Geiselhart v Trico Building Repairs Pty Ltd (ACN 601 875 567)
[2021] ACAT 52
•23 June 2021
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
GEISELHART v TRICO BUILDING REPAIRS PTY LTD (ACN 601 875 567) (Civil Dispute) [2021] ACAT 52
XD 732/2020
Catchwords: CIVIL DISPUTE – contract to renovate free-standing garage and shed – claim that owner did not receive ‘value for money’ and that work done was incomplete and defective – implied terms governing payment for agreed variations, quality of workmanship and materials and time for completion – where owner intended to take work out of the builder’s hands and engage others to complete the works at the builder’s cost due to delays and concerns about quality – where builder threatened to sue if owner withheld payment – where contract terminated by agreement before work completed – effect of early termination agreement – whether threat of legal action amounts to duress at common law – whether early termination agreement voidable on the grounds of duress – whether owner estopped from denying that early termination agreement constituted a “full and complete settlement of our contract” – whether in those circumstances all or any of the applicant’s claims are maintainable – proper construction of words of release – whether owner’s claims otherwise proved where authors of expert reports not called to give evidence at the hearing – application dismissed
Legislation cited: Building Act 2004 ss 84, 88
Cases cited:Australian and New Zealand Banking Group v Karam [2005] NSWCA 344
Bannon v Nauru Phosphate Royalties Trust [2019] VSCA 303
Beerens v Bluescope Distribution Pty Ltd [2012] VSCA 209
Burness v Hill [2019] VSCA 94
Cons-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7
Fischer v Nemeske Pty Ltd [2016] HCA 11
Gold Coast Oil Co. Pty Ltd v Lee Properties Pty Ltd (1985) 1 BCL 63
Grant v John Grant & Sons Pty Ltd [1954] HCA 23
Mann v Paterson Constructions Pty Ltd [2019] HCA 32
McDermott v Black (1940) 63 CLR 16
Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) [2015] FCA 825
Moratic Pty Ltd v Gordon [2007] NSWSC 5
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37
Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65
Santos & Ors v Delphi Petroleum Pty Ltd [2002] SASC 272
Sze Tu v Lowe [2014] NSWCA 462
Thorne v Kennedy [2017] HCA 49
Texts cited:D. Cremean, M. Whitten and M. Sharkey, Brooking on Building Contracts, (LexisNexis, 5th ed, 2014)
J. D. Heydon, Heydon on Contract (Lawbook Co., 2019)
J. W. Carter, Contract Law In Australia (LexisNexis, 7th ed, 2018)
Tribunal: Senior Member M Orlov
Date of Orders: 23 June 2021
Date of Reasons for Decision: 23 June 2021
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) XD 732/2020
BETWEEN:
KARIN GEISELHART
Applicant
AND:
TRICO BUILDING REPAIRS PTY LTD ACN 601 875 567
Respondent
TRIBUNAL:Senior Member M Orlov
DATE:23 June 2021
ORDER
The Tribunal orders that:
The application is dismissed.
………………………………..
Senior Member M Orlov
REASONS FOR DECISION
Introduction
At all material times the applicant owned a residential rental property in Downer, ACT. In 2016 she sought prices from several suppliers to replace the existing free-standing garage, which was in a dilapidated condition, with a new metal garage and shed. She subsequently engaged the respondent (although this is disputed) to renovate the garage and undertake some additional works for a fixed price. Disputes arose about the time the work was taking to complete, the quality of the work and the cost of variations, which led to the early termination of the contract by agreement before the work was completed. The applicant now claims damages for breach of contract on the grounds that she did not receive value for what she paid, and for allegedly incomplete and defective work.
The respondent (Trico) is a building company. It denies that it entered into any contract with the applicant. Instead, it claims that there was an oral contract between Philip Bell, who represented Trico at the hearing, and the applicant to the effect that he would assist the applicant to renovate the garage by sourcing trades, assessing whether trade prices were fair and reasonable and inspecting the works to ensure that it was fair and reasonable for the applicant to make payment. According to Philip Bell, the applicant was responsible for the day-to-day management of the works. Trico claims that the works were not completed because the applicant terminated the agreement with Philip Bell prematurely and denies that any of the work was defective.
At the relevant time, Philip Bell was employed by A. J. Grant as a Senior Project Manager Procurement.[1] However, he styled himself in emails to the applicant as a ‘Senior Building Consultant’ to Trico Building Repairs.[2] His son, Paul Bell, was the sole director of Trico.[3] Another son, Andrew Bell, also worked for Trico. All email communications between the applicant and Philip Bell were sent to or from Paul Bell’s Trico email address. It is clear, in my view, that in his dealings with the applicant in relation to the Downer project, Philip Bell was always acting as the agent of Trico and had actual authority to do so.
[1] Exhibit R2, Exhibit R9 (5th dot point)
[2] See for example Exhibit A7
[3] Exhibit R2 paragraphs 7, 8
The applicant’s former partner, George Bell, is Philip Bell’s brother. According to the applicant, the relationship with George Bell ended not long after the events that are the subject of this application, leading to protracted and apparently acrimonious Family Court proceedings over the division of the parties’ assets. It appears that although at one time the applicant enjoyed a cordial, and apparently friendly, relationship with Philip Bell, the relationship became fraught during the project and, according to the applicant, contributed to the breakdown of her relationship with her former partner. The hostility that the applicant displays towards Philip Bell and, perhaps to a lesser extent, he displays toward her, was evident during the hearing and significantly coloured their evidence. I have treated the reliability of their written and oral testimony with considerable caution as a result and, wherever possible, have relied on contemporaneous documents in making findings of fact.
Background
In May 2016, the applicant obtained written quotes from several contractors for the demolition of the existing garage and carport and the supply and installation of a new metal garage and shed at the Downer property.[4]
[4] Exhibits A3, A4, A5
On 14 June 2016, the applicant sent an email from George Bell’s email address[5] to Philip Bell, at Paul Bell’s email address,[6] enquiring whether Andrew Bell would be interested in quoting for the work. Philip Bell replied the same day, stating that “Yes Andrew can do this while he is completing the Home at Moruya” and enquired, among other things, whether the applicant had approved plans.[7] The reference to Moruya was to a property owned jointly by the applicant and her then partner, George Bell.
[5] Exhibit R5 (Email 1) – I note that the email appears to be from George Bell but ends with “Regards, George (from Karin)” and was understood by the recipient, Paul Bell, as being from the applicant
[6] The email was sent to Paul Bell but was addressed to ‘Phillip’
[7] Exhibit R5 (Email 1.5)
The next day, the applicant replied that “I enquired and doesn’t need approval as under the size for a DA. Same for carport”.[8]
[8] Exhibit R5 (Email 2)
On 10 July 2016, the applicant wrote to Philip Bell:[9]
George says you will be in Canberra on a weekend soon. Of course we hope you will stay with us.
He said you might be able to have a look at the garage that needs replacing, so here is the quote from Mordek for a metal garage. There is a separate quote for a carport and I’ll also send the quotes I received to demolish, put in a new slab and construct a metal garage to these specs.
Just let me know what else you need.
My preference would be for a brick garage, I’m now trying to rent out the house as is, but could schedule the garage rebuild any time.
Thanks for all your help.
[9] Exhibit R5 (Email 3.1)
On 27 July 2016, the applicant emailed some photos of the carport to Philip Bell, adding “Please let me know if you want more pics or specs”.[10]
[10] Exhibit R5 (Email 8)
The applicant claimed in her witness statement that on 28 August 2016, Philip Bell approached her with an “unsolicited verbal offer” to repair the garage.[11] In light of the earlier communications just mentioned that evidence was, at best, misleading.
[11] Exhibit A1, paragraph 5
On 2 September 2006, Andrew Bell emailed a priced scope of work to the applicant for approval.[12] The sender was identified as “Paul Bell – Trico Building Repairs” but the email was ‘signed’ by Andrew Bell. The attachment was a four-page document on Trico’s letterhead, titled ‘Garage, Shed, Carport, Driveway Restoration Works of Existing’. It contained a general description of the proposed works on the first two pages, including the statement that “all building and engineering approvals are the owners responsibility”. There followed a detailed scope, comprising 39 numbered items, for which the lump sum price was quoted as $34,670 including GST.
[12] Exhibit A6; see also Exhibit R5 (Email 9) which appears to be the same email but sent on 3 September 2016
The applicant replied on 5 September 2016, stating “Quote accepted thanks”.[13] Later the same day she sent a further email stating “Ps the additional shed at back has to be 3m not 2.5”.[14]
[13] Exhibit R5 (Email 10); see also Email 12
[14] Exhibit R5 (Email 11); see also Emails 12 and 13
The Trico quote emailed on 2 September 2016 and the applicant’s email on 5 September 2016 accepting the quote which resulted in a contract between Trico and the applicant by which Trico agreed to carry out a defined scope of works in consideration for the applicant agreeing to pay a lump sum price of $34,670. As my subsequent findings show, the parties conducted themselves on the basis that the contract was with Trico, including in negotiating the terms upon which the contract should be terminated by agreement. The argument that the agreement was with Philip Bell personally and that the agreement required him only to ‘assist’ the applicant while responsibility for the day-to-day management of the job remained with the applicant, is inconsistent with the parties’ written communications and their conduct during the term of the contract.
On 14 September 2016, Philip Bell updated the applicant on the progress of the works. [15] The applicant replied, thanking him, and requesting “details of invoices and labor so far for my taxes”.[16]
[15] Exhibit R5 (Email 15)
[16] Exhibit R5 (Email 15)
Trico invoiced the applicant for its first progress claim on 16 September 2016.[17] The invoice, which was for $12,490, identifies the applicant as the “Customer” and Trico as the “Recipient” and states that the “Contract Sum” is “$34,670 GST inclusive”. Direct deposit details for Trico’s bank account appear at the foot of the invoice.
[17] Exhibit A8
The applicant paid the invoice by electronic funds transfer to Trico’s bank account the same day.[18]
[18] Exhibit A11, page 3 of 5
On 9 October 2016, Philip Bell emailed an updated scope of works to the applicant, stating:[19]
The price has not changed with the amended scope as trades and offset have been done to achieve this with savings in some scope items allowing extra works such as the new garage slab and the 1m garage overhanging to the roof.
We will keep in touch with the progress during the week and I will see you again next weekend.
[19] Exhibit A7, see also Exhibit R5 (Email 16)
The applicant replied the same day, “Great level of detail, many thanks”.[20]
[20] Exhibit A13; Exhibit R5 (Email 16) – note that this is dated 23 October 2016
On 10 October 2016, Trico invoiced the applicant for its second progress claim in the sum of $12,650.[21] The applicant paid the invoice by electronic funds transfer to Trico’s bank account the same day.[22]
[21] Exhibit A9 – note that the invoice is dated 12 October 2016
[22] Exhibit A11, page 5 of 5
On 22 October 2016, Philip Bell updated the applicant on progress and changes in the cost of the works due to variations that he claimed had resulted, in some cases, in savings, and in others, in an increase in the cost of the works. He wrote:[23]
We provided an unbeatable quote for you as you are family and You and George have been through Hell with your Builder on the Coast.
I would just like you to know there is no money in this job for Trico as it has been done at cost.
The true price of this job is the quoted amount plus 33% [sic] our price should have been $50,101.10.[24] [Original emphasis]
[23] Exhibit R5 (Emails 19, 22)
[24] The “Builder on the Coast” reference relates to unsatisfactory work done by another builder at a property at Moruya owned by the applicant and her then partner, George Bell.
Details of the claimed savings and increases in cost were provided against each affected item in the scope of works, resulting in a net increase in cost of $4,900 including GST. However, the applicant’s approval was sought to increase the contracted price to $37,670 including GST, an increase of only $2,574 and, effectively, a saving of $2,326 against the calculated net cost increase.[25]
[25] Exhibit R5 (Emails 19, 22)
The applicant replied on 23 October 2016:[26]
Thanks, Philip, I know you are doing your best.
I just want it all finished so my tenants can enjoy the use of the property without interruptions.
[26] Exhibit R5 (Email 20B)
The applicant was on holidays overseas from 25 October to 8 November 2016.[27] On returning to Canberra she inspected the Downer property on 10 November 2016. She was dissatisfied with the lack of progress and had other issues with the work done by an electrician which she later recorded in an email to Philip Bell sent on 16 November 2016, to which I refer later.[28] In her witness statement, the applicant identified the following matters as being causes of her dissatisfaction, in addition to the lack of progress: (a) the new electrics were not ‘fit for purpose’; (b) the eaves were not enclosed and were left open to the air, allowing access for birds; (c) the dirt for spreading in the yard was of poor quality; and (d) Trico had installed a roller door instead of a panel lift garage door.[29]
[27] Exhibit A1 paragraph 13
[28] Exhibit A1 paragraph 14
[29] Exhibit A1 paragraph 12
The applicant telephoned Philip Bell on 10 November 2016 to raise her concerns. Although the details of what was said are unclear it is obvious that it resulted in a serious disagreement which poisoned relations between the applicant and Philip Bell. The applicant claimed in her witness statement that “Philip Bell screamed at me, insulted me and threatened me. He said, ‘I’m going to blame you for the building defects at Moruya’ or words to that effect”. The applicant made a diary note recording that, “Philip screams at me, threatens”.[30]
[30] Exhibit A15
According to the applicant’s evidence, her then partner, George, telephoned her the same day or the next and said, “If you don’t pay Philip the rest of the money, he is going to sue you”.[31] The applicant claimed in her witness statement that she was “intimidated and frightened because my partner George Bell was no [sic] recognising the poor work or poor behaviour of his brother”.[32] I consider the legal consequences of the applicant’s claim to have been intimidated in a later section of these reasons.[33]
[31] Exhibit A1 paragraph 14
[32] Exhibit A1 paragraph 14
[33] See paragraph 90 and following
Philip Bell acknowledged that the applicant was upset about the time it was taking to finish the project and that this led to him and the applicant having a significant disagreement[34] but denied on affirmation to the Tribunal that he made any threats.
[34] Exhibit R2 paragraph 14; Exhibit R9 (penultimate dot point)
Having regard to the content of the applicant’s email to Philip Bell sent on 16 November 2016, to which I refer below, including her stated intention to withhold part of the next progress payment and engage other tradesmen to finish the work, and the statement attributed to her partner, George, that she would be sued if she did not pay, I think it is likely that the applicant disclosed her intentions to Philip Bell during the telephone call on 10 November 2016. It would be unsurprising, in those circumstances, if the telephone call resulted in heated disagreement. The applicant is an intelligent and articulate person capable of communicating her views forcefully and with considerable conviction, as I observed during the hearing. I can well imagine that if she were as dissatisfied with Trico’s performance as she says she was, she would have made her displeasure abundantly clear in the telephone call to Philip Bell. Equally, I can imagine that Philip Bell, who believed he (and Trico) was doing the applicant a favour because she was ‘family’ and neither he nor Trico was making any money on the job, would take exception to the applicant’s attitude, particularly if she said she intended to walk away from the contract without paying in full for the work done to date. It would be natural in those circumstances for Philip Bell to say that he would sue the applicant if she went ahead with her plans. If he did say that it would be understandable for the applicant to perceive that as a threat. The question whether a threat of legal action would be considered legitimate in those circumstances is considered later in these reasons.[35]
[35] See paragraph 90 and following
However, the specific threat the applicant alleges Philip Bell made to her is that “I’m going to blame you for the building defects at Moruya”. As I understood the applicant’s evidence, she claimed this was a reference to an ‘expert’ report Philip Bell prepared relating to defective work done by another builder at a property in Moruya owned by the applicant and George Bell for the purpose of proceedings against the builder in the NSW Civil and Administrative Tribunal.[36] It is unclear what the substance of the threat, if it was made, was intended to convey. If the applicant understood the threat to convey the inference that Philip Bell was prepared to give false evidence in support of the builder’s position, contrary to the opinions expressed in his report (which was not in evidence) first, the applicant did not say so in her evidence and second, she did not put that to Philip Bell explicitly in her cross-examination of him to give him a fair opportunity to respond to the allegation. Moreover, I find it hard to believe that Philip Bell would threaten to do such a thing when, if he carried though on the threat, the result inevitably must damage the interests of his brother, George, who was a part owner of the property.
[36] Exhibit A1, paragraph 14
The applicant’s antipathy towards Philip Bell was evident in her written and oral evidence and during her questioning of Mr Bell. I do not consider that she was being deliberately untruthful in relating her dealings with Philip Bell, but I do consider that, to a significant extent, she has reconstructed events to suit her own narrative of what she believes happened. I am not satisfied that the applicant’s evidence of the conversation with Philip Bell on 10 November 2016 is an accurate, adequate or reliable account of the conversation, or the context in which the applicant’s accusation that Philip Bell ‘screamed’ and ‘threatened’ her should be evaluated. In particular, I do not accept the applicant’s evidence that Philip Bell said anything during the telephone call to the effect that “I’m going to blame you for the building defects at Moruya”.[37]
[37] Exhibit A1, paragraph 14
On 12 November 2016, Trico invoiced the applicant for its third progress claim in the sum of $11,220. Despite the earlier agreement to the price increase advised on 23 October 2016, the contract sum stated on the invoice remained $34,670 including GST.[38]
[38] Exhibit A10
On 16 November 2016, the applicant paid $7,000 towards the invoice.[39] On the same day, the applicant wrote to Philip Bell:[40]
[39] Exhibit A12, page 3 of 5
[40] Exhibit R3 (Email 1); Exhibit A17
I have now deposited $7K into your Trico account.
These items at least from the scope of works remain incomplete:
timber lining of garage
tank and pump installation
knocking over and banking of slope in front of house of small brick wall
Also, electrics are an important aspect of any renovation, and rarely will replacing ‘like for like’ be adequate.
As there was no consultation or discussion with me about this, the electrics are clearly not fit for purpose.
Because the timber lining is not in place, the garage is open at the top of the walls to the elements, and is therefore now less functional than it was before you began renovating.
It is necessary as a good landlord to give my tenants value and therefore I need to set a date at which I will have to have this completed.
By early January it will be more than 4 months since you started in early September. I believe this provides a more than generous timeframe for you to complete the works which you told me would take 2 or 3 weeks.
Because you have been unable to give me a completion date for the scope of works other than ‘when I have time’, I will withhold enough money to pay another tradesman to finish it off, and provide you with invoices. I will then pay any difference outstanding on your quote.
I hope this is agreeable to you.
Paul Bell replied on 17 November 2016:[41]
This is not acceptable please pay the balance of the Progress payment as advised there are still two progress payment to go before this job is complete.
At no time was Time the essence of this contract You were advise all the way with these works and you have approved the original quote along with the approved variations.
You will find further variations that you approved off at the property such as tree and vegetation removal to allow for the works to be done. We have now added the variations that you are requesting, please see the attachment. [Errors in the original]
[41] Exhibit R3 (Email 2); Exhibit A17; Exhibit A18
According to the applicant’s bank records, she paid a further $4,000 towards Trico’s last invoice on 17 November 2016.[42]
[42] Exhibit A12, page 3 of 5
The applicant claimed in her witness statement that, after receiving Trico’s third invoice she promptly made two payments “out of fear”.[43] I infer that the ‘fear’ was that she would be sued if she did not pay. That ‘fear’ was probably well founded.
[43] Exhibit A1 paragraph 16
At 10:49am on 18 November 2016, the applicant wrote to Philip Bell:[44]
As per this document Oct 22, there are a number of items still outstanding in the scope of works. I believe all variations are included in that document.
Of highest priority is the closing off of the internal walls to the garage, items 26 and 27.
There is also the landscaping out front and installation of the tank.
I would like you to calculate a deduction for these and any other incomplete items, and any others, and agree on a price to finalise our dealings.
I intend to contract someone else to finish the work.
[44] Exhibit R5 (Email 26); see also Exhibit R3 (Email 3); Exhibit A20
At 3:33pm on 18 November 2016, the applicant replied to Paul Bell’s 17 November 2016 email:[45]
Not acceptable, and I don’t want all those extras, only to end the contract with items unfinished as they stand.
As per Oct 22, as I never agreed to anything more.
I want to end the contract now.
You need to deduct the items that you won’t be doing, very simple and it’s over.
[45] Exhibit R3 (Email 4)
Paul Bell replied at 5:22pm on 18 November 2016:[46]
You have asked for the contract to be terminated and no further works to be completed and you have agreed to pay a further $2570.00 including GST tonight.
The variations list that have not been completed will now not be part of this contract.
Trico Building Repairs has Agreed to the early termination of the contract subject to the above payment being made into the Trico Account tonight as agreed.
[46] Exhibit R3 (Email 5)
The evidence did not establish how agreement was reached that the applicant should pay the further sum of $2,570 referred to in Paul Bell’s email. At that point, the applicant had paid $11,000 against an invoice for $11,220. As Trico tendered an apparently complete record of email communications with the applicant leading to the termination of the contract and in the absence of evidence to the contrary, I infer that the matter must have been discussed that afternoon in a telephone call between Paul Bell and the applicant, the effect of which was summarised in Paul Bell’s email sent at 5:22pm. Although the statement that “you have asked” may suggest that the applicant initiated the telephone call, it is equally possible that Paul Bell telephoned the applicant upon receipt of her email sent at 3:33pm.
The applicant’s bank records show that she paid the final amount of $2,570 to Trico on 18 November 2016 by electronic funds transfer. At 5:30pm that day, the applicant sent an email to Paul Bell confirming payment and advising that her bank had said it may “take a day” to show up in Trico’s account.[47]
[47] Exhibit R3 (Email 6); Exhibit A19
Paul Bell replied at 6:21pm by re-sending his earlier email sent at 5:22pm.[48] As noted earlier, the email stated that Trico’s agreement to early termination of the contract was conditional on “payment being made into the Trico Account tonight as agreed”.
[48] Exhibit R3 (Email 7)
The next morning, on 19 November 2016, the applicant wrote to Paul Bell, “Our business dealings are now finished”.[49]
[49] Exhibit R3 (Email 8)
On 20 November 2016, the applicant wrote to Paul Bell again, stating:[50]
Please confirm that the additional $2570 has shown up in your account, and constitutes full and complete settlement of our contract at 5 Heaton Place Downer.
[50] Exhibit R3 (Email 9)
There is no evidence that Trico replied. However, I infer that Trico was content to leave matters where they stood based on the applicant’s last email.
For the next three years, there were no communications between the applicant and Trico about the Downer project.
However, in October or early November 2019 the applicant commissioned George Pudja of Peak Consulting to prepare a report on the building works, which he did on 18 November 2019. Mr Pudja wrote that his instructions were to:[51]
… attend the site for the purpose of inspecting for and reporting on any defective building work associated with the garage structure. We were requested to investigate the site conditions, standard of workmanship, completeness of same and provide a report on our findings as well as the provision to provide an estimated cost against the aforementioned work executed including that to rectify any defects noted.
[51] Exhibit A25, page 3 of 29, under the heading ‘Terms of Reference’
Mr Pudja noted that he had not received a formal brief and therefore that “the case details are in accordance with “Your Ref:” as noted above”.[52] I infer that this was a reference to the paragraph extracted above. It appears that the only documentation relating to the project that Mr Pudja was provided was an undated quotation proposal by Trico to the value of $34,670 including GST, which he assumed referred to the garage structure at the Downer property.[53]
[52] Exhibit A25, page 3 of 29, under the heading ‘1. Case Details’.
[53] Exhibit A25, page 4 of 29, under the heading ‘6. Referenced Documents’
Mr Pudja summarised his opinions as follows:[54]
2.1 The garage and storage room extension at the subject property was inspected, and significant defects, incomplete and non-compliant work was found.
2.2 No approval was sought for the storage room extension. A a [sic] review of the ACTPLA Exempt and Complying Development criteria, revealed that addition of the storage room at the rear of the garage has exceeded the allowable cross-sectional area of 30m2 of a structure within the clearance zone of 1.5m from a boundary line. This means that formal approval would be required before any works is to be carried out.
2.3 The quote and scope of works from ‘TRICO Building Repairs’ includes several items which were not executed but invoiced by the builder, nonetheless.
2.4 The estimated cost of approval and rectification of the garage and storage structure defects is in the order of $49,461.50.
[54] Exhibit A25, page 3 of 29, under the heading ‘2. Executive Summary’
The estimated cost to ‘rectify’ the alleged defects included the following allowances (ex GST):[55]
[55] Exhibit A25, pages 17 – 21 of 29
(a)$6,000 to prepare plans and obtain development approval for a new garage and shed.
(b)$1,450 for electrical works.
(c)$2,160 to remove and store and subsequently replace stored items on completion.
(d)$2,210 to deconstruct and store for reuse undamaged components of the metal roof.
(e)$1,300 to deconstruct the ‘non-compliant’ storage shed, de-nail timbers able to be reused and dispose of other materials.
(f)$15,600 to rebuild the structure, including supply and installation of new sarking, wall cladding, anti-con insulation blanket, metal fascia and accessories, barge/fascia capping, additional timber framing and eaves lining sheets, an automatic opener to the garage door, and painting the new building including cleaning the concrete floor and applying a paving paint.
(g)$7,680 for stormwater and drainage works.
(h)$1,350 for miscellaneous items, including cutting down and removing a tree, final clean and disposal of rubbish and handover inspection by the building consultant.
(i)$5,865 for profit calculated at 15%.
It is evident that Mr Pudja was not made aware that responsibility to obtain any necessary approvals for the work lay with the applicant.[56]
[56] See paragraphs 6, 7, 11 and 12 above
If Mr Pudja considered the original scope of work in preparing the scope of the remedial works described above, it is not apparent from reading his report. It is not possible to relate the scope of Mr Pudja’s remedial works to the 39 items comprising the scope of works agreed initially.[57] Further, it does not appear that Mr Pudja was provided with any information about agreed variations to the original scope of work and clearly, he had no regard to those changes in formulating his opinion about the scope of remedial works.[58]
[57] See paragraphs 11 and 12 above
[58] See paragraphs 17, 18, 20 – 22 above
It is evident that the applicant did not disclose to Mr Pudja that the contract with Trico was terminated by agreement before the work was completed and the terms upon which that happened.[59]
[59] See paragraphs 31 – 42 above
As a result, it is evident also that, in preparing his report, Mr Pudja did not consider the possibility that anything short of total demolition and reconstruction may be appropriate.
The applicant emailed a copy of the report to Philip Bell on 16 December 2019 under cover of an email titled ‘Letter of Demand’, which stated:[60]
Please find attached the report done by Peak Consulting to assess the work Trico did on my garage and surrounds at 5 Heaton Place Downer several years ago.
The work is defective and I have incurred costs and liability for rectification.
I request you to pay me full restitution costs as outlined in this report within 14 days.
Are you a member of an appropriate insurance scheme? If so please provide details.
[60] Exhibit A27
Trico did not respond to the communication.
The applicant commenced proceedings in the tribunal on 8 July 2020, waiving her right to claim any excess over $25,000 (which is the limit of the tribunal’s jurisdiction in civil claims) and claiming interest, search fees and the tribunal filing fee.
Issues
The following issues arise for determination:
(a)First, what were the relevant terms of the contract governing Trico’s scope of work, quality of workmanship and materials and time to complete?
(b)Second, whether it was permissible for the applicant to engage others to finish the work and deduct the cost of doing so from money owed to Trico?
(c)Third, what was the effect of the early termination agreement on the parties’ rights and obligations under the contract?
(d)Fourth, is the early termination agreement voidable on the grounds of duress?
(e)Fifth, does the early termination agreement mean it is now not open for the applicant to make claims that:
(i) she did not receive value for money;
(ii) she should be compensated for incomplete work for which she claims to have paid;
(iii) she should be compensated for the cost to rectify defective workmanship and materials?
(f)Sixth, has the applicant established that there are defects in workmanship and/or materials for which Trico is liable?
(g)Seventh, has the applicant established the reasonable cost to rectify any such defects?
I will discuss each issue in turn.
The first issue – relevant terms of the contract relating to scope of works, variations, quality of materials and workmanship and time to complete
The contract between the applicant and Trico was made on 5 September 2016 by the applicant’s written acceptance on that date of Trico’s written offer (or quotation) communicated on 2 September 2016. The contract defined the scope of works, allocated responsibility to the applicant to obtain any necessary building and engineering approvals and specified the lump sum price payable for the work. However, the contract did not provide expressly for progress claims, variations to the scope of work, quality of workmanship and materials, or time for completion.
In the absence of express agreement there is no implied right on the part of an owner to order variations.[61] However, it always remains open for parties to agree to variations on an ad hoc basis. In this case the parties conducted their affairs on that basis.
[61] D. Cremean, M. Whitten and M. Sharkey, Brooking on Building Contracts, (LexisNexis, 5th ed, 2014) [10.3]
In the absence of express agreement as to how agreed variations should be valued, the builder will be entitled to payment of a reasonable sum for the varied work based on an implied promise by the owner to pay.[62] That was the case here.
[62] Ibid.[10.8]
There was no express agreement as to the time to complete the works. In the absence of express agreement, a term is implied that the work will be completed within a reasonable time.[63] That was the case here. What constitutes a ‘reasonable’ time is a question of fact that depends on the circumstances.
[63] Gold Coast Oil Co. Pty Ltd v Lee Properties Pty Ltd (1985) 1 BCL 63 at 66 (per Connolly J, Thomas and Derrington JJ agreeing)
A garage and shed is not a ‘residential building’ within the meaning of section 84 of the Building Act 2004 and the construction or renovation of such a structure is not ‘residential building work’ within the meaning of the Act. Accordingly, the statutory warranties implied by section 88(1) of the Act into every contract to carry out residential building work do not apply in this case.
In the absence of express agreement as to the standard of workmanship and materials, a term will be implied that the work will be carried out in a good and workmanlike manner and with good and proper materials.[64] That was the case here.
The second issue – whether it was permissible for the applicant to engage others to finish the work and deduct the cost of doing so from money owed to Trico
[64] D. Cremean, M. Whitten and M. Sharkey, Brooking on Building Contracts, (LexisNexis, 5th ed, 2014) [4.4], [4.5]
The applicant was concerned at the time the work was taking to complete. Whether Trico was taking longer than a ‘reasonable time’ to complete the works is not an issue I have to decide. Breach of the implied term to complete the works within a reasonable time entitles an owner to claim damages for late completion. It does not entitle an owner to terminate the contract.
The general rule is that where a contract specifies that something must be done by a specified date, time is not ‘of the essence’ – i.e., late completion does not entitle the innocent party to terminate the contract – unless the contract specifies that time is of the essence of the contract, or the time for completion is specified to be an essential term of the contract.[65] Time is not of the essence where the contract requires performance within a reasonable time, as was the case here. Where time is not of the essence, an innocent party wishing to terminate the contract for late performance may do so only after giving the other party a notice to complete making time of the essence and after non-compliance with that notice.[66]
[65] J. W. Carter, Contract Law In Australia (LexisNexis, 7th ed, 2018) [29.07] – [29.09]
[66] Gold Coast Oil Co. Pty Ltd v Lee Properties Pty Ltd (1985) 1 BCL 63 at 65-66
The applicant did not give Trico such a notice. Time, therefore, never became of the essence and the applicant never became entitled to terminate the contract on the grounds that Trico was taking too long to complete the work.
The applicant was also concerned with the quality of Trico’s work. She appears to have been particularly incensed by a mistake made by an electrical subcontractor in locating the switch for the garage and shed lighting and in Trico’s decision to supply replacement electrical components that were ‘like-for-like’. Whether the applicant’s views were justified is not an issue I have to decide. A breach of an implied term that the work will be carried out in a good and workmanlike manner and with good and proper materials entitles the owner to claim damages. It does not entitle the owner to terminate the contract.
The applicant also was concerned about the mounting cost of the work. When Trico issued its third invoice on 12 November 2016, the total amount invoiced to that time was $36,360, compared to the initial contract sum of $34,700 subsequently varied by agreement to $37,670, with further work remaining to be done. Disputes about payment and the valuation of variations are commonplace. If parties are unable to reach agreement, they have the right to have their dispute determined by the tribunal or a court of competent jurisdiction. However, an owner is not entitled to terminate a contract simply because they believe they are being charged too much for the work.
The evidence establishes that the applicant wrote to Trico on 16 November 2016, citing her concerns about the quality of the work and delays, and advising that she proposed to “withhold enough money to pay another tradesman to finish it off and provide you with invoices. I will then pay any difference outstanding on your quote”.[67] The applicant may have said something along the same lines to Philip Bell on 10 November 2016. The applicant had no contractual right to do so. In effect, the applicant indicated that she was not ready and willing to perform her payment obligations under the contract and to permit Trico to complete the performance of its obligations under the contract. It is not necessary to decide whether the applicant’s conduct amounted to repudiation of the contract or an anticipatory breach of contract entitling Trico to terminate the contract.[68] The fact that, in her email on 16 November 2016, the applicant sought Trico’s agreement to her proposal probably means that, in an objective sense, the requisite intention to not perform the contract according to its terms was lacking at that time. She reiterated her intention to bring the contract to an end in subsequent communications with Trico, but always in the context of her endeavouring to reach agreement on the terms upon which that should happen.
[67] Exhibit R3 (Email 1)
[68] See the discussion of the difference in J. W. Carter, Contract Law In Australia (LexisNexis, 7th ed, 2018) [30-6]
The significance of the applicant’s conduct is that she undoubtedly was exposed to liability to Trico if she had acted on her original intention to engage others to complete the works and deduct the cost of doing so from money owed to Trico. Trico would have been entitled to terminate the contract immediately by communicating its acceptance of her repudiation or anticipatory breach of contract. In that event, Trico would have been entitled to sue the applicant on a quantum meruit – i.e., for a reasonable sum in payment for the work done. It is not necessary to consider whether the agreed contract sum would have operated as a limit on the amount recoverable by Trico in those circumstances.[69]
[69] See Mann v Paterson Constructions Pty Ltd [2019] HCA 32
The context in which the parties negotiated the early termination agreement, which I consider next, was the applicant’s desire to have nothing further to do with Philip Bell and Trico and the risk that Trico would sue the applicant unless the parties reached agreement on terms of settlement of their disputes.
The third issue – the effect of the early termination agreement
The applicant reiterated her intention “to contract someone else to finish the work” in an email to Philip Bell on 18 November 2016 and sought agreement on a price to “finalise our dealings”.[70] On the same day she wrote to Paul Bell that she wanted to “end the contract with items unfinished as they stand”.[71] According to an email from Paul Bell later that day, the applicant “asked for the contract to be terminated and no further works to be completed” and “agreed to pay a further $2570.00 including GST tonight”.[72] Trico’s agreement to early termination of the contract was expressed to be “subject to the above payment being made into the Trico Account tonight as agreed”.[73]
[70] Exhibit R5 (Email 26)
[71] Exhibit R3 (Email 4)
[72] Exhibit R3 (Email 5)
[73] Exhibit R3 (Email 5)
It is unclear whether the parties intended that to mean that payment must be received into Trico’s bank account that night. It appears the applicant may have thought so because, after completing the electronic funds transfer that afternoon, she informed Paul Bell that she had been told by her bank that the money may take a day or two to show up in Trico’s bank account, prompting Paul Bell to resend the earlier email setting out the terms upon which Trico had agreed to early termination of the agreement – i.e., “subject to the above payment being made into the Trico Account tonight as agreed”.[74]
[74] Exhibit R3 (Email 5)
The applicant replied the next day that “Our business dealings are now finished”.[75]
[75] Exhibit R3 (Email 8)
Perhaps out of an abundance of caution, the applicant wrote to Trico again on 20 November 2016 asking for confirmation of receipt of payment and that it “constitutes full and complete settlement of our contract at 5 Heaton Place Downer”.[76] Trico did not reply.
[76] Exhibit R3 (Email 9)
I have found earlier that the early termination agreement probably was made in a telephone conversation between Paul Bell and the applicant on 18 November 2016 at some time between 3:33pm and 5:22pm.[77] Paul Bell’s email sent at 5:22pm is consistent with the parties having reached a binding oral agreement already, the purpose of the email being simply to confirm or record the effect of the agreement.
[77] See paragraph 38 above
The agreement, at that point in time, should be characterised as an ‘accord executory’ – i.e., it was a conditional agreement to terminate the contract, but the actual termination of the contract and any consequential compromise of the parties’ respective rights, obligations and liabilities under the contract, depended on the applicant giving ‘satisfaction’ in accordance with the terms of the agreement – i.e., by “payment being made into the Trico Account tonight”.[78] In McDermott v Black, Dixon J said:
The essence of accord and satisfaction is the acceptance by the plaintiff of something in place of his cause of action. What he takes is a matter depending on his own consent or agreement. It may be a promise or contract or it may be the act or thing promised. But whatever it is, until it is provided and accepted the cause of action remains alive and unimpaired. The accord is the agreement or consent to accept the satisfaction. Until the satisfaction is given the accord remains executory and cannot bar the claim. The distinction between an accord executory and an accord and satisfaction remains as valid and as important as ever. An accord executory neither extinguishes the old cause of action nor affords a new one.[79]
[78] Exhibit R3 (Email 7)
[79] (1940) 63 CLR 161 at 183-4
If payment “being made into the Trico Account tonight” meant that funds had to be received into Trico’s account “tonight” – i.e., before midnight on 18 November 2016 – then receipt of the funds into the account two or three days later would not amount to ‘satisfaction’ in accordance with the agreement. In those circumstances, Trico would have been required to elect between repaying the funds to the applicant, or accepting the late receipt of funds as a substitute for ‘satisfaction’ in accordance with the agreement. Clearly, Trico chose the latter course. Upon Trico electing to retain the funds received into its account, albeit possibly late, there was ‘accord and satisfaction’ in the sense explained by Dixon J in the passage extracted above.
The next issue I have to decide is whether the agreement “constitutes a full and complete settlement of [the] contract”. Those words appear for the first time in the applicant’s email sent on 20 November 2016,[80] to which Trico did not reply. In earlier emails the applicant had used expressions such as “finalise our dealings”,[81] “end the contract”[82] and “our business dealings are now finished”.[83] It is possible that the words “full and complete settlement of our contract” reflect the substance of what was discussed and agreed between the applicant and Paul Bell by telephone in the afternoon on 18 November 2016. Or it is possible that it was an afterthought on the part of the applicant, which she raised out of concern that late receipt of funds into Trico’s bank account may cause the deal to fall through. In that case, by retaining the payment Trico may be said to have agreed to what would be, in effect, an additional term of the early termination agreement.
[80] Exhibit R3 (Email 9)
[81] Exhibit R5 (Email 26)
[82] Exhibit R3 (Email 4)
[83] Exhibit R3 (Email 8)
The evidence leaves these issues unanswered. Therefore, I have approached the matter by considering whether it would be open for either party to deny, more than three years after the event, that upon the applicant tendering and Trico accepting payment, the resulting accord and satisfaction amounted to ‘full and complete settlement of the contract’. Adopting language familiar to lawyers, the question is whether both parties are now estopped from denying that there was a ‘full and complete settlement of the contract’ in November 2016. The relevant principles applicable to that issue relate to estoppel by convention.
Estoppel by convention is founded on the conduct of relations between parties to a contract based on an agreed or assumed state of facts, which the parties are estopped from denying if it would be unjust to permit them to do so.[84] In Moratic Pty Ltd v Gordon, Brereton J restated the principles as follows:
In common law conventional estoppel, it is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff.[85]
[84] Cons-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14 at [22]; Fischer v Nemeske Pty Ltd [2016] HCA 11 at [87], [196]
[85] [2007] NSWSC 5 at [32], approved in Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65 at [200] and restated by Gleeson JA in Sze Tu v Lowe [2014] NSWCA 462 at [431]–[433]
Based on my earlier findings I consider that a conventional estoppel arises in this case for the following reasons.
First, the applicant expressly adopted an assumption as to the terms upon which the contract with Trico had been finalised and communicated her assumption to Trico – namely that Trico’s receipt of payment “constituted full and complete settlement of our contract”.[86]
[86] Exhibit R3 (Email 9)
Second, the applicant sought assurance from Trico that it had the same understanding. If Trico disagreed it would be expected to say so. I infer therefore that Trico adopted the same assumption.
Third, both parties conducted their relationship on the basis of the mutual assumption. Trico did not return to site to complete the works or attend to any defects. The applicant engaged others to undertake some of the works that had not been completed. Neither party took steps to enforce the contract, or to pursue claims arising out of contract or relating to the circumstances in which it was terminated. That remained the position for a period of three years until the applicant sent a letter of demand to Trico on 16 December 2019 without prior warning.
Fourth, an inference arises from those facts that each party knew or intended that the other would act on that basis.
Finally, departure from the assumption would cause detriment to Trico. The applicant confirmed in her oral evidence to the Tribunal that she had not reserved her rights under the contract in any way. Had she done so, and in the context of how the negotiations unfolded, I think it is probable that Trico would have acted differently in relation to the terms upon which it was prepared to compromise its rights under the contract and the terms upon which it was prepared to agree to the early termination of the contract.[87]
[87] As to the requirement for a causal connection between the adoption of the common assumption, inaction on the part of Trico, and the detriment that Trico would suffer if the applicant was allowed to depart from the assumption, see: Santos & Ors v Delphi Petroleum Pty Ltd [2002] SASC 272 at [677] per Besanko J; Mineralogy Pty Ltd v Sino Iron Pty Ltd (no 6) [2015] FCA 825 at [770] per Edelman J; and Bannon v Nauru Phosphate Royalties Trust [2019] VSCA 303 at [73]–[74].
Accordingly, I find that the applicant is estopped from denying that there was a “full and complete settlement of [the] contract” in November 2016.
I consider what those words mean later in these reasons. However, whatever they mean, the applicant argued that she should not be bound by the early termination agreement. Although she did not use the word ‘duress’, in essence I understood her to claim that she was pressured to make the early termination agreement because she felt intimidated and threatened. I consider that issue next.
The fourth issue – whether the early termination agreement is voidable on the grounds of duress
An agreement entered under duress is voidable.[88] A person who is coerced into making a contract can elect between departing from the contract or enforcing it.[89]
[88] J. W. Carter, Contract Law In Australia (LexisNexis, 7th ed, 2018) [22.04]
[89] J. D. Heydon, Heydon on Contract (Lawbook Co., 2019) [16.50]
Duress may take many forms. In Thorne v Kennedy a plurality of the High Court stated:
The vitiating factor of duress focuses upon the effect of a particular type of pressure on the person seeking to set aside the transaction. It does not require that the person’s will be overborne. Nor does it require that the pressure be such as to deprive the person of any free agency or ability to decide. The person subjected to duress is usually able to assess alternatives and to make a choice. The person submits to the demand knowing “only too well” what he or she is doing. As Holmes J said in Union Pacific Railroad Co v Public Service Commission of Missouri:
“It always is for the interest of a party under duress to choose the lesser of two evils. But the fact that a choice was made according to interest does not exclude duress. It is the characteristic of duress properly so called.”[90]
[90] [2017] HCA 49 at [26] (per Kiefel CJ, Bell, Gageler, Keane and Edelman JJ)
The NSW Court of Appeal held in Australian and New Zealand Banking Group v Karam that duress at common law requires proof of threatened or actual unlawful conduct.[91] Although in Thorne v Kennedy the High Court expressly left open the question whether the concept of duress should be extended to illegitimate pressure exerted by lawful means, the common law in Australia currently remains as stated in Karam.[92]
[91] [2005] NSWCA 344 at [66]. See also the cases that have followed Karam mentioned by Nettle J Thorne v Kennedy [2017] HCA 49 f.n. 108
[92] [2017] HCA 49 at [29], [70]–[73]
Although the applicant claims that she felt threatened by Philip Bell screaming, insulting, and threatening her, including allegedly threatening that ‘I’m going to blame you for the building defects at Moruya’,[93] I have not accepted her evidence on that issue.
[93] Exhibit A1, paragraph 14
However, the applicant claims also that she was “intimidated and frightened” when, following her telephone call with Philip Bell on 10 November 2016, her then partner, George Bell, said to her that, “If you don’t pay Philip the rest of the money, he is going to sue you” because she felt that George “was no [sic] recognising the poor work or poor behaviour of his brother”.[94] She also claims to have made two payments towards Trico’s third invoice “out of fear” and that she agreed to pay the third invoice “because I was intimidated”.[95] I have found earlier that the ‘fear’ the applicant felt was that she would be sued and that the fear was probably well founded.
[94] Exhibit A1, paragraph 14
[95] Exhibit A1, paragraphs 16 and 17
A threat to enforce legal rights by civil proceedings is not unlawful provided the threat is not malicious or an abuse of process.[96] As my earlier analysis shows, the applicant was not entitled to walk away from the contract, much less back-charge Trico for the difference in cost of engaging someone else to finish the work. It is highly likely that Trico would have sued her if she had acted on her stated intentions. She was right to perceive the resulting threat of legal action as real. It was not, however, unlawful conduct for Trico to threaten legal action and it certainly did not amount to illegitimate pressure, whether by unlawful (or lawful) means.
[96] Beerens v Bluescope Distribution Pty Ltd [2012] VSCA 209 at [42]–[43]; J. D. Heydon, Heydon on Contract (Lawbook Co., 2019) [16.180]; J. W. Carter, Contract Law In Australia (LexisNexis, 7th ed, 2018) [22.19]
Fundamentally, none of the conduct about which the applicant complains, even if it was established, was directed at procuring her to agree to terminate the contract before Trico had finished the works. The negotiations for early termination of the contract were initiated by the applicant because she wanted nothing more to do with Trico and Philip Bell. The applicant described her motivation for wanting to terminate the agreement as being that “I was so distressed by Trico’s behaviour and lack of professionalism in my project that I just wanted them to go away, and therefore I terminated the contract”.[97]
[97] Exhibit A1, paragraph 18
I am satisfied that the applicant did not enter into the early termination agreement under duress. It is not necessary, therefore, to consider whether the applicant’s failure to take steps to avoid the agreement earlier, when any ‘duress’ had ceased to operate, amounted to an election to affirm the agreement – i.e. to treat it as binding.
The applicant remains bound by the early termination agreement, which constitutes a “full and complete settlement of [the] contract”. What that means in the context of the claims made in these proceedings is considered next.
The fifth issue – whether any of the present claims are maintainable where the early termination agreement constituted a “complete and final settlement of our contract”
The applicant conceded at the hearing that, by entering into the early termination agreement, she gave up her rights to claim against Trico, subject only to her claim that she should not be bound by the agreement for the reasons already discussed. Whether that is true in all cases depends on the meaning of the words ‘full and complete settlement of our contract’.
The early termination agreement discharged Trico from the requirement to further perform the contract. Work that was incomplete at the date of termination became the responsibility of the applicant to complete at her own cost if she wanted the work done. The applicant’s claim for compensation for the cost to complete unfinished work is not maintainable in those circumstances. The claim is premised on the failure to complete the work being a breach of contract by Trico. It is not. The applicant wanted the contract to end and for the work to be left as is.
When she first raised the issue with Trico, the applicant hoped to reach agreement on a credit or refund for the value of unfinished work. Her wishes did not eventuate and she ended up agreeing to pay Trico an additional sum of $2,570. She cannot complain about that now. It follows that valuation issues, particularly questions relating to the value of the work that Trico did and the value of the work not done or left partly done, were settled by the applicant’s agreement to pay Trico a further $2,570 and the subsequent tender and acceptance of payment of that amount. The applicant’s claim that she did not receive ‘value for money’ is not maintainable in those circumstances.
The question whether it is open for the applicant to claim damages for the cost to rectify defective work and materials raises more difficult issues. The distinction between work that is unfinished and work that is defective is not always obvious. The original contract required Trico to hand over a finished building that was defect free – i.e. a building that was built in a good and workmanlike manner and with good and proper materials.[98] Whilst it may be argued that, strictly speaking, a breach of contract will occur as soon as work is done that is not of the requisite standard, or other than good and proper materials are used in the work, an owner arguably suffers only nominal damages at that stage because, until the completed works are handed over, they remain under the builder’s control. Until then, the builder is under a continuing duty to inspect the works and take any corrective action the builder deems necessary to ensure that the works are complete and defect free upon handover, and has the opportunity to do so. The owner suffers more than nominal damage only at the point when works that not complete or free of defects are handed over. In this case, the termination of the contract by agreement when the work remained unfinished, necessarily means that that Trico gave up that opportunity as part of the bargain. The question in those circumstances is whether, by insisting on the contract being terminated with the work being left ‘as is’, the applicant must be taken to have given up any rights she might otherwise have had to claim damages for work or materials later found to be defective.
[98] See paragraph 63 above
That necessarily invites consideration of the meaning of the words “full and complete settlement of our contract”.[99] Clearly, they are intended to operate as words of release. The issue is the scope of the release effected by those words. Specifically, does the release operate to make the applicant’s claim for defects not maintainable?
[99] Exhibit R3 (Email 9)
The principles that apply to the construction of general words of release were stated by the High Court in Grant v John Grant & Sons Pty Ltd[100] and recently were summarised and restated by the Court of Appeal of Victoria in Burness v Hill:
Grant establishes two common law principles to be applied to the construction of contracts of release, and a third (equitable) principle. The first common law principle was stated in the following terms:
The principle ... is that adopted by the common law long ago for the restriction of wide words in a release of obligations, [namely] that the general words of a release should be restrained by the particular occasion ... Thus the general words of a release are to be restrained by the particular recital ... As it is concisely expressed ... :‘If there be introductory matter, that will qualify the general words of the release’.
The second common law principle stated in Grant provides that general words in a release should be restricted — or read down — by reference to the disputes existing between the parties at the time the release is given. In that respect, the High Court stated that the second principle:
is based upon a different conception [to the first common law principle] of the circumstances which should provide the means of restricting the generality of the release. It depends upon the simple allegation that there never at any material time was any dispute between the plaintiff and the defendant concerning the moneys claimed in or the subject matter of the suit. The difference between the two [principles] lies in the difference between controlling the general words by reference to the express recital and controlling them by reference to the disputes which existed between [the parties].
The principle which it is thus sought to apply was expressed by Lord Westbury in London & South Western Railway Co v Blackmore as follows: ‘The general words in a release are limited always to that thing or those things which were specially in the contemplation of the parties at the time when the release was given’. It was expressed by Taunton J in Upton v Upton in this way: ‘... the general words of a release may be limited by the particular matter out of which the release springs and the particular intent of the parties by whom the release is executed’.
The third principle stated in Grant is an equitable one, which prevents unconscientious reliance upon the general words of a release by restricting the general words ‘to that thing or those things which were specially in the contemplation of the parties at the time when the release was given’; and this principle ‘includes the proposition that in equity “a release shall not be construed as applying to something of which the party executing it was ignorant” [and] it matters not whether such ignorance was caused by a mistake of fact or of law’.
The court in Grant summarised the third (equitable) principle in the following terms:
From the authorities which have already been cited it will be seen that equity proceeded upon the principle that a releasee must not use the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction as ascertained from the nature of the instrument and the surrounding circumstances including the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor.[101]
[100] [1954] HCA 23; (1954) 91 CLR 112 at 123-124
[101] [2019] VSCA 94 at [71]–[74]
It is relevant also to keep in mind the principles that govern the construction of commercial contracts. As a general rule, the words used in a commercial contract are construed objectively by reference to text, context and purpose.[102] In Electricity Generation Corporation v Woodside Energy Ltd a plurality of the High Court stated:
The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties ... intended to produce a commercial result”. A commercial contract is to be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.[103]
[102] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 41 at [46]
[103] [2014] HCA 7 at [35] (French CJ, Hayne, Crennan and Kiefel JJ) citing Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352; Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 at 995 - 996
With those principles in mind, I consider the following matters are significant to the proper construction of the words of release in this case.
First, the issues the applicant raised expressly at the outset as the reason for her wanting to end the contract included that she considered that the electrical work was “not fit for purpose”,[104] the quality of soil supplied for landscaping was substandard, the structure had not been properly bird-proofed and a cheaper roller door had been substituted for a panel lift garage door, which she said the contract required Trico to supply and install.[105] So the issue of defective work and materials was raised expressly and was one of the matters about which the parties were in dispute.
[104] Exhibit R3 (Email 1)
[105] See paragraphs 23, 31 and 67 above
Second, the applicant explained that her reason for wanting to terminate the contract was because she was “so distressed by Trico’s behaviour and lack of professionalism in my contract that I just wanted them to go away”.[106]
[106] Exhibit A1, paragraph 18
Third, the applicant expressly asked for a “price to finalise our dealings”.[107] She reiterated that she wanted to “end the contract with items unfinished as they stand” and, even more emphatically, to “end the contract now”.[108]
[107] See paragraph 35 above
[108] See paragraph 36 above
Fourth, in the same vein, the respondent noted that the applicant “asked for the contract to be terminated and no further works to be completed”.[109] The words “no further works to be completed” in my view are not restricted simply to work that had not been started, or work that had been started but not finished. They contemplate that Trico would not return to site to do any further work, whatever such work may involve, including that they would not inspect the works to ensure they were free of defects and would not take any corrective action if they were not. The applicant wanted the works left ‘as is’ on the basis of an agreed price for Trico to ‘walk-away’ and not come back.
[109] See paragraph 37 above
Fifth, it would make no commercial sense for the parties to agree to terminate the contract on that basis if they intended that Trico should remain liable for defects, which it would have no opportunity to remedy, but for which it would be liable to meet the cost of repair by others. Clear words would be necessary to impute such an uncommercial intention to the parties.
Seen in that context, I consider the words “full and complete settlement of our contract” were intended to mean that neither party in future should be able to make any claim against the other for breach of contract, or relating to the termination of the contract.
I consider that the applicant’s damages claim for defects is not maintainable in those circumstances.
The sixth issue – whether the claims that the works were defective are proved
That necessarily disposes of the application. However, in case I am later found to be wrong, I have considered whether the applicant has proved her claim for defects.
The applicant relied on Mr Pudja’s report, which I have mentioned earlier. The report was tendered. However, the applicant chose not to call Mr Pudja to give evidence at the hearing, even after I raised the matter with her, so there was no opportunity for Trico to test Mr Pudja’s evidence or for the Tribunal to ask questions to clarify issues that arose during the hearing. That was unfortunate. The applicant appeared to be operating under the misguided belief that just because Mr Pudja was an expert and she had been told by a lawyer that “he was the best”, his unsworn evidence should be treated as determinative on any issue upon which he expressed an opinion without it being necessary to have him available at the hearing.
The applicant also tendered a report by Jim’s Building Inspections dated 16 November 2020, which had been commissioned by the respondent. Again, the applicant did not make arrangements for the author of the report to be available at the hearing.
The respondent failed to comply with the tribunal’s orders for the filing and service of evidence. The evidence, principally from Philip Bell responding to Mr Pudja’s report, eventually was filed and served shortly before the hearing. As a result I refused leave for Trico to rely on the evidence because it would have been manifestly unfair for the applicant to have to deal with it at such short notice and there were no grounds for an adjournment.
However, the applicant asked Mr Bell whether he agreed with Mr Pudja’s report and, when he answered that he did not, questioned him in detail about the reasons for his disagreement.
Mr Pudja’s report identified several alleged defects in the construction of the metal roof.[110]
[110] Exhibit A25, page 6
The first was that the gradient of the roof sheeting over the shed extension (although not the garage) was inadequate (generally between 0.2° and 0.6° and 1.3° in one isolated area, instead of 2°). He also said there was a noticeable change in roof pitch at the transition between the original garage and the shed extension. Photographs show that Mr Pudja took measurements of the roof fall using a spirit level while standing on the roof. Mr Bell claimed that this was not appropriate because standing on the roof would likely cause localised deflection of the roof structure, affecting the accuracy of the reading. He also disputed that the required fall was 2° and claimed instead that 1° was all that was required. The disagreement, so far as I could determine, turns in part on whether the ‘Lysaght Klip-lok Classic 700’ roof sheeting that Trico supplied was 0.42 BMT grade as Mr Pudja claimed (i.e. it has a thickness of 0.42mm) or 0.48 BMT grade as Mr Bell claimed (i.e. it has a thickness of 0.48mm). The difference is significant because Lysaght’s website states that 0.42 BMT grade sheets may be laid to a minimum fall of 2° whereas 0.48 BMT grade sheets may be laid to a minimum fall of 1°. Mr Bell also disputed that the change in roof pitch at the transition of the roof over the original garage (where the roof sheets had been laid on the existing timber roof structure) and the shed extension (which was a completely new structure) was a defect.
The applicant bears the onus of proof on these issues. Mr Bell’s evidence cast doubt on Mr Pudja’s unsworn and untested opinions which were unable to be resolved because Mr Pudja did not give evidence. I am unable to be satisfied that the roof over the shed extension was constructed with inadequate falls or that the change in roof pitch at the transition between the original garage and the shed extension constitutes a defect.
The second roofing defect that Mr Pudja identified was that some of the barge capping and flashing displays excessive gaps and cut-outs around the roof sheeting profiles, as well as some poorly formed joints. This can be seen in the photographs included in Mr Pudja’s report.[111] I accept that this is a defect. Mr Bell said that repairing the poorly formed joint was a relatively simple exercise using a sealant, which I accept. He did not consider that the notching to the capping was poor workmanship. I disagree. It appears to me that replacement of the affected section of capping would solve the problem. However, as Mr Pudja based his cost estimates on the removal and reconstruction of the entire roof, there is no evidence as to the cost of what would appear to involve a relatively minor repair.
[111] Exhibit A25, page 6, 8 (photos)
Next, Mr Pudja identified that the metal fascia on the left and right side of the garage and storage shed was not installed straight, resulting in a deviation at joints and the ends of the fascia of approximately 10mm. This can be seen in the photographs.[112] I agree this is the result of defective workmanship, although it appears to me to be a relatively minor defect. There was no evidence as to how this could be rectified – short of demolition and reconstruction of the whole structure – or the cost of doing so.
[112] Exhibit A25, page 10 (photos)
Mr Pudja mentioned that the water tank was positioned behind the residence instead of at the rear of the garage as originally intended, and a water pump and stormwater line had not been connected and a downpipe was missing on the right rear corner of the shed. Trico had delivered the water tank to site but had not installed it or done any of the other work mentioned by Mr Pudja when the contract was terminated by agreement. The applicant is not entitled to claim for these items.
The next item to which Mr Pudja referred was that the eaves had not been lined and, in any event, the cantilevered roof timbers had been installed in such a way as to prevent lining from being installed. He also noted that blocking had not been installed between roof members leaving gaps of up to 150mm which lacked vermin or bird proofing. I am not satisfied that installing lining to the eaves was part of Trico’s original scope of work. The applicant apparently thought the finish would look more “professional” if the eaves were lined, but that has no bearing on the question whether it formed part of Trico’s scope of work. Importantly, the applicant raised these issues in the negotiations with Trico.[113] Whether the issues are properly described as defects or unfinished work, the applicant is not entitled to claim for them now.
[113] See paragraph 31 above
Next Mr Pudja observed that “the storage room extension at the rear of the garage, generally presents as being unfinished, and the work as executed to date is not in compliance with AS 1684.2 Residential Timber Framed Construction”.[114] He considered the following issues were defects.
[114] Exhibit A25, page 12
First, he opined that some (but not all) of the timber studs used in the construction of the walls were not T2 termite resistant timber as specified. The author of the Jim’s Building Inspection report had the same view. However, the basis for the opinions was not explained and neither expert was available to clarify their evidence on this issue. Mr Bell disputed that Trico used any untreated timber in the construction. He relied on photographs showing significant colour variations in timber forming part of the roof and wall structure that was clearly marked as treated timber. Some of the timber had an obviously greenish tinge. Some was very light coloured. Mr Bell pointed out that treated timber fades. On balance, I am not persuaded that untreated timber was used anywhere on the job.
Second, Mr Pudja opined that since untreated timber framing was used, a termite barrier should have been installed. However, I have found that the premise for that opinion – namely that untreated timber framing was used – was not established. Further, Mr Bell claimed that he had told the applicant that she needed to arrange for a pest control company to spray a chemical treatment around the perimeter of the structure, which she said she would do. The applicant denied this. I am not persuaded that Trico was required to install a termite barrier and that failure to do so is a breach of contract.
Third, Mr Pudja claimed that the failure to provide a ribbon plate on top of the top plate on load bearing walls and the lack of a lintel over the door openings was contrary to AS 1684.2. He also claimed that the lack of wall bracing did not comply with AS 1684.2. Mr Bell disputed that AS 1684.2 applied. He disputed the need for a ribbon plate and, by reference to photographs, that Trico had not installed an appropriate lintel over the door opening. He also disputed the need for extra bracing, particularly where the walls were intended to be sheeted. Again, the fact that Mr Pudja was not available to explain the basis for his opinions means that I am unable to decide which of the competing views should be preferred.
Fourth, Mr Pudja noted that there was lack of tie-downs, which Mr Bell accepted was a defect. However, he said it was a simple matter to rectify.
Fifth, Mr Pudja noted that the omission of a light switch and incorrect positioning of the double power point was an “error”. However, the applicant’s belief that the electrical installation was not ‘fit for purpose’ was raised specifically in the negotiations. She cannot complain about that now.
Lastly, Mr Pudja referred to the scope of works in Trico’s quotation and listed items which he said were “invoiced but not executed“.[115] However, I have found earlier that the applicant’s claims for the cost to complete works that Trico left unfinished are not maintainable.
The seventh issue – whether the applicant has established the cost to rectify the defects
[115] Exhibit A25, page 15
The applicant sought to prove, through Mr Pudja’s report, that the works were so defective that it was necessary to demolish and reconstruct the storage shed and roof structure, reusing materials where possible, at a cost that substantially exceeded the amount she had paid for the work originally. Although I have found that there are some defects, they are relatively minor and do not justify wholesale demolition and reconstruction of the structure. However, the applicant has failed to establish the scope and reasonable cost of carrying out work that is reasonably necessary to rectify such defects.
As I have found that none of the applicant’s claims are maintainable for other reasons, this does not affect the result.
Conclusion
Having carefully considered all of the evidence and the submissions of the parties, I am satisfied that the applicant’s claim must be dismissed.
………………………………..
Senior Member M Orlov
| Date(s) of hearing | 7 & 8 April 2021 |
| Applicant: | In person |
| Respondent: | In person |
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