Bell v Sambuc Pty Ltd
[2011] QCAT 378
•5 September 2011
CITATION: Bell and Anor v Sambuc Pty Ltd [2011] QCAT 378
PARTIES: Mr Jonathan Bell
Mrs Kelsey Bellv Sambuc Pty Ltd
APPLICATION NUMBER: BDL232-10
MATTER TYPE: Building matters
HEARING DATE: 11 & 12 April 2011
HEARD AT: Brisbane
DECISION OF: Mr Andrew McLean Williams, Member
DELIVERED ON: 5 September 2011
DELIVERED AT: Brisbane
ORDERS MADE:
[1] By consent, all issues relating to H3 treatment of timber are dismissed;
[2] The responsible officer at Master Builders’ Queensland is to release from trust the sum of $28,000 (QMBA File Reference T-10-024) to Sambuc Pty Ltd (Trading as Fine Edge Homes).
[3] The Applicants are to pay to the Respondent the further sum of $27,455.33 within 28 days of the date of these orders in final satisfaction of the Respondent’s claims for payment for the costs of constructing the house at 33 Leila Place, at Pullenvale.
CATCHWORDS: Residential Building Dispute – whether works had been conducted in accordance with contract specification – whether project had attained practical completion – meaning of “practical completion”
Dispute as to costs of provisional sum and prime cost items – whether escalation in sums charged for provisional sum and prime cost items has the effect of the builder breaching the standard domestic building contract – statutory remedies for escalation in provisional sum costs
Entitlement to liquidated damages and interest on late payment of progress claims
Domestic Building Contracts Act 2000, ss 59, 60
APPEARANCES and REPRESENTATION (if any):
APPLICANT: Mr Jonathan Bell & Mrs Kelsey Bell appeared in person
RESPONDENT: Sambuc Pty Ltd appeared in person REASONS FOR DECISION
[1]This is a domestic building dispute between homeowners, Mr Jonathon Bell and Mrs Kelsey Bell (the applicants), against their builder Sambuc Pty Ltd (ABN 2147 483 647), trading as ‘Fine Edge Construction and Developments’ (hereinafter ‘Fine Edge’).
[2]The applicant’s case was conducted by Mr and Mrs Bell, in person. Mr David Manion is the authorised representative of Fine Edge, and he conducted the builder’s case before QCAT. The matter was conducted over two days, being 11 and 12 April 2011. After the hearing, the parties were given leave to file further written submissions, and the last of these (a reply by the homeowners), was filed on 5 May 2011.
[3]The dispute relates to domestic building works undertaken pursuant to a residential building contract for the construction of a new house of substantial proportions on land situated at No 33 Leila Place, at Pullenvale, in the Western suburbs of Brisbane.
[4]The homeowners and Fine Edge entered into a standard Master Builders residential building contract on 11 May 2009. The original contract price was $560,000.00 and the agreed construction period was 382.6 days, with time commencing from when the concrete slab was down. Subsequently, the contracting parties agreed that the date for final completion would be extended for a further 14 days, until 14 September 2010.
[5]These proceedings were commenced by the applicants in July 2010, even before the completion of building works, which Fine Edge contends occurred on 13 September 2010. At this juncture, it bears observing that the homeowners still dispute that the project has attained practical completion.
[6]Unfortunately, and as became most conspicuous to me during these proceedings, this is a case where the relationship between the homeowners and the builder has broken down irretrievably. It is now a relationship that is marked out by high levels of enmity and mutual distrust.
[7]By their originating Application, the homeowners were seeking orders directing Fine Edge to expedite completion of the building project, in accordance with the contract. In Part B of that Application, the homeowners specify some 15 items of allegedly defective or otherwise incomplete works. Because the applicants contend that the project has not attained practical completion, they also claim that they are entitled to liquidated damages from Fine Edge, at the agreed contract rate, which is $75.00, per day.
[8]By the builder’s Response and Counter Application, Fine Edge seeks orders dismissing the homeowners’ Application, as well as orders requiring the Bells to pay to Fine Edge outstanding amounts for various progress claims. As at the date of filing its Counter Application, Fine Edge claimed that $66,721.20 still remained outstanding. Fine Edge also denied that there were any substantially defective or incomplete works; and that the homeowners’ claim before QCAT had been commenced “vexatiously [so as] to delay payment of the Respondent’s progress claims”.
[9]Most recently, in the final submissions filed by Fine Edge at the conclusion of the hearing (after leave for same was given by me), and obviously after another opportunity to attempt to reconcile the various payment schedules created by Mr Jon Bell against the invoices raised by Fine Edge, the builder accepts the sum that the homeowners claim they have already paid to the builder, yet says that it is still owed $62,390.89.
[10]By way of reply to the Response and Counter Application, Mr and Mrs Bell deny that any monies are still owed by them, and they repeat and rely on their previous contention that there are still numerous items of defective and/or incomplete works. The Bells again say that the project has not attained practical completion, and that they have a claim for liquidated damages.
Framework for Analysis
[11]As the case was ultimately conducted before QCAT, the homeowners’ Application was organised and presented under a number of discrete heads of claim. These afford a useful framework for the further analysis (and resolution) of the various competing claims by the homeowners and the builder; such that I adopt that framework here, as part of my reasons:
(a)That QCAT should now determine the entitlement of the builder to payments of interest in relation to late/overdue payments by the homeowners in relation to progress claims numbered 2, 5, 6, 7, 9, and 11; as well as the builder’s entitlement to payment for various provisional and prime cost items under the contract, pursuant to sections 59 and 60 of the Domestic Building Contract Act 2000 (“the Commercial issues”).
(b)That QCAT should determine an appropriate adjustment to the contract price for issues going to the claimed failure by the builder to use H-3 treated timber in the construction, as was required by the contract (“the H-3 Timber issue”).
(c)That QCAT should determine an appropriate adjustment to the contract price for issues going to the failure of the builder to use ‘Durogal’ treated SHS posts, as required by the contract specification (“the SHS Post issue”).
(d)That QCAT should determine an appropriate adjustment to the contract price for issues going to the completion of the internal painting (“the internal painting issue”).
(e)That QCAT should determine an appropriate adjustment to the contract price for issues going to the condition of the guttering (“the guttering issue”).
(f)That QCAT should determine an appropriate adjustment to the contract price for issues related to the construction of a retaining wall (“the retaining wall issue”).
(g)That QCAT should determine an appropriate adjustment to the contract price for issues going to the non-inclusion of floor wastes in the laundry and powder room (“the floor wastes issue”).
(h)That QCAT should determine the defects listed in part 08 of the homeowners filed documents, as well as a time-frame for rectification of same (“practical completion”).
(i)That QCAT should determine an appropriate adjustment to the contract price for liquidated damages (“the liquidated damages claim”).
(j)That QCAT should determine appropriate orders pertaining to the release of $28,000, (representing the quantum of the builder’s final progress claim), as has now been deposited by the homeowners in the Queensland Master Builders’ Association (‘QMBA’) trust account, pending resolution of this dispute (“the trust monies entitlement”).
Matters No Longer in Dispute
[12]On the first day of this hearing Mr and Mrs Bell indicated that matters relating to the retaining wall (item (f), from the list above), were no longer in dispute.
[13]Next, after QCAT had heard considerable evidence and argument in relation to H-3 timber treatment (including uncontested expert evidence called by Fine Edge on the point), the homeowners indicated that they were satisfied that those timber components within the construction project that were required by the contract specification to be treated to H-3 standard were, in fact, treated to that standard.
[14]It is unfortunate that Mr and Mrs Bell did not give this concession much earlier in this dispute. It is my assessment that disputation in relation to H-3 timber treatment has greatly exacerbated the enmity, mistrust and poor communication between the contracting parties throughout this construction project, and its litigious aftermath. Considerable “shot and powder” (that is: time, effort, and expense) has now been expended by the parties in relation to this issue, in circumstances in which evidence was made available by the builder to the Bells far earlier in the dispute, that ought, reasonably, to have assuaged their concerns to ensure that their home was constructed with H-3 timber.
[15]By consent of the parties I dismissed the H-3 component of the applicant’s claim (item (b) in paragraph 11, above) during the first day of the hearing.
[16]For reasons of thematic convenience – and in manner following the rough order of the evidence heard before the tribunal – I will deal next with items (c) through (h) in the list of issues; before then dealing with items (i), (j), and (a) as listed in paragraph 11 of these reasons for decision.
The SHS Posts issue
[17]The house at the centre of this dispute is an elevated timber frame construction upon a sloping site (modified by means of cut and fill), whereupon a large proportion of the home is set upon steel hollow section (‘SHS’) posts, above grade. The parties are in agreement that the contract specification required that these SHS posts be finished in “Duragal”, which is a galvanising treatment with high/very high corrosion resistance properties.
[18]By reason of a mistake by the steel supplier, the SHS posts were supplied to site finished in a red oxide primer, rather than Duragal. Had the contracting parties waited for re-supply of the SHS posts, delays that would hold up subsequent stages of the construction schedule would have arisen, such that an election was made (apparently by agreement), that construction would proceed utilising the red oxide-primed SHS posts.
[19]Although affording some protection against corrosion, it is agreed by the parties that red oxide primer affords inferior protection against corrosion to that afforded by Duragal. Sometime in either November or December 2009, Fine Edge offered to treat the SHS posts with an applied (in other words, painted) finish, to improve their corrosion resistance. This was again confirmed in an e-mail sent by Mr David Manion, on behalf of Fine Edge, to Mr Jon Bell on 11 March 2010. By reply e-mail of that date Mr Bell advised Mr Manion he was agreeable to the SHS posts being treated by means of painting, yet also stated that the selected paint system still needed to be agreed.
[20]The homeowners require that the selected paint system achieve an equivalent standard of corrosion resistance to that which would have been achieved had the SHS posts been supplied in Duragal, as originally required. It is at this point where the dispute in relation to the SHS posts arises. The homeowners contend that protection equivalent to that afforded by Duragal can only be achieved by means of an applied paint system if the SHS posts are now powder-coated. The homeowners have obtained a quotation to have the SHS posts powder-coated, and say that this will cost $11,495.00. They are therefore willing to resolve this aspect of their claim on the basis of a contract variation (in other words a price reduction in their favour), of $11,495.00.
[21]Fine Edge hotly disputes that an equivalent corrosion resistance to that of Duragal can only be achieved by means of powder-coating, and contends that the application of an ordinary acrylic paint (over an appropriate metal base-coat primer) will achieve an acceptable level of corrosion resistance. Fine Edge has obtained and now put into evidence a report from Dec Con Pty Ltd, dated 21 March 2010, given under the hand of Mr George Englert. In that report, Mr Englert provides an opinion that the coating system (i.e. paint) already applied to the posts at Pullenvale accords with the requirements of Australian Standard 2311:2009 Guide to Painting of Buildings and will provide the level of protection for the steel posts situated under the residence that is mandated by that Australian Standard.
[22]Mr Englert was also called to give oral evidence before the Tribunal, whereupon he was cross-examined by Mr Bell, who is an engineer. Mr Englert struck me as an impressive witness. Mr Englert was able to explain why it is that AS2311:2009 Guide to Painting of Buildings was the applicable standard, and why it was that the application of ordinary paint could provide an adequate standard of corrosion resistance in conformity with AS2311:2009. Mr Englert was also able to explain why it was unnecessary to now treat the posts by means of powder coating in order to obtain the same corrosion resistance as that afforded by Duragal (the contract specification), which he states is a much higher level of corrosion resistance than that conventionally required by AS2311:2009. I accept Mr Englert’s evidence in that regard.
[23]The applicants did call some expert evidence of their own from a Mr Roger Donald. Mr Donald is a carpenter by trade, but has now moved into project management. I am sure Mr Donald has some understanding of painting, but he is not trade qualified as a painter. Mr Donald’s testimony was hastily arranged overnight by Mr Bell, in an attempt to rebut Mr Englert’s evidence, which had been given on the previous day. Mr Donald gave the clear impression to me that he conceived his task before this tribunal to be one in which he was required to come along and “swear the issue”, informing QCAT that powder coating was essential. However, a more considered approach to the issue demonstrates that this is not the case.
[24]I now express my clear preference for the opinion given by Mr Englert, and note, in particular, that Mr Englert has a lengthy history teaching the trade of house painting in the apprenticeship/TAFE system. I now accept Mr Englert’s explanation as regards the interpretation of the relevant Australian Standards, and why it is that the alternate Australian Standard – that as espoused by the homeowners as being the applicable standard – is not the applicable Australian standard.
[25]Mr Englert did however concede during his testimony that it may be necessary to apply a further coat of gloss acrylic paint to the outer two rows of posts (those closest to the perimeter of the building and thus most exposed to the weather) to achieve the same level of corrosion resistance as that afforded by Duragal. I accept that concession, because it was readily given by Mr Englert, during his cross-examination. I felt the frank concession to be a matter that galvanised the independent nature of his evidence.
[26]I reject the need for powder coating as excessive and unnecessary. I find that the dispute in relation to the SHS posts ought be determined on the basis that the extant condition of the SHS posts can be brought up to standard by means of an application of an additional coat of gloss acrylic paint to the external two (2) rows of SHS posts, after these posts have been appropriately prepared by means of light sanding in order for the top-coat to key into the paint that is already on those posts.
[27]As a general proposition, I am ordinarily inclined to order that any defects that have been identified in the course of proceedings before QCAT should then be fixed by means of an order for rectification that is directed towards the builder. However, in this instance, I have previously noted that there is a high degree of enmity and mutual distrust between the parties. In addition, this dispute has now been quite protracted. In light of that, the interests of finality are, in my view, now better served by my making a monetary compensation order in relation to the condition of the SHS posts in lieu of a rectification order, thereby avoiding the risk of further disputes between the parties, if an order were made requiring the builder to return to site. By reference to the sum quoted as being the likely costs for powder coating the SHS posts, I now order that the contract price be varied in favour of Mr and Mrs Bell in the sum of $1,200 in order to provide a reasonably sufficient sum to put the applicants in a position to then retain a painter to apply a further coat of gloss acrylic paint to the outer two rows of SHS posts.
The Internal Painting Issue
[28]Next, the applicants contend that the house at No 33 Leila Place has been painted in an incorrect colour scheme, on the inside.
[29]The applicants say that on 22 March 2010, Fine Edge had requested that the homeowners advise the builder in relation to their selected internal colour scheme. On 26 March 2010, by means of an e-mail sent at 8:57am, Mr Jon Bell advised Mr David Manion of the selected internal colour scheme, and also indicated that this advice was given “further to our discussions on Monday”.
[30]Later, in about late April 2010, Mrs Bell was on site dealing with issues to do with tile selection, when she observed what appeared to be incorrect paint colours being applied to the internal walls. Mr Bell followed up on this matter in another e-mail to Mr Manion, sent on 30 April 2010. That e-mail expresses the position that the paint scheme was supposed to be in conformity with Mr Bell‘s earlier e-mail “JB087- Internal Paint”, as had been sent on 26 March 2010.
[31]On the basis of the available evidence it seems satisfactorily clear (particularly from a reply e-mail sent by Mr Manion to Mr Bell on 1 May 2010) that the internal colour scheme was being applied by the painter in conformity with an earlier paint specification that had been forwarded by Mr Bell to Mr Manion on 22 February 2010, as part of Mr Bell’s e-mail regarding the external colour scheme (‘JB067 – external colours/reply’). Unfortunately, this colour scheme was later superseded by the e-mail of 26 March 2010, such that it would appear – at least to me on the balance of probabilities – which the builder has, in this instance, mistakenly relied on the superseded instruction. In his evidence Mr Manion explained that he was being inundated by in-coming e-mails from Mr Jon Bell, and that it was becoming a struggle to keep abreast of these. I find therefore on the balance of probabilities that the revised instruction was a matter that got lost in that volume of e-mail.
[32]The homeowners have now obtained a quotation from a painter of their own, Trade Painters Pty Ltd (dated 20 October 2010: see attachment 04.13 in the applicant’s bundle) indicating that the walls throughout the internal of the house can now be re-painted for $4,500.00, plus GST. On that basis the applicants now seek $4,950.00 as a variation by way of reduction in their favour from the contract price in final resolution of the internal painting issue.
[33]Although originally disputing that the incorrect paint scheme had been applied inside the house, it would not seem that Fine Edge persists in denying that the superseded colour scheme was on-forwarded to the painter. Fine Edge has obtained a quotation of its own to rectify the internal colour scheme and this quote (dated 18 March 2011), is more recent than that obtained by the homeowners. It indicates that two coats can be applied throughout the interior of the home for $2,000.00 inclusive of GST.
[34]I prefer the evidence regarding the cost of this rectification work as obtained by Fine Edge in preference to that obtained by Mr and Mrs Bell. For reasons previously explained I will I order that there should be a further variation of $2,000 in favour of the applicants, so as to put them in a position to have the house repainted, internally.
The Guttering Issue
[35]In relation to this issue the homeowners indicate that the contract provides (by means of drawing 06) that the facia/gutter should be “as selected”.
[36]On Monday 1 February 2010 – again by means of an e-mail – Mr Manion had requested that Mr Jon Bell provide his specification for the facia and gutter. By reply e-mail dated Wednesday 3 February 2010 Mr Bell advised Mr Manion that the selected gutter was to be a “Lysaght Quad 175 Slotted”, coloured “Woodland Grey”. In addition, by means of that same e-mail, Mr Bell also specified that the downpipes should be “100mm round”.
[37]The homeowners contend that the gutter as installed does not comply with this specification, and that it appears that a “150 Hi-front Quad” gutter has been installed in lieu of the requested “Lysaght Quad 175 Slotted”. Further, the homeowners contend that the gutters – as installed – do not comply with the requirements of AS3500.3.2 Stormwater drainage – acceptable solutions, in that the gutters are inadequate to discharge rainwater from the roof of the house at No 33 Leila Place. As part of the applicants’ materials, photographs have been included which do show the gutters on the house overflowing, during a very heavy rainfall event.
[38]The homeowners have also obtained two separate quotations from independent guttering installers, one in the sum of $5,439.50; and one in the sum of $7,579.00. Both of these do not include the price of scaffolding, which will now be necessary if the gutters are to be replaced. That – as yet unquantified expense – could be significant, given the heights involved. Notwithstanding that the costs of scaffolding are not yet quantified, the homeowners indicate that they are prepared to accept a contract variation (again by way of a reduction in their favour) in the sum of $8,000.00 in order to resolve the guttering issue.
[39]By way of reply on this issue, Fine Edge contends that during a meeting held on 2 March 2010 the builder had explained to Mr Bell the reasons why guttering different to that which had been specified had been installed; explaining that the roofing plumber had flatly refused to warrant his own workmanship if the selected gutter was installed, due to his expressing a strongly held view that the gutter was too large for the fascia, and therefore at risk of collapse under the weight of stormwater. Fine Edge contends that around this time the homeowners agreed to accept the installed gutter “as is”.
[40]Fine Edge also arranged for evidence to be given before the tribunal by Mr Scott Ellis-Butler, who is a hydraulic consultant in the employ of DEB & Associates. Mr Ellis-Butler has provided a report dated 14 March 2011, which was presented in evidence before me. In that report, Mr Ellis-Butler indicates that all gutter and downpipe sizes were reviewed by him and in his assessment all of the eaves and gutters at No 33 Leila Place are of sufficient size (assuming here that the gutters are 150mm), other than perhaps for those in the area of the roof described in that report as “Area A”.
[41]Mr Ellis-Butler says that, with respect to Area A, the position of the downpipe at the internal corner in the gutter (and immediately below a valley gutter higher on the roof), introduces additional volumes of water and turbulence in this area, so as to prevent the gutter and downpipe from performing at capacity. This is the same area of gutter that is portrayed in the photographs put into evidence by the homeowners showing the gutter overflowing during a significant rainfall event. Mr Ellis-Butler indicates that it is his opinion that any difficulties caused by water overflow will not be solved by means of a simple replacement of the gutters, but could be ameliorated by means of a larger rain head, at the internal corner of the gutter as indicated in “Area A” in his report dated 14 March 2011.
[42]There is a further wrinkle in this tranche of the dispute. As part of its case before the Tribunal the homeowners also contend that the gutters, as installed, are not 150mm Hi front quad as had been agreed could be left in-situ, notwithstanding that the homeowners had previously specified that their selected guttering style was to be “Lysaght Quad 175”. The photographs provided by the applicants show a tape measure across the base of the gutter, which appears to indicate that the guttering profile is only 130mm wide. Prima facie, this certainly gives rise to the suggestion that the guttering is not 150mm wide, and is in fact undersized. Certainly, Mr Ellis-Butler conceded that much, under questioning from me. This issue has however since been satisfactorily addressed by the builder as part of the additional materials, as were filed by the builder by leave, on 21 April 2011. As part of those additional materials, Fine Edge has adduced some trade literature that shows that the correct means by which to assess the size of the installed gutter is not by means of a measurement across the base of the gutter profile, but rather to measure across the gutter profile diagonally. The trade literature certainly goes to show that the base profile of 150 Hi-front Quad gutter is 129.58mm (say, 130mm) yet this is still marketed as “Hi-front quad gutter – 150mm”. I accept therefore that it is erroneous to measure gutter supplied by this particular manufacturer in the manner (quite innocently) attempted by the Homeowners.
[43]Included as part of the additional materials adduced by Fine Edge by leave is also a copy of an e-mail from Mr Bell dated 2 March providing minutes of a meeting of that date in which Mr Bell indicates (Item 5 of the e-mail) that “JB agreed to accept the gutter as is”. On the basis of that e-mail I find that the gutter should not be removed and replaced with Lysaght Quad 175, as the original contract specification has since been varied, by subsequent agreement between the contracting parties.
[44]Mr Manion has also obtained an additional (supplemental) report from Mr Scott Ellis-Butler who had taken the opportunity (at my suggestion) to re-visit his calculations regarding stormwater discharge rates, given the nature of the roof in question. The revised report Mr Ellis-Butler has produced now advises that there are three (3) areas on the roof that will likely require modification to comply with AS/NZS3500.3. These areas are described by Mr Ellis-Butler as Areas A, B and C. Mr Ellis-Butler advises that Area A requires the installation of a rain head and 100mm downpipe “as detailed in the previously issued sketch HSK-04”. This is a reference to the report provided by Mr Ellis-Butler that was referred to in his evidence before the Tribunal, being his original report dated 14 March 2011. In addition, Mr Ellis-Butler says that a similar rain head is also required at Area B, and that Area C requires replacement over its entire length of the installed gutter with a “true” 150mm quad gutter. For reasons that relate to the proper means for understanding the way to measure this type of gutter (diagonally), I find that there is not any need to replace the gutter along Area C, as advised in the supplementary report obtained from Mr Ellis-Butler dated 19 April 2011. In all other respects I accept the expert evidence of Mr Ellis-Butler.
[45]Although the parties have agreed by means of a subsequent variation made on or about 2 March 2010 to leave the gutters installed by Fine Edge in-situ, I find that the installation of the additional rain heads as described in the reports provided by Mr Scott Ellis-Butler dated 14 March 2011 in Areas “A” and “B” (only), as were described by Mr Ellis-Butler in his supplemental report dated 19 April 2011 should also be implied as a necessary corollary to that agreement, in order to ensure that the gutters can still comply with the relevant Australian Standard, AS/NZS3500.3. Having regard to the available evidence going to the costs of replacing the gutter, a fair and reasonable allowance by means of a further variation in favour of the homeowners for the cost of supplying and installing two rain heads as have been recommended would be in the order of about $500. I therefore order that sum as a further variation in favour of the homeowners.
The Floor Wastes Issue
[46]The homeowners contend that the building contract required for the installation of floor wastes to the laundry and the powder room. Initially, these were not installed. This would appear to have been an oversight on the part of the builder. This oversight was advised by the homeowners to Fine Edge in an e-mail from Mr Jon Bell sent on 24 June 2010.
[47]Sometime shortly after this Fine Edge did arrange for the installation of a floor waste to both the laundry and the powder room, by means of the removal and replacement of a single floor tile. However, the homeowners contend that this still does not conform to the applicable Australian Standard, which they say is AS3740 Waterproofing of Domestic Wet Areas. Herein, the difficulty is that although each of the laundry and the powder room now has a floor waste, there is no fall across the surface of the floor towards the floor waste.
[48]Photographs provided to the Tribunal by the applicants (see attachment 07.04 at page 2) do show what appears to be a four-foot spirit level on the floor. That photographic evidence tends to suggest that the floor is level. I accept that evidence and find that the floor is, on the balance of probabilities, level.
[49]The applicants rely upon AS3740 – 2010 (Waterproofing of Domestic Wet Areas) and in particular where it provides at paragraph 3.11:
“Where a floor waste is required, the floor finish shall be constructed so that water flows to the waste without water being retained on the finished surface with the exception of residual water remaining due to surface tension.”
[50]By way of reply Fine Edge contends that the owners sent an e-mail amending the plans for the laundry that do not show a floor waste, and that in all events, “good building practice” requires fall for laundry floors to go to the nearest exit, for flood-control. Although the builder has provided what appears to be some “screen shots” of a portion of a building plan for the laundry, the accompanying e-mail, by which the builder contends that the homeowner amended the plans for the laundry so as to exclude a floor waste from that room have not been included as part of Folio 13 in the respondent’s bundle of materials. I cannot infer from this evidence that there was any agreement to exclude a floor waste (which in all events appears contrary to the applicable Australian Standard). Equally, it is the case that the homeowners deny ever having made such an amendment.
[51]Although Mr Manion also contends that good building practice requires that the fall across the laundry floor be directed towards the nearest exit for flood-control, I find this assertion to be inconsistent with what is specified by plain words in paragraph 3.11 of AS3740-2010. I do not accept Mr Manion’s evidence on this particular point. Even if there is fall to the nearest exit, photographs of a four-foot spirit level across the tiled floor which have been included as part of the homeowners bundle (which evidence I have already said I have accepted), does tend to suggest that the floors in each of the powder room and the laundry are level; such that it is now very difficult to accept that that there is any fall across the floor, towards the nearest exit.
[52]On the basis of the evidence before me – and here relying in particular on AS3740-2010 – I find that each of the laundry and powder room qualify as “wet areas” (paragraph 1.4.28 in AS3740-2010 refers), such that the floor finish in each of these rooms ought to have been constructed so that water flows to the floor waste. Although it was commendable for the builder to install floor wastes after the omission had been identified, the difficulty is that the retrofit cannot achieve the necessary fall in the floor, so as to comply with the Australian Standard. The tiled floors in each of the powder room and the laundry will need to be lifted, in order that the finished tiled floor can be re-installed, once an appropriate tile bedding with fall-to-waste has been constructed. This is an unfortunate state of affairs, given that an apparently good quality tiling job (together with any preliminary waterproofing), must now be destroyed in order to fix the problem, but there would appear to be no way around it.
[53]The homeowners have obtained quotations (now Exhibit 5) from two tilers and two plumbers in relation to the necessary works to redo the laundry and powder room in order to obtain the necessary fall-to-waste in the floors. The lowest of these is that for $2,095.50 in accordance with the quotation obtained from “David Head Wall and Floor Tiling”, dated 15 March 2011. To this figure must still be added a further estimated $468.00 for tiles and about $500.00 for associated plumbing works. I accept these estimates as reasonable and now order that there be a further variation in favour of the homeowners in the sum of $3,063.50.
Practical Completion
[54]The applicants contend that as at the time of this application to QCAT the domestic building construction project at No 33 Leila Place at Pullenvale had not reached practical completion, by reason of the matters listed in folios 02 to 07 of the materials that were filed in this tribunal by the homeowners in accordance with a tribunal direction given to them on 9 February 2011. These matters are, of course, those matters previously addressed in these reasons.
[55]Matter 02 relates to the H-3 treatment of timber. This issue was dismissed from this claim (with the consent of the parties) and it is certainly apparent to me that all timbers within the construction project at 33 Leila Place that were required to be treated to H-3 standard had been treated to that standard, such that it cannot be said that this aspect of the construction project had not ever reached practical completion. In addition, dispute item 06 (being the retaining wall issues) was also not pursued by the homeowners as part of these proceedings. In short therefore the applicants now contend that the dispute referable to the condition of the SHS posts; matters going to the internal painting; matters going to the condition of the guttering; and the absence of proper fall-to-waste in the tiled floor of the laundry and powder room are matters that have the further result that the project has also not attained practical completion. For reasons that I shall now elaborate, I cannot agree with that contention.
[56]“Practical completion” is a matter that is defined in the general conditions of the Standard Master Builders’ Residential Building Contract:
Practical completion stage means that stage of the works when the works are completed in accordance with the contract and all relevant statutory requirements, apart from minor omissions or minor defects, and the works are reasonably suitable for habitation.
[57]Whether the project has attained practical completion is now a question for this Tribunal to determine. In relation to the allegation that Fine Edge did not attain practical completion, the homeowners assert:
a.the project cannot be said to have reached practical completion because of the omissions and defects previously raised by the homeowners;
b.upon achieving practical completion pursuant to the contract a defects document is required to be submitted by the builder to the homeowners pursuant to Clause 17.5;
c.The defects document provided to them by Fine Edge is non-compliant for reasons stated by them in Mr Bell’s e-mail correspondence to Mr David Manion of 14 September 2010. As part of Mr Bell’s e-mail correspondence of that date he contends that on Monday 13 September 2010 there had been a meeting on site at No 33 Leila Place at which the builder had spoken to Handovers.com Pty Ltd, whom Mr and Mrs Bell had been intent on using as their accompanying agent during the practical completion inspection, yet Mr Manion refused to let the representative from Handovers.com participate in the inspection. Mr Bell further records that Mr Manion did produce a practical completion stage notice and advised him that this stage had been reached the previous Friday, 10 September 2010. Mr Bell further records that the builder and the owners conducted an inspection to identify omissions and defects and that the builder completed a defects document. Yet, the owners allege that the builder refused to include in the defects document certain matters identified by them. On 22 September 2010, Handovers.com did conduct a further inspection of the house at 33 Leila Place. That inspection report (now attachment 08.04 in the applicants’ bundle of materials) does record that the project had attained practical completion.
[58]As might be expected, the version of events going to the meeting on 13 September 2010 as has been given to this tribunal given by the builder is slightly different to that given by the homeowners. According to Mr Manion, the project had reached practical completion on 13 September 2010, albeit with some minor defects and omissions. Fine Edge says that in accordance with Clause 17 of the Residential Building Contract it is necessary that there be a meeting on-site between the homeowner and the builder. Upon reaching the practical completion stage the builder must also give to the owner a final progress claim and a practical completion stage notice stating the date at which the works reach practical completion and providing for a final inspection.
[59]Mr Manion says that the final inspection took place on site at 1:30pm on 13 September 2010 and did not conclude until approximately 4:45pm. Mr Manion says that both Mr Bell and Mrs Bell were present at that inspection. Mr Manion says that at the final inspection he produced the necessary defects document, as required by Clause 17.5, yet that Mr Bell indicated that he would only sign the defects document if further words were added referable to the agreed defects including those later identified by Handovers.com. Mr Manion also says that he refused to agree to that.
[60]To the extent that there is any factual dispute as between the homeowners and Fine Edge regarding the events of 13 September 2010, I prefer the version of events given by Mr David Manion.
[61]I note that Clause 17.1(b)(ii) of the standard contract provides for a final inspection of the works “with the owner or the owner’s agent”. “Or” is a disjunctive term, and I note that on both the version given by the applicants and the version given by the respondent the homeowners were available to participate (and did participate) in the final inspection with Mr Manion, on 13 September 2010. I find therefore that it was unnecessary for Handovers.com to attend as the owner’s agent, and that Mr Manion was entitled to insist on conducting the final inspection with the homeowners, only. The site remained under the formal control of the builder until hand over, and Mr Manion then had sufficient contractual authority to exclude a third party.
[62]On 16 September 2010, the homeowners provided correspondence to the respondent indicating their view that the practical completion had not been reached. Furthermore, the homeowners indicated that they were of the view that failure to reach practical completion had the effect that the liquidated damages provision in Clause 18 of the Residential Building contract became operational from 15 September 2010, by reason that the builder had not reached practical completion by the agreed date for practical completion.
[63]As indicated previously, I do not accept that contention. The homeowners’ argument regarding the non-attainment of practical completion suffers from a type of dogmatic circularity: if there are defects or omissions there can be no practical completion. The logic in that argument suffers because it is inconsistent with the standard terms of the residential building contract, which comprehends that practical completion may be attained notwithstanding the fact of either defects or omissions. That much is clear from the definition of ‘Practical Completion Stage’, and is why the standard contract further contemplates, in Part 19, a ‘Defects Liability Period’, during which time the builder has make-good obligations, which run for a further six months beyond practical completion.
[64]In my view, Fine Edge attained practical completion, by the required date for same. The date for practical completion at the inception of the contract was initially 3 September 2010 (being 382.6 days from the date of commencement, being the date upon which the slab was done). Yet this was later varied, by agreement, until 14 September 2010.
[65]Practical completion contemplates the works be certified by the builder as completed in accordance with the contract and all relevant statutory requirements for construction apart from minor omissions or minor defects, and the works are then reasonably suitable for habitation.
[66]I find that as at 14 September 2010 the house at No 33 Leila Place, Pullenvale was “practically complete” and “reasonably suitable for habitation”. On the evidence before me the worst defect relates to the condition of the tiled floor in the powder room and laundry, which were constructed without proper fall-to-waste. However, that defect hardly qualifies as a matter that renders No 33 Leila Place unfit for human habitation.
[67]As part of their application the homeowners have requested that the Tribunal adopt an independent inspection report produced by Handovers.com as an agreed defects list. At no time has Fine Edge ever agreed to the content of the document produced by Handovers.com Pty Ltd. I decline therefore to adopt this as an “agreed” defects list. In all events, I note that the document prepared by Handovers.com (that dated 22 September 2010) indicates that the builder had attained practical completion when Handovers.com inspected the property, relatively soon after the final inspection conducted between Mr Manion and Mr and Mrs Bell. It is disingenuous therefore for the homeowners to persist in asserting that the builder has not reached practical completion (indeed, as they have consistently, ever since their letter to Mr Manion dated 16 September 2010), in circumstances where their own expert’s report expresses the opinion that the project had attained practical completion.
[68]I find therefore that the builder’s entitlement to the final progress payment had crystallised at the time when Fine Edge provided the practical completion certificate and that payment ought to have been made by the homeowners in accordance with the usual time frames contemplated in the standard terms and conditions of the Residential Building Contract. Fine Edge ought to have been paid their final progress claim by 18 September 2010.
[69]Although Fine Edge says that the defects and omissions identified by Mr David Manion on 13 September 2010 constitute the entirety of the defects and omissions, it is now the case that this contention has been overtaken by my own findings, as the umpire in this dispute. I have found there are some further defects and omissions that were not part of the original defects and omissions list prepared by Mr Manion on 13 September 2011. These matters have been the subject of orders by me for contract variations in favour of the applicants. For the complete avoidance of doubt, I declare that the additional minor defects and omissions identified by me in these reasons do not detract from my having found that the builder attained practical completion, on 13 September 2010.
[70]In their correspondence dated 16 September 2010, the homeowners also contend that the builder is in breach of Clauses 9, 10 and 11 of the general conditions by reason that the builder has failed to carry out the works in accordance with the plans and specifications by the incorporation into the works of non-compliant materials. I infer this to be a reference to the H-3 timber issue (in circumstances where no particulars have ever been provided by the homeowners), and in circumstances in which ultimately, it has been demonstrated that the builder did, in fact, use timber that had been treated to the H-3 standard.
[71]Further, the homeowners contend that the builder is in breach of contract for having failed to carry out the works with reasonable care and skill by his covering up non-compliant material (again an apparent reference to the H-3 timber issue) and, contrary to Clause 10.1(c) failing to calculate prime cost items and provisional sums with reasonable care and skill, by the builder having stated amounts in the contract that are less than the reasonable costs of providing the item or service. Having made the allegation of a breach of contract by the builder, there is an onus on the homeowners to point to some evidence to establish that breach. Yet there is no satisfactory evidence before me in support of the assertion that the builder has failed to calculate either prime cost items or provisional sum items with reasonable care and skill. I therefore dismiss the alleged breach of clause 10.1(c) of the contract. The alleged further breaches of Clauses 9, 10 and 11 of the contract by the builder are also matters that have insufficient particularity and such inadequate evidential foundation that these also cannot be established. I will however have something more to say about provisional sum and prime cost items, later in these reasons, in the context of a an application by the homeowners for a statutory remedy under s 60 of the Domestic Building Contracts Act 2000.
The Liquidated Damages Claim
[72]The Homeowners contend that the project has not attained practical completion, such that they are entitled to lay claim to liquidated damages at the contractually agreed rate of $75.00 per day. The Homeowners now claim the sum of $15,630.00, being their calculation of $75.00 per day from 14 September 2010 (the date set by the contract for practical completion) until 11 April 2011, being the first day of the hearing of this matter before QCAT.
[73]Not by any stretch could a claim for liquidated damages in this sum be available to the homeowners. Any entitlement to liquidated damages must first accord with what is permissible under Clause 18.1 of the standard Master Builders’ Residential Building Contract.
[74]Clause 18.1 provides that liquidated damages are only payable from the date of practical completion until the sooner of either the day on which the project attains practical completion; or the date on which owner takes possession. It is a matter of record that the homeowners took possession of No 33 Leila Place from the builder around 16 September 2010, thus terminating any entitlement they may have had to liquidated damages just two days after the date that had been agreed for practical completion. Even that entitlement is no more than academic, as I have found that Fine Edge did attain practical completion one day before the agreed completion date. I find that the homeowners therefore have no entitlement to liquidated damages.
The Trust Monies Entitlement
[75]The sum of $28,000 – representing the quantum of the builder’s final progress claim made under Fine Edge invoice No. 265 (as was issued by the builder to the homeowners by hand on 13 September 2010) is presently held in trust by the Queensland Master Builders Association, whom have produced a trust account receipt for same dated 16 September 2010.
[76]It follows from my earlier line of reasoning that I am of the view that practical completion was reached by Fine Edge on 13 September 2010. I order therefore that the responsible officer at Master Builders’ Queensland now release the sum of $28,000 (QMBA File Reference T-10-024) to Sambuc Pty Ltd (Trading as Fine Edge Homes).
The Commercial Issues
[77]As the term has been used in these proceedings the so-called “commercial issues” really relate to the builder’s contractual entitlement to be paid interest on late payments by the homeowners in relation to progress claims, as well as the builder’s entitlement to payment for various provisional and prime cost items under the contract, particularly in light that the homeowners have now made application to QCAT to have some of these determined pursuant to sections 59 and 60 of the Domestic Building Contracts Act 2000.
The Interest Claims
[78]The dispute in this domain relates to late payments of builder’s progress claims numbered: 2 (‘Slab down’); 5 (‘Frames and Trusses installed’); 6 (‘Roof installed’); 7 (‘Decking’); 9 (‘Internal fit off’); and 11 (‘Final’).
[79]Progress claim 2 (“Slab down”) was submitted to the Homeowners on 18 August 2009 by means of invoice 115. Pursuant to item 20 (‘payment period’) of the contract, payment was required within 5 days, or by 24 August 2009. The homeowners did not make payment until 3 September 2009. The payment was late, by 9 days.
[80]Progress claim 5 (“Frame and trusses installed”) was submitted to the Homeowners on 15 February 2010 by means of invoice 161. Pursuant to the contract payment was required by 20 February 2010. The homeowners did not make payment until 22 March 2010, some 30 days late.
[81]Progress claim 6 (“Roof on”) was submitted to the Homeowners on 24 February 2010 by means of invoice 167. Pursuant to the contract payment was required by 1 March 2010. The homeowners did not make payment until 22 March 2010, some 21 days late.
[82]Progress claim 7 (“Decking”) was submitted to the Homeowners on 5 March 2010 by means of invoice 171. Payment was required by 10 March 2010. Payment was not made by the homeowners until 22 March 2010, some 20 days late.
[83]Progress claim 9 (“Internal fit off”) was submitted to the Homeowners on 7 June 2010 by means of invoice 228. Payment was required by 12 June 2010. Payment was not made by the homeowners until 16 June 2010, some 4 days late.
[84]Progress claim 10 (“Landscaping”) was submitted to the Homeowners on 22 July 2010 by means of invoice 243. Payment was required by 27 July 2010. The homeowners did not make payment until 19 August 2010, some 23 days late.
[85]Progress claim 11 (“Final”) was submitted to the Homeowners on 13 September 2010 by means of invoice 265. Payment was required by 18 September 2010. Payment was not made by the homeowners and instead this sum was placed into the QMBA trust, after the Homeowners had notified Fine Edge of a dispute regarding practical completion. Fine Edge now seeks interest on that sum, as well.
[86]In their materials filed on 9 February 2011 the homeowners seek, in part, that this tribunal determine the entitlement of the builder to payment of interest in relation to these late payments of the builder’s progress claims. In their written response submissions to the cross-application filed by Fine Edge, which was filed by the homeowners on 5 May 2011 (by leave given by me at the conclusion of the hearing), the homeowners raise, for the first time, the point that the progress claims presented to them by the builder did not contain any certification from the builder that the works had been completed to the relevant stage, as required by clause 11.6. This is not a matter that has been raised by the homeowners at any time prior to 5 May 2011, such that I find that the homeowners have waived the benefit of clause 11.6.
[87]I determine that the homeowners did receive progress claims in sufficient conformity with clause 11.6, such that their obligations under clause 11.7 to pay the builder on each of those progress payments did arise, and, to the extent that these were not paid within the time allowed by item 20 of the contract, Fine Edge became entitled to interest pursuant to clause 11.9 of the contract at the rate specified in item 19 of the contract, being 15%, calculated daily. Accordingly I find that in relation to the late progress payments the homeowners should pay Fine Edge interest in accordance with the following:
Stage & Amount Days overdue Interest Calculation Interest Amount 2 (‘Slab down’)
$84,0009 9/365.25 x .15 = 0.003696 $310.46 5 (‘Frames and Trusses installed’) $28,000 30 30/365.25 x .15 = 0.0123203 $344.97 6 (‘Roof installed’) $28,000.01 21 21/365.25 x .15 = 0.0086242 $241.48 7 (‘Decking’)
$56,000.0020 20/365.25 x .15 =
0.0082135459.96 9 (‘Internal fit off’)
$112,000.004 4/365.25 x .15 =
0.0016427$183.98 11 (‘Final’)
$28,000.01204 204/365.25 x .15 = .0837782 $2,345.79 Total Interest: -- -- $3,886.64
Provisional sum and prime cost items
[88]On 22 July 2010 Fine Edge sent the Homeowners “the first and not the final”[1] invoice for provisional sum and prime cost items (‘ps/pc’) in the form of Tax Invoice No. 244, in the sum of $36,300.97.
[1] See the e-mail from Mr David Manion to Mr Jon Bell dated 22 July 2010.
[89]By an e-mail dated 9 August 2010 Mr Manion then sent an updated invoice for ps/pc items, which says that it included all the various invoices that Fine Edge had received from various subcontractors and suppliers for ps/pc items. I accept that to be the case. On or about 24 August 2010 Invoice 244 was reduced to $24,189.99 after taking into account some payments and credits, totalling $12,110.98.
[90]The homeowners have, again by their filed material, specifically contested the costs that have been passed on to them for the following ps/pc items: air-conditioning; floor sanding and polishing; and the external (veranda) balustrade.
[91]Earlier in these reasons I have indicated that the state of the evidence does not allow me to make a finding that Fine Edge are in breach of a contractual warranty raised by clause 10.1(c) of the standard Residential Building Contract, by reason of any (alleged) failure to calculate prime cost items and/or provisional sum items with reasonable care and skill. That however is not the end of the matter, as there are also parallel statutory remedies that are available to the homeowners, pursuant to s 60 of the Domestic Building Contracts Act 2000 (‘DBCA’). The homeowners now rely upon s 60 of the DBCA, and ask that QCAT use s 60 of the DBCA to reduce their liability with respect these particular provisional sum items, down to the amount originally stated in Part B of the contract, to the extent that QCAT considers appropriate.
[92]To understand the potential remedy for homeowners to be found in s 60 of the DBCA, one must first have recourse to s 59. The relevant portions of s 59 provide that, with respect to prime cost or provisional sum items:
59 Stating amounts
(1) A building contractor must not enter into a regulated contract stating-
(a) an amount for a prime cost item that is less than the reasonable cost of supplying and delivering the item; or
(b)a provisional sum that is less than the reasonable cost of providing the contracted services to which the sum relates.
Maximum penalty - 50 penalty units.
…
(3) In deciding, for subsection (1), what is a reasonable cost, regard must be had to—
(a) the information the building contractor had, or reasonably should have had, when the contract was entered into; and
(b) the nature and location of the building site.
[93]Section 60 of the DBCA then provides:
60 Effect of improper statements
(1) This section applies if a building contractor enters into a regulated contract in contravention of section 59(1).
(2) The contravention does not make any provision of the contract illegal or void.
(3) However, the tribunal may, on an application made, as provided under the QCAT Act, to the tribunal by the building owner, reduce the building owner's liability, for the item or contracted services to which the stated amount or sum relates, to the extent the tribunal considers appropriate.
[94]Disputes regarding escalations in the costs of provisional sum allowances and/or prime cost items in domestic building disputes are all too common before QCAT. This was also the case before QCAT’s predecessor, the Commercial and Consumer Tribunal (‘CCT’).
[95]In T & T Corporation Pty Ltd t/a Townsend Building Services v Boyaci, B. [2008] QCCTB 135 (“T & T”), CCT Member Butler AM SC (as he then was), expressed the view that dramatic provisional sum increases really warrant the preparation of a written variation, by the builder, for presentation to the homeowner. Here, the thinking was that this would then provide the party who is ultimately responsible for payment with a proper opportunity to consider their position, about the costs of the proposed works, before instructing the builder to proceed with it. Member Butler put the matter in these terms:
The builder is entitled to receive the provisional sum increase where there has been a legitimate increase in cost of the specified work ordered by the proprietor over the amount estimated by the builder at the time of contracting. Ordinarily this would arise because the price charged by a sub-contractor varied from the builder’s original estimate. The magnitude of the increase claimed here indicates it is not such a [sic] increase. In the absence of any specific evidence, one can only assume that an increase of such a magnitude reflects the introduction of work not contemplated at the time the provisional sum estimate was made. If that be so, the cost of additional work should have given rise to an application for a variation of the contract sum so that the respondent could consider his position as to the nature and extent of the proposed works.
[96]In T & T, Member Butler found that an increase in joinery costs for the project did not constitute a legitimate provisional sum, but should have been the subject of a variation, raised by the builder. The proprietor of the premises where the work was performed in T & T had not been given an opportunity to consider his position, which would have occurred had the works been the subject of a written variation. This is for the reason that a written variation, to be valid, needs to be signed before the works are performed. Accordingly, Member Butler fixed the costs for the joinery work performed at the level of the provisional sum estimate reflected in the contract.
[97]The authority afforded by T & T is not absolutely determinative of the approach that must be taken in an effort to resolve these types of disputes. For reasons that I will shortly elaborate, the circumstances of this case are different, at least in my view, to those that arose in T & T.
[98]On the facts before me, I consider the approach taken by CCT Member Oliver (as he then was) in Sparkes v Bali Pools Pty Ltd [2009] QCCTB 95 (“Sparkes”) affords a more apposite approach, in this case. In Sparkes, Member Oliver (I think correctly), identified that the effect of s 59 of the DBCA, by virtue of s 60, “does not vitiate the contract, but provides for a penalty to the contactor and permits a financial adjustment to ensure fairness”. This is expressed in s 60(3) as a discretion that inures in QCAT, by reason of the expression used in the provision: “to the extent the tribunal considers appropriate”. In other words the adjustment need not be all the way down to the estimate originally allowed by the builder for the provisional sum or prime cost item, in the contract.
[99]I find that the facts before me are distinguishable from those that were before Member Butler in T & T. In contrast to matters in T & T, where the evidence did show that the homeowner’s joinery requirements had remained unchanged, here, I find that the state of the evidence does not allow me to draw that conclusion. In deciding whether to reduce the homeowners’ liability for the quantum of the air-conditioning, floor polishing and balustrade, I must have regard to the information that Fine Edge had, or reasonably should have had, at the time the contract was entered into, as well as any extrinsic evidence regarding the escalation in price for each of these items. I must, of necessity, do that on a piecemeal basis.
[100]With respect each these disputed costs, the homeowners have not produced any actual evidence (beyond their own assertion) that might tend to show that these works could have been undertaken for less than the costs that were eventually passed on to them, with the builder’s margin.
[101]Unfortunately Fine Edge also did not address these issues with any great particularity, such that it now falls to me, largely by an examination of the available sub-contractor invoices for each of the disputed items, in order to make some determination as to what seems just and reasonable, in all the circumstances.
The Air-conditioning
[102]As regards the air-conditioning, the homeowners say that the provisional sum amount allowed by the builder was $11,925.45. Despite the scope of air-conditioning works having been allegedly reduced by them to exclude air-conditioning from the rumpus room and bedroom 4, the amount eventually claimed by Fine Edge for air-conditioning works was $16,702.20; or an increase of about 40% over the sum provided on a provisional basis in the contract.
[103]There is limited evidence from either of the parties going to the circumstances of the air-conditioning selection and installation. I do note an e-mail from Mr Manion to Mr Bell on 31 July 2009 enclosing a quote for air-conditioning works. That e-mail also advises that the system would require an upgrade to three-phase power and the installation of a separate metre box (themselves matters the subject of an agreed variation). The air-conditioning invoices provided by the builder (dated 2 July 2010) from Elliott Air Conditioning indicate the system, was an 18Kw ducted system, quoted at $13,753, which was just for the air-conditioning unit, alone. Other associated works (ducting, insulation, and so on), were also performed by Elliott Air Conditioning.
[104]The price of ducted air conditioning is notoriously variable, depending on what type of system is ultimately selected. I am not prepared to find that the provisional sum allowance amount of $11,925.45 was manifestly inadequate or in any way a provisional sum that might be regarded as less than the reasonable estimated cost of providing the contracted services to which the sum relates, as contemplated by s 59 of the DBCA. I decline therefore to find any breach of s 59 of the DBCA, and hence do not have the power to exercise a discretion and reduce the amount of Fine Edge’s claim for this particular item, pursuant to s 60 of the DBCA.
Floor Sanding and Polishing
[105]The homeowners say that Fine Edge allowed a provisional sum amount of $4,727.27 under the contract, yet they were eventually charged $9,920.51 for the finishing of their hard wood floors (an increase of about 110%), despite the homeowners claiming that there had been no change in the scope of works for this item.
[106]The evidence as to why the cost of this provisional sum item blew out by so much is scant, indeed. Floor sanding and polishing is a far more predictable undertaking than is that of air conditioning installation. Given the state of the evidence my sense of the matter is that Fine Edge made insufficient allowance for this particular provisional sum item, in breach of s 59(1)(b) of the DBCA. In light of this I am prepared to make an adjustment under this head pursuant to s 60(3) of the DBCA. I do so solely on the basis of the statutory discretion. As indicated previously I am not prepared to go further and find that Fine Edge are in breach of clause 10.1(c) of the contract, given the state of the evidence.
[107]In my view, a reasonable escalation in the cost of floor sanding and polishing would be no more than about 20% of the sum provisionally allowed. I will therefore allow a payment for this provisional sum item on the basis of:
Contract allowance: $4,727.27
Reasonable additional cost ($4727.27 x 0.2): $ 945.45Builder’s margin on excess ($945.45 @ 20%): $ 189.09
Allowable Claim: $5,861.81
The Veranda Balustrade
[108]In respect of the veranda balustrade, the homeowners say that the provisional sum allowed for this item was $12,000 on an assumption that the balustrade would be 43.1 lineal metres. Yet, the homeowners also say the scope of works was reduced by them during construction by 6.617 lineal metres (making for a total balustrade length of approximately 36.5 lineal metres). Ultimately, Fine Edge has charged them $18,223.81, or about 52% more, for this item. I have seen photographs of the selected balustrade. It is an architectural feature of the home (in other words a non-standard item), wherein steel and timber are combined. In all the circumstances I am not inclined to the view that the sum claimed by the builder on a provisional basis is unreasonable, or that the amount allowed on a provisional basis is in breach of s 59(1) of the DBCA. I find therefore that the homeowners should pay the amount claimed by Fine Edge for this item.
The Builder’s Counter-Application.
[109]Fine Edge filed a Response and/or Counter-Application before QCAT on 17 August 2010, originally seeking that the homeowners’ application be dismissed, together with payment of $66,721.20 then claimed to be owing to it in accordance with various unpaid progress claims. For reasons that should by now be clear from the foregoing parts of these Reasons for Decision, I have not dismissed the homeowner’s application, which I have upheld, in part.
[110]Examination must now turn to the builder’s counter-application, which was revised downwards on 21 April 2011 to the outstanding tax invoices,[2] which total $74,974.47. Fine Edge also however acknowledge that there are a number of credit notes,[3] totalling $12,583.58, thereby making for a claimed outstanding balance of $62,390.89. The homeowners contend[4] that they have paid Fine Edge in full, and that no amounts remain outstanding.
[2] Invoice Nos. 110, 109, 117, 242, 244, 261, 260, 265 and 264.
[3] Credit Notes Nos. 263, 258, 259, 195, 121 and 282.
[4] See the homeowner’s response to cross application, filed before QCAT on 5 May 2011.
[111]Invoice 110 relates to a variation for steel portals as arose per a variation contract by signed e-mail on 5 August 2009. The amount is $2,839.00. In my view, that is a legitimate claim and the homeowners should now pay it.
[112]Tax invoice 109 was raised on 10 August 2009 and relates to a variation to the contract for three-phase power connection and upgrade to the meter box, as per an e-mail of 4 August 2009. The amount claimed by invoice 109 is $1,900.94. Again, in my view this is a legitimate claim by the builder, and the homeowners should now pay it.
[113]Fine Edge raised invoice number 119 on 25 August 2009. It is a claim in the sum of $2,474.34 referable to additional costs for rock anchors (and builder’s margin), referable to the construction of some retaining walls. I am of the view that this sum should also now be paid to Fine Edge, by the homeowners.
[114]Invoice number 242, in the sum of $2,420.22, relates to additional excavation costs incurred by the builder referable to the rectification of cave-ins to footings caused by rain; unforeseen rock excavation of footings, and additional excavator hire time, for the construction of a sewerage line at the rear of the house. The homeowners have refused to pay this invoice. The homeowners contend that the builder has no entitlement to payment for these sums because the builder failed to notify them in relation to his discovery of a “latent condition” as required by Clause 14.1 of the Standard Contract.
[115]It is to be noted that not all of invoice 242 relates to any latent condition, as some of these costs (for example, additional machine time and additional costs occasioned by the cave-in of footings) is not referable to any latent condition, as defined. On balance, I am not prepared to find that the builder has failed to comply with Clause 14.1 of the contract insofar as it requires the builder to notify the owner of latent conditions. This is because I note e-mail correspondence from Mr John Bell to Mr David Manion on 31 October 2009 in which Mr Bell approves variations referable to a redesign of footings for the construction of the house at 33 Leila Place. Although Mr Bell also purports by that e-mail that his approval is conditioned upon “no extra costs for this variation”. It is sufficiently clear that the homeowners have approved additional works referable to the preparation of footings, and it is unreasonable for them to take the benefit of these variations yet unilaterally declare that they will not pay for the costs of additional works occasioned by them. In my further view, the additional costs occasioned by the need for 7 ½ hours of unforseen excavator hire time in order to undertake rock excavation for the preparation of these footings is not a matter that was reasonably foreseeable by the builder, notwithstanding that the builder had a geo-technical report beforehand. Oftentimes these types of things cannot be estimated in advance with any precision. Clause 14.5 of the contract does not, in my view, preclude Fine Edge from an entitlement to these additional costs. The full amount outstanding on invoice 242 should now be paid to the builder.
[116]Invoice number 244 is for provisional sum and prime cost items. Fine Edge raised it on 24 August 2010 in the sum of $33,000.88. The homeowners take issue with same saying that many of the items covered in invoice 244 are replicated in invoices 264 and 265. They also say that invoice 244 was met by them when they paid the progress claim for landscaping. On balance I prefer the evidence of the builder. In my view the homeowners are required to pay tax invoice 244.
[117]Invoice number 261 was raised by the builder for a variation signed on 17 July 2009 for a rear deck extension beyond that which had been originally envisaged in the plans that accompanied the building contract for the house at 33 Leila Place. It is in the sum of $2,200.00. The homeowners should also now pay that sum.
[118]Similarly, invoice 260 also relates to a signed variation (signed on 8 March 2010) for an adjustment made to the timber frame and door to the powder room. The amount of the invoice is $1,220.00. In my view that sum should now be paid by the homeowners.
[119]Invoice 265 relates to the final progress claim. Earlier in these Reasons for Decision I have indicated that the amount of the final progress claim which has been placed by the homeowners in trust with the Queensland Master Builders Association should be paid to Fine Edge, on the basis of my determination that the builder had attained practical completion on 13 September 2010.
[120]The final invoice that Fine Edge claims remains outstanding is invoice 264. This invoice is also for provisional sum and prime cost items and is in the amount of $12,204.32. The homeowners contend that the items covered by this invoice are a duplication of items previously included in invoice 244. I have not been provided with any examples of any alleged duplication. I do not accept the homeowners’ contention in that regard, and note that the builder is in a better position to determine which items have now been paid, and which have not. The homeowners should also pay invoice 264.
Credit Adjustments
[121]As indicated earlier in these reasons, the builder has identified certain items for which credit notes and adjustments should be given to the homeowners. The builder has included these credit notes as part of its final submissions filed before QCAT on 21 April 2011. I am satisfied that on a full settling of accounts, the builder is correct in identifying that $12,593.58 should now be credited against any outstanding balance owed by the homeowners to the builder. I conclude therefore that Fine Edge has a legitimate claim for $62,390.89.
Final Accounting
[122]In light of my foregoing reasons, there should be contract adjustments in favour of Mr and Mrs Bell in accordance with the following:
·SHS Posts $1,200.00
·Internal Painting $2,000.00
·Rainheads $500.00
·Floor Wastes $3,063.50
·S 60 DBCA adjustment: Floor polishing $4,058.70
TOTAL:$10,822.20
[123]Fine Edge has established an entitlement to $62,390.89 and I have found a further entitlement to interest on late payment of progress claims of $3,886.64, thus making for a total entitlement by the builder from the homeowners of $66,277.53. The sum still owing to Fine Edge should then be reduced by $10,822.20 on the basis of the contract variations that I have found, such that I find that the Applicants now owe to the Respondent the sum of $55,455.33. This figure includes the sum of $28,000 currently held in the Queensland Master Builders’ Trust Account, pending the resolution of this dispute.
Conclusions & Order
[124]In conclusion, I order as follows:
(a)By consent, all issues relating to H3 treatment of timber are dismissed.
(b)The responsible officer at Master Builders’ Queensland is to release from trust the sum of $28,000 (QMBA File Reference T-10-024) to Sambuc Pty Ltd (Trading as Fine Edge Homes).
(c)The Applicants are to pay to the Respondent the further sum of $27,455.33 within 28 days of the date of these orders in final satisfaction of the respondent’s claims for payment for the costs of constructing the house at 33 Leila Place, at Pullenvale.
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