Smith Development Pty Ltd v Moreton Island Development Group
[2013] QCAT 10
| CITATION: | Smith Development Pty Ltd v Moreton Island Development Group [2013] QCAT 10 |
| PARTIES: | Smith Development Pty Ltd (Applicant) |
| v | |
| Maybrey Pty Ltd ACN 081 021 463 Jan-Mar Trading Pty Ltd ACN 084 234 846 ESR Management Pty Ltd ACN 063 065 207 known collectively as the Moreton Island Development Group (Respondent) |
| APPLICATION NUMBER: | BDL031-09 |
| MATTER TYPE: | Building matters |
| HEARING DATE: | On the papers |
| HEARD AT: | Brisbane |
| DECISION OF: | David Paratz, Member |
| DELIVERED ON: | 8 January 2013 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. The Respondents, Maybrey Pty Ltd ACN 081 021 463, Jan-Mar Trading Pty Ltd ACN 084 234 846, and ESR Management Pty Ltd ACN 063 065 207 known collectively as the Moreton Island Development Group, pay to the Applicant, Smith Developments Pty Ltd, the amount of $85,513.37. |
| CATCHWORDS: | Unlicensed person – building work – reasonable remuneration Queensland Building Services Authority Act 1991, s 42 Cook’s Construction P/L v SFS 007.298.633 P/L (formerly trading as Stork Food Systems Australasia P/L) [2009] QCA 75 |
APPEARANCES and REPRESENTATION (if any):
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (QCAT Act).
REASONS FOR DECISION
This matter has had a long history.
The matter concerns the construction of a residential house at Lot 33 Trochus Place, Moreton Island, in the vicinity of the Tangalooma Island Resort.
After a series of protracted proceedings, including an appeal, on 13 June 2012, Member Deane found that Smith was not a licensed builder at the date of signing the Contract, and carried out building work whilst not licensed. She found that ‘subject to a claim under s 42(4) of the QBSA Act being made out, the sum of $528,753.50 ought to be repaid by Smith Development to MIDG’.
She found it appropriate to provide Smith Development with an opportunity to amend its claim to seek to recover amounts as provided in s 42(4) of the Queensland Building Services Authority Act 1991 (the QBSA Act), and made directions to afford Smith Development the opportunity to pursue such a claim. She made orders for the filing of material and listed the matter for a directions hearing on 3 October 2012.
On 11 July 2012, Smith filed an amended application seeking payment of the sum of $198,603.00. This amount was calculated as follows:
Contract Price $617,500.00
+ Variations $109,856.07
= Amended contract price $727,356.07- Paid $528,753.00
Balance = Claim $198,603.07
A Schedule marked ‘A’ was attached to the amended application, listing sub contractor charges and materials, and extra work.
Smith filed further submissions on 27 November 2012.
The solicitors for MIDG lodged a letter dated 18 December 2012, stating that MIDG did not intend to file any further material. The respondents have filed counter-applications seeking:
a) loss of rent and interest;
b) monies for replacement of timber battens;
c) certification costs;
d) the cost of painting the exterior.
The matter is now being decided ‘on the papers’ without a formal hearing, in accordance with the directions of 3 October 2012, on the basis of the material filed to date.
I will deal with the application and counter-application separately.
Smith’s Application
Section 42(1) of the QBSA Act provides that an unlicensed person is not entitled to any monetary or other consideration for carrying out building work.
Section 42(4) of the QBSA Act provides that an unlicensed person may claim ‘reasonable remuneration’ for carrying out the building work. The extent of that remuneration is confined by the subsequent provisions of s 42(4)(a) to (d) which provide as follows:
(a)is not more than the amount paid by the person in supplying materials and labour for carrying out the building work; and
(b)does not include allowance for any of the following—
(i)the supply of the person’s own labour;
(ii)the making of a profit by the person for carrying out the building work;
(iii)costs incurred by the person in supplying materials and labour if, in the circumstances, the costs were not reasonably incurred; and
(c)is not more than any amount agreed to, or purportedly agreed to, as the price for carrying out the building work; and
(d)does not include any amount paid by the person that may fairly be characterised as being, in substance, an amount paid for the person’s own direct or indirect benefit.
In relation to the applicant’s claim therefore, it becomes a matter of deciding the allowable ‘reasonable remuneration’ that is payable to it under s 42.
The ability of an unlicensed builder to recover reasonable remuneration under s 42 of the QBSA Act was considered in Cook’s Construction P/L v SFS 007.298.633 P/L (formerly trading as Stork Food Systems Australasia P/L)[1]. Keane JA (as he then was) said[2]:
There can be no doubt that where the builder is making a claim to recover payment of reasonable remuneration which has not been paid by the other party, the builder bears the onus of proving the amount which it is entitled in conformity with s 42(4).
[1] [2009] QCA 75.
[2] At [43].
MIDG has not identified what it considers a reasonable remuneration might be, and it is not required to do so. In its submissions, filed on 23 May 2012, it submits at paragraph 15 that:
The third effect is that Smith Developments will have to quantify and prove its claim in accordance with s 42(4).
MIDG, in its response filed on 2 August 2012, say as to Schedule ‘A’, that apart from the amounts for the engineer and the Vacumaid system, the other amounts are not set out in a manner required for a claim under s 42 or in a manner that enables them to determine whether the claim is within the section, and they dispute the allegations and the claim.
In the response, MIDG seek orders that the application be dismissed, that the applicant repay the amount of $528,753.00 that has already been paid.
The effect of this would be that MIDG would receive a free house plus the other amounts sought, being the interest on the monies paid to date, and amounts payable on the counter-application.
This would clearly be an unjust result, and would constitute unjust enrichment.
Keane JA in Cook’s Construction PL noted[3] that:
In my respectful opinion, it is important that the concern of the courts to avoid an unjust outcome in a particular case should not distort the operation of a statute intended to encourage the licensing of builders by disadvantaging unlicensed builders and advantaging consumers of building services at their expense.
[3] At [42].
Bearing these comments in mind, if a just outcome can be arrived at within the terms of the QBSA Act, and without distorting its operation, then it is the duty of this Tribunal to do so.
At paragraph 8 of its submissions, MIDG argues that:
Unless Smith Developments reframes the claims to claim the amounts permitted by s 42(4), the claim should be struck out (s 47 of Queensland Civil and Administrative Tribunal Act 2009 (the ‘QCAT Act’)).
Section 47 of the QCAT Act gives the Tribunal power to strike out a proceeding if it considers it is:
(a)frivolous, vexatious or misconceived; or
(b)lacking in substance; or
(c)otherwise an abuse of process.
Smith’s claim does not fall within any of these descriptions. It is a genuine claim. Smith has lodged a submission which effectively reframes its claims, and which will enable an assessment to be made in accordance with s 42(4) of the QBSA Act. I do not consider that the applicant’s claim should be struck out.
The contract was overseen by an architect on behalf of MIDG, Mr Ehrlich. MIDG made payments for stages 1 to 9 in the amount of $568,480.07 in accordance with the contract (although there seems to be conflicting evidence from both parties as to whether claim 9 in the amount of $39,726.57 was actually paid) believing at the time that the builder was licensed and that it was appropriate to do so.
I consider that the payment of these claims, in the circumstance of a contract under supervision of an architect, supports a finding that the claims were reasonable payments for the work under the contract. I am satisfied that this supports a finding that the amount of the claims (less the profit component and any payments made to the builder for its own work) are reasonable remuneration within the terms of the QBSA Act.
At paragraph 6 of the submissions filed by Smith on 29 May 2012, it makes some statements which are relevant to a calculation of profit. It submits:
The profit margin on construction contracts is something in the order of 10% upon most construction contracts. Upon that basis and it would be obvious to the tribunal that material and labour (including Mr Smith) comprise the substantial majority of a contract price. The contract price was $617,500.00 so the margin might be in the order of $61,000.00.
The original contract price was $617,500.00. That price includes a profit component, or builder’s margin. That builder’s margin cannot be recovered (s 42 (b)(ii)).
I will apply a builder’s margin of 10% to this contract in accordance with the statements of Smith. The balance to be considered is therefore 90% of the original contract price, being an amount of $555,750.00.
Mr Smith states in paragraph 2 of his statement filed on 19 March 2012, that he is a director of Smith Developments Pty Ltd. That company was formed in 2004, and changed its name on 11 May 2006 to the current name.
The relationship between a corporate entity as builder, and a physical person who conducts the work was discussed by Member Deane at paragraph 32 of her decision of 13 June 2012. She noted that:
Where the director of an unlicensed company has physically undertaken work the company is not entitled to claim amounts in respect of the labour and effort of the director. (Nortask Pty Ltd & Speziali v Rodriguez (2008) QCCTB 250).
The item designated ‘builder’ in Schedule ‘A’ in the amount of $49,819 is not attributed to any designated sub-contractor. In item 11 of section 2 of the amended application, Smith says that the value of the services of Mr Smith is calculated at $50 per hour. The clear implication is that this item represents either supply of Mr Smith’s own labour[4], or an amount in substance paid for the person’s own direct or indirect benefit[5] at that rate.
[4] QBSA Act, s 42(4)(b)(1).
[5] QBSA Act, s 42(4)(d).
The ‘builder’ item in the amount of $49,819.00 therefore cannot be recovered.
The next considerations then are as to the variations which are claimed by Smith.
Schedule ‘A’ attached to the amended application is as follows:
Sub Contractor and Materials
Survey – Bennett & Bennett $ 2,600.00
Engineer (Civil) – Laurie Oar $ 330.00
Excavation $ 5,253.00
Rock walls and barging
($19,680 variation $4,440) $ 24,120.00
Footings, steel, excavation, labour,
slab, steel, level & concrete $ 30,000.00
Plumbing and drainage $ 16,190.00
Steel structure and labour + barging $ 52,080.00
Cranage + Extra concrete cartage + pumps $ 9,000.00
Timber and barging $ 41,686.00
Windows
($40,000 + variation $11,396) $ 51,396.00
Carpentry $ 40,630.00
Shed hire $ 5,960.00
Blocklaying, blocks, block fill etc + barging
($12,000 + variations $730) $ 15,730.00
A/C Sheeting + Paper + jointers $ 6,500.00
Roofing + flashings complete $ 28,673.00
Plastering + barging $ 17,000.00
Texture, render, (pool) + scaffold $ 10,600.00
Waterproofing $940, Tiling $5,000 + Tiles $618 $ 6,558.00
Stairs $ 5,500.00
Garage doors and doors
($6,880 + Variation $2,215) $ 9,095.00
Painting $ 27,920.00
Gas, Hot Water and Lines
($6,600 + Variations $1,648) $ 8,248.00
Electrical ($10,000 + variations $5,275) $ 15,275.00
Floor Sanding ($6,101 + Variation $3,351) $ 9,452.00
Construction items (Nails, Glue and Screws etc) $ 24,000.00
Accommodation, barging and transport $ 34,630.00
Builder $ 49,819.00Extra Work to Contractor
Regency, Bath, ensuite, shower screens $ 4,542.00
Screw piles $ 10,200.00
Vacuum Maid System $ 3,214.00
Swimming Pool (Variation $19,225) $ 19,225.00
Clothes line $ 425.00
Back fence $ 1,545.00
Sand fill $ 270.00
Kitchen bench $ 160.00
Front block work and Block Fill $ 460.00
In its submission filed on 27 November 2012, Smith refers to Schedule ‘A’ of the amended application and states that there are no builder’s margins on any of the variations.
Smith states in its submission that no builder’s margins were included on the following items, and names the subcontractors who performed the work:
Rock wall
(Rice Brothers) $ 4,400.00
Screw piles
(Australian Screw Piles) $ 10,200.00
Vacuum Maid System
(Vacumaid) $ 3,214.00
Bath/ensuite
(Regency shower Screens) $ 4,542.00
Plastering, Roofing, Doors, Exterior finish,
Door furniture carpentry, Gas plumbing(Carpentry – Paul and Danny Russell;
Plasterer – Graham Hill;
Roofing – Hamilton roofing;
Doors and Door furniture – Bunnings;
Gas plumbing – Gasco Services) $ 25,369.55Lights, Louvres, Automatic opener, switch unit
(G.James) $ 10,703.00
Sand, varnish, polish patios and stairs
(Rays Sanding and Polishing) $ 3,351.50
Back fence
(Don Shipway) $ 1,545.00
Patio railing and gate
(Paul and Danny Russell) $ 1,140.00
Changes for kitchen bench
(Paul Russell) $ 160.00
Swimming pool(Designer – Brisbane Waterscapes;
Concrete – Geoff Rowlands
Renderer – John Shee
Pumping – Gold Coast Pumping
Waterproofing – Building Waterproof Services
Blocklayer – Steve York/Steve Kirkwood) $ 6,600.00Tiles
(Euro + Direct auctions) $ 618.00
Gasco services
(Rod Leifman) $ 6,400.00
Balustrade
(G. James Glass) $ 9,118.40
Electrical Costings
(Clearview electrical) $ 5,275.00
Mirrors and Baskets
(Regency Glass and Shower screens) $ 2,865.00
Shower Screens
(Regency) $ 306.00
Gas meter and condenser with bracket
(Brisbane Gas Supplies) $ 366.00
Garage doors
(Steeline) $ 985.00
Flyscreens
(G. James) $ 3,072.00
Blockwork
(Geoff Rowlands and Gold Coast Pumping) $ 406.00
Clothes line
(Bunnings) $ 425.00
Sand Fill(Tangalooma resort works) $ 270.00
The total of the variations is shown as $101,425.97. The total of the above amounts is $101,331.45, and I will adopt that figure and allow those amounts in total.
It is common ground that an amount of $528,753.00 has been paid to Smith to date in respect of the building works.
The total to be allowed to Smith is therefore as follows:
90% of contract price $ 555,750.00
- Builders work 49,819.00
+ Variations $ 101,331.45
= Total allowed $ 607,262.45- Paid $ 528,753.00
Amount allowed $ 78,509.45
The amount of $607,262.45 to be allowed is less than the initial contract sum of $617,500.00, and this includes allowable variations which arose after the original contract. The amount being allowed for the base contract is less than the price agreed to as the price for carrying out the building work under s 42(4)(c), and is therefore allowable under the QBSA Act.
The Counter-Application
The respondent filed a counter-application on 2 August 2012.
Apart from repayment of monies paid to date, it seeks:
a) $90,000 together with interest for loss of rent;
b) $20,000 together with interest for replacement of timber battens;
c) $4,250 for certification costs; and
d) $12,000 together with interest for painting the exterior of the house.
The claim for loss of rent is set out by Mr Ehrlich, architect, in his statement of evidence, filed on behalf of MIDG on 17 October 2012, at 39 as follows:
As to the loss for the inability to rent the house for holiday lettings, the respondent would have been able to rent the house for 10 weeks per year at $1,500 per week from the date of practical completion, the loss is $1,500 (weekly rental) x 10 (weeks letting per year) x 6 years, being an amount of $90,000. The six year period is calculated from the practical completion date provided for in the contract to the date that the property was able to be legally let following certification.
The claim for loss of rent is a claim for consequential damage. In order to allow it, evidence would have to be available as to remoteness, and questions as to any breach of the contract would have to be determined. Further, no explanation is given as to why MIDG failed to mitigate its loss of rental over a 6 year period.
Smith, in its submission, disputes that MIDG has lost rent. It states that the owners have been renting since construction ceased.
I find that the claim for loss of rent is not made out on the material, and is not shown as not being too remote.
Smith says that it placed the timber battens, and that this was a variation that it did not claim. Smith also disputes that the house needed painting again, and says it was painted by Mr Chutna and Mr Darren Brady.
Lester Ehrlich states that the battens were defective and had to be replaced. At [45] he states that:
The Respondent obtained a quote from Crocker Builders for the amount of $26,539.30 to replace the timber battens, however the work was completed by the respondents themselves at a total cost of $1,759.33 for materials and labour of $17,450.00.
At [51] Mr Ehrlich states that:
The Applicant was required to paint the house as part of the contract price and the Applicant failed to paint the house in accordance with the contract.
Mr Ehrlich sets out labour claimed on 13 May 2011 for 196 hours and on 30 September 2011 for 132 hours to re-batten and paint the house at $50.00 per hour. This is apparently labour carried out by individuals associated with the syndicate and their families.
I cannot help noting that MIDG is denying Smith its labour costs incurred by itself personally as it was not registered at the time, but sees fit to claim labour costs for itself who was not registered at all.
Mr Ehrlich does not give details of how the battens or painting were defective.
I am not satisfied that the battens or painting were defective, and do not allow any amounts for them.
The cost of certification of $4,150.00 is claimed by MIDG. Smith does not dispute this claim, and I allow it in full.
Conclusion
Interest is sought on the application and the counter-application.
I will allow interest on the application and counter-application at 5% (being a commercial rate of interest) from the date that the application was filed, being mid-December 2009 until the date of submissions being mid-December 2012, which is a period of 3 years.
I allow the application by Smith in the amount of $78,509.45 plus interest of $11,776.42 being a total of $90,285.87.
I allow the counter-application by MIDG in the amount of $4,150.00 plus interest of $622.50 being a total of $4,772.50.
The result is that an amount of $85,513.37 is payable by MIDG to Smith.
Consequently, I order that the Respondent, Maybrey Pty Ltd ACN 081 021 463, Jan-Mar Trading Pty Ltd ACN 084 234 846, and ESR Management Pty Ltd ACN 063 065 207 known collectively as the Moreton Island Development Group, pay to the Applicant, Smith Developments Pty Ltd, the amount of $85,513.37.
1
0