Builder Fails on Quantum Meruit Claim

17/08/2018

Watson & Watson acted on behalf of an owner who held an owner builder permit.  The owner engaged a Builder to carry out the residential building work.

In proceedings that were issued by the Builder out of the NSW Civil and Administrative Tribunal (NCAT) the Builder claimed outstanding moneys which he claimed was owing to him by the owner.

This is another case of many cases in which the Builder had failed to comply with his obligations under the Home Building Act.  The mere fact that the owner was an owner builder does not relieve the Builder who was engaged to carry out the works from complying with his obligations under the Home Building Act.

The Builder at the time of carrying out residential building work was not the holder of a licence to carry out the work; the Builder carried out work which was not covered by Home Owners Warranty Insurance; and there was no Building Contract which complied with section 7 of the Home Building Act.  The Contract was not signed by each of the parties.  It was partly in writing.  The writing was significantly deficient in defining the scope of the work and the terms of the Contract.

In those circumstances the Builder was not entitled to rely on the Contract to seek recovery of moneys due.

In this particular case like many others, the Builder invoiced from time to time and the owner made payments.  The owner was not aware that the claims made were excessive until sometime down the track when the relationship broke down.

The Builder commenced proceedings claiming $65,000.  Initially the claim was made in the Local Court.  The owner believed the claim was excessive.  Having regard to the jurisdiction of NCAT, the Application was transferred to NCAT on our client’s application following advice from us.

After some considerable time the Builder recognised that the Builder could not pursue the claim based on the terms of the Contract and thereafter sought to bring the claim on a quantum meruit basis.  In such a case there are two questions that need to be decided by the Tribunal, namely:

(a)      Is it just and equitable that the Applicant Builder be entitled to recover moneys on a quantum meruit basis in circumstances of the case; for example in this case where the Builder carried out uninsured residential work without a complying Contract at a time that the Builder was unlicenced?

(b)      If the Tribunal determines that it is just and equitable for the Applicant to be entitled to pursue the claim, what is the reasonable value of the work performed by the Applicant Builder which a benefit has been conferred on the owner?

Additionally one of the issues that arose in this particular case was how the Tribunal deals with the defective work and the cost of rectification of defective work.  The Solicitors for the Builder asserted that it is not taken into consideration in any way.  As asserted by us on behalf of the owner, the Tribunal held one must consider the cost of rectification of the defective work carried out and the cost should be deducted from the value of the work that was carried out (based on the assumption that the work carried was without defects) to ascertain what the reasonable value of the works were.

In a quantum meruit claim the appropriate course to be adopted is for the Builder making the claim to utilise expert evidence to satisfy the Tribunal as to the reasonable value of the work performed.  There is also an issue as to the benefit that has been conferred on the owner which must be considered.

It goes without saying and it is logical that for an expert to be able to calculate the value of the work, the expert must know what actual work was carried out by the Builder for which claim is made.  Of course the Building Consultant is not present when the work is carried.  Accordingly it is for the Builder to establish the work that is carried out. If the Builder does not establish this then the Builder will not be successful in relation to that part of the work that is in issue as to who undertook the work.  In this particular case on a review of the evidence on behalf of the Builder, we considered that the Builder had not established what work was carried out.  There was some limited evidence as to what work was carried out.  One needs to be careful to not underestimate what little evidence may satisfy the Tribunal and on the other hand, one needs to be careful not to fill in the gaps to establish the work that was carried out by the Builder.

There are difficult questions to be considered in each case.  In this particular case there were concerns whether the Builder would be able to meet any judgment against the Builder.  Following our discussions with our client the owner decided not to seek to recover overpayments, if any, that the owner had made to the Builder.

In those circumstances for the owner to be the successful party the owner established the value of the work undertaken by the Builder was less than the moneys paid by the owner to the Builder.  Consideration of this aspect was undertaken and on this basis it was clear that the owner could establish evidence of what work was undertaken by the Builder and could establish based on expert evidence, that the value of the work undertaken by the Builder was less than the amount that had been paid by the owner to the Builder.

In this particular case as soon as the issue arose and the Builder left the site we arranged for a Building Consultant to attend the site, document the work undertaken so that the appropriate evidence was available at the hearing.

In this case the learned Tribunal Member confirmed that in considering the value of the works one does take into consideration the cost of rectifying any defective works undertaken by the Builder.

As a separate issue the Tribunal ordered that the Builder pay the costs of the owner.  Steps are being taken to enforce that order.

If you find yourself as an owner builder in a difficult situation where you are contemplating commencing proceedings against a Builder or have been burdened with proceedings commenced against you as owner builder by a Builder please contact Richard Watson or his Personal Assistant Shereen DaGloria to discuss your concerns and seek appropriate advice as to your position.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 02 9221 6011.