Zachary Developments Pty Ltd v Turner
[2012] QCATA 86
•31 May 2012
| CITATION: | Zachary Developments Pty Ltd v Turner and Anor [2012] QCATA 86 |
| PARTIES: | Zachary Developments Pty Ltd (Applicant/Appellant) |
| v | |
| Wayne Turner (First Respondent) Judith Elaine Turner (Second Respondent) |
| APPLICATION NUMBER: | APL027-11 / APL413-11 |
| MATTER TYPE: | Appeals |
| HEARING DATE: | On the papers |
| HEARD AT: | Brisbane |
| DECISION OF: | Mr Charles Brabazon QC, Member |
| DELIVERED ON: | 31 May 2012 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | APL027-11 1. Set aside the adjudicator’s decision of 23 December 2011. 2. Order that the respondents pay $8,963 to the applicant. 3. Order that each party bear their own costs of the proceedings, after 26 September 2011. APL413-11 1. Order that the adjudicator’s costs order of 26 September 2011 be confirmed. 2. Order that each party bear their own costs of the proceeding, up to and including 26 September 2011. |
| CATCHWORDS: | Appeal – substantial performance – quantum meruit payment Costs – substantial delays – discretion – no order as to costs |
APPEARANCES and REPRESENTATION (if any):
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (QCAT Act).
REASONS FOR DECISION
Introduction – the Building Appeal
This is a most unfortunate building dispute, about an extension to Mr and Mrs Turners’ house. The contract is dated 16 July 2001. This appeal by the builder is from a judgment by the adjudicator dated 23 December 2010. The adjudicator ordered the builder to pay $31,878.26 to Mr and Mrs Turner. Each party seems to have been responsible for long delays.
The Dispute
Some explanation of the project is necessary. The Turners’ existing house was a two storey rectangle, the long side facing the street. The plans show an additional rectangular building, of two stories, to be built behind the existing house. The gap between them was to be some 4 metres. The bridging of that gap is the source of much of this dispute. The plans show concrete floors, at ground level and first floor level to connect the two buildings. They show balconies at each end, with bi-fold doors, to give security. The plans show a roof covering the gap. It is to be pitched, built on trusses, and covered with translucent panels, so that rain will run down into the gutters of the parallel buildings. The enclosed space is called a “breezeway”.
The work had unusual features that became sources of the dispute. The contract included Mrs Turner’s letter of 8 June 2001. The Turners had already done work on the site, such as soil tests, and the construction of a sanitary pipe to the nearby sewer. They agreed to supply quite a lot of building materials. Her letter sets out the details of their contribution at length.
The history of the work, and the parties’ disputes, is set out in the adjudicator’s judgment given on 23 December 2010. The contract price for the job was $132,000. The builder has been paid $85,000, for stages 1, 2 and 3. Stage 3 was the “enclosed stage”, and payment for it was made on 5 December 2001, even though the breezeway was not enclosed. Several things had not been completed:
a) The ground floor concrete slab was not in place.
b) The external doors at each end of both levels of the breezeway were not in place.
c) The wall sheeting above the doors was not in place.
d) The roof trusses and sheeting were not in place, over the breezeway.
e) The installation of new windows, and doors, in the existing building.
In the end, the ground floor concrete slab was re-laid. However, the other things were work that was never done.
Work started on 1 August 2001, and finished on 16 February 2002. By then, the builder asserted that it had almost finished the fourth or “fixing stage”. It wanted the $26,400 that the contract allowed for that stage.
The adjudicator correctly found that, when work stopped by 25 March 2002, the extension had been substantially completed and that, “the builder was presumably out of pocket” for the bulk of the fixing stage payment. That finding is consistent with the position expressed by Mrs Turner in her letters of 1 and 16 February 2002 – various things had not been completed, but she would pay for the fixing stage when the concrete slab was in place. It should be understood that Mrs Turner played a significant role in the progress of the work. In large part, that was consistent with the Turners’ decision to supply many of the materials and fittings themselves. Ms Turner kept a close eye on the progress of the work – her letters to the builder show that. It is unlikely that she would have agreed to make a progress payment, if the builder had not done enough work to justify the claim.
The unfinished work, and defects in the work, meant a dispute between the owners and the builder. The builder has not been paid the $26,400, for the fixing stage.
The builder gave a notice of termination, asserting that it was entitled to terminate the contract on 20 May 2002. The owners’ own formal notice of termination was not made until 26 May 2005. Time passed. Then the parties retained several experts in another round of disputation. It was accepted that the contract still governed the rights and duties of the parties up to completion of the fixing stage. The experts’ reports were very helpful, but the parties did not agree that they were conclusive – hence the present disputes.
The adjudicator found that the builder had to pay almost $32,000 to the owners. The builder appealed. The builder says that is too much. The builder also makes a counter-claim – that it was entitled to terminate the contract, and should be paid for the loss of its expected profits. The builder asserts that it was entitled to bring the contract to an end, by its notice given on 20 May 2002. The builder asks for damages for the loss of expected profits in the sum of $28,966.
The Builder’s Claim
The Master Builders’ form of contract sets out the ways in which the contract might be terminated by the builder. First, clause 16 sets out various failures on the part of the owners, which might entitle the builder to suspend the works. Secondly, clause 22 sets out the failures on the owner’s part which would give the builder a right to serve a notice, asking that the failures be remedied in a certain time.
Then, if the owner’s failures are not remedied the builder can give a further notice saying that the contract is terminated.
In this case the parties have agreed a written statement of facts and issues. Paragraphs 46 to 52 set out the sequence of events, which lead up to and include the builder’s notice of termination dated 15 May 2002.
The adjudicator came to the conclusion that the builder was not entitled to claim payment for the fixing stage, and was not entitled to terminate the contract. He said that the builder was responsible for the supply and installation of the breezeway roof trusses, but did neither of these things. As there was no roof over the gap between the buildings, the space was not habitable. It meant that the “enclosed stage” had not been achieved – so the builder’s own fault amounted to a “substantial breach of the contract” – see clause 22.3. There is a definition of “enclosed stage” in the contract, and it seems clear enough that it had not been achieved.
The issue about the roof trusses was a substantial one. For the reasons set out below, the builder was mistaken, in believing that it was the owners’ responsibility to supply the roof trusses. That mistake was the first substantial reason for its failure to complete the enclosed stage and the fixing stage on 5 December 2001, even though it was clear that the “enclosed stage” had not been achieved.
There are two other matters which impact on any entitlement to be paid for the fixing stage. First, the demand from the builder was for a payment of $32,405.20. It is not clear where that amount came from. The agreed amount for the fixing stage was $26,400.
Secondly, for the reasons set out in the submissions for the owners, at paragraphs 69-81, it seems correct to say that the builders’ notice of termination was ineffective, as it was given too soon, before the agreed time had passed for a response. See paragraph 76 of the submissions.
Thirdly, it had become apparent that the slab on the ground floor of the two buildings was defective, and would have to be ripped up and replaced.
The adjudicator was right in finding that the builder was not entitled to damages, following the notice of termination.
The adjudicator said that the parties abandoned their contract. To an observer it looked like that after work stopped and the builder claimed to have terminated the contract. There was an inconclusive, tactical skirmish in the Magistrates Court, and then silence for years.
However the parties then gained new vigour. They retained experts to assist in making their claims. Long delays followed the experts’ failure to agree. Finally, the dispute reached this Tribunal. Overall, it is clear that the parties have never lost or abandoned their contractual and restitutionary rights based on their contract, up to the end of the fixing stage. Those rights were not abandoned, or lost by the passing of time. There is no suggestion in the submissions of counsel to that effect.
It is also clear that the further performance of the contract, beyond the fixing stage, came to an end, no later than the time of the owners’ letter of termination. Consistently with that, attention was focused on fixing the defects in the work done by the builder. Any claims about demolition were abandoned.
It is now necessary to look in more detail at the things that were not done.
The Trusses
Were the breezeway trusses to be supplied by the Turners or by the builder? It is clear enough, that the builder had to do so. The builder’s letter of 26 April 2001, at item 11, spoke of its supplying steel roof trusses from Southside Steel, but that appears to mean the trusses in the new building, not the breezeway. Mrs Turner’s letter of 8 June 2001, after a heading “Additions for inclusion in final price”, says “supply and installation of trusses to breezeway …” The contract allowed a $500 PC item, for the expected cost of fixing the trusses. See also the builder’s letter of 8 February 2002, para 2, and Mrs Turner’s letter of 16 February 2002.
At para 26 and 27 the adjudicator found that the builder had to supply and install the trusses. That was the correct finding – it was the builder’s job to supply the trusses. The price of the trusses can be seen in Mrs Turner’s letter of 1 February 2002 – an amount of $2,290. With the addition of $500 for the fitting that is $2,790 which would have been payable to the builder. The trusses and sheeting work was never done.
Windows and Doors
The builder was to supply new windows and doors, to be fitted to the existing building. See item 8 in Mrs Turner’s letter of 8 June 2001, and the builder’s letter of 16 July 2001.
These were not installed. That was not the builder’s fault. Mrs Turner’s father, who lived next door and had power to act on her behalf, stopped the removal of the old windows and doors. The result is that the value of the expected work should be deducted from the claim for payment for the fitting out stage. The only evidence of the value of that work is in Mr Johnstone’s statement. He says it would have cost $1,200. That estimate should be accepted.
Three other items are in the same category of work not done – the fixing of the laserlite roofing; the fixing of the bi-fold doors; and, the fixing of the gable ends to the breezeway. $250 might be allowed for the wall sheeting.
The work to install cornices in the two new bathrooms was not done. Mrs Turner’s letter of 8 June said that they would suppy the tiles, and “cornice to go over tiles”. The cornice was to be supplied by the builder, but that was not done. Paras 24 and 25 of the adjudicator’s reasons are a finding that the builder was prepared to fit the cornices but could not do so because of the owners’ ‘failure to attend to the preliminary tiling work’. There is no evidence of the actual amount to be deducted. There should be a nominal deduction of $250 in the amount to be paid to the builder.
The Root Barrier
The owners submit that a deduction also has to be made for the cost of a root barrier, which was not installed. The contract allowed a provisional sum of $807 for that work. However, by definition, such work is not part of the fixing stage. It seems that it would have been included in the last stage, “practical completion”. In that case, no deduction should be made here, as no payment is being claimed, or made, for that final stage.
The Deductions
The effect of the above deductions can be set out this way:
(a) Supply and fix roof trusses $2,290
(b) Fix Laserlite roofing $1,441 (experts’ report)
(c) Fix bifold doors $ 488 (experts’ report)
(d) Remove and replace windows
and doors (Johnstone statement) $1,200
(e) End wall sheeting (estimate) $ 250
(f) Cornice – (estimate) $ 250
$5,919
The Defects
Some of the work was done badly by the builder, or the subcontractors, and has been rectified. It is necessary to turn to the adjudicator’s discussion about defective work – see his reasons at para 76.
Item 3
This is an example of rough work done by the builder. The footings supporting the brick walls should have been 300 mm below ground, but they were exposed in places. The adjudicator accepted the evidence of Mr Griffiths, a witness called by the Turners, and allowed $2,722 to trim the concrete overspill, for aesthetic reasons.
It is accepted that the work is structurally sound. It should also be noted that the price of $2,722 is based on Mr Griffiths’ report, and includes costings to excavate, level and extend the footings. That extent of work is unnecessary.
It can be accepted that something should be allowed for landscaping, on the basis that the footings are higher than expected. In that case an amount of $477 is appropriate – the amount suggested by Mr Griffith to provide landscaping to cover the footings.
Item 4
The experts agreed that $837 is appropriate, and that sum should be allowed.
Item 10
Likewise, $200 is the agreed figure.
Item 27
This is contentious. There is cracking in the brickwork of the existing house, near one of its rear corners. It is near the join between the existing brickwork, and the suspended slab which now links the two buildings. The word “join” is appropriate – the plans called for a gap between the building and the new concrete floor to allow for movement of the slab, but it was constructed hard up against the brickwork.
The engineers agree that the installation was defective. They do not agree about the impact it may have had on the brickwork of the existing house. It is common ground that there was cracking before the extension was built. Mrs Turner and Mr Johnston inspected it before the contract was signed. It was agreed that it should be fixed. He was prepared to do that as part of the job on the understanding that an engineer did not require more extensive repairs.
Now the engineers agree that the cracking is not due to a structural fault and that underpinning is not required.
The adjudicator’s award of $5,675.70 is based on Mr Griffiths’ evidence. However, it appears that his estimate was based on the assumption that demolition, excavation and underpinning was required. The adjudicator has allowed too much. He should have fixed the repair cost at $625 as assessed by Mr Dyer.
Item 29
It was agreed by the engineers that a carbon fibre strip was required to fix the builder’s omission of steel bars in the concrete slab. The adjudicator allowed $3,031, being the cost in 2010. It was submitted for the builder, that the cost in 2002 is appropriate, an amount of $1,728. However, it is difficult to see why the present cost should not be allowed when both parties have participated in the delay. (In any case, to start with the 2002 cost and then add the usual award of interest up to the present time, would seem an unnecessary exercise, and would probably mean even higher costs.)
Item 38
The plans showed 37 tie-down rods, but 33 were installed. The shape of the steel bracket used to hold the top plate down was not desirable. The adjudicator’s allowance of $848 appears to be in order.
Plumbing
The adjudicator remarked that a report by a plumber, Mr Fingleton, addressed only stormwater defects. However, in fact, the report shows that he was concerned also with an inspection of the sanitary plumbing. Another plumber, Mr Lacey, also gave evidence. A fairly clear picture emerges from his evidence. The sanitary defects were not the fault of the builder, while the multiple defects in the stormwater drains were its fault.
At the present time the overall costs to repair both systems are $11,888 as found by the adjudicator; but the builder should only be responsible for $5,500 of those costs for the stormwater defects. If these costs are costed in 2002, it is agreed by the experts that they would have been $2,365. Again it is difficult to see why the present figure of $5,500 should be not be adopted.
Therefore the following amounts for repairing defects should be paid by the builder to the owners:
Item 3 $477
Item 4 $837
Item 10 $200
Item 27 $625
Item 29 $3,031
Item 38 $848
Plumbing $5,500
TOTAL $11,518
Conclusion
It is necessary to consider, in principle, how the monetary result should be calculated. The builder has to pay for repairing the defects in the work, to the end of the fixing stage. That is the amount of $11,518.
The builder should not be paid for work which was not done. The details are set out above, at $5,919. So the total deductions from the builder’s claim are $17,437.
Otherwise, the builder is entitled to be paid for the fixing stage. When a builder largely completes a stage, and there are defects or work not done, the agreed amount for that stage has to be reduced accordingly. Once the reduction is made, the builder is entitled to be paid for the work that it has done – especially when most of that stage has been duly completed. That is this case. A builder may fail to complete some required work, but an owner is not automatically entitled to avoid payment for an entire stage. These principles are correctly applied in the written submissions by counsel for the Turners – see paras 60-63 of the submissions.
For an account of the general principles see Dorter and Sharkey, Building Law, 2nd Edition Volume 1 at paras 1.097-1.1030, 9.590 and 10.11.
In this case, it is appropriate that the judgment carry no interest, because of delay, which should be discouraged.
The overall result in this case is that these amounts should be paid to the builder:
Fixing stage $26,400
Less work not done, $ 5,919
Less defects in work $11,518
Amount payable $8,963
There should be an order in APL0207-11 that the builder is entitled to recover $8,963 from the owners:
(a) Set aside the adjudicator’s decision of 23 December 2010;
(b) Order that the respondents pay $8,963 to the appellant.
The Costs Appeal
The builder appeals against an existing costs order.
On 26 September 2011, the adjudicator made a costs order, dealing with costs up to and including his judgment of 23 December 2010. He ordered that each party bear their own costs of the proceedings. His judgment takes into account the relevant events, up to that time. He applied the usual principle in this Tribunal, that each party should pay its own costs. It seems to me that his decision was entirely appropriate.
In the usual case, the Tribunal would give judgment and then hear submissions about costs. The statutory framework about costs orders is set out in the member’s decision of 26 September 2011. Parties are to pay their own costs unless the interests of justice require otherwise. An award of costs is an exercise of discretion. Some relevant factors are set out in section 71.In this case, extreme delay by both sides is a relevant consideration. Secondly, each side seems to have been responsible for the generation of an excessive amount of written materials especially experts’ reports, quite out of proportion to the true value of the various disputes. A modest home building project has resulted in lengthy and detailed submissions by counsel – diligent, but not all helpful.
It is necessary to concentrate on the further costs of the appeal on the papers. It can be assumed that the costs of the written submissions (this appeal being on the papers) are small, compared to the overall costs of the litigation – various interlocutory skirmishes over the years culminated in a six day trial.
It is true that the builder was the more successful party on the appeal. However, it should not be encouraged, or allowed, to make a submission for further costs in its favour. Any order would cause additional expense and delay. In the long and unfortunate history of this litigation, that is to be avoided. The costs order is an exercise of the Tribunal’s discretionary power. The best course is one which brings this litigation to an end, once and for all, now. There will be no order about the costs of the appeal.
These are the formal orders of the Tribunal:
APL027-11
(a) The adjudicator’s decision of 23 December 2011 be set aside.
(b) Order that Mr Wayne Turner and Ms Judith Elaine Turner pay $8,963 to Zachary Developments Pty Ltd.
(c) Order that each party bears their own costs of the proceedings, after 26 September 2011.
APL413-11
(a) Order that the adjudicator’s costs order of 26 September 2011 be confirmed.
(b) Order that each party bears their own costs of the proceedings, up to and including 26 September 2011.
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