WA COUNTRY BUILDERS PTY LTD and BRADSHAW - [2012] WASAT 100

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: BUILDING SERVICES (COMPLAINT RESOLUTION and ADMINISTRATION) ACT 2011 (WA)

CITATION: WA COUNTRY BUILDERS PTY LTD and BRADSHAW [2012] WASAT 100

MEMBER: MS A DAVIES (SENIOR SESSIONAL MEMBER)

HEARD: 1 MAY 2012

DELIVERED : 9 MAY 2012

PUBLISHED : 15 MAY 2012

FILE NO/S: CC 462 of 2012

BETWEEN: WA COUNTRY BUILDERS PTY LTD
Applicant
AND
ALLAN BRADSHAW
Respondent

Catchwords:

Building Services (Complaint Resolution and Administration) Act 2011 (WA) - Effect of 'E&OE' notation on variation - Whether refusal to repay monies mistakenly credited constitutes breach of contract - Contract interpretation

Legislation:

Building Services (Complaint Resolution and Administration) Act 2011 (WA), s 5(2), s 10, s 11(1)(d), s 41(2), s 41(2)(c), s 43, s 49, s 49(1)
Building Services (Complaint Resolution and Administration) Regulations 2011 (WA), reg 6
Home Building Contracts Act 1991 (WA), s 17(a)(i)
State Administrative Tribunal Act 2004 (WA), s 32(2), s 87(1)

Result:

Application granted

Category: B

Representation:

Counsel:

Applicant: Self-represented
Respondent: Self-represented

Solicitors:

Applicant: N/A
Respondent: N/A

Case(s) referred to in decision(s):

BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 16 ALR 363
Burnett and BGC Construction Pty Ltd
Chartbrook Ltd v Persimmon Homes Ltd [2009] 4 All ER 677; [2009] UKHL 38
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; [1982] HCA 24
ConStan Industries v Norwich Winterthur Insurance (Aust) Ltd [1986] HCA 14; (1986) 160 CLR 226
David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353
Farah Constructions Pty Ltd v SayDee Pty Ltd [2007] HCA 22; (2007) 81 ALJR 1107
Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896
Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45; [2002] HCA 5
Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596; (1979) 26 ALR 567
Western Export Services Inc v Jireh International Pty Ltd (2011) 282 ALR 604; [2011] HCA 45

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The applicant agreed to build for the respondent a 'garden view cottage' at Greenhead for $364,761 inclusive of GST, pursuant to a lump sum contract. Certain prestart changes were agreed by a variation. A particular item of the variation provided for a provisional sum of $8,500 in respect of an air conditioner, but then, in the cost column, subtracted that amount. The applicant sought to recover the $8,500 under the 'E&OE' notation on the variation. It was not in dispute that 'E&OE' meant 'errors and omissions excluded'. The respondent refused to repay the amount on the basis that he had been unaware of the error until advised of it by the applicant, and by that time, construction had commenced.
The Tribunal found that there was no express or implied term that the contractual right to recover the $8,500 expired upon commencement of construction. The respondent's unwillingness to repay the $8,500, which prevented the error from being corrected, culminated in a breach of contract or a further breach of contract, at the latest, by the expiry of the due date of the final account and, accordingly, an order that the amount be repaid was justified.
The Tribunal found that the applicant had not established a contractual basis to claiming 18% interest on the $8,500.
The Tribunal ordered that the respondent pay the applicant $100 in respect of the application fee for filing the complaint at the Building Commission.

Introduction

This is an application under the Building Services (Complaint Resolution and Administration) Act 2011 (WA) (Act).
If an owner or builder under a home building work contract (HBWC) claims that there has been a breach of contract, the owner or builder may make a complaint under s 5(2) of the Act (s 17(a)(i) of the Home Building Contracts Act 1991 (WA) (HBC Act)). The Building Commissioner is then required to cause an investigation to be carried out and, after having regard to any report given under s 10 of the Act, may refer the complaint to this Tribunal for it to deal with under s 43 of the Act. This matter was validly transferred to the Tribunal pursuant to s 11(1)(d) of the Act.
The Tribunal's powers upon referral to it of a HBWC complaint are set out in s 43 of the Act including, in the following terms:
(1)… the Tribunal may -
(a)if satisfied that the order is justified, make a HBWC remedy order; or
(b)otherwise, decline to make the order.
…
Specifically, s 41(2) of the Act sets out what a HBWC remedy order may consist of in the context of a breach of contract, and this includes:
…
(b)an order that a person pay a specified amount payable under the contract;
(c)an order declaring that a specified amount is not payable to a person under the contract and, if already paid, an order that the builder or owner repay that amount;
…

The nature of the complaint

WA Country Builders Pty Ltd (applicant) agreed to build for Mr Allan Bradshaw (respondent) a 'garden view cottage' at Greenhead for $364,761 inclusive of GST, pursuant to a lump sum building contract dated 24 January 2011 (Contract).
By a variation signed by the respondent on 30 March 2011 (Variation), the Contract was varied to incorporate certain prestart changes, which, on the face of the document, were worth $12,169. The Costing Schedule dated 30 March 2011 stated the new total as $376,930.
It was not in dispute that item 38 (of 104 items) in the Variation mistakenly deducted $8,500. By letter dated 5 August 2011 (5 August Letter), which is at page 48 of the hearing booklet (booklet), the applicant advised the respondent of the mistake and sought to correct the error. The respondent ultimately refused to repay that money.
It was also not in dispute that the Variation was 'E&OE', which meant 'error and omissions excluded'. However, the effect of the 'E&OE' was in dispute; in particular, it was the respondent's contention that the 'E&OE' was no longer effective by 5 August 2011 when he was first notified of the error in question.
At the directions hearing on 10 April 2012, it was ordered that the matter be set down for a final hearing on 1 May 2012.
Each party provided written details of its respective position. This included two letters on JWH Group Pty Ltd letterhead from Mr Howard Finn, who appeared on behalf of the applicant, to the respondent - one dated 15 December 2011 (15 December Letter), at pages 56 58 of the booklet, and another dated 24 January 2012 (24 January Letter), at pages 59 67 of the booklet - and the respondent's statement to the Building Commission dated 13 March 2012, which is at pages 74 76 of the booklet.

The hearing and findings

Having had the benefit of hearing both sides' submissions and the evidence, the Tribunal sets out its findings.

Preliminary issue

The applicant is registered builder no 11422 (see the Variation). Mr Finn is the Special Projects and Compliance Manager of JWH Group Pty Ltd (see the 15 December Letter). The applicant is part of the JWH Group Pty Ltd (see the 5 August Letter).
At the hearing, the respondent said that he had received both the 15 December Letter and the 24 January Letter from Mr Finn.
At the hearing, Mr Finn confirmed that the applicant sought an order that the respondent repay $8,500. He also sought 18% interest from 24 December 2011 and a reimbursement of the $100 fee paid in filing the application at the Building Commission.
The Tribunal finds that the 15 December Letter and the 24 January Letter from Mr Finn constituted written notice in substantial compliance with reg 6 of the Building Services (Complaint Resolution and Administration) Regulations 2011 (WA). The claiming of interest and costs are incidental to the substance of this complaint.

The parties' position in respect of the $8,500

During the applicant's case, Mr Finn said that the $8,500 was the provisional sum for a split system air conditioning unit, which formed part of the Contract when it was signed on 24 January 2012. He later referred to item 22 of the Costing Schedule, which specified it as such.
Mr Finn said, as was common practice, prestart negotiations then occurred with the respondent. This resulted in the respondent requesting that the split system air conditioning unit be upgraded to ducted air conditioning.
Mr Finn referred to the emails at pages 38 42 of the booklet to show that there had been a lot of prestart changes, and also to show the negotiations which took place between the applicant and the respondent regarding the additional cost of upgrading the air conditioning unit.
Mr Finn said that 'we' build 1,400 1,500 houses a year and have a centralised auditing department. He said that the auditors picked up the mistake and that the applicant was made aware of it in August 2011. He said that a number of efforts were made to get the respondent to acknowledge the error and repay the $8,500. He referred to the statement of final account (Final Account) issued on 15 December 2011, at page 52 of the booklet, and said that he had suspended the Variation, seeking repayment of the $8,500 in order to complete the Contract and not disadvantage anyone. Mr Finn said that he believed that the covering letter to the Final Account (which was not included in the booklet) stated that the outstanding amount was payable within 10 days.
The respondent acknowledged that he did, in fact, pay the Final Account on or about 24 December 2012, because that was what was required in order to be handed the keys, and he obtained the keys on or about 24 December 2012.
Mr Finn said that the $8,500 was not part of the Contract, but that the applicant had clearly provided the service of installing ducted air conditioning and that the respondent was enjoying the benefit of it at the applicant's expense. Mr Finn referred to note 9 at the bottom of page 4 of the Variation, which indicated that the Variation was 'E&OE', and said that the client's signature acknowledged that 'this could occur'. In response to a query by the Tribunal, Mr Finn said that it was a standard commercial clause and was a term of the Contract. Mr Finn referred to the Building Disputes Tribunal decision in respect of complaint no O.16264 between Burnett and BGC Construction Pty Ltd published on 31 October 2005 (Burnett) in support of his submission.
During the respondent's case, the respondent said that Mr Finn had reasonably accurately set out the sequence of events, and that it was quite correct that the $8,500 was taken out when it should not have been. He said, however, that there was a period of approximately two months from signing the Contract to the commencement of construction. He said that if the error had been picked up prior to the commencement of construction, the 'E&OE' would have been effective. However, he said that it was not picked up for approximately four months, by which time it ceased to be effective because he was locked into the Contract with no way of making an adjustment.
The respondent said that Burnett did not apply because it effectively stated that an E&OE clause was to prevent an unfair advantage, and it should not be used to allow an unfair advantage. He also said that it was not intended to cover incompetence.
The Tribunal notes that, in the respondent's written statement to the Building Commission dated 13 March 2012, he also stated, inter alia, that:
…
I was very careful as to the variations to the original specifications as I was on a strict budget amount for the building of the house which was $375000.00.
The funds for the construction came from the estate of my late mother and as I was approaching retirement was not prepared to enter into any borrowings or eat into my retirement savings.
My total budget was $400000.00 with the balance being the funds to furnish the house and landscape the property.
As stated the fixed price contract as per the schedules that I signed was for an amount of $376934.00.
Whilst this was outside my quite strict budget I felt it was something that I could carry and therefore I went ahead.
I was unaware of any error in the contract until the 5th August 2011 when I had a letter and variation document sent to me from WA Country Builders telling me that an error had been detected by an internal audit and requesting me to sign the and accept the variation.
…
It is worthwhile noting that during the whole of the construction period there was not one variation made to the original plans and specifications signed.
This I think confirms my intention to be strictly within the terms of what I had signed up for.
…
If the internal costing controls at WA Country Builders are so slack that it takes them four months to detect a contractual error I do not believe that it is equitable, fair, reasonable or just that they then seek to rely on the E & OE provisions of the contract to remedy their ineptness.
The error should have been picked up well before four months if they were to rely on that provision.
It is my view that WA Country Builders had every opportunity of checking their documentation prior to the commencement of works and any errors should have been picked up prior to the construction commencing.
Had this been done I would have been afforded the opportunity of adjusting my contract back to my budget which I did not have the opportunity of doing.
...
In crossexamination by Mr Finn, the respondent said that he was an accountant but not an auditor. He said that he had not looked at the amounts but just considered whether the bottom line fell within his budget. He said that a builder has a responsibility to make sure the figures are accurate. He also said that the upgraded ducted air conditioning unit had been installed and he was enjoying the benefit of it.
In response to a query by the Tribunal, the respondent said that the disadvantage to him would be having to find an additional $8,500. He said that he had inherited $400,000 from his late mother and had been very careful about what he was including in the prestart changes. He pointed out that there had not been one further variation after that. He said that if he had made a further change to bring back costs, it would have been to the verandas. However, by the time he was advised of the mistake, the slab was down, and there was no opportunity to make a change of this kind.
In response to a further query by the Tribunal, the respondent said that when he looked at the Variation, it did not occur to him that the figure of $12,169 was cheap, only that it was within his budget. He said that when he received the Variation, it had been after having spent quite a lot of time on prestart changes, so he only looked at the major issues and the bottom line. He said that he did not notice the minus against the $8,500.
At the end of the respondent's case, Mr Finn further submitted that there were several minus figures in the 104 variations, and that it was incomprehensible to him that the respondent did not notice that the $8,500 had been mistakenly taken out. He also submitted that, when the respondent was advised of the mistake, he could have reverted to a split system air conditioning unit.
The respondent did not wish to add anything in reply to Mr Finn's further submissions.

Whether an order to repay is 'justified'

There are limited bases upon which a complaint can be made to the Tribunal. In this application, the basis of the complaint is s 17(a)(i) of the HBC Act; that is, that there has been a breach of contract. Therefore, in this application, whether an order under s 41(2) of the Act is justified hinges upon whether the respondent's failure to repay the $8,500, or his conduct around this issue, constituted a breach of contract.
These provisions of the Act must be read in conjunction with the State Administrative Tribunal Act 2004 (WA) (SAT Act), including s 32(2), which provides, in essence, that the Tribunal is not bound by rules of evidence and is to act according to good conscience and the substantial merits of the case. However, s 32(2) of the SAT Act does not operate so as to expand the scope of s 41(2) of the Act.
Further, the High Court has clarified that there is no general doctrine of unjust enrichment; instead, the areas in which the concept of unjust enrichment applies are specific and usually long established (Farah Constructions Pty Ltd v SayDee Pty Ltd [2007] HCA 22; (2007) 81 ALJR 1107 at [151] and [154]). One area in which the concept of unjust enrichment applies is to payments made under a mistake of fact or law (David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 (David Securities)). However, there is no provision in the Act which would enable the Tribunal to make an order for restitution and, therefore, a consideration of whether this remedy is available to the applicant is outside of the scope of the Tribunal's jurisdiction. It is worth noting that it is in relation to this remedy that a change of position defence would be considered; that is, whether 'in reliance upon receipt of the payments the respondent, in good faith, changed its position to its detriment' (David Securities at [48] per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ).
There is also no provision in the Act which would enable the Tribunal to order rectification of the Contract.
'E&OE' notations are most commonly seen on statements of account. One of the issues in dispute in Burnett was the effect of such a notation on the builder's accounts. In this application, however, the 'E&OE' notation in question was printed on a contractual document, which amended the Contract. The effect of the incorporation of this type of concept into a contract will depend upon the particular contract.
The respondent conceded that $8,500 had been mistakenly deducted in the cost column alongside item 38, and that note 9 'E&OE' on the Variation would have entitled the applicant to recover the $8,500 at any time before construction commenced. However, the respondent contended, effectively, that the term should be construed as expiring when construction commenced.
In interpreting written contracts, it is the parties' presumed intention, and not the parties' actual intention, which is to be determined (Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; [1982] HCA 24 (Codelfa) at [26] per Mason J). This is essentially a rule of necessity, because sometimes in entering into a contract, there is no actual meeting of minds in respect of every term - there may be a term where one party considers they have agreed one thing, the other party another thing - but having executed a contract, the parties are bound to observe the written terms of the agreement, and it is then for a court or tribunal to determine what was meant by the term in dispute. In Australia, currently, it follows that it is the plain meaning of the words of the contract, objectively determined initially by reference only to the four corners of the contract, which determines the meaning and effect of the terms of a contract (Codelfa at [22] per Mason J; Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45; [2002] HCA 5 at [39] per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ; Western Export Services Inc v Jireh International Pty Ltd (2011) 282 ALR 604; [2011] HCA 45 (Western Export); contra Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896; Chartbrook Ltd v Persimmon Homes Ltd [2009] 4 All ER 677; [2009] UKHL 38). Where the contract is, on the plain meaning of the words, ambiguous or susceptible to more than one meaning, the objective framework of facts (often referred to as the surrounding circumstances) within which the contract came into existence, may then be used as an aid to interpretation. Prior negotiations which tend to establish objective background facts known to both parties and the subject of the matter of the contract fall into this category, although prior negotiations, insofar as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations, do not (Codelfa at [22] - [24] per Mason J; Western Export).

There is nothing expressed in the Contract which could possibly enable a conclusion that the 'E&OE' term expired upon commencement of construction.
Whether a term can be implied into a contract depends upon satisfaction of the following conditions:
1)it is reasonable and equitable;
2)it is necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it;
3)it is so obvious that 'it goes without saying';
4)it is capable of clear expression; and
5)it does not contradict any express term of the contract.
(BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 16 ALR 363, 376; approved in Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596; (1979) 26 ALR 567, 575 576 per Mason J). It will not be so obvious, it goes without saying, unless it can be said that both parties would have consented to its inclusion (ConStan Industries v Norwich Winterthur Insurance (Aust) Ltd [1986] HCA 14; (1986) 160 CLR 226, 241 per Gibbs CJ and Mason, Wilson, Brennan & Dawson JJ).
The Contract is effective without the contended limitation, and it is not so obvious that it goes without saying. Accordingly, there is no basis to imply such a term into the Contract.
Clause 3.1 and cl 3.2 of the Contract provide as follows:
3.1In consideration of the Builder executing and completing the Works, the Proprietor shall pay the Builder the Contract Price by way of deposit and progress payments in the manner described in item 5 of the Schedule. At each such stage, the Builder shall give the Proprietor a Certificate stating that the Works have been completed to that stage, or the works have reached the value of the combined progress payments up to that stage, and stating the amount of the progress payment required ('the Certificate'). The Proprietor shall pay the amount within TEN (10) days of the date of the Certificate, without any setoff or deduction.
3.2If the Proprietor does not pay a progress payment within the time specified in subclause 3.1 the Builder may elect to continue with the Works and charge the Proprietor interest at the rate specified in item 8 of the Schedule [18%] on the amount of the progress payment due, from the date it was due to the date of payment.
Clause 11.5 of the Contract provides as follows:
11.5Practical completion of the Works is deemed to have taken place when:
11.5.1the Works are completed except for any omissions or defects which do not prevent the Works from being reasonably capable of being used for its intended purpose; or
11.5.2the Proprietor has taken possession of the Works without the written consent of the Builder; or
11.5.3the Builder has handed the keys of the Works to the Proprietor, whichever is the earlier.
There was no evidence detailing the respondent's refusal to permit the correction of the error, nor as to when a progress payment, including the upgrade amount of $6,113, was required. However, it is clear from cl 3.1 of the Contract and item 5 of the schedule in the Contract, that all outstanding amounts of the Contract price were payable around practical completion. The 15 December Letter from Mr Finn makes it clear that the Final Account did not include the $8,500 for purely technical accounting purposes in response to the respondent's unwillingness to pay the amount, but that the applicant continued to claim that the amount was owing and due. As such, the respondent's unwillingness to repay the $8,500, which prevented the error from being corrected in accordance with the Contract, culminated in a breach of contract or a further breach of contract, at the latest, by the expiry of the due date of the Final Account
Accordingly, the Tribunal finds that an order under s 41(2)(c) of the Act declaring that the $8,500 was not payable to the respondent (by way of the deduction) and that the respondent repay the $8,500 is justified.

The payment of interest

There was no evidence as to whether, or when, a Certificate within the meaning of cl 3.1 of the Contract was provided in connection with the Final Account. As such, the applicant has not established a contractual basis to claiming 18% interest on the $8,500.

Reimbursement of the filing fee

Section 87(1) of the SAT Act provides that:
Unless otherwise specified in this Act, the enabling Act, or an order of the Tribunal under this section, parties bear their own costs in a proceeding of the Tribunal.
Section 49 of the Act provides, inter alia, that:
(1)Subject to this section, the Building Commissioner or the State Administrative Tribunal may make such orders for costs as they think fit in relation to proceedings arising from a building service complaint or a HBWC complaint.
…
An order under s 49(1) of the Act that the respondent pay to the applicant the sum of $100 should also be made. It is inherently unlikely that a person who is an accountant, and who has been careful as to what was included in prestart changes because of a budgetary constraint, would not have appreciated that changes requested by him which should have come in at around $20,000, but instead came in at around $12,000, did not contain an error. Even if the respondent had not appreciated the error (and had not had the opportunity to honour the 'E&OE' prior to 5 August 2011), no arguable legal basis for resisting the applicant's claim after 5 August 2011 has been put to the Tribunal.

Order

The Tribunal orders that:
1.The sum of $8,500.00 in respect of item 38 of the variation signed by the respondent on 30 March 2011 was not (by way of a deduction) payable to the respondent and the respondent repay that amount.
2.The respondent pay the applicant's filing fee of $100.00.
3.The respondent pay to the applicant the total of $8,600.00 by 23 May 2012.

I certify that this and the preceding [52] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
MS A DAVIES, SENIOR SESSIONAL MEMBER