Supreme Court New South Wales Medium Neutral Citation: Barber v Oracle (NSW) Pty Ltd [2019] NSWSC 1370 Hearing dates: 9 October 2019 Decision date: 09 October 2019 Before: Ball J Decision: 1. Judgment for the plaintiffs in the sum of $2,185,099.80. 2. The defendant pay the plaintiffs' costs of the proceedings. Catchwords: CONTRACTS – Breach of contract – no issue of principle Category: Principal judgment Parties: Russell Barber (First Plaintiff) Gareth Barber (Second Plaintiff) Oracle (NSW) Pty Ltd (Defendant) Representation: Counsel: C Mobellan (Plaintiffs) No Appearance (Defendant) Solicitors: Nexus Lawyers Pty Ltd (Plaintiffs) No Appearance (Defendant) File Number(s): 2018/295405 EX TEMPORE Judgment 1. On 10 December 2015, the plaintiffs entered into a contract with the defendant, Oracle (NSW) Pty Ltd, for the construction of a new dwelling on land at Oyster Bay, New South Wales in accordance with plans that formed part of a tender for the work. The contract was for a fixed price of $3.1 million. The contract provided for the payment of a deposit of $155,000 and for the balance to be paid in instalments on the presentation of invoices relating to particular stages of the work. 2. In all, between 14 July 2016 and 6 December 2017, the defendant invoiced and the plaintiffs paid a total amount of $2,932,067.88. According to the contract, the building work was to be completed within 488 days, although the contract contained provisions for extensions of time for public holidays, delays caused by inclement weather and for other reasons. In all, 33 days' worth of extensions were granted. The contract also contained provisions for variations, and the evidence is that the plaintiffs requested and paid for a number of variations totalling $305,372.48, making an adjusted contract price of $3,405,372.48. 3. Disputes arose concerning the work and payment. On 6 February 2018, Mills Oakley, acting for the defendant at that time, sent a Notice of Default and Notice of Intention to Suspend the work for an alleged failure to provide evidence of capacity to pay by the plaintiffs. 4. Work was subsequently suspended on or around 21 February 2018. On or about 27 February 2018, the plaintiffs served the defendant with a Notice of Default under the contract in relation to the suspension of works, and subsequently on 7 March 2018 they served a Notice of Default under the contract in relation to defective work. On or about 6 April 2018, the plaintiffs served a Notice of Acceptance of Repudiation and Termination of the contract. 5. The plaintiffs commenced these proceedings on 27 September 2018 seeking damages for breach of contract. The proceedings were originally defended by the defendant which filed a list response on 10 January 2019 consisting largely of bare denials. Despite a number of extensions of time and two changes of solicitor, the defendant has not filed any evidence in the proceedings. Its most recent solicitors filed a Notice of Ceasing to Act on 30 September 2019, and there has been no appearance for or on behalf of the defendant since that time. 6. On 4 October 2019, Hammerschlag J set the matter down for a final hearing today. There was no appearance by the defendant, although I am satisfied that the defendant was notified of today's hearing. 7. The plaintiffs originally claimed a total of $2,502,571.09 which comprises four heads of loss. First they claim an amount of $1,070,974.93 representing an amount said to have been overcharged by the defendant and overpaid by the plaintiffs for the work the defendant actually did. 8. Second, they claim the difference between the contractual price for completing the work, and the estimated cost of having that work completed by another builder they have engaged which is said to total $2,024,894.92 making a difference of $1,238,907.05. Third, they claim $544,102.51 as the cost of rectifying defective work performed by the defendant. Lastly, they claim the cost for alternative accommodation from the date the work ought to have been completed in accordance with the contract to today's date. 9. Clause 28 of the building contract relevantly provides: Termination by the Owner a) Subject to compliance with Clause 26, if the Builder is in default in any of the following respects, namely: i) commits an act of insolvency; or ii) fails to proceed with the works with due diligence or in a competent manner with regard to the circumstances of the contract works; or iii) if without cause under the contract the Builder wholly suspends the carrying out of the works before Practical Completion; or iv) if the Builder refuses or persistently neglects – a) to comply with the requirements of Clause 12 of these conditions; or b) to remove or remedy defective work or improper materials, so that by the refusal or persistent neglect the works are materially affected; or v) if the Builder states in writing that he/she or it is unable or unwilling to complete the works or abandons the Contract; AND if, in the case of any default that is capable of remedy, the default continues for twenty five (25) days after notice in writing has been given to the Builder specifying the default and stating the Owner's intention to terminate this Contract, THEN the Owner may, without prejudice to any other rights or remedies, by notice served as allowed by Clause 30, terminate this Contract. b) The Owner may terminate this Contract in the circumstances provided by the general law however this does not prevent the Owner and Builder from agreeing to additional circumstances in which the contract may be terminated. c) In the event that the Owner terminates this Contract in accordance with Sub-Clause (a) of this Clause, the Owner may engage another Builder to carry out the works and the following provisions are to apply:- i) if the reasonable cost of the works exceeds that which would have been otherwise payable under this Contract, then the amount of that excess may be recovered as a debt by the Builder to the Owner. ii) If the reasonable cost of the works is less than that which would have been otherwise payable under this Contract, then the amount of that difference will be a debt payable by the Owner to the Builder. In the event that the Owner engages another Builder to complete the work under this contract and pursuant to the Owner's right to terminate then any claim under Sub-Clause (c) (i) above is restricted to work which is the same as required under this contract. 1. I am satisfied that the plaintiffs were entitled to terminate the contract under this clause. The uncontested evidence is that the defendant breached a number of the provisions of cl 28, and failed to remedy those breaches after they were served with default notices in accordance with the contract. 2. In principle, there is no reason why the plaintiffs should not be entitled to recover the four heads of damage they claim. Under cl 20 of the building contract, the defendant was entitled to submit an invoice for each stage of the work identified in item 4(d) of sch 2 of the contract where 95 per cent of the work was reached - that is, when 95 per cent of the work was complete except for minor omissions, incompleteness or defects. 3. The plaintiffs were required to pay invoices within five days of the date the claim was submitted. Under cl 20(e), the making of any payment to the defendant "is to be taken as payment on account". There is therefore no reason why the plaintiffs should not be entitled to recover amounts they have overpaid under the contract. 4. Under cl 28(c)(i) of the contract, on termination, the plaintiffs in accordance with subclause 28(a), may engage another builder to carry out the works. If the reasonable costs of that work exceeds the amount payable under the contract for that work, then the plaintiffs are entitled to recover the additional costs as a debt. That would include the costs of rectifying any defects. 5. Finally, the plaintiffs are entitled to recover reasonable accommodation costs to the extent that those costs would not have been incurred if the work had been completed in accordance with the contract. 6. It will be convenient to deal first with the second and third heads of damage. 7. The plaintiffs have engaged Bakker Built to complete the work and rectify the defects on a costs plus basis. Mr Bakker gives evidence that he proposed a costs plus basis because at the time he was engaged it was unclear what would be involved in rectifying the defects. In the light of that uncontradicted evidence, I accept that it was reasonable for the plaintiffs to engage Bakker Built on that basis. 8. In relation to the costs to complete, the plaintiffs have provided uncontradicted evidence from Mr Madden, an expert quantity surveyor, on the costs to complete the work. In the absence of any challenge to that evidence there is no reason not to accept it. It appears Mr Madden has completed a thorough inspection of the works and drawings, has prepared a detailed schedule of the further work required to be done, and has adopted an appropriate methodology in costing that work. 9. In relation to the defects, the evidence is that Bakker Built has rectified a number of defects and charged a total amount of $363,918.11 for that work. Mr Bakker gives uncontradicted evidence that the building work performed by the defendant was the worst he had ever seen in his 25 year career as a builder. Bakker Built kept records of the work that was done, and Mr Madden gave evidence based on those records, and an inspection of the site, that the amount charged by Bakker Built was reasonable. In the absence of any evidence to the contrary, I accept that evidence. 10. Mr Madden has also prepared a joint report with Mr Stewart, an expert building surveyor. That report identifies further defects which had not been rectified as at the date of the report. The report estimates that the costs of rectifying those defects is $180,184.40. Again the report appears to be thorough, and the approach taken in it appears reasonable. In the absence of any other evidence, I accept it. 11. That leaves the amount overpaid by the plaintiffs plus accommodation costs. In my opinion, the simplest way to take account of the amount overpaid by the plaintiffs in this case is to add the total amount they have paid the defendant to the total amount they have paid, or will be required to pay, to complete the work and rectify defects and deduct the contract sum from that total. The difference represents the additional amount the plaintiffs will have to pay to obtain a dwelling which the defendant contracted to build for them for $3.1 million plus the costs of variations. 12. That difference is calculated as follows: Costs to complete $2,024,894.92 Costs to rectify defects $544,102.51 Amount paid to defendnat $2,932,067.88 Total $5,501,065.31 Less contract price $3,100,000.00 $2,401,065.31 Less cost of variations $305,372.48 Amount owing $2,095,692.83 1. That leaves accommodation costs. The evidence is that the plaintiffs are currently paying rent of $2,200 per fortnight which equates to an amount of $157.13 per day. Although they have not yet moved into the new house, they claim rent at that rate from the day the work should have been completed until today, which seems to me to be a very reasonable approach. 2. Allowing for weekends, public holidays and extensions, I am satisfied that in accordance with the contract, the work should have been completed by 20 March 2018. On that basis, the plaintiffs are entitled to recover rent for 569 days at $157.13 per day making a total of $89,406.97. 3. It follows that the plaintiffs are entitled to judgment in the sum of $2,185,099.83 ($2,095,692.83 plus $89,406.97). 4. The orders of the Court therefore are: 1. Judgment for the plaintiffs in the sum of $2,185,099.80. 2. The defendant pay the plaintiffs' costs of the proceedings. ********** 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: 10 October 2019