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  • Appeal Determined (QCA)

Clemens v Flower

 

[2006] QCA 265

Reported at [2006] 2 Qd R 510
 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Clemens & Anor v Flower [2006] QCA 265

PARTIES:

GRAHAM CLEMENS
(appellant/respondent/respondent)
DELMA CLEMENS
(appellant/respondent/respondent)
v
MARK FLOWER
(respondent/applicant/appellant)

FILE NO/S:

Appeal No 542 of 2006
DC No 256 of 2005

DIVISION:

Court of Appeal

PROCEEDING:

Application for Extension of Time/General Civil Appeal

ORIGINATING COURT:

District Court at Brisbane

DELIVERED ON:

28 July 2006

DELIVERED AT:

Brisbane

HEARING DATE:

2 May 2006

JUDGES:

McMurdo P, Williams JA and White J
Separate reasons for judgment of each member of the Court, McMurdo P and White J concurring as to the orders made, Williams JA dissenting

ORDER:

  1. Application for an extension of time granted
  1. Application for leave to appeal granted
  1. Appeal allowed to the extent of setting aside paragraph 1 of the order of 6 December 2005 in the District Court of Brisbane
  1. Instead it is ordered that Graham and Delma Clemens pay Mark Flower an amount to be determined consistent with these reasons; and that Mark Flower deliver to Graham and Delma Clemens one mirror and such plans as remain in his possession
  1. The parties are to provide the Court with that agreed amount or, in the absence of agreement, submissions as to the quantum of that amount within seven days of the publication of these reasons
  1. The parties are to provide submissions as to the costs of this appeal including the applications for leave and of the application for leave and the appeal to the District Court, with reference if apposite to s 94 and s 100(8) Commercial and Consumer Tribunal Act 2003 (Qld), within seven days of the publication of these reasons
  1. Any further submissions arising from these orders are to be in the form set out in paragraph 37A Practice Direction No 1 of 2005

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – CUSTOM AND USAGE – CONSISTENCY WITH EXPRESS TERMS – where the applicant (builder) and respondents (home owners) entered into a building contract in respect of a dwelling house – the respondent was in breach of the contract by taking possession and control of the property before a final payment to the applicant was due – the final amount due was in contention – whether the applicant was, as a consequence, permitted to terminate the contract – whether (with reference to the contract) referral of the matter to the Commercial and Consumer Tribunal (albeit outside of the five working days specified in clause 28.5) meant that the applicant could not validly terminate the contract, until the Tribunal had made a determination on the issues

Commercial and Consumer Tribunal Act 2003 (Qld), s 4, s 94, s 100
District Court of Queensland Act 1967 (Qld), s 118(3)
Domestic Building Contracts Act 2000 (Qld)

Gianfriddo v Garra Constructions Pty Ltd [1971] VR 289, considered
Hosier & Dickinson Ltd v P & M Kaye Ltd [1970] 1 WLR 1611, considered
P & M Kaye Ltd v Hosier & Dickinson Ltd [1972] 1 WLR 146, considered

COUNSEL:

The applicant/appellant appeared on his own behalf
A N Skoien for the respondents

SOLICITORS:

The applicant/appellant appeared on his own behalf
Winchester Young & Maddern for the respondents

  1. McMURDO P:  Williams JA has set out the relevant facts and issues in this application for leave to appeal so that my reasons for reaching a different conclusion can be briefly stated.
  1. The applicant, Mr Flower, a registered builder ("the builder"), built a home at Scarborough for the respondents Mr and Mrs Clemens ("the homeowners") during 2003. They fell into dispute which was determined by the Commercial and Consumer Tribunal ("the Tribunal").[1]  The Tribunal ordered the homeowners to pay the builder $72,248.88.  The homeowners successfully appealed by leave to the District Court under s 100 Commercial and Consumer Tribunal Act 2003 (Qld) ("the Act").[2]  The District Court ordered the homeowners to pay the builder $25,227.39.  Mr Flower now applies for an extension of time within which to apply for leave to appeal to this Court under s 118(3) District Court of Queensland Act 1967 (Qld).
  1. He states in his application for an extension of time that his application for leave to appeal was filed a few days late because of his difficulty in securing legal advice caused by delay in receiving payment from the homeowners of the District Court judgment and the public holidays over the Christmas/January period. The homeowners do not point to any prejudice arising from the late filing of the application. In those circumstances this Court would not refuse the extension of time if the builder demonstrated that he had real prospects of success in his leave application and appeal.
  1. That the dispute between the parties has already had two hearings and that it involves an amount less than $50,000 are considerations which do not favour the granting of the application for leave to appeal. The principal ground on which the builder seeks to rely in his proposed appeal is that the District Court judge wrongly found that under the contract between the parties the homeowners' referral of the dispute to the Tribunal prevented the builder from terminating the contract and claiming damages under the contract. This is a question of law. The contract between the parties was the Home Industry Association Limited standard form Plain Language New Home Construction contract ("the contract") which is apparently in wide use in the home construction industry. Because the construction of that contract is a matter of law of considerable importance well beyond the concerns in the present dispute between the parties, the applications for an extension of time and for leave to appeal on that ground should be granted.
  1. It is helpful to set out the relevant portions of cl 28:

"Clause 28TERMINATION BY DEFAULT

...

When the28.2The owner is in substantial breach of this owner is in                             contract if the owner:

substantial...

breach(k)takes possession of or uses the works or any part of the works without the prior written agreement of the builder prior to the payment in full of the contract price, adjusted by any additions or deductions made under this contract, in breach of Clause 26; or

...

Notice to28.3If a party is in substantial breach of this show cause                            contract, then the other party may give to that party a written notice to show cause:

(a)specifying the substantial breach;

(b)requiring that the substantial breach be rectified within 10 working days after the notice is given under this contract; and

(c)stating that, if the substantial breach is not rectified, the other party intends to end this contract.

Notice to end28.4If the party in substantial breach does not rectify or commence to substantially rectify the substantial breach stated in the notice to show cause within 10 working days of receiving that notice, the other party may end this contract by giving a separate notice to that effect.

the contract

 

No right to28.5A party is not entitled to end this within 5 working days of receiving the notice to show cause, the party in substantial breach refers the question as to whether the other party has the right to end this contract for determination by the ... Tribunal under Clause 37.contract if,

end where

matter is

referred to

QBT

Where28.6If a reference for determination is made under matter is                            subclause 28.5 the carrying out of the works is referred to                            suspended and the notice to show cause is not the QBT                            effective until the ... Tribunal has made a                                           determination.

..."

  1. Essentially the relevant facts are that the builder considered the homeowners substantially breached the contract under cl 28.2(k). Under cl 28.3, the builder gave them notice to show cause why he should not end the contract in a letter faxed to them on 17 October 2003.  The homeowners did not commence to rectify the breach within 10 working days under cl 28.4 and nor did they refer the question whether the builder was entitled to end the contract to the Tribunal within five working days of 17 October 2003 under cl 28.5.  They did refer the dispute to the Tribunal on 6 November 2003.  By letter dated 12 February 2004 the builder purported to terminate the contract by giving notice under cl 28.4.
  1. The builder contended and the Tribunal member accepted that the failure of the homeowners to tick a particular box in their application of 6 November 2003 on the Tribunal's standard form Application - Domestic Building Dispute meant that they had not referred the dispute with the builder under cl 28 of the contract to the Tribunal.
  1. Although the homeowners did not tick the box marked "Declaration about the effect of term of contract", they sought in their application an order from the Tribunal determining "the amount of money payable by the [builder] to [them] pursuant to the building contract executed by the parties". The objects of the Act establishing the Tribunal include:

"to have the tribunal deal with matters in a way that is just, fair, informal, cost efficient and speedy".[3]

The ordinary meaning of the words used in the homeowners' application to the Tribunal, especially when considered with the objects of the Act, fully satisfies me that the homeowners had referred to the Tribunal for determination the question whether the builder had the right to end the contract under cl 37.  The Tribunal erred in concluding otherwise.

  1. The substantive question of law for determination in this appeal is whether the builder, after giving the notice to show cause on 17 October 2003, was entitled to end the contract with the homeowners under cl 28.4 by his letter of 12 February 2004 despite the homeowners' application to the Tribunal on 6 November 2003 and the provisions of cl 28.5. If so, the builder was entitled to have damages assessed under cl 28.8.
  1. I agree with Williams JA that the 10 working day limitation before the builder can exercise his right to end the contract under cl 28.4 after giving the notice to show cause under cl 28.3 is an essential term.
  1. I have, however, reached a different conclusion from Williams JA as to the effect of the words "5 working days" in cl 28.5.
  1. The Tribunal member, in a careful, reasoned judgment, concluded that the builder's right to terminate the contract under cl 28 and at common law remained unaffected by the homeowners' prior commencement of proceedings in the Tribunal some weeks after receiving the builder's cl 28.3 notice; cl 28.5 did not apply as the homeowners had not referred the matter to the Tribunal within five working days of the receipt of the builder's cl 28.3 notice to show cause. After a three day trial in which he preferred the evidence of the builder to that of the homeowners, the Tribunal member found that the homeowners were in substantial breach of cl 28.2(k) of the contract in taking possession of the house without the builder's prior written agreement before they paid the full contract price adjusted by additions or deductions;  the builder was entitled to and did terminate the contract by the letter of 12 February 2004 and was entitled to damages against the homeowner under cl 28.8.  The member assessed these at $64,253.76 which, with interest payable under the contract, totalled $72,248.88.
  1. On appeal the District Court judge reached a different conclusion. He determined that because the homeowners had referred the dispute under cl 28 to the Tribunal, although not within five working days, under cl 28.5 the builder was not entitled to end the contract. The cases to which his Honour referred in support of that conclusion[4] all turn on their individual facts and the terms of the apposite contractual documents.  They are not inconsistent with the construction given to cl 28.5 by the Tribunal member that the homeowners' referral of the dispute under cl 28 to the Tribunal after five working days of receiving the cl 28.3 notice to show cause did not prevent the builder from terminating the contract under cl 28.4.  In the present case, the issue for determination was the amount of money payable under the contract;  the homeowners had entered into possession of their home in breach of the contract;  there was no question of equitable remedies.  Clause 28.5 disentitles a party to end the contract when the party alleged to be in substantial breach has referred the question as to whether the other party has the right to end the contract for determination to the Tribunal under cl 37 "within 5 working days of receiving the notice to show cause".[5]  In my view, giving the plain words "5 working days"[6] their natural and ordinary meaning, they indicate that the parties objectively intended to limit the operation of cl 28.5 to circumstances where the referring party has referred the matter to the Tribunal within five working days of receiving the cl 28.3 notice to show cause.  Unless the referral is made within five working days of receiving the cl 28.3 notice, the stated objective intention of the parties is that the referral to the Tribunal will not stop the party who gave the notice from terminating the contract under cl 28.4.  The reading of cl 28.5 in context and with its juxtaposition to cl 28.6 does not suggest a different meaning.  Clause 28.6 refers to where "a reference for determination is made under subclause 28.5", that is, one made within five working days of receipt of the notice to show cause under cl 28.3.  If the parties did not intend cl 28.5 and cl 28.6 to have this effect they would not have included the words "5 working days"[7] in cl 28.5.  The District Court judge was wrong to overturn the conclusion of the Tribunal member as to the effect of cl 28.5.
  1. The learned primary judge additionally noted that the Tribunal member overlooked the undisputed claim of the homeowners that the builder retain and should deliver up certain property in his possession namely a mirror and some plans, and that although the Tribunal member rejected the homeowners' claim for defective work, he identified their claim for additional credits of $11,396, particulars of which were in evidence and were not disputed, and should have brought them into calculation. These conclusions appear to be correct. The orders made by the District Court judge insofar as they reflect these issues should not be altered.
  1. I would grant the applications for an extension of time and for leave to appeal and allow the appeal to the extent of setting aside par 1 of the order of 6 December 2005 in the District Court at Brisbane. Instead I would give judgment for the builder in an amount to be determined consistent with these reasons, that is for $64,253.76 less $11,396 together with interest calculated under the contract.
  1. Orders
  1. Application for an extension of time granted.
  1. Application for leave to appeal granted.
  1. Appeal allowed to the extent of setting aside par 1 of the order of 6 December 2005 in the District Court of Brisbane.
  1. Instead it is ordered that Graham and Delma Clemens pay Mark Flower an amount to be determined consistent with these reasons;  and that Mark Flower deliver to Graham and Delma Clemens one mirror and such plans as remain in his possession.
  1. The parties are to provide the Court with that agreed amount or, in the absence of agreement, submissions as to the quantum of that amount within seven days of the publication of these reasons.
  1. The parties are to provide submissions as to the costs of this appeal including the applications for leave and of the application for leave and the appeal to the District Court, with reference if apposite to s 94 and s 100(8) Commercial and Consumer Tribunal Act 2003 (Qld), within seven days of the publication of these reasons.
  1. All submissions arising from these orders are to be in the form set out in par 37A Practice Direction No 1 of 2005.
  1. WILLIAMS JA:  Disputes arose between the parties consequent upon a building contract entered into between the applicant as builder and the respondents as owners on 13 February 2003 with respect to a dwelling house to be erected for the respondents at Scarborough.  In circumstances which will be outlined subsequently, the disputes came before the Commercial and Consumer Tribunal, and on 21 December 2004, for reasons delivered by the Member, it was ordered that the respondents pay to the applicant $72,248.88.  The respondents were successful in obtaining leave from the District Court to appeal from that decision on the ground of error of law (s 100 Commercial and Consumer Tribunal Act 2003 (Qld)).  For reasons delivered on 6 December 2005, Wilson DCJ allowed the appeal, set aside the order of the Tribunal, and ordered that the respondents pay to the applicant $25,227.39.  From that decision the applicant, who has appeared in person, sought leave to appeal to this Court.
  1. There was a difference of opinion between the Member of the Tribunal and Wilson DCJ as to the proper construction and application to the facts of certain clauses in the contract, particularly cl 28.5 thereof, and it was essentially that which resulted in the difference in the quantum of the respective judgments.
  1. In a case such as this, where there has already been one appeal, this Court would only grant leave for a further appeal (including an extension of time) on a question of law of some significance. The question of the construction and application to the facts of cl 28.5 is a question of law of some importance and leave should be granted to enable argument to be heard on that issue. However, despite submissions to the contrary from either side, this Court ought not to embark on any further consideration of quantum issues. If the approach of the Tribunal is upheld, then quantum as determined by that Tribunal should be restored; if the construction favoured by the District Court is upheld, the appeal should be dismissed and the quantum determined by that court should stand.
  1. On 6 October 2003 a Certificate of Practical Completion was prepared and signed by all of the parties. Thereafter the respondents entered into possession of the building but had not paid the amount of the Final Claim demanded by the applicant, namely the sum of $34,112. Clause 28.2 of the contract provided that the owner was in "substantial breach of this contract" if the owner took "possession of … the works … without the prior written agreement of the builder prior to the payment in full of the contract price …". Then cl 28.3 provided that if a party was in "substantial breach of this contract" the other party may give "a written notice to show cause … specifying the substantial breach … and stating that, if the substantial breach is not rectified, the other party intends to end this contract."
  1. Acting pursuant to cl 28 the applicant on 17 October 2003 sent a "Notice of Substantial Breach" to the respondents. Relevantly that notice stated:

"We note that you have taken control and possession of the site prior to paying the Final Claim under the Contract.  This is a substantial breach of Contract under Clause 28.2 of the Contract.

We note that you have not paid the Final Claim in the sum of $34,112 that is now due and payable.  This is a substantial breach of Contract under Clause 28.2 of the Contract. 

We also note that you have been contacting our contractors and suppliers and discussing financial matters with them relating to the Contract in breach of Clause 10.3.

Your conduct shows an intention by you to no longer be bound by the Contract.  This conduct is a repudiation of the Contract by you and we reserve our rights in relation to your repudiation.

We give notice to you under Clause 28.3 of the Contract that you are required to remedy the substantial breach of the Contract by giving us all keys to the locks that you have installed on the property and by paying to us the final claim in the sum of $34,112 within 10 working days of this notice being given to you. 

If you do not remedy the substantial breaches as required we intend to end this Contract."

  1. On 20 October 2003 the then solicitors for the respondents replied to that Notice making an offer to pay a lesser amount in full satisfaction of the applicant's claims. That was rejected by the applicant in a letter of 27 October 2003 to the solicitors.
  1. Clause 28.4 of the contract provided that if a party in substantial breach did "not rectify … the substantial breach stated in the notice to show cause within 10 working days of receiving that notice, the other party may end this contract by giving a separate notice to that effect." Notwithstanding that the asserted substantial breach was not rectified within 10 working days, the applicant did not then give a separate notice ending the contract.
  1. Clause 37 of the contract relevantly provided that if "any dispute … between the owner and the builder arises … then either party may give to the other party written notice of such dispute … and such dispute … may be referred for determination to the Queensland Building Tribunal." It is not in dispute that the Commercial and Consumer Tribunal is the relevant successor of the Queensland Building Tribunal.
  1. By application dated 3 November 2003, and lodged with the Registrar of the Commercial and Consumer Tribunal on 6 November 2003 the respondents referred a dispute to that Tribunal. They used the standard form of application in so doing. In Part B the respondents placed a tick in the box indicating they were seeking "Relief from payment of amount claimed $34,112". On the hearing of the appeal the applicant made much of the fact that the respondents did not put a tick in the box against the relief: "Declaration about the effect of term of contract." The form then stated that the order the respondents were seeking was: "The tribunal determine the amount of money payable by the applicant to the respondent pursuant to the building contract executed by the parties." Accompanying that was a Statement of Claim; it set out over some two and a half pages issues as to quantum. If all of the matters raised by the respondents were accepted then no further money was payable by them to the applicant.
  1. The applicant then lodged a Defence and Counter-claim on 28 November 2003 seeking, amongst other relief, a declaration that the applicant was entitled to "validly terminate the contract".
  1. Clause 28.5 of the contract, the critical provision for present purposes, is in the following terms:

"A party is not entitled to end this contract if, within 5 working days of receiving the notice to show cause, the party in substantial breach refers the question as to whether the other party has the right to end this contract for determination by the Queensland Building Tribunal under clause 37."

It is beyond dispute that the respondents' reference to the Tribunal was not within five working days of receiving the notice to show cause; the reference was made some 19 days after receiving the notice.

  1. It is then provided by cl 28.6 that if there is a reference under cl 28.5 "the notice to show cause is not effective until the Queensland Building Tribunal has made a determination." Relevantly the solicitors then acting for the applicant sent a letter dated 12 February 2004 to the then solicitors for the respondents in the following terms:

"We refer to the above building contract dated 13 February 2003 and the following:-

  1. Our client's letter titled Notice of Substantial Breach to your clients dated 17 October 2003; and

In reliance on the above referred Notice of Substantial Breach and, further, on the ground that your clients have repudiated their obligations under the contract in taking possession of the property, contrary to clause 26 of the contract, without having paid the contract price, as adjusted in accordance with the contract, our client hereby elects to terminate the contract.

Our client reserves all his rights under the contract including his right to claim the amounts specified in clause 28.8 of the contract and otherwise his rights available at law and in equity."

  1. Clause 28.8 of the contract provided for the calculation of damages to which the builder would be entitled upon terminating the contract pursuant to cl 28. It was the reliance on this clause which resulted in the calculation of damages by the Tribunal Member.
  1. In his reasons for judgment the Tribunal Member noted that the respondents did "not appear to have taken any steps to remedy the substantial breaches referred to" in the applicant's Notice of 17 October 2003. After referring to the bringing of the application before the Tribunal on 6 November, the applicant's Defence and Counter-claim of 28 November, and the applicant's election to terminate the contract by the letter of 12 February 2004, he reasoned as follows:

"The applicants' counsel submitted that the effect of clause 28.6 was such that, even if a referral to the Tribunal was made after the 5 working days referred to in clause 28.5, a Notice issued under clause 28.3 was still 'not effective' once the (late) referral was made.  It was submitted that, as a consequence of this interpretation, the respondent was not entitled to terminate the contract once the application was made to the Tribunal, until the Tribunal makes a determination. 

At common law the validity of a notice terminating a contract (or a notice of intention to do so) is not affected by the recipient of the notice referring the matters in issue to court or to arbitration: Gianfriddo v Garra Constructions Pty Ltd [1971] VR 289.  Only the 'clearest of contractual terms' will operate to suspend the rights of the parties pending judicial consideration or arbitration:  Matthews v Brodie (unreported Vic Supreme Court 2 April 1980).

On its face clause 28.6 applies only if 'a reference for determination is made under subclause 28.5'.  A reference under subclause 28.5 must be made within 5 working days.  As well, the reference under subclause 28.5 is one made by the 'party in substantial breach'. 

If the broader meaning for which the applicants contend were intended, one would expect the reference to be to a reference for determination under clause 37, rather than the more constrained clause 28.5. 

The applicants took no step in the Tribunal within 5 working days.  It was 14 working days later that these proceedings were commenced.  It does not appear that the applicants (being the party in substantial breach) have ever referred 'the question as to whether the other party has the right to end this contract' to the Tribunal for determination.  By his counterclaim of 28 November 2003, the respondent referred the question of whether he himself was entitled to end the contract to the Tribunal for determination.  By their Answer, the applicants ensured that matter remained formally in issue between the parties. 

In the circumstances, the respondent's right to terminate the contract under clause 28 (and at common law) remained unaffected by the applicants’ commencement of proceedings in the Tribunal.  The respondent's act of 12 February 2004 was effective to terminate the contract."

  1. On the appeal to the District Court that issue was dealt with relatively briefly. The reasoning disclosed in the reasons for judgment is as follows:

"More than the five days mentioned in cl 28.5 passed between the builder’s notice and the Clemens referral to the CCT, and the learned Member also concluded that, in its terms, that referral was not one determinative of the question whether the builder could rightfully terminate.  Reliance was placed upon the decision in Gianfriddo v Garra Constructions Pty Ltd (1971) VR 289, but the case is authority for nothing more than the proposition that the validity of a notice terminating a contract is not affected by the referral of the matters in issue to a court and is not, it seems to me, determinative of the question whether the time limits set out in cl 28.5 might be construed as a procedural matter, and not of the essence of the contract.

As a number of other decisions show, if there is nothing in the contract which suggests time must always be construed as essential, the court will lean against that construction (United Scientific Holdings Ltd v Burnley Borough Council (1997) AC 904; G R Mailman & Associates Pty Ltd v Wormald (Aust) Pty Ltd (1991) 24 NSWLR 80, and GHD Pty Ltd v Wayne [2001] QSC 73.)  At the highest, the owners’ failure to act within the prescribed time meant that they were exposed to the risk of an election by the builder, which was not made.  The terms of the referral, which asked whether the amount claimed by the owner was payable, was on any reasonable inference simply a less than precise way of addressing the matters in dispute between lay parties, particularly in the face of the builder's Notice of Substantial Breach.  The contrary finding in the CCT must, in those circumstances, involve an error of law which is properly appellable."

  1. In my view the District Court judge was correct in concluding that the application to the Tribunal referred the essential matters in dispute between the parties to determination by that Tribunal. The real issue between the parties was whether or not any sum of money was owing by the respondents to the applicant at the time the owners entered into possession. If no money was so payable then the respondents were entitled to enter into possession when they did; if money was owing then they were in breach of contract in that they owed that amount of money and entered into possession without paying it. In consequence the real issue was whether or not the applicant was entitled to demand payment of $34,112 (or some other sum) – the matter the respondents asked the Tribunal to resolve. In essence the Tribunal was being asked to determine whether the applicant had "the right to end this contract." That that was the real issue for determination was made even clearer by the applicant's claim for relief in the Defence and Counter-claim of 28 November 2003.
  1. I do not understand what is meant by the words in Part B of the standard form Application – "Declaration about the effect of term of contract." In the circumstances I cannot see that the respondents are in any way prejudiced by their failure to place a tick in the box against those words.
  1. The real issue therefore can be identified as whether or not the referral of the dispute raised in the notice to show cause to the Tribunal outside the five working days period had the effect in all the circumstances of rendering the notice to show cause ineffective for the purposes of providing a basis for terminating the contract until the Tribunal has made a determination on the matter referred to it.
  1. A question certainly arises as to whether or not the requirement that the reference to the Tribunal pursuant to cl 28.5 be made "within 5 working days of receiving the notice to show cause" is an essential term. It is true, as noted by Wilson DCJ, that there is a tendency for courts to lean against regarding a time limitation in a contract as an essential term. Whether or not it will be regarded as an essential condition will depend upon a consideration of the contract as a whole. It is clear that the 10 working day limitation on the builder's right to end the contract pursuant to clause 28.4 is an essential term.  A builder could not, for example, give a notice after six days ending the contract.  But it is difficult to see that the time limitation in cl 28.5 is essential to the rights of the parties.  Why should the position be any different if the owner referred the matter to the Tribunal after the five day period but before the expiration of the 10 day period?  A builder has a right after the 10 day period referred to in cl 28.4 to end the contract, but if that right is not exercised then it could be said that the builder has elected to keep the contract on foot, at least for the time being.  If, before the builder elects to end the contract by giving notice under cl 28.4, the owner refers to the Tribunal the question whether or not the builder has the right to end the contract, then it is difficult to see why the conclusion should not be reached that the builder has impliedly waived his right to end the contract and the entitlement to end the contract is in abeyance until the issue is determined by the Tribunal.  It would not matter, in my view, whether the reference to the Tribunal was strictly pursuant to cl 28.5 or cl 37. 
  1. But on the facts of the present case that is not the end of the matter. The applicant has, by his Defence and Counter-claim of 28 November 2003 asked the Tribunal to adjudicate upon his entitlement to "validly terminate the contract". In my view that was more than merely submitting the matter to the Tribunal for determination. It amounted to a waiver of reliance on the five working day period referred to in cl 28.5 and an election to have the Tribunal determine the issue on the basis that cl 28.5 still operated. By referring that issue to the Tribunal before electing to end the contract the applicant is estopped from asserting that he had a valid right pursuant to cl 28.4 to end the contract before the determination of the Tribunal.
  1. Some support for that approach is found in some passages in Hosier & Dickinson Ltd v P & M Kaye Ltd [1970] 1 WLR 1611 (CA) and [1972] 1 WLR 146 (HL).  The building contract in that case contained a clause providing that unless arbitration had been requested within specified times before and after the issue of the architect's final certificate, that certificate should be conclusive evidence in any proceedings arising out of the contract.  Without the dispute being referred to arbitration, proceedings were commenced in the courts.  The question then arose as to the conclusiveness of the final certificate.  Relevantly Cairns LJ said at 1617:

"Then the official referee held that the parties ‘waived their rights in respect of resolving their differences by arbitration.’  This is indeed so: the contractors waived their right by starting the action and the employers waived their right by taking a step in the action - that is, by applying for leave to defend: see Pitchers Ltd v Plaza (Queensbury) Ltd [1940] 1 All E.R. 151.  But the question is not whether they waived the right to arbitration but whether they waived the right to rely in the action on a final certificate if one was given while the action was pending.  There is no reason for inferring that either party waived such right . . ."

In the House of Lords (at 157) Lord Wilberforce said that he accepted the reasoning of Cairns LJ on those issues.  Just as the parties in Hosier & Dickinson were held to have waived their rights in respect of resolving differences by arbitration, so it seems to me in the present case the parties waived reliance on the time provision in cl 28.5; in particular the applicant waived any entitlement to rely on that clause by formally asking the Tribunal to determine whether he had a right "to validly terminate the contract". 

  1. In my view the decision in Gianfriddo does not avail the applicant.  Essentially it was a decision on the particular terms of the building contract in question.  The court merely held that it would be inconsistent with the actual terms of the contract to imply a term that once the matter had been referred to arbitration the builder could not give a notice pursuant to an express term of the contract entitling him to take possession of the works. 
  1. It follows that I am of the view that the District Court judge was correct in concluding that the applicant was not entitled to end the contract by giving the notice of 12 February 2004. Because of that the Tribunal was not entitled to assess quantum pursuant to the provisions of cl 28.8. In those circumstances the calculation of quantum by the District Court should stand.
  1. In the circumstances leave to appeal should be granted, but the appeal should be dismissed with costs.
  1. WHITE J:  The applicant seeks leave to appeal from the decision of a District Court judge hearing an appeal from a determination made by the Commercial and Consumer Tribunal.  The applicant was the builder of domestic premises for the respondents at Scarborough. The agreement between the parties was contained in the Housing Industry Association’s QC1 2000 Plain Language New Home Construction Contract together with a building schedule, plans and drawings. 
  1. I agree with the other members of the Court that the construction of certain important clauses in that contract raises a matter of law of importance extending beyond the interests of these parties. The applicant should be granted an extension of time (he was a short period outside the time limit for filing an application for leave to appeal and has offered a plausible explanation) and be granted leave to appeal.
  1. The facts and circumstances of this matter have been set out in some detail in the reasons of Williams JA and I need do no more than state them briefly before considering the construction of the relevant clauses of the contract.
  1. The contract was entered into between the builder and the homeowners on 13 February 2003 for the construction of a low set brick veneer house for a price of $259,000. The contract was a regulated contract pursuant to the Domestic Building Contracts Act 2000 (Qld) and the work to be performed was domestic building work under that Act.  The dispute between the parties essentially concerned an alleged substantial breach of the contract by the homeowners within the meaning of cl 28.2(k) of the contract in that the homeowners had taken control and possession of the site prior to payment of the final claim under the contract in the sum of $34,112.  The homeowners contended that they did not owe that amount to the builder. 
  1. It is convenient next to set out the clauses of the contract which govern this dispute. Italicised words in the contract indicate that they are defined terms in the contract.
  1. Clause 28 concerns termination by default by either the builder or homeowner and provides relevantly in cl 28.2:

‘The owner is in substantial breach of this contract if the owner:

(k)takes possession of or uses the works or any part of the works without the prior written agreement of the builder prior to the payment in full of the contract price, adjusted by any additions or deductions made under this contract, in breach of Clause 26;  or

…’

  1. Clause 28.3 provides:

‘If a party is in substantial breach of this contract, then the other party may give to that party a written notice to show cause:

(a)specifying the substantial breach;

(b)requiring that the substantial breach be rectified within 10 working days after the notice is given under this contract;  and

(c)stating that, if the substantial breach is not rectified, the other party intends to end this contract.

  1. Clause 28.4 provides for notice to bring the contract to an end. It provides:

‘If the party in substantial breach does not rectify or commence to substantially rectify the substantial breach stated in the notice to show cause within 10 working days of receiving that notice, the other party may end this contract by giving a separate notice to that effect.’

  1. Clause 28.5 deals with the circumstances of a matter being referred to the Queensland Building Tribunal pursuant to cl 28. It provides:

‘A party is not entitled to end this contract if, within 5 working days of receiving the notice to show cause, the party in substantial breach refers the question as to whether the other party has the right to end this contract for determination by the Queensland Building Tribunal under Clause 37.’

  1. Clause 28.6 provides that if a reference to determination is made under cl 28.5:

‘… the carrying out of the works is suspended and the notice to show cause is not effective until the Queensland Building Tribunal has made a determination.’

  1. Clause 28.8 provides for the measure of damages the builder may recover from the homeowner if the contract is terminated by the builder, inter alia, pursuant to cl 28.  It provides:

‘On this contract being ended by the builder under Clauses 2, 15, 24, 28 or 29 the builder may, without prejudice to any other rights or remedies that the builder may have under this contract or at law, recover from the owner as a debt due and owing the greater of the following amounts:

(a)5% of the contract price;  or

(b)damages including:

(i)the cost of all work carried out by the builder under this contract;

(ii)the cost to the builder of any materials purchased by the builder and delivered to the site or ordered by the builder from suppliers and which orders can not be cancelled;

(iii)the cost to the builder of quitting the site;

(iv)the builder’s margin on the total of the amounts payable under subparagraphs (i), (ii) and (iii);

(v)default interest on any unpaid moneys under Clause 33;  and

(vi)all other costs and losses incurred by the builder as a consequence of this contract being ended.’

  1. Finally, cl 37.1 provides:

‘If any dispute or difference between the owner and the builder arises in connection with the subject matter of this contract then either party may give to the other party written notice of such dispute or difference and such dispute or difference may be referred for determination to the Queensland Building Tribunal.’

  1. The builder gave a notice of substantial breach dated 17 October 2003 to the homeowners in the following terms:

‘We note that you have taken control and possession of the site prior to paying the Final Claim under the Contract.  This is a substantial breach of Contract under Clause 28.2 of the Contract.

We note that you have not paid the Final Claim in the sum of $34,112 that is now due and payable.  This is a substantial breach of Contract under Clause 28.2 of the Contract.

We also note that you have been contacting our contractors and suppliers and discussing financial matters with them relating to the Contract in breach of Clause 10.3.  This is not withstanding our previous notices to you regarding similar breaches informing you that you are not to make enquiry to our contractors in breach of Clause 10.3.

Your conduct shows an intention by you to no longer be bound by the Contract.  This conduct is a repudiation of the Contract by you and we reserve our rights in relation to your repudiation.

We give notice to you under Clause 28.3 of the Contract that you are required to remedy the substantial breach of the Contract by giving us all keys to the locks that you have installed on the property and by paying to us the final claim in the sum of $34,112 within 10 working days of this notice being given to you.

If you do not remedy the substantial breaches as required we intend to end this Contract.

We also reserve our rights to late payment interest under the Contract from the date that the Final Claim became due and payable.’

  1. The homeowners responded with an offer to settle the outstanding claim by the builder by making a payment of $8,000 to him. Their solicitors added:

‘If you do not accept this offer they [the homeowners] will refer the matter to the Tribunal.  This offer shall lapse at 4 pm on Wednesday 22nd October 2003.’

The date of lapse of the offer was within the five working days provided for in cl 28.5 since the notice was faxed to the homeowners’ solicitors on 17 October which was a Friday so the homeowners had until the following Friday, 24 October to refer the dispute to the Tribunal within cl 28.5, see cl 38.

  1. The builder responded by a letter dated 27 October 2003 rejecting the offer and setting out much of the recent history of the dispute between them to which it is unnecessary to refer.
  1. The homeowners referred the dispute to the Tribunal on 6 November 2003. The relief sought by them was that the Tribunal ‘… determine the amount of money payable by the applicant [homeowners] to the respondent [the builder] pursuant to the building contract executed by the parties’. The statement of claim contested various items in the final account. It was subsequently amended considerably on 27 April 2004.
  1. On 28 November 2003 the builder filed a defence and counter-claim seeking, inter alia, a declaration that he was entitled to terminate the contract. 
  1. By letter dated 12 February 2004 the builder’s then solicitors (the builder appeared on his own behalf before the Tribunal and on the appeal) terminated the contract, relying on the notice of substantial breach which remained unremedied. The letter concluded:

‘Our client reserves all his rights under the contract including his right to claim the amounts specified in clause 28.8 of the contract and otherwise his rights available at law and in equity’.

By his amended counter-claim dated 12 November 2004 the builder sought, inter alia, a declaration that he had lawfully terminated the contract and damages pursuant to cl 28.8 of the contract. 

  1. The Tribunal member, in lengthy and careful reasons, preferred the evidence of the builder and his witnesses over that of the homeowners and their witness. Relevantly for this appeal, the Tribunal member found that the builder was entitled to terminate the contract under cl 28 and claim the cl 28.8 damages notwithstanding that the homeowners had commenced proceedings in the Tribunal. This was because he concluded that time was of the essence so far as the suspension of the entitlement to terminate under cl 28.5 was concerned. The Tribunal order was that the homeowners pay the builder $72,248.88 of which $7,995.12 was for interest.
  1. The District Court Judge upheld the appeal by the homeowners, inter alia, that the builder was not entitled to damages pursuant to cl 28.8 because his right to terminate the contract was suspended by the operation of cl 28.5, time not being essential.  His Honour concluded:

‘At the highest, the owners’ failure to act within the prescribed time meant that they were exposed to the risk of an election by the builder, which was not made.’

  1. A minor matter first needs to be mentioned before turning to the principal issue. When the homeowners filled in their application to the Tribunal they were asked in Part B of the form to tick an appropriate box and, if ticked, to include details in the statement of claim. They ticked the box opposite ‘Relief from payment of amount claimed’ in the sum of $34,112. That they had not ticked the box opposite ‘Declaration about the effect of term of contract’ meant, the builder contended, and the Tribunal member found, that the homeowners were not seeking to have the dispute with the builder under cl 28 of the contract referred to the Tribunal. I agree with the President, whose reasons I have read, that the relief sought by the homeowners made clear that they had referred to the Tribunal for determination the whole of the dispute between the parties and nice distinctions in wording have little place in proceedings which are to be ‘just, fair, informal, cost efficient and speedy’, s 4 of the Commercial and Consumer Tribunal Act 2003 (Qld).  In concluding otherwise the Tribunal fell into error.
  1. The important question of law for determination is whether the builder was entitled to terminate the contract with the homeowners pursuant to cl 28.4 by the letter of 12 February 2004, notwithstanding that the homeowners had made an application to the Tribunal on 3 November 2003. If he was, then he was entitled to have his damages assessed pursuant to cl 28.8. Whether he was entitled to do so depends upon the meaning to be given to the expression ‘within 5 working days of receiving the notice to show cause’.
  1. It is trite law to say that words in a contract must be construed in the context of the whole agreement. The expression ‘within 5 working days’ appears throughout the contract, for example, in cl 17.4 (dispute about an extension of time), cl 19.1(d) and (e) (the builder’s right to suspend the works), cl 20.4, cl 20.5 (variations), cl 21.2, cl 21.4 (prime cost and provisional items substitutes), and cl 25 (practical completion).  While working days is defined, time is not stipulated to be of the essence as a term of the contract.  The contract would be unworkable if that were the case.  Clearly some of the time limits in the various clauses are not essential while others are.  I agree with the President and Williams JA that the requirement in cl 28.3 that the homeowner have 10 working days to rectify or commence substantially to rectify a substantial breach is essential.
  1. But is that the case with the five working days in cl 28.5? Depriving a party to a contract of the right to terminate for substantial breach must be clearly expressed. Clause 28.6 does so providing that ‘[i]f a reference for determination is made under subclause 28.5 the carrying out of the works is suspended and the notice to show cause is not effective’ until the Tribunal has made the determination.  The reference was not made under subclause 28.5 because it was not made within five working days. The provision is clear and there is no basis for having recourse to the rent review cases such as United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904, Gollin & Co Ltd v Karenlee Nominees Pty Ltd (1983) 153 CLR 455 and GR Mailman & Associates Pty Ltd v Wormald (Aust) Pty Ltd (1991) 24 NSWLR 80 to alter the objectively plain intention of the parties.
  1. It follows that in my view the District Court Judge was in error in overturning the conclusion of the Tribunal member on this issue.
  1. As the President has observed the Tribunal overlooked dealing with the claim of the homeowners that the builder should deliver up a mirror and some plans remaining in his possession. He also identified their claim for additional credits of $11,396, particulars of which were not disputed and ought to have been brought into calculation. I agree with the President that the orders made by the District Court Judge on these issues should not be altered.
  1. I agree with the orders proposed by the President.

Footnotes

[1]Clemens v Flower [2004] CCT B713-03.

[2]Clemens v Flower [2005] QDC 378;  DC No 185, 256 and 387 of 2005, 6 December 2005.

[3]Section 4(1)(b) of the Act and see also s 4(2).

[4]Clemens v Flower [2005] QDC 378;  DC No 185, 256 and 387 of 2005, 6 December 2005, [12];  United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904;  GR Mailman & Associates Pty Ltd v Wormald (Aust) Pty Ltd (1991) 24 NSWLR 80 and GHD Pty Ltd v Wayne [2001] QSC 73;  SC No 1237 of 2001, 20 March 2001.

[5]The emphasis is as in the contract.

[6]Above.

[7]Above.

Close

Editorial Notes

  • Published Case Name:

    Clemens & Anor v Flower

  • Shortened Case Name:

    Clemens v Flower

  • Reported Citation:

    [2006] 2 Qd R 510

  • MNC:

    [2006] QCA 265

  • Court:

    QCA

  • Judge(s):

    McMurdo P, Williams JA, White J

  • Date:

    28 Jul 2006

Litigation History

EventCitation or FileDateNotes
Primary JudgmentNA--
Appeal Determined[2006] 2 Qd R 51028 Jul 2006-

Appeal Status

Appeal Determined (QCA)
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