Rehman v F&F Smart Homes Pty Ltd

[2023] NSWCATCD 12

Civil and Administrative Tribunal

New South Wales

• Amendment notes

Medium Neutral Citation:

Rehman v F&F Smart Homes Pty Ltd [2023] NSWCATCD 12

Hearing dates:

21 December 2022

Date of orders:

16 January 2023

Decision date:

16 January 2023

Jurisdiction:

Consumer and Commercial Division

Before:

G Ellis SC, Senior Member

Decision:

1.   The respondent is to carry out a work order, as set out in Schedule 1.

2.   The respondent is to pay the applicant $26,250.64 forthwith.

3.   The applicant’s submissions as to costs, not exceeding five pages, are to be filed and served, together with any relevant evidence, on or before 23 January 2023.

4.   The respondents’ submissions as to costs, not exceeding five pages, are to be filed and served, together with any relevant evidence, on or before 6 February 2023.

5.   Any submissions in reply from the applicant, not exceeding two pages, are to be filed and served on or before 13 February 2023.

6.   Any submissions should indicate whether it is agreed that costs should be determined on the papers, ie without the need for a further hearing.

Catchwords:

BUILDING AND CONSTRUCTION – claims for defective, incomplete work, and delay – whether work order or money order should be made

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW) – s 50, s 60

Civil and Administrative Tribunal Regulation 2013 (NSW) - s 9(1)(a)

Civil and Administrative Tribunal Rules 2014 (NSW) – r 35

Home Building Act 1989 (NSW) – s 3B, s 18B, s 48MA

Cases Cited:

Banco de Portugal v Waterlow and Sons [1932] AC 452

Blatch v Archer [1774] ER 2; 1 Cowper 63

Bellgrove v Eldridge [1954] HCA 36

Brooks v Gannon Constructions Pty Limited[2017] NSWCATCD 12

Galdona v Peacock [2017] NSWCATAP 64

Hadley v Baxendale (1854) 9 Exch 341

Haines v Bendall [1991] HCA 15

Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313

Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305

Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8

TC Industrial Plant Pty Ltd v Robert’s Queensland Pty Ltd [1963] HCA 57

The Owners – Strata Plan No 76674 v Di Blasio [2014] NSWSC 1067

Category:

Principal judgment

Parties:

Applicant – Abdul Mateen Rehman
Respondent – F&F Smart Homes Pty Ltd

Representation:

Counsel:
Applicant – W Marshall
Respondent – W Calokerinos

Solicitors:
Applicant – Greenwood Lawyers
Respondent – Arch Law (Australia) Pty Ltd

File Number(s):

HB 22/00516

Publication restriction:

Nil

Contents

Topic	Paragraph
Outline		1
Hearing		3
Jurisdiction		10
Relevant law		11
Lay evidence		16
Mr Rehman		16
Mr Khan		20
Expert evidence		31
Owner’s submissions		32
Builder’s submissions		43
Submissions in reply		48
Consideration		51
Assessment of witnesses		51
Work order or money order?		62
Contested items		70
Low e glass		72
Feature tiles		74
Insulation		79
Drainage		90
Scaffolding		99
Retaining wall		100
Concrete path		107
Defective work		112
Unit 1, internal		113
Unit 1, external		120
Unit 2, internal		125
Unit 2, external		134
Incomplete work		141
Period of delay		144
Claim for unit 2		152
Claim for unit 1		157
Summary		165
Costs		167
Orders		169

Reasons for decision

Outline

1. These proceedings relate to the construction of duplex residential properties in Schofields. The owner alleged defective work, incomplete work, and delay.

2. After considering the evidence, and having regard to the submissions, the Tribunal determined that a work order should be made in relation to the defective work, and that there should be a money order in relation to the remaining claims of the owner.

Hearing

3. Documents admitted as evidence of marked for identification were as follows:

Exhibit A   Two volume joint tender bundle (1-1456)

MFI 1   Owner’s outline submissions

MFI 2   Builder’s outline submissions

MFI 3   Rejected pages from joint tender bundle (1457-1567)

MFI 4   Public Health (COVID-19 Temporary Movement and Gathering Restrictions) Order 2021

MFI 5   Public Health (COVID-19 Additional Restrictions for Delta Outbreak) Order 2021

MFI 6   Schedule of Public Health Orders

4. The rejected documents were (1) an additional affidavit of the owner, dated 3 December 2021, seeking to raise additional defects, (2) a further report from the owner’s expert, dated 16 December 2022, (3) a further affidavit of Mr Khan for the builder, dated 19 December 2022, and (4) proposed Amended Points of Claim, dated 20 December 2022.

5. A hearing of this application was previously adjourned on 28 June 2022, due to the owner’s desire to rely on additional evidence and, later, an allocated hearing date was vacated on two occasions. The late filing of documents makes it difficult to achieve procedural fairness and, given the history of this application, the Tribunal considered the preferable course was to confine the evidence to that which had been filed and service in response to the Tribunal’s directions.

6. Those directions are designed the achieve a level playing field whereby each party has an opportunity to lead evidence in support of their case and in response to the case of the other party. To permit parties to rely on later evidence, without prior notice to either the Tribunal or the other party, would be to condone evidentiary ambush and to move towards a situation where parties feel they can file and serve whatever they like whenever they wish.

7. As to the defects claim, it indicated at the outset of the hearing, that the owner sought a money order, and the builder sought a work order.

8. After cross-examination began, it became apparent that there were many items where the experts agreed there was defective work and agreed on the applicable rate but disagreed on the number of hours reasonably required to carry out rectification work. That was in the context of the owner’s expert raising what was said, in the owner’s outline submissions, to be 94 defects in 30 locations for what was called the left-side dwelling and 106 defects in 36 locations for what was called the right-side dwelling. Rather, than trawl through many instances of such differences, counsel left those differences to the Tribunal so they could focus on the remaining issues raised by the experts.

9. That enabled the cross-examination of those experts, Mr Bournelis for the owner and Mr Sim for the builder, to be completed before 11am, after which there was cross-examination of the owner and then the builder’s Mr Khan. As a result, closing submissions were made in the afternoon.

Jurisdiction

10. These proceeding relate to residential building work and have been commenced. Accordingly, the Tribunal has jurisdiction under the Home Building Act 1989 (the HBA).

Relevant law

11. The statutory warranties for residential building work, set out in s 18B(1), are:

(a)   a warranty that the work will be done with due care and skill and in accordance with the plans and specifications set out in the contract,

(b)   a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new,

(c)   a warranty that the work will be done in accordance with, and will comply with, this and any other law,

(d)   a warranty that the work will be done with due diligence and within the time stipulated in the contract or, if no time is stipulated, within a reasonable time,

(e)   a warranty that, if the work consists of the construction of a dwelling, the marking or alternations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling,

(f)   a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes know to the holder of the contractor licence or person required to hold a contractor’s licence, or another person with express or apparent authority to enter into or vary any contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires that work to achieve, so as to show that the owner relies on the holder’s or person’s skill or judgment.

12. It is necessary to note that s 48MA of the HBA provides:

A court or tribunal determining a build claim involving an allegation of defective residential building work or specialist work by a party to the proceedings (the responsible party) is to have regard to the principle that rectification of the defective work by the responsible party is the preferred outcome.

13. In Galdona v Peacock [2017] NSWCATAP 64 it was noted that s 48MA set a preferred outcome, not a mandatory outcome. That case suggested a work order would not be appropriate in circumstances which include if the relationship between the parties has broken down. It is clear the Tribunal must weigh up the factors in each case and make an evidence-based decision: Brooks v Gannon Constructions Pty Limited [2017] NSWCATCD 12 at [64].

14. If a money order is to be made, the assessment of the amount payable must be determined by reference to the fundamental principle that the party affected by the breach should be put in the same position as if the breach had not occurred: Haines v Bendall [1991] HCA 15 (Haines). It is also noted that, where there has been defective work, the rectification method must be both necessary and reasonable and the rectification cost must be reasonable: Bellgrove v Eldridge [1954] HCA 36 (Bellgrove).

15. Decisions such as Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305 (Makita) make it clear that, for expert evidence to be accepted (1) the opinion must clearly indicate the facts upon which it is based, (2) those facts must be proved so there is a factual basis for the opinion, (3) reasons or the process of reasoning for the opinion must be disclosed, and (4) any opinion must fall within the expert’s qualifications and experience.

Lay evidence

16. Mr Rehman (the owner) provided three affidavits (A9, ie from page 9 in Exhibit A, A131, and A416). The first of those affidavits, which traced the history of the dealings between the parties, included the owner’s evidence that: “The plan for the other unit (Unit 1) was for my mother to live in it or to advertise it for rent once the building works were finished.” (A10 at [6]). This affidavit also set out the owner’s views on a work order (A33 at [131]).

17. The second affidavit of the owner revisited matters raised in the first affidavit and raised further matters. The third affidavit provided additional evidence in relation to the water meter for unit 1 and the stormwater work.

18. In cross-examination, the owner accepted that his expert, Mr Bournelis could oversee any rectification work. He also accepted that he would be content for the rectification work to be carried out by a licensed builder other than the respondent and certified by an expert. The last question and answer in cross-examination served to confirm that the owner was content for another builder to carry out the rectification work with Mr Bournelis certifying that work.

19. To the owner’s evidence that the second duplex unit could not be rented until the defects were fixed was added evidence, during cross-examination, that he could not mitigate his loss by fixing those defects as he did not have the money to do so. When it was indicated that he had provided no evidence of that, the owner suggested he could, if required. He said that, from handover to date, he had been paying for two mortgages.

20. Mr Khan provided a single affidavit (A438) which succinctly dealt with matters of the quotation, contract, development approval, variations, payments, plans, and hydraulic works, before dealing with events between commencement and completion of the building work relevant to the owner’s delay claim. He also referred to a 1 November 2021 letter from his then solicitors (A846) which contained an offer to remedy any defects found by a building inspector agreed by the parties. This affidavit concluded with paragraphs relating to the insultation and low e glass.

21. In cross-examination, Mr Khan indicated that, although the insulation was installed by a sub-contractor, he was present and made sure the correct insulation was delivered. He accepted that there was no insulation at the back of the house, in the kitchen and dining room but disputed the claim that there was insulation only rated 1.5 which should have been rated 2.5.

22. When his attention was drawn to wording which said, in relation to bathroom tiles, “statement tile wall (5 sqm) in each bathroom from builder’s range (Capped to $30 sqm)” (A467), and it was put to him that a 5 sqm area was not installed, Mr Khan suggested he installed what was required. It was noted that feature tiles were only installed in the niche in the bathroom wall (A904).

23. Mr Kahn was then taken to four matters relating to the “Smart Theatre Room” (A479). First, in relation to the specification of “EPSON HD Projector (to be installed in Ceiling Mount)”, Mr Khan suggested that was supplied but not installed. Secondly, as to “High Spec Polk Home Theatre Sound System”, it was suggested that a better or equivalent was provided. However, it was then conceded that a sound bar was provided. Mr Khan suggested it did not need to be installed, only placed in position. Thirdly, it was conceded there was no compliance with “Premium Dulux Domino Paint in Theatre Room”. Fourthly, as to the “Frost Glazing Sliding Door to Media Room”, it was suggested the plans did not have a sliding door and what was bult was as shown in the plans.

24. The next topic covered in cross-examination was the specification related to the following words in the quotation (A480):

Points Agreed via Email Communications or Whats App Conversations:

…

3)   All windows/doors smart low e laminated and tinted (Agreed, need to check tinted options)

25. Mr Khan claimed that he checked with the glass supplier who was said to have advised that low e glass cannot be tinted but, when asked if he disclosed that to the owner, he said he did not know. Next, it was conceded the builder did not comply with the specification of “Retaining wall split face blocks with caps”.

26. It was agreed that the contract price of $980,000 comprised the tender amount of $895,000, $25,000 for “Section 94” (fees to council), and $60,000 for the pool, as recorded in handwriting on a page signed by the parties (A482). It was conceded that the pool was not built.

27. As to the time for completion, Mr Khan’s evidence was that work commenced on 25 September 2020 (A442 at [31]). He agreed with the proposition that the time for completion, according to the contract was 38 calendar weeks after that, which was 18 June 2021, final payment was made on 29 November 2021 and that the keys were handed over on or about 3 December 2021. Matters relating to extensions of time are considered below.

28. After being referred to the plans listed in the construction certificate (A622), Mr Khan accepted that the stormwater pits were not installed in accordance with the plan at A742 and likewise for the landscaping plan at A757.

29. Mr Khan agreed that he knew the owner intended to live in one of the units and that he was renting until it was built but denied knowing the owner was going to rent the other unit. His attention was directed to a 4 October 2021 text message (A97) in which he said: “its you who will be losing rent and paying rent”.

30. In re-examination, Mr Khan referred to text messages, containing photos, relating to the owner’s selection of bathroom tiles (A579), which suggested a choice of grey floor tiles, while wall tiles, and a different choice of tile for use in the niche. He suggested the red handwriting on A455 was that of the owner’s brother.

Expert evidence

31. Reports were provided by Mr Borunelis for the owner (A850 and A1111) and by Mr Sim for the builder (A1278). A joint report was also provided (A1397). That expert is considered below, when dealing with the defects claim.

Owner’s submissions

32. In relation to the defects claim, it was submitted that the primary dispute was how many hours are required to carry out the rectification work and, in that regard, it was suggested the evidence of Mr Bournelis should be preferred to that of Mr Sim. Submissions were also made in relation to the other matters that were canvassed in cross-examination.

33. As to the low e glass, it was contended that low e tinted was included in the quote (A480), that it was accepted that the installed glass was clear, and that the experts agreed that low e glass can be tinted.

34. Next, the feature tiles. It was said there was not 5 sqm of features tiles installed. Reference was made to the words and photos at A472. It was noted that Mr Sim agreed with the amount of $2,770 suggested by Mr Bournelis, on an ‘if found’ basis.

35. The third topic was insulation. It was claimed that ratings of 1.5 for acoustic, 3.5 for ceilings, and 2.5 for walls was required and that the experts agreed there was no insulation in the ceiling, but the method of rectification was in dispute,

36. In relation to drainage pits and stormwater, it was suggested that the experts agreed, and Mr Khan accepted, there had been a failure to comply with the plans.

37. Fifthly, submissions were made in support of the claim that scaffolding was required for the painting work.

38. Next, the retaining wall. It was contended there was agreement that what was required was not installed, that it was not sufficient to refer to the wall functioning it was not aesthetically satisfactory, and that the decision in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8 (Tabcorp) at [17]-[18] set a high threshold for finding, when applying what was said in Bellgrove, that a method of rectification is not reasonable.

39. As to incomplete work, the owner claimed $21,480, being the cost to complete the pool less the amount attributed to that work in the contract price.

40. On the topic of the delay claim, it was contended that the delay period was from either 18 June 2021, according to the contract, or from 30 June 2021, by reason of the delayed notified by the builder, to either 5 November 2021, when the occupation certificate was issued, or 3 December 2021, when the keys were handed over. The owner was said to be paying $410 per week in rent and that a claim for that amount for was made in the owner’s outline submissions for 18 or 22 or 24 weeks. It was acknowledged that a deduction of $2,000 should be made to allow for the payment already made for delay by the builder.

41. It was suggested that a loss of rent from the other unit either flowed naturally or was in reasonable contemplation of the parties, plainly a reference to the two limbs set out in Hadley v Baxendale (1854) 9 Exch 341 (Hadley). Reference was made to the text message sent by Mr Khan (A97) which was said to show awareness. That rent loss claim was said to be $750 per week for 22 weeks less a 4.4% real estate agent’s fee, giving an amount of $15,774. There was a further claim, that the unit could not be rented until the defects were rectified, said to add a further 52 weeks, which added $37,284 ($750 per week for 52 weeks, less 4.4%) to the claim for lost rent for the second unit.

42. On the question of whether a work order or money order should be made, the points made were (1) the extent of the defects, (2) that the builder had disregarded its contractual obligations, (3) that there was a failure to recognise defects in the work, and (4) that there was unchallenged evidence of a breakdown in the owner-builder relationship (A33 at [131](a)).

Builder’s submissions

43. As to s 48MA, it was suggested that the builder was ready, willing, and able to carry out rectification work and would be able to commence that work from 1 March 2023. In response to the suggestion of a relationship breakdown, it was indicated that the builder is willing to engage its expert, Mr Sim, to carry out the rectification work and for that work to be inspected/certified by Mr Bournelis.

43. Allowing Mr Sim to carry out the rectification work was said to have advantages in that the Tribunal could be confident the necessary work would be done to the necessary standard and within time.

44. In relation to any difference between the evidence of Mr Sim and Mr Bournelis, it was noted that Mr Sim had made concessions which the builder accepted, and the Tribunal was urged to prefer his evidence to that of Mr Bournelis.

45. On the topic of damages for delay, the Tribunal was then taken through a sequence of dates and events relevant to these proceedings, from 15 January 2020 to 6 April 2022. Reference was made to the Public Health Orders provided to the Tribunal (MFI 4 and MFI 5). It was suggested that the owner was suggesting the second unit could not be rented at a time when he was living in the first unit and that a suggestion that a site was dangerous by reason of an outdoor barbeque was an insufficient basis for that rent claim.

46. It was observed that clause 5 of the contract (A496) required commencement of the building work within 60 working days of the latest of three events and that clause 6 (A497) required the builder “to complete the work within 38 calendar weeks from the date when the work is due to commence as referred to in Clause 5”. As the construction certificate was dated 18 September 2020, that was said to give a date for commencement of 14 December 2020. Adding 38 weeks was said to give 6 September 2021 and 16 days for the Public Health Orders gave 28 September 2021 Reference was made to s 3B of the HBA in relation to the date of completion of the work. The Tribunal was reminded that $2,000 had already been paid by the builder to the owner.

Submissions in reply

48. Reference was made to decision in The Owners – Strata Plan No 76674 v Di Blasio [2014] NSWSC 1067 (Di Blasio) in support of the proposition that the owner’s claim for damages would only be affected if it could be said that he unreasonably refused an offer made by or for the builder.

49. It was also suggested that damages arose from the owner being deprived of use of the units, having to pay rent and not being able to earn rent, and that the obvious point when those damages stop is when the owner gains access which was said to be 3 December 2021.

50. Finally, it was suggested that Mr Sim’s involvement in the proceedings to date operated to exclude him from carrying out the rectification work and that a money order should be made, rather than a work order.

Consideration

51. Assessment of witnesses. In his first affidavit, dated 28 June 2022, the owner said (A10 at [6]):

The plan for the other unit (Unit 1) was for my mother to live in it or to advertise it for rent once the building works were finished.

52. In his second affidavit, dated 8 July 2022, the plan for his mother to live in unit 1 was retracted (A140 at [58]), on the basis that his mother was living with his brother. There was no supporting evidence from either the owner’s brother or their mother. That second affidavit, which was sworn only ten days after the first, does not explain why the evidence in the first affidavit was being changed.

53. It is to be noted that the second affidavit (dated 8 July 2022) suggested it was not until after the subject building work started (on 25 September 2020) that the owner’s mother began living with his brother. But that evidence was known to the owner at the time he swore his first affidavit (28 June 2022).

54. In those circumstances, it appears the second affidavit was used to remove a non-compensable option (the owner’s mother living in unit 1) and leave only the compensable option (unit 1 being rented). It is not necessary to make such a finding but that is a reason for treating the evidence of the owner with caution.

55. Support for that view derives from further evidence of the owner in relation to renting unit 1, namely his evidence as to whether that property could be rented without first addressing any defects. In his first affidavit (A33 at [128]), the owner said he had been informed by a real estate agent that the duplex referred to as unit 1 could be rented for between $750 and $770 per week and 11 pages were provided in support of that claim (A120-130), having been obtained from Azeem Khan of Quba Real Estate. In the same paragraph the owner added the sentence:

However, because of the numerous defects identified, I have not been able to rent out Unit 1 to date.

56. The owner’s second affidavit (A142 at [66]) suggested that, on or about 20 December 2021 when he was inspecting unit 1 for the purpose of preparing his rental appraisal, Mr Khan said words to the effect:

There are lots of defects. These will need to be fixed up before you get any tenants in.

57. Again, it is to be noted that the second affidavit (dated 8 July 2022) gave evidence of what Azeem Khan is alleged to have said on or about 20 December 2021, but that evidence was known to the owner at the time he swore his first affidavit (28 June 2022). Again, there is no explanation as to why the evidence in the second affidavit was not included in the first affidavit.

58. Again, what the owner said in his second affidavit sought to strengthen what he said on the topic of renting unit 1 by elevating his view to in his first affidavit to that of a real estate agent in his second affidavit. That evidence in the second affidavit raises the question as to why Azeem Khan did not say that is his rental appraisal and why the owner did not ask him to include that in his rental appraisal, a document obviously prepared after that inspection.

59. As Lord Mansfield observed almost 250 years ago, in Blatch v Archer [1774] ER 2; 1 Cowper 63 at 65:

It is certainly a maxim that all evidence is to be weighed according to the proof which it was in the power of one side to have produced ...

60. The Tribunal also considers the evidence of Mr Khan in support of the builder’s case should also be viewed with caution by reason of his non-responsive answers during his cross-examination. It is noted that, while there were consecutive questions where he suggested there was compliance with the stormwater plan then accepted there wasn’t compliance with the plan at A148, that is explained by the fact that there is an earlier plan (A539).

61. In these circumstances, the Tribunal is not prepared to make findings based on the uncorroborated evidence of either the owner or Mr Khan, each of whom has a significant financial interest in the outcome of these proceedings. It is preferable to place greater weight on contemporaneous documents.

62. Work order or money order? It is convenient to first consider whether a work order or a money order should be made. The starting point is the statutory preference for a work order, established by s 48MA of the HBA. It is the Tribunal’s view that a work order should be made for the following reasons.

63. First, in the current environment, where building costs are increasing significantly, often over a short period, to make a money order based on costs assessed by an expert prior to the hearing to compensate an owner for costs incurred after the hearing may well leave the owner out of pocket. However, the effect of a work order in this instance will be that the owner is not out of pocket as the builder will bear the actual cost of rectification.

64. Secondly, during his oral evidence, the owner indicated he was willing to have the rectification work carried out by another builder with that work being certified by Mr Bournelis and that was obviously also acceptable to the builder.

65. It is noted that Mr Sim remained in the hearing room during closing submissions, after his evidence was completed, and was thus present when the proposal that he carry out the rectification work was put to the Tribunal. For the avoidance of doubt, the Tribunal records that its decision to make a work order was influenced by the indication of the builder’s counsel that Mr Sim would be carrying out the rectification work if the Tribunal made a work order.

66. If the builder retains someone other than Mr Sim to carry out that work, the owner will no doubt commence renewal proceedings in which a money order is sought instead of a work order.

67. Thirdly, according to the outline submissions for the owner (MFI 1) there are a total of 200 defects with many instances of different estimates by the experts of the time required to carry out the rectification work. Any assessment of those estimates is likely to create a result where the owner receives either too little or too much and the builder either pays too much or too little for at least some of the items of defective work. A work order removes that outcome because the owner bears the cost resulting from the actual hours required.

68. Fourthly, a work order would usually result in the rectification work being carried out either by the same builder who was responsible for the defective work, or another builder whose identity is not known to the owner. Further, that rectification work is sometimes carried out without any inspection on behalf of the owner. Here, the owner will have benefits: (1) knowing who will be carrying out the rectification work, (2) Mr Sim being familiar with the alleged defects), and (3) having that work inspected by the expert retained by the owner.

69. Fifthly, while it is accepted that the relationship between the owner and the builder has broken down, the work order proposed by the builder will not be affected by that breakdown in that the work will be carried out by Mr Sim with inspection by Mr Bournelis.

70. Contested items. Those two words are used to denote the seven items which were pursued during the cross-examination of the experts.

71. It is convenient to consider those items before assessing what should be the form of the work order. Various terms were used to distinguish between the two dwellings: the dwelling with the street number 14 was referred to as the dwelling on the left side and as unit 1; the dwelling with the street number 14A was referred to as the dwelling on the right side and as unit 2. The terms unit 1 and unit 2 are used below.

72. Low e glass. The quotation, upon which the contract was based, specified: “All windows/doors smart low e laminated and tinted (Agreed, need to check tinted options)” (A480 at 3)). The supplier’s certificate indicated that ”Low-E Clear” glass was supplied (A814). In his report, Mr Sim suggested that no tinting was required (A1294). When cross-examined, he accepted that it was possible to have both low e and colour tint, and that low e clear was installed. There was no cross-examination of Mr Bournelis in relation to this item.

73. In relation to this item, it is clear there was a failure to provide what was required by the contract and that the reasonable course is to supply and install window tint to all glazed windows and sliding doors rather than to replace the glass.

74. Feature tiles. The quotation, under the heading “Bathrooms and ensuite”, specified “Bathroom Tiles to the roof (300x6000) mm or (600x600) mm plus statement wall tile (5 sqm) in each bathroom from builder’s rang (Capped to $30 sqm).” (A467) and a picture underneath those words showed a feature tile on the entire wall behind the bath. Further, under the heading “Flooring/tiling & Electricals”, there appeared the words “Every bathroom to have statement Contrast feature wall (capped to 5 sqm each bathroom, Capped to $30 sqm).” Underneath those words appeared three photos of feature tiles, one of round tiles and two of hexagonal tiles.

75. What was, in fact, installed was feature tiles only in the niche of the wall behind the bath (A904 and A1132). There was no evidence in the owner’s case that the feature tiles had a cost within the $30 per sqm cap and the only evidence of the cost of those tiles is that given by Mr Sim during his cross-examination.

76. Mr Sim suggested that the mosaic tile used in the niche had a cost of more than $100 per sqm and that the surrounding wall tile would cost $30 per sqm. He accepted that the area of the installed feature tile was less than 5 sqm and indicated that the basis of his opinion that this item did not involve a defect was the cost of the tiles used. He accepted there was no variation, and that the cost for each bathroom suggested by Mr Bournelis was reasonable on an ‘if found’ basis. Again, Mr Bournelis was not cross-examined in relation to this item.

77. There are contemporaneous documents (A577-A579) which form part of Mr Khan’s evidence that what was installed was in accordance with the owner’s choice, made on 5 February 2021, and that evidence went unchallenged in cross-examination. Further, there was evidence, from questions that were asked in cross-examination of Mr Sim, which suggests the cost of the feature tile used exceeded the $30 per sqm cap. It is to be noted that a 5 sqm cap and a $30 cap per sqm suggests a maximum amount of $150 and the feature tiles in the niche appear to involve an area of about 1.5 sqm which, at the $100 per sqm suggested by Mr Sim, gives the same amount.

78. The Tribunal is satisfied that the tiles installed in the niche exceeded the $30 cap with the result that the wording in the quotation which suggested a feature tile would cover the entire wall does not apply. As a result, what was built was not a variation to the contract, but a choice of a kind commonly made under a building contract whereby the builder installs the tiles as selected by the owner. The uncontradicted evidence provided by contemporaneous documents (notably A579) is considered sufficient to warrant a finding that there was agreement between the owner and the builder as to what was installed and that this item should not be considered to involve defective work.

79. Insulation. In relation to this item, it is necessary to record that the R-value of thermal insulation measures the level of resistance to heat transfer: a higher number indicating a greater level of resistance. The report of Mr Bournelis (A1134) commences with the words “I am instructed …” and his opinion is expressed to be based on three photos, said to have been taken by the owner during construction.

80. Mr Bournelis goes on to suggest that the insulation batts used were as follows: (1) mostly R2.5 with a mix of R1.5 and R3.5 in the roof, not R3.5 throughout, (2) R1.5 in all internal and external walls, not R2.5, and (3) no insulation added in the back of the house (family room, kitchen, and laundry) or under the roof. However, he does not provide the basis for that opinion.

81. In his report (A1297), Mr Sim said his site inspection did not reveal that the insulation that was installed was non-compliant. He said:

During my site investigation I was unable to gain access to all areas behind the ceiling and wall linings (plasterboard), to inspect the thickness of the insulation batts. However, I was able to gain access through the manhole cover of the upper storey to view the ceiling insulation and, in my opinion, based on my construction experience in the industry the pink fibre glass batts were similar to that of R3.5 insulation batts.

82. The joint report (A1410), dated 26 June 2022, adds to the available evidence in the column which sets out the comments of the experts following their on-site meeting which appears to have been on 24 June 2022. They agree no insulation was installed in the ground floor ceiling at the rear of the dwelling, which was something they observed. There is reference to a photo, said to have been taken of an opening in an external wall of the kitchen, which was said to show that R1.5 insulation was used when R2.5 should have been used. That photo was annexed to the joint report (A1456).

83. Mr Bournelis was not cross-examined in relation to this item. The cross-examination of Mr Sim was primarily directed to the difference in the proposed method of rectification: Mr Bournelis suggesting a need to remove the entire ceiling; Mr Sim saying that it would be sufficient to remove a strip one metre in width in the ceiling on the basis that the room is only four metres wide so that there would only be an area 1.5 metre wide on either side of that strip.

84. When it was put to Mr Sim that the photo referred to in the joint report identified R1.5 insulation, he agreed. His evidence was that there was a cost difference between R1.5 and R2.5 of $1,412.25 and the basis for that figure was provided as part of the joint report (A145). That would plainly be a cost saving achieved by the builder which should be passed on to the owner.

85. Mr Sim suggested there was little point in removing all the linings to replace the insulation when there was very little difference between R1.5 and R2.5 insulation batts in relation to temperature control and sound. He accepted that if replacement was found to be warranted then the rectification cost would be close to the amount suggested by Mr Bournelis.

86. In the joint report (A1410), the method of rectification suggested by Mr Bournelis contains two components: first, removing the insulation batts installed in the ceiling and replacing them with insulation batts which have an R3.5 rating; secondly, installing such batts where they were not installed. It is noted Mr Bournelis does not suggest replacing the R1.5 with R2.5 insulation batts.

87. It is necessary to deal with each of the three aspects raised by Mr Bournelis (listed in [80] above). First, as to the ceiling batts that were installed, the evidence of Mr Sim (quoted in [81] above) suggests it was possible to use a manhole cover to observe what was installed in the ceiling and it is a reasonable inference that the evidence of Mr Bournelis on this aspect was also observation evidence. As the insulation batts in that area should all be rated R3.5, the removal and replacement suggested by Mr Borunelis is considered reasonable and should be included in the work order, but only of those not rated R3.5.

88. Secondly, in relation to the use of insulation batts with a rating of R1.5 instead of R2.5, the Tribunal considers it is neither necessary nor reasonable to replace those insulation batts, but the builder should not be permitted to have the benefit of the cost saving with the result that the owner should be awarded $1,412.25 in respect of this aspect.

89. Thirdly, the work order should reflect the agreement of the experts for there to be installation of insulation batts were none were installed.

90. Drainage. In his report (A1145), Mr Bournelis expressed the opinion that no drainage pits having been installed on either the left side of unit 1 or on the right side of unit 2 constituted a defect because those drainage pits were shown on the hydraulic plans dated 30 August 2020 (A148).

91. Mr Sim, in his report (A1301 and A1316), suggested there was no defect because (1) the quote was dated 28 April 2020, the contract was dated 1 May 2020 and the stormwater drawings (ie hydraulic plans) were issued subsequently, on 30 August 2020, and (2) the work carried out “complied with Fair Trading Compliance for plumbing and drainage”.

92. In relation to this item, the joint report (A1415) recorded no more than that the experts disagree as to both liability and quantum.

93. Only Mr Sim was cross-examined on this topic but that did no more than identify the relevant documents, confirm that what was done did not accord with the hydraulic plans, and explore the dispute as to quantum.

94. When cross-examined, Mr Kahn accepted that building work should be in accordance with the Construction Certificate (A620), dated 18 September 2020, which referred to a stormwater drainage plan with the reference 300820-01 and dated 30 August 2020 (A148), being the plan upon which the opinion of Mr Bournelis was based.

95. The quotation upon which the contract was based included a provision that the builder would pay for the construction certificate fees (A476) which suggests the builder was obtaining the construction certificate for the owner.

96. It is clear the builder obtained a revised stormwater plan because (1) Mr Khan sent a message to the owner (A46) which said: “I have discussed with storm water engineer and I am pushing him to get the storm water plans done Tuesday or Wednesday max …” and requested a payment of $1,000 for those plans, (2) the builder sent an email to the owner on 31 August 2020 (A47) which said: “The sw plan is enclosed. I will send the certificate tomorrow.” (3) Mr Khan sent an email to the certifier on 1 September 2020 (A52) which said: “Refer attached storm water plan with design certificate which concludes all the cc requirements.”

82. The construction certificate, issued on 18 September 2020 (A620) referred to a stormwater plan with the reference 300820-01 (A622) and a copy of that plan forms part of the evidence (A148). Mr Khan accepted, during his evidence that the builder was required to build in accordance with the construction certificate. If that difference the original storm water plan (A539) and the subsequent storm water plan (A148) involved an additional cost, the builder could and should have sought a variation of the contract but there is no evidence that was ever done.

83. In those circumstances, the builder was under an obligation to install the drainage pits and, if there had been a variation, the builder would have been entitled to adjust his contract price for that change in the work. As a result, the failure to install drainage pits is a defect for which the builder is responsible.

84. Scaffolding. In view of the Tribunal having determined that a work order be made, it is not necessary to consider this issue which involved the question of whether it was reasonable to include the cost of scaffolding.

85. Retaining wall. The issue in relation to this item is that the quotation specified “Retaining wall split face blocks with caps” (A481) but what was installed was standard concrete blocks (A1148). The retaining walls are on the side and rear boundaries, are either two or three courses high, and have a Colorbond fence installed on top of the caps.

86. Mr Bournelis suggested all 30 lineal metres of blockwork should be removed and replaced, which would require removing and reinstalling the fence. The total cost of his suggested method of rectification was said to be $14,650 for each unit, giving a total cost of rectification of $29,300.

87. Mr Sim suggested an alternative method of rectification of rendering and painting the existing block work at an estimated cost of $2,480 for each unit. When cross-examined, Mr Sim expressed the view that replacement of the blockwork was unnecessary as the retaining wall was structurally sound with the result that the result that the method of rectification suggested by Mr Bournelis involved significant work (and cost) with little benefit.

88. In closing submissions for the owner, reference was made to what was said in Tabcorp to the effect that qualification expressed in Bellgrove, namely that the proposed method of rectification must be both necessary to produce conformity with the contract and a reasonable course to adopt, is only satisfied by “fairly exceptional circumstances”.

89. The question of whether a method of rectification is reasonable depends on the factual circumstances of each case. Here, there is no evidence to suggest that the retaining walls have any structural deficiency: the only difference between what was built and what would conform with the contract is aesthetic in that “split face blocks” have a rough rather than a smooth surface. The subject blocks are only two or three courses high and sit underneath a Colorbond fence. More than half the length of the retaining wall is at the rear of the property where it is only visible to the occupants and, even then, not often. The estimated cost of changing from a smooth surface to a rough surface for both walls is $29,300.

90. It is considered that incurring that cost in such circumstances is not a reasonable course to adopt and that support for that view is to be found in the fact that the alternative method of rectification, estimated to cost about one sixth of the method proposed by the owner, will result in a rendered and painted finish, the colour of which can be chosen to match either the fence or the house.

91. For those reasons, the Tribunal is satisfied that the work order should include the method of rectification for which Mr Sim contended for this alleged defect.

92. Concrete path. This item, relating to unit 2, was described in the report of Mr Bournelis (A1260) as follows:

Left hand side concrete path dips, no falls away from the dwelling with severe pooling of water along the length of the side path and the drain is blocked towards the front of the property.

108. His suggested method of rectification was to demolish and reinstate a section of the path with an estimated cost of $7,840 for that work.

109. In his report (A1321), Mr Sim agreed there was pooling water but suggested there is drainage which appears to be blocked, as indicted in a provided photo. His estimated cost of rectification, for clearing that blockage, was $400.

110. When cross-examined in relation to this item, Mr Sim said he only saw water ponding around the blocked drainage and that there was a fall away from the dwelling.

111. The opinion of Mr Bournelis quoted above contained opinions without any indication of the basis for those opinions: there is nothing to suggest any measurements or water tests. He claims there are no falls in the path away from the dwelling, but Mr Sim asserts there are, and the Tribunal has not been provided with any reason why that conflict should be resolved in favour of Mr Bournelis. In relation to this item, the owner has failed to prove there is any defect beyond a blocked drain. As a result, the method of rectification proposed by Mr Sim is accepted as the appropriate outcome.

112. Defective work. As no written or oral submissions were made to assist the Tribunal as to the form of a work order, it is necessary to undertake that exercise by reference primarily to the joint report, and to the reports of the experts as and when necessary. Unfortunately, the individual defects were not numbered sequentially and repeatedly reverted to 1 and contain sub-headings within the numbered defects. To facilitate future reference, the work order contains sequential numbering with sufficient indication to enable identification of the matters raised in the joint report (JR). What is set out below is confined to providing reasons in relation to disagreements as to either whether there is a defect and what is the reasonable method of rectification.

113. Unit 1, internal. In the kitchen, item 2(e) was disputed as to liability. Mr Bournelis referred to AS 4386.1 which requires 300 mm clearance from combustible surfaces for a cooktop and provided a photo which suggested a 60mm clearance from a wall. Mr Sim noted that wall within 300mm is not combustible. As a result of that evidence, which was not refuted, this item does is not considered to involve a defect.

114. In the master bedroom and ensuite, items 10(c), 10(d), and 10(e) were disputed as to liability. As to (c), Mr Sim expressed the view that the owner selected the mirror but the factual basis for that opinion does not appear to have been established. The only document the Tribunal has been able to locate is a claim by Mr Khan (A575) but there does not appear to be any document to corroborate that claim. As to (d) and (e), Mr Bournelis suggested a lack of drawers in the vanity and a water pipe evident in the underside of the vanity were defects but did not provide any basis for those opinions. In those circumstances, (c) is considered a defect but not either (d) or (e). Item 11(d) is not considered a defect for the same reason as item 10(e).

115. The response of Mr Sim to items 12(a), 12(b), and 12(c) was that the vanity and mirror were selected by the owner. Again, applying what was said in Makita, there is no indication of the basis for that opinion. As a result, items 12(b) and 12(c) are considered to involve defects.

116. It is convenient to here note that if items within the scope of work were the result of choices made by the owner, with the result that he does not wish to have them changed, then he can agree not to have those aspects of the work order carried out. Provision for that election to be made in writing has been included in the work order.

117. In relation to item 13, as to the method of rectification for the areas where no insulation batts were installed, the Tribunal is satisfied that the method of rectification suggested by Mr Sim is reasonable way to carry out that work.

118. As to item 15, the two photos provided by Mr Bournelis (on A1136 and A1137) do not indicate to the Tribunal what he alleges. The Tribunal is left with competing evidence: Mr Bournelis claiming there is evidence of water stains and grass clippings; Mr Sim finding no such evidence. The factual foundation for this alleged defect has not been established and the owner has failed to discharge the onus of proof which he bears.

119. The position in relation to item numbered 17 is the same as item 15: there is a conflict between the evidence of the experts as to whether there is “breeze flowing through the dwelling”. As no reliable reason has been provided for accepting the evidence of one expert and rejecting the evidence of the other expert in relation to this item, the owner has failed to prove this alleged defect.

120. Unit 1, external. Item 1(g) is another case of conflicting expert evidence: Mr Bournelis stating: “Water tap pipe not connected in front yard” (A1144)and Mr Sim saying: “I found the water pipe to the front of the dwelling was connected …” (A1301). The joint report does no more than record their disagreement. This is another instance where the alleged defect has not been proved.

121. Item 2(b) contains no more than “Ingress of water to light fittings at the front façade” in the report of Mr Bournelis (A1146) and suggested rectification work of: “Allow electrician to remove and replace light fittings with water resistant light fittings”. Mr Sim’s response was: “The electrician was onsite during my site investigation to replace the light fittings” (A1302) and that evidence was not challenged. The ten words of Mr Bournelis provides scant support for this defect and the unchallenged evidence of Mr Sim suggest the rectification work for which Mr Bournelis contended has already been undertaken. In relation to this item the Tribunal is not persuaded that there is any defect or that any addition to the work order is warranted.

122. Item 4(d) is another instance where the evidence of Mr Bournelis was brief:

Window head outside Level 1 Family Room not square, see photograph 30A below.

123. There was no measurement or other supporting evidence apart from that photo (A1150) which does not provide sufficiently clear evidence. Mr Sim expressed the view that this item did not involve a defect because it cannot be seen from a normal viewing position and is not measurable. There is insufficient evidentiary support for the inclusion of this item as a defect warranting the rectification work suggested by Mr Bournelis.

124. Item 8 is another instance where the expert evidence clashes. Mr Bournelis claims paint is peeling off the driveway and provides a photo which does not make that clear. Mr Sim said that, based on his site inspection, there was no paint peeling from the driveway and provided a photo which does not appear to suggest any defect. This is another item where the evidence does not enable the Tribunal to make a finding that there is a defect. As a result, no addition has been made to the work order in relation to his item.

125. Unit 2, internal. Item 2(b) will, according to Mr Sim, require a free service from the window manufacturer. That item should be included in the work order so that the work is carried out. Item 2(c) is another item where the is limited evidence from Mr Bournelis and competing evidence from Mr Sim. As with other such situations, this item has not been included in the work order.

126. Item 4(b) is rejected for the same reason as item 2(e) in unit 1. Items 4(e) and 4(f), which are further instances of little evidence from Mr Bournelis and competing evidence from Mr Sim, have not been included in the work order.

127. In relation to item 8(b), Mr Bournelis said no more than “No exposed projector and screen as specified” (A1167) which does not indicate whether he is claiming none were supplied of that what was supplied was not as specified. Mr Sim provided photos of a projector, on a shelf, and a screen (A1310). The work order has been framed to include the supply and installation of what was specified which may or may not require further work.

128. As to item 8(c), the opinion of Mr Bournelis is based on instructions. It is not identified who provided those instructions. If those instructions came from the owner, they are not considered sufficiently reliable. This item is treated as having been covered by the issue of insulation, considered above.

129. The oral evidence revealed that a sound bar was supplied. However, the contract was based on a quotation which specified “High Spec Polk Home Theatre Sound System” (A479) which should have been supplied and installed.

130. Moving from item 8(f) to item 8(g), the contract specified “Frost Glazing Sliding Door to Media Room” and provided a photo (A479). Mr Bournelis provided a photo which shows that was not done (A1167). Mr Sim disagreed that a frosted sliding door was part of the contract and suggested a wardrobe had been installed instead of sliding doors (A1309). As there does not appear to be any evidence of a variation, the Tribunal considers the work order should include what was included in the quotation upon which the contract was based.

131. While aspects of item 9(a) are covered by item 18, addressing gaps and jagged edges has been included in the work order as a separate item.

132. Item 10(d) in the report of Mr Bournelis (A1170) is a conclusion devoid of any reason(s) and has not been established as a defect. Item 10(e) is allowed, and item 10(f) is rejected, on the same basis as items 10(c) and 10(e) for unit 1.

133. Items 11(a) and 11(b) are further instances of single sentence allegations by Mr Bournelis which are contested by Mr Sim. Again, the Tribunal does not consider those items to have been proved by the owner. Item 11(c) relates to the feature tiles, considered above. As items 11(d) and item 11(e) involve the same issues as dealt with previously, they have been dealt with in a consistent manner.

134. Unit 2, external. Item 2(a) is rejected for the same reason as item 2(b) for unit 1. Item 4 relates to the retaining walls, considered above.

135. Item 8 is another instance where the evidence of Mr Bournelis was brief:

Front façade right hand side above the column is out of alignment as viewed from street level see photograph 67a) adjacent.

136. There was no measurement or other supporting evidence apart from that photo (A1197) which does not provide sufficiently clear evidence. Mr Sim expressed the view that this item did not involve a defect because it cannot be seen when viewed from the street.

137. There is insufficient evidentiary support for the inclusion of this item as a defect which warrants the rectification work suggested by Mr Bournelis: the photo does not provide a clear indication and the Tribunal is again left with competing evidence from the experts.

138. For clarity, and to ensure no item has been overlooked, Table 1 sets out the outcome in relation to each of the alleged defects, using the references contained in the joint report.

139. There remains the question of how long should be allowed for the completion of the rectification work set out in the work order. Having regard to the nature and extent of the work, on the basis that commencement can occur by 31 January 2023, a period of three months is considered reasonable and that give a date for completion of 30 April 2023. Clearly, adverse weather and other considerations may impact on the ability to complete the required work. While s 9(1)(a) of the Civil and Administrative Tribunal Regulation 2013 enables the Tribunal to amend an order when both parties consent, the practical course is to provide for completion by any later date agreed in writing by the parties.

140. It is sufficient to here record that, for the items considered to involve defects, the Tribunal is satisfied that there has been a breach of s 18B(1) of the HBA, as suggested in the report of Mr Bournelis.

141. Incomplete work. The sole claim under this heading was for the builder’s failure to complete the swimming pool. The unchallenged and uncontradicted evidence of the owner was that the GST inclusive cost to now build the swimming pool is $81,480.96 (A923-924).

142. There is no doubt that the $980,000 contract price included $60,000 for the swimming pool (A482). Nor can there be any doubt that the builder decided not to construct that pool in view of the text messages sent at 2pm on 4 October 2021 (A399) in which Mr Khan said he was not charging for pool, was not carrying out that work, and the owner could “… get the pool done elsewhere”.

143. Applying what was said in Haines to be a fundamental principle, the amount required to put the owner in the same position as if the work had been completed without the breach of a failure to build the swimming pool, is clearly $21,480.96 (ie $81,480.96 less $60,000).

144. Period of delay. Clause 6 of the contract (A497) provides for the calculation of the time for completion by adding 38 weeks to the date the work is due to commence, not the date the work did commence. Applying clause 5 of the contract (A496), the work was due to commence 60 working days from 18 September 2020, when the construction certificate was issued (A620). That gives a date the work was due to commence of 14 December 2020, due to the public holiday in October. Adding 38 weeks to 14 December 2020 gives a date for completion of 6 September 2021.

145. It is relevant to note clause 7 of the contract (A497), headed “Extension of time”, provided as follows:

If the work is delayed by:

*   inclement weather or conditions resulting from inclement weather

*   any order of a court or tribunal that the work be suspended, unless that order resulted from the fault of the contractor

*   any act or omission of the owner

*   any industrial dispute affecting the progress of the work (not being a dispute limited to the site or limited to the employees of the contractor)

*   the unavailability of materials necessary for continuation of the work unless due to the fault of the contractor

*   a variation to the work

*   a suspension of the work by the contractor under Clause 24; or

*   any other matter, cause or thing beyond the control of the contractor, the contractor will be entitled to a reasonable extension of time to complete the work. Both the contractor and owner (if applicable) must take all reasonable steps to minimise any delay to the work.

If the contractor wishes to claim an extension of time, the contractor must notify the owner in writing of the cause and estimated length of the delay within 10 business days of the occurrence of the event or, in the case of a variation, from the date of agreement to the variation.

If the owner does not, within a further 10 business days, notify the contractor in writing that the extension of time sought is unreasonable, the completion date for the contract will be extended by the period notified to the owner.

If the owner gives the contractor written notice disputing the extension of time claimed and no agreement can be reached on the time to be allowed, the dispute must be dealt with in accordance with the dispute resolution procedure (Clause 27).

146. The owner’s outline submissions conceded an extension of time of 12 days due to inclement weather (MFI 1 at [103]. That serves to extend the date for completion from 6 September 2021 to 18 September 2021.

147. On 10 July 2021 the builder sent the owner an email (A845) which advised of “current COVID-19 lockdowns and restrictions”, advising the owner that “your project handover may be delayed”. While that notice could be said to not comply with clause 7 in that it did not specify the estimated length of the delay, it did indicate the cause and is considered sufficient to warrant an extension of time based on Public Health Orders.

148. Those Public Health Orders, which have the force of law, operated in 2021 to prevent building work for two working weeks, from 19 to 30 July, and for a week and a day, and from 31 July to 10 August. Extending the date for completion from 18 September 2021 by reason of those periods, which total three weeks and one day, gives 10 October 2021 as the due date for completion.

146. Various completion dates were suggested: 5 November 2021 when the occupation certificate was issued, 30 November 2021 when the final payment was made, and “on or about 3 December 2021” when the builder provided the keys to the owner. The builder was entitled to retain the keys until it was paid, and the owner cannot recover damages for a period when the builder was waiting for him to make the final payment.

147. In the HBA, s 3B provides a statutory regime for determining when building work is completed but it is expressed to apply subject to any provision in the contract.

148. Here, clause 8 of the contract provided that the work will be complete when “there are no omissions or defects that prevent the work from being reasonably capable of being used for its intended purpose”. Since the issue of an occupation certificate is considered to satisfy that test, the Tribunal determines that the work was completed on 5 November 2021.

149. Claim for unit 2. The right to recover damages is always subject to the requirement that the party claiming damages take reasonable steps to mitigate their loss but the onus here is on the builder to show the owner acted unreasonably: TC Industrial Plant Pty Ltd v Robert’s Queensland Pty Ltd [1963] HCA 57. It is noted that when an innocent party is required to take steps to mitigate, the steps required will not be set too high: Banco de Portugal v Waterlow and Sons [1932] AC 452 at 506.

150. It was contended that the owner’s claim for incurred rent should be calculated to 19 December 2021 on the basis that was the earliest date for termination of the lease. The owner gave notice on 29 November 2021, the day he made the final payment, indicating that his last day in the rented premises would be 19 December 2021.

151. However, the Tribunal considers the owner was reasonably required to give notice on 5 November 2021 when an occupation certificate was issued. Had that been done, the last day for paying rent would have been 24 days earlier, ie 25 November 2021.

152. The result is that, in accordance with what was said in Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 at [187} the owner’s damages should reduce to the loss which he would have suffered had he acted reasonably.

153. As the owner is entitled to be awarded his incurred rent of $410 per week (A325) during the period from 10 October 2021 to 25 November 2021, which is a period of 46 days, he is entitled to be awarded $2,694.29 ($410 x 46/7) for the additional rent incurred due to the delayed completion of unit 2.

154. Claim for unit 1. Hadley established two tests for the recovery of damages when there has been a breach of contract: damages which may fairly and reasonably considered to arise naturally (first limb), and/or damages which may reasonably be supposed to have been in the contemplation of both parties (second limb), both considered at the time the parties made their contract.

155. The text message sent by Mr Khan on 4 October 2021 (A97), in which he said: “its (sic) you who will be losing rent and paying rent” could provide support for a finding that the owner’s had an intention to rent unit 1 and that such an intention was known to the builder but for the fact that the time that comment was made week over a year after the contract was made, which was on 1 May 2020 (A489).

156. As there does not appear to be any reliable evidence as to what was said that would establish the position at the time when the contract was made, it is necessary to consider the Hadley tests objectively. Where a person asks a builder to build two residences on one block of land, with the clear intention of living in one of them, it must follow that the other residence will either be sold or rented. In the former case, a claim for interest, in the latter case, a claim for lost rent may be considered to satisfy the first limb in Hadley.

157. There is evidence from a real estate agent that the duplex referred to as unit 1 could be rented for between $750 and $770 per week (A129). Had there been no delay, unit 1 would have been available for rent from 10 October 2021. In fact, it was available for rent from 5 November 2021. The time taken for the owner to make the final payment is not attributable to the builder.

158. As the owner’s receipt of rent of $750 per week was delayed by 26 days, from 10 October to 5 November in 2021, he is entitled to an award of $2,785.71 ($750 x 26/7) less 4.4% for the real estate agent’s fee. That gives $2,663.14 in respect of the lost rent for unit 1.

159. The owner’s evidence in his first affidavit ((A33 at [128]), that he was unable to rent unit 1 until the defects were fixed, is expert evidence from a lay witness, with no indication of any relevant qualifications or experience. It is also opinion evidence provided by a lay witness whose uncorroborated evidence is not considered to provide a sufficient basis for such a finding in favour of a claim for a substantial claim for loss of rent in relation to unit 1, namely $39,000 ($750 per week for 52 weeks).

160. The owner’s second affidavit (A142 at [66]) does not strengthen this claim for two reasons. First, he is again the sole source of the evidence that the property could not be rented until the defects were fixed and his uncorroborated evidence is not considered reliable. Secondly, the owner led first-hand, documentary evidence from Areem Khan as to the weekly rent but did not provide evidence from Areem Khan as to the suggested inability to rent unit 1 but instead sought to provide hearsay evidence.

161. Further, it is also difficult to accept that the owner was able to live in unit 2 but not rent unit 1.

162. Summary. Adding $2,694.29 for incurred rent in relation to unit 2 and $2,663.14 for lost rent in relation to unit 1 gives $5,357.43. However, it is necessary to deduct the amount of $2,000 which it is agreed was paid by the builder to the owner in respect of that delay. As a result, the amount awarded as damages due to delay is $3,357.43.

163. Accordingly, the Tribunal considers the owner to be entitled to a work order, as set out in Schedule 1, and a money order for the payment of $26,250.64 ($1,412.25 for the cost saving arising from the use of lower-rated insulation batts, plus $21,480.96 for incomplete work and $3,357.43 for delay) forthwith.

Costs

167. As the amount claimed or in dispute in these proceedings exceeded $30,000, costs will be governed by r 35 of the Civil and Administrative Rules 2014, rather than by s 60 of the Civil and Administrative Tribunal Act 2013 (the CATA) with the result that it is not necessary to establish there are special circumstances warranting an order for costs.

168. The orders will cater for written submissions to be lodged, including an indication as to whether it is accepted that costs can be determined on the papers, ie without a further hearing, as permitted by s 50(2) of the CATA.

Orders

169. Accordingly, the following orders are made:

1. The respondent is to carry out a work order, as set out in Schedule 1.

2. The respondent is to pay the applicant $26,250.64 forthwith

3. The applicant’s submissions as to costs, not exceeding five pages, are to be filed and served, together with any relevant evidence, on or before 23 January 2023.

4. The respondents’ submissions as to costs, not exceeding five pages, are to be filed and served, together with any relevant evidence, on or before 6 February 2023.

5. Any submissions in reply from the applicant, not exceeding two pages, are to be filed and served on or before 13 February 2023.

6. Any submissions should indicate whether it is agreed that costs should be determined on the papers, ie without the need for a further hearing.

Schedule 1 (235661, pdf)

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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

Amendments

22 August 2023 - Formatting amendments.

Decision last updated: 22 August 2023