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AL Builders Pty Ltd v Fatseas[2015] QCAT 166

AL Builders Pty Ltd v Fatseas[2015] QCAT 166

CITATION:

AL Builders Pty Ltd v Fatseas [2015] QCAT 166

PARTIES:

A L Builders Pty Ltd

(Applicant)

 

v

 

Nicholas Fatseas and Tricia Fatseas

(Respondents)

APPLICATION NUMBER:

BDL302-12

MATTER TYPE:

Building matters

HEARING DATE:

1- 5 December 2014

HEARD AT:

Brisbane

DECISION OF:

Member King-Scott

DELIVERED ON:

8 May 2015

DELIVERED AT:

Brisbane

ORDERS MADE:

  1. The Applicant’s claim is dismissed;
  2. The Respondents’ counterclaim is allowed in the sum of $191,559.86 with interest of $14,064.34;
  3. The Applicant to pay the Respondents $205,624.20 by 4.00 pm on 31 July 2015.
  4. I direct that written submissions, if any, in respect of costs be filed by the Respondents by 1 June 2015 and any reply, by the Applicant, by 14 June 2015.

CATCHWORDS:

Building dispute – Fixed price contract or costs plus contract – Contract not in writing – Acceptance by conduct – Written contract a sham – Effect of Domestic Building Contracts Act 2000 on oral costs plus contract and s. 55(4) discretion – implication of terms – quantum meruit claim – Failure to mitigate

APPEARANCES and REPRESENTATION (if any):

APPLICANT:

Mr L D Bowden of Counsel instructed by Nicholas Radich solicitor.

RESPONDENT:

Mr M Williams of Counsel instructed by Robert Casalegno solicitor.

REASONS FOR DECISION

Introduction

  1. [1]
    The Respondents, Mr and Mrs Fatseas, entered into a contract with Deep North Developments Pty Ltd (Deep North) to build a house at 20 Admiralty Drive, Paradise Waters in 2007.  That company went into receivership and was unable to complete the contract.  The Applicant, A L Builders Pty Ltd (“A L Builders”), submitted a quote to the Building Services Authority (BSA) to rectify and complete the work, There were two quotes, the Applicant’s was the lowest at $1,098,939.60. Previously, the Applicant had been involved in the original construction as a form work subcontractor.
  2. [2]
    The house was designed by architect Paul Clout. It’s construction consisted of wooden floors, wooden louvre windows, curved walls and involved the extensive use of natural stone and marble. All these features created challenges for the builder.  At the time the Applicant took over the construction all of the structural work had been completed.  The house consisted of two storeys and a basement.  The roof was substantially on and the windows and outside doors had been installed.  Some of the internal gyprock lining had been completed.  It seems not to be disputed that the house had reached a lock-up stage.[1] 
  3. [3]
    Mr and Mrs Fatseas made a successful claim on the Queensland Building Services Authority (QBSA) statutory insurance scheme. An amount of $200,000 as an insurance payment was approved to be paid to the contractor engaged to complete the work.
  4. [4]
    The Building Services Authority (BSA) invited quotes for rectification work to be undertaken at the Respondents’ property. The Applicant provided a quote in response to an invitation to tender by the BSA. The Applicant responded to the BSA Scope of Work for Incomplete Building Work as follows:

1. To carry out all necessary work to complete the contract

works in accordance with the approved plans, specifications,

written and approved variations, relevant legislation and

attached conditions.  $995,736

2. To rectify the defects detailed in the attached

Defects Scope of Work (if applicable). $19,630

3. Allowance for BSA insurance premium (applicable

to works over $3300)  $3,300

TOTAL $1,098,939.60

  1. [5]
    The Applicant allowed the sum of $19,630 to rectify the defects under paragraph 2. The defects I take to be those referred to in the complaints item in the BSA Complaint Form that was completed by the Respondents. Item 8 refers to the house as being "not weather proofed resulting in damage to internal gyprock". I can find no other reference to Scope of Work to which the Applicant's tender would apply.
  2. [6]
    The Applicant has certified that:

The quotation does not include any departures from the original contract documentation and has been prepared for only the works described in the approved plans and specifications which formed the contract between the owner/s and original contract.

  1. [7]
    The quotation assumes that the scope of work is attached. That appears not to be the case. The Applicant also certifies that:

… if no defects scope of work has been attached to this scope, that any latent defective construction that becomes apparent will be the subject of a contract variation and will be referred to the Owner and BSA for consideration.

  1. [8]
    Because of the extensive variations to the original plans that Mr and Mrs Fatseas' wished to make and because they wished to use certain favoured subcontractors, Mr Haley, the principal of the Applicant, suggested Mr and Mrs Fatseas enter into a cost plus agreement.  It was still necessary for them to sign the fixed price contract as that was a requirement of the QBSA and they would not receive the benefit of the insurance monies unless such a contract was executed.
  2. [9]
    Mr and Mrs Fatseas deny that they entered into a cost plus agreement but concede that it was discussed.
  3. [10]
    The first issue for the Tribunal to consider is whether the house was constructed under a fixed price contract or a cost plus contract.

Fixed price contract or a cost plus contract?

  1. [11]
    There exists a signed written contract dated 14 February 2010.[2] It contained no schedule for progress payments.  Part B of the schedule referred to an annexure but no annexure was provided. Mr and Mrs Fatseas allege that the progress payment schedule which formed part of the tendering process was the schedule they worked from.[3] However, it is clear that no schedule was annexed.
  2. [12]
    Initially, the Applicant submitted that Mr Haley prepared an addendum to this contract and handed it to Mr and Mrs Fatseas.[4] He recalled it was signed on or about 4 February 2010.  An unsigned copy was exhibited to his affidavit.[5] He deposed that the reference to 14 February 2010 in the document was a typographical error and should read "4 February 2010". The addendum was as follows:

ADDENDUM TO AGREEMENT DATED 03 February 2010

Between

N & T FATSEAS

(‘the Owner’)

And

A.L. BUILDERS

(‘The Builder’)

Dated the                day of February 2010

The parties having entered into a Master Builder’ Agreement on 14 February 2010, hereby further agree as follows:

  1. Notwithstanding the amount of the contract price, the Owner agrees to pay the Builder:

1.1 On presentation of an invoice for work completed, the amount reflected on the invoice, provided the parties are in agreement about the costs incurred;

1.2 On completion of the building work, a sum equal to 10% of the total of the invoices submitted by the Builder, excluding GST amounts.

1.3 Any agreed costs exceeding the contract price of $1,098,939.60, until handover date.

  1. This Addendum serves only to vary the sum payable to the Builder by the Owner and how it will be paid.
  1. The payment arrangements concluded between the parties in terms hereof shall not affect the validity of the Agreement insofar as future liability for defects is concerned, and the Builder shall remain bound by the BSA insurance provisions.  The parties accept that the Agreement has been concluded with the intention of protecting the Owner from future liabilities in case of defective building works being carried out by the Builder.

Payments to be made fortnightly on invoices presented.

________________________

A B Haley as authorized representative for

A.L. Builders

N or T Fatseas

  1. [13]
    In his statement of evidence dated 25 September 2014 Mr Haley recanted his earlier sworn statement and said

… I now say that the copy exhibited to my affidavit sworn earlier in this proceeding is not the copy which I forwarded to the respondent.  What I now believe happened is that I drew up the first one, then later amended it but did not mark it as "Version 2" or the like; the amended document simply replaced the original document.  That meant that I produced from the computer a copy of the Addendum for my affidavit, it was the later one which I produced.  The respondent says that he never received the later version; I now accept that that is probably correct.[6] 

  1. [14]
    The chronology of events seems to be that the email dated 24 January 2010 following a meeting confirmed that Mr and Mrs Fatseas agreed in principle to engage the Applicant to complete the residence pending a formal contract.[7] Mr and Mrs Fatseas stated in the email that it was not to be considered as binding on either party. The email went on to discuss ways of rectifying and varying the existing work.  Some of those items would clearly amount to a variation of the contract.
  2. [15]
    Mr Haley emailed Mr Fatseas on 26 January 2010:

Nick, did you want to use the cost plus method or full contract?  Cheers Alan’. 

  1. [16]
    Mr Fatseas responded by email on 27 January 2010:

We are happy to follow your recommendations. 

However, you have to satisfy the conditions set out by the BSA, for Tricia and I to take advantage of the funds allocated to us.

We will have to provide the BSA with a contract proving payments to you as the builder.  They will pay the final $200 K of the contract price.

  1. [17]
    Mr Haley said in evidence that he had a subsequent conversation where Mr Fatseas advised him he could proceed with the work. Mr and Mrs Fatseas deny the conversation. Mr Haley did not mention this conversation in his affidavit or Statement of Evidence. He agreed that it was a crucial piece of evidence.[8]
  2. [18]
    Under cross-examination Mr Haley agreed that the document that Mr and Mrs Fatseas were given was a document dated 1 January 2010.[9] That document was incorrectly dated and should have been dated 1 February 2010.
  3. [19]
    Mr Haley emailed Mr and Mrs Fatseas on 31 January 2010 as follows:

Nicholas and Trish,

Will mail agreements in the morning.

The Master builders Contract is to be signed and the appropriate pages copied and sent to the BSA with the original four pages I sent to the BSA.

I have included a copy of the agreement that I signed with Angelo, and also too (sic.) new agreements for you to sign one of these will be returned to me with the Master builders agreement.

Note the agreement between the two of us must not be posted to the BSA. 

The Master builders agreement and my original written quote was assure that you receive your $200,000. Thanks Alan,

Please ring if this doesn't make sense.

  1. [20]
    Mr and Mrs Fatseas agree that they received the documents, but said they didn't agree with the terms of the addendum (described as a new agreement in the email).  Despite being invited to respond, if they did not understand, they said nothing.
  2. [21]
    The addendum was as follows: –

The parties have received confirmation that the building services authority (BSA) has approved an insurance amount $200,000 to be applied towards completion of the building works at lot 5 Admiralty Drive

  1. The builder shall continue with the building works at the site as agreed
  1. The owner shall pay the builder for the building works as agreed
  1. Any payments made by the Owner to the Builder as from this date, up to the sum of $200,000, shall be regarded as an advance to the builder of future monies payable by the BSA to the builder.
  1. The Builder should submit invoices to the owner for presentation to the BSA on completion of certain stages of the building works without delay, until the full amount payable by the BSA has been successfully claimed.
  1. On receipt of payment by the BSA in respect of the work done, the builder shall without delay, within 48 hours, transfer any payment received into the Owners nominated account.
  1. It was agreed that the builder shall be regarded as a trustee for the owner in respect of such payments up to the sum $200,000 and that it shall be obliged to transfer such funds to the owner with time being of the essence.
  1. The completion of the house is on the basis of A L Builders receiving 10% of the total completion costs excluding GST.
  1. [22]
    Under cross-examination Mr Haley seemed to accept a chronology, that there was a meeting on the site on 24 January 2010 and the addendum was agreed but not signed. The fixed price contract, he agreed, was signed on 14 February 2010.[10] That chronology was markedly different to what, initially, was the Applicant’s case and Mr Haley’s evidence. It is submitted, by the Respondents’ Counsel, that the Addendum of 3 February 2010, was a subsequent fabrication. It is certainly a matter of concern, however I am prepared to give Mr Haley the benefit of the doubt and accept his explanation. I do not believe that Mr Haley was being deliberately untruthful. Unfortunately, I suspect that he did not think these matters would become matters of any great significance. His evidence is unsatisfactory and unreliable in many respects.
  2. [23]
    There is no doubt that the Applicant started work on 2 February 2010 or thereabouts which was well before the contract was signed but after the cost plus agreement had been provided to Mr and Mrs Fatseas. It is submitted by the Applicant that Mr Haley met Mr and Mrs Fatseas on site on 1 February 2010 and handed them the agreements being the fixed price contract, the Cantatore agreement[11] and the redraft of it.
  3. [24]
    Mr Fatseas knew what a cost plus contract was. He was also familiar with a fixed price contract that he had with Deep North. He knew that Mr Haley was recommending a costs plus contract. He said in evidence he didn’t agree with it but did not let Mr Haley know his view.[12]
  4. [25]
    Mr Haley failed to follow up on the addendum and failed to get it signed. As so often happens in these sorts of dispute, the parties only turn their minds to the contractual arrangements when a dispute arises.
  5. [26]
    The Applicant’s case is that the cost plus agreement was concluded by 31 January 2010 even though not signed. Further it submits that the fixed price contract dated 14 February 2010 was merely a piece of paper to be given to the QBSA. In other words it was a sham. In Esanda Ltd v Burgess [1984] 2 NSWLR 139 Hutley J said at 144:

For an agreement to be found to be a sham it is necessary for both parties to intend to enter into an agreement of a different kind and with different incidents from the legal form which they in fact adopt.

  1. [27]
    The meaning ascribed to the word “sham” was discussed in KD Properties Pty Ltd v Leda Design & Construction (Qld) Pty Ltd[13] and referred to in QBSA v McGrath Corporation Pty Ltd[14] which adopted the following meaning from Courthard v Colonial Settlements Pty Ltd where the Full Court of the Supreme Court of South Australia said.[15]

A sham means acts done or documents executed by the parties to the sham which are intended to give third parties or the court the appearance of creating between the parties legal rights and obligations different to the legal rights and obligations (if any) which the parties intend to create.

  1. [28]
    At the meeting on site on 24 January 2010 Mr Haley said he explained how the cost plus contract would work:

We discussed how a cost plus contract would work.  I told them that under a cost plus contract I would bill them fortnightly, supply all invoices to them so they would know what they had been charged for and if I got a trade discount that would be passed on to them.  I would charge them 10% + GST for "running the job".  My own time and my bookkeeper’s time were not be charged for separately; that was included in the 10%.[16]

  1. [29]
    There is no other explanation for the behavior of the Applicant in providing to the Respondents’ invoices relating to work done by themselves and various subcontractors unless they were provided as evidence of the costs, in fact, incurred by the Applicant as proof of the costs for the costs plus contract. It would seem that that is how the contract was administered right up to when the parties were in dispute. An example, is Claim 8. Mrs Fatseas response to that claim is contained in a document[17] typed in black ink. The Applicant’s comments are in blue ink. The amount claimed in May 2010 was $71,708.80. It was disputed by Mrs Fatseas who deducted $40,449.54. Included was $20,000 supervisory fee charged by the Applicant. It was disputed that the builder was getting the benefit of GST they had paid. It was explained that was not the case. Interestingly, Mrs Fatseas wrote at the bottom of the document, ‘This represents cost plus 10% payments as agreed’.
  2. [30]
    Mr Fatseas emailed a complaint about the colour of the garage door on 1 June 2010. He said ‘As per our agreement you are to provide us with 2 quotes and obtain our approval before proceeding with work’. This is hardly consistent with the fixed price contract and more in keeping with a costs plus arrangement.
  3. [31]
    Another instance of conduct inconsistent with a fixed price contract involved the payment of the insurance premium of $3,300.00 by Mr and Mrs Fatseas. Initially, Mrs Fatseas said it was paid because ‘Alan was asking on site because he didn’t have the money to pay it at the time. Could we please pay that …’ Subsequently, Mrs Fatseas changed her evidence and said by way of explanation ‘… that’s the only thing I can assume’.
  4. [32]
    I had the distinct impression that Mr and Mrs Fatseas were content to proceed with the project on terms agreeable to the Applicant and it was only when a dispute arose that the contractual basis of the project became an issue. I believe that they proceeded on the basis that it was a costs plus agreement, and that was their intention. Certainly, the way it was managed by both parties up to the final claims were made suggests that was the case. It follows that I find that they did not intend the fixed price contract to be binding on them.
  5. [33]
    I have considered the issue of illegality. Neither party raised it as an issue that would preclude either or both of them from recovering. The issue is, was the Applicant seeking to enforce an illegal contract? Although, I find there was some deception of the BSA I am of the opinion that it should not constitute a ground for denying the Applicant the entitlement to recover from the Respondents as I have found that an entitlement does, otherwise, exist. See Pickersgill and Harvey v Tsoukalas [2009] SASC 357 paragraph [63].
  6. [34]
    Mr Fatseas was content to leave much of the project administration to his wife. During cross-examination, on crucial issues, he deferred to his wife.
  7. [35]
    They did not engage their architect, Mr Clout, to project manage the construction.
  8. [36]
    I was not impressed with Mrs Fatseas as a witness. During cross-examination she was unnecessarily defensive, attempted, many times, to anticipate the questioner and was obdurate in her responses.
  9. [37]
    In the end I find that none of the principal witnesses, namely, Mr Haley and Mr and Mrs Fatseas were reliable on this issue and where possible I prefer to resolve any conflict by reference to the documented evidence and the parties conduct.
  10. [38]
    In my opinion the parties did enter into a costs plus agreement. I find that Mr and Mrs Fatseas’ acceptance of Mr Haley’s offer can be inferred from their silence and their conduct. Authority for such a proposition can be found in Cheshire & Fifoot Law of Contract 10th Australian Edition paragraph 3.23 et seq. See also Brogden v Metropolitan Railway Co (1877) 2 App Cas 666, Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523, Brambles Holdings Ltd v Bathurst city Council (2001) 53 NSWLR 153 and Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424.
  11. [39]
    In Branir Pty Ltd (supra) Allsop J (with whom Drummond and Mansfield JJ agreed) said at paragraph [369] speaking of the contemporary approach to identifying the existence of a contract:

There was in fact a clear crystallization of intent. The contract arose from the prior conduct and communications of the parties, in particular around mid-December. Mr Campbell QC called this a "springing contract" and something not known to the law. On the contrary, a number of authorities discuss the need not to constrict ones thinking in the formation of contract to mechanical notions of offer and acceptance. Contracts often, and perhaps generally do, arise in that way. They can also arise with business people speak and act and order their affairs in a way without necessarily stopping for the formalities of dotting "i"s and crossing "t"s or where they think they have done so. Here, the "i"s were not dotted and the "t"s were not crossed because of Mr Graham's conduct. Sometimes this failure occurs because, having discussed the commercial essentials having put in place the necessary structural matters the parties go about the commercial business on the clear basis of some manifested mutual consent, without the ensuring exhaustive completeness of documentation. In such circumstances, even in the absence of clear offer and acceptance, and even without being able to identify precisely when the contract arose, if it can be stated with confidence that by a certain point the parties mutually assented to a sufficiently clear regime which must, in the circumstances, had been intended to be binding, the court will recognise the existence of the contract. Sometimes this is said to be a process of inference or implication. For my part, I would see it as the inferring of a real intention expressed through, or to be found in, the body of conduct, including, sometimes, communications, even if it be the case that the parties did not consciously advert to, or discuss, some aspect of the relationship and say: "we hereby agree to be bound" in this or that respect. The essential question in such cases is whether the parties' conduct, including what was said and not said and including the evident commercial lines and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract. (Citations omitted)

  1. [40]
    I am comforted in my view by the opinion of Mr Malcom Davidson, a Quantity Surveyor, who gave evidence on behalf of the Applicant. At the end of his report he expressed the following opinion:

The number of variations would lead me to believe that it would have been administered as a cost plus contract. These include:

  • The incompleteness of the tender documentation;
  • Various references "to future detail" on the drawings and in the Schedule of Finishes for which there is no equivalent provisional allowance to be adjusted when the details finalised;
  • The lack of updated drawings to reflect the ‘as built’ condition rather than the original design. For example area of lawn to the south side of the pool on Paul Clout drawing 0 1.1 is reduced in size and been replaced with tiled concrete pool surround. Also, planters have been built on the south side that are not in the drawings.

These are typical indicators of design changes "on the run" and a cost plus arrangement.

  1. [41]
    What were the terms of the Costs plus contract? In my opinion the Addendum was just that it was a variation of the terms of the Fixed Price contract which varied the sum paid and how it was paid. In the Addendum the Applicant promises it "will continue with the building works… as agreed". In my opinion the parties intended that the terms of the fixed price contract would have effect where they were not inconsistent with the costs plus Addendum. That appeared to be the Applicant's intention as appears in the second addendum. However, that document, as subsequently revealed, was a draft, not shown to the Respondents. It is of limited value but it does disclose, at least, the Applicant's intention. The Applicant in that document clearly stated that the contract would not be affected by the Addendum except to vary the sum paid and how it will be paid. In my opinion, the true agreement between the parties comprised the terms of the Addendum and the fixed-price contract terms that are not inconsistent with the terms of the Addendum.

Was the Cost Plus contract prohibited by Statute

  1. [42]
    The cost plus agreement reached by the parties is a regulated contract under the Domestic Building Contracts Act 2000 (Qld) and, therefore, under section 30 of the Act is required to be signed by the building contractor and building owner.

Applicable Legislation

  1. [43]
    The following sections of the Domestic Building Contracts Act 2000 (Qld) are relevant:

3 Purpose of Act

 The purpose of this Act, in regulating domestic building contracts, is –

 (a) to achieve a reasonable balance between the interests of building contractors and building owners; and

 (b) to maintain appropriate standards of conduct in the building industry.

30 Contracts must be signed

 A regulated contract has effect only if it is signed by the building contractor and building owner) or their authorised agents).

55 Costs plus contracts

  1. (1)
    A building contractor must not enter into a cost plus contract that would be a regulated contract unless –

 (a) the contract is included in a class of contracts prescribed under a regulation; or

 (b) the cost of a substantial part of the subject work can not reasonably be calculated without some of the work being carried out.

 Maximum penalty – 100 penalty units.

  1. (2)
    A building contractor must not enter into a cost plus contract that would be a regulated contract unless 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.

 Maximum penalty – 100 penalty units.

  1. (3)
    If a building contractor enters into a cost plus contract in contravention of this section, the building contractor can not enforce the contract against the building owner.
  1. (4)
    However, the tribunal may, on an application made, as provided under the QCAT Act, to the tribunal by the building contractor, 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.

84 Right of building contractor to recover amount for variation

  1. (1)
    This section applies if –

 (a) the building contractor under a regulated contract gives effect to a variation of the contract; and

 (b) the variation consists of –

  (i) an addition to the subject work; or

  (ii) an omission from the subject work that results in the building contractor incurring additional costs.

  1. (2)
    If the variation was originally sought by the building owner, the building contractor may recover an amount for the variation –

 (a) only if the building contractor has complied with sections 79, 80, 92 and 83; or

 (b) only with the tribunal’s approval given on an application made, as provided under the QCAT Act, to the tribunal by the building contractor.

  1. (3)
    If the variation is not a variation that was originally sought by the building owner, the building contractor may recover an amount for the variation –

 (a) only if –

  1. (i)
    the building contractor has complied with sections 79, 80, 82 and 83; and
  1. (ii)
    the ground of unforeseen circumstances applies; or

 (b) only with the tribunal’s approval given on an application made, as provided under the QCAT Act, to the tribunal by the building contractor.

  1. (4)
    The tribunal may approve the recovery of an amount by a building contractor for a variation only if the tribunal is satisfied that –

 (a) either of the following applies –

  1. (i)
    there are exceptional circumstances to warrant the conferring of an entitlement on the building contractor for recovery of an amount for the variation;
  1. (ii)
    the building contractor would suffer unreasonable hardship by the operation of subsection (2)(a) or (3)(a); and

 (b) it would not be unfair to the building owner for the building contractor to recover an amount.

  1. (5)
    For subsection (3)(a)(ii), the ground of unforeseen circumstances applies if the variation became necessary because of circumstances that could not have been reasonably foreseen by the building contractor when the contract was entered into.
  1. (6)
    If the building contractor is entitled to recover an amount for the variation of a fixed price contract, the amount is –

 (a) the increase in the contract price stated, or worked out in the way stated, in the appropriate variation document for the variation; or

 (b) if paragraph (a) does not apply – the cost of carrying out the variation plus a reasonable profit.

  1. (7)
    If the building contractor is entitled to recover an amount for the variation of a cost plus contract, the amount is the amount worked out in the way stated in the contract.

92 Effect of failure by building contractor to comply with requirement

Unless the contrary intention appears in this Act, a failure by a building contractor to comply with a requirement under this Act in relation to a domestic building contract does not make the contract illegal, void or unenforceable.

93 Contracting out prohibited

  1. (1)
    A domestic building contract is void to the extent to which it –

 (a) is contrary to this Act; or

 (b) purports to annul, exclude or change a provision of this Act.

  1. (2)
    An agreement (other than a domestic building contract) is void to the extent to which it seeks to exclude, change or restrict a right conferred under this Act in relation to a domestic building contract.
  1. (3)
    Nothing in this section prevents the parties to a domestic building contract from including provisions in the contract that impose greater or more onerous obligations on a building contractor than are imposed under this Act.
  1. (4)
    Subsections (1) and (2) apply subject to any contrary intention in this Act.

Effect of Section 30

  1. [44]
    The cost plus agreement was not signed by Mr and Mrs Fatseas. 
  2. [45]
    The Respondent submits that the effect of s.92 on s.30 does not preclude recovery by the Respondent of a fair and reasonable sum for the work undertaken by it.  The Applicant opposes such relief on the basis that a quantum meruit claim has never been pleaded or advanced by the Applicant until the close of its case.  I will return to this issue later in these Reasons.

Effect of Section 55(3) and (4)

  1. [46]
    The Applicant says that the cost plus agreement does not comply with s.55(1)(b) as the Applicant has not satisfied the requirement that the cost of a substantial part of the work cannot reasonably be calculated without some of the work being carried out.  The Respondent says the exception is applicable, however, it does not respond further other than to submit that it is a question of fact.
  2. [47]
    Uncertainty as to the amount of work involved, for example, earthmoving or excavation, can be reasonably estimated and allowed for by the use of provisional sum allowances as can uncertainty as to the choice of product or changes in the owner’s preference by the use of prime cost allowances.  In my opinion, the Applicant does not satisfy the threshold requirement of s.55(1)(b).
  3. [48]
    The effect of s.55(3) is that the Applicant cannot enforce the contract against the Respondent. 

Section 55(4) – Discretion

  1. [49]
    The Tribunal is invested with a discretion to allow recovery of the cost of providing the contracted service plus a reasonable profit where the Tribunal considered it would not be unfair to the building owner to make the award. 
  2. [50]
    In the recent Court of Appeal decision of CMF Projects Pty Ltd v Riggall & Anor [2014] QCA 318[18], Gotterson JA, with whom Holmes and Morrison JJA agreed, said of the provision:

[41] … Section 55(4) does not confer an enforceable right to payment of any amount on the building contractor.  It does not create a statutory right which might be regarded as compensating for an abrogation of the rights to payment on any other basis.  What the section does is regulate a jurisdiction given to QCAT to make an award in favour of a building contractor.  An enforceable right to payment would arise only upon exercise of that jurisdiction in a way favourable to the building contractor. 

[42] Further, the basis and nature of the award that QCAT may make is distinctly different from an amount that a building contractor might recover on a quantum meruit.  Under s.55(4) what is awarded is the cost of providing the contractor with services plus a reasonable profit.  By contrast costs recoverable in a quantum meruit have reasonable costs of providing the services.  Moreover exercise of the jurisdiction under s.55(4) is conditioned upon QCAT considering that it would not be unfair to the building owner to make the award.  That significant condition has no counterpart in the recovery of a quantum meruit.

  1. [51]
    It is clear from that decision that a quantum meruit entitlement also exists.  Again, the Applicant’s objection that no such entitlement has been pleaded will be considered later.
  2. [52]
    As will appear later in these Reasons, the Applicant rendered accounts with invoices attached on a fortnightly basis.  Mrs Fatseas went through those invoices with a fine toothcomb.  She questioned the reasonableness of some costs, the duplication of claims and in some instances, identified totally unrelated items. Despite Mrs Fatseas best attempts it appears that there was still duplication in the Applicant’s claim.  It is difficult to establish the reasonableness of the accounts without obtaining several quotes.  In some cases, the Respondent did that.  Overall, I am inclined to find that it would not be unfair to the Respondent to allow the costs plus 10% if the claim can be verified.

The Applicant’s Accounting

  1. [53]
    Mr Haley exhibited a schedule[19] that showed all payments made by Mr and Mrs Fatseas together with the date of payment.  The total amounted to $796,793.02.  In addition, the Applicant has received $175,335.72 from the BSA.  Mr Haley agreed that the Applicant has been paid a total of $972,128.74.[20]
  2. [54]
    There are discrepancies in the invoices themselves, for example, stone has been charged at $16,940 in claim 1 and then again the same amount has been claimed in claim 2, with no adjustment, and those amounts have been paid.  There was also duplication of other amounts and amounts in the claims do not tally with the amounts claimed in the Amended Points of Claim document.
  3. [55]
    The Amended Points of Claim sets out the invoice numbers, dates and amounts of the invoices as follows:

Invoice Number

Date

Amount

Adjustment

1

16/02/10

$34,541.66

($16,940.00)[21]

2

25/02/10

$56,048.02

($10,380.52)[22]

3

11/03/10

$84,365.63

 

4

25/03/10

$89,621.86

($2,200.00)[23]

5

08/04/10

$59,508.63

 

6

23/04/10

$55,092.92

 

7

06/05/10

$47,953.58

 

8

20/05/10

$46,849.26

($20,000.00)[24]

9

03/06/10

$127,651.53

($3,136.66)[25]

10

16/06/10

$52,424.24

 

10(a)

28/06/10

$25,000.00

 

11

01/07/10

$29,532.15

 

12

01/07/10

$33,000.00

 

13

16/07/10

$30,942.77

 

14

29/07/10

$13,379.13

 

15

12/08/10

$51,837.98

 

17

20/08/10

$18,970.65

 

20

21/10/10

$65,349.53

 

21

10/03/11

$14,898.35

 

 

 

$936,967.89

 

  1. [56]
    It will be noted that Claims 16, 18 and 19 are missing from the Points of Claims schedule but are exhibited to Mr Haley’s Statement of Evidence.[26]  There appears to be no explanation as to why those claims are not included but it is not submitted that they have any impact on the claims. Mr Haley said they were not withdrawn.[27]
  2. [57]
    Mr Haley said in cross-examination that he had his office girl prepare the document.  He conceded that he had no way of independently knowing whether it was done accurately and that he took the calculations at face value.[28] The office girl was not called as a witness.
  3. [58]
    As the cross-examination of Mr Haley revealed, his system of accounting was deficient, he had an assistant prepare the accounts and check them but did not check her work. He then duplicated the errors in the schedules he provided which formed part of the claim. I have no confidence in the accuracy of the Applicant’ claim.
  4. [59]
    As at 22 September 2010 Mr Haley conceded that Mr and Mrs Fatseas had paid all that was due and owing at that time.[29] That is putting aside the overpayments recorded in the schedules above.
  5. [60]
    The Applicant seeks payment of the sum of $103,630.61 which is set out in its final claim of 8 August 2011.[30] However, it has been demonstrated to my satisfaction that much of the claim has previously been paid and acknowledged as having been paid.[31] On my calculation well over half the claim ($63,739.87) has been paid. I note that the Applicant made no real attempt to refute or rebut the Respondents’ Counsel’s extensive criticism of the Applicants accounts as set out in the Respondents’ written submissions.
  6. [61]
    The Respondents make the further submission that the Applicant has not made out a case of unfairness as required by s.55(4) of the Domestic Building Contracts Act 2000 (Qld).  They do so in this way.  It is submitted that the original contract price was $1,089,939.40.  The Applicant has received the sum of $796,793.02 from Mr and Mrs Fatseas and a further sum of $175,335.72 from the BSA, giving a subtotal of $972,128.74.  Added to that account must be payments made directly to the Applicant’s suppliers and subcontractors on the Applicant’s behalf of $110,195.22.[32]  That increases the sum paid to the Applicant of $1,082,323.96. 
  7. [62]
    It is accepted that part of the works have not been carried out by the Applicant.  Although it remains in issue as to whether these items were taken out of the contractual scope of work by agreement, as submitted by the Applicant, or simply not attended to, as submitted by the Respondents, Items such as the pontoon [$25,000], fly screens [$1,500], carpet [$2,800], air conditioning [$10,000] and stone tops [$8,000] are deletions to the contract.[33]
  8. [63]
    These items reduce the original contract price to $1,042,639.40.  When one takes account of the payments made to the Applicant of $1,082,323.96, the adjusted price of the contract is exceeded by $39,684.56.  There is a degree of artificiality in this exercise as the calculations assume a fixed price contract whereas I have found that a cost plus contract existed.
  9. [64]
    Nevertheless, under s.55(4) the onus is on the Applicant to convince the Tribunal of the lack of unfairness to the Respondents.  I am not satisfied on the basis of these accounts that that unfairness has been established and I so find.

Variations

  1. [65]
    There is no doubt that Part 7 (variation of contracts) of the Domestic Building Contracts Act 2000 (Qld) applies to cost plus contracts.  Section 84 (7) makes specific reference to such contracts. The Applicant has set out in a document the variations.  Exhibit ABH-8 is the schedule of variations and in ABH-9, a document dated 10 March 2013, Mr Haley assesses the cost of the variations to be $154,000 inclusive of GST.  This claim was amended in the Amended Points of Claim to include further items with the total being increased to $303,487 inclusive of GST.
  2. [66]
    Mr Haley, candidly, conceded that the assessment of variations was a “best guess”. The claim was reconstructed after the event by Mr Haley with the assistance of his supervisor, Mr Benson.[34]
  3. [67]
    The Applicant identified 38 alleged variations in Exhibit ABH-8.  In its Amended Points of Claim, it increased the number of items to 39 and itemised the value of each, increasing the total to $303,487 inclusive of GST.  In the original List of Variations, there was merely the lump sum claim of $140,000 plus GST.
  4. [68]
    Of the original 38 items, two have been replaced in the Amended Points of Claim with new claims.  There has been no evidence led as to the costs or reasonableness of the costs of the individual items. 
  5. [69]
    The Applicant has not complied with the requirements of the Domestic Building Contracts Act 2000 (Qld).  The Applicant does not appear to seriously advance a case for the Tribunal’s intervention under s.84 (4) of the Act.  Neither exceptional circumstances nor hardship is argued.
  6. [70]
    The uncertainty in the Applicant’s own mind as to the quantum of the variations and the basis upon which the quantum was reached makes me doubt the accuracy of the assessment of the respective items and their values.  The Applicant has failed to discharge its onus to warrant recovery of these items.

Quantum Meruit

  1. [71]
    The Applicant submits it is open to the Tribunal to make a quantum meruit award as an alternative to an award under s.55 (4) of the Domestic Building Contracts Act 2000 (Qld).  The Court of Appeal in CMF Projects Pty Ltd v Riggall & Anor [2014] QCA 318 found that s.55 (4) of the Act did not deprive the building contractor of a quantum meruit claim.
  2. [72]
    The Applicant says that the decision in CMF Projects Pty Ltd (supra) was delivered during the course of the hearing of this matter and that the Applicant should, if necessary, be allowed to plead the quantum meruit claim at this late stage. 
  3. [73]
    I should interpolate here that this matter was the subject of extensive pleadings. There is no provision for formal pleadings in the QCAT Act or rules.[35] However, where parties have chosen to plead their case, and it is entirely appropriate in building cases, then appropriate regard should be had to the pleadings when considering the evidence[36]. In Ryan v Worthington [2014] QCATA the Tribunal said:

Where parties are legally represented it is more likely than where parties are self represented that tactical decisions will be made during the conduct of the hearing as to the nature of evidence to be lead and the extent of cross examination pursued in opposing the claims being made against them.

  1. [74]
    The Respondents strenuously oppose such a course.  They point out that the failure of the Applicant to have the cost plus agreement signed by the building owners meant that the cost plus contract was unenforceable and the Applicant’s only alternative was recovery under quantum meruit. 
  2. [75]
    The Applicant, until the provision of written submissions in this matter, never sought to recover any amount on a quantum meruit basis.  The Respondents say that they will be irreparably prejudiced as they have been denied the opportunity to lead their own evidence of what would have or should have been a reasonable price for the works, especially in circumstances where the Applicant had been on notice for a good time to consider its position under s.30 to seek a quantum meruit as an alternative claim.  That position was always available to the Applicant and was unaffected by the decision in CMF Projects Pty Ltd (supra).
  3. [76]
    I accept the Respondents’ submissions on this point. However, in view of my findings on the state of the Applicant’s accounts, a quantum meruit claim ceases to be of any relevance.

Counterclaim

  1. [77]
    The Respondents have brought a counterclaim that is pleaded in the Second Further Amended Points of Defence and Counterclaim.  The claim is for:
  1. (a)
    $76,364.36 for the amount by which their payments exceeded the adjusted contract sum;
  1. (b)
    $1,341,227 for the cost of completing the works and rectifying the defects;
  1. (c)
    $280,039.57 being costs they have incurred because of the Applicant’s breach of contract in failing to complete the works;
  1. (d)
    an unspecified sum for distress and inconvenience.
  1. [78]
    By the time the matter reached a hearing, the issues had crystallised.  Their central issue was whether practical completion had been reached.  If not, what remained to be done in order to bring the dwelling to practical completion.  Were there defects that required rectification and what would be the cost of rectification and completion?

Practical Completion

  1. [79]
    During the end of 2010, the relationship between the parties had deteriorated. The Respondents issued a Notice of Default dated 25 February 2011.  That Notice claimed that the Applicant had breached its contract in not proceeding with due diligence.  Further, it identified a number of defects, the major ones being:
  1. (a)
    unsatisfactory tiling involving the Turkish Travertine tiles which had cracked and exhibited exudation of both grey and white material from the cracks (later identified as effervescence);
  1. (b)
    vehicular access via the driveway was not possible;
  1. (c)
    leaking pool (subsequently the tear in the liner was identified and repaired).
  1. [80]
    On 3 March 2010, the Applicant claimed it had remedied the defects.[37]  The Applicant advised the Respondents their home would be ready for occupation.
  2. [81]
    A report was received from Jeffrey Hills & Associates dated 24 March 2011 that listed further defects.  The Applicant then attended to rectifying some of those defects and advised the Respondents’ solicitors that the works would be complete by 6 April 2011.[38]
  3. [82]
    It is submitted by the Respondents that the fact that the Applicant set alternative dates for practical completion indicated that, in fact, practical completion had not been attained on those earlier occasions.  Mr Haley disputed this in cross-examination, saying that he considered it was practically complete but was happy to fix up anything that they were not happy with.[39]
  4. [83]
    I understand that the last work that was carried out on the building by the Applicant was some time in March 2011.
  5. [84]
    The Respondents through their solicitors then sent a Final Notice to the Applicant on 12 July 2011[40] which it rejected on 14 July 2011[41].
  6. [85]
    As a consequence, Mr and Mrs Fatseas terminated the contract on 29 July 2011.[42]
  7. [86]
    It is accepted that practical completion means that the works have been completed save for minor defects and that the building is reasonably suitable for habitation. The definition in the fixed price contract would be implied into the cost plus contract I have found existed. At the hearing, the principal area of dispute appeared to be:
  1. (a)
    the driveway and entry to the garage;
  1. (b)
    the Travertine tiles;
  1. (c)
    the leaking windows, weatherproofing;
  1. (d)
    other defective work.
  1. [87]
    There was also a claim for incomplete work.  The nature of the cost plus contract would preclude recovery in respect of a number of the items.  I will refer to them in further detail later in these Reasons.
  2. [88]
    The parties called various experts in respect of the counterclaim.
  3. [89]
    The Applicant relied upon a David Aitken of DA Project Management and a Quantity Surveyor, Malcolm Davidson, from Turner and Townsend. 
  4. [90]
    The Respondents called as an expert Terence Daniel Betteridge, a Registered Builder, and Jock Thomas Barnes of Gray Robinson Cotterill, Quantity Surveyors. 
  5. [91]
    An additional expert, Dr Hans Hensel of Hensel Geoscientists was called to provide expert evidence in relation to the travertine tiles issue.
  6. [92]
    Mr Allan Williams, a civil engineer, was also called.
  7. [93]
    The Tribunal directed an experts’ conclave be held with the respective experts and joint reports were prepared.  In compliance with the Tribunal’s direction, a joint report was provided by Mr Betteridge and Mr Aitken, and another joint report was prepared in the form of a Scott Schedule by Mr Davidson and Mr Barnes. 
  8. [94]
    The building experts failed to agree on any issues. The quantity surveyors  reached agreement on many of the issues.
  9. [95]
    The following further witnesses were called in addition to Mr Haley and the Respondents and the experts already referred to.  Those witnesses were:
  1. (a)
    Andrew Norman McLeod, a subcontract tiler; and,
  1. (b)
    Neil Gregory Benson, the Applicant’s Site Supervisor.
  1. [96]
    An additional witness to be called, who was unavailable for cross-examination, was Michael Beasley, an Electrician who worked on site as a subcontractor.  By agreement of the parties[43], his evidence, contained in a statement filed in the Tribunal, was to be treated in accordance with s.92 of the Evidence Act 1977. 
  2. [97]
    Both Mr Benson and Mr Beasley stated that they were told to take instructions directly from the Respondents. In Mr Beasley’s case he was told that the Respondents could have whatever they wanted, as far as electrical work was concerned, and he was to invoice the Respondents directly. He says he raised this with Mr Haley on the basis that the Applicant would not get its supervision fee but was told to proceed as it would save the Respondents costs.
  3. [98]
    Counsel for the Respondents submits that the Tribunal should accept Mr Betteridge, in preference to Mr Aitken as Mr Betteridge is appropriately qualified whereas Mr Aitken does not hold a Residential Building Inspector's License, and, in fact, in carrying out the inspection it is alleged that he was in breach of s.42(1) of the Queensland  and Construction Commission Act 1991. Mr Aitken is, otherwise, well qualified, to provide the evidence he did.
  4. [99]
    Mr Aitken, I noted, was not familiar with the Rectification of Building Works Policy and the meaning of a Category 1 defect.
  5. [100]
    In assessing Mr Aitken’s evidence I will bear in mind that he is not appropriately licensed, however, that does not, in my opinion, necessarily impact on his expertise. Many of the claimed items were not inspected or commented upon by Mr Aitken and so, to that extent, those claims were undisputed. Other items were not recoverable under the Costs Plus Contract I have found existed. I do prefer the opinion of Mr Aitken on some issues such as the affect of the house being unoccupied, closed up and not maintained. Finally, in some instances I have rejected Mr Betteridge's opinion, on the basis that I am of the opinion that his views sometimes reflect counsel of perfection rather than a reasonable response to the claims. On occasions I have not agreed with the legal basis for the claim, a concern Mr Betteridge was quick to emphasis as a basis for rejection of his opinion. 

Driveway

  1. [101]
    Mr Haley’s evidence was that this was a design issue. Mr Haley says that when he took over the job the house structure already existed, having been built in accordance with the plans and specifications and the Council roadway already existed.  The driveway had to be constructed in the most effective way between those two points.  It was obviously going to be a problem.  The parties recognized that.  So much was conceded by Mr Fatseas.[44]  However, he denied that he gave instructions to pour the concrete.[45] I believe he was well aware of Mr Haley’s concern but was prepared to allow the concrete pour and to take the risk that it would solve the problem. He had earlier rejected a solution suggested by M Haley that the driveway be extended into the garage. Mr Benson also confirmed that possible solution was put to Mr Fatseas, and rejected by him.
  2. [102]
    Mr Haley’s evidence was that Mr Fatseas had raised concerns about getting his car into the driveway.  They had discussed it.  Mr Haley said:  “We both discussed it.  We knew that it was marginal”.[46]
  3. [103]
    In my opinion, it was not a problem of the Applicant’s making.  On the cost plus basis, it would have cost a substantial sum to rectify.  They have suffered no loss.  If anything, fault lies with the Architect.  In fact, the Applicant allowed a credit in his costs of $3,340 towards rectification of the driveway, but refused to be involved further with the changes.[47]  I do not accept that letter as being evidence of any admission of fault by the Applicant but rather an attempt to resolve the issues before the proceedings were brought.

Travertine Tiles

  1. [104]
    It is the Applicant’s case that the tiles were selected by the Respondents in February 2010.  The Applicant says it did not receive its 10% supervisor’s fee (in accordance with the cost plus agreement) because the Respondents purchased the tiles directly from the supplier.
  2. [105]
    The tiler, Andrew McLeod, trading as Multifix Tiling, had been a subcontractor with the first builder, Deep North, and had already commenced tiling in some areas. 
  3. [106]
    The Applicant says when it took over it was instructed by the Respondents to obtain further quotes for tiling.  It did so, but the Respondents selected Mr McLeod.  Although the Applicant supervised the tiler, it did not charge and was not paid its 10% supervision fee.  That was according to Mr Haley.  However, Mr McLeod, in cross-examination, agreed that he was a subcontractor to the Applicant and he directed his invoices to the Applicant.[48]  Certainly, Multifix appears in a number of the claims and, presumably, some supervision fee was paid, but in any event, even if it was not, I am prepared to find that the Applicant assumed a responsibility to supervise the tiler. 
  4. [107]
    The complaint in respect of the tiling was that there was evidence of considerable cracking, efflorescence and drumminess in the tiles laid externally.
  5. [108]
    Mr McLeod was an experienced tiler.  He gave evidence of being a successful contractor in respect of a number of large projects involving more than a million dollars. He said in evidence that he has now downgraded to smaller projects.
  6. [109]
    Mr McLeod said that during the contract the Respondents were regularly on site and he never received a complaint, either from Mr or Mrs Fatseas about his work.[49]
  7. [110]
    Mrs Fatseas says she complained about the tiles as early as 16 May 2010.  Those complaints, it appears, did not relate to the travertine tiles, but to the tiles laid in the bathrooms.  However, there were complaints.  Mrs Fatseas was not cross-examined on the issue of complaints.
  8. [111]
    Mr Betteridge was critical of the tiling for the reasons set out in the BSA complaint document and because incorrect adhesive had been used.  The BSA inspector recorded, in relation to Items 7 and 37 in the Scott Schedule:

Visual inspection noted a travertine paving/tile, large format (600 x 600) approximately 12mm thick with a honed finish has been used to the exterior paving around the dwelling and adjacent the pool area.

Visual inspection noted diagonal fracturing is present adjacent to the numerous handrail post penetrations.  An invasive inspection was undertaken in that the cover plate at the base of the post was lifted.  The inspection noted a flexible sealant had not been used at the post penetration and that a rigid grout is present between the post and the tile.  The inspection noted a flexible joint needs to be used between the tile surface and any fixed object to allow for any movement or expansion in the tile, subsurface or the fixed object to avoid pressure being applied to the tile surface.  The inspection noted that when a finger was rubbed over the fracture a sharp edge was detected.  The fracturing of the tile surface due to ridged grouting does not meet a reasonable standard of construction and presents a safety issue for the occupants of the dwelling.

  1. [112]
    It was noted that it was a Category 1 defect.
  2. [113]
    The complaint in respect of Items 8 and 46 was recorded as follows:

Visual inspection noted numerous paving tiles have fractured.  The inspection noted the extent of fracturing has increased since the previously BSA inspection.  The inspection also noted that efflorescence has migrated through the tile fractures and calcified on the tile face creating a sharp raised surface.  The licensee stated that the tiles were wet bedded into the bedding material and that the glue was also applied to the rear tile surface. 

It is my professional opinion that this is an unusual way to lay tiles and a system I have never heard of.  It is my professional opinion that the fractures have been and are being caused by moisture in the bedding material causing the porous material to expand during saturation.  It is likely that the fracturing may have started during the initial drying of the bed if the tiles were wet bedded as stated by the licensee.  The slight movement of the bedding material has caused the fracturing of the tile surface.  Fracturing of the tile surface due to saturating and drying of the bedding material does not meet a reasonable standard of construction and presents a safety issue for the occupants of the dwelling.

  1. [114]
    It was also noted to be a Category 1 defect.
  2. [115]
    Mr Betteridge relied upon the Hensel Geosciences report for the nature of the defects in the tile and the adhesive.
  3. [116]
    The Hensel Geosciences report[50]:
  • there was nothing unusual in terms of the weakness or structural integrity of the stone;
  • it was very obvious that all fracturing had occurred where the tiles were subject to loose water (rainfall).  None of the tiles laid internally have fractured;
  • there were a number of fractures associated with the stainless steel posts supporting glass fence panels;
  • the probable cause of the fractures outside was the use of inappropriate adhesive, namely one which was unsuitable for use in areas where there were recurring moisture problems;
  • there was a continuation of the fractures from one tile into an adjacent tile.  This usually indicated a serious structural problem associated with instability of the concrete slab.  However, the saturation of the screed and consequential movement was more likely the cause. 
  1. [117]
    I should note that if it was the slab moving, that would not be the responsibility of the Applicant as the slab was laid by Deep North.
  2. [118]
    Rectification of the problem would involve the substantial removal of external tiling.  It was recommended that all external tiles be replaced.
  3. [119]
    I accept the evidence of Dr Hensel, particularly where his evidence differed with Mr McLeod.  I was of the opinion that Mr McLeod’s recollection of events was hazy. He gave his evidence by telephone from Thailand where he was holidaying. He demonstrated little interest in the issues being canvassed.
  4. [120]
    The agreed cost of rectification of the external floor tiles was $54,900 including those tiles in the pool surrounds.  I would allow that sum. I am not prepared to direct that the internal travertine tiles be replaced.

Leaking Windows/Weatherproofing

  1. [121]
    The Applicant provided a quotation to complete the house and rectify defects for $1,098,939.60 inclusive of GST.  It detailed the rectification work to the value of $19,630.00 which included “waterproof and repaint wooden exterior windows”.[51]  There was evidence of water penetration in the master bedroom, before the Applicant’s engagement.[52] However, the damage was not to the extent as evident in later inspections. Interestingly, there was no complaint about the leaking windows in the Notice of Default.
  2. [122]
    The Applicant did not install the windows.  They were installed by a subcontractor of Deep North.  They were of wooden construction, manufactured and installed, in most instances, in accordance with the design of the Architect.
  3. [123]
    In his report, Mr Betteridge states that the Applicant knew or should have known that the installed external doors and windows were or were likely to be defective and not in accordance with the contractual documents in that they could not withstand a wind load speed of W41.  He was of the opinion that the existing doors and windows could not be rectified to comply with the contract.  He advised that they should all be removed and replaced. 
  4. [124]
    Mr Betteridge noted on inspection that every window he inspected in 2013 showed signs of water penetration. At that time he noted water penetration in the wooden windows, not only in the various joints but also where the glass meets the wood.[53] He agreed that unless they were regularly maintained they would deteriorate.
  5. [125]
    He was cross-examined along the lines that the wooden windows and, particularly, the wooden louvres were not ideal for preventing water penetration in the area where the house was situated, which was adjacent to the ocean and on the Nerang River.  Mr Betteridge conceded that the windows would inevitably fail to restrict water penetration.[54] He advised that he had been in contact with the manufacturers of wooden windows to ascertain whether a wooden window was manufactured that would comply with the performance requirements of the contract and had been unable to obtain a positive response. 
  6. [126]
    Mr Betteridge further opined that timber was hydroscopic, that is, it naturally absorbs moisture.  Painting or staining it will not prevent it from expanding in times of high humidity or rain or shrinking in dry times.  That will affect the sealant properties which I find makes it inappropriate for use in areas in which this house was situated.
  7. [127]
    Mr Allan Williams a civil engineer who specialised in structural engineering was of a similar opinion to Mr Betteridge as to the weatherproof qualities of wooden windows.[55]
  8. [128]
    In my opinion, the inappropriately designed doors and windows are not a defect but rather a design fault.  The Applicant was unlikely to solve the water leakage problem by the application of paint or stain. Indeed, it could only be achieved by the total replacement of the wooden windows. On a cost plus contract, the Applicant could not be liable for their replacement that, presumably, would involve the installation of entirely different doors and windows, probably constructed of aluminium.
  9. [129]
    The Respondents’ damages for the defective work or failure of the Applicant to perform the contract to waterproof the building is limited to the costs of the defective and useless work carried out, not the cost of erecting different windows and doors, contrary to the Architect’s design. It would be unreasonable to expect the Applicant to install totally different windows to that designed. The damages are too remote.[56]

Other Defective Work

  1. [130]
    I will deal with these items as they are itemized in the Scott Schedule. Many of the items were not the subject of cross examination, which makes it difficult to assess them. Doing the best that I can I make the following determinations.

Item

Description

Allowed

cost

1

Entry Driveway already commented upon

$0

2

Detached floorboards – lipping in the master bedroom

Mr Haley says that this defect is a consequence of the combination of heat and water ingress.  The Applicant’s expert, Mr Aitken, has recorded that the contractor had agreed to rectify the issue.  In examination-in-chief, he said when he was engaged, he was asked not to make comment on 48 items.  He says he has incorrectly asserted that the contractor had taken responsibility for them.  He did not inspect them nor did he form an opinion about them.[57] The BSA considered it a Category 1 defect because of the lipping.  It also noted that the Applicant had undertaken repairs to the floor following the initial inspection [31 May 2011] and that it had deteriorated further by the second inspection [28 February 2012].  Mr Haley comments that the flooring defects were a consequence of water ingress.  He is probably correct as further damage was observed between inspections.[58]

The cost of rectification is $4,328.  It would seem that it was a Category 1 defect because of the lipping and that lipping was not present at the time of the first inspection.

It is not easy to reconcile the earlier inspections by BSA or the inspection on 17 March 2011 by Jeffrey Hills & Associates [report dated 24 March 2011].  Certainly, there was no evidence of damage to the extent noted in the second BSA report.[59]

I note that in cross examination[60] Mr Aitken agreed he did not inspect the Master Bedroom floorboards because he was directed not to comment on it, but it is clear from his report and other evidence that there was minimal damage to it on the first inspection.

Mr Aitken further commented later in the report as follows:

8.4  The longer the dwelling sits unoccupied additional issues are going to arise due to the fact that no cleaning or maintenance has been carried out.  This is due to the extensive use of natural products (timbers, stones etc), the proximity to the salt water marine environment and the local fluctuating atmospheric humidity and temperature. 

8.5  The fact that the dwelling has no window coverings, is unoccupied and continually closed up without ventilation is contributing to the maintenance issues, particularly internal timber.  The building façade as designed and installed has extensive glazing which creates excessive internal heat and humidity.

Those comments are rejected by Mr Betteridge under cross-examination.  He thought that if there was excessive heat build-up, it would be sufficient to cause problems with the tongue and groove floorboards which would act as a barometer or guide, and he noted no such damage. 

Having inspected the building myself, I can understand Mr Aitken’s proposition and I am more inclined to accept his view of the deterioration brought about by the lack of maintenance due to the building not being occupied.  I note Mrs Fatseas’ evidence that they would visit the house on a weekly basis and open it up and that other people visited from time to time.  However, it is my opinion that for the bulk of the 5 years or more since the house reached a lock-up stage, it has not been lived in. 

It was put to Mrs Fatseas that she could have moved in 3 ½ years ago instead of leaving the house unoccupied.  She refused to move in because substantial work would be required to rectify the house, including the tiles.  She is of the view that all tiles, including the internal travertine tiles, would have to be replaced.  That is not my finding.  Her response was the house was not compliant but she conceded she made no enquiries as to whether it was compliant or not or whether she could live there.  She assumed that it was not compliant.[61]

Mr Fatseas was cross-examined in relation to this issue. 

You could move down there tomorrow? --- No. 

Why not? --- Not with the type of defects that are involved with the house. 

What defects prevent you from living in that house? --- Look ---

This is silly, isn’t it? --- Well, no, because you’re going to move down there.  You have major works to be carried out on the place.  And then where do you go and live while all of this is being done.

Well, alright. Okay? --- And, quite frankly, we don’t accept the way the house has been finished; the workmanship, there’s reports and so on there.  We don’t believe that it is acceptable and [indistinct].

Well, look all this blew up partly because you were – you didn’t like the driveway and you didn’t like the travertine tiles? --- No.  Well, we can’t gain access to the house for one.  I wouldn’t leave my vehicle sitting out in that area ---$0

…

This is a street full of mansions ---?

…

--- But you wouldn’t park your car on the street.  Is that what you’re telling ---?  --- That’s right.

--- This Tribunal --- it’s had a very high crime rate, that area.

I am not at all satisfied that the house could not have been moved into and rectification work carried out whilst they remained in residence.  As stated earlier, I am of the opinion that a considerable amount of the claim is due to deterioration of the house due to lack of maintenance and it being locked up.

Mr Aitken also observed that:

8.8 It was unusual for so many defect inspections to occur on one project; and particularly for each subsequent inspection to introduce so many additional defect items. The first defect inspection between Owner and the Contractor contained a list of 20 items, through to the current list which contains 110 items (now 130). Based on the information we have been provided all defects from the first inspection were addressed within one week by the Contractor.

$0

3

Water penetration Master Bedroom I have already commented on this above under Leaking Windows/Weather proofing. It was also submitted that the concrete slab and block wall would require demolishing and rebuilding. The balcony $0was described as acting like a bathtub in heavy weather because of the way the original slab was poured[62]. In my opinion, these are not defects under the cost plus contract.

$0

3A

Water penetration Master Bedroom I have already commented on this above under Leaking Windows/Weather proofing. It was also submitted that the concrete slab and block wall would require demolishing and rebuilding. The balcony was described as acting like a bathtub in heavy weather because of the way the original slab was poured[63]. In my opinion, these are not defects under the cost plus contract.

$0

3B

Shelf fallen off. This item is included under Items 103, 104 and 105.

$0

4

Support to tile edge. This item was not contested by Mr Aitken and I allow it at the agreed sum of $308

$308

5

Flexible joining pool coping and pavers. This item is referred to under items 8 and 26

$0

6

Efflorescence staining to river terrace, stonewall. Mr Aitkin agreed this was the responsibility of the Applicant and the cost agreed was $1,975.00

$1,975.00

7

Cracked paving tiles. Refer to items 8 and 26.

$0

8

Fracture paving tiles, pool surrounds. The cost with Item 26 was agreed at $54,900.  See comments above in respect to travertine tiles.             

$54,900.00

9

Incomplete works – entry path. Cost agreed at $1,200.  However, this was not part of the cost plus contract and was not allowed.

$0

10

Incomplete electrical works. This was not disputed by Mr Aitken however, Mr Davidson noted that there had been extensive changes to the electrical installation as the project progressed.[64] I am not satisfied the Applicant is liable. Cost was agreed at $1,300. I have disallowed the sum.

$0

11

Irrigation system incomplete. Not part of the cost plus agreement.  Agreed cost was $3,000.00. Not allowed.

$0

12

Front footpath – storm water drain not complete. Not part of the cost plus contract.  Agreed cost was $200.00.

$0

13

Condensation in light fittings. This was not disputed but according to the evidence a lot of the electrical work was directly subcontracted by the Respondents. Agreed cost was $250.00. Not allowed.

$0

14

Cement stains to painted wall – planter box over driveway. Not disputed.  Agreed cost $75                                                

$75.00

15

Render cracking right side boundary fence. The Applicant’s responsibility.  Agreed at cost of $750.00.  See Items 17, 21, 33 and 34, all of which are not disputed.

$750.00

16

Gas bottle regulator valve broken Not disputed.  Agreed cost.                                                       

$300

17

Cracked and drummy render. See comments to Item 15.

$0

18

Incomplete waterproof membranes. According to Mr Davidson this was not evident in the drawings. I assume therefore that the Applicant installed them at the request of the Owner in which case the Applicant is liable as a cost plus matter.  Cost agreed at $2,500.00. Allowed.

$2,500.00

19

Building materials left on site. No comment.  No cost.

$0

20

Mould and algae to concrete path. Due to failure to maintain and clean, no cost provided. Mr Aitkin agreed this was the responsibility of the Applicant, No cost was agreed.

$0

21

Cracking and Drummy render. No cost or rectification  required.

$0

22

Insufficient sealing of air conditioning condensation lines right hand side of path. Not disputed.  Allowed at the agreed cost of $75.00.

$75.00

23

Rusting hinges, timber awning at barbecue area. These hinges were stainless steel.  It is reasonable that in a marine environment, without regular cleaning and maintenance staining and corrosion will occur. No specification was made available according to Mr Davidson. I do not think the Applicant is responsible.  The agreed cost was $350.00.  I do not allow the sum.

$0

24

Render droppings, stonework adjacent BBQ area. This is not disputed.  The agreed cost was $50.00.  I have allowed that sum

$50.00

25

Waterproofing incomplete, planter box right hand side of river terrace. Refer to Item 18.

$0

26

Falls to floor tiles, river terrace and pool terrace. Refer to Item 8.

$0

27

Efflorescence BBQ area, river terrace. Refer to Item 26.

$0

28

Cracked tiles, river terrace. Refer to Item 26.

$0

29

Cracked tiles, river terrace. Refer to Item 26.

$0

30

Efflorescence and algae, stairs from river terrace. Agreed cost was $8,500.00.  It is difficult to decide whether the algae growth was a result of lack of maintenance and cleaning or whether it was  a defect. Mr Bettteridge says there was also calcification. Mr Hensel thought that the tile adhesive was inadequate. I allow the sum.

$8,500.00

31

Waterproofing not complete, curved planter boxes. This was not allowed in the cost plus agreement.

$0

32

Waterproofing not complete, curved planter boxes. This was not allowed in the cost plus agreement.

$0

33

Cracked render, adjacent control joint in boundary fence. Refer to Items 15, 17, 21 and 34.

$0

34

Cracking to render, junction of timber frames. See Items, 15, 17, 21 and 34.

$0

35

Flexible sealant not applied, boundary fence control joints. This was not disputed and the cost was agreed at $600.00.

$600.00

36

Excessive gap under fence and formwork still present, pool fence – no rectification required

$0

37

Plastic wedge broken, pool fence spigot. This was not disputed by Mr Aitken – agreed cost $50.00

$50.00

38

Cracked floor tiles, pool fence spigot. Refer to Item 8.

$0

39

Incomplete waterproofing, garden planters This was a cost plus item.  The owner undertook the installation.  Included in item 18.

$0

40

Cracked tiles, pool waterline. Mr Aitken considered 5 tiles needed replacing.  The cost of rectification was the responsibility of the Contractor.  The cost of replacing 5 tiles was agreed at $1,163.00.  The Respondent submitted that based on Mr Hensel’s report, the existing tiles were defective as the adhesive was defective.  They all required removal at a cost of $6,058.00.  If the pebblecrete required replacement, the total cost would be $17,058.  Mr Barnes of Turner & Townsend thought that the tiles could be removed and replaced without the need to remove and reapply the pool liner at a cost of $5,200.  I will allow that sum             

$5,200.00

41

Repair to timber post, pool pavilion. Agreed cost $11,800.00.  The post was selected by the Owner who wanted a secondhand hardwood.  Mr Aitken considered it was not the Contractor’s responsibility.  I agree and I do not allow the sum.

$0

42

Cover plate not fixed, pool area. I allow the agreed cost of $10.00.  

$10.00

43

Conduit clip corroded, pool pump area. I allow the cost agreed at $15.00. Not disputed.

$15.00

 

44 & 45

Broken pool pump filter gauge. Rectification not required.

$0

46

Fractured paving tiles, front entry to pool area. Refer to Item 8.

$0

47

Cracked edge tile, front entry. Refer to Item 8

$0

48

Damage to paint finish, external wall adjacent to pool. Not evident on examination.

$0

49

Discolouration of door frame styles, master bedroom deck. Refer to Item 3A

$0

50

Excess wood stain on glass, master bedroom balcony door. Refer to item 113

$0

51

Incorrect light switch cover plate.This was not disputed.  Agreed cost was $75.00             

$75.00

52

Slight damage to jamb and architrave, master bedroom entry door. This was not contested disputed. Agreed cost was $75.00.                

$75.00

52A

Water penetration, water closet to master bedroom. Not commented upon by Mr Aitken.  Agreed cost $715.00.  I am not aware of the cause of this and I do not allow the sum.

 

$0

53

Ensuite not clean in master bedroom – no cost

$0

54

Sensor not flush with plate in office. Not disputed.  Agreed cost $150.00.  I will allow             

$150.00

55

Damage to door jamb, bed 3. This was not disputed.  I allow the agreed sum of $75.00.                         

$75.00

56

Cracking to mitre and shadow line, bedroom 2 wardrobe. This was not disputed by Mr Aitken.  Agreed cost $100.00.  I allow the agreed cost $100.00

$100.00

57

Gapping between skirting and wall, bedroom 2. Not contested.  Agreed cost $100.00

$100.00

58

Poorly finished plasterboard, guest bedroom ground floor. Not evident on examination.

$0

58A

Marking/staining to floor tile, ensuite to guest bedroom. Refer to Item 105.

$0

59

Window not cleaned, guest bedroom ensuite. Rectification not required.

$0

60

Buttons missing to sound control unit, living room. It was not in the dwelling at the time of Mr Aitken’s examination.  I do not allow the agreed cost of $60.00.

$0

61 & 62

Crack to concrete slab, support plinth for fireplace. Not disputed.  Agreed cost $250.00.  I will allow $250.00.

$250.00

63

Visible screw fixing of skirting board, living room. Intentionally done to allow access to electric relay behind.  Not a Contractor’s responsibility.  I do not allow the item.  Agreed at $15.00.

$0

64

Crack in plasterboard, below glass portholes. Not disputed.  Allow the agreed cost of $300.00.

$300.00

64A

Bubbling to plasterboard, living room/kitchen adjacent to doors at river terrace. This is as a result of water penetration which is due to the wooden windows.  I do not allow the sum.  Agreed cost of $1,245.00.

$0

65

Damage to stainless steel door, kitchen above fridge space. Not evident on inspection. 

$0

66

Pressure from pressure-reducing valve, kitchen under sink. No rectification required.

$0

66A

No power point, kitchen island bench. Allowed for in plans.  The electrical work was directly subcontracted by the Respondents. Agreed cost $300.00.

$0

67

Light not working, garage above workbench. The electrical work was directly subcontracted by the Respondents. Agreed cost $40.00.

$0

68

Missing door, garage bar fridge. Not disputed by Mr Aitken.  Agreed cost

$450.00

69

No floor finish to garage and storeroom. Agreed cost $1,042.13.  That has not been paid for by the Owner and is not included in the cost plus agreement.  This is not allowed.

$0

70

Gatic cover lids not properly installed in garage. Not disputed by Mr Aitken.  If they are not defective, there is no cost.  If they were defective, then the cost would be $440.00.  There is no evidence I am aware of to decide this issue.  I do not allow the sum.

$0

71

Bar unit not sealed to wall garage. Agreed cost $163.00.  Not disputed. I allow the sum

$163.00

72

Gap between plaster and wine rack in wine cellar. Agreed cost $150.00.  Not disputed.  I allow the sum $150.00.

$150.00

73

Garage not cleaned of material. No amount claimed.

$0

74

Roller door not installed or correct provision allowed. It has not been paid for and therefore is not part of the cost plus contract.  No allowance is made for it.

$0

75

Gutter not uniform in colour. Not evident on examination.  I do not allow any sum.  The agreed cost was $103.00.

$0

76

Windows not clean. No rectification required.

$0

76A

Paint not complete, window reveal at base of internal stairs. Agreed cost $50.00.  I allow the sum of $50.00.

$50.00

77

Chandelier pendants are twisted. The electrician was engaged directly by the Owner. Not the Applicant’s responsibility.

$0

78

Cleaning issues, living room and kitchen. No rectification required.

$0

79

Vacuum system installed with incorrect cover plates. The rectification is the Applicant’s liability.  Agreed cost $500.00.

$500.00

80

Timber staining needs reapplication, river elevation exposed rafters. This was not disputed.  Agreed cost $600.00 however, Mr Davidson considered it a maintenance issue. I am inclined to agree, I disallow the item.

$0

81

Lights not working river deck stairs.  Existing tiles to river deck stairs will require replacement. Refer to Item 30.

$0

82

Loose light fitting, entry wall niche. The electrical work was directly subcontracted by the Respondents. Agreed cost Agreed cost $20.00.

$0

83

Dust and small particles between glass and Perspex, walkway bridge to study. No rectification required.

$0

83B

Inadequate paint coverage, office window.  Refer Item 113

$0

84

Poor silicone jointing, gutter outside office window. Not disputed by Mr Aitken.  Agreed cost $50.00.

$50.00

85

Different colour paint, custom orb roofing sheet outside bridge gallery. If item can be cleaned, agreed cost $300.00.  If needs replacing, $1,000.00.  No evidence as to which is likely.  I allow $500.00

$500.00

85A

Water penetration, window sill adjacent walkway office. Refer Item 113.

$0

86

Paint mark, adjacent internal stairs. No rectification required

$0

87

Ineffective bird control, top of columns overlooking pool. Agreed cost $100.00.  This was not included in the contract.  No allowance made for it.

$0

88

Material used on rainwater heads and downpipes as per Schedule of Finished – no rectification required

$0

89

Stormwater outlets not evident, street kerb. No rectification required.

$0

90

Delamination of front gate entry. Agreed cost $3,600.00.  Not disputed. Gate was not one specified by the architect. I allow $3,600.00.

$3,600.00

91

Finish to front door lock defective. Agreed cost $200.00.  Not disputed.  I allow $200.00.

$200.00

92

Unsatisfactory security alarm. Agreed cost $2,091.00.  Owner engaged electrician directly for installation. Not the Contractor’s responsibility.

$0

93

Glass shelf support to showers inadequate in shower recesses.  See Items 103, 104 and 105.

$0

94

Pull out shelves hit doors in linen press. Rectification cost agreed at $830.00.  This is said by Mr Aitken not to be a Contractor’s responsibility.  I am of a different opinion.  I allow the sum.

$830.00

95

Mitre opening up, first floor hall to bridge. Rectification not required.

$0

96

Laminated timber trim has delaminated around portholes. Cost agreed at $1,500.00.  Not disputed. It was not referred to in the contract documents. I am unaware whether this was installed by the Applicant or Deep North? In any event the defect should have been observable and rectified. I have allowed the sum of $1,500.00.

$1,500.00

97

Laminated timber floor edging between bedroom 2 and 3 lipping – rectification not required.

$0

98

Cracking to plasterboard, walkway support beam. Agreed cost $250.00.  Not disputed.

$250.00

99

Incorrect colour between columns at top – rectification not required.

$0

100

Open mitre, bedroom 3 wardrobe. Agreed cost $100.00.  Not disputed.

$100.00

101

Intercom stations not been installed, base of stairs at basement Agreed cost $760.00.  Owner engaged electrician directly for installation.  Not a Contractor’s responsibility.  Not allowed.

$0

102

Refer to Item 64A

$0

103, 104 & 105

Tiling remove and replace all wall and floor tiles to all Bathrooms. The tiler, Mr McLeod, argued that the travertine tile varied in thickness.  He agreed it would be unacceptable if joints did not line up.  Mr Aitken on behalf of the Applicants said that the tiles were supplied by the owner and cut on site and it was not the Contractor’s responsibility.  In my opinion, it was, as I stated earlier in these Reasons.  I allow the sum of $54,073.00.

$54,073.00

106

Stair treads poorly installed to basement. Rectification cost agreed at $5,000.00.  I think that it is the responsibility of the Contractor and I allow the sum.

$5,000.00

107

Pontoon not constructed, waterfront. This is a cost plus contract.  The pontoon was not included. Agreed cost was $25,000.00.  Not allowed.

$0

108

Fly screens not installed. Agreed cost $4,202.00.  This was a cost plus contract.  Fly screens were not included. Not allowed.

$0

109

Carpet not installed, storeroom, basement, media room. Agreed cost $2,670.00.  This is a cost plus contract.  Carpet was not provided.  Not allowed.

$0

110

Epoxy finish to garage floor not installed. Refer to Item 69

$0

 

Sub Total

$143,849.00

  1. [131]
    Items 111 to 130 are additional items of defect added at a later time.  Mr Aitken has not commented on these items, nor are they referred to in the Building Services’ Authority inspections.

111

Swimming pool control. Further detail is said to be required.

$0

112

Balcony of Master Bedroom. Refer to item 3A.

$0

113

Hebbel blocks not fixed at window sills. The cost of this item was agreed at $137,731.00. It is associated with the replacement of all wooden windows. For the reasons stated earlier I do not consider that this is the responsibility of the Applicant.

$0

114, 115 & 116

New internal timber stairs. The agreed cost was $12,200.00. The stairs are said not to comply. To some degree this is because of design faults but also the fault of the Applicant. The stairs have varying riser heights and a non-complying bottom tread. I allow the sum.

$12,200.00

117

Fix window next to internal stairs. There are gaps between the tread and the fixed glass window that is a safety issue, additional cost of $300.00. I allow the sum of $300.00.

$300.00

118

External stairs to the river terrace have varying riser heights. Rectification required but no cost provided.

$0

119

Bottom riser tiling overlaps timber deck. Rectification required but no cost provided.

$0

120

Living room timber floor is cupped due to water penetration. Could be due to slab edge dampness due to water penetration from external areas. Rectification required at agreed cost of $7,751.00. I am not prepared to allow the sum for the reasons given in respect of the design deficiencies of the windows and doors and the fact that the house has been left unoccupied for so long. I also note from the annexure to Mr Batteridge report that slab edge dampness is often a consequence of poor concrete. The Applicant did not pour the slab and cannot be held liable for latent defects.

$0

121

Timber post bases. Refer to item 41.

$0

122

Electrical installation. This related to an audit by an electrical contractor BNG Electrical. The agreed cost was $4,000.00. No evidence was given in relation to the cost although the audit document was part of the filed material. Mr Betteridge did not profess to have any expertise in electrical matters and said he was unable to comment. It appears to me to be a cost plus item and the Applicant should not be liable. I do not allow the sum. I refer to my comments in Item 10.

$0

123

Security. No evidence provided.

$0

124

Timber windows in ground floor guest shower. Mr Betteridge says they are exposed to the shower and will deteriorate. This appears to be a design issue and one for which the Applicant cannot be held responsible. Agreed cost $10,383.00.

$0

125

Balustrade to Master bedroom terrace is safety hazard. This appeared to be picked up by Mr Williams the engineer. There is no evidence that it was not built to design of the architect. I do not allow the item.

$0

126

Handrail and balustrade to edge of river terrace. This was the subject of cross-examination.[65] Clearly it was the architects omission to design a complying balcony and the builder cannot be expected to be required to construct it at his own cost contrary to the plans and specifications he was given. The agreed cost was $8,790.00. It is disallowed.

$0

127

External concrete demolish. Refer to Item 8.

$0

128

Builders rubble. Already attended to.

$0

129

Front entry step down. Agreed cost $3,435.00. Commentary in the Quantity Surveyor’s reports suggest that further detail is required. It is not clear to me whether this is a design issue or not. I disallow the sum.

$0

130

Internal sliding door to dining room. Agreed cost $50.00. Door is difficult to open. I allow the sum.              

$50.00

 

TOTAL

$12,550.00

Consequential Loss and Damage for Inconvenience

  1. [132]
    The amount claimed under this head of damage is $282,990.01.  It comprised the claim that was unspecified in the Second Further Amended Points of Defence and Counterclaim.
  2. [133]
    The bulk of the claim represents interest that the Respondents have incurred on borrowings to build the house. They had intended to set off the borrowings by applying the sale proceeds of their current home. However, because they say the house is unfinished and uninhabitable they continue to reside in their old house and pay expenses on 2 properties. The balance comprises land tax, maintenance costs as well as rates and insurance on the two homes.
  3. [134]
    The Applicant rejects the claim as being too remote to be recoverable and on the basis that the Respondents have failed to mitigate their loss.
  4. [135]
    The Respondents say the house never reached practical completion so it was never fit for habitation.  Consequently, there is no obligation on the Respondents to rectify the defects, at their costs, to enable them to take possession. 
  5. [136]
    The contract was terminated by the Respondents on 29 July 2011. 
  6. [137]
    It is instructive to review the various attempts by the Applicant to reach practical completion.
  7. [138]
    When the Applicant gave notice that the house was ready for occupation on 9 March 2011, the Respondents’ response was to have the house inspected by Jeffrey Hills & Associates.  Their report dated 24 March 2011 contained a list of extensive defects as well as a list of incomplete work.
  8. [139]
    The Applicant attended to those defects and advised that the work would be completed by 6 April 2011 and the house had reached practical completion.
  9. [140]
    A further inspection was carried out by Jeffrey Hills & Associates on 11 April 2011.  A report was provided on the same date.  Many of the defects had been remedied in the interim, but the author of the report raised new items. 
  10. [141]
    The Applicant attended to the defects and again advised, by email dated 27 April 2011, that the house was complete and ready for final inspection.  Excepted from the rectified items were the driveway and the travertine tiles which the Applicant wanted referred to the BSA.
  11. [142]
    The BSA carried out its own inspection on 31 May 2011.  The report noted that the inspection was confined to defective work and not to contractual issues.
  12. [143]
    It determined the driveway was a Category 1 issue as it affected the functional use of the dwelling.  General fracturing of tiles was noted on the external tiles and they were considered to be Category 2 defects.  It was suggested that the rectification of the tiles be delayed by 6 months to evaluate if further deterioration occurred.  No other Category 1 defects were noted.
  13. [144]
    A further inspection was carried out by Jeffrey Hills & Associates on 31 May 2011.  The report from that inspection found in Bedroom 1 repairs to water damage to timber floors was incomplete and not to an acceptable standard.  The rectification work to the guest bedroom en-suite window and the pool area curved window was not considered satisfactory. The reports contained an erroneous assertion that an allowance of $19,630.00 had been made for rectification of finishes to timber window frames which was not the case, that was the total amount allowed for defects. Other than those items, none of the pre-existing matters were considered to be unacceptable. 
  14. [145]
    Again, many new items were added to the list and were not the subject of criticism in the earlier inspections.  No explanation was provided as to why these additional items were not apparent on earlier inspections.  One could well imagine the frustration of the Applicant when, after responding to a list of defects and rectifying same, additional defects were added to the list on the next inspection. That occurred on more than one occasion.
  15. [146]
    By letter dated 14 July 2011, the Applicant advised it had attended to the BSA’s defects list.  Obviously, the driveway was not one of those items rectified.
  16. [147]
    In my opinion, the house was habitable at the time of the 12 July 2011 notice.  Some vehicles were not capable of entering the garage but I do not consider that detracted from the house being habitable.
  17. [148]
    A very strange aspect of this case is the Respondents’ reluctance to move in to what was described as a very lovely house. My inspection reveals that to be the case.
  18. [149]
    It is relevant when considering whether a party has failed to mitigate its damages to look at the reasonableness of a party’s conduct. Impecuniosity or even financial stringency created by carrying out the repairs would be a relevant factor.[66] Neither are present here.
  19. [150]
    In my opinion, the house could have been occupied by the Respondents as early as July 2011. The Respondents could have retained other contractors to carry out any defective work not completed by the Applicant. Impecuniosity was never pleaded or mentioned by the Respondents for their reluctance to move into the house. It was inconvenience, because they could not park their car in the garage and would have to leave it on the street or inconvenience and disruption which would result from the travertine tiles being replaced. I note that Mrs Fatseas was speaking of all the tiles whereas it was the exterior tiles that I have found were affected and required replacement.
  20. [151]
    I note that the Applicant bears the onus[67] of the failure to mitigate. In my opinion, the onus has been satisfied on the Respondents’ own evidence.[68]
  21. [152]
    I am not satisfied that the Respondents have made out any claim for damages under this head.

Conclusion

  1. [153]
    I dismiss the Applicant’s claim;
  2. [154]
    I allow the Respondents’ counterclaim in part as follows:
    1. $35,160.86[69] for the amount by which their payments exceeded the adjusted contract sum;
    2. $156,399.00 for the cost of rectifying the defects;
  3. [155]
    In respect of interest, the Respondents are entitled to interest on the overpayment. I allow 4 years at 10%. That amounts to $14,064.34. In respect of the claim for interest on the costs of rectification of defects, as those costs are based on current costs, I make no allowance.
  4. [156]
    The total sum inclusive of interest amounts to $205,624.20. I order the Applicant to pay the Respondents the sum of $205,624.20 by or before 4.00 pm on 31 July 2015.
  5. [157]
    I invite written submissions in respect of costs. Such submissions to be filed by the Respondents by 1 June 2015 and the Applicant by 14 June 2015.

Footnotes

[1]  Transcript Day 3 1-20 line 3.

[2]  Master Builders Residential Building Contract January 2009. 

[3]  Transcript 1 – 77 line 25.

[4]  Affidavit Alan Haley 25 March 2013.

[5]  Exhibit ABH 4.

[6]  Mr Haley’s Statement of Evidence dated 25 September 2014 paragraph 2.1.16.

[7]  See email dated 24 January 2010 document 12 Respondents book of documents.

[8]  Transcript 1-35 line 2.

[9]  Document 14 in the Respondents’ book of documents.

 

[10]  Transcript 1-34 line 10 - 20.

[11]  This was another house that Deep North was unable to complete. The Applicant successfully completed it under a cost plus agreement, and the Applicant used that agreement as a precedent in drafting the agreement between it and the Fatseas.

[12]  Transcript 1-32 lines 30 – 37.

[13]  [2003] QCCTB 26.

[14]  (unreported) QBT 13 April 1994.

[15]  (1986) BCL 264.

[16]  Paragraph 2.1.11 (b) of Statement of Evidence of Alan Haley dated 25 September 2014.

[17]  Exhibit 2.

[18]  This judgment was delivered on 2 December 2014 in the course of the hearing of this matter.

[19]  Exhibit ABH 6.

[20]  Transcript 1-38 lines 5 -12 and 1-40 line 28.

[21]  This sum was claim and paid for in Claims 1 and 2. Transcript 1-41 line 40.

[22]  Addition of items invoiced in claim amount to $45,667.50 conceded by Mr Haley. Transcript 1-41 line 25.

[23]  Error in addition of schedule Transcript 1-43 line 6.

[24]  The Respondents actually paid $66,849.26. It was thought to be a supervision fee. Transcript 1-44 line 20.

[25]  The account was for $124,514.87 which is the amount actually paid and the $3,136.66 was thought to be a credit. Transcript 1-44 line 25-35.

[26]  Exhibit AH 8 pages 43, 45 and 46.

[27]  Transcript 1-44 line 20.

[28]   Transcript 1-45, ll.1-5.

[29]  Transcript 1-45 line 10 and Exhibit AH8 to Statement of Evidence of Alan Haley.

[30]  Document 81 in the Respondents’ book of documents).

[31]  Transcript 1-47 to 1-49.

[32]   See Mrs Fatseas’ Statement of Evidence dated 26 August 2013, paragraphs 36 and 37.

[33]   Total deletions amount to $47,300.  The Applicant acknowledges deletions of $45,800 in paragraph 19 of its Amended Points of Claim but that sum does not include the amount for fly screens.

[34]  See Transcript at p.1-51, ll.26-29 and 1-52, ll.16-20.

[35] Airstrike Industrial Pty Ltd v Robertson & Anor [2014] QCATA 043.

 

[36]  

[37]  Letter – Applicant to Respondents’ solicitors dated 3 March 2011, Document No 61 in the Respondents’ Book of Documents.

[38]  Letter – Applicant to Respondents’ solicitors dated 31 March 2011, Document No 71 in the Respondents’ Book of Documents.

[39]  Transcript 1-64, l.5.

[40]  Letter dated 12 July 2011 from Respondents’ solicitors to Applicant, Document 78 in Respondents’ Book of Documents.

[41]  Letter dated 14 July 2011 from Respondents’ solicitors to Applicant, Document 79 in Respondents’ Book of Documents.

[42]  Letter – 25 July 2011 from Respondents’ solicitors to Applicant, Document 80 in Respondents’ Book of Documents.

 

[43]  Transcript Day 3, 1-2, line 30.

[44]  Transcript Day 3, 1-46, line 40.

[45]  Transcript Day 3, 1-48, line 4.

[46]  Transcript Day 3, 1-65, lines 5-10.

[47]  Letter – 1 August 2011 – Exhibit 10 to Mr Haley’s Statement of Evidence.

[48]  Transcript 2-31, line 25.

[49]  See statement dated 26 February 2014.

[50]  Document 55 in the Respondents’ Book of Documents.

[51]  BSA Quote 25/11/2009 document 8 in the Respondents Bundle of Documents.

[52]  Photo 20 in Exhibit 5.

[53]  Transcript 4-6 Lines 15 to 25.

[54]  Transcript 4-7, line 25.

[55]  Transcript 4-22 line 1 to 15.

[56] Bellgrove v Eldridge (1954) 90 CLR 613.

[57]  Transcript 2-46, lines 30-35.

[58]  See Mr Aitken’s evidence – Transcript 2-52, lines 35-40.

[59]  This was commented upon by Mr Aitken in his report:

It is noted that from 26 January 2013 for the 6 week period following, South East Queensland experienced an extraordinary weather pattern with high winds and heavy rainfall.  The weather created by ex Tropical Cyclone Oswald (26 January to 28 January) brought winds and rain to the Gold Coast which exceeded the wind rating for domestic type window installations.  It is evident that water ingress has most likely occurred in the Master Bedroom of this dwelling over this period. This would likely have been caused by the wind rating of the external door being exceeded allowing wind and rain to penetrate, or excessive rain causing flooding above the door sill on the Master Bedroom deck.  The deck has a floor drain and overflow installed.  The water ingress has caused damage to the timber floor in the Master Bedroom and ceiling damage to the Kitchen below.  We do not consider this leak to be a result of defective building work, rather extreme weather.  Note that the Master Bedroom external doors installed by the previous contractor.  Damage was not evident at inspection on 17/12/12; it was evident at inspection on 16/3/13.

 

[60]  Transcript 2-49 lines 22 to 27

[61]  Transcript Day 3,1-91, lines 5-25.

[62]  Transcript 4 -11 Lines 5 to 14.

[63]  Transcript 4 -11 Lines 5 to 14.

[64]  See report dated 9 October 2014 exhibit to affidavit of Malcolm Davidson.

[65]  Transcript 1-110 lines 15 to 25.

[66]  Dodd Properties v Canterbury City Council [1980] 1 WLR 433.

[67] Monroe Schneider Associates Inc v No 1 Raberem Pty Ltd (1991) 104 ALR 387 at 412.

[68]  Transcript Mr Fatseas at 1-49 lines 6 to 46, 1-50 lines 1 to 25 and Mrs Fatseas 1-90 lines 40 to  45 and 1-91 lines 1 to 45.

[69]  Transcript 1-40 line 5 to 25.

Close

Editorial Notes

  • Published Case Name:

    AL Builders Pty Ltd v Nicholas Fatseas and Tricia Fatseas

  • Shortened Case Name:

    AL Builders Pty Ltd v Fatseas

  • MNC:

    [2015] QCAT 166

  • Court:

    QCAT

  • Judge(s):

    Member King-Scott

  • Date:

    08 May 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
Airstrike Industrial Pty Ltd v Robertson [2014] QCATA 43
1 citation
Jump To
Cite 1 - [2014] QCATA 43
Bellgrove v Eldridge (1954) 90 CLR 613
1 citation
Jump To
Cite 1 - (1954) 90 CLR 613
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
1 citation
Jump To
Cite 1 - (2001) 53 NSWLR 153
Branir v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424
1 citation
Jump To
Cite 1 - (2001) 117 FCR 424
Brogden v Metropolitan Railway Co (1877) 2 App Cas 666
1 citation
Jump To
Cite 1 - (1877) 2 App Cas 666
Bullock v London General Omnibus Company (1986) BCL 264
1 citation
Jump To
Cite 1 - (1986) BCL 264
CMF Projects Pty Ltd v Riggall[2016] 1 Qd R 187; [2014] QCA 318
2 citations
Jump To
Cite 1 - [2014] QCA 318
Cite 2 - [2014] QCA 318
Dodd Properties Ltd v Canterbury City Council (1980) 1 WLR 433
1 citation
Jump To
Cite 1 - (1980) 1 WLR 433
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523
1 citation
Jump To
Cite 1 - (1988) 14 NSWLR 523
Esanda Ltd v Burgess (1984) 2 NSWLR 139
1 citation
Jump To
Cite 1 - (1984) 2 NSWLR 139
KD Properties Pty Ltd v Leda Design & Construction (Qld) Pty Ltd [2003] QCCTB 26
1 citation
Jump To
Cite 1 - [2003] QCCTB 26
Monroe Schneider Associates Inc v No 1 Raberem Pty Ltd (1991) 104 ALR 387
1 citation
Jump To
Cite 1 - (1991) 104 ALR 387
Pickersgill and Harvey v Tsoulkalas [2009] SASC 357
1 citation
Jump To
Cite 1 - [2009] SASC 357

Cases Citing

Case NameFull CitationFrequency
Dinamick Developments Pty Ltd v Niksic [2016] QCAT 4062 citations
Nicholls v Kline Industries International Pty Ltd [2018] QCATA 1231 citation
1

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