Hodges v Queensland Building Services Authority
[2013] QCAT 576
| CITATION: | Hodges v Queensland Building Services Authority [2013] QCAT 576 |
| PARTIES: | David Hodges Carole Hodges (Applicants) |
| v | |
| Queensland Building Services Authority (First Respondent) Vapino Pty Ltd (Second Respondent) |
| APPLICATION NUMBER: | GAR130-13 |
| MATTER TYPE: | General administrative review matters |
| HEARING DATE: | 14 October 2013 |
| HEARD AT: | Brisbane |
| DECISION OF: | Michelle Howard, Member |
| DELIVERED ON: | 1 November 2013 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. The decision of the Queensland Building Services Authority dated 15 March 2013 is confirmed. |
| CATCHWORDS: | GENERAL ADMINISTRATIVE REVIEW- QUEENSLAND BUILDING SERVICES AUTHORITY-STATUTORY INSURANCE SCHEME- where homeowners claim incomplete building work- where policy provides for claim under insurance scheme- where insured has properly terminated the contract- where inconsistency in contract about construction/completion period- whether homeowners validly terminated contract- whether builder validly terminated contract-whether extrinsic evidence relevant Queensland Civil and Administrative Tribunal Act 2009 ss 20, 24 Amalgamated Television Services Pty Ltd v Television Corporation Limited (1969)123 CLR 648. |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | David Hodges and Carole Hodges represented themselves. |
| FIRST RESPONDENT: SECOND RESPONDENT: | Ms Kellie Lowe, in-house legal officer, represented the Queensland Building Services Authority Mr Gary Jasinski and Mr Stuart Woodall, directors, represented Vapino Pty Ltd. |
REASONS FOR DECISION
On 8 December 2011, David and Carole Hodges (the homeowners) entered into a domestic building contract with Vapino Pty Ltd (the builder) for the construction of a residential dwelling on their land at Lot 963 Fletcher Crescent, Pacific Pines for $275,000. It is not controversial that the contract is a regulated contract under the Domestic Building Contracts Act 2000 (the DBC Act).
Both the homeowners and the builder later purported to terminate the contract. The homeowners purported to terminate on 12 December 2012 and subsequently on 15 March 2013 under section 90 of the DBC Act. The builder purported to terminate on 19 December 2012 by accepting the homeowner’s alleged repudiation on 12 December.
The homeowners made a claim on the statutory insurance scheme through the Queensland Building Services Authority (QBSA) for incomplete work. It is uncontroversial that the applicable version of the QBSA Insurance Policy (the Policy) is edition 8. It relevantly provides for insurance cover for loss incurred by a homeowner, in the event that a contractor fails to complete residential construction work.[1] Liability for payment for non-completion only arises for fixed price contracts which the homeowner has properly terminated.[2] Properly terminated is defined. It means lawfully terminated under the contract or otherwise at law, upon default of the builder, including by breach of the contract.[3]
[1] Exhibit 8, clause 1.1.
[2] Exhibit 8, clause 1.2.
[3] Exhibit 8, Part 11, 11.1 ‘properly terminated’.
The insurance claim was refused on the basis of the QBSA’s conclusion that the homeowners did not lawfully terminate the contract. The homeowners now seek review of the QBSA decision.
Mr Hodges filed 2 statements and gave oral evidence for the homeowners. Mrs Hodges did not file a statement in the proceeding and accordingly was not cross-examined. Mr Woodall and Mr Jasinski, both directors of Vapina, filed a joint statement and both gave oral evidence.
The review process and the relevant law
The purpose of the Tribunal’s review is to produce the correct and preferable decision.[4] For the review, the Tribunal stands in the shoes of the decision-maker (that is, in this case, the QBSA) and makes the decision afresh.[5] The Tribunal’s decision is then taken to be a decision of the decision-maker.[6]
[4] QCAT Act s 20.
[5] QCAT Act s 20.
[6] QCAT Act s 24(2).
The construction of a contract is a matter of fact. Contracts are to be construed as a whole, rather than construing terms in isolation.[7] The aim is to construe the contract as a consonant whole, if possible, to give effect to the bargain struck by the parties. The intention of the parties is ascertained objectively from the perspective of a reasonable third party.[8] When a contract has been wholly reduced to writing, as is the case here, the intention of the parties is to be gathered from the contract documentation.[9] Generally, extrinsic evidence is not admissible to add to, vary or contradict the terms of the contract.[10] However, it is well established that in the case of ambiguity, extrinsic evidence may be admitted to resolve the ambiguity. That said, evidence of prior negotiations may not be considered, since the final document contains the bargain struck.[11] Further, it is generally accepted that subsequent conduct can not be referred to for the purpose of interpreting the contract.[12]
[7]Amalgamated Television Services Pty Ltd v Television Corporation Limited (1969)123 CLR 648.
[8] Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451.
[9] Allen v Carbone (1975) 132 CLR 528.
[10] Gordon v MacGregor (1909) 8 CLR 316.
[11] Prenn v Simmonds [1971] 1 WLR 1381.
[12]James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Limited [1970] AC 583; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337.
Section 90(1) of the DBC Act provides that a homeowner may end the contract if the work is not finished within 1.5 times the effective completion period. The effective completion period is ascertained having regard to the definitions of effective completion period and stated completion period in Schedule 2, and sections 18 and 33 of the DBC Act. In essence, under section 18 the effective completion period is the stated period for completion specified in a regulated contract as adjusted to take account of any additional days required to be applied under section 33 for the carrying out the work.[13] Section 33 provides for allowances for the effect of inclement weather and days that are non-working days.[14] Also, the period must be adjusted to take into account any additional days under a variation to the contract.[15]
[13] DBC Act s 18(2) and (3).
[14] DBC Act s 33, esp 33(2).
[15] DBC act s 18(5).
In determining the period which is 1.5 times the effective completion period (that is, relevant period applicable under s 90), it is proper to calculate 1.5 times the whole of the adjusted period. The adjusted period is the completion period, together with any extensions of time applicable.[16]
[16] Chelbrooke Homes Pty Ltd v Russell [2011] QCAT 286 at [30-31].
Parties to contracts are also presumed to have rights to terminate a contract at common law, unless those rights are explicitly exluded.[17] At common law, repudiation occurs when a party evinces an intention to no longer be bound by the contract. Repudiation does not terminate the contract. Until the repudiation is accepted the contract remains binding on both parties.[18] Generally, wrongful termination constitutes repudiation.[19] Following repudiation, the other party is entitled to accept the repudiation and elect to terminate the contract.[20]
[17] Amann Aviation Pty Ltd v Commonwealth (1988) 100 ALR 267.
[18] Foran v Wight (1989) 168 CLR 385.
[19] Ogle v Comboyoro Investments Pty Ltd (1976) CLR 444.
[20] Sargent v ASL Developments Ltd (1974) 131 CLR 634.
The conditions in the contract about the construction and completion periods
A standard Master Builders contract was used, version RBC August 2010.[21] Item 8 of the Schedule provides for the construction period. The standard wording in Item 8 is in the following terms, ‘The Construction period (in days) including provision for delays (Refer to Part C of the Appendix which must be completed by the Contractor)’. In handwriting, ‘179’ days is inserted.
[21] Exhibit 7.
Part C of the Appendix is completed. It specifies ‘construction days’ as 179 days. Calculable delays are also specified: for inclement weather, 7 days and for non-working days, 51 days. The construction period (in days) including delays is then specified at 237 days.
Then in Item 10, the date for practical completion is specified as 179 days from the date for commencement. It is common ground that the date of commencement was 21 February 2012.
If practical completion was delayed, liquidated damages of $10 per day were payable.[22]
[22] Exhibit 7, Schedule Item 18.
The homeowners say that the contract as signed required completion within 179 days of commencement, that is by, 18 August, 2012. The builder says it was required within 237 days, that is by 15 October 2012.
The General Conditions to the contract
Clause 3 of the General Conditions provides a process for dealing with discrepancies and ambiguities in the contract. It requires a party finding a discrepancy or ambiguity to notify the other party in writing. The parties must then consult with a view to resolving it. Failing resolution, it must be dealt with under clause 28. Specifically, the parties acknowledge that the contract is complete in itself.[23]
[23] Exhibit 7, General Conditions, clause 3.2.
Clause 1.2 provides that the owner must provide the builder with free and uninterrupted occupation of and access to the site to carry out the works. An owner is entitled to access to the site during the works only by prior arrangement with the contractor: clause 7.4.
The works are to be brought to practical completion stage by the date for practical completion stage, as adjusted in accordance with the contract: clause 8.3.
Clause 28 then provides for referral of a dispute to Master Builders Queensland by agreement of the parties for a conference and if unsuccessful, for referral to the Tribunal. (It is not controversial that the parties did attend mediation through the Master Builders Association and some outcomes from the mediation were disclosed in the course of the evidence.)
Clause 15 makes provision for delays and extension of time claims in a variety of circumstances including any act, default or omission by the home owner and any suspension of works or other cause beyond the reasonable control of the builder. If the owner rejects the claim for extension, the builder is still entitled to a fair and reasonable extension of time of the date for practical completion: clause 15.4. Clauses 12 to 14 provide for variations to the contract.
Clause 16 provides for suspension of works where the owner is in substantial breach of the contract. If a suspension occurs, the date for practical completion is automatically extended by an equivalent period: clause 16.2.
Clauses 20 to 22 set out rights of the homeowners and the builder to terminate the contract. The right to terminate at common law is not excluded.
Alleged Issues, suspensions, variations and extensions
The course of construction did not run smoothly as between the homeowners and the builders. Various allegations are made by both about actions taken or not taken by the other.
Mr Hodges denied in cross-examination that he had been shown Part C of the Appendix to the contract. He said he believed the completion period was 179 days. In making this assertion, he relies at least in part on an email from the builder dated 1 June 2012 (over 6 months after the contract was signed), which states that if there are no delays beyond those identified in the contract, completion will be due on 19 August 2012. That is, 180 days from commencement. Reliance is also placed on pre-contract negotiations and general information on the builder’s website.[24]
[24] Exhibit 3, paragraph 4 c,d,e.
Mr Jasinski says that he sent the email of 1 June 2012. He says he looked at the earlier pages of the contract only, (where items 8 and 10 appear in the schedule), when he prepared it, without appreciating the inconsistency between those Items and Part C of the Appendix.
A copy of the contract including the Appendix was provided by the homeowners to the QBSA (which included in Exhibit 1) and in Mr Hodges’ written statement to the Tribunal.[25] Also, at the hearing, when asking questions of the builder’s witnesses, he provided the original contract which (which had been in the homeowners’ possession), to Mr Woodall to consider when responding to a question he posed. It subsequently became Exhibit 7 in the proceedings. It contains Part C of the Appendix. Accordingly, I give no weight to the assertion that Mr Hodges was not shown it. I am satisfied that Appendix C was contained in the original contract as signed by the parties and forms part of the agreement between them.
[25] Exhibit 3, DH1.
It is common ground that a number of variation and extension of time claims were made or proposed by the builder. However, only two variations were signed by both parties. Firstly, a variation which extended the completion period by 2 days was signed. The only other variation signed by both parties did not vary the construction period.
Vapino Pty Ltd made claims for a variation for 111 days (because of the alleged breaches of Clause 11.12 for failure to provide requested information and locking the power box)[26] and for an extension of time of 58 days to deal with what they refer to as the ‘ambiguity’ in the contract. [27] It also says it suspended works.
[26]The homeowner sought to make something at hearing of the completion dates nominated by the builder in extension of time and variation claims at Exhibits 4 DH 7 and Exhibit 5.However, nothing turns on the nominated dates. It is for me to determine the actual completion period in these proceedings.
[27] Exhibit 5, attachment.
The claim[28] for 111 days was apparently amended with respect to the completion date nominated within it (although I do not have the earlier version).[29] In any event, for the reasons set out later, this is not significant.
[28] Exhibit 5, attachment.
[29] Exhibit 4, paragraph 9, DH6.
Mr Woodall, a director of Vapino, says the homeowners hindered works at the site. He says, and it is not disputed by the homeowners, that on about 7 July 2012, they placed a lock on the electrical metre box and required the builder to contact them for access if going onsite.[30] Mr Hodges says he did this because, he says the metre box was left open on numerous occasions, including in the rain.
[30]See Exhibit 4, DH 8 email from homeowners about the lock and requirement for homeowners to open the lock.
In relation to the non-provision of information, [31] there were some 9 items of additional information requested on 1 June. Mr Hodges relies upon a text message of 2 April to Gary Jasinski providing some of these details previously. There is no identifying information in the text to make it clear who it is from. Unless Mr Jasinski had Mr Hodges number identified in his telephone he may not have known who it was from. There is no evidence to suggest whether he did. He also gave evidence of having supplied some, but not all, of the requested information indicating that he could not supply the rest until Vapino came back to him with further information. In any event, it does not cover all of those items identified. It is apparent from DH 9 to Exhibit 4 that was at least a period from 1 June 2012 to 9 July 2012, information issues were being discussed between the parties.
[31]Exhibit 4, attachments DH 9 (email Vapino to David Hodges dated 1 June 2012 sets out information requested) and DH 15. (In the hearing, it was suggested that attachments DH12 and 15 may have been reversed DH 15 in the Tribunal’s copy of the document is referred to.
In addition to seeking a variation related to the alleged hindrance of works the builder asserts that it suspended the works at times because of breaches of the contract by the homeowner,[32] for hindering works by failing to provide information and placing a padlock on the electrical metre box. In cross-examination, Mr Hodges denied receiving the suspension (and associated breach) notices, although he acknowledged receiving an email about a suspension.[33]
[32]Exhibit 5, Witness statement and attachments (pages unnumbered but two suspension notices dated 17 June 2012 and one notice dated 7 July 2012).
[33] Exhibit 4, paragraph 11.
Mr Hodges said at hearing that photographs provided with his witness statement at Exhibit 4 demonstrated that further work was done during the suspension period.[34] The photographs are not date stamped (although dates and descriptions are typewritten under them). Mr Hodges offered at hearing to later provide electronic copies with dates on them. Mr Woodall in evidence observed that any date can be set within a camera.
[34] Exhibit 4, attachment DH 14.
Similarly, Mr Woodall offered to later provide copies of emails between the builder and Mr and Mrs Hodges to which he referred in his evidence, but likewise has not provided to the Tribunal and did not bring to the hearing. He said that because of the approach of the homeowners some 512 emails in all had been generated.
Directions had been made for the filing of material. In respect of the builder (which was not joined as second respondent until shortly before the hearing in July 2013) the direction was unfortunately, and inexplicably, limited to filing written submissions.[35] No provision was made for the filing of witness statements by the builder, although a brief joint written statement was filed by Mr Jasinski and Mr Woodall in apparent response to the direction to file submissions. It became clear in the course of the hearing that its representatives were under the misapprehension that they were limited in what they could place before the Tribunal. If my view of the matter had been different, to accord Vapino procedural fairness, it may well have been necessary to afford Vapino the opportunity to file further material. However, ultimately I consider it is unnecessary to take that step.
[35] QCAT orders dated 5 and 16 July 2013.
However, the homeowners have had several opportunities to provide material and have filed substantial material. I did not consider it appropriate to give them the opportunity to file yet more material. I am able to make the decision based on the material and other evidence before me. Regarding the photographs, I accept in any event that the date can be set in the camera and so it would not assist me to have further date-stamped copies.
In relation to payment, and notwithstanding his evidence that in total some $237,000 had been paid under the contract by the homeowners, Mr Hodges asserted that an obligation to pay monies under the contract had not arisen because the builder had not provided certification of completion of each stage. The contract provides for the homeowners to pay the deposit under General Conditions, clause 11.5, upon signing of the contract.[36] Clause 11.6 provides that a progress claim must be in writing, certify that the works have been completed to the relevant stage and set out the amount to be paid. A homeowner is then obliged to pay the claim in accordance with clause 11.7.
[36] Exhibit 7.
Mr Woodall says that Mr and Mrs Hodges paid their deposit over 294 days in four instalments (on 23 December 2011; 3 January 2012; 2 May 2012; and 3 October 2012), despite their obligation to pay it upon signing of the contract (clause 11.5). Despite that apparent breach, it is not suggested by Vapino that any variation was sought in relation to it.
Actions taken by both parties purporting to terminate the contract
On 12 December 2012, practical completion had not been reached. The homeowners purported to terminate the contract under s 90 of the DBC Act, alleging that the work was not finished within 1.5 times the effective completion period. No other basis for termination was relied upon, and nor is it now asserted is there any other basis upon which the homeowners were entitled to terminate the contract. Vapino Pty Ltd denied that the termination was valid, purported to accept the repudiation of the contract by the homeowners and terminate the contract on 19 December 2012.
Then on 15 March 2013, the homeowners denying that the builder had validly terminated (asserting that the builder was in substantial breach and it therefore could not do so), again purported to terminate the contract under s 90 of the DBC Act.
In the meantime, on 14 December 2012, the homeowners made their complaint to the Queensland Building Services Authority (QBSA) alleging incomplete building work which was treated as a claim under the statutory insurance scheme.
Constructing the contract: what was agreed the completion period under the contract?
The stated construction period in days specified in Item 8 is 179 days. That said, Part C of the Appendix sets out that the actual construction days are 179, but that the construction period is 237 days including delays and non-working days. Item 10 specifies 179 days from commencement of construction as the date for practical completion.
The homeowners say that the construction period is irrelevant, that the completion period is to be ascertained by reference only to Item 10.
The law is well-established. I must consider the contract as a whole from the perspective of an objective and reasonable third person to ascertain the bargain struck by the parties. I may have regard to extrinsic evidence only if after having gone through this exercise, I consider there is ambiguity.
The matters specified in Part C of the Appendix are part of the agreement struck and were intended to have meaning. They explain the period of time the parties intended the construction of the house to take, including construction days as well as calculable delays for inclement weather and non-working days. The total construction period including calculable delays is specified at 237 days. The period for completion could not logically be a shorter period than the construction period, that is, shorter than 237 days.
An objective reading of the contract as a whole from the perspective of a reasonable third party supports a conclusion that the intended construction and completion periods are 237 days. There is no other sensible or logical interpretation. The homeowners arguments that it was intended to be 179 days including the allowances, do not serve to give meaning to the clear provision made for the construction period (that is construction days plus the calculable delay days), rather than simply the number of actual construction days. The construction they contend would mean that the calculations set out in Part C of the Appendix had no effect.
Although I do not need to be concerned when constructing the contract with why or how the inconsistency came about, I make the observation that it appears likely that a simple transcription error occurred in inserting in Items 8 and 10, 179 rather than 237 days.
I consider that the objective reading of the contract does not reveal ambiguity in the contract, as opposed to inconsistency between Items 8, 10 and Part C of the Appendix. Therefore, the extrinsic evidence may not be considered in the process of constructing the contract.
In any event, I make the observation that if it had been permissible for me to have regard to the email negotiations which pre-date the contract and general statements on the website, I would not have considered they revealed the completion period as agreed between the parties at the time of the contract. Further, as unsatisfactory as it may be that various completion dates later appear in the email of 1 June 2012, and in the extension of time and variation documents and amended extension claim documents, I would also have found them unhelpful in construing what the parties agreed at the time of entering into the contract. Mr Jasinski’s explanation about the 1 June email is plausible, and I would accept it.
The DBC Act, which binds the parties, supports the logical conclusion which arises from the contract document, that the completion period was 237 days. Section 18 provides for the stated completion period in a contract to be adjusted to include those delays specified in section 33. The delays included in section 33, include delays for inclement weather and non-working days. In this case, the allowances for inclement weather and non-working days set out in Part C of the Appendix are such delays, namely 7 days and 51 days respectively. Therefore, even if the stated completion date was 179 days, the effective completion date, adjusting for those allowances under the DBC Act, was 237 days.
I find that the completion period under the contract struck by the parties was 237 days. On this basis, completion was due under the contract on 15 October 2012.
Additional days to be added to the completion period for variations
Given the completion date under the contract as found by me, I do not need to determine the disputed extensions of time and variation claims and disputed suspension periods in order to decide the termination issue, since the homeowners terminated too early under s 90, even if no further extensions other than those agreed are taken into account in calculations.
The parties acknowledge one signed variation which allowed two further days for completion. An additional 2 days must be allowed by virtue of the agreed variation. That is, taking those 2 days into account, I find that the effective completion period as adjusted was then 239 days, that is, it was due on 17 October 2012.
Purported termination
When did 1.5 times the effective completion period as adjusted expire? The relevant calculation is as follows: 1.5 times 239 days, which rounds to 359 days. Calculated from the commencement date of 21 February 2012, 359 days later was 14 February 2013.
The homeowners purported to terminate under s90 of the DBC Act on 12 December 2012. The homeowners do not claim any other lawful basis for termination was available to them. I find that the homeowners purported termination was therefore invalid because it occurred before the homeowners were entitled to terminate under s 90 of the DBC Act.
I am satisfied however that the homeowner’s wrongful termination did amount to a repudiation of the contract. At common law, the repudiation entitled the builder to terminate it, which it did on 19 December 2012. I find that the builder validly terminated the contract on 19 December 2012.
The homeowners’ lawyers raised an argument in correspondence[37] on their behalf, namely that because the builder was in substantial breach of the contract, the builder was not entitled to terminate. Clause 22.3 of the contract prohibits a builder from terminating in accordance with the clause, that is, under the contract, if the builder is in substantial breach of the contract. However, the builder purported to terminate at common law.
[37] Exhibit 1, pages 89-92.
At the time of the builder’s termination, the contract ended. Therefore, the homeowners’ second purported termination on 15 March 2013 was also invalid.
Conclusions
Under the Policy, the QBSA is only liable to pay for loss for non-completion under the relevant Part when the homeowner properly terminated the contract with the contractor. I have found that the homeowners did not properly terminate the contract. It was validly terminated by the builder.
Accordingly, the QBSA decision to reject the homeowners claim was the correct and preferable decision. Therefore, I make orders confirming the QBSA’s decision.
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