IN THE COUNTY COURT OF VICTORIA
AT Melbourne
COMMERCIAL DIVISION
BUILDING CASES LIST	Revised
Not Restricted
Suitable for Publication	

Case No. CI-19-00242

F & J Investment Assets Pty Ltd (ACN 621 866 180) as trustee for The Mustafa Property Trust	First Plaintiff	
		
and		
		
Jetmir Mustafa	Second Plaintiff	
		
and		
		
Florije Mustafa	Third Plaintiff	
		
v		
		
Paul Etcell 	Defendant	

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JUDGE:	His Honour Judge Anderson	
WHERE HELD:	Melbourne	
DATE OF HEARING:	10-14, 17, 24-28 October, 2, 3, 7, 8 - 11 November 2022; 12 & 22 December 2022 (final written submissions)	
DATE OF JUDGMENT:	7 May 2024	
CASE MAY BE CITED AS:	F & J Investment Assets Pty Ltd v Etcell 	
MEDIUM NEUTRAL CITATION:	[2024] VCC 594		

REASONS FOR JUDGMENT
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Subject: 	BUILDING CONTRACT – TERMINATION – SUSPENSION BY BUILDER – SUFFICIENCY OF NOTICES

Catchwords: 	Building Contract – Refurbishment of premises as a childcare centre – Contract terminated by Client following giving of Show Cause Notice pursuant to the contract – Numerous “substantial breaches” relied upon including Builder’s suspension of the work – Whether Builder had validly suspended the works for Client’s failure to pay progress claims – Sufficiency of Builder’s Suspension Notice and related Show Cause Notice served on the Client – Sufficiency of Client’s notice served on Builder – Suspension of works not in accordance with the contract – Builder’s notices invalid and ineffective - Contract validly terminated by the Client – Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, MLW Technology Pty Ltd v May [2005] VSCA 829 and Yan & Anor v Zhang [2018] VSC 694 applied.
	
	Delay – Extension of time – Whether notice claiming extension necessary - Jolin Nominees Pty Ltd v Daniel Investments (Aust) Pty Ltd [2021] VSC 705 distinguished.

	Parties – Contract defined the “Client” as “The Mustafa Property Trust” – Contract negotiated by Mr and Mrs Mustafa and signed by Mr Mustafa “on behalf of” the Trust – At the time the contract was entered into the trustee was a company – No mention of company during negotiations  – Mr and Mrs Mustafa were the sole directors of the company – Company not mentioned during contract negotiations - Whether the contract should be rectified to name the company as the “Client” – Contract rectified.

Legislation Cited: 	Domestic Building Contracts Act 1995 (Vic); Building and Construction Industry Security of Payments Act 2002 (Vic). 

Cases Cited: 	Northern Health v Kuipers [2015] VSCA 172; Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; Matthews v SPI Electricity Pty Ltd [Ruling no 20] [2013] VSC 197; Jolin Nominees Pty Ltd v Daniel Investments (Aust) Pty Ltd [2021] VSC 705; Jolin Nominees Pty Ltd v Daniel Investments (Aust) Pty Ltd [2022] VSCA 209; Yan & Anor v Zhang [2018] VSC 694; Lanshen Pty Ltd v F3 Enterprises Pty Ltd [2024] VSCA 59; Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749; Central Pacific (Campus) Pty Ltd v Staged Developments Australia Pty Ltd [1997] VicSC 581; Catley v Watson (1983) V ConVR; Greydae Pty Ltd v Malilane Pty Ltd [2003] VSCA 27; MLW Technology Pty Ltd v May [2005] VSCA 829; Burbank Trading Pty Ltd v Allmere Pty Ltd [2009] VSCA 82; Salta Constructions Pty Ltd v St George Bank [2014] VSCA 289; and Balanced Securities Ltd v Dumayne Property Group Pty Ltd [2017] VSCA 61; Etlis v New Age Constructions (NSW) Pty Ltd [2005] NSWCA 165; Bunbury Foods Pty Ltd v National Bank of Australia [1984] HCA 10; Cardona v Brown [2012] VSCA 174; Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; Hankey v Clavering [1942] 2 KB 326; Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002]; Stojanovski v Australian Dream Homes [2015] VSC 404; J-Corp Pty Ltd v Mladenis [2009] WASCA 157; Hacer Group Pty Ltd v Euro Façade Tech Export Sdn Bhd [2022] VSC 373; Dura (Australia) Constructions Pty Ltd v. Hue Boutique Living Pty Ltd (No. 3) [2012] VSC 99.

APPEARANCES:
	Counsel	Solicitors	
For the Plaintiffs	Mr R A Harris of counsel	MGA Lawyers	
			
For the Defendant	Mr J R Gurr of counsel	Ward & Co	

HIS HONOUR:

1	In 2017, Jetmir and Florije Mustafa (“Mr and Mrs Mustafa”) wished to proceed with the refurbishment of a building in Eltham (“the Eltham property”) for use as a childcare centre. It was their intention to engage a Builder to carry out the works on behalf of The Mustafa Property Trust (“The Property Trust”).
2	Mr and Mrs Mustafa had been the trustees of The Property Trust since 1 February 2017. F&J Investment Assets Pty Ltd (“F&J Investment”) was incorporated on 22 September 2017. Mr and Mrs Mustafa had at all times been the directors of F&J Investment. By a deed dated 9 October 2017, F&J Investment replaced Mr and Mrs Mustafa, and became the trustee of The Property Trust. 
3	On 26 October 2017, a Building Contract for the refurbishment of the Eltham building was entered into by “The Mustafa Property Trust” as the “Client” and Paul Etcell as the “Builder” (“the Building Contract”). The contract was signed by Mr Mustafa “for and on behalf of” the Client and by Justin Barnett on behalf of the Builder. The contract sum was $1,472,847.00. A document headed “Variation” for an additional sum of $134,959.99 was also executed by the parties on 26 October 2017. 
4	Mr and Mrs Mustafa had first discussed the building refurbishment and the proposed Building Contract with Mr Barnett. Mr Etcell was first introduced to Mr and Mrs Mustafa on 4 October 2017. Mr Etcell was a registered Builder trading under the business name “Ikonic Homes”. Mr Etcell and Mr Barnett were to share the expected profits from the Building Contract. Mr Barnett was the Construction Manager for the project, although Mr Etcell was also involved on site. 
5	The stage one building permit was issued on 12 October 2017. Demolition work had commenced on 15 October 2017 and construction work on the refurbishment started shortly afterwards. The Building Contract was terminated on 24 August 2018. By that time, the parties had been in dispute for a lengthy period over a number of issues including the payment of progress claims, delays in construction and the quality of the building works. 
6	In July and August 2018, leading up to the termination of the Building Contract, there were meetings between Mr and Mrs Mustafa, Mr Etcell and Mr Barnett. Various notices and other correspondence were exchanged to which more detailed reference will be made in due course. 
7	Many of the disputes between the parties will be resolved by the Court’s determination as to which party validly terminated the Building Contract. 
8	On 24 August 2018, Mr Mustafa submitted to Grimbos Building Surveyors, the Registered Building Surveyor for the project (“the building surveyor”), an application to take over the refurbishment of the Eltham building from Mr Etcell. On 3 September 2018, the stage four amended building permit was issued naming Mr Mustafa as the “Client Builder”, replacing Mr Etcell as the Builder. 
9	Mr and Mrs Mustafa had engaged Shady El-Sheikh, a construction manager, to assist them with the completion of the project. Trades were contracted directly to finish the works. The refurbishment was completed in mid-2019. The works undertaken included the completion of matters left unfinished by the Builder, the rectification of defective work and the carrying out of other new redesigned works. 
10	Soon after the Building Contract was terminated, a building consultant, Matthew Osborne, was engaged by Mr and Mrs Mustafa to inspect the building works. He did so on 30 August and 11 September 2018. Mr Osborne identified defective work performed by the Builder prior to the termination of the Building Contract. 
11	On 8 May 2019, an occupancy permit was granted. On 8 July 2019, F&J Investment leased the property to a related company, Bridge Kids Pty Ltd, to operate the childcare centre.
12	The principal issues raised for determination in the proceeding are as follows:
(a)	Whether F&J Investment, or Mr Mustafa (separately, or with Mrs Mustafa), was the appropriate “Client” under the Building Contract. In this judgment, the expression “the Client” shall refer to the party to the Building Contract who, during the carrying out of the contract works acted in the position of “the Client”, or what might more commonly be described as “the owner”, without attempting to define at any particular time whether that meant:
(i)	Mr Mustafa, either personally, as trustee for The Property Trust, or as a director of F&J Investment as the trustee of The Property Trust;
(ii)	Mrs Mustafa, together with her husband, in any of the roles referred to; or
(iii)	F&J Investment as the trustee of The Property Trust; 
(b)	The legal effect of the Builder’s suspension of the works and of his service of Suspension and Show Cause notices under the Building Contract, dated 31 July and 1 August 2018;
(c)	The legal effect of the Client’s Show Cause Notice dated 1 August 2018 and the subsequent purported termination of the Building Contract on 24 August 2018;
(d)	The financial consequences which follow from the decision I made about the termination of the Building Contract; and
(e)	The resolution of other claims which survived the termination of the Building Contract, including whether the Builder carried out the contract works in a defective manner or was otherwise in breach of the Building Contract as a result of the delay in the completion of the project.
Summary of conclusions in the reasons for judgment
13	In view of the length of these reasons for judgment, it is appropriate that I set out a summary of my conclusions at this stage. This summary must be read in light of the more extensive reasons that follow.
14	Amendment of the Plaintiffs’ pleadings (paragraphs 36 to 52): Shortly before the trial concluded, I refused an application by the Plaintiffs to amend their Statement of Claim and their Reply and Defence to Counterclaim. The proposed amended pleadings were the Plaintiffs’ Fourth Further Amended Statement of Claim (“P4FASOC”) and the Plaintiffs’ Fifth Further Amended Reply and Defence to Counterclaim (“P5FARDCC”), both filed on 9 November 2022.
15	The amendments referred to and relied upon the processes by which a quantity surveyor, Charter Keck Cramer (“CKC”), in three reports between February and July 2018, assessed the Builder’s progress claims and recommended how much of the progress claims should be paid by the Client. CKC was engaged by the Client’s bank, National Australia Bank Ltd (“NAB”).
16	The amendment application was refused principally because of the late stage at which the application was made, and the likely reliance placed upon the Plaintiffs’ existing pleadings by the Defendant in the conduct of the case over an extended period.
17	Credit of witnesses (paragraphs 60 to 64): I have generally accepted the evidence of Mr and Mrs Mustafa. I found Mr Etcell an unreliable witness. The absence of Mr Barnett as a witness without reasonable explanation led to the usual consequences.
18	I preferred the evidence of the Plaintiffs’ expert Mr Osborne to the evidence of Mr Jeffery, who I found adopted the role of an advocate rather than of an expert.
19	Issue 1 – Which party was the “Client” in the Building Contract? (paragraphs 65 to 78): The trustee of The Property Trust was always intended by the parties as the “Client” in the Building Contract. F&J Investment was the trustee when the Building Contract was entered into. All parties mistakenly believed that Mr (or Mr and Mrs) Mustafa was (or were) the trustee(s) at that time.
20	As the Client is the successful party in the litigation, there would be no prejudice to the Defendant if the Building Contract was rectified to name F&J Investment as the “Client”.
21	Issue 2 – Delays during the Building Contract before termination (paragraphs 79 to 213): The date for practical completion was extended to 7 September 2018. The Building Contract was terminated rightfully by the Client on 24 August 2018. Consequently, no rights relating to delays under the Building Contract had accrued to the parties and survived the termination.
22	Nevertheless, there were issues of delay by the Builder, both in the performance of the works and in the ordering of materials that were proper bases for the service of the Client’s Show Cause Notice on 1 August 2018.
23	Issue 3 – Termination of the Building Contract (paragraphs 214 to 487): The Building Contract was rightfully terminated by the Client on 24 August 2018.
24	The Builder’s Suspension Notices dated 31 July 2018 were not effective as there was no proper basis to give the notices at that time and the notices were inadequate under the Building Contract. The Builder’s Show Cause notice was similarly defective. 
25	Prior to the suspension of the works, the Client had substantially paid all monies owing under the Building Contract, as represented by completed “stages” of the work and as recommended by CKC in its third report dated 6 July 2018. 
26	The Builder’s progress claims on 15 and 17 June 2018 for the balance of Stage 7: Rough in and Stage 5: Frame did not comply with clause 21.1, being made prematurely before the works of each of those stages had been completed. In those circumstances, the balance of clause 21 of the Building Contract, specifically the deeming provisions in clause 21.5, had no application. 
27	The Client’s Show Cause Notice was an effective notice in terms of the “substantial breaches” of the Building Contract relating to:
(a)	the wrongful suspension of the works by the Builder;
(b)	the extent of the defective work of the Builder, representing 30% of the contract price and completed variations; and
(c)	the late supply of materials and other delays by the Builder that meant the Builder would not have completed the works as programmed for reasons that were his sole responsibility.
28	Issue 4 – The Builder’s items of defective work (paragraphs 488 to 1026): The pre-trial processes involving the experts reduced the disputed matters to the defect items set out in an agreed Scott Schedule dated 9 November 2022 (“the Scott Schedule”), containing each party’s position on issues of liability and quantum.
29	After examining each of these items, I have determined that the reasonable cost to the Client to rectify the defective work was the total sum of $478,599.88.
30	Issue 5 – Quantum (paragraphs 1027 to 1102): As a consequence of the determination that the Building Contract was properly terminated by the Client, the Client is also entitled to:
(a)	the cost of completing the works of the Building Contract which I have fixed at $512,282.75; and
(b)	delay costs for the period to complete the works of the Building Contract and to rectify defective work which I fixed at $910,136.99.
31	The Builder did not succeed in relation to any of his counterclaims.
32	Conclusions and orders: As a consequence of these determinations, and taking into account the state of the works when the Building Contract was terminated and the payments made to the Builder by the Client, the First Plaintiff is entitled to judgment on its claim in the sum of $654,117.17 and, on the counterclaim, that the counterclaim be dismissed.
33	Other orders were made to allow the parties time to check the arithmetic of the calculations in the reasons for judgment and to address any further submissions that they might have on issues of interest and costs.
Pleadings, claims, evidence, credit of witnesses
34	The proceeding was commenced by writ issued on 23 January 2019. Fixed trial dates on 27 November 2019, 17 March 2020, 15 June 2020, 13 October 2020, 29 June 2021 and 22 November 2021 were vacated as the parties requested more time to complete interlocutory steps. On 23 November 2021, the trial commenced before his Honour Judge Cosgrave (as he was then). The Defendant made application to further amend his defence. On 8 December 2021, after 5 sitting days hearing submissions, Judge Cosgrave delivered a ruling and made further interlocutory orders, including refixing the trial for 5 September 2022.
35	The final form of the parties’ pleadings are contained in the following documents:
(a)	the Plaintiffs’ third Further Amended Statement of Claim dated 18 February 2022 (“P3FASOC”);
(b)	the Defendant’s fourth Further Amended Defence and Counterclaim dated 1 June 2022 (“D4FADCC”); and
(c)	the Plaintiffs’ fourth Further Amended Reply and Defence to Counterclaim dated 18 February 2022 (“P4FARDCC”).
36	Plaintiffs’ application to amend their pleadings: Probably the most critical issue for determination in this matter is which party effectively terminated the Building Contract. This decision depended, to a significant degree, on the sufficiency of the Suspension Notices and Show Cause Notices served by the parties on 31 July and 1 August 2018.
37	That issue is not determined in a vacuum. The efficacy of each notice must be considered in the light of the circumstances which existed when the notice was served. The amendment proposed by the Plaintiffs was intended to clarify, and expand, the legal implications which they allege arose from the circumstances of which the parties were aware when the various notices were served.
38	The ability of the Plaintiffs to raise these matters was unaffected by the outcome of the amendment application, as the issue of the construction of the provisions of the Building Contract, in respect of the Builder’s Suspension and Show Cause notices, was raised in P3FASOC.
39	The basic facts which were relevant to the amendment application were as follows:
(a)	in early 2018, NAB became the Client’s financier for the project;
(b)	as part of NAB’s arrangement with the Client, it appointed CKC to assess the Builder’s progress claims for the Staged Works and Variations and to report on the value of the works that had been performed by the Builder and to recommend how much the Client, through NAB, should pay the Builder in respect of his progress claims;
(c)	CKC made three reports dated 23 February, 5 April and 6 July 2018;
(d)	the process for the preparation of each report involved CKC inspecting the works on site with the Builder’s appointed quantity surveyor, Louis Ng, and having discussions and correspondence with the Builder and the Client;
(e)	following each report, the Client paid the Builder a sum which was substantially the amount recommended for payment by CKC;
(f)	the recommendation made by CKC in its third report was that the progress claim for Stage 6: Carpark structure was owing, but that the claims for the balance of Stage 5: Frame and Stage 7: Rough-in were not owing as those stages had not been completed;
(g)	After the third CKC report, the Client paid the recommended sum of $147,283.40 for Stage 6, but did not pay the Builder’s claims for the balance of Stage 5 and Stage 7; and
(h)	on no occasion, did the Client provide a progress certificate within seven days, pursuant to cl 21.3(b) of the Building Contract conditions, disputing that all or part of a progress claim was not owing, including in relation to the progress claims for the balance of Stages 5 and 7.
40	Paragraph 4A of the proposed P4FASOC alleged that, “in or about February 2018 and continuing up until the Contract was terminated it was agreed between the Client and the Builder to vary the operation of clause 21.3 and clause 21.5 of the Contract”. 
41	It was alleged that the variation involved the Builder submitting his progress claims to CKC for assessment. It would follow that the Client would therefore not be required (under clause 21.3) to issue a certificate within 7 days and would only be required to pay the amount assessed by CKC.
42	Alternatively, the Plaintiffs alleged in paragraph 4B of P4FASOC that the Defendant had made representations to the same effect.
43	The Plaintiffs alleged in paragraph 4C of P4FASOC that as a consequence of the variation, or in reliance upon the representation, the Builder’s progress claims had been provided to CKC for assessment, no progress certificate had been issued by the Client pursuant to clause 21.3 of the Building Contract, and the Client had paid to the Builder the sum assessed by CKC in respect of the progress claims. 
44	The Plaintiffs in their proposed P5FARDCC also relied upon these allegations as giving rise to an estoppel or an actionable representation. 
45	There was no significant difference between the parties in relation to these facts, save for whether the works of Stages 5 and 7 had been completed. The matters will be discussed later in more detail. The result is summarised in the following table:
Claim date	Amount claimed by Builder	CKC report no.	CKC report date	Amount recommended by CKC	Date  paid by Client	Amount paid by Client	
To 19 Jan 2018	$506,854.09	1	23 Feb 2018	$506,854.70	To 5 Mar 2018	$504,955.80	
To 21 Mar 2018	$497,436.02	2	5 Apr 2018	$497,436.50	11 Apr 2018	$497,436.50	
To 17 Jun 2018	[$12,606.00] $147,284.70
[$117, 827.76 $12,144.00]	3	6 Jul 2018	$147,283.40	19 Jul 2018	$147,283.40	
	$1,294,152.57			$1,151,574.60		$1,149,675.70	
46	At issue in the case as pleaded in P3FASOC, D4FADCC and P4FARDCC was:
(a)	Whether the Builder’s progress claims for the balance of Stages 5 and 7, if made when those works were incomplete, satisfied the requirements of cl 2.1 as a valid progress claim, and cl17 as a proper basis for the suspension of works and for the suspension notices;
(b)	whether the Client’s failure to pay the Builder’s progress claims for the balance of Stages 5 and 7, or to dispute them within 7 days of the claims being made, had the effect by reason of cl 21.5(b) of the Building Contract conditions of deeming that the payments were immediately due and payable;
(c)	whether the Builder might rely upon this deeming to issue Suspension Notices or a Show Cause Notice pursuant to the Building Contract;
(d)	the adequacy and effectiveness of the progress claims and the Builder’s Suspension and Show Cause notices.
47	The issues raised by the Plaintiffs’ proposed amended pleadings are whether:
(a)	the Builder and the Client varied by agreement, the Building Agreement to allow for the process of assessment by CKC of the Builder’s progress claims and the acceptance of that payment in accordance with the CKC report recommendations would satisfy the progress claim provisions of the Building Contract;
(b)	alternatively, whether the Builder’s conduct constituted a representation relied upon by the Client to its detriment;
(c)	as a consequence, the Builder was estopped or otherwise unable to enforce cl 21.5(b) of the Building Contract conditions, including by the service of Suspension or Show Cause Notices.
48	I considered that it was appropriate to refuse the proposed amendments for the following reasons:
(a)	the basic facts were not significantly disputed by the parties;
(b)	however, the effect of those matters would need to be considered by the Court, whether or not the amendments were allowed, as part of the circumstances in which the various Suspension and Show Cause Notices were served, in order to determine the sufficiency and effectiveness of those notices in light of the appropriate construction of clauses 17 and 21 of the Building Contract;
(c)	the proposed amendments were not formalised until very late in the proceeding at trial and after lengthy interlocutory processes;
(d)	the Defendant had defended the case on the basis of the Plaintiffs’ pleaded case and would likely have made forensic decisions based upon the limitations of those pleadings. When Defendant’s counsel, Mr Gurr, opened his case early in the trial, he clearly had a thorough understanding of the issues relating to the non-payment of the progress claims for the balance of Stages 5 and 7. This included the role of CKC, who Mr Gurr said was “entirely irrelevant to the contractual relationship between the builder and the owner” [at T122] and “had no formal role under the contract” [at T201];
(e)	whilst it is impossible to determine whether any, and what, actual prejudice the Defendant may have suffered, if the amendment were allowed, it would likely be significant if the Defendant had made decisions about the possible settlement of the proceeding or about the conduct of the trial, based on the way the Plaintiffs had pleaded their case.
49	Balancing these matters, I considered that the interests of justice required that the amendment application be refused.
50	Having now reached my decision in the proceeding based upon the unamended pleadings, I know that the basic facts underpinning the amendment application have had particular significance in my decision concerning the adequacy and effectiveness of the Builder’s Suspension Notices and Show Cause Notices. The Client has therefore succeeded in the proceeding without needing to rely on the additional legal bases which may have arisen from the critical facts I have referred to.
51	In reaching my decision on the amendment application, I followed the decision of the Court of Appeal in Northern Health v Kuipers [2015] VSCA 172 (“Kuipers”), and the further important decisions referred to in Kuipers of Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 and Matthews v SPI Electricity Pty Ltd [Ruling no 20] [2013] VSC 197.
52	In Kuipers at [22], the Court of Appeal referred to the “pivotal” position of the Civil Procedure Act 2010 “to the resolution of disputes about case management issues in civil proceedings” and, at [24] to the need for the Court to have regard to the objectives set out in s 9 to further and give effect to the overarching purpose of the Act in s 7 “to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute”. These are processes I followed in relation to the amendment application.
53	Plaintiffs’ claims: By its claim in the proceeding (P3FASOC), F&J Investment, or alternatively Mr and Mrs Mustafa, as trustee or trustees of The Property Trust, sought a determination of the following matters:
(a)	rectification of the Building Contract to clarify the name of the Client;
(b)	that the Building Contract was properly terminated by the Client and not the Builder;
(c)	the cost of carrying out the contract works left incomplete by Mr Etcell;
(d)	the cost of rectifying the defective work of Mr Etcell; 
(e)	liquidated damages or delay damages for the time beyond the date for practical completion necessary to complete the incomplete works and to rectify defects; and
(f)	interest.
54	Mr Etcell, by his counterclaim (D4FADCC), claimed:
(a)	various declarations relating to the “Client” in the Building Contract and, the adjusted date for completion, and whether the Defendant validly terminated the Building Contract;
(b)	$ 144,476.89 as unpaid progress claims;
(c)	alternatively, reasonable remuneration for the work and labour done and materials provided;
(d)	loss and damage totalling $432,316.19 arising from the termination, as follows:
(i)	$303,406.86 termination fees paid to subcontractors or suppliers;
(ii)	$34,389.30 materials ordered and paid for;
(iii)	$94,520.03 lost profit on work not performed;
(e)	interest.
55	Evidence: The documents in the case were contained in three Court Books, the Court Book (“CB”) containing 4,849 pages, the Supplementary Court Book (“SCB”) containing 2,223 pages, and the Further Supplementary Court Book (“FSCB”) containing 1,998 pages.
56	Initially, individual documents in the three Court Books, that the parties wished to put in evidence, were marked as an exhibit, for example, Exhibit P1 included the documents the Plaintiffs tendered from the Court Book. This system broke down before the end of the trial. However, documents that were not in the Court Books were given a distinctive exhibit number and any objections were noted.
57	Accordingly, in preparing this judgment, I have had regard to all documents in the three Court Books and I have described and referenced all key documents relied upon in reaching decisions on the critical issues in the case.
58	At various times during the hearing, the parties’ counsel, at times taking objections, at other times making comment rather than taking objection, anticipated that these matters would be resolved by me, when considering my decision, giving appropriate weight to what the documents contained. This approach was also followed by me in relation to the evidence of witnesses contained in the witness statements and in their oral evidence. 
59	I have considered that this matter is best dealt with by making an order that, “all documents in the Court Book, Supplementary Court Book, and the Further Supplementary Court Book shall be admitted into evidence subject to consideration of all objections and the appropriate weight that should be given to the contents of the documents”.
60	Credit of witnesses: When assessing the evidence of both the lay and expert witnesses, I have taken account of the following matters:
(a)	the evidence-in-chief of the principal lay witnesses, including Mr and Mrs Mustafa and Mr Etcell, involved each of them affirming the truth of extensive witness statements prepared by the parties’ lawyers. The language of the statements was, therefore, not necessarily that of the witnesses. For example, there appeared to be considerable copying between the statements of Mr and Mrs Mustafa;
(b)	Mr Barnett did not give evidence although he would have been anticipated to be one of the principal defence witnesses. No witness statement was filed by him. No satisfactory explanation for his absence was given, although the Plaintiffs indicated that they would rely on Mr Barnett’s absence to make submissions as to what evidence should be accepted as a consequence. 
(c)	Mr Gurr stated early in the trial, on 12 October 2022, at T291, that Mr Barnett was “not giving evidence”. Mr Barnett was not called as a witness. When Mr Etcell gave evidence on 2 November 2022 about whether Mr Barnett had been aware of the architect’s specification of Loxo cladding before February 2018, I asked him [at T1408] whether there was any reason Mr Barnett could not come to court to give evidence about his knowledge of this matter.
(d)	Mr Etcell said that he had “been a little bit worried for Justin’s state of mind. So at the time when I asked him to give evidence, he wasn’t in a position where he could give evidence. He said, ‘the last thing he needed in his life right now was this court case’”. However, asked when that conversation had taken place, Mr Etcell replied that it probably would have been around about when this first trial came about [November 2021] … But recently, no, I haven’t asked him to come and give evidence in the case” [at T1409].
(e)	Mr Etcell said [at T1328], whilst giving evidence on 28 October 2022, in relation to Mr Barnett, “Yes, we do have a project we’re currently working on at the moment”. Accordingly, I am not satisfied that an adequate explanation has been given by the Builder as to why he did not call Mr Barnett as a witness.
(f)	I have assumed that, if Mr Barnett had attended to give evidence, his evidence would not have assisted the Defendant, without speculating about what that evidence might have been. I have, in these circumstances, found it easier to accept the evidence of the Plaintiffs’ witnesses where there was a matter about which Mr Barnett would have been likely to have personal knowledge. This has also affected my assessment of conflicting evidence, for example where the evidence of Mr Etcell conflicted with other evidence but has not been supported by evidence that might have been expected from Mr Barnett;
(g)	the reports of experts, as is commonly the case, supported the contentions of the party which had engaged them and often, in regards to the Builder’s experts, contained uncritical endorsement of the instructions given by the respective parties as the basis for opinions expressed;
(h)	the processes of preparing a Scott Schedule, conclaves of experts and concurrent evidence sessions at the trial, to a degree, narrowed some issues canvassed by the experts, particularly as they related to the alleged defective work.
61	In relation to the key witnesses, I would make the following further comments:
(a)	Mr and Mrs Mustafa: Generally, I accepted the evidence of these witnesses. However, I was not persuaded that their evidence on certain matters was a full and frank account. These matters included the extent of the new works undertaken by the Client after the termination of the Building Contract;
(b)	Mr Etcell: I would not accept any statement by Mr Etcell at face value. It was impossible to be confident that he was speaking from personal knowledge in both his witness statements and oral evidence. Mr Etcell did not meet Mr and Mrs Mustafa until 4 October 2017. Mr Barnett, who had dealings with Mr and Mrs Mustafa since April 2017, continued during the project to be the principal person on behalf of the Builder who dealt with Mr and Mrs Mustafa personally and corresponded by email with them and others involved in the project.
(c)	I would regard Mr Etcell’s evidence as essentially a version of the facts that he thought best supported his case. In many instances, it was demonstrably inaccurate or untrue;
(d)	Mr Osborne: I found Mr Osborne’s written reports and oral evidence about his observations and opinions on technical matters to be straight-forward, unvarnished and reliable. Many of his quantum figures, relating to his evidence of the extent of the alleged defective work and the cost of rectification, were significantly reduced during the conclaves. This is how these processes should operate and, although it made me examine his evidence more critically, I do not consider that it reflected adversely on his credit as a witness;
(e)	Mr Jeffery and Mr Casamento: I consider that, particularly in the case of Mr Jeffery, much of the written reports of these witnesses was inadmissible. It was, to a significant degree, in the nature of advocacy based upon the correctness of their client’s instructions, without critical analysis in reaching the opinions stated. This made the determinations in relation to the alleged defective work more difficult, particularly as the Plaintiffs had the onus of proof and more cogent expert evidence on behalf of the Defendant would have assisted;
(f)	Mr Gulevski and Mr Papasavvas: Mr Gulevski’s evidence in relation to the work he undertook as a subcontractor, particularly in distinguishing between the categories of later defective, incomplete and new work, lacked the detail and precision of his initial report. I do not, however, have any criticism of the professionalism or credibility of either Mr Gulevski or Mr Papasavvas.
62	These matters have meant that I have been particularly careful when examining the oral evidence and, where it has been at all possible, have sought confirmation on contentious issues from the evidence of other witnesses or, more often, from the considerable volume of contemporaneous documents. 
63	Further, I consider that it is appropriate to record certain conclusions I have reached from the evidence. These are matters which have been relevant, although not necessarily critical, to the determinations I have made in the case, particularly in regard to the primary issue of the termination of the Building Contract. My general conclusions are as follows:
(a)	Mr and Mrs Mustafa were not as careful as they might have been in their attention to the formalities of the Building Contract and the obligations of the Client under it. This led them to put too much faith in Mr Barnett and Mr Etcell and to be disappointed with the Builder and critical of his performance as the progress of the works slowed;
(b)	Before CKC became involved in the project, Mr and Mrs Mustafa failed to make payments as required by the Building Contract, and the reasons for these failures were not always apparent;
(c)	the issue of building permits was staged, which may not have allowed for the most efficient completion of the works. However, there is little evidence to suggest that the Builder’s progress was delayed by the absence of building permits;
(d)	Mr and Mrs Mustafa, in about August 2018, made significant changes to the scope of the works. The opportunity to make these changes was opened up by the poor performance of the Builder, and as Mr and Mrs Mustafa did not, by that time, consider the continued employment of Mr Etcell as the Builder was a serious option;
(e)	Mr and Mrs Mustafa’s record keeping, particularly following termination of the Building Contract, made it very difficult to allocate responsibility for the further spending on the project to the Builder for having left the works incomplete and defective, rather than to the changes made as a result of design decisions at the time of, or subsequent to, termination;
(f)	The Builder’s performance was generally unsatisfactory, including in the organisation of the site, the planning of the execution of the works, the supervision of subcontractors and the timely ordering of materials. The Builder was, at times, unconcerned with or unaware of his legal obligations under the Building Contract, including the requirements relating to variations, delays and notices, as well as the extraordinary approach he adopted to the use of his own engineer without reference to the Client or its design engineer;
(g)	The Builder took pre-emptive action by suspending the works before Mr and Mrs Mustafa themselves took the necessary steps to terminate the Building Contract, and in circumstances in which the Builder did not at the time, appear to have the will or demonstrated capacity to complete the works in a timely manner.
64	Following my assessment of the evidence and the parties’ submissions, I have determined that the Client properly terminated the Building Contract and, consequently, is entitled to recover the cost of completing the contract works and rectify defective work, and to an award of damages resulting from the Builder’s delay in completing the works. There is no sum that the Builder is entitled to recover, although the contract price and variations must be taken into account in calculating the amount the Client is entitled to recover.
Issue 1: Who was the correct “Client” party or parties?
65	Mr Etcell has raised, as an issue in the proceeding, whether the Client, as a party to the Building Contract, was F&J Investment or Mr Mustafa (with or without Mrs Mustafa).
66	The Writ issued on 23 January 2019 named “F&J Investment Assets Pty Ltd (ACN 621 866 180) as trustee of The Mustafa Property Trust” as the sole Plaintiff.
67	The Statement of Claim annexed to the Writ alleged that F&J Investment as trustee of The Property Trust, and as “the Client”, entered into a Building Contract which, insofar as it was in writing, “was constituted by an HIA Medium Works Commercial Contract document executed by the parties on or about 26 October 2017”.
68	In his Defence and Counterclaim dated 11 March 2019, Mr Etcell denied the pleading of the Building Contract in the Statement of Claim and joined Mr and Mrs Mustafa (with F&J Investment) as Defendants to his Counterclaim. Mr Etcell further alleged that “at all relevant times prior to service of F&J’s [F&J Investment’s] Writ, the Second and Third Defendants by counterclaim (Mustafas) held themselves out as the trustees of The Property Trust (Trust)”.
69	Subsequently, Mr and Mrs Mustafa were added as further Plaintiffs to the Writ and the claim was pleaded in the alternative with them as the “Client” party to the Building Contract.
70	In the Plaintiffs’ latest pleading, P3FASOC, it was alleged that the Client pursuant to the Building Contract entered into “on or about 26 October 2017”, was “F & J as trustee of the Trust”, or alternatively, “Mr and Mrs Mustafa in their own personal capacity”, or “alternatively, Mr and Mrs Mustafa as trustees of the Trust”.
71	The relevant facts are as follows:
(a)	from 1 February 2007, until their retirement on 9 October 2017, Mr and Mrs Mustafa were the trustees of The Property Trust;
(b)	upon their retirement as trustees on 9 October 2017, F&J Investment was appointed the trustee of The Property Trust. Mr and Mrs Mustafa were at all relevant times the directors of the F&J Investment;
(c)	Mr and Mrs Mustafa, in 2015, had become the registered proprietors of the Eltham property [CB 4159], Mr and Mrs Mustafa alleged that they held the Eltham property “as bare trustees for The Mustafa Property Trust”;
(d)	the initial discussions concerning the project were in about March 2017, and were between Mr Mustafa and Mr Barnett. On 22 August 2017, Mr Barnett submitted a quotation under his business name “Vault Corporate” to complete the project [CB 1557];
(e)	on 5 September 2017 [CB 1594], Mr Mustafa forwarded an email from his Accountant, James Hakim, to Mr Barnett stating:
“Hi Justin, Please write the contract in this entity, Jetmir Mustafa & Florije Mustafa ATF The Mustafa Property Trust, 161-163 Serpells Rd Templestowe 3106”;
(f)	on 13 September 2017, Mr Barnett forwarded a draft Building Contract to Mr Mustafa which named “Jetmir Mustafa” as the “Client”. Mr Mustafa said in his witness statement dated 20 August 2021 [Exhibit P3, para 24] that: 
“Sometime between receiving the Draft Contract on 13 September 2017 and signing the Contract on 26 October 2017, I told either Justin or Paul that the Client was not to be me personally but ‘The Mustafa Property Trust’.”
(g)	a Building Contract, prepared by Mr Barnett, was executed by Mr Mustafa and Mr Barnett. The Building Contract [at CB 2107] named “The Mustafa Property Trust” as the “Client” and “Paul Etcell” as the “Builder”. The document is dated 26 October 2017 and was “Signed for and on behalf of The Mustafa Property Trust” by “Jetmire Mustafa” and was “Signed for and on behalf of ETCELL, PAUL C Builders reg – CB 41507” by “Justin Barnett” [CB 2111].
72	The applicable legal principles are as follows:
(a)	a trust cannot, of itself, be a party to a contract;
(b)	the trustee of a trust may enter into a contract on behalf of a trust, if the trustee is authorised by the trust deed to do so;
(c)	the trustee is personally liable under a contract entered into on behalf of a trust, unless the trustee’s liability is excluded by the terms of the contract;
(d)	a trustee, entering into a contract on behalf of a trust with appropriate authority, may indemnify itself from the assets of the trust.
73	In these circumstances, the following conclusions follow from the facts of the present case:
(a)	on 26 October 2017, the appropriate party to have entered into a contract on behalf of The Property Trust was its trustee, F&J Investment and not Mr Mustafa (or Mr and Mrs Mustafa). At that time, Mr and Mrs Mustafa were the sole directors of F&J Investment;
(b)	if the Plaintiffs were successful in the proceeding (taking into account all matters of set off and counterclaim), it would be appropriate for judgment to be entered in the name of F&J Investment (the actual trustee on 26 October 2017) and not Mr and Mrs Mustafa (who had ceased to be the trustees); and 
(c)	on the other hand, if the Defendant were successful in the proceeding on his counterclaim (taking into account any success by the Plaintiffs on their claims), there would be an argument as to whether it would be appropriate for Mr Mustafa (and perhaps Mrs Mustafa) to be personally liable by reason of Mr Mustafa having executed the Building Contract, and Mr Mustafa (or Mr and Mrs Mustafa) having held himself (or themselves) out as entitled to enter into the Building Contract for and on behalf of The Property Trust.
74	The Plaintiffs have sought to have the Building Contract rectified to name F&J Investment as the “Client”, the company being the actual trustee of The Property Trust at the time the Building Contract was entered into. On the evidence, it would be appropriate to make findings that Mr and Mrs Mustafa and Mr Etcell believed, at all relevant times, and particularly at the time the document evidencing the Building Contract was prepared and executed:
(a)	that The Property Trust was “involved” in the project and was intended to be the “Client” party to the Building Contract through its trustee;
(b)	mistakenly, that Mr and Mustafa were the trustees of The Property Trust.
75	In these circumstances, it would be appropriate to rectify the Building Contract to name the actual trustee (F&J Investment) as the “Client” under the Building Contract as a result of the misapprehension by both parties as to the correct position, unless to do so would unfairly prejudice one of the parties. 
76	If Mr Etcell had been the successful party in the proceeding, it would not, in my view, have been appropriate to rectify the Building Contract. Mr Mustafa held himself out to be the trustee of The Property Trust when he executed the Building Contract. In those circumstances, he (and possibly Mrs Mustafa) would have been the contracting parties with a personal liability to Mr Etcell in respect of all the “Client’s” obligations under the Building Contract. That liability would extend beyond any recovery Mr Mustafa (and Mrs Mustafa) may have been entitled to from the assets of The Property Trust, to his (and Mrs Mustafa’s) other personal assets.
77	However, as a Plaintiff party (the “Client”) is the successful party in the proceeding, it would be appropriate, and of no prejudice to Mr Etcell, for the Building Contract to be rectified so that the actual trustee of The Property Trust at the relevant times (F&J Investment) is entitled to recover in the proceeding on behalf of The Property Trust.
78	In these circumstances, an order will be made to rectify the Building Contract to name as the “Client”, “F&J Investment Assets Pty Ltd as trustee for The Mustafa Property Trust”.
Issue 2: Delays and the date for “practical completion”
79	One of the principal complaints by the Client about the Builder was his lack of application and progress with the contract works. This issue has relevance to the following questions:
(a)	the termination of the Building Contract, as the Client’s Show Cause Notice dated 1 August 2018, included as two of the “substantial breaches” relied upon, the Builder’s “failure to adhere to the practical completion date and  three subsequent extensions to the practical completion date and failure to complete the works in a timely manner”, and the Builder’s “failure to order materials on time to ensure practical completion of the works”;
(b)	the Client’s claim for damages in the nature of delay costs.
80	Both of these matters will now be considered, although the reasons for my determination that the Building Contract was validly terminated by the Client will be more fully discussed in the next section of these reasons under Issue 3.
81	The matters relating to the Builder’s timely completion of the building works require consideration of the following questions:
(a)	Under the Building Contract, what was the “commencement date” of the “building period”?
(b)	What was the effect of the Builders Extension of Time claims?
(c)	Whether the Client was entitled to liquidated damages or delay damages as a result of the Builder’s failure to achieve practical completion?
(d)	Whether the Builder was prevented from achieving practical completion by the Client’s failure to obtain all necessary building permits?
82	At the outset of the discussion of this issue, it is necessary to examine the provisions of the Building Contract as they relate to the time allowed to the Builder to complete the contract works and the clauses relating to the provision of programmes of how the Builder planned to carry out the works. 
83	a. The “commencement date” of the “building period”: In relation to the general question of the timely completion of the building works, a critical matter to determine is the “commencement date” of the “building period” under the Building Contract, in order that the date for practical completion might be calculated.
84	Item 5 of the Schedule attached to the “Medium Works Contract Conditions” (“Contract Conditions Schedule”) provides as follows:
“5.	Building period (Clause 16)
a.	Commencement date: 1 week from the later of the date that the Client
i.	gives possession of the site to the Builder;
ii.	gives the Builder evidence of capacity to pay the contract sum, or
iii.	provides the Builder with the required building and planning approvals.
b.	date for practical completion being:
i.	date nominated for practical completion; or
ii.	period of time for practical completion: 24 weeks from the commencement date.”                 
85	The parties agree that the “commencement date” of the “building period” was to be determined as the date the Client provided “the Builder with the required building and planning approvals”, and that the “date for practical completion” would be “24 weeks from the commencement date”.
86	Mr and Mrs Mustafa assert that the operative commencement date should be 26 October 2017, the date the Building Contract was executed. The stage one building permit had been issued on 17 October 2017 for, “Proposed internal non-structural and external doorways demolition of existing two storey office building … to completion of proposed Stage one works only” [CB 1914]. Mr Mustafa, in his witness statement [paras. 70-2 of Exhibit P3], stated that, “on 5 October 2017 the Builder erected hoarding at the site and commenced demolition works on 15 October 2017”.
87	Choosing 26 October 2017 as the appropriate “commencement date” allows “one week” from the date of the building permit and the giving of possession of the site. It means that the date for practical completion would be 24 weeks later, plus any extensions of time. The earliest date, based on this analysis, would be 12 April 2018. 
88	The Builder, in final written submissions asserted that “the ‘required building approvals’ were provided on 21 March 2018, which was the date of issue of the Stage 4 Building Permit". That permit, the Builder submitted, “permitted the Builder to undertake the bulk of the works required to be performed, [although] it did not permit the Builder lawfully to complete all the contract works”. 
89	Mr Gurr submitted that this was “a practical response to the difficulties created by the fact that the parties did not in their definition of commencement date specify whether “required building approvals” means approvals required to commence the works or approvals required to perform and complete all works to be performed under the Contract”.
90	I consider that Item 5 of the Contract Conditions Schedule should be construed as meaning that the “commencement date” is the latest date satisfying all of the three requirements, in order for the Builder to meaningfully commence the contract works. This does not mean a capacity to perform a few preparatory tasks. It must mean that the Builder is, after the date of the last of the relevant events specified in Item 5, capable of going on site and starting work and which, at that time, would be expected to continue to conclusion within the “period of time for practical completion”; in this case 24 weeks from commencement.
91	The matters which lead me to that conclusion are as follows:
(a)	Item 5 deals with the critical dates in the context of the “building period” where the “commencement date”, in conjunction with the “building period”, determines the expected date for completion. The provision therefore foreshadows that, once started, the building works will continue until completion;
(b)	Item 5 references cl 16 of the Contract Conditions. Clause 16 is headed “Time and programming”. It recites the Builder’s obligation “not to impede the progress of the works” and, if directed, to prepare a “construction program”, which must include the “order” of the works and “major events, activities and milestones in the carrying out of the works”. The program is “deemed to be a contract document” [cl 16.4];
(c)	Clause 22 anticipated that delays might occur which would result in the building period and the date for completion being extended. Provided the cause of delay was not “within the sole control” of the Builder, and he was not the “sole cause of the delay”, time would be extended [cl 22.1];
(d)	Staged building permits were within the contemplation of the parties. Clause 6.1 of the Building Contract provided that “the Client must obtain all building and planning approvals and provide those approvals to the Builder”;
(e)	The building permit issued on 12 October 2017 was made following an application dated 9 October 2017 [CB 1912]. Mr Mustafa said that the building permit application forms were “pretty much filled out by Justin” although Mr Mustafa, after the application form was sent to him, “would fill in the relevant [parts]”, and then sign and return it to Mr Barnett [T276–277]; 
(f)	In the application form, under the heading, “Stage of building work”, the form stated, “If application is to permit a stage of the building work. Extent of Stage”, the handwritten word “DEMOLITION” was inserted;
(g)	the Builder commenced the demolition of the works on site contemporaneously with the application for, and grant of, the building permit;
(h)	whilst the Builder was proceeding with the works after commencement, further staged building permits were obtained and were the subject of Notice of Delay 3 dated 15 February 2018 and Extension of Time (“EOT”) claim no. 3 dated 29 July 2018;
(i)	the construction of Item 5 asserted by the Builder, is inconsistent with the natural meaning of the language of the item and other clauses of the Building Contract, and the conduct of the parties both prior and subsequent to the execution of the Building Contract; and
(j)	it is likely that the parties, foreshadowing staged building permits, intended the reference to “required building and planning approvals” would be of a similar nature as the other two parts of Item 5(a), being matters necessary for the works to commence, but not necessarily anticipating everything required for the works to reach completion.
92	Alternatively, the Builder submitted that the “commencement date” was at or after 13 November 2017 when the “required … planning approvals” were obtained. A planning permit for the project had been issued on 18 April 2017 [CB 1372]. The planning permit was subject to conditions including that, “before the development and use commences, three copies of amended plans to the satisfaction of the Responsible Authority must be submitted to and approved by the Responsible Authority”. The relevant plans were submitted on 20 September 2017 [CB 1744] but not approved until 13 November 2017 [CB 2296].
93	I consider that the operative date for “planning approvals” was the issue of the permit on 18 April 2017. The issue of the Stage 1 building permit was adequate for the Builder to commence work, and to expect that he might continue those works to completion. The Builder did not, during the course of the building works, claim to have been impeded in the progress of the works because of the absence of planning approval or approved issued drawings, save for the limited delays referred to in NOD 03 and EOT claim no. 3 to which I shall later refer.
94	A broad interpretation of “building and planning approvals” might include, not only “permits” but also, the results of on-site inspections. For example, during the course of building works many approvals might be obtained at various stages before works can proceed, including when the frame is erected, before concrete pours and at other critical times. It is not every such “approval” that the parties had in contemplation by Item 5 of the Schedule to the Contract Conditions.
95	However, the definition of “building or planning approval” in cl 1.1 of the Building Contract as, including “permits, licences and the like and any fee payable in connection with these”, appears to foreshadow an extended scope for the words.
96	Further and alternatively, the Builder submitted that if it were “accepted that ‘required building approvals’ means approvals required to perform and complete all works under the Contract, then the “‘required building approvals’” were not obtained prior to termination of the Contract, with the consequence that a condition necessary for the determination of the commencement date was never achieved”. The Stage 5 building permit (issued 16 October 2018) and the Stage 6 building permit (issued 29 April 2019) “were not issued until well after the Contract was terminated [although these permits] were necessary to enable the Builder to achieve practical completion”.
97	I shall deal further with this matter later. I note, at this stage, that the circumstances that arose during the course of the building works did not require the Builder to reach completion prior to the termination of the Building Contract by the Client on 24 August 2018. From that date, by its actions in terminating the Building Contract, the Client accepted that the Builder was no longer obliged to perform its obligations under the Building Contract.
98	It is apparent that the Client, in a letter to the Builder dated 24 July 2018 [CB 3498], anticipated that the Builder had until 7 September 2018 to complete the building work. Further, CKC had on 6 July 2018 considered “completion to be achievable by August 2018”.
99	The letter from Mr and Mrs Mustafa to Mr Etcell dated 24 July 2018 [CB 3498] reads as follows:
 “We refer to the recent build programme provided to us on 19 July 2018, which we have attached a copy of.
 We consider the attached programme to be a request for an Extension of Time for Practical Completion pursuant to clause 22 of the Build Contract.
 We advise that the practical completion date has now been revised [in the Builder’s programme dated 19 July 2018] to 7 September 2018. If practical completion is not reached by such date, we will be claiming liquidated damages for every day practical completion is not achieved.
 Pursuant to clause 22.1 of the Contract, any further requests for an Extension of Time for Practical Completion will not be accepted on the basis that we consider you have directly caused the delay and such cause is within your sole control and the sole cause of the delay.”
100	The Builder responded by letter dated 31 July 2018 [CB 3573], which reads as follows“
 “I refer to your letter of 24 July 2018.
 Clause 22 entitles a Builder to an extension to time. It requires, however that [the Builder] give the Owner a written claim which sets out evidence of the cause of the need for the extension and what the delay is.
 I sent you a rolling schedule of works in response to your request. The rolling schedule neither complies with Clause 22 nor requests an extension. I am entitled to extensions but the schedule is not a request. In any event the time for Practical Completion is 13 September, 7 September is hardly an extension.
 We reserve the rights to exercise an Extension of time under the Build contract clause 22 due to your late payment and should there be an event arise that is not in the builder’s control prior to the Completion date.”
101	On 6 July 2018, CKC had provided to NAB a report on the state of the works at the time of its inspection on 4 July 2018. The report [CB 3409] includes the following statements:
 “Construction Cost
 Our assessment on a staged payment basis, of the Stages of Works Completed, and the Stages of Works to Complete as at the date of our site inspection is attached to this report. In summary:
Stages of Works Completed	$1,046,886 (GST excluded)
Stages to Complete		$414,757 (GST excluded)
 The above-mentioned figures are based on the contract sum of $1,472,847.00 (GST included) or $1,338,951.82 (GST excluded) and approved variations of $122,690.90 (GST excluded). We note from a $/m2 calculation that this amount appears to fall within the expected range of construction costs appropriate for carrying out the works as documented. We further note that we have not been commissioned to provide a full Initial Report as per the bank's normal procedures. As such, we cannot confidently confirm the adequacy and breakdown of the contract price.
 Please note the above-mentioned figures, do not take into consideration, the stage payments contractual obligations. We note that both Stage 5 (Frame) & Stage 7 (Rough in) have not been fully completed, as at the date of our inspection. However, we have been provided with a 'RFI' dated 29 March 2018, where the Client and the Builder, have mutually agreed to the part payment of these stages.
 Please note that the amounts payable under the contract for completion of the different stages may not necessarily be a true reflection of the actual value of works carried out on site. …
 Programme
 We have been provided with a construction programme that indicates an estimated completion date of end March 2018. Subsequent to our  2nd progress report, the builder has advised of a revised completion date of end July 2018. We consider completion by this date to be optimistic. Based upon progress of the works, we would consider completion to be achievable by August 2018, provided sound management is maintained and delays are not encountered due to inclement weather, industrial action and variations. We will monitor the progress of the works and provide an update in our next progress report [emphasis added].”
102	There is little evidence to support a conclusion that, prior to the Builder’s suspension of the building works on 31 July 2018 and the subsequent termination of the Building Contract, that the Builder would have been able, or likely, to complete the contract works until after the “revised” date for practical completion of 7 September 2018 referred to in the Client’s letter to the Builder dated 24 July 2018. The effect of the Builder’s suspension and the subsequent termination of the Building Contract will be considered later in the discussion of issue no. 3.
103	In my view, it is appropriate to conclude that, if the Builder had not suspended the building works on 1 August 2018 and the Client had not terminated the Building Contract on 24 August 2018, that the Builder was unlikely to have completed the building works under the Building Contract by 7 September 2018, having regard to the following matters:
(a)	the pace at which the Builder was proceeding with the works;
(b)	the extent of defective work;
(c)	delays in the ordering of materials.
104	These matters will be discussed in more detail in the next section of these reasons in relation to issue no.3 and the Client’s Show Cause Notice.
105	b. The Builder’s programmes for the completion of the contract works: The Builder was not required to provide the Client with a construction programme until it was directed to do so. The Building Contract provides as follows:
“16.3 Within 14 days of being so directed, the Builder must give a construction program to the Client. The construction program must include:
(a) the order in which the Builder proposes to carry out the works;
and
(b) major events, activities and milestones in the carrying out of the works.
16.4 The construction program is deemed to be a contract document.”
106	The Client first requested a construction programme from the Builder on a date that I have been unable to identify. The first report of CKC dated 23 February 2018 discussed the Builder’s construction programme at CB 2920, stating that the programme indicated “an estimated completion date of end March 2018” and that “The Builder has since provided a revised completion date of mid April 2018”.
107	The further three programmes provided by the Builder will be described as programmes 2, 3, and 4, and were supplied as follows:
(a)	Programme 2 was provided by Mr Barnett to the Client with an email dated 31 May 2018 [CB 3238]. This programme [CB 789] provided for the project to be completed by 23 June 2018.
(b)	Programme 3 was provided by the Builder to the Client on about 5 July 2018 after Mr Mustafa sent a text to Mr Barnett expressing concerns about the completion of the project [SCB 555]. The programme [CB 790] provided for “Defect Inspection with Clients” on 11 August 2018.
(c)	Programme 4 was provided on 19 July 2018 [CB 791] following a request by an architect from Ewert Leaf, Katherine Voyage dated 18 July 2018 [SCB 556]. Ms Voyage, during the project changed her name to Stewart. For consistency, she will be referred to as “Ms Voyage” in these reasons. The programme provided for “Final Inspection” on 7 September 2018. At paragraph 113 of his witness statement dated 5 October 2021, Mr Etcell stated that, 
“Based on my knowledge of the scope of the remaining works, discussions with suppliers and the availability of materials, expected durations of particular activities and the availability of trade, I was confident that this date could be achieved provided the Mustafas promptly paid our invoices and obtained and provided the necessary permits for the works on time.”
108	At paragraph 184 of his witness statement, Mr Etcell said, 
 “I was responsible for the preparation of the programmes during the course of the project. I have many years’ experience in programming building works and I prepared the programmes in accordance with my usual practice and based on my experience and knowledge as to the scope of works and the rates at which the relevant trades could perform those works. I say, based on that experience, that all of the programme dates and completion dates in the programmes I produced were achievable.”
109	On the evidence, it appears more likely that Mr Barnett had some responsibility for the programmes as the person with more direct knowledge of the works. In my view, the programmes were fairly simplistic with no attempt to define the critical items of work or the critical path to completion. It appears also that the Builder paid little heed to the programme and was prepared to carry out works with whatever trades were available to be onsite regardless of the logic of those works.
110	An example Mr Etcell gave was in relation to the installation of the in-wall toilet cisterns and his explanation for having plastered the walls whilst being fully aware that the cisterns would need to be placed there. At T1311, he said, 
 “Look, we were under absolute, ridiculous pressure from the Mustafas to complete this project. We were pushing trades as hard as we could. The plasterer came in. He plastered over the top of those walls. We were well aware that the cisterns had to go in. We were aware that we had to cut the plaster to install them.”
111	I shall shortly examine the Builder’s delay claims. The Notices of Delay refer to matters such as the Client’s late payment of progress payments, the late issue of building permits, and the suspension of the works. These matters are repeatedly referred to by Mr Etcell as causes of delay, although it must be assumed that the updated programmes had taken account of these matters by subsequent programmes extending the date for completion.
112	c. The effect of the Builder’s EOT claims: It is necessary to examine correspondence and discussions between the parties during the period of the building works, including each of the Builder’s Notices of Delay and EOT claims, and the factual basis for those notices and claims.
113	Clause 25 of the contract conditions, relating to “Liquidated damages”, provides as follows:
“25.1	If the works do not reach practical completion by the date for practical completion, the Client is only entitled to liquidated damages in Item 14 for every day after the date for practical completion to and including the earliest of:
(a)	the date of practical completion;
(b)	the date the Client takes possession or control of the whole or any part of the works without the Builder's prior written consent; and
(c)	the termination of the contract.
25.2		If, after the Builder has paid or the Client has set off liquidated damages, the time for practical completion is extended, the Client must immediately repay to the Builder the amount of the liquidated damages as represents the days the subject of the extension of time.”
114	In my view, the letter Mr and Mrs Mustafa gave to Mr Etcell dated 24 July 2018 extended the date for practical completion to 7 September 2018. The contract was terminated before that date was reached. By the operation of clause 25.1(c), the termination of the contract (as the earliest of the 3 options specified in the provision) would mean that no liquidated damages had accrued when the Building Contract was terminated.
115	After the termination of the contract, although liquidated damages would have no application, the Client would be able to establish an entitlement to delay damages, if it were shown that the Client had suffered loss and damage as a result of any action or lack of action on the part of the Builder. I will deal with this matter under Issue 5: Quantum.
116	The Builder submitted that if the works had not been suspended as a result of the non-payment of progress claims, and appropriate extensions of time had been allowed, the date for practical completion would have been achieved. Further, the Builder submitted that the Client had not obtained two building permits until after termination of the contract, which effectively meant that the Builder was prevented from achieving practical completion by the due date. 
117	Clause 22 of the Conditions of Contract provides as follows:
“22.	Extension of time for Practical Completion
22.1	Except as otherwise stated in Item 13, the Builder is entitled to an extension of time for carrying out the works (including reaching practical completion), if the Builder is or will be delayed in reaching practical completion unless the Builder directly caused the delay and such cause was:
(a)	within the sole control of the Builder; and
(b)	the sole cause of the delay.
22.2	The Builder must give to the Client a written claim for an extension of time, evidencing the facts of causation and of the delay to the works, within 28 days of when the Builder became aware of both the causation and the extent of the delay.
22.3	The Client is deemed to have been given a direction granting the extension of time as claimed by the Builder unless, within 7 days of the Builder giving the claim, the Client gives the Builder a written direction:
(a)	disputing the claim;
(b)	certifying the extension of time that the Client believes the Builder is entitled to claim; and
(c)	detailing the reasons why there is a difference from the extension of time claimed by the Builder.
22.4	The Builder's entitlement to an extension of time is not affected by:
(a)	whether the Builder can reach practical completion by the date of practical completion without the extension of time;
(b)	whether the Builder can accelerate; or
(c)	a concurrent delay.
22.5	The Builder must take reasonable steps to mitigate the duration of any delay.”
118	In Schedule 3 to D4FADCC, the Builder lists the “extensions of time claimed”, as follows:
No.	Notice of delay	Time extension claim	Basis of claim	Days claimed	
1	NOD1: 2 Nov 17		Deposit paid late	13	
2		EOT 1: 29 Jul 18	Invoices paid late	22	
3	NOD2: 13 Feb 18	EOT 2: 29 Jul 18	Invoices paid late	20	
4	Suspension Notice: 31 Jul 18		Suspension of works	24	
5	Cutting concrete for grease trap	EOT 5: 31 Jul 18		10	
	Total			89	
6	NOD3: 15 Feb 18	EOT 3: 29 Jul 18	Failure to procure permits	45	
	Total days claimed			134	
119	In addition to the documents listed in the table, at CB 3338 there is a copy of “NOD 04” dated 26 June 2018. NOD 04 was not listed as a “Notice of Delay” issued by the Builder, in Schedule 3 of the D3FADCC from which the table above was based. I shall refer to NOD 04 later.
120	The Building Contract does not provide for the giving of such notices, but simply the making of claims for extensions of time under clause 22. A Notice of Delay has no contractual force, although the notice of delay may provide evidence as to whether the Builder has made his EOT claim within the period of 28 days prescribed by clause 22.2.
121	Under clause 22.2, the Builder has 28 days after becoming “aware of both the causation and the extent of the delay”, to “give to the Client a written claim for an EOT, evidencing the facts of causation and of the delay of the works”. 
122	It is noted that none of the EOT claims were issued until 29 or 31 July 2018 and that no explanation has been offered for the delays in issuing the written claims for an extension, including where the claim was made long after Notices of Delay relating to similar complaints were made by the Builder.
123	It is also noted that there is a dispute as to whether the EOT  claims were ever served on the Client. This matter will be addressed later.
124	a. NOD 1 - 2 November 2017: On 2 November 2017, the Builder sent “Notice of Delay – NOD 01” to the Client [CB 2134]. I will quote the substance of the document in the form it was apparently drafted  by Mr Barnett. I will not attempt to clarify (by square bracketed additions) the meaning of this and some other parts of documents quoted in these reasons where the meaning of what is written is reasonably clear. On occasions, I have used bracketed additions to clarify the meaning of the passage quoted. The document dated 2 November 2017 reads as follows:
 “We hereby advise that this NOD 01 claim is for an event occurring on or before the Date of Practical Completion, which is beyond the reasonable control of the Contractor.
 lkonic Homes was meant to commence the fitout and extension works on site as the demolition work is currently completed. We are unable to start works or let packages to our sub-contractors due to the deposit of 5% under the contract is not fully paid by the Client. Should the outstanding balance of $58,642.35 is not being paid in the next couple of days, it would incur further delay as we might not able to secure any sub-contract works and/or the suppliers before the Christmas break. Once the delay has been quantified a formal extension of time will be issued.
 Due to these delays practical completion prolonged. Once we know what the delays is a new practical completion date can be determined.”
125	The progress claim for the deposit of $73,642.35, was issued by the Builder on 15 October 2017. There was a part payment of $15,000.00 on 1 November 2017. The balance of $58,642.35 was made by two payments on 3 November 2017, following the service of Notice of Delay – NOD 1 by the Builder. 
126	There may have been an argument that the progress claim would not have become due and payable until seven days after 15 October 2017, as the contract itself was only executed on 26 October 2017. However, the matter is of little consequence as the delay notified in Notice of Delay 1 was not the subject of a subsequent EOT claim. EOT claim no. 1 did not relate to the matters raised in NOD 01.
127	b. EOT 1 - 29 July 2018: The first EOT claim, “Extension of Time Claim No. 01”, is dated 29 July 2018 [CB 3561], two days before the builder suspended the building works. There is a dispute as to whether this and other EOT claims were served on the Client. This is a matter I will discuss later. The claim was made on the basis of: 
 “late payment [being the fact that the] Payment due and payable as per the contract Wednesday 27th June[;] part payment was received on Thursday 19th of July. Duration: 22 calendar days[,] critical path item works [were prevented from] proceeding further & subcontractors have to reschedule their programme to complete their works. [The] total delay time [is] currently 22 days[;] full delay time can be advised only once full payment is received. … Steps taken to mitigate[;] issuing a NOD on Thursday 28th of June.”
128	It is not clear as to which “NOD” is referred to. It is likely to be a reference to NOD 04 dated 26 June 2018 which referred to “Progress Claim for works up to and including the month of June 2018 is now overdue”.
129	The operative part of NOD 04 dated 26 June 2018 [CB 3338] read as follows: 
“We hereby advise that this NOD 04 claim is for an event occurring on or before the Date of Practical Completion, which is beyond the reasonable control of the Contractor.
 Progress Claim for works up to and including the month of June 2018 is now overdue. Should the Claim is not being paid in the next couple of days, it would incur further delay as we might not able pay any our sub-contract works and/or supplier. Once the delay has been quantified a formal extension of time will be issued.
 Due to these delays practical completion prolonged. Once we know what the delays is a new practical completion date can be determined.”
130	The Builder made two progress claims on 15 and 17 June 2018, as follows:
Date	Stage	Amount	Total	
15 June 2018	Rough in (20% balance)	$44,185.41	$132,332.57	
17 June 2018	Frame (20% balance)	$73, 642.35	$73,642.35	
131	The non-payment of these claims will be discussed later in these reasons. The Builder gave his Suspension Notice of the works on 31 July 2018 on the basis of progress claims being unpaid. I consider these matters under Issue 3 in relation to the validity of the Builder’s suspension of the works and the Client’s Show Cause Notice dated 1 August 2018. In the circumstances, this EOT claim was overtaken by the Builder’s Suspension Notice and Show Cause Notices dated 31 July 2018 and the Client’s Show Cause Notice dated 1 August 2018 and the resulting termination of the contract by the Client on 24 August 2018.
132	c. NOD 2 - 13 February 2018; EOT 2 - 29 July 2018: The Builder gave the Client “Notice of Delay – NOD 02” on 13 February 2018 [CB 2907]. The document reads as follows:
 “We hereby advise that this NOD 02 claim is for an event occurring on or before the Date of Practical Completion, which is beyond the reasonable control of the Contractor.
Invoice No.	Descriptions	Date issued	Amount	
Invoice #1711/09	Windows	9/11/17	$470.00	
Invoice #1712/10	Shop Drawings	10/12/17	$35,463.50	
Invoice #1801/19	12.5% Stage Payment 4	19/1/18	$184,105.90	
Invoice #1801/24	Balance of Windows Variation	24/1/18	$45,529.99	

 Ikonic Home have issued the above claims to The Mustafa Property for payments. Pursuant to contract clause 21.2, the Client must pay within 7 days after received the claims, otherwise interest in item 17 of the Contract Schedule will be payable currently at 20%. Should the outstanding balance of $265,569.39 is not being paid in the next couples of days, it would incur delay as we are unable to pay our sub-contractors to ensure they continue to work on site. Once the delay has been quantified a formal extension of time will be issued.
 Due to these delays practical completion prolonged. Once we know what the delays is a new practical completion date can be determined.”
133	The table included in NOD 02 is confusing and inaccurate in the following respects:
(a)	Invoice #1711/09 issued 9 November 2017 was for the amount of $19,470.00, not $470.00;
(b)	$19,000.00 was paid on 23 November 2017, leaving a balance of $470.00;
(c)	Invoice #1712/10 issued on 10 December 2017 was for $110,463.50, not $35,463.50;
(d)	The first invoice issued for the ‘Balance of Windows Variation’ in the sum of $45,529.99 was invoice #1712/10.1 issued on 10 December 2017 [CB 2613], not 24 January 2018.
134	The following table better reflects the invoices issued by the Builder and the payments made by the Client to which NOD 02 relates:
Date	Invoice	Description	Invoice amount	Payment	Balance owing	
9 Nov 17	1711/09 	Variation no. 1 - GF Window (30% deposit)	$19,470.00		$19,470.00	
23 Nov 17				$19,000.00	$470.00	
10 Dec 17	1712/10.1	Variation no. 1 - GF Windows (Balance)	$45,529.99		$45,999.99	
10 Dec 17	1712/10	Stage 3: Shop Drawings	$110,463.50		$156,463.49	
5 Jan 18				$75,000.00	$81,463.49	
19 Jan 18	1801/19	Stage 4: Equipment Deposit	$184,105.90		$265,569.39	
5 Mar 18				$263,671.10	$1,898.29	
135	The Builder referenced Notice of Delay – NOD 02 in “Extension of Time Claim No. 02” dated 29 July 2018 [CB 3562]. The Builder claimed, “Total delay time: 20 calendar days” from 13 February 2018 when NOD 02 was issued until “full Payment received on Monday the 5th March 2018”, on the basis that “critical path item works [were prevented from] proceeding further & subcontractors have to reschedule their programme to complete works”.
136	It is likely that the Builder would have difficulty establishing that the EOT claim had been made within the 28 day time limit prescribed by cl 22.2. NOD 02 was no doubt taken into account in the Builder’s second, third and fourth programmes prepared in May and June 2018. In any event, EOT Claim No. 02 had, as with EOT Claim No. 01, been overtaken by the termination of the Building Contract on 24 August 2018 and it was disputed whether the claim had been served on the client.
137	d. Suspension Notice - 31 July 2018: The Builder has claimed an EOT of 24 days arising from the suspension of the works, presumably the period claimed being calculated from the date of suspension (31 July 2018) to the date of termination of the Building Contract (24 August 2018). Although cl 17.3 deems a variation as a result of the suspension, there is no reference to an EOT in cl 17. Any application for EOT must follow the procedure in cl 22. 
138	The Builder’s Suspension Notices stated that, “the time for completion shall be extended in accordance with Clause 22 for the period of suspension” However, no claim for an EOT was apparently made by the Builder until he filed his Counterclaim in the proceeding. However, by 24 August 2018, this potential claim had been overtaken by the termination of the Building Contract, after which the Builder had no obligation to complete the contract works and, therefore, any accrued rights to an extension of the completion date became irrelevant. 
139	e. EOT 5 - 31 July 2018 (grease trap): In EOT Claim No. 05 dated 31 July 2018 [CB 3583], the Builder claimed, “Total delay time: 10 days” from 25 May 2018 (when the variation was “issued by Jerry to Ikonic Homes to Jerry”) to 14 June 2018. The basis of the claim was stated as, “works actioned cutting of concrete to allow drains to be connected, dig 1200x1050 Deep hole for Grease Trap to be installed. Test and re-concrete pipe work in the slab. Waiting time for supply & install by licensed plumber”. 
140	On 25 May 2018, Mr Mustafa was informed by an officer of Yarra Valley Water, in a phone call and confirmatory email [CB 3234], that it “will accept a 600L grease trap”. A draft of Variation Claim No. 3 was issued by the Builder on 15 June 2018. It included the item “1 x grease trap”. I will deal with this matter further in relation to defect item 29. I have determined that the Builder’s work was defective requiring rectification by re-doing the work and that there was no value in the work performed by the Builder.
141	f. NOD 3 - 15 February 2018; EOT 3 29 July 2018: The Builder gave the Client “Notice of Delay – NOD 03” on 15 February 2018 [CB 2910]. The document reads as follows:
 “We hereby advise that this NOD 03 claim is for an event occurring on or before the Date of Practical Completion, which is beyond the reasonable control of the Contractor.
As the full building permit is yet to be issued by Grimbos Building Surveyors due to the issues which are out of control of Ikonic Homes. Pursuant to Contract Schedule Item 5, the Date for Practical Completion of “24 weeks from the commencement date” is based on the Client providing Ikonic Home with the required Building Permits. Ikonic Homes has taken every possible steps to mitigate the delay including replacement of the Ground Floor Windows and commencement of the Rough-in Works on site. It would incur further delay if the required permit is not ready for the above ground structural and the remaining fitout works. Once the delay has been quantified a formal extension of time will be issued.
 Due to these delays practical completion prolonged. Once we know what the delays is a new practical completion date can be determined.”
142	The Builder referenced Notice of Delay – NOD 03 in “Extension of Time Claim No. 03” 29 July 2018 [CB 3563].  In the EOT Claim, the Builder claimed that the 
 “total delay time [is] unknown until permit is issued & if any extra works will be required as a part of the full building permit conditions once received then a EOT with delay days will be issued. [The notice stated that the] critical Path item works [were prevented from] proceeding further & subcontractors have to reschedule their programme to complete works [and that the] Steps taken to mitigate [the delay were by] issuing a NOD 03 on Thursday the 15th February 2018, issued a further notice to Jerry on Monday 26th March 2018, further emails dated July 5th 2018 to the Client’s Building Surveyors requesting when full permit can be issued. No permit has been issued to date.”
143	The “further notice [issued] to Jerry on Monday 26th of March 2018” [CB 3050-2], was an email to Mr Mustafa that reads as follows:
’“I'm writing in regards to your concerns raised today by phone call regarding progress on site & incomplete works.
 Stage One permit issued on 12 October 2017, Demolition (completed).
 Stage Two permit issued on 06 December 2017, (permit was of no use to us due to services internal).
 Stage Three permit issued on 01 February 2018, Screw piles (completed).
 Stage Four permit issued on 22 March 2018 contains balance of works (not including fire).
 As you are aware our works have been actioned based on the above permits being issued for all internal and external works prior to the 22 March 2018. Works apart from demo[lition] would not have been able to commence as if they had. There would have been a breach notice against our company with a following, stop works notice issued (site shutdown), BCA issuing a breach fine of $200,000 to our company as all works must be with a permit. 
 Also, bank would not issue payments to our company without permit. 
 Permit has been not the issue of the Builder however we have assisted in all aspects to fast track where we have been able to.
•	Obtained dispensation regarding fire hydrant relocation arise late in the picture;
•	Service cad and design of all services (no services consultants ever engaged for the project)
Quality assurance
We at lkonic homes have strict policies on all works carried out by our contractors they must adhere to. All contractors must issue a ITP to or on completion of their works, that is then inspected by management at lkonic Homes prior to the next stage of works commencing. Followed by our regular site meeting with Client architects and banks QS.
 Program
 A UpToDate program will be issued prior to next week's site meeting.
Moving forward we hope that prior to future works commencing, we would like to see any building permit issued ironed out to enable a consistent flow to all works. Also, Jerry could you please raise all concerns directly with me by phone or email? We are happy to have you flow freely around our job site unless stated otherwise. However, contractors are under our direction and all communications must come through our management to avoid miscommunications. We look forward to delivery your project ahead of time and will consistently update you on all progress throughout the build.
Please note you may come to site & it could look like works haven't proceeded as some works don't have a visual impact and at times it will look like abundant of work has been complete however may just be simply walls been closed out (lead up prior to been seen).”
144	The relevant parts of the further emails dated 5 July 2018 between the Builder and the Building Surveyor [CB 3402-3], read as follows:
(a)	email from Mr Barnett to the building surveyor:
“Could you please advise me on where the Client and your self is at for finalising bridge street for full permit as last I was updated was in regards to MFB inspecting and a report been issued for last stage of permit.”
(b)	email from the building surveyor to Mr Barnett:
“Steve and Chirag are currently finalizing the final items regarding the CFA 309 Report & Consent. They will provide me/us with an update shortly.”
145	In Schedule 3 to D4FADCC, the Builder claimed that the “extent of delay” arising from the matters raised in NOD 3 and EOT 3 was “45 days”. The pleading stated, however, that in relation to this “further EOT if, alternatively to paragraph 36 above, the commencement date occurred prior to 28 March 2018, an EOT ought to be granted for the delays arising from the Clients’ failure to procure the full building permit in sufficient time to avoid delays to the works”.
146	Clause 36 of D4FADCC provided as follows:
 “On or about 21 March 2018 the Client provided the Builder with the required building and planning approvals, and accordingly the commencement date for the building period occurred on 28 March 2018.
 Particulars
The building permit was issued in stages as follows:
(i) 1585/20170368/1 on 12 October 2017;
(ii) 1585/20170368/2 on 4 December 2017;
(iii) 1585/20170368/3 on 1 February 2018; and
(iv) 1585/20170368/4 on 21 March 2018.
 The commencement date is calculated pursuant schedule item 5(a). On its proper construction, the construction period only began to run 1 week after permit 1585/20170368/4 was received, which occurred on 21 March 2018.”
147	The question of the late issue of the staged building permits will be considered shortly.
148	No further notices of delay were issued by the Builder apart from the three which have been discussed [EOT Claims nos. 1–3]. There is no reference in the documents produced by the parties and included in the Court books to an EOT Claim No. 04.
149	g. EOT 5-31 July 2018: The Builder issued EOT Claim No. 05 on 31 July 2018 [CB 3583-6]. The claim related to the variation claim for the grease trap. On 23 July 2018 the Builder, by invoice no. 1807/23 [CB 3495], had made a claim for “Variation invoice for grease trap as per Client’s request. Cost $11,040.00, GST $1,104.00, Total $12,144.00”. This matter has already been discussed.
150	Service of the EOT Claims: The Client submitted in its final written submissions that “there is no evidence [that any of the EOT claims] were served on the Owner prior to termination of the Building Contract” [paragraph 11(a)]. The Client claimed that the first mention of the EOT claims had been in the Builder’s defence and counterclaim.
151	Mr Etcell, in his witness statement dated 5 October 2021 [Ex D7 at paragraph 140] stated that, “on 29 July 2018 Ikonic Homes issued to the Mustafas” EOT claims 1, 2 and 3. However, in cross-examination, Mr Etcell said that he had not himself provided the claims to Mr and Mrs Mustafa and that “they would have been sent by Justin” [T1525]. No evidence was provided that the claims had been served on the Client by Mr Barnett. Further, the claims had not been referred to in the letter from the Builder’s solicitors dated 1 August 2018 [CB 3660], although the three NODs had been referred to.
152	At paragraph 281 of his final written submissions, the Builder submitted that,
 “Despite having the opportunity to do so, neither Mr Mustafa nor Mrs Mustafa denied in their reply witness statements that the claims had been received. In cross- examination, both agreed that where they disagreed with any matters set out in Mr Etcell’s statement, they had set out that disagreement in their reply statements. Although it was suggested to Mr Etcell in cross-examination that the Mustafas did not receive the EOT claims, neither Mr Mustafa nor Mrs Mustafa denied having received the claims, despite having had the opportunity to do so. Moreover, having regard to the piecemeal way the plaintiffs undertook discovery in the proceeding - including the provision during the trial of multiple documents not previously discovered, the Court should place no weight on the fact that the plaintiffs did not make discovery of the EOT claims.” 
153	Mr Gurr submitted that, “The Court should find, on the balance of probabilities, that the Mustafas received the EOT claims on or about 29 July 2018 [282].
154	In paragraph 39 of D4FADCC, the Builder pleaded:
 “In respect of each of the Delaying Events, the Builder gave the Owner a written claim for an extension of time pursuant to clause 22.2 within 28 days of when the Builder became aware of both the causation and the extent of the delay.
Particulars
 A list of extensions of time claims is set out in schedule 3.”
155	Paragraph 26 of the Client’s P4FARDCC denied the allegations in paragraph 39. I consider that in view of the responses by Mr Etcell in cross-examination, the absence of evidence from Mr Barnett and the failure by the Builder’s solicitors to refer to the claims in their letter of 1 August 2018, I cannot be satisfied that EOT claim nos. 1–3 were provided to the Client on about 29 July 2018, or no. 5 on 31 July 2018. It is therefore likely the first reference by the Builder to the EOT claims was in D4FADCC.
156	The Client submitted further that each EOT claim was invalid or ineffectual because the “Description of Claim in each EOT does not sufficiently ‘evidence the facts of causation and of the delay to the works’” and that Mr Etcell had conceded that no evidence had been produced that any of his trades or sub-contractors “were delayed in any way” [T1515].
157	Under clause 22 of the Contract, is the issuing of a written claim for an EOT a condition precedent to the Builder’s entitlement to an extension? The Builder submitted that it had a “contractual entitlement under clause 22 of the Building Contract to extensions of time to the date for practical completion”, and that, “On a proper construction of clauses 22.1 and 22.2 of the Contract, the issuing of a written claim for an EOT was not a condition precedent to the Builder’s entitlement to an extension”.
158	In paragraph [273] of the Builder’s final written submissions, Mr Gurr stated,
 “On a proper construction of clauses 22.1 and 22.2 of the Contract, the issuing of a written claim for an extension of time was not a condition precedent to the Builder's entitlement to an extension. That entitlement arose, independently of the issue of any notice, if the Builder ‘was or would be delayed in reaching practical completion’, unless the Builder directly caused the delay and (a) such cause was within the sole control of the Builder; and (b) the sole cause of the delay. See, to similar effect, the analysis by Associate Justice Daly in Jolin Nominees Pty Ltd v Daniel Investments (Aust) Pty Ltd [2021] VSC 705 (Jolin Nominees) at [170] – [183]. Her Honour's analysis in this regard was undisturbed on appeal: Jolin Nominees Pty Ltd v Daniel Investments (Aust) Pty Ltd [2022] VSCA 209.”
159	I do not accept this submission. In the Jolin Nominees appeal, the Court of Appeal at [80] said, “it is unnecessary for us to determine the proper construction of cl 34” (being the equivalent contractual provision to cl 22 in the present case). The critical part of Daly AJ’s judgment relied upon by the Builder was not endorsed by the Court of Appeal.
160	Jolin Nominees may be distinguished from the present case on a number of bases, as follows:
(a)	in Jolin Nominees, the contract was a domestic building contract subject to the provisions of the Domestic Building Contracts Act 1995 (Vic) (“DBCA”);
(b)	the requirements of clause 34 of the contract, construed in Jolin Nominees and dealing with EOT claims, had significant differences to cl 22 of the Building Contract, including: 
(i)	the very broad entitlement in cl 22 of the present contract for a builder to claim an EOT, including where there were concurrent reasons for delay or lack of any control on the Builder’s part;
(ii)	the use of the word “must” in cl 22.2, and the specifying of the requirements of the notice, indicated that the giving of a written notice in particular terms was mandatory and, as the margin note suggests (although it is not determinative), these matters were “preconditions to claim” an EOT; 
(iii)	a written notice under cl 22.2 must be given “within 28 days of when the Builder became aware of both the causation and the extent of the delay”. By contrast, in Jolin Nominees, there was no specific time stipulated for notice to be given. Daly AJ noted at [180] with respect to cl 34, “Significantly, nothing in that clause prescribes the time when the obligation for the builder to provide a notice under cl 34.1 arises”;
(iv)	as Daly AJ also stated at [182], “cls. 34.1 and 34.2 amount to no more than a dispute resolution procedure and an incomplete one at that”. On the other hand, cl 22 of the Building Contract, when read with the provisions of cl 32 (as suggested by the margin note), provides a comprehensive dispute resolution process.
161	The Court of Appeal, agreeing with Daly AJ, stated “even assuming VCAT erred in applying cl 34, the builder was nonetheless entitled to an EOT pursuant to s39(c) [of the DBCA] [80]. However, the Court of Appeal went on to say:
 “… grounds 1 and 2 must be rejected because they would not result in overturning the judge’s decision. Given her Honour decided the appeal on a different basis, it is unnecessary for the Court to resolve the issue of construction of cl 34.”
162	In these circumstances, I am satisfied that the notice requirements of cl 22.2 are pre-conditions to the Builder claiming extensions of time to the date for practical completion. This was the Builder’s understanding of how the contractual provision operated, as set out in Mr Etcell’s email to Mr and Mrs Mustafa dated 31 July 2018 [CB 3573].
163	In the letter, quoted in full earlier, Mr Etcell stated, 
 “Clause 22 entitles a Builder to an extension to time. It requires, however that [the Builder] give the Owner a written claim which sets out evidence of the cause of the need for the extension and what the delay is. I sent you a rolling schedule of works in response to your request. The rolling schedule neither complies with Clause 22 nor requests an extension.”
164	Whether the Builder was prevented from achieving practical completion by the Client’s failure to obtain all necessary building permits: The Builder claims that he was prevented from progressing the works as a result of the Client’s failure to obtain the necessary permits. The Builder submitted that the requirements for the commencement of the works period under Item 5 of the Contract Conditions Schedule had not been met because the permits which allowed for the completion of the works had not been issued by the Building Surveyor until 16 October 2018 (for Stage 5) and 29 April 2019 (for Stage 6), both after the Building Contract had been terminated. 
165	In paragraphs 224 and 228 of the Builder’s written submissions, it was stated as follows:
“224. 	If, as the Owners contend, the Owners’ delay in providing the Builder with the necessary building permits does not affect the commencement date of the works, the Builder will nevertheless still be entitled to extensions of time to the date for practical completion because of the Owners’ delay in providing all necessary building permits. That is because without all necessary building permits, the Builder could not have lawfully completed the works and, consequently, could not have achieved practical completion of the works. …
228. 	For the reasons set out in this part of the Builder’s submissions, the Builder was contractually entitled to extensions of time to the date for practical completion to a date well past the date the Contract was improperly terminated on 24 August 2018. Indeed, because 
(a) 	the Owners had still not obtained all necessary building permits as at the date of termination; and 
(b) 	the Builder’s lawful suspension of the works for non- payment by the Owners was still ongoing as at the date of termination, 
the properly adjusted date for practical completion cannot properly be determined. As a result, the Builder was not in breach for failing to achieve practical completion by the date for practical completion, and the Owners were not permitted to terminate the Contract on the grounds of that alleged breach.”
166	The relevant dates upon which the staged building permits were issued, are as follows:
No.	Issue date	CB ref.	Works permitted	
1	12 Oct 17	1914	Stage One - Proposed Internal Non-Structural and External Doorways Demolition of Existing Two Storey Office Building	
2	4 Dec 17	2482	Stage Two – To Permit In-Ground Civil Works Located 1m from Easement 5 Only (Excluding In-Ground Structural, Above Ground Structure, Architectural & Services)	
3	1 Feb 18	2866	Stage Three – To Permit In-Ground Structural Works Located 1m from Easement 5 and 1m from 10 Bridge Street Only (Excluding Above Ground Structure, Architectural & Services)	
4	21 Mar 18	3025	Stage Four – To Permit In-Ground Civil & Structural Works within 1m from 10 Bridge Street, Above Ground Structures, Internal Architectural Fitout, Electrical Services and Mechanical Services	
4A	3 Sep 18	3773	Stage Four Amended Building Permit – To Include Owner Builder Details	
5	16 Oct 18	3953	Stage Five Building Permit – To Include All Remaining Building Works (Excluding Fire Services & CFA 129 Report & Consent)	
6	29 Apr 19	4455	Stage Six Building Permit – To Permit All Remaining Works Including Fire Services, Fire Engineering, DDA Non-Compliances & Amended Planning Documentation	
167	Conclusions: In my view the following conclusions on this issue are appropriate:
(a)	the “commencement date” in accordance with Item 5 of the Schedule to the Contract Conditions was on or about 26 October 2017, as works commenced on site on 15 October 2017 and the building permit for Stage 1 of the works was issued on 17 October 2017;
(b)	there were delays during the course of the building works which were not solely the result of the Builder’s conduct or arising from matters solely under his control. These included the late payment of progress claims and the various dates upon which building permits were obtained. These matters may have entitled the Builder to extensions of the date for practical completion pursuant to cl 22 of the Building Contract, if the Builder had made appropriate claims;
(c)	there is insufficient evidence to be satisfied that EOT claims 1–3, or claim 5 were given to the Client by the Builder during the course of the works. It is likely in my view, that they were not;
(d)	in any event, the documents purporting to be EOT claims 1–3 given to the Client, may not have satisfied the timing and content requirements of cl 22.2;
(e)	however, the Client by its letter to the Builder dated 24 July 2018 acknowledged that it was appropriate that the Builder have until at least 7 September 2018 to reach practical completion of the building works;
(f)	at that time, the Client was aware that the Builder had delivered a program on 19 July 2018 showing final completion not before 7 September 2018;
(g)	presumably this programme, and the earlier programmes had taken account of delays as they arose and this was the reason for the completion date to be extended to a later date in each programme;
(h)	 CKC, in a letter to NAB dated 6 July 2018, had indicated its opinion that the Builder “provided sound management is maintained and delays are not encountered” may complete the works by August 2018;
(i)	when the Builder served a Suspension Notice on 31 July 2018, the building works could not be completed without the grant of further building permits for Stages 5 and 6;
(j)	however, there is no evidence that if the Building Contract had not been terminated by the Client, that the remaining two buildings permits would have been issued on the dates they were, or that the Builder would have been delayed in completing the works by the grant of the permits for stages 5 and 6 at some date in the future; and
(k)	it is likely that the extent of the Builder’s defective and incomplete work and the late ordering of materials (as shall be discussed shortly, and for which the Builder was solely responsible) were matters that would have made the dates of issue of the later building permits of no consequence and it is unlikely that the absence of these permits would at any time, have delayed the Builder’s progress with the works.
168	Accordingly, it is not possible to conclude that any inability on the part of the Builder to complete the building works was a matter which survived the Client’s termination of the contract.
Builder’s Late Ordering of Materials – Delayed Completion of the Works
169	The Client, in paragraph 6(c)(b) of the P3FASOC, alleges that the Builder breached clauses 15.7, 15.8, and 16.2(b) of the Building Contract by failing to order materials to ensure the orderly and timely completion of the works.
170	The Client gave examples of the consequences resulting from the late ordering of materials, including:
(a)	“carpets and vinyls having to be changed”; and
(b)	“the non-delivery of materials at the time the Building Contract was terminated on 24 August 2018”.
171	Materials that the Client alleged the Builder failed to order included:
“(i)   	the joinery;
 (ii)	the aluminium battens which had not been ordered as at 25 July 2018, and had a 8 to 12 week lead time; 
 (iii) 	the lift which had not left its country of origin as at 24 August 2018 and would take four weeks to arrive by ship, and have another 1 to 2 weeks to clear customs;
 (iv)	the steel supporting posts for the North and West side fence and Façade of the building and to the play deck area;
 (v)	the whiterock for the splashbacks which had not been ordered as at 29 June 2018; and landscaping; and
 (vi)	fittings such as tapware, basins and toilets.”
172	Although further and better particulars of these matters were foreshadowed, it appears that none were supplied. The Defendant denied the allegations and said further that it had been “subject to interference and hindrance by the Owner [but that nevertheless] the materials were ordered in an orderly and timely manne [at page 15]r”.
173	As a starting point, I shall refer to the email exchange between Ms Voyage and Mr Barnett on 6 July 2018 [CB 3406-8] as it notes  most of the issues later included in the Plaintiffs’ pleading relating to this matter. Ms Voyage’s email was responded to by Mr Barnett who made his comments in bold and underlined on her email. 
174	Mr Barnett’s responding email with his comments on Ms Voyage’s original follows:
“Hi Justin,
Could you please let us know what the status is on the finishes for Eltham
including whether they have been ordered and dates for installation:
•	Carpet order has been placed
•	Vinyl. Installing
•	Marmoleum all vinyl has been ordered so yes this item is with the installer
•	Whiterock ordered
•	Acoustic panels we have placed a hold on this item with the supplier will have on site when required
•	OSB ordered
•	Ply. Ordered
•	Decking in stock and will have on site when required
•	Rubber, artificial turf for play areas
in stock will be on site when required
Also, what is the status on the timber look aluminium batten? Do you have a
sample ready for us to Approve?
they are currently moulding samples will have back ready for approval shortly
Kind regards,
Katherine Voyage”
175	Clause 15.7 of the Building Contract provides for the standard of the Builder’s workmanship and clause 15.8 that the Builder must supply “everything required to carry out the works” except where otherwise stated to be provided by the Client. Clause 16.2 provides that the Builder must “ensure that the works reach practical completion by the date for practical completion”. There was no issue between the parties that the Builder had an obligation to supply the necessary materials at a time that would not cause a delay to the completion of the works. 
176	The evidence in relation to these matters, particularly in the witness statements and, to the extent that certain specific matters were canvassed in the oral evidence, is extensive and, in significant respects, contradictory. In the months leading up to the termination of the Building Contract there were items of the materials supply which became points of contention between the parties. 
177	In my judgment, little of value is to be gained by trawling through the evidence in an attempt to form a coherent picture or definitive conclusions. Such an examination would be unlikely to affect the conclusions I have reached in relation to the principal reasons for the position the works had reached when the Builder suspended the works on 31 July 2018. The matters delaying the works by that stage were solely the responsibility of the Builder.
178	However, in relation to the particular issue of the ordering and supply of materials, the critical question which I must address is to determine whether these matters satisfy the criteria of “substantial breaches”, as relied upon by the Client in its Show Cause Notice, and whether there was a significant “failure to order materials on time to ensure practical completion of the works”. I will therefore only refer to the evidence in relation to two of the specific matters raised by the Plaintiffs in their pleading of the claim; the lift and the battens. 
179	Ordering the lift: The project included the supply and installation of a lift. The lift was to be supplied by Jentec Elevators (“Jentec”). Jentec tendered for the supply of the lift on 20 February 2017 [CB 1342] and a subcontract was entered into with the Builder on 12 November 2017 [CB 2234]. 
180	Brett Jenkinson, the director of Jentec, in his witness statement dated 19 August 2021, said in paragraph 9 that, 
 “The lift was to be manufactured in Italy, and as is detailed in the tender, had a lead time for delivery of 13 weeks (being 8 weeks to manufacture and 5 weeks shipping, and a further 2 weeks was allowed for practical completion and commissioning).”
181	The purchase price was $49,440.00. The Builder paid a deposit of $19,072.90 on 30 November 2017 and a second payment of $19,815.40 on 23 July 2018. 
182	The lift was manufactured but never left Italy. Mr Barnett sent an email to Jentec on 27 March 2018 [CB 3071] indicating that the Builder wished to “resize the pit and change the travel length and headroom from what was detailed in the shop drawings”. Mr Jenkinson said that he discussed these matters with Mr Barnett.
183	On 16 July 2018, enquiries were made by Mr Jenkinson to the Builder “on the state of the works as the lift had been ready to be delivered from Italy for weeks” [CB 3488]. Mr Barnett replied that the project was “on hold” [CB 3488]. 
184	The principal contentions between the Builder and the Client included:
(a)	whether the lift pit was large enough for the ordered lift; and
(b)	whether the lift was “going to fit with the headroom that had been allowed”.
185	These issues were not resolved before the Building Contract was terminated. The Client subsequently ordered a different lift which was installed. By email dated 28 August 2018 [CB 3719], the Builder offered to assign the contract with Jentec in relation to the lift ordered from Italy. That offer was not accepted by the Client. 
186	It appears that due to the uncertainties about the continuation of the Building Contract in July 2018, the delivery of the lift was put on hold by the Builder although the Builder paid the second substantial payment under the supply contract in order to preserve his rights. 
187	The matters which required resolution before the lift could be installed were said by the Builder to include design issues relating to the pit and the surrounding area which he said were the responsibility of the architect. However, it appears that after the Building Contract was terminated, these issues were quickly resolved and a replacement lift was installed.
188	The Builder’s programmes had a separate line item for the “lift”. The only matter specified in the programme was “Install”, which was programmed to take:
(a)	three days on the second programme of 31 May 2018 from 11–13 June 2018 (with completion programmed for 23 June 2018); 
(b)	five days on the third programme of 5 July 2018 from 9–13 July 2018 (with completion programmed for 11 August 2018); and
(c)	five days on the fourth programme of 19 July 2018 from 6–10 August 2018 (with completion programmed for 7 September 2018).
189	When one looks at the dates of contact between Mr Jenkinson and Mr Barnett in March and July 2018, and the lead times specified in the Jentec works schedule [CB1350], and compares them with the dates programmed for the lift installation and final completion of the project on the three later programmes, it is difficult to discern any logic or purpose in the programmes.
190	Mr Etcell, in paragraph 348 of his first witness statement dated 5 October 2021, said that in July 2018 Mr Jenkinson informed him “that the lift had left Italy and was in transit” and in a further phone call shortly afterwards that the lift “would arrive in [Australia] in time for our September completion date”. Mr Etcell said that “in an email from Jentec on 20 July 2018, after the second payment had been made … Brett confirmed that the install of the lift would meet Ikonic Homes’ altered programme [CB … 3488–3489]”.
191	The documents in the Court Book disclose a different picture:
(a)	16 July 2018, Jenkinson to Barnett – “Not sure what is going on at your site. Our team have now placed your lift into storage and charges will be applied to your account. You said you were ready, and your lift had now been sitting for weeks and weeks. Please let me know when you will be ready to move forward”;
(b)	Later on 16 July 2018, Barnett to Jenkinson – “As mentioned to you last week we put hold on project as we need client to agree on a large VO this is been finalised and will sort out our lift with you this week”;
(c)	19 July 2018, Barnett to Jenkinson – “Could you please advise us how long will it take your lift to arrive on site once payment is made tomorrow? We just programming works in”;
(d)	Later on 19 July 2018, Jenkinson to Barnett – “4 to 6 weeks depending on ship availability”; and
(e)	20 July 2018, Barnett to Jenkinson – “Payment has been made today please check your accounts tomorrow and move forward on the lift thank you”.
192	It is noted that Builder’s programme no. 4 was issued on 19 July 2018 showing installation of the lift between 6–10 August 2018. This was inconsistent with the information provided to Mr Barnett by Mr Jenkinson on 19 July. Mr Barnett did not seek to correct the programme. 
193	In Mrs Mustafa’s notes of the meeting on 26 July 2018, that both Mr Etcell and Mr Barnet signed as a true record, it is recorded:
(a)	“Emails of proof of order of products and confirmation of trades booked”;
(b)	“Justin and Paul still confident the timelines on program will be met”; and
(c)	“Lift confirmation of arrival and installation”.
194	Mr Etcell confirmed at T1497 that, at the meeting on 26 July, Mr and Mrs Mustafa were requesting information “regarding the lift”, and wanted “some confirmation on the orders”. What they received was misinformation and obfuscation.
195	Battens: The project included the installation of battens which were to be attached as a cladding material to screens, fences, balustrades and soffit linings around the perimeter of the building. The principal issues in relation to the battens were:
(a)	whether the battens in the original tender documents were timber and were later changed to aluminium battens for the screens, fence and balustrade at a site meeting in February 2018, as suggested by Mr Etcell at paragraph 78 of his first witness statement;
(b)	whether at that stage the battens were not ordered because the sequence of works did not require their installation until towards the end of the project;
(c)	whether a variation to the Building Contract was required because of the Builder’s contention that the materials had been changed;
(d)	whether Mr and Mrs Mustafa agreed to a change of supplier from Woodform to Covet at the suggestion of the Builder and in order to save costs;
(e)	whether during conversations in July 2018, Mr Barnett told Mr and Mrs Mustafa that the battens had been ordered, or whether Mr Barnett said that he had simply made enquiries from the supplier.
196	These matters were referred to in the Witness Statements of Mr Etcell, particularly paragraph 232 of his Witness Statement dated 5 October 2021. Mr Etcell said,
 “[W]e were reluctant to outlay for delivery for the battens until we had a signed variation document for the battens and added cost … We needed the costing [from Covet] in order to alter the draft variation document before we could supply it to the Mustafas.”
197	The Schedule of Finishes Revision B dated 8 September 2017 includes the item “Timber – cladding (fence, balustrades, soffit)”. In Revision O dated 4 October 2017 the description of the item reads, “Timber veneer over aluminium battens – cladding (fence, balustrades, soffit)”. 
198	The balance of the entries, in both versions of the Schedule of Finishes for this item, are precisely the same; the “code” is TIM1, the “description” is “Aluminium Exterior Foil Wrap” 32 x 60 mm battens (fence, balustrades) 19 x 60 mm brackets (soffit lining)”, “range/colour/finish” is “Walnut” and the supplier is “Woodform”. 
199	In Variation No. 3, prepared by the Builder as a draft on about 15 June 2018 [CB 3308], the details of work the subject of proposed variations included, “window screens changed from timber battens in tendered documents to Woodform product”, and similar changes in respect of “soffit lining”, “fences and front deck balustrade”, and “carpark soffit lining”. However, in the draft variation notice, those entries are crossed through. The document was not given to the Client.
200	Mrs Mustafa at paragraph 49 and 50 of her witness statement dated 19 August 2021 referred to the dealings she and Mr Mustafa had with Mr Barnett on a date, probably in June 2018, regarding Mr Barnett’s concern “about the cost of having the battens supplied from Woodform”. Mrs Mustafa stated, “We said we were prepared to consider an alternative product if they sourced one, which Justin did after a period of time from a supplier called Covet. The battens from Covet were cheaper, and we agreed to use them to assist Ikonic in reducing its costs”. 
201	Mrs Mustafa said that Mr Barnett had on an unspecified date prior to 6 July 2018 “tried to get us to use another supplier [than Covet] but I just wanted the project completed”. On 6 July 2018, Mr Barnett responded to queries that Ms Voyage had sent to him, including, “What is the status on the timber-look aluminium batten? Do you have a sample for us ready to approve?” Mr Barnett’s response was, “They are currently moulding samples. Will have back ready for approval shortly”. 
202	Shortly after, there was a response from Mrs Mustafa to Mr Barnett in which she stated: 
 “I can only see the responses … the battens under construction … In regards to the battens, I am leaning towards not accepting another substitute product. It has taken over a week to just get a sample. We already went to extra measures to find an alternative for you to reduce your costs. We are all happy with the products selected and shown to you from Covet. … I just want this project finished.” 
203	Mrs Mustafa said at paragraph 61 of her Witness Statement dated 19 August 2021 that, at the meeting between Mr and Mrs Mustafa and Mr Etcell and Mr Barnett on 24 July 2018, “We queried them both about the timelines and products for completion and Paul confirmed that they would be finish[ed] on time. Justin also told me specifically that the battens had been ordered”. Subsequent enquiries by Ms Voyage apparently confirmed that this was incorrect. 
204	Mr Etcell said at paragraph 232 of his Witness Statement dated 5 October 2021 that, “Justin did not tell the Mustafas or the architect that the battens had been ordered but rather that he had liaised with Covet to obtain the costing and timeline of supply”. 
205	Mr Etcell also suggested in paragraph 232 that the Builder was unable to obtain a quotation from Covet as “the Mustafas had requested that Covet stop communicating with us”. This a distortion of the facts. Mr Etcell and Mr Barnett misled Mr and Mrs Mustafa at the meetings on 24 and 26 July 2018. The misinformation was discovered the following week after the works were suspended. It was then that Mr and Mrs Mustafa “requested [Covet] send a revised quote directly to them and that it was no longer necessary to provide [the Builder] with a copy of the quote” [SCB 562].
206	I do not consider that it is useful to further discuss the material in the witness statements or the oral evidence on this matter. I can see no basis in the evidence for Mr Etcell’s suggestion that the Building Contract had been changed from timber to aluminium battens. Further, I consider it more likely that Revision O of the Schedule of Finishes dated 4 October 2017 was the appropriate contract document, even though the description of the product to be supplied had not materially differed from the earlier Revision B dated 8 September 2017. 
207	There appear to have been reasons, not explained by the Builder, either at the time to Mr and Mrs Mustafa or in the evidence, as to why the battens could not have been ordered in time to meet the Builder’s anticipated completion date which was fast approaching. 
208	Mrs Mustafa related in her witness statement that after the Building Contract had been terminated, the enquiries made both from Covet and other suppliers of battens indicated that a lead time of about 13 weeks after ordering the material was necessary. 
209	Mr Etcell, in his oral evidence at T1497, was asked about the record in Mrs Mustafa’s notes of the meeting on 26 July, “Waiting on Covet for final quote and order placement” and whether he accepted that with Covet “there was a lead time of some eight weeks for delivery from order”. Mr Etcell responded, “[W]e hadn’t received any confirmation on lead time at that point of time”.
210	The Builder’s programmes showed the following entries beside the general heading of “carpenters”:
(a)	on the second programme dated 31 May 2018: “soffit lining/balustrade” was to be carried out between 8 and 11 June with “soffit lining” to continue on 12 and 13 June, and with “carpark soffit” on 21 to 23 June, and completion of all works also on 23 June 2018;
(b)	on the third programme dated 5 July 2018: “balustrade install east side” between 3 and 5 July, “?? Install/balustrade ??” [part indecipherable] on 10 and 11 July, carpark soffit fitoff” was to be carried out between 25 and 28 July, “fencing screen fitoff” between 30 July and 3 August, “first floor terrace screens fitoff on 4 August and “soffit fitoff between 6 and 9 August as the final work activity on site and with “defect inspection with clients” on 11 August 2018; and
(c)	on the fourth programme dated 19 July 2018: “soffit lining install” between 27 and 30 August, “screen battens” between 31 August and 5 September and “fencing battens” between 5 and 8 September as the final work activity on site and with “final inspection” on 7 September 2018.
211	It is clear that the battens could not have been delivered and installed for many weeks after the product was ordered. The programme was inaccurate and the promises made by the Builder were false. The Builder would have been quite incapable of completing the project for many months, even if it had not suspended the works on 31 July 2018. 
Conclusion on the issue of delays
212	During the month of July 2018, the Builder was way beyond schedule and quite unlikely to complete the works of the Building Contract within the foreseeable future. It would have been obvious to Mr Etcell and Mr Barnett that they were in considerable trouble. It is likely that their management of the project was seriously deficient, including the planning of the sequence of works, the proper ordering of equipment and materials, having the appropriate trades on site and the supervision of their work.
213	It is likely that all these matters were further exacerbated by inadequate financial management and the desperate hope that a substantial claim for variations might improve the situation. It was in these circumstances, with Mr and Mrs Mustafa raising their concerns about workmanship, delays in the works and the late supply of critical materials and equipment that Mr Etcell and Mr Barnett decided to make a last throw of the dice and to suspend the works before the Client took steps towards terminating the Building Contract.
Issue 3: Termination of the Building Contract
214	The Client purported to terminate the Building Contract by a letter from its solicitors to the Builder’s solicitors dated 24 August 2018. The Builder claims that this purported termination was itself a repudiation of the Building Contract which the Builder, through his solicitors, accepted. The Court must determine which party appropriately brought the Building Contract to an end. It is important, therefore, to carefully examine the events leading up to the termination.
215	In June and particularly in late July 2018, the relationship between the parties deteriorated, culminating in the termination of the Building Contract on 24 August 2018. The critical events were as follows:
(a)	15 June 2018 – the Builder claimed the remaining 20% of Stage 7: Rough-in, and the whole of Stage 6: Car Park structure;
(b)	17 June 2018 – the Builder claimed the remaining 20% of Stage 5: Frame;
(c)	6 July 2018 – the CKC third report on the Builder’s progress claims on 15 and 17 June 2018 [CB 3409] concluded that the works of Stages 5 and 7 had not been completed;
(d)	6 July 2018 – Ms Voyage’s email to Mr Barnett about the ordering of materials and his responses;
(e)	19 July 2018 – the Builder issued a program with completion on 7 September 2018;
(f)	19 July 2018 – the Client made a progress payment of $147,283.40 for the completion of Stage 6 in accordance with the recommendation of CKC;
(g)	24 July 2018 – a meeting of Mr and Mrs Mustafa with Mr Etcell and Mr Barnett was held at the Small Plates restaurant. There is no dispute that the parties met. There is dispute as to:
(i)	the length of the meeting; 15 minutes, as Mr Etcell suggested, or longer;
(ii)	whether the letter dated 24 July was handed to Mr Etcell that day, as Mrs Mustafa and her notes of the meeting at CB 3385 state, or at the later meeting on 26 July as Mr Etcell recalled; and
(iii)	whether Mrs Mustafa took notes at the meeting.
(h)	Mrs Mustafa’s notes of the meeting record that the parties discussed Mr and Mrs Mustafa’s “concerns of ordering products and timelines of Practical Completion”, and received reassurances from Mr Barnett and Mr Etcell that:
(i)	“All products had been ordered or in stock as per specifications”;
(ii)	“Paul confident that they will complete before the proposed Schedule”; and
(iii)	“Justin confirmed battens were ordered”;
(i)	The notes also recorded that Mrs Mustafa “handed signed letter to both Justin and Paul about late delay payments after Sep. 7”. It is unclear whether the letter was served on 24 or 26 July. The date is of little consequence, although I consider it possible, and perhaps more likely, that the notes of the meeting on 24 July may have been written in the days that followed;
(j)	Letter dated 24 July 2018 – I have earlier set out the contents of this letter. The letter informs Mr Etcell that as a result of receiving the Builder’s revised programme on 19 July 2018, “the practical completion date has now been revised to 7 September 2018”. The letter advised that if that date were not reached, the Client would “be claiming liquidated damages” and “any further requests [by the Builder] for an EOT for practical completion will not be accepted”;
(k)	26 July 2018 – there was a meeting on site between Mr and Mrs Mustafa, Mr Barnett and Mr Etcell. The meeting commenced at 5.30pm and concluded at 8.00pm. Mrs Mustafa’s notes of the meeting are at CB 3387–91. Mr Etcell, at paragraph 188 of his witness statement dated 5 October 2021, said, “We were never supplied a copy of these notes”. After Mrs Mustafa had given evidence at the hearing and had produced text messages sending the notes to Mr Etcell and Mr Barnett [at T1012], Mr Etcell conceded [at T1301] that he had been given the notes, signed them, and asked Mrs Mustafa “to provide a copy of those notes to myself and Justin”;
(l)	The four pages of notes include complaints by Mr and Mrs Mustafa about “breaches of contract”, including in respect of workmanship and delays, and reassurances by Mr Barnett and Mr Etcell of work that would be done in the following days, the availability of certain materials, and expressing that they were “still confident the timelines on program will be met and that they wanted progress payments “to be made for balance of frame [and rough in stages]”;
(m)	29 July 2018 – the Builder prepared EOT Claim nos. 1, 2 and 3 [CB 3561–3], but probably did not serve them on the Client;
(n)	31 July 2018 – at a meeting between the parties at McDonalds (opposite the site), Mr Etcell handed to Mr and Mrs Mustafa a Suspension Notice dated 31 July 2018 addressed to The  Property Trust suspending the Works from “3/8/18” (“the Builder’s first Suspension Notice”) [CB 3576];
(o)	1 August 2018 – by email at 8:58 am [CB 3596], Mr Barnett sent to Mr and Mrs Mustafa a further notice of suspension, in precisely the same terms as the Builder’s first Suspension Notice, save that the Works were suspended “from 1/8/18” (“the Builder’s second Suspension Notice”) [CB 3598]. The email also attached a Show Cause Notice dated 31 July 2019 (“the Builder’s Show Cause Notice”) [CB 3597];
(p)	1 August 2018 – by email at 9.01 am to Mr and Mrs Mustafa [CB 3594], Mr Barnett attached a letter dated 31 July 2018 [CB 3595] responding to the Client’s letter dated 24 July 2018;
(q)	1 August 2018 (later) – a Show Cause Notice dated 1 August 2018 signed by Mr and Mrs Mustafa (“the Client’s Show Cause Notice”) [CB 3591] was served on Mr Etcell together with a letter from Mr and Mrs Mustafa’s solicitors, Boutique Legal [CB 3592–3593];
(r)	8 August 2018 – a Building Notice was issued by the Registered Building Surveyor [CB 3638–3642];
(s)	9 August 2018 – letter from Builder’s solicitors to the Client’s solicitors [CB 3660–3664] responding to the Client’s Show Cause Notice. The Builder’s solicitors claimed that the sum of $47,601.88 was owing in respect of the Builder’s progress claim and unpaid sums of $72,124.99 for Variation 1 and $24,750.00 of Variation 2;
(t)	15 August 2018 – email from Ms Voyage to Mr and Mrs Mustafa [CB 3674–3675] summarising the defects found on site “today” by the architect;
(u)	16 August 2018 – Letter from architect Toby Ewert of Ewert Leaf to the Client’s solicitors outlining the architect’s “issues that we have experienced with the Builder”;
(v)	23 August 2018 – Between 10pm and 2am the following morning, Mr Etcell and Mr Barnett attended the site and removed cladding the subject of the Building Surveyor’s notice dated 8 August 2018;
(w)	24 August 2018 – Mr and Mrs Mustafa’s solicitors, served a letter on Mr Etcell purporting to terminate the Building Contract [CB 3709]; and
(x)	28 August 2018 – the Builder’s solicitors, by letter to the Mustafa’s solicitors purported to accept Mr and Mrs Mustafa’s purported termination of the Building Contract as a repudiation of the contract [CB 3719].
216	Parties’ notices dated 31 July and 1 August 2018: It is necessary to carefully consider, in the context of the parties’ dealings, each of the four notices served by the parties on 31 July and 1 August 2018:
(a)	the Builder’s two suspension notices dated 31 July 2018 (“the Builder’s Suspension Notices”);
(b)	the Builder’s Show Cause Notice dated 31 July 2018; and
(c)	the Client’s Show Cause Notice dated 1 August 2018.
217	Each of these notices was served within a period of about 24 hours. However, the timing of the issue and service of these notices, and the Client’s Notice of termination on 24 August 2024, will not be determinative of the question of which party successfully brought the Building Contract to an end.
218	Builder’s Suspension Notices and Show Cause notice dated 31 July 2018: The Builder Suspension Notices dated 31 July 2018 were served pursuant to cl 17.1 of the Building Contract. The notices advised that the Builder was suspending the whole of the works under the Building Contract. Each Suspension Notice is in similar form, save that the Builder’s first Suspension Notice was expressed to be suspending the Works from 3 August 2018, and the Builder’s second Suspension Notice, from 1 August 2018.
219	The operative part of each Suspension Notice reads as follows:
“To Client
NAME The Mustafa Property Trust
TAKE NOTICE that pursuant to Clause 17.1a of the Contract the Builder hereby gives Suspension Notice of the Building Works at:
LOT NO 1
ADDRESS 12 Bridge Street
SUBURB Eltham 	STATE 3106 	POSTCODE 3106
from 3/8/18 [1/8/18]
 the reason for the suspension is as follows: non payment of invoices to the full amount being $271,022.40 due and payable under clause 21, amount paid $147,283.40 leaving balance due and payable $123,739.00 without delay for works completed of the medium works commercial contract conditions for 12 Bridge Street, Eltham.
 This notice is given without prejudice to the Builder's right to end the Contract by notice pursuant to Clause 30 of the Contract or otherwise.
 During suspension of the Building Works, interest upon any monies due and unpaid under the Contract will accrue at the rate stated in VIC or the Contract until payment thereof. In addition, the time for completion shall be extended in accordance with Clause 22 for the period of suspension.
 Please contact the undersigned as soon as possible regarding the above.”
220	The Builder’s Show Cause Notice dated 1 August 2018 reads as follows:
 “The following document is a Notice of default under clause 30 of the Medium Works Commercial Contract Conditions for 12 Bridge Street, Eltham.
 This notice is raised due to non-payment of full amount being $271,022.40 due and payable under clause 21, amount paid $147,283 .40 leaving a balance due and payable $123,739.00 without delay for works completed at 12 Bridge Street Eltham. I ask that you show cause in writing as to why lkonic Homes should cease further action under this notice as per Clause 30 of the above stated contract, if you fail to show reasonable cause under cause 30.4 we reserve the right to terminate the contract.
 I ask that your response be returned to lkonic Homes at 10 Seccull Drive, Chelsea Heights 3196 or alternatively by Hand no later than COB on the 8/7/18.”
221	The Client’s Show Cause Notice reads as follows:
“SHOW CAUSE NOTICE (UNDER CLAUSE 30 OF THE MEDIUM
 WORKS COMMERCIAL CONTRACT CONDITIONS)
TO: PAUL ETCELL trading as IKONIC HOMES of 10 Seccull Drive
CHELSEA HEIGHTS VIC 3196
The alleged substantial breaches of the Medium Works Commercial Contract Conditions are as follows:
•	Failure to follow the specifications and plans of the Works;
•	Failure to complete the Works in a good and workmanlike manner and of a standard required relevant to the Works and Contract;
•	Failure to adhere to the practical completion date and 3 subsequent extensions to the practical completion date and failure to complete the works in a timely manner;
•	Failure to order materials on time to ensure practical completion of the Works;
•	Failure to apply the appropriate Building\Plumbing Code to the Works;
•	Failure to ensure adequate supervision of the Works to ensure that they are being completed in accordance with the plans and specifications provided to you;
•	Failure to follow our directions with respect to the Works;
•	Engaging in misleading and deceptive conduct regarding the Works;
•	Failure to maintain appropriate Occupational Health and Safety requirements for the site;
•	Suspending Works without proper basis; and
•	Varying the Works without agreement with us.
You are required to:
•	show reasonable cause in writing why we should not exercise a right referred to in Clause 30 of the Medium Works Commercial Contract Conditions; and deliver your show cause response to Boutique Legal Pty Ltd of 26 Beetham Parade Rosanna Vic 3084 by no later than 5pm on 9 August 2018”. 
222	In respect of each suspension and show cause notice, it will be necessary to determine whether the notice sufficiently complied with the relevant provisions of the Building Contract.
223	Relevant provisions of the Building Contract: The relevant provisions of the Building Contract in relation to each type of notice differs:
(a)	the Builder’s Suspension Notices require an examination of the following clauses of the Building Contract:
(i)	Clause 17 – Suspension;
(ii)	Clause 21 – Certificates and Payments;
(iii)	Schedule item 16 – Stages of the works for progress claims;
(b)	the Builder’s and the Client’s Show cause notices require consideration of Clause 30 – Default.
224	The Builder’s Suspension Notices were purportedly given pursuant to clause 17.1 of the Building Contract, which (omitting side notes) provides as follows:
“17.   Suspension
17.1	If the Client:
(a)	fails to make a payment that is due and payable pursuant to the contract; or
(b)	has not given a direction, the time for so doing has elapsed and the contract does not deem a direction, 
the Builder may suspend the progress of the whole or part of the works by giving written notice to the Client.
17.2	The Builder must recommence suspended works within 21 days of the reason for such suspension ceasing to exist.
17.3	There is deemed to be a variation if the suspension causes the Builder to incur more or less cost than would otherwise have been incurred but for the suspension.”
225	Clause 21 of the Building Contract sets out the process for the Builder to make progress claims. The clause (omitting side notes) reads as follows:
“21.   Certificates and Payments
21.1	The Builder must claim progressively in accordance with Item 16 and Clause 27, as the case may be.
21.2	Each progress claim given to the Client must:
(a)	be in writing; and
(b)	include details of the value of the works carried out and of other moneys then due to the Builder pursuant to the provisions of the contract.
21.3	The Client must, within 7 days after receiving a progress claim,
(a)	pay the amount of the progress claim; or
(b)	give the Builder a progress certificate evidencing the Client's opinion of the moneys due from the Client to the Builder pursuant to the progress claim and the reasons for any difference and pay the amount certified.
21.4	If the amount payable under the Client's progress certificate is less than the Builder's progress claim then:
(a)	there is deemed to be a dispute, the details of which are the reasons for the difference stated in the progress certificate; and
(b)	the Client's progress certificate is also deemed to be the notice of dispute under subclause 32.1 regarding that dispute.
21.5	If the Client does not give a progress certificate within 7 days of receiving a progress claim:
(a)	the progress claim is deemed to be the progress certificate; and
(b)	the amount of the progress claim is deemed to be a debt due and payable.
21.6	Where the contract elsewhere provides that a progress payment is payable net of a retention, the Client must hold such retention as security.”
226	Item 16 of the Schedule to the Medium Works Commercial Contract Conditions (“Schedule to the Contract Conditions”) provides for the “Stages of the works for progress claims” (pursuant to clause 21 for progress claims and clause 27 for the final claim), as follows:
“1.	Deposit 5% (including hoarding, insurances, site set up, temporary power etc) $73,642.35
2.	Demolition 5% $73,642.35
3.	Services shop drawings and design works 7.5% $110,463.50
4.	Deposit for lift, mechanical plant, joinery, windows etc 12.5% $184,105.90
5.	Frame 25% $368,211.75
6. 	Car park structure 10% 147,284.70
7.	Rough in 15% $220,927.05
8.	Fix 10% $147,284.70
9.	Completion 10% $147,284.70.”
227	Item 16 of the Schedule was amended by the parties to the final signed copy of the Building Contract [at CB 2110] to insert the following qualification:
 “Please note: Claims on stages will be invoiced as they become due regardless of sequential order stated within the contract.”
228	According to Mr Etcell, at paragraph 60-2 of his witness statement, Schedule item 16 was amended to have “reordered the stages of the works for progress claims 2 to 6”. Mr Etcell stated that the amendment was made at the request of Mr Mustafa on 28 February 2018 and the signing pages of the Building Contract were re-executed and backdated to 23 October 2017.
229	This may not be correct as:
(a)	the only signed version of the Building Contract in the Court Books [CB 2103-2133] is dated 26 October 2017 and has a signed version of Variation no. 1 following it;
(b)	this version of the Building Contract contains what Mr Etcell says is the amended version of Schedule Item 16 with the reordered stages and the qualification permitting out of sequence work; and
(c)	the later signing of the document in February 2018 by the parties [at CB 2913-6] is of the signature page of Variation no.1.
230	 Stages 2 to 6 were reordered to reflect what seems to be a more logical sequence of works. It is more likely, based upon an examination of the documents in the Court Books, that the parties realised before the Building Contract was signed on 26 October 2017 that the stages in Item 6 required reordering and amended the Building Contract accordingly, with the qualification to allow the Builder to work out of sequence. 
231	Clause 30 of the Building Contract sets out the processes for terminating the contract if there is a serious default which continues following the service of a Show Cause Notice. Clause 30 (omitting side notes) reads as follows:
“30.	Default
PRESERVATION OF OTHER RIGHTS
30.1	If a party breaches (including repudiates) the contract, nothing in this clause prejudices the right of the other party to recover damages or to exercise any other right or remedy.
NOTICE TO SHOW CAUSE
30.2	If either party commits a substantial breach of the contract, the other party may, by hand or registered post, give to the party in breach a written Show Cause Notice.
30.3	That notice must state:
(a)	that it is a notice under this Clause 30 of these Medium Works Commercial Contract Conditions;
(b)	the alleged substantial breach;
(c)	that the party in breach is required to show cause in writing why the other party should not exercise a right referred to in this Clause 30;
(d)	the date and time by which the party in breach must show cause (which time must not be less than 7 clear days after the notice is given to that party); and
(e)	the place at which cause must be shown.
FAILURE TO SHOW CAUSE
30.4	If the party in breach fails to show reasonable cause by the stated date and time, the other party may, by giving written notice to the party in breach, terminate the contract.
RIGHTS OF THE PARTIES ON TERMINATION
30.5	If the contract is terminated pursuant to this Clause 30, the parties remedies, rights and liabilities are the same as they would have been under the law governing the contract had:
(a)	the party in breach repudiated the contract; and
(b)	the other party elected to treat the contract as at an end and recover damages.”
232	Each of these provisions will be discussed in detail shortly in relation to the relevant notices.
233	Matters raised by the pleadings: The parties’ pleadings raise many issues in relation to the Builder’s Suspension Notices and Show Cause Notice, and the Client’s Show Cause Notice.
234	I noted earlier in these Reasons, my refusal of the Plaintiffs’ applications to further amend both their Statement of Claim and their Reply and Defence to Counterclaim. As a consequence of that decision, the specific matters raised in the proposed P4FASOC and P5FARDCC relating to the progress claims and payments, including aspects of the CKC reports, do not require determination. 
235	However, the factual matters which were relied upon as the basis for the proposed amendments, must be considered as part of the context or surrounding circumstances in which the adequacy of each of the parties’ notices and their compliance with the provisions of the Building Contract, must be considered.
236	The critical allegation by the Plaintiffs in P3FASOC is at paragraph 6, where they plead that:
“6	Wrongfully and in breach of the Contract: …
(c)(c) the Builder in breach of clause 21.1 of the Contract issued progress claims and demanded payment from the Owner for stages of work not completed. 
Particulars
The Builder issued progress claims for 100% of the frame stage and 100% of the rough in when that work had not been completed. 
The Owner refers to the expert report of Matt Osborn dated 31 October 2018 and 4 June 2020 and the 3rd Progress Report of Charter Keck Cramer dated 6 July 2018.
(d)	the Builder wrongfully suspended works on site from approximately late July 2018.”
237	The Defendant responded to these allegations in D4FADCC, as follows:
“6. As to paragraph 6:
(c)(c) it denies the allegations in sub-paragraph (c)(c) and says that the Owner consented to part payment of the progress claims for the frame stage and rough in stages. The Builder further says that the Owner failed to issue any certificates under clause 21.3(b) of the Contract thereby rendering all amounts invoiced by the Builder as due and owing pursuant to clause 21.5(b) of the Contract;
…
(d)	it denies the allegations in sub-paragraph (d) and says further that:
(i)	pursuant to clause 17.1 of the Contract, the Builder could suspend if the Owner failed to make a payment that was due and payable, or failed to give a direction after the time for doing so had elapsed;
(ii)	by reason of the matters set out in paragraphs 23 to 34 of its counterclaim below, the Owner had failed to make payments of amounts due and payable under the Contract in the sum of $144,476.89, alternatively $127,739.00, alternatively $47,601.88, by 31 July 2018; and
(iii)	in the circumstances, the Builder was, to the knowledge of the Owner, entitled to suspend the Works and did so lawfully by notice dated 31 July 2018.
Particulars
By no later than 13 August 2018 the Owner knew that at least $47,601.88 was due and payable under the Contract and that the failure to make payment of this amount entitled the Builder to suspend the Works.
The Owner’s knowledge is to be inferred from the letter dated 9 August 2018 from the solicitor in response to the purported Notice to Show Cause (in particular at paragraphs 12 to 15 thereof) and from an email exchange dated 13 August 2018 between John Arthur and Trent Harris (in particular at subparagraphs (d) and (p) thereof), which email was provided to Jerry Mustafa and Florije Mustafa on 14 August 2018 and forwarded by Jetmir Mustafa to Shady El-Sheikh on the same day.”
238	The Defendant in his Counterclaim raised the following relevant allegations:
“Progress Claims
24.	The Builder:
(a)	completed stages 1 to 7 and was entitled to issue progress claims in respect of those stages; and
(b)	issued progress claims for stages 1 to 7 in the total sum of $1,178,277.58.
Particulars
A list of progress claims and payments made is set out in schedule 1.
25.	The Owner did not give the Builder any progress certificate in respect of the progress claims, and accordingly the amounts set out therein became due within 7 days of the receipt.
26.	The Owner has, to date, paid the Builder the sum of $1,130,675.70 in respect of the progress claims.
Particulars
A list of progress claims and payments made is set out in schedule 1
27.	In the circumstances, the Owner is indebted to the Builder in the sum of $47,601.88.
…
42.	There was an implied term of the Contract that the parties would exercise the termination provisions reasonably and in good faith, and would not exercise them vexatiously.
Particulars
The implication arises as a matter of fact in order to give business efficacy to the Subcontract. The term (1) is reasonable and equitable; (2) is necessary so as to give business efficacy to the Subcontract; (3) is so obvious that “it goes without saying”; (4) is capable of clear expression; and (5) does not contradict any express term. Alternatively, the term is to be implied at law.
43.	On or about 1 August 2018, the Mustafas purported to serve a notice to show cause on the Builder pursuant to clause 30 of the Contract (Notice).
…
44.	The Notice was not a valid notice pursuant to clause 30 as:
(a)	the Builder was not in breach, alternatively substantial breach, of the Contract as alleged in the Notice;
(b)	the Notice failed to set out any proper details of substantial breach committed by the Builder as required by clause 30.3(c), and instead set out only a list of vague, generalised allegations without proper particulars;
…
45.	Alternatively, if (which is denied) the Notice was a valid notice pursuant to clause 30, the Builder:

(a)	rectified the said substantial breaches within the required time; and/or
(b)	provided sufficient or reasonable cause within the required time by letter from its solicitor dated 9 August 2018.
…
46.	By letter dated 24 August 2018, the Owners purported to terminate the Contract in reliance on the Notice.
…
47.	By reason of the matters set out in paragraphs 44 and 45 above, the purported termination was ineffective and unlawful.
48. Further or alternatively, in breach of the implied term set out at paragraph 42 above, the purported termination was vexatious or unreasonable, and therefore ineffective at bringing the Contract to an end.
Particulars
(a)	The Works were not far from completion.
(b)	At the date of the Notice, the Owner was in breach of the Contract in having failed to make payment of progress payments to the Builder.
(c)	On 31 July 2018, the Builder served notice of default and notice of suspension of works on the Owner for non-payment of progress claims, a copy of which is available for inspection at the offices of the solicitors for the Builder by appointment. The Owner issued the Notice only after receipt of the Builder’s notices and its suspension.
(d)	The Notice contained vague and ambiguous grounds, without any proper particulars of the alleged substantial breaches.
(e)	By letter dated 9 August 2018, the Builder (via its solicitor) responded to the Notice, a copy of which is available for inspection at the offices of the solicitors for the Builder by appointment. The Owner failed to engage with the Builder’s response at any level prior to purporting to terminate.”
239	Part of the relief sought in the Counterclaim by the Defendant was:
“A. Declarations that:
…
A.2 the Builder validly terminated the Contract on 24 August 2018.”
240	The Plaintiffs in P4FARDCC responded to the relevant paragraphs of the Defendant’s Counterclaim, as follows:
“Progress Payments 
7.	In respect of the matters alleged in paragraph 23 of the Counterclaim the Defendants to Counterclaim admit all express terms of the Contract. 
8.	To paragraph 24 the Defendants to Counterclaim say: 
(a)	they admit the Builder issued progress claims as set out in schedule 1 and the payments as set out in schedule 1, but they say that the payments were made by the Owner Plaintiff/First Defendant to Counterclaim; 
(b	 they otherwise deny the allegations in paragraph 24. 
9.	To paragraph 25the Defendants to Counterclaim say: 
(a)	they admit that the Owner Plaintiff/First Defendant to Counterclaim did not issue any progress certificates, but they say that:- 
(i)	the Builder never requested any and made no complaint and raised no dispute about that; and 
(ii)	in any event pursuant to clause 25.1 [21.5] of the Contract after a period of seven (7) days a progress claim is deemed to be a progress certificate. 
(b)	they say that neither of the Mustafas or the Mustafas as trustee of the Trust Second or Third Defendants were party to the Contract and were not, therefore, obliged to issue any payment certificates; 
(c)	to the extent that the Builder rendered a progress claim for an incomplete stage of work, it was not a progress claim issued in accordance with the Contract and the Owner Plaintiff had no obligation to issue a progress certificate under the Contract or at all; 
(d) 	they otherwise deny the allegations in paragraph 25. 
10.	Save that the Defendants to Counterclaim admit that the Owner Plaintiff has made payments totalling $1,130,675.70 (or a sum approximating to that amount) they otherwise deny the allegations in paragraph 26. 
11.	The Defendants to Counterclaim deny the allegations in paragraph 27. 
…
29.	The Defendants to Counterclaim deny any implied term to the effect as that alleged in paragraph 42. 
30.	Save that they admit that the Owner Plaintiff/First Defendant to Counterclaim served on the Builder a Notice to Show Cause dated 1 August 2018, they otherwise deny the allegations in paragraph 43. 
31.	The Defendants to Counterclaim deny the allegations in paragraph 44. 
32. To paragraph 45 the Defendants to Counterclaim say: 
(a)	the Builder failed to show cause, on the contrary, they say that in response to the Notice to Show Cause the Builder steadfastly refused to accept that it was in substantial breach of the Contract, as to which they refer to and rely on the Builder’s solicitor’s letter dated 9 August 2018 a copy of which will be tendered at the opening of the Plaintiff’s case; 
(b)	they otherwise deny the allegations in paragraph 45. 
…
36.	The Defendants to Counterclaim deny the allegations in paragraph 49. 
37.	The Defendants to Counterclaim deny the allegations in paragraph 50. 
38.	The Defendants to Counterclaim deny the allegations in paragraph 51 and say further that: 
(a)	the Contract was already terminated by the Owner Plaintiff prior to the Builder’s purported acceptance of the alleged repudiation; 
(b)	further and in any event, the Builder was on 24 August 2018 in substantial breach of the Contract and was therefore not entitled to terminate the Contract at common law. 
…
44.	The Defendants to Counterclaim deny that the Builder is entitled to any of the relief claimed. “
241	These pleadings raise a myriad of issues, including most relevantly the following:
(a)	the sufficiency of each notice, including specifically whether the requirements of the Building Contract have been satisfied;
(b)	in relation to the Builder’s suspension of the works on 31 July 2018: 
(i)	whether there was a proper basis for suspending the works pursuant to cl 17;
(ii)	whether the Builder had satisfied the requirements of cl 17 in the suspension of the works;
(iii)	if the justification for suspension were the failure to make progress claims, which progress claims were relied upon, and did those progress claims comply with the provisions of cl 21 of the Building Contract;
(iv)	if the notices related to progress claims for the final 20% of each of the Frame stage and Rough-in, whether those claims required each of those stages to be complete;
(v)	if the Client considered that there was a proper basis for refusing to pay the amount claimed as a progress payment, whether the Client was required to have issued a progress certificate under cl 21.3(b) of the Building Contract;
(vi)	whether the failure to issue a progress certificate rendered all unpaid amounts invoiced by the Builder due and payable, pursuant to cl 21.5(b);
(vii)	whether the Client was entitled to pay the amount of a Builder’s progress claim assessed by CKC and no more;
(viii)	whether the works of Stage 5: Frame and Stage 7: Rough-in were not complete at the time the Builder claimed the balance of the Stage payments on 15 and 17 June 2018;
(ix)	whether the Builder’s Suspension Notices, relying upon a further payment under the Building Contract of $127,739.00, alternatively $47,601.88 as due and owing, were valid and effective; and
(x)	whether the Client acknowledged that the balance of the Stage 5 and Stage 7 progress claims or some other sum may be due and payable, and whether this validated the service of the Builder’s Suspension Notices;
(c)	in relation to the Builder’s Show Cause Notice dated 31 July 2018:
(i)	whether the notice has similar deficiencies as the Builder’s Suspension Notices; and
(ii)	whether the decision reached in relation to the Builder’s Suspension Notices will make it unnecessary to decide any further issues in relation to the Builder’s Show Cause Notice;
(d)	in relation to the Client’s Show Cause Notice dated 1 August 2018:
(i)	whether there were “substantial breaches” by the Builder of the Building Contract which justified the Client serving the show cause notice on 1 August 2018 pursuant to cl 30;
(ii)	whether the Client had satisfied the requirements of cl 30 in the issue and service of the show cause notice; and
(iii)	whether the Builder had sufficiently shown cause in response to the client’s Show Cause notice;
(e)	whether, in relation to the Client‘s termination of the Building Contract on 24 August 2018, the Client was entitled to determine the Building Contract pursuant to cl 30; and
(f)	if the Client were not entitled to determine the Building Contract pursuant to cl 30, whether the Builder’s acceptance of the Client’s termination of the Building Contract, as a repudiation of the Building Contract, brought the Building Contract to an end.
242	Determining the sufficiency of a Suspension notice or a Show Cause notice – relevant legal principles: The appropriate principles to apply in determining the sufficiency of a notice given pursuant to a contractual requirement were re-stated by Kennedy J (as she then was) in the decision of Yan & Anor v Zhang [2018] VSC 694 (“Yan”). Yan was recently considered by the Court of Appeal in Lanshen Pty Ltd v F3 Enterprises Pty Ltd [2024] VSCA 59 and the appropriate principles reaffirmed. These principles apply to both the Suspension Notices and to the Show Cause Notices.
243	In Yan, Kennedy J was required to determine whether a party had given “requisite notice(s) of breach” pursuant to a Settlement Deed. Her Honour, at paragraphs 111 to 113, following the Victorian Court of Appeal’s adoption of Lord Steyn’s remarks in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 (“Mannai”), stated as follows:
“Principles
111 	First, as stated by Lord Steyn in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd, the construction of a notice must be approached objectively. The issue is how a reasonable recipient would have understood the relevant notice, i.e. the issue is what reasonable persons in the same circumstance as the actual parties were, would have had in mind. 
112 	Second, it is important that the notice identify the applicable clause of the contract allegedly breached, i.e. that the contents of the notice are ‘matched’ against the relevant requirements in the clause. 
113 	Third, it may be enough to direct attention to the provision in the contract in respect of which default is made. However particulars may also be necessary with each case depending on its own circumstances. 
114 	Finally, it may be relevant to consider any information provided by the drafter of a notice in response to an inquiry by the addressee [footnotes omitted].”
244	This statement in Yan of the relevant principles to apply in such disputes distilled many years of discussion by the Court of Appeal in a number of cases, before and after the decision in Mannai. I shall set out the development of those principles through the cases, each of which provides an example of the application of the principles in a variety of contractual settings.
245	Mannai is an important decision on the construction of contractual notices, particularly the analysis in the judgment of Lord Steyn (one of the majority with Lord Hoffman and Lord Clyde). Relevantly, Lord Steyn said [at [767]–[769]]:
 “(2) The question is what reasonable persons, circumstanced as the actual parties were, would have had in mind. That is, the question is how the reasonable recipient would have understood the relevant notice. 
 (3) In determining the meaning of the language of commercial contracts, and unilateral contractual notices, the law therefore generally favours a commercially sensible construction. The reason for this approach is that a commercial construction is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them. And the standard of the reasonable commercial person is hostile to technical interpretations and undue emphasis on niceties of language.”
246	In 1997, shortly after the decision in Mannai was handed down, the Victorian Court of Appeal in Central Pacific (Campus) Pty Ltd v Staged Developments Australia Pty Ltd [1997] VicSC 581; (1998) V ConVR 54-575 (“Central Pacific”), in determining the question of the effectiveness of a notice of rescission of a contract for the sale of land, considered Mannai and whether the appeal before the Court should be reopened.
247	The Court of Appeal in Central Pacific did not consider that the decision of the majority of the House of Lords in Mannai affected the conclusion the Court of Appeal had reached by the application of principles affirmed in decisions that had been followed for many years in Victoria. The appeal judges “emphasized that this Court is saying nothing as to the correctness or otherwise, or of its applicability to notices of default of this kind, of the decision in the Mannai Investment Case” (per Ormiston JA at page 3).
248	The Court of Appeal in Central Pacific adopted the test expounded by Brooking J in Catley v Watson (1983) V Conv R 54-003 at 62, 109 (“Catley”). At 62, 115, Brooking J stated as follows:
 “[A] notice...is not valid unless it is, in relation to its essential features as required by [the relevant] condition, clear and unambiguous. By this I mean, not that its import must be clear beyond the slightest peradventure, but that its terms must be such that a reasonable person, having given it fair and proper consideration, would be left in no doubt as to Its meaning. A notice if not unequivocal, In the sense that such notices are required to be unequivocal in relation to their essential contents, if a reasonable person, having considered the notice as a whole, fairly and properly, might entertain a doubt as to its meaning in relation to some essential matter, even though he would form in his mind a preference for one view, rather than the other, of what the notice was intended to convey. It must be possible to say that, after the appropriate consideration, any doubts that may have arisen would be quieted and the purchaser would not be left in any uncertainty as to the meaning of the notice.”
249	This approach was reaffirmed by the Court of Appeal in Greydae Pty Ltd v Malilane Pty Ltd [2003] VSCA 27 (“Greydae”) at [30] and [31]. After quoting the same passage from Brooking J’s judgment in Catley, the Court of Appeal [at 31] examined the question of who should be considered the “reasonable person” to whom Brooking J referred.
250	The Court of Appeal in Greydae at [31] quoted with approval from the judgment of Ormiston JA in Central Pacific where he noted (at pages 1-2) that: 
 “the ‘reasonable reader in the position of the purchaser’ who is knowledgeable not only of the terms of the contract, but also ‘the circumstances in which and the purposes for which notices of default might be given pursuant to conditions 5 and 6 [of Table A]’. Thus, before it can be said that a notice is not, relevantly, ‘clear and unambiguous’: ‘such of the surrounding circumstances as relate to the default and such understanding as would flow from referring to the very terms of the contract entered into by the parties are all relevant matters to take into account when construing this notice from the viewpoint of the reasonable recipient and in determining whether or not it is sufficiently clear for it now to be given effect’. (emphasis added)”
251	In Greydae, the Court of Appeal did not refer to Mannai, or to the references to that decision in the judgments of Ormiston JA, and Callaway JA (with whom Buchanan JA agreed), in Central Pacific.
252	In MLW Technology Pty Ltd v May [2005] VSCA 829 (“MLW Technology”), Gillard AJA (with whom Winneke P and Buchanan JA agreed) discussed the judgment of Lord Steyn in Mannai in the context of determining the validity of a notice given by a licensee (MLW) to the guarantors of a licence agreement requiring them to purchase the shares in a company (ADVC) transferred by the licensor as part of the licence agreement, and to pay the difference between an agreed sum ($2.3m) and the “aggregate price” of the shares.
253	Since that time, the decision of MLW Technology has been followed and applied by the Court of Appeal in Burbank Trading Pty Ltd v Allmere Pty Ltd [2009] VSCA 82 at [82], Salta Constructions Pty Ltd v St George Bank [2014] VSCA 289 at [28] and Balanced Securities Ltd v Dumayne Property Group Pty Ltd [2017] VSCA 61 at [128]. A similar approach was taken by the New South Wales Court of Appeal in Etlis v New Age Constructions (NSW) Pty Ltd [2005] NSWCA 165 at [39].
254	The sufficiency of a notice, in the context of the contractual provisions, is the principal consideration and notices may be effective (or ineffective) notwithstanding errors or extraneous material. In Bunbury Foods Pty Ltd v National Bank of Australia [1984] HCA 10; 153 CLR 491 (“Bunbury”) the High Court rejected the appellant’s contention that “the demand was invalid because it did not specify the amount payable”. 
255	The High Court determined that it was “not essential to the validity of a notice calling up a debt that it correctly states the amount of the debt” [at 30]. The Court explained at [29]: 
 “True it is, that in the absence of a specific statement of the debt, [the debtor] may lack precise knowledge of the amount which he must pay in order to avoid enforcement or realization of the security. On the other hand, to require the creditor in all cases to specify the amount of the debt may operate to impose an onerous burden upon him. Some accounts may be so complex and so constantly changing that it is difficult at any given time to ascertain or to assert the precise amount that is due and payable.”
256	The application of these principles in relation to each of the parties’ notices will be discussed shortly. First, I shall examine whether the procedural requirements of the applicable provisions of the Building Contract have been satisfied in relation to each notice served by the Builder and the Client.
257	Compliance of the Builder’s Show Cause Notice: The Builder’s Show Cause Notice generally contained part of the information required to be stated by cl 30.3. The notice included:
(a)	a statement that it was a notice under cl 30 (cl 30.3(a));
(b)	the requirement that the Client “show cause in writing why [the Builder] should not exercise a right referred to in this Clause 30” was substantially complied with by the Builder asking the Client to “show cause in writing as to why Ikonic Homes should cease further action under this notice as per Clause 30” (cl 30.3(c);
(c)	the date, time (not less than 7 days) and the place at which the Client must show cause was stated (cl 30.3(d) and (e)).
258	The substantive matters of dispute are:
(a)	whether a “substantial breach” was adequately stated in the Show Cause Notice;
(b)	the identification of the progress claims said to be “due and payable”, and why that was so;
(c)	whether the Client’s failure to issue a “progress certificate” pursuant to cl 21(5) of the Building Contract in respect of the relevant progress claims meant:
(i)	that each of those progress claims was “due and payable”; and
(ii)	the Client could not, in this proceeding, challenge its liability to pay the amount claimed; and
(d)	whether the Builder was disqualified from serving the Show Cause Notice under cl 30 by reason of: 
(i)	the fact that the progress claims made by the Builder were not valid claims as the work forming the basis of each claim had not been completed; and
(ii)	his own breach or breaches of the Building Contract, and in particular, the delays in completing the works and the extent of defective works requiring rectification.
259	The Builder’s Show Cause Notice stated that, “This notice is raised due to “non-payment of full amount being $271,022.40 due and payable under clause 21, amount paid $147,283.40 leaving a balance due and payable $123,739.00”. This was the “alleged substantial breach of the [building] contract” relied upon by the Builder and which he was required to “state” in the notice by clause 30.3(b) of the Building Contract.
260	It is necessary to examine: 
(a)	whether, on 31 July 2018, any and which progress claims were due and payable, taking into account both the claims made and any payments in respect of those claims; and
(b)	the circumstances in which and the purposes for which the Show Cause Notices might be given pursuant to cl 30.
261	The Builder’s progress claims and the Client’s payments are tabulated in Schedule 1 to D4FADCC (“Schedule 1”). Schedule 1 purports to be, “A list of progress claims and payments made”. Paragraph 8(a) of P4FARDCC states that, “the Defendants to Counterclaim [the same parties as the three Plaintiffs] … admit the Builder issued progress claims as set out in Schedule 1 and the payments as set out in Schedule 1, but they say that the payments were made by the Owner”. The “Owner” was defined by the Plaintiffs in paragraph 3 of P3FASOC as F&J Investment, or alternatively Mr Mustafa or both Mr and Mrs Mustafa.
262	Schedule 2 to D4FADCC is headed “List of variation claims and payments made” (“Schedule 2”). The document lists 11 variations, of which Mr Etcell stated 7 were completed, 2 not started and 2 were completed as to 50%. The 11 variations had a total value of $149,429.00, of which 9 completed and partially completed variations had been invoiced in the total sum of $115,874.99. Schedule 2 indicated that only one invoiced variation had been partially paid; part of Variation 1 for “Ground floor only existing window and glass replacement” in the sum of $64,999.00, of which $19,000.00 was alleged to have been paid by the Client.
263	The Plaintiffs (Defendants to counterclaim), in P4FARDCC, did “not admit” the matters alleged by the Builder in Schedule 2, save to admit that the Client had paid to the Builder the total sum of $1,149,675.70. In the context of the pleadings, it appears that this sum is comprised of the payments totalling $1,130,675.70 referred to in Schedule 1 and the further payment of $19,000.00 for part of Variation 1, as referred to in Schedule 2. However, $1,149,675.70 is the total of all payments made by the Client pursuant to the Building Contract, as I shall analyse shortly. 
264	Whilst the parties in their pleadings appeared to accept that Schedule I accurately set out the progress claims made by the Builder and the payments made by the Client, this position became less clear during the hearing. A redrawn schedule was filed by the Builder on about 22 October 2022. The redrawn schedule was included as Annexure E to the Defendant’s final submissions (“Annexure E”). It is necessary to examine Annexure E in some detail to determine what payments were made and what remained outstanding.
265	Analysis of the Builder’s progress claims and variation claims: Clause 21.1 provides that, “The Builder must claim progressively in accordance with Item 16 and clause 27, as the case may be”. Both Item 16, and clause 21.1 by reference to Item 16, anticipate that the stages of the contract work might be performed “out of sequence” by the Builder. Notwithstanding this possibility, I consider that, based on the language of item 16, it was intended that the works involved in each specified stage would need to be “complete” before a progress claim for a particular stage might be made.
266	In Cardona v Brown [2012] VSCA 174; (2012) 35 VR 538 (“Cardona”) at [74], Tate JA, with whom the other members of the Court of Appeal agreed, stated (with footnotes omitted) that:
 “It is necessary for there to be ‘effective and satisfactory completion of the required stage ... [as] a condition of any instalment payment and while trivial failures, or failures borne of impracticalities, do not preclude effective and satisfactory completion … [emphasis added].”
267	Although Cardona related to a domestic building contract (where the statutory provisions enshrine the consumer protection aspects of those contracts), nevertheless I consider that the “entire” nature of the stages of a building contract has wider application. 
268	These provisions might be varied by the agreement of the parties. This happened in relation to both the Frame stage and the Rough-in stage, as the parties agreed that the Builder could make a progress claim when only 80% of each stage was complete. However, it was necessary that the whole of each of these stages be complete before the final payment for the stage could be claimed. As I shall discuss later, Mr Etcell accepted that this was also his belief.
269	The Court Book contains copies of the invoices but not any evidence of how the progress claims were served on the Client and therefore the date of receipt by the Client. If the progress claims were sent by email, then by operation of clause 33.2 they are taken to be received at or about the time and date they were sent. 
270	For the purpose of analysing the progress payments, it will be assumed that the date of the invoice was the date it was given and received. However, in the Client’s response to the Builder’s schedule of payment claims dated 22 October 2022, there are disputes about:
(a)	whether certain progress claims were given later than the date alleged by the Builder;
(b)	in relation to later invoices, that the invoices may have been reissued with a different date at a later time whether the initial invoices or that some invoices were backdated and submitted before completion of the works. 
271	I am satisfied that the claims for the remaining 20% of the Stage 7: Rough-in and Stage 5: Frame progress claims were made on 15 and 17 June respectively.
272	The table of the progress payment invoices and payments in respect of those invoices, are as follows:
Date	Invoice No.	Invoice Description	Invoice Amount	Amount Paid	Balance Owing	
15 Oct 17	1710/15	Stage 1: Deposit	$73,642.35		$73,642.35	
1 Nov 17				$15,000.00	$58,642.35	
3 Nov 17				$38,642.35	$20,000.00	
3 Nov 17				$20,000.00	$0.00	
9 Nov 17	1711/09	Variation no. 1: Windows (30%)	$19,470.00		$19,470.00	
23 Nov 17				$19,000.00	$470.00	
25 Nov 17	1711/08	Stage 2: Demolition	$73,642.35		$74,112.35	
28 Nov 17				$73,642.35	$470.00	
10 Dec 17	1712/10	Stage 3: Services shop drawings	$110,463.50		$110,933.50	
10 Dec 17	1712/10.1	Variation no. 1: Windows (balance)	$45,529.99		$156,463.49	
5 Jan 18				$75,000.00	$81,463.49	
19 Jan 18	1801/19	Stage 4: Deposits for equipment and joinery	$184,105.90		$265,569.39	
5 Mar 18				$263,671.10	$1,898.29	
21 Mar 18	1803/21	Stage 5: Frame (80%)	$294,569.39		$296,467.68	
21 Mar 18	1803/21.1	Stage 7: Rough-in (80%)	$176,741.63		$473,209.31	
21 Mar 18	1803/21.2	Variation no. 1: Fire Services (50%)	$14,850.00		$488,059.31	
21 Mar 18	1803/21.3	Variation no. 1: Security cameras & data racks (50%)	$11,275.00		$499,334.31	
11 Apr 18				$497,436.50	$1,897.81	
3 May 18	1805/03	Variation:  Bulkheads 	$2,970.00		$4,867.81	
3 May 18	1805/03.1	Variation: Steel post relocation	$4,950.00		$9,817.81	
3 May 18	1805/03.2	Variation: Kitchen window and door	$1,980.00		$11,797.81	
3 May 18	1805/03.3	Variation: Music and kitchen walls	$946.00		$12,743.81	
3 May 18	1805/03.4	Variation: Added power points	$1,760.00		$14,503.81	
15 Jun 18	1805/15	Stage 6: Carpark structure	$147,284.70		$161,788.51	
15 Jun 18	1805/15.1	Stage 7: Rough-in (balance 20%)	$44,185.41		$205,973.92	
17 Jun 18	1806/17	Stage 5: Frame (balance 20%)	$73,642.35		$279,616.27	
19 Jul 18				$147,283.40	$132,332.87	
23 Jul 18	1807/23	Variation: Grease trap	$12,144.00		$144,476.87	
			$1,294,152.57	$1,149,675.70	$144,476.87	

273	The table does not separate the stage claims from the variation claims. In my view, the separation of these claims in Schedules 1 and 2 of D4FADCC is artificial as it disguises the balance owing at any particular time, and the actual interaction between the Builder and the Client and the involvement of CKC in the progress claim and payment processes adopted by the parties. Each claim and payment will now be examined.
274	a. Stage 1: Deposit – The progress claim for the payment of the deposit [CB 1920], and the 3 payments by the Client [CB 2135, 2138 & 2231], were as follows:
Date	Invoice	Description	Invoice amount	Payment	Balance owing	
15 Oct 17	1710/15	Stage 1: Deposit	$73,642.35		$73,642.35	
1 Nov 17				$15,000.00	$58,642.35	
3 Nov 17				$38,642.35	$20,000.00	
3 Nov 17				$20,000.00	$0.00	
275	It is noted that the deposit was claimed before the contract was signed on 26 October 2017. In these circumstances, the time for payment may not have begun to run until the date the Building Contract was signed. 
276	A Notice of Delay was issued by the Builder on 2 November 2017. This appears to have resulted in the balance of the deposit being paid shortly afterwards. No EOT claim was made by the Builder in relation to this matter. 
277	b. Variation No. 1: General – The variation was dated 23 October 2017 [CB 2741]. This was three days before the Building Contract was signed on 26 October. It reflected the “extra works required by Client and variations from original price which was based on preliminary drawings”. Rather than increasing the Contract price, the parties agreed that this would be regarded, in some respects, as a separate contractual arrangement, although it was apparently attached to the contract documents.
278	Variation Number 1 included variations for four separate items:
	Variation	Excl. GST	Incl. GST	
a.	Ground floor only window and glass replacement	$59,090.90	$64,999.99	
b.	Security cameras and data rack	$20,500.00	$22,550.00 	
c.	Decking materials and labour for carpark and front of building	$16,100.00	$17,710.00	
d.	Fire services and panel to meet building class	$27,000.00	$29,700.00 	
	TOTAL PRICE	$122,690.90	$134,959.99	
An initial error in the calculation of GST on the variation items was soon corrected.
279	c. Variation No. 1: Ground floor window and glass replacement – The following claims and payments were made in respect of this part of Variation 1:
Date	Invoice	Description	Invoice amount	Payment	Balance owing	
9 Nov 17	1711/09 	GF Window (30% deposit)
[Total cost $64,999.00]	$19,470.00		$19,470.00	
23 Nov 17				$19,000.00	$470.00	
10 Dec 17	1712/10.1	GF Windows (Balance)	$45,529.99		$45,999.99	
280	On 9 November 2017, in invoice 1711/09, “30% deposit for window variation” [CB 2232], $19,470 was claimed in respect of ground floor windows and glass.
281	On 23 November 2017, $19,000 was paid by direct credit [CB 2433]. 
282	On 10 December 2017, by invoice number 1712/10.1 [CB 2613], the “balance of window variation” was claimed in the sum of $45,529.99 ($64,999.99 less $19,470.00).
283	The Client did not pay the $45,529.99 as a separate amount, although the Client likely included this sum in the payment on 5 January 2018 of $75,000.00, as shall be discussed shortly.
284	d. Stage 2: Demolition – The Stage 2 demolition claim, by invoice 1711/08 on 25 November 2017, was paid in full in the claimed amount on 28 November 2017. As at that date, only the $470.00 balance of the Ground floor windows 30% deposit claim of $19,470.00 on 9 November 2017 remained unpaid.
285	e. Stage 3: Shop drawings – On 10 December 2017, by invoice 1712/10 [CB 2612], the Builder claimed the shop drawings figure of $110,463.50. Also on that date, by invoice 1712/10.1 [CB 2613], the Builder claimed the sum of $45,529.99 for the balance of the GF window variation). The total of the sum for the two invoices dated 10 December 2017 was $155,993.49. 
286	f. Payments between 10 December 2017 and 5 January 2018 – On 5 January 2018, $75,000.00 was paid [CB 2802]. The purpose of this payment was not specified. The sum of $75,000.00 appears to have been an arbitrary sum, sufficient to cover the balance owing on the GF window variation ($470.00 plus $45,529.99), but insufficient to cover the Stage 3 claim. The claims for the GF window variation and the Stage 3 Shop drawings were not paid in full until the payment of $263,671.10 on 5 March 2018. The payment of the two invoices issued on 10 December 2017 was therefore late. 
287	g. Stage 4: Equipment deposits – The Builder made a further claim on 19 January 2018 in invoice 1801/19 [CB 2849] for Stage 4 Equipment deposits of $184,105.90. 
288	The total of the three invoices (the two on 10 December 2017 and the third on 19 January 2018) was $340,099.39. Taking into account the payment of $75,000.00 on 5 January 2018, that left $265,099.39 owing. The Builder submitted Notice of Delay no. 2 by letter dated 13 February 2018 [CB 2907] citing the outstanding window variation claims of $470.00 and $45,529.99, the Stage 3 claim balance of “$35,463.50” and the Stage 4 claim of $184,105.90.
289	 The notice stated that, “Should the outstanding balance of $265,569.39 is not paid in the next couple of days, it would incur delay as we are unable to pay our sub-contractors to ensure they continue to work on site”. The figure of $265,569.39 included the sum of $470.00 twice. The correct figure was $265,099.39.
290	Notice of Delay 02 and the related EOT claim no. 2 dated 29 July 2018 were discussed earlier, including the Client’s assertion that the EOT claim had not been provided to the Client at that time.
291	h. Payments between 6 January and 5 March 2018 – The next payment was $263,071.10 on 5 March 2018. The Redrawn Schedule showed that this left a balance owing of $1,898.29.
292	It seems clear that, by 5 March 2018, the GF window variation as part of variation Number 1 had been paid in full and the claims for Stages 1, 2, 3, and 4 had also been paid, save for the balance of $1,898.29. This conclusion would accord with the principle of allocating payments to the invoices in their order of receipt, unless the contrary is indicated.
293	i. Stage 5: Frame (part 1, 80%) – The Stage 5 Frame was claimed in two parts, 80% ($294,569.39) was claimed on 21 March 2018 as part of invoice 1803/21 [CB 3044]. The balance of 20% ($73,642.35) was claimed on 17 June 2018 by invoice 1806/17. The agreement permitting the Builder to claim 80% on 21 March 2018 was contained in RFI no. 11 dated 28 March 2018 (signed by Mr Mustafa on 29 March 2018) [CB 3080]. 
294	j. Stage 7: Rough-in (part 1, 80%) – The Stage 7 rough-in was also claimed in two parts. Eighty percent ($176,741.63) on 21 March 2018 by invoice 1803/21.1 [CB 3045]. The 20% balance ($44,185.81) was claimed on 15 June 2018 in invoice 1805/15.1. RFI no. 11 dated 28 March 2018 also evidenced the agreement permitting the progress claim for 80% of this stage.
295	k. Further claims for Variation no. 1 items – On 21 March 2018, the Builder made 2 further progress claims in respect of Variation no. 1 items, as follows:
Description	Invoice no.	Agreed sum (incl. GST)	%	Claimed sum	
Fire Services	1803/21.2 [CB 3047]	$29,700.00	50	$14,850.00	
Security cameras	1803/21.3 [CB 3046]	$22,550.00	50	$11,275.00	
296	l. Payments between 6 March and 11 April 2018 – A payment of $497,436.50 was made on 11 April 2018. This payment obviously related to the four progress claims made on 21 March 2018. Leaving aside the balance of $1,898.29 owing after the last payment on 5 March 2018, the amounts owing at that time, being the 4 progress claims made on 21 March 2018, were: 
Description	Invoiced amount	Total owing	
80% of Stage 5 frame	$294,569.39		
80% of Stage 7 rough-in	$176,741.63		
Fire services variation	$14,850.00		
Security cameras variation	$11,275.00	$497,436.02	
297	m. Further claims for Variation – On 3 May 2018, the Builder made 5 further claims for variations, as follows:
Date	RFI	Invoice Number	Invoice Description	Invoice Amount	Running Total	
3 May 2018	RFI no 9 [CB 2894]	1805/03 [CB 3179]	Bulkheads variation	$2,970.00	$2,970.00	
3 May 2018	RFI no 16 [CB 3150]	1805/03.1 [CB 3180]	Steel post relocation variation	$4,950.00	$7,920.00	
3 May 2018	RFI no 13 [CB 3147]	1805/03.2 [CB 3181]	Kitchen window and door variation	$1,980.00	$9,900.00	
3 May 2018	RFI no 14 [CB 3148]	1805/03.3 [CB 3182]	Relocation of music and kitchen walls variation	$946.00	$10,846.00	
3 May 2018	RFI no 15 [CB 3149]	1805/03.4 [CB 3183]	Additional power points variation	$1,760.00	$12,606.00	
298	None of the progress claims for variations made by the Builder on 3 May 2018 were paid by the Client. Each of the variations claimed appears to be justifiable. The variations were initiated by Builder’s RFIs. On 24 April 2018, Mr Barnett emailed Variation Order no. 2 to Ms Voyage and Mr Mustafa [CB3163-6]. Variation Order no. 2 included each of the variations claimed on 3 May 2018.
299	However, it is not clear whether Mr Mustafa was ever asked to sign Variation Order no. 2. On 25 June 2018 [at CB 3354], Mr Barnett wrote to Mr Yap of CKC, responding to a query by Mr Yap asking “any update on the variations sign-off”? Mr Barnett advised Mr Yap that, “VO claims put to one side won’t be a part of this claim, just stage payments for works completed to date”;
300	n. Stage 6: Carpark structure – On 15 June 2018, by invoice no. 1805/15 [CB 3303], the Builder made a claim for the completion of Stage 6: the carpark structure of $147,284.70. 
301	o. Stage 7: Rough-in (part 2, 20%) – On 15 June 2018, the Builder made a progress claim for Stage 7: Rough-in [CB 3312], being the remaining 20% ($44,185.41) due upon the completion of that stage. This sum was never paid. CKC stated that the Stage 7 works had not been completed.
302	p. Stage 5: Frame (part 2, 20%) – On 17 June 2018, the Builder made a progress claim for Stage 5: Frame [CB 3313], being the remaining 20% ($73,642.35) due upon the completion of that stage. This sum was never paid. CKC stated that the Stage 5 works had not been completed.
303	q. Payments after 12 April 2018 – On 19 July 2018, the Client paid the sum of $147,283.40 to the Builder. It is clear from the evidence that this payment was made in respect of the Stage 6 carpark structure, from the coincidence of the amounts claimed with the amount paid, and that this sum was essentially the sum recommended by CKC as required to be paid in its third report dated 6 July 2018. CKC stated that the balance of the Stage 5: Frame and Stage 7:Rough-in had not been completed by the Builder. 
304	The five variations claimed by the Builder on 3 May 2018 did not have the supporting signed documentation that CKC had requested. It appears that for this reason, Mr Barnett “put [the variation claims] to one side”.
305	Mr and Mrs Mustafa claimed that the progress claims had been backdated and had not been received by the Client until a later time. This appears unlikely as CKC were discussing arrangements with the Builder and Client about the assessment of the claims as early as 20 June 2018.
306	r. Variation claim for Grease trap – On 23 July 2018, by claim no. 1807/23 [CB 3495], the Builder made a claim for a variation for the grease trap. This sum was never paid. The claim, as with the other “Variation 3” claims (to which I will later refer) had not been processed as a variation by the Builder, and was otherwise disputed by the Client.
307	s. Amounts claimed but not paid by 31 July 2018 – As at 31 July 2018, when the Builder suspended the works and served his Show Cause Notice, the following progress claims (or parts of claims) had not been paid:
Date	Description	Amount	Balance	
11 April 2018	Balance after payment	$1,897.81	$1,897.81	
3 May 2018	Bulkheads variation	$2,970.00		
3 May 2018	Steel post relocation variation	$4,950.00		
3 May 2018	Kitchen window and door variation	$1,980.00		
3 May 2018	Relocation of music and kitchen walls variation	$946.00		
3 May 2018	Additional power points variation	$1,760.00	$12,606.00	
15 June 2018	Rough-in (20% balance)	$44,185.41		
17 June 2018	Frame (20% balance)	$73,642.35	$117,827.76	
	Balance unpaid from Stage 6 progress claim	$1.30	$1.30	
	TOTAL		$132,332.87	

308	t. Conclusions – It is clear from this analysis that:
(a)	there were significant delays from the date the Stage 3 shop drawings progress claim was made on 10 December, and after 19 January 2018 when the Stage 4 equipment deposits progress claim was made;
(b)	these matters were the subject of the first CKC report dated 23 February 2018 which resolved the outstanding claims on 5 March 2018 when the balance was paid (save for $1,898.29); and
(c)	the alleged delays arising from these late payments were the subject of the Builder’s NOD 02 dated 13 February 2018 [CB 2907].
309	In March 2018, the parties agreed to vary the staged payment process to permit the Builder to claim further payments when the works of Stages 5 and 7 were only 80% complete. These claims (and two further variation claims as part of the agreed Variation no. 1 were the subject of the second CKC report dated 5 April 2018, leading to the substantial payment on 11 April 2018 in line with the recommendation by CKC.
310	Problems occurred in relation to the progress claims for the final balance of 20% claims in respect of Stage 5: Frame and Stage 7: Rough-in. These claims were not paid. The reason for this was that CKC, in preparing its third report dated 6 July 2018, determined that these stages had not been completed. The payment by the Client to the Builder on 19 July was therefore limited to the Stage 6: Carpark structure progress claim in line with the recommendation by CKC. It is appropriate now to examine the CKC reports, and how they came about, in some detail.
CKC’s involvement in contract processes for progress claims and payments
311	Although I refused the Plaintiffs’ application to amend their pleadings, the factual basis for the proposed amendments remains very relevant to other critical issues requiring decision. 
312	These issues relate to the involvement of CKC in the processes set out in the Building Contract for the making of progress claims by the Builder and the payment of them by the Client. These are important matters of context in respect of which the parties’ notices on 31 July and 1 August 2018 must be considered. It is necessary to make a comprehensive analysis of the evidence relating to the involvement of CKC in the assessment of the Builder’s progress claims. 
313	Events leading to the first CKC report on 23 February 2018: In paragraph 51 of Mr Etcell’s Witness Statement dated 5 October 2021, he described the process by which the Builder made progress claims for the contract stages, and the claims for variations set out in Schedule 2 to D4FADCC.
314	Mr Etcell stated that the columns in the Schedule headed “Value” and “Percentage complete”, were the Builder’s calculations of “the value and percentage of the works completed by viewing the works, assessing the relevant trade invoices and the cost to complete the item of work”. He continued:
 “Charter Keck Cramer (CKC), who were the quantity surveyors appointed by the Mustafas’ financier, NAB, then assessed our claims, including the variations, and either approved or amended the amount claimed.”
315	At paragraphs 230 to 232 of Mr Mustafa’s first witness statement, he said: 
 “In respect of payments of Ikonic’s invoices, Paul knew from the outset that progress claims had to first be submitted to our Bank’s QS, Charter Keck Cramer, for approval. This required Charter Keck Cramer attending site and preparing a written report to NAB for its approval. Paul knew that this was the process and the likelihood of approval being granted within 7 days of issue of a progress claim was unlikely.”
316	Whilst it is likely Mr Barnett and Mr Etcell knew prior to signing the Building Contract that Mr and Mrs Mustafa were financing the project via NAB, the first reference to the bank requiring a Quantity Surveyor’s report occurs in text messages between Mr Barnett and Mr Mustafa on 1 February 2018 [at CB 2873]. From the substance of the text messages, it is unlikely that the Builder was specifically aware of the arrangement for a Quantity Surveyor’s inspection much before that time. 
317	The text messages were as follows:
Mr Barnett:     	“Jerry, you can always appoint Louis [Ng] [a QS who was advising the Builder] as bank QS as he’s registered as nab bank QS call him direct to discuss.”
Mr Mustafa:      	“Ok will do. … I think that will be a conflict of interest. … I’ll ask the manager any way, but I doubt it?”
Mr Barnett:      	“You know we only claim as per the stage payment also nothing more than contract cost. On this one it’s fine you don’t need [to] appoint Louis.”
Mr Mustafa:      	“It’s not up to me. It’s the bank’s decision as part of the loan agreement. They forced me to get one.”
318	In paragraph 198 of his witness statement, Mr Etcell said: 
 “Ikonic Homes was aware that the quantity surveyor needed to complete reports prior to the bank releasing funds. The relevant quantity surveyor had completed his reports in a timely manner whenever we had issued invoices. The Mustafas were supplied with supporting documentation for the suspension of works and at no point did the Mustafas supply Ikonic Homes with the quantity surveyor’s reports or inform us that the quantity surveyor disagreed with any of our claims or invoices.”
319	At T1458–9, Mr Etcell was asked about the Builder’s dealings with CKC. He stated: 
“Although the “first few payments of the contract were paid by the Mustafas … when they got their funding in place … I understand that they were probably obtaining the payments from the bank”. 
320	Mr Etcell agreed that the Builder would then “not expect payment until Charter Keck Cramer signed off on it … and part of that process was the representative from Charter Keck Cramer coming out on site and then preparing a written report for the bank”. 
321	Mr Etcell denied that he “would receive those written reports”. He stated that:
 “If [the CKC representative] required further documentation, we would supply it to him. But basically, we supplied our invoices [and] the stage of work. He would come out, … go through the works, and … prepare his report”.
322	At T1459, Mr Etcell agreed that CKC, as part of its assessment process, would require the Builder to complete statutory declarations which included statements as to whether the Client was “in breach of its obligations under the Building Contract”. Mr Etcell signed a statutory declaration on “3” [the day is unclear as it appears to be “3th”] February 2018 [CB 2883] to this effect. Paragraph 4 of the declaration read: “To the best of my knowledge the borrower is not in breach of its obligations under the Building Contract”.
323	On 13 February 2018, Mr Barnett sent an email to Mr Mustafa stating, “Please let your bank know they need to move along to avoid any delay. I know late today you have advised the bank QS will be contacting us shortly”. Mr Mustafa responded to Mr Barnett, “I just forwarded the email to the bank manager, can you please make sure you are up to date with your claims as you will be dealing with the QS for your payments” [CB 2909]. 
324	On 31 January 2018, [at CB 2967] NAB had contacted Mr D’Cruz at CKC asking, 
 “Could you please commence the initial report please? Please find attached herein a copy of our funding table in addition to the amounts previously paid by the clients already. I have included the fixed price contract as well as the variation to the contract. The client will have tax invoices for all amounts paid to date should you require this.” 
325	After each inspection, CKC reported on a number of matters, including:
(a)	the date the works were inspected;
(b)	CKC’s assessment of the value of the completed stages of work and approved variations;
(c)	by calculation, the cost to complete all stages and approved variations;
(d)	the Builder’s programmed completion date and CKC’s assessment of when it considered completion was achievable; and
(e)	other relevant matters.
326	CKC prepared three reports for NAB as follows:
(a)	23 February 2018 [CB 2918];
(b)	5 April 2018 [CB 3094]; and
(c)	6 July 2018 [CB 3409].
327	An analysis of the three CKC reports is contained in the following table:
Item description	No. 1
[CB 2918]	No. 2
[CB 3094]	No. 3
[CB 3409]	
Report date	23 Feb 18	5 Apr 18	6 Jul 18	
Date NAB requested report	13 Feb 18	26 Mar 18	Jun 18	
Date CKC inspection	19 Feb 18	29 Mar 18	4 Jul 18	
Value of stages completed (including GST)	$506,854.70
	$1,004,291.20	$1,151,574.60	
Cost of stages to be completed (including GST)	$1,100,952.60	$603,516.10	$456,232.70	
Programmed completion date	End March 18	End April 18	End Jul 18	
Revised date advised by Builder	Mid-April 18			
CKC: Date considered achievable	Mid-May 18	Mid-May 18	Aug 18	
328	The CKC reports used figures excluding GST for the assessment of the value of completed stages and approved variations. The following table converts the CKC figures to include GST:
Report	Assessment	Value excl GST	Value incl GST	
No. 1 	Value of completed work	$460,777.00	$506,854.70	
	Cost to complete work	$1,000,866.00	$1,100,952.60	
No. 2 	Value of completed work	$912,992.00	$1,004,291.20	
	Cost to complete work	$548,651.00	$603,516.10	
No. 3	Value of completed work	$1,046,886.00	$1,151,574.60	
	Cost to complete work	$414,757.00	$456,232.70	
329	A comparison of the three most relevant amounts at the date of each of the CKC reports, and when the next payment following the report was made, shows:
(a)	the total amount claimed by the Builder for work stages and approved variations;
(b)	the assessment by CKC of the value of work stages and approved variations;
(c)	the total amount paid by the Client:
(i)	in respect of the first report, up to and including the next payment on 5 March 2018;
(ii)	in respect of the second report, by the next payment on 11 April 2018;
(iii)	in respect of the third report, by the next payment on 19 July 2018.
330	A table analysing the matters contained in the three CKC reports (before the Builder’s claim of $12,144.00 for the grease trap variation on 23 July 2018) follows:
No.	Date	CKC assessed  stage values (incl. GST)	Stages claimed by Builder	Totals claimed by Builder	Extra from previous CKC report	Payments by Client	
1	23 Feb 2018	$506,854.70	1-4 & Var 1  
	$506,854.70   	$506,854.70	$504,955.80	
2	5 Apr 2018	$1,004,291.20	5 & 7 80%
Variations	$471,311.02 $26,125.00
$497,436.02	$497,436.50	$497,436.50	
3	6 Jul 2018	$1,151,574.60	6
5 & 7 20% Variations	$147,284.70
$117,827.76
$12,606.00 $277,718.46	$147,283.40	$147,283.40	
				$1,282,008.57	$1,151,574.60	$1,149,675.70	
331	The third CKC report stated, in relation to the stages of work completed: 
We note that both Stage 5 (Frame) & Stage 7 (Rough in) have not been fully completed, as at the date of our inspection. However, we have been provided with a 'RFI' dated 29 March 2018, where the Client and the Builder, have mutually agreed to the part payment of these stages. 
332	The conclusions to be drawn from this analysis are as follows (with all figures including GST):
(a)	in relation to the first CKC report dated 23 February 2018, by that date:
(i)	$506,854.09 was the total amount the Builder had claimed for stages 1 to 4 and the completed part of variation no. 1;
(ii)	$506,854.70 was the sum CKC had assessed as the value of the work stages and variations completed to the date of its report;
(iii)	$504,955.80 was the total sum paid by the Client, which included a payment of $263,671.10 on 5 March 2018 and four previous payments;
(b)	in relation to the second CKC report dated 5 April 2018, by that date:
(i)	$497,436.02 was the total amount the Builder had claimed for 80 per cent of stages 5 and 7 and two further invoices for variation no. 1, totalling $26,125.00;
(ii)	$497,436.50 was the sum CKC had assessed as the value of so much of the work stages as it considered had been completed, together with the appropriate variations, after CKC’s first report;
(iii)	$497,436.50 was the sum paid by the Client on 11 April 2018.
(c)	in relation to the third CKC report dated 6 July 2018, by that date:
(i)	$147,284.70 was the amount the Builder had claimed for stage 6 together with a total of $117,827.76 as the remaining 20 per cent of stages 5 and 7 and $12,606.00 for five variations invoiced on 3 May 2018;
(ii)	$147,283.40 was the sum CKC had assessed as the value of so much of the work stages as it considered had been completed (Stage 6: Car Park Structure). The third report noted that “both Stage 5 (Frame) & Stage 7 (Rough in) have not been fully completed”. The Builder had removed the variations from the progress claim by an email to CKC dated 25 June 2018 [CB 3355].
(iii)	$147,283.50 was the sum that had been paid by the Client to the Builder on 19 July 2018.
333	Correspondence relating to CKC’s second report dated 5 April 2018: On 22 March 2018, Mr Barnett sent an email to Mr Mustafa attaching the frame and rough-in invoices dated 21 March 2018 (claiming 80% of the payment for each stage), stating, “Please advise your bank so they can arrange prompt site inspection for their QS this may take them a week or two so please kindly advise your bank of next claim” [emphasis added]. NAB sent an email to Mr Yap of CKC on 26 March 2018, stating, “Thank you for your time over the phone. As discussed, please arrange inspection with client/builder to confirm invoice claims attached”.
334	On Monday 26 March 2018 [CB 3051] a letter from Mr Barnett to Mr Mustafa stated, “An up-to-date program will be issued prior to next week’s site meeting” [scheduled for 4 April 2018]. Also in this letter, when discussing the issue of building permits, Mr Barnett noted that the “bank would not issue payments to our company without permit”. Mr Barnett also referred to “our regular site meeting with Client architects and banks QS”.
335	By email dated 29 March 2018 [at CB 3086], Mr Barnett wrote to Mr Yap, “Missing invoice that you didn’t seem to have, also Jerry the owner will sign off the RFI we have raised for the 80% approval for the x2 stage claims once we have it signed send to both you and the bank”. Mr Barnett was likely referring to RFI No. 11 [at CB 3080]. The email dated 29 March 2018, RFI No. 11, and the email instruction for this report were all included in the attachment to the CKC report dated 5 April 2018.
336	On 3 April 2018 [at CB 3086], Mr Yap wrote to Mr Barnett and Mr Mustafa, “Thanks. Can you please confirm the approval of these invoices? Also, please provide more details of the scope of works to be undertaken for these variation works”.
337	Later on 3 April 2018 [at CB 3085], Mr Yap wrote to Mr Barnett,
“Can you please provide the following documents to our report:
	1.    Contract works and public liability insurance …
	2.    Statutory Declaration.”
338	Mr Barnett agreed to provide the documents to Mr Yap, which he did the following day. The statutory declaration made by Mr Etcell on 4 April 2018 [CB 1967] included a statement, “To the best of my knowledge the borrower is not in breach of its obligations under the Building Contract”. 
339	Correspondence relating to CKC’s third report dated 6 July 2018: On 15 June 2018, the Builder issued invoice 1805/15 claiming the Stage 6: Carpark structure progress payment of $147,284.70 and invoice 1805/15.1 claiming the balance of Stage 7: Rough-in progress payment of $44,185.41. On 17 June 2018, the Builder issued invoice 1806/17 claiming the balance of Stage 5: Frame progress payment of $73,642.35.
340	On 20 June 2018 [at CB 3317–8], Mr Yap sent an email to Mr Barnett and Mr Mustafa asking for the completion of “the attached statutory declaration” and confirmation that “the attached additional variations have been approved by the client” (bulkheads, remove and relocate music room, extra power points, and remove and relocate steel post) and that “no further building permit is required, beyond Stage 4”, and that “the revised completion of the project is now mid to late July 2018”.
341	Mr Etcell signed a statutory declaration in similar terms to earlier declarations required by CKC. The declaration is dated 18 June 2018 [CB 3315]. It included the statement that, “To the best of my knowledge the borrower is not in breach of its obligations under the Building Contract”.
342	At CB 3351 to 3355 are a series of emails between Mr Barnett and others, including Mr Yap of CKC and Mr Soong of NAB from 21 June 2018 to 29 June 2018 as follows:
(a)	On 21 June 2018 [at CB 3355], Mr Barnett sent an unidentified attachment to Mr Yap, Mr Soong, Mr Etcell, and Mr Ng;
(b)	Later on 21 June, Mr Yap replied, “Thanks – any update on the variations sign-off? Please forward these so that I can complete the QS Report” [at CB 3355];
(c)	Later on 21 June, Mr Barnett responded, “We are awaiting Jerry [Mustafa] to sign off on those once he has I will forward them to you” [at CB 3355];
(d)	On 25 June 2018 [at CB 3354], Mr Barnett wrote to Mr Yap, “VO claims put to one side won’t be apart [a part] of this claim, just stage payments for works completed to date”;
(e)	On 28 June 2018 [at CB 3354], Mr Etcell wrote to Mr Yap: 
“Could you please advise where we are at with the overdue stage payments according to the scheduled payments listed within the construction contract for 12 Bridge St Eltham. I understand you have been liaising louise [Louis Ng]. To ensure continuity of work and no further delays could you please attend to these payments promptly as we are about to issue a NOD (notice of delay), if you require to discuss the matter further please feel free to contact myself on [number deleted] or louis;”
(f)	Later on 28 June [at CB 3354], Mr Yap responded: 
“Thanks for your email – we are still reviewing the scope of works as per the ‘Stage’ Progress claims in the contract, as well as a ‘Cost To Complete’ assessment, as required by the financier, and will come back to you in a separate email;”
(g)	Later on 28 June [at CB 3353], Mr Etcell replied:
“Thank you for your reply, the claim stages as per the contract are quite clear, the claims made are balance of rough in, balance of frame and the car park structure, rough in works are completed and frame works are completed, plaster is in place on 95% of the project and installation of final finishes are beginning. Car park structure has had concrete poured and is in place curing. I believe a question has been raised in regards to the formwork in place under the slab. This formwork remains while the slab cures as per the engineers recommendations. It is industry standard that it is deemed “slab stage complete once concrete has been poured and in place”. In regards to the cost to complete assessment? I do not understand how this affects our claims made as per the signed contract. The stage claims on the contract were varied twice upon the client’s and financier’s request at the beginning before the contract was signed. Once the stages were altered and agreed upon the contract was signed and became effective. Please find attached the notice of delay for 12 Bridge St Eltham, please contact myself on [mobile phone number deleted] or louis [Louis Ng] to discuss further.”
343	The attached notice of delay was presumably NOD 04 dated 26 June 2018 [CB 3338]. This notice of delay formed the basis of EOT claim no. 1 dated 29 July 2018 [CB 3561]. The notice of delay and the EOT claim were extracted and discussed under issue 2.
344	The exchange of emails between Mr Etcell and Mr Yap on 28 June 2018 is significant. Mr Etcell in his evidence has constantly sought to distance himself from the conclusions in the CKC reports by suggesting that he was never supplied with copies of the reports and that essentially the reports were of no relevance or importance to him. Mr Etcell’s evidence, in this regard, is inherently improbable as he participated in the agreed process knowing that it was necessary before he would be paid. He gave evidence that he had not looked at the CKC reports even after they had been discovered in the proceeding. 
345	The third CKC report is dated 6 July 2018 and the report states CKC’s conclusion that both Stage 5: Frame and Stage 7: Rough-in were incomplete. It appears from the email correspondence on 28 June 2018, Mr Etcell was aware that CKC was not satisfied with the completeness of the claimed stages; as that would later be formally stated by CKC in its report.
346	Whether Stages 5 and 7 were complete when the Builder made the progress claims on 15 and 17 June 2018: In my view, the assessment by CKC in its third report was correct. The balance of Stages 5 and 7 could not be claimed until the works involved in those stages were complete, save for “trivial” matters. 
347	In March 2018, Mr Barnett proposed a “new payment arrangement” to Mr Mustafa to allow for “part payment of staged progress claims”. Mr Mustafa agreed and the arrangement was documented in RFI No. 11 dated 28 March 2018 [CB 3080], which permitted progress payments to be claimed upon completion of 80 per cent of the stage 5 frame stage and 80 per cent of the stage 7 rough-in stage. 
348	On 15 June 2018, when the remaining 20 per cent of the Stage 7: Rough-in was claimed, and on 17 June 2018, when the remaining 20 per cent of the Stage 5: Frame was claimed, Mr Etcell said in his witness statement at paragraphs 105 and 106 that “the rough-in had been completed [and the frame had been completed] at the time we issued [the invoices for the balance of these stages]”. Mr Etcell claimed he had photographs of the completed works without referencing them in his witness statement. At T1474, Mr Etcell conceded that the photographs he had referred to in his witness statement were not relevant to the completion of Stages 5 or 7.
349	Mr Mustafa said his witness statement at paragraph 111, that 
 “… on 28 March 2018, Ikonic agreed to accept 80% of the Builder’s progress claim for the frame stage and service rough-in despite the fact that these stages had not been completed. Ikonic were pressing for 100% payment for each of these stages, but as they had not been completed, we agreed to assist Ikonic by paying 80% for each of these stages. In this regard the Pergola on the play deck had not been framed when Ikonic left site, the airlock to the front door had not been completed, the framing to the South side on the play deck was not complete. 
 The rough in for the pluming to the ground were not complete notably ground level stormwater and sewerage and the storm water to the roof to the play deck had not been connected to the storm water outlet. 
(d) Ikonic commencing works on subsequent stages, without completing the previous stage – for example, when the building works were (sic) still in the frame stage, I noticed that wall plastering was being installed and vinyl flooring was being laid. Those tasks should not have began until the Site was locked and secured, and all roughing in of the services was completed. This resulted in the vinyl floor being damaged, and the walls being scuffed and I was under the impression that the Builder was rushing the works to issue progress claims.”
350	Mr El-Sheikh in his witness statement dated 26 August 2021 said at paragraph 36 as follows:
At the time I was engaged to work on the Project the building works were about 65-70% complete, with most of the internal structural works being close to completion but the external façade works were still to be commenced. For instance, there was no LOXO panels installed to the first level façade of the building, the timber screens around the perimeter of the building had not been installed and the Pergola on the play deck had not been constructed. 
351	In his first report [at CB 10–11], Mr Osborne examined the “current stage of building works and works remaining”, including the stage of completion of specific works in the areas of the ground floor, the first floor, the south car park, and the first-floor play area, and building exterior. 
352	At CB 11, he also noted the works to be completed on the ground and first floors as follows:
“Ground floor works to be completed
 1.14. The ground floor of the building required electrical and plumbing fit off, Installation of the lift and lift shaft, floor covering, sand and patch of plaster, painting, tiling, installation and completion of the cabinetry, installation of the fire prevention system, construction of the out-door storeroom, connection of the stormwater and fire systems, installation of timber screens to the north and western elevations, and completion of the wall separating the building from the south car park for completion.
First floor works to be completed
 1.15. The first floor of the building required the extension and alteration of the roof, covering of the first floor play area, timber pergola and roof, cladding to the outdoor store room, perimeter fencing, painting, floor coverings, Installation of heating, electrical and plumbing fit off, sand and patch of plaster, painting, tiling and installation of cabinetry for completion.”
353	Mr Osborne stated, at CB 11, “I have been asked to provide an assessment of the cost of the work completed. A detailed costing is included as attachment D to this report, the estimated cost of works completed by the Builder is calculated at $881,385.78”. This figure includes GST. Attachment D is at CB 87-91. 
354	Mr Jeffery, in his first report at CB 251–2, discussed Mr Osborne’s estimate of $881,385.78 as the “estimated cost of works completed by Ikonic”. He compared Mr Osborne’s estimate to the assessments carried out by CKC in their three progress reports. Mr Jeffery’s conclusions were as follows:
 “6. It is important to understand that, as previously stated, CKC was engaged by the Owners on this project to assess the progress claims, during the undertaking of the works, so as to ensure, amongst other things, that the works claimed as completed by lkonic within their progress claims were correct and in proportion to the value of those works as claimed by lkonic. I am advised by Paul Etcell (PE) that CKC attended the Site to assess each of lkonic's Progress Claims and that their assessment was of both the value, quantity, and quality of the works completed and claimed for under each respective progress claim. CKC also took into consideration the cost to complete the works when making their assessments.
 7. In my opinion the CKC reports must be relied upon as providing an accurate and contemporaneous description of the works and their value as completed by lkonic, as CKC was involved in the project throughout the construction period, attending the Site to specifically perform the function of assessing lkonic's progress claims, the overall progress of the works and to some degree the quality of the works performed by lkonic.
 8. It would appear that the author of the Buildspect report [Mr Osborne] is not a qualified Quantity Surveyor. In addition, he would not have witnessed any of the in ground, sub floor or in wall works which have been covered up by subsequent structural and finishing works. Consequently, there is no reliable way for his estimated costs to be a more accurate reflection of the works performed by lkonic than the CKC reports” (emphasis added).  
355	CKC’s report no.3 dated 6 July 2018 was made following an inspection on 4 July 2018 and discussions between CKC and the Builder as early as 20 June 2018. The CKC report refers to “recent progress claims by the builder”, presumably the Builder’s progress claims on 15 June 2018 (Stage 6 and the final 20% of Stage 7) and on 17 June 2018 (the final 20% of Stage 5). Report no. 2 dated 5 April 2018 stated that the “assessment [of] Stages of Works Completed” was $1,004,291.20 (adjusted to include GST). In report no. 3, the comparable figure was $1,151,574.60. 
356	The difference of $147,283.40 was for the progress claim for Stage 6: Car Park Structure in the sum of $147,284.70. CKC made no allowance for Builder’s claims for the 20% balances of Stage 7: Rough-in and Stage 5: Frame, and stated in the report, “We note that both Stage 5 (Frame) & Stage 7 (Rough in) have not been fully completed, as at the date of our inspection”.
357	No allowance was made for the five variations claimed by the Builder on 3 May 2018, as Mr Barnett wrote to CKC on 25 June 2018 that these were to be “put to one side won’t be a part of this claim”.
358	Mr Etcell made a generalised statement about the completeness of the frame stage and the rough-in stage. However, I am not prepared to accept his unsupported evidence, for the following reasons:
(a)	Mr Etcell’s evidence was generally unreliable. Mr Barnett was not called to give evidence that might have supported him.
(b)	There is no reason to doubt the veracity of the CKC reports and particularly the statement in its third report that the work of Stages 5 and 7 was not complete. There is substantial agreement in the evidence (both in the contemporaneous documentation, the witness statements and the oral evidence) of the status of CKC’s involvement in the assessment of the Builder’s progress claims for the purpose of the Client’s bank making progress payments. Mr Jeffery was strongly supportive of CKC’s ability to assess that “the works claimed as completed by lkonic within their progress claims were correct and in proportion to the value of those works as claimed by lkonic [and that] their assessment was of both the value, quantity, and quality of the works completed and claimed for under each respective progress claim”.
(c)	The assessments by Mr Osborne and the architects, Ms Voyage and Mr Ewert confirmed that work of the Frame and Rough-in stages had not been completed when they later inspected the works on site.
(d)	The examination of the defective work in Issue 4 confirms that there was significant work that was defective or partly completed. This included the frame and other areas that were covered up by plaster, and had involved work that was often not carried out in the usual sequence. 
(e)	The frame and other required regulatory inspections were not undertaken by the Registered Building Surveyor. Although certificates of relevant inspections were later supplied by an engineer, which might ordinarily be unexceptional, in the case of this project, it was very unprofessional. The “Builder’s engineer”, who carried out the inspections, was anticipated by the Contract Conditions Schedule as possibly having a role to play. However, on more than one occasion, the Builder’s engineer redesigned critical structural aspects, cutting across or replacing the design in the contract documents, and which the Builder proceeded to build, without reference to the Client or the Project’s design engineer;
(f)	Under Issue 4, I further consider all the Certificates of Compliance issued by Mr Holland when discussing defect Item 31 – Frame. Mr Etcell’s evidence about Mr Holland’s certificates is unsatisfactory. There is insufficient evidence to be satisfied that Mr Holland either inspected the frame or certified the frame as complete before the termination of the Building Contract. I consider it more likely that the Builder proceeded with the plaster work without calling for the Registered Building Surveyor to inspect the frame or engaging Mr Holland to carry out an inspection and to certify the frame’s compliance.
Validity of the Builder’s Suspension of the works and the Show Cause Notice
359	Critical issues in the proceeding are raised by the Client in relation to the Builder’s issue of the Show Cause Notice and Suspension Notices, given to the Client on 31 July and 1 August 2018, including:
(a)	whether the Builder must positively establish, as a pre-condition of the suspension of the works and the issue of the Show Cause Notice that progress claims (for the 5 variations claimed on 3 May 2018, and the final 20% balance claims for the Stage 5: Frame and Stage 7: Rough-in claimed on 17 and 15 June respectively) were due and payable;
(b)	whether the Client’s failure to issue a progress certificate within 7 days after the receipt of each of these progress claims meant that, by clause 21(5) of the Building Contract, the claims became due and payable;
(c)	whether the articulation by the Builder in the notices of the reason for the suspension of works and the issue of the Show Cause Notice was adequate; and
(d)	whether the notices given by the Builder on 31 July and 1 August 2018 were sufficient for the purposes of the clauses 17 and 30 of the Building Contract.
360	Conclusion on the termination issue: I shall briefly state the conclusions I have reached on the termination issue and then examine the matter in more detail, including the alternative paths that lead to the same result.
361	I am satisfied, as a matter of construction of the Building Contract, that:
(a)	at the time the Builder served his Suspension Notices on 31 July and 1 August 2018, the sums claimed by the Builder as progress claims on 15 and 17 June 2017 in respect of the balance of Stages 5 and 7, were not “a payment that is due and payable pursuant to the contract” as required by cl 17.1(a);
(b)	further, the two progress claims were not “claim[ed] progressively in accordance with Item 16” as required as a pre-condition of the operation of cl 21.1;
(c)	further, each of the Builder’s Suspension Notices was not an effective “written notice to the Client” for the purpose of “suspend[ing] the whole or part of the works” under cl 17.1;
(d)	further, the Builder’s Show Cause Notice was ineffective as the pre-condition of serving such a notice – “a substantial breach of the contract” by the Client – had not occurred, as required by cl 30.2;
(e)	further, the Builder’s Show Cause Notice” was ineffective as it did not state “the alleged substantial breach” as required by cl 30.3(b); and
(f)	alternatively, the Client’s Show Cause Notice dated 1 August 2018 did rely upon “substantial breach[es] of the contract” by the Builder and did properly state “the alleged substantial breach[es]”.
362	These are matters of “construction” of the provisions of the Building Contract. They are not matters involving the application of principles of “reasonableness” or “fairness” or whether the burden of proof has been satisfied by one party or the other.
363	The Building Contract is a commercial contract. It is a standard form Housing Industry Association contract proffered by the Builder to a commercial client. Its terms must be construed sensibly and in accordance with the surrounding circumstances as known to the parties.
364	The Builder submits that this process involved the following steps:
(a)	the Builder served progress claims for the balance of Stages 5 and 7 on 15 and 17 June 2018 (cl 21.1);
(b)	the Client did not, within 7 days, pay the claims or give a progress certificate indicating that the whole or parts of the claims were disputed (cl 21.3);
(c)	each of the unpaid progress claims is “deemed to be the progress certificate” (cl 21.5(a));
(d)	“the amount of [each] progress claim is deemed to be a debt due and payable” (cl 21.5(b));
(e)	the Client thereby “fails to make a payment that is due and payable pursuant to the contract” (cl 17.1(a));
(f)	the Builder thereby became entitled to “suspend the progress of the whole or part of the works by giving written notice to the Client” (cl 17.1);
(g)	the Builder gave the Client the appropriate written notice(s) on 31 July and 1 August 2018, thereby suspending the whole of the progress of the works; and
(h)	further and alternatively, the Client’s failure to pay the progress claims constituted “a substantial breach of the contract” entitling the Builder to give the Client “a written Show Cause Notice” (cl 30.2).
365	The Builder’s submissions ignore the following matters of which the parties were well aware, as is evidenced by a series of responses by Mr Etcell during his oral evidence which summarise the circumstances I have previously outlined in detail:
(a)	“that in respect of progress claims payable under the contract, they are only payable on completion of a particular stage … And if the stage is not completed, [the Builder is] not in a position to issue that progress claim” [at 1456-7];
(b)	that CKC’s “role was to assess … progress claims that [the Builder] made [and] to advise the NAB if they should or should not be paid … or [to assess] the value of the works they believed were completed” [at T1457];
(c)	that the Builder “would not expect payment until [CKC] signed off on it” [at T1457];
(d)	that “part of that process was the representative [Mr Yap] from [CKC] coming out on site and then preparing a written report for the bank” [at T1458];
(e)	that the Builder would “provide documentation to [Mr Yap] for the purposes of his assessment [and] if he required further documentation, [the Builder] would supply it to him” [at 1459]; and
(f)	that on 3 February 2018, Mr Etcell signed a statutory declaration attesting that the Client “is not in breach of its obligations under the Building Contract”. Mr Etcell said that, “I don’t believe they’d done anything significant to breach the contract [including] if they were in arrears in payments of progress claims” [at T1459-60]. Mr Etcell signed statutory declarations which included a similar paragraph on 4 April and 18 June 2018 for CKC’s two later reports.
366	It was against this background that:
(a)	the Builder made progress claims on 15 June 2018 for the balance of Stage 7: Rough-in and Stage 6: Carpark structure, and on 17 June for the balance of Stage 5: Frame;
(b)	the progress claims were immediately referred to CKC for assessment in accordance with the processes established between the parties in February 2018 for dealing with progress claims and payments and followed by the parties to produce the CKC reports dated 23 February and 5 April 2018;
(c)	the claims assessed by CKC were paid by the Client (through its bank) in accordance with the assessments and recommendations contained in the CKC reports;
(d)	I note that there is a discrepancy in the payment after the first CKC report. There was a short payment of $1,898.29 when the next payment was made, following the report, on 5 March 2018 of $263,671,10. CKC had assessed the Builder’s entitlement for the “Cost of Works Completed” at “$460,777 (GST excluded)”. With GST included, the sum was $506,854.09. This was the total amount claimed by the Builder to 5 March 2018. Instead of paying the balance outstanding of $265,569.39 (including GST), the Client paid $263,671.10. There is no explanation for this discrepancy, and it does not appear to have been a point of contention between the parties at any time. In my view, it has no significance to the determination of the critical issues in this proceeding;
(e)	the progress claims made by the Builder on 15 and 17 June 2018 (and the outstanding variation claims made by the Builder on 3 May 2018) were considered by CKC and the parties in accordance with the processes followed earlier that year. This involved an inspection on site, discussion and correspondence between the parties (including Mr Barnett, Mr Etcell and Mr Ng on behalf of the Builder) and the submission of further documentation by the Builder to CKC;
(f)	the CKC report assessed the “Stages of Works Completed” at “$1,046,886 (GST excluded)” or $1,151,574.60 (including GST). The difference between this figure and the GST included figure in CKC’s second report dated 5 April 2018 of $1,004,292.20 was $147,283.40; 
(g)	for some unexplained reason, this figure was $1.30 short of the figure of $147,284.70 claimed by the Builder on 15 June 2018 for Stage 6: Carpark structure. I consider that this matter is also of no significance in the determination of the critical issues in this proceeding;
(h)	the CKC report dated 6 July 2018 noted that, “The site was inspected on 4 July 2018”, and following the heading “The works under the following stages are generally complete”, included “Car Park Structure”, and following the heading, “Generally the following works are in progress”, included “Frame” and Rough In”;
(i)	the report also recorded, “that both Stage 5 (Frame) & Stage 7 (Rough in) have not been fully completed, as at the date of our inspection [ 4 July 2018]”. The report also noted that the figures in the report “do not take into consideration the stage payments contractual obligations” as the “Client and the Builder have mutually agreed to the part payment of these stages [Stages 5 and 7]” by the “RFI dated 29 March 2018” that agreed to a proportionate payment at 80% completion of each of those stages; and
(j)	on 19 July 2018, the Client, through its bank, paid the Builder the sum of $147,283.40, which was the figure recommended by the CKC report.
367	I have previously referred to the important authorities which I must follow. It is instructive to examine how the Courts have considered these issues should be dealt with.
368	The High Court in Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 (“Woodside Energy”) reaffirmed the appropriate approach to the interpretation of a commercial contract. Chief Justice French and Hayne, Crennan and Kiefel JJ stated at [35] that, 
 “The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract.”
369	It is appropriate to look more closely at the seminal decision of Mannai. It is clear from an examination of the majority judgments in Mannai, that the tests adopted would not have assisted the Builder in this case. In Mannai, as Lord Clyde said at page 781, under the relevant term of the lease, there were four requirements to determine the lease:
 “The tenant must give six months’ notice; the notice must be in writing; the notice must be served on the landlord or its solicitors [and] the notice is to expire on the third anniversary of the term commencement date”. It was in respect of the latter requirement, that the appeal arose.”
370	The third anniversary of the term commencement was 13 January 1995. The notice given by the tenant was “to determine the lease on 12 January 1995”. Lord Steyn at pages 766-7 stated the issue for determination in the appeal as, “whether, despite the erroneous references in the notices to 12 rather than 13 January, the notices were nevertheless as a matter of construction sufficiently clear to be effective”.
371	 The determination of this task, Lord Steyn said, was a matter of construction, and:
 “The construction of the notices must be approached objectively. The issue is how a reasonable recipient would have understood the notices. And in considering this question the notices must be construed taking into account the relevant objective contextual scene” (emphasis added).”
372	A critical statement in Lord Steyn’s judgment is at page 768 where he said:
 “Prima facie one would expect that if a notice unambiguously conveys a decision to determine, a court may nowadays ignore immaterial errors which would not have misled a reasonable recipient...[and] that the reasonable recipient is left in no doubt that the right reserved is being exercised.”
373	The majority of the House of Lords were prepared to disregard the earlier authority of Hankey v Clavering [1942] 2 KB 326 (“Hankey”); the minority were not. In Hankey, as Lord Hoffman said in Mannai at page 774, “the notice to quit said ‘21 December’ instead of ‘25 December’, Lord Greene MR said at pp 328, 330, ‘...the whole thing was obviously a slip’ on the part of the landlord”.
374	As Lord Steyn said at pages 770-71:
 “... Hankey v Clavering was decided more than half a century ago. Since then, there has been a shift from strict construction of commercial documents to what is sometimes called purposive construction of such documents ... [and that] in determining the meaning of the language of commercial contract, and unilateral contractual notices, the law therefore generally favours a commercially sensible construction”.
375	The latter passage that, “the law therefore generally favours a commercially sensible construction”, was commented upon with approval by Gillard AJA in MLW Technology and, in a more general context by the plurality (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ) in Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5 at [48], an appeal dealing with the construction of a lease. It is also accords with the High Court’s restatement of principle in Woodside Energy and the more specific application of this approach in Bunbury, to which I have earlier referred.
376	Lord Steyn, in Mannai at page 772 reframed the question for determination as follows: 
 “The question is not whether 12 January can mean 13 January: it self-evidently cannot. The real question is a different one: Does the notice construed against its contextual setting unambiguously inform a reasonable recipient how and when the notice is to operate under the right reserved? (emphasis added).”
377	The reasoning process of Ormiston JA in Central Pacific was not dissimilar. At the commencement of his judgment, Ormiston JA said that he: 
 “originally was inclined to the opinion that the notice given by the vendor was imprecise in both form and substance. In the end, however, I have concluded that the defects relied upon by the appellants are of no consequence and the meaning of this notice is sufficiently clear for the recipients to have been in no real doubt as to the claimed default as to what the vendor required them to do and as to when that should be done.”
378	In the present case, it is my view that no reasonable person imbued with the contextual knowledge of the parties would have regarded the failure by the Client to pay the balance of the Stage 5 and Stage 7 progress claims as:
(a)	a claim made “progressively in accordance with Item 16”, and therefore as required by cl 21.1;
(b)	a progress claim which permitted the deeming provisions of cl 21.5 to have any operation;
(c)	a failure “to make a payment that is due and payable pursuant to the contract”, to which cl 17.1 would apply, and that would permit a suspension of “the whole or part of the works”;
(d)	sufficiently specified in the Suspension Notices dated 31 July 2018, as to make clear to the Client the basis upon which the Builder was purporting to suspend the whole of the works;
(e)	a “substantial breach” required by cl 30.2 in order to serve a Show Cause Notice; and
(f)	a sufficient statement of the substantial breach in the Builder’s Show Cause Notice dated 1 August 2018.
379	The following is a suggestion of how the substantive parts of the Builder’s Suspension Notices might have been drafted:
 “The Builder issued progress claims on 15 June 2018 claiming $147,284.70 for Stage 6: Carpark structure and $44,185.41 for the 20% balance for Stage 7: Rough-in and, on 17 June 2018 claiming $73,642.35 for the 20% balance for Stage 5: Frame. 
 In breach of cl 21.3 of the Building Contract, the Client failed within 7 days to either pay the amount of the progress claims or to give the Builder a progress certificate evidencing the Client’s opinion of the moneys due from the Client to the Builder pursuant to the progress claim and the reasons for any difference and pay the amount certified.
 On 19 July 2018, the Client paid the Builder the sum of $147,283.40 for the Stage 6: Car Park Structure progress claim. The balance of the progress claims of $117,829.06 remains unpaid.
 In the circumstances, by reason of cl 21.5(a) and (b) of the Building Contract, the balance of the progress claim of $117,829.06 is deemed to be the progress certificate and the unpaid balance of the progress claim is deemed to be a debt due and payable which the Client has failed to pay.” 
380	Although this theoretical draft notice may have complied with the formalities of cl 17, the substance of the notice indicates the fallacious premise upon which the Builder’s suspension of the works, and the giving of the Show Cause Notice was based. It is not simply the accuracy of the figures in the Builder’s Suspension Notice or Owner’s Show Cause Notice that matters. Regard must be had to the relevant context in which the notices were drafted and served.
381	The Suspension and Default provisions of the Building Contract had necessary pre-conditions before they would operate. Any notices given to the other party pursuant to those provisions needed to be clear and unambiguous so that a reasonable person reading the notice was left in no doubt as to its meaning (to paraphrase the test stated by Brooking J in Catley). Or, to pose the question as Lord Steyn did in Mannai: How would a reasonable recipient, “circumstanced as the actual parties were”, have understood the contents of the Builder’s Suspension Notices and Show Cause Notice?
382	In my view, the Builder must fail in his claim for the declaratory relief it seeks in relation to the termination of the Building Contract. The Client has made out its claim that the Builder’s suspension of the works was ineffective and invalid and that therefore the Client’s Show Cause Notice was valid and effective.
383	There are further grounds upon which I consider the Client had a proper basis for giving its Show Cause Notice, and to which the Builder did not show reasonable cause. I shall now make some further observations about the Builder’s Suspension and Show Cause notices and the other grounds relied upon by the Client in its Show Cause Notice.
384	a. Whether a progress claim must be a valid claim under clause 21.1 before the other processes in cl 21 can apply, particularly if the failure to pay the progress claim is to be the basis for the service of a suspension notice under cl 17: Under cl 21.1, it is a fundamental requirement for making a progress claim that, “The Builder must claim progressively in accordance with Item 16 and Clause 27, as the case may be”.  Item 16 of the Schedule to the Contract Conditions sets out the “stages of the works for progress claims”. There are nine stages; the last is “Completion” to which cl 27 relates. In the present case, the evidence establishes that at the time the Builder submitted the claims for the balance of Stage 7: Rough-in and Stage 5: Frame, the works of those stages were not complete.
385	If those progress claims were invalid, the other processes in cl 21, including the deeming provisions in cl 2.5, can have no application. Clause 21.5 should not be construed as meaning that an invalid progress claim, if not paid or the subject of a progress certificate pursuant to cl 21.2, is nonetheless to be regarded as due and payable, and is able to form the basis of a suspension notice pursuant to cl 17. Apart from the logic of this conclusion, an examination of the whole of cl 21 and other relevant provisions of the Building Contract, reinforces this view.
386	The note to Item 16 provides for the possibility that the stages of the contract works might be performed “out of sequence”, Notwithstanding, I consider that, in accordance with the principle enunciated by Tate JA in Cardona, it was intended that the works involved in each specified stage would need to be “complete” before a progress claim for a particular stage might be made.
387	It would seem, however, that the requirement (as expressed by Tate JA in Cardona at paragraphs 67–69) that a progress claim for a completed stage must follow the completion of the preceding stages, as set out in the DBCA and in relevant domestic building contracts, would not be a requirement in the present case. The legislation does not apply to the Building Contract and Item 16 specifically permitted out of sequence works, presumably at the Builder’s option.
388	Clause 21.1 provides that “the Builder must claim progressively” (emphasis added). That requirement is qualified by the words immediately following; “in accordance with Item 16”, that allows claims to be invoiced “regardless of sequential order stated within the contract”. However, out of sequence staged work could only be claimed when each stage was complete.
389	Clause 21.2 of the Building Contract requires, not only that the claim “be in writing”, but critically that it “must … include details of the value of the works carried out and of other moneys then due to the Builder pursuant to the provisions of the contract” (emphasis added).
390	I note that in clause 21 there is contrasting language used between the mandatory requirement in clause 21.2 that “[e]ach progress claim … must … include details of the value of the works carried out”, and the requirement in clause 21.3(b) that the “progress certificate” given by the Client must only evidence “the Client’s opinion of the moneys due” (emphasis added).
391	The different language suggests that there might be some significance between the objective obligation on the Builder to provide details of “the value of the works carried out”, and the subjective obligation on the Client to form an “opinion” about the moneys due to the Builder.
392	In the circumstances, I accept that in order to satisfy the requirements of the procedure to suspend the works, cl 21 requires that the Builder can only make a progress claim when the particular stage of works claimed is “complete”, subject only to “trivial failures, or failures borne of impracticalities”.
393	b. Does a failure by a Client to give the Builder a “progress certificate” under clause 21.3(b) bar the Client from later disputing the validity of a progress claim? The non-payment of a valid progress claim entitles the Builder to suspend the works or, if appropriate, take steps under clause 30 to issue a Show Cause Notice. As the precursor to the possible termination of the Building Contract, these are very serious steps.
394	At common law, without a specific contractual provision, it is likely that only a failure by a Client to pay a substantial progress claim incontrovertibly due for payment, or such payments having remained unpaid following repeated requests over a lengthy period, would entitle a Builder to either suspend the works or threaten termination of a Building Contract. 
395	These steps would generally only be contemplated by a builder if the client’s default would be regarded as a flagrant disregard of the client’s contractual obligations evidencing an intention that the client no longer wished to be bound by the contract.
396	The Building Contract recognises the serious nature of a suspension of contract works and the giving of a Show Cause Notice, in the following provisions:
(a)	with a suspension under clause 17:
(i)	the Builder must give “written notice to the Client”;
(ii)	the Builder must determine whether the suspension applies to “the whole or part of the works”;
(iii)	even after the “reason for such suspension ceasing to exist”, the Builder is only required to “recommence suspended works within 21 days”. The provisions entitle the Builder to seek an EOT and delay costs for both the period until any outstanding progress payment was made, together with a further period of up to 21 days;
(iv)	any costs consequences of the suspension resulting from there being “deemed to be a variation” would need to be taken into account when construing cl 21.1 and 21.5(b);
(b)	with a Show Cause Notice under clause 30:
(i)	there must be “a substantial breach of the contract”;
(ii)	the Notice must be “in writing” and must “state” certain things, including “the alleged substantial breach” and how, and by when, the receiver of the Notice “is required to show cause in writing”;
(iii)	a failure “to show reasonable cause” entitles the party giving the Notice to “terminate the contract”.
397	During the hearing, reference was made to the similarity between clause 21.3(b) and s15 of the Building and Construction Industry Security of Payments Act 2002 (Vic) (“SOP”). Both provisions relate to the need for an owner to speedily and expressly dispute a builder’s progress claim, if the owner were to avoid an immediate liability to pay the progress claim. There are, however, significant differences between the wording of the relevant provisions of the Building Contract and in the legislation both in relation to the requirements for the progress claim and for the progress certificate. 
398	Under the SOP, the rationale of this process has been expressed as “pay now, argue later”, recognising that progress payments during the course of a building contract are the “lifeblood” of the builder, who cannot continue performing his obligations under a contract without receiving regular payments to pay sub-contractors and for materials.
399	The SOP does not apply to domestic building contracts. The legislation would apply to this Building Contract. However, the SOP is designed to provide a simple straightforward process that will enable builders to recover progress payments unless the client provides a timely certificate which raises, a genuine matter of dispute, leaving those disputes to be determined in later litigation, if the progress payments are pursued by the builder under the SOP, and in accordance with its own specific requirements.
400	However, under the Building Contract, the present issue is not about deferring the determination of a dispute and requiring immediate payment of a progress claim, but rather whether the Builder, by use of a deeming provision, can escalate a dispute by suspending the works under cl 17, or by taking steps pursuant to cl 30 that may lead to the termination of the contract.
401	The Builder submitted that the parties are bound by their bargain and, subject to compliance with the requirements of clauses 21, 17 and 30 of the Building Contract, there is little ambiguity as to how those provisions should operate. 
402	However, the resolution of this issue requires determination of the following matters:
(a)	whether clause 21 necessitates a requirement for the Builder to do more than simply give to the Client a progress claim that purports to “claim progressively in accordance with Item 16” and that includes “details of the value of the works carried out”;
(b)	whether the processes in cl 21, particularly the deeming provisions of cl 21.5, can be called in aid, particularly for a suspension under cl 17, if the Builder cannot establish “the value of the works” or that such works are “complete”.
403	I have previously expressed the view that the principles expressed by Tate JA in Cardona have application to progress claims pursuant to cl 21 of the Building Contract. Mr Etcell stated that this was his understanding of the Building Contract.
404	This conclusion would have the effect of moderating the express terms of cl 21.3(b) that unless the Client, “within 7 days after receiving a progress claim”, gives to the “Builder a progress certificate evidencing the Client’s opinion of the moneys due … and the “reasons for any difference”, and pays “the amount certified”, the Client “must … pay the amount of the progress claim”.
405	In my view, cl 21.3(b) cannot be intended by the parties to operate where the Builder has made a premature progress claim before being entitled under the Building Contract to do so. 
406	If this construction were not correct, the Client may lose any rights it might have had to raise a dispute in the progress certificate. In this event, the Client would be unable to avoid an obligation to make an immediate payment, or to challenge the position where the failure to pay the progress claim were to be regarded as a sufficient pre-condition for the suspension of the works or service of a Show Cause Notice, and possible termination of the Building Contract. 
407	The Client may be able to raise such matters in later proceedings, either by way of defence to a claim for the progress claim or by a counterclaim based on a separate breach by the Builder of the Building Contract. However, these rights would, in my view, also extend to being able to challenge the validity of the progress claims themselves, and not be prevented from doing so by the deeming provisions in cl 21.5, in the circumstances where the progress claims were made prematurely. 
408	I do not consider that a “deeming” clause such as cl 21.5(b) was intended to have the consequence of giving validity and effect to progress claims made prematurely before the completion of the appropriate stages.
409	c. Must the Builder’s Suspension Notice specify the “reason” for the suspension? Clause 17.1 requires the Builder to give “written notice to the Client”. The clause does not, however, specifically state what the written notice must contain.
410	This clause contrasts with other related clauses of the Building Contract, for example:
(a)	clause 21.2(b) requires a “progress claim” to “include details of the value of the works carried out and of other moneys then due to the Builder pursuant to the provisions of the contract”;
(b)	clause 30.3 requires a “Show Cause Notice” to contain certain details including statements of “the alleged substantial breach” of the contract and of the requirement that the party served with the notice must “show cause”. 
411	However, clause 17 does contain matters which suggest that the written Suspension Notice should specify the “reason” for the suspension, including:
(a)	the Builder is given the opportunity to suspend the works in two separate circumstances, being the failure by the Client:
(i)	“to make a payment that is due and payable”; and also
(ii)	to give “a direction” within the specified time and where a direction is not deemed;
(b)	by clause 17.1, the Builder has a discretion whether to suspend the works in “whole or part”. That decision should be based upon such matters as:
(i)	the “reason” the works are being suspended and whether it is “substantial”;
(ii)	the likelihood, or possibility, that the reason for the suspension may cease to exist (for example by the payment of an outstanding progress claim);
(iii)	the seriousness of the consequences of a suspension of the whole, or alternatively a part of the works, (for example the part of the works directly affected by the cause of the suspension); and
(iv)	the likely impediment to recommencing work more quickly if the cause of the suspension were to cease;
(c)	by clause 17.2, if “the reason for such suspension” ceases to exist, the Builder must “recommence suspended works within 21 days”. In many, if not most, cases where works are suspended, the Client would have the opportunity to speedily remedy “the reason for such suspension” so that it ceased to exist and yet, even if that were done, 21 days more may pass before the works were recommenced; and
(d)	by clause 17.3, a variation is deemed “if the suspension causes the Builder to incur more or less cost than would otherwise have been incurred but for the suspension”. This provision envisages the possibility that the contract sum may be adjusted in the Client’s favour. It also suggests that the Client’s interests should be considered by the Builder in its determination as to whether the whole or only part of the contract works should be suspended or, in determining how long to take to recommence works if the reason for the suspension ceases to exist. This view would be consistent with a party’s obligation, at law, not to do anything which might prejudice the other party’s ability to obtain the benefits of the contract.
412	In my view, it is appropriate in the circumstances of this contract, to regard it as a requirement of a written notice given pursuant clause 17.1, that the Builder clearly state in the notice the reason for suspension.
413	d. The content of the Builder’s Suspension Notices: It necessary to examine the following matters in relation to the Builder’s Suspension Notices:
(a)	whether the reason given in the Suspension Notices is supported by the facts;
(b)	the degree of specificity or accuracy the law requires in the notice.
414	The Suspension Notice refers to 3 figures:
(a)	$147,283.40 – the “amount paid”;
(b)	$271,022.40 – the “full amount” of “invoices”; and
(c)	$123,739.00 – “balance due and payable”.
415	The amount of $147,283.40 as the amount paid: This sum was paid by the Client to the Builder on 19 July 2018. It is clear that this payment related to Stage 6: Carpark structure, in respect of which the Builder had issued invoice 1805/15 on 15 June 2018 for $147,284,70. The invoice was the sum set out in Item 16 as payable for Stage 6: Carpark structure. 
416	If one uses the figures in the second and third CKC reports for CKC’s opinion of the “stages of works completed, which are excluding GST, and converts the result to a figure including GST, one arrives at a figure of $147,283.40, which is precisely the sum paid by the Client on 19 July 2018:
Report	“Stages of works completed” (excluding GST)	Converted to include GST	
2	$912,992.00	$1,004,291.20	
3	$1,046,886.00	$1,151,574.60	
Difference	$133,894.00	$147,283.40	
417	Full amount of invoices of $271,022.40: It is not possible to determine from either the Defendant’s Schedule 1 or the Redrawn Schedule from where the figure of $271,022.40 stated in the Suspension and Show Cause notices, as the “full amount” of “invoices", is derived. The total of the 3 progress claims made on 15 and 17 June 2018 is $265,112.46. The 5 progress claims for variations made on 3 May 2018 total $12,606.00. The claim for the grease trap variation on 23 July 2018 was for $12,144.00. These claims, although adjacent to the claims made on 15 and 17 June 2018, do not help to explain the “full” amount of invoices totalling $271,022.40.
418	The amount of $123,739.00 as the “balance due and payable”: This sum cannot be readily explained. The balance owing, according to Schedule 1, as at the last date referred to of 19 July 2018 (when the payment of $147,283.40 was made) was $47,601.88. The equivalent figure in Annexure E was $132,332.87.
419	It is not clear whether, as at 19 July 2018 and/or 31 July 2018, an amount was owing in respect of all progress claims made by the Builder for the contract stages. Schedule 1 allocates certain payments ($263,671.10 on March 2018 and $497,436.50 on 11 April 2018) solely to the staged work and not to the variations dealt with separately in Schedule 2. This is shown to be incorrect by the analysis of claims and payments previously made in these reasons.
420	Annexure E has greater credibility. However, these documents simply point up the inadequacies of the statement in the Suspension Notice of the Builder’s “reason” for the suspension.
421	e. What degree of specificity does the law require of a Suspension Notice? To answer this question required an examination of the relevant principles and their application to the relevant facts concerning the giving of the Suspension Notice. My conclusion, after having conducted that examination was that the Suspension Notices were inadequate, and that in the circumstances, the works were suspended by the Builder contrary to the terms of the Building Contract.
422	In my view, and consistent with authority in Victoria and with Mannai, the Suspension Notices served by the Builder in the present case was clearly ineffective. The authorities reinforce the primacy of the parties’ bargain, construed in accordance with modern principles of the construction of commercial contracts.
423	It is also critical to consider the “circumstances” in which the parties found themselves at the time of service of the relevant notices, in order to determine how the particular notice would have been understood by “reasonable persons in the same circumstances as the actual parties”.
424	In the present case, the Builder served a Suspension Notice that stated “the reason for the suspension” was, “non-payment of invoices to the full amount being $271,022.40 due and payable under clause 21, amount paid $147,283.40 leaving balance due and payable $123,739.00 without delay for works completed …”.
425	To be an effective notice to suspend the building works, the notice was required to state that the Client “fails to make a payment that is due and payable pursuant to the contract”. This is what the Builder failed to make clear in the Suspension Notice. 
426	The Suspension Notice stated that:
(a)	“invoices to the full amount being $271,022.40 [were] due and payable under clause 21”, but had not been paid. This statement was incorrect;
(b)	the “amount paid $147,238.40” must, in context, relate to the payment of “invoices to the full amount being $271,022.40”. This statement is also incorrect as the only payment of $147,238.40 made under the Building Contract, on 19 July 2018, clearly related to invoice 1805/15 dated 15 June 2018; and
(c)	the “balance [left as] due and payable [is] $123,739.00”. This statement is also incorrect, as the following further statements by the Builder indicated:
(i)	the letter from the Builder’s solicitors to the Client’s solicitors dated 9 August 2018 stated that the balance owing for staged payment claims was $47,601.88;
(ii)	Schedule I stated that the “balance” owing at 19 July 2018, after the payment of $147,283.40 was made, was $47,601.88; and
(iii)	Annexure E stated that the “running balance owing”, taking into account invoices for all variations at 19 July 2018, after the payment of $147,283.40 was made, was $132,332.87.
427	These figures all assume that the following progress claims by the Builder totalling $130,433.76 were all due and payable on 31 July 2018:
(a)	$73,642.35 as the balance for Stage 5:Frame;
(b)	$44,185.41 as the balance for Stage 7: Rough-in; and
(c)	$12,606.00 as the total of the 5 variation claims made on 3 May 2018.
428	CKC had from its site inspection on 4 July 2018 concluded that the works for both Stages 5 and 7 were incomplete. CKC had sought appropriate paperwork from the Builder to establish his entitlement to claim the five variations on 3 May 2018. Mr Barnett was not able to comply with this request and informed Mr Yap of CKC on 25 June 2018 that he would set those claims apart.
429	The defects in the Suspension Notice were both fatal and irremediable. A reasonable person reading the notice, in the light of the surrounding circumstances, would also know that the Client had paid the amount stated as owing by CKC in its third report and which Mr Yap of CKC had discussed with Mr Etcell on 28 June 2018. 
430	The Client did not regard either the Frame and Rough-in stages as complete and CKC had reached the same conclusion in its third report. The Builder was well aware of these matters.
431	Some amount may have been owing to the Builder; from the Builder’s perspective, a significant sum including $130,433.76 as the total of the balances for Stages 5 and 7 and the five Variation no. 2 claims. From the calculations I have made, there may have been a minor shortfall of about $1,897.81.  However, it is impossible from the Suspension Notice to ascertain any credible sum, and therefore, how the “reason for such suspension” might be made to cease to exist, by an appropriate payment by the Client.
432	A number of provisions of the Building Contract lay down strict timetables which, if not complied with, have serious consequences. The most obvious example is clause 21.5 upon which the Builder relies to submit that the Client’s failure to issue a progress certificate within 7 days of receipt of the claim had the consequence that the claimed amount was immediately due and payable entitling the Builder to suspend the works. There are similar time limits, and consequences for failure to strictly comply, in other clauses of the Building Contract.
433	The notice disregarded the provision in the Building Contract that there must be “a payment that is due and payable”, which the Client had failed to make. The Suspension Notice did not refer to a “payment” that, upon reasonable construction, could be regarded as an amount which satisfied the contractual requirements of clauses 17.1, 21.1 and 21.2.
434	To use words often used in the authorities, the Suspension Notice was “defective”, “unenforceable” and “invalid”.
435	f. Whether the Client knew that it owed the Builder money: The Client received legal advice about the Builder’s Suspension Notice. The legal advice included an email from Mr Arthur of Counsel to the Client’s solicitors on 13 August 2018 and the solicitor’s comments on counsel’s email [CB 568–70]. Mr and Mrs Mustafa were apparently made aware of the nature of the lawyers’ views. A copy of the emails were sent to Mr El-Sheikh in circumstances in which any privilege in respect of the advice was waived by the Client.
436	The email from Mr Arthur includes the statement, “(p) It may be sensible to pay the debt as there would not seem to be any excuse for not doing so and until paid the Builder may suspend works as it has done; Agreed, however I believe it may be beneficial to issue a Calderbank offer to offset the claim with the rectification costs”. It appears that the first sentence was Mr Arthur’s and the following sentence the response by the Builder’s solicitor, Mr Harris.
437	Earlier in the email it is stated, “(d) as discussed as a debt to the Builder seems to have crystallized under clause 21 it appears that the Builder had prima facie the right to suspend the works under clause 17; I note that the Suspension Notice of Works states an amount owed of $123,739 but the Builder's Solicitors letter reduces it to $47,601.88. Therefore is the Suspension Notice of Works defective?”. The final two sentences raise an issue which is not answered in the email. This matter appears to have been raised by the solicitor.
438	In my judgment, the views expressed by both Mr Arthur and Mr Harris were tentative. They were to be followed by a telephone conference with Mr and Mrs Mustafa. These exchanges between Mr Arthur and Mr Harris are, in my view, of limited relevance in the consideration of what a reasonable informed person might conclude about the meaning of the Suspension Notice. I consider that the Suspension Notice provided an insufficient basis for taking the step of suspending “the whole … of the works” without reasonable clarity as to why the whole of the works were suspended, and also how the “reason for the suspension” might be rectified.
Validity of the Builder’s Show Cause Notice dated 31 July 2018
439	The Builder’s Show Cause Notice leads to a similar conclusion. I accept that:
(a)	the written notice was apparently served by Mr Etcell on Mr and Mrs Mustafa by handing them a copy at their meeting on 31 July 2018, as required by clause 30.2;
(b)	the notice stated that it was “a Notice of default under clause 30 of the … Contract Conditions”, as required by clause 30.3(a);
(c)	the notice called for the Client “to show cause in writing” as required by clause 30.3(c). However, the Client was asked to show cause “as to why Ikonic Homes should cease further action action [repeated] under this notice as per Clause 30 of the above stated contract, if you fail to show reasonable cause under clause 30.4 we reserve the right to terminate the contract”. These words are not entirely clear although probably they should be construed as meaning:
(i)	that the Client should show reasonable cause as to why the Builder “should cease further action under this notice as per clause 30”;
(ii)	if the Client fails to show reasonable cause, the contract may be terminated by the Builder;
(d)	 the notice contained the timing and place at which the Client must show, cause as required by clauses 30.3(d) & (e).
440	However, in my view, the Builder has failed in the notice to state “a substantial breach of the contract” as required by clause 30.3(a). Accordingly, it is impossible to be satisfied that the Client has, in the circumstances, committed a “substantial breach”. 
441	A failure to pay a progress claim may, at common law, constitute a breach entitling a party to treat the failure as a repudiation of the contract. However, that would be an unusual case and would depend on matters such as the extent of the unpaid claim, the proportion it bears to the contract sum and the period of default. It is for this reason that building contracts specifically include processes to clarify the circumstances in which a failure to make a progress payment may lead to the termination of the contract.
442	In my view, the matters stated in the notice of default as the reasons for the raising of the notice, cannot be regarded as a “substantial breach”. I have previously discussed the shortcomings of these “reasons” in relation to the Builder’s Suspension Notices. They are equally applicable to the Builder’s Show Cause Notice.
Validity of the Client’s Show Cause Notice dated 1 August 2018
443	In the proceeding, the Client relies upon the Show Cause Notice dated 1 August 2018 as the basis for having terminated the Building Contract on 24 August 2018. 
444	The Builder challenged the validity of the Show Cause Notice on a number of bases and otherwise asserted that, even if the Show Cause Notice were valid, there are reasons why termination of the contract was not justified. It is necessary, therefore, to examine each of the issues raised by the parties on the pleadings in order to determine these matters.
445	The Show Cause Notice and the Boutique Legal letter dated 1 August 2018 set out a number of “substantial breaches” by the Builder upon which the Client relies, as follows:
(a)	failure to follow the specifications and plans;
(b)	failure to complete the works in a good and workmanlike manner and a standard required relevant to the works and contract;
(c)	failure to achieve the date for practical completion and complete the works in a timely manner;
(d)	failure to ensure adequate supervision of the works;
(e)	suspending works without proper basis;
(f)	failure to order materials on time to ensure practical completion of the works;
(g)	failure to apply the appropriate Building / Plumbing Code to the works;
(h)	failure to follow directions with respect to the works; and
(i)	varying the works without agreement.
446	The Client’s Show Cause Notice was served together with a letter dated 1 August 2018 from the Client’s solicitors. In the letter, it was stated that: 
 “On 19 July 2018, you issued to our Clients a revised Build Programme, extending the practical completion of the works to 7 September 2018. We note that you have attempted to extend the date now to the 13 September 2018.
 On 26 July 2018, our Clients met with Justin and you to discuss various issues with the works including but not limited to delays to works, failure to attend to the works specified in accordance with your Build Programme, failure to follow the plans and specifications provided and failure to order the materials required to complete the works. We also note that our Clients hand delivered to you on 26 July 2018 a notice that no further extensions to the practical completion date would be granted.
 On 27 July 2018, we understand that you and your subcontractors and/or employees attended the site to progress the works, following the meeting on 26 July.
 On 31 July 2018, our Clients attended the site to ensure the works were progressing and were advised that there were major issues with construction of the roof, by the roofing plumber on site. We note that the roof plumber is awaiting payment before he will attend to rectification of the issues with the roof.
 Following the meeting on 26 July 2018, our Clients have also discovered that materials have still not been ordered from suppliers, to ensure their delivery in time, for completion of the works, pursuant to your Build Programme issued on 19 July. Further, you have told our Clients that the lift is situated in Australia yet our Clients have confirmed with the supplier that the lift is still in their warehouse overseas.”
447	The Builder alleges that the Show Cause Notice was not a valid notice pursuant to clause 30 by reason of the following matters:
(a)	“the notice was not served by hand or registered post as required by clause 30.2”;
(b)	“if (which is denied) the relevant Client under the Contract was F&J, and not Mr and Mrs Mustafa, then the Notice was not served by F&J at all”;
(c)	the Notice “failed to set out any proper details of such substantial breaches as required by cl 30.3(c) and instead set out only a list of vague, generalised allegations without proper particulars’’; and
(d)	the Builder was not in breach; alternatively substantial breach, of the contract as alleged in the notice.
448	a. The Show Cause Notice was not properly served: In my view, and notwithstanding the requirements of clause 30.2, that the Notice “may” be given “by hand or registered post”, the notice was sufficiently served by email addressed to Mr Etcell. It is clear from the correspondence that followed, that the letter from Boutique Legal dated 1 August 2018 and the attached Show Cause Notice had been received by Mr Etcell. The acknowledgment by the Builder’s solicitors that the Client’s Show Cause Notice had been received by Mr Etcell and his preparedness to respond, effectively waived any defective service.
449	The Client can also rely upon cl 33.1 which deems a notice “given and received”, if “emailed to the relevant address shown in the Schedule or last communicated in writing to the person giving the notice”. Item 3 of the Contract Conditions Schedule lists Mr Etcell’s email address. The Client’s Show Cause Notice was sent by the Client’s solicitors to Mr Etcell at that email address.
450	b. The Show Cause Notice was not signed by F&J: Although the Show Cause Notice was signed by Mr and Mrs Mustafa, I have previously in these Reasons for Decision discussed the position of Mr and Mrs Mustafa as the previous trustees of The Property Trust and later as the sole directors of the corporate trustee. In my view, any confusion about the identity of the trustee is an insufficient basis for challenging the validity of the Notice.
451	c. No proper details of the alleged substantial breaches given: To determine whether the Show Cause Notice contains a sufficient statement of “the alleged substantial breach[es]” depends on the circumstances in which the Notice was served and how the Notice would have been understood by “reasonable persons,  circumstanced as the actual parties were”.
452	However, I consider that the following “alleged substantial breaches” are adequately detailed:
(a)	“Suspending the Works without proper basis”; 
(b)	Allegations relating to delays in the Works by the Builder:
(i)	“Failure to adhere to the practical completion date and 3 subsequent extensions …”; 
(ii)	“Failure to complete the works in a timely manner”; and
(iii)	“Failure to order materials on time …”;
(c)	Allegations relating to defective workmanship in carrying out the Works, by the Builder’s:
(i)	“Failure to follow specifications and plans of the Works”;
(ii)	“Failure to complete the works in a good and workmanlike manner and of a standard required …”;
(iii)	“Failure to apply the appropriate Building\Plumbing Code to the Works”; and
(iv)	“Failure to ensure adequate supervision of the Works …”.
453	It is clear that each of these matters is a breach of the Building Contract:
(a)	the Builder’s wrongful suspension of the works breached cl 17;
(b)	the Builder’s actions which caused delays in the works breached cls 15.8, 16.2 and 22.5; and
(c)	the Builder’s poor workmanship reflected his breaches of cl 15.7.
454	Similarly, in my view, it is clear that each of these breaches, both separately and together, were “substantial”:
(a)	a suspension of the whole of the works shut down the site. The Builder was, if justified in suspending, able to delay recommencing work for 21 days after the reason for the suspension ceased to exist. In circumstances where the suspension was invalid, the breach had far-reaching consequences;
(b)	delays in the progress of the works, solely the responsibility of the Builder, had substantial financial consequences. Liquidated damages of $500.00 per day provides compensation in the short term. Despite substantial blow-outs in the completion date (few of which were the Client’s responsibility), it became apparent that the Client was incapable of completing the works for the foreseeable future, well beyond the programmed completion date. The principal reason for this was due to the late confirmation of delivery or non-ordering of critical equipment and materials by the Builder. These delays resulted in substantial financial losses; and
(c)	the poor workmanship of the Builder was extensive and reflected extremely poor planning and management. The nature of the Builder’s poor workmanship impacted all areas of his responsibilities including adherence to the contract documents, regulatory requirements and standards and proper management of sub-contractors and the orderly supply of materials and equipment for the works. The extent of the rectification work required was substantial.
455	It is arguable that without more detail, the following matters relied upon in the Client’s Show Cause Notice as “substantial breaches”, would not be adequate: 
(a)	“Failure to follow our directions with respect to the Works”;
(b)	“Engaging in misleading and deceptive conduct regarding the Works”;
(c)	“Failure to maintain Occupational Health and Safety requirements …”; and
(d)	“Varying the Works without agreement with us”.
456	Before stating my conclusions in relation to the matters raised in the Client’s Show Cause Notice, it is appropriate to have regard to the Builder’s response to the Show Cause Notice by the Builder’s solicitors letter dated 9 August 2018.
457	d. Whether the Builder showed “reasonable cause” by the letter dated 9 August 2018: On 9 August 2018 the Builder’s solicitors, Brixton Legal, sent a letter by email to the Client’s solicitors purporting to show cause pursuant to the Client’s Show Cause Notice dated 1 August 2018. The letter criticised the Client’s Show Cause Notice as:
(a)	“breaching an overarching implied contractual obligation on your Client to act reasonably in regard to the default notice procedure”;
(b)	not properly particularising certain specific allegations “in any detail” or to demonstrate a “proper basis”; and
(c)	relying upon breaches of the Building Contract which were not substantial.
458	In relation to the allegation that the Builder “failed to adhere to the practical completion date,” the Builder’s solicitors disputed the factual basis of this allegation and relied on matters justifying practical completion in mid-September 2018. I am satisfied that the Builder, when it suspended the works and responded to the Client’s Show Cause Notice had no ability to complete the works for many months beyond 7 September 2018.
459	I am also satisfied that the poor workmanship of the Builder was so deficient and extensive that the Builder must have carried out the works with a reckless disregard of his responsibilities. It is not appropriate in these circumstances to pay much heed to complaints of lack of specificity in the details provided in the Client’s Show Cause Notice. The Client engaged Mr Osborne to carry out the work of investigating the defective workmanship in late August 2018. After site inspections on 30 August and 11 September 2018, Mr Osborne reported on 31 October 2018. When it became apparent that much further defective work had been hidden by plasterwork, Mr Osborne again inspected the site on 26 October 2018 and delivered a second report on 4 December 2018.
460	This was not a case at all similar to the decision of Dixon J in Stojanovski v Australian Dream Homes [2015] VSC 404 (“Stojanovski”). In that case, an owner, following the terms of a different form of contract, and armed with a report of a Building Consultant, served a “Notice of intention to terminate the contract” unless the builder within 14 days “remedied the breach or breaches” set out in the consultant’s report of the defective work. It would apparently take six weeks to complete this work, and the contract still had three months to run. The contract also provided that the owner must not terminate the contract “unreasonably or vexatiously”. 
461	I also reject the Defendant’s submission that there is evidence that, on 1 August 2018, the Client had “become aware” of “the Builder’s defective work”, as those phrases are used in cl 15.9 of the Building Contract, so that he was obliged “to give written notice to the Builder … within 2 days”. 
462	This would not be a sensible construction when one has regard to other contractual provisions and the circumstances known to the parties. Clause 1.1 narrowly defines “defect”, and therefore “defective work” in cl 15.9. It is likely that cl 15.9 only has application after practical completion, when work can be more clearly defined as “defective” rather than “incomplete” This is a distinction that will be encountered many times in the discussion of Issue 4.
463	In relation to the assertion that the Builder had wrongly issued the Notices of Suspension, the Builder’s solicitors, in the latter dated 9 August 2018 [at CB 3663] analysed the payment claims and the payments made in response to them, asserting that, taking into account “claims and payments … (excluding variations) … the overdue balance owing to our Client as at today’s date is $47,601.88”. In regard to “Variation #1 [the Client] has failed to pay the remaining $72,124.99 of invoices rendered”, and “for Variation #2 [the Builder has] issued invoices in the amount of $24,750.00”.
464	The analysis made earlier in these reasons demonstrates that certain variations were paid for by the Client, being:
(a)	ground floor windows $64,999.00, by a first claim of $19,470.00 on 9 November 2017, of which $19,000.00 was paid on 23 November 2017, and $45,529.99 claimed on 10 December 2017, which was part of the payment of $75,000.00 on 10 January 2018 and $263,671.10 made on 5 March 2018; and
(b)	fire services variation of $14,850.00 and security cameras, and data rack variation, claimed on 21 March 2018 of $11,275.00 were part of the $497,436.50 payment made on 11 April 2018.
465	As a consequence, the actual amount claimed by the Builder as unpaid on 31 July 2018 was $142,577.76, made up as follows:
Date	Invoice Description	Invoice Amount	
3 May 2018	Bulkheads variation	$2,970.00	
3 May 2018	Steel post relocation variation	$4,950.00	
3 May 2018	Kitchen window and door variation	$1,980.00	
3 May 2018	Relocation of music and kitchen walls variation	$946.00	
3 May 2018	Additional power points variation	$1,760.00	
15 Jun 18	Stage 7: Rough-in (balance 20%)	$44,185.41	
17 Jun 18	Stage 5: Frame (balance 20%)	$73,642.35	
23 Jul 18	Variation Grease trap	$12,144.00	
	Total	$142,577.76	
466	The Builder in Annexure E to his final submissions revised Schedule 1 and Schedule 2 “list of invoices and payments made” to show that the “running balance owing” on 31 July 2018 was $144,476.87. The difference between this figure and the total of the figures in the previous paragraph is $1,899.11 which is very close to the short payment balance, after each of the Client’s payments on 5 March and 11 April 2018.
467	The Builder’s solicitors’ letter dated 9 August 2018 also stated, in relation to the allegation that the works have been delayed:
(a)	that the Builder has “issued notice[s] of delay”; 
(b)	the Client “has still not obtained all the relevant building permits and therefore its obligation to complete the works within 24 weeks has not even begun”; 
(c)	the Builder has “commenced … the 8th of 9 stages of the works … being electrical meter board fit off, tiling, plastering, cabinetry, floor coverings, internal doors and upholstery which is well advanced”; and 
(d)	“a timing overrun of a matter of months falls well short of the high bar needed to establish a substantial breach. At its highest, it would permit your Client a modest offsetting claim limited to contractual liquidated damages only”. 
468	These matters were addressed in the consideration of Issue 2.
469	The Builder’s solicitors’ letter dated 9 August 2018 asserted that if the Client were to terminate the contract: 
 “that conduct will constitute a clear repudiation of their obligations under the Contract. Should that occur, our Client reserves its right to accept any such repudiation and to terminate the contract at common law … Our Client remains committed to the due performance of the Contract [and] remains willing and able to recommence work within 21 days.”
470	Further, it was stated that the Client had committed “further repudiatory conduct” by stating “it will ‘not pay another cent for any reason’ to our Client”, by attending “the site and attempting to carry out [the Builder’s] building work while the Contract remains on foot, and has attempted to correspond directly with [the Builder’s] sub-contractors and suppliers in order to obtain materials and contract labour to complete works at the site”. Accordingly, the Builder “may elect to terminate the contract at common law in reliance on that repudiatory conduct”.
471	e. Further correspondence prior to termination: Between 1 August and 24 August 2018, when the contract was terminated by the Client, there was further correspondence which included correspondence between the Architect and Clients, and the Clients and Mr El-Sheikh. Also, the Building Surveyor was involved, and a Building Notice was issued on 8 August 2018 [CB 3654-6] following a site inspection on 5 August 2018.
472	The notice from the Building Surveyor required Mr and Mrs Mustafa to “show cause” in relation to “Building work being carried out in contravention of a building permit” being the installation of “external cladding”, and for work in “contravention of the Building Act 1993” being “external building works” carried out without a building permit, and the Building surveyor not having been notified of “mandatory inspections … prior to placing a footing … prior to pouring all in-situ concrete … and upon completion of framework”.
473	An email from the Architect to the Clients dated 15 August 2018 [CB 3674-5] recording the defects that had been noted by the architect during an onsite inspection that day.
474	A letter from the Architect to the Client’s solicitors (Boutique Legal) dated 16 August 2018 [CB 3676-80] set out “the defects in the building that will need to be rectified”, as noted at the site visit on 1 August 2018. The architect recorded:
 “We were also alarmed that the person running the job, Justin Barnett was not a registered Builder, and was doing the job under Paul Etcell’s licence [that] the Builders also were unable to ever draw up a proper program with the sequencing of trades [and that the breaches were substantial – we haven’t seen the complete incompetence and disregard for our design before by other Builders on any project”.
475	A letter from MGA Lawyers (the Client’s new solicitors) to the Builder dated 24 August 2018 [CB 3709] enclosed the letter from the Architect to the Client’s former solicitors dated 16 August 2018 and advised that “our Clients exercise their right to terminate the Contract effective immediately”.
476	A letter from the Builder’s solicitor, Brixton Legal dated 24 August 2018 [SCB 587] denying that the Builder had received a copy of the architect’s letter dated 16 August 2018 “in open correspondence” and stating that, in any event, the architect’s letter “fails to particularise each of the items in the Show Cause Notice dated 1 August 2018 with any precision or indeed, any connection with the dot points in the notice”. 
477	The letter reiterated that: 
 “there is no basis for your Client to terminate the Contract and your Client’s purported termination evinces that it considers itself no longer bound by the terms of the Contract. Our Client considers your Client’s wrongful termination to be a repudiation of the Contract. Our Client accepts your Client’s repudiation and terminates the Contract on the basis of your Client’s repudiation.”
478	A letter from Builder’s solicitors to Client’s solicitors dated 28 August 2018 [CB 3719] stated in part that: 
 “As the Building Contract between our Clients has now come to an end, our Client would be prepared to assign the contract with Jentech to your Clients or a nominee subject to your Clients pay to our Client the sum of $19,815.40 already paid to Jentech and Jentech consenting to the assignment.”
Conclusions as to the validity of the Client’s Show Cause Notice
479	a. Suspending the Works without proper basis: In my earlier discussion of the Builder’s Suspension Notices dated 31 July 2018, I considered that the Notice was given “without proper basis”. In the circumstances, I concluded that this gave rise to a substantial breach of the Building Contract, which was relied upon in the Client’s Show Cause Notice dated 1 August 2018. Accordingly, the Notice required a response by the Builder to show reasonable cause by 9 August 2018 as required by the Notice. 
480	As I have concluded in the discussion above, the Builder did not show reasonable cause as to why the Client should not exercise its rights under cl 30 as a result of the Builder’s suspension of the works.
481	b. Allegations relating to delays in the works by the Builder including in the ordering and supply of equipment and materials: Earlier in these Reasons, I addressed the issue of the appropriate date for “practical completion” and reached the conclusion that in the circumstances, it was appropriate to conclude that the Builder, in mid-June 2018, might have been able to complete the Works to a state of practical completion by the extended completion date of 7 September 2018. By I August 2018, it was obvious that this was no longer the case, due to many causes for which the Builder was solely responsible. 
482	In the discussion under Issue 2, I concluded that there were substantial delays to the Works that were the sole responsibility of the Builder. Accordingly, I consider that there were separately, and in combination, substantial breaches of the Building Contract in respect of which the Builder’s solicitors did not show reasonable cause in their letter dated 9 August 2018.
483	c. Allegations relating to the Builder’s defective works: In the following section, Issue 4, the items of defective work in the Scott Schedule are considered. I have concluded that there was substantial defective work carried out by the Builder and that the reasonable cost of rectification of that defective work is the sum of $478,599.88. This sum represents 30 per cent of the sum of “$1,046,886 (GST excluded)”, or $1,151,174.60 including GST, as the “Stages of work completed”, assessed by CKC on 5 July 2018. 
484	By 6 July 2018, the remaining 20 per cent of both Stages 5: Frame and 7: Rough-in had not been completed. It is likely that some work had been done which would form part of Stage 8: Fit out and Stage 9: Completion. However, of more relevance is the fact that progress claims had been made by the Builder on the basis that seven of the nine stages of the work of the Building Contract, comprising 80 per cent of the contract price for all stages, had been completed.
485	This suggests that a significant proportion of the value of the Builder’s work should have been completed. However, the extent of the defective work that I have found, and the cost to rectify that defective work, and the separate cost to complete the works of the Building Contract, indicates that there were serious shortcomings in the Builder’s workmanship. This fact alone must be regarded as having given the Client sufficient cause to include the workmanship issue in the Show Cause notice with each of the four separate aspects constituting a “substantial breach” of the Building Contract. 
486	It was submitted that the Client’s Show Cause Notice did not descend to sufficient detail of the inadequacy of the Builder’s poor workmanship. I have discussed the matter earlier. In my view, the Builder, having been responsible for the carrying out of the building work, which in a project of this magnitude involves the active supervision of subcontractors, must have been either well aware, or recklessly indifferent, to the quality of the work that had been performed.
487	I am satisfied that no reasonable cause was shown by the Builder in response to the matters raised in the Client’s Show Cause Notice, and the letter dated 1 August 2018 accompanying the notice from the Client’s solicitors.
Issue 4: Defective work performed by the Builder
488	Mrs Mustafa, in paragraph 121 of her witness statement dated 19 August 2021 stated that, “The total cost to rectify the works undertaken that were part of the contract was $1,873,321.14 (excluding GST)”.  Including GST, which would have been payable by the Client, the total cost would be $2,060,653.25.
489	In P3FASOC, the Plaintiffs make a claim for damages of $1,873,321.14 (exclusive of GST) or $2,060,653.25 (inclusive of GST) in respect of the cost of rectifying the Builder’s defective workmanship. The defective workmanship is largely defined by reference to the reports of Mr Osborne and the electrical and plumbing specialists. 
490	The defects pursued by the Plaintiffs have been detailed in an updated Scott Schedule dated 9 November 2022 (“the Scott Schedule”) which lists separate items numbered 3 to 38, with five of these items divided into two parts. I have added the additional item “Electrical” to separate it from item nos. 26 and 31 which presently contain parts of the additional item. Of the total of 42 items:
(a)	13 items are not pursued – nos. 11, 15, 18, 20, 21, 23, 24, 30, 33, 34, 36 37 and 38;
(b)	One item (no. 35) is agreed both as to liability and quantum;
(c)	A further 11 items are agreed by the parties to be defective work and the only matter that should have been in issue was quantum. 
(d)	17 items were disputed as to both liability and quantum.
491	The items agreed to be defective work, with the parties’ experts’ respective quantum estimates, taken from the Scott Schedule, are as follows:
Item	Description	Osborne’s estimate	Jeffery’s estimate	
3	Window installation	$1,644.00	$1,310.00	
5	Internal doors	$88,096.00	$19,904.00	
6a	Stormwater part 1	$8,203.00	$7,096.00	
7a	Toilet cistern part 1	$8,164.00	$5,329.00	
8b	Structural steel to room 5 (TC rectification)	$358.00	$347.00	
10	Western balustrade wall 	$5,867.00	$4,006.00	
12b	Steel members to roof frame as GHA design 	$0.00	$4,712.00	
13	Steel framing to carpark and building 	$236.00	$208.00	
14	Concrete 	$5,785.00	$3,347.00	
17	East store screw piles 	$236.00	$208.00	
29	Sewer drainage 	$27,065.00	$6,015.00	
35	Eastern boundary retaining wall 	$1,400.00	$1,400.00	
	Total of estimates	$147,054.00	$53,882.00	
492	The items where liability for an item is disputed, with the parties’ experts’ quantum estimates from the Scott Schedule, if an item were found to be defective, are as follows:
Item	Description	Osborne’s estimate	Jeffery’s estimate	
4	Fire rated wall to boundary 	$8,519.00	$7,418.00	
6b	Stormwater part 2 	$6,948.00	$6,722.00	
7b	Toilet cistern part 2 	$17,448.00	$3,839.00	
8a	Structural steel to room 5 (Client's actual works, not TC rectification) 	$4,738.00	$3,571.00	
9	Eastern balustrade wall	$15,001.00	$8,718.00	
12a	Steel members to roof frame as constructed	$70,151.00	$43,987.00	
16	Play area concrete level 	$84,295.00	$48,822.00	
19	Reception cabinetry 	$236.00	$208.00	
22	OSB ceiling 	$10,558.00	$8,869.00	
25	Vinyl floor coverings 	$19,615.00	$721.00	
26	Procedural compliance matters relevant to the issue of completion	$3,209.00	$0.00	
27	Structural steel to roof perimeter	$32,618.00	$28,741.00	
28	Interior structural steel frame	$2,603.00	$1,788.00	
29A	Sewer drainage to ground floor bathrooms	$17,294.00	$5,655.00	
31	Framing	$208,929.00	$4,643.00	
32	Lift well slab	$3,366.00	$2,266.00	
	Electrical			
	Total of estimates	$505,528.00	$175,968.00	
493	The total of the experts’ estimates of the claims pursued by the Client were $652,582.00 (for Mr Osborne’s estimates) and $229,850.00 (for Mr Jeffery’s estimates). However, of Mr Jeffery’s estimates totalling $229,850.00, only part of this sum is admitted as rectification costs. Even the total of $53,882.00 in the first table for items where liability was “admitted” by the Defendant, some items were disputed before me. The estimates of Mr Jeffery, totalling $175,968.00, in the second table, where liability was disputed, were provided to assist the Court, if it were to determine that the item was defective work.
494	Analysis of the individual defects: Each of the defects in both tables will be analysed in the following paragraphs and a conclusion stated as to whether an allowance for the item is to be made.
Item 3: Window installation (Matthew Osborne (“MO”) - $1,644.00, Trevor Jeffery (“TJ”) - $1,310.00)
495	The Client alleged that the windows had been installed by the Builder without a pressure flashing as required by Australian Standards 2047:2014. To rectify the item required the installation of a flashing in the form of a continuous bead of polyurethane.
496	Although the Builder agreed that the absence of a window flashing was defective work, the Builder asserted that he was denied the opportunity of having the defective work rectified by his relevant subcontractor. As I have determined that the Client was justified in terminating the Building Contract, the Builder’s assertion has little consequence as the Builder is responsible for the cost of rectifying defective work and completing any incomplete work. In any event, I consider the Builder’s work to be defective in this instance.
497	Mr Jeffery’s estimate of rectification cost varied slightly from Mr Osborne’s because of their different estimates of the amount of sealant required and as to the appropriate allowances for Builder’s margin and contingency.
498	There is no basis to distinguish the evidence of Mr Osborne and Mr Jeffery as to the quantity of sealant required to rectify the defects. I propose therefore to split the difference between their estimates of 40 tubes and 30 tubes respectively and to allow the cost of rectification based on a requirement for 35 tubes of sealant at $10 per tube = $350.00. Other costs totalling $645.00 are agreed by the experts.
499	The issue of the appropriate margins is a matter of significance which will relate to other items in respect of which an allowance is to be made. The relevant margins contended for by the experts were as follows:
(a)	Mr Osborne – 30% Builder’s margin; 10% contingency allowance;
(b)	Mr Jeffery – 20% Builder’s margin, 5% contingency allowance.
500	In relation to the appropriate “contingency allowance”:
(a)	Mr Jeffery said [at T1692], “I always allow five percent unless it’s a particularly unknown job, where there may be items that you don’t know about. But, in this job, there’s no[thing] hidden … we can see exactly what needs to be done”;
(b)	Mr Osborne said [at T1692] that, “generally … I allow 10 percent, very similar to what Mr Jeffery is saying. I think … he’s correct in this … particular item … the five percent would be sufficient.
501	In relation to the appropriate “margin”;
(a)	Mr Osborne [at T1692-3] said that, 
“when I was building, I always did 30 per cent.  That covered an erosion of profit. It also covered the overheads that you incurred, wages, etc. … At thirty percent actually, by the time you've finished anything, it drops back down to about 18. Starting at 20 per cent you end up with a profit margin of about five;”
(b)	Mr Jeffery [at T1693] said, “I think for a job of this nature 20 per cent is a fair amount.  You would basically have a builder that has very limited overheads.  He would probably have no office, would be working from a home office, limited overheads, no staff”. Mr Jeffery stated that “overhead costs” would include “memberships [and] any affiliations, insurance, telephones, vehicle … but these would be spread over many jobs”.
(c)	Mr Jeffery said [at T1694] that he would assume that the builder would:
“be a carpenter [at $75 per hour] … so his income is basically paid from working on site, and then he organises all the materials and everything and … that’s where the 20 percent margin comes in – to give him additional profit and reward for him taking the risk of taking the job on.”
502	Both Mr Osborne and Mr Jeffery were asked by me [at T1693] whether “picking up someone else’s work is always more difficult or … is perceived as justifying a higher margin”. Mr Jeffery responded, “I think the size of this job is enough to make it attractive … for a small builder to want to build it”.
503	Mr Osborne responded [at T1693-4] that, a small builder would not have many
 “jobs on the go at any one time. So nearly all of your income will come from this single project [and] the amount of work you can … physically look after limits the amount of income you have”.
504	Mr Jeffery was asked in cross-examination [at T1697-8] whether a “builder coming to site to perform rectification works … carries … a greater degree of risk”. Mr Jeffery said that he had priced the rectification on “an open book pay as you go type arrangement” as “a builder giving a fixed price … would be open to that sort of risk”.
505	Mr Osborne said [at T1698-9] that he calculated his price:
 “As if I was building the property. I would do the due diligence. … a builder walking into this property at the time of termination would’ve had to try and come up with a cost or provide some estimated costs because you don’t become an open book”.
506	In my view, it is appropriate to accept the evidence of Mr Osborne and to allow a 30% Builder’s margin and, ordinarily, a 10% contingency allowance. I generally prefer the cogency of the evidence of Mr Osborne to that of Mr Jeffery. Mr Jeffery, in the paragraph quoted above [at T1697-98] appears to envisage that a builder would be paid on a cost-plus basis (“pay as you go”) although his estimate for this item purports to be a reasonable fixed cost. Also, I consider that these allowances would be more usual for a project with substantial items requiring rectification and completion, particularly in circumstances where the original contract involved the renovation of existing premises. 
507	Clause 20.5 of the Building Contract, relating to the pricing of variations, provides that, “in the case of additional work”, a variation is to include “an amount of 20% of the cost of the variation for overheads and profit”. 
508	Mr Osborne was asked in cross-examination about the 20% allowance for overheads in cl 20.5. At T1700-1, Mr Osborne agreed that the 20% allowance would be: 
 “sufficient to cover a builder’s overheads and profit, ordinarily … because at the time that you do a variation, you’re generally within 3 to 4 weeks of supplying the materials or the labour or whatever. So, the 20% is sufficient. The 30% I allow is rather for the total building time.”
509	I note that the 20% allowance does not appear to have been regarded as sufficient by the Builder during the project. An example of the margin applied by the Builder for variations appears in the discussion of defect item 12 considered later.
510	In relation to that item, Mr Etcell referred at paragraph 27 of his witness statement dated 5 October 2018 to the payment of a “trade invoice” by a bank transfer by the Builder of $2,376.00 to Peninsula Steel on 2 May 2018 in respect of invoice 19216 [SCB 524]. The Builder’s subsequent invoice to the Client for this work [at CB 3180] is dated 3 May 2018 and claimed $4,950.00 (incl. GST) for work described as, “Variation invoice to remove and relocate steel post as per engineers”.
511	The Builder added a margin of $2,571.00 to the sub-contractor’s invoice of $2,376.00, and claimed from the Client the total cost of $4,950.00. This is an additional allowance of 108%.
512	I will allow the sum of $1,569.07 for this item, being $995.00 plus allowances of 30% builder’s margin, 5% for contingencies and GST.
Item 4: Fire rated wall to boundary (MO - $8,519.00), TJ - $7,418.00)
513	Architect’s drawing A101 specified the fire rating of the Fyrchek cladding which was to be installed to the play deck storeroom. Drawing A101.0 issued on 4 October 2017 “for construction” [CB 1616], in the legend in the bottom left corner, required “2 hour fire rated walls” for the “boundary wall” with, on the external face, “two layers 16mm Fyrchek”, covered by “render over 6mm Cemintel sheet” over “35mm batten”. There was no issue that the Builder was required to build to this standard.
514	Mr Osborne reported that the Builder, when constructing the boundary wall, did not install the double layer of 16mm Fyrchek and the battens [CB 14]. Mr Osborne said (T199) that he observed plywood bracing on the timber frame covered by cement sheeting over the top of the ply. This was confirmed by Mr Jeffery and is shown by Mr Osborne’s photographs 33 and 34 [at CB 48].
515	The Builder said that the works were “incomplete”. Mr Etcell gave evidence [at T1315], after the concurrent evidence of the experts discussing this item. Mr Etcell said that, 
 “we constructed both the wall and the storeroom. We knew Frychek had to be installed. But we couldn’t install it because there’s no roof to cover it up. … We were being pressured … by the Mustafas to have things completed. … we had some cement sheet there, we installed it so that we could lock the storeroom up and basically reach the lock-up claim. … and then afterwards when we had the roof on, we were going to put the Fyrchek plaster in place. It had to go inside and outside, we were well aware of that.”
516	I do not accept this evidence. It seems most improbable and, as I have previously indicated, I am reluctant to accept Mr Etcell’s evidence on controversial matters in the absence of Mr Barnett as a witness, or other corroborating evidence.
517	 The explanation offered by Mr Jeffery as to why the Fyrchek had not been installed was that, “Builders make errors, I guess” [T405]. Mr Casamento suggested that, as the Fyrchek had a paper backing it needed to have a further covering for protection and could not be erected on site if it were to be exposed to the weather. 
518	The experts agreed in the concurrent evidence session that it would be very difficult to retrofit the Fyrchek. There was evidence from Mr Jeffery that the Fyrchek layers might have been installed later over the existing cement sheeting, with a second cement sheet on battens on top of the Fyrchek layers to provide protection from the weather. This evidence was unconvincing. I accept the evidence of Mr Osborne that for the Builder to do so would be to proceed “out of sequence” and not in accordance with the contract drawings.
519	This was the first defect item examined in the concurrent evidence session with Mr Osborne, Mr Jeffery and Mr Casamento. Some of the evidence given by Mr Jeffery and Mr Casamento was not helpful. Their evidence was, at times, speculative and more in the nature of advocacy on behalf of the Builder. This approach by these experts became more apparent as the trial progressed and further evidence was received. I refer, by way of example in relation to this item, to Mr Jeffery’s explanations as to why the Builder might have proceeded with the works in the order he did, including:
(a)	installation of the Fyrchek layers in wet weather would destroy the “fire integrity” of the material [at T401]. Mr Jeffery, and Mr Casamento appeared to exaggerate the susceptibility of Fyrchek to moisture, although Mr Jeffery later produced “a CSR document” that stated, “Protect plaster board and cornice from weather and moisture”;
(b)	it “doesn’t matter” if the detail on the architectural drawing is not followed as “the Fyrchek gives the fire rating. So that can be installed over cement sheet or plywood or you can put it straight onto the timber studs … if there’s cement sheeting there it’s actually going to add to the fire rating” [at T402-3]; and
(c)	the cement sheeting was only installed, without the layers of Fyrchek underneath in one area – “We’re only talking the front of the storeroom which is about two metres … and then the side”. Mr Jeffery then accepted Mr Osborne’s evidence that the measurement was “six metres” not two metres for the front of the building [at T406]. Later [at T415], after the experts had examined drawing A100 [CB 1617], they agreed that the Fyrchek was to go on “all four sides of the storeroom”.
520	Mr Casamento’s comments [at T407–8] were, in my view, similarly disingenuous:
 “Well, it's clear that, I guess, the builder hasn't, you know, conformed exactly with what's, with what's on that diagram. The question is what he was going to do in terms of the installation of the Fyrchek and the cement sheet and the batons, you know, after it. When I saw it, you know, there was no roof there so I thought, okay, well he hasn't finished, but why he's installed an initial extra layer of cement sheeting? I don't know the answer to that, Your Honour. I don't know. The only thing I can suggest is that without the roof, the top part, all the top part of the Fyrchek is going to be destroyed with water and the weather getting in, so that's important. It's not just the sides, but the top.”
521	These comments were made in the context of considering the issue of whether the omission of the Fyrchek layers under the cement sheet was a careless mistake or a deliberate choice to proceed with the works differently to the drawings because of some other reason not apparent from the evidence. 
522	As I said at [T411–2]: 
 “It seems to me there are two alternatives. Either the builder was going to leave the cement sheeting on the outside and do nothing more, or the builder, at a later time was going to put in the Fyrchek and he would just wear the cost of the additional cement sheeting.”
523	I am satisfied that the Builder did not proceed with the construction of the boundary wall in a proper sequence and in accordance with the contract drawings. There is no evidence that he intended to return to install the Fyrchek layers and further cement sheeting, or that there are facts from which the latter course would be a more probable inference. The work was defective and not simply incomplete.
524	Quantum: There are only minimal differences between the basic rectification cost estimates of Mr Osborne ($5,416.00) and Mr Jeffery ($5,352.00). The difference in the total estimates – Mr Osborne ($8,519.00) and Mr Jeffery ($7,418.00) arises from the application of different allowances for margin and contingency. I prefer the allowances made by Mr Osborne for the reasons I gave earlier.
525	Accordingly, I shall allow the sum of $8,519.00 in respect of this defect item.
Item 5 (and 37) – Internal doors (MO - $88,096.00, TJ - $19.904.00)
526	In his report dated 31 October 2018 [CB 14], Mr Osborne raised a number of items of defective work relating to the internal doors, as follow:
(a)	Handle height: the height of door handles varied from door to door rather than the 1.5 metres above the floor specified on the door and window schedule notes on architectural drawing A.900.1;
(b)	Height of door frames: the height at which the doors and door frames were installed above the finished concrete level was too high leaving an excessive gap at the base of the door and frame and the floor covering;
(c)	Service cupboard doors: the door and door frame on the ground floor (“GF”) services cupboard was a normal MDF clad Redicoat door rather than the semi solid core timber, smoke sealed door and pressed metal frame specified in the door and window schedule on architectural drawing A.900.1.
527	In his report dated 4 December 2018 [at CB 150], Mr Osborne added a further door-related item requiring rectification (Item 37), as follows:
(d)	Width of door frames: doors to the laundry, room 1 and office were installed with a clear opening of less that 850mm from the most internal edge of the door jamb to the closest part of the door or jamb on the opposite side, when the door is in full open position, as required by the door and window schedule notes on Architectural drawing A.900.1.
528	Handle height: There was no dispute that this part of the item was defective work. Note 7 to Architectural drawing A.900.B [SCB 98] provided that, “All door handles to be mounted at 1500mm”. I reject the statements by Mr Etcell, at paragraph 292(c) of his witness statement dated 5 October 2021 that, “The Architect signed off on the shop drawings for the windows and the heights of the door handles”, and at paragraph 319, refuting the Client’s claim that “the doors supplied and fitted by us were noncompliant and defective, [as] these doors were installed as per the approved shop drawings and deemed to be compliant by the Architect”.
529	I also reject the assertion by Mr Etcell [at T1321–T1322] that, had the issues:
 ”That there were door handles at the wrong height … or gaps that were too big under the face of the doors and also the width of the door openings [and they had been] brought to our attention before the end of the project, obviously we would have had SEM Windows rectify those issues.”
530	The dispute is largely about the nature and extent of the rectification work required. Mr Osborne estimated the cost of removing and disposing of the doors and to supply and install new doors.
531	Mr Jeffery suggested an alternative method of rectification involving “remove doors, replace aluminium lock side of door and replace latch side of door frame [supply] new aluminium side of door and single side of frame, fixings and sundries … dispose of materials”. This would have involved replacement of sections of the doors. 
532	Mr Jeffery gave evidence [at T1705] that, “if I was doing this work, I would contact the original supplier of the doors and ask them to come out, take the doors off, go back to the factory, do the works in their factory and then bring the doors back and it’s just a matter of screwing them back on”. 
533	Kosta Polites is the director of Full View Windows Pty Ltd, the subcontractor engaged by the Client after the termination of the Building Contract to complete the installation of the doors.  Mr Polites had given evidence [at T1148], in relation to the 850mm clear door openings, that as the doors were a Chinese product, he could not modify the doors and frames easily as, “I do not have access to that material. So, I couldn’t change the locks style or the bottom or top rail to actually make it grow and cut down the sidelight. That way you can actually have that wider door”.
534	I accept the evidence of Mr Polites. In the absence of supporting evidence for Mr Jeffery’s suggestion that it would be a straight-forward and cost-effective matter to request replacement materials from the local supplier, I would not accept that as a likely possibility. 
535	Mr Jeffery did not price the cost of the total replacement of the doors. Although his estimate of the suggested alternative is substantially lower than Mr Osborne’s estimate, I am not persuaded that what he has suggested and priced is appropriate or feasible. 
536	Height of door frames: The parties did not agree that this was an agreed defect. It was agreed by Mr Osborne and Mr Jeffery that “good building practice” required a maximum of no more than 20mm from the finished floor level (“FFL”) to the bottom of the door [at T1640]. 
537	Mr Osborne reported that he had measured gaps at between 25mm and 42mm [at T53]. Mr Polites, who replaced the doors and window units, said that he estimated the gap between the doors and FFL at 30mm [at T1143]. Mr Polites said that in his work he aimed for a gap between 12mm and 15mm.
538	Mr Jeffery said that when he inspected the doors, no rectification work had been undertaken. The photographs taken by Mr Osborne dated “2021/06/16” [at CB 657–9] show various sized gaps including a gap of 15mm between the bottom of the door and the FFL on photograph 5. Mr Osborne stated in his report dated 18 June 2021 that by the time of the later inspection, at which he took the photographs, the doors and door frames had been lowered [CB 636]. I accept this evidence.
539	Service cupboard doors: There was a dispute as to whether the Builder’s work was defective or incomplete. The Builder said that he intended to install the correct doors and was waiting until the plastering for the door frames allowed him to do this. 
540	Mr Jeffery went further [at T575] and stated that it was “normal building sequence”. He said, “The builder’s put a temporary door on there just to make it safe for any temporary power that’s in there but at a later date a fire door and frame will be installed”.
541	Mr Osborne said that as the service cupboard did not guard a power supply, there was no need for a temporary door [T582]. Mr Osborne also said that the door frame for the service cupboard had been “packed into place” [T575] and “the reveal of the door opening had been plastered” and the frame with the door “should have been installed ready for painting” [T576–7]. Mr Osborne suggested that this indicated that the service cupboard door would not be altered. Mr Jeffery conceded under cross-examination [at T583] that on photographs 39–41 [at CB 51–2], “it does look like the door frame is fixed in place”. 
542	The evidence of Mr Jeffery appeared to be based upon assumptions that were not justified and, in the circumstances, his evidence on this point was unreliable. I am persuaded by the evidence of Mr Osborne that it was more likely that the Builder had not proposed to install the specified fire doors.
543	Width of door frames: It was agreed by the experts that the relevant contractual requirements were contained in note 20 on Architectural drawing A.900.B [SCB 98] that provided that, “All doors to measure 850mm clear openings”, and note 19 of Building Permit no. 4 that provided under the heading “Disabled provisions” (clause D3.3) that, “All new doorways to measure a minimum of 920mm in width and provide a clear opening of 850mm”.
544	These provisions required a minimum door frame width of 850mm and, as a result, the totality of the door related works were defective. This conclusion was reached only after considerable discussion, including Mr Jeffery referring to shop drawings which he said would take “precedence over any of the other documents” [at T1598–1599]. Most of this discussion was unhelpful. 
545	Mr Osborne gave evidence that door openings were less than 850mm and referred to photographs 38, 39, 40 and 41 [at CB 172–4]. I am satisfied that his evidence accurately reflected what the Builder had constructed.
546	In respect of matters raised in the Builder’s final written submissions:
(a)	I accept the evidence of Mr Osborne and Mr Polites as to the existence of defective workmanship in the installation of the doors;
(b)	I consider that the number of doors with door handles is irrelevant as the doors exhibited multiple problems which meant that the replacement of all doors and frames was, in the circumstances, the most appropriate method of rectification;
(c)	I accept the evidence of Mr Osborne [at T1713] as to the works required to replace each door;
(d)	there is no evidence that the Chinese manufacturer or the local supplier of the doors would have made available proprietary parts to enable the rectification of the doors without replacement of the doors and frames;
(e)	the use of metal plates to cover holes created by the removal of door handles and other items or to fill gaps at the bottom of doors would not have been appropriate for a childcare centre, and would not satisfy the contractual requirement to use new materials;
(f)	I do not accept Mr Etcell’s evidence, particularly in the absence of supporting evidence from Mr Barnett or a witness from the Builder’s subcontractor, SEM Windows, that the doors were installed in accordance with the shop drawings or that the architect had approved any variation to the architectural drawings, if in fact there were inconsistencies between the architectural drawings and the shop drawings;
(g)	both Mr Osborne and Mr Jeffery agreed that the Guide to Standards and Tolerances, apart from any application to domestic building contracts, was also an accepted industry standard of what was good building practice, with application to the Building Contract;
(h)	all parts of items 5 and 37 were not work in progress but were defective work; and
(i)	the cost estimates of Mr Osborne, involving the replacement of the doors and door frames were reasonable and appropriate.
547	Quantum for all parts of items 5 and 37: Mr Polites replaced 24 doors and undertook significant plaster rectification. Mr Osborne said that for Mr Polites to undertake his work, he would have needed in respect of each door, to “pull out all the framing, cut the plaster, install new framing, instal the new doorframes and install the new door” [at T1713]. Mr Polites said in evidence that it was more cost effective to replace the whole doors and the lack of access would generally prevent a sectionalised approach to rectification, particularly having regard to the different types of defects.
548	On behalf of the Client, it was submitted that it was entitled to “brand new doors and window frame suites” and was not obliged to accept a “makeshift alternative fix”. Clause 15.6 of the conditions of contract provided that, “Where the nature of materials is not stated in the contract, new materials are to be used”.
549	In his report dated 17 June 2021 [CB 635], Mr Osborne commented upon the estimate prepared by Mr Jeffery, including that:
(a)	Mr Jeffery only allowed for the replacement of 14 doors;
(b)	a labour rate of $75.00 per hour for a carpenter was more appropriate;
(c)	dismantling the lock side of the doors and replacing the latch side of the door frames risked damage to the aluminium door leaf;
(d)	Mr Jeffery did not allow for the difficulties resulting from dismantling machine manufactured door leaves;
(e)	Removing the aluminium channel and striker plate risked damaging the door frames.
550	Mr Jeffery did not price the cost of the total replacement of the doors. Mr Jeffery also had not suggested any further works to rectify the remaining three disputed matters apart from filling gaps with caulking (Mastic) [at T1711–1712]. 
551	During the concurrent evidence there was debate about the cost of replacing the doorframes. At T1711, Mr Jeffery said:
“Mr Osborne’s got 32 for the removal of the doorframes and 16 hours for the reinstallation of them, equals 192 hours. If I divide that by 24, we’ve got eight hours. That’s one day for each doorframe. Now, that, I would say, is excess to remove a doorframe and reinstall it in the same opening. I would say that should be more like about two hours”.
552	However, the figures that Mr Jeffery quoted were from Mr Osborne’s initial estimate of rectification of this item included in his first report dated 31 October 2018 [CB 102]. After the processes between the experts during the various conclaves, Mr Osborne had reduced these figures to those contained in the Scott Schedule, which for the removal of doorframes allowed 24 hours and to install the new doorframes (“after opening and move adjoining windows”) he allowed 66 hours. This is a total of 90 hours, not 192 hours.
553	I accept the evidence of Mr Osborne and am satisfied that the labour allowances he has made both in relation to the doors (which he discussed at T1712) and in relation to the doorframes.
554	Accordingly, I shall allow Mr Osborne’s estimate of $88,096.00 for items 5 and 37.
Item 6a: Stormwater part 1 (MO - $8,203, TJ - $7,096.00)
555	Part 1 of this item has two claims of defective work:
(a)	The pipe in the concrete pavement located on the north elevation outside Bathroom B on the ground floor needed to be removed and replaced. Although this item was included as an “agreed defect”, in fact it was not agreed that this item was a defect. In addition, there was no agreement on quantum, if the item were regarded as a defect;
(b)	The inlet pipe to the carpark drainage pit was undersized and was laid lower than the outlet pipe. This was an agreed defect. The only dispute was as to quantum.
556	Pipe in the concrete pavement: This defect is shown in photographs 42-45 of Mr Osborne’s report dated 31 October 2018 [CB 52-4]. Mr Osborne said that the work was defective and rectification was required by digging up the concrete, lagging the pipe, and covering it in re-laid concrete. Mr Osborne estimated the cost of removing the pipe and replacing it at $625.00. This estimate, and Mr Jeffery’s estimate of $525.00, are the basic costs only without allowances for margin and contingency.
557	Mr Jeffery disputed that the Builder’s work was defective. Mr Jeffery attached a photograph (3.6a) to his report dated 7 April 2020 [CB 263] which was supplied by Mr Etcell. Below the photograph, Mr Jeffery commented in paragraph 8:
 “It must be noted that the stormwater pipe is an existing pipe protruding from the slab at a fixed level. The area shown in the picture had to be completed by installing timber decking that would have provided cover to the stormwater pipe, which in my opinion would satisfy the relevant regulatory requirements. Any additional works associated with this issue will be considered a variation (latent condition).”
558	I shall return shortly to Mr Jeffery’s conclusion of “variation (latent condition)”.
559	Various issues were discussed in the concurrent evidence session:
(a)	it was accepted that the pipe was pre-existing and that lagging should be installed before concrete was poured to cover it [T429];
(b)	Mr Etcell did not identify photograph 3.6a. I am not able to be satisfied that it depicts the relevant pipe shown in Mr Osborne’s photographs 42–45 or that photograph 3.6a is of sufficient quality to show whether the pipe in the photograph was lagged, particularly when compared to the exposed parts of the pipe in Mr Osborne’s photograph no. 43; and
(c)	I accept Mr Osborne’s evidence that there was insufficient room underneath the window to cover the stormwater pipe with timber decking, although decking was later installed after the rectification work was completed.	
560	Latent condition: I have earlier quoted Mr Jeffery’s comment at CB 263 that this item was a “variation (latent condition)”. This is an example of Mr Jeffery offering his opinion on the construction of the Building Contract as though it was a matter within his professional expertise. The issue has relevance to other defect items and is also indicative of Mr Jeffery’s approach to providing expert evidence.
561	The relevant provisions of the Building Contract are as follows: 
(a)	By cl 1.1, the definitions provision:
“latent condition means a condition on, about, below or appertaining to the site which differs from:
(a)	those stated in the contract; or 
(b)	what ought to have reasonably been anticipated and allowed for by a competent builder at the earlier of the date of:
(i)	the Builder's tender; and
(ii)	the contract”;
(b)	Clauses 14.8 to 14.11 relevantly provide that:
“SITE CONDITIONS
14.8	Within 7 days after becoming aware of a latent condition, the Builder must give written notification to the Client.
14.9	Within 2 days of being notified of a latent condition, the Client must give the Builder a direction to overcome the effect of the latent condition.
14.10	If no such direction is given, there is deemed to be a direction to the Builder to overcome the effect of the latent condition as the Builder sees fit.
14.11 	There is deemed to be a variation if compliance with any such direction causes the Builder to carry out more or less work than otherwise would have been carried out if the latent condition did not exist.”
562	These clauses only operate if the Builder has given a “written notification” to the Client. Such a notification must be given by the Builder to the Client within 7 days “after becoming aware of the latent condition”. If the Client, within 2 days, fails to give a direction to the Builder, there is “deemed to be a direction to the Builder to overcome the effect of the latent condition”. If this involves more or less work to the Builder, “there is deemed to be a variation”. These processes could not be relied upon in relation to this item as there was no written notification by the Builder of a latent condition.
563	Similarly, the provisions in cl 20 of the Building Contract, “Variations” had no operation, A variation cannot arise under cl 20 unless the Builder is directed in writing or there is an agreement in writing. In relation to this item, there was neither a written direction nor a written agreement.
564	Finally, there are a number of clauses of the Building Contract in which a matter “is deemed to be a variation”. I list them here for completeness. The following are instances provided for in the Building Contact in which a variation is “deemed”:
(a)	by cl 4.5, if a direction, including a deemed direction, is given by the Client ”as to the interpretation and construction to be followed … in the event of an ambiguity, inconsistency or discrepancy being discovered in or between the contract documents”.
(b)	by cl 6.4, if there is “a direction [or deemed direction] to a Builder to obtain a building and planning approval”.
(c)	by cl 6.5, if the Builder complies “with a change to a building and planning approval”.
(d)	by cl 6.7, if “a legislative requirement … is at variance with the contract”.
(e)	by c. 7.4, if the Builder, at the direction of the Client, rectifies “loss or damage being caused or contributed to by any of the Client’s risks”.
(f)	by cl 15.11, if the Builder rectifies “defective work” of which the Client has given written notice “within 2 days of becoming aware of it”.
(g)	by cl 16.5 if the Builder complies with the Client’s “direction to provide a construction program”.
(h)	by cl 17.3, if the suspension of works by the Builder causes “more or less cost than would otherwise have been incurred”.
(i)	by clause 18.3. a variation is deemed if the “actual quantity of … work [the Builder is] required to carry out [is different] than that shown in the schedule of rates”.
(j)	by cl 19.1, if “the Builder carries out work or supplies an item to which a provisional sum relates”.
565	For completeness, it is appropriate to record the breadth of the definition of “direction” in cl 1.1; “direction, whether deemed or otherwise, includes, agreement, approval, assessment, authorisation, certificate, decision, demand, determination, explanation, instruction, notice, order, permission, rejection, request of requirement”. The definition of “variation, whether deemed or otherwise, means a change: (a) in the character, form, quality or extent of the works; (b) to the Builder’s method of working”.
566	None of these provisions of the Building Contract justify the simplistic construction by Mr Jeffery in relation to this or other defect items, or the attitude adopted by Mr Barnett and Mr Etcell in their approach to variations during the course of the Building Contract.
567	I am satisfied that the Builder’s work was defective and rectification work was necessary.
568	Mr Osborne’s estimate was $625.00 for the basic cost without added margins. Mr Jeffery’s estimate for the basic costs was $525.00. It is difficult to compare the two estimates. Mr Jeffery appears to have reduced Mr Osborne’s estimate on the basis that there was no need to cut back the existing pipe or to lag what he believed was a smaller exposed area of pipe which would not require lagging because it would not be covered by concrete. 
569	For the reasons I have discussed above, I do not accept those assumptions. I prefer the estimate of Mr Osborne. I shall deal with the issue of quantum further after discussing the second issue under this item.
570	Inlet pipe to the carpark drainage pit: It was agreed that this matter was limited to the area of the pits and involved defective work that needed to be rectified [T443]. The only dispute related to quantum. It appeared from the Scott Schedule that Mr Osborne’s estimate to rectify this matter was $8,203.00 and Mr Jeffery’s estimate was $7,096.00.
571	However, both of these estimates include in the basic cost, before the addition of margin and contingency, the experts’ respective estimates of $625.00 and $525.00 for the “pipe in the concrete pavement issue”. If one subtracts these amounts, and only includes the estimates of basic costs relating to the “inlet pipe to the carpark drainage pit” matter, Mr Osborne’s estimated costs total $4,590.00 and Mr Jeffery’s $4,595.00. Essentially, there is no dispute between them (apart from the allowances for margin and contingency) in relation to this matter.
572	Determination of quantum for the two parts of this item: I consider that Mr Osborne’s estimates should be accepted for both matters included in this item, as well as his allowances for margin and contingency. I would, therefore, ordinarily, allow the total sum of $8,203.00 for this item. 
573	However, as this defect item involves plumbing matters, I have considered it further with the other plumbing items 6b, 7a, 29 and 29A when dealing with the issue of the insurance monies paid to the Client in relation to the Builder’s plumbing work. I have concluded, in the discussion under Item 29A, that this item was covered by the insurance payment to the Client. 
574	Accordingly, no further allowance shall be made for this item.
Item 6b: Stormwater part 2 (MO - $6,948.00), TJ - $6,722.00)
575	A downpipe to the first-floor play deck was left protruding in the roof eave. The downpipe is shown in photograph no. 41 attached to Mr Mustafa’s witness statement dated 20 August 2021 [CB 740]. The only issue is whether this is defective work. If it were to be considered defective work for which the Builder is responsible, the experts have minor disagreements as to the reasonable rectification cost. Mr Osborne estimates $6,948.00; Mr Jeffery $6,722.00.
576	Mr Mustafa said in relation to photographs 41 and 42 [at SCB 685]:
 “Taken 3 September 2018. Photo 41 shows the stormwater pipe extending from the roof which became visible after the illegal cladding had been removed from the façade to the play deck area. This pipe had not been connected to a storm water outlet. To rectify the issue the plumber had to run the pipe down the south wall penetrate the play deck slab all the way to the carpark slab and make a cut into the concrete as shown in picture no. 42 and connect it to the carpark storm water. These repairs took a week to rectify.”
577	Sandro Perugini is a registered plumber and the director of Perus Plumbing Pty Ltd who completed the plumbing work for the Client after the termination of the Building Contract. Mr Perugini said [at T1218], in relation to “the upstairs downpipes”, that 
 “there was nothing there to connect the downpipes, so we had to bring in new lines to pick that up, and also we ran another line to pick up the trench grate which was at the front of the building and the playground, because … the outside was level with the inside. … There’s a metal trench [in the photograph at SCB 2]”. Mr Perugini said that in order for the stormwater to “drain somewhere [he] cored a hole through the slab … and the downpipes … on the play deck area … came down the side of the building, and then through the play deck area.”
578	The discussion in the experts’ concurrent evidence session at times strayed into other defect items that had been resolved in the pre-trial discussions. Originally, Mr Osborne’s estimate for the cost to rectify item 6a was approximately $58,665.00. In addition, a related defect item to item 6 was item 38 where there was a claim originally formulated by Mr Osborne as “Stormwater system to carpark” at a cost of $183,774.00.
579	These alternative claims, particularly item 38, related to the fact that the stormwater needed to be routed via the western side of the property rather than the eastern side. However, this was not a matter that remained for decision at trial. 
580	Having concluded that Item 6b is defective work, I need to briefly consider the question of quantum. Mr Jeffery estimate for the basic cost is higher than Mr Osborne’s. However, applying Mr Osborne’s allowances for margin and contingency, his final figure is slightly higher than Mr Jeffery’s. Therefore, I would ordinarily allow Mr Osborne’s final estimate of $6,948,00 for this item.
581	However, as this defect item involves plumbing matters, I have considered it further with the other plumbing items 6a, 7a, 29 and 29A when considering the issue of the insurance monies paid to the Client in relation to the Builder’s plumbing work. I have concluded, in the discussion under Item 29A, that this item was covered by the insurance payment to the Client. 
582	Accordingly, no further allowance shall be made for this item.
Item 7a: Toilet cistern part 1 (MO - $8,164.00, TJ - $5,329.00)
583	The contact drawings provided that in Bathrooms A, B and C, the toilet cisterns to be installed would be “in-wall cisterns”. The Schedule of Finishes [SCB 1729] specified the “Toilet suite” to be used in the construction as “719105BW Leda Care Invisi Series II® Wall Faced Suite with Backrest and Caravelle Care Single Flap Seat – White”, to be supplied by Caroma.
584	The Builder constructed the steel framing without regard to the fact that the toilet cisterns were required to be installed between the steel framing. The Builder had installed plaster over the framing.
585	Mr Etcell gave evidence that he was aware that the in-wall cisterns would need to be installed. He said, “I accept, we had not installed the bathroom cisterns, no. … But where they were to be installed, the tiling had been deliberately left off those walls, so they could be” [T128]. Later, Mr Etcell said, “we were always aware that the in-wall systems were still to be put in. We’d actually placed [an order for] them all with … Swan Plumbing” [T1311].  He said, “We were aware that we had to cut the plaster to instal them. But it would not have been a difficult job to do” [T1312].
586	This evidence is not credible. The in-wall cisterns could not be installed without the removal of the plaster and alterations to the components of the steel framing. It is probable that in the course of carrying out the work of removing the plaster and altering the framing, that damage would have been caused to the framing requiring its replacement.
587	The more likely explanation for the sequence of works adopted by the Builder is that the Builder had neglected to take into account that the specified toilet cisterns were in-wall cisterns and the construction sequence was followed because it was believed that ordinary cisterns would be installed.
588	In my view, Mr Etcell’s insistence that the works had proceeded in a logical and appropriate sequence lacked all credibility and generally left a poor impression of Mr Etcell’s evidence on other matters.
589	The Builder’s experts asserted that the installation of the in-wall toilet cisterns could be accomplished, at a cheaper cost, by removing areas of plaster very carefully so as not to damage the framing to which it was affixed, removing the areas of steel framework which covered the spaces to be occupied by the in-wall cisterns, installing further steel framework on either side of where the in-wall cisterns would need to sit and making good the areas of plasterwork affected by this work.
590	Mr Jeffery said that he would “disagree” with Mr Osborne’s method of rectification. He said he “would carefully cut the area required [using] a multi tool to separate the plaster from the steel and I would have installed the cisterns with minimal demolition”. Mr Jeffery said, “Yes, it would take longer, but in the long run it would be much cheaper than rip the whole lot out” [T626]. 
591	After further questioning, it was apparent that more extensive work was necessary, including cutting a large enough hole to “get additional framing back in to suit the new cisterns going in”. Mr Jeffery said that exploratory holes would be used to identify the location of parts of the frame behind the plasterboard. A frame adjusted to suit the space behind the plasterboard would then be made and inserted.
592	Mr Jeffery’s evidence was that this method would also allow for insertion of “additional framing … to suit the new cisterns going in” and that, following removal of the appropriate sections of plaster, the “trimmer piece along the top … would connect … [the] new studs into any revised locations”. After this, all that would be required would be “to patch that one area” [T626].
593	Mr Jeffery said that “removing the wall … the floor finish is already there, so the vinyl comes off. The ceiling’s already in. The ceilings come down. Any joinery connected to the walls, off. It’s enormous; the follow on works” [T628].	
594	Mr Osborne said, “I wouldn’t do it like that, I would demolish the wall, mainly for speed, get it finished. It’s easier to repair, followed back [with] a covering if there’s nothing wrong with the linoleum or any other items”. He suggested that with Mr Jeffery’s method, “there’d be a hell of a lot of work and it would be a lot more expensive”. Photograph no. 93 [at CB 75] showed “where the cisterns have to go [with] the steel studs directly behind” [T629].
595	Mr Casamento supported Mr Jeffery’s evidence. He said at [T631] that: 
“You just unscrew the actual stud itself, because it’s actually all screwed in. So that can easily come out. And then you would actually then put in another stud wherever you wanted it, at one side or another, but you don’t necessarily have to take out the whole wall.” 
596	Mr Osborne agreed that, “During construction, you just move the studs across”. However, he said at [T631-632]: 
 “In this case it’s a whole wall with a window sitting above it. So it’s not something you can just cut out all the studs, because you’ve got nothing supporting the window. Again, pulling out the studs you’re also going to damage the plaster on the other side [of the wall frame] … As you pull the stud out it’s attached to the plaster on the other side … What normally happened is that you actually cut out that one stud, get rid of it and put [in] another one. You don’t remove the whole wall …”
597	Mr Osborne said in evidence that moving the studs to the correct spacings to fit the cistern in between [them would require] demolition of the steel wall” [T619]. The steel studs, according to his evidence, could not be relocated, and “new ones [would have to be] put … in” [T619]. 
598	Mr Osborne said that “with steel framing, if you … pull plaster off steel framing and undo the screws, you damage the steel frame, so you can’t replace it; it buckles and twists” [T618]. He continued, “To put in the cisterns you have to move the studs to the correct spacings to fit the cistern in between” [T619]. “In-wall cisterns are required to fit between specific spacings of studs to be supported on both sides” [T623].  Mr Osborne said that it is necessary to take “the plaster off and then the steel framework underneath the plaster had to be moved to accommodate the in-wall cisterns” [T624]. 
599	This was because pulling plaster off steel framing and undoing the screws would “damage the steel frame [by making it] buckle and twist” [T618 and T624]. As these were “underneath windows”, these too, would have to be removed. He said: “Steel framing, once you start, you sort of can’t stop till you get to a corner” [T619]. Mr Osborne did not notice these alleged defects on his first inspection of the site but made a note of them during his second inspection. It was during this second inspection that he saw the inwall cisterns were being installed [T623].
600	The experts agreed that the removal of plaster from the steel frame might result in irremediable damage to the steel framework to which the plaster was attached.
601	However, the insistence by Mr Jeffery and Mr Casamento that their suggested means of completing the work was appropriate and reasonable must be rejected. In fact, as with Mr Etcell’s statement that the sequence of works undertaken by the Builder was entirely appropriate, I consider that Mr Jeffery and Mr Casamento diminished the overall credibility of their evidence by their continued defence of the rectification method they had suggested as the most appropriate.
602	Mr Etcell gave evidence that this “would not have been a difficult job to do” [T1312] and would involve: 
 “gently cutting the plaster underneath the window down to the floor, exposing the studs and sliding the in-wall cisterns in and fixing them and then having the plumbing work that was in the wall already attached to the cistern; then re-instal[l] some plaster and file over the top [T1312].”
603	In the circumstances, I do not accept that the work carried out by the Builder was simply incomplete. It was defective work carried out by the Builder without regard to the contract requirement for in-wall cisterns. I am not satisfied that the method of rectifying the installation was likely to be more cheaply completed by the methods endorsed by Mr Jeffery and Mr Casamento.
604	I accept the evidence of Mr Osborne. I regard the evidence of Mr Jeffery and Mr Casamento as unpersuasive and overoptimistic.
605	Nonetheless, Mr Jeffery’s assessment correctly factors in the price of purchase and installation of four, rather than five, toilets (being for bathrooms A and C alone). Accordingly, I would not award the full amount claimed by the Client for Item 7 (Part 1) but would allow $6,531.20, as 80 per cent of its full claim. 
606	It was put to Mr Mustafa that, in substance, “a substantial part of the demolition of the walls and the like was done to accommodate … the opportunity [given to him and Mrs Mustafa] to reconfigure the internals of the childcare centre”. Mr Mustafa responded that, “If the childcare centre was … built correctly, … we would have left it as is” [T734]. I do not consider that this disputed evidence should affect the conclusions I have reached in relation to the installation of the in-wall toilets.
607	Accordingly, I would ordinarily have allowed the sum of $6,531.20, being 80% of Mr Osborne’s estimate of the reasonable cost to rectify this item of defective work. However, in my further consideration of the plumbing matters under item 29A, I have concluded that this item was covered by the insurance payment to the Client.
608	No further allowance shall be made for this item.
Item 7b: Toilet cistern part 2 (MO - $17,448.00), TJ - $3,839.00)
609	Mr Osborne stated that “the incorrect plasterboard had been used to line the shower recess of the upstairs WC”. This would breach the National Construction Code that “requires wet areas to have water resistant plasterboard installed to the surfaces” [T614].
610	The point of contention in relation to the builder’s liability for this item was whether the evidence established that the wrong plasterboard was in fact used.
611	Mr Osborne said that he first saw the remnants of plasterboard at his second inspection on 11 September 2018, after the removal of the plasterboard. He did not see it at his first inspection on 30 August 2018, as at that time the plasterboard was tiled and painted.
612	On 11 September 2018, Mr Osborne did not directly take a photograph of the plasterboard as he was distracted by another item of defective work. However, a photograph he did take on that day [photograph 90 at CB 284] showed, what Mr Osborne said was, the “normal plasterboard colour … a brown cardboard colour [whereas] water resistant plasterboard is either blue or green colour” [T615].
613	Mr Osborne agreed with Mr Jeffery’s suggestion that “when you pull tiles with waterproofing off that plasterboard … the blue or green cardboard that defines that it is [water resistant] plasterboard would come up with the waterproofing and you would be left with just a brown residue of the cardboard”. However, Mr Osborne said that was “not what has occurred”. He said that, on the photograph, “the lefthand arrow is pointing to the section of plaster that was still remaining” [T617]. Mr Osborne conceded that it was “a very small amount of plaster … approximately 200mm in length and probably 100mm at its longest point of the triangle” [T618–619].
614	Mr Osborne said that his “opinion” was based on “an actual visual inspection” on 11 September 2018 and that “the area of plasterboard” he saw at that time was the “area there that is indicated by the red arrow” on photograph no. 90 [T623] and that, “If I had thought it was wet area plasterboard, I would not have put it in my report” dated 31 October 2018.
615	Mr Etcell at paragraph 430 of his witness statement [Exhibit D7] said, “We installed wet room plaster to all wet areas and sealed the walls with paint and waterproof membrane”.
616	Mr Jeffery said that “wet board … costs exactly the same” as ordinary plasterboard. He said that there was no “logic” for a builder to “not install wet board”. Mr Jeffery said that “when you pull something like tiles or waterproofing off, the blue just comes away and you are left with a brown finish” [T620]. Mr Jeffery disagreed with Mr Osborne that it was possible to identify whether the fragment of plasterboard in photograph no. 90 was water resistant plasterboard or not.
617	In the Builder’s final written submissions, Mr Gurr referred to the fact that when Mr Osborne first inspected the area on 30 August 2018, he was unable to see anything because the plasterboard was tiled. When Mr Osborne returned on 11 September, the plasterboard had been largely removed. The removal of the plasterboard was for a reason totally unrelated to the piece of unsuitable plasterboard that Mr Osborne said he saw on that inspection. 
618	Mr Gurr submitted further that the plastering works “formed part of the completion stage under the contract” for which the Builder had not been paid, and accordingly the Client had suffered no loss.
619	I was unable to resolve the conflicting evidence as to what photograph no. 90 shows by my own examination. I am, however, persuaded that I should rely on Mr Osborne’s recollection of what he observed of the relatively small, but not insubstantial, remaining piece of plasterboard at his inspection on 11 September 2018, and what he recorded shortly afterwards in his report. His evidence, based on his observations on site, has in my view, been consistently accurate and reliable. 
620	Mr Etcell’s evidence, in relation to the construction of other items, has on many occasions been inaccurate. The use of an appropriate product would be consistent with inadequate supervision by the Builder. In my view, that is more likely than Mr Osborne recording an incorrect observation. I am satisfied that this item has been established as defective workmanship.
621	Quantum: Mr Osborne’s estimates in the Scott Schedule for this item can be ascertained by comparing the estimates for both parts of item 7. Mr Jeffery made no comparable estimates.
622	Mr Osborne’s estimate for part 1 totals $5,190.00 as the basic cost. He allows “$0.00” for four work items under “Part 1” and makes monetary allowances under “Part 2”, as follows:
Item no.	Description	MO Part 1	Item no.	MO Part 2	
6.07	Waterproof wet area plaster		7.07	$949.00	
6.08	Tiles to bathroom	$0.00	7.08	$6,480.00	
6.09	Tiling labour	$0.00	7.09	Included in 7.08	
	Total basic costs			$7,429.00	
623	With the addition of contingency, margin and GST to the basic costs, the total cost is $11,154.64. I shall allow that sum for this item.
Item 8a: Structural steel to room 5 (Client's actual works, not TC rectification) (MO - $4,738.00), TJ - $3,571.00)
624	When Mr Osborne reported on 31 October 2018, he was critical of “a 10mm steel plate ... welded to the top of ... a steel column ... installed to the north side of store room 4 doorway ... supporting a structural steel beam above room 5”.
625	Mr Osborne’s view was that the steel column should be removed and replaced by “the installation of steel columns to either side of the doorway with a steel lintel installed above the doorway”, as shown in drawing S3B by Nettle Engineering.
626	Later in the experts’ conclave, Mr Osborne was persuaded by Mr Casamento that a simpler method of rectification could have been used involving the welding of a gusset plate to the column.
627	Mr Jeffery considered that the Builder had simply followed a replacement design by the engineers he employed, GHA Engineers. Mr Jeffery said that the contract conditions gave this design precedence over the original drawing by Nettle Engineering. I do not accept this argument as there is no reason why the Builder should not have followed the Nettle drawings which had apparently been requested by Mr Barnett in about March 2018. I will have more to say about the issue of Mr Etcell’s use of his own engineer in my consideration of defect no. 16.
628	In the absence of supporting evidence from Mr Barnett, I reject the evidence of Mr Etcell that “we had Geoff [Holland of GHA] look at it to see if he could come up with a better, more practical, design” [T1395]. Mr Mustafa stated at paragraph 193(p) of his witness statement dated 20 August 2021, “I was not made aware by Ikonic of the GHA designs for this item and no variation was issued by Ikonic to vary the designs”.
629	In any event, both Mr Osborne and Mr Casamento agreed that the installation of the steel column by the Builder, purportedly following the GHA design, was defective because it did not adequately support the structure above. Mr Jeffery deferred to Mr Casamento’s view on this matter [T447].
630	The rectification method suggested by Mr Casamento was a cheaper and simpler option than following the original design and would ordinarily have been regarded as an appropriate and reasonable method of rectification.
631	However, it is probable in my view that Mr Mustafa, as the replacement builder, followed the original Nettle Engineering design as Mr Osborne’s report had advised was required. Mr Casamento agreed in evidence that this course would have been appropriate for Mr Mustafa at the time [T450]. At para. 21(f) of his witness statement dated 26 August 2021, Mr El-Sheikh stated that he remembered the rectification works carried out by the steel fabricator. He referred to photographs showing “work to Room 5”. I consider that these photographs, showing steel framing of a doorway, support the view that the original design by Nettle Engineering was followed during the rectification works.
632	In final oral submissions, Mr Gurr submitted that using a gusset plate as a reasonable method of rectification “was a matter that was discussed and agreed at the liability conclave ... and that’s why it wasn’t progressed further” [T1723]. However, at the trial, the matter was presented in the Scott Schedule as a matter in respect of which neither liability nor quantum was agreed by the parties. 
633	In the Scott Schedule, on page 1 in the “Grand Summary”, the following entries appear for Item 8:
(a)	“MO Item 8 – Structural steel to room 5 (Owner’s actual works, not TC [Tom Casamento] rectification)”, and then under the heading, “If found to be defect”, “$4,738” as Mr Osborne’s estimate and “$3,571” as Mr Jeffery’s estimate; and
(b)	“MO Item 8 – Structural steel to room 5 (TC rectification)”, and then under the heading “Agreed defect”, “$358” as Mr Osborne’s estimate and “$347” as Mr Jeffery’s estimate.
634	There are some differences in the costings by Mr Osborne and Mr Jeffery of both methods of rectification. In relation to the method involving the more substantial works, there are small differences in relation to the labour and quantities of material required and the appropriate margins. I prefer the evidence of Mr Osborne in this regard. I consider that Mr Jeffery’s general approach to this item indicated a propensity to “argue a case” rather than simply express professional opinions.
635	I will allow Mr Osborne’s estimate of $4,738.00 for this item.
Item 8b: Structural steel to room 5 (TC rectification) (MO - $358.00, TJ - $347.00)
636	It is unnecessary to further consider this matter.
Item 9: Eastern balustrade wall (MO - $15,001.00), TJ - $8,718.00)
637	The parties’ experts disagreed as to whether this item was defective work requiring rectification. However, the experts did agree that if the Court were to find that the item was defective, that rectification work would have been required. The parties’ experts disagreed as to the cost of appropriate rectification work – Mr Osborne said $15,001.00, Mr Jeffery said $8,718.00.
638	Mr Osborne reported on 31 October 2018 that the eastern balustrade wall had not been constructed properly and it was required to be demolished and rebuilt. The wall is shown in photographs 51–52 [at CB 57–58]. It is essentially an external fence to the children’s play area lined internally with cement sheet cladding.
639	Mr Osborne’s opinion was that the wall was not constructed properly for the following reasons:
(a)	the wall was not timber framed as shown by Architectural drawing A500.0 [CB 1329];
(b)	the steel columns were at 1.8m and not 1.2m spacing as shown on the Architectural drawing;
(c)	0.55mm gauge steel was used in the construction of the frame which was inadequate for external walls.
640	Was the architectural drawing the appropriate drawing for construction? The Builder stated that he had constructed the wall in accordance with the redesign by the Builder’s engineer GHA Engineers set out in the detail on the Site Instruction dated 21 June 2018 at CB 342. The design of the wall structure was an engineering matter. The Builder asserted that he was entitled pursuant to the Building Contract to engage his own engineer for these purposes.
641	Was the 1.8m spacing of the steel columns defective? There is no evidence that the spacing of the steel columns at 1.8m, as designed by the Builder’s engineer, was inadequate. This was outside Mr Osborne’s expertise. Mr Casamento, a structural engineer, gave evidence that he was unable to say whether the design was satisfactory although he assumed it was adequate because the engineer had prepared it. There is therefore no evidence that the wall with the revised spacing of the steel columns, as constructed, was structurally adequate or inadequate.
642	Was the use of .55mm gauge steel adequate for construction of the frame? Mr Osborne stated in his report at para. 9.8 that “the eastern boundary balustrade wall is partly constructed of rondo .55 mm gauge steel framing”, and at para 9.10, that “The Rondo Pro manual 2015 in the notes for wall installation states: N6. These walls are not for external applications".
643	During the concurrent evidence session on 13 October 2022, Mr Osborne stated that he had telephoned a person at Studco, the supplier of the steel framing used for the eastern balustrade wall [at T454–455]. Mr Osborne was told that .55 gauge steel was inadequate for external framing. Mr Osborne admitted during discussion that he had not specified the context in which the steel had been used.
644	At the resumption of the concurrent evidence session on 7 November 2022, Mr Osborne produced an email dated 19 October 2021 from Beta Zhang at Studco. Mr Osborne had supplied Mr Zhang with a copy of Architectural drawing A500.1 showing where the steel framing would be used. Mr Zhang stated that 75mm gauge steel should be used for the studs and 1.15mm gauge steel for the top plate [T1623].
645	Mr Gurr had noted that Mr Casamento was not present as part of the concurrent evidence that day. And after Mr Gurr had sought instructions in relation to the matter, he said, “it may be that further evidence needs to be given by Mr Casamento on this particular point” [T1624]. No evidence was later sought to be led from Mr Casamento.
646	A number of factors are relevant to the determination of the adequacy of the materials used in the structure: 
(a)	the required fire rating of the structure which would determine the type and strength of the materials used;
(b)	the strength added to the structure by the cladding on the inside of the wall;
(c)	the forces that might be applied to the structure and whether they are limited to wind and impact;
(d)	how the various design factors operated together.
647	It is not, in my view, appropriate to determine the structural adequacy of the wall on the basis of the untested evidence of a representative of Studco, particularly where the basis of the opinions expressed is not clearly articulated.
648	The Client also sought to rely on a basis for claim that had not previously been articulated; that the structural steel elements of an external structure should not simply have been powder coated but hot-dip galvanised. The Client’s case, the discussions by the experts that led to the preparation of the joint report and the fact that the experts’ estimates of rectification costs did not address this further issue would be appropriate bases for not permitting this further matter to be relied upon. 
649	Notwithstanding these matters, the critical issue in my view is the failure by the Builder to construct the wall in accordance with the Contract drawings prepared by Nettle Engineering.
650	As I discuss in detail in relation to item 16, there is no basis for accepting the generality of the submission by the Builder that he was entitled to choose to follow the redrawn plans of his own Engineer, particularly where there was no agreement to this course by the Client. Accordingly, the adequacy of otherwise of the amended structural design has little relevance. Further, where there is an absence of evidence that the wider spacing of the steel columns and the lighter gauge steel used were structurally adequate, there is clearly little basis for accepting the Builder’s workmanship in the circumstances of the use of an altered design.
651	Quantum: Mr Osborne estimated the cost of rectification at $15,001.00 and Mr Jeffery at $8,718.00. The differences in their estimates are largely because of the hours and cost of labour and the different allowances for margin and contingency.
652	In relation to item 10, I have noted the evidence that Mr Jeffery gave in the concurrent evidence session that notwithstanding the fewer hours he had allowed for labour, he would expect that the rectification work “would be done on a no risk type scenario for the builder, where he would be compensated for all the hours that he took to do something” [T1724].
653	I prefer the evidence on Mr Osborne in relation to the quantum of the rectification of this item. I shall allow the sum of $15,001.00 for this item.
Item 10: Western balustrade wall (MO - $5,867.00, TJ - $4,006.00)
654	A note on the “Typical detail through feature balustrade” on Architectural drawing A500.0 [at CB 1329] required the steel columns for the construction of the western balustrade wall to be installed at one metre centres. Timber cladding on battens was to be attached to the posts. The Builder installed the steel columns at 1.8 metre centres. The over-spacing of the steel columns required rectification. There was no dispute that this work was necessary.
655	The only dispute was in relation to the cost of the rectification work. Originally, Mr Osborne estimated the cost of this work at $10,074.00, and Mr Jeffery at $2,897.00. The Scott Schedule narrowed the dispute to $5,867.00 (Mr Osborne) and $4,006.00 (Mr Jeffery). The reasons for the remaining dispute are:
(a)	Mr Osborne allowed 32 hours at $75.00 per hour, and Mr Jeffery 24 hours at $65.00 per hour for the labour to remove the existing steel columns and to install new columns;
(b)	Mr Osborne allowed $250.00 for scaffolding “to access side of playground slab to attach steel columns” and Mr Jeffery allowed $125.00; and
(c)	the different allowances for margin and contingency.
656	Mr Osborne stated in paragraph 3.10-6 of his report dated 4 June 2020 that Mr Jeffery “does not allow sufficient labour cost or time for the removal and reinstallation of the steel columns [which] requires 2 men to mark the position of the steel, drill, bolt and pack each individual steel post to be installed, plumb and to a straight line”.
657	Mr Jeffery indicated in the concurrent evidence session [at T48] that in making his estimates, he did so on the basis that the builder “would be compensated for all the hours that he took to do something”. However, those hours may exceed the estimate by Mr Jeffery and involve additional expense to the Client, unless the risk was with the rectifying builder.
658	I have previously indicated that I generally prefer the evidence of Mr Osborne. I adopt the same approach in relation to this item. I shall allow the total amount of $5,867.00 for this item.
Item 11: Not pursued.
Item 12a: Steel members to roof frame as constructed (MO - $70,151.00), TJ - $43,987.00)
659	Mr Osborne, in his first report dated 31 October 2018 [CB 19–20], highlighted (as item 12) that the steel members to the roof frame had not been constructed in accordance with the contract drawings S3 and S4 (issue 2) [CB 1426 and 1433] designed by Nettle Engineering. 
660	The non-compliances are apparent from an examination of photographs 58–60 taken by Mr Osborne [at CB 60–61]. Photograph 58 shows that what was constructed by the Builder was in accordance with the GHA Engineers design in Sketch SK4 [CB 2064] and was not compliant with section C of Nettle Engineering drawing S4. Photograph 73 [CB 68], which Mr Osborne used to substantiate the scale of the overhang of the roof, shows the overhang eve line of the roof exceeding 500mm.
661	In Mr Osborne’s second report dated 4 December 2018 [CB 142], he noted (as item 27) that additional steel columns were required for the support of the roof structure. This requirement was specified in the certificate issued by Geoff Holland of GHA Engineers on 8 June 2018 [SCB 2065] where he recorded, “Construction of supporting posts to this roof – not yet constructed, 08Jun18 – Not approved”.
662	In relation to item 12, the Builder relies upon the design in drawings SK3 and SK4 [SCB 2063-4] by his own engineer, GHA Engineers (“GHA”), which the Builder said he followed in constructing the roof structure. The Builder submitted that he was entitled to follow the design by his own engineer because item 9 of the Schedule to the Contract Conditions gave “precedence” to the “structural plans builders engineer supplied” over the “structural plans” of Nettle Engineering.
663	At paragraph 394 of his witness statement dated 5 October 2021 [Ex D7], Mr Etcell stated:
“Ikonic Homes’ engineer (GHA Engineers) was engaged after Nettle Engineering had supplied the original drawings. GHA Engineers reviewed Nettle’s drawings and revised the structural details with new engineering. As we had engaged GHA Engineers and his drawings post-dated the Nettle drawings, it was GHA Engineers design that took precedence.”
664	I have discussed the relevant contract provisions in some detail in relation to defect item 16. For the reasons set out there, I consider that there was no contractual basis for the Builder to have constructed the roof structure, otherwise than in accordance with the Nettle Engineering drawing S4. The use of his own engineer’s design in place of the contract drawings was entirely inappropriate and irresponsible.
665	The Builder did not consult or advise Nettle Engineering or the Client of his intention to ignore the design of the roof structure in the contract drawings and to build the structure using an alternative design obtained by the Builder from GHA.
666	In the concurrent evidence session, there was an extensive discussion about the buildability of the Nettle Engineering design in relation to Section C of S4 and the GHA design in sketch SK3 [T466–483]. The discussion was not particularly helpful. However, a critical factual matter that Mr Osborne raised, and Mr Casamento accepted, was that certain parts of the fascia as built, and as shown on the photographs, were in excess of 1.2m rather than 0.5m as shown on the GHA drawings.
667	During this part of the concurrent evidence, it seemed to me that whilst Mr Osborne was attempting to answer the specific questions I asked, Mr Casamento was attempting to demonstrate that the GHA design for the roof was a better, more stable design and, although it could not be built without modification, it would require less modification than the Nettle Engineering design. 
668	Mr Casamento had in his report dated 14 October 2021 stated that the GHA design for the roof structure in sketches SK3 and SK4 was “structurally adequate” [SCB 2029-30]. Mr Casamento clearly had not had regard, in reaching this conclusion,  to the extent of the roof overhand and the full terms of Mr Holland’s certificate on 8 June 2008, where Mr Holland noted that additional steel columns had not been .constructed although they were required for the support of the roof structure. Mr Casamento also said in his report that, “This is a structural issue and outside of MO & TJ’s [Mr Osborne’s and Mr Jeffery’s] area of expertise”. I found Mr Casamento’s evidence unconvincing.
669	At the conclusion of the discussion [at T482-3], there was the following exchange:
His Honour:	“…I think what you’re saying is that it would be easier to modify the GHA design to achieve that final result, rather than modifying the original Nettle design.”
Mr Casamento:		“Yes.”
His Honour:	“Because the GHA design provides lateral support as well, whereas the original design would not. It still doesn’t answer the question: Why was there a need for a second design that wasn’t followed anyway? Which we can’t answer yet.”
670	Further relevant matters were raised in the cross-examination that followed:
(a)	Mr Osborne had raised, in his reports, the fact that, although there was “no detail” on the GHA plan of the “actual attachment of the timber framing” and how “the steel beams … get tied back to the original building. The Builder had used “tech screws approximately 50mm long”. Mr Casamento agreed that this would not be “an appropriate way to affix these members” and they should have been “bolted” [T483];
(b)	 “If Loxo [cladding] was to be attached to this façade”, Mr Casamento’s opinion was that, “it’s highly likely that the actual beam going across the support beam may have needed strengthening”, although he could not say that “the existing beam wouldn’t take the load”, he hadn’t “done any computations” [T484]. This view accorded with that of Mr Etcell who, at paragraph 292(j) of his witness statement [Ex D7], stated that “LOXO is a heavier product than the original foam and render in the plans and it is likely that the supporting steel had to be redesigned to bear this additional weight”;
(c)	Mr Casamento said [at T485] that, because the overhang of the facia was longer than 500mm, he could not be satisfied “that the works had been undertaken in a proper structural manner”, notwithstanding Mr Holland’s certification as the design engineer on 8 June 2018.
671	Mr Fernandes was responsible for the preparation of the structural drawings at Nettle Engineering. On drawing S3, he placed two notes. They read as follows:
 “Top left-hand corner of drawing S3 – “Builder to confirm any beam and or any supporting structures before demolition occurs and contact this office for further assessment and details to slab underside and cut-out”.
 Centre right of drawing S3 – “Builder to contact this office once demolition of existing roof eave commences to further assess the exist roof rafters and check proposed connections”.
672	Mr Fernandes said [at T1107–8] that
 “we knew obviously that the eave was going to be extended out on all four sides … But again, until the ceiling was demolished and removed, we could only guess as to what was there. So my original design had timber rafters to make up the extension. … Once … the ceiling and the external eave was demolished [the Builder was] to contact us, so I could do a site inspection and further assess the situation.”
673	The GHA roof design provided for SHS posts [steel square column posts] some distance from the wall. The eaves, which had already been extended on all sides were to be extended by a further distance, except the east wall. The GHA drawing did not differentiate between the need for posts on one side of the building and not the other. 
674	Mr Fernandes was asked about Mr Holland’s certification of the roof structure on 8 June 2018 and the absence of the steel posts. He agreed that the absence of the steel posts, although originally an architectural feature (“just there to hold the screen”), made the roof structure “unsound” because of the extension of the existing roof [T1131–3]. He said that he saw Mr Holland’s design “as requiring those posts as support” for the “extension”. Mr Fernandez did not regard “the posts as being sufficient as a support”. 
675	Mr Fernandes noted that Mr Holland did not issue a certificate of compliance for the eave structures due to the lack of installation of the posts [SCB 2065]. The certificate, signed by Mr Holland and dated 8 June 2018, relevantly reads as follows:
 “Building work inspected being the alterations to the external roof to the existing Medical/Office Centre:
 Extension and alterations to the existing roof frame structure, inspection, 08Jun18 - Approved
 Construction of supporting posts to this roof – not yet constructed, 08Jun18 – Not approved.” 
676	Mr Fernandes interpreted Mr Holland’s conclusion “not approved”, in his certificate dated 8 June 2018, as being reached because Mr Holland “required … these posts to support … that section of roof, and because they weren’t installed at the time, it wasn’t approved” [T1133]. Mr Fernandes’ opinion was that GHA’s design was not sufficient to achieve its designed purpose and was structurally unsound [T1131-3].
677	In my view, the fact that the Builder followed the GHA design of the roof rather than the Nettle Engineering drawing, and the inadequacy of the GHA design as it was constructed by the Builder, leads to the conclusion that the roof works were defective and required rectification.
678	Mr Mustafa, at paragraph 193(t) of his witness statement dated 20 August 2021 [Ex P3], stated:
 “The work required to rectify this defect (steel members to roof frame) was performed. The structural steel was supplied by C & M Aluminium. I was not made aware by Ikonic of the GHA designs for this item and no variation was issued by Ikonic to vary the designs. I am aware that a significant amount of steel needed to be placed into the roof once Ikonic left site. I engaged Marcos Fernandes of Nettle Engineering to inspect the works after Ikonic left site as Ikonic had not issued Certificates of Inspection or Certificates of Compliance and Robert Soklevski has issued a Building Order on 8 August 2018 stating that Certificates of Compliance had not been issued. Marcos Fernandes issued a Certificate of Inspection on 15 October 2018.”
679	The Building Order of Mr Soklevski dated 8 August 2018 [CB 3654-6] related to:
(a)	the installation of an unapproved cladding by the Builder. This was later rectified by the installation of the LOXO product;
(b)	the absence of notification to the building surveyor “of the mandatory inspection notification stages, being inspections prior to placing a footing (e.g. foundation/pre-slab), prior to pouring all in-situ reinforced concrete (e.g. slab or trench steel, columns, beams) and upon completion of framework (e.g. steel, timber)”. 
(c)	Some of these matters were also resolved by further works carried out by the Client and the Certificate of Inspection by Mr Fernandes dated 15 October 2018 [CB 3947-8]. Mr Fernandes inspected 3 items including “Rectified bracing works to roof and existing wall bracing” and “Amended roof beam connection” and “internal non-load bearing wall partitions”. Mr Fernandes certified that the works complied with the relevant statutory requirements and were completed in accordance with the Nettle structural drawing S3C dated 13 September 2018;
(d)	The question of “framing” remained unresolved. It was mentioned in a Certificate of Compliance issued by Mr Holland on 30 April 2019 [at CB 4500]. This certificate referred to limited framing items. This certificate is further discussed under Issue 4 in relation to defect Item 31 – Frame;
(e)	An analysis of all of Mr Holland’s Certificates of Compliance issued in relation to the project suggests that framing inspections were not carried out by Mr Holland apart from the limited inspections referred to. Mr Holland was not called as a witness. It would have been expected that it would be the defendant who might have called him, particularly as Mr Etcell, in his own evidence, relied upon Mr Holland’s design work as well as his inspections, in lieu of those by the Registered Building Surveyor.
680	There are further matters raised by the Builder in relation to Mr Osborne’s estimates:
(a)	whether Variation no. 2 has any relevance to this item;
(b)	whether the “uncertainties” in the original Nettle design would, inevitably, have resulted in further works by way of variation at additional cost to the Client.
681	Variation no. 2: At paragraph 97(b) of his witness statement dated 5 October 2018 [Ex D7], Mr Etcell referred to Variation no. 2 [CB 3167] which included, “b. removal and relocation of a steel post including bracing ceiling and strengthening of roof. The variation had been requested by the Architect by email to myself and Justin [Barnett] on 8 March 2018 [CB 3006]”. The email dated 8 March 2018 [CB 3006] does not appear to refer to work of the nature described in Mr Etcell’s witness statement.
682	At paragraph 127 of his witness statement, Mr Etcell again referred to Variation 2 and works required to the roof. He stated:
 “These works have been completed and I have the correlating trade invoice that was paid by Iconic on 2 May 2018 [SCB 524]. Upon completion of these works Ikonic Homes issued Invoice #1805/03.1 on 3 May 2018 in the sum of $4,950,00 [CB 3180]. This invoice has not been paid.”
683	The payment of the “trade invoice” is said to be evidenced by a document referring to a bank transfer of $2,376.00 to Peninsula Steel on 2 May 2018 in respect of invoice 19216. This invoice is not cross-referenced to any of the three Court Books. The Builder’s invoice to the Client at CB 3180 is dated 3 May 2018 and claims $4,950.00 (incl. GST) and is described as “Variation invoice to remove and relocate steel post as per engineers”. It is unclear what “steel post” and what “engineers” are being referred to in the invoice. I cannot reach any conclusion about the relevance of the invoice to this defect item. I note that there appears to be a considerable mark-up of the payment by the Builder to his subcontractor when preparing the invoice for the Client.
684	“Uncertainties” in the Nettle design: It was said by the Builder that, if the Builder had gone back to Mr Fernandes at Nettle instead of engaging GHA to redesign the roof structure, Mr Fernandes would have required additional work, particularly arising from the extension of the roof line which would probably have involved a variation and additional expense to the Client.
685	Further, the redesign of the roof structure would have needed to take account of the requirement to install heavier Loxo cladding which would have required a variation and additional expense.
686	Each of these matters was dealt with by the further works undertaken by the Client after it terminated the Building Contract and Nettle Engineering was asked to redesign the roof structure. I consider that this would likely have involved variations to the Building Contract and additional expense to the Client for the more substantial roof structure required. 
687	In relation to the Loxo cladding, this requirement was added by amendment to the architectural drawing A.300.0 dated 10 October 2017 [CB 1326] shortly prior to the execution of the Building Contract by the parties. However, the amendments to the drawing included, a note in the top right hand corner reading, “All new rendered walls to be constructed with Loxo 50mm AAC External Wall System”. This amendment was not “clouded”, which is apparently the normal practice. It is possible, therefore, that the Builder was unaware of this requirement prior to the execution of the contract documents, particularly as the engineering drawings were not altered at that time. The Builder should, however, have become aware of the requirement to install Loxo, long before that work became necessary. 
688	Accepting therefore, that the original structural drawings were likely inadequate in the final design of the roof structure because of the need to extend the facia from 500mm to about 1.2m, and the reasonable possibility that the Loxo cladding would require further strengthening of the structural elements, the difficulty becomes how to assess what part of the cost of the later works would have needed to be borne by the Client in any event.
689	I am given little assistance by the evidence, although these issues were known to the parties and their experts for some time prior to trial. I consider that I should deduct a percentage from the amount allowed to the Client, which must follow as a result of the Builder’s failure to either follow the Nettle Engineering structural drawings or, alternatively, to comply with the contractual processes to deal with any conflicts or shortcomings in the contract design in order to recover any additional costs involved as a variation to the contract.
690	I propose to deduct 20% from any sum to which the Client is entitled to recover, as the additional work resulting from the Builder’s failure to construct the roof structure in accordance with the Nettle Engineering design. I consider that this deduction will prevent the Client receiving the reimbursement for costs it would ordinarily have had to bear.
691	Mr Osborne’s original estimate of the cost of rectification was $70,151.00. As defect item 27, Mr Osborne included an additional estimate of cost of $32,618.00. This sum is made up of additional allowances for “new steel purlins” of $28,755.00 and crane hire of $4,400.00, total $33,155.00, less $12,419.00 allowed in his first costing. The adjusted net estimate for the additional matters is $20,736.00. In his later report, Mr Osborne increased his original estimate of $70,151.00 by this net figure of $20,736.00, to $90,887.00.
692	As Mr Osborne explained [at T486], item 27 is “the same matter [as item 12], it was just the costings that have changed because the rectification works that were undertaken were a lot more substantial than what I’d originally calculated”. Mr Jeffery agreed that, as well as his original estimate, there should be added a net additional cost estimate of $20,736.00, making a total for his estimate of $64,723.00.
693	Mr Jeffery’s estimate for the “cost for rectification, should it be proven that the GHA design was not applicable”, was $43,987.00. The differences between Mr Osborne’s original estimate of $70,151.00 and Mr Jeffery’s original estimate of $43,987.00 were essentially made up by the following matters:
(a)	in regard to “scaffold to perimeter of building”, Mr Jeffery reduced the allowance to $3,900.00 on the basis that on the “east, west and north perimeter of building”, “scaffold cost to be shared 50% with other façade and window sunshading screen and structure works” and “scaffold to south of building will be small mobile off 1st level playdeck slab”;
(b)	a reduction in hours for the items of work described by Mr Osborne as “remove timber roof framing” (from 32 to 16 hours, and “remove steel purlins” (from 32 to 16 hours) and “install new purlins” (from 120 to 64 hours – Mr Jeffery calculating the hours as “128 no at ½ hr each”);
(c)	the differences in allowances for margin and contingencies; and
(d)	Mr Jeffery noted that it was his understanding that these further works are as a result of strengthening the roof fascia for the variation to Loxo panels required for fire rating [and] as such these works should be a variation to the Builder’s Contract scope of works”.
694	I am satisfied that Mr Osborne’s estimates for items 12a and 27 are appropriate and reasonable. The allowances for item 12a, as adjusted by his estimate for item 27, totalling $90,887.00 ($70,151.00 plus $20,736.00), and deducting 20% for the provision for likely additional works to accommodate the LOXO cladding ($18,177.40), calculates at $72,709.60. I shall allow that sum for defect items 12a and 27.
Item 12b: Steel members to roof frame as GHA design (MO - $0.00, TJ - $4,712.00)
695	There is no need to address this item.
Item 13: Steel framing to carpark and building (MO - $236.00, TJ - $208.00)
696	The parties’ experts agreed that this item was defective work and that the appropriate method of rectification was to use a non-shrink grout, the cost of which was in the vicinity of $150.00. The difference between the estimates of Mr Osborne ($236.00) and Mr Jeffery ($208.00) was in their respective allowances for Builder’s margin and contingencies. For the reasons given earlier, I accept the allowances made by Mr Osborne are appropriate. I will allow the sum of $236.00 for this item.
Item 14: Concrete (MO - $5,785.00, TJ - $3,347.00)
697	The Scott Schedule lists this item as an “agreed defect”, with the only disagreement being as regards quantum, and with Mr Osborne estimating the reasonable rectification cost at $5,785.00 and Mr Jeffery at $3,347.00. However, during the hearing, arguments were advanced suggesting that the issue of liability by the Builder to rectify the item was not agreed.
698	In Mr Osborne’s report dated 14 October 2018, he described exposing a hole in the second level slab that had resulted from the Builder’s removal of a disused service or structural member. The penetration measured “approximately 800mm long and 400mm wide” and had been partially “filled with expansion foam then covered with a piece of tin and covered with a 1mm to 2mm coating of Ardite that was blended into the existing concrete”. There were further smaller penetrations in the slab.
699	There was no issue that good building practice required the floor slab to be fireproofed to a certain fire rating level. This would ordinarily be achieved by sealing holes with concrete compatible with the surrounding slab or filling the hole with appropriate fire-resistant foam and covering the foam. Mr Osborne said that the foam used by the Builder was not “fire rated foam [which] is generally red or pink in colour” [T498]. The foam used was “bright mustard yellow colour” [T499]. 
700	Mr Osborne said that the colour of the foam used by the Builder was confirmed by photographs 68-70 in his report dated 31 October 2018 [CB65-6]. Mr Osborne said that when he uncovered the hole, he saw, “the foam sits down approximately 100mm below the tin” cover he removed [T507]. Mr Casamento agreed that the hole “could have been filled either with concrete or with foam” [T504].
701	In his report dated 7 April 2020, Mr Jeffery stated, “I have been advised by Paul Etcell that fire rated foam was used in filling all slab penetrations”.  Mr Jeffery later stated in the report, “Based on the advice from Ikonic that fire rated foam was used to fill the penetrations it is my opinion that there was no requirement for additional works to be undertaken in order to ‘achieve the recommended FRL’” [CB 273]. 
702	Mr Jeffery also referred to his interpretation of the contract documents and the need for a variation if the Builder were to be required to fill the holes created by the removal of disused services. In the concurrent evidence session, Mr Jeffery repeated his views on the contractual issue which he asserted provided an answer to the claim of defective work, referring [at T500] to the absence on the “contract plans” of a note of the fire rating to be achieved when filling holes in a floor slab resulting from the removal of disused services. 
703	Mr Jeffery said, “This is a contract where the builder does what’s on the plans. That note was not on the plans therefore the builder didn’t – wouldn’t have allowed for that in his contract price”. These arguments were also supported by Mr Casamento [SCB 2030]. In my view, these matters were not raised as permissible expert evidence but rather as submissions better left to the Builder’s counsel.
704	The Builder by removing disused services exposed holes in the slab. He knew that the holes could not be left there, so he filled the holes. This work was not done properly, and once discovered by Mr Osborne, required rectification as defective work. 
705	Quantum: The essential differences between the two estimates of Mr Osborne and Mr Jeffery, to have “the penetrations filled with concrete”, are:
(a)	Mr Jeffery allowed nothing for the cost to “cut hole in ground floor ceiling and install formwork under penetrations through slab” and “repair plaster ceiling”, stating that the rectifying builder should “co-ordinate works to be done at the time when the ceilings below were removed”; and
(b)	the figures used for “contingency” and “builder’s margin”.
706	In relation to each of these matters, I prefer the evidence of Mr Osborne. I considered that Mr Jeffery’s evidence on quantum appeared coloured by the inappropriate views he expressed on the liability questions. There appeared to be no real issue that the rectification work required work from the underside to the floor slab. If it were suggested that this aspect of the rectification had been duplicated by other rectification or completion work, such matters have not sufficiently been established on the evidence.
707	Accordingly, I will allow the sum of $5,785.00 for this item.
Item 15: Not pursued.
Item 16: Play area concrete level (MO - $84,295.00), TJ - $48,822.00)
708	Order of precedence of contract documents: In relation to a number of defect items, including this one, the Builder has referred to paragraph 9 of the Schedule to Contract Conditions which sets out the “Order of precedence” of certain documents. The reference to the paragraph has usually been made in instances where the Builder submits that “structural plans builder’s engineer supplied” should have precedence over “structural plans” or “architectural plans”.
709	It is important, however, to examine the contractual provisions to determine the circumstances in which, and how, the “order of precedence” operates. The following provisions are relevant:
(a)	 “contract means the agreement between the Client and the Builder” [cl 1.1 of the Conditions];
(b)	Under the heading, “2. Nature of Contract”, it is provided that, “The Builder must carry out and complete the works in accordance with the contract and directions authorised by the contract” [cl 2.1 of the Conditions];
(c)	“works means the whole of the work to be carried out by the Builder, including variations, to be handed over to the Client in accordance with the contract” [cl 1.1 of the Conditions];
(d)	“direction, whether deemed or otherwise, includes agreement, approval, assessment, authorisation, certificate, decision, demand, determination, explanation, instruction, notice, order, permission, rejection, request or requirement” [cl 1.1 of the Conditions];
(e)	“contract documents means the documents comprising the contract and are listed in Item 8(a)” [cl 1.1 of the Conditions].
(f)	The “Schedule” is attached to the Contract Conditions and is “incorporated into the contract”. The Schedule contains separate “items” numbered 1-20. Item 8 of the Schedule is headed “Documents” and reads as follows:
“8.	Documents
(a)  Contract documents (Clause 1):
1.	Schedule
2.	Medium Works Contract Conditions
3.	victorian variations contract
4.	builders engineer structural plans

(b)  Client supplied documents (Clause 4):
Document:						No. of copies:
1.	architectural plans					1
2.	structural plans					1
3.	civil plans						1
4.	specifications fixtures and finishes			1
5.	section 173 agreement				1
6.	copy of title						1
7.	services plan						1”
(g)	Item 9 of the Schedule is headed “Order of precedence” and reads as follows:
“9.	Order of precedence   (Clause 4)
1.	section 173 agreement					
2.	medium works contract				
3.	victorian variations contract					
4.	structural plans builders engineer supplied		
5.	structural plans		
6.	architectural plans
7.	civil plans 
8.	specifications fixtures and finishes	
9.	services plan
10.	schedule
11.	copy of title;” 

(h)	Clauses 4.1 to 4.5 of the contract conditions (omitting side notes) read as follows:
“4.	Contract documents
		ACCURACY AND SUITABILITY
4.1	The Client warrants the accuracy of the contract documents and the suitability of the design, materials and methods of working each specified therein.
		COPIES
4.2		The Client must supply without charge to the Builder the documents and number of copies thereof both stated in Item 8(b).
		AMBIGUITIES AND DISCREPANCIES
4.3		In the event of an ambiguity, inconsistency or discrepancy being discovered in or between the contract documents, the Client must within 2 days direct the Builder as to the interpretation and construction to be followed.
4.4		If no such direction is given, there is deemed to be a direction to the Builder to use the order of precedence stated in Item 9 to resolve the ambiguity, inconsistency or discrepancy.
4.5		There is deemed to be a variation if compliance with any such direction causes the Builder to incur more or less cost than otherwise would have been incurred had the direction not been given or deemed.”
710	Unless, therefore, the circumstances envisaged by cl 4.3 of the contract conditions arise, it is unlikely that the order of precedence contained in Item 9 of the Schedule will have any operation.
711	On 8 September 2017, Mr Mustafa and Mr Barnett were discussing and finalising the proposed contractual arrangements concerning the project. On 13 September 2017, Mr Barnett sent Mr Mustafa a draft of the HIA contract conditions and schedule to show the Client’s solicitors. On 8 September 2017, there had been a text exchange between Mr Barnett and Mr Mustafa, as follows:
10:34 am		Mr Mustafa:	“I sent you the latest plans.”
10:41 am		Mr Barnett:	“Thank you.”
10:45 am	Mr Barnett:	“Have everything for you and Grimbos 
Monday! Site set up and demo next week. Also I have ask my Eng to give me a proposal and redesign we prefer to use our own guy!”

10:47 am 	Mr Mustafa:	“Ok great. I would like to verify the 
engineering plans first.”
10:50 am		Mr Barnett:	“Of course.”
712	In my view, the reference in Item 8 of the Schedule to “builders engineer structural plans” only applies to such plans which are “contract documents”, by those plans having been in existence at the time of the execution of the contract documents and therefore agreed by the parties as forming part of the agreement between them, or by following the processes contemplated by clauses 4, 15 and 20.
713	Clause 15.2 of the contract conditions foreshadows that the parties might agree that the Builder may carry out “design” as part of their contract. The entirety of cl 15 (omitting side notes) reads as follows:
“15.	Materials, Work and Design
		DESIGN
15.1	The Client warrants the suitability and adequacy of the design of the works.
15.2 	If the Builder is required to carry out design, the Builder is to give the completed design (comprising drawings, specifications and calculations) to the Client for approval within the time elsewhere stated in the contract or, if no time is stated, within a reasonable time.
15.3	Within 7 days of receiving the Builder’s design the Client must give the Builder either written approval of the design and a direction to carry out the relevant work or written reasons for not doing so.
15.4	If the Client does not do either of the above, the Client is deemed to have:
(a)	approved the Builder’s design; and
(b)	given a direction to carry out the relevant work.
15.5	The responsibility for the completed design and its satisfaction of the contract requirements remains solely with the Client and the Builder is only liable for defects in the works caused by the Builder’s design to the extent that the Builder failed to use reasonable skill and care in its design.”
714	In my view, if the Builder were to be entitled to introduce his own design as part of the contract works, some process, such as the provisions of clauses 15.2 to 15.4 would need to be introduced into the contractual relationship to provide the necessary procedures for that to happen.
715	The better view is that, unless the Builder’s engineer’s structural plans had been supplied to, and agreed by, the Client prior to the execution of the Building Contract, or by following other contractual provisions subsequently, there is no scope for such plans to form part of the contract documents, even though “builders engineer structural plans” are expressly listed in Item 8(a) to the Schedule.
716	Insofar as there is any ambiguity in Item 8(a) by the listing of such plans as contract documents, or the reference is inconsistent with the requirements of cl 15, particularly the responsibilities placed on the Client in relation to the “design”, then clearly cl 15 has primacy. In Item 9 of the Schedule to the contract conditions, the “medium works contract”, which includes the contract conditions, has precedence over the “schedule”.
717	If the Builder wishes to introduce an alternative design after the execution of the Building Contract, cl 20 dealing with variations contains the appropriate procedure. Clause 20 (omitting side notes) reads as follows:
“20.	Variations
20.1	The Builder must not vary the works except as directed or as agreed in writing.
20.2 	The Client may before the date of practical completion, direct the Builder to carry out a variation. The Builder does not have to comply with such a direction unless the variation is:
(a)	of a character and extent contemplated by; and
(b)	reasonably capable of being carried out under, 
the provisions of the contract.
20.3	Either party may, before the date of practical completion, request a variation.
20.4	If the parties agree to a variation then they are to record the agreement in writing.
20.5	If the Client and the Builder have not agreed on the price of a variation, that variation is to be priced by using:
(a)	comparative rates stated in the contract; or 
(b)	if no rates are so stated, reasonable rates and prices, and, in the case of additional work, including an amount of 20% of the cost of the variation for overheads and profit and, in the case of work that is taken out of the contract, the deduction must not include an amount for overheads or profit.
20.6 	The price of a variation is added to or deducted from the contract sum.
718	Mr Mustafa, in his witness statement dated 20 August 2021, stated as follows:
“54.		Justin or Paul did not send to me any engineering plans from another Engineer during the time Ikonic Homes was on Site.
55.		Florie and I subsequently discovered after Ikonic had left Site that Ikonic had changed the first floor slab plans without seeking our permission or Grimbos’ [the Building Surveyor’s] permission and had other structural elements of the works re designed.
56.		Florie and I were not informed of any change to the engineering plans despite me asking to be notified so as I could first check with my own engineer.”
719	Mr Etcell, in his further witness statement dated 16 September 2022 at paragraph 100 [SCB 323] stated that:
 “…The Contract (CB 1935 - 1966) at clause 4.4 and Items 8 and 9 of the Schedule of the Contact (CB 1397 - 1947), which was reviewed by the Mustafas’ lawyers at the time before signing, clearly showed Ikonic would be using its own structural engineer. Without any details or specifics of what exactly or how Marco [Fernandes, formerly of Nettle Engineering] alleges that Ikonic saved costs, I cannot properly respond to the assertion, save as to say that I do not believe that Ikonic saved any costs, or if it did, any such savings were minimal. …
… Given that GHA had redesigned and certified the deck, and the Contract provided that the builder’s engineering documents took precedence, there was no reason for Ikonic to refer back to Marco [Fernandes] in circumstances where his design had become redundant”.
720	During his oral evidence, Mr Etcell stated that by the text message to Mr Barnett, Mr Mustafa “agreed that he’s happy with us using our engineer”. When asked about Mr Mustafa’s request “to verify the engineering plans first”, Mr Etcell said that “the engineering documents … weren’t changing the design aspect of the project”. Mr Etcell said that often the Builder would “encounter … situations … on this project … and we like to work with engineers that come up with very reasonable solutions to the problem, and quickly” [T1387].
721	At [T1388], Mr Etcell said that, “under the Building Code in Victoria … as a builder we are allowed to redesign, with the use of an engineer if required, redesign the structural elements of the building to … give the project that is drawn that they want. Mr Etcell was then asked, “Without reference to the client? --- Well, yes”, he responded. 
722	Based on the analysis of the contract provisions which I have just outlined I do not accept that Mr Etcell’s views are an accurate reflection of the contractual arrangements between the parties in relation to the redesign of part of the contract works by Mr Etcell’s engineer.
723	Analysis of defect Item 16: In his initial report dated 31 October 2018 [CB 20], Mr Osborne noted the discrepancy in finished levels compared with the Architect’s drawing A101.5 [SCB 1220] and Structural drawing S4 [CB 1433] by Nettle Engineering showed a “step down” from the internal slab of the building and the external slab level noted in the architectural drawing. The Nettle Engineering drawing contained a note that, “Builder to confirm existing slab heights edge details once demolition is completed for further detail to connection and contact this office prior to any further works”. It appears, however, that the Builder did not build to the Nettle Engineering design.
724	Instead, GHA Engineers was instructed by the Builder to prepare a design of the slab [CB 3177]. The levels of the re-design were the same as on the Nettle Engineering design. The drains for the slab were installed by the Builder in accordance with the GHA Engineers design [T1319]. The engagement of GHA Engineers for this purpose was done without any consultation with Mr and Mrs Mustafa. Mr Osborne’s original report initiated a discussion in the experts’ reports and later in the evidence about the precedence of documents under the Building Contract.
725	However, events soon overtook Mr Osborne’s first report. The Client accepted the level of the external slab in relation to the building. From that time, the Client’s concern “with the play deck slab was the fact it did not drain appropriately to the drainage points that had been installed in the slab”.
726	Mr El-Sheikh on behalf of the Client accepted a quotation by Antonio Guida dated 20 November 2018 [CB 4098] to rectify the “poor drainage of the external play deck slab” as a result of “significant level variance” and “insufficient drainage outlets”. Mr Guida said he worked with laser measuring equipment and completed the work over 3 weeks in December 2018. Mr Guida was paid the invoiced costs totalling $69,090.00. This work included waterproofing the slab, which would more appropriately be described as “completion work” rather than rectification. 
727	A steel grate was also installed at a cost of $9,900.00 running the length of the wall [CB 4394]. The installation of the strip drain resolved any issues arising from the omission of a step down from the internal floor level of the building to the level of the playground. The sole question on the liability issue relating to this item is whether the Builder’s drainage works were inadequate and the rectification by Mr Guida was necessary.
728	I consider that it was necessary and appropriate for Mr Guida to have been engaged by the Client to rectify the uneven drainage levels and that the work he carried out was necessary to fix the problem. Mr Guida said at [T1096] that when a slab “starts to dry, then – and you have receding water, that’s when you see the water pooling around where it’s not going in”.
729	I note that Mr Etcell said that the original levels he had achieved were appropriate and the evidence of Mr Casamento was that he did not observe on site or see in photographs any pooling of water, saying in relation to one photograph, “It’s just a wet slab” T660]. Later Mr Casamento noted in relation to another photograph, “You can see some minor pooling there” which was “absolutely” what you would expect “on a large slab” [T663]. 
730	Mr Casamento agreed that the catchment for each drainage point was approximately 9 square metres [T664]. Mr Casamento noted in his evidence that he had taken levels on site whilst Mr Osborne had not. Later when his levels were produced, Mr Casamento agreed that the levels had been taken after rectification work had been performed by Mr Guida. I found Mr Casamento’s evidence on this item unhelpful.
731	Mr Etcell stated in paragraph 153 of his witness statement that, “Over the course of carrying out the Works, water never pooled in significant quantities on any area of the play deck” and he did not “observe any issues to do with improper drainage on the slab or pooling of water on the slab [T1319]. He said that it was “not unusual to have slight differences in levels once a concrete slab has been poured … especially on a slab [that] was close to 400 square metres” [T1320]. 
732	I prefer the evidence of Mr Guida and Mr El-Sheikh, to the unsupported evidence of Mr Etcell, that the slab levels for drainage purposes required rectification by the work performed by Mr Guida and the installation of grating to ensure that water did not enter the building. I am also satisfied that the work was performed by the Builder without proper regard to the finish between the slab and the building, and the grating was a simple and appropriate method of preventing water accessing the building.
733	In the circumstances, I will allow the sum of $78,990.00 for the rectification of this item, being the total cost of the drainage level work by Mr Guida ($69,090.00) and the installation of the grate ($9,900.00), which I allow instead of Mr Osborne’s estimate (without contingency, margin or GST). The total is $78,990.00.
Item 17: East store screw piles (MO - $236.00, TJ - $208.00)
734	The parties’ experts agreed that the only rectification work required was additional concrete at a further cost of $150.00 (to which allowances must be added). The difference between the experts was in their allowances for Builder’s margin and contingencies. I accept that the allowances made by Mr Osborne are appropriate and will allow this item as defective work in the sum of $236.00.
Item 18: Not pursued.
Item 19: Reception cabinetry (MO - $236.00), TJ - $208.00)
735	Discussions between the experts resolved most disputes relating to the reception cabinetry. The remaining dispute concerned to the length of the front reception upstand. Mr Osborne said in his first report that the upstand installed by the Builder was 2.015 metres rather than 2.150 metres as shown on Architectural drawing A700.0 [CB 1297].
736	Mr Jeffery disputed this item on the basis that, “it’s work in progress and there’s no costs associated with it” [T1547]. Mr Jeffery said that the reception desk had been built to accommodate a planter box that, when installed, “will extend out that extra 115 mm that it’s supposedly been built too short” [T1549]. Mr Osborne disputed this interpretation of the drawings. He referred to the timber framing of the planter box shown in photograph 85 [CB 74] and said that what was constructed was incorrect and needed to be demolished and the upstand extended. Mr Jeffery said that the upstand could be extended as “part of the planter box” [T1549]. Therefore, “it’s just work in progress, as far as I see it” [T1550].
737	Both experts agreed that the reasonable cost of resolving the issue was $150.00. There was a dispute about the appropriate margins to apply.
738	I accept the evidence of Mr Osborne that what was constructed was defective, as it did not accord with the dimension on the drawings. Rectification work was required. The Builder did not remain on-site to complete the work himself. I will allow Mr Osborne’s estimate of $236.00 (including his suggested margins) in respect of this item.
Items 20 and 21: Not pursued.
Item 22: OSB ceiling (MO - $10,558.00), TJ - $8,869.00)
739	The oriented strand board (“OSB”) installed to the ceiling of Room 5 was a specialised product chosen by the “interior design team” within the architect’s office. It was specified in the Schedule of Finishes (Rev. 2) [CB 3239], forming part of the contract documents, as “Gunnerson” and requiring a “clear powder coated finish”.
740	Mr Etcell, at paragraph 404 of his witness statement dated 5 October 2021, described the product as “a cheap form of a chipboard engineered board that is typically used in shipping crates and boxes. It is particularly unsightly”. Ms Voyage said that she had “never used the OSB product” herself [T926].
741	At some stage, the Builder apparently substituted another product. The reason for the change and the circumstances in which the substitution was made are unclear. I am unable to conclude whether it was an alteration made because the Builder was late in ordering the product or because he wished to use a cheaper product (as Mrs Mustafa seemed to suggest), or it was an agreed change authorised by Mr and Mrs Mustafa and the architect Ms Voyage (as the Builder asserts).
742	Ms Voyage gave evidence that there was a discussion about the fastening of the OSB to the ceiling and it was agreed that the fastenings or fixings would be concealed. The Builder conceded that “filler” was intended to be used by the Builder, to cover and conceal the fixings.
743	Mr and Mrs Mustafa and Ms Voyage considered that the installation of the OSB was unsatisfactory because of “perforations” and other damage to the OSB, and “misalignment of the boards”. They said that it was in this context, the Builder persuaded Mr and Mrs Mustafa to agree that, instead of the specified clear finish, the OSB should be painted white.
744	This version is disputed by Mr Etcell who said, at paragraphs 403–406 of his witness statement dated 5 October 2021 that, “based on numerous discussions I had with them on site” Mr and Mrs Mustafa “were not convinced that the OSB ceiling would look good” and later asked “that we paint the OS boards a shade of white”. Mr Etcell said that the decision to alter the specified finish was the Client’s choice and was made before the OSB was installed. He said that he was asked by Mr and Mrs Mustafa and Ms Voyage to prepare a sample painted ceiling finish which they later chose as the desired finish for the whole of the ceiling.
745	It is difficult, on the evidence, to determine the precise sequence of events. There is an email from Ms Voyage to Mr Barnett, and Mr and Mrs Mustafa dated 27 June 2018 [CB 3339] which listed “key items from today’s meeting”. The first item was, “OSB on children’s rooms to be painted in Quarter strength Dulux Silver Twilight SG6CI. Note exposed OSB in joinery to remain as natural finish”. 
746	In cross-examination at [T960], Ms Voyage agreed that, “the change had happened as a consequence … of the discussions in relation to whether powder coating was appropriate for the OSB”. Ms Voyage had earlier in her evidence said at [T925] that “powder-coated finish is for a metal product, it [the schedule of finishes] probably should have read ‘a clear two-pack finish’, which is a factory-applied paint finish”.
747	Mr Etcell, at paragraph 406 of his witness statement dated 5 October 2021, said it was at this meeting, and as noted by Ms Voyage, that Mr and Mrs Mustafa “asked that we paint the OSB boards a shade of white specified by them”. He said that the request was made in response to Mr Etcell having shown Mr and Mrs Mustafa “samples and clear finish for the OSB”.
748	I am not satisfied that the reference to painting the OSB in the record of matters discussed on site on 27 June 2018 was the relevant direction by the Client to the Builder to paint the OSB white. It is not clear whether “Silver Twilight” is a shade of white. What is likely, on the evidence, is that the decision to paint the OSB white was made later in July 2018, and in circumstances more consistent with the versions of events given by Mr and Mrs Mustafa and Ms Voyage.
749	At [CB 3494] there is a text message exchange on 20 July 2018 between Mr Barnett and Mr Mustafa, as follows:
Mr Barnett:	“Happy with the sample of OSB painted board? Can we proceed?”
Mr Mustafa:	“Yes.”
750	When cross-examined about this exchange, Mr Mustafa said [T322-3] that on 20 July 2018, because of the:  
 “‘incorrect’ and ‘rough’ way in which the OSB was applied, we thought we would see how the painted version goes … to cover up the defects … At that stage, I believe that the actual OSB was put up in the timber fashion form and … then we compromised to get it painted.”
751	Earlier in the cross-examination, at [T320], when asked about the meeting on 27 June 2018, Mr Mustafa said that there was: 
 “not an agreement … we were sort of forced, in a sense, to agree upon a compromise to a painted finish because there were so many defects with the actual joinery on the ceiling … so the only way we could try and avoid it was to paint it.”
752	Another specific date mentioned in the evidence is 25 July 2018. Mrs Mustafa wrote to Ms Voyage on that day stating:
 “The OSB has been installed incorrectly - it is very disappointing especially when they specifically asked us whether we wanted exposed fixings or concealed last week. We said concealed. Not sure why every sheet has been punctured multiple times, and the gaps between sheets aren’t even. Some of the corners also look very damaged. Although not yet complete, it is very poor workmanship.”
753	Ms Voyage, at paragraph 106 of her witness statement dated 19 August 2021 [Ex P11] said that on 25 July 2018 there was an inspection and meeting on site involving Mr Barnett and Mr Etcell, Mr and Mrs Mustafa and herself. 
754	Ms Voyage said that, at the meeting: 
 “We discussed the poor installation of the OSB panels by the Builder as they had been installed unevenly and with a number of perforations … Paul [Etcell] said he would fix the same … I believe it was fixed before they left the site.” 
755	I note that the item is not included in the “summary of the defects that we found on site today” in Ms Voyage’s email to Mr and Mrs Mustafa and Mr El-Shiekh dated 15 August 2015 [CB 3674]. 
756	Mr Mustafa, at paragraph 7.22 of his witness statement dated 20 August 2021 [Ex P3], stated that, “Ikonic installed the OSB in Room 5 which was not installed correctly as there were perforations and it was misaligned … Florie and I raised this with Justin and Paul and after some discussion it was decided to paint it white and not with a clear coat, hoping it may have hidden the imperfections. Painting it white did not fix the defects. … We later discovered that Ikonic had not installed Gunnerson OSB as specified but a cheaper product”.
757	Mr Etcell, at paragraph 235 of his witness statement, said that “the OSB boards had been painted with 1 coat of paint before fitting them”. In paragraph 236, Mr Etcell said that the OSB panels were painted so that they could be” fitted in one room, as they [Mr and Mrs Mustafa] were unsure about them and wanted to see how they looked”. He said that the only damage to the OSB was to “one corner” and “the fixings were exposed as they were yet to fitted and painted over [with a] final coat”.
758	At [T1313-4], Mr Etcell said in evidence that, “we’d only installed OSB to about half of one room … room 5 [so that Mr and Mrs Mustafa] could view it in place”. This “was in the last week in July”. The OSB still needed “a second or third coat of paint [and filler] to conceal the fixings”.
759	Mr Casamento, in his report dated 28 May 2021 at paragraph 7.22.2 [CB 500] noted that Mr Etcell advised him that: 
 “2 samples of the OSB ceiling were submitted for approval by the owners, one painted white and the other sample was clear coated as specified … the owners accepted the white painted option and as per their instructions, the ceiling to room 5 had been painted white by Ikonic”.
760	It seems likely that both the Builder and the Client’s representatives hoped the painted finish would mask any imperfections caused by the installation of the OSB. On the other hand, Mr Etcell said that he was asked by Mr and Mrs Mustafa and Mrs Voyage to prepare a sample painted ceiling finish which they later chose as the desired finish for the whole of the ceiling. Mr Etcell said that the decision to alter the specified finish was the Client’s choice and was made before the OSB was installed.
761	I consider that the version given by Mr and Mrs Mustafa and Mrs Voyage is more likely. They were disappointed with the finished product and the obvious visual shortcomings after the OSB was installed. It is probable that the decision to change to a painted finish was only made in an attempt to mask the obvious defects after installation of the material. I consider it unlikely that the Client’s representatives would have otherwise contemplated a change to the finish of the specified product.
762	Room 5 was apparently to be used as “the children’s room”. It seems likely that the OSB was selected by Mr and Mrs Mustafa originally with the interior designers because of the effect of a clear timber finish rather than a plain white ceiling.
763	The Builder asserted that the finish achieved was what the Client’s representatives requested and agreed to on site. The Builder said that, after the Builder’s services were terminated, no change was made to ceiling by the replacement builder. Mr Casamento stated that when he inspected the building (in October 2019 and/or January 2020) that, “Room 5 had a white painted plasterboard finish as had all other areas that were required by the Contract documents to have a clear finish OSB ceiling installed” [paragraph 7.22.3].
764	Mr Mustafa, in his witness statement dated 15 July 2022 [FSCB 180], stated at paragraph 54, “We did not replace the damaged OSB … to save on costs as the costs were getting out of hand after Paul left”.
765	Mrs Mustafa was taken in cross-examination to an invoice dated 31 August 2018 from Mr El-Sheikh’s company, Romaac Construction Pty Ltd [CB 3756] recording as part of the work costing $12,936.00 undertaken by Mr El-Sheikh, “Removal of OSB from ceiling in East child room”.
766	Mr El-Sheikh said at paragraph 22(t) of his witness statement dated 26 August 2021 [Ex P25] that “I recall the ceiling was pulled down and reinstalled. Romaac performed this work and invoiced for it as per Romaac Invoice No 3 dated 31 August 2018”. Mrs Mustafa said that the invoice had been paid. It appears that the ceiling is presently comprised of the OSB material and was likely replaced by Mr El-Sheikh.
767	In the circumstances, I am satisfied that the installation of the OSB by the Builder was unsatisfactory, with perforations and other damage. However, it is difficult to ascertain the extent of the damage or the nature of the rectification work undertaken by the Client after the Building Contract was terminated.
768	The experts were not able to offer any real assistance in relation to the issue of quantum. Mr Jeffery’s estimate varied little from Mr Osborne’s, principally in relation to the margins. Mr El-Sheikh’s Romaac invoices provide no breakdown of cost. Invoices 1 and 2 [CB 3720–1] are dated 28 August 2018 and are stated to relate to materials. Invoice no. 3 appears to relate to Mr El-Sheikh’s labour. By that stage, he had been assisting Mr and Mrs Mustafa since “early August”. The invoice was for the total sum of $12,936.00 (including GST).
769	The next Romaac invoice for Mr El-Sheikh’s labour is no. 2 dated 7 September 2018 for $11,088.00 (including GST). The invoice does not refer to any OSB work. Having regard to the other items included in invoices 2 and 3 for Mr El-Sheikh’s labour, it seems likely that the actual rectification work carried out in relation to the OSB was relatively minor.
770	In the circumstances, I consider that an allowance of $2,500.00 for the rectification work would be appropriate.
Items 23 and 24: Not pursued.
Item 25: Vinyl floor coverings (MO - $19,s615.00), TJ - $721.00)
771	Mr Osborne considered that the installation of the vinyl floor coverings in the bathrooms was defective and required replacement. Mr Etcell said that it was work in progress and would, in time, have been satisfactorily completed. Mr Jeffery supported his view.
772	Mr Osborne, on his first inspections on 30 August and 11 September 2018, noted numerous faults in the vinyl flooring. These included many examples of:
(a)	the vinyl not adhering to the bathroom walls or was pulling away from the walls;
(b)	bubbling where the flooring met the walls and sections where the vinyl had not been installed flat;
(c)	joints between segments of vinyl had not been finished.	
773	These matters were shown on photographs taken by Mr Osborne on his first inspection. By the time the Builder’s experts examined the building, the Client had removed and replaced the vinyl flooring. Mr Jeffery and Mr Casamento relied upon the information given to them by Mr Etcell and upon their interpretation of what was shown in Mr Osborne’s photographs.
774	Mr Osborne said in the concurrent evidence session that: 
 “At my first inspection the bathrooms had been completed with the vinyl floor coverings. There were areas that it was lifting off the floor and peeling away from the walls. There was an area that hadn’t been completed. … But the rest of it had been completed, other than the welding of the joints between the sheets. … you’re meant to have a gap of 1 to 2 mm … the gaps onsite were just slightly larger than that and they were just peeling away from the walls … [T1569–70].”
775	Mr Jeffery said that, it was clearly work in progress because the welded joints had not been done in the photos [of Mr Osborne at CB 83 and CB 296]. Mr Jeffery said that the installer, at the time of welding the joins would have fixed any areas where the skirting upturn may not be fixed to the wall [T1570].
776	During the concurrent evidence session, many of the photographs were enlarged and carefully examined. There were differences of opinion expressed. For example, [at T1570], Mr Osborne said that “the top photograph” at CB 296 showed that 
 “the vinyl as it rolls up the wall … has started to come away. And it also shows … to the left … the vinyl has creased and hasn’t been attached properly to the wall. … this room had been finished … [the vinyl] had all been laid … Everything had been done. … that’s typical of what every other room was like … [T1571].”
777	Mr Jeffery’s comment on the photograph in his report was, “vinyl has not yet been adhesive fixed to the wall” [CB 296]. I suggested to Mr Jeffery that the photograph “seems to show that part of the vinyl has been affixed and part has not”. Mr Jeffery responded, “it’s possible that none of it was affixed at all”. Mr Jeffery referred to the “photo below” showing that “the welding hasn’t been done in the joint”, in support of his conclusion that the vinyl may not have been fixed with adhesive in the first photograph. 
778	Mr Osborne identified on the second photograph that “you can actually see that there is adhesive installed”. Later he explained, “where it started to separate [the area with adhesive] it’s a darker colour”. Mr Jeffery responded, “It’s not possible from that photo to tell whether the skirting is adhesive fixed. It appears to me that it’s not … I don’t believe [the photograph] conclusively proves that there’s adhesive there at all” [T1571–4].
779	The next photograph examined was no. 99 at CB 81. Mr Osborne stated that the vinyl had been “attached to the wall [but] it’s started to came loose”. I asked Mr Jeffery to comment. He stated, “Other than to say it’s works in progress” and then described what he said was “the normal method” of installing vinyl flooring. I then asked Mr Jeffery specifically, “Do you say that this upstand in the vinyl has been attached or not attached?” Mr Jeffery replied, “it appears to me that it has been attached” [T1574–5].
780	In photograph no. 100 at CB 81, Mr Jeffery conceded that the photograph showed “some form of bubbling” to the vinyl flooring [T1576]. Mr Osborne said that “the bubbles indicate that insufficient adhesive had been installed”. Similarly, with photograph no. 101, Mr Osborne stated that “the vinyl has started to separate away from the wall”. My observation was that the installation “looks incomplete”. Mr Jeffery responded, “I’d say that the pieces that are missing would be filled in, and then any areas where the – that [adhesive] appears to be coming away, that additional adhesive would be put there. This is clearly work in progress” [T1577].
781	Another issue related to the gaps left between the sheets of vinyl flooring which had not been filled. Mr Osborne said that the gaps should not exceed 1–2 mm. Mr Jeffery’s response was to point to areas where he had measured some of the filled joints in the flooring later reinstalled by the Client at 5 mm [T1583]. There appeared to be no issue that the appropriate join between the vinyl sheets should be no more than 3 mm. However, Mr Jeffery appeared to consider that the likely unsatisfactory workmanship of the Client’s sub-contractor re-set the standard to be met by the Builder’s sub-contractor.
782	I have quoted the evidence, and passages from the transcript, at some length as they show the general approach taken by Mr Jeffery when giving evidence. In my view he was far too ready to simply express views supportive of his client than to approach matters with an independent mind. In relation to this item of defective work, the evidence of Mr Osborne was far more persuasive.
783	Whether this was an example of incomplete or defective work may not matter very much in the final analysis. However, in relation to this item, I am satisfied that the work was not only incomplete, but also in many areas, was defective.
784	The evidence of Mr Etcell was that the installation of the vinyl flooring occurred in the last week of July 2018, immediately before the works were suspended by the Builder. Mr Etcell said that the flooring sub-contractor had left the vinyl flooring incomplete and it would have been completed later. At T1313, Mr Etcell said that, “where the vinyl meets [it] needed to be welded together … the coves up the wall … still needed to be finished off [by being] cut to shape, glued and pressed against the wall”.
785	The Builder’s sub-contractor delivered an invoice to the Builder dated 2 August 2018 [SCB 130]. The work described in the invoice was, “Prep Floors with Feather Finish and Rapid. Supply and install Altro Non Slip Vinyl. Cove all walls. Supply and install Polyflor Expona Concrete. Cove all walls. Extra prep work”.
786	It does not appear, however, that the sub-contractor had actually completed installing the vinyl in all areas. Mr Etcell said that this was “his invoice for works to date” [T157]. Mr Mustafa said in evidence [at T1039], “I recall asking the vinyl guy to stop laying because we would not accept [his work]”. Mr Mustafa said that the vinyl “wasn’t laid correctly … it had bubbles in it, it had rocks that were actually still – you could see the bumps in the vinyl. The walls … the coving of it had already peeled away, it was very obvious”. Mrs Mustafa gave evidence [at T1082] that she noticed faults in the installation of the vinyl and had pointed out to the subcontractor that, “it’s peeling away already”.
787	Mr and Mrs Mustafa denied in their evidence that, although there had been a direction by the architect to Mr El-Sheikh that the finished flooring in certain areas should be polished concrete [CB 3669], a decision was made to replace the vinyl installed by the Builder to all areas, and that installation was completed.
788	The Builder’s sub-contractor who did the original work did not give evidence and no satisfactory explanation was given for the absence of that evidence. I have previously referred to matters which made me cautious of accepting the uncorroborated evidence of Mr Etcell. It would not, in my view, be appropriate to give much weight to Mr Etcell’s evidence in relation to this item where it conflicts with the evidence of other witnesses.
789	There is a significant difference in the quantum evidence of the experts. Mr Osborne’s evidence is that, as similar faults existed throughout the vinyl flooring, it was necessary to take up and replace all the vinyl flooring. Mr Jeffery does not attempt to address the reasonable cost of completing the scope of this work. He simply gives an estimate based on the very limited view he took of what was rectification work as opposed to part of the cost of completing the contract works.
790	I have indicated my reasons for rejecting the approach taken by Mr Jeffery. I see no reason to not allow the estimate of Mr Osborne as the reasonable cost of rectifying the defective work. I shall allow the sum of $19,615.00 for this item.
Item 26: Procedural compliance matters relevant to the issue of completion (MO - $19,615.00), TJ - $721.00)
791	Item 26 is headed “Procedural compliance matters relevant to the issue of completion”. From Mr Osborne’s first report dated 31 October 2018 [at CB 28], Mr Osborne relates this item to two distinct matters:
(a)	rectification of electrical defects; and
(b)	the building notice issued by the Building Surveyor on 8 August 2018 [CB 3654–3656] which referred to “building works [that] have been carried out [without] … a building permit [being] issued”.  
792	The building notice required cause to be shown as to why the builder should not “remove all building work carried out without a building permit approval (including external polystyrene cladding)” and require “a structural engineer to verify the compliance of the existing building works carried out without the relevant mandatory inspections having taken place” and in respect of “external architectural works [that] have commenced without a building permit issued”. 
793	The mandatory inspections were stated as “being inspections prior to placing a footing (eg. foundations/pre-slab), prior to pouring all in-situ reinforced concrete (eg. slab or trench steel\,columns, beams) and upon completion of framework (eg. steel, timber)”.
794	Mr Osborne noted in his report that “the Builder has not had the mandatory inspections undertaken to approve the construction of the play area concrete slab, the framework internally and the roof alterations”. These latter items have been or will be discussed under other defect items. 
795	In regard to the specific matters raised in the building notice:
(a)	On 23 August 2018 between 10.00 pm and 2.00 am the next morning, the Builder attended the site and removed the noncompliant external polystyrene cladding;
(b)	In September, the Builder provided the Building Surveyor with some certificates by Mr Holland of GHA Engineers in relation to the inspections at various stages of construction. Mr Osborne has made no estimate of any costs required to comply with the building notice. At [CB 112], he has estimated the cost to “rectify defective electrical works” as totalling $3,208.00 made up of 24 hours of electrical work at $85.00 per hour, together with appropriate margins and GST;
(c)	In relation to defect item 31, “Framing”, Mr Osborne had included in his cost estimate the sum of $80,000.00 (exclusive of contingency, margin and GST) as “allowance for electrical re-wire and replumbing”; and
(d)	This costing has been overtaken by reliance by the Client upon the actual costs incurred for the actual payments made to Mason Fox for the electrical works performed. 
796	These matters will be further discussed after I have considered each of the alleged items of defective electrical work, as the final defect item.
Item 27: Structural steel to roof perimeter (MO - $32,618.00), TJ - $28,741.00)
797	This item is addressed under Item 12 above.
Item 28: Interior structural steel frame (MO - $2,603.00), TJ - $1,788.00)
798	Mr Osborne, in his second report dated 4 December 2018, stated that, “the blade wall to the east side of the staircase”, shown on Architectural drawing A.101.5, did not have “additional framing … installed to support the plaster wall cladding” [at CB 142-3]. Mr Osborne said that this breached the requirements on page 20 and table 8 of the Gyprock Guide. Mr Osborne observed the defective work at his inspection on 26 October 2018 after plaster to the wall had been removed. This is shown on photographs 4-6 [at CB 155-6].
799	Mr Osborne stated that, “The overspacing of the steel studs to the wall framing is defective work by the builder”. He recommended the installation of “steel framing to comply with the building code [and to] reline the wall to the east of the stair well with plaster and paint”. He estimated the cost of this work at $2,869.00.
800	Mr Jeffery, in his report dated 7 April 2020 [at CB 300] stated:
(a)	 “Table 8 [of the Gyprock Guide] is irrelevant to the internal wall in question [as it] will never have any wind loads placed upon it [and] Table 8 … specifically states it is for “Perimeter Walls”;
(b)	 “I completely fail to understand how [Mr Osborne] has formed the conclusion that this item is a defect”;
(c)	Mr Osborne fails “to provide details of what has been installed, what specifically makes the installed works defective and what is specifically required to be installed to rectify the purported defect”;
(d)	“no works are required in respect of the … purported defect as the works are not defects”.
801	Mr Osborne prepared a supplementary report dated 4 June 2020. At CB 421, he referenced page 39 of the Gyprock installation manual relating to “the maximum spacings for plaster products” that noted the need to “ensure that … studs are spaced at a maximum of 600mm centres and in accordance with Table 8 on page 20”.
802	Mr Osborne said that “it is common building practice to ensure plasterboard does not span a distance greater than 600mm centres from stud to stud”. He referred to his initial report that described “that only the structural support for the roof had been installed” and clarified that he was saying that “no additional framing had been installed at the spacings required to support the plasterboard wall lining”. It was “the spacing of the substrate supporting the plasterboard [that] was defective”.
803	In Mr Jeffery’s subsequent report dated 28 May 2021, rather than addressing the clarifications offered by Mr Osborne in his supplementary report, at CB 503 Mr Jeffery simply said, “I repeat that Table 8 of the Gyprock guide … specifically states it is for ‘Perimeter Walls’”. Mr Jeffery also repeated his previous request for “details” including “what specifically makes the installed works defective”. He then restated his earlier conclusion “that no works are required … as the works are not defective”.
804	I have set out these matters in some detail as, in my view, they are another example of the differing approaches of these two experts to their responsibilities. Mr Osborne stated the supporting facts that lead to his conclusions including specific references to the building standard relied upon. In his supplementary material he clarified the matters raised by Mr Jeffery. Mr Jeffery did not at any time address the issue of whether plaster attached to framing with supports at greater than 600mm centres was defective and what constituted “good building practice” in this regard. His general approach was “nitpicking” and avoiding. His tone was disrespectful.
805	The matter was further discussed in the concurrent evidence session [T605–17]. Mr Osborne gave evidence that, on his second inspection, demolition work was occurring. Whilst walking on site, Mr Osborne said he hit the relevant wall with his shoulder and “the whole plaster sheet moved”. He said, “I asked the builder [to] strip away and show me what’s in behind that”. Mr Osborne returned to the area about 30 minutes later and took photographs 4-6. They show that “there was no steel framing installed at the required spacings to support the plaster”.
806	Mr Osborne again referred to “the manufacturer’s guidelines”. He also produced a “timber framing manual” from Studco which provided that “stud centres should not exceed 600mm”.
807	Mr Jeffery said in relation to Mr Osborne’s evidence, “There must have been some metal framing, at least something here in the corner. I’ve no idea what – how can I comment on something that’s totally gone?” When I asked Mr Jeffery, “You seem to concede that there should have been proper framing but you don’t know whether there was or not? … But if there was not, then it would be defective?” Mr Jeffery answered, “Yes”.
808	Mr Casamento’s involvement with this item was also unhelpful. In his report dated 14 October 2021 [at SCB 2036], Mr Casamento stated, 
 “This is an inside wall, not an exterior wall subject to wind load. The Gyproc specification articulated by [Mr Osborne] does not apply to interior wall which is not subjected to wind loading. [Mr Osborne] has erred in his allegation. Photo 6 in [Mr Osborne’s] Report does not provide any evidence that supports his allegation that additional framing is required to support the plaster wall cladding to the blade wall on the east side of the staircase. No work is required.”
809	During the concurrent evidence session [at T612], I asked, “Do you have anything to say, Mr Casamento?” He replied, “Yes, absolutely … there is framing there. It’s all there. You’ve got all your studs are in, you’ve got your bottom plate in … up top its supported. … You’ve got spacing of around 600mm. So where on earth is the framing not installed?” After it was pointed out by Mr Osborne to Mr Casamento that “it was a double thickness wall”, Mr Casamento said, “Then I take back what I’ve just said”.
810	I am satisfied that the Builder’s work was defective. I am more persuaded by the evidence of Mr Osborne than that of Mr Jeffery. Mr Osborne observed plasterboard not properly supported by adequately placed studs according to what he regarded, from the manufacturer’s guides, and from his own experience, as good building practice.
811	On the question of quantum, I accept My Osborne’s estimate of $2,603.00 as a reasonable cost to rectify the Builder’s defective work. I shall allow that sum for this item.
Item 29: Sewer drainage (MO - $27,065.00, TJ - $6,015.00)
812	Both parties agreed that the external grease trap outside the eastern wall of the building had been installed defectively as the pipes from the kitchen had insufficient fall and CCTV footage showed that the sewer pipe was retaining water. Mr Jeffery said that “it’s totally unacceptable to have water remaining in the pipe, which is what the CCTV footage shows” [at T527]. Mr Casamento agreed.
813	The dispute in relation to this item is limited to the rectification works required to provide the appropriate fall to the grease trap. Mr Osborne considered that it was necessary to excavate the flooring to expose the piping, re-lay the pipes with sufficient fall and reinstate the flooring. Mr Jeffery agreed “that it was necessary to remove the existing sewer pipe from the kitchen to the grease trap to install the correct fall”.
814	Mr Osborne estimated the total cost of this work at $27,065.00. Mr Jeffery’s estimate was $6,015.00.
815	Mr Jeffery’s view was that “the extent of demolition works carried out was disproportionate from what was required to be demolished in rectifying the purported defective pipework”. Mr Jeffery “marked up a floor plan to show the extent of concrete [that, in his opinion, needed] to be demolished so as to rectify [the fall of] the sewer pipe … marked in orange, as compared to the extent of the concrete that was actually demolished by the new builder … marked in purple” [CB 304].
816	Mr Jeffery said, “To suggest that this much concrete needed to be removed to rectify the purported defective ‘fall installed on the sewer line’ is frankly ridiculous and not even in line with the scope of the alleged defect as identified by [Mr Osborne]” [CB 302]. Mr Jeffery stated [at CB 304], “I can only conclude that there must have been other works carried out by the owner which were not related to the reported sewer pipe from the kitchen to the grease trap”. 
817	Mr Casamento reported [at SCB 2036–7] that: 
 “The extensive excavation and slab cutting shown in the photos [nos. 7-11 at CB 157-9 and 302-3] is considered extraordinary given the alleged defect of a simple run of sewer pipe from the kitchen to the grease trap. This need not have occurred unless changes to the kitchen layout were required.”
818	In the concurrent evidence session, Mr Osborne explained that, “Because the sewer line … was too flat … every service that ran into that sewer line had to be altered because all the pipes had to drop down to provide sufficient fall” [T529]. By reference to Mr Jeffery’s marked up drawing, Mr Osborne indicated the location of the relevant services including a basin and tongue dish, the grease trap itself and, where the pipes joined and ran to the sewer. 
819	Mr Osborne said that Mr Jeffery’s orange lines did not correctly indicate where the sewer line ran, as the grease trap was located in a different position than on the drawing [T528]. Mr Osborne said that, “you can’t change [the concrete where the orange lines were marked] without changing all [the other areas where pipes to services were located as] everything falls to [the grease trap]” [T529]. “Everything that branches from [the sewer line] also has to have fall towards it” [T530].
820	After the experts and counsel had studied other drawings and photographs, including nos. 76, 77 and 79 [at CB 69–71] and made markings on Ex P7, my question to Mr Jeffery was, “what [Mr Jeffery had] shown hatched in purple on your plan is where the location of the sewer pipe was, above [to the north of] the orange”. Mr Jeffery answered, “Possible” [T532]. Notwithstanding Mr Jeffery’s equivocation, I am satisfied that Mr Jeffery’s orange marking on the drawing at CB 304 did not accurately locate the replaced sewer pipe.
821	I accept the evidence of Mr Osborne [at T532] that “the replacement sewer pipe was put in the same place as where the old one was … there just was a straight replacement”. I also accept that there were two pipes replaced, “the sewer pipe that comes from the building and … the sewer pipe which leads … from the kitchen … to the grease trap” and that each pipe likely had a diameter of 90mm [T533]. The pipes would be lagged, surrounded by cement and would not be “hard against each other” [T534]. 
822	The pipe holding water would need to be excavated back to the connection where other sewer pipes joined. It would also be necessary to lower the grease trap itself to accommodate the lowering of the pipe leading into the grease trap. However, simply lowering the grease trap by itself would not solve the problem of water remaining in the sewer pipe [T549]. I do not accept Mr Etcell’s statement at paragraph 364(f) of his witness statement [Ex D7] that, “I fail to understand what concrete was required to be cut in the kitchen to carry out the alleged works. These lines and falls could have easily been amended with minimal work and cost, and the grease trap lowered”.
823	I accept Mr Osborne’s statement in paragraph 7 of his 4 June 2020 report [CB 423] that, “The costs allowed in Mr Jeffery’s report to cut and remove the concrete, demolish and replace walls, dispose of soil, bring in materials by hand, reinstate the walls, plaster, floor coverings, kitchen, tiles, paint and sinks is insufficient”.
824	Mr Gurr, in the Builder’s final written submissions, sought to draw a distinction between the “grease line” and the “sewer pipe” and that the Client had not established that “the sewer system was holding water”. There is no substance in the submission. There was no confusion in the concurrent evidence session that what was alleged to be holding water because of inadequate fall was the “sewer pipe” taking kitchen wastes to the grease trap after which it was disposed of through the sewerage system. 
825	At T532, Mr Osborne explained that “the grease trap is purely where you wash your oil, your deep frying material” and agreed that “there is a direct sewer line or a direct line from the kitchen to the grease trap”. In paragraph 5 of his report dated 4 June 2020 [CB 422], Mr Osborne referred to “the sewer servicing the kitchen amenities”. The terminology “sewer pipe”, “sewer line” and “grease line” was used interchangeably in relation to the kitchen and was clearly understood by the witnesses.
826	Mr Perugini’s company, Perus Plumbing Pty Ltd, carried out the rectification of the fall of the sewer line to the grease trap. He prepared a Plumbing Fault Report noting, “Kitchen drain to grease trap, not enough fall holding water”, and stating, “Cut slab, jack hammer concrete, relay new drain deeper and reinstate concrete” was required to “rectify fault” [CB 862]. He took photographs of the work he carried out in the kitchen area where the concrete was removed and later replaced [SCB 1794-8].
827	Mr Perugini said that normally he digs out a trench to 450mm wide, “so basically my two feet go inside the trench with the drain in the middle” [T1214]. The photographs taken by Mr Perugini appear to confirm that the drainage trenches were about 450mm wide.
828	Mr Etcell, in a number of places in his witness statement dated 5 October 2021 [Ex D7] asserted that “several of the plumbing locations and drains in the kitchen had to be altered to accommodate changes made to the kitchen layout and design following termination of the Contract” [paragraph 293(a) and also paragraphs 361(a), and 364(j)]. 
829	Mr Etcell said, in paragraph 433 that, “It appears to me, based at looking at the photographs and my experience as a builder that more pipes and multiple lines have been run. I say this based on the area of concrete that was removed and from the direction of the cuts. This would be consistent with changes having been made to the kitchen layout”.
830	In paragraph 143 of his second witness statement dated 16 September 2022 [FSCB 334], Mr Etcell referred to photographs nos. 101-111 taken by Mr Mustafa, which Mr Etcell said showed changes in the kitchen – “a sink to the east wall … a cool room to the northwest corner … the relocation of the pantry to the southwest corner [which] would have meant that the sewer waste pipes in the kitchen would have had to be re-run”. Mr Etcell also referred to the need to re-run the hot and cold water supplies “through the walls” [and in paragraph 200], the removal of plumbing works as “the sewer lines for the grease trap had also been run through [the] accessible toilet [located to the east of the kitchen which would have been] demolished”.
831	I note that the relevant Architectural drawing forming part of the contract drawings [A.100B at SCB 80] notes on the proposed ground floor plan, “Kitchen (by others)” and on drawing A.100B under “General Notes (Interior)” it is recorded, “3, Kitchen to be designed by kitchen subcontractor as nominated by Builder” [SCB 77]. Also, I note that drawing A.100B shows, in the kitchen, the “cool rm” in the northwest corner, the “ptry” in the southwest corner and what seem to be sinks on the eastern wall. 
832	Mr Mustafa, in his witness statement dated 20 August 2021, stated at paragraph 193(a) that “post termination … structural changes” to the kitchen involved it being “opened … up to a viewing kitchen by removing a non-structural wall”. In an attachment to the witness statement, Mr Mustafa described the photographs he took. In relation to “Photos 102-111”, he said about the kitchen, “Before Ikonic left the kitchen cabinets were installed, but that was the [Client’s] scope of works and not part of Ikonic’s. When the grease [line] was replaced the kitchen fit out was replaced. This is not claimed against Ikonic in this proceeding”.
833	It is difficult to clarify from the evidence what sum the Client is entitled to claim from the Builder in respect of the grease trap sewer line (item 29) in particular, and the plumbing defects generally. There are 3 issues that require resolution:
(a)	whether Mr Osborne’s cost estimate is reasonable or whether I should prefer Mr Jeffery’s;
(b)	what amounts were paid in respect of work carried out by Perus Plumbing Pty Ltd, and what relevance those amounts have to the allowance I should make in respect of this defect item;
(c)	how the amount of $100,000.00 paid to the Client by the Builder’s subcontractor plumber’s insurer for his defective work should be taken into account.
834	I shall deal with the first issue but defer my discussion of the remaining two issues until after I have completed by evaluation of defect item 29A.
835	The differences between the (basic) cost estimates of Mr Osborne and Mr Jeffery contained in the Scott Schedule are as follows:
(a)	for “concrete cutting”, Mr Osborne appears to allow the total sum of $3,0474.00 for a specialist subcontractor to remove 11 square metres at a rate of $221 per square metre ($2,431.00) and bin hire of $380.00. Mr Jeffery allows a total cost of $1,700.00 made up of 20 hours for a labourer ($65.00 per hour, cost $1,300.00) to use a hired concrete saw ($300.00, presumably 1-2 days for 2 workers or possibly 2-3 days for one worker) and part of a bin for the disposal of the concrete ($150.00);
(b)	The concrete saw cutting associated with Perus Plumbing’s work was carried out by Advanced Sawing and Drilling Pty Ltd. Its invoices are included in the Court Book. It is difficult to relate the invoices to any specific work. However, some invoices [for example at CB 4118], list the hours and days on site covered by the invoice. Although it does not appear that the charge was calculated on an hourly rate, the average charge for every hour worked would be about $220 (which is very similar to Mr Osborne’s rate);
(c)	for the plumber’s work for the installation of new sewer pipework and reinstall the grease trap, Mr Osborne allowed 20 hours for a plumber at $85.00 per hour ($1,700.00) with no further allowance for materials. Mr Jeffery allowed 6 hours labour at $75.00 ($450.00) and $450.00 for materials ($900.00 total). I consider the hours allowed by Mr Osborne and the hourly rate to be more reasonable estimates. Probably, Mr Osborne should also have included a further allowance for materials;
(d)	for the repair of the concrete slab, Mr Osborne has allowed 16 hours labour at $75.00 and Mr Jeffery 16 hours at $65.00. A concreter’s rate would be more appropriate than a labourer’s. Mr Osborne allows $1,660.00 for pump hire, concrete and steel; Mr Jeffery a total of $650.00;
(e)	Mr Osborne allowed the replacement of 12 metres of steel framing for work to walls, floors and ceiling. Mr Jeffery allows no sum ascribing the materials as necessary only “as owner’s alterations required all affected areas to be removed”; and
(f)	the differences between the experts for margin and contingency.
836	Generally, I prefer the evidence of Mr Osborne on matters of both liability and quantum for reasons I have indicated in relation to other defect items. Further, as regards the costing of this item, I consider that the estimates of Mr Osborne totalling $27,065.00 are more appropriate and realistic. 
837	However, as this defect item involves plumbing matters, I have considered it further, with the other plumbing items 6a, 6b, 7a and 29A, when considering the issue of the insurance monies paid to the Client in relation to the Builder’s plumbing work. I have concluded that this item was covered by the insurance payment to the Client. 
838	Accordingly, no further allowance shall be made for this item.
Item 29A: Sewer drainage to ground floor bathrooms (MO - $17,294.00), TJ - $5,655.00)
839	When Mr Perugini from Perus Plumbing was contracted by the Client to rectify the defective work of Polimeni Plumbing, he prepared a number of Plumbing Fault Reports recording the problems and how they should be rectified. Plumbing Fault Report no. 2 was relevant to defect item 29. The reports of Mr Perugini relevant to this defect item (29A), are as follows:
(a)	Plumbing Fault Report no. 1 noted that, “all drains to bathroom fixtures under slab doesn’t have enough cover. Pipes have been encased in concrete and does not comply to AS/NZS … to rectify fault: cut concrete slab, jackhammer concrete, relay drain deeper and reinstate concrete” [CB 858];
(b)	Plumbing Default Report no. 3 noted that, “Outside main sewer drain not having pipe bedding material to support pipe. Doesn’t comply to standards … to rectify fault: excavate and relay new sewer drain outside of building” [CB 864].
840	In the Client’s counsel’s final submissions, the defective work was described as follows:
 “The pipes in the bathrooms A and B downstairs were encased in concrete, set too high and did not have the required fall. The needed to be replaced and retraced around the property to the sewer outlet point as per the Sewer Map produced by Mr Perugini.”
841	The Client alleges both that the Builder’s subcontractor plumber, M & A Polimeni Plumbing Pty Ltd did not complete the plumbing work and that part of the work it did was defective. 
842	In a “Compliance Certificate” completed by Mr Polimeni for the Victorian Building Authority in respect plumbing work by Polimeni Plumbing [CB 883], Mr Polimeni noted, 
 “M & A Polimeni has carried out plumbing and drainage works at the above property for the connection of sewer points, section of stormwater to back carpark, running of hot and cold water, gas, suspended sewer attacks – PLEASE NOTE THAT ALL THE ABOVE WORKS WERE INCOMPLETE AT THE STAGE WHEN WE WERE REMOVED OFF SITE.”
843	In regard to the defective work, Mr Mustafa at paragraph 193(n) of his witness statement dated 20 August 2021, refers to “three defects, namely to the sewer pipe, the carpark drainage pit and the grease trap” that were the subject of a report by Michael Mikic of the Victorian Building Authority following an inspection of the plumbing works on 10 December 2018.
844	A note from the Victorian Building Authority, in Case Number 00008679 of Mr Mustafa, records the “items noted by investigator” [Mr Mikic] as:
“1.	Sewer pipe incorrectly installed without correct cover and bedding material on right side of building.
2.	Grease trap incorrectly installed on left side of building.
3.	Storm water pit and pipes incorrectly installed, outlet higher than inlet (noncompliant) in carpark.”
845	The directions contained in the note appear to be as if facing the building from Bridge Street to the north. Therefore “right side” would be the western side of the building and “left side” would be the eastern side.
846	Mr Mikic notified Mr Mustafa by letter dated 13 December 2018 that, “Mario Polimeni has carried out plumbing work which an investigator from the Victorian Building Authority has found to be defective” [CB 4205].
847	The insurance matter was assessed by a loss adjuster, Paul Hardy of Sedgwick. In an email to the insurer dated 9 September 2019 [CB 4673], Mr Hardy recorded matters he had discussed with Mr Polimeni, Mr Mustafa and Mr Mikic. Mr Hardy noted that Mr Mikic:
 "Confirmed that the newly laid sewer pipe (by the insured [Polimeni Plumbing]) to the front and right [north and west] of the property was insufficiently bedded in the ground and not of sufficient depth. [Mr Mikic] advised that the Insured had argued that the pipe had been raised since their works and the soil had been removed since they laid it; the VBA contested this with the Insured on the basis that the pipe was clearly at those levels due to its join with the legal point of discharge which the Insured had fixed it to.”
848	Although this statement is hearsay upon hearsay, it is in evidence. It suggests that Mr Polimeni, whilst contesting with Mr Mikic the state in which he left the sewer pipes, did not contest that he had installed the sewer pipes to the legal point of discharge. If this were so, it would suggest that the works Polimeni Plumbing carried out for the building included laying the sewer pipes to the legal point of discharge which Mr Perugini said was to the north of the building. In the absence of evidence from Mr Polimeni or Mr Barnett to the contrary, I would consider this was most likely the position.
849	In his oral evidence, Mr Perugini said [at T1215] that for the “pipes outside … for the toilets …basically all of the sewer lining had to be dropped lower. … Therefore, all of the sewer lines had to be redone”.
850	Mr Etcell stated at paragraph 364(j) of his witness statement dated 5 October 2021 that, “All sewer pipes were in the correct locations and correct falls as per the original plan design. Subsequent changes to the layout by the Client’s additional works would have required these pipes to be altered”. This statement, even if accurate, also seems to suggest that Polimeni Plumbing connected the sewer pipes to the legal point of discharge.
851	I accept the evidence that the sewer pipes to the two bathrooms were laid in a defective manner and were required to be re-laid to the point of discharge.
852	Quantum: The differences between the cost estimates of Mr Osborne ($17,294.00) and Mr Jeffery ($5,655) contained in the Scott Schedule are as follows:
(a)	for “concrete cutting”, Mr Osborne appears to allow the total sum of $3,474.00 for a specialist subcontractor to remove 14 square metres at a rate of $221.00 per square metre ($3,094.00) and bin hire of $380.00. Mr Jeffery allows a total cost of $1,490.00 made up of 16 hours for a labourer ($65.00 per hour, cost $1,040.00) to use a hired concrete saw and the disposal of concrete ($300.00, presumably 1 day for 2 workers or possibly 2 days for one worker) and part of a bin for the disposal of the concrete ($150.00);
(b)	for the plumber’s work for the installation of new sewer pipework to the sewer point and bathrooms, Mr Osborne allowed 54 hours for a plumber (and materials) at $115.00 per hour ($6,210.00). Mr Jeffery allowed 6 hours labour at $75.00 ($450.00) and $450.00 for materials. I consider the hours allowed by Mr Osborne and the hourly rate to be more reasonable estimates. However, the fundamental difference is that Mr Jeffery has not included the cost of installing the sewer pipes to the sewer point. For the reasons I have indicated previously, I consider that this was part of the Builder’s work;
(c)	for the repair of the concrete slab, Mr Osborne has allowed a total of $1,310.00 for 2 cubic metres of concrete at $280.00 per cubic metre ($560.00), $150.00 for steel and 8 hours labour at $75.00 per hour ($600.00) and Mr Jeffery allowed a total of $1,690.00 being labour of 16 hours at $65.00 ($1,040.00) and materials of $650.00; and
(d)	the differences between the experts for margin and contingency.
853	Generally, I prefer the evidence of Mr Osborne on matters of both liability and quantum for reasons I have indicated in relation to other defect items. Further, in relation to the costing of this item, I consider that the estimates of Mr Osborne totalling $17,294.00 are more appropriate and realistic.
854	Unresolved issues relating to the allowances for defect items 6a, 6b, 7a, 29 and 29A: It remains necessary to consider two unresolved issues which relate to each of the plumbing defect items that I have discussed, as follows:
Item no.	Description	MO Reports estimates	Amount claimed	Quantum determined	
6a	Stormwater part 1	$62,549.20	$8,203.00	$8,203.00	
6b	Stormwater part 2		$6,948.00	$6,948.00	
7a	Toilet cistern	$39,334.76	$8,164.00	$6,531.20	
29	Grease trap	$52,340.28	$27,065.00	$27,065.00	
29A	Sewer drainage to GF bathrooms		$17,294.00	$17,294.00	
	Total	$154,224.24	$67,674.00	$66,041.20	
855	The remaining issues requiring resolution are:
(a)	what amounts were paid in respect of work carried out by Perus Plumbing Pty Ltd, and what relevance those amounts have to the allowances I should make in respect of these defect items;
(b)	how the amount of $100,000.00 paid to the Client by the Builder’s subcontractor plumber’s insurer for his defective work should be taken into account in assessing the appropriate allowances.
856	Firstly, I note that when Mr Perugini went on site, he prepared 11 Plumbing Fault Reports. Six of these reports are relevant to my consideration of the present issues:
(a)	for the matters raised under defect item 6a – “Inlet pipe to the carpark drainage pit”, Mr Perugini issued Plumbing Fault Report no. 4 [CB 865] which read:
“Storm water incorrect invert level at pit 2. Top end storm water pipe is about 100mm lower than outlet … to rectify fault: Cut concrete in car park, excavate soil, lay new stormwater and reinstate concrete [no. 4];”
(b)	for the matter raised under defect item 7a – “Toilet cistern part 1”, Mr Perugini issued Plumbing Fault Report no. 7 [CB 872] which read:
“Ground floor and 1st floor toilet have no cisterns and are exposed. Not what specified … Install cisterns in wall as specified [no. 7];”
(c)	for the matter raised under defect item 29 – “Grease trap”, Mr Perugini issued Plumbing Fault Report no. 2 [CB 862] and no. 5 [CB 867] which read:
“Kitchen drain to grease trap, not enough fall, holding water. … to rectify fault: Cut slab. Jack hammer concrete. Re-lay new drain deeper and reinstate concrete [no. 2];
Plastic grease trap caved in due to no concrete support around pit … to rectify fault: Remove plastic grease trap and replace with concrete grease trap [no. 5].”
(d)	for the matter raised under Defect Item 29A – “Sewer drainage to GF bathrooms”, Mr Perugini issued Plumbing Fault Report no. 1 [CB 858] and no. 3 [CB 864] which read:
“All drains to bathroom fixtures under slab doesn’t have enough cover. Pipes have been incased in concrete and does not comply to AS/NZS … to rectify fault: cut concrete slab, jackhammer concrete, relay drain deeper and reinstate concrete [no. 1];
Outside main sewer drain not having pipe bedding material to support pipe. Doesn’t comply to standards … to rectify fault: excavate and relay new sewer drain outside of building [no. 3].”
857	In paragraph 193(n) of his witness statement dated 20 August 2021, Mr Mustafa discussed the plumbing defects identified by Mr Perugini, including item 29A. Mr Mustafa referred to the investigation by the Victorian Building Authority in December 2018, including of the grease trap and the claim made against the Builder’s plumber (M & A Polimeni Plumbing Pty Ltd’s) insurer. The insurer paid the Client $100,000.00, the maximum payable under the policy for the “defective plumbing works” [CB 4677].
858	The actual claim is not in the Court Book. In his witness statement, immediately after referring to the insurance claim, Mr Mustafa lists the 5 “invoices for defective works” issued by Perus Plumbing, as follows:
Inv no.	Date	Amount	Notation	Ref.	
1256	19 Oct 18	$19,406.20	None	CB 3973	
1262	8 Nov 18	$16,469.75	None	CB 4055	
1277	28 Jan 19	$18,258.35	“paid … Nab … 5/2/18”	CB 4268-9	
1282	4 Mar 19	$15,420.90	“paid Nab … 9/3/19”	CB 4343-4	
1309	28 May 19	$1,238.00	“paid D/D 10/6/19”	CB 4515	
	Total	$70,793.20			
859	Mr Mustafa stated at paragraph 193(n) that the Client has “only claimed for invoices no 1277, 1282 and 1309 against” the Builder. It appears that the work performed by Perus Plumbing covering the period 1 to 18 October 2018 and detailed in invoice no. 1256 dated 19 October 2018 was submitted by another of the Client’s subcontractors, AARC Services on 22 October 2018 by invoice no. 0194 [CB 4020]. Perus’ charges were significantly increased in the AARC invoice, so that the total amount of the AARC Services invoice was $31,903.30. This invoice had the notation “paid D/D NAB connect 26/10/18”.
860	There is a similar situation in relation to Perus Plumbing invoice no. 1262 dated 8 November 2018 covering work performed between 19 October and 7 November 2018 for the total amount of $16,469.75. The AARC Services invoice no. 0203 dated 9 November 2018 [CB 4063] covering the same work as the Perus Plumbing invoice between 19 October and 7 November 2018 claimed the total sum of $25,639.68. The AARC invoice had the notation “paid D/D NAB connect 13/11/18”.
861	No adequate explanation was offered as to why these Perus Plumbing invoices were re-issued by AARC Services for higher amounts and apparently paid by the Client.
862	The insurer seems to have paid out the claim on the basis of the investigation by the Victorian Building Authority which apparently indicated receiving verbal explanations from Mr Polimeni. The insurer’s loss adjuster’s report [CB 4653] notes in paragraph 14.1 that, “The Claimant [the Client] has submitted invoices for the rectification and completion of works in the sum of $169,757 incl GST” in respect of Polimeni Plumbing’s work. No further details of those invoices are apparent from the evidence.
863	The total of the three invoices from Perus Plumbing which Mr Mustafa says have been claimed from the Builder (1277, 1282 and 1309) is $34,946.25. The total of the amount covered by the work performed by Perus Plumbing (included in its first 2 invoices 1256 and 1262) is $35,875.95, though the total as claimed by AARC Services, and apparently paid by the Client, is $57,542.98. Together the sums apparently paid for Perus Plumbing’s work is $92,489.23.
864	There are two further invoices from Perus Plumbing, as follows:
Inv no.	Date	Amount	Notation	Ref.	
1293	14 Apr 19	$28,854.10	“paid NAB connect”	CB 4437	
1300	13 May 19	$748.00	“paid NAB connect”	CB 4504	
865	Mr Mustafa said at paragraph 193(n) that these invoices were issued “for completion works for fit off, which are not in respect of defective works … Both of these invoices form part of the claim against [the Builder] for completion costs”. It is difficult to see how these costs could have been included in the insurance claim.
866	There does not appear to be any element of legal costs included in the Client’s insurance claim. The correspondence from the insurer and the loss adjuster was with Mr Mustafa. The Client’s lawyers only seemed to become involved when Polimeni Plumbing refused to pay the $5,000.00 excess on the insurance.
867	I have noted in the table at the commencement of this discussion about the insurance payout, the estimates in Mr Osborne’s first and second reports/ His estimates for items 6, 7 and 29 totalled $152,224.24. These estimates were not, however, based on “invoices”. It is unlikely that the invoices totalling $169,757.00 including GST “submitted” by the Client to Polimeni Plumbing’s insurer would have referred to Mr Osborne’s estimates. His estimates were substantially reduced by the time the Scott Schedule was finalised. 
868	The total amount now claimed for this defect item is $17,294.00, and for the related item (29) is $27,065.00. Not all the costs claimed, on the basis of Mr Osborne’s estimates for these items, appear to be covered by the Perus Plumbing invoices, for example concrete cutting and the re-concreting of the slab. It is therefore possible that some of these other non-plumbing costs were included in the insurance claim. I note, however, that the cost estimate produced by Mr Osborne in his report dated 4 December 2018 in respect of item 29 (not including 29A) was $52,340.28 before being reduced following the discussions in conclave between the experts.
869	Defect item 6b (connecting downpipes required as a result of a downpipe to the first floor play deck being left protruding in the roof eve) is a matter not mentioned by Mr Perus in his Plumbing Fault Reports. Notwithstanding, it was rectified by Perus Plumbing and was presumably included in its invoices. I consider, therefore, that the cost of this work was probably included by Mr Mustafa as part of the insurance claim.
870	Accordingly, I consider it likely that any cost to the Client arising out of defective work performed by the Builder, through its subcontractor, Polimeni Plumbing, has been fully compensated by the payment of $100,000.00 received from Polimeni Plumber’s insurer. 
871	As with defect items 6a, 6b, 7a and 29, no further allowance shall be made for defect item 29A.
Item 30: Not pursued.
Item 31: Framing (MO - $208,929.00), TJ - $4,643.00)
872	Mr Osborne, in his second report dated 4 December 2018, made a number of criticisms of the Builder’s framing works [at CB 144–5], including:
(a)	stud spacing: Mr Osborne said that, “The spacings of the steel studs were measured at over 600mm centres”, which breached page 20 and Table 8 of the Gyprock Guide. He referred to photographs 16–18 at CB 161–2;
(b)	fixing to concrete columns: Mr Osborne said that, “The steel framing was not attached to steel, concrete columns and the concrete slab”, breaching the requirements of “typical wall intersections” in the Rondo guide. He referred to photographs 19 and 20 at CB 163;
(c)	installation of steel floor and ceiling tracks: Mr Osborne said that on the project, “The track to the concrete slab did not have fixings within the last 100mm [from ends]” as required by item 2 of the Rondo guide. He referred to photographs 21-25 at CB 164-6.
873	Mr Jeffery’s response in his report dated 7 April 2020 [at CB 306] was that Mr Osborne had (as he also had in relation to defect 28 – Interior structural steel frame) relied upon “Table 8 of the Gyprock Guide which is specifically used for ‘perimeter walls’. All photos relied upon by [Mr Osborne] are of internal walls that will never have any wind loads placed on them. Table 8 is irrelevant to the internal walls as Table 8 relates to external walls only”. 
874	In relation to the defects relating to the attachment of the steel framing and “the track to the concrete slab”, Mr Jeffery said that Mr Osborne had “failed to provide any photos and/or any other documentation to substantiate the extent of the purported defective items”. Mr Jeffery referred to comments by Mr Etcell and Mr Barnett “that the extent of changes [by the Client since the Building Contract had been terminated] left some areas unrecognisable”. Mr Jeffery questioned Mr Osborne’s statements that the defects were discovered when the new builder “had removed plaster to rectify other works”. 
875	Mr Jeffery said that Mr Osborne’s suggestion that: 
‘”the defective work will require demolition of the internal steel wall frames’ is unacceptably excessive and fails to take into consideration that the demolition of these walls was a result of the Owner’s elected changes, alterations and extensions to the project and not a result of having discovered the purported defects in the works undertaken by [the Builder].” 
876	Mr Jeffery said that “given the extent of the Owner’s alteration works, I do not believe it is either fair or reasonable to hold [the Builder] responsible for [Mr Osborne’s] cost of rectification works”. Mr Jeffery described the “rectification works” as “the alleged minor defects asserted by [Mr Osborne]”. Mr Jeffery concluded by saying:
 “I do however acknowledge that there appears to have been some questionable works shown in [Mr Osborne’s] photos, but it is not possible to establish if such works were in the walls that were replaced as part of the Owner’s alterations.” 
877	Mr Osborne’s estimate of the rectification cost was $208,928.00. Mr Jeffery’s calculation of “a fair and reasonable amount for these works” was $2,500.00. 
878	In Mr Osborne’s supplementary report dated 9 July 2020 [at CB 424], Mr Osborne quoted page 39 of the Gyprock installation guide “stud framing”, which reads as follows: 
 “Ensure that all timber or steel framing members to receive sheeting are plumb and true in accordance with the chosen Level of Finish, and studs are spaced at a maximum 600mm centres and in accordance with TABLE 8 on page 20.”
879	The relevant photographs referred to by Mr Osborne were 19–25, although photograph 16 begins the relevant series of photos for this item [at CB 161–166]. Mr Osborne said that the defects in the framing were clearly visible and reaffirmed his estimate of the rectification costs. 
880	In Mr Jeffery’s further report dated 28 May 2021 [at CB 505–506], without addressing Mr Osborne’s responses in relation to the Gyprock Installation Guide or the detail of the photographs in Mr Osborne’s original report, Mr Jeffery repeated that “all photos relied upon by Buildspect are of internal walls that will never have any wind loads placed on them”, and that “Table 8 relates to external walls only”.
881	Mr Casamento, in his report dated 15 October 2021 [SCB 2037], simply repeated Mr Jeffery’s statement that “the Gyprock specification … does not apply to interior wall which is not subjected to wind loading”. Mr Casamento further stated that
 “The steel stud spacing in excess of 600mm (i.e. 640mm at 670mm as measured by [Mr Osborne]) appears to be isolated and not consistent throughout the wall. Similar with the corner studs, [Mr Osborne] has not articulated the extent of the alleged defective studs. Therefore it is difficult to quantify.” 
882	Mr Casamento does not include any information in his report to support his conclusion that the steel stud spacing “appears to be isolated and not consistent throughout the wall”. Mr Casamento also suggested that “with the removal of the plasterboard it is highly likely that the studs could have also been damaged in the process”. Juxtaposing “highly likely” and “could have” makes the stated conclusion meaningless. 
883	In the concurrent evidence session, Mr Osborne said that, as the plaster was being removed, inadequacies in the framing became apparent. At the time of Mr Osborne’s second or third inspections (on 11 September 2018 and 26 October 2018 respectively), the removal of plasterboard “was pretty limited, the demolition was limited to plumbing defects”. Mr Osborne said that he did not see the property again until “after it was virtually completed and done”, presumably at the time of his next inspection. 
884	Mr Jeffery at T620 said that he was “finding it hard to understand why all the walls had to be demolished [as] normal building practice would be that you have regular inspections as the works proceed and an item such as faulty framing to the extent of requiring wall demolition would have been picked up at a very, very early stage”. In answer to my questions, Mr Jeffery said that such inspections would be carried out by a building inspector “walking around with the architect” presumably on behalf of the Client, and that the “building surveyor [is] required to do a frame inspection … before the wall claddings go on”. 
885	Mr Jeffery’s assumption about the building surveyor was incorrect, as appears from the building notice issued by the building surveyor on 8 August 2018 [at CB 3656] where under the heading “Building Work Has Been Carried Out in Contravention of The Building Act 1993”, the notice stated that: 
 “External Building Works have been carried out by the builder … where a building permit in relation to the work has not been issued and in relation to Section 33, the relevant building surveyor was not notified of the mandatory inspection notification stages, being inspections … upon completion of framework (eg steel, timber).” 
886	At T627, Mr Jeffery stated that behind the plasterboard (in this case in one of the bathrooms), “there probably would be a stud … and then I’d say probably 600 mm in there’d be another stud and then another one”. This evidence appears to be inconsistent with Mr Jeffery’s assertion, at other times, that the requirement for 600-millimetre centres for studs referred to in the Gyprock Installation Guide would only apply to external walls. 
887	At T632, Mr Casamento described the process for removing and replacing a stud by unscrewing it and screwing the replacement stud back in, and stated, 
 “I mean that happens quite often actually because all the studs are put in a certain centre, 600 centres, and if by chance, you know, you've got a toilet or something that has to be put in and it's in the way, you take it out and you put it in wherever you want it.”
888	This evidence was also inconsistent with the statements made by Mr Casamento in his report that the requirement in the Gyprock Installation Guide for the studs to be at centres of 600 millimetres only applied to external walls. This discussion in the concurrent evidence session related to defect Item 7a – the Builder’s failure to install the inwall toilet cisterns before the walls were plastered, and the ease with which the cisterns could be properly installed without damaging the framework. 
889	Mr Osborne said the process of removing and replacing the steel studs was difficult because “pulling out the studs you are also going to damage the plaster on the other side”. Rather than removing existing studs “the easiest, most economical way is to pull that section [of plaster wall] out”. At T647, Mr Osborne gave specific evidence about the framing defects. He said, “There were various studs over spaced. They were up to 670mm apart was the worst one I identified. There were studs missing to the corners, which is good building practice to pick up plaster. They hadn’t been attached … there were no studs. No means of fixing the steel framing to any concrete columns or anything … in a couple of locations”.
890	Mr Jeffery conceded at T648 that, “It would heighten my awareness that I would need to do some checking to see the stability of walls” in the absence of a framing inspection by a registered building surveyor or in the absence of any other inspection report.
891	Mr Etcell in his Witness Statement dated 5 October 2021 stated at paragraphs 247–248 as follows:
 “The Mustafas, the architect and the RBS [registered building surveyor] were all told that our engineer [GHA Engineers] was supplying structural documentation. This was never raised as an issue until the Mustafas terminated the contract and requested all the certificates issued. GHA [Engineers] did all the certifications of the works in place of the RBS [CB 3210–3211, 3224–3229, 3294–3295 and 3298–9].
 In my experience as a builder, it is common for engineers to complete footing, frame and structural inspections in lieu of the RBS. I had used Grimbos as the RBS on the Camberwell gym project. On that project the engineers also did the inspections of the RBS, without any issue. In light of this, I deny the assertion in paragraph 113 of Katherine’s [Ms Voyage’s]  statement that no inspections were undertaken, and that the RBS was not notified to inspect the work.”
892	Notwithstanding Mr Etcell’s statements that, at the time the Building Contract was terminated, Mr and Mrs Mustafa and Ms Voyage were specifically aware that frame inspections, and other, inspections had been undertaken by Mr Holland of GHA Engineers, I am not satisfied that these statements are correct. 
893	I have previously referred, in the consideration of defect Item 26 to the Building Notice issued on  8 August 2018 by the Building Surveyor which required the Builder to verify that “mandatory inspections” had been carried out, including “upon completion of the framework (eg steel, timber)”.
894	Mr Etcell referred to documents in the Court Book, being Certificates of Compliance by Mr Holland of GHA Engineers. However, Mr Ercell omitted the most relevant certificate. The certificates of Mr Holland to which Mr Etcell referred were as follows:
Date	CB ref.	Description	
12 May 18	3210	The certificate related to “inspections” on 27 March, 2 and 16 April and 12 May 2018 prior to concrete pours to the “upstairs outdoor area above ground level carparking”. A “Project note inspection report” with a summary of each inspection was attached.	
19 May 18	3224	The certificate related to the “design” of the “revised concrete playdeck” in May 2018.	
8 Jun 18	3294	The certificate related to an “inspection” on 8 June 2018 of the “existing roof work structure”. The certificate noted that the work was “approved” save for “construction of supporting posts to this roof – not yet constructed”, which was noted as “Not Approved”. This certificate has already been discussed in relation to defect Item 12a.	
12 Jun 18	3298	The certificate relates to an inspection of the “first floor slab reinforcement” which was noted as “approved”. The certificate attached a “Project note inspection report” with a summary of the inspection.	
895	None of these certificates related to framing. There is, as far as I could find, only one certificate which relates to framing. It is a Certificate of Compliance by Mr Holland dated 30 April 2019 [at CB 4500]. The certificate lists “Building Works inspected being the structural works of the alterations” on dates between 27 March 2018 and 30 April 2019. The only reference to framing is to “First floor deck, pergola and outdoor store framing: 08Jun18, 19Jan19, 30Apr19 – Approved”. 
896	The following matter should be noted:
(a)	there is no Project note inspection report attached to the certificate which might have summarised each inspection;
(b)	the dates upon which the Builder claimed the Stage 5: Frame progress payments were 21 March 2018 for 80% completion, and 19 June 2018 for the completion of the balance of the stage;
(c)	Mr Mustafa had expressly referred to certain items as having “not been framed when Ikonic left site”, including “the Pergola on the play deck [and] the framing to the South side of the play deck”, that Mr Mustafa said was “not complete”;
(d)	The fact that there were three inspections by Mr Holland before the framing for that area was noted as “Approved” suggests that on the first inspection on 8 June 2018, the works were incomplete;
(e)	The absence of any other record of “frame” inspections suggests that Mr Holland did not carry any more.
897	Ms Voyage on 2 August 2018 [CB 3611] requested the Builder to supply any engineer’s certificates. The email listed the requested inspection reports and asked, “Were these conducted by your engineer?” This request was not complied with by the Builder. It was not until later in September 2018 that Mr Holland provided certificates to the Registered Building Surveyor. 
898	At paragraph 293(c), Mr Etcell said that “the framework installed by Ikonic Homes was correct and in accordance with the plans and specifications at the time”. This statement is not borne out by the evidence of Mr Osborne and the photographs he took.
899	At paragraphs 416 and 417, Mr Etcell noted that the “works as ultimately constructed are significantly different in terms of their design and layout from the works we were required to construct under the contract”. And as a result Mr Etcell said that he 
"Formed the view, based on my observations, as to the nature and extent of the changes made to the floor plan and fixtures and finishes that a lot of our original works would have needed to be removed to accommodate the changes.”
900	At CB 2923–2924, there are a number of photographs taken on 19 February 2018 showing the steel framework in a number of locations. Mr Etcell agreed, when taken to these photographs at T1460, that the frame stage “wasn’t too far off completion [although] I don’t believe we’d completed it fully”. He agreed that there were “no noggins … in that steel frame”. At T1461, Mr Etcell stated, “I don’t believe that the steel frame required noggins. I don’t believe the manufacturer stipulates that noggins have to be put in with those steel frames”.
901	Mr El-Sheikh in his witness statement dated 26 August 2021 stated at paragraph 22 (e) that:
“… During the course of the works, it became apparent that a lot of the steel framing installed by the Builder was poorly installed. I refer to photos No 16 to 25 of Matt Osborne’s report dated 4 December 2018 (CB… 1313 – 1339) … which illustrates the general nature of the poor work
Romaac removed a significant amount of the existing steel framework and replaced it with timber framing, except for where the framing was required to be fire rated, such as the store room on the external play deck…”
902	I am satisfied that the framework installed by the Builder was defective in the respects identified by Mr Osborne.
903	Quantum: Mr Osborne estimated the cost of replacing the framing, and associated work, at $208,929.00.
904	 Mr Jeffery estimated, what is described in the Scott Schedule as, the cost of “Labour in rectification of MO [Mr Osborne’s] identified wall defects [and] Materials in rectification of MO identified wall defects” at $4,643.00, comprising:
(a)	2,600.00 for labour - 40 hours at $65.00 per hour; 
(b)	$750.00 for materials; and
(c)	$3,350 total basic cost, plus contingency, margin and GST.
905	Mr Osborne’s basic costing of $132,822.00 (without contingency, margin and GST), is made up as follows:
Description	Item	Quantity	Unit	Rate	Amount	
Demolish internal framing, remove internal doors and windows, remove plaster, tiling to interior walls	L	80	Hours	$65.00	$5,200.00	
Bins for disposal of rubbish	P	3	E	$1,070.00	$3,210.00	
Install steel framing in accordance with the manufacturer’s instructions and building standards	LM	300	LM	$8.00	$2,412.00	
Reinstall interior doors and windows	L	16	H	$75.00	$1,200.00	
Allowance for electrical re-wire and replumbing	LM	1	E	$80,000.00	$80,000.00	
Plaster installation	LM	240	H	$85.00	$20,400.00	
Repaint internal walls	LM	240	H	$85.00	$20,400.00	
BASIC COSTS					$132,822.00	
906	I must take into account the allowances I have made for other defect items:
(a)	in dealing with the electrical defect items below, I have made appropriate allowances for individual items rather than allowing Mr Osborne’s global estimate of $80,000.00 for “electrical rewire and re-plumbing”. I have dealt with the quantum of the plumbing defects under item 29A. I do not consider that there is any basis for me to determine what replumbing was required or how the cost of it might be determined from the evidence. I consider that it is likely to be relatively insignificant. I will not allow any sum for electrical or plumbing work as part of this item;
(b)	in dealing with item 3 – window installation, no claim was made for window installation in the revised claim. In item 5 – internal doors, $2,400.00 was claimed for the labour to install 24 new doors. By reason of these matters, it is not appropriate to make any allowance to reinstall interior doors and windows; and
(c)	in relation to each of the remaining items of cost, in my view it is appropriate to discount these items by a percentage to take account of the fact that these items are also relevant to the new work undertaken by the Client after the termination of the Building Contract. It is impossible to make an accurate estimate of the cost of carrying out the new work or to determine whether particular further works can be allocated with any accuracy between rectification and/or completion work on the one hand and the cost of new work on the other. This matter is further discussed in a later part of these reasons dealing with the remaining issues of quantum. In that discussion, I have concluded that I should apportion costs as between rectification and/or completion work, and new work, in the proportions 50:50. I will use that approximation in relation to the present item.
907	Accordingly, I have determined that the appropriate allowance for this defect is $40,915.70, calculated as follows:
Description	Claim	Determination	Allowed	
Demolish internal framing, remove internal doors and windows, remove plaster, tiling to interior walls	$5,200.00	Reduced by 50%	$2,600.00	
Bins for disposal of rubbish	$3,210.00	Reduced by 50%	$1,605.00	
Install steel framing in accordance with the manufacturer’s instructions and building standards	$2,412.00	Reduced by 50%	$1,406.00	
Reinstall interior doors and windows	$1,200.00	Disallowed	Nil	
Allowance for electrical re-wire and replumbing	$80,000.00	Disallowed	Nil	
Plaster installation	$20,400.00	Reduced by 50%	$10,200.00	
Repaint internal walls	$20,400.00	Reduced by 50%	$10,200.00	
Basic costs	$132,822.00		$26,011.00	
		Contingency 10%	$2,601.10	
			$28,612.10	
		Margin 30%	$8,583.63	
			$37,195.73	
		GST 10%	$3,719.57	
Total allowance			$40,915.70	
Item 32: Lift well slab (MO - $3,366.00), TJ - $2,266.00)
908	Based upon information provided by Mr El-Sheikh to Mr Osborne at his inspection on 26 October 2018, Mr Osborne included item 32 in his report dated 4 December 2018. Mr El-Sheikh had told him that “there was no steel reinforcement mesh installed and attached to the pre-existing slab [for the lift well]”. Mr Osborne identified this as defective work that the Client would have needed to remove and reconstruct in accordance with a fresh engineer’s design with appropriate “steel and tie in details” [CB 146].
909	After the Building Contract was terminated, the Builder offered to assign his contract for the supply of the lift to the Client. This offer was not accepted. The Client ordered a new lift. The new lift was slightly larger than the old lift. As a consequence, Mr El-Sheikh said at paragraph 22(f) of his witness statement dated 26 August 2021 that, the “pit size was too small” and the:
 "Existing lift well slab was removed … To increase the size of the lift well slab it had to be jackhammered out, the concrete removed and the concrete re-layed with steel reinforcement mesh installed. When the slab was removed, I observed that it did not have steel reinforcement mesh installed.” 
910	It is not clear from these statements precisely what Mr El-Sheikh observed, as he continued, “Jerry Mustafa and his concreter undertook the demolition work and Romaac [Mr El-Sheikh’s company] was engaged to remove the excess concrete”.
911	In his witness statement dated 20 August 2021, Mr Mustafa relevantly stated at paragraph 193(ii), “We extended the pit [for the lift well], which involved jackhammering the slab out. When we undertook this work, it became apparent the slab laid was not thick enough and reinforcement had not been used”.
912	Mr Etcell, at paragraph 422 of his witness statement dated 5 October 2021 stated that, “Upon reaching the required depth [of excavation] and allowing for minimum depth of concrete we installed mesh at the base of the well and starter bars around the perimeter edge of the lift well and poured the concrete to the required depth and height”.
913	Mr Etcell indicated, and there was no controversy about this, that it was the “lower part” only of the slab that had been poured by the Builder before the Building Contract was terminated. The Builder was intending to later complete the slab by pouring the “upper part”. The pour of the lower part is shown in photograph 26 (see below).
914	There is no other direct evidence from individuals who may have been involved in the original work by the Builder to lay the slab, or the subsequent work to remove the slab after the Building Contract was terminated.
915	The experts relied upon photographs to make any useful contribution to the debate. Otherwise, the experts were reliant upon what they had been told by others. This evidence, including much of their reports, was unhelpful.
916	There were 4 photographs discussed by the experts:
(a)	photograph 26 [CB 166] showing the lift well filled with concrete when Mr Osborne inspected the property on 30 August 2018;
(b)	photograph 27 [CB 167] showing that the concrete had been removed by the time of Mr Osborne’s inspection on 26 October 2018; and
(c)	photographs 4.4a and 4.6b forming part of Mr Jeffery’s report dated 7 April 2020 [at CB 308]. Mr Jeffery labelled each of these photographs as showing, “Starter bars installed in lift pit base”. The photographs were supplied to Mr Jeffery by Mr Etcell. Mr Osborne disputed whether these photographs were actually of the site of the lift slab pit.
917	I am unable to resolve the factual dispute between the witnesses who saw the steel reinforcement, including starter bars, when the lower part of the slab was poured, and those who said that there was no steel in the slab later jackhammered and removed. I am also unable to obtain assistance from the photographs. The 2 photographs, apparently from Mr Etcell, may be of the site of the lift slab pit. I cannot be satisfied that they are.
918	In the circumstances, where the Plaintiffs have the onus of proof, I am not satisfied that there was defective work in the installation of the slab. There are also other arguments as to whether the Client suffered any loss as, by reason of the change in the size of the lift to be installed, even if the lower part of the slab contained steel reinforcing including starter bars, the slab would have needed to be removed. However, the need for a replacement lift only became apparent after the Building Contract was terminated.
919	No allowance will be made for this item.
Items 33 and 34: Not pursued.
Item 35: Eastern boundary retaining wall (MO - $1,400.00, TJ - $1,400.00)
920	This item is agreed both as to liability and quantum. The parties’ experts agreed that this was defective work and that the reasonable cost to rectify the item was $1,400.00. I shall allow that sum for this item.
Items 36, 37 and 38: Not pursued.
Electrical defects
921	In the Particulars to paragraph 6 of the P3FASOC, the Plaintiffs claim that the “electrical work performed by the Builder” was constructed defectively and referred “to the matters contained in the Mason Fox Electrical and Safety Report (“Mason Fox Report”) dated 25 September 2018” and “to the Witness Statement of the author of the Safety Report Ljubisa Gulevska dated 18 August 2021”. A convenient summary of the Mason Fox Report is contained in Part B of Annexure C to the Defendant’s Written Closing Submissions.
922	Paragraph 3 of Part B of Annexure C states that: 
“The alleged electrical defects set out in the Mason Fox Report can be grouped as follows:  
(1)		defects 1 to 10 relate to the temporary power supply; 
(2)		defects 11 to 13 relate to the service pit; 
(3)		defect 14 relates to the main earthing conductor; 
(4)		defects 15 to 20 relate to the metering enclosure and current transformer chamber; and 
(5)		defects 21 to 23 relate to the main switchboard.”
923	Defects 1–10 – Temporary power supply: There is disagreement in the evidence of Mr Etcell and Mr Mustafa as to whether the temporary power was supplied by the Builder or by the Client. The only reference in the contractual documents to “temporary power” is contained in item 16 of the Schedule to the Contract Conditions, which provides under the heading “Progress Claims”, that the first stage of the works for a progress claim was “1. Deposit 5% (including hoarding, insurances, site set up, temporary power etc) $73,642.35”. From this provision it can be inferred that “temporary power” was in the nature of an overhead or item of preliminaries for which the Builder was responsible.
924	Mr Mustafa in paragraph 48(a) of his Written Statement dated 15 July 2022 referred to this provision and said, “I did not undertake or arrange for the temporary power to be connected to the site to allow for the building works. This was always a contractual obligation of the Builder as contained in the contract (CB 2110) it was part of the 5% deposit paid”. Mr Etcell responded in paragraph 43 of his Further Witness Statement dated 16 September 2022 that Mr Mustafa’s further statement was “untrue and incorrect. Ikonic did not undertake any works in respect of the temporary power or its connection”. 
925	At paragraph 163 Mr Etcell said:
 “I refer to paragraph 7(a) of Lou’s [Gulevski’s] Further Statement and his comments about the GMB Electrics Quote and the excluded items that he mentions. As stated at paragraphs 292(v) and 368(c) in my First Statement, Jerry told me that he was a licensed electrician by trade, and he organised and undertook the works for the temporary power to the Site.”
926	In paragraph 292(v), and essentially repeated in paragraph 368(i) of his first witness statement dated 5 October 2021, Mr Etcell said that “the temporary power works … were undertaken by Jerry [Mustafa] and his own contractor at the start of the project”. At paragraph 165, Mr Etcell said:
 “The temporary power to the Site was organised by Jerry. There is a text message from Jerry to Justin [Barnett] dated 8 September 2017 (FSCB#) where he tells or asks Justin to remove the provision of a temporary power pole from the preliminaries as ‘the existing original switchboard will be sufficient.’ Jerry then organised for the temporary power to come from the switchboard [FSCB 340].” 
927	There are a substantial number of text messages between Mr Mustafa and Mr Barnett contained in the three Court Books. The earliest of these text messages is dated 27 April 2017 [CB 1387]. I have been unable to find a copy of the text message referred to in Mr Etcell’s Further Witness Statement that he references as “FSCB#”. It is difficult, without seeing the actual copy text message, to form any firm conclusion about this matter. 
928	However, the following matters are confirmed by other evidence: 
(a)	At paragraph 193(e) of his Witness Statement dated 20 August 2021 Mr Mustafa stated, “I am a registered A Grade Electrician having practiced for 16 years”; 
(b)	It is likely that “the provision of a temporary power pole” would have been regarded as part of the Builder’s allowance for “preliminaries”;
(c)	On 2 May 2017, Mr Barnett (through entities associated with him) gave a quotation in the name of Vault Corporate headed “Demolition Quote” with the “works to be carried out” including:
“6. 	Temporary power pole 4-month hire. $1,000 4-month hire owner arranges current supply to do a reconnect to the temp pole. We provide paperwork and inspection CRT. 20 days total till connection only if required;” 
(d)	If the final arrangement for demolition whether directly with Mr Barnett or with the Builder was on similar terms, this may explain a request to Mr Barnett in the alleged text message dated 8 September 2017 “to remove the provision of a temporary power pole from the preliminaries”;
(e)	On 14 August 2917 [CB 1900–1901] there is a quotation for electrical installation at the project by GMB Electrics (the Builder’s ultimate subcontractor) which includes, “Use of existing mains supply and mains switchboard”, “4 x temp power boards”, and “Temporary connection to 4 x site sheds”, but noted that exclusions were, “Upgrades to existing switchboard and mains supply [and] Main temporary power supply”; 
(f)	The Builder in fact used the existing original switchboard for temporary power from the commencement of work in October 2017 until works were suspended on 31 July 2018 and did not use a temporary power pole;
(g)	It is likely that Mr Mustafa, particularly with his professional experience as an electrician and his involvement during the Builder’s time on the site, would have been fully aware that the Builder was obtaining temporary power from the existing switchboard; 
(h)	Mr Mustafa did not respond to Mr Etcell’s Further Witness Statement. Mr Mustafa at paragraph 48(b) of his Witness Statement dated 15 July 2022 stated, in response to paragraph 368(c) of Mr Etcell’s first Witness Statement, “I discovered after Paul [Etcell] left site when I arranged for Lou Gulevski to inspect the works that the power had been connected illegally and there were many defects to the electrical work performed”;
(i)	Although, I do not accept that this evidence of “discovery” is entirely credible, I am satisfied the Builder had accepted the responsibility for the temporary power supply and that, because of the defective work, it was appropriate to discontinue the use of the existing switchboard.
929	Mr Gulevski in his Witness Statement dated 18 August 2021 said that he attended the project in late August 2018 at the request of Mr El-Sheikh whom he knew “from a few other jobs I had done over the years”. Mr Mustafa asked him to “look at the electrical work that had been carried out at the Site … and to complete the unfinished electrical work”. Mr Gulevski stated that, “from my observations on 3 September 2018 [after which he produced the Mason Fox Report] I formed the view that the temporary electrical installation … was not compliant with AS/NZS 3012 for the reasons in the Report. I disconnected the temporary electrical services”.
930	Mr Gulevski in his Further Witness Statement dated 14 July 2022 [FSCB 144] at paragraph 9(b) stated that:
 “Defects 1 to 10 were resolved on the day of inspection by disconnecting the power and installing temporary supply, which consisted of a petrol generator connected to a Switchboard. This was to allow the building works to continue.”
931	It seems from this evidence that the progress of the completion and rectification work undertaken by the Client after the termination of the Building Contract was not disrupted by the temporary power issue. It is possible that the need to connect a petrol generator to a switchboard may have involved additional expense to the Client. However, no specific cost has been claimed on this basis. Mr Gulevski indicated in his first witness statement that Mason Fox Electrical had submitted seven invoices to the Client for the work it performed. 
932	One of the invoices, No. 1584, related to “an audio zoning system [that] was new work” (at CB 4124). Invoice no. 1559 [at CB 3860] only provides a total price for that work without being broken down into particular items of work. The remaining six invoices set out items of work with varying degrees of specificity. Although there is no reference in any of them to a temporary generator, it is likely that any expense involved in the supply of a generator would have been included in invoice no. 1559. 
933	Defects 11–13 Service Pit: In the Mason Fox Report [CB 3759], Mr Gulevski describes defects 11 to 13 as follows:
(a)	Defect 11 – “Consumers Mains cross sectional area exceeds the maximum allowable for a shared service pit [requiring] installation of a new dedicated service pit to accommodate the maximum demand required for the electrical installation which complies with the applicable standard”. The applicable standard is stated to be, “Service and Installation Rules 2014 [(‘S&I Rules’)], Section 7, Clause 7.5.1.3”;
(b)	Defect 12 – “Consumer Mains have not been colour coded or sleeved [requiring] installation of sleeving and colour coding which complies with the applicable standard”. The applicable standard is stated to be, “Section 7, Clause 7.5.1.4.2 [of the S&I Rule]"; 
(c)	Defect 13 – “Consumers Mains conductors do not extend the mandatory minimum of 1 Mt [metre] beyond the top of the service pit [requiring] installation of new consumers mains which complies with the applicable standard”. The applicable standard is stated as, “Section 7, Clause 7.5.2.4 [of the S&I Rules]”.
934	In paragraph 9 of Mr Gulevski’s Further Written Statement dated 14 July 2022 (FSCB 144), Mr Gulevski stated:
 “(b) The existing consumer mains were connected to the shared pit with Rare Bears [a neighbouring business] when it should not have been.
 (c) … Rare Bears were running 25mm consumer mains in the pit and the maximum that can be run by a single user is 35mm consumer mains. The Builder had installed 50mm consumer mains in the shared pit (when it was only permitted to run 35mm consumer mains in a shared pit) … a 35mm consumer main was never going to be sufficient for the maximum demand load of Bridge Street. I installed 50mm consumer mains. The maximum one can install in a shared pit is each user installing 35mm consumer mains each, ie 70mm. It is not allowable for one user to install say 20mm consumer mains and the other 50mm consumer mains in a shared pit, for the reason stated above that any one user is only permitted 35mm consumer mains in shared pit;
 (d) … AusNet Services [the service provider for the site] confirmed that with our load and the need to use 50mm conductors that a new pit would have to be created so that the consumer mains of Rare Bears and 12 Bridge Street were separated into separate pits. …;
 (e) The installation of the new pit was required to be installed some 30 meters from the Rare Bears pit. …”
935	AusNet Services confirmed this requirement in a letter to Mr Gulevski dated 24 October 2018 [FSCB 1222], which relevantly stated as follows: 
“To cater for your requirements it would be necessary to install a low voltage underground cable to a sole use low voltage underground service pit located on the left hand side property boundary. … All works from the underground service pit to your installation are your responsibility … the preliminary estimate of your contribution to these works is in the order of $16,000.00 to $19,000.00 GST inclusive.”
936	Photographs numbers 79 to 83 [at SCB 804-808] show works necessary to separate the supplies from “the street power pole and Rare Bears from Bridge Street”.
937	The Builder’s electrical expert, Simon Papasavvas, prepared a report dated 26 September 2022 [FSCB 516] in which he responded to the defects described by Mr Gulevski in the Mason Fox Report. In his report, Mr Papasavvas made the following responses:
(a)	Defect 11: Service Pit – “I am advised by the Builder that the shared service pit was existing, and that the Builder did not run any cables to this pit and had only installed a conduit between the building and the service pit. The conduit was empty, and the electrician had not run any cables at the time that the Builder left the site”.
(b)	Defect 12: Colour coding or sleeved – “I am advised by the Builder that the shared service pit was existing and was not installed by the Builder, nor did the Builder run any cables to it. It would therefore be incorrect to hold the builder responsible for works that it did not carry out and in any event, the electrical works were yet to be completed and a signed certificate had not been issued as the works had not been tested and commissioned, which is the stage at which coloured sleeving is normally installed”.
(c)	Defect 13: Consumer Mains Conductors – “It is incorrect to hold the builder responsible for works that it did not carry out as I am advised that the builder did not install the cable. It also appears from the photo of the consumers mains as provided in the Mason Fox Report that there was sufficient length for the supply authority termination, being 1 metre out of the pit. I do note however that there are no measurements provided in the Mason Fox Report to support the alleged defect”.
938	Mr Etcell, in his further Witness Statement dated 16 September 2022, said at paragraphs 167 to 168 that:
 “All works associated with the installation of a new power pit … were not part of the Preliminary Plans and Drawings … and would have been a variation … At the time the Mustafas terminated the Contract, GMB Electrics had not yet progressed their works to a stage where Ausnet could have attended the Site to advise on the required load.”
939	Mr Papasavvas [at T798] conceded that the installation of the 50mm cable was defective because it was “oversized”. Either it would be necessary to remove that and install a 35mm cable (the maximum for a shared pit) or to install a separate pit. Mr Papasavvas said: 
 “Normally what happens is you assess how much the building needs to run and then you do either that [shared] pit or a separate pit for it, so I don’t know if the order of sequences has been mixed up along the way because they wanted to progress the job … Normally the drawings get done first, you apply for power, and then you start the job. I think in this instance it was start the job and then we’ll work it out as we go, it was more of a … construct … and then design, instead of a design … and then a construct [at T798–799].” 
Mr Gulevski agreed with this analysis.
940	In the concurrent evidence session with the two electrical experts, there was considerable discussion about how the original subcontractor GMB Electrical and the replacement contractor, Mason Fox, would have determined electrical loading and therefore whether the existing shared pit would be adequate or it would be necessary to have a separate pit with upgraded 50-millimetre cabling. 
941	Mr Gulevski said in his Further Witness Statement that the latest electrical drawing he was supplied with was the Reflected Ceiling Drawing A.150.0 dated 4 October 2017 [SCB 1702]. In answer to a subpoena, Mr Gulevski produced this drawing (but not the later drawing A.150.11 Reflected Ceiling Plans dated 17 December 2018 [FSCB 1248]). The earlier drawing, A.150.0 [SCB 1702] was probably the appropriate drawing that had been used by the Builder’s subcontractor to price for the sub-contract.
942	It would not be possible to determine the appropriate loading solely from an examination of the Reflected Ceiling Drawings. Mr Gulevski explained that information would be needed about heating and air conditioning, cool rooms and the lift, as well as the lighting shown on Reflected Ceiling Plans, in order to determine the required electrical loading.
943	As disclosed in Exhibit P10, on 12 October 2018 Mr Gulevski on behalf of Mason Fox Electrical made a “proposed supply request” to Ausnet, noting that “the maximum demand onsite is in the vicinity of 125-140 amps per phase”. This resulted in the preliminary estimate provided by Ausnet to Mr Gulevski on 24 October 2018 [FSCB 1222]. 
944	Earlier, in March 2018, Mr Barnett and Mr Mustafa discussed making an application to AusNet. On 16 March 2018, Mr Barnett sent an email to Mr Mustafa forwarding “supply authority request SP AusNet” asking Mr Mustafa to, “Please sign send back, also please send copy of your current or old bill” [FSCB 1115]. The attached Electricity Supply Request Application was in Mr Barnett’s name on behalf of Ikonic Homes, noting the registered electrician as GMB Electrics Pty Ltd, and requested a “firm quote” of an “upgrade to existing supply”, indicating three-phase supply was required. 
945	Mr Mustafa apparently signed the application, dated it 16 March 2018, and returned it to Mr Barnett on 16 March 2018 [FSCB 1121]. 
946	Exhibit P9 contains text messages between Mr Barnett and Mr Mustafa apparently on 17 July 2018. The text messages in the morning apparently related to the power offer to AusNet. Mr Mustafa indicated that the fee had been paid to AusNet and Mr Barnett noted that he would “push them for connection”. That afternoon, Mr Mustafa sent further text messages to Mr Barnett requesting him to “chase up” SP AusNet for a date and to make sure they have received the signed application. 
947	On 17 July 2018 a “minor extension and supply agreement” was issued by AusNet naming the customer as Bridge Kids Pty Ltd and the “rate of supply” as 45kW. The document was executed by Mr Mustafa and accepted by Ausnet on 19 July 2018. This forms part of Exhibit P10. The email correspondence in relation to the execution of the agreement and the timetabling of the works is contained in Exhibit P24. 
948	It is appropriate from this material to note the following matters:
(a)	It was not until 19 July 2018 that the Builder was in a position to have a permanent power supply connected to the Eltham property;
(b)	It is clear that the level of supply required would necessitate the installation of a separate pit as the continued use of a shared pit was inappropriate because of the supply demands of the childcare centre; and
(c)	AusNet had indicated that it would be at least six weeks before the necessary works could be commenced.
949	I accept Mr Gulevski’s evidence that he found new 50-millimetre wiring in the shared pit, which must have been installed by the Builder’s electrical subcontractor. It seems likely therefore that:
(a)	the Builder’s subcontractor was, to a degree, aware of the electrical load requirements for the project; and
(b)	The subcontractor had mistakenly intended to use the existing shared pit rather than create a separate pit as was required.
950	It was suggested that the requirement for a separate pit was additional work which would have entitled the Builder to claim a variation to the Building Contract. In that event, the installation of 50-millimetre wiring in the shared pit would be unnecessary and inappropriate work by the Builder’s electrical subcontractor. However, it is difficult to see how this has resulted in any loss to the Client as the shared pit appears to have been left in the same condition. These conclusions would have equal application to defects 12 and 13 and therefore, apart from perhaps the cost of Mr Gulevski’s investigation of these matters, there may not be any basis for making any allowance to the Client in respect of them.
951	However, the question remains as to whether the alleged defects identified work which the subcontractor failed to complete before the Building Contract was terminated. The Builder, including its expert, Mr Papasavvas, asserts that any work associated with upgrading the power supply to the property was not part of the works in the Building Contract and would have been the subject of a variation. 
952	The following are matters which have, or might have been, relied upon by the Builder in the submission that the works by Mason Fox would have constituted a variation to the Building Contract:
(a)	the sub-contractor’s specific exclusion in its quotation of works in respect of “upgrade to existing switchboard and mains supply”;
(b)	the fact that the reflected ceilings drawing (A.150.0) in the contract set was replaced by amended drawings during construction, including A.150.11 on 17 December 2018;
(c)	the contract drawings were incomplete, including by the reference in the Architect’s “Proposed Ground Floor Plan” (A.100.0) to, “Kitchen by others”;
(d)	it was unclear whether the Builder or the Client had initiated the application to AusNet in March 2018 for an upgrade of the power supply to the property; and
(e)	whether, before the circuit line diagram was prepared by the electrical subcontractor, it was not possible for the Builder to accurately determine the power requirements for the renovated building.
953	Notwithstanding these matters, I am satisfied that:
(a)	the subcontractor’s quotation was a matter between it and the Builder with no reference to the Client;
(b)	the differences in the various iterations of the reflected ceiling plans were described as inconsequential by both experts during the concurrent evidence session;
(c)	although drawing A.100.0 did not purport to be a comprehensive design of the kitchen, it did represent the elements that would be present including the cool room and dishwasher;
(d)	from the documents in evidence from March and July 2018, it appears that the Builder was more likely than the Client to have initiated the application to AusNet for the power upgrade and the Client was, in July 2018, pushing the Builder to obtain a response from AusNet as to when the necessary works for the upgrade would be undertaken; and
(e)	the running of 50mm power cables to the shared pit by the Builder’s sub-contractor was an indication that the subcontractor regarded the determination of the appropriate power loading as part of its responsibilities. 
954	In the circumstances, I consider that it is appropriate to conclude that it was part of the Builder’s responsibilities under the Building Contract to determine or ascertain the necessary power loading so that the required works might proceed. This work would include necessary upgrading work (for example, by using appropriately sized cabling).
955	It is not entirely clear that the scope of the works required for the upgrade was, or could have been, definitively determined at the time the Building Contract was entered into. It is therefore possible that, at least part of the works associated with the upgrading of the power supply, were works that may have been the subject of a claim for a variation.
956	However, the Builder and his subcontractor embarked on the works and appeared to have substantially progressed the works without claiming variations. Much of the work that was performed was either misconceived or performed in a defective manner. In these circumstances, I consider that the Builder must accept responsibility for the Client’s cost of having that work completed to an appropriate standard.
957	Defect 14 – Main earthing conductor: In the Mason Fox Report, Mr Gulevski describes defect 14 as follows: “Main Earthing conductor cross sectional area and length of uninsulated conductor is less than the minimum requirement”. Mr Gulevski recommended the “installation new main earthing system which complies with the applicable standard [which he referred to as] … AS/NZS 3000 Wiring Rules, Section 5, Clause 5.3.6.3(b)(i)”. Included in the defect report was a photograph of Mr Gulevski measuring the length of the uninsulated conductor.
958	In paragraph 9(g) of Mr Gulevski’s Further Witness Statement dated 14 July 2022 [at FSCB 148] he stated, “Defect 14 concerned the length of the wiring for the Main earthing conductor which was buried direct and as seen in the attached photo did not meet the minimum criteria of 3 metres in length”. 
959	At FSCB 532, Mr Papasavvas noted in relation to Defect 14, as follows:
“… If the cable depicted in the photographs is the new main earth as was installed by the builder (notwithstanding that the cable shown there appears to be new and unused) it is less than the minimum size of 25mm and would be defective. I note that there the electrical works were yet to be completed and a signed certificate had not been issued as the works had not been tested and commissioned, and that the cable depicted here is not the same as that in defect 10, in circumstances where there is only one main earthing conductor.”
960	At T839–842, Mr Gulevski explained that the new main earthing conductor, although “a portion of it was within the actual enclosure”, had not been installed in a trench, but was “coiled and not buried in the trench where the CT [current transformer] chamber is”. The conductor was 16 millimetres in diameter rather than the 25 millimetre minimum diameter that was required. 
961	It was suggested in the concurrent evidence session that the Builder’s subcontractor may have realised that the conductor was undersized and therefore not installed it underground. There was debate between Mr Gulevski and Mr Papasavvas as to whether the work was defective or incomplete. It was agreed that the conductor could be removed “relatively easily” and replaced with the appropriately sized material.
962	I am satisfied that the connection of the undersized conductor was defective work and that the cost of the appropriate material and its installation should be allowed. I will deal later with the issue of quantum.
963	Defects 15–20 – Metering enclosure and CT enclosure: Mr Gulevski’s defect items 15–20 relate to the meter enclosure and CT [current transformer] enclosure and include the following items: 
(a)	Defect 15 – “installation of the meter & current transformer enclosure does not allow for unhindered access [and needed to be relocated] to a suitable location approved by AusNet Services;
(b)	Defect 16 – the equipment was “not sealed with a fire-retardant sealant”;
(c)	Defect 17 – the “Current Transformer enclosure has not been installed in accordance with manufacturer’s specifications and is subject to ingress of water”;
(d)	Defect 18 – “Consumer’s Mains entering the Current Transformer Enclosure has not been provided with adequate protection against sharp angles and projecting edges [and requires replacement of compliant] conduits, bushes, and/or glands”;
(e)	Defect 19 – the “Consumer’s Mains orange HD conduit is exposed to direct sunlight and is not UV rated [and should be] treated with a light-coloured water-based acrylic paint which complies with the applicable standard”;
(f)	Defect 20 – “Consumer’s Mains orange HD conduit is not suitable protected from impact damage [and requires] additional mechanical protection which complies”.
964	Each of the alleged defects was shown in photographs attached to each description of the defects. At paragraphs 9(h)–(k) of his witness statement dated 14 July 2022 [FSCB 148], Mr Gulevski stated: 
“(h)	Defects 15, 16, 17 and 18 relate to the Current Transformer situated at the Owners site. There were significant defects with the Current Transformer, of power authorities access, lack of fire-retardant sealant, water ingress, IP ratings, just to mention a few, not being suitable for the applicable AS/NZS 3000 Wiring Rules as stated in the Report including clause 1.7.1(c) and AS/NZS 3439.1 manufactures specification;
(i) 	Further, it had been located in the incorrect location, in that it was installed in the Children’s play area, which is not permissible. We relocated the new Current Transformer to the north east side of the building as directed by the authorities with an industry lock on the gate;
(j) 	I have been shown a photo numbered 83 which shows the new Current Transformer we installed;
(k) 	Defects 19, 20 related to the insufficiency of the consumer mains entering the Current Transformer, in that they had not been protected from UV and mechanical damage. This work was rectified as part of the creation of the new pit and relocation and installation of a new Current Transformer.”
965	Mr Etcell, in his further witness statement dated 16 September 2022 [FSCB 340] responded to Mr Gulevski’s comments, as follows:
 “I refer to the works to upgrade the transformer that was on Site mentioned by Lou [Gulevski] in paragraph 9 (h). These works were not part of the Preliminary Plans and Drawings (SCB 77–121) and would have been a variation. At the time the Contract was terminated, GMB had not had an opportunity to carry out any works to the transformer.
 In response to paragraphs 9(h) and 9(i) of Lou’s Further Statement, the Current Transformer had already been installed in its present location when we commenced works under the Contract, as the building was an existing building. At the time that the Works were suspended, and the Contract subsequently terminated by the Mustafas, no authorities had attended the Site and no advice had been given in respect of the switchboard, transformer or electrical pit. Had Ikonic been advised by the relevant authorities that further works were necessary, these works would have been a variation, as they were not provided for as part of the original Contract scope (SCB – 77–121).”
966	In his report dated 26 September 2022 [FSCB 516], and in relation to defect items 15–20, Mr Papasavvas stated as follows:
(a)	[at FSCB 533] from the photograph provided in the description by Mr Gulevski of defect item 15: 
“It appears that the alleged defect is based solely on an assumption [that the enclosures were installed in an area that was not suitable or … the location would have been deemed unacceptable by AusNet] … [although] there does not appear to be any hindered access to the enclosure;”
(b)	[at FSCB 534] in relation to item 16 “Works to the Current Transformer Chamber” were not defective but were yet to be completed. The electrical works had not been tested and commissioned, and no certificate of compliance had been issued;
(c)	[at FSCB 535] in relation to item 17, Mr Papasavvas made a similar comment and added that, “The Builder has installed an external enclosure but was yet to install the silicone and fire caulking at this time”;
(d)	[at FSCB 536] a similar comment was made in relation to item 18, that the works “were yet to be completed”;
(e)	[at FSCB 537] a similar comment was made in relation to item 19, and Mr Papasavvas further commented, “It can be seen in the photograph provided that the Builder had created a channel in the brickwork to make allowance for a second galvanised pole cover to be slid over the lower part of the exposed orange conduit”; and
(f)	[at FSCB 538] Mr Papasavvas’ comment in regard to alleged defect item 19 was equally applicable to item 20.
967	At FSCB 545, Mr Papasavvas responded to Mr Gulevski’s comments in paragraph 9(i) about the location of the metering and CT enclosure. Mr Papasavvas said: 
 “Mr Gulevski has failed to provide any evidence or reference any plans or drawings to how that the current transformer and metering enclosure had been installed in an area which was impermissible, or that an AusNet responsible officer had deemed it to be in an area that was inappropriate or not in accordance with the Service and Installation Rules.”
968	These defect items were discussed in the concurrent evidence session. At T842, Mr Gulevski said that, as shown on the photograph, the “CT chamber on the left-hand side [and the] meter enclosure on the right-hand side … were installed in a restricted location … the actual northwest corner in the back yard … it’s the play area … for the childcare centre”. 
969	He said that, “The service installation regulation requires … the power authorities to have unhindered access to a CT chamber enclosure [and] specifically says that it cannot be installed in[side] … childcare centres [in certain circumstances]”. Mr Gulevski explained that the equipment was installed “on the northwest corner closest to the roundabout … under the directive and instructions by SP AusNet [and] a gate [was] manufactured in the front of the property with a power industry lock, so they could access that point at any time”. 
970	Mr Papasavvas responded at T844 that he thought the problem: 
 “All stems back to a poorly documented scope of works for the job from the consultants, etc., because all this sort of stuff generally is documented at the start of the job; locations. SP AusNet are consulted at the start of the job through consultants, the amperage of the building and the supply load are consulted at the start of the job, so normally all this is documented at the very start of the job prior to any works being undertaken, so it’s just a case of everything seems to have been done wrong throughout the whole process of this project.”
971	In response, Mr Gulevski said at T845: 
 “The responsible person is a registered electrical contractor [REC], and the documentation generally says, with any consultant or architect, ‘to comply with the minimum standards and criteria’ … I think the REC made a mistake in judgment of what was a restricted location and what was not.”
972	I accept Mr Gulevski’s evidence that it was the responsibility of the Builder’s subcontractor to locate the CT and metering enclosures appropriately, particularly as it was suggested that the contract drawings did not provide any assistance in this regard. The location of the enclosure by the Builder’s subcontractor was inappropriate. 
973	The enclosures were relocated by Mason Fox as directed by AusNet in a part of the site not accessible to children and securely locked. In these circumstances the Builder’s work was defective and the Client is entitled to an allowance for the cost of completing this work properly.
974	In relation to item 16 [discussed at T847–853], Mr Gulevski said that the electrician “generally would install the fire-retardant material”. However, Mr Papasavvas said that, from the photograph it was clear that the conductors are shown as “hanging” in the photograph and “still needed to be terminated on the left-hand side of that bar” before the fire-retardant material could be installed by sealing the gaps around the conductors. Mr Papasavvas said that normally the fire caulking is applied once all the equipment has been positioned.
975	In my view it does not matter whether further work was to be carried out before the fire retardant could be installed. The enclosures were placed in an incorrect position and as part of the rectification works needed to be relocated. The Client is entitled to be allowed the cost of completing those works, including the application of the fire retardant.
976	Defect No. 17 was discussed at T854–859. Mr Gulevski said that because the CT enclosure “has not been installed in accordance with the manufacturer’s specification [it was] subject to ingress of water”. Mr Gulevski referred to the back of the enclosure having been removed and not made weatherproof. Mr Papasavvas indicated that “normal practice is to silicone the outside between the top of the enclosure and the concrete wall behind it and that’s what creates a water barrier”.  
977	Mr Gulevski stated that the Australian Standard AS3000 did not permit silicone to be used to prevent ingress of water. Mr Gulevski said that the appropriate solution would be for the conductors that “entered as they did, in the bottom [of the enclosure, should have] then exited through the bottom of that enclosure [and] because everything’s at the base of the unit, [it is] protected from weather”.
978	Defect No. 18 was discussed [at T859–862]. To prevent damage to conductors from sharp edges, Mr Papasavvas described what is generally installed, being “a nylon strip that you … cut and you clip on to cover those burr edges”. He said this could be installed afterwards. Mr Gulevski said that it is more difficult to do this “after the fact” as it would require pulling off the front CT portion and reinstalling it. 
979	In my view, although it was possible for these works to have been done at final fit-off, this was not the most appropriate process. In any event, the relocation of the enclosures meant that, as with the previous defect, an allowance should be made to the Client for the whole of the works carried out by Mason Fox to relocate and complete the CT and metering enclosures.
980	Defect Nos. 19 and 20 were discussed [at T862–865]. They relate to the UV stabilisation of the conduit and protection from impact damage to the conduit. The experts agreed that this work would involve the installation of a further metal galvanised cover. This would involve a degree of excavation and the fixing of the cover at the bottom. 
981	Again, with this item, it is likely that the necessary work would have been carried out at a later stage, but for the reasons I have previously expressed, I consider that the rectification costs are incidental to the relocation of the enclosures. I shall discuss the issue of quantum later.
982	Defects 21–23 – Main Switchboard: Defects 21–23 related to the main switchboard and were described by Mr Gulevski in his defect reports as follows:
(a)	Defect 21 – “Overload protection has not been provided at the Main Switch Board … which complies with … AS/NZS 3000 Wiring Rules, Section 2, Clause 2.5.1.1(b)”;
(b)	Defect 22 – “Final sub-circuits entering the Main Switchboard enclosure has not been provided with adequate protection against sharp angles and projecting edges”;
(c)	Defect 23 – “Final sub-circuits entering the Main Switchboard have not been sealed with a fire-retardant sealant”.
983	Mr Gulevski at paragraph 9(l) of his report dated 14 July 2022 stated that defects 21, 22, and 23 were “self-explanatory. As part of the rectification works, a new Main Switchboard, and 2 sub-boards, and a mechanical board were installed so these defects were rectified as part of this process”.
984	Mr Papasavvas made the following responses in relation to Mr Gulevski’s description of the defects:
(a)	[FSCB 539] Defect 21: “It is evident from the photo that these works were still in progress and not defective as alleged …”;
(b)	[FSCB 540] Defect 22: These works “were yet to be completed. It is usual practice to seal off and protect the penetrations at fit off, so as to ensure that the wiring remains easily accessible whilst the works are still ongoing”;
(c)	[FSCB 541] Defect 23: These works “were yet to be completed. It is usual practice to seal off and protect the penetrations with fire caulking at fit off, so as to ensure the wiring remains easily accessible whilst the works are ongoing”.
985	In response to paragraph 9(l) of Mr Gulevski’s report dated 14 July 2022, Mr Papasavvas said [at FSCB 544–5], 
“I have been provided with the plans, drawings, and fixtures and finishes schedule and note that there was no requirement for the Builder to install any sub-boards, additional distribution boards, or a separate mechanical switchboard. Further, Mr Gulevski has not referenced any documentation to show that the Builder was required to do so”. 
986	At paragraph 164 [FSCB 339] of the Further Witness Statement of Mr Etcell dated 16 September 2022, he stated: 
 “The works to the switchboard were yet to be completed when the Mustafas terminated the Contract. These works would have constituted a variation because the relocation of the meter and the current transformer that Lou [Gulevski] says he was directed to undertake by the power authority did not form part of Ikonic’s scope of works, as the existing building already had a power supply. Ikonic was only required to replace the existing switchboard. There was no requirement to upgrade the transformer and meter, or to relocate them so as for them to be compliant. These works and the running of any additional cabling would have been a variation.”
987	In paragraph 171 [at FSCB 341], Mr Etcell stated: 
 “In response to paragraph 9(l) of Lou’s Further Witness Statement, to my observation based on visits to the site as part of this proceeding, the Mustafas made numerous changes to the layout of the ground floor after they terminated the Contract. This included changes to the office and an extension of the building, which would have required the switchboard to be changed and/or redesigned and for the wiring into the board to be redone. Further, changes to the north wall of the office and the east wall of the reception, as well as the relocation of the switchboard, resulted in the circuits that had been run to the switchboard by GMB having to be redone. The addition of a cool room in the kitchen, three ducted heating and cooling units and an on-demand hot water unit meant that there was to be a greater load placed on the building than originally required under the Contract. I anticipate that this is likely why Lou recommended that a distribution board be installed, so as to share the power load from the main switchboard.”
988	The non-provision of overload protection at the main switchboard was discussed in the concurrent evidence session at T866-9. Mr Gulevski said that “a supply capacity control device” would need to be installed for a supply of 77 amps. This would involve modifying the equipment “to make it suit the load that gets accepted from the power company”. Mr Gulevski stated that Mason Fox “engaged manufacturers to come in, and then we physically built a main switchboard … [designed] for the actual building itself [with] enough allowance for circuits and a supply capacity control device”. The switchboard that had been installed by the builder’s subcontractor had been removed and was not used. 
989	Mr Papasavvas stated that this work “completely altered the design of the building … with a custom-made board, which is what we do on larger jobs”. He suggested that “if that information was supplied to the electrician at the time [the power throughput], [the main switchboard installed by the builder’s subcontractor] could have worked with a bit of altering”. 
990	Mr Gulevski disagreed that the suggested alterations would be appropriate or feasible. Mr Papasavvas said [at T870], “Obviously there’s a couple of defects that need to be rectified along the way, but with the design of the main switchboard that could have been after the fact, when they got told you can do it with 100 amps instead of 77”. 
991	Both experts considered that these matters should have been planned at the start of the job. Under cross-examination, Mr Papasavvas agreed that: 
 "If you were the person doing electrical work here, the first question you would have asked is, what are you putting in, what are the loads? [and would have asked] what kind of switchboard do we need, do we need other main switchboards or distribution boards.” 
992	Mr Papasavvas stated that he “would have asked for all the documentation to get a proper scope of the job [and] wouldn’t have started the work unless [he] had that documentation”. In cross-examination, Mr Gulevski was taken to the Client’s application form dated 19 July 2018 to take up the AusNet supply offer of 77 amps. Mr Gulevski agreed that he was not aware whether there was “an acceptance of this supply offer by SP AusNet prior to 31 July 2018”.
993	Part of Exhibit P10 is a copy of an email from AusNet received by Mr Gulevski on 15 October 2018, which states: 
 “Hi Andrew, I spoke to David and it turns out the customer has already registered and accepted an offer of 77 amps diversified and the work instructions show the cable was upgraded to the existing pit. This has already been completed.”
994	I am not satisfied that the main switchboard, including the overload protection, was variation work. The Builder had installed the switchboard. No variation to the Building Contract was ever claimed. Variation No. 3 [CB 3307], which was apparently prepared in June 2018 by the Builder but not given to the Client, does not include any electrical items. It is difficult to see how the work which had been undertaken by the Builder’s subcontractor, and that was nearing completion, could have been claimed as a variation under the Building Contract.
995	In relation to defect 22, at T879, Mr Gulevski said that in the CT enclosure “the back of the enclosure was cut away [with] sharp edges [and showing] top entry and also bottom as well”. Mr Papasavvas said that the cutaway might be completed by the installation of a nylon strip and then fire caulking completed. His view was that the work was not defective but “simply incomplete", and would be finalised once everything was fitted off. Mr Gulevski stated that, “It’s still a defect, you’re still in breach of the manufacturer’s specification [even though] it gets done quite a lot”.
996	In relation to defect 23, at T884, Mr Jeffery offered his view about the cost of completing the electrical work. Mr Jeffery obtained a quote for $25,000.00, $15,000.00 of which was for the overload protection. He said that this defect was the same as for Defect 22, but “in a different location”. Mr Papasavvas at T883 again categorised the defect as “incomplete work” and stated “I’m a big believer that until someone has given a certificate to say the works are completed it’s hard to find defective work until it’s completed, tested, commissioned and ready for public use”.
997	I do not accept that the standard is as stated by Mr Papasavvas. The present defect is an example of work apparently regarded as complete at the relevant time but clearly defectively performed. Whilst the Builder Contract was terminated, and this would have affected the opportunities available for the Builder to seek to have the subcontractor rectify the work, the responsibility for rectification lies with the Builder. I shall discuss questions of quantum shortly.
998	Additional defects found whilst Mason Fox was completing its work: Part of the Client’s claim in respect of electrical defects relates to work that Mr Gulevski said was necessary as a result of what was discovered once Mason Fox commenced work. It is important, in order to understand the nature of these alleged defects, to examine the context in which the further defects were discovered and additional rectification was carried out. 
999	In Mr Gulevski’s first witness statement dated 19 August 2021, he stated that, 
 “I attended the Site on 3 September 2018 to look at the works and produced a written report dated 25 September 2018 … The Report was intended for [Mr Mustafa] to give him guidance as to whether the electrical work that had been performed was safe and compliant … In all I identified 23 defects or faults … I was engaged by [Mr and Mrs Mustafa] to complete the electrical work on the Site.”
1000	Paragraphs 16 and 17 of Mr Gulevski’s first witness statement read as follows:
 “As I progressed with the electrical work, I observed the electrical work was incomplete in parts and what had been carried out was faulty and warranted a complete re-wiring.”
 “The electrical work was non-compliant in many ways such that the building was not functional. Cabling was missing, there were exposed cables and live cables behind plaster and in the ceilings, wiring cables wire to incorrect light switches and there was a multitude of other unsafe defects.”
1001	It is difficult from these statements to ascertain when Mr Gulevski made the decision that a rewiring was necessary. At paragraph 13 he stated, “When I commenced work, [Mr and Mrs Mustafa] asked me to complete a mini audit of the electrical work compared to the Drawings I had been provided”. At paragraph 22 Mr Gulevski stated, “During the audit process, I determined it was safer to effectively rewire the building”.
1002	Mr Etcell in his first witness statement dated 5 October 2021 responded to Mr Gulevski’s first witness statement. He said: 
(a)	at paragraph 368(a), that “the electric works onsite were yet to be completed when the contract was terminated”; 
(b)	at subparagraph (e), that Mr Gulevski “fails to identify any specific defective works, and in the absence of such, I am not able to respond further”; and 
(c)	at sub-paragraph (g), “Due to the vast changes made to the layout of the building after termination of the Contract, a lot of the electrical work would have been pulled out when the walls were moved and/or altered”. 
1003	It is appropriate to record at this stage that, prior to the termination of the Building Contract, the only live power supplied to the building was through the use of the existing switchboard and that none of the new electrical work carried out by the Builder’s subcontractor was at that stage “live”. At T898, Mr Gulevski distinguished between “live cables behind plaster which had been sitting … in a wall cavity or something like that, that were live when the temporary supply was on”, and that exposed cables comprised “part of the new wiring, which is part of the new build” by the Builder’s subcontractor.
1004	In his second witness statement dated 14 July 2022, Mr Gulevski gave further details in paragraph 9 of the 23 defects in his report, which I have previously discussed. He then noted in paragraphs 10 and 11 that, “[w]hen I undertook the initial investigation on 3 September 2018, the Premises was completely plastered … I undertook further investigative testing of the site. To do the investigations sections of the plasterboard was cut out”. 
1005	Mr Gulevski stated that this testing confirmed a number of faults in the incomplete work. When Mr Gulevski went on site on 3 September 2018 and identified 23 defects, he prepared a comprehensive report in relation to each of the defects with references to appropriate standards and photographs. However, there have been no contemporaneous documents produced by Mr Gulevski in relation to the later “investigative testing”. 
1006	The electrical work apparently commenced with the rectification of the 23 identified defects. Concurrently, building works under the direction of Mr El-Sheikh involved the removal of a substantial number of walls because of what Mr Gulevski believed to be defects unrelated to electrical matters. Mr Gulevski said that the demolition of these walls exposed further electrical work which was apparently incomplete. 
1007	There is, however, no contemporaneous record or photographs which confirm Mr Gulevski’s evidence of what was revealed. At paragraph 12 of his second witness statement, Mr Gulevski said: 
 “As a result [of further investigate testing of the site], it became increasingly obvious that removal of only part of the wiring was not going to suffice as the installation was not only functionally poor but there was potential of fire or electric shock once the building was energised.” 
1008	Mr Gulevski, at paragraph 16 of his second witness statement, referred to “a quote provided by me to undertake the rectification and completion work”. The quotation is in the form of Invoice No. 1559 dated 11 September 2018 [CB 3860–3861]. Mr Gulevski said at paragraph 17 that:
 "The Quote represented my best estimate from what I had observed from my inspection and from my initial testing. If some of the works had not been required or required to a lesser extent, then the Quote would have been reduced. Ultimately, more work was required to be performed than that originally detailed in the Quote.” 
1009	From paragraph 28, Mr Gulevski refers to "Invoice No. 1568 dated 14 October 2018 in the sum of $24,406.21” [CB 3942–3943]. Mr Gulevski said in paragraph 29 that “the variation related to the fact that I had now determined that a complete rewire was now required”. 
1010	At paragraph 33 of his second witness statement, Mr Gulevski refers to “Invoice No. 1591 dated 7 September 2018 in the sum of $38,280.00” [CB 4183–4184]. Mr Gulevski said that “this work was separate from the quote [although] a portion of the work in this invoice was not part of the original Builder’s scope. I would estimate approximately $10,000.00 to $15,000.00 was for new works”. Mr Gulevski purported to “say, doing the best I can from the invoice”, what was “within the [original] Builder’s scope”.
1011	Mr Etcell in his further witness statement dated 16 September 2022 [at FSCB 339–51] responded in detail and as far as he was able, to the matters raised by Mr Gulevski both in his original report dated 3 September 2018 and in respect of the later rewiring of the premises.
1012	These matters were further explored in the concurrent evidence session at T884–908. I will only make reference to parts of that evidence. At T884, Mr Gulevski said “We had a small window to [do] mandatory testing and an audit as we moved through, but obviously within a very short period plaster was coming down and ceiling and other bits and pieces within the building, which then gave us an opportunity to have visual inspections”.
1013	Mr Papasavvas, in his report dated 26 September 2022 (FSCB 514) responded to the witness statements of Mr Gulevski. Mr Papasavvas noted [at FSCB 542] that Mr Gulevski “has provided nothing to support his assertion that the alleged faulty wiring warranted a complete rewiring of the building [or] any evidence to show how or why he says that the works were unsafe, or what the alleged unsafe defects were”. Both Mr Papasavvas and Mr Jeffery expressed the view that, because of the stage at which the Building Contract was terminated, the works of the Builder’s electrical subcontractor were incomplete rather than defective. 
1014	Mr Papasavvas said, at FSCB 547, that “if, when testing and commissioning their Works, GMB [the Builder’s electrical subcontractor] had encountered any defective wiring, then they would have been able to determine how best to reasonably rectify any such defects based on their knowledge of the works as carried out, with there being no need to rewire the entire building as any faulty cables could have been replaced at the relevant time”. Mr Jeffery made similar comments during the concurrent evidence session, to which reference will shortly be made.
1015	At T896, Mr Gulevski was asked about the “audit” that he had referred to in his witness statement. He responded, “It wasn’t specific – no, it wasn’t an audit I had taken photos of, or made any detail of specific areas. It was a matter of us working our way through the building to see the condition of the building”.
1016	Mr Gulevski was asked “what cabling was missing” [at T896–897]. He responded: 
 “I can’t recall exactly what areas but there were areas where we had cabling missing … I don’t have any documentation to show any detail … to show which portion of the building, but physically, as we went through the building we found multiple issues through the internal base building.” 
1017	At page T899, in relation to Mr Gulevski’s statement in his witness statement that “wiring cables wired to incorrect light switches”, Mr Gulevski was asked whether he had “a note of locations”. He answered that he had not. In relation to the “multitude of other functional and unsafe defects”, Mr Gulevski said, “There was too many to mention, to be honest”. 
1018	Mr Gulevski was asked about his statement that, “I undertook further investigative testing of the site” and his statement on 3 September that, “The premises was completely plastered”. He responded that, “it was plastered, but very quickly with the on site meetings, the plastering was coming down in a lot of areas with other issues with other trades”. 
1019	At T900–1, Mr Gulevski agreed that he had not noted on invoices “what was rectification of defects that you had discovered”. He agreed that “the plasterwork was not coming down for reasons connected with the electrical work”. 
1020	At T903, when asked about a particular defect, he responded that “it was fairly extensive” and made a number of further generalised statements. He agreed that “apart from that … you have no independent recollection”. 
1021	Quantum: The Mason Fox invoices are summarised in the following table:
No.	Date	CB	Amount	Detail	Paid	
1559	11 Sep 18	3860	$94,585.70 -increased by $9,233.51 to $103,819.21	Quotation – mains and CTs, sub-mains, sub-circuits, Rectify wiring, cabling to fans and exhaust, bonding and earthing, emergency system, fixtures and switchboards 	$28,375.71 [later paid
$10,000.00
$43,125.79
$22,317.71] $103,819.21	
1559	18 Sep 18	3881		Part payment of quoted work	$10,000.00	
1560	26 Sep 18	3898	$9,348.72	Inspection report	$9,348.72	
1563	8 Oct 18	3922	$43,125.79	Quoted items, equipment, shop drawings, manufacture of components	$43,125.79	
1568	14 Sep 18	3942	$24,406.21	Variations due to complete rewire	$24,406.21	
1584	26 Nov 18	4124	$15,627.28	Audio zoning system [New work]	n/a	
1591	7 Dec 18	4183	$38,280.00	New wiring for FIP system [$10-15,000.00 was new work]	$38,280.00	
1602	23 Jan 19	4255		Part payment of quoted work [$22,317.71 paid]	$22,317.71	
1022	In the circumstances, I consider that the Client should recover some costs of Mason Fox completing the electrical works, although other costs are either not satisfactorily established or are not the responsibility of the Builder.
1023	I will allow the following amounts in respect of the Mason Fox invoices: 
(a)	Invoice no. 1559 - $94,585.70 as the cost of rectifying defect items 1-23. The further sum of $9,233.51 was said by Mr Gulevski in his witness statement to have been added to the quotation by agreement. Without further explanation, this additional sum will not be allowed;
(b)	Three invoices (the second invoice no. 1559 for $10,000.00, invoice no. 1565 for $43,125.79 and invoice no. 1602 for $22,317.71) were all separate payments for work covered by the first invoice no. 1559;
(c)	Invoice no. 1560 – I will not allow the cost of the inspection report of $9,348.72. The Client may, if a costs order is made later in its favour, be able to claim this amount as part of the costs of the proceeding;
(d)	Invoice no. 1563 for $43,125.79 was a separate payment for work included in the first invoice no. 1559;
(e)	Invoice no. 1568 is a claim for variations of $24,406.21. The sum of $12,203.11 representing 50% of the invoice, will be deducted from this, and a similar percentage from the following invoice, to take account of the possibility that some of this work may have been related to the Client’s new work. Further, with proper record keeping, Mr Papasavvas may have been better able to articulate more cost-effective methods of rectification that might have been adopted; 
(f)	Invoice no. 1591 for $38,280.00 - after first deducting $15,000.00 for the new work included in this invoiced cost, the further sum of $11,640.00, being 50% of the balance of $23,280.00, will also be deducted.
1024	The total allowance for the rectification of electrical defects is $118,428.81, made up as follows:
Invoice	Amount invoiced	Amount allowed	Reason of disallowance or deduction	
1559 (1)	$103,819.21	$94,585.70	No explanation for additional $9,233.51	
1559 (2)	$10,000.00	Nil	Part payment of Invoice no. 1559 (1)	
1560	$9.438.72	Nil	Only claimable as part of costs order	
1563	$43,125.79	Nil	Part payment of Invoice no. 1559 (1)	
1568	$24,406.21	$12,203.11	Additional work outside Building Contract	
1591	$38,280.00	$11,640.00	Additional work outside Building Contract	
1602	$22,317.21	Nil	Part payment of Invoice no. 1559 (1)	
Total		$118,428.81		
Allowances: 
1025	The allowances made in respect of defective work items are as follows:
Item	Description	Osborne’s estimate	Jeffery’s estimate	Allowance	
3	Window installation	$1,644.00	$1,310.00	$1,569.07	
4	Fire rated wall to boundary 	$8,519.00	$7,418.00	$8,519.00	
5	Internal doors	$88,096.00	$19,904.00	$88,096.00	
6a	Stormwater part 1	$8,203.00	$7,096.00	Nil	
6b	Stormwater part 2 	$6,948.00	$6,722.00	Nil	
7a	Toilet cistern part 1	$8,164.00	$5,329.00	Nil	
7b	Toilet cistern part 2 	$17,448.00	$3,839.00	$11,154.64	
8a	Structural steel to room 5 (Client's actual works, not TC rectification) 	$4,738.00	$3,571.00	$4,738.00	
8b	Structural steel to room 5 (TC rectification)	$358.00	$347.00	Nil	
9	Eastern balustrade wall	$15,001.00	$8,718.00	$15,001.00	
10	Western balustrade wall 	$5,867.00	$4,006.00	$5,867.00	
12a	Steel members to roof frame as constructed	$70,151.00	$43,987.00	$72,709.60	
12b	Steel members to roof frame as GHA design 	$0.00	$4,712.00	Nil	
13	Steel framing to carpark and building 	$236.00	$208.00	$236.00	
14	Concrete 	$5,785.00	$3,347.00	$5,785.00	
16	Play area concrete level 	$84,295.00	$48,822.00	$78,990.00	
17	East store screw piles 	$236.00	$208.00	$236.00	
19	Reception cabinetry 	$236.00	$208.00	$236.00	
22	OSB ceiling 	$10,558.00	$8,869.00	$2,500.00	
25	Vinyl floor coverings 	$19,615.00	$721.00	$19,615.00	
26	Procedural compliance matters relevant to the issue of completion	$3,209.00	$0.00	Nil	
27	Structural steel to roof perimeter	$32,618.00	$28,741.00	Nil	
28	Interior structural steel frame	$2,603.00	$1,788.00	$2,603.00	
29	Sewer drainage 	$27,065.00	$6,015.00	Nil	
29A	Sewer drainage to ground floor bathrooms	$17,294.00	$5,655.00	Nil	
31	Framing	$208,929.00	$4,643.00	$40,915.70	
32	Lift well slab	$3,366.00	$2,266.00	Nil	
35	Eastern boundary retaining wall 	$1,400.00	$1,400.00	$1,400.00	
	Electrical defects			$118,428.81	
	Total estimates and allowances	$652,582.00	$229,850.00	$478,599.88	
1026	In the circumstances, F&J Investment is entitled to recover as part of its damages the sum of $478,599.88 as the appropriate sum of damages for the rectification of the Builder’s defective work. I note that, in respect of defect items 6a, 6b, 7a, 29 and 29A (the plumbing defects), I assessed the total cost of rectifying these items at $66,041.29. This did not form part of the Client’s damages as the Client had already been compensated for its losses by the insurer of the Builder’s plumbing subcontractor. However, this sum has some bearing on the further issues I need to deal with in Issue 5.
Issue 5: Quantification of the Client’s claims
1027	The calculation of the Client’s damages flowing from the rightful termination of the Building Contact presents significant difficulties in their assessment.
1028	The damages must be assessed on the basis that the Client is put back in the position it would have been if the Builder had properly performed the Building Contract. In the present case, that would include completing the works and rectifying defective work and an allowance for delay damages until this work was finished.
1029	One difficulty is the fact that, having terminated the Building Contract, the Client took the opportunity of making design changes and carrying out works which had not been contemplated by the Building Contract.
1030	A further problem is that the evidence of the extent of the changes, their cost and the length of additional time they required to be completed is unclear and, in some respects, unsatisfactory. I will discuss these matters in more detail shortly.
1031	The Client claims appropriate damages in respect of the following matters:
(a)	the cost of rectifying defective work, which I have allowed in the sum of $500,162.72;
(b)	the cost of completing works left incomplete by the Builder; and
(c)	the losses suffered by the Client as a result of delays to the completion of the project following the Client’s rightful termination of the Building Contract. 
Cost of completing the works of the Building Contract
1032	The quantum of rectifying defective work, in respect of a limited number of items, has included what would otherwise have been part of the cost of completing the works. In those instances, although the Builder had not completed the contracted works, there was also defective work and the cost of rectifying the defective work was inextricably bound up with the cost of completion of the works. I will not try to unravel these matters but will attempt to determine the cost of completing the works of the Building Contract by separate calculation to that of the cost of rectification.
1033	In determining the cost of completing the works of the Building Contract, there are a number of matters I need to take account of, and to which I shall shortly refer, including:
(a)	the payments made by the Client after the termination of the Building Contract in order to complete the project;
(b)	Mrs Mustafa’s allocation of the payments made by the Client to three categories: rectifying defects, completing the contract works and carrying out the new additional work;
(c)	Mr Buchanan’s confirmation of Mrs Mustafa’s analysis;
(d)	whether the Builder grossly under-estimated the contract price and whether this matters;
(e)	the progress claims by the Builder, and the payments made by the Client; 
(f)	the estimates of the value of the Builder’s work prior to termination; and 
(g)	the time taken by the Builder to carry out the contract works prior to termination, and the time taken by the Client to complete the project.
1034	Mrs Mustafa’s allocation of the payments made by the Client following the termination of the Building Contract: The Client seeks to establish the cost of completion in a very simplistic manner. Mrs Mustafa calculated from bank statements how much had been spent on the project after the Building Contract was terminated. She then deducted the cost of rectification work and the cost of the new, redesigned work. The third category comprised the cost of completing the works additional to those of the Building Contract. .
1035	In paragraphs 120 to 124 of Mrs Mustafa’s witness statement dated 19 August 2021, she stated as follows:
“120.	The Mustafa Property Trust paid the sum of $2,618,533.85 excluding GST to complete the construction of the Centre, after the termination of the Building Contract with Etcell.
121.	The total cost to rectify the works undertaken that were part of the contract was $1,873,321.14 (excluding GST). These costs do not include any alterations to the plans that we made once the building had to be almost gutted. These costs were directly related to the rectification.
122.	The total cost to complete the project for works that had not yet been started and that were in our contract for Paul to complete totalled $556,013,42 excluding GST.
123.	Total costs we incurred to complete the project amounted to $189,199.29 excluding GST. These costs were not in the contract for Paul. These costs were related to some of the changes we made to the floor plan layout, curtains, kitchen fit out, awnings and the like. Paul is not liable to pay this sum.
124.	Legal fees, architectural fees relating to changes made internally, Surveyors fees in relation to obtaining occupancy are not included in the above figures.”
1036	Mrs Mustafa said that the total payments of $2,618,533.85 are made up of three items:
Description	Amount paid (excl GST)	
Cost to rectify the works	$1,873,321.14	
Cost to complete contract works	$556,013.42	
Cost of further works outside the contract	$189,199.29	
Total	$2,618,533.85	
1037	It is unclear why Mrs Mustafa has used figures which do not include GST. The amounts the Client paid presumably did include GST. To give an example, there is at the end of the preceding section an analysis of the Mason Fox invoices, the electrical sub-contractor engaged by the Client after the Building Contract was terminated. The Mason Fox invoices set out the amount of the invoice excluding GST and the amount including GST. Invoice no. 1559 is for $94,585.70 (including GST). An “agreed” additional sum of $9,234.51 was added making a total sum of $103,819.21. This sum was paid in four instalments – $28,375.71, $10,000.00, $43,125.79 and $22,317.71, totalling $103,819.21. Most of the handwritten notations on the Mason Fox invoices contain a reference to “Nab connect”, which I have assumed refers to a payment by or through the Client’s bank, NAB. 
1038	It is appropriate to convert all figures into sums which include GST, as GST would be payable, and seems was, by the Client in respect of these costs. The costs are as follows:
Description	Amount paid (excl GST)	Amount paid (incl GST)	
Cost to rectify the works	$1,873,321.14	$2,060,653.25	
Cost to complete contract works	$556,013.42	$611,614.76	
Cost of further works outside the contract	$189,199.29	$208,119.22	
Total paid since termination	$2,618,533.85	$2,880,387.24	
1039	Mrs Mustafa said, at paragraph 125ff of her witness statement, that she:
(a)	collated the invoices for the payments made by the Client following the termination of the Building Contract.
(b)	separated the invoices into the three categories – those “relating to rectification works, works to complete the Project and works that were additional to the scope”.
(c)	the expert report of Douglas Buchanan dated 20 November 2019, in Appendix D [CB 223], purportedly lists each invoice (or quote).
(d)	later, after these and other matters were highlighted by Mr Jeffery, Mrs Mustafa conceded that certain invoices were not claimable. Confusingly, Mrs Mustafa refers in her witness statement to the GST exclusive figure for the duplicated Romaac invoice no. 9, although the NAB statements refer to the GST included figure, and to the GST included figure for the Mason Fox invoice 1584, as having been paid. The invoices are as follows:
Invoice	Description	Amount (excl. GST)	Amount (incl. GST)	W/S Reference	CB Reference	
1584	Mason Fox	$14,206.61	$15,627.28	W/S para 130	4124	
1559 (2)	Mason Fox	$9,090.90	$10,000.00	W/S para 131	3881	
[Items 87 & 292]	Romaac [Inv. no. 9]	$47,833.00	$52,616.30	W/S para 132	4027 & 3916	
	Total	$71,130.51	$78,243.58			
(e)	in the “Payment Schedule” to her witness statement, Mrs Mustafa attached the   statements of The Property Trust and cross referenced “each payment made with each invoice or quote”. 
1040	Client’s counsel, Mr Harris, submitted that “while a number of the invoices may have been addressed to different entities such as Bridge Kids Pty Ltd the sums claimed in this proceeding were all paid from The Property Trust Bank Account”.
1041	There may be a reasonable basis for accepting that there is a direct connection between the payments made by The Property Trust and invoices or quotations for the completion of the project following the termination of the Building Contract. However, the Court needs to be satisfied that the payments made by the Client represented costs reasonably associated with necessary rectification or completion works relating to the Builder’s obligations under the Building Contract.
1042	To determine the necessary rectification work, I examined each of the items pursued by the Client in the Scott Schedule. I determined that the total liability of the Builder to the Client was the sum of $478,599.88. This figure is substantially less than Mrs Mustafa’s figure of $2,060,653.25 (including GST), which she claims the Client spent on rectification works. The figure is, however, closer to the total of Mr Osborne’s estimates in the final version of the Scott Schedule of $652,582.00.
1043	Further adjustments must be considered when looking at these figures in order to make the comparison more accurate. The allowances I made for rectification work does not include the allowances for plumbing defect items totalling $66,041.20. Mrs Mustafa conceded that Mr Buchanan’s Appendix D included duplicated invoices that total $78,243.58.
1044	Mrs Mustafa has claimed that the Client spent the further sum of $556,013.42 (excluding GST), or $611,614.76 (including GST) as the cost to complete the contract works.
1045	I must, however, take into account the fact that the “allocations” made by Mrs Mustafa, when separating the payments into the three categories of rectification, completion and further work, appear to have substantially overestimated the payments required to rectify defective work, to have failed to properly identify rectification works or to have included unreasonable costs for the necessary rectification work. 
1046	This conclusion inevitably results from an analysis of Mrs Mustafa’s allocation for the cost of rectification, and a comparison with the estimates finally adopted by Mr Osborne for necessary rectification work, and the allowances I have made after an examination of the evidence given in respect of each defect item.
1047	Mr Buchanan’s report: Mr Buchanan, an experienced quantity surveyor, prepared an expert report dated 20 November 2019 at the request of the Client’s solicitors. At CB 202, Mr Buchanan stated that he was asked to express an opinion on whether the Client’s costs of “rectifying the defects and completing the works” were reasonable.
1048	In his report, Mr Buchanan said that:
(a)	he included “each invoice” in Appendix D to his report;
(b)	he satisfied himself that all of the invoices related to the project;
(c)	he attempted to allocate each of the invoices to one of three categories – rectification, completion and, in the third category, “items which do not form part of the original contract scope”;
(d)	he deducted items in the third category, totalling $208,119.22 (the same figure as Mrs Mustafa had arrived at), and an additional sum of $31,650.00 which he determined from his “inspection” comprised “modifications” from the “original contract scope”;
(e)	once these amounts totalling $239,769.22 were deducted, he determined that “the total cost of rectification and completion of the original contract scope, including Variation 1 is $2,640,618.01 [including GST]”;
(f)	he noted that this figure was “significantly lower” than Mr Osborne’s estimates, which Mr Buchanan said totalled $3,002,528.76, as follows:
Item	Amount	
Cost to complete the work (in first report)	$1,189,842.50	
Cost of rectification (in first report)	$1,274,957.04	
Additional rectification costs (in second report)	$537,729.22	
Total	$3,002,528.76	
1049	As I have noted earlier, the initial estimates of rectification costs by Mr Osborne were substantially reduced to a final figure of $652,582.00, which was included in the Scott Schedule. There are also many other explanations, including:
(a)	removal of $66,041.20 of plumbing defect costs because they were covered by insurance;
(b)	the duplication of $78,243.58 items in Appendix D;
(c)	the likely inclusion of many further entries in Appendix D that are also errors including having been wrongly allocated as a cost for which the Builder is responsible. Without an independent audit, including one free from the biases of Mr Jeffery, would be required before a more accurate picture was available.
1050	Mr Buchanan attached to his report the letter of instruction from the Client’s solicitors dated 3 September 2019. The letter listed amongst the documents supplied to Mr Buchanan, “List of invoices received by our client on account of our client’s building works, following the termination of the Builder. Copies of the invoices are accessible through via the following Dropbox link …” [CB 239].
1051	In a supplementary report dated 28 May 2021 [CB468], Mr Jeffery provided a summary of his review of Appendix D. At CB 474, he noted:
“From my review and assessment of the Bank Statements provided by the Owner, and with reference to Appendix D of the DBQS [Mr Buchanan’s] Report dated 20 November 2019, I am of the opinion that:
a.	The Owner’s Bank Statements do not accurately reflect the cost to complete as reported by Mr Buchanan in Annexure D of his report dated 20 November 2019;
b.	There is a sum of $347,833 of costs claimed that are not associated with the completion works;
c.	There is a sum of $802,159 of costs claimed that cannot be reconciled with the Owner’s invoices provided to Mr Buchanan for preparation of his invoice summary; and
d.	There is a remaining total of $2,013,537 in invoices that I have not been able to reconcile with Mr Buchanan’s invoice summary.”
1052	Mr Jeffery also made detailed comments on a number of items, and the allocation by Mr Buchanan which Mr Jeffery said was demonstrably inaccurate. I do not have access to the list of invoices and I have not attempted to replicate the exercise that Mr Buchanan and Mr Jeffery were requested to undertake. I will, however, examine two of Mr Jeffery’s concerns. 
1053	Mr Buchanan in Appendix D [at CB 227] listed the following Mason Fox invoices as “rectification” costs:	
Inv. No.	Date	Amount	Corrected to all include GST	
1559	11 Sep 2018	$85,987.00	$94,585.70	
1560	26 Sep 2018	$8,498.84	$9,348.72	
1563	8 Oct 2018	$39,205.26	$43,125.79	
1568	14 Oct 2018	$22,187.46	$24,406.21	
1591	7 Dec 2018	$34,800.00	$38,280.00	
1602	23 Jan 2018	$22,317.71	$22,317.71	
		$212,996.27	$232,064.13	
1054	From the analysis I made of these invoices as part of issue 4 of these reasons, I make the following comments: 
(a)	Mr Buchanan wrongly transcribed the amount of invoice no. 1559 (CB 3860] as (excluding GST) $85,897.60 [at CB 227]. The correct figure was $85,987.00. 
(b)	Mr Buchanan’s figures (save for invoice no. 1602 [at CB 4255], for $22,317.71) were exclusive of GST. The other figures have been corrected to include GST in the table above.
(c)	Invoice nos. 1563 ($39,205.26 excluding GST) and 1602 ($22,317.71 including GST) are part of the amount included in invoice no. 1559(1) ($85,987.60 excluding GST). There is therefore a duplication in Appendix D of invoice nos. 1563 and 1602 (totalling $61,512.97 excluding GST) which are included in the figure of $85,897.60 excluding GST for invoice no. 1559.
(d)	Invoice no. 1591 ($34,380 excluding GST) includes “new”, non-Building Contract work of $10-15,000.00 (including GST), according to Mr Gulevski. This means that there is a further overstatement of between $10-$15,000.00 (including GST) in Appendix D.
(e)	I also found that it was appropriate that 50% of the whole of invoice no. 1568 for $24,406.21, and 50% of part of invoice no. 1591 for $38,280.00 should not be regarded as payments for the completion of the works of the Building Contract.
1055	The Mason Fox invoices, included as “completion” work in Appendix D, wrongly included invoices no. 1559(2) (separate to invoice 1559(1) referred to in the previous paragraph) and no. 1584 as follows: 
Inv. No.	Date	Amount	Corrected to include GST	
1559	11 Sep 2018	$9,090.90	$10,000.00	
1584	26 Nov 2018	$14,206.51	$15,627.28	
		$23,297.41	$25,627.28	
1056	As my earlier analysis under Issue 4 shows, the second invoice no. 1559(2) for $10,000.00 (including GST) was part of the initial sum of $94,585.70 (later increased to $103,819.21), and was a payment of part of the first invoice no. 1559(1).  Therefore, it is a duplicated payment in Appendix D. 
1057	Invoice no. 1584 for $15,627.28 was for the audio zoning system. Mr Gulevski said at paragraph 25 of his first witness statement dated 18 August 2021 that this invoice was for “new” work, and accordingly was not the responsibility of the Builder and should not be included as part of the cost of completion.
1058	In Appendix D, Mr Buchanan includes eleven Ewert Leaf (the architect’s) invoices (totalling $58,803.00) as part of the “rectification” costs. No Ewert Leaf invoices were included as “completion” costs. This seems a surprising allocation.
1059	Even on the basis of this cursory examination of Appendix D to Mr Buchanan’s report, and Mr Jeffery’s responses, I consider that I cannot rely upon Mr Buchanan’s conclusions to determine the reasonable cost to the Client of completing the work of the Building Contract.
1060	As earlier noted, there is a substantial discrepancy between the amount of the rectification costs I have determined as part of the damages to which the Client is entitled ($478,599.88) and the total of the rectification costs included in Appendix D of Mr Buchanan’s report ($1,873,321.14 including GST) and his interpretation of Mr Osborne’s estimates of the rectification costs in his first two reports ($1,812,686.26 including GST). The allowance I have made is close to the total amount of Mr Osborne’s revised estimates included in the Scott Schedule of $652,582.00. 
1061	It is appropriate to examine the cost estimates for the items included in Mr Osborne’s first and second reports compared with his amounts included in the Scott Schedule. The following table also includes in the final column notations on the Scott Schedule which apparently explain why some items were abandoned and others were significantly reduced by the time the Scott Schedule was finalised:

Item	Description	Osborne’s estimate in reports	Osborne’s estimate in Scott Schedule	Reason for deletion or change noted in Scott Schedule	
3	Window installation	$87,741.00	$1,644.00	Revised scope of works now being claimed by the Plaintiff, refer page 5 of Conclave part 1	
4	Fire rated wall to boundary 	$11,050.00	$8,519.00		
5	Internal doors	$101,810.97	$88,096.00		
6a	Stormwater part 1	$62,549.20	$8,203.00		
6b	Stormwater part 2 		$6,948.00		
7a	Toilet cistern part 1	$39,334.76	$8,164.00		
7b	Toilet cistern part 2 		$17,448.00		
8a	Structural steel to room 5 (Client's actual works, not TC rectification) 	$15,053.96	$4,738.00		
8b	Structural steel to room 5 (TC rectification)		$358.00		
9	Eastern balustrade wall	$19,949.55	$15,001.00		
10	Western balustrade wall 	$10,074.00	$5,867.00		
11	Store room to play area	$1,317.70		MO has agreed that this item is not defective	
12a	Steel members to roof frame as constructed	$66,939.92	$70,151.00		
12b	Steel members to roof frame as GHA design 		$0.00		
13	Steel framing to carpark and building 	$911.00	$236.00		
14	Concrete 	$7,990.00	$5,785.00		
15	North east area play area	$786.00		Included in item 35 (Invoice provided by Owners in the amount of $1,400)	
16	Play area concrete level 	$692,001.44	$84,295.00	Revised scope of works as in MO report of 28 July 2022	
17	East store screw piles 	$11,199.00	$236.00		
18	Stairs	$1,368.00		Items 16.01 to 16.05 are no longer applicable	
19	Reception cabinetry 	$6,802.00	$236.00	Revised scope of works agreed in Conclave	
20	Second level WC and shower	$12,688.48		Costing provided in item 7	
21	Position of toilets to bathrooms A and C	$10,764.56			
22	OSB ceiling 	$18,058.00	$10,558.00		
23	Fire services	$9,304.00		Agreed by MO that these works are a variation not a defect	
24	Reverse cycle installed	$54,440.50		Agreed by MO that these works have been installed in accordance with the Building Permit documentation	
25	Vinyl floor coverings 	$19,615.00	$19,615.00		
26	Procedural compliance matters relevant to the issue of completion	$3,208.00	$3,209.00		
27	Structural steel to roof perimeter	$32,616.44	$32,618.00		
28	Interior structural steel frame	$2,859.00	$2,603.00		
29	Sewer drainage 	$52,340.28	$27,065.00		
29A	Sewer drainage to ground floor bathrooms		$17,294.00		
30	Fire compliance	$13,303.50		Items 4.01 to 4.06 are included in MO item 14 in schedule 1	
31	Framing	$208,928.00	$208,928.00		
32	Lift well slab	$6,228.00	$3,366.00		
33	Plumbing	$614.00		MO has agreed that this item is not defective, part of item 21	
34	Eastern Boundary fence	$3,523.00			
35	Eastern boundary retaining wall 	$28,030.00	$1,400.00		
36	Stairs	$5,505.00		MO has agreed that this item is not defective	
37	Door openings	$0.00			
38	Stormwater system to carpark	$183,772.00		Works are all covered in MO item 6	
	Electrical defects				
	Total cost estimates 	$1,812,686.26	$652,582.00		
1062	Mr Osborne’s cost estimates were reduced in the Scott Schedule to about 36% of the total of the figures in his first two reports. There are very large adjustments to the following items:
Item no.	Description	Reduction	
3	Window installation	$86,097.00	
6a	Stormwater part 1	$54,346.20	
7a	Toilet cistern part 1	$31,170.76	
16	Play area concrete level	$607,806.44	
24	Reverse cycle installed	$54,440.50	
29	Sewer drainage	$25,275.28	
35	Eastern boundary retaining wall	$26,630.00	
38	Stormwater system to carpark	$183,472.00	
	Total	$1,069,238.18	
1063	It seems probable that none of these adjustments was considered by the Plaintiffs when relying at the trial on the out-of-date information about the cost of rectification that Mrs Mustafa had included in her earlier witness statement and Mr Buchanan had included in Appendix D of his expert report.
1064	Did the Builder grossly under-estimate the contract price? Mr Buchanan was requested by the Plaintiffs’ solicitors to offer an opinion on “whether the cost of the building works set out in the Contract was reasonable and commercial?”
1065	The contract price in the Building Contract was $1,472,847.00. A quotation with this price was sent by Mr Barnett to Mr Mustafa in an email on 22 August 2017 [CB 1557]. A single page breakdown of the quoted price, trade by trade, accompanied the email [“Cost estimate summary” at CB 1560]. Although higher sums were mentioned in the following weeks, the Building Contract was executed on 26 October 2017 with a contract price of $1,472,847.00. Variation no. 1, covering additional items with a total value of $134,959.99 arising from later design changes, was the subject of further agreement on 26 October 2017 [CB 2131]. The total contract price was $1,606,806.99 (including GST).
1066	Mr Buchanan’s opinion, in his report dated 20 November 2019 [at CB 199–200], was that “the contract sum [did not] reasonably reflect the scope of the contracted works”.  Mr Buchanan’s opinion was that “the reasonable value of the contracted scope of works was $2,220,030.00 including GST. Mr Buchanan provided a “detailed measurement and calculations” [CB 207–19].
1067	At paragraph 6.5, Mr Buchanan said that “It is difficult to identify why my assessment of the construction cost is so much greater than the builder’s price as there is no detailed breakdown of the builder’s contract price”. Mr Buchanan does not list the “Cost estimate summary”, mentioned above, among the documents with which he was provided.
1068	Mr Buchanan said that the Works could not have been satisfactorily undertaken for the contract price. It would follow, from that logic, that the cost of completing the works of the Building Contract would, to a significant degree, be inflated by the fact that the original contract price was too low.
1069	If the Building Contract had been entered into for an appropriate price, the Client may have been required to pay substantially more. However, this fact should not affect the assessment of damages as the Builder is bound by his bargain and Mr Etcell and Mr Barnett, in the months that preceded the execution of a formal agreement, had a long period to determine the price for which they were prepared to enter the Building Contract.
1070	In Mr Jeffery’s supplementary report dated 28 May 2021, he expressed the opinion that Mr Buchanan’s “estimate of the Original Contract Sum is highly inflated” and was not appropriate [CB 474] and provided his own estimate of “$1,492,145 including GST and [ie, plus] variation number 1” [CB 475]. Mr Jeffery said that his view of the contract price was supported by the reports of CKC.
1071	Mr Buchanan responded in a further supplementary report dated 18 June 2021, suggesting that the CKC reports were prepared for different purposes and were expressly limited to those purposes. At paragraphs 6.4 and 6.5, Mr Buchanan stated that:
 “The Jeffery costing is limited in extent and limited to principal scope items and does not provide for the full scope of the works. For example, no sundries are included in his estimate. … Generally, the rates applied by Jeffery are too low and not reflective of current construction costs. In my opinion Jeffery has applied bottom of the market or lower than bottom of the market values to all of the rates in his calculations to produce his assessment.”
1072	There is a draft Variation no. 3 at CB 3307, with the date “15/6/18” for the net sum of $564,060.37 ($605,128.68, less credits of $41,068.31). The document was never finalised or submitted to the Client. The net sum of $564,060.37 would represent an additional 35% on top of the total contract sum of $1,615,747.90.
1073	I have referred to these matters in some detail because of the difficulties earlier mentioned in distinguishing on the evidence between the cost of completing the works in the Building Contract and the cost of additional works necessary by reason of the Client’s changes following the termination of the Building Contract.
1074	The experts’ conclusions on matters of quantum can be summarised as follows:
Item	Agreed or determined				
Contract sum	$1,472,847.00				
Value stages 1-7 complete	$1,177,822.00				
Var. 1 (as agreed)	$142,900.90				
Var. 1 (completed)	$103,730.99				
Var. 2 (claimed)	$24,750.00				
Var. 2 (allowed)	$12,606.00				
Var. 3 (draft)	$564,060.37				
Var. 3 (claimed)	$12,144.00				
Var. 3 (allowed) 	Nil				
Progress claims by Builder	$1,294,152.57				
Payments by Client	$1,149,675.70				
		Osborne	Jeffery	Buchanan	
Value of Builder’s work (incl vars.)		$881,385.78	$1,155,929.00	No estimate	
					
Rectification costs	[$478,599.88]	$1,812,686.26
($652,282.00)	$24,463.00
($229,850.00)	$2,060,653.25	
Completion costs		$1,189,842.50	$509,820.00	$589,614.76	
Cost of additional work to Contract		n/a	No estimate	$239,769.22	
1075	Another factor that may be considered relevant, is the time taken by the Builder to carry out the contract works prior to termination, and the time taken by the Client to complete the project. The period from the signing of the Building Contract on 26 October 2017 to the suspension of works by the Builder on 31 July 2018 was 279 calendar days. The period from the termination of the Building Contract on 24 August 2018 to the issue of an occupancy certificate on 8 May 2019 was 257 calendar days.
1076	In my view, the most appropriate way to calculate the reasonable cost to the Client to rectify defective work and to complete the works of the Building Contract is to take account of the following matters:
(a)	The contract price of $1,472,847.00.
(b)	The cost of the properly allowable variations totalled $103,730.99. I have excluded the grease trap variation claimed by the builder in the sum of $12,144.00. The grease trap variation was part of draft Variation 3 and, as defect item 29, an allowance would have been made to the Client to re-do the variation work claimed by the Builder. It had no value. The allowable variations are:
Var No.	Description	Amount (incl GST)	
1	Windows	$64,999.99	
1	Fire services	$14,850.00	
1	Security cameras & data racks	$11,275.00	
2	Bulkheads	$2,970.00	
2	Steel post relocation	$4,950.00	
2	Kitchen door and window	$1,980.00	
2	Music and kitchen walls	$946.00	
2	Additional power points	$1,760.00	
	TOTAL	$103,730.99	
(c)	The payments made by the Client to the Builder for the contract stages and variations totalling $1,149,675.70.
1077	I consider that in calculating the cost of completing the works of the Building Contract an additional allowance should be added to compensate for the extra time that it would be likely to take to complete the works, and for the inconvenience of taking over a partially completed project with significant defective work.
1078	I have previously accepted, as appropriate margins in respect of rectification work, a builder’s margin of 30% in addition to a contingency allowance of 10%. This effectively adds 43% to the basic cost. For the original contract work, involving a refurbishment and change of use of premises, an allowance of 20% for builder’s margin and 5% contingency allowance would be more appropriate and would effectively add 26% to the basic cost. 
1079	The difference between the effect of these allowances is an additional 17%. In the circumstances, I consider that an additional 20% should be added when calculating an appropriate figure for completion of the contract works by the Client. This would  take account of many other factors which may not have been otherwise included.
1080	In my view, the Client is entitled to be paid or allowed the sum of $512,282.75 by the Builder as the cost of completing the contract works. This sum is calculated as follows:
	Amount (incl GST)	
Contract sum	$1,472,847.00	
Add Variations	$103,730.99	
	$1,576,577.99	
Less Payments	$1,149,675.70	
	$426,902.29	
Add Allowance (20%)	$85,380.46	
Total	$512,282.75	
1081	When the sum of $512,282.75 is compared with other suggested or possible allowances, I am satisfied that this figure is appropriate:
Description	Amount (incl GST)	
Mrs Mustafa’s allocated payments for completion	$611,614.76	
Mr Jeffery’s estimate of completion costs	$509,820.00	
Contract sum plus appropriate variations less total payments (without the additional 20%)	$426,902.29	
1082	Accordingly, I shall allow the sum of $512,282.75 as the appropriate cost for the Client to complete the works of the Building Contract.
The Client’s damages arising from delays in completing the project
1083	The Client claims that it suffered losses as a result of the delays to the completion of the Building Contract arising from the need for the Client to terminate the Building Contract and to carry out further rectification and completion works.
1084	The Client claims that the builder should have completed the building works and approved variations by 12 April 2018 and that the Client lost rental on the property until 1 July 2019 when it was able to lease the property for use as a childcare centre.
1085	On 8 July 2019, F&J Investment (as trustee for The Property Trust) entered into a lease of the property with Bridge Kids Pty Ltd (as trustee for The Bridge Kids Trust) for a term of 15 years commencing on 1 July 2019 and a further term of 5 years at an initial annual rental (excluding GST) of $280,000.00 [CB 4610].
1086	I consider that the evidence establishes the following matters:
(a)	the lease is between related entities associated with Mr and Mrs Mustafa. However, there was no evidence that the sum of $280,000.00 did not reflect a reasonable yearly rental for the property;
(b)	it is unlikely that, at the date of termination of the Building Contract on 24 August 2018, the Builder had the capacity to complete the building works by 7 September 2018, the extended date for practical completion;
(c)	however, the Client chose to terminate the Building Contract and there were no rights accruing to the Client for liquidated damages at that time. If there had been, the Clients damages would have been limited to the sum of $500.00 per day (specified in item 14 of the Schedule to the Contract Conditions, whether or not its actual losses were greater (J-Corp Pty Ltd v Mladenis [2009] WASCA 157 [at 35-36], as applied in Hacer Group Pty Ltd v Euro Façade Tech Export Sdn Bhd [2022] VSC 373 [at 179-182] and Dura (Australia) Constructions Pty Ltd v. Hue Boutique Living Pty Ltd (No. 3) [2012] VSC 99 [at 644]);
(d)	the Builder was aware that, if the project were not completed in accordance with the terms of the Building Contract, there would be significant financial consequences by reason the property not being able to be used for the purpose of a commercial childcare centre; and
(e)	the following relevant dates can only be determined by a more thorough examination of the evidence concerning:
(i)	the date upon which any claim for delay damages should commence; and
(ii)	the date upon which the delay damages should cease.
1087	Commencement of delay damages: The Client rightfully terminated the Building Contract on 24 August 2018, including on the basis that the Builder had wrongfully suspended the building works on 31 July 2018. I consider that 7 September 2018, the date referred to by the Client in its letter to the Builder dated 24 July 2018, as the extended date for the Builder to complete the building works, is the earliest date upon which the Builder was required to complete.
1088	However, taking into account the circumstances considered by the Client in nominating that date in the Builder’s works programme dated 19 July 2018 including, the state of works at that time, the extent of defective and incomplete work and the matters which had been raised by the Builder as having delayed its completion of the work, it would be appropriate to conclude that the building works should have reached practical completion by 30 September 2018.
1089	Although two building permits were not obtained until later dates, I am satisfied that the permits could have been obtained earlier by the Client if the Builder’s performance on site had required them.
1090	In my view, the Client’s delay damages should be calculated as having commenced on 1 October 2018.
1091	Cessation of the Client’s entitlement to delay damages: The lease with Bridge Kids Pty Ltd is dated 8 July 2019. Pursuant to Item 8 of the Schedule of the lease, rental was to be payable from the commencement date of 1 July 2019. 
1092	However, I consider that allowance should be made for the following matters:
(a)	a certificate of occupancy was issued on 8 May 2019;
(b)	the Client, through Mr Mustafa had been primarily responsible for the building works upon the issue of the amended building permit in his name; and
(c)	the Client carried out rectification work, completion work and further work between August 2018 and July 2019, not all of which was the responsibility of the Builder.
1093	I consider that, although there is no specific evidence on this matter, that it would be appropriate to allow a further period of 14 days after the issue of the occupancy certificate to 23 May 2019 for the Client to obtain all necessary further permissions to allow the property to be used as a childcare centre, and therefore for the Client to expect a commercial return after that time. 
1094	I have, in this regard, taken account of the fact that the Client (through Mr Mustafa) was effectively in the position of the builder and would have had a degree of control over when the building works would be complete and, as essentially the proposed lessee was a related entity, the ability to efficiently commence to operate the business. Without more specific evidence as to the delay in the commencement of the lease, it would not be appropriate to allow a further period beyond the period of 14 days from the issue of the occupancy certificate.
1095	Calculation of the Client’s entitlement to delay damages: The Client carried out work during this period for which the Builder was not responsible. I consider that the relevant considerations that I should take account of are:
(a)	The similar time taken by the Builder to reach the stage of works he did when he suspended the works (279 days) and the time the Client took, following termination of the Building Contract, to complete the works and obtain an Occupancy permit (257 days).
(b)	The amount paid by the Client to the Builder of $1,149,675.70 (similar to the sum assessed by CKC of $1,151,574.60) is probably the best indication of the value of the contract works that the Builder had completed. This would leave a balance to be paid of $$426,902.99 of the adjusted contract price (including the completed variations.
(c)	Bearing in mind the degree of rectification required, the value of the works carried out by the Builder was likely to have been less than the total of the Client’s payments.
(d)	The total of the rectification work ($478,599.88) and the completion work ($512,282.75) that I have assessed is $990,882.63. If the defective plumbing works I assessed at a total rectification cost of $66,041.20 were included, the adjusted total for the Client to complete the works of the Building Contract would be $1,056,923.83.
(e)	I consider that the total of altered works initiated by the Client following termination of the Building Contract, and which are additional to the contract works and therefore not the responsibility of the Builder, are likely to have cost more than the calculations of Mrs Mustafa ($208,119.22) and Mr Buchanan ($239,769.22). 
(f)	Further, I consider that the figure derived by Mrs Mustafa and Mr Buchanan as the total amount spent by the Client to complete the project ($2,880,387.24) is likely a significantly inflated figure. From the figures of Mrs Mustafa and Mr Buchanan must be deducted the total sum of $78,243.58, conceded by Mrs Mustafa in her further witness statement as being incorrectly added to the amounts set out in Appendix D to Mr Buchanan’s report. Also, consideration must be given to the few examples I have referred to of clear mistakes in the allocation of invoices in Appendix D. Mr Jeffery raised many more in his report.
(g)	The proportion of whatever expenditure the Client spent on the project which is the responsibility of the Builder is certainly inflated. The figures used by Mrs Mustafa and Mr Buchanan, that they derived from Mr Osborne’s estimates of the cost of rectification work, in his first two reports a total of $1,812,686.26), was not consistent with his revised total estimate ($652,582.00) or the amount I have allowed of $478,599.88 or, if the plumbing defect items were included, $544,641.08.
1096	Taking all these matters into account, it is my view appropriate, that the relevant period of delay following the termination of the Building Contract, should be considered as equally divided between the period of time reflecting the rectification and completion work which was the responsibility of the Builder, and the period of time taken by the Client to undertake works additional to the Building Contract and for other works that I have not been satisfied were the responsibility of the Builder.
1097	The Client is therefore entitled to delay damages of $90,136.99 calculated at the rate of $767.12 per day (1/365 of $280,000.00 per annum) for 117.5 days (one half of the period of 235 days from 1 October 2018 to 23 May 2019).
The Builder’s counterclaims
1098	In calculating the amount to which the First Plaintiff is entitled, it is necessary to take into account the balance owing under the Building Contract. This is necessary as the damages awarded to the First Plaintiff are assessed on the basis that it is entitled to be put in the position as if the Building Contract had been performed and the building properly constructed for the contract price (adjusted for variations).
1099	However, by reason of the decision I have made as to validity of the Client’s termination of the Building Contract, Mr Etcell must fail in his claims arising from the termination.
The Client’s entitlement
1100	The amount of $619,070.43 is due to the Client as damages, calculated as follows:
Contract price	$1,472,847.00		
add Variations	$103,730.99		
Adjusted price	$1,576,577.99		
less Payments	$1,149,675.70		
Unpaid balance	$426,902.29		
less Cost to complete	$512,282.75		
	-$85,380.29	$85,380.29	
add Client’s rectification costs		$478,599.88	
add Client’s delay costs		$90,136.99	
Client’s damages		$654,117.16	
1101	Interest: My tentative views in relation to the issue of interest is that:
(a)	the Client may have been entitled to interest on the overpayment of $85,380.29 from the date of the last payment by the client on 19 July 2018;
(b)	each of the figures for Completion costs ($512,282.75), Rectification costs ($478,599.88) and Delay costs ($90,136.99) may attract interest from a date that might best be calculated as the mid-point between the two relevant dates I have chosen, 1 October 2018 as the starting date and 23 May 2019 as the completion date of the further works. That date on my calculation is 27 January 2019.
1102	However, I will deal with the issues of interest and costs after hearing further submissions from the parties, and if necessary, sequentially.
Orders
In the circumstances, the following orders are made by the Court:
1. 	The Plaintiffs’ application to deliver a fourth further amended statement of claim dated November 2022 and a fifth further amended reply and defence to counterclaim is refused. 
2.   All documents in the Court Book, Supplementary Court Book, and the Further Supplementary Court Book shall be admitted into evidence subject to consideration of all objections and the appropriate weight that should be given to the contents of the documents.
3.	The contract dated 26 October 2017 between The Property Trust as the “Client” and Paul Etcell as the “Builder” (“the contract”) is rectified by amending the name of the Client in Item 2 of the Schedule to the Medium Works Contract Conditions, and in any other corresponding places in the contract where the “Client” is described, from “The Mustafa Property Trust” to read “F & J Investment Assets Pty Ltd as trustee for The Mustafa Property Trust”.
4.	Declare that the contract was, on 24 August 2018, validly terminated by F & J Investment Assets Pty Ltd.
5.	Judgment for the First Plaintiff against the Defendant on the First Plaintiff’s claim that the Defendant pay to the First Plaintiff the sum of $654,117.16. Stay this order until 4pm on 31 May 2024.
6.	Judgment for the First Plaintiff against the Defendant on the Defendant’s counterclaim that the counterclaim be dismissed.
7.	By 4.00 pm on 28 May 2024, the parties must file and serve written submissions limited to the following matters:
a.	the calculation of the judgment sum, limited to any errors in the arithmetic;
b.	the entitlement to and calculation of interest upon any sums awarded to the First Plaintiff;
c.	the question of the costs of the proceeding;
d.	whether the party wishes to make further oral submissions, and if so the reasons for requesting a further hearing.
8.	However, if the parties consider that it would be inappropriate to have the issue of costs determined at the same time as the issue of interest, the filing (but not the service) of the parties’ submissions on costs may be delayed until 7 days after the Court’s determination on the issue of interest.
9.	Upon receipt of the parties’ written submissions, or the expiry of the time limited by the order in paragraph 7, further orders will be made by the Court.

Certificate
I certify that the preceding 310 pages are a true copy of the judgment of his Honour Judge Anderson delivered on 7 May 2024.

Dated: 7 May 2024

Tracey Huang

Associate to His Honour Judge Anderson