MDC Developments Pty Ltd v G & M Van der Vegt Nominees Pty Ltd
[2012] QCAT 565
•5 November 2012
| CITATION: | MDC Developments Pty Ltd v G & M Van der Vegt Nominees Pty Ltd and Anor [2012] QCAT 565 |
| PARTIES: | MDC Developments Pty Ltd (Applicant) |
| v | |
| G & M Van der Vegt Nominees Pty Ltd ATF G & M Van der Vegt Family Trust (First Respondent) | |
| Ray Wells Pty Ltd | |
| (Second Respondent) |
| APPLICATION NUMBER: | BD484-08 |
| MATTER TYPE: | Building matters |
| HEARING DATE: | 10, 11, 12, 13, 14 October 2011 |
| HEARD AT: | Brisbane |
| DECISION OF: | Andrew McLean Williams, Member |
| DELIVERED ON: | 5 November 2012 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | (a) The responsible officer at Master Builders Queensland release to the Applicant the sum of $31,916.00 presently held in trust. (b) The First Respondent pay to the Applicant the sum of $229,490.04 within 28 days. (c) The Second Respondent pay to the First Respondent the sum of $40,038.57 within 28 days. (d) The First Respondent pay the Applicant/Second Respondents’ costs of counsel preparing further submissions in response to the First Respondent’s unauthorised submissions (as were received by QCAT on 13 February 2012), to be assessed on the standard basis. |
| CATCHWORDS: | Residential Building Dispute – extensive undocumented variations – claim by builder for payment – meaning of “unreasonable hardship” and unfairness to building owner under s 84(4)(b) – unlicensed project management by Second Respondent – ineligibility for remuneration – onus of proof with respect matters in s 42(4) – assessment of claim on the basis of conflicting expert opinion – principles applicable to the assessment of expert evidence Domestic Building Contracts Act 2000, s 84(4)(a)(ii) Cooks Construction P/L v SFS 007.298.633 P/L (formerly trading as Stork Food Systems Australasia P/L) [2009] QCA 75 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT/SECOND RESPONDENT: | Mr Chris Tam of Counsel, instructed by Radcliff Lawyers (for the Applicant) & by Maunsell Pennington Solicitors (for the Second Respondent) |
| RESPONDENT: | Mr Mark Steele of Counsel, instructed by Lawyers Qld |
REASONS FOR DECISION
Preliminary Matters – submissions made without leave
This matter was heard at Brisbane over five days, commencing on 10 October 2011. At the conclusion of the hearing on 14 October 2011 the parties were invited to make written submissions, in accordance with directions for same, which were promulgated on 29 November 2011.
In accordance with those directions, submissions were received from the Applicant/Second Respondent on 5 December 2011. The First Respondent then provided written submissions on 9 January 2012. Submissions in reply were then received from the Applicant/Second Respondent, on 10 February 2012. That ought to have marked the close of submissions.
However, and despite the 29 November 2011 direction containing no provision for any other submissions, further reply submissions were received from the firm of solicitors acting for the First Respondent, on 13 February 2012. Predictably, these became the subject of an objection by the Applicant/Second Respondent, raised by way of an e-mail sent by their Counsel, on 14 February 2012.
Noting in particular the spirit of s 28 of the QCAT Act, I invited further short submissions from the First Respondent in order for it to demonstrate why these additional submissions should be considered. In the event that I might be persuaded, a further submission in response to the First Respondent’s “further reply” submissions was also invited from the Applicant/Second Respondent, which I indicated would only be taken into consideration in the event that I had been persuaded to receive the First Respondent’s unsanctioned submissions. The First Respondent’s justifying submission was received on 17 February 2012.
I record that I am unpersuaded by any of the points raised by the First Respondent, in its submission received on 17 February 2012. In blunt terms, the extra submissions contain no justification at all for this departure from the Tribunal’s directions regarding the filing of submissions, and the extra submissions are just surplusage. These are not in aid of resolution of the dispute.[1] Unnecessary additional cost and delay has been caused for the other parties. It follows therefore that the First Respondent’s further submissions dated 13 February 2012 and the Applicant/Second Respondent’s response thereto (dated 20 February 2012) will not be considered any further, as part of these reasons for decision.
[1]The observations made by Beach AJA in AJ Lucas Drilling Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd (No 2) [2009] VSCA 310 at [7] and [9] are apposite.
Parties to the Dispute
The Applicant, MDC Developments Pty Ltd (“MDC”), is a building company and now claims against the First Respondent, G & M Van Der Vegt Nominees Pty Ltd (as Trustees for the G & M Van Der Vegt Family Trust) (“VDV”) for the balance of monies alleged to be owing pursuant to a Master Builders domestic building contract, entered into between MDC and VDV, on 9 July 2007. In addition thereto the Applicant seeks a further sum in respect of 63 variations to the original contract, which it says were requested by the First Respondent, plus interest, and costs. This case, unfortunately like so many other domestic building disputes heard before QCAT, is one in which the variations have not been recorded in writing, despite the explicit requirements of Division 4 Part 7 of the Domestic Building Contracts Act 2000 (“the DBCA”).
The contract at the centre of this dispute relates to a residential extension and renovation to an existing 1980s residence, at Cotlew Street East, at Surfers Paradise. At all material times this house was the principal place of residence of Mr and Mrs Van der Vegt and their children, although it is to be inferred that the residence was held by VDV, as a trustee company. The original contract was for a scope of works quoted at $638,320.00. By the end of it, and because of a great many variations requested mostly by Mrs Van der Vegt, the First Respondent paid $1,156,424.15 for building works. The Applicant now seeks a further $379,374.13, plus interest,[2] and costs. The house in question has since been sold by VDV, at a loss.
[2]The claimed interest is a combination of contractual interest at 15% and interest at 10% pursuant to the Supreme Court Act 1995.
The Second Respondent, Ray Wells Pty Ltd, (“Ray Wells”) is a building design company. In addition to architectural drafting and building design work, Ray Wells held itself out to be a project management firm. Ray Wells is closely related to the Applicant, MDC. Indeed, at all material times Ray Wells operated from the same business premises as did MDC, and Mr Sam Ray was the sole director and shareholder in each company. On 19 January 2007,[3] Ray Wells were retained by VDV to act as project managers, overseeing the extension and renovation of the property on Cotlew Street East, on behalf of VDV.
[3] Exhibit 9.
Although Ray Wells Pty Ltd seeks no further recompense from VDV, notwithstanding that the full amount[4] of its agreed project management fee has not been paid, Ray Wells still finds itself joined as a party in these proceedings, by reason that VDV seeks the return of all the monies paid by it, for project management.
[4]The original project management retainer is exhibit 9. Ray Wells were to be paid $16,500. Because of enlargement in the scope of works this was later revised on 17 July 2007 (Exhibit 17), with the agreed fee for project management by Ray Wells becoming $33,000.00 inclusive of GST. As at the date of hearing the First Respondent had paid $25,102.55 to Ray Wells for project management.
Originally,[5] the claim against Ray Wells was expressed as a claim for damages for breach of contract, and in negligence. By its Counterclaim (originally filed in the Commercial and Consumer Tribunal), VDV seeks to assert implied terms into the contractual retainer for project management, akin to fiduciary duties, which are alleged to have been breached by Ray Wells. In the alternate, VDV alleges that breach of those same duties amounted to negligence.[6]
[5]By means of a Defence and Counterclaim filed in the former Commercial and Consumer Tribunal (CCT) on 28 January 2009.
[6] Consider paragraphs [36]-[38] of the Defence and Counterclaim.
Considering the negotiations and discussions between the First and Second Respondent prior to them entering into the project management agreement, as well as the actual terms of the project management retainer,[7] especially in light of those principles recognised by Gibbs CJ in Hospital Products Ltd v United States Surgical Corporation,[8] I do not think it appropriate to find implied duties such as those now alleged by VDV. These go beyond what would be necessary to give the project management agreement business efficacy. Rather than “over-engineer” the cause of action in this fashion, the parties were directed by the Tribunal to instead consider the Court of Appeal decision in Cooks Construction P/L v SFS 007.298.633 P/L (formerly trading as Stork Food Systems Australasia P/L) [2009] QCA 75 (“Cooks Construction”). This need arose by reason that it became very clear during the proceedings that at no time were either of Ray Wells Pty Ltd or Mr Sam Ray the holders of a QBSA contractor’s licence for project management. Indeed, during his evidence before the Tribunal, Mr Sam Ray was candid enough to admit that he was not even aware of the need to hold a contractor’s licence in order to operate as a project manager. Mr Ray was of the mistaken belief that it was sufficient for him to operate as a project manager under the aegis of the building license of MDC’s nominee builder, Mr Ken Ede. In light of that, by the time of final submissions, the First Respondent’s claim against the Second Respondent had transformed to become one in which VDV primarily seeks an order for recovery of monies paid pursuant to s 42(3) of the Queensland Building Services Authority Act 1991 (‘the QBSA Act’). Before turning to that issue as a first port of call, it is desirable to set out more fully certain factual matters, in order to set the scene for the various issues that will be determined by these reasons.
[7] Exhibits 9 and 17.
[8] (1984) 156 CLR 41, at 72, 73 and at 96-97.
Factual Background
In 2007, MDC was a relatively new building firm, as was the architectural design firm, Ray Wells. At all material times MDC operated as a licensed building contractor by means of a nominee builder, Mr Ken Ede, although Mr Sam Ray was the sole director, company secretary, and beneficial owner[9] of each of MDC and Ray Wells.
[9] Exhibit 8.
The first residential project undertaken by MDC and Ray Wells in Queensland was a house at Piper’s Point, Robina, owned by a family by the name of Hutchinson. Mr and Mrs Van der Vegt knew the Hutchinsons, and Mrs Van der Vegt, in particular, was impressed by the level of finish attained by MDC on the Hutchinson project. Mrs Van der Vegt therefore became intent to retain the services of the same building team as had been used by the Hutchinsons, on the basis that both she and her husband were time poor, yet still wanted a renovation with a high level finish yet that would be smooth and hassle-free. As became clear from Mrs Van der Vegt’s evidence, the Van der Vegts wanted the exact same service as had been received by their friends at Piper’s Point, which was described by Mrs Van der Vegt before the Tribunal as being “the full package, design right through to completion of construction, with a single point of contact – everything done in-house”. That desire did much to shape the nature and style of the contractual relationships eventually entered into by VDV with each of MDC, and Ray Wells.
The Contract with MDC
Early in 2007, Mr and Mrs Van der Vegt invited Mr Sam Ray to a preliminary meeting at their house at Cotlew Street East. Mr Ray told the Tribunal, and I now accept, that he explained to Mr and Mrs Van der Vegt that “Ray Wells did the design work” and that MDC was a related entity and “the construction arm”, and that MDC was conducted by means of a nominee builder, being Mr Ede. I also accept that Mr Ray advised Mr and Mrs Van der Vegt that he was involved with both companies.
At that meeting, Mr and Mrs Van der Vegt explained that they had in mind a budget of approximately $350,000, and wished, at this stage, to alter the layout of the upstairs bedrooms. Mr Ray then went away to do some preliminary drawings, and returned with these, approximately six weeks later.
When the Van der Vegts next met with Mr Ray, the initial plans that had been drawn by Mr Ray after their first meeting 6 weeks previously were rejected, on the basis that they had, by now, resolved to considerably enlarge their ambitions. The Van der Vegt wish list now also included a gymnasium; an extension to the meals area; various cabinet works in two bathrooms; replacement of the cabinet works in the existing kitchen (in-situ); and the addition of a balcony to the master bedroom. Revised plans were then prepared by Mr Ray in light of that enlarged scope of works.
On 5 July 2007 a quotation together with new drawings and a copy of the May 2005 version of the Master Builders Queensland Residential Building Contract was provided by Mr Ray to Mr and Mrs Van der Vegt, for their perusal and consideration. On 7 July 2007, Mr Ede and Mr Ray attended at the Van der Vegts' rental premises at Sorrento in order to discuss these documents. At that time Mr Van der Vegt indicated that he wished to have the documents examined by his solicitor, yet communicated to Mr Ray very shortly afterwards that this had happened, and all was in order.
On 9 July 2007 Mr Ede and Mr Ray returned to Sorrento in order to sign the contract.[10] Mr and Mrs Van der Vegt signed the contract in their capacity as directors of VDV. The contract was then countersigned by each of Mr Ede, and Mr Ray, on behalf of the builder, MDC.
[10]The contract is annexure SJR5 to the statement of Mr Ray, which itself became Exhibit 2 in these proceedings. The standard terms and conditions to that contract were admitted into evidence as Exhibit 3.
In her evidence, Mrs Van der Vegt was at pains to assert that she had no idea that Mr Ray was involved with MDC until such time as the parties had fallen into dispute and she was advised of this by her solicitor. Yet, the circumstances in which the contract was signed in early July 2007 just do not support that assertion. I find that at all relevant times Mr and Mrs Van der Vegt were aware that Mr Sam Ray was involved in a controlling sense with both of Ray Wells and MDC, and that they were aware that these two corporate entities were inter-related; and that they were untroubled by this. Indeed, the very inter-relatedness between these two entities was one of the key factors that was so attractive to Mr and Mrs Van der Vegt, as busy, time-poor home-owners, about to embark on a very substantial renovation.
As at the date of signing the contract, the agreed price had escalated to $638,320.00 and the scope of works entailed those further matters already referred to, in paragraph [16], above. Builder’s margin was agreed to be set at the rate of 20%.
Mr and Mrs Van der Vegt were particularly anxious for the project to be commenced expeditiously, so that they could move out of rental accommodation and back into their own home in time for Christmas. To accommodate that, construction commenced virtually immediately, on 11 July 2007. As works progressed Mr Van der Vegt took a back-seat role, primarily by reason of his own business commitments, which necessitated that he commute to Brisbane each day. Mrs Van der Vegt took on primary responsibility for liaison with MDC, and Ray Wells.
The Parallel Contract, with Ray Wells
As became clear from the evidence of Mrs Van der Vegt, she and her husband regarded themselves to be time-poor, and were motivated by the notion of their having a “hassle-free” renovation, provided by a full-service builder, with a single point of contact. In that context, in an email dated 19 January 2007,[11] Mr Sam Ray offered to them an additional optional service, in the form of project management. VDV took up that offer.
[11] Exhibit 10.
The scope of the project management retainer and fees for same are as now set out in exhibit 9, which was signed as having been accepted by Mr and Mrs Van der Vegt on 11 February 2007. The agreed fee for project management was later enlarged to $33,000 on or about 17 July 2007.[12]
[12] Exhibit 17.
As is intimated by the agreed increase in the fee to Ray Wells for project management, within one week after the commencement of construction on 11 July 2007, VDV begun to request extra things. The two most significant changes relate to the kitchen and the bathrooms.
In early August 2007, Mrs Van der Vegt communicated to Mr Ray that VDV now wished to fully (rather than partially) renovate the upstairs bathrooms, thereby also necessitating the removal of one wall in the master bedroom. In September 2007 Mrs Van der Vegt communicated that the kitchen was to no longer be refurbished in situ, but was to now be relocated into the existing dining room; thus necessitating further large-scale revisions to the existing scope of works downstairs. At this stage a revised scope of works was prepared and it was agreed that these additional works would cost a further $151,730. Although these two changes were the most significant (and best documented), thus commenced a process that came to define the project: one of constant fairly ad hoc variations, large and small, mostly instigated by Mrs Van der Vegt.
Mr Ray estimates that, in total, “more than 100” variations were requested by Mrs Van der Vegt. Mr Ray also said that these overwhelmed MDC, and that the prospect of the renovation being completed in time for Christmas 2007 quickly diminished. Mr Ray also told the Tribunal that he clearly communicated to both Mr and Mrs Van der Vegt that the sheer number and scale of their requested variations meant that it would now be all but impossible for MDC to complete the project in time for Christmas. Mr Ray said (and it is not now seriously disputed) that Mr and Mrs Van der Vegt acknowledged that their requesting additional changes would take extra time, and would also come at an additional cost to them. Despite that, in no instance was any effort made by MDC to complete variation documents in conformity with clause 12.4 of the contract. Nor did MDC seek to invoke clause 15 of the contract, in order to extend the time allowed for it to attain practical completion.
As now becomes clear from the materials before the Tribunal, Mrs Van der Vegt’s expensive tastes and enthusiasm for ad hoc revisions (sanctioned by her husband), when coupled with what can only be described as a bewildering, laissez-faire attitude by MDC towards the need to properly document variations, has now lead to the very state of affairs giving rise to these proceedings.
Project Management
It is convenient at this stage to dispose of VDV’s cross-claim against Ray Wells.
VDV contends that as Ray Wells was unlicensed for project management, it is ineligible to charge fees for same, because of the effect of s 42 of the QBSA Act 1991, despite VDV having already paid $25,102.55 to Ray Wells pursuant to the project management agreement.
In response thereto, Ray Wells contends that s 42 of the QBSA Act should not be regarded as applicable, because MDC’s nominee builder Mr Ede was licensed by the QBSA and acted as the “umbrella” nominee over both of MDC and Ray Wells.[13] The obvious difficulty with that submission (only faintly pressed by Counsel for Ray Wells), is that Mr Ede was licensed for building construction work, and was acting (quite legitimately) as the nominee for MDC. There is just no satisfactory documentary evidence of Mr Ede also performing in any nominee capacity for Ray Wells, which was separately retained by VDV to perform the distinct task of project management.
[13] Applicant/Second Respondent’s final submissions, paragraph 443.
Next, Ray Wells contends that VDV has the onus to prove that Ray Wells’ license was defective, and that the First Respondent had failed in that regard, as Mr Ray had “satisfactorily” explained his understanding of the necessary licensing requirements.[14] Although it be true that Mr Ray explained his understanding of the requirements for licensing, that explanation is unhelpful to Ray Wells. As became clear from his evidence, Mr Ray had absolutely no idea that a license was required for project management, such that Mr Ray’s understanding about the legitimacy of what he was undertaking was just plainly wrong. In these circumstances it is hard to conclude other than that s 42 of the QBSA Act has been triggered. Section 42 provides:
[14] Ibid.
42 Unlawful carrying out of building work
(1) A person must not carry out, or undertake to carry out, building work unless that person holds a contractor's licence of the appropriate class under this Act.
(3) Subject to subsection (4), a person who carries out building work in contravention of this section is not entitled to any monetary or other consideration for doing so.
(4) A person is not stopped under subsection (3) from claiming reasonable remuneration for carrying out building work, but only if the amount claimed—
(a) is not more than the amount paid by the person in supplying materials and labour for carrying out the building work; and
(b) does not include allowance for any of the following—
(i) the supply of the person's own labour;
(ii) the making of a profit by the person for carrying out the building work;
(iii) costs incurred by the person in supplying materials and labour if, in the circumstances, the costs were not reasonably incurred; and
(c) is not more than any amount agreed to, or purportedly agreed to, as the price for carrying out the building work; and
(d) does not include any amount paid by the person that may fairly be characterised as being, in substance, an amount paid for the person's own direct or indirect benefit.
(5) An unlicensed person who carries out, in the course of employment, building work for which that person's employer holds a licence of the appropriate class under this Act does not contravene this section.
Note for subsection (5)—
An individual must not personally carry out fire protection work unless the individual is authorised to carry out the work under this or another Act--see section 42C.
(5A) An unlicensed person who, as a subcontractor, carries out, or undertakes to carry out, building work for a licensed trade contractor, does not contravene this section if the work is within the scope of the building work allowed by the class of licence held by the contractor.
Note for subsection (5A)—
An individual must not personally carry out fire protection work unless the individual is authorised to carry out the work under this or another Act--see section 42C.
(6) An unlicensed person who holds an owner-builder permit does not contravene this section by carrying out building work permitted by the permit.
(7) An unlicensed person who carries out, or undertakes to carry out, building work in partnership with a person who is licensed to carry out building work of the relevant class does not contravene this section.
Note for subsection (7)—
An individual must not personally carry out fire protection work unless the individual is authorised to carry out the work under this or another Act--see section 42C.
Also, section 56 states that a licensed contractor may carry on business under the contractor's licence in partnership with an unlicensed person subject to the conditions stated in the section.
(8) An unlicensed person who carries out, or undertakes to carry out, design work does not contravene this section if—
(a) the person carries on business as a landscape architect; and
(b) the person carries out the design work, or undertakes to carry it out, as part of the person's work as a landscape architect; and
(c) the design work is of a type ordinarily carried out as an appropriate or necessary component of a landscape architect's work.
(8A) A consumer who engages 1 or more licensed contractors to carry out building work for the consumer does not contravene this section if the consumer does not provide building work services for the work.
Examples of a consumer who does not provide building work services—
a consumer who engages a licensed builder to build, and carry out all building work services for, a new residence
a consumer who, as a principal, enters into construction management trade contracts for building work and engages a construction manager for building work services for the work
(8B) A person who holds any of the following licences does not contravene this section only by doing something permitted under the licence—
(a) a nominee supervisor's licence;
(b) a site supervisor's licence;
(c) a fire protection occupational licence.
(9) A person who contravenes this section commits an offence.
Maximum penalty--250 penalty units.
(10) Subsection (4) applies to building work carried out on or after 1 July 1992, unless the entitlement to payment for the carrying out of the building work was—
(a) before the commencement of this section, decided by—
(i) a court; or
(ii) the tribunal; or
(iii) an arbitrator or another entity authorised to make a binding decision about the entitlement; or
(b) before 2 March 1999, the subject of—
(i) a claim or counter claim filed in a court; or
(ii) an application made to the tribunal; or
(iii) a reference to an arbitrator or another entity authorised to make a binding decision about the entitlement; or
(c) provided for as a term of a binding agreement entered into before the commencement of this subsection, but only if the binding agreement--
(i) is between—
(A) 1 or more consumers and 1 or more building contractors; or
(B) 1 or more building contractors and 1 or more other building contractors; and
(ii) was entered into to resolve a dispute between some or all of the parties to the binding agreement; and
(iii) is not the contract for the carrying out of the building work as originally entered into, or as originally entered into and as subsequently varied.
(11) In subsection (10)—
“tribunal” means the Queensland Building Tribunal under this Act before the commencement of this subsection.
(12) In this section—
licensed trade contractor means a licensed contractor other than the following—
(a) a licensed builder;
(b) a licensed contractor who holds a contractor's licence authorising the licensee to carry out completed building inspections.
The effect of s 42 was explained by Keane JA (as he then was) in Cooks Construction (supra) (at [37]-[49]) as follows:
“Section 42(1) renders illegal the making and performance of a contract for building work by an unlicensed builder. It is the conduct of the builder which is struck at. The provision is plainly intended to operate for the benefit of the other party to the building contract.
It is clear from the terms of s 42(3) and s 42(4) that neither provision purports to create a right of action to recover money in any person. Rather, each subsection is concerned to regulate a cause of action for payment which is assumed to have arisen, either under contract or under the principles of the common law which permit claims for payment for work done at the request of another. These common law claims have been variously described as claims for quantum meruit or in quasi-contract or to prevent unjust enrichment.
Section 42(3) is, in terms, concerned to sterilise any claim which might otherwise be made under a contract or under the common law by an unregistered builder. Section 42(4) is concerned to impose limitations upon the right of action at common law which it preserves against the sterilising effect of s 42(3). Without s 42(4), the entitlement of an unregistered builder to payment which would, apart from the Act, arise upon the performance of work by the builder, would be defeated by s 42(1) and s 42(3).
Section 42(4) and the onus of proof
In my opinion, the course taken by the appellant below in assuming the onus of proof of its claim pursuant to s 42(4) of the Act was correct. The language of s 42(3) and s 42(4) of the Act is a clear statement of legislative intention that an unlicensed builder may recover payment for building work carried out in contravention of s 42(1) and contrary to s 42(3), but only to the extent that it proves a claim in conformity with s 42(4). As I have said, no right of action is conferred by s 42(4) of the Act. Rather, s 42(4) assumes the existence of a common law right to remuneration which it preserves against the operation of s 42(3) while at the same time imposing conditions upon the availability and extent of that right. Unless the builder has a good claim conforming to these conditions, the builder's right to reasonable remuneration cannot avail the builder against the operation of s 42(3).
It is true that, as the appellant argues, the operation of s 42(3) of the Act is qualified by s 42(4). But it is also clear that s 42(4) permits an unlicensed builder to claim "reasonable remuneration for carrying out building work, but only if the amount claimed" satisfies the criteria in paragraphs (a) to (d). It is only the amount of the claim so quantified that the builder may recover despite s 42(3). Absent a good claim so quantified, the operation of s 42(3) is, for practical purposes, unqualified by s 42(4). If the legislature had intended that s 42(3) as amended should read "Subject to the absence of any claim under subsection (4)", so as to cast the burden of disproof of any claim for reasonable remuneration on the other party to the contract, it could easily have said so.
In my respectful opinion, it is important that the concern of the courts to avoid an unjust outcome in a particular case should not distort the operation of a statute intended to encourage the licensing of builders by disadvantaging unlicensed builders and advantaging consumers of building services at their expense. It is hardly surprising that the legislature should have left the burden of proving a claim for reasonable remuneration on the builder. What would have been surprising would have been a provision which cast the burden of disproof of an unlicensed builder's claim on the consumer of building services. What is most surprising, of course, is the failure of the builder in this case to adduce evidence capable of proving a claim for an amount of reasonable remuneration in conformity with s 42(4) of the Act.
Ordinarily, the law expects that "he who asserts must prove". There is a number of textual indications that this expectation has not been altered in the case of s 42(4) of the Act. First, as I have already said, s 42(4) contemplates the making of a quantified claim by an unlicensed builder. There can be no doubt that where the builder is making a claim to recover payment of reasonable remuneration which has not been paid by the other party, the builder bears the onus of proving the amount to which it is entitled in conformity with s 42(4). There is no indication in the text of s 42 that the onus of proof shifts to the other party (and becomes an onus of disproof) if progress payments have been made under the contract which s 42(1) and (3) have sterilised. It would be distinctly odd if the onus of proof of a claim under s 42(4) were to be altered by the fortuitous circumstance of the making or non-making of a progress payment by the other party to the contract.
Secondly, the evident policy of the Act is to improve building standards and to protect the interests of those who depend on the provision of services by builders. To this end the Act requires builders to be licensed. It is unlikely that the legislature intended to cast upon persons to whom building services are provided, many of whom will be unsophisticated consumers, the onus of establishing the reasonable remuneration payable to the unlicensed builder in conformity with s 42(4). This is especially so when one bears in mind the practical reality that the information necessary to formulate such a claim in conformity will be in the possession of the builder.
The appellant's submission, as it ultimately emerged under the pressure of argument on the appeal, was that the introduction of the words "subject to subsection (4)" in s 42(3) by the 1999 amendments had the effect that, so long as there was some apparent basis for a claim by an unlicensed builder for reasonable remuneration for building work – even though that claim might be unquantified – the other party to the transaction could not enforce a claim under s 42(3) for the recovery of money paid to the unlicensed builder. The appellant argued that, although its claim in this case might not have been quantified by the evidence which it adduced, nevertheless it was sufficiently apparent that it had a real basis for a claim to some amount in conformity with s 42(4) that the respondent could not enforce a claim for recovery of payments made for the work, unless the respondent itself discharged the burden of proving that the amount properly claimed by the appellant in conformity with s 42(4) was less than the amount of payments already made by the respondent. In that event the respondent would be entitled to recover only the amount of any balance whereby the payments made by it overstepped the amount properly due to the builder by way of reasonable remuneration.
This submission has the attraction of affording a plausible basis whereby the apparent injustice of the outcome in this case might be avoided. Fundamental to this submission, however, is the proposition that a person who has paid an unlicensed builder for building work is obliged to discharge the onus of proof of the amount properly recoverable by the unlicensed builder in accordance with s 42(4) as a condition of a claim for the recovery of the amount paid to an unlicensed builder. As I have endeavoured to explain, that proposition derives no support, either from the text of s 42, or from the policy of the section.
For these reasons, I conclude that it is only to the extent that a claim for reasonable remuneration is made out by the builder in conformity with s 42(4) that the operative effect of s 42(3) upon the rights and liabilities of the parties is affected.
The operation of s 42(3)
It is convenient now to consider more closely the legal effect of s 42(3) upon the rights and liabilities of the parties to a contract which involves the performance of building work.
In Marshall v Marshall, McPherson JA identified the entitlement in the payer to recover moneys paid to an unlicensed builder as the reciprocal of the builder's disentitlement to receive the payment. On this analysis, no other fact, such as, for example, mistake on the part of the payer, is necessary to give rise to the payer's cause of action for recovery of the moneys paid. McPherson JA said:
"In my opinion, the effect of s 42(3) is to prevent an unlicensed builder, in proceedings of any kind, from recovering the price or any part of it payable under a contract for building work carried out in contravention of the section. Taken by itself, that might perhaps not prevent a builder from receiving money voluntarily paid by the other party. The terms of s 42(3) are, however, very wide. A person who carries out work in contravention of s 42 is 'not entitled' to any 'monetary consideration' for doing so. According to the ordinary meaning of those words, a person receives a 'monetary consideration' for carrying out work if he is paid for doing it. The sum of $51,000 paid by the plaintiff to the defendant satisfies that description. Counsel were unable to refer the Court to authority bearing in any relevant way on the meaning of 'entitled' in a context like this. But s 42(3) expressly declares it to be money to which the recipient is 'not entitled', which can only mean that it is money to which he has in law no right or title. If that is so, there is no identifiable basis on which he can, as against the person who paid it, claim to keep or retain it or its equivalent" (emphasis added).
Ray Wells has not satisfactorily adduced any evidence regarding matters identified in s 42(4) of the QBSA Act, thereby making out any right to recover an amount for reasonable remuneration. Accordingly, it follows that the disentitlement to any remuneration whatsoever – as caused by the legislative effect of s 42(3) – remains, unfettered. Consistent then with the observation of McPherson JA in Marshall v Marshall,[15] as quoted by Keane JA in Cooks Construction (above), Ray Wells must “disgorge”[16] the sum of $25,102.55 already received by it from the First Respondent, for project management.
[15] [1991] 1 Qd R 173 at 176.
[16] Cooks Construction [2009] QCA 75, per Keane JA, at [57].
Given that Ray Wells has unrightfully had the benefit of the fees paid to it for project management it has thereby denied VDV the benefit of retention that money. Interest should now be payable to rectify that. I fix interest at the rate of 10% for a period of four years and six months. This amounts to $11,296.15.
Importation of s 42 of the QBSA Act into the DBCA?
Before proceeding to determine the claims by MDC against VDV, it becomes necessary to deal with VDV’s further submissions regarding s 42 of the QBSA Act. In its final written submissions, VDV submits that the effect of Cooks Construction goes much further than merely disentitling Ray Wells to its contractually agreed project management fee; contending that it also precludes MDC from much of its right to be remunerated, under its own contract with VDV, as well. That argument,[17] would have it that many of the subcontractors who performed work on the Cotlew Street East project were unlicensed contractors, and MDC were under a positive obligation to disclose that fact to QCAT in order to assist in the determination of what amounts to “reasonable remuneration” for purposes of s 42(4) of the QBSA Act. Furthermore, VDV raises s 84(4)(b) of the DBCA and submits that it would now be unfair to it as the building owner to require it to pay for unlicensed building works by these subcontractors, when such payment would be prohibited by s 42(3) of the QBSA Act, as no person has yet proved a claim for payment of reasonable remuneration under s 42(4) of that Act for those subcontract payments. It is curious, tricky submission, raw and inchoate in form. I have a number of difficulties with it.
[17] See paragraphs 50-64 of the First Respondent’s final written submissions.
Firstly, it is to be noted that during the hearing itself on 11 October 2011 Counsel for VDV conceded that the various matters raised by VDV regarding the license status of various sub-contractors did not disentitle MDC from making any claim for payment. Counsel for VDV was at pains, (correctly in my view), to preface his remarks by stating that license status was now a problem for Ray Wells, rather than MDC.
Next, as a matter of evidence, I cannot be satisfied that many of the subcontractors used on this project by MDC were in fact unlicensed, as is now alleged, as has been demonstrated in the Applicant/Second Respondent’s reply submissions. In light of that demonstration, I am just not confident in the factual accuracy of the assertion regarding unlicensed subcontractors, and will not therefore act on it.
Finally, and most importantly, the submission requires the wholesale importation – by implication – of matters relevant when considering sections 42(3) and 42(4) of the QBSA Act into section 84 of the Domestic Building Contracts Act 2000, when the clear language[18] employed in section 84 just does not warrant that. The approach proposed is one that entails a puritanical, fundamentalist interpretation of what might constitute “reasonable remuneration” in the context of s 42(4)(a) of the QBSA Act, when the clear words of that section do not require it. Even if some subcontractors were unlicensed (a moot point), I do not see how that fact, – in and of itself – could restrain a claim by MDC for reasonable compensation under s 42(4)(a). At the end of it, MDC has a legitimate contractual claim against VDV, and notwithstanding obvious non-compliance by MDC with several provisions within the DBCA, the contract is still the contract, and it remains enforceable. The DBCA itself reminds us that this is so.[19] It seems to me that the only qualification to MDC’s contractual rights arising in this case is because of the manner in which variations were effectuated – without regard for the requirements of Division 4 Part 7 of the DBCA – thus necessitating that MDC first prove its claim in accordance with the particular requirements of section 84.
[18]Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27, at 46-7, per Hayne, Heydon, Crennan and Kiefel JJ.
[19] Consider here DBCA, s 92.
MDC’s Claim against VDV
It is convenient now to turn to the claims brought by MDC against VDV. These are for unpaid sums pursuant to the original contract, as well as for variations that arose during construction. The unpaid sums pursuant to the contract dated 9 July 2007 are the final progress claim ($31,916.00) currently held in escrow in the Master Builders Queensland trust account, pending resolution of this dispute; as well as further sums caused due to prime cost and provisional sum items varied during construction at the request or direction of Mr and Mrs Van der Vegt.
For reasons identified by the experts in their joint report dated 13 May 2011 (now exhibit 24), the great majority of these prime cost and provisional sum items are really more in the way of variations, by reason that the need for these changed prime cost and provisional sum amounts did not arise until after the commencement of construction. It is more convenient therefore that the dispute regarding outstanding sums for prime cost and provisional sums be dealt with by me as part of the disputed variations. The unpaid sums pursuant to the contract is best then confined to the final progress claim, together with any entitlement arising as a result of that non-payment to interest under the contract.
The final payment for the practical completion stage, due 14 days after the attainment of practical completion, is presently held in escrow in the Master Builders Association Trust Account. If the project has attained practical completion then MDC ought be entitled to payment of it.
Although clause 17.1 of the standard terms of the Master Builders contract requires that a practical completion certificate be issued by the builder to certify the attainment of practical completion, this was not done by MDC. Mr and Mrs Van der Vegt had already resumed occupation of the house on 23 May 2008, despite MDC not having completed the project at that time. An independent inspection was undertaken on 4 August 2008,[20] which did indicate that the project was, for all practical purposes practically complete on that date.
[20] Exhibit 20.
Because Mr and Mrs Van der Vegt moved back into the house on 23 May 2008 the project is deemed to have attained practical completion as that time by reason of the operation of clause 17.9 of the contract. Relevantly, clause 17.9 provides:
If the Owner takes Possession of the Works, or any part of the Works, when not entitled to do so under this Contract, the Works are deemed to have reached Practical Completion Stage on the date of Possession and the Owner is liable to the Builder for any loss or damage arising as a result.
Clause 11.9 provides that should the owner fail to make any payment to the builder within the time for payment under the contract, then the builder is entitled to interest on the outstanding sum at the rate specified in item 19 in the schedule. Item 19 specifies a rate of 15% and item 20 of the schedule requires that payment of the final progress claim (for the attainment of practical completion) is to be made within 14 days. In light of those matters traversed in paragraphs 245-253 in Exhibit 2, I am satisfied that MDC attained practical completion on 23 May 2008, because of the effect of clause 17.9 of the contract. Accordingly I will allow a claim for interest at 15% on the final progress claim of $31,916 from 14 days after 23 May 2008, until the commencement of the hearing at QCAT on 10 October 2011 (1,235 days). This amounts to $16,198.46.
I decline to award contract interest on any other sums outstanding for variations or prime cost or provisional sum items (discussed further, below) because of the failure by MDC to provide variation documents in accordance with the requirements of the contract, thus making the ascertainment of the required time for payment of the variations (a necessary pre-determinant in order to be able to calculate interest entitlements) unascertainable.[21]
[21] Clause 12.5 of the Contract.
Liquidated damages
Clause 18.1 provides:
If the Builder fails to bring the Works to Practical Completion by the Date for Practical Completion, the Builder must pay or allow to the Owner liquidated damages at the rate stated in Item 18 of the Schedule for the period commencing from the Date for Practical Completion and ending on the day the Works reach Practical Completion, or the date the Owner takes Possession, whichever is the earlier.
The date for commencement was specified in the contract as being 11 July 2007 and the date for practical completion was specified by item 10 in the contract as being 209 days after the date of commencement. Accordingly, the project was supposed to be at practical completion by Tuesday 5 February 2008, absent any application for an extension of time by the builder in accordance with clause 15.1(a) of the contract.
Although there have been a great many variations that caused considerable delay in the attainment of practical completion, MDC has not sought any extensions to the date for practical completion pursuant to clause 15.1 of the contract, which exists for the benefit of the builder. By reason of that oversight by the builder, the agreed date for practical completion remains unmoved from 5 February 2008, and MDC is now required, pursuant to clause 18.1 of the contract, to pay liquidated damages from 5 February 2008 until 23 May 2008 (being the date upon which VDV took possession, thus creating the deemed date of practical completion), being a period of 108 days beyond the contractually agreed date for completion.
The agreed rate for liquidated damages pursuant to item 18 of the contract was $180, per day. VDV are therefore entitled to liquidated damages, in the sum of $19,940.00.
The Variations
As indicated at the commencement of these reasons, a defining feature of this case has been the manner in which variations were effectuated with scant regard for any of the statutory requirements for effectuating variations, as set out by Division 4, Part 7,[22] of the Domestic Building Contracts Act 2000 (‘the DBCA’).
[22] Ie sections 79-84 of the DBCA.
Mr Ray told the Tribunal that he was unfamiliar with these requirements, and was depending on MDC’s nominee builder, Mr Ede, in relation to all such things. The evidence is that Mr Ede was not on site a great deal after Christmas 2007, due to his having had a very serious heart attack during that Christmas vacation period. Yet, when it is remembered that construction commenced in early July 2007, Mr Ede’s ill-health at Christmas time does not adequately account for the scale of the non-compliance with the statutory requirements of Division 4 Part 7 of the DBCA, whether before Christmas 2007, or afterwards.
Non-compliance with the requirements of Division 4 Part 7 of the DBCA means that the applicant’s entitlement to recover an amount for variations must be determined in accordance with s 84 of the DBCA, which provides:
84 Right of building contractor to recover amount for variation
(1) This section applies if—
(a) the building contractor under a regulated contract gives effect to a variation of the contract; and
(b) the variation consists of—
(i) an addition to the subject work; or
(ii) an omission from the subject work that results in the building contractor incurring additional costs.
(2) If the variation was originally sought by the building owner, the building contractor may recover an amount for the variation—
(a) only if the building contractor has complied with sections 79, 80, 82 and 83; or
(b) only with the tribunal's approval given on an application made, as provided under the QCAT Act, to the tribunal by the building contractor.
(3) If the variation is not a variation that was originally sought by the building owner, the building contractor may recover an amount for the variation—
(a) only if—
(i) the building contractor has complied with sections 79, 80, 82 and 83; and
(ii) the ground of unforeseen circumstances applies; or
(b) only with the tribunal's approval given on an application made, as provided under the QCAT Act, to the tribunal by the building contractor.
(4) The tribunal may approve the recovery of an amount by a building contractor for a variation only if the tribunal is satisfied that—
(a) either of the following applies—
(i) there are exceptional circumstances to warrant the conferring of an entitlement on the building contractor for recovery of an amount for the variation;
(ii) the building contractor would suffer unreasonable hardship by the operation of subsection (2)(a) or (3)(a); and
(b) it would not be unfair to the building owner for the building contractor to recover an amount.
(5) For subsection (3)(a)(ii), the ground of unforeseen circumstances applies if the variation became necessary because of circumstances that could not have been reasonably foreseen by the building contractor when the contract was entered into.
(6) If the building contractor is entitled to recover an amount for the variation of a fixed price contract, the amount is—
(a) the increase in the contract price stated, or worked out in the way stated, in the appropriate variation document for the variation; or
(b) if paragraph (a) does not apply—the cost of carrying out the variation plus a reasonable profit.
(7) If the building contractor is entitled to recover an amount for the variation of a cost plus contract, the amount is the amount worked out in the way stated in the contract.
[the emphasis is not in the original, and has been included].
In its final submissions, MDC has attempted to categorise the 63 disputed variations into 3 sub-categories. ‘Category One’ variations (variations 1-9) being those where some effort was made by MDC to document the variation in writing before it was approved by VDV, such that these at least arguably accord with the requirements of Division 4 Part 7 of the DBCA; ‘Category Two’ variations (Nos 10-41), being extra materials; and ‘Category Three’ (Nos 42-63) being extra labour costs associated with the extra works requested by VDV.
Although the so-called Category One variations are considerably closer to complying with the requirements of Division 4 Part 7 of the DBCA than are those in either of Categories Two and Three, ultimately, I have concluded that the Category One variations still do not comply with the specific (mandatory) requirements for variations specified by section 80 of the DBCA. These too are claims that must still be looked at by QCAT “through the lens” of section 84(4).
MDC seeks payment for these variations by citing ‘unreasonable hardship’, were it now prevented from recovering an amount for the variations: s 84(4)(a)(ii). It is the case that all of the claimed variations arise by reason of requests made by VDV either for additional features, or changes to the scope of works that had been settled at the commencement of the renovation. Consistent with what was observed by Member Lohrisch in Ross v Rangel,[23] in the former Commercial and Consumer Tribunal, in those circumstances I conclude that it would be inequitable for the Applicant to wholly bear the burden of the costs of these variations, and for VDV to have the benefit of them without just remuneration, or any remuneration at all. MDC would, in my view suffer an unreasonable hardship in these circumstances, which are similar to those identified in Weier v Pugh,[24] in that:
(i)the variations arose in the context of a renovation, rather than a new build;
(ii)the variations were requested by VDV in circumstances in which VDV was aware that their would be an extra cost;[25] and
(iii)there had been no challenge by the home-owner at the time that the cost of the works were excessive, or that the claimed variations were otherwise unnecessary.
[23] [2004] CCT B432-02, at [77]; see also Lida [2010] QCAT 431 at [32].
[24] [2008] CCT BD486-06, [23] at [60], [63] and [65].
[25] See Exhibit 2, at [263]-[268].
Unfairness to the Homeowner?
In order for QCAT to approve the recovery of an amount for a variation where the building contractor has not complied with ss 79, 80, 82 and 83 of the DBCA, the Tribunal must be satisfied that the builder would suffer an unreasonable hardship by the operation of s 84(2)(a) and, in addition, that it would “not be unfair” to the home-owner for the building contractor to recover an amount: s 84(4)(b). The test is a two-limbed one, and the Tribunal needs to be satisfied in relation at each limb.
In those circumstances where VDV had requested the variations and received the benefit of them, and in the further circumstance where VDV has pointed to no specific unfairness to it as the home-owner, I can discern no basis for concluding that there is any unfairness to VDV by allowing MDC to recover. Ultimately, what needs to be determined is the appropriate amount that is to be allowed for the variations. On this issue, in its submissions VDV point to s 84(6) of the DBCA and Lida Build Pty Ltd v Miller & Anor.[26]
[26] [2011] QCATA 219, at [18]-[20].
In Lida, the Tribunal originally refused to allow any builder’s margin on an undocumented variation in a fixed price contract that allowed builder’s margin at 20%. That finding was appealed by the builder, who sought 15% margin on the appeal, representing a 5% reduction on the amount that would have been recoverable had the variations been documented, as required. The Appeal Tribunal held that the Tribunal at first instance had fallen into error by finding that a builder’s margin could not be justified, and then allowed an award of 10% builder’s margin, yet without any elaboration as to the reasons for selecting that further reduced margin. Naturally, it is to be assumed that the reason for the further reduction in Lida was in order to punish the builder for its failure to adhere with a statutory obligation. Despite that, no binding principle relating to the need to reduce builder’s margin can be discerned from Lida, such that I am content to treat the appeal result in Lida it one that is confined to its own particular factual circumstances. As such, approval of a sum for the building contractor for undocumented variations remains a matter that is at the discretion of the Tribunal, bounded only by the need to be satisfied in relation to each limb comprised by each of s 84(4)(a) and (b). In circumstances in which it was at all times known by VDV that requested variations would attract a 20% builder’s margin (the default rate under the Master Builders domestic building contract) and where no specific unfairness to the building owner has been identified pursuant to s 84(4)(b) I do not regard a 20% profit margin to be unreasonable, and I will not depart from it.
The Expert Evidence
Each of the parties have retained the services of an expert quantity surveyor. Mr Jason Thornley of WT Partnership was retained by MDC, and Jeffrey Hills and Associates was retained by VDV. Each of those experts prepared separate reports on the cost of the entire project and the outstanding sums.
As is very often the case in this jurisdiction, and in an effort to further narrow the issues, the two experts were subsequently directed by QCAT to confer further, and prepare a joint report. The joint experts' report, dated 13 May 2011, is now exhibit 24.
Unfortunately, each of Mr Thornley and Mr Hills have been unable to agree as to the appropriate methodology, such that the “joint report” is that but in name only, with each of the experts still expressing divergent opinions, albeit now juxtaposed in the one document. In these circumstances this Tribunal is placed in the position where it must choose between the opinions expressed by the experts.
Mr Taber gave evidence before QCAT on behalf of Jeffrey Hills and Associates (“JHA”). In part, he informed QCAT that in preparing[27] the JHA report:
·Documents were examined, “but not necessarily every page, in detail”;
·JHA did not look at the “physical invoices from the contractors, the detail”, but rather “the overview or final account was reviewed”, only;
·JHA “did not have a lot of invoices….only a few bits and pieces”;
·JHA were unsure whether the final plans ‘as-built’ had been provided to them;
·JHA only had the initial structural drawings, and no updated structural drawings were provided;
·The original CCT statement of claim (by MDC) was not provided to JHA;
·No reference was made by JHA to either plumbing or electrical plans, rather, an estimate of plumbing and electrical works was conducted on the basis of a site visit to the completed house;
·Mr Ray’s statement (Exhibit 2) was “not read, in detail” by JHA.
[27]Regard should also be had to the methodology section at part 2.2.1 in the methodology section of Exhibit 24 (pp. 5-6).
In contrast, Mr Thornley informed QCAT that WT Partnership:
·Thoroughly read the statements by Mr Sam Ray and Ms Samantha Hough;[28]
·Reviewed the JHA initial report;
·Received and reviewed the original contract plan and structural plans;
·Examined each individual quote and invoice;
·Considered each variation individually;
·Had regard to the Rawlinson’s costs guide supplement for residential housing, which is updated quarterly, in order to gauge whether the claimed costs for variations were in accordance with prevailing market conditions at the time when these were claimed.
[28] Now exhibit 21.
In an overall sense, I preferred the evidence of Mr Thornley to that from JHA’s representative Mr Taber regarding the approach taken to the costing exercise, particularly in relation to the variations, given the manner in which these were effectuated throughout the project. Equally, it becomes clear from reading the JHA original report – as well as their portions of the joint report – that JHA elected to ignore what had been agreed between MDC and VDV by means of the original contract, and to instead adopt a methodology to assess the reasonable costs of the works as a whole, on the basis that this approach was thought to be “more favourable” to VDV. Adopting an approach (described in the joint report as method 2) that chooses to ignore the original contract price ($638,320.00) on the basis that to adopt that figure would be to “disadvantage” VDV suffers from the obvious problem that it is to ignore that VDV agreed to pay that sum. At the end of it, this is a contractual dispute, and one cannot choose to ignore the agreement, simply because it is no longer thought convenient. Courts and tribunals should, wherever possible strive to uphold a contract, in order to avoid the reproach of being the destroyer of bargains.[29]
[29] Hillas and Co Ltd v Arcos Ltd [1932] 147 LT 503 at 514, per Lord Tomlin.
The conditions governing the admissibility of expert opinion are those expressed by Heydon JA (as his Honour then was) in the oft-cited passage from Makita v Sprowles:
“In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of "specialised knowledge"; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be "wholly or substantially based on the witness's expert knowledge"; so far as the opinion is based on facts "observed" by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on "assumed" or "accepted" facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert's evidence must explain how the field of "specialised knowledge" in which the witness is expert by reason of "training, study or experience", and on which the opinion is "wholly or substantially based", applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ's characterisation of the evidence in HG v R [1999] HCA 2; (1999) 197 CLR 414, on "a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise" (at [41]).[30]
[30](2001) 52 NSWLR 705 at 743-4, the emphasis is not in the original and has been included, by me.
I conclude that JHA’s expert opinion is based on a number of either “assumed” or “accepted” facts (per Makita v Sprowles, ibid), and that the aetiology of those facts is not now sufficiently clear to me that I can repose full confidence in the basis for the JHA opinion. Moreover, as discussed by me above at [64], the starting premise for the costing exercise undertaken by JHA is such that it is one that is infused with a partisan objective. I therefore express a clear preference for the opinion expressed by Mr Thornley and WT Partnership.
The approach used by WT Partnership adopts the values agreed between MDC and VDV in the original contract as well as for the August/September 2007 agreed variations for the kitchen and bathrooms; before then adding estimates for the provisional sum adjustments and variations estimated on the basis of market rates current in July 2007; taking into account the contractually agreed builder’s margin, of 20%. I consider that approach to be fair and reasonable. In summary, an assessment of costs on that basis is as follows:
Item Cost, inclusive of GST
Original (agreed) contract works $638,320
Additional works agreed, bathrooms $93,500
Additional works agreed kitchen $56,230
Additional works agreed, remove
eastern wall, Master bedroom $2,000
Provisional sum adjustments $369,830
Variations not yet paid (1 – 63) $197,837
Variations, paid already $74,908
Total Estimated Costs $1,432,625
Other matters:
For the sake of completeness I deal with the following further matters.
(a) Defects
In part, the First Respondent makes a claim for $50,807 for the costs of defect rectification. The evidence in support of that amount is contained in the JHA report, yet is not part of the expert costs quantification prepared by WT partnership. Previously in these reasons I expressed a clear preference for the opinion expressed by Mr Thornley over that given by Mr Taber. No other evidence in relation to defects was adduced by VDV. Accordingly I will not consider a claim for defects as part of the counterclaim.
(b) DBCA, ss 59 and 60
In part, the First Respondent makes a claim that MDC is in breach of s 59 and s 60 of the DBCA by having allegedly allowed insufficient sum for provisional cost and prime sum items; such that the amount that the builder should now be entitled to should be reduced by the Tribunal. Given that extensive extras were requested by VDV after the commencement of construction, I am of the view that s 59(3)(a) is operable. That is to say that the sums originally allowed by MDC for provisional sum and prime cost items were reasonable in all the circumstances, and there has been no breach of s 59 of the DBCA.
QCAT Determination
To date, VDV has paid $1,188,340.15. Accordingly the difference between the sum paid and the total amount still to be paid is $244,284.85, which is inclusive of the final progress claim (held in escrow), but not the builder’s entitlement to contractual interest which has now been found by me to be $16,198.46 (at [44], above).
I have indicated that I will not allow interest on the outstanding sum for variations, for reasons already elaborated by me at [45], above.
MDC is entitled to $244,284.85 together with interest of $16,198.46 making for a total of $260,483.31, of which $31,916 should now come to MDC by way of release of that sum from the Master Builders trust account. The balance, less VDV’s entitlement to liquidated damages of $19,940 (as found by me at [49], above) is payable by VDV to MDC. Accordingly I find that VDV should now be required to pay MDC the sum of $208,627.31. I will allow Supreme Court interest on that sum for one year, so as to account for the time since the end of the hearing, on 14 October 2011. On this basis VDV must pay to MDC $229,490.04.
For reasons elaborated at [33]-[34] Ray Wells must disgorge the sum that it has received for project management and give it back to VDV, and must pay interest on that sum, as well. This requires a payment by the Second Respondent to the First Respondent of $36,398.70. I will again allow Supreme Court interest on that sum for one year. Ray Wells must therefore pay to VDV the sum of $40,038.57.
Because of s 100 of the QCAT Act I make no general order as to costs however because of s 48(1)(a) and s 102(1) of the QCAT Act I do now make a specific order that the First Respondent pay the Applicant’s additional costs of counsel preparing further submissions in response to the First Respondent’s unauthorised submissions as were received by QCAT from the First Respondent on 13 February 2012, to be assessed on the standard basis.
Orders
I order as follows:
(a)The responsible officer at Master Builders Queensland release to the Applicant the sum of $31,916.00 presently held in trust, pending the resolution of this dispute.
(b)The First Respondent pay to the Applicant the sum of $229,490.04 within 28 days.
(c)The Second Respondent pay to the First Respondent the sum of $40,038.57 within 28 days.
(d)The First Respondent pay the Applicant/Second Respondents’ costs of counsel preparing further submissions in response to the First Respondent’s unauthorised submissions (as were received by QCAT on 13 February 2012), to be assessed on the standard basis.
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