Current state of play One Year On from the introduction of legislation and the changes in Building Law (Part Four):

VCAT Building List case update especially significant cases up until January 2019:

Owners Corporation No.1 of PS613436T, Owners Corporation No. 2 of PS613436T, Owners Corporation No. 4 PS613436T & Ors v Lu Simon Builders P/L, Stasi Galanaos, Gardner Group & Ors [2019] VCAT Reference No. BP 350/2016.

1. In 2014 a fire raced up 13 storeys of a Melbourne apartment building in part because the outside wall was not clad in fire-resistant sheeting. The fire, started by a cigarette on an eighth-floor balcony of the Charter Hall-developed Lacrosse apartment building, raced up to the 21st floor in as little as 10 minutes and stopped only because it reached the top.
2. Domestic building s75 Victorian Civil and Administrative Tribunal Act 1998,standing of owners corporation to bring proceeding on behalf of private lot owners, s9 Domestic Building Contracts Act 1995,s12 Owners Corporations Act 2006 and whether architect owes duty of care to the owners corporations.
3. This case was about a fire at Lacrosse tower on La Trobe St – aluminium composite panels (ACPs) and the resultant compliance with the Building Code of Australia (BCA), construction of the BCA, International Fire Engineering Guidelines (IFEG), consultant agreements with building professionals, history and use of ACPs, causes of damage by fire, compliance of ACPs with the BCA, construction of BCA clause C1.12(f) “bonded laminated materials” – construction of BCA clause C2.4 of specification C1.1 “attachments to a wall”, breach of warranties under the Domestic Building Contracts Act 1995 (Vic).
4. Of major importance for this matter was the role of relevant building surveyor and whether obligations under consultant agreements coextensive with duty to exercise reasonable care and failure by building professionals to exercise reasonable care under construction agreements and whether building surveying a “profession”.
5. There was a Wrongs Act 1958 (Vic) s59 peer professional opinion defence relevant of D&C Contract to construction of consultant agreements and breach of consultant agreements, construction of specification forming part of D&C Contract and meaning of “indicative to”, the role of fire engineer, meaning of “full fire engineering assessment” under IFEG and failure to warn of non-compliant ACP. Liability of smoker, the role of superintendent.
6. Liability of owners in relation to items stored on balconies, and most important the causation and remoteness in relation to failures of building surveyor, architect and fire engineer to exercise reasonable care and would a warning have avoided harm, proportionate liability and the allocation of responsibility between building surveyor, architect, fire engineer and smoker.
7. The damages claim was $24 million by the owners of the 328 apartments brought against LU Simon.
8. That claim, which included $1 million in emergency accommodation costs and lost rent, included a $10.7 million provision for recladding.
9. LU Simon offered to do the job for $5.5 million before the VCAT case started.
10. It was found by VCATLU Simon breached the warranties of suitability of materials, compliance with the law and fitness for purpose implied into its Design and Construct Contract dated 14 May 2010 (“D&C Contract”) with the developer 675 La Trobe Street Pty Ltd (“developer”) by (respectively) s8(b), (c) and (f) of the Domestic Building Contracts Act 1995 (Vic) (“DBC Act”), and is therefore primarily liable to pay damages to the Owners.
11. Whilst LU Simon is primarily liable, 97% of the damages have then been apportioned amongst other parties including the Building Surveyor, Architect and Fire Engineer.
12. This decision clarifies that the same standard of liability exists for breaches of statutory warranties, notwithstanding the differentiation between the warranties being considered for the purpose of contractual provisions or disciplinary provisions.
13. The Tribunal emphasised that it will construe the Act “as far as possible to give the same meaning to words which occur in different parts of the statute, unless there is good reason to do so otherwise.”

Mann V Paterson Constructions Pty Ltd [2018] VSCA 231

14. This case highlights the approach taken by the Victorian Supreme Court of Appeal when assessing a claim made in quantum meruit as a result of one party accepting the repudiation of a contract made by the other party.
15. The Court will have regard to actual costs when assessing the amount payable, however is not bound by the actual cost under contract, as the contract has ceased.
16. In addition, the case further highlights that claims in quantum meruit for variations are not precluded under s.38 of the Domestic Building Contracts Act 1995, where the variation is one that has been agreed to orally.
17. Furtherconcerns how to calculate damages when a building contract is repudiated partway through.
    1. VCAT found that the owners repudiated a contract for two townhouses in Blackburn, after the construction ran overtime.
    2. The Supreme Court judge and then the Court of Appeal unanimously held that the tribunal rightly awarded damages to the builders based largely on a quantity surveyor’s findings of the actual value of the builders’ works (minus money paid under the contract), rather than the (lower) price agreed under the contract.
    3. The Courts rejected arguments that these arrangements are inappropriate under either private law or the Victorianstatutory provision regulating variations to domestic building contracts.
    4. The High Court will now determine whether this principle was correctly applied and provide clarity as to whether quantum meruit claims remain available in circumstances where a Contract is repudiated.
18. The Manns entered into a written domestic building contract with Paterson Constructions for the construction of two double storey townhouses on their property for the sum of $971,000.00 including liquidated damages of $500.00 per week.
19. One unit was completed approximately 4 months after practical completion, and before unit two was completed the Applicants asserted that the Respondents had repudiated the contract and purported to terminate the contract by accepting the alleged repudiation. The Respondents asserted that the Applicants conduct was a repudiation of the contract and accepted that repudiation.
20. The Respondent made an application to VCAT for relief on quantum meruit basis or alternatively sums under the contract. Both amounts included variation amounts orally discussed with the work.
21. VCAT found that the Applicants had orally requested variations claimed by the Respondent, that they had repudiated the contract by their purported termination and that the Respondent had determined the contract when it accepted the repudiation.
22. VCAT made orders that the Applicants pay the Respondents the quantum meruit sum of $660,526.41, being the value of the work performed by the Respondent. In reaching the decision, VCAT order was less the sums already paid by the Applicants and the cost of the rectification of defects.
23. The Applicants appealed to the Supreme Court on the basis that VCAT had misunderstood or misapplied the principles relating to the valuation of the work on a quantum meruit basis and that VCAT had erred in allowing the Respondent to recover for variations to the Works on a quantum meruit basis.
24. The Judge dismissed the appeal, however granted the Applicants leave to appeal for the limited purpose of correcting a minor mathematical error of the VCAT order.
25. The Applicants seek leave to appeal to the Court of Appeal against the Judge’s decision on the following proposed grounds:
    1. Whether the Judge erred in holding that VCAT had applied the correct legal principles in valuing the Respondents work on a quantum meruit basis by going outside the value purported within the contract.
    2. Applicant contends that this is an opportunity for the Court to reconsider the correctness of a long established principle that a builder who accepts an owners repudiation and determines the building contract is entitled to sue the owner in quantum meruit.
    3. Whether the Judge erred in finding that s.38 of the DMCA 1995 did not prevent the Respondent from recover the value of the work covered by the variations on a quantum meruit basis.
26. This case shows that in assessing a claim in quantum meruit where one party has wrongly repudiated the contract, the Court will not be bound by the contract price, or possibly the written contract, and will take into account all relevant evidence when determining the claim by the innocent party.
27. The Victorian Supreme Court of Appeal had essentially found that the builder was entitled to recover the ‘fair and reasonable’ value of the benefit conferred on the owner by the work that the builder performed as at the point that the Owner repudiated the Contract in question.
28. The High Court of Australia has granted special leave (only 35 granted 2018) to appeal from the decision of the Victorian Court of Appeal in Mann v Paterson Constructions Pty Ltd[2018] VSCA 231.

Daniel Epstein of Counsel