Sarah Constructions P/L v Phillips - [2007] SADC 137

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
SARAH CONSTRUCTIONS P/L v PHILLIPS
[2007] SADC 137
Judgment of His Honour Judge Burley
13 December 2007
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS
Claim by builder to recover the balance of a building contract price and for orders for enforcement of liens - building contract for the construction of a dwellinghouse - a claim for progress payments - builder asserted practical completion achieved - the defendant (owner) asserted numerous defects - alleged delay in completion - owner purported to terminate the contract for alleged substantial breach on the part of the builder - whether practical completion achieved - whether a delay as alleged or at all - whether a grounds for termination of contract - counterclaim for cost of completion and damages for various alleged breaches of contract - held plaintiff entitled to recover balance of contract price and interest on portion of the balance - defendant entitled to offset deductions and damages in respect of the balance of the purchase price - limited orders for enforcement of lien and made.
Worker's Liens Act 1893 s10; Building Work Contractors Act 1995 ss6(2), 37(2), referred to.
Mancorp Pty Ltd v Baulderstone Pty Ltd (1992) 60 SASR 120; Heyman v Darwins Ltd [1941] AC 356; Carr v J.A. Berriman Pty Ltd (1953) 89 CLR 327; Porter v Hannah Builders Pty Ltd [1969] VR 673; Graham Roberts Ltd v Maurbeth Investments Ltd [1974] 1 NSWLR 93; McDonald v Dennys Lascelles Ltd (1993) 48 CLR 457; McLachlan v Nourse [1928] SASR 230; Queensland University of Technology v Project Constructions (Aust) Pty Ltd (In Liquidation) [2003] 1 Qd R 259, considered.

SARAH CONSTRUCTIONS P/L v PHILLIPS
[2007] SADC 137

This is a claim by a builder to recover the balance of a building contract price, together with interest, and for orders in relation to the enforcement of liens lodged by the plaintiff pursuant to the provisions of the Worker’s Lien Act 1893 (WLA). The defendant, in her defence, asserts that the plaintiff is not entitled to the relief sought; she has pleaded a set-off and she has also counterclaimed for damages.
Some of the paragraphs of the statement of claim have been admitted, or admitted in part. In addition, some factual matters were not the subject of dispute during the course of the trial. Mr Harms, counsel for the defendant, provided at the end of his written final address a chronology, the content of most of which I propose to include in the following narrative. For the most part the chronology provided by Mr Harms is uncontroversial. I do not propose to include in the following narrative any controversial assertion contained in the chronology. The narrative will stand as my findings in relation to the matters recounted. I include within the narrative a review of some of the issues raised in the pleadings.
Background findings – pleadings issues
In 2002 the defendant purchased Lot 7 Freycinet Way, Penneshaw, which is the whole of the land in Certificate of Title Volume 5203 Folio 380 (“the land”). In September 2002 she visited the plaintiff’s display home at Port Elliott. On 8 April 2003, she met with a sales consultant employed by the plaintiff and selected one of the plaintiff’s designs. She paid a deposit of $1,000. Prior to mid-May 2003 she arranged finance through Bernie Lewis Home Loans and Homestart Finance. On 16 May 2003 the contract for the construction of the house (the contract) was entered into between the plaintiff and the defendant. Subsequently, variations were requested and agreed to. A copy of the contract is included within exhibit P1 commencing at page 32. Exhibit P1 is a book of documents which was tendered at the trial by the plaintiff with the consent of the defendant.
In her defence, at paragraph 18.2.1, the defendant says that the contract was entered into on about 15 March 2003. An examination of the contract, particularly at page 43 of exhibit P1, shows that the document is dated 16 May. The year is difficult to read but it seems to be common ground between the parties that 2003 was the year that the building contract was entered into.
The contract stated that the contract price was $126,702. Variations adding to the contract price were agreed to. The contract provided for progress payments of varying percentages, one of which was that 25 per cent of the contract price would be paid upon the completion of second fix carpentry. The claim for that payment has been referred to as the fourth progress payment claim.
On 11 August 2003, development approval was received.
By letter dated 22 August 2003, the plaintiff advised the defendant that the plaintiff was ready to commence construction. Shortly thereafter, Mr Neil Mayne, an employee of the plaintiff, was appointed as the site supervisor. Mr Mayne visited the site and noted that one of the survey pegs relating to the boundaries of the land had been dislodged and that one was correctly placed. He thereafter advised the defendant that a survey peg had been moved and the site should be resurveyed. Under the contract, any survey was the defendant’s responsibility.
Work commenced on the site in about November 2003. As the work progressed, the first three progress payments, which were respectively 20%, 20% and 25% of the contract price, were claimed by the plaintiff and paid by the defendant. Most of the monies used by the defendant to make the payments came from a loan from Homestart Finance secured by mortgage over the land. The mortgagee’s approval of a progress payment claim led to it providing the appropriate portion of the loan funds to the defendant to enable payment to be made.
By tax invoice dated 11 December 2003 (exhibit P1, page 101) the plaintiff claimed the fourth progress payment ($31,575) on the basis that it had completed the second fix carpentry by then. The plaintiff now claims the sum of $31,175 plus interest of $3,407.89 in respect of the fourth progress claim. This is $400 less than the invoice amount. The lesser amount conforms with the amount claimed in the notice of lien dated 23 December 2004 (exhibit P1, page 166). The defendant admits that she has not paid the fourth progress claim but denies that the plaintiff is entitled to it.
The first step in the building process occurred when the site was cut, apparently without the benefit of a further survey. Mr Mayne advised the defendant that a retaining wall was necessary and referred her to a contractor for that purpose. It was common ground at the trial that the plaintiff did not undertake any contractual responsibility for the provision of the retaining wall, although it was the defendant’s contention that the plaintiff was responsible for the subsequent construction of the retaining wall in the wrong place by the contractor retained by the defendant. It appears that the retaining wall was originally placed along the edge of the site cut which had been arranged by the plaintiff (through, I infer, Mr Mayne) without a survey having been conducted.
Encroachment of the house
The house itself was originally constructed and positioned by reference to the site cut. The site cut was not along the side boundaries of the land. This led to the wrong placement of the retaining wall and the house. The house encroached on the adjoining owner’s land.
The plaintiff did not accept responsibility for the incorrect placement of the retaining wall but it did accept responsibility in relation to the incorrect placement of the house. The plaintiff arranged to move the house into the correct position but continued work on the house (when it was still in the wrong position) until the move could be implemented.
The defendant did not find out until February 2004 that the house had been constructed such that it encroached upon a neighbour’s land. On the plaintiff’s case, this was at a time when the second-fix stage had been completed. Whatever may have been the stage of completion for contractual purposes, it was common ground that the construction of the house was, when it was moved to its correct position, at an advanced stage.
Between the end of February 2004 and mid-June 2004, the plaintiff carried out further work in relation to the construction of the house on the land. The plaintiff claims to be entitled to the sum of $15,167.20 (the balance of the contract price) in respect of that further work. The defendant does not dispute that further building work was performed after the end of February 2004, but asserts that the plaintiff is not entitled to the amount claimed or any sum. The defendant also concedes that she has failed to pay the sum of $15,167.20 as demanded by the plaintiff.
On about 27 April 2004, the defendant gave written authority to Mr Phillips, her former husband, to act as her agent in dealings with the plaintiff.
It is apparent from the letter from the Kangaroo Island Council to Mr Phillips (page 56 of exhibit P3) that a meeting took place between a council representative and Mr Mayne on 17 June 2004, in relation to the house. The council officer advised:
In your absence, the building work was inspected and it was noted that extensive remedial measures have been undertaken by Longridge Sarah Housing Group to attend the issues which you had raised in earlier correspondence to council, and that the building appears to meet the engineering and approved plan criteria.
On about 17 June the plaintiff asserted that practical completion had been achieved and it forwarded to the defendant the final progress claim of $15,167.20 (exhibit P1, page 108).
At the end of June 2004 Mr Phillips took photographs of the site which are now exhibit D6.
By letter dated 29 July 2004, the council wrote to the plaintiff requesting an engineer’s inspection and certification in respect of the footings and the tie-down structure.
Between mid-August and early September 2004, Koukourou Engineers (retained by the plaintiff) visited the site and subsequently recommended a different tie-down specification. That recommendation was accepted by the plaintiff.
In mid-September 2004 there was a meeting on site between Mr Phillips, Mr Mayne and a council officer.
In mid-November 2004 Mr Rowland, a building consultant retained by the defendant, inspected the site and subsequently gave his report which is exhibit P4.
By mid-November 2004 the plaintiff had still not made any payment in respect of the fourth progress payment claim. By notice dated 17 November 2004, purportedly given pursuant to clause 27 of the building contract, the plaintiff notified the defendant that it would stop work on the building site because of the plaintiff’s failure to pay the progress claim and interest and also, it was alleged, because the defendant entered the building works by her agent, allegedly in breach of clause 9 of the building contract.
Between mid-November 2004 and March 2005 notices under the Worker’s Liens Act 1893 (WLA) were given by the plaintiff to the defendant and liens were registered on the title to the land by the plaintiff. In mid-March 2005 the defendant excluded the plaintiff from the site.
It is not in dispute that, as alleged in the statement of claim, the plaintiff has served upon the defendant the required notices under the provisions of s 10 WLA and that notices of lien have been lodged in respect of the land at the Lands Titles Office.
Although the prayer for relief in the statement of claim does not specifically make a claim for the recovery of the balance of the building contract price, it is clear from the plaintiff’s closing address that the same is sought because the plaintiff seeks to enforce liens to that extent. The plaintiff also claims in the alternative the respective sums of $34,582.89 and $15,167.20 on a quantum meruit, but this was not pursued except for an alternative plea to which I will refer later.
To the extent that the plaintiff claims interest, the defendant does not dispute that the building agreement contains a provision for the payment of interest on outstanding instalment moneys.
In paragraph 18 of the defence, the defendant asserts that she is not liable to the plaintiff for any of the amounts of money claimed by the plaintiff “by reason of a failure of the plaintiff to complete the work or in the alternative its defective workmanship in respect of the second fix carpentry and delay”. Detailed particulars are then given, by way of schedules, in relation to alleged non-completion and defects (paragraph 18.1). Paragraph 18.2 provides particulars of alleged delay. Several of the matters given as particulars were not pursued at the trial.
Allegation of delay
The defendant’s pleading in relation to alleged delay is unclear. When she asserts (in paragraph 18.2.2) that she “anticipated” completion before April 2004 and, in paragraph 18.2.11, that it was “intended” that the property be sold in April 2004, there is no assertion (nor was there any evidence) that it was agreed between the parties that the house would be completed and ready for sale by April 2004. In those circumstances, I accept the submission of Mr Manuel, counsel for the plaintiff, that, to the extent that the defendant alleges that the plaintiff failed to complete the home within time, the only relevant time for completion is that calculated by reference to clause 11 of the contract.
An important issue in relation to alleged defective workmanship involved the incorrect placement of the house on the land. The plaintiff accepted responsibility for this mistake and took steps to move the house to the correct position. It is alleged in paragraph 18.2 of the defence that this was done by crane. It was common ground at the trial that the house was moved to its correct position by the combined use of electric jacks and a low loader.
Another important issue concerns the time at which, if it occurred, the house reached practical completion. It was the defendant’s contention at trial that the house had not reached practical completion at the time the plaintiff was excluded from the site in mid March 2005. A great deal of evidence was given about the progress of the building work during the course of 2004. It was the plaintiff’s case that practical completion, as provided for in the building contract, was achieved in about mid-June 2004 and that the defendant was informed accordingly.
From time to time during the course of 2004, the plaintiff continued to carry out work on the house. On the plaintiff’s case, the work after the alleged practical completion in mid-June 2004 was carried out pursuant to clauses 20 and 21 of the contract and addressed either defects in workmanship and/or materials or the completion of incomplete work. Clause 20 provided for payment of the balance of the purchase price after practical completion, but the defendant was entitled to have defects or incomplete work rectified or completed by the plaintiff after the payment of the balance of the purchase price.
Because the defendant has never accepted that the plaintiff achieved the stage of practical completion, the parties do not agree that any remedial work carried out by the plaintiff since June 2004 has been undertaken pursuant to clause 20 or clause 21. However, it is clear that during 2004, complaints were made by the defendant and responded to by the plaintiff (by either accepting or denying the appropriateness of the complaint) and that additional work was performed on the house by the plaintiff, but not necessarily as a result of an acceptance by the plaintiff of the correctness of the position taken by those who spoke on behalf of the defendant. (I have referred to those who spoke on behalf of the plaintiff because, with the exception of some initial contact by the defendant with an employee of the plaintiff in early 2004, the defendant dealt with the matters in dispute either through her ex-husband or her solicitors).
Views of the parties as to the repositioning of the house
To a large extent, the differing positions taken by the parties after February 2004 were determined by the views they respectively took as to the effect the repositioning of the house on the land had on its structural soundness. The defendant and her ex-husband took the view that the move caused structural damage to the house which they thought was incapable of being rectified. The plaintiff’s view, as expressed by Mr Mayne and by Mr Neighbour, the Managing Director of the plaintiff, was that superficial internal damage was caused by the move which was subsequently fully rectified.
It should be said, and I find, that the expert evidence adduced by the defendant did not support the view of the defendant and her ex-husband that the repositioning of the house caused irremediable structural damage to it. Mr Rowland, whose report (exhibit P4) was tendered by the defendant, without the necessity for him to be called, was the first building expert retained by the defendant. Later the defendant sought the advice of Mr Stuart-Skinner, who gave evidence at the trial. It is clear from Mr Rowland’s report and Mr Stuart-Skinner’s report and evidence that no permanent structural damage was caused to the house when it was repositioned.
As I have said, both the defendant and her ex-husband took a different view up to and including the trial. They erroneously thought that the house was irretrievably damaged by the move and that view coloured their thinking in relation to what was or was not acceptable by way of remedial work subsequently undertaken (or offered to be undertaken) by the plaintiff.
House tie downs
It is probable that they were also influenced by the fact that the engineer retained by the plaintiff to advise as to the structural sufficiency of the house recommended that a stronger structure for tying down the house be implemented. The specification required the house to be tied down to concrete blocks set in the ground. As I understand it, once the house was constructed on piers consisting of concrete blocks, a certain number of holes of a specified size were dug at specified locations around the perimeter of the house, a length of steel was then lowered into each hole and the top of the length of steel was bolted securely onto the underframe of the house. The steel was thereby suspended from the frame over and down the middle of the hole which was then filled with concrete. Such a structure had been approved by the local council as part of the building approval. However, the engineer retained by the plaintiff after February 2004 did not think that the tie-down structure actually installed was sufficient. The plaintiff accepted the engineer’s recommendation for a stronger tie-down structure and implemented the recommendation at no cost to the defendant.
I should mention that the conclusions to which I have come with regard to the many questions falling for decision in these proceedings are sometimes based on reasoning which is, to some degree, different from the arguments which were put before me respectively by counsel. It would unduly burden these reasons to traverse those arguments in detail. It is sufficient to state that I have read the written submissions of both parties and have taken into account what they have said as to these matters. To the extent that I have not always followed the reasoning underpinning submissions by either side in arriving at given conclusions means that I have preferred the reasoning articulated by me in these reasons as constituting the necessary support for the conclusions to which I have come.
Purported termination of the contract

The parties, through their solicitors, attempted to resolve their differences by negotiating a settlement. By letter dated 28 February 2005 (exhibit P2) to the plaintiff’s solicitor, the defendant’s solicitors referred to recent negotiations and to a number of their client’s concerns. The defendant contended in her pleading and at trial that the letter constituted a lawful termination by the defendant of the building contract. The plaintiff denied this, stating that, at best, the letter advised of an intention to terminate the building contract if a proposal for settlement put by the defendant was not accepted. To the extent that the letter is relied upon as part of the process of termination of the building contract, it is also linked to the subsequent exclusion from the site of the plaintiff by the defendant after the commencement of these proceedings. The plaintiff was excluded from the site by letter dated 16 March 2005 from the defendant’s solicitors to the plaintiff’s solicitors (at page 198 of exhibit P1). That letter and the correspondence from the defendant’s solicitors prior to that (at page 196 of exhibit P1) contain the assertion that the building contract was terminated by the letter of 28 February 2005 (exhibit P2).
In my opinion, the plaintiff’s contention that the letter (exhibit P2) did not operate as a termination of the contract, purported or otherwise, is correct. However, the letter dated 16 March 2005, clearly discloses an intention on the part of the defendant to bring the contract to an end. Consequently, if the defendant was legally entitled to terminate the contract as at 16 March 2005, a termination was achieved by the letter of that date, a copy of which is at page 198 of exhibit P1.
I should also point out that the correspondence of 28 February 2005 and 16 March 2005 points to the possibility of a fundamental inconsistency in the positions taken by the defendant. On the one hand, up to and including the time of the letter of 28 February 2005, the defendant had required the plaintiff to remedy numerous alleged defects and the plaintiff had accepted some of those demands. On the other hand, the letter of 16 March 2005, expels the plaintiff from the site at a time when the plaintiff was attempting either to complete incomplete work or to remedy defects. The apparent inconsistency may be resolved if (and, it seems to me, only if), as at 16 March 2005, there were grounds available to the defendant which provided a legal basis for terminating the contract. I shall return to this when dealing with clause 28 of the contract.
Practical completion/defective work
As I have said earlier, in mid-2004 the plaintiff claimed that the house had reached the stage of practical completion and notified the defendant accordingly. “Practical completion” is defined in clause 1 of the contract as “when the work is substantially complete and reasonably fit for use”. The plaintiff sought to invoke clause 20 of the contract which provides that, upon practical completion, although the defendant must pay the balance of the contract price, she is able to require the plaintiff to remedy defective or incomplete work. The clause makes it clear that the defendant is not entitled to set-off the cost of remedial work against the final payment. If the plaintiff establishes that practical completion has been achieved, the effect of the clause, where defects or incomplete work are concerned, is to entitle (and to oblige) the plaintiff to carry out remedial work as opposed to an obligation to pay (or to have offset) damages commensurate with the cost to the defendant of such work. This is confirmed by clause 22, which provides that the plaintiff has the right to fix defective or incomplete work. It is only if the plaintiff wrongfully fails or refuses to carry out the required remedial work, or if the defendant lawfully terminates the contract, that contractual damages, assessed by reference to the cost to the defendant, could be claimed by the defendant.
Under clause 21 of the contract, which may apply to some of the remedial work agreed to by the plaintiff, the defendant is able to require the plaintiff to remedy defective or incomplete work discovered by the defendant within three months of practical completion. Clause 21 has the same effect and is to be applied in the same way in relation to defective or incomplete work as clause 20. In other words, the contract does not permit the defendant to offset the cost of remedial work, however calculated, against the amount owing under the contract. The exceptions based on the plaintiff’s wrongful failure or refusal to perform remedial work or lawful termination by the defendant, apply.
The plaintiff benefits from clauses 20 to 22 in that the cost to remedy defects or to complete incomplete work is the cost to it, rather than costs commensurate with what it would reasonably cost the defendant to have the remedial work done.
It goes without saying that remedial work under clauses 20 and 21 is only required to be undertaken where alleged defective or incomplete work is actually defective or incomplete. Much of the evidence at trial was taken up with the question of whether alleged defective or incomplete work was actually defective or incomplete.
It is against this background and contractual structure that the issues debated at trial are to be viewed. Before turning to those issues, I propose to make some general observations about the witnesses who gave evidence at the trial.
The witnesses
The plaintiff called three witnesses, a Mr N A Mayne, the building supervisor employed by the plaintiff, Mr P R Neighbour, the Managing Director of the plaintiff and a Mr C J Short, a building inspector independently retained by the plaintiff to give expert evidence in relation to the sufficiency of the house built by the plaintiff and in relation to the complaints made about the house by the defendant in respect of which damages were sought in the counter-claim.
The defendant gave evidence and called as witnesses Mr R H Brooke, a valuer, Mr R B Wedding, a real estate agent retained by the defendant to sell the house, Mr M Stuart-Skinner, a building expert and her ex-husband Mr K J Phillips.
Both counsel accepted, correctly in my view, that each of the lay witnesses attempted to give their evidence as to relevant matters according to their best recollection. Both counsel made submissions in relation to the accuracy and reliability of each of the lay witnesses. I accept that to some degree Mr Mayne and the defendant may have unconsciously reconstructed events in a manner favourable to their respective cases but, like both counsel, for the most part I do not consider that anything turns upon whatever differences may arise from an examination of the evidence of those two witnesses.
Evidence as to repositioning the house
There is, however, one aspect of the evidence given by lay witnesses where there is a material and important difference. This relates to those witnesses who saw the house in the process of it being repositioned on the site. This was observed by the defendant, Mr Phillips and Mr Wedding. The defendant’s evidence as to what she saw on that occasion was vague, but the evidence given by Mr Phillips and by Mr Wedding was not. The difference in their evidence relates to the way in which the house was supported by jacks when it was lifted off the concrete blocks on which it had been built. It was Mr Wedding’s recollection that there were jacking devices on either side of the house between which ran a steel girder which supported the weight of the house. It was his observation that this steel girder was significantly bent in the middle and that consequently the floor and underframe of the house was bent to the same degree and thereby stress was put on the walls and roof of the house.
Mr Phillips’ evidence was that the house was supported on each side by a number of jacks but that there was no girder between the jacks that ran the full width of the house. Rather, he said, a steel beam ran horizontally out from each jack but only to the extent of a few metres along the underside of the house. In other words, there was no continuous beam or girder between the two jacks. Mr Phillips was positive about this when he was questioned in detail on the topic. The photographic evidence tends to support Mr Phillips recollection. I prefer his evidence where it conflicts with that given by Mr Wedding on the topic.
It has been necessary to resolve this difference in the evidence because the way in which the house was repositioned on site needs to be properly understood so that an accurate determination may then be made of what damage occurred to the house during the course of it being repositioned.
For the sake of completeness, it is necessary also to mention that when the house was being repositioned, it was supported at different times by two different means. One of the means was the support given by jacks on either side of the house as described by Mr Phillips. The other means of support was the trailer of a low loader which was used to move the house from the position where it encroached on an adjoining property to a position where no such encroachment occurred. When the house was supported by the trailer of the low loader, the floor and supporting timbers tended to sag at the edges downwards such that an overall convex shape occurred. When the house was supported by the jacks, the lower part of the house tended to sag in the middle producing a concave shape.
Photographs of the house were taken when it was supported by the jacks. These are included within exhibit D10. Photograph 6 shows the support offered by the jacks and photographs numbered 4, 12 and 18 show the house with the trailer of the low loader underneath the house. It is not clear whether the trailer was taking the weight of the house at the time those photographs were taken. None of the photographs, whether of the house being supported by the jacks or the trailer of the low loader, support the degree of deflection of the floor of the house, whether convex or concave, as deposed to by both Mr Wedding and Mr Phillips.
The Expert Witnesses
As to the expert witnesses, both counsel accepted, correctly in my view, that they all gave their evidence in an honest manner in an attempt to explain the respective views held by them. Both counsel offered the criticism that sometimes the other side’s expert was less than objective. There was limited common ground between the witnesses called as building experts.
The only valuation evidence was called by the defendant from Mr Brooke. The plaintiff accepted some but not all of his opinions.
Section 6(2) of the Building Work Contractors Act 1995
One of the grounds of defence pursued by the defendant was based on section 6(2) of the BWCA. The relevant part of that subsection is as follows:
6.(2) A person required by this Act to be licensed as a building work contractor is not entitled to any fee, other consideration or compensation under or in relation to a contract with another on whose behalf the person performed work as a building work contractor unless – …
It was not in dispute that much of the construction of the house to the completion to the second fix stage was carried out by a subcontractor, Mr Olinga, who was assisted by a person who was either his employee or his partner. It is also not in dispute that the building licence held by Mr Olinga was limited to the installation of the roof cladding. The amount paid by the plaintiff to Mr Olinga for the performance of all of the work undertaken by Mr Olinga was about $10,600. The defendant argued that most of the work performed by Mr Olinga and the other workman was building work in respect of which Mr Olinga was not licensed and accordingly, the plaintiff’s claim should be reduced to that extent.
As I understand the defendant’s argument, it was not submitted that the provisions of section 6(2) of BWCA applied directly between the plaintiff and the defendant. Rather, it was submitted that Mr Olinga was not entitled to be paid by the plaintiff for the work performed by him and his assistant because he was not licensed as required by section 6(1) of BWCA. According to the defendant, if Mr Olinga was not entitled to be paid by the plaintiff, there was no corresponding expense incurred by the plaintiff and the claim of the plaintiff should be reduced accordingly.
This submission may have some force if the proceedings by the plaintiff were to recover building costs as opposed to a contract price. However, it is clear from the building contract that the defendant agreed to pay a contract price, payable in the instalments provided for in the contract, in return for the construction of the dwelling the subject of the contract. In those circumstances, the fact that the plaintiff may not have been legally obliged to pay a subcontractor because the subcontractor was not appropriately licensed, has no bearing upon the recoverability of the contract price. For this reason the defendant’s contention that an adjustment should be made to the contract price because the plaintiff was not legally obliged to pay the subcontractor has no merit, at least insofar as the plaintiff is able to sue to recover a contract price.
Unlicensed Tradesmen - damages
On the question of whether the defendant can recover damages because a subcontractor was unlicensed, it was a term of the contract that those performing building work be licensed. To the extent that this includes subcontractors (and I assume, without deciding, that it does), if a subcontractor is not licensed there is a breach of the contract. Damages for such a breach would be nominal unless loss flows from the fact of the subcontractor is unlicensed. In this case the only loss that could arise would be from defective workmanship in respect of which the defendant may claim damages in any event. The defendant is not able to recover damages twice for the same item of faulty work. Thus if the defendant obtains damages for faulty work, she cannot claim the same damages for breach of contract consisting of the failure on the part of a subcontractor to have the appropriate licence. The defendant has effectively done this by claiming a reduction (at page 27 of the written closing address) in the sum of $11,000 based on the use of an unlicensed contractor. The defendant then claims damages for defective workmanship some of which may have arisen from building work carried out by the unlicensed subcontractor. In my opinion this aspect of the defendant’s set-off and counterclaim may only be based on allegations (and subsequent findings) of defective workmanship. Consequentially I reject the contention that a deduction of $11,000 should be made from the purchase price as asserted at page 27 of the written closing address.
Quantum Meruit/BWCA
It seems that some of the defendant’s submissions based on section 6(2) of BWCA were directed to the plaintiff’s reliance, in the alternative, upon a claim based on quantum meruit. It is necessary to say something about the extent to which the plaintiff has advanced a claim based on a quantum meruit. Such a claim is only referred to in paragraph (v) of the prayer for relief of the statement of claim which is as follows:
(v)a quantum meruit in the sum of $34,582.89 and a quantum meruit in the sum of $15,167.20;
…
Nothing in the statement of claim indicates how the quantum meruit is said to arise, but, in paragraph 7.2.11 of the plaintiff’s written final address, it is stated:
7.2.11However, even if this was not correct, it would be entitled to a payment by way of quantum meruit. Such a payment would be for the same sum as is claimed. Whether licensed or not, the work has been done and all of the materials supplied. (citation omitted)
This subparagraph forms part of paragraph 7.2 which is headed “Unlicensed Subcontractor and Quantum Meruit”. This is the only quantum meruit claim referred to in the plaintiff’s final address. It is a claim in the alternative and only needs to be considered if I form the view that the defendant’s reliance upon section 6(2) of BWCA has merit. I have stated above that there is no merit in such an argument and consequently it is not necessary for me to consider whether or not, in the alternative, the plaintiff may rely upon a claim partly based on quantum meruit.
Summary of defendant’s set-off and counterclaim
At page 27 of the defendant’s written closing address, the defendant summarises her position in relation to the monetary claim made by the plaintiff. The summary is as follows.
1The Defendant would summarise its (sic) response to the Plaintiff’s claim in the following table.

Claim for fourth progress payment (Invoice at page 102 of Exhibit P1)

$31,575.50

Claim for practical completion (Invoice at 108 of Exhibit P1)

$15,167.20

Less reduction applicable to increased claims made in respect of provisional sums items 19 and 21 not identified or proven.

($2,537.00)

Less amount allowed in the contract for termite treatment not carried out.

($1,474,00)

The best position the Plaintiff can maintain without allowing for matters mentioned hereafter.

$423,731.70

Reduction in respect of the cost of construction resulting from the use of unlicensed contractor as identified above.

($11,000.00)

Reduction applicable to the use of non galvanised nails in breach of the contract as identified above.

($24,940.40)

Add back the proportion of the above amount which relates to Mr Olinga’s work namely 14% thereof as referred to above.

$3,492.00

Reduction applicable to the use of inadequate tie down pads in breach of the contract as identified above.

($24,940.40)

Add back the proportion of the above amount which relates to Mr Olinga’s work namely 14% thereof as referred to above.

$3,492.00

Balance to be recovered by the Defendant from the Plaintiff as damages for above identified breaches.

($11,165.10)

2As can be seen from the above table it is the Defendant’s position that no amount is owing to the Plaintiff but rather that the Defendant should receive by way of damages an amount of $11,165.10. However if the Court were to reject one or more of the claims made that might result in an amount being owed to the Plaintiff. In that event the Defendant says that it is entitled to set off against any such amount to the extent necessary the damages which it has claimed in respect of other outstanding or defective work as dealt with below.

There are a number of reductions referred to in paragraph 1 above. I have already touched upon some of the claimed deductions in paragraph 1 and in one case, when I dealt with the provisions of the BWCA, determined that the claimed cost of work performed by an unlicensed tradesman ($11,000) could not be deducted from the contract price. It will be necessary to deal specifically with each of the other claimed deductions.
Paragraph 2 of the defendant’s summary states that for the reasons given in paragraph 1, the defendant should receive by way of damages the net amount of $11,165.10. In addition, it is asserted that if any of the claimed deductions are not allowed, the defendant in any event is entitled to set-off for damages against the contract price. The defendant has claimed damages under various headings as follows:
LDefendant’s claim in respect of incorrect siting of the building;
MThe defendant’s claim for damages resulting from delay and completion;
NDamages claimed for various construction defects;
OAt pages 38 and 39 of the defendant’s written closing address, the defendant has summarised her claim as follows:
SUMMARY OF THE DEFENDANT’S COUNTERCLAIM

Item Amount Sought

Balance to be recovered by the Defendant from the Plaintiff as damages for breaches after deduction of Plaintiff’s claim for balance of purchase price (see paragraph 1 of Section K above) $11,165.10

Diminution in value of property (see paragraph 9 of Section L above). $30,000.00

Additional marketing expenses – cost of an engineer’s report (see paragraph 11 of Section L above.) $ 1,600.00

Additional interest incurred (see paragraph 5 of Section M) $ 3,606.00

Damages for loss of use of money (see paragraph 7 of Section M). $ 3,573.00

Cost of remedying defects to rear facing lounge window (see paragraph 2 of Section O). $38,432.00

Cost or remedying blackbutt flooring (see paragraphs 4 and 5 of Section O). $ 3.800.00

Cost of remedying defects to decking and rear balustrade (see paragraph 7 of section O). $ 2,500.00

Cost of remedying defects to wet areas (see paragraph 12 of Section O). $30,000.00

Cost of remedying defects to laundry door (see paragraph 14 of Section O). $ 150.00

Cost of remedying defects to external side wall to dining area (see paragraph 15 of Section O). $ 400.00

Cost of retention of Mr Rowland (see paragraph 16 of Section O). $ 1,628.00

Cost of making good external cladding and flashing etc (see paragraph 18 of Section O). $ 3,000.00

Cost of items 1-21 in Short report (see paragraph 19 of Section O). $ 1.800.00

Cost of straightening roof trusses (see paragraph 20 of Section O). $ 1,500.00

Damages for distress and inconvenience (see paragraph 22 of Section O). $ 5,000.00

Total $134,798.00

The foregoing points to two matters which will need to be determined before proceeding to the detail of the claim and counterclaim. The first is whether the contract was lawfully terminated or wrongfully repudiated by the defendant and the second is whether or not practical completion was achieved by the plaintiff. Both these matters affect the approach to be taken to claim for the balance of the contract price and interest and, to the extent that I find defective work has not been remedied, how any set-off or counterclaim in relation thereto is to be assessed and applied.
Termination or Repudiation of the Contract by the Defendant
I have referred earlier in these reasons to the question of whether or not the defendant had grounds to terminate the contract in March 2005 when the plaintiff was excluded from the site.
Paragraph 14 of the statement of claim is as follows:
14. On 11 March 2005, pursuant to section 10(2)(a) of the [WLA] the plaintiff gave to the defendant a notice in writing, demanding payment of the final account in the sum of $15,167.20.
At paragraph 14.4 of the defence the defendant pleads:
14. As to paragraph 14 of the statement of claim the defendant:
…
14.4 says the defendant terminated the agreement by reason of the plaintiffs substantial breach of the terms thereof pursuant to the terms of a letter from her solicitors dated 28 February 2005.
The plaintiff filed a reply to paragraph 14 of the defence. In paragraph 2 of the reply the plaintiff asserted that no grounds of defence were set out in paragraph 14 of the defence. It was also asserted, in relation to paragraph 14.4 of the defence, that the letter of 28 February 2005 did not operate to terminate the agreement.
Clause 28.2 of the contract provides that the defendant may terminate the contract “if there is a substantial breach of the contract by” the plaintiff. This clause, in my opinion, does no more than provide a right which the defendant has at common law in any event. Certainly, common law rights of termination are not excluded: Mancorp Pty Ltd v Baulderstone Pty Ltd (1992) 60 SASR 120 at 127.
In paragraph 4 on page 8 of the defendant’s written final address, reference is made to termination of the building contract by the defendant pursuant to clause 28.2 of the contract. Earlier in these reasons I stated that I did not consider that the letter of 28 February 2005, constituted a termination of the contract. I also stated that, if by mid-March 2005, the defendant had grounds for termination of the contract, she had effectively terminated it by mid-March 2005. The plaintiff, as I have said, does not accept this. On the contrary, Mr Manuel argued that the actions of the defendant constituted a wrongful repudiation of the contract.
One of the problems that exists with the defendant’s contention that she lawfully terminated the contract is that neither the pleadings nor the written final submissions of the defendant articulate what the effect of the termination was on the rights and liabilities of the parties under the contract. The plaintiff has, however, addressed the point, at least in part. The following consists of my understanding of the law.
It often occurs in cases such as these that one party asserts lawful termination of the contract and the opposing party characterises such conduct as repudiatory. Lord Wright in Heyman v Darwins Ltd [1942] AC 356 at 378 said:
Perhaps the commonest application of the word repudiation is to what is often called the anticipatory breach of a contract where the party by words or conduct evinces an intention no longer to be bound, and the other party accepts the repudiation and rescinds the contract. In such a case, if the repudiation is wrongful and the rescission is rightful, the contract is ended by the rescission, but only as far as concerns future performance. It remains alive for the awarding of damages … for the breach which constitutes the repudiation.
The repudiation may be inferred from conduct as was the case where the owner wrongfully refused to give possession of the building site to the contractor: cf Carr v J.A. Berriman Pty Ltd (1953) 89 CLR 327.
If the defendant’s exclusion of the plaintiff from the site was wrongful, in other words, if there was no justification by way of substantial breach on the part of the plaintiff for the exclusion, the plaintiff had no opportunity to complete whatever building work remained to be done and was thus absolved from the contractual obligation to do such work. There is no practical alternative open to a builder wrongfully excluded from the site other than to accept the repudiation: cf Porter v Hannah Builders Pty Ltd [1969] VR 673; Graham Roberts Ltd v Maurbeth Investments Ltd [1974] 1 NSWLR 93. If on the other hand, the defendant establishes that at the time that the plaintiff was excluded from the site, the plaintiff was in substantial breach of the contract, the defendant would be entitled to recover damages arising from the plaintiff’s substantial breach.
If the wrongful repudiation is accepted, both parties are discharged from further performance under the contract: McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476-477, per Dixon J; Hayman v Darwins Ltd (supra).
Even if the contract was lawfully terminated by the defendant because of substantial breach on the part of the plaintiff, the plaintiff is entitled to recover the amount due under the contract prior to the termination: McLachlan v Nourse [1928] SASR 230. However, the defendant may set-off against that amount any claim for damages available to her, even though (as in this case by clauses 20-22) the contract has otherwise ousted the right to set-off: Queensland University of Technology v Project Constructions (Aust) Pty Ltd (In Liquidation) [2003] 1 Qd R 259.
It follows from the cases just referred to that the defendant would be able to off-set against the liability to pay the amount due under the contract, damages for incomplete or unremedied defective building work and damages for any other breach by the plaintiff of the contract. The damages for defective or incomplete work would be assessed as the cost to the defendant of having defects remedied or incomplete work completed.
If, on the other hand, she wrongfully repudiated her obligations under the contract in about mid March 2005, she remained liable to pay any amounts due under the contract and she remained bound by the terms of the contract. This has particular significance in relation to how the question of alleged defective and incomplete work is to be dealt with. It was the plaintiff’s submission that, if the defendant wrongfully repudiated the contract, and if the court were to find that practical completion had been achieved but that some of the work in respect of the house was either defective or incomplete, the plaintiff’s position was that it could recover the contract price less the cost to it of remedial work and work required to complete incomplete work which it otherwise would have been required to perform but for the repudiation. I agree with that submission.
Because different consequences apply, depending on whether or not the contract was lawfully terminated by the defendant or wrongfully repudiated by her, it is necessary to determine the effect of the correspondence in mid-March 2005, whereby the plaintiff was excluded from the site.
As stated earlier, the only basis upon which it could be said that the defendant had lawfully terminated the contract in mid-March 2005 is that the plaintiff was in substantial breach of the contract (Clause 28.2) at that time. The defendant submitted (paragraph 4.3 at page 8 of the written final address) that the question should be looked at in light of “the various substantial breaches of contract committed by the plaintiff”. The defendant develops this point at page 32 of the written submissions as follows:
3. In the submission of the defendant there can be no doubt that there were various and substantial breaches of the contract by the plaintiff some of which taken alone would be sufficient to justify termination of a contract but certainly as a whole there can be no doubt that precision by the defendant was justified. The defendant relies on the following breaches:
·The use by the plaintiff of an unlicensed tradesperson to erect the building.
·The use of non-galvanised nails in the course of construction contrary to the building consent.
·The substantial delay in completion of the contract.
·The assertion of practical completion and the demand for payment due upon practical completion when such completion had not been achieved.
·Failure to obtain necessary approvals as identified in the Rowland report.
·The failure by the plaintiff to take any action to address the defects identified in the Rowland report.
·The failure to remove and re-do the original undersized pads for tie downs.
·The issue of a stop work notice on unjustified grounds (see page 152 of Exhibit P1).
·The wet areas having floors constructed not in compliance with the building consent.
I shall deal with these allegations of breach of contract seriatim.
Use of an unlicensed tradesperson
It is not in dispute that Mr Olinga, together with an assistant or partner, carried out building work that Mr Olinga was not licensed to perform. In broad terms he was responsible for the construction of the house to the completion of the second-fix. That work included the installation of the roof cladding in respect of which he had an appropriate licence. He was otherwise unlicensed. This constitutes a breach of the contract because Clause 2.3 requires that the building work will be carried out in accordance with statutory requirements and therefore by licensed tradespersons. It follows from what I have already said about the lack of a licence, that if the standard of workmanship is otherwise acceptable, the fact that it was carried out by an unlicensed person is a relatively minor breach because it has no practical consequences.
In my view, the evidence, such as it is, falls far short of establishing that there is a link between the lack of an appropriate licence on the part of Mr Olinga and any unsatisfactory workmanship. At most there is a vague suggestion that because Mr Olinga was unlicensed, the work that he performed was therefore deficient. In my view, unless there is clear evidence that any part of the building work performed by Mr Olinga and his assistant was defective, a finding to that effect may not be made.
My conclusion that there is no connection between the lack of a licence and defective workmanship does not, and is not meant to, address the position where there are allegations of specific defects which have been the subject of evidence by the various building experts. In summary, I do not consider that the use of an unlicensed tradesperson constituted, in itself, a substantial breach of contract by the plaintiff.
The use of non-galvanised nails
There was no in dispute that non-galvanised nails were used in the construction of the house, including on the interior of the roof structure. The defendant contended that this constituted a breach of the contract because part of the building consent imposed the requirement that a certain type of galvanised nail be used on the house. The written consent is page 60 of exhibit P1. The relevant condition is as follows:
All nails shall be galvanised and all bolts, complete with nut and washer, shall be hot dip galvanised.
The defendant contended that the plaintiff was in breach of this requirement, and therefore in breach of the contract, because non-galvanised nails were used other than on the exterior of the roof structure. The plaintiff contended that the condition only required galvanised nails to be used on those parts of the roof which were exposed to the open air. It was also said that it was common building practice for galvanised nails to be used on the outside of the roof and non-galvanised nails to be used elsewhere.
In my opinion, the condition of consent clearly requires galvanised nails to be used on the house as a whole. Because this was not done, the plaintiff is in breach of the approval condition and therefore of the contract, because the contract requires the plaintiff to comply with all relevant building requirements.
The defendant accepts that the breach is not capable of being remedied in the sense that the house would have to be dismantled and rebuilt using galvanised nails. It seems to me that the measure of the seriousness of the breach requires the taking into account of two matters: first, that the defendant says that the breach sounds in damages because the house has a lesser value; and, second, the expert evidence as to what effect the use of the non-galvanised nails has upon the structure of the house.
In my opinion, it would have no bearing on value. I shall deal with that question in more detail when I deal with the evidence of the valuer, Mr Brooke. As to the second matter, it was Mr Short’s view that the house was no less structurally sound than a house which was constructed with galvanised nails. Mr Stuart-Skinner was not prepared to go this far but, when pressed in cross-examination, he said that he had never in his lengthy career in the building industry come across a house that had become unsound because of the use of non-galvanised nails in what has been referred to as a corrosion zone. It was not in dispute that the house the subject of these proceedings was in a corrosion zone in that it was within a certain distance of the sea-side.
In my opinion, the use of non-galvanised nails is a relatively minor breach which both in the short-term and the long-term has had and will have no effect on the structural soundness of the house.
Alleged delay
I have already determined that the time within which the house was to be completed is to be calculated by reference to the terms of the contract rather than by reference to the assertions by the defendant that the plaintiff agreed to finish the house by April 2004.
The contract provided for a start date of approximately seven weeks from the contract becoming unconditional and development approval granted. Development approval was granted on 11 August 2003. The “finish date” provided for in the contract is “approximately 25 weeks from commencement at site”. By clause 11.1 the plaintiff agreed to start work on the site “as soon as reasonable after the start date”. Clause 11.2 provides that the “work must be practically complete by the finish date”. In other words, by the finish date the house had to be substantially completed and reasonably fit for use. Clause 11.3 specified a number of instances where the finish date could “be put back by whatever time is reasonable if there is delay in the work” caused by the occurrence of those matters.
The plaintiff relied upon some of the matters set out in 11.3 to extend the finish date. In paragraph 5.2.5 of the plaintiff’s written final address, reference is made to the retaining wall, the construction of which it was conceded at trial was the defendant’s responsibility. According to the plaintiff, this was a matter that needed to be attended to before the plaintiff commenced construction on the site. It was argued that it came within clause 11.3.11, the effect of which was that if there was something that the defendant was required to do before the commencement of work and the defendant delayed in completing that task, the finish date was to be put back commensurately.
I do not think there is any substance in this contention on the part of the plaintiff because it was common ground at the trial that the site had been cut prior to the construction of the retaining wall and that because the site had been cut without reference to the true boundaries, the retaining wall was actually constructed in the wrong place. The effect of this is that the plaintiff had commenced work (by the site cut) independently of the construction of the retaining wall and therefore cannot now claim that the finish date is to be put back because of an alleged delay on the part of the defendant in having the retaining wall constructed.
For the same reasons, I reject the submission in paragraph 5.2.9 of the plaintiff’s written final address that the start date should be March 2004. [The submission says 2003 but this is clearly wrong].
It was not in dispute that the plaintiff actually commenced work on the site in November 2003. This is at variance with the contractually defined start date calculated by reference to the grant of development approval (on 11 August 2003) and commencement within approximately seven weeks of that time. According to that calculation the commencement time would be late September or early October.
It follows from the above that the 25 week construction period contained in the contract would have expired in about late March 2004. The plaintiff contends that practical completion was achieved in mid-June 2004.
It was the defendant’s contention that the plaintiff has never achieved practical completion, let alone practical completion as at June 2004. If that is correct, and if damages flowed from that delay, the basis of calculation of damages would be different depending on whether, in March 2005, the plaintiff had lawfully terminated the contract or wrongfully repudiated the contract. In the former case, damages may well flow for a period before and after the lawful termination. In the latter case, whatever may have been the question of damages for delay up to the date of wrongful repudiation, the defendant would be unable to recover damages under that heading after the wrongful repudiation. I will return to this aspect later.
Termination or repudiation also has a bearing on the degree of breach of contract by delay, if the delay extended to March 2005, because practical completion had not been achieved. If there was a lawful termination, the delay persisted until the defendant had a reasonable opportunity to finish the house.
The next point to be determined in relation to the question of delay is whether or not the plaintiff has established that the house was practically complete as at mid-June 2004 and if not, whether or not subsequent to that time a stage of practical completion was reached and if so, when. Consideration will need to be given to the question of what, if any, defects there were in the house after mid-June 2004. By defects I include defective workmanship, use of defective materials and incomplete work.
It is necessary to take into account that practical completion can be achieved under the terms of the contract even though there are defects. As previously stated, the contract allows for defects to be notified up to a period of three months after practical completion. Consequently, the existence of these defects will not in itself indicate that the house is not practically complete. The question becomes: if there were defects after mid-June 2004, did those defects render the building work not substantially complete or the house unfit for use, and if so, for how long? This question involves a consideration of what defects existed as at mid-June 2004 and what remedial work was performed by the plaintiff thereafter.
There is little doubt that, as at mid-June 2004, there were defects in the house, but there is limited evidence as to what they were. The first detailed building report as to defects (provided by Tecon Australia Pty Ltd) was not obtained until 25 November 2004. I have previously stated that, during 2004, allegations were made by the defendant, principally through Mr Phillips, to the plaintiff and to the local District Council of allegedly defective workmanship. Some of these matters were addressed by the plaintiff, at least to the point where the Council was satisfied that the house was in a satisfactory state.

I think the safest approach to take to the question of what defects existed at mid-June 2004 is to work back from the report of 25 November 2004 referred to above and to the reports of other experts who commented upon the report of 25 November 2004. Some of these reports also referred to alleged defects not mentioned in the report of November 2004.
The report of Tecon Australia Pty Ltd (Ex P4) was prepared by Mr Kym Rowland, a director of that company. He was retained by the defendant through her solicitors to provide a report. He attended at the building site with Mr Ken Phillips on 17 November 2004. In his report he said:
The purpose of the inspection was to view the dwelling and confirm that the builder had reached practical completion in a satisfactory manner. I was also required to comment on structural condition and general compliance with the requirements of the building rules under the Development Act 1993.
It was agreed prior to the inspection that there would be difficulties in undertaking a thorough framing inspection once the cladding and internal linings have been installed and that there would need to be some assumptions made based on the findings of the inspection.
Of particular concern was the potential damage to the building and services resulting from the relocation on the site after being constructed in the incorrect location.
Prior to the inspection I had the opportunity to review the approved documents provided by Council and to view a number of photographs taken during the relocation of the dwelling. Mr Ken Phillips also provided me with some background information on a number of issues arising during the construction and relocation of the dwelling.
Mr Rowland addressed, in broad terms, whether the construction was properly documented with all relevant approvals, on the one hand, and defective workmanship (as I use that term in these reasons) on the other hand. I propose only to deal with his assertions as to defective workmanship because the other category of matters addressed by him does not, in my opinion, have a bearing upon whether practical completion, as defined in the contract, was achieved by the plaintiff as at mid-June 2004 or at any other time.
Before turning to the detail of Mr Rowland’s report, it is necessary to refer again to the definition of “practical completion”. (Clause 1.10 of the contract.) There are two elements:
·substantially complete; and
·reasonably fit for use.
These two elements will inevitably overlap: the building may be incomplete to the extent that it is not reasonably fit for use. Nevertheless, a building may be substantially complete but not reasonably fit for use because, for example, it has numerous defects, or one or more serious defects, which preclude it from being reasonably fit for use. An example of the latter would be a completed dwelling with a roof that leaks excessively.
With regard to the first part of the definition, “substantial” has a number of meanings (the Macquarie Dictionary, 2^nd ed.) but it is clear that the use in clause 1.10 of the word in its adverbial form invokes the meaning where an incomplete achievement is compared to the completed achievement in the sense that the essentials of the former should be close to the latter. Once again, apart from Mr Mayne’s assertion that practical completion had been reached by mid-June 2004, there is no detailed evidence as to the state of completion as at mid-June 2004. Accordingly, the degree of completion may therefore only be measured by reference to Mr Rowland’s findings of defective workmanship in his report and the other experts’ comments in relation to Mr Rowland’s report.
As to substantial completion, the question must be asked: if there are defects in workmanship (as opposed to documentary defects) as asserted by Mr Rowland, do they either individually or cumulatively prevent the building from being assessed as “substantially complete”? Even if this question is answered in the negative, the further question must be asked: do the defects, taken individually or cumulatively, preclude the building from being found to be “reasonably fit for use”?
Mr Rowland’s report was based on an inspection of the property on 17 November 2004. The matters commented upon by him occur at pages 2, 3 and 4 of his report. They are set out as a series of bullet points and are unnumbered. However, the copy of the report tendered as an exhibit had a paragraph number written in the left hand margin of the letter. This numbering was the work of Mr Mayne when he addressed each of the points raised by Mr Rowland. Mr Rowland’s comments have been in turn commented upon in the report of Mr Short, the building expert called by the plaintiff, in his report of 25 June 2005 (P20). He has adopted the numbering of the paragraphs initiated by Mr Mayne. Mr Short has also summarised the effect of Mr Rowland’s comments. I will use Mr Mayne’s numbering and Mr Short’s summary unless I think that it is insufficient.
Mr Stuart-Skinner, the building expert called by the defendant, commented upon a number of matters referred to in Mr Short’s report of 25 June 2005. These comments are contained in paragraph 3 at pages 8-10 of his report of 16 November 2006 (exhibit D22).
Mr Rowland’s report (exhibit P4)
I turn now to the details of Mr Rowland’s report for the purpose, at this stage of my reasons, of ascertaining the stage of completion reached by the plaintiff as at November 2004, using that to make findings relating to completion (or otherwise) as at mid June 2004.
1.Roof truss details not granted provisional building rules consent.
If there is a defect disclosed by Mr Rowland, it is of a documentary type relating to an absence of appropriate approval. I accept Mr Short’s explanation and his references to the documentation which indicate that there has been an appropriate approval by KBS Consultants. In any event, even if this is a mistaken view, the defect does not sound in damages nor does it effect the question of whether or not a practical completion had been reached.
2.Trevor John and Associates pad tie-down details inappropriate, do not match floor plan.
Reference has already been made to the change to the tie-down structure recommended by Koukourou Engineers on 8 September 2004. It is apparent from the Council file (exhibit P3 page 10) that the Council inspected the revised pad structure and set out on 1 October 2004 which was confirmed to the builder by letter dated 1 June 2005.
It is clear from Mr Short’s comments that he accepted that the tie-down structure was inadequate but that it was remedied when the recommendation by Koukourou Engineers was implemented in early October 2004. It follows from these findings that as at mid-June 2004, the tie-down structure was inadequate and had to be redone.
As I understand it, the prime purpose of the tie-down structure was to tie-down the building which rested on piers consisting of concrete blocks glued with masonry glue to one another. In other words, without an adequate tie-down structure, there was an appreciable risk that, in high winds, the building might be dislodged from the piles which supported it. This is obviously a fundamentally important part of the structure, and, unless and until that part of the structure has been completed by reference to acceptable engineering standards, the building could hardly be said to be substantially completed both from the point of view of the first element of the definition and the second element because an inadequate tie-down structure is an essential part of the first element and constitutes a basis for concluding, in relation to the second element, that the building is not reasonably fit for use.
If the inadequate tie-down structure was the only defect relating to the question of when the building had reached practical completion, it would follow that practical completion had been reached in early October 2004. However, it is necessary to look at the other comments made by Mr Rowland in case, where a defect is established, such defects either cumulatively or individually have a bearing upon the question of when (if at all) the building reached the stage of practical completion.
3.Tie-down detail for truncated girder trusses not adequately detailed
This consists of a documentary defect which does not effect the question of when (if at all) practical completion was achieved.
4.Revised tie-down pad details by TMK Consulting and floor framing details by Koukourou Engineers not approved
This is a documentary matter which does not effect the question of practical completion. Mr Rowland has not identified an item of defective work as opposed to a possible lack of the required approval. This is evident from Mr Short’s opinion at paragraph 4 of his report. Mr Stuart-Skinner in his report of 16 November 2006 refers to the question of whether or not there was adequate floor bearing framing but that is not a matter raised by Mr Rowland at item 4 of his report.
5.Not clear whether the retaining wall was part of the development approval
This does not raise a matter relevant to the question of practical completion.
6.Stair details not approved
This does not raise a matter which affects the question of practical completion.
7. Elevations do not match floor plan
This does not raise a matter which affects practical completion.
8. Issues relating to the relocation of the house
I have not used Mr Short’s summary because it is insufficient. Mr Rowland’s comment is as follows:
It is reported the builder continued to build in the incorrect location even after being asked by Council to relocate the construction prior to the walls being constructed. The building has not been designed or constructed as a transportable building and the builder would have known the relocation would place additional stress on connections, wall linings, some framing members and the services. It does not appear from the photographs that sufficient effort was made to minimise this stress during the relocation.
I assume the photographs referred to are those taken by Mr Phillips on one of the days when the house was relocated. It is to be noted that Mr Rowland also commented, under the heading “issues arising from the inspection” that “during the inspection I did not observe any significant framing distress as a result of the relocation although I could not see the connections or bracing behind the wall linings”.
The issues raised by Mr Rowland relating to the relocation of the house speaks only in general and inconclusive terms. It seems to me that if any specific damage had been caused by the relocation which, by the time Mr Rowland visited the site, was still present, such specific matters may have a bearing on the question of whether or not practical completion was reached as at mid-June 2004. However, the generality of the comment under this paragraph does not assist with that question.
9.The Council should have stopped the work until the house was correctly sited
This does not raise a matter which is material to the question of practical completion.
The paragraphs which follow come under the heading– “Issues arising from the inspection”
10.Roof sheets, cappings not adequately screw fixed, some screws have missed the relevant timber supports
I accept that Mr Rowland identified defective workmanship in this comment but by the time Mr Short wrote his report, the defect had been remedied. The evidence does not permit a more precise finding. The inadequate fixing of screws was a defect which existed as at mid-June 2004. Taken in isolation it could not be regarded as a defect which in itself could lead to the conclusion that there had not been practical completion.
11.Many purlins not adequately fixed to rafters or trusses
This comment discloses a fault which I infer existed as at mid-June 2004. The defect was subsequently remedied prior to Mr Short compiling his report but the evidence does not permit a more precise finding. By itself, the defect does not preclude a finding of practical completion.
12. Many rafters are not fixed to trusses at every junction
The same findings may be made in relation to paragraph 12 as were made in relation to paragraphs 10 and 11 and for the same reasons. There was a defect detected by Mr Rowland. The defect was in existence as at mid-June 2004 but it was subsequently corrected prior to Mr Short’s first report of 25 June 2005. It is not a defect which in itself would preclude practical completion.
13.Girder trusses not connected to the wall framing
This comment identified a fault which was in existence as at mid-June 2004. It has since been remedied at a time prior to Mr Short producing his first report because he found no defects of that nature. He refers to builder’s comments and to photographs to indicate that satisfactory tie-downs had been carried out in relation to the external walls. I infer that the fault was in existence as at mid-June 2004.
14.The two standard trusses are out of plumb and are bowed approximately 125mm
Mr Short deals with this comment in some detail. In his report he sets out the basis of calculations to be made in assessing whether or not a truss is out of plumb. I accept his conclusion that one of the trusses was within acceptable tolerances and the other was not. He said:
While the southerly of the two affected trusses is slightly out of plumb, the amount is less than or equal to this dimension. It is therefore within the tolerances allowed by MI Tek notwithstanding the bowed top cord in one of the trusses, the departure from these tolerances has not been to the detriment of the roof structure. The roof lines are straight and crisp. See our photograph 1. In particular there is no deflection apparent, which is often the first symptom of a defective roof truss.
Although Mr Stuart-Skinner referred to paragraph 14 of Mr Short’s report, he did not join issue with Mr Short as to the conclusions just referred to.
It is apparent from Mr Short’s report, and I accept, that further remedial work was required to be done in relation to the truss with the bowed top chord. He said:
Sufficient roof sheets should be removed from the westerly side of the roof to allow access to the truss with the bowed top cord, and the purlins should be disconnected from it so that the truss can resume its natural alignment (and fall within the MI Tek erection tolerances). The purlins should then [be] fish-plated as necessary, restrapped to the truss and the roof sheets reinstated.
The defect found to exist by Mr Short was present as at mid-June 2004. It is not clear from the evidence whether the remedial work recommended by him has been carried out. It is a defect which, in itself, would not preclude practical completion.
15.Roof trusses do not appear to provide for a 10mm space between the bottom cord and the top plate of the internal wall frame
This is a defect which was present as at mid-June 2004. Mr Short accepted that it is a defect but said:
Even though the trusses were not designed to be supported by internal walls [ie the roof trusses rested on the internal wall frame], this is not proven to be to the detriment of the roof structure. The roof lines are straight and crisp.
Paragraphs 16-22 of Mr Rowland’s report are under the heading “Wall framing”
16.The top plates are not properly connected to the studs
This comment identifies a defect which was subsequently rectified by the builder. The defect was present as at mid-June 2004. The defect, by itself, does not preclude a finding of practical completion.
17.Top of the bracing walls not connected properly with the external walls
This was a defect which was in existence as at mid-June 2004. It has been remedied but the evidence does not permit a more precise finding.
18 and 19.The plates are not adequately connected to the studs supporting the triple girder truss.
This comment identifies a fault in the house as at mid-June 2004. Mr Short refers to the builder’s comments as to remedial work and to photographs of same included with his report. I accept his opinion that the defect has been remedied based as it is on the photographs which showed “that satisfactory tie-downs had been executed at the top plate and bottom plate location of the external walls”. The defect, by itself, would not preclude practical completion.
20.Wall framing not connected to the floor framing
This identifies a fault which was in existence as at mid-June 2004. I accept Mr Short’s opinion that the fault has been rectified as evidenced by the photographs included with his report. The defect, by itself, would not preclude practical completion.
21.Internal non-load bearing walls not fixed to roof framing
This identifies a fault present as at mid-June 2004. I accept Mr Short’s opinion that this defect has been remedied by the installation by the builder of internal wall brackets on the trusses. This is not a defect which by itself, would preclude practical completion.
22.Verandah posts bolted to deck fascia not to floor framing
This is a defect which was in existence as at June 2004. It has been remedied prior to Mr Short’s report of 25 June 2005. The evidence does not permit a more specific finding. It is not a fault which in itself would preclude practical completion.
23.    Floor joists not in accordance with the approved documents
This is a defect which existed as at mid-June 2004. I accept Mr Short’s opinion that the defect has been remedied at an unspecified time. The defect in itself would not preclude practical completion.
24.Southeast corner concrete block leaning and unstable
This is a defect which was in existence as at mid-June 2004. The concrete block referred to formed part of the concrete block pier supporting the house. Mr Short noted the builder’s comments that the support blocks have been checked and repaired where necessary. He confirmed that this had been done and I accept his finding. I am not able to say when that took place other than it had taken place prior to 30 May 2005 when he inspected the site with Mr Mayne. It is not a fault which would preclude practical completion.
25.Bathroom floor joists cut through not replaced
This comment identifies a fault in existence as at mid-June 2004. The joists were cut to allow for the sewer pipe from the floor trap within the bathroom. A replacement joist has been installed which Mr Short found to be satisfactory. The defect in itself would not preclude practical completion.
26.Some tie-down angle bolts too close to bottom face of floor framing
This is a defect which existed as at mid-June 2004. I accept Mr Short’s opinion that this fault has been remedied to an acceptable degree. The fault in itself would not preclude practical completion.
27.Koukourou floor joist alterations not completed
This was a defect which existed as at mid-June 2004. I accept Mr Short’s opinion that the defect has been remedied to an acceptable standard. The defect in itself would not preclude practical completion.
28.Floor frame does not provide adequate vertical support for verandah post and girder truss
In relation to this Mr Rowland said:
The deck joist on the western side of the building has been cut to house in the verandah posts,      on[e] of these posts supports the triple girder truss. The deck fascia is also cut and joined at this location. The floor frame does not provide adequate vertical support for the post and girder truss.
Mr Short noted that a “short steel post has been installed below the western deck post and is supported by a concrete pier”. He referred to photograph 2 included with his report. He said that the roof loads from the triple girder truss are transferred to the foundation which was a satisfactory support. I accept his opinion. The remedial work was carried out prior to 30 May 2005. It is not a defect which would preclude practical completion.
Paragraphs 29-32 are under the heading “Subfloor details” in Mr Rowland’s report
29.Tie-down pads under size
This raises the same problem as in paragraph 3 above which I need not repeat.
30.Redundant tie-down pads undersize
This comment does not identify a fault in the structure as at mid-June 2004. It refers to the undersize tie-down pads which were replaced by larger pads after Koukourou Engineers required that the tie-down pads be redone.
31.Concrete block not founded in firm soil
This is a fault which was present as at mid-June 2004. Mr Rowland said:
The concrete block stumps are not all founded on firm natural soils as required by condition of provisional building laws consent with a number being placed on fill of dubious compaction.
I accept Mr Short’s opinion that the defect has been remedied to an acceptable standard. The fault in itself would not preclude practical completion.
32.Stairs, tie-downs, etc may interfere with termite protection. Regular inspections are required.
This comment does not identify a defect but draws attention to the need for regular inspections in relation to termites in the future.
33.Stair risers not of a consistent height. Some exceed 190mm
This identifies a defect that existed as at mid-June 2004. I accept Mr Short’s opinion that this defect has been remedied to an acceptable standard as evident from photographs included with his report. The defect in itself would not preclude practical completion.
34, 35 and 36.   These paragraphs deal with Mr Rowland’s comments relating to the retaining wall. I have already concluded that the retaining wall was not the responsibility of the builder. Consequently any defects relating to them do not have a bearing upon whether or not practical completion was or has been reached.
37.No access to inspect the waterproofing behind the ceramic tiling
This item does not raise an identifiable defect but merely points to an inability to check as to whether waterproofing behind tiling was sufficient.
38.Electrician and plumber should check the wiring and plumbing
As I understand it, Mr Rowland suggests that these be checked because the house was relocated at a late stage of its construction. It does not in itself identify any particular fault. I accept Mr Short’s comment that each of the plumbing and electrical contractors have issued a written certificate of compliance and that no further obligation to check the work arose.
39.Some of the flyscreens have been damaged
It was the plaintiff’s position that any damaged screens would be repaired or replaced. I accept Mr Short’s opinion that at the time of his inspection on 30 May 2005 there was no evidence of damage to the screens. This was a defect which was present as at mid-June 2004. It would not in itself preclude practical completion.
40.Minor distortion of aluminium frames, it is not significant
Mr Rowland did not think that this constituted a defect. Mr Short was of the view that it would be appropriate for the builder to attend to blemishes of this nature during the defects liability period. The defect was present as at mid-June 2004. It would not in itself preclude practical completion.
41.Suitability of glass in the building
Mr Rowland was unable to comment but Mr Short was of the opinion, which I accept, that the glass was in accordance with the requirements of the Building Code.
42.Stormwater not installed with the approved details
This comment does not identify a fault because the building contract provides that stormwater disposal is the owner’s responsibility.

In paragraphs 8, 9 and 10 of the Statement of Claim, the plaintiff asserts that on 23 November 2004, pursuant to the provisions of the WLA, the plaintiff gave to the defendant two notices demanding payment of the fourth progress claim plus interest in the sum of $3,407.89, that a lien was registered for the aggregate of the amount of the fourth progress claim and the amount of interest, namely a total of $34,582.89 and that the defendant has failed to pay the outstanding sums or any part thereof or to secure payment of same or to compromise the same. The defendant admits these allegations.
By paragraph 11 of the Statement of Claim the plaintiff asserts that after the completion of the second fix carpentry the plaintiff undertook work and furnished materials with the consent of the defendant to the total value of $15,167.20. This constituted the final account consisting of the balance of the contract price plus the cost of extras. It is common ground that the defendant has not paid this amount.
Paragraph 12 of the statement of claim is as follows:
12.It was a term of the agreement that the defendant would pay the final account within seven days.
In response, the defendant has pleaded in the further amended consolidated defence (“the defence”):
12.     As to paragraph 12 of the statement of claim the defendant:
12.1   says the final payment was due and payable upon completion of the dwelling and hand over of keys;
12.2   says the plaintiff failed to complete the work on the land or in the alternative complete (sic) the work to the point of practical completion as defined in the agreement;
12.3   says the plaintiff used unlicensed tradesmen to erect the house in breach of the agreement;
PARTICULARS
The defendant relies upon the particulars provided in paragraphs 18 and 18A of the defence and paragraph 9 and Schedule 1 of the counterclaim below.
In my opinion, the assertion in paragraph 12.1 is a correct statement of her position with regard to the liability to make the final payment. I have already found that the house has not reached practical completion. Therefore, at the date of the demand, whether pursuant to the contract (or as alleged later in the Statement of Claim pursuant to the provisions of the WLA) the amount claimed by way of the final account was not payable. Consequently, the claim to enforce a lien in respect of this amount has not been made good because at the time that the demand was made, the amount said to be due was not due.
After the demands pursuant to the WLA, the defendant validly terminated the agreement. At that time she became obliged to pay the fourth progress payment and the amount of the final account, but she was entitled to deduct from these sums the cost to her of completing the house and the amount of any damages she recovers. Interest pursuant to the terms of the contract in respect of the fourth progress payment will only be payable if the aggregate of the claimed deductions, the cost of finishing the house and any damages, as assessed by me, are less than the amount of the fourth progress payment.
Defendant’s claimed deductions (summarized at page 27 of her closing address)
The first claimed deduction amounts to $2,537. This is an amount which is said to be deductible because of the lack of an appropriate licence on the part of Mr Olinga. I have already dealt with this contention and determined that the defendant is not able to claim a reduction in the contract price because one of the tradesmen working on the house did not have the appropriate licence. It follows from that conclusion that the deduction of $2,537 should not be made.
The next item claims a reduction on account of termite treatment. I have already indicated that some allowance should be made for the cost of termite treatment because it is not in dispute that that work has not been carried out. To put it another way, it is part of the cost to the defendant recoverable by her to bring the house to the stage of actual completion (as opposed to practical completion). The evidence of the experts as to this amount differed. I think it appropriate to allow a reduction of $1,000.
The next claimed deduction is for $11,000 based on the contention that unlicensed tradesmen were used. I have already dealt with this. No deduction will be made.
The next deduction claimed is in the sum of $24,940.40 rising out of the use of non-galvanised nails. At paragraph 8 on page 17 of the defendant’s written submission, it is stated:
It is the defendant’s submission that because the work was not carried out in accordance with the building consent, because such failure was a breach of a specific provision of the contract, and the cost such failure has left an irremediable defect, the plaintiff should not be entitled to recover the cost of the work done.
The defendant asserted that the cost of the work done should be equated with the contractual instalment payable after the construction of the wall and roof frame, namely $24,940.40. In my opinion, this submission should be rejected for the reasons given by me when dealing above with the question of the use of non-galvanised nails. In my opinion, the structural integrity of the building was not affected, it is not suggested by the defendant that the house should be pulled apart and rebuilt and the evidence does not support a finding that the house will in the future become structurally deficient. That prospect has not been established even as a remote possibility. Consequently, there should be no deduction from the purchase price, nor an award of damages based on the breach of contract consisting of the use of non-galvanised nails in the structure of the house.
The next deduction claimed is in the sum of $24,940.40 relating to the inadequate tie-down pads. I have specifically dealt with this contention above when dealing with the question of whether or not the house had reached the stage of practical completion. For the reasons then given, no such deduction should be made.
That completes my review of the items referred to at page 27 of the defendant’s written submission. I have only allowed one deduction, namely the sum of $1,000 in respect of the termite treatment.
The defendant’s counterclaim
I have set out above the defendant’s summary of her counter claim contained at pages 38 and 39 of the written submission. The first amount referred to in the counter claim is the balance of $11,165,10 which is created when the claimed deductions are deducted from the balance of the contract price. Because I have only allowed one such deduction (in the sum of $1,000) there is no surplus of deductions over the balance of the contract price. Consequently the defendant is unable to counter claim the sum of $11,165.10.
Claim for Diminution in Property Value
This is the second item referred to in the summary of the defendant’s counter-claim at page 38 of the defendant’s written submissions. The claim is based on the evidence of the valuer, Mr Brooke. He was retained to provide an opinion as to the diminution in value of the property based on the matters set out in the letter of instruction dated the 17 October 2005 from the defendant’s solicitors to his firm. A copy of the letter is contained within his report which was admitted as Ex D5. The relevant part of the letter is as follows:
The contract price was $126,702 and the expected market price of the completed house and property was to be $250,000. It was anticipated, based on representations made by the builder, that the property would be ready to be offered for sale in the Easter holidays 2004. Pursuant to the contract the expected length of time to complete the building was to be 25 weeks from the date of commencement on the site.
Work was commenced on site in late November 2003. However the house was constructed so as to encroach on an adjoining property and the builder elected to raise it by crane and move it to the correct location, which took place in late March/early April 2004.
The builder asserted that practical completion had been reached in June 2004. However concerns over the quality of the building work and damage sustained in the movement of the house led to our client arranging inspections by the Kangaroo Island Council in September 2004 and a building expert Mr Rowland in November 2004.
The current status of the property is that .. . . . . . . the builder has left the site after our client terminated the contract, and rectification work has not yet been carried out. A number of serious issues were identified as a result of our client’s experts’ inspection in November and further work was carried out by the builder in September 2004 and subsequently, including during March 2005.
In addition to the above general background we are instructed as follows:
·The history of the construction of the house, including the encroachment on the neighbours’ property, the moving by crane, the involvement of Council and subcontractor’s problems, has attracted notice in the small Penneshaw community and the house accordingly has a bad reputation. At least one of the neighbours has contacted the local Council about the matter.
·There had been an opportunity for our client to sell the property to a Kangaroo Island resident “off the plans” in February 2004 but this came to nought when the person in question observed the movement of the house from its encroaching position.
·Other potential purchasers have been put off given the reputation of the house and after talking with neighbours.
·According to our client’s real estate agent for the house to now be sold landscaping would need to be carried out to make the property attractive to buyers and a comprehensive engineer’s report proving that all necessary rectification work had been carried out and the house was in a satisfactory structural condition would be required.
Mr Brooke was asked to provide an opinion as to any financial loss sustained by the defendant by reference to given dates, but this was not pursued by the defendant. Mr Brooke was also asked to provide an “estimate of the diminution in market value or other loss due to ‘loss of reputation’ of the house for the reasons set out above”.
Whilst I accept that if a house has a “reputation” known to potential buyers, such a reputation, good or bad, may have a bearing upon the value of the property. Any opinion given by a valuer relating to an increase or decrease in the value because of reputation will, of course, only be as good as the assumptions that underlie the opinion. Mr Brooke assumed the correctness of the matters set out in the letter of instruction. One of the assumptions, that the house was relocated by moving it by crane, was incorrect.
Mr Wedding, the local agent, was called to establish that the house, for a number of reasons had attracted a bad reputation and that potential purchasers had been put off purchasing the house.
It is difficult to see how the latter assertion has been made out because the property has never formally been marketed and so it is mere surmise that potential purchasers, particularly potential purchasers from the mainland, would be aware of the alleged bad reputation. Mr Wedding’s evidence did nothing to address this aspect of the defendant’s case.
At page 15 of his report Mr Brooke referred to conversations he had with three real estate agents on Kangaroo Island. It identified a need to make an adequate disclosure to prospective purchasers of the condition of the building. He said:
In these circumstances I think it is likely that relatively intimate details of the history of the construction of the dwelling would be disclosed to an intending purchaser. At this point there is no objective or unbiased assessment of the condition of the dwelling and because some aspects of the structure remain concealed or cannot be viewed, there cannot be complete confidence that all defects have been identified and remedied.
I accept his opinion that “there is likely to be some stigma attached to the property associated with its history and the doubt about the integrity of the building and services”. He concluded that these considerations would lead to a discounting of the price at which he assessed at 12.5% of the value of the property. In his opinion the value of the property in the early part of 2004 was $240,000. It was in this manner that the $30,000 now claimed by the defendant is calculated.
It seems to me that this aspect of the defendant’s counter-claim is fatally flawed. The flaw consists of an alleged diminution in value assessed as at March 2004 in circumstances where the defendant remains the owner of the property. I think there is little doubt that had she sold the property in about March 2004 and if, because of bad reputation the value of the property was diminished, she could claim the difference between the value of the property as it should have been and its actual (diminished) value. However, the defendant has retained the property and consequently any hypothetical loss that she may have sustained had she sold it in March 2004 is not to the point. In my opinion therefore the claimed $30,000 diminution in value should be rejected.
Even if Mr Brooke’s evidence were translated to the current position, the house’s supposed bad reputation would be addressed by an engineer’s report obtained after the house is completed and put on the market. I have found the house to be structurally sound. An engineer’s detailed report would allay any concerns a prospective purchaser may have. As appears immediately below, I would allow the $1,600 claimed by the defendant for such a report.
At the conclusion of his opinion Mr Brooke also referred to a loss of $5,000 representing the additional marketing costs and aborted marketing costs. There is no evidence before me as to aborted marketing costs but I accept, even now, if the defendant were to sell the property, it would be prudent to obtain the report of an independent building expert as to the building status once the work required for the completion of the house had been carried out. In this regard the sum of $1,600 has been claimed and I think it appropriate to award that amount.
The next two counterclaim items consist of additional interest incurred by the defendant, amounting to $3,573, and damages for loss of use of monies amounting to $38,432. The submissions in support of these aspects of the counterclaim are set out at pages 30 – 32 of the defendant’s written submission. It seems to me that the claim for additional interest does not take into account the fact that the defendant has made no attempt to sell the property since March 2005. Even though she will need to incur expense to finish the house off, that is no justification for claiming a loss arising out of an alleged delay up to the point of trial which took place over two and a half years after she lawfully terminated the contract. Any expense incurred by her in completing the house would have been more than offset by the balance of the contract price she was required to pay.
It seems to me that the cut-off point for damages for delay (including additional interest) would be the expiration of a reasonable period after March 2005 during which two things would need to be done: first, that the house be completed; and second, that the house be marketed and sold. In my view an adequate period to allow for these two things would be until the end of 2005.
As to the commencement of the period during which mortgage interest was paid, the house should have been completed in about March 2004 and there should be added to this a period to allow for the marketing and sale of the property. I think three months would be an appropriate period to allow for marketing and sale. This would make the commencement of the period during which extra interest would have been payable the end of June 2004. Consequently, she should recover interest for the period 30 June 2004 to 31 December 2005. I would allow the sum of $1,800.
As for the damages for loss of use of money, the defendant cannot recover any sum under that heading because no allowance has been made for any increase in the value of the property for the period in respect of which such damages are sought. In addition, the defendant has made no attempt to sell the property since termination of the contract and it is not open to her to claim damages of this nature when she has done nothing to mitigate such a loss.
The remainder of the summary of the counterclaim consists of the cost of remedying defects referred to in Section O of the written submission between pages 34 and 38 of the written submission. They are itemised in the Scott schedule as items 1, 2, 3, 4, 6, 7, 12, 13, 14, 15 and 16. In referring to the various items, I shall use the Scott schedule number. When such defects are corrected, the house will be complete. In other words, the award of damages in respect of these defects will cover the cost to the defendant of completion of the house.
1.The cost of remedying defects to the rear facing lounge window. This is an admitted defect. The only cost of rectifying the same is that given by Mr Stuart-Skinner. I allow the sum referred to by him namely $250.
2.The Scott schedule refers to the blackbutt flooring. The claim is $3,800. I dealt with this aspect of the matter previously in these reasons. I make no allowance in respect of this claim.
3.The cost of remedying defects to the decking and rear balustrade. I have referred earlier to the fact that the difference between the parties on this aspect of the matter appears to be the difference between defective work, as alleged by the defendant and lack of maintenance as suggested by the plaintiff. In any event, the photographic evidence does not permit me to make findings one way or the other in relation to the allegations made by the defendant. I make no allowance in respect of this alleged defect.
4.The wet areas. Mr Stuart-Skinner, both in his report and in his evidence, suggested that the sum of $30,000 should be allowed for this aspect of the matter. Given my findings as to the defects in the wet areas and in particular that no rectification work needs to be carried out to the laundry, and given that I do not consider that the compressed cement substrate needs to be replaced, the figure suggested by Mr Stuart-Skinner cannot be recovered.
Mr Stuart-Skinner made no attempt, with his estimate, to calculate, by reference to the costs of labour and materials, the likely cost of the replacement of all of the wet area floors including the compressed cement substrate. He has allowed the work which in my opinion is not necessary. It would be quite inappropriate to use his broad estimate, even as a starting point.
Mr Mayne gave evidence as to the cost of rectification of the wet areas. His estimate was $5,000. It suffers from the same problem as Mr Stuart-Skinner’s estimate because it is directed to a much larger job than that contemplated by my findings. Given the lack of detailed evidence on the point, I must of necessity be conservative in fixing the amount of damages to be awarded in respect of this defect. I think it appropriate to allow the sum of $2,000.
6.The defective laundry door. The cost of rectifying this defect is included within item 14 below.
7.Alleged defects to the external side wall to the dining area. This is a defect which I have found to exist. I allow the amount claimed of $400.
13.Costs of retention of Mr Rowland. Normally this is an amount which would be recoverable as a disbursement if the defendant obtained an order for costs in her favour in respect of these proceedings. I see no reason why this aspect of the defendant’s claim should not be dealt with in such a manner.
14.Cost of making good external cladding. The sum of $3,000 has been claimed. As best I can tell, there are bits and pieces of external cladding that need to be completed, not so much as a result of defective work but because cladding was removed to enable inspection to be taken of the interior of the outside walls. In my opinion $3,000 is too great a sum for what would amount to a relatively small item of work. In assessing these costs I take into account that it may be necessary for the plaintiff to retain more than one tradesman to carry out all repairs and that she may have to engage tradesmen who do not carry on business on Kangaroo Island. I think an appropriate amount to allow is $1,000.
15.This is a claim for rectification work which Mr Short, in his first report (Exhibit D20), accepted was required to be done. Mr Short and Mr Stuart-Skinner differ as to the amount.

Mr Short’s evidence is $600 and Mr Stuart-Skinner’s, $1,800. In this instance, I think Mr Short’s estimate is too low because it reflects a cost which the builder could achieve rather than the cost to the defendant. I would allow the sum of $1,200.
16.The straightening of roof trusses. I have previously found that one of the roof trusses bows to an unacceptable degree. I accept Mr Short’s evidence relating to the cost of rectification except that insufficient allowance has been made to reflect the fact that the cost to the defendant would be a greater sum. I would allow the sum of $1,000.
The last item in the summary at page 39 of the written submission refers to the plaintiff’s claim for distress and inconvenience. The claim is in the sum of $5,000. I am not aware that the authorities permit the court to make an allowance by way of damages for these matters in the circumstances of this case. I would make no allowance for this aspect of the matter.
In summary the total deductions are as follows:
Additional marketing expenses  $ 1,600
Cost of completing termite treatment  $ 1,000
Additional interest incurred  $ 1,800
Scott schedule items:
1.  $250
4.  $2,000
7.  $400
14.  $1,000
15.  $1,200
16.  $1,000  $ 5,850
Total  $10,250
Turning now to the plaintiff’s claim, the first Notice of Demand under the WLA was $31,175. Interest is to be calculated by reference to the amount demanded less the offsets. That gives a net amount of $20,925. The defendant is liable to pay interest on $20,925 at 15% per annum from 23 April 2004 (see para 3.1.3 of plaintiff’s final address) until mid March 2005 when the contract was lawfully terminated. That amounts to approximately $2,500. The plaintiff’s claim is therefore made up of the following amounts:
The first WLA demand  $31,175
Interest  $ 2,500
Final payment claim  $15,167
Total  $48,842
Less deduction  $10,250
Total  $38,592
This is a case where it is appropriate to offset against the total of the plaintiff’s claim the total of the deductions and damages recoverable by the defendant. Consequently the plaintiff is entitled to a net judgment of $38,992 inclusive of interest.
As to the orders for enforcement of liens, for the reasons previously given, there will be no order in respect of the lien for the final payment. The plaintiff is entitled to an order in respect of the first lien, but only to the extent of the difference between the amount of the WLA demand and the total offsets claimed by the defendant. That is a net total of $20,925. There will be an order for the enforcement of the lien to the extent of $20,925.
Finally, a lien has been claimed in respect of interest on the fourth progress payment. The ability to claim such a lien depends on whether interest payable pursuant to the terms of the contract may be said to come within the “contract price” as defined in s2 WLA. I have not been able to find any authority on the point.
“Contract price” means:
The money payable to any contractor … for any work, or materials furnished or to be furnished in connection with work, under any contract, and whether such price has been fixed by express agreement or not.
When this definition is considered in conjunction with s5 WLA, it seems to me that s5 does not contemplate a lien for interest on a contract price, whether the contract price and interest be included in the one lien or whether a separate lien in respect of interest is claimed. For this reason, there will be no order for the enforcement of the lien claimed in respect of interest.
There will be judgment for the plaintiff in the sum of $38,592 inclusive of interest to the date of judgment. There will be no order on the counterclaim except as to costs.
I will hear the parties as to costs.

Claim for fourth progress payment (Invoice at page 102 of Exhibit P1)	$31,575.50
Claim for practical completion (Invoice at 108 of Exhibit P1)	$15,167.20
Less reduction applicable to increased claims made in respect of provisional sums items 19 and 21 not identified or proven.	($2,537.00)
Less amount allowed in the contract for termite treatment not carried out.	($1,474,00)
The best position the Plaintiff can maintain without allowing for matters mentioned hereafter.	$423,731.70
Reduction in respect of the cost of construction resulting from the use of unlicensed contractor as identified above.	($11,000.00)
Reduction applicable to the use of non galvanised nails in breach of the contract as identified above.	($24,940.40)
Add back the proportion of the above amount which relates to Mr Olinga’s work namely 14% thereof as referred to above.	$3,492.00
Reduction applicable to the use of inadequate tie down pads in breach of the contract as identified above.	($24,940.40)
Add back the proportion of the above amount which relates to Mr Olinga’s work namely 14% thereof as referred to above.	$3,492.00
Balance to be recovered by the Defendant from the Plaintiff as damages for above identified breaches.	($11,165.10)

Item	Amount Sought
Balance to be recovered by the Defendant from the Plaintiff as damages for breaches after deduction of Plaintiff’s claim for balance of purchase price (see paragraph 1 of Section K above)	$11,165.10
Diminution in value of property (see paragraph 9 of Section L above).	$30,000.00
Additional marketing expenses – cost of an engineer’s report (see paragraph 11 of Section L above.)	$ 1,600.00
Additional interest incurred (see paragraph 5 of Section M)	$ 3,606.00
Damages for loss of use of money (see paragraph 7 of Section M).	$ 3,573.00
Cost of remedying defects to rear facing lounge window (see paragraph 2 of Section O).	$38,432.00
Cost or remedying blackbutt flooring (see paragraphs 4 and 5 of Section O).	$ 3.800.00
Cost of remedying defects to decking and rear balustrade (see paragraph 7 of section O).	$ 2,500.00
Cost of remedying defects to wet areas (see paragraph 12 of Section O).	$30,000.00
Cost of remedying defects to laundry door (see paragraph 14 of Section O).	$ 150.00
Cost of remedying defects to external side wall to dining area (see paragraph 15 of Section O).	$ 400.00
Cost of retention of Mr Rowland (see paragraph 16 of Section O).	$ 1,628.00
Cost of making good external cladding and flashing etc (see paragraph 18 of Section O).	$ 3,000.00
Cost of items 1-21 in Short report (see paragraph 19 of Section O).	$ 1.800.00
Cost of straightening roof trusses (see paragraph 20 of Section O).	$ 1,500.00
Damages for distress and inconvenience (see paragraph 22 of Section O).	$ 5,000.00
Total	$134,798.00