GC Group Pty Ltd v McCoy - [2023] QCAT 481

QUEENSLAND CIVIL AND
ADMINISTRATIVE TRIBUNAL

CITATION:

GC Group Pty Ltd v McCoy [2023] QCAT 481

PARTIES:

GC GROUP PTY LTD

(applicant)

v

ADAM MCCOY

(First respondent)

APPLICATION NO/S:

BDL067-21 and BDL113-21

MATTER TYPE:

Building matters

DELIVERED ON:

1 December 2023

HEARING DATE:

1 June 2023

HEARD AT:

Brisbane

DECISION OF:

Member Poteri

ORDERS:

1.     Adam McCoy must pay the sum of $16,566.36 into the nominated bank account of GC Group Pty Ltd by 4pm in the 12 December 2023.

2.     GC Group Pty Ltd must deliver to the residence of Adam McCoy all remote-control devices, keys to the house, all warranty/manufacturer’s documents relating to any equipment/items installed in the house, all relevant certificates for the house and any other relevant documents/items that are normally handed to owners by GC Group Pty Ltd at practical completion by 4pm on 12 December 2023.

3.     The application of Adam McCoy in file BDL 113 – 23 is dismissed.

CATCHWORDS:

ADMINISTRATIVE TRIBUNAL – QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL – BUILDING CONTRACT – CLAIM FOR DELAY COSTS/PENALTIES -Where a builder has entered into a fixed price building contract with a landowner to erect a dwelling house – Where the landowner alleges that the builder has misled the landowner regarding the cost of installing a septic system – Where the landowner is alleging that the provisional sum allowance for the installation of the septic system in the building contract is inadequate – Where the landowner is claiming other losses from the builder – Where the builder is claiming delay damages under the building contract from the landowner

Plantec Pty Ltd v Chandra [2018] QCAT 235 at paragraphs 63 to 65

APPEARANCES & REPRESENTATION:

Applicant:

Self Represented

First Respondent:

Self Represented

REASONS FOR DECISION

The Respondent, Adam McCoy (McCoy), is the registered proprietor of a property situated at 34 The Spur, Worongary (Land).
The Applicant, GC Group Pty Ltd (GC Group), is a registered builder. Michael Berry (Berry) is the managing director of GC Group. Berry provided evidence and a statement (Berry’s Statement) to the Tribunal on behalf of GC Group. Berry’s Statement is dated 13 January 2022 and was filed in the Tribunal on 14 January 2022.
On 31 May 2019 GC Group entered a building contract (Contract) with McCoy regarding the erection of a dwelling house on the Land. See annexure A of the application of GC Group filed in the Tribunal on 25 March 2021.
The dispute relates to alleged claims by McCoy and GC Group:
(i)      GC Group to finalise some defects as outlined in exhibit D of the affidavit of Neil McCoy (N McCoy), the father of McCoy sworn on 28 January 2022 and filed in the Tribunal on 28 January 2022.
(ii)      McCoy claims a credit of an amount of approximately $29,000 for the cost of installing a HSTP System (Septic System) for the dwelling house.
(iii)     McCoy claims damages of $68,892.20 (See Annexure A to McCoy’s claim in file BDL113/21) for defective work, extra costs regarding the installation of the Septic System and loss of rent. This claim includes the claims referred to in (i) and (ii) of this paragraph.
(iv)     GC Group are claiming the payment for practical completion, delay costs and interest.
There is evidence that McCoy and Neil McCoy, McCoy’s father (N McCoy), had some heath issue. Some of the discussions and correspondence with GC Group took place with N McCoy. N McCoy says in his affidavit sworn on 17 December 2021 and filed in the Tribunal on 21 December 2021 that he holds McCoy’s power of attorney.
There are two matters (BDL 067/21 and BDL 113/21) in the Tribunal relating the facts and circumstances of this dispute. I propose to deal with both claims/counterclaims together.

SEPTIC SYSTEM – PROVISIONAL SUM ALLOWANCE

The issue of the Septic System begins at the time of negotiations and the execution of the Contract by the parties.
Berry says that a provisional allowance for the Septic System was $7640 and was included in the Contract. All correspondence between the parties that occurred during and after the construction of the house refers to the prime cost allowance of $7640. However, the prime cost allowance in part B of the Contract refers to an amount of $8404 whereas the works agreement (Exhibit B to GC Group’s application) and variation 2 dated 3 April 2020 refers to an amount of $7640. Therefore, there is some discrepancy in the figures. I note that $8404 equates to an amount of $7640 plus GST.
It seems to me that a mistake was made in drafting of the terms of the Contract and the works agreement which were both executed by McCoy on 31 May 2020. The figures in item 3 on page 1 of the schedule to the Contract outlines the figures which include provisional sums and prime cost items in the appendix and include a component of GST. These figures include the amount of $8404 in the calculations referred to on page 5 of the schedule to the Contract. Therefore, McCoy should receive a credit $764 for the GST component of the provisional sum of $8404.

SEPTIC SYSTEM - ESTIMATE

Berry says the estimate of the cost of installing the Septic System was reasonable at the time. Berry says that the prime cost allowance of $7640 ($8404) was based on a previous estimate (see exhibit C to Berry’s Statement) and the cost of a septic system for another house (see page 1 dot point 4 of Berry’s Statement). Although this quote was from 2017, Berry says that costs were not increasing at that time, and this is a comparable quote.
Berry also says that GC Group could not prepare an effluent report which is required for a septic system. This report could not be prepared at this time because McCoy was proposing to erect a second dwelling house on the Land and McCoy was taking care of Council approvals for a material change of use application.
McCoy relies on the discussion at the time of the settling on the terms of the Contract. McCoy says that he originally was going to sign a contract with Dixon Homes to build the home. McCoy says that GC Group agreed to match the price of Dixon Homes, which included the installation of a septic system. McCoy says that there was a collateral contract signed regarding the Septic System. See the annexure A to the affidavit of N McCoy sworn on 28 January 2022 and filed in the Tribunal on 28 January 2022. McCoy says that this document supports his claim because the figures and issue such as the “Septic included” was discussed and agreed in these discussions.
McCoy also says that when the Septic System was to be installed by GC Group, the cost of installation had increased to approximately $29,000 which far exceeded the provisional allowance of $7640 ($8404) in the Contract. He says that Berry would have known about the cost around the time of the execution of the Contract and therefore Berry and GC Group engaged in misleading and deceptive conduct.
I accept the version of events that has been outlined by Berry and GC Group because:
(i)      GC Group acknowledge that the Septic System was discussed at the time that the terms of the Contract were settled but say that the provisional allowance value of the Septic System of $7640 ($8404) was reasonable at the time. That is in 2019.
(ii)      There is no corroborating evidence (except the Annexure A to N McCoy’s affidavit) to support the submission by McCoy that there was a separate contract or arrangement with GC Group where the Septic System would be installed by GC Group or at GC Group’s cost, notwithstanding the cost of installation.
(iii)     McCoy has not submitted any expert evidence about the possible cost of installing a similar septic system on the Land in or about 2019.
(iv)     Berry refers to rock being discovered on site during excavation for footings and plumbing. See page 3 of Berry’s Statement. This may have added to the cost of installing the Septic System. There is a variation which is Annexure H to Berry’s Statement which refers to rock being encountered.
(v)      Berry provided independent evidence of the value of installing a similar septic system. See Exhibit C to Berry’s Statement.
(vi)     There was some delay in obtaining approval for the material change of use. At this stage GC Group were aware of the increased cost of installing a Septic System and looked at ways to reduce the cost.
(vii)   Berry says that McCoy executed a negative variation claim 2 of S7640 on 3 April 2020. See Exhibit 1.1 annexed to Berry’s Statement.
(viii)     Berry says that in April 2020, McCoy advised GC Group by phone that he wished to install the Septic System.
(ix)     There may have been problems with McCoy’s financier in processing the building cost claims. See pages 3 and 4 of Berry’s Statement.
(x)      McCoy took steps to arrange approval for the installation of a septic system with Council without consultation with GC Group. See page 4 of Berry’s Statement.
(xi)     Variations V18 and V19 (Exhibits T and T1 to Berry’s Statement) were signed and accepted by N McCoy on 26 August 2020. See page 4 of Berry’s Statement. Variation 18 refers to a claim for delay costs and that the “owner supplied and installed the HSTP system”. Variation 19 refers to a final certificate of occupancy. “Party responsible for obtaining building approval and occupancy certificate – Owner”
I find in favour of GC Group regarding McCoy’s claim for a credit of approximately $29,000 for the Septic System. However, McCoy should receive the full benefit of the provisional allowance of $8404 in the Contract. That is a credit of $764 for the GST component.

PRACTICAL COMPLETION

GC Group have issued 2 notices of practical completion of the house. The first notice of practical completion was dated 15 June 2020 and the second notice is dated 26 August 2020. See Exhibit M annexed to Berry’s Statement and Exhibit U annexed to the application of GC Group.
On the evidence provided by both parties it is not clear to me why GC Group issued 2 notices of practical completion. Berry says on pages 3 and 4 of his Statement that there were delays caused by NAB, McCoy’s financier, and GC Group contacted Master Builders legal to ascertain their rights. After receiving this advice GC Group decided to issue a variation and then follow the process to issue another notice of practical completion dated 26 August 2020.
In June when the first notice of practical completion was issued by GC Group, a walkthrough of the house was conducted with McCoy. McCoy signed the defect list and the notice of practical completion dated June 2020. The defect list is Exhibit P annexed to the application of GC Group.
Berry says in his Statement Berry that GC Group conducted a further walkthrough of the house with McCoy in September 2020 and McCoy would not sign the notice of practical completion dated August 2020. Also, McCoy added further defects to the list of defects. Berry says that this list includes additional items which involved adjusting doors because of tiles installed by McCoy.
There was correspondence between the parties between June and August 2020 regarding the payment of the final payment and the installation of the Septic System.
I note that 3 variations were issued by GC Group in or about August 2020. They are:
(i)      Variation v20 – This variation is Exhibit AD annexed to Berry’s Statement. This variation is dated 26 August 2020 and refers to a credit $1,272.73 in favour of McCoy for the temporary power pole. This variation has been executed by N McCoy on 26 August 2020.
(ii)      Variation v19 – This variation is Exhibit T annexed to Berry’s Statement. This variation relates to a nil variation
(iii)     Variation v18 – This variation is titled an authority for variation of the Contract with regard to a claim for delay costs which are referred to as “Each day of delay incurs a $100.00 penalty”.
On 14 November 2023, I requested the parties to provide submissions on variation 20 and whether GC Group had accounted for the credit of $1,272.73, referred to in variation 20, in the calculation of the final claim of $13,891.25. On 24 November 2023 GC Group stated that the credit was issued prior to the issue of the final invoice. McCoy did not provide any response. I arranged for a Tribunal case officer to attempt to contact McCoy by telephone. This case officer confirmed that he made two attempts to make contact with Mccoy, without success. On the information before me I find that the credit was accounted for in the calculation of GC Group’s claim of $13,691.25.
On the material before me I find that the house reached practical completion in accordance with notice dated 26 August 2020, to take effect on 8 September 2020.
(i)      The defects listed in Exhibit P of GC Group’s Claim have been rectified.
(ii)      McCoy has taken possession of the house in or about June 2020 and he has undertaken some works in the house.
(iii)     GC Group was following the terms of the Contract when the notice of practical completion was provided to McCoy in August 2020.
(iv)     Subject to any adjustment for McCoy’s further defects claim outlined in N McCoy’s affidavit dated 28 January 2022 and the GST credit of $764, the amount of owing under the Contract is $13,691.25.

LIST OF FAULTS AND NON-SUPPLY OF GOODS AND SERVICES AS OUTLINED BY MCCOY

GC Group assert that when McCoy took possession of the house in or about June 2020, McCoy was in breach of the Contract. GC Group submit that because McCoy was in breach of the Contract then the provisions of clause 17.10 of the Contract applies. That is, when an owner takes possession of the works when not entitled to do so, then the works are deemed to have reached practical completion without any defects or omissions. It is my view that there is not sufficient evidence and material before me to make such a finding. Therefore, I will now comment on McCoy’s list of faults and non supply of services. I will refer to each item using the numbering in Exhibit D annexed to affidavit of N McCoy filed in the Tribunal on 28 January 2022.
This list of defects and non-supply of goods and services is Annexure B to McCoy’s claim in Tribunal file BDL 113/21filed in the Tribunal on 24 May 2021. A value or cost of the items has been included on the list where relevant.
This list has been reproduced by GC Group with comments beside each item in Berry’s Statement.
Items 1, 2, 25 and 26. No evidence, such as photographs or expert’s reports, have been provided to the Tribunal to support these claims. Further, these claims have not been admitted by GC Group and GC Group have not had the opportunity of inspecting the alleged defects. Therefore, these claims are refused.
Item 24 Shower floor tiles (3) to be replaced with non-slip tiles. No evidence has been provided by McCoy to support this claim. Further this defect was not raised or mentioned in the two walk throughs with GC Group. This item is not listed in GC Group’s defect list in Exhibit P to Berry’s Statement. Therefore, this claim is refused.
Items 3,13 and 14 are admitted by GC Group who say that these items would normally be rectified in the 12-month defect liability period. McCoy has not provided a cost estimate to rectify these defects. As the parties are in dispute, I propose to ascribe a value of $750 to rectify these defects. This amount should be deducted from any award to GC Group.
Items 11, 15 and 16. These are remote control devices and a certificate of termite treatment. I will make orders that these items must be delivered to McCoy by GC Group.
Item 27. This item refers to a leak in the dishwasher which should be repaired under a manufacturer’s warranty. No details of such warranty have been provided by McCoy. I will make orders that any warranty or manufacturer’s documentation relating to the dishwasher in the possession of GC Group should be delivered to McCoy. This claim is refused.
Item 23. This item refers to the keys of the house being in the possession of GC Group. As McCoy has taken possession of the house this claim is refused. I will make orders that any house keys in the possession of GC Group should be delivered to McCoy.
Item 4. This item refers to alleged safety issues and illegality regarding the power pole and power connection. McCoy has placed no value on this item and has provided no evidence to support this claim. I make no finding regarding this item. However, if there are alleged safety issues with the power connection, then immediate steps should be taken by McCoy to report the problem to the appropriate authorities or experts so any safety issues may be addressed.
Item 10. This item refers to McCoy supplying a temporary power pole to GC Group. GC Group say that McCoy increased a credit of $1,400 in variation 20 which is Exhibit AD annexed to Berry’s Statement. Therefore, this claim is refused.
Item 7. This item refers to a wrong sized bath and mirror. No evidence has been provided by McCoy to support this claim or his assessment of cost to rectify this claim. GC Group do not admit the claim and say that this item was the subject of variation 20 which is Exhibit AC annexed to Berry’s Statement. However, I believe that Berry was referring to variation 20 which is Exhibit AD annexed to Berry’s Statement. In this variation there is a reference to a zero variation for a bathroom mirror and bath installed on site and confirmation that the mirror and bath have been installed “as per specifications”. This variation has been signed by McCoy on 28 August 2020. This claim is refused.
Item 19. This item refers to the front porch being concreted and tiled. No evidence has been provided by McCoy to support this claim. GC Group say that McCoy received a credit of $200 for this work and the credit is contained in variation 16 which is Exhibit AD to Berry’s Statement. I believe that variation 16 is contained in Annexure AC. This variation was signed by McCoy on 25 June 2020. Therefore, this claim must be refused.
Items 17, 18, 20, 21 and 22. McCoy says in his list that these items were omitted to be supplied and installed by GC Group. No evidence has been provided by or submissions made by McCoy to support these claims. GC Group say that these items are not part of the specifications of the Contract. Accordingly, GC Group say there is no legal requirement under the Contract to supply these items. I have perused the specifications annexed to the Contract and I can find no mention of microwave, clothesline or curtains in the specifications. GC Group say that the mesh requirements are outlined on page 20 of the specifications annexed to the Contract. From my consideration of the specifications, I have no way of determining if GC Group have complied with its legal requirements. GC Group say that it has complied with the terms of the Contract regarding these items. In the absence of any evidence to the contrary I accept the evidence of GC Group. Therefore, these claims are refused.
Items 5 and 6. These items refer to a power point connections and plumbing connections for the Septic System. The Septic System was the subject of earlier analysis and findings by me. I have previously found that GC Group is not responsible for the installation of the Septic System and the Septic System was the subject of an agreed variation. I also note that McCoy had contacted the Council regarding the installation. These items are part of the installation of the Septic System. Therefore, this claim is refused.
Item 9. This item refers to safety fencing which McCoy alleges was not erected and therefore he should be given a credit of $900. No evidence or legal basis has been provided by McCoy to support this claim. The safety fence is a matter for GC Group, and it is not part of any contractual arrangements between McCoy and GC Group. This claim is refused.
Items 8 and 12. This relates to the solar panel connection and the solar panels rebate. No details or evidence have been provided by McCoy to explain or outline his claim. In his response filed in the Tribunal on 4 February 2022, Berry has stated on page 2, items 8 and 12 - “Requested NMI from Neil on 9/07/2020 so that the connection could take place. No response.” Berry has annexed a letter dated 9 July 2020 on page 7 of this Statement. This claim has not been fully detailed and there has been no evidence to support the claim by McCoy. It seems to me that once the solar panels are connected through Energex, the rebate will be available to McCoy. This claim is refused.

Item 28. This claim relates to a claim for lost rental of $850 per week for lost rental of 21 weeks. McCoy has outlined this claim in his counterclaim of $43,232 in File BDL 113/21 at items 12 and 13 of Annexure B of the Counterclaim. There is no evidence to substantiate the claim, especially the amount of rent claimed by McCoy. McCoy bases his claim on the Septic System issue. McCoy says that because the Septic System was not connected to the house, he was not able to offer the house for rent. I have previously made findings about the Septic System. That is McCoy assumed responsibility for the installation of the Septic System. Therefore this claim is refused.

DELAY DAMAGES CLAIM BY GC GROUP

After the hearing I gave leave to GC Group to provide details and submissions on the basis and calculation of the claim for delay damages. This claim is for the amount $7183.61. GC Group filed submissions in the Tribunal on 23 June 2023.
The claim relates to the period between June and August 2020 in which GC Group issued two notices of practical completion and served them on McCoy. GC Group say that a final certificate for the erection of the house was not able to be obtained from a certifier because McCoy had not had his plans for the Septic System approved and installed. GC Group say that if you read clauses 24.1 and 15.1(c) together then this gives a basis for claiming delay costs where delays have been caused by the owner.
I am not convinced that GC Group is entitled to these delay costs because:
(i)      The delay or time that elapsed between the issue of two notices was not caused solely by the acts or omissions of McCoy. Certainly, delays were caused by McCoy in relation to the approval and installation of the Septic System. However, GC Group chose to take legal advice and as a result of the legal advice issued another variation and a new notice of practical completion in August 2020.
(ii)       Clauses 15 and 24 of the Contract refer to delays where the progress of the works has been delayed by the act or omission of the owner. In these proceedings the house had reached the practical completion stage by June 2020 and no further works, except for some minor rectification works, were required to be carried out by GC Group.
(iii)     If a claim is to be made for delay costs under clause 24 of the Contract, the contractor must give the owner a formal claim as set out in clause 24(1) of the Contract. This clause requires the contractor to give details of the claim and details of the reasonable costs to comply. GC Group have made these claims by way of variations 18 and 19 which have been counter signed by N McCoy. These variations do not comply with clause 24 of the Contract as reasonable costs have not been outlined in the variations. The only details provided is the claim for $100 per day as outlined in Item 17 of the Contract.
(iv)     Notwithstanding the issue of compliance with the notice(s), Variation 18 refers to a “penalty”. Penalties are void if they do not bear any relationship to any possible or potential loss. This doctrine is clearly set out in the matter of Plantec Pty Ltd v Chandra [2018] QCAT 235 at paragraphs 63 to 65. At paragraph 63 the presiding member said, “A penalty clause in a contract which requires a party to pay a particular amount which lacks any connection to the potential loss that could follow from the breach is void”.
(v)      In these proceedings GC Group is claiming a $100 penalty per day which amounts to a total $7,183.61 in respect of a claim of $13,691.25. This equates to an annual interest rate of approximately 50%. This must be a penalty when the construction work was, for all intents and purposes, was completed.
(vi)     Because the house had been completed by June 2020, the possible or potential losses of GC Group after this time are minimal.
I find that GC Group’s claim for delay damages is refused.

INTEREST AND FILING FEE

GC Group are claiming interest on any monies owed by McCoy to GC Group which is the interest rate outlined in item 19 on page 4 of the Contract. In Clause 11.9 of the Contract states that the contractor is entitled to interest on the outstanding amount at the rate stated in item 19 of the schedule, payable from the day after the payment was due. Therefore, I find that any outstanding amount that is owing to GC Group by McCoy is an amount owing under the conditions of the Contract and this amount attracts an interest rate of 10% per annum.
What is the relevant date for calculation of interest? Clause 11.9 of the Contract states interest is payable on any amount outstanding from the day after the amount is payable. This clause states that the times for payment under the Contract is 2 days after payment is due. See Item 19 of the schedule to the Contract. However, the final variation 20 which is annexure AD to Berry’s Statement states that the invoice must be settled within 7 days from the “issue”. Variation 20 is dated 25 August 2020 and countersigned by N McCoy on 26 August 2020 and the notice of practical completion is dated 26 August 2020 to take effect from 8 September 2023. Because of the inconsistencies between the terms of the Contract and the 7 days mentioned in Variation 20 I find that interest should be calculated from and including 11 September 2020 at an interest rate of 10% per annum.
GC Group have also claimed the filing fee of $352 for filing the application in the Tribunal. As GC Group have been successful in their claim, except for some minor issues, I find that the filing fee should be reimbursed to GC Group by McCoy.

ORDER

The orders:
(a)McCoy must pay the sum of $13,691.25 plus $352 for the filing fee, less $750 for defects and less $764 for the GST credit. This is an amount of $12,529.25 and payment should be made into the nominated bank account of GC Group by 4pm on 12 December 2023.
(b)Interest is calculated from and including 11 September 2020 at the rate of 10% per annum. The interest component is calculated up to including 1 December 2023. That is 1177 days at a daily rate of $3.43 per day. This is a total of $4037.11 that should also be paid by 4pm on 12 December 2023.
(c)The total payable by McCoy to GC Group is 16,566.36.
(d)GC Group must deliver to the house of McCoy all remote-control devices, keys to the house, all warranty and manufacturer’s documents relating to any equipment/items installed in the house, all relevant building certificates and any other document that is normally handed to homeowners by GC Group on practical completion of a house by 4pm on 12 December 2023.
(e)McCoy’s claim in Tribunal file BDL 113 – 21 is dismissed.