M J G Constructions (Australia) Pty Ltd v Folkes

[2010] QCAT 193

CITATION: M J  G Constructions (Australia) Pty Ltd v Folkes [2010] QCAT 193

PARTIES:	M J  G Constructions (Australia) Pty Ltd
v
Mr & Mrs Kevin & Serena Folkes

APPLICATION NUMBER:   BD071-08     

MATTER TYPE: Building matters

HEARING DATE:     27,28 and 29 April 2010

HEARD AT:  BRISBANE

DECISION OF: Mr A Crawford

DELIVERED ON: 11 May 2010

DELIVERED AT:      BRISBANE 

ORDERS MADE:

1. The respondents pay the applicant the sum of $62,208.71 on or before 4:00 pm on 30 May 2010.

2. There is no order as to costs.

CATCHWORDS :  Contractual Building Dispute, Claim for Money Owing, Damages for Breach of Contract, Defective Workmanship and Termination of a Building Contract

APPEARANCES and REPRESENTATION (if any):

APPLICANT:	M J  G Constructions (Australia) Pty Ltd represented by Mr Gilbert, a Director of the Applicant
RESPONDENT:	Mr & Mrs Kevin & Serena Folkes represented by themselves

REASONS FOR DECISION

Introduction

1. MJG Constructions (Australia) Pty Ltd (“the applicant”) claim the sum of $84,038.71 and interest, pursuant to a cost plus contract entered into between the applicant and Kevin and Serena Folkes (“the respondents”), for the construction of improvements of the dwelling including a renovation of the existing improvements at the respondents’ property situated at 121 Alison Road, Carrara (“the property”).  The respondents deny any monies are due and owing and counterclaim for monies overpaid by the respondents to the applicant, damages for breach of contract and the cost to rectify the defective work, interest and costs.

Background

2. The original application was filed in the Commercial and Consumer Tribunal (“the CCT”) in February 2008.

3. The CCT has amalgamated into the Queensland Civil Administrative Tribunal (“QCAT”).  QCAT now hears and decides all matters previously dealt with by the CCT: s256 Queensland Civil Administrative Tribunal Act 2009 (“the QCAT Act”).

4. There have been a series of directions and orders by the Tribunal in relation to this matter.

5. In particular, on three occasions, Mrs Serena Folkes has been ordered to file with the Tribunal her final statement by certain dates, the last date being 6 April 2010.  The Tribunal ordered that if she had not filed her final statement by that date, the respondents would be restricted to rely only upon the material already filed.  That is what eventuated at the hearing.

6. Mr Michael Gilbert for the applicant relied upon his statement dated 31 July 2008 and his affidavit sworn 18 February 2009.

7. He said that the applicant and the respondents entered into a cost plus contract in respect of the alteration of the property. That contract was in accordance with s.55(1)(b) of the Domestic Building Contracts Act 2000 (“the DBC Act”). That contract contained a cost plus conversion special conditions insert, signed by the respondents.[1]

[1] Exhibit 5.

8. Work commenced on 21 June 2007 and progressed between June 2007 and January 2008.

9. A series of progress claims were issued by the applicant to the respondents. 

10. Mr Gilbert said there were claims totalling $423,879.80 and the respondents made payments of $340,931.09.

11. Mr Gilbert said the job was an extensive renovation and it was very hard to put a fixed price on the whole job without doing a substantial amount of work and that the physical premises were uncertain.  He discussed the need for a cost plus contract with the respondents, to which they agreed, and they signed the cost plus conversion special conditions information sheet.

12. Mr Gilbert said the budget was controlled by the respondents and directed by the respondents.  It was agreed that he would charge for what the costs were plus a margin of 15% being his profit. 

13. In December 2007 Mr Gilbert raised concerns with the respondents as to the non-payment of invoice no. 307 for $48,042.37 which had been delivered to them in person by him on 4 December 2007.  He said that invoice covered work done to date and referred to the invoices at pages 172 to 185 of his bundle of documents to his statement dated 31 July 2008.[2]  There was one missing invoice for $48.00 but he said that was subsequently found.

[2] Exhibit 6.

14. On 14 January 2008 Mr Gilbert forwarded a letter to the respondents advising them that they were in breach of the contract for non-payment.  He said unless the payment issues were settled, the work would be suspended.  On 15 January 2008 the applicant issued to the respondents invoice no. 310 dated that date in the sum of $35,996.34.

15. Both invoices 307 and 310 have not been paid.

16. On 7 February 2008 the respondents did by notice purport to terminate the contract.  However, on 8 February 2008 the applicant notified the respondents that it rejected the termination and further notified the respondents that the conduct of the respondents purporting to terminate the contract amounted to a repudiation of the contract which was accepted by the applicant.

17. Mr Gilbert said he provided all invoices as evidence of the work done.  There were variations from the plans that were drawn by the respondents’ draftsman but these variations were under instructions from the respondents.  They were mostly verbal.  The respondents were on site.  The respondents were unhappy with the draftsman’s plans from day one.  The plans were really a guideline of the type of work to be carried out and there were many alterations, amendments and changes to the designs as work proceeded. 

18. Mr Gilbert also said that his quantity surveyor, Mr Lowry, in his report dated 14 January 2009 estimated the value of the work completed by the applicant to be $449,210.00.  In a report commissioned by the respondents by quantity surveyor Mr Costanzo dated 26 May 2009 he estimated the value of the work completed by the applicant to be $419,699.45.

19. The applicant stated that the eight claims above mentioned amounted to $423,879.80.  The applicant considered that the progress payments issued for the work actually carried out were very close in value to the values estimated by both quantity surveyors.  Thus there was no basis upon which the respondents could say that they had been overcharged.

20. Mrs Serena Folkes, in her evidence, relied upon her two statements dated 19 May 2009 and 19 August 2009.  She agreed that she and her husband signed the cost plus special conditions insert but asserted it was not part of the contract.

21. I note that in the progress payment table on page 6 of schedule 2 of the contract there was reference to the amount of the contract being the actual cost of the work plus the builder’s margin of 15%.

22. Mrs Folkes did not challenge Mr Gilbert’s evidence in any direct or meaningful way regarding the contract other than to say that she disagreed with the fact that the cost plus special conditions insert was not included as part of the contract.

23. Mrs Folkes’ previous solicitors instructed Mr Paul Haskard, building consultant, to provide a report which he did dated 10 March 2009.

24. This report was a result of his instructions to inspect alleged defects and incomplete building work at the property.

25. The letter of instruction from Sawford Voll Solicitors dated 3 December 2008 to Mr Paul Haskard indicated that they were instructed by the respondents that they entered into a fixed price contract with the applicant, not a cost plus contract.  Mr Haskard prepared his report on the basis of those instructions.

26. His report mentioned 100 items with a total costing of $152,559.00.

27. Mr Haskard said he was not aware that the tiling was contracted out to Morrissey Tiling by the respondents under cross-examination by Mr Gilbert.  The cost of the tiling contractors (items 15, 16, 21, 28, 29, 43, 66, 67, 80, 84 and 92) totalled, according to Mr Haskard, $12,617.00.

28. Further, in the summary of costing there are four credits given (items 32, 35, 60 and 98) in the total sum of $19,960.00.

29. Mr Haskard, according to Mr Gilbert, had costed the work allowed for and not done and therefore a credit was due on the basis that he was viewing the contract as a lump sum contract.  A cost plus contract, Mr Gilbert said, led to the respondents being only charged for what was actually done.

30. Further, Mr Gilbert asserted that in the light of the fixed price contract assumed by Mr Haskard there were a number of items identified by Mr Haskard as not constructed as per the plans.

31. These were items 8, 38, 39, 47, 49, 52, 53, 54, 55, 56, 58, 69, 75, 78, 88, 93, 94, 95, 96, 97 and 99 which totalled $80,322.00.

32. Totalling the sum of $80,322.00, $19,960.00 and $12,617.00 gives $112,899.00.

33. Taking this sum away from $152,559.00 leaves $39,660.00.

34. Mr Haskard’s evidence initially was that his report showed 50% of defective work and 50% of incomplete work.

35. He also referred to omissions to do certain work.  I find Mr Haskard’s initial evidence to be reasonable.  Mr Gilbert agreed with the proposition of 50% work as being defective and 50% work being incomplete in respect of the balance of $39,660.00.

36. Mr Gilbert conceded and I consider rightly that the sum of $19,830.00 (50% of $39,660.00) would be an appropriate figure for defective work.  When he left the premises, there were some things that needed to be repaired and he accepts that to be the case.

37. Mrs Serena Folkes gave evidence that at times was somewhat rambling and confused.  She said she was now not actively working and found her dealings with Mr Gilbert had caused her a lot of trouble.  She became very distressed when she left the house on 30 July 2007 and only returned on 10 March 2010.

38. Annexure SF67 to her undated statement filed 19 August 2009, she said, sets out the costings of all the items/services that they have paid or part paid.

39. She agreed, for example in item 44, that the respondents paid $13,200.00 to Morrissey Tiling for the tiling work.  She said this was because they had to.  She maintained, however, that Mr Gilbert should be responsible for the tiles including the rectification and completion of the tiling work set out in Mr Haskard’s report.  When asked to provide proof of Morrissey Tiling not being engaged by the respondents (which was their assertion), she referred to an email in which she referred to the applicant’s tiler.

40. Mr Englert, expert painter, provided a report on behalf of the respondents which was filed on 13 March 2009[3] and showed to repair and paint the external and internal parts of the property would cost $20,052.00 plus GST.

[3] Exhibit 13.

41. Again, this report was based on the instructions that the contract was a fixed price contract.

Submissions

42. Mr Gilbert submitted that in invoice no. 310 Mr King, his painter, had charged for painting works one progress payment for $2,200.00 and another for works with $4,400.00 totalling $6,600.00.  Mr Gilbert estimated that the work done by Mr King was about half the internal work of the house.

43. Mr Englert estimated that the cost of repairs and completion for the interior work was $11,722.00.  Half of this amounts to $5,861.00.  However, when pressed, Mr Gilbert would not concede any part of this should be his responsibility.

44. Mr Gilbert provided the applicant’s written submissions.

45. In those submissions he said that the contract was entered into under s.55(1)(b) of the DBC Act.

46. S.55 of the DBC Act says as follows:

Cost plus contracts

55.(1) A building contractor must not enter into a cost plus contract that would be a regulated contract unless

(a)the contract is included in a class of contracts prescribed under a regulation; or

(b)the cost of a substantial part of the subject work can not reasonably be calculated without some of the work being carried out.

Maximum penalty - 100 penalty units

(2) A building contractor must not enter into a cost plus contract that would be a regulated contract unless the contract contains a fair and reasonable estimate by the building contractor of the total amount the building contractor is likely to receive under the contract.

Maximum penalty - 100 penalty units

(3) If a building contractor enters into a cost plus contract in contravention of this section, the building contractor can not enforce the contract against the building owner.

(4) However, the tribunal may, on an application made to the tribunal by the building contractor, award the building contractor the cost of providing the contracted services plus a reasonable profit if the tribunal considers it would not be unfair to the building owner to make the award.

47. Mr Gilbert submitted that upon the basis that it was a renovation of an existing house with existing services and improvements, the cost of all the sub trades and the foundation and the site excavation work, the cost of a substantial part of the job could not be calculated until part of the works were performed. Accordingly, the applicant submitted that these considerations satisfied s.55(1)(b) of the DBC Act.

48. Mr Gilbert further submitted that a contract price estimate was provided to the owners under s.55(2) of the DBC Act. The estimate was the handwritten document consisting of a breakdown on totals or sub trades and items and showing exclusions and inclusions.[4]

[4] Annexure SF96.

49. Mr Gilbert submitted that the work cost is relatively consistent with the written estimate except for the extent the scope of works were varied from commencement.  He said this in defence of the submission by Mrs Folkes that the estimate was not fair and reasonable for the work to be performed.

50. Mr Gilbert said the estimate provided for over $408,000.00.  The owners had not paid anywhere near that amount by the time payment stopped and work stopped.  The final and completed cost was likely to have exceeded the estimate because of the selections and instructions of the respondents after the work started.

51. Mr Gilbert further submitted that as regards the respondents’ allegations of monies overpaid, the quantity surveyor’s evidence supported the view that that could not be regarded as correct.

52. Regarding the claims for breach of contract and misrepresentation and the rental and storage costs, Mr Gilbert submitted that he was not responsible for that as the works were stopped because of the non-payment by the respondents.

53. Regarding the cost of rectification, Mr Gilbert conceded that the figure of $19,830.00 was an appropriate figure.

The respondents Submissions

54. Mrs Folkes said that there were no monies due and owing.  However, there were overpayments.  When she was asked to quantify these, she had difficulty in doing so.

55. Regarding the claim for breach of contract and misrepresentation, she said she could not put a figure on the damages for that.  Regarding the costs of rental, she asserted the figure of $23,984.00 was appropriate.  She was still having to pay storage costs.

56. She also asserted that the respondents were due to be paid $152,559.00 pursuant to the costings by Mr Haskard.

57. Finally she submitted that the total amount of the counterclaim amounted to $211,501.39.

58. Mrs Folkes also provided written submissions.  They were a copy of the submissions previously provided by her solicitors on 16 July 2009.[5]

[5] Exhibit 15.

Observations and Findings

59. Having heard the evidence in this matter, I prefer and accept the evidence of Mr Gilbert to the evidence of Mrs Folkes.  Mr Gilbert gave evidence in a forthright and direct manner and made an appropriate concession regarding the cost of rectification of defects.

60. Mrs Folkes’ evidence was less persuasive and at times somewhat confused.

61. I find that the contract between the parties was a cost plus contract entered into on 21 June 2007 pursuant to s.55(1)(b) of the DBC Act.[6]

[6] See Versace, L. Lavis J. & N. [2005] QCCTB 2.

62. I find that the requirements of s55 (2) of the DBC Act have been satisfied.

63. I further find that the respondents have breached the contract by failing to pay the sum of $84,038.71 being the monies owing pursuant to invoices 307 and 310.

64. I further find that on 8 February 2008 the applicant notified the respondents that it rejected a purported termination by the respondents and notified the respondents that the conduct of the respondents purporting to terminate the contract amounted to repudiation of the contract which was accepted by the applicant.

65. Because of the findings I have made, the respondents’ claims for money overpaid and damages for breach of contract and/or misrepresentation are dismissed.

66. In relation to the costs of rectification work I consider that the applicant made a correct concession that the sum of $19,830.00 would be an appropriate figure for the applicant to pay to the respondents for the defective work.

67. I add to that figure the sum of $2,000.00 for the rectification work for painting.

68. Accordingly the sum of $21,830.00 should be subtracted from the sum of $84,038.71 leaving the sum of $62,208.71.

69. The circumstances of this case, in my view, do not enliven the Tribunal’s jurisdiction to award any interest on the amounts claimed.

Costs

70. I make no order as to costs.  The CCT’s jurisdiction in respect of costs was dealt with in Part 5 Division 7 of the Commercial & Consumer Tribunal Act 2003.  Section 70 provided that the purpose of the division was to have “parties pay their own costs unless the interest of justice requires otherwise”.  Further, subsection 71(5) provided that a party is not entitled to costs merely because that party was the beneficiary of an order of the Tribunal, or the party was legally represented at the proceeding.[7]

[7] These provisions have been considered by the Court of Appeal in Tamawood Ltd & Anor v Paans [2005] QCA 111.

71. The provisions impose a general rule that the parties should pay their own costs, unless good reason is shown in terms of the interests of justice for making an award of costs in the proceedings.

72. I note that the starting point regarding costs under the QCAT Act is set out in Section 100 as follows:

“Other than as provided under this Act or an enabling Act, each party to a proceeding must bear the party’s own costs for the proceeding.”

73. For the purposes of this case, the relevant legislation is that under the CCT Act.  In all the circumstances of this case I am of the view that I should make no orders as to costs which means that each party should bear their own costs.

Orders

74. The respondents pay the applicant the sum of $62,208.71 on or before 4:00 pm on 30 May 2010.

75. There is no order as to costs.