Amolo v CJ Homes Pty Ltd ATF CJ Homes Trust - [2024] QCAT 497

QUEENSLAND CIVIL AND
ADMINISTRATIVE TRIBUNAL

CITATION:

Amolo v CJ Homes Pty Ltd ATF CJ Homes Trust [2024] QCAT 497

PARTIES:

LUCY AMOLO

(first applicant)

MAXWELL OCHIEN’G AMOLO

(second applicant)

v

CJ HOMES PTY LTD ATF CJ HOMES TRUST

(respondent)

APPLICATION NO/S:

BDL264-23

MATTER TYPE:

Building matters

DELIVERED ON:

8 November 2024

HEARING DATE:

23 July 2024

HEARD AT:

Brisbane

DECISION OF:

Member Howe

ORDERS:

The preliminary issue is determined as follows: The contract was not lawfully terminated by CJ Homes Pty Ltd ATF CJ Homes Trust.

CATCHWORDS:

CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – THE CONTRACT – CONSTRUCTION OF PARTICULAR CONTRACTS AND IMPLIED CONDITIONS – OTHER MATTERS – where a preliminary issue whether the builder had terminated the contract was to be determined – where the building contract included a special condition which said the contract was valid for 120 days and then a price increase might occur – whether the provision rendered the contract void at 120 days – where the provision granted the builder an election to increase the price after 120 days or terminate if no price agreement was struck – where the builder elected not to terminate the contract by claiming a price increase after the 120 days had passed – where termination in reliance on the special condition was not available to the builder after the election – where the provision allowed a price increase but it was not noted on the first page of the contract schedule as required by s 108D of the Queensland Building and Construction Commission Act 1991 (Qld)– where the provision was therefore an attempt to contract out of the Act and therefore void – where the builder had not validly terminated the contract

Queensland Building and Construction Commission Act1991 (Qld), s 108D, Schedule 1B s 14

Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788 [2022] HCA 38

Perera v Bold Properties (Qld) Pty Ltd [2023] QDC 99
Saaroq Pty Ltd t/as Stroud Homes Wide Bay v Queensland Building and Construction Commission & Ors [2024] QCAT 436

Sargent v ASL Developments Ltd (1974) 131 CLR 634

APPEARANCES & REPRESENTATION:

Applicants:

Self-represented

Respondent:

K T Grimshaw of Counsel, instructed by Creevey Horrell Lawyers

REASONS FOR DECISION

The applicant owners and the respondent builder entered into a HIA Peace of Mind New Home Construction Contract on 3 November 2021.
The contract price was $405,595 including GST. The owners paid $3,800 to cover the preliminary costs of the builder including soil tests, drawings, building approval and costs of contract. By item 10 of the Schedule to the contract the builder was responsible for obtaining building and plumbing approval.
Practical completion was to be obtained within 330 days after commencement and by item 14 of the Schedule the anticipated start date was, given nothing was stated, 60 days from the date of the contract.
The builder had plans prepared and lodged an application for building approval with a private certifier on 10 February 2022.
The following day, 11 February 2022, the certifier informed the builder that a “Build-over Sewer” relaxation was necessary due to a sewer line running through the property. The certifier advised:
A build over sewer application is required as the retaining wall on the Western side boundary is less than 1m to the sewer house connection point, and the front of the retaining wall. Please advise if you wish to proceed or if plans are to be amended to comply.
There had been an existing home on site to be demolished and the applicants advised that had been removed on 21 March 2022.
On 21 April 2022 Urban Utilities agreed to relocation of the water meter at the property.
On 9 June 2022 the builder submitted a variation document to the applicants proposing a price increase of $40,000 to the contract price ($56,000 “as discussed with Peter” less $16,000 absorbed by CJ Homes). The price increase was said to be pursuant to clause 15.1 of the general conditions. The applicants signed the document.
On 20 July 2022 building approval issued from the certifier, and the builder invoiced the applicants for a deposit of $12,766.40 under the contract. The deposit was paid on 29 July 2022.
On 25 August 2022 the builder says it received “construction drawings”.
On 30 August 2022 the builder asked for confirmation that the applicants had obtained an identification survey.
On 28 September 2022 the applicants provided an identification survey.

On 6 October 2022 the applicants through solicitors asked when work would commence. The builder said 25 October 2022 and that the job would be finished within the agreed 330 days of commencement.
On 9 December 2022 the applicants made a complaint to the Queensland Building and Construction Commission (‘QBCC’).
On 16 December 2022 solicitors acting for the builder invoked a special condition of the contract which provided:
This contract is vaild (sic) for 120 days from date of execution, and may be subject to a price review after this time.

The solicitors advised the contract was signed on 3 November 2021. The anticipated start date was 60 days after that, 3 January 2022. The period of 120 days after execution expired 3 March 2022 and the builder invoked its right to conduct a price review. Another variation document was forwarded to the applicants adding an additional $40,000 to the price.
The solicitors also claimed delay on the part of the owners and reserved the builder’s right to claim interest pursuant to clause 15.1 of the contract from 31 January 2022 until “commencement” of work.
The owners were required to sign the variation document by 21 December 2021.
On 18 January 2023 the owners’ solicitors responded that the builder was not entitled to terminate the contract as proposed and that if it did do that, such would itself amount to repudiation of the contract. The builder was accused of substantial breach under the contract because it had suspended work other than under clause 18 of the conditions to the contract; it had failed to commence work under the contract as required; and failed to carry out work with reasonable diligence. The builder was required to commence work as a matter of priority and urgency.
On 25 January 2022 the builder’s solicitors advised the owners’ solicitors:
To the extent that the special condition has not by its own force “invalidated” the contract, on our client’s instructions we give notice that our client terminates the contract.
On 19 July 2023 the owners’ solicitors advised the builder’s solicitors that the letter of 25 January 2023 amounted to a repudiation of the contract by the builder and the owners elected to accept the repudiation and terminate the contract.
The owners filed an application for domestic building dispute in the Tribunal on 22 August 2023.
The Tribunal has directed that the following preliminary issue be determined:

Was the contract lawfully terminated by CJ Homes Pty Ltd t/as CJ Homes Trust?

The special condition

The special condition provided:
This contract is vaild (sic) for 120 days from date of execution, and may be subject to a price review after this time.
The Queensland Building and Construction Commission Act1991 (Qld) (‘the Act’) Schedule 1B s 14 provides:
Requirements for contract—level 2 regulated contract
(1)     This section applies to a level 2 regulated contract.
…
(3)     The contract must contain all of the following –
…
(e)the contract price or the method for calculating it, including the building contractor’s reasonable estimate;
…
(6)     If the contract price may be changed under a provision of the contract, the contract must also contain—
(a)a warning to that effect; and
(b)a brief explanation of the effect of the provision allowing change to the contract price.
(7)     The warning and explanation mentioned in subsection (6) must be in a prominent position on the first page of the contract schedule.
Section 108D of the Act referred to states:
108D Contracting out prohibited
(1)A person can not contract out of the provisions of this Act.
(2)A domestic building contract is void to the extent to which it—
(a)is contrary to this Act; or
(b)purports to annul, exclude or change a provision of this Act.
(3)An agreement (other than a domestic building contract) is void to the extent to which it seeks to exclude, change or restrict a right conferred under this Act in relation to a domestic building contract.
(4)Nothing in this section prevents the parties to a domestic building contract from including provisions in the contract that impose greater or more onerous obligations on a building contractor than are imposed under this Act.
(5)Subsections (2) and (3) apply subject to any contrary intention in this Act.
The owners say the special condition permitted the price to change but there was no mention or warning about that on the first page of the contract as required by s 14(6) and (7) of Schedule 1B. They claim the special condition was therefore made void by s 108D of the Act and they rely on the decision of Perera v Bold Properties (Qld) Pty Ltd [2023] QDC 99 (‘Perera’) as authority for that proposition.

Void or voidable

The builder submits that the special condition does not operate as a price escalation clause. The builder says there is no mechanism specified for that referred to in the provision. Rather the clause operates to render the contract “invalid” in certain circumstances.
The builder adds that whilst the second part of the special condition refers to a price review, that should be understood as occurring after and if the provision rendered the contract “invalid”. The parties were then required to negotiate a replacement contract. Given the contract as a whole is rendered “invalid”, the provision offers no scope to vary the contract price. Therefore on its proper construction the provision did not allow a change to the contract price and consequently s 14 of Schedule 1B has no application.
There is no immediate answer to why 120 days was chosen. Commencement of work was required within 60 days of contract but that did not happen. The builder was responsible for obtaining building approval but did not obtain that until 10 February 2022, 69 days after contract.
The builder submits the special condition should be construed as operating to “invalidate” the contract if commencement of work had not occurred within 120 days of execution. The builder says that construction of the provision is consistent with the contemplated significant preliminary works being undertaken and delay could have presented significant risks to the builder. Given what is noted above, that the builder contracted to commence work within 60 days and did not, and did not even obtain building approval until after that, there is little evident concern about delay being a factor, at least on the part of the builder. The owners complain that they could not do anything to get the builder to start work throughout 2022.
I do not interpret the clause as providing that the contract was “invalidated” in the event that work had not commenced under the contract within 120 days of execution.
The special condition has two aspects. Both are linked with the conjunctive “and”. An objective reading of the special condition which gives full effect to the entire provision is to be preferred to an interpretation which gives effect to only one part (the first) but renders meaningless the other. That is the result if one adopts the interpretation suggested by the builder.
Had the provision intended the termination of the contract to be effective without more after day 120, there was no reason to add the mechanism of a price review. A price review where the contract has terminated is pointless and meaningless. No contractual relationship would remain extant to be revisited by the parties.
The word intended to be used in the special condition is “valid”. It is not a legalistic word that readily suggests a formal end to legal relations between parties. The word end or terminate would have been better had that been the intention.
I am unable to construe the phrase ‘the contract is valid for 120 days’ as a provision terminating the contractual relations between the parties going forward. Rather it describes the period of 120 days past. The second part of the special condition governs the ongoing relations between the contracting parties, which is a price review.
I determine that what the provision provided for was that for a period of 120 days from execution of the contract the agreed contract price would apply, but after that the builder was entitled to review the price. If a new consensus on price could not be agreed, (albeit an increase or the same), then the contract became voidable at the election of one or both of the parties.

Election

By the special condition after 120 days the builder (and the owners) had an election available: continue with the contract or terminate it.
In Saaroq Pty Ltd t/as Stroud Homes Wide Bay v Queensland Building and Construction Commission & Ors [2024] QCAT 436 (‘Saaroq’) the owners signed a HIA construction contract and paid a deposit of $20,213.13. It was a fixed price contract with an anticipated start date for construction of “60 days from the date of the contract”. Some four months later, the builder sought a price increase of $56,694.31. The owners rejected the claim and the builder purported to terminate the contract. The owners accepted that attempt at termination as a repudiation of the contract and terminated the contract themselves. The builder refused to refund the deposit paid.
The owners claimed the deposit under the QBCC Home Warranty Insurance Scheme. The Queensland Building and Construction Commission accepted that the owners had validly terminated the contract and the builder sought review of that decision.
The matter came to the Tribunal for review before learned Member Oliver. Initially the builder had relied on an entitlement to increase the price pursuant to a price escalation clause in the conditions, but at the hearing before the Tribunal the builder resiled from that (it had evidential difficulties justifying the price increase claimed) and relied on a provision whereby the owners had been required to give the builder evidence of their capacity to pay the original contract price after which the builder was to commence work within 20 days. The owners had not done that.
Member Oliver found that up to the time the builder claimed a price increase, four months after execution, it could have elected to terminate the contract. Once the price increase was claimed however, the builder had made an election not to terminate and to continue with the contract. The learned Member referred to the comments of Mason J in the High Court’s decision of Sargent v ASL Developments Ltd (1974) 131 CLR 634 (‘Sargent’). In Sargent, Mason J had said:
26. …A person is said to have a right of election when events occur which enable him to exercise alternative and inconsistent rights, i.e. when he has the right to determine an estate or terminate a contract for breach of covenant or contract and the alternative right to insist on the continuation of the estate or the performance of the contract. It matters not whether the right to terminate the contract is conferred by the contract or arises at common law for fundamental breach - in each instance the alternative right to insist on performance creates a right of election.
27. Essential to the making of an election is communication to the party affected by words or conduct of the choice thereby made and it is accepted that once an election is made it cannot be retracted (R. v. Paulson (1921) 1 AC 271, at p 284 ; Tropical Traders Ltd. v. Goonan (1964) 111 CLR 41, at p 55 ). No doubt this rule has been adopted in the interests of certainty and because it has been thought to be fair as between the parties that the person affected is entitled to know where he stands and that the person electing should not have the opportunity of changing his election and subjecting his adversary to different obligations.
28. A person confronted with a choice between the exercise of alternative and inconsistent rights is not bound to elect at once. He may keep the question open, so long as he does not affirm the contract or continuance of the estate and so long as the delay does not cause prejudice to the other side. An election takes place when the conduct of the party is such that it would be justifiable only if an election had been made one way or the other (Tropical Traders Ltd. v. Goonan (1964) 111 CLR 41 ).
I note in Sargent Stephen J had also said:
16. The doctrine of election as between two inconsistent legal rights is well established but certain of is (sic) features are not without their obscurities. The doctrine only applies if the rights are inconsistent the one with the other and it is this concurrent existence of inconsistent sets of rights which explains the doctrine; because they are inconsistent neither one may be enjoyed without the extinction of the other and that extinction confers upon the elector the benefit of enjoying the other, a benefit denied to him so long as both remained in existence.
Why the doctrine applies has been explained in Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788 [2022] HCA 38 where the comments of Mason J and Stephen J were accepted as good law regardless of whether the doctrine to be applied is identified as waiver or election by Gageler J (as his Honour then was):
152. Each of those versions of the answer is an expression of the same basic notion of fairness as Isaacs J expressed in Craine[230] when he said that a party who has "approbated" should not afterwards be permitted to "reprobate", and as Gavan Duffy CJ and Starke J expressed in Wendt v Bruce[231] when they said that a party "cannot blow hot and cold". Whatever the form in which it might be expressed, the core of the answer is that fairness to the other party makes it "in the interests of justice, that the choice, when once made, should be irrevocable"[232].
…
157. Whichever of the two approaches is adopted, however, the trigger for a waiver to occur where a person is faced with a choice between keeping an accrued right and abandoning that same right is the same: knowledge of the facts giving rise to the right and unequivocal communication of a choice to abandon that right. And the legal operation of waiver where so triggered is the same: the right abandoned is not extinguished but assertion of the abandoned right is thereafter precluded.
In the matter at hand, the 120 day period ended on 3 March 2021. On 9 June 2022 the builder claimed a $40,000 price increase pursuant to clause 15.1 of the general conditions and the owners agreed to pay the new price. Then on 20 July 2022 the builder invoiced the applicants for a deposit of $12,766.40 under the contract which the owners paid on 29 July 2022. Then the builder required the owners provide an identification survey, which the owners provided on 28 September 2022.
After 9 June 2022 when the builder elected to continue the contract with the advantage of a price increase of $40,000 and the owners agreed to pay it, the right to terminate the contract pursuant to the special condition ended. As explained by Mason J in Sargent, once an election is made it cannot be retracted. The builder could not rely on it to terminate the contract as it purported to do by its letter of 25 January 2023.
Similar reasoning likewise dismisses the alternate claim of the builder that it was in any case entitled to terminate the contract on 25 January 2023 pursuant to clause 2.2 of the general conditions.
Clause 2.2 provided:
If any of the requirements set out in clause 2.1(a) to (e) (inclusive) are not satisfied by the anticipated start date, the builder may, by notice in writing to the owner:
(a) end this contract, in which case clause 25.7 applies; or
(b) extend the time for the owner to satisfy the requirements of clause 2.1and, at the option of the builder, increase the contract price under clause 15.

The builder says it was not given exclusive possession of the site until October 2022. The owners it should be said, say the builder was avoiding commencing work over the period concerned.
As in Saaroq the builder could have elected to terminate the contract after expiry of the initial 60 days for commencement. At that point, not one year later, the builder had an election to make. It could either terminate the contract as provided for by clause 2.2, or continue performing the contract. It had to make a choice however, the rights were entirely inconsistent. It chose the latter when it sought a price increase. With the price increase sought and agreed the builder had made an election not to terminate but to continue with the contract and it could not resile from that election thereafter. Repeating what was said by Gageler J in Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788:
Whatever the form in which it might be expressed, the core of the answer is that fairness to the other party makes it "in the interests of justice, that the choice, when once made, should be irrevocable."[1]
[1][152].
Its election not to terminate was further evidenced, if such be needed, by its invoice to the owners for the deposit on 20 July 2022 and by its request to the owners to provide an identification survey, which they supplied on 28 September 2022.
Clause 2.2 could not be relied upon by the builder when it purported to terminate the contract on 25 January 2023.

Contracting out

The owners also rely on s 108D of the Act to render the special condition void and of no effect.
In Perera, a building dispute, the start of work was delayed and the contractor advised that, due to the increased costs of building materials amongst other things, the price would increase by over $50,000. The builder relied on special condition 7 to the contract which permitted the contractor to increase the contract price “of the house type… to the builder’s current base price for that house type.” The homeowners did not agree. The contractor refused to start work.
The homeowners commenced legal proceedings in the District Court seeking a declaration that special condition 7 was void. Barlow KC DCJ found the special condition void for a number of reasons including because there was no warning given that the special condition could increase the price in breach of s 14(3)(e), s 14(6) and s 14(7) of Schedule 1B of the Act. The learned Judge said:
[50] There was no warning on the first page of the contract schedule concerning special condition 7, let alone an explanation of its effect. Even if it were lawful to amend that warning by special condition 11 (which it is not), the warning in respect of special condition 7 is insufficient for the purposes of the QBCC Act: again, it does not refer to that condition but to all the special conditions, and it does not explain the effect of the condition.
[51] The warning, at least insofar as it concerns special condition 7, is therefore contrary to the QBCC Act and, under s 108D(2)(a), is void to the extent of that insufficiency. Does that mean that special condition 7 is itself void as being contrary to the Act? In my view, that is the effect of the invalidity of the warning insofar as it concerns that condition. The condition, if effective at common law, provides for a change to the contract price but no warning is given about the existence or effect of the condition. The effect of the legislation must be that the special condition itself is void, because otherwise the absence of a necessary warning and explanation would have no effect on the parties’ rights, but it would simply be an offence against the Act for the respondent to commence work before the contract complied with the requirement of schedule 1B, s 14.^[26]
[52] Therefore, special condition 7 is wholly void. Under clause 38.7 of the contract, it is effectively severed from the contract and it does not invalidate any other provision of the contract.^[27]Nor does the elimination of that condition change the kind of contract between the parties,^[28]nor, in other words, affect the “heart of the transaction.” The condition is not, in substance, so connected with the other terms of the contract that they form an indivisible whole which cannot be taken to pieces without altering its nature.^[29]
The builder says Perera is to be distinguished on its facts. There the special condition itself enabled the contract price to be changed. Here, says the builder, there is no mechanism set out explaining how the price might change. Rather, the builder submits, the special condition simply terminates the contract 120 days after execution.
For the reasons set out above, I do not accept the builder’s submission. The special condition gave the parties an election to terminate the contract if a price for the work going forward could not be agreed.
There was no mechanism or formulae laid down to describe how the price might change, but rather it left the builder (theoretically also the owners, but only theoretically) with unrestrained discretion to set a new contract price.
Perera is entirely on point. The special condition here, as in Perera, enabled the price to be changed whilst the contract was extant. It is not a point of distinguishment that the provision here offered no formulaic calculation and therefore no restraint to the price increase and was therefore of broader brush than the provision in Perera. In breach of s 14(6) and (7) there was no warning or explanation about it in a prominent position on the first page of the contract schedule. The open ended aspect of the discretion to change the price makes it arguably more dangerous and significant than the provision in Perera such that a warning of its existence and an explanation about it should very much have appeared on the first page of the contract schedule.
Given various other provisions which might change the price were noted on the first page of the contract schedule, the failure to note the special condition could have misled the owners to believe there were no other provisions that might change the price that need concern them.
Section 108D of the Act renders provisions which attempt to contract out of the Act void. The High Court addressed contracting out in Caltex Oil (Aust) Pty Ltd v Best (1990) CLR 516:
[5] … The most obvious and direct form of contracting out of a statute is the case in which a party covenants under seal or agrees for valuable consideration not to make a claim for a benefit for which the statute provides: see Lieberman v. Morris (1944) 69 CLR 69 (where a covenant not to make a claim under the Testator's Family Maintenance and Guardianship of Infants Act 1916 (N.S.W.) was held to be void or inoperative). But contracting out of a statute is not limited to cases in which a party simply foregoes or waives a benefit directly conferred upon the party by the statute. Contracting out may take many forms. They will vary with the nature, subject-matter and object or purpose of the statute, as well as the means selected with a view to escaping from its provisions or its operation.
[6] An express statutory prohibition against contracting out renders void or inoperative contractual provisions which are inconsistent with the statute. Inconsistency between contract and statute is not confined to literal conflicts or collisions between the contractual provisions and the statutory provisions. Inconsistency in this context arises whenever there is a conflict between a contractual provision or the operation of such a provision and the purpose or policy of the statute. So, if the operation of a contractual provision defeats or circumvents the statutory purpose or policy, then the provision is inconsistent in the relevant sense and falls within the injunction against contracting out.[2]
[2][6].
By s 3(d) of the Act an object of the legislation is to regulate domestic building contracts to achieve a reasonable balance between the interests of building contractors and building owners. The statutory requirements of s 14 Schedule 1B are consumer provisions attempting to strike the balance. The contract is invariably prepared by the contractor, and more often than not signed by homeowners without the benefit of legal oversight.
The balance referred to is compromised if the statutory requirements of s 14(4) to (7) Schedule 1B are ignored. The failure of the builder here to comply with the statutory requirements of ss 14(5) to (7) Schedule 1B amounted to contracting out of the Act and accordingly, pursuant to s 108D of the Act, void for the reason explained by Barlow KC DCJ in Perera that no other remedy succeeds in giving effect to s 108D.

Conclusion

The contract was not lawfully terminated by CJ Homes Pty Ltd ATF CJ Homes Trust.