Logan Cold Storage Pty Ltd v GD Building Solutions Pty Ltd
[2024] QCAT 503
•15 October 2024
QUEENSLAND CIVIL AND
ADMINISTRATIVE TRIBUNAL
CITATION:
Logan Cold Storage Pty Ltd v GD Building Solutions Pty Ltd [2024] QCAT 503
PARTIES:
LOGAN COLD STORAGE PTY LTD (applicant)
v
GD BUILDING SOLUTIONS PTY LTD (respondent)
APPLICATION NO/S:
BDL150-19
MATTER TYPE:
Building matters
DELIVERED ON:
15 October 2024
HEARING DATE:
20 June 2024
HEARD AT:
Brisbane
DECISION OF:
Member Bertelsen
ORDERS:
The Applicant pay to the Respondent the sum of $2,785.79 within thirty days.
CATCHWORDS:
CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – COMMERCIAL BUILDING CONTRACT – where applicant claims a credit from the reduction in the floor area of a mezzanine floor forming part of the contract and a refund for a second set of stairs categorised as a variation and not as an inclusion in the contract – where the contract ought properly to have allowed for the credit and refund – where credit allowed for inadequate and refund denied – whether there was defective or incomplete work.
APPEARANCES & REPRESENTATION:
Applicant:
Leah Zhao, authorised representative
Respondent:
Nathan Dee, director
REASONS FOR DECISION
By commercial building dispute application filed 3 June 2019 the applicant Logan Cold Storage Pty Ltd (‘Logan’) (‘owner’) sought a $20,256.40 credit arising from the reduction in the floor area of the mezzanine floor forming part of the cold storage facility constructed at 5 Ironside Road Berrinba by the respondent GD Building Solutions Pty Ltd (‘GD’) (‘contractor’) pursuant to a Master Builders Commercial Building Contract (‘the contract’) entered between the parties on the 18 March 2015. The credit claim was for $14,740.00 plus “back interest” of $5,516.40 a total of $20,256.40. On 17 July 2019 GD filed a response and counterapplication for $3,484.74 for money remaining owing under the contract.
Following a compulsory conference Logan filed an amended application on 20 December 2019 claiming as a refund an additional $10.500.00 plus interest of $4,397.54, total $14,897.54, paid for the installation of a staircase to the reduced size mezzanine floor which was assertedly incorrectly categorised and charged as a variation at the time of construction. The total amended claim with updated interest totalled $36,524.04. On 27 January 2020 GD filed a further response and counterapplication asserting that the staircase was an approved and agreed to variation.
Background and evidence
Initially with respect to the creation of architectural drawings and design and approval documentation GD dealt with an entity associated with and representing Logan (the Friendship Group). After that GD and Logan engaged with each other with a view to contracting for the construction of the cold storage facility. The design of the facility included a large mezzanine floor which was problematical in that Local Authority approval would be required for the inclusion of a mezzanine floor. The building classification would be upgraded to require a fire rating/sprinkler system thus substantially increasing the build cost which Logan in emails with GD was clearly eager to avoid.
Ms Zhao for Logan asserted that the stage one construction[1] contract between the parties signed on the 18 March 2015 included in attached contract drawings both a full floor 60.8 square metre mezzanine floor and a second set of stairs from the facility’s first floor to the mezzanine floor for storage space and roof access. It was a separate and special requirement. Given that GD was uncertain as to how much of the 60.8 square metre floor the certifier Toby Spencer of Bartley Burns would approve GD would include the maximum 60.8 square metres and a second set of stairs into the contract pricing. Therefore, when the building certifier provided a final building approval GD would make a reduction variation for anything in the contract not approved. In the event the certifier approved 20.259 square metres, about one third of the 60.8 square metres sought. That reduced the area of the mezzanine by 40.6 square metres or two thirds. Logan’s first notification of that reduction occurred on 2 April 2015. Based on what she considered the cost of the maximum mezzanine floor area at $22,000.00 as recited in the contract payment schedule that reduced the mezzanine floor cost by $14,740.00.
[1]Stage one was construction of the cold storage facility building to be followed by a stage two cold storage rooms construction to operate within the building. Stage two was never the subject of any contract between the parties.
Ms Zhao said Logan was assured at the time of contract signing, 18 March 2015, that as the second set of stairs was the same as the first there was no need to revise the contract specification and that the build would be as per contract drawings. There was no revision of the contract to remove the second set of stairs nor did the contract schedule B list of exclusions exclude the second set of stairs. It was on 14 July 2015 that GD first raised the second set of stairs as a contract variation. Without informing Logan GD went ahead in early August 2015 with measuring and ordering the second set of stairs. On or about 18 August 2015 Logan was coerced into approving the variation finally agreed at $10,500.00 even though expressing disagreement because GD threatened to stop work. Logan paid for the second set of stairs on 31 August 2015. In emails of 13 September and 28 September 2015 Logan expressed disagreement with the variation and reserved its right to claim overcharges later.
When queried about the defects liability period and structural warranty period having passed Ms Zhao stated Logan’s claim was about overcharges and not defective or incomplete work. She agreed that the contract drawing, dated 13 March 2015, included in the contract depicted second floor stairs, and that the contract specification Schedule A which referred to the contract drawing dated 10 March 2015 did not include a second set of stairs.
Ms Zhao agreed the contract specification on page one stated “specification to take precedence over drawings in any discrepancies” and that the contract price was changed/reduced on 18 March 2015. She asserted that the extent of work did not change but rather discounts including changes to fencing and electrical were provided by GD to get Logan to sign the contract. The trade breakdown/payment schedule was not changed but revised a day or two later.
When asked why the project manager appointed by Logan, when identifying approximately thirty-one items to be discussed/attended to, did not refer to the mezzanine floor and second set of stairs, Ms Zhao said that failure to identify the scope of works in the contract did not mean they were not included. When asked why the stairs and mezzanine issues were not brought up at project completion Ms Zhao said initially that GD threatened to suspend works, that they were raised during the course of the contract and finally that if they were to be raised then GD would not give access to the building or the keys. When asked why it took to 2017 to notify GD about the mezzanine floor Ms Zhao said Logan needed to prioritise stage two which was completed the same year. When asked why it took to 2019 to raise the asserted overcharge for the second set of stairs Ms Zhao said it was to give GD ample time to correct a contract violation.
Mr Dee for GD stated that Logan was eager to proceed with the construction of the cold storage facility and for a construction contract to be entered into prior to building approval. On 22 February 2015 architectural drawings were sent to the certifier Bartley Burns and on the next day a discussion took place regarding purpose and access for a top mezzanine floor. The certifier advised that if access was required the floor area could be reduced to one third room size classed as a mezzanine for storage use. A full floor with stairs would result in a change of building type with requirements for fire rating and sprinklers. That was not an option for Logan.
A meeting took place on 12 March 2015 at which a quotation was discussed in detail. Logan’s written list of items to be discussed included at item four access to mezzanine. A contract was prepared and forwarded to Logan on 16 March 2015. On 18 March 2015 a meeting was held late in the day. The certifier’s advice about the mezzanine floor was again discussed. Logan was advised that if there was to be access from the building’s office side the mezzanine floor area would have to be reduced to one third of total mezzanine floor area but that no second set of stairs would be included in the contract price at that point because there was no specific advice from the certifier that even one third would be allowed. As Logan’s representatives, in particular Ms Linda Zhao, seemed confused about this a drawing dated 13 March 2015 was produced depicting a visual representation of how the stairs would work from the building’s office side. It was only an elevation. No second set of stairs was ever included in the contract. Nor was it necessary to exclude something that was never included in the first place. The drawing dated 10 March 2015 on which the contract was initially based had detailed a full floor mezzanine with no staircase access.
The mezzanine was reduced in size to one third of its original area because prospectively that was all that could be approved as part of the final building approval incorporating a second set of stairs. In evidence Mr Dee said
We reduced the mezzanine floor because we could define that extent at signing of contract but could not define second set of stairs until I had advice from the certifier which was received on 2 April.
The contract sum was proportionately reduced on the day[2] along with changes/reductions on account of other items including fencing and electricity. The contract specification provided that the specification took precedence over drawings. The specification did not identify a second set of stairs. The contract dated 18 March 2015 on its face recorded a reduction in the contract price from $1,140,018.00 to $1,116,500.00 a difference of $23,518.00. Two days after the 18 March 2015 Mr Dee said the trade breakdown (payment schedule) was updated to reflect the changed contract sum and extent of works. He stated the trade breakdown was included purely for the purpose of claiming progress payments. It bore no direct correlation to the cost of actual work. Nor was the price reduction on 18 March 2015 ever about discounts to get the building work.
[2]Mr Dee used Rawlinson’s, an industry-recognised construction cost guide, to calculate proportionate reduction.
On the 2 April 2015 GD, based on the certifier’s preliminary advice, notified Logan by email stating.
In addition, I have managed to get the second set of stairs approved however the second floor will be limited to maximum of 21m2 mezzanine floor with an open balustrade rather than a wall. See attached markup.
That raised variation one which was included in the June 2015 progress claim and described as “additional set of stairs, wall balustrade and handrails to mezzanine”. At that point the variation had not been priced. There was discussion around variation one, agreement on price and then renegotiation. Discussion/negotiation centred on price not whether variation one applied. Variation one was repriced four times. Pursuant to the contract progress claims were to be submitted on the 20th of the month with payment by the 30th of the month. There was no coercion or force. It was a case of claim and payment in accord with contract conditions. About this time Logan appointed an external consultant/project manager. A meeting was held on 21 June 2015 at which the whole of the contract arrangements was discussed. Variation one was not identified as inapplicable.
A detailed costing for variation one was submitted on 14 July 2015 and finally agreed at $10,500.00. Mr Dee said a request was made for variation one (and other variations) to not be included in the July 2015 progress claim giving rise to concerns about Logan’s capacity to pay. On 4 August 2015 GD accepted non inclusion of variations for the purposes of the July progress payment. Around 17/18 August 2015 a renegotiation of the second set of stairs cost was raised by Logan but Mr Dee said the stair issue had been discussed, agreed to, and priced with the stairs on order. On 18 August 2015 Logan emailed GD specifically on the issue of variation one stating
Variation 1- additional topflight of stairs from first floor to mezzanine
Supply and install additional set of stairs to mezzanine floor built same way as office stairs including the following …
The email enumerated the inclusions and went on to state that approval was capped at $11,000.00 setting out the reasons for the cap.
On 24 August 2015 GD issued its August progress claim which included “additional set of office stairs, wall balustrade and handrails to mezzanine” at $10,500.00 plus GST. On 3 September 2015, 7 September 2015 and 11 September 2015 GD emailed Logan seeking approval of variations. On 13 September 2015 Logan emailed GD confirming payment of all progress claims thus far and stating
We will reserve the right to claim all unreasonable, unfair and overcharges at a later stage.
In a response email of 14 September 2015 GD stated
Does this mean you intend to renegotiate the variations at the end of the contract by short paying the contract amount by what has already been agreed or paid previously??? We advise that we do not accept this claim in any form, for any contract work or any variation work that has been approved or paid for. …if there are issues with the variation or contract amounts, they need to be resolved now.
On 28 September 2015 Logan emailed GD about clarifying the August progress claim and stated
According to your request on 18/09/2015 (the responses to requests from GD referred to in that email were about a multiplicity of changes and delays on the part of Logan) we have carefully reviewed the variation (the stairs from FF to mezzanine). We cannot find any reason to treat it as a variation according to the contract and related drawings. It should be included in the contract. Therefore, your claim for the stairs is an overcharge. However, in the interests of moving forward, our payments are “on account only”. Please be aware that we will reserve rights to claim back for unsatisfactory plumbing works and overcharges at a later stage.
On 21 September 2015 GD forwarded its September progress claim. On 29 September 2015 GD complained to Logan about what it termed extensive client delays including
Additional office stairs – variation1-previously approved, resolved and partially paid. Advice given that variation is again in dispute?? Works to stairs may now be suspended until resolved.
On 2 October 2015 GD complained that the September progress claim had been short paid. On 14 October 2015 GD emailed Logan stating all variations had been approved and resolved on the 28 August 2015. Nonetheless a final listing of all variations was provided including:
Variation 1 – we have been over this variation, including last weeks meeting and I priced this variation multiple times with breakdown amounts for your perusal. This is a genuine variation because I identified to you from the start that stairs to mezzanine were not included.
You have already negotiated and approved a revised variation amount of $10,500.00 + GST = $11.550.00.
In due course building works proceeded to practical completion on 18 December 2015 when all relevant certificates were handed over together with premises keys. Mr Dee asserted some minor works/defects were attended to in January 2016 after which GD issued its final tax invoice for $3,484.74 calculated as follows.
Contract works summary to date (inc GST) $1,116,500.00
Variation works summary claim to date (inc GST) $ 11,514.05
Less ceiling to archive room $ 200.00
Total claim to date (inc GST) $1,127.814.05
Less previous paid amount (inc gst) $1,124,329.31
Recent minor claims
Latterly in material filed in the Tribunal on 21 February 2020 Logan asserted incomplete jobs on GD’s part. Logan had stated in its email of 14 February 2016 it would discuss GD’s final payment/invoice if these jobs were finished clearly entertaining a trade-off. However, the incomplete jobs never formed part of the initiating application or the amended application and to that extent were not capable of being prosecuted. Nevertheless, Mr Dee gave evidence in respect of those works. For the sake of fairness and completeness they can be dealt with as follows
Installation of chiller entry platform with suitable finish
The platform formed part of the certifier’s sign off and deemed compliant. It was not raised at project completion on 18 December 2019 but only two months later. The contract specification did not provide for any non-slip galvanised steel checker plate.
Galvanised steel stairs with riser to chiller entry
Apart from not being referred to in the specification there was never any compelling evidence of a change from concrete stairs to galvanised steel stairs.
Installation of downpipe cover
Mr Dee agreed that it was intended a downpipe cover be installed. But it was not installed. Rather the downpipe cover would be installed if GD’s final invoice was paid. That did not relieve GD of its obligation to complete the job at hand. Logan reasonably obtained a quote from Haystack Property Maintenance and Renovation dated 15 February 2020 for a downpipe metal protector 1.5 metres high at $450.00.
Archive room and mezzanine floor covering and painting.
According to the contract terms these never formed part of the internal fit out.
Storeroom wall painting
According to the contract terms this never formed part of the internal fit out.
Installation of two covers for drainages of plant room
Where that formed part of a requirement was never properly identified.
Electricity and water
Generally speaking, temporary electricity charges and water consumption directly associated with construction are a contractor expense. Here there appears to be no reason to deviate from that norm. Water is allowed at $104.10 and electricity at $144.85, both as claimed.
Conclusions
As early as 22 February 2015 when architectural drawings were sent to the certifier it was clear that the purpose and access for a top mezzanine floor reduced in size was an issue. The certifier advised that if access was required, the floor area could be reduced to one third. When the 12 March 2015 meeting took place Logan’s own written list of items to be discussed included access to a mezzanine floor. The Tribunal accepts the mezzanine floor area was discussed at this meeting.
At the 18 March 2015 meeting the certifier’s advice about the mezzanine floor was again discussed. The mezzanine floor area would have to be reduced to one third of its original size. That was the probability. Certainly, a full-size mezzanine floor was out of the question. It would change the building type with more onerous compliance requirements. A price calculation/reduction for a mezzanine floor one third original size could be incorporated into the contract on the day. For clarity an additional replacement contract drawing dated 13 March 2015 was produced depicting how a second set of stairs would look with the mezzanine at one third of its original size. The reduction in the mezzanine floor area was calculable at one third. Not so the second set of stairs because any second set of stairs could not be defined until advice was received from the certifier. The contract price was reduced on the day consequent on the reduction in the mezzanine floor area as well as other items including electrical and fencing.
Whilst there were differences in the calculation of the floor area and the cost per square metre used to arrive at the monetary reduction on the day (18 March 2015) the fact of the matter is there was a reduction, and it was incorporated into a reduced contract price. The contract signed off on that day was a fixed price contract. Logan’s own written list of items about access to a mezzanine floor, discussions at the 18 March 2015 meeting, the production of a replacement drawing dated 13 March 2015 illustrating what a second set of stairs would look like in the context of a reduced mezzanine floor and the contract price reduction on the day makes any assertion of not being aware of any price reduction on account of reduced mezzanine floor area untenable.
The contract was signed on 18 March 2015 well before any final building approval. That could well be construed as putting the cart before the horse. It was impossible to incorporate the cost of a second set of stairs on 18 March 2015 for the reason it was not clear whether it would be possible to construct such a set of stairs let alone conditions attaching to such construction. That accords with the illustrative nature only of the second set of stairs included in the contract. Unsurprisingly then it seems to be with some joy that GD was able to inform Logan on 2 April 2015 that a second set of stairs had been approved. That approval became variation one, initially included in the June 2015 progress claim but unpriced. Logan requested variation one and others not be included in the July 2015 progress claim. The cost was the subject of a lot of chopping and changing and delay. What is clear is that it was not the legitimacy of the variation but the cost that was the bone of contention. On about 24 August 2015 a price was settled at $10,500.00 plus GST and included in the August 2015 progress claim. In the midst of asserted difficulties and delays in getting approvals for variations GD said it would stop works until variations were confirmed. On 13 September 2015 Logan emailed GD confirming payment of all progress claims but reserving the right to claim all unreasonable, unfair and overcharges at a later stage.
In its response of 14 September 2015 GD effectively said it would not have a bar of any such arrangement. If there were issues with the variation or contract amounts, they needed to be resolved at the time. The assertion about reservation of rights seems to have arisen from a perception by Logan that it was being coerced into making progress payments. But GD’s Mr Dee said the contract was clear, providing for progress claims by about the 20th of the month and payment by the end of the month. Issues were to be sorted out as they went. He was sticking to the contract. The Tribunal agrees. Progress payment clauses are in building contracts for a reason, primarily to ensure continuity of construction. There was no evidence of coercion.
On 28 September 2015 Logan emailed GD stating that payments were on account only and again reserving rights for unsatisfactory work and overcharges. When practical completion was reached on 18 December 2015 all payments due by Logan had been made except for a minor $3,484.74. Getting variation one across the line was a longwinded and tortuous process including pricing, settling, construction, and payment. Logan asserted it was concerned it would not gain access to the premises if it raised the stairs and mezzanine issues at practical completion. On the contrary it could well be argued that accepting GD’s final invoice in exchange for keys constituted finality of contractual obligations between the parties. Even accepting Logan’s statements about reserving rights and overcharges the time to argue monetary adjustments was 18 December 2015.
When asked why it took to 2017 to notify GD about the mezzanine floor Logan’s Ms Zhao stated that Logan needed to prioritise stage two. But stages one and two were sequential builds. When asked why it took to 2019 to raise the asserted overcharge for the second set of stairs, (four years) she said it was to give GD ample time to correct a contract violation. The reasoning lacks efficacy and borders on the nonsensical.
A payment on account infers part payment and likely later negotiation. That was never an option where the progress payment/variation payment was made pursuant to the contract, as here, and where GD was entitled to such payment pursuant to the contract and where in the absence of such payment work might cease. To make a progress payment or variation payment in full and then call it a payment on account is a contradiction in terms akin to some sort of attempt to have an each way bet. Even the apprehension that GD would stop work if payment was not made does not make a progress or variation payment a payment on account. The argument that payment of a progress payment or variation payment in full is somehow reduced to a payment on account only because one party unilaterally declares it to be so after the event is nonsense. What speaks loudest here is payment in full enabling continuity of the build.
The Tribunal finds variation one was properly raised, priced, paid for and constructed.
For clarity the Tribunal accepts the evidence of Mr Dee with respect to the chronology of events consequent on the execution of the subject contract prior to a final building approval, which brought about the reduction in the fixed price contract sum on account of the reduced mezzanine floor area and the second set of stairs variation claim. In short Logan got the maximum result possible namely a mezzanine floor serviced by a set of stairs from its office.
Given that GD’s counterapplication records the totality of payments made against the adjusted contract price (which the Tribunal accepts) disclosing a minor shortfall of $3,484.74, and that the quantum of payments made by Logan is not in dispute the Tribunal can readily accept the counterclaim in full, less those recent minor claim items of downpipe cover allowed at $450.00, and electricity and water allowed at $248.95.
In summary the Tribunal finds there are no adjustments to be made against GD on account of the reduced mezzanine floor or the second set of stairs. The counterapplication is allowed at $3,484.74 less $698.95, a net figure of $2,785.79. With GD only making its own claim in response to Logan years after the event and given the effluxion of time since it is not intended to make any orders with respect to interest.
Orders
The Applicant pay to the Respondent the sum of $2,785.79 within thirty days.
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