Radcliff v Walker
[2011] QCAT 435
•13 September 2011
| CITATION: | Radcliff and Anor v Walker [2011] QCAT 435 |
| PARTIES: | G L & M G Radcliff t/a MGR Homes |
| v | |
| Glen Walker Michelle Walker |
| APPLICATION NUMBER: | BD350-09 |
| MATTER TYPE: | Building matters |
| HEARING DATE: | 13-15, 18 October 2010, 14-16 December 2010, 19 January 2011 |
| HEARD AT: | Brisbane |
| DECISION OF: | Mr Paul Favell, Member |
| DELIVERED ON: | 13 September 2011 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | The Tribunal orders that the $56,740.55 plus any accretions held by the Master Builders Association trust account be paid to the respondents by 4:00pm 20 September 2011 and the Applicant pay to the respondents $13,685.65 by 4:00pm 30 September 2011. |
| CATCHWORDS: | Domestic building contract – defective work –incomplete work- when practical completion is reached – authorisation of variations – costs Bellgrove v Eldridge (1954) 90 CLR 613 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | G L & M G Radcliff t/a MGR Homes represented by Andrew Evans instructed by Radcliff Lawyers |
| RESPONDENT: | Glen Walker and Michelle Walker self-represented |
REASONS FOR DECISION
Mr and Mrs Walker owned land at 38 Glenrowan Drive, Worongary. On Christmas Eve 2008, they signed a contract with the applicant. It was agreed that the applicant would build a two-storey house in accord with various drawings and specifications. The contract price was $394,476.00. The contract documents included plans prepared by Total Vision and specifications prepared by N Radcliff. There was also foundations data prepared by Structerre.
On or about 9 January 2009 the works commenced.
The builder claims that between 8 January 2009 and 26 May 2009 the Walkers paid the builder the sum of $339,412.70.
The builder claims that in breach of the contract the Walkers have refused or neglected to pay the final progress claim given to the respondents in the sum of $56,740.55.
The Walkers deny that they are in breach of the contract because the works were not brought to practical completion and the final claim payment was not due. They also deny that practical completion was reached on 16 July 2009 and contend that they have paid the builder $380,848.35.
The Walkers claim compensation for defects, omissions and unauthorised variations which are outlined in exhibit 5. They also seek liquidated damages of $9,600.00 and damages as outlined in Attachment C of their counterclaim. They also contend that the applicant should be denied payment for the final progress claim.
The claims made by the Walkers are numerous and various and have been set out in much detail in a Scott schedule and in a report by Mr Hill (an expert) and attachments to that report (exhibits 2 and 4).
They claim that the builder breached the contract and warranties implied by the Domestic Building Contracts Act2000 in that the builder:
a)failed to carry out works in an appropriate and skilful way;
b)failed to carry out works with reasonable care and skill;
c)failed to carry out works in accordance with all relevant laws and legal requirements;
d)failed to carry out works in accordance with the plans and specifications;
e)failed to bring the detached building to a state suitable for occupation;
f)failed to carry out the works with reasonable diligence;
g)failed to ensure that the purported provisional sums were calculated with reasonable care and skill;
h)failed to ensure that the PS Schedule contained the required things;
i)failed to ensure that the builder complied with the restrictions in Part 5 of the Domestic Building Contracts Act 2000;
j)failed to comply with the variation provisions of the contract and Part 7 of the Domestic Building Contracts Act 2000;
k)abandoned the works prior to completion of the works; and
l)failed to make progress claims in accordance with the schedule agreed in the contract.
The builder submits that there are five primary issues to be determined. Those issues are:
a)Was the property practically complete at 9 July 2009?
b)If ‘yes’ to (a), what are the legal consequences of the Walkers’ refusal to accept practical completion?
c)If ‘no’ to (a), what was the legal effect of taking possession of the property?
d)With respect to (a):
i) Was the alteration of the slab done by agreement?
ii) Was it agreed that there would be no spoon drain?
iii) Was the construction of the property sufficiently compliant with the Bushfire Standards applicable at the time?
iv) Were the defects to the property either admitted or found by the Tribunal to be defects sufficient that they rendered the property not practically complete?
v) When was the commencement of the contract?
The respondents addressed those issues in their written material.
The contract contains a definition of ‘practical completion stage’ as:
“means that stage of the works when the works are completed in accordance with the contract and all relevant statutory requirements, apart from minor admissions or minor defects, and the works are reasonably suitable for habitation.”
Part D of the contract sets out the stages and the value of each of the stages. The practical completion stage was said to be 15% of the contract with a value of $59,171. Clause 17 of the General Conditions of the contract sets out the obligations of both parties upon practical completion stage. Clause 17.1 requires the builder, on reaching practical completion stage, to give to the owner the final progress claim and a practical completion stage notice stating the date the works reached practical completion stage and providing for a final inspection of the works with the owner or the owner’s agents at a time and date specified in the certificate.
The term ‘works’ was defined in the contract as meaning “the whole of the work to be carried out by the builder under the contract, a description of which is contained in Item 3 of the schedule and includes variations to the works.”
Clause 11.8 of the General Conditions of the contract provides that there be no retentions or set-off subject to clause 18.2. Clause 18.2 allows liquidated damages to be deducted from the final payment.
The Walkers contend that on 16 July 2009, the builder provided an amended progress claim and sheet regarding the provisional cost and provisional sum amounts. They contend he did not give a practical completion stage notice on 16 July 2009 but provided such a notice on 10 July 2009 which was sent via email on 9 July 2009. They also contend that there was no final inspection of the works undertaken by the builder and the Walkers.
Clause 17.7 of the General Conditions of the contract allows the owner to take possession of the works if they dispute the amount payable to the builder and the builder is a member of the Queensland Master Builders Association upon paying the disputed amount into the Queensland Master Builders trust account. That occurred.
Clause 17.7 then provides:
“the owner is to then give the builder a receipt showing the disputed money has been deposited and the owner must pay the undisputed amount to the builder. On receiving the receipt and payment, the builder is to hand the keys to the owner and give the owner vacant possession of the works.”
Evidence of payment of the disputed money into the Queensland Master Builders trust account was given to the builder.
Clause 17.8 provides that the owner:
“must not take possession of the works, nor is it entitled to the keys to the works prior to payment to the builder of the final progress claim unless the owner has obtained the builder’s written consent.”
The Walkers contend that the builder abandoned the works and performed no significant work on the dwelling between 16 July 2009 and late October 2009. They contend that the works were left to deteriorate and the builder ignored the owners’ correspondence until 5 October 2009 when the Walkers advised their intention to pay the final payment into the Master Builder’s Trust Account and take possession. They contend that Mr Radcliff through his lawyers responded and indicated that the keys would be provided following receipt of proof of payment into the QMBA Trust Account. The Walkers say that within thirty-five minutes of providing the proof of payment into the Trust Account, the lawyers acting for the builder rescinded the representation to provide the keys.
The builder denies that it abandoned the works and the email which is attached B11 to the statement of Mrs Walker indicated that on receipt of proof of payment to the Master Builders of the disputed amount, the lawyers anticipated being able to provide keys to the property prior to the intended occupation.
Clause 17.9 provided that if the owner took possession of the works, or any part of the works, when not entitled to do so under the contract, the works are deemed to have reached practical completion stage on the date of possession and the owner is liable to the builder for any loss or damage arising as a result.
The Walkers took possession of the property on or about 10 October 2010. There is no evidence that they had the builder’s consent to do so. I have had regard to the expert evidence given concerning defects and omissions in order to determine whether the practical completion was achieved. In my view, it was not. Whilst there were numerous complaints about matters which I consider to be minor defects in the terms of the definition provided for in the contract, there were, however, a number of matters identified in the report of Mr Hills, which in my view, were not minor defects. Those included the provision of spoon drains, the patio area ceiling sheeting, and the veranda joist/veranda foundation. Clearly the construction has not been in strict compliance with the plans. Some structures were omitted, some different materials were used and some of the dimensions of the building were changed without a written variation.
Further, in my view the evidence establishes that the works were not completed in accordance with the contract and all statutory requirements. Part of non-compliance was the lack of a final plumbing inspection and certificate.
There is also an apparent difficulty (if practical completion had been reached) with the builder’s compliance with clause 17.1 of the general conditions of the contract. The practical completion stage notice was dated 9 July 2009 and emailed to the Walkers on that date. It notified that the works reached practical completion on 10 July 2009 and requested a final inspection at 8:00 am on 10 July 2009. On its face the notice seeks to give notice of practical completion which has not yet been reached.
In my view clause 17.1 required the builder to give a final progress claim and a practical completion stage notice on reaching practical completion stage. The final progress claim was a tax invoice dated 18 June 2009 attached to an email of that date. After further correspondence, meetings and disagreements, another tax invoice dated 16 July 2009 which applied valuations and changes to provisional sum and prime costs were given to the Walkers by the builder.
I find that even if practical completion was reached the requirements of clause 17.1 were not complied with by the builder.
Prior to the Walkers talking possession of the works, there was clearly a demand made for payment the amount of which was disputed by the Walkers. The evidence shows that at the time of the payment of money into the trust account of the Master Builders Association all of the payment sought was disputed. The amount paid in was the amount sought by the builder. Hence under clause 17.7 there was no undisputed amount to be paid to the builder by the Walkers. On being provided with a receipt showing that the disputed money was deposited into the trust account the builder was obliged to hand the keys to the owner and give the Walkers vacant possession of the works.
A copy of the trust account receipt for $56,740.55 was provided to the solicitors for the builder by email on 7 October 2009. The amount was the amount set out in invoice 0002 dated 16 July 2009.
The Walkers were entitled to take possession when they did and accordingly clause 17.9 of the General Conditions of the contract does not apply.
Clauses 17.7, 17.8 and 17.9 must be read together. Clause 17.8 in my view does not require the builder’s written consent before possession of the works can be taken by the owner in circumstances where possession has been taken on a proper interpretation of clause 17.7 and the circumstances which pertained here.
Because of the findings above at the time possession was taken of the works the contract was still on foot. Both parties were still bound by the content. Some further work was done by the builder after the owners took possession. Some of the works such as the spoon drains (for example) has not been done by the builder and in the sense that there is work not done or there is defective work which is not a minor defect or omission, practical completion under the contract has not been achieved.
The builder expressed a will to complete defective work while disputing the extent of defects and omissions. The owners at the time of hearing were desirous of not having the builder return to carry out defective or incomplete work.
Neither party has ever given a notice to terminate the contract.
The builder contends that the contract is still on foot. The Walkers contend it is not and it came to an end when they made payment into the Master Builders Association Trust Account.
The consequence of the finding that at the time the notice was given the works were not practically complete is that the builder’s statement that the works were practically complete was wrong. The builder did not have an entitlement to demand final payment. The builder was not entitled to stop work and in doing so displayed an intention not to be bound by the contract. Further, his refusal to give the keys to the owners when he was required to do so pursuant to clause 17.7 after the owners had paid all of the disputed money into the trust account of the Master Builders Association displayed an intention not to be bound by the contract.
The builder failed to bring the works to practical completion by the date provided for by clause 8 and items 8, 9 and 10 of the contract. In that sense he was in breach of the contract. The owners did not terminate the contract by the methods provided for in the contract. Instead they took possession of the works and sought damages for defects and omissions. The owners contend that the contract is at an end and submit that by the issue of the claim by the builder and the counterclaim by the owners both parties accepted that the contract was at an end. They contend that there was a mutual abandonment of the contract.
In my view the contract came to an end when the owners defended and counterclaimed as they did.
After many emails and correspondence between the owners and the solicitors for the builder, some identified defects/omissions had been attended to but by 10 October 2009 not all of the identified defects/omissions had been attended to and the owners in effect banned the builder from the site and thereby accepted the repudiatory conduct of the builder.
The builder submitted that it ought to be allowed to rectify defective items.
The decision of the High Court in Bellgrove v Eldridge[1] remains the leading authority when considering rectification of building works. In that case the trial judge found that the defective foundations required demolition and rebuilding of a house in order to ensure stability. The only qualification was that the undertaking of the work necessary to produce conformity must also be a reasonable course to adopt.
[1] (1954) 90 CLR 613.
In their joint judgment Dixon CJ, Webb and Taylor JJ made the following observations at 617:
"In the present case, the respondent was entitled to have a building erected on her land in accordance with the contract and the plans and specifications which formed part of it, and her damage is the loss which she has sustained by the failure of the appellant to perform his obligation to her. This loss cannot be measured by comparing the value of the building which has been erected with the value it would have borne if erected in accordance with the contract; her loss can, prima facie, be measured only by ascertaining the amount required to rectify the defects complained of and so give to her the equivalent of a building on her land which is substantially in accordance with the contract ... Subject to a qualification to which we shall refer presently the rule is, we think, correctly stated in Hudson on Building Contracts (7th ed. Sweet & Maxwell, 1946), p 343 "The measure of the damages recoverable by the building owner for the breach of a building contract is, it is submitted, the difference between the contract price of the work or building contracted for and the cost of making the work or building conform to the contract, with the addition, in most cases, of the amount of profits or earnings lost by the breach ...".
Their Honours went on to formulate the qualification saying:
"The qualification, however, to which this rule is subject is that, not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt."
They went on to say that:
"What remedial work is both ‘necessary’ and reasonable’ in any particular case is a question of fact. But the question whether demolition and re-erection is a reasonably method of remedying defects does not arise when defective foundations seriously threaten the stability of a house and when the threat can be removed only by such course. That work, in such circumstances, is obviously reasonable and in our opinion, may be undertaken at the expense of the builder."
The Court concluded that, in the circumstances, demolition of the structure and reconstruction was reasonable and necessary to provide a building in conformity with the contract. In doing so, the Court declined to adopt a less expensive mode of rectification involving the underpinning or the replacement of the existing foundations saying at page 620:
"To give to the respondent the cost of a doubtful remedy would by no means adequately compensate her, for the employment of such a remedy could not in any sense be regarded as ensuring to her the equivalent of a substantial performance by the appellant of his contractual obligations."
In accordance with these principles, both the manner of rectification and the cost of performing it must be reasonable having regard to the circumstances of this case. The test is what work is reasonably required to restore the applicant to that which should have been provided had the contract being performed.
In my view the relationship between the parties is now such that there is little or no goodwill between the parties and it would not be practical or desirable to require the builder to rectify. I consider that in the circumstances which prevail in the case and because of my findings the appropriate order in respect of final defects and omissions should be a monetary one.
There was evidence given by various experts concerning the extent of work done, the extent of compliance with the plans, the nature and extent of defects or omissions and the cost of rectification. I prefer the evidence given by Mr Hills over that given by Mr Silk.
In my view the evidence given by Mr Hill was after a more comprehensive examination of the issues had been done in the context of the Australian Standards, the plans, and practical building standards. Mr Silk conceded he did not examine the works to check if the Australian Standards had been complied with. He also missed various defects and omissions identified by Mr Hills.
The builder admitted that he had installed floor joists which were different from those in the plans and there were other changes such that the build was not in accord with the plans.
I have heard evidence from the builder concerning the cost of rectifying defects and omissions. In part he contended for a lower cost because he could do the work or he would require the subcontractor who did the work to rectify at his cost. However I prefer the costing done by Mr Hills and those which appear in Appendix C to the report by Mr Hills (exhibit 4), the detailed defect list Scott Schedule.
I have had the benefit of a view of site and the works done. Each defect/omission has been photographed and the subject of detailed evidence.
Each item of incomplete work or defective work was addressed individually during the hearing of the matter. On balance I am satisfied that each of the defects and omissions identified by Mr Hills is correct. Some are very minor but as I have said earlier some as identified in exhibit 4 are not minor. The number of those items, in my view, reinforce my finding that the works had not reached practical completion.
The finding by Mr Silk (exhibit 1) that the dwelling was at the time of his inspection before 31 August 2009 suitable for habitation despite the defects and incomplete works identified by him does not decide the question whether the works had reached practical completion. Even if the dwelling was suitable for habitation, the definition of ‘practical completion’ stage also required the works to be “completed in accordance with the contract and all relevant statutory requirements apart from minor admissions or minor defects”.
There are factual differences between the owners and the builder. At the stage after practical completion was claimed there was animosity between the parties. The recording of the inspection meeting demonstrated that animosity. That animosity probably created a barrier to the resolution of this matter. On balance I accept the evidence of the Walkers over that of Mr Radcliff.
In my view the evidence supports the Walkers recovering $117,601.75 (as claimed and detailed in Appendix C) less $35.00 for Item 84 which I accept was rectified by the builder ($117,566.75) in respect of defects and omissions.
Whilst I have found that there were numerous defects and omissions and that the works had not reached practical completion, it is clear that much of the work required for the practical completion stage had been done and in my view the builder is entitled to be paid for that work. The appropriate and fair way to account for that work is to allow the amount of $56,740.55 which was claimed on 16 July 2009 and paid into the Master Builders Association trust account. In that way the Walkers will be compensated for the incomplete and defective work and the builder will be paid for work completed, not paid for and not defective.
In my view, the evidence which I have accepted requires rectification of the defects and omissions conceded and found. Such rectification is both necessary to produce conformity with the contract and is also a reasonable course to adopt in the circumstances here. That view is supported by the decisions in Bellgrove v Eldridge (1954) 90 CLR 613 and Tabcorp Holdings Limited v Bowen Investments Pty Ltd [2009] HCA 8.
The Walkers contend that even if practical completion had been reached the amount claimed for that stage should have amounts deducted for refunds, liquidated damages, variations not in writing and interest on overpayments and payments made early.
The Walkers had paid for variations which were not in writing. On so paying in my view they waived the need for the variation to be in writing before the variation could be claimed. Similarly, when they paid the builder earlier than he was entitled to be paid they were consenting to the early payment. In my view they are not entitled to now claim the money paid or claim interest on that money.
The Walkers also claim accommodation costs of $1,400 while rectification work is undertaken. I am not satisfied that such a claim is necessary or reasonable.
They also claim the cost of obtaining building consultant reports in relation to the incomplete and defective works. That claim is really a claim for costs. The claim does not particularise those costs.
Section 100 of the Queensland Civil and Administrative Tribunal Act 2009 requires each party to bear the party’s own costs for the proceeding. Section 102 provides for an order for costs if the tribunal considers the interests of justice require it to make the order and s 102(3) provides for matters which the tribunal may have regard to in deciding whether to award costs.
Clearly the intended purpose of the cost provisions of the QCAT Act is that parties must bear their own costs unless the interests of justice require otherwise. Factors the Tribunal may have regard to in making the decision whether the interests of justice require a costs order are set out in section 102(3) of the Queensland Civil and Administrative Tribunal Act 2009.
As has been recognised, there is no common law jurisdiction in Tribunals to award costs. The power is entirely a creation of statute.[2]
[2] Knight v FP Special Assets Ltd (1992) 174 CLR 178, 193.
As Judge Kingham Deputy President of QCAT in Ascot v Nursing and Midwifery Board of Australia [2010] QCAT 364 said “The public policy intent of the provisions in the QCAT Act is plain. The tribunal was established as a no costs jurisdiction. That may be departed from where the interests of justice require. The considerations identified in section 102(3) are not grounds for awarding costs. They are factors that may be taken into account in determining whether, in a particular case, the interests of justice require the Tribunal to make a costs order.”
In Ralacom Pty Ltd v Body Corporate for Paradise Island CTS 17653 (No 2) [2010] QCAT 412 the President, Justice Wilson said “The phrase ‘in the interests of justice’ is not defined in the Act but is to be construed according to its ordinary and plain meaning, which obviously confers a broad discretionary power on the decision maker.”
The Respondent in Ralacom Pty Ltd v Body Corporate for Paradise Island relied on the decision of the Court of Appeal in Tamawood Ltd & Anor v Paans [2005] QCA 111 a case decided under the cost provisions of the now repealed Commercial and Consumer Tribunal Act 2003 (CCT Act).
Commenting on that Act the President Justice Wilson said in Ralacom Pty Ltd v Body Corporate for Paradise Island:
“Although those provisions are not analogous to the equivalent provisions under the QCAT Act, the principles found in Tamawood provide guidance about the circumstances in which it may be in the interests of justice for this Tribunal to award costs against parties. His Honour considered the wording of the CCT cost provisions and said “the similar QCAT Act provision to section 70 (of the CCT Act) is, it might be said, in terms that more plainly indicate that the legislature has turned its face against awards of costs in this Tribunal: section 100 says that “other than as provided under this Act or an enabling Act, each party to a proceeding must bear the party’s own costs for the proceeding”.
In considering sections 70 and 71 Keane JA (as his Honour then was) referred however to two matters relevant here. His honour held that the CCT provisions negated the traditional proposition that costs should prima facie follow the event (unless of course that the Tribunal considers that another order is more appropriate) and that the nature and extent of the power to award costs could only be discerned by close consideration of the terms of the statute which created and prescribed the occasions and conditions for its exercise. Sections 100 and 102 of the QCAT Act attract the operation of the same principles.
Keane JA was of the view that where the complexity of the matter justified legal representation it would not be in the interests of justice to bar the successful party from recovering costs that were reasonably necessary to achieve a satisfactory outcome.
That conclusion must, here, be considered in the light of the difference between section 70 of the CCT Act and section 100 of the QCAT Act. Section 70 speaks of a “main purpose”, but section 100 mandates that parties shall bear their own costs. Section 70 contains, within itself, a reference to the condition or circumstance in which the main purpose may be subsumed to the interests of justice; section 100 has no such proviso, although it appears later, in section 102(1).
Under that subsection QCAT has a discretion to make a costs order “…if the Tribunal considers the interests of justice require it…”. Section 102(3) says that, in deciding whether to award costs, the Tribunal may have regard to matters not dissimilar to those set out in section 71 of the CCT Act including, in particular for present purposes, the nature and complexity of the dispute and the relative strengths of each party’s claims.
Under the QCAT Act the question that would usually arise in each case in which costs are sought is whether the circumstances relevant to the discretion inherent in the phrase “the interests of justice” point so compellingly to a costs award that they overcome the strong contra-indication against costs orders in section 100.”
I am not persuaded that in this case the interests of justice require the Tribunal to make any order requiring any party to pay any costs. I dismiss the claim for costs and make no order as to costs.
The liquidated damages sought are $9,600. That amount is calculated in the claim as $150 per day from and including Wednesday 5 August 2009 until 9 October 2009. The evidence supports a finding that the works commenced on 9 January 2009. The contract allowed for 208 days for the construction period. Item 18 of the contract and clause 18 set the liquidated damages sum as $150 per day. In my view the owners are in the circumstances entitled to liquidated damages as calculated.
So far as the primary issues which the builders submitted should be determined are concerned, for the reasons given herein the property was not practically complete as at 9 July 2009. I am satisfied on the evidence that the alteration of the slab was done by agreement. I am not satisfied that it was agreed that there would be no spoon drain. I am not satisfied the construction was sufficiently compliant with the applicable bush fire standards. Apart from what I have said in these reasons it is not necessary to further answer those submitted issues. Generally I preferred the evidence given on behalf of the Walkers. I have had the benefit of hearing the expert evidence with the experts present when that evidence was given. I have also had the benefit of detailed written submissions and generally I have accepted those of the Walkers after a comparison with the available evidence, the photos, the discs and the reports. I do not, however, accept that Mr Radcliff was dishonest or was of the character submitted by the Walkers. It is unfortunate that this dispute got to the stage it did, but it is not necessary to make findings as suggested by the Walkers concerning Mr Radcliff. I have, however, observed the way each witness gave their evidence and took that observation into account when assessing the evidence and the relevant issues.
Other than the findings set out herein I am not satisfied that the final stage inaccuracies articulated in the submissions of the Walkers are made out. Further I am not satisfied that the other claims for delayed credits, variation credits or incomplete works other than those which I have allowed were made out.
Because the reasons set out herein the Walkers would be entitled to $127,166.75 ($117,566.75 plus liquidated damages of $9,600.00) and the builder $56,740.55.
The order of the tribunal is that the $56,740.55 plus any accretions held by the Master Builders Association trust account be paid to the respondents by 4pm 16 September 2011 and the Applicant pay to the respondents $13,685.65 by 4pm 30 September 2011.
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