Tom Builder Pty Ltd v Duong
[2013] QCAT 366
| CITATION: | Tom Builder Pty Ltd v Duong [2013] QCAT 366 |
| PARTIES: | Tom Builder Pty Ltd (Applicant) |
| v | |
| Van Quan Duong (Respondent) |
| APPLICATION NUMBER: | BDL070-11 |
| MATTER TYPE: | Building matters |
| HEARING DATE: | 3 June 2013 |
| HEARD AT: | Brisbane |
| DECISION OF: | Michelle Howard, Member |
| DELIVERED ON: | 21 June 2013 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: |
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| CATCHWORDS: | BUILDING CONTRACT DISPUTE- where home owner claims damages for demolition and related works, costs of electricity connection and return of deposit-where contract term regarding obligation to obtain building approval varied by agreement where implied term to vary completion date–where wrongful termination by homeowner amounts to repudiation- where contract later terminated by builder- where homeowner not entitled to damages Domestic Building Contract Act 2000 ss79, 98 Commonwealth v Amann Aviation Pty Ltd (1991) 174 64 Ogle v Comboyoro Investments Pty Ltd (1976) CLR 444 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Mr JK Meredith, Counsel, instructed by Southside Lawyers represented Tom Builder Pty Ltd |
| RESPONDENT: | Mr DJ Nguyen, Australasia Law, represented Mr Duong |
REASONS FOR DECISION
Mr Duong and his partner bought a property at South Brisbane, which had development approval for three townhouses. He bought it because his children wanted to attend Brisbane State High School, and to do so, they needed to live in the catchment area. According to Mr Duong, his family needed to reside in the area by December 2010.
Mr Duong and his partner entered into a building contract with Tom Builder Pty Ltd on 12 March 2010. Although the Schedule to the contract does not include a description of the works, it is common ground that the building works involved the construction of three residential dwellings on the South Brisbane property. Mr Duong’s partner is not a party to the proceedings. For convenience, I refer to Mr Duong as the home owner and Tom Builder as the builder.
Some terms were set out in the Schedule to the Contract.[1] The contract price was $750,000. A deposit of $20,000 was payable and was paid. The Schedule specified the commencement date for the works as 28 March 2010[2] and completion date as 28 October 2010.[3] A construction period of 180 days was specified.[4]
[1] Exhibit 4.
[2] Exhibit 4, Item 9.
[3] Exhibit 4, Item 10.
[4] Exhibit 4, Appendix Part C.
It is common ground that there was a house on the property which was to be demolished before the three new dwellings were constructed. A demolition approval was obtained on 3 August 2010. The house was demolished in September 2010. It is common ground that demolition and excavation costs were not included in the contract, and were to be separately met by the home owner. The builder says that similarly excavation costs were not included.
Mr Duong paid for the costs of demolition and related asbestos removal. However, he did not pay for the excavation and removal of demolished materials which cost $8,250. Although the costs were billed directly to him initially,[5] they were paid by the builder.[6]
[5] Exhibit 1, Attachment F.
[6] Exhibit 9, Attachment TH-5 (page 187).
Both parties acknowledge that at the time the contract was entered into, there were two current Brisbane City Council development approvals, dated 15 May 2009 and 2 December 2009. However, the builder says that Mr Duong only made him aware of the earlier approval. The builder says he discovered the second approval, which was in different terms, through his certifier but not until about mid-September 2010.
Mr Doung, did not initially suggest in his statement evidence he had given any development approval to the builder.[7] In a later statement, he asserted that he gave both development approvals to the builder on 5 March.[8] At hearing, he gave evidence that he gave the builder a disc containing the documents. He did not know what documents it contained.
[7] Exhibit 1, paragraphs 2- 3.
[8] Exhibit 3, paragraph 12.
The builder acknowledges receiving hard copies of draft plans prepared by architects Blu Liquid from Mr Duong on 5 March. He also acknowledges receiving on 12 March 2010, before the contract was signed, draft plans from the home owner prepared by STA, engineers.
Mr Huynh, sole director of the builder, says in a witness statement, that he told the home owner that full plans and building approval would be required before the works could commence and that the owners were aware that the draft plans and development approval of 15 May 2009 was inadequate.[9] However, inconsistently he also says that when the contract was signed, Mr Duong asserted that the plans provided were adequate to obtain Council building approval and that accordingly, he believed he would be able to commence construction on 28 March 2010, in compliance with the date specified in the contract.[10]
[9] Exhibit 9, paragraphs 12-13.
[10] Exhibit 11, paragraphs 16-17.
Mr Huynh says that despite the contract providing for the home owner to obtain building approval, he later offered to do so as he thought this would be quicker.[11] The home owner says that it was always intended that the builder would obtain the approval.[12] The Schedule to the contract indicates that the home owner was responsible for obtaining building approval, although it is apparent on the face of the contract that changes were made about which party was to obtain it.
[11] Exhibit 9, paragraph 14.
[12] Exhibit 1, paragraph 3.
It is common ground that after the contract was signed, work did not commence. The builder says he was engaged in obtaining the necessary plans and approvals to allow construction to begin. He says he expended considerable monies in this endeavour, some $29,062.45.[13] He also organised demolition approval, and paid premiums required under the contract for insurance and other necessary matters, at a cost of $10,282.40.[14] Although it is not clear whether he did this before or after the contract was terminated, he also later paid the excavation and rubbish removal costs referred to earlier, which Mr Duong did not pay.
[13] Exhibit 1, paragraphs 21-22.
[14] Exhibit 9, paragraphs 29-31, paying further amounts of $6,344.40 and $3,938.
Mr Huynh says he kept Mr Duong informed and that it was understood construction would commence as soon as possible. He understood the home owner understood and accepted that the works could not commence until building approval was obtained.[15] Mr Doung says he was frustrated by the failure of the builder to commence the works, and his constant excuses about why they could not commence.[16]
[15] Exhibit 1, paragraph 49.
[16] Exhibit 1, paragraph 10-13 and Exhibit 3, paragraphs 13-14.
Building approval was finally received on 16 December, 2010. However, Mr Duong purported to terminate the contract in a letter dated 11 December 2010 from his lawyers to Tom Builder. The letter states that the contract is terminated under clause 20.2 of the General Conditions for failure to comply with a notice to remedy breach dated 23 November 2011, essentially because the works had been abandoned and not completed in a timely way.[17]
[17] Exhibit 9, TH9, pp191-192.
Around this time, although it is not clear when, Mr Duong’s children were not accepted at Brisbane State High, which he says caused a lot of problems in his family. Mr Duong subsequently sold the property to Mr Tran. Settlement was in May 2011. The builder asserts that Mr Tran received copies of the plans and approvals that he had obtained. Mr Tran does not recall receiving them and says he obtained his own. Mr Duong says he did not receive them from the builder.
Inconsistently with the purported termination under the General Conditions and the initialling by him of clauses 25 and 26 in the General Conditions,[18] the home owner now disputes that the General Conditions were given to him when the contract was signed and that they form part of the contract between the parties. He also disputes that the Contract Information Statement[19] was given to him.
[18] Exhibit 5.
[19] Exhibit 6.
Tom Builder filed an application seeking damages from Mr Duong, who then made a counter-claim. The proceeding was listed for hearing on 1 March 2012. Orders were made dismissing Tom Builder’s claim, and making orders in favour of Mr Duong. That order, as far as it relates to the orders in favour of Mr Duong, was set aside by the Appeal Tribunal which remitted the determination of Mr Duong’s counter-claim to the Tribunal.[20] The claim of Tom Builder Pty Ltd was dismissed because Tom Builder failed to progress it, rather than following a hearing on its merits.[21] The Appeal Tribunal did not disturb the orders dismissing it.
[20] Tom Builder Pty Ltd v Duong [2012] QCATA 167.
[21] Ibid, esp [1-4, 38].
Therefore, only Mr Duong’s counter-claim for damages for breach of, and in reliance on, the contract between the parties is now to be determined.
Mr Duong claims $39,636 plus interest at 6% from 28 October 2010 to date. Claim is broken down as follows:
(a) Return of deposit $20,000
(b) Cost of demolition of existing premises $14,190
(c) Cost of asbestos removal $ 4,290
(d) Cost of electricity connection $ 1,156
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TOTAL $ 39,636
Other than the deposit monies, the amounts claimed are for damages for loss incurred in reliance upon the contract.
Tom Builder submits that the claim should be dismissed.
For the claim to succeed, the home owner must establish to my reasonable satisfaction that the builder breached the contract and that the home owner suffered loss as a result, for which he is entitled to be compensated.
The evidence
Mr Duong and Mr Thanh Tran, the subsequent purchaser of the property, gave evidence in support of the counter-claim. Mr Tommy Huynh gave evidence on the builder’s behalf.
Mr Tran’s evidence was brief and to the effect that he did not recall receiving copies of plans and approvals obtained by Tom Builder when he purchased the property from Mr Duong. At its highest, his evidence was equivocal about whether he received plans and approvals obtained by the builder. In any event, in light of the conclusions I reach, his evidence is not of assistance.
The evidence of Duong and Mr Huynh contains inconsistencies, some of which have been referred to earlier.
Mr Duong resisted answering straight-forward questions. He said in response to a variety of questions that he did not know, that he did not speak or read English, and that he simply left everything to the builder. On his version of events, he signed a contract to pay $750,000 without understanding anything about it, except he says, when building was to commence and complete under the contract. Ultimately, I formed the view that he returned to standard responses when he perceived that answering the questions asked was inconvenient for his claim.
Mr Huynh’s gave his evidence in an apparently more straight-forward manner. He acknowledged delays and made appropriate concessions when being cross-examined. However, he was vague about some details, for example, when and for what period he had requested an extension of time to complete the works. Also, he did not in my view adequately explain why the contract provided for the commencement date of 28 March, when a building approval had not been obtained, and (while undoubtedly there were some additional delays relating to the confusion about development approvals in existence) as the course of events in the matter suggests, approvals take time to obtain.
Because of the somewhat unsatisfactory nature of the evidence from Mr Duong and Mr Huynh, wherever possible I have formed conclusions which are supported by the documentary evidence. However, in the case of inconsistency, I have preferred Mr Hyunh’s evidence which I consider more reliable, and which I have therefore given greater weight.
Are the General Conditions part of the contract?
Mr Duong says he was not presented with and did not receive a copy of the General Conditions or the Contract Information Statement. However, Mr Duong had initialled clauses 25 and 26 in the body of the copy of the General Conditions produced to the tribunal by the builder.[22] He does not dispute that the initials are his. Further, Mr Duong’s lawyers on his instructions wrote to Tom Builder purporting to terminate the contract in reliance on a term of the General Conditions.
[22] Exhibit 5.
The General Conditions are contained in a booklet as part of the standard Master Builder’s Contract Package. The home owner’s copies of the Schedule are no longer in the booklet. Mr Huynh says he gave a separate copy of the General Conditions, together with his two copies of the Schedule to Mr Duong.[23] Inconsistently, in another statement, he says he gave the Schedule and the General Conditions to Mr Duong in a bound booklet after the contract was signed.[24] In oral evidence he said he gave an explanation of them also to Mr Duong.
[23] Exhibit 11, paragraph 7.
[24] Exhibit 10, paragraph 7.
Items 27 and 28 of the Schedule are ticked indicating that copies of the Contract Information Statement and the General Conditions have been given to the home owner, but inconsistently, the boxes contained in the Warning[25] have not been ticked to confirm that the Contract Information Statement has been given. However, nor has the box been ticked to indicate that clauses 25 and 26 have been initialled in the General Conditions, whereas they have been.
[25] Exhibit 4, page 12.
Despite the inconsistencies in his statements, in essence Mr Huynh says he gave a copy. The initialling in the contract Schedule and the purported termination letter in reliance upon the General Conditions point to the General Conditions having been presented and given respectively. I accept that Mr Huynh gave a copy of the General Conditions to Mr Duong when the contract was signed.
In any event, had I not been satisfied of this, I would have found that Mr Huynh is estopped from denying that the General Conditions formed part of the contract as a result of his actions, taken through his lawyers, purporting to terminate the contract in reliance upon the General Conditions.
Building approval, development approval of 2 December 2009 and related matters
Works could not lawfully commence until building approval was obtained.
Mr Duong’s asserts that on 5 March 2010, Mr Huynh told him he would take the plans and progress the application.[26] Mr Huynh’s evidence says that it was not until after the signing of the contract, sometime in March or April 2010, that the parties agreed that that the builder would accept responsibility for obtaining the building approval.[27] He says that between March and December 2010, with Mr Duong’s knowledge, he engaged consultants to obtain the necessary plans and building approval.[28]
[26] Exhibit 1, paragraph 3.
[27] Exhibit 9, paragraph 14.
[28] Exhibit 9, paragraph 15.
Mr Huynh asserts that based on what Mr Duong told him, when the contract was signed he had believed that the building works could be completed by 28 October 2010. On this basis, he nominated the commencement and completion dates in the Schedule. However, he also said he explained that construction would take 6 months from the time approval was obtained.
As a builder, he was in a better position to know about the requirements for and likely timeframes for obtaining the necessary approvals, including the plans required. However, he says he included the commencement date based on what Mr Duong told him. On this basis, Mr Huynh allowed some two weeks from the date of the contract for obtaining approval (by the nominated commencement date of 28 March 2013), rather than specifying that the construction period was 6 months from the building approval being obtained. Although it is a somewhat inadequate explanation, he simply says he did not complete the contract in that way as he did not know the plans were not correct.
Mr Duong submits that an email dated late January 2010[29] from an employee of the builder to a certifier enquiring about the project and indicating a desire to obtain BA[30] supports his evidence. However, I do not find this persuasive because the email was some 6 weeks before the contract was signed. A deal was not struck until 12 March, 2010. Whatever preliminary discussions may have taken place in January 2010 which preceded the email, are not necessarily reliably indicative of the agreement struck in March 2010 and whether steps had been taken in the interim to secure building approval.
[29] Exhibit 9, page 66.
[30] I accept that BA is a commonly used shorthand for building approval.
As outlined earlier, there are alterations to the Schedule,[31] in Item 14 about building approval. There is a tick in blue ink placed in the box provided to indicate this was the contractor’s responsibility, and then two lines in black ink are crossed through that tick. A tick in black ink is placed in the box provided to indicate that the owner is responsible.
[31] Exhibit 4.
In the Schedule most of the items have been completed in blue ink. However, Items 9 and 10 about commencement and practical completion respectively are completed in black ink. On the execution page, the name of the builder is in blue ink, whereas his signature and the signatures of Mr Duong and his partner are all in black ink. It is reasonable to infer that the builder completed the contract in draft in blue ink, but that when it was presented, there were discussions, following which additions and alterations were made in black ink. The contract was then executed.
This tends to suggest that there were negotiations about who was to be responsible for building approval when the contract was presented. It is reasonable to infer that this is the case, and I do. I am satisfied that under the contract, the home owner was to obtain the building approval.[32] Consistently with this, Item 5 sets out that the home owner was also to obtain the necessary plans.[33]
[32] Exhibit 4, Item 14.
[33] Exhibit 4, Item 5
I also accept, as Mr Huynh says that he later offered to do what was necessary to obtain building approval in March or April 2010. This included obtaining the necessary plans. I accept that from March to December 2010, with Mr Duong’s knowledge, he engaged consultants to obtain the necessary plans with a view to obtaining building approval. He does not suggest that this variation to the contract was reduced to writing as it should have been in compliance with clause 12 of the General Conditions and the Domestic Building Contracts Act 2000. [34]
[34] Section 79.
By his own admissions and the focus of his answers in cross-examination, Mr Duong’s only real interest was in having the property built by the date he desired. I consider it is more likely than not that he did, as Mr Huynh suggests, assert that the plans to hand at the time of signing the contract were adequate as this is consistent with getting works underway as soon as possible. Also, despite the various assertions Mr Duong made in written statements to the tribunal, I am satisfied on the basis of his evidence in cross-examination that he does not actually know what development approval documentation he gave to the builder.
For the reasons set out earlier, I prefer Mr Huynh’s evidence and accept that Mr Duong did not provide the development approval of 2 December 2009 to the builder at any time. The initial building approval application was being progressed on the basis of the 15 May 2009 development approval. But the type of construction intended could not be achieved under the earlier approval. I accept that Mr Duong’s failure to provide the 2 December 2009 development approval, which was only discovered and notified to Tom Builder some months later by his certifier, delayed the building approval process.
Was there an implied term that the date for completion was extended?
The builder submits that at the time it was agreed that he would obtain building approval, an implied term also varied the completion date, such that completion was required by 180 days after building approval was obtained or within a reasonable time of building approval. Mr Duong submits that there was no written request for an extension under clause 15 of the General Conditions.
Mr Huynh says that he did, on behalf of the builder, request an extension in June 2010 and that a further request was made in October 2010. He acknowledges that the requests and outcomes were not reduced to writing. His evidence was vague about what agreed as a result, but he was clear that when they spoke in October that he told Mr Duong that a further 4 to 8 weeks was required for the approval process before construction could commence. At this stage, the development approval of 2 December 2009 had only recently been discovered. He says he understood Mr Duong agreed to this.
A term will only be implied in a detailed contract if it is reasonable to imply it although the parties did not turn their minds to it; it is necessary to give business efficacy to the contract; it is obvious; it is capable of clear expression; and does not contradict any express term.[35]
[35]BPRefinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266; Julong Pty Ltd v Fenn & Anor [2002] QCA 529.
I have found that the contractual terms were varied by agreement after execution, such that the builder became responsible for obtaining building approval and the necessary plans to achieve approval. There is no evidence that there was agreed at that time a corresponding variation to the commencement and completion dates. The evidence of Mr Huynh is that he requested extensions at two later dates in June and October, 2010.
By the time it was agreed later in March or April 2010 for the builder to be responsible for the building approval, what little time had been allowed under the contract for obtaining approval and other steps before construction had effectively passed. By necessary implication, at that stage, an extension of time for commencement and completion was necessary for the efficacy of the contract. It is clear on the face of the Schedule that at the time of the execution of the contract, the parties contemplated and specified a 180 day construction period.
An implied term to the effect of a 180 day construction period after approvals were to hand also appears consistent with the actions of both Mr Huynh and Mr Duong.
The builder could have taken action to terminate the contract and recoup his reasonable expenses if building approval was not obtained within 75 days of the contract date (that is, in June 2010) under clause 4.2 of the General Conditions. But he did not do so. Instead, once the builder accepted responsibility for obtaining the necessary plans and building approval, he continued with that process, even once he discovered that he had not been given the correct development approval, expending considerable monies in doing so. It is reasonable to infer that he would not have done so, if he had reason to think that Mr Doung did not intend for the construction period to be altered to commence from the time of building approval.
Likewise, Mr Duong did not terminate the contract under clause 4.2 when building approval was not to hand after 75 days. Instead, he continued to act as though the construction would commence once approval was to hand. Demolition approval was obtained for the existing dwelling in August 2010. He arranged to have the house demolished in September 2010, in apparent preparation for construction.
Mr Huynh says, and I accept, that he requested some form of extension, although perhaps in vague terms, in June and again in October 2010, with which Mr Duong agreed. It is reasonable to infer from his actions that Mr Duong knew as the builder suggests that Tom Builder continued to work towards building approval through that period and up until Mr Duong took steps purporting to terminate the contract.
Mr Duong’s combined actions, consistent with preparation for construction, and inaction in failing to terminate under clause 4.2, between 28 March and 23 November 2010 tend to suggest that he had impliedly agreed to an extension of the construction period pending building approval.
While variation to the contract should have been in writing, the variation is not void or unenforceable for the failure to reduce it to writing.[36]
[36] Domestic Building Contracts Act 2000, s 98.
For these reasons, I am satisfied that there was an implied term extending the time for construction so that completion was due 180 days after building approval.
Mr Duong’s purported termination of the contract
Clause 20 sets out the home owner’s right to terminate, including when a builder unlawfully suspends the works, or is unable or unwilling to complete the work or abandons the contract upon the giving of 10 days notice unless the breach is remedied. The clause provides that notice of termination is not to be given unreasonably or vexatiously. If it is so given, it is void. It also provides that if the contract is ended under the clause, the builder is entitled to a reasonable amount for the value of the works to the date of termination.
By letter dated 11 December 2010, Mr Duong’s lawyers advised the builder that the contract was terminated under clause 20.2 of the General Conditions because it had suspended or abandoned the building works and was in substantial breach of the contract. It refers to a Notice to Remedy Breach given on 23 November, 2010.
Given the implied term to extend the time for completion to 180 days after building approval, it follows that Mr Duong’s purported termination of the contract was unreasonable because the works had not been suspended or abandoned. The purported termination is therefore void under clause 20.2.
Conclusions
Generally, wrongful termination constitutes repudiation.[37] I am satisfied that Mr Duong’s actions were a repudiation of the contract.
[37] Ogle v Comboyoro Investments Pty Ltd (1976) CLR 444.
Following repudiation, an innocent party is entitled to accept the repudiation and elect to terminate the contract[38] by taking unequivocal conduct inconsistent with the contract.[39] The builder did this by his actions in commencing the proceedings in March 2011 seeking to recover damages from Mr Duong, and in doing so demonstrating his intention not to be bound by the contract.
[38] Sargent v ASL Developments Ltd (1974) 131 CLR 634.
[39] Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622.
Both parties were relieved of their obligations under the contract from the time of termination.[40] Upon termination, all obligations except accrued obligations were discharged. The obligation of the purchaser to pay the deposit under the contract was an accrued obligation, it having been payable on signing of the contract under clause 11.5 of the General Conditions. A deposit is considered a bond for performance, indicating a sincere intention to be bound, which is forfeited if the party breaches the contract. [41]
[40] Mc Donalds v Dennys Lascelles Ltd (1933) 48 CLR 457.
[41] Howe v Smith (1884) 27 Ch D 89;
Following breach or repudiation, an innocent party is entitled to damages for loss to compensate for the actual loss suffered as a result of the other party’s failure to perform the contract. Mr Duong is not an innocent party. In breach of the contract, he wrongfully repudiated it and the builder later terminated it. It follows that Mr Duong is not entitled to any damages.
Mr Duong’s counter-claim is dismissed.
I also make directions about the filing of material and submissions in support of any application for costs, and for a determination of the issue of costs.
Observations
If I am wrong about termination, and Mr Duong lawfully terminated the contract under clause 20 of the contract, in the event of termination by the home owner, the builder is entitled to a reasonable amount for the value of the works carried out. The builder performed work in accordance with the variation to the contract to secure building approval and plans for Mr Duong. They had value, even though Mr Duong may ultimately have decided not to use them. The costs of doing so were some $29,062.45, plus, his own efforts. I would be satisfied that the builder should retain the whole of the deposit monies.
Further, even if Mr Duong lawfully terminated the contract, I also make the following observations about the claim for reliance damages for the demolition-related costs and costs of the electricity connection. Reliance damages, or damages for wasted expenditure, may be awarded when a party has sustained a loss because of the other party’s breach of contract.[42]
[42]See for example, Commonwealth v Amann Aviation Pty Ltd (1991) 174 64; Robinson v Harman (1848) 1 Ex 850.
The fact that Mr Duong expended monies associated with demolition and the subsequent re-connection of electricity does not of itself lead to the conclusion that he suffered a compensable loss. Loss must be established. Mr Duong’s oral evidence that he lost about $100,000 on the project does not reasonably satisfy me that he sustained loss as a result of any breach by the builder. The purchase and sale prices of the land were not disclosed. Even if (and I do not accept on the evidence that this is the case) the land was sold for less than the purchase price and the costs of demolition, it may or may not be attributable to the builder’s actions. Therefore, even if Mr Duong lawfully terminated the contract, I would not award damages associated with the costs of demolition and electricity connection.
Accordingly, even if I had found Mr Duong had lawfully terminated the contract, I would dismiss his counter-claim.
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