Hajrudin Turcinovic t/a HNT Civil Building Construction Maintenance v Vasilios Kavvadas
[2014] QCAT 11
•13 January 2014
| CITATION: | Hajrudin Turcinovic t/a HNT Civil Building Construction Maintenance v Vasilios Kavvadas [2014] QCAT 11 |
| PARTIES: | Hajrudin Turcinovic t/a HNT Civil Building Construction Maintenance (Applicant) |
| v | |
| Vasilios Kavvadas (Respondent) |
| APPLICATION NUMBER: | BD402-08 |
| MATTER TYPE: | Building matters |
| HEARING DATES: | 30 April 2012, 1 May 2012 |
| HEARD AT: | Brisbane |
| DECISION OF: | Member McLean Williams |
| DELIVERED ON: | 13 January 2014 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. The Respondent is to pay the Applicant the sum of $144,457.40, within 28 days of the date of judgement. 2. Each party is to file in the Tribunal any submissions on costs, (including any reserved costs), before 4.00pm on 31 January 2014. |
| CATCHWORDS: | Residential building dispute – claim by builder for substantial undocumented variations – consideration of circumstances in which variations might be allowed pursuant to s 84(4) of the Domestic Building Contracts Act 2000. Queensland Civil and Administrative Tribunal Act 2009 s 17, 20 Better Homes Queensland Pty Ltd v O’Reilly & Anor [2012] QCATA 37 |
APPEARANCES and REPRESENTATION (If any):
| APPLICANT: | The Applicant, in person, assisted by Mr Paul Baggaley |
| RESPONDENT: | Mr Liam Dollar of Counsel, instructed by Mills Oakley Lawyers. |
REASONS FOR DECISION
At the time of the events that have resulted in this claim, Hajrudin Turcinovic was a builder, trading under the name HNT Civil Building Construction Maintenance (HNT).
In late 2006, Mr Turcinovic was busy constructing multiple projects for the Respondent, Mr Vasilios Kavvadas, a property developer, otherwise known to him as Bill Kavvadas. At around this time, Mr Kavvadas indicated that he had another sub-division site at Morningside, this one comprising four lots, that he also wished to develop, starting with a luxury house on Lot 1, of what was to become known as ‘Palm Square’. Mr Turcinovic was asked to submit a price to build Lot 1.
A course of prior dealings between the Applicant and the Respondent - and the norms that had evolved as part of it – now sets the scene for this dispute. In total, Harry Turcinovic has been engaged by Mr Kavvadas as the builder on 9 discrete projects. Mr Kavvadas and Mr Turcinovic conducted all of these projects in a fairly consistent manner, in the sense that Mr Kavvadas would often make oral requests for variations, and these would be then be effectuated by Mr Turcinovic, without these first being reduced to writing and then signed, in the manner that is required by the Domestic Building Contracts Act 2000 (the DBC Act).
Although Mr Turcinovic and his office administrator Mr Paul Baggaley (who also gave evidence) say that Mr Kavvadas was sometimes advised of the expected costs of these variations beforehand, these changes were however only ever reduced to writing to the extent that they were then documented in the next progress claim. Until their dispute arose, and as the evidence before me sufficiently confirms, Mr Kavvadas was perfectly content with this arrangement and had knowingly paid numerous progress payments that included undocumented variations. Now however, because the parties are in dispute, and because of the undocumented manner of their dealings, Mr Turcinovic’s claim for payment for variations is one that becomes dependent on his establishing an entitlement to payment, under section 84(4) of the DBC Act, which provides:
(4)The tribunal may approve the recovery of an amount by a building contractor for a variation only if the tribunal is satisfied that—
(a)either of the following applies—
(i)there are exceptional circumstances to warrant the conferring of an entitlement on the building contractor for recovery of an amount for the variation;
(ii)the building contractor would suffer unreasonable hardship by the operation of subsection (2)(a) or (3)(a); and
(b) it would not be unfair to the building owner for the building contractor to recover an amount.
In parallel with the construction of the house at Lot 1 Palm Square, Mr Turcinovic was also constructing another house for Mr Kavvadas at Princess Street, Bulimba; as well as two dwellings at 20 and 22 Wambool Street Bulimba. The Princess Street project also ended in a dispute, which has become the subject of separate proceedings before this Tribunal.[1]
[1]Hajrudin Turcinovic t/as HNT Civil Building Construction Maintenance v Kavvadas [2013] QCAT 265.
In large measure, this dispute - much like the Princess Street dispute, and various other[2] disputes in which Mr Turcinovic has found himself - arises because of undocumented variations. Mr Turcinovic also seeks recompense for other works performed by him (mainly excavation and earthworks) on adjoining lots at Palm Square; and payment for various prime cost items, which Mr Kavvadas has also not paid. Mr Kavvadas, in turn, brings a very significant claim for the cost of rectification works and seeks liquidated damages because of the builder’s approximately seven-month delay in attaining practical completion.
[2]Habchi and Anor v Hajrudin Turcinovic [2011] QCAT 309; HNT Civil Construction v Mahamoud [2013] QCAT 36.
The originally agreed price for the construction of Lot 1 at Palm Square was $1,173,758. The final costs incurred by the builder at the behest of the owner is claimed to be $1,734,572.17. Mr Kavvadas has paid $1,396,806.16 to the builder. In the result, the Applicant contends that he is still owed $324,082.90.
Mr Kavvadas contends that there were relatively few variations requested by him; that many of the items now claimed by the builder as variations were always included as part of the original contract price; and that the contract does not allow the builder to claim any builder’s margin (i.e. profit), on either variations, or prime cost items. Mr Kavvadas also contends that there are a number of very significant uncompleted works and defects in the house as built, not the least of which has been a failure by Mr Turcinovic to construct the house at the correct level, such that the ceiling heights for the ground and middle floors are lower than that specified by the plans, and no longer conform with the requirements of the Building Code of Australia (BCA). Mr Kavvadas also denies that there was any agreement by which Mr Turcinovic was required to perform earthworks on Lot 3. Mr Kavvadas further says that Mr Turcinovic failed to fully excavate Lot 2 - as was required by him under the contract - such that he was then put to further expense – in the amount of $55,215.60 – to have the earthworks on lot 2 completed by another earthworks contractor.
The contract - price, formation and terms:
Mr Kavvadas provided plans for the proposed development at Palm Square to Mr Turcinovic sometime in late 2006. On 23 January 2007, HNT provided Mr Kavvadas with an estimate of the cost to build the house at Lot 1.[3] That estimate indicated that the house could be built for around $1,100,000, predicated on an assumed 26 week construction period, yet also excluding any rock excavation, or work outside the building envelope, such as, for example, the swimming pool indicated on the plans.
[3]Annexure “PB-1” to the statement of Paul Baggaley dated 3 February 2009.
The estimate sent to Mr Kavvadas on 22 January 2007 became the basis for further discussions. On 22 February 2007, a revised list of PC items was sent to the owner,[4] together with a separate letter[5] indicating a construction price of $1,173,755. That letter also reveals that Mr Turcinovic’s price by now included the cost of constructing the swimming pool, and the external spa.
[4]Annexure “PB-2” to the statement of Paul Baggaley dated 3 February 2009.
[5]Exhibit 6.
Mr Kavvadas then made further hand-written notations on the new list of PC items contained in the HNT letter dated 22 February 2007. These had the effect of expanding the scope of works included in the contract price. During the pre-contract negotiations Mr Kavvadas gave every indication that he was going to appoint HNT as the builder for the other lots at Palm Square, as well.[6] It seems tolerably clear that this was done by Mr Kavvadas in order to induce Mr Turcinovic to perform additional works, as part of the Lot 1 contract.
[6]A building contract was prepared by HNT for the House on Lot 2 and sent to Bill Kavvadas, yet he never signed this.
On 26 February 2007 the Applicant and the Respondent entered into a Building Services Authority ‘Major Works’ Contract for the construction of a new dwelling on Lot 1, Palm Square at Stephens Street Morningside for an agreed price of $1,173,755.00.
When the contract was signed, Mr Turcinovic and Mr Kavvadas also signed the list of PC items,[7] and the construction cost letter.[8] The hand-written addendum on the list of PC items agreed between the parties on that day records the following as part of the agreement between Mr Turcinovic and the Respondent:
(1)Should cost of any of these PC items come under the listed amount, the adjusted amount is to be refunded to the owner.
(2)The owner will have the right to refuse works of any of these items if he see’s the amount to be unreasonable.
(3)Landscaping is included in the contract amount.
(4)Site is to be excavated at builders expense and the proposed lot 2 adjoining Lot 1 is to be cleared for future construction also at the builder’s expense. Lot 2 is to be cut and cleared to the same level as Lot 1.
(5)All colours and specifications are to be as per plans and interior design specifications as described by Arden Interiors. All items listed on compact disc as supplied by Arden interiors. Colours & fit out detail as on specification chart supplied by Arden Interiors.
[7]Exhibit 6.
[8]Exhibit 7.
Owing to a delay by Mr Kavvadas obtaining an approved set of plans, works did not commence until 7 May 2007. The contract envisaged that practical completion would then be attained 182 days later, although an allowance was made for up to 10 days for time lost due to wet weather, and a further 4 non-working days. On that basis, the project was expected to attain practical completion by no later than Monday 19 November 2007. In reality the project did not attain practical completion until 7 July 2008, that is, more than seven months after the agreed date.
Although the Applicant attributes some of the extra delay to adverse weather conditions, for the most part, Mr Turcinovic says that the extra delay was caused by the extensive variations that were requested by Mr Kavvadas; or arose as the result of Mr Kavvadas requesting that HNT prioritise work on either of the other two Kavvadas sites, at Bulimba.
Pursuant to the contract, liquidated damages had been agreed, at the rate of $200.00 per day. Mr Kavvadas now seeks liquidated damages for what amounts to 232 days ($46,400.00).
Excavation Works
Mr Turcinovic says that he has now done a lot of extra excavation works for Mr Kavvadas on Lots 1, 2, 3 and 4, for which he has not been paid. Prior to entering into the contract Mr Kavvadas had provided HNT with a proposed site plan, dated 18 September 2006, and proposed elevations, dated 12 October 2006. The builder had then used these in order to estimate the costs of excavation and construction for the house on Lot 1. Yet, after the contract had commenced, Mr Kavvadas produced a revised set of plans. These required considerably more excavation than had been provisioned in HNT’s price. Because of condition (4) latterly included on the list of PC items by Mr Kavvadas (and agreed by Mr Turcinovic) this then meant that extra excavation was required on Lot 2, as well.
Although Mr Turcinovic concedes that he had agreed to excavate Lot 2 at no extra cost, he contends that his agreement in that regard should be limited to the extent of any excavation that had been revealed to him before the agreement. Additionally he contends that any other excavation works, such as for example that requested by Mr Kavvadas at Lots 3 and 4 should also be counted as an extra.
On 5 September 2008 3 further invoices were sent to Mr Kavvadas, for:
a) “subdivisional works” relating to Lots 1 - 4 ($12,837.88);[9]
b) additional excavation on Lot 2 ($46,988.42);[10]
c) excavation on Lot 3 ($8,032.75);[11] and
d) excavation on Lot 4 ($32,320.75).
[9]Annexure HT-52 to Exhibit 2.
[10]Annexure HT-53 to Exhibit 2.
[11]Annexure HT-54 to Exhibit 2.
To date, none of these invoices have been paid by Mr Kavvadas.
In relation to the subdivisional works (HT-52), Mr Turcinovic says that when he commenced work on Lot 1 at Palm Square the site comprised only one lot and needed to be subdivided into 4 separate lots and that in order to obtain Council approval all four lots required footpaths, etc. Mr Turcinovic says that all of the matters comprising invoice HT-52 fall outside what is now Lot 1, after the sub-division. Mr Turcinovic contends that this is extra works, for which Mr Kavvadas has received a benefit that is outside the contracted scope of works and should now be treated as a variation.
I accept the evidence of Mr Turcinovic where he says that all of the works embodied in invoice HT-52 were outside the boundary of Lot 1, and outside the agreed scope of what had been agreed for the contract. I also agree that these matters should be dealt with as if they were a variation. Yet, these must still be dealt with as an un-written variation, and can only be assessed by means of s 84(4) of the DBC Act.
It is inconsistent with the purpose of the DBC Act to find unreasonable hardship merely because a builder has incurred, and cannot now recover, the costs of a non-compliant variation.[12] In order to demonstrate unreasonable hardship there is both a subjective and objective element to the enquiry: evidence must be lead to demonstrate hardship to the builder (beyond the mere inability to recover an amount claimed) and, in addition, the nature and extent of the hardship must be objectively unreasonable in the circumstances in which it has occurred.[13]
[12]Better Homes Qld Pty Ltd v O’Reilly & Anor [2012] QCATA 37 at [28].
[13]Ibid at [29].
On the face of the invoice that is now HT-52 as well as after analysis of the limited accompanying invoices, it is quite impossible for me to determine whether there has been any “unreasonable hardship” for the Applicant in the manner that must be demonstrated because of s 84(4)(a) of the DBC Act, at least in respect of those components of invoice HT-52 that relate to either “own labour” or “own machinery” by the builder. That result might have been different had (for example), further supporting documents (such as employee timesheets, fuel dockets, or machinery lease agreements, all revealing obligations to third parties) been included as part of the supporting evidence.
To the limited extent that the supporting invoices underpinning invoice HT-52 do reveal payments to third parties, I find that the Applicant would suffer an unreasonable hardship if he were now prevented from recovering an amount, and that it would not be unfair to Mr Kavvadas for Mr Turcinovic to receive an amount, given that Mr Kavvadas has received the benefit of it. Accordingly, from the $12,837.88 claimed by invoice HT-52 I find that Mr Turcinovic should be entitled to $5,332.72.
On 5 September 2008 an invoice was sent by HNT to Mr Kavvadas indicating that the total excavation cost for Lots 1 and 2 at Palm Court were $46,988.42. Mr Kavvadas says that all of this invoice is for works that are within the originally agreed contract price, because the builder had agreed to excavate Lot 2 at the same time as Lot 1. Evidence from Mr Paul Baggaley suggests[14] that the additional earthworks for Lots 1 and 2 were a good deal more than the builder had been lead to expect on the basis of the earlier set of drawings, however it is not now possible on the basis of the evidence before me to determine by how much.
[14]Exhibit 3: Statement of Paul Baggaley dated 3 February 2009, at [9].
Although Mr Kavvadas contends that the Applicant has failed to excavate Lot 2 to the correct levels, such that he was subsequently put to significant[15] additional expense that should now be required to be reimbursed to him by Mr Turcinovic, I will not order that. The owner has produced no acceptable evidence in support of that contention. In relation to this issue I also accept the evidence of the builder,[16] in preference to that of the Respondent regarding the nature of their agreement for the excavation of Lot 2.
[15]An additional $55,215.60 was paid by Mr Kavvadas to another contractor in order to complete the earthworks on Lot 2.
[16]Exhibit 2 [39] – [43].
In relation to the excavation works for Lot 2, all of the items on that invoice,[17] with the exception of $22,049.50 paid by Mr Turcinovic to Deen Brothers, a subcontractor, relate to machinery or equipment already owned by HNT, or for labour by HNT. In his evidence Mr Turcinovic said, and I now accept, that the Deen Brothers invoice that comprises an element of invoice HT-53 related to a 45 tonne excavator, used by Deen Brothers. Under the contract, Mr Turcinovic was only required to meet the cost of the excavation of Lot 2 within the agreed contract price to the extent that a 20 tonne excavator could not perform the work. On this basis, the Deen Brothers invoice becomes an additional matter, beyond the excavation works included in the contract price and, because Mr Turcinovic has incurred a liability to a third party, I find that the builder would suffer unreasonable hardship if he were prevented from recovering an amount in respect of it and that it would not be unfair to Mr Kavvadas to award a sum for it, given that Mr Kavvadas has attained the benefit of it.
[17]Annexure HT-53 to Exhibit 2.
As a matter of general principle Mr Turcinovic should not ordinarily be required to meet the cost of any additional excavation works on either of Lot 1 or Lot 2, that were not advised by Mr Kavvadas until after the contract had been signed. Unfortunately, it is not possible, on the basis of the evidence before me to determine whether the balance of the charges on invoice HT-53 (beyond the aforementioned Deen Brothers component) relate to additional excavation works, or contract excavation works, or a combination of both of these. On that basis the Applicant has failed to establish that he has any entitlement to the balance of the items on invoice HT-53.
Similar considerations apply in relation to the extra excavation invoices presented in respect of each of Lot 3 (HT-54), and Lot 4 (HT-55). Unreasonable hardship cannot be shown merely by reason that the builder cannot recover an amount for a non-complying variation.[18] The underpinning invoices reveal only $400 in third party payments for Lot 3 (the remainder being either “own labour” or “own machinery” charges), and HT-55 reveals $18,700 in third party charges. I find that in having incurred these costs the builder would suffer unreasonable hardship if he were prevented from recovering those amounts and that it would not be unfair to Mr Kavvadas to allow for recovery of those sums, as Mr Kavvadas has received the benefit of them.
[18] Better Homes Queensland Pty Ltd v O’Reilly & Anor [2013] QCATA 37 at [25] – [28].
In summary, in relation to additional excavation costs, I determine that the Applicant should be entitled to the following:
Claimed item
Amount claimed
Amount Allowed
Subdivision works, Lots 1 – 4 Palm Square
$12,837.88
$5,332.72
Lot 2
$46,988.42
$22,049.50
Lot 3
$8,032.75
$400.00
Lot 4
$32,320.75
$18,700.00
Total
$100,179.80
$46,482.22
Entitlement to a Profit Margin?
Mr Kavvadas contends that because the contract dated 26 February 2007 is silent as regards the rate of builder’s margin, there can be no entitlement for Mr Turcinovic to be awarded any builder’s margin on variations, prime cost items, or extra work. As a matter of law that contention is unsustainable. In all respects the claims now brought by the Applicant before QCAT are for payment of undocumented works. Any entitlement to payment therefore arises by operation of statute, and s 84(6) of the DBC Act provides that recovery can include a reasonable component for profit.
Mr Turcinovic and Mr Baggaley have both given evidence that, on this project (and as was the case for all the other projects undertaken by HNT for Mr Kavvadas), builder’s margin was set at 15%, and that Mr Kavvadas was fully aware of that. I accept their evidence and I do not accept Mr Kavvadas when he claims that he was “not aware” that builder’s margin was being charged by Mr Turcinovic on extra work, requested variations, or prime cost items. Indeed, I regard that to be quite disingenuous. In light of the extensive course of business dealings between Mr Kavvadas and Mr Turcinovic it is inconceivable that Mr Kavvadas did not know the rate of builder’s margin being applied by HNT.
In all the circumstances I regard a 15% builder’s profit margin to be reasonable, and I adopt that figure throughout this claim. It follows therefore that the $46,482.22 already allowed by me (above) for excavation works should have that margin applied to it, making for a total allowable claim for excavation works of $53,454.55.
Contract Variations
Mr Kavvadas claims that he did not request many variations. I cannot accept that evidence. I accept the evidence of the Applicant and Mr Baggaley that variations were frequently requested by Mr Kavvadas, generally by means of on-site verbal requests, directed generally to Mr Turcinovic personally, or sometimes to Mr Baggaley, and, on occasion, directly to subcontractors. I accept too that Mr Kavvadas was usually advised in relation to the cost of these variations at the time of the next progress claim, and that he routinely paid these, at least until the development of this dispute.
The variation items have now been reduced into the form of a Scott Schedule. By the time the matter came to be determined by the Tribunal some of the disputed items had been agreed by the Respondent. In respect of the claimed items that have been allowed by me, I am satisfied that the Applicant would suffer an unreasonable hardship if a sum were not to be awarded for them and that it is not unreasonable to Mr Kavvadas to now award a sum to Mr Turcinovic. In relation to the claimed variations, my assessment is as follows:
Variation description
Amount Claimed[19] by Applicant
Amount Allowed
Notes
Stairco, change to stairs
$2,464.00
$2,464.00
Evidence of the Applicant preferred.
CBUS, preliminary works
$5,500.00
$5,500.00
Evidence of the Applicant accepted. CBUS system quoted as $27,500 Annexure HT-24 to Exhibit 2.
Smart crane hire
$254.00
$254.00
Agreed by the Respondent.
Hudson building supplies
$219.98
$219.88
Agreed by the Respondent.
Bunnings
$612.12
$612.12
Agreed by the Respondent.
Additional Work, interior
$21,702.88
nil
Claims for predominantly labour, yet no sub-contractor invoices or time sheets available for assessment. Accordingly insufficient evidence before the Tribunal to substantiate the claimed variation.
Glass handrail to deck
$9,275.00
$10,202.50
Respondent agrees to this higher amount: See statement of Vasilios Kavvadas dated 9 July 2010 at [36(g)].
Glass handrail to stairs
$9,146.50
$9,146.50
Agreed by the Respondent.
CBUS, balance
$22,000.00
$22,000.00
Evidence of the Applicant accepted. CBUS system quoted as $27,500 Annexure HT-24 to Exhibit 2.
Marble tiling
$20,247.78
$20,247.78
Evidence of the Applicant accepted.
Basement works
$522.72
$522.72
Agreed by the Respondent.
Repayment of St George fees
$3,681.82
$3,681.82
Evidence of the Applicant preferred.
Swimming Pool
$30,018.94
nil
Pool construction agreed to be part of original contract price: see reference to “external works” in HNT letter dated 22 February 2007 (Exhibit 6). See also [6(b)] in Exhibit 3.
Swimming pool tiling
$14,220.13
nil
Pool construction agreed to be part of original contract price: see reference to “external works” in HNT letter dated 22 February 2007 (Exhibit 6). See also [6(b)] in Exhibit 3.
Window tinting
$2,101.00
$2,101.00
Evidence of Applicant preferred.(Exhibit 2 [23(p)])
Window variations
$11,727.36
$11,727.36
Evidence of the Applicant accepted.
Electrical variations
$6,565.70
$6,565.70
Agreed by the Respondent.
Hardware variations
$8,137.88
$8,137.88
Evidence of the Applicant (Exhibit 2 [23(s)]) accepted.
Door variations
$5,825.21
$5,825.21
Evidence of the Applicant accepted (Exhibit 2 [23(t)]).
Balcony handrail variation
$2,891.00
$2,891.00
Evidence of the Applicant accepted.
Cladding to RHS
$1,854.00
nil
No evidence adduced by Applicant to substantiate the actual cost of this variation.
Concrete sealing
$6,457.00
nil
Concrete sealing included in original contract price. Insufficient evidence from builder to determine extent of variation between original concrete sealing specification and actual works, as eventually performed.
Storage room under front door
$350.00
nil
No evidence adduced by Applicant to substantiate the cost of this variation.
Removal of existing bi-fold door
$940.00
nil
No evidence adduced by Applicant to substantiate the cost of this variation.
Sub-Total
$186,715.02
$112,099.47
Builder’s margin (15%)
$28,007.25
16,814.92
Grand Total
$214,722.27
$128,914.39
[19] See Addendum Schedule of variations filed by the Applicant on 24 October 2011.
Prime Cost Items
Originally, the allowance pursuant to the contract for prime cost items was $221,750. Ultimately, the builder says that $349,965.45 was expended by him on prime cost items, making for a sum of $128,215.45 still owing. After the addition of builder’s margin (at 15%), and GST, Mr Turcinovic claims that he is still owed $162,192.54 for prime cost items.
In a document[20] prepared by Mr Turcinovic’s solicitors (when they were still acting for him) the amount claimed as still owing for Prime Cost items is however the lesser sum, of $121,016.41, inclusive of GST. On that basis the sum claimed for prime cost items, when including builder’s margin at 15% becomes $139,168.85. I adopt that amount as the true quantum of the builder’s claim, rather than the higher figure expressed in the preceding paragraph.
[20]See Annexure HT-59 to the addendum statement of Harry Turcinovic, now Exhibit 2 in these proceedings.
A dispute remains in relation to some of the prime cost items, given that many of these have now been conceded by Mr Kavvadas. After analysis of the various contentions by the parties,[21] and the various receipts and invoices, I conclude that the builder would suffer an unreasonable hardship if a sum is not awarded in relation to these items and that it is not unreasonable to Mr Kavvadas to now award sums to the Applicant as follows as regards the various prime cost items:
[21]Addendum statement of Mr Turcinovic (Exhibit 2) and second statement of Mr Kavvadas dated 9 July 2010.
PC Item Description
Contract Provision
Builder’s Claimed Amount[22]
QCAT Assessment
Notes
Cabinet Work
$50,000.00
$79,219.896
$58,826.53
Evidence of the Respondent preferred.
Sauna
$6,000.00
$518.09
$518.09
Agreed amount.
Spa, internal
$14,000.00
$6,382.85
$6,382.85
Evidence of the Applicant preferred.
Spa, external
$10,000
$2,200.00
$2,200.00
Applicant accepted.
Air conditioning
$25,000.00
31,095.00
$31,095.00
Evidence of the Applicant preferred.
Light fittings
$4,000.00
$4,594.15
$4,594.15
Evidence of the Applicant preferred.
Lift
$45,600.00
$50,519.70
$50,519.70
Agreed amount.
Tiles
$3,000.00
$43,522.35
$3,962
Evidence of the Respondent preferred.
Sanitary Ware
$10,000.00
$45,395.11
$45,395.11
Evidence of the Applicant preferred.
Front Door
$3,900.00
$5,713.40
$5,713.40
Agreed amount.
White Goods
$9,000.00
$17,613.00
$17,613.00
Agreed amount.
Building Certification
$1,750
$6,059.00
$6,059.00
Evidence of the Applicant preferred.
Hydraulic design
$2,500.00
$466.90
$466.90
Agreed amount.
Sewer connection
$20,000.00
$22,000.00
$22,000.00
Agreed amount.
Water main
$2,000.00
$3946.00
$3,946.00
Agreed amount.
Side gates
$4,000.00
$4.521.00
$4,521.00
Agreed amount.
$221,750.00
$263,812.73
Variance
$42,062.73
Builder’s margin @ 15%
$6,309.41
Total
$48,372.14
[22]Based on Annexure HT-59 to Exhibit 2.
Defects
Examination must now turn to the question of the reasonable cost of rectifying the defects, so far as possible, subject to the qualification stated in Bellgrove v Eldridge,[23] at 617:
The measure of the damages recoverable by the building owner for breach of the building contract is… the difference between the contract price of the work or building contracted for and cost of making the work or building conform to the contract, … The qualification however, to which this rule is subject is that, not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt.
[23] (1954) 90 CLR 613 at 617-18.
Some of the defects said to exist by the owner are claimed by Mr Turcinovic not to be defects, as much as they are merely further examples of variations that were orally requested by the Mr Kavvadas. The Respondent denies this. The contested matters are:
a) slab to the gym terrace constructed without a 150mm step-down;
b) doors have not been fitted to ensuite from bedroom area; and
c) windows are of a different height in bedroom 3.
Mr Turcinovic says that the 150mm step-down from the basement level gymnasium to the gymnasium forecourt was omitted at the behest of Mr Kavvadas for aesthetic reasons, and that the window variances in bedroom 3 and the omission of the door to the ensuite bathroom were similarly matters done at the election of the owner. Although these matters are denied by Mr Kavvadas I assess Mr Turcinovic to be more credible. In relation to each of these alleged defects I accept the evidence of the builder over that of Mr Kavvadas and find that these matters do not qualify as defects, as these were changes requested by the owner.
Expert reports have been produced by Mr Eric Hebron (architect) on behalf of the Applicant and Mr Cecil Fritz (builder) in relation to the alleged defects in the construction. In turn, the likely costs for rectifying the alleged defects have then been estimated by the quantity surveyors, Mr David Mitchell of Mitchell Brandtman (on behalf the Applicant), and Mr Stephen Gray of Gray, Robinson, Cottrell, on behalf the Respondent. There is a very considerable disparity between the two estimates. Mr Mitchell puts the cost of remediation works (as at 3 August 2009) at $60,857.23, whereas Mr Gray estimates (as at May 2009) that the remediation works will cost $352,860.97.
Having heard evidence from each quantity surveyor and having considered the methodology employed by each of them, I express a clear preference for the estimates that have been provided to the Tribunal by Mr David Mitchell. Equally, I prefer the evidence of the architect Mr Hebron over that of builder Mr Fritz, on the basis that the remediation steps that have been proposed by Mr Fritz would appear to be, in some instances, quite disproportionate to the magnitude of the problems now requiring rectification. This has, in turn, meant that the cost estimates for remediation that have been provided by Mr Gray exceed what is reasonable, and thereby outside the qualification expressed in Bellgrove v Eldridge (ibid). I also agree with Mr Mitchell observation that Mr Gray’s estimates contain an excessive allowance for latent conditions; builder’s preliminaries; builder’s off-site overheads; and profit margin.
Although I express a preference for Mr Mitchell’s estimates, and propose to adopt them, these do not include any allowance for builder’s margin, as Mr Mitchell had predicated his estimates on an assumption that Mr Turcinovic would himself undertake any necessary rectification works. That will not now be possible, such that it is necessary to enlarge the cost estimates provided by Mr Mitchell to include another builder’s profit margin, which I shall do, at 15%. Mr Mitchell’s estimates were also prepared in 2009. I will therefore allow a further 15% to account for cost increases in the intervening period. I therefore assess the costs of rectification at $80,483.68.
Liquidated Damages
The Respondent seeks $46,400.00 as liquidated damages at the contractually agreed rate of $200.00, per day. Yet, it seems clear from the evidence heard before the Tribunal that a considerable portion of the additional time beyond the originally envisaged construction deadline is attributable to additional time required to make variations that had been requested by Mr Kavvadas; or arose as a result of his having requested that work be prioritised at either of the Wambool Street or Princess Street developments that were also being constructed for him at that time by Mr Turcinovic. At least in respect of those delays, the builder should be entitled to an extension of the contract period in accordance with s 18(6)(b) of the DBC Act.
In all the circumstances, I am unwilling to entertain a claim for liquidated damages of anywhere near the sum now contended for by the Respondent. Notwithstanding that, it is still the case that the project over-ran, in circumstances where the builder has not even bothered to seek an extension of time in proper conformity with the requirements of either the contract, or the DBC Act, and not all of the delay was caused by Mr Kavvadas. In those circumstances some amount should still be awarded as liquidated damages.
The only evidence available to me by which to even begin to assess the Respondent’s entitlement to liquidated damages is a concession, by Mr Baggaley, that it is arguable that 29 days delay on the project cannot be explained by the builder. On that basis, I will award liquidated to the Respondent in the sum of $5,800.00
Conclusion
The Respondent is ordered to pay to the Applicant the sum of $144,457.40, within 28 days of the date of judgement, assessed as follows:
Extra excavation: $53,454.55
Variations: $128,914.39
Prime Cost Items: $48,372.14
Sub-Total: $230,741.08
Less, Defects: ($80, 483.68)
Less, Liquidated Damages ($5,800.00)
Total: $144,457.40
I will hear the parties as to costs.
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