Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Rathchime Pty Ltd v Willat; Willat v Rathchime [2016] NSWCATCD 74 Hearing dates: 18 November and 19 November 2016(Final submissions received 17 February 2016) Decision date: 09 September 2016 Jurisdiction: Consumer and Commercial Division Before: T Simon, Senior Member Decision: 1. The homeowners are to pay the builder the amount of $26,688.53 immediately. 2. The parties are to provide to the Tribunal and each other, either in person or by post, submissions and documents in relation to costs by 15 September 2016. 3. The parties are to provide to the Tribunal and each other, either in person or by post, submissions and documents in reply on costs by 30 September 2016. 4. Costs will be determined on the papers. If either party seeks to be heard in person, they should advise the Registry prior to 30 September 2016, setting out the reasons why and the Registry will advise in due course. Catchwords: Home Building, abandonment, repudiation, abandonment, variations, defects. Legislation Cited: Home Building Act 1989 (NSW) Cases Cited: Brewarrina Shire Council v Beckhaus Civil Pty Ltd & 1 Or [2005] NSWCA 248. Pavey & Matthews Pty Ltd v Paul [1987] HCA 5). Ryder and Anor v Frohlich and Anor [2004] NSWCA 472 Zeman v Bollard [2015] NSWCATCD 13 Category: Principal judgment Parties: Parties in HB 14/43750 (homeowners application) Rathchime Pty Ltd (first applicant) Grant Willatt (respondent) Parties in HB 15/11593 (builder's application) Grant Willatt (applicant) Rathchime Pty Ltd (respondent) Representation: Counsel: J Hyde − or the homeowners M Klooster − for the builder Solicitors: Mills Oakley Lawyers − for the homeowners Snelgroves Lawyers − for the builder File Number(s): HB 14/43750 & HB 15/11593 Publication restriction: Unrestricted Reasons for the Decision 1. These reasons relate to two applications. Matter HB 14/43750 is an application made by the homeowner. Application HB 15/11593 was a subsequent application made by the builder. The Applications 1. For ease of reference the parties shall be referred to as builder and homeowner. 2. The initial application was made by the homeowner on 2 September 2014 seeking $300,000.00 for defective works. 3. The homeowner's claim was subsequently amended to seeks damages for breach of the contract, breach of statutory warranties, cost savings, costs, interest and interest on costs. 4. The builder's application was made on 2 March 2015 seeking an amount of $103,313.02 for outstanding monies due under the contract and unpaid variations. 5. Both applications were subsequently amended seeking higher amounts and the quantum's claimed shall be dealt with in greater detail below. Jurisdiction of the Tribunal 1. It is not in contest when the parties contracted. However, on 11 July 2011, the parties executed three separate contracts. The first of the three contracts had been previously provided to the homeowners in about April 2011. The contracts were in the following amounts: 1. Contract 1 was in the amount of $560,758.57. 2. Contract 2 was in the amount of $499,661.39. 3. Contract 3 was in the amount of $142,503.54. 1. While the terms and scope of the contracts will be discussed in further detail below, for the purposes of determining jurisdiction, the Tribunal finds that the parties contracted for residential building works on 11 July 2011 as defined in s 3 of Home Building Act 1989 (NSW) (HBA). The Tribunal is satisfied that both applications involve a building claim as defined by s 48A of the HBAt. The Tribunal is also satisfied that both claims have been made within time and that the Tribunal has jurisdiction to determine the building claims pursuant to section 48K of the HBA. The Evidence 1. The Tribunal had before it the following: 1. Five folders containing the parties lay and expert evidence (Exhibit 1) 2. A photo taken by Mr Willatt in about November 2015 showing a retaining wall (Exhibit 2) 3. The conclave scott schedule (Exhibit 3) 4. A transcript of hearing (Exhibit 4) 5. The homeowners amended Points of Claim (Exhibit 5). 1. Submissions were received from the parties as follows; 1. Closing submissions were received from both parties on 23 December 2015. 2. Closing submissions in reply were received from each party on 10 February 2016. 3. A further submission was received from the homeowner on 12 February 2016. 4. On 17 February 2016 the builder filed submissions opposing consideration of the further submissions filed by the homeowner on 12 February 2016. However, the builder's submissions also addressed the 12 February submissions. 1. The Tribunal in coming to its decision has considered all exhibits and the oral evidence of the parties given at the hearing The Tribunal has considered all the submissions that were provided to it, including those that were provided out of time. The Tribunal has considered the 12 February 2016 submissions of the homeowners and they do not appear to raise anything new and in any case have been addressed by the builder. How did the Contract come to an end? 1. A primary issue for determination in the proceedings is how and if the contract has come to an end. That finding is important to determining whether the homeowner is entitled to certain damages claimed, in particular incomplete works. 2. Neither party took steps under the contract to terminate the contract in accordance with the terms of the contract. Early in the hearing the Tribunal raised with the parties that given the damages that were being claimed, the Tribunal would need to find on the issue and time was given for the parties to address that issue. Also on the first day of hearing, the Tribunal raised the case of Brewarrina Shire Council v Beckhaus Civil Pty Ltd & 1 Or [2005] NSWCA 248. In particular at para 68 and 69 of that decision, Ipp J states: 68 While, on this assumption (the Contract still being on foot), the Council may have been entitled to claim damages for delay arising out of Beckhaus' failure to achieve practical completion by the date for practical completion, it could not sue Beckhaus for defective or incomplete work. As long as the Council maintained that the Contract was alive and had not been terminated, and held Beckhaus to its obligation to complete the work in accordance with the specification, on its contention the work remained lawfully in Beckhaus' possession. In other words, it was an inevitable incident of the Council's argument that the work had not been delivered to and accepted by the Council (Beckhaus – on the Council's argument – being in possession of and obliged to complete the work). While the work was in Beckhaus' possession, the Council suffered no loss by reason of defective or incomplete work; the work, not being in the Council's possession, did not at that stage form part of its patrimony. 69 This situation would have changed when the Contract was terminated. When that occurred, the work (in its defective and incomplete state) was handed over to the Council. At that stage, the Council suffered loss by being in possession of defective and incomplete work. 1. Both parties made submissions that certain issues were not raised and ventilated in pleadings prior to the hearing. In particular, the homeowner made submissions that the builder did not plead abandonment by way of defence. The Tribunal has considered those submissions and while they may not have been well articulated by way of pleadings prior to the hearing, the issues relating to how the contract came to an end were raised and each party was given adequate opportunity to address it at the hearing. Moreover, the homeowner needs to establish valid termination or acceptance of repudiation in order to establish they were entitled to the damages they were seeking. How did the Contract come to an end? 1. The homeowner's position was that by about September 2012 the builder had substantially abandoned the building site but continued to hold out that he was willing to complete the contract and that he made various representations in both 2013 and 2014 that he was willing to return to fix defects and complete the work. The homeowners commenced proceedings on 2 September 2014. On 12 October 2014 they filed amended points of claim that they say claim demonstrates the homeowner's acceptance of the builders repudiation. 2. The builder makes submissions that the contract was abandoned by early July 2013 as by that time the builder had failed to carry out any work for more than 6 months and more than 12 months had passed since works were due to be completed under the contracts. The homeowner alleges that the builder had failed to rectify defective works that had been raised more than 18 months earlier and both parties had failed to meet their obligations in accordance with the terms of the contract. Neither party had issued a breach notice or terminated the contract in accordance with its terms and neither party had commenced proceedings in the Tribunal. The builder regards those matters as sufficient for the Tribunal to make a factual finding that the parties manifested the intention of abandoning the contract and that by early July 2013 both parties regarded the contract as at an end. 3. Mr Michael Wren is a co-director of the homeowner (a Corporation) with his wife Ms Deirdre Wren. Only Mr Wren provided affidavits and was cross-examined. The builder suggested that given Ms Wren was a competent, compellable and available witness who would have been able to give evidence on conversations and contested factual matters and that no explanation or reason was provided as to why Ms Wren did not give evidence, the Tribunal should make a Jones v Dunkel inference that Ms Wren's evidence could not have assisted the homeowner's case. The builder rejected the submissions that the Tribunal should make such an inference as there was nothing that Mrs Wren could have added to the proceedings and Mr Wren had canvassed the issues in depth. The homeowner's make submissions that the proceedings were already protracted and that the homeowner was of the view that Mrs Wren's evidence would add little if any new material as she acted jointly with Mr Wren on most matters. 4. The Tribunal finds it unnecessary to make a Jones v Dunkel inference in relation to Ms Wren and has dealt with the evidence before it. 5. Having considered the evidence of the parties the Tribunal finds that the contract came to an end by mutual abandonment of the parties by July 2013. 6. Mr Wren provided an affidavit dated 22 December 2014 and was cross-examined in relation to the affidavit. At para 22 of the affidavit he states that the building works commenced on or about 23 August 2011 and continued until around December 2012. At para's 35-36 he details how by about November 2011 he noticed a number of defects in the work and began corresponding with the builder about the defective and incomplete works. 7. At para's 37-38 of the affidavit he states: 37. On or around August 2012, GW stopped attending the property and all work appeared to cease. I recall having a telephone conversation with GW at the time in words to the following effect: Me: "Grant there are a number of defects and works unfinished and we need you to come back and finish the work. If you do not I will be forced to take legal action." GW: "If you pursue me then I will put Epica Constructions into liquidation. I do not want to but that is what I will have to do as I do not have any money." 38. On or around 5 September 2012, I sent GW a letter complaining of the defects and incomplete works and asking him to take action (Defect Letter)…. 1. In that letter Mr Wren detailed the defective works and relevantly concluded; …. We require a complete reconciliation of all invoices and payments and a summary of what work has been completed and what is remaining. We require this by 14 September 2012. There is painting to be completed and the undercroft finalised etc 1. Mr Wren evidence differed in cross-examination and he stated that all works ceased in January 2013 rather than August 2012. In any case, it appears that even if works did occur in January 2013 it was only minor and related to the electrical works. 2. At para 39 of his affidavit Mr Wren states that in the months following the issuing of the defects letter in September 2012 he attempted to liaise with the builder to attend to the defects and complete the works under the contract. He states that subsequently, there was a meeting on 22 July 2013 in which the parties met on site to discuss the defects and incomplete works. 3. There were email communications provided to the Tribunal between the parties until 29 November 2012. In an email dated 16 November 2012 and sent from Mr Wren to the builder he states: "you have an obligation to complete the work." 1. The builder raises that contrary to the evidence given by Mr Wren there is no objective evidence of any communication between the parties during the period from 30 November 2012 to 22 July 2013 being a period of more than 33 weeks. 2. No questions were put to Mr Willatt regarding that time period during cross­ examination. Mr Wren's evidence was cross examined in relation to the time period and stated the following: Q: Between January 2013 and June 2013? A: I was always trying to contact Grant to try and come and finish the works, there would have been ongoing discussions or telephone conversations or whatever or emails. 1. Mr Wren was also questioned in relation to what he included in his affidavits: Q: When you prepared each of your affidavits you would of made sure you put everything you thought was important in those affidavits? Is that correct? A: Correct. Q: So if there were emails which you thought were important you would have put them in your affidavit is that correct? A: Yes. 1. Mr Wren denied in cross-examination that there was no contact with the builder in the period between November 2012 and June 2013 and the transcript reveals that the question was put to him more than once; Q: "Sir, I am saying, putting squarely to you, that you did not have any contact with my client about this job during the period December 2012 all the way up to July 2013, which is when the onsite meeting occurred. That is what I am putting to you. Do you accept that? A: No." 1. Mr Wren provided with his affidavit a copy of minutes he made after that meeting of 22 July 2013. He also provided an email dated 6 September 2013 in which the builder provided to the homeowner a status on the list of defects and incomplete works. However, the builder did not return to site. 2. At para's 42-44 of his affidavit Mr Wren detailed a complaint he made with Fair Trading. He stated that in late 2013 he contacted Fair Trading to make a complaint about the respondent. A Fair Trading inspector attended the property on 20 January 2014 and prepared a report and ordered the builder to return, complete and rectify works. On 24 March 2014, Mr Wren wrote to the builder stating: I have received your email regarding attendance on site to commence the remediation work. I will need a detailed program of work and the times when the work is going to be carried out. What is the situation for tomorrow as I will need to be there. The Office of Faith Trading has stipulated that the work was to be completed by 28 March 2014 which obviously will not be complied with and you are in breach of their order. I reserve Rathchimes rights to protect its position and again request full reconciliation of all payments, receipts and tenders etc. 1. The builder responded by return email: Michael I can provide a remediation schedule but the completion date of 28 March 2014 will not be possible. As the contract is lump sum as you claim a reconciliation of payments and receipts is not applicable. Grant 1. The builder did not return to the building site after 24 March 2014. In cross examination he stated: Q ''And it's the case isn't it after 24 March 2014 you did not return to the home and carry out any further work? A: March 2014? No I was advised that it was beyond that now. Q: And what do you mean by beyond that? A: That I think that they were going to go down this legal route. " 1. A letter from Fair Trading dated 30 July 2014 also confirmed the homeowners advice that the builder had not returned to complete the defective work in relation to the rectification order which Fair Trading had issued. 2. It was a month after the issuing of the letter from Fair Trading that the homeowner made the application seeking an order for the builder to pay an amount of $300,000.00. The application is signed by a solicitor and in the reasons for requesting the order it is stated: - The builder abandoned the site leaving incomplete work - There are defects in the work with substantial value for rectification (a more accurate quantification will be made when further evidence is obtained. A building consultant has been appointed to prepare a report and Scott Schedule) - The builder also failed to credit the applicant amounts of savings which were to be returned to the applicant pursuant to the terms of the contract. The applicant will, in due course, seek leave to prepare a detailed "points of claim." 1. The relevant evidence given by the builder on in relation to the contract end is contained his statement dated 21 May 2015. Mr Grant Willatt states at para 35 that by February 2012 the parties were in disagreement in relation to the works and the progress of the works ceased around that time with him returning to the site up until about August 2012 to rectify works which were defective. 2. The circumstances in which abandonment occurs are stated by McColl JA in Ryder and Anor v Frohlich and Anor [2004] NSWCA 472 where her honour said: "135. Where it is plain from the conduct of parties to a contract that neither intends that the contract should be further performed the parties will be regarded as having so conduct themselves as to abandon or abrogate the contract: DTR Nominees Pty Ltd v Mona Homes Pty Ltd ... [1978] HCA 1 2; 1 38 CLR 423 at 434 ...; Summers v The Commonwealth ... [1918] HC/\ 33; 25 CLR 1 44 at 1 51- 1 52 ... The inference of abandonment will be drawn where "an 'inordinate' length of time has been allowed to elapse, during which neither party has attempted to perform, or call upon the other to perform, a contract made between them ... What is really inferred in such a case is that the contract had been discharged by agreement, each party being entitled to assume from a long -continued ignoring of the contract on both sides that ... 'The matter is off altogether"'. Fitzgerald v Masters... [1 956] HCA 53; 95 CLR 420 at 432... 1. The Tribunal finds that there was after January 2013 an inordinate length of time elapsing during which neither party has attempted to perform, or called upon the other party to perform the contract between them. Both parties evidence suggests that the builder had substantially abandoned the work in August 2012 and the homeowner claims that an electrician had returned for electrical works in January 2013. Mr Wren states that he continued to ask the builder to return on site, but there is no objective evidence to support that claim and the Tribunal is not satisfied on his evidence that he did continue to ask the builder to return to complete the works after January 2013. The Tribunal is satisfied that by time the parties had the meeting in July 2013 the contract had been abandoned and neither party had affirmed the contract since January 2013. Both parties had mutually abandoned the contract. The builder had failed to carry out any work for more than 6 months. Neither party had issued a breach notice or terminated the contract in accordance with the contract terms. The evidence reveals that the parties had previously communicated by email, but no email correspondence between the parties was provided for after 30 November 2012. Mr Wren did not point to a date or time when he contacted the builder after 30 November 2012 or provide specific details of exact conversations. The time to complete the works under the contract had passed and the builder had not rectified the defective works that had been raised by the homeowner some 18 months earlier in November 2011. Accordingly the Tribunal finds that the contract was abandoned by July 2013. 2. In regards to the builder and homeowners actions after July 2013, those actions cannot serve to resurrect a mutually abandoned contract. Mr Wren's records of the minutes of the meeting of July 2013, even if they are accurate, are irrelevant because by the mutual actions the contract had been abandoned prior to the meeting. The email dated 6 September 2013 sent by the builder to the homeowner is simply a status on the list of defects and incomplete works. In relation to the rectification orders of Fair Trading, Mr Wren's email of 24 March 2014 refers only to the commencement of "remediation work." 3. A letter from Fair Trading dated 30 July 2014 also confirmed the homeowners advice that the builder had not returned to complete "defective work" in relation to the rectification order which Fair Trading had issued. 4. Having found that the parties mutually abandoned the contract by July 2013, the Tribunal finds that the homeowners are not entitled to claim amounts for completion costs. 5. The consequences of abandonment are helpfully summarised in Zeman v Bollard [2015] NSWCATCD 13; Where a contract is abandonment, an issue arises as to whether the abandonment is prospective or whether the parties intend any accrued rights should also be forgone. In the present case the issue does not arise as the parties have agreed the amount payable if abandonment is found. In any event, it is clear from the fact that each party commenced proceedings that the parties did not intend for accrued rights to be forgone. The Tribunal is satisfied that abandonment did not prevent either party from enforcing their accrued rights up to when the contract was abandoned. 1. Similarly in this case the fact that both parties commenced proceedings is indicative that the parties did not intend for accrued rights to be forgone. 2. Accordingly, the Tribunal is satisfied that the applicant is entitled to claim defects for breach of statutory warranty. Section 48MA which was inserted into the HBA for a work order to be the preferred outcome does not apply in this case as the homeowners application was filed prior commencement of the the amendment of the HBA which inserted that section into the HBA. Defective Works 1. Mr Craig Nisbett completed an initial report for the homeowners on 9 March 2015 and a supplementary report on 5 August 2015. He provided a further report on 29 September 2015. Mr Adam Nash-Smith for the builder completed reports on 29 May 2015 and 21 August 2015. A joint expert report was completed on 2 November 2015. A conclave took place on 30 June 2015. The item numbers referred to in the headings below are the numbers allocated to the scott schedule resulting from that conclave. Much of the joint report deals with incomplete works. The Tribunal has only dealt with items that it regards as defective work or where there was a dispute as to whether the items were incomplete or defective. The Tribunal has not dealt with items that are agreed incomplete works. Item 18 – The Family Room Terrace 1. The builder conceded this defect and an amount of $7,081.80 was agreed as the appropriate quantum between the parties. Item 19 - External Doors 1. Mr Nisbett the expert for the homeowner regarded this item as a defect because the glazing had been installed on the inside as opposed to the outside. He stated in his report that "the glass panes are no longer sealed against prevailing weather which can only be achieved with the glazing rebate facing to the outside". 2. The builder made submissions that this is not a defect because Mr Nisbett had failed to identify any breach of the Building Code of Australia or any applicable Australian standard that Mr Nisbett had failed to find any water penetration despite the fact it was raining at the time of his first inspection on 25 August 2014. 3. AS2047, the Australian Standard for window glazing, was put to Mr Nisbett under cross-examination and he was asked about it. Although the standard was not referred to in this report, under cross examination Mr Nisbett explained that AS2047 contains drawings that show sections of the door sashes with the rebates being installed facing outwards. 4. Mr Nash-Smith for the builder agreed it would be preferable that the lower half of a window – sill be on the outside. 5. Having considered the evidence on this point the Tribunal is satisfied that the windows and doors have been installed with the rebates facing inwards and although Mr Nisbett did not initially refer to the standard to establish the defect, in cross examination he clarified the standard. Considering the evidence on this point, the Tribunal finds that the installation of the windows and doors with the rebates facing inwards is a defect. The builder suggested that because there was no evidence of water penetration, even though it was raining, it was not a defect. The Tribunal finds this irrelevant to the determination of the issue of whether the defect is a breach of statutory warranty. Pursuant to section 18B (1) (c) the builder has a responsibility to build in accordance with the Building Code and the Tribunal finds that a failure to build in accordance with the requirements of AS 2047 is a breach of the building code and a breach of statutory warranty. 6. The joint scotts schedule indicates under the Members comments that at the conclave the experts agreed that if found Mr Nisbett's calculation was agreed by Mr Nash-Smith at $5,385.00. Accordingly the Tribunal allows that amount to the homeowner for rectification of the defect. Item 20 - Painting 1. The builder conceded this item at the agreed amount of $432.30. Items 21A & 21B - Family Room 1. The builder conceded these items at the agreed amount of $1,372.80. The homeowner later made submissions that the agreed amount for this item was $2,544.00 and not $1,372.80. However, the amount allowed by Mr Nisbett on the conclave joint schedule report is $1,372.80 and on that basis the Tribunal only allows that amount. Item 22 - Floor Heating 1. The homeowner did not press this item. Item 23 - Stone Retaining Wall 1. On this point the homeowner alleged that the builder was negligent and that his negligence caused the retaining wall to collapse. The builder agreed that if it ccould be established that the builder was negligent in causing the wall to collapse then he would be responsible in relation to the defect. 2. In his report of 2 December 2014, Mr Nisbett stated that based on instructions the builder caused the wall to collapse. 3. The builder made submissions that there was no objective evidence to establish the amount of material placed by the builder on top of the subject wall. Mr Nisbett agreed in cross-examination that there could be other reasons as to why the subject retaining wall collapsed other than through the actions of the builder. 4. The Tribunal cannot be satisfied that the wall has collapsed through the actions of the builder. Mr Nisbett agreed that he was not an engineer to assess the structural integrity of the wall. There was no evidence before the Tribunal in relation to the structural integrity of the wall prior to the commencement of the works. The Tribunal is not satisfied from the evidence that the wall collapsed due to the negligence of the builder and that amount is not allowed to the homeowner. Item 24 - Retaining Wall 1. The builder conceded this item at the agreed amount of $20,387.56. Item 25 -Wall Tiles 1. The builder conceded this item at the agreed amount of $2,471.04. Item 26 - Gas metre 1. Mr Nisbett stated that the builder had failed to diligently complete the gas metre connection and as a result the gas connection was defective. The builder made submissions that the works are incomplete works. 2. Mr Nisbett has provided photographs of the works. Having considered the photographs and the evidence of the experts the Tribunal is satisfied that the works are incomplete works, not defective works. Mr Nisbett in his own evidence states that the builder has failed to complete the gas metre connection and in light of the photograph it is accepted that the work to the gas metre was work yet to be completed. Costs Savings and Oral Contract 1. This case is complicated by the fact that three contracts were signed on the same day for what is generally the same scope of works. Mr Wren's explanation is that on 6 April 2011 the builder dropped off a contract signed by the builder for him and his wife to sign. He recollects that he told the builder he was not ready to sign the contract as he need to finalise talks with the bank "etc" and that he asked the builder "what about our agreement to adjust for savings?" Mr Wrens states that the builder told him "if you trust me we can just have a verbal agreement that any savings I make against the Trade breakdown …. will be credited back to you". 2. Mr Wren states that in the months following he arranged his finance and continued talking with the builder and that in early May 2011 the builder gave him two further contracts which the builder had signed on 16 and 17 May 2011. He states that the builder told him the following; GW: Mr Wren, I'm just organising myself for the build and I think that it would be easier for my administration and getting the necessary paperwork done, to break the work up into two separate portions, one for 80 and one for 88 Arabella Street. Would you mind if I gave you an additional two contracts to sign together with the first one I gave you in April? 1. In effect, he states that he questioned the reason for the separate contracts and commenced to sign all three contracts on the basis that the first contract for $560,000 was the contract they were working to. He states he signed the contracts because he trusted the builder. Under cross-examination Mr Wren continued to maintain that the intended that the applicable contract was the first contract given to him in April 2011 for the lump sum amount of $560,000.00. 2. At hearing, the homeowners legal representatives confirmed the scope of works for the first contract was subsumed by the second and third contracts, with some minor and inconsequential exceptions. The homeowners accepted that the second and third contracts executed by them are those engaged for assessing whether the work performed by the builder was incomplete or defective. 3. The builder states that the first contract was provided to Mr Wren at his request in order to secure finance from the bank and so that it could be provided with his loan application. 4. At paragraph 19 of his affidavit of 22 December 2014, Mr Wren also details what he alleges was a verbal contract relating to savings and bonuses. He refers to an email dated 5 July 2011 that proposed the terms of a deed of variation, however no deed of variation was ever signed between the parties. 5. The homeowner alleges that instead the parties entered into as side oral contract entitling it to any cost savings made during the progress of the works to be credited to the homeowner. 6. The oral agreement is outlined in Mr Wren's affidavit dated 22 December 2015. He states that there was an agreement that the builder would keep a running tally of his costs and that he would account for all expenditure incurred during the build process and that if there were savings in the trade breakdowns, they were to be credited back to the homeowners. At paragraph 20 of his affidavit, Mr Wren relevantly recollects a conversation in relation to the side agreement: GW:... The side agreement is like this: • I will keep a running tally of my cost carrying out the work and account to you for all the expenditure • If I make a saving against the budgets in the trade breakdown (referring to the Costs Break-up), then you get credited 100% of the saving • You can give me a tax invoice for saving inclusive of GST an I will credit you with it. You can then apply that other works that you may ask me to do such as the optional extras I've given you in my quote • The lump sum contract is however fixed and guaranteed, providing that you do not change the scope of works from what I've based my quote on Me: Okay Grant that sounds good ... we will be happy to pay you a discretionary bonus if we are happy with your work and it all works out OK. 1. The homeowner also referred to the following of evidence of the side agreement between the parties: * An email dated 7 May 2012 sent by the builder to Mr Wren referring to an account reconciliation of the project budget. * An email dated 25 October 2012 sent by the builder forecasting a cost saving of $19,011.00. * An email from the Builder dated 24 November 2012 with further reference to cost savings. * The affidavit of Mr Wren sworn 26 June 2015. 1. Having considered the evidence of the parties and the cross examination, the Tribunal does not find either party to be credible witnesses. Rather the evidence both parties gave was self-serving. Mr Wren gave evidence that he did have a long standing relationship with the respondent and they had been friends for over 20 years and he trusted him. While it is accepted that the parties had been friends for some time, the Tribunal does not find it credible that Mr and Ms Wren simply signed three contracts because they 'trusted' the builder. During cross-examination Mr Wren presented as a careful and considered witness. The Tribunal finds the builder's evidence that the first contract was provided in order to assist Mr Wren to obtain finance and that Mr Wren has not been truthful regarding the contract. 2. Mr Wren conceded in cross-examination that the oral agreement was an "important matter to him." The Tribunal finds that if such a deal existed, Mr Wren would have properly documented any deal reached. 3. The Tribunal does not find that there was a separate side contract. All three contracts that were signed between the parties have an clause that states that the agreement between the parties is limited to the written documents forming part of the signed contract and any additional conditions "which must be in writing". 4. Consistent with the Tribunals findings of credibility, the Tribunal finds that although pre-contractual conversations were had about a possible arrangement, there was no binding side agreement that ever came into effect. In regards to subsequent costing's provided in emails by the builder, the Tribunal accepts they were provided to the homeowner to show the homeowner updates of how the work was travelling and not to confirm a side agreement. Accordingly no amount is allowed to the homeowner in relation to that part of the claim. The Builder's Claim 1. The builder concedes that none of the variations claimed are in writing and signed by both parties and that the builder is only entitled to recover any variations under quantum meruit. 2. In accordance with the principals set out in Pavey & Matthews Pty Ltd v Paul [1987] HCA 5) quantum meruit would be made out where the homeowner has received a benefit at the builders expense and in circumstances where it would be unjust to allow the homeowner to retain the benefit. 3. The Tribunal finds in this case that where the homeowner has received a benefit it would be unjust for the homeowner to retain that benefit and is satisfied to allow amounts for variations that were not in writing on a quantum meruit basis. Item 1- Clear site sandstone 1. The homeowner alleges that these works are within the scope of the contract. Mr Nisbett relied on the description of ground works in all three Contracts to support the assertion that the works were within the scope of the contract. The description of ground works in the contract reads as follows: Excavation of working space to complete the works Trimming and removal of overburden Cartage and disposal off site (if required) of excavated material (VENM) and any loose debris and materials 1. The builder makes submissions that the moving and stockpiling of sandstone on site was distinct and different from disposing of excavated material and any loose debris and materials because the sandstone was to be reused by homeowner and cannot be classified as "debris". 2. The builder makes submissions that the scope of works attached to "contracts 2 and 3 are detailed, considered and comprehensive documents" and that there was no reference to moving and stockpiling of sandstone in the detailed cost break up for "Earthworks" under Contract 2 and/or Contract 3 and that it was the objective intention of the parties that moving and stockpiling sandstone was not within scope. 3. Having considered the evidence the Tribunal does not accept that this work was outside the scope of contracts 2 and 3 which the Tribunal finds are the applicable contracts. The Tribunal finds that clearing the site of sandstone was part of the contract and does not find this a variation, but within the scope of contract works. 4. Further having considered the evidence of the parties the Tribunal makes the following findings in relation to each of the claimed variations: Item 2 - Temp access stair 1. The builder did not press this item. Item 3 - Stone tiles in lieu of vitrified 1. The builder did not press this item. Items 4 - Full height stone in undercroft 1. The Tribunal finds that this item was not part of the scope of works and was completed by the builder and that the builder is entitled to payment on a quantum meruit basis. It was agreed between the parties that if found the amount owing in relation to this item on a quantum meruit basis was $4,035.87 and the Tribunal is satisfied to allow that amount to the builder. Item 5 - Shower to undercroft 1. The Tribunal finds that this item was not part of the scope of works and was completed by the builder and that the builder is entitled to payment on a quantum meruit basis. It was agreed between the parties that if found the amount owing in relation to this item on a quantum meruit basis was $198.00 and the Tribunal is satisfied to allow that amount to the builder. Item 6 - Stone sealer 1. The Tribunal finds that this item was not part of the scope of works and was completed by the builder and that the builder is entitled to payment on a quantum meruit basis. It was agreed between the parties that if found the amount owing in relation to this item on a quantum meruit basis was $462.00 and the Tribunal is satisfied to allow that amount to the builder. Item 7 - Brick Piers/Wall to Terrace 1. The Tribunal finds that this item was not part of the scope of works and was completed by the builder and that the builder is entitled to payment on a quantum meruit basis. It was agreed between the parties that if found the amount owing in relation to this item on a quantum meruit basis was $3,973.00 and the Tribunal is satisfied to allow that amount to the builder. Item 8 - Relocate Subboard at Ground Floor 1. The builder alleges that the homeowner requested the subboard to be relocated. The homeowner conceded in cross-examination that those instructions were provided to the builder. The Tribunal finds that the homeowner did request the relocation of the subboard and that it was outside the scope of works of the contract and amounts to a variation. The builder agreed with the homeowners costing on this item as being in the amount of $508.00 and the Tribunal is satisfied to allow the amount to the builder on a quantum meruit basis. Item 9 - Palisade fence 1. The Tribunal finds that this item was not part of the scope of works and was completed by the builder and that the builder is entitled to payment on a quantum meruit basis. It was agreed between the parties that if found the amount owing in relation to this item on a quantum meruit basis was $2,575.60 and the Tribunal is satisfied to allow that amount to the builder. Item 10 and 11 - Lower Courtyard Road Base and Lower Courtyard Laying Road Base 1. The Tribunal finds that this item and item 11 double up. Having found that the homeowner is not entitled to completion costs the Tribunal is satisfied that this item and variation item 11 were not part of the scope of works and were completed by the builder and that the builder is entitled to payment on a quantum meruit basis. The Tribunal is satisfied to allow a combined amount of $2,723.00 for this item and variation 11. Item 12 - Dispersion Trench 1. The builder did not press this item. Item 13 - Labour & Excavation Costs 1. The builder did not press this item Item 14 - Rubbish Removal 1. The builder alleges that the homeowner instructed him to remove rubbish from another location. The homeowner claimed that the works are within the scope of the contract and that there is no evidence to support the instructions provided to Mr Nash-Smith by the builder that the homeowner requested the builder to dispose of rubbish brought onto site from a house owned by the homeowner in Northwood Road. 2. The homeowner conceded in cross-examination that he instructed the builder to remove rubbish that he had brought onto site from Northwood Road. The Tribunal finds that this was not within the scope of the contract and was a variation and that the builder is entitled to the cost on a quantum meruit basis. 3. Mr Nisbett costed the item at $1,013.10 being the amount invoiced by the builder. Mr Nash-Smith costed this item at $1,063.76 being the amount invoiced by the builder plus an additional 5% builder's margin that the builder inadvertently did not charge. 4. The Tribunal finds that a 5% margin has not been allowed in Mr Nisbett's costing and that it should be included and allows the amount of $1,063.76 for this item. Item 15 - Pavilion Slab 1. The Tribunal finds that the Pavilion Structure was contained as an optional extra in contract 1 but does not appear as an optional extra in contracts 2 and 3. Accordingly, the Tribunal finds that it was not within the scope of works of the ultimate contract between the parties, which was contracts 2 and 3 and that it is a variation and that the builder it entitled to its costs on a quantum meruit basis. Both experts agree that the builder supplied and installed the concrete floor slab for the pavilion floor. 2. The builder has accepted the homeowners costings in relation to this amount for $25,027.34 and the Tribunal is satisfied to allow that amount to the builder. Item 16 - Bricklaying Extras 1. The builder did not press this item. Item 17 - Gatehouse Masonry Wall 1. The Tribunal finds that this item was not part of the scope of works and was completed by the builder and that the builder is entitled to payment on a quantum meruit basis. The parties are in dispute with respect to costing of this item. 2. Mr Nisbett costs this item at $2,281.65 being the amount invoiced by the builder. Mr Nash-Smith costs this Item at $2,645.38 being the amount invoiced by the builder plus an additional 5% builder's margin that the builder inadvertently did not charge. 3. The Tribunal finds that a 5% margin has not been allowed in Mr Nisbett's costing and that it should be included and allows the amount of $2,645.38 for this item. Item 18 - Pavilion South Retaining Wall 1. The builder did not press this item. Item 19 - 80/88 Retaining Wall 1. The builder did not press this item. Item 20 - Garage South Retaining Wall 1. The Tribunal finds that this was within the scope of contract works. The Tribunal prefers the evidence of Mr Nisbett on this point in that he relies on contract drawing no. 2001065-CD3A - issue 11 which shows an inclusion of the northern retaining wall on the western side of stair 13. The Tribunal rejects the builder submissions that this is referring to some other wall and accepts that the wall was within the scope. Item 21 - Increase in North RW by 1000 1. Similarly the Tribunal prefers the evidence of Mr Nisbett that the works were within the scope of the contract and does not allow this variation Item 22 - Light Fittings 1. The builder did not press this item. Item 23.1 - Rainwater Tank 1. The builder did not press this item Item 23.2 - Engineer, Geotech, drafting 1. The Tribunal finds that this variation has been established and that the builder is entitled to a total amount of $4,824.00 for this item on a quantum meruit basis. Pursuant to the contract the engineering and drafting fees were to be paid by the homeowner. The builder provided the following evidence in relation to cost 1. Casa Studios Tax Invoice dated 21 September 2011 to re-design access stairs. Paid on 27 September 2011 for an amount of $600.00. 2. Stutchbury Jacques Limited Tax Invoice dated 29 September 2011 for site attendances on 1 September 2011 for preparation of sketch. Paid on 9 October 2011 for an amount of $2,200.00. 3. Stutchbury Jacques Limited Tax Invoice dated 29 September 2011 for site attendance on 26 October 2011 for preparation of sketch. Paid on 16 November 2011 for an amount of $1,100.00. 4. MPN Consulting Engineer Tax Invoice dated 7 March 2012 for site visits. Paid on 4 April 2012 for an amount of $924.00 Item 23.3 - Slate Roof 1. The Tribunal finds that this item was not part of the scope of works and was completed by the builder and that the builder is entitled to payment on a quantum meruit basis. The parties are in dispute with respect to costing of this item. The Tribunal prefers Mr Nisbett' s rates in relation to this item and does not find a mathematical error. 2. Mr Nisbett costs this item at $13,665.00 (excluding GST and margin). Adding the margin and GST the total amount for the item $15,783.08. The Tribunal is satisfied to allow that amount to the builder. Orders 1. The Tribunal has arrived at its calculations as follows: * Amount owing to the homeowner for defects: $37,130.50 * Amount owing to the builder for variations: $63,819.03 The total owing by the homeowner to the builder is $26,688.53. 1. The orders are made accordingly. T Simon Senior Member Civil and Administrative Tribunal of New South Wales 9 September 2016 I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 November 2016