Garth & Ruffin v Bali Pools Pty Ltd
[2010] QCAT 57
•5 March 2010
CITATION:Garth & Ruffin v Bali Pools Pty Ltd [2010] QCAT 57
PARTIES: ROBERT GARTH & KATHRYN RUFFIN
V
BALI POOLS PTY LTD
APPLICATION NUMBER: BD 366-08
MATTER TYPE: Building matters
HEARING DATE: 22, 23 February 2010
HEARD AT: Brisbane
DECISION OF: S W Sheaffe
DELIVERED ON: 5 March 2010
DELIVERED AT: Brisbane
ORDERS MADE: The applicants to pay to the respondent the sum of $14, 830.15 on or before the 19 March 2010
CATCHWORDS: A claim for excavation costs in excess of the provisional sum, variations, suspension of the contract and termination.
APPEARANCES and REPRESENTATION (if any):
The applicants are self represented
Mr Knipe represents the respondent
REASONS FOR DECISION
Introduction
Robert Garth & Kathryn Ruffin (the applicants) claim against Bali Pools Pty Ltd (the respondent) relief from payment of invoices for $25,534.55, an amount over and above the contract price, damages for solatium ($5,000), compensation for a reduction in the pool size ($1,887.80) and the costs of filing the application. The respondent denies the applicants’ claim and seeks an order that the applicants pay the balance of the contract price plus extras under the contract of $27,683.79.
Background
The applicants are the owners of a home at 44 Bridie Drive, Upper Coomera (the land) and the respondent is a licenced pool building company.
On 20 October 2007 the respondent delivered a quotation to the applicants to build a pool on the land for a price of $28,880.00 plus extras. The total quoted price including the extras was $42,132.00 (“the quotation”).
On the 26 October 2007 the applicants and the respondent entered into a standard domestic swimming pool contract 01818 (“the contract”) whereby the respondent agreed to build a pool on the land for a price of $42,000. The contract also included a document signed by the parties (“the attached document”) and the quotation expressly stipulated on its face that “this quote is part of contract #01818.”
The applicants made the respondent’s representative, Mr Edwards, well aware the site was very rocky and admitted that he knew it was rocky. It is clear that the respondent knew the site was rocky, as page 8 of the contract expressly stated that “large excavator required very rocky.”
On the 23 November 2007 the respondent commenced work and arrived on site with a 7 tonne excavator, and with the bob-cat they worked all day excavating and removing rubble. According to Mr Knipe, they were required to excavate and remove material from the rear of the property and the rear of the pool in locations that were not part of the pool area specified in the contract. Eventually digging commenced in the pool area and after the overburden was removed it quickly became apparent that the subsurface was blue stone, a hard rock that could not be shifted with the 7 tonne excavator.
The next day a 12 tonne excavator was brought onto the land and unfortunately, it also could not break up the blue stone. A third excavator was eventually bought onto the site.
On or about the 26 November 2007, the male applicant instructed the respondent to rotate the pool and raise its level by about one metre with the consequent effect that it would reduce the amount of blue stone that had to be extracted. The respondent maintains that this change to the pool required extra work, including additional boxing and foundation work, and they were entitled to claim for this extra work. The respondent also claimed that they were entitled to claim for extra excavation work over and above the provisional sum.
The respondent delivered invoices for the excavation work and a letter outlining the breakup of the excavation costs dated the 21 February 2008.
10. On the 19 September 2008 the solicitor for the respondent forwarded a letter to the applicants advising that the works were suspended by reason of the failure by the applicants to pay the excavation costs.
11. On 5 December 2008 the applicants gave a written notice of termination of the contract pursuant to clause 17.1 of the contract.
12. The most significant provisions of the contract, so far as relevant provide:
Clause 11 Variations
The work to be done, or the materials used, under the contract may be varied:
a. by agreement between the parties
b. where there is a latent Condition, in order to remove the Latent Condition; or
c. where due to a requirement of a private certifier, the statute, local authority or other body having jurisdiction over the carrying out of the works, in order to comply with the requirements
Variations by Agreement
…
…
…
Variations for Latent Condition
If , in carrying out the works or attempting to gain access to the site for materials or equipment, the contractor becomes aware of any Latent Condition which effects the performance of the works, the Contractor must give the Customer a written notice describing the Latent Condition and the Contractor’s estimate of the work and cost required to overcome the Latent Condition
Subject to this Clause, the Contractor may, with the written consent of the Customer, vary the Works to overcome the Latent Condition.
The customer must not unreasonably withhold its consent to a variation due to a Latent Condition and must take all steps to sign the variation document provided by the Contractor
The expression “Latent Condition” was defined in clause 20 to mean “any physical condition on or around the site, including surface, access and subsurface conditions, which differ materially from the physical conditions reasonably expected by the Contractor at the time the Contract was entered into.
Clause 13 Provisional Sums
The Contract Price includes the items of work shown in the Provisional Sums Schedule, which sets out the Contractors estimated allowance of the cost of carrying out each item of work for which the contractor cannot give a definite price.
The Contractor may, at its discretion, allow the Customer a reasonable opportunity, upon giving of adequate notice, to be present at the site during the performance of any work included as a Provisional Sum in order to verify the actual cost of the work.
If the actual cost for a Provisional sum is greater than the amount allowed, the excess amount together with the Contractor’s margin on the excess amount is to be added to the contract price.
If the actual cost for the Provisional sum is less….
Unless otherwise agreed in advance in writing by the parties, any adjustments to the contract Price in accordance with this clause, are claimed by:
a. The Contractor making a claim for any adjustments within 5 working days from the Contractor becoming aware of the actual costs, and
b. The Customer must pay each adjustment claim within 5 working days of receiving the Contractor’s claim.
13. The Provisional Sums Schedule, so far as relevant expressly provides:
PROVISIONAL SUMS
Provisional Sums Schedule (clause 13) (Estimates only)
Safety Fencing By Owner
Pre- Cut/Site Preparation Allowance N/A
Excavation Allowance $1200.00
Cartage Allowance
Note: The above amounts are “provisional only and are not a Fixed cost. The actual cost of completing these requirements will not be become known until their completion. Any reduction in extra cost will be refunded to the Customer and any increase in the actual cost will be separately invoiced to the Customer
14. The additional charges schedule provides, so far as relevant:
The cost of any additional work required (in excess of the Provisional amounts), together with any other additional rates (for items not included in the contract Price) are to be paid by the customer:
at the Contractor’s Cost, plus the Contractor’s margin, or in accordance with the following rates:
Mechanical Excavation incl: removal/ relocation $ perM3/ hr
Rock Excavation Incl: removal/ relocation $130 per M3/ hr
Backfill by Hand $ per M3/ hr
Formwork: below ground $ per M3/ hr
Structural: below ground $140 perM3/hr
Clause 15 Suspension of Work by the Contractor
In addition to the provisions of Clause 26, if the Customer
a. Fails to….
b. Fails to pay any progress payment or other amount due to the contractor within the time allowed in the contract
c. Fails….
The contractor may, without prejudice to any other rights under the contract, suspend the works by giving notice to the customer specifying the reason for the suspension. Such notice will also automatically extend the completion date by the number of days taken to remedy the failure or default
Clause 17 Termination of Contract by the Customer
In addition to the provisions of clause 26, if the Contractor:
a. Unlawfully suspends work without reasonable cause:
b. Unreasonably fails to proceed diligently with or complete the works
c. Unreasonably fails to replace or remedy any agreed defective work or materials which substantially affect the works
d. Is in substantial default of this contract
the customer may if the failure or default is capable of being remedied by the Contractor, give the contractor notice in writing setting out the details of the failure or default and stating the contractors intention to terminate the contract if the failure or default is not remedied within 5 working days or such longer time as is specified in the notice
If the Contractor does not remedy the failure or default within the time allowed, the customer may terminate the contract immediately by giving a further written notice
Applicants’ submissions
15. The applicants maintain that the respondent had breached various terms of the contract including clause 1.3 that stated the respondent must exercise care and skill.
16. The clause “additional charges” on page 9 of the contract was ambiguous, and clause 3.2 concerning ambiguous clauses applied, also the oral representations by Mr Edward should be taken into account to determine the meaning of the additional charges clause. They submit that this clause should be construed so that any extra excavation work over and over the provisional sum should be charged at $130 per hour.
17. The progress claims have not satisfied the requirements of clauses 10.2 & 3.
18. The blue rock is a latent defect as set out in clause 11.1, and that the requirements of clause 11.5 have not been complied with.
19. The extra work undertaken were variations and the variation provisions in clause 11.13-15 and sections 79-83 of the Domestic Buildings Contract Act 2003 (“DBC Act”) had not been complied with.
20. The applicants had no knowledge of the extra costs and were not given an opportunity to end the contract pursuant to clause 17.4.
21. The provisional sums were not calculated with reasonable care in breach of section 48 of the DBC Act and clause 1.3 (c) of the contract.
22. The respondent failed to complete the pool by the agreed date in breach of clauses 9.2.
23. The purported suspension of works by the respondent was not lawfully undertaken, or it was not suspended pursuant to clause 15 of the contract.
24. In summary, the applicants assert that the respondent was not entitled to recover for the rock excavation other than at $130 per hour for 20 hours less the provisional sums of $2,400 a total of $200. Secondly, the respondent was not entitled to recover for the additional work for the rotated pool as the variation requirements were not complied with.
25. Further, the respondent has breached the contract by wrongfully suspending the works, and this gave the applicant the right to terminate the contract and recover damages for solatium, interest paid and other damages.
Respondent’s submissions
26. The respondent says it is entitled to recover the amount outstanding in the sum of $27,683.79
27. They maintain an entitlement to recover additional sums for excavation of $5,008.66 plus $6561.49 (before a deduction of $3,300 for the water feature), a total of $11,570.15 over and above the provisional sum of $1,200.00 as prescribed by the contract.
28. The respondent also maintains that he is entitled to claim additional costs for the rotated and raised pool pursuant to the express terms of the additional charges clause of the contract. The amount claimed for the extra work is:
i.Drainage gravel and spreading- $1,478.64
ii.Extra boxing $4,640.00
iii.Extra concrete $840.00
iv.Redraw plans $435.60
v.Extra tressles- hire equipment $520.00
vi.Footings $4000.00
$11,913.64
29. The respondent maintains that the balance of the original contract price was not paid:
i.95% of the contract price $39,900
ii.Less deduction of the water feature $3,300
iii.Less amount paid $32,400
iv.Amount owing $4,200
30. The respondent says he was lawfully entitled to suspend the contract on the 19 September 2010 on the ground the applicants failed to pay the excavation costs. Consequently, the applicants’ termination of the contract was unlawful.
Observations and findings
31. There are four broad issues that require determination and are: The claim for rock excavation costs; the claim for the extra work; the claim for the balance of the contract price and the contract issues of suspension, termination and damages.
The Rock excavation claim of $11,570.15
32. The Respondent makes a claim for extra rock excavation in the sum of $11,570.15 as an additional charge in excess of the provisional sum of $1,200. The applicants raise many arguments in an attempt to defeat the claim.
33. The provisional sum clause 13 (1) expressly stated that the contract price includes the items of work shown in the provisional sums schedule, which sets out the contractors estimated allowance for each item of work for which the contractor cannot give a definite price. By this schedule, $1,200 was specified as the excavation allowance. Clause 13 (3) expressly stated that if the actual cost for provisional work is greater than the amount allowed, the excess amount together with the contractor’s margin on the excess amounts is to be added to the contract price. This clause 13 made it clear that the parties have agreed that the respondent is entitled to recover the actual cost over and above the provisional sum for excavation costs.
34. The applicant’s challenge liability for the additional excavation costs on a number of grounds as noted below.
35. Firstly, they argue that the respondent bought a 7 tonne excavator onto the site and it was too small and in breach of the term that a “large excavator required very rocky”. Mr Knipe said that he knew the site was rocky, but the 7 tonne excavator was large enough and sufficient to do the job. It was only when they discovered blue rock that the machine was found to be too small. The next day they bought a 12 tonne excavator onto the site with a rock breaker and it still could not break the rock. A heavier machine was subsequently used on the site.
36. The evidence is clear that the contractor knew the site is rocky, but did not know how tough the rock was under the surface. On some occasions rock breaks very easily as it has grains and cracks, and on other occasions it is as hard as diamonds. I accept the evidence of Mr Knipe on this issue. This is the very reason why a provisional sum was included in the contract and the applicants as the owners are required to pay the excavation costs over and above the provisional sum. The respondent had no way of knowing what the sub-strata was like until digging commenced.
37. The respondent also argued that a provisional sum of $1,200 was unreasonable as the respondent, and especially Mr Edwards knew the site was rocky. They submitted this was a breach of section 48 of the DBC Act, a section which warrants that the provisional sum has been calculated with reasonable care and skill. Mr Edwards was adamant that the $1,200 sum was sufficient in almost every circumstance, even where the site was rocky. Mr Edwards, Mr Nelson and Mr Knipe were adamant that they could not be determinative of the hardness of the substrata and they could not be definitive in advance as to how much time it would take to excavate the rock. I reject the submission that the respondent had breached the requirement that the provisional sum had been calculated without reasonable care and skill.
38. The applicants also maintain that the blue stone was a latent condition that the respondent became aware of during the performance of the excavation works. This issue is determined by consideration of the definition of the expression Latent Condition in clause 28, that is, it included any physical condition that differs materially from the physical condition reasonable expected at the time the contract was entered into. At the time of entering into the contract the contractor did not have any reasonable expectation as to what the subsurface was like. They knew the surface was rocky, but did not know whether the subsurface was a similar type rock, whether the rock fractured easily or not, whether it was clay or a sandstone type rock. This uncertainty is the reason why a provisional sum was included in the contract for rock excavation rather than an agreed fixed price. The builder simply had no knowledge of the character of the substrata and had no reasonable expectation of any type of rock or subsoil. It cannot be said that the physical condition of blue stone was materially different from the physical condition reasonably expected. I reject this submission by the applicants.
39. The next submission is based on an interpretation of the additional charges clause. The applicants submitted that the builder was limited to the recovery of $130 per hour and this was supported by the evidence of Mr Edwards.
40. The applicants rely on the evidence of Mr Edwards who filled in the contract by his hand, and these terms were agreed and signed by the parties. Mr Edward’s evidence was extremely unsatisfactory on this issue. He said that the rock excavation was at $130 per hour and then changed his mind and said the respondent could recover all the excavation costs plus a margin. He changed his mind during cross examination. To me, he was terribly confused and uncertain and I do not place any weight on his evidence at all, and I regard his evidence on this issue to be of no probative value at all. He must also have been confused at the time he completed the contract as he ticked a number of boxes where alternative answers were required. For example, he ticked both the yes and no boxes on page 8 where the questions were asked whether a pre-cut and ramping were required. Similarly, he must not have properly read or understood the additional charges section when he completed it as he ticked the first option, didn’t tick the alternative option but then completed some of the items in this alternative option.
41. The additional charges section states that “the cost of any additional work required (in excess of the Provisional Amounts), together with any other additional rates (for items not included in the contract price) are to be paid by the customer:” The clause then specified two alternative ways of assessing the amount to be paid, and one of the two boxes were to be ticked. The two alternatives were “at the contractors cost, plus the contractors margin or in accordance with the following rates”. If the latter option were chosen, space was then provided to list the rates for mechanical excavation, rock excavation, formwork, structural and others. Of these two alternatives, the first item was ticked and the second one was not, making it clear that the parties had agreed that the applicants were to pay in excess of the provisional sum at the contractors cost plus his margin. I am satisfied that this was the agreed position and it is supported by the express words of clause 13(3) that the excess over the provisional sum was to be added to the contract price.
42. Confusion arose in this case because the second of the two alternatives was not ticked (or in accordance with the following rates), but a rate was included in the blank space for Rock Excavation inc removal/ relocation $130 per m3/hr. Further confusion and uncertainty was created by one of the alternative charging methods (either M3/ hr) not being crossed out; in other words, was this rate at $130 per cubic metre or $130.00 an hour. Mr Knipe was adamant it was $130.00 per cubic metre. He said $130 an hour was unrealistic as there were usually three machines operating at once and at a charge out rate of between $120 and $150 per hour for each machine: an excavator, a bob-cat to load the truck and the truck. To the contrary, Mr Edward said it was $130 per hour, though he was not convincing when he gave his evidence.
43. The applicants said that Mr Edwards informed them on the day they signed the contract that the rock excavation would be charged at $130 per hour. I must say that the applicants were extremely bright and impressive individuals and were obviously well educated and understood the legal issues that confronted them. Ms Ruffin gave detailed and learned submissions for one and a half hours on every aspect of the contract and she knew the terms of the contract in minute detail. But yet they say they were surprised by the ambiguity in the additional charge clause and did not understand them. I am surprised and staggered that she did not pick up the errors made by Mr Edwards at the time the contract was entered into. If she had read the additional charges clause at the time it would have been apparent that the ticked box stated that they were responsible for the additional work (in excess of the provisional amounts). I accept that Mr Edwards stated these words but I reject the submission that they override the express words of the contract that the applicants were responsible for the additional charges at the contractors cost plus margin. I reject the submission that it was a term of the contract that the price for the excavations was at $130 per hour. It is clear that this clause was completed without care being taken by Mr Edwards, but the applicants cannot blame him for all the errors as they signed the contract.
44. The preliminary words “The cost of any additional work required (in excess of the Provisional Amounts)” made it clear that the section concerns extra work for the items listed in the provisional sums schedule, and so far as relevant the important item in this case is the Excavation Allowance of $1200. The second part of clause “together with any additional rates (for items not included in the Contract Price) are to be paid by the Customer” has no bearing on the issue as it referred to additional rates only.
45. The above analysis is supported by the express words contained in the excluded items schedule. This schedule expressly provided that the contract price did not include the excavation of rock and disposal of over burden.
46. Finally, it was asserted that the provisional sum was $2,400. I reject this submission and find that the provisional sum was $1,200 and it has already been deducted from the amount claimed. This is apparent by the express words in the provisional sum schedule of $1,200.00.
47. I reject the submissions by the applicants and find that the respondent is entitled to recover the sum of $11, 570.15 for the excavation work over and above the provisional sum of $1, 200.00
Extra work claim of $11,913.64
48. It is not disputed that Mr Garth suggested and instructed the respondent to rotate and raise the pool so as to reduce the amount of blue rock to be excavated. It was agreed that there were discussions between Mr Garth and Mr Knippe about the need for new plans and approvals but the nature of the discussions were disputed. Mr Knipe said there were discussions about additional costs but this was denied by the male applicant. Mr Knipe maintains that he informed Mr Garth that the cost of excavating the blue stone could be between $10,000 and $20,000 and the next day the male applicant suggested the pool be changed to reduce the excavation costs. The evidence of Knipe is preferred on this issue and I accept his evidence where it is in conflict with Mr Garth. His evidence was simply more realistic and believable. The suggestion that the rotation and the raising of the pool did not justify an alteration to the price is simply not believable.
49. Mr Knipe maintained that the extra work was not a variation but was recoverable as additional work under the relevant additional work clause. He maintained that the respondent was entitled to recover for any additional work at the contractors cost plus the margin. On the other hand, the applicants maintain that the additional work was a variation and was not recoverable as the requirements of the variation clause in the contract and the DBC Act Part 7 were not complied with. It is agreed that a variation document was not prepared and signed by the parties and Mr Knipe says it was not necessary to sign such a document as the work was not a variation.
50. I am of the view that the additional work clause is limited to additional work in excess of the provisional amounts. I am also of the view that the extra work carried out by the respondent was not additional work in excess of the provisional amounts as prescribed in the clause. I find the extra work was not additional work as stated in the addition work clause. The rotation of the pool, the need for new engineering plans, the raised boxing and altered footings were not provisional items. If the respondent’s argument was correct, it would mean all additional work could be charged at contractors cost plus margin and the variation provisions would be made obsolete. The extra work undertaken is, in my view, a variation to the works originally agreed to be carried out. There is no doubt that extra work was required and carried out and I am satisfied it was a variation.
51. As the parties agreed the pool was to be rotated and raised, I accept that the additional works were variations by agreement pursuant to clause 11 of the contract. However, I also find that the respondent had not satisfied the procedure for variations prescribed in clause 11 as he had not ensured that the details of the variation were put in writing and signed by the parties.
52. More significantly, the respondent had failed to comply with the requirements of Part 7 of the DBC Act. The variations were not placed in written form and signed by the applicants as required by section 82. I am satisfied that the statutory requirements had not been satisfied. In these circumstances, the respondent is not entitled to recover the cost of these variations. I dismiss the respondent’s claim for the sum of $11,914.64
Contract price outstanding
53. The third issue concerns the balance of the contract price due and owing. I accept that the respondent had suspended the contract on the 19 September 2008 and I accept Mr Knipe’s evidence that all he had to do to complete the job was $3,040.00 in additional work. I also note that a contrary position was not suggested to him in cross examination. Therefore, the amount outstanding under the contract was:
a.Contract price- $42,000
b.Less water feature $3,300
c.Less amounts paid $32,400
d.Less amount required to complete the job- $3,040
e.Balance owing $3,260
54. In summary, I find that the balance owing under the contract is $3,260.00
Contractual issues
55. On the 29 September 2008 the respondent, by his solicitor purportedly suspended the works for the applicants’ failure to pay the excavation costs. The letter set out in detail the reasons for the suspension. It is also noted that the applicants were well aware of the claim for the extra excavation costs as on the 21 February 2008 the respondent had set out in writing the additional excavation costs, claiming $11,798.95. As stated above, I find that the applicants were liable for the additional excavation costs and they refused to pay these moneys. It follows that the respondent was entitled to suspend the contract until these payments were made pursuant to clause 15 (1) of the contract. Therefore, I find that the suspension of the contract was lawful.
56. The applicants sought to terminate the contract on the 5 December 2008, alleging that the suspension was without reasonable cause and for failure to diligently complete the works. As the suspension of the contract was lawful, the work could only proceed if the amount outstanding was paid and this had not occurred. It follows that the applicants were not entitled to terminate the contract. I find that the termination was unlawful. Consequently the applicants are not entitled to recover any damages for solatium, interest paid and for the reduced size of the pool and the other items claimed.
57. In summary, the applicant is entitled to recover the sum of $11,570.15 plus $3,260.00 or $14,830.15.
Order
58. The applicants to pay to the respondent the sum of $14,830.15 on or before the 19 March 2010.
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