Faulks v New World Constructions Pty Ltd
[2013] QCAT 658
| CITATION: | Faulks v New World Constructions Pty Ltd [2013] QCAT 658 |
| PARTIES: | Mr Richard Faulks and Mrs Megan Faulks (Applicant/Appellant) |
| v | |
| New World Constructions Pty Ltd (Respondent) |
| APPLICATION NUMBER: | BDL173-12 |
| MATTER TYPE: | Building matter. |
| HEARING DATE: | 1, 2 and 3 October 2013 |
| HEARD AT: | Brisbane |
| DECISION OF: | Member King-Scott |
| DELIVERED ON: | 24 December 2013 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. The First and Second Applicant’s claim for general damages is dismissed. 2. The Respondent’s counter-application for payment of Stage 4 and ancillary orders is dismissed. |
| CATCHWORDS: | Failure to complete a stage in construction — Works wrongly suspended — Application for relief from payment of stage because of defective and incomplete work and claim for general damages for distress, inconvenience and discomfort — Contract terminated as Respondent’s QBSA licence suspended — Entire contract — Counter application for payment of stage — Availability of recovery on quantum meruit — Whether the claim for general damages by innocent party enlivens claim by defaulting party for recovery on quantum meruit Chalet Homes Pty Ltd v Kelly [1978] Qd R 389 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | The Applicants were represented by Mr A West of Counsel instructed by Dale and Fallu. |
| RESPONDENT: | The Respondent was represented by Mr B Hall of Counsel instructed by JKR Lawyers. |
REASONS FOR DECISION
Richard and Megan Faulks (the Faulks) own a house at 9 Stanley Street, North Booval. On 12 December 2011, they entered into a Contract with the respondent, New World Constructions Pty Ltd (New World) to carry out renovations to the property. Those renovations involved raising the house and constructing several rooms underneath.
Plans were drawn up by King Architectural Engineering (KAE).
The construction by New World was supervised by its nominee, Nelson Leon, who was also the Secretary and a Director of New World.
The parties used a Housing Industry Association printed form Contract[1] described as “Qld Plain Language Alteration, Addition and Renovation Contract QC3 March 2008”.
[1] Document 1 Exhibit 1.
The Contract Price was $183,712. The “works” were described as ‘to complete all alteration, addition, renovation works as documented on drawings: King Architectural Job No 11069 pages 1-16’, an outline for the works to be completed as follows: ‘Proposed raise and build of new habitable space below existing house’. [Passages in italics above were handwritten into the document].
Part B of the Contract (being the Prescribed Customised Progress Payment Schedule) was completed as follows:
Stage
Percentage
Amount
1. Deposit
5%
$9,185.60
2. Bulk excavation of fill under existing residence removal + dumping of soil + subgrade + prep ready for house raising
20%
$36,742.40
3. Raising of existing residence into position ready to place steel – needs to be at desired height
15%
$27,556.80
4. Placement of structural supporting elements under raised structure and + tied off of residence
25%
$45,928.00
5. Construction of retainer walls new ground slabs, frame in + external cladding, rough in + sheeting of walls + ceilings
30%
$55,113.60
6. Completion of works in accordance with contract documentation. This means practical completion
5%
$9,185.60
Total
100%
Work commenced on 4 January 2012. New World advised completion of Stages 2 and 3 and was paid for those stages by the Faulks. The sum of $73,484.00 has been paid under the contract.
There was a Written Variation (Faulks 01)[2] to the Contract on 19 February 2012. It provided ‘alter the original line of the front retaining wall 10 lineal metres’. The variation allowed for this variation to be paid with Stage 4 payment. The cost was $1,428.20.
[2] Document 2 Exhibit 1.
A second Variation was agreed to on 20 February 2012 (Faulks 02)[3]. It provided ‘increasing the original design width of excavation and cone area as per contract’. The cost was $1,333. Further, it was provided that it was to be completed in line with Contract Works, payable with Stage 5 of the Contract. Below that entry is a further entry that provided a Special Condition ‘payable at stage 4 of contract works’.
[3] Document 3 Exhibit 1.
New World issued a Progress Payment Claim[4] dated 16 March 2012 in the sum of $45,928 for the Stage 4. Indeed, Mr Leon advised Mr Faulks by text message on 7 March 2012 that stage 4 had been reached and an invoice should have been sent that day.
[4] Exhibit 11A.
New World alleges that Mr Faulks agreed to pay the claim in a text message[5] to Mr Leon. Mr Faulks admits that that is so, but says that at the time he was unaware that Stage 4 had not been completed. New World allege that the Faulks were delaying and playing for time to pay.
[5] Exhibit 2.
It seems to be common ground that Mr Faulks was in hospital during this period and was discharged from hospital on 27 March 2012. Subsequently, Mr Faulks became aware that Stage 4 had not been completed and some of the work was defective. He notified Mr Leon to that effect by text message on 28 March 2012.
Mrs Faulks, who was working during this period, arranged on 26 March 2012 for KAE to inspect the works. KAE carried out an inspection on 27 March 2012. The Inspection Report[6] was as follows:
Partial installation of structural subfloor beams. 125PFC steel beams have not been installed.
180PFC beam welded to existing steel beam compromising beam strength and integrity.
Some steel subfloor beams have temporary tack welding to support posts and no connection to existing house bearers.
Partial installation of support posts. Front right corner of building has no support posts. Sections of the building have unsecured temporary support only.
[6] Document 8 Exhibit 1.
Summary
The dwelling has had partial installation of support posts and structural beams. Building has partial tie down to foundation. Safety of temporary supports has not been accessed in this inspection.
New World issued a Notice to Remedy Breach[7] dated 28 March 2012. On the same day, New World gave a Notice of Suspension of Works[8].
[7] Document 22 Exhibit 10.
[8]Document 21 Exhibit 10.
Several attempts were made by New World to rectify the work in early April 2012.
A report from KAE dated 3 April 2012 reported[9]:
Partial installation of structural subfloor beams. 125PFC steel beams have not been installed.
180PFC beam welded to existing steel beam compromising beam strength and integrity.
Some steel subfloor beams have tac welding to support posts and no connection to existing house bearers
Partial installation of support posts. Front right corner of dwelling has no support posts. Sections of the building have unsecured temporary support only.
Note numerous serious structural defects exist in the construction.
[9]Document 24 Exhibit 10.
Summary
The dwelling has had partial installation of support posts and structural beams. Building has partial tie down to foundations. Safety of temporary supports has not been assessed in this inspection. Please note that we consider this building is in a dangerous condition, and temporary supports should be added as a matter of urgency.
KAE again attended on 13 April 2012 and reported[10]:
Installation of structural subfloor beams and support posts was completed excluding the front retaining section of dwelling.
Some PFC beams will require further reinforcement and attachment to support posts during next phase of construction, but are considered safe for construction purposes. During the inspection one angle was being installed to attach the rear deck bearer to the 300PFC beam and installation bolts attaching a 150PFC beam to the existing bearer was still in progress when KAE staff left the site. Completion of these items has not been verified.
Rear deck support posts have been installed by attaching to existing foundations not as per plans. This attachment is structurally adequate but subfloor bracing will have to be reviewed. Amendments to plans for the changes to posts and foundations will have to be verified with owner’s approval.
Safety of temporary supports has not been accessed in this inspection.
[10]Document 32 Exhibit 10.
New World’s solicitors forwarded that Inspection Report to Mr and Mrs Faulks’ solicitors and again demanded payment of Stage 4 by letter dated 16 April 2012[11].
[11]Document 43 Exhibit 10.
New World served various Notices[12] to Remedy Breach during April 2012. It is not necessary for me to refer to them in any detail.
[12]Documents 25 -31 Exhibit 10.
The Faulks reciprocated by serving a Notice to Remedy Breach[13] on 10 April 2012 for ‘wrongfully suspending the works and wrongfully claiming progress payments for stage 4 when Stage 4 work had not been completed’. It detailed the incomplete work and also the defective work.
[13]Document 20 Exhibit 1.
On 21 May 2012, New World issued proceedings in the Magistrates Court claiming the Stage 4 payment of $45,928.00 with interest and costs.
The Faulks again reciprocated by having those proceedings transferred to the Tribunal and filing their own Domestic Building Dispute application on 15 May 2012.
Brian Thomas is a consulting engineer. He has extensive experience as an engineer and as a project manager. He has provided reports dated 10 August 2012[14] and 7 June 2013[15] under the practice name of Focon Pty Ltd. Although, Mr Thomas was questioned about his qualifications, his expertise, to provide the evidence he did, was not attacked.
[14]Document 35 Exhibit 10.
[15]Exhibit 3.
The reports address the Stage 4 requirements[16] as set out in the Contract. Mr Thomas set out his understanding of what Stage 4 entailed as follows:
· All supporting post members inclusive of their footings.
· All additional hot rolled steel floor beams to existing floor structure inclusive of the existing floor structure itself.
· All connections of post members, additional floor beams and posts to existing reinforced concrete slabs (known as tie offs).
· In this instance, footings for concrete block retaining walls as the builder had decided to incorporate them as post supports.
· All ground floor bracings support members.
[16]It is noted that in his report Mr Thomas misquoted the requirements of Stage 4 being “Placement of Structural Supporting Elements under raised structure and tied off of residence” by omitting the words and letter in italics.
The report then addressed these issues under their respective headings. I will summarise Mr Thomas’ findings:
A. Post Footings
Missing from all the footings of the posts were the two temporary starter bars, M12 500mm long as required by KAE. In addition, there was an issue in respect of the strength of the concrete used in the footings. The engineers’ requirements were that they have a minimum strength of 20Mpa for the footings. I will refer to this matter later in these Reasons.
B. Posts to Existing Slab
The posts to the rear of the project had been chemically anchored to an existing 75mm thick reinforced slab. The slab is inadequate to support the load. They did not have their own footing as per design and they had blown out the existing slab due to the thickness and distance from the edge.
C. Ground Floor Posts
The posts to the ground floor supporting the floor above were of mild steel with minor cold gal coating and were not galvanised as per design. Timber and steel posts were not installed and were lying on the ground. Temporary posts and manual props were currently in place of the correct structural members. The concrete block retaining wall was not installed, inclusive of footings, to allow for the front and side posts to the project to be installed. Some of the steel posts had been welded together in lieu of one length of post.
Mr Thomas noted that the posts, whether timber or mild steel, were not installed and the house was vulnerable to movement, particularly due to lack of bracing.
The stumps at the rear of the property that were to be 100 x 100 SHS were to be installed.
D. Main Subfloor Bracing
The cross-bracing to the rear of the structure as indicated on the architectural drawings were to be M16 but in fact were M12 dimension. Welding of the rods to the post had not been completed. Mr Thomas commented that the subfloor cross-bracing, unless installed as per the design, compromised the house and allowed additional movement of the house under external forces. The connection and the sizes of the cross-bracing were inadequate.
E. Posts to Existing House Bearers or New Support Beams
Mr Thomas considered there was insufficient tie down of the top posts to either the existing timber floor bearers or additional steel support beams. The top plates were not connected as per design. The type of bolts were not adequate for the application and there were physical gaps where the top of the posts were not tied down to the structural member. There were bolts missing from the top plates of posts and some posts simply did not have any tie down at all, excluding the posts that were physically not installed.
Mr Thomas commented, essentially, that the omissions were too many to identify each defect, and his comments, necessarily had to be general in nature. His report was complimented by photographs of the defects. Mr Faulks also took numerous photographs.[17] By way of comment, Mr Thomas thought that a major concern was that the upper house was not connected to the subfloor structure. It was dangerous and there was a high risk of it falling down. It required immediate attention.
F. Additional Subfloor Supporting Beams
Additional support beams to the first floor framing were missing at the front of the house and sitting on the ground. Other support beams as required by the architectural drawings had not been installed. Beams were short and had been welded with different size beams and some that were installed, were installed in wrong locations. The tie down of the steel beams to existing timber bearers was inadequate in the form of bolts used and the number of bolts used. Again, Mr Thomas commented that there were too many examples to identify each and every one in the report.
[17] See Exhibit 2.
In a further report dated 7 June 2013 Mr Thomas responded to a request to provide a report indicating the work required to achieve a Stage 4 only sign-off. It was noted in the report that the retaining wall was considered part of Stage 5 works but part of the retaining wall, particularly to the front of the house, impacted on Stage 4 and was included in the report.
In cross examination Mr Thomas was asked what had to be done to finish off stage 4. His response was that the posts, bracketing and plates would have to be removed and replaced to make the existing structural elements both vertical and horizontal, structurally durable. One would have to provide minimum fixing as detailed in the plan. All of this he considered would involve a significant amount of work. He also considered a fresh engineering design would be required to determine the most appropriate and safe method of rectification.
Compliance with the matters set out in the second report would then permit a Form 16 Engineering Certification to be issued.
Counsel for New World put to Mr Thomas that the Stage 4 requirements only required temporary supports and that they could be made permanent at a later stage. Mr Thomas did not agree with this proposition and if asked to certify the structure on that basis, as complying, he would not have done so. It can be observed that neither Stages 5 or 6 provided for making the supports permanent and as Mr Thomas observed in re-examination it would be very dangerous to rely on the stage of practical completion to do so.
Mr Thomas considered the structure quite dangerous and likely to collapse.
On this issue the evidence of Mr Leon lacked credibility. He was cross examined on the absence in Stage 5 of the contract to any reference to the installation of the final structural supporting elements and removal of the temporary structures which would have been necessary if New World’s proposition had substance. He was unable to answer the question save to say that final certification would have dealt with it. Mr Leon’s assertion that the temporary posts would come out when the framing went in showed a lack of knowledge of what were the load bearing elements of the structure. The posts were the load bearers not the frames. His view was not put to Mr Thomas.
Mr Leon was referred to his Project timeline[18] that further exemplified the lack of substance to his claims in that there was no reference in the detailed document to any item for the removing temporary structures and installation of permanent ones.
[18] Exhibit 10 page 205.
New World responses to Mr Thomas’ criticism were:
A. Post footings
New World agreed that they were allowed for in the contract but that they were not required for the temporary tie off and would actually be a work hazard. Mr Thomas response was that there were plastic caps commonly used in the building industry to protect workers from injuring themselves. I will refer to the concrete issue later in these reasons.
B. Posts Existing Slab
Mr Leon said in evidence that this was done in consultation with Mr Faulks. Mr Faulks denied this and text messages on 15 March 2012 at 12.21 pm and 1.10 pm passing between Mr Faulks and Mr Leon support Mr Faulks, who wanted the engineers consulted and the job done correctly.
C. Ground Floor Posts
Mr Leon decided to use painted posts and not galvanised posts as specified in the contract for reasons which are not clear to me. Although acceptable they do not comply with the contract.
The concrete retaining wall the subject of the 2 variations was, according to New World, part of Stage 5 and could not be completed. However, the variation Faulks 01 provided that it was to be paid with Stage 4 and commenced in line with the program. Mr Leon said that the Faulks could not afford the additional payment and he had left it to Stage 5 which is what the program provided. That is not necessarily the case Stage 5 did include the retaining walls but the program allowed for the retaining walls to be constructed as the next item after pouring the slab and footings. Variation Faulks 02 provided as a special condition that the additional payment would be payable with Stage 4 but the work was to be carried out as part of Stage 5. In my opinion, the reference to Stage 5 in the variation document was an error. Why should the Faulks pay for the work in Stage 4 when it was to be carried out in Stage 5 as Mr Leon maintained. Mr Leon’s evidence that the Faulks could not afford it and that was the reason New World had not carried out the work, again, lacked credibility.
The welded steel posts were said to be temporary supporting elements. Mr Leon offered to powder coat some of the posts under the deck which were required to be galvanised. To achieve this Mr Leon said he would have taken the posts out (as he maintained they were temporary), have them powder coated and then reinstalled. However, he could not explain how the bracing would be welded to the post without damaging them. He said he would have to rely on his steel sub-contractor to solve the problem. He made the offer to Mr and Mrs Faulks without any consideration of the difficulties or costs involved.
Mr Leon was quite unconvincing in cross-examination on this issue, the examples of the poor workmanship of New World depicted in the photographs comprising Exhibit 2 are too numerous to outline in these reasons. Mr Leon was unable to provide explanations as to why steel posts had plates welded to them or why bracing was welded together or why there were gaps between posts and bearers.
D. Main Sub Floor Bracing
New World maintains that Stage 4 only required temporary bracing.
E. Posts to Existing House Bearers or New Support Beams
New World maintains that Stage 4 only required a tie off to be completed in Stage 5. It was submitted that this was a matter which Mr Leon sought further information from KAE and if works had not been suspended would have been rectified in the ordinary course. Mr Leon was cross-examined on a main support beam depicted in a photograph,[19] I found his answer unsatisfactory and evasive. He claimed that KAE had been consulted and approved the work depicted in the photograph. I think that is unlikely and inconsistent with their reports.
F. Additional Subfloor Supporting Beams
Again it was submitted that this was a Stage 5 matter and was not required to be tied down until then.
[19]Photo 21 of Exhibit 2.
It was submitted by New World that the defects are minor and would have been attended before practical completion and before certification and are not such as should be taken into account in assessing whether Stage 4 is complete or not.
Mr Muscolino is a quantity surveyor and gave evidence in the applicant’s case. He concluded that Stage 4 had not been completed. He estimated that to complete the contract would cost $119,081.00. To complete Stage 4 would cost $5,500.00.
In my opinion the defects are more than defects that one would expect to be rectified prior to practical completion. New World’s work was shoddy, incompetent, incomplete and unworkmanlike. The cost of rectification is substantial, as testified to by Mr Muscolino. Mr Thomas has also expressed an opinion that the rectification of the defective work will be significant.
Mr Muscolino estimated the cost of rectification work to be done at $41,690.00.
Mr Muscolino’s character and professional standing was challenged by Counsel for New World. However, in my opinion, not successfully. I accept his qualifications and his evidence. No expert evidence was called by New World to challenge his evidence.
The concrete issue referred to above arose in the aftermath of the Stage 4 dispute that New World’s workman used pool salt water to mix concrete used in the work. The concrete was analysed and this issue was abandoned. However, in the course of testing the concrete it was established that it was not of the strength specified or required by the contract.
It was tested by Mr Ryan, a concrete tester. His results revealed that the compression strengths of the concrete was 15, 17, 13, 12.5, 15 and 30.5MPas. The design requirements were that the concrete strength was to exceed 20MPas.
I was impressed by Mr Ryan, he obviously knew what he was talking about. His evidence was unchallenged. There was no explanation from New World as to why the concrete would be under strength.
Considerable time was spent on the terms “tie down” and “tie off”. As Counsel for New World submits the clarification of the meaning of the terms has a critical bearing upon what was required for completion of Stage 4.
Mr Leon submitted that “tied off” referred to a temporary securing of elements of a build necessary to secure the build for the next stage of works but not necessarily permanent. “Tied down” he referred to as meaning permanent fixing or securing of the elements of a build as required by the plans for the project and was permanent in nature.
Mr Thomas expressed the opinion that the terms had distinct meanings: “tied off” applied to horizontal elements and “tied down” to vertical elements. However, he conceded that some in the industry used them interchangeably and that either term could refer to temporary or permanent securing of elements, depending upon the context in which the terms was used.
Counsel for New World also referred in his submissions to Australian Standards 1884.2-2010 Residential Timber-Frame Construction which referred to fixing and tie down design. However, I do not think that takes the matter further.
It was further submitted by Counsel for New World that Mr Leon had significant experience in the building industry and his characterisation of the term should be favoured. Having heard Mr Leon give evidence over two days, for reasons I will expand on later, I place no weight on his experience in the building industry. Having observed him give evidence, I formed the opinion that the reference to the phrase “tied off” in the Contract has occurred by chance rather than design. I note that he used the phrase “tied down” in a draft copy of the Contract but referring to a different stage.
In another context, I might be concerned that the phrase was being used in a different context in each case. However, in this instance, it is my opinion that Mr Leon has seized on the phrase “tied off” as a convenient means to justify the position New World found itself in when the Stage 4 payment was challenged.
Mr Leon, in a series of telephone texts to Mr Faulks, assures Mr Faulks that Stage 4 will be completed with the building tied down.[20] At that time, Mr Leon was using the terms interchangeably for the obvious reason that to him they meant the same thing.
[20]See messages 15 February 2012 “bolted down”, 6:43am; 24 February 2012, 6:56am and 28 February 2012, 8:45am and 7 March 2012, 8:46am.
As I have already indicated I found Mr Leon to be a poor witness. He was prepared to say anything that supported his case and if cornered, prevaricated. When challenged on specific and obvious defects he spoke in generalities and what he considered acceptable building practice. He would justify the work as complying with external standards but would ignore the requirements of the plans and specifications. He rarely conceded anything adverse to his interest. An exception was when the KAE reports of the state of the works were put to him. He, frequently, pleaded ignorance when cross-examined on the defective steel works saying he was not a structural steel contractor, yet he was responsible for supervising the sub-contractors work. He was prepared to shift the blame to the sub-contractors for the shoddy workmanship.
Mr and Mrs Faulks on the other hand I found to be impressive witnesses. I have no reason not to accept their evidence.
I find that New World had not completed Stage 4 at the time it submitted its invoice to the Faulks. Indeed, I am of the view that Mr Leon knew that to be the case at the time. Mr Leon, when cross-examined by Mr West, was unforthcoming in his answers about the difficulties he was having with cash flow at the time and threats of bankruptcy he was allegedly facing.
It follows that New World was in breach of the contract when it suspended the works.
Other breaches of the contract have been referred to by Counsel for the Faulks as follows:
· Refusing to allow the applicants access to the land contrary to section 87 of the Domestic Building Contracts Act 2000;
· Failing to comply with the legal requirements contrary to clause 1.1(b) of the contract and DBCA 2000, section 43;
· Failing to take out adequate insurance in due time;
· Having its principal, Nelson Leon, become an excluded individual and itself become an excluded company.
It is not necessary for me to consider these further breaches, although I do note that when New World suspended the works it took steps to fence the site and barred the Faulks access to the site. Subsequently, it asserted that those steps were for workplace health and safety reasons. That may be the case now as the building has been described as being dangerous but I formed the view from the correspondence exhibited and after hearing Mr Leon that the initial action in fencing the property was as an act of retribution for the Faulks’ failure to pay for Stage 4. I note that prior to that time there appeared to have been no restriction on the Faulks’ access to the site or mention of workplace health and safety issues.
The Faulks issued a Notice of Termination of Contract on 25 October 2012. They gave 10 working days after the notice was given for New World to remedy the breach. The basis of the notice was that on 18 October 2012 New World’s licence pursuant to the Queensland Building Service Authority Act 1991 was suspended[21]. New World failed to remedy the breach and the Faulks advised New World by email dated 20 November 2012 that the contract was terminated.
[21] Exhibit 14.
Clause 28.1 of the contract provided:
The owner is entitled to give a Notice to Remedy Breach under subclause 28.3 if the contractor is in substantial breach of this contract. The contractor is in substantial breach of this contract if the contractor:
(a) Suspends the carrying out of the works, otherwise than under clause 19;
(b) Has the contractor’s licence cancelled or suspended; or
(c) Is otherwise in substantial breach of this contract.
New World, in its submissions, accepted that the contract was terminated. Exhibit 14 certifies that as at 14 November 2012 New World’s licence was suspended by the Building Services Authority.
I find that the contract was validly terminated by the Faulks on that date.
The applicants seek the following orders in their application to the Tribunal:
1 That the applicants be relieved from paying any further money to the respondent under the contract.
2 That the respondent pay the applicants’ general damages in the sum of $4,000.00 for the substantial inconvenience, distress and discomfort.
3 That the respondent pay the applicants’ legal costs of and incidental to this matter.
4 Findings that:
(a)The respondent has failed to achieve stage 4 under the contract;
(b)The respondent is in substantial breach of the contract;
(c)The respondent is in anticipatory breach of the contract;
(d)The applicants are at liberty to terminate the contract.
In its response and counter-application New World sought the following orders:
1 The contract between the applicants and respondent dated 12 December 2011 be terminated;
2 Further or alternative to 1 above, a declaration that the contract between the applicants and the respondent dated 12 December 2011 was wrongfully terminated by the applicants on 20 November 2012;
3 Further or alternative to 1 or 2 above, a declaration the contract between the applicants and the respondent dated 12 December 2011 was terminated by the applicants on 20 November 2012;
4 The applicants pay the respondent at a minimum sum of $97,772.71 for breach of contract made up as follows:
(a)$45,928.00 being stage 4 progress payment;
(b)$5,970.50 being legal costs as damages pursuant to clause 34.1 of the Contract;
(c)$1,056.44 being default interest pursuant to clause 33.1 of the Contract; and
(d)$9,001.89 being interest pursuant to clause 16.2(b) of the Contract;
(e)$22,045.00 being loss of profit margin at 20% on remaining stages pursuant to the Contract;
(f)$1,892.00 being cost of temporary fencing pursuant to the Contract;
(g)$5,850.00 being cost of timber used in the construction which is part of the Stage 5 works pursuant to the Contract;
(h)$6,028.88 for all site visits, fuel, tolls, meetings with solicitors, meetings with consultants and drafting of correspondence;
(i)All other costs and losses incurred by the Respondent as a consequence of the Contract being ended pursuant to clause 28.8(vi) of the Contract; and
(j)Any GST payable upon any settlement of, or decision obtained in this action.
In the alternative, the respondent submitted that if the applicants’ case is preferred and the Tribunal finds that the applicants have validly terminated the contract then it claims the value of the work done under Stage 4 in accordance with Mr Muscolino’s assessment. Essentially, it is claiming a quantum meruit claim.
The applicants’ claim for general damages has not been particularised. There was very little evidence on the subject. As a matter of law general damages for inconvenience, distress and discomfort are not usually available to owners. Mere disappointment or disruption is insufficient unless the object of the contract involved an emotional outcome which is defeated by the breach[22]. If there was an entitlement to general damages for inconvenience, distress and discomfort, in order for it to be considered it would need to arise from specifically identified breaches of contract and not from conduct of the builder within the terms of the contract or pursuant to its common law right. In other words, there must be a nexus between the damage claimed and the particular breach. Bonchristiano v Lohmann at 94, lines 35 to 45. No expert evidence has been adduced from a psychiatrist or a doctor attesting to the true nature of the distress. That would be a normal requirement. See Bonchristiano v Lohmann (supra) page 95. I am not prepared to allow the claim.
[22]Falko v Jones McKewen & Co. Pty Ltd [1977] BR 447; Coshott v Fewings Joinery Pty Ltd BC 960 2970 NSWCA 15 July 1996 (unreported); Baltic Shipping Company v Dillon (1993) 176 CLR 344; Hutchinson v Harris (1978) 10 BLR 24, 37-238; Batty v Metropolitan Realisations Ltd (CA) (1978) 1 QB 554 at 563 A-B; Burke v Lunn [1976] VR 268 at 286; Contra Bonchristiano v Lohmann [1998] 4 VR 82.
The contract in this case, like most building contracts, is an entire contract. As Connolly J said in Chalet Homes Pty Ltd v Kelly[23]:
The provision for progress payments does not alter the essential nature of the contract, for progress payments are provisional and subject to adjustment at the end of the contract.
[23][1978] Qd R 389 at 392.
In Nguyen v Luxury Design Homes Pty Ltd[24] McColl JA cited with approval the following passage from Hudson’s Building and Engineering Contracts 1995 11th Edition at page 476:
Thus where the contract is entire, the owner may get the benefit of valuable works not entirely completed by the builder without having to pay for them, unless the circumstances are such as to justify a quasi-contractual remedy. So a builder who has not fully completed the work, through no fault of the owner, cannot overcome his difficulty by ignoring the contract and sue on a quantum merit for the work he has done. However, the rigours of this rule are often considerably reduced because, in a large number of cases where there is not entire performance, the owner may decide to sue the builder for damages for breach of contract. If he does, he will on general principles of damages for breach of contract, have to give credit for what he would have had to pay had the contract been properly performed. But in a case where the owner decides not to sue he may derive considerable advantage from the foregoing rules, which are, however, an essential and necessary sanction to discourage the deliberate breaking and abandonment of contracts, which will be absent in such cases the builder was entitled to demand partial payment notwithstanding his own breach.[25]
[24](2004) NSWCA 178 [52].
[25]Nguyen v Luxury Design Homes Pty Ltd (supra) [52].
No right to claim reimbursement by way of quantum meruit arises in such circumstances. The right only arises if the party not in breach sued for damages. See Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd[26].
[26][2012] NSW Court of Appeal 184.
The question here is whether the claim for general damages which I have disallowed would preclude the Faulks from the benefit of the principle set out in the above passage from Hudson’s text.
The damages sued for must be for defective or incomplete work so as to put the owner in the position he would have been had the work been performed in accordance with the contract. See: Robinson v Harman[27] and Belgrove v Eldridge[28]. The applicants have not sued for damages of that kind and do not claim any set off.
[27](1848) 1 Exch 850.
[28](1954) 90 CLR 613.
The general damages the applicants claimed were ancillary damages and don’t fall within that description, in my opinion. Therefore, the Faulks can take advantage of the principles that I have referred to as set out in Hudson’s text and in the decision of Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd (supra).
I am prepared to make findings that New World was in substantial breach of the contract when it wrongly suspended the works. It was also in breach of the contract for wrongly seeking payment of the Stage 4 progress payment. However, the contract was validly terminated by the Faulks on 20 November 2012.
I dismiss New World’s claim for payment of Stage 4 and all its other claims including its claims for costs and interest.
I invite submissions in respect to costs, such submissions to be filed by the respondent by 4.00 pm on 30 January 2014 and any response by the applicants by 4.00 pm on 6 February 2014.
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