Withers v Urban Homes Pty Ltd
[2015] QCAT 233
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- Unreported Judgment
- Withers v Urban Homes Pty Ltd[2015] QCAT 233
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Withers v Urban Homes Pty Ltd[2015] QCAT 233
Withers v Urban Homes Pty Ltd[2015] QCAT 233
CITATION: | Withers v Urban Homes Pty Ltd [2015] QCAT 233 |
PARTIES: | Glenn Withers (Applicant) |
v | |
Urban Homes Pty Ltd (Respondent) |
APPLICATION NUMBER: | BDL162-14 |
MATTER TYPE: | Building matters |
HEARING DATE: | 30 October 2014 |
HEARD AT: | Brisbane |
DECISION OF: | Member Allen |
DELIVERED ON: | 24 June 2015 |
DELIVERED AT: | Brisbane |
ORDERS MADE: |
|
CATCHWORDS: | BUILDING DISPUTE – Whether builder entitled to retain amount for variation where variation document does not show cost of variation works and not signed by home owner Domestic Building Contracts Act 2000 (Qld) |
ss 79 - 84 Allaroo Homes Cairns Pty Ltd v O'Reilly & Anor [2012] QCA 286 |
APPEARANCES:
APPLICANT: | Mr Withers was self-represented. |
RESPONDENT: | Mr Brian Maloney, director represented Urban Homes Pty Ltd. |
REASONS FOR DECISION
History of the application
- [1]Mr Withers engaged Urban Homes to build a house at Lot 17, Oasis Close Manly West for the amount of $371,630.00 under a contract dated 10 April 2013. During the course of construction rock was encountered, excess fill had to be removed from the site and a diversion was required around a spring. The costs of this work was not included in the contract and Urban Homes issues variations to Mr Withers in respect of the works totalling $19,745.00.
- [2]This amount was paid by Mr Withers on the basis that he reserved his rights and he is now seeking repayment of the sum with interest on the basis that Urban Homes has not complied with the terms of the contract in regard to variations.
- [3]Urban Homes deny that they have not complied with the contract and have made a counter application for the amount of $3,940.00, which represents the builder’s margin in respect of the variation. Mr Maloney withdraw the claim for the builder’s margin at the hearing as the evidence of Mr Alan Coffey, the building supervisor was that the variation was to be at cost.
- [4]The parties agree that in accordance with clause 2 of the contract specification the work in regard to the rock constitutes a variation. In particular, it states that “no allowance has been made for excavation in rock or other foreign matter not easily removed by standard digging equipment as determined solely by the builder. The owner may incur extra costs including but not limited to machine hire, labour and extra materials should such rock or extra material be revealed.” The specification also state that excavated material spoil, trees, etc to be stockpiled on site
- [5]Mr Coffey[1] stated that rock was found on 31 May 2015, which was the day site work commenced. He says he contacted Mr Withers and advised him of this and invited him to attend the site. He also gave him the option of Mr Coffey coming to him to have a variation signed. The work would involve the removal of the rock and Mr Withers agreed with him that while the trucks were there it would be best to have the soil removed off site as well. He says that he was not able to tell Mr Withers how much the work would cost and the variation would be at cost to be advised. Mr Withers initially said he would not sign a blank variation and Mr Coffey mentioned that they could stop the job, which would incur costs. Mr Withers then gave the go ahead for the work but he refused to sign such a variation as it amounted to a blank cheque.
- [6]Mr Withers[2] confirmed that he had been advised of the rock and that he had refused to sign a blank variation but had given the go ahead for the work in regard to the rock to avoid the costs of a stop work. Mr Withers denies that he gave any authority to remove excess fill, as it was his understanding that under the contract this was his responsibility.
- [7]On 4 June 2013, a spring was discovered on site and Mr Coffey states that again Mr Withers was contacted in regard to the additional works on the site. Mr Coffey states that he was not able to estimate the costs but Mr Withers gave the go ahead for the work to be performed. Mr Withers again refused to sign the variation. Mr Withers denied that he was contacted in regard to the spring though it is clear from the email trail that he had an awareness of it.
- [8]
- [9]The first variation dated 31 May 2013 describes the following work:
- Remove excess fill to be charged actual cost.
- Rock breaker required to be charged actual cost.
- [10]The second variation dated 4 June 2013 describes the following work:
- Extra work required to divert the spring as per instructions from engineer to be charged at actual cost.
- [11]Mr Withers made an email request for confirmation of the cost of “removal of the rock” on 15 July 2013 with an estimate of AUD1,600 to 1,800. Mr Maloney replied on 16 July “that he was currently getting the invoices for the removal of the fill. But the amount you have mentioned is not in the ball park”.
- [12]Variation No 05-1302 dated 23 July 2013[7] was prepared by Urban Homes and forwarded by email on 23 July 2014 with copies of the sub-contractors invoices. The variation described the following work:
- Removal of fill from site $16,128.50
- Rock excavation $1,947.00
- Dig and divert natural spring around retaining
wall and provide ag drain $1,669.00
Total $19,745.00
- [13]Eagle Alliance Earthmoving performed the majority the work covered by the variation and provided a breakdown of their work at the request of Mr Withers[8], which showed that soil, was removed and dumped on 31 May, 1 June, 3 June, 4 June, 18 June and 19 June, performed the majority of the work. The rock breaker was used on 31 May, 4 June and 18 June.
- [14]Mr Withers in his response to the variation made it clear that the variation amount was much greater than he was lead to believe and there were a series of emails[9] and a meeting with Mr Maloney on 5 August 2013 to try to resolve the matter. In an email dated 16 August, Mr Maloney stated that the spring was not disclosed to Urban Homes and did not appear on the geotechnical report; as such, it forms a latent condition, something that is your (Mr Withers) responsibility.
- [15]Variation 05-1302 was included for payment with a progress claim dated 15 August 2013. Mr Withers asked that the progress claim be amended to remove the variation as it was still in dispute. Mr Withers raised the requirements of the contract in regard to latent conditions not being complied with in an email[10] in reply to the progress payment request.
- [16]Mr Maloney replied by email[11] that should payment not be made in full as detailed in the progress claim, then I have no option but to stop work on the site. Should work stop on the site, cost escalation will apply (as well as interest). Mr Withers then forwarded a payment confirmation on 22 August 2013 noting that the payment is paid in dispute[12].
- [17]Mr Withers sent a letter of demand on 19 June 2014[13] in respect of the amount of $19,745.00 for variation 05-1302 noting that the variation was unsigned and not approved by the home owner and also did not comply with the latent condition clauses of the contract. When the demand was not met, he filed this application.
The contract and the law
- [18]Variations are dealt with in clauses 12, 13 and 14 of the contract General Conditions. Clause 12 relates to variation by agreement and requires that either party may give to the other a written notice requesting a variation in clause 12.1. In accordance with clause 12.3, “the parties may agree to vary the works by adding or omitting work from the works. The contractor must ensure that the parties’ agreement to vary the works is put in writing in a variation document signed by the contractor and the owner within the shortest practicable time and before any work the subject of the variation is carried out.”
- [19]The requirements for the variation document are set out in clause 12.4. The document must describe the variation, if the variation was requested by the contractor state the reason for the variation, state the contractors estimate of any delay to works as a result of the variation, state any adjustment to the contract price as a result of the variation or how the adjustment will be calculated and state when any adjustment to the contract price is to be claimed or allowed by the contractor this part must be initialled by the owner. Where a variation results in an increase to the contract price, in accordance with clause 12.5, the owner must pay the contractor the amount of the increase in accordance with the time stated in the variation document
- [20]Where the contractor has requested the variation clause 12.6 states that they are only entitled to additional payment if the variation was necessary due to circumstances that could not have been reasonably foreseen by the contractor when the contract was entered into. The contractor must give the owner a copy of the signed variation document as soon as practicable, and within five business days, after a variation is agreed in accordance with clause 12.7.
- [21]The term latent condition is defined in the General Conditions as any physical condition on or around the land, including surface and subsurface conditions, which differ materially from the physical conditions reasonably expected by the contractor at the time the contract was entered into. Clause 14 deals with latent conditions and requires that when the contractor becomes aware of a latent condition they must promptly give the owner a written notice describing the latent condition, the contractors estimate of the work required to overcome the latent condition and the contractors estimate of the time required to rectify the condition. The contractor shall, in accordance with clause 14.2, with the prior written consent of the owner, vary the works to include the work required to overcome the latent condition.
- [22]Prior to the contractor commencing any work the subject of the variation for a latent condition in accordance with clause 14.3, the parties must agree to vary the works and confirm their agreement in writing in accordance with clause 12.3. The requirements of clauses 12.3, 12.4, 12.5 and 12.7 apply to variations under clause 14. The owner must not, in accordance with clause 14.4, unreasonably withhold its consent to a variation under clause 14 and must take all steps necessary to sign the variation document provided by the contractor.
- [23]Clause 15 of the General Conditions enables the contractor to claim a reasonable extension of the date for practical completion for delay caused by amongst other things variations to the works. The contractor has power to suspend the works under clause 16 of the General Conditions where the owner is in substantial breach of a term of the contract. A substantial breach is one where there is a refusal or failure to perform a substantial obligation under the contract and includes failure to make a payment on time. The contract at clause 26 of the General Conditions allows the contract price to be increased because of delays for which the contractor is not responsible at either the cost of the delay or .05% of the contract price per day, which in this case would be $185.81.
- [24]The contract between Mr Withers and Urban Homes is a regulated contract[14] for the purposes of the Domestic Building Contracts Act 2000 (Qld). There are specific provisions in the Act about variations, which require compliance by the builder[15]. These provisions are more or less mirrored in the contract General Conditions and require firstly that the building contractor must ensure any variation agreed to between the building contractor and building owner is put into written form within the shortest practicable time and for one consisting of an addition to the subject work before any domestic building work the subject of the variation is carried out[16]. That is unless the variation is for domestic building work that is required to be carried out urgently or it is not reasonably practicable, in the particular circumstances, to produce a variation document before carrying out the work.
- [25]Where the proposed variation consists of an addition to the works the building contractor must ensure that no domestic building work the subject of the proposed variation is carried out until the variation has been signed by the owner and the contractor[17].
- [26]The formal requirements for variation documents are set out in section 80 of the Act and are substantially the same as those stated above for clause 12.4. Where the contract provides for progress payments as it does here the variation document must make appropriate provisions for payment under the contract to reflect any change of the contract price caused by the variation[18]. Where the variation results in an increase in the contract price the variation document must state when the increase is to be paid which cannot be before the work is started and this must be initialled by the building owner[19].
- [27]As soon as practicable after an appropriate variation document is made, the building contractor must sign the document and take all reasonable steps to ensure the document is signed by the building owner.[20] A readily legible signed copy of an appropriate variation document for the variation must be provided to the building owner as soon as practicable but within 5 days after the variation is agreed to[21].
- [28]The right of the building contractor to recover the amount for a variation is governed by section 84 of the Act. Where a building contractor gives effect to a variation and the variation consists of an addition to the subject works and the variation is not one originally sought by the building owner as is the case here, the building contractor may recover an amount for a variation only if the building contractor has complied with sections 79, 80, 82 and 83 and the ground of unforeseen circumstances applies or only with the Tribunal’s approval.
Do the variation documents comply?
- [29]In this case, there are several areas where it appears there has not been compliance with the contract or the Act. The first two variation documents did not set out the adjustment to the contract price or how it would be calculated and were not signed by the building owner, Mr Withers. While the third variation document set out the cost of the variation works, it again was not signed by Mr Withers. Work under the variations also commenced before the variation documents were signed. The Building Contractor was in contravention of clause 12 and14 of the General Conditions and section 79 and 80 of the Act. While the third variation document sets out the adjustment to the contract price it was prepared after the work was done and was again not signed by the building owner.
- [30]It has not been argued by Urban Homes that the work was required to be carried out urgently and it was not reasonably practicable to produce a variation document which if accepted would have excused the variation not being in written form in accordance with s 79(2) of the Act. In this case the need for the work was discovered at the start of the building project and while it may have caused some delay there was no apparent urgency in it.
- [31]Mr Withers refused to sign the original variation documents as they did not set out the change in the contract price or how it would be calculated all that was stated was that it was be TBA (to be advised). Urban Homes claim that they were unable to determine how long the machines were required or how far the rock would go back and how much the rock had to be excavated as the rock appeared very hard about the first variation. Similarly, they could not confirm the additional cost in regard to diversion of the spring.
- [32]Mr Withers is said to have given verbal approval for the variations including that soil was to be removed from the site and dumped as opposed to being stockpiled in accordance with the contract. The bulk of the costs for the variation was in relation to the removal and dumping of soil as set out above.
- [33]Urban Homes claim that the verbal approval for the variations by Mr Withers is the basis for Urban Homes going ahead with the work and that it sent out the final variation as soon as the cost was known. Urban Homes also state that Mr Withers was required to act reasonably in regard to signing the variation as it was in respect of a latent condition in accordance with clause 14.4 of the General Conditions.
- [34]Mr Withers says that he was advised that the cost of the rock removal would be between $1,600 and $1,800 and would involve approximately two days work and denies that he received the first two variation documents. Mr Withers says that he never gave approval for the removal of the soil. The Tribunal notes that there is no mention by Mr Maloney of the earlier variation documents in the emails between himself and Mr Withers. In regard to the first two variation documents they did not comply at any rate because they did not provide any details in regard to the cost of the variation work
- [35]Whether or not Mr Withers gave approval for the work to be done is not determinative of the question as to whether Urban Homes has an entitlement to the variation amount. Even where the variation has been at the request of the home owner and the variation document has been signed by both parties the variation document has been held to be non-compliant if it did not state the change of the contract price because of the variation nor state how the change of the contract price might be worked out[22].
- [36]North J in Allaroo Homes determined that there was no entitlement under the variation and there were no exceptional circumstances or unreasonable hardship, which could satisfy the court that the builder should be paid for the cost of the variation in the amount of $47,147.97. The fact that the builder had incurred the costs, as is the case here, was not considered sufficient to enable recovery.
- [37]The third variation document did set out the change of the contract price but it did not detail when the variation would be payable. It was not signed and the work had already been performed at the time it was issued. Urban Homes argued that the contract requires that the owner must not unreasonably withhold its consent to a variation under clause 14.4.
- [38]The time for giving consent is clearly, before work has commenced, as the contractor must ensure the agreement is put in writing and signed by the parties before then in accordance with clause 12.3.
- [39]In this case, the work had been completed at the time the variation was issued and so it was not unreasonable for Mr Withers to withhold consent where the variation document had not been prepared at the appropriate time.
- [40]The variations here do not comply with the contract nor the Act. It is not sufficient that Mr Withers may have given approval for the work to be done nor that the work was done and costs were incurred. Urban Homes has not complied with the requirements of s 84 of the Act, which requires that a complying variation document be signed by the building contractor, and building owner before the work the subject of the variation is commenced and so Urban Homes is not entitled to recover an amount for the variation.
- [41]The Tribunal notes that Urban Homes has not made an application for recovery of the variation amount on the basis of exceptional circumstances or unreasonable hardship. Having regard to the decision in Allaroo Homes which shows a strict approach in these matters it does not appear on its face that such a claim would have been successful.
- [42]Urban Homes did raise the issue of payment of the amount of the variation and that the matter was not raised again until a year later. It was said that the payment was made as a commercial decision to avoid the possibility of cost escalation and the stopping of work on the site. It is clear from the email of 19 August 2013 that Mr Maloney stated that if payment was not received for the variation then there would be no option but to stop work on the site. It is equally clear in the email sent by Mr Withers on 22 August with the confirmation of payment that the amount was paid in dispute and that he reserved the right the right to seek recompense of these funds in due course.
- [43]The Tribunal accepts that Mr Withers reserved his rights to make a later claim in respect of the payment and that as the variation did not comply with section 84 Urban Homes has no right to retain the amount of $19,745.00. Interest is payable on this amount at the rate of 15% per annum[23] from the date it becomes payable until it is paid.
- [44]The Tribunal orders that Urban Homes Pty Ltd pay Glenn Withers the amount of $19,745.00 within 14 days of the date of this order.
Footnotes
[1] Exhibit 2.
[2] Exhibit 1.
[3] Exhibit 3.
[4] Exhibit 2 attachment 7.
[5] Exhibit 3 attachment 7.
[6] Exhibit 2 attachments 3 and 5.
[7] Exhibit 3 attachment 8.
[8] Exhibit 1 email F.
[9] Exhibit 1 emails D to H.
[10] Exhibit 1 email H dated 19 August 2013 12.18pm.
[11] Exhibit 1 email H dated 19 August 2013 12.34pm.
[12] Exhibit 1 email I.
[13] Exhibit 1 email L.
[14] Domestic Building Contracts Act 2000 (Qld) ss 7, 8 and 9.
[15] Domestic Building Contracts Act 2000 (Qld) s 93.
[16] Domestic Building Contracts Act 2000 (Qld) s 79.
[17] Domestic Building Contracts Act 2000 (Qld) ss 79(3) and (4).
[18] Domestic Building Contracts Act 2000 (Qld) s 80(2)(g).
[19] Domestic Building Contracts Act 2000 (Qld) s 81.
[20] Domestic Building Contracts Act 2000 (Qld) s 82.
[21] Domestic Building Contracts Act 2000 (Qld) s 83.
[22] Allaroo Homes Cairns Pty v O'Reilly & Anor [2012] QCA 268 per North J at [7] to [9].
[23] Section 34B of the Queensland Building and Construction Commission Regulation 2003 and item 19 of the Contract Schedule.