BRADLEY and BURRAN CONSTRUCTION PTY LTD
[2011] WASAT 51
•31 MARCH 2011
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: COMMERCIAL & CIVIL
ACT: HOME BUILDING CONTRACTS ACT 1991 (WA)
CITATION: BRADLEY and BURRAN CONSTRUCTION PTY LTD [2011] WASAT 51
MEMBER: DR B DE VILLIERS (MEMBER)
HEARD: 22 FEBRUARY 2011 AND 3 MARCH 2011
DELIVERED : 31 MARCH 2011
FILE NO/S: CC 1591 of 2010
BETWEEN: LANCIANO BRADLEY
Applicant
AND
BURRAN CONSTRUCTION PTY LTD
Respondent
Catchwords:
Application for leave to review a decision of the Building Disputes Tribunal What constitutes a 'notice' under cl 15(b) of the Home Building Contracts Act 1991 (WA) Lump Sum Building Contract Is a list of defaults that is given to a builder sufficient to constitute a 'notice' for purposes of cl 15(b) of the contract? Is an application before the Building Disputes Tribunal sufficient to constitute a 'notice' for purposes of cl 15(b) of the contract? Was the list of defaults by the owner to the builder clear, concise and unequivocal to constitute a 'notice' under cl 15(b) of the contract? Would a reasonable person standing in the shoes of the respondent have concluded that the list of defaults was in fact a 'notice' under cl 15(b) of the contract? Waiver of rights pursuant to cl 19(e) of the contract Does s 28 of the Home Building Contracts Act 1991 (WA) void cl 19(e) of the contract on the basis that cl 19(e) restricts the right of the applicant to bring a matter for determination? Did the applicant lawfully waive his rights by occupying the house without a lawful termination?
Legislation:
Home Building Contracts Act 1991 (WA), s 17, s 17(1), s 17(4), s 28, s 28(1), s 28(2)
Result:
The application succeeded in part and leave was granted for a review to the decision
Category: B
Representation:
Counsel:
Applicant: Mr GJ Douglas
Respondent: Mr A Searle
Solicitors:
Applicant: Hotchkin Hanly
Respondent: Doyles Contruction Lawyers
Case(s) referred to in decision(s):
Balog v Crestani [1975] HCA 16; (1975) 132 CLR 289
Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd (1997) AC 749
Tangent Nominees Pty Ltd and Edwards [2005] WASAT 119
Wilson v Metaxas [1989] WAR 285
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
The applicant, Lanciano Bradley, sought leave to review a decision by the Building Disputes Tribunal by which it found that a building contract had not been lawfully terminated and that the applicant was not entitled to compensation under the contract. The applicant contended that the Building Disputes Tribunal erred in law and that its decision, if left unreserved, would constitute a serious injustice.
The Building Disputes Tribunal found that the applicant did not give adequate notice, pursuant to cl 15(b) of the standard Home Building Contracts Act 1991 (WA) Lump Sum Building Contract, of the defaults that required to be addressed within 10 days of the notice, whereafter the contract may be terminated. The Building Disputes Tribunal further found that, since the applicant went on to occupy the house without the permission of the respondent, Burran Construction Pty Ltd, the applicant, pursuant to cl 19(e) of the Home Building Contracts Act 1991 Lump Sum Building Contract, waived his right to claim compensation for losses he incurred as a result of having to find alternative accommodation while the house was being completed.
The applicant contended that the notices he gave of defaults, including the commencement of proceedings before the Building Disputes Tribunal, complied with the requirement of a 'notice' under cl 15(b) of the Home Building Contracts Act 1991 Lump Sum Building Contract. The termination of the contract took place after 10 days had expired from the date that the notice was given. The termination was therefore lawful and the applicant should be entitled to claim compensation for losses he suffered. The applicant further contended that cl 19(e) of the Home Building Contracts Act 1991 Lump Sum Building Contract may be void in light of the fact that it restricts the right of the applicant, pursuant to s 28(1) of the Home Building Contracts Act 1991 (WA), to bring a dispute to the Building Disputes Tribunal. The applicant further said that if the decision of the Building Disputes Tribunal were to remain unreversed, it would constitute a serious injustice to him.
The respondent contended that the Building Disputes Tribunal was correct to find that a 'notice' under cl 15(b) of the Home Building Contracts Act 1991 Lump Sum Building Contract is not any ordinary communication or complaint about works. The notice must be of such a nature that it is clear and that it will enable a reasonable person standing in the shoes of the builder to conclude that the contract may be terminated unless the defaults are remedied within 10 days. The respondent says the complaints of defaults issued by the applicant did not meet the test for a notice under cl 15(b) of the Home Building Contracts Act 1991 Lump Sum Building Contract. The respondent further says that parties to a home building contract are entitled to reach agreement on terms that are acceptable to them. The parties were therefore entitled to agree on the content of cl 19(e) of the Home Building Contracts Act 1991 Lump Sum Building Contract. The State Administrative Tribunal should therefore give effect to the contract, since the decision of the Building Disputes Tribunal does not constitute a serious injustice, as the decision was consistent with the terms of the contract and there was no error on its part to apply the terms of the contract.
The Tribunal found that the complaints about the defaults sent by the applicant to the respondent did not comply with the requirements of a 'notice', pursuant to cl 15(b) of the Home Building Contracts Act 1991 Lump Sum Building Contract. The complaints were not sufficiently clear, precise and unequivocal to put the respondent on notice that if the defaults were not remedied within 10 days the contract may be terminated. As a result, the contract was not terminated lawfully.
In regard to the effect of cl 19(e) of the Home Building Contracts Act 1991 Lump Sum Building Contract and the possible impact of s 28 of the Home Building Contracts Act 1991, the Tribunal found that although the Home Building Contracts Act 1991 Lump Sum Building Contract has been in use for some time, there is sufficient doubt as to the correctness of the finding by the Building Disputes Tribunal, and that leave for review should be granted in regard to the question of compensation. The Tribunal was satisfied that cl 19(e) of the Home Building Contracts Act 1991 Lump Sum Building Contract is void by reason of s 28(1) of the Home Building Contracts Act 1991.
The application for leave to review in regard to whether 'notice' had been given was therefore dismissed and the decision of the Building Disputes Tribunal was affirmed. The application for leave to review in regard to the refusal to award compensation was successful and the question of compensation was set down for a hearing.
Issue
Should leave be granted to review the decision of the Building Disputes Tribunal (BDT) on the basis of three grounds, namely that:
1)The BDT erred in law when it found that the Home Building Contracts Act 1991 (WA) Lump Sum Building Contract had not been lawfully terminated;
2)The BDT erred in law when it found that the applicant had waived his right to claim compensation; and
3)To leave the decision unreversed would constitute a serious injustice.
Background
The parties entered into a standard Home Building Contracts Act 1991 (WA) Lump Sum Building Contract (contract) on 20 July 2007. The contract stipulated that the house would be completed on 24 September 2008.
During the process of construction, the applicant brought various defaults to the attention of the respondent.
On 13 August 2008 the respondent informed the applicant that practical completion had been reached.
On 5 October 2008 the applicant identified several defaults that required rectification before, in his assessment, practical completion was achieved.
On 16 February 2009 the applicant lodged a complaint with the BDT in which several complaints about defaults were raised. The applicant contended that the house, in light of the complaints and particularly that the roof was purportedly not compliant with the required wind specifications, was not at a stage of practical completion.
Between August 2008 and August 2009 the applicant continued to bring concerns about defaults to the attention of the respondent.
The applicant sent the respondent a letter on 8 October 2009 to terminate the contract. At that stage the BDT proceedings were underway, although the BDT had not yet determined the complaint. The applicant continued the BDT proceedings and sought from the BDT orders for compensation for rent for alternative accommodation that he had had to pay since the house was not practically complete, as well as an order for rectification of defaults.
The BDT found that the applicant had not lawfully terminated the contract; that the applicant took possession of the house without the approval of the respondent; and that, by his action, the applicant waived his right to claim compensation for the costs incurred to find alternative accommodation.
The decision of the Tribunal was reserved on 22 February 2011 after it had received final written submissions from the parties.
While preparing its reasons for decision, the Tribunal noted that s 28 of the HBC Act may have relevance to the interpretation of cl 19(e) of the contract. Since neither of the parties, nor the BDT, referred to s 28 of the Home Building Contracts Act 1991 (WA) (HBC Act), the Tribunal convened another directions hearing on 3 March 2011 to invite the parties to make written submissions as to whether s 28 of the HBC Act has any relevance to these proceedings. The submissions were received on 18 March 2011 and the decision was reserved.
Contentions by the parties
The contentions of the applicant can be summarised as follows in regard to the three issues:
1)The BDT erred in law by finding that there was no lawful termination of the contract. The BDT should have found that the contract had been lawfully terminated. A notice to terminate the contract need not be in a specific form, provided that it follows on a complaint of defaults and the builder has had sufficient time to remedy the complaint. The 'series of notices in writing and attending a series of meetings', as well as the application for relief before the BDT, more than satisfies the requirements of the contract for 'notice to be given'. The respondent had much more than 10 days to remedy the defaults but failed to do so. The house had not reached practical completion since the roof did not comply with engineering specifications to withstand winds of a rating of up to N2. The applicant was therefore entitled to terminate the contact and to occupy the house.
2)The BDT erred in law by finding that the applicant had no recourse for compensation pursuant to cl 19(e) of the contract. The BDT should have found that cl 19(e) of the contract is void by reason of s 28(1) of the HBC Act and the purported waiver is therefore void by reason of the working of s 28(2) of the HBC Act.
3)It would be a serious injustice to the applicant if, in light of the error in law made by the BDT and the resultant dismissal of the applicant's claim for compensation, leave were not granted for the decision of the BDT to be reviewed.
4)In essence, the applicant contends that there was no practical conclusion on the date specified by the respondent; the applicant terminated the contract lawfully after he had given notice of defaults to the respondent; and the applicant is entitled to compensation for accommodation costs he had to incur, suffered between the purported date of practical completion and the date when the contract was terminated.
5)Leave must therefore be given for the decision of the BDT to be reviewed.
The contentions of the respondent can be summarised, as follows, in regard to each of the issues:
1)The BDT was correct in its finding that the applicant did not lawfully terminate the contract. The purported notices, which constituted a series of meetings and written communications, did not comply with the requirements of a 'notice' under the contract. The complaints upon which the applicant relies did not refer to cl 15(b) of the contract; it did not put the respondent on notice that the contract may be terminated if remedial action were not taken within a specific time; and the complaints would not have been seen by a reasonable person as clear and unambiguous for purpose of compliance with cl 15(b) of the contract. Furthermore, an application with the BDT cannot be construed as a 'notice' for purposes of cl 15(b) of the contract.
2)The BDT was correct to find that cl 19(e) of the contract prevents the applicant from claiming compensation. While it may be unfortunate for the applicant that compensation was not awarded, the BDT had to give effect to the terms of the contract. The parties to any home building contract are entitled to reach an agreement acceptable to themselves. The respondent was entitled to insist on terms that are necessary to protect its legitimate interests. It is not unreasonable for parties to agree, that if an owner takes possession of the works prior to a date given by the builder, that the owner waives its rights pursuant to cl 19(e) of the contract. The applicant occupied the house in breach of the contract and, in doing so, forfeited a claim for compensation under the contract. The effect of cl 19(e) of the contract is as interpreted by the BDT, namely, that it prevents the applicant from bringing an application for compensation since he occupied the house without the approval of the respondent and thereby waived his rights for compensation.
3)The decision of the BDT to give effect to the terms of the contract cannot be construed as a serious injustice to the applicant. The outcome may be unfortunate for the applicant but that does not equate with a serious injustice, since the terms of the contract were agreed to and the BDT gave effect to it.
4)In summary, the applicant did not give proper notice pursuant to cl 15(b) of the contract; the applicant did not terminate the contract in pursuance to cl 15(b) of the contract; the applicant waived his rights to claim compensation pursuant to cl 19(e) of the contract; and no serious injustice exists as a result of the BDT decision.
The application for review should therefore be dismissed and the decision of the BDT should be affirmed.
Principles for successful review
As explained to the parties during the directions hearing and prior to the hearing, the following principles must guide the decision of the Tribunal in regard to an application for leave to review. These principles are set out in Tangent Nominees Pty Ltd and Edwards [2005] WASAT 119 and follow a previous Supreme Court decision in Wilson v Metaxas [1989] WAR 285 at 294.
Those principles are:
a)It must be shown that the decision in respect of which review is sought is wrong, or at least attended with sufficient doubt to justify the grant of leave;
b)If there is a significant question of law to be considered;
c)Even if there are grounds for granting a review, would a substantial injustice be done if the decision is unreversed? What constitutes substantial injustice depends on the circumstances of each case; and
d)The intent and purpose of the legislation may be frustrated if ordinary principles of appeal are applied, and that the Tribunal must therefore be slow to grant leave unless in cases where there is no discernable basis for the decision, or where the rules of natural justice have been breached.
Consideration
The applicant identified three possible grounds for review, namely, that the BDT made an error in law when it found that notice had not been given; the BDT made an error in law when it found that compensation cannot be claimed and that the decision, if left unreversed, would constitute a serious injustice to the applicant.
The Tribunal will deal with these potential grounds for review separately and give its finding for each ground followed by the reasons for the finding.
Error in law: notice of default
The Tribunal finds that the BDT did not err in law by finding that the contract was not lawfully terminated by the applicant pursuant to cl 15(b) of the contract. The reasons for this finding are as follows:
Neither the notices of defaults that were given to the respondent over a period of time by way of written and oral communications nor the application before the BDT comply with the meaning of a 'notice' in cl 15(b) of the contract. Clause 15(b) of the contract provides as follows:
Except as provided herein neither party shall be at liberty to terminate this Contract or exercise or enforce any other right or remedy in relation hereto whether pursuant to this Contract or at law or in equity without first giving to the other party a notice in writing specifying the matter complained of and requesting that other party to remedy it within TEN (10) working days of the service of such notice. If such notice is given and the other party fails within such period to remedy the matter complained of then the party giving such notice may terminate this Contract immediately by giving a separate notice to such effect.
The Tribunal accepts that the applicant, on various occasions, brought concerns about alleged defaults to the attention of the respondent. The applicant also lodged an application before the BDT to determine the complaints. The Tribunal further accepts that the applicant may have felt frustrated that such a long period had elapsed before he could take lawful occupation of the house and that he had to find alternative accommodation.
The question to consider is, however, whether the concerns raised by the applicant over a period of time about defaults were made sufficiently clear, precise and unequivocal to constitute a 'notice' under cl 15(b) of the contract so as to enable the applicant to lawfully terminate the contract. Any complaint, even if minor, cannot be regarded as a 'notice' unless it is sufficiently clear to put the builder on notice that the contract may be terminated pursuant to cl 15(b) of the contract. The effect and consequences of cl 15(b) of the contract are serious and the builder must be made aware that it faces a risk of early termination of the contract.
The Tribunal accepts that in the absence in the contract of a specific form that the notice must take, it is the substance of the communication that must constitute a 'notice'. This is consistent with literature on this topic: see JW Carter, E Peden and GJ Tolhurst, Contract Law in Australia (5th ed, 2007) at para 717. The acceptance of the Tribunal that no specific form for a notice is required but that the Tribunal must be guided by the substance of communication follows the finding in the matter of Balog v Crestani [1975] HCA 16; (1975) 132 CLR 289 in which the form and clarity of a notice aimed at terminating a contract were described as follows:
Of course it is not necessary that the notice should use any particular form of words; it is the substance of what it conveys that matters. For example, it will obviously be sufficient to state that if the notice is not complied with, the party giving the notice will treat the contract as abandoned (Stickney v. Keeble (1915) AC 386) or will rescind it (Canning v. Temby [1905] HCA 45; (1906) 3 CLR 419, at p 431) or will put an end to it (Wendt v. Bruce [1931] HCA 9; (1931) 45 CLR 245, at p 257) … '. (Tribunal emphasis)
and
On the whole, therefore, I have reached the conclusion that upon a fair reading of the notice its concluding words could only reasonably be understood as an intimation of an intention to exercise the powers given by cl 16 of the contract, or in other words to treat the contract as at an end. Once this conclusion is reached it follows that the notice was effective and that the respondent was entitled to rescind the contract.
Additional valuable guidance is given in the matter of Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd (1997) AC 749 at 767 and 768, when his Honour Lord Steyn observed as follows in regard to the question how a 'notice' issued by a landlord to a tenant should be approached:
The question is not how the landlord understood the notices. The [c]onstruction of the notices must be approached objectively. The issue is how a reasonable recipient would have understood the notices. And considering this question the notices must be construed taking into account the relevant objective contextual scene.
…
Thirdly, the inquiry is objective: the question is what reasonable persons, circumstanced as the actual parties were, would have had in mind. (Tribunal emphasis)
The list of defaults sent to the respondent did not constitute a 'notice' for purposes of cl 15(b) of the contract. There was no specific communication or warning that put the respondent 'on notice', that if certain defaults were not remedied, then the contract may be terminated. The notices, correspondence, communications and BDT application that were sent by the applicant to the respondent are typical of the exchanges that often arise between owner and builder during the building process. Each such complaint, notice, correspondence or BDT complaint cannot be construed as serving as a 'notice' for purposes of cl 15(b) of the contract, with the possibility that the contract may be terminated if the default, albeit minor, is not remedied within 10 days.
The purpose of a notice pursuant to cl 15(b) of the contract is to make the builder aware that the complaint is of such serious nature that the contract may be terminated unless remedial action is urgently taken. It puts the builder on notice that certain defaults, as specified in the notice, must be remedied within a very strict time limit of 10 days. None of the complaints by the respondent individually, or all of the complaints collectively, can be construed as constituting a notice under cl 15(b) of the contract.
The wording of the purported notice of 8 October 2009, aimed at terminating the contract, adds to the ambivalence in which the applicant approached the cl 15(b) notice. The applicant stated as follows:
Burran has been provided adequate notice of the breach by [the] Building Disputes Tribunal Claim 0.18731 and has failed or refused to remedy the default. (Tribunal emphasis)
The applicant suggests that the BDT application constituted 'adequate notice' of a breach of the contract. The Tribunal does not accept this contention. While it is clear that the applicant was very unhappy about the state of affairs, and he arguably had grounds to issue a notice pursuant to cl 15(b) of the contract, he did not issue a notice that complies with cl 15(b) of the contract.
In summary, a notice pursuant to cl 15(b) of the contract does not require a specific form or template to be effective. However, even if a specific form of notice is not required, a reasonable person standing in the shoes of the builder who receives the notice must conclude that it is a 'notice' for purposes of cl 15(b) of the contract and that the contract may be terminated unless remedial work is done. Neither the list of defaults nor the application before the BDT would have put a reasonable person standing in the shoes of the respondent on notice that the contract may be terminated.
The Tribunal finds that the BDT did not err in law when it concluded that the contract had not been terminated by the applicant in accordance with cl 15 of the contract.
Error in law: compensation
The Tribunal finds that the BDT did err in law by finding that the applicant, by occupying the house without the permission of the respondent, had waived his right to claim compensation on the basis of cl 19(e) of the contract.
The reasons for this finding are as follows:
a)The 'absolute waiver' contained in cl 19(e) of the contract restricts the right of the owner to have a dispute determined under the HBC Act. The effect of cl 19(e) of the contract is that the parties have endeavoured to contract out of the provisions of the HBC Act and, in doing so, they acted outside the scope of s 28 of the Act. Cl 19(e) of the contract must therefore be held to be void. Cl 19(e) of the contract reads as follows:
If, without the prior written consent of the Builder, the Owner shall take possession of the Site, permit work outside this Contract or provide materials, goods or work to the Site before the Builder gives possession to the Owner under clause 19(d), such action shall constitute an absolute waiver, release and discharge to the Builder from the owner of any and every claim which the Owner had or might have had against the Builder hereunder and the Builder shall thereupon be discharged, released and relieved absolutely from all his obligations and responsibilities under this Contract (other than the Builder's obligations pursuant to Clause 14 – Defects Liability Period) and all moneys payable under this Contract shall become immediately due and payable together with any interest thereon for late payment at the rate specified in Item 8 of the Schedule calculated from the date of the Owner taking such action.
b)Section 17(1) of the HBC Act provides that an owner may apply to the BDT for relief if there has been a breach of the contract. Section 17(4) of the Act provides that one of the remedies that may be ordered by the BDT is for the payment of compensation if there had been a breach of the contract.
c)Section 17(1) and s 17(4) of the HBC Act provide as follows:
(1)Where an owner or a builder under a contract claims that
(a)there has been a breach of
(i)the contract, not being a breach in respect of which an order may be made under section 12A of the Builders’ Registration Act 1939; or
(ii)a provision in Part 2;
or
(b)the owner or the builder is entitled to compensation under Schedule 1,
he or she may apply to the Disputes Tribunal for relief.
…
(4)Upon the making of an application under subsection (1) the Disputes Tribunal may
(a)by such order as it considers appropriate in the circumstances
(i)restrain any action in breach of the contract or of a provision in Part 2; or
(ii)require any work to be done in performance of the contract or to ensure compliance with a provision of Part 2 or to remedy a breach of the contract or of a provision of Part 2;
(b)order the payment of any amount payable under the contract;
(ba)by order declare that an amount is not payable to a person under the contract and, if already paid, order the repayment of that amount;
(c)order the payment of compensation for loss or damage
(i)caused by any breach of the contract or of a provision of Part 2; or
(ii)referred to in Schedule 1;
(d)by order declare that a specified amount of money claimed or money claimed for specified work is not payable by a person;
(e)make such ancillary or incidental orders as the Disputes Tribunal considers appropriate.
Although the BDT did not make a finding as to when the date of practical completion was, the applicant's right to claim compensation for losses he incurred due to the purported breach of the contract cannot be restricted by the working of cl 19(e) of the contract. Even if the applicant failed to give 'notice' of a default as per the contract, it does not automatically mean that the applicant has waived all rights to claim compensation under the HBC Act.
d)The Tribunal does not accept the contention of the respondent that parties are able to agree on terms that are acceptable to them and that are designed to protect their respective interests. The HBC Act provides a minimum framework for protection to both parties and they do not have the liberty to contract out of any provision of the HBC Act unless empowered to do so. Section 28(1) of the HBC Act provides explicitly that an agreement that purports to restrict or exclude the operation of any provision of the Act is void.
Section 28(1) and s 28(2) of the HBC Act provide:
(1)An agreement or arrangement that purports to exclude or restrict the operation of any provision of this Act or to modify any such provision to the disadvantage of an owner is to that extent void.
(2)A purported waiver of a right conferred by or under this Act is void.
The result of these provisions is cl 19(e) of the contract, which purports to restrict or modify the right of compensation of the applicant pursuant to s 17 of the HBC Act, is void.
Serious injustice
The Tribunal is satisfied that if leave to review the decision of the BDT was refused, it would give rise to a serious injustice.
The claim for compensation by the applicant is substantial. The Tribunal cannot at this stage make a determination as to whether the actual claim would succeed and, if so, what quantum should be ordered. The Tribunal also notes that in order to make a determination regarding quantum, the date for practical completion must be determined something the BDT had not done. The Tribunal is, however, satisfied that if the review was not granted it would constitute a serious injustice.
Summary
The Tribunal finds as follows in regard to the three issues:
a)The BDT did not err in law when it found that the contract had not been lawfully terminated, pursuant to cl 15 of the contract. The decision in this regard should be affirmed.
b)The BDT erred in law when it found that, pursuant to cl 19(e) of the contract, the applicant had waived his right to claim compensation. Leave should be granted for this part of the decision to be reviewed; and
c)The decision of the BDT would constitute a serious injustice if it were to remain unreversed.
Orders
1.The application for leave to review the decision of the Building Disputes Tribunal that the contract was not lawfully terminated by the applicant, pursuant to cl 15(b) of the Home Building Contracts Act 1991 (WA) Lump Sum Building Contract, is dismissed and the decision of the Building Disputes Tribunal is affirmed.
2.The application for leave to review the decision of the Building Disputes Tribunal that the applicant waived its right to claim compensation, pursuant to cl 19(e) of the Home Building Contracts Act 1991 (WA) Lump Sum Building Contract, is granted. Leave is granted for the decision of the Building Disputes Tribunal to be reviewed.
3.The review application is adjourned to a directions hearing to be held on 14 April 2011 when programming orders for the hearing will be made.
I certify that this and the preceding [42] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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DR B DE VILLIERS, MEMBER
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