Sutton Constructions Pty Ltd v Wilkes

Case [2021] QCAT 282

QUEENSLAND CIVIL AND
ADMINISTRATIVE TRIBUNAL


CITATION:

Sutton Constructions Pty Ltd v Wilkes & Anor [2021] QCAT 282
PARTIES: SUTTON CONSTRUCTIONS PTY LTD

(applicant)

v
MICHAEL WILKES
RICHARD SACHS

(respondents)

APPLICATION NO:

BDL012-20

MATTER TYPE:

Building matters

DELIVERED ON:

16 August 2021

HEARING DATE:

On the papers

HEARD AT:

Brisbane

DECISION OF:

Senior Member Brown

ORDERS:

1.       The application for miscellaneous matters filed 12 March 2021 is refused.

2.       The application is listed for a three (3) day hearing in Brisbane on a date and time to be advised.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – DISCOVERY AND INTERROGATORIES – DISCOVERY OF DOCUMENTS – DISCRETION OF COURT AND POWER TO ORDER – where the applicant is a builder – where the respondents are homeowners – where the respondents contracted with the applicant to perform building work – where there is dispute as to whether the contract was a cost-plus contract or a fixed price contract – where the respondents seek production of documents which are said to form the basis of the initial quote prepared by the applicants before the parties entered into the contract – whether production of the documents should be ordered

Domestic Building Contracts Act 2000 (Qld), s 55

Queensland Building and Construction Commission Act 1991 (Qld), s 62

Byrnes v Kendle (2011) 243 CLR 253.

Cannon & Anor v Saunders [2017] QCATA 4
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) and Others (2001) 188 ALR 566
Franklins Pty Ltd v Metcash Trading Ltd (2009) NSWLR 603.
John Burke Ltd v Insurance Commissioner [1963] Qd R 587
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104.
Secured Income Real Estate (Australia) Ltd v St. Martins Investments Pty Ltd (1979) 144 CLR 596

Waratah Coal Pty Ltd v Nicholls & Anor [2013] QSC 68

This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld)

REASONS FOR DECISION

What is this application about?

  1. The applicant and the respondents entered into a contract for the renovation of the respondents’ house (the contract). The applicant says that the contract was a cost plus contract. The respondents say that the contract was a fixed price contract. The building works commenced and progressed for a period of time. The parties then fell into dispute. The applicant is seeking from the respondents money it says is owing under the contract. The respondents have counterclaimed for the recovery of overpayments of amounts paid to the applicant and damages for defective, incomplete and unlawful works.

  2. The parties have filed their statements of evidence. The matter appeared to be ready to proceed to a hearing. The respondents have however filed an application seeking disclosure of documents which are said to form the basis of a quote for building work prepared by the applicant before…

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Sutton Constructions Pty Ltd v Wilkes [2021] QCAT 282
Case
[2021] QCAT 282
Decision Date

CaseChat Overview and Summary

Sutton Constructions Pty Ltd v Wilkes is a case concerning a dispute over the terms of a building contract between Sutton Constructions (the applicant) and Wilkes (the respondent). The dispute involves the interpretation of whether the contract was a fixed price contract or a cost plus contract, and the admissibility of extrinsic evidence to clarify the terms of the contract. The case was heard in the Queensland Civil and Administrative Tribunal (QCAT).

The legal issues in this case revolve around the application of the parol evidence rule and the admissibility of extrinsic evidence to interpret the terms of the contract. The primary issue is whether the documents underpinning a pre-contractual quote are relevant to the interpretation of a cost plus building contract. The respondents argue that these documents are crucial to determine whether the contract was a fixed price contract, whether the amount payable could be accurately calculated when the contract was entered into, and whether the costs claimed by the applicant were reasonable and properly incurred.

The court examined the principles of the parol evidence rule, which excludes extrinsic evidence to determine the meaning or legal effect of words used in a document that the parties have adopted as contractual. The court noted that evidence of prior negotiations is not admissible to interpret the terms of the contract but may be led to establish objective background facts known to both parties. The court found that the documents underpinning the pre-contractual quote were not relevant to the interpretation of a cost plus building contract, as the scope of works was significantly revised, and the quote was prepared before the parties signed the contract. The court also concluded that the evidence concerning whether the work carried out and the costs incurred by the applicant were reasonable and proper would focus on the actual building works and costs incurred and charged to the respondents.

Ultimately, the court ruled that the documents sought by the respondents were not relevant to the determination of an issue in the proceedings, and the application for the production of documents was refused. The court did not make detailed directions for progressing the matter to a hearing until hearing dates had been set and ordered that the matter be listed for a 3-day hearing on dates to be advised.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

In Carter on Contract the parol evidence rule is expressed thus:The parol evidence rule excludes the use of extrinsic evidence in determining the meaning or legal effect of words used in a document which the parties have adopted as contractual or as evidencing their contract in whole or in part. Properly applied, the rule has the effect of excluding extrinsic evidence to determine what the contract means, not what terms constitute the contract. From this perspective, the rule protects the completeness and integrity of the writing.This perspective suggests that the formulation approved by Isaacs J in Gordon v Macgregor is not today to be applied to determine ‘what the contract really was’, it is restricted to what was ‘really meant’. This includes the legal effect of the document and the terms stated. (footnotes omitted)[8] (emphasis added)[8]JW Carter, LexisNexis, Carter on Contract (online at 28 July 2021) [13-010]. There is therefore a distinction to be drawn between whether the parol evidence rule applies and the effect of the rule when it does apply. As is apparent from the passage from Carter, the parol evidence rule is not applied to restrict evidence about the terms of the contract but rather restricts evidence going to the interpretation of the terms. Evidence may be led of prior negotiations in order to establish objective background facts known to both parties and the subject matter of the contract however any such statements or actions are superseded by, and merged in, the contract. In order for evidence of surrounding circumstances to be admissible as an aid to the interpretation of a contract, the word or expression in question must be susceptible of more than one meaning.[9] Evidence of surrounding circumstances does not however include the parties’ negotiations[10] which is in fact evidence of the expectations of the parties and cannot be used to construe the parties’ written agreement.[11][9]Ibid, per Mason J, Stephen and Wilson JJ agreeing. [10]Ibid.[11]Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) and Others (2001) 188 ALR 566. Neither parties’ submissions address directly the issue of the application of the parol evidence rule. The respondents submissions in particular do not address whether the documents sought are relevant to establishing the terms of the contract or are relevant to determining what the terms of the contract mean. It is clear from the respondents’ submissions that they consider the documents the subject of the present application to be directly relevant to the parties’ pre-contractual negotiations. It is also clear that the respondents’ case is that the contract was a fixed price contract.[12] In the response to the original building dispute application, the respondents refer to various contractual provisions they rely upon as support for the contention that the contract was for a fixed price:(a)The contract nominated a deposit payable of $32,500.00 as representing 5% of the contract price;(b)Clause 11.4 of the contract required the respondents to pay a fixed contract price;(c)Clause 11.6 permitted the applicant to make claims for the payment of the contract price progressively. [12]Response dated 9 March 2020, annexure ‘A’ at [2(f)].

Decision

Reasons for decision

Assuming for present purposes that such a term may be implied into the contract the issue is, are the documents relevant to whether the term was breached by the applicant? It seems to me that the documents underpinning a quote prepared before the parties signed a cost plus contract, before commencement of the works, and where the scope of works was significantly revised between the preparation of the quote and the execution of the contract could not be said to be relevant. The evidence as to whether the work carried out and the costs incurred by the applicant were reasonable and proper will concern the actual building works undertaken by the applicant and the cost of materials and labour incurred and charged to the respondents. It will presumably then be a matter for the respondents to lead evidence that the works were not reasonable or necessary and/or that the costs incurred and claimed by the applicant were unreasonable or unnecessary.Conclusion I am not persuaded that the documents sought by the respondents are relevant to the determination of an issue in the proceedings nor am I persuaded that it is in the interests of justice for an order for the production of the documents to be made. The application for the production of documents is refused. The parties have filed submissions in relation to the directions to be made progressing the matter to a hearing. I decline to make any detailed directions as have been suggested until such time as hearing dates have been set. I will, at this stage, order that the matter be listed for a 3 day hearing on dates to be advised.

Ratio Decidendi

Legal Principle Established

The applicant says:(a)The documents sought by the respondents do not ‘probably relate’ to a matter in question in the proceeding;(b)The contract was not made for a fixed price of $857,000.00 (the amount of the quote) or on the terms proposed by the quote;(c)It is clear from the evidence of the respondent, Richard Sachs, that:(i) The respondents chose to make a cost plus contract because they proposed the applicant would construct a lined building shell with wiring and plumbing;(ii) The precise scope of work was not determined;(iii) Mr Sachs understood the benefits and risks associated with entering into a cost plus contract;(d)The calculations behind the quote are irrelevant to the question whether the building contract is a cost plus contract given the evidence of Mr Sachs that:(i) He relied upon his own independently sourced building costs;(ii) The cost plus contract was entered into to allow the respondents to have direct control of the ultimate scope and cost of the building works;(e)The amount payable by the respondents to the applicant under the cost plus contract will be determined by identifying the work undertaken by the applicant and the reasonable cost of that work;(f)The documents sought by the respondents are irrelevant to whether the amount the applicant was to receive could be accurately calculated when the contract was entered into on a cost plus basis and are also irrelevant to:(i) Identifying the ultimate scope of the work completed by the applicant; and (ii) Whether the applicant exercised reasonable competency and economy in undertaking the work.Consideration As I have noted, the respondents say that the circumstances in which the quote came into existence is important to the following:(a)Whether the contract is a fixed price contract or a cost plus contract;(b)Whether the amount the applicant was entitled to receive under the contract could be accurately calculated when the contract was entered into;(c)Whether the costs claimed by the applicant were reasonably and properly incurred. The construction of a contract is a question of law.[6] A contract must be construed as a whole having regard to the factual and legal context and taking a common sense approach. Where the words of a contract are not ambiguous, the words must be given their plain meaning.[7] [6]Ryan v Worthington [2015] QCA 201.[7]Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 (‘Codelfa’). It is not clear from the response, the respondents’ evidence or the respondents’ submissions whether their case is that the contract does not contain the entirety of the terms of the parties’ bargain or that the terms of the contract are ambiguous in some respect. As a statement of general principle, once the parties have embodied their agreement in a contract, extrinsic evidence is not normally admissible to add to, subtract from, vary or contradict the terms of the written agreement. The court (or tribunal) must look to the written contract to determine its terms and their meaning and effect unless one of the exceptions to the parol evidence rule applies.