Farrell Builders Pty Ltd & Anor v Hall & Anor [2018] QCAT 420

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL CITATION: Farrell Builders Pty Ltd & Anor v Hall & Anor [2018] QCAT 420 PARTIES: FARRELL BUILDERS PTY LTD (first applicant) SHANE FARRELL (second applicant) v BRENT HALL (first respondent) HELEN HALL (second respodent) APPLICATION NO/S: BDL204-16 MATTER TYPE: Building matters DELIVERED ON: 9 November 2018 HEARING DATE: 7, 8, 9 August 2017; 7 September 2017 HEARD AT: Brisbane DECISION OF: Member Holzberger ORDERS: 1. Shane Farrell must pay Brent Hall and Hellen Hall the sum of $5,461.56, by: 4:00pm on 7 December 2018. 2. The parties must file in the Tribunal two (2) copies and serve on the other party one (1) copy of written submissions limited to five (5) A4 pages in 12 point font in relation to costs, by: 4:00pm on 18 January 2019. CATCHWORDS: CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – PERFORMANCE OF WORK – GENERAL – where the parties contracted for the construction of a dwelling – what documents were included as contract documents – where the contract provided for monthly claims – installation of cladding other than that specified – substantial breach – whether notice to remedy breach and notice of termination were defective – lawfulness of termination – inconsistency between building approval documents and contract – appropriate method of calculation of damages – reasonableness of assessment based on rectification costs – assessment of incomplete and defective works – -- 1 of 27 -- 2 assessment of liquidated damages before and after termination Bellgrove v Eldridge (1954) 90 CLR 613 Ridolfi v Rigato Farms Pty Ltd [2001] 2 Qd R 455 Ruxley Electronics & Construction Limited v Forsyth [1966] AC 344 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272 Willshee v Westcourt Ltd [2009] WASCA 87 APPEARANCES & REPRESENTATION: Applicants: B Thomas (direct brief) Respondents: N M Cooke, instructed by Rostron Carlyle Lawyers REASONS FOR DECISION [1] In March 2015, Brent Hall and Helen Hall (‘the Halls’) obtained a development approval to demolish an existing dwelling and construct a new dwelling (‘the dwelling’) at their property at 112 Milson Street, Coorparoo (‘the site’). [2] The Halls engaged an architect, Stephen Milton. He was engaged to ‘design the Dwelling; prepare the plans and specifications for the construction of the dwelling; call tenders for the demolition of the former dwelling on the site and the construction of the new dwelling; prepare the tender and contract documents; and (originally) to administer the contract.’1 [3] When the design phase was complete and the plans and specifications had been settled to the Halls’ satisfaction, Mr Milton contacted a number of builders to obtain tender quotes, including Shane Farrell, who he contacted by phone in or around May 2015.2 [4] Mr Milton’s evidence is that he emailed Shane Farrell quotes, the relevant architectural drawings, specifications, structural drawings and tender documents.3 The only email in evidence indicates only an amendment to the terms of the tender and the ‘rev tender issue’ plans dated 25 May 2015 and structural design plans, were attached to it.4 [5] Shane Farrell provided a quote dated 1 July 2015.5 He met with Mr Milton and the Halls at Mr Milton’s office on 2 July 2015. He provided a series of amended quotes dated 13, 16 and 21 July 2015.6 All quotes, including the original quote were on the letter head of Farrell Builders Pty Ltd and all were prepared in a consistent trade breakdown format. 1 Joint statement of agreed facts, filed 17 May 2017, para 4. 2 Witness statement of Stephen Milton, filed 24 July 2017, paras 9, 12. 3 Witness statement of Stephen Milton, filed 24 July 2017, para 13. 4 Witness statement of Stephen Milton, filed 24 July 2017, Ex SM2. 5 Exhibit 3, Trial Brief, Volume 3, Tab 31, p 1952. 6 Exhibit 3, Trial Brief, Volume 3, Tab 31, p 1954–1961. -- 2 of 27 -- 3 [6] It is an agreed fact that Mr Farrell held a licence in the class ‘builder’ at all relevant times but Farrell Builders Pty Ltd did not hold such a licence until 8 September 2015.7 [7] Mr Farrell met with Mr Milton and the Halls on 3 August 2015 at Mr Milton’s office. At that meeting a contract document, which was finalised ‘directly prior’ to that meeting was presented to the Halls and Mr Farrell.8 [8] It is agreed that the Halls and Mr Farrell (as builder) executed the contract at that meeting on 3 August 2015. It is also agreed that at that point the contract included the following: (a) Queensland Builder and Construction Commission (‘QBCC’) standard form, general conditions of new home construction contract (general conditions); (b) A completed schedule for the QBCC general conditions of new home construction contract (schedule); (c) 48 pages of drawings, notes and plans (drawings); and (d) A specification dated August 2015 titled ‘project no 238 – May 2015 – L1 – construct issue’ (specification).9 [9] During the course of reviewing the contract, some amendments were made to the document. Mr Farrell’s evidence is that those changes included making the supply of tiles a cost plus item, the introduction of the new schedule 8B and some changes to the drawings, hand drawn by Mr Milton.10 [10] Mr Farrell’s last quote, on 21 July 2015,11 provided for a price of $758,426.00. The contract now, as a result of changes discussed at the 3 August meeting, shows a contract price of $760,426.00. [11] Mr Farrell says ‘since the price had changed I said that I had to give a revised breakdown so that the total of my quotation breakdown was the same as the final price.’12 [12] He says that despite Mr Milton saying it was not necessary, an amended quote, (dated 4 August 2015,13 consistent with the contract price of $760,426.00) was sent to Mr Milton on 4 August 2015 (the original breakdown). [13] Both parties agreed in the joint statement of agreed facts, that the ‘costs breakdown’ was one of the documents included in the contract.14 On the first day of the hearing Mr Cooke, Counsel for the Halls, sought to withdraw that admission and contended that the document did not in fact form part of the contract. The Tribunal reserved its decision on that point and it is dealt with later in these reasons. 7 Joint statement of agreed facts, filed 17 May 2017, para 5. 8 Witness statement of Stephen Milton, filed 24 July 2017, para 18. 9 Joint statement of agreed facts, filed 17 May 2017, para 6. 10 Witness statement of Shane Farrell, filed 2 June 2017, para 8. 11 Exhibit 3, Trial Brief, Volume 3, Tab 31, p 1960–1961. 12 Witness statement of Shane Farrell, filed 2 June 2017, para 8. 13 Exhibit 3, Trial Brief, Volume 3, Tab 31, p 1962–1963. 14 Joint statement of agreed facts, filed 17 May 2017, para 8. -- 3 of 27 -- 4 [14] The site was fenced on 27 August 2015, and demolition of the existing dwelling commenced on 31 August 2015.15 [15] A copy of the building approval documents were forwarded by email from Mr Milton to Mr Farrell on or about 4 September 2015.16 [16] The contract nominated Mr Milton as the Owner’s Authorised Representative, and initially he was Mr Farrell’s contact in all matters relating to the contract, but Mr Farrell was notified by him on 5 January 2016, that he had ceased in that role and future contact was to be directly with the Halls.17 [17] Robert Sternberg, a licenced builder, was appointed by the Halls, on his evidence, to provide project management services on or about 6 January 2016.18 Mr Farrell says he was introduced to him as ‘Bob’, the Halls’ new ‘building advisor’ in late January 2016.19 [18] Between 4 August 2015 and 30 June 2016, Mr Farrell made 10 claims for progress payments,20 each claim was made on stationary bearing the name Farrell Builders Pty Ltd. Apart from the first of them (for the deposit) each claim consisted of a tax invoice addressed to the Halls for the amount claimed. For each of those claims there was an additional document again on Farrell Builders Pty Ltd letterhead, which gave a percentage breakdown of the claim on a trade basis consistent with the format of the original breakdown. [19] In the first four progress claims the breakdown document was addressed to Steve Milton and thereafter to Brent and Helen Hall. All invoices were addressed to Brent and Helen Hall. [20] Generally, after issue of each claim, site meetings were held between Mr Farrell and initially Mr Milton and later the Halls, to discuss, among other things, the appropriateness of the claim. [21] On 1 March 2016, installation of the external cladding (which was to become the principle dispute between the parties in these proceedings) commenced.21 [22] As the works progressed a number of disputes surfaced, some of which remain the subject of these proceedings, and it appears the relationship between the Halls and Mr Farrell was deteriorating. [23] By email dated 25 September 2016, after the completion of installation of the cladding, the Halls notified Mr Farrell that they considered him to be in breach of the contract because the cladding he had installed was not the cladding specified in the contract.22 15 Witness statement of Shane Farrell, filed 2 June 2017, paras 14, 15. 16 Witness statement of Shane Farrell, filed 2 June 2017, para 17. 17 Joint statement of agreed facts, filed 17 May 2017, para 13. 18 Affidavit of Sternberg, 2 July 2017, para 2. 19 Witness statement of Shane Farrell, filed 2 June 2017, para 26. 20 Applicant’s documents A399 – A432; there are two claims for the ninth progress payment. 21 Witness statement of Shane Farrell, filed 2 June 2017, para 31. 22 Witness statement of Shane Farrell, filed 2 June 2017, para 38. -- 4 of 27 -- 5 [24] On 30 May 2016, a site meeting was attended by Mr Farrell, the Halls, Mr Sternberg and Peter Ashman, an employee of Dulux (the manufacturer of the cladding). There are differing versions of what occurred at the meeting but it is uncontroversial that, as Mr Farrell puts it, ‘the mood was tense’,23 and the dispute was not resolved. Some time prior to the 30 May meeting, Mr Farrell had delivered to the Halls a progress claim numbered 9, totalling $93,417.00. The tax invoice was dated 27 May and the breakdown part was dated 30 April 2016. [25] On 3 May, Mr Farrell emailed the Halls an amended progress claim 9 reducing the claim and the cladding component of the trade breakdown by $18,900.00. [26] On 2 June 2016, the Halls’ lawyers emailed a notice of default to Mr Farrell requiring removal of the installed cladding and replacement with the contract specified cladding within 10 working days of the notice. [27] On 8 June 2016, by letter on Farrell Builder Pty Ltd letterhead, Mr Farrell emailed the Halls requiring them to rectify their non-payment of the amended progress claim nine, which he said was due for payment by 7 June 2016. [28] On 17 June 2016, the Halls’ lawyers delivered by email, a notice of termination of the contract for failure to comply with the notice of default. [29] By correspondence emailed to the Halls’ lawyers on 22 June, Mr Farrell’s lawyers asserted that both the notice of default and notice of termination were defective and as a result of the Halls’ purported termination of the contract, the exclusion of Mr Farrell from the site and non-payment of progress claim 9, the Halls had repudiated the contract and that Mr Farrell accepted that repudiation and terminated the contract. What documents are included in the contract? [30] It has been noted that the parties agree that the contract includes the general conditions, the schedule, the drawings and the specification.24 [31] Mr Thomas, counsel for Mr Farrell, says two further documents should also be included namely, the original breakdown dated 4 August 2015 and the building approval forwarded to Mr Farrell by Mr Milton on or about 4 September 2015 (‘the building approval’). [32] Mr Cooke submitted that the admission made on behalf of the Halls, that the original breakdown is included in the contract, is legally incorrect, and as a consequence, it is not appropriate for the Tribunal to decide the matter by reference to a contract which includes that document. [33] Mr Thomas, referring to Ridolfi v Rigato Farms Pty Ltd,25 submitted that leave to withdraw the admission should be refused because the Halls had failed to take steps to withdraw the admission before the hearing and to explain how the admission had come to be made in the first place. In those circumstances (which are not disputed) I am not persuaded that leave should be granted, but in any event I am satisfied for the reasons set out below that the original breakdown is included in the contract. 23 Witness statement of Shane Farrell, filed 2 June 2017, para 41. 24 Joint statement of agreed facts, filed 17 May 2017, para 6. 25 [2001] 2 Qd R 455. -- 5 of 27 -- 6 [34] The schedule gives two options in relation to progress payments to the contracting parties. The first, option 8A, is for payments of fixed percentages of the contract price on the completion of various specified stages and is marked ‘not applicable’ in the contract. The second, option 8B, allows the parties to substitute alternative stages to those specified in option 8A. In the contract this option is marked ‘refer attached monthly payment claims.’ [35] That attachment is an alternative option 8B, which provides as follows:26 SCHEDULE8B - OPTION B - ALTERNATIVE PROGRESS PAYMENT AGREED BETWEEN OWNER AND CONTRACTOR Staged Monthly Progress Claims The value of each claim to be assessed by the Owners Authorised Representative on the basis of the work completed. Progress Claims - procedure for Contractor The contractor may submit a progress claim every month on the last business day of the month addressed to the Owners Authorised Representative. The Contractor shall supply a trade breakup with each claim assessed against the tendered trade breakup schedule supplied as part of the Contractors tender. The claim must set out the contractor's valuation of: a) All necessary work required to complete the works, including work for a variation which the owner has supplied a written instruction to proceed. b) Materials and equipment delivered to the site address for incorporation in the works all in relation to the overall cost of building work, as adjusted, up to and including the day of the claim. [36] Mr Cooke submitted: (a) Mr Farrell had never submitted a tender; (b) The section of the contract (contained in the specification) which related to the tender had been left blank or incomplete;27 (c) No tender or breakdown had in fact been submitted or accepted when the contract was executed; (d) The document Mr Farrell sought to include was in fact created after execution of the contract. [37] Mr Thomas responded: (a) The original breakdown was necessary to calculate progress payments; 26 That document is in the trial bundle, Exhibit 3, Vol 1, Tab 10 at p 57. That attachment was signed by Mr Farrell and the Halls. 27 The tender breakdown section was in fact marked ‘not applicable’ - Exhibit 3, Vol 1, Tab 10, pp 81 - 82. -- 6 of 27 -- 7 (b) It was in fact used for that purpose; (c) The trade breakup had to be revised because of changes made to the contract on the day it was executed; and (d) Mr Milton acknowledged in his evidence that the breakdown was necessary to comply with schedule 8B. [38] Item 15 of the schedule provides that the ‘contract documents’ comprised the plans specification, prime cost items, provisional sums and foundations data.28 [39] Clause 3 of section 01000 of the specification, which it is not disputed forms part of the contract, provides: The contract documents comprise: - QBCC new home construction contract July 2015; - This specification; - The accepted tender form and associated breakdown; - The drawings listed in the drawings schedule; - Any other drawings or documents issued by the architect in accordance with the contract during the course of the contract.29 [40] The mechanics of the tender process are set out in section 00200 of the specification.30 While it is clear those terms have not been complied with, I do not accept that no tender process occurred. [41] Mr Milton contacted Mr Farrell by telephone in late May 2015 asking him to tender.31 While it is his evidence that the specification (which contained the tender documents) was sent to Mr Farrell, the only email from him to Mr Farrell at the tender stage contains only an addendum to the terms of the tender and plans.32 [42] In cross-examination Mr Milton acknowledged that, at the time he called for Mr Farrell’s tender, no specification was sent.33 While he says the specification followed, there is nothing in evidence which indicates that Mr Farrell sighted it before the initial quotation.. [43] It is unsurprising in those circumstances that his tender did not strictly comply with section 00200. What he did provide was a series of quotes in breakdown form which were consistent with the information section 00200 contained. [44] Mr Farrell’s quotes were informal tenders (non-conforming tenders) pursuant to clause 14 of section 00200. 28 Exhibit 3, Vol 1, Tab 10, p 59. 29 Exhibit 3, Vol 1, Tab 10, p 83. 30 Exhibit 3, Vol 1, Tab 10, pp 79–82. 31 Milton’s statement, dated 24 July 2017, para 9-12. 32 Milton’s statement, dated 24 July 2017, SM 2. 33 T2-10, L 15. -- 7 of 27 -- 8 [45] While clause 6 of section 00200 provided that ‘consideration may not be given to non- conforming tenders’, clearly consideration could, at the Halls’ option, be given to the series of quotes or breakdowns provided by Mr Farrell. Notwithstanding that no letter of acceptance was sent out or at least put into evidence pursuant to clause 16 of section 00200, a tender process albeit, a non-conforming tender process did take place and the tender was ultimately accepted by the Halls. [46] The tender breakdown and components of the tender form contained in section 00200 were marked ‘not applicable’, but schedule 8B refers to ‘the tendered trade breakup schedule supplied as part of the contractor’s tender.’ [47] Mr Milton conceded in cross-examination that a new breakdown schedule that reconciled to the contract (after changes were made on the day of signing), would have to be provided to comply with schedule 8B and that Mr Farrell would have to provide a trade breakup with each claim to be assessed against the tender breakup.34 [48] Mr Milton would not however accept that it was impossible to calculate a claim without assessing the claim trade breakup against the tender trade breakup,35 but concluded ‘that it was likely a reference I used in determining whether the builder did the correct amount. I was using that as a tool but it wasn’t the requirement to – to work off his…’36 [49] In my view, the clear wording of schedule 8B did require that very procedure to be undertaken in respect of each claim. No alternative method of assessment is articulated or implied. [50] Accordingly, I find that the original breakdown, dated 4 August 2015, is the ‘tender form and associated breakdown’ referred to in the specification section 01000 and is a contract document. [51] The submission on behalf of Mr Farrell that the building approval documents37 come within the definition of contract documents contained in the specification is made on the basis that they were issued by the architect in accordance with the contract during the course of the contract. [52] In support of that, Mr Thomas submitted: (a) The schedule provides that the owners, the Halls, are responsible for obtaining the building approval; (b) Mr Milton was at the time, the authorised owners’ representative and architect specified in the schedule; (c) Mr Milton’s evidence is that he ‘issued’ the building approval to Mr Farrell; and (d) The word ‘issue’ should be given its normal meaning which in the Macquarie dictionary is: 34 T2-18, L 4 -10. 35 T2-18, L 20 -25. 36 T2-19, L 5-9. 37 Exhibit 3, Vol 4, L 1719–1814. -- 8 of 27 -- 9 The act of sending, or promulgation, delivery…to send out, discharge, remit.38 [53] Mr Milton’s evidence on that point under cross-examination is as follows: Thomas: So you agree that you have issued the building approval to Shane Farrell? Milton: I forwarded it on, yes, but yes from the certifier. I’ve just – I’ve just I’ve issued it to the – the builder but I don’t – I’m not the responsible person.39 [54] There are a number of difficulties with the very broad construction proposed by Mr Thomas. Firstly, it follows that any written communication no matter how trivial from the architect to the builder would become a contractual document. Secondly, on Mr Thomas’ interpretation, it would permit the architect to vary the parties’ agreements simply by issuing inconsistent documents notwithstanding the variation provisions of the contract and the provisions of the Queensland Building Construction Commission Act 1991 (‘QBCC Act’). Thirdly, the inclusion or otherwise of the building approval in the contract documents would depend on who physically delivered it to the builder. Had the certifier forwarded it directly to Mr Farrell it would be excluded. [55] The word ‘issued’ must be properly interpreted in the context of the provision in which it appears in the terms of the contract generally. Mr Milton is clear in his evidence that he is not responsible for its production and in fact obviously did not read it carefully enough to detect the inconsistency with the specification. The word ‘issue’ in the context of the contract requires a greater involvement than merely on forwarding someone else’s document. I find that the building approval documents are not part of the contract. Is the failure to install ‘Kooltherm’ a breach of contract? [56] The Halls’ purported termination of the contract is a result of their contention that Mr Farrell installed external cladding other than the cladding specified in the contract and failed to remove it and install the specified cladding when required to. [57] Section 09100 of the specification defines the scope of work to be the provision and installation of ‘Exsulite – Kooltherm Lightweight External Thermal Façade Cladding System and associated applied coating.’40 It also describes the materials to be used as ‘a Dulux – Exsulite – Kooltherm 80mm lightweight façade.’41 That product is referred to as ‘Kooltherm’ in these reasons. [58] It is not controversial that Mr Farrell installed a different product, also manufactured by Dulux, called Exsulite Thermal Façade or Exsulite Thermal Façade System.42 That product is referred to as ‘Exsulite’ in these reasons. [59] By the time of the hearing, the parties had acquired a familiarity with both products, but that is certainly not the case at the time of contracting and during construction. 38 Amended applicant’s written submissions, p 6, para 11. 39 T2, L 27-40. 40 Exhibit 3, Vol 1, Tab 10, p 110, para 1. 41 Exhibit 3, Vol 1, Tab 10, p 110, para 2. 42 Information and installation manuals for both products are contained in the applicant’s documents at pages A236–A358. -- 9 of 27 -- 10 The Halls were unaware of Exsulite. Mr Farrell and Mr Meecham, the installer who quoted on and installed the cladding, had not heard of Kooltherm. [60] Mr Milton was not asked if he was aware of both. The evidence suggests he was not, but if he was, he did very little to ensure the correct product was used and that there was no confusion. [61] Despite the products being distinctly different in appearance prior to coating, nobody detected the problem until the installation of the cladding had been completed.43 Mr Peter Ashman, a sales executive at Dulux Acratex, gave oral evidence as follows: (a) He spoke to Mr Farrell in relation to the Hall project; (b) The working drawings (prepared by Mr Milton from which Mr Farrell quoted) showed Exsulite rather than Kooltherm;44 (c) Exsulite was designed for standard residential housing (up to two stories);45 (d) Kooltherm was most commonly used for ‘multi-level high rise development’46 and he was aware of only one project in Queensland where it had been used which was a multi-level high rise, in Mackay, where it was specified due to cyclonic conditions.47 (e) The additional cost of installing Kooltherm rather than Exsulite was ‘in the vicinity of $20K for the project.’48 [62] When asked in examination in chief to explain the difference between Exsulite and Kooltherm, Mr Ashman responded: Well the Kooltherm really, I guess, is probably a step up on the – Exsulite residential product because of the – the wind loading, higher fire rating and R value thermals.49 [63] I am satisfied that at the time Mr Farrell submitted his first quote/breakdown on 1 July 2015 and his first meeting with the Halls and Mr Milton on 2 July 2015, he did not have a copy of the specification. The earliest document evidencing delivery of a specification to him is a fax dated 6 July 2015.50 [64] The working drawings provided by Mr Milton on 19 June 2015, referred only to ‘Exsulite panel’51 and the product depicted in the plans was according to Mr Ashman, Exsulite and not Kooltherm. 43 T1-83, from L 9; Mr Ashman’s evidence is that Exsulite is bright blue and Kooltherm is orange with a brown paper coating. 44 T1-83 from L 23, and cross-examination T1-88, L 24. 45 T1-84, L 6; T1-83, L 25 and L 34–35. 46 T1-83, L 36. 47 T1-83, L 36 and L 44. 48 T1-84, L 20. 49 T1-84, L 1. 50 Exhibit 3, Vol 3, Tab 31, pp 1952–1953. 51 Exhibit 3, Vol 1, Tab 10, p 156. -- 10 of 27 -- 11 [65] It is common ground that Mr Farrell’s first quote on 1 July 201552 included an item ‘ext. cladding and rendering’ for supply and installation of a third product known as ‘Koolwall’ which was identified at the meeting as unacceptable. [66] Mr Farrell’s evidence was that Mr Milton did not use the word ‘Kooltherm’ but referred to a ‘Dulux system’ and gave him the number of a Dulux representative to ring.53 The Halls in their evidence do not say the words ‘Kooltherm’ was used; Mr Hall specifically says the direction Mr Milton gave to Mr Farrell referred to a ‘Dulux cladding’ system.54 [67] Mr Milton says in evidence in chief that, at the meeting on 2 July 2015, he communicated to Mr Farrell the importance of the ‘specified Dulux Exsulite Kooltherm system’55 but in cross-examination he said that while he believed he said this, he could not recall for certain.56 I am, in those circumstances, satisfied that Mr Farrell was not made aware of any specification requirement for Kooltherm. [68] That however changed on 6 July 2015, when the specification was emailed to him by Mr Milton.57 It required ‘Dulux Exsulite – Kooltherm 80mm lightweight façade.’58 [69] Also on 6 July 2015, Mr Farrell obtained a quote for the supply and installation of Exsulite from Mr Scott Meecham who was licensed to install Dulux products. At that time Mr Meecham did not know Kooltherm existed.59 He quoted from the working drawings provided either by Mr Farrell or another builder, who had asked him to quote about three weeks earlier, and did not have the specifications. He priced Exsulite.60 [70] Mr Farrell’s subsequent quotes/breakdowns on 13, 16, 21 and 27 July, and in the breakdown contained notation ‘CSR Exsulite has been priced’.61 [71] It is not in dispute that the contract executed by the parties on 3 August 2015 included the specification which required supply and installation of Kooltherm. [72] Mr Thomas submits that the building approval documents were incorporated in the contract on 4 September 2015 and either ‘positively changed the contractual cladding requirement to Exsulite’ or alternatively created an ambiguity which should be resolved contra proferentem. Alternatively, he says any right to have Kooltherm installed is unenforceable because its installation is unlawful. For the reasons set out earlier I have found that the building approval documents have not been incorporated in the contract, but even if I am wrong in that regard, they do not alter the terms of the contract. [73] Clearly there is an inconsistency between the specification in the building approval which requires either an amendment of the building approval documents or a variation 52 Exhibit 3, Vol 3, Tab 31, pp 1952–1953. 53 Affidavit of Shane Farrell, dated 30 July 2017; Exhibit 3, Vol 1, Tab 17, p 264, para 5; T1- 35, L9. 54 Exhibit 3, Vol 1, Tab 18, p 0286. 55 Exhibit 3, Vol 1, Tab 20, p 0423. 56 T2-13, L 22 – 25. 57 Exhibit 3, Vol 2, Tab 23, p 0981. 58 Exhibit 3, Vol 1, Tab 10, pp 0109–0110, 0114. 59 T1-96, L 23. 60 T1-96, L 9-14. 61 Exhibit 3, Vol 3, Tab 31, p 1717. -- 11 of 27 -- 12 of the contract. If the parties cannot agree on the terms of that variation, it is the building approval that must be amended to reflect the terms of the contract. [74] If, as Mr Thomas suggests, the building approval documents are incorporated in the contract as ‘drawings or documents issued by the architect’, the architect must still act ‘in accordance with the contract’.62 [75] Clause 21 of the general conditions requires, among other things, that the variations must be ‘put in writing in a variations document signed by both parties and initialled as necessary by the owner’.63 [76] For the same reason, Mr Farrell’s breakdown of 4 August 2015, which I have found is incorporated in the contract, does not vary its terms. [77] It cannot be that a document, particularly one which appears to have been prepared in error by a certifier which apparently has not been read by either party, could unilaterally override the terms and agreement the parties have reached. [78] If it is unlawful to install Exsulite, which I do not accept, a written variation is still required by clause 21.7 of the contract. [79] While Mr Farrell may feel Mr Milton’s lack of attention to detail is at least equivalent to his own, he had the specification in his possession in sufficient time prior to the execution of the contract to make himself aware of its contents. [80] The contract clearly specifies Kooltherm and the experts assisting the Tribunal. Mr Dixon and Mr Wiersma agreed that the external cladding is not installed to the manufactures specifications, and is not the correct system and is therefore defective.64 Was the Halls’ termination lawful? [81] Clause 26 of the general conditions relevantly provides: 26.1. If: a) a party is in substantial breach of this contract; and b) the other party gives a notice to the party in breach identifying and describing the breach and stating the intention of the party giving the notice to terminate the contract if the breach is not remedied within 10 business days from the giving of the notice; and c) the breach is not remedied. Then, the party giving that notice may terminate this contract by further written notice given to the party in breach and may recover from the party in breach all damages, loss, cost or expense occasioned to the party so terminating or in connection with the breach… 26.4 Substantial breach by the contractor includes but is not limited to: 62 Exhibit 3, Vol 1, Tab 10, p 83. 63 Exhibit 3, Vol 1, Tab 10, p 72. 64 Exhibit 2, pp 10, 13, Item 3b and 5a. -- 12 of 27 -- 13 a) failing to perform the work under this contract competently; b) failing to provide materials which comply with this contract; c) unreasonably failing to replace all remedy defective work or materials; d) unreasonably failing to perform the work diligently or reasonably delaying, suspending or failing to maintain reasonable progress.65 [82] Having found that the contract specified Kooltherm, and Mr Farrell instead installed Exsulite without the agreement of the Halls, it is difficult to argue that he is not in substantial breach of the contract under clause 26.4(b) [83] Mr Thomas submitted: (a) The purported termination is void and of no effect because, in breach of the implied term of the contract, it is unreasonable in all circumstances; and (b) The Halls were not entitled to terminate because at the relevant time they were in substantial breach of the contract. [84] Through their lawyers, the Halls issued a notice of default dated 2 June 2016, requiring the removal of the Exsulite and its replacement with Kooltherm within 10 business days, failing which they would terminate the contract. [85] Mr Farrell made no attempt to comply with the notice of default. [86] The Halls again through their lawyers issued a notice of termination of the contract dated 17 June 2016. [87] Mr Dixon estimated that it would take 30 days to replace the Exsulite with Kooltherm without any allowance for the delivery of the Kooltherm.66 [88] Mr Sternberg estimated it would take 30–40 workers two days to remove the Exsulite and 7 or 8 workers 10 days to install Kooltherm.67 [89] Mr Ashman gave evidence that delivery times varied but a recent inquiry put it at around 10 days.68 [90] I accept that Mr Farrell could not order the Kooltherm panels, remove the Exsulite and install the Kooltherm after its delivery within the 10 business day timeframe specified in the notice, although given the variables in play it would be difficult to accurately estimate the period Mr Farrell would require. [91] On a strict interpretation of clause 26.1 of the general conditions, the notice period of 10 business days is mandatory. No doubt if a longer period was given Mr Farrell would be arguing that the notice of default is non-compliant and therefore void. 65 Exhibit 3, Vol 1, Tab 10, p 74. 66 Exhibit 3, Vol 2, Tab 26, pp 1433–1435. 67 T2-107, L21–38. 68 T1-84, L30–39. -- 13 of 27 -- 14 [92] The Halls have not, having regard to clause 26.4, acted unreasonably in issuing a notice of default in the terms they did. Assuming for the moment that there is an implied term requiring the Halls to act reasonably, the question of whether they have done so attaches to the termination rather than the notice of default. [93] Had Mr Farrell, after receiving the notice of default, agreed to replace the cladding but requested a reasonable extended time frame to do so, any insistence on the ten- business-day timeframe and termination may well be seen as unreasonable. That, however, did not occur. While there is some inconsistency in the evidence, it is uncontroversial that Mr Farrell did not attempt to rectify or request an extended time to do so. [94] In those circumstances, I find that the termination was not unreasonable. [95] The replacement of standard items 8A and 8B of the schedule with the monthly payment claim system is significantly less precise than had the standard terms been adopted. It permits Mr Farrell to make a claim at the end of each month. It does not, as Mr Cooke submits,69 or as clause 19.1(b) of the general conditions states, require him to establish that any stages have been completed. The amount he is entitled to claim is his estimate of ‘the overall cost of building work, as adjusted up to and including the day of the claim’,70 less, presumably, claims already paid. [96] The amount payable is ‘the value of each claim to be assessed by the owners’ authorised representative on the basis of the work completed.’ He does so by assessing the trade breakup required to be submitted with each claim assessed against the original breakup dated 4 September 2015 prepared by Mr Farrell. [97] The new schedule 8B now sits uncomfortably with the detailed procedures for making claims and raising and resolving disputes in relation to those claims detailed in clause 19 of the general conditions. The parties did not follow those procedures at any time while the contract was on foot. None of the progress claims including the two progress claim 9 was for example accompanied by a notice of dispute as required by clause 19.1(d). [98] General condition 1 defines the owner’s authorised representative as the person ‘specified in the schedule, or other person notified in writing to the contractor’ as the person empowered by the owner to communicate with the contract including giving instructions as to variations. [99] Mr Milton was appointed as the owner’s authorised representative under the contract but notified Mr Farrell that he ceased in that role on 6 January 2016. It is not suggested that Mr Sternberg or any other person was notified as the owners’ authorised representative to Mr Farrell. In the absence of an owner’s authorised representative, the contract is silent as to the calculation of the amount owing. [100] The Halls very clearly raised the dispute in respect to progress claim 9 and amended progress claim 9. Even if they have not strictly complied with clause 19.1, the parties throughout the course of the contract have not strictly observed the provisions of clause 19 and Mr Farrell cannot now insist on strict compliance. Their failure to pay 69 Respondent’s submissions, para 64. 70 Exhibit 3, Vol 1, Tab 10, p 57. -- 14 of 27 -- 15 both the original progress claim 9 and the amended claim 9 clearly arose from a dispute and do not place them in substantial breach of the contract. Is it reasonable to replace the cladding? [101] Mr Thomas submits that even if the contract requires the installation of Kooltherm as the Tribunal has found, it is unreasonable to require it now because among other things: (a) It is ‘unbelievable’ that the Halls intend to do so; (b) The expert Mr Wiersma is of the view that the Exsulite would meet and exceed BCA requirements; and (c) The cost of rectification is ‘wholly disproportionate’ to the benefits.71 [102] In Bellgrove v Eldridge (‘Bellgrove’),72 the High Court laid down the principle that in defective building work cases the building owner is prima facie entitled to damages equivalent to the cost of rectification of the work so that it conforms with the contract subject to two qualifications, namely: (a) The work must be necessary to achieve conformity; and (b) It must be a reasonable course to adopt. [103] Where the necessary work was not reasonable, the Court said the true measure of loss was the diminution in value, if any, resulting from the defective work. The Court dismissed the possibility that the building owner might retain the damages and not undertake the rectification as ‘quite immaterial’.73 [104] In Ruxley Electronics & Construction Limited v Forsyth (‘Ruxley’),74 the House of Lords restored the award of the trial Judge to award damages for loss of amenity, but not the claimed costs of rectification where a swimming pool, though functional, was shallower than had been specified in the contract. [105] In relation to the intention of the homeowner to rebuild, or its absence, Lord Lloyd said that while he ‘fully accept[ed] that the courts are not normally concerned with what a plaintiff does with his damages… it does not follow that intention is not relevant to reasonableness, at least in those cases where the plaintiff does not intend to reinstate’.75 [106] Ruxley was distinguished by the High Court in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (‘Tabcorp’),76 on the basis that its facts, which the House of Lords ‘evidently saw as quite exceptional’ were distinguishable from those before the Court.77 71 Applicant’s written submissions, p 18, paras 47–48; p 34, para 77. 72 (1954) 90 CLR 613. 73 Ibid 620. 74 [1996] AC 344. 75 Ibid 372. 76 (2009) 236 CLR 272. 77 Ibid 289. -- 15 of 27 -- 16 [107] While rectification costs were disproportionate, the High Court nonetheless assessed damages as the cost of rectification stressing the importance of contractual performance. [108] In respect of the qualifications in Bellgrove that the work must be necessary to ensure conformity, the Court held the word ‘necessary’ did not mean essential, but rather, ‘apt to conform with the plans and specifications which had not been conformed with’.78 [109] In respect of the second qualification in Bellgrove of reasonableness, the Court said the test was one of ‘unreasonableness’ which is ‘only satisfied in fairly exceptional circumstances’.79 It would apply only where the claimant is using a technical breach to secure an uncovenanted profit. [110] In Willshee v Westcourt Ltd (‘Willshee’),80 the Western Australian Court of Appeal followed Tabcorp. The ruling principle attributed in Bellgrove required damages to be assessed as the cost of rectification, even though the defective work did not make the defective building structurally unsound. [111] While Ruxley was argued in both Tabcorp and Willshee, the Courts have made it clear that the reasonableness qualification applies only in very limited circumstances – using a technical breach to secure an uncovenanted profit. In both cases, the Court referred to the example in Bellgrove of substituting new bricks when the contract specified second hand bricks. It is Mrs Hall’s evidence that various cladding options were discussed with Mr Milton, and Kooltherm was selected and specified ‘because of its insulation, soundproofing and non-flammable properties’.81 Mr Hall agreed.82 [112] In examination in chief, Mr Hall reiterated the importance of those matters and added their concerns about Kooltherm’s impact resistance which he believed had a ‘higher impact resistance than any of the other claddings in the market…’83 [113] Mr Dixon and Mr Wiersma attached to the joint experts’ report an ‘Exsulite comparison schedule’ which compares the properties of Exsulite and Kooltherm, compiled primarily from the installation manuals for each of those products and made comments about them in the body of the experts’ report.84 [114] In relation to the matters said by Mr Hall to be of importance to them in the selection of Kooltherm, the experts agreed: (a) Fire resistance level – Kooltherm is suitable for use as a fire resistance level (‘FRL’) walling system, Exsulite is not. Neither the contract, nor the Building Code of Australia (‘BCA’) require a particular FRL rating in residential construction; 78 Ibid 290. 79 Ibid 288. 80 [2009] WASCA 87. 81 Exhibit 3, Vol 1, Tab 17, p 0268, para 5. 82 Exhibit 3, Vol 1, Tab 18, p 0285, para 3. 83 T2-64, L20; T2-65, L40; and T2- 65, L23. 84 Exhibit 2, p 21, pp 23–26. -- 16 of 27 -- 17 (b) Thermal insulation – Kooltherm has a higher R value than Exsulite;85 (c) Acoustic properties – both products have the same acoustic properties; (d) Impact resistance – Kooltherm has a greater impact resistance, but both products comply with the relevant standards and the BCA. [115] While I accept the experts’ opinion that neither the contract nor the BCA require any particular FRL level or impact resistance level, and Mr Thomas’ submission that the contract did not require any particular thermal insulation R level, that is hardly the point. In three of the four matters raised by the Halls, Kooltherm appears to be the superior product. [116] There is no evidence of the practical benefits to the Halls of Kooltherm’s apparent thermal insulation and impact resistance characteristics. [117] While I accept Mr Wiersma’s evidence that the ignitability index for Exsulite is superior to weatherboard,86 it is apparently inferior to Kooltherm, which does not come with the same warnings about the placement of barbeques, heaters and so on.87 [118] The Halls concede that they have taken no action to change the cladding, or the building approval to allow it. Both were insistent in cross-examination that their preferred option was to replace when they could afford it. Their failure to do so to date is either a matter of necessity, or at least prudence, and does not disqualify them from claiming rectification damages. [119] In Willshee, the Full Court said:88 Mr Willshee entered into a contract which he considered served his interests, and he is entitled to the performance of that contract quite irrespective of the views which other people might form in relation to the advancement of those interests, such as views relating to the aesthetic appearance of the house. [120] It may well be that the installation of Kooltherm is ‘over engineering’ but having specified it in the contract, and given some evidence of its importance to the Halls, they are entitled to have the contract performed, or alternatively to have damages calculated at the cost of rectification. Defective and incomplete work [121] The joint experts’ report sets out Mr Dixon and Mr Wiersma’s opinions in relation to defective and incomplete works and the quantity surveyor, Mr Barns, who also attended the experts’ conclave estimates of the costs of rectification or completion. The parties are in substantial agreement in respect of many of these items but those below are in dispute. In respect of those items that are agreed, I accept the experts’ evidence and Mr Barns’ estimate of rectification or completion costs. 85 Kooltherm has 6.3 value as opposed to 4.3 value for Exsulite. 86 Transcript T3-81, L24 – 29. 87 Exhibit 2, p 25. 88 Willshee v Westcourt Ltd [2009] WASCA 87, para [68]; Also see similar comments in Tabcorp at 288. -- 17 of 27 -- 18 Storm water [122] In their joint experts’ report, Mr Dixon and Mr Wiersma agreed that the storm water drainage had not been installed in accordance with the contract. In his submissions, Mr Farrell concedes that the number of drainage points and pipe diameters are not in accordance with the contract, but says rectification should not be required because: (a) Pursuant to the contract Mr Adam Brunckhorst, who designed the installed storm water drainage, was appointed as the Halls’ consultant for hydraulics approvals and design detail;89 and (b) The Halls, or their authorised owners’ representative Mr Milton, had agreed to the variation. [123] The terms of Mr Brunckhorst’s appointment as a consultant, if he is indeed so appointed, are vague to say the least. Even within the broadest interpretation of the appointment, it could not possibly permit him to unilaterally impose a variation on either/or both the Halls or Mr Farrell without their consent. [124] It is common ground that there is no variation document in respect of storm water, and that the variation was either agreed or not at a meeting on site involving Mr Farrell, Mr Hall, Mr Milton and Mr Brunckhorst sometime in December 2015. [125] It is Mr Farrell’s evidence that at that meeting, Mr Brunckhorst drew a plan illustrating the proposed changes on block work, ‘Steven Milton asked Brent if this change was accepted and Brent said it was fine. Steven Milton then agreed to the change.’90 He confirmed that agreement in cross-examination.91 [126] Mr Hall gave evidence of two meetings in relation to storm water involving the same four parties. The first of those occurred on 22 September 2015,92 the second meeting was the December meeting. [127] Of the second meeting, Mr Hall says that he met with Mr Farrell and Mr Brunckhorst for about 20 minutes and told them he had to leave and told them he would discuss the proposed variation with Mrs Hall. At that point, Mr Milton arrived and he remained there for another 10 minutes while Mr Brunckhorst explained his proposal to Mr Milton. Mr Hall says he left them without agreeing.93 [128] Mr Milton makes no mention of the December meeting in either of his affidavits. [129] In respect of the September meeting, he says that he met with Mr Hall, Mr Farrell and Mr Brunckhorst, and later emailed Mr Farrell that he was ‘to proceed as per plan with 150mm dedicated storm water pipe’.94 89 Exhibit 3, Vol 1, Tab 10, p 79, Item 11. 90 Exhibit 3, Vol 1, Tab 11, p 94, para 24. 91 Transcript T1-55, L35. 92 Exhibit 3, Vol 1, Tab 18, p 0296, para 48. 93 Exhibit 3, Vol 1, Tab 8, p 297, para 89. 94 Exhibit 3, Vol 1, Tab 20, p 0424, para 26–28; Exhibit 3, Vol 1, Tab 20, p 0483 ‘SM5’. -- 18 of 27 -- 19 [130] During cross-examination, Mr Milton said that he remembered the December meeting because the block work had been erected,95 and he remembered Mr Brunckhorst drawing the plan on that blockwork. He said he did not agree, referring to his email of 22 September 2015. When it was pointed out that that email preceded the December meeting, he said ‘I am not someone that would approve a variation unless I minuted it and wrote it down’.96 [131] In his affidavit, Mr Brunckhorst said ‘I have a very clear recollection that at the meeting there was complete agreement that I should proceed’.97 [132] In cross-examination, however, Mr Brunckhorst conceded that in view of the passage of time he did not have a clear recollection of what had happened.98 He accepted that Mrs Hall did not attend, despite initially saying she did, but remained ‘under the impression that everyone had agreed to it’.99 [133] In view of their poor recollection, little weight can be placed on the evidence of either Mr Milton or Mr Brunckhorst. It comes down to the evidence of Mr Farrell and Mr Hall. On the balance, I prefer Mr Hall’s version. His evidence of the meeting was considerably more detailed than that of Mr Farrell and is supported by the lack of any variation document or confirmation of the agreement to vary. Bathroom dimensions [134] In relation to dimensions, the general notes to the architectural drawings which form part of the contract provide:100 Do not scale off this drawing – use figured dimensions only. Contractor shall verify all dimensions on site prior to construction. Any discrepancies or errors shall be referred to the architect and owner prior to installation or manufacture of any works. [135] It is common ground that the drawings relating to the upstairs (ensuite) and downstairs bathrooms are un-dimensioned.101 [136] The experts agreed that it was visually clear that the constructed bathrooms were not in proportion to the drawings,102 and that it ‘would have been prudent to consult with the architect and the homeowner in regard to dimensions’.103 [137] Mr Dixon was of the view that the rectification work was required for both on the basis of the differing dimensions. Mr Wiersma disagreed.104 95 Transcript T2-22, L45. 96 Transcript T2-24, L43. 97 Exhibit 3, Vol 1, Tab 3, p 259, para 4. 98 Transcript T1-75, L5. 99 Transcript T1-74, L40. 100 Exhibit 3, Vol 1, Tab 10, p 144. 101 Exhibit 3, Vol 1, Tab 10, pp 164–166. 102 T3-93, L 16-17, L 35-38. 103 Exhibit 2, p 11, para [3(c)]. 104 Ibid. -- 19 of 27 -- 20 [138] Both were of the view that the ‘downstairs shower recess screen may be required to be moved due to insufficient gap between it and the toilet’.105 In oral evidence, Mr Wiersma said that it was beyond doubt that the screen was too close to the toilet.106 Both experts agreed that the preferable solution was to remove the screen, rather than removing the tiles and floor.107 [139] I accept the experts’ joint evidence in relation to the downstairs shower recess screen and find that the work is defective in that regard. [140] While the experts agree that it would be ‘prudent’ to clarify the unspecified dimensions with the architect and homeowner before proceeding, they were appropriately at pains to avoid offering any opinion as to whether it was a contractual or legal requirement to do so.108 [141] Neither party asserts that there is a contractual requirement to obtain dimensions or otherwise, other than the general note on the architectural plans as set out above. [142] I am not satisfied that the direction that the builder ‘verified all dimensions’ on site prior to construction imposes any obligation on the builder to meet on site with the architect and homeowner in every instance before proceeding. Such an interpretation would be unworkable in a practical sense. [143] I am not persuaded that the omission of dimensions which is clearly contemplated by the general condition can be said to be a discrepancy or error. There is not discrepancy between the relevant drawings and any other document. There is no obvious error. [144] There is no evidence that Mr Farrell has altered the layout of either room, it is merely the dimensions that are at issue, and that issue arises only if the works as constructed are scaled off the drawings, which the general condition quite plainly states should not be done. [145] I also accept the experts’ evidence that the preferable solution is to move the shower screen rather than move the pedestal. There is no evidence of the cost of that. Mr Barnes’ estimate of costs of $1,520.00 excluding GST and margin is based on the costs of re-dimensioning the upstairs bathroom. The Halls have failed to prove the quantum of their damages and that part of their claim must fail as a result. Timber [146] In the joint experts’ report, the experts agreed that Mr Farrell had supplied standard and better grade spotted gum when the contract specified select grade. [147] In oral evidence, Mr Dixon said that he was not an expert in timber grading and that his opinion was based on a Findlayson’s invoice showing that standard and better grade had been delivered to the site.109 105 Ibid. 106 T3-96, L 35. 107 T3-97, L 10-20. 108 T3-100, L 16-41. 109 T3-110, L 6-11. -- 20 of 27 -- 21 [148] Mr Wiersma’s oral evidence is that he had worked with timber:110 …a lot in my life, and I do have a fair idea of when timber is select grade or non-select grade when I look at it and we’ve done a fair bit of training, when I worked for the Queensland Department of Housing, in timber grading and the timber grade that I saw was of a good quality finish. [149] He added ‘…supplies can have and supply you with a standard grade of timber that could actually fall into that category of select timber’.111 [150] In cross-examination, Mr Farrell agreed that he had purchased standard or better grade timber from Boral because they do not do a select grade, ‘their select grade is their standard and better’.112 [151] I agree with Mr Thomas’ submission that the relevant consideration here is not what Mr Farrell bought, but rather what he installed. I accept Mr Wiersma’s evidence that the timber supplied as standard and better may in fact be select. I am not satisfied that the incorrect grade of timber has been installed and this part of the Halls’ claim fails accordingly. Termite barriers [152] I understand from Mr Dixon’s evidence that reinstallation of the physical termite barrier specified in the contract, that is Termimesh, is an inevitable consequence of replacing the cladding.113 In the absence of a claim for a specific amount for it, I assume it is allowed for in Mr Barnes’ estimation of the costs of installation of the cladding. Patio slab and path [153] There remains the issue originally identified by Mr Dixon of the installed patio slab and concrete path installed adjacent to the laundry slab reducing and compromising the 75mm required termite inspection zone.114 [154] In the joint experts’ report, the experts agreed that this was defective. The costs of rectification by removal and replacement of the slab and path were estimated by Mr Barnes at $9,660.00 exclusive of margin and GST.115 [155] In oral evidence, Mr Thomas asked both experts whether it was now necessary for there to be a 75mm exposed edge of the laundry slab, to which they both replied ‘no’. Mr Dixon later added that the 75mm exposed edge was not necessary to comply with the BCA.116 [156] While the reason for the apparent change of heart is not clear, the Halls have not established on the balance of probability that the replacement is necessary. 110 T3-110, L 30-34. 111 T3-110, L 39-40. 112 T1-58, L 15-18. 113 T3-24, L 25-45. 114 Exhibit 3, Vol 2, Tab 26, p 1414, Item 2.4. 115 Exhibit 2, p 14, Item 5(d). 116 T3-30, L 22-37. -- 21 of 27 -- 22 Refrigerator [157] Mr Farrell claims the sum of $6,500.00 from the Halls being the cost of a refrigerator being mistakenly delivered to the site by Mr Farrell, and subsequently stolen, some months after the contract was terminated. [158] In written submissions, the basis of the claim is said to be either unjust enrichment or liability as bailees, or possibly for detinue or conversion.117 [159] That claim is a claim quite separate from the building dispute before the Tribunal. The Tribunal does not have jurisdiction to hear it. Dishwasher [160] The general conditions require all materials ‘to be of good quality and suitable for the purpose for which they are used’, and to be ‘new unless the contract expressly provides otherwise’.118 The fixtures and appliance schedule in the architectural drawings specify a Miele G8300SCU dishwasher.119 [161] A dishwasher described on the tax invoice as a ‘G6300SCU C/Steel built under dishwasher’ was supplied. The tax invoice contained the notation ‘the Miele guarantee for “B” stock and or “display” stock covers functional parts only it excludes any marks or imperfections compensated for by the reduced price’.120 Nobody appears to take issue with the supply of a G6300 rather than a G8300. The Halls’ assertion is that it is not new. [162] In the joint experts’ report, the experts agreed ‘that the dishwasher had not been sold as a new item and it is not covered by the full new stock warranty’.121 [163] Both Mr Dixon and Mr Wiersma gave evidence that they had inspected the dishwasher. Both were satisfied that it was not used or second hand.122 Mr Dixon noted a ‘blemish’ on the front door,123 but Mr Wiersma said the unit appeared to be in good condition and had no surface defects.124 [164] Both expressed concerns about its description as ‘B’ stock, and Mr Dixon was concerned that it had not been boxed on delivery in reaching their conclusion that it was not new.125 [165] I agree with Mr Thomas’ submission that while the experts’ observations are of assistance, the question of whether the dishwasher is new or not for the purposes of the contract is not a matter of expert opinion. [166] The contract does not require the dishwasher to arrive in a box, nor does it require Mr Farrell to purchase it from any particular source. It must be new, of good quality and fit for purpose. The expert evidence is that it is not used or second hand and other 117 Applicant’s submissions, p 33. 118 General condition 3.1, Exhibit 3, Vol 1, Tab 10, p 67. 119 Exhibit 3, Vol 1, Tab 10, p 157. 120 Exhibit 3, Vol 3, Tab 31, p 2377. 121 Exhibit 2, p 16, Item 5(l). 122 T3-104, L 15-20. 123 T3-103, L 20-29. 124 T3-103, L 10-15, L 32-37. 125 T3-102, L32-40. -- 22 of 27 -- 23 than its description as ‘B’ stock there is no evidence that it is not of good quality or fit for purpose and that it is actually defective in anyway. I find that the supply of this dishwasher is not a defect. Electrical [167] Neither Mr Dixon, nor Mr Wiersma have electrical qualifications. Mr Dixon conceded that he was not qualified to comment ‘in detail’ on electrical matters, but his and Mr Wiersma’s experience as builders and building consultants to consider, and ultimately agree, that 33% of the electrical work was not completed.126 [168] Neither particularised the incomplete works in their reports, or in the joint experts’ report. Unlike the other items considered at the experts’ conclave, the cost of the work was not determined by Mr Barnes costing a scope of works to complete. Rather, he applied the experts’ estimate to the electrical budget in Mr Farrell’s breakdown. [169] Even if I am satisfied that Mr Wiersma and Mr Dixon, as experienced builders can estimate the percentage of incomplete work, I am not satisfied that simply applying that percentage to Mr Farrell’s budget provides a reliable estimate of the cost of completing the works. [170] Mr Barnes, in oral evidence, was clearly uncomfortable with the approach. He could, he said, estimate the labour component based on Mr Nayson’s evidence, but could not estimate the cost of the materials or ‘fixtures and fittings’ on the information before him.127 [171] When asked by Mr Thomas whether he thought the calculation was a correct approach, or whether he thought he had insufficient information to price it, he responded ‘I don’t have enough information to price it. I don’t have that scope’.128 [172] Mr Toby Nayson, Mr Farrell’s electrical sub-contractor on the job, estimated that ‘about 3 Days (sic) work remained for the job to be completed’.129 [173] In cross-examination, Mr Nayson suggested that it may be even less than three days, but admitted that at the time of signing his statement, his recollection was ‘hazy’. [174] Mr Nayson was not asked what materials would be needed to complete the works. He was not asked to provide a costs estimate. [175] There is no other evidence before the Tribunal of the cost of completing the electrical work, and in those circumstances the Halls have failed to discharge their onus in relation to the quantum of those works. [176] The experts did agree that the television antenna was in the wrong position and was not as specified. Mr Barnes calculated the cost of rectification at $403.00 excluding GST and margin.130 126 T3-6, L18-46; T3-7, L 1-19. 127 T3-122, L 3-15. 128 T3-122, L 28-30. 129 Exhibit 3, Vol 1, Tab 12, p 0258. 130 Exhibit 2, p 16, Item 5(p). -- 23 of 27 -- 24 [177] Mr Nayson’s evidence was that he positioned the antenna on the facia rather than the roof on Mr Hall’s instruction.131 In cross-examination he said he did not think any particular antenna was specified.132 His recollection was again hazy. [178] In those circumstances I prefer the evidence of Mr Hall. He acknowledged that the specified antenna had been discontinued but did not agree to the substituted product. He denies instructing anyone to relocate it. Slab survey [179] I find that Mr Farrell is not liable for the cost of provision of a slab survey.133 I accept Mr Thomas’ submissions in that regard. I am satisfied on the basis of Mr Farrell’s evidence that he provided the new slab RL to the architect, who accepted it.134 Liquidated damages [180] Under the contract the starting date was the later of the agreed day of 25 August 2015 or 10 business days after the issue of the approved plans by the assessing certifier.135 The date of practical completion was specified in the contract as 25 April 2016.136 The date for practical completion can be extended in the circumstances set out in Clause 23 of the general conditions of the contract.137 [181] The parties agree that extensions of time for seven business days had been granted. One of those was for rain which was already allowed for in the contract.138 It is submitted on Mr Farrell’s behalf that an additional 23 days should be allowed on the basis that the approved plans did not issue until 3 September 2015.139 The start date would then become the day 10 business days after that issue, namely 17 September 2015. [182] Mr and Mrs Hall are responsible under the contract for obtaining the building approval.140 A delay in doing so beyond the agreed start date of 25 August 2015 is a delay caused by them entitling Mr Farrell to an extension of time for the additional 23 days. [183] I find the date for practical completion then is 29 May 2016. [184] The Halls have an entitlement for liquidated damages from that date until the date of termination of contract on 17 June 2016, that is 19 days at $200.00 per day, totalling $3,800.00. [185] The Halls also claim liquidated damages from 18 June 2016 until 1 September 2018, totalling some $88,000.00 on the basis that they had not achieved practical completion at that time. While it is not difficult to accept that the Halls have continued to suffer damage after termination of the contract, they cannot quantify that damage by relying 131 Exhibit 3, Vol 1, Tab 12, para 3. 132 T1-78, L 35-44. 133 Exhibit 2, p 14, Item 5(c). 134 Transcript T1-23, L8-10. 135 Exhibit 3, Vol 1, Tab 10, p 55, Item 5. 136 Exhibit 3, Vol 1, Tab 10, p 56, Item 7. 137 Exhibit 3, Vol 1, Tab 10, p 73. 138 Statement of agreed facts, Exhibit 3, Vol 1, Tab 7, p 0048, para 15. 139 Statement of agreed facts, Exhibit 3, Vol 1, Tab 7, p 0048, para 11. 140 Exhibit 3, Vol 1, Tab 10, p 58, para 13. -- 24 of 27 -- 25 on the liquidated damages provision in the contract. One consequence of that termination is that they recovered possession of the site. After that, they would need to provide evidence of their actual loss and their efforts to mitigate that loss. They have not done so. [186] There is no evidence of their loss after termination and in those circumstances, and in those circumstances no damages are payable. Interest [187] In written submissions, the Halls claim an amount of $43,157.06 for ‘interest on payments made to uncontracted parties (5% p.a. on each amount paid by the respondents)’. Presumably this relates to payments for progress claims to Farrell Builders Pty Ltd. I can find nothing in the evidence or submissions which shows how it is calculated or how it is a loss suffered by the Halls. Orders [188] Mr Farrell’s claim is for monies he says remain owing under the contract. Offset against that amount are the amounts counterclaimed in respect of incomplete and defective works and liquidated damages. [189] It is agreed by the parties that Mr Farrell has been paid $538,850.30 exclusive of interest,141 and that the contract price after adjustments for variations is $757,836.11.142 [190] In respect of the incomplete and defective works, where there is no dispute between the experts and the parties I accept the evidence contained in the joint experts’ report, both in relation to the scope of works and the value of works determined by Mr Barns other than those items considered earlier in these reasons in respect of which specific contrary findings of fact have been made. [191] I accept the evidence of Mr Barns that the appropriate builder’s margin in this case is 20 percent.143 [192] My calculation of the amounts payable by each party are set out in the attached schedule (Annexure A). [193] I order that Shane Farrell pay Brent Hall and Helen Hall the sum of $5,461.56 by 7 December 2018. 141 Joint statement of agreed facts, filed 17 May 2017, Table 1. 142 Respondent’s written submissions, schedule A, applicant’s amended submissions, p 69. 143 Exhibit 3, Vol 2, Tab 25, p 1283. -- 25 of 27 -- 26 ‘Annexure A’ Incomplete Work Exhibit 2 Item No. Works Amount (excluding GST & margin) 1a (p 2) Standard preliminaries (adopting the option for replacement of cladding) $21,650.00 1b (p 3) Bulk and detailed excavation $925.00 1c (p 3) Demolition $870.00 1d (p 3) Concrete slabs, drive ways and paths $3,895.00 1g (p 4) Timber supply, balustrades and screens $5,325.00 1h (p 4) Timber door supply $16,565.00 1j (p 4) Aluminium windows, door shower screens and mirrors $4,085.00 1k (p 5) Joinery white goods, fabrication and appliance deposit (excluding dishwasher) $20,861.00 1L (p 5) Sundries and fixings $1,974.00 1n (p 6) Painting (internal and external) (on the basis that the cladding is to be replaced) $7,425.00 1o (p 7) Metal roofing fascia guttering $695.00 1p (p 8) Hydraulics, fixtures $5,951.80 1r (p 9) Tiles $450.00 1s (p 9) Air-conditioning $300.00 5k (p 16) Shower screens and doors $5,100.00 Rectification Work Exhibit 2 Item No. Works Amount (excluding GST & margin) 1m (p 6) Remove and reinstall cladding $67,212.00 3g (p 12) Storm water $2,070.00 3i (p 13) Window glazing $35.00 3j (p 13) Internal stairs (including water damage) $575.00 5i (p 15) Door seals $236.30 5j (p 15) Door stops $55.00 5p (p 16) Roof and tenner $403.00 5q (p 17) Kitchen bulkhead grills $499.00 Subtotal $167,157.10 Plus margin (20 %) $200,588.52 Plus gst (10 %) $220,647.37 Total $220,647.37 Contract Price: $757.836.11 Less amount of incomplete and defective work: $220,647.37 Sub Total: $537,188.74 -- 26 of 27 -- 27 Less liquidated damages: $3,800.00 Amount payable to Shane Farrell: $533,388.74 Less payments made under contract: $538,850.00 Total: $5,461.56 -- 27 of 27 --