
Date of orders: 12 December 2019
Decision date: 12 December 2019
Jurisdiction: Civil
Before: Abadee DCJ
Decision:
See paragraph 464 – 466.

Catchwords:
BUILDING AND CONSTRUCTION – construction works for residential dwelling – whether practical completion arose through owner’s entry into possession – whether Builders in breach of implied statutory warranties – whether works defective or incomplete – whether works ‘practically complete’ – whether Builders should be ordered to rectify defects.

CONTRACT – existence of implied term as to date for completion of works – whether implied term breached – whether contract validly terminated – whether terminating party entitled to exercise express right to terminate if it is itself in breach.
PRACTICE AND PROCEDURE – referral of issue of costs of rectification of defective works to referee.
Legislation Cited: Environmental Protection Assessment Act 1979 (NSW)
Home Building Act 1989 (NSW), ss 14B, 48MA
Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited: Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd (2009) 178 FCR 57
Australian Financial Services and Leasing Ltd v Hills Industries Ltd (2014) 253 CLR 560
Bellgrove v Elridge (1954) 90 CLR 613
Clements v Murphy [2018] NSWCATAP 152
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 148 CLR 337
Con-Stan Industries Pty Ltd v Norwich Winterthur Insurance (Aust) Ltd (1986) 160 CLR 226
Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Ettridge v Vermin Board of the District of Murat Bay [1928] SASR 124
Gilbert Ash Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689
Master Glass Facades Pty Ltd v Pollak [2017] NSWCATAD 45
McDonald v Denny Lascelles Ltd (1933) 48 CLR 457
Mondel v Steel (1841) 151 ER 1288
Tabcorp v Bowen Investments Pty Ltd (2009) 236 CLR 272
The Owners – Strata Plan No. 66375 v King [2018] NSWCA 170
The Owners-Strata Plan 78465 v M D Constructions Pty Ltd [2016] NSWSC 162
The Owners-Strata Plan No. 76674 v Di Blasio Constructions Ltd [2014] NSWSC 1067
The Owners-Strata Plan No. 89041 v Galyan Pty Ltd [2019] NSWSC 619
Thompson v Palmer (1933) 49 CLR 507
Wheeler v Ecroplot Pty Ltd [2010] NSWCA 61
Category: Principal judgment
Parties: Mr J Morrison (Plaintiff)
Mr A Moss (Defendant)
Ms E Moss (Defendant)
Representation:
Counsel:
Mr T Bland
Mr G Campbell
Solicitors:
Osborn Law
Keystone Lawyers

File Number(s): 2018/121395
Publication restriction: Nil

Judgment

Introduction

This proceeding concerns alleged defective or incomplete building works affecting a new dwelling house at Murrays Beach, which is near Lake Macquarie. The plaintiff, Mr Morrison (who I will generally call the ‘Owner’) was the registered proprietor of this property.
The construction works were performed by the defendants, Mr and Mrs Moss (who I will generally call the ‘Builders’) who traded in a partnership. These works were performed over two discrete contracts. The first building contract was entered into on 28 August 2013. That contract was brought to an end on 28 August 2015. By this point, the Owner’s Counsel said that between 75-80% of the work had been completed. It had reached ‘lock up’ stage in late December 2014.
After the termination of the first contract, a second building contract was entered into in November 2015. When the Owner moved back in as at September 2016, the builders soon issued a notice of practical completion. By then, the Owner had paid the builders all but one of the milestone payments under the second building contract, being the final milestone payment relating to practical completion; as well as, what the Builders contend, were amounts owing on account on prime cost and provisional sum items as calculated under the contract and subject to the operation of a collateral contract. However, the Owner refused to pay the milestone payment or any further payments and asserts that the works performed pursuant to the Second Building Contract were incomplete and defective. Further, he asserts, the estimated costs of the rectification are greater than the price for the contract.
In November 2016, the Builders issued a notice of termination. The Owner contends that there were many disputes about the work that remained to be performed. He contends that the Builders repudiated the Second Building Contract. He asserts that he has accepted that repudiation and that as a result the Second Building Contract was terminated.
By their Defence, Mr and Mrs Moss (the ‘Builders’) say that they validly terminated the second building contract and were thereby discharged from further performance. They deny the existence of any defects, but say that they are prepared to rectify any ‘defective’ works done by the court pursuant to s 48MA of the Home Building Act.
By his claim, Ms Morrison claims the sum of $640,047.16. Mr Morrison says that the builders’ claim is unable to be established and should be dismissed. Alternatively, the quantum of the builders’ claim against him is (much) less than the amount owed to him, as determined by the builder’s expert, Mr MacGregor. The Builders say that the Court should facilitate opportunity for them to rectify the defects. Mr Morrison says that relations between the Owner and the Builders are such that no such order should be made.
The Builders deny that they repudiated the Second Building Contract. They say that they validly terminated it for the Owner’s non-payment of monies owned. They reject that any valid claim that the Owner may have is anything like the $640,000 that is claimed. They also say that there is a real question whether an order under s 48MA of the Home Building Act should be made.
The Builders’ brought a cross-claim seeking repayment of the sum of $52,470.56 as a debt for the Owner’s failure to pay two invoices.

Issues

In his schedule of issues supplied shortly before the commencement of the trial, the Owner identified the issues as requiring the Court’s determination are as follows:

Was the sum of $11,618.88 claimed by the builders validly offset, or was it a payment directly made to subcontractors by Mr Morrison?

Should the sum of $11,618.88 have been included in the second contract?

Was there a delay in completion of the second contract?

Was it reasonable for Mr Morrison to enter into and live on the property from September 2016?

Was there a valid termination of the second contract by the Builders?

Were the works the subject of the second contract ‘practically complete’?

Did the builders have any entitlement to seek payment for practical completion?

Were the works ‘defective’? If so, what is the extent of the defects?

What is the quantum of the defects?

However, during the closing addresses of Counsel, the issues were distilled as being:

Whether there was an implied term as to when the Works needed to be completed by;

Whether the Builders breached the said implied term;

Whether any such breach:

deprived the Builders of the right to terminate the Contract;

and thereby deprived the Builders of the right to damages arising from any breach of the Contract by the Owner;

whether the Owner had taken possession of the property by 1 September 2016 (or some later date);

whether the Builders were entitled to issue an invoice and receive payment for the practical completion milestone;

whether an estoppel precluded the Builders from relying upon the circumstance that practical completion was deemed to be achieved for the Owner’s taking possession of the Property;

whether the Builders were entitled to terminate the contract for the Owner’s:

failure to pay the invoice for the practical completion milestone;

failure to pay the two other invoices issued by the Builders to the Owner; and/or

failure to comply with the Builders’ direction to the Owner to allow it to re-access the site;

the quantum of any claim the Builders have for damages caused by the Owner’s breach of contract;

whether any set-off is available to the Owner by reason of any defective work;

Whether any order should be made pursuant to s 48MA of the Home Building Act.

The quantum of works to rectify the defects.

Prospective referral on quantum issues

As to the last of these issues, shortly after commencement of the trial, I indicated that my predisposition, subject to hearing from the parties, was to refer the dispute as to quantum of any rectification works out to a referee; after determination of whether or not there were ‘defects’ and the scope of the rectification works. This predisposition was formed, partly from past experience, and especially my view that matters relating to appropriate costings (such as labouring rates, or profit margins) are of such technical nature, where the choice of a costing is sometimes inscrutable, subjective and, at any rate, beyond the ordinary scope of a layperson’s understanding, that the interests of justice favour a specialist consideration of the applicable issues. No party voiced any objection to this indication.
Notwithstanding my predisposition to refer the matter of quantum out, I allowed evidence to be received from the parties’ respective quantity surveyors, or (at least) the experts who provided evidence of that kind, on the issue of quantum. This was with a view to enabling the referee to consider what they had to say in evidence as part of his or her deliberations. It is not necessary, however, for me to refer to that evidence on the principal issues concerning defects, and (where appropriate) scope of rectification works in these reasons.
I propose to allow the parties the opportunity to reconsider their respective positions about a referral having regard to the findings I make in these reasons on the issues of whether defects are proven and the scope of rectification works. In the meantime, and subject to hearing from the parties on their sufficiency, I will set out, only as a guide, directions I propose to make to facilitate the referral for the parties’ further consideration.

THE BUILDER’S CLAIM – THE EVIDENCE

Elaine Moss

In her affidavit sworn on 23 October 2018, Elaine Moss deposed that she attended to the administrative and accounting functions for the business. In her affidavit, she noted that her husband, Alister, holds the contractor license and, up to 22 January 2018, the contractor licence was held in the name of the business. She also noted that, up until about the middle of 2016 her son, Shane Moss was employed in the family business as a carpenter. In 2015, he became a licensed building holding contractor. The family business, Moss Building Pty Ltd, was incorporated on 22 March 2013. Shane is the sole director and shareholder. Moss Building Pty Ltd held a contractor license.
Under cross-examination, Mrs Moss clarified that she did not hold a license or nominated supervisor certificate herself – this was in the name of the partnership. Her role within the partnership was administrative: she prepared accounts and paid suppliers.

Lead up to the first building contract

The design plans for the development were prepared in late 2011 and were sent to the Builders in about the middle of January 2012. DA approval was granted by Lake Macquarie Council on 9 May 2012.
In July 2013, Mr Morrison modified the house plans to the final drawings. These were called ‘revision J’ plans.

The First Building Contract

Mrs Moss deposed that until about January 2014, the business received referral work from two businesses operating in Queensland. In May 2013, one of those businesses forwarded an email attaching a set of plans and drawings for the subject dwelling. Mrs Moss recalled that she received a telephone call from Mr Morrison inquiring whether the business would be interested in carrying out the construction of the dwelling. To that end, in about July 2013, she and her husband met with the plaintiff and the plaintiff’s wife at the site. Mr Morrison deposed that on 12 July 2013 he received an email from the Builders providing a quote to build the house as per the ‘revision J’ plans.
They met again on 28 August 2013 on which occasion Mr and Mrs Moss provided a quote to perform the work for the sum of $526,670. On that date, Mr Morrison and his wife indicated that, after considering their quote, they were prepared to enter into a building contract for the construction of the dwelling on the site. The contract (the ‘first building contract’) was signed on that date.
Between 28 August 2013 and 17 December 2014, Mrs Moss attached a series of tax invoices for work performed under the ‘First Building Contract’. She also attached a credit note to the plaintiff on 23 November 2014 (for the sum of $288.20).
Some other events of significance in this period that had certain repercussions for later events were that:

In March 2014, Mr Morrison separated from his wife;

In April 2014, Mr Morrison met and spoke with Alister Moss, on site, to discuss changes to design; so as to maximise space, without changing any cost;

In September 2014, Mrs Morrison refused to sign any further drawdown paperwork

As at 23 December 2014, the works under the first building contract had reached the ‘lock up stage’, and the ceilings to the dwelling had been built, however Mr Morrison (and Mrs Morrison) were in default of the first building contract, owing the alleged sum of $139,546.93. Between 24 December 2014 and March 2015, and after the intervention of lawyers for the contracting parties, this amount had been reduced by a series of payments such that the remaining balance was $38,908.98. On 23 March 2015, the parties had entered into a ‘Deed of Agreement and Indemnity’.
The First Building Contract was terminated on 28 August 2015 (pursuant to clause 29 of the contract) by reason of Mr Morrison’s failure to pay monies owed by them, being the sum of $11,618.88; which sum represented the electrical ‘rough in’ amount paid by the Builders to the electrician.
Mrs Moss deposed to Mr Morrison ringing on 29 August 2015 and requesting a meeting to discuss a path forward. She deposed to Mr Morrison acknowledging that he was indebted to the Builders and that he was happy to settle this in any new contract.

The Second Building Contract

Mrs Moss deposed that on or about 1 September 2015 she had another telephone conversation with Mr Morrison, in which she said that Mr Morrison had pressed her for a new contract to be put in place urgently. This was, she deposed, because Mr Morrison had explained that he needed a building contract in place in order to obtain finance; and because he offered to agree to pay the amount outstanding under the first contract of $11,618.18, as a condition for entry into a new contract.
She deposed to informing him that the Builders had a lot of work on and would be unable to start for quite some time. To this, she deposed, Mr Morrison confirmed that he did not care how long the work took, but needed a contract to be entered into urgently.
Mrs Moss deposed that on or about 9 September 2015 she emailed to Mr Morrison a draft quote and contract; in response to which Mr Morrison had requested a lower price.
Alister Moss deposed that he met with Mr Morrison on site, to discuss the second contract. He deposed to Mr Morrison handing him a brochure for a Jetmaster free standing fireplace and requesting allowance for this in the second contract.
On 14 October 2015, Mr Morrison entered into a lease. This was due to expire on 2 June 2016.
On 3 November 2015 a second building contract was signed for the contract price of $230,000. One of the special conditions to the contract was that the plaintiff would pay the sum of $11,618.18 prior to Mr and Mrs Moss commencing new works.

Performance of the Second Building contract

Mrs Moss deposed in her affidavit that the works under the new contract were commenced on 3 December 2015 and that these had been performed by her son, Shane Moss, under the supervision of her husband, Alister. She deposed to attending the site, every few weeks, to check on the progress. Under cross-examination, Mrs Moss was asked about the frequency of her attendance at the site. She said she was there quite often, mainly to deliver materials. The site was an hour’s drive from her Branxton home. At the time of this second contract, the Builders had other jobs – at least two or three in number.
Mrs Moss deposed that in February 2016, Mr Morrison asked her if the builders could redirect funds in the amount of $16,000 from the PC items of the contract, but that Mr Morrison would still pay for those sums, and transfer the sum of $16,000 to Charleston Law Firm. On 11 February 2016, Mrs Moss deposed that this sum had been paid, as Mr Morrison had requested.
Mrs Moss accepted that from June 2016, there were some discussions with Mr Morrison about his request to move back into the residence, but her recollection was not all that clear. She recalled that he had moved much of his property into the home between June and August. She knew that he wanted to move back in for a weekend in August, but it was clear that he had to move out again on the Monday.
It was suggested to Mrs Moss that she had heard Alister say that it would take 6 weeks to complete the works. She rejected that proposition and said that the Builders could not put a time on the date for completion, because of the other work.
In cross-examination, Mrs Moss was referred to Mr Morrison’s email of 12 August 2016, in which the latter had commented on the length of time for the build and a list of outstanding items. She did not recall whether or not she responded to this email. At any rate, she was taken through it by Counsel for Mr Morrison at length. She did not reject the notion (it was at least ‘possible’) that Mr Morrison had been in touch at least once a day. She acknowledged that he had expressed concern about the length of time to progress the works. As to the list of ‘outstanding’ items, Mrs Moss was informed by her husband and son that they had gone through much of it. She thought that someone had made a note when particular items had been ticked off. She was not sure whether a response was sent to Mr Morrison about his list.
Mrs Moss was asked whether or not she had met Mr Morrison on site on 16 August 2016. She could not recall. She was referred to Mr Morrison’s email to her of that date, which, on its face, purported to summarise what was said at a meeting the day before. Although she thought she had read this email, she did not know whether she had responded to it. She did not consider that there was anything in Mr Morrison’s message with which she disagreed; save for the dollar amounts referred to throughout the email message.
Mrs Moss deposed that until 1 September 2016, her son, Shane, had never communicated that there were any problems with the works on the site, or with Mr Morrison’s conduct. That same date, Mrs Moss said that Mr Morrison had never communicated to her that there had been any problems with the works but she was informed that Mr Morrison had started moving into the partially completed dwelling on the site.
Under cross-examination, Mrs Moss was referred to Mr Morrison’s email to Shane Moss (to which she was copied) on 1 September 2016. She said she thought that she had read it and believes that she discussed content with Shane Moss. She was specifically referred to Mr Morrison’s declaration that he would not submit any final payment paperwork to the bank until the works reached completion and he had inspected it. I understood Mrs Moss to respond by saying that it was possible that he might change his mind. She accepted that the fireplace had not been put in and that there were other things that were not completed. She was asked why she had not complied with Mr Morrison’s request for the supply of invoices to verify the correct figures used to tally the PC item costs. That, she said, was not something that she had done throughout her experience. She was also asked about Mr Morrison’s reference to the letter (apparently emailed to him by Mr Moss on 1 September). She clarified that this was a letter that had been drafted by her solicitor; not herself.

She was also asked about when a final inspection took place. She did not remember when but recalled that such request was typically made by telephone. She was referred to the inspection report and asked if an interim occupation certificate had been issued. Although this was usually the case, Mrs Moss said that she did not keep a copy. She said that she was informed that the occupation certificate could not be issued to the builder because it was not the applicant.
On 2 September 2016, the Business issued a tax invoice representing a progress payment on practical completion, purportedly pursuant to the second building contract, for the sum of $23,700. On the same date, Mrs Moss sent an email to Mr Morrison directing that he not access the site as it was dangerous.
On 5 September 2016, Mrs Moss deposed that an occupation inspection by the Council had occurred; although no occupation certificate had issued.
By 6 September 2016, the due date for payment of practical completion invoice (#327) had passed without payment by Mr Morrison.
On 19 September 2016, variation had been added for prime cost and provisional sum items resulting in a second tax invoice being issued for the sum of $28,770.56.
On the same day, the Owner sent to the Builders an email attaching a document titled ‘Legal Agreement’. The builders never signed nor agreed to this document. Mrs Moss was asked in cross-examination whether she ever responded to the email by stating her refusal to sign the document emailed to her. She was not sure whether she had responded to it or not.
By 24 September 2016 the due date for payment of the variation and provisional sum adjustment invoice (#330) had passed without payment by Mr Morrison.
As at 26 September 2016, Mrs Moss deposed, the plaintiff was in default of the second building contract: it had not paid either the first tax invoice for the second tax invoice in the total amount of $52,470.56, or sum of $11,618.18 due under the special conditions to the second building contract.
On 26 September 2016, the Builders sent a demand to Mr Morrison for payment of tax invoices 327 and 330.
The same day, the Builders’ lawyers, Hallewell Law, said a letter to Morrison’s solicitors, the Charleston Law Firm, sent a dispute notice, pursuant to cl 26(b) of the Second Building Contract.
On 21 October 2016 the Builders’ lawyers sent a letter to Mr Morrison being a dispute notice, pursuant to cl 26(b) of the second building contract.
On 2 November 2016, Hallewell Law sent an email to Mr Morrison stating that works were suspended under cl 21(a) of the second building contract.
On 9 November 2016, Hallewell Law sent a letter to Mr Morrison, being a ‘Notice to Remedy Breach’, pursuant to cl 29(a) of the Second Building Contract. The due date for remedy the breach identified in the breach notice passed without remedy by the Owner.
On 25 November 2016, the Builders terminated (by written notice to the Owner) the second building contract by reason of the plaintiff’s failure to comply with a ‘notice to remedy breach’, due to various defaults under that contract.
Ms Moss deposed that she and her husband were in the process of seeking a renewal of their associated contractor license. With reference to section 48MA of the Home Building Act, she says that the Business would be prepared, upon renewal of its associated contractor license, to rectify any works found to be defective for which the builder was responsible.

Mr Morrison’s affidavit of 19 February 2019

Part of Mr Morrison’s affidavit of 19 February 2019 responded to Mrs Moss’ evidence.

The First Building Contract

Mr Morrison deposed to conversations with Shane Moss in April 2014 about changes to the design plans. He deposed to agreeing with Mr Moss that they not construct walls around the staircase but rather that they should move wall out on the right side of the garage, to be in line with the laundry external wall. This would increase the floor space to Mr Morrison’s main bedroom and garage by approximately 600mm.
He deposed that in the period from March to September 2014, he and his ex-wife had been signing jointly, for the drawdown paperwork to pay the builder’s invoices. However in September 2014, he deposed that his ex-wife refused to sign any more paperwork relating to the construction of the property during the pendency of Family Law proceedings. On 17 December 2014, Mr Morrison sent a letter explaining to the builders the reasons why he was unable to pay the invoices.
On 11 March 2015 there was a conference involving Mr Morrison, his ex-wife, Mr and Mrs Moss and various legal representatives. His ex-wife’s lawyer indicated that she was only prepared to jointly pay, with Mr Morrison, the sum of $100,673.95.

The Second Building Contract

Mr Morrison deposed that during a meeting on 3 November 2015 at the Moss’ home, he agreed with Mrs Moss’ account of what occurred at that meeting, although he said that additional modifications were discussed in relation to the ‘revised J’ plans and the timeframe for the build to be complete.
He deposed that Mr Moss had said that there was not much for the builder to do in building work; it was mainly subcontractor work which should only take about 6 weeks. As the builders did not have any other jobs going, they would make Mr Morrison’s job a priority. Mr Morrison also deposed that a similar 6-week estimate had been provided to him in January 2016. It was put to Mr Morrison that Alister Moss had not said these things, but Mr Morrison maintained that he had.
Mr Morrison deposed that the majority of the building work performed under the second building contract had been performed by two apprentices and two labourers under the supervision of Shane Moss. Mr and Mrs Moss rarely visited the property during the second contract. He deposed to periods of time (in the span of three to four days) where no one from the business attended the property.
It was put to Mr Morrison in cross-examinations that these statements were incorrect. On the basis of the times that Mr Morrison had calculated, he was contending that he was on the site up to 7 hours a day and that was unlikely. Mr Morrison maintained that it was so. He disputed the proposition put to him that Elaine and Alister Moss attended the property site more regularly than Mr Morrison had given them credit for; although he accepted that they may have been there at the times he had not visited.
Mr Morrison deposed that on 3 February 2016 he had a telephone conversation with Mrs Moss. He said that he asked for items, to the value of $16,000, to be removed from the second contract, under the table of ‘Allowances for Provisional Sum Items and Works’ the remaining funds after the items were removed was paid to the Charlestown Law Firm’s trust account, to pay his legal fees resulting from the family law proceedings. He said he did not have a full works that were not going to be performed.
He deposed that in or around March 2016, at the property, he discussed with Mr and Mrs Moss items to be removed from the PC schedule. He deposed that there were several items that he raised with the Builders, in excess of $16,000, that either: (a) had not been installed under the second contract; (b) had been overcharged by them; or (c) had already purchased the items and therefore did not need to be included in the second contract. He generated a marked up PC Schedule, which he annexed to his affidavit. Specifically, he deposed that, with the agreement of Shane Moss:

The underfloor heating to bathroom and ensuite ($1,750) was not supplied or installed under the second contract;

fire rated fly screens ($4,000) were not supplied or installed under the second contract;

Fire rated gutter guard ($1,500) was already installed as part of the first contract and duplicated into the second contract. Mr Morrison regarded this as an overcharge.

Gas fireplace ($3,200) was not supplied or installed under the second contract. Mr Morrison said that this item was later paid by his wife and himself in July 2017, installed by Glendale Heating Warehouse.

Solar 5Kw (labelled in the PC items as Solar HWS) ($5,500) was not supplied or installed under the second contract price paid for by Ms Morrison separately and installed by Origin Solar.

Gas HWS ($2,500) was not supplied under the second contract pay for through Reece Plumbing Warners Bay and supplies to the builder for the plumber to install.

In relation to the underfloor heating, it was put to Mr Morrison under cross-examination that the reason this was not installed was because he had made an alteration to the bathroom to install a glass recess. Mr Morrison disputed this proposition.
At the same time, in March 2016, Mr Morrison deposed to having explained to Shane Moss that with his rental tenancy agreement coming to an end, he needed to sign another lease to live somewhere and wants to know that if he signed up for a three-month agreement whether the house be finished by then. He deposed that Shane Moss indicated that it would be. By June 2016 the house and still not been completed and Mr Morrison deposed that he received another indication from Shane Moss that the house should be completed within a couple of weeks. He said he moved into a friend’s house. He deposed that it was still not ready until 4 September 2016.
Under cross-examination, Mr Morrison was referred to his initial tenancy agreement (26 November 2015 to 2 June 2016) which indicated that there was no need for him to enter into any additional tenancy agreement. Mr Morrison accepted that this was so. An earlier retail tenancy agreement was put into evidence (which terminated on 26 November 2015).
On 31 July 2016 Mr Morrison sent correspondence to the builders requesting a meeting with them, on-site, as there were many items that needed to be completed on site before the house reached ‘completion’. Mr Morrison deposed, and Shane Moss disputes, that the latter had advised that there was only one week’s work in order to complete the construction to ‘completion’.
In his second affidavit, Mr Morrison deposed that in 3 August 2016, he had received correspondence from the Builders indicating that they had exceeded the amount allowed for in the prime cost and provisional cost schedule and that they would not install the frameless glass doors. Mr Morrison disputed this.
Mr Morrison disputed Elaine Moss’ assertion that no complaint about the works had been made until 1 September 2016. He attached a number of (mainly unanswered) emails that he had sent requesting further information and addressing items that need to be repaired in July and August 2016. He recalled a dispute with Elaine and Alister emanating from their advising him that they had exceeded the amount they had allowed for in the prime cost and provisional cost schedule.
On 3 August 2016, Mr Morrison deposed to receiving correspondence from the Builders advising they had calculated their costs and believed that they had exceeded the amount allowed for in the prime cost and provisional cost schedule and that they would not install the frameless glass doors. Mr Morrison said that he did not agree - there was a specific listing in the PC items for the Frameless Glass Doors of $8,500 and the quote that O’Brien Glass had just supplied was for $6,500.
On 7 August 2016, Mr Morrison sent correspondence to the Builders in which he noted that 40 weeks had passed since work had started on the Second Building Contract, with still much to be done before the works had reached the stage of completion.
On 12 August 2016, Mr Morrison deposed to having a telephone conversation with Shane Moss regarding a final occupation inspection to take place on 18 August. In the email he attached a list of items yet to be finished, or which he believed needed fixing (which he could identify), and requested that after a meeting to be held three days later, that Elaine and Alister confirm in writing that they would rectify the works that he had listed, arrange the final occupation inspection on 18 August, provide a date by which they would have the property cleaned and when occupancy could occur and supply invoices to verify the actual cost of items they believed they had exceeded. If they were unable to do these things than he would commence legal proceedings.
He deposed to having a meeting with Elaine, Alister and Shane on 15 August at the Property to discuss these issues. He sent Elaine and Alister an email the next day documenting what had been discussed. The email listed the items that needed to be completed. A vast number were listed under the categories: laundry, powder room, hallway to garage, entry, bar, kitchen, panty, family room, garage, stairs, hallway-upstairs, cinema, main bathroom, main bedroom, ensuite/WIR, flooring, painters, electrician, outside and ‘cleaning for occupancy’.
Mr Morrison accepted in cross-examination that this was a list of items which were ‘incomplete’, rather than ‘defective’. It was also put to him that cleaning had also occurred, but had been hindered by the furniture that Mr Morrison had installed back in the home. In relation to this Mr Morrison said he did not see any professional cleaning.
Earlier that month he received an indication from Shane Moss that the occupational inspection would be completed by 18 August so that he could expect to move back in by 2 September 2016.
It was put to Mr Morrison that on 15 August 2016, the occupancy inspection occurred. Mr Morrison did not dispute that a meeting had occurred, but did not know whether it was an ‘occupancy’ inspection.
On 1 September 2016 he received a tax invoice from the Builders for practical completion (# 327). By this time, he deposed, none of the items agreed to at the meeting on 15 August, as needing to be completed, had been actioned. He sent an email regarding the final occupation inspection and discussed his need to move in by 3 September. The same day, AR & E Moss emailed to him an agreement to allow him to gain temporary access to the property over the weekend of 3-4 September. They would permit his occupation only where a final account had been accepted and submitted to the bank for payment. The Builders also sent a letter directing Mr Morrison to sign.
This Mr Morrison did not do: his position was that he would not arrange for final payment until occupation certificate have been provided, in addition to the completion of the list of items that were missing and require fixing. Mr Morrison indicated that he had received advice from the Department of Fair Trading that he should not pay the final invoice until the house was completed.
By the middle of September, Mr Morrison moved back into the home; even though it was not, in his view, completed.
On 19 September 2016 Mr Morrison met Elaine and Shane again. They had an animated discussion in which Elaine and Shane demanded that he pay the final invoices, with Mr Morrison responding that he would not do so until after the house was completed. Eventually, he and they agreed that they would be willing to build the frame for the fireplace only. Otherwise relations had reached an impasse.
The next day Mr Morrison lodged a complaint with the Department of Fair Trading.
On 25 October 2016, Mr Morrison deposed to receiving a letter from the Department of Fair Trading. Advice was supplied to lodge a dispute with the local tribunal. It appeared, from the letter, as though Mr Morrison did not want the Builders to carry out any further works
Eventually, on 11 November 2016, Mr Morrison brought an application to the NSW Civil and Administrative Tribunal.
On 25 November 2016, the Builders terminated the Second Building Contract.

THE OWNER’S CLAIM – THE EVIDENCE

LAY EVIDENCE

John Morrison’s affidavit of 17 March 2017

Mr Morrison says that from September 2015 he entered into negotiations with the builder to complete building work. He says that during those discussions, Alister Moss indicated that there was not a lot of work to be done to complete the building. That message was reinforced in early November 2015.
The second building contract was entered into on 3 November 2015; however the builder did not commence the work until early January 2016. Mr Morrison says he was assured that it would take only about six weeks to complete the work.
Mr Morrison says that between January and June 2016 he was “constantly” making enquiries with the builder regarding when the home would be complete. In this period, he was concerned that there were periods of several weeks at a time when little or no work being performed.
He says that, in or about mid-September 2016, he moved back into the residence, at the time of the building work had not been completed. He deposed in his affidavit that shortly after moving back in, the builder performed two days of consecutive work after which Elaine Moss demanded that he pay two invoices. To this, Mr Morrison deposed that he responded that he would be happy to pay the final progress claim once the work was complete. He explained that the bank would not release the funds until he confirmed that the work was complete. At this point he handed Mrs Moss a copy of a handwritten list of work that had not been performed.
On 9 November 2016, the builder issued a ‘Notice to Remedy Breach’, pursuant to cl 29(a) of the contract.
On 25 November 2016, Mr Morrison received notice of termination of the second building contract. This was premised upon Mr Morrison not having remedied the defaults set out in the Notice of 9 November 2016, being: the non-payment of the sum of $52,470.46 owed under the contract; the non-compliance with the direction provided by the builders in their solicitor’s letter of 21 October 2016, to remove himself and his possessions from the house on the site and not to access the site for any purpose; the non-payment of the sum of $11,618.18 pursuant to the special conditions to the second building contract; and the failure or refusal to confer with the builders, within 10 days of the letter of 21 October 2016, in an attempt to resolve a dispute or to agree on methods for resolving the dispute.

Alister Moss

Alister Moss is a licensed builder. There was some dispute as to whether or not he was licensed to perform the contract. In re-examination he was referred to a contractor license spanning the period 8 January 2004 to 22 January 2018 [1] .
1. Ex 1 (Vol 2), p 50
It was put to Alister Moss, and accepted by him, that whereas in relation to the first building contract he was regularly on-site and involved, when it came to the second building contract, he periodically attended to check on it: he was not there all the time. He explained that he used to keep site diaries and would have in the relevant period but for disposing of them during residential moves in the last few years. To the extent that his wife, Elaine, inputted information into electronic form, the builders’ computer crashed and information was lost.
Alister Moss said, when cross-examined, that there were a great many discussions with Mr Morrison in the period from December 2015 to September 2016 about variations - they were almost weekly; but only some were recorded in writing. He denied saying anything to Mr Morrison to the effect that the estimate for the works would be six weeks. So far as he was concerned, it was an open-ended arrangement, which potentially could still have kept going.
Alister Moss was referred to Mr Morrison’s email of 12 August 2016, which had been sent only to Elaine and Shane Moss. He had not seen this email before. Alister Moss said that Elaine had not raised with him Mr Morrison’s complaint that it had taken 42 weeks since the beginning of the contract. He did, however, recall Elaine referring him to the list of items attached to that email. About this, Alister recalled speaking with her and his son on-site.
Alister Moss could not recall the last time, prior to 1 September 2016, when he had attended the site. It is agreed that it could have been June 2016: he was on the job once or twice every week although he was working on another job that was nearby. He acknowledged that the Owner had been seeking access since June 2016. This is because the Owner wanted access to his son.

Alister Moss accepted that he had been involved in organising some certification inspections. He was not present during an inspection with OC Certification that the work was incomplete.

Shane Moss

Shane Moss is the son of the defendants. In his affidavit he deposed to performing building works on behalf of his parents’ business. He is a qualified carpenter and, up until 21 January 2015, he was employed as a foreman for the building works. Thereafter, his formal status changed to ‘builder’, but he said that his day-to-day responsibilities did not change.
Under cross-examination he said he worked with (two) apprentices on site, four days a week and was occasionally subject to his father’s supervision. Other qualified staff included Leigh Stokes, a tradesman. He observed the Owner regularly attend the site. There were consultations where, sometimes, variations had been agreed. He acknowledged that he had not seen variation certificates; but believed that they were emailed to him.
Shane Moss agreed that, at the time that the first building contract had been terminated, the house had just reached ‘lock up’ stage. He said he commenced work under the second building contract in late 2015. At this point, the condition of the site was little different to what had been in September. Asked how long he thought the fit out would take, Shane Moss estimated 6 months: 99% of the walls were to be done, ‘roughing’ of the electrical had not been completed (that might take 3 weeks); plumbing had to be done; waterproofing had not been done; the fitting off of the walls a couple weeks; the final fit off of plumbing would take three weeks.
Shane Moss thought that the major cause of delay in the period from December 2015 through to September 2016 was variations and, so far as he was concerned, there was no time limit by which the work had to be completed. It was put to Shane Moss and denied by him that he provided a six-week estimate to Mr Morrison.
Shane Moss was referred to an email sent to him (and Elaine) by Mr Morrison on 12 August 2016. He did not recall whether there was any response to this. He was also referred to the list of outstanding items to reach completion that had been prepared by Mr Morrison. He acknowledged that he had gone through this list and had met Mr Morrison on-site although did not recall precisely when he did so - he took no diary note of the occasion. He did, however, recall systematically ticking off the jobs on the list. It was put to him that he had not; but Shane Moss said that he recalled talking to Mr Morrison and went through the list. (He estimated that the plaintiff generally attended the site for a period between 45 minutes to an hour each day). He also recalled that his mother may have gone through some of the items on the list.
Shane Moss was referred to the ‘Prime Cost Schedule’. To the extent that he was asked by either of his parents to comment in respect to individual items in this document, such communications were only verbal. In the same documents he was referred to the section concerning ‘Provisional Sum Items’.
In cross-examination, Shane Moss was referred to the Builder’s letter to the Owner dated 1 September 2016; by which temporary access was granted to the Owner. It was Shane who, it was said, negotiated this with the Owner. Shane Moss acknowledged that the Owner had requested that he be allowed to move in but said that this was not permissible. It was put to Shane that the Owner had been asking this since June 2016. Shane thought that it was in about August 2016, and not beforehand, that the Owner had mentioned anything about the need to renew a lease.
On 5 September 2016, Mr Ripp Stewart, an accredited certifier, prepared an Inspection Report. The gist of this report was that the dwelling had progressed to a stage that would permit occupation, but some issues needed to be addressed prior to the release of an occupation certificate. Shane Moss believed that Mr Steward had conducted a further inspection, but there is no other evidence to support that belief.
When asked in cross-examination why it would normally take 42 weeks to take the dwelling from the lock-up stage to practical completion, Shane Moss said that the Builders were doing other things. He disagreed with the proposition that, for the Builders, this was merely a ‘fill in’ job and said that they were awaiting the arrival of materials.

EXPERT EVIDENCE AS TO PERFORMANCE OF WORKS

Mr Morris

Mr Morris is a building and construction consultant with a full supervisor certificate. He is a professional Master builder, a member of the Master Builders Association and an accredited Life Member of the Institute of Building Consultants. He prepared numerous reports for the Owner in this proceeding.
One of those reports was dated 13 June 2017. Another was 25 January 2018. It emerged, through the course of Mr Morris giving evidence concurrently, that the latter report substantially adopted the content of the former; though with some additional references to the BCA. It is sufficient to expose the primary opinion of Mr Morris to work from this latter report.

Mr Morris’ report 25 January 2018

This report was prepared following site inspections on 18 October 2016 and 14 March 2017. It was prepared when the dispute was before the NCAT.
Mr Morris described his methodology as consisting of the following steps: (a) inspecting each item of work referenced in his report and investigating the suitability of the repair for their intended purpose; (b) consideration of his visual observations, measurements and testing against the contract plans and specifications; (c) where he determined that the item was not in compliance with the contract plans and specifications (or good building practice) considering the nature and extent of the departure from the contract plans and specifications (including such matters of any loss of utility, reduced longevity of the works and likely damage or loss); (d) considering his observations and measurements against the Building Code of Australia (BCA), any relevant Australian Standard (AS), or manufacturer’s recommendation and industry guide (such as the Guide to Standards and Tolerances); (e) where there is a departure from the technical standards, considering whether there was evidence of consequential damage arising from the non-compliance of the item by reference to the technical standards; (f) considering whether the item of the work was carried out with due care and skill.
Mr Morris took the view that in the event that the item of work departs from the contract plans or specifications, fails to comply with technical standards or falls short of the expectations of due care and skill in carrying out building works, then the item of works was defective. Where an item of work departs from the contract plan or specifications are equal to or better than the specified item, that would not be a defect but he would regard it as a variation.
Mr Morris also gave evidence as to costs. However, in view of the approach that I take such matters are suitable for a referral, I will not refer to such costs in these Reasons.
Mr Morris’ general opinion was that the building works were “substandard” and did not comply with the statutory warranties under the Home Building Act; and, further, that the builders have failed to complete the works under the contract.
He identified the defective works, and suggested rectification works by reference to the following items as follows:

Item 8.04: this item was described as front entry desk soffit and ceiling lights not being trimmed no backing block. The defect was described as moisture collecting in the metal soffit, which was not insulated. The downlights were not correctly cut into the corrugated lining and not trimmed to avoid vermin and weather entry.

Mr Morris’ suggested rectification involves removing the soffit lining and reinstalling with insulated lining and reinstalling the downlights profile backing block to ensure that there were no voids.

Item 8.05A: this item was described as external cladding – ‘failed fixing screws’. The defects were described in various ways: the screws were undersized and not stainless steel. There was evident rust staining. There was a failure to comply with the BCA/NCC for building in a saltwater environment and a failure to provide cavity ventilation as required by the BCA. It was a general failure to comply with industry standard practice for cavity ventilation when timber cladding was used.

Mr Morris’ suggested rectification involves removing planning and fixing battens and replacing with new fixing battens and stainless steel screws of the correct gauge and length; as well is providing ventilation as necessary.

Item 8.05B: this item was described as ‘external cladding – butt joints mid span’. Joints were not supported nor waterproofed. The defects were described as the vertical cladding boards being joined mid span between horizontal fixing positions or battens. There was no provision to support the joints or to waterproof the joints with the joints flexing and moving as the timber swells and cups. There was a lack of compliance with industry standard practice for cavity ventilation when timber cladding was used and lack of support at joints.

Mr Morris’ suggested rectification involve removing all the cladding and discarding all shortly or and installing falling. Water stepped joints should be installed in each story in the height of approximately 3000 mm. Cladding butt joints should be supported and waterproofing measures installed. All butt joints should be screwed to avoid twisting within a minimum of 10 g 50 mm self-drilling class III stainless steel screws.

Item 8.05C: this item was described as ‘external cladding-insufficient ground clearance’. The defects were identified as cladding, in some places, extending to below ground level which provided an ideal termite entry location and, in places, the cladding was not supported at ground level; allowing the timber to cup, move and rotate. There was no base trim to the cladding. There was a lack of compliance with industry standards for timber cladding and with the Weathertex Installation Guide (p 11).

Mr Morris’ suggested rectification involves installing a termination position to fix the base of the cladding with a termite protection system. Cladding at the base should be correctly installed and supported.

Item 8.05D: this item was described as ‘external cladding - window head flashings’. The defect was described as water penetrating the structure and the cladding at all window locations. There was no observable head or sill flashings. Obvious water entry and staining existed around the windows, resulting in cladding deterioration and uncontrolled movement.

Mr Morris’ suggested rectification involves removing all cladding and installing correct flashings at window heads and window sills and reveals with drainage provisions.

Item 8.05F: this item was described as ‘external cladding - protected porch area’. The defect was described as the incorrect use of screws that which were not stainless steel and the failure to install provisions in the cavity for ventilation and drainage.

Mr Morris’ suggested rectification involves removing all the screws and replacing stainless steel bollards removing the cladding and installing battens for ventilation.

Item 8.05G: this item is described as ‘external cladding - lack of cavity ventilation’. The defects were identified as the sheet foil sarking or cavity mining being directly in contact with the external cladding boards; preventing airflow and creating an unhealthy cavity environment with no airflow to allow the cavity dry out the timber cladding which would become fungi affected. This is not in accordance with general industry standards for practice.

Mr Morris’ suggested rectification works involved removing all the cladding and foil sarking and spray on installation; as well as reconstruction with correctly positioned and sized fixing battens and foil boards installation to maintain a cavity void. Install cavity ventilation openings at high and low levels to allow air circulation.

Item 8.06: this item is described as hand railing to the rear of the kitchen stairs. Mr Morris identified that the stair handrail was not correctly manufactured: the gauge of the steel was not sufficient for the stands and was to the end. The joints were not correctly mitred and flush with each other.

Mr Morris’ suggested rectification involves removing the handrails and reassembling them with correctly cut joints and welded so as to ensure that all joints were sealed no voids and sharp open edges and that no moisture could penetrate the metal structure.

Item 8.07: this item is described as sandstone retaining wall being 1650 mm high with no handrail. The defect was identified as the failure to provide a handrail to prevent persons from falling. The height of the fall was greater than 1000 mm whereas the BCA specify that the maximum height, without a handrail, was 1000 mm and measured at 1650 mm.

Mr Morris’ suggested rectification involves installing a compliant handrail, or balustrade, to the edge of the retaining wall, to prevent injury to persons by falling.

Item 8.08: this item was described as metal gates to the subfloor sagging at the hinges. The defects were identified as the hinged gates not being correctly manufactured and sagging under their own weight.

Mr Morris’ suggested rectification involves remanufacturing the gates with strong or rigid steel, with the installation of correct braces.

Item 8.09: this item was identified as the metal hand railing to the stairs made entry being substandard and fascia trim being undersized under the garage. The defects were identified as the gauge of the steel not being sufficient for the spans and were too thin. Joints were not correctly mitred and flush with each other. Gaps and voids were obvious.

Mr Morris’ suggested rectification involves removing the handrails and reassembling them with correctly cut joints and welded to ensure that all joints were sealed, no voids and sharp open edges existed and no moisture could penetrate the metal structure.

Item 8.10: this item was described as garage access personnel door being of a hollow core internal quality and was now water affected and damaged. The defects identified were the omission of a head or side flashings where the entry door to the side wall existed. The timber door frame was neither painted nor protected and indeed was decaying.

Mr Morris’ suggested rectification involve removing the door and frame and replacing them with a durable door and durable timber frame correctly primed, painted and protected and reinstalled with head, side and sill flashings.

Item 8.12: this item was described as the aluminium made entry door being hollow overhead and the bottom which collected water; with no water resistant provisions having been made. The gap under the door was excessive. Specifically, the aluminium entry door had not been correctly manufactured and incorrect aluminium section had been used. The door did not correctly fit to the opening and there was an excessive gap at the threshold, with no weather strip, door provisions, to prevent wind and rain from penetrating the building.

Mr Morris’ suggested rectification involves replacing the door and installing a weatherproof threshold or step.

Item 8.13: this item was described as the rear deck stormwater downpipe not been correctly bracketed or supported to the wall. Specifically the defect was identified as the downpipe not correctly aligning with the house structure and not being correctly secured to the structure.

Mr Morris’ suggested rectification involves removing the downpipe and correctly reassembling it so as to fit correctly to the structure and to also align with the wall surface.

Item 8.14: this item was described as a lack of clearance cladding to ground level to protect against termite entry and timber decay and allow for ventilation to occur. Specifically, Mr Morris identified defects as the omission to provide a termite protection system or certificates and incorrectly cutting the timber to a length to be clear of the ground.

His suggested rectification involves appointing a termite specialist to design a termite prevention system and have that installed.

Item 8.16: this item involves the front soffit entry. The defects were identified as moisture collecting in the metal soffit, which was not insulated. Down lights were not correctly cut into the corrugated lining and not trimmed to avoid vermin and weather entry.

Mr Morris’ suggested rectification involve removing the soffit lining and reinstalling it with insulated lining and reinstalling down lights with profiled backing block to ensure that there were no voids.

Item 8.17: this item concerns the main bedroom balcony. Specifically, defects were identified in relation to the glazed hand railing - the top on the handrail was undersized. The ceiling metal corrugated lining condensates moisture due to a lack of insulation.

Mr Morris’ suggested rectification involve removing and replacing the glazed hand railing and removing the insulation and replacing balcony soffit and providing insulation/ventilation to prevent the ‘dew’ point from occurring.

Item 8.18: this item also involved the main bedroom balcony. Specifically, gaps or boys existed and the lights at the interface to the light and the ceiling allowed permit and moisture entry.

Mr Morris’ suggested rectification involved removing the lights and manufacture or obtaining mounting plates, or brackets, and correctly reinstalling them.

Item 8.19: this item was described as ‘made entry stairs on the concrete pathway’ having excessive tannin stains to the concrete underside. Specifically, incorrect timber has been used to construct the stair treads. Tannin was leaching from the timber.

Mr Morris’ suggested rectification involved installing new treads with durable type timber (being iron bark or similar).

Item 8.21: this item was described as ‘External - front storm drainage’. The drainage did not extend to the roadway and the driveway trench great was a lowly lightweight footpath quality. The specified defects were non-compliance with Council approval. The driveway drain was of insufficient strength for motorcars travel over.

Mr Morris’ suggested rectification involves replacing the concrete trench gate with one of suitable size and strength for vehicular traffic; and to extend the storm drainage to the street kerb.

Item 8.22: this item was described as ‘rear balcony gazebo stairs’. The identified defects were the use of incorrectly sized timber stair treads that were not formed in one section: they were not correctly bolted or secured so as to avoid cupping or twisting. The stair treads were not formed in one section.

Mr Morris’ suggested rectification involved removing the existing timber stair treads in multiple sections and replacing them with single sections of timber, with two bolts to each tread, to prevent twisting or deformation.

Item 8.23: this item was described as the incorrect installation of the metal subfloor timber frame. Specifically Mr Morris identified the defect is the incorrect joining or connection of the steel work. He noted that no certification was provided.

His suggested rectification consisted of an engineer to inspect and certify; as well as a carpenter to check all functions and to re-bolt, as necessary.

Item 8.24 this item was identified as the incorrect construction of the subfloor retaining wall. Mr Morris opined that the retaining wall was deformed due to underground pressure and it being out of vertical alignment. This indicated that the structure was inadequate to withstand the ground pressure with correct backfill of materials and subsoil drainage.

His suggested rectification involves replacing the retaining wall with more adequate support posts to a deeper depth; and to get a structural engineer to certify.

Item 8.25: this item was identified as the hand rails in the area of the rear stairs, adjacent to the kitchen, not being trimmed nor sealed. Nor was the cladding water tight. Water penetration was occurring and deterioration evidence. Hand railing was also unfinished. Sharp edges and vermin entry points existed.

Mr Morris’ suggested rectification involve the removal of the hand railing is and replacing them with a properly welded and sealed metal sections so as to create a durable structure.

Item 8.26: this item was identified as the exhaust fan roof penetration to the range hood in the kitchen leaks. Specifically, the defects identified were the ventilation fans penetration blocking warm flows; which was penetrating the roofing at the damming point, due to a lack of correct flashing and a reliance on silicone sealants which failed to prevent water entry into the kitchen ceiling area.

His suggested rectification involves removing the ventilation fan and providing over flashing; as provided in the SAA/HB39 Metal roofing.

Item 8.28: this item was described as the ‘main metal stairs at the main landing’. The defect identified was the exposed edge of the landing being visible from the adjoining window. There was a failure to comply with design drawings.

Mr Morris’ suggested rectification involves removing and adjusting the window and the timber cladding to the window area at the head and sill to ensure that the edge of the stair landing was not visible.

() Item 8.29: I understood Mr Morris’ assessment of this item as corresponding to item 8.26, above.

() Item 8.30: this item was described as the kitchen benchtop not being correctly sanded or sealed and the surface was open. The tops were not matched. Specifically, the kitchen bench had an open surface which could not be properly cleaned and had an irregular colour and grain. Bench tops did not match.

Mr Morris’ suggested rectification consisted of re-sanding and replacing a section of the top, in order to ensure that the top had a regular appearance.

() Item 8.31: this item was described as excessive flexion in the kitchen floor. The defects identified were that the kitchen floor moved underfoot, when a dynamic load test was carried out.

Mr Morris’ suggested rectification consisted of checking the subfloor area and introducing additional strengthening to the flooring systems as necessary.

() Item 8.32: this item also involves the kitchen, specifically the dishwater and the white goods not being correctly installed. The discharge or waste pipe had not been correctly extended to the underside of the benchtop, before leading down to the waist drain, to avoid syphoning. There was a non-compliance with the manufacturer’s instructions and Sydney Water requirements.

Mr Morris’ suggested rectification involved installing a saddle support to the dishwater pot waste pipe directly under the benchtop, to allow discharge without a syphoning.

() Item 8.33: this item concerns the powder room taps. Specifically, Mr Morris identified defect being that the taps were not installed as the body of the taps were incorrectly fixed too deep into the wall from the fireplace.

Mr Morris says that this issue has already been rectified by Mr Morrison at his cost.

() Item 8.34: these items were described as ‘laundry benchtop and entry door’. The defects identified by Mr Morris were that the benchtop had not been correctly sanded and sealed; the door architrave and frame (and door hanging) were not ‘professional’; and the gaps or margins were not regular.

Mr Morris’ suggested rectification involved re-sanding and re-sealing the benchtop; removing and re-hanging the door and ensuring that the door margins were regular.

() Item 8.35: this item concerns the main stairs handrail. Mr Morris identified as a defect in the circumstances that the handrail gap was only 18 mm and a person’s hand could get jammed between the handrail and the adjoining surface.

His suggested rectification involved removing the utilities stared hand railing and replacing it with a properly constructed welded stair handrail.

() Item 8.36: this item was described as the galvanised metal post (first floor). The defect identified was that the posts had been scratched, damaged and marked. There was also a failure to comply with architectural drawings.

Mr Morris’ suggested rectification was to replace the post.

() Item 8.37: this item concerns the linen cupboard. Mr Morris identified defects the circumstances that hinges and the top rail were undersized, and did not correctly support the doors. There was no pelmet cover, and there was a non-compliance with architectural drawings.

Mr Morris’ suggested rectification involves removing the cupboard doors and tracks and replacing with a suitable size and installed equipment and reinstalling the timber doors.

() Item 8.39: this item was titled ‘electrical issues’. Stair lights at the stairs, as well as GPOs did not work in the bathroom, media room and bar area.

Mr Morris’ suggested rectification was the appointment of an electrician to investigate and rectify electrical defects.

() Item 8.40: this item concerns the main ensuite bathroom. Blue was present and visible on the mirror back; the shower window trim was discoloured; air vents were not correctly working, the external grille was restricting airflow and the shower window trim was faulty.

Mr Morris’ suggested rectification consisted of replacing the mirror; adjusting or replacing the shower trim and rectifying the ventilation system.

() Item 8.41: this item concerns the garage. Plasterboard had been installed over the sewer drainage inspection access point.

Mr Morris’ suggested rectification was to locate the access point and install an access manhole.

() Item 8.42: this item concerns the metal stairs to the garage area. These stairs were not correctly sets out nor correctly installed. There was a 70 mm gap between the treads.

Mr Morris’ suggested rectification was the removal of the stairs and the remanufacturing and reinstallation you stairs to comply with BCA clause 3.9.1.4.

() Item 8.43: this item concerns the floor tile grates. Mr Morris opined that they had been installed out of squared trial joints. He opined that there was a non-compliance with architectural drawings and standard tile laying procedure.

His suggested rectification involves removing and reinstalling the tile grates, as well as adjacent tiles, as necessary.

() Item 8.48: this item is described as the incorrect ceiling height. It was said to be not installed at the correct floor-to-ceiling heights.

The only suggested rectification was to compensate the owner for loss of amenity.

() Item 8.49: this item concerns the incorrect colour paint to finish works at various parts of the residence (upstairs and downstairs).

The only suggested rectification was to repaint the walls and timber services using the correct paint with ‘White on White’.

Items of work which Mr Morris regarded as ‘incomplete’ were:

Item 8.27: this item was identified as the underside of the roof not being lined nor trimmed in places.

Item 8.44: this was the lounge fireplace. It had not been installed

Item 8.46: this item was the installed glazed doors to the gym and bar area. They had not been installed.

Item 8.47: this item concerns the rear stair landing pad. This had not been installed externally at ground level to the kitchen stairs.

Mr Macgregor & Mr Seeto

Mr MacGregor is a qualified architect and builder. He prepared a report on the part of the builder dated 14 January 2019. Mr MacGregor has also been admitted as a lawyer. He has mainly practised as a building consultant since 1983, advising on building and building related matters on many buildings, typically houses.
Mr Seeto is a quantity surveyor. He has a Bachelor of Building and a Master’s of Science (Building). He has had four years of experience in the building industry. His views as to costs were appended to Mr MacGregor’s report, which I admitted, over the objection of Counsel for the Owner. It was given a separate exhibit marking (Ex 2).

Mr MacGregor’s report of 14 January 2019

Mr MacGregor conducted site inspections on 2 and 4 October 2018. His general method was to refer to his own observations, relevant standards, relevant test measurements or research and experience as he considered necessary. Mr Morrison was in attendance during both inspections. Mr MacGregor noted discrepancies between the two sets of drawings.
Generally, Mr MacGregor did not take issue with Mr Morris’ methodology. Upon his site inspections in October 2018, he found the house to be in normal habituation. Subject to the contract, he found that the contract work had reached practical completion.
Mr MacGregor’s specific responses in his written report to Mr Morris’ findings may be summarised as follows:

Item 8.04: Mr MacGregor found no moisture collected in the metal soffit. He thought that it was most likely that there was salt by windborne water droplets condensing on the metal sheet. The bunker lights with visitors close as possible to the uneven corrugated ceiling surface. There were no downlights but lights were provided by the owner. There was no rectification that is needed.

Item 8.05A: Mr MacGregor found no evidence of fastener failure because of fastener size. There was a likelihood that some fasteners had been sheared off. He found some sap stain and fungus stains, but no rust stains. Bearing on the side of generosity, he thought that the damaged fasteners should be superseded with fasteners provided where they were missing. He thought there may be about 200 overdriven fasteners.

Item 8.05D: this MacGregor could not see anywhere that water penetrated the structure, since the structure was typically concealed from view. He found no evidence of water penetration to the interior adjacent any of the windows. He could not see any flashings at the windows although acknowledged that does not mean that there are none. He did however find water stains. Such timber tannin and dirt stains as there were did not cause any cladding deterioration or uncontrolled movement. He did not consider that any rectification were necessary.

Item 8.05F: Mr MacGregor accepted that there were some screws that were not stainless steel, but said that this did not mean that they were incorrect. He found no call for any cavity ventilation and drainage system. He did not consider that any rectification works was necessary

Item 8.05G: Mr MacGregor did see, by a small sample view, that sarking was present but did not think that it was reasonable doubt to remove the cladding from the building to establish the presence of reflective sarking. He thought that the cladding was fitted as per the industry construction practice. He found no evidence of water entering the building from the cladding. He did not consider that there was any rectification that was necessary.

Item 8.06: Mr MacGregor found that the handrail was a galvanised steel material that appeared to satisfactorily span between newel posts. He thought that it was fitted on-site. He also thought that gaps and joints could be better but that any gaps and joints found to be unsightly could be filled with a flexible filler of colour to match the galvanised finish. The only rectification he would suggest would be to fill any open joints with appropriate filler.

Item 8.07. The experts agree that there is no issue.

Item 8.08. The experts agree that there is a defect. Mr MacGregor suggested that the rectification consist of brace gate frames as necessary; adjusting the alignment/ height of the gates so that the slats meet level; and supersede the gate latch with appropriate hardware.

Item 8.09: Mr MacGregor’s views in relation to the main hand railing largely reflect item 8.06.

Item 8.10. The experts agree that there is a defect.

Item 8.12: Mr MacGregor disagreed that the aluminium entry door had been incorrectly manufactured or that the incorrect aluminium section had been used. He thought that the bottom door rail/threshold clearance was about 4-6mm though, given an acceptable practice, any slight variation to the estimate was immaterial. He did not consider that any rectification works were necessary.

Item 8.13. The experts agree that there is a defect with the rainwater downpipe.

Item 8.14: Mr MacGregor assumed that the builder had provided termite treatment; although suggested that the builder should provide a satisfactory certificate for the termite management system provided (as per AS 3660).

Item 8.16: Mr MacGregor regarded this as a repeat of 8.04. Mr MacGregor could not see the top side of the corrugated zincalume ceiling soffit. He thought that the ceiling might collect moisture since the slatted floor above was not waterproof. He did not consider that there was any requirement for the bunker lights to be cast into the corrugated lining. He did not consider that any rectification works were necessary.

Item 8.17: Mr MacGregor did not regard the handrail as being undersized and did not consider that it would have been established that the ceiling metal corrugated lining condensates moisture due to lack of insulation or that the presence or absence of insulation would make any difference. He did not consider that any rectification works were necessary.

Item 8.18: Mr MacGregor said that a small gap between the ceiling lining and the lamp, the body of the latter was required to permit the lamp to be fitted up into the ceiling. The gap was the result of either inappropriate ceiling lining or the choice of the lamp that was supplied by the owner. He thought the builder had fitted the supplied lights in accordance with contract with no rectification required.

Item 8.19: Mr MacGregor indicated that the contract called for timber treads. There was no call for any special timber. The concrete pavement underneath was provided as part of the landscape work that was built subsequently to the stairs. The subsequent tannin stairs were not the builders’ responsibility and there was no rectification required.

Item 8.21: Mr MacGregor was uncertain as to who was responsible for providing the stormwater drainage channels and drainage. The channel train with a plastic grate was fit for purpose with respect to likely vehicle loads. Mr MacGregor thought that the stormwater drains should have been provided by the owner. If the metal grate was asked to have been provided by the builder, then it should be taken out and disposed and the rectification should consist of providing satisfactory plastic grates in lieu, at approximately 6 m length.

Item 8.22: Mr MacGregor found no evidence that the treads were incorrectly mentioned; nor any evidence of twisting or cupping. There was no evidence of fungal decay damage. No rectification was required.

Item 8.23: Mr MacGregor found a number of missing screws although there was no apparent instability even with some screws that were missing. Aside from the given missing screws the specification appears to have been so far what is required by way of rectification.

Item 8.24: Mr MacGregor agreed with Mr Morris the wall was out of line and slightly out of plumb. He did not however consider that the wall was unfit for purpose or in need of rectification

Item 8.25: Mr MacGregor could not find water injury and moisture damage to the rear stairs. He could not identify any sharp edges of any apparent consequence. He did find a vermin entry point. He disputed that the hand railings were unsightly and unfinished. He did not consider that there was any requirement for rectification.

Item 8.26: The experts agree that there is a defect.

Item 8.27: Mr MacGregor disagreed that the underside of the roof was not lined nor trimmed in places. No rectification was required.

Item 8.28. The experts agree that there is a defect.

Item 8.29: Mr MacGregor regarded this as a repeat of item 8.26.

() Item 8.30: Mr MacGregor believed that the builder was only responsible for the current condition of the bench top if the builder damaged the bench top surface or finish prior to practical completion. He found no evidence of this. No rectification was necessary.

() Item 8.31. The experts agree that there is no defect.

() Item 8.32: Mr MacGregor found no high loop in the drain hoses. He could not say whether the drain hoses were correctly extended or not. If necessary, rectification could consist of providing extended hoses and high loop harnesses all fitted, as appropriate.

() Item 8.33. The experts agree that there is a defect.

() Item 8.34: The experts agree about the need to replace the door.

() Item 8.35: the experts agree that there is a defect.

() Item 8.36: Mr MacGregor did not see any undue variability in marks on the surface when comparing the metal post with other internal steelwork. If the mark was found to be satisfactory, however, at most the post should be painted.

() Item 8.37: Mr MacGregor regarded the hinges and found no evidence of any lack of support to the doors caused by top rail size. He accepted that there was no pelmet cover; and that a pelmet painted to match the remainder was normal practice. There was no rectification works required for this item.

() Item 8.39: Mr MacGregor opined that there was no specific allegation of electrical issues so no rectification was required.

() Item 8.40: the experts agree that there are defects in relation to the mirror, the need for an internal aluminium window.

() Item 8.41: the experts agree that a reusable service access opening should be provided

() Item 8.42: the experts agree that there are defects with relation to the metal stairs to the garage area.

() Item 8.43: Mr MacGregor found no evidence of floor tile work non-performance. He opined that the contract implicitly called the builder to tile floors of the bathroom, the powder room and laundry and that this had been done. He could not see any note on the drawings as to how the tile work should be done and it is agreed that there was not any lack of compliance with standard tile laying procedure: there was no standard way to orientate floor waste inlet grates. No rectification was required.

() Item 8.44: Mr MacGregor found a discrepancy or conflict between the approved drawings and the contract drawings in relation to the fireplace. If, contrary to his opinion, it is to be found that the fireplace and chimney should have been built then the builder should account for the variations as per the builder’s invoice 330 variations spreadsheet. That will require the builder to refer to the contract documents, set up the website, demolish the family room roof walls and floor, provide effective temporary weather protection to the family room and all necessary labour, material and incidental item to build the fireplace footings and foundation walls.

() Item 8.46: Mr MacGregor found that there were no doors at either of the doorways. The builder had deducted the Provisional Sum included for these glass doors from the contract sum. No rectification was required.

() Item 8.47: there was no ‘landing pad’ at the bottom of the stair. There was no obligation on the builder to have provided it. No rectification was required.

() Item 8.48: Mr MacGregor could not identify any specification as to the ‘floor to ceiling’ given in the contract. Both of the dimensions for the ‘finished floor level’ at the south-west and north-east slightly exceeded the design dimensions, however the floor to ceiling height satisfied contractual obligations and no rectification was required.

() Item 8.49: Mr MacGregor found that there was some variable colour and finish in painted surfaces and agreed with Mr Morris’ list.

Mr Morris’ report dated 11 February 2019

This was in reply to Mr MacGregor’s report of 14 January 2019.
Mr Morris’ item-by-item response to Mr MacGregor’s report was:

Item 8.04: the deck above the soffit has gaps between the timber decking boards, which allow sufficient access for water and vermin to enter into the space below the deck. The entry deck had full flashing ceiling around all three edges (the other is being attached to the house wall cladding and the corrugated steel being installed completely level) there was no egress for water entering into the space during heavy rainfall. The use of zincalume products was inappropriate for the fixtures already selected and provided by the owner. Rectification was necessary to prevent further water damage resulting from an inappropriate use of flashing which now sealed water into an area exposed to heavy rainfall.

Mr MacGregor accepted that the gap under the aluminium door was significant. Generally, Mr Morris was very critical of its construction, but his criticisms were, I thought, quite general; other than his complaint about a lack of a sealant.
In my view, however, such further work as would have been reasonable and necessary was a sealant. That being so, I would classify this item as work which was ‘incomplete’.

Item 8.14

The owner submits that there was non-compliance with the requirement to provide termite protection and this amounted to a breach of the warranties in s 18B(a), (b), (c) and (e).
He submitted that I should prefer Mr Morris’ evidence, which, if anything, erred on the side of caution in saying that protection was still required.
The Builders submit that there is no evidence to sustain the alleged breach; that Mr Morris’ reference to the BCA was to the 2014 version and that the Guide to Standards and Tolerances upon which Mr Morris placed reliance was of no legal force. The termite protection certificate evidenced the application of a system to the concrete slab in the garage.
The Builders produced an invoice from Advanced Pest Control which, at least, proved that there was termite protection which (expressly) was stated to be ‘perimeter to garage’. Mr Morris acknowledged that production of this invoice satisfied him that there was protection to the garage and he was prepared to modify his opinion on this item to that extent. He also accepted that there was no way of knowing whether (to the extent that this coverage was insufficient) there was any other way of knowing that protection was installed.
In my view, it was open for this issue to be probed more fully with the Builders. It would surprise me if the termite protection procured would be limited only to the garage. I am not satisfied that any defect has been established in relation to this item of work.

Item 8.16

It appeared to me that this was the same item of work as item 8.04, although Mr Morris identified it as the same problem, occurring twice (two different balconies).
The same scope of rectification should apply to this item as per item 8.04.

Item 8.17

The owner submits that there was non-compliance with the statutory warranties in s 18B(a), (b) and (c). Due care and skill would have seen the BCA checked to identify a need to provide compliant balcony rails; the railings were not fit for purpose due to a failure to ensure the weight loading was correct. The dwelling was not fit for purpose.
He submits that although balustrade certification was provided to Mr MacGregor it did not cover this area and that Mr Morris’ evidence should be preferred to Mr MacGregor who made only cursory inspections.
The Builders submit that there is no evidence to sustain this alleged breach. In relation to the alleged ceiling metal defect, the Builders repeated their submissions in relation to item 8.04. As to the balcony railing, although Mr MacGregor conceded that it might fail if tested, no such testing has been performed.
The experts’ consideration of this item was also affected by the belated production of a certificate of compliance for the balustrade. It emerged that this had come from the Builders themselves and I agree with Mr Morris that the certificate would have greater weight if it had been produced by an independent entity. Mr MacGregor opined that, to the extent that there was corrosion generated by the salt water environment, this was a maintenance issue for the Owner.
Counsel for the Owner referred to the Inspection Report prepared on 5 September 2016, but in my view, that only (relevantly) indicated the requirement for hand railing or a balustrade and did not say anything about what standard that it had to meet.
I have also had regard to the video recording of the front top of the balustrade. I find that there was a non-compliance with the warranties in s 18B(a) and (e).
I accept Mr Morris’ suggested rectification for this item, involving the removal and replacement of the hand railing and removal of the insulate and replacement of the balcony soffit and providing installation and ventilation.

Item 8.18

The owner submits the non-compliance with s 18B(a) warranty in respect to this item. He submits that Mr MacGregor made only cursory inspections and was generally reliant upon what he saw in the photographs which Mr Morris took; and for those reasons, Mr Morris’ evidence should be preferred.
The Builders repeat their submissions in relation to item 8.04.
In his evidence at trial, Mr Morris was critical of the moisture behind the light metal ceiling and into the metal structure. I prefer Mr MacGregor’s evidence in this regard in relation to the particular lights (being outdoor lights) chosen for the particular (salt water) environment and I am not persuaded as to the cause of the condensation or moisture identified by Mr Morris. I am not persuaded that there is a defect in this regard.

Item 8.21

The owner submits that Mr MacGregor has admitted that there was a defect. He relies upon a non-compliance with the warranties in s 18B(a), (b) and (c). Due care and skill would have seen the BCA requirement and development consent requirements to identify the need to provide compliant storm water to the roadway; the storm water was not fit for purpose due to a failure to ensure it went to the street;
The Builders submit that this work was incomplete rather than defective and points to Mr Morris’ concession that it was incomplete.
I accept Mr Morris’ evidence that the front storm drainage was not extended to the roadway; but I am not satisfied that this amounts to a ‘defect’, but rather amounts to ‘incomplete’ work.

Item 8.22

The owner submits that the Builders did not comply with the warranties in s 18B(a), (b) and (c). Due care and skill would have seen the BCA and development consent checked to identify the need to provide compliant external stairs; and the stairs were not fit for purpose due to a failure to ensure compliance with the BCA.
He submits that Mr MacGregor made only cursory inspections and no inquiry into the existence of a specification for these stairs and that Mr Morris’ evidence should be preferred.
The Builders submit that there was no evidence to sustain the alleged breach. Mr Morris had confirmed that the measurements of the stairs complied with requirements and he saw no evidence of decay. There was no damage.
It appeared to me that Mr Morris’ criticisms in this regard concerned the choice of timber and the use of two pieces of timber treads. But Mr Morris acknowledged, under cross-examination, that he did not know what particular grade of hardwood had been used. He also confirmed that he saw no evidence of decay.
I am not persuaded that there is any defect in relation to this item.

Item 8.23

The owner relies upon non-compliance with the warranties in s 18B(a), (b), (c) and (e). Due care and skill would have seen the BCA and development consent checked to identify the need to provide compliant support for the subfloor structure – this being an essential element of the structural integrity of the building. There was a failure to comply with engineering specifications. The dwelling was not fit for purpose.
He submits that this is an agreed defect, that Mr MacGregor relied upon Mr Morris’ photographs and had not properly inspected the area.
The Builders submit that if the complaint be that there was no engineering certification, there was no requirement for such certification. The inspection report from the building certifier indicated that a certificate from a structural engineer was required before an occupation certificate could issue. To the extent that there were missing screws, there was no evidence of damage. To the extent that matters remained, the works were incomplete.
Mr MacGregor accepted, to a degree, Mr Morris’ criticism that there were at least some missing screws from a steel post in the ground.
On the matter of structural engineering certification, I am not persuaded by Mr Morris’ view that there is a sort of on-going progressive requirement for certification; but prefer the view that the certification is required at completion.
In my view, this is a minor defect arising from non-compliance with the warranty in s 18B(a) and the appropriate scope of rectification is for a carpenter to be engaged to check all functions and re-bolt where necessary.

Item 8.24

The Owner submits that the statutory warranties in s 18B(a), (b), (c) and (e) were not complied with. The Owner presses the same arguments for how these warranties were breached as he did for item 8.23.
The owner submits that Mr MacGregor relied upon Mr Morris’ photographs and as such had not properly inspected the area; so that Mr Morris’ views should be preferred.
The Builders submit that there was no obligation upon the Builders to construct a retaining wall nor evidence that they constructed it. Mr Morris’s assumptions, or instructions, were not proven. His reliance upon the BCA was misplaced.
An initial difficulty in relation to this particular item is that there was no cross-examination of the experts when they gave their evidence concurrently. As noted, in the experts’ reports, Mr MacGregor agreed with Mr Morris that the retaining wall was out of line, but said that, having regard to its location and purpose, it could not be said to be unfit for purpose.
The difficulty is that it is not clear to me as to who it was who constructed the retaining wall. I would be surprised if the Builders installed it in the absence of any requirement to do so. Mr Morrison’s affidavit evidence (given in February 2019) as to the identity of the builder was, in my view, ambiguous. Neither Shane Moss nor Alister Moss said that they constructed the retaining wall and they were not cross-examined that they had.
I am not persuaded that the Owner has established non-compliance with any of the statutory warranties in relation to this item.

Item 8.25

The Owner relies upon the non-compliance with the warranties in s 18B(a) and (e). He says there was an absence of care and skill which made the finished product not fit for purpose.
The owner submits that Mr MacGregor noted that there was work to be done. The owner submits that he relied upon Mr Morris’ photographs and, as such, had not properly inspected the area. Mr Morris’ views should be preferred.
The Builders repeat their submissions in relation to item 8.09.
Mr Morris identified sharp edges to the rear stairs and a lack of sealant. He criticised a lack of workmanship. But he acknowledged that, to some extent, he thought that the work was incomplete and admitted that the stairs were at the correct height.
I am not persuaded that the work amounts to a defect, as distinct from incomplete work that required filler by a sealant.

Item 8.26

This was an agreed defect.
On the scope of rectification, I find Mr MacGregor’s scope of works (identified at paragraph 180 of his report) is more appropriate than that suggested by Mr Morris for its more comprehensive nature.

Item 8.27

The owner says that for this item, there was a non-compliance with the warranty in s 18B(a) and (e) in that the lack of care and skill resulted in an installation not fit for purpose.
The owner submits that Mr MacGregor interpreted the contract and the statutory warranty in a way that denied liability. The lining was a requirement of the Basix certificate.
The Builders submit that there is no evidence to sustain a breach. Alternatively, they say that if there was a requirement, the defendant was not responsible given the Owner’s early possession of the works.
Mr Morris identified a need to line or trim the underside of the roof. Mr MacGregor could not identify such requirement in the contract or the statute. I do not consider it necessary to resolve the debate in circumstances where, at most, the ‘work’ could only be regarded as ‘incomplete’.

Item 8.29

The parties treated this item in the same way as they treated item 8.26 (which was an agreed item). I make the same findings as I did in relation to that earlier item.

Item 8.30

The Owner contends that there was a non-compliance with the warranties in s 18B(a) and (f). The Owner submits that it was accepted that the Builders installed the Bench tops and were required to finish the works.
The Builders submit that there is no evidence to sustain such claim. There is no evidence that any requirement for sanding had not been satisfied.
Mr Morris says that the kitchen bench tops are ‘basically not finished’ and require only additional sanding and sealing, where necessary. I agree that the photographs that he took indicated an irregular colour and grain. Mr MacGregor thought that it was the Owner who chose this particular bench top and that the Builders could only be responsible for the condition of the bench top if they damaged it.
I consider that this item is ‘incomplete’.

Item 8.32

The owner relies upon non-compliance with the warranties in s 18B(a) and (c). He says that there was a lack of skill and care in the installation. This resulted in a non-compliance with a BCA drainage requirement.
The owner submits that there was faulty installation of the dishwashers which amounted to a breach of the statutory warranty in s 18B of the Act.
The Builders submit that there is no evidence to sustain a breach. In particular, there was no obligation upon the Builder to supply whitegoods in this contract. Even if there was, the omission amounted to incomplete work.
I consider that it is more likely than not that the Builders fitted the dishwasher. I accept Mr Morris’ evidence (not seriously disputed by Mr MacGregor) that the discharge or waste pipe had not been sufficiently extended to the underside of the bench top. I also accept that this presented a health issue.
I find that this is a defect arising from a non-compliance with the warranty in s 18B(a), and accept Mr Morris’ view that the appropriate rectification is to install a saddle support to the dishwasher waste pipe directly under the bench top to allow for discharge without syphoning.

Item 8.34

The Owner submits that there was a non-compliance with the statutory warranties in s 18B(a) and (f). He repeats his arguments advanced in relation to item 8.30.
The owner submits that Mr MacGregor had accepted that the door needed to be replaced. In the absence of evidence of the owner’s neglect, Mr Morris’ evidence should be preferred.
The Builders repeats its submission relating to item 8.30.The BCA provisions that Mr Morris relied upon were objectives; not standards capable of being breached.
Mr MacGregor accepted that the laundry bench top was rough and “a bit scuffed” and ‘unsatisfactory’. I also find, on the basis of the photographs provided, some gaps or margins in the door. I consider it more probable than not that the Builders were responsible for this item.
I find that this item is a defect arising from a non-compliance with the warranty in s 18B(a) and that the bench top should be re-sanded and re-sealed; and, further, that the door should be removed and re-hung to ensure that the door margins were regular.

Item 8.36

The owner asserts non-compliance with the warranty in s 18B(a). The owner submits that the galvanizing of the post and associated galvanized parts form an aesthetic feature.
The Builders submit that there was no obligation and even if there was, no evidence that the problem with the work was caused by the Builders. Further, if there was a breach, reasonable rectification was to paint the post; not replace it.
There is no serious dispute that the galvanised post is damaged through scratching and that the item is a prominent architectural feature. I consider that it is probable that it was scratched during the process of installation and was the responsibility of the builder and that there was a non-compliance with the warranty in s 18B(a).
I am not convinced that an acrylic paint coating will be sufficient to rectify the defect and accept Mr Morris’ recommendation that it is appropriate that the post be replaced.

Item 8.37

The Owner relies upon non-compliance with the warranty in s 18B(b) and (c). He says that the item was not fit for purpose and did not meet BCA requirements. The owner submits that Mr Morris’ evidence should be preferred to Mr MacGregor.
The Builders submit that the experts agree that a pelmet cover is required and the work is incomplete. But in relation to the hinges, Mr MacGregor’s opinion is to be preferred.
I find that the omission to use a pelmet cover in relation to the linen cupboard, by itself, suggests ‘incomplete’ work.
Having had regard to the video recording of the opening of the cupboards and Mr Morris’ photos, I agree with Mr Morris that there is a lack of alignment in the doors reflective of substandard workmanship in non-compliance with s 18B(a). I do not accept that Mr MacGregor’s reference to the doors being part of the Provisional Sum item negates this last finding.
I accept Mr Morris’ evidence that the appropriate scope of rectification consists of removing the cupboard doors and tracks and replacing with suitably sized and installed equipment and for the reinstallation of the doors.

Item 8.39

The owner relies upon non-compliance by the Builders with the warranties in s 18B(a), (b) and (e). He says that the work does not meet BCA requirements for electrical wiring and presents a fire danger; which means that the dwelling is not fit for habitation.
The owner submits that in the absence of evidence of any claim brought by the Builders against their subcontractor, the Builder is liable for the problem.
The Builders submit that the experts accepted that they were not qualified to comment on this alleged defect.
I do not accept the builders’ submission is fully accurate in this regard. Although there was some muted ambivalence between the parties, it appeared to me that both experts accepted that there were electrical faults but that the cause was undisclosed.
On balance, I regard this as a minor defect arising from a non-compliance with the warranties in s 18B(a) and (b) and also find that the appropriate scope of rectification works is retention of an electrician to investigate and rectify whatever electrical faults exist.

Item 8.43

The owner relies upon non-compliance with the warranty in s 18B(a). The owner submits that the dispute was narrow, concerning the spatial positioning of grates and amounted to a workmanship issue.
The Builders submit that there is no evidence to sustain the alleged breach. There was no evidence that the installation was not approved by the Owner nor any reference to any architectural drawing against which a claim of non-compliance could be measured; there was no identified, or identifiable, standard tile laying procedure. To the extent that Mr Morris relied upon a reference from the BCA it was to a later version.
Mr Morris posited that this was an aesthetic issue. He accepted, however, that the grate was correctly positioned, albeit that he would have preferred a rounded grate (which he could not established was required under the contract).
I am not persuaded that Mr Morris’ criticisms, limited as they are, amount to any defect.

Item 8.44

The Owner relies upon non-compliance by the Builders with the warranties in s 18B(a) and (c). He says that the EPA Act required that the building be built in accordance with approved plans. This included the fireplace. This was not merely incomplete work, but defective work, since the fireplace was required to be constructed with the footings and ground and upper levels.
The owner submits that a review of the plans and specifications indicate that there was a fireplace to be built. That was not contradicted by lay evidence.
The Builders submit that this amounts to incomplete work and that there was a variation. There was no requirement for foundations to be constructed; which was not unusual for Jetmaster fireplaces, as they are freestanding. Further, this item was listed as a provisional sum item (item 11), which meant that this item would have had to have been paid for by the Owner: if there was incomplete works, the cost would have been added to the provisional sum under the contract. This had not yet been paid.

In my view, this item is properly classified as ‘incomplete’ work.

Item 8.46

The Owner relies upon the non-compliance with the warranties in s 18B(a) and (c). He says the EPA Act required that the building be built according to the approved plans including glass doors to the gym and bar.
The owner submits that there has been no compliance with the contract to supply the doors glazed or glass. There was no variation.
The Builders submit that this was another provisional sum such that either it amounts to incomplete work, or provisional sums for which the owner would have to pay but has not. It cannot be paid as damage.
I am satisfied that Schedule 2 to the Contract (item 9) reflects a requirement for glazed doors to the gym and bar areas and that these doors had not been installed. The assumption that Mr MacGregor was asked to make by his instructing solicitors was erroneous.
This work is incomplete.

Item 8.47

The owner submits that Mr MacGregor erroneously considered that this was a landscaping issue which was contrary to the instructions he received from the Builders’ then lawyers.
The Builders submit that there is no evidence to sustain the alleged breach. No contractual requirement was identified.
I am not persuaded that any obligation was cast upon the Builders to install a rear stair landing pad. I do not consider it necessary to determine whether Mr MacGregor’s contention that the matter may fall within an exclusion in the contract is correct. There is no defect.

Item 8.48

The owner submits that this involves a non-compliance with s 18B(a) and (c) warranties. He says that the EPA Act required the building to be built according to the approved plans, which showed the ceiling height.
The Builders submit that there is no evidence to sustain the alleged breach. First, there was no ‘correct’ ceiling height identified. Secondly, there was no survey evidence to illuminate the position. The video evidence was insufficient in the absence of ceiling heights set out in the drawings. Mr Morris conceded that the maximum required ceiling height, if there was one, was 2520mm. Subject to one exception, concerning video 17, there was no measurement contrary to that, and in the case of the exception, the height was excused to the requirement for pipework – a matter which Mr Morris admitted. Finally, if there was a defect, the scope of the rectification works proposed by Mr Morris was unreasonable.
After the experts had conducted their review of the drawings whilst giving concurrent evidence, I am not persuaded that there was any erroneous construction of ceiling to height in any of the powder room, main bathroom or laundry.
This left the ensuite. Mr MacGregor considered that the drawing (sheet 6) required the ensuite to be lower than 2.6m. Mr Morris disagreed. I am not persuaded that it is necessary or appropriate to expect that the roof level could, or might, be raised so as to achieve the level of 2.6m; or, more to the point, that it was unreasonable or in non-compliance with the Builders’ obligations to make that type of alteration.
I am not persuaded that there is any defect.

Section 48MA

This provision indicates that the generally preferable outcome is that the responsible party – the Builders – undertake the rectification of defective work.
The Owner resists opportunity being given to the Builders to rectify the defects in circumstances where, he submits:

the Builder was unable to complete the works on time (or within what the Owner says was a reasonable period of time);

the level of defects in the building; given the costs to rectify are now greater than the combined contract works (under both contracts);

neither Mr or Mrs Moss would be performing the works – they would need to engage others;

Mr Shane Moss has offered to do the work, but the Owner says he was substantially responsible for the failure of the second contract;

Mr and Mrs Ross wrongfully terminated the second contract and otherwise could not properly administer it.

they acted improperly in demanding money which was not due.

Counsel for the Owner notes that the terms of s 48MA are discretionary and referred me to authority in the NCAT (Master Glass Facades Pty Ltd v Pollak [2017] NSWCATAD 45) which noted that although under common law it was preferable for the contractor to perform the rectification work, such preference was more apt where it arises prior to practical completion, or during the pendency of the defects period; but is inapt where the contract has come to an end.
Counsel for the Builders submits that there is some doubt as to whether s 48MA applies to incomplete work, as distinct from defective work (Clements v Murphy [2018] NSWCATAP 152). He also submitted that as both contracts were terminated by the Owner, it would be inappropriate for the Court to exercise its discretion to apply the provision; notwithstanding the general rule, amounting to a preference or perhaps presumption, that rectification by the builder is the preferred outcome.
In my view, given the extent of the distrust and protracted disputation between Owner and Builders, the significant number of defects (admittedly some more major than others) as well as the doubt as to whether it will really be Shane Moss – the person in whom the Owner appears to repose the least amount of confidence in – undertaking the work, I would not be inclined to apply s 48MA to impose, in effect, a work order upon the defendants.
In very brief summary, I have found that there were some breaches of warranty which generates an entitlement to recovery of damages for the Owner. Since the contract was validly terminated by the Builders’ however, the Owner’s right of recovery is for damages in such sum as would enable rectification of those defects.
As indicated, the quantification of rectification costs should be the subject of referral; after which, the damages award is to be set off against any claim that the builder has for payment. I now turn to that subject.

BUILDER’S CLAIM FOR PAYMENT

I have found that the Builders validly terminated the contract. Prima facie, it is entitled to receive the amount claimed in the cross-claim, being the sum of $52,470.56 (incl of GST) plus interest.
There was no serious dispute about the claim to the invoices other than the invoice issued in relation to the practical completion milestone. I accept, therefore, the Builders’ claim in relation to those invoices for the reasons submitted by the Builders in their Counsel’s written submissions.
There was no suggestion, also, that the Builders would not be entitled to interest on the unpaid invoices at the rate of 15% per annum.
The Owner submits that should I find that the works were not actually completed, then the Builders were not entitled to anything. He says that no claim in restitution was raised (ie a quantum meruit). It is, of course, true that no quantum meruit claim is brought, but the Owner’s submission effectively negates the operation of the provisions in cll 22 and 23. As indicated earlier in these reasons, it matters not that the invoice issued in cl 23 was the result of practical completion being taken to have resulted from the Owner’s entry into possession.
The Owner submits, as an alternative, that to the extent that the Builders’ claim is allowed, it would need to be set off against the amount, if any, that it is liable to pay the Owner for damages for breach of the statutory warranties in the Contract.
I accept this submission. It is a reflection of the principle in Mondel v Steel (1841) 151 ER 1288 at 1293-1294, which applies to contracts for work and materials[12] .
12. Gilbert Ash Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 at 717
As the net result from the set-off, this awaits the quantification exercise to be undertaken by the referee. If, as Counsel for the Owner submits, the cost of rectification works has been agreed or is not contested, then these circumstances will plainly be considered by and simplify the task of the referee. It is open, of course, for the parties, with the benefit of these findings, to persuade me whether referral is the appropriate course. Bound up in that should be consideration whether other forms of dispute resolution may be appropriate, such as mediation; however, having regard to the level of distrust and manner in which this litigation has been conducted, I would need some persuasion as to how such alternatives would be preferable to the referral I have proposed.

SUMMARY OF FINDINGS

I summarise my findings as follows:

As at 1 September 2016, the Builders were in breach of the statutory warranty to complete the works within a reasonable time, which I assess as being about July 2016;

The Builders’ breach:

did not result in any entitlement to compensation; and

did not disentitle them from terminating the Contract in September 2016 pursuant to their express right to terminate;

The Owner had taken possession of the Property by 1 September 2016, which had the consequence that the stage of practical completion had been achieved;

The Builders were entitled to invoice and receive payment for the practical completion milestone;

There is no estoppel precluding the Builders from relying upon the circumstance that practical completion was deemed to have arisen by reason of the Owner taking possession;

As a result of the Owner’s failure to pay the invoice for the practical completion milestone, the Builders were entitled to terminate the contract;

The Builders were also entitled to terminate the contract because of:

the Owner’s failure to pay the two other invoices, and

the Owner’s non-compliance with the Builder’s direction to allow it to access the site;

the Builders are entitled to receive payment for the sum of $52,470.56 (incl GST) plus interest under the contractual rate on the unpaid invoices;

the Builders’ entitlement to receive the said sum is subject to the operation of a set-off resulting from whatever sum the Owner is entitled to receive for compensation for breach of warranties causing defects affecting items 8.04, 8.05A, 8.05D, 8.05F, 8.05G, 8.06, 8.08, 8.09, 8.10, 8.13, 8.16, 8.17, 8.23, 8.26, 8.28, 8.32, 8.33, 8.34, 8.35, 8.36, 8.37, 8.39, 8.40, 8.41 & 8.42.

The quantification of the costs of rectifying the said defects should, absent any persuasive reasons to the contrary, be the subject of referral.

No work order is made reflecting the objective referred to in s 48MA of the Home Building Act.

ORDERS

I direct the parties to bring in short minutes to give effect to these reasons, in the following way. The appropriate sequence is:

The plaintiff serve proposed short minutes by 31 January 2020;

Within a further 10 days, the defendants are to indicate to the plaintiff whether the short minutes are agreed and, if disagreed, set out proposed alterations which explanation is to be set out in no more than 3 pages;

Within a further 7 days, the plaintiff is to supply my Associate with final short minutes (prepared after considering the Builders’ version), and supply them and the Builders’ version and explanation (set out in (b), above).

Costs should be reserved.

Liberty to apply on 3 days’ notice.

My preliminary view as to appropriate directions to give effect to the referral are as follows:

The plaintiff is, by 31 January 2020, to nominate to the defendants two persons from the Australian Institute of Quantity Surveyors website who is willing and able to act as a referee (and will, to that end notify the defendants of any conflict of interest).

The defendants are, within a further 10 days thereafter, to indicate:

Whether they agree to either of the nominees proposed by the plaintiff; or

Whether they disagree with the nominees proposed by the plaintiff and, if so, to nominate 2 persons who might be willing and able to act as referee (and will, to that end, notify the plaintiff of any conflict of interest).

If there be a continuing dispute, then within a further 7 days, the plaintiff is to notify my Associate and the Court will (in Chambers) determine the referee (and for that purpose, the parties are to send to my Associate details of the nominees in terms of their qualifications and charge out rates).

Pursuant to r 20.14 of the Uniform Civil Procedure Rules, the court will refer the matters in the Schedule to the referee (identified as a result of the process in steps (2) and (3) above) for enquiry and report.

Without affecting the powers of the Court as to costs, the parties will be directed to be jointly and severally liable to the referee for his or her fees, at first instance and each party must act expeditiously and comply with the terms of engagement and fee agreement of the referee.

The parties will deliver to the referee a copy of:

the Orders that will be made;

A copy of Division 3 of Part 20 of the UCPR;

A copy of these Reasons for Judgment;

All exhibits admitted in these proceedings;

Any other document required by the referee.

A direction should be made for:

the provisions of r 20.20 applying to the conduct of the proceedings under the reference;

the referee to consider and implement a matter of conducting the proceedings under the reference, so as to enable a just determination to be made without undue formality or delay including, if the referee thinks fit:

the making of enquiries by telephone;

communication with Mr Morris (for the plaintiff) and Mr Seeto (for the defendants);

The evidence in chief before the referee is to be given by way of the written statements of the quantity surveyors admitted in the proceeding.

Any applications for additional orders with respect to pleadings or evidence are to be made to the Court

a date for the reference to commence (unless otherwise ordered by the referee);

a date for the referee to submit his or her report to the Court in accordance with r 20.23, addressed to the Judicial Registrar of the District Court;

provision for the referee to provide an interim report to the Judicial Registrar if s/he is unable to comply with the date for delivery of the report in order (9) above, setting out the reasons for such inability and an application to extend the time to deliver a final report to the Court.

Liberty to apply is granted to either the referee or any party on 3 days’ notice to seek directions with respect to any matter arising proceedings under the reference, upon application to the Judicial Registrar or, in his absence, to the Civil List Judge.

The application to amend the orders (or the content of the Schedule) is to be the subject of an order made by the Court.

All questions of costs of the proceedings, and interest (including pre-judgment interest) are to be reserved until completion of the quantification exercise.

The Schedule should consist of:

the referee is to quantify the rectification costs of each item of defective work, as found, using the reasonable and necessary scope of rectification, comprised in these Reasons for Judgment.

The referee is to quantify all costs with respect to (1) above including (without limitation):

preliminaries which are necessary and reasons why any included item of preliminary costs should be considered necessary;

margin, as separate from supervision costs;

contingency costs, including setting out the basis for why such costs are necessary; and

supervision, and reasons why separate supervision should be allowed for items not completed simultaneously with all other items.

**********

Endnotes

Decision last updated: 12 December 2019

Medium Neutral Citation:	Morrison v Moss & Anor [2019] NSWDC 746
Hearing dates:	16 – 19 September, 5 – 6 December 2019
Date of orders:	12 December 2019
Decision date:	12 December 2019
Jurisdiction:	Civil
Before:	Abadee DCJ
Decision:	See paragraph 464 – 466.
Catchwords:	BUILDING AND CONSTRUCTION – construction works for residential dwelling – whether practical completion arose through owner’s entry into possession – whether Builders in breach of implied statutory warranties – whether works defective or incomplete – whether works ‘practically complete’ – whether Builders should be ordered to rectify defects. CONTRACT – existence of implied term as to date for completion of works – whether implied term breached – whether contract validly terminated – whether terminating party entitled to exercise express right to terminate if it is itself in breach. PRACTICE AND PROCEDURE – referral of issue of costs of rectification of defective works to referee.
Legislation Cited:	Environmental Protection Assessment Act 1979 (NSW) Home Building Act 1989 (NSW), ss 14B, 48MA Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd (2009) 178 FCR 57 Australian Financial Services and Leasing Ltd v Hills Industries Ltd (2014) 253 CLR 560 Bellgrove v Elridge (1954) 90 CLR 613 Clements v Murphy [2018] NSWCATAP 152 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 148 CLR 337 Con-Stan Industries Pty Ltd v Norwich Winterthur Insurance (Aust) Ltd (1986) 160 CLR 226 Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 Ettridge v Vermin Board of the District of Murat Bay [1928] SASR 124 Gilbert Ash Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 Master Glass Facades Pty Ltd v Pollak [2017] NSWCATAD 45 McDonald v Denny Lascelles Ltd (1933) 48 CLR 457 Mondel v Steel (1841) 151 ER 1288 Tabcorp v Bowen Investments Pty Ltd (2009) 236 CLR 272 The Owners – Strata Plan No. 66375 v King [2018] NSWCA 170 The Owners-Strata Plan 78465 v M D Constructions Pty Ltd [2016] NSWSC 162 The Owners-Strata Plan No. 76674 v Di Blasio Constructions Ltd [2014] NSWSC 1067 The Owners-Strata Plan No. 89041 v Galyan Pty Ltd [2019] NSWSC 619 Thompson v Palmer (1933) 49 CLR 507 Wheeler v Ecroplot Pty Ltd [2010] NSWCA 61
Category:	Principal judgment
Parties:	Mr J Morrison (Plaintiff) Mr A Moss (Defendant) Ms E Moss (Defendant)
Representation:	Counsel: Mr T Bland Mr G Campbell Solicitors: Osborn Law Keystone Lawyers
File Number(s):	2018/121395
Publication restriction:	Nil