Hanna v Kore

1. [1]

   BALL JA: By an unfiled amended notice of appeal, Mr John Hanna and Intelligent Building Pty Ltd (Intelligent Building) appeal against orders made by Weber SC DCJ on 8 August 2025, by which the primary judge relevantly gave judgment for Nishant and Divya Kore (the Owners) on their claim against Intelligent Building and Mr Hanna in the sum of $360,511.71: see Kore v Intelligent Building Pty Ltd [2025] NSWDC 297 (Primary Judgment or PJ).

2. [2]

   The proceedings below concerned the construction of a two-storey dwelling by Intelligent Building in Schofield, NSW, pursuant to a contract with the Owners (the Contract), and a dispute regarding termination of the Contract before the works were completed. The primary judge relevantly found that (1) the Contract had been validly terminated by the Owners, (2) Intelligent Building was not contractually entitled to payment for works which were the subject of a payment claim it had made under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act) and later sought to enforce (Progress Claim 3), and (3) that the Owners were entitled to damages of $360,511.71 against Intelligent Building and Mr Hanna for completion costs, alleged defects, and consequential loss.

3. [3]

   The claim against Mr Hanna was brought under s 37 of the Design and Building Practitioners Act 2020 (NSW) (DBP Act) as a person carrying out construction work. Mr Hanna was described by the primary judge as an engineer who was supervising the works and, it appears, accepted that he came within the scope of s 37 of the DBP Act: PJ[4]. Similar claims were made against Mr Hanna’s son, and Ms Eman Shonoda, Mr Hanna’s wife and the sole director of Intelligent Building, although those claims were dismissed by the primary judge having regard to their lack of involvement in carrying out the relevant construction work: see PJ[3], [70]-[71], [75].

4. [4]

   The appellants, who were not legally represented at the hearing before the primary judge, are self-represented in this appeal. Some procedural difficulties have attended the preparation of the appeal, leading to the Owners filing two motions for the appeal to be dismissed for want of due despatch. The first was heard, and dismissed, by Stern JA on 13 April 2026, who set the appeal down for hearing on 1 June 2026. Her Honour also gave the appellants leave to file the amended notice of appeal apart from ground 7, which relates to costs not involving the parties to the appeal. The second motion for dismissal of the proceedings for want of due despatch was filed on 27 May 2026. Although the appellants have failed to comply with the directions of the Registrar and although the material before the Court is incomplete, there is sufficient material before the Court to determine the appeal on its merits. Accordingly, the motion filed on 27 May 2026 was dismissed at the beginning of the hearing of the appeal with no order as to costs.

5. [5]

   Although the Owners claim that leave to appeal is required because Progress Claim 3 was for an amount of less than $100,000, that is not correct since the total amount of the judgment of the Court below, which is sought to be set aside, exceeds the $100,000 threshold.

Background

1. [6]

   The Contract, although undated, was entered into in about August 2021. It is in the form of a standard form NSW Residential Building Contract for New Dwellings, with some special conditions. The contract price was $314,000 including GST, with a 10% deposit. Schedule 2 provided for the making of progress payments at various stages of the works, including a claim for 30% of the contract price ($94,200.00) at “Lock Up Stage”, described as “Brickwork and roofing complete”.

2. [7]

   Completion was to be achieved within 26 weeks after Intelligent Building commenced the building works on site, subject to any extension of time sought and approved under cl 19. Although it is not clear when the building works commenced, they were underway no later than February 2022. The works may have been delayed by action taken by Blacktown City Council, which included relevantly giving the Owners and Intelligent Building a development control order under Div 9.3 of the Environmental Planning and Assessment Act 1979 (NSW) in about August 2022.

3. [8]

   On 6 March 2023, Intelligent Building served Progress Claim 3 on the Owners. The claim was for $94,200.00, with the following description:

4. [9]

   On 30 March 2023, Intelligent Building gave notice that the works would be suspended in view of the Owners’ failure to pay Progress Claim 3. It lodged an adjudication application under the provisions of the SOP Act and obtained an adjudication certificate dated 11 May 2023 in the amount of $94,466.02, which it registered as a judgment with Blacktown Local Court on 12 May 2023. It appears that the Owners paid the amount of that judgment into Court when they commenced the proceedings in the Court below. The amount has since been paid to Intelligent Building.

5. [10]

   On 21 June 2023, the Owners served on Intelligent Building a Notice of Substantial Breach, which relevantly provided:

6. [11]

   On 26 June 2023, Intelligent Building served its own breach notice alleging that the Owners were in substantial breach of the Contract for the following reasons:

7. [12]

   On 11 July 2023, the Owners served on Intelligent Building a notice of termination pursuant to cl 27.4 of the Contract, which gave a right of termination 10 working days after service of a notice of default if the relevant breach had not been remedied. Intelligent Building replied with its own notice of termination on 24 July 2023, which stated:

The decision of the primary judge

1. [13]

   The primary judge found that, by the time Progress Claim 3 was issued, the works had not yet achieved lock up stage and Intelligent Building was not entitled to payment for the works the subject of that claim: PJ[36]. Payment Claim 3 was supported by a report from a quantity surveyor, Mr Gary Uys. However, it is apparent from the transcript of the hearing before the court below that the primary judge rejected that report on the basis that the author was not called by the appellants to give evidence and the report itself did not comply with the Expert Witness Code of Conduct in sch 7 to the Uniform Civil Procedure Rules 2005 (NSW). Consequently, the only evidence before the primary judge on the work that had been done was unchallenged evidence from an expert called by the Owners, Mr Mario Bournelis, who expressed the opinion that lock up had not been achieved when he inspected the site on 7 August 2023. Based on that evidence, the primary judge concluded that Intelligent Building had no entitlement to issue Progress Claim 3. He expressed his conclusion on that issue in the following terms:

2. [14]

   In their notice of termination, the Owners relied on a failure of Intelligent Building to complete the works within 26 weeks from commencement, which was said to be 11 April 2022. Although Mr Hanna argued on behalf of Intelligent Building that he served on the Owners a notice seeking an extension of time relating to the period from 1 April 2022 to 29 August 2022, the primary judge accepted the Owners’ evidence that the notice had not been served, or in any event, served within the time required by cl 19 of the Contract: see PJ[26]-[31].

3. [15]

   The effect of these conclusions was that the primary judge accepted that the Owners were entitled to terminate the Contract on 11 July 2023 and did so effectively: PJ[23]-[24]. It also meant that the primary judge did not accept Intelligent Building’s contention that it had lawfully terminated the Contract.

4. [16]

   Another issue before the primary judge was whether the Owners had paid the full amount of the deposit. Intelligent Building and Mr Hanna had admitted as much in their defence, which was filed when they were legally represented: PJ[39]. The primary judge did not accept that the admission was in error, including because the former solicitor had not been called and because of an email Mr Hanna had sent the Owners on 5 September 2021 which stated “I will be sending you tonight a receipt of deposit of $31,400 to give to your bank”: PJ[40]-[42].

5. [17]

   The primary judge went on to deal with the Owners’ claims for damages for defects, consequential losses and completion costs. He concluded that they were entitled to recover $25,002.78 in respect of defects, $17,720.00 for rent they had to pay because they were unable to occupy the house and $408,894.20 for the costs of completion. They had already paid Intelligent Building $222,894.73 (including the amount paid into Court and subsequently paid out to Intelligent Building). It followed that they were entitled to recover the total of those amounts less the contract price as damages. That amount came to $360,511.71.

6. [18]

   The primary judge seems to have assumed that Mr Hanna’s liability for breach of the statutory duty of care imposed by s 37 of the DBP Act was co-extensive with Intelligent Building’s liability for breach of the Contract, and that damages should be assessed in the same way. There appear to be difficulties with both those assumptions. An unfortunate feature of this case is that neither was challenged on appeal. In the light of the way the appeal was conducted, this Court must proceed on the same basis as the primary judge so far as the liability of Mr Hanna is concerned.

Grounds of appeal

1. [19]

   The amended notice of appeal contains the following six grounds:

Consideration

1. [20]

   The first two grounds of appeal proceed on a misunderstanding that an adjudication determination operates as a final determination of the parties’ rights under a construction contract in respect of the matters the subject of the determination. It does not. It is perhaps unfortunate that the primary judge suggested that Intelligent Building was not entitled to an adjudication of Progress Claim 3 or to have the determination in its favour registered as a judgment of the Local Court. It plainly was under the SOP Act. However, as the primary judge recognised (at PJ[18]ff), an adjudication determination is an interim determination of the parties’ rights in order to facilitate the prompt payment of contractors: for discussion, see Ceerose Pty Ltd v Building Products Australia Pty Ltd [2015] NSWSC 1886 at [10]-[14] (Beech-Jones J) (a case referred to by the primary judge at PJ[19]). Contrary to the appellants’ submissions, and as s 32 of the SOP Act makes clear, the provisions of the Act providing for adjudication determinations do not affect “any right that a party to a construction contract … may have under the contract” or “any civil proceedings arising under a construction contract”. Section 32(3) expressly contemplates that it may be necessary for a court which reaches a different conclusion from an adjudicator when finally determining the parties’ rights under the contract to make orders for the restitution of money paid as a consequence of an adjudication determination or to make allowance for such a payment in giving judgment on a claim. It provides:

2. [21]

   It is not easy to follow grounds 3 and 4. They challenge the validity of the Owners’ breach and termination notices on the basis that the primary judge wrongly ruled that “the progress claim #3 was invalidly issued”. It appears from oral submissions made by Mr Hanna during the hearing of the appeal that the appellants do not challenge the conclusion that the work had not reached “lock up stage”. In any event, such a challenge could not succeed in view of the primary judge’s acceptance of the uncontested evidence of Mr Bournelis. Instead, Mr Hanna submitted that Intelligent Building was entitled to submit a claim for the work that it had done, apparently independently of the Contract. He submitted that Intelligent Building was entitled to be paid for that work on a quantum meruit basis calculated in accordance with the (rejected) report of Mr Uys, which was served with Progress Claim 3.

3. [22]

   One difficulty with this submission is that Mr Hanna does not explain why Intelligent Building was entitled to make a claim when it did for the work that it had done and why it was entitled to calculate that claim on a quantum meruit basis, when the Contract clearly sets out the contract price, when progress payments are to be made and their amounts. A further difficulty is that Intelligent Building obtained an adjudication determination in its favour in respect of the progress claim and has been paid the amount of that determination. That is, it has been paid for the work the subject of the claim. Intelligent Building and Mr Hanna’s liability arises from the fact that the primary judge found that the Owners were entitled to terminate the Contract and to claim damages by reference to the costs of completing the works. The only relevance of Progress Claim 3 to that claim was that the primary judge correctly held that the Owners were entitled to be given credit for that payment in calculating the damages they were entitled to recover.

4. [23]

   Although not obvious from its terms, ground 5 challenges the primary judge’s conclusion that the Owners had paid the full amount of the deposit. That finding was based principally on an admission contained in Intelligent Building and Mr Hanna’s defence which was prepared at a time when they were legally represented and which was verified by Intelligent Building and Mr Hanna.

5. [24]

   On appeal, Mr Hanna sought to explain the admission on the basis that his son gave the solicitors then representing Intelligent Building instructions and to explain the email referred to by the primary judge on the basis that he created it so the Owners’ bank would release funds that it had agreed to lend for the construction work. Those submissions, however, misunderstand the nature of an appeal. The question is whether the primary judge made an error based on the material before his Honour. His Honour was plainly entitled to act on the basis of an admission made in a verified defence prepared at a time when the appellants were legally represented, particularly in light of the additional material his Honour referred to. Mr Hanna did not advance any reason for why his Honour was not entitled to do so.

6. [25]

   Ground 6 raises the question whether the Owners validly terminated the Contract. The primary judge concluded that they did for two reasons. The first was that Intelligent Building was in breach of the Contract because of extensive delays that had not been the subject of applications for extensions of time in accordance with the Contract. The second was that the Owners were not, at the time they exercised their right of termination, in breach of the Contract themselves because of their failure to pay Progress Claim 3.

7. [26]

   On appeal, Mr Hanna did not seriously challenge the first of these conclusions. It is difficult to see how he could have done so. Plainly, there were substantial delays. Equally plainly, the primary judge was entitled to conclude that Intelligent Building had failed to make any applications for extensions of time in accordance with the Contract. In oral submissions, Mr Hanna did seek to challenge the second of the primary judge’s findings. But that challenge depends on a conclusion that the primary judge’s conclusions in relation to Progress Claim 3 were wrong. For the reasons already given, they were not.

Conclusion

1. [27]

   It follows that the appeal must be dismissed with costs.

2. [28]

   FREE JA: I agree with Ball JA.

3. [29]

   GRIFFITHS AJA: I agree with Ball JA.