Builder defeats Home Owner’s attempted Termination of Contract invalid. Builder successful in its claim for outstanding moneys due under the Contract and loss of profit

17/09/2020

Watson & Watson were instructed by the Builder in relation to a dispute between the Builder and the Home Owner resulting from residential building work pursuant to a Contract.  Each of the Builder and the Home Owner commenced proceedings in the New South Civil and Administrative Tribunal (NCAT).

In this particular case almost everything was in dispute.  On behalf of the Builder the case was put in a simple format however the Home Owner introduced many elements that were not relevant and held to be invalid in the decision.

Brief Facts

In about August 2017 the parties entered into a Building Contract to construct a residential home on a site. 

The contract sum of $700,000 was to be paid by way of progress payments as set out in the Contract. 

There were some provisional sum items.  There was one major variation. 

During the progress of the works the Builder issued progress claims for works undertaken. 

The Home Owner disputed on numerous grounds a progress claim for approximately $140,000 and failed to make payment of that. 

The Builder approached Watson & Watson to assist in resolution of the issues. 

The Home Owner by his lawyer sent several letters to the Builder in relation to numerous allegations relating to claimed defaults by the Builder many of which were not relevant to any issue. 

Eventually in August 2018 the Home Owner (by his lawyers) issued a Notice of Termination of the Contract. 

We considered the circumstances of the matter and the predicament in which the Builder found himself in that he was being denied payment of $140,000 and was being pressured to complete the works (at a costs in excess of $120,000) without any assurance that the payments would be made.

In our view the attempted termination of the Contract by the Home Owner was invalid. 

In those circumstances in accordance with our recommendations, the Builder claimed that the termination was invalid and accepted the invalid termination as a repudiation of the Contract.  This brought the Contract to an end. 

In those circumstances the Builder was not required to complete the works as the Contract was at an end.

Claims

However each of the parties held a strong position as to the rights and wrongs of their position. 

As it happened:

1. The Builder claimed the payment of the outstanding invoice of $140,000 and loss of profit on the balance of the Contract.
2. The Home Owner claimed approximately $268,000 in relation to some contract adjustments and the cost to complete the residential building over and above the Contract sum.

Presentation of Case

On behalf of the Builder we presented the case as a simple case and the main issue was whether the termination by the Home Owner was valid.

The Solicitors for the Home Owner presented the case by adding many issues.  There were issues in relation to the project however these issues were not relevant or determinative of the issue of the termination or other matters to be decided by the Tribunal.  The Tribunal accepted our position on behalf of the Builder.

NCAT’s Finding

The Senior Member of NCAT held that the termination was invalid and accepted that the Home Owner had repudiated the Contract and the Notice drafted by Watson & Watson on behalf of the Builder was a valid Notice accepting the invalid termination as a repudiation of the Contract, which brought the Contract to an end.

Essentially the Home Owner’s case was rejected by the Tribunal. 

The Tribunal ordered:

1. That the Home Owner pay to the Builder approximately $190,000. 
2. The Home Owner to pay the legal and other associated costs of the Builder in relation to the proceedings.

Having regard to the numerous matters raised by the Home Owner which were eventually held to be irrelevant in the proceedings, the costs in the proceedings were high.

In this case our client the Builder, prior to the issue of the invalid Notice of Termination was in a difficult position as the Builder with difficulties having regard to the demands of the Home Owner to continue to carry out the work whilst the Owner would not make payment for the claims.  There were difficulties as to whether the claims by the Builder were going to be successful having regard to the completeness of the works and the status of the claimed outstanding invoice.  There are almost always issues that arise in particular, in relation to provisional sum items and variations. 

Separately from this case in light of recent developments in a case in which we acted for an Owner on Appeal to the Supreme Court of New South Wales, it is now clear that Builders have a more difficult road to recovery of moneys claimed for undertaking residential building work in particular, in relation to variations and provisional sum adjustments.  There are serious considerations to be had. 

In this particular case if there had been no attempted termination of the Contract by the Home Owner, there would not have been a repudiation by the Home Owner and the course to recovery by the Builder would have been more difficult. 

If more care had been taken by the Home Owner as to the consideration of the effects of an invalid termination there were other courses available which would have protected the Home Owner. 

In this case having regard to issues and the nature and extent of the disputes, the Senior Member had difficulties accepting evidence of the lay witnesses and in those circumstances the written contractual basis and documentation was fundamental. 

If you find yourself in a building or construction dispute or have any concerns in relation to associated building matters, contacting the experienced Lawyers at Watson & Watson is the first step. Our experienced building and construction lawyers can advise you as to the best course and a way forward.  Please contact Richard Watson Accredited Specialist Building & Construction or his personal assistant Shereen Da Gloria to discuss your matter and seek the appropriate advice.

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