Plantspec Pty Ltd v Chandra
[2018] QCAT 235
•23 July 2018
QUEENSLAND CIVIL AND
ADMINISTRATIVE TRIBUNAL
CITATION:
Plantspec Pty Ltd v Chandra [2018] QCAT 235
PARTIES:
PLANTSPEC PTY LTD
(applicant)v SHANNAL CHANDRA
(respondent)
APPLICATION NO/S:
BDL033-18
MATTER TYPE:
Building matters
DELIVERED ON:
23 July 2018
HEARING DATE:
16 July 2018
HEARD AT:
Brisbane
DECISION OF:
Member Howe
ORDERS:
1. Leave granted the applicant to amend its claim to include a claim for interest of $94,995.22 and penalty for late payment of $8,700 pursuant to contract.
2. The respondent pay the applicant the sum of $1,234.22 for claim plus $98.73 for interest within 14 days of the date hereof.
CATCHWORDS:
ADMINISTRATIVE LAW – ADMINISTRATIVE TRIBUNALS – QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL – minor civil dispute – where matter transferred to the Building list – where additional claim to interest and penalty mooted - where the claim in excess of the monetary limit set for minor civil disputes – whether the matter becomes a building dispute under s 77 Queensland Building and Construction Commission Act 1991 (Qld) – whether appropriate that all matters in dispute arising out of the factual circumstances of dispute be dealt with together – whether applicant would suffer estoppel if subsequent proceedings attempted to claim interest and penalty in the Magistrates Court
CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – PERFORMANCE OF WORK – REMEDIES FOR BREACH OF CONTRACT – DAMAGES – OTHER MATTERS – where the applicant performed unlicensed work – whether applicant entitled to recover cost of performing work – where estimate of costs of performing work necessary
CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – PERFORMANCE OF WORK – REMEDIES FOR BREACH OF CONTRACT – DAMAGES – OTHER MATTERS – whether builder entitled to payment for work variation – where method of calculating increase on contract price available from terms of variation – whether applicant entitled to recover large claim for interest – where no basis for claim to compound interest – where interest awarded in accordance with terms of contract – where penalty provision in special terms and conditions void
Queensland Building and Construction Commission Act 1991 (Qld), s 42, s 77
Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30
Exports Credits Guarantee Dept v Universal Oil Products Co [1983] 1 WLR 399
Tomlinson v Ramsey Food Processing Pty Limited [2015] HCA 28APPEARANCES & REPRESENTATION:
Applicant:
Self-represented, S Gough and S Clancy
Respondent:
Self-represented
REASONS FOR DECISION
The applicant (Plantspec) is a landscaping contractor. The respondent (Mr Chandra) owns a house at Coorparoo.
The house was built in 1973 and had terracotta pipes for storm water and sewerage. There was a broken section. The pipes were under and behind a retaining wall near a pool. Various plumbers had tried to fix issues caused by the broken pipes but the proximity to the retaining wall caused problems. Mr Chandra called for quotes to remove and rebuild the retaining wall and replace the pipes.
Plantspec gave 3 quotes for the various parts of the work all dated 12 June 2017. The quotes were described as estimates. The quote for the retaining wall was for $11,333.30. The quote for removing the pool pump and repositioning it and rewiring the unit was $852.50. The quote for removing and replacing the terracotta pipes was $1,980.
Plantspec did the work associated with the retaining wall, the plumbing and the electrical connections.
Additionally on 12 July 2017 Mr Chandra had asked Plantspec to quote for a variation to the work. A concrete path discovered under dirt had to be removed to finish the pipework. Plantspec quoted $1,493.25. Mr Chandra accepted that. The work was done but Plantspec charged Mr Chandra $4,479.75.
The invoices from Plantspec total $18,645.55. Mr Chandra has paid Plantspec $11,416.58. The amount claimed to be outstanding by Plantspec is $7,228.97.
Mr Chandra initially refused to pay that because he had to pay other contractors $2,160.53 to rectify and complete the work done by Plantspec, and he wanted Plantspec to confirm the plumbing and electrical work had been performed by licensed contractors. As to the quote for the variation, he said he accepted it at $1,493.25, not the $4,479.25 charged.
In addition to the outstanding money for the retaining wall and variation work, Plantspec has issued an invoice for interest of $94,995.22 and a daily penalty for late payment, in addition to the interest, of $50 per day totalling $8,700. The invoice is set out in Mr Chandra’s material.
Plantspec commenced the subject claim as minor debt proceedings in the Tribunal claiming only the balance outstanding on the work invoices of $7,228.75. In the minor civil dispute proceedings an order was made that the application be transferred to the building list of the Tribunal. Why the transfer was ordered is not explained however the factual circumstances clearly show it is a building dispute as defined in s 77 of the Queensland Building and Construction Commission Act 1991 (Qld) (‘QBBC Act’).
The representative for Plantspec believed it could split its claim and proceed on the limited issue of only for the money outstanding on its work invoices which was under the $25,000 monetary limit for minor civil dispute claims. Then Plantspec intended to ‘go to the Magistrates Court’[1] after the QCAT proceedings to sue for the large amount of interest and the penalty.
[1]According to Mr Gough at hearing.
But the claim to interest and penalty arises, it is alleged, from the contract between the parties and is surely so connected with the claim about payment of the invoices as to make it unreasonable that it not be determined here as part of the building dispute if that is possible. If Plantspec does not pursue the claim to interest and penalty now, when it sensibly can, it will not, I conclude, be able to claim the interest and penalty in any subsequent Magistrates Court proceedings because Anshun estoppel will apply to any such further claim. As explained by the High Court in Tomlinson v Ramsey Food Processing Pty Limited:[2]
The third form of estoppel is now most often referred to as "Anshun estoppel", although it is still sometimes referred to as the "extended principle" in Henderson v Henderson. That third form of estoppel is an extension of the first and of the second. Estoppel in that extended form operates to preclude the assertion of a claim, or the raising of an issue of fact or law, if that claim or issue was so connected with the subject matter of the first proceeding as to have made it unreasonable in the context of that first proceeding for the claim not to have been made or the issue not to have been raised in that proceeding.[3]
[2][2015] HCA 28.
[3][22] (citations omitted).
There were no reasons given for the order made in the minor civil dispute proceedings that ‘The application is transferred to the Building List of the Tribunal’. However when the matter came on for hearing before a learned Adjudicator it appears a copy of an invoice from the applicant claiming $110,924.19 for interest and penalty was handed up. I surmise given that amount suddenly introduced into the equation, the learned Adjudicator realised the potential claim by the applicant far exceeded the monetary jurisdiction for minor civil disputes and transferred it as a building dispute to the Building List. I conclude as and from transfer the matter fell within the Tribunal’s jurisdiction to determine the matter as a building dispute under s 77 of the QBCC Act.
Accordingly at hearing I gave Plantspec leave to increase its claim in the building dispute before me by adding its claim for interest of $94,995.22 and penalty for late payment of $8,700. Mr Chandra had no objection to that amendment but wanted all issues dealt with together if possible.
At hearing Mr Chandra resiled from his claim for the cost of completing work or rectifying the work because he said he did not want to file a counter application. He does not dispute most of the work was done by Plantspec.
However he challenges a charge made for a concrete pump and ready-mix concrete quoted for and not utilised; he maintains an objection that Plantspec did not use licensed contractors for either the plumbing work or the electrical work; he does not accept the charges for the variation work; and finally he disagrees with the claim for interest and penalty.
The parties entered into a QBCC Level 1 Renovation, Extension and Repair contract on 4 July 2017. It was signed by Mr Chandra. Both parties agreed at hearing that it was part of the contract documents. At hearing the parties also agreed the General Conditions referred to in that QBCC Level 1 contract applied. They did not have a copy of the General Conditions available however. Mr Chandra said he had prepared the contract, not Plantspec. The parties also agreed there were, what I termed, special conditions to the contract prepared by Plantspec. These primarily concerned the terms of payment and contained the provision relied on by Plantspec to claim the very large interest amount and penalty.
The Contract
The QBCC Level 1 contract is primarily formed by the completed pages entitled a Schedule. It referred to the owner having purchased retaining wall material (concrete sleepers and steel posts) and that the owner would be providing steel mesh for post holes.
At item 13 of the Schedule the contract documents referred to are noted as plans supplied by the owner dated 3 July 2017 and also Specifications similarly dated 3 July 2017. The plans and specifications referred to are those documents included in Mr Chandra’s material entitled Scope of Work – 3/7/2017.
There is no reference to the so called special terms and conditions in the Schedule but the parties agree that they were also part of the contract documents and the special terms and conditions are signed by Mr Chandra and bears the same date as the Schedule.
Concrete Pump and Ready-mix Concrete
Plantspec quoted for the cost of a concrete pump and using ready-mix concrete as follows:
To source, supply and deliver ready-mix concrete 1.2M3 of ready-mix concrete
$468
To source, supply and deliver concrete pump
$740
But Plantspec mixed concrete by hand on-site and wheel barrowed it in behind the house. Mr Gough said it was not worth getting in a pump. He said it would have been more expensive to do that than the price quoted. He said the time it took him to do the work meant that he lost out on the job.
Mr Chandra said Plantspec was the only contractor who quoted to use a concrete pump and that that in part was why he gave Plantspec the job.
Mr Chandra does not challenge the quality of the concreting work done nor does he suggest the cost of hand mixing concrete and using wheel barrows should have been cheaper than the price quoted and the saving allowed him in the final bill.
I do not find that the quotation for the work would have been less if Plantspec had correctly stated how the concreting would be done nor do I find that Plantspec would not have been given the work if the quotation had referred to hand mixing concrete and wheel barrowing the concrete in. The quotation would have been in line with the other quotations from other contractors. There is no evidence that the Plantspec quote was not the most attractive in any case.
Nothing turns on this point. No reduction is allowed Mr Chandra.
The Electrical and Plumbing Work
By Schedule 1B of the QBCC Act there were certain warranties made by Plantspec as contractor made to Mr Chandra as owner. Those warranties are repeated in the general conditions to the QBCC contract.
Importantly, Plantspec warranted that the work would be carried out in accordance with all relevant laws and legal requirements.
Mr Chandra suspects the electrical and plumbing work part of the contract was not done by licensed contractors. He said he has repeatedly asked Plantspec to supply a copy of the necessary certifications for that part of the work. He says he will pay for that work but wants to make sure it was done properly by licensed contractors. That is entirely reasonable and sensible. Leaving aside the potential dangers of poorly done electrical work and the health and potential for significant property damage caused by poor plumbing work, homeowners may be personally liable for plumbing and electrical work that should be done by a licensed contractor but is performed by someone who is not licensed. Here, specifically, Mr Chandra has had problems with the terracotta pipes and that was a significant reason for him having the work done replacing them.
Plantspec was represented at hearing by its director, Mr Gough. Mr Gough could not produce the requisite Form 16 certifications. He said his uncle arranged for the plumbing and electrical work to be done and his uncle had passed away within a month of the work being completed on site. Mr Gough says he does not know which tradesmen his uncle engaged to do the work.
By s 42 of the QBCC Act:
Unlawful carrying out of building work
(1) Unless exempt under schedule 1A, a person must not carry out… building work unless the person holds a contractor’s licence of the appropriate class under this Act.
…
(3) Subject to subsection (4), a person who carries out building work in contravention of this section is not entitled to any monetary or other consideration for doing so.
(4) A person is not stopped under subsection (3) from claiming reasonable remuneration for carrying out building work, but only if the amount claimed—
(a) is not more than the amount paid by the person in supplying materials and labour for carrying out the building work; and
(b) does not include allowance for any of the following—
(i) the supply of the person’s own labour;
(ii) the making of a profit by the person for carrying out the building work;
(iii) costs incurred by the person in supplying materials and labour if, in the circumstances, the costs were not reasonably incurred; and
(c) is not more than any amount agreed to, or purportedly agreed to, as the price for carrying out the building work; and
(d) does not include any amount paid by the person that may fairly be characterised as being, in substance, an amount paid for the person’s own direct or indirect benefit.
Mr Gough says the electrical and plumbing work was carried out by licensed contractors. He said the work has been done well and if necessary can be approved.
Section 42 does not concern itself with subsequent approval being obtained for licensed works. It is concerned to ensure people who do building work without a licence do not do it, and if they do, they do not profit from it.
Mr Gough tendered an email from a plumber who went to Mr Chandra’s home approximately 2 weeks before the hearing (without making an appointment, according to Mr Chandra, and was therefore asked to leave) for the purpose of providing a quotation. There is no indication as to what work that plumber was to quote on. The email does not assist him with the s 42 prohibition.
As far as the electrical work is concerned, there is an invoice from an electrician dated 4 August 2017, which was after the work was done by Plantspec, for relocating a power point for the pool pump. This was an electrician called by Mr Chandra who was worried about the electrical work done by Plantspec. The plumber’s invoice says ‘Existing GPO had been taken off the wall and all conduit work had been left lying above ground. This was rectified.’[4] The cost for that was $247.73 and it was paid for by Mr Chandra.
[4]Exhibit 3.
There are photographs in Mr Chandra’s material showing the rather extensive plumbing work and showing electrical conduit lying in trenches behind the retaining wall. The trenches are yet to be filled in the photographs.[5] Mr Chandra maintains it was Plantspec employees who did all the electrical and plumbing work.
[5]Ex 2 pages 15-17.
Mr Chandra said he saw Plantspec employees removing the existing terracotta pipes, installing new PVC piping and using union connectors to join pipes.
He has a photograph of a Plantspec employee turning off the power at the circuit board.
Mr Chandra seemed a sensible and reasonable home owner and someone who seemed far more knowledgeable about contractual matters than did Mr Gough. Mr Gough gave rather glib and thoughtless answers to questions put to him. He did not seem to comprehend that the parties had entered into a QBCC Level 1 contract which set out the rights and obligations of the parties and that there was more to the matter than that he had done work and wanted to be paid for it. I felt his evidence was most unreliable. Where the evidence of Mr Chandra conflicts with that of Mr Gough I prefer the evidence of Mr Chandra. I accept Mr Chandra’s evidence that it was Plantspec who did the plumbing and electrical work and that no other licensed contractors were involved.
Plantspec is a landscaping contractor. It is not licensed to perform electrical or plumbing work. Section 42 QBCC Act has application and Plantspec cannot be remunerated so as to profit from either the plumbing or the electrical work.
Its invoice for the plumbing work was $1,980. Its invoice for electrical work was for $852.50
Section 42 precludes Plantspec from claiming any profit from doing the electrical or plumbing work. It does allow the person who did the work to recover the cost of materials and labour paid for by the person.
I have no evidence what the labour cost was to Plantspec in having its employees do the electrical and plumbing work. There is no evidence as to how many hours the employees worked nor what they were paid.
I estimate a reasonable hourly cost to an employer like Plantspec for a labourer doing general labouring work would be $20 per hour.
With respect to the electrical work, the electrician called in by Mr Chandra seems to have fixed some of the electrical work poorly done by Plantspec or finished off some of the work. The matter is unclear given the paucity of evidence on this point from both parties. I am forced to make assumptions.
The general labour involved in performing the work noted in the electrical estimate of 12 June 2017 I set at 4 hours. Plantspec is therefore allowed $80 as the cost to it of its labourers doing work removing the existing pool pump and removing the pump base and re-plumbing and rewiring it on returning it back into position, as well as disconnecting and isolating the electrical feed for the pool pump and outdoor lights referred to in the specifications (the scope of work document). I have no information about electrical cabling or connectors used. I make no allowance for such. I take into account the fact that the electrician called in by Mr Chandra charged him to complete the work which should have been done under the electrical estimate.
In respect of the plumbing, given the trench dug for the retaining wall exposed the pipes and that trenching is the matter of separate charge, I consider the cost of the labour to Plantspec to remove the exiting terracotta pipes and place with 100mm PVC in lieu and connect would be 2 men for 1 day. That totals $320 and is allowed. There is no indication of the cost of the pipes or fittings. I allow $200 for that, which makes a total recoverable under this head of charge for plumbing of $520.
The Variation
Mr Chandra asked Plantspec to do additional work. A concrete path and soil had to be removed to allow access to the pipework which was to be replaced. Plantspec gave an estimate of $1,493.25 for the work. That was dated 12 July 2017. The document evidencing the variation is entitled Estimate and provides where applicable:
To complete the variation to estimate 5997
…
To source and supply manual labour per 8 hour day x 2 men estimate only – 3 days to complete
$960.00
To remove load and transport all waste to a waste transfer station, ‘Fire Ant’ regulations and commercial tipping fees per tonne and are included price per load
$397.50
Mr Chandra’s evidence was that he accepted that quote and he understood the work would probably take 3 days. He would also have to pay $397.50 for each load taken to the tip. Mr Chandra said the work in fact took only one day and there was only one trip to the tip. What was thought to have been a hidden concrete path approximately 1 metre wide under the dirt turned out to be the footing for the old retaining wall and it was able to be removed in one day.
When Plantspec delivered its invoice for the variation work however, not only did it claim for 3 days to do the work, but it charged at three times the daily rate originally quoted and charged for 3 loads to the tip though utilising the same description of the charges for the work as set out in the estimate. The invoice charged:
To complete the variation to estimate 5997
…
To source and supply manual labour per 8 hour day x 2 men estimate only – 3 days to complete
$2,880
To remove load and transport all waste to a waste transfer station, ‘Fire Ant’ regulations and commercial tipping fees per tonne and are included price per load
$1,192.50
Mr Gough said the manual labour figure in the estimate was intended to be the cost for each day’s work. He maintained at hearing that that interpretation was clear on the face of the document. I disagree.
He also claimed the work took 3 days and there were 3 loads taken to the tip. Mr Chandra’s evidence of course was that the work took one day and there was only one load taken to the tip.[6]
[6]Ex 2 page 42.
Any reasonable reading of the estimate shows that Plantspec estimated 3 days to do the work and for 3 days work the charge would be $960. By s 41 of Schedule 1B to the QBCC Act a building contractor must ensure a variation complies with various requirements including:
Describes the variation
States the change to the contract price because of the variation or the method for calculating the change to the contract price because of the variation.
The estimate formed a variation to the contract. It said it was an estimate only. I find it set out a method to calculate the cost of the work. If the work took less than the estimated 3 days it was reasonable to assume the charge would be proportionally reduced. Similarly, if the work took more than 3 days the charge could be proportionally increased.
Mr Chandra said the work only took one day. I accept that. He said there was only one trip to the tip. I accept that too. The proportionate charge for one day was $320 for the labour. Plantspec was also entitled to one load to the tip at $397.50.
Interest and Penalty
Plantspec also pursue a quite extraordinary claim for penalty and interest. It is said to be based on its special terms and conditions to the contract.
The special terms and conditions simply say:
Overdue Account
Plantspec Pty Ltd has the right to charge interest on overdue accounts if not paid by the due date. This amount is subject to change and is dependent on current interest rates and will be calculated daily.
Plantspec Pty Ltd reserves the right to charge $50 per day for any outstanding invoice not paid in full.
From that meagre offering Plantspec draws its calculation of $94,995.22 for interest. It issued an invoice to Mr Chandra for that amount dated 12 July 2017. Obviously that date is wrong, but that is not unexpected.
In that invoice it states as far as relevant:
To supply labour and equipment to perform the above works
$7,595.00
Account was due on 27/7/2017
$94,995.22
Account is 174 days overdue
Interest on the total owing is accrued daily @ current RBA cash rate (1.5%)
Overdue invoice daily charge of $50$8,700.00
Account is 174 days overdue
In Mr Gough’s statement of evidence he refers to the special terms and conditions and says that the interest claimed is compound interest at the rate of 1.5%.[7]
[7]Ex 1 page 1.
There is neither mention of compound interest, reference rate benchmark nor interest rate in the document described as special terms and conditions.
On my calculation, the sum of $7,595 charged with compound interest of 1.5% for say 6 months calculated daily gives $57.18 interest. If the penalty of $50 per day is added perhaps the sum might climb to $94,995.22 however it is not necessary to attempt to understand the formula relied on.
Mr Gough agreed at hearing that the charge of $50 per day was a penalty applied in addition to interest on the monies outstanding.
A penalty clause in a contract which requires a party in breach to pay a particular amount which lacks any connection to the potential loss that could follow from the breach is void. As explained by the High Court in Andrews v Australia and New Zealand Banking Group Ltd:[8]
… as the term suggests, a penalty is in the nature of a punishment for non-observance of a contractual stipulation and consists, upon breach, of the imposition of an additional or different liability.
… this collateral stipulation, upon the failure of the primary stipulation, imposes upon the first party an additional detriment, the penalty… If compensation can be made to the second party for the prejudice suffered by failure of the primary stipulation, the collateral stipulation and the penalty are enforced only to the extent of that compensation. The first party is relieved to that degree from liability to satisfy the collateral stipulation.[9]
[8][2012] HCA 30.
[9][9]-[10].
Put succinctly:
[P]erhaps the main purpose, of the law relating to penalty clauses is to prevent a plaintiff recovering a sum of money in respect of a breach of contract committed by a defendant which bears little or no relationship to the loss actually suffered by the plaintiff as a result of the breach by the defendant.[10]
[10]Exports Credits Guarantee Dept v Universal Oil Products Co [1983] 1 WLR 399, 403; [1983] 2 All ER 205, 224 (Lord Roskill), cited with approval in Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30, [47].
Accordingly, a penalty is void if the penalty bears no relationship to any possible or potential loss caused by a breach of the contract. That is the case here. There is already an interest factor agreed for late payment and there is no evidence to suggest such an interest award will not adequately cover any detriment caused by late payment. The penalty of $50 per day is therefore void and cannot be claimed.
Returning to the claim for interest, the only reference to an interest rate is in item 11 of the QBCC Level 1 contract Schedule. The interest agreed between the parties was 8 per cent. I conclude it is 8% simple interest.
The amounts due to Plantspec following my findings are as follows:
Retaining wall work as quoted
$11,333.30
Pool/Electrical
$80.00
Plumbing
$520.00
Variation
$717.50
$12,650.80
Mr Chandra has paid $11,416.58. He therefore owes a balance of $1,234.22. That means the payments made cleared the monies due under all the invoices save for the variation, which was disputed, but of which the sum of $1,234.22 was indeed owing. There does not appear to be any specific provision under the QBCC contract general conditions linking the interest rate agreed at item 11 of the Schedule with variation monies,[11] however there is an agreed rate of interest at item 11 and the parties agreed in the special terms and conditions to the payment of interest on overdue accounts.
[11]See clause 14.1(g) which does not refer to variations and clause 16 which does not allude to interest.
Accordingly I conclude Mr Chandra owes interest at 8% per annum on $1,234.22 from a reasonable time after the account was rendered, say 7 days after, which is from 19 July 2017 to the date hereof, which is fortuitously one year. That amount is $98.73.
The parties were not legally represented. I make no order as to costs.
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