Silec & Anor v Al Mamun & Anor (Civil Dispute) - [2022] ACAT 36

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

SILEC & ANOR v AL MAMUN & ANOR (Civil Dispute) [2022] ACAT 36

XD 589/2021

Catchwords: CIVIL DISPUTE – residential building contract – variations and ‘extras’ to building contract made – additional agreement signed – claim by builder for enforcement of the additional agreement – counter-claim by owners for liquidated damages under the building contract due to delays in completion and defective works – acceptance of additional contract by part-performance and conduct of both builder and owners– additional agreement found to be enforceable – implied term in additional agreement that defects will be attended to – interest under additional agreement payable to builder and defects claimed by owners to be assessed

Cases cited:Laman & Anor v Zaparo Property Bowes Street Pty Ltd ACN 612 564 879 [2020] ACAT 42

Tribunal:Senior Member L Beacroft

Date of Orders:  28 April 2022
Date of Reasons for Decision:      28 April 2022
AUSTRALIAN CAPITAL TERRITORY          )
CIVIL & ADMINISTRATIVE TRIBUNAL     )          XD 589/2021

BETWEEN:

DRAGO SILEC
A PARTNER OF A & D CONSTRUCTIONS
TRADING AS ADR HOMES
First Applicant

ROBERT SILEC
A PARTNER OF A & D CONSTRUCTIONS
TRADING AS ADR HOMES
Second Applicant

AND:

MOHAMMAD EZAZ AL MAMUN
First Respondent

SWAPNA SHANAZ BANU
Second Respondent

TRIBUNAL:Senior Member L Beacroft

DATE:28 April 2022

ORDER

The Tribunal orders that:

The respondents will pay to the applicants $14,100, plus contractual interest in a sum to be determined, and re-imbursement of the Tribunal fee being $162.50, by a due date to be determined.
The applicants will file and serve a schedule setting out the total amount of interest they claim is payable and how it is calculated by 5:00pm on 12 May 2022.
The respondents will file and serve any response to 2) above, including completing a Scott’s Schedule (see attached) setting out the details of their claim for defects and unfinished work by 5:00pm on 7 July 2022.
The applicants will file and serve any response to 3) above by 5:00pm on 4 August 2022.
Either party is at liberty to seek a further hearing by filing and serving a request by 5:00pm on 18 August 2022.

………………………………..
Senior Member L Beacroft

REASONS FOR DECISION

Background

The applicants, Mr Drago and Mr Robert Silec, are partners and conduct a building business, A & D Constructions trading as ADR Homes. They filed an application with the Tribunal dated 9 June 2021, claiming money for a house they built for the respondents, Mr Mohammad Ezaz Al Mamun and Ms Swapna Shahnaz Banu, plus contractual interest of 10%, and re-imbursement of fees.
The parties had signed a contract titled “ACT Residential Building Contractors for New Dwellings. HIA edition 5” on 10 April 2017 (the Building Contract).[1] The building contract price was $489,500 (inclusive GST).[2] It was not disputed that all scheduled progress payments set out in the Building Contract were fully paid by the respondents.[3] However, the applicants claimed the respondents were liable to pay them for numerous ‘extras’ and variations, that is items, materials and related labour that were not in the inclusions list and/or above the agreed prime costs allowance in the Building Contract.
[1] Respondents’ supplementary bundle filed 19 October 2021
[2] Attachment A, Item 13, Part B, of the building contract
[3] Amended application and response, dated 22 November 2021 at [5]
The applicants submitted a copy of an undated document (the document) that they relied on, which they claimed was an agreement between the parties that was signed on or about 28 November 2018[4] and which overrode, waived their rights, under the Building Contract.[5] The applicants sought to have the document enforced. The amended application dated 22 November 2021 and the witness Statement of Robert Silec dated 22 November 2021 claimed $14,100, interest at 10% as set out in the document from 30 November 2018, and re-imbursement of fees ($162.50). The applicants claimed, in the alternative if the document is found to be not enforceable, that the respondents owe the applicants the sum of $12,498 under the Building Contract for various extras and variations.[6] The applicants denied the respondents’ cross claim for damages due to delay (see below). They claimed that any delay in completing was allowable under the Building Contract and due to various reasons including bad weather, Christmas slow-down in 2017-2018, delays caused by the respondents picking their selections or arranging for their preferred contractors, and variations.[7] In their further and final submissions dated 3 March 2022, the applicants re-iterated their claims.
[4] Transcript of proceedings 11 January 2022, pages 30, 42; application dated 9 June 2021
[5] Amended application 22 November 2021 at [7]
[6] Amended application 22 November 2021 at [10], Annexure C
[7] Transcript of proceedings 11 January 2022 pages 118-121; amended application and response dated 22 November 2021 at [5]
In the respondents’ response and cross claim dated 5 August 2021, the respondents denied the applicants claims and cross claimed for $26,342 plus interest from 1 December 2018, being for liquidated damages ($16,342) and the estimated costs of repair for defects ($10,000) under the Building Contract, and re-imbursement of fees ($165). They acknowledged that they owed money to the applicants for some extras that had been agreed. Allowing for the costs of the agreed extras, the respondents claimed that the sum owned to them by the applicants is $8,286.50, interest on $26,342 from 1 December 2018, and reimbursement of fees ($165).[8] The respondents revised the sum they claimed after the hearing in their final submission dated 3 March 2022, to $19,957 for liquidated damages plus interest, again acknowledged that they were liable for some agreed variations, and they stated that the cost of rectifying the defects is subject to information from the applicants about what they propose to rectify at the applicants’ cost.

Written arrangements between the parties

Building Contract
[8] Respondents’ response dated 5 August 2021

The Building Contract had many of the standard terms of such contracts, some of which are summarised below.
The Building Contract included an attachment titled “Inclusions List”.
Practical completion was stated to be 180 days after commencement but subject to clause 22 about extensions of time (clause 23).[9] Clause 22(1) stated that the completion time, and hence the practical completion date, will be extended if the building works are delayed because of various circumstances, including: “a variation”, “bad weather that affect the building works”, “anything done or not done by the owner”. Clause 22(2) stated that the procedure for claiming an extension of time is that the builder “must notify the owner in writing within 5 days of becoming aware that the building works will be delayed.” Clause 27 set out requirements for “Notices”, which involved them being written.
[9] Attachment A, Item 9 Building Contract
When practical completion is achieved, the Building Contract stated that the builder must give the owner a notice of this with the final progress payment (clause 23(1)). Within five days of the latter occurring, under the Building Contract the parties were required to meet to inspect the building works and the respondents were then required to give to the applicants a signed list of any work that is defective or unfinished, which the applicants were required to promptly rectify (clause 23(2)). After the defects and unfinished works are rectified, the applicants were required to notify the respondents, who were then required to pay the final progress payment within five days, after which the applicants were to provide the respondents with the keys (clause 23(3)-(4)).
Clause 23(6) stated that the owners “may be entitled to liquidated damages if the building works are not finished by the completion time”, and the rate was stated to be $550/week calculated on a daily basis.[10]
[10] Attachment A, Item 12 Building Contract
Clause 21 of the Building Contract allowed for variations agreed by the parties or as requested by the owners, which were required to be in writing. Clause 21 (1) (a)-(h) allowed for “automatic variations” including “specified materials become unavailable” (g) or “something happens that the builder could not have reasonably foreseen” (h), and the price for such variations is added to the contract price and payment made at the next progress stage. Clause 21(6) stated that price or cost of the variation is added or deducted from the contract price, and payment is made at the next progress payment stage unless a different time is agreed.

Document

There were two versions of the document submitted to the Tribunal, one by the applicants with Drago Silec’s signature on it,[11] and the other submitted by the respondents at the hearing with Tony (Anton) Silec’s signature on it (Mr Anton Silec was a partner of in the applicants’ business but had died on 14 April 2020).[12] At the hearing it was accepted by the parties that the latter version submitted by the respondents was a copy of the original signed document.[13]
[11] Applicants’ application 9 June 2021
[12] Hearing 11 January 2022; Exhibit R1
[13] Transcript of proceedings 11 January 2022 pages 16-17
The document’s content was as follows:
We, Mohammad Ezaz Al Mamun and Swapna Shanaz Banu being the owners of 15/25 Coombs agree to pay ADR Homes the full amount of $18,600 within two months of this agreement with no further dispute to be entered into regarding the outstanding amount or any other claim.
We agree to make a part payment of $2,500 off the full amount stated above by Friday 30 November 2018.
Agree to pay a penalty interest of 10%pa interest calculated daily if we fail to pay the outstanding monies by this date and acknowledge that all legal expenses incurred to recover this amount will be charged to us.
Signed:
Anton Silec and Ezaz Al Mamun and Swapna Shanaz Banu

Timeframe

The respondents claimed that actual commencement under the Building Contract was almost immediately after the date that it was signed, being 10 April 2017, because there were no approval issues.[14] But the applicants claimed that the actual commencement was on 20 July 2017, after the final approvals were obtained on 18 May 2017 and bad weather had cleared.[15]
[14] Respondents’ amended response dated 13 December 2021 page 2
[15] Applicants’ submission “Causes of delays to construction” page 1
‘Practical completion’ was required by the ‘completion time’ being 180 days from commencement. Note, under clause 2 of the Building Contract ‘day’ is defined to mean working days, not weekends or (ACT) public holidays. If there were no valid extensions under clause 22, under the Building Contract this would require practical completion to occur by or on 28 December 2017 (initial practical completion date).
On 20 August 2018 the applicants sent a letter to the respondents advising of a delay in completing and reasons for this, and the letter stated that the then expected completion was 14 September 2018. In the latter letter the applicants stated that there had been a delay at that stage of 117 days due to rain, supply problems, delays in selections by the respondents, and delays caused by sub-contractors, and a further delay was notified for a garage door requested by the respondents to be obtained.[16]
[16] Transcript of proceedings 11 January 2022; Exhibit R2
In their submissions to the Tribunal the applicants stated there was a delay due to “wet weather, failure by the respondents to nominate their choices or inclusions in a timely manner, and delays caused by the respondents nominated tradespersons”.[17] The applicants set out in more detail the reasons for delay in their submission “Causes of delays to construction”, being due to weather (at least 117 days), obtaining items or materials that the respondents had selected (many weeks), a delay in the respondents’ preferred painter starting the work (four weeks), and a delay in obtaining the correct trusses (six to eight weeks).
[17] Amended application dated 22 November 2021, Annexure B
On 23 October 2018 the applicants sent to the respondents an invoice for extras, however the respondents disputed the invoice.[18] On 15 November 2018 the applicants sent to the respondents a revised invoice for extras with an itemised list attached, in the sum of $18,934 (GST inclusive).[19] If the document is not enforceable, the applicants claimed various amounts for extra costs under the Building Contract.
[18] Applicants’ submission “Causes of delays to construction”, Attachment: Tax Invoice dated 23 October 2018
[19] Transcript of proceedings 11 January 2022; Exhibit R1, email and invoice dated 15 November 2018
The applicants claimed that actual practical completion occurred on either of the following: when the respondents signed the application for the Certificate of Occupancy, which included warnings to owners not to sign it unless the building work and other contract requirements have been “completed satisfactorily”;[20] or when the Certificate was issued. The ‘Application for Certificate of Occupancy and Use’ was signed by the respondents on 23 October 2018[21] and the Certificate of Occupancy and Use was issued on 30 October 2018.[22]
[20] Applicants’ Submission “Causes of delays to construction”; Witness statement of Robert Silec dated 22 November 2021, attachment B
[21] Applicants’ submission “Causes of delays to construction”, Attachments: certificate of occupancy and application for certificate of occupancy and use
[22] Amended application dated 22 November 2021, Annexure A, C
The respondents in a letter to the applicants dated 30 October 2018 claimed for liquidated damages for late completion under the Building Contract,[23] and the latter letter followed prior communications from the respondents to the applicants raising concerns about delays in completing the building works.[24] In that letter the respondents demanded payment of liquidated damages in the sum of $15,557 being for a delay in completion of 198 days under clause 23.6 of the Building Contract.[25] In the ACAT proceedings the respondents claimed that there was a delay of 208 days which they stated excluded rainy days as evidenced by the Bureau of Metrology.[26] In their final submission the respondents revised the delay up to 254 days which allowed for rainy days; they contended that the practical completion date under the Building Contract was 9 March 2018 and the applicants did not complete until 18 November 2018.[27] The respondents acknowledged some delays due to bad weather. But they contended that any other bases for delays claimed by the applicants were not valid under the Building Contract because notices were not issued or not in a timely manner.[28]
[23] Respondents’ supplementary bundle filed 19 October 2021
[24] Respondents’ supplementary bundle filed 19 October 2021
[25] Transcript of proceedings 11 January 2022; Exhibit R1, letter dated 30 October 2018
[26] Respondents’ amended response dated 13 December 2021, page 2
[27] Respondents’ final submission dated 3 March 2022
[28] Transcript of proceedings 11 January 2022 pages 81-85
The parties agreed that they signed the document on or about the 28 November 2018. Upon signing of the document, the respondents stated that they got access to the house about the same time.[29] The applicants relied on the document and stated that it is a valid agreement that resolved all disputes related to the Building Contract that had arisen between the parties.[30]
[29] Transcript of proceedings 11 January 2022 pages 30-31
[30] Amended application dated 22 November 2021, Annexure A
The respondents made two payments under the document, on or about 30 November 2018 and on 4 October 2019.[31] After signing the document, the respondents did not raise again their claim for liquidated damages until the applicants sought payment of the remainder owed under the document on 3 July 2020;[32] the respondents did however continue to send numerous communications about alleged defects in the building works.[33]
[31] Applicants’ application 9 June 2021
[32] Applicants’ application 9 June 2021
[33] Transcript of proceedings 11 January 2022; Exhibit R2, emails dated 29 November 2018, 18 December 2018
The applicants claimed that while there were variations and extras, these were not advised or agreed in accordance with the Building Contract under clause 21. In a letter dated 29 August 2018 the respondents acknowledged that they had got various paperwork about variations, that they had agreed to some, but that many of the variations were “unacceptable”.[34]
[34] Transcript of proceedings 11 January 2022; Exhibit R1, letter from respondents to applicants dated 29 August 2019
The respondents raised with the applicants’ various defects at various times, including immediately after signing the document.[35] The respondents stated that they had provided their list of defects as was agreed between the parties, and that while the applicants had attended to some defects many of these defects remain outstanding.[36] In their final submission after the hearing dated 3 March 2022, the respondents stated that the cost of rectifying the defects and unfinished work is subject to information from the applicants about what they propose to rectify at the applicants’ cost.
[35] Transcript of proceedings 11 January 2022; Exhibit R1, email dated 29 November 2018, email dated 13 July 2020 from respondents to applicants; transcript of proceedings 11 January 2022; Exhibit R2, email dated 8 December 2018 from respondents to applicants
[36] Transcript of proceedings 11 January 2022 pages 94, 96, 98, 107

Issues

1)Is the document enforceable?
2)If the document is not enforceable, what claims under the Building Contract by the applicants and respondents are proved?
3)If the document is enforceable, what claims by the applicants and respondents are proved?

Findings

1) The document is enforceable

The document is not dated, and in this respect is incomplete. However, the parties agree that the document was signed by both parties on or about the 28 November 2018. The Tribunal finds that there is sufficient certainty that it was signed and agreed to on the 28 November 2018, and that therefore this omission in the document does not make the agreement between the parties unenforceable.
The Tribunal further finds that after the document was agreed and signed on 28 November 2018, that it was partially performed by both parties, and the conduct of both parties demonstrated the terms of the agreement resolved the respondents’ claim for liquidated damages and the cost of the extras.[37] The applicants relied on the document and stated that it was a valid agreement that clearly stated that no further disputes would be entered into, and on this basis that it resolved all disputes between the parties related to the Building Contract.[38] The Tribunal finds that the applicants claims about the document are well supported by the evidence, but does not find that it resolved issues about unrectified defects and unfurnished works.
[37] Application dated 9 June 2021; transcript of proceedings 11 January 2022 pages 11-14; applicants’ further and final submissions dated 3 March 2022 at [14]
[38] Application dated 9 June 2021; amended application dated 22 November 2021, Annexure A; applicants’ further and final submissions dated 3 March 2022 at [13]-[14]; transcript of proceedings 11 January 2022 pages 11-14
In finding that the document is a valid and enforceable agreement the Tribunal particularly relies on the evidence that the document has been partly performed by both parties – performance of an agreement is strong evidence of the agreement and its terms. Upon signing of the document, the applicants sought a sum consistent with the document from the respondents and did not pursue the higher sum for extras that had been invoiced prior to the document being signed;[39] the respondents paid part of the sum payable under the document including a first payment of $2,500 on or about 30 November 2018 as was required under the document, and then one other payment of $2,000 was paid on 4 October 2019.
[39] Transcript of proceedings 11 January 2022 page 42

While the respondents stated at the hearing that they continued to raise their claim of liquidated damages after signing the document, the Tribunal finds that their claim for liquidated damages was not raised after the signing of the document until they responded to a request by the applicants to pay the amount due under the document on 3 July 2020.[40] From the signing of the document in November 2018 to the request by the applicants for full payment in July 2020, the evidence is that the applicants received communications from the respondents advising them that the respondents had difficulty in getting a loan to make the full payment under the document but the claim for liquidated damages was not raised by the respondents.[41]
[40] Application dated 9 June 2021, attachment: SMS from applicants to respondents dated 3 July 2020; transcript of proceedings 11 January 2022 pages 14, 19, 22, 35
[41] Application dated 9 June 2021, attachment: copies of SMS messages from respondents dated 11 June 2019, 2 October 2019, 4 October 2019
The Tribunal finds that there was not duress when the respondents signed the document. The respondents claimed that they were under duress to sign the document: on “30 November 2018, Mr Anthony Silec (one of the owners of ADR) came with a written paper and told us to sign the document to get the keys. We have no choice to sign the document to save us from all miseries, risk of bankruptcy and psychological torcher [sic]”.[42] They also contended that they thought the agreement only settled the dispute about the cost of the extras, which arose after they received an invoice for the extras dated 23 October 2018 which they disputed,[43] and not their claim for liquidated damages and to rectify defects.[44] They stated that they were desperate to get access to the house to rent it out due to financial pressures, and that “[Tony]… managed to do that, kind of sort out talking to us with this one there [the document]. So, like, we signed it because of Tony, yes”.[45]
[42] Respondents’ second response 13 December 2021 page 2; transcript of proceedings 11 January 2022 page 15
[43] Transcript of proceedings 11 January 2022 pages 47-56
[44] Transcript of proceedings 11 January 2022 pages 18, 23-26
[45] Transcript of proceedings 11 January 2022 page 34
The Tribunal finds that the test for duress is not met given the evidence before the Tribunal. A claim of duress requires the respondents in this case to prove that improper pressure was placed on them.[46] The respondents were not new to building a home and have no special needs. Further, the Tribunal finds that on their own evidence the respondents willingly signed the document and understood that they gained a benefit from it namely that they were then liable for a significantly lesser amount for the extras and variations.
[46] Laman & Anor v Zaparo Property Bowes Street Pty Ltd ACN 612 564 879 [2020] ACAT 42
While the Tribunal finds that the document is an enforceable agreement that dealt with the then disputes about payment for extras and any claim for liquidated damages, there is a question about whether it contained any implied terms. The Tribunal finds that it contained an implied term that the respondents could provide to the applicants a list of any defects and unfinished works for rectification by the applicants. This finding is supported by the fact that the respondents raised issues about defects and unfinished work with the applicants immediately after the signing of the document, and in a non-adversarial manner that indicated they understood that the applicants expected that they would do so.
Further, at the time the document was signed the respondents had not been given full access to the building works and it was only after signing it that they obtained this access. Given this circumstance, in the Tribunal’s view a reasonable person in the situation of the applicants would understand that the respondents intended to pursue any defects or unfinished work, and that this was an implied term in the document. When asked about how the document settled issues of defects and unfinished work when the respondents did not get full access to the house until after its signing, the applicant’s representative, Robert Silec, at the hearing initially stated that as an act of “good faith” they could assist with the rectifying the defects; he also stated that “the defects still stand but not the claim for liquidated damages”.[47] On this basis it appears to the Tribunal that the applicants admitted in their evidence before the Tribunal that the issue of defects and unfinished work was an implied term of the document.
[47] Transcript of proceedings 11 January 2022 pages 104, 105, 101-107, 111
The respondents stated at the date of the hearing that various defects and unfinished work remained outstanding, and provided a list in their written submissions that included missing warranty papers for appliances and materials and no working security alarm system.[48] While they were required to provide any expert report in an Order dated 25 October 2021 to support their claims, the respondents did not provide any such report and stated that the sum of $10,000 claimed was based on “market prices …and generic idea [sic]”.[49] Given the latter, the Tribunal has insufficient evidence to determine the nature and quantum of the respondents claims for outstanding defects and unfinished works.
2) The document is enforceable, therefore any claims under the Building Contract by the applicants and respondents do not need to be determined
[48] Respondents’ amended response dated 13 December 2021 page 2
[49] Respondents’ amended response dated 13 December 2021 page 2
Given the Tribunal’s findings as set out under 1) above and that the document is enforceable, the Tribunal does not need to make findings about any damages due under the Building Contract. Given the document is found to be enforceable and that it overrides the Building Contract, the respondents’ cross claim is dismissed, and the applicants’ alternative claim is dismissed.
In any case, the Tribunal observes that each party has difficulties in proving their claims under the Building Contract based on the evidence they presented during the proceedings. Also, the Tribunal observes that there was a high level of non-compliance with the Building Contract that each party demonstrated, encouraged, and/or tolerated, and therefore proof of non-compliance with the Building Contract alone in this circumstance, especially when a party has gained a benefit from the informal arrangements, is unlikely to be sufficient evidence to support damages claims.
3) Conclusion and orders
In summary, the Tribunal finds that the document is enforceable, and that it resolved disputes about the cost of extras payable by the respondents and the claim by the respondents for liquidated damages related to the Building Contract. The respondents therefore are ordered to pay to the applicants the outstanding amount under the document, $14,100, plus contractual interest of 10% calculated to the date of this order in a sum to be determined (see below), plus re-imbursement of Tribunal fees being $162.50, by a due date to be determined. The applicants are required to file and serve a schedule setting out the total amount of interest they claim is payable and how it is calculated by 5:00pm on 12 May 2022.
The Tribunal finds that the document has an implied term that the applicants will rectify defects and unfinished work as notified by the respondents in their communications to the applicants shortly after gaining access to the house and after signing the document. The respondents will file and serve a Scott’s Schedule, setting out the details of their claim for defects and unfinished work by 5:00pm on 7 July 2022.
Either party is at liberty to seek a further hearing by filing and serving a request by 5:00pm on 4 August 2022.
If neither party seeks a further hearing, the Tribunal will proceed to determine the interest payable by the respondents to the applicants, and any damages or actions required for rectifying defects and unfinished works and resulting final orders.

The Tribunal Orders as follows:

The respondents will pay to the applicants $14,100, plus contractual interest in a sum to be determined, and re-imbursement of the Tribunal fee being $162.50, by a due date to be determined.
The applicants will file and serve a schedule setting out the total amount of interest they claim is payable and how it is calculated by 5:00pm on 12 May 2022.
The respondents will file and serve any response to the order above, including completing a Scott’s schedule setting out the details of their claim for defects and unfinished work by 5:00pm on 7 July 2022.
The applicants will file and serve any response to the order above by 5:00pm on 4 August 2022.
Either party is at liberty to seek a further hearing by filing and serving a request by 5:00pm on 18 August 2022.
If neither party seeks a further hearing, the Tribunal will proceed to determine the interest payable by the respondents to the applicants, and any damages or actions required for rectifying defects and unfinished works and resulting final orders.

………………………………..

Senior Member L Beacroft

Date(s) of hearing:	11 January 2022
First Applicant:	In person
Second Respondent:	Mr R Silec, Authorised representative
First Respondent:	In person
Second Respondent:	In person