J-CORP PTY LTD and LEADBITTER - [2009] WASAT 168

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: BUILDERS' REGISTRATION ACT 1939 (WA)

CITATION: J-CORP PTY LTD and LEADBITTER [2009] WASAT 168

MEMBER: MR T CAREY (MEMBER)

HEARD: 16 JUNE 2008

DELIVERED : 1 SEPTEMBER 2009

FILE NO/S: CC 710 of 2008

BETWEEN: J-CORP PTY LTD
Applicant
AND
SEAN LEADBITTER
DAVID GROCHOWSKI
Respondents

Catchwords:

Building disputes - Review of decision of Building Disputes Tribunal - Declarations that price increases the subject of signed variations not payable - Delay in commencement of building works - Responsibility for delay - Consequences of finding of responsibility under statutory scheme - Whether signed variations satisfy 'otherwise agree' exception - Duress claim - Whether duress made out on facts - Effect of 'under duress' notations - Whether economic duress a common law or equitable principle - Whether lack of consideration

Legislation:

Builders' Registration Act 1939 (WA)
Home Building Contracts Act 1991 (WA), s 9, s 9(1), s 9(2), s 13, s 15, s 17, s 21, Pt 2, Sch 1 cl 1, cl 2, cl 3, cl 4

Result:

Application for review refused

Category: B

Representation:

Counsel:

Applicant: Mr A Buchan
Respondents : Self-represented

Solicitors:

Applicant: Hotchkin Hanly
Respondents : Self-represented

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

Commodore Homes (WA) Pty Ltd v Standley [2001] WADC 89
Crescendo Management Pty Ltd v Westpac Banking Corporation (1998) 19 NSWLR 40
Dimskal Shipping Co SA v International Transport Workers Federation [1992] 2 AC 152
J-Corp Pty Ltd and Leadbitter [2008] WASAT 266
Mason v State of New South Wales (1959) 102 CLR 108
Nixon v Furphy (1925) 25 SR (NSW) 151
North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] QB 705; [1978] 3 All ER 1170
Pao On v Lau Yiu Long [1979] 3 All ER 65
Pao On v Lau Yiu Long [1980] AC 614
Parras Holdings Pty Ltd v Commonwealth Bank of Australia [1999] FCA 391
Smith v William Charlick Ltd (1924) 34 CLR 38
TA Sundell & Sons Pty Ltd v Emm Yannoulatos (Overseas) Pty Ltd (1956) SR (NSW) 323
Westpac Banking Corporation v Cockerill [1998] FCA 43

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The applicant builder sought review of declarations made by the Building Disputes Tribunal that amounts claimed by it by way of variations to the contract prices for the construction of three units were not payable.
The respondent owners relied on a number of arguments to support the affirmation of the declarations, including that the imposition of the price increases was not permitted under the contracts, nor under the relevant statute, the Home Building Contracts Act 1991 (WA). The applicant disagreed, and contended that in any event the variations providing for the price increases, to which the respondents agreed, were enforceable. The respondents submitted that the variations were invalid for duress or lack of consideration.
The Tribunal analysed the provisions of the Home Building Contracts Act 1991 (WA) impacting upon the respondent's claims before considering those claims. It found against the claim pursued in the Building Disputes Tribunal. However, based on its findings on the evidence that the delays to the commencement of works was attributable to the builder, the Tribunal concluded that, on a proper construction of the statute, the terms of the original contracts, including price, continued to apply. In reaching its conclusion, the Tribunal found the variations entered into by the respondents 'under duress' not to satisfy an exception to that consequence in a case where the parties 'otherwise agree'.
The Tribunal refused the application and affirmed the declarations.

Introduction

This is a review of a decision of the Building Disputes Tribunal (BDT) reflected in Order to Pay No 171/2007-08 made on 18 April 2008. Leave to review was granted by the Tribunal on 21 October 2008, the reasons for which appear in J-Corp Pty Ltd and Leadbitter [2008] WASAT 266 (Leave Decision). At the commencement of the hearing on 16 June 2009, counsel for the applicant (builder) clarified that the relief it sought on the Tribunal's review was to have set aside the declarations which the BDT made pursuant to s 17(4)(ba) of the Home Building Contracts Act 1991 (WA) (HBC Act) in terms that:
(i)the sum of $17,221 claimed by the Respondent [builder] as a variation to the Contract price in respect of Unit 1 is not payable to the Respondent under the Contract;
(ii)the sum of $20,696 claimed by the Respondent as a variation to the Contract price in respect of Unit 2 is not payable to the Respondent under the Contract;
(iii)the sum of $17,050 claimed by the Respondent as a variation to the Contract price in respect of Unit 3 is not payable to the Respondent under the Contract.
(BDT's declarations)
In substitution, orders for the payment of the said sums pursuant to s 17(4)(b) of the HBC Act are sought.
Each of the sums referred to in the s 17 declarations is the amount of a price increase claimed by the builder in respect of its construction for the respondents (owners) of one of three units at No 443 Karrinyup Road, Innaloo. These claims were the subject of written variations to the respective building contracts, which the owners signed subject to the express notation 'under duress'. The builder's demands for the price increases and the basis provided by the owners for their 'under duress' notation are referred to in the Leave Decision at [6] - [9], which paragraphs are incorporated by reference into these reasons.
The owners were successful before the BDT in having the three price increases overturned. In their complaint to the BDT (Exhibit 2 before the Tribunal), the owners described their contractual dispute with the builder in terms which included:
No explanation has ever been presented to us regarding the cause of the delays attributable to the approvals passing 45 working days when asked for. All delays from complainants [sic] view are completely the builder's fault.
Price increases were signed under duress in the interest [sic] of continuing the development.
As appears in the Leave Decision, however, the legal underpinning of the owners' case before the BDT was that the builder had no entitlement to rely upon cl 3.5 of the contracts, and the variations were themselves illegal rise‑and‑fall clauses.
Subsequent to the Leave Decision, the owners and the builder were directed to file, respectively, points of claim and points of defence. In their points of claim prepared by their former solicitors, the owners relied upon the following primary grounds in support of the retention of the declarations that the amounts of the price increases are not payable:
[1]The imposition of the price increase was not permitted under the terms of the contract, nor under s 13 and Sch 1 of the [HBC] Act.

[2]They [the variations] were entered into in circumstances of common law duress and therefore any consent to the variations did not amount to agreement in law and was of no force or effect; alternatively
[3]There was no consideration for the variations.

A fourth ground based on s 15 of the HBC Act in relation to unconscionable conduct was not pursued in light of the time limitation for such claims in s 21 of the HBC Act.
For reasons which will become apparent, in my view, the outcome of the review is to be obtained upon a consideration of ground 1, such consideration entailing reference to the other two live grounds.
My consideration of ground 1 will comprise the following elements:
a)an explanation of the jurisdictional basis for the owners' complaints;
b)the analysis of the owners' complaint based on s 13 of the HBC Act;
c)the analysis of the owners' complaint based on the alleged failure by the builder to comply with its obligations;
d)consideration of whether the alleged failure of the builder is made out, and the consequence of the conclusion on that matter; and
e)the application to the facts and conclusions based on the facts of cl 1 of Sch 1 of the HBC Act, and, in particular, its exception where the parties have 'otherwise agreed'.

Jurisdictional basis for complaints

Ground 1 raises the issue referred to in the Leave Decision under the heading 'Complaint 1: re-opening of the cl 3.5 issue' - see Leave Decision at [24] ‑ [28]. The issue is whether the BDT had, and the Tribunal standing in its shoes has, the ability to concern itself with questions going to the applicability of cl 3.5 of the contracts giving rise to the builder's right to increase the contract price for delay, where the owners signed the variations in consequence of the operation of that clause. The builder submits that the variations must prevail absent any of the accepted vitiating factors in the formation of the contracts constituted by the variations, such as fraud or common law duress.
The full text of cl 3.5 of the contract is reproduced here:
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.
As I alluded to in the Leave Decision at [25] and [27], it is necessary, in order to form a view about the 're-opening' issue, to consider the jurisdictional basis for the owners' complaints before the BDT.
When one has regard to the written complaints to the BDT (Exhibit 2), the owners' statement of claim in the BDT (part of Exhibit 3) and the order actually made by the BDT, expressed as a declaration in accordance with s 17(4)(ba) of the HBC Act, it is clear that the complaints fall within s 17(1) of the HBC Act. The full terms of that subsection are:
Where an owner or a builder under a contract claims that -
(a)there has been a breach of -
(i)the contract, not being a breach in respect of which an order may be made under section 12A of the Builders’ Registration Act 1939; or
(ii)a provision in Part 2;
or
(b)the owner or the builder is entitled to compensation under Schedule 1,
he or she may apply to the Disputes Tribunal for relief.
The sections in the HBC Act which have been raised as possibly relevant in the context of the claim under s 17(1) of the HBC Act are s 9 and s 13. Both appear in Part 2, any breach of which would therefore satisfy the qualification for applying to the BDT under s 17(1)(a)(ii). A breach of what I shall refer to as a 's 9(1) condition' would also, and more accurately, fit the description of a breach of contract under s 17(1)(a)(i).
Section 9 of the HBC Act provides relevantly:
(1)Subject to subsection (5) every contract is conditional upon ‑
(a)a building licence being issued, in respect of the home building work included in the contract, within 45 working days from the date of the contract;
(b)where a condition is attached to the licence which will result in a variation of the contract, the owner and the builder acknowledging in writing within that period that each of them accepts that condition;
(c)it becoming lawful under the Water Act, within 45 working days from the date of the contract, for the home building work to be commenced; and
(d)where a direction is given under the Water Act by the Water Corporation (established by the Water Corporation Act 1995) in connection with the carrying out of the work which will result in a variation of the contract, the owner and the builder acknowledging in writing within that period that each of them accepts that direction.
(2)It is a term of every contract that ‑
(a)the builder will ‑
(i)do all things that are reasonably necessary to be done to ensure that any condition referred to in subsection (1)(a) and (c) applicable to the contract is fulfilled; and
(ii)not unreasonably decline to accept a condition or direction referred to in subsection (1)(b) or (d) that applies to the contract;
(b)the owner will ‑
(i)do all such things as may be required to be done by the owner to ensure that any condition referred to in subsection (1)(a) and (c) applicable to the contract is fulfilled; and
(ii)not unreasonably decline to accept a condition or direction referred to in subsection (1)(b) or (d) that applies to the contract.
(3)If a builder properly submits to the relevant authorities within 20 working days after the date of the contract all necessary applications required for the purpose of having conditions referred to in subsection (1)(a) and (c) fulfilled, the builder is to be taken to have complied with the builder’s obligations under subsection (2)(a)(i).
(4)If a condition implied by subsection (1) is not fulfilled the consequences to, and the rights and remedies of, the parties are as set out in Schedule 1.
Section 13 of the HBC Act provides:
(1)A builder must not enter into a contract that contains a rise‑and‑fall clause.
Penalty: $10 000.
(2)A rise‑and‑fall clause in a contract is void.
(3)In this section rise‑and‑fall clause means, subject to subsection (4), a provision under which a price stipulated for the performance of home building work may change to reflect changes in the costs of labour (including related overhead expenses) or materials, or both, to be incurred by the builder.
(4)A provision of a contract is not within the definition in subsection (3) by reason only that it allows a builder to increase the stipulated price to reflect further costs actually imposed on or incurred by the builder ‑
(a)as a direct consequence of a written law of the State or the Commonwealth;
(b)on account of an increase in any tax, duty or other charge imposed under any such law after the date of the contract; or
(c)by reason of a delay in the commencement of home building work beyond 45 working days after the date of the contract being a delay -
(i)that is caused solely by the failure of the owner to comply with a condition imposed on the owner by the contract, including a condition to the effect that the owner produce satisfactory evidence of the owner’s ability to pay the contract price or of the owner’s title to the land on which the work is to be performed; or
(ii)that occurs without any failure on the part of either the owner or the builder to comply with his or her obligations under the contract.
(5)Where subsection (4)(c) applies the consequences to, and the rights and remedies of, the parties are as set out in clauses 4 and 5 of Schedule 1.
Schedule 1 of the HBC Act is as follows:
Consequences of non‑fulfilment of conditions
1.If any condition set out in subsection (1) of section 9 is not fulfilled solely because the builder has failed to comply with the builder’s obligations under subsection (2) of that section, the contract is not affected but remains in force on the same terms and conditions except as otherwise agreed between the parties.
2.If any condition set out in subsection (1) of section 9 is not fulfilled solely because the owner has failed to comply with the owner’s obligations under subsection (2) of that section, the contract remains in force on the same terms and conditions until the parties agree otherwise, but subject to the provisions of clause 4.
3.If any condition set out in subsection (1) of section 9 is not fulfilled and both the owner and the builder have, or neither the owner nor the builder has, failed to comply with their respective obligations under subsection (2) of that section, the contract remains in force on the same terms and conditions until the parties agree otherwise, but subject to the provisions of clause 4.
4.Where clause 2 or 3 or section 13(4)(c) applies ‑
(a)the builder may by notice in writing to the owner ‑
(i)increase the price stipulated in the contract by an amount set out in the notice; and
(ii)specify when any increased amount is payable, which must be either ‑
(A)not later than 10 working days after the notice is given; or
(B)at the time of a progress payment;
(b)if the amount of an increase exceeds 5% of the price stipulated in the contract, the owner may terminate the contract in accordance with section 19 within 10 working days after receipt of notice under paragraph (a); and
(c)if the owner so terminates the contract, the owner is liable to compensate the builder for the reasonable costs incurred by the builder up to the date of termination.
5.(1)If the owner considers that the amount of a price increase notified under subclause (a) of clause 4 is excessive or unjustified the owner may apply to the Disputes Tribunal, within 10 working days after receipt of a notice under that subclause, for a review of that amount.
(2)On a review under this clause the builder is required to show that the price has been increased to reflect actual increases in costs between the date of the contract and the date of the notice under clause 4(a).
(3)On a review under this clause the Disputes Tribunal may confirm, vary or disallow the amount of the price increase, and the contract must have effect in accordance with the Disputes Tribunal’s decision.
Looked at through the prism of the statutory limitations on claims pursuant to s 17 of the HBC Act, these provisions work together in an intricate and rather fascinating way, as will emerge when applying them to the facts and conclusions drawn from those facts.

Complaint based on s 13 of the HBC Act

In the BDT, the owners relied upon the ground provided by s 17(1)(a)(ii) of the HBC Act, the provision in Pt 2 said to have been breached being s 13(1) of the HBC Act. Before the Tribunal, according to the first of the owners' points of claim:
[t]he imposition of the price increase was not permitted under the terms of the contract, nor under s 13 and Sch 1 of the [HBC] Act.
The points of claim document then goes on to analyse the operation of Sch 1 to the HBC Act in the circumstances of this case, without reference to s 13. In the hearing before me, the owners did not press the argument based on that provision. However, because their case before the BDT was founded upon it, and they did not formally resile from it at the hearing, I think it is necessary for me to deal with it.
Section 13 of the HBC Act provides for a general prohibition of 'rise‑and‑fall' clauses in building contracts, such clauses being defined as provisions whereby the price of building work may change to reflect the costs to the builder. A penalty applies where a builder enters a contract containing such a clause, and the clause itself is void. There are, however, exceptions to the general prohibition where a clause permits price increases reflecting additional costs to the builder by reason of the matters referred to in s 13(4)(a) ‑ s 13(4)(c) of the HBC Act. It is the delay in commencement of the building work with which s 13(4)(c) of the HBC Act is concerned which is arguably applicable to the facts of this case.
Bearing in mind that it is the owners who have sought to rely upon s 13 of the HBC Act, it is for them to satisfy the Tribunal that the section applies. As alluded to in the Leave Decision at [12], the submission made on their behalf in the BDT was that the builder was not entitled to rely upon cl 3.5 of the contract because the delay encountered was caused by or attributable to the builder, with the consequence that the variations 'were separate contracts containing rise‑and‑fall clauses which are void … because it is not within the exceptions to a rise-and-fall clause within s 13(4)(c) of the HBC Act'.

As I said in the Leave Decision at [20], this ground was not accepted by the BDT, which determined the complaint in favour of the owners on an alternate basis. As I also said in the Leave Decision at [22], the BDT's reasoning represented an implied rejection of the ground. The owners were unrepresented at the hearing before me, and although the manner of the presentation of their case was of a very high standard in light of that fact, I think it is fair to say that the nuances of the difference between the ground pursued before the BDT and the basis of the BDT's decision were in all probability lost on them.
In my view, the owners' s 13 argument advanced in the BDT is plainly wrong. Assuming that the assertion upon which it is predicated ‑ that the delay was attributable to the builder ‑ is correct, the conclusion that the variations contained void rise-and-fall clauses under s 13 of the HBC Act does not follow. Section 13 is concerned with illegal rise-and-fall clauses in contracts. The variations were, in each case, a simple statement of a price rise of a particular amount. They were a consequence (actual or purported) of an asserted election by the builder to increase the price under cl 3.5, rather than the repository of the election. I cannot see how the variations could themselves be regarded as rise‑and‑fall clauses, legal or illegal.
There might be a question whether cl 3.5 falls foul of s 3 of the HBC Act. If so, this would have provided a basis for the owners to seek relief under s 17(1)(a)(ii) of the HBC Act. However, this was not the argument before the BDT - see Leave Decision at [12] and [19]. The owners did not attempt to rely upon it before me. Had they done so, it is highly doubtful whether they would have been permitted to rely upon such a novel argument on this review.

Complaint based on failure by builder to comply with obligations

In their points of claim, the owners assert that an implied condition of the contract under s 9(1) of the HBC Act was not fulfilled, such failure being solely attributable to the builder's failure to comply with its obligations under s 9(2) of the HBC Act, with the consequence that cl 1 of Sch 1 applies. Although this is not the argument that was made before the BDT, it falls within the same broad submission of entitlement to relief under s 17 of the HBC Act arising from a breach by the builder in connection with its claimed entitlement to the price increases. Further, the builder was prepared to, and did, make submissions in the hearing before me specifically on the applicability of the various clauses of Sch 1 of the HBC Act and whether there was any non fulfilment of the s 9 implied conditions. It is proper, and consistent with the Tribunal's objective on a review to make the correct and preferable decision, that I hear and determine the argument upon which the owners now rely.
There are two primary incidents of delay by the builder which are said to constitute fulfilment of a s 9(1) condition. They were the failure of the builder to obtain a building licence within 45 working days from the date of the contract, and its failure to obtain an approval of the Water Corporation for building work to commence within the same period (being the effect of the requirement under s 9(1)(c)).
The contract imposed on the builder obligations relevant to both alleged failures.
Clause 2.1.2 of the contract was to the following effect:
This contract is conditional upon a 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 period, neither the Proprietor nor the Builder gives notice in writing to the other that any condition attaching to the building licence is unacceptable to the party giving such notice.
Under cl 2.2 of the contract, the builder was required to apply for the building licence and all approvals required by any statute or subsidiary legislation. Under cl 2.3 of the contract, it was to do all reasonable things required to be done 'to obtain any building licence or approval required to be done pursuant to cl 2.1.2'.
In the event that the delay was attributable to a breach by the builder of one or more of these express contractual obligations, the builder would not be entitled to the price variation for which cl 3.5 provided, by reason of the words in cl 3.5, 'not being a delay caused by or attributable to the Builder'. Co‑extensively with this, however, by reason of the nature of the two incidents of delay relied upon by the owners, a breach of the builder's implied obligations under s 9(1)(a) and s 9(1)(c), when read with s 9(2)(a)(i), of the HBC Act would be made out. Section 9(1) of the HBC Act contains conditions which are to be implied into every construction contract subject to limited exceptions, none of which apply in this case. A breach of a s 9(1) condition gives rise to a right to apply to the BDT under s 17(1)(a)(ii) of the HBC Act. It also triggers the operation of Sch 1, by reason of s 9(4) of the HBC Act.
Interestingly, cl 4 of Sch 1 prescribes the same procedure for the builder to increase the contract price by notice, subject to the owner's right to seek review of the amount of the increase in the case of non-fulfilment of a s 9(1) condition (other than where the non-fulfilment is solely the builder's responsibility) and under a valid rise-and-fall clause of the type referred to in s 13(4)(c) of the HBC Act. The legislation thus preserves the builder's right to a price increase in cases of delay, but only where the delay is not the fault of the builder.

Is the alleged failure by the builder to perform its obligations made out, and if so, what is the consequence?

In order to resolve the first ground, it is necessary to determine, as a threshold question, which of cl 1, cl 2 or cl 3 of Sch 1 of the HBC Act applies. The answer to this question is to be ascertained exclusively by reference to the reason for any condition under s 9(1) of the HBC Act not being fulfilled. If the condition was not fulfilled -
•solely because the builder failed to comply with its obligations under s 9(2), cl 1 applies;
•solely because the owners failed to comply with their obligations under s 9(2), cl 2 applies; or
•both the builder and the owner failed to comply with its obligations under s 9(2), or neither of them did so, cl 3 applies.
There is no doubt that neither of the conditions implied into the building contracts by s 9(1)(a) and s 9(1)(c) of the HBC Act was fulfilled. Although it was common ground at the hearing that the contracts were signed on 14 June 2005, which is the date which appears on their face, the BDT found as fact that the contracts were signed by the owners on 15 July 2005. Some of the documents forming part of Exhibit 1 support such a finding. Given that by 20 February 2006, when the builder formally invoked the cl 3.5 election for a price increase, building work had still not been commenced, nothing arises from this.
A useful summary of the course of events from negotiations stage to the point where the builder raised the price increase claim appears in the BDT's reasons at [4] ‑ [33]. That summary, which largely reflects the documentary record before me (Exhibit 1), is as follows:
4.Negotiations in respect of the Contract commenced between the Complainants and the Respondent on the 5th November 2004.
5.A pre-start meeting following the preparation of plans agreement was held between the parties on the 18th March 2005 at which meeting various changes to the plans were agreed upon.
6.On the 5th June 2005 the Contracts were delivered to the Complainants with the Contract date being the 14th June 2005.
7.In an email dated the 21st June 2005 from Leadbitter to Chantel Elgey 'Elgey' the Contracts manager of the Respondent, concern was expressed that the following listed matters needed attention before the Contract could be signed:
•'All changes to the plans as detailed to Perceptions over 3 months ago, be included within the Contracts.
•David's request for final figures on pilings are clearly answered and the costs are defined. For example extension on the back wall to the back fence another 20cm at an additional cost of "$........" which will increase the piling costs up to "$......." and extension by 30cm at an additional cost of "$......" which will increase piling costs up to "$....."[.]
•The contracts we received were severely lacking in any of the changes we had previously requested, and we would like these tightened to ensure they meet our requirements as we have already specified[.]
•Confirmation that due to the poor handling of our contracts and the time that was taken to get them prepared with only 3 business days to get them signed, we will not incur further costs associated with price increases.'
8.An email from Grochowski to Elgey of the 30th June 2005 sought confirmation that:
'… we will not be hit with any price increases since it will not be able to be all be finalised till early next month.'
In a responsive of [sic] email of the same date Elgey stated:
'Seeing as we couldn't get you the information that was required until this late stage, you will not receive a price increase on your contract if the contracts are received as soon as the quotes are passed on to yourself.'
9.An email of the 1st July 2005 from Elgey to Grochowski, Elgey noted that:
'I will require your contracts by the start of next week to avoid any price increases.'
10.In an email from Grochowski to Elgey of the 7th July 2005 a further request was made for the maximum cost of pilings. A quote for piling was sent to the Complainants for $4,056.00 to 'provide piling to the rear wall of the house at 800mm away from the sewer line as per engineer's details'. In an email of the 8th July 2005 Growchowski [sic] again sought a maximum costing for the piling.
11.On the 8th July 2005 Elgey emailed Grochowski and Leadbitter advising:
'The provisional sum for the piling after your extension of 200mm as per the current plans is PS $5,200.00. This is the best I can do today'.
12.On the 15th July 2005 the Contracts were signed by the Complainants and delivered to the Respondent.
13.On the 10th August 2005 the Respondent applied to the City of Stirling for a Builder's Licence for the three residences.
14.In an email of the 18th August 2005 Leadbitter queried how the plans were going.
15.By email of the 22nd August 2005 Leadbitter advised that the Complainants had received unconditional confirmation of finance and again requested an update on the status of the plans.
16.By email of the 26th August 2005[,] Elgey confirmed that revised prestart documents would be available at the end of the day but that the plans were not yet completed.
17.In an email of the 8th September 2005 Elgey stated:
'We are still in Building at Council and are awaiting a Building Licence which is being looked at now but I can't tell you when it will be approved.
Once the plans are finalised and the Building Approval has been received then we will be able to have a better estimate of when construction can commence.'
18.Amended plans were lodged by the Respondent at the City of Stirling on the 23rd September 2005.
19.At some point between the 9th September 2005 and 4th October 2005 the Complainants were advised verbally of a $34,368.00 price increase.
20.A meeting was held between Leadbitter and Bill Hughes of the Respondent on the 4th October 2005 to discuss the price increase when the Complainants agreed to the development proceeding on the basis that they would file complaints at the 'BRB' in relation to increases being in breach of the Building Contracts Act.
21.By email of the 4th October 2005 Elgey advised:
'I have just spoken with them (management) and they have asked me to put a hold on your job until the indicative price increases are accepted. They have also said they will put it in writing to you.
Do you still wish to go ahead with the BRB and put the jobs on hold?'
22.Leadbitter responded with an email in the following terms:
'I have already said we wish to proceed with the development and am seeking finance for the extra money (ie that is why I want the costs in writing). Given that I have no other choice but to continue with the development at those prices.
Going ahead with the BRB does not mean the work is to be put on hold or delayed any more than the time it already has been.
Therefore, I wish to receive the cost increase in writing please so I can get my finances in order and proceed with the development ‑ I do not want any further delays.
Can you tell me if council has approved the plans yet?'
23.On the 5th October 2005 David Hansen, the Contracts Manager of the Respondent, sent the following email:
'I refer to our telephone conversation on the 30/09/05 in respect to INDICATIVE PRICE INCREASE
Contract date: 14/6/05
Contract expiry date: 16/8/05
job 60631: $10,668 INDICATIVE
job 60629: $10,764 INDICATIVE
job 60630: $12,936 INDICATIVE
Please note a variation will be raised once a end date and jobs are ready for construction.
Please contact me concerning the above if required.'
24.Various emails were exchanged between the parties confirming unconditional finance approval for the increased Contract amounts.
25.On the 14th October 2005 Leadbitter requested whether any progress had been made in relation to the building licence prestart options and costs, various sign offs and piling costs noting:
'I am wary of it quickly approaching the end of October and don't want to have to go through the whole price increase saga again.'
26.On the 14th October 2005 Elgey sent the following email to the Complainants:
'There is no easy way to tell you this (so keep in mind I am the messenger), the surveyors got the plans wrong and the sewer line is actually further in from the boundary than they first told us. Because of this[,] we have had to move Unit 3 and reduce the Living, Bed 1,2 and the Ensuite by 200mm. I will be sending out ALL the variations/total costs and plans to you on Monday.
No update on receiving the building Licence - sorry.
You will receive everything Tuesday.'
27.The City of Stirling issued the Building Licence on the 15th October 2005.
28.Further emails were sent by Leadbitter to David Hansen following Elgey's ceasing work with the Respondent on the 21st October 2005. The further requests for updates were on the 7th November 2005 and the 17th November 2005.
29.Alistair Hat took over from Chantel Elgey and emailed Leadbitter in the following terms on the 21st November 2005:
'I'm not sure you are aware but Chantel never put this job into drafting for the prestart drawings to be done. She only got some variations done for you. As we are endeavouring to bring the jobs up to date with the changes asked for after Chantel left, it was then that I noticed last week that we did not have the signed builders copies (blue) of variations and prestart selection forms of all three units for you and David which would have been the case had it gone to drafting. This is why I organised those blue builders copies for you last week at the same time putting them into Drafting to which they are being dealt with by a draftee today. As we still have to wait for the shire to approve the changes with regards to the site adjustments[,] this should not delay the job. We do need you both the Final prestart plans once they are completed then it will be forwarded onto our construction department. So at this time we are unable to give you an estimate time for construction to begin.'
On the same day Alistair Hat emailed Leadbitter confirming that the site adjustments went into the mail to the Shire on the 17th November 2005.
30.On the 24th November 2005 amended plans were lodged by the Respondent to comply with a requirement for sewer 1m clearances.
31.On the 12th January 2006 Sheila Webb of the Respondent emailed Leadbitter confirming that the jobs were being sent to construction tomorrow and that the construction area would advise when earthworks would commence.
32.In an email following a further request for an update on the 30th January 2006 Sheila Webb advised:
'I am trying to get to the bottom of problems re your jobs. We do not have [W]ater [A]uthority approval on your job as yet. Have you paid the Headworks to WAWA? Have you received a quote to pay them?
I have our Shires chasing the Water Authority to get some answers for me urgently - I will keep you informed of progress.'
33.A further email was sent by Sheila Webb to Leadbitter on the 2nd February 2006 in the following terms:
'I have just spoken to our Drafting lady who has been liaising with Paul Munyard (our Drafting Manager you met in the office yesterday). He advised us the Headworks were not able to be paid until your sub division [sic] approval had been granted. In order to speed the process up we were advised by the Water Authority to temporarily withdraw your application in order for the Headworks to be paid. Please note we have no control over your Sub division [sic]. Paul Munyard printed of [sic] the plans in order for you to take to the Water Authority. According to Gail at the Water Corporation, the headworks quote is going to be sent out directly to you. Until this has been paid, we will not get the Water approval required to proceed with your job.
Please therefore advise us when you have received the quote and paid this as we require the stamp receipted plans.'
The Respondent lodged an Application with the Water Authority on the 3rd February 2006 with the Application being approved on the 8th February 2006.
In my view, the delay in obtaining the building licence was clearly attributable to the builder. The documented chronology reveals a series of errors, inattention, and lack of responsiveness to the owners' communications. The application for the building licence was not made until 10 August 2005, three working days prior to the expiry date (assuming a 14 June 2005 contract date). Further delays in the process continued thereafter, the builder's lack of response to attempted promptings by the owners being a cause of continuing concern to them.
The approval by the Water Corporation was the subject of an even greater delay. Approval was only obtained on 8 February 2006. The first that the owners knew that the approval of the Water Corporation had not been obtained (and, indeed, applied for), according to the documents, was on or around 1 February 2006. By the owners' urgings, the application to the Water Corporation was made on or about 3 February 2009, and the approval was forthcoming some five days later. Although the suggestion was made on the builders' behalf in the email on 2 February 2006, and repeated by their counsel at the hearing, that the delay was attributable to delays in the strata subdivision approvals which were the responsibility of the owners, the evidence indicates that no subdivision application was then current, the subdivision application having been withdrawn in August 2005 (Exhibit 1.59). The irresistible inference is that the builder had simply overlooked its responsibility regarding obtaining the approval. Once it was reminded of it, the approval was obtained, with the cooperation of the owners, within days.
As the owners aptly put it, 'the builder controlled the process'. It was for the builder to take all necessary steps to ensure compliance with the time limitation place by both s 9(1) of the HBC Act and the contract to secure the required approvals. I find that it was seriously wanting in that respect.

The builder's opposition to the proposition that the failure to comply with the time limitations was its sole responsibility relies primarily upon the failure of the owners to comply strictly with their obligation under cl 2.4.1 of the contracts to obtain finance within the required period. Clause 2.1.1 imposed a condition that the owners obtain finance to the extent of the amount referred to in the Schedule. Those amounts were $106,550 in respect of Unit 1, $128,269 in respect of Unit 2 and $105,588 in respect of Unit 3. In each case, the time to obtain finance referred to in the Schedule was 45 working days. The owners were required, by cl 2.4.1 of the contract, to use their best endeavours to obtain the finance so described. It is common ground that finance was obtained on 22 August 2005, some nine working days outside the 45-day period (although well within that period if the correct contract date was 15 July 2005).
The difficulty I have with this argument is that the owners' finance obligation was independent of the builder's obligations which it failed to meet. It is the reason for the non-fulfilment of the builder's obligations which inform a finding as to which of cl 1, cl 2 and cl 3 of Sch 1 of the HBC Act applies. There is no evidence that the short delay in obtaining finance contributed in any way to the much longer delays affecting the approval processes for which the builder was responsible. In those circumstances, the owners' technical default becomes irrelevant.
For the above reasons, I find that the non-fulfilment of the conditions implied by s 9(1)(a) and s 9(1)(c) of the HBC Act was solely attributable to the failure of the builder to comply with its obligations under s 9(2)(a) of the HBC Act.
The conclusion just mentioned means that cl 1 of Sch 1 applies. That clause states, as the consequence of any non-fulfilment of a s 9(1) condition:
The contract is not affected but remains in force on the same terms and conditions except as otherwise agreed between the parties.
I will now deal with the application of the stated consequence to the facts.

Application to the facts of cl 1 of Sch 1, and in particular the words 'except as otherwise agreed between the parties'

In oral submissions at the hearing, counsel for the builder submitted that, on the facts, the parties did 'otherwise agree' to the price increases, by signing the variations.
Absent any 'other agreement' of the type contemplated by cl 1 of Sch 1 of the HBC Act, the contracts remained in force on their original terms and conditions. This is a consequence of the finding that the delay was solely attributable to the builder. At the time, however, the builder was asserting a right to the price increases by reference to cl 3.5, and in so doing disavowed any responsibility for the delay. Moreover, it was holding off commencing work still further until the owners signed the variations.
The owners were clearly in a difficult position. I accept their statement that termination of the contract and engaging a new builder was not a commercially viable option. Given that cl 1, and not cl 2 and cl 3 ‑ nor s 13(4)(c) ‑ applied, the avenue of an application to the BDT for review of the amount of the increase was also not available. The only other alternative, an application to a court for relief analogous, perhaps, to the BDT's declarations, would have tested the patience and resources of the most diligent and well‑resourced home owner and resulted in yet further delay.
What the owners did do was to sign each of the variations submitted to them with the notation 'UNDER DURESS' immediately above each signature. In addition, the letter by the owners to the builder accompanying the signed variations dated 2 March 2006 stated:
In relation to the recent price increases[,] Perceptions The Home Builder have nominated for our three developments (your ref #.60629, 60630 and 60631) totalling $54,985, we hereby notify you that we are signing off these increases under duress as we feel the delays that have resulted in these increases are wholly the responsibility of Perceptions The Home Builder due to the mismanagement of our development process thus far. As stated in the contracts for the developments, such price increases can only be put forward by the builder where delays are incurred past the 45 working day approval period that are not the builder's fault or are outside of the builder's control.
We feel we have always done everything we can to insure [sic] the development would proceed as quickly as possible and are signing under duress in the interest of not incurring further delays to the progress of our development.
The proposition that the signed variations satisfied the 'otherwise agree' exception in cl 1 of Sch 1 of the HBC Act gives rise to a number of questions. Can the exception apply where the agreement relied upon was predicated upon an entitlement which was challenged at the time and has been found non‑existent? Is the agreement susceptible to avoidance, as the owners contend, on duress grounds? If so, is the duress equitable in nature, thereby disentitling the BDT from having regard to it? Given the circumstances of the entry into the variations, was consideration lacking? What was the effect of the 'under duress' notations?
It will be noted that these questions subsume grounds 2 and 3 upon which the owners rely. The legal authorities, which, it must be said, are not without inconsistencies, do tend to indicate that there is much overlapping and some interchangeability of the various principles at work in this complicated area.
In my view, the argument could be advanced that the variations are not to be regarded as falling within the cl 1 exception, based on a purposive interpretation of Sch 1 of the HBC Act. According to such an argument, the scheme of Sch 1 discriminates between delays attributable solely to the builder and other delays, with the builder being entitled to increase the contract price only in the latter case, and then in a highly regulated way. It would wholly defeat that scheme to allow a claim that a variation entered into on the premise that the builder was entitled to the increase, which premise was challenged at the time and has now been found to be false, satisfied the 'as otherwise agreed' exception in cl 1.
Although having some initial attraction to such an argument, in the end I reject it, because of the language of cl 1. In my view, where the clause applies, but where the parties have entered into a real or purported agreement which alters the terms and conditions of the original contract, the agreement must be accorded its legal effect. However, this is not to say that the agreement must necessarily be found to apply. Like any agreement, it is susceptible to invalidation on one or more of the accepted grounds for doing so. Duress is one of those grounds. Failure of consideration is another.
I turn then to the questions concerning duress.
Duress has been found to arise in contractual dealing where pressure is applied to induce the 'victim' to enter the contract in circumstances where the pressure went beyond what the law is prepared to countenance as legitimate: Dimskal Shipping Co SA v International Transport Workers Federation [1992] 2 AC 152 (The Evia Luck No 2); Crescendo Management Pty Ltd v Westpac Banking Corporation (1998) 19 NSWLR 40 (Crescendo Management). Although many of the earlier authorities speak in terms of there being a coercion of will (see, for example, Pao On v Lau Yiu Long [1980] AC 614 at 636; and Pao On v Lau Yiu Long [1979] 3 All ER 65 at [79]), the tendency in more recent times has been to emphasise the lack of legitimacy in the pressure or compulsion applied, rather than upon the element of coercion of will. Thus, in Crescendo Management at [45] ‑ [46], McHugh J said:
In my opinion the overbearing of the will theory of duress should be rejected. A person who is the subject of duress usually knows only too well what he is doing. But he chooses to submit to the demand or pressure rather than take an alternative course of action. The proper approach in my opinion is to ask whether any applied pressure induced the victim to enter into the contract and then ask whether that pressure wnt [sic] beyond what the law is prepared to countenance as legitimate?
It will still be necessary to establish that the illegitimate pressure was a reason for the person entering the agreement, although it need not be the only reason: Crescendo Management at [46].
Here, the pressure exerted by the builder which the owners contend was illegitimate was its threat to suspend commencement of the works under its contract with the owners if the variations were not signed. In North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] QB 705; [1978] 3 All ER 1170 (North Ocean Shipping), a ship owner agreed to an extra payment in order to avoid the ship builder's threat to break a ship building contract between them. It was held that a threat to break an existing contract can constitute 'economic duress', and did so on the facts.
In North Ocean Shipping, Mocatta J set out at 716 ‑ 719 a useful history of the development of the law of duress, with particular regard to a number of Australian decisions, including Nixon v Furphy (1925) 25 SR (NSW) 151, Smith v William Charlick Ltd (1924) 34 CLR 38 and TA Sundell & Sons Pty Ltd v Emm Yannoulatos (Overseas) Pty Ltd (1956) SR (NSW) 323 (Sundell's case). Unlike the first two cases, which dealt with the payment of money under compulsion, Sundell's case concerned the position obtaining here of a party with pre‑existing contractual rights entering into a fresh contract on terms more favourable to the other party as a result of the threat by the other party not to honour its obligations under the original contract. As Mocatta J noted, the court in Sundell's case rejected an argument that the original contract was superseded by the new contract, on the basis of a lack of consideration. It also rejected a further argument which sought to limit actionable duress to threats to withhold a proprietary or statutory right as opposed to a contractual right.
The result in North Ocean Shipping was that the contract for the extra payment was voidable, although, on the facts, the conduct of the ship owner in making the extra payment without protest and delaying its claim for a refund meant that it had affirmed the contract, which could therefore no longer be avoided.
In The Evia Luck No 2, a case concerning a claim for repayment under a contract found to have been entered into under economic duress, it was held that the duress gave rise to a right to rescind the contract. Once rescinded, any payment made could be recovered 'on the ground either of duress or possibly of failure of consideration' (at 165). I note that in the present case, the amounts of the variations were never paid.
In my opinion, the authorities I have canvassed justify the finding on the facts of this case that the builder did exercise illegitimate pressure when it threatened to suspend the works further if the variations were not signed.
As for the owners' notations on the signed variation documents, the authorities suggest that a protest by the victim to the course of conduct required by a threatening party is relevant to the question whether or not the victim acted under compulsion, although the presence or absence of protest is not conclusive: Mason v State of New South Wales (1959) 102 CLR 108 at 142. The process, considered in these terms, is therefore relevant to the less important of the Crescendo Management factors, coercion of the will. However, the impact of any illegitimate pressure remains a necessary element before duress can be made out, and the owners' notation is consistent with their submission that they agreed to the variations in circumstances where they felt they had no choice. It also avoided any argument that their conduct was affirmatory of the variations, as in North Ocean Shipping. The owners' use of the term 'under duress', it seems to me, is equally apt to the more conventional 'under protest', and in fact is more specific as identifying the quality of the pressure to which they regarded themselves as being subjected.
This leaves for consideration the final question concerning duress as to whether the duress, as I have found it to be, fell within the scope of common law duress or equitable duress. The builder strongly contends for the latter, in which case, on the basis of Commodore Homes (WA) Pty Ltd v Standley [2001] WADC 89, it would not fall within the jurisdiction of the BDT to determine, nor the Tribunal on review.
In The Evia Luck No 2, Lord Goff described the development of the common law in relation to duress in these terms (at 165):
We are here concerned with a case of economic duress. It was at one time thought that, at common law, the only form of duress which would entitle a party to avoid a contract on that ground was duress of the person. The origin for this view lay in the decision of the Court of Exchequer in Skeate v. Beale (1841) 11 Ad. & El. 983. However, since the decisions of Kerr J. in Occidental Worldwide Investment Corporation v Skibs A/s Avanti (The Siboen and the Sibotre) [1976] 1 Lloyd's Rep. 293, of Mocatta J. in North Ocean Shipping Co. Ltd v Hyundai Construction Co. Ltd. [1979] Q.B. 705, and of the Judicial Committee of the Privy Council in Pao On v. Lau Yiu Long [1980] A.C. 614, that limitation has been discarded; and it is now accepted that economic pressure may be sufficient to amount to duress for this purpose, provided at least that the economic pressure may be characterised as illegitimate and has constituted a significant cause inducing the plaintiff to enter into the relevant contract …
The distinction between the common law and equitable branches of duress appears to lie in the difference in the meaning of 'unconscionable' in both contexts. Hence, in Parras Holdings Pty Ltd v Commonwealth Bank of Australia [1999] FCA 391 (Parras Holdings), the primary judge's decision, with which the Full Court concurred generally, included the following passage (at [66]):
To vitiate consent, the duress or compulsion must be of such a nature, illegitimate or unconscionable, as of itself to vitiate consent. The equitable principle of unconscionable conduct as illustrated in Amadio requires rather the unconscientious taking advantage of a person in a position of special disability or special disadvantage. Although the term 'unconscionable' is used in both principles, it has in each a somewhat different operation. In the equitable principle, the term 'unconscionable' refers to the nature of the advantage taken of a person in a position of disability or special disadvantage. For the purposes of economic duress, the term 'unconscionable' looks rather to (the nature of the duress or compulsion exercised, to its legitimacy or illegitimacy). In both principles, present day views of acceptable conduct play a part.
The authorities to which I have referred demonstrate the expansion over the past hundred years or so of the principle of duress to include economic duress of the type alleged by the owners. When one considers that development, and the above passage from Parras Holdings, it is clear that where economic duress arises, it will be recognised by the common law. The owners' claim in this case does not depend upon any position of special disadvantage on their part, but, rather, upon the exertion of illegitimate pressure by the builder in the form of its threat to withhold services to which it was contractually committed if the owners did not enter into a new agreement which was more disadvantageous to it than the original agreement. This was the position in North Ocean Shipping, and before it, Sundell's case.There is nothing on my reading of the decision of the Full Federal Court in Westpac Banking Corporation v Cockerill[1998] FCA 43, upon which the builder relies, to detract from the conclusion that economic distress falls within the common law.
My findings on the questions concerning duress lead to the outcome that the owners were entitled to, and did, rescind the variations. The variations cannot, therefore, satisfy the exception in cl 1 of Sch 1 of the HBC Act of 'except as otherwise agreed between the parties'. As such, the contracts remained in force on the same terms and conditions, including the original price.
I will say something briefly about the issue of lack of consideration, which was the primary basis for the decision of the BDT in favour of the owners. As with duress, the question of whether or not there was a lack of consideration for the variations comes into proper focus, in my view, when considering whether the exception in cl 1 of Sch 1 of the HBC Act applies.
My discussion of the relevant authorities on duress indicates that the courts have on occasions referred to lack of consideration as a possible basis for avoidance of contracts entered into under duress. For example, in TheEvia Luck No 2, it was a possible alternative basis to reclaim a payment made under the new contract, and in Sundell's case it formed the basis of the court's rejection of the argument that the original contract was superseded by the new contract.
In my view, the two concepts represent two sides of the same coin. The duress forms the foundation of the avoidance of the contract; the failure of consideration is a consequence of the duress. It is, however, the duress which is the bedrock of the innocent party's rights, which no doubt explains its pre‑eminence in the jurisdiction in the area. Once duress is established, the right of avoidance will arise, which is what occurred in this case.
The decision of the BDT will be affirmed, albeit on the basis of the different chain of reasoning disclosed by these reasons.

Order

The Tribunal orders:
1.The application for review is refused.
2.The decision of the Building Disputes Tribunal constituted by its orders declaring under s 17(4)(ba) of the Home Building Contracts Act 1991 (WA) that the sums of $17,221, $20,696 and $17,067 are not payable is affirmed.

I certify that this and the preceding [74] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MR T CAREY, MEMBER