Mt Cotton Constructions Pty Ltd v Greer
[2017] QCAT 11
•17 January 2017
CITATION: | Mt Cotton Constructions Pty Ltd v Greer [2017] QCAT 11 |
PARTIES: | Mt Cotton Constructions Pty Ltd |
| v | |
| Damien Greer | |
APPLICATION NUMBER: | BDL190-14 |
MATTER TYPE: | Building matters |
HEARING DATE: | 10, 11, 12, 13 and 14 October 2016 |
HEARD AT: | Brisbane |
DECISION OF: | Member Howe |
DELIVERED ON: | 17 January 2017 |
DELIVERED AT: | Brisbane |
ORDERS MADE: | 1. The Applicant’s claim is dismissed. 2. The Respondents’ counter application is dismissed. 3. The parties file and serve submissions as to costs within 7 days of the date of this order and each file and serve any submissions in reply within another 7 days thereafter. |
CATCHWORDS: | CONTRACTS – BUILDING AND, CONSTRUCTION CONTRACTS – CONTRACTS – BUILDING AND, CONSTRUCTION CONTRACTS – VARIATIONS – builder’s failure to comply with statutory requirements – claim for restitution by owners – claim for all moneys paid for variations - voluntary payment – effect of s 84 Domestic Building Contracts Act 2000 (Qld) – owners not entitled to recover moneys paid Domestic Building Contracts Act 2000 (Qld), s 16, s 26, s 27, s 28, s 29, s 55, s 84, s 92, s 93 Commission Act 1991 (Qld), s 42 Hughes v St Barbara Mines Ltd [No 4] [2010] WASC 160 |
APPEARANCES: | |
APPLICANT: | M Taylor instructed by DCL Associates Lawyers |
RESPONDENTS: | L Campbell instructed by Colin Biggers and Paisley Lawyers |
REASONS FOR DECISION
Mr and Mrs Greer own a property on the Brisbane River at the Corso. The property was damaged in the 2011 Brisbane floods. They engaged a builder to effect repairs. That builder commenced work in or about May 2013 but in September that year he broke both wrists in a sporting accident.
The Greers needed another builder to carry on. A friend recommended Mr Chris Scroope. They met with Mr Scroope to discuss the job. Also present was Ms Bosanquet, an architect engaged by Mr and Mrs Greer for the project.
Mr Scroope submitted a tender. He quoted $138,190 plus GST for various specified items of work. The tender was forwarded to Ms Bosanquet signed by Mr Scroope as Managing Director of Mount Cotton Constructions Pty Ltd (MCC).
Ms Bosanquet prepared a Master Builders contract in which the contractor was identified as Chris Scroope trading as Mount Cotton Constructions. The contract was signed on 21 October 2013 by Chris Scroope and by Mr and Mrs Greer.
The description of the work at item 3 of the contract schedule stated it was “Alterations, additions and completion of rectification works of flood damaged house, incorporating internal fit out, new pool deck, jetty refurbishment, external works and landscaping coordination.” The contract price was fixed at $138,190 plus GST.
MCC commenced work under the contract on about 21 October 2013. A number of tradesmen engaged by the previous builder continued their work on site, and some did not.
MCC identified some defective work done by the first builder. The owners also wanted extra work to be done. MCC engaged some additional tradesmen, generally performed the work under the contract and also did additional work until the parties fell out in or about February 2014.
Throughout the course of the job MCC made 6 progress claims for its work totalling $481,338.59. However the owners only made one payment of $239,128.40.
The parties fell out over the builder’s failure to provide estimates of the cost of proposed work before doing the work and the cost of the work. MCC advised the owners they were in breach of the contract in failing to pay the progress claims. The owners disputed the moneys claimed and took the position that the additional work done by the builder was variation work additional to the fixed price contract and the builder had no entitlement to payment for that because the builder had failed to comply with the variation requirements set by the Domestic Building Contracts Act 2000 (Qld) (the Act) which had application at that time.
The owners through solicitors advised MCC (and alternatively Mr Scroope) that they elected to accept the builder’s continued demand for money for its progress claims as an unlawful repudiation of the contract and advised they terminated the contract at common law.
MCC instituted these proceedings in the Tribunal claiming $350,345.02 from the owners for breach of contract. The owners counterclaim seeking recovery of monies overpaid to the contractor for variations in the amount of $87,119.40 plus general damages for breach of contract for cost of rectification of defective work. By hearing the claim of the builder had reduced to $162,773.10 for the value of unpaid variations, and the claim of the owners for costs of defective work particularised at $115,232.99.
The Parties Principal Contentions
The parties concur that Mr and Mrs Greer engaged MCC to carry out building work at the property after the first builder stopped work and that the property was affected by the 2011 floods. Apart from that however, there is little agreement and there is no consensus that the contract reflects the true arrangements between the parties.
MCC’s primary position is that the true agreement between them was made earlier, partly in writing and partly oral, on or about 10 October 2013, to the effect that the applicant should complete the works specified in the applicant’s tender document dated 9 October 2013 in accordance with its terms, and complete other work at the property on a cost plus 10% basis. MCC argues the consequence of the written contract of 21 October 2013 failing to capture the true agreement between the parties is that the written contract is void and of no effect by virtue of s.93(1) of the Act and the applicant may therefore recover the value of its work done on a quantum meruit basis.
Alternatively, the contract stands but what is covered under the contract is only the fixed price items referred to in the contract. All other aspects of the contract are void pursuant to s.93(1) and s.55(2) of the Act, the latter dealing with the prohibition against entering into cost plus contracts without a prior reasonable estimate of cost being attempted. Again it is argued those “other aspects” of the contract may be recovered on a quantum meruit basis.
In the further alternative, even if the contract stands and also extends to cover costs plus work, the costs plus work is described so broadly in item 3 of the contract schedule under the heading Description of Works that none of the costs plus work required resort to the variations procedure under the contract and they can be recovered by quantum meruit claim.
On the owners part, they say the contract of 21 October 2013 is a duly executed and binding domestic building contract between MCC and Mr and Mrs Greer which prescribes the respective rights and obligations of the parties. Further all additional work done on site were variations to that contract and the failure to comply with the requirements of Part 7 of the Act prevents the builder from recovering for its work done performing the variations.
The Contract Provisions
The starting point is the written contract of 21 October 2013. It is poorly drafted. It is a fixed price contract incorporating, apparently, references to cost plus concepts.
The identity of the contractor is unclear. The name of the contractor at item 1 of the contract schedule is noted as Chris Scroope, but all other contractor details refer to MCC, not Mr Scroope. It is not disputed by either party that it was MCC who did all the subsequent work on site.
Item 3 of the schedule entitled Description of Works states “Alterations, additions and completion of rectification works of flood damaged house, incorporating internal fitout, new pool deck, jetty refurbishment, external works and landscaping coordination.”
At item 5 there are two check boxes for the parties to nominate “yes” or “no” as to any prime cost or provisional sum items. The no box is marked for both.
At item 6 a fixed contract price of $138,190 plus GST is inserted.
Besides setting a fixed price, item 6 gives parties the opportunity to note a contractor’s margin for variations, prime cost and provisional sums. It states, “If the contract price is subject to an increase in accordance with Clauses 12, 13, 14 (Variations) or Clause 9 (Prime Cost items and Provisional Sums) then the following contractor’s margin is to apply to that increase.” The item continues “Contractor’s margin on variations, Prime Cost Items and Provisional Sums” and a box is added to allow the parties to write in a percentage figure. The box is followed by words “% if nothing stated – 20% to be applied”. There is an oblique forward slash through the box.
Appendix Parts A and B to the schedule deal respectively with allowances for prime cost items and provisional sums and these are also crossed through across the page and the words “Not Applicable” written adjacent to the crossing out.
Similarly appendix Part D (Method A) dealing with progress payments is crossed through and marked “Not Applicable”. But in Part D (Method B) which deals with progress payments where Method A does not suit, the following notation has been added: “Continuation of open book - direct billing of client/owner with 10% + GST margin added - invoiced monthly.”
Then if one turns to appendix J, special conditions, there are three special conditions added. The third states:
3. Progress claims
The claims will include all invoices paid for materially (sic) and services completed in period being claimed.
The contractor is entitled to a 10% + GST margin of the actual cost of works that excludes GST.
Expended labour will be nominated and quantified by task + hours associated to task.
Is the contract a fixed price contract? Is there a cost plus component? Is any additional work done on site variation work extra to the contract? If such work is variation work, is the builder entitled to a 10% margin on that work or what margin?
The contract is unclear about these crucial issues. The ambiguities that arise from a reading of the document cannot be determined by consideration of the terms of the contract alone. Resolution of the ambiguities require recourse to other available principles of construction.
The Identity Of The Contractor
Counsel for the builder conceded in final submissions that Mr Scroope and Ms Bosanquet negotiated arrangements for MCC to perform the building work for the owners. But given the parties filed pleadings and in MCC’s Reply to the owners Amended Response MCC asserts the contractor was Mr Scroope, not MCC, a formal finding in that regard is perhaps appropriate.
The owners maintain the contractor was always MCC. All other particulars of the contractor completed in the contract indicate and refer to MCC as the contractor, not Mr Scroope. At hearing Mr Scroope agreed the contract was entered into with the intention of creating legal relations between MCC and the Greers. Given he has been the sole director of MCC for the last ten years, I accept the latter admission as one made both in his own right and as director of MCC and I find that the contracting builder under the contract was at all material times MCC.
Construction of the Contract
“It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied.”[1] It is perhaps even more trite to say the starting point in a contract dispute involving a written contract is construction of the document.
[1]Hughes v St Barbara Mines Ltd [No 4][2010] WASC 160 at [594].
But the builder argues that one should consider the course of negotiations and subsequent conduct of the parties to establish what was agreed between them rather than what the parties wrote in the written contract. If that is done, argues the builder, it becomes clear that the contract does not set out the intention of the parties. The submission is that this suggested course is analogous to the task before a court or Tribunal in a rectification suit. But this is not a rectification suit. This is necessarily, at outset, a construction exercise.
In Ryledar Pty Ltd & Anor v Euphoric Pty Ltd [2007] NSWCA 65 the New South Wales Court of Appeal expressly rejected the builder’s proposed course of construction in adopting the words of Palmer J at first instance:
“31. However, that does not mean that when the Court begins the task of construction it puts the words of the document aside and endeavours first to ascertain the commonly known factual context and purpose of the transaction, often only by resolving a strenuous contest between the parties. The Court does not, once it has found the commonly known factual context and purpose, then look at the words of the contract and, if they do not readily accommodate the context and purpose so found, force them to do so by a process of interpretation.
32. When the Court is construing a commercial contract, it begins with the words of the document: there it often finds expressed the factual context known to both parties and the common purpose and object of the transaction. But the court is alive to the possibility that what seems clear by reference only to the words on the printed page may not be so clear when one takes into account as well what was known to both parties but does not appear in the document. When that is taken into account, the words in the contract may legitimately have one or more of a number of possible meanings. It is then the Court’s task to identify which of the possible meanings represents the parties’ contractual intention.”[2]
[2]at [108].
The first task therefore is to construe the contract. This is a commercial contract. How does one do that? If the language is ambiguous, “… that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, "even though the construction adopted is not the most obvious, or the most grammatically accurate"….(T)he court should construe commercial contracts ‘fairly and broadly, without being too astute or subtle in finding defects’".[3]
[3]Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at [3] per Gibbs J.
The parol evidence rule of course excludes the use of extrinsic evidence in the form of pre-contractual negotiations and statements of the intentions of parties in the process of construction of express terms of a contract. But there are exceptions. One such is the admissibility of evidence of surrounding circumstances of the contract.
It is not unhelpful to refer to the oft cited “true rule” of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW[4] explaining the restricted use of surrounding circumstances:
“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.
It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself….”[5]
[4](1982) 149 CLR 337; [1982] HCA 24.
[5]Ibid at 352.
Surrounding Circumstances
The provisions of the contract are ambiguous. To ascertain the commercial purpose and object of the contract it is appropriate to consider evidence of mutually known surrounding circumstances associated with the contract.
The builder restricts relevant surrounding circumstances to the following. Both parties knew the property flooded in 2011 and that works were being undertaken to remedy the flood damage and improve the property; further additions and renovations were also being undertaken; work on the property had commenced but had not been completed by another builder; the build had gone by its intended completion date.
Beyond these factors however, the builder maintains the conversations between the parties including the architect on site, the tender, acceptance of the tender and other conversations represent the subjective intentions of the parties only and should not be used in interpreting the contract. Similarly the written statements of evidence at hearing and evidence given in cross examination purporting to interpret the contract.
It is often challenging to determine what are objective background facts known to both parties which reveal the subject matter of the contract. But why does the builder claim factors such as further additions and renovations were being undertaken and the build had already gone by its intended completion date under the previous contractor are available for consideration of objective background facts, but not the tender and its acceptance? Why is the latter categorised as a factor of subjective intention of the parties?
In Gladstone Area Water Board & Anor v AJ Lucas Operations Pty Ltd[6] Jackson J pointed to the guidance available in that regard from a consideration of the High Court’s decision in Royal Botanic Gardens And Domain Trust V South Sydney City Council.[7] In Royal Botanic Gardens the High Court took into account correspondence passing between the parties well before the lease being construed was executed; minutes of a meeting of one of the parties; and also the fact that for the period of 20 years before execution of the deed in question the parties had conducted themselves in a particular way which supported the construction of the relevant provision of the document by one of the parties.[8]
[6][2014] QSC 311 at [182].
[7][2002] HCA 5.
[8]Ibid at [36].
Bearing that in mind here I consider the following circumstances leading up to execution of the contract of 21 October 2013 relevant surrounding circumstances available for consideration in construing the contract.
The property was damaged by the 2011 Brisbane floods and needed repairs. Work on that had commenced under another builder, but that builder could not continue with the work.
The owners’ architect, Ms Bosanquet, forwarded two emails to MCC on 2 October 2013. By the first email, she said she was working on a scope of work letter. A description in brief was referred to, which appears to be a reference to the scope of work proposed. There are seven items referred to:
·Installation of in-ground watertank at front of property
·Automated sliding entry driveway gate
·Entry structure – “no details yet for this”
·Rear pool deck and walkway – including glass balustrade
·Landscaping
·Refurbishment of jetty
·Coordination of interior fit out (“finishing off – hanging internal doors and skirting”)
In the email Ms Bosanquet refers to the tiling and she says “We are sourcing two quotes presently – do you have a tiler you could recommend?” She refers to “Trades we have” and goes on to refer to plumber, electrician, sound, air-conditioning and painter. She finishes “Tiles, light fixtures, sanitary and kitchen fixtures and appliances have all been purchased.”
The second email was forwarded shortly after and enclosed various drawings and approvals concerning the jetty.
MCC forwarded a tender submission to the architect via email on 9 October 2013. The tender submission submitted a price of $138,190 plus GST for “the renovations to 73 Brisbane Corso, Fairfield.” There are seven items referred to in the tender:
·Installation of in-ground watertank at the front of the property to collect garage roof water (including a pump).
·Automated sliding entry driveway gate
·Entry structure
·Rear pool deck and walkway – including glass balustrade
·Landscaping
·Refurbishment of jetty
·Coordination of completing building including supervision and administration
In respect of five of the items, watertank, driveway gate, entry structure, glass balustrade and jetty, the builder makes reference to a “PC sum” and a specified amount is noted in respect of each PC sum. The tender concludes “We consider a total construction period of seven weeks. This tender submission is based on information provided at this time.”
Later that day MCC emailed the architect a document described “Schedule of Rates” which then goes on to list three different sets of hourly rates for various trades. The rates appear to be rates quoted for other jobs, one for the Echo Entertainment Group, another for McDonalds Australia Ltd and the third entitled Coomera City. The McDonalds quote quotes higher rates than the other two.
By email dated 15 October 2013 from the architect to MCC, the architect advised MCC all parties would meet on site on the coming Thursday “to establish and document the site conditions and form contract to complete the work.” The architect attached a document described as a Project Summary and said in the email “We will be endeavouring to have the site handover between builders this Friday with QBSA insurance paid that day with the intent of starting work on Monday.” She then refers to contacting tradespeople and states that the cabinet maker, electrician and plumber are aware of the change but the plumber was unsure about continuing.
The Project Summary refers to statutory approvals in place, lists consultants, sets out the existing trades contact list, notes some materials on site and then refers to items outstanding as follows: garage door, entry gate, driveway gate, entry structure, pool fence, watertank, recessed LED light, existing cast iron fireplace refit, heated towel rail, sliding doors and powder room. There were also drawings and plans attached.
In none of these common communications is there any reference to any other work agreed to be done by the builder as part of the contract.
The Scope of the Contract
This then was the common background and context within which the contract was executed.
The subject contract was a commercial contract. What would a reasonable business person privy to these background circumstances and this context conclude was the intention of the parties in executing the contract of 21 October 2013?[9]
[9]Electricity Generation Corporation Ltd v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35].
In my opinion the conclusion would be that the contract was intended to follow the terms of the tender. The builder was to perform the work described in the tender, including those items with a reference to a “PC Sum” as PC sums, for an agreed fixed price of $138,190 plus GST. Item 3 of the contract entitled Description of Works roughly coincides with the matters set out in the tender and the architect’s first email of 2 October 2013 listing seven parts to the scope of work.
No additional prospective work outside the scope of work covered by the fixed price contract formed part of the contract, or had at that stage been agreed upon. The builder’s provision of sample rates under cover of the email of 9 October 2013 was just that, sample rates.
The sentence in special condition 3 “The contractor is entitled to a 10% plus GST margin of the actual cost of works that excludes GST” is, I conclude, a reference to an agreed builder’s margin for any such future work if it be done. But as stated, there was no agreement about extra work to the fixed price work as at date of contract. In support of that conclusion I note the builder advised the Queensland Building and Construction Commission (then QBSA) that the contract value for the building work at 73 Brisbane Corso, Fairfield was $138,000.
Though appendix A Prime Cost and appendix B Provisional Sums were crossed through in the contract, and the box at Item 6 of the schedule to the contract allowing an amount to be noted for builder’s margin on variations, Prime Cost and Provisional Sums is struck through, and at Item 5 Prime Cost and Provisional Sums are marked not applicable, I conclude that does not reflect the intention of the parties which was that the items described as Prime Cost (erroneously, rather than more appropriately provisional sums) in the tender were included as Prime Cost items included in the fixed price contract.
I reject the builder’s submission that there was an agreement between parties partly in writing and partly oral made on or about 10 October 2013 to the effect that the applicant would complete the works specified in the applicant’s tender in accordance with its terms but also complete other work at the property on a cost plus 10% basis. The email from the architect to MCC of 15 October 2013 makes clear to my mind that no agreement existed between the parties as at that date. The architect refers to meeting at site two days hence “…to establish and document the site conditions and form contract to complete the work.” There was no reference to documenting by written contract any earlier oral agreement between the parties. Any such oral agreements were subsumed into or overtaken by the terms of the written contract entered into on 21 October 2013. The contract of 21 October 2013 was a duly executed and binding domestic building contract between MCC and the owners which prescribed the respective rights and obligations of the parties.
The Builder’s Alternate Contentions
The builder also argues the written contract of 21 October 2013 is void and of no effect by virtue of s.93(1) of the Act because the contract fails to comply with various provisions of the Act. Given the contract is void the builder may recover the value of work done on a quantum meruit basis.
The contract of 21 October 2013 is in writing, utilises a standard form Master Builders fixed price contract and is signed by the authorised agent of the building contractor. The latter means s30 of the Act has been satisfied.
The only challenge might be the requirement in s29(2)(a) of the Act that the contract contain a detailed description of the subject work under the contract. However that requirement is satisfied by the general description of work at item 3 of the schedule to the contract when taken together with the information contained in the architect’s email of 15 October 2013 and the attachments to that email described as Project Summary. Both the email and attached Project Summary are documents forming the contract by special condition 2 of the contract.
But in any case, if the contract did not comply with the requirements of Part 3 Division 1 of the Act (other than s30) I do not agree that s93 applies to render it void.
Section 93(1) provides that a domestic building contract is void to the extent it is contrary to the Act or purports to annul, exclude or change a provision of the Act. But consideration must also be given to s92 which provides that unless the contrary intention appears in the Act, a failure by a building contractor to comply with a requirement under the Act in relation to a domestic building contract does not make the contract illegal, void or unenforceable.
The apparent conflict between these provisions was explained away in Venamore T/as Kobble Gardens v Reynolds[10] as follows:
[10][2003] QCCTB 71 at [228].
“(iv) Section 93 of the Domestic Building Contract Act does not operate to render void and illegal a regulated contract which does not comply with the provisions of, for example, sections 27, 28 and 29. Section 93, as the Applicant submits, deals with attempts to contract out of, annul, exclude or change the provisions of the Act. (v) Section 92 limits the civil/contractual consequences of any failure to comply with the Domestic Building Contracts Act by a builder to those instances where the effect of non-compliance is specifically dealt with in those parts of the Act which lays down compliance criteria for particular purposes. (vi) Accordingly the statutory result of non-compliance in respect of a regulated contract appears confined to section 30 of the Domestic Building Contracts Act.
(vii)
Section 30 does not prevent the contractor from recovering upon a quantum meruit.”
I concur. The headings to the respective provisions are informative. Those headings form part of the provisions for the purpose of interpretation[11] and confirm the suggested interaction between the sections. Section 92 is entitled “Effect of failure by building contractor to comply with requirement”. Section 93 is entitled “Contracting out prohibited”. Section 93 should be understood as applying to those circumstances where an attempt is made to step outside or avoid the application of the Act, rather than failure to follow prescribed form. It does not have the effect claimed for it by the builder, namely that the contract concerned is void and has no effect. A claim in quantum meruit is therefore not available.
[11]Acts Interpretation Act 1954, s 35C(1).
Builder’s Claim for Variations
Section 16 of the Act defines variation of a domestic building contract as “an addition of domestic building work to the subject work” or an omission from the subject work. “Subject work” for a domestic building contract is defined in Schedule 2 of the Act to mean the domestic building work carried out, being carried out or to be carried out under the contract, or the domestic building work the carrying out of which has been, is being or is to be managed under the contract.
By s8(1)(b) of the Act, domestic building work includes the renovation, alteration, extension, improvement or repair of a home. By s7(1)(a) a domestic building contract is a contract to carry out domestic building work.
There was significant additional domestic building work performed by MCC outside the scope of work covered by the fixed price contract. As concluded previously however, no additional work formed part of the scope of work agreed under the fixed price contract. Any such additional work would therefore be a variation to the contract as provided by s16 of the Act.
There is no dispute that the statutory requirements for variations contained in Part 7 of the Act were never complied with. There has been no application for the Tribunal’s approval of an amount to the contractor in respect of the variations as permitted by s84 of the Act. The builder is therefore prohibited by the Act from recovering an amount for the variations. That includes a claim based on quantum meruit.
McGill DCJ concluded in Thompson Residential Pty Ltd v Tran[12] that unless a builder utilises the recovery procedure stipulated for in s84(4) of the Act, there is no contractual or restitutionary remedy available to the builder to recover for variations which fail to comply with the legislative requirements.
[12][2014] QDC 156 at [18].
His Honour also pointed out: “In Allaro Homes Cairns Pty Ltd v O’Reilly [2012] QCA 286 the Court of Appeal refused to interfere in the refusal of QCAT to allow the statutory restitutionary remedy under s 84(4). Significantly however it appears that Holmes JA at [2] rejected the idea that the applicant could have a restitutionary remedy outside s 84(4), a remedy which, had it existed, the applicant ought to have been able to pursue before the Tribunal.[5] If there was a general law restitutionary remedy available as well as that provided by s 84(4), it is very surprising that the Court did not say so.”[13]
[13]Ibid at [13].
There is no claim in quantum meruit available to the builder in respect of the variations.
Owners Claim to Recover Variations Paid
It is not disputed that the owners have paid the builder $239,128.40 including GST. The fixed price under the contract was $138,190 plus GST. The owners claim they are entitled to recover the difference representing variations which failed to comply with the variation requirements of the Act. They say the builder has no entitlement to keep those monies.
They submit s84 has similar prohibitive effect on a builder’s right to payment as does s42 of the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act) which disentitles unlicensed builder from receipt of any remuneration.
Section 42(3) provides “a person who carries out building work in contravention of this section is not entitled to any monetary or other consideration for doing so.” The right of owners to recover monies paid to an unlicensed builder was confirmed in Cook's Construction P/L v SFS 007.298.633 P/L (formerly trading as Stork Food Systems Australasia P/L).[14]
[14][2009] QCA 75.
Section 84(2)(b) provides that “the building contractor may recover an amount for the variation… only with the tribunal’s approval….”
As stated above, McGill DCJ concluded in Thompson Residential Pty Ltd v Tran that there is no contractual or restitutionary remedy available to a builder additional to the s84 process to allow recovery for variations failing to comply with the legislative requirements.
McGill DCJ also referred to the District Court decision of CMF Projects Pty Ltd v Riggall[15] where Andrews DCJ concluded s84(4) was “an instance of the legislature creating a specific and restricted right to a restitutionary remedy for builders who failed to obtain properly documented variation agreements, a remedy available only from the tribunal and to the exclusion of other rights of recovery….[16]
[15][2014] QDC 90.
[16]Ibid [23].
My decision in Office Shop Renovations Australia Pty Ltd v Zhou & Anor[17] was relied on in support of the owners proposition that they are entitled to recover the monies they paid for variations. That reliance is misplaced. There I ordered that the builder repay money charged over and above the agreed amount for variations. The owners there did not seek to recover all moneys they had paid for variations even though they argued, successfully, that the variations breached the requirements of Part 7 of the Act.
[17][2014] QCAT 510.
Concerning s42 of the QBCC Act, in Cook's Construction Pty Ltd Keane JA said “In Marshall v Marshall McPherson JA identified the entitlement in the payer to recover monies 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.”[18]
[18]Op.cit at [49].
However Keane JA also noted McPherson JA said[19] “In my opinion, the effect of s42(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.”
[19]Marshall v Marshall [1999] 1 Qd R 173 at 176.
The wording in s84(4) is different to the wording used in s42(3). Section 42(3) refers to the unlicensed builder being “not entitled to any monetary or other consideration.” Section 84 refers to the “recovery” of money by a builder. The former, in my opinion, casts a far broader net than does the latter. The latter directs the course to be followed by a builder pursuing action to recover remuneration for work done. The former encompasses both action able to be taken by an unlicensed builder to recover remuneration, and also the unlicensed builder’s receipt of remuneration. Hence McPherson JA’s conclusion in Marshall that the money received by the unlicensed builder there was “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.”[20]
[20]Ibid.
In Cook's Construction Pty Ltd Keane JA said McPherson JA’s reasons in Marshall for the conclusion that s42(3) was intended to disentitle an unlicensed builder from receiving or retaining any payment on any basis were compelling. McPherson JA had examined the history of changes made to the provision, the connection to the statutory home insurance statutory scheme and the regulatory function of the Act concerned to protect home owners from incompetent or dishonest builders.
But s84(4) does not remove any entitlement to monetary or other consideration of a builder who fails to comply with Part 7 of the Act. It simply limits the builder’s process of recovery to only the Tribunal process provided for in s84(4). Section 84(4) lacks the clear legislative proscription against any entitlement to remuneration that is contained in s42(3).
In the appeal decision of CMF Projects Pty Ltd v Riggall[21] the Court of Appeal applied the presumption of statutory interpretation against abrogation or curtailment of common law rights without clear legislative intention to achieve that to permit a builder’s claim in quantum meruit against a home owner despite the prohibition in s55 of the Act against enforcement of a non-compliant cost plus contract.[22]
[21][2014] QCA 318.
[22]Ibid at [34].
The Court of Appeal referred with approval to the statement of principle by O’Connor J in Sargood Brothers v The Commonwealth[23] that “… an Act will never be construed as taking away an existing right unless its language is reasonably capable of no other construction.”
[23](1910) 11 CLR 258 at 279.
This presumption, called the principle of legality,[24] “…requires that clear language be used in legislation if a person is to be deprived of a valuable right.”[25]
[24]R v Independent Broad-based Anti-corruption Commissioner [2016] HCA 8 at [40].
[25]Tabcorp Holdings Limited v Victoria [2016] HCA 4 at [68].
I conclude there is no clear intention to be derived from the wording of s84(3) and (4) that the builder’s right to retain payment of monies made to it voluntarily for variations which fail to comply with the requirements of the Act is intended to be abrogated so as to entitle the owners to subsequently recover monies so paid.
Here there is no claim made either in the pleadings or at hearing that payment for the variations was made other than voluntarily. There was no evidence that payment for variations was made on a mistaken view that there was a legal obligation to pay the amounts claimed. Rather payment seems to have been pursuant to a course of compromise and conciliation adopted with the builder, based in part to avoid conflict[26] and in part to achieve earliest possible completion of the job.[27] By January 2014 the project was already some five months behind schedule.[28]
[26]Ex 9 at [45].
[27]T4-82 L23-31.
[28]T3-85 L22.
The owners cannot now recover the monies voluntarily paid by them for the variation work done by the builder.
Owners Claim for Defective Building Work
The respondents also counterclaim for damages for breach of contract for defective building work. They claim $115,232.99 based on the cost assessment experts (Messrs Thompson and Costanzo) agreed estimate of costs of the scope of work, and where not agreed, Mr Thompson’s assessment.
All defects are associated with the variation work. The failure to comply with the statutory requirements for variations does not make the contract nor the additional work of the variations illegal, void or unenforceable.[29] As stated above, s84 of the Act simply prescribes a specific and restricted method of recovery for variation work performed, nothing more. The builder is still subject to the warranties for its work (extending to variations) both contractual and statutory, which apply to the performance of the work regardless that the contract was terminated by the owners.[30]
[29]Section 92 DBCA.
[30]Thompson Residential Pty Ltd v Tran at [12].
Where an owner sues for damages for breach of contract the general rule of the measure of damages laid out in Robinson v Harman[31] applies. By that rule the owner is entitled to recover an amount that will put him in the same position, so far as money can do it, as if the contract had been fulfilled. That also means however that in assessing damages for breach of contract the normal rule is that credit should be given for any benefit acquired under the contract.
[31](1848) 1 Exch 850.
In Mertens v Home Freeholds Company[32] Warrington LJ said “The Referee has adopted what I think is the true measure of damages – namely, ‘what it cost the plaintiff to complete the house substantially as it was originally intended, and in a reasonable manner, less any amount that would have been due and payable’ to the builder by the building owner, that is to say to the defendant by the plaintiff, had the defendant ‘completed the house at the time agreed by the terms of his contract’.”[33]
[32][1921] 2 KB 526.
[33]Ibid at 538.
The learned authors of McGregor on Damages[34] in considering a builder’s breach of his building contract in failing to build at all or in part and the correct measure of damages that flows from that, noted: “The normal measure of damages is the cost to the owner of completing the building in a reasonable manner less the contract price.”[35] A footnote to that statement continues “Or that part of the contract price, if any, remaining unpaid.” The text goes on to cite authority for that measure of damages, cost of completion less contract price, as the Court of Appeal decision of Mertens and they continue “which must still be regarded perforce as the leading case since it proves to be the only one dealing with this issue”.
[34]17th Edition, 2003, Sweet & Maxwell.
[35]Ibid at 26-003.
Other cases have dealt with the matter, most commonly in the context of entire contracts. In circumstances of breach by a builder of his obligations under an entire contract, where he is not entitled to any payment because the contract requires completion before any payment, the advantage to the owners following the builder’s breach is often in not suing and seeking damages for breach of contract. If the owner does sue for damages however, then the rule of Robinson v Harman applies and credit must be given to the builder for any unpaid balance of the price of the contract.[36]
[36]Rocci & Anor v Diploma Construction Pty Ltd [2004] WASC 18 at [23]; Tan Hung Nguyen v Luxury Design Homes Pty Ltd [2004] NSWCA 178 at [52]; Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184.
The rule is of general application. It is not limited to cases involving entire contracts. It applies in my view with even greater force if possible to the present situation where the work has been done but s84 inhibits the builder’s recovery of remuneration for that work.
How credit is given for the unpaid price is perhaps unclear. In Cordon senior counsel for the builder made a concession that Tan Hung Nguyen was authority for the proposition that where a proprietor claimed damages for wrongful repudiation the builder was entitled to set off a claim for work done based on quantum meruit against that claim.[37] That concession appears to have been accepted without demur by Bathurst CJ, with whom the other members of the Court of Appeal agreed.
[37]At [195].
In Ventura v Svirac[38] however, the court, after confirming the measure of damages against a building contractor for failure to properly complete the contract was the cost of proper completion less any unpaid balance of the contract price, said it was not necessary in order to get credit for the unpaid balance of the contract price that the builder should have to plead a set off or counterclaim. Mertens was cited as authority.
[38][1961] WAR 63.
Here, regardless of whether credit for the price payable for variation additions to the contract is to be subtracted from the owners claim for damages for rectification of defective building work associated with those variations during calculation of those damages or whether the price of the variations is to be set off against the owners claim, the mathematical exercise is the same.
Both parties led extensive expert evidence at hearing. Both parties relied on building experts to assess the scope of work of variations and defective work, and both called quantity surveyors to give evidence about their values. Mr Thompson was a quantity surveyor engaged by the owners. His calculations were generally significantly less than that of Mr Costanzo, a quantity surveyor called for the builder.
Mr Thomson’s assessment of the reasonable value of variation work, taking into consideration, he said, the “contract conditions” and statements of the owners and the architect was $157,809.72.[39] That estimate might be described as a best case scenario for the owners.
[39]Ex 13 at [63].
Cost Assessment of the Variations
Mr Thompson, the costs expert for the owners explained at hearing that he provided in his report a number of different streams of calculations for the variations claimed. One, Option A, was his estimate of the value “clarified” by the statements of evidence of the architect[40] and Mrs Greer[41] where they disagreed with various aspects of the builder’s claimed scope of work. I note in respect of his calculations of reasonable costs for variations as opposed to his calculations of costs for rectification work, Mr Thompson appears to have adopted a fairly conservative mindset. In his estimates in costing the value of rectifying defects he added a fairly significant additional contingency allowance for the contractor which he did not allow for in his estimate of the cost of variation work. He also set higher rates for tiling rectification than for variation work. The costs of such things as sealing coats and acid wash after tiling was allowed for retiling defective work, but not for the tiling in the variations.
[40]Ex 10.
[41]Ex 7.
Despite that, I prefer Mr Thompson’s methodology Option A in addressing the scope of work and reasonable cost of that work to that of Mr Costanzo, the costs expert for the builder. This choice is only made on the basis that Mr Thompson’s Option A scope of work takes into account and gives effect to the evidence of the architect and Mrs Greer as to scope and performance of work with respect to the variations. It should in no way be considered a reflection on the skill or experience of Mr Costanzo, a very experienced quantity surveyor. However I prefer the evidence of the architect and Mrs Greer about the scope of work of the variations and the work of the builder attending to that scope of work in preference to the evidence of Mr Scroope. Both women attended the site regularly, if not every day, and I found both women gave open and honest evidence and had good recall about detail. I found by contrast Mr Scroope a little vague at times in his evidence and careful not to commit himself on some fairly straight forward matters put to him by Counsel for the owners.
The builder took exception to Mr Thompson’s methodology in so far as he allowed only a 10% builder’s margin on variations whereas he provided a 20% margin for defect rectification. Mr Costanzo suggested a 20% margin for variations was appropriate here but that rate was based on a reasonable commercial rate under a normal commercial arrangement. The builder’s claim had it succeeded would have been based on quantum meruit. But I have concluded that the contract was not void or unenforceable. I also concluded that the agreement between the parties was for a 10% margin on additional work. That is one basis upon which Mr Thompson limited the builder’s margin on variations to 10%, and in applying the agreed rate I conclude he was correct.
Adjusting Mr Thompson’s figures where in giving his evidence he agreed that adjustment was called, and where the experts jointly agreed on costs, the reasonable value of the variations are therefore as follows:
| Variation | Subtotal | 20% Margin | GST | Total |
| E001 Electrical * | 22,459.74 | 2,245.97 | 2,470.57 | 27,176.28 |
| P001 Painting ** | 19,982.99 | 1,998.29 | 2,198.12 | 24,179.40 |
| P002 Painting (Agreed) | 685.05 | |||
| Variation 08 | 918.50 | 91.85 | 101.04 | 1,111.39 |
| Variation 30 (Agreed) | 734.80 | |||
| Variation 44 | 704.10 | 70.41 | 77.45 | 851.96 |
| 001 Plumbing | 6,590.90 | 659.09 | 725 | 7,974.99 |
| 002 Plumbing (Agreed) | 5,395.08 | |||
| 006 Plumbing | 116.50 | 11.65 | 12.82 | 140.97 |
| 007 Plumbing | 925 | 92.50 | 101.75 | 1,119.25 |
| 001 Tiling | 25,391.51 | 2,539.15 | 2,793.07 | 30,723.73 |
| Variation 11 | 22,306.31 | 2,230.63 | 2,453.69 | 26,990.63 |
| Variation 12 | 17,247.48 | 1,724.75 | 1,897.22 | 20,869.45 |
| Additional Items | 11,691.37 | 1,169.14 | 1,286.05 TOTAL | 14,146.56 $162,099.54 |
* Mr Thompson conceded an increased rate of $80 per hour
** $199.69 added to correct River Room soffit rate as agreed by Mr Thompson at hearing. The joint experts report “agreed” the area was 401sqm without further elaboration. That was unhelpful given Thompson area walls and ceiling totalled 733.3 sqm and Costanzo 941 sqm, with significantly different rates applying throughout the house. The original Thomson areas are therefore relied on.
Owners Claim for Cost of Rectification of Defects
I turn to consider the owners claim for damages for cost of rectification of defects. The parties led evidence on scope of work of rectification of defects from two experts, Mr Carpenter for the owners and Mr Browning for the builder. Separate additional evidence was led as to cost of rectification. Mr Thompson gave evidence for the owners and Mr Costanzo for the builder.
Water Ponding to Loggia
Water ponds on the tiles in the outdoor entertainment area described as the Loggia adjacent to the house. There is a low point in the Loggia floor which prevents water getting away. There is a possible associated water wicking effect to barbeque cabinetry with a granite fascia panel there too. The parties agree there is a problem to be rectified but not on what should be done nor the cost of rectification. Water was always intended to be able to enter the Loggia but also to drain away. There was no fall specified in any of the architectural drawings. According to both experts however, good workmanship dictates a fall to the Loggia tiles regardless.
Mr Browning proposes to lift then relay approximately 100 tiles on the Loggia floor itself. The area from the bordering swimming pool fence would be left as is, level. From the fence the tiles would fall through the Loggia from the kitchen steps to a construction joint approximately 1100 mm in front of the top step leading down to the garden.
Both Mr Browning and Mr Carpenter agreed no Australian standard applied to the Loggia area. Mr Carpenter suggested a fall of 75 mm to make the fall accord with an Australian Standard for waterproofing wet areas in buildings. But he agreed that Standard did not apply here and indeed at hearing agreed that any fall that remedied the water pooling problem would suffice.[42]
[42]T5-17 L2.
Mr Carpenter argued for one constant fall however, from inside the Loggia area at the kitchen steps at one end through to the top of the steps down into the garden area, and from the pool again through to those steps. Mr Browning proposed a fall from the kitchen steps through to the construction joint approximately 1100 mm before the top step. He also argued for a fall from the pool fence rather than the pool itself through the Loggia to the construction joint in front of the step rather than the step itself.
Mr Carpenter’s proposal is based on maintaining one level throughout the area, from the pool coping through to the external top step and avoiding transitions at the pool fence and again at the construction joint in front of the top step. There is no dispute that from the construction joint to the top step there is sufficient fall. He suggested a transition from the construction joint to the top of the step, some 1100mm, would be too noticeable. He suggests for the sake of one paver between the pool and the pool fence, it would be better to transition from the pool coping tile.
The key difference between Mr Browning and Mr Carpenter is the number of tiles which have to be lifted and relayed for their suggested rectification works. The cost experts agreed that the cost of the Browning scope of work was $12,992 inclusive of GST. It is unclear whether an allowance is made in that figure for the cost of rectification of the potential wicking effect to the granite barbeque fixture, but I conclude it is intended to be part of that estimate.
But it is not only with respect to the fall that the experts differ when suggesting the number of tiles to be removed. Another alleged defect is that associated with the pool deck waterproofing. Beneath the pool deck there is another open area described as the River Room. It is open on two sides. The defect complained about there is that the soffit shows mould and delamination. Unhelpfully Mr Thompson did not separately cost the rectification of just the Loggia. He costed the Loggia on the basis that the River Room defect should be rectified in conjunction with the Loggia work.
In the building experts joint report Mr Browning was of the opinion that the dampness could be rectified by stripping the ceiling under the pool deck and reinstalling it on 25 mm battens fixed to the deck floor joists. Additional PVC ventilation grills could also be fitted at the river face of the room and 50 mm air holes drilled in each of the south wall blocking at the underfloor area wall. His opinion was that that would provide sufficient air flow across the top face of the ceiling to remove the problem with dampness which he considered to be the cause of the soffit mould and sheet delamination, which he said was simply a sheet fixing problem.
Mr Carpenter however concluded in the joint experts report that tiles on the deck above the River Room soffit should be taken up and a waterproof membrane applied. Then the mould should be cleaned from the soffit, mould inhibitor applied and the soffit repainted.
As at the date of the joint experts conclave and report neither expert knew that the deck had already been waterproofed. By hearing however that was understood to have occurred, though the extent of the waterproofing was unclear, with a suggestion, and nothing more than that, from Counsel for the owners that tiles may have been taken up after being laid on the waterproofing membrane which may have damaged the membrane. The cost of waterproofing approximately 35 sqm of the deck above the River Room formed part of a variation claim[43] and photographs of the area suggest a full coating was applied to the entire deck area over the river room.[44]
[43]Ex 2, Folder 6 Tab V11-10 page 4 item 79 and Tab V11-13 page 4 item 70.
[44]Ex 28 and Ex 2 Folder 4 V39-3.
At hearing Mr Browning’s view remained unchanged that the problem with the River Room was caused by the boxed in unventilated ceiling cavity beneath the deck above the River Room ceiling. He said when the experts had visited the site there had been no significant moisture level in the soffit cement sheet. He had used Mr Carpenter’s moisture meter to confirm that. But the examination was limited. They had cut only one hole in the ceiling and looked inside and taken a photograph, which was attached to their joint report, and that showed the cement sheet was dry inside.[45]
[45]T2-125 L46.
Mr Browning’s solution remained to add battens across the deck floor joists, add ventilation grills and air holes, and then refix the plasterboard to the battens.
Mr Carpenter agreed with that rectification work but he went further. He suggested the tiles above the room on the pool deck should be removed and the waterproofing redone.
During cross-examination Mr Carpenter disclosed that he had attended the property only the day before hearing to refresh his recollection of the ceiling and walls of the River Room. Counsel for the builder objected to that visit, on the basis that the new site visit was an attempt to introduce new material which had not been put to his expert, Mr Browning, for comment. But no attempt was made by Counsel for the owners to lead new evidence through Mr Carpenter. That new evidence would be adduced was simply a suspicion on the part of Counsel for the builder at that stage of cross examination. I allowed Counsel for the builder to explore Mr Carpenter’s conclusions as to his recent site visit on the basis the recent attendance on site might simply reinforce the expert’s opinion set out in the joint experts report. But the matter was left entirely up to Counsel. Mr Carpenter’s further comments indeed simply reinforced the position he had adopted at conclave. There was nothing prejudicial to the interests of the builder in having Mr Carpenter attend the site for the purpose of refreshing memory.
Mr Carpenter did add however in reply to a question by Counsel for the builder enquiring as to the condition of the ceiling he observed the day before that the ceiling had deteriorated from the time of his previous inspection. In answer to a further question from Counsel as to whether the ceiling was intact or if it had been pulled off in sections, Mr Carpenter replied he had seen paint on the ceiling hanging in two places, and two joints opened. There was nothing unfair to the builder about these comments made by the expert answering questions put to him by Counsel for the builder. The further examination of the site to refresh memory did not breach the Tribunal’s Practice Direction about expert evidence and I therefore do not exclude the comments by Mr Carpenter from my consideration. It comes down to weight of the evidence however, and here I conclude it is not significant. Mr Carpenter’s comments about his observations at his latest inspection was simply to the effect that the ceiling had deteriorated. Mr Carpenter did not say that the further deterioration could only be attributable to leaks from the deck above.
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