Catchwords

Expert determination — assessment of costs to complete and rectify defects — assessment included value of variations — whether expert’s report met the contractual description of function —whether ambiguity between terms of settlement and building contract about calculation of final payment on termination — whether ambiguity affects orders that may be made on expert’s determination

Significance

This case illustrates the application of the rules of construction to a termination payment clause and the status of expert determinations.

Facts

Sidrak (defendant) contracted Eliana Constructions and Developing Group Pty Ltd (plaintiff) to build a home.  The construction contract (contract) was based on the HIA Victorian New Homes Contract (January 2008).  Following a dispute under the contract, the parties signed terms of settlement (TOS).

The TOS varied the contract, including by providing that, on termination, an expert appointed by the parties would inspect the works and submit a report setting out those items of building works and rectification works that had not been completed or rectified, together with an assessment of the reasonable cost of completing and rectifying those works.  The contract was terminated, at which point the expert issued a report that assessed the final amount payable by the plaintiff to the defendant.

In accordance with the terms of the TOS, the defendant subsequently applied to the Victorian Civil and Administrative Tribunal (VCAT) for an order against the plaintiff for payment. VCAT granted the order in the amount assessed by the expert plus the expert's costs.

The plaintiff sought leave to appeal on the grounds that VCAT had made errors of law in its construction of the contract (as amended by the TOS), and on a number of other grounds.

Decision

Dixon J granted leave to appeal and allowed the appeal.  The matter was remitted to VCAT to be determined in accordance with the reasoning outlined below. His Honour held that:

  • there was an ambiguity in the contract and the TOS as to the meaning of the term 'assessed amount' for the purposes of determining the final amount payable on termination;
  • the proper businesslike interpretation was that the term 'assessed amount' referred to the difference between the unpaid balance of the contract price and the reasonable cost of completion determined under the termination clauses of the contract;
  • the expert's function was only to assess the costs of completion and defect rectification, not to determine the final payment;
  • VCAT erred in granting a money judgment for the amount of the expert's assessment and not making its own determination in accordance with the termination clauses of the contract; and

VCAT had not otherwise erred in its construction of the contract or in finding that the expert was entitled to obtain and rely upon independent expert reports and certifications.