Tan v Innova Projects Pty Ltd
[2018] QCAT 237
•27 July 2018
QUEENSLAND CIVIL AND
ADMINISTRATIVE TRIBUNAL
CITATION:
Tan & Anor v Innova Projects Pty Ltd [2018] QCAT 237
PARTIES:
CHING SIAN TAN
and
DAVID CHIN LOON CHAN
(applicant)v INNOVA PROJECTS PTY LTD
(respondent)
APPLICATION NO/S:
BDL179-17
MATTER TYPE:
Building matters
DELIVERED ON:
27 July 2018
HEARING DATE:
14 February 2018
HEARD AT:
Brisbane
DECISION OF:
Member Allen
ORDERS:
Innova Projects Pty Ltd must pay the amount of $5,526.15 to Ching Sian Tan and David Chin Loon Chan within 14 days of today.
CATCHWORDS:
CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – OTHER MATTERS – termination – where concurrent land purchase contract and building contract – where deposit paid under building contract – where both contracts subject to finance – where building contract finance clause lapses and extension of land purchase contract finance clause – where land purchase contract terminated due to failure to obtain finance – where owner purports to terminate building contract – where builder offers to refund part of the deposit having regard to their costs incurred – whether owner has properly terminated the building contract – what entitlements do each party have in regard to the deposit?
APPEARANCES & REPRESENTATION:
Applicant:
Self-represented
Respondent:
Mr Green appeared for Innova Projects Pty ltd
REASONS FOR DECISION
Ms Tan and Mr Chan (‘the Applicants’) entered a contract for the purchase of land at Ripley on 10 January 2017 which was subject to finance approval by 31 January 2017. Several extensions were obtained for financial approval with the last of these granted to 14 March 2017. They also entered a building contract with Innova Projects Pty Ltd on 6 February 2017 for the construction of a dwelling on the land for a price of $176,163. The building contract was also subject to finance with finance due on 20 February 2017. A deposit totalling $8,808 was paid by the Applicants in instalments to Innova Projects with the final instalment paid on 6 February 2017.
I note that the Applicant’s had paid a preliminary deposit on 17 January 2017 with an expectation that the plans would be prepared by the draftsman but the evidence shows that they were still requesting amendments to the plans as late as 16 February 2017 which is confirmed by both parties. At the time the building contract was entered a hand drawn plan was attached to it.
Ultimately the land contract was terminated on 14 March 2017 due to a failure of the Applicants to obtain finance with the issue being that the financier’s valuer would not complete the valuation until he had a finalised plans for the building work. The Applicants terminated the building contract on the same day and requested a release of the building contract deposit.
Initially Innova Projects indicated to the Applicant’s lawyers that the contract had been terminated and stated that they had done a considerable amount of work. Mr Green of Innova Projects sent an email to the applicant’s solicitors on 9 May 2017 which stated: ‘after detailing and costing our expenses regarding the building deposit we will be agreeable to refund $1,800 including GST to a nominated bank account.’
The Applicant’s forwarded a reply to Mr Green rejecting this offer to refund $1,800 by email of 19 June 2017 and, after setting out their position, demanded that the full deposit of $8,800 be released to them without deduction as well an amount of legal costs pursuant to the contract dispute of $2,699 and stating that if the funds were not paid by 30 June 2017 they would bring the case to the Tribunal.
The applicants made application to the Tribunal on 21 July 2017 for the return of the deposit and also in accordance with the affidavit of 19 October 2017 their legal costs of $2,710.
The Applicants dealt primarily with Mr Green of Innova Projects and Mr Burke from Greenspace Finance, the mortgage broker. A series of emails between the Applicants and Mr Burke accompanied the application. It is clear from these that finance approval was subject to Mr Burke obtaining a copy of the completed plans and drawings from Mr Green (‘Marty’). Mr Burke advised the Applicants on 15 February 2017 that the valuation had been completed however the valuer will not finalise the report until we have finalised plans from Marty. The plans we currently hold are hand drawn. Again on 2 March 2017 Mr Burke stated:
I have been provided with all the documentation except the plans which are hand drawn. I have spoken to Marty who expects we will have the finalised plans next week.
The email of 2 March 2017 suggests that a 21 day extension for finance should be requested. The extension was only granted to 14 March 2017 as mentioned above.
Mr Burke advised the Applicants by email on 14 March2017 that:
We cannot finalise the valuation until the builder has provided the finalised plans. At present we hold a hand drawn copy of the plans. I have followed up with the builder again today for you.
I note that Innova Projects did not deny either in its written material or in Mr Green’s oral evidence that Mr Burke had been in communication with Mr Green during the course of the building contract. Mr Green confirmed at the hearing that he had contact with Mr Burke on 10 March 2017. Mr Green did make it clear in his statement that he had not seen the emails between the applicants and Mr Burke.
The Applicants claimed that the contract required that Innova Projects provide them with the formalised contract documents ('finalised CAD plans) and detailed specifications within 5 working days after the contract had been signed and that Innova Projects was in breach of this duty. This is said to be in accordance with the note on page 10 of the contract which states: ‘The builder must give the owner a signed copy of this contract and contract documents (plans and specifications) within 5 working days after it is signed by the builder.’ Mr Green’s statement of evidence sets out what was contained in the contract documents and this was acknowledged by the Applicants at the hearing. These documents included the Innova Projects scope of works document comprising 1 page and the generic specifications styled ‘Essencia by Innova’ comprising 5 pages (the scope of works), a certain preliminary plan dated 5 February 2017. Contract documents are defined in clause 38 of the contract general conditions as ‘these general conditions, any special conditions, the specifications, the plans and other documents specified in item 16.’ Item 16 of Schedule 1 of the contract refers back to item 9. It is therefore clear that the requirement on page 10 only related to the preliminary plans and these were provided. So there can be no breach of duty in that regard.
While the Applicants sought and obtained extensions of time in respect of the land contract they acknowledged at the hearing that they had not sought any extension of time in respect of the building contract. Their written evidence was that they considered that Mr Burke and Mr Green of Innova Projects had communicated and would ensure all process will be taken care of, They noted that Mr Green in his statement had confirmed that he had spoken to Mr Burke and the valuer. The Applicants stated in their affidavit of 23 January 2018 that Mr Green had advised at point of contract signing that he could have the fiancé cluse extended since he needed to get things done. Hence, we did not request an extension as we deemed that it was all mutual agreement that build contract finance clause will be automatically extended and he was aware the delay was caused by himself.
Mr Green stated in his statement of 15 November 2017 that he had not been aware of the terms of the land purchase contract until he received the applicants affidavit and that neither he nor Mr McKanna, his associate had been involved in or consulted about the land purchase contract or any extensions of time of the land purchase contract. Mr Green stated at the hearing that ‘we would have done the pans much earlier if we had known the land contract was subject to finance.’
Innova Projects submits that as the Applicants did not seek an extension of time in regard to finance or advise them that finance was not approved on or before
20 February 2017 in accordance with cl 7.2(d) of the contract that the contract ceased being conditional upon finance.
Innova Projects had sought to make a counter-application based on delay damages under cl 16 of the contract which was abandoned at the hearing. Innova Projects with its response also made counter-application that it was entitled to recover an amount of against the Applicants under cl 28.7 of the building contract for termination by default. This was based on a notice to remedy breach given to the Applicants on
4 September 2017 and a notice ending the contract given to the applicants on
19 September 2017. Innova Projects claims that it is entitled to an amount of $8,808 in accordance with cl 28.7 of the building contract.
The evidence of the Applicant’s is that they had previously terminated the contract by letter of 14 March 2017. I note that this letter was not couched in terms of notice of a refusal of finance under cl 7.2(c) of the building contract but set out that the building contract had been terminated as a result of the termination of the land contract. This is more akin to a notice that performance of the contract had been frustrated due to the land upon which the dwelling was to be built not coming into the ownership of the applicants and therefore the builder could not construct a dwelling on that land.
While initially Innova Projects as set out above had indicated they did not accept termination it is clear from the email of 9 May 2017 that they had accepted termination as they were prepared to refund part of the deposit after allowance for their expenses. On that basis Innova Projects cannot purport to terminate a building contract of which they had already accepted the termination and there will be no entitlement for Innova under the counter-application.
The Applicants have paid Innova Projects $8,808 as their deposit under the building contract and Innova Projects have incurred expenses in relation to the Building Contract as follows:
(a)Steve Cooper & Associated for contour survey ordered 13 February 2017 and received 20 February 2017 $495.00;
(b)Wink + Co Building Design & Drafting for preparation and amendment of working drawings order placed 21 and 22 February 2017 received 10 March 2017 $1,485.00;
(c)Structerre Consulting Engineers for preparation of soil test and site and wind classification order placed 13 February 2017 received 26 April 2017 dated 23 February 2017 $352.
Innova projects also claimed an amount in respect of contract administration of $4,620.00 calculated at an hourly rate of $150.00 as follows:
(a)Establish contract administration system and client accounting file, management of supplier accounts, issuing of deposit invoice and management of part payments of deposit (approximately 14 hours);
(b)Preparing files and CAD drawings for submission to Wink + Co (approximately 4 hours);
(c)Engaging with Steve Cooper & Associates for the purpose of contour survey (40 minutes);
(d)Engaging with Structerre for the purposes of the soil test and site classification (40 minutes);
(e)Receiving (and managing) numerous plan changes received from the Applicants (2 hours);
(f)Reviewing CAD drawing and marking up with client changes and marking up for revision by Wink + Co (approximately 5 hours)
(g)Reviewing amended drawings and changes requested by the Applicants to estimate cost of amendments and prepare variation document (11/2 hours); and
(h)Discussions with Applicant’s fiancé broker (Greenspace Finance) and property valuer (Land Mark White).
Ultimately the building contract was terminated because the Applicants were unable to get finance approval and it was the fact that the finance broker could not provide the finalised plans to the valuer which resulted in this. While part of the deposit of was paid by the Applicants on 17 January 2017 and they had an expectation that the working plans would be drawn following. This did not occur and they signed the contract on 6 February 2017 with the hand drawn plans.
The Applicants made the last major changes to the design by 16 February 2017. They knew the plans would take 2 to 3 weeks to be finalised as advised by Mr Green and should have expected them to be available at the end of that time. They did not though directly communicate to Innova Projects that the plans were needed before a certain date to ensure that the land contract finance condition would be met. They say they relied on Mr Burke, their mortgage broker liaising with Mr Green, of Innova projects to ensure that these things occurred in a timely manner. They say that there was a lack of response from Innova Projects.
The Applicants were also advised by Mr Burke to request a 21 day extension of time for finance on 2 March 2017 which he said would be automatically granted. As mentioned above the finance in regard to the land contract was extended to 14 March 2017.
The evidence shows that the plans were emailed to Innova Projects on 10 March 2017. Mr Burke though advised the Applicants on 14 March 2017 as mentioned above that ‘he still only holds the hand written plans the applicants that he had followed this up with the builder again today for you.’ Unfortunately there was no statement provided by Mr Burke to clarify his emails and to set out his recollection of his dealings with Mr Green and Innova Projects.
Innova Projects submitted that the building contract was not subject to ‘finalised working drawings and full detailed specifications of building being provided by it to the applicants’. The Applicants disagreed with this at the hearing. I note that the Scope of Works annexed to the building contract states ‘all details and dimensions to plans to be finalised by Innova Projects draftsman with working drawings.’ The Essencia standard specifications also state that the Working Drawing are by Innova Projects. Clearly therefore Innova Projects was responsible for the preparation of the working drawings.
Innova Projects attended to the work necessary to have the plans finalised by ordering the contour plan and soil test on 13 February 2017 and upon them becoming available on 21 February 2017 ordering the plans to be prepared by Wink & Co. As noted above if they had known about the finance clause situation they could have had the plans prepared much earlier. If evidence had have been available from Mr Burke then the Tribunal would have been able to determine if Mr Green of Innova Projects did have that knowledge. As it is there is a lack of communication between the parties which has resulted in the Applicants not obtaining finance but there is insufficient evidence to assign fault to any party.
If the Applicants had have obtained an extension for finance under the building contract they would have been able under clause 7.2(c) of the building contract general conditions to terminate the building contract by advising Innova Projects that finance had been refused In which case they would have been entitled in accordance with cl 7.2(e) to a refund of all monies paid under the contract except for the builder’s reasonable expenses. So even if there had been an extension sought by them and granted by Innova Projects they would not have been entitled to a full refund of the deposit.
The claim by Innova Projects under cl 28 of the building contract general conditions was one relying on a breach by the Applicants of the contract. If the contract had have been terminated by Innova Projects for the Applicants’ breach, Innova Projects would in accordance with cl 28.7 of the building contract general conditions have been entitled to the greater of 5% of the contract price or damages including the cost of all work carried out by the builder under the contract, the cost to the builder of all material purchased by the builder and delivered to the site or ordered by the builder from suppliers and which orders cannot be cancelled, the cost to the builder of quitting the site, the builders margin on those amounts and default interest.
These two provisions cl 7.2 and cl 28 set out what each party would have been entitled to under the contract in those circumstances. Where neither party was at fault and an extension of time for finance had been granted the contract would have been terminated due to failure to obtain finance, Innova Projects would have been entitled to its reasonable expenses under cl 7.2. If the Applicant had been at fault and Innova Projects had terminated under cl 28, then it would have been entitled at least to retain the full deposit.
The only thing the applicants could have done differently was request an extension of time in regard to finance from Innova Projects in the same way they did under the land contract. Instead they say they relied on Mr Burke, the mortgage broker to liaise with Innova Projects. It is clear from the email trail and Mr Green acknowledging that he had had discussions with both Mr Burke and the valuer that he was aware that there was a finance component and the dealings with Mr Burke clearly continued after
20 February 2017 so he must also have been aware that finance had not yet been approved. What has not been shown was that Innova Projects was aware that the land contract was still subject to finance and an extension of time had only been granted to 14 March 2017. I accept Mr Green’s statement that if he had known the situation he would have done the plans much earlier.
I do not consider in the circumstances that either party is at fault, and it was as much the vendor of the land contract not being prepared to grant any further extensions of time for the finance under that contract which caused the building contract to be terminated.
In that case I think the rights of the parties should be determined on a similar basis to that under clause 7.2(e) of the building contract general conditions and that the Applicants should be entitled to a return of their deposit after allowing for Innova Projects reasonable expenses including an amount for reasonable management expenses. This includes the following amounts:
(a)Steve Cooper & Associates $495
(b)Wink + Co Building Design and Drafting $1,485
(c)Structerre Consulting Engineers $352
Innova Projects has also claimed an amount of $4,620 as set out above and described as being for contract administration. I note at the hearing that the applicants raised issue with the hourly rate of $150 being claimed by Innova Projects in regard to work requiring the expertise of a builder. I will adjust the amount allowed but accept the hourly rate. The largest amount is for the first item of 14 hours which represents mostly clerical and date entry tasks. I do not consider that it is reasonable to claim those tasks at $150 per hour and no amount will be allowed for them. There are amounts claimed for liaising with the engineer, draftsman and surveyor. This work clearly would have been carried out and would have required a reasonable amount of skill. I will allow the amount of $799.85 for 5 hours and 20 minutes in respect of that work. There is also an amount claimed for 2 hours managing numerous plan changes received from the Applicants. There is only one text message dated 16 February 2017 evidencing this. I consider that the 4 hours already allowed in regard to preparing files and CAD drawings for submission to Wink + Co covers this. There is a further amount for reviewing amended drawings and changes requested by the Applicant. There was no evidence provided to support this and it will not be allowed. An amount of one hour is claimed for discussions with the finance broker and valuer. It is clear from the finance broker’s email trail that this occurred and it will be allowed in the amount of $150. I am satisfied that Innova Projects reasonable expenses for contract administration are $949.85.
Innova Projects is entitled to retain the amount of $3,281.85 from the deposit of $8,808 and must repay the amount of $5,526.15 to the Applicants within 14 days.
The Applicants have also claimed their costs in particular those incurred when they were terminating the building contract. I note that following Innova projects response of 9 May 2017 it was the Applicants on their own behalf who advised Innova Projects that they would not accept the amount offered and would pursue them for the whole of the deposit, their previous costs and damages. Innova Projects also requested its costs although this as not pursued. An award of costs must represent costs in the application. I consider the costs incurred by the Applicants related to the termination of the building contract and not the dispute in regard to each party’s entitlement in regard to the deposit and I make no order as to costs.
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