Chen v Mason & Mason Investments Pty Ltd

[2016] NSWCATCD 4

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:	Chen v Mason & Mason Investments Pty Ltd [2016] NSWCATCD 4
Hearing dates:	12 November 2015
Decision date:	07 January 2016
Jurisdiction:	Consumer and Commercial Division
Before:	C R Xuereb, General Member
Decision:	The respondent must pay $11,052.65 to the applicant within 28 days of the date of these orders.
Catchwords:	Building contract, variation, consideration for variation, completion, liquidated damages
Legislation Cited:	Home Building Act 1989
Cases Cited:	Musumeci v Winadell Pty Ltd 34 NSWLR 723
Category:	Principal judgment
Parties:	Wen Chen – applicant Mason & Mason Investments Pty Ltd – respondent
Representation:	Applicant in person No appearance for or on behalf of respondent
File Number(s):	HB 15/48448
Publication restriction:	Nil

REASONS FOR DECISION

APPLICATION

1. The application was lodged on 20 August 2015. The applicant, Wen Chen, claims from the respondent, Mason & Mason Investments Pty Ltd, trading as House Logic Solutions liquidated damages at the rate of $350.00 per week from 25 July 2014 to 3 August 2015.

JURISDICTION

2. The claim concerns residential building work in respect of the construction of a granny flat at the applicant’s property. Section 48K of the Home Building Act 1989 gives the Tribunal jurisdiction to hear and determine any building claim brought before it in accordance with Part 3A of the Act. Part 3A of the Act is concerned with resolving building disputes and building claims. Section 48A defines “building claim” widely to include claims for money arising out of the supply of building goods or services whether under a contract or not. The Tribunal finds that it has jurisdiction to hear and determine the claim.

BACKGROUND

3. The parties entered into a written home building contract in the form provided by NSW Fair Trading (revised January 2012) on or about 17 September 2013. The contract price was $99,947.00. The contract did not specify a time for completion of the works which were to be carried out. In clause 12 of the contract, there was a schedule of progress payments and the total amount payable under the contract.

4. The applicant contended that the contract had been varied so as to specify a completion date for the works and included the imposition of an additional term to the contract which entitled the applicant to claim liquidated damages from the respondent if the respondent failed to complete the works by the completion date stipulated in the contract variation.

5. The applicant claims that the respondent defaulted in that the building was not completed by the agreed completion date and the applicant is consequently entitled to be paid liquidated damages by the respondent.

6. The matter came before the Tribunal in a group list for conciliation on 30 September 2015. As the group list hearing, the applicant was present and the respondent was represented.

7. The parties were unable to resolve the dispute at the group list hearing and the matter was adjourned to a date to be fixed by the Registrar. Orders were made on 30 September 2015 that the applicant was to provide to the Tribunal and to the respondent all documents on which she intended to rely by 14 October 2015. The respondent was required to provide its documents by 28 October 2015.

8. The applicant did not comply with the order and only filed her documents with the Tribunal registry on 3 November 2015. The applicant informed the Tribunal that she sent a copy of the documents to the respondent at its business address in Parramatta at the same time.

9. No documents were received from the respondent by the Tribunal. The applicant informed the Tribunal that she also did not receive any documents from the respondent.

10. The Tribunal notes that the applicant lodged her documents about three weeks later than ordered and only nine days before the hearing.

11. At the commencement of the hearing, on 12 November 2015, there was no appearance for or on behalf of the respondent. At the request of the Tribunal, the applicant attempted to call the respondent’s business premises. The applicant informed the Tribunal that her attempts to contact the respondent’s representative was unsuccessful as she was met with a recorded message. The Tribunal also requested the Penrith registry of the Tribunal to attempt to contact the respondent but that attempt by registry staff was also met with a recorded message.

12. The hearing was due to start at 9:15 AM on 12 November 2015, but the commencement of the hearing was deferred whilst the attempts were made to contact the respondent. When those attempts failed, the hearing proceeded in the respondent’s absence, commencing at 9:40 AM.

EVIDENCE

13. The only witness to give evidence was the applicant herself who gave evidence on oath. The applicant said that on 17 September 2013, she entered into a written building contract with the respondent for the construction of a granny flat at her home in Dundas. The contract price was $99,947. The construction work commenced in or about March 2014.

14. Clause 12 of the contract provided for six progress payments. The fourth progress payment required under the contract was for an amount of $24,986.75 (being 25% of the contract price) and that was due at the lock-up stage. The applicant paid that instalment to the respondent on 20 June 2015.

15. The last two instalments due were $14,992.05 (being 15% of the contract price) at the fixings and lining stage and $4,997.35 (being 5% of the contract price) on completion.

16. A tax invoice for the fifth instalment was sent by the respondent to the applicant by email on 30 June 2014.

17. In her evidence, the applicant stated that when she received the fifth instalment tax invoice she went, with her husband, to the respondent’s business premises in Parramatta to seek an amendment to the written contract to provide for a completion date. The date for completion of the contract had been omitted from clause 6 of the contract signed on 17 September 2013.

18. On arrival at the respondent’s premises, the applicant and her husband met with a person called Michael who was, apparently, the father of the Zac Mason, a director of the respondent company. The applicant told Michael that unless a completion date was specified, she would not pay the fifth progress payment claimed under the tax invoice dated 30 June 2015. Michael told the applicant that a completion date would be provided but refused to write it into the contract dated 17 September 2013 as the applicant had then requested him to do. The applicant and her husband left the respondent’s premises.

19. On 3 July 2014, an email from Eve Baldin on behalf of House Logic was received by the applicant. The relevant parts of the email are reproduced:

“Your completion date 25th July, 2014 but my aim is for the 18 July, 2014.

To complete this task could you please forward your progressive (sic) payment to Zac at your convenience so that I can finish ordering your materials to site.

I have set a high standard to complete your project with confidence, but for unforeseen circumstances House Logic will pay you liquidated damages each week in the amount of $350 if I do not complete construction on the said completion date.”

20. On 4 July 2013, the applicant responded to the email from the respondent on the following terms:

“Hi Eve/Zac

Richard Wang came on the site yesterday to finish cornice. So I made payment $4992.05 today for invoice #1266 and scheduled $10,000 on Monday for the same invoice. Please confirm receipt.

Thanks for your below email regarding completion date which supersedes corresponding part in the contract as Michael told us so last week.”

21. Clause 8 of the contract dated 17 September 2013 relevantly provides:

“The work will be completed when the contractor has finished the work in accordance with the contract documents and any variations (and) it is free of apparent defects…

When the contractor believes the work is complete, the contractor must notify the owner in writing certifying that the work has been completed in accordance with this contract… “

22. The applicant gave evidence that she did not receive any notice in writing that the work had been completed until she was provided with a copy of a final occupation certificate dated 3 August 2015 by email from the respondent.

23. The applicant’s documents show that there were two inspections by Fair Trading officers in respect of building defects – the first on 25 November 2014 on the second on 30 June 2015.

24. The report for the inspection conducted on 25 November 2014 indicates some 26 defects. Defect 14 has the comment: “Pantry cupboard in kitchen is 300mm wide, specification in quote states 400mm wide. The contractor will provide a credit of $200.00 in regard to this issue”.

25. The report for the inspection conducted on 30 June 2015 noted that agreement was reached that all building repairs will be completed by 3 July 2015, the outstanding electrical defects would be rectified by 10 July 2015 and the builder would provide the applicant with an occupation certificate on completion of the works.

26. The electrical defects were particularised in an email dated 14 June 2015 from Angelo Hatzikalimnios (an independent electrical contractor) to the applicant. The email from Angelo Hatzikalimnios was forwarded by the applicant to the respondent on 15 June 2015.

27. The applicant gave evidence that the respondent did send an electrician to rectify the electrical defects but the electrician sent by the respondent only made things worse.

28. The electrical works were still defective after the respondent’s electrician attempted to correct the deficiencies. The applicant then accepted a quote from Angelo Hatzikalimnios to rectify the electrical installations to enable compliance. The work was carried out by Mr Angelo Hatzikalimnios who issued a Certificate of Compliance – Electrical Work Certificate No. 0896934 on 28 August 2015.

29. Clause 27 of the contract provides a mechanism for the resolution of disputes. The final paragraph of the clause states:

“Even if a dispute has arisen, the parties must, unless acting in accordance with an express provision of this contract, continue to perform their obligations under the contract so that the work is completed satisfactorily within the agreed time.”

30. The applicant also gave evidence that she let the granny flat to a person named Maria Johnson under a commercial arrangement for a period of four weeks from 10 March 2015 at a weekly fee of $420. The applicant stated that Maria Johnson was introduced to her by a mutual friend. Apparently, Ms Johnson was seeking short term accommodation as part of a visit to Australia from New Zealand.

FINDINGS

31. On the uncontested evidence of the applicant, the Tribunal makes the following findings:

1. there was a contract in writing dated 17 September 2013 between the applicant and the respondent for the construction of a granny flat at the applicant’s property for a price of $99,947.

2. the construction works required under the contract did not commence until in or about March 2014.

3. the contract, in its original form, did not specify a completion date for the building works.

4. the contract provided that the completion of the works was to be evidenced by the giving of a written notice by the respondent to the applicant.

5. the contract specified that the works were to be free of apparent defects on completion of the works.

6. there were defects in the granny flat building until at least some time in or about August 2015 when the occupation certificate was issued, as evidenced by the Fair Trading reports dated 25 November 2014 and 10 July 2015.

7. the respondent offered to vary the contract dated 17 September 2013 by providing that the completion date would be no later than 25 July 2015 as evidenced in the respondent’s email dated 3 July 2015.

8. the respondent also offered to vary the contract dated 17 September 2013 by providing that if the building works were not completed by 25 July 2014, the respondent would pay the applicant $350 per week by way of liquidated damages from 26 July 2014 to the date of completion of the building works.

9. the applicant accepted the offers made by the respondent to vary the contract in the manners set out in (g) and (h) above, by an email dated 4 July 2014.

10. the electrical installations installed by the respondents were defective and it was necessary to have the installation rectified to obtain compliance with electricity safety regulations.

11. the respondent agreed to allow $200 for a mis-sized kitchen cabinet as evidenced in the Fair Trading report dated 25 November 2014.

12. the applicant leased the granny flat under a commercial arrangement to a third party from 10 March 2015 for a period of four weeks at a fee of $420 per week.

DETERMINATION

32. The Tribunal is satisfied that the respondent offered to complete the building works by 25 July 2014 and failed to abide by that commitment. Until the defects, which were the subject of Fair Trading intervention and the issue of occupation certificate to the applicant, were rectified, there was no completion of the contract within the terms of clause 8 of the contract dated 17 September 2013.

33. The issue to be determined is whether or not the respondent’s offer to vary the contract by its email dated 3 July 2014 (which offer was accepted by the applicant, as evidenced by her email dated 4 July 2014) is supported by consideration.

34. The applicant had a pre-existing contractual obligation to pay the fifth instalment of $14,992.05 when called upon to do so by the respondent. The applicant unequivocally stated that she would not pay the money until a completion date was written into the contract.

35. The respondent not only obliged the applicant by providing a completion date, but went further and promised to pay liquidated damages if that completion date was not adhered to.

36. Was there consideration for either or both of those promises? In Musumeci v Winadell Pty Ltd 34 NSWLR 723, the Supreme Court decided that where the performance of one party to a contract becomes doubtful and the other party promises an additional payment or concession to secure the first party’s performance, a practical benefit to the second party or a detriment to the first party is capable of being consideration for the second party’s promise, so long as the benefit to the second party as a result of the first party’s performance is worth more to the second party that any likely remedy against the first party, taking into account the cost to the second party of the payment or concession. The court held that such a promise will be legally binding, provided that it was not made as a result of economic duress, fraud, undue influence or unconscionable conduct on the part of the first party, nor induced as a result of unfair pressure on the part of the first party.

37. The practical benefits to the respondent builder in this case was that the fifth progress payment would be paid promptly without the need for any dispute resolution procedures to be undertaken. From the builder’s perspective, it seems that the building was nearing completion and it was in its interest to accede to the applicant’s request to vary the contract and stipulate a completion date. This move, by the respondent, avoided any potential dispute between the parties which may have necessitated the introduction of a third party to assist in the resolution of the dispute or the intervention of Fair Trading. The Tribunal is satisfied that the offers made by the respondent to vary the contract were made to provide a practical benefit to the respondent to avoid any further dispute and consequential delay. Accordingly, the Tribunal finds that the practical benefit to the respondent provides sufficient consideration to support the variations.

38. The applicant sought only a variation to the contract which provided a fixed completion date. The respondent provided that completion date, but went further, and unilaterally made an offer that if the completion date was not met by the builder, the respondent would pay liquidated damages at the rate of $350.00 per week from 27 July 2014 to the date of completion. Having been made unilaterally by the respondent, the offer was not made as a result of economic duress, fraud, undue influence or unconscionable conduct on the part of the applicant, nor induced by any unfair pressure brought upon the respondent by the applicant. It follows that the respondent’s offer to amend the contract by providing a completion date was also untainted with duress fraud, undue influence or unconscionable conduct on the part of the applicant.

39. The Tribunal has made a finding that the respondent’s offer dated 3 July 2014 to vary the contract to include a completion date of 25 July 2014 and also to include a provision for the payment of liquidated damages in breach of meeting the completion date was accepted by the applicant on 4 July 2014.

40. The obligation of the respondent to pay liquidated damages ceased when the applicant leased the premises on 10 March 2015. It would be inequitable for the respondent to continue to be liable to compensate the applicant for alleged losses after that date when the applicant was clearly prepared to lease the premises notwithstanding the unrectified building defects and inadequate electrical installations.

41. The Tribunal determines that the respondent is liable to pay the applicant the following amounts:

42 (a)	43 Liquidated damages at the rate of $350 per week from 26 August 2014 to 10 March 2015 (195 days at $70 per day)	44 $13,650
45 (b)	46 Reimbursement of electrical rectification work carried out by Angelo Hatzikalimnios	47 $2,200
48 (c)	49 Allowance for mis-sized kitchen cabinet	50 $200
Total		$16,050

42. The Tribunal determines that the final progress payment of $4,997.35 has not been paid by the applicant to the respondent.

43. The Tribunal finds that the respondent is indebted to the applicant in the sum of $11,052.65, being the amount found to be payable by the respondent to the applicant ($16,050.00) less the unpaid final progress payment ($4,997.35).

ORDERS

1. The respondents must pay $11,052.65 to the applicant within 28 days of the date of these orders.

C R Xuereb

General Member

Civil and Administrative Tribunal of New South Wales

7 January 2016

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 24 February 2016