Wormwell v Frost
[2011] QCATA 8
•20 January 2011
| CITATION: | Wormwell v Frost [2011] QCATA 8 |
| PARTIES: | Mr Samuel Wormwell |
| V | |
| Mr Jeremy Frost |
| APPLICATION NUMBER: | APL 087-10 |
| MATTER TYPE: | Appeals Building matters |
| HEARING DATE: | 18 November 2010 |
| HEARD AT: | Brisbane |
| DECISION OF: | Hon James Thomas, Presiding Member Clare Endicott, Senior Member Kerrie O’Callaghan, Senior Member |
| DELIVERED ON: | 20 January 2011 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: | Leave to appeal should be granted but the appeal should be dismissed |
| CATCHWORDS : | Leave to appeal (QCAT Act s 142) – Whether error of law shown – Building Contract – payment of “deposit” to third party – whether third party was builder’s agent – ostensible authority of agent – “Subject to finance” condition – whether contract came into effect and whether rights under clause waived |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Mr Samuel Wormwell was represented by Mr James Bell QC & Mr Christopher Johnstone of counsel, instructed by McCullough Robertson |
| RESPONDENT: | Mr Jeremy Frost was represented by Mr David Maunsell of Maunsell Pennington |
REASONS FOR DECISION
Nature of proceedings and jurisdiction
This is an application for leave to appeal against a decision of a Tribunal member in a domestic building dispute under the Queensland Building Services Authority Act 1991. The application to this Appeal Tribunal is brought under section 142 of the Queensland Civil and Administrative Tribunal Act 2009.
The applicant erroneously asserted in his application that he did not require leave to appeal, despite the fact that the stated grounds all raise issues of fact or mixed issues of fact and law, as to which there is no right of appeal without leave (QCAT Act section 142(3)(b)).
Mr Bell QC who appeared for the applicant/appellant, conceded that leave was necessary, and based his submissions on three principal points which he claimed showed clear errors of law.
The present litigation involves a claim by Mr Jeremy Frost (“the owner”) against Mr Wormwell (“the builder”). It was for the return of $27,000 allegedly paid to the builder.
Another entity (Redstar Modular Homes Pty Ltd) also played an important, indeed a dominant role, in the relevant events, but it was not included as a party. Redstar was the entrepreneur which conducted the dealings with the owner that lead to the contract in question, including quotation of the price, and it also intermeddled in the performance of the contract.
For convenience we will refer to the applicant/appellant as “the builder”, to the respondent as “the owner” and to the entrepreneur as “Redstar”.
The owner’s claim against the builder was for the return of $27,000 allegedly paid by him to the builder under a building contract. The learned Tribunal member allowed the claim and ordered the builder to pay $27,000 plus interest to the owner.
The contract sued on was in the form of a Master Builders Residential Building Contract, which provided for the supplying and fixing in place of two transportable houses upon the owners land at Cloncurry for a price of $420,380 payable at various stages.
The owner was named in the contract as “Jeremy Frost” and the builder as “Samuel W. Wormwell..(as shown on the BSA license card) trading as Samuel W. Wormwell as nominee for Redstar Builders Lot 77 Focal Court, Qanda Park, Industrial Estate, Coolum”.
At material times Redstar apparently imported from China the necessary components for relocatable modular houses and marketed them. All negotiations leading to the contract were negotiated by Redstar. The assembly and affixation of these homes required some building work, but Redstar did not hold a BSA license. It made contact with the owner, provided the necessary quotation, and having ascertained that it was acceptable to him, produced the contract in question designating Mr Wormwell as the BSA licensed builder.
The owner signed it without ever seeing the builder. Indeed there was never any relevant direct contact between the owner and the builder thereafter.
It would not have been unlawful for Redstar to have contracted in its own right, but to have done so would have exposed it to the possibility of lost remuneration, including its profit, under section 42 of the QBSA Act.
At the outset the learned member adverted to the absence of Redstar as a party, but the owner (through his legal representatives) elected to proceed against the builder only.
Alleged errors of law
The principal alleged errors of law relied on during argument by Mr Bell QC for the builder are:
a) Incorrect assumption by the learned member, contrary to the pleadings, that the building contract was alive when the relevant payment of $27,000 was made.
b) Reliance by the learned Member on oral representations not raised by the parties in their pleadings, and failure to take account of unchallenged and contemporaneous documents.
c) Absence of evidence capable of proving that the $27,000 was paid to the builder under the contract, or at all.
Facts
The facts according to the evidence appear in the following paragraphs.
Early in November 2007 the owner requested a quote from Redstar through Redstar’s representative Robert Johnston to build 2 transportable houses on his site in Cloncurry.
On 6 November 2007 Redstar provided a quotation to the owner for provision of the 2 houses for a price of $420,300.
On 17 January 2008 Johnston met with the owner at the Oasis Hotel in Cloncurry and was presented with a Master Builders Residential Building Contract that had already been signed by the builder. The owner then signed it.
The contract contained the following –
a) (Item 11 of the Contract Schedule) That the contract was conditional on the owner obtaining loan approval from a financial institution, namely Commonwealth Bank of Australia of an amount to be advised.
b) (Under the heading “progress payments” in the Contract Appendix) There was provision for “deposit.. 5% of contract price.. $21,015; and further provision for “transportable home deposit.. 45% of contract price.. $189,135.”. Further provisions entitled the builder to other payments at different stages of performance.
c) (In the General Conditions) “Deposit” was defined as “the amount to be paid by the owner to the builder pursuant to clause 11.5 of this contract and as stated in item 7 of the schedule”. It may be noted that no amount was included in item 7, but there was a standard statement in that item that it was “not to exceed 5% if the contract price is $20,000 or greater”. However it is plain from the progress payments clause that the initial “deposit” was to be 5% of the contract price and this was expressly stated to be $21,015.
d) (Under clause 11.5 of the General Conditions) It was provided that “the owner must pay the deposit to the builder, upon signing of this contract”. Under clause 11.4 of the general conditions the contract was expressed to be “subject to the owner obtaining from the lender stated in the schedule, on or before the loan approval date stated in the schedule, approval for a loan not less than the amount stated in the schedule”. (The schedule failed to state either the loan approval date or the amount.) Clause 11.14 then stated certain periods by which the application must be made to the lender, and that the owner must give the builder a written notice within 3 days after loan approval date stating whether the owner has obtained the loan approval.
e) (Under clause 11.15 of the General Conditions) It was provided as follows: “Right to cancel contract if loan approval rejected
If, within 3 days after the loan approval date, the owner gives the builder written notice that the owner has not obtained the loan approval, together with evidence satisfactory to the builder that the lender has assessed and rejected the loan approval, this contract is at an end and the builder must refund the deposit less any expenses incurred by the builder in performing the works.”
f) (Under clause 22 of the General Conditions) The builder was given the right to terminate the contract on a number of bases, one of which was failure by the owner to comply with any of its obligations under clause 11.
g) (Under item 16 of the contract schedule) Under the heading “Authorised Officer / Agent” it was provided “The Builder’s Representative is Robert A. Johnston” and “The Owner’s Agent is Jeremy Frost”.
Johnston was at all times Redstar's representative in the area, and it can be seen that he also became the builder’s representative for the purposes of the contract. He therefore had the capacity to act as agent of both Redstar and the builder. The ambit of his authority will be considered later.
From the time of signing of the contract, Redstar, through Johnston, conducted all relevant dealings with the owner and the owner’s bank manager concerning the administration of the contract and attempts to bring it into effect. There was never any relevant contact between the owner and the builder. The dealings of both of them were through Johnston.
It is difficult to tell the precise arrangements that existed between Redstar and the builder inter se. The learned member was not prepared to accept the evidence of either the builder or of Mr Anderssen (the sole Principal of Redstar). But some facts concerning the arrangement are clear, and these are consistent with the way the parties subsequently conducted themselves. In particular the builder admitted, and Mr Anderssen agreed, that the basic arrangement between Redstar and the builder was for the builder to build the structure for the homes and be paid out of the profits. Further, it was always intended that Redstar would perform other acts required for the carrying out of the contract, including purchasing and providing the necessary materials, arranging for the preliminary work (e.g. council consents), preparation of plans and specifications, foundations data and the work mentioned in the provisional sum schedule in the contract. Anderssen was prepared to accept that general administration of the contract including invoicing would be done by Redstar, but the builder said that there was no particular arrangement to that effect, while admitting that that was in fact what happened.
On 20 February 2008, a little over a month after the contract was signed, the owner was advised by his bank manager that the terms of payment under Redstar’s quotation were not acceptable, and that the bank would release funds only when houses were affixed to the land[1]. The problem with both Redstar’s quotation and the building contract was that they provided for “deposits” of 50% of the total cost, payable at an early stage, and such provisions did not meet the Bank’s guidelines. The bank manager suggested that the owner would need to address this with Redstar.
[1] Attachment JF13 to the statement of Jeremy Frost
It may seem curious that the bank manager referred to Redstar's quotation rather than to the contract, but plainly the contract was regarded by all concerned as the vehicle that would bring into effect the owner’s acceptance of Redstar's quotation, and the prices were identical. This is a further indication of Redstar’s adoption of a dominant position in all relevant dealings.
On the following day, 21 February 2008, Redstar prepared an invoice for $210,150 (namely the deposit, 50% of the price) and sent a copy of it to the owner’s bank manager.
On 7 March 2008 the bank specifically advised Redstar that finance would only be approved “when house fixed to land”. On the same day Redstar emailed the owner that it had not received the deposit, and that “Until we receive payment we hve no choice but to holt (sic) any further work on your project, if possible can you please attend to this before close of business on Monday 10th March so we can proceed with construction”. (our emphasis)
On 10 March 2008 Redstar issued an invoice to the owner claiming $29,991.50. The items contained in it were a hotch-potch of alleged work and out of pocket expenses incurred thus far by Redstar. Some of the items were for provisional sum allowances in the Contract Appendix. The items and amounts comprising the invoice were as follows-
Town planning $ 820.00
Council development applications $ 900.00
Meetings with town planner and Cloncurry Shire Council $ 425.00
Site levelling $ 1,000.00
Soil tests $ 770.00
Drafting $ 1,200.00
Materials/steel for chassis $21,600.00
Travel expences (sic) $ 550.00
(When GST was added the total was $29,991.50).
The invoice was sent by Anderssen on instructions received from Johnston.
This invoice was sent under cover of an email from Redstar stating “as per the email receipt from your bank we have drawn up an invoice to bring us up to date on costs already outlaid by Redstar until you are able to sort out the rest of the finance issues”.
No doubt Redstar had incurred outlays in trying to get the contract under way, but there is no satisfactory evidence of any obligation on the owner’s part to reimburse it for most of the demands that were made in the invoice. Mr Anderssen’s evidence attempts to justify some of them but the learned Member was not prepared to accept that evidence.
The major item ($21,600), it may be noticed, was for alleged steel items that were never delivered. The learned member was completely justified in rejecting Anderssen’s evidence that Redstar had for a time held steel items to that value for the owner in a yard, but that it was no longer available to the owner (who on Redstar’s accounting had now paid for it) because Redstar no longer enjoyed access to it as the yard had passed into the possession of Mr Johnston or his family[2]. If Redstar ever acquired such steel items there is no good reason for regarding them otherwise than as stock. Other specious items in the invoice include travel expenses as to which there was no acceptable evidence that the owner had agreed to reimburse Redstar.
[2] See Anderssen’s statement paras 15, 24-26.
However the owner soon afterwards sent a cheque to Redstar for $27,000, on 13 March 2008.
There was no covering note sent by the owner, and a great deal of the argument before the member and before us concerns the characterisation of that payment.
It was accepted by the learned member that the owner made the payment after Johnston had represented to him that it was a deposit pursuant to the contract “to commence works”. She recognised that the invoice preceding the payment did not make any demand for payment of a "deposit" and that both the amount claimed in the amount paid exceeded the amount provided for in the contract as the first deposit. Nevertheless she accepted that both the owner and his bank manager were led by Johnston to believe that the $27,000 payment would be a contractual deposit.
On the basis that the builder was bound by the conduct of Johnston and that the payment had been made pursuant to his representations the learned Member characterised the $27,000 payment as a deposit under the contract[3] notwithstanding that the payee was Redstar.
[3] Member’s reasons para 27.
Having received $27,000, Redstar “updated” its invoice to claim the balance of $2,991.50.
On 21 April 2008 Mr Johnston sent an email to the owner referring to “this hold up in funds” and stating that “we are willing to hold this price until 25 April.. if nothing changes we have other clients who will take on these houses..”. This could be regarded as a statement made on behalf of both the builder and Redstar.
Finally, on 12 May 2009 the owner’s solicitors terminated the contract on behalf of their client on a number of grounds including the rejection of loan approval.
Demand was then made upon the builder for “return” of the money that had been paid. When the builder failed to do so the present proceedings were initiated.
Alleged errors of law – point (a)
So far as point (a) is concerned (see para [14] above) it is true that there is an allegation in paragraph 9(b)(iii) of the owner’s statement of claim that on 7 March 2008 “the contract came to an end”, and that this allegation was admitted in the defence. However the statement of claim also relied on the alternative on the fact that “on 12 May 2008 the applicant terminated the contract pursuant to clause 5 of the contract”, and the defence contains an alternative admission that “on 12 May 2008 the applicant [owner] terminated the contract pursuant to clause 11.15..”.
Although counsel for the builder referred to the first admission of the owner during the hearing, it is clear that the litigation proceeded on the basis that all evidence would be received as to the history of the contract, and the subsistence or non-subsistence of the contract at various stages would be determined in accordance with the evidence. We think it clear that the relevant finance provisions in the contract were not conditions precedent to the existence of any contract at all, and that in the circumstances the contract was kept alive by the parties.
None of the respective rights of the owner and builder to cancel the contract were exercised before 12 May notwithstanding knowledge by both that the necessary finance had not been obtained. It seems to have been common ground that the owner needed finance to the full extent of the lenders price, and that this was never forthcoming because of lenders policy not to release funds for transportable homes until the buildings were fully installed. This could never satisfy the needs of the contract which required 50% of contract price to be paid as a “deposit” before performance of the works on site. Both parties knew this very early in the piece. This was not an automatic self-executing clause or a condition precedent. Either party could waive the time necessary for the finance to be obtained.
It is apparent that the time provisions in clause 11.15 were waived and that the contract remained alive for performance until the owner terminated it for lack of finance (and on other grounds) on 12 May 2009.
We therefore reject the submission that the payment made by the owner on 13 March 2008 could not in law have been a payment made pursuant to the contract.
Discussion of alleged errors of law- points (b) and (c)
It was common ground that the money was not paid to the builder personally and no suggestion that he in fact received it or any of it. The only basis upon which it could be held that he had done so would be through deeming Redstar’s receipt of the money to be his receipt. This could only be the case if Redstar can be regarded as the builder’s agent either generally or for the purposes of receiving that particular payment. This was the principal issue in the litigation.
The primary submission of the owner both in the original Tribunal and on this appeal is that the $27,000, although paid into the hands of Redstar, was paid as a deposit pursuant to the building contract, induced by the representation of Mr Johnston that the payment was a deposit, and on the footing that Johnston was the builder’s nominated representative under the contract.
By way of background it would seem that there remained at all times an overarching arrangement or understanding between the owner and Redstar for the supply and installation of the two homes, and that the residential building contract between the owner and the builder became the vehicle by which this would be effected. The owner of course had no knowledge of the arrangements between the builder and Redstar inter se, or as to what works would be arranged or done by one or other of them. The actual arrangement between the builder and Redstar, as disclosed in the builder’s evidence, was that he would build the homes and be paid by Redstar “out of the profit”. His essential function was “to build the homes”. He said in evidence that it had not actually been discussed as to who was going to look after "all the rest" under the building contract, but agreed that that was in fact what happened [4]. Of course none of this was known to the owner. He was presented with a building contract under which the immediately accountable party would be the builder.
[4] Transcript pages 72-73
In the event Redstar from day one undertook the “administration” of the building contract, and arranged for performance of provisional items such as development and building applications, site levelling and soil tests. It also remained in direct negotiation with the banker through whom the owner was attempting to raise the necessary finance. Through all this the builder stood by. He did no work at all under the contract. Redstar also saw fit to issue invoices to the owner demanding payment to it of various such items[5].
[5] Invoices of 21 February 2008 and 10 March 2008
The question is whether the builder acquiesced in this arrangement under which Redstar did the “administration” including invoicing and collection of monies from the owner, and under which he would be reimbursed for his work by Redstar later. If by his conduct he held out Redstar as his agent for collection of monies under the contract, there would be a sufficient basis to uphold the Member’s decision.
The Member’s decision was based primarily on Johnston’s representations to the owner that such a payment was a deposit. It is true that this representation was inconsistent with the terms of Redstar's invoice, but there is no rule of law or fact-finding that a person may not rely upon an oral representation that contradicts a document. Having regard to the learned Member’s view of the owner as a simple man dealing with more sophisticated people, there is no error in law in her failing to give primacy to the written invoice.
The learned Member proceeded to find that the $27,000 was paid as a deposit pursuant to the contract and that it must therefore be returned to the owner, less any expenses incurred by the builder in performing the works. The learned Member recognised that the payment had been made to Redstar rather than the builder, but characterised the position in this way – “That [the builder] did not directly receive the $27,000 payment is not the issue, rather, it is whether that payment was made pursuant to the contract in question”. The learned member then acknowledged the evidence of the owner’s statement that when he made payment of Redstar's invoice of 10 March 2008 he believed it was for services performed by Redstar, but referred to other statements as well by him that he believed the payment was a deposit, because “This is how Johnston told me it would happen”. The evidence included discussions between the bank manager and Mr Johnston which also led the bank manager to the opinion that Redstar had “accepted the deposit” knowing that they would not complete the dwelling.
On the basis that Johnston had represented to the owner and his bank manager that the $27,000 was a contractual deposit, and on the further basis that the builder was “bound by the conduct of Johnston” the learned member held that “it would be unjust to allow [the builder] to avoid responsibility for representations of Johnston to [the bank manager and the owner] relating to the building contract and characterisation of the $27,000 as a deposit payment made pursuant to that.”[6] She found that the payment was “a deposit made pursuant to the contract in question, and determined that “As such, [the owner] is entitled to the return of it, having lawfully terminated the contract, less any expenses incurred by the builder in performing the works”.
[6] Member’s reasons para 27.
There is evidence on which the view could be taken that all parties, including the builder, accepted Redstar as the paymaster, that is to say the party to whom contractual monies would be paid for the purposes of the contract. The builder accepted in evidence that he would be paid by Redstar "out of the profits”. This could not occur unless Redstar was the primary accounting party and was to account to the builder for the contract monies. Plainly the builder intended and permitted Redstar to proceed with the administration of the contract, and left it to Johnston to advance the contract. The builder stood by, and his agent did the rest. It is true that there was no personal contact between the owner and the builder, but Johnston's statements are capable of being regarded as made on behalf of both Redstar and the builder. In the event the payment was made to the party designated as the builder’s agent.
Having read all the evidence it is difficult to resist the overall impression of a simple man (Frost) dealing with chameleons. The member had good reason to be suspicious of the evidence of both Wormwell and Anderssen. They had a long association, and as an instance of their closeness at material times, the name "Redstar" was included in the contract as a trading name of the builder. His explanation of this was that he had proposed to trade under that name in the expectation that his work for Redstar would occupy him full-time, but that that did not eventuate. It is not a particularly convincing explanation, but in any event it indicates the closeness of their association at a very material time - the date of the contract in question. It is a situation where the fact-finder was entitled to be robust in drawing available inferences against the builder.
In short it is not been shown that the Member’s findings were not open.
Whether the basis for deeming $27,000 to have been received by the builder is best described as a consequence of an estoppel, or as the builder (through his agent) holding out Redstar as the primary recipient for payments under the contract, there was no error of law in the circumstances in treating the money as having been paid to the builder’s agent, and therefore to the builder.
While there is academic debate over the rationale behind apparent (or ostensible) authority of an agent to bind the principal, and whether or not it is correct to speak of agency by estoppel,[7] the basic principles are well established. Authority may be constituted by words or conduct that permits it to be represented that another entity has authority to act on his behalf. Gurtner v Beaton [1993] 2 Lloyd’s Rep 369 and Lease Management Services Ltd v Purnell Secretarial Services Ltd [1994] C.C.L.R.127 are illustrations of ostensible authority being found to exist following conduct that allows the putative agent to act in a way that gives the impression that he is acting for the principal. We are satisfied that the evidence in the present case permits such an inference to be drawn.
[7] Fridman The Law of Agency 7th edn pages 120-125; Bowstead and Reynolds on Agency 19th edn pages 364-368.
It may well be that some accounting remains to be done between Redstar and the builder, as none of the $27,000 (which in our view was received by Redstar as agent of the builder) was passed on by it to the builder, or otherwise accounted for. However Redstar is not a party to these proceedings and has not been heard, these remarks will have no binding effect if further proceedings were to be brought against Redstar.
We therefore reject Mr Bell’s submissions noted in para 14(a) and 14b) above.
Costs
Both parties indicated that in the event of their success upon the appeal they desired orders for costs against the other party both in the Tribunal and in the Appeal Tribunal.
In our view there is no good reason in the interests of justice why such orders should be made. There is no reason to depart from the usual position stated in section 100 of the QCAT Act, and none of the circumstances set out in section 102(3) appear to have come into play. The same remarks apply to the proceedings in this Appeal Tribunal. There will be no order for costs.
Orders
Leave to appeal should be granted but the appeal should be dismissed.
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