J CORP PTY LTD and GHEORGHIU - [2005] WASAT 224

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: BUILDERS' REGISTRATION ACT 1939 (WA)

CITATION: J CORP PTY LTD and GHEORGHIU [2005] WASAT 224

MEMBER: MR C RAYMOND (SENIOR MEMBER)

HEARD: 12 AUGUST 2005

DELIVERED : 24 AUGUST 2005

FILE NO/S: VR 280 of 2005

BETWEEN: J CORP PTY LTD
Applicant
AND
GEORGINA GHEORGHIU
Respondent

Catchwords:

Application for leave to review decision and review heard together Whether decision attended with sufficient doubt Whether substantial injustice would result if leave not granted

Legislation:

Builders Registration Act 1939 (WA), s 41

Home Building Contracts Act 1991 (WA), s 13, s 15

Result:

Application for leave refused

Category: B

Representation:

Counsel:

Applicant: Mr A Clarke
Respondent: No appearance

Solicitors:

Applicant: Self-represented
Respondent: N/A

Case(s) referred to in decision(s):

Tangent Nominees Pty Ltd and Edwards & Anor [2005] WASAT 119
Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429

Case(s) also cited:

Nil

REASONS FOR DECISION OF THE TRIBUNAL:

Summary

The applicant, J Corp Pty Ltd, applied for leave to review a decision of the Building Disputes Tribunal (the Disputes Tribunal) in which it awarded liquidated damages for delay in completion of the construction of residential dwelling (the Works). The application for leave and the review were heard together.
The issue raised by the application was the proper construction of the applicant builder's standard form lump sum building contract concerning the date by which the applicant builder was obliged to commence and complete the Works. The Disputes Tribunal found that the Works had to commence within 45 days of the date of the contract. The applicant builder contended before the Disputes Tribunal and in the application for leave that the 45 day period to commence work operated from the last date upon which various approvals were obtained.
The Disputes Tribunal's construction of the contract resulted in liquidated damages being awarded for 10 working days beyond the date for which the applicant builder contended. A liquidated damages clause operated providing for liquidated damages to be paid at a rate of $20 per day so that if the review was finally determined in favour of the applicant, it would result in a reduction of the monies ordered to be paid of only $200.
The State Administrative Tribunal (the Tribunal) concluded that the Disputes Tribunal's decision was attended with sufficient doubt to meet that particular criteria for the grant of leave to review the decision. However, the Tribunal was not persuaded, in the context of a building contract to the value of $112754 that a substantial injustice would result if the decision was not reversed. Accordingly, leave to review the decision was refused.

Application

The application is for leave to review a decision of the Building Dispute Tribunal made on 25 February 2005 pursuant to s 41(2) of the Builders Registration Act 1939 (WA) and for an order that upon the review the decision be varied to reduce the amount ordered to be paid to the respondent.

The Disputes Tribunal's decision under review

The Disputes Tribunal's issued written reasons for its decision on 5 May 2005.
The Disputes Tribunal referred to the lump sum building contract entered into between the parties on 23 October 2003 and identified that the relevant clauses of the contract were cl 2, cl 11, cl 24 and item 7 of the Schedule to the contract.
Clause 24 is an interpretation clause, which relevantly defines "days" to mean Monday to Friday but excluding any day that is a public holiday in the area of the site or throughout the state of Western Australia.
The relevant parts of cl 2 and cl 11 and item 7 of the Schedule provide as follows.
"2. Approvals
2.1This Contract is conditional upon:
2.1.1the Proprietor obtaining finance, in the event that the Proprietor requires finance, in the amount described in item 4 of the Schedule from the Lender described in item 4 of the Schedule;
2.1.1a building licence as required by any applicable written law of the State of Western Australia in force from time to time governing Local Government's authority in relation to building projects being issued in respect of the Works within FORTY FIVE (45) days from the date of this Contract, provided that within such a period, neither the Proprietor nor the Builder gives notice in writing to the other that any condition attached to the building licence is unacceptable to the party giving such notice;
2.1.2all other approvals required to be obtained under any statute or subsidiary legislation before construction can commence being obtained within FORTY FIVE (45) days from the date of this Contract, provided that neither the Proprietor nor the Builder gives notice in writing to the other party that any condition attached to such approval is unacceptable to the party giving such notice.
…
11Commencement, Completion and Delays
11.1The Builder shall commence the Works by the time specified in item 7a of the Schedule and shall complete the Works within the time specified in item 7b of the Schedule, provided that:
11.1.1the Builder has received notice in writing that finance has been approved in accordance with clause 2.1.1, and that the Proprietor has provided adequate evidence in writing to the Builder of his ability to pay the Contract Price;
11.1.2the Builder has received all necessary approvals from the relevant authority;
11.1.3the Builder is satisfied that the boundaries of the Site have been adequately delineated;
11.1.4provision has been made for adequate potable water supply to the Site;
11.1.5provision has been made for adequate electrical power supply to the Site;
11.1.6the Builder has received all final detailed construction drawings, plans and specifications and any addenda thereto signed by the Proprietor; and
11.1.7there is no other sufficient reason why Works should not commence."
The Disputes Tribunal set out the evidence as to when various approvals were obtained, the last being the building licence which was issued, at the latest, by 8 December 2003.
In relation to the construction of the contract concerning the date by which the applicant builder was obliged to commence the works, the Disputes Tribunal stated as follows.
"10.With the greatest respect to the Respondent, we do not agree with its contention that it had 45 days from approvals in which to commence. The words of clause 11.1 are 'The builder should commence the works by the time specified in item 7a of the Schedule …' That is, in our view, within 45 days of the date of the contract.
11.Clause 2.1 is entirely consistent with this. It makes the contract conditional, ie. likely to come to an end within that 45 day period, if the owner does not obtain finance (2.1.1), a building license with appropriate conditions is not issued (2.1.1) or all other approvals in acceptable terms (2.1.2) have been obtained [sic]."
The Disputes Tribunal proceeded to set out that on its calculation the applicant had to commence work on or before 29 December 2004. The Disputes Tribunal calculated 180 days from that date, plus permissible extensions of time claimed and found that the house should have been completed by 13 October 2004. It was common ground that the house was in fact completed on 6 December 2004 and that the respondent received the keys on 11 December 2004. The Disputes Tribunal concluded that the applicant builder was 37 days late in the completion of the house and it awarded liquidated damages in terms of the contract at a rate of $20 per day, that is, in a total amount of $740.
The reasons for decision reflect that the respondent claimed actual damages for the delay, but the amount of the claim was not stated, nor can it be gleaned from any of the material before the Tribunal.
The Disputes Tribunal gave reasons for rejecting the defence by the applicant builder that it was entitled to a further 50 day extension of time for completion as a result of the unavailability of Laminex boards.

The criteria for the grant of leave

The criteria for grant of leave to review a decision of the Disputes Tribunal are set out fully in Tangent Nominees Pty Ltd and Edwards & Anor [2005] WASAT 119. Following the principles applied by the District Court when it had jurisdiction to review the decisions of the Disputes Tribunal, this Tribunal should be slow to grant leave except where there is no discernable basis for the decision or there has been a breach of the rules of natural justice so that the decision can be regarded as being attended with sufficient doubt. Further, it must be demonstrated that if the decision were not to be reversed, a substantial injustice would result.

Is the decision attended with sufficient doubt?

The rationale for the Disputes Tribunal's decision, relevant to the particular issue raised, is somewhat limited, and appears wholly within par 10 and par 11 set out in parenthesis above. The rationale is in effect, that cl 2.1 makes the contract conditional upon various approvals being obtained within a 45 day period and that a conclusion that cl 11.1, read with item 7a of the Schedule means that work must commence within 45 days of the date of the contract, is consistent with cl 2.1.
Clause 3.5 of the contract provides as follows.
"If there is a delay in the commencement of the Works beyond the period of FORTY FIVE (45) days after the date of this Contract, not being a delay caused by or attributable to the Builder, then subject to any provisions of the Home Building Contracts Act 1991 to the contrary, the Contract Price may be varied at the election of the Builder by an amount which reflects any increase in the Builder's budgeted cost of construction of the Works (such cost to include the builder's margin for supervision and overheads) between the date of this Contract and the date of the proposed commencement of the Works, such increased amount to be apportioned equally by the Builder to the Certificates furnished by the Builder after commencement of the Works."
This clause appears to support the Disputes Tribunal's conclusion.
The operation of cl 11 with item 7 of the Schedule on the other hand lends support to the applicant builder's argument. It provides that the Works are to be commenced and completed within the times specified within item 7 of the Schedule, provided that various events have occurred, including that the builder has received all necessary approvals. Thus, the time periods within item 7 only operate once the approvals have been obtained and the contract is conditional upon those approvals being obtained within 45 days (cl 2). In my view, this is the clear and ordinary meaning of these provisions.
On the other hand, if my above conclusion is wrong, at the very least the contract would then be ambiguous. Any such ambiguity can be cured by the proper construction of the contract.
Clause 3.5 governs an increase in the price due to delay. If the builder is not able to commence the Works within 45 days of the date of the contract because of a delay which is not caused by or attributable to the builder, the price can be adjusted. The clause operates for no other purpose. But if the approvals are obtained in good time, and the builder does not commence Works with the 45 day period for reasons attributed to the builder, there can be no price increase. It does not matter that the time limit has not arrived by which the builder must have commenced the Works to avoid being in breach of the contract. (By this discussion of cl 3.5 of the contract, I should not be taken to be endorsing the enforceability of the clause, which may be doubtful having regard to section 13 of the Home Building Contracts Act 1991 (WA) (the Home Building Contracts Act). Section 13, thereof, permits a price adjustment in respect of further costs actually imposed or incurred, whereas the clause is base on an increase in the budgeted costs.)
The construction of cl 11 and item 7 of the Schedule then need to be considered.
Commercial contracts should not be given a narrow, technical, or artificial interpretation. Questions of meaning are to be answered in a practical and realistic way. Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 437; Seddon, NC and Ellinghaus, MP "Cheshire and Fifoot's: Law of Contract", 8th Ed LexisNexis Butterworths, Chatswood, 2002, par 10.34.
In my view, the purpose of the 45 day period referred to in item 7a (of the Schedule) is to provide the builder with a timeframe within which to make the necessary arrangements for work to start. That cannot be done with any certainty until most, if not all, approvals have been obtained. One would not expect that a builder would attempt to make such arrangements for work to commence unless, at the very least, there was a basis for believing with some certainty that the approvals would be very shortly forthcoming, and would be available to commence work.
Ideally, work should be programmed to ensure continuity of trades. A shortage of material or trades may therefore make it prudent to delay initial works, such as site works, to ensure an orderly flow of trades once work commences. Notice can be taken of the overheating which has taken place within the housing construction industry in Western Australia over the past few years. Although even then a 45 day period from when the last event referred to in cl 11 occurs seems excessive (being equivalent to two calendar months and 1 calendar week) that is the agreed period. That it appears excessive cannot affect the construction of the contract because no absurdity results, the purpose of the clause remains unchanged and operable in an efficacious way, as discussed further, below. The time period itself may be susceptible to challenge under s 15 of the Home Building Contracts Act 1991 (WA), but on the other hand, evidence of the difficulty in organising trades and in ensuring availability of materials in the current climate within the building industry may show that it is justifiable.
On the Disputes Tribunal's construction, the time available for the builder to make such arrangements would be perambulatory. The time available to make arrangements between the last of the events referred to in cl 11 occurring and the 45 days from the date of the contract would reduce with each passing day until the last event occurs. It would result in a situation that if the builder did not terminate promptly upon non‑fulfilment of any of the conditions stated in cl 2, the builder would immediately be in breach of cl 11 and item 7a if the last outstanding condition was met after the elapse of the 45 day period. Such a construction, in my view, is not practical nor realistic.
In these circumstances, I consider that the proper construction is that for which the applicant builder contends. In the context of the contract as a whole, item 7 of the Schedule must be read as imposing an obligation to commence work within 45 days of the various conditions and events referred to in both cl 2 and cl 11 of the contract occurring.
This construction enables the contract to operate efficaciously. The price is fixed if approvals are obtained and through the fault of the builder work does not commence within 45 days of the contract. Otherwise, subject to the qualification expressed above concerning enforceability, the price, according to cl 3.5, may be adjusted. In any event, the builder must commence the Works within 45 days of the last approval being provided or condition being met referred to in cl 11.
The Disputes Tribunal's Reasons for Decision in relation to this issue are terse, and there is no process of reasoning examining the purpose and operation of the contract. Further, the interpretation ignores the qualification expressed within cl 11 that the builder is to commence the Works by the time specified in item 7a of the Schedule, provided that the stated approvals have been obtained. The above analysis shows no discernable basis upon which to support the Disputes Tribunal's conclusion. It follows that I conclude that the decision is attended with sufficient doubt to meet that element of the requirement for the grant of leave to review the decision, and that the review, if leave is granted, would succeed.
It is then necessary to consider whether, if the decision under review is not reversed, a substantial injustice would result.

Substantial injustice

As set out above, there is no information on which the value of the dispute as a whole can be determined. Mr Clarke, for the applicant, conceded that the effect of applying the construction for which he contended was that the sum of $740 awarded to the respondent as liquidated damages would be reduced by only $200. The liquidated damages accrued under the contract at a rate of $20 per day. In the absence of any other yard‑stick, the Tribunal must measure the effect of allowing the decision to stand against the value of the building contract which provided for a contract sum of $112 754.
It has not been demonstrated to the satisfaction of the Tribunal that a substantial injustice would result if leave to review the decision in question is refused.

Order

The Tribunal accordingly orders as follows.
1.The application for leave to review the decision of the Building Disputes Tribunal dated 25 January 2005 is refused.
I certify that this and the preceding [33] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
MR C RAYMOND, SENIOR MEMBER