Ozzie Homes Building & Construction Pty Ltd v Singh
[2024] VCC 1337
•2 September 2024
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
BUILDING CASES LIST
Case No. CI-23-03422
| Ozzie Homes Building & Construction Pty Ltd (ACN 130 154 906) | Plaintiff | |
| v | ||
| Sukhvinder Singh | First Defendant | |
| and | ||
| Rupinder Singh | Second Defendant | |
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JUDGE: | Her Honour Judge Burchell | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 13 – 16 August 2024 | |
DATE OF JUDGMENT: | 2 September 2024 | |
CASE MAY BE CITED AS: | Ozzie Homes Building & Construction Pty Ltd v Singh & Anor | |
MEDIUM NEUTRAL CITATION: | [2024] VCC 1337 | |
REASONS FOR JUDGMENT
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Subject: BUILDING CONTRACTS
Catchwords: whether the builder is entitled to issue the lock-up stage invoice – whether the lock-up stage was complete – whether the builder is entitled to recovery of a fair and reasonable sum on a quantum meruit – whether the contract was abandoned – whether the builder terminated the contract – whether the termination of the contract was unlawful – whether the builder or owners were in repudiation of the contract – whether the owners are entitled to damages
Legislation Cited: Domestic Building Contracts Act 1995 (Vic), s40(1); Penalty Interest Rates Act 1983
Cases Cited:Cardona v Brown (2012) 35 VR 538; Maples Winterview Pty Ltd v Liu & Anor [2015] ACTSC 58; Mohamed v Adrija Pty Ltd (No 2) [2022] ACTSC 89; Browne v Dunn (1893) 6 R 67; Mann v Paterson Construction Pty Ltd (2019) 267 CLR 560; Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; Woolworths Group Limited v Gazcorp [2022] NSWCA 19; McDonald v Dennys Lascelles (1933) 48 CLR 457; Phillips v Ellinson Brothers [1941] 65 CLR 221; Steele v Tadiani (1946) 72 CLR 386; Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; Mushinski v Dodds (1985) 160 CLR 585; Tropical Traders v Goonan (1964) 111 CLR 41; Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313; Poort v Development Underwriting (Victoria) Pty Ltd (No 2) [1977] VR 454; Jolin Nominees Pty Ltd v Daniel Investments (Aust) Pty Ltd [2021] VSC 705; Jolin Nominees Pty Ltd v Daniel Investments (Aust) Pty Ltd [2022] VSCA 209; Sargent v ASL Developments Pty Ltd (1974) 131 CLR 634; Baese Pty Ltd v RA Bracken Building Pty Ltd (1990) 6 BCL 137; Adapt Constructions Pty Ltd v Whittaker [2015] ACTSC 188
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | L P Wirth | Johnston Construction Lawyers |
| For the Defendants | - | Daniel Legal Group |
HER HONOUR:
Introduction
1In this proceeding, the plaintiff (“the Builder”) seeks judgment against the defendants (“the Owners”) for the sum of $169,750.00 on account of completion of lock-up stage of the building works pursuant to a contract dated 21 January 2021. The Owners defend the claim on the basis that lock-up stage was not complete.
2The Owners further counterclaim that the Builder is liable to them for the sum of $105,042.25 comprising delay damages, interest charges and the loss of a land deposit. The Builder denies liability on the counterclaim and argues that the counterclaim does not disclose a cause of action and should be dismissed.
3In my judgment, none of the Owners’ grounds are made out. My reasons in respect of each ground are set out below.
4Accordingly, I order that there is judgment for the plaintiff in the proceeding in the sum of $169,750.00, together with interest at the rate of 15% per annum pursuant to contract, and the counterclaim ought to be dismissed. I also order that the defendants pay the plaintiff the costs of and incidental to the proceeding on the standard basis, in default of agreement, unless either party has a basis for seeking a different order as to costs. I will invite the parties to prepare draft orders to give effect to these reasons and will determine any issue concerning costs on the papers.
The background facts
5Ozzie Homes entered into an agreement with the Owners comprising of a ‘Housing Industry Association Limited (“HIA”) Victorian New Homes Contract (August 2017)’ dated 12 January 2021 (“the Contract”) to construct a new double storey dwelling (“the Works”) at Lot 30369, Andaman Drive, Craigieburn (“the Property”).
6The total price for the Contract was $485,000.00.
7The Owners paid a total of $145,000.00 for the following three stages: $24,250.00 for the initial stage, $48,500.00 for the base stage and $72,750.00 for the frame stage.
8The Builder issued the invoice for lock-up stage twice, on 2 February 2022 and 1 May 2022. The lock-up invoice requested a payment of $169,759.00 from the Owners. It was claimed that the lock-up invoice was issued in accordance with Schedule 3 and Clause 30.0 of the Contract.
9The Owners refused to pay the lock-up invoice on the ground that the lock-up stage is incomplete. They rely on the inspection report by Paul Laycock of Inspect365 dated 16 March 2022 (“the March Report”) and 28 June 2022 (“the June Report”).
10The Owners requested that the Builder complete the lock-up stage as shown in the March Report. The Builder maintained its position for the full payment of the invoice.
11The Builder then issued these proceedings.
The issues
12This proceeding concerns the following issues for determination:
(a) Was the frame stage competed? Answer: his issue was no longer relevant on the amended pleadings.
(b) Was lock-up stage completed? Answer: yes
(c) Was the Builder entitled to payment of its claim for lock-up stage? Answer: yes.
(d) Is the Builder entitled to payment of some other sum assessed as on a quantum meruit? Answer: not applicable.
(e) Have the Owners, by the counterclaim, pleaded any cause of action against the Builder? Answer: Only with leave to file a further amended defence and counterclaim.
(i)Are the Owners entitled to payment of money from the Builder on some basis? Answer: no.
(f) If so, what is the quantum of that payment? Answer: not applicable.
The Builder’s submissions
13The Builder submits that lock-up stage was completed in February 2022. On 2 February 2022, the Builder gave the Owners a progress claim for that stage. The Owners raised concerns about the frame stage, and so the Builder did not initially insist on payment of its progress claim for lock-up stage. On 24 March 2022, the relevant building surveyor, Yavuz (Leo) Demirel of Building Surveyors Code Pty Ltd, certified that the frame stage had been satisfactorily completed.
14In April 2022, as a result of ongoing difficulties in its relationship with the Owners, the Builder retained Jaswinder Singh of Jim’s Building Inspections, who inspected the works on 6 April 2022 and subsequently produced a report. In that report, he opined that lock-up stage had been completed.
15On 1 May 2022, the Builder gave the Owners a fresh progress claim for lock-up stage. This is the claim that the Builder relies on in the present proceeding. The following day, the Builder’s solicitors gave the Owners’ solicitors a copy of Jaswinder Singh’s report.
16The Builder contends that the definition of lock-up stage in the Contract conforms with s 40(1) of the Domestic Building Contracts Act 1995 (Vic) (“the DBC Act”) which relevantly provides as follows:
“When the home’s external wall cladding and roof covering is fixed, the flooring is laid and external doors and external windows are fixed (even if those doors or windows are temporary).”
17The Builder submits that, as a condition of the staged instalment payment, there must be effective and satisfactory completion; trivial failures or failures borne of impracticalities do not preclude effective and satisfactory completion.[1]
[1] Cardona v Brown (2012) 35 VR 538 at [74] (per Tate JA, Bongiorno and Osborn JJA agreeing) (“Cardona”).
18The Builder argues that each of the conditions for completion of lock-up stage was satisfied. It contends that the absence of the front door, which does not appear to be a matter relied on by the Owners in any event, is explained as an impracticality that does not preclude completion of lock-up stage.
19The Builder submits that, by their defence, the Owners rely on the reports of Mr Paul Laycock of Inspect365 dated 16 March 2022 and 28 June 2022. The Builder argues that Mr Laycock’s report does not establish that lock-up stage was not complete. Instead, the Builder contends that the reports identify work that arguably would require completion before giving the Final Claim or rectification at some point, but those matters are not in issue.
20Further, the Builder claims that the joint expert report of Mr Benjamin Wood dated 22 July 2024 does not advance the Owners’ case.
21The Builder submits that, in their amended defence, the Owners give particulars that identify what they describe as evidence of non-completion of lock-up stage. These include directions and notices from the relevant building surveyor that pre-date and post-date the progress claim for lock-up stage. The Builder contends that none of them bear upon the conditions for completion of lock-up stage.
22In the alternative, the Builder seeks recovery of $169,750.00 on a quantum meruit. The Builder contends that the Owners do not plead any meaningful defence to that claim.
23The Builder submits that the difference between the bases of recovery is interest payable on the judgment sum. If the progress claim became payable under the Contract, interest accrues from 8 May 2022 at 15% per annum. If the sum recoverable is on the non-contractual basis, interest accrues pursuant to statute, which is 10% per annum either from 8 May 2022 or the date of commencement of the proceeding, being 29 June 2023.
The Owners’ submissions
24The Owners submit that the dispute is whether the lock-up stage was complete when the Builder demanded the full $169,759.00 for lock-up stage.
25The Owners claim that when the Builder issued the lock-up invoice on 2 February 2022, he later suspended the building works and did not return to the building site again.
26Between January 2022 and August 2022, the following documents were issued by the appointed building surveyor and the Victorian Building Authority (“VBA”):
(a) First Written Direction to the Builder to Fix Building Work dated 2 December 2021;
(b) First Building Notice dated 13 January 2022;
(c) Second Written Direction to the Builder to Fix Building Work dated 1 April 2022;
(d) Second Building Notice dated 9 April 2022;
(e) Third Building Notice dated 5 May 2022;
(f) First Building Order dated 31 May 2022; and
(g) VBA’s Letter of Investigation for prosecution for failure to comply with Building Order dated 1 August 2022.
27The Owners contend that these notices, directions and orders in addition Mr Laycock’s March 2022 Report were issued before, during and after the lock-up invoice was given by the Builder on both 2 February 2022 and again on 1 May 2022. However, the Builder did not act on any of these notices, notifications and orders.
28The Owners ordered a second inspection report authored by Mr Laycock on 28 June 2022, which they submit again confirmed the findings concerning the outstanding issues with the incomplete lock-up stage. The Builder then terminated the Contract for non-payment of the lock-up invoice on 8 August 2022, which was one week after the VBA’s letter was issued.
29The Owners also rely on Cardona to assert that the Builder is not legally entitled to issue the lock-up invoice in February 2022, and nor was it in May 2022 if the lock-up stage was not complete on either occasion.
30The Owners contend that the Single Joint Expert (“the SJE”) concluded that the lock-up stage was 95% complete when the invoice was issued. They claim that the SJE further concluded that there were defects not rectified by either the Builder or Kotam Projects, the new builder.
31Kotam Projects was retained by the Owners soon after the Builder terminated the Contract. Kotam Projects commenced work in January 2023. The Owners submit that Kotam Projects completed the lock-up stage on 21 February 2023, and they received an invoice in the sum of $150,000.00.
32The Owners argue that the building notices, orders, VBA’s prosecution letter, the March Report and the SJE show that the level of the completion in the lock-up stage was not considered to be effective and satisfactory completion of the required stage – which is a condition for any instalment payment.
33The Owners submit that the level of non-completion of the lock-up stage are not considered trivial failures, or failures borne of impracticalities when considering all the evidence collectively in this matter.
34The Owners argue that the Builder’s entitlement to end the Contract is dependent on the Contract being terminated in accordance with Clause 42, and because it was not terminated by the Builder in accordance with that clause, the Builder has no entitlement to payment under Clause 29 of the Contract.[2] This is because the operation of Clause 29 is dependent upon the Contract coming to an end in accordance with the methods of termination provided for in the Contract, and in this case, the Contract did not come to an end in accordance with any of the methods for ending the Contract in accordance with Clause 42.
[2] Maples Winterview Pty Ltd v Liu & Anor [2015] ACTSC 58.
35The Owners claim that the entitlement to progress payment under Schedule 3 and Clause 29 of the Contract is dependent upon the lock-up stage being completed as set out in Schedule 3 of the Contract and section 1 of the DBC Act. The entitlement to suspend work under Clause 35 of the Contract is dependent upon either the Owners not making a progress payment that is due within 7 days or being in breach of the Contract.
36The Owners submit that the Builder expressly repudiated the Contract during the collective performance of the following acts:
(a) when it refused to resume the building works after February 2022;
(b) when it issued a Notice of Intention to Terminate on 26 July 2022; and
(c) when it issued a Notice of Termination on 8 August 2022.
37The Owners contend that, as the Contract did not come to an end in accordance with any of the methods for ending the Contract in Clause 42, the Owners treated the Builder’s purported termination on 8 August 2022 as a repudiation, which they accepted.[3]
[3] Mohamed v Adrija Pty Ltd (No 2) [2022] ACTSC 89 at [17].
38The Owners argue that, even if the Builder suspended the Contract in February 2022, this was also an act of repudiation on behalf of the Builder, and the Owners were entitled at common law to bring the contract to an end,[4] However, the Owners submit that they were still trying to negotiate a resolution to the dispute, and the Builder rejected any form of resolution and subsequently terminated the Contract on 8 August 2022.
[4] Cardona at [87].
39The Owners submit that, due to the repudiation of the Contract by the Owners on 8 August 2022, which the Owners accepted, either by way of an email dated 2 August 2022 and/or by the retention of new builders, the Owners are entitled to compensation and damages in the sum of $105,042.25.
40The Owners contend that the construction of the project commenced on 18 February 2021, and the Contract in Item 1 of Schedule 1 (subject to Clause 34) only allowed for a total of 270 days of building, which included 30 days for public holidays, weather events and other foreseeable breaks.
41The Owners further rely on Clause 40 and Item 9 of Schedule 1 of the Contract which concerns building delay and provides that if the building works have not reached completion by the end of the building period, the owner is entitled to agreed damages in the sum of $250.00 a week for each week after the end of the building period to and including the earliest of:
(a) the date the building works reached completion;
(b) the date the Contract is ended; and
(c) the date the owner takes possession of the land or any part of the land.
42The Owners claim delay damages in accordance with Clause 40 and Item 9 of Schedule 1 of the Contract as follows:
(a) the building commenced on 18 February 2021 and the agreed practical completion date was 15 November 2021. It took the Owners four months to find another builder to complete the building project. The building project was completed on 7 August 2023. The delay damages cover the period between 15 November 2021 and 7 August 2023. The total of the delay damages is $22,500.00;
(b) interest on mortgage in the sum of $67,542.25; and
(c) loss of land deposit on another property due to the building delay in the sum of $15,000.00.
43The Owners also seek interest on the damages in accordance with the Penalty Interest Rates Act 1983.
The witnesses
Ozcan Oztas
44Mr Ozcan Oztas is a director of the Builder. He generally presented as a careful, considered witness who was ready to make appropriate concessions. Mr Oztas was an honest witness whose evidence can be accepted.
45To carry out the Works, Ozzie Homes subcontracted Emperial Homes Pty Ltd (“Emperial Homes”). Mr Ikbal Singh (“Ikbal”) is the director of Emperial Homes.
46Emperial Homes was placed into liquidation on 3 August 2022. Ikbal is a director of Emperial Homes. Among other matters, Emperial Homes attended to paying subcontractors and the day-to-day conduct of the Works. Prior to this project, Mr Oztas had worked on several other projects with Ikbal. The subcontract arrangement he had with Emperial Homes for this Contract, like the other projects, was not documented.
47As the Owners made progress payments under the Contract, Mr Oztas transferred money to Emperial Homes’ account, from which Ikbal would pay the tradespeople he had brought in to carry out the Works.
48Mr Oztas arranged the paperwork for the project, such as the Contract and the building permit, and he maintained supervision of Ikbal’s work. He was in regular communication with him, and from time to time, came to the Property to inspect the Works.
49In preparing the Contract for this project, Mr Oztas worked on pricing with Ikbal. The price in the Contract was calculated to allow for a profit margin of approximately 20 to 25%.
50On 9 April 2021, Mr Oztas prepared a progress claim for base stage of the Works in the amount of $48,500.00 and gave it to Ikbal to provide to the defendants. The Owners paid that invoice.
51On 28 July 2021, Mr Oztas prepared a progress claim for frame stage of the Works in the amount of $72,750.00 and gave it to Ikbal to provide to the defendants. The Owners paid that invoice.
52On 2 December 2021, the building surveyor issued a Direction to Fix Building Work. When Mr Oztas received it, he forwarded a copy of it to Ikbal. Mr Oztas also went out to the Property to help Ikbal deal with that direction. They went through each item of the direction and made sure that Ikbal understood what had to be done to ensure that each item was fixed.
53On 13 January 2022, the building surveyor issued a building notice in relation to the Direction to Fix Building Work. When he received it, Mr Oztas forwarded a copy of it to Ikbal.
54In about late January 2022, Mr Oztas inspected the Property and formed the opinion that the Works had reached lock-up stage. The external cladding (being ground-floor brickwork and upper-level foam) had been installed, the roof covering was installed, the flooring had been laid and external doors and windows had been supplied and fixed (with the exception of the front door and the garage roller-door).
55Mr Oztas said that the garage roller-door is impossible to install until after the plastering has been done, which occurs at fixing stage.
56The front doors were a solid timber double-door system. It was not practical to install those doors as they were expensive, heavy and liable to be damaged if fixed into position before fixing stage had been completed. Installing the doorjamb prior to fixing stage would leave it exposed to being damaged by workers coming and going. The doors’ hinges would be at risk of being damaged. The final doors also needed to be levelled. This is a time-consuming process. When the plastering is done, the jamb needs to be able to move. After the plastering is done, the lock-up fixer levels the jamb and fixes it in place permanently, and then puts on architraves and skirting around the doors.
57Therefore, instead of fixing the permanent doors at the end of lock-up stage, a piece of plyboard was fixed to the entry way by nails to the timber frame of the house from the inside. Mr Oztas said it was more secure than a temporary swinging door in a doorjamb. To gain entry through the plyboard from the outside, it would need to be destroyed. To remove it without damaging the plyboard, it would need to be removed from the inside.
58All other entries into the house were locked by either fixed doors or fixed windows. Entry into the building for the purposes of fixing stage was via a sliding door to the al-fresco area.
59On about 2 February 2022, Mr Oztas prepared a progress claim for lock-up stage and gave it to Ikbal to provide to the Owners.
60On 24 March 2022, the building surveyor reported that frame stage was satisfactorily completed. When Mr Oztas received it, he forwarded a copy of it to Ikbal.
61On about 1 April 2022, the surveyor issued a Direction to Fix Building Work following an inspection carried out on 30 March 2022. When Mr Oztas received it, he forwarded a copy of it to Ikbal.
62About 3 or 4 weeks later, Mr Oztas returned to inspect the works and checked that the items in the direction to fix had in fact been fixed. By the end of his inspection, he was satisfied that they had been.
63In the meantime, on 9 April 2022, the building surveyor issued a Building Notice. When Mr Oztas received it, he forwarded a copy of it to Ikbal.
64Having dealt with the directions and notice, and not yet having been paid for lock-up stage, Mr Oztas decided to re-issue the lock-up stage claim. Ikbal also told him about having received an inspection report that he had commissioned confirming that lock-up stage had been reached.
65On 1 May 2022, Mr Oztas prepared a new progress claim for lock-up stage of the Works in the amount of $169,750.00 and gave it to Ikbal to provide to the Owners.
66On 2 May 2022, Ms Jillian Johnston, solicitor at Johnston Construction Lawyers, wrote by email to the Owners’ then solicitor, Mr Mannu Devgan of MND Lawyers. In that email, Ms Johnston wrote that lock-up stage had previously been reached, attached the inspection report of Jim’s Building Inspections dated 6 April 2022 together with the surveyor’s report dated 24 March 2022, and demanded payment of the lock-up stage invoice.
67On 5 May 2022, the building surveyor issued a building notice. When Mr Oztas received it, he forwarded a copy of it to Ikbal. He also replied by email (in Turkish) to the surveyor, asking why he had sent the notice. Mr Oztas said that the matters in that notice were either not defects (such as the incomplete brick piers out the front of the house) or simply called for amendments to the permit plans. The circumstances of the notice were also unusual, in that the notice was issued after an unscheduled ‘audit’ inspection. He was not informed that any inspection of that nature would be taking place. The only inspections that Mr Oztas expected were those for base stage, frame stage and completion.
68On 11 May 2022, Ms Johnston wrote by email to Mr Devgan. In that email, Ms Johnston wrote that the Works were past lock-up stage and demanded payment of the lock-up stage invoice.
69Mr Oztas says that had the Owners paid the lock-up stage invoice, Ozzie Homes was ready, willing and able to continue carrying on the balance of the Works.
70On 6 June 2022, Ms Johnston wrote by letter to Mr Devgan confirming once again that the Works had reached lock-up stage and that the Owners were required to pay the lock-up stage invoice.
71On 26 July 2022, Ozzie Homes’s solicitors sent to the Owners a ‘Notice of Intention to Terminate’ the Contract, as the Owners had failed to pay the lock-up stage payment.
72Despite that Notice, the Owners did not pay the lock-up stage invoice.
73On 2 August 2022, Ms Johnston received an email from one of the Owners, Mr Sukhwinder Singh (“Sukhwinder”). In that email, Sukhwinder, among other things, stated that he would not pay the lock-up stage progress claim unless Ozzie Homes paid “compensation in advance”, “complete[d] all the queries for selection sheet” referred to in other correspondence, “provide[d] ... time frame for construction completion on statutory declaration” and “provide[d] customer service and progress in work (if they want payment from [the Owners]) then we will think about if we can go ahead with you”. Mr Oztas did not reply to that email, and he did not instruct Ms Johnston to reply to that email.
74On 8 August 2022, Ozzie Homes’s solicitors sent to the Owners a ‘Notice of Termination of Contract’.
75Mr Oztas said that he was aware (verbally) of the Inspect365 report dated 16 March 2022 in which Mr Laycock opined that the air conditioning unit and ducting was not complete and did not conform with plans. Mr Oztas said that this was not part of the lock-up stage.
76Further, Mr Oztas said that the brickwork mentioned in the March 2022 Report does not affect lock-up stage as it is an incomplete work, and a bit of timber and the flashing is missing. He said the bricks were missing possibly because, when the flashing is put on, it needs to be adjusted. He explained that the bricklayer puts the bricks on before the flashing and the plumber asked for them to be cut to get the flashing on. He said that rectification of the bricks would take approximately 10 minutes.
77In addition, Mr Oztas gave evidence that the parapet wall set out in the March Report does not affect lock-up stage. The gutter had been put in and the gutter and flashing had been rectified in that area and then “[the Builder’s] work on with it further into the stage”. He accepted that the Builder had to fix it, but Mr Oztas said they did not get the chance to do it because the Builder did not get paid to continue on. The parapet bricks were in the state they were in because of the roof plumbing, and he had broken the bricks to get the flashing and gutter on, as well as the capping that needed to go on the top. Mr Oztas said that the work to rectify was to put 5 courses of bricks on the parapet wall. Mr Oztas gave evidence that he would cost the works at $1.40.00 per brick, totalling $20.00 worth of expenses and time wise it would take a total of 30 minutes.
78In relation to the temporary door referred to in the March Report, Mr Oztas said that the installation of a temporary door is a normal process that is used 80 per cent of the time to come up to lock-up stage. Mr Otzas did not agree that the temporary door would not make the dwelling watertight. Mr Otzas gave evidence that the Builder would, at fixing stage, fix the gap in the door/window. He said it was the permanent window, temporarily put in at that stage and when the plasterer did the plastering, it would be adjusted and levelled out.
79Mr Oztas agreed that having the roof covered is part of lock-up stage. He said the roof tiles were fixed. Mr Oztas gave evidence that the roof was open in the area photographed in the March Report because of the steel beams which needed to be rectified at both ends of the beam during lock-up. There were 1.5 tiles missing on one end and approximately 5-6 tiles missing on the other end of the steel beam. He said they had been taken off to install the steel in that location. Mr Oztas said that the tiles need to be slid down and locked back in. It was about 20 minutes of work. The tiles are not missing, and instead had been moved for access reasons.
80Mr Oztas conceded that safety hazards are part of each stage as set out in the March 2022 Report, but did not agree that debris inside the dwelling was a safety hazard. He said that only authorised people are allowed on site and after each stage they have a clean-up process.
81Mr Oztas said that they would fix up the eave linings set out in the March Report. He said that it was possibly there in March 2022, but it would be done because the Builder would have fixed it. Mr Oztas said because there was render work they would have cut the plaster for that section of the eave. Mr Oztas said that this was approximately 1-1.5 hours of labour for one person and approximately $50.00 worth of materials to replace the eave with a 250 mm wide eave and a couple of nails. Mr Oztas said that the wall and roof flashings did not prevent him from sending an invoice for lock-up stage.
82Mr Oztas could not recall the last time he was on site.
Ikbal Singh
83Ikbal Singh is the site supervisor.
84There were gaps in his recollection and his memory lapses were generally explicable by the extensive effluxion of time involved with this case. Ikbal was an honest witness who sought to give evidence within the limits of his powers of memory. I find that where Ikbal’s recollection diverged from contemporaneous written documents, the documentary record is more reliable and ought to be accepted.
85He was a company director of Emperial Homes Pty Ltd. Emperial Homes was placed into liquidation on 3 August 2022.
86Emperial Homes was a subcontractor to Ozzie Homes for the construction of the Works at the Property. Its role was the organisation and supervision of tradespeople for the carrying out of the Works. Ozzie Homes would pay Emperial Homes and Emperial Homes would then pay tradespeople.
87Ikbal has known Mr Oztas, known to him as "Ozzie”, the director of Ozzie Homes, since about 2017. From about that time, until Emperial Homes was put into liquidation on 3 August 2022, Mr Oztas and Ikbal had an arrangement whereby Ikbal would find customers for Ozzie Homes, Ozzie Homes would prepare the contract and be responsible for building permits and the like, and, subject to Mr Oztas’ supervision, Ozzie Homes would subcontract the management of the project, including organising subcontractors, to Emperial Homes.
88In 2020, Ikbal was working on a construction in Thomastown. Sukhvinder Singh and Rupinder Kaur knew the owners of that project and while Ikbal was working there, they approached him and spoke with him. They told Ikbal that they were interested in building something that they were having designed. In subsequent meetings, they showed Ikbal a sketch of a floorplan of what they had in mind and a list of inclusions. Ikbal subsequently prepared a quote, which they accepted.
89In the process, Ikbal referred the Owners to a building designer, Harmanjot Singh of Arch Designs, who then prepared the construction drawings.
90As Ikbal was having these discussions, he kept Mr Oztas informed. Once the quote was accepted, Ozzie Homes prepared the Contract, which included the Arch Designs drawings, and arranged for it to be signed. Ikbal received a copy after the Owners and Ozzie Homes signed it.
91Ozzie Homes then prepared the application for the building permit, which Ikbal sent by email to the building surveyor. On 15 February 2021, the building surveyor issued the building permit.
92Once the building permit was issued, he arranged for site preparation, starting with site cut and pegging.
93During the Works, Ikbal attended the site at least 3 times a week to inspect and make sure things were being done correctly.
94On 2 December 2021, the building surveyor issued a Direction to Fix Building Work, which Ozzie forwarded to Ikbal by email. Ikbal saw to it that the matters identified in that notice were fixed, although Ikbal cannot recall exactly when.
95On 13 January 2022, the building surveyor issued a Building Notice, which Mr Oztas forwarded to Ikbal by email. Ikbal does not recall what the issue was at the time, but they were working on the things the building surveyor had taken issue with.
96On about 2 February 2022, Ozzie Homes sent the Owners a claim for lock-up stage. Ikbal said that lock-up stage had been completed as the windows were in, the cladding was done and the roof was on, but a front door was yet to be installed because it was not practical to at that time (which was to be a large solid timber double-door system). It would only have been damaged if it had been installed.
97During the Works, Ikbal met on site with the Owners regularly. After the claim for lock-up stage was given to them in February 2022, the Owners raised with him some concerns about the frame stage works, even though they had already paid the claim for frame stage.
98On about 15 March 2022, Ikbal received a copy of an ‘Inspection Memo’ following an inspection that the building surveyor had carried out on 23 February 2022. In that document, the building surveyor instructed or directed that some works be rectified, and Ikbal said that he subsequently made sure that they were attended to.
99On 24 March 2022, the building surveyor reported that frame stage was satisfactorily completed.
100In carrying out the Works to frame stage, various subcontractors provided the following invoices:
(a) Deleon Projects Pty Ltd in the amount of $6,367.46;
(b) Deleon Projects Pty Ltd in the amount of $6,367.46;
(c) Unique Trusses Pty Ltd in the amount of $19,500.00; and
(d) Unique Doors & Timber Pty Ltd in the amount of $32,490.46.
101On about 1 April 2022, the building surveyor issued a Direction to Fix Building Work following an inspection carried out on 30 March 2022. The items of work set out in the notice concerned the frame. Each of those items was fixed.
102Ikbal recalls receiving a report from Inspect365, but he does not recall in relation to what issues. He spoke with Sukhvinder about it. kbal said to him that the Builder would attend to what they could, but they were going to be guided by the building surveyor.
103Ikbal recalls having at least one or two conversations with the Owners about lock-up stage. He tried to explain to them what lock-up stage was, as it is defined in the Contract. They were complaining about aspects of work not being done, or not done to their satisfaction, that were not part of lock-up stage but were for that reason refusing to pay the claim for lock-up stage.
104Because the Owners had taken issue with completion of lock-up stage, Ikbal contacted Mr Jaswinder Singh of Jim’s Building Inspections to carry out an inspection and produce a report on whether, in his opinion, lock-up stage had been completed. By a report dated 6 April 2022, he concluded that it had.
105After receiving the Jim’s Building Inspection Report, and in about early April 2022, Ikbal went to Mr Oztas’ office to discuss with him the lock-up progress claim not being paid and what to do about it. Mr Oztas referred Ikbal to his solicitor, Ms Johnston and said to get in contact with Ms Johnston and have a letter of demand sent out.
106In about mid-April 2022, Ikbal met with Ms Johnston at her office. Ikbal told her about the Jim’s Building Inspections report and she asked that Ikbal send it to her so she could prepare a letter of demand, which he subsequently did on about 19 April 2022.
107On 2 May 2022, Ms Johnston sent by email to Mr Devgan, the owners’ then solicitors, a letter of demand together with the building surveyor’s report dated 24 March 2022 and the report of Jim’s Building Inspections dated 6 April 2022.
108In carrying out the Works to lock-up stage, various subcontractors provided the following invoices:
(a) Asr Concrete in the amount of $700.00;
(b) All Proof Building Protection in the amount of $747.00;
(c) Uppal Steel in the amount of $12,900.00;
(d) WindowsNow Pty Ltd in the amount of $14,600.00;
(e) Star Scaffolds in the amount of $811.84;
(f) Hume Bricks and Pavers Pty Ltd in the amount of $6,743.10;
(g) Supervised Building Services Pty Ltd in the amount of $11,704.00;
(h) Star Scaffolds in the amount of $1,960.20;
(i) MYS Roofing Pty Ltd in the amount of $8,250.00;
(j) Mahavir Insulation Pty Ltd in the amount of $651.20;
(k) Express Steel Sales Pty Ltd in the amount of $114.84;
(l) Hume Bricks and Pavers Pty Ltd in the amount of $988.00;
(m) Apneet Pty Ltd in the amount of $12,186.00.
(n) Star Scaffolds in the amount of $6,272.20;
(o) Star Scaffolds in the amount of $308.59;
(p) Star Scaffolds in the amount of $858.00;
(q) Shine Rendering in the amount of $9,900.00;
(r) Star Scaffolds in the amount of $1,518.00;
(s) Star Scaffolds in the amount of $261.12;
(t) Star Scaffolds in the amount of $528.00 (a credit note);
(u) Oktay Duman in the amount of $12,100.00 (part of which was for work following lock-up stage);
(v) WindowsNow Pty Ltd in the amount of $1,000.00.
(w) Hume Bricks and Pavers Pty Ltd in the amount of $860.70; and
(x) Apneet Pty Ltd in the amount of $3,535.00.
109In about May 2022, Mr Oztas told Ikbal that the Owners had not paid the lock-up stage invoice. Apart from some minor internal carpentry following lock-up stage, Ikbal did not have any further work carried out pending payment of the lock-up stage claim. Had the Owners paid that claim, and Ozzie had asked Ikbal to continue carrying out the Works, Ikbal said he would have been willing and able to do that.
110On 9 April 2022, the building surveyor issued a Building Notice. It had four items on it.
111The first item was the render on the garage wall. During the brickwork for the garage wall, Sukhvinder called Ikbal and told him that he thought the bricklayer laid some of the bricks facing the wrong way. Ikbal called the bricklayer and told him to stop. He went to the site to inspect what had been done. Sukhvinder was also there. Instead of having the bricklayer fix the issue, Sukhvinder asked if the wall could simply be rendered instead. Sukhvinder said that because there was already render on the front of the house, render on the garage wall would not be a problem.
112Accordingly, Ikbal had the garage wall rendered. He did not take any step to have Mr Oztas issue a variation, and Ozzie Homes did not charge the owners for the render. The bricklayer said that he was willing to pay for the render, but Ikbal did not end up charging him for it.
113The second item was the brick piers. These are large, essentially decorative, columns of bricks that stand in front of the house at the entrance. At the time of the direction, bricks had only been laid to the height of the ground floor. That part was done without scaffold. Scaffold was required to finish them. Other external work would be done on the first storey at the same time when the scaffold was there.
114The third item was that the brickwork on the north elevation had a “step down in lieu of being straight”. This was the result of an error in the drawings. One drawing showed that the brickwork of the ground floor met the render on the first floor and had a straight line at the top that ran underneath the study window (labelled W26) and along the full length of the wall. However, that was inconsistent with another drawing showing the parapet wall. In the end, the only way to make the brickwork match the height of the parapet wall was to add two or three courses of bricks to the ground floor brickwork, which continued in a straight line until it met the study window, and then the line of brick had a “step down” to go underneath the window.
115The fourth item was the laundry door. The drawings for the laundry door had an error. Briefly put, a 1500 mm door could not fit in the cavity provided for whilst maintaining compliance with relevant standards. To fit a 1500 mm door, an opening of 1560 mm was required. The space available was 30 mm too short to comply with the standards. This problem was identified while brickwork was being carried out. There was no room to move the door to fix the problem. The maximum size door that could fit was 1440 mm, but there is no such door size, so Ozzie Homes arranged for a 1400 mm door.
116Shortly after discovering this problem (Ikbal did not remember the date), he met with Sukhvinder on site to talk about it. Ikbal explained the problem to Sukhvinder and told him that Ikbal would put in a 1400 mm door instead of a 1500 mm door. He said that he was not happy about it. He said that he wanted. as compensation, to upgrade some other small items without charge. Ikbal does not recall exactly what they were, but one request was to include a cavity door on the first floor, which he thought was installed between the master walk-in wardrobe and the ensuite. The render on the first floor was also upgraded with some basic lines.
117Ikbal recalled that the Owners claimed that the lock-up stage was not complete. He could not recall exactly what items they claimed were incomplete.
118Ikbal could not recall the exact date that they stopped working. In due course he said they would rectify any problems set out in the building surveyor Building Notice. He did not carry out the work because they would carry it out in the next stage, if they continued on with the work.
119The missing noggins in Item 20 of the March Report are in the level 1 bathroom. The noggins at Item 3 of the Second Written Direction do not match. They are in a different area.
120Ikbal recognised the photo of the door from the garage to the house to confirm to the building inspector that lock-up items had been completed. He took the photo on 7 April 2022. Confirmation was needed because, at the time of inspection, the door was missing. The carpenter installed the door. He had not received an invoice at that time. He knew that moving forward he had to come back to complete the work and would invoice once all the works were completed.
121Ikbal recalled working on the brick wall after this time.
Jaswinder Singh
122Mr Jaswinder Singh (“Jaswinder”) is a building inspector, and he conducts a business as a building inspector through Jim’s Building Inspections in Wantirna. He is a registered building practitioner: DB-U 72472. He was a reliable and credible witness.
123In about early April 2022, Ikbal asked him to conduct an inspection of the Property and produce a report as to whether the works there had reached lock-up stage.
124As requested, on 6 April 2022, Jaswinder conducted an inspection of the Property. He took photographs during the inspection.
125Following the inspection, Jaswinder produced a report dated 6 April 2022. In that report, he recorded some of his observations and included some of the photographs he had taken. Those observations included that the external wall cladding was completed, the roof was covered, doors and windows had been installed and the slab on the ground floor and the flooring on the first floor had been installed. Jaswinder instructed for a door to be installed for it to be completed. He was sent a photo by phone from Ikbal showing installation of the door to the garage a couple of days later. Jaswinder said that he recalled the door and the site and was able to match the door with the existing conditions. The date of the photo is 7 April 2022. Jaswinder inspected the day before that.
126Based on his inspection, Jaswinder reported that, in his opinion, the works had reached lock-up stage. Jaswinder said that he did not need to take photos of the inside of the dwelling to determine if lockup stage had been achieved.
127Jaswinder was asked to provide an opinion about whether lock up had been achieved because the Owners were denying it. Jaswinder looked at the HIA Contract and the definition and he said that the invoice could be claimed.
128Jaswinder said that the missing items identified would be defects which is different to not reaching lock-up stage. He said this is the general practice in the building industry to be able to claim the progress payment for that stage because the building surveyor passed the frame inspection.
129Jaswinder noted that the missing bricks in the parapet was not part of lock-up stage. He said that this is not stopping the building from proceeding further. The external work had been completed but someone had knocked off some brickwork. Jaswinder said that when he inspected, he did not see incomplete brickwork.
130Jaswinder also said that the eaves damage does not impact lock-up stage. It is part of the fixing stage. It is not external wall cladding. He said eaves is not part of lock up stage, so he was not looking for it.
131Jaswinder said that the flashing was missing. If it was a water leak, then it is lock-up stage. He did not see evidence of this at the time of his inspection.
132Jaswinder noted that the laundry door was there. He said if there was a minor adjustment required then this could be done at fixing stage. It was not part of lock-up stage.
133Jaswinder said that the missing bricks are part of lock-up but that the work could be continued. If he had to give a percentage of incomplete works, Jaswinder said it was 1% incomplete. This was not something he saw during his inspection.
134Jaswinder said that the work could continue and they needed to put the flashing there. If there is internal flashing installed, then the building is watertight. `He said the Builder installed cladding, a capping, a flashing and then they put the cladding on. If that is the case, then the building is watertight. Jaswinder said that the HIA Contract does not say if a flashing is missing you cannot say it is not lock-up stage. This was not something that he saw during his inspection.
135Jaswinder said that he saw the capping was on, meaning the middle floor flashing and the first floor and ground floor cladding was on when he inspected the dwelling.
136Jaswinder said his report was not a defect report, it was a general report.
Benjamin Wood
137Mr Benjamin Wood is the single joint expert and a building consultant.
138Mr Wood presented as a careful, considered witness who was ready to make appropriate concessions. He was a reliable and credible witness. I preferred his evidence to that of Mr Laycock as he was an independent expert.
139Mr Wood inspected after completion. In relation to whether lock-up stage had been completed, he relied on documents given to him, such as the two Inspect365 reports from Mr Laycock, the Registered Building Surveyor and the Jim’s Building Inspection Report by Jaswinder Singh. He relied on assumptions as set out in the reports. Mr Wood noted that the Jim’s Inspection Report did not include internal photographs and that lock-up stage does not necessarily require internal works to be completed. He said there were no issues with the floors, and they are done at structural stage. Doors can be temporary, and the relevant definition is set out in the DBC Act. Lock-up does not include workmanship for the definition of completion of that stage.
140Mr Laycock’s March Report was carried out during framing stage on 16 March 2022. He broke down the report into 22 items. He included flashings as part of the overall roof and wall cladding system. Mr Wood said that cappings and flashings are part of the roof system and flashings would form part of the wall system. If they are absent, however, it would not enable someone to enter the house. The flashings were omitted and would need to be done before handing over the house. Mr Wood’s opinion was that flashings would need to be done as part of lock-up. The Builder would need to return under by capping over the top and return under the cladding to create a seamless interface.
141In relation to the missing bricks from the height of the ground floor to the height of the balustrade, Mr Wood said there was other work to be done such as the installation of the balustrades and the Builder would need scaffolding to do this work. There would need to be a trestle system to get up to the height to lay the extra brick courses on the first-floor level. The scaffolding would wrap the building to the necessary height and be erected once and pulled down once. Mr Wood said that the most common practice is that the bricks would be done all at once, but he conceded that it is possible to do it separately in respect of the brickwork for the piers. He said that it is a cladding of a pier on a porch attached to a home.
142Mr Wood said that the temporary door is not in accordance with the plans because it is temporary.
143Mr Wood noted missing roof tiles in two locations over a steel beam. He could tell for one course of the tiles that one could have been pushed up but not two courses. He conceded there were not lot of tiles on the roof. He could not tell if the steel beam was in the way but said it is possible they were left off for that reason or generally left off.
144He said that external walls are plumbed at frame stage. Mr Wood said that the internal walls and nogging have nothing to do with lock-up stage.
145At lock-up stage, Mr Wood said it may be best practice to take photos of the internal as more photos are better, however, they are not required.
146Mr Wood said that the tiles can be determined from aerial mapping and drone inspections and internal photos are not necessarily required.
147The First Written Direction and First Building Notice from 2 December 2021 included works within the frame stage and would be completed as part of frame stage. In sequence, the frame stage should be completed before lock-up stage, but it is possible to carry out lock-up works. Item 1, the cypress posts, would be required for the brick pier to be installed. Items 4, 5, 6, 8, 10, 11, and 12 would not be required for lock-up stage as it is just bolts, connection plates and small fixing items. In relation to the flashings to the brickwork items 13 and 14, he could not conclude just from the definition without being taken to the photos, which were not attached to the notice.
148In lock-up stage if it is defective work, they are considered completed and defects are rectified during the course of the building work. Mr Wood said that the best practice is to rectify the defects. However, if the works are completed and completed incorrectly, they are considered completed, nonetheless. They do need to be competed at some stage, but he does not know when.
149Mr Wood said that downpipes are not included in the definition provided for lock- up stage. They are usually competed with scaffolding, but they are not part of the cladding system.
150Mr Wood said that heating and air conditioner are not part of lock-up. It can be completed in the fixing stage. He acknowledged that some builders do it during lock-up stage and some may not. Ordinarily builders do not, and it is not part of the definition.
151The Second Written Direction dated 1 May 2022 all relates to the frame. The window frame is secured with window fastenings by nail with studs on either side. Item 8 relates to studs needing noggins and studs are out of plumb and the timber frame is out of plumb and additional noggins are needing to be included. Mr Wood said that noggins are not needed to fix a window frame. Under the building standards, the correct practice is to fix them through the reveal, whether that be through a screw fastener, and they are typically packed with window packers between the frame of the window and the structural frame and they are secured with a screw or a bullet nail.
152Typically, the definition for lock-up stage does not specify internal services such as electrical, plumbing or mechanical services.
153In relation to the brickwork being item 3 and laundry door being item 4, Mr Wood said that these were defective works as they were not part of the plans. Mr Wood said this comes back to the issue of defective and incomplete works for the purposes of completion of the lock-up stage.
154Mr Wood said that the on review of the March and June Reports, the photos appeared to be the same. It suggested that no further works were taken during that period. The Building Notices and Building Orders were consistent. The documents aligned and that was all he could confirm from the documents.
155Mr Wood said that for the items regarding the roof and flashings, the works were incomplete, and he could not confirm that they had been completed and there was no evidence otherwise.
156He believes that his opinion of 95% completion of the lock-up stage given the exception of the entry door, roof tiles and roof and wall flashings is a reasonable conclusion. The calculation is $161,262.50 of the invoiced amount of $169,750.00.
157Mr Wood noted, in relation to the new builder’s invoice for lock-up stage, there were no separate defects work invoice put in by the new builder for all works in each of the 3 stages. Mr Wood said that the sum $152,775.00 invoiced by Kotam Projects could include establishment, other project costs, fixing costs, defects, and cleanup site in addition to lock-up stage. There was no detailed breakdown of those costs. The works had not been carried out, so they were the reasonable costs for them to rectify.
158Mr Wood said that if the Builder had entered into a contract with the market value of lock-up at the time of execution of the contract, it would be 35% of the contract price and 95% of those works of $825,611.89, which amounts to a sum of $274,515.95, which is more than the Builder invoiced in this proceeding.
Sukhvinder Singh
159Sukhvinder Singh and his wife, Rupinder Kaur, entered into two building contracts with Ozzie Homes for the Property. In late 2020, he agreed to sign the building contract with Emperial Homes as Ikbal said he was using Mr Oztas’ building license as he did not have enough insurance left. He was a witness of truth whose evidence was consistent with available contemporaneous documents.
160Sukhvinder said he placed his trust in Ikbal to get his home built. He expected the project to be completed by 15 November 2021 given the 270 days for construction under the Contract.
161By March 2021, Sukhvinder was complaining about the lack of progress at the site. By text message to Ikbal, he said that “I am telling you Emperial home is responsible for wasting my time and money (interest) & I will be charge [sic] from you”.
162The delay and loss of interest was a growing concern for him. Sukhvinder then asked for time frames to completion. By 4 August 2021, Sukhvinder wrote that he was now under a defaulter’s list according to the bank because of Ikbal.
163By 22 September 2021, Ikbal texted Sukhvinder that there was a COVID restriction of 2 weeks. They would then start back straight away and finish the brickwork and start the first-floor rendering. Sukhvinder replied that brick work started at 1 September 2021 and 21 days had gone and it was “not even half work done”. Sukhvinder expected one week to complete the whole lock-up stage. Ikbal had given expectations, and he was not meeting expectations.
164In November 2021, the house had not been completed or even reached lock-up stage. Sukhvinder conceded that he was frustrated sometimes and was frustrated at Ikbal at the slow progress and the financial impact it was having on him.
165On 8 December 2021, the Owners visited Ozzie Homes and met Mr Oztas for the first time. They discussed the delayed work and a “compensation letter” dated 3 August 2021 in which they claim the Builder confirmed it would pay the Owners’ bank loan interest as a result of the construction delays.
166By text message dated 16 December 2021, Sukhvinder wrote to Ikbal chasing up messages from the previous week about the selections for colour and material selections and Ikbal did not provide it.
167Sukhvinder gave evidence that they had a dispute with the Builder about the incomplete frame and lock-up stage work and multiple defects for the building works, both internal and external. He said that:
“As per contract our front all facade should have rendered as the part of the lock up stage, wrong brickwork on the garage wall built with the incorrect bricks instead of face brick wall, flashing, downpipes and 3 front pillars must complete as lock up stage before removing scaffold, laundry door incorrect as per plan 1500mm not 1400mm even there was enough space 100mm at both sides of the door (frame must install accordingly) and need to complete before issuing invoice. Wrongfully built the whole north side wall (not meeting with plan elevation requirement)”.
168He gave further evidence that there was:
“no flashing, downpipes, incorrect laundry door, incorrect alfresco door installed, no electric/plumbing rough in installed, not any type of services even started as a part of the lock-up according to Inspect365 report and asking the full payment for the incomplete stage works”.
169Sukhvinder said that the Builder never fixed these “big and small” items.
170On 2 February 2022, the Owners received a lock-up stage invoice by email from Ozzie Homes with a threat to stop work.
171On 6 February 2022, the Owners lodged a Domestic Building Dispute Resolution Victoria (“DBDRV”) complaint and consulted their previous solicitor, MND Lawyers.
172By text message dated 11 February 2022, Sukhvinder told Ikbal that he sent a soft copy of the electric plan the day before, and he had given a hard copy 3 months prior. He asked, “please let me know you paying me compensation by cash or I need to send you my bank account number”. Sukhvinder had had conversations with Ikbal about payment of compensation. He said that Ikbal had agreed the night before to pay compensation. Sukhvinder said that Ikbal was saying one thing one day and another thing another day. It caused Sukhvinder concern as to whether Ikbal could get the job done.
173By further text messages dated 11 February 2022, Sukhvinder said that he had an inspection report which said that lock-up had not finished yet. Sukhvinder agreed it was Mr Laycock who was sent out. The reason for the request for the report was because Sukhvinder had lost faith in Ikbal. Sukhvinder agreed he did not trust Ikbal to get the work done. Sukhvinder wanted a report to give to Ikbal to make sure he could get the job done right.
174Sukhvinder said he went to Ikbal’s office and showed him the Inspect365 email. He said that he did not discuss the report with anyone at Inspect365.
175On 16 February 2022, Ikbal told Sukhvinder that all lock-up was complete and asked him to process the lock-up stage invoice. Sukhvinder did not want to pay Ikbal because in his view, lock-up was not complete. Sukhvinder said that he had a very bad experience in the frame stage which they had paid in August 2021. Sukhvinder said they did not want to pay Ikbal for lock-up stage because he would have to pay more interest on his loan. He said that if Ikbal fixed everything in the reports, then they would pay Ikbal for lock-up stage. Sukhvinder wanted him to do more work before they would pay. Sukhvinder was running out of money given the high interest rates paid and the delay in construction.
176By text dated 21 February 2022, Sukhvinder wrote to Ikbal with 5 items that needed to be done before the Owners would pay the lock-up stage invoice including:
(a) Fully lock-up passed by a surveyor report and the Owners’ inspector report and locked with their original front door;
(b) Complete selection sheet;
(c) Declaration from Ikbal and Ozzie Homes with all interior and exterior items in the written selection sheet;
(d) Construction finishing time by the first week of April 2022; and
(e) Pay the Owners’ bank loan interest for the past 3.5 months in the sum of $8,800.00 and a rental house from the next month (March 2022) because they needed to sell their house as their bridging loan was finished.
177Sukhvinder said it was their right to ask the Builder for these demands. They would not pay the invoice until the Owners were paid what they were “entitled to”. Sukhvinder was upset and he did not have “trust with Ikbal”. He wanted Ikbal to make good the things he had done wrong by him. The Owners would hold onto the money until Ikbal made things right by them.
178On 23 February 2022, Sukhvinder said that they had MND Lawyers write to the Builder requesting a response to the delays in the works along with the defective and unfinished work; no reply was provided. On 21 March 2022, he caused MND lawyers to send an email to Johnston Construction Lawyers attaching Inspect365's report “showing all the defects”.
179In March 2022, the Owners contacted Insepct365 again because the Builder kept asking for payment claiming that lock-up was complete. Mr Laycock gave Sukhvinder the report dated 16 March 2022 and he read the report. Sukhvinder explained it to his wife and read the summary of major defects and safety hazards and a summary of minor defects as well. He was upset to learn about the defects.
180Sukhvinder conceded that this was deeply personal to the Owners as this was their family home and their forever home. Sukhvinder wanted the Builder to do “his proper job”.
181On 23 March 2022, Sukhvinder said that the same report was sent to the DBDRV case officer to communicate with the Builder. Sukhvinder gave evidence that they tried to communicate on multiple occasions to complete the lock-up stage and all works to complete the dwelling via DBDRV and their solicitor, but nothing was resolved.
182By invoice dated 1 May 2022, Ozzie Homes made a second claim for payment of lock-up stage in the sum of $169,750.00. Sukhvinder gave evidence that they paid the Builder up to frame stage (total $145,000.00) per their invoice in August 2021. He said that for lock-up stage, the Builder was demanding payment in February 2022, when all internal works were still outstanding.
183By letter dated 2 May 2022, the Builder’s solicitor sent a letter to the Owners’ solicitor attaching the relevant building surveyor’s report dated 24 March 2022, Jim’s Inspections Report dated 6 April 2022 and the reissue of the claim for lock-up stage. It requested payment within 7 days. Sukhvinder disagreed with the assertion that lock-up had been achieved. He relied on Mr Laycock’s reports and said that Jim’s Building Inspections Report must be wrong. Sukhvinder said that Jim’s Building Inspections did not check the roof from inside and he was critical about this omission.
184By email dated 11 May 2022 from the Builder’s solicitor to the Owners’ solicitor, it was said that the dwelling was past lock-up, making the Owners’ position untenable, and payment was required immediately.
185By email dated 25 May 2022, in response, the Owners’ solicitor included some requests as follows:
“10.Our client had proposed a split Payment options with 50% of invoice to be paid after they receive all the compensation, completed selection sheet and defects fixed issued in both reports by surveyor and our clients building inspector. Loan repayment Compensation to be paid in advance is average $2550 pm from 11/11/21 until may-22 total =$15300 & + ongoing when the house construction is completed.
Plus Construction delay:
$250 P/week pay in advance as contract a builder compensation from 11/11/21 until May 22 total =$7350 + ongoing when the house construction is completed.
Compensation for our client's ongoing stress $10,000.00
11.The remaining 50% will be paid after the plaster is completed and our client will monitor the progress for the next 2 weeks after the plaster. In the event, there is no progress then our client will not proceed further.
If the above is unacceptable to your client then, we believe that DBDRV has issued the certificate and our client retains their rights in relation to the issues mentioned above. Please reply to our offer by 6/6/22 or else our client may have to employ other builders to finish the construction.”
186Sukhvinder said that the Builder did not comply with the request.
187By letter dated 6 June 2022, the Builder’s solicitor wrote to the Owners’ solicitor, stating:
“We confirm that lock up stage has been reached; and your client was required to make payment.
We note that our client is entitled to interest on the lock up progress claim payment.
However, if your client makes payment in the sum of $169,750.00 by no later than 4pm on 9 June 2022 our client will forgo the interest due and payable.
Failing payment by that date, your client will be required to pay interest pursuant to the contract at the rate of 15% per annum. On the amount outstanding, interest is not insubstantial.”
188Sukhvinder said that because the Builder was not “coming to” his demands, so he was not “going to” the Builder’s demands.
189By letter dated 22 June 2022, the Builder’s solicitor wrote to the Owners’ solicitor responding to each of the items set out in the 25 May 2022 email and further stated:
“We reiterate that payment in full of the lock-up stage is overdue; as per previous correspondence.
Interest is accruing on the payment. We reiterate that in accordance with the contract, lock up stage has been reached; and also in accordance with the contract; your clients are not entitled to make any deductions from such payment. Our client expressly reserves its rights.
…
We refer you to above items - payment in full of the lock up stage is well overdue. There is no legal basis whatsoever for non payment; and for the outrageous request/demand that our client pays your clients ‘compensation’ now; and then your clients pay 50% of lock up stage.
Summary
Your clients are in substantial breach of their obligations pursuant to the contract and the Domestic Building Contracts Act (Vic). The failure to make lock up stage payment is a substantial breach; and also amounts to a repudiation of the contract. The contract remains on foot at this stage, however, our client would be entitled to terminate due to your clients' conduct. Further and in the alternative, our client is also entitled to an extension of time for the time that your clients remain in breach of their obligations.
Time remains of the essence. We look forward to receipt of your clients’ immediate payment of lock up stage.”
190After receipt of the letter, Sukhvinder engaged Inspect365 for another report in June 2022. He maintained the view that lock-up stage had not been completed and the Builder owed them compensation, and this remains the Owners’ position to this day. Sukhvinder said that the Jim’s Building Inspections’ Report was “wrong”, and he arranged for his inspector to provide a report to show that the Builder’s position was wrong.
191Sukhvinder received the Notice of Intention to Terminate dated 26 July 2022 and held the view that the Builder had no right to terminate for non-payment.
192On 2 August 2022, Sukhvinder wrote an email to the Builder’s solicitor stating, relevantly:
“We clearly mentioned to you, Ikbal and Ozcan in our first communication in Feb 2022, we aren’t paying the invoice for the incomplete lock up stage to your builder until we will get all the answers, compensation and a guarantor who will take the responsibility of our house completion.
But you all just ignoring us and don’t value your customers and have disturbed our mental health & financial lost.…
They don’t have any workmanship, after I paid them $169750 they will run away, one partner Ikbal is already disappear & shut his office, so I don't have anymore trust left on them and we aren’t paying the invoice this time until :
- complete all the works reported in inspection report by our inspector and surveyor’s report
- pay us the compensation in advance which is due from 11/11/2021, contracted & provided letter of bank loan interest until now +$2000 for site cleanup +$700 for temporary fence.
- complete all the queries for selection sheet asked in our previous emails,
- provide me the time frame of construction completion on statutory declaration.,
- provide customer service and progress in work (if they want payment from us) then we will think about if we can go ahead with you.
I am offering them for the last time to arrange a time with me. Otherwise, I don’t care if wants to terminate the contract.”
193Sukhvinder had so little trust in the Builder at that stage that he feared if he paid them the invoice, they would not do what the Owners wanted. Once the demands were met, he said the Owners would think about whether or not they would terminate the Contract. Sukhvinder did not care if the Builder wanted to terminate the Contract if they did not comply with their requests. He accepted that the Builder had issued the notice to terminate the Contract.
194Sukhvinder accepted that, even if the Builder had satisfied all the Inspect365 reports, the Owners would still not pay the invoice because they wanted the other requests to be satisfied. Even if Mr Laycock subsequently gave a report that satisfied lock-up stage, Sukhvinder said that they would not have paid the lock-up stage invoice as they still wanted payment of compensation that they felt was owed to them. He gave evidence that they still needed to sort out the VBA complaint and the other items set out in their correspondence. Sukhvinder would not otherwise carry on with the Builder because of the delay he did not trust them. Sukhvinder said that the Builder was playing with their emotions. They lodged a complaint with the VBA against the Builder.
195In the 2 August 2022 letter, Sukhvinder relevantly, wrote to the Bulder’s solicitor the following:
“Our Lawyer sent you a letter in email on 23/02/2022 where we asked to you reply back with our queries the same questions, we have asked so many times verbally and in emails by us to Ikbal but still no reply and no communication with him from so many weeks and months till.
So, you did reply for (23/02/22 questions) to us on 22/06/2022 which are incomplete anyways and we patiently waiting for all those things from so many months.
And also, there is nothing mentioned about our pending compensation in advance.”
196Sukhvinder said that on 3 August 2022, Emperial Homes went into liquidation and Ozzie Homes terminated the contract on 9 August 2022.
197Sukhvinder said from February to August 2022, they tried to resolve the matter, but the Builder was just demanding their money. The 2 August 2022 email was the last correspondence he sent to the Builder about the project. Sukhvinder said he needed to think about if they would continue with the Builder because they were not providing customer service and progress in work. Sukhvinder consulted with the building surveyor who said not to go through trauma, and the bank said he needed to refinance and find a new builder to take over the work. Sukhvinder said it was hard to find a new builder and they signed the new contract in December 2022. They received the occupancy permit on 7 August 2023.
Paul Laycock
198Paul Laycock is a registered builder and carpenter. He was an apprenticed carpenter from 16 years of age, attained his building registration in 2006 and commenced Property Inspections about 4 years ago and received a certificate of inspections. He does property inspections full time now.
199Mr Laycock had gaps in his recollection and his memory lapses were generally explicable by the extensive effluxion of time involved with this case. Initially, his evidence was that the site was “exactly the same” on the second inspection but he later accepted that there may have been some differences. He did not take photographic evidence of the state of the works on the second inspection. Further, Mr Laycock was engaged by the Owners to produce inspection reports on their instructions. He is not an independent expert and did not have regard to the Expert Witness Code of Conduct, nor attach his curriculum vitae or demonstrate his line of reasoning for his conclusions in his report. I prefer the evidence of Mr Wood over that of Mr Laycock, particularly in relation to the items that fall within the definition of lock-up stage.
200In addition, all the evidence led from Mr Laycock in relation to the cost and difficulty of rectifying defects or incomplete works must be given no weight as none of these matters were put to the Builder’s witnesses for comment as per Browne v Dunn.[5] In closing submissions, the Owners sought to rely on the 7 items identified in the SJE report and not the March and June Reports as set out in their further amended defence.
[5] (1893) 6 R 67 (“Browne”).
201Mr Laycock authored a Private Building Inspection Report on 16 March 2022 in relation to the Property.
202Mr Laycock was involved in the inspection of the Property during the dispute between the parties regarding the lock-up stage. He inspected all the items set out in the summary of the March Report, including roof exterior, safe movement and access, glazing, wall and roof cladding and wall frame. He said it usually takes 1-2 hours to complete inspection.
203The main difference between the two opinions is how much of the lock-up stage was actually complete when the Owners received the lock-up stage’s invoice on 8 May 2022 from the Builder.
204Mr Laycock could not remember how many tiles were missing from the roof. He recalled there were 2 places in which tiles were missing. The flashings were also missing. He said that he had a copy of the plans during his inspection.
205Mr Laycock inspected the following items for lock-up stage on 16 March 2022:
“Description of Building Works Inspected
Description Of Building Works Inspected Wall and Roof Cladding and Flashings Safe Movement & Access Services Glazing Brickwork A/C Unit and Ducting Building Interior Roof Space Waterproofing Fixing No inspection of roof due to height restrictions.”
206Mr Laycock took photos in relation to the air conditioning unit which demonstrated that it was not there.
207Mr Laycock said there was unfinished brickwork, and the height of the brickwork was incorrect, and he could see the inside frame from the outside. It was unflashed and incorrect. He said to make it to specified plans, an estimate to rectify would be between $10,000.00 to $20,000.00 by the time the brickwork was pulled down, re-clad and re-flashed. It would take a week to rectify.
208Mr Laycock said that the parapet brickwork was incomplete and defective and there was poor workmanship. The gutter and flashings were incomplete. He could not recall the location. He estimated $2,000.00 to complete the work and 1 day of work.
209Mr Laycock said the front pillar was incomplete and the wrong height. There were two pillars, so the costs to complete to flash and finish off the Property to stop water getting in were doubled. He said it was possible that there were three pillars, but he could not recall.
210Mr Laycock said the bottom of the window had poor brickwork, was poorly sealed and damaged. The brick wall was broken.
211Mr Laycock said that the alfresco sliding door was loose and hanging. The door frame had not been installed correctly and was flapping in the breeze. It was not fixed in place, and it was leaning into the building unsecured. It could have been easily pushed in. The cost to rectify was approximately $2,000.00 and about 2 days’ worth of work.
212Mr Laycock observed that the garage door was a temporary cover. There was no front door when he inspected. Mr Laycock said that at minimum you have a temporary door, or the permanent door installed. Depending on the door to be installed it may be $5,000.00 to complete. There was no frame at inspection on 16 March 2022.
213Mr Laycock said that a window was not installed properly, it was proud from the frame. Some frames were damaged. It would be $200.00 to fix and 2 hours’ worth of work. Mr Laycock said it was easy to push the frame in as it was not secured.
214Mr Laycock said that the tiles missing from the roof was major because of water ingress and easy access for people. It was unfinished work. The cost to rectify the proper installation of the battens was about 1 day’s work and $2,000.00.
215Mr Laycock said the flashing was missing between the lower roof section and the wall of the above section. There were other areas on the brickwork. He took photos of those areas, for example, the front balcony. Mr Laycock said the eave line had a big gap. The cost to rectify would be about $3,000.00. There were three different trades involved, a tiler, plumber and carpenter.
216Mr Laycock said it was a dangerous worksite and there were trades working without a handrail and no fall protection between the first floor and the ground floor.
217Mr Laycock said there were no flashing over the brickwork, and they could see into the lower roof on the balcony. It was not watertight, there were no handrails, no fall protection and rubbish around. He said that removal of rubbish is relevant to lock up. To complete the flashings, handrail and brickwork it would cost around $5,000.00. Only flashings were cost approximately $3,000.00. To rectify the flashings, it would take 2 days.
218Mr Laycock said brickwork was incomplete and the flashings were missing so it was not watertight.
219Mr Laycock said the insulation was missing and was required before plaster would go on the wall and ceiling. It was an incomplete item. The plumbing and electrical $50,000.00 to complete and a couple of days for each trade. The toilet had no wastepipe or plumbing at all. Mr Laycock said the purple spray marks were from the building surveyor and the noggings were missing and the wall was not fixed off. The spray marks are a usual practice to indicate to trades where something is missing. The shower base or waste and hot and cold water was installed. It was not completed.
220Mr Laycock said that the laundry was an incorrect size as per the plan.
221Mr Laycock noticed mould on the windows from water damage. It would cost around fix the mould about $1,000.00 to get it to the point where it could be painted.
222Mr Laycock observed that the eave was broken, and the tiles and the flashings were incomplete.
223Mr Laycock said the brickwork as incomplete and there were no flashings. The cost was between $500.00 and $1,000.00. He said a scaffold was necessary, and not just a ladder to complete the Works.
224Mr Laycock said the flashing underneath the balcony door was incomplete. The cost to complete was approximately between $1,500.00 to $2,000.00.
225Mr Laycock observed that some of the walls were out of plumb and there was a gap. He said that when lock-up is done the walls should be straightened and ready for plaster. He said this work should be done at that stage. The cost to fix was approximately $1,000.00. It would take a couple of hours to fix.
284First, in relation to flashings, in his evidence, Mr Wood considered them to be either part of the roof or cladding “system”. I accept the evidence of Mr Oztas, Ikbal and Jaswinder that flashings do not make up part of the roof or external cladding and they do not affect the lock-up stage. In the case of Jaswinder, he said that a missing flashing would only impact lock-up if there is a water leak, however, there is no evidence that there was a leak. Further, I give weight to their collective evidence that there were reasons for why the flashings were missing in the affected areas because of the sequencing of the brickwork and the flashing on this project.
285Mr Wood also gave evidence, which I accept, that there is a distinction between statutory requirements for completion of a stage and different building practices preferred by different builders and on different projects.
286In my view, in light of all the evidence, the flashings are not part of either the roof or external cladding for the purposes of s40(1) of the DBC Act. Further and in the alternative, the absence of the flashings in the areas identified in the reports are not a completion item for either the roof or the external cladding but rather were part of a preferable or more convenient method or sequence of construction on this project.
287In relation to the roof tiles, I accept Mr Oztas’ unchallenged evidence that the 4 to 6 tiles had been moved out of the way due to the steel beam. Mr Wood also noted the missing roof tiles in the two locations over a steel beam. Mr Wood gave evidence, and I accept, that he could tell that one course of tiles had been pushed up and underneath. He conceded that it is not a lot of tiles on the roof that were missing and that it is possible they were left off for a good reason and not generally left off. I find that the missing tiles are not incomplete works but rather there were reasons for the moving of the tiles out of the way given the nearby steel beam.
288I do not accept the Owners’ position that the missing tiles resulted in a lack of security as understood in Cardona.[9] The Court of Appeal noted that the expression “lock-up” conveys the achievement of “some degree of security”. In my view, 1.5 pushed up tiles on one end and 5-6 on the other end of a steel beam still falls within the expression of “some degree of security” as understood in Cardona. I accept the Builder’s proposition that a person could throw a rock through a glass window or pull off plyboard and walk in but that is not part of lock-up. Lock up stage does not require that the home is impregnable, nor does it require that all means of access are precluded.[10]
[9] Cardona at [85].
[10] Cardona at [54].
289In relation to the doors, I accept Mr Oztas’ unchallenged evidence that it was not possible to install the garage door until after the plaster had been done. In addition, I accept his and Ikbal’s evidence that the front doors were a sold timber double-door system. Mr Oztas and Ikbal said the doors were expensive, heavy and liable to be damaged if fixed into position before fixing stage. I further accept Mr Oztas’ evidence that, instead of fixing the permanent doors at the end of lock-up stage, a piece of plyboard was fixed to the entry by way of nails to the timber frame which is more secure than a temporary swinging door. Mr Laycock also confirmed that the front door was boarded up when he inspected the site.
290I further accept Ikbal’s evidence that he took a photo on 7 April 2022 of a door from the garage to the house to confirm that lock-up stage was complete. When Jaswinder inspected on 6 April 2022, his recollection was that the door was missing. Ikbal said that a carpenter then attended the site and hung the door, and he sent the photo of the door to Jaswinder. Therefore, further work was done by the Builder after 2 February 2022, contrary to the Owners’ assertions.
291In my view, I accept the evidence of the Builder that the entry door system was not installed because it was impractical to do so, but the entry was boarded up. I rely on Cardona[11] in which the Court of Appeal observed the reference to “temporary doors and windows” which suggests:
“that there may be a need for interim works to be done for the purpose of ensuring that the home is completely enclosed. This suggests that some minor and temporary construction may indeed be required beyond the specifications in the plans”.
[11] Cardona at [85].
292I find that the garage and front doors had plyboard in situ which gives the effect that the house is locked up, which is the statutory purpose of that stage.
293In relation to the bricks on the pillars that support the balcony, I accept Ikbal’s unchallenged evidence about the impracticality and that a scaffold was required to finish them off which would be done at the same time as the first storey work. Mr Wood also gave evidence that the cladding of the pillars is best understood as preferring a different method or sequencing of construction, rather than an expectation that the final few courses of brickwork should have been laid prior to claiming payment for lock-up stage. For these reasons, I find that the bricks on the pillars were not incomplete works that prevented the Builder from issuing an invoice for lock-up stage.
294In any event, I accept the Builder’s position that even at its highest, Mr Wood maintained that, taken altogether, the incomplete items amounted to 5% of lock-up stage. In my view, 5% is a trivial amount and it does not preclude effective and satisfactory completion of the stage.
295My finding that lock-up stage was completed, also necessitates a finding that the Builder is entitled to payment.
Issue 2: Is the Builder entitled to payment of some other sum assessed as on a quantum meruit?
296The Builder’s alternative case is on a quantum meruit in accordance with the principles set out in Mann v Paterson Constructions Pty Ltd.[12] The Builder accepted that there is a prima facie ceiling on the amount to be claimed by it and the claim is limited to its contract price in the sum of $169,650.00. The Builder contends that Mr Wood accepted that he assessed the market value of the contract at $825,611.89, then his assessment for lock-up stage at 95% of 35% of the market value of the Contract in the sum of $274,515.95, was more than what was claimed by the Builder.
[12] (2019) 267 CLR 560 at [102] and [215] (“Mann”).
297The Builder argues that there are two alternatives to get to its quantum meruit claim. First, by service of the Builders’ notice of intention to terminate and its termination notice, if the contractual basis fails, then the notice of termination can be taken to be an election to accept a repudiation.[13] An election once made is irrevocable.
[13] Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 (“Shepherd v Felt”).
298The Builder relies on the 2 August 2022 email from Sukhvinder to the Builder’s solicitor that the Owners were not willing to perform the Contract in accordance with its terms.[14]
[14] KoompahtooLocal Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at [44] (“Koompahtoo”).
299Alternatively, the Builder relies on the doctrine of abandonment or agreed termination. This follows from the 2 August 2022 email at the conclusion of that correspondence where Sukhvinder said that he did not care if the Builder terminated the Contract. The Builder contends that is an offer to terminate by the Owners. The Builder relies on the case of Woolworths Group Limited v Gazcorp[15] which states that it is inferred by the parties’ conduct and the silence that followed which results in abandonment and termination of the Contract.
[15] [2022] NSWCA 19 (“Gazcorp”).
300The Builder further relies on the case of McDonald v Dennys Lascelles[16] that when a contract is terminated due to a breach, the Contract is not void ab initio (meaning, from the beginning). There is a discharge of future obligations, however, the rights and obligations that have arisen from partial execution of the contract continue to exist. Since the Builder has done work, he is entitled to a quantum meruit. The Builder submits that a fair and reasonable value is the full $169,750.00. This is so, when compared to Mr Wood’s report that shows that the contract price was in fact grossly underquoted at $485,000.00 as opposed to the sum of $825,611,89.
[16] (1933) 48 CLR 457 (“Denny Lascelles”).
301Relying on the principle in Mann, although the market value of lock-up stage was well in excess of $169.750.00, the Builder accepts that its contract price is its ceiling.
302The Builder contends that it did not complete the contracted work required for a debt to accrue for any sum for services rendered under the Contract. The Builder asserts that where the work has been substantially performed then the Contract price may be recovered subject to damages for the incomplete component.[17]
[17] Phillips v Ellinson Brothers [1941] 65 CLR 221.
303The Builder submits that the analysis is what is the basis of a quantum meruit of work already done when a contract is terminated. The Builder says that it is an implied term to pay for past work. The Builder relies on the case of Steele v Tadiani[18] where logs were cut to the wrong dimension, but the purchaser took the benefit of the wood anyway. By the acceptance of the wood in the wrong dimensions, there was to be inferred by the parties’ conduct, acceptance of an agreement to pay for the services of cutting the wood and a reasonable sum was recovered.
[18] (1946) 72 CLR 386 (“Tadiani”).
304The Owners say that the Builder failed to show an invoice for a door that was alleged to have been installed after 2 February 2022. They assert that there was no evidence, in their view, that the Builder was working after this time.
305The Owners otherwise did not challenge the evidence of Mr Wood in relation to the market value of the Builder’s contract in the sum of $825,611.89.
306If I am wrong and the invoice did not fall due under the Contract, then I find that the Owners are liable to pay for the work done for and at their request capped in the price of the stage payment of $169,750.00 for the following reasons.
307In Mann, the Manns contracted Paterson Constructions to build two townhouses under a domestic building contract. Before the completion of the second townhouse, disputes arose. The Manns claimed that Paterson refused to return to the site until additional work was paid for and that the work was defective. They argued this amounted to a repudiation of the contract and purported to accept this repudiation. Paterson claimed the Manns’ actions amounted to a repudiation which it had accepted. The High Court held that contractor could recover a quantum meruit for work done before termination for which no contractual right to payment had accrued, however, the claim is limited to the contract price. The contract cannot rely on quantum meruit to recover more than what would have been recovered under the contract.
308In the case of Shepherd v Felt, Shepherd was dismissed from his employment, and the company later discovered additional grounds that could justify the dismissal. The High Court held that the employer could rely on after-acquired knowledge to justify dismissal.
309Applying these authorities, I find that, by its service of a notice of termination, even if ineffective on the contractual non-payment ground, consistent with the principles set out in Shepherd v Felt, the Builder elected to terminate the Contract on the ground of the Owners’ repudiation for the following reasons.
310In my view, the Builder was an innocent party who was entitled to terminate the Contract and, therefore, was entitled, as an alternative to damages, to claim a quantum meruit for work done for an incomplete stage in accordance with the propositions set forth in Mann.
311I find that the Owners unequivocally evinced an intention no longer to be bound or to perform as and when it suited them. The 2 August 2022 email from Sukhvinder to the Builder’s solicitor was plain on its face that the Owners were not willing to perform the Contract in accordance with its terms.[19] The email clearly stated that the Owners would not pay the Builder its invoice until each of their additional demands had been met. The five additional matters included completion of all works reported in the March and June 2022 Reports and the building surveyor’s reports, payment of compensation in advance for bank loan interest, site clean-up and temporary fencing, completion of the selection sheet, provision of a time frame of construction of completion by a statutory declaration and provision of customer service and progress in work. Then the Owners would “think about if we can go ahead with you. … Otherwise, I don’t care if wants to terminate the contract” [sic].
[19] Koompahtoo at [44].
312In cross-examination and in re-examination, Sukhvinder doubled down on his position as expressed in the 2 August 2022 email. He gave evidence that, even if the Builder had satisfied all the items set out in the March and June 2022 Reports, the Owners would still not pay the lock-up stage invoice as they still wanted compensation, they wanted to sort out the VBA complaint and they did not trust the Builder. Sukhvinder feared that, if the Owners paid the Builder, they would not do what the Owners wanted them to do. The problem for the Owners is that there is no contractual basis for them to take the position expressed in their email or in evidence.
313Quantum meruit is available independently of the basis of termination has its genesis in restitution based on the concept of unjust enrichment.[20] The law recognises an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff.[21]
[20] Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at [256-257] (“Pavy & Matthews”).
[21] Mushinski v Dodds (1985) 160 CLR 585 at [617].
314It is not necessary on the facts of the present case to give detailed consideration as to what constitutes a benefit or the circumstances in which the benefit obtained might be “unjust”, as the Owners have clearly obtained a benefit in the Builder working to construct a partially built house owned by the Owners.
315As Deane J observed in Pavy & Matthews, the concept of monetary restitution:
“involves ... the payment of an amount which constitutes, in all the relevant circumstances, fair and just compensation for the benefit or “enrichment” actually or constructively accepted. Ordinarily, that will correspond to the fair value of the benefit provided (e.g. remuneration calculated at a reasonable rate for work actually done or the fair market value of materials supplied).”[22] (emphasis added)
[22] Pavy & Matthews at [263].
316The Builder is entitled to payment for services rendered or goods supplied, and the fair value of the benefit provided takes account of the particular Contract between the parties.
317The costs of building works undertaken (services rendered) and for goods supplied set out in the invoice is the sum of $169,750.00. There was nothing to suggest that figure did not represent fair and reasonable price and in fact was under market value as valued by the SJE.
318Alternatively, both parties referred to the case of Gazcorp[23] which involved an agreement for lease executed in 2008 between Woolworths and Gazcorp. The agreement required Gazcorp to carry out works to construct a shopping centre and grant a lease of part of the centre to Woolworths. However, there was a significant period during which Gazcorp did not perform the required works, and Woolworths did not insist on performance.
[23] Gazcorp at [93] and [96].
319The New South Wales (“NSW”) Court of Appeal in that case examined whether the agreement for lease was abandoned due to the prolonged period of inactivity and lack of insistence on performance by Woolworths.[24] The Court found that the parties’ conduct, and correspondence indicated a mutual intention that the contract not be performed.
[24]Gazcorp at [184].
320The Court emphasised the prolonged period of inactivity and the parties’ conduct supported the inference that they no longer intended to be bound by the agreement.
321This alternative is only advanced by the Builder if the Owners establish that the Builder was not entitled to terminate the Contract on either the contractual ground or the repudiation ground set out above.
322For the reasons already given, in my view, on 9 August 2022, the Builder validly exercised a right to termination. If I am wrong and lock-up stage was not complete and the right of termination did not accrue, then, in my view, the parties abandoned the Contract or agreed to its termination in accordance with the principles in Gazcorp.[25] The effect was to discharge the parties from their future obligations but not accrued obligations.
[25]Op Cit.
323The NSW Court of Appeal considered whether abandonment has its own doctrine or if it is really a construction of discharge by inferred agreement and are doctrinally the same.[26]
[26] Gazcorp at [93].
324The inferred agreement to terminate the Contract arises from the Builder’s legally ineffective termination and the absence of any termination by the Owners. Effectively, by the termination notice on 9 August 2022 the Builder says that it will do not more work and the Owners do not say or do anything in response. They simply fell silent. The inference is that the Contract has been abandoned.
325Alternatively, at the conclusion of Sukhvinder’s email dated 2 August 2022, he made an offer to the Builder that it could either meet the Owners’ demands or it could accept the Owners’ offer to terminate the Contract. By the termination notice dated 9 August 2022, the Builder accepted the offer to terminate the Contract.
326For the reasons set out above, given that there has been substantial performance of the lock-up stage, in my view, the Contract price may be recovered by the Builder for the work done.
The Owners’ counterclaim
327The Owners say that the Builder wrongfully terminated the Contract as the notice of termination was issued in breach of clause 42.3, and they are entitled to damages. The Owners contend that it took them three to four months to find another builder to take over the work.
328The Owners submit that the issuing of the invoice for lock-up and correspondence from the Builder to the Owners on 2, 7 and 15 February 2022 indicated an intention not to be bound by the Contract. The Builder requested payment of the invoice, or they would stop work on the site. The Owners assert that no further works occurred after 2 February 2022.
329The Owners observe that the Notice of Intention to Terminate was sent by the Builder on 26 July 2022 and the Notice of Termination was dated 8 August 2022. The Owners contend that the combination of this, together with the behaviour of the Builder, gave rise an unwillingness or inability of the Builder to render substantial performance of the Contract, which was accepted by the Owners by their email dated 2 August 2022 and the retention of another builder to complete the works.
330The Owners submit that their demands for compensation by text and emails came after the Builder showed its intention not to be bound by the Contract as they had already stopped work. The Owners cited the decision of Mohamed v Adrija Pty Ltd (No 2) in relation to the Builder’s purported termination as a repudiation which the Owners say they accepted.[27]
[27] [2022] ACTSC 89 at [117].
331The Owners rely on the delay damages clauses of the Contract pursuant to clause 40. The Owners submitted that, by email dated 2 August 2022, Sukhvinder said he would consider if they would continue on with the Builder which came after the Builder had suspended work and was evidence of their acceptance of the Builder’s repudiation. The Owners claim they had tried to resolve the matter in the interim and then they contracted with a new builder in November 2022. The Owners, therefore, seek the delay damages from 15 November 2021 to 7 August 2023 in accordance with clause 40 of the Contract.
332The Owners seek 90 weeks delay period at $250.00 per week in the sum of $22,500.00.
333The Owners further seek interest charges for the delay period on their bank loan in the sum of $67,542.25 which they say was agreed to by the Builder in a letter dated 3 August 2021 that it would compensate the Owners by paying their bank loan interest charges as an extra expense due to the delay in the construction of the Property.
334The final loss sought by the Owners is a land deposit. The Owners claim they were going through significant financial strain due to the delay. They could not then keep up payments for the other commitments and they lost $15,000.00 in a land deposit.
335The Owners conceded that if the Builder did not unlawfully terminate the Contract and it was entitled to the invoice, then the defence would not stand there would be no issue on the counterclaim.
336The Builder contends that the counterclaim must fail. This is in light of the finding of at least 95% completion on Mr Wood’s evidence and the Owners asserted that they were ready willing and able to complete the Contract despite the correspondence from the Builder to the Owners between 2 to 15 February 2022 and the 2 August 2022 email. The Builder submits that it was not challenged that it was ready, willing and able to complete the Contract. The Builder argues that it could not have repudiated the Contract when it did not complete minor items and was willing to keep going upon payment of the invoice.
337The Builder contends that the Owners’ pleaded case was that the email of 2 August 2022 was their acceptance of the Builder’s repudiation, however, the language of the correspondence was that they would keep going with the Contract if the Owners’ demands were met. The Builder claims that the email is in the language of affirmation, not an acceptance of repudiation.
338The Builder notes that the alternative plea of acceptance of the Builder’s repudiation is said to be the appointment of the new builder. However, the Builder contends that, in the present case, appointment of the new builder does not work as an election because there was an election that had been spent and the point of the election is that it must be communicated to the defaulting party. The Builder submits that this conflicts with the principles set out in the case of Tropical Traders Ltd v Goonan.[28] That is, that once an election to affirm has been made, the right to terminate is no longer available. The Builder says that there was no evidence that the Builder was made aware of the appointment of the new builder.[29]
[28] (1964) 111 CLR 41 at [55].
[29] Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 at [155] (“Karacominakis”) and Poort v Development Underwriting (Victoria) Pty Ltd (no 2) [1977] VR 454 at [459].
339In relation to losses claimed by the Owners, the Builder contend that the first head of loss sought is a matter of general damages after termination for repudiation which must fail. The Builder submits that the agreed damages is a debt due and payable under the Contract. The Builder contends that the Owners need to plead the term providing for agreed damages and all the elements that give rise to the debt. The Builder conceded that, although the building period is referred to in evidence, a building period is not relevant unless the commencement date is pleaded and proved. The Builder argued that there is no material allegation of work commencing on a given day in the counterclaim. Further, the Builder says it must be alleged that the construction had not been completed within the 270-day period. The Builder submits that if those material allegations had been pleaded then it would rebut the claim on the basis that it is subject to clause 34.0 of the Contract and the Builder would deny the allegation, as there were delays was due to COVID restrictions.
340The Builder referred to Jolin Nominees Pty Ltd v Daniel Investments (Aust) Pty Ltd[30] in which Daly AsJ found that the building period is extended by anything that is beyond the builder’s reasonable control. The Builder contended that in those circumstances, there is no need for an extension of time under clause 34.1 as there is an automatic extension of time. However, the Builder states that this was not pleaded and proved by the Owners.
[30] [2021] VSC 705 upheld on appeal in Jolin Nominees Pty Ltd v Daniel Investments (Aust) Pty Ltd [2022] VSCA 209.
341The Builder notes that there is no loan agreement before the Court to evidence the interest charges incurred on the Owners’ mortgage repayments during the delay period. In any event, the Builder contends that the Contract is on foot to the effect that unless damages are nominal then the parties have been taken to have agreed that unliquidated damages are not available as an alternative to the agreed damages under the Contract.[31]
[31] Baese Pty Ltd v RA Bracken Building Pty Ltd (1990) 6 BCL 137.
342After 9 August 2022, the Builder acknowledges that some unliquidated damages might accrue, but nothing has been proven by the Owner in a meaningful way. In addition, the Builder submits that there is no evidence of a contract of the other property before the Court, no evidence of payment of deposit for that land by the Owners and it says the loss is too remote in any event.
343Given my anterior finding that the Builder completed lock-up stage and the termination was effective on 9 August 2022, the counterclaim must fail. However, even if I am wrong in that determination, the SJE concluded that the Builder had completed 95% of the lock-up stage and it was willing to continue building once the Owners had paid the invoice. Its evidence that it was ready, willing and able to continue performing the Contract was uncontested.
344I also accept the Builder’s position that the Owners fail to identify any act of acceptance of any alleged repudiation. In my view, a proper reading of the 2 August 2022 email is not evidence of acceptance of repudiation. Rather, it is an affirmation of the Contract. The Owners were demanding performance of the Contract. As set out in Sargent[32], words or conduct may communicate acceptance if they are consistent only with electing to terminate the contract.
[32] Sargent at [646].
345Alternatively, the Owners rely on their appointment of the new builder. The Builder accepts that conduct may be sufficient for the purposes of electing to terminate a contract, but the repudiating party must be made aware of the conduct.
346In the case of Karacominakis,[33] Karacominakis claimed damages for defective building work and delays in completion. The NSW Court of Appeal observed that to accept and terminate, one must communicate this by words or conduct; the latter must be enough to make the election manifest to the other party. In my view, the appointment of the new builder fails as a response to an alleged repudiation as an election to terminate the Contract in the present case because there is no evidence that the Builder was made aware of the new builder.
[33] Karacominakis at [155].
347Finally, in my view, the Owners have failed to prove their loss.
348First, there is no evidence that they paid interest on their mortgage repayments in the sum of $67,542.25 or why this amount ought to be granted over and above the delay damages which is supposed to be a genuine pre-estimate at the time the Contract is signed of the costs that the Owners will incur if the project is not completed by the date for practical completion.[34] The Owners did not put in evidence any obligations under a loan agreement and explain how their losses accrued because of a breach of Contract. They relied on a letter dated 3 August 2021 as evidence of an agreement by the Builder to compensate the Owner for the delay in the construction by paying their bank loan interest. No separate agreement was pleaded and proven by the Owners to this effect and no source documents were tendered by them. The Court is left with no evidence to be able to calculate this loss.
[34] Adapt Constructions Pty Ltd v Whittaker [2015] ACTSC 188.
349Second, in relation to the lost deposit in the sum of $15,000.00, the Owners did not tender a contract for the purchase of this property, and they did not explain how the loss of the deposit related to the Builder’s performance or breach of contract. The only evidence tendered by the Owners was a notice of recission dated 5 July 2022. There was no evidence in relation to a contract of sale of land, a deposit of $15,000.00, or payment of an amount of $15,000.00.
350Third, although the particulars to the counterclaim allege that building works commenced on 18 February 2021, and the Owners referred to that date in opening submissions, no evidence was led as to prove the actual date of commencement of construction. Sukhvinder only gave evidence at trial that he expected the project to be completed by 15 November 2021 (given the 270 days for construction under the Contract). Proving the start date is an essential element of the Owners’ delay claims to enable the Court to calculate the Building Period under the Contract. Without this evidence, the Court cannot quantify the loss.
351For the reasons set out above, even if the liability under the counterclaim could be established by the Owners, this damage is not made out.
Conclusion
352Accordingly, for the foregoing reasons, I am satisfied that the Builder’s claim has been made out and the Owners’ counterclaim ought to be dismissed.
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Certificate
I certify that these 68 pages are a true copy of the judgment of Her Honour Judge Burchell delivered on 2 September 2024.
Dated: 2 September 2024
Alexandria Peck
Associate to Her Honour Judge Burchell
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