Hunterland v Rosa[2017] QCAT 25

This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act).

REASONS FOR DECISION

1. [1]
   The Hunterlands are the owners of a home that required significant reconstruction after it was inundated by flood waters in the January 2011 floods.  John Rosa was (at that point in time), a licenced builder, and the builder with whom the Hunterlands contracted.
2. [2]
   The Tribunal has previously ordered that Mr Rosa pay the sum of $36,493.26 to the Hunterlands, along with interest and costs.  This matter has now been returned to the Tribunal, for consideration of Mr Rosa’s counterclaim against the Hunterlands, for the sum of $15,416.26 in respect of variations 28 to 41.
3. [3]
   Mr Rosa’s ability to recover these variations sums is governed by s 84 of the Domestic Building Contracts Act 2000 (Qld) (as it applied at that time):

84 Right of building contractor to recover amount for variation

1. (1)
   This section applies if—

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

2. (b)
   the variation consists of—

1. (i)
   an addition to the subject work; or

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

32. (2)
    If the variation was originally sought by the building owner, the building contractor may recover an amount for the variation—

1. (a)
   only if the building contractor has complied with sections 79, 80, 82 and 83; or

2. (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.

3. (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—

1. (a)
   only if—

1. (i)
   the building contractor has complied with sections 79, 80, 82 and 83; and

2. (ii)
   the ground of unforeseen circumstances applies; or

2. (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.

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

1. (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;

2. (ii)
   the building contractor would suffer unreasonable hardship by the operation of subsection (2)(a) or (3)(a); and

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

5. (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.

6. (6)
   If the building contractor is entitled to recover an amount for the variation of a fixed price contract, the amount is—

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

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

7. (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.

4. [4]
   As noted by the appeal Tribunal:^[1]

In summary, variations must be put in writing within the shortest practicable time and before the variation is carried out. It is clear Mr Rosa did not comply with this requirement of the Act, as the works were completed long before the delivery or execution of the variation forms.

5. [5]
   The Tribunal has now been asked to consider, with respect to variations 28 to 41, whether, based upon the evidence that was before it, whether ‘it is satisfied that there are exceptional circumstances or if Mr Rosa establishes that he will suffer unreasonable hardship as a result and it would not be unfair to the owner for the contractor to recover an amount.’^[2]
6. [6]
   It is necessary to traverse some previous ground in order to make the decision now required.

The driveway/ramp

7. [7]
   The Hunterlands had sought a refund from Mr Rosa for a concrete driveway/ramp that they say was included in their contract at a cost of $30,000.00, and which was not built.  Rather than building a concrete driveway/ramp, they sought to build a less expensive timber ramp.
8. [8]
   The Hunterlands alleged that, for town planning reasons, it was necessary to instead build a timber ramp, as well as it being less expensive.  They said that at the time the contract was priced by Mr Rosa, it was priced to include the more expensive concrete construction, and there should therefore have been a savings from this. The contract in evidence reflects a ‘provisional sum’ of $30,000.00 for the driveway, on the ‘Provisional Sums Schedule’.
9. [9]
   Having paid the full contract price, the Hunterlands claim in relation to the driveway was that they had paid the full amount of the $30,000.00 provisional sum allowance and should be due a refund given that the driveway component did not cost $30,000.00.  The Hunterlands’ evidence in this respect was supported by the architect, Jan Hogarth. Ms Hogarth gave evidence that it was her understanding that when the timber ramp was costed, during the course of what was a fast moving project, that the timber ramp would cost be ‘between 10 and $15,000’.  Ms Hogarth referred to this as a ‘saving’ that was not ‘part of the contract documentation, but it was always understood that there would be a saving due to the owners through the construction period.’
10. [10]
    At the hearing of the matter, Mr Rosa’s Quantity Surveyor, Mr Chris Spencer, gave evidence that the actual cost of the driveway was valued by him at $27,531.00.  Mr Spencer endeavoured to give evidence in relation to the amounts actually paid by the Hunterlands to Mr Rosa for the driveway, and by them in relation to a separate contract to raise the house, directly with the house raiser.  Mr Spencer tried to suggest that the $7,000.00 of the $30,000.00 provisional sum allowance had been reallocated to pay for house raising.  On this basis, it was Mr Spencer’s view that the Hunterlands had only paid $23,000.00 to Mr Rosa, and therefore still owed him $4,531.00.
11. [11]
    The house raising was the subject of a separate contract, not in dispute before the Tribunal, and the evidence of the Hunterlands was that they paid the house raiser directly.  Evidence about payment of the $7,000.00 is not within Mr Spencer’s area of expertise, and he did not have any independent knowledge of the matters he spoke of.  There was no independent evidence to support Mr Rosa’s claims that he paid $7,000.00 to the house raiser, from the provisional sum allowance for the driveway, on the Hunterlands’ behalf.  For this reason, the Tribunal prefers the evidence of the Hunterlands, which is consistent with the ordinary operation of a standalone building contract.  As such, accepting the Hunterlands’ evidence and Mr Spencer’s costings, there should be an adjustment in the Hunterland’s favour of $30,000.00 less $27,531.00 = $2,469.00.

Variations admitted by the Hunterlands

12. [12]
    The Hunterlands accepted that it was reasonable for them to pay variations 28, 29, 30, 31, 38 and 42.  At the hearing of the matter, following the evidence of Mr Spencer, the difference between the parties in relation to the costings of these items was described as follows:

If I accepted the quantity surveyor’s evidence, what that would mean is that instead of there being $3,135 going to you [Mr Rosa], there would be $4,531 going to them [the Hunterlands].

13. [13]
    The Tribunal, having no other practical mechanism to resolve the dispute in cost estimates between Mr Rosa and the Hunterlands, then ‘split the difference’ between these figures, resulting in an award to Mr Rosa of $4,000.00 for variation items 28, 29, 30, 31, 38 and 42. As the Tribunal ultimately made an award in the Hunterlands’ favour, that award was reduced by the figure that the Hunterlands’ admitted was owing to Mr Rosa. This Tribunal is limited to reconsideration of Mr Rosa’s dismissed counterapplication, and has not been asked by the Appeal Tribunal to reconsider the award made in favour of the Hunterlands in relation to their application.

The balance of variations in Mr Rosa’s counterapplication

14. [14]
    The Tribunal must now consider whether Mr Rosa should have been allowed to recover for the balance of the variations claimed by him. 
15. [15]
    As Member Deane set out in Sun Building Services Pty Ltd v Minh & Anor [2015] QCAT 134, it is necessary for Mr Rosa to establish (emphasis original):^[3]

a) either:

i) there are exceptional circumstances that warrant recovery of an amount; or

ii) the builder would suffer unreasonable hardship by the section being applied; and

b) it would not be unfair to the owner to allow the builder to recover an amount.

16. [16]
    Member Deane set out the law relating to claims by builders for unsigned variations:^[4]

The Appeal Tribunal has previously found that it would be inconsistent with the purpose of the DBC Act to find unreasonable hardship just because a builder incurred and cannot recover the costs of a non-compliant variation. The Appeal Tribunal in that case also considered that the test requires an assessment of the impact of the inability to recover both subjectively i.e. the hardship caused to the particular builder and objectively i.e. the nature and extent of the hardship must be unreasonable in the circumstances in which it occurs. The Court of Appeal endorsed these findings.

17. [17]
    Mr Rosa addresses these separate factors in conglomerate fashion. He submits that ‘The applicants have admitted that they were in charge of the contract’. And further that:

Some variations were required because without them the works would not have achieved certification; this was not because of fault of [Mr Rosa] but rather because of the poor architectural plans. By making verbal requests to vary the contract the [Hunterlands] waived the requirement for variations to be in writing, and promised to pay [Mr Rosa] the reasonable cost of the variations in accordance with [Mr Rosa’s] costings. It was agreed that as contract administrator the [Hunterlands] were to prepare the relevant variations documents for the parties to sign and [Mr Rosa] was to prepare costings of the variations.

18. [18]
    The Tribunal does not accept Mr Rosa’s argument in relation to the alleged arrangement for preparation of variation documents.  Firstly, it was Mr Rosa who held the builder’s licence, and as such, he cannot discharge the responsibilities that flow from that.  One of those responsibilities is to put variations in writing.
19. [19]
    Even if Mr Rosa could discharge these responsibilities to the homeowners, the Tribunal does not accept that there was any such arrangement in place.  There is no written documentation of any such arrangement, and the evidence at hearing from the Hunterlands was that there was no such arrangement.  Given that it is Mr Rosa who alleges a practice that departs from the normal arrangements whereby the licensed builder should prepare the variation documents, the Tribunal does not accept that Mr Rosa has established the arrangements were to the contrary.
20. [20]
    As a consequence, it is difficult to then see how there are exceptional circumstances that warrant an order in Mr Rosa’s favour.
21. [21]
    As to whether Mr Rosa would suffer unreasonable hardship were an order not made in his favour, he has not explained, beyond a mere assertion, that he will experience hardship.  The Hunterland’s assert, and a licence search of the Queensland Building and Construction Commission database reflects that Mr Rosa has a record that includes demerit points, infringement notices, and directions to rectify.  He surrendered his licence on 18 October 2012. The Hunterland’s Application was filed in the Tribunal on 31 July 2012. They assert that he surrendered his licence to escape the QBCC’s net, as he may otherwise have been prosecuted. 
22. [22]
    The Tribunal cannot draw any inference from this, save to say that at some point relatively soon after the application was filed, Mr Rosa elected not to remain in business in Queensland.  Therefore, it is difficult to see, in the absence of detail from Mr Rosa, what the hardship to him is if he does not recover sums from a project that predates his decision to cease operations.
23. [23]
    The only unreasonable hardship that Mr Rosa has established here is in relation to additional costs to complete work that was required for certification.  The Tribunal accepts that in these limited circumstances, it would not be unfair to the Hunterlands to order them to pay for amounts that were required to complete the structure, as opposed to amounts that relate to the design elements of the dwelling.  In this respect, because they would have always needed to incur these costs (as opposed to matters that they had choice in relation to), it would create an unreasonable hardship to Mr Rosa to pay for these sums.
24. [24]
    The specifics of the variation claims are addressed below.

Variation 32

25. [25]
    Variation 32 relates to the scaffolding on the site. Mr Rosa claimed that there were additional scaffolding costs, as the Hunterlands required the scaffolding to remain on site so that they could paint the exterior off the works. The evidence from the architect, Ms Hogarth, was that the Hunterlands worked:

Pretty much to the deadline that they had to get it [the painting] done; however, the scaffolding did stay up longer than after the painting was done, although I don’t know why. It might – it might have been wet weather for all I know, or some delay with the subcontractor. I – n – my recollection is that the painting was done weeks before the scaffolding came down.

26. [26]
    Having accepted Ms Hogarth’s evidence, as an independent witness, Mr Rosa’s claim in relation to variation 32 must fail.  He has not established that he will suffer unreasonable hardship, and in circumstances where the scaffolding company was his subcontractor and he was responsible for communication to them, it would be unfair to require the Hunterlands to pay an additional sum for this when the evidence is that the scaffolding was up longer than it needed to be.

Variation 33

27. [27]
    Variation 33 relates to angles and sleeves installed under the shower. In his submissions, Mr Rosa explains that:

Angels [sic] and sleeves are elements which are put into the concrete under the tiles to allow for expansion of the concrete which occurs with temperature fluctuation. However, the plans did not make allowance for the inclusion of the angels [sic] and sleeves. However, the respondent’s subcontractor advised the respondent that they be included. The applicants were notified of this requirement.

28. [28]
    There was no evidence before the Tribunal about why this work was not something which was contemplated within the original scope of work, and for which there should have been a variation. There is no Provisional Sum or Prime Cost Allowance item referable to this work within the contract; yet the plans contemplate installation of a bathroom. The Quantity Surveyor’s costing of this variation was $700.70. There is no evidence before the Tribunal indicating why, beyond Mr Rosa’s mere assertions, that this work was not merely part and parcel of the contract in the main. There is no evidence explaining how Mr Rosa would suffer unreasonable hardship were he not to recover this sum, in circumstances where it appears that such work may well be within the scope of installation of the bathroom that the plans required.

Variation 34

29. [29]
    Variation 34 seeks to recover the costs of extra concrete (and labour) required to reinforce the concrete piers supporting the front porch. Mr Rosa says that the concrete piers were originally installed with dimensions of 600mm deep by 200mm diameter. However, upon inspection by the engineer for certification, he was told that the concrete piers had to be reinforced by increasing the size of the piers. Mr Rosa says that this requirement was not clear to him he entered into the contract, and that the variation was necessary. 
30. [30]
    The Tribunal accepts that Mr Rosa was required to increase the concrete, and that this cost would have been incurred at whatever point in time he became of it. In these circumstances, it would be unreasonable and create hardship to him to not allow recovery of this additional cost. The Tribunal accepts the costing provided by the quantity surveyor, Mr Spencer, of $1,033.31, and will award this figure to Mr Rosa.

Variation 35

31. [31]
    Variation 35 relates to the painting/staining and finish of wood on the internal staircase. Mr Rosa says that the Hunterlands requested that he vary the material used to complete this aspect of the works, and that there were additional costs of applying a veneer overlay and stained finish.
32. [32]
    Mr Rosa has not, for the reasons explained earlier, established exceptional circumstances or unreasonable hardship. It would be unfair to the Hunterlands to require them to pay this additional sum in circumstances where they did not have the opportunity to consider the additional costs Mr Rosa now claims, before the work was complete.

Variation 36

33. [33]
    Variation 36 relates to the extension of the roof and the extension of the guttering to match the roof. Mr Rosa says the plans for the works included an extension of the main roof, but did not provide for the guttering to be extended. Mr Rosa says that there was no requirement to extend the guttering, but that the Hunterlands asked him to.  In view of this, it cannot be said that completion of this work was required for certification or completion of the dwelling, and as such, the Tribunal concludes that Mr Rosa has not established exceptional circumstances or unreasonable hardship.

Variation 37

34. [34]
    Variation 37 relates to the reuse of the existing external stairs, as called for by the plans.  Mr Rosa assets that the old stairs were unsafe, full of wood rot, and could not be reused.  It was always necessary for the dwelling to have stairs. In such circumstances, the Tribunal considers that it would create unreasonable hardship for Mr Rosa to bear the costs of the new stairs, costed by Mr Spencer at $1,096.94, and awards Mr Rosa this sum.

Variation 39

35. [35]
    Variation 39 relates to the installation of a front door lock, the plans calling for a new front door. Mr Rosa says that the Hunterlands instructed him to use the door he ordered elsewhere, and to reuse the old door with its existing lock. Mr Rosa says that lock malfunctioned. Mr Rosa has not established unreasonable hardship or exceptional circumstances in relation to this claim. The Hunterlands should have been told of the extra costs before the variation was incurred.

Variation 40

36. [36]
    Variation 40 relates to the constructions and installation of new aluminium window screens. Mr Rosa says that the Prime Cost Items Schedule reflects the cost of security screens as being $200.00 per unit. He says this amount was calculated on the basis of labour only to remove and then refit the existing six aluminium frames. He also says that only three frames could be reused, and that the costs of the additional materials to construct new screens was not included in the estimate. The Tribunal does not accept that the Hunterlands would have understood that this sum was to merely refit existing screens. It was not necessary for screens to be installed in order to complete the dwelling. Mr Rosa has not established unreasonable hardship or exceptional circumstances in relation to this claim.

Variation 41

37. [37]
    Variation 41 relates to a new aluminium pool fence that was required. Mr Rosa says that the plans required a fence to be constructed, but were not drawn correctly and more fencing was required.  Mr Spencer has costed the additional fencing at $971.34.  As it would always have been necessary to appropriately fence the pool, which Mr Spencer’s costings indicate this fencing was part of, the Tribunal considers that it would create unreasonable hardship to Mr Rosa for him to bear this cost.  The Tribunal awards $971.34 to Mr Rosa for the fencing.

Summary

38. [38]
    The Tribunal considers that Mr Rosa has established entitlement to the following sums:

Variation 34 - $1,033.31

Variation 37 - $1,096.94

Variation 41 - $971.34

Total award to Mr Rosa = $3,101.59

39. [39]
    The Tribunal accepts that the approach taken by Member Deane in Sun Building Services Pty Ltd v Minh & Anor [2015] QCAT 134 in relation to interest is correct.  That is, there is no entitlement to interest on amounts payable for variations as at the date of this decision. Member Deane explained:^[5]

Under the QBCC Act⁴³ the Tribunal has power to award interest on moneys owing under a progress payment. The entitlement under the DBC Act to any sum only arises upon the making of this decision and is not moneys owing under a progress payment. In any event, no entitlement to interest arises for any period prior to the making of this decision because there was no amount owing prior to the making of the decision.

⁴³ QBCC Act s 67P.

Orders

1. The Applicants, Vicky Hunterland and Jane Hunterland, pay the Respondent, John Rosa, the sum of $3,101.59 no later than 28 February 2017.