Mitchamy Developments Pty Ltd v Morrison & Walsh
[2010] QCAT 28
•10 February 2010
CITATION:Mitchamy Developments Pty Ltd v Morrison & Walsh [2010] QCAT 28
PARTIES: MITCHAMY DEVELOPMENTS PTY LTD
V
DENNIS MORRISON AND SUZANNE WALSH
APPLICATION NUMBER: BD166-07
MATTER TYPE: Building matter
HEARING DATE: 8 and 9 February 2010
HEARD AT: Brisbane
DECISION OF: SW Sheaffe
DELIVERED ON: 10 February 2010
DELIVERED AT: Brisbane
ORDERS MADE: The respondents to pay to the applicant the sum of $4,348 on or before the 26 February 2009.The applicant to deliver up to the respondents the termite, engineering, frame, truss and window certificates on or before the 26 February 2009.
CATCHWORDS: Variations and compliance with the Domestic Building Contracts Act 2000, defective workmanship and termination of a building contract.
APPEARANCES and REPRESENTATION (if any):
Mr Gibson, a director for the applicant
The respondents self represented
REASONS FOR DECISION
Introduction
Mitchamy Developments Pty Ltd (“the applicant”) claimed the sum of $41,086.00 against Dennis Morrison and Suzanne Walsh (“the respondents”). This claim has two components: $21,232 for unpaid variations including a margin charge and $19,854 for damages for breach of contract by the respondents. The respondents deny any money is due and owing and counterclaim for $48,210 in damages for breach of contract namely the costs to complete the building work.
Background
The applicant carried on business as a home builder and the respondents were the owners of a property located at 39 Cicada Close, Buderim (“the land”).
On the 8th October 2006 the applicant and the respondents entered into a major works contract (“contract”) whereby the applicant agreed to build a home for the respondents on the land for a contract price of $297,970.00. The contract provided, so far as relevant that:
1.The respondents must pay the deposit upon the signing of the contract.
2.The respondents must pay the applicant the progress claims within 5 days of receipt of the claim.
3.If the respondents dispute the relevant claim for a progress claim or any part of it, they must within 5 days of the receipt of the claim give a Notice of Dispute of the progress claim.
4.By clause 26, if a party is in substantial breach and the other party gives a notice stating the intention of the party giving the notice to terminate the contract if the breach is not remedied within seven business days from the giving of the notice and the breach is not remedied then the party giving the notice may terminate the contract. Significantly, a party is in substantial breach of the contract if it fails to pay any money due and owing for five (5) business days.
It was agreed that the respondents obtained the plans and were responsible for there accuracy and the applicant quoted the contract price based on these plans.
It was agreed by the parties that the price to build the home pursuant to the plans was $277,970 and the extra $20,000 was added to the contract price so the bank would provide additional funding of $20,000. It was expected that this extra $20,000 was to be used for contingencies or unforseen items.
The payment schedule in the standard contract was deleted and another payment schedule was attached to the contract. This attached schedule provided, so far as relevant:
Stage 1- Deposit on signing the contract: 5% $14,898
Stage 2- Slab, Plumbing under slab etc: 10% $29,797
Stage 3- External Block Walls, installation of windows etc: 15% $44,695
Stage 4- Internal Frame, Erection of Trusses, etc: 25% $74,492
Stage 5- Lock-up etc 20% $59,594
Stage 6- Render, external painting etc 20% $59,594
Stage 7- Mould out, Carpet etc 5% $14,900
Total 100% $297,970
The applicant delivered claims for stages 1, 2 3 & 4 to the respondents. The respondents accepted that these stages were completed, signed the relevant documentation for the bank and the funds were duly paid to the applicant. Stages 1- 4 have been paid, a total of $163,882.
The applicant has also delivered to the respondents’ variation documents. Mr Gibson, the applicant’s director, gave evidence that there were 4 variation documents and these were attached to the statement of claim. These variation claims were written on a letter containing the applicant’s letterhead and addressed to the respondents.
The first variation dated 27 October 2006 and signed by the respondents stated:
Further to your site meeting at noon today the approximately cost of doing a full block base from the natural ground up to the slab height for the main house will be $5,000 plus Gst. Additional cost may be incurred for redesign of slab. Have forwarded plans to the engineer.
The second variation dated 21 November 2006 and signed by the respondents stated: The following is variation costs for B1 to terrace window to sliding door and screen. The total cost incl GST is $545.
The third variation dated 21 November 2006 was also signed by the respondents and stated: The following is variation costs for garage roof. The total cost incl GST is $2313.
The fourth variation dated 6 December 2006 was not signed by the respondents and stated: The following is variation costs for garage/rompus/wir waterproof and termite protection is $265.00
On 12 February 2007 the applicant gave a notice of default to the respondents, so far as relevant this letter expressly provides:
The following is current list of variations, all unpaid and interest free up to the last draw.
1. Variations- Blockup base $10,373
Water proof & Termite $265
$10,638 invoiced 6 Dec 06- unpaid
2. Variation- B1 Window to Door $545 invoiced 18 December 2006 unpaid
3. Variation additions
Trusses
Raised Garage Walls
Additional Cladding
Additional rendering $2313 unpaid 28 Jan 07 unpaid
4. Variation
Garage Door $250.00
Gyprock Sheeting $1665
Slab Fill $2782
Slab Fill Machine- Bebrock $1432
Slab Fill Machine- Corbett $753
TOTAL $20,378
The letter then proceeded to say that if the breaches were not remedied within 7 working days the contract would be terminated
The respondents did not pay the variations and the applicant terminated the contract by its letter dated 27 March 2007.
The law with respect to the recovery of money for variations is contained in The Domestic Building Contracts Act 2000 (Qld) (“the DBC Act”) sections 79-84. By these sections, a builder can recover for a variation only if the variation is in writing and signed by the owner.
Applicant’s submission
The applicant submitted that the respondents paid stages 1 to 4 and refused to pay for the variations despite the variation invoices being signed. A notice of termination was sent to the respondents and they still refused to pay the money outstanding and consequently the applicant terminated the contract and is now entitled to recover loss of profits at $10,797.
Respondent’s submissions
The respondents assert that the contract was wrongfully terminated and consequently they are entitled to recover damages, that is the cost of completing the job and that includes the cost of rectifying the defective work of the applicant.
They say that the applicant ripped them off as: they paid for 55% of the price but 55% of the work was not completed; the $20,000 for extras has been included in the work done; they designed the schedule of payments for themselves with the intention of ripping them off.
They say the contract price was $297,970.00 the amount paid was $163,882 leaving a balance of $134,088 and after deducting the $20,000 for the extras there was not sufficient funds available to complete the job.
They rely on the report of Mr Wildman and say the workmanship by the applicant was defective.
Further, they rely on the report of Mr Carey who says the cost to complete the job was $190,840.77. After deducting the balance of the contract price the extent of damages is $48,210.17.
The respondents invited the tribunal to accept the evidence of both Mr Carey and Mr Wildman.
Observations and findings
A large amount of hearing time was spent on the levels of the house, whether the footings had to be raised and whether the levels expressed in the plans were accurate. Prior to the construction it was ascertained that the rear corner of the property was lower than anticipated and additional block work was required. It was accepted that the quoted price for this extra block work was $700. There was considerable discussion as to whether the height of the foundations had to be raised, by using extra block work, and whether the $700 cost was to cover the increase in height of all the footings or just the rear corner only. Mr Gibson spent a lengthy period of time in cross examination of Mr Morrison and Mr Carey on these issues. Broadly, Mr Carey said that the final building levels were not in accordance with the plans. The measured heights stated by Mr Carey were challenged and Mr Gibson said the building heights had to be changed from the plans as the plans were in error. This, Mr Gibson says, was due to the respondent’s refusal to have a survey undertaken at the commencement of construction. There was also disputation as to whether it was necessary for Mr Gibson to dig a test hole to determine the appropriate levels.
It was stated by me during the hearing that I could not see the relevance of all this evidence and I now restate that this evidence was not relevant to the issues in dispute.
The applicant claims for variations in the sum of $21,232 and seeks to rely on four written variation invoices. The law is clear that a builder can only recover a variation if the variation claim is in writing, stating the work to be done and the price, and is signed by the respondents.
Three of the tendered variation invoices satisfy the requirements of the Act and these are variation one-$5,500; variation two-$545; and variation three $2,313. This is a total of $8,358.00. Signed variation invoices have not been tendered to support the balance of the variations claimed. I reject the assertion that the recoverable variations are $18,463. Furthermore, I reject the submission that the applicant is entitled to now claim an additional amount of $2,518, described as a margin charge. There is no basis for this claim.
I am satisfied that the respondents signed the three variation invoices, accordingly, these debts are due and owing by them.
I reject the respondents’ submission that these invoices were not due and owing and that they have already been paid. The respondents paid the first four claims as provided for in the schedule and has failed to pay the compliant variation invoices. It is not relevant that the cost to complete the building is greater than the original contract price and that it appears there is insufficient money left in the balance of the contract price to complete the building.
The next issue concerns the lawfulness of the termination. I find that the respondents wrongfully failed to pay the variation invoices and that these invoices totalled $8,358. I also accept that the applicant gave a notice satisfying the requirements of clause 26 and that the applicant finally terminated the contract. I am satisfied that the termination of the contract by the applicant was lawful.
Consequently, the applicant is entitled to recover his loss. This loss is not measured as the money unpaid or the balance of the contract price but his loss of profits. He says the lost profits were calculated at $10,797, being the unpaid portion of the contract price less the subcontractor’s costs to complete the job. However, the applicant has failed to tender any evidence on what job he undertook after this contract was terminated and how much profit he earned on this new job. He may have made a greater profit on this new job than he would have on the contract.
The respondent’s submitted that the applicant had underpriced this job and therefore he would not have made any profit at all. I accept this evidence. The evidence of Mr Carey was quite clear that the cost to finish the job was much greater than the unpaid portion of the contract price. In other words, the applicant would not have made a profit on this job at all. I accept the evidence of Mr Carey and find that the applicant would not have made any profit on this job if it had been completed as agreed.
Counterclaim
The respondents make a claim for damages for breach of contract in the sum of $ 48,210.17. This claim is broadly divided into two components: The costs to rectify the defective workmanship by the applicant’s subcontractor and damages for breach of contract, namely the cost to complete the job.
I reject the respondents’ claim that they are entitled to claim damages for breach of contract. This submission is rejected on the findings noted above that it was the respondents who failed to pay the variations when they fell due and the applicant was entitled to terminate the contract. I find that the applicant had not breached the contract.
In any event, I do not accept the evidence of Mr Carey that the respondents could recover (if the applicant was in breach) all the items that are set out in his statement. I am not satisfied that the respondents are entitled to recover Mr Morrison’s time for 40 hours per week for 21 weeks at $50 per hour or $42,000. Also, I am not satisfied that a miscellaneous materials item of $3,000 is recoverable. I reject the respondents’ claim for damages.
Mr Wildman gave strong and convincing evidence that the block work was not of sufficient standard and Mr Gibson also accepted the proposition that the block work undertaken by his subcontractor was inadequate. The photographs of the before rendered block work show that the standard of the workmanship was poor as the walls were not straight and gaps existed between the blocks. I accept the evidence of Mr Wildman and find that the workmanship was not of an adequate standard. I also accept the evidence of Mr Wildman that all these defects could be rectified by using additional render.
I accept the evidence of Mr Carey that additional costs would have had to be incurred by the respondents to have the defective block work repaired. I also accept Mr Carey’s evidence that the additional rendering costs would have been between $2,500 and $5,000 to rectify the defective workmanship.
I find that the cost to rectify this defective work was $4,000 and I find that the respondents are entitled to a judgment on the counterclaim in the sum of $4,000.
In summary, the applicant is entitled to recover from the respondents the difference between the $8,348 for the unpaid variations and the $4,000 for the defective block work or $4,348.00.
Orders
The respondents to pay to the applicant the sum of $4,348 on or before the 26 February 2009.
The applicant to deliver up to the respondents the termite, engineering, frame, truss and window certificates on or before the 26 February 2009.
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