Logan Cold Storage Pty Ltd v GD Building Solutions Pty Ltd

[2021] QCAT 20

QUEENSLAND CIVIL AND
ADMINISTRATIVE TRIBUNAL

CITATION:	Logan Cold Storage Pty Ltd v GD Building Solutions Pty Ltd [2021] QCAT 20
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:	28 January 2021
HEARING DATE:	5 November 2020
HEARD AT:	Brisbane
DECISION OF:	Member Richard Oliver
ORDERS:	The Applicant is to pay the Respondent the sum of $3,000 by 26 April 2021
CATCHWORDS:	CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – THE COMMERCIAL BUILDING CONTRACT – where the applicant claims credits for overpayments for building work – where contract price agreed on the day the applicant signed the commercial building contract – where the mezzanine floor area had to be reduced in area to avoid formal Development Approval from the Local Authority – where discussions about the total contract price – whether the final contract price took into account the reduction in area of the mezzanine floor – whether stairs to the mezzanine floor included in the contract – whether applicant agreed to variation for the construction of the stairs – whether applicant should have been given a credit for the stairs – whether respondent failed to attend to defective or incomplete building work.
APPEARANCES & REPRESENTATION:
Applicant:	Self-represented by Ms Zhao, director of the Applicant
Respondent:	Self-represented by Mr Dee, director of the Respondent

REASONS FOR DECISION

1. On 18 March 2015  Logan Cold Storage Pty Ltd (‘Logan’) and  GD Building Solutions Pty Ltd (‘GD Solutions’) entered into a commercial building contract to construct a cold storage facility at Beringa, in the Logan area. The contract price of $1,116,500. Work commenced soon after the contract was executed and practical completion and handover was achieved by 18 December 2015.[1] The individuals behind each of the corporate entities involved in this project were Ms Linda Zhao for Logan and Mr Nathan Dee for GD Solutions.

   [1]Exhibit 3 (Statement of Nathan Dee dated 06.03.20), page 117.

2. During the course of the build there were a number of variations to the contract with price adjustments. At the conclusion of the works there remained a small amount outstanding to the GD Solutions of $3,484.74. The Respondent has filed a counterclaim for that amount of money.

3. More than 2 years after the work was completed, Logan claimed that it had been over charged $18,553.34 because the original mezzanine floor which was to be constructed within the warehouse facility, had been reduced in size and the cost of that had not been adjusted in the final contract. GD Solutions did not respond to that claim or pay the alleged credit and as a consequence, Logan commenced the proceeding in the Tribunal on 3 June 2019 claiming $20,256.40 which included interest on the amount claimed for the credit. The claim for the credit for the mezzanine floor was $14,666.67, plus “back interest” $2,420 at 10% for 1.5 years.

4. GD Solutions filed a response to the claim and made a counterclaim referred to above for money outstanding under the contract. The matter proceeded in the usual way to a compulsory conference and after that, the Tribunal made a direction that the Applicant could file an Amended Application. It did so and included in the Amended Application a further claim not previously made seeking a credit for money paid for the installation of a staircase to the mezzanine floor, which had been reduced in size. The additional cost of this was added to the contract price by way of a variation in the sum of $14,897.54.

5. It is GD Solution’s position that the contract price was adjusted for the reduction in the size of the mezzanine floor at the time it was executed by the Applicant’s representative Linda Zhao. As for the staircase, it says the original amended plans and specifications with the reduction in size of the mezzanine floor made no allowance for a staircase to the mezzanine floor. It was later included and this was the subject of a variation which was accepted by Logan.

6. Therefore the issues on Logan’s case are twofold. Firstly, is Logan entitled to a credit for the reduction in the size of the mezzanine floor. Secondly, should Logan be refunded the cost of the variation for the cost of the stairs to the mezzanine floor.

7. For GD Solutions, is it entitled to payment of the balance owing under the contract of $3,484.74.

Background

1. There was some urgency on the part of Logan’s directors to proceed with the construction of the cold storage facility as soon as possible. Another entity, presumably controlled by the directors of Logan, Friendship Group Pty Ltd, initially engaged GD Solutions to have conceptual architectural drawings prepared and then for the design and approval phase of the works. This was then, by mutual agreement, taken over by Logan and invoices issued for the preliminary work were sent to Logan and paid.

2. The design of the warehouse included a large mezzanine floor. This was to be used for storage and was originally designed with a staircase from the ground floor to the mezzanine floor for access. However, the size of the floor posed a problem because it would have been necessary to obtain a Development Approval from the Local Authority to include the mezzanine as designed. Also, the classification of the building would change to Type B which would then result in compliance with stringent fire ratings including a sprinkler system. This would increase building costs significantly which Logan was anxious to avoid. This is consistent from the email exchanges between the parties during the build. To avoid this additional cost, and delay, the size of the mezzanine floor design was revised down by about 1/3 and the access stairs deleted.

3. All of this was discussed between Nathan Dee and Linda Zhao at a meeting on 12 March 2015. The quotations, architectural drawings and specifications were given to Logan t to consider. It is Mr Dee’s evidence that the mezzanine floor was discussed and in support of this, it is referenced on the agenda for the meeting, amongst other things produced by the applicant for the meeting.[2]

   [2]Exhibit 3 annexure AO5

4. The item on the agenda is “access to mezzanine” and there is a tick beside it which GD Solutions, Mr Dee, contends supports his contention that Logan were aware of the need to reduce the floor size. I accept Mr Dee’s evidence and the inference from the agenda list on this point.

5. After that meeting, on Monday 16 March 2015, GD Solutions signed a Master Builders Contract and emailed it to Logan for Ms Zhao, to review before a further meeting which was conducted on 18 March 2015. The contract price was $1,140,018.00 (inc GST).

6. During the course of the 18 March  meeting, there was discussion about the price that was initially on the contract, and adjustments were made. Mr Dee’s evidence is that there was a reduction for the size of the mezzanine floor and other things which reduced the contract price by $21,380. After the price adjustment, and the discussion about the reduction in size of the mezzanine floor, Logan signed the contract with the reduced size mezzanine floor but, the plan that had been provided noted the stair access to the top floor. Mr Dee’s explanation for this is that having had discussions with the certifier, it was considered that there may be a way to install stairs at a later point in time and the notation on the plan was simply to demonstrate where the stairs would be included.

7. I accept Mr Dee’s evidence that the staircase was merely illustrative of where it could go at a later stage if certification could be obtained. I also accept his evidence that the cost of the reduction of the mezzanine floor was included in the $21,380 because, amongst other things, it is consistent with his costings, take off, of the builders cost to construct the floor

8. Ms Zhao contends that the contract was signed by Logan on the basis that the stairs would be included in the contract price and she also denies that there was any discussion about the mezzanine floor at that time and denies any discussion about a reduction in price for the mezzanine floor at that time. I do not accept her evidence on this point or generally. This is largely because the claims she now makes is entirely inconsistent with the course of events relating to Logan’s acceptance of the variation.

9. Subsequent to the signing of the contract, Mr Dee continued to do what he could to get a set of stairs included in the building approval by the certifier. There is support for this in an email[3] in which Mr Dee wrote to the certifier, Toby Spencer, querying whether, because the mezzanine was only going to be used for storage, a second set of stairs could be included. Ultimately, after further discussions between Mr Dee and the certifier, the second set of stairs was approved and included in the certified drawings[4].

   [3]Exhibit 3 A15.

   [4]Exhibit 3 A19.

10. What follows from this, and the difficulty here for Logan is that, the stars could not have been priced in because, the builder is only authorised to build that which has been certified by the building certifier. To do otherwise would expose the builder to a complaint to the Queensland Building and Construction Commission.

The mezzanine floor stair variation

1. On 22 June 2015, a progress claim was made[5] which included as a variation, the “additional set of office stairs, wall balustrade and hand rails to mezzanine”. The price had not been included at that time. Also, during this time there were meetings between Mr Dee and Ms Zhao. Then, at a later point in time, a further progress claim was made again noting as Item 1, the stairs to the mezzanine floor. There were exchanges of emails about the variations that had been priced in that progress claim but still at that point the stairs had not been priced up.

   [5]Exhibit 3 A25.

2. It was not until the progress claim including variations dated 21 July 2015 that the stairs had been priced at a total cost of $11,550 including GST. There had been some argument about the total cost of that progress claim but that did not have any impact on the cost of the stairs.

3. Then on 14 July 2015 to justify the cost of the stairs included in the progress claim, Mr Dee sent an email to Ms Zhao which provided particulars of the stair cost with some variation to design to reduce the cost to $10,695 plus GST or alternatively by varying the materials to be used, the cost could come down to $8,400 plus GST. In a response email of 16 August 2015, there were queries made as to the breakdown of the costs and the materials used[6].

   [6]Exhibit 3 A39-41.

4. Eventually, after these discussions verbally, I assume, and by email, an agreed price for the stairs to the mezzanine floor was $10,500 plus GST which, on the email of 14 July 2015, is noted as having occurred on 14 August 2015.

5. The important feature of this email exchange is that nowhere does Ms Zhao challenge directly, or even indirectly, the validity or the entitlement of GD Solutions to the variation for the cost of the stairs, the only dispute is about the materials to be used and the cost.

6. Logan’s position is that, through the evidence of Ms Zhao, it had no choice but to agree to the variations otherwise the project would be stalled. In an email of 17 August 2015, Mr Dee expressed his concerns about delay in approving variations and noted in that email correspondence that:

   We have provided you with discounts on all costings including variations throughout the project which to date totals $28,189.50.

   In the interests of moving forward, could you please approve all variations, presented to date, in writing. We have a progress claim due this week and would like to resolve all outstanding issues so we may progress with works.

7. That correspondence was followed by another email on 17 August 2015 (1 minute later)[7] in which the variations are set out and include variation 1 (stairs) and notes:

   (a)Variation 1 – originally $10,695 plus GST – revised amount - $10,500 plus GST – option to reduce scope to $8,400 plus GST.

   (b)Additional stairs have already been ordered as we believed that this variation was resolved when we agreed to the reduced price.

   (c)Please approve asap today or we will have to cancel stair order if not already made.

   [7]Exhibit 3 A43.

8. The response to this email is from Ms Zhao of 18 August 2015 in which she specifically addresses variation 1, the stairs. She instructs GD Solutions to:

   Supply and install additional set of stairs to mezzanine floor built same way as office stairs including the following …

9. Ms Zhao there sets out some specifications. The email then goes on to say:

   For the above variation, we only can approve it @ $11,000 include GST. The reasons are as follows:

   1.     We give your sub-contractors more jobs, they do two stairs together at one time, the rate should be much cheaper.

   2.     Comparing with stairs from GF to FF, this additional flight of stairs from first floor to mezzanine doesn’t include:

   tactiles top and bottom of stairs as they service mezzanine. You didn’t deduct this cost in your quote.

   3.     Your other jobs need to hire scaffolders well. It is not reasonable and fair to allocate all the hiring cost of this variation job.

   4.     We have searched market price, $11,000 include GST is enough money for doing this variation.

   In short we only can approve it at $11,000 including GST please consider. Otherwise just do it as per drawing.

10. Mr Dee responded to that email attempting to hold his ground, and then after a further email exchange where Ms Zhao said that Logan could only approve $11,550 to which ultimately, to move the job forward, Mr Dee agreed.

11. The exchange of emails in respect of the stairs is somewhat torturous but the point is, and it is worth repeating, that nowhere in the email exchange does Logan, or Ms Zhao, raise any complaint about the variation itself. In further progress claims[8] the variation for the stairs is costed at $11,550 including GST as finally agreed. Throughout the remainder of the job, even at the end of the job, there is no evidence, in writing at least, of any complaint by Logan as to the inclusion of the stairs as a variation.

    [8]Exhibit  3 A52.

12. Even in the final summary of accounts[9] where the balance of $3,484.74 is claimed in a tax invoice as the final payment, Logan’s response to that did not include any complaint about the stairs variation. Complaints were made but they related to other minor matters which included:

    (a)Installation of chiller entry platform.

    (b)Installation of stairs to chiller entry.

    (c)Archive room floor covering and painting.

    (d)Downpipe cover.

    (e)Post missing in storeroom.

    (f)Line marking.

    (g)Failure to provide a soil test.

    [9]Exhibit 3 A119.

13. The first time the issue of the variation for the stairs was raised was after the Compulsory Conference when the Amended Application was filed.

14. The only evidence that Logan can point to to assert that the stairs were included in the original price is the drawing which was produced at the meeting on 18 March 2015 which showed a staircase. Even if that is to be regarded as a contractual document to bind GD Solutions, as Mr Dee points out, it is the specification which takes priority and that staircase is not included in the specification. If there is any doubt about what occurred at the meetings on 12 March 2015 and 18 March 2015 I accept the evidence of Mr Dee because it is entirely consistent with what occurred subsequent to the execution of the contract and entirely consistent with the exchange of emails between Ms Zhao and Mr Dee concerning the variation for the stairs. I find that the stairs to the mezzanine were never included in the contract.

15. I therefore reject Ms Zhao’s evidence where it conflicts with Mr Dee’s. This is  principally because it is inconsistent with the documentary evidence produced during the course of this construction. Ms Zhao has sought to manufacture a claim simply relying on the drawing and the unfounded assertion that Mr Dee was exercising some threat to stop work if the variation was not agreed to. Once again this notion is dispelled by the very fact that Mr Dee negotiated down on the cost of the variation, just so he could move on with the job.

The credit for the reduction in the mezzanine floor area

1. Similarly, in respect of the credit for the reduction of the size of the mezzanine floor, I similarly accept Mr Dee’s evidence in preference to that of Ms Zhao. The first time this issue was raised by Logan was in June 2017 in an email to GD Solutions in which it alleges that GD Solutions did not provide any credit for the reduction of the mezzanine floor size. It stated that:

   We are writing this letter to advise that there is an overcharge for a mezzanine floor variation which involves a reduction in the value of the work.

   You provided master builders version contract and we signed it on 18/03/2015. There is a clear definition for ‘variations’ in Masters Builder’s website. Variations are changed as to the original contract of the work which involve either an addition or reduction in the scope or value of works. The signed contract was based on the following drawings on 10/03/2015 (see page 1 of the contract).

   1.     You charged us $22,000 plus GST for the mezzanine floor (see payment schedule page 2). Your drawing A01 (VA issued 10/03/2005) shows that the mezzanine area is 60.8sqm.[10]

   [10]Exhibit 3 A124.

2. GD Solutions’ response was that upon payment of the final invoice it was happy to have a discussion with Ms Zhao about this issue.

3. The difficulty with this contention is that Logan alleges that the reduction in the size was a variation of the original contract price. However, at the meeting on 18 March 2015, Mr Dee’s evidence is, and Ms Zhao agreed, that there was a discussion about the reduction of the mezzanine floor. Logan knew prior to the signing of the contract that the mezzanine floor would be reduced to one third of its original design for the reasons stated above. The price was then adjusted to address this, and other matters, and signed by Logan on the basis that the mezzanine floor would be smaller. This is a fixed price contract and having accepted Mr Dee’s evidence on the discussions that occurred at the time, the contract price was agreed, and the contract signed in the knowledge of the mezzanine floor size being reduced.

4. Therefore, Logan are not entitled to a credit as claimed. This claim will also be dismissed.

Sundry other claims

1. In a further response to GD Solutions’ statement of evidence, Logan makes a further claim for other unfinished or defective work. This did not form part of the amended application and for that reason alone it should be dismissed. It is addressed in Ms Zhao’s statement of evidence in support of the main claims.[11] Also GD has made a submission with respect to these matter so it is appropriate to deal with them sequentially. One would expect these matters to be raised during the build not after the issuing of the final invoice. There is no evidence of that.

   [11]Exhibit 1 pages 6 – 7

   Chiller entry platform

2. The building certifier engaged for this project has ‘signed off’ on the job meaning that the builder has constructed the works in accordance with the plans and specifications. I accept GS Solutions’ submission that the specification did not require the installation of non-slip galvanised checker plate. Again raised late in the day in an email of 14 February 2016.

   Chiller entry stairs

3. There was no specification for closed-in risers to these stairs. Again I accept Mr Dee’s evidence on this point and once again, the stairs have been ‘signed off’ by the certifier.

   Downpipe cover

4. The cover to the downpipe is missing. Given its location it would be sensible for it to have a protective cover. However, GD Solutions was prepared to address this in the defects liability period but Logan refused to pay the final invoice. Despite that, a cover should have been installed when the job was done. As Ms Zhao says the forklift passes by it regularly and it would be difficult to repair if badly damaged. She has obtained a quote of $165 for this work. I propose to allow $211.79 (rounding) given the quote was obtained some time ago.[12]

   [12]Applicants submission filed 21.02.2020 Ex 50

   Floorcoverings and painting

1. I accept Mr Dee’s submission and evidence on these items which are not included in the works to be undertaken.

   Electricity and Water

2. GD Solutions were prepared to consider this in its email to Logan on 29 February 2016. Although now disputed, and GD Solutions rely on usual practice with respect to these charges during a building programme, which seems reasonable, there is no evidence of any direct discussion with Logan/Ms Zhao about these ongoing costs. On that basis I propose to allow the $276.53 as claimed simply for the purposes of finality.

Decision

1. I have found against Logan in respect of both the claims for a credit for the reduction in the mezzanine floor area as well was the credit for the variation. These claims are dismissed.

2. As for the sundry items, I am prepared to allow a total of $484.74[13] for the reasons stated.

   [13]Increased for the purposes of rounding.

3. As a consequence of these findings GD Solutions is to pay Logan $484.74. Logan is to pay GD Solutions $3,000.00.

4. The nett effect is and the Tribunal’s order will be that Logan is to pay GD Solutions the sum of $3,000.00 by 26 April 2021.