SINGH and BEYOND BUILDERS PTY LTD
[2024] WASAT 19
•26 MARCH 2024
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: BUILDING SERVICES (COMPLAINT RESOLUTION AND ADMINISTRATION) ACT 2011 (WA)
CITATION: SINGH and BEYOND BUILDERS PTY LTD [2024] WASAT 19
MEMBER: MR E CADE, MEMBER
HEARD: 7 FEBRUARY 2024
DELIVERED : 26 MARCH 2024
FILE NO/S: CC 785 of 2023
BETWEEN: SURJEET SINGH
First Applicant
REETU SINGH
Second Applicant
AND
BEYOND BUILDERS PTY LTD
Respondent
Catchwords:
Home building work contract complaint - Home building work remedy order - Whether stage progress payment is not payable by owners and should be repaid by builder - Whether price variation claimed by builder should be disallowed - Whether requiring builder to reach practical completion is an order which requires specified work to be performed - Meaning of lock-up stage - Damages for delay in completion of home - Whether damage includes emotional harm, disappointment and distress - Discretion
Legislation:
Building Services (Complaint Resolution and Administration) Act 2011 (WA), s 5, s 5(2), s 6(3)(b), s 7(1)(a), s 11(1)(c), s 12, s 38, s 41, s 41(2)(a)(i), s 41(2)(a)(ii), s 41(2)(a)(iv), s 41(2)(c), s 41(2)(d)(i), s 41(2)(d)(i), s 42(2)(c), s 43, s 43(1), s 43(2)(a)
Building Services (Complaint Resolution and Administration) Regulations 2011 (WA), reg 6, reg 6(2)
Home Building Contracts Act 1991 (WA), s 7, s 7(1), s 7(3), s 8, s 8(1)(b), s 8(3), s 8(3)(b), s 8(4), s 10, s 10(1)(b), s 10(3), s 17, s 17(a)(i), s 27, s 27(1), Pt 2
State Administrative Tribunal Act 2004 (WA), s 32(6)(c), s 55
Result:
Application allowed in part
Representation:
Counsel:
| First Applicant | : | In Person |
| Second Applicant | : | In Person |
| Respondent | : | Mr Abbas |
Solicitors:
| First Applicant | : | N/A |
| Second Applicant | : | N/A |
| Respondent | : | N/A |
Case(s) referred to in decision(s):
Alison Louise Lobbe atf Lobbe Newman Trust and Kelpie Endeavours Pty Ltd atf Testa Rossa Family Trust and Quality Builders Pty Ltd [2014] WASAT 110
Cardona v Brown [2012] VSCA 174
Chalakuzhy and Olsen [2017] WASAT 104
Deshmukh and Distinctive Building Services Pty Ltd [2024] WASAT 15
Dumbreck and Tangent Nominees Pty Ltd [2017] WASAT 88
Gemmill Homes Pty Ltd v Sanders [2018] WASC 179
Jetpoint Nominees Pty Ltd and Lee [2021] WASAT 10
KBE Contracting Pty Ltd and Mawer & Anor [2007] WASAT 210
Lee v Lawfirst Pty Ltd [No 2] [2023] WASCA 166
Vernon v Ashmy Pty Ltd WADC (unreported 23 January 1997, Library No BC9740021
Vitte and Studio 8 Builders & Designers Pty Ltd [2013] WASAT 43
Yao-Jing Li v Minister for Immigration & Multicultural Affairs (1997) 74 FCR 275
REASONS FOR DECISION OF THE TRIBUNAL:
Introduction
These proceedings concern a home building work contract (HBWC) complaint made by the applicants to the Building Commissioner pursuant to s 5(2) of the Building Services (Complaint Resolution and Administration) Act 2011 (WA) (BS(CRA) Act).
The applicants are the owners of the home the subject of the complaint (owners). The respondent is the builder of the home (builder).
The owners' complaint is that they entered a fixed price HBWC on 23 December 2020 pursuant to which the builder was to construct a new home for the owners, but on building the home to the lockup stage in September 2022 the builder suspended work and will not resume work unless the owners agree to increase the price, or agree to substantially reduce the finishes and fittings the builder will install in the home.
The owners request the Tribunal make orders (which the Tribunal understood as a request that the Tribunal make HBWC remedy orders pursuant to s 43 of the BS(CRA) Act) that:
(a)requires the builder to immediately resume building the home and bring it to practical completion within six months;[1]
(b)requires the builder to repay the lock-up stage progress payment on the basis this was not a genuine progress payment;[2]
(c)disallows variations claimed by the builder that:
(i)increases the contract price by $117,000;[3] and
(ii)reduces the cost of the finishes and fittings the builder will install in the home;[4] and
(d)requires the builder to pay compensation to the owners for the financial loss and emotional harm caused to them by the builder's delay in achieving practical completion of the home.[5]
[1] The Tribunal has assumed the order is sought pursuant to s 41(2)(a)(ii) or s 41(2)(a)(iv) of the BS(CRA) Act.
[2] The Tribunal has assumed the order is sought pursuant to s 41(2)(c) of the BS(CRA) Act.
[3] The Tribunal has assumed the order is sought pursuant to s 7 and s 8 of the HBC Act and s 41(2)(c) of the BS(CRA) Act.
[4] The Tribunal has assumed the order is sought pursuant to s 7 and s 8 of the HBC Act and s 41(2)(a)(i) of the BS(CRA) Act.
[5] The Tribunal has assumed the orders are sought pursuant to s 41(2)(d)(i) of the BS(CRA) Act.
The builder denies the owners are entitled to any of these orders.
The owners, in their written statement, also sought orders that the builder compensate them for their mortgage payments from 4 January 2022, that the builder repay the roof cover stage progress payment and all payments that are more than 70% of the contract price, and that the Tribunal prohibit the builder from claiming any further price increases. During their opening submissions, however, the owners withdrew their application for these orders. The Tribunal will therefore not consider these matters any further.
The proceedings were listed for final hearing at the Tribunal on 7 February 2024. Neither the owners nor the builder elected to give evidence at the final hearing, nor did any party call any witnesses to give evidence at the final hearing.
Procedural history
The proceedings originated with a notice of complaint containing ten complaint items given by the owners to the builder on 16 April 2023.[6] On 1 June 2023, a delegate of the Building Commissioner referred seven of the ten complaint items to the Tribunal pursuant to s 11(1)(c) of the BS(CRA) Act for it to deal with pursuant to s 43 of the BS(CRA) Act.[7] [8]
[6] Pursuant to reg 6(2) of the BS(CRA) Regulations a complainant must, 14 days before making a complaint to the Building Commissioner under s 5(1) or s 5(2) of the BS(CRA) Act, give to a respondent written notice of the proposed complaint together with a reasonable description of the remedy sought by the complainant and the evidence on which the complainant proposes to rely.
[7] The delegate of the Building Commissioner accepted complaint items 1 - 5 and 9 - 10 pursuant to s 7(1)(a) of the BS(CRA) Act. Pursuant to s 7(3) of the HBC Act the delegate refused to accept complaint items 6 - 8.
[8] Pursuant to s 12 of the BS(CRA) Act the Building Commissioner on referring a complaint to this Tribunal does not become a party to the proceeding (unless joined to the proceeding), and the complainant to the Building Commissioner becomes the applicant in the proceedings before the Tribunal.
The seven building complaint items referred to the Tribunal are set out in Annexure A. Alongside each complaint item is the order sought by the owners in their closing submission, as well as the builder's response to the complaint items and to the orders sought.
The proceedings in the Tribunal
Prior to the final hearing the owners, in accordance with orders made by the Tribunal on 23 November 2023, lodged with the Tribunal and gave to the builder their written statement of orders sought and the book of documents on which they intended to rely at the hearing. In turn, the builder lodged with the Tribunal and gave to the owners its written response to the owners' statement and the book of documents on which it intended to rely at the hearing.
In accordance with its usual practice, the Tribunal compiled these documents into a paginated hearing book (HB) which it made available to the parties prior to the final hearing.
At the commencement of the final hearing on 7 February 2024, the Tribunal:
(a)informed the parties that the presiding member was to preside at two other final hearings in February 2024, each of which involved an application for HBWC remedy orders against this builder. The parties were informed that each hearing would be treated as a separate hearing, and it gave each party an opportunity to make submissions on this issue. Neither party elected to do so;[9] and
(b)explained to the parties their right to make opening and closing submissions, to call and give evidence and to examine, crossexamine and re-examine witnesses.[10]
[9] In addition the Tribunal informed the owners that they bore the burden of proof in these proceedings, in reliance upon Jetpoint Nominees Pty Ltd and Lee [2021] WASAT 10 at [69]: 'Even in proceedings within the Tribunal's original jurisdiction where, like the plaintiff in civil court proceedings, the applicant bears the onus or legal burden of proving their case on a balance of probabilities, and the hearing consequently has an adversarial character, such as building dispute proceedings, as in the original proceeding …". However, following the final hearing the Tribunal became aware of the observations of AJ Smith in Gemmill Homes Pty Ltd v Sanders[2018]WASC 179 at [123] citing Yao-Jing Li v Minister for Immigration & Multicultural Affairs (1997) 74 FCR 275, 288: '… In administrative proceedings, unless an onus is expressly created by statute or arises by inference from the statute, a party to proceedings does not legally bear an onus of proof of a particular material fact'. The Tribunal was not required to resolve this issue in this proceeding as except for matters relating to the statutory onus in s 10(3) of the HBC Act, nothing in these proceedings turned on whether a party did or did not bear an onus or a legal burden to prove its case or to prove a material fact.
[10] SAT Act, s 32(6)(c).
Pursuant to s 55 of the State Administrative Tribunal Act 2004 (WA) (SAT Act) the Tribunal ordered the removal of pages 202 - 205 and the redaction of paragraphs 17 and 18 at page 173 of the HB as the owners objected to them as they referred to matters discussed at a mediation conference held at this Tribunal.
With the consent of the parties the redacted version of the HB was then admitted into evidence as Exhibit 1. The documents in Exhibit 1 then became evidence in the proceeding.
The owners submitted that as neither party has terminated the HBWC it remains on foot and the builder is required to complete the building works for the price and to the specifications set out in the HBWC.
The builder accepted that pursuant to the HBWC it was required to complete the building works by 4 January 2022, and that it has performed no work since September 2022. The builder submitted it is willing to resume the building works but says that due to the unprecedented increase in the cost of labour and materials since 23 December 2020 it cannot do so unless it is permitted to increase the contract price or to reduce the cost to the builder of certain finishes and fittings to be installed in the home.
Statutory framework
These proceedings are within the original jurisdiction of the State Administrative Tribunal (Tribunal) pursuant to the Home Building Contracts Act 1991 (WA) (HBC Act) and the BS(CRA) Act.
The legislation relevant to the proceedings are s 7, s 8, s 10, s 17 and s 27 of the HBC Act; s 5, s 41 and s 43 of the BS(CRA) Act and reg 6 of Building Services (Complaint Resolution and Administration) Regulations 2011 (WA) (BS(CRA) Regulations).
The BS(CRA) Act
In these proceedings the Tribunal's power to make a HBWC remedy order pursuant to s 43(1) of BS(CRA) Act is dependent on certain preconditions being met. These are that:
(a)a complaint by the owners that a price variation claimed by the builder is not valid must be made within 10 working days after the notice of the variation was given to the owners;[11]
(b)each complaint by the owners that the builder is in breach of the contract must not be a breach in respect of which a building remedy order may be made, and also must not be made more than 3 years after the cause of action arose;[12] [13] and
(c)each HBWC remedy order must relate to a complaint item that has been referred to the Tribunal.[14]
[11] HBC Act, s 8(3)(b) and s 8(1)(b).
[12] HBC Act, s 17(a)(i).
[13] BS(CRA) Act, s 6(3)(b).
[14] BS(CRA) Act, s 43(1).
The Tribunal will now consider each of these pre-conditions in turn.
The complaint by the owners pursuant s 8(3) of the HBC Act must be made within 10 working days after the notice of variation was given to the owners
Section 8(3) of the HBC Act prevents an owner from making a complaint about a price increase pursuant to s 8(1)(b) of the HBC Act unless the complaint is made within 10 working days after notice was given by the builder of the claimed price increase.
The builder notified the owners of its claim for a price increase on 16 April 2023. The owners notified the builder that they rejected the price increase on 17 April 2023. The owners' notice of complaint in respect of the price increase was also given to the builder on 17 April 2023.
The Tribunal therefore finds that the owners did make their complaint within the time required by s 8(3) of the HBC Act.
The complaints by the owners are not as to breaches in respect of which a building remedy order may be made, and must not be made more than 3 years after the cause of action arose
The owners' complaint in this proceeding is made pursuant to s 5(2) and s 17 of the BS(CRA) Act.
Pursuant to s 17(a)(i) of the HBC Act an owner may make a complaint pursuant to s 5(2) of the BS(CRA) Act only if the complaint alleges a breach of contract which is not a breach in respect of which a building remedy order may be made. A building remedy order may be made in respect of a complaint that building work is not carried out properly or proficiently or that it was faulty or unsatisfactory.[15]
[15] Pursuant to s 38 of the BS(CRA) Act a building remedy order may be made in respect of a complaint that a regulated building service 'has not been carried out in a proper and proficient manner or is faulty or unsatisfactory'. In general terms, this is a complaint that a building service has been performed to an unacceptable standard.
In their building complaint the owners did not complain that the builder's work was not carried out properly or proficiently or that it was faulty or unsatisfactory, except to the extent that they complain the roof leaked. However, the owners complain that the roof leaked because it was incomplete, not because it was built improperly or not proficiently or that it was faulty or unsatisfactory.
The owners' cause of action in respect of their complaint that the builder is in breach of the HBWC arose on the date by which the home was to reach practical completion pursuant to the HBWC, which was 4 January 2022. Their cause of action in respect of the complaint about the price increase claimed by the builder arose on the date they gave notice to the builder that they rejected the price increase, which was 17 April 2023. Their cause of action in respect of the claim for repayment of the lock-up stage progress payment arose on the date on which they made the payment to the builder, which was 4 September 2022.
The owners made their complaint to the Building Commissioner about these causes of action on 2 May 2023, with the result that each complaint was made within the 3 year period required by s 6(3)(b) of the BS(CRA) Act.
The Tribunal therefore finds that none of the owners' complaints are complaints about which a building remedy order could be made, but rather that they are complaints about which a HBWC remedy order might be made. The Tribunal also finds that the complaints were made within the time required by s 6(3)(b) of the BS(CRA) Act.
Each HBWC remedy order must relate to a complaint item that has been referred to the Tribunal
The Tribunal has considered whether each HBWC remedy order sought by the owners relates to a complaint item that has been referred by the Building Commissioner to the Tribunal.
The proposed HBWC remedy order the builder resume the home building works is within complaint item 1. The proposed order the builder repay the lock-up stage progress payment is within complaint item 4. The proposed order disallowing the price increase of $117,000 claimed by the builder is within complaint item 9. The proposed order disallowing the reduced cost to the builder of certain finishes and fittings is within complaint item 2. The proposed order the builder pay the owners compensation for their financial losses is within complaint items 1 and 10.
The Tribunal is therefore satisfied that, except for the order requesting compensation for emotional harm, each order sought by the owners relates to a complaint item referred by the delegate of the Building Commissioner to the Tribunal.
The discretion to make a HBWC remedy order under s 43(1) of the BS(CRA) Act
Section 43(1) of the BS(CRA) Act provides:
(1)If the Building Commissioner refers a HBWC complaint to the State Administrative Tribunal, the Tribunal may —
(a)if satisfied that the order is justified, make a HBWC remedy order; or
(b)otherwise, decline to make the order[.]
The Tribunal considered the proper construction of the discretion conferred by s 43(1) of the BS(CRA) Act in Deshmukh and Distinctive Building Services Pty Ltd [2024] WASAT 15 (Desmukh). The Senior Member in that decision said at [59] - [60]:
59.In my view the considerations concerning whether a HBWC remedy order is justified to resolve a HBWC complaint that a respondent has breached a home building work contract are:
(1)Is there a valid home building work contract between the applicant and the respondent to the proceeding?
(2)What are the relevant terms of the contract?
(3)Has the respondent breached the relevant terms of the contract?
(4)Has the applicant suffered loss, damage, or detriment which can be addressed by a HBWC remedy order?
60.In my view, if the Tribunal is satisfied that there is a valid home building work contract between the applicant and the respondent, and that the respondent has breached a relevant term of the contract which can be addressed by way of a HBWC remedy order then the Tribunal is required to make a HBWC remedy order. It then has a discretion regarding the HBWC remedy order it will make under the provisions of s 41(2) of the BSCRA Act.
The Tribunal accepts this is the proper construction of s 43(1) of the BS(CRA) Act.
The home building works contract (HBWC)
It is not in dispute and the Tribunal finds that the HBWC contained the following details and terms:
(a)clause 2: The parties are Surjeet Singh (owner) and Reetu Singh (owner) and Beyond Builders Pty Ltd (builder);
(b)clause 2: The registered building practitioner is Atalla Abbas, who is also a director of the builder;
(c)clause 2.2 timing: The commencement date for works is either 10 business days after either loan approval or a building permit is obtained, whichever is the later, and the finish date is 270 days after the works have commenced;
(d)clause 3: The contract price is $400,000;[16]
[16] The original price of $390,000 was increased by agreement to $400,000 on 22 January 2021.
(e)specifications addenda: Specifies that finishings are to be of 'Standard + High mix Level'; and
(f)clause 4: Progress payments fall due as each of the following stages of works are done:
Payments stage
% of contract price
Amount $
1. Deposit
6.5%
$25,350
2. Ground slab
15%
$58,500
3. Ground floor plate height
14%
$54,600
4. Suspended slab
10%
$39,000
5. Upper floor plate height
8.5%
$33,150
6. Roof cover
13%
$50,700
7. Lock-up
12%
$46,800
8. Fixing (Fit-out)
11%
$42,900
9. Practical completion
10%
$39,000
Some notable features of this HBWC are:
(a)clause 11 does not permit the builder to increase the price except by way of variation to the scope of the building works;
(b)it does not make time of the essence;
(c)it does not provide for liquidated damages due to delay;
(d)it does not contain any provision as to termination of the contract; and
(e)it does not provide an estimated amount for prime cost items and a means by which those items can be priced during the building process.
The Tribunal notes that no party asserted that any of the documents in Exhibit 1 were anything other than genuine documents. Based on the common documents in Exhibit 1 the Tribunal is satisfied the following additional matters are not in dispute in this proceeding. The Tribunal therefore finds that:
(a)the building permit was issued on 6 April 2021;
(b)'days' in the HBWC means calendar days and not working days, and as the building works commenced on 9 April 2021 the builder was to achieve practical completion by 4 January 2022;
(c)on 31 May 2022, the builder sent to the owners a schedule of allowances for various finishes and fittings and requested the owners contact the suppliers nominated in the schedule to select their preferred items;
(d)the builder demanded the owners pay the lock-up progress payment on 1 August 2022 and the owners paid the builder $46,800 on 4 September 2022;
(e)the works were completed up to either full or partial lock-up stage by September 2022;
(f)the builder, on 4 April 2023, by email sent to the owners, proposed that the builder and owners each take responsibility for performing certain parts of the remaining building works. It is accepted by the builder that the owners did not accept this proposal;
(g)the building permit expired on 6 April 2023;
(h)at 10.00 pm on 16 April 2023 the owners gave the builder notice they intended to make a complaint to the Building Commissioner in respect of the above matters;
(i)at 10.51 pm on 16 April 2023, the builder gave the owners notice of a $117,000 price increase, which the owners rejected by email sent to the builder at 10:25 pm on 17 April 2023;
(j)during the 270 day building period the builder did not give notice it required an extension of time to complete the works; and
(k) the builder has not performed work on the build since September 2022.
While the parties disagree as to what stages of the building works have been completed by the builder, the parties do agree that the home did not achieve practical completion by 4 January 2022, and nor has it ever reached practical completion. The Tribunal therefore finds by not bringing the home to practical completion by 4 January 2022, or within any reasonable time after that date, that the builder is in breach of clause 2.2 of the HBWC.
Issues in dispute/issues to be decided
The following issues are in dispute in this proceeding:
(a)whether the builder is required to resume building the home pursuant to the HBWC, and, if so, whether the Tribunal has the power to require the builder to do this;
(b)whether the payment of $46,800 by the owners to the builder for the lock-up stage was a genuine progress payment within the meaning of s 10(1)(b) of the HBC Act and, if not, whether the Tribunal should make a HBWC remedy order requiring the builder to repay that money;
(c)whether the builder's claim for a price increase pursuant to s 8(1)(b) of the HBC Act is a valid claim and, if so, whether the HBWC price is increased by $117,000;
(d)whether the builder's proposal to reduce the cost to the builder of certain fittings and finishings in accordance with a schedule of allowances, was agreed to by the owners and, if so, whether the HBWC is varied by incorporating this schedule into the HBWC;
(e)whether the owners have suffered a financial loss due to the builder's breach in not achieving practical completion by 4 January 2022 and, if so, whether the Tribunal should make a HBWC remedy order that the builder pay compensation to the owners for their financial loss; and
(f)whether the owners have suffered emotional harm due to the builder's breach in not achieving practical completion by 4 January 2022 and, if so, whether the Tribunal should make a HBWC remedy order that the builder pay compensation to the owners for this emotional harm.
The Tribunal will now deal with each of the issues in dispute in turn.
Whether the builder is required to resume building the home pursuant to the HBWC and, if so, whether the Tribunal has the power to require the builder to resume building the home
The owners request the Tribunal order the builder to immediately resume the building works and bring the home to practical completion within six months of commencing the works.
The HBWC remedy orders the Tribunal may make are set out in s 41 of the BS(CRA) Act. They do not include an order requiring the builder to resume the building works in accordance with a HBWC, but rather permits the Tribunal to make HBWC remedy orders:
(a)'requiring any specified work to be done' in the performance of the HBWC;[17] and
(b)'requiring any specified work to be done to remedy a breach of the' HBWC a provision in Pt 2 of the HBC Act.[18]
[17] BS(CRA) Act, s 41(2)(a)(ii).
[18] BS(CRA) Act, s 41(2)(a)(iv).
The Tribunal has previously considered whether it has a power to make an order in the terms sought by the owners in Chalakuzhy and Olsen [2017] WASAT 104. The Tribunal at [37] - [40] said:
37Section 41(2)(a)(ii) of the BS(CRA) Act empowers the Building Commissioner to make an order requiring any 'specified work' to be done in performance of the relevant contract. The wording used in the provision of course needs to be given its natural and ordinary meaning. In this regard assistance is again given by the Macquarie Dictionary Online (2017) as to the definition of 'specify':
1.to mention or name specifically or definitely; state in detail.
2.to give a specific character to[.]
38In the Tribunal's view where an order which requires work to be performed, which if not complied with can lead to disciplinary action and/or an applicant seeking to exercise their rights pursuant to s 51 of the BS(CRA) Act, it is important that it is clear in the terms of the order what is being required of the respondent. This is consistent with the ordinary and natural meaning of the word 'specified'.
39To specify work to be performed, such work must be set out in a clearly identified and unambiguous manner. It is not specifying work to be done to issue an order which is ambiguous, broad or vague in its terms.
40Order 1 of HBWC remedy order 1 of 2017, however, simply provides '[t]he respondent is to bring the building service at 18 Leaside Way, Spearwood to practical completion …'. It is often the case that parties have differing views regarding what is required for a contract to reach practical completion. In the Tribunal's view this is not an order capable of being made under the legislation. this is because, in the Tribunal's view, it does not specify the work which is required to be performed in order to allow an assessment to be made by the parties, the Building Commissioner and the Tribunal as to whether the order has in fact been complied with once the date requiring compliance has passed.
The Tribunal agrees that '[t]o specify work to be performed, such work must be set out in a clearly identified and unambiguous manner'.
In the Tribunal's opinion, there should also be evidence that the specified work is required pursuant to the HBWC as well as evidence of the estimated the value of the specified work it orders a builder to perform.[19] So as to ensure that any order made was certain and enforceable, the Tribunal adds that there should be evidence as to the reasonable time it would take a builder to complete the specified work.
[19] Pursuant to s 43(2)(a) of the BS(CRA) Act, the Tribunal is not able to order works to be performed where the total value exceeds $500,000.
The Tribunal is therefore satisfied it can make a HBWC remedy order that a builder performs specified work to be done in performance of the HBWC or to remedy a breach of the HBWC, subject to the following requirements:
(a)that the specified work is set out in a clearly identified and unambiguous manner;
(b)there is evidence that the specified work is required pursuant to the HBWC;
(c)there is evidence as to the reasonable time it would take the builder to complete the specified work; and
(d)there is evidence as to the value of each specified work.
It would be preferable in contentious matters such as this if there was evidence from an independent expert as to each of these requirements, but here there is no such evidence, or indeed any evidence at all about any of these requirements.
The Tribunal is therefore not satisfied that a HBWC remedy order that requires the builder to resume building the home is justified. Pursuant to s 43(1) of the BS(CRA) Act the Tribunal must decline to make an order pursuant to either s 41(2)(a)(ii) or s 41(2)(a)(iv) of the BS(CRA) Act with respect to this complaint item.
Whether the owners' payment of $46,800 to the builder for the lock‑up stage was a genuine progress payment within the meaning of s 10(1)(b) of the HBC Act and, if not, whether the Tribunal should make a HBWC remedy order requiring the builder to repay that money
Section 10(3) of the HBC Act provides that a payment demanded by a builder in accordance with a schedule of progress payments set out in a HBWC is 'taken to be a genuine progress payment for the purposes of subsection (1)(b)(i) until the contrary is shown'.
Pursuant to s 41(2)(c) of the BS(CRA) Act the Tribunal may by order declare 'that a specified amount is not payable to a person under the contract and, if already paid … order that the builder or owner repay that amount'.
Pursuant to clause 4.1 of the HBWC the builder is entitled to demand payment for a stage of work that it has done. Clause 4.1 of the HBWC states:
At the relevant stages defined in the Act,[20] the Builder may demand and recover or retain amounts by way of progress payments for the Work done that are not a greater percentage of the Contract Price than permitted in the Act.
[20] Act is defined in the HBWC as 'the Building Act 2011 of Western Australia'.
The Tribunal is satisfied the word done in the clause is synonymous with completed or finished.[21]
[21] Macquarie Dictionary Online: verb 1. past participle of do –adjective 2. executed; completed; finished; settled.
The owners paid the lock-up stage progress payment to the builder on 4 September 2022. The owners claim that at the date of the final hearing the home is still not at lock-up and that the builder should now repay them the amount of $46,800.
The issue whether the lock-up stage progress payment 'is not payable … under the contract' is to be decided by determining whether at this time the lock-up work is or is not complete.
The email exchanges between the builder and the owners, which commenced on 1 August 2022 with the builder demanding the lock-up progress payment, show on that date the ground floor of the home was without a roof. These emails are as follows:
Email 1 August 2022 at 10.47 am from the builder to the owners:
Hi Bro,
See attached our Inv #B2002-7 for the Lock-up stage.
Appreciate if you can get it processed at your earliest convenience[.]
Email 7 August 2022 at 5.00 pm from the builder to the owners:
Hi Bro,
I totally understand your situation in regard to the progress payment.
The point is that the stages are mixed with each other, and we have already paid and spent money for next stages, like the following works:
1.Lock-Up for Upper Floor.
2.Plastering for Upper Floor.
3.Texture & Painting for Upper Floor.
4.Electrical & Plumbing works for Upper Floor.
5.Glazing for Ground Floor already paid.
All these works are part of the next stages which we haven't yet claimed, but we have already paid for.
This is why we need to keep the cashflow running to maintain the next stages, otherwise if I would have to do stage-by-stage which means waiting until a full stage is done the start the next stage, but this is going to cause huge unexpected delays of course.
We appreciate your understanding and cooperation if you can get the payment processed at your earliest convenience[.]
Email 8 August 2022 at 9.14 am from the owners to the builder:
Hi Bro,
I understand your situation as well and as you know that I have paid you all the previous payments without any questions.
…
I don't know what to say as there are numbers of works need to be done at house. Plumbing works hasn't started yet. Ground floor roof, Plaster, electrical. Lockup etc. First Floor roof hasn't been finished yet as it is leaking from many places inside. Number of jobs still pending for lockup.
There is no sign of timber and colorbond for ground floor yet.
On our last meeting in early 5th of July you have told us that house will be completed by December but looking at current stage it is not looking possible.
We had booked holidays in December- January to go India, but when you have said house will complete in December, we had canceled (sic) them.
I always trust on your words, please don't let me down in front of my family.
If I pay you this invoice 80 percent payment will be paid. And as you know there are numbers of works still pending.
I will be happy to process this payment when at least ground floor roof will be on.
I hope you will understand my situation[.]
The Tribunal finds that clause 4.2 of the HBWC sets out a regime whereby the builder was able to demand a certain percentage of the contract price be paid to it as each stage of the works set out in the clause was done. This requires the builder to perform the works in the order set out in clause 4.2. It is not permissible for the builder to demand payment for a stage of works that is incomplete on the basis that it includes payment for works that have been performed out of sequence.
The Tribunal therefore finds that as the lock-up stage progress payment was demanded by the builder when the roof cover was not complete, that it was not a demand for a genuine progress payment.
Included in Exhibit 1 are two bundles of undated photographs which the owners submit show that at this time the home is still not yet at lock-up stage. The Tribunal finds that, except for the garage opening, all windows and door openings that are visible in the photos are secured by glass windows, a glass sliding door and solid doors. The Tribunal is satisfied these photographs show that no interior wall plastering work has been done or that any ceilings have been installed. The Tribunal finds that the photographs were taken on a date after September 2022.
The owners also rely on a Building Inspection Report on the home by Syed Ali to show that the home is still not yet at lock-up stage. Mr Ali inspected the home on 28 November 2023. He gives his qualification as 'Engineer Australia Membership' and says that he is both a licensed building practitioner and a licensed builder. His report, under the heading 'Recommendations', stated 'The house was not in lock down stage'. The report includes 12 photographs which show many parts of the interior and exterior of the home.
The Tribunal is again satisfied that, except for the garage door opening, all window and door openings that are visible in these photographs are secured by glass windows, glass doors and a solid door. The Tribunal is also satisfied the photographs show no evidence of any interior wall plastering work or any evidence that any ceilings have been installed as at the date the photographs were taken, which was on 28 November 2023.
The owners submit that Mr Ali, in saying that the home was not at 'lock down' stage, meant to say that it was not at lock-up stage. Mr Ali did not support his statement with any reasons and nor was he called to give evidence at the final hearing.
Given that the term that the Tribunal is required to construct is the term lock-up stage, and as the Tribunal is not given any information that would help it understand what the term 'lock down' means, the Tribunal has had no regard to Mr Ali's opinion.
The term lock-up stage is, unhelpfully, not defined in the HBWC. The owners submitted that the website of the Department of Energy, Mines, Industry Regulation and Safety provides an information pamphlet Building contracts and progress payments which gives a definition of the lock-up stage. The definition is:
Externally:
•The structure is now able to be secured, hence the term lock up. All external doors and windows have been installed. In some cases external door openings are secured temporarily to prevent damage to specialist timber frames and doors, but generally all glazing and glass sliding doors have been fitted.
•Rendering of the external walls (if part of the proposed structure) may be complete at this stage but painting or texturing comes later.
Internally:
•First fit plumbing and electrical (pipes and wires have been run but are not functional).
•Wall plastering and ceilings have been installed.
Generally, the structure is ready internally for the finishing trades such as carpenters, electricians, cabinet makers, tilers, plumbers, and painters.
The Tribunal has read this pamphlet and notes that this definition is preceded by the following qualification:
…
On the following page is a set of common progress claim stages and descriptors which may be used when building a new home. These are simply intended to serve as a general guide, as each home building project needs to be considered on a job-by-job basis in constructing an appropriate progress claim schedule[.]
As this definition is a qualified 'general guide' the Tribunal is not satisfied it establishes that the lock-up stage in every home building work will mean that the interior walls of the home will have been plastered and that the ceilings will have been installed.
The builder, in its closing submissions, submitted that the meaning of the term lock-up stage in the building industry means no more than that all external openings to the home, excluding the garage area, are capable of being secured and have been secured.
The builder submitted that the interior of the home is secured by a door inside the garage area and that the garage door is installed at the fixing stage. The builder's submission is that with the exception of the garage opening that all external openings to the home have been secured and the home is at the lock-up stage.
The Tribunal, in the absence of an accepted industry definition of the term lock-up stage, accepts the literal definition proposed by the builder, which is that lock-up is achieved when all external openings to the structure have been secured. However, even on this definition, the home is not yet at lock-up as the garage opening which forms part of the home has not been secured. The Tribunal has reached this finding by applying the reasoning of the Victorian Court of Appeal in Cardona v Brown [2012] VSCA 174 at [78]:
In determining the question of whether the garage was part of the home, importance must be placed on the terms of the contract and, in particular, what the owners and builders were contracting for. As described at the outset of these reasons, the contract was for the builders to carry out 'the Building Works', comprising a 'brick veneer dwelling' to be built in accordance with the plans. … The plans of the dwelling included the construction of the garage. The contract price included the construction of the garage. The agreed staged payments were expressed as a percentage of the contract price. The price for the construction of the garage was not distinguished as a separate item from the construction of the house, nor did it have its own specific payment regime. On entering into the contract, what the parties were contracting for was the construction of a dwelling including the garage. The owners undertook the liability for progressive payments, expressed as a percentage of the contract price, measured against a staged progression in the construction of the dwelling. The 'dwelling' that was agreed between the parties to be constructed, the owners' new 'home', included the garage[.]
The Tribunal is satisfied that as the garage is an integral part of the home, that unless the garage opening is secure the home is not at lockup.
The Tribunal therefore finds that:
(a)the demand by the builder on 1 August 2022 for the lock‑up stage payment was not a demand for a genuine progress payment;
(b)the owners, on 4 September 2022, paid the builder $46,800 for the lock-up stage payment; and
(c)as at the date of the final hearing the home is not at the lock‑up stage, as the garage opening is not secure.
The Tribunal therefore finds that the failure to secure the garage opening shows, to the contrary, that the demand by the builder for the lock-up stage payment is not at this time a demand for a genuine progress payment, and so it is not now payable by the owners.
The Tribunal is therefore satisfied that a HBWC remedy order is justified with respect to this progress payment, and so pursuant to s 43(1) of the BS(CRA) Act it must make a HBWC remedy order with respect to this complaint item. The order the Tribunal will make is that pursuant to s 41(2)(c) of the BS(CRA) Act the Tribunal will declare that the lock-up stage progress payment of $46,800 is not payable by the owners, and that the builder is to repay to the owners the amount of $46,800.
The owners also claim interest on their progress payment at the rate of 6% per annum. The Tribunal finds that on proper construction s 41(2)(c) of the BS(CRA) Act confers on the Tribunal a power only to declare a 'specified amount' is not payable and then, if that amount has already been paid, to 'order that the builder … repay that amount' (Emphasis added).
The Tribunal therefore finds it is only able to order the builder to repay the 'specified amount' of $46,800 to the owners, and as it has no power to order the builder pay interest on the amount it will decline to make the order sought by the owners.
Whether the builder's claim for a price increase pursuant to s 8(1)(b) of the HBC Act is a valid claim and, if so, whether the HBWC price is increased by $117,000
Clause 11 of the HBWC deals with variations. It states:
11Variations
This clause identifies the process for varying this contract.
11.1The Builder and the Building Owner acknowledges that the Work may be varied at the request of the Builder or Building Owner on the terms in the Act and in this clause.
11.2Unless agreed in writing between the Builder and the Building Owner, any adjustments to the Contract Price because of an approved Variation will be taken into account at the time of the next progress payment.
11.3The Building Owner can terminate the contract by notice to the Builder stating that the Building Owner is unable to meet the cost of the Variation because:
a)the Variation is due to a matter that could not reasonable have been expected to be needed for the Work to be completed; or
b)the Variation is due to a requirement of an approving authority or any other statutory authority, which was no known at the date of the contract.
This clause permits the builder to vary the price only when the scope of the building works is varied. The builder, however, has only claimed a price increase and does not attempt to vary the scope of the building works. The builder can therefore only validly claim an increase in the price by agreement between the parties pursuant to s 7 of the HBC Act, or pursuant to s 8(1)(b) of the HBC Act on the basis of a circumstance that has arisen 'that could not reasonably have been foreseen by the builder at the time when the contract was entered into'.
It is agreed by the parties that the builder gave notice of the price increase by email sent to the owners at 10.51 pm on 16 April 2023. It is useful to set this email out in full:
Email from builder to owners at 10.51 pm on 16 April 2023:
Hi Surjeet,
As you and all the people of WA aware of, the construction industry has been plagued with a spate of price increases caused by a perfect storm of supply chain disruptions, skilled labour shortages and skyrocketing costs of materials and logistics.
We hereby sending you this Price Increase Notice for the construction of your house at #22 Phascogale St, Brabham.
As a minimal, the average rate of the overall price increase for materials and labour is ranging around 25% to 35%.
We are requesting a rate of 30% for the average overall price increase as per the below calculations:
-Contract Value: $390,000
-Price Increase: 30% x $390,000 - $117,000.
The above amount can be paid either in one off payment or in progress instalments.
Should you have any questions please do not hesitate to contact us[.]
The parties agree that the owners rejected this price increase on 17 April 2023. Consequently, as the owners did not agree to the variation pursuant to s 7 of the HBC Act, the HBWC price can only be validly increased if the builder's claim for the price increase satisfies the requirements set out in s 8 of the HBC Act. There are three such requirements.
The first requirement is that s 8(1)(b) of the HBC Act applies only in circumstances 'that could not reasonably have been foreseen by the builder at the time when the contract was entered into'.
In this proceeding the Tribunal understands the builder's claim of a 'perfect storm of supply chain disruptions, skilled labour shortages and skyrocketing costs of materials and logistics' to be a reference to the impact of the COVID-19 pandemic, which emerged in January 2020. However, the only evidence from the builder on this issue are the emails it sent on 28 April 2022 to say '[t]he timber prices have gone up almost triple the original prices at the time when we signed the contract …', and the builder's email dated 16 April 2023 which I have set out above.
In the absence of any evidence about the impact of the COVID‑19 Pandemic, the Tribunal is unable to make a finding as to whether any such circumstances did in fact impact the materials supply chain or the availability of labour in April 2023. It is therefore also unable to make a finding that the circumstances were not reasonably foreseen by the builder at the time it entered the HBWC on 23 December 2020.
The second requirement is that a notice given pursuant to s 8(1)(b) of the HBC Act must be given within 10 working days after the builder 'became aware, or should reasonably have become aware, of the circumstances' which gave rise to the notice.
The builder emailed the owners on 28 April 2022 to say '[t]he timber prices have gone up almost triple the original prices at the time when we signed the contract …'. The Tribunal therefore finds the builder did know there were significant increases in the price of materials for far longer than 10 days before it made its claim for the price increase on 16 April 2023.
The third requirement is that s 8(4) of the HBC Act does not permit a builder to vary the HBWC under subsection 8(1)(b) by reason only of an increase of costs of labour or materials, or both, to be incurred by the builder. The builder's emails of 28 April 2022 and 16 April 2023 state that the builder claimed the price increase only because of the increase in the cost of materials and labour.
As the builder's notice does not meet either of the first two requirements in s 8(1)(b) of the HBC Act and is contrary to the third requirement under s 8(4) of the HBC Act, its notice claiming the price increase on 16 April 2023 is not a valid variation of the HBWC and must be disallowed.
The Tribunal is therefore satisfied that a HBWC remedy order is justified with respect to the price increase claimed by the builder, and so pursuant to s 43(1) of the BS(CRA) Act the Tribunal must make an order with respect to this complaint item. The order the Tribunal will make is that pursuant to s 41(2)(c) of the BS(CRA) Act the Tribunal declares that the sum of $117,000 claimed by the builder is not payable by the owners to the builder under the HBWC.
Whether the builder's proposal to reduce the cost to the builder of certain fittings and finishings in accordance with a schedule of allowances was agreed to by the owners and, if so, whether the HBWC is varied by incorporating this schedule into the HBWC
Pursuant to s 41(2)(a)(i), the Tribunal may, by order, restrain 'any specified action in breach of the contract'.
On 31 May 2022, the builder sent to the owners its proposal to reduce the cost to the builder of completing certain finishes and fixings as part of the building works in accordance with a schedule of allowances set out in the email. The owners replied to this email on 1 June 2022. It is useful to set out these emails in full, which are as follows:
Email from the builder to the owners on 31 May 2022:
Hi Surjeet,
Hope this email finds you well.
This is about the selection of finishing materials and other internal items for your house.
Please see below the list of our suppliers and your allowance for each item. If your selections are within the allowances we will pay the supplier, but if your selections go beyond the allowances then you have to pay the extra differences of course. Please call them individually and make appointments for visits:
1.Sanitary/Plumbing fixtures: QA Bathrooms in Malaga – call Nuraini on 08 9249 2026 (your allowance is $6,000 for sinks, tapware, showers, toilets, basins, etc).
2.Tiles: Malaga Tile Centre – call Jerry on 08 6118 1666 (your allowance is $28 per square meter rate for any type or size).
3.Kitchen appliances: Harvey Norman Malaga - call Gill on 0402 193 325 (your allowance is $5,000 for all oven, cooktop, rangehood, etc).
4.Cabinetry/Stone works: Casvino Kitchens in Malaga – call Cassandra on 0467 741 761 (your allowance is $30,000 for kitchen, scullery, laundry, bathroom vanities, alfresco kitchen, store shelving, linen shelving, robes shelving, WIR shelving, mirror sliding doors, etc).
5.Doors, Handles, Locks: Executive Doors & Mouldings in Malaga - call Natalie on 08 9248 2596 (your allowance is $5,000 for all timber doors, locks and handles)[.]
Email from the owners to the builder on 1 June 2022:
Hi Atalla,
Thank you for sending suppliers details, but I didn't understand about this allowances as when we have signed the contract, there was nothing mention about these allowances. In the contract And also verbally it is discussed many times that my specifications are premium. That is why I have paid you more for my contract price.
I don't know these allowances are enough for what you have promised us. As you know number of things between you and us are verbally discussed.
I am not saying that I will choose super expensive things but what we have discussed and what is in contract at least you can cooperate with us.
As we are also cooperating with you when building time is taking longer than contract time.
I hope you understand as we are also not in position to pay extra but we will try not to pick expensive material. We will try our best to look after you as we have done in past.
I will ring you to discuss more.
Thank you[.]
The owners submit the builder's email on 31 May 2022 was a request to vary the 'standard + High Mix Level' specifications in the HBWC. This was because, for example, rather than the builder installing a 'Set of 900 mm Oven, Cooktop & Rangehood from ARTUSI (Italian made) as per meeting / 600 mm2 oven required' the builder would instead pay only $5,000 toward these items. The owners submit their email on 1 June 2022 constituted their rejection of the builder's request.
The builder in its closing submissions did not dispute the owners' submission that its email of 31 May 2022 was a request to the owners to vary the HBWC. However, it said the owners then selected certain items from the nominated suppliers and the builder then paid for these items and they were delivered to the home. The builder submits the act of selecting items constituted acceptance through conduct of its request to vary the HBWC in accordance with its email of 31 May 2022.
Section 7(1) of the HBC Act states variations to a HBWC are to be in writing, are to set out the terms and the cost of the variation and are to be signed by both the owners and the builder.
In this case, the proposed variation was in writing, and it did set out the terms of the proposed variation, but it did not set out the cost of the variation and neither was it signed by the owners and the builder. However, a breach of s 7 of the HBC Act does not of itself render the contract or a provision of the contract illegal, void or unenforceable.[22]
[22] HBC Act, s 27(1). See also Vitte and Studio 8 Builders & Designers Pty Ltd [2013] WASAT 43.
The Tribunal does not, however, accept the builder's submission that the owners by selecting some items from the suppliers nominated by the builder demonstrated through their conduct that they accepted the builder's proposed variation. The Tribunal is satisfied that if the owners did this that they were acting in accordance with their email of 1 June 2022 to the builder in which they stated they did not accept the proposed variation but would nonetheless do their best to ensure they did not choose items which were unnecessarily expensive.
The Tribunal therefore finds that the builder's proposed variation sent to the owners on 31 May 2022 was rejected by the owners, and the proposed variation is therefore not a variation of the HBWC.
The Tribunal is therefore satisfied that a HBWC remedy order is justified with respect to the builder's claim to vary the HBWC by incorporating a schedule of allowances that reduces the cost to the builder of certain finishes and fittings to be installed in the home. Pursuant to s 43(1) of the BS(CRA) Act the Tribunal must make an order with respect to this complaint item. The order the Tribunal will make is that pursuant to s 41(2)(a)(i) of the BS(CRA) Act the Tribunal orders that the builder is restrained from relying on the schedule of allowances for finishes and fittings dated 31 May 2022.
Whether the owners have suffered a financial loss due to the builder's breach in not achieving practical completion by 4 January 2022 and, if so, whether the Tribunal should make a HBWC remedy order that the builder pay compensation to the owners for this loss
Pursuant to s 41(2)(d)(i) of the BS(CRA) Act the Tribunal may order the builder 'pay specified compensation for loss or damage' caused by any breach of the contract or of a provision of Part 2 of the HBC Act.
The Tribunal notes that the HBWC does not limit the amount of compensation the owners may claim for delay by setting a rate for liquidated damages. Therefore, if the owners are entitled to claim compensation for their losses due to a breach by the builder, they are able to claim their actual losses.[23]
[23] Supra.
The owners in their opening submissions claim they have suffered a financial loss due to the builder's delay in bringing the home to practical completion. The owners submit they intended to occupy the home when it was completed in or around 4 January 2022, and they would then have used their current home as an investment property. That is, they intended to rent out their current home to a tenant and so expected to earn income from that property. The owners claim compensation from the builder for the loss of this expected income.
The first issue the Tribunal must determine is whether the owners' loss is sufficiently connected to the builder's breach of the HBWC due to its delay in building the home. The test of remoteness for financial loss due to breach of contract is set out in the decision of the Tribunal in Alison Louise Lobbe atf Lobbe Newman Trust and Kelpie Endeavours Pty Ltd atf Testa Rossa Family Trust and Quality Builders Pty Ltd at [70]:[24]
[24] Alison Louise Lobbe atf Lobbe Newman Trust and Kelpie Endeavours Pty Ltd atf Testa Rossa Family Trust and Quality Builders Pty Ltd [2014] WASAT 110.
70As set out by Justice Le Miere in Total Waste Management Pty Ltd v The City of KalgoorlieBoulder [2010] WASC 234 (2 September 2010), at [31]:
…
Loss or damage will not be recoverable if it is too remote, the tests of remoteness being those stated in what are described as the two limbs of Hadley v Baxendale (1854) 156 ER 145, 354.
For present purposes those tests can be expressed in the statement of principle formulated by Lord Reid in Koufos v C Czarnikow Ltd (The Heron II) [1969] 1 AC 350, 385 and which has been adopted in this country: see GEC Marconi Systems [938]; Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344, 368
The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.
In support of their claim for compensation the owners provided a letter from Centurion Elite Property Management dated 8 December 2023 which stated:
… This home consists of 4 well sized bedrooms, spacious central kitchen with dining is neat and tidy throughout with secure parking all in a high demand area.
In the year 2022 this property was appraised and would have been able to achieve a rental return of $600 to $650 per week.
Given the current rental marker in 2023 and features throughout out the property we would expect this type of property to attract a rental return of $650 - $700 per week[.]
The builder has not disputed the assertion by the owners that they would have moved into the home once it was completed, and that they intended to then rent out their current property. The Tribunal is therefore satisfied the owners have suffered a loss of income which has been directly caused by the builder's breach of the HBWC in not completing the home by 4 January 2022.
The owners claim their loss at the lowest rate of rent in the Centurion Elite Property Management appraisal, at $600 per week from 4 January 2022 to the date of the final hearing on 7 February 2024. The builder did not dispute that the owners could have reasonably expected to have received $600 per week in rent for their property. On this basis, the owners have calculated their loss to be $62,400.
However, in their closing submissions the owners accepted this figure does not include the expense of operating a rental property and they accepted that their claim for compensation should be discounted by 10% for property management fees, by $900 per annum for property insurance and $600 per annum for services. They also concede it would have been likely the property would be tenanted only 6 to 8 weeks after 4 January 2022, if the home had been completed by that date. These concession by the owners appear reasonable to the Tribunal.
On the basis most favourable to the builder the Tribunal finds that the commencement date of the owners' loss is 7 March 2022. The calculation of the owners' lost rental income, using the period of a month as the unit of time, is therefore:
TOTAL $
SUBTOTAL $
Before discount
Monthly income
2,400
600
x4
Before discount
Income 12-month period
28,800
2,400
x23
Applying management cost discount
Income 12-month period
25,920
28,800
x90%
Applying insurance and services discount
Income 12-month period
24,420
25,920
- 900
- 600
Monthly (total) income after discounts
Income 1 month period
2,035
24,420
/12
Income (total) 23‑month period 07.03.22 to 07.02.24
46,805
2,035
x23
The Tribunal therefore finds that a HBWC remedy order is justified with respect to the lost income suffered by the owners due to the builder's breach in not bringing the home to practical completion by 4 January 2022. Pursuant to s 43(1) of the BS(CRA) Act the Tribunal must make an order with respect to this complaint item. The order the Tribunal will make, pursuant to s 41(2)(d)(i) of the BS(CRA) Act, is that the builder compensate the owners by paying to them the amount of $46,805 for their lost rental income up to the date of the final hearing.
Whether the owners have suffered emotional harm due to the builder's breach in not achieving practical completion by 4 January 2022 and, if so, whether the Tribunal should make a HBWC remedy order that the builder pay compensation to the owners for emotional harm
The owners claim compensation in the amount of $50,000 for the 'emotional losses' they claim was caused to them by the builder's delay in completing their home. The Tribunal understands the owners' claim to be a request that the Tribunal order the builder pay them compensation pursuant to s 41(2)(d)(i) of the BS(CRA) Act for the emotional harm caused to them by the builder's breach in not achieving practical completion of the home by 4 January 2022.
In their communications to the builder within Exhibit 1 the owners made several references to the emotional harm the builder's delay was causing them. On 2 February 2023, an owner emailed the builder to say:
… I am telling you that I am not in a position mentally and financially to wait anymore as me and my wife are getting depressed day by day which is not good for us and our young kids.
On 7 March 2023, the owner sent the builder the following text message:
We are struggling mentally and financially for this project. I have younger kids who keep asking me about the completion of house and I don't have any answers to give them. You can't understand what emotional trauma and stress we are going though[.]
On 14 March 2023, the same owner sent a text message to the builder to say:
…
Please ring and talk to me as when you don't answer our calls and texts it makes us very depressed and sad.
While the Tribunal is satisfied these messages are an accurate and contemporaneous description of the emotional effect the builder's delay has had on the owners, their claim for emotional harm is not within any of the complaint items referred by the Building Commissioner to this Tribunal.
The Tribunal, under s 43(1) and s 41 of the BS(CRA) Act, is conferred with jurisdiction to make a HBWC remedy order only with respect to a complaint that has been referred by the Building Commissioner to the Tribunal. As the Building Commissioner did not refer such a complaint item, the Tribunal must decline to make the orders sought by the owners.
However, even if the Tribunal had been satisfied that a complaint in respect of emotional harm had been referred to it, the Tribunal would not have made the order sought as it finds that the owner cannot be compensated for non-financial loss or damages, such as emotional harm, pursuant to s 41(2)(d)(i) of the BS(CRA) Act.[25] This is for two reasons.
[25] The Tribunal has carefully considered but respectfully does not agree with earlier decisions of this Tribunal which found that the Tribunal is able to award damages for emotional harm such as stress e.g. KBE Contracting Pty Ltd and Mawer & Anor [2007] WASAT 210 and Dumbreck and Tangent Nominees Pty Ltd [2017] WASAT 88.
Firstly, the Tribunal finds that on correct construction the scope of an order made under s 41(2)(d)(i) of the BS(CRA) Act is confined to 'loss or damage' that is 'caused by' any breach of the HBWC or of a provision of Part 2 of the HBC Act, and this does not extend to making an award of damages for personal injuries.[26]
[26] See also Vernon v Ashmy Pty Ltd WADC (unreported 23 January 1997, Library No BC9740021, which considered a similar (but now amended) provision: 'In my opinion, the provisions which I have referred to illustrate the fact that the Act is intended to regulate contracts between consumers and builders for the performance of certain home building work. The words 'loss or damage' in s 17(4)(c)(1) must be read in the context of the Act as a whole. In my opinion, they relate to loss or damage occurring in the performance of certain home building work and do not include personal injury. This is not a case in which s 18 of the Interpretation Act 1984 (WA) should lead to a different conclusion. In my opinion, the construction which I have placed upon the section promotes the underlying purpose or object of the Act in the regulation of contracts between consumers and builders. I am, therefore, of the opinion that it is not necessary to consider whether anxiety and injured feelings form part of the appellants' compensable loss flowing from the breach of contract, since the Committee has no jurisdiction to consider such a claim'.
By its long title, the BS(CRA) Act is to provide for, among other matters, a system for dealing with complaints about building services, home building work contract matters and disciplinary matters and a system for ensuring compliance with laws about building services. As explained by the Senior Member in Deshmukh:
53.In Kulowall Construction Pty Ltd v Chellem at [44] and [45], Tottle J agreed with the observation made by the Tribunal in Owners of Island Apartments Strata Plan 52597 and Pindan Pty Ltd at [57] that the BSCRA Act is at its core consumer legislation and Tottle J went on to state that the making of a complaint under the BSCRA Act is the first step in the process of resolving disputes (emphasis added).
54.In my view, the purpose of the BSCRA Act as consumer legislation, in relation to complaints about disputes which arise under home building work contracts, is to provide a system and process for resolving those disputes (emphasis added).
(Footnotes omitted)
In the Tribunal's view, a provision such as s 41(2)(d)(i) of the BS(CRA) Act which has as its object the resolution of consumer disputes due to breaches of a HBWC or of Part 2 of the HBC Act, is limited to that subject matter and does not extend to making awards for personal injuries.
Secondly, it is well established in the law of contract that as a general rule there is no recovery for non-financial damage caused by breach of contract, with one of the few exceptions to the rule being where damages for disappointment and distress can be recovered on the breach of a contractual term which had as its object the provision of an intangible benefit such as enjoyment, relaxation or freedom from molestation. The Court of Appeal (WA) in Lee v Lawfirst Pty Ltd [No 2] [2023] WASCA 166 stated at [76]:
… where the claim is brought for the breach of a particular contractual provision, damages for disappointment and distress can only be recovered if 'an' object of that particular obligation was the provision of enjoyment, relaxation or freedom from molestation. It is the object of the term that is relevant. That is not to say, however, that the purpose of other provisions - as well as the contract as a whole - will not be relevant in construing the particular term in context and identifying its object.
(Footnotes omitted).
In this proceeding the builder is in breach of clause 2.2 of the HBWC. The object of this clause is to provide the owners with certainty as to the date when their home will reach practical completion, it is not to provide the owners with 'enjoyment, relaxation or freedom from molestation'.
The Tribunal therefore finds that it cannot, pursuant to s 41(2)(d)(i) of the BS(CRA) Act, order the builder to compensate the owners for any emotional harm, including disappointment or distress, that they may have suffered due to the breach of clause 2.2 of the HBWC by the builder. The Tribunal would therefore decline to make an order with respect to this complaint item.
Orders
The Tribunal orders:
Pursuant to a home building work contract the parties entered on 23 December 2020 the Tribunal, under s 43 of the Building Services (Complaint Resolution and Administration) Act 2011 (WA):
1.Declares the lock-up stage progress payment is not payable by the applicants and order that by no later than 20 April 2024 the respondent must pay to the applicants the amount of $46,800.
2.Order the builder is restrained from relying on the schedule of allowances for finishes and fittings dated 31 May 2022.
3.Order that by no later than 20 April 2024 the respondent must pay compensation to the applicants in the amount of $46,805.
4.Declares the price increase of $117,000 claimed by the respondent on 16 April 2023 is not payable by the applicants.
5.The application is otherwise dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
MR E Cade, MEMBER
26 MARCH 2024
Annexure A
| Complaint Item # | Building Complaint Items referred to SAT | Orders sought by owners in its written statement | Orders proposed by builder in its response statement |
Item 1: | Building works not completed within 270 days as required by the HBWC | Order for (1) immediate resumption of building works and (2) for payment by the builder of an amount of money for each day from date of final hearing until completion of the building works | Will complete the home within 10 months subject to agreement reduce the building works it is required to perform and agreement to cap the costs of internal finishes and fittings, but otherwise denies the owners are entitled to the orders sought |
Item 2: | Builder has given notice that the cost of certain internal finishings is capped at a certain amount, and if the owners want finishes and fittings above the cap that they will pay the difference. | Order to disallow the cap on certain finishes and fittings as it is a variation of the HBWC that the owners have not agreed to | Denies the owners are entitled to the orders sought / claims the owners agreed to the cap |
Item 3: | Builder proposed to owners to limit the building works the builder is to perform, with the owners being responsible for performing the balance of the works themselves | No orders sought Owners submit they have rejected this proposal. Builder agrees that owners rejected the proposal | N/A |
Item 4: | Owners paid the builder the lock-up stage progress payment in advance of the builder performing these building works. Owners submit home is still not at lock-up stage. | Order for repayment by the builder of the lock-up stage progress payment in the amount of $46,800 plus interest at 6% p/a. | Denies the owners are entitled to the orders sought - builder submits that while it did claim payment for the lock-up stage progress payment in advance of the building works being completed, that the home achieved lock-up stage in September 2022. |
Item 5: | Builder has set various dates for completion of the building works but did not complete the works by those dates. | No orders sought. | N/A |
Item 9: | Builder on 16 April 2023 gave owners notice of 30% / $117,000 price increase, which the owners rejected | Order to disallow the price increase sought by the builder | Submits that notice of price increase is a valid notice, but that the builder is willing to forego the price increase and complete the home within 10 months subject to agreement reduce the building works it is required to perform, but otherwise denies the owners are entitled to the orders sought |
Item 10: | Compensation for lost rent from investment property, interest on mortgage, water, and service charges due to the delay in completing the building works from date works should have been completed to date of final hearing. | Order the builder pay compensation to the owners for lost rental income in the amount of $62,500 | Denies the owners are entitled to the orders sought |
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