Zhao v Goodman & Anor [2010] NSWCA 2 (5 February 2010)

NEW SOUTH WALES COURT OF APPEAL

CITATION:
Zhao v Goodman & Anor [2010] NSWCA 2

FILE NUMBER(S):
40012/09

HEARING DATE(S):
19 November 2009

JUDGMENT DATE:
5 February 2010

PARTIES:
Yan Shuo Zhao
Marla Shoshana Goodman
Brian Goodman

JUDGMENT OF:
Tobias JA Macfarlan JA McClellan CJ at CL

LOWER COURT JURISDICTION:
District Court

LOWER COURT FILE NUMBER(S):
DC 976/06

LOWER COURT JUDICIAL OFFICER:
Johnstone DCJ

LOWER COURT DATE OF DECISION:
1 October 2008

COUNSEL:
A: In person
R: M Dolenec (Ms)

SOLICITORS:
A: In Person
R: Mills Oakley Lawyers, Sydney South

CATCHWORDS:
CONTRACTS – Building contract – Identification of contract between parties – Claim for rectification of defects and completion of works – Cross-claim for unpaid works – Where findings of primary judge based upon credit of parties – Requirement of appellant to overcome principle in Fox v Percy

LEGISLATION CITED:
Evidence Act 1995
Home Building Act 1989

CATEGORY:
Principal judgment

CASES CITED:
Cullen v Trappell [1980] HCA 10; (1980) 46 CLR 1
Dowling v Rae [1927] HCA 5; (1927) 39 CLR 363
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
Sindel v Georgiou [1984] HCA 58; (1984) 154 CLR 661

TEXTS CITED:

DECISION:
Appeal dismissed with costs

JUDGMENT:

1 TOBIAS JA: In 2000 and 2001, the appellant, a licensed builder, constructed a dwelling house upon land owned by the first respondent at 2 Cadigal Place, Dover Heights (the property). That respondent instituted proceedings by Statement of Claim filed in the District Court on 9 March 2006 alleging that the building work performed by the appellant was defective and claiming damages for incomplete work and the cost of rectification work.

2 On 7 April 2006 the appellant filed a defence denying liability on the basis that any damage or defects related to work that was not performed by him but by others or arose because the work was performed in accordance with express instructions from the first respondent or her agent, the second respondent. The appellant also filed a cross-claim seeking outstanding payments which he alleged were due to him under the building contract. This claim was opposed by the respondents. In a judgment delivered on 1 October 2008, following 14 days of hearing, Johnstone DCJ awarded damages to the first respondent in the sum of $157,847.30 plus interest, found in favour of the first and second respondents on the cross-claim and ordered the appellant to pay the respondents’ costs of both the claim and the cross-claim. It is from those orders that the appellant appeals to this Court. It may be noted that the appellant was represented by counsel at trial but represented himself on the appeal.

3 The second respondent is the husband of the first respondent. The second respondent met the appellant when the latter was undertaking construction works on a property opposite the premises of the first respondent’s parents. They entered into discussions with a view to the appellant being engaged to construct a dwelling house on the property. His Honour noted at [3] that it was common ground that the second respondent acted as agent of the first respondent at all relevant times.

4 During the course of negotiations, a number of documents were created. These relevantly included:

5 His Honour found (at [14]) that it was common ground that a final contract was concluded between the parties on a date in either late January or early February 2000 when the appellant met with the respondents at the first respondent’s parents’ house (the meeting). However, the parties disagreed as to the sequence in which the above documents came into existence and which of them governed their contractual relationship.

6 The respondents contended that the contract between the first respondent and the appellant was constituted by the Home Building Contract and incorporated documents including the specifications and drawings and that this contract was signed by the parties during the course of the meeting.

7 The contract price in the Home Building Contract was stipulated to be $533,800 (Blue 3, 886). Its signature page (Blue 3, 910) contains the signatures of the appellant as builder and first respondent as owner each of which was witnessed by the second respondent. The date of the contract is stated to be 1 February 2000. The second respondent purportedly inserted this date some time after the meeting to reflect the date that a deposit of $25,000 was paid to the appellant.

8 Stapled to the inside cover of the Home Building Contract (at Blue 3, 883) was a typed quotation (the booklet quotation). Except for some handwritten notes made by the second respondent next to some of the items, that document is identical to the alleged contractual quotation (for the details of which, see [8] below). The booklet quotation appears to have been initialled by the appellant. That quotation reveals a total price of $533,800 comprising a fixed sum of $375,000 and prime cost (PC) items totalling $158,800.

9 The appellant agreed that he signed the Home Building Contract and that he discussed the booklet quotation with the respondents. (Although he initially denied having signed the booklet quotation, this was conceded in cross-examination.) However, he contended that within minutes of his signing of the Home Building Contract, that agreement was discarded and replaced with another contract constituted by the alleged contractual quotation and certain oral terms. Essentially, the appellant asserted that the respondents had told him at the meeting that they wanted to save money and that he should not follow the architect’s specifications incorporated into the Home Building Contract but that the second respondent would instruct him as to the nature of the works that he was to undertake.

10 The parties therefore agreed, so the appellant contended, to take responsibility for the jobs that they respectively completed and that the contract price would be reduced to account for any works that the second respondent himself arranged for third parties to complete. In light of this agreement, the second respondent typed up the alleged contractual quotation. It reflected the same price as that contained in the Home Building Contract, that is, $533,800, which was formulated from an itemised list of works and prices. It was also identical to the booklet quotation except for the second respondent’s handwritten notes thereon. The alleged contractual quotation was signed by the appellant and the first respondent and dated 25 January 2000 in handwriting. The appellant contended that this document, combined with oral instructions given to him by the second respondent from time to time, formed the basis of the contractual relationship between the parties.

11 The primary judge held (at [16]) that on both the appellant’s and the respondents’ case with respect to which document constituted the contract between them, there was no doubt that the contract price was $533,800. (It was agreed that an additional $10,000 was to be paid to the appellant if the respondents decided to proceed with the construction of a fourth bedroom, which they ultimately did, bringing the total contract price to $543,800.)

12 However, his Honour was required to determine the circumstances in which each of the documents referred to at [4] above came into existence. He found (at [16]) that the appellant’s assertion that the alleged contractual quotation was prepared in order to become the basis of the contract after the preparation of the booklet quotation and the signing and discarding of the Home Building Contract, was “entirely unreliable”.

13 His Honour preferred the second respondent’s evidence that the alleged contractual quotation was prepared before the iteration of that document constituting the booklet quotation. He found (at [17]) that the alleged contractual quotation was simply the final quote in which the agreed upon negotiated price of $533,800 was recorded and that the booklet quotation came into existence subsequently, when the second respondent made handwritten notes on a copy of the pre-existing document. His Honour also noted (at [17]) that the booklet quotation, stapled to the inside cover of the Home Building Contract, was only relevant insofar as it reflected the manner in which the contract price was arrived at and thus the objective intention of the parties as to price. He stated that he was satisfied that none of the discussions alleged by the appellant to the effect that the Home Building Contract was discarded, varied, replaced or renegotiated took place at the meeting.

14 His Honour therefore found (at [18]) that the contract that governed the building works, the subject of the dispute, was comprised of the Home Building Contract dated 1 February 2000. He continued:

16 The primary judge concluded his consideration of the contract issue by noting the submission made by the appellant to the effect that the respondents had made numerous variations in respect of the works during the course of construction which was said to be evidence of an objective intention consistent with the appellant’s version of the agreement between the parties. His Honour rejected this submission at [22] and adopted the respondents’ submission that the fact that changes were requested and agreed to in no way proved that it was a term of the contract that the appellant would only perform such work as he was directed from time to time to do by the second respondent. The primary judge noted at [22] that

17 The first respondent’s claim for the cost of rectifying defective work was based upon the alleged negligence of the appellant as well as his alleged breaches of the express warranties contained in clause 8 of the Home Building Contract and the warranties in the same terms which were implied pursuant to s 18B of the Home Building Act 1989 (the Act). That section provides:

(a) a warranty that the work will be performed in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract,

(b) a warranty that all materials supplied by the holder or person will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new,

(d) a warranty that the work will be done with due diligence and within the time stipulated in the contract, or if no time is stipulated, within a reasonable time,

(e) a warranty that, if the work consists of the construction of a dwelling, the making of alterations or additions to a dwelling or the repairing, renovation, decoration or protective treatment of a dwelling, the work will result, to the extent of the work conducted, in a dwelling that is reasonably fit for occupation as a dwelling,

(f) a warranty that the work and any materials used in doing the work will be reasonably fit for the specified purpose or result, if the person for whom the work is done expressly makes known to the holder of the contractor licence or person required to hold a contractor licence, or another person with express or apparent authority to enter into or vary contractual arrangements on behalf of the holder or person, the particular purpose for which the work is required or the result that the owner desires the work to achieve, so as to show that the owner relies on the holder’s or person’s skill and judgment.”

18 Section 18F of the Act provides the following defence to a breach of a statutory warranty:

19 The first respondent relevantly made claims for defective work in relation to the following items:

20 The first respondent relied below on the expert evidence of a Dr Bayliss as well as that of Messrs Robinson, Howard and Valencia. The appellant did not call any expert evidence in support of his defence. In addition, the primary judge noted at [29] that he had had the benefit of a view of the property on 26 March 2008 which enabled him to obtain a better understanding of the nature and extent of the defects in the construction work. He was entitled to draw any reasonable inference from that inspection in accordance with s 54 of the Evidence Act 1995.

21 His Honour’s consideration of the nature, cause and costs of rectification of each of the alleged defective items is set out below.

22 The respondents alleged that the appellant had constructed the eave soffits and external bulkheads of the level 2 and 3 terraces without drip grooves, the absence of which allowed rainwater to penetrate at the external edge and cause damage. They contended that the appellant did not construct the soffits in accordance with the plans and drawings, which required a drip groove to be installed.

23 The appellant responded to this claim to the effect that he had been instructed by the second respondent to produce a square finish to all roof edges, irrespective of the plans, and in particular, that he was instructed not to install drip grooves despite him giving advice to the second respondent that this was necessary to prevent rainwater from blowing inside. The appellant also gave evidence that the relevant drawing did not show that any drip grooves were to be installed.

24 As a result of his findings as to the appellant’s credibility, the primary judge did not accept his account that he did not install drip grooves because the second respondent told him not to. He found (at [34]) that the appellant “simply did not understand the detail in the drawings” and (at [36]) that he was negligent and in breach of warranty in respect of his construction of the eave soffits and external bulkheads for the level 2 and 3 terraces.

25 His Honour also found (at [35]) that even if the appellant’s evidence in relation to the drip grooves were to be accepted, it could not amount to a defence to the claim for breach of warranty under s 18F in that he did not establish that the deficiencies of which the respondents complained arose from any written instructions contrary to his advice.

26 The respondents alleged at trial that there was a failure to properly, or at all, waterproof and/or flash the balconies, terraces and deck, a fountain constructed in the kitchen as well as the front entry tiles. The respondents’ expert, Mr Robinson, found minimal to no evidence of waterproofing of these areas upon his inspection of the relevant work.

27 The appellant contended that he did waterproof these areas. However, with respect to the terraces and balconies, his case was that the water damage arose because the respondents had changed their minds and instructed him to install concrete pavers that were thicker and heavier than the intended tiles without reconstructing the terrace and balcony surface levels to accommodate the variation. Although, so he submitted, he warned the second respondent that the pavers were too high and heavy and could damage the membrane, the second respondent instructed him to proceed with the concrete pavers and not the tiles provided for in the specifications with the result that the variation in materials caused the water penetration.

28 At [41] his Honour stated that he preferred the evidence of the second respondent that it was always his intention to use concrete pavers. He found (at [44]) that it was unlikely, having regard to the fact that successful rectification work involving the same type of concrete pavers and no change to the superstructure had been effected, that the height of the pavers was the cause of the water damage, and it was more probable that, in accordance with the evidence of Mr Robinson, a waterproof membrane simply was not installed.

29 Again, his Honour found (at [45]) that even if he were to accept the appellant’s account of events, this could not amount to a defence under s 18F of the Act as the appellant did not establish that the deficiencies of which the respondents complained arose from any written instructions that they had given him contrary to his advice.

30 With respect to the front entry tiles, Mr Robinson gave evidence, which his Honour accepted at [78], that the water penetration occurred as a result of inadequate sealing. The primary judge therefore rejected the appellant’s contention that water entry was also caused by the increased height of the concrete pavers.

31 Finally, with respect to the kitchen fountain, the appellant suggested that any damage to the waterproofing was caused by the installation of the plumbing for the fountain, for which he had not been responsible. At [72] his Honour found that there was no evidence of any damage caused by the plumbing. He again accepted the evidence of Mr Robinson who, on inspection, had found minimal to no waterproofing of the water holding receptacle of the fountain.

32 The primary judge thus found (at [44], [46], [72]-[73] and [78]-[79]) that the water damage claimed by the respondents in respect of the balconies, terraces, kitchen fountain and front entry was caused by the appellant’s failure to properly waterproof the surfaces concerned by the installation of membranes and flashing and that he was negligent and in breach of warranty in respect of these failures.

33 His Honour also found (at [49], [77]) that attempted rectification by the application of a silicon shield or coating over the pavers as suggested by the appellant would be short term and inadequate and that rectification would require the removal of the pavers and the waterproofing of the sub-strata. He thus awarded damages for the cost of rectification and repair of the affected areas on this basis: the sum of $23,878.21 was awarded for the terraces and balconies and the sum of $2,016.63 was awarded for the front entry. The sum of $443.05 was awarded for the kitchen fountain claim.

34 The primary judge noted (at [50]) both on the basis of the report of Dr Bayliss and his own inspection, that much of the render work was defective in that it was uneven and cracked, was salting and shrinking, had lost adhesion and had fallen off or was peeling away.

35 At [52] his Honour recorded the following factors as contributing to the defective render according to Dr Bayliss:

36 At [54] his Honour found on the basis of the reports of Dr Bayliss and Mr Robinson that

37 The primary judge then considered (at [56]) the appellant’s defence which was to the effect that the expert opinions did not adequately explain the basis for their assertions of improper workmanship, that cement rendering skills are, of their very nature, imprecise, and that a possible cause of the defective render was rainwater which had penetrated the external walls underlying the render as well as natural cracking. The appellant also asserted that he had used experienced tradesmen to perform the work which he had supervised. Having set out (at [55]) the appellant’s assertion as to the methodology he had adopted, his Honour noted that none of the tradesmen or employees who had performed the work had been called to corroborate the appellant’s testimony as to that methodology.

39 After considering the experts’ opinions as to the reasons for the defective render, the primary judge concluded:

40 His Honour then turned to consider the question of quantum. He found (at [67] and [68]) that rectification required removal and reapplication of 433 square metres of the render. On this basis he awarded damages for this item in the sum of $68,962.29.

41 The first respondent alleged that the appellant had failed to provide any, or any proper, termite protection system, continuous ant capping and proper sub-floor ventilation.

42 In 2003 a termite infestation was discovered in the respondents’ house. Experts in pest control retained by the respondents, Mr Howard and Mr Valencia, found:

43 In the opinion of Mr Howard, the termites had obtained access to the house through a build up of soil that was abutting the external wall above the level of the internal floor of one of the bedrooms (Black 1, 390). No expert evidence on this issue was called by the appellant so that that of the respondents’ experts, his Honour found (at [96]), was uncontradicted.

44 The specifications for the works required the installation of a product known as Termimesh (see Blue 1, 312). During the negotiations that led to a reduction in the contract price, the appellant had reduced the allowance made in respect of termite protection from $6,000 to $2,000. It was the appellant’s case that the reduction occurred as a result of the abandonment by the second respondent of the requirement for the Termimesh. Instead, the appellant was only required to use a protective spray, and this was indicated by the words ‘spray only’ written by the second respondent next to the termite protection item on the booklet quotation.

45 Once the contract had been concluded, so the appellant submitted, the requirement for the spray was dispensed with as the second respondent told him that he would arrange for the spraying himself, and another contractor carried it out.

46 In addition, the appellant claimed that he had told the second respondent that a retaining wall needed to be built to prevent soil from abutting the house and allowing termite entry but that the second respondent had said that building such a wall would be too expensive.

47 The second respondent denied the version of events given by the appellant. In particular, he denied that the reduction of price involved dispensing with the requirement for Termimesh or that he had told the appellant not to conduct the spraying. Despite discussions occurring with respect to a retaining wall, according to the second respondent, this was never in the context of termite protection.

48 Having regard to his findings as to the appellant’s credibility, the primary judge did not accept the appellant’s account of the termite issue, observing at [99] that

49 His Honour also found at [100] that no preventative termite spraying was ever carried out at the respondents’ house, the sub-floor ventilation was inadequate, the ant capping installed was substandard, and that the appellant was negligent and in breach of warranty in respect of these failures.

50 His Honour then considered the cause of the termite damage, finding at [101] that

51 He stated (at [102]) that it was the appellant’s responsibility to ensure that soil did not slip onto the site of the building works and to remove building debris that had accumulated. The appellant had created the site conditions for which he could not avoid responsibility. Accordingly, his Honour found (at [103]) that the appellant’s negligence and breach of warranty was the cause of the termite infestation. He awarded $53,940.00 for the termite claim and $4,336.40 for the sub-floor ventilation claim.

52 His Honour also remarked (at [104]) that even if the appellant’s conversations with the second respondent were to be accepted, they could not amount to a defence to his breach of warranty under s 18F of the Act in that the appellant did not establish that the deficiencies of which the respondents complained arose from any written instructions given to him contrary to his advice.

53 In light of his findings, the primary judge found it unnecessary to decide whether the respondents agreed to excise the requirement for the installation of Termimesh in accordance with the specifications. However, he noted (at [107]) that if this were to become a relevant consideration, he was not satisfied that the parties dispensed with the requirement to install the mesh as no amendment to the specifications was formally recorded and the words “spray only” in the booklet quotation were equivocal.

54 The first respondent claimed that there was a failure by the appellant to fill voids within and complete the painting of the garage ceiling. The appellant conceded that he did not complete the garage ceiling work, but contended that he did not do so because the second respondent had given him a direction to do other work instead. Having regard to his findings in relation to the appellant’s credibility, the primary judge did not accept the appellant’s explanation as to why he did not complete the work on the garage (at [84]). He awarded $4,420.72 in damages in respect of this item.

55 The appellant’s cross-claim was brought against both the first respondent and the second respondent, seeking payment for amounts the appellant claimed remained outstanding in respect of various items of work that he had performed and for which he alleged he had not been paid.

56 The primary judge found (at [112]) that there was no basis for the joinder of the second respondent as a cross-defendant, as there was no suggestion that he acted at any time other than as agent for the first respondent and he was not party to the relevant building contract with the appellant.

57 Insofar as the cross-claim against the first respondent depended upon the appellant’s case as to the applicable building contract, his Honour rejected it at [113]. In any event, he noted that the appellant would have been unable to enforce the contract he alleged applied (consisting of the alleged contractual quotation and oral terms) on the basis of s 10(b) of the Act which was in the following terms:

58 In addition, to the extent that the cross-claim against the first respondent relied upon alleged variations to the works contracted for, his Honour rejected (at [116]) this claim on the basis that there was no evidence of any written variations in accordance with the requirements of clause 12 of the Home Building Contract which, as noted above, was the contract found by his Honour to govern the parties’ relationship.

59 Furthermore, the primary judge found (at [119]) that the items for which payment was claimed were either part of the works covered by the agreed fixed price, or had already been the subject of payments made by the first respondent above that fixed price.

60 His Honour also rejected an alternative claim based upon a quantum meruit. In this regard the appellant had relied upon paragraphs 12, 13 and 14(b) of his Statement of Cross-Claim which relevantly provided:

(b) alternatively, work done at the request of the first and second [respondents].”

61 The appellant submitted that these allegations were wide enough to encompass a quantum meruit claim. However, the primary judge held at [117] that these paragraphs were insufficient to put the respondents on notice of such a claim such that the appellant was unable to agitate the quantum meruit claim which he therefore rejected.

62 On 11 May 2009 the appellant filed an Amended Notice of Appeal containing 10 grounds of appeal. This was supplemented by a set of submissions dated 12 April 2009 (Submission 1) and another set of submissions dated 16 November 2009 (Submission 2). The appellant also filed a reply to the respondents’ submissions on 12 July 2009 (Reply 1) and filed another document on 18 November 2009 which purported to respond to the respondents’ amended submissions (Reply 2). I have carefully considered these submissions which, with respect to the appellant, are often discursive and repetitive. However, I have attempted to distil from them the essential contentions relevant to the issues in the appeal.

63 It is, as the respondents submitted, difficult to identify the relationship between Submission 1 and Submission 2 on the one hand and the grounds of appeal on the other such that the submissions include matters which are not raised in the Amended Notice of Appeal and there is considerable overlap between Submission 1 and Submission 2. With all due respect to the appellant, being a litigant in person, both Reply 1 and Reply 2 are quite difficult to understand and they do not appear to have been strictly confined to responding to the respondents’ amended submissions. However, as the appellant appeared in person on the appeal he presumably prepared his submissions and Amended Notice of Appeal with little or no legal advice. Accordingly, notwithstanding the attendant difficulties, I have attempted, as I have said, to identify by reference to each of the appellant’s documents the key challenges made to his Honour’s findings.

64 It is convenient to set out seriatim each of the appellant’s challenges to the findings of the primary judge, the respondents’ response thereto and my determination of the relevant challenge.

65 However, before doing so it is necessary and relevant to make two observations. The first is that, as noted at [15] above, the primary judge formed an adverse view as to the appellant’s credit which infected his findings on those aspects of the dispute between the parties where the issue was whether to accept the evidence of the respondents and/or the experts they called on the one hand, or the uncorroborated evidence of the appellant on the other. The second is that it can be fairly said that most, if not all, of the submissions of the appellant seek to assert that his Honour in effect erred by failing to accept the appellant’s evidence. But to succeed in the appeal on this ground requires the appellant to overcome the constraints, where evidence has been rejected by a trial judge on the basis of adverse credit findings, authoritatively stated by the High Court in Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at 129 [29]. I shall refer further to this constraint when dealing with the individual issues to which I now turn.

66 The appellant submitted that his Honour erred in accepting the respondents’ account that the Home Building Contract and the documents incorporated by clause 3 thereof governed the agreement between the parties and rejecting the appellant’s contention that this agreement was constituted by the alleged contractual quotation as well as oral terms.

67 Before considering this submission, I should clarify that the determination of which documents constituted the building contract between the parties was, in effect, only relevant to the cross-claim. This is because each of the documents asserted by the parties to constitute the agreement between them stipulated an identical contract price. The only difference of any significance between the two asserted agreements was the additional clauses contained in the Home Building Contract, and in particular, clause 12 which related to variations. The import of this clause was that it required a contractor (in this case, the appellant) to provide the owner (in this case, the first respondent) with notice in writing before commencing work on any variations. As the variations alleged by the appellant in the cross-claim were not in writing in compliance with clause 12, a finding that that clause did not apply to the contract between the parties would have assisted the appellant.

68 At the hearing of the appeal, counsel for the respondents agreed that the appellant’s assertion that the alleged contractual quotation applied but the Home Building Contract did not was, in essence, only relevant to the appellant’s cross-claim. However she also noted that the appellant’s assertion that the contract between him and the first respondent included oral terms was relevant to the issue of whether the contract was for a fixed price, as asserted by the respondents, or on the basis that the appellant would perform and be paid for works as and when directed, as asserted by the appellant.

69 Having explained the import of this ground of appeal, I now turn to my consideration of it.

70 Consistent with my remarks at [65] above, I indicated to the appellant at the hearing of the appeal that this Court was limited in its power to set aside the primary judge’s finding of fact as to which documents constituted the construction contract between the parties. To the extent that that finding was based upon his Honour’s impressions of the appellant’s credibility, this Court could only set it aside if the appellant established inconvertible facts or uncontested testimony demonstrating that the primary judge’s conclusions were erroneous or glaringly improbable or contrary to compelling inferences drawn from the evidence.

71 It appears to me that his Honour’s finding that the Home Building Contract comprised the relevant agreement between the parties was indeed reached on the basis of his findings as to the appellant’s credit and his observation (at [16]) that the appellant was “entirely unreliable”. Although he noted at [19] that

it appears that the further justification he provides (at [19] and [20]) for accepting the account of the respondents and rejecting that of the appellant is independently additional to, rather than merely cumulative upon, his credibility findings. In other words, his finding that the Home Building Contract, on the balance of probabilities, formed the relevant agreement between the parties, was based not only upon his impression of the demeanour of the relevant witnesses, but also was independently confirmed or reinforced by the improbability of the account provided by the appellant, rather than deriving from a combination of his impressions as to credit and the relative persuasiveness of the respective parties’ accounts. Accordingly, in my opinion, the appellant is constrained by the rule in Fox v Percy in successfully reversing his Honour’s finding on this issue.

72 The appellant referred in his submissions to a number of facts which he asserted were contrary to the primary judge’s ultimate finding. However, for the reasons I articulate below, none of these facts are incontrovertible; nor do they demonstrate that his Honour reached an erroneous conclusion.

73 First, the appellant contended (at Orange 8N) that the primary judge erred in accepting the second respondent’s evidence that the alleged contractual quotation was typed by him as a quote because the appellant “could not type”, and that this evidence was false as he was in fact able to type. In his affidavit sworn 23 March 2007, the second respondent had stated that he typed the booklet quotation on the appellant’s letterhead because the appellant had said “I can’t because I do not have a computer”. However, whether or not the appellant could type or access a computer was not relevantly in issue and his Honour’s acceptance of the second respondent’s evidence in this regard could not have influenced his ultimate finding on the contract which applied to the building works. The appellant agreed (at Orange 8P) that the second respondent had typed the alleged contractual quotation. The only issue was whether this document was intended as a quote of the agreed upon price or as a final record of the contract between the parties. The question of who typed the document or who was capable of typing this document cannot have affected the determination of this issue.

74 Second, the appellant contended (at Orange 9D) that his Honour erred in finding (at [14]) that the Home Building Contract was signed by the first respondent in either late January or early February 2000. In support of this contention, he asserted that the respondents’ counterpart of the Home Building Contract, which they had provided to their insurer and the appellant had seen in 2005, only contained the appellant’s signature and had not yet been signed or dated by the first respondent (see Blue 2, 744, 856). The appellant claimed that this evidence was inconsistent with the evidence given at trial by the second respondent to the effect that the first respondent signed and dated her counterpart of the Home Building Contract “shortly [after] or a few months [after]” the meeting (Black 1, 135R). At Black 1, 136, an explanation is proffered by counsel for the respondents to the effect that the copy of the Home Building Contract which was provided to the insurer was one which was made before the additional signature of the first respondent was added. It would therefore appear that the testimony of the second respondent was not necessarily inconsistent with his Honour’s findings.

75 In any event, in his affidavit evidence (at Blue 2, 716) the appellant deposed that after he signed one copy of the Home Building Contract on 25 January 2000 which he then handed to the second respondent, the respondents went out of the appellant’s sight but then returned and handed one of the copies of the document to the appellant which had the first respondent’s signature on it at page 23. The appellant then said that he signed the same copy but did not date it. The evidence of the second respondent was that he dated the document 1 February 2000 being the date upon which he paid the appellant a deposit of $25,000 (Blue 1, 135 para 11) in accordance with the contractual terms.

76 However, the appellant also asserted that both the evidence of the Home Building Contract which had been unsigned by the first respondent and the oral evidence of the second respondent was nevertheless inconsistent with the evidence of the first respondent to the effect that she signed both copies of the Home Building Contract at the meeting in the presence of the appellant and did not subsequently add anything to the signature page (See Blue 1, 135; Black 1, 74-75). It does appear therefore that there was inconsistent evidence as to when the first respondent signed her counterpart of the Home Building Contract. Indeed, the respondents conceded this inconsistency in their submissions at trial (at Black 2, 763). Yet the submission itself was consistent, except with respect to the dating of the document, with the appellant’s affidavit evidence to which I have referred at [75] above.

77 Nevertheless, I do not think that this inconsistency (if such it be) in the evidence as to when the first respondent signed her counterpart of the Home Building Contract is an incontrovertible fact demonstrating that the primary judge’s finding was glaringly improbable. At its highest, this inconsistency may cast doubt on the credibility or reliability of the evidence of either the first or second respondent (depending on which account as to the signing of the contract is indeed accurate). However, given that, where a contract is concluded by way of an exchange of identical counterparts signed by each of the parties, it is unnecessary for both parties to sign both counterparts immediately, the inconsistency in the evidence as to when the first respondent’s signature was added to her counterpart does not make his Honour’s finding that the Home Building Contract was executed by the parties and that this document constituted the whole of the construction agreement between the parties “glaringly improbable”: Sindel v Georgiou [1984] HCA 58; (1984) 154 CLR 661 at 665-666.

78 Third, the appellant contended (at Orange 12U-13F) that his claim that the Home Building Contract did not constitute the construction agreement between the parties was supported by the fact that the schedule of progress payments under clause 11 of the Home Building Contract (Blue 2, 758, 782) was different to the payment record (Blue 2, 811) which indicated the amounts that were actually paid to the appellant during the course of the works. The appellant also referred (at Orange 13C-F) to evidence demonstrating that the first respondent contracted a not insignificant proportion of the construction work to third parties, which was purportedly in contravention of clause 25 of the Home Building Contract, as well as evidence showing that the respondents purchased construction materials, purportedly in contravention of clause 15 of the Home Building Contract. This evidence proved, so it was submitted, that the parties had not intended to be bound by the Home Building Contract. In my view, this submission should fail for the same reason that it was rejected by the primary judge: see [16] above.

79 Finally, the appellant submitted (at Orange 13W-14T) that the following findings of his Honour were flawed:

80 It is arguable that at least the third and fourth of these contentions have some force. However, notwithstanding the merit or otherwise of these complaints with respect to his Honour’s reasons, these allegations neither suggest nor establish the existence of any incontrovertible fact or uncontested testimony which demonstrates that the primary judge’s finding that the Home Building Contract constituted the relevant agreement between the parties was erroneous and should be set aside.

81 I should also observe that although the primary judge formed his conclusion as to the identity of the contract between the parties on the basis of his credibility findings, there was nevertheless contemporaneous documentary evidence inconsistent with the appellant’s case. In particular, on an application form submitted on 2 February 2000 by the appellant to obtain home warranty insurance in respect of the building works (Blue 3, 1131) the “contract date” appears to have been filled in as “01/02/2000”. This document suggests that the building contract between the parties was indeed the Home Building Contract dated 1 February 2000 and not the alleged contractual quotation dated 25 January 2000. In cross-examination (Black 2, 742-743) the appellant did not provide any convincing explanation as to why this document stipulated the contract date to be 1 February 2000 even though the true contract date, on his case, was 25 January 2000.

82 Accordingly, the challenge to his Honour’s findings as to which documents comprised the building contract between the parties should be rejected.

83 Before turning to consider the submissions on the appeal in relation to the primary judge’s findings in respect of each of the alleged defects, I should note that many of the challenges to his Honour’s findings on each of the defects were repetitive of the appellant’s submissions at trial. His case with respect to a number of the defects (namely, the absence of appropriate drip grooves, waterproofing and termite protection) was that even though the works were not perfect, they were carried out pursuant to the explicit instructions of the second respondent.

84 In relation to these defects, his Honour unequivocally rejected the appellant’s evidence that he received instructions from the second respondent to perform the allegedly defective works at a reduced standard or not at all.

85 His Honour then found at [35], [45] and [104] that even if he had accepted the appellant’s evidence that he had received instructions from the second respondent to deviate from the specifications (relating to, respectively, the drip grooves, waterproofing and termite protection), the defence contained in s 18F of the Home Building Act 1989 could not be invoked by the appellant. This was because the defective work complained of by the respondents was not performed pursuant to any written instructions that they had provided to the appellant contrary to his advice: see paragraphs [25], [29] and [52] above.

86 In my view the primary judge erred with respect to his treatment of s 18F in this manner. That section, which I have recorded at [18] above, provides a defence to a builder whose work is subject to a complaint where the builder can prove that the work was completed in accordance with instructions provided by the building owner that were contrary to the builder’s written advice. In other words, although the primary judge indicated that the s 18F defence should fail because there was no evidence of written instructions from the respondents in respect of the relevant items, the section only requires the advice from the builder, in this case, the appellant, to have been in writing.

87 Nevertheless, despite his Honour’s misinterpretation of s 18F, his consideration of this defence was only recorded as an alternative piece of reasoning and, therefore, any error contained therein does not of itself affect the validity of his Honour’s findings with respect to the relevant defects. It is convenient to now turn to the appellant’s challenges to those primary findings.

88 It should be recollected that the appellant contended at trial that he was instructed by the second respondent not to install a drip groove. It is not unimportant to observe that such a contention implicitly acknowledges that but for that instruction, the appellant recognised that a drip groove was in fact required. Nevertheless, his Honour (at [34]) rejected the appellant’s evidence which was denied by the second respondent on the ground of the appellant’s lack of credibility and upon the basis that the second respondent was not cross-examined upon his denial of the alleged instruction.

89 The appellant also submitted that his Honour erred in holding that his failure to install drip grooves on the terrace bulkheads was work that did not accord with the relevant drawing. He referred to the architect’s drawing numbered AKDGM-108 (at Blue 2, 637) and asserted that a sketch by Mr Robinson (at Blue 2, 631) to explain this drawing misconstrued it. The appellant relied upon the observation of a Mr Martin to the effect that there was no drip groove detailed in the drawing and also asserted that his contention that there were no drip grooves required by the drawing should be accepted on the basis of his own expertise as a builder (Orange 15H). He also submitted that the experts called on behalf of the respondents, presumably Dr Bayliss and Mr Robinson, did not tell the truth and did not have sufficient knowledge of the respondents’ house. There is no substance in these last-mentioned submissions given his Honour’s finding that the evidence was uncontradicted by any contrary expert evidence as none was called.

90 The respondents contended that the primary judge had the benefit of Mr Robinson’s oral evidence and explanation of the drawing AKDGM-108 and that the report by Mr Martin was not in evidence such that there was no incontrovertible evidentiary basis upon which his Honour’s findings could be disturbed. This submission is clearly correct.

91 At Blue 3, 1016 Mr Robinson circled the relevant part of the section depicted on drawing AKDGM-108 which detailed the location of the drip groove which is shown as a gap depicted as a small horizontal line from the outside of the vertical sheet to the edge of the horizontal sheet. The purpose of the drip groove or gap between the outside vertical surface of the eave and the horizontal lining is to prevent rainwater being drawn from the edge of the eave back into the lining (Black 1, 341). The necessity for such a groove would seem to be self-evident and Mr Robinson’s evidence, accepted by the primary judge, was that it was shown on the relevant architectural drawing. No Fox v Percy basis exists for rejecting that evidence.

92 The appellant further submitted (at Orange 16E) that the water damage caused to the eave soffits was not due to his failure to install drip grooves, but rather due to the overflow of the gutters which, he alleged, had not been maintained free from debris. He referred in support of this submission to photographs of the soffits prepared by Mr Robinson (Blue 2, 575) as well as photographs that he himself arranged to be taken of the roof and which were Exhibit 8 at the trial. It is clear that these photographs do not provide, of themselves, proof of the cause of the water damage.

93 The appellant further asserted that his Honour erred in failing to give any weight to the evidence that the level 3 terrace ceiling was replaced by the respondents without the installation of a drip groove and no longer experiences water penetration problems. The respondents submitted, and I accept, that this was contrary to the evidence as the water penetration damage can be observed in the photographs included in both reports of Mr Robinson.

94 Accordingly, the challenge to his Honour’s findings as to the appellant’s failure to install drip grooves and damages arising therefrom should be rejected.

95 The appellant submitted that his Honour erred in finding that the appellant did not install a waterproof membrane beneath external tiling on the balconies and terraces.

96 The appellant contended that he did install a waterproof membrane, but that this was damaged as the respondents had instructed him to use concrete pavers rather than the tiles specified in the plans and for which the relevant sub-strata was designed. He relied upon a drawing by the respondents’ architect (at Blue 3, 1222) which identified that “tiles” were to be used in the door sills to the balconies as well as a drawing (at Blue 3, 1224) which specifically referred to concrete paving which, he submitted, revealed some kind of design flaw.

97 The appellant also claimed (at Orange 9Q) that his Honour erred in finding at [44] that the rectification works were successful, as upon his own inspection of the property on 26 May 2008, it was evident that the ceiling beneath the concrete paving was leaking to a greater degree than before the paving had been rectified. He finally submitted that his Honour should not have found that the application of a coating or sealant to the affected areas (as suggested by the appellant) would be a temporary solution only.

98 Despite these claims, the appellant does not refer to any incontrovertible evidence that contradicts the primary judge’s findings in relation to the waterproofing which were based upon his Honour’s acceptance of Mr Robinson’s evidence that was, his Honour found, uncontradicted by any expert evidence called on behalf of the appellant. The challenge to these findings cannot, therefore, be sustained.

99 The appellant made no substantive submission with respect to the kitchen fountain issue, such that his Honour’s findings with respect to this defect should remain undisturbed. He simply did not believe the appellant’s explanation for the problem given the evidence of Mr Robinson that on inspection he found no or minimal waterproofing.

100 In relation to the render issue, the appellant first submitted (Orange 10 and 23) that the evidence of Dr Bayliss and Mr Robinson should not have been admitted or accepted as neither of them were experts in the field of rendering and neither had told the truth in their evidence. Although it is true that Dr Bayliss was academically trained as a chemist, he was an expert in coatings and construction materials. In particular, according to his CV, as a self-employed consultant for over eight years, he had inspected and reported on the condition of coatings and associated substrates including cement render. His expertise with respect to cement render was not called into question in his cross-examination: cf Black 1, 438Y. Mr Robinson had been a licensed builder since 1992, had been a council health and building surveyor for many years and a recognised building consultant by the Department of Fair Trading since 1994 and in private practice since 1991. The opinions expressed by each of these experts indicated on their face that each had a clear understanding of the issues relating to the proper application of cement render to external walls of a residence. The primary judge clearly thought so and no good reason has been advanced by the appellant to reject his Honour’s assessment of the expertise and evidence of those witnesses.

101 With respect to Dr Bayliss’ evidence, the appellant further submitted (at Orange 23) that not only did he not have experience in brick wall rendering but was only a painting coat expert but also his opinions as to render mixing were inconsistent with Australian Standard 3700-1988 and (at Orange 24O) that he should not have taken render samples from the ground. In relation to the contention that Dr Bayliss’ opinions contravened the relevant provisions of Australian Standard 3700-1988, not only was he not cross-examined on that Standard but also it was not in evidence. In any event, it is clear from the exchanges in the transcript (at Black 1, 434-437) that Dr Bayliss took render samples from many locations in the house and that there was no evidence to support the contention that his method of sampling was flawed.

102 At the hearing of the appeal, the respondents confirmed (at Tpt 31) that although there was an objection taken at trial in relation to whether or not there was a specialist field of knowledge in relation to rendering (his Honour found that there was at Black 1, 331S), as I have already noted no objection was taken to Dr Bayliss’ expertise, even though he was a chemist and a construction materials consultant rather than a building expert. In these circumstances, there is nothing in the appellant’s submissions which persuades me that his Honour erred in accepting Dr Bayliss’ expert opinions.

103 With respect to Mr Robinson, the primary judge specifically rejected (at Black 1, 331T) an objection to Mr Robinson’s evidence on the basis that he did not possess a level of expertise sufficient to express an opinion in relation to the specialist ‘rendering’ body of knowledge. The appellant challenged the rejection of this objection.

104 The appellant submitted (at Orange 24R) that Mr Robinson’s lack of expertise was evidenced by his absence of knowledge of the product range of PlasterMaster and that he was untruthful because despite saying in cross-examination that it was not part of his brief to consider whether water had been driven back through the window sill (Black 2, 558Y-559B), in his report dated 19 January 2001, he referred to this phenomenon in paragraph 3.6.8 (Blue 2, 547), thus indicating that it clearly was part of his brief. In addition, even though he had said in cross-examination that he had not read the report of a Mr Martin (Black 2, 507), this was untruthful as a letter dated 7 May 2007 to him from the respondents’ solicitors enclosed this report (Blue 2, 621). His statement in his report dated 19 January 2007 (at Blue, 529) that “in arriving at my opinion, I have considered all the documents provided to me by the solicitor” was, so it was submitted, also untruthful.

105 In my opinion, Mr Robinson’s concession in cross-examination that he did not know the detail of the product range offered by PlasterMaster does not cast any doubt on his expertise, especially given his previous statement which disclosed his awareness of PlasterMaster as a company manufacturing plasterboard and his evidence as to the effects of a product with PlasterMaster’s chemical properties. I do not think that the first and second mistruth alleged against Mr Robinson necessarily discredits his evidence. Rather, these inconsistencies appeared to be slips or mistakes in the context of a lengthy cross-examination which extended over some 70 pages of transcript (excluding his cross-examination on the voir dire). Moreover, the third alleged mistruth is clearly unfounded as even if Mr Robinson did lie in cross-examination about having seen the report of Mr Martin, this report was only purportedly sent to him in May 2007, three months after Mr Robinson prepared his own report on the evidence then available to him.

106 At [62] the primary judge observed that Mr Robinson did not change his opinion when cross-examined (at some length) as to the appellant’s use of the PlasterMaster product. A reading of that cross-examination reveals that Mr Robinson stood his ground on all the defect issues upon which he was challenged. It was thus open to his Honour to accept his evidence.

107 Thus, as with Dr Bayliss, in my opinion the appellant has failed to disclose any evidence which would persuade me that the primary judge erred in his acceptance (at [58]) of the expertise of and evidence given by Mr Robinson. The appellant’s assertion that he himself was a qualified expert and that his evidence should have been accepted on this basis does not assist him in this regard. As his Honour noted (at [57]), the appellant called no independent expert evidence on this or any other issue.

108 Second, in relation to the render issue the appellant submitted (at Orange 10) that his Honour erred in stating (at [57]) that he did not offer any explanation as to why the render was defective, as he had in fact provided a comprehensive list of reasons. It is clear when this statement is read in context that his Honour was referring to the appellant’s failure to offer a plausible or compelling explanation as to the reasons for the defective render, rather than his failure to provide any justification at all.

109 Third, the appellant submitted (at Orange 18) that although the render was defective, this was a result of rainwater penetrating the cavity between the render and the external wall. He relied upon clause 19 of the British Standard on rendering which provided that water is liable to cause loss of adhesion, further cracking or complete disintegration of the rendering through either frost action or the action upon the cement of soluble sulphates that may be present in bricks. However, the respondents submitted that Dr Bayliss had specifically given evidence that this clause did not apply to Australian conditions because Sydney did not experience sufficient frost action and bricks manufactured in Australia do not contain soluble sulphates.

110 There was an apparent inconsistency in the evidence of Dr Bayliss and Mr Robinson with respect to the effects of water penetration on the render which the appellant referred to in support of his submission that these witnesses were not qualified experts. Whilst Dr Bayliss said (at Black 1, 456Y) that continuous leaking of salt through the cracks in the render could not cause it to lift, Mr Robinson gave evidence (at Black 2, 495) that if water continuously entered through hairline cracks, it could cause a deterioration of the bond between the render and the surface of the brick wall, leading to drummy render and to it lifting. However, Dr Bayliss’ statement was made in the context of his evidence that where the bond between the render and the external wall is adequate, the continuous penetration of water into the cavity between the render and the brickwork would not cause the render to lift (Black 1, 495). Mr Robinson does not appear to have been asked specifically about the effects of water continuously entering the wall cavity.

111 Nevertheless, I agree with the respondents’ submission (at Orange 34D) that regardless of whether continual exposure to rainwater could cause the relevant render damage, the appellant did not point to any incontrovertible evidence tending to show that anything other than his own negligence or breach of statutory duty did in fact cause the defects in the render work.

112 It is true that the appellant asserted that water penetration occurred due to a number of factors over which he had no control, namely:

113 However, an examination of the following documents referred to by the appellant in support of these assertions does not self-evidently reveal that any of this evidence clearly supports the appellant’s case that any of these factors actually caused the acknowledged defects in the render: See photograph 13 of roof from Exhibit 8 at the trial; transcript at Black 1, 207-208 relating to slope of windows; report at Blue 2, 547 relating to increased possibility of leaking around the window; photograph of rendering around window at Blue 1, 160; photograph of glass joinery at Blue 1, 411; report at Blue 2, 556 relating to the kitchen fountain. In particular, it is not suggested that any of these documents were put to Dr Bayliss or Mr Robinson in cross-examination or that either of them accepted that any of the four factors relied on by the appellant could have contributed to the defective render.

114 Fourth, the appellant claimed that his Honour erred in finding that he did not competently mix or apply the render. He submitted (at Orange 46J) that Dr Bayliss should not have found that the manufacturer’s instruction as to how to apply the PlasterMaster was incorrect. However, it appears to me that this was not asserted by Dr Bayliss. Rather, Dr Bayliss gave evidence (Black 1, 424-429) that the ratios allegedly contained in the PlasterMaster instructions corresponded to a high-strength render which was unsuitable for the relevant clay brick background wall, and that the relevant mix required the addition of lime to prevent cracking. His Honour’s finding (at [64]) was not that the appellant failed to follow the PlasterMaster instructions, but rather that the application of cement render is an acquired skill and that the methodology employed by the appellant with respect to the selection of render additives was defective. The appellant has not adverted to any evidence that is contrary to this finding.

115 Finally, the appellant submitted (at Orange 8) that because of the fact that in the eight years since their house was constructed, the respondents’ had elected not to strip the defective render and redo the rendering, the work that he performed could not be as defective as was claimed. In my opinion, even if the respondents had chosen not the redo the rendering, this fact would not provide incontrovertible evidence that his Honour’s finding on the render claim was incorrect. In any case, the Court has no concern as to the use to which a successful party may put the amount paid to him in satisfaction of an award of damages: Cullen v Trappell [1980] HCA 10; (1980) 46 CLR 1 at 15.

116 For the foregoing reasons, I see no reason to disturb his Honour’s finding at [65] that the appellant did not competently or properly mix and apply the cement render as a result of which it was defective and, therefore, in breach of the statutory warranties.

117 The appellant made a number of submissions that his Honour erred in finding that the termite damage was caused by works he performed. First he relied upon the affidavit dated 8 May 2007 of Mr Howard (at Blue 2, 702), the respondents’ pest control expert, to the effect that “the Sentricon baiting system is the only way to deal with termites at this Property, due to the way the Property was initially constructed”. The appellant contended (at Orange 20M) that this evidence proved that the termite infestation was caused by the fact that the ground level of the house was higher than the floor levels because the property was located on a hill, rather than due to the manner in which he built the house. It is clear that this statement of Mr Howard does not assist the appellant. In its context, the reference to the “way the Property was initially constructed” should be read as relating to Mr Howard’s observation in his earlier affidavit (at Blue 2, 649) that “no joints in the ant capping had been sealed” and that “termites were entering ... via soil build up to the external wall”, both construction faults caused by the appellant, rather than any inherent design flaw in the building.

118 Second, the appellant asserted that he gave the second respondent a quote for the construction of a retaining wall to prevent the soil from sliding downhill and that the second respondent accepted this (at Black 2, 570B). This submission is of no consequence as his Honour did not find that the termite infestation occurred due to the presence or absence of this retaining wall. Indeed, a retaining wall was ultimately constructed.

119 Third, the appellant submitted (at Orange 20V) that an inspector retained by the second respondent advised him to cover the ant capping once it had been installed, indicating that this work was acceptable to the respondents. There is no compelling evidence referred to which would support this submission. In my opinion, even if this submission was substantiated, it would not relieve the appellant from the breach of warranty or negligence found by the primary judge due to the gaps in the ant capping which rendered it ineffective.

120 Fourth, the appellant submitted (at Orange 21C) that clause 58(1)(k)(vii) of the Home Building Regulation 2004 precluded the respondents from claiming damages for termite infestation on the basis that any loss suffered was a result of the respondents’ failure to maintain appropriate protection against pest infestation of the natural timber. Although I think that the appellant’s reliance upon this clause is misplaced, even if it were relevant, the appellant has not referred to any evidence to suggest that his Honour erred in failing to find that the termite damage was due to the fault of the respondents rather than the manner in which the appellant had constructed the sub-floor area of the house.

121 Fifth, the appellant appears to submit (at Orange 21K) that he could not be held responsible for failing to spray the site because the second respondent had independently arranged for this to be done by another contractor, a Mr Kevin Joyce/Jolie (see Blue 3, 1290; Red 71 [97]), and a witness had seen the spraying being performed. This alleged cause of the termite infestation (if that is what is being alleged and that is far from clear) was specifically rejected by his Honour at [98] and the appellant has not referred to any substantive evidence which would support a finding to the contrary.

122 Sixth, the appellant submitted that he could not be held liable for failing to install an exhaust fan which Mr Howard said (at Black 1, 382) was necessary to provide ventilation to the sub-floor timbers, as there was no indication in the drawings or specification of the need for such a fan. Again, this submission is baseless – the primary judge did not find that the appellant should have installed an exhaust fan, but rather that the sub-floor ventilation was inadequate, presumably for the reasons articulated by Mr Howard: see [43] above.

123 Finally, the appellant submitted that the words “spray only” written next to the termite protection item in the booklet quotation combined with the fact that this item cost $2,000 as opposed to the $6,000 which had been contained in a previous quote dated 8 December 1999 (Blue 2, 780) meant that the appellant was only required to apply a termite spray, and was not required to install the Termimesh.

124 However, the respondents submitted that this was not the case, as the Home Building Contract was a fixed price agreement which incorporated a specification which required the installation of Termimesh (Blue 1, 312). They contended that the booklet quotation was not a contract document under clause 3 of the Home Building Contract. However, even though his Honour found that the contract between the parties had not been varied so to dispense with the requirement to install the Termimesh, a contrary finding would not have affected his ultimate award with respect to the termite damage. This is because even if the reduction in price and the words “spray only” were construed to evidence an agreement that Termimesh would not be installed – which, in my view, is a logical inference – his Honour’s findings as to the termite damage were not dependent upon the absence of Termimesh. Rather, so the respondents submitted, the soil abutting the external wall enabled the original infestation and the defective ant capping created the main termite problem as this allowed the termites continual concealed entry into the sub-floor area of the house.

125 Having regard to the expert reports and the findings of his Honour, I accept the respondents’ submission that the question of whether or not the appellant was required to install Termimesh or to only apply a spray treatment was essentially a false issue. His Honour expressly stated (at [107]) that in the light of the findings that he had made it was unnecessary for him to make a finding as to whether the respondents agreed to excise the installation of Termimesh from the contract.

126 Mr Howard, both in his affidavit sworn 22 November 2006 and the oral evidence he gave at trial, emphasised the defective ant capping as the source of the ongoing termite problem as well as the absence of sub-floor ventilation (see Black 1, 382-385). Although his Honour found (at [101]) that the cause of the termite damage was “multi-factorial”, and termite entry occurred “through the soil and debris left abutting the external wall”, he held that the damage was

127 Indeed, his Honour found (at [105]) that because of the fact that the ant capping was defective and unable to be rectified without lifting the house from its foundations that a baiting and monitoring system for the termites was required to be implemented (see also, Black 1, 385).

128 Accordingly, even if the found failure of the appellant to apply a spray treatment or install the Termimesh were to be disregarded, his Honour’s findings that the construction work was defective in that “the sub-floor ventilation was inadequate” and that “the ant capping installed was substandard and unfit”, do not reveal error. Thus the appellant’s challenge to his Honour’s award of damages with respect to the termite issue should be rejected.

129 Despite the appellant’s contention (at Orange 20H) that his Honour erred in disbelieving his account as to why he did not complete works on the garage ceiling, there is no substance to this challenge. No relevant evidence is referred to that contradicts his Honour’s finding which was based on his assessment of the parties’ credibility.

130 The appellant submitted (at Orange 8) that his Honour was prejudiced against him and did not take him seriously/ridiculed him, referring to Black 2, 698-699. In the passages referred to, the appellant was asked by his Honour to be more precise when he was referring to the first or second respondent due to the lack of gender distinction in the Chinese language. By no means were these comments prejudicial and the appellant’s submission that the judge was ridiculing him is baseless.

131 The appellant also appears to argue at (Orange 8) that the respondents instituted proceedings against him to obtain money from their insurance company under false pretences. This submission also lacks any foundation.

132 The appellant claimed $61,185 on his cross-claim both at trial and on the appeal. In order to determine whether the appellant is entitled to this amount, it is necessary to first consider what amount the appellant was owed under the contract and then what amount the appellant was paid by the respondents.

133 The appellant in his submissions at Orange 22-23 arrived at the sum of $61,185 in the following manner:

Contract price	$533,800
Less work performed by the respondents	$172,830
	$360,970
Plus variations including GST	$47,715
	$406,685
Less paid	$345,500
Amount owing	$61,185

134 According to the appellant’s evidence at trial, in January 2001 the second respondent provided the appellant with a breakdown of costs and payments which can be summarised as follows:

Contract price	$543,800.00
Less PC’s	$92,500.00
	$451,300.00
Less paid	$437,215.26
Balance owing	$14,084.24
Plus extras (incl GST of $6,000)	$17,450.00
Balance owing	$31,534.74

135 The reconciliation of the contract payments contended for by the respondents was provided in their submissions at trial in the following table (Black 2, 819):

Total contract price for fixed costs works	$375,000
Plus Variations Bedroom 4 Agreed extras	$10,000 $2,298.00
Plus PCs supplied and installed	0.00 (nil - no evidence of actual cost)
Adjusted Contract Price		$387,295
Less amount paid directly to [the appellant]	-$302,500
Less amount paid directly to sub-contractors and suppliers	-$117,662.12
Total paid to [the appellant] or directly to his sub-contractors or suppliers		-$420,162.12
Credit to [respondents] in respect of fixed works		($32,867.12) - reduced to $30,722.12 to take account of a further admitted extra in the sum of $2,145.

136 The foregoing table only refers to the contract price for fixed items, being $375,000, and payments made in respect of these items as it seems to have been agreed by the parties that the respondents were to pay for the PC items directly. A payment claim prepared by the appellant and issued to the second respondent on 25 May 2001 after the completion of the works seems to accept that the PC items listed in the booklet quotation were indeed items that were paid for by the respondents, as these are described as “less owner buy or taked (sic) job”. Thus, the parties’ original identification and reconciliation of the PC items was identical but with three exceptions.

137 First, the “cornice & skirting item” was not included in the appellant’s list of PC items paid for by the respondents and the respondents conceded that this PC item was provided by the appellant. However, as there was no evidence from the appellant as to the cost of this work, the respondents did not include this as a sum owing to the appellant above the fixed price component of the contract. Second, while the respondents claimed that the costs of the PC items for indoor tiling and terrace tiling were $11,200 and $10,000 respectively in accordance with the booklet quotation, the appellant’s reconciliation stated that these items cost $3,300 and $3,150 respectively. Third, in reconciling the contractual payments, the appellant calculated the amount owing to him to be the total contract price (including the fourth bedroom) of $543,800, minus the sum of the PC items as identified by him to have been paid by the respondents, resulting in a total price of $406,850. In contrast, the respondents took $375,000 to be the base price of the fixed cost items as specified in the booklet quotation. An extra $10,000 was added to this amount for the fourth bedroom along with agreed extras of $2,295 such that the total amount to which the appellant was entitled to be paid under the contract was $387,295.

138 The primary judge (at [115]) accepted the calculations of the respondent with the consequence that no moneys were owing to the appellant - if anything, he had been overpaid. The question is whether it was open to his Honour to accept the respondent’s calculations in preference to those of the appellant.

139 The respondents claimed both at trial and on the appeal that they had paid $420,162.12 to the appellant or his contractors and suppliers. As they were only required to pay the appellant $387,205, they submitted, and his Honour found at [119], they had overpaid the appellant for the fixed price contract works by some $32,867.12.

140 The appellant contended that in addition to the fixed price for the contract works (whichever amount was accepted), he was entitled to further amounts referrable to variations to the contract as well as GST. The items included in the cross-claim were set out at Orange 22 (and summarised at [133] above. However, they overlap considerably with the items and amounts claimed by the appellant as “extra works” in his payment claim of 25 May 2001 (Blue 3, 1134-1135) and a list headed “Cost breakdown of extra works completed for: [property]” at Blue 2, 800. It is difficult to ascertain from each of these documents how the total claim of $61,185 is arrived at although this figure does appear in the “Payment record for Lot 6 Military Road Dover Heights” at Blue 2, 811 as the amount owing to the appellant as at 30 April 2001 except for the fourth bedroom ($10,000) which was conceded and included in the table set out at [135] above. If one excludes that item and the GST ($12,870), the balance of the alleged variations is $22,845.

141 The respondents submitted, and his Honour found at [115], that under clause 10 of the Home Building Contract which applied as between the parties, the installation of PC items was included in the fixed contract price of $533,800. In any case, his Honour also found (at [116]) that to the extent that the extra items for which payment was claimed were alleged variations, the appellant could not enforce these variations as they were not effected in writing in compliance with clause 12 of the Home Building Contract. (In addition, the respondents submitted that ss 6(1)(b), 7 and 10 of the Act precluded a builder from enforcing a variation to a written contract that is not itself in writing: see also Dowling v Rae [1927] HCA 5; (1927) 39 CLR 363.)

142 The primary judge found, and I have confirmed, that the contract between the parties was that constituted by the Home Building Contract. That contract complied with the relevant provisions of the Act. I would be inclined to reject any submission by the respondents that a variation of that contract was unenforceable by the appellant by virtue of s 10(1) of the Act because it was not in writing. I would also doubt that any such variation was irrecoverable for non-compliance with clause 12 of the Home Building contract where otherwise it was agreed by the parties that the work was to be, and was in fact, performed. However, it is unnecessary to form a concluded view with respect to those issues.

143 The difficulty in the present case is that the primary judge made no finding to the effect that the items claimed by the appellant as variations (and which amount in my view to $22,845) were in fact variations to the works the subject of the Home Building Contract and that they were performed by the appellant at the respondents’ request. At least one reason for this is that the appellant’s case was always that the building contract was constituted by the alleged contractual quotation and that the Home Building Contract was abandoned immediately after it was signed, a submission his Honour rejected. Certainly, there was reason for the primary judge to find (at [114]) that the alleged contractual quotation did not comply with the Act and was thus unenforceable by virtue of s 10.

144 But for present purposes, the critical finding of his Honour is at [119] where he found that even if the appellant had a valid claim for variations, he had in fact been paid for them as he accepted the calculations in the table that I have recorded at [135] above.

145 His Honour therefore accepted that the first respondent had paid the appellant and his suppliers a total of $420,162.12. On the appellant’s own case, the total amount which he was entitled to be paid (including variations) was $406,685 (see [133] above). Although the appellant contended that he and his suppliers had only been paid $345,500, this assertion was rejected.

146 It is not suggested by the appellant that the respondents’ payment records did not support their claim to have paid the appellant and his suppliers a total of $420,162.12. The second respondent tendered a form of spreadsheet detailing all the payments he had made with supporting documentation: see at Blue 1, 12-16 and to which he deposed at Blue 1, 3-4 (para 14 of his affidavit sworn 11 January 2007); Blue 1, 193-217, paras 10-83 of his affidavit sworn 29 June 2007. The spreadsheet and some of its supporting documentation (cheque butts) was also tendered as Exhibit E: Blue 3, 926-1010. This evidence was referred to at paras 302-312 of the respondents’ written submissions at trial (at Black 2, 818-819) which his Honour accepted at [119]. The appellants’ written submissions at trial did not challenge those of the respondents to which I have referred although reliance was placed upon the appellants’ own calculations at Black 2, 919 (paras 22-30). Whether the appellants dealt with the issue in oral submissions is unknown as the appeal papers do not include the transcript, if any, of those submissions.

147 I have read the relevant cross-examination of the second respondent relating to payments made by him to or on behalf of the appellant. It is confined to the transcript at Black 1, 244-252 and at Black 2, 583-584. This cross-examination comprised only 11 pages of transcript out of a total of approximately 150 pages of cross-examination of the second respondent. Moreover the main cross-examination on this issue at Black 1, 244-252 was generally confined to ascertaining whether the second respondent had invoices to match the payments itemised in his cheque butts. It is thus apparent that the main issues between the parties related to the respondents’ claim for defective work and that the appellants’ cross-claim received but scant attention.

148 It is telling that it was never suggested to the second respondent (except once at Black 1, 252D) that either the payments evidenced by the cheque butts were not in fact made or that they were unrelated to the building works undertaken by the appellant. Furthermore, at Black 1, 249N, counsel for the appellant conceded that there had been discovery of those quotations or invoices in the respondents’ possession. It also needs to be acknowledged that the second respondent was being cross-examined in 2008 about payments he had made in 2000-2001, some seven to eight years earlier.

149 In the foregoing circumstances it cannot be said that it was not open to the primary judge to accept the first respondent’s evidence as to the total payments he had made to or on behalf of the appellant.

150 Accordingly, in my view it has not been demonstrated that his Honour erred in finding at [119] that the total amount paid by the respondents exceeded that to which the appellant was entitled with the consequence that as no further monies were due to the appellant and unpaid, his cross-claim fails.

151 For the foregoing reasons, the appellant has not established any proper basis which would warrant appellate intervention with respect to his Honour’s findings and orders. Accordingly, I would propose that the appeal should be dismissed with costs.

Supreme Court of New South Wales - Court of Appeal

Zhao v Goodman & Anor [2010] NSWCA 2 (5 February 2010)