DESHMUKH and DISTINCTIVE BUILDING SERVICES PTY LTD
[2024] WASAT 62
•1 JULY 2024
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: BUILDING SERVICES (COMPLAINT RESOLUTION AND ADMINISTRATION) ACT 2011 (WA)
CITATION: DESHMUKH and DISTINCTIVE BUILDING SERVICES PTY LTD [2024] WASAT 62
MEMBER: MR D AITKEN, SENIOR MEMBER
HEARD: 10 JUNE 2024
DELIVERED : 1 JULY 2024
FILE NO/S: CC 1089 of 2023
BETWEEN: SONAL RAMESH KONDE DESHMUKH
First Applicant
ABHIJEET KALE
Second Applicant
AND
DISTINCTIVE BUILDING SERVICES PTY LTD
Respondent
Catchwords:
Home building work contract (HBWC) - Breach of contract - HBWC remedy for compensation for rent paid by owners for residential accommodation because of delay in completion of dwelling - Water charges, local government rates and interest on applicants' loan are not a loss caused by the builder's breach of contract - Costs
Legislation:
Building Services (Complaint Resolution and Administration) Act 2011 (WA), s 3, s 41(2)(d)(i), s 43(1)(a), s 49(1), s 58(2), s 58(5),
State Administrative Tribunal Act 2004 (WA), s 9, s 87(1)
Result:
Application partly successful
Category: B
Representation:
Counsel:
| First Applicant | : | In Person |
| Second Applicant | : | In Person |
| Respondent | : | Mr K Hassan (acting as Agent) and Mr M Hassan (Director) |
Solicitors:
| First Applicant | : | N/A |
| Second Applicant | : | N/A |
| Respondent | : | N/A |
Case(s) referred to in decision(s):
Deshmukh and Distinctive Building Services Pty Ltd [2024] WASAT 15
Ghetia and Beyond Builders Pty Ltd [2024] WASAT 17
Gileno and Riviera Homes (WA) Pty Ltd [2018] WASAT 48 (S)
Hippydayze Pty Ltd and Mener Group Pty Ltd [2019] WASAT 92
Hippydayze Pty Ltd and Mener Group Pty Ltd [2019] WASAT 92 (S)
Marvelle Investments Pty Ltd and Argyle Holdings Pty Ltd [2010] WASAT 125 (S)
Perth Central Holdings Pty Ltd and Doric Constructions Pty Ltd [2008] WASAT 302
Total Waste Management Pty Ltd v The City of Kalgoorlie-Boulder [2010] WASC 234
Western Australian Planning Commission v Questdale Holdings Pty Ltd [2016] WASCA 32
REASONS FOR DECISION OF THE TRIBUNAL:
Introduction
On 25 October 2021 the applicants, Mr Abhijeet Kale and Ms Sonal Ramesh Konde Deshmukh (Owners) entered into a home building work contract (Contract) with the respondent, Distinctive Building Services Pty Ltd (Builder) for the construction of a dwelling on land owned by the Owners in Piara Waters.
Construction of the dwelling should have been completed by 10 January 2023 (Finish Date). This had not occurred at the time of the final hearing of this matter on 10 June 2024, but during the final hearing the Builder's representative said completion should be achieved by 30 June 2024.
The Owners have been renting residential premises (rental accommodation) in the nearby suburb of Success awaiting the completion of the dwelling.
The Owners are seeking an order for compensation from the Builder for the delay in the completion of the dwelling for several financial costs they have incurred. First, the cost of the rental accommodation from the Finish Date until they can move into the dwelling. Second, for water charges and local government rates they have paid for their land from the Finish Date. Third, the interest paid by the Owners from the Finish Date until the dwelling is completed on the mortgage loan they took out to finance the payment of the contract price.
The Owners are also seeking an order that the Builder pay their legal costs and the cost they paid for a hearing transcript.
For the reasons which follow I have decided to order that the Builder pay the amount of $42,805 to the Owners as compensation for cost of the rental accommodation, but not the water charges and local government rates or the interest on their mortgage loan. I have also decided to order that the Builder pay the amount of $10,704.85 to the Owners for their legal costs and the cost they paid for the hearing transcript.
I will order that the Builder pay those amounts to the Owners within 28 days and that if the Owners are required to pay the final payment under the Contract to the Builder (upon the completion of the construction of the dwelling) prior to that date, then the Owners are permitted to set off those amounts against the final payment.
Background details
This proceeding is the review under s 58(2) of the Building Services (Complaint Resolution and Administration) Act 2011 (WA) (BSCRAAct) of the decision of the Tribunal in proceeding CC 698/2023 (original proceeding) to decline to make an order in favour of the Owners regarding their claim for compensation for the delay by the Builder in the completion of the dwelling.
Section 58(5) of the BSCRA Act provides that a review application cannot be made under s 58(2) unless the Tribunal gives leave for review. I granted leave to review the decision of the original Tribunal on 6 March 2024 for the reasons given in Deshmukh and Distinctive Building Services Pty Ltd [2024] WASAT 15 (Deshmukh).
Following that decision, the Owners and the Builder were each given the opportunity to file submissions, documents and statements of evidence prior to the final hearing of this review on 10 June 2024 (final hearing).
The Owners filed (and gave to the Builder) a written statement of the orders they are seeking, a book of the documents they wish to rely on and a statement of evidence of Mr Kale.
The Builder did not file any response, documents or statement/s of evidence.
At the final hearing the Owners' book of documents and Mr Kale's statement of evidence were received into evidence and Mr Kale made an affirmation and affirmed that his statement of evidence was true and correct.
At the final hearing the Builder was represented by Mr Kareem Hassan (Operations Manager) and Mr Marwan Hassan (Director). They did not challenge any of the documents submitted into evidence by the Owners or the amount of rent the Owners have paid for the rental accommodation since the Finish Date. They also did not dispute that the Owners should be awarded compensation for the rent they have paid since the Finish Date. However, Mr Kareem Hassan submitted that the Owners should not be entitled to the compensation they are seeking for the interest they have paid on their mortgage loan and the water rates and local government rates because they would have had to make these payments if the dwelling had been completed by the Finish Date.
Statutory framework
The order for compensation sought by the Owners is an HBWC remedy order pursuant to s 43(1)(a) of the BSCRA Act.
In Deshmukh at [59] – [60] I said the following regarding the considerations which the Tribunal should take into account in deciding whether a HBWC remedy order is justified under s 43(1)(a) of the BSCRA Act:
59In my view, the considerations concerning whether a HBWC remedy order is justified to resolve a HBWC complaint that a respondent has breached a home building work contract are:
(1)Is there a valid home building work contract between the applicant and the respondent to the proceeding?
(2)What are the relevant terms of the contract?
(3)Has the respondent breached the relevant terms of the contract?
(4)Has the applicant suffered loss, damage, or detriment which can be addressed by a HBWC remedy order?
60In my view, if the Tribunal is satisfied that there is a valid home building work contract between the applicant and the respondent, and that the respondent has breached a relevant term of the contract which can be addressed by way of a HBWC remedy order then the Tribunal is required to make a HBWC remedy order. It then has a discretion regarding the HBWC remedy order it will make under the provisions of s 41(2) of the BSCRA Act.
Relevantly in this matter, s 41(2)(d)(i) of the BSCRA Act provides that a HBWC remedy order may consist of an order that a person pay specified compensation for loss or damage caused by any breach of a home building work contract (as defined in s 3 of the BSCRA Act).
Is a HBWC remedy order justified?
It is not in dispute, and I find, that:
(1)The Contract is a home building work contract for the purposes of the BSCRA Act.
(2)The Contract contains terms which required the Builder to complete construction of the dwelling by the Finish Date (10 January 2023).
(3)The Builder has breached the terms of the Contract by not completing the construction of the dwelling by the Finish Date (the Builder's breach).
(4)The Owners have suffered loss or damage caused by the Builder's breach, which can be addressed by a HBWC remedy order of the type specified in s 41(2)(d)(i) of the BSCRA Act.
Therefore, a HBWC remedy order is justified, and the Tribunal is required to make a HBWC remedy order against the Builder to compensate the Owners for the financial loss or damage caused to them by the Builder's breach.
What compensation are the Owners entitled to for the Builder's breach?
The principles governing the measure of damages for breach of contract, in the absence of a liquidated damages clause in the contract,[1] were stated in Total Waste Management Pty Ltd v The City of Kalgoorlie-Boulder [2010] WASC 234 by Le Miere J at [31]:
31The general principle governing the measure of damages for breach of contract is that where a party sustains a loss by reason of such a breach that party is, so far as money can do it, to be placed in the same situation with respect to damages as if the contract had been performed: Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64. If the innocent party can establish expenditures which would not have been sustained but for the breach damages for those losses will be recoverable subject to the remoteness rule: Amann Aviation (128); GEC Marconi Systems v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1, [937] (Finn J). Loss or damage will not be recoverable if it is too remote, the tests of remoteness being those stated in what are described as the two limbs of Hadley v Baxendale (1854) 156 ER 145, 354. For present purposes those tests can be expressed in the statement of principle formulated by Lord Reid in Koufos v C Czarnikow Ltd (The Heron II) [1969] 1 AC 350, 385 and which has been adopted in this country: see GEC Marconi Systems [938]; Baltic Shipping Co v Dillon (1993) 176 CLR 344, 368:
The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.
[1] A liquidated damages clause may be described as a provision in a contract that fixes the amount payable as damages for a breach of the contract by a person.
There is not a liquidated damages clause in the Contract and, therefore, I must determine the compensation which should be awarded to the Owners by the application of the principles set out in the preceding paragraph.
Should compensation be awarded for rent?
I am satisfied that the rent paid by the Owners from the Finish Date is expenditure which would not have been sustained but for the Builder's breach and that a reasonable person in the position of the Builder when the Contract was made would have realised that such expenditure was sufficiently likely to result from the Builder's breach. The Owners are intending to reside in the dwelling as their home and they have had to remain in the rental accommodation until the dwelling is completed.
The Owners have provided documentary evidence that they have paid rent of $500 per week from the Finish Date until 20 July 2023 (the amount of $13,500), then $540 per week from 21 July to 6 October 2023 (the amount of $9,180), then $550 per week from 7 October 2023 (which is the amount of $18,425 to 30 June 2024), which is a total of $41,105. The Builder has not challenged that evidence and I find that the Owners have paid rent totalling $41,105 from the Finish Date to 30 June 2024.
Mr Kale gave oral evidence during the final hearing that the Owners are required to give three weeks' notice to terminate their tenancy and that the rent will increase to $600 per week from 14 July 2024. The Builder has not challenged that evidence and I find that additional rent of $1,700 will be required to be paid by the Owners until their rental accommodation ends. The amount of $1,700 is calculated as two weeks at $550 per week and then $600 for the third week after 30 June 2024 when the dwelling is expected to be completed and the Owners can then give the three weeks' notice required to terminate the tenancy of their rental accommodation.
Therefore, pursuant to s 43(1)(a) and s 41(2)(d)(i) of the BSCRA Act, I will order that the Builder pay to the Owners within 28 days the amount of $42,805 and that if the Owners are required to pay the final payment under the Contract to the Builder (upon the completion of the construction of the dwelling) prior to that date, then the Owners are permitted to set off that amount against the final payment.
Should compensation be awarded for water charges and local government rates?
The Owners are seeking to be compensated for the amounts which they have paid to the Water Corporation for service charges of $910.90 and to the City of Armadale for rates of $1,599.56 since the Finish Date.
I am satisfied that the Owners have paid these charges and rates, however I find that this expenditure is not a loss or damage suffered by the Owners because of the Builder's breach. Had the Builder completed the dwelling by the Finish Date the Owners would still have paid those charges and rates and they are not a loss or expenditure sustained by the Owners because of the Builder's breach.
I note that the Tribunal made a similar finding in Ghetia and Beyond Builders Pty Ltd [2024] WASAT 17 (Ghetia) at [91].
Should compensation be awarded for interest on the mortgage loan?
The Owners are seeking to be compensated for the interest they have paid on the mortgage loan they took out to finance the payment of the contract price, which is the amount of $11,227.12 from the Finish Date to April 2024 and further interest of an unspecified amount from April 2024 until the completion of the dwelling.
I am satisfied that the Owners have paid this interest, however I find that this expenditure is not a loss or damage suffered by the Owners because of the Builder's breach. Had the Builder completed the dwelling by the Finish Date the Owners would still have paid this interest and it is not a loss or expenditure sustained by the Owners because of the Builder's breach.
I note that the Tribunal made a similar finding in Hippydayze Pty Ltd and Mener Group Pty Ltd [2019] WASAT 92 at [118] and in Ghetia at [91].
Costs
The Owners are seeking an order that the Builder pay their legal costs of $9,443.50 of the original proceeding and this review proceeding and the cost of $1,261.35 they paid for a transcript of the hearing on 30 June 2023 in the original proceeding.
The Builder did not challenge the evidence given by the Owners of the payment of those costs and I am satisfied that the Owners paid those legal costs and the transcript fee.
The Builder also did not challenge the Owners' claim for costs. However, I still need to be satisfied that it is fair and reasonable in all the circumstances of this case to award costs to the Owners.
In Hippydayze Pty Ltd and Mener Group Pty Ltd [2019] WASAT 92 (S) (Hippydayze (S)) at [4] to [12], the Tribunal considered the principles regarding the exercise of the discretion of the Tribunal to award costs in a proceeding under BSCRA Act.
In Hippydayze (S) at [6] the Tribunal referred to s 87(1) of the State Administrative Tribunal Act 2004 (WA) (SAT Act) and s 49(1) of the BSCRA Act and the consideration of the interrelationship between those provisions in the earlier decision of the Tribunal in Gileno and Riviera Homes (WA) Pty Ltd [2018] WASAT 48 (S) (Gileno).
In Gileno at [13] – [16] the Tribunal stated:
13Section 87(1) of the SAT Act provides that each party bear their own costs unless the Tribunal orders otherwise. However, relevant to these proceedings, the principle in s 87(1) of the SAT Act commences with the proviso, unless specified in the enabling Act. The enabling Act in these proceedings is the BS(CRA) Act which has a specific provision allowing for a costs application.
14Relevant to these proceedings, s 49(1) of the BS(CRA) Act provides that the Tribunal may make such orders for costs as the Tribunal thinks fit arising from a building service complaint. This is a broad discretion to award costs conferred on the Tribunal. Section 49(7) of the BS(CRA) Act provides that s 49 does not limit the powers of the Tribunal under Pt 4 Div 5 of the SAT Act, the part of the SAT Act which provides for costs applications.
15The legal principles applicable to costs applications in the Tribunal in matters determined under the BS(CRA) Act and the SAT Act have been considered in a number of published decisions of the Tribunal. In particular we refer, and respectfully follow with one exception to be identified shortly, the principles enunciated in the decisions of the Tribunal in the following decisions: Wright and 3B Build Pty Ltd [2016] WASAT 68 at [7]-[10]; WA Country Builders Pty Ltd and Hathersage Nominees Pty Ltd [2016] WASAT 70 at [10][15]; Sanders and Gemmill Homes [2017] WASAT 41 (S) at [8]-[9].
16The one exception where we respectfully do not follow those Tribunal costs decisions identified above, is in relation to the use of the phrase 'neutral in effect' as to the operation of s 49 of the BS(CRA) Act. That phrase was coined by the Tribunal in Hoskins and Daniel Vinci t/as D'Vinci Contracting [2011] WASAT 188 at [19]. In our view, s 49(1) is not 'neutral in effect'. To conclude that a provision is 'neutral in effect', in our view, does not accord with ordinary principles of statutory interpretation. In our view, s 49 of the BS(CRA) Act operates so as to create a broad discretion as to costs in these type of proceedings, that is, the discretion is not limited to the starting position that each party bear their own costs as stated in s 87(1) of the SAT Act (and this principle is stated in those Tribunal decisions). Section 49 of the BS(CRA) Act operates so as not to limit the application of s 87 of the SAT Act, however the converse cannot be said in that s 87(1) of the SAT Act cannot operate so as to limit the operation of the broad discretion found in s 49(1) of the BS(CRA) Act. This interpretation is consistent with the proviso in s 87(1) as well as s 5 of the SAT Act which provides that the enabling Act prevails. However, having made that observation, we otherwise agree with, and respectfully follow, the principles identified in those Tribunal decisions as a guide in the exercise of the Tribunal's discretion to award costs under s 49 of the BS(CRA) Act and s 87 of the SAT Act.
In Hippydayze (S) at [7] the Tribunal agreed with those comments in Gileno, and the conclusion reached and adopted it.
The Tribunal then went on to say in Hippydayze (S) at [8] and [9] that, in substance, s 49(1) of the BSCRA Act, by conferring a broad unrestricted discretion on the Tribunal to award costs, appears to constitute a departure from s 87(1) of the SAT Act. Thus, in considering a claim for costs made pursuant to s 49(1) of the BSCRA Act, the Tribunal is not required to start from the position that each party is to bear its own costs. However, as is well understood, costs do not 'follow the event' in Tribunal proceedings and the broad discretion conferred on the Tribunal is to be properly exercised by taking into account relevant considerations.
In Hippydayze (S) at [11] the Tribunal referred to the guidance given to the Tribunal in relation to the exercise of its discretion to award costs by the Court of Appeal in Western Australian Planning Commission v Questdale Holdings Pty Ltd [2016] WASCA 32 (Questdale) in which the following principles were found to apply:
(1)The discretionary power is to be exercised judicially; that is not arbitrarily, capriciously, or so as to frustrate the legislative intent;
(2)The power to award costs is to be exercised if it is fair and reasonable in all the circumstances of the case to do so;
(3)The onus is on the party seeking an order in its favour to establish that a favourable order ought to be made;
(4)Every party to proceedings before the Tribunal is taken to be cognisant of the objectives of the Tribunal as expressly provided for in s 9 of the SAT Act. It is therefore necessary for the applicant to establish that the respondent's conduct has impaired the attainment of the Tribunal's objectives to have the proceedings determined fairly and in accordance with the substantial merits, with as little formality and technicality as possible and in a way which minimises the costs to the parties; and
(5)The mere fact that a party ultimately fails on a contention advanced during the course of the hearing does not, in itself, signify that the party has acted inconsistently with the objectives set out in s 9 of the SAT Act.
In Hippydayze (S) at [12] the Tribunal noted that if it exercises its discretion to award costs, it is to approach the task of fixing costs in a broad and relatively robust fashion, referring to the decisions of the Tribunal in Perth Central Holdings Pty Ltd and Doric Constructions Pty Ltd [2008] WASAT 302 at [67] and Marvelle Investments Pty Ltd and Argyle Holdings Pty Ltd [2010] WASAT 125 (S) at [49]. However, although fixing costs involves a relatively broad-brush approach, the Tribunal must nevertheless be satisfied that the costs claimed are reasonable and not excessive in nature.
I agree with the view of the Tribunal expressed in both Gileno and Hippydayze (S) that in considering a claim for costs made pursuant to s 49(1) of the BSCRA Act, the Tribunal is not required to start from the position that each party is to bear its own costs, although that does not mean that costs 'follow the event'.
The broad discretion conferred on the Tribunal under s 49(1) of the BSCRA Act is to be properly exercised by taking into account relevant considerations. The power to award costs is to be exercised if it is fair and reasonable in all the circumstances of the case to do so and the onus is on the party seeking an order for costs in its favour to establish that a favourable order ought to be made.
I have decided that it is fair and reasonable to award the legal costs and transcript fee claimed by the Owners for the following reasons:
(1)The Builder did not file any documents or call any witnesses in either the original proceeding or this review proceeding and took little part in either proceeding.
(2)The Builder did not dispute that the terms of the Contract required it to complete the construction of the dwelling by the Finish Date and its breach of the Contract by not completing the construction of the dwelling by the Finish date which continued up to the date of the final hearing in this review proceeding.
(3)The Builder did not dispute that the Owners should be awarded compensation for the rent they have paid since the Finish Date.
(4)Nevertheless, the Builder has not agreed at any time to pay any compensation to the Owners for the financial loss they have suffered because of the Builder's breach, which has necessitated the Owners pursuing both the original proceeding and this review proceeding to obtain an order for the Builder to pay compensation to them.
(5)There have been legal issues for the Tribunal to consider and determine during both the original proceeding and this review proceeding, which necessitated the Owners obtaining legal advice and representation.
(6)It was necessary for the Owners to obtain the transcript of the final hearing in the original proceeding to commence this review proceeding.
Variation credit
The Owners are also seeking an order that the Builder must deduct the amount of $2,963.00 from the final payment under the Contract as a credit to them pursuant to a variation dated 22 March 2022. That is not an issue which is before the Tribunal in this proceeding and, therefore I am not able to deal with it. However, I note that during the final hearing Mr Kareem Hassan said that the Builder will deduct this amount from the amount of the final payment of $40,473 due by the Owners under the Contract on completion of the dwelling, which will result in a net amount of $37,510 being payable.
Conclusion
In conclusion, I have decided that:
•a HBWC remedy order is justified to compensate the Owners for the financial loss or damage caused to them by the Builder's breach in the sum of $42,805;
•it is fair and reasonable to award costs to the Owners in the sum of $10,704.85; and
•the Builder must pay those amounts to the Owners within 28 days (being 29 July 2024) and if the Owners are required to pay the final payment under the Contract (upon completion of the dwelling) prior to that date, then the Owners are permitted to set off those amounts against the final payment leaving the Builder to pay the balance of those amounts to the Owners by 29 July 2024.
I will therefore make the following orders.
Orders
The Tribunal orders:
1.By 29 July 2024 the respondent must pay compensation to the applicants in the amount of $42,805 pursuant to s 43(1)(a) and s 41(2)(d)(i) of the Building Services (Complaint Resolution and Administration) Act 2011 (WA).
2.By 29 July 2024 the respondent must pay costs to the applicants in the amount of $10,704.85 pursuant to s 49(1) of the Building Services (Complaint Resolution and Administration) Act 2011 (WA).
3.If the applicants are required to pay the final payment under their contract with the respondent prior to 29 July 2024 they are permitted to set off the amounts due to them under orders 1 and 2 above against the final payment and the respondent must then pay the balance due to the applicants under orders 1 and 2 above by 29 July 2024.
I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
MR D AITKEN, SENIOR MEMBER
1 JULY 2024
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