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Lavish Constructions Pty Ltd v Haywagner Investments Pty Ltd QCAT 52
Lavish Constructions Pty Ltd v Haywagner Investments Pty Ltd  QCAT 52
Lavish Constructions Pty Ltd
Haywagner Investments Pty Ltd
1 December 2016
14 February 2017
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS – THE CONTRACT – GENERALLY - whether signed written contract binds parties – whether party entitled to declaration that any misleading, deceptive or otherwise unjust contractual term is of no effect or to otherwise vary a contract to avoid injustice - whether entitlement to and quantum of claims for payment proved – whether rate of interest claimed in the nature of a penalty
Queensland Building and Construction Commission Act 1991 (Qld), s 77
Acts Interpretation Act 1954 (Qld), s 36, Schedule 1
Paciocco & Anor v Australia and New Zealand Banking Group Limited  HCA 28
Lavish Constructions Pty Ltd
Haywagner Investments Pty Ltd
represented by Mr T Haydock, director
represented by Mr K Wagner, director
REASONS FOR DECISION
- Lavish, a building contractor, agreed to perform some internal carpentry works for Haywagner as part of a fit-out of commercial premises leased by Haywagner.
- Lavish commenced proceedings seeking payment of amounts owing under a written contract including interest on amounts claimed to be owing. The amount claimed as at 11 March 2016 was $9,546.38. Lavish claims that interest continues to accrue. Lavish seeks costs including solicitor’s costs on an indemnity basis and submits further submissions should be sought once I determine the substantive claims.
- Haywagner denies it owes the money claimed. It disputes that the terms of the written contract reflect the agreement between the parties.
- At the commencement of the hearing, Lavish produced updated interest calculations as at the date of the hearing.
- During the course of the hearing, Mr Haydock withdrew Lavish’s claim for interest under the written contract on invoice 30, which he ultimately conceded was issued in respect of work performed under a prior agreement/quote and not under the written contract.
- Lavish is the applicant. It bears the onus of establishing its entitlement to the amounts claimed on the basis claimed on the balance of probabilities.
- Lavish claims amounts owing in respect of the following invoices:
- Invoice 49 issued 15 December 2015 originally for $33,273.10. Lavish acknowledges that Haywagner part paid this invoice. It claims the unpaid balance in the sum of $3,300 (incl GST), interest for late payment and interest on the currently unpaid balance. Haywagner disputes that Lavish is entitled interest and to payment for a generic charge for Mr Haydock’s time for 10 hours per week for 6 weeks.
- Invoice 54 issued 12 January 2016 originally for $7,714.97. Lavish acknowledges that Haywagner part paid this invoice. It claims the unpaid balance in the sum of $1,100 (incl GST), interest for late payment and interest on the currently unpaid balance. Haywagner disputes that Lavish is entitled to interest and to payment for a generic charge for Mr Haydock’s time for 20 hours during the period 14 December 2015 and 3 January 2016.
- Invoice 57 issued 28 January 2016 for $4,554.56, which remains unpaid together with interest. Haywagner disputes that Lavish is entitled to interest and to charge a 20% margin on the supply of materials. Lavish acknowledges that Haywagner has previously paid for the supply of the materials but claims that Lavish’s office staff omitted to apply the margin when originally invoicing for the materials.
- Invoice 62 issued on 11 March 2016 for $591.82 in respect of interest accrued on claimed outstanding balances as at 11 March 2016. Haywagner disputes interest is payable.
- The issues for determination include:
- whether Haywagner is bound by the terms of the written contract. Haywagner disputes that the terms of the written contract reflect the prior oral agreement and that Lavish performed the contract in a manner inconsistent with the written contract and consistent with the oral agreement until there was a dispute about the hours claimed.
- whether Lavish is entitled to charge for all Mr Haydock’s time or only for Mr Haydock’s time when he performed building work. Haywagner disputes that it is required to pay for work performed by Mr Haydock except where it was in respect of actual building work completed by him on site.
Is Haywagner bound by the terms of the written contract?
- I find that Haywagner is bound by the terms of the written contract.
- Mr Wagner does not dispute signing the written contract. His evidence is that:
- there was no discussion between him and Mr Haydock about the differences between the oral agreement, reached a few days prior to Mr Haydock presenting the written contract and the terms of the written contract and in particular about the rate of interest on late payments and margin on materials supplied. In these circumstances, he was mislead that the contract reflected the prior oral agreement.
- he was asked to sign the contract over a period of a few minutes.
- he did not read the contract before signing it, which he now accepts was an error of judgement on his part.
- Mr Haydock told him that the contract needed to be signed for insurance purposes.
- as there was no clear scope of work Lavish was to be engaged on an hourly rate basis and that materials would be invoiced at cost. There was no agreement to pay interest and no specific agreement about when invoices were to be rendered and due for payment.
- he didn’t receive a copy of the written contract from Mr Haydock until after the dispute arose as to Mr Haydock’s chargeable time.
- Mr Haydock’s evidence is that he walked Mr Wagner through the first two pages of the written contract, which contain the terms as to interest and margin and that there was a discussion about the applicable hourly rates appearing on the first page, which resulted in the handwritten amendments. He says that he scanned and emailed a copy of the contract to Mr Wagner shortly after it was signed. A copy of the email was not produced in evidence.
- Under the Queensland Building and Construction Commission Act (Qld) 1991 the Tribunal has power to
declare any misleading, deceptive or otherwise unjust contractual term to be of no effect, or otherwise vary a contract to avoid injustice.
- Essentially Haywagner seeks to be relieved of the terms that do not reflect the prior oral agreement. This is in the nature of a claim for rectification of the contract.
- A person who signs a contract is generally taken to have agreed to be bound by the terms contained in the document and to have agreed that the written terms supersede any prior oral agreement.
- I note that the special condition, which provides for a 20% ‘surcharge’ on materials is located immediately above the space for signing the contract. The provision in the schedule setting out the rate of interest appears immediately above the special condition.
- Even if Mr Haydock did not expressly point out these terms, there is no evidence that Mr Haydock hid these provisions from Mr Wagner. I am not satisfied, on the balance of probabilities, that Mr Haydock mislead Mr Wagner. The terms were a matter of a few centimetres from where Mr Wagner signed.
- I am not satisfied that Mr Haydock knew or ought to have known of Mr Wagner’s apparent mistaken belief that the written contract did not contain these terms. In these circumstances, I am not satisfied that he ought to have said something to correct Mr Wagner’s mistaken belief.
- Haywagner points to Lavish’s failure to charge a margin on materials until after the dispute as to chargeable hours arose, as evidence that the contract was performed in accordance with the oral agreement rather than the written contract. I note that the contract provides that payment of payment claims other than the final claim are on account only. Such a term contemplates that adjustments maybe made in respect of payment claims other than the final claim. Mr Haydock’s evidence is that his office staff omitted to include the charge and that when he became aware of the omission a few weeks later he instructed a further invoice be issued. Mr Haydock’s explanation is plausible.
Claim for Margin - $4,554.56
- I find that Lavish is entitled under the terms of the written contract to a margin on materials supplied in the amount claimed.
- Haywagner did not dispute the claim for margin on any basis other than that the written contract did not reflect the prior oral agreement. During the course of the oral hearing, I enquired whether or not Haywagner agreed with the calculation. Haywagner made no submissions about the calculation. In these circumstances, I accept Lavish’s calculation.
Claim for Interest
- I find that Lavish has not established its entitlement to interest under the written contract as there is insufficient evidence to permit me to calculate the amount owing.
- Lavish relies upon the written contract to claim interest on overdue amounts at the rate of 25%.
- Haywagner disputes that interest is payable because it says under the prior oral agreement there was no agreement to pay interest and on the basis that it says no amounts are outstanding.
- Clause 4(c) together with the contract schedule provides that Lavish’s payment claims are payable by 7 Business Days after the Submission Date. Business Day and Submission Date are defined terms in clause 20 as
Business Day has the meaning in Section 36 of the Acts Interpretation Act 1954 (Qld) but does not include 27, 28, 29, 30 or 31 December of any Year.
Submission Date means the date on which the Subcontractor submits ...the payment claim or the final progress claim.
- Section 36 of the Acts Interpretation Act 1954 (Qld) provides as set out in Schedule 1 of that Act that:
business day means a day that is not –
- (a)a Saturday or Sunday; or
- (b)a public holiday, special holiday or bank holiday in the place in which any relevant act is to be or may be done.
- Lavish’s initial calculations of the due date do not appear to take into account the definition of Business Day. The due date in Annexure A to the Application is 7 days not 7 Business Days. The due dates in the revised interest calculations also do not appear to be calculated by reference to 7 Business Days.
- Clause 4(e) provides that interest is
calculated on a daily basis ...on any overdue amount under this Clause, including any part of the amount of a payment claim, or the final payment claim, wrongly withheld ...up to and including the date on which the overdue amount is paid ....at the rate stated in the Schedule or the rate comprising the annual rate, as published from time to time by the Reserve Bank of Australia, for 90 day bills plus 10%, whichever is the higher.
- The rate stated in the Schedule is 25%.
- Lavish has not provided any evidence of the relevant Reserve Bank rate. Mr Haydock’s evidence was that he had not looked at the relevant Reserve Bank rate. There is insufficient evidence before me to find that Lavish is entitled under the terms of the written contract to interest at the rate claimed because there is no evidence before me as to whether 25% is higher that the relevant Reserve Bank rate plus 10%.
- I also observe that interest provisions are in the nature of liquidated damages for breach of the obligation to pay by the prescribed time. Liquidated damages are to be a genuine pre-estimate of the loss expected to be sustained upon a breach otherwise they may be unenforceable as a penalty if the amount charged is out of all proportion to the interest sought to be protected.
- Mr Haydock’s evidence was that, at the time the written contract was entered into, Lavish did not operate an overdraft and that a representative of the Master Builders’ Association told him that ‘25% was usual’. The representative did not give direct evidence in this proceeding and therefore did not give evidence of the facts and circumstances said to be ‘usual’. On the evidence before me, interest at 25% when a contractor is not operating an overdraft appears more in the nature of a penalty than a genuine pre-estimate of Lavish’s loss.
Claim for Mr Haydock’s time - $4,400 (incl GST)
- I find that Lavish has not established its entitlement under the written contract to amounts claimed in respect of work performed by Mr Haydock.
- Lavish claims 80 hours of Mr Haydock’s time remains unpaid for work performed under the written contract.
- The written contract was signed by both parties on 28 October 2015. It provided that the contract period was 2 months and set out hourly rates. Lavish claimed amounts for work performed after the 2 month period expired i.e. up to 3 January 2016. Haywagner did not take issue with this. The contract period appears to have been extended by conduct.
- Lavish acknowledges that the schedule provides that Mr Haydock’s time was to be charged out at the rate of $60 per hour plus GST. Despite this, Lavish only claims Mr Haydock’s time at the rate of $50 per hour plus GST. Haywagner denies that under the oral agreement this was the rate agreed but for the purposes of this dispute does not take issue with the rate of $50 per hour. It disputes that Lavish’s claim is for chargeable work.
- The undisputed evidence is that the scope of work required was unclear so that the parties agreed that the work should be performed on an hourly rate basis. Lavish’s employees contend that there were no plans or specifications shown to them and that they received oral directions. Haywagner’s directors’ evidence is that plans were on site and available to be viewed. It is difficult to reconcile this disputed evidence.
- Mr Haydock’s evidence is that:
- he spent many hours ordering, picking up and delivering materials to site.
- he spent at least 10 hours each week on site performing work including discussing construction issues with Haywagner’s directors and providing advice, providing instructions to his employees as to the work to be performed due to the lack of documentation and co-ordinating with other trades, which were also on site.
- Lavish called evidence from its former carpenter and its apprentice, who worked on this site. They also gave evidence that Mr Haydock was on site for at least 10 hours a week doing the work Mr Haydock contends he performed.
- Mr Hay, Haywagner’s other director, gave evidence that he was on site for approximately 90% of the time and that his role was to co-ordinate the various trades on site. He disputed that Mr Haydock was on site for at least 10 hours a week. He also disputed that Mr Haydock was entitled to be paid for site supervision and co-ordination work because the owner’s of other trades did not claim for such time and Mr Haydock’s presence on site was often not specifically requested by Haywagner.
- Mr Haydock produced time sheets for his employees but only outlook calendar entries to support his claims for his own time and some evidence of missed calls and texts messages. He concedes that he should have recorded his time in a more comprehensive way.
- The written contract contemplates that Haywagner was to issue written Work Orders setting out the work to be performed by Lavish for which it was entitled to the contract hourly rates.
- There is no evidence that Haywagner ever issued Work Orders as contemplated, possibly because Mr Wagner claims a copy of the written contract was not provided prior to the dispute arising. Strictly speaking, if there were no Work Orders issued then no entitlement under the written contract to payment arose.
- Even if it could be said that both parties waived the strict terms of the written contract in respect of written Work Orders, I am not satisfied that Lavish has established, on the balance of probabilities, that the work claimed was work for which it was entitled to charge under the written contract.
- Mr Wagner and Mr Haydock both gave oral evidence that there was no specific discussion about what work would be chargeable. I am not satisfied that Lavish has established its entitlement to claim the 80 hours under the written contract, whether or not Mr Haydock was on site for at least 10 hours a week performing the work he contends. Lavish’s claim was based entirely upon the written contract and not on any alternative basis.
 Exhibit 7.
 Queensland Building and Construction Commission Act (Qld) 1991, s 77(3)(e).
 Attachment to Exhibit 1, Clause 4(f).
 Exhibit 1.
 Exhibit 7.
 Paciocco & Anor v Australia and New Zealand Banking Group Limited  HCA 28.
 Exhibit 7.
 Attachment to Exhibit 1, Schedule, clause 1 and clause 4.
- Published Case Name:
Lavish Constructions Pty Ltd v Haywagner Investments Pty Ltd
- Shortened Case Name:
Lavish Constructions Pty Ltd v Haywagner Investments Pty Ltd
 QCAT 52
14 Feb 2017