Petkovski and Hawe v Basbuilt Developments Pty Ltd - [2024] NSWCATCD 62

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation: Petkovski and Hawe v Basbuilt Developments Pty Ltd [2024] NSWCATCD 62
Hearing dates: 15 and 16 April 2024
Date of orders: 11 November 2024
Decision date: 11 November 2024
Jurisdiction: Consumer and Commercial Division
Before: M Tyson, Senior Member
Decision:
(1) The respondent is ordered to pay the applicants $117,600.00 immediately;
(2) Direct the applicants, by 20 November 2024, to serve on the respondent a draft document setting out the terms of a proposed work order under s. 48MA of the Home Building Act, that reflects the findings set out in this judgment;
(3) If the respondent does not agree to the terms of the applicants’ proposed work order that reflects the findings set out in this judgment, direct the respondent, by 27 November 2024, to lodge with the Sydney registry of the Tribunal and serve on the respondent, a memorandum (no more than three pages in length) explaining the reasons for the respondent’s opposition to the applicants’ proposed work order;
(4) If the respondent does not agree to the terms of the applicants’ proposed work order that reflects the findings set out in this judgment, direct the applicants, by 27 November 2024, to lodge with the Sydney registry of the Tribunal and serve on the respondent, a document setting out the terms of a proposed work order that reflects the findings set out in this judgment
(5) Leave is granted to the applicants to adduce further evidence limited to the rectification work needed to address the defects in the masonry wall that have been found by the Tribunal;
(6) List the proceedings before me for a short hearing, on a date convenient to the Registry and the parties, after 27 November 2024, with a view to (a) making directions for the serving of evidence and submissions limited to the rectification work needed to address the defects in the masonry wall that have been found by the Tribunal, (b) to hear submissions and decide, if necessary, any dispute about the applicants’ proposed work order, contemplated by the orders made above; and (c) hear submissions and decide, any applications for a costs order;
(7) The application is otherwise dismissed;
(8) Direct that if any party seeks a costs order, that party should, by the close of business on 20 November 2024, file with the Registry and serve on the other party, the terms of any costs order contended for, evidence (if any) relevant to the question of costs, and a short outline of submissions (that is no more than three pages in length) in support of the application for a costs order;
(9) Direct that if any party opposes a costs order proposed by the other party, that party should, 2 business days before any hearing listed in accordance with order 6 above, file with the Registry and serve on the other party, evidence (if any) relevant to the question of costs, and a short outline of submissions (that is no more than two pages in length) in opposition to the costs order sought against it;
(10) If any orders resolving the extant issues are consented to by the other party, the parties are granted liberty, until the close of business on 27 November 2024, to file with the Tribunal signed consent orders dealing with those extant issues.

Catchwords:
CONTRACTS – building and construction – Home Building Act 1989 (NSW) – damages – liquidated damages – whether work order should be made under s. 48MA of the Home Building Act – damages - out of pocket expenses
EVIDENCE – expert evidence – requirement to explain expert’s reasoning process
JURISDICTION – whether Tribunal has jurisdiction to relieve against a liquidated damages clause

Legislation Cited:
Civil and Administrative Tribunal Act (2013) NSW
Home Building Act (1989) NSW

Cases Cited:
Andrews v Australia & New Zealand Banking Group Pty Ltd (2012) 247 CLR 205
Bellgrove v Eldridge (1954) 90 CLR 613
Boucaut Bay Co Ltd v Commonwealth (1927) 40 CLR 98
Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588
Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525
Pavey and Matthews Pty Ltd v Paul (1987) 162 CLR 221

Texts Cited:
NCAT Procedural Direction No. 3
Minister for Fair Trading, on 6 May 2014, Second Reading Speech for the Home Building Amendment Act 2014

Category: Principal judgment
Parties:
Margaret Petkovski and Rick Hawe (applicants)
Basbuilt Developments Pty Ltd (respondent)
Representation:
Counsel:

J. Young (applicants)
A.E. Hopkins (respondent)

Solicitors:
Colin Biggers & Paisley (applicants)
Reuben George Lawyers (respondent)

File Number(s): 2023/00379613
Publication restriction: Nil

Judgment

The applicants (“the Homeowners”) are the registered proprietors of a freehold estate at an address in Grenfell Street, Blakehurst, New South Wales (“the Property”). They engaged the respondent to construct a single storey residential dwelling and swimming pool (“the Dwelling”) at the Property. The respondent in the proceedings (“the Builder”) is a corporation which operates a residential construction business and holds a contractor’s licence under the Home Building Act (1989) NSW (“the Act”).
By application filed 22 August 2023, the applicants seek an order that the respondent pay them $500,000.00 and they bring that claim under the Act. The applicants contend that they have incurred damages and loss at the hands of the respondent that exceed $500,000.00. The applicants accept that because of the Tribunal’s jurisdictional limit in dealing with claims under the Act, that the maximum amount they may be awarded by the Tribunal is limited to $500,000.00.
The principal issues in dispute in the proceedings include: (a) how the contract between the Homeowners and the Builder was determined; (b) whether the applicants had discharged their onus of proving the defects asserted in their application before the Tribunal, in circumstances where the respondent challenged, in particular, the quality of the reasoning in the engineering expert report relied upon by the applicants; (c) whether a work order should be made; (d) whether the applicants are entitled to liquidated damages; and d) whether the applicants are entitled to damages for certain claimed ‘out of pocket expenses’ and interest.

THE COURSE OF THE HEARING, PROCEDURAL APPLICATIONS AND THE EVIDENCE

The applicants’ case is set out in points of claim, being the document “Annexure A reasons for requesting orders” that was annexed to their application in the proceedings.
The respondent filed points of defence in response to the points of claim.

(a) the Builder’s application

Prior to the hearing on 15 and 16 April 2024, at an earlier directions hearing, the Tribunal had made orders for the parties to file and serve evidence on which they would rely at hearing. An order was subsequently made extending the time for the respondent to file and serve evidence on which it would rely at hearing. The respondent did not file evidence in accordance with the timetable that had been made by the Tribunal. The Tribunal had also made orders for the parties’ experts to meet together and prepare a joint report. There was no meeting of experts and no joint report was produced.
When the hearing began on 15 April 2024, Mr. J. Young of counsel appeared for the applicants. Mr. A.E. Hopkins of counsel appeared for the respondent. Mr. Young opened the applicant’s case. Mr. Hopkins then indicated that the respondent would make a procedural application. The respondent sought leave to rely on an affidavit from a director of the respondent, Mr. Joshkin Basara made 11 April 2024 and a report from Mr. Matthew Melick of Building Inspections Houspect dated 12 April 2024 and alternatively, the respondent sought an adjournment of the hearing, if the leave were not granted. The leave and the adjournment was opposed by the applicants. There was than a hearing of the respondent’s procedural application. Evidence was led on the application, including oral evidence from the first applicant Ms. Petkovski (and there was cross-examination of her on behalf of the respondent) and submissions were made by both parties. The Tribunal gave oral reasons for its decision and dismissed the application for leave to rely on the material sought to be relied upon and for an adjournment. The applicants sought costs of the application and the Tribunal reserved that question.
The hearing proceeded and took place over two days on 15 and 16 April 2024 and when oral submissions were finished on the second day, the Tribunal reserved its decision, subject to some supplementary written submissions soon thereafter filed in accordance with directions made by the Tribunal on 16 April 2024.
During the addresses by counsel on the second day of the hearing, the Tribunal raised some provisional concerns about some of the submissions being made on behalf of the parties in the light of the evidence before the Tribunal. Having indicated to the parties that the Tribunal would reserve its decision, the Tribunal invited the parties to see if they could reach their own agreement about settling their dispute, the Tribunal said that it would allow the parties some additional time to see if they could reach a compromise of the issues in dispute. That time has by now, long elapsed.
Turning then to the evidence with respect to the substantive issues raised by the application:
For their evidence on the substantive application, the applicants relied upon an affidavit of Margaret Petkovski affirmed 16 October 2023. The affidavit, together with exhibit MP 1 referred to therein, became exhibit A in the proceedings. There was a report of Noviion Engineering which was part of the exhibit to Ms. Petovski’s affidavit. An issue was raised by the respondent about whether the Noviion Engineering report could be relied upon as expert opinion evidence. A direction was made by the Tribunal limiting the use to which that report could be put by the Tribunal.
Ms. Petkovski was cross-examined by counsel for the respondent.

(b) the Homeowners’ engineer’s report

The applicants next relied upon a report dated 7 April 2023 from Triaxial Consulting Pty Ltd. The respondent made objection to the report and certain of the opinions expressed in this report.
The author of the report from Triaxial Consulting Pty Ltd is a consulting civil and structural engineer. The author was briefed to, amongst other things, attend the relevant building site and carry out an investigation identifying alleged defects and a methodology for rectification of the alleged defects. The author indicated in his report that he had read and agreed to be bound by the Expert Witness Code of Conduct set out in NCAT Procedural Direction 3 – Expert Evidence. Having regard to his academic qualifications and work experience (see section 2 in his report the curriculum vitae which is Appendix A to his report) and compliance with the Expert Witness Code of Conduct, the Tribunal is satisfied that he is qualified to provide opinion evidence to the Tribunal within his field of expertise.
The report provisionally became exhibit B in the proceedings. The Homeowners’ engineer was cross-examined by counsel for the respondent. During the closing addresses on the parties’ behalf, the applicants sought leave to make a further written submission about the admissibility or weight which the Tribunal could attach to the report. As alluded to above, direction was made by the Tribunal on 16 April 2024 allowing for supplementary written submissions going to the question of the admissibility of the applicants’ expert evidence and submissions were filed in response to that direction and have been considered by the Tribunal.
The respondent’s counsel’s objection to the report was principally that the engineering expert made conclusory statements and did not disclose a basis for the opinions expressed in the report, such that the expert’s opinions could not be relied upon by the Tribunal. The respondent’s counsel also pointed out that “documentation” indicated by the expert in his report was not in evidence such that the opinion could not be evaluated by the Tribunal. It was also submitted that it was not permissible for the Tribunal to make “inferences” to fill-in the gaps in the engineer’s reasoning.
The applicants’ counsel urged that the report should be admitted into evidence and that the respondent’s objections should be regarded as matters going to the persuasive weight of each of the expert’s relevant opinions rather than the admissibility of the report as a whole.
It was submitted on behalf of the applicants that it was wrong to subject the engineer’s report to “too close attention” and the report had to be considered in the context that when it was written, a conclave of experts on behalf of both parties would have been expected to have taken place.
It was submitted that there was nothing wrong with the repeated opinion in the report about there being “poor workmanship” in relation to each of the items to which the engineer applied that opinion. It was further submitted that it did not matter that the Tribunal did not have in evidence the architectural and structural drawings referred to by the engineer in the course of his report because the engineer plainly had them (see for example section 3 headed ‘reference documents’ in his report).
There were references in the course of counsels’ submissions to well-known authorities such as Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588. The general principles relevant to both the admissibility and the weight of expert opinion evidence were not in dispute by the parties. It was the application of those principles to the engineer’s report relied upon by the Homeowners that was in issue.
In essence, the Tribunal needs to be persuaded by material which parties bring before it. Where expert opinion is sought to be relied upon by a party but where the factual basis of that opinion is not available to the Tribunal, it is very difficult for the Tribunal to test or assess the probative value of the opinion, and thereupon be persuaded by the material. Where there is expert opinion evidence that amounts to the expert stating his or her opinion without setting out each of the steps relied upon to reach that opinion, it is very difficult for the Tribunal to understand how the expert’s ‘training, study or experience’ has been applied to facts assumed or observed, so as to produce the opinion propounded, and thereupon be persuaded by the material.
With respect to the applicants’ engineering report, there are difficulties for the Tribunal even to comprehend large parts of the report of the applicants’ engineering expert and his reasoning process.
The way that the engineering report is structured is that, in the case of each defect alleged by the applicants, there is a first an assertion of the defect. Work by the respondent is claimed by the engineering report in some cases to be not “as required” or not reflecting of “the structural documentation.” Then there is sub-heading “Defect cause” where the author repeatedly says in his report, in relation to alleged defects, “Poor workmanship by the builder”, without more under that sub-heading.
The report also featured a sub-heading “Reference Clause” in relation to each alleged defect. In those parts of the expert report, the author of the report included, from time to time, certain quotations from the warranty provisions in the Act, Australian Standards and NSW Fair Trading Guides. The references are not linked in the report to the claim of “Poor workmanship by the builder”. There are also some photographs which are included by the author of the report when he discusses each of the alleged defects.
By way of an overview of some of the problems affecting the Tribunal’s ability to be persuaded by the Homeowners’ engineering report:

architectural plans and “structural documentation” alluded to by the engineering expert are not in evidence and these cannot be considered and evaluated by the Tribunal;

there are at times photographs of a tape measure and ruler being held by someone over certain parts of the respondent’s work but the scale on the tape measure ruler cannot actually be seen by the viewer of the photograph, in many cases;

the context of the specific defects asserted is hard to understand: first, the sorts of plans that the Tribunal would often see in the evidence for a case involving a damages claim under the Act at the Tribunal’s jurisdictional limit (e.g. site plans, floor plans, elevations, cross-sections and long sections, landscape plans, landscape detail and standard specifications and so forth) are not in evidence; secondly, on one occasion where some parts of plans have been put in evidence by the engineer, they have been put into evidence in an obscure way, appearing within a document prepared by the applicants’ engineering expert but with key dimensions such as setbacks cut-off in the document provided to the Tribunal, and featuring arrows pointing to parts of the plan but with no explanation of what the arrows mean; thirdly, many of the photographs taken are very narrowly focussed and it is difficult to understand where in the Dwelling the alleged defect is said to arise and how it arises in the context of the respondent’s contractual obligations towards the applicants;

there is frequently an ‘abbreviated’ approach by the engineer to explaining why he says there is a defect, that is, there is a generalised assertion of “poor workmanship” as the cause of the alleged defects, some references quoted and some photographs shown, but no simple logical explanation linking the material together and explaining how and why the defect is said to arise, in the light of the material selected by the engineering expert. In one instance, the material quoted by the engineer actually contradicts the assertion of a defect and in some instances, the engineer’s meaning is impenetrable or at least obscure.

The submission made on behalf of the applicants that the engineer’s report and its reasoning should not be scrutinised too closely as the applicants’ engineer was expecting there to be a joint report in due course, is not one that the Tribunal finds persuasive. An applicant, who claims work has been done in breach of statutory warranties implied by the Act into a contract between a homeowner and a builder, bears the onus of proving a defect and proving what damages arise in respect of the alleged defect. An applicant who bears the onus of proof when bringing a claim under the Act cannot assume that a, perhaps abbreviated or broad-brush approach, taken when preparing an expert report, can be clarified in a subsequent joint report. Nor can such an applicant assume that some of the defects would be so plain or obvious to another engineer, that they would be readily conceded by the other engineer, such that the asserted defects do not need to be properly explained in the initial expert report. It is the Tribunal has to be satisfied and persuaded by the material brought before it by the parties.
The Tribunal has decided in this case that the provisional exhibit B (the engineer’s report) should be admitted into evidence and become exhibit B before the Tribunal on the substantive application. That is because of paragraph 3 in NCAT Procedural Direction 3 and, because as set out below in these reasons, some of the engineer’s opinions in relation to some alleged defects are sufficiently clear for the Tribunal to be able to reach a level of satisfaction that the applicants have discharged their burden of proof in relation to particular alleged defects. However, and as will be explained below in these reasons, the Tribunal is not persuaded by many of the opinions expressed in the engineering report relied upon by the applicants. The Tribunal will address below in these reasons each of the alleged defects raised by the applicants’ evidence.

(c) the balance of the evidence

The applicants also relied upon an expert report from Mr. Adam Arden of Mitchell Brandtman. This report is dated 12 October 2023. Mr. Arden is a quantity surveyor. He was briefed to, amongst other things, review the alleged defects set out in Exhibit B and provide an opinion on the cost of rectifying those alleged defects. Mr. Arden indicated in his report that he was aware of and had read and agreed to be bound by the Expert Witness Code of Conduct set out in NCAT Procedural Direction 3 – Expert Evidence. Having regard to his academic qualifications and work experience (see section 1.12 – 1.14 in his report the curriculum vitae which is Attachment 11 to his report) and compliance with the Expert Witness Code of Conduct, the Tribunal is satisfied that he is qualified to provide opinion evidence to the Tribunal within his field of expertise. This report became exhibit D in the proceedings.
Mr. Arden, who was permitted by the Tribunal to give his evidence by audio-visual link, was cross-examined by counsel for the respondent.
The applicants tendered an ASIC company search in relation to the respondent, together with a creditor watch search for the respondent, which became exhibit E in the proceedings.
The applicants’ evidence was provided to the Tribunal in the form of a Tender Bundle and from time to time in these reasons, the Tribunal will refer to pages in that bundle so that the parties can follow the reasons.
The applicants also provided documents to the Tribunal which were not admitted as evidence but which were marked for identification, including a Scott Schedule (MFI 13), a schedule of damages (MFI 14) and a schedule of out of pocket expenses (MFI 15).
As for the respondent’s evidence, during the cross-examination of Ms. Petkovski, certain documents were shown to her and marked for identification. In the course of the hearing, the Tribunal later found that the respondent should be permitted to tender some of those documents but rejected the tender of some other of the documents that had been shown to Ms. Petkovksi and which had been marked for identification. The Tribunal’s reasons for taking that approach were indicated orally at the hearing.
The respondent had provided a tender bundle to the Tribunal.
From that tender bundle, the respondent’s evidence, which was admitted, consisted of: p. 73 of Australian Standard 2870-2011 (exhibit 1), Australian Standard 4773.2:2015 headed “Masonry in small buildings Part 2: Construction” (exhibit 2), p. 197 from the respondent’s tender bundle, which is a text message dated 4 December 2021 (exhibit 3), pp. 198 – 9 from the respondent’s tender bundle, which consists of an email transmission dated 25 February 2022 from the respondent to the applicants with the subject “Variations” (exhibit 4), p. 212 from the respondent’s tender bundle, which is a text message dated 25 August 2022 (exhibit 5), pp. 206 – 211, which is an email transmission dated 6 July 2022 from Daniel Brisigotti of Select Electrical Solutions to Mr. Basara of the respondent, the subject of which is “Blakehurst variations and updated design” and which attaches ‘variation 1’ and ‘variation 2’ (exhibit 6), p. 213 from the respondent’s tender bundle, which is an email exchange from Ms. Petkovski to Mr. Basara of the respondent sent at 5.02 pm on 4 May 2022 and Mr. Basara’s response sent at 5.21 pm on 4 May 2022 (exhibit 7), p. 214 from the respondent’s tender bundle, which is a text message exchange dated 28 May 2022 involving Ms. Petkovski (exhibit 8), p. 215 from the respondent’s tender bundle, which is a text message dated 21 June 2022 involving Ms. Petkovski and Mr. Hawe showing two photographs of part of architectural plans, one of which indicates a hand-written change to the existing plan (exhibit 9), pp. 222 – 230 from the respondent’s tender bundle, which is a document from Miele, in relation to the applicants’ dwelling identifying, inter alia, various kitchen appliances and terms and conditions (exhibit 10), p. 231 from the respondent’s tender bundle, which is an email transmission dated 21 June 2022 from Finese Electrical & Air Conditioning to Mr. Basara with the subject ‘Quote no. 1006’ (exhibit 11) and pp. 202 – 204 from the respondent’s tender bundle, which is an email transmission dated 7 May 2022 from Mr. Basara to Ms. Petkovski and Mr. Hawe with the subject ‘Variation invoice’ (exhibit 12).

(d) application for leave to adduce further evidence

One of the subjects of the applicants’ expert evidence going to the issue of defects, was a masonry wall constructed by the Builder for the Homeowners. The Homeowners’ engineering expert identified a number of individual defects in the masonry wall. He then opined that the masonry wall as a whole should be demolished and re-built and provided a costing for rebuilding the masonry wall. The expert report from Mitchell Brandtman also relied upon by the Homeowners did not quantify the cost of rectifying the claimed individual defects in the masonry wall.
During closing addresses, the Tribunal raised with counsel for the Homeowners the difficulties the Tribunal would face if it came to the view that there were some defects associated with the masonry wall, but was not satisfied that the Homeowners’ evidence established the proposition that the masonry wall needed to be demolished and rebuilt. Counsel for the Homeowners then made application for leave to adduce further evidence, if the Tribunal did conclude that the Homeowners’ evidence failed to establish the proposition that the masonry wall needed to be demolished and rebuilt. Counsel for the respondent made submissions opposing that course. The Tribunal will indicate its finding on the application for leave to adduce further evidence below in these reasons for decision.

FACTUAL BACKGROUND

Based on the evidence referred to above the factual background is as follows:
On 10 September 2021, the applicants entered into a written contract (“the Contract”) with the respondent, pursuant to which the respondent agreed to construct a single storey residential dwelling and swimming pool at an address at Grenfell Street, Blakehurst, New South Wales.
The residential dwelling to be built was to be constructed with masonry double leaf brickwork, structural steel and timber framed roof on a concrete slab.
The works the subject of the Contract were “residential building works” for the purposes of the Act.
On 1 October 2021, a second contract was issued in draft form with an adjusted progress payment schedule (“Adjusted Payment Schedule”). This document was not signed by the parties but the applicants pleaded in their points of claim, and the respondent admitted in its points of defence, that the Adjusted Payment Schedule was adopted by the parties. Accordingly, the Tribunal finds that the Adjusted Payment Schedule is part of the Contract.
The Contract price for the works the subject of the Contract was $975,776.00, including 10% GST, and subject to any adjustment of the price in accordance with the Contract: see item 2.(a) in the Particulars of Contract schedule to the Contract.
The work the subject of the Contract was permitted to be varied (see clause 18), subject to compliance with the terms of the Contract that permitted variations: see clauses 5, 8.5, 10, 14 and 15 in the General Conditions part of the Contract.
Progress payments were to be paid for by the applicants as each of six stages of work was progressively completed under the Contract: see Schedule 2 of the Contract.
The Contract included a number of express terms, warranties and implied terms, as set out in the points of claim and admitted by the respondent.
Clause 6 in the Particulars of Contract schedule to the Contract required the respondent to bring the works the subject of the Contract to “Practical Completion” (as defined in the Contract) no more than 40 weeks from the commencement of the building period.
Clause 32 in the General Conditions part of the Contract and item 11 in the Particulars of Contract schedule to the Contract provided that the applicants were entitled to liquidated damages at the rate of $1,400.00 per day from the end of the building period until and including the earlier of: (a) the date Practical Completion has been achieved, (b) the date the Contract is ended, and (c) the date the applicants take possession of the site or any part of it.
On 2 October 2021, the applicants paid the respondent a deposit of $97,577.60.
On 8 November 2021, the building period for the works the subject of the Contract commenced.
On 10 December 2021, the respondent issued the applicants with an invoice, in the amount of $146,366.40, for Stage 2 of work required under the Contract. The applicants paid that amount on 16 December 2022.
On 3 June 2022, the respondent issued the applicants with an updated invoice, in the amount of $243,943.00, for Stage 3 of work required under the Contract. It appears that this invoice was paid by the applicants: see Tender Bundle p. 156.
During the course of the works the subject of the Contract, the applicants allege that the respondent issued them with $125,411.37 (including GST) of purported variations. The respondent denies that allegation and alleges that it issued the applicants with $216,691.64 of variations.
There were variations (or purported variations) issued as follows during the time the Contract was on foot: there was a variation issued on 13 November 2021 relating to asbestos, paid by the applicants; a variation issued on 25 February 2022 relating to retaining walls, electrical and plumbing works in the amount of $79,104.00; an invoice from Quickflow Plumbing Solutions issued on 29 June 2022 for variations for bathroom changes; invoices/variations issued on 6 July 2022 by Select Electrical Solutions in the amount of $16,142.50 and $3,732.88; a variation issued by the respondent on 16 July 2022 for bathroom changes; and a variation issued on 21 July 2022 by the respondent in relating to fencing and walls in the sum of $15,482.00.
The applicants paid the respondent a total of $532,547.00 (including GST) during the course of the works the subject of the Contract. The total paid was not in dispute. However, it is not entirely clear how to reconcile the total with payments falling due under the Contract. Doing the best I can with the evidence, it seems that the Homeowners paid the deposit, paid for the Stage 2 works under the Contract, paid for the Stage 3 works under the Contract, and paid some amount towards variations under the Contract.
The works the subject of the Contract were required to be completed by 15 August 2022, subject to any approved extensions of time in accordance with the Contract.
Ms. Petkovski said in her affidavit that the applicants became concerned in around 4 July 2022 about what appeared to be defective work by the respondent. The applicants engaged Noviion Engineering who prepared a report for them and that report is part of exhibit A.
The applicants rented another property from 15 August 2022.
There was a meeting between the applicants and Mr. Joshkun Basara of the respondent on 25 August 2022.
According to Ms. Petkovski’s evidence, the respondent then removed materials and equipment from the Property following the meeting.
From late August 2022, the respondent did not perform any further works at the Property.
When Mr. Arden inspected the Property on 6 June 2023, he found that the work carried out to date included:

concrete ground slab and foundations;

retaining walls;

concrete shell to the swimming pool;

approximately 85% of the internal and masonry walls including structural steel beams;

approximately 85% of the timber roof framing.

In the absence of any evidence to suggest that work was performed at the Dwelling after the respondent left the Property, the Tribunal finds that Mr. Arden’s description of the works he inspected in June 2023, represents the extent of the work performed by the respondent at the time it left the Property in 2022.

The photographs in the report of the applicants’ engineer suggest that when the respondent left the Dwelling, that the Dwelling was incomplete and open to the elements. There is no evidence before the Tribunal suggesting that the Builder had completed all the works falling under Stage 3 of the Contract by the end of August 2022.
The Tribunal is satisfied, and finds, that the respondent did not achieve Practical Completion by 15 August 2022 in that the work by the respondent required to have been completed by that date under the Contract was incomplete.
On 2 September 2022, the applicants, through their then solicitors, issued a notice of dispute to the respondent, alleging a number of breaches of the Contract by the respondent.
On 19 October 2022, the applicants issued a notice of breach to the respondent, which notice, amongst other things, required the respondent to recommence the works the subject of the Contract within 10 days of receiving the notice.
By letter dated 7 November 2022 issued to the respondent, the applicants allege that they terminated the Contract. The respondent does not admit that allegation but says that the Contract was mutually terminated on 19 November 2022 by virtue of an agreement, the terms of which are pleaded at paragraph 16 in the points of defence.
In December 2022, Ms. Petkovksi says that she and Mr. Hawe became aware that the Noviion report had not identified all the alleged defects in the works performed by the respondent.

SUBMISSIONS

By way of summary of the parties’ principal submissions:
The applicants submit that there were defects in the respondent’s work, which variously involved breaches of clauses 6, 39 and 40 in the Contract and ss. 7E and 18B of the Act.
The applicants claim there is defective work quantified in total in the amount of $496,788.00. The applicants’ structured their case around 24 alleged defects. The defects claimed, and the total quantification claimed in respect of each, are submitted by the applicants to be as follows:

timber roof framing pitch (item 1);

timber roof resting on external wall (item 2);

timber roof framing collar ties (item 3) ($33,242.00) for 71.(a), (b) and (c);

masonry wall issues: $111,891.00;

edge overhang (item 4)

damp proof course/cross cavity flashing not installed correctly (item 5)

voids and holes in mortar (item 6)

inadequate spacing and installation of cavity ties (item 7)

lack of installation of insulation within the wall cavity (item 8)

base bed joint exceeds 20 mm in thickness (item 9)

deviation from specified thickness of bed joint, exceeding 10 mm (item 10)

deviation from specified width of the cavity (item 11)

incorrect construction of masonry piers at rear of building, rather than installation of steelwork in the ‘structural documentation’ (item 12)

concrete slab: $8,660.00 (item 13);

structural steelwork (item 14);

steel lintels corrosion (item 15): ($12,855.00) for 71.(f) and (g);

underpinning of adjoining structure along Property boundary: $11,300.00 (item 16);

drainage pit: $10,000.00 (item 17);

retaining wall (item 18);

surface drainage (item 19) ($50,340.00) for 71.(i) and (j);

concrete slab crack: $5,000.00 (item 20);

building and pool set-out: $110,500.00 (item 21);

swimming pool shoring and construction: $109,500.00 (item 22);

rainwater tank and stormwater system: $25,500.00 (item 23);

slab on ground and retaining wall construction: $8,000.00 (item 24).

As to the masonry wall issues which the applicants’ engineer said involved defects, the engineer did not identify the cost of rectifying each of the individual components making up the masonry wall alleged defects (as has already been mentioned above in these reasons). The applicants’ claim is that the masonry wall should be demolished and rebuilt and the $111,891.00 figure is for the demolition and re-building of the masonry wall.
The applicants next claim an amount of $71,085.00 for preliminaries, $56,787.00 for a builder’s margin calculated at 10%, a construction contingency of $62,466.00 calculated at 10%, and professional fees and authority costs in the sum of $35,000.00.
The applicants claim that their evidence therefore establishes $722,127.00 as loss and damage arising from the respondent’s defective work.
In oral submissions, the applicants urged reasons why the Tribunal should accept the applicants’ engineer’s report in relation to each of the items he identified there as defects. (The applicants’ submissions about the admissibility/weight of the report have been referred to above in these reasons).
The applicants next claim $117,600.00 for liquidated damages, calculated as the day rate of $1,400.00 multiplied by 84 days (from 15 August 2022 as date for Practical Completion, to 7 November 2022 as the date of termination of the Contract). The applicants claim interest on this amount. In the alternative, the applicants seek $53,629.42 for alternative accommodation. The applicant claims interest on this amount.
The applicants further claim to be entitled to ‘out of pocket’ expenses in the sum of $2,465.45 and interest on those expenses.
As mentioned above in these reasons, the applicants recognise that the Tribunal does not have jurisdiction to order that the respondent pay more than $500,000.00 and accept that if the Tribunal finds that more than $500,000.00 should be awarded to them, that the Tribunal’s money order should be limited to $500,000.00.
The applicants submit that a work order under s. 48MA of the Act is “not an option” in this case.
The respondent in its submissions primarily attacked the quality of the applicants’ evidence. The respondent submitted that the applicants bear the onus of proof in establishing first that a defect exists and secondly, the quantification of damages in respect of that item. The respondent made submissions about each of the items claimed by their engineering expert Dawson to be a defect and explaining why his opinion could not be relied upon by the applicants.
The respondent further submitted that if the Tribunal did not accept that demolition and rebuilding of the masonry wall were appropriate in relation to part of the alleged defective work the subject of this case, that where Mr. Arden’s quantity surveyor report proceeded on the assumption that demolition and rebuilding were appropriate, his report does not assist the applicants. The respondent submitted that the applicants having closed their case and given that the matter had proceeded to a final hearing, should not be permitted to re-open their case and adduce further evidence about their claimed loss and damage.
The respondent, alternatively, submitted that if defects were found, the Tribunal should permit the respondent to rectify its work and make a work order under s. 48MA the Act.
The respondent submits that at the meeting on 25 August 2022 between Mr. Basara and Ms. Petkovski, the respondent suspended the contract. The respondent submits that the Builder was entitled to suspend the contract at that time because the respondent had issued invoices at that time that were unpaid by the applicants and that the Builder did suspend the Contract at the meeting. The respondent submitted that the Tribunal should find that at the meeting, the respondent requested the payment of money on the outstanding invoice, that Ms. Petkovski was not willing to pay and so the respondent was entitled to suspend work for the applicants. The respondent submits that clause 25 of the Contract can apply, even though there was no suspension in writing, because the clause has an “evidentiary effect” in that if the Tribunal accepts that Mr. Basara for the respondent suspended the Contract, that means there was a suspension.
On liquidated damages, the respondent submitted that the liquidated damages sought by the applicant are unconscionable in their amount and are out of all proportion to the applicants’ actual loss. The Tribunal should give the respondent relief from the amount of liquidated damages sought, it was submitted. On the alternative accommodation costs which the applicants claim to have suffered as a result of the respondent’s breach of Contract, the respondent agrees that it should pay 10 days of weekly rent calculated at a weekly rent of $750.00 per week and applicable only to the 10 days beginning 22 August 2022. The respondent submitted that the out-of-pocket expenses claimed by the applicants were either not supported by evidence or amounted to costs of the proceedings which were not recoverable as damages.

In reply, counsel for the applicants submitted, inter alia, that a work order under the Act should be ordered if the Tribunal accepted the submission that the applicants had failed to establish the quantification of damages for some of the claimed defects.

CONSIDERATION

Jurisdiction

Based on the factual background referred to above, the Tribunal has jurisdiction to determine the applicants’ claim. The applicants are making a claim for the payment of a specified sum of money or a claim that arises from a supply of building goods and services (see Home Building Act (1989) NSW (“the Act”) s. 48A and definition of “building claim”), supplied for in connection with the carrying out of “residential building work”. That is because the work involved in this case was the construction of a “dwelling” (the Act Schedule 1 clause 2(1)(a)), being a building designed constructed or adapted for use as a residence (the Act Schedule 1 clause 3(1)) and further, a swimming pool constructed for use in conjunction with the dwelling: the Act Schedule 1 clause 3(2)(a). The claim, to the extent that the applicants accept the Tribunal has no jurisdiction to make a money order above $500,000.00, is within the jurisdictional limit of the Tribunal (the Act s. 48K(1)). As the claim was lodged on 22 August 2023, it has been lodged within time (the Act s. 48K(3)).

Variations

It is difficult to identify what the precise position was in regards to variations under the Contract: which of the variations were accepted by the Homeowners as valid even though there was not formal compliance with the Contract’s provisions relating to variations, which of the variations, were paid for by the Homeowners, and what, if any, work was actually performed or completed by the Builder, different from or in addition to the work identified in the Contract at the time it was made and as opposed to different work merely discussed or quoted for.
The evidence shows that the applicants did ask questions/raise issues with the variations charged to them (see e.g. 12 July 2021 email transmission from Mr. Hawe to the respondent and the 2 September 2022 letter from Construction Legal at paragraphs 1.4, 2.2 and 4 therein). However, it is not clear in the evidence what the respondent’s position was, if any, in response to the questions/issues raised about variations.
The applicants’ case at the hearing accepted that there were “two variations” to the Contract agreed between the parties. The way the Tribunal understood the applicants’ case was that even though the two variations might not have complied formally with the Contract provisions relating to variations, the applicants accepted they were obliged to pay the respondent for the two variations.
Ms. Petkovski was cross-examined by counsel for the respondent about other possible variations to the Contract to which the applicants agreed. During cross-examination, as the Tribunal understands her oral evidence, Ms. Petkovski acknowledged that apart from two variations agreed by the applicants and the respondent, while other items of potential building work may have been discussed, or “potentially” discussed, or were the subject of communications between the respondent and the applicants, no other variations were agreed by the applicants.
The Tribunal accepts Ms. Petkovski’s evidence with respect to other possible variations to the Contract. The Tribunal’s impression of her was that she was a truthful witness doing her best to recall the matters described in her affidavit and the matters about which she was cross-examined.
The Tribunal has reviewed the evidence before it, in the light of clause 18 in the Contract (which amongst other things requires variations to be in writing and signed by or on behalf of the applicants and the respondent (cl. 18.1) or permits the Contract price to be adjusted in accordance with cl. 18.5). The Tribunal can see no evidence of variations claimed by the respondent that comply with, or fall within, clause 18 in the Contract, which were not paid by the applicants, and which the Tribunal would need to take account of in determining any damages owed by the respondent to the applicants.
The situation before the Tribunal is found to be one where the Homeowners and the Builder entered into discussions concerning the performance of changed or additional work to that described in the Contract. Some quotations were sought and provided to the Homeowners for changed or additional work. There is an absence of evidence to permit the Tribunal to identify changed or additional work performed by the Builder to that described in the Contract, but also, in any event, there is an absence of evidence to suggest that if there was changed or additional work performed by the Builder to that described in the Contract, the work amounted to a “variation” (as defined in the Contract, see clause 1.1) and complied with the provisions of clause 18 in the Contract. No submission was made by the respondent about how or whether cl. 18.5 in the Contract might apply in this case.
The Homeowners are entitled therefore, so the Tribunal finds, to refer to the price in the Contract, as the extent of their obligations to make payment to the Builder - subject to the “two variations” agreed by the Homeowners and for which, it appears the Homeowners paid, which the Tribunal infers from the total amount which they paid to the respondent as being in excess of the deposit and the Stage 2 and Stage 3 payments made to the respondent.
Where a builder has performed work under a contact for residential building works, but where it has no contractual basis to sustain its variations claim, it may be open to it to make a claim for work done to the homeowners’ benefit, arising under the law of restitution and on the basis of the principles expressed in Pavey and Matthews Pty Ltd v Paul (1987) 162 CLR 221, but there was no cross-claim by the respondent in these proceedings and there is no evidence that the elements in such a cause of action are established in this case.

The 25 August 2022 meeting

As mentioned above, there was a meeting between the applicants and Mr. Joshkun Basara of the respondent on 25 August 2022. There is a lack of detail about what was said at the meeting. Mr. Hawe gave no evidence about it. Mr. Basara gave no evidence about it.
In her affidavit at paragraph 16, Ms. Petkovski gave a brief account of what was said at the meeting. She provided there a summary of what the meeting was about in that she said the meeting was “in relation to defective works”, as opposed to Ms. Petkovski giving an account of the actual words spoken, or the effect of the words spoken, at the meeting.
Counsel for the respondent cross-examined Ms. Petkovski about the meeting at some length. In the course of the cross-examination, Ms. Petkovski said, amongst other things, that “we” (which the Tribunal understands to be a reference to Ms. Petkovski and Mr. Hawe, the second applicant) discussed with Mr. Basara at the meeting how much they had paid the respondent and what work had been completed. Ms. Petkovski said that Mr. Basara wanted payment from the applicants for work that had not been done.
Ms. Petkovksi did not accept the respondent’s counsel’s proposition that what she said about the meeting at paragraph 16 in her affidavit was incorrect and she did not accept counsel’s proposition that the applicants wanted the respondent to continue with the works the subject of the Contract. Ms. Petkovksi did not accept counsel’s proposition that she wasn’t concerned with defective works at the meeting. Ms. Petkovski said in a response to questioning on the topic about the extent of her concerns about defects by the time of the meeting that “a few things” had been “picked-up” by the applicants by the time of the meeting but she “wasn’t an expert.”
Ms. Petkovski did not accept the respondent’s counsel’s proposition that Mr. Basara said he was suspending building works.
The Tribunal accepts the evidence of Ms. Petkovski in relation to the August 2022 meeting. As mentioned already, the Tribunal’s impression of her was that she was a truthful witness doing her best to recall the matters described in her affidavit and the matters about which she was cross-examined. Ms. Petkovski accepted as possible certain matters that were put to her during cross-examination and at no stage during her cross-examination did the Tribunal gain the impression that she was a poor historian.
The Tribunal finds that Ms. Petkovski had a belief, at the time of the meeting, that the respondent had charged the applicants for work that had not been completed at the time of the meeting.
The state of the evidence before the Tribunal is that the Tribunal cannot be satisfied that by the time of the August 2022 meeting, the respondent had satisfactorily completed all the work required of it under a stage of the Contract but which the applicants had not paid, or that were variations complying with clause 18 in the Contract for which the applicants were refusing to pay.
There is no evidence before the Tribunal that the Homeowners, by their words or conduct at the August 2022 meeting, afforded the Builder any reason that would entitle the Builder to suspend its works under the Contract. There is no evidence before the Tribunal that the respondent communicated to the applicants at the meeting that it was suspending works under the Contract.
There is no evidence to suggest that the respondent had formally complied with clause 25 in the Contract to suspend the carrying out of building work. Counsel for the respondent, as the Tribunal understands it, accepted that. As to the submission about giving an “evidentiary effect” to clause 25, the Tribunal does not accept that submission. Clause 25 is predicated on there being a breach of the Contract by the Homeowners, but the Tribunal finds there was no breach of the Contract by the Homeowners at the time of the August meeting, so the Tribunal fails to see how any evidentiary effect can be given to the clause where the predicate for its operation is not established.
Following the meeting, according to Ms. Petkovski’s evidence, which the Tribunal accepts, the respondent then removed materials and equipment from the Property. The Tribunal finds that the Builder performed no further work under the Contract when it demobilised from the Property after 25 August 2022.

Paragraph 16 of the respondent’s defence

Paragraph 16 in the respondent’s points of claim pleads that the Contract was “mutually terminated” on 19 November 2022 “by virtue of an agreement between the applicants and the respondent”, an element of which (see para 16.(a)iv) included that the parties are otherwise released from all claims in relation to the Contract and works of the Property.
There is no evidence to support the existence of such an agreement. Counsel for the respondent indicated in his closing address that the “release” defence was not pressed. The Tribunal finds that that part of the respondent’s defence to the application should be rejected.

Termination of the Contract

The Tribunal is satisfied that the respondent wrongfully suspended work under the Contract after 25 August 2022, when, following the meeting that took place on 25 August 2022, the respondent removed materials and equipment and did not perform any further works on the Property. The Tribunal is satisfied that the respondent wrongfully suspended building works that it was obliged to perform under the Contract.
The Tribunal finds that the building works which were the subject of the Contract did not reach practical completion by the end of the building period: see clause 32.1 in the Contract. The end of the building period was 15 August 2022: see item 6 in Schedule 1 to the Contract. There is an absence of any evidence that an extension of time as contemplated by clause 19 of the Contract was effected. There is an absence of any evidence to suggest a notice of the sort contemplated by clause 25.2 of the Contract was given to the applicants.
On 19 October 2022 the applicants issued to the respondent a written notice of breach of the sort contemplated by clause 27.3 in the Contract: see p. 237 in the Tender Bundle. There is no evidence to suggest that the respondent remedied the breach the subject of the written notice within 10 days. On 7 November 2022 the applicants issued to the respondent a further written notice of the sort contemplated by clause 27.4 in the Contract, terminating the contract with immediate effect: see p. 239 in the Tender Bundle.
The Tribunal is satisfied that the applicants validly terminated the Contract in accordance with the terms of the Contract.
The Tribunal finds that the date the contract was ended (see clause 32.1(b) in the Contract) was 7 November 2022.

Defects claimed by the applicants

As the Contract has been determined, the next issue to consider is the Homeowners’ defects claim.
Timber roof framing pitch:
The applicants’ engineer says that the timber roof framing has been constructed at the wrong roof pitch. He says the rafters are installed at 21 to 22 degrees, rather than the “specified” 35 degrees. There are seven photographs associated with this item in the report.
The applicants’ engineer says the cause of the defect is “poor workmanship” by the respondent. He refers to s. 18B.(1)(a) and (c) of the Act.
He includes a recommendation in his report relating to this item.
Finding: the Tribunal rejects this claim. Relevant architectural plans are not in evidence. The source of the “specified 35 degrees” claim that the report’s author appears to have relied upon to support this item was not before the Tribunal. The Tribunal cannot tell what the requirement was in regards to the pitch of the roof in any relevant plan or drawing. The factual basis supporting the expert’s opinion must be disclosed so that the Tribunal can assess it. It is not possible to connect any of the timber frames shown in the photographs associated with this item in the report to any specification in a plan or drawing.
Timber roof framing resting on external wall:
The applicants’ engineer says that the timber roof framing has been constructed to be bearing on the external cavity wall of the residential dwelling.
The applicants’ engineer says the cause of the defect is “poor workmanship” by the respondent. He quotes s. 18B.(1)(a) and (c) of the Act.
He includes a recommendation/discussion in his report relating to this item.
Finding: the Tribunal rejects this claim. In the recommendation/discussion report of the engineer’s report, there is a figure (10.13) and note taken from AS4773.2:2105. The figure is captioned “Typical roof connections for a cavity wall.” Even if the Tribunal accepts, on the basis of the photographs in the applicants’ engineer’s report applicable to this item that the timber roof has been constructed to be bearing on the external cavity wall of the residential dwelling, all that the report shows is that what has been done is not “typical”.
The respondent also submitted that the figure relied upon by the applicants’ engineer related to a home constructed with eaves and the Dwelling was not such a home. The evidence is unclear as to whether or not there should have been eaves in the vicinity of the timber roof frames identified in the engineer’s report as bearing on the external cavity wall. But the submission draws attention to the applicants’ engineer quoting part of an Australian Standard but then providing no explanation as to how the part of the Australian Standard cited relates to, or is connected to, the obligations of the respondent under the Contract.
How or why there is a breach of the warranties provided for in s. 18B.(1)(a) and (c) is not explained. What poor workmanship means in the context of this claimed defect is unclear. Just because the resting of the roof frames on the external wall was not typical for a home constructed with eaves, does not satisfy the Tribunal on the evidence in this case that there was “poor workmanship.” The applicants have not discharged their onus of proof in relation to this item.
Timber roof framing collar ties:
The applicants’ engineer says that the installed collar ties to the rafters “do not reflect the structural documentation.”
The applicants’ engineer says the cause of the defect is “poor workmanship” by the respondent. He refers to s. 18B.(1)(a) and (c) of the Act.
He includes a recommendation in his report relating to this item. The recommendation starts by referring to his previous recommendations for roof framing items 1 and 2, discussed above in these reasons. He also includes two quotations from AS1684.2 clause 7.2.16, one version of which begins “Where underpurlins are not required, the collar ties shall be fitted …”
Finding: the Tribunal rejects this claim. The “structural documentation” that the report’s author appears to have relied upon to support this item was not before the Tribunal. The Tribunal cannot tell what the structural documentation requirement was in regards to this item. The expert’s reasoning must be disclosed so that the Tribunal can assess it and it is not satisfactory that there is a section in the expert’s report where he identifies some parts of reference documents, none of which are specifically connected to this item. There was no explanation whether or not underpurlins were required for this aspect of the work. What poor workmanship means in the context of this claimed defect is unclear.
Masonry wall: overhang
As to the masonry wall, the applicants’ engineer claims a number of defects.
First, he says the “edge overhang exceeds 15mm around the perimeter of the building, and in internal areas.” He says the cause of the defect is “poor workmanship” by the respondent. He refers to s. 18B.(1)(a) and (c) of the Act.
He cites part of AS3700-2019 Masonry Structures clause 12.5 tolerances in masonry, table 12.2 and also NSW Fair Trading Guide to Standards and Tolerances 2017 clause 3.16 “Masonry that overhangs slabs.”
He includes a recommendation in his report relating to this item. He refers to the relevant set-out survey. He says that “a portion of the walls do not meet the minimum 900mm setback requirements of the architectural documentation.”
The applicants’ engineer says that based on other defects relating to the masonry walls he recommends that the masonry walls be demolished.
Finding: the Tribunal rejects this claim. It is difficult to understand the applicants’ engineer’s conclusions on this item. The extent to which overhang is an issue is unclear to the Tribunal because of the reference by the applicants’ engineer to “a portion of the walls” not meeting the “requirements.” One asks, which portion of the walls do not meet the minimum? The photographs taken by the applicants’ engineer and included in this part of the report are difficult to place in context and give very little assistance to the Tribunal in understanding the extent of this issue.
A survey from Harrison Friedmann and Associates is referred to in the report. One asks, where is the survey? What are the qualifications and expertise of the person who did the survey for that firm? Then the “architectural documentation” is referred to that the report’s author appears to have relied upon to support this item, but the documentation was not before the Tribunal. The Tribunal cannot tell what the “requirements” were in regards to this item. The expert’s reasoning must be disclosed so that the Tribunal can assess it and it is not satisfactory that there is a section in the expert’s report where he identifies some reference documents, none of which are specifically connected to this item.
Masonry wall: damp proof course/cross cavity flashing not installed correctly
The engineer says that “damp proof course/cross cavity flashing not installed correctly.” He says the cause of the defect is “poor workmanship” by the respondent. He refers to s. 18B.(1)(a) and (c) of the Act.

He gives a number of references: NCC 2019 Building Code of Australia Volume 2 clause 3.3.5.8, AS3700-2018 clause 4.7.3 and NSW Fair Trading Guide to Standards and Tolerances 2017 clause 3.17.
Finding: the Tribunal accepts one part of this claim and rejects the balance of the claim.
The second photograph included by the engineer in this part of the report does raise a concern for the Tribunal in that the cavity flashing apparently depicted there is not continuous through the wall and is a breach of NCC 2019 Building Code of Australia Volume 2 3.3.5.8(a)(ii). The Tribunal is sufficiently satisfied that this work by the respondent has not been performed with due care and skill and so constitutes a breach of the statutory warranty imposed by the Act to perform work with due care and skill and in accordance with plans and specifications set out in the Contract.
There is no evidence before the Tribunal suggesting that the whole of the masonry wall should be demolished on the basis of that breach alone. There is no evidence before the Tribunal suggesting that rectification of this defect would require demolition of the whole of the masonry wall.
As to the quantum of this defect, the applicants have adduced no evidence which allows the Tribunal to find what amount should be allowed for this item, in isolation from other defects alleged with respect to the Dwelling’s masonry wall. The applicants’ case was that given a number of issues associated with the masonry wall, it needed to be demolished and rebuilt and the total costs of that was $111,891.00.
As for the other two photographs in this part of the report and the engineer’s opinion, it is difficult to understand the engineer’s reasoning with respect to them.
As for the first and third photographs included in this part of the report, it is not clear what is depicted there, whether they depict completed work or incomplete work, or how they relate to the references cited by the engineer in this part of his report.
The engineer’s opinion in relation to this matter about incorrect installation in respect of those two photographs does not go much beyond a bare assertion. How or which parts of the three references cited by the engineer are relevant to this item is unclear. What “poor workmanship” means in the context of the first and third photographs included in this part of the report is unclear.
Masonry wall: voids and holes in mortar
The engineer says there are voids and holes in mortar. He attaches 11 photographs to this part of his report. He says the cause of the defect is “poor workmanship” by the respondent. He refers to s. 18B.(1)(a) and (c) of the Act. He quotes NSW Fair Trading Guide to Standards and Tolerances 2017 clause 3.9 which states: “Voids and holes in mortar in masonry walls, with the exception of weepholes and vents, are defective if they are visible from normal viewing position, which is 1.5 metres.”
Finding: the Tribunal accepts this item claimed amounts to a defect in the respondent’s work under the Contract.
The eleven photographs in this part of the engineer’s report, and especially photographs 1, 2, 3, 5, 7, 8, 9, 10 and 11, show voids and holes in the mortar, which are not weepholes and vents and which, to my mind having regard to the photographs, are visible from normal viewing position. Having regard to the photographs, the Tribunal is satisfied that work has been done in breach of NSW Fair Trading Guide to Standards and Tolerances 2017 clause 3.9 or alternatively, not done with due care and skill because there are number of very clear gaps between the bricks, where it is clear that mortar should have been applied but has not been or is incomplete. The Tribunal is satisfied on the basis of the photographs and the said breach, that there is poor workmanship by the respondent and that this work has not been done with due care and skill, contrary to the warranty provided by s. 18B(1)(a) of the Act that is implied in the Contract.
In cross-examination from the respondent’s counsel, the engineer did not agree that the holes and voids outlined in his report would be filled if the walls were rendered. When then asked whether a renderer could fix this problem, the engineer said it would be “up to the individual renderer.” The engineer later also said that the holes and voids could be seen through the render. There is no evidence that the Tribunal was taken to showing that the walls in the Dwelling would be rendered. A concession by the witness about what any individual renderer could do is not helpful to the Tribunal in deciding the issue in dispute. But even if the walls were rendered, the engineer’s evidence was clear (and which the Tribunal accepts in relation to this matter) that the holes and voids would still be seen.
The Tribunal notes the evidence of the engineer during cross-examination, that the ‘void and holes issue’ was not a structural issue. Accordingly, the Tribunal has no basis, based on the engineer’s evidence, to find demolition of the masonry walls to be justified based on this issue or that rectification of this defects requires demolition of the masonry wall.
As to the quantum of this defect, the applicants have adduced no evidence which allows the Tribunal to find what amount should be allowed for this item, in isolation from other defects alleged with respect to the Dwelling’s masonry wall. The applicants’ case was that given a number of issues associated with the masonry wall, it needed to be demolished and rebuilt and the total costs of that was $111,891.00.
Masonry walls: inadequate spacing and installation of cavity ties
The engineer called by the Homeowners to give evidence says that there is inadequate spacing and installation of cavity ties throughout the external cavity wall of the building. He opines as to the spacing for cavity ties. He says wall “ties have vertical displacement, with several wall ties lower on the inside masonry leaf with potential for water to flow … Vertical spacing between wall ties was observed to exceed 750 mm.” He says “Wall ties have mortar debris set on top of wall tie installed within the wall cavity.”
He attaches 12 photographs to this part of his report. He says the cause of the defect is “poor workmanship” by the respondent. He refers to s. 18B.(1)(a) and (c) of the Act.
He quotes from one part of an Australian Standard applicable to masonry in small buildings which says “The outer leaf of a cavity masonry wall shall be connected to its supporting inner leaf by wall ties spaced at no more than 600 mm centres vertically.”
Finding: the Tribunal rejects this claim. The applicants have not discharged their onus of proof in relation to the item.
In assessing one of the aspects of the Builder’s work making up this item, the Tribunal is concerned about the engineer’s claim that there is displacement of the vertical ties. The eleventh photograph in this part of the report does suggest the possibility of displacement of ties. However, the Tribunal cannot with any confidence discern any displacement in the ties as depicted in any of the other photographs appearing in the report. The Tribunal’s duty is to determine issues before it on the evidence presented to it in this case and on the balance of probabilities. The Tribunal must also apply the principle that the party alleging a defect in work done under a contract under the Act (in this case, that is of course the applicants), has the onus to establish its case. The engineer’s reason for reaching his conclusion is not outlined in the report. The extent of any displacement of the ties is not made clear and the applicants have not discharged their onus in relation to the claim that there is displacement of the vertical ties.
As to the spacing of wall ties “at not more than 600 mm centres vertically”, the quality of the evidence is so poor that it cannot be relied upon by the Tribunal. There are six photographs showing a tape measure inside the cavity but in every case, I cannot actually see what the distances or spacings are in relation to the scale on the tape measure. The engineer’s reasoning is not persuasive.
The part of the Australian Standard cited by the engineer relates only to spacing of the wall ties, so in regards to issues other than spacing raised by the engineer, there is actually no standard against which the Tribunal can evaluate the evidence.
As for what “poor workmanship” means in the context of the balance of this claimed defect, that is unclear and there is no connection made between anything in the photographs and any established standards of proper workmanship.
Masonry wall: lack of installation of insulation within the wall cavity
The engineer says that there is a lack of insulation within the wall cavity as per the architectural documentation on sheet A0003. There are six photographs included in this part of the report showing some parts of external wall cavity where there is no insulation. In the ‘recommendation/discussion’ section of the report, there appears to be an extract from a sheet in the architectural documentation showing that ground floor external walls were to include rigid thermal installation required by BASIX. The Tribunal assumes that the extract is part of the architectural documentation on sheet A0003, based on the context of the ‘recommendation/discussion’ section of the report connected to this item.
He says the cause of the defect is “poor workmanship” by the respondent. He refers to s. 18B.(1)(a) and (c) of the Act.
Finding: the Tribunal accepts this item claimed amounts to a defect in the respondent’s work under the Contract.
This issue is difficult to determine because of the quality of the evidence. However, and while mindful that the onus of proving the defect rests on the applicant, the Tribunal is sufficiently satisfied that the evidence supports a finding that this claim by the applicants is established. A specific part of the architectural documentation has been cited by the engineer giving the Tribunal some confidence in the engineer’s reasoning, there appears from that documentation to be a requirement for rigid thermal insulation to have been installed and the photographs, (which doing my best seem to be photographs of parts of the ground floor external walls in the Dwelling), show no insulation at all.
The Tribunal is satisfied that the failure to install the installation is poor workmanship because a requirement in the plans and specifications set out in the Contract has not met been contrary to the warranty provided by s. 18B(1)(a) of the Act that is implied in the Contract.
The Tribunal also notes that the applicants’ evidence does not show how widespread this issue is. There is no evidentiary basis from which the Tribunal could conclude that rectification of this defect requires demolition of the masonry wall.
As to the quantum of this defect, the applicants have adduced no evidence which allows the Tribunal to find what amount should be allowed for this item, in isolation from other defects alleged with respect to the Dwelling’s masonry wall. As mentioned above, the applicants’ case was that given a number of issues associated with the masonry wall, it needed to be demolished and rebuilt and the total costs of that was $111,891.00.
Masonry wall: base bed joint exceeds 20 mm in thickness
The engineer says that there is a base bed joint that exceeds 20 mm in thickness. The engineer quotes a reference applicable to the thickness of exposed base bed joints. A photograph is included in this part of the report.
Finding: the Tribunal rejects this claim.
As to the single photograph that is included with this item in the engineer’s report, the photograph is not persuasive. The photograph has a narrow focus and it is difficult to understand the context of the photograph. The Tribunal is given no persuasive information about where within the Dwelling the photograph has been taken, what it depicts, and indeed, it is not even clear that the photograph is showing the base bed joint of the masonry wall. In any event, the joint and the measurement on the ruler shown in the photograph is not clear. Doing the best I can with the photograph, it seems that the joint, at one end of the joint, may extend up to a height of 20 mm, rather than exceeding 20 mm, as claimed, and where the rest of the joint is lower than 20 mm in height.
Masonry wall: deviation from specified thickness of bed joint, exceeding 10 mm
The engineer says that there is a deviation from “specified thickness of bed joint” and the bed joint was observed to exceed 10 mm. The engineer quotes a reference applicable to the thickness of mortar joints and a Guide applicable to the deviation permitted from the specified thickness of base joints. A photograph is included in this part of the report.
Finding: the Tribunal rejects this claim.
As to the single photograph that is included with this item in the engineer’s report, the Tribunal struggles to understand it. It may even appear from the photograph that a brick may even be missing from the wall or a face of the brick removed, but in relation to the defect relied upon, the Tribunal cannot see where the bed joints end or their thickness, let alone identify whether the deviation exceeds any relevant standard. The ruler shown in the photograph is unhelpful as the Tribunal cannot discern the measurement or measurements apparently sought to be indicated by the ruler.
Masonry wall: deviation from the specified width of the cavity
The engineer says that sheet A001 of the architectural drawings shows the wall cavity spacing that is to be maintained is 50 mm. He cites references which show that a deviation from the specified width of cavity is permitted plus or minus 15 mm.
Finding: In relation to one of the cavities depicted in this part of the report, the Tribunal accepts this item claimed amounts to a defect in the respondent’s work under the Contract.
On page 43 of the engineer’s report, the two photographs that appear on that page, show a wall cavity gap or gaps that appears to be over 70 mm in length. Thus, the cavity spacing depicted there is beyond the total of the required spacing (50 mm) and the permitted deviation (15 mm). The reference to a specific page in the architectural drawings gives the Tribunal a sufficient degree of confidence in the engineer’s reasoning behind his conclusion pertaining to this item.
The Tribunal is satisfied that the failure to construct this part or parts of the wall cavity does show poor workmanship because a requirement in the plans and specifications set out in the Contract has not been met, contrary to the warranty provided by s. 18B(1)(a) of the Act that is implied in the Contract.
There is no evidentiary basis from which the Tribunal could conclude that this defect requires demolition of the masonry wall or that rectification of this defect requires demolition of the masonry wall.
As to the photograph on page 42 of the engineer’s report, it is unclear to the Tribunal whether the wall cavity gap or gaps there is over 70 mm in length. As for the other photographs in this part of the report, apart from the ones already mentioned, they do not establish the defect claimed by the engineer. The photographs do not show impermissible spacing, as the Tribunal cannot see the measurement or measurements apparently sought to be indicated by the ruler appearing in the photographs.
As to the quantum of this defect, the applicants have adduced no evidence which allows the Tribunal to find what amount should be allowed for this item, in isolation from other defects alleged with respect to the Dwelling’s masonry wall. As mentioned above, the applicants’ case was that given a number of issues associated with the masonry wall, it needed to be demolished and rebuilt and the total costs of that was $111,891.00.
Masonry wall: incorrect construction of masonry piers at rear of building, rather than installation of steelwork in the ‘structural documentation’
The engineer claims there is incorrect construction of masonry piers at rear of building, rather than installation of steelwork in the ‘structural documentation.’ He refers to “the structural documentation by ABVD and architectural documentation by EMK Architects.”
Finding: the Tribunal rejects this claim.
The “structural documentation” and “architectural documentation” that the report’s author appears to have relied upon to support this item was not before the Tribunal. The Tribunal cannot tell what the documentation required in regards to this item.
The factual basis for the expert’s reasoning must be disclosed so that the Tribunal can assess it and be persuaded by it.
Concrete slab: saw cuts resulting in full depth cuts, terminating the continuity of the reinforcement
The engineer says in his report that there were saw cuts in part of the slab laid at the Dwelling, terminating the continuity of the reinforcement laid within the concrete slab. During his cross-examination, the engineer gave additional oral evidence in relation to the saw cuts, explaining that the cuts were right through the slab. He says in his report that these cuts involved “poor workmanship” by the respondent.
The engineer sets out in his report the steps needed to deal with the cuts. Mr. Arden’s report sets out the $8,660.00 cost of doing the work contemplated by the engineer and Mr. Arden’s report also explains how he reaches that costing.
The respondent submitted that the cuts were preparatory work for a change to the layout in the Dwelling, that had been agreed by the applicants, after the slab was laid. There was cross-examination by the respondent of Ms. Petkovksi where she agreed that there was a discussion between the parties about moving the location of the shower. There was cross-examination of the engineer where the engineer agreed that if the homeowner applicants had agreed to a change in the bathroom, such that cuts to the slab were needed to achieve the requested change, that this item would not be a defect.
Finding: The Tribunal accepts this item claimed amounts to a defect in the respondent’s work under the Contract.
The Tribunal does not accept the respondent’s submissions on this item as there is no evidence before the Tribunal that actually explains that the cuts in the slab observed by the engineer did follow on from a request from the applicants for a change in layout, or explains when the cuts took place.
The Tribunal recognises that the onus of proof falls on the applicants. The photographs in the engineer’s report do assist in substantiating his oral evidence about the depth of the cuts through the concrete slab and the Tribunal accepts his evidence that the cuts involve “terminating the continuity of reinforcement” in the slab. On the basis of the engineer’s brief evidence on this item, the Tribunal is sufficiently persuaded that the ‘termination’ of the “continuity of reinforcement” is “poor workmanship” and amounts to a breach of the statutory warranty that work will be done with due care and skill and in accordance with the plans and specifications set out in the contract: s. 18B(1)(a) of the Act.
The Tribunal is satisfied that the rectification work proposed by the engineer for this item is necessary to achieve conformity with the Contract and is a reasonable course to adopt (Bellgrove v Eldridge (1954) 90 CLR 613), or is at least not unreasonable (Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272).
The Tribunal is satisfied that $8,660.00 is the cost of doing the rectification work to address this item. The Tribunal accepts the engineer’s recommendations at p. 50 in his report and Mr. Arden’s costing of that work, on the basis of his expertise and the persuasive way he sets out in his report how he has come to the figure of $8,660.00.
Structural steelwork:

When setting out findings on each of the defects with respect to the masonry wall, the Tribunal explained why in each case, there was no evidentiary basis for the Tribunal to make a further finding that the particular defect, or part of claimed defect established by the evidence, suggested any need to demolish the masonry wall and re-build it.
The Tribunal now also considers whether, in light of the findings of several defects associated with the masonry wall, whether the aggregation of those findings provides any basis for the demolition and re-building of the masonry wall.
The evidence does not permit the Tribunal to make such a finding. The engineer’s explanation for the need for the demolition and rebuilding of the masonry wall, was expressed in his report very broad terms along the lines of, for example, the statement (at p. 22 in his report) “Based on the other defects relating to the masonry walls including setback requirements, I recommend that the masonry walls be demolished.” The logic of the engineer’s opinion, therefore, as the Tribunal understood it, was that the accumulation of all the other masonry wall defects, gave rise to the recommendation for demolition and re-building of the masonry wall. In circumstances where the Tribunal has found that the Homeowners’ evidence has established a minority of the defects claimed to exist with respect to the masonry wall, the persuasive logic of that opinion is substantially weakened. The Tribunal was not satisfied that the applicants established any of their claims about the masonry wall not complying with setback requirements. Further, as to the specific defects associated with the masonry wall that the Tribunal has found to be established, there was no evidence from the applicants’ engineer which suggested that there was anything about the nature of the specific defect that would merit demolition and rebuilding of the masonry wall.

Other elements of the Homeowners’ rectification claim

Because the applicants have established their damages claim in relation to only three of the claimed defects, the need for the Tribunal to explain in detail any findings and reasoning dealing with the Homeowners’ claim for preliminaries, builder’s margin, construction contingency and professional fees and authority costs, does not arise. And further as set out below, the Tribunal finds that a work order under the Act is warranted in this case. If that conclusion were reached in error, then on the three defect items where the Homeowners’ established their damages claim - the concrete slab item ($8,660.00), the drainage pit item ($10,000.00) and the rainwater tank and stormwater system item ($25,500.00) – I would have allowed builder’s margin calculated at 10% and a construction contingency calculated at 5% on those items (rather than 10%). I would not have been able fairly to allocate an amount for preliminaries, because of the way Mr. Arden calculated preliminaries “based on a four month duration” for all of the items of defective work suggested in the applicants’ engineering report. I would not have able to allow an amount for professional fees and authority costs because the evidence does not permit me to work out which of those claimed costs relate to the three defect items where the Homeowners’ established their damages claim.

Work order

As mentioned above, the applicants submitted that a work order should not be countenanced in these proceedings while the respondent submitted that if the Tribunal did, contrary to its submission, find defects, then a work order should be made. In submissions in reply, counsel for the applicants submitted that if the Tribunal did find that the applicants had not established the quantum of damages applicable to some of their claims for defects, that a work order would be appropriate.
The legal principles involved in determining whether or not to make a work order under the Act are well-established. These proceedings involve an allegation of defective building work. The Tribunal must have regard to s. 48MA of the Act and the preferred outcome that the “responsible party”, in this case, the respondent, should rectify the items of defective work which I have found above. However, the Act does not afford a builder any absolute right to a work order and in an appropriate case, the Tribunal can give relief to a homeowner without making a work order.
The Tribunal accepts Ms. Petkovski’s evidence (at paragraph 30 in her affidavit) that she and Mr. Hawe would prefer that a work order would not be ordered in this case. That preference though is not determinative of the Tribunal’s decision whether or not to make a work order. When considering whether to make a work order, the Tribunal must bear in mind the purpose of s. 48MA of the Act and that it was enacted for the timely and cost-effective resolution of disputes: Minister for Fair Trading, on 6 May 2014, Second Reading Speech for the Home Building Amendment Act 2014, by which s. 48MA of the Act was enacted.
In a case like this where the Tribunal has found that there are only three defects where the quantum of the applicants’ loss has also been established by the Homeowners’ evidence (and assuming no leave is given for further evidence on damages to be adduced), then if the Tribunal does not make a work order in this case, the Homeowners would be left without an effective remedy for the:

two defects which were found to have been established by the applicants’ evidence but the evidence did not permit a finding as to the quantum of the applicants’ loss or damage in relation to these items; and

three defects which were found to be established as to one portion of the defect claimed but the evidence did not permit a finding as to the quantum of the applicants’ loss or damage in relation to these items.

In the Tribunal’s view, an order for the respondent to pay nominal damages in respect of those other defects found, to have been established, would not amount to an effective remedy for the Homeowners or amount to the satisfactory resolution of the Homeowners’ claim.
The Tribunal therefore finds that in these proceedings, it is appropriate to give effect to the preferred outcome provided for in s. 48MA of the Act and make a work order requiring the Builder to rectify its defective work.
The Tribunal has not had the benefit of any submissions from the parties about the time that it should take to complete the work order. The terms of any work order that should apply to the defects, apart from the masonry wall issues, should be apparent from the reasons above as the reasons show that the Tribunal accepted the rectification work recommended by the Homeowners’ engineer. The Tribunal will direct the applicants to lodge with the Tribunal the terms of any proposed work order, having first sent a draft proposal to the respondent for its consideration.

The application by the Homeowners for leave to adduce further evidence

As should be apparent from the reasons given above, because of the form the Homeowner’s evidence took in relation to the masonry wall, and in circumstances where the Tribunal is not satisfied that the masonry wall should be demolished, but the Tribunal has made findings of some defects in the respondent’s work associated with the masonry wall, the Tribunal is left in a situation where it does not have any evidence before it of what rectification work should be ordered in relation to the particular defects associated with the masonry wall at the Dwelling that have been found to be established on the evidence.
As should also be apparent from these reasons, and as already mentioned above, the Homeowners, during the closing addresses, made application for leave to adduce further evidence, in the event that the Tribunal did not accept the engineer’s opinion that the masonry wall the subject of the evidence needed to be demolished and re-built and the Tribunal found that only some items of the claims made in relation to the masonry wall were established.
I will deal with that application now.
The Tribunal finds that the application for leave to adduce further evidence should be granted, but with any further evidence limited to the rectification work needed to respond to the defects in the masonry wall that have been found by the Tribunal.
The reasons for that finding are as follows:
The Tribunal is mindful of the “guiding principle” (s. 36 Civil and Administrative Tribunal Act 2013) that it must apply when dealing with the Homeowners’ application for leave to adduce further evidence.
In my view, further evidence from the Homeowners about damages for the rectification work needed to respond to the defects in the masonry wall should not be permitted. There is a risk that disputes between the parties about whether preliminaries should be allowed, what builder’s margin might apply, what contingency margin might apply, what professional costs and fees might be involved, and even disputes perhaps about rates and quantities for the work, are likely to have too great a cost in terms of efficiency, costs to the parties, and costs to the Tribunal in terms of time and resources. In circumstances where the Tribunal is satisfied, based on the timetabling orders made by the Tribunal on 25 September 2023, that the Homeowners had an ample opportunity to file evidence that they needed to advance their case in these proceedings and to consider their position with respect to evidence, any grant of leave for further evidence on damages is not merited.
The interests of justice do, on the other hand, weigh in favour of the Homeowners having an opportunity to adduce further evidence limited to the rectification work needed to respond to the defects in the masonry wall that have been found by the Tribunal. In circumstances where the parties joined issue about the masonry wall built by the respondent at the Dwelling, over the course of a two day hearing, and some claims of defects have been found to be established, it is in not just, in my view, that the Homeowners be left without a remedy in relation to those findings. It is true that the Homeowners could have filed and served evidence dealing with the rectification of each of the specific defects asserted in regards to the masonry wall, but they didn’t for whatever reason, and sometimes mistakes can happen in the course of litigation. In my view it would not be just and there would be a disproportionately adverse consequence for the Homeowners, if the Tribunal refused their application to adduce further evidence, notwithstanding that the Homeowners could have filed and served evidence dealing with the rectification of each of the specific defects asserted in regards to the masonry wall.
Granting the Homeowners the opportunity to adduce further evidence on rectification work that is necessary and not unreasonable to address the defects found to be associated with the masonry wall, should promote the interests of justice. The grant of such an opportunity, without entailing the additional risks to efficiency, costs to the parties, and costs to the Tribunal if the evidence where permitted as to the damages necessary and not unreasonable to rectify the defects found to be associated with the masonry wall, represents, in my view, an appropriate balancing between the competing interests recognised in s. 36 of the Civil and Administrative Tribunal Act 2013.
This aspect of the proceedings will be adjourned for a directions hearing so that a timetable can be made to deal with evidence and submissions going to this issue.
Before leaving this topic, an observation should be made. In circumstances where the Tribunal has made findings about four defect issues with respect to the masonry wall, it is of course open to the parties to negotiate between themselves the terms of any work order that could resolve the four defect issues with respect to the masonry wall. The Homeowners’ engineer has seen the masonry wall and as I understand it from the respondent’s application at the outset at the trial, the respondent had itself engaged an independent expert who had inspected the building works the subject of these proceedings. A negotiated outcome between the parties will save the parties the time and expense of further legal costs and possible expert evidence costs.

Liquidated damages

As mentioned above, the Tribunal has found that the Contract was terminated on 7 November 2022.
In paragraph 6.(e) in the points of claim, the applicants had cited the clause on which the applicants rely to ground their liquidated damages case and pleaded that the applicants “are entitled to liquidated damages.” The respondent admitted that paragraph in its points of defence. The respondent in its pleading, having admitted the paragraph, made no further plea that the liquidated damages clause was unlawful nor did it aver that the Tribunal should give, for a there-stated reason, relief against the clause.
Nonetheless the Tribunal is not satisfied that it should decide the applicants’ claim for liquidated damages purely on the basis of an admission in the respondent’s pleading, because in the particular circumstances of this case, the issues raised by the liquidated damages claim can be dealt with on their substantive merits and that is how I propose to deal with the issues.
The respondent submitted that the amount of liquidated damages sought by the applicants was unconscionable and was “in terrorem” for the respondent, such that the Tribunal should give the respondent relief from paying that amount. When the Tribunal suggested during closing addresses that that submission might sound like a submission that the liquidated damages clause was a penalty, which would entail a jurisdictional problem, counsel for the respondent submitted that the Tribunal, as part of its procedural powers to relieve against a party making a payment, should grant relief to the respondent from paying liquidated damages.
As to the respondent’s substantive argument about the liquidated damages clause, the Tribunal does not accept that submission.
The jurisdiction to relieve against a clause in a contract which names a sum or provides a means for a “pre-assessment or pre-estimation of damages” (Boucaut Bay Co Ltd v Commonwealth (1927) 40 CLR 98 at 106 – 107 per Isaacs J) upon the clause’s characterisation as a penalty, is a jurisdiction enjoyed by the Court of Equity (Andrews v Australia & New Zealand Banking Group Pty Ltd (2012) 247 CLR 205 at [10]) and is not a jurisdiction that is afforded to the Tribunal. The Tribunal’s jurisdiction is provided by statute and neither the statute which constitutes the Tribunal, being the Civil and Administrative Tribunal Act (2013) NSW, nor any other statute, affords the Tribunal the jurisdiction to prevent a party from relying on a clause such as clause 32 in the Contract, upon the Tribunal characterising the clause as a penalty.
The Tribunal’s procedural powers do not exist at large. Any procedural power of the Tribunal to grant a party relief from making a payment, otherwise due under a contract, is not a power that can exist outside of some cause of action or claim, either available at common law or available under statute, or established legal doctrine, upon which the Tribunal has power to adjudicate. The respondent did not point to any cause of action or claim that would support the exercise of the Tribunal’s asserted procedural power to grant a party relief from making a payment.
If those findings as to the Tribunal’s jurisdiction and the scope of its procedural powers are incorrect, and the Tribunal does has general jurisdiction to relieve a party from making a payment in circumstances that might be analogous (as I understood the respondent’s alternative submission) to the relief a Court might grant against a penalty, then the Tribunal is not persuaded that the jurisdiction to grant relief is enlivened on the facts of this case.
The Tribunal has no evidence before it to suggest that the liquidated damages clause agreed by the applicants and the respondent in their Contract is unconscionable, exorbitant or indeed, out of all proportion to the interests of the party which it is the purpose of the provision to protect (Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525 at [29]). Nor is there evidence to sustain a conclusion that there is a punitive purpose to the liquidated damages clause relied upon by the applicants in seeking to provide a negative incentive to perform and one that is so far out of all proportion with the positive interest in performance that the negative incentive amounts to deterrence by threat of punishment (Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525 at [164]). To the contrary, the value of the contract between the applicants and the respondent was a very substantial one. The Contract price for the works the subject of the Contract was $975,776.00. The Contract provided for the respondent’s building work to be performed over six stages. The commercial circumstances of the applicants would be substantially adversely affected if the respondent failed to comply with the Contract and especially, failed to complete the Contract, particularly in circumstances where there was not even evidence that the respondent had completed all of stage 3 of the works required under the Contract. There is no evidence suggesting to me that the daily amount of the liquidated damages clause in the Contract is unconscionable. The liquidated damages relied upon by the applicants is then calculated over an interval that appropriately, in my view, reflects the passage of time between the respondent’s failure to bring the building works to practical completion and the date at which the Contract is at an end.
The Tribunal finds accordingly that the liquidated damages clause in the Contract is enforceable. Applying the terms of the clause, the Tribunal finds that the applicants are entitled to liquidated damages in the sum of $117,600.00 (84 days between 15 August 2022 as the ‘date of practical completion’, and 7 November 2022 as date the Contract ‘is ended’, and being the earliest possible date of the dates identified in clause 32.(1) of the Contract, calculated at $1,400.00 per day).
Because the Tribunal has accepted the Homeowners’ claim with respect to liquidated damages, the alternative claim for which they advance for accommodation costs does not arise for consideration.

Out of pocket expenses

The applicants claim $30,271.39 for ‘out of pocket’ expenses based on the amounts set out in paragraphs 25 and 26 of Ms. Petkovski’s affidavit. The applicants submit that there was no cross-examination of Ms. Petkovksi challenging any of those amounts. That submission is correct but the Tribunal nonetheless can only award damages where there is a proper legal basis to do so.
The Tribunal will deal first with the amounts referred to in paragraph 25 of the relevant affidavit. These amounts are said in Ms. Petkovski’s affidavit to represent the costs of “investigating” the respondent’s works.
The Tribunal is not satisfied that it is appropriate to award the applicants $11,880.00 for the Triaxial Consulting Pty Ltd invoice. So far as the Tribunal can tell, the Triaxial Consulting Pty Ltd invoice is for the engineer’s report used in the proceedings. The invoice is for an “expert witness report” and is dated 31 March 2023. This seems to me to be a cost of the proceedings which the Homeowners are seeking to recover as damages. Thus, the Tribunal finds that the invoice does not represent a loss recoverable as a head of damage in an action for breach of contract: see for example Michael Vaz Lorrain v Singapore Rifle Association [2020] 114 at [29].
As for the amounts appearing in the two Construction Legal Pty Ltd invoices, dated 4 July 2022 and 1 September 2022 and noting that the second substantive item of work referred to in the Construction Legal Pty Ltd invoice is “consider and respond to email from client regarding NCAT application”, I am not satisfied that the invoices represent anything under than legal costs incurred by the Homeowners in connection with anticipated legal proceedings. Thus, the Tribunal finds that the invoices do not represent a loss recoverable as a head of damage in an action for breach of contract.

As for the amounts appearing in the two Noviion Engineering Pty Ltd invoices, the Tribunal infers that they relate to the Noviion Engineering Pty Ltd report in the Homeowners’ evidence relied upon at the hearing. That report describes its author reading and agreeing to be bound by NCAT Procedural Direction No. 3 and Schedule 7 in the Uniform Civil Procedure Rules. The invoices also show that they were sent to Construction Legal Pty Ltd. I am not satisfied that the invoices represent anything under than costs incurred by the Homeowners in connection with anticipated legal proceedings. Thus, the Tribunal finds that the invoices do not represent a loss recoverable as a head of damage in an action for breach of contract.
Turning next to the amounts referred to in paragraph 26 of the relevant affidavit, these amounts are said in Ms. Petkovski’s affidavit to be incurred in connection with the respondent abandoning the building site and the resulting termination of the Contract.
As for the Screw Piling Solutions Pty Ltd invoice that invoice relates to “debt collectors fees due to non-payment from Basbuilt” and a fee “to allow release of certification”. The Tribunal knows very little about the fees referred to in the invoice and I am not satisfied that it represents loss properly arising from the respondent’s breach of the Contract. The Tribunal does not understand how the invoice is connected with the respondent abandoning the building site and the resulting termination of the Contract.
As for the Freddy’s Skip Bins Pty Ltd invoice from 5 December 2022, the Tribunal knows very little about the 9m square skip bin referred to in the invoice and I am not satisfied that it represents loss properly arising from the respondent’s breach of the Contract. The Tribunal does not understand how the invoice is connected with the respondent abandoning the building site and the resulting termination of the Contract.
As for the Spot On Projects invoice from 7 December 2022, the Tribunal knows very little about the driver and excavator and rubbish removed from the site, as referred to in the invoice, and I am not satisfied that it represents loss properly arising from the respondent’s breach of the Contract. The Tribunal does not understand how the invoice is connected with the respondent abandoning the building site and the resulting termination of the Contract.
As for the Harrison Friedmann & Associates Pty Ltd invoice, the Tribunal notes that it is dated 10 February 2023 and that it applies to the Property. The invoice represents work including for surveying and establishing boundaries and locating the building and obtaining heights. It seems to me that this is an invoice for the survey referred to from time to time in the Homeowners’ engineer’s report referred to above in these reasons. This seems to me to be a cost of the proceedings which the Homeowners are seeking to recover as damages. Thus, the Tribunal finds that the invoice does not represent a loss recoverable in an action for breach of contract. Further, I am not satisfied that it represents loss properly arising from the respondent’s breach of the Contract. The Tribunal does not understand how the invoice is connected with the respondent abandoning the building site and the resulting termination of the Contract.
As for the Wire Mesh World Invoice, the Tribunal cannot find any Wire Mesh World Invoice in the applicants’ evidence, knows nothing about that invoice and is not satisfied that it represents loss properly arising from the respondent’s breach of the Contract.
Had the invoices represented losses recoverable by the applicants, the Tribunal is satisfied from the Homeowners’ evidence (the exhibit to Ms. Petkovski’s affidavit) that each of the amounts referred to in the relevant invoices have been paid by them.

Interest

The Homeowners claim interest on their liquidated damages claim and for the out-of-pocket damages claimed by them. For the reasons explained above, the Tribunal is not satisfied that the out-of-pocket expenses claimed are properly payable to them as damages or loss arising from a breach of the Contract.
No submission was made on behalf of the Homeowners explaining why interest should be awarded in their favour on the liquidated damages claim which the Tribunal has found established.
There is no contractual right in the Contract for the Homeowners to recover interest on the liquidated damages amount (noting that clause 33 in the Contract does not apply in favour of the Homeowners), no statutory right to recover interest was relied upon, and there is no evidence of any actual loss by the Homeowners in respect of interest, either as the result of being out of their money as a result of a breach of contract or being forced to borrow money and as a consequence paying interest that they otherwise would not have had to pay.
The Tribunal is not satisfied that there is any proper basis for it to make an order that the respondent should pay interest on the liquidated damages.

Duty to mitigate and other defences

The respondent, at paragraph 24 in its points of defence, pleads three affirmative matters raised as “defences”, including that the Homeowners allegedly “failed to mitigate their loss.” During the closing address on behalf of the respondent, the Tribunal was not taken to any evidentiary material that established any element of any of those affirmative matters pleaded as defences. The Tribunal is not satisfied that any of the matters pleaded at paragraph 24 in its points of defence are established on the evidence before the Tribunal.

COSTS

The Tribunal will also direct that if any party seeks a costs order, that party should write to the Registry and ask for the matter to be re-listed for a short costs hearing before me, on a date convenient to the Registry and the parties. If there is evidence relevant to the issue of costs, it can be filed with the Registry and served before any costs hearing and tendered on the occasion of the costs hearing.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 02 May 2025

Medium Neutral Citation:	Petkovski and Hawe v Basbuilt Developments Pty Ltd [2024] NSWCATCD 62
Hearing dates:	15 and 16 April 2024
Date of orders:	11 November 2024
Decision date:	11 November 2024
Jurisdiction:	Consumer and Commercial Division
Before:	M Tyson, Senior Member
Decision:	(1) The respondent is ordered to pay the applicants $117,600.00 immediately; (2) Direct the applicants, by 20 November 2024, to serve on the respondent a draft document setting out the terms of a proposed work order under s. 48MA of the Home Building Act, that reflects the findings set out in this judgment; (3) If the respondent does not agree to the terms of the applicants’ proposed work order that reflects the findings set out in this judgment, direct the respondent, by 27 November 2024, to lodge with the Sydney registry of the Tribunal and serve on the respondent, a memorandum (no more than three pages in length) explaining the reasons for the respondent’s opposition to the applicants’ proposed work order; (4) If the respondent does not agree to the terms of the applicants’ proposed work order that reflects the findings set out in this judgment, direct the applicants, by 27 November 2024, to lodge with the Sydney registry of the Tribunal and serve on the respondent, a document setting out the terms of a proposed work order that reflects the findings set out in this judgment (5) Leave is granted to the applicants to adduce further evidence limited to the rectification work needed to address the defects in the masonry wall that have been found by the Tribunal; (6) List the proceedings before me for a short hearing, on a date convenient to the Registry and the parties, after 27 November 2024, with a view to (a) making directions for the serving of evidence and submissions limited to the rectification work needed to address the defects in the masonry wall that have been found by the Tribunal, (b) to hear submissions and decide, if necessary, any dispute about the applicants’ proposed work order, contemplated by the orders made above; and (c) hear submissions and decide, any applications for a costs order; (7) The application is otherwise dismissed; (8) Direct that if any party seeks a costs order, that party should, by the close of business on 20 November 2024, file with the Registry and serve on the other party, the terms of any costs order contended for, evidence (if any) relevant to the question of costs, and a short outline of submissions (that is no more than three pages in length) in support of the application for a costs order; (9) Direct that if any party opposes a costs order proposed by the other party, that party should, 2 business days before any hearing listed in accordance with order 6 above, file with the Registry and serve on the other party, evidence (if any) relevant to the question of costs, and a short outline of submissions (that is no more than two pages in length) in opposition to the costs order sought against it; (10) If any orders resolving the extant issues are consented to by the other party, the parties are granted liberty, until the close of business on 27 November 2024, to file with the Tribunal signed consent orders dealing with those extant issues.
Catchwords:	CONTRACTS – building and construction – Home Building Act 1989 (NSW) – damages – liquidated damages – whether work order should be made under s. 48MA of the Home Building Act – damages - out of pocket expenses EVIDENCE – expert evidence – requirement to explain expert’s reasoning process JURISDICTION – whether Tribunal has jurisdiction to relieve against a liquidated damages clause
Legislation Cited:	Civil and Administrative Tribunal Act (2013) NSW Home Building Act (1989) NSW
Cases Cited:	Andrews v Australia & New Zealand Banking Group Pty Ltd (2012) 247 CLR 205 Bellgrove v Eldridge (1954) 90 CLR 613 Boucaut Bay Co Ltd v Commonwealth (1927) 40 CLR 98 Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588 Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525 Pavey and Matthews Pty Ltd v Paul (1987) 162 CLR 221
Texts Cited:	NCAT Procedural Direction No. 3 Minister for Fair Trading, on 6 May 2014, Second Reading Speech for the Home Building Amendment Act 2014
Category:	Principal judgment
Parties:	Margaret Petkovski and Rick Hawe (applicants) Basbuilt Developments Pty Ltd (respondent)
Representation:	Counsel: J. Young (applicants) A.E. Hopkins (respondent) Solicitors: Colin Biggers & Paisley (applicants) Reuben George Lawyers (respondent)
File Number(s):	2023/00379613
Publication restriction:	Nil