Paraiso v CBS Build Pty Ltd

[2020] NSWSC 190

Supreme Court

New South Wales

Medium Neutral Citation:

Paraiso v CBS Build Pty Ltd [2020] NSWSC 190

Hearing dates:

28 October 201922 November 2019

Date of orders:

11 March 2020

Decision date:

11 March 2020

Jurisdiction:

Common Law

Before:

Fagan J

Decision:

(1) Leave to appeal granted in respect of grounds 1(ii), 5(i), 5(ii), 6 and 8 in the plaintiff’s amended summons and each of the said grounds is upheld.
(2) Leave to appeal refused in respect of all other grounds in the plaintiff’s amended summons.
(3) The appeal is allowed.
(4) The orders of the Appeal Panel of the Civil and Administrative Tribunal made 19 August 2019 are set aside.
(5) In lieu thereof the following orders are made:
(a) Grounds 3, 7 and 10 of the appeal to the Appeal Panel and so much of ground 14 as relates to Variations Nos 0 and 58 are upheld.
(b) The appeal to the Appeal Panel is allowed.
(c) The Senior Member’s order (1) made 14 March 2019 that the owner pay the builder $94,381.21 is set aside.
(d) The proceedings are remitted to a Member of the Tribunal in the Consumer and Commercial Division other than the Senior Member whose decision is the subject of the appeal, for re-determination of the amounts payable or repayable between the parties in respect of variations and provisional sums.
(e) Upon redetermination of the amounts payable or repayable between the parties under order (d), the Member to whom the proceedings are remitted is to take into account a credit to the plaintiff of $11,858.34 in respect of Home Owner’s Warranty insurance premium.

Catchwords:

CONTRACT - building - whether variations required to be in writing and signed - consequence of non-compliance - Home Building Act 1989 s7E - terms that do not require variations to be in writing and signed unenforceable

 

BUILDING AND CONSTRUCTION - whether defendant entitled to quantum meruit if not contractually entitled to payment for variations

  ADMINISTRATIVE LAW - whether denial of procedural fairness - Tribunal member cross-examining plaintiff’s expert - bias - failure to invite counsel to cross-examine opposing expert - relief granted

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW)
Home Building Act 1989 (NSW)
Domestic Building Contracts Act 1995 (Vic)
Electronic Transactions Act 2000 (NSW)

Cases Cited:

Mann v Paterson Constructions Pty Ltd [2019] HCA 32
Paraiso v CBS Build Pty Ltd [2019] NSWCATAP 211
Wright v Foresight Constructions Pty Ltd [2011] NSWCA 327
Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277

Category:

Principal judgment

Parties:

Rica Paraiso - plaintiff
CBS Build Pty Limited - defendant

Representation:

Counsel:
B DeBuse - plaintiff
R Freeman - defendant

  Solicitors:
Watson & Watson - plaintiff
Phontos Legal - defendant

File Number(s):

2019/182926

Publication restriction:

No

Judgment

1. This is an application under s 83 of the Civil and Administrative Tribunal Act 2013 (NSW) for leave to appeal on questions of law against a decision of an Appeal Panel of the Civil and Administrative Tribunal made on 19 August 2019: Paraiso v CBS Build Pty Ltd [2019] NSWCATAP 211.

2. The plaintiff is the registered proprietor of land at Bray Street Dundas. By written contract dated 23 March 2016 she engaged the defendant to build two conjoined dwellings on the land for a price of $630,000. The work was performed between 31 May 2016 and May 2017. By mid-2017 the plaintiff had paid $719,267.20 by way of progress payments, amounts invoiced for variations and amounts for excess over provisional sums and prime cost allowances. This was nearly $90,000 or 14% over the contract price.

3. On 26 July 2017 the defendant filed an application in the Tribunal claiming further amounts said to be due for variations and for adjustments to provisional sums. The plaintiff denied liability for many of the variations and adjustments. On 6 September 2017 she filed an application claiming a refund to herself in the amount of $300,000. The plaintiff alleged that some of the building work was defective.

4. A Senior Member of the Tribunal heard the competing claims over two days in June 2018. He received written submissions in the period July to October 2018 and on 14 March 2019 ordered that the plaintiff pay to the defendant $94,381.21. That brought the total payable by the plaintiff to $813,648.41, an increase of $183,648 or 29% on the contract price. The Senior Member also ordered that certain rectification work be carried out by the defendant. He published reasons comprising 144 pages. The plaintiff filed an internal appeal against this decision, which was heard on 1 July 2019. On 19 August 2019 the Appeal Panel of two senior members dismissed the appeal with costs and published the judgment cited above.

5. The grounds of appeal for which leave is now sought in this Court are primarily concerned with the basis on which the Senior Member (a) upheld numerous claims by the defendant for variations and (b) allowed the defendant’s claims against a provisional sum of $56,000 for plumbing work. There are two sundry grounds, concerning prime cost items and Home Owner’s Warranty insurance. The grounds raise the following questions:

1. Whether variations to the work to be performed under the contract, as requested by or on behalf of the plaintiff or as dictated by extraneous circumstances, gave rise to binding contractual obligations of the plaintiff to pay for the additional work, in the absence of written details for each variation signed by both the plaintiff and defendant in accordance with cll 2A(b) and 14(d)(i) of the contract (ground 1(ii)).

2. Whether payments by the plaintiff in respect of the defendant’s variation invoices issued during the course of the work were on account only and were open to dispute by the plaintiff as to liability and/or amount at the conclusion of the works (grounds 2 and 3).

3. If the amounts paid by the plaintiff for variations during the course of the work were agreed and contractually binding, whether the defendant was entitled to a margin of 15% on these amounts (ground 9).

4. In the alternative to the defendant’s contracted claim for payment for variations, whether the defendant was entitled to payment for additional work executed at the request of the plaintiff or her representative, by way of restitution of a quantum meruit (ground 4).

5. Whether the Senior Member should have assessed the quantum meruit in respect of the variations in accordance with cl 14 (g), (h) and (i) of the contract, having regard to costs incurred by the defendant to subcontractors and the agreed rates for the defendant’s own employees as prescribed in item 2 of Sch 2 of the contract (grounds 5(i) and 6).

6. Whether there was no evidence of costs incurred by the defendant in respect of 19 of the variations and adjustments for which the Senior Member assessed amounts payable to the defendant (ground 10).

7. Whether the plaintiff was denied procedural fairness by the Senior Member as a result of not being afforded an opportunity to cross examine the defendant’s expert on his written report regarding the cost of the work (ground 5(ii)).

8. Whether the contract provided for a provisional sum in respect of plumbing work (ground 7).

9. Whether the contract provided for a prime cost for the supply of bricks and for foundation piers (ground 7).

10. Whether the plaintiff was entitled to a credit for an amount paid by her for Home Owner’s Warranty insurance premium (ground 8).

6. At first instance the defendant relied upon 63 claimed variations and provisional sum or prime cost expenditures. On the basis of these alleged adjustments to price the defendant sought to retain the extra $90,000 that it had been paid up to mid-2017 and to recover an additional amount of over $94,000.

7. The dispute in relation to many of the claimed variations concerned whether the alleged additional work was actually included in the contract scope. Uncertainty about this was in a number of cases due to poor contract documentation. To take an example, an original landscape plan prepared by Greenland Design Pty Ltd was dated 25 June 2015 and was listed in a schedule to the Council’s notice of determination of the Development Application. The notice of determination was provided to the defendant prior to its first quotation dated 25 February 2016. It is not clear from the evidence tendered in this Court whether the 25 June 2015 landscape plan was provided to the defendant at that time. However the defendant’s Standard Inclusions List accompanying its 25 February quotation contained an item “Landscaping – As per plan – Included”. The Standard Inclusions List of each subsequent revised quotation and of the contract executed on 23 March 2016 contained the same item. The list of drawings in the contract did not include a landscape plan. The list of progress payments in Sch 2 of the contract described the stage at which the tenth payment was to be made as “Landscaping and driveway completed”. The scope of the contract landscaping work was left highly uncertain. A significant number and value of variation claims turned on this.

8. In relation to provisional sum allowances, the contract left room for argument concerning the extent of the plumbing work for which a provisional sum of $56,000 was allowed. This is referred to in more detail below at [138]-[140]. There was a dispute as to whether the defendant was required to construct two on site detention (“OSD”) tanks within its price for the construction generally or whether the cost of these tanks was to be brought to account against the $56,000, so that the defendant would be entitled to extra payment if the tanks contributed to that allowance being exceeded. Again, a significant number and value of items turned upon this issue.

9. The administration of the contract was deficient. There was evidence that the detail of additional work was not documented at the time when variations were requested or when they otherwise became necessary. For reasons explained below, detail in writing of any additional work was essential in order for there to be a contractually effective variation upon which the defendant could claim extra payment in accordance with cl 14. This deficiency of administration led to a great deal of the dispute. Similarly the defendant failed to provide in a timely fashion detailed breakdowns of its claimed prices for variations, applying the labour rates specified in the contract. Many one line invoices were issued long after the work was done.

10. Responsibility for the above deficiencies of contract documentation and administration lies primarily with the defendant. On the other hand, the dispute has been widened and inflamed by the plaintiff making an unsustainable claim that she was entitled to receive an $80,000 refund of part of the contract price. The result has been very expensive litigation involving 63 separate contentious areas of work, each concerning a relatively small sum and the whole adding up to a total amount in issue to which the legal costs are vastly disproportionate. Although hearing time at first instance and on appeal in the Tribunal was relatively short, massive amounts of paper have been generated. The documents submitted to the Appeal Panel comprised 10 lever arch volumes.

11. Against that background it is extremely unfortunate that an error of interpretation of the contract and a failure to accord procedural fairness make it necessary, in my view, for a significant part of the dispute to be remitted to the Tribunal at first instance for redetermination. The plaintiff has not sought leave to appeal against the Senior Member’s resolution of her claim for defective work, nor with respect to the dismissal of her claim for a refund of $80,000.

12. Upon reconsideration at first instance of the defendant’s variation claims and claims for plumbing work counted towards the $56,000 provision, it is conceivable that the outcome of the proceedings will be little different in monetary terms from what the Senior Member ordered. When cl 14 of the contract, concerning variations, is applied according to what I have held is its correct interpretation, the result may be that while the defendant is not entitled to payment for a contractual variation in any amount agreed to by the plaintiff he is entitled to a quantum meruit calculated at the labour rates prescribed in the contract. The difference in law and in principle is between, on the one hand, the defendant seeking to retain or recover an amount to which the plaintiff is alleged to have agreed in circumstances that do not sustain an agreement binding at law and, on the other hand, the defendant establishing its entitlement to restitution of an assessed reasonable payment for its additional work. The assessed amount may prove to be not materially different from the amount that the plaintiff agreed, unenforceably.

The contract

13. According to the findings of the Senior Member at first instance, on about 15 January 2016 the plaintiff provided drawings and specifications to the principal of the defendant, Mr Gagic, and requested that he quote for the construction work on the basis of, inter alia, “$1.00 per brick”.

14. On 25 February 2016 the defendant provided an estimated total cost of $550,000. The written estimate incorporated a “Standard Inclusions List” in which the areas of work and trades were broken down into elements and marked as either “Included” or “By Owner”. Significantly for the issues that arose before the Tribunal, the following items were marked “By Owner”:

Planning and External Works

Water service connection (inside of boundary)

Storm water drains and pits as per engineers plans

Sewer drains and connections (inside of boundary)

Gas service connection (subject to availability of natural gas)

Storm water drainage inside and outside, rainwater tank connections to BASIX requirement

Heating

1 x Gas Heating Points […]

Air conditioning and Ventilation

Ducted air-conditioning […] - Two zones […]

Plumbing Fixtures

Sewer connection to sewer line and water connection to water point within boundary

Installation of sanitary fixtures and fittings – (standard builders range)

Bosch T26 external continuous flow gas hot water unit

2 x Garden taps (front and rear) every single units [sic]

Building External

PVC downpipes for rainwater tanks and charged line

Taps and Accessories

Kitchen – Sink mixer – Chrome – (standard builders range)

If Required

Minor works Section 73, or upgrades, gas upgrades, Level 2/3 upgrades

15. The explanation for most of these exclusions from the builder’s scope of work in its first quote is that the plaintiff’s husband, Mr Gonzales, was a plumber and it appears to have been intended that he would do the plumbing work that was designated “By owner”. On 25 February 2016, in response to the defendant’s estimate, the plaintiff sent to Mr Gagic the following email with a copy to Mr Gonzales:

Hi Ross,

Can you please include an additional $80k to the quote to cover the following:

All plumbing, fixtures, minor works, sewage [sic] et cetera

Ducted Air-conditioning ($14k for both dwellings)

Kitchen Appliances

Counsel fees, insurance etc

16. Evidence given by the plaintiff before the Tribunal suggests that in making this request she expected that Mr Gonzales would still do the plumbing work, that the cost to the defendant would therefore be reduced and that so far as the provisional sum for plumbing work would therefore not be expended by the defendant there would be a credit to herself. The plaintiff exhibited considerable confusion and illogicality about this. In her own mind the potential credit in respect of the provisional sum for plumbing work done by her husband was misconceived as an entitlement to a refund from the defendant of $80,000.

17. On 28 February 2016 Mr Gagic on behalf of the defendant sent to the plaintiff a revised estimate of $630,000. The document containing this figure included schedules suitable to form part of a BC4 standard contract of the Master Builders Association of New South Wales. In Sch 3(a) the following description of the work was inserted:

As per the attached quotation and List of Inclusions.

18. A Standard Inclusions List was attached in the same terms as the list that had accompanied the estimate of $550,000 provided on 25 February 2016. In particular the items set out at [14] above were similarly marked “By Owner”. Most of those items are within the description of “plumbing” and “sewage”. Marking them as “By owner” was inconsistent with the defendant’s increase of the price by $80,000.

19. Schedule 3(b) to the estimate of 28 February 2016 nominated aspects of the work described in the contract drawings and specifications that was excluded from the contract. The following words were typed on this schedule:

All plumbing and plumbing related works to be completed by owner. Owner is a licensed plumber.

ie Water, stormwater, sewer, pits, refer to separate list of inclusions/exclusions

This was, likewise, inconsistent with the addition of $80,000 to the price, which had been made partly on account of plumbing work being included as a provisional sum item.

20. At item 12A and 12B of Sch 2 of the BC4 pro forma contract the revised estimate of 28 February 2016 contained a table of allowances for prime cost items and a table of allowances for provisional sum items. The only entry in each of these tables was: “As per separate list of inclusions”.

21. On 3 March 2016 the plaintiff emailed the defendant in reference to item 12 of Sch 2 of the draft BC4 contract, with the following request:

[Is] it possible to note the $80k on this section of the contract?

-$56k for plumbing related works

-$10k for kitchen appliances

-$14k for ducted a/c

and change the “standard inclusions list” to reflect the above?

22. The defendant replied to the plaintiff’s email of 3 March 2016 on the same day. He attached a further copy of the schedules to the BC-4 pro forma contract with Table 12B of Sch 2 now completed in accordance with the plaintiff’s request, as follows:

1.   Ducted air Con   $14,000

2.   All plumbing works   $56,000

3.   Kitchen Appliances   $10,000

Detailed description of the above are documented in the List of Inclusions

The attached Standard Inclusions List still showed all of the items referred to at [14] above as “By Owner”. This was a repetition of the inconsistency referred to at [18] above.

23. On 5 March 2016 the plaintiff’s finance broker informed her that finance would not be available if part of the work was to be undertaken by herself. The broker required that the notation at Sch 3(b) of the BC4 pro forma contract (see [19] above) be removed and that all items in the Standard Inclusions List that related to plumbing and air-conditioning (quoted at [14] above) be marked “Included” rather than “By Owner”.

24. In the contract signed on 23 March 2016 the Table of Allowances for Provisional Sum Items at 12B of Sch 2 was not completed with the items that had been included in the defendant’s revised estimate when it increased its price to $630,000; that is, the items referred to at [22] above. It contained only the words “As per separate list of inclusions”. The price in the executed contract was $630,000. The Senior Member found that it was a term of the contract that this price included $80,000 on a provisional sum basis for the items referred to at [22] above, despite their omission from Table 12B of Sch 2.

25. The Senior Member also found (at [51] and [77] of his reasons) that the cost of bricks was a prime cost item at an allowance of $1.00 per brick although this was not referred to anywhere in the signed contract. He found (at [77] and [206]), on the basis of entries at pages 6 and 7 of the Standard Inclusions List, that the price included piering for the foundation slab of the building to a depth of 1.5m for the piers shown on the structural engineer’s drawings and that any additional or deeper piers would incur an additional cost of $95 per lineal metre.

Statutory provisions and contract terms re variations.

26. The contract of 23 March 2016 was for “residential building work” within the meaning of the Home Building Act 1989 (NSW): see cl 2 of Sch 1 of the Act. The defendant was a building contractor licensed under Pt 3 of the Act and the contract price exceeded the amount prescribed by the Regulation made under the Act. Accordingly, by force of ss 6 and 7(1A), ss 7-7E applied to the contract. Relevant parts of those sections as in force at 23 March 2016 were as follows:

7 Form of contracts (other than small jobs)

(1) A contract must be in writing and be dated and signed by or on behalf of each of the parties to it.

(4) If the contract price is known, it must be stated in a prominent position on the first page of the contract.

(5) If the contract price […] may be varied under the contract, the contract must contain a warning to that effect and an explanation of the effect of the provision allowing variation of the price. The warning and explanation must be placed next to the price if the price is known.

7A Offence

A person must not contract to do work under a contract unless the requirements of sections 7, 7AAA and 7E in relation to the contract are complied with.

Maximum penalty: 80 penalty units in the case of a corporation and 40 penalty units in any other case.

7E Terms of contracts

(1) A contract must include (and is taken to include) each of the terms set out in Part 1 of Schedule 2. A contract that contains a term that is inconsistent with a term set out in Part 1 of Schedule 2 is unenforceable to the extent of the inconsistency.

Schedule 2 Terms to be included in certain contracts

(Sections 7E and 16DE)

Part 1 Contracts to do residential building work

1 Plans and specifications

(1) All plans and specifications for work to be done under this contract, including any variations to those plans and specifications, are taken to form part of this contract.

(2) Any agreement to vary this contract, or to vary the plans and specifications for work to be done under this contract, must be in writing signed by or on behalf of each party to this contract.

10 Enforceability of contracts and other rights

(1) A person who contracts to do any residential building work, or any specialist work, and who so contracts:

(b) under a contract to which the requirements of section 7 apply that is not in writing or that does not have sufficient description of the work to which it relates (not being a contract entered into in the circumstances described in section 6 (2)), or

(c) in contravention of any other provision of this Act or the regulations that is prescribed for the purposes of this paragraph,

is not entitled to damages or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, and the contract is unenforceable by the person who contracted to do the work. However, the person is liable for damages and subject to any other remedy in respect of a breach of the contract committed by the person.

27. In compliance with s 7(4) and (5) the price of $630,000 was stated prominently on p 1 of the contract, followed by a clear statement that certain provisions of the contract “will, or may in appropriate circumstances, change the contract work and/or the contract price or costs payable by the Owner”. Clause 14 relating to variations and cl 15 relating to prime cost items and provisional sums were included in the list of contract provisions that could potentially affect the contract price.

28. Schedule 2 of the contract, commencing at p 7, stated in item 1 that the percentage to be allowed for supervision, overhead and profit on variations was 15%. Item 2 set out the labour rates for various trades and supervising personnel to be applied in calculating the cost of variations. Both of these items made express reference to cl 14, which dealt with variations to the contract work.

29. Schedule 3 at pp 13-14 identified the work to be performed. It incorporated by reference an attached quotation and the eight-page Standard Inclusions List referred to earlier. It also listed the applicable drawings, including those of the architect, hydraulics engineer and structural engineer. Schedule 3 identified a Specification booklet in accordance with which the work was to be undertaken.

30. The contract incorporated unamended provisions of the standard BC4 contract. The following are extracts from the provisions concerning variations to the work, so far as relevant to the present application for leave to appeal:

2A. Joint Responsibilities of the Builder and Owner

The Parties acknowledge the fact that the amount payable by the Owner under this contract […] is subject to change for various reasons. As at the date of the contract the work detailed in Schedule 3 is work which can be carried out for the contract sum.

The contract sum will be affected by the impact of choices made and work done under the provisional sum and prime cost allowances as well as the various other matters listed on the page 1 warning as to matters which may change the contract price.

The Parties agree that:

(b) any adjustments to the work to be done under the contract are to be recorded in writing and signed by both parties. If such adjustment comprises a variation under Clause 14, the variation should be valued under that clause and the contract price adjusted accordingly.

2. Owners Responsibilities Concerning the Works […]

The Owner must:

(d) provide written instructions to the Builder, where required, in a timely and proper manner so as to avoid delay to the works. This specifically relates to variations, directions and instructions in relation to work under the contract.

14. Variations – How to Deal with Changes to the Work

(a) The works may be varied by such things as:

(i) execution of additional work;

(ii) decreases in or omissions from the Works;

(iii) changes in the character or quality of any material or work such as may be necessary due to the existence of a latent condition;

(iv) changes in the levels, lines, positions or dimensions of any part of the works.

(b) For the sake of clarity a variation is established by:

(i) written instructions from the Owner or the Owner’s representative; and/or

(ii) the supply to the Builder of post contract details such as drawings; and/or

(iii) the discovery of an otherwise unknown or latent condition; and/or

(iv) an instruction issued by a relevant authority under clause 12

which alters the work done, the work to be done or requires adjustments to an existing situation or the work which was otherwise expected to be done.

Accordingly a variation may, for example, result from such things as a request from the Owner, the choice made by the Owner dealing with latent conditions and complying with the requirements of an Authority

(c) The Builder is not obliged to vary the Contract works or carry out any extra work unless the Builder consents. Such consent will not be unreasonably withheld.

(d)    (i) if the Builder agrees to undertake a variation requested or required by the Owner, the variation is to be detailed in writing and signed by the Owner (or the Owner’s agent) and the Builder. Documents detailing the variation, including as appropriate, amended drawings or specifications, become contract documents.

Builder to Advise Value of Variations

(e) The Builder, within a reasonable time of receipt of instructions to execute a variation (ie an instruction signed by the Owner or Owners agent), is to notify the Owner, in writing, of the value of the variation.

Less work due to a variation

(f) Where the works are decreased or omissions from the works are made the cost of the work not now required is to be deducted from the contract price. Cost in this case means the actual expense or amount saved by the Builder because the work is now not required to be done. […].

Additional work due to a variation

(g) Where the work to be done is increased, the cost of the extra work is to be added to the contract price. The Builder can choose when and how often to claim payment for variation work and is not required to wait until the next progress claim.

(h) Where the price has not been previously agreed to the extra work, the Builder may proceed with the variation work and the price to be paid for the work will be the cost as calculated in accordance with Sub-Clause (h) [scil (i)] below, together with the allowance specified in item 1 of Schedule 2 for supervision, overhead and profit.

(i) The cost referred to in (g) [scil (h)] above, unless otherwise agreed, will be calculated as follows:

(i) for work by the Builder’s employees, the rates for such labour are those set out in item 2 of Schedule 2. […];

(ii)   where the work or some part of it is executed by a sub-contractor, the cost to be paid under Clause (g) [scil (h)] above is the amount properly paid or payable to the sub-contractor which will be established by provision of a proper tax invoice from the sub-contractor engaged to do the extra work;

(iii)   the price for materials is the cost of the materials to the Builder. […].

31. By the operation of cl 20 in conjunction with item 5 of Schedule 2, the plaintiff was required to make 11 progress payments during the course of the works. Clause 20 contained the following further provisions:

20. Payment

(b) A progress payment claim by the Builder is to show:

(i)   the value of the contract work performed at the date of the claim;

(ii)   the value and brief description of any variations which are included in the claim;

(c) The Owner must pay the amount of the progress payment claim to the Builder within [3 days].

(e) The making of any progress payment to the Builder is to be taken as payment on account.

Construction of cl 14

32. The introductory words of cl 14(a) are: “The works may be varied by …”. The sub-paragraphs that follow do no more than describe what will amount to a difference between the work that was agreed to be done, in the contract as made, and the work actually performed. Clause 14(a) does not purport to describe events or circumstances that of themselves amount to or give rise to a change in the builder’s contractual obligations. For example cl 14(a)(i) provides that the works “may be varied by” actions of the builder such as doing additional work. Clause 14(a)(iii) states that the works “may be varied by […] changes in the character or quality of any material or work such as may be necessary due to the existence of a latent condition”.

33. Clause 14(b) commences with the words: “… a variation is established by …”. The effect of par (b) is merely to expand the concept of what may be treated by the builder as an instruction or request to vary the works. For example, cl 14(b)(i) and (ii) state that “a variation is established by” express written instructions from the owner or the supply of post-contract details such as drawings. Clause 14(b)(iv) extends this to an instruction from a relevant authority. Paragraph (b) of cl 14, like par (a), does not purport to describe events or circumstances that of themselves change the builder’s contractual obligations.

34. The events described in sub-paragraphs (a) and (b) of cl 14 are either unilateral actions of the builder or owner or they are events extraneous to and independent of both parties. Clause 14(c) makes it clear that such unilateral actions and extraneous events are not sufficient, alone, to change the builder’s contractual obligations with respect to the scope of work. By force of cl 14(c) a change of contractual obligation does not occur unless the builder consents. As the Senior Member observed at [154] it would be a very rare case in which the builder’s consent could reasonably be withheld. Nevertheless, the requirement in par (c) that the builder must consent before the parties will be contractually bound by a variation confirms that pars (a) and (b) of cl 14 do not operate independently of the other paragraphs of the clause. They do not constitute alternative, stand-alone provisions under which a contractually effective variation to the works can come into being.

35. Clause 14(d) stipulates that a variation in the scope of contractual works, to which the Builder consents, “is to be detailed in writing and signed by [both parties]”. If the variation is initiated by a written instruction from the owner or by the supply to the builder of post-contract details such as drawings (see pars (i) and (ii) of cl 14(b)), par (d)(i) does not necessarily require that the variation be “detailed in writing” in an additional document. The written instruction or post-contract details/drawings, signed by the owner, may sufficiently specify the variation for the purposes of par (d)(i) so that the only further requirement of that sub-paragraph is that it should also be signed by the builder.

36. Paragraph (d)(i) is to the same effect as cl 1(2) of Pt 1 of Sch 2 of the Home Building Act, which is statutorily imported under s 7E. That provision, quoted at [26] above, is repeated for ease of reference as follows:

1(2) Any agreement to vary this contract, or to vary the plans and specifications for work to be done under this contract, must be in writing signed by or on behalf of each party to this contract

37. If the parties should both sign a variation, detailed in writing, but fail to agree at that time upon a certain sum to be deducted from or added to the contract price on account of the change in the works, there would nevertheless be a concluded and contractually binding variation. That is because pars (f), (h) and (i) of cl 14 provide certain and enforceable formulae for calculation of the price adjustment. In the case of a variation involving additional work and extra cost, pars (h) and (i) allow for the alternative of the builder and owner agreeing a price adjustment. I construe those paragraphs as providing for agreement on the price of a variation either before or after the extra work is executed. These provisions with respect to cost are not inconsistent with the statutorily imported term referred to above.

38. The Home Building Act does not state what, if any, consequence follows if the parties should fail to comply with the statutory term that there be a signed written agreement for any variation of the works. Likewise, the BC4 contract does not expressly stipulate the effect of the parties failing to have the variation “detailed in writing” and signed by or on behalf of both parties as required by cl 14(d)(i). Clause 14(d)(i) contains imperative language: “the variation is to be etc”. From this I impute to the clause an objective intention that non-compliance is to have a consequence. I take into account the nature and purpose of the entire contract. Inherently from its subject matter the clause is intended to protect the parties against uncertainty with respect to variations, which very commonly arise during the execution of building contracts and are a notorious source of dispute.

39. First, with respect to the requirement that the variation be “detailed in writing”, the clear purpose of this is to avert disputes about what extra work the owner requires to be performed, for which the builder may require the owner to pay. I conclude that the absence of a detailed written description of the variation is intended to protect both parties equally. If this requirement is not met then either party may invoke the omission to deny that the putative variation has altered contractual obligations, with respect to what is to be built in the case the builder and with respect to what is to be paid for in the case of the owner. If the instructed variation of the works is not “detailed in writing” then the contract scope of works is not varied.

40. Secondly, with respect to the requirement of signatures the clear purpose is to benefit the parties severally, so that if the builder has not signed the written details no obligation to perform additional or different work can be enforced against it and if the owner has not signed no obligation to pay can be enforced against her. It would be an unreasonable and capricious construction to treat cl 14(d)(i) as having the effect that a sufficiently detailed written variation signed by the owner would not be contractually enforceable by the builder for payment where the work has been done, merely for lack of the builder’s signature. All of the disputed variations in the present case concerned situations where the defendant had done the work and claimed payment. On the above analysis, in these instances relevant fulfilment of cl 14(d)(i) is concerned with details in writing and signature of the owner or owner’s representative. In the following consideration of cl 14 I will ignore the requirement of a signature by the builder as not being presently relevant.

41. If a putative variation is detailed in writing and signed at least by the owner or owner’s representative, the variation will have contractual effect under cl 14 and be enforceable as to payment, if the builder has performed the varied work. The parties may reach agreement on the sum payable for such a variation pursuant to cl 14 (h) or (i). The agreed amount will then be contractually enforceable. But if there is no written detail signed by the owner there will be no variation capable of being contractually binding and enforceable. Hence there will be no contractual variation to which agreement as to an amount payable could attach as a term. In that situation the builder’s only recourse would be a claim in restitution for a quantum meruit, provided that the owner’s request for the additional work, although not detailed in writing or signed, is clear and has been acted on by the builder and provided that other prerequisites for a restitution reclaim are satisfied: Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277 at [106] (Macfarlan JA, Basten JA agreeing).

42. Section 10 of the Home Building Act would not disentitle the defendant from pursuing restitution of a quantum meruit for additional work in these circumstances. It could not be said that by entering into the BC4 contract the defendant acted in contravention of any provision of the Act or regulations, which is the only basis upon which s10 denies a builder remedies at law. Having regard to the consistency between cll 2A(b) and 14(d)(i) of the BC4 contract and statutory cl 1(2) from Sch 2 of the Act, it is apparent that the defendant contracted upon terms entirely in conformity with the legislation.

43. In the hearing at first instance the Senior Member’s task with respect to each separate variation was to address the following questions:

1. Were the prerequisites in cl 14, particularly details in writing signed by the owner as required by sub-cl (d)(i), satisfied so as to give rise to a contractual variation for which the defendant could enforce payment?

2. For each variation found to have been contractually effective, was the price agreed under sub-cl (h) or (i) and if so in what amount?

3. For each contractually effective variation where a price was not agreed, to what amount is the defendant entitled upon application of the rates in item 2 of Sch 2 and the 15% margin in item 1?

4. For each claimed variation that was not contractually effective by reason of the prerequisites in cl 14 not having been satisfied, did the defendant carry out work additional to or different from that required under the contract and did this occur in circumstances that entitle the builder to restitution of a quantum meruit?

5. For each claimed variation that was not contractually effective but for which the builder is entitled to a quantum meruit, what is a reasonable payment for the varied or additional work, subject to a cap calculated at the rates and 15% margin in Sch 2, as discussed at [97]-[104] below?

Issue (1)/ground 1(ii) – contractual variations under cl 14

The Senior Member’s construction of cl 14

44. The Senior Member held that cl 14(b) specifies mechanisms by which a variation to the work could become contractually binding independently of and as an alternative to the signing of written details under cl 14(d)(i). In effect he construed the words “a variation is established” in par (b) as meaning that a contractually binding variation would result from any of the events listed in that paragraph, without more.

45. This construction is expressed at [148]-[163] of the Senior Member’s reasons, from which the following passages are extracted (emphasis added):

[148] [If any of the actions or events listed in cl 14(b)] alters the work […] to be done […] then a variation is established. […]

[149] The [plaintiff’s] submission seemed to proceed on the incorrect assumption that there needs to be a written instruction along with, or in addition to, the supply of post-contract details or drawings. […] There is no requirement for written instructions by, or in behalf of the Owner, and the variation is established by the supply to the Builder of “post contract details such as drawings” [see cl 14(b)(ii)], or “the discovery of an unknown condition” [see cl 14(b)(iii)]. It might be argued that the post contract details may be supplied orally, so long as it is apparent that the new details have the defined consequence.

[151] Once a variation is established by the supply of written instructions or post contract details including amended drawings issued by or on behalf of the Owner, and assuming the inevitable consent by the Builder to perform the work, the only issue to be addressed is the cost of the work. In such circumstances there is no necessity for the performance of such a variation to be the subject of an agreement, see H Build Nixon [2018] NSWCATCD 20.

[153] The written instructions and post contract details including drawings […] will most often be issued by the [plaintiff’s] representative, identified in the particulars of the contract as “eg Architects, Building Designer”. This would include any other consultant engaged by the [plaintiff] to act on her behalf in relation to the definition of the work to be performed, including engineers engaged by the [plaintiff] to design structural, or service elements and landscaping.

[155] It should also be understood that if the builder agrees to undertake a variation then the work involved can proceed and that the notification of the value of the variation is not a condition precedent to the variation work proceeding, or to the builder’s entitlement to be paid. The “agreement” to proceed may be effected by the builder proceeding with the varied work.

[158] Clause 14(d)(i) refers to the necessity for the variation established by an instruction by, or on behalf of, the Owner to be detailed in writing and signed by the Owner (or the Owner’s agent). This requirement, in so far and if it applies to drawings, is most often satisfied by the delivery, under cover of an email or transmittal notice, of drawings which change the work to be performed in the manner defined in the last operative paragraph of cl 14(b). The written instruction to proceed is effected by the delivery [of] documentation and the detailed definition of the variation is contained in the amended drawings. The instruction to proceed may be given on behalf of the Owner. […]

[159] It is arguable that the terms of cl 14(d) are intended for the protection of the Builder’s interests. […]

[162] The Tribunal does not accept that the failure of the Owner or the Owner’s representative or agent to provide written instructions under cl 14(d)(i), or cl 2(d), when required, precludes the Builder from recovering the cost of complying with an oral instruction to perform work which was not part of the work under the Contract. The Clause [presumably referring to cl 14(d)(i)] is not in exclusionary terms.

[163] The Tribunal has also concluded, see [149]-[151], that where the variation is established by the supply of amended drawings there is no need for a written instruction to the Builder to perform variation work identified in the amended drawings.

[164] Many of the oral agreements for the builder to perform variation works arose because there was uncertainty as to what was required, or because the work was necessary, but was not included on the contract drawings. In most such circumstances the builder having identified the problem asked the owner or her husband what was to be done and made suggestions as to how the problem could be addressed.

46. The Senior Member also said:

[144] [A]part from the procedures under Clause 14 the parties are able to conclude separate agreements for the performance of variations which may involve different considerations to variations which are established under Clause 14. Such variations arise under an agreement between the parties rather than having been established by action on the part of the Owner, or on her behalf. Such variations are not addressed within the terms of Clause 14.

47. The Senior Member’s construction of cl 14 is in my view not correct. Contrary to his reasons at [149], [162] and [164], oral instructions from the owner for a change to the work are not capable of giving rise to a contractual variation under cl 14. It follows that oral variation instructions are not capable of supporting an agreement, enforceable against the owner, as to a sum to be paid for the variation. The true effect of par (b) of cl 14 is limited as described at [33]-[34] above. It is not a provision that enables contractually binding variations to the contract works to be brought about without compliance with cl 14(d)(i).

48. The supply of amended drawings may be capable of serving as an instruction from the owner for a variation to the works (see [163] of the Senior Member’s reasons), provided that the drawings detail the variation adequately. The doubt expressed by the Senior Member at [158] as to whether cl 14(d)(i) applies to post-contract drawings that are delivered by or on behalf of the owner and require a change to the work is misplaced. It may not be necessary for the amended drawings to be accompanied by an express written instruction. But cl 14(d)(i) must be satisfied. If amended drawings are the only document in which a putative variation is “detailed in writing” then the detail must be sufficient for contractual certainty and cl 14(d)(i) requires that the drawing be signed by the owner (or agent) and by the builder.

49. Reading cl 14 as a whole shows that par (b) does not provide an independent, alternative route by which there may be brought about a binding contractual variation to the works. That paragraph simply elaborates the ways in which the extent of a required variation to the works may be communicated. Paragraph (b) is dependent upon pars (c) and (d) for the means by which the requested variation may become contractual. This is reinforced by cl 2A(b). There has not been cited to me any binding authority that would support the Senior Member’s construction and the only case referred to in his reasons is a previous decision of his own to the same effect. The contract in this case is in different terms from that considered in Wright v Foresight Constructions Pty Ltd [2011] NSWCA 327, where the equivalent of cl 14(d)(i) only provided that “the variation should be detailed in writing and signed by the Owner or the Owner’s agent” (emphasis added): see [38]. The decision in Wright v Foresight Constructions Pty Ltd was concerned with a builder’s defensive reliance upon an oral instruction to vary the work, not with a claim for payment under an oral variation.

50. Relevantly to [155] of the Senior Member’s reasons, upon the considerations stated in [40]-[41] above it may be accepted that if the builder proceeds with the varied work in response to an adequately detailed written description of the variation (whether in a post-contractual drawing or otherwise), signed by or on behalf of the owner, then the builder would be able to enforce the owner’s obligation under cl 14 to make payment. The enforceable obligation would be to pay any amount agreed under par (h) or (i) or an amount calculated from the schedule of rates under par (i).

51. If the Senior Member’s construction were correct cl 14 would be inconsistent with the statutory term in cl 1(2) of Sch 2 of the Home Building Act and would be unenforceable by operation of s 7E: Xu v Jinhong Design & Constructions Pty Ltd at [28]-[29] (Basten JA). The Senior Member did not consider this and it is not apparent from the materials before me that the parties raised the point with him. Even if they did not, it was an error for the Senior Member to give effect to par (b) of cl 14 according to his construction where the Act rendered the paragraph unenforceable if so construed. Statutory unenforceability cannot be disregarded. On the construction of cl 14 that I have adopted no inconsistency with the statutory term arises. My decision on the present appeal does not turn upon the operation of the Act in that respect. There is therefore no occasion to examine more closely whether inconsistency and statutory unenforceability were sufficiently raised at first instance or before the Appeal Panel or whether failure to argue these points below should have any procedural consequence in this Court.

52. The Senior Member’s statement at [144] cannot be accepted. In cll 2A(b) and 14(d)(i) the parties agreed upon the manner in which any requested or required variation would become contractually binding, namely by bringing into existence written details signed by both of them. They also agreed at cl 3(d) that, apart from any terms implied by statute, “the whole of the terms, conditions and warranties of this Contract are set out in the Contract”. They bound themselves not to make agreements varying the works to be performed except in accordance with cl 14 and in particular sub-cl (d)(i). If the contract left it open to the parties to make separate simple contracts to vary the works, without complying with sub-cl (d)(i), that would be inconsistent with the statutory term referred to above and would be unenforceable.

The Senior Member’s application of cl 14

53. At [390]-[391] the Senior Member found as follows (emphasis added):

[390] [T]here is no operative provision in cl 14 for a request by the owner for a variation. Variations may be established by a number of means. The primary means by which the variations in this matter were established was by the supply to the [defendant] of post contract details including amended drawings. Such variations are to be detailed by or behalf of the owner. These usually are detailed by the content of the amended drawings. The fact that the owner requested that a variation be performed is established by the supply to the builder of the drawings by the owner, or by representative of the owner. There is no requirement for a request by the owner to the builder.

[391] Where the owner does wish to make alterations to the work to be executed, other than by amended drawings, subclause 14(d)(i) of the contract requires that the owner or her agent provide detailed written instructions. For the reasons at [158]-[162] the builder is not disentitled to be paid the cost of compliance if the owner or her agent fails to provide written detailed instructions when the work is not part of the work under the contract.

[392] The Tribunal concludes that the owner has not established that there was any relevant breach by the builder, particularly for those variations established by the supply of amended drawings for which the absence of a separate request is irrelevant.

54. In the highlighted part of [391] the Senior Member treated cl 14(d)(i) as casting upon the owner responsibility for having variations detailed in writing. That is not borne out by the terms of the sub-clause. Clause 14(d)(i) is not concerned with who must prepare the written details of the variation but it makes the production of such a document, signed by or on behalf of the parties, an essential requirement of a contractually effective variation. The reference at [392] to establishing “any relevant breach by the builder” is inapposite. Fulfilment or otherwise of the prerequisites in cl 14(d)(i) is not a question of “breach by the builder”.

55. The words highlighted above in [391] do not address the case of a change to the work that is necessitated by an extraneous event such as the discovery of a latent condition or the issue of instruction by the local Council. In such an event the change in the contract work that is made necessary must be detailed in writing by one of the parties and then signed by both.

56. At [396] the Senior Member held as follows:

[396] There is no provision in cl 14 which refers to, or requires, an approval of a variation by the owner. Most of the variations in this matter were established by the supply of amended drawings to the builder […]. It is obvious that the builder is entitled to rely upon the presumption that the owner’s representatives have authority to vary the work under the contract, and to deliver amended drawings. There may be circumstances when an architect or engineer issues amended drawings to the builder which establish a variation, when the owner has not been adequately warned as to the need for, and consequences of, the amendments […].

57. Paragraphs [390]-[392] and [396] in their entirety are directed by the Senior Member to the question of what would constitute a request from the owner for a change to the work, which is one of the events identified in cl 14(b) by which the process towards a contractual variation may be commenced. In applying his construction of cl 14 the Senior Member did not address the requirement under cl 14(d)(i) of a mutually signed document and did not examine each putative contractual variation for compliance with this sub-clause, as in my view he was required to do.

Drawings-based variations

58. At [172]-[370] the Senior Member worked through all of the variations claimed by the defendant and found that approximately 10 of them had been requested by the provision of post-contract drawings. On this basis, in accordance with his construction of cl 14(b), the Senior Member concluded that each such variation to the work had been “established”. He used that word in the sense that the defendant had become contractually bound to perform the varied work and that the plaintiff had become liable to pay for it in accordance with cl 14(h) and (i). In each of these cases the relevant drawings may have sufficiently identified in writing the extra work required and they may have been signed by the plaintiff’s architect or engineer. But no finding was made on either of these requirements of cl 14(d)(i) for any of the drawings-based variations. It was essential for the Senior Member to make such findings, with reasons.

59. The drawings-based variations upheld by the Senior Member are listed as follows. I have adopted the Senior Member’s convention of referring to the number of the variation used in the defendant’s aide memoire table presented at the hearing, followed in parentheses by the number used in the defendant’s variation register and in the joint report of the building experts. References in square brackets are to the commencement point of consideration of the relevant variation in the Senior Member’s reasons:

6(3) Waffle pod concrete slab [187]

13(10) Additional bricks and box gutter [217]

22(19) Insulation and acoustic Gyprock [248]

24(21) Structural retaining wall – Unit 1 [255]

27(24a & b) Structural retaining wall – boundary Units 1 & 2 [264]

31(28) Boundary fence Unit 1 [274]

32(29) Boundary fence Unit 2 [278]

33(30) Boundary fence rear [282]

56(54) Additional structural beams [347]

59(57) Structural retaining wall – rainwater tank [354]

62 Rendering to feature wall Unit 1 & 2 [366]

60. The Senior Member found that where an architect or engineer had delivered amended drawings to the defendant he or she did so as the plaintiff’s agent: [396]. It was also held that Mr Gonzales, the plaintiff’s husband, was her authorised agent and that he communicated requests for some variations: [123]-[129]. It is possible that any drawing that called for changes to the work but did not bear a signature may have been transmitted under cover of a signed letter or by email in circumstances that may have satisfied the requirements of the Electronic Transactions Act 2000 (NSW). These matters are not the subject of findings by the Senior Member. But they had to be addressed in order to apply cl 14(d)(i) according to its proper construction.

61. In order to determine whether cl 14(d)(i) was satisfied, in some cases it was necessary to compare post-contract drawings with drawings that were scheduled to the contract or otherwise referred to in it. For example, in connection with variation items 31(28), 32(29) and 33(30) related to landscaping, the plaintiff deposed that on 25 May 2016 she provided to the defendant a hard copy of Greenland Design Pty Ltd’s revised landscape plan dated 29 October 2015. This raised the problem of what landscape plan was intended to be referred to in the Standard Inclusions List (see [7] above). The Senior Member’s reasons do not disclose that he determined what landscaping work was called for under the executed contract or that he attempted a comparison for the purpose of ascertaining what if any variation to the works was called for by the plan delivered on 25 May 2016. The Senior Member described how, in his view, the requirement for additional work was initiated in relation to landscaping. This description indicates that changes were not nominated on the revised plan but came from an oral discussion: see the boundary fence items 31(28) at [274], 32(29) at [278] and 33(30) at [282]. Clearly the Senior Member did not determine that cl 14(d)(i) was satisfied.

Orally and informally requested variations

62. About 17 further variations allowed by the Senior Member were described in his findings as having been initiated by oral requests from the plaintiff or by some form of written communication other than a drawing, the particulars of which are not stated in the reasons. In respect of the variations in this group no finding was made that they were “detailed in writing” or signed by or on behalf of the plaintiff as required by cl 14(d)(i). The Senior Member did not consider whether the circumstances of initiation of any of the variations in this category would engage the Electronic Transactions Act in the absence of handwritten signatures. The relevant items are as follows:

7(4) Stack door to Unit 1 [191

10(7) Additional steps to patios [203]

14(11) Additional study room doors [221]

15(12) House alarms and cameras [225]

17(14) Roller door motors Units1 & 2 [234]

18(15) Additional kitchen wall Unit 2, bulkhead and stack Unit 1 [238]

19(16) Materials for bulkhead and stack [241]

20(17) Subdivision of site [243]

25(22) Spice rack Unit 1 [260]

26(23) Additional electrical variations [261]

35(32) Mirror splashback Unit 1 kitchen [290]

36(33) Longer fence panels and key operated doors [293]

54(51) Tree root removal [338]

55(52) Raising backyard ground level [342]

60(58) 2 in 1 light units to laundry and powder room [359]

61(59) Tiling from floor to ceiling in laundry and powder room [363]

63 Upgrade of internal door furniture [368

63. Some items in the above list were allowed by the Senior Member although he expressly could not identify how the relevant change was initiated, for example items 14(11) (see [223] of the Senior Member’s reasons) and 55(52) (at [344]). In those circumstances a contractual variation under cl 14 could not be upheld.

Council directed variations

64. Approximately 6 of the variations allowed by the Senior Member were found to have been “established” under cl 14(b)(iv) as a result of an instruction from the local Council. On what I regard as the correct construction of cl 14, such variations are not exempt from the requirements of cl 14(d)(i). If an authority should give an instruction that would require varied and/or additional work then in order to be entitled to payment under cl 14 the builder would have to ensure that written details were prepared and signed by the owner showing what change to the contract work was necessitated. The Council might give its directions in writing, spelling out the work required. Satisfaction of cl 14(d)(i) might then require no more than that the builder procure the owner to counter-sign Council’s instruction. In other cases the alteration to the agreed works that would flow from a Council direction would not be self-evident and would have to be written up by one of the parties and signed by both.

65. As a result of the Senior Member applying his construction of cl 14 he allowed variations in this category without making any finding as to whether the additional work required by Council’s directives was detailed in writing and signed by or on behalf the owner. The relevant items are as follows:

The work of this Trade Section includes but is not limited to supplying and laying a complete system of site stormwater drainage and:

Excavation, bedding and backfilling for drain lines

Drains below slabs on ground

Culverts, pits, manholes, frames, covers

Water retention pits

139. A stormwater plan to which the works were built shows what could fairly be described as a “complete system of site stormwater drainage”. The OSD tanks are shown as an integral part of this. They are within the description “water retention pits”, as used in the Specification. Their purpose is water retention. The term “water retention pits” in the Specification refers to something different from the stormwater pits, the function of which is to facilitate the free flow of stormwater rather than to retain it.

140. I arrive at the same conclusion as the Senior Member, that the OSD tanks were within the scope of “all plumbing work” to which the provisional sum of $56,000 applied. This Court is in as good a position as the Senior Member to determine this, as it is not a construction issue that would be affected by assessment of oral evidence or a substantial matrix of contested facts. The issue is governed by a small number of documents. The fact that the proceedings must be remitted to the Tribunal for reasons that include my upholding of the plaintiffs procedural unfairness ground (ground 5(ii)) does not warrant that this legal question of construction of the contract should be remitted. The Court is able to resolve it.

141. Clause 15(b) required the plaintiff to furnish to the defendant “written directions regarding the selection and supply of the work and/or goods represented by [prime cost items and provisional sums]”. Paragraph (c) of cl 15 provided that, at the completion of all prime cost and provisional sum work, any unspent part of the total of the allowances for these items should be deducted from the contract price. Under par (d), if the total amount expended should exceed the allowances then the excess would be added to the contract price.

142. So far as I can ascertain from the Senior Member’s reasons and from other materials before the Court, the defendant did not claim that there were any variations to the contract scope of plumbing work. The defendant claimed only that its expenditure on the plumbing work it had executed, within the contract scope, had exceeded $56,000. This appears, particularly, from the Senior Member’s treatment of the plumbing items at [511] and [669]-[672]. In order to apply cl 15, the whole of the defendant’s expenditure on plumbing had to be counted against the $56,000. The contract does not expressly provide for the basis upon which expenditure is to be assessed where the work is not sub-contracted. However the builder appears to have adopted for this purpose the rates for its own employees specified in item 2 of Sch 2.

143. Upon rehearing the Tribunal will have to consider what evidence there is to substantiate the defendant’s expenditure on the numerous items that it has sought to bring to account against this provisional sum. “Expenditure” is the word used in cl 15. The plumbing provisional sum items considered by the Senior Member are identified as “PS” under various sub-headings of paragraphs of the reasons in the range [185]-[329]. The item numbers are summarised at [370]. The third item in that paragraph should read “9(6)”. Item 16(13) concerned air-conditioning. There should be added items 41(39) and 49(47).

144. There are 15 plumbing items. In relation to nearly all of these the Senior Member relied entirely upon alleged agreement by the plaintiff to the amounts invoiced. He treated payment invoices as proof of agreement that the amounts had been expended and should be brought to account. Unlike cl 14, cl 15 contains no provision for the plaintiff and defendant to agree upon and be bound by an amount of expenditure in respect of the whole or any part of the plumbing work. Given the terms of cl 15, any purported agreement on the quantum of the builder’s expenditure for any part of the plumbing work would be unsupported by consideration and not enforceable contractually. Further, the plaintiff’s purported agreements to amounts are not based on anything other than payment which, for reasons given earlier, cannot support an inference of agreement without having regard to the circumstances surrounding the payment. The mere evidence of payment is conspicuously insufficient to prove agreement where, as occurred in many cases here, payment was made in response to one line invoices for significant sums. Even as evidence of an admission by the plaintiff that the invoiced amount had been expended, the fact of payment had little if any weight.

145. Mr Roberts’ evidence before the Senior Member will be of little utility when the Tribunal attempts to determine the defendant’s total expenditure on plumbing. In his report of 2 February 2018 Mr Roberts acknowledged that there is “insufficient information to determine the extent of work involved and carried out at the time” for several such items. For most of the others, his opinion is limited to noting that the invoice was paid. He has reiterated numerous times the following formulaic statement:

In the light of no evidence or calculations to the contrary the Builders variation cost previously paid by the Owners would appear reasonable.

That is a consideration of little weight given the defendant’s onus of proving that its expenditure on plumbing exceeded $56,000.

146. If, contrary to my understanding, any of the plumbing items claimed by the defendant are for work beyond the original contract scope to which the provisional sum applied, the Tribunal on rehearing also would have to go through the steps listed at [43] above for each such claim.

Issue (9)/ground 7 – construction contract with respect to prime cost items

147. Contrary to the plaintiff’s submissions, it was open to the Senior Member to find that the cost of bricks and the extent of foundation piering were both prime cost items: see [25] above. I agree with those conclusions. Leave will be refused in relation to ground 7 so far as it relates to prime cost items.

148. Whether any additional piering was carried out over and above the allowance of 1.5m indicated in the original engineering drawings and if so the extent of that work is a matter that will have to be re-determined in the Tribunal. The Senior Member dealt with this at [212] and simply allowed the amount claimed by the defendant on the basis that that it was “agreed to and paid for by the Owner”. Like all other matters of quantum and of supposed agreement by the plaintiff this must be re-determined pursuant to my upholding of ground 5(ii) concerning procedural fairness.

149. The defendant appears to have provided no substantiation of the additional length of piers as mentioned above at [119]. Its own expert, Mr Roberts, could only say that the amount claimed appeared to represent 30m of additional pier length, which he thought would “not be unexpected”. He repeated the following familiar formula that, as I have said in relation to its use in another context, is no evidence upon which the defendant’s entitlement could be assessed:

In the light of no evidence or calculations to the contrary the Builders variation cost previously paid by the Owners would appear reasonable.

Issue (10)/ground 8 – plaintiff’s claim for refund of warranty insurance

150. Pursuant to Pt 6 of the Home Building Act the defendant was prohibited from carrying out building work under the contract unless there was in force a policy of insurance for the benefit of the plaintiff, against risks of loss arising from non-completion of the work due to insolvency of the defendant or through non-compliance with statutory warranties. The plaintiff deposed that the insurer’s charges for each Home Owner’s Warranty policy in respect of the dwellings under construction, one policy for No 12 Bray Street and one for No 12A, were as follows:

Premium	2,835.00
GST	313.50
Stamp duty	280.67
Broker fee	300.00
Total	$3,739.17

151. On 16 March 2016 the defendant issued invoice No 323 in the sum of $5,929.17 for “Home Owner’s Warranty policy, administration and broker fees” for No 12 Bray Street. That charge represented a markup of $2,200, nearly 60%, for which no justification is evident on the materials that were before the Senior Member. The plaintiff tendered documentary evidence that she paid the defendant the full amount of this invoice on 23 March 2016, unaware of the insurer’s actual charges, which were not disclosed on invoice No 323.

152. On 31 March 2016 the defendant issued invoice No 325 in the sum of $5,929.17, with the same description but in respect of No 12A Bray Street. The plaintiff’s documentary evidence showed that she paid the defendant the full amount of this invoice on 27 April 2016.

153. The Standard Inclusions List in the contract provided that Home Owner’s Warranty insurance was “Included”. The defendant asserted that this was a mistake. The Senior Member made no determination that it was a mutual mistake or that the contract was to be rectified. The plaintiff was entitled to a credit for the full amount of these two invoices, being a total of $11,858.34. They were within the contract price, on an objective construction of its terms.

154. The defendant claimed at first instance that it was owed $2,200 in respect of Home Owner’s Warranty insurance for each dwelling, a total of $4,400. The amounts were claimed as variations Nos 0 and 57. There was never any justification for either of these claims so far as I can see on the materials presented to this Court. At p 244 of the transcript on the second day of the hearing counsel for the defendant said:

[With] respect to the claims for home owner’s warranty insurance, we will be conceding any amount and that includes the actual invoice payable to the insurance, the builder’s margin and […] Broker fee. Anything about that we’re going to concede.

155. At [177], [353], [470] and [511] the Senior Member gave effect to a credit in favour of the plaintiff of $2,200 in respect of each unit on account of Home Owner’s Warranty insurance. This should have been a credit of $5,929.17 on each unit both because the defendant, through its counsel, conceded everything in relation to the subject and because there was no contractual basis for the defendant’s invoices Nos 323 and 325. The Appeal Panel found no error in the Senior Member’s decision on this matter (at [63]) but it should have done.

156. The plaintiff’s ground 8, for which leave to appeal is now sought, is as follows:

The [Appeal Panel] acted without evidence and contrary to the terms of the construction contract at [63] … in failing to credit the whole of the home warranty insurance paid by the plaintiff to the defendant [$11,858] and instead accepting a concession of the defendant in a lesser amount.

157. Leave will be granted in respect of this ground. The error was one of law in that the Senior Member acted on the basis of no evidence and, indeed, contrary to an explicit concession and in the face of evidence to the contrary of what he decided. The Appeal Panel should have upheld the ground pursuant to which this was raised before them, which was part of ground 14. The plaintiff’s ground 8 in her summons will be upheld

Orders

158. The orders of the Court will be to the following effect:

1. Leave to appeal is granted in respect of grounds 1(ii), 5(i), 5(ii), 6 and 8 in the plaintiff’s amended summons and each of the said grounds is upheld.

2. Leave to appeal is refused in respect of all other grounds in the plaintiff’s amended summons.

3. The appeal is allowed.

4. The orders of the Appeal Panel of the Civil and Administrative Tribunal made 19 August 2019 are set aside.

5. In lieu thereof the following orders are made:

1. Grounds 3, 7 and 10 of the appeal to the Appeal Panel and so much of ground 14 as relates to Variations Nos 0 and 58 are upheld.

2. The appeal to the Appeal Panel is allowed.

3. The Senior Member’s order (1) made 14 March 2019 that the owner pay the builder $94,381.21 is set aside.

4. The proceedings are remitted to a Member of the Tribunal in the Consumer and Commercial Division other than the Senior Member whose decision is the subject of the appeal, for re-determination of the amounts payable or repayable between the parties in respect of variations and provisional sums.

5. Upon redetermination of the amounts payable or repayable between the parties under order (d), the Member to whom the proceedings are remitted is to take into account a credit to the plaintiff of $11,858.34 in respect of Home Owner’s Warranty insurance premium.

159. The costs of the proceedings in this Court will be determined after hearing submissions of the parties following publication of these reasons.

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Decision last updated: 11 March 2020