| JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : COMMERCIAL & CIVIL ACT : BUILDING SERVICES (COMPLAINT RESOLUTION and ADMINISTRATION) ACT 2011 (WA) CITATION : JAVIER & ANOR and MICHAEL SCHULZE T/AS CUSTOM DESIGN POOLS & WATER FEATURES [2013] WASAT 42 MEMBER : MR T CAREY (MEMBER) HEARD : 20 FEBRUARY 2013 DELIVERED : 25 MARCH 2013 FILE NO/S : CC 1543 of 2012 BETWEEN : JOSEPH JAVIER & ANOR Applicants
AND
MICHAEL SCHULZE T/AS CUSTOM DESIGN POOLS & WATER FEATURES
Respondent
Catchwords: Building dispute Contractual claim concerning contract to construct swimming pool Purported termination of contract based upon builder's failure to agree to owner's conditions for completion Nonreceipt of owner's notifications alleged Legal effect of notifications
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Legislation: Building Services (Complaint Resolution and Administration) Act 2011 (WA), s 5(2), s 11
Home Building Contracts Act 1991 (WA), s 10(1), s 10(4), s 17(a)(i), s 19(1), s 20 Result: Application unsuccessful
Summary of Tribunal's decision: The applicants, having purported to terminate their contract with the respondent for construction of a swimming pool, sought compensation for the additional cost involved in engaging another contractor to complete the pool.
It was necessary, in order for the claim to succeed, that the applicants demonstrate that a pretermination email notification, and the termination notice itself, were legally effective.
The Tribunal analysed the notices. It found that the email sought to impose conditions which were inconsistent with the contract. It concluded that the respondent's failure to comply with one of the new conditions was not a proper basis to terminate the contract, and the applicants were unable to rely upon it.
The Tribunal accordingly dismissed the application.
Category: B
Representation: Counsel:
Applicants : Self-represented
Respondent : Self-represented
Solicitors:
Applicants : Self-represented
Respondent : Self-represented
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Case(s) referred to in decision(s):
Nil
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REASONS FOR DECISION OF THE TRIBUNAL:
Overview 1 Mr and Mrs Javier (the Javiers, Mr Javier or Mrs Javier, as appropriate) entered into a written contract with Mr Schulze on 22 July 2009 for the construction of a concrete pool at their Iluka address. 2 Construction was to occur in two stages. This was because, contemporaneous with the construction of the pool, the Javiers were also having their residence built. The first stage of the pool construction comprised the excavation and installation of the shell, whereupon a temporary fence would be erected closing off the pool area. The second stage through to completion was to occur after handover of the Javiers' residence. 3 The shell was installed in 2010. A significant delay then occurred while the Javiers' house was constructed. From about July 2011, the Javiers attempted to inform Mr Schulze that handover was approaching. A large part of the documentary and verbal evidence in this proceeding concerned those attempts, and, from Mr Schulze's perspective, factors said to have inhibited their effectiveness. 4 On 27 August 2011, the Javiers sent Mr Schulze an email putting him on notice that he had one month to complete the pool, and informing him of a precondition to the final instalment of the contract sum being paid involving inspection of the complete pool by the Javiers' bank. The email required Mr Schulze's written concurrence by a particular date, failing which the contract would end. 5 On 22 September 2011, not having heard from Mr Schulze, the Javiers gave notice of termination of the contract. Mr Schulze denies receipt of either notification. 6 By the time of the purported termination, the Javiers had decided to engage another pool contractor, which they duly did. 7 The Javiers' claim is for breach of contract under s 17(a)(i) of the Home Building Contracts Act 1991 (WA) (HBC Act), brought originally by way of a complaint under s 5(2) of the Building Services (Complaint Resolution and Administration) Act 2011 (WA) (BS(CRA) Act) to the Building Commissioner, and subsequently referred to the Tribunal under s 11 of the BS(CRA) Act. The claim seeks compensation for the additional cost involved in completion of the pool of $15,256. (Page 5)
8 In determining the claim, the Tribunal must consider whether the Javiers were entitled to terminate the contract as they purported to do, by reason of Mr Schulze's lack of response. This question turns upon whether the Javiers are entitled to rely upon the notifications they say were given, but which, according to Mr Schulze, were never received. 9 Before considering the events which precipitated the purported termination in greater detail, I will refer to some of the features of the pool construction contract.
Relevant contractual terms 10 The parties executed what is described as a 'Standard Contract for Swimming Pool Construction'. 11 The contract describes the subject pool as an L-shaped pool of 32 square metres. The contract price was $45,000, of which $6,750 (15%) was payable as a deposit on signing the contract, and subsequent payments of 25%, 30% and 30% respectively were to occur. The deposit percentage appears to be in clear breach of the limitation for deposit of 6.5% appearing in s 10(1) of the HBC Act. Although not a matter relied upon by the Javiers, I will return to it at the end of these reasons. 12 Clause 9 of the contract provides for the contractor to complete the swimming pool to a state suitable for swimming within four weeks from the date of all statutory approvals or completion of other building works (whichever was the later). The contractor was required to submit all necessary plans and application(s) to regulatory authorities within 30 days of the contract date. 13 If the pool was not completed within the contracted period, or within any permitted extension, the customer could claim liquidated damages in accordance with clause 14.2 of the contract. The Javiers do not rely upon this clause, but, rather, seek to recover loss and damage suffered arising from Mr Schulze's conduct or omissions they contend entitled them to terminate. 14 Clause 15.1, dealing with termination, states relevantly: If either party fails to comply with the provisions of this agreement … the other party may opt, without prejudice to any other legal rights, to terminate this agreement upon giving seven days' notice in writing to the other party. (Page 6)
15 Clause 24, relating to 'notices', provides: Any notice or demand given or made by either party to this agreement shall be signed by that party, or agent, and may be served on the other either personally or sent by the [sic] certified registered mail to the address specified in this agreement or to the also [sic] known place of abode … Such notice or demand shall be deemed to have been served on the date when it would, in the ordinary course of post, have arrived at the address to which it has been sent. 16 The agreement specified, as the 'postal address' for 'the contractor' (Mr Schulze) 9 Indiana Way, Hocking.
Events leading to purported termination 17 The timeline from the installation of the concrete shell by Mr Schulze until handover of the Javiers' residence is not clear. As best as I can tell, a period of about a year, if not more, passed. 18 Although not of particular moment, the emails between the parties in April 2011 (Exhibit 1, at pages 20 and 22) evidence tension between them concerning Mr Schulze's requests for payment in circumstances where the Javiers considered that they had already paid more than what the contract had required. 19 The email from Mrs Javier dated 11 April 2011, which commences '… when we ring you never pick up[,] not even for our neighbours when they try to ring so I just don't leave a message', refers to limitations placed by their bank on the release of further funds, and indicates that the final instalment would be paid only when the pool is finished satisfactorily. 20 According to Mrs Javier's evidence at the hearing, during the period from the end of July 2011 until 26 August 2011, as handover of their house loomed, she and her husband tried to contact Mr Schulze by telephone on numerous occasions, to no effect. Specifically, she said that she left approximately 10 messages for Mr Schulze to call. Neither she nor her husband had seen Mr Schulze since 24 March 2011, when Mr Schulze was present at the property of the Javiers' neighbours, for whom he was also constructing a pool. 21 On 27 August 2011, Mrs Javier drafted and sent an email to Mr Schulze. The email is reproduced here: (Page 7)
Michael We are about to move in to our house, we have just taken APG up on their faults and have won with them so I am not in any mood for any trouble with building our pool now. We are going to give you exactly one month to build it 100 percent correct not like Pat & Angie[']s pool as they have had to have their pool totally corrected[,] like the shell not straight, brick work not straight and all the tiles etc pulled off and redone. You have 5 days to let us know if you can do this and we will need this in writing and if need be will have a lawyer involved so no confusion is made between us. The bank will not pay any money to you until the job is fully finished and done 100 percent correct, you are not entitled to anymore money at this stage and we have paid more than the shell is worth so don't expect anymore money from us at this stage. The bank will inspect it as they did with the house so you have an obligation to do it correctly first time. If this is not able to be [met] then you will have to pull out of [the] contract with us and make a credit payment back to us. We already have had quotes on what the shell so far is worth. If we don't have a response within five days then we will seek advice from a lawyer, make no mistake we are serious on this matter, after winning with APG with all they have done to us I am wanting this matter sorted out ASAP. All correspondence we want in writing so that the lawyers can use this in court if it needs to proceed with your [sic] what ever your response is. If we don't hear from you then we know what needs to be done. This email address will expire on Friday 2nd September. So you have till then. Jenny and Joey Javier 22 I asked Mrs Javier the reason for the hostile tone of the email. Her response included reference to problems the Javiers' neighbours had had with Mr Schulze in the construction of their pool, their advice that Mr Schulze was not building pools anymore and that he was working on the railways, and Mr Schulze's failure to answer phone calls. I am satisfied that the earlier disagreement between the parties regarding Mr Schulze's requests for money, the Javiers' own experience with their home builder, and the financial pressures they were under, can be added to the list. 23 On 22 September 2011, no response to the email having been received, the Javiers sent a letter by registered post to Mr Schulze at 9 Indiana Way, Hocking. The full text of this letter is reproduced here: (Page 8)
22 September 2011 Custom Design Pools and Water Features
PO BOX 232
BEECHBORO WA 6063
9 Indiana Way
HOCKING WA 6065
ATT: Michael Schulze MB 0417 181 789
This is to notify you Michael Schulze from Custom Design Pools & Water Features that we have given you thirty one three thousand, five hundred dollars in payment so far. We emailed you on the 27th August to ask you what you were going to do in response to finishing off our pool and we gave you five working days to respond and no response has been made. We know that you are owing a lot of people money for unfinished work to many people. The shell and work so far that has been done for us at 24 Kallatina Dr, Iluka is not worth what we have paid for so far and we are now owed money in return as we should only pay for what has been done. What work has been done on our neighbour[']s pool at 21 Kallatine Dr Iluka was built [unsatisfactorily] and had to totally be rectified by other people. Our neighbour has also out laid more money than the pool at that stage was worth. We (Joey & I, Jennifer Javier) are pulling out of contract with you as your work is not qualified and unprofessional. With regards all the products that you say you have stored in your house for our pool that we have paid you for out of the thirty one thousand, five hundred dollars we know that this is not true and are all lies[;] you have nothing at all stored at your house. We will take this matter further with what is owing once legal advice has been given. At the bottom of this page is another copy of the email that was sent to you on the 27th August as well as conversations stating what you have in storage for our pool and also asking us for more money when this is legal to do, asking for money when money was not due. We are letting everyone know about your business and including letting people know that you are a fraud and a Conn artist, and how you have ruined a lot of lives with lies by taking their money from them with saying that you are very good at what you do building pools and show them the picture of a pool that was in [The West] Australian that you say you built and that you need so many people to help you get your licence with Spasa by building their pool. You will never get the certificate of membership now; all of us will make sure of it. You might have everyone's money that doesn't belong to you, but was it worth it, things do go wrong when you do wrong to others. I will never know what your outcome on life will be but every time bad things [happen] just remember what you did to all the people out there. (Page 9)
24 On 27 October 2011, the Javiers were returned the registered post letter marked 'unclaimed'. 25 Although an issue arose at the hearing as to the timing of the contract entered into by the Javiers with Dolphin Pools to complete the Javiers' pool, I am satisfied, on the basis of the documents in the hearing book at pages 7 10 and pages 193 196, that a contract with Dolphin Pools to complete the pool was entered into on 24 September 2011. Mrs Javier indicated that she and her husband had decided to go with Dolphin Pools at the time that the registered mail letter was dispatched. 26 Mr Schulze's position is that he received neither the email of 27 August 2011 nor the registered mail dated 22 September 2011. Consequently, he was unaware of any requirements of the Javiers with respect to his return to site to complete the pool, and of any steps designed to terminate the contract for construction of the pool, until receipt of a disparaging Christmas card from the Javiers in December 2011. According to Mr Schulze, he was all the while awaiting advice that the Javiers were now back in their house and that he was free to return and complete the pool. 27 Mr Schulze gave evidence that his phone was disconnected due to failure to pay the provider's charges in mid to late July for three or four weeks, and he and his wife (who also gave evidence) said that their computer service (including email account) was disconnected for a similar reason approximately five times over a six month period commencing June or July 2011. Mrs Javier, for her part, sought to discredit these claims. For reasons I will come to, it is unnecessary for me to make findings as to these matters. 28 In relation to the return of the registered mail letter, Mr Schultz pointed out (and produced - Exhibit 1, pages 69 and 70) two examples of registered mail addressed correctly which he did receive at a similar time. Again, I have, for the purposes of this matter, found it unnecessary to decide the issues surrounding the return of the letter. (Page 10)
29 Before considering the notifications forming the basis of the Javiers' claim that they were entitled to, and did, terminate their contract with Mr Schultz, I will deal briefly with the possible significance of the express contractual provisions concerning time for performance and termination to the facts of this case.
Operation of express provisions of the contract 30 The provision dealing with time to complete, clause 9, is referred to earlier. There was no discussion at the hearing about the meaning of the words 'or completion of other building works'. There was, however, mutual acceptance that completion of the pool was going to occur only after the Javiers had obtained handover of the house, which would seem to invoke the quoted portion of the clause. If this is correct, as I think it is, Mr Schultz was entitled, by clause 9, to take four weeks from handover of the Javiers' house in which to complete the pool to a stage suitable for swimming. 31 Clause 9 is not, however, an essential time stipulation. That is to say, it does not use language which indicates that immediately after the four week period, the owners had a right to terminate the contract if the contractor has not fully complied. In order for this result to follow, there would need to be, firstly, an actual breach of the term, and, secondly, the giving of a notice fulfilling a number of basic requirements, including an indication that time is now of the essence: JW Carter, E Peden, GJ Tolhurst, Contract Law in Australia (5th ed, 2007) at [30 - 61]. I will consider below whether the email notification being relied upon satisfies these requirements. 32 The usual course open to an innocent party affected by a breach of a nonessential time stipulation is to press for completion (and perhaps give notice that time is now of the essence) and, if any loss and damage resulting from the delay can be demonstrated, to pursue an action for recovery. 33 The written contract in this case would also allow the same innocent party to give notice of termination, provided it complied with clause 15.1. The relevant portion of clause 15.1 is reproduced above. It gives a right of termination upon the failure of the other party to comply with the agreement. The right is expressed as without prejudice to any other legal rights, which is to say that the parties remain able to rely upon their rights under the general common law to bring the contract to an end in appropriate circumstances, quite apart from the contractual provisions enabling the same result. My observations above regarding clause 9 being (Page 11)
a nonessential time stipulation, and what would be required in order to make time of the essence, reflect that common law. 34 Clause 15.1 contemplates a failure of a party to comply with an obligation and the subsequent giving of seven days' notice to the innocent party prior to termination occurring. The clause does not state whether the notice ought give the defaulting party an opportunity to remedy the default. 35 It should not be forgotten, however, that, as at 27 August 2011, there was no breach of clause 9 by Mr Schulze. That being so, the Javiers could not, as at 27 August 2011, issue a notice under clause 15.1 of the contract. 36 Just as the email of 27 August 2011 was not a notice of default under clause 15.1, nor was the 22 September 2011 letter, if for no other reason that it purports to terminate the contract immediately, rather than give the seven days' notice required by the clause.
The legal effect of the Javiers' notifications 37 What, then, is the legal substance and effect of the Javiers' notifications? 38 I will consider this question first, before, if necessary, going on to deal with Mr Schultz's claims that he did not receive them, because if they are incapable of giving rise to a valid right of termination assuming they are received and read, the question of whether they were legally given and received becomes academic. 39 The 27 August 2011 email, according to its terms: (a) advised Mr Schulze that the Javiers were about to move into their house; (b) stipulated that Mr Schulze had one month from the date of the email in which to complete the pool '100% correct'; (c) required Mr Schulze to advise in writing that he was capable of meeting the stipulation in item (b), alternatively, within five days or by 2 September 2011; (d) stipulated that final payment would be contingent upon the Javiers' bank being satisfied the work was complete and correct; and (Page 12)
(e) advised that unless Mr Schulze was agreeable to the stipulations in items (b) and (d), the contract would be terminated ('you will have to pull out of the [contract]') and the Javiers would be entitled to a partial credit of the monies already paid by them. (Items (a) (e) respectively). 40 The advice comprising item (a) was consistent with the informal arrangement between the parties that the Javiers would inform Mr Schulze when he was able to reenter the site. It is, however, less than precise about the actual handover date; the closest it comes is to inform Mr Schulze that the Javiers were 'about to' move in. 41 Item (b) is perhaps best described as a reminder to Mr Schulze by frustrated owners of his obligation to complete within the time allowed under clause 9, and a reaffirmation of their desire for a quality job. The consequences of the builder falling short in either respect are dealt with in the remaining items. 42 Item (d) sought to impose a condition upon final payment which is not present in the contract. It reflects the similar requirement, alluded to earlier, in Mrs Javier's email of 11 April 2011. 43 Items (c) and (e), in combination, proposed, as a basis for the immediate termination of the contract, Mr Schulze's failure to indicate, by a certain time, his concurrence with items (b) and (d). 44 What the email did not do is convert the nonessential time for performance under clause 9 of the contract to an essential term. It could not possibly do so, because there existed no outstanding breach by Mr Schulze, much less the ability to set a reasonable period for rectification of the breach (a second requirement for such notices: JW Carter, E Peden, GJ Tolhurst, Contract Law in Australia (5th ed, 2007) at [30 - 61]). 45 As I have said, the 27 August 2011 email reflects the Javiers' disquiet, stemming in part from what they regarded as Mr Schulze's unreasonable monetary demands, but also from a number of other matters extraneous to the contract: advice received from their neighbours about Mr Schulze and his performance in constructing their pool; the neighbours' belief that he was working on the railways; the Javiers' own recent building experience; the Javiers' financial pressures. (Page 13)
46 Moreover, the email (by items (c) and (e)) purported unilaterally to impose the condition precedent to continuation of the existing contract that Mr Schulze formally agree with the general item (b) and more specific item (d) within the given time period, failing which the contract would be brought to an end. Of course, the Javiers had no right to insist on such a condition, inconsistent as it was with the contract, and in particular clause 9 as I have construed it. 47 It was Mr Schulze's failure to agree to the Javiers' new terms that was the motivation for the Javiers' purported termination of his services and engagement of another pool contractor. The registered mail letter makes this clear in its second sentence. Although the letter goes on to suggest that the contract was being terminated because 'your work is not qualified and unprofessional', no evidence was led at the hearing to support such a contention. There is no suggestion, either contemporaneously nor at the hearing, that the Javiers had any issues with the standard of the installation of the pool shell, which was the extent of Mr Schulze's work at their property. Indeed, the objective of the 27 August 2011 email was to obtain Mr Schulze's commitment to return to site and complete the pool. And a general allegation that work was 'not qualified and unprofessional' would not constitute a valid basis for immediate termination in any event. 48 For the reasons given, the 27 August 2011 email did not convert the contractual time for completion to an essential time stipulation, thereby making any delay a valid basis for termination. Nor did it succeed in its objective of unilaterally imposing the proposed condition precedent to continuation of the contract. Even assuming its receipt by Mr Schulze, it could therefore not warrant the purported termination of the contract by the 22 September 2011 letter on the grounds given in that letter. This is sufficient to dispose of the Javiers' application, depending, as it does, upon the proposition that the Javiers were entitled to terminate the contract for the reasons advanced for doing so. 49 I turn, finally, to the apparent breach of s 10(1) of the HBC Act, to which I alluded earlier. 50 Section 10(1) allows a maximum deposit of 6.5% under a contract to which the HBC Act applies. Although it is unnecessary for me to decide, it appears an inescapable conclusion that the deposit payable under the contract between the Javiers and Mr Schulze exceeded the maximum permitted. (Page 14)
51 By s 10(4) HBC Act, a breach of s 10(1) entitles termination of the contract by the owner under s 19 of the HBC Act. Section 19(1) provides, in effect, that such termination occurs when the owner gives a notice of termination to the other party. If this is done, the owner is entitled by s 20 of the HBC Act to make a complaint under s 5(2) of the BS(CRA) Act claiming the return or repayment of the whole or part of any consideration given by the owner under or in relation to the contract. 52 Although I thought of alerting the parties to the prospect of liability under the HBC Act provisions to which I have just referred in the context of an offer to the Javiers to amend the current application, I ultimately decided against this course because of the substantial differences between the two claims. Although both are by way of complaint under s 5(2) of the BS(CRA) Act, the current application is dependant upon a particular termination scenario, and seeks, essentially, damages on a contractual basis. Any claim under s 20 of the HBC Act would be for a breach of s 10(1) of the HBC Act, seeking the quite different relief provided by that section. Whether such a claim remains open may be a question for debate. Any such claim would require a fresh complaint to the Building Commissioner.
Order 53 The Tribunal will issue an order that the application be dismissed. |