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Fordham v P Hobson (Home Building) [2011] NSWCTTT 164
(21 April 2011)
CONSUMER, TRADER & TENANCY TRIBUNAL
Home Building Division
ORDERS
1. On the substantive claim:
Dewsash Pty Ltd t/as P Hobson is to pay James Fordham
$8,000.00 immediately.
2. On the cross claim:
James Fordham is to pay Dewsash Pty Ltd t/as P Hobson
$7,000.00immediately.
APPLICATION NO: HB 09/25483
HB 10/21874 (cross claim)
APPLICANT: James Fordham (cross respondent)
RESPONDENT: Dewsash Pty Ltd t/as P Hobson (cross
applicant)
APPLICATION: Application for compensation for defective
building works. Cross claim for unpaid money
APPEARANCES: The homeowners were represented by Mr J
Carpenter of Messrs Blackwell Short Solicitors
of Orange and Mr Shepherd instructed by Mr
Finch represented the builder
HEARINGS: Directions: various commencing 25 October
2007 with about a dozen mentions or directions
hearings in 2008 and another 10 in 2009
Hearing: 28-30 April 2010 in Bathurst
LEGISLATION: Home Building Act 1989
KEYWORDS: Mitigation of loss; quantum of damages;
estoppel; specifications.

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3. James Fordham is to pay the costs of Dewsash Pty Ltd as agreed
or assessed.
4. Order 3 stayed for 21 days from the date of these reasons for the
parties to file written submissions on costs.
REASONS FOR DECISION
Application
This was an application by a homeowner for compensation in relation to
building works carried out by the respondent builder at Bendick Murrell in the
central west of NSW. In particular the homeowner complained that the
concrete slab on which the dwelling was to stand was defective. Subsequently
a cross claim was lodged by the builder for money he claimed to be owed.
Evidence
In deciding the matter I had the benefit of detailed witness statements from Mr
Fordham as applicant and Mr Hobson for the respondent company and I saw
both of them cross examined on their evidence. Two engineers, Mr Andrew
Simpson and Mr Robert Noonan, also gave evidence. Mr Simpson was cross
examined at length on his report. Various documentary exhibits were also
before me including the contract, plans and specifications, engineer’s details
for the slab and its subsequent augmentation, a file from Young Council, a
geotechnical report on the site, sketches of levels together with an amount of
correspondence passing between the parties and their legal representatives. I
have given appropriate weight to each aspect of the evidence as it emerged
before me.
After the hearing the parties made written submissions on the evidence and
the conclusions I should draw from it.
Background facts
The relevant facts, as I find them, are as follows. In 2000 and 2001 the
applicant made preparations for the construction of a cavity brick cottage on
rural land he owned at Bendick Murrell near Young in NSW. In about March
2002 he approached the respondent about constructing a home on the site in
accordance with plans and specifications he already possessed.
After negotiations, which included the builder preparing two quotes, a contract
in the standard HIA form was executed on 25 June 2002. There had been
some delay in the builder obtaining homeowners warranty insurance and site
work only commenced in November 2002. The contract provided for a price of
some $187,000.00 with no deposit and a schedule of progress payments
commencing with $50,000.00 when slab and underfloor plumbing were
complete.

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It is clear that the homeowner took a keen interest in all aspects of the works
and was on site most days. An earthmoving contractor was engaged to
excavate the footings for a concrete slab, the engineering detail for which had
been obtained independently by the applicant.
As the slab excavation progressed in December 2002, Mr Fordham came to
think that he needed to supplement the advice he was getting from the builder.
He sought and obtained outside advice. As a result he insisted that Mr Hobson
laid road base and remove all vegetable matter from the excavation. Mr
Hobson on the other hand had been satisfied, from his building experience,
with the natural ground as a substrate but acceded to the request. That was
first of many approaches by Mr Fordham for Mr Hobson to adhere strictly to
building practice and the plans and specifications for the job as they were
understood by him.
There were complaints about service conduits passing through the excavation,
questions about the depth of the concrete and so on. There was input from a
builder friend of Mr Fordham, from an engineer in Sydney (a Mr Bradshaw),
from the designer of the house and several visits from the council inspector.
All this before the slab was poured and it was also at this stage that a local
engineer Mr Andrew Simpson was engaged.
In March 2003 Mr Simpson inspected the works, took penetrometers’ readings
and approved the pour, making contemporaneous notes of his site inspection.
He did recommend that vegetable matter be removed from the trenches and
that strengthening be applied to the edge beams where sewer pipes passed
through the concrete. Apparently not satisfied with Mr Simpson’s inspection,
Mr Hobson arranged for the Young Shire Council to visit the site. Their
inspector, Mr Byles, found some organic matter under the granite fill. It was
ordered that this be removed.
The next time Mr Fordham saw the works, the plastic membrane and steel
reinforcement were in place ready for the pour. He ordered that the pour be
delayed until inspected to his satisfaction and contacted Mr Bradshaw from
Sydney who inspected the works to determine the final depth of concrete. He
found that, at least at one point, the minimum depth was 85mm rather than
100mm as specified. He said this would be acceptable if concrete of
compression strength 25MPa were used. Mr Hobson’s evidence before me
was that he readily agreed to this as he always used 25 MPa concrete. Thus
after many inspections and rectifications the slab was poured on 13 May 2003.
It should be noted at this stage that no other significant works ever proceeded
on the job.
At about this time, on 27 April 2003, Mr Hobson presented Mr Fordham with
an account for $36,000.00. The contract did not provide for a deposit and the
first progress payment of $50,000.00 was said to be payable at the stage of
“Floor slab complete” which (relevantly) included plumbing and electrical rough
in. Although Mr Fordham might have been within his rights to make no
payment until all works referrable to the first progress payment were

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substantially complete, on 28 April 2003 he paid $29,000.00. It will be noted
this was $7,000.00 short of the amount sought by the builder.
Mr Fordham’s concern with the job was such that in about March 2005 (years
after the pour and last work on site) he retained Mr Alec Rendell, a building
consultant, to review the construction thus far. The review was critical of the
slab which can be crystallised into three points:
 there were no set downs for hob-less showers as alleged had been agreed
 the tie down bolts for the roof were not to specification and;
 vegetable matter was detected under the slab.
It seems that the non complying tie down bolts were the fault of the supplier.
They could be remedied with little difficulty by sawing off the existing and
replacing them. Similarly, the showers could be set down by scrabbling a small
amount of concrete from the top of the slab with a concrete saw and chisel.
Both of these courses of action were suggested in Mr Rendell’s report.
That left the suspicion that there was vegetable matter under the slab, an
issue which had been on Mr Fordham’s mind since before the pour. He
retained another engineer, Mr Noonan of Barnson’s to inspect and assess. He
reported that vegetable matter was present and that it compromised the slab
to the point where demolition was recommended. Mr Simpson was called back
and he embarked upon a detailed analysis of the position. He dug under the
edge beams and found what he considered to be a small amount of soft
organic material. It seems to have been common ground that organic material
had been removed from the trenches at one stage but winds had since blown
vegetable matter and sheep droppings back into the trenches. Unlike Mr
Noonan, Mr Simpson’s report commented on the calculated loads to be
imposed on the slab and the reinforced concrete structure available to support
it. His conclusion was that, even if compromised by soft material, the slab
could support at least twice the anticipated load from a cavity brick dwelling
such as that to be built for Mr Fordham.
Moreover, he analysed the movement in the slab from surveyor’s datums over
several years. He found the movement to be due to seasonal variations of soil
moisture content and well within the displacement parameters. Actual
movement was 1 to 9mm but such a slab was designed to accommodate
movement of up to 40mm. His overall conclusion was that the slab as built
was performing its design function appropriately. He was specifically cross
examined on the question of ‘doming’ i.e. a condition where the edge beams
in effect droop and forces concentrate on the centre. He considered this and
assessed it as unlikely.
There was a clear conflict of opinion between Mr Simpson and Mr Noonan. It
seems that there was some discussion between the two experts and they
agreed on a rectification whereby a concrete topping would be put on the
existing slab to:
 allow for a shower set down and to

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 provide some stiffening of the overall structure.
I think it fair to say that Mr Noonan was more enthusiastic about the need for
this than Mr Simpson. I discerned that Mr Simpson thought this unnecessary
but in the end agreed on it in the end to carry the matter forward in a spirit of
comity. I also mention that in cross examination Mr Fordham agreed that the
engineers had agreed on the plan to strengthen the slab.
The Dispute
As it turned out all of this became of historical interest only as Mr Fordham had
the slab broken up as a prelude to recommencing the job with a new builder
and a new slab.
The witness statements show that over many months there were several
attempts to recommence construction but they all broke down. I think it is fair
to say that the sticking point was the disagreement over the outstanding
$7,000.00. Mr Hobson insisted on it and Mr Fordham refused to pay it. It
seems clear to me that, if they had agreed on that point, the work would have
recommenced on the basis of the compromise plan agreed on by the
engineers. On the view I have taken of the facts, the contract had been varied
and $7,000.00 was properly payable.
The way the matter unfolded before me there was a cross claim by the builder
for what he says is due under the contract, a variation of it or in the alternative
on a quantum meruit. The builder’s case was that he was not obliged to do
work with payment outstanding and liability denied by the owner. As against
this, Mr Fordham interpreted Mr. Hobson as abandoning the works and
purported to terminate the contract. In addition he has a detailed claim seeking
compensation exceeding $90,000.00 under various heads. These relate to
removal of the slab poured by the respondent and reconstruction of the whole
project under a new contract. On the homeowner’s case all of this flows from
the respondent’s faulty workmanship on the original slab.
Adjudication
As the matter unfolded before me I found three issues requiring determination.
One was whether the slab as built by Mr Hobson was amounted to a breach of
the building contract, including the implied terms of s.18B Home Building Act
1989, another was whether Mr Fordham had mitigated his loss if there were a
breach and the other was who had the right to terminate the contract. This last
required me to interpret the building contract. In particular I had to characterise
the circumstances where the builder rendered an account not in accordance
with the contract, the homeowner agreed to pay most, but not all of it, and the
builder accepted the payment but then pursued the disputed balance.
Was the Contract Amended?
It is common ground that at about the time of the concrete pour Mr Hobson
presented an invoice for $36,000.00. On the builder’s evidence the reason for

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this was that, by agreement with Mr Fordham (who disputes it), the separate
veranda slab was to be poured independently and towards the end of the job
in accordance with his usual practice. Mr Fordham says that there never was
such an agreement. Having heard both parties on the matter I accept the
applicant’s evidence and I am not satisfied that Mr Hobson ever mentioned
separate slabs before issuing the invoice. Mr Hobson says that his account for
$36,000.00 was calculated thus:
the nominal 1st
progress payment $50,000.00
less the estimated veranda slab cost $14,000.00
to arrive at the net figure $36,000.00
Mr Fordham seems to agree that the invoice for $36,000.00 was discussed on
site with Mr Fordham at about the time of the pour. The builder says that there
was an agreement that the homeowner would pay $29,000.00 forthwith and
the $7,000.00 balance immediately after the slab pour. Mr Fordham denies the
details of the agreement but does concede that there was pressure from Mr
Hobson to make a payment or the work might be delayed or not proceed. The
$7,000.00 seems to have been a sticking point as the amount has never been
paid and little further work has been done on the site since.
Mr Fordham could have invoked the dispute settlement clause of the contract
but did not and adhered to his decision to withhold payment. Mr Fordham’s
position is that the builder’s is not entitled to the $7,000.00, could not cease
work and was required to adhere to the progress payment schedule. Thus the
builder’s refusal to progress the works gives the owner a right to terminate the
contract, which right he has exercised. On the other side, Mr Hobson says that
the owner is required to pay the $7,000.00 as agreed and a refusal to do so
entitles him to stop work until paid. I have found as a fact that the contract was
varied by agreement and that the payment was to be made on completion of
the slab, it follows that a refusal to pay indicated an unwillingness to be bound
by the contract as varied and empowered Mr Hobson to stop work.
From the evidence as it emerged before me, I am satisfied that Mr Fordham
agreed, or allowed Mr Hobson to imagine that he agreed, to the payment of
the $36,000.00 in two instalments as alleged. It will be seen that Mr Fordham
paid $29,000.00 of the $36,000.00 claimed. On the basis of the evidence in
the statements and in the witness box together with the somewhat
corroborative documentary evidence of invoices and the like, I find that there
was an agreement of the kind alleged by Mr Hobson whereby Mr Fordham
agreed to pay the further $7,000.00 on the pouring of the slab. I do not accept
the invitation on the owner’s legal team to see the payment by Mr Fordham as
an ex gratia payment involving no variation to the contract.
This agreement was an alteration to the rights and responsibilities of the
parties under the building contract. However, it was not put to me that the
agreement was procured under duress so as to be unenforceable nor that it
was a sort of contract not supported by consideration. As is usual, the building
contract required formalities for variation including writing and it is not disputed
that the verbal arrangement did not comply. I find that this was an informal

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variation to the contract the details of which were agreed by the parties. As a
result, in the wake of such cases as Pavey & Matthews Pty Ltd v Paul (1987)
162 CLR 221 the builder cannot assert a right to payment under the contract
itself but is entitled to rely on a quantum meruit. The underlying juristic
rationale is that an owner would be unjustly enriched by gaining the benefit of
the builder’s work and materials for nothing. On the facts as I find them in this
case, the owner has agreed to pay the builder the sum agreed on performance
of certain work and the agreed sum was related to the value of that work.
I note that at least one count in the builder’s claim was founded on an
estoppel. In my opinion the part played by estoppel in this matter goes to the
amount of the quantum meruit being the value of the work done. Because Mr
Hobson acted to his detriment on the promise of Mr Fordham to pay the
outstanding balance of $7,000.00 for the completion of house slab, I do not
think he can be heard now to say that its value is other than $7,000.00 and
that it is payable forthwith. Nevertheless Mr Fordham has refused point blank
to make the payment and Mr Hobson seems to have insisted on it ever since.
It follows from my findings that the builder is entitled to succeed on the cross
claim for $7,000.00.
Contract Breach and Quantum of Loss
The way I see the case there is another major hurdle for the applicant on the
claim as filed. He has chosen to break up a concrete slab which, as built, a
structural engineer has agreed to certify as well able to fulfil its intended
function. This being the case there is a real question about whether there was
a breach of contract by the builder at all. The builder has constructed a slab
which might not be strictly in accordance with the specification. However, the
builder’s expert says the work as executed was more than adequate for the
job and meets all pertinent performance criteria. Section 18B implies into
every building contract a term that the work should…
18B Warranties as to residential building work
The following warranties by the holder of a contractor licence, or a person required
to hold a contractor licence before entering into a contract, are implied in every
contract to do residential building work:
(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.
…
I think it is fair to say that it was common ground to applicant and respondent
that the slab detail as prepared formed part of the contract specifications and
the litigation was conducted on that basis.
If the works as built (here a slab) will do the job, the role of the details of the
technical specifications becomes moot. It could be argued that if the works
gain engineering approval they satisfy requirements under the contract and

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the statute. As a result there can be no breach of the contract. In this case Mr
Simpson would have certified the slab as built and will certify the slab if
augmented in accordance with the compromise agreed with the homeowner’s
engineer. I do not think I have to decide the question of breach of the contract
because other aspects of the case are fatal to Mr Fordham’s claim.
It is true that Mr Simpson was challenged in cross examination about his
assessment of the slab and that Mr Noonan for the homeowner held a
different view about it. Mr Simpson conceded or opined that some things -such
as the quantity of vegetable material- were unknowable. However, as Mr
Simpson points out in his main but undated report, the excavation for the slab
was inspected before concrete pour by a council building inspector and two
consulting engineers. He draws some conclusions about the volume of organic
material being low from that. No doubt his conclusion is that the more
extensive the organic material the more likely it would be discovered on
inspection. He is entitled to draw such a common sense inference in arriving at
his conclusion and he stands by his approval of the slab. It will be recalled that
the engineers for the parties agreed on a compromise which involved
upgrading the existing slab. I take the view from the evidence that the
compromise so reached was binding on the parties. That must have been the
intention of the parties in encouraging their experts to confer in the way they
did. So although Mr Simpson was satisfied with the slab as built, the
compromise solution now governs the rights and responsibilities of owner and
builder. As the strengthening was a consequence of the way the builder
constructed the slab, it must be that he is to bear the cost of the extra works.
Even if the slab as built does amount to a breach of the contract it is of little
assistance to Mr Fordham. The problem for him would one of quantifying his
loss. The line of cases of which Robinson v Harman (1848) 1 Exch 850 is only
a small part state the relevant principle thus:
"The rule of the common law is, that where a party sustains a loss by reason
of a breach of contract, he is, so far as money can do it, to be placed in the
same situation, with respect to damages, as if the contract had been
performed."
In the Tabcorp Holdings Ltd v Easdown [2009] HCA 8 in the High Court there
is a discussion about damages and reasonableness:
“The (respondent on the appeal) stressed that in Bellgrove v Eldridge (1954)
90 CLR 613 this Court pointed out that there was a qualification to the rule it
stated in regard to damages recoverable by a building owner for the breach of
a building contract…. "The qualification ... is that, not only must the work
undertaken be necessary to produce conformity, but that also, it must be a
reasonable course to adopt.”
The example which the Court gave of unreasonableness was from an obiter
dictum in Bellgrove v Eldridge (1954) 90 CLR 613 thus:
"No one would doubt that where pursuant to a building contract calling for the
erection of a house with cement rendered external walls of second-hand
bricks, the builder has constructed the walls of new bricks of first quality the

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owner would not be entitled to the cost of demolishing the walls and re-
erecting them in second-hand bricks."
That of course is an extreme case and one of amelioration. Here the issue is
the reasonableness of rejecting an $8,000.00 repair for a $95,000.00
demolition and reconstruction. It is hard to see that such a course is
reasonable on any test. I might observe at this point that the flaw in the
Bellgrove case was substandard concrete foundations. Unlike the present
case, it was not disputed that the foundations as installed could not be made
good. The question on appeal was how to quantify the loss and the
requirement that the wrong party act reasonably.
The homeowner could be put in the position of having a functional slab by
applying the topping. The only evidence before me on the value of those
works was Mr Simpson’s estimate of $8,000.00. A breach, if there is one, in
those circumstances it would sound in damages equal to the homeowner’s
loss according to law, here the $8,000.00 for the topping slab.
Mitigation
There is a further point and, on the view that I take of the matter as a whole, it
is lethal to most of the homeowner’s claim irrespective of the outcome of any
other fact or point of law in dispute. It goes to mitigation rather than
quantification of damages. The homeowner has chosen to ignore a far
cheaper design solution (the topping slab) which was agreed between experts
for the parties. Whether or not Mr Fordham is bound by his expert’s
compromise, he has failed to mitigate his loss. I am satisfied from the
evidence that Mr Fordham was approached about the rectification compromise
agreed between Messrs Simpson and Noonan but rejected it in favour of
demolition.
In those circumstances it is not open to the innocent party on a breach of
contract to select any remedial course of action he chooses. It is well
established law that there is a duty upon a plaintiff to take all reasonable steps
to mitigate the loss caused by the breach of contract and it debars him from
claiming compensation for any part of the damage which is due to his neglect
to do so. See British Westinghouse Electric and Manufacturing Co v
Underground Electric Railway of London [1912] AC 673. The innocent party
must select the cheapest solution reasonably available and reasonable
availability is a question of fact. In this case the preferred remedy would be
augmentation of the slab as agreed between the experts rather than its
demolition. To decline to do so in the circumstances of this case is to refuse to
act reasonably.
If it could be established that the homeowner validly terminated the contract
for some breach by the builder (which is neither conceded by the builder nor
found by me) the common law is supplemented clause 36.2 of the contract
requires that:
(the owner) …must take all reasonable steps to minimise the cost of
completing building works

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I do not see how this can be interpreted in the present case as other than
obliging Mr Fordham to proceed with the topping slab. Even if the engineers’
compromise is not binding on him he can reject it only if it is an unreasonable
course of action. It is true that Mr Noonan withdrew his approval of this
solution even though he had agreed to with Mr. Simpson. However, no
technical justification for resiling from his previous opinion was offered. I was
left with the possibility that Mr Noonan had succumbed to pressure from Mr
Fordham rather than found some new evidence or discovered an error in
calculations. As a result I give little weight to Mr Noonan’s present position
when measuring reasonableness. Meanwhile it seems that Mr Simpson had
designed the topping and was ready, willing and able to certify it. If the matter
had proceeded on the basis of a “battle of the experts” rather than accepting
their joint solution, I would have preferred the evidence of Mr Simpson over
that of Mr. Noonan.
Mr Fordham informed the Tribunal that he was intending to continue with the
construction as an owner builder. In summary, he, in my view unreasonably,
refused to proceed with the topping slab and ordered demolition of the existing
slab. One reason cited by Mr Noonan for turning his back on the solution
agreed with Mr Simpson was the small difference in cost. As it turns out, Mr
Simpson’s estimate of the cost rectification was the only one before me. He
indicated the cost at about $8,000.00 and I accept that estimate. The claim by
the applicant for demolition and reconstruction was (as pleaded) $91,000.00 in
round figures and notice was given before the nearing that the claim would be
increased by another $3,700.00. The owner’s submissions did deal with
quantum but it was not easy for me to discern whether the claim has now been
reduced. In any event the hearing was conducted on the basis that the
applicant’s claim was in the order of $95,000.00.
As I see the situation, Mr Fordham refused to proceed with the $8,000.00
solution whereby Mr Simpson would certify the slab. Instead he opted to
pursue a $95,000.00 solution and to send Mr Hobson the bill. The obligation to
mitigate loss is specifically provided for in the contract as set out above and
well established at common law. In the circumstances of the present case I am
well satisfied that Mr Fordham has not acted reasonably in rejecting the
topping slab and has failed to mitigate his loss which would otherwise be
$8,000.00.
COSTS
Although the amount awarded to the homeowner slightly exceeds that
awarded to the builder, the builder has achieved complete success on his
claim whereas the owner has only been awarded a small fraction of his. Prima
facie, the appropriate outcome would seem to be that the builder should have
an order for costs. However, the parties may file written submissions.
ORDERS
1. On the substantive claim:

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Dewsash Pty Ltd t/as P Hobson is to pay James Fordham $8,000.00
immediately.
2. On the cross claim:
James Fordham is to pay Dewsash Pty Ltd t/as P Hobson $7,000.00
immediately.
1. James Fordham is to pay the costs of Dewsash Pty Ltd as agreed or
assessed.
4. Order 3 stayed for 21 days from the date of these reasons for the parties
to file written submissions on costs.
S Smith
Member
Consumer, Trader and Tenancy Tribunal
17 March 2011