Duthy (T/As Duthy Homes) v Valkonen & Valkonen
[2014] SADC 104
•10 June 2014
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
DUTHY (T/AS DUTHY HOMES) v VALKONEN & VALKONEN
[2014] SADC 104
Judgment of Her Honour Judge McIntyre
10 June 2014
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - THE CONTRACT - GENERALLY
The plaintiff is a builder and was engaged by the defendants to construct their house at Somerton Park. The plaintiff says that the defendants have failed to pay a progress payment of $26,482.25. The plaintiff lodged a Notice of Lien under the Worker’s Liens Act 1893 over the defendants’ property and instituted proceedings in the Magistrates’ Court seeking payment of that progress payment. The defendants deny their indebtedness for that sum and have further counter-claimed the sum of $113,251.00 for the work required to complete the building.
Held:
1. Progress claim was a valid claim under the terms of the contract. The plaintiff is entitled to payment in the sum of $26,482.25
2. The defendants were not entitled to terminate the contract in the circumstances. The counter claim is dismissed.
Worker's Liens Act 1893 , referred to.
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 clr 337; Pacific Carriers Ltd v BNP Paribus (2004) 218 CLR 451; Taylor v Johnson (1983) 151 CLR 422; Toll (FGCT) Pty Ltd v Alpha Pharm Pty Ltd & Ors (2004) 219 clr 165, considered.
DUTHY (T/AS DUTHY HOMES) v VALKONEN & VALKONEN
[2014] SADC 104
The plaintiff is a builder and was engaged by the defendants to construct their house at Somerton Park. The plaintiff says that the defendants have failed to pay a progress claim of $26,482.25. The plaintiff lodged a Notice of Lien under the Worker’s Liens Act 1893 over the defendants’ property and instituted proceedings in the Magistrates’ Court seeking payment of that progress claim. The defendants deny their indebtedness for that sum and have further counter-claimed the sum of $113,251.00 for the work required to complete the building.
For the reasons that follow I dismiss the counter-claim and find that the plaintiff is entitled to the sum of $26,482.25.
Issues
The issues in this matter are as follows:
1.What were the contract terms and specifically what was the amount of the contract?
2. Was progress claim no. 21 a valid claim?
3. Was the plaintiff was entitled to stop work on the defendants’ property?
Chronology
The chronology of key events is not in dispute and is as follows:
Date Description Exhibit No. 15.08.08 Plaintiff prepares estimate for construction of defendants’ residence based upon architect’s concept drawings. P3 26.06.09 Plaintiff submits quotation to defendants’ architects in response to formal tender process P4 24.06.09 Letter from plaintiff to defendants following a meeting discussing the plaintiff’s quotation P5 26.06.09 Plaintiff’s building specifications completed P2 07.08.09 Domestic Building Plain English Contract signed by the parties P1 Late 2010 Defendants late in paying progress claims; plaintiff stops work. Contract renegotiated 08.12.10 Addendum contract signed reflecting renegotiation of original contract P7 29.06.11 Plaintiff renders progress claim 21 P8 06.07.11 Plaintiff hands defendants notice of work stoppage due to non-payment of progress payment 21 P9 08.07.11 Defendants’ solicitors write to plaintiff denying liability to pay progress claim 21 giving 14 days notice of intention to terminate contract on stated grounds P11 20.07.11 Letter from plaintiff’s solicitors to defendants’ solicitors maintaining entitlement to payment for progress claim 21 P12 03.08.11 Defendants purport to terminate contract D4 16.05.12 Plaintiff lodges Notice of Lien 21.05.12 Plaintiff files Magistrates Court claim commencing the within proceedings Witnesses
Two witnesses gave evidence in this matter, the plaintiff Mr Duthy and one of the defendants Mr Valkonen.
Mr Duthy was an impressive witness. He appeared to have a good recall of the events in question and his evidence was cogent and credible. Moreover, he had a good understanding of his business and the documents associated with it. The records that were tendered as part of his evidence were consistent with that evidence.
There was not much disagreement between Mr Duthy and Mr Valkonen as to surrounding events however their evidence does differ on some critical issues. I have rejected Mr Valkonen’s evidence on those topics on the basis of the documents and the law. I do not consider that he was trying to mislead the court. Rather I consider his evidence reflected his views but I find, for the reasons that follow, that his views are misconceived.
Accordingly, where there is a conflict between Mr Duthy and Mr Valkonen I have preferred the evidence of Mr Duthy.
The Terms of the Contract
There is no dispute that the contractual arrangements between the parties comprised the contract documents dated 7 August 2009;[1] the building specifications dated 26 June 2009[2] and the addendum agreement dated 8 December 2010.[3] The area of contention relates to the status of the letter from the plaintiff to the defendants dated 24 June 2009.[4]
[1] Exhibit P1
[2] Exhibit P2
[3] Exhibit P7
[4] Exhibit P5
The plaintiff’s contention is that the contract dated 7 August 2009, as amended by the addendum agreement dated 8 December 2010, speaks for itself. The agreement signed on 7 August 2009 specified a construction price of $1,745,599.00. The building was to be constructed according to drawings, specifications and other documents identified in the contract; these documents include inter alia the Duthy Homes building specification.[5] The plaintiff was entitled to render progress payments in accordance with clause 14 of the agreement. Clause 18 of the agreement set out the defendants’ entitlement to cancel the contract.
[5] Exhibit P2
The contract was varied by letter dated 8 December 2010.[6] The parties renegotiated some terms of the original contract following the plaintiff ceasing work on site due to non-payment of progress payments by the defendants. The letter sets out the basis upon which work would recommence. Of particular relevance for present purposes, the letter sets out agreement as to certain variations and credits and the payment terms. The effect of this agreement according to the plaintiff was inter alia to reduce the contract value to $1,271,089.00. The plaintiff says that this amended contract value was reflected in subsequent progress claims including progress claim 21. The payment terms were altered to enable progress claims to be issued fortnightly and to require that they be paid in full within 5 days of the invoice date.
[6] Exhibit P7
The defendants contend that the original contract sum of $1,745,599.00 and the amended contract sum of $1,271,089.00 asserted by the plaintiff are incorrect. The defendants say that these amounts do not take into account a deduction of $127,000.00 which was to be credited against the construction price because the defendants were to perform certain of the works and to provide some appliances. The defendants assert that the correct amended contract sum is therefore $1,144,089.00.
The basis of the defendants’ contention is a letter from the plaintiff to the defendant dated 24 June 2010. Mr Valkonen gave evidence that, following receipt of the plaintiff’s quotation dated 26 June 2009, he had a meeting with Mr Duthy to discuss the price. He said he told Mr Duthy that he and his wife were happy with the price and that Mr Duthy had the job. Mr Valkonen however wanted to know what his share of the contract price was because he was going to do work on the building, specifically the steel frame work for the ceilings, walls and insulation. He identified the letter dated 24 June 2009[7] as the plaintiff’s response. The submission made on the defendants’ behalf is that the amount in that letter under the heading “Credits” which deals with linings and insulation, steel frame work, Rondo ceilings, battens and appliances totalling $127,000 is the assessment of the value of the plaintiff’s work. It is said that this amount should be deducted from the contract price of $1,745,599.00 and from the subsequently amended contract price of $1,271,089.00.
[7] Exhibit P5
Mr Duthy on the other hand says that Mr Valkonen requested him to explain the difference between the estimate dated 15 August 2008 and the tender quote on 23 June 2009. Mr Duthy said that he prepared the letter dated 24 June 2009 in response to that request. He pointed to the heading which states “extras and credits to original estimate in August 2008” in support of that contention. The letter sets out the credits referred to above together with a number of additional costs totalling $200,550.00 which Mr Duthy says account for the difference between the estimate and the quotation. Mr Duthy said that he had, for example, quoted $45,000 for supply and installation of air-conditioning in his estimate of August 2008 whereas the architect had specified a $60,000 prime cost for air-conditioning. His letter of 24 June 2009 let the owners know that the air-conditioning estimate had gone up $15,000 from the 2008 estimate.[8]
[8] Transcript p39-40
In other words rather than identifying a deduction to made from the quoted price of $1,745,599.00, Mr Duthy says the letter was to explain why that quote was higher than the original estimate of $1.6 million. Mr Duthy says that he first became aware that the defendants asserted a different position when he received emails dated 29 March 2011 and 28 March 2011.[9] He responded to those emails by letter dated 29 April 2011 where he addressed that topic in a manner consistent with his evidence in court. The plaintiff’s evidence is consistent with objective facts including the contract and the terms of the letter dated 24 June 2009.
[9] Exhibit D2 & D3
The defendants signed and initialled the contract dated 7 August 2009 and the addendum agreement dated 8 December 2010. Those documents are inconsistent with the position asserted by the defendants. The question is to be determined objectively.[10] In the absence of fraud or misrepresentation a party signing a contract will be bound by the terms of the contract.[11] The High Court has stated the position as follows:
It should not be overlooked that to sign a document known and intended to effect legal relations is an act which itself ordinarily conveys a representation to a reasonable reader of the document. The representation is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents, as Layton CJ put it, whatever they might be. That representation is even stronger where the signature appears below a perfectly legible written request to read the document before signing it.[12]
[10] Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Taylor v Johnson (1983) 151 CLR 422
[11] Toll (FGCT) Pty Ltd v Alpha Pharm Pty Ltd & Ors (2004) 219 CLR 165
[12] Toll see note 12 above at para 45
In this case the signatures of the defendants appear immediately below the price of $1,745,599.00. They have moreover initialled every page of the initial agreement and signed the addendum agreement which identified the remaining amounts to be paid under the contract.
The contract states that certain items are excluded from the contract price. In particular, the specification that forms part of the contract[13] identifies a number of items to be undertaken “by owner”. These are particularised, inter alia, as internal wall frames, internal ceiling frames, bulkheads, insulation, linings and various appliances. These are the items for which the defendants say they were entitled to a deduction from the contract price. However, a number of other items were also identified as “by owner”. These include a swimming pool shell, fit-out, equipment and fence, landscaping elements and the like. No suggestion is made that there should be any deduction for those items despite their similar treatment in the contract documents.
[13] Exhibit P2
No explanation was advanced by Mr Valkonen as to the stage at which he anticipated receiving the credit for the sum of $127,000 for the items outlined in the letter dated 24 June 2009 or indeed how this was to be achieved. Nor did he explain the significance of the items under the heading “Extras”.
The addendum contract set out a number of direct payments, variations and credits which had the effect of reducing the contract price by nearly $500,000. If there was indeed to be a credit to the defendants no explanation was proffered to explain why it was not accounted for in the addendum contract. Further, the next two progress claims submitted by the plaintiff contained the amended contract price. This was not queried by the defendants and those claims were paid. The topic was raised for the first time in the email dated 29 March 2011.[14]
[14] Exhibit D2
The plaintiff rejected the defendants’ contention about the credit saying that the contract price was for the work nominated to be completed by the builder in the contract.[15] This in my view is plainly correct. I find that the contract price was $1,745,599.00 which price was varied to $1,271,089.00 by reason of the agreement reached and documented on 8 December 2010.
[15] Exhibit P13
Is progress claim 21 valid?
The plaintiff’s entitlement to render claims for progress payments is governed by clause 14 of the contract dated 7 August 2009. Clause 14.5 relevantly provides as follows:
14.5 A progress claim must show:
14.5.1 The Builder’s valuation of work done to that date;
14.5.2 The Builder’s valuation of any unfixed materials and/or goods intended for and delivered to and secured at or adjacent to the Work included in such claim;
14.5.3 The total amount already claimed;
14.5.4 The total amount now claimed by the Builder.
Progress claim 21 complies with these requirements. The basis of the claim that this progress claim was invalid is based on the misapprehension of the defendants as to the contract price. It further appears from the correspondence that they further assert that some of the work for which payment was claimed had not been carried out. However no evidence was called to substantiate this claim and I reject it. It is my view that progress claim 21 was a valid progress claim under the terms of the contract between the parties.
Was the plaintiff entitled to stop work?
The plaintiff’s entitlement to stop work is governed by clause 17 of the contract, specifically clause 17.1 which provides as follows:
If the Owner does not pay the Builder at the times agreed, the Builder can stop work until paid.
The agreement of 8 December 2010 dealt with the question of payment terms and relevantly provided as follows:
Progress claims will be issued fortnightly and must be paid in full within 5 days of the invoice date, these claims may include deposits or pre-payment for certain trades or suppliers.
Progress claim 21 was not paid within 5 days. Indeed it remains unpaid to this date. Accordingly the plaintiff was entitled to stop work until the claim was paid. In order to stop work he was required by the contract to tell the owner in writing.[16] He did so by letter dated 6 July 2011.[17]
[16] Clause 17.2, Exhibit P1
[17] Exhibit P9
The assertion was made in correspondence and reiterated in Mr Valkonen’s evidence that the plaintiff walked away from this building because he did not wish to complete the work. Mr Duthy denies that this was the case. His evidence on the topic was quite unequivocal. In cross-examination he was asked as follows:[18]
[18] Transcript p44, line 25 – p45, line 16
QThere was still work to be done at that point, wasn’t there, 29 June to finish off the house.
AYes.
QAnd you are aware of course that my client’s claim is for the cost of doing just that, of finishing off the house, I’m not saying you agree with that, that’s what their claim is about, but if you had completed it, hadn’t gone off site or if the contract hadn’t been terminated, you would have had to finish off the house, wouldn’t you.
AWe would have finished the house off, yes, for the contract value.
QUnder the contract, you would have had to.
AYes, correct.
QIt would have cost you a sum of money to do that work, to actually finish it off.
AThere would be a cost, yeah, to finish it.
QI put it to you there wasn’t enough unpaid moneys in the contract price for you to be reimbursed for the cost of finishing the house; you would have lost a bit.
AWell, the owners had to pay us the contract value.
QYes, that’s right.
ASo –
QIt would have cost more.
AThat’s my problem.
QYou would have had to bear that cost, wouldn’t you.
AWe would have finished the house as per the contract.
QBut if it cost you more than the remainder owing by the owners, you would have had to wear that additional cost.
AIf it did, yes.
This evidence is consistent with the contemporaneous correspondence. The letter informing the defendants that the plaintiff would stop work dated 6 July 2011[19] clearly contemplates resumption of work if payment was made by 8 July 2011. The letter from the plaintiff’s solicitors to the defendants’ solicitors dated 20 July 2011[20] puts the plaintiff’s position as follows:
Our client categorically rejects that it has no capacity to resume work on the site. Work has stopped due to your client’s non-compliance with the contract, namely failure to pay the progress claim number 21. Our client will immediately resume all works on the site as soon as your client has paid progress claim number 21 in conformity with the contract.
Our client would like to note that despite the assertions in your letter in relation to clause 18.1.6 of the contract, at no time has it stated that it does not wish to complete the contract. To the contrary, our client very much wishes to complete the works however it must receive payment of the progress claim number 21 in order to do so.[21]
[19] Exhibit P9
[20] Exhibit P12
[21] Exhibit P12, p2
This unambiguously stated the plaintiff’s position in relation to continuing the work. When this was put to Mr Valkonen in cross-examination he agreed that he remembered reading the letter. He was then asked as follows:[22]
QAfter you received the letter from Duthy Homes explaining that they intended to stop work until you paid progress claim 21, you never contacted Mr Duthy, did you.
AProbably not, no.
QBut you understood, didn’t you, that Duthy Homes were willing to complete and continue work once you paid progress claim 21.
AAbsolute not. It had come to a stage where Mr Duthy and Peter Eblen, who was with him, said to me quite implicitly ‘No money, no work’, and it was final; No money, no work’.
QBut you understood, didn’t you, if you paid progress claim 21 they would continue.
ANo.
[22] Transcript p69, line 17 - 31
Mr Valkonen’s report of the plaintiff saying to him ‘No money, no work’ is entirely consistent with Mr Duthy’s position that he would recommence work on the building once progress claim number 21 was paid. I do not understand why Mr Valkonen formed the view that the work would not recommence even if the progress claim was paid.
I find that the plaintiff was entitled to stop work for non payment of progress claim 21 and that manner in which he exercised that right was in accordance with the contract.
Defendants counter-claim
The defendants counter claim for the additional costs they incurred in completing the building following their purported termination of the contract under clause 18 of the contract; specifically clauses 18.1.3 and 18.1.6. These provide as follows:
18.1 The Owner can cancel this contract if the Builder does any of these
18.1.3 Stops the Work without good reason;
……………….
18.1.6 Says or leads the Owner to think he does not want to finish the work.
In view of my findings neither of these circumstances apply. The plaintiff had good reason to stop the work namely the non-payment of progress claim 21. Despite Mr Valkonen’s evidence I find that Mr Duthy did not say or lead the owner to think he did not want to finish the work. On the contrary the plaintiff expressly indicated that he wanted to finish the work and would do so once his claim was paid.
Further, the owners are not able to use the provisions of clause 18 to cancel the contract if they are in breach of the contract themselves.[23] As I have found, the defendants were in breach of the contract for failing to pay the progress claim.
[23] Clause 18.4, Exhibit P1
Accordingly I dismiss the counter-claim.
The plaintiff is entitled to judgment for the sum of $26,482.25 – I will hear the parties as to interest and costs.
0