The Craftsmen Restoration and Renovations v Thomas Boland, Thomas Boland v The Craftsmen Restoration and Renovations - [2008] NSWSC 660

No judgment structure available for this case.

CITATION: The Craftsmen Restoration & Renovations v Thomas Boland, Thomas Boland v The Craftsmen Restoration & Renovations [2008] NSWSC 660

HEARING DATE(S): 31/10/2007, 13/12/2007, 07/03/2008

JUDGMENT DATE :
1 July 2008

JUDGMENT OF: Howie J at 1

DECISION: The appeal by The Craftsmen Restoration and Renovations Pty Ltd is dismissed. The appeal by the Bolands is allowed in part. The builder is to pay the owners' costs of the appeals. The parties are to bring in final orders in accordance with the findings made in this judgment within 7 days.

CATCHWORDS: Administrative Law - Rules of Natural Justice and Breach thereof - whether finding against witness a breach of natural justice - Appeal from Consumer, Trader and Tenancy Tribunal - Residential building dispute - whether errors of law by Tribunal - Contracts - Construction and Interpretation of Contracts - Building Contract - whether builder waived rights under contract - whether owners in breach of contract when terminated contract for poor workmanship - Interest - Recovery of Interest under Common Law - whether interest payable on monies expended for rectification of works.

LEGISLATION CITED: Consumer, Trader and Tenancy Tribunal Act 2001
Home Building Act 1989
Supreme Court Act 1970
Workers Compensation Act 1926
Uniform Civil Procedure Act

CATEGORY: Principal judgment

CASES CITED: Grygiel v Baine [2005] NSWCA 218
Azzopardi v Tasman UEB Industries (1985) 4 NSWLR 139
Kalokerinos v HIA Insurance Services Pty Ltd [2004] NSWCA 312
Chapman v Taylor and Ors; Vero Insurance Ltd v Taylor [2004] NSWCCA 456
Bahadori v Permanent Mortgages Pty Limited [2008] NSWCA 150
Peninsula Balmain Pty Limited v Abigroup Contractors Pty Limited [2002] NSWCA 211
Hyder Consulting (Aust) Pty Limited v Wilh Wilhelmsen Agency Pty Limited [2001] NSWCA 313
Mifsud v Campbell (1991) 21 NSWLR 725
Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247
Beale v Government Insurance Office (1997) 48 NSWLR 430
Amery v New South Wales Director-General, NSW Dept of Education and Training [2004] NSWCA 404

PARTIES: The Craftsmen Restoration & Renovations Pty Ltd v Thomas Boland & Ors
Thomas Boland & Anor v The Craftsmen Restoration & Renovations Pty Ltd & Anor

FILE NUMBER(S): SC 030128/06; 030130/06

COUNSEL:
G Miller QC with R Zikmann (Plaintiff/Defendant)
E Olsson SC (Defendant/Plaintiff)
R Bhalla (submitting appearance for CTTT)

SOLICITORS: G Aronstan, Solicitor and Attorney (Plaintiff/Defendant)
Massey Bailey, Solicitors and Consultants (Defendant/Plaintiff)
Crown Solicitor

LOWER COURT JURISDICTION: Consumer Trader and Tenancy Tribunal of NSW

LOWER COURT FILE NUMBER(S): HB 03/32695; HB 03/41455

LOWER COURT JUDICIAL OFFICER : Senior Member C. Paull

LOWER COURT DATE OF DECISION: 28/08/2006

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
ADMINISTRATIVE LAW LIST

HOWIE J

TUESDAY 1 JULY 2008
030128/06 THE CRAFTSMEN RESTORATION &

RENOVATIONS v THOMAS BOLAND & ORS

030130/06 THOMAS BOLAND & ANOR v THE CRAFTSMEN
RESTORATION & RENOVATIONS & ANOR

JUDGMENT
Introduction

1 HIS HONOUR: On 5 September 2001 the parties entered into a building contract for alterations to domestic premises in Riverview. The plaintiff was the builder and the first and second defendants were the owners of the premises. Problems arose between the parties in June 2002 and on 5 August 2003 the owners purported to terminate the contract on the basis of default by the builder in the manner in which the work was carried out. On 6 August 2003 the owners commenced proceedings in the District Court. On 12 August 2003 the builder commenced proceedings before the Consumer, Trader and Tenancy Tribunal (“the Tribunal”), the third defendant.

2 Eventually the two matters came on for hearing before Senior Member Paull. The parties were represented by counsel, Senior Counsel in the case of the owners. There was a conclave of expert witnesses, eight hearing days from 22 August 2005 through to March 2006 and submissions ran over four days from May to June 2006. The Tribunal delivered its decision on 28 August 2006. The judgment of the Senior Member runs for 93 pages. The judgment was substantially in favour of the owners.

3 Almost immediately the builder commenced proceedings by summons in this Court seeking declaratory relief as to the rights of the parties and orders in effect overturning the Tribunal’s findings and replacing them with those in favour of the builder. The owners in effect cross-claimed by a summons seeking to quash some of the orders made by the Tribunal on the basis of errors of law.

4 Consistent with the manner in which the dispute has so far proceeded, there has been voluminous material placed before this Court. The matter was listed for hearing with a two-day estimate although I had only one day then available. However, during the hearing it became obvious that the matter could not be completed largely because of the tender by the builder of a 46-page document setting out the alleged errors made by the Tribunal, relevant sections of the transcript, and submissions by the builder. It was referred to as an “aide memoir”. The owners’ legal representatives had not previously seen the document and they wished to have time to consider it. It should be noted that in April 2008 the owners responded to this document with a critical analysis of it extending over 48 pages.

5 The matter was stood over to the last two days of the 2007 term and further submissions were filed. At the completion of the hearing the parties sought to make further submissions in writing. Written submissions on behalf of the owners were not filed until April 2008. The builder raised certain objections to these submissions and there has been further correspondence between the solicitors for the parties and the Court. The incessant bickering between the parties and their legal representatives has continued even after this Court reserved its decision.

6 It is appropriate here to note that the matter was not conducted in a way that was appropriate for the resolution of a dispute before the Tribunal. One of the objects of the Consumer, Trader and Tenancy Tribunal Act 2001 (the Act) in establishing the Tribunal is:

7 The matter was fought strenuously before the Tribunal on both sides with innumerable objections to the contents of affidavits, evidence and procedure, including taking pleading points. This was not lost on the Senior Member who quoted a passage from the decision of Basten JA in Grygiel v Baine [2005] NSWCA 218 with whose judgment the President agreed. That was also an appeal in relation to a residential building dispute before the Tribunal. It is worth quoting the passage here because the comments are apt to the present proceedings. Basten JA refers to the commencement of proceedings in the Tribunal and then goes on:

8 The present matter commenced in the District Court. With respect to those that may have a contrary view, that is where it should have remained if for no other reason than the manner in which the parties intended to litigate the matter. It was removed to the Tribunal as a result of the operation of s 48L of the Home Building Act 1989 (the “Building Act”) because the builder commenced proceedings under the Act notwithstanding that the owner had already commenced proceedings in the District Court. I understand that the section operated to give the Tribunal jurisdiction but this was no doubt in the belief of the legislature that the spirit of the Act would be complied with by the person seeking to have the proceedings heard in the Tribunal and that the matter would be more appropriately dealt with in the Tribunal than in the District Court in order to obtain an inexpensive and expeditious resolution of the dispute. The conduct of these proceedings shows how misguided that belief has proved to be.

The dispute

9 The builder was licensed under the Building Act and contracted with the owners to carry out work for the sum of $197,400. The contract was in accordance with the Building Act and is called a “Lump Sum Contract for simple building works”. An architect, who was responsible for drawing up the plans of the work (“the architect”), was appointed as the certifier under the contract for the payment of progress payments. The work commenced on 10 September 2001.

10 Problems arose at about the time of the claim for the eighth progress payment that occurred on 24 June 2002. The sum claimed was $21,662,39, almost the balance of the outstanding monies. The architect certified the payment but it was never forthcoming. The owners complained of certain defects in the work. These later formed a substantial basis of the dispute before the Tribunal. On 8 July 2002 the builder suspended work by reason of the failure of the owners to pay the progress payment. On 5 August 2003 the owners purported to terminate the contract. The builder claimed that the owners were in breach of the contract by refusing to make the progress payment and by repudiating the contract. The owners claimed that the builder was in breach by failing to carry out the work in a diligent and workman-like manner.

11 Before the Tribunal the owners claimed the sum of $231,663.56 that they had paid to rectify and complete the works together with costs and interest. The builder sought payment for the work done.

12 Apart from the issue as to the rights of the parties under the contract arising from the non-payment of the eighth progress payment, there was a substantial dispute about the appropriateness of an air conditioner that was installed by the builder and leaking sliding glass doors, “the Trend windows”. There were also a large number of items claimed by the owner that individually were for relatively small amounts by way of compensation.

The judgment of the Tribunal

13 The Senior Member set out the following summary of conclusions and findings she made in her reasons:

“1. The date fixed for practical completion of the works under the contract was 15 May 2002.

2. Some time shortly thereafter, the problems with the builder's work, principally the windows and the air-conditioner, began to feature prominently.

3. The builder continued to work on the site and on 19 June 2002 the builder issued progress claim 8.

4. On 24 June 2002 the architect certified progress claim 8 (progress certificate 8).

5. On 3 July 2002 the owners wrote out a cheque for payment of progress certificate 8.

6. By 4 July 2002 the owners were obliged under the contract to have paid the builder progress certificate 8.

7. The owners' failure to pay progress certificate 8 by that date put them in breach of the contract.

8. This breach gave the builder the right to issue the suspension notice on 8 July 2002 under clause 12.7.1 of the contract.

9. The builder's failure to have reached practical completion by 15 May 2002 did not prevent the builder from exercising his right to issue that suspension notice.

10. From the time that the builder suspended the works on 8 July 2002 both parties made genuine and constant attempts to reach some agreement.

11. The parties met in an attempt to reach some resolution from 21 August 2002 to 4 December 2002.

12. It was not reasonable for the builder to continue to rely on the suspension notice after the meeting in December 2002 and the builder must be taken to have waived his right under the suspension notice after that meeting.

13. On 16 July 2003 the owners issued a default notice pursuant to clause 12.2 of the contract.

14. On 3 August 2003 the owners purported to end the contract pursuant to clause 12.3 of the contract.

15. At the time that the owners initiated this action in August 2003, a number of defective items for which I have found the builder liable, still persisted.

16. Principal among these were the windows and the air-conditioner which had been the subject of dispute between the parties for over 12 months.

17. The windows alone were of such magnitude and had been in the arena such a considerable period of time without the builder having been able to rectify them, that (subject to the caveat mentioned below) they gave rise to the owners' entitlement to end the contract under clause 12.3.

18. That caveat is that clause 12.3 specifically provides that the owners' determination notice is deemed to be void and of no effect if, at the time the owners issued the notice, they themselves were "in breach" of the contract.

19. The owners' failure to pay progress certificate 8 in July 2002 was not a "breach" as contemplated under clause 12.3 so as to preclude them from exercising their right to end the contract under clause 12.3 in August 2003.

20. The owners are entitled to the reasonable cost of rectification of the work for which I have found the builder liable being $92,137.08.

21. The owners are also entitled to damages of $6,767.20 for storage costs and $1677.84 telephone charges.

22. The total of the owners' damages is $100,582.08.

14 Accordingly the Senior Member made orders consistent with these findings. The ultimate consequence of these orders was that the builder was required to pay the owners $100,582.08 less the sum of $33,368.29 plus interest within 28 days of the date of the orders. The Senior Member also ordered the owners to return to the builder the Trend windows.

The proceedings in this Court

15 Section 65 of the Act limits the jurisdiction of this Court to exercise its power to make orders in the nature of prerogative relief and the power under s 75 of the Supreme Court Act 1970 to give declaratory relief. That section is as follows:

65 Review by prerogative writ etc generally excluded

16 Section 67 of the Act provides for an appeal on a question of law to this Court. It is relevantly as follows:

67 Appeal against decision of Tribunal with respect to matter of law

17 The parties wished to tender the whole of the transcript of the proceedings before the Tribunal and the exhibits. I made it clear that I did not intend to read any documents unless they were specifically referred to in submissions. As a consequence a “joint bundle of documents” was tendered. That contains the transcript of four days of the hearing including the seventh day, 22 November 2005, when the two experts, Mr Ogden for the owners and Mr Austin for the builder, gave concurrent evidence. It also includes the transcript for 27 March 2006, the last day of the hearing before submissions and when Mr Boland, one of the owners, gave further evidence. Other than that the parties annexed portions of the material before the Tribunal, upon which they wished to rely, to their submissions. There are six volumes of documents.

The builder’s summons

18 The builder claims the following orders: (1) allow the appeal against the decision of the Tribunal under s 67 of the Act; (2) a declaration pursuant to s 65 of the Act that it was denied procedural fairness; and (3) an order in the nature of certiorari for the making of orders to replace those made by the Tribunal.

19 The builder also seeks the making of 12 declarations as to the rights of the parties. The basis for the power of the Court to make such declarations are claimed to be s 65(1)(b) of the Act, s 67(3)(a) of the Act and s 75 of the Supreme Court Act. This is notwithstanding that s 65(1)(b) expressly prohibits this Court from making declarations in relation to proceedings within the Tribunal unless the matter concerns a ruling or a failure to give a ruling as to its jurisdiction, an order made without jurisdiction or a denial of natural justice. None of the declarations sought relate to any of these matters.

20 The summons asserts that the Tribunal made a number of errors of law as follows:

1. The Tribunal erred in finding that the owners were entitled to send the builder a Notice of Default on 16 July 2003.

2. The Tribunal erred in finding that the owners were entitled to determine the contract on 5 August 2003.

3. The Tribunal erred in the determination of damages.

Each of these general grounds of appeal is subdivided into multiple sub-grounds and sub-grounds within sub-grounds. The grounds of appeal take up over ten pages of the summons.

The owners’ summons

21 The owners seek an order quashing the decision of the Tribunal and the entering of judgment for the owners. There are 14 grounds of appeal asserting errors of law by the Tribunal. They relate to orders made by the Tribunal as a consequence of finding generally in favour of the owners and on the issues of damages, interests and costs. The grounds extend to the minutiae of the Tribunal’s decision.

The nature of the appeal

22 An appeal to this Court from the Tribunal is based upon the plaintiff establishing an error of law. The words used in s 67(1) of the Act allow an appeal to this Court on a decision of the Tribunal “in respect of a question of law”.

23 The scope of such an appeal was considered in Azzopardi v Tasman UEB Industries (1985) 4 NSWLR 139. That was a decision concerned with an appeal on a question of law under the Workers Compensation Act 1926. Glass JA with whom Samuels JA agreed stated at 156

“……..To say of a finding that it is perverse, that it is contrary to the overwhelming weight of the evidence, that it is against the evidence and the weight of the evidence, that it ignores the probative force of the evidence which is all one way or that no reasonable person could have made it, is to say the same thing in different ways. Upon proof that the finding of a jury is vitiated in this way, it will be set aside because it is wrong in fact. Since the Act does not allow this Court to correct errors of fact, any argument that the finding of a Workers' Compensation Commission judge is vitiated in the same way discloses no error of law and will not constitute a valid ground of appeal. It is also pointless to submit that the reasoning by which the court arrived at a finding of fact was demonstrably unsound as this would not amount to an error of law: R v District Court of the Metropolitan District Holden at Sydney; Ex parte White (1966) 116 CLR 644 at 654.

24 There are a number of cases that have considered the scope of an appeal from the Tribunal under s 67(1) of the Act. In Kalokerinos v HIA Insurance Services Pty Ltd [2004] NSWCA 312 the Court considered an appeal from the Tribunal that had been determined in the Common Law Division of this Court and dismissed. The matter leading to the determination of the Tribunal was a residential building dispute. In the course of ruling that the appeal to the Court of Appeal was incompetent because it did not raise a question of law, reference was made to s 67(1) and the scope of an appeal brought under that section. Bryson JA, with whom the other member of the Court, Santow JA, agreed, stated:

“[39] Limited rights of appeal are sometimes conferred in legislation which refers to “a point of law” or “a question of law.” The words of s 67(1) are not in one of these familiar forms, and raise for consideration the possibility that when the legislation refers to the Tribunal “[deciding] a question with respect to a matter of law,” the subsection might be intended to refer to deciding a question which is in some way wider than or different to simply deciding the matter of law, such as a question of the kind referred to (not at all clearly) as a question of mixed fact and law, in which decision is required on the application of a legal test or a standard to the facts under consideration; the facts as well as the law must be decided, in the process of deciding what result is produced by their interaction.

[40] The terms of s 67(1) and particularly the words “with respect to” in their context seem to me to be capable of bearing a meaning in which the decision which may be appealed against is a decision specific to a matter of law. However they also seem to be capable of or at least to raise for consideration whether they bear another meaning in which the decision is one in which a question of law is involved, but the decision is or may be a decision on some wider matter than the question of law itself. In the first reading the words “a question with respect to” make the relation between the decision and the question of law specific; in the second reading the longer expression including these words is employed to indicate some penumbrum of meaning wider than the question of law itself.

25 After considering decisions with regard to sections in other Acts in terms similar to s 67, his Honour went on:

26 Bryson JA then reviewed decisions on s 67(1) and came to the opinion that the section should be read with the narrower reading of the two that he had posited in paragraph 40 of his judgment as set out above. Thus the appeal relates to a pure question of law. There it was held that a determination that an agreement was not a fixed price contract was a question of fact.

27 Basten JA, with whom Mason P agreed, in Grygiel v Baine, above, at [26] followed Bryson JA’s view of the scope of an appeal under s 67(1).

28 In Chapman v Taylor and Ors; Vero Insurance Ltd v Taylor [2004] NSWCA 456 Hodgson JA said at [33]:

29 The jurisdiction of this Court under s 67(1) was recently considered in Bahadori v Permanent Mortgages Pty Limited [2008] NSWCA 150. There Tobias JA reviewed the decisions that had considered the jurisdiction under this section or similar sections in other legislation and stated:

Determination

(a) Termination of the contract

30 The first two grounds of appeal relied upon by the builder are that the Senior Member erred in law in finding that the owners were entitled to terminate the contract in accordance with clause 12.3 of the contract on 3 August 2003. It is alleged that there were subsidiary errors of law made by the Tribunal in reaching this decision. The particular findings of the Senior Member that are challenged are numbers 12, 17, 18 and 19 as set out in the Tribunal’s reasons quoted above.

31 There is no issue that the owners were in breach of the contract by the failure to pay the eighth progress payment following certification by the architect. Nor is it in dispute that the builder was entitled to issue the notice suspending works on 8 July 2002 in accordance with cl 12.7.1 of the contact.

32 What the builder does dispute is the finding that in December 2003 the builder “must be taken to have waived his rights under the suspension notice” (finding 12). The builder also disputes that the owners were not in breach of the contract when they issued the notice terminating the contract, (finding 18) because the failure to pay the eighth progress payment was not a “breach” under cl 12.3 so as to preclude the owners from exercising their rights under that clause (finding 19). The builder contends that these decisions are erroneous “in respect of a question of law”.

(i) the builder’s abandonment of the right to terminate

33 The factual bases for the Senior Member’s findings are set out in her reasons commencing at page 50. It is unnecessary to detail them given the issues raised on the appeal. In brief they are as follows.

34 On 19 June 2002 the builder submitted the claim for the eighth progress payment. The architect certified the claim on 24 June 2002. By 4 July 2002 the builder was aware that there was a problem with the payment and sought a written explanation from the architect for the delay and enquired when it would be paid. The architect replied that it was a matter between the builder and the owner. The Senior Member held that the owners had withheld progress payment 8 on the architect’s advice.

35 On 8 July the builder purported to suspend the works. The Senior Member found that the builder was entitled to take that step and to commence action to end the contract under cl 12.7.

36 On 5 August the builder sent a notice of dispute pursuant to cl 13.1 of the contract. On 9 August the architect advised the builder that the certificate was to be “withdrawn” by reason of defective work. The Senior Member held that the architect was not entitled to withdraw the certificate.

37 The Senior Member concluded that the owners were in breach of the contract by failing to pay the progress payment.

38 The Senior Member found that from 8 July both parties made “genuine and constant” attempts to settle the dispute (finding 10) and that they met in an attempt to reach a resolution from 21 August 2002 to 4 December 2002 (finding 11).

39 However, the Senior Member found that “by early December after the third dispute resolution conference and some 5 months after the builder had issued the suspension notice, he had abandoned his rights in respect of that notice”. The Senior Member reached this conclusion principally from a consideration of cl 12.7 of the contract. This clause is relevantly as follows (the emphasis to the word “immediately” is that given to it by the Senior Member when quoting the clause):

“Determination by Builder”

Without prejudice to any other rights and remedies which the builder may possess if the Proprietor shall make default in any one or more of the following respects:

12.7.1 If the Proprietor fails to make any payment due under the provisions of clause 10.4 within 5 days of its becoming due or commits any other breach of this Agreement; or

…………………….

12.7.7 If the Proprietor intimates that the Proprietor is unable or unwilling to make any payment required by this Agreement,

immediately

40 The Senior Member stated (at 64-65):

41 The Senior Member determined that the builder had to exercise its right to terminate the contact, having issued a suspension notice, within a reasonable time. She also held that the reasonable time had terminated by early December after the third and last attempt to resolve the dispute or at least by the time the owners terminated the contract in August 2003.

42 The builder argues that the Senior Member made the following errors in making these findings:

(a) there was no regard to the “established legal principles regarding waiver”;

(b) no notice was given during the proceedings of the Senior Member’s intention to make the finding;

(c) no reference was made to the evidence;

(d) no reference was made to the terms of the contract;

43 The owners argue there was no error of law made by the Senior Member in determining that the builder had waived its right to terminate the contract. It is submitted that it was a finding of fact made in accordance with the evidence.

44 It seems to me that the Senior Member was correct to read into the contract a term that the builder had to exercise its right to terminate the contract within a reasonable time following the giving of the notice suspending works. The builder could not refuse to continue to carry out the work and yet keep the contract on foot indefinitely. True it is that while negotiations were underway under the dispute resolution procedures, the builder could not be expected to terminate the contract as it was taking action in order to keep the contract alive. It could not be said that the builder waived or abandoned any rights by making a genuine effort to resolve the dispute with the owners, especially as the owners were themselves in breach and could have at any time resolved the dispute by making the payment that was due under the contract. Clause 13.6 of the contract preserved rights accrued to the builder in the event of no agreement being reached between the parties after efforts to resolve the dispute.

45 But it was open to the Senior Member to find as a fact that the dispute resolution progress had effectively reached an end by December 2002 and that the builder should then have made a decision what to do about the breach by the owners: either to terminate the contract or to carry on with the works notwithstanding the breach. It was further open to the Senior Member to decide that at least by July 2003 the builder had in effect decided to take no further action under the contract and certainly not to exercise the right of termination immediately or in the near future.

46 Both parties have referred me to the conduct of the builder and the owners after December 2002. The submission is made by the builder that in light of that material the builder could not be taken to have abandoned its right to terminate and was still negotiating. The builder submits that the Senior Member could not have taken this material into account in finding as she did. There is no direct reference to it in her judgment.

47 There were offers of settlement made by the builder through to April 2003 but none of them refers to any intention to terminate the contract if the offer were refused. There was thereafter an attempt at mediation but that broke down when the builder took umbrage at the owners’ approaching the mediator. The builder made no attempt to attend to defective work even where it was not in dispute and had occurred before the issue of the notice suspending the works. There is little doubt that the builder was using the suspension notice as a tactical advantage in the negotiations without bringing the dispute to a head.

48 The finding by the Senior Member is one of fact, or at least mixed fact and law. It does not matter that this Court may have come to a different conclusion. The builder never did exercise the right to terminate the contract between the offer in April 2003 and the purported termination by the owners in August 2003 even though all attempts at resolution of the dispute had virtually come to an end in July.

49 I am not persuaded that the Senior Member’s decision as to the abandonment of the builder’s right to terminate the contract was an error “with respect to a matter of law”. In any event it does not seem to me that this finding has any particular relevance in light of my finding in relation to the termination of the contract by the owners.

(ii) the owners’ termination of the contract

50 On 16 July 2003 the owners issued a notice under cl 12.2 of the contract calling upon the builder to complete the works or the owners would terminate the contract. That clause is as follows:

12.2 Proprietor’s Notice of Builder’s Default

If the Builder makes default in any one or more of the following respects:

12.2.1 If the Builder, without reasonable cause, wholly suspends the carrying out of the Works before Practical Completion thereof; or
12.2.2 Fails to proceed diligently with the Works,

51 On receipt of the notice, the builder informed the owners that it would regard any attempt to terminate the contract as a repudiation of it.

52 The Senior Member determined that the owners were entitled to issue the notice under cl 12.2 by reason of the defective work of the builder in relation to an air conditioner and the Trend windows. In relation to the latter the Senior Member found that the builder had failed “to proceed with the works with due diligence and in a competent manner” within the terms of that clause.

53 On 5 August 2003 the owners purported to terminate the contract under cl 12.3. That clause is as follows:

12.3 Determination by Proprietor

54 In the Tribunal two objections were raised by the builder to the owners’ purported termination of the contract under this clause: first, the termination was “unreasonable or vexatious” and, secondly, as the owners were themselves in breach, the notice of determination was “deemed to be void and to no effect”.

55 The Senior Member found that the notice of determination was not “unreasonable or vexatious” in light of the defective installation of the Trend windows. However, having found that the owners were in breach of the contract by reason of failing to make the progress payment, she had to consider the consequences of that breach on the validity of the notice issued under clause 12.3.

56 The Senior Member accepted that she had to construe the contract to determine the rights of the parties although she did quote from, and have regard to, a passage from a leading text on contract law concerned with the situation where one party is in breach of the contract at the time when a breach by the other party occurred. The passage quoted by the Senior Member in her reasons was as follows (the emphasis given to certain words is that of the Senior Member) (at 75):

“Where one party (A) breaches the contract and that breach is followed by a breach by the other party (B) then, assuming that both the breaches are repudiatory .. (my emphasis) the breach by party A will give party B the right to terminate future performance of the contract. If B exercises that right and accepts the repudiation his subsequent failure to perform his obligation under the contract will not constitute a breach of contract…… It is suggested that in such a case the effect of B electing to affirm the contract is to leave the primary obligation of both parties unchanged. The contract therefore remains in existence for the benefit of A as well as for B so that A should be free to elect to terminate performance. Thus in State Trading Corporation of India v M Golodetz Ltd Kerr LJ stated that :

“If A is entitled to treat B as having wrongfully repudiated the contract between them and does so, then it does not avail B to point to A’s past breaches of contract whatever their nature. A breach by A would only assist B if it were still continuing when A purported to treat B as having repudiated the contract and if the effect of A’s subsisting breach was such as to preclude A from claiming that B had committed a repudiatory breach. In other words, B would have to show that A, being in breach of an obligation in the nature of a condition precedent, was therefore not entitled to rely on B’s breach as a repudiation.”

57 Having determined that the builder had not repudiated the contract by failing to achieve the practical completion date of 15 May 2002, or that, if such repudiation had occurred, the owners had not accepted it, the Senior Member then considered the terms of cl 12.3.

58 The relevant part of the Senior Member’s reasons is as follows (the emphasis is that of the Senior Member) (at 77):

“What does clause 12.3 mean by ‘breach’? Does it mean any ‘breach’? Does it mean (as I have found) that although the builder was liable to remove and replace all the windows, a problem of which he had been on notice and failed to address for over 12 months, the owners were prevented from terminating the contract under clause 12.3 because they were in ‘breach’ of their obligation to pay progress certificate 8?

It is difficult to accept that in these circumstances the owners would not have been entitled to bring matters to an end under their common law rights. It is therefore difficult to accept that they were precluded from exercising their right under clause 12.3 of the contract. As I have already noted, contractual rights to determine contracts are included in contracts to expand common law rights (my emphasis).

What is more, I have found that by the time the owners acted to end the contract in August 2003, the builder had waved his rights under clause 12.7 to suspend the work and end the contract due to the owners' failure [to] pay progress certificate 8 in July 2002.

It is difficult to accept that the owners could not avail themselves of their right under clause 12.3 in August 2003 because of a ‘breach’ they had committed over 12 months prior to that time, a ‘breach’ which the builder had failed to act upon.

To conclude therefore:

(a) I reject the submission that the builder's failure to reach practical completion by 15 May 2002 was repudiatory as contemplated in Chitty, so as to absolve the owners' failure to pay progress certificate 8 from amounting to a breach of contract;

(b) The owners' failure to pay progress certificate 8 in July 2002 amounted to a breach of clause 12.7.1 of the contract;

(c) This breach did not, however, amount to a ‘breach’ within the magnitude of what was contemplated under clause 12.3 so as to prevent the owners from exercising their right to end the contract under that clause;

59 The reference to the phrase “expand common law rights” is a reference to an observation that the Senior Member had made earlier in her judgment as follows (at 72):

Brooking on Building Contracts

60 This statement refers to a comment made by the authors of the text to which the Senior Member referred in a chapter entitled “Express Powers of Determination” and under the heading “Proprietor’s powers”. However, the comment should be seen in the context in which it was made in the text. It comes at the end of a paragraph dealing with a decision concerned with a provision of a contract that used the term “substantial breach of contract” in respect of the power of a proprietor to terminate the contract. That decision held that the breach by the builder had to be a substantial one but not one that was so serious as to justify termination at common law. This decision was one, according to the authors, that was consistent with “a general perception that contractual rights to determine are included into contracts to expand the common law right to determine”.

61 In effect the Senior Member has considered the word “breach” in cl 12.3 to mean “a breach that would have amounted to a repudiation of the contract under the common law”. That is apparently why she quoted the earlier passage giving emphasis to the words “assuming that both the breaches are repudiatory”. I note in passing that a failure to pay a progress payment would not necessarily amount to a repudiation of the contract. It would depend upon all the circumstances including how many progress payments had been made. But this particular contract had to be read according to its terms and not by comparing or contrasting it with what might have been the situation under the common law. In any event the statement from Brooking quoted above refers to what is “generally accepted”, and does not purport to state a definitive principle of construction of provisions for the determination of a contract.

62 There is nothing in the contract between the parties that suggests that there are breaches under the contract having different degrees of seriousness. Nor is the word “breach” in cl 12.3 modified in any way, for example by the use of the phrase “in substantial breach of the contract”. I do not understand why the word should not be given its normal meaning, even if such a meaning might appear to be unjust in a particular factual situation. But I see no injustice in the present case when the owners could so easily have remedied the breach at any time. In any case a refusal to pay the progress payment for 13 months might amount to repudiatory conduct.

63 The learned authors of Brooking refer to the type of provision contained in cl 12.3 as one being found in “some older standard form building contracts”; see [12.14] at pg 226. Although they comment on the drafting of the clause and a problem as to whether it is the notice specifying the default or the notice terminating the builder’s employment that should not be “unreasonable or vexatious”, they make no comment on the proviso concerning the proprietor not being in breach. There is no suggestion in the text that the proviso should be read down in the way that the Senior Member did.

64 In my opinion the Senior Member erred in law in her construction of cl 12.3 by not giving the term “breach” its ordinary meaning as “having failed to comply with a term of the contract”. The Senior Member accepted that the owners were in breach of the contract from the time they refused to make progress payment 8. As I have noted, that was a breach that could easily have been remedied. The owner should have made the payment and then pursued other rights under the contract to address the defective work. In my opinion the owners’ position at common law was irrelevant when considering whether they were entitled to proceed under cl 12.3. In effect the parties had abandoned the contract by August 2003.

65 Whether this error makes any substantial difference to the orders that should have been made by the Tribunal will be considered later.

(b) building defects

66 A substantial dispute between the parties before the Tribunal and before this Court concern various alleged defects in the work carried out by the builder and in particular the installation of the Trend windows. The latter dispute was a major source of the evidence before the Tribunal and the submissions before this Court. As I have noted, there was a conclave of experts formed at the Tribunal to consider these issues and a number of experts gave evidence on this aspect of this dispute including the architect.

(i) the architect

67 It was argued by the builder that, because of the position of the architect under the contract, his evidence should have been given primacy to the views of other experts called at the conclave and who gave evidence before the Tribunal. It was submitted that the Senior Member erred in law in not treating the evidence of the architect in this way.

68 Much was made on behalf of the builder of the architect’s role under the contract as the “assessor, valuer and certifier” under cl 5.2.3. He performs this role on behalf of the owner, as his agent. His involvement in the building may make him an important witness when it comes to his opinion on various aspects of the work when there is a dispute. His on-site experience may mean that his evidence might be preferred to another expert who was not in so advantaged a position. But it does not seem to me that the Tribunal or any other court must of necessity gave pre-eminence to his opinions over those of other experts regardless of the qualifications of the other experts.

69 The Senior Member referred to this argument as follows (at 34):

“Before moving on to the rectification cost I will deal with one further point raised by the builder’s submissions, namely, that I should accept the architect’s evidence on the windows as being ‘determinative’. As I understand the submission, because ‘the Architect was the only person nominated under the Contract to make assessments: then his evidence must be determinative. The short answer to this is that I consider the architect’s evidence to be less ‘at arm’s length’ than the experts due to his involvement in the dispute.

70 I agree. The decision relied upon by the builder before the Tribunal was Peninsula Balmain Pty Limited v Abigroup Contractors Pty Limited [2002] NSWCA 211 and particularly at paragraph 80 in the judgment of Hodgson JA. I do not understand that the decision is on point at all, not even by analogy. That case concerned a Superintendent appointed under a contract and what powers that person could exercise after the contract had been terminated. In my opinion it has nothing at all of relevance to say about the weight to be attributed to the evidence of the architect appointed under a contract before a tribunal dealing with a dispute arising under the contract as to the quality of the work carried out.

(ii) The builder’s expert, Mr Austin

71 A major complaint raised by the builder in this Court was the attitude of the Senior Member to the evidence of the expert for the builder at the Tribunal, Mr Austin. It was claimed in effect that the Senior Member treated his evidence unfairly and as a result denied the builder procedural fairness. Further it was submitted that the Senior Member was unfair to the builder because of criticism she made of the conduct of his solicitors during the conclave of experts at which she was not present.

72 There is a lengthy affidavit by the solicitor for the builder in relation to this issue. The background is that the owners employed a company to rectify the works once they had purported to terminate the builder’s employment. For the proceedings in the Tribunal they produced an expert report prepared by Mr Ogden as to the rectification of defects. The solicitor for the builder took objection to the report on the basis that many of the matters had not been specified in the owners’ amended points of claim. The solicitor instructed Mr Austin not to consider these matters when he was inspecting the site in order to comment upon Mr Ogden’s report.

73 At the conclave of experts the owners were directed to prepare a Scott’s Schedule in relation to defective work. Some of the items on this schedule were those appearing in Mr Ogden’s report and disputed by the builder as not being originally claimed by the owner. It was agreed to mark these items as “not claimed”. All items claimed were considered by the conclave and a document, T1, was prepared that listed the items and the experts’ views as to the rectification costs of each item. Mr Austin had marked some items on T1 as “not inspected” or “not claimed”.

74 After the conclave concluded there was correspondence between the legal representatives of the parties as to the “unclaimed” matters; the owner insisting on the claim and seeking that the experts jointly review these items, and the builder insisting that the items were not to be considered by the Tribunal.

75 At the hearing the Senior Member dismissed the objection by the builder to the “unclaimed” items on the basis that the Tribunal was not bound by strict pleadings and that the builder had ample notice of all the items claimed and had been able to address them (at 15 and 720 of the transcript). They were set out in a document that became T3. Mr Austin gave evidence about these matters without having inspected them.

76 The Senior Member commented upon the course of conduct of Mr Austin as follows (at 38):

“In relation to the “Not claimed” category, Mr Austin’s position was that as the owners had not pleaded these items he did not address them at the conclave. It now appears from the builder’s written submissions that the builder’s legal representatives intervened and that this led to Mr Austin taking this approach. I leave to one side the propriety of legal representatives interfering at an expert’s conclave convened by the Tribunal. What is of concern is that Mr Austin’s stance shows a less than satisfactory understanding of his role as an expert witness whose primary duty is to assist the Tribunal in trying to understand the nature of the technical issues it is asked to determine.

77 The builder complains that the Senior Member did not raise her criticism of Mr Austin’s conduct during the hearing so that it might have been addressed by submissions or further evidence and hence there was a breach of procedural fairness against the builder. There is also complaint about the criticism of the builder’s lawyers contained in the above quote, but that was a comment made in passing that could not possibly give rise to any defect in the hearing or the Senior Member’s reasons whether or not the criticism was justified.

78 It is unwise for any court or tribunal to use criticism of a witness’s conduct to reflect adversely upon the witness’s evidence without raising that matter with the party calling the witness. Of course some matters that might affect an assessment of the evidence of a witness may not be apparent or sufficiently apparent at the time of the hearing to permit the tribunal to raise the issue. Some matters are impressionistic or come to light when a detailed examination is made of the evidence of the witness when compared with other evidence. It is not every matter affecting the witness’s reliability that needs to be raised at the hearing by the tribunal.

79 It seems to me, with respect, that the criticism of Mr Austin was unduly harsh, even if it were justified, which I doubt. Clearly the builder’s lawyers made a strategic decision as to what instructions to give Mr Austin in relation to the material contained in Mr Ogburn’s report upon which Mr Austin was to comment. The criticism, if any, should have been made of the builder’s lawyers and, if their conduct meant that less weight could be given to the evidence of Mr Austin in relation to those matters that he had not inspected, so be it. This would have been as a result of the attitude taken by the legal representatives of the builder to the proceedings in the Tribunal, proceedings that their client had commenced. In the end the decision to treat the proceedings as having a degree of formality more appropriate to the District Court and to take pleading points resulted in Mr Austin being less able to assist the Tribunal on deciding the matters contained in Mr Ogden’s report.

80 In any event, whether the criticism of Mr Austin was justified or not, it does not seem to me that the result has been a breach of procedural fairness. It was not this criticism alone that caused the Senior Member to diminish the value of the evidence of Mr Austin. The Senior Member was critical of Mr Austin for his failure to conduct water tests on the windows and she did not accept his explanation that he did not have sufficient time to do so (at 31). She was also critical of his evidence in relation to window fins and the installation of flashings (at 32). The builder raises no criticism of these findings. It is clear that the Senior Member would have preferred the evidence of Mr Ogden to that of Mr Austin regardless of the particular criticism about which complaint is now made. In my opinion the Senior Member was entitled to come to the finding of fact that she did when choosing between expert witnesses.

(iii) Denial of access to builder

81 By 5 December 2003 the owners had commenced rectification work on the premises using new builders. The builder sought access to the site on 13 December but the owners refused this request on 19 December. Despite a letter from the builder’s lawyers advising that they would consider the denial of access as a defence to any claim by the owners for rectification work, the owners made no offer of access. On 11 February 2004 the Senior Member gave an indication that the denial of access might lead to inferences being drawn adverse to the owners. Access was granted on 16 February after the rectification work had been completed.

82 This was a matter ventilated at the Tribunal with all the vigour that attended every issue raised between the parties. It was dealt with fully by the Senior Member in her reasons (at 10ff). She determined that the explanation given by the owners for refusing access in December was both plausible and reasonable. Ultimately the Senior Member made the following decision (at 12):

83 These were clearly findings of fact well within the power of the Senior Member to make. They are in my opinion not attended by any error of law that would provide an appeal to this Court.

(iv) The Trend windows

84 A major cause of the dispute between the builder and the owner concerned sliding doors and windows fitted as part of the renovation works and manufactured by Trend. I shall refer to them collectively as “windows”. The windows leaked and the issue for resolution by the Tribunal was essentially whether the leaking was a result of poor workmanship by the builder in fitting the windows, as the owners contended, or whether they were defective in manufacture, as the builder argued. A significant issue was whether the windows leaked because of the absence of adequate flashing.

85 The Senior Member listed the following matters as being “common ground” (at 26-27):

“(a) The owners chose the windows, the builder installed them and the owners have paid him for them. (The builder's evidence that he advised the owners against installing the windows is directly refuted by the owners.)

(b) The windows leaked and, to use the words of the architect, were "lemons".

(c) The architect became aware that there was a problem when the owners' neighbour hosed the windows sometime around 29 May 2002.

(d) On 30 May 2002 the architect wrote to the builder requesting that the windows be water tested.

(e) By 19 June 2002, the site meeting minutes state that: "window rectification under way".

(f) The manufacturer "Trend" attended the site on a number of occasions as attempts were made to address the problem.

(g) Around February 2003 Trend advised the builder that it would refund to him the cost of the windows and some additional money for removal and installation costs.

(h) On the 13 October 2003 Trend refunded to the builder the $19,210.33 he paid for the windows and an additional $3000 "as a contribution towards the cost of removal and replacement of the windows and doors" (the Trend Deed of Release).

86 The Senior Member heard evidence on this issue from a number of expert witnesses including Mr Ogden and Mr Romeika on behalf of the owners and Mr Austin on behalf of the builder. The architect, the builder and Mr Boland, one of the owners, gave evidence on the topic.

87 As a result of the evidence she heard and the arguments put before her, the Senior Member made the following finding (at 33):

88 I am quite unable to see how the decision of the Senior Member in any way involved an error of law. The submissions of the builder simply seek to relitigate at length the issue determined by the Senior Member, an issue of pure fact.

89 There was ample evidence to support the findings of the Senior Member and the submissions of the builder before this Court, with respect, take a very narrow view of the evidence much of which is quoted out of context, isolating single answers to particular questions and then seeking to argue the generality. The simple fact is that, apart from the evidence of the builder’s expert, the predominant evidence was that the leaking was due to poor installation, because the windows were out of alignment, and/or because of the absence of flashings. As has already been indicated, the Senior Member did not accept the evidence generally of the builder’s expert and she was entitled to come to this view.

90 There was a dispute between the builder and the architect as to the use of flashings; the builder insisting that his instructions were that the flashings not be visible. But the Senior Member determined that dispute for reasons that she gave adverse to the builder (at 29-30). Mr Ogburn was of the opinion that the use of flashings would not have made any difference because the windows had not been installed correctly. Mr Romeika was critical of the windows as not being compliant with the applicable standard but was of the opinion that this was not the cause of the leaking. His view was that there was no, or insufficient, flashings. He was critical generally of the installation of the windows. Trend offered to replace the windows but this was not an admission of any defect in the windows, as it insisted that they had been incorrectly installed.

91 Of course, if the windows were installed incorrectly, it did not matter that the owners chose the brand of windows. Nor was it matter for the architect to determine and instruct the builder in detail how to install the windows or whether or not to use flashings. As I have already indicated, there was a dispute between the architect and the builder about the instructions given by the architect and this was determined adversely to the builder.

(v) Statutory warranties

92 It is clear that the builder purchased the windows from Trend and supplied them to the owner by installing them into the building. It was common ground that the builder purchased the Trend windows upon the instructions of the owners. The question of warranties by the builder under the Building Act arises. Section 18B of the Act relevantly provides:

93 Section 18F contains the following defence:

94 It seems clear that it was to this issue that the Senior Member was referring in the second quote from her judgment above when she commented upon the fact that it did not matter whether the leaking was due to defective windows or defective installation. The result would be the same because the builder had breached the warranty under s 18B(b) in relation to his supply of those windows. The builder does not come within the statutory defence because he did not give “advice in writing” to the owners that the windows were defective.

95 Although it is unnecessary for this Court to decide the issue, it seems to me that there is a legislative intention that the warranties and defences available are to be only those set out in the Act. The builder argued that the defence in s 18F was only one defence available. But I find it impossible to accept that, if the defence provided to a statutory warranty does not apply because the builder has not done what was required to engage the defence, the builder can look to some other non-statutory defence that does not have such a precondition.

96 The builder argued that he installed the windows at the express instruction of the architect and that it was obliged to comply with that instruction under the contract notwithstanding the builder’s view, orally expressed to the architect, that the windows were defective. It was submitted that “contractual compliance with an Architect’s instructions in the face of reasonable objection by a Builder is within the contemplation of section 18F”. I do not accept that submission. The builder could, and should, have raised those concerns in writing with the architect. The defence would then have applied. It seems clear to me that the defence is limited in order to avoid the very contest that arose in this case: a dispute as to whether the builder gave advice against the work it was required to carry out. By not giving advice in writing the statutory defence did not apply. There is no justification to read the defence wider than it is stated or to read some other defence into the Act.

97 In my opinion, if the windows were defective, the builder was in breach of the statutory warranty in respect of them so far as the owners were concerned. The builder would have to look to Trend for any compensation for the breach of any warranty that it gave in selling the windows to the builder.

(c) Bias

98 It was submitted by the builder that, given the breach of procedural fairness in relation to the evidence of Mr Austin, its expert, and the mistakes of law that allegedly infest the reasons of the Senior Member, there is a reasonable apprehension of bias on the part of the Senior Member to the builder.

99 This ground of appeal does little to commend its drafter. For my part, allegations of bias, either actual or imputed, against a tribunal should not be made without good justification. If there were errors in the judgment sufficient to warrant the findings of the Tribunal being overturned, it would not matter whether there was apprehended bias or not. If there were a breach of procedural fairness sufficient to find that the proceedings before the trial miscarried, similarly the allegation of bias is superfluous.

100 But in any event, there was, in my opinion, only one significant error of law in the reasons by the Senior Member and that merely discloses that she is human. There was no breach of procedural fairness. From that part of the transcript I have seen, it is evidence that the Senior Member strove to deal with the matter fairly and expeditiously against sometimes taxing conduct by the parties or their representatives because of the antagonism of the parties toward each other.

(v) Damages

101 Senior Counsel appearing for the builder eschewed during the hearing before this Court any reliance upon a claim for quantum meruit. There is no claim by the builder for compensation by reason of the termination of the contract other than for monies owed. Although the owners repudiated the contract by giving notice terminating the builder’s employment in breach of the contract, it simply meant that the contract was then at an end. If the builder had not already abandoned its contractual rights and obligations by the time of the owners’ repudiation, as the Senior Member found, the builder certainly accepted the repudiation. But, of course, it does not follow that rights and obligations accrued under the contract that had not been abandoned thereupon ceased to exist. The owners were entitled to rely upon statutory warranties and the terms of the contract up until the time it was terminated.

102 Clearly the builder was entitled to the eighth progress payment and interest on that amount from the date it was due. In accordance with the Senior Member’s findings as to defective work carried out by the builder, the owners were entitled to reasonable costs for rectification of those defects. None of this is in dispute. The issue litigated before the Tribunal and again before this Court is the amount of work that needed to be rectified and the costs of the rectification. These are clearly matters of fact.

(i) The Tribunal’s assessment.

103 The Senior Member held that the owners should be reimbursed for the cost of replacement windows together with the costs associated with the removal of the Trend windows and the installation of the new windows. She awarded the owners the amount of $22,210.33, being the costs of the Trend windows even though the owners had installed more expensive windows. The Senior Member accepted Mr Ogburn’s assessment of the costs for the removal and replacement of the windows. This determined on a total sum as damages in respect of the windows of $60,024.33.

104 The Senior Member considered the other claims made by the owners and made ruling to which I will refer shortly

105 The builder was to receive the eighth progress payment of $21,662.39 and $11,705.90 retention money plus interest on those amounts.

(ii) The builder’s submissions

106 The builder submitted that the owners were not entitled to damages in respect of any item “where the Builder was unreasonably denied access by the Owners to inspect (and where such access was denied)”. But the Senior Member decided that the owners did not act unreasonably in denying the builder access. This was clearly a finding of fact and is not to be reviewed by this Court.

107 The builder also submitted that the owners were not entitled to recover any damages “for any item of alleged defective work not claimed or pleaded by the owners”. This was a matter dealt with by the Senior Member. It was open to her to reject a similar submission made before her and there is no error of law arising. This submission should be rejected.

108 The builder next submits that “any damages for defective or incomplete work should be limited to the costs the Builder would have incurred if he had been given the opportunity to complete that work”. I do not understand why the damages should be so limited or how the Senior Member erred in law in the manner in which she calculated the damages.

109 In relation to the Trend windows the builder submitted that the owners were entitled to the refund of the costs of the windows and the $3000 towards removal and reinstallation. This is the amount of the ex gratia payment made by Trend to the builder. Again I do not understand why this Court should not adopt the damages awarded by the Tribunal unless it can be shown that in someway the assessment of the damages was erroneous in respect to a question of law. In my opinion no such error has been shown.

The owners’ submissions

(i) rectification costs

110 After the contract was at an end by reason of the owners’ notice purportedly terminating the builder’s employment, the owners had the work completed by a company, BRM. The owners paid BRM $78,364.00 for rectification of the works and claimed this amount. However, at the conclave there was a document drawn up, T1, containing the items of work claimed by the owners against which the two experts gave opinions as to the reasonable costs of rectification. The Senior Member described this document in her reasons (at 12) as “persuasive evidence”.

111 The Senior Member notes that the owners’ principal argument was that they should recover the actual cost of rectification work done by BRM and stated (at 130);

112 The Senior Member then referred to T1 and stated:

113 The owners complain that the Senior Member had no basis to question the reasonableness of the amount paid to BRM as there was no challenge to the actual costs of rectification during the hearing: none of the experts were questioned about the amount claimed and paid to BRM. The owners rely upon Hyder Consulting (Aust) Pty Limited v Wilh Wilhelmsen Agency Pty Limited [2001] NSWCA 313 as support for the proposition that the actual cost of rectification should ordinarily provide the basis for damages. There Meagher JA stated

114 Giles JA with whom Sheller JA agreed stated:

[96] In my opinion his Honour was in error. Neither Bellgrove v Eldridge (1954) 90 CLR 613 nor the other cases cited supported damages based on the theoretical cost of reconstruction of the pavement when the actual cost of reconstruction of the pavement was known, and the actual cost was powerful evidence of an alternative method of calculating rectification costs.

[97] In Bellgrove v Eldridge the owner sued the builder for breach of contract in constructing a building with defective foundations. It was held that the measure of damages was not the diminution in the value of the building by reason of the defective foundations, but the cost of reasonable and necessary work to rectify the foundations plus consequential losses, and that in the particular case demolition and rebuilding was reasonable and necessary to provide a building in conformity with the contract. Theoretical cost versus actual cost was not in question.

"It was suggested during the course of argument that if the respondent retains her present judgment and it is satisfied, she may or may not demolish the existing house and re-erect another. If she does not, it is said, she will still have a house together with the cost of erecting another one. To our mind this circumstance is quite immaterial and is but one variation of a feature which so often presents itself in the assessment of damages in cases where they must be assessed once and for all."

115 Complaint is made by the owners that the Senior Member did not give reasons why she preferred the costs calculated on T1 over the actual costs of rectification paid to BRM, particularly where there was no issue taken with the reasonableness of the actual cost of the rectification of works.

116 As I have already indicated the assessment of damages is primarily a question of fact and provided it was open to the Tribunal to assess damages in the way that it did, it cannot be a ground of appeal to this Court under s 67(1) that some other way of assessing the damages may have been fairer or more appropriate.

117 This ground seems to me to give rise to a question of fact within the passage I have quoted above from Azzopardi. There was evidence before the Senior Member as to the reasonable costs of rectification contained in T1. The actual costs may be “powerful evidence” as to the reasonable costs of rectification but it is not the only evidence. One of the significant purposes of the expert evidence was to provide the Tribunal with the evidence in order to assess damages. The Senior Member was entitled to find it persuasive on the basis that it was the joint evidence of experts from both sides. Although there was no evidence to the effect that the actual payment to BRM was unreasonable, in my opinion it was open to the Senior Member to assess the damages according to the evidence from the experts who had given evidence before her.

118 The reasons of the Senior Member acknowledge the competing submission made on behalf of the owners but she determined that the evidence of the experts was “more neutral”, by which I presume she meant that it was an assessment made for the purposes of the Tribunal by the owners’ own expert. I accept that there can be different estimates as to the costs of rectification and yet both be reasonable. I acknowledge that it might have been fairer to the owners to use the actual costs paid when there was no challenge that the amount for rectification by BRM was unreasonable. However, I do not believe there was an error of law. The reasons for the decision to use the T1 estimate rather than the actual cost of rectification could have been more fulsome but they seem to me to be adequate. It may be that the reasons show that the decision was unreasonable but this is not a valid ground of appeal.

(ii) Trend windows

119 It is submitted on behalf of the owners that the Senior Member erred in law in relation to her treatment of the evidence as to the replacement of the Trend windows.

120 The builder received the sum of $22,210.30 from the manufacturer of the windows made up of the cost of the windows and a contribution to removal costs. By that payment Trend become the owners of the windows.

121 The Senior Member found that the only way of rectifying the problem with the windows was for their replacement. The owners had replaced the windows with those of better quality that were more expensive. Although the owners were seeking repayment of the cost of Trend windows, and not the more expensive brand, the Senior Member found that there was no evidence of the cost of new Trend windows (at 35.8 and at 82.8) and, therefore, awarded the owners the refund that Trend had allowed to the builder.

122 However item 72 of T1 was the cost of the replacement Trend windows according to the evidence of Mr Ogden given at the conclave and recorded on T1. As has been noted above, the Senior Member had indicated her preference for the evidence of Mr Ogden over the evidence of Mr Austin. There was no basis upon which the Senior Member would have rejected the evidence of Mr Ogden on this matter. It appears that the Senior Member simply overlooked this evidence.

123 The Senior Member recognised that the appropriate measure of damages was an amount that put the owners in the position as if the breach had not occurred (at 35). That was in this case the actual cost of replacement of the windows. However, in effect the Senior Member allowed an amount being the reimbursement of the amount paid for the windows and not the cost of their replacement.

124 The builder answers that the claim by the owners was for the more expensive windows as was clear from the Amended Statement of Claim that mentions the “Fantasy Windows”. However, this matter was fully argued before the Tribunal and evidence given about the matter. It was not a case of the Senior Member refusing to allow the claim because of the erroneous pleading but rather that she had simply overlooked evidence on the matter when she came to determine the issues and deliver her reasons.

125 In my opinion the Senior Member erred in law in finding that there was no evidence as to the cost of the replacement of the Trend windows. This was not a case where she had to assess the evidence and determine whether to accept it or reject it. The result of the error was in adopting the costs reimbursed to the builder for the windows, being $22,210.00, rather than the costs for the replacement of the Trend windows, being $26,710.00. Ultimately the cost of replacement of the Trend windows should have been allowed at $65,255.50, a difference of a $5,231.17 over that allowed by the Senior Member. The builder accepts that there was also a slip in the figures used by the Senior Member in relation to this claim.

126 The Senior Member also should have ordered that the windows in the possession of the owners be made available to Trend, who obtained ownership under the Deed of Release, and not to the builder which had no longer any rights in the Trend windows removed from the owners’ premises.

(iii) Costs of experts and consultants

127 The owners claim that the Senior Member made an error of law in failing to award damages for professional costs in respect of experts retained by the owners to identify defects in the work and to provide advice in carrying out the rectification work.

128 The Senior Member stated the following in her reasons with respect to this claim:

1. In general the invoices provided do not adequately identify the amount charged by the relevant persons in identifying and rectifying the damage alleged from the amounts that could be classified as disbursements in the litigation.

2. Although Mr Phillips' invoice and the architect’s invoices provide a clearer delineation between the two categories, I am not minded to take any different stance.

3. In relation to Mr Phillips' report, the architect gave sworn evidence conceding that several of the matters identified by Mr Phillips in his report were not in the builder's scope of work (for example, the painting). It is therefore difficult to ascertain what, if any, fees could be awarded to the owner and being provided simply with the invoices does not assist.

4. In relation to the architect's fees, although he has categorised and separately costed what he refers to as "dispute resolution", there is no breakdown of the figures he charged in relation to this, for example, the actual hours spent, the amount charged per hour. Further, this general categorisation is not assist me in ascertaining whether the time spent was in assisting and to identify the damage or indeed, if the time spent was warranted.

5. In relation to the claim made in regard to National Banking Solutions I am at a loss to understand why the builder should be liable for costs arising from the owners' decision to "preserve" their insurance rights which in turn led to the insurer requiring this report for defective work.

129 The owners complain that there was a “significant” claim for damages arising from the cost of the provision of advice by experts in the rectification of the works and that the invoices in evidence before the Tribunal make it clear, at least so far as some of the experts are concerned, what amount of the fees paid was due to advice in respect of the rectification work and that advice given in respect of the litigation.

130 It is submitted that the failure to award damages under this claim amounted to an error of law because the Senior Member failed to apply “the correct principle” to her finding of facts. The principle that she failed to apply is not identified and yet it is clear that the Senior Member understood that the owner could claim damages for fees paid to experts in the course of rectifying the work of the builder. She clearly knew that there was a distinction to be drawn between costs incurred in rectification and costs incurred in litigation.

131 The owners rely upon the judgment of Samuels JA in Mifsud v Campbell (1991) 21 NSWLR 725. That was a decision concerned with the absence of sufficient reasons in a judgment of the District Court. The complaint was that the judge ignored evidence critical to an issue in the case, there the issue was negligence, and as a result there was a mistrial. Samuels JA thought the error was one of law, Clarke JA doubted that it was an error of law and Hope AJA did not determine the question. That of course was an appeal by way of rehearing and it was unnecessary for the Court to find whether there had been an error of law or not.

132 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 281, McHugh JA said:

133 In Beale v Government Insurance Office (1997) 48 NSWLR 430 Meagher JA noted that, although it was unnecessary to decide in that case whether a failure to give adequate reasons was an error of law, most cases “have assumed the error is one of law”.

134 It seems to me with respect that the Senior Member failed to address the evidence before her as to each of the experts. It is clear that some of the accounts for fees that were in evidence before the Tribunal were rendered before any proceedings were commenced. Mr Romeika was engaged initially to give advice as to the leaking windows. As this was ultimately held by the Senior Member to be a result of the builder’s defective installation, those fees should have been awarded as part of the damages claimed by the owners. The fees sought were $1,760. Mr Reed gave advice in relation to the faulty air conditioning and the owners paid him fees amounting to $940. Accounts rendered by Partridge Partners totalling $3,547.50 were clearly referrable to pre-litigation advice.

135 There are fees payable to the architect, Mr Oliver, amounting to $21,494.00 that may have been incurred in attempts to resolve the dispute with the builder and rectification work. However the Senior Member dealt with this evidence at point 4 of her reasons set out above. Whether or not she was correct in her findings about that material is beside the point as this was a finding of fact. It is not reviewable in this Court. Similarly the Senior Member dealt with the fess incurred in respect of Mr Ogburn at point 6.

136 In my opinion the Senior Member ought to have allowed the sum of $6247.50 by way of damages for the cost of expert advice to the owners as part of the rectification costs.

(iv) Interest

137 The owners complain that the Senior Member erred in failing to make any order for interest. The Senior Magistrate held (at 88):

As far as I am aware, the owners' claim for interest was first raised in their written submissions when they sought interest pursuant to section 45 of the Consumer, Trader and Tendency Tribunal Regulations 2002.

In their submissions apply basic interest under the Uniform Civil Procedure Act 2005 (the CP Act).

I have therefore proceeded on the basis that the claim is now made under the CP Act.

Due to the brevity of the submission I can only assume that interest is claimed up to the judgment under s 100 of the CP Act.

Section 100 is found in Part 7, Division 3 of the CP Act. Pursuant to s 4 of the CP Act, Part 7 only applies to a court (which is defined to include a tribunal) referred to in Schedule 1 of the CP Act. The Consumer Trader and Tendency Tribunal is not referred to in Schedule 1.

138 The owners note that interest was claimed in respect of monies expended in the rectification work in both the Statement of Claim filed in the District Court and in the Amended Points of Claim before the Tribunal.

139 The owners argue that even if s 100 was not applicable, they were entitled to interest on the monies paid out as part of the damages suffered as a result of the defective work performed by the builders and the Tribunal could order payment as part of its general power under s 48O of the Building Act. In this regard the owners rely upon the decision of the Court of Appeal in Amery v New South Wales (Director-General, NSW Dept of Education and Training) [2004] NSWCA 404. Although this decision was overturned on an appeal to the High Court, the relevant part of that judgment was not considered on the appeal.

140 The relevant part of Amery is as follows:

Interest
[148] The appellants claimed interest on any damages they may be awarded. This claim was determined by the presiding member as he considered that it raised an issue of law: see Administrative Decisions Tribunal Act, s 78(2). The judicial member refused the claim for interest on essentially two grounds. First, he considered that, there being no provision in the ADA for the award of interest, and no authority that the Tribunal had the power to award interest, no award should be made. Secondly, he considered that as the matter had been raised late in proceedings, any interest which would have been made would have only been from the time of amendment so that an order would be of no utility.

Hungerfords v Walker

This appeal raises the important question whether, at common law, a court, when awarding damages for breach of contract or negligence, can include in its award damages, assessed by reference to appropriate interest rates, for the loss of the use of money which the plaintiff paid away and lost as a direct consequence of the defendant’s breach of contract or negligence.

if his damages are not paid promptly

… there is no acceptable reason why the ordinary principles governing recovery of common law damages should not, in an appropriate case, apply to entitle a plaintiff to an actual award of damages as compensation for a wrongfully and foreseeably caused loss of the use of money.

[152] The appellants submit that in this case the teachers’ claim for damages is a claim for the amount they ought to have been paid from 1996 arising out of their Department’s discriminatory conduct. The appellants submit that, as a matter of law, interest is payable and in this case, ought to have been paid in order to properly compensate them for the loss they had sustained. The claim for interest will of course only be of utility to those appellants who were awarded damages below the maximum of $40,000.00.

[153] In my opinion, the judicial member refused the claim for interest on the substantive basis that there was no authority that supported the proposition. He did not however, enter upon a determination as to whether as a matter of law a claim for damages under the Act could include a claim for compensatory interest. In my opinion, by failing to consider this question, he erred in law. Accordingly, the discretionary consideration that he relied upon, namely the late making of the claim for interest, does not need to be considered.

141 The owners submit that the situation is similar in this case. The Tribunal ruled that interest was not payable under the Uniform Civil Procedure Act but not otherwise. The Tribunal may be forgiven for making this error as the owners nominated the authority for their claim as the provisions of that Act. However interest was payable on the common law principle stated in the passage quoted above from Amery and it seems to follow from that decision that there was an error of law on the part of the Senior Member in limiting the consideration of interest to a specific Act.

142 The builder made no submission in answer to this ground of appeal.

143 There is no apparent reason why the Senior Member would not have awarded interest on the monies paid for rectification work had she believed that she could do so. In my opinion interest should be awarded as part of the damages and calculated at the rate in the Uniform Civil Procedure Act.

(v) Slip Errors in rectification costs

144 It is submitted by the owners that the Senior Member made errors in calculating the costs of rectification. The owner’s calculated the total amount of these slips as $5,198.00. The builder accepts some of these alleged errors but others are disputed. There is also the sum of $300 by reason of damage to the owners’ fax machine caused by the builder. That sum is conceded.

145 In relation to these matters I accept that the Senior Member was prepared to act upon T1 as a persuasive document and preferred generally the evidence of Mr Ogburn. I am only prepared to deal with obvious errors. On that basis it seems to me that I should allow the following matters:

(i) Item 5 should have been $440 not $185;

(ii) item 9 should have been $160 not $80;

(iii) item 11 should have been $325 not $250 (conceded)

(iv) Item 45 as there was agreement as to this matter between the experts and the reasons do not indicate why that agreement should not have been accepted;

(v) Item 55 should have been $380 not $578;

(vi) Item 56 should have been $689 not $530;

(vii) Item 63 of $546 should have been allowed in light of evidence of Mr Austin;

(viii) Item 85 should have been $162.50 not $125;

(ix) Item 88 should have been $4,082.00 not $3,991 (conceded)

(x) Items 89-92 no change

(xi) Item 93 should be $260 not $250

Orders

146 The appeal by Craftsmen Restoration and Renovations Pty Ltd is dismissed. The appeal by the Bolands is allowed in part. The builder is to pay the owners’ costs of the appeals.

147 The parties are to calculate the damages awarded to the owners in accordance with the findings made in this judgment within 7 days.

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Citations

The Craftsmen Restoration and Renovations v Thomas Boland, Thomas Boland v The Craftsmen Restoration and Renovations [2008] NSWSC 660

Most Recent Citation

Cases Citing This Decision

11

The Owners - Strata Plan No 66375 v King [2018] NSWCA 170

Craftsmen Restoration & Renovations Pty Ltd v Boland [2011] NSWCA 147

Owners - Strata Plan No 68372 v Allianz Australia Insurance Limited [2014] NSWSC 1807

Cases Cited

16

Statutory Material Cited

5

Grygiel v Baine [2005] NSWCA 218

Ghosh v Medical Council of New South Wales [2020] NSWCA 122

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CITATION:	The Craftsmen Restoration & Renovations v Thomas Boland, Thomas Boland v The Craftsmen Restoration & Renovations [2008] NSWSC 660
HEARING DATE(S):	31/10/2007, 13/12/2007, 07/03/2008
JUDGMENT DATE :	1 July 2008
JUDGMENT OF:	Howie J at 1
DECISION:	The appeal by The Craftsmen Restoration and Renovations Pty Ltd is dismissed. The appeal by the Bolands is allowed in part. The builder is to pay the owners' costs of the appeals. The parties are to bring in final orders in accordance with the findings made in this judgment within 7 days.
CATCHWORDS:	Administrative Law - Rules of Natural Justice and Breach thereof - whether finding against witness a breach of natural justice - Appeal from Consumer, Trader and Tenancy Tribunal - Residential building dispute - whether errors of law by Tribunal - Contracts - Construction and Interpretation of Contracts - Building Contract - whether builder waived rights under contract - whether owners in breach of contract when terminated contract for poor workmanship - Interest - Recovery of Interest under Common Law - whether interest payable on monies expended for rectification of works.
LEGISLATION CITED:	Consumer, Trader and Tenancy Tribunal Act 2001 Home Building Act 1989 Supreme Court Act 1970 Workers Compensation Act 1926 Uniform Civil Procedure Act
CATEGORY:	Principal judgment
CASES CITED:	Grygiel v Baine [2005] NSWCA 218 Azzopardi v Tasman UEB Industries (1985) 4 NSWLR 139 Kalokerinos v HIA Insurance Services Pty Ltd [2004] NSWCA 312 Chapman v Taylor and Ors; Vero Insurance Ltd v Taylor [2004] NSWCCA 456 Bahadori v Permanent Mortgages Pty Limited [2008] NSWCA 150 Peninsula Balmain Pty Limited v Abigroup Contractors Pty Limited [2002] NSWCA 211 Hyder Consulting (Aust) Pty Limited v Wilh Wilhelmsen Agency Pty Limited [2001] NSWCA 313 Mifsud v Campbell (1991) 21 NSWLR 725 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 Beale v Government Insurance Office (1997) 48 NSWLR 430 Amery v New South Wales Director-General, NSW Dept of Education and Training [2004] NSWCA 404
PARTIES:	The Craftsmen Restoration & Renovations Pty Ltd v Thomas Boland & Ors Thomas Boland & Anor v The Craftsmen Restoration & Renovations Pty Ltd & Anor
FILE NUMBER(S):	SC 030128/06; 030130/06
COUNSEL:	G Miller QC with R Zikmann (Plaintiff/Defendant) E Olsson SC (Defendant/Plaintiff) R Bhalla (submitting appearance for CTTT)
SOLICITORS:	G Aronstan, Solicitor and Attorney (Plaintiff/Defendant) Massey Bailey, Solicitors and Consultants (Defendant/Plaintiff) Crown Solicitor

LOWER COURT JURISDICTION:	Consumer Trader and Tenancy Tribunal of NSW
LOWER COURT FILE NUMBER(S):	HB 03/32695; HB 03/41455
LOWER COURT JUDICIAL OFFICER :	Senior Member C. Paull
LOWER COURT DATE OF DECISION:	28/08/2006