Kulowall Construction Pty Ltd v Chellem
[2023] WASC 140
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: KULOWALL CONSTRUCTION PTY LTD -v- CHELLEM [2023] WASC 140
CORAM: TOTTLE J
HEARD: 12 APRIL 2023
DELIVERED : 3 MAY 2023
FILE NO/S: GDA 13 of 2022
BETWEEN: KULOWALL CONSTRUCTION PTY LTD
Appellant
AND
OBED CHELLEM
First Respondent
SHAZIA ALI
Second Respondent
Catchwords:
Administrative law - Appeal against decision of State Administrative Tribunal - Building services complaint - Home Building Work Contract complaint under the Building Services (Complaint Resolution and Administration) Act 2011 (WA) - Whether the Tribunal had jurisdiction to find the appellant was not entitled to increase the price under the Contract - Whether the Tribunal had jurisdiction to make an order for compensation - Turns on own facts
Legislation:
Building Services (Complaint Resolution and Administration) Act 2011 (WA), s 3, s 5, s 7, s 8, s 9, s 10, s 11(1)(d), s 36, s 41(2), s 43
Home Building Contracts Act 1991 (WA), s 17
State Administrative Tribunal Act 2004 (WA), s 105
Result:
Leave to appeal dismissed
Category: B
Representation:
Counsel:
| Appellant | : | J Jacobson |
| First Respondent | : | J M Healy |
| Second Respondent | : | J M Healy |
Solicitors:
| Appellant | : | Jacobson and Associates |
| First Respondent | : | Tang Law |
| Second Respondent | : | Tang Law |
Case(s) referred to in decision(s):
Chellem and Kulowall Construction Pty Ltd [2022] WASAT 95
Giudice v Legal Profession Complaints Committee [2014] WASCA 115
Owners of Island Apartments Strata Plan 52597 and Pindan Pty Ltd [2017] WASAT 25
Paridis v Settlement Agents Supervisory Board [2007] WASCA 97; (2007) 33 WAR 361
TOTTLE J:
Summary
The appellant (the builder) has applied for leave to appeal against orders made by the State Administrative Tribunal on 2 November 2022 in favour of the respondents (the owners). The orders were made pursuant to s 43 of the Building Services (Complaint Resolution and Administration) Act2011 (WA) and they required the builder to do the following:
(a)complete the building of a double-storey house at the owners' property at 34 Burnham Way, Girrawheen in accordance with a home building contract (the Contract) between the builder and the owners; and
(b)pay the owners the sum of $9,115 as compensation for loss or damage caused by the builder's breach of the Contract.
The application for leave to appeal is brought pursuant to s 105 of the State Administrative Tribunal Act 2004 (WA). In summary, the builder's grounds of appeal are to the following effect:[1]
(a)The Tribunal had no jurisdiction to find that the builder was not entitled to increase the price under the Contract because the complaint made by the owners to the Building Commissioner, in respect of which the Tribunal's orders were made, was not a complaint about either a breach of the Contract or an increase in price (ground 1).
(b)The Tribunal had no jurisdiction to make an order for the payment of compensation because the Tribunal made no finding that there had been an 'unlawful suspension' of the building work and because the complaint made by the owners to the Building Commissioner was not a complaint about a breach of the Contract (ground 2).
[1] At the hearing of the application the appellant was granted leave to amend the grounds of appeal but declined to do so.
For the reasons set out below I refuse leave to appeal.
The facts
The critical facts are as follows.
On 8 December 2020 the builder, which traded under the name 'Opus Homes' and the owners entered into the Contract. The Contract was in the form of the WA HBCA Lump Sum Building Contract published by the Housing Industry Association.
The Contract included terms to the following effect:
(a)The builder would construct a double-storey house on the owners' property (schedule of particulars item 3 and general condition (GC) 1(a)).
(b)Subject to certain terms that enabled the price of the work to be varied, the price for the building work was fixed at $273,750 (schedule of particulars item 6 and GC 6).
(c)The building work was to commence within 40 days and was to be completed within 350 days (schedule of particulars item 9 and GC 9).
(d)The Contract was conditional on the owners obtaining finance to pay for the work and the owners were obliged to obtain finance approval within 45 days, that is, by 12 February 2021 (schedule of particulars item 4 and GC 3(c)).
(e)If the commencement of the building work was delayed by more than 45 days, and (relevantly) the delay was caused by the owners, the rights of the parties would be governed by GC 22(d) and (e) (GC 6(b)).
(f)Pursuant to GC 22(d) the builder was entitled to give notice in writing that the price had increased by the amount stated in the notice and that the amount of the price increase had to be paid either within 10 days or at the time of the next progress payment (GC 22(d)(i)). If the price increase exceeded 5% of the Contract price then the owners were entitled to give a notice terminating the Contract but the notice of termination had to be given within 10 days of the builder's notice of the price increase (GC 22(d)(ii)). GC 22(e) is not relevant.
On 23 February 2021, the owners received finance approval.
On 31 March 2021, the builder obtained a building permit from the City of Wanneroo permitting it to commence work.
Earthworks commenced on 12 June 2021 and the slab was laid on 23 June 2021. On 24 June 2021 the owners paid the builder the first progress payment of $38,000.
After the slab was laid Mr Muhammad Salman of the builder met one of the owners, Mr Chellem, on site and told him that the cost of bricklaying had increased. Mr Salman said that the builder was not in a position to start bricklaying until the owners contributed to the increased cost. Mr Salman did not say what the price increase would be but said that it would be around $1 or $2 per brick. Mr Chellem said that he would not 'pay a penny'. Mr Salman did not provide an estimate of the price increase and the builder did not serve a written notice of any price increase.
On 3 August 2021, the builder issued a notice of extension of time (for 20 working days) for completion of the construction works due to rain in July 2021.
Following discussions between the parties, on 28 October 2021 the respondents lodged a complaint against the appellant with the Building Commissioner. I refer to the terms of the complaint in more detail when dealing with ground 1.
On 15 December 2021, the builder issued a second notice of extension of time (for 150 working days) for completion of the construction of works due to labour shortages resulting from COVID‑19 and state border closures.
On about 10 January 2022 the builder responded to the owners' complaint to the Building Commissioner and, among other matters, stated that it would be seeking an increase in price due to the works not commencing within 45 days of signing the contract and 'due to labo[u]r and material shortage resulted from COVID‑19 and state border closure'. The builder estimated that the increase in price would be around '$50,000 plus'.
On 14 January 2022, the builder sent the owners a letter attaching a builder's warranty certificate cancellation relating to 'termination [of the contract] by mutual agreement with effect from 14 January 2022 on the owner[s'] request'.
On 17 February 2022, the Building Commissioner referred the owners' complaint to the Tribunal. The referral was made under s 11(1)(d) of the Building Services (Complaint Resolution and Administration) Act.
Proceedings before the Tribunal
The Tribunal held a directions hearing on 22 March 2022. At that hearing an order was made referring the dispute to mediation. The mediation was unsuccessful. A further directions hearing was held on 9 June 2022. At that hearing there was a discussion of the issues in dispute. The matter was listed for hearing on 15 and 16 August 2022 and various directions were made for the filing of evidence and documents. In the orders published by the Tribunal on 9 June 2022 the issues to be determined were identified in the following terms:
(i)Whether the [builder] was entitled to raise a variation to the contract price as a matter of contract law and whether the [builder] has complied with the provisions of the Home Building Contracts Act 1991.
(ii)Whether the contract between the parties was validly terminated by mutual agreement or by the [owners] pursuant to the terms of the contract and/or the Home Building Contracts Act 1991.
(iii)The [owners] seek compensation for non-compliance with the terms of the contract between them.
At the final hearing neither side was represented by counsel. The Tribunal and the parties had a bundle of documents that had been prepared for the hearing and incorporated the documents on which each party relied.[2] Each party made an opening statement. One of the owners, Mr Obed Chellem, began by stating the owners' position. In opening Mr Chellem referred to a 'compensation schedule' that he had prepared. The compensation schedule was in the following form:
[2] The bundle was made available to the court for the purpose of the application for leave to appeal.
No evidence was adduced in support of the claim for loss of rental income. There is no mention of that claim in the transcript of the hearing. The bundle of documents did not contain any documents that evidenced the claim.
Mr Salman made the opening statement on behalf of the builder. In his opening statement Mr Salman maintained that the builder was entitled to increase the Contract price because there had been a delay in commencing the building work caused by a delay in the owners obtaining finance approval.
The owners adduced evidence from a builder, Mr Fabian Barzasi, as to the current cost of the building work the subject of the Contract. Mr Chellem also gave oral evidence on behalf of the owners. During Mr Salman's questioning of Mr Chellem, an exchange took place between one of the Tribunal members and Mr Salman about the builder's claim that the owners were obliged to pay the increased cost of the works and the quantum of that increase. During that exchange Mr Salman said:[3]
[T]he procedure is, like, if we are approximating these costs, we negotiate, we see, see who go, - if the client is saying, "I'm not going to pay any" like, because - when we were talking with him in June, we were saying: "You pay us the extra money from the brickwork," and we start the brickwork. He saying he is not going to pay one penny, so then we - what - why we spend time on estimation if he - he is totally - in saying he is not going to pay one cent either.
[3] Transcript of State Administrative Tribunal dated 15 August 2022, 35.
In answer to a question from Mr Chellem in cross-examination Mr Salman said (addressing Mr Chellem):[4]
The price has increased that much, and - that's why we - when we were talking with you to start the brickwork, the cost increase were $2 per brick. And I had spoken with you, "We will share $1 and you contribute $1, so instead of paying $3 from my pocket as a builder, then I signed that contract, and you will pay $1". But you said, "No, I don't want to pay anything". And that's why you got - we - the work was stopped. We couldn't agree. If we agree on that time in 2021, I think maybe the house was in the lockup stage and there was not, like, what is happening. Because no - in September the timber prices are increasing again. There are (indistinct) again, so the price will keep increasing until we agree, we can start the work and we have some progress. So whatever the state (indistinct) the - they will not be increasing the costs at that stage.
[4] Transcript of State Administrative Tribunal dated 15 August 2022, 55.
The Tribunal's decision was delivered on 2 November 2022 and formal written reasons for the decision were published. The Tribunal stated that the primary issue was whether a Home Building Work Contract (HBWC) remedy order was justified in the circumstances. The Tribunal formulated secondary issues in terms that reflected the issues noted in the Tribunal's orders of 9 June 2022.
The Tribunal concluded that the builder was not entitled to increase the Contract price and that there had not been any valid exercise of any right to do so under the Contract. The correctness of this conclusion is not challenged by the builder. Rather the builder challenges the jurisdiction of the Tribunal to make that determination.
The Tribunal concluded that the Contract had not been terminated. There is no challenge to this conclusion.
Consistently with its conclusion that the Contract had not been terminated the Tribunal found that there was no basis for the owners' claim for compensation for an increase in the cost of building work on the basis that the work was to be undertaken by a new builder. The Tribunal also rejected the owners' claims in respect of water and sewer charges, council rates and interest on their bank loan.
The Tribunal accepted that the owners had lost the opportunity to rent their home earlier and had incurred the cost of temporary fencing to secure their property. It was on this basis that the Tribunal made the compensation order in the sum of $9,115 which comprised $715 in respect of the cost of temporary fencing and $8,400 for loss of rental income.
Statutory framework
Home Building Contracts Act 1991 (WA)
Section 17 of the Home Building Contracts Act 1991 (WA) provides:
If an owner or builder under a contract claims that -
(a)there has been a breach of -
(i)the contract, not being a breach in respect of which a building remedy order may be made under the Building Services (Complaint Resolution and Administration) Act 2011; or
(ii)a provision in Part 2; or
(b)the owner or builder is entitled to compensation under Schedule 1,
then, subject to the Building Services (Complaint Resolution and Administration) Act 2011, the owner or builder may make a complaint under section 5(2) of that Act.
Building Services (Complaint Resolution and Administration) Act 2011 (WA)
The long title to the Building Services (Complaint Resolution and Administration) Act states that it is an Act to provide for the following:
·a system for dealing with complaints about building services, home building work contract matters and disciplinary matters;
·a public officer with functions relating to building services and complaints;
·a levy in relation to certain authorisations for building services;
·a system for ensuring compliance about building services;
·related matters.
An owner or builder under a home building work contract may make a complaint to the Building Commissioner about a matter referred to in the Home Building Contracts Act under s 17, s 20 or sch 1 cl 5.[5] Such a complaint is termed a 'HBWC complaint'.[6] A HBWC complaint must be made in a manner and form approved by the Building Commissioner.[7]
[5] Building Services (Complaint Resolution and Administration) Act2011 (WA) s 5(2).
[6] Building Services (Complaint Resolution and Administration) Act2011 (WA) s 3.
[7] Building Services (Complaint Resolution and Administration) Act2011 (WA) s 5(6).
A person may make a complaint about a regulated building service not being carried out in a proper and proficient manner or being faulty or unsatisfactory.[8] Such a complaint is termed a 'building service complaint'.[9]
[8] Building Services (Complaint Resolution and Administration) Act2011 (WA) s 5(1).
[9] Building Services (Complaint Resolution and Administration) Act2011 (WA) s 3.
If a HBWC complaint is made to the Building Commissioner a preliminary decision to accept the complaint or to refuse to accept it must be made.[10]
[10] Building Services (Complaint Resolution and Administration) Act2011 (WA) s 7.
The Building Commissioner may require a complainant to provide further details about the complaint and may refuse to accept a complaint if the complainant does not comply with a request for further details within a reasonable time.[11]
[11] Building Services (Complaint Resolution and Administration) Act2011 (WA) s 8.
Once the Building Commissioner makes the preliminary decision to accept a HBWC complaint (or a building service complaint), the Building Commissioner must cause an investigation of the complaint to be carried out by an authorised person.[12]
[12] Building Services (Complaint Resolution and Administration) Act2011 (WA) s 9.
An authorised person must prepare a report on an investigation of a complaint and the report must be given to the Building Commissioner. The authorised person may include in the report recommendations as to the manner in which the complaint should be dealt with.[13]
[13] Building Services (Complaint Resolution and Administration) Act2011 (WA) s 10.
The Building Commissioner must consider an investigation report and may act on it in a number of ways. These include referring the complaint to conciliation, making remedial orders or referring the complaint to the Tribunal for it to deal with under s 43 if it is an HBWC complaint.[14]
[14] Building Services (Complaint Resolution and Administration) Act2011 (WA) s 11.
Section 43 of the Building Services (Complaint Resolution and Administration) Act provides:
43.How State Administrative Tribunal may deal with HBWC complaint
(1)If the Building Commissioner refers a HBWC complaint to the State Administrative Tribunal, the Tribunal may -
(a)if satisfied that the order is justified, make a HBWC remedy order; or
(b)otherwise, decline to make the order.
(2)The State Administrative Tribunal cannot make a HBWC remedy order requiring a party -
(a)to do work of a value estimated by the Tribunal to exceed the prescribed amount; or
(b)to pay an amount exceeding the prescribed amount,
unless the party consents to the order being made.
(3)Unless a greater amount is prescribed by the regulations, in subsection (2) the prescribed amount is $500 000.
(4)Nothing in this section prevents a HBWC complaint from being dealt with through a compulsory conference or mediation process under the State Administrative Tribunal Act 2004.
The expression 'HBWC remedy order' is defined in s 41(2) as follows:
(2)A HBWC remedy order in respect of a complaint by an owner or builder under a home building work contract referred to in the Home Building Contracts Act 1991 section 17 (other than a complaint about a breach of section 15 of that Act) consists of one or more of the following -
(a)an order -
(i)restraining any specified action in breach of the contract or of a provision in the Home Building Contracts Act 1991 Part 2;
(ii)requiring any specified work to be done in the performance of the contract;
(iii)requiring any specified work to be done to ensure compliance with a provision of the Home Building Contracts Act 1991 Part 2;
(iv)requiring any specified work to be done to remedy a breach of the contract or of a provision of the Home Building Contracts Act 1991 Part 2;
(b)an order that a person pay a specified amount payable under the contract;
(c)an order declaring that a specified amount is not payable to a person under the contract and, if already paid, an order that the builder or owner repay that amount;
(d)an order that a person pay specified compensation for loss or damage -
(i)caused by any breach of the contract or of a provision of the Home Building Contracts Act 1991 Part 2; or
(ii)referred to in the Home Building Contracts Act 1991 Schedule 1;
(e)an order declaring that a specified amount of money claimed or money claimed for specified work is not payable by a person.
Finally, though it is not directly relevant, I record that a 'building remedy order' (as referred to in s 17 of the Home Building Contracts Act) is an order that a person who carried out a regulated building service remedy the building service as specified in the order, pay the costs of remedying the building service, or, pay compensation for failing to carry out the building service in a proper and proficient manner or for faulty or unsatisfactory building work.[15]
State Administrative Tribunal Act 2011 (WA)
[15] Building Services (Complaint Resolution and Administration) Act2011 (WA) s 36.
The State Administrative Tribunal Act provides that a party to proceedings before the Tribunal may appeal. Subject to a limited and presently irrelevant exception an appeal may only be brought on a question of law. Leave to appeal is required. The Court of Appeal has emphasised on a number of occasions that it is critically important for an appellant to identify the question of law on which an appeal is brought.[16]
[16] Paridis v Settlement Agents Supervisory Board [2007] WASCA 97; (2007) 33 WAR 361 [53] - [57] (Buss JA); Giudice v Legal Profession Complaints Committee [2014] WASCA 115 [67] - [77] (Buss JA).
Ground 1
By this ground the builder contends the Tribunal did not have jurisdiction to determine whether the builder was entitled to increase the contract price or whether there was any valid exercise of a right to do so under cl 22(d) of the Contract. The proposition upon which this ground depends is that the owners' complaint neither alleged a breach of the Contract nor involved any complaint about any price increase. That proposition has no merit.
The owners' complaint was made using a pre‑printed pro‑forma form that it may be inferred was approved by the Building Commissioner. One section of the form required the owners to provide a description of their complaint. The owners gave this description:
Opus Homes stopped building works due to High brick prices.
| No. | Item/location/clause | Description | Reference to evidence relied upon | Remedy sought | Respondent's response |
| 1 | Clause 9(b) Contract | Builder refuse to start work due to high labour costs | Phone conversation and emails | Commencement of works | Delaying works breaching contract |
Part of the complaint form completed by the owners was entitled 'Complaint schedule'. The complaint schedule took the form of a table and was completed by the owners in the following way:
In Owners of Island Apartments Strata Plan 52597 v Pindan Pty Ltd,[17] in the context of a building service complaint, Tribunal member Ms P Le Miere, observed:[18]
The BSCRA Act is at its core consumer legislation. The purpose of the BSCRA Act is to provide consumers with a means to bring their complaints about 'the quality of performance of the regulated building service' in a nontechnical manner. It is about substance, not form.
[17] Owners of Island Apartments Strata Plan 52597 and Pindan Pty Ltd [2017] WASAT 25.
[18] Owners of Island Apartments Strata Plan 52597 and Pindan Pty Ltd [57].
With respect I agree with those observations. They apply with equal force to a HBWC complaint. Complaints made under s 5 of the Building Services (Complaint Resolution and Administration) Act are the first step in dealing with complaints about building services. That the Building Commissioner is empowered to seek further details of a complaint and is required to cause a complaint to be investigated leading to the preparation of a report supports the conclusion that the purpose of the complaint is limited to identifying the nature of the complaint and its general ambit. The making of the complaint is the first step in the process of resolving disputes. Given the beneficial purpose of the Building Services (Complaint Resolution and Administration) Act and that complaints will often be made by owners acting without legal assistance, complaints should be read generously, paying attention to the substance rather than legal technicalities.
It is plain beyond peradventure that the owners were complaining that the builder had stopped work and that this constituted a breach of the Contract. The complaint identified the reason why the builder had stopped work, that is, because costs had increased. Resolving the complaint necessarily involved determining whether there was any contractual justification for the builder stopping work. It is immaterial that the builder had not in fact purported to increase the Contract price. The owners' complaint that the builder had stopped work and the reason why the builder had stopped work could not sensibly be considered to be separate matters. To attempt to separate the owners' complaint from the builder's justification of the conduct about which the owners complain is highly artificial and would make the system for resolving complaints unworkable.
Further, there is no doubt that the builder understood the nature of the complaint and that it was required to identify a contractual justification for stopping. This was apparent from its response to the complaint which is reproduced below:
Builder has signed the WA HBCA Lump Sum Building Contract with the client on 8-Dec-20 with 40 working days to commence work (clause 9(a)) and 350 working days to complete the work (clause 9(b)). At the time of signing the contract, Builder has informed the client that there will be delay in the construction due to COVID-19 and state border closure and was included as special condition to Contract on Page-24. Builder gotten the Building Permit on 1-Apr-21. The Slab was poured for this project on 23-Jun-21. Builder issued two notice of Extensions, first one on 3-Aug-21 for 20 working days EOT for inclement weather and second notice on 15 Dec 21 for the 150 days EOT for Shortage of Bricklayers. Builder is scheduling to start the brickwork around Jun 2022.
Before the start of Brickwork in June 2022, Builder will do the estimation of cost increase due to not commencing the work within the 45 working days after the signing of the contract (clause 6(b)) due to labour and material shortage resulted from COVID‐19 and state border closure and will inform the client. As Builder's initial rough estimate, cost increase will be around $50,000 plus (not fully estimated yet). If client agree to go ahead, then the Builder and client will sign the variation as per increased cost estimation and builder will start the brickwork as per plan date of June 2022.
If everything goes as per plan and there is no further shortage of labor and material encountered, Builder is forecasting that the Practical Completion will happen on 15 Aug 2023.
It is necessarily implicit in the builder's response that if the client did not agree to the cost increase that the builder would not complete the building work.
Ground 1 has no merit.
Ground 2
By this ground the builder contends that the Tribunal had no jurisdiction to make a compensation order because it made no finding that there had been an 'unlawful suspension' by the builder. This ground must fail. The Tribunal clearly found the builder's suspension of work was unlawful. In the introductory section of the reasons the Tribunal recorded:[19]
After the ground floor slab was poured, no further works were undertaken as the parties disagreed about an increase in the contract price.
…
The contract remains on foot, and the owners will be compensated for the loss of rental income and consequential losses due to the unlawful suspension of work by the builder. (emphasis added)
[19] Chellem and Kulowall Construction Pty Ltd [2022] WASAT 95 [2], [7].
In a later section of the reasons entitled 'Legal Framework' the Tribunal recorded:[20]
The owners have made a complaint under s 5(2) of the Building Services (Complaint Resolution and Administration) Act 2011 (WA) (the Building Services Act) on the basis that the builder has breached its contract with the owner and/or provisions of Pt 2 of the Contracts Act, namely, by refusing to start work due to the increase in the price of brickworks.
[20] Chellem and Kulowall Construction Pty Ltd [77].
As is recognised in the passages to which reference has just been made the central issue between the parties was whether the builder was contractually justified in refusing to continue with the building work because of an increase in the price of brickworks. That issue was resolved in favour of the owners and against the builder. That the Tribunal concluded that the builder was in breach of the Contract and that its suspension of work was unlawful is necessarily implicit in the Tribunal's conclusion that the builder was not entitled to increase the Contract price.
Ground 2 has no merit.
Conclusion
The application for leave to appeal will be dismissed. I will hear the parties in relation to costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
OK
Associate to the Honourable Justice Tottle
3 MAY 2023
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