MENER GROUP PTY LTD and HIPPYDAYZE PTY LTD - [2019] WASAT 91

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL
ACT: BUILDING SERVICES (COMPLAINT RESOLUTION AND ADMINISTRATION) ACT 2011 (WA)
CITATION:   MENER GROUP PTY LTD and HIPPYDAYZE PTY LTD [2019] WASAT 91
MEMBER:   MS C WALLACE, SENIOR MEMBER
MR D MOROLLA, SESSIONAL MEMBER

HEARD:   10 AND 11 SEPTEMBER 2019
DELIVERED          :   15 OCTOBER 2019
FILE NO/S:   CC 943 of 2019
BETWEEN:   MENER GROUP PTY LTD
Applicant
AND
HIPPYDAYZE PTY LTD
Respondent

Catchwords:

Building Services (Complaint Resolution and Administration) Act 2011 (WA) - Whether final progress payments due and owing - Quantum merit basis when practical completion not achieved - Provisional sums - Delay in provision of itemised statement of provisional sum works - Whether interest owing

Legislation:

Building Services (Complaint Resolution and Administration) Act 2011 (WA), s 5(2), s 11(1)(d), s 41(2)(b), s 49(1), s 58(2)
Home Building Contracts Act 1991 (WA), s 17
State Administrative Tribunal Act 2004 (WA), s 25(2), s 27(1), s 27(2), s 27(3), s 29(3), s 29(3)(c)(i), Div 3, Pt 3

Result:

Partly successful

Category: B

Representation:

Counsel:

Applicant	:	In Person
Respondent	:	In Person

Solicitors:

Applicant	:	N/A
Respondent	:	N/A

Case(s) referred to in decision(s):

Hippydayze Pty Ltd and Mener Group Pty Ltd [2019] WASAT 92
Mener Group Pty Ltd and Hippydayze Pty Ltd [2019] WASAT 37
Mener Group Pty Ltd and Hippydayze Pty Ltd [2019] WASAT 58

REASONS FOR DECISION OF THE TRIBUNAL:

Introduction

On 13 April 2018 the applicant, Mener Group Pty Ltd, lodged three home building work contract (HBWC) complaints with the Building Commissioner against the respondent, Hippydayze Pty Ltd, pursuant to s 5(2) of the Building Services (Complaint Resolution and Administration) Act 2011 (WA) (BSCRA Act) and s 17 of the Home Building Contracts Act 1991 (WA) (HBC Act). Each complaint alleged that the respondent had breached three separate HBWCs relating to the construction of three units in the suburb of Gosnells, due to the failure of the respondent to pay the final progress payment, plus interest.
On 23 April 2018 the HBWC complaints were referred to the Tribunal pursuant to s 11(1)(d) of the BSCRA Act. The complaints were mediated unsuccessfully and were ultimately heard by the Tribunal differently constituted (Original Tribunal) during 20 and 22 March, 3 April and 22 May 2019. The Original Tribunal delivered an oral decision on 28 May 2019 which was subsequently published on 11 June 2019; Mener Group Pty Ltd and Hippydayze Pty Ltd [2019] WASAT 37. The following final order was made:
1.The applicant shall pay to the respondent by not later than 7 June 2019 the amount of $16,374.06 in full and final settlement of matters CC 829/2018, CC 830/2018, CC 831/2018, and in compliance with order dated 26 March 2019 in regard to matter CC 1439/2017.

On 1 July 2019 the applicant filed an application pursuant to s 58(2) of the BSCRA Act seeking leave to review the Original Tribunal's decision. Upon receipt of the application the Tribunal made an order pursuant to s 25(2) of the State Administrative Tribunal Act 2004 (WA) (SAT Act) staying the operation of the order made on 28 May 2019 until further order of the Tribunal.
The review application was determined on the documents and leave was granted except in respect of the Original Tribunal's decision in relation to costs; Mener Group Pty Ltd and Hippydayze Pty Ltd [2019] WASAT 58.
The applicant's hearing de novo was programmed concurrently with six related complaints made by the respondent in this proceeding against the applicant, being proceedings CC 1436, CC 1438 and CC 1439 of 2017 and CC 754-756 of 2019. The Tribunal ordered that evidence filed in respect of each proceeding was to be evidence in each other proceeding.
All of the proceedings were heard concurrently on 10 and 11 September 2019, with the decision being reserved at the conclusion of the hearing.

Jurisdiction of the Tribunal on review

The jurisdiction of the Tribunal in a review proceeding is contained in Div 3 of Pt 3 of the SAT Act.
The nature of the review proceeding is by way of a hearing de novo, that is, the proceeding is not confined to matters before the Original Tribunal but may involve the consideration of new evidence; s 27(1) of the SAT Act.
The purpose of the review is to produce the correct and preferable decision at the time of the decision upon the review; s 27(2) of the SAT Act.
The reasons for decision provided by the Original Tribunal, or any grounds for review set out in the application, do not limit the Tribunal in conducting the review proceeding; s 27(3) of the SAT Act.
The Tribunal in a review proceeding has the jurisdiction to make the following orders:
(a)affirm the decision that is being reviewed; or
(b)vary the decision that is being reviewed; or
(c)set aside the decision that is being reviewed and
(i)substitute its own decision; or
(ii)send the matter back to [the Original Tribunal] for reconsideration in accordance with any directions or recommendations that the Tribunal deems appropriate,
and in any case, make any order the Tribunal considers appropriate.
(s 29(3) of the SAT Act)

Evidence before the Tribunal

All of the evidence filed with the Tribunal by the parties in respect of each of the respondent's complaints were compiled by the Tribunal into a hearing book comprising two volumes. Volume 1 was received into evidence as Exhibit 1 and volume 2 was received into evidence by the Tribunal as Exhibit 2. A separate hearing book was prepared by the Tribunal in respect of the applicant's proceeding, which was accepted into evidence as Exhibit 3. Annexures to the witness statement of Mr Glen Wilkins dated 20 July 2018 were accepted into evidence as Exhibit 4.
As is ordinarily the case, the hearing books which were before the Original Tribunal when the applicant's contractual claim was initially heard, were before this Tribunal at the rehearing. The hearing books were accepted into evidence by the Tribunal as Exhibits 5-8. In addition, during the course of the hearing the applicant tendered a document entitled 'Addenda Elemental Complete Slate' dated 13 November 2015 which was accepted into evidence as Exhibit 9.
The Tribunal was also assisted by the receipt of oral evidence from the following witnesses:
(a)Mr Todd Buckley, director of the applicant; and
(b)Mr Glen Anthony Wilkins, director of the respondent.

Relevant background facts

The Tribunal has already made detailed findings of fact in the related proceedings which were heard concurrently with this matter, and in respect of which a final decision has been published; Hippydayze Pty Ltd and Mener Group Pty Ltd [2019] WASAT 92. It is therefore unnecessary to repeat the facts in great detail in this decision, so as to avoid duplication, but also because a large extent of the history between the parties is not strictly relevant to the determination of the narrow issues arising in this proceeding.
The parties first met and commenced discussions in or about early November 2014 in respect of the respondent's plan to construct three units at the rear of an existing property in the suburb of Gosnells, in the State of Western Australia.
Those discussions culminated in the parties executing three separate HBWCs in identical terms on 22 May 2015; pages 321-470 of Exhibit 1. The price of each HBWC was $202,613.33 and required construction to be completed within 180 working days.
In addition, the parties reached an oral agreement for site works to also be undertaken at the existing front property which included demolishing a carport to ensure access to the rear of the property and various requisite Western Power works to ensure sufficient power supply to the existing property and the three anticipated units. The respondent was invoiced $20,342.00 on 19 May 2015 in respect of these works; page 85 of Exhibit 2.
In July 2015 the works commenced in relation to the demolition of the existing carport. Then in October 2015 other site works commenced.
The applicant subsequently obtained a building permit in respect of the construction of the three units from the City of Gosnells on 13 November 2015.
It is not in dispute between the parties that there was some significant delay in the applicant achieving practical completion in respect of the three units.
In addition, the parties were operating on very different understandings in respect of the operation of the provisional sum amounts set out in each HBWC; Hippydayze Pty Ltd and Mener Group Pty Ltd [2019] WASAT 92 at [42]. The apparent lack of transparency in providing a detailed breakdown of the provisional sums incurred was a particular point of agitation for the respondent, who first began requesting this information from the applicant on 20 June 2016 (document 18, volume 1 of Exhibit 4) and which request was repeated on multiple occasions before the information was finally provided to the Original Tribunal in March 2019; Exhibit 7.
In or about mid-2016, the respondent noticed ceiling damage in the existing property which had been the subject of the separate demolition works undertaken by the applicant; para 81, page 35 of Exhibit 2. This culminated in the respondent providing the applicant with a notice of proposed complaint on 5 August 2016 which referred to various issues including the lack of provision of a detailed breakdown in respect of the provisional sums and the damage to the roof of the existing property; document 23, volume 1 of Exhibit 4.
On 4 July 2016 the respondent provided costings in respect to each of the three units which had been incurred in respect of electrical and plumbing, site hire and earthworks and site clean as at 22 June 2016. On 4 July 2016 the applicant responded by seeking a detailed breakdown of the provisional sums. The respondent informed Mr Wilkins that because the works were continuing to be carried out, the final breakdown would not be able to be provided together with supporting invoices until practical completion had been reached; document 20, volume 1 of Exhibit 4.
Eventually, in December 2016, the respondent lodged three complaints with the Building Commissioner against the applicant which were referred to the Tribunal and became proceedings CC 1436, CC 1438 and CC 1439 of 2017.
On 22 January 2018 the applicant informed the respondent that practical completion had been reached in respect to each of the three units and issued the final progress invoices as follows:
•unit A in the amount of $16,409.13;
•unit B in the amount of $16,409.13; and
•unit C in the amount of $18,601.39.
(document 36, volume 2 of Exhibit 4)
In February 2018 the respondent arranged for an independent expert to complete a practical completion report in respect of each of the units, following which the respondent's lawyer informed the applicant that practical completion had not been reached. In particular, the respondent asserted that practical completion had not been achieved because of the failure to install puddle flanges to each unit and also given an issue with the stair risers in respect to tolerances and gaps which may render them unable to be used. The respondent again sought a statement in respect of the provisional sums; document 46, volume 1 of Exhibit 4.
The respondent therefore refused to pay the final progress invoices on the basis that it contended that practical completion had not been achieved.
Also in February 2018 the respondent became aware that the air conditioning systems at the units had been decommissioned due to the failure of the applicant to pay the contractor; pages 69-75 of Exhibit 2.
The respondent then lodged three new complaints with the Building Commissioner against the applicant in respect of the three units which were also referred to the Tribunal and became proceedings CC 708-710 of 2018.
In early March 2018 the respondent became aware that the hot water systems to the units were missing and/or had been removed by the applicant; page 42 of Exhibit 2.
In midMarch the contractor who had installed the air conditioning systems attended the units and removed them; page 43 of Exhibit 2.
In or about 20 March 2018 the puddle flanges and stair riser defects were remedied by the applicant. However, the air conditioning systems and hot water systems had not been replaced.
On 27 March 2018 the respondent terminated each of the HBWCs alleging, inter alia, that the delay in reaching practical completion by the applicant was repudiatory conduct; document 46, volume 1 of Exhibit 4.
On 29 March 2018 the respondent changed the locks to the front doors of each respective unit and effectively took possession. The final progress payment in respect of each unit remained unpaid.
The applicant lodged three complaints with the Building Commissioner on 13 April 2018 pursuant to s 5(2) of the BSCRA Act and s 17 of the HBC Act claiming breach of the HBWC's due to the respondent's failure to make final payment, plus a claim of interest owing on the amounts. The complaints were referred to the Tribunal on 23 April 2018 pursuant to s 11(1)(d) of the BSCRA Act. The history of the proceedings at the Tribunal is set out at [2]-[6] above.

Applicant's position

The applicant conceded, for the purpose of this proceeding, that the date of practical completion in respect to each of the three units was 27 March 2018; ts 20, 10 September 2019. That date coincides with termination of the HBWCs by the respondent and is also the date by which time the puddle flanges and stair risers had been rectified by the applicant.
The applicant claims that each of the final progress invoices are owing to it but conceded at the hearing that a deduction ought to be made in respect of the cost of replacement air conditioning units and gas hot water systems; ts 215, 11 September 2019.
The applicant, despite incurring in excess of the amounts provided for as provisional sums in each of the HBWCs (pages 649-671 of Exhibit 7), never sought to claim the increased amounts from the respondent; ts 32, 10 September 2019.
In relation to any defects and minor breaches of the HBWCs alleged by the respondent, the applicant's position is that those complaints ought to be determined in the respondent's separate proceedings and do not in any event interfere with the applicant's right to receive its final progress payments.
The applicant also seeks interest on each of the outstanding final progress payments pursuant to clause 8 in each of the HBWCs at a rate of 25% per annum.

Respondent's position

The respondent's position is effectively as follows:
(a)The applicant is not entitled to the final progress payments because practical completion was never reached;
(b)In the alternative to (a) above, the final progress payment in respect of each of the three units ought to be reduced by the amount the respondent has incurred in respect to the supply and installation of air conditioning units and gas hot water systems;
(c)In the alternative to (a) above, the amount of $20,342 should be refunded to the respondent on the basis that it was an upfront payment of the provisional sums which was to be refunded upon completion of the HBWCs;
(d)In the alternative to (a) above, given the applicant's failure to provide a provisional sum statement pursuant to the relevant terms of each of the HWBCs, the applicant is not entitled to the payment of the provisional sums and those amounts ought to be deducted from each of the final progress payment invoices; and
(e)As an alternative to (d) above, the provisional sum allocated for site works in each of the HBWCs should be reduced on the basis that the amounts estimated were excessive and unreasonable. The respondent contends that the site works allocation in each HBWC ought to have been in the amount of $2,760 rather than $6,833.43 thus claiming a deduction from each final progress payment in the amount of $4,073.43; page 211 of Exhibit 2.

Determination

Final progress payments

The Tribunal does not accept the contention that the applicant is not entitled to the final progress payments on the basis that it never achieved practical completion. The applicant has appropriately conceded that the final invoices ought to be reduced by the cost of supplying and installing air conditioning units and gas hot water systems. Aside from those items of work, it asserts that practical completion was achieved and payment was due and owing, even if on a quantum merit basis.
In the Tribunal's view, the practical completion reports prepared by the respondent's expert Mr Martelli do not support the respondent's position in this regard; pages 67-264 of Exhibit 1. Those reports identify that the defects referred to at [33] suggest that practical completion may not have been achieved in February 2018, yet those defects were remedied by the applicant in March 2018.
At the hearing the respondent also submitted to the Tribunal that due to the inadequate water supply to the three units, practical completion was never reached. The Tribunal rejects this submission for the following reasons:
(a)Whilst the respondent succeeded in separate proceedings in obtaining an order in its favour reflecting the costs which it would incur in remedying the inadequate water supply to the three units (order dated 26 March 2019 in proceeding CC 1439/2019), no expert evidence has been filed in this proceeding that supports the position that as a result of the inadequate water supply, practical completion could not have been achieved. That is, there was no evidence before the Tribunal to support the submission that as a result of the inadequate water supply the units were not 'reasonably capable of being used for [their] intended purpose' pursuant to clause 19(a) of each of the HBWCs.
(b)To the contrary, the units have all been tenanted since mid-2018 which, in the Tribunal's view, is persuasive evidence swaying against a finding that the units are 'incapable of being used' for their intended purpose. The units are, in fact, being used for the very purpose for which they were constructed; documents 41, 44 and 55, volume 2 of Exhibit 4.
The Tribunal therefore accepts the date of 27 March 2018 as the date when the applicant had completed the HBWCs other than in respect of the provision of the air conditioning units and gas hot water systems, which had been removed from site. That was the only outstanding work to be performed by the applicant which prevented the units from achieving practical completion. The applicant is therefore entitled to the final progress payments deducting the costs of the supply and installation of those items on a quantum merit basis.
The total cost incurred by the respondent in respect of the supply and installation of the gas hot water systems for all three units was $3,176; pages 215-218 and 221 of Exhibit 2. This will require each final progress payment to be reduced by the amount of $1,058.66.
The respondent incurred, in respect of the supply and installation of the air conditioning units, a total amount of $7,838; pages 219 and 223 of Exhibit 2. This therefore requires each final progress payment to be reduced by a further $2,612.66.

Deduction of upfront payment

In relation to the respondent's contention that it was entitled to a $20,342 deduction or refund spread across each of the three HBWCs, the Tribunal notes that this claim was agitated by the respondent in proceedings CC 1436, CC 1438 and CC 1439 of 2017 unsuccessfully; Hippydayze Pty Ltd and Mener Group Pty Ltd [2019] WASAT 92 at [88]. On that basis this submission fails.

Provisional sums

In respect to the respondent's position that the delay in the applicant complying with clause 11(d) of the HWBCs precludes it from entitlement to be paid the provisional sums, the Tribunal does not accept that submission. Clause 11(d) of each of the HBWCs provides as follows:
Upon completion of the work the subject the subject of a Provisional Sum or on installation of an item the subject of the Prime Cost Item, or at the next progress payment notice, the Builder must provide the Owner with an itemised statement of the price for the work or the items, calculated in accordance with the provisions of Clause 11(b) and (c) hereof, and the Contract Price will be adjusted accordingly and paid in accordance with Clause 7.

In the Tribunal's view the delay in the applicant complying with cl 11(d) above, entitled the respondent to await provision of that information in order to ascertain whether the contract price needed to be adjusted, before being required to make payment pursuant to clause 7 of each of the HBWCs. The delay does not result in the applicant not being entitled to receive payment of the provisional sums at all, but does result in the applicant's entitlement to payment being delayed as a result of its own conduct. It also has the result that interest does not accrue on the amount until the applicant has complied with its contractual obligations.
In relation to the respondent's contention that the provisional sums were exaggerated or overinflated based on its own costings of what site works were required to be performed, the Tribunal also finds no merit in this submission.
In respect of the respondent's costing obtained from T&G Earthmoving dated 7 June 2018; page 211 of Exhibit 2, the Tribunal finds that evidence to be misconceived. The respondent clearly misinterpreted the HBWCs as they relate to the provisional sums and proceeded on the basis that 'site works' only included earthmoving. This is despite the addenda to each HBWC identifying a variety of works encompassing 'site-works', including such items as fencing, sewer connections, piling and so forth; pages 359-360, 407-408 and 459-450 of Exhibit 1.
The T&G Earthmoving quote was obtained on the basis of this erroneous interpretation of 'site-works' held by the respondent and simply provided for the moving of sand. It is therefore not appropriate to assess the reasonableness of the provisional sums in each HBWC by comparing them to an earthmoving quote particularly given the much broader site works to be undertaken by the applicant.
In any event, the more appropriate method by which to assess whether the cost/price of the work the subject of the provisional sums were exaggerated or overinflated is by a proper consideration of the actual costs incurred in respect of the relevant works. Those were provided by the applicant and are contained in Exhibit 7. The Tribunal has considered those underlying invoices which form part of the provisional sum site works. The invoices evidence that the total costs incurred by the applicant are well in excess of those estimated in the HBWCs and were properly incurred by it in undertaking the site works.
The respondent also raised at the hearing that there was an over-charging in the water and gas run element of the provisional sums. The applicant corrected the position at the hearing by conceding that there was an overcharge in respect of the service trench charge, as opposed to the water and gas run, which was a charge of $1,100 across the three units but instead was invoiced as $1,100 per unit; ts 238, 11 September 2019. However, the additional amount has never been invoiced to the respondent given that only about half of the provisional sum costs have been claimed by the applicant. Thus this anomaly makes no difference to the final progress payments claimed.
In the Tribunal's view the applicant is therefore entitled to the provisional sum as estimated by it in each of the HBWC's and that sum ought not to be reduced in the manner contended for by the respondent.

Claim for interest

In respect of the applicant's claim for interest owing on each final payment, the Tribunal finds that it is not entitled to interest on the amounts owing because the applicant was only entitled to those amounts on the basis that it had reached practical completion pursuant to clause 19 of each HBWC. Subclause (a) provides as follows:
'Practical Completion' means when the Works are completed except for any omissions or defects which do not prevent the Works from being reasonable capable of being used for its intended purpose.
As appropriately conceded by the applicant in this proceeding, the units could not have achieved practical completion in the absence of the installation, at the very least, of the gas hot water systems. Therefore, whilst the applicant is entitled to its final payment with those costs deducted, it is not entitled to interest owing for that reason.
The Tribunal therefore intends to make an order in the applicant's favour in the amount of $40,405.65 in respect to all three units pursuant to s 41(2)(b) of the BSCRA Act. This comprises the total of each final payment invoice and deducting those amounts set out at [47] and [48] above.

Costs

As referred to at [4] above, leave to review was not granted to the applicant in respect of the order made by the Original Tribunal awarding costs in favour of the respondent. This is on the basis that s 58(2) of the BSCRA Act does not give the Tribunal jurisdiction to review orders made pursuant to s 49(1) of the BSCRA Act in respect of costs.
There is some difficulty in preserving the costs finding in favour of the respondent given that the Original Tribunal did not make a separate costs order but rather made one consolidated order. The order made by the Original Tribunal effectively comprised three elements:
(1)a finding that the applicant was entitled to the amount of $12,503.96 in respect to the final payments owing in relation to the three units pursuant to s 41(2)(b) of the BSCRA Act;
(2)a costs order in favour of the respondent in the amount of $21,000 pursuant to s 49(1) of the BSCRA Act; and
(3)a 'set-off' in the amount of $7,878.02 which was an amount awarded by a differently constituted Tribunal in separate proceedings between the parties, being proceeding CC 1439 of 2017, by way of final order dated 26 March 2019 which had remained unsatisfied as at the date of the Original Tribunal's decision.
This Tribunal has clearly reached a different finding to the Original Tribunal in respect of what order should be made pursuant to s 41(2)(b) of the BSCRA Act. This Tribunal has also found that the Original Tribunal could not set off a final outcome in a separate proceeding; Mener Group Pty Ltd and Hippydayze Pty Ltd [2019] WASAT 58 at [45]-[47]. Ordinarily if each order had been made separately, the Tribunal could have set aside the decision and substituted its own decision pursuant to s 29(3)(c)(i) of the SAT Act. However, given the consolidated nature of the order and the fact that it partly comprises a costs order which cannot be reviewed by this Tribunal, the Tribunal is left with the only option of varying the decision of the Original Tribunal in a way that attempts to preserve the costs order made in favour of the respondent, whilst setting aside the other aspects of the order.
The Tribunal will not give liberty to the parties to make any further costs applications in respect of this proceeding. Costs have already been determined by the Original Tribunal, and no party has sought to appeal that decision. No additional costs were incurred by the parties in the rehearing and therefore there is no basis for a further application for costs to arise.

Orders

The Tribunal therefore makes the following orders:
1.Order 3 made by the Tribunal on 19 July 2019 staying the operation of the order of Member De Villiers dated 28 May 2018 is hereby revoked.
2.Order 1 made by Member De Villiers on 28 May 2019 is varied as follows:
(a)Pursuant to s 41(2)(b) of the Building Services (Complaint Resolution and Administration) Act 2011 (WA) the respondent shall pay to the applicant the sum of $40,405.65 within 21 days of the date of this order; and
(b)The applicant shall pay to the respondent the amount of $21,000 by not later than 7 June 2019.

I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
MS C WALLACE, SENIOR MEMBER
15 OCTOBER 2019