Roberts v Charterarm Investments Pty Ltd
[2014] VSC 22
•12 February 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
No. SCI 2013 01644
| CLYNTON ROBERTS | Appellant |
| v | |
| CHARTERARM INVESTMENTS PTY LTD (IN LIQUIDATION) | Respondent |
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JUDGE: | KAYE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 6 February 2014 | |
DATE OF JUDGMENT: | 12 February 2014 | |
CASE MAY BE CITED AS: | Roberts v Charterarm Investments Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2014] VSC 22 | |
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ADMINISTRATIVE LAW – Appeal from Victorian Civil and Administrative Tribunal – Building contract – Cost plus contract – Whether Tribunal erred in determining compliance with s 13(2) of Domestic Building Contracts Act 1995 – Whether Tribunal erred in finding that builder reasonably incurred costs claimed by it.
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APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr T Margetts SC | Chadwicks – the Law Firm |
| For the Respondent | Mr S Smith | Lovegrove Solicitors |
HIS HONOUR:
The appellant appeals from a decision of a Senior Member of the Victorian Civil and Administrative Tribunal (“the Tribunal”) dated 8 March 2013. By that decision, it was ordered that the appellant pay the respondent $217,716.91.
The respondent was a building company which focused its business activities primarily on residential development projects. It was the vehicle through which its director, Mr George Bougioukos, carried out property development work. In 1997, Mr Bougioukos formed a business relationship with the appellant, Mr Clynton Roberts, who was an estate agent. By that arrangement, the appellant was engaged by Mr Bougioukos to source and purchase residential sites for re-development by the respondent, and then to re-sell the completed development.
In about 2000, the appellant purchased a residential property in Beaver Street, East Malvern. He intended to demolish the existing dwelling and re-develop the site as a two lot development, comprising a two storey townhouse on each allotment. In late 2004, the appellant discussed the proposed project with the respondent.
Ultimately, on 27 June 2005, the appellant and the respondent entered into a building contract in respect of the proposed works. The contract was a standard HIA Cost Plus contract, under which the respondent was to construct two residential townhouses on the property. The contract provided for a construction period of 330 days. It did not stipulate a commencement date for the building works. Ultimately, construction did not commence until 5 February 2007. Significant delays were experienced in carrying out the works. In part, the delay was caused by substantial changes which were made to the scope of the works. By June 2009 the works were not complete. By then, the appellant had already paid the respondent more than $300,000 in excess of the estimated contract price. Those payments were made pursuant to 12 progress claims which had been made by the appellant to the respondent.
In June 2009, a dispute arose between the appellant and the respondent concerning the time taken to complete the works, and concerning the cost of construction of the works. On 17 June, the respondent formally suspended the works. Ultimately, the contract was terminated on 27 July 2009.
In the proceeding before the Tribunal, the respondent claimed three outstanding progress claims (numbered 13, 14 and 15) totalling $236,752.96. The Tribunal upheld that claim. The respondent also claimed three other items (an outstanding builder’s fee, builder’s margin on variation work, and delay damages) which were disallowed by the Tribunal. In response, the appellant counterclaimed for a number of items of damages. The Tribunal disallowed most of the counterclaim, except for the claim by the appellant for delay damages, which were fixed (according to the contract) at $19,036. The amount allowed on the counterclaim was set off against the respondent’s claim for progress payments.
The grounds of appeal which were pursued before me relate to two principal issues. The first issue is whether the contract complied with s 13(2) of the Domestic Building Contracts Act 1995 (“the Act”), which requires a builder, in a cost plus contract, to provide a fair and reasonable estimate of the total amount of money the builder is likely to receive under the contract. The second issue is whether the builder established its claim for progress payments in accordance with the requirements of clause 28 of the contract.
The building contract
As a cost plus contract, the building contract did not specify a fixed price. Clause 12.0 of the contract provided that the owner must pay the builder the “price of the building works” in accordance with clause 28 of the contract. Clause 12.0.1 provided:
“The Owner acknowledges that the Estimated Price is provided only for the purposes of complying with section 13(2) of the Domestic Building Contract Acts, calculating the deposit under clause 9 and the Owner’s ability to pay under clause 13 and is a non-binding estimate that cannot be relied on by the Owner for any other purpose.”
Clause 1 of the contract defined the term “Estimated Price” as “… the amount stated in item 2 of schedule 1”.
Item 2 of schedule 1 was entitled “Estimated Price (clause 12)”. It stated:
“Estimated Price including GST $850,000. The Estimated Price includes GST.”
Clause 1 of the contract defined “Builder’s fee” to mean the amount determined in accordance with schedule 5. In that schedule, the “Builder’s fee” was prescribed in the set amount of $110,000, payable in four stages (frame, lock up, fixing and final completion) of $27,500 each.
Clause 28 prescribed the manner by which the builder was to claim progress payments. It provided:
“28.0 The Builder is to give the Owner a written claim for a Progress Payment as set out in schedule 3. The claim must set out each of the following:
•The amount paid or to be paid for the Price of the Building Works for Building Works done;
•Payments made by the Owner; and
•The balance payable under the claim.
28.1 A Builder’s claim for a Progress Payment is to be accompanied by such invoices, receipts or other documents as may reasonably be expected to support the claim and evidence the Cost of the Building Works being claimed.”
Schedule 3 of the contract was entitled “Progress Payments”. In the box entitled “Describe Progress Stages here” this schedule provided:
“The Builder shall supply to the Owner a detailed costings with copies of invoices, every month for progress payments of approximately $100,000 depending on the amount of construction expenditure to date.”
Clause 1 of the contract defined the term “Cost of the Building Works” to mean the amount determined in accordance with Schedule 4 of the contract. That schedule provided that the “Cost of the Building Works” included (but was not limited to) eleven specified items. It also provided that “the above amounts are in addition to the builder’s fee”.
Grounds 3 and 4: Whether the building contract complied with s 13(2) of the Act
The first issue on the appeal, to which I have earlier referred, is addressed in grounds 3 and 4 of the Notice of Appeal. Those grounds are as follows:
“3 The Tribunal erred in law in holding that the Contract (as referred to in the Tribunal’s reasons) complied with section 13(2) of the Domestic Building Contracts Act 1995 (the Act) by reason of the finding that the Contract contained a fair and reasonable estimate by the Builder of the total amount of the money that the Builder was likely to receive under the Contract.
4 The Tribunal further erred in law by taking into account the evidence of Mr Roberts and Mr Bougioukos in determining that the Contract complied with section 13(2) of the Act.”
Section 13(2) of the Act provides:
“A builder must not enter into a cost plus contract that does not contain a fair and reasonable estimate by the builder of the total amount of the money the builder is likely to receive under the contract.”
The Senior Member of the Tribunal held that the contract contained a fair and reasonable estimate by the builder as required by s 13(2). He reached that conclusion on the basis that the “estimate” in the contract of the total money the builder was likely to receive under the contract was $960,000. The principal point made on behalf of the appellant, in respect of grounds 3 and 4, is that the Senior Member erred in basing his conclusion on an estimate in the contract of $960,000, rather than the correct figure of $850,000.
In his detailed and careful reasons, the Senior Member concluded, on the basis of expert evidence adduced before him, that a reasonable estimate of the cost to construct the works, as depicted in the design documents available as at June 2005, was $1,010,839. At paragraph 50 of his reasons, the Senior Member then stated:
“In determining whether section 13 of the Act has been infringed, Mr Lucas[1] submitted that I should compare the reasonable cost of construction to the builder’s estimate by reference only to the price stated in item 2 of schedule 1 of the contract. That states that the Estimated Price is $850,000. However, as I have already indicated, schedule 5 separately states that a fixed Builder’s Fee of $110,000 was also to be charged. Having regard to the evidence of both Mr Roberts and Mr Bougioukos, I find that the parties were under no misapprehension that the Estimated Price figure of $850,000 did not include the builder’s fee price of $110,000, such that the aggregate estimated amount the builder was to receive under the contract was $960,000.”
[1]Mr Lucas was counsel for the appellant before the Tribunal.
The Senior Member then noted that the difference between the amount, which he considered to be a reasonable estimate of the cost to construct the works ($1,010,839), and the builder’s estimated price ($960,000), was 5.3 percent. Relying on the evidence of an expert witness that an amount, that was 4.5 percent above the estimated price, would be reasonable, the Senior Member concluded that the contract complied with s 13(2) of the Act.
Mr Margetts SC, who appeared on behalf of the appellant, submitted that, on the plain construction of the contract, the estimated price contained in the contract, for the purposes of s 13(2), was that specified in the second item of schedule 1 of the contract, namely, $850,000. Mr Margetts submitted that the Tribunal Member erroneously construed the contract by reference to evidence given by the appellant and Mr Bougioukos as to their individual understanding that the estimated contract price of $850,000, stated in the contract, did not include the builder’s fee of $110,000. Mr Margetts submitted that such an approach to the construction of a contract is impermissible. In support of that submission, he referred to the often cited decision of the High Court in Pacific Carriers Limited v BNP Paribas.[2]
[2](2004) 218 CLR 451, 461 [22].
Mr Margetts submitted that if the Senior Member had based his conclusions on the correct figure, of $850,000, as the estimated contract price, the difference between that figure and a reasonable estimate of the cost of the works (as found by the Senior Member) would be $160,839, or 18.29 percent. The Senior Member accepted evidence that a reasonable margin of an error would be approximately 4.5 percent. Thus, it would follow that the estimate by the builder of the total amount likely to be received under the contract, in item 2 of schedule 1, was not fair and reasonable for the purposes of s 13(2).
In response, Mr Smith, who appeared on behalf of the respondent, relied on two principal arguments. First, Mr Smith submitted that the contract between the parties was partly written and partly oral. He relied on evidence which supported the finding by the Senior Member that both the appellant and Mr Bougioukos understood that the builder’s margin of $110,000 was additional to the estimated cost of $850,000, specified in item 2 of schedule 1 of the contract. Mr Smith submitted that although s 31(1)(a) and (b) of the Act require that the contract be in writing and that it set out all of its terms, s 133 of the Act has the effect that a contract, which does not comply with s 31, is not void. Thus, he submitted that the Act does not preclude a building contract being partly in writing, and partly oral. He submitted that the evidence established that there was an oral term of the building contract, the effect of which was that the estimate in the contract of the amount likely to be received by the builder was a combination of the amount stated in item 2 of the first schedule ($850,000) together with the builder’s fee ($110,000).
The second argument relied on by Mr Smith was that the case for the appellant, before the Senior Member, was conducted on the basis that the estimate by the builder, for the purposes of s 13(2) of the Act, was $960,000, and not $850,000. In support of that proposition, Mr Smith referred to paragraph 5 and paragraph 8(e) of the appellant’s points of defence, which alleged that the contract was for a price of $850,000 together with a set amount of $110,000 for the builder’s fee. In paragraph 28 of the points of defence, the appellant relied on s 13(2) of the Act. In the particulars to that paragraph, it was stated:
“The contract specified an estimated cost price of $850,000 plus a fixed fee to the builder of $110,000 (GST inc) in total $960,000 (GST inc) … .”
Mr Smith also referred to a passage of the transcript before the Senior Member, in the course of openings, in which counsel for the appellant made it clear to the Senior Member that the appellant’s defence was based on an estimated cost price of $850,000 plus the fixed fee of the builder of $110,000. Mr Smith submitted that the appellant should not be permitted to depart from the manner in which it had made its case before the Senior Member. In support of that proposition, he referred to the decision of the High Court in Metwally v University of Wollongong.[3]
[3](1985) 59 ALJR 481.
In response to the latter submission, Mr Margetts accepted that the case for the appellant, initially, was conducted on the basis stated by Mr Smith. However, he referred me to a passage in the written final submissions made on behalf of the appellant before the Senior Member, in which the appellant put his defence, under s 13 of the Act, on the basis that the estimated price contained in the contract was $850,000. In addition, Mr Margetts referred to the first sentence in paragraph 50 of the Senior Member’s reasons (to which I have referred above), in which the Senior Member noted that counsel for the appellant (Mr Lucas) had submitted that the Senior Member should compare the reasonable cost of construction to the price stated in item 2 of schedule 1 of the contract ($850,000). Mr Margetts also referred to an earlier passage in the Senior Member’s reasons, which contained an extract of the witness statement of the quantity surveyor, Mr Buchanan, called on behalf of the respondent. In that witness statement, Mr Buchanan stated “I have been asked to state whether the $850,000 estimated price was reasonable in mid to late 2005”.
Conclusion on grounds 3 and 4
In the course of his submissions, Mr Smith, at one stage, argued, albeit faintly, that on its proper construction, the contract provided for an estimated price of $960,000, not $850,000. In my view, Mr Smith was correct in not pressing that argument.
I have already set out the relevant terms of the contract. Clause 12.0.1, in clear terms, provides that the “estimated price”, stated in the contract, was specified for the purposes of complying with s 13(2) of the Act. The term “estimated price” was defined in clause 1 to be the amount stated in item 2 of schedule 1. Item 2 of schedule 1 was entitled “estimated price (clause 12)”. It provided that the “estimated price” (including GST) was $850,000. The builder’s fee of $110,000 was specified in a separate part of the contract, inschedule 5. On a plain reading of the contract, it is clear that the amount specified in the written contract, for the purpose of s 13(2), was that stated in item 2 of schedule 1, namely $850,000.
It was no doubt in the face of that proposition that Mr Smith sought to rely on a submission that the contract between the parties was partly written and partly oral. There are a number of difficulties associated with that proposition. First, in its points of claim before the Tribunal, the respondent pleaded the contract as partly written and partly implied. Insofar as it was written, it was contained in the HIA cost plus contract. Insofar as it was implied, it was pleaded that “such implication necessarily arises as to give the relationship between the parties business efficacy … “. There was no pleading that the contract was, in any way, partly oral.
The second difficulty confronting the proposition advanced by Mr Smith is that there was no finding by the Senior Member that the contract was, in any way, partly oral. To the contrary, at the commencement of his reasons, the Senior Member recited that on 27 June 2005, the appellant entered into a building contract with the respondent, and that the contract was “ … a standard form HIA Cost Plus contract … “. There is nothing in the Senior Member’s reasons which could be construed as a finding that the contract contained any other oral term, or a term collateral to it. On its face, the written contract between the parties was complete. Indeed, clause 3 of the contract provided:
“This contract is complete in itself and overrides any earlier agreement, whether made verbally or in writing.”
Accordingly, I do not accept the submission made on behalf of the respondent that there was an oral term of the contract to the effect that the estimate, for the purpose of s 13(2), was the amount stated in item 2 of schedule 1 together with the builder’s fee of $110,000.
In paragraph 50 of his reasons, the Senior Member adopted the figure of $960,000 as the figure prescribed in the contract for the purpose of s 13 of the Act, on the basis of the understanding by the two parties to the contract that the estimated price figure of $850,000 did not include the builder’s fee price of $110,000.
It is well accepted that, in construing the meaning of terms used by parties in a commercial contract, it is permissible, and indeed important, to take into account the background context to the agreement, in order to ascertain, objectively, the underlying purpose of the particular transaction. On the other hand, it is not permissible to construe a contract according to the parties’ subjective intentions in respect of an aspect of the agreement reached between them.[4] In those circumstances, the Senior Member erred in construing the contract by reference to the evidence of the parties’ intentions, instead of by reference to the concluded terms of the contract.
[4]Prenn v Simmonds [1971] 1 WLR 1381, 1383-4 (Lord Wilberforce); Reardon Smith Line v Hansen-Tangen [1976] 1 WLR 989, 995-6 (Lord Wilberforce); Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 348-351 (Mason J); Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, 461-2 [22].
The second submission made by Mr Smith was that the proposition advanced by the appellant, in support of grounds 3 and 4, constituted a departure by the appellant from the manner in which he conducted the case before the Senior Member. Certainly, at the outset of the hearing before the Senior Member, the appellant approached the case on the basis that the amount stated in the contract, for the purposes of s 13(2) of the Act, was $960,000, and not $850,000. However, at least by the time the parties made their final submissions to the Tribunal, if not earlier, the appellant had based his defence, under s 13 of the Act, on the proposition that the estimated price specified in the contract, for the purposes of s 13 of the Act, was $850,000. As Mr Margetts correctly pointed out, the Senior Member, in paragraph 50 of his reasons, recited that counsel for the appellant had submitted that, in determining whether s 13 of the Act had been infringed, he should compare the reasonable cost of construction with the price stated in item 2 of schedule 1 of the contract, namely, $850,000.
In those circumstances, I reject the submission made on behalf of the respondent that the appellant’s contentions, in respect of grounds 3 and 4 of the appeal, constitute an impermissible departure from the manner in which the appellant conducted its case before the Tribunal.
It follows that I accept the appellant’s submission that the Senior Member erred in concluding that the contract complied with s 13, on the basis that the estimated price stated in the contract was $960,000. If the Senior Member had correctly concluded that the estimated price, specified in the contract, for the purposes of s 13, was $850,000, it would follow, on the findings made by the Senior Member, that the estimated price stated by the builder in the contract, for the purposes of s 13(2) was not a fair and reasonable estimate of the total amount of money that the builder was likely to receive under the contract for the purposes of s 13(2) of the Act. On that basis, I uphold grounds 3 and 4 of the grounds of appeal.
Section 13(3)(a) provides that if the builder fails to comply with s 13, the builder cannot enforce the contract against a building owner. Section 13(3)(b) provides that, in those circumstances, the Tribunal may award the builder “… the cost of carrying out the work plus a reasonable profit if the Tribunal considers that it would not be unfair to the building owner to do so”. Based on the conclusions which I have made, it will therefore be necessary for me to remit the case to the Senior Member for consideration of an alternative claim by the builder under s 13(3)(b) of the Act.
I shall hear from counsel as to the precise basis upon which I should remit the matter to the Senior Member for the purposes of determining that matter.
Grounds 6 and 7: Whether the builder established its claim for progress payments
The second issue on the appeal relates to whether the builder established its claim for progress payments in accordance with the requirements of the building contract. It is raised by grounds 6 and 7 of the Notice of Appeal, which were in the following terms:
“[6] The Tribunal erred in law in holding the cost of the building works under the contract was proven by reference to costs estimates given by Mr Shah, a quantity surveyor engaged by the appellant, and not by evidence proving the cost of the building works in the manner as required by the contract.
[7] The Tribunal further erred in law in holding the builder’s entitlement to progress payments under clause 28.0 of the contract was proven by the estimates of the as constructed works rather than the express requirements of the contract, which in substance required proof of the actual costs of the building works.”
Grounds 6 and 7 address the findings by the Senior Member: firstly, that the respondent expended or incurred the costs claimed by it in progress claims 13, 14 and 15; and, secondly, that the respondent had complied, in substance, with the requirements of clause 28 of the contract in submitting claims for progress payments to the appellant.
In essence, on appeal, Mr Margetts submitted that the Senior Member determined the entitlement of the respondent to the progress claims, by reference to whether those claims were commensurate with the assessment by the quantity surveyors of reasonable cost of the works conducted by the respondent. Rather, Mr Margetts submitted, the Senior Member was required to make findings as to whether the costs, claimed in the progress payments, were properly and reasonably incurred by the respondent in respect of the building works. Mr Margetts submitted that the cost of the building works was to be calculated in accordance with the mathematical addition of costs specified in schedule 4 of the contract. The Senior Member did not make such a finding. Nor did the Senior Member rely on any evidence which proved that the respondent had established the costs of the building works in accordance with clause 28.
In response, Mr Smith submitted that the Tribunal did make a finding that the respondent had established its claim to the progress payments in accordance with the provisions of the contract. He submitted that the Tribunal accepted the evidence of the respondent that the invoices, tendered in the course of the hearing, related to costs and expenses reasonably incurred by the respondent in respect of the works. He further submitted that the Tribunal found that the invoices, which were tendered in evidence, had been properly provided to the appellant in accordance with the requirements of clause 28 of the contract. Mr Smith contended that the resort by the Senior Member to the evidence of the quantity surveyors was legitimate, as the Senior Member used that evidence as a “cross check” to verify the reasonableness of the claims made by the builder for progress payments.
Conclusion on grounds 6 and 7
In order to determine the issues raised by grounds 6 and 7, it is necessary to examine the reasons of the Senior Member in a little detail. The Senior Member commenced the relevant section of his reasons by identifying four questions, which were raised by counsel for the appellant in final address. He noted that those questions were directed to the two principal issues to which I have referred, namely, whether the respondent had actually incurred the costs which were contained in the claims for progress payments, and, secondly, whether the respondent had complied with the regime for progress payments prescribed by the contract.
The Senior Member commenced by noting that progress claims 1 to 12 had been paid by the appellant. In addition the appellant had paid all but one of the builder’s fee claims. The appellant’s amended points of defence did not allege that progress claims 1 to 12 had been mistakenly paid, or that, in the absence of a breach of s 13 of the Act or any set off, the respondent was not otherwise entitled to retain the amounts paid pursuant to those claims. The Senior Member further noted that the appellant, in his amended points of defence, did not allege that, in the absence of any breach of s 13 of the Act or set off, progress claims 13, 14 and 15 did not represent the cost of constructing the works. However, the Senior Member noted the submission by counsel for the appellant that those claims did not reflect the costs incurred by the respondent in carrying out the works. The Senior Member stated:
“[64] Nevertheless, even if that line of defence was previously raised, I do not accept Mr Lucas’ submission that the value of the unpaid progress claims and unpaid part of the builder’s fee are not commensurate with what the builder has expended in constructing the works. In that regard, both quantity surveyors engaged by the parties assess the reasonable cost of the as built works.
[65] If regard is had to the expert evidence of both quantity surveyors, one can determine, at least on a rudimentary basis, whether the aggregate amount claimed by the builder (excluding its claim for the margin on variations and delayed damages) is commensurate with what the quantity surveyors opine is the reasonable cost of the as built works.”
At paragraph 67 to 74 of his reasons, the Senior Member analysed the assessments made by the two quantity surveyors, namely, Mr Buchanan, the expert for the respondent, and Mr Shah, the expert for the appellant. The Senior Member preferred the evidence of Mr Shah as to the reasonable cost of the as built works. He adjusted Mr Shah’s estimate, which was based on 2005 rates, to reflect 2007 rates. The outcome of that exercise was that the adjusted price estimate by Mr Shah, of the works, was only $16,919.29 less than the total amount claimed by the respondent in progress claims 1 to 15. The Senior Member then concluded as follows:
“[75] Therefore, I am satisfied on the balance of probabilities that the amount charged by the builder pursuant to the progress claims submitted reflects the true cost of construction. My finding is reinforced by the fact that no evidence was adduced to suggest that any of the invoices related to other work or were not reasonably incurred.”
The Senior Member then considered the second question, namely whether the respondent had complied with the regime prescribed by the contract for making progress claims.
The Senior Member noted the evidence of the appellant that he was not, at any time, given invoices supporting the claims for payment made by the respondent. The Senior Member noted that the appellant’s evidence in that regard was contradicted, not only by Mr George Bougioukos, but also by Mr John Bougioukos. The latter was an officer and employee of the respondent, who was responsible for the book keeping work of the respondent. The Senior Member stated that, in essence, the evidence of those two witnesses was to the effect that the parties agreed that progress payments would be submitted on a monthly basis, but that the supporting documentation would be collated and provided to the appellant on a quarterly basis. The Senior Member noted that according to Mr Bougioukos, a total of ten folios of invoices and supporting documentation were given to the appellant during the life of the contract. Copies of each of those folios were produced and tendered during the hearing before the Senior Member. Each folio spanned a period of approximately three months, and included what the respondent contended was all of its expenditure incurred over the relevant period. The Senior Member observed, in that regard, that each supply invoice, listed in the progress claims, was able to be located in one of the ten folios that was tendered to the Tribunal by the respondent. The Senior Member then noted the evidence to the contrary by the appellant, namely, that the procedure described by Mr John Bougioukos and Mr George Bougioukos was not employed.
The Senior Member then concluded in respect to that issue as follows:
“[90] I prefer the evidence of Mr George Bougioukos and Mr John Bougioukos concerning this particular issue. The evidence is corroborated by the documents produced, which are consistent with their evidence. Mr George Bougioukos and Mr John Bougioukos were extensively cross-examined on this issue but maintained that the staged progress claims, non-staged progress claims and folios were given to Mr Roberts progressively during the course of the building project. Their evidence is detailed, in the sense that they are able to say when the documents were given to Mr Roberts and the surrounding circumstances. By contrast, Mr Roberts’ evidence is that he first asked the builder for copies of all invoices relating to the builder’s expenditure in October 2008, after he was advised that $870,000 had been spent on the project and a further $375,000 was required to complete the works. It seems peculiar that Mr Roberts would first request copies of all invoices relating to expenditure almost 20 months after the works commenced … . In my view, it is unlikely that Mr Roberts would not have sought some documentation to verify the amount charged by the builder during a 20 month period.
[91] Accordingly, I find that the more likely scenario is that the non-staged progress claims and folios were submitted by the builder to Mr Roberts during the life of the contract and on or about the dates which they bore. This was done contemporaneously with the builder also submitting the staged progress claims directly to Mr Roberts’ lender for payment.
…
[95] I find that the builder substantially complied with (the) payment claim regime by submitting progress claims which detailed each element of expenditure making up the amount claimed and by subsequently providing the folios, which again detailed each element of expenditure and attached copies of the invoices listed in the folio.”
Based on those findings the Senior Member found that, in the absence of any right to set off damage, progress claims 13, 14 and 15 were due and payable under the contract.
Three points emerge from the foregoing examination of the reasons of the Senior Member. Firstly, the Senior Member accepted the evidence given on behalf of the respondent that invoices and other documentation (all of which was tendered in evidence) were provided by the respondent to the appellant in support of each of the progress claims in accordance with clause 28 of the contract, as modified by the oral agreement between the parties.[5] Secondly, the Senior Member found that each of the supply invoices, which were listed in the 15 progress claims, could be located in the ten folios of documentation tendered to the Tribunal by the respondent.[6] Thirdly, the Senior Member noted that, notwithstanding the lengthy cross-examination of the respondent’s witnesses concerning the invoices, no evidence was adduced to suggest that any of the invoices related to other work or were not reasonably incurred.[7]
[5]Senior Member’s Reasons, paragraph 90.
[6]Senior Member’s Reasons, paragraph 85.
[7]Senior Member’s Reasons, paragraph 75.
The sum total of those three propositions is that the Senior Member accepted that each of the three progress claims, which were the subject of the proceeding in the Tribunal, were supported by invoices, that those invoices related to work performed by the respondent on the project, and that they were reasonably incurred.
It is, perhaps, curious that the focus of the Senior Member’s reasons (at paragraphs 66 to 73) was on the evidence of the quantity surveyors as to their estimate of the reasonable cost of the as built work. That part of the Senior Member’s reasons occupied most of the section of his reasons which dealt with the issue whether the builder reasonably incurred the costs, claimed by it, in respect of the project.
Nevertheless, it is important to bear in mind that, in examining the estimates made by the quantity surveyors, the Senior Member (at paragraph 65 of his reasons) made it clear that his consideration of the expert evidence of the quantity surveyors was undertaken to enable him “at least on a rudimentary basis” to determine whether the aggregate amount claimed by the builder was commensurate with what was a reasonable cost of the as built works. It was perfectly legitimate for the Senior Member to have recourse to expert evidence in that regard. Indeed, one of the issues which the Senior Member had to consider was whether the costs claimed by the builder were reasonably incurred. That question was directly addressed by the expert evidence. In addition, by forming an estimate of the reasonable cost of the as built works, the Senior Member was able to undertake a “cross check” as to whether the amounts, claimed by the builder, and contained in the invoices, were incurred in respect of the project. The fact that the estimates of Mr Shah, when adjusted, were commensurate with the total amounts claimed by the builder, reinforced the evidence given on behalf of the respondent that the costs, claimed by it, were incurred in respect of the project.
In that respect, I also note that later in his reasons, the Senior Member addressed the cross claim by the appellant for loss and damage sustained as a result of having paid over and above the estimated contract price of $960,000. The Senior Member noted that no submissions had been put to him to explain how, or on what legal basis, that cross claim was made. He then stated as follows:
“[187] Nevertheless, there was some cross-examination of Mr Bougioukos over the invoices generated by the builder to claim for the work of its subcontractors or employees. However, as I have already stated, Mr Bougioukos maintained that all of the builder generated invoices accurately reflected costs to the builder for labour engaged by it in constructing the works. Although Mr Lucas contends that the burden of proof rests on the builder, in the absence of any conflicting evidence, I accept that those builder generated invoices reflect work undertaken for the builder in relation to the works. Indeed, as I have already found, the aggregate amount charged by the builder is commensurate with what Mr Buchanan has assessed as being the reasonable cost of construction.”
(The reference to Mr Buchanan seems to be by way of mistake, and should have been a reference to Mr Shah).
It is clear, from the foregoing, that the Senior Member accepted the evidence of Mr Bougioukos that the invoices, tendered in evidence, reflected the works undertaken by the respondent and costs incurred by the respondent in respect of the works which were the subject of the contract. Those invoices included the invoices tendered in respect of progress claims 13, 14 and 15. It follows that, contrary to the submissions made on behalf of the appellant, the Senior Member did find that the respondent had established that it had reasonably incurred the cost of the building works which were the subject of progress claims 13, 14 and 15. Accordingly, the appellant has not made out grounds 6 and 7 of the Notice of Appeal.
Summary of conclusions
For the reasons which I have stated earlier, the appellant should succeed on grounds 3 and 4 contained in the Notice of Appeal. In particular, the Tribunal erred in law in holding that the building contract complied with s 13(2) of the Domestic Building Contracts Act 1995. As a result of other findings of fact made by the Senior Member, the Tribunal should have held that the contract did not comply with s 13(2) of the Act.
The appellant has failed to establish grounds 6 and 7 of the Notice of Appeal. In particular, the Senior Member did not err in finding that the respondent had reasonably incurred the costs of the building works claimed by it in progress claims 13, 14 and 15.
As a result of my conclusions in respect of grounds 3 and 4 of the Notice of Appeal, the matter should be remitted to the Senior Member in order to determine the claim by the respondent pursuant to s 13(3)(b) of the Act. I shall hear counsel on the appropriate formulation of the order which should be made remitting the matter to the Senior Member.
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