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  4. DC Mills Developments v Fitch - [2015] QCAT 114

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DC Mills Developments v Fitch[2015] QCAT 114

DC Mills Developments v Fitch[2015] QCAT 114

CITATION:

DC Mills Developments v Fitch [2015] QCAT 114

PARTIES:

David Cameron Mills t/as DC Mills Developments

(Applicant)

 

v

 

Peter Fitch and Andrea Fitch

(Respondent)

APPLICATION NUMBER:

BDL052-13

MATTER TYPE:

Building matters

HEARING DATES:

24, 25 and 26 February 2014 and 23 May 2014

HEARD AT:

Brisbane

DECISION OF:

Member J Allen

DELIVERED ON:

24 March 2015

AMENDED ON:

2 April 2015

DELIVERED AT:

Brisbane

ORDERS MADE:

  1. David Cameron Mills t/as DC Mills Developments must pay the amount of $75,469.24  $75,569.24 to Peter Fitch and Andrea Fitch within 21 days of the date of this order.
  2. David Cameron Mills t/as DC Mills Developments must provide all Form 15 and 16s he currently holds or has under his control in respect of the construction of the dwelling at 2 Clarance Street, Wakerley to Peter Fitch and Andrea Fitch within 21 days of the date of this order.
  3. Interest on any amount unpaid under order 1 will be calculated at the rate of 10% per annum and payable as from the due date of payment and payable until the whole amount is paid.
  4. Each party may make submissions in regard to costs within 14 days of the date of this order.
  5. The Tribunal will consider any application for costs on the papers.

CATCHWORDS:

BUILDING DISPUTE – where parties a cost plus contract – whether cost plus contract enforceable by builder – where construction of new dwelling - whether variations to be taken into consideration when calculating entitlement where unenforceable cost plus contract – factors to be taken into account when making award under unenforceable cost plus contract – where labour hourly rate under contract different to rate charged to builder - factors to consider where claim for undocumented variations.

Domestic Building Contracts Act 2000 (Qld) ss 7, 8, 9, 16, 55, 79-84, Schedule 2 Dictionary

Queensland Building and Construction Commission Act 1991 (Qld) ss 77(2)(c)

Queensland Building and Construction Commission Regulations s 34B

Allaro Homes Cairns Pty Ltd v O'Reilly [2012] QCA 286

Folkes v L.V. Lavis, J.&N. [2005] QCCTB 2(10 February 2005)

Gemini Nominees Pty Ltd v Queensland Property Partners Pty Ltd ATF The Keith Batt Family Trust [2007] QSC 20

Pavey & Matthew Pty ltd v Paul (1987) 162 CLR 180

APPEARANCES:

 

APPLICANT:

David Cameron Mills

RESPONDENT:

Peter Fitch and Andrea Fitch

REPRESENTATIVES:

 

APPLICANT:

Mr Fraser of Counsel instructed by Berrigan Doube Lawyers

RESPONDENT:

Ms McNeil of Counsel instructed by Colville Johnstone Lawyers

REASONS FOR DECISION

Introduction

  1. [1]
    Mr Mills is a builder who, in 2011 and 2012 built a house for Mr and Mrs Fitch at 2 Clarance Street, Wakerley. The Fitches contacted him in early 2011 when they were looking for the land to build their house on as they had had previous dealings with Mr Mills. He had been one of the directors of the building company, which renovated their previous residence. Mr Mills made it clear to the Fitches that on this occasion he would be undertaking this work under his own name.
  2. [2]
    Mr and Mrs Fitch bought the land and advised Mr Mills that they had a budget of $500,000 to build the house and this figure would be all up including a pool, landscaping etc. Around this time they also provided Mr Mills with a copy of a site survey, which had been given to them by the vendor of the land, the survey was dated 5 June 2008 and they suggested this may help to reduce costs of getting one. Mr Mills indicated on a preliminary basis that on a budget for the house itself of $420,000.00 and at a per m2 costs of between $1,250 and $1,400 a house of between 300 and 340 m2 could be built.
  3. [3]
    Mr Mills introduced the Fitches to an architect, Sarah Foley and concept plans were prepared. The Fitches paid Ms Foley directly.
  4. [4]
    Mr Mills noted that the concept plans showed a larger house of 433m2 and indicated to the Fitches that the house would now cost about $670,000.00 and that they need to sit down and trim before going to the draftsman. He met with the Fitches on 15 June 2011 and they instructed him to have preliminary plans prepared.
  5. [5]
    Building Design Services (Qld) Pty Ltd were engaged by Mr Mills on 22 June 2011 to draft the preliminary plans and to bill the Fitches directly. The preliminary plans were forwarded to the Fitches on 27 June 2011.
  6. [6]
    On 2 July 2011, the Fitches requested some changes to the preliminary plans noting that there was no cupboard in the office as had been originally requested. That the fence was to be rendered not a timber one and they do not want to walk downstairs to hang clothes out. There were also some changes to the upstairs windows.
  7. [7]
    Mr Mills then engaged Structerre Engineers on 7 July 2011 to prepare an engineering report based on the preliminary plans. He prepared a detailed estimate of the cost of the building, which set out the costs of each individual item including amounts for labour, hydraulic and electrical items in the amount of $765,445.81.
  8. [8]
    He stated he provided the document to the Fitches on 8 July 2011. They say that this meeting took place in late August 2011 and that the estimate was based on a worst-case scenario and that they discussed savings with Mr Mills by way of them supplying some of the materials and engaging sub-contractors.
  9. [9]
    The Fitches forwarded further amendments to the preliminary plans on 11 July 2011 including the reconfiguration of the rear deck, addition of a deck over the lower garage and relocating the internal stairs. These amendments were sent to the draftsman Building Design Services on 29 July 2011.
  10. [10]
    The engineering plans were received on 8 August 2011 and forwarded to the Fitches. They replied to Mr Mills assistant that they were looking forward to getting a price from Mr Mills over the next couple of days.
  11. [11]
    The drawings for the revised plans were forwarded to the Fitches on 18 August 2011 and Mr Mills held a meeting with them on 24 August 2011 to discuss the revised plans and the corresponding increase in costs. Mr Mills states at the end of that meeting they instructed him to commence construction. 
  12. [12]
    On 29 September 2011, Mr Mills prepared a contract for the construction of the building which was executed by the parties. The type of contract was a cost plus contract. The contract contained an estimate that the building work would cost $765,000.00, while this estimate must be genuine, it is not binding on the contractor, as it would be in fixed price contract. The owners are obliged under a cost plus contract to pay for the actual cost of the contracted services plus a margin for the contractor, in this case the contract set out a margin of 5% plus 4%. At the time the contract was entered, the engineers had been sent the revised plans but had not provided their amended engineers drawings.
  13. [13]
    Construction began once building approval was granted around 14 October 2011 and the Fitches took up occupation of the house in August 2012. The house was not yet complete at that time. The tilers were still working. The Fitches had been renting and Mr Mills indicated that the house would be ready by a particular date and they had given notice to their landlord. At the end of the notice period, they took up residence with Mr Mills’ agreement.
  14. [14]
    During the course of the construction several variations were requested by the Fitches including the following:-             
    1. A store room was converted to a garage;
    2. The cladding was changed from Fibre Cement to NRG Greenboard;
    3. Changes to windows;
    4. The upstairs retreat was enlarged;
    5. A landing was built off the laundry with a clothesline;
    6. A fish tank was built;
    7. A fireplace surround was built;

There were no written variation prepared in respect of these works.

  1. [15]
    Following the obtaining by the Fitches of a building report they served Mr Mills with a breach notice requiring him to remedy the defects and when that did not occur they terminated the contract on 18 December 2012.

The application and counter-application

  1. [16]
    The contract stipulated that Mr Mills would invoice the Fitches for work done on a monthly basis.  During the construction period Mr Mills caused to be sent to the Fitches invoices totalling $919,436.35, each invoice included a copy of the supporting invoices for materials and sub-contractors as follows:-
    1. 7/7/11 Invoice No 5 $3,025.00 Inc. GST
    2. 24/10/11 Invoice No 12 $31,884.60 Inc. GST
    3. 5/11/11  Invoice No 14 $30,833.82 Inc. GST
    4. 2/2/12 Invoice No 16 $52,467.80 Inc. GST
    5. 9/3/12 Invoice No 17 $101,926.24 Inc. GST
    6. 20/4/12 Invoice No19 $85,582.68 Inc. GST
    7. 23/5/12 InvoiceNo20 $77,734.67 Inc. GST
    8. 25/6/12 Invoice No 23 $83,491.64 Inc. GST
    9. 24/7/12 Invoice No 27 $164,438.53 Inc. GST
    10. 30/8/12 Invoice No 30 $174,029.74 Inc. GST

(amended at hearing to $168,774.49)

(amended at hearing to $86,009.77)

  1. 21/9/12 Invoice No 32 $87,240.04 Inc. GST

    (amended at hearing to $21,903.38)

    The contract

    Is the contract enforceable by Mr Mills as a cost plus contract?

    Mr Mills‘s entitlement under s 55(4) of the Act

    Total $543,979.65

    The amount to be allowed for labour

    Total $133,848.75, which allowing for Margin and GST would be $151,922.16.

    The profit margin

    The amount if any to be allowed for variations

    Amount counter claimed for defects

    $47,628.00

    Total $52,390.08

    Form 15 and 16 certificates

    These forms are necessary to enable the Fitches to obtain the Form 21 – final inspection certificate in respect of the dwelling. The Tribunal will make an order in similar terms to that submitted by Mr Fraser.

    Interest and costs

    Summary

    Order

    1. 31/10/12 Invoice No 35 $26,781.59 Inc. GST
      1. [17]
        Mr Mills alleged that the Fitches had paid $711,394.00 in respect of the invoices and that $194,021.63 remained outstanding in respect of the following invoices:-
        1. Invoice No 30 $80,000.00inc GST
        2. Invoice No 32 $87,240.04 Inc. GST
        3. Invoice 35 $26,781.59 Inc. GST
      2. [18]
        There were admissions made at the hearing that invoice 12 should be amended by a reduction of the amount of $11,990.00 representing a deposit. There were also reduction in invoice 30 and 32 by reduction of $41,578.92. Which is a total for the invoices of $854,503.71. From this is deducted the amount the Fitches have paid under the invoices of $711,394.99 and cash in hand payments totalling $25,465.00 discussed below. Mr Mills is now then claiming the amount of $117,643.72 plus interest at the rate of 15% per annum in accordance with the contract and his costs.
      3. [19]
        Mr Mills was granted leave to amend his application so that that he could make a claim for payment under the cost plus provisions of the Domestic Building Contracts Act 2000 (Qld) in the alternative to his claim under the contract due to the response raised by the Fitches.
      4. [20]
        The Fitches while confirming they received the invoices and that they have paid the amount of $711,384.98 in respect of the invoices say that they have made additional cash payments of $25,465.00 and that the total they have paid is $736,849.98. They say that they relied on Mr Mills to construct the house with due care and skill and that the construction price should not have been more than the amount indicated of $765,000.00.
      5. [21]
        Further, that Mr Mills is not able to enforce the contract, as it did not comply with the requirements of the law in regard to cost plus contracts. With the result that he is only entitled to be reimbursed for the cost of the work including materials and subcontractors. The Fitches say that they had also provided a large amount of material in respect of the construction themselves such as the light fitting and plumbing fixtures which were allowed for in the contract in the amount of $103,762.69 and wished to have the contract price reduced to take that into account.
      6. [22]
        The Fitches’ also made a counter application including in relation to defects which they alleged had caused loss and damage exceeding $200,000.00. The claim in respect of defects was subject to expert evidence on both sides and a joint experts report was prepared following an expert’s conclave. There were some further issues sought to be raised by the Fitches’ expert Mr Salmon about the report. Unfortunately, one of Mr Mills’ experts Mr Cec Fritz passed away during the hearing process and it was then not possible to obtain any further material to deal with issues raised by Mr Salmon. The Tribunal determined that some matters could be subject to further evidence in terms of the extent of some work about the driveway and its crossover and the cost of such work. In addition, there is a need for approval of the covered walkway. Mr Salmon and Mr Mills’s other expert Mr Barns provided evidence in regard to those matters. 
      7. [23]
        Mr Mills claim for subcontract labour is also the subject of the Fitches’ counter application. He had provided Invoices from Milvert Pty Ltd, which he said, provided subcontract labour to him at $55 per hour. It is alleged by the Fitches, that Milvert, a company controlled by Mr Mills did not provide the subcontract labour. That the tradespeople had contracted with Mr Mills directly and that this had been at varying rates some as low as $30 per hour and further that Mr Mills had miscalculated the hours that they had worked on the site.
      8. [24]
        The Fitches had sought to make a further claim in respect of the tradesman billing for hours they had not worked. As this matter was only raised on the day of the hearing, the Tribunal determined not to allow the claim to proceed.
      9. [25]
        In the alternative, the Fitches say that Mr Mills represented to them prior to entering the cost plus contract, that the best contract for the works would be a cost plus contract and the estimated cost of the works would be $765,000.00. That some items were deleted from the contract and the scope for the works has not increased significantly to justify a blowout in costs from the estimate provided and should have come in under the estimate due to the deletion of works. Having regard to the decision of the Tribunal in regard to the primary claim this alternative claim has not been dealt with in the reasons.
      10. [26]
        The Fitches seek relief from payment of the amount claimed by Mr Mills, damages for the defects and reimbursement for the labour charges as well as their costs.
      1. [27]
        The contract document is in the form of a Master Builder Contract MB CP-5 2/11 edition with the appropriate general conditions. The contract documents included working drawings prepared by Building Design Solutions and Foundation data prepared by STA Consulting Engineers. The parties agree that the entry by them of a contract in this form constitutes a cost plus contract. The works set out in the contract are described in item 3 of the contract schedule as “construction of a new dwelling at 2 Clarance Street, Wakerley.
      2. [28]
        A domestic building contract is a contract to carry out domestic building work[1], which includes the erection or construction of a detached dwelling[2]. A regulated contract[3] is a domestic building contract for which the contract price is more than the regulated amount (that is $3,300[4]). The contract here is then a regulated contract.
      3. [29]
        That is the contract is subject to the provisions of the Domestic Building Contracts Act 2000 (Qld). The purpose of that Act is to achieve a reasonable balance between the interests of building contractors and building owners and to maintain appropriate standards of conduct in the building Industry. One of the ways in which the Act seeks to strike that balance is to regulate the circumstances under which a cost plus contract may be enforced by a builder.
      4. [30]
        A cost plus contract has the effect of moving some of the building risk in terms of the costs of the works exceeding the estimate from the builder to the homeowner. In a fixed price contract the builder is entitled to the contract price with adjustments for prime cost items and provisional sums plus the amount for any agreed variations, which comply with the Act. Under a cost plus contract such as the one here, the homeowner must pay the builder for the actual cost of the works and a margin for profit and off site fees, this is termed the cost plus component in clause 29 of the contract. The cost plus fee in this contract, which is a percentage of the actual cost of the works (CL 29.5 of the general conditions) set out in the contract at item 9, was said to be “5% and 4% as agreed”. While the contract provided an estimate of the cost of the works of $765,000.00, the contract makes it clear that this figure is not binding on the parties.
      5. [31]
        Where the builder is subject to a fixed price contract by necessity he or she will be minded to ensure that costs are kept within budget and that there are specific allowances for items, which can cause variations of the contract price. That is prime cost items and provisional sums. In a normal contract where the homeowner wished to purchase tiles for examples at a cost greater than the prime cost then they would have to pay the difference. By the same token, if the home owner used less than the allowance then that would be credited to them. In this case, there were no amounts listed in the contract for either of prime cost or provisional sums.
      6. [32]
        There were amounts set out in the spreadsheet used by Mr Mills to calculate his estimate of the cost of building the house for such items, which the Fitches acknowledge, was discussed with them. This document did not form part of the contract document and Mr Mills initially sought to rely on some oral terms to be introduced into the contract to cover such things, this was not pursued. Clearly on its face the contract does not make any provision or allowance for items which would normally be set out either as prime cost, provisional sum or as part of the specifications. Mr Mills loosely stated that the Fitches had indicated that they wished the contract to be finished in a low to mid-range.
      7. [33]
        Effectively, this contract did not provide any way of ensuring that costs were kept to any budget and there is no evidence that any stage during the course of the contract specific amounts were considered when such things as the tiles, carpet or other items were being sourced. It is noted that the spreadsheet estimated that the cost of labour would be $80,000 whereas the amount ultimately claimed by Mr Mills for labour was in excess of $220,000.00.
      8. [34]
        The result of the apparent lack of discipline in terms of monitoring the cost of the contract works is that Mr Mills finally invoiced an amount of $919,436.35 and when this is added to the additional amount paid by the Fitches in cash to Mr Mills of $25,465.00 and the amounts allowed in the budget for materials and subcontractors they paid for of $103,762.90, including $35,000 for the pool, the total cost of building the house is $1,048,664.20. Which is 37% more than the estimate in the contract of $765,000.00.
      9. [35]
        While there must be consideration for the variations, which were made to the contract in terms of increasing costs it is not contended by Mr Mills that they are the reason for the increase in cost. Interestingly, Mr Mills’ expert Mr Barns, a quantity surveyor, provided a detailed assessment of the total cost of completing the dwelling and estimated that it would be $912,332.00, though is for the house as built not in accordance with the plans. Mr Salmon estimated the cost of construction on a square metre of $1,320.00 per sq. metre for a 535 square metre house at $706,200.00
      10. [36]
        The Tribunal notes that Mr Mills informed the Fitches that under a cost plus contract they would be responsible to rectify errors that occurred during the building works. This though is not reflected in the contract, which requires the builder to carry out the works with due care and skill and in clause 29.2 which states at item (ff) that the actual cost of the works includes, cost of making good defects which are not due to material and workmanship not in accordance with the contract. This would have had an effect on the amount charged.
      11. [37]
        There has been no attempt to dissect the subcontractor invoices to determine which are for actual works and which would constitute defect work or even variation work. Mr Salmon did provide an estimate of the cost of some of the variations, which has been adopted by Mr Mills.
      1. [38]
        A building contractor must not enter a contract cost plus contract that would be a regulated contract unless:
        1. relevantly, the cost of a substantial part of the subject work cannot reasonably be calculated without some of the work being carried out[5] or
        2. The contract contains a fair and reasonable estimate by the building contractor of the total amount the building contractor is likely to receive under the contract[6].
      2. [39]
        Sections 55(1) and (2) of the Act facilitate the protection of the interests of a building owner and specify the standard of conduct of the building contractor when the project is to proceed on a cost plus basis[7].
      3. [40]
        If a contractor enters a cost plus contract, which contravenes s 55 of the Act then they cannot enforce the contract against the building owner[8]. That is not to say that the contract is void it is only enforceable by the building owner not the building contractor. This means that the building contractor in this case Mr Mills would not be able to enforce payment under the contract.
      4. [41]
        The Act then makes provision under s 55(4), so that on application, the Tribunal may award the building contractor the cost of providing the contracted services plus a reasonable profit if the Tribunal considers it would not be unfair to the building owner to make the award[9].  This is similar to a quantum meruit where a contract is unenforceable[10], the reasonable cost of the work actually performed plus a reasonable profit margin on the basis that the building owner would otherwise be unjustly enriched.
      5. [42]
        As a matter of construction, the legislature has restricted a builder who breaches ss 55(1) or (2) of the Act to recovering costs for the work undertaken pursuant to that contract to the extent provided in ss 55(4). It cannot be concluded that in addition to s 55(4) a builder who breached s 55 of the Act would be entitled to make a claim based on a quantum meruit[11]. In terms of s 55(4) “the cost of providing the contractual services “is, in my view, a reference to the actual cost to the builder, that is, akin to, or the equivalent of, what the builder could charge, if the contract was a lawful cost plus contract and was otherwise duly enforceable[12]
      6. [43]
        Mr Mills stated[13] that “due to the ongoing variations and consequential increases in price I formed the view that I could no longer reasonably calculate the cost of the project without a substantial part of the work being performed and scope of work to be completed being locked in. The ongoing requests for substantial variations meant that I was unable to provide an accurate estimate. In those circumstances I considered that a costs plus contract would be necessary.”
      7. [44]
        At the hearing, Mr Mills stated that he had quite a few discussions with the Fitches about cost plus contracts because we did not have the plans or engineers drawings finalised. The owners wanted to bring in their own contractor in regard to the pool. He confirmed that he had indicated that they could potentially save money along the way. That the margin could be reduced as risk would usually be priced into the work for a fixed price contract. There were benefits in flexibility and that he could get his payments more quickly with monthly invoices. He noted that there was never a specification provided by the owners and his estimate was based on the best estimate of what they may require.
      8. [45]
        Mr Mills stated in cross examination that he was to build a house for Mr and Mrs Fitch and they wanted to have an ability to bring their own contractors and there was flexibility by way of this contract. That it was an appropriate contract to enter in the circumstances as it allowed for flexibility, such as variations of design without fees. He confirmed that he did not discuss a lump sum contract with the Fitches. Mr Mills stated that he thought he could enter a cost plus contract if the works could not be priced and that a fair and reasonable estimate was required. He said his difficulty was the changes requested and the lack of a specification. He said he thought that there was a difference between variations under a cost plus contract and a lump sum contract.
      9. [46]
        Mr Mills stated that at the time the contract was entered due to the Fitches wanting to make further changes, them wanting to provide their own materials and possibility subcontractors, the lack of a specification he was not in a position to provide a cost to build the house as at 29 September 2011. Mr Mills denies that he indicated to the Fitches that he said the price of $765,000.00 which is similar to his estimate was a worst case scenario,
      10. [47]
        Mrs Fitch in her oral evidence stated that Mr Mills did not request that they provide him with a specification nor did he explain what a specification was. Further that he never said he could not provide an estimate of the cost of building the house without a specification. It was suggested to Mrs Fitch that Mr Mills said cost plus contract would advantage her, as she was not sure as to inclusions and precise details of items wanted in the house. She agreed that he had said it would advantage her but denied that a cost plus contract interested her because she had not decided on particular finishes. She acknowledged that the plans forming part of the contract did not include details in regard to finishes.
      11. [48]
        Mr Fitch in his oral evidence denied that at the meeting of 24 August 2011 he did not know what he wanted in terms of the level of finishes and that it was never discussed. He also denied that Mr Mills had said to give an estimated budget on cost to build the house they would need to give details of the level of finishes for the house. Mr Fitch confirmed that Mr Mills had said the price of $765,000.00 would be a worst case scenario and that a cost plus contract would suit him because he wanted to supply items for the house himself.
      12. [49]
        When asked about the cost of the house exceeding $765,000.00 both Mr and Mrs Fitch made it clear they would not have built the house if they had known it would exceed that amount.
      13. [50]
        Counsel for the Fitches noted in her submission that at no time during his evidence did Mr Mills state that he told the Fitches that the reason he considered they should enter into a cost plus contract was because he was unable to cost a substantial part of the works due to him not having the second engineering drawings or not having a specification from them.
      14. [51]
        It is submitted by counsel for the Fitches that the relevant point in time for consideration as to whether there was a substantial part of the works that could not be reasonably calculated without some of the works being carried out was as at 29 September 2011. Therefore, variations to the works requested by the Fitches after the contract was entered are irrelevant. Mr Mills case was that until he received the updated engineering plans and a specification he couldn’t cost the works and that this is not the test under s 55(1)(b) because it did not require some of the work to be carried out before substantial part of the work could be calculated.
      15. [52]
        The circumstances under which a cost plus contract is allowable have been considered as “where there are too many uncertainties in a substantial part of the works as to what work has to be done. Those circumstances relate to that which is so hidden from view that it impossible to ascertain the nature and extent of the work required, without some work being done, therefore making it impossible to cost a substituent part or parts of the works which would be necessary for a fixed price contract. …S 55(1)(b) is not directed to circumstances where a homeowner might not have finalised selections of product to anticipated changes to the project. Those matters can be appropriately, and are commonly accommodated within the terms of a lump sum contract, namely through the terms dealing with provisional sums, prime cost items and variations. In my view the use of a cost plus contract is to be very specifically confined in instances of absolute necessity, that is, where the condition of the physical premises is, in substantial respects in doubt.”[14].
      16. [53]
        An example of a case where a cost plus contract was allowed by the Tribunal was also cited by Counsel for the Fitches[15]. In that case, the work included a renovation to an existing dwelling and there were many problems uncovered in the existing house before the renovation could proceed. While the builder had raised issues of the homeowners changing their minds in that and there being no specifications these were not determinative of whether a cost plus contract was enforceable.
      17. [54]
        Counsel for Mr Mills did not make submissions on the law in regard to cost plus contracts only noting that Mr Mills’ reasons for entering the contract were as set out at para 38 above.
      18. [55]
        In this case, Mr Mills was to enter a contract to build a new house for the Fitches according to plans prepared at the time of the contract. He had previously given them a very detailed estimate of the costs involved and could have based a fixed price contract on that estimate by making appropriate provision in the contract for prime cost items and provisional sums. While there had been some recent amendments to the plans the provision of amended engineers drawings would have enabled Mr Mills to calculate the final cost.
      19. [56]
        It is not that there was any work that needed to be done before the cost of a substantial part of the work could be calculated. What needed to be done was that amended engineering plans were required to be prepared before the overall cost of the works could be calculated and not that any building work was required.
      20. [57]
        The fact that there may have been further variations to the works is always contemplated by the contract and as long as the contract provisions and s 84 of the Act are complied with the builder is able to have his costs in regard to the variation.
      21. [58]
        The Tribunal does not accept Mr Mills’ evidence in regard to his justification to enter a cost plus contract. He has, by not disclosing side payments and by charging the Fitches inflated labour prices, shown himself not be a person of honour. The Tribunal prefers Mr and Mrs Fitches evidence that they were informed by him that this would be a more flexible contract and would enable them to vary the works without costs including by taking over some of the supply of items.
      22. [59]
        Clearly, Mr Mills did not explain to them the effect of a cost plus contract in terms of the builder not being limited to charge the amount of the estimated cost of the works and that they would be required to pay for his invoices based on the actual cost with a cost plus margin.
      23. [60]
        Mr Mills could have ameliorated the situation to a certain degree by preparing a specification with the Fitches which would have dealt with such things as the amount allowed for lights, tiles and carpets and included these items as prime cost items to at least highlight the amount that would be available within the contract estimate for them to help keep the costs within the estimate. He did none of this.
      24. [61]
        In circumstances where the cost of a substantial part of the work could be calculated without some of the work being done Mr Mills does not have a ground for entering the cost plus contract in respect of the Fitches residence at 2 Clarance Street, Wakerley and the Tribunal finds that Mr Mills is in breach of s 55(1) of the Act and could be subject to penalty of a maximum of 100 penalty units. Mr Mills is not able to enforce the contract against Mr and Mrs Fitch[16].
      25. [62]
        It was contended that Mr Mills was also in breach of ss 55(2) of the Act in terms of the estimated total costs of the works at $765,000.00 not being a fair and reasonable estimate. The Tribunal considers that this was estimate was based on the calculations included in the budget to build a new house in accordance with the plans and that it has not been shown that a house built in accordance with the plans could not have been built for the amount estimated. In fact Mr Salmon’s evidence as to what it should have cost to build the house was $706,200.00[17]. While Mr Barns calculated the value of the construction on a quantum meruit basis at $912,332.00[18], this is a substantially different dwelling having regard to the variations.
      26. [63]
        The Tribunal therefore finds that there was not a breach of ss 55(2) of the Act. The finding that ss 55(1) was breached is testament that if the house had have been built on a fixed price basis, with discipline and variations had have been properly documented that the costs should have been able to be contained and that this was not a contract which required it be done on a cost plus basis.
      27. [64]
        The finding that Mr Mills is in breach of s 54(1) of the Act means that Mr Mills is not able to enforce the contract in accordance with s 55(3) of the Act and his claim for payment based on his unpaid invoices must be dismissed
      1. [65]
        The amended application in the alternative sought an order pursuant to s 55(4) of the Act that Mr Mills be awarded the cost of providing the contracted services plus a reasonable profit as it was not unfair on the Fitches to make such an award. In the submissions for Mr Mills the analysis has been in respect of the invoices which are partly paid or unpaid with a separate allowance for overcharging. It is submitted on behalf of the Fitches that no further amount be paid under the contract to Mr Mills with counter claims for defects and the overcharge of labour. The job of the Tribunal then is to determine how much Mr Mills should have received for the contracted services plus a reasonable profit if the Tribunal considers it would not be unfair to the Fitches.
      2. [66]
        It is contended for Mr Mills that the contract is not void though unenforceable by him and this relates in particular to the amounts charged for labour. Where the contract states this is to be charged at $55.00 per hour and was on charged at that rate despite the rate at which labour was paid being much less in some cases. It is submitted for the Fitches that it should be only the actual cost of labour charged to Mr Mills that he should be able to recover.
      3. [67]
        The use of the word “cost” in s 55(4) of the Act clearly indicates that it is the actual cost and not any notional amount as contemplated by the contract and so it is the actual amount charged to Mr Mills for labour which will be taken into account.
      4. [68]
        Counsel for Mr Mills submitted that Mrs Fitch agreed that the work that was the subject of the invoices issued by Mr Mills was work that she had requested him to perform. It is then Mr Mills case that all of the work that is the subject of the invoices constitutes the contracted services provided by him for the purposes of s 55(4) of the Act and that the Fitches did not contend otherwise. It is noted though that the work encompassed by the invoices includes three specific items costed separately as variations by Mr Salmon as follows:-
        1. Walkway to front door $6,534.00
        2. Fireplace building work $1,375.00
        3. Extension to upstairs $4,158.00
      5. [69]
        It was then contended on behalf of Mr Mills that in calculating an entitlement under s 55(4) of the Act variations including the above ones would be able to be taken into account and that they would not need to be considered under the variation provisions in s 84 of the Act.
      6. [70]
        This is said to be based on the decision in the Versace case.  In determining the actual costs of the works in para 458 of that case Member Lohrisch in fact subtracted the cost of the variations and had earlier found that as the contract was in breach of s 55 there could not be any variations as a result of hidden features which would be the types of variations contemplated by a cost plus contract in terms of s 16(2) of the Act at [427] onwards.
      7. [71]
        It is submitted on behalf of Mr Mills that the evidence as to the actual cost of providing the contracted services is the subtotal on each invoice breakdown for each of the invoices for materials and subcontractors which sits behind each of the invoices as this excludes the builders margin expressed as being 5% and GST on that margin and each of the invoices is substantiated by the invoices from the various suppliers and subcontractors sitting behind them.
      8. [72]
        A total has been calculated in respect of the unpaid invoices to arrive at an amount owing of $98,763.56 and that in addition there should be a reasonable profit as contemplated in the Act.
      9. [73]
        It is contended that it is not unfair that an award be made pursuant to s 55(4) of the Act.  The Fitches have the benefit of a house that has been built in accordance with their instructions. If an award was not made they would be unjustly enriched in that they will have obtained that benefit yet will not have paid the associated cost. The report of Mr Barns which calculated the final value of the works on a quantum meruit of $912,332.00 was cited to show the advantage the Fitches would receive and the reasonableness of Mr Mills’s costs.
      10. [74]
        It was noted that Mr Salmon had given a per square metre estimate of $706,200.00 and that that there was no reasoning set out for this and that the evidence of Mr Barns should be preferred. The windfall is said to be $158,032.91 being the difference between what the Fitches have paid and the reasonable cost of building the house.
      11. [75]
        The reasonable profit is contended on behalf of Mr Mills to be 9% in accordance with the contract and it is noted that Mr Barns made an allowance of 12.5% for overheads and profit margin.
      12. [76]
        It is submitted for the Fitches that the evidence Mr Mills needs to present to the Tribunal to enable it to make any award to him is evidence of the actual cost of the works that he could charge the Fitches as if there was a lawful cost plus contract not on a quantum meruit and that it must not be unfair to the Fitches to make an award to him.
      13. [77]
        There are said to be several matters relevant to that issue including that there had been various estimates of the cost of the works and that there was no evidence that Mr Mills stated that the estimate of $765,000 was not reliable or unrealistic. This was the amount disclosed to the Building Services Authority for insurance purposes and it was said to be a worst case scenario. The total amount sought to be paid by the Fitches is $1,048,664.04 including amounts for materials and subcontractors of $103,762.69 and that is 37% more than the estimate.
      14. [78]
        On behalf of Mr Mills, it is countered that the Fitches’ material only shows the contract allowance in regard to these items and not the actual amount they may have paid.
      15. [79]
        It is further submitted for the Fitches that there is no expert evidence before the Tribunal from Mr Mills in respect of the actual cost of the works, save for the invoices he issued. There is evidence of overcharging, particularly in respect of labour charges discussed below, and a failure of Mr Mills to supervise the works in such a way as to minimise costs and errors. There were issues with the painter and renderer where they were specifically not preferred contractors of the Fitches and when payment was not forthcoming Mr Mills substantially reduced their costs. It is stated that in the circumstances it would be grossly unfair to the Fitches to require them to pay Mr Mills any more money.
      16. [80]
        It is noted on behalf of the Fitches that, if the Tribunal does require them to pay an amount of money to Mr Mills the Tribunal is unable to do this without allowing him money for variations, which he cannot claim, save for those few that Mr Salmon has costed and subject to satisfying the test under s 84 of the Act. The cost to undertake the variations is included in the amount claimed by Mr Mills under s 55(4). It is submitted that the Tribunal therefore cannot award Mr Mills any amount under s 55(4) without awarding him money for the variations, which he has no entitlement to unless he can satisfy s 84 of the Act.
      17. [81]
        Mr Mills has calculated his entitlement above of $98,736.56 plus margin plus GST based only the unpaid invoices. The calculation though requires a consideration of all of the invoices provided by Mr Mills. There is some difficulty having regard to the fact that the house as ultimately built and the work which was invoiced is somewhat different to the contracted works which are the building of the house in accordance with the plans. The procedure for variations of the works in accordance both with the contract and the Act was not followed and it is only in regard to those variations described above in the amount of $12,067.00 that there is any quantification.
      18. [82]
        While it was submitted on behalf of Mr Mills that the variations were not required to be separately assessed as the Tribunal was considering the matter under s 55(4) the Tribunal has determined that this is not the proper course of action. It was submitted on behalf of the Fitches that in the case where the variations could not be quantified then there should be no amount awarded to Mr Mills. This though was in the context of any additional payment to him.
      19. [83]
        The Act in s 55(4) brings in the concept of unfairness in terms of making an award if it is not unfair to the Fitches. In this case, the Fitches have the benefit of a substantial dwelling which has cost money to construct and for which Mr Mills has been responsible for the payment of materials and the subcontractors. It is not unfair that they be asked to be pay for the cost of the works. While clearly variations should not be taken into account in determining the amount that they are required to pay Mr Mills they have only quantified an amount of $12,067 in respect of those variations. Therefore that amount will be subtracted from the amount of the total costs for consideration under s 55(4) of the Act and will be considered under the variation provisions in ss 79 – 84 of the Act.
      20. [84]
        From the invoices as amended which have been agreed by the parties the Tribunal has calculated the amounts that represent the costs of the works excluding labour costs and the builders margin and GST as follows:
        1. 7/7/11 Invoice No 5 $2,500.00
        2. 24/10/11 Invoice No 12 $18,074.93[19]
        3. 15/11/11 Invoice No 14 $25,345.86
        4. 2/2/12 Invoice No 16 $44,931.67
        5. 9/3/12 Invoice No 17 $58,572.82
        6. 20/4/12 Invoice No 19 $30,601.68
        7. 23/5/12 Invoice No 20 $42,427.74
        8. 25/6/12 Invoice No 23 $38,716.62
        9. 24/7/12 Invoice No 27 $116,071.01
        10. 30/8/12 Invoice No 30 $103,909.10[20]
        11. 21/9/12 Invoice No 32 $52,655.32[21]
        12. 31/10/12 Invoice No 35 $10,172.90[22]
      1. [85]
        From that amount will be subtracted the amount for variations of $12,067.00 which will be considered separately. That leaves a total of $531,912.65.
      1. [86]
        To this amount must be added the amount for sub-contract labour. The Fitches have raised two issues in their counter-application. Firstly, that on a reconciliation of the  invoices from the tradespeople who provided labour to Mr Mills there was an amount of overcharging in respect of the hours worked. Mr Mills accepted this. There will be no deduction from the amount allowed though as the calculation being done here is based on the actual cost and there is then no need for a set off. The agreed hours will be used to calculate the total amount claimable in respect of the various tradespeople.
      2. [87]
        The second issue, relates to the rates charged in respect of those tradespeople. It became apparent to the Fitches that while they were being invoiced at the rate of $55 inc. GST per hour in respect of the tradespeople that was not the rate at which they were invoicing Mr Mills. As mentioned above some of the tradespeople were charging Mr Mills at the rate of $30.00 per hour. Mr Mills was relying on the rate set out in the contract at Part K(1) in respect of carpenters, which was $55 inc. GST per hour. Item 11 of the contract states that if the Actual Costs of the works include hourly rates for Labour Part K(1) of the works must be completed.
      3. [88]
        This then relates to Clause 29.2 (e) of the contract, which defines actual costs in relation to “wages and allowances paid for labour etc. at the charge out rates set out in part K(1) o the appendix. It was submitted for Mr Mills that the amount stipulated under K(1) represents all of the costs of an employee including superannuation. The Tribunal notes that item (g) includes superannuation and other award entitlements separately to the amount in item (e)
      4. [89]
        It is also contended for Mr Mills that while the contract may be unenforceable by him it is not void and so the Fitches must be able to prove the elements of a cause of action entitling them to return of the payments in relation to the labour charges. The Tribunal has determined that the contract is unenforceable by Mr Mills and that his entitlement is to found in ss 55(4) of the Act. This entitles to him, if it is not unfair to the Fitches, to the cost of providing the contracted service. This must be founded outside of the terms of the contract and that an artificial rate such as that set out in item K(1) of the schedule is not relevant.
      5. [90]
        It is the actual costs which are reflected in the invoices from the tradespeople which are relevant here. While it was contended for Mr Mills that regard should be had to the on-costs of superannuation etc. It cannot be that the on-costs of a person whose charge out is $30 are greater than those for a person whose charge out rate is $49 as would be the case if the figure of $55.00 Inc. GST was accepted. Since the additional amount of on-costs for a person who charges Mr Mills $33.00 per hour inc GST would be $25.00 per hour inc. GST and the on-costs for someone charging $44.00 per hour inc. GST would only be $11 per hour inc. GST
      6. [91]
        The total adjusted claim if the tradespeople were charged out at $50.00 per hour with the builder’s margin and GST would be $223,530.58.
      7. [92]
        The hours worked and actual charge-out rates for the respective tradespeople from there invoices are as follows[23]:-
        1. Derek Maccarone 1072.5 hours x $49.00 GST exc. = $52,552.50
        2. Christian Laird 747 hours x $40.00 (no GST) = $29,880.00
        3. Peter Horne 602 hours X $30.00 (no GST) = $18,060.00
        4. Nightingale Constructions 64.5 hours x $42.50 (GST exc.) = $2,741.25
        5. R Morrison 1020.5 hours x $30.00 (GST exc.) = $30,615.00
      1. [93]
        The difference between the costs as calculated under the contract and those based on the actual rates is $71,608.42, which is mainly in respect of Mr Laird, Mr Horne and Mr Morrison whose charge out rates were either $30.00 or $40.00.
      2. [94]
        There is no other evidence before the Tribunal as to additional costs in respect of these subcontractors and the amount, which will be allowed, is then $133,848.75 exc. GST.
      3. [95]
        When that amount is combined with the amount for other costs the total costs to be allowed to Mr Mills is $665,761.40 exc. GST.
      1. [96]
        The Tribunal must then consider what is a reasonable profit for Mr Mills? It has been submitted for Mr Mills that a reasonable profit would be as agreed under the contract, that is 9% and it is noted that Mr Barnes made an allowance for overheads and profit of 12.5% in his calculation of the value of the house on a quantum meruit.
      2. [97]
        It was submitted on behalf of the Fitches that no payment should be made to Mr Mills in excess of what he had already been paid which is $736,859.90. This was having regard to the representation that the amount of $765,000.00 was a worst case scenario and the Fitches would not have entered the contract if they had have known that it was going to cost what it did. That is the amount of $1,048,664.04 including the entire amount paid to Mr Mills and third parties as well as his claim for further payments, which is 37% more than the estimate provided. There being no proof of his costs save for the invoices. The evidence of overcharging, in respect of labour and a failure of Mr Mills to supervise the works in such a way as to minimise costs and errors. There also being independent evidence of labour wastage from Stephen Woodward. Mr Mills engaging tradespeople such as the painters and renderers against the request of the Fitches and without obtaining second quotes. It is also noted that the painters and renderers were related to Mr Maccarone.
      3. [98]
        The Fitches indicated in their evidence that they anticipated that Mr Mills who had said he would be undertaking the work under his own name would be directly supervising the work. Whereas his evidence was that, he was not hands on, though he visited the site regularly.
      4. [99]
        The example of the overcharging of labour shows the style of Mr Mills in supervising. Mr Maccarone was engaged by Mr Mills as the site foreman/leading carpenter. In cross-examination Mr Maccarone stated that he did not monitor the invoices of the carpenters only their quality and progress of work. When Mr Mills was queried about how he monitored the time claimed by the carpenters, he said there were other contractors on site and they talked to him. The allowance in the original budget for labour $80,000 and amount in excess of $223,000 was charged. The person who was on site, Mr Maccarone, was well able to monitor the cost of labour but was not charged with that task.
      5. [100]
        The Tribunal does not accept Mr Mills’ evidence he clearly was not interested in having the cost of labour monitored as it would be paid and he would receive his margin.
      6. [101]
        The Tribunal considers that there are several factors, which led to the blow out in the cost of the construction. Firstly, the lack of specifications and prime cost items in the contract. This meant that the Fitches had little guidance on how much they could spend on each item without affecting the overall cost. While this information was set out in the budget, it was not translated into the contract. While Mr Mills evidence was that he did not consider that the Fitches knew what level of finishes they wanted he had line items in the budget which could have been used to ensure that the cost did not blow out.  The Fitches had strongly indicated that they did not want to spend more than $765,000 and they wanted to spend less if they could.
      7. [102]
        Secondly, there were many variations to the contract and none of these were costed. If the Fitches had have become aware of the cost of the changes to the contract they may have moderated their requests. This never occurred. There was no motivation for Mr Mills to do this, as it was his understanding that, as it was a cost plus contract he could simply pass on the additional costs. Clearly, this is not the case any variations were required to be costed in accordance with the contract.
      8. [103]
        Not only that, but variations were undertaken without considering the flow on effects. For example the conversion of the store room to a garage. There was a post in the way, which supported the upper level. The storeroom was converted, the post was constructed, and it was only after that rectification took place to allow access to the garage. This would have cost extra and would have inevitably been passed onto to the Fitches. There was also a change in cladding the Fitches were led to believe would be a cheaper alternative but in the end once the walls were rendered it cost them more.
      9. [104]
        There are also many examples of poor workmanship, which will require rectification due to the lack of supervision. While those costs will be borne separately, they show that Mr Mills has not adequately supervised the construction of the dwelling.
      10. [105]
        Generally the fact that it was perceived as a contract where all and any costs could be passed onto the Fitches meant that there was no discipline in regard to monitoring the costs.
      11. [106]
        Having regard to all the failures which are associated with Mr Mills management of this project  while it is fair that he be paid for the cost of materials and subcontractors the Tribunal considers that it would unfair for the Fitches to pay him any amount in respect of profit and his profit margin is set at 0% for the reasons set out above which show he has not acted with reasonable care and skill in the carrying out of his duties as is required under the contract and the Act.
      12. [107]
        Mr Mills is then entitled to the amount of $665,761.40 plus GST (except in relation to the portable long service leave amount of $4,018.00) which equals $731,945.74. As the Fitches have paid him the amount of $736,859.90, they are entitled to a refund of $4,924.16 in regard to Mr Mills claim under s 55(4) of the Act.
      1. [108]
        The Tribunal must also consider whether any amount should be allowed to Mr Mills in respect of the variations. The amended application asks the Tribunal to award an amount for variations pursuant to s 84 of the Act or on a quantum meruit basis. In regard to a claim on a quantum meruit, that it not available where the work constitutes a variation to a regulated contract such as the case here[24]. The variations costed by Mr Salmon as mentioned above are as follows:-
        1. Walkway to front door $6,534.00
        2. Fireplace building work $1,375.00
        3. Extension to upstairs $4,158.00
      2. [109]
        In submissions on behalf of Mr Mills, it was noted that the Fitches have requested Mr Mills to perform the work. It was otherwise argued that these amounts should be considered as part of the claim under s 55(4) of the Act which has been denied by the Tribunal.
      3. [110]
        In his oral evidence, Mr Mills stated that he was aware generally that a variation was required to comply with the requirements of the Act but that he thought that there was a difference with cost plus contracts. All parties accepted that there had been variations agreed, none of which were documented. The evidence of the Fitches was that these variations were also not costed
      4. [111]
        The contract in clause 12 of the general conditions deals with the requirements for variations, which includes that the variation be in writing. The Act defines variations as an addition or omission form the subject work[25]. In regard to a cost plus contract there is an additional requirement that it is not reasonably contemplated by the contract. As the contract is not enforceable by Mr Mills, the definition of variation, which is relied on, will be the one for a standard variation. The Act requires that all variations be in writing[26] except where there is a need for urgent work or it is not practicable in the circumstances. Those circumstances were not raised on Mr Mills’s behalf. Section 80 and 81 set out what matters need to be incorporated into the variation document. This includes a description of the variation, any delay, the change in contract price or fair and reasonable estimate for a cost plus contract. The evidence before the Tribunal is that there was no information given to the Fitches about the actual cost of any variations.
      5. [112]
        Where a variation does not comply with the requirements of the Act then the Tribunal may approve the recovery of an amount by Mr Mills in exceptional circumstances or where he would suffer unreasonable hardship, and it would not be unfair to the Fitches for Mr Mills to recover an amount[27]. There was no evidence before the Tribunal as to those matters from Mr Mills. Counsel for the Fitches cited the decision of the Appeals Tribunal in Better Homes Queensland Pty Limited v O'Reilly & Anor [2012] QCATA 37, which makes it clear that the requirements of s 84(4) are strictly construed Therefore in the absence of evidence in support of the approval for the variations the Tribunal declines to approve the variations in the amount of $12,067.00.
      1. [113]
        The Fitches have made a counter application in respect of alleged building defects. Their expert, Mr Salmon and Mr Mills expert, the late Mr Cecil Fritz provided reports and attended an expert’s conclave following which a joint experts report was filed. The joint experts report sets out the items where the experts have agreed rectification or completion work is to occur and a price to be allowed for such work as follows[28]:-
        1. 5.1 Paint work - $5,545.00 (total wall and fence)
        2. 5.2/3 Service to windows – builder to arrange on completion
        3. 5.4 Ceramic tiling to floors - $500.00
        4. 5.5 Balcony waterproofing – Builder has supplied Form 16[29]
        5. 5.6 No window sills - $9,957.00
        6. 5.7 Front patio concrete - $318.00
        7. 5.8 Laundry (paint on sill) - with 5.7
        8. 5.9 Front door sill - with 5.7
        9. 5.10 Steps near water tank - $512.00
        10. 5.11 Damage to window frame in office - $258.00
        11. 5.12 Wall sheeting - with 5.6
        12. 5.13 Wall sheeting – with 5.6
        13. 5.14 Joints in external walls - $9,374.00
        14. 5.15 Paint spots on external joinery - $103.00
        15. 5.16 Control joint in block wall - $460.00
        16. 5.17 Articulation joint in wall near hot water system - $460.00
        17. 5.18 Steps and landing - $354.00
        18. 5.19 West wall near hot water system – with 5.1
        19. 5.20 Holes in wall near hot water system – with 5.1
        20. 5.21 Holes in wall near A/C unit – with 5.1
        21. 5.22 West wall – with 5.1
        22. 5.23 Water tank - $103.00
        23. 5.24 West side water tap - $103.00
        24. 5.25 West side crack at garage door jamb - $123.00
        25. 5.26 Walkway not plumb - Nil
        26. 5.27 Cover strips - $406.00

        aa) 5.28 South east bin area joint - $700.00

        bb) 5.29 Driveway excess concrete - $103.00

        cc) 5.30 East side gate excess concrete - $103.00

        dd) 5.31 Articulation joint in fence wall – $358.00

        ee) 5.32 Crack in wall near gate - $358.00

        ff) 5.33 Articulation joint at electricity box - $358.00

        gg) 5.34 Painting to block fence – with 5.1

        hh) 5.35 Cleaning to barges and gutters - $206.00

        ii) 5.36 Cleaning to front entry - $103.00

        jj) 5.37 Door to pool from kitchen - $440.00

        kk) 5.38 Wall near pool pump - $700.00

        ll) 5.39 East wall slab – with 5.38

        mm) 5.40 Top floor balcony membrane – Builder has provided Form 16[30]

        nn) 5.41 Roof cleaning - $1,412

        oo) 5.42 Driveway crossing and BCC approval – agreed no approval

        pp) 5.43 Walkway to front door – agreed no approval

        qq) 5.44 Top floor bathroom mirror - $153.00

        rr) 5.45 Top floor bathroom sundries - $316.00

        ss) 5.46 Painting items – with 5.1

        tt) 5.47 Damage to end wall of retreat - $300.00

        uu) 5.48 Bedroom 1 painting item – with 5.1

        vv) 5.49 Ensuite sundry items - with 5.1

        ww) 5.50 Ceiling above stairs – with 5.1

        xx) 5.51 Riser to stairs - $300.00

        yy) 5.52 Upper level stairs – not a defect

        zz) 5.53 Door below stairs – not a defect

        aaa) 5.54/55/56 Fireplace – if this is a variation $610.00

        bbb) 5.57 Painting to top and bottom of doors - $1,320.00

        ccc) 5.58 Ground floor bathroom windows - $868.00

        ddd) 5.59 Ground floor bathroom sundries - $100.00

        eee) 5.60 Pump operation - $224.00

        fff) 5.61 Water tank operation – covered by handover procedure

        ggg) 5.62 exterior to front of house - $812.00

        hhh) 5.63 West side taps and pipes – a new item retaining wall $770.00

        iii) Fish tank – parties do not agree part of building work $500.00

        jjj) 5.65 Garage internal height – agreed not built in accordance with plan

      2. [114]
        The total of the defects quantified above is $39,690.00, after the Tribunal accepted Mr Young’s evidence that the balcony was waterproofed. This amount does not take into account QBCC insurance, workplace health and safety and Builders overheads and profit which at this price is said to be 20% as well as GST. Counsel for the Fitches has calculated that the amount they are entitled to in respect of the quantified defects and incomplete items is :-
        1. Defects and incomplete items $43,152.00
        2. plus Builders overheads and profits $7,938.00
      1. plus GST of 10% $4,762.80
      1. [115]
        The Tribunal granted leave for further evidence to be provided in respect of item 5.42 the driveway crossover and item 5,43 BCC approval for the covered walkway. Mr Salmon opinion was that the crossover was not compliant and would need to be replaced. He estimated that the cost to remove and replace the cross would be $6,314.00 inclusive of a 20% margin and GST. Mr Salmon also considered that the driveway did not comply with the minimum 1:4 gradient. This would mean that the house could not be certified and the driveway would need to be replaced. He estimated that the costs of removing and replacing the driveway would be $13,992.00 inclusive of 20% margin and GST. The costs of replacing the driveway and crossover would be $20,306.00. Mr Salmon also estimated that the cost of obtaining the necessary approval for item 5.43 walkway to the front door would be $2,508.00 inclusive of 20% margin and GST.
      2. [116]
        Mr Mills’s expert, Mr Barns estimated that the cost of removing and replacing the crossover would be $4,870.00 including 20% margin and GST. With an additional amount of $216.00 for the BCC application fee. Mr Barns estimated that the cost to remove and replace the driveway would be $10,661.00 including a 20% margin and GST. The cost of replacing the driveway and crossover would be $15,747.00. The cost of approval for the front walkway was estimated by Mr Barns to be $2,508.00.
      3. [117]
        At the hearing, it was noted that no attempt had been made to have the driveway crossover approved. Following the hearing Mrs Fitch made application to the Brisbane City Council to retrospectively approve the driveway. The council officer indicated that the driveway was not constructed to levels that council would have issued in the first instance. A new driveway permit was issued by council nominating the maximum grades allowed.
      4. [118]
        Following a further directions hearing the parties were directed to file any submissions in regard to whose responsibility it was under the contract to obtain council approval for the driveway crossover and quotes for the work necessary to comply with the Brisbane City Council permit. Mr Mills did not file any submissions and filed a statement with a quote from Mr Ashlie Enright. Mr Enright was provided with a copy of the permit and the email from the council officer advising that the driveway did not comply.
      5. [119]
        Mr Enright quoted to remove the crossover and to finish it to council regulations. His quote was in the amount of $4,917.00. Mr Enright stated that it was his professional opinion that the driveway in question is structurally sound, controls water runoff in a manner that is exactable and has a more practical shape (for vehicle access), then what is staged in the council regulations.
      6. [120]
        Mrs Fitch filed a further affidavit annexing a quote from All Round Concreting to remove the existing driveway and crossover and replace them with a new exposed aggregate one in the amount of $26,312.00. She also advised that the cost of the permit application was $169.00.
      7. [121]
        Mr Mills was given an opportunity to provide a quote for the necessary work to be done to ensure that the crossover and driveway were compliant. He has not done this, the quote he provided only dealt with making the crossover compliant which would mean that when the crossover was inspected it would not pass as the driveway would still not be compliant. It is expected that all work be done in a good and workmanlike manner and comply with all statutory requirements. Mr Enright’s solution does on its face comply with the requirements of the Council.
      8. [122]
        The quote provided by Mrs Fitch in the amount of $26,312.00 is considerably higher than that of either of Mr Salmon and Mr Barns. Mr Salmon quoted on the removal and relaying of 66 sq. metres of concrete and Mr Barns quoted on 65 sq. metres. The quote provided by Mrs Fitch was for 95 sq. metres of concrete and that quote will be rejected.
      9. [123]
        The major difference between the estimates of Mr Salmon and Mr Barns is the per sq. metre price for concrete. Mr Salmon’s rate is $150.00 and Mr Barn’s is $91.00 for 20 sq. metres and $87.00 for 45 sq. metres. Mr Barns sourced his costs from an accepted industry guide, Rawlinson’s. Mr Salmon did not indicate on the face of his report where he sourced his rates from. The Tribunal accepts the estimate of Mr Barns as it is more soundly based and the amount that is allowed for the driveway and crossover is $15,747.00.
      10. [124]
        The amount to be allowed for defects is then $52,390.08 plus $2,508 for the approval of the covered walkway and $15,747.00 for the driveway and crossover a total of $70,645.08.
      1. [125]
        At the close of the hearing counsel for the Fitches flagged that they would be seeking an order that Mr Mills provide copies of all Form 15 and 16 Certificates that he obtained from subcontractors in respect of the construction of the house. There were no submissions made in regard to this request. It has been submitted on behalf of Mr Mills that he may not be in possession of some of the relevant forms and therefore not in a position to comply with an order if it were made. It was submitted that an order in the following form would be acceptable:-
        1. That, within 28 days of the delivery of judgment in this proceeding, the applicant provide to the respondents copies of any Form 15 and 16 certificates relating to the construction of the house at 2 Clarance Street, Wakerley in the State of Queensland that he currently has in his possession.
      1. [126]
        The Tribunal’s jurisdiction in Building matters is under the Queensland Building and Construction Commission Act 1991 (Qld). The Tribunal may award damages and interest on damages[31]. Interest and its calculation is governed by the regulations and is payable at the appropriate rate, in this case 10% as there is no rate specified in the contract, from the day that the amount became payable until and including the day payment is made[32]. As interest is not payable from any earlier date no order as to interest will be made except that interest on any late payment is to be calculated at the rate 10% per annum.
      2. [127]
        The parties both claimed costs in their respective application and counter-application so they will be given an opportunity to make submissions in that regard for determination by the Tribunal on the papers.
      1. [128]
        Mr Mills is entitled to the amount of $731,945.74 inc. GST in respect of his claim under s 55(4) of the Act. Since the Fitches have paid him the amount of $736,859.90, they are entitled to a refund from him of $4,924.16. The Fitches are also entitled to the amount of $70,645.08 inc. GST in respect of defects. The total amount payable by Mr Mills to Mrs and Mrs Fitch is then $75,569.24
      1. [129]
        The order of the Tribunal is than that
        1. David Cameron Mills t/as DC Mills Developments must pay the amount of $75,569.24 to Peter Fitch and Andrea Fitch within 21 days of the date of this order.
        2. David Cameron Mills t/as DC Mills Developments must provide copies of all Form 15 and 16s he currently holds or has under his control in respect of construction of the dwelling at 2 Clarance Street, Wakerley to Peter Fitch and Andrea Fitch within 21 days of the date of this order.
        3. Interest on any amount unpaid under order 1 will be calculated at the rate of 10% per annum and payable as from the due date of payment until the whole of the amount is paid.
        4. Each party may make submissions in regard to costs within 14 days of the date of this order.
        5. The Tribunal will consider any application for costs on the papers.

Footnotes

[1]Domestic Building Contract Act 2000 (Qld) s 7.

[2]Domestic Building Contract Act 2000 (Qld) s 8.

[3]Domestic Building Contract Act 2000 (Qld) s 9.

[4]Domestic Building Contract Act 2000 Schedule 2 Dictionary.

[5]Domestic Building Contracts Act 2000 (Qld) ss 55(1).

[6]Domestic Building Contracts Act 2000 (Qld) ss 55(2). 

[7]Per Mullins J at para 34 in Gemini Nominees Pty Ltd v Queensland Property Partners Pty ltd ATF The Keith Batt Family Trust [2007] QSC 20.

[8]Domestic Building Contracts Act 2000 (Qld) ss 55(3).

[9]Domestic Building Contracts Act 2000 (Qld) ss 55(4).

[10]See Pavey & Matthew Pty Ltd v Paul (1987) 162 CLR 180.

[11]Gemini Nominees Pty Ltd v Queensland Property partners Pty Ltd ATF The Keith Batt Family Trust [2007] QSC 20 per Mullins J at para 35.

[12]Versace v L.V. Lavis, J.&N. [2005] QCCTB 2(10 February 2005) per Member Lohrisch at [423].

[13]Exhibit 4.

[14]Versace v L.V. Lavis, J.&N. [2005] QCCTB 2 (10 February 2005) per Member Lohrisch.

[15]Folkes v MJG Constructions (Aust) Pty Ltd [2011] QCATA 192.

[16]Domestic Building Contracts Act 2000 (Qld) ss 55(3).

[17]Exhibit 25.

[18]Exhibit 22.

[19]Allowance made for the amount of deposit of para [95] of Ms McNeill’s submissions confirmed in Mr Fraser’s submissions at para [67] and exhibit 18 (deposit $9,090.00). Portable long service leave of $4,018 not subject to GST.

[20]Allowance made for agreed adjustments to subcontractors invoices in accordance with para [96] of Ms McNeill’s submissions confirmed by Mr Fraser’s submissions at para [67].

[21]Allowance made for agreed adjustments to subcontractors invoices in accordance with para [97] of Ms McNeill’s submissions confirmed by Mr Fraser’s submissions at para [67].

[22]Amount for individual invoices in accordance with para [92} of Ms McNeill’s submissions.

[23]Exhibit 10 to exhibit 13.

[24]Allaro Homes Cairns Pty Ltd v O'Reilly [2012] QCA 286 per Holmes J at para [2].

[25]Domestic Building Contracts Act 2000 (Qld) s 16.

[26]Domestic Building Contracts Act 2000 (Qld) s 79.

[27]Section 84(4).

[28]Exhibit 19 and Exhibit 2.

[29]Exhibit 2.

[30]Exhibit 2.

[31]Queensland Building and Construction Commission Act 1991 (Qld) ss 77(2)(c).

[32]Queensland Building and Construction Commission Regulation 2003 (Qld) s 34B.

Close

Editorial Notes

  • Published Case Name:

    David Cameron Mills t/as DC Mills Developments v Peter Fitch and Andrea Fitch

  • Shortened Case Name:

    DC Mills Developments v Fitch

  • MNC:

    [2015] QCAT 114

  • Court:

    QCAT

  • Judge(s):

    Member Allen

  • Date:

    24 Mar 2015

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Allaro Homes Cairns Pty Ltd v O'Reilly [2012] QCA 286
2 citations
Jump To
Cite 1 - [2012] QCA 286
Cite 2 - [2012] QCA 286
Better Homes Queensland Pty Limited v O'Reilly & Anor [2012] QCATA 37
1 citation
Jump To
Cite 1 - [2012] QCATA 37
Folkes v M J G Constructions (Aust) Pty Ltd [2011] QCATA 192
1 citation
Jump To
Cite 1 - [2011] QCATA 192
Gemini Nominees Pty Ltd v Queensland Property Partners Pty Ltd[2008] 1 Qd R 139; [2007] QSC 20
3 citations
Jump To
Cite 1 - [2007] QSC 20
Cite 2 - [2007] QSC 20
Cite 3 - [2007] QSC 20
Pavey & Matthew Pty Ltd v Paul (1987) 162 CLR 180
2 citations
Jump To
Cite 1 - (1987) 162 CLR 180
Cite 2 - (1987) 162 CLR 180
Versace v Lavis [2005] QCCTB 2
3 citations
Jump To
Cite 1 - [2005] QCCTB 2
Cite 2 - [2005] QCCTB 2
Cite 3 - [2005] QCCTB 2

Cases Citing

Case NameFull CitationFrequency
Gravenall v Craig Rynne Constructions Pty Ltd [2016] QCAT 662 citations
The Chief Executive, Office of Fair Trading, Department of Justice and Attorney General v O'Brien [2016] QCAT 3191 citation
1

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