ALISON LOUISE LOBBE ATF LOBBE NEWMAN TRUST AND KELPIE ENDEAVOURS PTY LTD ATF TESTA ROSSA FAMILY TRUST and QUALITY BUILDERS PTY LTD
[2014] WASAT 110
•27 AUGUST 2014
ALISON LOUISE LOBBE ATF LOBBE NEWMAN TRUST AND KELPIE ENDEAVOURS PTY LTD ATF TESTA ROSSA FAMILY TRUST and QUALITY BUILDERS PTY LTD [2014] WASAT 110
| STATE ADMINISTRATIVE TRIBUNAL | Citation No: | [2014] WASAT 110 | |
| 27/08/2014 | |||
| BUILDING SERVICES (COMPLAINT RESOLUTION and ADMINISTRATION) ACT 2011 (WA) | |||
| Case No: | CC:508/2014 | 8 AUGUST 2014 | |
| Coram: | MS L WARD (MEMBER) | 12/08/14 | |
| 18 | Judgment Part: | 1 of 1 | |
| Result: | Application successful | ||
| B | |||
| PDF Version |
| Parties: | ALISON LOUISE LOBBE ATF LOBBE NEWMAN TRUST AND KELPIE ENDEAVOURS PTY LTD ATF TESTA ROSSA FAMILY TRUST QUALITY BUILDERS PTY LTD |
Catchwords: | Home building work contract Time for completion Delay No valid extension of time Builder failed to complete contract on time Damages for delay in completion Measure of damages Quantum of compensation |
Legislation: | Building Services (Complaint Resolution and Administration) Act 2011 (WA), s 5(1), s 5(2), s 36, s 41(2)(d)(1), s 43(1) Home Building Contracts Act 1991 (WA), s 3, s 7(a)(i), (s 17, s 20, Sch 1 cl 5) |
Case References: | Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344, 368 Hadley v Baxendale (1854) 156 ER 145, 354 Robinson v Harman [1848] Eng. 135; (1848) 1 Ex 850, at p 855 [1848] Eng. 135; (154 ER 363, at p 365) Total Waste Management Pty Ltd v The City of KalgoorlieBoulder [2010] WASC 234 |
Summary | The applicant owners and respondent builder signed a standard 'HIA FORM 45 September 2008 Prefabricated Homes Contract' on 23 August 2012. The owners and the builder agree that completion of the home was delayed by 86 days. The builder stated that the delay was due to the owners not providing the Certificate of Title until 22 April 2014. The builder did not give the owners any notice of extension of time under the contract. The Tribunal found that the builder was responsible for not completing the home on the contractual due date. The Tribunal found that irrespective of whether a home is built for investment or as the owner's residence, where completion of the home is delayed there are financial implications for the owners. The financial implications may be lost rent, holding costs or rental incurred to live elsewhere. Applying the Hadley v Baxendale (1854) 156 ER 145, 354 rules of remoteness, the Tribunal found that the owners were entitled to recover from the builder damages in respect of the delay in the completion of the works in the sum of $34, 305.74, being the equivalent of the owners' lost rental income. This decision was delivered orally on 12 August 2014. These reasons have been edited and citations added. |
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : COMMERCIAL & CIVIL ACT : BUILDING SERVICES (COMPLAINT RESOLUTION and ADMINISTRATION) ACT 2011 (WA) CITATION : ALISON LOUISE LOBBE ATF LOBBE NEWMAN TRUST AND KELPIE ENDEAVOURS PTY LTD ATF TESTA ROSSA FAMILY TRUST and QUALITY BUILDERS PTY LTD [2014] WASAT 110 MEMBER : MS L WARD (MEMBER) HEARD : 8 AUGUST 2014 DELIVERED : 12 AUGUST 2014 PUBLISHED : 27 AUGUST 2014 FILE NO/S : CC 508 of 2014 BETWEEN : ALISON LOUISE LOBBE ATF LOBBE NEWMAN TRUST AND KELPIE ENDEAVOURS PTY LTD ATF TESTA ROSSA FAMILY TRUST
- Applicants
AND
QUALITY BUILDERS PTY LTD
Respondent
Catchwords:
Home building work contract Time for completion Delay No valid extension of time Builder failed to complete contract on time Damages for delay in completion Measure of damages Quantum of compensation
Legislation:
Building Services (Complaint Resolution and Administration) Act 2011 (WA), s 5(1), s 5(2), s 36, s 41(2)(d)(1), s 43(1)
Home Building Contracts Act 1991 (WA), s 3, s 7(a)(i), (s 17, s 20, Sch 1 cl 5)
Result:
Application successful
Summary of Tribunal's decision:
The applicant owners and respondent builder signed a standard 'HIA FORM 45 September 2008 Prefabricated Homes Contract' on 23 August 2012. The owners and the builder agree that completion of the home was delayed by 86 days. The builder stated that the delay was due to the owners not providing the Certificate of Title until 22 April 2014. The builder did not give the owners any notice of extension of time under the contract. The Tribunal found that the builder was responsible for not completing the home on the contractual due date. The Tribunal found that irrespective of whether a home is built for investment or as the owner's residence, where completion of the home is delayed there are financial implications for the owners. The financial implications may be lost rent, holding costs or rental incurred to live elsewhere. Applying the Hadley v Baxendale (1854) 156 ER 145, 354 rules of remoteness, the Tribunal found that the owners were entitled to recover from the builder damages in respect of the delay in the completion of the works in the sum of $34, 305.74, being the equivalent of the owners' lost rental income. This decision was delivered orally on 12 August 2014. These reasons have been edited and citations added.
Category: B
Representation:
Counsel:
Applicants : In Person
Respondent : Mr J Hearn (Acting as Agent)
Solicitors:
Applicants : N/A
Respondent : N/A
Case(s) referred to in decision(s):
Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344, 368
Hadley v Baxendale (1854) 156 ER 145, 354
Robinson v Harman [1848] Eng. 135; (1848) 1 Ex 850, at p 855 [1848] Eng. 135; (154 ER 363, at p 365)
Total Waste Management Pty Ltd v The City of KalgoorlieBoulder [2010] WASC 234
Introduction
1 The applicant owners seek an order that the respondent builder pay them $34305.74 in contractual damages arising from the builders 86 day delay in completing their home in Newman. The builder denies the claim and submits that the owners were responsible for the delay.
Background details
2 Alison Lobbe as Trustee for Lobbe Newman Trust and Kelpie Endeavours Pty Ltd as Trustee for Testa Rossa Family Trust (owners) contracted with Quality Builders Pty Ltd Pty (builder) for the construction, transporting and placing of a prefabricated home (home) on a site in the town of Newman in the north of Western Australia.
3 The site address in the contract is Lot 56 Daniels Drive East Newman (site). The owners live in Melbourne, Victoria. The builder is based in Perth, Western Australia.
4 The owners and builder signed a standard 'Housing Industry Association Limited Form 45 September 2008, Prefabricated Homes Contract' on 23 August 2012 (contract) (Hearing Book (HB) 6).
5 As of 1 April 2012, that is, before the building contract was entered into, the owners formed a joint venture agreement with Ms Tess Williver. The express purpose of the joint venture was (clause 3, HB 43):
The Joint Venture shall be formed for the purpose of investing in the construction of a dwelling on lot 56 East Newman Estate Newman WA which will then be let under a residential tenancy agreement and held by the Joint Venture as a positive cash flow, revenue generating asset. The profits to be distributed as described in the Agreement.
6 Various addresses for residences in Melbourne, Victoria are given as the contact details for the three parties to the joint venture.
7 On 20 June 2012, Ms Williver became the registered proprietor of Lot 56 Daniels Drive East Newman (HB 72), that is, before the joint venture and the contract for the home were entered into by the relevant owners.
8 The owners and the builder agree a number of important facts, including that:
• the completion date under the contract was 15 May 2013;
• the completion actually occurred on 9 August 2013 (HB 38);
• the completion was delayed by 86 days (HB 173);
• no notice of any extension of time, for any reason, including weather or lack of Certificate of Title, was ever given by the builder under clause 9(c) of the contract. Therefore the builder is not entitled to any additional time under the contract; and
• the owners provided the Certificate of Title for the site to the builder on 22 April 2014 (HB 125).
Owners' position
9 As a result of the 86 day delay in construction, the owners claim that they have suffered losses due to the builder's delay. The owners quantify their losses at $34,305.74 in lost rental.
10 The loss is calculated based on the actual rental received from the home once it was completed and leased at $12,133.33 per month, which equates to $398.90 per day. Over a period of 86 days the amount of lost rental is $34,305.74.
11 The 86 day period is from the contractual end date to the actual date of practical completion. The owners' claim does not include the period from practical completion until the date when the property was actually leased.
12 The owners submit that they provided all information requested by the builder promptly. For example, while they accept that the Certificate of Title was requested before the contract was signed, it was not requested post contract until Friday 19 April 2013 (HB 151), some 10 months later. The first indication from the builder that the failure to provide the Certificate of Title may cause a delay in the building permit process was on 19 April 2014.
13 The Certificate of Title was then provided to the builder on the next working day on Monday 22 April (HB 125).
14 In summary, the owners submit that:
• the provision of the Certificate of Title was not, and could not be, the cause of the delay under the contract, because it was requested when construction of the home was almost complete (for example, see email from Mr Baker a consultant to the builder, dated 13 May 2013 at HB 152).
• the delay was caused entirely by the builder; and
• the owners are entitled to compensation in the form of damages for the loss of rental income flowing from the builder’s delay.
Builder's position
15 In response, the builder submits that the owners caused the entire delay of 86 days by not providing the Certificate of Title for the site until 22 April 2013 (HB 125).
16 Mr Baker's evidence was that he had requested the Certificate of Title on numerous occasions before the contract was signed (for example, see HB 69 and 149). The fact that these requests were made is not disputed by the owners.
17 There was then a delay of about 10 months between Mr Baker requesting the Certificate of Title before the contract was signed and 19 April 2013 (HB 151). Mr Baker said that the delay in him making another request arose because he assumed that the owners had problems getting the Certificate of Title.
18 The builder's submissions also refer to bad weather on site causing delays after the contractual completion date had passed. However, Mr Baker accepted in his evidence before the Tribunal that no valid notice for an extension of time was given under the contract for this reason or for any other reason.
19 The builder submits that therefore the owners are not entitled to any amount in lost rental because they caused the delay by providing the Certificate of Title 10 months or so after the contract was signed.
20 Further, the builder submits that, in any event, it was unaware that the building was for investment purposes until the joint venture agreement was provided to it on 8 May 2013 (HB 143 and 126), which was just one week before the completion date under the contract. The builder submits that therefore it could not be taken to know that the home was built for the purpose of rental in Newman.
Issues for determination
21 The issues for determination by the Tribunal are:
1) Were the owners responsible under the contract for the 86 day delay?
2) If the builder was responsible for the 86 day delay, what compensation, if any, are the owners entitled to under the contract?
22 Each of the above issues, will be considered by the Tribunal below.
23 Before considering the above issues the Tribunal will deal with the issue of the Tribunal's jurisdiction, proceedings in the Tribunal and the relevant clauses of the contract.
Tribunal's jurisdiction
24 This proceeding arises out of a complaint made by the owners to the Building Commission on 8 January 2014 under s 5(2) of the Building Services (Complaints Resolution and Administration) Act 2011 (WA) (BSCRA Act), being a claim for a breach of contract that cannot be remedied by the making of a building remedy order, as provided for by s 36 of the BSCRA Act: see s 7(a)(i) of the Home Building Contracts Act 1991 (WA) (HBC Act) and s 5(1) of the BSCRA Act.
25 The complaint was referred to the Tribunal by the Building Commission on 14 April 2014. The Tribunal's powers upon referral to it of a 'home building work contract' (HBWC) complaint are set out in s 43(1) of the BSCRA Act.
26 A 'HBWC complaint' is defined in s 5(2) of the BSCRA Act and is a complaint about 'a matter referred to in the HBC Acts 17 or 20 or Schedule 1 cl 5'.
27 The Tribunal is satisfied that the contract between the parties is a home building contract, within the meaning of that term, as provided for by s 3 of the HBC Act.
28 The Tribunal finds that the proceeding is within the Tribunal's original jurisdiction.
29 By reason of s 41(2)(d)(i) of the BSCRA Act, the Tribunal is empowered to make an order that a person pay specified compensation for loss and damage 'caused by any breach of the contract or of a provision of the Home Building Contracts Act 1991 Part 2'.
Proceedings in this Tribunal
30 The matter was listed in the Tribunal for a directions hearing on 1 May and 26 June 2014.
31 Both parties were selfrepresented before the Tribunal at all times. Ms Alison Lobbe and Mr Chris Williver represented the owners. The builder was represented by Mr John Hearne the general manager and a director of the respondent, and Mr Baker.
32 Various standard orders were made at the directions hearing programming the matter for final hearing on 8 August 2014.
33 During the final hearing on 8 August 2014, the following witnesses gave evidence in person and were cross-examined by the other party, namely:
• Mr Chris Williver on behalf of the applicant; and
• Mr Paul Baker on behalf of the respondent.
34 As set out above, the essential facts are agreed in this matter and accordingly, the credibility of witnesses is not in issue.
35 Various documents and photographs were provided by the parties to the Tribunal prior to the hearing. These documents form the hearing book, which comprises 177 pages (marked Exhibit A).
36 At the final hearing:
• the builder provided additional emails dated 3 to 10 April 2012 between the builder and Ms Williver (Exhibit B).
• the owners provided a letter from Landcorp to Ms Williver dated 21 June 2012 (Exhibit C); and
• the owners provided an email to the builder dated 10 August 2012 re: $328, 000 finance has been approved by NAB (Exhibit C).
Relevant clauses of the contract
37 The relevant parts of clauses 2, 3 and 9 of the contract are set out below:
2. NECESSARY APPROVALS
(a) Subject to Clause 2(b), this Contract is conditional on the following occurring within FORTY FIVE (45) working days from the date of this Contract:
(i) a building licence under Part XV of the Local Government (Miscellaneous Provisions) Act 1960 being issued in respect of the Works;
…
(c) The Builder shall:
(i) do all things that are reasonably necessary to be done to ensure any condition referred to in Clause 2(a)(i) and (iii) applicable to this Contract is fulfilled;[.]
3 OWNERS WARRANTIES AND INITIAL OBLIGATIONS
…
(d) The Owner shall give to the Builder written evidence, to the Builders satisfaction that the owner has:
…
(ii) title to the Site; and
…
(e) If the Owner does not give the written evidence required by Clause 3(d) within TEN (10) working days of the Builder giving the Owner notice in writing requiring such evidence, the Builder may by a further notice in writing terminate this Contract immediately.
…
9. TIME FOR PERFORMANCE
(a) Subject to this Contract the Builder shall commence the Works within the number of working days specified in Item 9(a) of the Schedule or as soon thereafter as may be reasonably practicable calculated from the latest of the following dates:
(i) on which the Owner shall have complied with the conditions referred to in Clause 2;
…
(v) on which the Builder has received approval from all relevant authorities....
(b) Subject to this Contract the Builder shall complete the Works (bring the Works to Practical Completion Clause 19(a)) by the time specified in Item 9(b) of the Schedule. The Builder is entitled to an extension to the time for completion of the Works due to delay from a cause beyond the Builder's sole control[.]
Preliminary matters
38 The Tribunal has satisfied itself that the contractual commencement date and completion date agreed by the parties are both correct. The Tribunal also finds that the builder has not sought any extension of time, and nor is it entitled to any extension of the date for practical completion.
39 The builder at times denied the owners' claim for damages for breach of contract on the basis that the contract did not include a provision for liquidated damages. The Tribunal accepts that the builder is correct in that the contract does not contain a liquidated damages clause. Therefore the owners have a right at common law to damages. The legal basis for a claim to damages for breach of contract is set out below. The failure of the builder to include a liquidated damages claim in the contract is not a ground for denying the owner's complaint. Rather, as Mr Williver stated in his evidence before the Tribunal while being crossexamined, it is precisely because there is no clause of this type in the contract that the damages claim is now before the Tribunal.
Issue 1: Were the owners responsible under the contract for the 86 day delay?
40 In this case, the parties agree that the builder commenced working on the owners' home before the owners had provided the builder with written evidence that they had title to the site.
41 The Certificate of Title issued on 18 May 2012 and was registered in Ms Williver's name on 20 June 2012 (HB 72).
42 The parties agree that the Certificate of Title was requested by the builder on three occasions before the contract was signed; for example, on 27 June 2012 (HB 69).
43 The parties agree that work on the home commenced in the builder's yard by 6 September 2012, which is within 10 days of the contract having been signed on 23 August 2012.
44 The parties agree that the builder decided to commence building, notwithstanding it had not sighted the Certificate of Titlefrom the owner.
45 The builder is now claiming that the 86 day building delay arose because of the owner's failure to provide the Certificate of Title as required by clause 3(d)(ii) of the contract.
46 The Tribunal is not satisfied, on the basis of the facts before it, that provision of the Certificate of Title played any part in causing any of the agreed 86 day delay. The Tribunal's reasons for this decision are set out below.
47 It is clear to the Tribunal that not having the Certificate of Title did not prevent the builder electing to keep the contract on foot and proceeding to construct the home in its building yard.
48 Mr Baker's evidence was that he took it in good faith that the owners had title to the property, and commenced the construction. Mr Baker's action in commencing construction is consistent with him being satisfied as to who the registered proprietor was and being satisfied of her relationship with the owners via the joint venture agreement, although Mr Baker admitted that he was 'confused to say the least' about the joint venture agreement and the registered proprietor. In the Tribunal's view, Mr Baker's confusion as to the ownership arrangements is not a reason for the builder to sheet home the cause of the delay to the owners.
49 Before construction commenced, the builder was emailed a letter from LandCorp (Exhibit C) dated 21 June 2012 which named Tess Williver as the registered proprietor of the site. The email was sent to the builder on 24 July 2012.
50 The three requests for the Certificate of Title were made by the builder before the contract was entered into and, as such, the requests did not form part of the contract. There is no evidence before the Tribunal to suggest that the provision of the Certificate of Title before the contract was entered into was material to the parties entering into the contract. Further, it may have been open to the builder to terminate the contract under clause 3(e) for the owners' failure to provide the Certificate of Title if it was relying on the precontractual requests, however, it decided to keep the contract on foot.
51 The builder elected to commence building the home without having the Certificate of Titleor a building permit (see clauses 3(e) and 2(a) of the contract).
52 Obviously, the builder is unable to, on the one hand, have the benefit of the contract by commencing construction without the building permit or Certificate of Title and then rely on the lack of building permit and Certificate of Title to claim a delay under the contract. Under the contract the builder cannot have the benefit of the contract it has agreed with the owners without the burden of completing the contract on time.
53 After the contract was signed on 23 August 2012, the builder took until 19 April 2013 (HB 151), a period of some 10 months, to request the Certificate of Title.
54 The email of Friday 19 April 2013 (HB 151), was from Mr Baker and it was addressed to the owners and it stated that:
'Hi Alison & Chris
Could you please sign and date attached BA1 Form, which becomes part of the building permit, and return to me. Also could you please send copy of certificate of title for the block as this is also a required component and we will not be able to locate house on site until we receive it. You should be able to obtain title from the Land gate Website.’
55 The Certificate of Title was provided by Mr Williver by email to the builder on the next working day on Monday 23 April 2013 (HB 125).
56 Accordingly, the facts do not support the builder's contention that the 86 day delay was caused by the owners' failure to provide the Certificate of Title. The Certificate of Title was provided on the next working day once it had been requested under the contract. The builder chose to commence building without the Certificate of Title (and, for that matter, the building permit). Mr Baker's own evidence was that the Certificate of Title was required for the building permit and that according to him while it was preferable from a risk management point of view for the builder to have the building permit before building commenced it was not necessary when building a prefabricated home in the builder's yard. This is a risk management decision made by the builder. Obviously in such a situation the builder risked the building permit not being issued at a later date, when the home was nearing completion and required transportation to Newman.
57 Mr Baker explained the builder's 10 month delay in making a request for the Certificate of Title as being due to him assuming that the owners were having problems with getting a Certificate of Title from Landgate. Although the Tribunal notes that Mr Baker never asked the owners if his assumption was in fact the case. In fact the Certificate of Title was issued on 18 May 2012 well before the contract was signed (HB 36).
58 The Tribunal also notes that at no point before 19 April 2013 (HB 151) did the builder indicate that any failure to provide a Certificate of Title would delay the builder with completing the home. The Tribunal does not accept that the builder indicated on more than one occasion that the failure to present the Certificate of Title would cause a delay. Accordingly, the builder's claim in this regard is not made out.
59 The Tribunal does not accept that the 86 day delay was caused by the owners' failure to provide the Certificate of Title as claimed by the builder. Rather the owners did provide the Certificate of Title within one working day once it was requested under the contract; this is not a delay under the contract. More importantly the builder was unable to identify why the request was made so late under the contract or for that matter what took the project outside of the contract period.
60 The Certificate of Title was provided to the builder on 22 April 2013 and then the building permit was lodged with the Shire on 27 May 2013. The building permit then issued on 10 June 2014 (HB 27).
61 Further, the Tribunal also notes that Certificates of Title are publicly available documents which can be accessed for a small fee by any member of the public. Accordingly the builder could easily obtain the Certificate of Title and this would be an easy way for it to mitigate its risk and potential loss if it was a matter of concern to it. However this did not occur in this case.
62 Based on all of the evidence before it, the Tribunal is satisfied that the delay was not caused by any delay on the owners' behalf and in particular was not related to the provision of the Certificate of Title.
63 The lack of Certificate of Title did not prevent the builder from commencing the building or affect the rate of the builder's progress with the building. The Tribunal accepts that a building permit was required from the time when the home was to leave the builder's yard at the latest. The Tribunal accepts also that placing the property on the correct block is of the utmost importance to all parties and especially to the builder who is contracted to undertake this task.
64 The contract required the builder to complete the contract by 15 May 2013. This completion date was subject to certain exceptions or a possible extension of time, under the contract where notice is given in accordance with the contract. No extension of time under the contract applies in this case. The builder did not hold up its end of the contractual bargain. It did not complete the home on the contractual due date.
65 Accordingly, for the reasons set out above, the builder is responsible for the 86 day delay under the contract.
66 The Tribunal will now determine the consequences of the builder's breach of contract.
Issue 2: What compensation, if any, are the owners entitled to under the contract?
67 As a result of the above finding, namely that there was an 86 day delay under the contract caused by the builder, the builder is liable for damages for the breach of contract.
68 The general principles are well established in relation to the measure of contractual damages for a breach of contract, where there is an absence of a liquidated damages clause in the contract.
69 The broad general rule at common law, as stated by Parke B in Robinson v Harman [1848] Eng. 135; (1848) 1 Ex 850, at p 855 [1848] Eng. 135; (154 ER 363, at p 365), 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.
70 As set out by Justice Le Miere in Total Waste Management Pty Ltd v The City of KalgoorlieBoulder [2010] WASC 234 (2 September 2010), at [31]:
…
Loss or damage will not be recoverable if it is too remote, the tests of remoteness being those stated in what are described as the two limbs of Hadley v Baxendale (1854) 156 ER 145, 354.
For present purposes those tests can be expressed in the statement of principle formulated by Lord Reid in Koufos v C Czarnikow Ltd (The Heron II)[1969] 1 AC 350, 385 and which has been adopted in this country: see GEC Marconi Systems [938]; Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344, 368
The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.
72 The intended purpose of the contract is not stated in the contract. Accordingly, regard must be had to evidence of the surrounding circumstances.
73 That evidence, as given by Mr Williver was that he and Ms Lobbe are based in Melbourne, they do not work in the mining sector and that as far as they are concerned it would be obvious to anyone that the building and placing of a new prefabricated home in a mining town like Newman, where the majority of the workforce rent, is for the purpose of investment. Mr Baker of the builder denies that he had any express knowledge of the investment intentions of the owners until 8 May 2013 when he was provided with a copy of the joint venture agreement.
74 The Tribunal accepts that there is no one piece of paper which was provided to the builder at the time of the contract which states that the home is an investment property.
75 However, in the Tribunal's view, as set out by Deputy Chair Raymond, as he then was, in Building Disputes Tribunal in 2004, in Complaint No B.4895 and O.15181 between: Johnson Grey Kitto complainant and t.g.s.b.c. pty ltd respondent,
It is difficult to imagine any circumstance in which the completion date of a building contract would not be of significance. When the construction is for commercial or investment purposes delay has obvious financial consequences. Where a residential dwelling has been constructed, as here, the intended purpose is either to enable the owner to reside in the property or to take steps to realise the benefit of the investment either by letting or resale. In either case there are usually cost consequences in the form of rental incurred to live elsewhere or holding costs.
76 The crucial part of the above passage is that, irrespective of whether the home is built for investment or as the owner's residence, where completion of the home is delayed then there are financial implications for the owners. It is irrelevant as to whether those financial implications are lost rent, holding costs or rental incurred to live elsewhere.
77 Applying the Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344, 368 principle set out above, in the Tribunal's view given the owners' circumstances, particularly that they lived in Melbourne, and were building a prefabricated home to be placed on a site in a mining town in northern Western Australia, the reasonable person in the builder's position would, have realised that a loss was sufficiently likely to result from the breach of contract.
78 Based on the above, express knowledge of the owners' intention for the home is not a prerequisite to an award of damages for contractual breach, but rather, an objective standard of the reasonable person in the same circumstances as the builder applies.
79 In this case, the builder attempted to distinguish between an investment for the purpose of earning income and an investment for the purpose of capital growth.
80 In the Tribunal's view, this distinction is irrelevant as long as the damages sought for loss of profit occur naturally and in the usual course of things from the breach: see Hudson A, Hudson's Building and Engineering Contracts (11th ed, 2004) (Hudson) in volume 1 at paragraph 8.162, which refers to the situation where there is no liquidated damages clause in the contract.
81 Several emails refer to the owners' investment purpose; however the Tribunal accepts that the builder was not privy to those emails. For example, the email between Ms Lobbe and her accountant on 24 April 2012 (HB 105) and the email from Ms Lobbe to the interior designer contracted by the builder to undertake the colour schemes (HB 107) which states in part:
As Paul may have already told you we are building this dwelling as an investment so we will be looking for colour schemes that will have the greatest appeal to prospective tenants and potential buyers in the future' (Tribunal's emphasis).
82 Although Ms Lobbe states in an email to Mr Baker of the builder dated 26 June 2012 (HB 106) that 'I'm sure Kate knows the product range well and can put together the most suitable combinations for our needs'. Those 'needs' are not expressly stated in the email and were not made known to the builder in writing until 8 May 2013 when it received a copy of the joint venture agreement.
83 However in the Tribunal's view, the loss claimed by the owners, namely the loss of rental income between the due date and the actual completion date, being the period between 15 May and 9 August 2013, is damage arising under the first branch of the Hadley v Baxendale (supra) test of remoteness, as something occurring naturally and in the usual course of things.
84 The owners have not claimed any loss or damage for the period between completion of the home on 9 August 2013 and the signing of the 12 month lease agreement on 16 September 2014 (HB39). In this case, the property has been leased and the owners seek the loss of rental in the equivalent amount from the delay period of 86 days.
85 As set out above, whether the property was for investment purposes in the unlikely event of the owners relocating from Melbourne to live in East Newman, the Tribunal is satisfied that a loss arose from either the lost rental as claimed by the owners, or in holding costs or rental elsewhere. The builder has not challenged the amount of the loss; rather it has challenged its liability for the loss.
86 As set out above the owners are entitled at common law to be placed, so far as money can bring it about, in the same positon as they would have occupied had the contract been performed on time. In this case the 86 day delay in completing the home meant that the owners were without rental income for that period.
87 Accordingly the Tribunal finds based on the evidence before it that the owners are entitled to the following amount as a measure of damages for the breach of contract arising from the builder's delay in completion, namely the $34,305.74 (HB 173) as calculated by the owners and as supported by the lease agreement (HB 75).
Conclusion
88 In conclusion, the Tribunal is satisfied that the owners are entitled to damages for the breach of contract in the sum of $34,305.74 arising from the delay in the completion of the home between the period 15 May and 9 August 2013.
Order
89 The Tribunal makes the following order:
1. By close of business on 3 September 2014 the respondent shall pay the applicants $34,305.74.
I certify that this and the preceding [89] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
MS L WARD, MEMBER
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