Thistle Projects Pty Ltd v Pollard
[2010] QCAT 551
•5 November 2010
| CITATION: | Thistle Projects Pty Ltd v Pollard [2010] QCAT 551 |
| PARTIES: | Thistle Projects Pty Ltd |
| V | |
| Mr Neil Pollard |
| APPLICATION NUMBER: | BD401-09 |
| MATTER TYPE: | Building matters |
| HEARING DATE: | 21 September 2010 |
| HEARD AT: | Brisbane |
| DECISION OF: | Dr Bridget Cullen Mandikos, Member |
| DELIVERED ON: | 5 November 2010 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: | 1. The Respondent, Mr Neil Pollard’s, Counterclaim is dismissed. 2. The Respondent, Mr Neil Pollard, to pay the Applicant, Thistle Projects Pty Ltd, the sum of $17,259.00, together with interest at the rate of 15% compounded daily from 18 May 2010, no later than 4.00 pm on Friday, 10 December 2010. |
| CATCHWORDS : | DOMESTIC BUILDING DISPUTE – ADJUSTMENT OF PROVISIONAL SUMS BY QCAT – consideration of information builder had, or reasonably should have had, at time of contract – determination that increase in electrical costs due to change of requirements by home-owner - painting costs primarily due to extensive preparation work that should reasonably have been considered by builder at time of contract. Domestic Building Contracts Act 2000 (Qld), ss 59 and 60 T & T Corporation Pty Ltd t/a Townsend Building Services v Boyaci, B. [2008] QCCTB 135 Sparkes v Bali Pools Pty Ltd [2009] QCCTB 95 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Mr Lachlan McLean, Director of Thistle Projects Pty Ltd |
| RESPONDENT: | Self |
REASONS FOR DECISION
This Domestic Building Dispute was commenced by the builder, Thistle Projects Pty Ltd (“Thistle Projects”), against the home owner, Mr Neil Pollard (“Mr Pollard”), seeking payment of an amount owing on a Master Builders Residential Building Contract. The Application, filed in the former Commercial and Consumer Tribunal (“CCT”) on 26 August 2009, seeks payment of the exceeded provisional sum amounts for electrical and painting.
The CCT was amalgamated into the Queensland Civil and Administrative Tribunal (“QCAT”) on 1 December 2009. QCAT now hears and decides all matters previously dealt with by the CCT: s256 Queensland Civil and Administrative Tribunal Act 2009.
The contract provided, at “Part B – Allowances for Provisional Sums” for several items, including the disputed electrical and painting sums. The provisional sum reflected in the contract for “Elect. Incl. Batting” is $8,000.00 (exclusive of GST), and the provisional sum for “Painting in + out New4Old” is $18,000.00 (exclusive of GST). Thistle Projects seeks repayment of $26,499.00, together with 15% interest.
Thistle Projects’ calculation of loss
As a preliminary matter, it is useful to outline the methodology employed by Thistle Projects to calculate its loss.
Electrical
Thistle Projects’ evidence substantiates that the ultimate price for the electrical work was $17,920.00, exclusive of GST.[1] This amounts to $9,920.00 more than the figure estimated in the contract. The electrical work was performed by a subcontractor, Tony Hendry Electrical Services Pty Ltd, engaged by Thistle Projects.
[1] Exhibit K to the Statement of Lachlan Lethbridge McLean, dated 27 November 2009.
Painting
Thistle Projects’ evidence substantiates that the ultimate price for the painting was $28,155.00, exclusive of GST.[2] This amounts to $10,155.00 more than the figure estimated in the contract. The painting work was also performed by a subcontractor, Brad Russell’s Painting.
[2] Exhibit P to the Statement of Lachlan Lethbridge McLean, dated 27 November 2009.
Overall, the adjustment of the electrical and painting provisional sums amounted to $20,075.00, exclusive of GST (($17,920.00 – 8,000.00) + ($28,155.00 - $18,000.00)) = $20,075.00).
In addition to the increase for the electrical and painting provisional sums, there were other undisputed provisional sums that were adjusted, upwards and downwards, at the time that Thistle Projects issued its amended final invoice to Mr Pollard.[3] Taking these other provisional sum adjustments into account, together with variations to the project, and the addition of a 20% builder’s margin[4], plus GST, Thistle Projects issued a final invoice for $40,725.01. After deducting the payments made by Mr Pollard, there remains $26,499.00, inclusive of GST, outstanding.
[3] Exhibit U to the Statement of Lachlan Lethbridge McLean, dated 27 November 2009.
[4] The Master Builder’s Contract Signed by the parties, Clause 9.5, provides that a builder’s margin of 20% may be added where the cost exceeds the allowance.
Thistle Projects now claims the outstanding $26,499.00, together with contractual interest of 15% from the time that the payments were overdue.[5]
[5] The Master Builder’s Contract Signed by the parties, Item 19, nominates an interest rate on overdue payments of 15%, calculated on a daily basis. Item 20 nominates a period of 7 days for payment.
Mr Pollard’s Counterclaim
10. Mr Pollard seeks payment of $5,000.00 for “internal painting works incorrectly carried out”. While Mr Pollard’s evidence clearly disputes his view that the increase in the electrical and painting costs is justified, the basis for his counterclaim is less clear. There does appear to be a dispute as to whether Mr Pollard’s wife instructed the painters to change “gloss trims and doors to low sheen”. Mr Pollard argues that as a result of this mistake, it will cost him $3,000.00 to complete remedial work.
11. It may not be readily apparent to non-lawyers, but there is an important difference between a counterclaim and a defence. A counterclaim is a proceeding in its own right, and here, Mr Pollard would minimally be expected to put evidence before QCAT establishing that the painting work was (1) defective; and (2) evidence substantiating the costs of rectification. In contrast, a defence disputes the merits of the claim that has been made against the party from whom relief is sought.
12. Mr Pollard has not put on any evidence in support of his counterclaim, and has not called any supporting witnesses, including his wife. In view of this absence of evidence, I dismiss his counterclaim, and instead propose to deal with the merits of the arguments he makes in his counterclaim as a set-off defence. In short, Mr Pollard is arguing that it would be unjust for Thistle Projects to be entitled to payment in consideration of the mistake it has allegedly made with respect to the gloss versus low sheen finish.
Legal Framework
13. The dispute between Thistle Projects and Mr Pollard, over the cost of domestic building work, falls squarely within the provisions of the Domestic Building Contracts Act 2000 (Qld) (“DBCA”).
14. The relevant portions of s59 of the DBCA provide that, with respect to provisional sums:
59 Stating amounts
(1) A building contractor must not enter into a regulated contract stating--
* * *
(b) a provisional sum that is less than the reasonable cost of providing the contracted services to which the sum relates.
Maximum penalty--50 penalty units.
* * *
(3) In deciding, for subsection (1), what is a reasonable cost, regard must be had to—
(a) the information the building contractor had, or reasonably should have had, when the contract was entered into; and
(b) the nature and location of the building site.
15. Following on from s59, s60 of the DBCA provides that:
60 Effect of improper statements
(1) This section applies if a building contractor enters into a regulated contract in contravention of section 59(1).
(2) The contravention does not make any provision of the contract illegal or void.
(3) However, the tribunal may, on an application made, as provided under the QCAT Act, to the tribunal by the building owner, reduce the building owner's liability, for the item or contracted services to which the stated amount or sum relates, to the extent the tribunal considers appropriate.
16. The problem that Thistle Projects and Mr Pollard find themselves facing is one that arises frequently in domestic building disputes before QCAT, and also before QCAT’s predecessor, the CCT. Member Butler AM SC (as he was then) expressed a belief that dramatic provisional sum increases should give rise to a written variation in T & T Corporation Pty Ltd t/a Townsend Building Services v Boyaci, B. [2008] QCCTB 135 (“T & T”). The reason for this is to provide the party responsible for payment the opportunity to consider their position about the costs of the proposed works:
The builder is entitled to receive theprovisional sum increasewhere there has been a legitimate increase in cost of the specified work ordered by the proprietor over the amount estimated by the builder at the time of contracting. Ordinarily this would arise because the price charged by a sub-contractor varied from the builder’s original estimate. The magnitude of the increase claimed here indicates it is not such a [sic] increase. In the absence of any specific evidence, one can only assume that an increase of such a magnitude reflects the introduction of work not contemplated at the time the provisional sum estimate was made. If that be so, the cost of additional work should have given rise to an application for a variation of the contract sum so that the respondent could consider his position as to the nature and extent of the proposed works.
17. In T & T, Member Butler found that an increase in joinery costs did not constitute a legitimate provisional sum item, but rather should have been the subject of a variation. The proprietor of the premises where the work was performed in T & T had not been given an opportunity to consider his position, which would have happened if the works were the subject of a written variation. This is for the reason that a written variation, to be valid, needs to be signed before the works are performed. Accordingly, Member Butler fixed the costs for the joinery work performed at the level of the provisional sum estimate reflected in the contract. Importantly, for reasons that will be discussed further below, Member Butler also found that the proprietor had not changed his requirements in respect to the joinery works subsequent to the signing of the contract. The circumstances in this case, at least so far as the electrical work is concerned, are quite different.
18. On the facts before me, I consider the approach taken by Member Oliver (as he as then) in Sparkes v Bali Pools Pty Ltd [2009] QCCTB 95 (“Sparkes”) to be the correct approach here. In Sparkes, Member Oliver pointed out that s59 of the DBCA, by virtue of s60 of the DBCA, “does not vitiate the contract, but provides for a penalty to the contactor and permits a financial adjustment to ensure fairness”.
Application of the law to this dispute
19. I find that the facts before me are distinguishable from those that were before Member Butler in T & T. In contrast to the proprietor in T & T, whose joinery requirements remained unchanged, here, I find that Mr Pollard significantly changed his electrical requirements following the signing of the contract.
20. Much of Mr Pollard’s defence draws upon his 40-plus years of experience working in the building industry, including work as a construction manager for a large corporation, arguing that he knows the job could have been performed for less. However, whether the job could have been performed for less is not the determinative test, but merely one of the factors that I might consider. In deciding whether to reduce Mr Pollard’s liability for the quantum of the electrical and painting provisional sums, I must have regard to the information that Thistle Projects had, or reasonably should have had, at the time the contract was entered into.
Information had, or reasonably should have had, vis-à-vis electrical costs
21. With respect to the electrical costs, Mr Pollard produced an estimate from another contractor, Tristate Electrical and Communications Pty Ltd, which he says established that the electrical work could have been done for considerably less.[6] That evidence carries little weight, however, in that Tristate Electrical was not called to give evidence, or elaborate upon the basis for its estimate.
[6] Exhibit PQ to the Statement of Neil Pollard, dated 15 January 2010.
22. Mr Lachlan McLean, the sole director of Thistle Projects, gave evidence that at the time the parties negotiated the contract, Mr Pollard advised him that he required a basic electrical plan only, consisting of one power point and batten for each room, and a basic kitchen. On the strength of this assurance, Mr McLean said that he reduced the provisional sum in the contract for electrical from $14,000.00 to $8,000.00. I accept Mr McLean’s evidence on this point.
23. Subsequently, Mr Pollard produced an electrical plan that contained considerable work beyond the “basic” plan originally contemplated.[7] The plan that eventuated called for some 20 down lights, 4 fans, and additional power points. Mr Pollard then amended the electrical plan a second time, including Foxtel Points, speaker and data cabling, television and telephone points, an exhaust fan, and other modifications. It is my view that these alterations took the electrical plan well beyond what might be considered “basic”. Further, Mr McLean gave evidence that Mr Pollard requested the heights and location of several electrical items be changed during the course of the job. Such requests naturally add to the labour costs.
[7] Exhibit I to the Statement of Lachlan Lethbridge McLean, dated 27 November 2009.
24. With regard to the electrical provisional sums, I do not think that Thistle Projects should suffer a loss due to the changes made by Mr Pollard to the electrical plan originally envisaged at the time the contract was entered into. I find that Thistle Projects should be paid the balance of the electrical provisional sum costs as follows:
$9,920.00, balance of electrical costs exclusive of GST
$1,984.00, 20% Builder’s Margin
$1,190.40, GSTTotal payment required for electrical = $13,094.40
25. In consideration of the relevant Master Builder’s contractual provision relating to interest, I further find that Mr Pollard should pay interest on the sum of $13,094.40 at the rate of 15%, compounded daily, from the date the payment was due. As the amended invoice was issued to Mr Pollard on 10 May 2009, and was due within 7-days, I find that interest should accrue from 18 May 2010.
Information had, or reasonably should have had, vis-à-vis painting costs
26. My views about the information that Thistle Projects had, or reasonably should have had, with respect to the painting costs differ from my views about the electric costs. The property being renovated was an existing residence that was being extended. By his own admission, at the time he undertook the quoting process, Mr McLean undertook a “quick site inspection”.[8]
[8] Paragraph 13, Statement of Lachlan Lethbridge McLean, dated 27 November 2009.
27. Much of the increase in painting costs relates to additional preparatory work required, as the “original residence was in a terrible state of neglect,” and had been damaged by white ants.[9] I do not think that Mr Pollard should be expected to bear these additional costs, as had Mr McLean conducted a more fulsome inspection at the time he prepared his quotation, these costs could have reasonably been identified.
[9] Paragraphs 58-59, Statement of Lachlan Lethbridge McLean, dated 27 November 2009.
28. Mr Pollard produced an estimate from a painting contractor, Tri-Part Pty Ltd, suggesting that the painting work could have been done for less than the ultimate amount claimed.[10] However, as Tri-Part was not called to give evidence, this evidence could not be properly challenged before the Tribunal and therefore carries little weight. Neither Thistle Projects nor Mr Pollard called any witnesses in support of their positions. As such, it would be fair to classify the dispute relating to painting as a “he-said, he-said” dispute.
[10] Exhibit T to the Statement of Neil Pollard, dated 15 January 2010.
29. For example, Thistle Projects claims that Mr Pollard’s wife gave the painters incorrect instructions, leading to increased costs. While Mr Pollard did not call his wife as a witness, she did make a statement disputing Thistle Project’s interpretation of her instructions to the painters.[11] With respect to some doors that were ordered, Thistle Projects says that costs escalated when Mr Pollard required modifications to some doors that were being painted; Mr Pollard says that Thistle Projects ordered the wrong doors and this is the reason for the increase in costs. On any level, it is apparent to me that the communications between the parties as to the painting requirements were ineffective and at times, at cross-purposes.
[11] Statement of Charlee Pollard dated 15 January 2010, Exhibit M1 to the Statement of Neil Pollard, dated 15 January 2010.
30. Taking all these factors into account, I consider that Mr Pollard is entitled to a reduction of the painting costs in accordance with s60(3) of the DBCA. In the circumstances, I consider a reduction of the painting costs by $7,000.00 to be appropriate. That leaves a balance of $3,155.00, exclusive of GST, owing for the painting.
31. In reducing the painting costs to be paid by Mr Pollard, I have had regard to the statements provided by the painters[12], indicating that the prep work was extensive and costly because once onsite, the painters became aware that the existing paint had lead content. As a consequence, it had to be scraped by hand, adding significantly to the costs. Based upon the material before me, I estimate that approximately 70-75% of the increased painting costs were due to the additional preparation work, which could have been discovered at the time of quotation by Thistle Projects. In other words, I have concluded that an appropriate provisional sum for the painting would have been in the order of $25,000.00. I have adjusted the amount of the painting costs to be paid by Mr Pollard in accordance with this estimation, requiring him to pay the amount that is over $25,000.00 only (that being $3,155.00). It is my view that this is fair in the circumstances, as I believe that there were some painting costs that could not have been foreseen at the time of contract, and which Mr Pollard should pay.
32. I find that Thistle Projects should be paid the balance of the painting provisional sum costs as follows:
$3,155.00, balance of painting costs exclusive of GST
$631.00, 20% Builder’s Margin
$378.60, GSTTotal payment required for painting = $4,164.60
33. As I have found with the electrical costs, I consider that interest should accrue on the outstanding amounts for painting works from 18 May 2010.
Orders
1. The Respondent, Mr Neil Pollard’s, Counterclaim is dismissed.
2. The Respondent, Mr Neil Pollard, to pay the Applicant, Thistle Projects Pty Ltd, the sum of $17,259.00, together with interest at the rate of 15% compounded daily from 18 May 2010, no later than 4.00 pm on Friday, 10 December 2010.
Statement of Jason Bradley Russell, dated 24 November 2010, Exhibit I to the Statement of Lachlan Lethbridge McLean, dated 27 November 2009.
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