Thallon Mole Group Pty Ltd v Morton

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DISTRICT COURT OF QUEENSLAND

CITATION:

Thallon Mole Group Pty Ltd v Morton [2022] QDC 224

PARTIES:

THALLON MOLE GROUP PTY LTD
ACN 104 671 801
(plaintiff)
v
LOUISE MORTON
(defendant)

FILE NO/S:

2695/19

DIVISION:

Civil - Commercial List

PROCEEDING:

Trial

ORIGINATING COURT:

Brisbane District Court

DELIVERED ON:

7 October 2022

DELIVERED AT:

Brisbane

HEARING DATE:

25 - 28 May 2021; 1 - 4 June 2021; 6 - 10 September 2021; 13 - 16 September 2021; 10 & 11 February 2022;

Final submissions in reply 14 February 2022

JUDGE:

Muir DCJ

ORDER:

By 4.00pm Thursday 27 October 2022, the parties are to:

(a)      Bring in Final Orders including relevant interest calculations and provision for the release of the Retention Monies consistent with my findings; and

(b)      Exchange and deliver written submissions as to costs (if necessary), no longer than four pages.

CATCHWORDS:

CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – REMUNERATION – STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS – PROGRESS PAYMENTS – where defendant entered into a contract with the plaintiff – where contract was for construction of a luxury residential property – where during the course of construction the contract was terminated by the defendant for breaches – where plaintiff claimed they were willing and able to continue performing the contract – where the defendant did not pay outstanding progress claims for works completed – where the plaintiff seeks payment for the works completed.

PROCEDURE – CIVIL PROCEDURE IN STATE AND TERRITORY COURTS – COSTS – ISSUES AND COUNTERCLAIMS – where works performed under the contract were defective – where the defendant counterclaims for the cost of rectifying defective works – where there is dispute as to defects and the cost of rectification.

CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – THE CONTRACT – CONSTRUCTION OF PARTICULAR CONTRACTS AND IMPLIED CONDITIONS – OTHER MATTERS – where specifications of the contract were not able to be met – where the contract price must be reduced to account for failure to meet conditions of the contract.

CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – PERFORMANCE OF WORK – TIME – where performance of the contract was delayed – where the plaintiff claimed entitlement to an extension of time – where the defendant claimed no entitlement to extension of time exists – where the defendant argued that delays were caused by the plaintiff, were foreseeable and no notice of an extension was given.

CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS ­­– PERFORMANCE OF WORK – GENERAL ­– where the plaintiff claimed that works had reached practical completion – where the defendant argued that practical completion was not reached due to defective works.

CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS ­­– THE CONTRACT ­–CONSTRUCTION OF PARTICULAR CONTRACTS AND IMPLIED CONDITIONS – SECURITY AND RETENTION FUNDS – where retention money was to be given to plaintiff after practical completion – where practical completion did not occur – where the contract stipulated that defendant had recourse to unpaid retention money if notice…

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Details
Case
[2022] QDC 224
Decision Date

CaseChat Overview and Summary

The case of Thallon Mole Group Pty Ltd v Morton was heard in the Supreme Court of Queensland. The dispute involved a contract for the construction of a luxury residential property. The defendant terminated the contract for alleged breaches by the plaintiff, who claimed they were willing and able to continue performing the contract. The plaintiff sought payment for the works completed, while the defendant counterclaimed for the cost of rectifying defective works. The court was required to decide several legal issues, including the entitlement to progress payments, the cost of rectifying defective works, and the impact of estoppel in the face of statutory requirements.

The court examined the terms of the contract, the nature of the defects, and the cost of rectifying them. The court found that the plaintiff had not met certain specifications and that the contract price should be reduced accordingly. The court also considered whether the plaintiff was entitled to an extension of time for delays in performance and whether practical completion had been achieved. The court further assessed the plaintiff's claim for quantum meruit regarding works subject to variation and whether an agency by estoppel could override statutory requirements for written variations.

The court concluded that the plaintiff was not entitled to progress payments for works completed after the contract's termination. Regarding the counterclaim for defective works, the court held that the plaintiff was liable for the cost of rectification. The court found that estoppel could not override the statutory requirement for written variations. The court ordered that the retention monies be released to the plaintiff, subject to certain deductions for the cost of rectifying defective works. The court also directed the parties to exchange written submissions on costs.

Orders

Orders of the court

By 4.00pm Thursday 27 October 2022, the parties are to:

(a) Bring in Final Orders including relevant interest calculations and provision for the release of the Retention Monies consistent with my findings; and

(b) Exchange and deliver written submissions as to costs (if necessary), no longer than four pages.

Background

Background to the litigation

As the factual analysis below reveals, in April 2018, the two Schucco doors (D07) and (D08) were ultimately omitted from the contracted scope of works.Relevant Facts Mr Stewart (or TSA) was not a party to the proceeding, but Mr Stewart was called by Mrs Morton and gave evidence at the trial. The specification for the house provided for a four and five panel (or leaf) sliding door system. The five leafed door faced the pool. The four leafed door faced the back yard. When the design of the house was being undertaken in October 2015, TSA communicated with Ian McFarlane, who was, at that time, a representative of Schucco Australia Pty Ltd (Schucco being a German brand) to obtain pricing for the two doors.[17] [17]Exhibit 271. On 30 October 2015, Mr McFarlane wrote to Mr Rhodes at TSA, and provided an estimate of $140,013 (excl. GST) (excluding the drainage system, low E and tinted glass, cranage, as well as fly, barrier and security screens) from Central Glass and Aluminium, for a four and five panel (or leaf) door system.[18] At the time, Mr McFarlane added the following proviso: [19]“In order not to hold up cost estimating any further, we have also increased the number of panels by one for each set of doors – this is pending a request sent earlier this week to Schueco [sic] engineering to determine whether we can oversize the panels to 3.4m in width.” [Emphasis added][18]Exhibit 278 p. 20013.[19]Ibid p. 20012. Mr Rhode’s evidence in chief was that after receiving the email dated 30 October 2015, he had confidence that the doors could be delivered in the required configuration.[20] It is difficult to understand what instilled such confidence in Mr Rhodes at this point in time given that there is no evidence that he ever received an answer from Mr McFarlane about this “pending request”. But Mr Rhode’s confidence may be explained by other evidence (which I accept as a matter of common sense) – that is, he discussed the project in detail with the suppliers of Schucco doors during the design phase of the project. In these circumstances it is reasonable to assume (as I do) that Mr McFarlane told Mr Rhodes at some point during this phase that the doors TSA wanted could be delivered. [20]T14-64, ll 42-45. The tender process for the Contract closed on 31 October 2016. The Contract included a specification for two Schucco branded doors of four and five panels. On 5 October 2016, Scott Andrews (the Contracts Administrator of Thallon Mole), emailed Marc von Briel (the managing director of Schucco Australia), about the supply of the Schucco doors for the house.[21] Mr von Briel responded by email on the same day, stating that Schucco Australia had appointed Capral Aluminium as the exclusive distributor of the doors for Australia and that Mr McFarlane was now the Business Development Manager for Capral. In this email Mr von Briel also relevantly stated that:[22]“In general though we (and Capral) do not supply finished products but have a network of qualified fabricators that can give you peace of mind and a complete supply and install price.” [Emphasis added][21]Exhibit 50 p. 20991. [22]Ibid p. 20990.

Evidence

Evidence Before The Court

Thallon Mole submitted that no amount should be allowed for these costs as they have not been proved and were otherwise not reasonably incurred. The Evidence Supporting the Residual Labour Claim The premise underpinning Mrs Morton’s claim is that these were labour costs that cannot be attributed to any particular defect but are recoverable because Mr White and Mr Diamond’s evidence is that they were reasonably incurred as part of the overall rectification work carried out at the house.[871] For example:(a)The Hutchinson Builders direct labour claimed is on the basis of Mr White’s evidence that he was on-site full-time (five days a week, hours a day) and oversaw all of the remedial works as a supervisor; and that the total cost of his supervision was $34,894.84 (excl. GST);[872] together with Mr Steele’s supervision and site foreman services (in Mr White’s absence) of $14,497.69 (excl. GST);[873] and(b)The hire labour not been allocated to any particular defect is claimed on the basis that there is “sufficient causal connection” between the widespread nature of the defects identified to support the award of these costs as damages.[874][871]Exhibit 296 [92]-[96]; Exhibit 305 pp. 270301-270310. [872]This is the total of the amount of his costs claimed in respect of particular defects of $31,156.11 (excl. GST) plus the 12 percent margin of $3,738.73 (excl. GST).[873]Including the 12 percent margin. [874]Defendant’s Trial Submissions at [923]. The methodology for the calculation of this part of the claim (and indeed all of the labour costs claimed in this case) is premised on the following: (a)First, Mr White making an estimate of the time that was spent by labourers on site on each category of defect by making an estimate of the time associated with performing all the major categories of work that was done;[875](b)Secondly, Mr Diamond then, by reference to the invoices that were issued, performed a mathematical exercise that simply multiplied out each invoice by that estimate;[876] and(c)Thirdly, Mr Diamond then calculated a value for the labour that could not be allocated to a particular task. [875]T16-85, ll 16-20.[876]Exhibit 305. The necessity and justification for such an approach is found in the evidence of Mr White as follows: (a)He did not keep detailed records regarding the number of men who worked on what defect; and (b)He cannot show with certainty the costs of each defect in terms of the Hutchinson direct labour and hire labour; and(c)A key reason why not all labour costs were able to be allocated accurately to particular defect work was because a “time and motion” administrator was not engaged; and whilst that would have ensured detailed records of labour and what work had been carried out, it would have added significant cost to the work. I accept that any exercise to calculate such costs will be imperfect. But the true extent of the unreliability of the broad-brush approach taken by Mr White and Mr Diamond was revealed when the following three matters came to light under their respective cross examinations: [877] (a)First, not all of the time in respect of the three invoices to Mrs Morton can be accounted for;(b)Secondly, even allowing for the allocation of the tiling invoices, only 50 percent of the labour invoiced on seven out of 58 invoices can be accounted for; and(c)Thirdly, in total, half of the labour costs incurred by Hutchinson Builders cannot be accounted for. [877]Under cross examination, a document reproducing the work that was done by Mr Diamond was shown to both Mr Diamond and Mr White (MFI-R). A slightly amended copy of that document, which allocates the invoices in respect of tiling and stonemasonry (which page was missing from a version of the affidavit), was attached to the Plaintiff’s Submissions in Reply.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

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