SAID and RANDO CONSTRUCTIONS PTY LTD - [2012] WASAT 84

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: BUILDING SERVICES (COMPLAINT RESOLUTION and ADMINISTRATION) ACT 2011 (WA)

CITATION: SAID and RANDO CONSTRUCTIONS PTY LTD [2012] WASAT 84

MEMBER: MR T CAREY (MEMBER)

HEARD: 26 MARCH 2012 - PRELIMINARY ISSUE

DELIVERED : 1 MAY 2012

FILE NO/S: CC 27 of 2012

BETWEEN: NURU SAID
ZAM ZAM MOHAMMED
Applicants
AND
RANDO CONSTRUCTIONS PTY LTD
Respondent

Catchwords:

Building - Preliminary issue - Whether contract governing construction is cost plus or fixed price

Legislation:

Building Services (Complaint Resolution and Administration) Act 2011 (WA)

Result:

Preliminary issue determined - cost plus contract is governing contract
Application dismissed for lack of jurisdiction

Category: B

Representation:

Counsel:

Applicants: Self-represented
Respondent: Mr MS Barrett-Lennard

Solicitors:

Applicants: Self-represented
Respondent: MS Barrett-Lennard & Co

Case(s) referred to in decision(s):

Nil

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The parties have been in a contractual relationship for the construction by the respondent of the applicants' home. The applicants sought to pursue a number of claims against the respondent of a contractual nature.
A dispute arose as to which of two written contracts is the contract. The applicants contended that the contract under which the parties should have proceeded was a fixed price contract, whereas the respondent asserted that the fixed price contract document upon which the applicants relied was never properly executed and that an alternative cost plus contract applied. If the respondent were proved correct, the effect would be that the Tribunal lacked jurisdiction to deal with the applicants' complaint.
Because of its threshold significance, the Tribunal directed that the question of which of the alternatives advanced was, as a result of negotiations between the parties, the contract governing the construction of the applicants' home.
On the basis of the evidence and written and oral submissions, the Tribunal determined the cost plus contract to be the governing contract. It answered the preliminary question accordingly, and dismissed the application because of its lack of jurisdiction.

Preliminary issue

On 27 February 2012, I ordered that the following issue be determined as a preliminary issue:
Which written contract was, as the result of negotiations between the parties, the contract governing the construction of the applicants' home.
The outcome of the preliminary issue is critical to the application. The Tribunal will have jurisdiction to go on and deal with the applicants' complaint only if it finds that the fixed price contract upon which the applicants rely governs the building project.
Two different written contractual documents have been advanced as 'the contract'. There is a cost plus contract which bears the date 1 February 2011, and a fixed price home building contract which bears the date 3 February 2011. With respect to the cost plus contract, the applicants (specifically Mr Said) say that execution was completed on the specified date, whereas the respondent (specifically Mr Rando) says that the contract was not signed by the applicants and the respondent until at least 5 March 2011, when it was backdated to 1 February 2011. The fixed price contract, on the other hand, was, according to Mr Said, signed on 3 February 2011 by both parties in duplicate, with a third original copy retained by the applicants signed only by the respondent. Mr Said claims the latter document was signed by the applicants in front of a bank officer in September 2011.
After careful consideration of the two competing chronologies chronologies which, despite each being believable in isolation, are wildly divergent in significant respects I have decided that the respondent's version is to be preferred. I will explain the reasons for coming to this result by placing each party's significant assertions of fact into a rough chronological timeline, and indicating why one party's version is accepted over the other's.

Chronology of events

In late 2010, the applicants approached the respondent with a view to it constructing a house for them on their property in Harrisdale. Although, according to Mr Said, the respondent was engaged to construct their house 'in late 2010', there is no corroboration of any such engagement at that time. I am satisfied that the more accurate description of what occurred was, as stated by the respondent, that it agreed to build the premises after a delay of some four months.
The building plans were prepared by a third party, Cottage and Engineering Surveys. The plans bear the date 31 January 2011. The draughtsman, Mr D'Agnone, gave evidence to the effect that the drawings were finished in 'late January 2011'. He was uncertain, but indicated that they were 'probably given to the clients (that is, the applicants) at that time'. The point made on behalf of the respondent of there being a low likelihood of the cost plus contract, which attaches the drawings, being signed two days following the date indicated by the drawings as their completion date, on or after which they were available for the applicants and the respondent, has a good deal of force.
I am satisfied, on Mr Rando's evidence, that the building plans were lodged with the City of Armadale on 11 February 2011 and approved on 3 May 2011. During the same period, the respondent arranged home indemnity insurance with QBE Australia. A certificate of insurance issued on 7 February 2011 indicated a contract date of 3 February 2011, although correspondence from QBE Australia accepted 1 February 2011 as the correct date on sighting the cost plus contract and a form referred to as a 'Project Application form'. That form is in evidence (Exhibit 5), is signed by Mr Rando, and refers to a contract date of 1 February 2011. The form also indicates the nature of the contract as being a cost plus contract. Mr Rando explained that it was necessary to arrange insurance prior to submission of the plans for council approval. Although the contents of these documents must yield to any direct and probative evidence contradictory to them, their significance lies in the fact that they represent confirmation of the respondent's understanding contemporaneous with the events being played out.
Mr Said said that he and his wife signed the cost plus contract on 1 February 2011 in front of their neighbours, Mr and Mrs Gevana. The applicants filed an affidavit of Mr Gevana, which not only confirmed their witnessing of the document on 1 February 2011, but produced a copy of his personal diary entry of the signing event, consistent, according to Mr Gevana's affidavit, with his business practice. I have had regard to this evidence, which, in normal circumstances, would be compelling, subject to the qualification that neither Mr Gevana nor Mrs Gevana was called as a witness. In any event, I must weigh it against the contraindications in the material upon which the respondent relies, which I will come to shortly.
Again according to Mr Said, on the night of 1 February 2011, he and his wife discussed the pros and cons for them of a cost plus contract as opposed to a fixed price contract, and decided that they preferred a fixed price contract. Mr Said said that they told Mr Rando of this decision, which resulted in a meeting at Mr Rando's house on 3 February 2011, when three copies of a fixed price contract prepared by Mr Rando were ready for signing by them. Mr Said provided an explanation of handwritten changes to the contract price in the fixed price contract from $350,000 to $300,000, and consequential amendments to the progress claims for which that contract provided.
Thereafter, according to Mr Said, Mr Rando attempted to persuade them that a cost plus contract was better for them, and they were so persuaded. A letter requesting that the parties now proceed on the basis of a cost plus contract, 'and … cancel the fixed price contract', based upon a draft letter supplied by the respondent's solicitor, was sent. However, as the applicants received no response about such a change, '[the second applicant] and I assumed that the Fixed Rate contract was the valid one'.
The chronology presented by the respondent is markedly different. Apart from arranging insurance and finalisation and lodging of the plans with the council, no relevant event occurred, according to the respondent, until 21 February 2011. On that day, says Mr Rando, the respondent was provided by its solicitors with three copies of a proposed fixed price home building contract, together with a solicitor's invoice for its preparation. Then, according to Mr Rando, at a meeting between the respondent and the applicants on 24 or 25 February 2011 at the respondent's premises, a discussion occurred in relation to the contract price shown in the fixed price contract of $350,000, which resulted in the handwritten changes to the amounts alluded to earlier. At the same meeting, however, and prior to signing the fixed price contracts, 'the applicants then stated they did not want a fixed price contract at all, and instead wanted a cost plus contract, which they considered would work out to a lesser sum'. The response was that the parties might proceed under a cost plus contract, provided the solicitor's costs for preparation of the fixed price contract were paid, which the applicants agreed to do. Mr Rando claims to have retained, at the end of the meeting, all three copies of the 'rejected' fixed price contract, unsigned by the applicants but signed by the respondent.
According to the respondent's version of events, on 25 February 2011, it requested its solicitors to provide a draft letter requesting the change to a cost plus contract, and a draft was provided by facsimile on the same date. The applicants, on an unspecified date, did send a written request based upon the draft letter.
The respondent produced two of the copies of the fixed price contract (Exhibits 9 and 10) which, according to Mr Rando, he retained after the meeting on 23 or 24 February 2011. Both are signed by Mr Rando and his wife, and neither is signed by the applicants. Significantly, although not signed by the applicants in the signature block on the page bearing the date 4 January 2011 (which date is unexplained), Exhibit 9 shows the changes to the progress payments and total contract sum in Appendix 1 item 5 as being initialled by four people. Mr Rando's evidence was that this initialling occurred on 24 or 25 February 2011, and was by each of himself, his wife and the two applicants. Mr Said denied the initials attributed to himself and his wife were theirs. The significance of Exhibit 9 is that it is entirely consistent with Mr Rando's statement that the fixed price contracts were presented to the applicants but not signed by them.
I am unable to accept what Mr Said has said in relation to Exhibit 9. The initials bear a striking resemblance to the admitted signatures of Mr Said and Ms Mohammed appearing in the cost plus contract (Exhibit 2), and, in Mr Said's case, to his initials in his statement, described as a declaration, dated 6 March 2012 filed in the Tribunal. In addition, it beggars belief that the respondent would have the foresight to rely upon the two sets of initials so skilfully forged on a copy of the original document, other than the counterpart documents presented to the applicants, as part of a fraudulent design. I am satisfied that Exhibits 9 and 10 are two of the three copy fixed price contracts not signed by the applicants which were retained by the respondent.
The circumstances of the respondent's relinquishment of the third copy fixed price contract, which resurfaced as 'the contract' signed by both parties upon which the applicants rely, are the subject of Mr Rando's evidence to the following effect. On an unspecified date in August 2011, Mr Said requested a copy of the rejected fixed price contract. His explanation for this request concerned the value of the construction required for the purposes of the applicants' bank. Mr Rando agreed, 'despite some misgivings', to hand Mr Said one copy of the fixed price contract signed on behalf of the respondent but unsigned by the applicants.
The respondent's version of events exhibits a degree of certainty, rationality and corroboration by contemporaneous documents which the applicants' chronology lacks. So, for example, the timing of the preparation of both the fixed price contract and the cost plus contract in accordance with the respondent's chronology is consistent with the documents produced by the respondent relating to certain accompanying documents, specifically a project management and supervision deed, and also documents relating to a cost plus building contract for other clients of the respondent, Mr Regasa and Ms Abbisa, which was administered at approximately the same time, together with invoices and facsimiles bearing dates which go to support it.
In addition, certain aspects of the applicants' chronology make little sense. If, as Mr Said claimed, Mr Rando was so keen for the applicants to enter into a lump sum contract, then it would be entirely surprising if the respondent simply failed to respond to the letter, based upon the draft letter prepared by the respondent's solicitors on its instructions, requesting a change of contract from fixed price to cost plus. The train of events concerning signing of the fixed price contract in accordance with the applicants' version is also extremely difficult to believe. Accepting the possibility that an owner is left with only a copy signed by the builder and not the bank's customer, the applicants, this apparently caused no difficulty for the applicants' bank. Despite having 'had the document from day one', which, on the applicants' account, would have been since February 2011, the bank officer was apparently oblivious to the fact that the contract was unsigned by the applicants until that matter was brought to her attention in September 2011. Then, despite, on Mr Said's version, the counterpart fixed price contracts having been regularly executed by the applicants in duplicate on 3 February 2011, the applicants chose to sign the copy, allegedly retained by them, with the bank officer as their witness. This is unusual, to say the least. Logic would have dictated that either the bank officer or Mr Said request the respondent for one of the original counterparts, or a copy thereof, of the fixed price contract signed by the applicants said to be in the respondent's possession or control. There is no evidence of any such request. The bank officer, who may have been able to cast light on the matter, was not called to explain the unusual course claimed by the applicants to have occurred.
I was troubled by a couple of aspects of the respondent's behaviour during the currency of the building contract which, on their face, appeared consistent with the fixed price contract applying. The first and most obvious was the fact that the claims made by the respondent by way of progress claims were largely in accordance with the schedule of payments set out in item 5 of Appendix 1 of the fixed price contract. Mr Rando gave evidence about this, the broad effect of which was that, despite the different basis for billing clients under a cost plus contract, there were advantages in terms of efficiency and cashflow to claim amounts similar to those set out in the fixed price contract, whilst providing justification as required by the cost plus contract. Further, Mr Rando said this is his normal method of billing in all his cost plus contracts. Mr Regasa, who gave evidence for the respondent, confirmed that he was billed in a similar fashion. In my view, the method of billing employed is a neutral factor in my consideration of the preliminary question.
The second potentially inconsistent action, upon which the applicants placed particular emphasis, concerned a document entitled 'Variation to Home Building Contract' (draft variation agreement). To place this issue in its correct context, by approximately October 2011, costs on the building project (or at least the respondent's progress cost claims) were becoming contentious, either (on the applicants' version) because the respondent's claims were outside the fixed price contract, or (on the respondent's version), the applicants were running short of money. According to the respondent, in light of the applicants' reliance upon the fixed price contract as the applicable contract, he instructed his solicitors to draft an agreement to enable additional charges to be raised, regardless of which of the two contracts applied. Further, says Mr Rando, on Mr Said's refusal to sign the draft variation agreement, he tore up the document.
The draft variation agreement, which was prepared and given to Mr Said in either November 2011 or December 2011, proposed that the 'building contract' be considered concluded at an earlier stage than practical completion, with certain items excluded from the original contract. The excluded items were then incorporated into categories A and B. The items in category A were to be completed promptly by the builder for an additional cost of $45,000. Performance of the items in category B was optional, dependant on future commitment by both parties, at an indicative total additional cost of $65,000.
The applicants' point about the draft variation agreement in relation to the preliminary question is that such an agreement would only ever be necessary in the case of a fixed price agreement. Although that might be true, it is also clear that the applicants were, by the time the applicants were asked to sign it, asserting the fixed price contract as 'the contract'. In circumstances where, as I have found, this assertion was baseless, the respondent's response to seek an agreement in terms of the draft variation agreement is to be regarded as a defensive tactic designed to achieve a result similar to that which would follow if it were accepted that the cost plus contract applied. In my view, it cannot detract from the conclusion, flowing from all the facts and circumstances, that the cost plus contract was the true governing contract.

Submissions by the applicants following the hearing

On 28 April 2012, Mr Said wrote to the Tribunal by facsimile transmission. It is unclear whether the facsimile was copied to the respondent, although there is no indication on the Tribunal's copy of this being done. The facsimile commenced:
We refer to the documents the respondent['s] solicitor produced and tendered as evidences [sic] in our hearing. Obvious[ly,] we haven't seen some of those documents until the hearing of yesterday.
The facsimile went on to comment on various aspects of Exhibit 3, being Mr Rando's written statement.
On 3 April 2012, the Tribunal received a facsimile from the solicitors engaged by the applicants for substantial parts of the proceeding, but who did not represent them at the hearing. This facsimile referred to the documents tendered by the respondent at the hearing, and pointed out that some of the tendered documents 'were not shown to the Applicants until the hearing itself'. The facsimile requested a copy of all the documents tendered.
Although it is true that the applicants were not provided with a copy of Mr Rando's statement until the hearing, the statement is largely repetitious of documents previously filed and served by the respondent, albeit with greater detail in relation to some parts of the chronology. The course of reasoning, which appears above, did not require me to deal specifically with any of the points raised in Mr Said's facsimile. Had it done so, it would have been necessary for me to ensure that the respondent had notice of those points and the opportunity to respond to them.

Referring to the other exhibits, some were previously filed and served (I have in mind Exhibits 4 and 6), and some others were documents well known to the applicants (Exhibits 1 and 5). The bulk of the remaining exhibits are 'originals' of the disputed contract documents which were the subject of forensic examination at the hearing. Had Mr Said considered that the applicants were disadvantaged by any document being produced and relied upon at the hearing, it was well within his capability to raise an objection. That said, I am mindful of the fact that the applicants appeared on their own behalf at the hearing. Had I considered at the hearing that any risk of prejudice to the applicants existed, I would have raised the matter with the parties. I did not then, a position which has, in my mind, been affirmed subsequent to the matter having been considered through to determination.

Conclusion and order

For the reasons given above, I conclude that the applicable contract based on the dealings between the parties is the cost plus contract. In the event of my so concluding, Mr Said accepted that the Tribunal would lack jurisdiction to deal with the applicants' complaint.
There will be an order in the following terms:
1.The answer to the preliminary issue is:
The cost plus contract dated 1 February 2011 is the contract governing the construction of the applicants' home.
2.The application is dismissed as the Tribunal lacks jurisdiction.

I certify that this and the preceding [32] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
MR T CAREY, MEMBER