Potts v T&M Buckley Pty Ltd t/a Shailer Constructions
[2010] QCAT 638
•14 December, 2010
| CITATION: | Potts v T&M Buckley Pty Ltd t/a Shailer Constructions [2010] QCAT 638 | |
| PARTIES: | Phillip Potts | |
| v | ||
| T&M Buckley Pty Ltd t/a Shailer Constructions | ||
| APPLICATION NUMBER: | N015-05 |
| MATTER TYPE: | Building matter |
| HEARING DATE: | 1 and 2 September, 2010 |
| HEARD AT: | Brisbane |
| DECISION OF: | Member Fitzpatrick |
| DELIVERED ON: | 14 December, 2010 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: |
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| CATCHWORDS : | Section 42 Queensland Building Services Act 1991; unlicensed subcontractor tendering for building work; variations to subcontract; mistake; quantum meruit; unjust enrichment; restitution; scope of contract works; waiver and estoppel; section 67P Queensland Building Services Act 1991. Brogden v Metropolitan Railway Co.(1877) 2 App Cas 666 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 Queensland Alumina v Alinta DQP Pty Ltd (2007) QCA 387 Balfour Beatty Power Construction Australia Pty Ltd v Kidston Goldmines Limited (1989) 2 Qd R 105 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 W Cook Builders Pty Ltd (in liq) v Matthew Lumbers (2007) SASC 20 Brenner v First Artists Management Pty Ltd (1993) 2 VR 221 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Phillip Potts represented by Mr. M Cooke of Counsel, instructed by Rostrum Carlyle |
| RESPONDENT: | T&M Buckley Pty Ltd t/a Shailer Constructions represented by Mr.F Redmond of Counsel, instructed by Mills Oakley, Lawyers. |
REASONS FOR DECISION
This decision relates to moneys claimed by the applicant from the respondent, arising out of work he did at the Pacific Pines State High School sports hall, pursuant to a subcontract with the respondent for the supply and installation of roofing, wall cladding including vents, skylights and edge protection. The respondent was the builder on the project, who in turn was contracted to Education Queensland.
The application was filed on 11 May, 2005 in the then Commercial and Consumer Tribunal, whose functions are now performed by this Tribunal. The most recent documents filed in this Tribunal setting out the issues between the parties are a Further Amended Statement of Claim, filed 6 July, 2010, a Response and Counterclaim to the Further Amended Statement of Claim, dated 12 August, 2010, the Applicant’s Reply, filed 20 August, 2010 and a Scott’s Schedule in relation to variations, filed 12 August, 2010. The hearing took place on 1 and 2 September, 2010. Statements filed by the parties and their witnesses were admitted as evidence in the proceeding. Oral testimony was given. I have been provided with written submissions by the parties.
Issues
The application and counter-application require a determination of 2 main issues.
Was the contract between the applicant and respondent void on the basis of the state of the applicant’s licence?
Is the applicant entitled to moneys claimed as variations to the Subcontract or alternatively on a quantum meruit?
Licence issue
The applicant pleads that at all material times (that is, from the date the contract was signed on 19 April, 2004 and while the contract works were carried out), he was a subcontractor to the respondent and that he was licensed by the Queensland Building Services Authority (the QBSA), as the holder of licence number 30881 in the class of “Roof and Wall Cladding”. The applicant pleads that the respondent was licensed by the QBSA as the holder of licence number 16602 in the class of “Builder-Open”.
The applicant filed a statement in the Tribunal on 20 August, 2010, attaching a QBSA Licence Search History which reveals that for the period 30 August, 2003 to 9 February, 2004 he held a Supervisor Licence in the licence class “Roof and Wall Cladding”. For the period 9 February, 2004 to 17 August, 2004 he held a Trade Contractor Licence in the “Roof and Wall Cladding” class.
The respondent denies that the applicant presently holds any licence and says that the applicant did not hold licence number 30881 at all material times, because the applicant did not obtain that licence until 9 February, 2004. It alleges that the contract was entered into on or about 14 January, 2004.
The significance of this is said to be that the applicant did not hold a contractor’s licence of the appropriate class in contravention of section 42(1) of the Queensland Building Services Act 1991 (QBSA Act). In this decision I will refer to the section in force at the material time set out in Queensland Building Services Authority and Other Legislation Amendment Act 2003 No 1 – pts 1-2. It is asserted the applicant was thereby prohibited from submitting a tender, making an offer and/or entering into a subcontract in respect of building work. The respondent pleads that as a result the subcontract was unlawful pursuant to section 42 of the QBSA Act and therefore void.
It is on the basis of this pleading that the respondent denies liability for the applicant’s claim for payment for variations and makes a counterclaim for recovery of $50,000.00 of the moneys paid to the applicant under the purported contract between them, as moneys had and received. The sum of $50,000.00 is the limit of this Tribunal’s monetary jurisdiction over matters of this type.
The respondent abandons its claim for money allegedly had and received in excess of $50,000.00.
[10] Section 42(1) of the QBSA Act provides that a person must not carry out, or undertake to carry out, building work unless that person holds a contractor’s licence of the appropriate class under the Act.
[11] A supervisor’s licence does not entitle a person to carry out building work or to undertake to carry out building work. Section 42 of the QBSA Act as it existed during January and April 2004 provided that a person undertakes to carry out building work if that person enters into a contract to carry it out or submits a tender or makes an offer to carry it out.
[12] Section 42(3) of the QBSA Act provides that a person who carries out building work in contravention of this section is not entitled to any monetary or other consideration for doing so.
[13] On these facts the applicant commenced work on 23 April, 2004. By then he had a trade contractor’s licence (Roof and Wall Cladding class). There has been no suggestion that the work performed by the applicant did not fall within the scope of work in that class.
[14] Although there may be a question as to whether the applicant was appropriately licensed at the time he submitted his quotation, this is not a case where the whole of the dealings between the parties are tainted by illegality. The applicant did have the appropriate licence during the performance of the work the subject of the contract.
[15] The following are the relevant dates:-
§21 November, 2003 the applicant received the tender package;
§2 December, 2003 the applicant received addendum no.2;
§3 December, 2003 the applicant received the Metal Work specification;
§3 December, 2003 the applicant transmitted a quotation to the respondent;
§14 January, 2004 the respondent issued a signed purchase order to the respondent
§20 January, 2004 the respondent issued a revised signed purchase order and commercial subcontract agreement ; and
§22 April, 2004 the applicant transmitted to the respondent a facsimile cover sheet, a copy of the 14 January, 2004 signed purchase order, countersigned by the applicant and a copy of the commercial subcontract agreement also countersigned; both containing handwritten amendments. The cover sheet requested return of countersigned changes.
[16] The respondent contends that the contract was entered on 14 January, 2004 when the respondent issued a signed purchase order to the applicant accepting the applicant’s quotation. At this time the applicant did not have a trade contractor’s licence.
[17] The applicant contends that the contract was entered on 19 April, 2004 when he signed the purchase order and subcontract agreement. At this time the applicant did have a trade contractor’s licence.
[18] I find that the quotation given by the applicant on 3 December, 2003 offends section 42 of the QBSA Act, in that it purports to be a tender or offer to carry out building work, made at a time when the applicant did not hold a contractor’s licence of the appropriate class under the QBSA Act. On that basis I find that the purported tender was incapable of acceptance in order to create a binding contract at that time. If a contract was entered it was void for illegality. However, other subsequent exchanges between the parties are capable of being construed as an offer and acceptance, made at a later time when the applicant was able to lawfully contract to perform building work.
[19] I find that the applicant made an offer to the respondent to perform the relevant work when he sent to the respondent the following documents by facsimile transmission on 22 April, 2004:
§Purchase order, dated 14 January, 2004 bearing handwritten amendments signed and dated by the respondent on 19 April, 2004;
§Commercial subcontract agreement bearing handwritten amendments, signed and dated by the respondent on 19 April, 2004.
[20] The fact that different terms were proposed by the applicant, being those made by the handwritten amendments, than those originally put by the respondent, casts the facsimile transmission of 22 April, 2004 and its attachments as an offer, capable of acceptance.
[21] In the absence of other evidence from the parties, it would appear that offer was accepted by the conduct of the respondent when it allowed the applicant to commence the contract works on 23 April, 2004.[1]There is no evidence before me as to whether the handwritten amendments were countersigned or whether copies of the countersigned contract documents were returned to the applicant. The respondent has not complained that the signed and amended purchase order and commercial subcontract agreement did not form part of the contract documents.
[1] Brogden v Metropolitan Railway Co. (1877) 2 App Cas 666
[22] Accordingly, I find that the applicant was appropriately licensed at the time of entry into the contract on 23 April, 2004 and at the time of performance of the work. The provisions of sections 42(3) and (4) of the QBSA Act are not engaged. On this basis the respondent’s counter application fails.
What documents comprise the contract?
[23] It is an issue between the parties as to whether the applicant’s quotation, dated 3 December, 2003 forms part of the contract documents. The applicant contends that it does not. The respondent contends that it does.
[24] I find that the contract is comprised at least, of the following documents, which formed part of the bundle of documents exchanged between the parties:
i) Purchase Order No 94/7110, dated 14 January, 2004, signed by the applicant and bearing handwritten amendments;
ii) Commercial Subcontract Agreement, signed by the applicant on 19 April, 2004, bearing handwritten amendments;
iii) Drawings nominated on the Purchase Order;
iv) Specifications: Roofing, Schedule of Colours, Metalwork, Addendum No 2;
v) Quality Policy Statement and Safety Policy Statement; and
vi) Variations Procedure.
[25] The contents of the quotation are not mentioned in the Purchase Order. However, the Purchase Order was initially directed to the quotation. It accepted the price given on the quotation. The quotation explains how the price was arrived at and gives certain interpretations of the tender documents. If these matters were not accepted by the respondent one would expect the Purchase Order to expressly contradict or exclude them. The terms of the quotation were in fact accepted and the respondent confirms that contention by its current insistence that the quotation forms part of the contract.
[26] The quotation cannot be a contract document. It was illegal as a result of statutory prohibition at the time it was given. However, its illegality does not alter the intention of the parties. The applicant quoted to perform the contract works at a price calculated in a certain way with some express interpretations of the tender documents. That price was accepted without cavil as to those provisos. On this basis I find that the contents of the quotation are implied terms in the contract between the applicant and the respondent. The implication is necessary to give business efficacy to the contract in order to determine the scope works to be performed by the applicant as part of the contract. I consider the implication of the contents of the quotation as terms of the contract reflects the true intention of the parties. [2]
[2] BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Variations
[27] Clause 5 of the Commercial Subcontract provides:
“(a) The Subcontractor shall only vary the Works as required by the Builder but shall not be entitled to claim for any variation not authorized in writing.
(b)The Subcontractor must notify the Builder immediately upon becoming aware that any Variation to the Works is required.
(c)The Builder may direct the Subcontractor to carry out any Variation to the Works including deletions or omissions to the Works providing however that such Variation is in writing.
(d) The Contract sum is to be adjusted by the price of a Variation and the adjustment is to be included by the Subcontractor in its next progress claim after the work or any part of the work the subject to (sic) the Variation is carried out.
(e)The price of a Variation shall be determined by agreement between the Builder and the Subcontractor or in the absence of such agreement, the Builder must make a fair and reasonable valuation of the Variation.
(f) Unless otherwise agreed the price of a Variation that increases the Contract Sum must be agreed or valued before the Subcontractor carries out the Variation.”
The Variation procedure forming part of the contract provides inter alia:
“Both variation price requests and variations must be priced within 48 hours. We have a time limit on submission of variations and if they are not forthcoming the client will estimate a price and that is what they will be valued at.”
[28] In the following analysis of the applicant’s claims I have treated the claims as exclusive of GST. GST is dealt with at the end of these reasons.
Variation 1- Item 147/01 Change in insulation
Background
[29] The applicant claims to be entitled to the sum of $4,380.00 for labour and materials utilized in installing perforated roof insulation, instead of plain sisalation, in the roof of the main hall. The applicant recognizes some payments have been made, but that overall money remains owing under the contract when adjusted to take account of variations such as this claimed variation.
[30] The Respondent contends that the sum of $4,380.00 was paid to the applicant, but says that it was mistakenly paid. As part of its counterclaim, the respondent seeks from the applicant the sum of $4,380.00 as money had and received. As part of its defence, the respondent argues that the installation of perforated roof insulation in the roof of the main hall was work covered by the scope of the original contract and that the work was not a variation for which the applicant was entitled to be paid.
[31] The relevant provisions of the contract are:
a)Clause 4.1 of the Roofing Specification, which requires “Sisalation or equal (perforated)” to the whole of the roof areas or as shown on the drawings.
b)Sheet 23 of the Drawings, which shows “underside roof sheeting” for R3 (main roof) as perforated roof insulation. R4 (Store) and R5 (Fitness Testing) are depicted in that sheet as plasterboard ceilings.
c)Addendum no. 2 to the Specification, which adds to specification 4.1 by requiring that “perforated foil bonded to insulation is to be applied to the exposed underside of roof structure in rooms R4 and R5 only. Standard Class A, Grade A and Type 1 reflective foil is to be used elsewhere where there is a ceiling or soffit”.
[32] Evidence was given that rooms designated R1,R2,R6,R7,R8,R9,R10,R11, and R13 are other rooms where there is a ceiling or soffit.
[33] The applicant’s evidence is that in formulating his price to perform the works he sought verbal instruction from a John Bruce, an estimator employed by the respondent as to the meaning of addendum no. 2. He says that as a result of that conversation he adjusted his estimate in Roof Insulation Quantities to a total of 130 square metres of perforated sisalation for Rooms R4 and R5 only and the balance being plain sisalation. Mr Bruce was not called by the applicant to prove the conversation attributed to him.
[34] That material was delivered to site. Mr Rendall , the respondent’s foreman directed the applicant to install perforated foil insulation to the main roof not the plain sisalation delivered to site. The applicant did so and claimed the extra cost of $4,380.00 as a variation.
[35] The applicant’s interpretation of addendum no.2 is set out in his fax to the respondent dated 28 April, 2004, attachment PP11 to his statement dated 26 July, 2005, where he says “ Perforated foil bonded to insulation to Rooms R4 and R5 only – is precisely that.” In other words he thought the only rooms to have perforated insulation installed were R4 and R5. The applicant’s intention to claim a variation in the sum of $$4,380.00 was spelled out in that fax.
[36] The respondent argues that the addendum was intended to supplement Clause 4.1 of the Roofing Specification and to make clear that only rooms R4 and R5 of the rooms with a ceiling or soffit were to also be fitted with perforated insulation. They say it was not intended that only rooms R4 and R5 of all the rooms with or without a ceiling or soffit, were to be fitted with perforated insulation.
[37] Evidence was given that perforated insulation has sound proofing properties and that it was always required over the main hall (R3) which was used for sports and had no ceiling.
[38] In cross examination the applicant conceded that with hindsight he could see that the installation of perforated insulation in the roof of the main hall was part of the original contract.
[39] Nevertheless that was not his interpretation at the time. He claimed the sum of $4,380.00 as a variation to the contract in Progress Claim no. 2, dated 20 May, 2004. A reconciliation of payments made to the applicant was provided by the respondent and appears as attachment PP31 to the applicant’s statement dated 26 July, 2005. The reconciliation shows that sum of $4,380.00 was paid.
Findings
[40] I find on a fair reading of the contract documents that installation of perforated sisalation in the roof of the main hall was part of the original contract works. Without evidence from Mr Bruce or some other evidence that the scope of works had been changed to reflect the applicant’s interpretation of addendum no.2, it is not possible to find that installation of perforated insulation in the main hall roof was a variation. However, addendum no. 2 is confusing in the way that it is drafted and I can see how the applicant formed a mistaken understanding of what was required by the specification. I accept that the applicant held a genuine view at the time that the work involved was a variation and that his claim was honestly made.
[41] Despite finding that installation of perforated sisalation in the main hall was part of the original contract, I do not find for the respondent in its claim to recover the sum of $4,380.00 from the applicant as money had and received as a result of a mistake.
[42] I find that the payment was voluntarily made. I find that the sum of $4,380.00 was paid by the respondent in satisfaction of the applicant’s claim for payment for the alleged variation.
[43] The basis for these findings is that the payment was made after the respondent was apprised of the applicant’s interpretation of addendum No.2; after the respondent knew the claim by the applicant was for payment of a variation and in circumstances where the respondent’s evidence was that the respondent had always maintained that the work was part of the original contract. In this last respect I note the evidence of Mr Rendall in his statements of evidence[3]. The decisions of David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 and Queensland Alumina Ltd v Alinta DQP Pty Ltd(2007)QCA 387 are authority for the principle that mistaken payments are not recoverable if made voluntarily and not because of a mistaken belief as to the legal position. The relevant test set out in David Securities at pages 373-374 is:
“The payment is voluntary or there is an election if the plaintiff chooses to make the payment even though he or she believes a particular law or contractual provision requiring the payment is, or may be, invalid, or is not concerned to query whether payment is legally required; he or she is prepared to assume the validity of the obligation, or is prepared to make the payment irrespective of the validity or invalidity of the obligation, rather than contest the claim for payment.”
[3] See paragraph 10 of Colin Rendall’s statement made 13 December, 2005, paragraphs 11-14 of Colin Rendall’s statement made 8 October, 2010 and the submissions of the respondent at paragraph 46.
[44] In this case the respondent chose to make the payment even though it believed the claim was not a proper claim for a variation. In these circumstances it is not entitled to recover the payment on the basis of a mistake.
[45] Further, a key element in a claim for restitution such as this is that the applicant has been unjustly enriched at the expense of the respondent. It is apparent from the Variation Procedure forming part of the subcontract that variations are submitted to the principal and then approved and paid by the principal or not. The respondent, as builder on the project, is merely a conduit for payment of a variation to a subcontractor such as the applicant. No evidence was given by the respondent that this procedure was departed from on this occasion or that it is out of pocket because the principal did not meet the cost of the claimed variation. In the ordinary course it is the principal who has suffered the expense of making the payment to the applicant, albeit via the respondent. Accordingly, the respondent cannot make out a claim for restitution.[4]
Variation 147/02 – Change eaves gutter to 300mm Creataform Half Round Eaves Gutter
[4] L.Willmott, S.Christensen, D.Butler, B.Dixon, Contract Law, 3rd edition, Oxford University Press, Australia and New Zealand, 2009, p.799.
Background
[46] This is a claim where respondent is prepared to concede the claimed variation but contends for the value it ascribes to the variation.
[47] The roofing specification provides for eaves gutters at clause 7.5 of “minimum 175mm wide gutter”. However drawing 28 shows a typical eave detail nominated as “150 mm half round gutter”.
[48] The applicant noted this discrepancy and said in his quotation:
“Eavz Gutters are specified as 175 Quad but detailed on Drwgs as 300 mm and 150 mm half round. We have allowed 300mm H.R.G on the main building and 150mm on the covered way. Note; Considerable savings are available should 175 Quad be selected for this Project Our HRG (300mm) is segment folded.”
[49] On 16 March, 2004 the Principal contractor issued Variation Order 7 to correct the discrepancy and called for Creataform gutter, which gives a smooth curve. This was notified to the applicant on 17 March, 2004, before he signed and amended the purchase order and commercial subcontract.
[50] Creataform gutter was installed. The applicant claimed the cost of the variation as $10,770. He calculated the cost by comparing the price for 175 Quad gutter with that for 300mm half round gutter.
[51] The respondent is prepared to concede the value of the variation in the sum of $1,197, being the difference in the cost of 300mm half round gutter segment folded on the main roof and 150mm half round gutter on the covered way with Creataform 300mm half round gutter on the main roof and Creataform 150mm half round gutter on the covered way.
Findings
[52] Given my finding that the terms of the quotation are implied terms in the contract I find that the applicant did not calculate his contract price by reference to the cheaper 175 Quad gutter, referred to in the specification. He calculated the contract price by reference to half round gutter. Accordingly his extra cost in installing Creataform guttering is the difference in cost between the half round guttering he referred to in his quotation and the Creataform half round guttering in fact installed. I prefer the evidence of Mr Rendall as to the value of the variation and the mode of calculation. I find that the applicant is entitled to the sum of $1,197.00 for this part of the claim.
Variation147/03 – Metal roof battens
[53] The respondent concedes that this is a variation and has paid the applicant the claimed amount of $488.00 for this variation. The Scott’s Schedule filed in the Tribunal records the applicant as noting the claim to be settled.
Variation 147/04 – Supply and install metal cover flashing to fascia purlin below eaves gutter
Background
[54] This claim raises 2 issues:
a)whether the work performed was part of the original scope of work or was work outside the contract; and
b)on what basis the applicant is entitled to be paid for the work and in what amount.
[55] The applicant’s quotation provides:
“Metal Fascia Detail: Our interpretation is this is not detailed/not required on all gutter purlins and the covered way. We have therefore allowed metal fascia and barge capping to all other fascias only. Should you require metal fascias to other locations our extra unit rate is $20.10 +GST per lin.metre for this item. We propose to submit our working detail for the fascia and capping should we be successful on this project”.
[56] The applicant’s evidence was that he was verbally instructed by Mr. Buckley, General Manager of the respondent, and Mr. Rendall to install colorbond fascia to purlins at eave gutters to the main building (high and low level roof). The work was performed. The applicant recorded this instruction as a variation in his facsimile to the respondent, dated 11 May, 2004, being attachment PP38 to his statement dated 26 July, 2005. The facsimile sets out the applicant’s expectation that he will be paid extra for this work and records “Note Item No.2 of our quotation qualifies this exclusion from our scope of work. 100 lineal metres at $20.80 per lineal metre $2,080.00 plus GST”.
[57] On 30 September, 2004 the respondent queried the claim on the basis that there was an allowance in the contract for Metal Fascias to the Main Building and Metal Fascias were not required on the covered walk. See PP39 to the statement of the applicant made 26 July, 2005.
[58] The respondent submits that the contract drawings detail flashing and there is no basis for the claimed variation because the work forms part of the original contract. Mr Rendall in his statement of 8 October, 2010, admits that the direction was given by him and Mr Buckley for the work to be performed but that they were of the view the work was part of the original contract and they were not directing a variation of the work.
Finding as to whether the work was within the scope of the subcontract works
[59] I accept the evidence of the applicant that he could not locate in the tender documents a requirement for metal fascias on all gutter purlins. I find, based on the applicant’s evidence, and my own observation, that the drawings do not depict metal facscias on all gutter purlins, nor is there any reference in the specification to colorbond metal fascias to the eaves gutters. I accept the applicant’s evidence that he was requested by Mr Buckley and Mr Rendall to install metal fascias on all gutter purlins on the main building and that he did so at extra cost. The work was extra work outside the scope of the subcontract works.
[60] That is not however the end of the analysis. The ambit of clause 5 of the subcontract and the Variation Procedure forming part of the subcontract need to be analysed in order to determine whether the work falls within the scope of the variation power and should therefore be dealt with as a contractual claim.
[61] Clause 5 is unlimited in its scope. Clause 5(c) provides that “The builder may direct the subcontractor to carry out Variations to the Works including deletions or omissions to the Works providing however that such a Variation is in writing”. The extra work is therefore amenable to being treated as a variation under the contract. The question is whether extra work being amenable to treatment as a variation is sufficient to make it a variation under the contract.
[62] The applicant contends in the first place that the direction to perform work was a variation under the contract. His alternative argument is that he is entitled to recover on a quantum meruit. Neither the applicant nor the respondent have dealt with the lack of writing in relation to the direction to perform the work nor the lack of agreement in relation to price. In many cases, a lack of compliance with the procedural requirements in relation to a variation is fatal to a claim for payment for extra work.
[63] The decision of His Honour Justice Dowsett in the Supreme Court of Queensland in Balfour Beatty Power Construction Australia Pty Ltd v Kidston Goldmines Limited [5]is a useful precedent. In that case the relevant construction contract contained a variation clause at clause 40 which was intended to deal with additional work beyond the scope of what was originally contemplated. Dowsett J said at page 149:
“Clause 40 prescribed variations by the superintendant as a conscious act of that official evidenced in writing.”
[5] (1989)2 Qd R 105
[64] Clause 40 required both a written instruction and agreement as to the cost of the variation. It is similar in these respects to clause 5 and the Variation Procedure in this subcontract. The claimant in that case flagged an intention to rely on the principles of waiver and estoppel to overcome the lack of writing in the giving of the direction to perform additional work. His Honour said at page 150:
“Clause 40 contemplates a written instruction coupled with a written agreement including agreement as to the cost of the variation. Indeed, because of the possibility that the scope of the contract may be varied entitling the builder to refuse the variation, it is critical to any operation of cl.40 that the price be fixed in advance. The question therefore is whether or not it is possible to characterize a variation pursuant to an oral request with no prior agreement as to price as a variation pursuant to cl.40. To state the problem in that way is, I feel, to give the answer. It is clear that the variations here alleged, adopting the most favourable view possible to the builder, do not fall within cl.40. This is not to shut out the builder from any claim with respect to the “H” poles if that work in fact be subject to formal requirements and time limits in the original contract, for the builder to make a claim pursuant to any agreement or implied agreement which it is felt can be spelt out from the various conversations and items of correspondence between the parties concerning this issue.
It is implicit in what I have said that the issues of waiver and estoppels are unlikely to alter the position. If the application be not within cl.40 by virtue of the fact that it is not identifiable as a cl.40 variation, then other than in exceptional cases, it would be unlikely that either waiver or estoppels could be raised in such a way as to bring the matter within cl.40. The builder is left to his other rights.”
[65] On this reasoning I find that the oral direction by Mr Rendall and Mr Buckley to the applicant to install colorbond fascia to purlins at eave gutters to the main building was not a variation to the contract within clause 5 of the subcontract or the Variation Procedure. In particular, Mr Rendall and Mr Buckley were of the opinion at that time that the work was part of the subcontract works. They could not be construed as engaging in a conscious act to direct a variation. Further, they did not put the direction in writing as required by clause 5. Nor was there any agreement as to the price of the variation.
[66] Having made this finding it is unnecessary for me to consider the impact on the applicant’s claim, of a lack of writing with respect to the direction to perform the work.
[67] Any entitlement the applicant may have to payment for the variation cannot be pursuant to the contract.
Finding as to the basis on which the applicant is entitled to be paid and the amount to be paid
[68] Dowsett J said in the Balfour Beatty case that the builder is left to his other rights. Those rights were contemplated to be a quantum meruit claim founded in an implied promise to pay.
[69] The High Court decision of Pavey& Matthews Pty Ltd v Paul[6] has established that rather than rely on an implied promise to pay, the preferable view is that the principle of unjust enrichment is a basis for restitution in a range of cases.
[6] (1987) 162 CLR 221
[70] In this case the applicant claims in the alternative for the value of the work performed on a quantum meruit. Neither the applicant nor the respondent clearly addressed the basis of the quantum meruit claim, however, the facts of this case lend themselves to a quantum meruit claim based on restitution.
[71] Recovery of a quantum meruit based on restitution requires that 3 elements are satisfied[7], which in this case are:
a)the applicant did extra work for the respondent, outside the scope of the subcontract works;
b)the extra work was of value to the respondent; and
c)it would be unjust if the respondent were to keep the benefit of the additional work without paying for it.
[7] Phillip Davenport, “Variations and Restitution – A Neglected Remedy”, Australian Construction Law Newsletter, Issue 23, p 67.
[72] I have found that the work was extra work outside the scope of the subcontract works.
[73] I am of the view that the extra work was of value or benefit to the respondent because it was performed at the builder’s request and the work was freely accepted.[8] The applicant made it plain that he considered the work to be extra work and that he expected to be paid for it. He gave the amount he expected to be paid. Knowing this, the respondent stood by and allowed the work to be performed, not raising any challenge until many months after the work was completed.
[8] Lindy Willmott et al, op.cit, p.662.
[74] In their text “Contract Law”, Wilmott, Christensen, Butler and Dixon say:
“The exact meaning of free acceptance has given rise to much academic comment. However, in simple terms, free acceptance involves the acceptance of a benefit in circumstances where the defendant, realizing that the services were not gratuitous, exercised a choice whether to accept or reject the benefit, it will usually be unjust to retain the benefit without making restitution.”[9]
[9] Ibid.,p.796.
[75] As to the last element, the cases suggest that free acceptance of a person’s services, such as we have here, also make it unjust for the services to be retained without payment.[10]
[10] W Cook Builders Pty Ltd (in liq) v Matthew Lumbers (2007) SASC 20.
[76] On the basis of this reasoning I find that the applicant is entitled to recover on a quantum meruit a fair and reasonable sum for the work performed, founded in the applicant’s right to restitution.
[77] In the Scott’s schedule filed in this matter, the respondent notes that in the event a variation is found, the applicant is only entitled to payment at the rate of $20.10 per lineal metre, being the rate specified in the Applicant’s quotation in the event that the work was required.
[78] In response to an assertion put to the applicant in cross examination, that the applicant’s claim for 100 lineal metres of metal fascia was excessive because it related to metal fascia used on the entire roof on four sides; the applicant said that the 100 lineal metres of colorbond fascia related only to locations adjacent to the eaves on the main building and did not relate to the covered way. I accept that evidence.
[79] I allow the claim in the sum of $2,010.00, being referable to the rate given by the applicant in his quotation and referable to the rate the respondent has conceded is fair, in the event it is liable for payment.
Variation 147/05 – skylight variation
Background
[80] The applicant claims the sum of $985.00, being the cost of boom hoist stand down and administrative charges incurred while a dispute with the respondent over the correct method of installation of skylights was discussed between the parties. The applicant made his claim on the respondent in Progress Claim No.3, attachment PP12 to the applicant’s statement of 26 July, 2005. The amount is claimed as resulting from a variation. Attachments PP18 and 19 to the statement of the applicant dated22 July, 2010 give a breakdown of the claim.
[81] The applicant pleads at paragraph 9 (h) of his Further Amended Statement of Claim that the applicant and respondent agreed a variation. The variation was said to be “to assess instructions to vary the scope of works and impact of variation on construction program and calculating extension of time due to requested variation and boom hoist stand down on 28, 29 and 30 May, 2004”. The respondent denies authorizing such a variation.
[82] At the hearing a good deal of evidence was given as to what the contract drawings depicted with respect to the skylights and the correct method of construction, in an effort to demonstrate which party was responsible for the delay and its attendant costs. I do not consider it necessary to make any finding as to these issues for the following reasons.
Findings
[83] I find that the claim as pleaded is incapable of forming a variation. “Assessment of instructions and calculation of extension of time” is not a fundamental change to the performance of work as contracted or a request for the performance of additional work as one would ordinarily understand the meaning of a variation. The work is work incidental to the contract work. It is not extra work. For that reason, neither is the claim amenable to a quantum meruit claim.
[84] At best the claim is one for the costs of delay. The respondent submits and I agree that delay caused to the applicant is dealt with exclusively in clause 2 of the contract which only entitles the applicant to an extension of time for the date for practical completion. There is no entitlement under the contract for the applicant to be paid the sum he claims as a variation or for delay.
Variation 147/06 – supply and install internal cladding
Background
[85] The applicant asserts that the contract documents do not require internal metal cladding. He said that he therefore did not include the cost of internal metal cladding in the quotation. The applicant says that internal metal wall cladding is shown on the Internal Fitout Drawings, however, those drawings are not part of the Applicant’s subcontract.
[86] At the hearing, counsel for the respondent referred the applicant to clause 3.1 of the metalwork section of the specification and to drawings being sheets numbered 26, 31 and 35, suggesting that what the applicant claims as a variation appears in the drawings as part of the original contract. The applicant denied this assertion and said that the drawings do not relate to the claimed variation. The drawings relate to external cladding. He said that no drawings show the extent of internal cladding required.
[87] The applicant’s evidence in his statement of 26 July, 2005 and in his statement of 22 July, 2010 was that in response to verbal instructions by Mr Rendall to install a wall panel to internal wall R3 he told Mr Rendall that the work is not part of the scope of work and that it would be performed as a variation. I accept this evidence. In a fax to the respondent, dated 7 June, 2004, being PP23 to the statement of the applicant made on 26 July, 2005, he noted the work as a variation. A claim for the sum of $2,180.00 was included in progress claim number 4, dated 21 July, 2004, being PP24 to the applicant’s 26 July, 2005 statement. On 10 September, 2004 the respondent objected to the claim for a variation contending the work was part of the original contract. In this regard, I note PP39 to the applicant’s 26 July, 2005 statement.
Findings
[88] I agree with the applicant that the contract drawings and the specification do not refer to internal metal wall cladding for internal wall R3. I find that the internal metal wall cladding was installed as extra work, outside the scope of the contract.
[89] The reasoning set out in relation to variation 147/04 is apposite and I adopt the reasoning and authorities with respect to this claim.
[90] I find that:
a)The direction given by the respondent for performance of the work did not constitute a variation. Although the work fell within the scope of the variation clause, the formal requirements for a variation were not attended to by the respondent. The respondent did not consciously intend to direct the performance of work as a variation, believing as it did that the work was part of the subcontract works.
b)The work falls outside the subcontract works;
c)The applicant is left to a remedy other than pursuant to the contract. The appropriate remedy is recovery of the benefit conferred on the respondent as a quantum meruit based on restitution.
[91] The applicant performed the work at the request of the respondent. The respondent freely accepted the work, standing by and allowing the work to be performed in circumstances when it knew the applicant expected to be paid, raising no complaint about that expectation until many months after the work was performed. In these circumstances it would be unjust for the respondent to have the benefit of the work without paying for it.
[92] There is no evidence as to what the respondent would consider a fair and reasonable amount for this work.
[93] When a subcontractor such as the applicant has an entitlement to recover the fair and reasonable value of work performed on the basis of restitution, an assessment of the benefit enjoyed by the builder is undertaken. Byrne J in Brenner v First Artists Management Pty Ltd[11] said:
“The assessment then, must have regard to what the defendant would have had to pay had the benefits been conferred under a normal commercial arrangement.”
[11] (1993)2 VR 221 at p.262-263.
[94] I consider this to be a fair approach to the calculation of the applicant’s claim.
[95] I find that a reasonable sum for the work performed by the applicant is a sum which the respondent would have had to pay to another contractor to complete the work. The breakdown of the applicant’s claim set out at PP21 to his statement of 22 July, 2010 reveals that most of the claim relates to labour and materials. I find that another contractor would at least have charged for those components and overheads. I therefore allow the sum of $2, 079.97 being the applicant’s claim set out in PP21, less the sum of $80.00 for assessing the instructions and assessing the impact of the variation on the construction program and calculating an extension of time. Those last two items are not items which the respondent would have had to pay to another subcontractor, being peculiar to the applicant.
Variation147/07 – change in design of covered way.
[96] The parties agree that changed work relating to the covered way is a variation. The variation is in writing being Variation Order Number 23, issued 31 May, 2004. (SeePP23 to the statement of the applicant made 22 July, 2010). The only dispute is in relation to the value of the variation.
[97] The respondent says that the contract required variation price requests to be priced within 48 hours to enable submission to the principal contractor for approval. The respondent also says the contract provides that if this does not occur, the principal will estimate a price and that will be the value of the variation.
[98] The applicant says that the requirement for the work was verbally conveyed around 20 May, 2004, however no drawings were provided and the respondent worked out what was required on the job. I accept this evidence. I find that the contractual provisions with respect to pricing of a variation within 48 hours were incapable of being complied with and were waived by the respondent’s conduct. Further the respondent took no steps to comply with clause 5(e) and (f) of the subcontract.
[99] The variation order specifically leaves blank the rate for the variation. In the circumstances it is an implied term of the subcontract that the new work to be performed by the applicant will be paid for at a fair and reasonable price.
I accept the applicant’s evidence that the work was completed in late July, 2004 and that the claim for the work was faxed to the respondent on 5 August, 2004. (See PP40 to the applicant’s statement of 26 July, 2005).
The respondent challenged the amount claimed and on 10 September, 2004 required a breakdown. (See PP30 to the applicant’s statement of 26 July, 2004). The respondent set out a price of $158.00 for the work. The applicant provided no breakdown of his claim until his statement of 22 July, 2010 was filed and served. It is apparent that it has been a concern of the respondent that the applicant in his claim for the new work, deduct the value of valley flashing included in the original contract price.
The applicant’s evidence at the hearing was that his claim was for the cost of providing the new items of work with the deletion of the original allowance. I accept that evidence. I also accept that the breakdown of the claim as set out in attachment PP24 to the applicant’s statement dated 22 July, 2010 demonstrates a fair and reasonable price for the work performed.
I find in the applicant’s favour in relation to his claim for payment for a variation in the sum of $895.00.
Variation 147/08 – change downpipes form mild steel to zincalume
The respondent concedes that this claim relates to a variation. The respondent directed the applicant to install Zincalume downpipes in a written variation issued 16 June, 2004. (See attachment PP41 to the applicant’s statement of 26 July, 2005).
The applicant’s evidence is that he endorsed the sum of $4,680.00 onto the blank part of the variation order in the rates column and returned the document by fax on 28 July, 2004. An invoice for the work was issued in progress claim 5 on 25 August, 2004.
On 10 September, 2004, the respondent requested a breakdown of the claim and suggested the sum of $2,000.00 was more reasonable. See PP39 to the applicant’s 26 July, 2005 statement. The respondent gave no breakdown of this sum to demonstrate its reasonableness. No breakdown was given by the applicant of his claim, until his statement of 22 July, 2010. (See attachment PP26). In its submission the respondent says that $2,000.00 was the amount accepted under the head contract for the variation.
I note that the 48 hour pricing provision of the subcontract has not been complied with, by either party. I note Clause 5 (f) of the subcontract provides that unless otherwise agreed the price of a variation must be agreed or valued before the subcontractor carries out the variation.
I find that the respondent waived compliance with these provisions by its conduct. The respondent allowed the work to be performed and later sought to agree the price. The respondent appeared willing to discuss a fair price for the work when it sought a breakdown of the claim in September, 2004, many months after the varied work was requested.
Clause 5(e) of the subcontract provides that the price of a variation shall be determined by agreement between the Builder and the Subcontractor, or in the absence of agreement, the Builder must make a fair and reasonable valuation of the Variation. I take that to mean that the price must objectively be a fair and reasonable price, however it is to be established by the builder.
In the absence of agreement, I find that in these circumstances, it was the intention of the parties that the applicant would be paid a fair and reasonable price for the work the subject of the variation. A term is implied to that effect. The only evidence before me of the reasonableness of the respondent’s price for the variation is the assertion by Mr Rendall that the sum in reasonable. At no stage is a breakdown of labour, materials or allowance for profit and overheads given to substantiate this allegation. The applicant has given evidence of the components of the price of the work the subject of the variation.
I accept the applicant’s evidence and find that the sum of $4,680.00 is a fair and reasonable price for the variation. The sum of $2,000.00 all ready paid must be taken into account leaving a sum of $2,680.00 remaining.
The fact that the head contractor has allocated a sum of $2,000.00 to this variation is a matter between the head contractor and the respondent. I do not construe the Variation Procedure as enabling the Head Contractor’s determination to be imposed on a subcontractor. The Variation Procedure merely notes that if the 48 hour time frame (set in the context of the steps required by clause 5(e) and (f)), is not met, the respondent will be fixed with the Head Contractor’s determination.
Variation 147/09 – supply and install Colorbond cover trims to louvres and windows
The applicant asserts that on 11 June, 2004 Mr Rendall verbally instructed him to supply and install metal flashings to the external columns between the Metal Louvres, which were installed by others. The applicant contends that he told Mr Rendall that the work was a variation. The respondent maintains that the work formed part of the subcontract and that drawing A07-01 which formed part of the subcontract documents specified this work.
The applicant contends that installing the metal flashings is normally work which would be done by the louvre installer and that the documentation relating to this work is part of the metal louvre package and not part of the roofing and wall cladding package.
This is not consistent with his conduct. In a fax dated 23 July, 2004, being attachment PP44 to the applicant’s 26 July, 2005 statement, the applicant referred to the site instruction and referred to details 2,4,5,6,7, and 8 on Drawing A07 - 01 and Doors D3-1 and D3-2. The applicant sought designer details to assist with the work and then performed the work.
The applicant claimed the sum of $2,234.00 as a variation in progress claim 5, dated 20 August, 2004 (See attachment PP27 to the 26 July, 2005 statement of the applicant). The claim is for “additional flashing to louvers and columns”. The applicant was asked by the respondent in its fax of 10 September, 2004 (SeePP39 to the 26 July, 2005 statement of the applicant), for a breakdown of “what you consider is extra work. This should have been done as detailed on the drawings.” The applicant does not appear to have responded until he detailed the claim in his statement of 22 July, 2010.
I accept the evidence of Mr Rendall. I find that the requirement for the work was specified in drawing A07-01 and that it formed part of the subcontract works. I find that the work was not extra work. The applicant is not entitled to recover any amount for this work.
Variation 147/10– Supply and install colorbond angle trim at junction of colorbond horizontal custom orb cladding and FC soffit
Each party agrees that this work constitutes a variation to the subcontract works. However the respondent contends that the changed method of construction resulting in the need for the colorbond angle trim at the junction of the cladding and the FC soffit, which constituted the variation, was for the benefit of the applicant. The respondent says that the changed method of construction resulted in reduced labour costs for the applicant. Mr Rendall asserted that he and the applicant verbally agreed the applicant would bear the extra materials costs in order to achieve a cost neutral outcome from the variation.
The applicant denies that the changed work method resulting in the variation was for his benefit and denies any agreement in relation to the work being cost neutral. The applicant‘s evidence was that the junction requiring the colorbond angle trim was 12 to 25 feet above the ground, with difficult access. He said that it was necessary to hire a hoist, with additional delivery costs and to return to site to perform the work.
I accept the applicant’s evidence. There is insufficient evidence of any binding agreement between Mr Rendall and the applicant for me to find that the applicant agreed to absorb the costs of the extra work. On the contrary, the documented exchanges between the parties make no reference to such an agreement. Consistent with his usual practice the applicant faxed the respondent on 2 August, 2004 with a confirmation of the verbal instruction to perform the work. The applicant asserted the instruction amounted to a variation and gave the cost of the work as $1046.00. Attached was a breakdown of the claim, dated 2 August, 2004 (See attachments PP30 and 31 to the applicant’s statement of 22 July, 2010).
The respondent replied by fax dated 12 August, 2004, suggesting the claim was excessive and that it had measured 43 Lm at $24.33/Lm.
The applicant claimed the sum of $1,046.00 in progress claim number 5.
I find that the work was performed as a variation to the contract. I find that the respondent has waived compliance with the requirements of clause 5 of the subcontract with respect to writing and prior agreement on price.
I find that there was no agreement that the applicant bear the cost of the variation. I find that in the absence of an agreed price, the applicant was entitled to be paid a fair and reasonable price for the work and that is an implied term of the subcontract. I find that the cost claimed by the applicant is fair and reasonable and in the absence of any other evidence allow his claim in the sum of $1,046.00.
Variation 147/11 – Site attendance to inspect reported leak
Attachment PP46 to the applicant’s 26 July, 2005 statement reveals that on 9 November, 2004 the respondent notified the applicant of a roof leak. The fax from the respondent to the applicant dated 11 November, 2004 required urgent rectification.
PP47 to the applicant’s statement of 26 July, 2005 is a fax from the applicant to the respondent confirming that the matter has been investigated and that the leak has been caused by a design failure with respect to the rainwater downpipe spreaders from the high main roof. Reference was made to earlier comments by the applicant prior to installation, that an alternative method of discharging the high roof stormwater would be preferable.
The respondent concedes that the leak was not due to negligent work on the part of the applicant and that it was the result of a design fault.
The applicant rendered an invoice to the respondent, dated 9 March, 2005 in the sum of $374.00 being for “attendance to Site to Inspect, Consult, Investigate and Recommend alternative Rainwater Downpipe Spreader details to rectify this Design Defect/Leak”.
The respondent asserts that the claim is not a variation and that there is no contractual basis for such a claim. The respondent complains that there are no supporting invoices or timesheets to corroborate the claim.
I accept the applicant’s evidence that practical completion was achieved by him around 9 September, 2004. The subcontract provides for the defects liability period to end 12 months after practical completion under the Head Contract. Clause 6 of the Subcontract provides:
“(a) The Subcontractor will, at its own cost maintain the Works until completion and thereafter make good all defects that may appear in Works prior to the expiration of the Builder’s Defects Liability Period under the Head Contract.
(b)If the Subcontractor fails to comply with a direction the Builder may have the work rectified or the materials removed and replaced by others and the cost is a debt due and payable by the Subcontractor to the builder.”
Plainly at the time the direction to rectify was given, the applicant was under a contractual obligation to attend the site and attempt to perform the required work. I find that attending the site and determining the cause of the leak is work within the scope of clause 6 of the subcontract. It is not extra work capable of being a variation or capable of founding a quantum meruit claim. I disallow the claim.
Interest and GST
The applicant claims interest on the outstanding sum said to be owing to him calculated at the rate of 10% plus the rate comprising the annual rate, as published from time to time by the Reserve Bank of Australia, for 90 day bank bills. Alternatively, interest is claimed pursuant to section 47 of the Supreme Court Act 1995 (Qld).
The respondent has submitted that no evidence has been admitted in relation to these matters; that interest should only be paid on a claim which is undisputed (See Metal Line Brisbane Pty ltd v Knight No.3 (2004) CCT B 218-03) and that interest should be limited to the period since November, 2009 given the delay of the applicant in prosecuting the matter.
Clause 5 of the subcontract provides that interest on overdue progress payments shall be “As per QBSA”. I take that to be a reference to section 67P of the Queensland Building Services Act 1991 (Qld)(QBSA Act). Clause 4(e) of the Subcontract provides that “the Subcontractor is entitled to interest on the unpaid balance of any overdue progress payment, including any part of a progress claim wrongfully withheld by the Builder, either at the rate set out in Clause 5 of the Schedule or at the rate of 10% a year plus the rate comprising the annual rate as published by the Reserve Bank of Australia for 90 day bills, for each day the amount is unpaid, whichever is the higher.” The rate of 10% plus the annual rate published by the Reserve Bank of Australia for 90 day bank bills is the interest payable in accordance with section 67P of the QBSA Act.
The applicant has included in his submissions two interest calculations based on the claims set out in the Further Amended Statement of Claim. They claim the maximum possible amount. They are not helpful, because they do not disclose the components of the formula used or the formula for calculation.
In relation to the matters raised by the respondent, I reject its submissions. I intend to order the payment of interest in accordance with section 67P of the QBSA Act and clause 4 (e) of the subcontract.
With respect to the assertion that interest should only be payable on matters not in dispute, the contract provides that interest is payable on any part of a progress claim wrongfully withheld by the Builder. Moneys “wrongfully withheld by the Builder” can only be those moneys which I have found are owing to the applicant pursuant to the contract and which have not been paid. The phrase encompasses moneys not in dispute but withheld. It also has a broader meaning, catching any moneys owing, found to have been wrongfully withheld.
Moneys to which the applicant is entitled as a result of restitution are not moneys paid pursuant to the contract. Accordingly they do not attract interest under the contract.
I decline to order the payment of interest pursuant to section 47 of the Supreme Court Act 1995 (Qld) on any sum.
I am presently unable to calculate the interest which I am prepared to award and require assistance from the parties in this regard.
The parties have made no submissions in relation to provision for GST in relation to any order made by the Tribunal. In light of GSTR 2001/4 and the decisions of Peet Limited v Richmond (No.2)[12], Sandtara Pty Ltd v Longreach Group Ltd[13] and Adamson v Ede[14], I require submissions from the parties as to whether provision for GST should be made in this Order. It occurs to me that the applicant having already issued tax invoices in the form of progress claims for his claimed variations may have already returned GST.
[12] (2009) VSC 585.
[13] (2008) NSWSC 373.
[14] (2008) NSWSC 767 1.
Orders and Directions
I order that the respondent pay to the applicant the sum of $10,907.97. That sum is exclusive of GST, pending the parties making further submissions in relation to whether GST should form part of the Orders of this Tribunal and in what amount. The sum of $10,907.97 comprises moneys owing pursuant to the contract in the sum of $5,818.00 and moneys pursuant to a quantum meruit based on restitution in the sum of $5,089.97.
I order that the respondent pay interest on the sum of $5,818.00 in accordance with the formula set out in section 67P of the QBSA Act. The interest is to be calculated with respect to Variations 147/02, 147/07147/08 and 147/10.
I direct that no later than 17 December, 2010, the applicant file and serve submissions:
(a) calculating the interest ordered to be paid, including a full description of the components of the formula and the date from which it is said the interest is payable;
(b) in relation to GST, which the applicant may seek by way of further Order of this Tribunal; and
(c) in relation to costs
I direct that the respondent file and serve any submissions in reply by 23 December, 2010.