Builder Ordered to Pay Homeowners for Defective Works

The Tribunal decided that a builder must compensate homeowners for defective and incomplete works if the builder unjustifiably terminates the contract. The decision was based on the Home Building Act 1989.

OUTCOME: Allowed

Civil and Administrative Tribunal New South Wales Medium Neutral Citation: [NAME_1] and [NAME_1] v [NAME_2] t/as [NAME_4] [NAME_2] t/as [NAME_4] v [NAME_1] and [NAME_1] [2014] NSWCATCD 57 Hearing dates: Directions: Various including 13 August, 8 October and 14 November 2013. Hearing: 7 and 8 April 2014 at [NAME_5]. Decision date: 29 April 2014 Before: [NAME_6], General Member Decision: [NAME_2] is to pay [NAME_1] and [NAME_1] $93,852.12 immediately. Claim of [NAME_2] is dismissed. [NAME_2] is to pay the costs of [NAME_1] and [NAME_1] as a agreed or assessed. Order 3 stayed for 21 days from the date of publication of these reasons during which time the parties may make written submissions on the question of costs. Legislation Cited: Home [NAME_4] Act 1989 Cases Cited: [NAME_7] v [NAME_7]: Principal judgment Parties: [NAME_1] and [NAME_1] (applicant / cross respondent) [NAME_2] t/as [NAME_4] (respondent / cross applicant) File Number(s): HB 13/27279 and HB 13/04832 Publication restriction: Unrestricted

reasons for decision APPLICATION 1.This was an application brought by homeowners against a [NAME_4] contractor who had performed residential [NAME_4] work for them in the construction of additions to a dwelling at Northmead. The builder claimed for moneys outstanding under the contract for works done and materials provided. APPEARANCES 2.[NAME_8], solicitor of [NAME_5] appeared for the applicants and the respondent was not represented. JURISDICTION 3.The jurisdiction of the Tribunal is to be found in the Consumer Claims Act 1998 and Home [NAME_4] Act 1989. PROCEEDINGS 4.The matter was commenced when the homeowners filed an application on 28 January 2013. Subsequently, the builder's action was commenced in this Tribunal on 21 April 2013. There were various interlocutory hearings where directions were made for the proper conduct of the matters. The hearing took place on 7 and 8 April 2014 at [NAME_5]. 5.On the day appointed for hearing only the applicants were present. [NAME_9] handed up a letter from the respondent dated Friday 4 April, the last business day before the hearing. The letter stated that the respondent now wished to be represented and that the solicitors he had instructed had numerous unavailable dates including those upon which the matters were set down. [NAME_9] made a telephone call to the respondent's solicitor who confirmed that she was busy on both 7 and 8 April. 6.The applicants had filed and served formal witness statements together with an expert report. The respondent had filed a lengthy statement with photographs which took issue with various statements made by the expert and the applicants. It seemed to me that the respondent considered that he had some sort of defence to the claim. However it was difficult to see how an adjournment could be justified in circumstances where the respondent had chosen to call no expert evidence and had selected busy legal advisors the day before the hearing. 7.On my instruction [NAME_9] informed the respondent's solicitors that the applicants' case would start that day (7 April) and that if the respondent wished to be heard he would have to appear before 9.30 am on the second hearing day. The respondent appeared in person on 8 April, questioned witnesses and made submissions in his case. EVIDENCE 8.In deciding the matter I had the benefit of hearing oral evidence from the homeowners. They had filed and served lengthy statements which they adopted under oath and were cross examined on by the respondent. Also in evidence was a formal [NAME_4] report by a consultant (a [NAME_10]) which acknowledged the Chairperson's direction and had photos as well as a commentary on the works and a [NAME_10] Schedule. There was also a letter from Mr [NAME_11], a carpenter who worked on site commenting on the workmanship. Quotes and invoices to make good the alleged defects in the job were filed for the applicants as were the contract and plans. Documents relating to the homeowners warranty insurance were also tendered at the hearing. 9.[NAME_3] was not represented and his statement, although lengthy and embellished with photos, was not effective in advancing his case as it might have been. He had no independent expert evidence and often concentrated on matters which were of marginal relevance.

BACKGROUND FACTS 10.There were myriad allegations and contested facts. The applicants say that they accepted a quote from the respondent for $31,000.00 to extend and modernise a weather board dwelling at Northmead. On their evidence on 23 October 2013 the respondent had them sign an OFT contract which was almost blank except for the price. [NAME_1] says she had suspicions and although she signed the front, refused to initial every page as requested. 11.The applicants said they asked for a copy of the contract several times but were fobbed off and when they were given a copy it had details not on the original when they signed it. For example, it now said that materials were to be provided by them and were not included in the contract price. Indeed it was [NAME_3]'s case that the arrangement was for project management only and he was to be paid $31,000.00 for that. At other times he maintained (as I understood it) that he was to be paid 15% of the overall cost. I note that the homeowners from the outset agreed that some of the materials, including the kitchen cabinets and bathroom PC items, were to be provided by them. 12.The plain words of the document suggested a standard fixed price labour and materials contract. But the matter was complicated by the fact that English was not the first language of applicants or respondent. They spoke Farsi and negotiations were conducted in that language. [NAME_9] produced a search which indicated that [NAME_3] was not licensed to take on [NAME_4] work which required HOW insurance. He said it was out of date but it seemed that [NAME_3]'s [NAME_4] experience was limited in spite of his boast that he had recently completed the construction of 90 home units in the Illawarra. 13.The contract provided for a construction period of 6 weeks and work commenced in late October or early November. The applicants say before long they had grave misgivings about the competency of [NAME_3] and the quality of his workmanship. He frequently asked for money and was not on site as often as they expected. 14.It would be impossible to get to the bottom of the confused accounts of what happened but it seems safe to say that when the builder had been paid about $14,000.00 of the contract price there was a frank falling out. One contentious matter seems to have been aluminium windows which were to be tinted but which arrived as clear float. The builder blamed the suppliers but when contacted by the homeowner they were adamant that tinted glass had not been ordered. This led to the homeowners accusing the builder of a course of misleading conduct. There was a crisis in the relationship, the builder purported to terminate the contract, there was an attempt as mediation but in early December the builder left the site. By the time that happened the applicants say they had been paying for materials and meeting subcontractors' invoices for some time. 15.[NAME_3] asserted that there was a subsequent meeting where the applicants agreed to reinstate the contract but then refused to pay progress claims. At that point he asserted a right to suspend the works for non-payment. 16.The applicants sought the assistance of the Office of Fair Trading but the builder refused to participate and both owner and builder commenced proceedings. ADJUDICATION 17.The way this dispute evolved it came before me as an unequal contest. The applicants had complied with directions, had their lay and expert evidence filed and served and were competently represented. [NAME_3] was not represented, had no independent expert evidence, did not appear on the first day of the hearing and his approach to the dealing with the litigation was at many points misconceived. 18.To start with one of the last points first, I find that the builder terminated the contract in circumstances where he had no right to do so. I am unable to find on the material before me that there was any subsequent revival or novation of the contract as he alleges. I observe that one matter upon which he placed great weight in his written materials and in person before me was that the owners "interfered" in the project. Interference is not a separate category of relief but it did seem to me that their interest in the quality and speed of the works as well as the payment of subcontractors and suppliers was amply justified. The termination of the contract is important because [NAME_3] claimed a right to return to the site to make good any proven defects. While I agree that a contractor should be given the opportunity to remedy defects, I do not think the builder can claim this as a 'right' where he himself (as here) has abandoned the contract. There was also the point that I was far from satisfied that the licence condition restricting [NAME_3] to small jobs had been lifted. 19.[NAME_3] was keen to establish that the works as executed by him were satisfactory. He pointed to the fact that much of the job had passed the private certifier and that the quality of the work was no worse than numerous other jobs. The problem about that was that the independent expert had recorded chapter and verse each of the defects in the work and the particulars of the defects. For example the isolated piers were out of plumb, had mortar beds and perps varying from 1 to 15mm and seem to have been laid by [NAME_3] himself. Chunks had been cut from architraves to accommodate wall switches, window heights were not uniform and did not comply with the plans, to cite but a few of the problems with the job. I gave little weight to a hearsay statement by a carpenter that a plumber observed to him: "Mate, this builder has got no idea" but it was consistent with the expert report. Seeing the photos and assessing the material relating to the job, I formed the view that [NAME_3] was badly out of his depth in cottage construction in NSW although he might have been competent in other [NAME_4] work in other places. 20.I accepted the expert report of [NAME_10] and where there is conflict in evidence about the works between him and [NAME_3], I prefer [NAME_10]. 21.I also think the parties are bound by an ordinary interpretation of the written contract signed by all of them. It provided for a fixed price labour and materials project in the normal way. I also accept that the original contract did not specify that the homeowners were to provide materials. [NAME_9] told of efforts to have the original contract brought into evidence. He issued a summons to produce and called for its production at the hearing but [NAME_3] failed to produce it, although it was originally in his possession. There was no further explanation and I think I am entitled to draw an adverse inference from those facts on a principle akin to that in [NAME_7]. 22.The effect of my findings is that the homeowners had a right to have the works as specified in the contract, plans and specifications delivered to them at a cost of $31,000.00. They paid $14,000.00, the work was not finished and much of what existed had to be rectified. As a matter of contract law they are entitled to be put in the position they would be in if the contract had been performed according to its terms. 23.The net cost of the completed project under the contract was, as I find the agreement between the parties, $31,000.00. Prima facie the applicants are entitled to compensation from the builder for the extra cost to them of the finished job. [NAME_9] provided a useful aide memoire setting out the claim thus: Contract sum: $31,000.00 paid to builder $14,000.00 balance $17,000.00 Moneys paid by applicants direct to sub contractors and for materials $27,447.64 difference being overpayment by homeowners: $10,447.64 plus defective and incomplete works paid for $58,024.48 plus estimated cost to finalise $25,380.00 total claim: $93,852.12 24.On my enquiry [NAME_9] revealed that the claim is for the actual costs incurred in making good the defects and completing the work where this has been done rather than the estimate provided in the report. I am satisfied that the amount claimed by the homeowners should be awarded in their favour. 25.From the findings of fact that I have made it is clear that the builder's cross claim and desire to return to site to rectify defects and complete the job cannot succeed. In dismissing the builder's claim I have lingering suspicions that he might have been able to salvage more from the wreckage if he had competent advice at an earlier stage. COSTS 26.As the homeowners have achieved success in their application the usual position would be that costs should follow the event and that the respondent should meet their costs. I will make such an order but stay it for 21 days to allow the parties to make submissions. ORDERS 1. [NAME_2] is to pay [NAME_1] and [NAME_1] $93,852.12 immediately.

2. Claim of [NAME_2] is dismissed. 3.[NAME_2] is to pay the costs of [NAME_1] and [NAME_1] as a agreed or assessed. 4.Order 3 stayed for 21 days from the date of publication of these reasons during which time the parties may make written submissions on the question of costs. [NAME_6] Member Civil and Administrative Tribunal of New South Wales 29 April 2014 I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar

********** 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: 24 July 2014