Andrix Homes and Constructions Pty Ltd v Mac

[2021] NSWDC 53

District Court

New South Wales

Medium Neutral Citation:

Andrix Homes & Constructions Pty Ltd v Mac & Anor [2021] NSWDC 53

Hearing dates:

3 March 2021

Date of orders:

12 March 2021

Decision date:

12 March 2021

Jurisdiction:

Civil

Before:

J Smith SC, DCJ

Decision:

(1) The question stated to be determined pursuant to Pt 28 of the Uniform Civil Procedure Rules:

“Whether the settlement agreement and deed of release attached to these orders marked “A” is binding upon the Parties”

Be answered as follows:

“Yes.”

(2)   The statement of claim and cross-claim are to be listed for further directions before the List Judge on 26 March 2021 at 9:30am.

Catchwords:

BUILDING AND CONSTRUCTION – Contract – Termination – binding and enforceable agreement – separate question

Legislation Cited:

Building Code of Australia

Conveyancing Act 1919, s 38

Home Building Act 1989, s 18B

Uniform Civil Procedure Rules, Pt 28

Cases Cited:

Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1

Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429

Texts Cited:

J W Carter, Carter on Contract, online version, [04-040]

Category:

Principal judgment

Parties:

Andrix Homes & Constructions Pty Ltd – Plaintiff
John Mark Mac – First Defendant
Kerry Leanne Mac – Second Defendant

Representation:

Counsel:
Mr T Bland – Plaintiff
Mr S Blackman - Defendant
Solicitors:
Bilbie Faraday Harrison – Plaintiff

File Number(s):

2019/167516

Publication restriction:

Nil

Judgment

1. These are proceedings originally commenced in the New South Wales Civil & Administrative Tribunal (NCAT) by a builder in respect of amounts claimed to be outstanding under a home building contract. The defendants, who are the home owners, resist the claim on the basis of an agreement that they say was entered into between the parties on or about 10 October 2018 (the termination agreement). In light of this contention by the defendants, the NCAT transferred the proceedings to this court for determination. The defendants argue that the home building contract was terminated by reason of the termination agreement and that another term of the agreement was that no further amounts were outstanding under it.

2. By order made by Judge Wilson SC on 10 September 2020, a separate question is to be determined pursuant to Pt 28 of the Uniform Civil Procedure Rules. That question is:

“Whether the settlement agreement and deed of release attached to these orders and marked “A” is binding upon the Parties”

3. The settlement agreement and deed of release referred to in the order is what I have referred to as the termination agreement.

4. The plaintiff contends that the parties are not bound by the termination agreement. That contention was originally based upon three matters set out in its defence to the cross-claim brought by the defendants. They are: first, that the plaintiff did not know of the agreement until after commencement of proceedings; secondly, that the signature affixed to the termination agreement was in fact attached to a document on 6 September 2018 and only later attached to the termination agreement; and thirdly, that the termination agreement was a “fabrication … so that (the defendants) can have the benefit of the brickwork supplied and paid for by (the plaintiff) without paying for same”.

5. It appears that those allegations were maintained when the application for a separate question was heard before Judge Wilson SC. It also appears to have been on that basis that expert evidence as to the authenticity of the termination agreement were intended to be, and ultimately were, obtained by both parties. However, the reports of each of the experts both strongly support the conclusion that the termination agreement relied upon by the defendants was in fact the agreement signed by the plaintiff. In other words, the forceful suggestion that the defendants had fabricated a document was not made out on the plaintiff’s own evidence. As a consequence of that, when the matter came on for hearing before me, Counsel for the plaintiff changed tack.

6. The plaintiff now no longer relies upon the allegation of fraud but claims instead that the agreement was not binding because it was uncertain. In his written submissions at [34], [37] and [38], Counsel for the plaintiff argued that, while the agreement as to termination of the home building contract was reached and binding, the dispute as to the proper construction of the agreement (as shown in emails between the parties between 2 and 8 October) was sufficient to make the agreement uncertain. Thus it was asserted that the contractual provisions other than termination were void for uncertainty.

7. The relevant principle was stated in the plaintiff’s written submission at [39]:

“A contractual provision will not be void for uncertainty merely because its language may admit more than one possible meaning or because, when construed, the application of the provision may produce more than one result, unless the Court is unable to attribute to the parties any particular contractual intention or to determine its meaning upon the proper application of the principles of construction: G Scammell & Nephew Ltd v Ouston [1941] AC 251 at 268 …”

8. Further, as Barwick CJ explained in Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429, provided it is capable of being given a meaning which is consistent with the intention of the parties, as determined by construction of the agreement as a whole in light of its context, a clause will ultimately bear that meaning. Thus, if two or more meanings are possible, the function of the court is to determine which was intended. The overall question is one of construction, and the language used will be construed broadly and fairly, and not narrowly or pedantically. The agreement will be binding provided that it is not utterly impossible to place a reasonable meaning on the language used and to discern the parties’ intention: see also J W Carter, Carter on Contract, online version, [04-040]. Of course, the contractual intention required to provide contractual certainty, is not the “subjective intention of either or both of the parties but such mutual contractual intention as the words and conduct attributed to the parties might convey to a reasonable person having the background knowledge reasonably available to both of them”: Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1 at [53] (Gageler J).

9. Understood against the background of the dispute between the parties prior to the execution of the termination agreement, there is no uncertainty in that agreement such that it is unenforceable. The answer to the separate question is “yes”.

10. Before proceeding to the reasons for my conclusion, it ought to be noted that the termination agreement was expressed to be a deed, but there was no witness to the defendants’ execution of the document. However, the concession by the plaintiff that there was a concluded agreement between the parties expressed in the termination agreement makes it unnecessary to consider the application of s 38 of the Conveyancing Act 1919 or whether there was delivery by the plaintiff such as to bind it to the terms of the agreement.

Relevant Facts

11. The defendants are the registered proprietors of property in Toukley. They engaged the plaintiff, a building company, to construct a duplex on that property. Although construction began at the property on 18 February 2018 it was not until 14 May 2018 that the parties entered into a building contract.

12. The relevant terms of that contract were that the builder had to give the owner a written claim for progress payments for the completion of each stage (cl 17.3) and then that the owner pay on that claim. The builder’s obligations included, amongst other things, the obligation to comply with the Home Building Act (cl 39.1(c)) as well as the Building Code of Australia (cl 40.1(a)). The term “stage” referred to in the payment provisions in cl 17 of the contract is defined to have been set out in sch 2 to the contract. Unfortunately, sch 2 which, according to the index to the contract appeared at page 4, was not included in the material put into evidence in the proceedings. However, as will be seen later in these reasons, there is some evidence as to nature of the relevant stages of the construction.

13. By July 2018 there were significant disputes between the parties. On 4 July 2018 the foreman, Ben Seidler, wrote by email to the defendants proposing a number of options for resolution of those issues. These were: option 1, that the plaintiff continue the building; option 2, that to amend the contract so that the plaintiff will complete only up to (lock up); and option 3, that the contract be mutually terminated at the current stage.

14. It is difficult on the evidence to ascertain at precisely what stage the construction was at the time of that email however, it may be inferred that it was prior to lock up. Further, in light of the evidence that bricks were delivered to the property on 2 August 2018 and the brick work started a week later, it may be inferred that the construction was, as at 4 July 2018, not at the stage of brick work.

15. The relationship between the parties did not improve and on 4 September 2018, Mr Seidler wrote to the first defendant saying that if he wished to terminate the contract to respond by 12pm that day. The second defendant replied to that email saying that they were not terminating the contract. In reply to that, Mr Seidler responded:

“… If you wish to proceed there will be no access to the site until the completion of the build, we will no longer be working together on this project and I will complete the build as per the contract. …”

16. On 4 September 2018 at 8:07pm, Mr Seidler sent an email to the defendants attaching a letter “outlining the build works” asking that it be signed and returned as soon as possible. The letter which was addressed to the defendants stated that the plaintiff was completing the building work under the terms and conditions of the contract for $552,200 and that included in the contract was a provisional sum for the works of $45,050 to be completed by the owner. The final line of the letter was “please sign and return that you agree for the build to continue under these terms”.

17. By email of 5 September 2018, the defendants wrote to Mr Seidler saying that they were not willing to sign as it was against everything that they agreed upon.

18. On 5 September 2018 the owners made a complaint to NSW Fair Trading, saying amongst other things, that the builder was refusing to come to site and that they were two months behind schedule. On 6 September 2018, Mr Seidler wrote to the defendants saying:

“The current build expenses to date are $257,773.05 and the invoice from the Brickwork (yet to be sent through) may vary the amount.

The works have been suspended and you are currently in breach (for the second time), if you wish for the contract to continue it will be at the full contract and the letter I sent yesterday to be signed and returned.

As you have said you do not want to continue the contract without interfering with the progress of the building works I suggest that we mutually terminate at this point, (Deed attached).

Please sign this in the presence of a JP and post it to: …”

(Without alteration)

19. The deed attached to this email provided relevantly as follows:

“BACKROUND

●   The Builder and the Owner have entered into a contract dated 10^th May 2018 … for the performance of building work …

●   The Builder has completed that part of the building work under the Contract up to Partial Lock Up.

●   The Owner has paid to the Builder the sum of $259,534 being the amount payable for building work performed by the Builder.

●   The parties agree to end the Contract and discharge their obligations pursuant to it, on the terms and conditions of this Deed.

OPERATIVE

1.    The Builder and the Owner hereby end the Contract and release each other absolutely from any obligations arising out of or in connection with the Contract.

2.   The Owner agrees that the Builder has no liability to perform or rectify building work that is incomplete at the date of this Deed and that the Builder is released from any obligations that may arise out of the operation of the Contract regarding incomplete work.

3.   The Builder agrees that the amount paid by the Owner to the Builder is in full and final satisfaction for the performance of any building work and that the Builder has no other claim for any additional payment by the Owner under the Contract.

4.   The operation of this Deed is conditional on the Owner entering into a separate contract for the performance of the incomplete building work under the Contract contemporaneously with the execution of this Deed.”

(Emphasis in original, without alteration)

20. This is the document that the plaintiff originally asserted was executed by it and that the defendants fraudulently changed by replacing the first page. As I have explained, that is no longer asserted and it is not in contention that this document was never executed by any of the parties.

21. The defendants replied by email the same day asking for Mr Seidler to send the expenses and then saying “we can talk about how to proceed”. Mr Seidler replied saying that he had previously emailed all the remittances for paid expenses and that he was yet to receive an invoice for bricklaying.

22. On 13 September 2018 the defendants met with the principal of the plaintiff. On the same day the first defendant wrote to the plaintiff summarising what occurred at the meeting. This summary helpfully outlines the progress claims and by reference to the stages in the contract. Those stages are:

• Stage 1 deposit

• Stage 2 slab

• Stage 3 frames and trusses

• Stage 4 brickwork

• Stage 5 lockup

• Stage 6 internal linings

• Stage 7 fix out painting

• Stage 8 practical completion

The amount for Stage 4, brickwork, is set out as $71,786.

23. By letter dated 17 September 2018 the plaintiff wrote its understanding of the way in which the matter would continue which included payment of two invoices, one of which was for the Stage 4 progress claim. There was then provision for the defendants to sign that letter. The letter was not signed by the defendants.

24. On 21 September 2018 the second defendant wrote to the plaintiff saying that the brick work was not finished and therefore they would not be approving the progress payment.

25. On 24 September 2018 the plaintiff wrote to the defendants stating that all works were completed to plan as per stage complete, being brick work. The email then requested for the progress claim for the brick work to be paid and for the letter to be signed so that work would progress.

26. On 28 September 2018 the defendants received a certificate from the independent building certifier noting, amongst other things, that the inspection was unsatisfactory. The comments to this report related both to matters outstanding from a previous inspection relating to the slab as well as to the frame inspection. In respect of the latter, the report noted that “complete brickwork and nailing off brick ties throughout frame” as well as a number of other incomplete or unsatisfactory matters.

27. On 2 October 2018 the plaintiff wrote to the defendants again attaching the schedule to progress payment claim (although that attachment is not in evidence). It asserted that the brick work was complete and that in respect of Stage 5 that certain work had been done. He then wrote:

“Terminate from there, or continue with contract.

I had received an email from my Home Warranty insurer stating that the contract has Already been Terminated Between the owners and the builder, Sorry but the contract has not been Terminated.

You are required to take proper avenues in Terminating a Contract.

If you choose to continue terminating the contract there will be monies still owing.”

(Without alteration)

28. In response to this the second defendant wrote by email on 3 October 2018:

“We would like to mutually terminate the contract at the moment, however, if this is not an option i will issue paperwork to end on breach of the contract by builder and the removal of Andrix homes from further works. Furthermore, i will invoice Andrix homes for works completed by the owners to date and the current outstanding trade accounts.

We are hoping to settle this out of court, however, if this is what it takes I will commence legal action.

I again state, that this build has not been to contract and the contract has been mutually manipulated by both parties. The build has not been done to plan note that there is no front door and the builder changed the roof lines. Furthermore, the layouts of kitchen and bathroom are not as per plan.

In settling the contract i would like to agree that no further invoices for money will be issued.”

(Without alteration)

29. Attached to this email was a “draft deed” entitled “Deed of Mutual Termination of Building Contract”. This relevantly provided (without amendments):

Background

i.    The Builder and the Owner have entered into a contract dated 10^th May 2018 … for the performance of building work …

The Builder has completed that part of the building work under the Contract up to Partial Lock Up.

The Owner has paid to the Builder the sum of $259,534 being the amount payable for building work performed by the builder.

Terms of settlement

1.    The Builder and Owner agree to fully and finally settle the matter on the following basis:

1.1. The owner has paid a total of $259,534, The ammount paid is the final and full payment to the builder.

1.2. The Builder accepts no responsibility for NEW works commenced post the termination of contract.

1.3. All work completed by Andrix homes is to be of a satisfactory level that meets building codes.”

30. Over the page was the execution page which in relation to the defendants as owners stated “Signed as a Deed” and in respect of the plaintiff it had provision for an attestation of the common seal of the company and then “Signed, Sealed and delivered in the presence of” and then further down the page “a Justice of the Peace”.

31. By email dated 8 October 2018 the principal of the plaintiff wrote to the defendants stating (without alteration):

“You have a letter in the mail, of Termination,

Andrix Homes and Constructions P/L has finalised Terminating your agreement, Mutually

unless you want Andrix Homes and Constructions P/L to come after the last Progress claim, of $71,000 witch [sic] Andrix Homes and Constructions is entitled too,

With

the Council Contributions of $8,900 totalling $79,900 in which you were reimbursed, and under the contract is paid by the owner,

Legal advice Has already been Consulted.”

32. Later that day the defendants replied to this email saying “thank you is it the exact letter I sent you?”

33. The plaintiff replied “Yes”.

34. On 10 October 2018 the defendants received the settlement agreement that had been executed by the plaintiff. On the same day, the defendants emailed the plaintiff saying “thank you I have received the letter from you”. The email also attached the reports from the building certifier and said “can you please ensure that the works the frame and fire wall at a satisfactory level”. Comments from the building certifier are then set out before the email ends with: “please ensure all works are completed within 10 business days and provide the appropriate certification”.

35. On 10 October 2018 each of the defendants signed the termination agreement. However, there was no witness to those signatures. There is no issue about the authenticity of their signatures. The defendants posted the termination agreement to the plaintiff on the same day.

36. On 11 October 2018 the plaintiff wrote to the defendants saying that the schedule 2 progress payments were attached (but these are not in evidence). The email continued:

“All fixings asked by yourself to come to complete Stated Below, within 10 days to complete are under Lock Up Stage 5 of progress claims.

For Andrix Homes to bring to this stage requires payment of Progress Claim 4, we will bring the stage to Lock with termination of contract.

Letter of termination is based on works being satisfactory completed as per the Building code,

Work is not completed to a stage of completion ready for Inspection Stage 5 of the progress claims, but to a satisfactory level and Standard and Building code.

The owner has Paid works up to date as per progress Claim #3 The amount of $259,534 being for the amount of Building work Performed by the Builder.

Under the letter of Deed of release,

Release Andrix homes and Constructions P/L

Andrix Homes is not responsible to get works to inspection of Lock up Progress Claim #5 but to satisfactory level as per deed of release.

Have your new Builder Complete works up to Progress Claim 5 Lock Up

or

Pay Progress claim 4 Brickwork as per contract for works to be completed.

For Any Works to be completed,

Progress Claim to be Paid in full within 5 Days of this email,

Payment to be made within 5 days of the Building Act and Contract,

Invoice Attached Progress Claim 4 Brickwork.

Andrix Homes and Constructions P/L will Enforce payment to be made under the building Act.

Payment or Legal Action of Progress payment No4 Brickwork,

For any additional work to be completed.”

(Emphasis in original, without alteration)

37. The defendants responded to this by email on 11 October 2018 stating (without alteration):

“The frames are not built to building code, and are not structurally sound.

The slab needs to be certified

Pest control certification.

As per the termination letter, works completed need to be satisfactory and meet the code current frames, brickwork slab or pest control do not meet code.”

38. On 25 October 2018 the defendants wrote again to the plaintiff asking (without alteration):

“Can you please advise if the existing work now meets code and has been certified.

Can you please send the following

●   Slab on ground steel inspection

●   Stormwater drainage connections inspection

●   Peg Out Survey

●   Prefabricated Roof Truss & Wall Frame compliance certificates

●   Termite Risk Management Certificates

●   Window Glazing certificates”

39. On 29 October 2018 the defendants again wrote to the plaintiff indicating that they had lodged a formal complaint with the Department of Fair Trade as to the works completed by Andrix Homes stating that they did not meet code. The email continued:

“The new builder is due to start this week and if the new builder is required to fix the work completed by Andrix we will be putting through a claim for you to pay the full amount charged.”

40. The plaintiff responded to this email on 29 October 2018 stating relevantly:

“Please forward Progress payment #4 and Andrix Homes will be more then [sic] happy to complete works you are requesting, to complete to Lockup.”

41. On 29 October 2018 the defendants replied:

“We will not be paying you any more money the contract has now been ended.

All works must be completed as per code, please forward the previous information requested including the compliance certificates for the work that has been completed.”

Consideration

42. The circumstances pertaining in early October 2018 were, in essence, that the parties were unwilling to continue to work together and wanted to terminate the building contract. The plaintiff had completed up to stage 4, being the brick work and had been paid $259,534. It had also completed some of the next stage, lock up. The matters for resolution between the parties included payment of the invoices for the brick work sent in September 2018 and responsibility for work after the brick work. This included the balance of the lock up (stage 5) and stages 6 (internal linings), 7 (fix out painting) and 8 (practical completion). Much of this work had agreed to be done by the defendants. In addition, there was the issue about the quality of some of the work that had been done by the plaintiff. The defendants’ email of 3 October sending the deed raised this expressly with the plaintiff.

43. Against this background, the terms of the termination agreement are clear or, at least, readily able to be given a clear meaning. First, the parties agreed in cl 1.1 that no more money was to be paid to the builder. Secondly, cl 1.2 deals with responsibility for the balance of the work by providing that the plaintiff is not responsible for any “NEW works commenced post the termination of contract.” The emphasis on the word “NEW” is important in understanding not only cl 1.2 but also cl 1.3. That clause provides:

“1.3    All work completed by Andrix Homes is to be of a satisfactory level that meets Building code.”

44. Although there is some grammatical lack of clarity in this clause, the context makes its meaning plain. The clause is meant to address the issue that some of the work that had been done by the plaintiff was not satisfactory. Clause 1.2, in which the plaintiff does not accept responsibility for “NEW” work makes it clear that it would remain responsible for the work it had already done and, in particular, that it was still required to comply with the statutory warranties under the Home Building Act 1989 (see s 18B).

45. Once that is understood, the plaintiff’s argument that the dispute that arose between the parties after the execution of the termination agreement reveals uncertainty must be rejected. There was no dispute that the plaintiff had an ongoing obligation to make sure that the work it had done was to a “satisfactory level”. The only question was whether the particular works referred to by the defendants as unsatisfactory (adopting the conclusion of the building certifier) fell within the scope of its obligation. Whether that was so or not is a matter of fact that may be determined on all of the relevant material.

46. The termination agreement was binding and enforceable. The answer to the separate question is “yes”.

Orders

1. The question stated to be determined pursuant to Pt 28 of the Uniform Civil Procedure Rules:

“Whether the settlement agreement and deed of release attached to these orders marked “A” is binding upon the Parties”

Be answered as follows:

“Yes.”

2. The statement of claim and cross-claim are to be listed for further directions before the List Judge on 26 March 2021 at 9:30am.

**********

Decision last updated: 12 March 2021