Investing in Property Pty Ltd v Reality Software Pty Ltd

[2010] QCAT 456

CITATION: Investing in Property Pty Ltd v Reality Software Pty Ltd [2010] QCAT 456

PARTIES: Investing in Property Pty Ltd v Reality Software Pty Ltd

APPLICATION NUMBER:            7/10; and 000151/10

MATTER TYPE: Other Minor Civil Dispute Matters

HEARING DATE:   28 August 2010

HEARD AT:   Pine Rivers Court House

DECISION OF: Louise Mc Donald

DELIVERED ON:   13 September 2010

ORDERS MADE:

1. That the Respondent, Reality Software Pty Ltd, pay the Applicant Investing in Property Pty Ltd the amount of $5229, that being damages for breach of agreement, $4860 plus $90 court costs and interest $279.

2. That the respondent makes this payment within 28 days of the date of this Order.

3. That application 000151/10 be dismissed.

CATCHWORDS :  Breach of Agreement

APPEARANCES and REPRESENTATION (if any):

Rhonda Madden, Applicant; Jeffrey Lynne, Respondent

REASONS FOR DECISION

HISTORY OF THE APPLICATION

1. An application was filed by Rhonda Madden on 27 January 2010 seeking $4950 for damages as a result of breach of an agreement between the parties for the development of a website for the Applicant’s property investment business.

2. The Applicant sought a decision by default on the grounds that the Respondent failed to lodge a response. A default order was made on 26 February 2010 awarding the Applicant $5194.99, which included $90 cots and $244.99 interest.

3. On 13 July 2010 the Respondent sought to have the default judgement set aside, on the grounds that they had not received the correspondence relating to proceedings, and sought to lodge a counterclaim.

4. On 19 July 2010 the default order was set aside, and the matter was re-opened. It was ordered that any cross application be filed within 14 days, and to be listed for hearing together with the matter.

5. On 2 August 2010 the Respondent sought an extension of time to lodge the counterclaim.  On 5 August the Applicant objected to the extension, a submitting that the Respondent was deliberately delaying and providing misleading information to the Tribunal.  By order of 10 August the Respondent was granted until 18 August 2010 to submit the counter application and attend to service. A cross application was not filed until 19 August 2010. The Respondent argued that he had served this and presented registered post certificate to indicate this. The Applicant stated that she had not been served. The Respondents’ application had not been filed as a counterclaim but as a fresh application and given the number 000151/10. However, the content related to the same facts and was in effect a counter application, which had not complied with the order of 10 August 2010.

6. At the hearing on 23 August 2010, the Respondent sought an adjournment on the grounds that he had insufficient time to prepare his case. The tribunal noted the substantial delays caused by the Respondent in this matter, and the costs and inconvenience incurred by the Applicant given the Respondents approach to procedural requirements and orders. The Tribunal denied the requested adjournment and under s 61 waived procedural requirements in order that the matter proceeds on the 23 August 2010. The tribunal stepped the matter down briefly for the Applicant to prepare her case in relation to the material in what was in effect the counterclaim.

7. The tribunal was mindful of section 28 of the Queensland Civil and Administrative Tribunal Act2009, (the Act)  and in particular, subsection (3) (d) which enables the Tribunal to Act with as much speed  as the act rules, and proper consideration of the matters before the tribunal permit.  

8. The Tribunal directed that matters joined 7/10, and 000151/10 to ensure the speedy and fair conduct of the proceeding under s 62 of the Act. The Tribunal heard evidence in relation to both applications, admitting into evidence the contents of documents relied upon by the Respondent despite non compliance, and rules relating to a document and service of it, in accordance with s 28 (4) of the Queensland Civil and Administrative Tribunal Act2009. 

9. The counterclaim contained in application 000151/10 was ultimately dismissed, being received out of time.

REASONS

THE AGREEMENT

10. On 22 April 2009 the parties entered a website development agreement for the development of a website for the Applicant’s property investment business. The Respondents held themselves out as qualified and experienced web designers to undertake this task for valuable consideration.

11. Specific terms of the agreement relevant to this dispute are:

12. A project Plan containing specifications which comply with the customers’ request and a schedule containing a delivery date for each deliverable item was included in the agreement. By clause 16 (i) (referred to as section rather than clause), time was of the essence. Section 2, Payment was payable by instalments, upon completion of each phase and acceptance by the customer.

13. Changes in project scope were to be evidenced by a written Project Plan Amendment. This was to be developed was the designer had considered the proposal and submitted a written response as to the effect the proposed changes would have on price and delivery dates.  The designer was not obliged to perform further work if the Project Plan amendment was not approved.

14. Section 4 enabled the customer to declare default and pursue remedies if any delivery date was missed. The customer must allow the designer 14 days notice to cure the delay.

15. The test for acceptance under section 5 of the Agreement is upon completion of the web site and delivery of all items required to be provided under the project plan the customer has 14 days to inspect test and evaluate the website to determine whether it satisfies the acceptance criteria in the project plan. Written notice is required if it does not satisfy the test and 14 days notice is given to rectify. The customer has 7 days to test rectifications and then terminate if it continues to be unmet. 

16. By Section 13, the Customer could terminate and elect to have the goods delivered and keep all title in the goods, or elect to purse legal and equitable remedies.
17. The designer after 14 days written notice to customer of default may elect to require payments, or pursue legal remedies.

18. Section 16 (c) states that no term of the agreements waived unless in writing and signed by the party claimed to have consented.

19. The project plan specified completion of the four stages of development as follows:

Phase 1:  8 May 2009
Phase 2:  23 May 2009
Phase 3: 15 June 2009
Phase 4:  20 June 2009

20. The preamble to the completion dates notes that it is not uncommon for development to run under or over time. This is inconsistent with the contractual term that time is of the essence and is severable to the extent of this inconsistency.

21. The Applicant argues that the Respondents did not meet the timelines for the production of the website. 

22. She indicated that she communicated dissatisfaction with the product, and its failure to meet crucial timeframes. Email correspondence from the Applicant to the Respondent dates 24 July and 27 July 2009 confirms communication about these concerns.

23. In the end she argues that she received a worthless and unworkable product.

24. Invoices were issued for work performed although these were not strictly in accordance with the timeframes stated in the project plan.

25. Phase 1 invoice was issued on 28 May 2009 and paid on 3 June 2009 in the amount of $1200.  Phase 1 was due for completion on 11 May 2009. 

26. Phase 2 Initiation Invoice for $1230 was issued on 11 May 2009 and Paid on 13 May 2009. Phase 2 Completion invoice for $1200 was issued 29 May 2009, but paid by the Applicant on 20 July 2009.Phase 3 Initiation Invoice for $1230 was issued 28 May 2009 and paid 3 June 2009. 

27. The Applicant submits that that the Phases 2 and 3 were not approved. Email correspondence indicates that she was not content with the product and sought changes. 

28. The Respondent submits that the delay in completion was caused by the Applicant who had poor understanding of the web development process and had an operating system which would not support the efficient operation of the system.  The customer’s knowledge of the details of the work performed by the designer is an irrelevant factor for consideration of the reasons for the Respondents delay. The latter was a factor was known at the point of agreement and assessed in the preparation of the costings.

29. Phase 4 initiation invoice for $1200 was issued on 29 May 2009 and not paid because the Applicant argued that phases 2 and 3 were not acceptable.

30. 16 July 2009 an invoice of data capture .This was not an invoice issued in accordance with the project plan and was therefore not payable under the agreement which specifies clear terms for payment.

31. It is also noted that tax invoices issued were not valid in accordance with requirements to include ABN and tax invoice.

32. The Respondent argued the Applicant communicated acceptance by payment of invoices. However, Section 2 of the Agreement makes clear that the contract price was payable in instalments upon completion of each phase. Acceptance is defined clearly in Section 5 to be tested upon completion of the website and delivery of the goods. The payment was clearly conditional upon acceptance, and where no product has been delivered, and the essential term of time deliverables were not met, acceptance was clearly not communicated by the Applicant.

33. Email correspondence from the Applicant to the Respondent indicates dissatisfaction with delays and a desire to move forward to phase 4. The tribunal accepts the Applicant’s submission that payment was made in order to move the product toward completion. Failure to pay would have resulted in further delays. It is noted that the agreement clearly states at section 4 that the web designer recognises and agrees that the failure to deliver the website in accordance with the project plans delivery schedule will result in expense and damage to the customer, and afforded the customer a right to pursue remedies accordingly.

34. The delivery date for the final product was 20 June 2009. It was not delivered at this time.  The Applicant was running on line seminars for which she required the product to be completed. As a result she has lost customers and income. She has not received any access to the website, and has never sited a completed workable product.

35. The Applicant submitted that she complied with all the procedural requirements in the agreement to lawful terminate and claim damages. She has by correspondence of 24 July 2009 provided written notice of the breach being non conformance with features and time deliverables, and requesting a cure within 14 days.

36. Notice of the breach was provided by the Applicant to the Respondent in correspondence of the 10 August 2009. Notice of termination was provided on 24 August 2009.

37. The Applicant has complied with procedural requirements to terminate within the agreement.

38. The Respondents argue that the Applicant communicated acceptance by payment of the amounts. They further argue that the Applicant was the source of the delay because the scope of the project “blew out” with the Applicants demands which were beyond the scope of the project plan.  They pointed to email correspondence about the growing scope of the project. Nevertheless, the agreement makes very clear that amendments to the project plan were to be evidenced by a project plan amendment. There is no such written amendment, and no written waiver of the same. An email from the Respondents acknowledges “slackness” in this regard, but is no written waiver in accordance with s 16 of the agreement. It is clear that the agreement requires any changes in the delivery date to be amended by a project plan amendment where such changes increase the scope of work, and the designer is given the option not to continue work in the event changes were not accepted. The Respondent did not exercise his rights in relation to the amendments in the scope of the project and as time was of the essence by virtue of section 16(i), are in breach of an essential term of the agreement where they failed to deliver the goods in the timeframes stated in the project plan. This gave the Applicant the rights by virtue of section 13 to terminate and sue for damages for breach of agreement.

39. The Applicant has received a product which was not consistent to that embodied in the agreement. The Respondent is in breach of the agreement and has caused loss to the Applicant by failure to deliver the product within agreed timeframes. The Applicant has outlaid $4860 + $90 filing costs.

40. She has experienced significant delays in obtaining payment made under a default order, where an application to set aside was initiated some four and a half months after judgement was entered into. The Respondent has delayed requesting extensions and failing to comply with orders. Interest, therefore is payable from the original date of application in the amount of $279.61.