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Ian Perkins & Kylie Perkins v Queensland Building and Construction Commission & Platinum Construction Solutions Pty Ltd[2017] QCAT 283

Ian Perkins & Kylie Perkins v Queensland Building and Construction Commission & Platinum Construction Solutions Pty Ltd[2017] QCAT 283

CITATION:

Perkins & Anor v Queensland Building and Construction Commission & Anor [2017] QCAT 283

PARTIES:

Ian Perkins

Kylie Perkins 

(Applicants)

v

Queensland Building and Construction Commission  

(First Respondent)

Platinum Construction Solutions Pty Ltd

(Second Respondent)

APPLICATION NUMBER:

GAR043-16

MATTER TYPE:

General administrative review matters 

HEARING DATE:

9 and 10 March 2017 

HEARD AT:

Brisbane

DECISION OF:

Member Traves

DELIVERED ON:

21 August 2017

DELIVERED AT:

Brisbane

ORDERS MADE:

  1. The decision of the QBCC to disallow the claim under the statutory insurance scheme be set aside.
  2. It is declared that the contract was properly terminated in accordance with clause 27 of the policy.
  3. The parties be at liberty within 14 days thereof to make submissions as to costs.

CATCHWORDS:

CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – THE CONTRACT – GENERAL CONTRACTUAL PRINCIPLES – REPUIDATION - whether contract “properly terminated” within the meaning of the policy – whether builder had repudiated the contract – whether demand for progress payments premature – whether builder wrongfully suspended works – whether provisional sums not due and owing at the time works suspended

Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 20, s 42

Queensland Building and Construction Commission Act 1991 (Qld), s 71, s 72, s 86, s 87

Cardona v Brown [2012] VSCA 174

Carr v JA Berriman Pty Ltd (1953) 89 CLR 327; [1953] HCA 31

DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; [1978] HCA 12

Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; [2007] HCA 61

Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; [1989] HCA 23

Maples Winterview Pty Ltd v Liu [2015] ACTSC 58

Nina’s Bar Bistro Pty Ltd v MBE Corporation (Sydney) Pty Ltd [1984] 3 NSWLR 613

Wesiak v D & R Constructions (Aust) Pty Ltd [2016] NSWCA 353

APPEARANCES:

 

APPLICANTS:

Mr Peter Somers, Counsel for Ian and Kylie Perkins

RESPONDENTS:

Mr Earl Tan, Senior principal lawyer, Queensland Building and Construction Commission Mr Jim Feehely, Jim Feehely Project Law, for Platinum Construction Solutions

REASONS FOR DECISION

Introduction

  1. [1]
    Ian and Kylie Perkins entered into a domestic building contract with Platinum Construction Solutions Pty Ltd (PCS) on 17 February 2015 for the renovation of their home at Camp Hill. The contracted works were not completed and on 27 November 2015 the Perkins lodged a complaint with the Queensland Building and Construction Commission (QBCC).
  2. [2]
    The Perkins purported to terminate the contract on 23 November 2015.
  3. [3]
    The QBCC treated the complaint as a claim on the Queensland Home Warranty Scheme and forwarded it to its Insurance Department for assessment. The claim was, however, rejected on 19 January 2016.
  4. [4]
    The Perkins have now brought an application in the Tribunal to review the decision by the QBCC to refuse their claim under the scheme. This is a reviewable decision pursuant to s 86(1)(h) of the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act).
  5. [5]
    The reason the claim was refused was because the QBCC took the view that the contract entered into between the Perkins and PCS had not been “properly terminated” by the Perkins and that this was a pre-condition to recovery under the scheme.
  6. [6]
    If the contract had been properly terminated and the claim allowed, the QBCC would be entitled to recover the amount paid pursuant to the scheme as a debt from PCS.[1] As a consequence, PCS had been joined to the proceedings prior to the Hearing as a person whose “interests may be affected” by the Decision.[2]

The issue

  1. [7]
    The purpose of the Tribunal’s review is to produce the correct and preferable decision.[3] Whether the decision to reject the claim is the “correct and preferable” one depends upon whether the contract was properly terminated within the meaning of the scheme. This involves consideration of two further issues:
    1. Whether PCS repudiated or renounced its obligations under the contract;
    2. Whether, if it did, the Perkins were in a position to terminate the contract, and whether the Perkins did so.

What does “properly terminate” mean?

  1. [8]
    Part 5 of the QBCC Act deals with the statutory insurance scheme. It gives the Board the power to approve the terms of an insurance policy which is to comprise the home warranty scheme. The version of the policy that applies is the policy that was in existence at the time the contract was entered into. 
  2. [9]
    When the relevant building contract was entered into, on 17 February 2015, the relevant policy was Insurance Policy Conditions – edition 8 (the Policy) which took effect on 1 July 2009 when it was published in the Queensland Government Gazette.[4]
  3. [10]
    The Perkins claimed under Part 1 of the Policy for loss suffered as a result of the failure by PCS to complete the contracted building work.
  4. [11]
    Clause 1.1 provides:

Subject to the terms of this policy, the QBCC agrees to pay for loss suffered by the Insured in the event of the contractor failing to complete the contract for the residential construction work.

  1. [12]
    However, clause 1.2 provides:

The QBCC is only liable to pay for loss under this Part when the contract is for a fixed price and the insured has properly terminated the contract with the contractor.

  1. [13]
    “Fixed Price” is defined to mean a price which is certain, except for the effect of provisional costs or sums, prime costs or sums, variations and any cost escalation clause.[5] The parties agreed that this was a fixed price contract. The contract price was $321,200.
  2. [14]
    “Properly terminated” is defined to mean:

“lawfully under the contract or otherwise at law, upon the contractor’s default which extends to, but is not limited to:

  1. (a)
    the cancellation or suspension of the contractor’s licence; or
  2. (b)
    the death or legal incapacity of the contractor, or
  3. (c)
    the insolvency of the contractor; or
  4. (d)
    any breach of the contract by the contractor (emphasis added).[6]
  1. [15]
    Termination can therefore be in accordance with the procedure set out in the contract or otherwise according to law. It can stem from the contractor’s default which extends to “any breach” of the contract by the contractor.

Did the Perkins terminate under the contract?

  1. [16]
    In order to have terminated under the contract, the Perkins needed to comply with clause 27 of the contract. This clause required the following:
    1. A substantial breach by the contractor (as defined by clause 27.1);
    2. A notice to be given to the contractor which:

    i) Specified the breach;

    ii) Directed it be rectified within 10 working days; and

    iii) Stated that if not rectified, that the owner intends to end the contract (clause 27.3)

  2. [17]
    If rectification work has not commenced or been completed within 10 working days the owner may end the contract by giving a second, separate notice (clause 27.4). Neither party is permitted to give a notice to remedy breach while that party is in substantial breach of the contract. A notice given in such circumstances will be ineffective (clause 27.7).
  3. [18]
    On 9 November 2015 the Perkins (by their solicitors) emailed a written notice to remedy to the contractor which identified alleged substantial breaches, namely, demanding payment for works that had not yet been completed and delay. Clause 30 provides that a notice is deemed to be given and received if the notice is emailed to the party’s current email address.
  4. [19]
    On 23 November 2015, the Perkins purported to terminate the contract.
  5. [20]
    The Perkins should have given their notice purporting to terminate on 24 November 2015. The notice given on 23 November was not given in compliance with clause 27.4 because it did not allow 10 working days for the rectification work to commence. The notice was sent on the 10th working day after the notice was given. This meant the contractor was deprived of the 10th working day within which to commence or complete the rectification work.
  6. [21]
    I find, accordingly, that the contract was not “properly terminated” in accordance with the contract.

Did the Perkins terminate at law?

  1. [22]
    Clause 27.9 of the contract expressly maintains the power of either party to terminate the building contract under general law and to do so independently of the specific procedure set out in that clause. It provides:

If a party breaches (including repudiates) this contract, nothing in this Clause prejudices the right of the other party to recover damages or exercise any other right or remedy.

  1. [23]
    Under general law, a party has a right to terminate the contract and claim damages if:
    1. The other party has renounced his or her liabilities under it in the sense that there is no longer an intention to be bound by it or to fulfil it only in a manner substantially inconsistent with the party’s obligations (repudiation); or
    2. Where a breach of contract by the other party justifies termination.[7] A breach of contract will justify termination either where the obligation breached was agreed to be essential (sometimes described as a condition) or where it was a sufficiently serious breach of a non-essential term.[8]
  2. [24]
    The test for repudiation is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, unwillingness or inability to perform either the contract as a whole or a fundamental obligation under it.[9] The focus is on the conduct or attitude of the party alleged to have repudiated. That party will be seen to have repudiated the contract if he or she has evinced an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with his or her obligations[10] or only ‘if and when it suits’.[11]
  3. [25]
    It is not necessary for the repudiator to make plain that he or she will never perform his or her contractual obligations at all. Renunciation can exist where there has been “persistent procrastination” by one party of the performance of its obligations or “shilly-shallying” to the point where it is reasonable to infer that the party does not take the contract seriously.[12] 
  4. [26]
    Repudiation can be found in a combination of breaches which, on their own, would not be enough to justify termination by the aggrieved party.[13]
  5. [27]
    In assessing whether conduct can be characterised as repudiatory, the civil standard of proof applies.[14] However, the repudiation of a contract has been said to be a serious matter, not to be lightly found or inferred.[15] As  Kirby J observed in Koompahtoo:

The principle that parties should ordinarily fulfil their contractual obligations not only underpins the law of contract, but comprises a basic assumption on which our society and its economy and well-being depend. It would be destructive of that assumption of one of the parties to an agreement could terminate it with relative ease. It is for that reason that strong grounds are needed to support unilateral termination of a contract.[16]

  1. [28]
    Terminating a contract is a two stage process. If the contract has been repudiated the repudiation must then be “accepted” by the other party. This is what brings the contract to an end.
  2. [29]
    It is not necessarily fatal for a party to rely on an invalid ground for terminating provided a valid ground existed at the time.[17] There is a risk, however, that a party who attempts to terminate on an incorrect ground may be seen to have repudiated the contract or at least not be ready and willing to perform it.[18] 
  3. [30]
    In this case the Perkins served a notice to terminate which, under the contract, was invalid. It has been held that service of an invalid notice to terminate in circumstances where termination is otherwise justified does not constitute repudiation.[19]
  4. [31]
    If the contract has been repudiated the repudiation must be “accepted” by the other party. This brings the contract to an end. Communication of an election to terminate is normally essential.[20]
  5. [32]
    A party is not able to terminate if, at the time of termination, it is itself in breach of an essential term or has itself repudiated.[21]
  6. [33]
    The grounds relied upon by the Perkins as constituting repudiation are:
    1. Claiming payment for building work for stages not yet complete;
    2. Claiming payment for sums over the amount of provisional sum allowances for electrical and painting not in accordance with the requirements of clause 20;
    3. Claiming for additional painting works as an increase in the provisional sum when it was outside the scope of works and therefore should have been treated as a variation under clause 19;
    4. Unlawfully suspending the works on 11 November 2015;
    5. Requesting payment for stages before five working days had elapsed after issuing the invoice for the progress payment, in breach of clause 4.5 of the contract; and
    6. The delay in completing the works in the time required by the contract.
  7. [34]
    In order to consider whether the Perkins were able to rely on those grounds in order to terminate the contract it is necessary to set out the course of events concerning the contract and its performance.

The course of events

  1. [35]
    Work commenced on the site on 25 February 2015. Clause 3.1 provided that work was to be completed in 126 days, by 1 July 2015. At the time the Perkins served the Notice to Remedy Breach on 9 November 2015, the building period was 257 days, more than twice that specified in the contract.
  2. [36]
    On 2 November 2015 Mr Smith sent Mr Perkins the following text message:

Hi Ian I will give you a call tmro to discuss where to from here. It’s pretty clear that we will never agree on anything so let’s stop trying. I am going to work out a way to resolve this so we can terminate the contract and you can move in and we can move on with clients that we can work with.

  1. [37]
    This was followed by a lengthy email from Mr Smith to Mr Perkins on 3 November 2015 with the subject: Moving Forward! The email provides, relevantly:

I have spoken with the HIA in regards to the fractured relationship that has been evident virtually the whole way through this project, principally due to your constant interference with both the progress of the building strategy and the people appointed by myself to conduct the work as per the building contract.

HIA has advised me to inform you of your obligations in regards to Provisional sums within the contract and to attempt to work out a resolution to achieve mutual agreement and to allow both parties to move forward.

I believe the one thing we both agree on is that it hasn’t worked in a satisfactory manner and that enough is enough!

  1. [38]
    The email then set out a calculation which was said to represent the amount owed to the builder. It began by outlining the sums said to be owing for stages under the contract ($56,360) and the sums said to be owing for prime costs and provisional sums ($27,029.04). These were added together to arrive at a total of $83,389.04. From this was deducted an amount for provisional sums that had not been incurred ($45,925.95) leaving a total of $37,463.09. From this figure a further deduction was made of an amount representing an amount for work still to be completed ($15,676) leaving a revised “total amount outstanding to the builder” of $21,787.09.
  2. [39]
    The Perkins argue that the email of 3 November 2015 demanded payment from them for work that had not yet been completed.
  3. [40]
    The Perkins sent a Notice to Remedy Breach to Platinum on 9 November 2015. In that letter the two main complaints raised against the builder were in demanding payment for works not competed in accordance with the customised progress payment table and delay. The notice also referred to the email from PCS of 3 November 2015 which in their view demanded payment from for work not yet completed and contained “a tacit refusal to complete the contracted works and a request for termination of the contract.” This was relied on as a further repudiation of the contract.
  4. [41]
    The remedy sought by the notice was for PCS to complete the contracted works to a reasonable standard and free from defect and for delay damages to be paid in the sum of $6,450.
  5. [42]
    This was responded to by the solicitors for PCS on 11 November 2015. That letter stated that PCS was not in breach. The letter demanded the sum of $32,229.04 for work performed by PCS in excess of the provisional sum items for electrical and painting. The letter then provided:

PCS gives your clients notice under clause 18.1 that it will suspend the works until the outstanding amount of $32,229.04 is paid. PCS have not claimed any money to which it is not entitled.

  1. [43]
    In relation to the issues raised by the notice to remedy, the letter stated:

You (sic) purported notice of breach and declaration of intention to terminate the contract in circumstances where PCS is not in breach and your clients are constitutes a clear repudiation of the contract. PCS reserves its rights in respect of that repudiation.

  1. [44]
    This was followed by a notice of termination by the Perkins on 23 November 2015.

Did PCS repudiate or renunciate the contract?

  1. [45]
    For the reasons below, I find that PCS repudiated and renunciated the contract in a manner which permitted Perkins properly to terminate the contract. I so find because PCS on or about 11 November 2015 wrongfully suspended work on the contract. Its purported reliance on clause 18 was ill-founded. While the mistaken reliance on a contractual term will not necessarily amount to a renunciation or repudiation, I find, in all of the circumstances, that it did so.
  2. [46]
    Its purported suspension of work evinced objectively the intention no longer to perform the contract. That this was, objectively, the builder’s intention finds corroboration in the correspondence of 2 November and 3 November 2015, albeit, at that time, the intention was not so unequivocally expressed.
  3. [47]
    Perkins relied upon a number of grounds as repudiation and I will now address in more detail the following conduct of PCS:
    1. Claim for payment for stages not yet complete;
    2. Significant delay; and
    3. Invalid suspension of works by letter dated 11 November 2015.

i) Claim for Stages when work required by those Stages not complete

  1. [48]
    A great deal of time in the case was spent exploring whether PCS claimed by way of demands for progress payments and accepted amounts which were not then due and owing. For the reasons below, I find that was the case. However, although this did, in my view, amount to breaches of the contract by PCS, the breaches were not acted upon and the contract proceeded. The claims made in advance of the amount due do, in my view, demonstrate why, by the renunciation of the contract by PCS in November 2015, the amounts owing under the contract were exceeded by the value of the work still to be done. Strictly, the fact that payments were ahead under the contract is irrelevant to my determination: I would find PCS renunciated the contract irrespective of that finding. It does, however, provide some context to the decision of PCS to suspend work, and hence I set out my reasoning below.  
  2. [49]
    One of the main points of dispute between the parties was whether PCS had demanded payment for Stages in respect of which the work required by that Stage was incomplete. In determining whether PCS was entitled to the progress payments it received it is essential to understand what it was required to have done by each Stage.
  3. [50]
    In the case of stage payments it has been held that there is no scope for the application of any theory of substantial performance, excluding trivial failures or failures borne of impracticalities.[22] The approach has been described as a relatively strict one which only requires progress payments to be made where non-compliance with the documented requirements for that stage is “purely trivial” and, while “extreme exactitude” is not envisaged, “effective and satisfactory completion” of the stage is required.[23] The strictness of this approach could be addressed by alternative drafting such as existed in the contract considered in Hometeam Constructions Pty Ltd v McCauley[24] which imposed an obligation to make a progress payment for the “substantial completion” of each stage.
  4. [51]
    Clause 4 deals with how payment for the works is to occur. It provides, relevantly:

4. Progress Payments

4.1 The owner must pay the contract price adjusted by any additions or deductions made under this contract progressively at each stage.

4.3 The contractor must give the owner a written claim for a progress payment for the completion of each stage.

4.4 A progress claim is to state:

(a) the amount claimed for the stage;

(b) the amount of any addition or deduction for variations;

(c) the amount of any addition or deduction due to a prime cost item or provisional sum item;

(d) the amount of any other addition to or deduction from the contract price made under this contract; and

(e) the sum of the above amounts.

4.5 The owner must pay a progress claim to the contractor within 5 working days of receiving the progress claim.

4.8 Other than in relation to the final claim:

(a) payment of a progress claim is on account only; and

(b) the owner has no right of set off.

  1. [52]
    “Stage” is defined in clause 37.1 to mean the relevant stage as described in schedule 2. The parties adopted a customised progress payment schedule permitted by Part B.
  2. [53]
    The Table identifies 10 stages. Progress claims were made for the first 8 stages, including, relevantly:
    1. “site set out and footings complete” stage issued on 27 March 2015;
    2. “roofing complete” stage issued on 6 June 2015;
    3. “electrical and plumbing rough in complete” stage issued on 4 August 2015;
    4. “internal carpentry fit out complete” stage issued on 16 September 2015. 
  3. [54]
    In Schedule 1, clause 4 the works are described as follows:

Extend and renovate the existing timber home using the following documents:

1. Platinum Construction Solutions Pty Ltd tender document dated 11.2.2015

2. Architectural plans provided by the Focon Group

3. Engineering plans provided by the Focon Group.

  1. [55]
    The building contract by clause 4 incorporated, as having contractual effect, the terms of the tender document. I have had recourse to the tender document in determining what each stage contemplated by the contract would cover. Although the headings in the tender document do not always match the Stage name in the contract, the documents together provide the  basis for determining what must be completed. The expert evidence by Mr Davies and Mr O'Shannessy who gave opinions at the hearing as to the objective interpretation of work required by each stage was also of assistance.
  2. [56]
    The Stages are clearly sequential (for obvious reasons) and together comprise the entirety of the contracted works. The stages are:

1. Demolition of back deck and skillion roof section

2. Site set out and footings complete

3. Sub floor complete

4. Roofing complete

5. Internal demolition complete

6. Electrical and plumbing rough in complete

7. Walls and ceilings sheeted

8. Internal carpentry fit out complete

9. Bathroom tiled and kitchen cabinetry installed

10. Practical completion

  1. [57]
    Stage 2 called Site set out and footings complete covered the footings required for the block fence. The fence was referred to in the tender document as follows:

Front fence with block work and electric gate

  • Contract earthworks company to dig footings required as per engineering plans
  • Install all steel required for footings, pour and finish using 25MPA concrete
  • Supply and install all block work to create front fence as per client design
  • Contract company to render all block work prior to installation of powder coated panels
  • Platinum carpenters to construct timber work for entry gate house as per client design
  • Supply and install all fence panels, gate and motor using Provisional Sum 2 as an allowance.
  1. [58]
    Of the items required for construction of the fence, the experts agreed that the digging of footings and the installation of steel and concrete in those footings was required to be completed by stage 2. I agree.
  2. [59]
    The evidence established that the footings for the fence had not been completed.[25] Trenches were dug, but reinforcing steel and concrete was not installed.
  3. [60]
    Stage 4 Roofing complete is not referred to in the tender document.
  4. [61]
    Both Mr Davies and Mr O'Shannessy gave evidence that PCS failed to install downpipes for the new area of the roofing. This item was complaint number 18 in Mr Pullar’s report.
  5. [62]
    Both experts were of the view that the work fell within the roofing stage. I agree. If however if it fell within Stage 6 as plumbing work, a claim for plumbing rough in was made on 4 August 2015. In either case the work was incomplete when the relevant progress claim was made.
  6. [63]
    The effect of a failure to install a downpipe was considered in the context of a claim for a progress payment in Maples Winterview Pty Ltd v Liu.[26] There it was held:

In my view, while the failure to install a downpipe is something which can practically be remedied after practical completion, it is an item of such significance that it cannot be said that the stage which requires its fitting is substantially complete. It is an item specifically mentioned in the description of the stage and not a minor defect or omission.[27]

  1. [64]
    In Maples the court held that the entitlement to payment of a later stage was dependent upon completion of each earlier stage.[28] As the court had found that a previous stage, namely the sub floor stage was incomplete due to a failure to install insulation, it did not need to rely on the failure to install the downpipes.
  2. [65]
    In relation to Stage 5 Internal carpentry fit out complete, the evidence of the Perkins was that this was incomplete due mainly to the failure to install skirtings and balustrades.[29] On balance I find that was the case. Mr Smith gave evidence on behalf of PCS to the effect that the skirting was not installed at the time the progress payment claim was made due to a late decision by the Perkins to change the proposed floor covering from tiles to a floating timber floor. Mr Smith said that the polishing of the timber floors, extra skirting required due to the installation of the timber floor or due to rain damage was not covered by stage 5. If, contrary to my finding above, the extra skirting constituted a variation, it would not change my ultimate conclusions in the case because, as I have found below, the claiming by PCS of payments for stages 2, 4 and 8 did not constitute repudiatory conduct.
  3. [66]
    The Perkins alleged that Stage 6 Electrical and Plumbing Rough In Complete was also incomplete. The tender document states under the heading Electrical:
  • Disconnect and make safe existing wiring
  • Supply and install all light switches, power points, lights and fans.
  1. [67]
    I am unable to conclude based on the evidence whether the electrical work covered by the contract was completed prior to the claim for the relevant progress payment being made. 
  2. [68]
    The Perkins alleged that live wiring was exposed in the roof cavity and that an electrical inspector had directed it be attended to. The evidence from the electrical sub-contractor engaged by PCS was that all electrical work completed by him was tested upon its completion in accordance with AS3000 and that the test results were left on site.[30]
  3. [69]
    I have also had regard to the Table tendered at the hearing that lists the claim stages and adjacent to each lists the incomplete items as identified in Mr Pullar’s report that are relevant to that stage.[31] The Table was prepared on the basis of the expert evidence of Mr Davies and Mr O'Shannessy as to what stage was relevant to which incomplete items.
  4. [70]
    In conclusion, I am satisfied on the evidence that claims were made for progress payments for Stage 2, Stage 4 and Stage 8 before the work required by those stages was complete. That said, the work which I find had not been completed in each of these stages was relatively insignificant. While it may have provided a basis for the Perkins to refuse to pay the progress claims they did not do so. In all of the circumstances, I find that the issuing of the progress claims was not, at the time of termination, a repudiation of the contract.

ii) Extensive delay in completing the works

  1. [71]
    The Perkins argue that PCS repudiated or renunciated the contract by reason of the substantial delay in performance.
  2. [72]
    Work commenced on the site on 25 February 2015. Clause 3.1 provided that work was to be completed in 126 days, by 1 July 2015. At the time the Perkins served the Notice to Remedy Breach on 9 November 2015, the building period was 257 days, more than two times that specified in the contract. A build expected to take 4 months was, at over 8 months from commencement, still incomplete.
  3. [73]
    Mr Smith of PCS argued that the Perkins caused the delay by their conduct in making late payments, failing to give PCS exclusive possession until 1 June 2015 and being dilatory in their selection of a kitchen.
  4. [74]
    The Perkins were 30 days late in making a payment early on in the contract.  Mrs Perkins had been waiting for an inheritance which she intended to use to fund the renovation work. Although the Perkins signed an unconditional contract, Mrs Perkins told Mr Smith prior to entry into the contract that her ability to pay was dependent upon an inheritance she was expecting. Mr Smith understood that the timing of this was outside her control. I find that Mr Smith was prepared to proceed with the contract notwithstanding the possibility of late payment because he was anxious to secure the contract. I find that he acquiesced in the late payment by the Perkins and that there was insufficient evidence which established that late payment caused delay.
  5. [75]
    In relation to the failure by the Perkins to give exclusive possession to PCS as soon as practicable after the contract in accordance with clause 10.1, I find that Mr Smith by his conduct waived compliance with this requirement.
  6. [76]
    I accept that the Perkins and the kitchen designer both contributed to the delay in finalisation of the design for the kitchen. I am not satisfied, however that this delay, which occurred towards the end of the construction, was a cause of the overall delay in completion of the contracted works.
  7. [77]
    PCS gave evidence that it was requested by the Perkins to perform extra electrical work which, in turn, required extra painting.[32] This resulted in a claim for additional amounts for both the electrical work and painting work.[33]  I find that extra work was performed and that this contributed to delay.
  8. [78]
    The contract permits an extension of time where the carrying out of the works are delayed by a claimable delay.[34] However, in order to take advantage of the extension provision, PCS needed to give written notice of the extension of time to the Perkins.[35] This it did not do.
  9. [79]
    In considering whether delay in these circumstances constituted repudiation by PCS it is necessary to consider the significance of the date fixed for completion and whether the conduct by PCS otherwise was dilatory so as to show a repudiation of the contract.
  10. [80]
    It has been observed that only in the most exceptional circumstances will the courts hold time to be of the essence in a building contract and that the existence of provisions for extension of time and delay damages clauses will generally be regarded as inconsistent with an intention that time is of the essence.[36]
  11. [81]
    Here, even if the Perkins could have terminated for delay when the date for completion came and went, they elected to continue with the contract. No notice was given after the completion date by the Perkins setting a reasonable time for completion. If there had been non-compliance with such a time limit there may have been grounds for termination on the basis of delay.[37] However, in the circumstances, delay was not a ground for termination.

iii) Invalid suspension of works

  1. [82]
    Clause 18 of the contract provides:

18. Suspension of works

18.1 The contractor may by written notice to the owner suspend the carrying out of the works if:

  1. (a)
    the owner does not pay a progress claim as required by Clause 4;
  1. (b)
    the owner does not give the contractor evidence, satisfactory to the contractor, of the owner’s capacity to pay the balance of the contract price when requested by the contractor under subclause 7.3;
  1. (c)
    the owner enters the site in breach of Clause 10;
  1. (d)
    the owner does not give an instruction within 5 working days of becoming aware of a problem under Clause 13;
  1. (e)
    the contractor gives written notice of unforeseen circumstances under Clause 15 and the owner fails to agree to a variation within 5 working days of receiving the contractor’s request;
  1. (f)
    the owner objects to the contractor’s selection of a substitute prime cost item in accordance with Clause 20;
  1. (g)
    the owner or the owner’s contractors when supplying materials or goods or carrying out any work breach the requirements of Clause 23;
  1. (h)
    the owner takes control of, possession of or uses the works or any part of the works without the contractor’s written consent, prior to payment of the final claim;
  1. (i)
    any dispute or difference between the owner and contractor has been referred for determination to the Queensland Civil and Administrative Tribunal under Clause 36; or
  1. (j)
    the owner is otherwise in breach of this contract.
  1. [83]
    On 11 November 2015 PCS gave notice that it was suspending works pursuant to clause 18 because of the failure by the Perkins to pay $32,229.04 for additional electrical and painting works.
  2. [84]
    There are a number of points I wish to make about the letter of 11 November 2015. First, it purported to rely on clause 18, which set out particular circumstances in which the builder may suspend works. Secondly, it demanded a sum of $32,229.04, which was more than the sum referred to in the email of 3 November 2015, which stated that the total sum owing for PS5 and PS6 for electrical and painting was $27,029.04 and, thirdly, the letter did not comply with clause 20.9 of the contract which requires the contractor to give to the owner evidence of the cost of the prime cost items or provisional sum items when claiming payment for those sums. For the reasons below, the letter in its context constituted a repudiation by the builder of its obligations. The builder wrongly relied upon clause 18; asserted that an amount was owing without providing the requisite evidence in accordance with clause 20.9; did so in circumstances where the sum was significantly different from an amount identified only days earlier as owing to the builder for those items; and refused to do any more work until the amount was paid. This was, in my view, a clear renunciation of the contract.
  3. [85]
    Clause 18 provides that the builder may suspend works on a number of grounds. The grounds potentially relevant include where the owner fails to pay a progress claim as required by clause 4 or where the owner is otherwise in breach of contract.   
  4. [86]
    The amount for excess in provisional work for electrical and painting had not been claimed as a progress claim during the course of the construction and, as discussed earlier, had not been properly calculated or claimed in accordance with clause 20. Under clause 4.4 a progress claim, relevantly, is to state the amount claimed for the stage, any amount for variations and the amount for any increase in a prime cost item or provisional sum and the sum of those amounts. Clause 20.8 provides that any adjustment to the contract price for a prime cost item or a provisional sum is due and payable with the progress payment in which the amount for that item is included. Clause 20.9 provides that the contractor must give the owner evidence of the cost of the prime cost item or provisional sum item when claiming payment for that item.
  5. [87]
    In this case, the first time the amount of $32,229.04 was claimed was on 11 November 2015, the very day works were suspended. Even if the letter of 11 November was regarded as a valid progress claim, the Perkins were entitled, pursuant to clause 4.5, to 5 working days to pay it. Further, as accepted by PCS, some of the claim for the provisional sum for electrical work should have been claimed as part of the invoice at Stage 6 Electrical and Plumbing Rough In and the balance at Stage 10 Practical Completion while the provisional sum for painting should have been included as part of the invoice for the Practical Completion Stage. This invoice could not be issued until the works for that stage had been completed, which they clearly had not. Finally, no evidence was provided as required by clause 20.9.
  6. [88]
    PCS therefore, by its letter of 11 November wrongfully purported to suspend work in reliance upon clause 18. By doing so, it repudiated the contract.

Was the termination ineffective because the Perkins were in breach of the contract?

  1. [89]
    I find for the reasons below that at the time the Perkins terminated the contract on 23 November 2015, they were not in breach of the contract nor were they repudiating the contract and hence were not prevented, thereby, from terminating the contract.
  2. [90]
    It is said against the Perkins that they did not give exclusive possession of the site to the builder until 1 June 2015; that they were late in making payments; and that they were late with the kitchen design. However, for the reasons below, such breaches of the contract committed by the Perkins in these respects no longer subsisted when they terminated the contract on 23 November 2015. Nor were any such breaches of such a nature as caused the breaches and/or renunciation upon which the Perkins were entitled to rely.[38]
  3. [91]
    For the sake of completeness I set out my reasoning concerning the allegations of breach by PCS.

i) Did not give PCS exclusive possession until 1 June 2015

  1. [92]
    The Perkins did not move out of their home until 31 May 2015. The contract was signed on 17 February 2015. Clause 10.1 required the owner to give to the contractor exclusive possession of the site as soon as practicable after the date of the contract.
  2. [93]
    On 27 February 2015 Mr Smith wrote to the Perkins. In that letter he states:

I hope you have moved forward with the finance and renting side of things as we are really keen to get started. (Even though I realise that you will be in the house for the first month or so). [Emphasis added].

  1. [94]
    On 2 March 2015 another letter from Mr Smith to the Perkins stated:

13th April we will be ready to commence work internally and can help you move any furniture required so we can take possession of the house.

  1. [95]
    On 27 April 2015 Mr Smith asked Mr Perkins to vacate the property so that they could begin the internal work while waiting for the trusses.
  2. [96]
    On 4 May 2015 Mr Smith wrote saying that from 18 to 22 May he would appreciate the move out starting to progress so that internal demolition could begin on 25 May. He also says “Please let me know if you think this is doable from your end”.
  3. [97]
    On 4 May Mr Perkins replied explaining that “now the unit is out of the way we have no other pre-requisite before getting out of the house”. He continued:

We did not (nor do not) have any emotional connection to staying in the house, it is just the enormity of the task of clearing everything out. It was not a case of not wanting to leave, but probably a case of procrastinating the large task at hand.

  1. [98]
    On 20 May Mr Perkins wrote saying:

Slow progress on the packing, but we are committed to moving out on the weekend. I think furniture moving will be a challenge tomorrow as everything will not yet be ready. I will have to scramble a plan to ensure we are not in your way.

  1. [99]
    Mr Smith replied the same day that if the moving was too much tomorrow that they could do it next week which would give them the weekend to get completely organised.
  2. [100]
    On 27 May Mr Perkins wrote to Mr Smith apologising for the surprise of the house not being empty and assuring him it would be done the next day.
  3. [101]
    On 3 June Mr Smith wrote saying:

Great news that the house is finally clear and we can move forward with the works so thank you the effort is appreciated.

  1. [102]
    The estimated completion date was 8-10 weeks from then.[39]
  2. [103]
    The material above demonstrates some delay on the part of the Perkins in granting the builder possession of the site. However, performance of the contract continued and both parties moved on. The contract was affirmed, and by the time of the repudiation and renunciation of the contract by PCS there was no complaint by PCS in respect of the then availability of the site.[40]
  3. [104]
    Accordingly, I find that the Perkins were not in breach of this term of the contract on or about 23 November 2015.

ii) Were late in making payments

  1. [105]
    There were some delays by the Perkins in paying progress payments. In the first few months of construction the delay was due to Mrs Perkins having to wait for her mother’s estate to be finalised and a loan being approved. Mr Smith acquiesced in these delays and accepted part payment until the Perkins were able to pay him in full.
  2. [106]
    Importantly, aside from the payment for provisional sum items relating to painting and electrical, the Perkins as at 3 November 2015 had fulfilled their monetary obligations under the contract. This was accepted by Mr Smith in cross examination.[41]
  3. [107]
    The Perkins began to question whether they had been invoiced ahead of work being completed in late September.[42] Mr Smith acknowledged on 25 September that the fence and pouring of footings still needed to be done. He also said that he would make inquiries of Poncho as to whether there was any further carpentry work to be done. The floors had not been polished at this stage.
  4. [108]
    Even if the Perkins had been late with payments I am of the view that Mr Smith acquiesced in this and was prepared to accept part payment. I also find, in any event, that some of the progress payments were not due because the work required to be done at that stage had not been completed.
  5. [109]
    Finally, at the time of termination, I find that the Perkins were ahead of the customised progress payments schedule and had complied with their monetary obligations under the contract.

iii) Late with the kitchen design

  1. [110]
    On 13 March 2015 Mr Perkins wrote to Mr Smith relevantly as follows:

Kylie and I would really like to get organised with understanding the internal DESIGN.

We would like to get started ASAP with the Kitchen design. We would like to meet with the cabinet maker if possible.

  1. [111]
    In an email of 14 April Mr Smith made reference to having discussions the next day with his cabinet maker and that a meeting would be organised “soon after he hears from him”.
  2. [112]
    On 4 May Mr Smith sent the Perkins a link to his cabinet maker’s website and later in a further email that evening asked when Kylie could meet with the cabinet maker. The cabinet maker was Jeremy Carney of Konstruct Interior Services.
  3. [113]
    On 13 July Mr Perkins asked Mr Smith for a meeting with the cabinet maker.
  4. [114]
    On 21 July an email from Mr Perkins indicated Kylie had met with the cabinet maker but that the design was not finalised. At the first meeting Kylie had told Jeremy that she wanted a provincial style kitchen. When Jeremy found out after the meeting from the foreman how much had been allowed for the kitchen he said that she could have all she wanted but that she would need to pay for it. Jeremy agreed to do a design. There were delays with the design. Various reasons were given for this delay: problems in mastering a new computer system, lack of direction from the Perkins and conflicting instructions.
  5. [115]
    The quote for the kitchen came in at approximately $10,000 over the provisional sum allowance. Following this, on or about 8 October 2015 discussions broke down with Jeremy. Mr Smith then suggested deducting the kitchen provisional sum amount from the second last payment so that the works could go ahead which the Perkins agreed to.
  6. [116]
    A resolution to the difficulties concerning the kitchen had therefore been reached in October 2015. In my view, the events concerning the kitchen do not affect my conclusion as to whether the contract was properly terminated.

Conclusion

  1. [117]
    At the time of the termination, PCS was wrongfully refusing to perform the contract. It thereby renunciated the contract and repudiated it.
  2. [118]
    The Perkins were not themselves in breach of the contract in a manner which would prevent them from terminating the contract, nor were the Perkins renunciating the contract.
  3. [119]
    Accordingly, I find that the Perkins on or about 23 November 2015 “properly terminated” the contract in accordance with clause 27 of the policy.
  4. [120]
    The parties have not had an opportunity to make submissions to me on costs in light of my decision. I give leave to the parties to make submissions to me on costs within 14 days of the publication of my decision.

Footnotes

[1] QBCC Act, s 71(1), s 71(3). See also clause 8.4 Subrogation of the statutory policy.

[2] Queensland Civil and Administrative Act 2009 (Qld) (QCAT Act), s 42(1).

[3] Ibid, s 20(1).

[4] Transitional provisions of the QBCC and Other Legislation Amendment Act 2014 (Qld).

[5] Policy, Part 11: Definitions and interpretation, 44.

[6] Ibid, 45.

[7] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61, [44] (Gleeson CJ, Gummow, Heydon and Crennan JJ).

[8] Ibid, [47]-[49] (Gleeson CJ, Gummow, Heydon and Crennan JJ).

[9] Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623, 659.

[10] Carr v JA Berriman Pty Ltd (1953) 89 CLR 327, 351.

[11] Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623, 634.

[12] Ibid.

[13] Carr v JA Berriman Pty Ltd (1953) 89 CLR 327, 351 (Fullagar J).

[14] Wesiak v D & R Constructions (Aust) Pty Ltd [2016] NSWCA 353, [91].

[15] Ross T Smyth & Co Ltd v TD Bailey Son & Co [1940] 3 AllER 60, 71 (Lord Wright).

[16] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61, [74] (Kirby J).

[17] Sunbird Plaza Pty Ltd v Maloney  77 ALR 205, 213 (Mason CJ), citing Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359; DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, 431-3.

[18] DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, 433-4.

[19] McRae v Bolaro Pty Ltd [2000] VSCA 72, [30].

[20] Poort v Development Underwriting (Victoria) Pty Ltd (No 2) [1977] VR 454, 459.

[21] DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, 433.

[22] Cardona v Brown [2012] VSCA 174, [74], referring with approval to Hudson’s Building and Engineering Contracts, 12th ed, Sweet & Maxwell, [3-076].

[23] Maples Winterview Pty Ltd v Liu [2015] ACTSC 58, [77].

[24] [2005] NSWCA 303.

[25] Report of W. Pullar, exhibit page 9; Exhibit 2 (Report of M. Davis), 8.

[26] [2015] ACTSC 58.

[27] Ibid, [109] (Mossop AsJ).

[28] Ibid, [84]; see also Cardona v Brown [2012] VSCA 174, [71]-[72].

[29] Other items of incomplete work were identified by Mr Davies and Mr O'Shannessy as falling within the internal carpentry work stage.

[30] Exhibit 17, Statement of Michael Laine dated 27 January 2016.

[31] Exhibit 15, Table tendered by the Applicant on 10 March 2017.

[32] Exhibit 14, Plan indicating extra electrical work tendered by the second respondent and Exhibit 13, Plan indicating extra painting work tendered by the second respondent.

[33] Letter from Bennett & Philp to Jim Feehely Project Law dated 11 November 2015.

[34] Clause 16.1.

[35] Clause 16.3

[36] Nigel Wilson and Fay Wilson v Kirk Contractors Pty Ltd, unreported, Victorian Supreme Court, Ashley J, 4963 of 1989, 21 December 1990, 21; Carr v JA Berriman Pty Ltd (1953) 89 CLR 327, 348-9.

[37] Carr v JA Berriman Pty Ltd (1953) 89 CLR 327.

[38] Nina’s Bar Bistro Pty Ltd v MBE Corporation (Sydney) Pty Ltd [1984] 3 NSWLR 613, 620, 632.

[39] Email from Ian Perkins to Phil Smith dated 4 July 2015.

[40] Transcript, Day Two, 1-53, [20].

[41] Transcript, Day Two, 1-52, [40]-[45].

[42] Email from Mr Perkins to Mr Smith dated 21 September 2015.

Close

Editorial Notes

  • Published Case Name:

    Ian Perkins & Kylie Perkins v Queensland Building and Construction Commission & Platinum Construction Solutions Pty Ltd

  • Shortened Case Name:

    Ian Perkins & Kylie Perkins v Queensland Building and Construction Commission & Platinum Construction Solutions Pty Ltd

  • MNC:

    [2017] QCAT 283

  • Court:

    QCAT

  • Judge(s):

    Member Traves

  • Date:

    21 Aug 2017

Appeal Status

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

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