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- Unreported Judgment
Richards v Queensland Building and Construction Commission QCAT 189
QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL
Richards & Anor v Queensland Building and Construction Commission & Anor  QCAT 189
TREVOR JAMES RICHARDS
ELLEN HANNAH RICHARDS
QUEENSLAND BUILDING AND CONSTRUCTION COMMISSION
BAX INVESTMENTS PTY LTD
General administrative review matters
19 July 2019
7 May 2019
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON-PERFORMANCE – REPUDIATION – where the applicants terminated a residential building contract on the respondent’s failure to proceed with due diligence – where the applicants claimed under the statutory home warranty scheme for incomplete building work – where the first respondent refused the claim on the basis the applicants had not been entitled to terminate the contract – whether the termination by the applicants was effective under the contract – whether the applicants were entitled to terminate under the general law
Queensland Building and Construction Commission Act 1991 (Qld), schedule 1B s 40, s 44
Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 21(2)(b)
Concut Pty Ltd v Worrell  HCA 64; 75 ALJR 312
Cousins T/as Cousins Housing Industries v Dumesny  QCCTB 23
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423;  HCA 12
Mousa & Anor v Vukobratich Enterprises Pty Ltd & Anor  QSC 49
Rocci & Anor v Diploma Construction Pty Ltd  WASC 18
Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359
Sunbird Plaza Pty Ltd v Maloney & Ors (1988) 166 CLR 245
Zahedpur v Idameneo (No 123) Pty Ltd  QCA 134
APPEARANCES & REPRESENTATION:
J R Moxon, instructed by Broadley Rees Hogan
N Thirumoorthi, in-house lawyer
Self-represented by L Bax
REASONS FOR DECISION
- Mr and Mrs Richards (‘the owners’) own a property in the rural area of Palen Creek. They signed a building contract with the second respondent (‘Bax’) on 18 April 2016 for an extension to their home.
- The contract price was $144,327.50. The construction period was to be 243 days. The owners paid a deposit of $7,954.38 on 22 April 2016. There was a delay in starting the work. Work commenced between 8 and 12 September 2016, nearly 5 months after signing the contract.
- The contract provided that Bax could claim agreed payments at the conclusion of various stages of construction. On 20 September 2016 Bax issued an invoice for the sub-floor stage claiming $36,081.88 and on 21 November 2016 an invoice for the frame stage claiming $21,649.13. These were paid.
- On 15 December 2016 Bax issued an invoice for the fixing stage claiming $50,514.63. The owners refused to pay all of that. They paid $25,000 in part payment. They disputed all the work required for that stage had been done.
- Bax issued other invoices and on 8 March 2017 issued what was described as an Adjustment Note giving a credit of $10,055.46 to the owners for, amongst other things, cabinetry in the kitchen and laundry.
- The owners wrote to Bax on 3 April 2017 complaining that the work had stopped.
- On 27 April 2017 the owners’ solicitors issued a Notice to Remedy Breach to Bax alleging a failure to proceed with the work with due diligence and advising that if the breach was not remedied within ten business days the owners would be at liberty to terminate the contract and recover damages or pursue other rights and remedies that might be available.
- On 16 May 2017 those solicitors wrote again to Bax saying the Notice to Remedy Breach had not been remedied and therefore the owners terminated the contract.
- The owners claimed under the statutory home warranty insurance for non-completion of building work to the Queensland Building and Construction Commission (‘QBCC’).
- On 3 July 2017 the claim was disallowed (‘the first decision’) by QBCC on the basis that the owners had not properly terminated the contract as required under the policy of insurance. QBCC instead found the owners were in substantial breach under the contract when they issued the Notice to Remedy Breach and were therefore not entitled to terminate.
- The owners applied for internal review of the first decision. An internal review decision must be made within 28 days of application and if not, the decision under review is confirmed. The first decision was not reviewed within 28 days. An extension of time was sought by QBCC from the owners but not granted. Accordingly the first decision disallowing the claim under the insurance was confirmed.
- The owners have applied to the Tribunal to review the decision to refuse cover under the statutory insurance scheme.
The evidence at hearing
- Bax failed to comply with orders of the Tribunal to file statements of evidence intended to be relied upon by them at hearing, before hearing. They were put on notice by the owners’ solicitors prior to the hearing that there would be objection taken to any party attempting to lead evidence not reduced to statement form and filed and served as directed by the Tribunal.
- Bax had supplied documents relevant to the matters in issue to QBCC however which had been relied on in reaching the first decision. QBCC included them in the statement of reasons for the decision as documents that might be relevant to the Tribunal’s review of the decision as provided for in s 21(2)(b) of the QCAT Act. As such the Tribunal is entitled to consider them and give them such weight as appropriate, which in this case means being mindful that their veracity was not tested by cross-examination at hearing.
- The owners filed statements of evidence. Mrs Richards was cross-examined on her material. She impressed me as a forthright person giving open and honest evidence, without prevarication, though sometimes specific dates of discussions she recalled having with the builder eluded her. She kept a diary of attendances of the builder’s workers on site but admitted she was not used to keeping a diary and there were some lapses. Overall however she seemed to have good recall of the interaction of her husband and herself with the builder, she was clear about what was agreed and what was not, such as no variations to the contract and particularly that it was never agreed the bathroom work would be excluded from the scope of work under the contract. I accept her evidence where it conflicts with statements contained in the documents supplied by Bax to QBCC and filed with the statement of reasons.
Termination following notice to remedy
- The owners’ solicitors issued a Notice to Remedy Breach to Bax on 27 April 2017. The breach was described as:
1 Failure to proceed with the Works with due diligence
- Practical completion is yet to take place despite the QMBA RRC being first entered into on 18 April 2016;
- Item 8 of the schedule to the QMBA RRC stipulated that the Construction Period specified was to be 243 days;
- The 243 days period has long expired; and
- No extension of time request has been made.
- The breach was failure to proceed with the work with due diligence.
- By item 8 of the contract schedule the construction period was 243 days. Item 9 indicated that the date of commencement was to be determined under clause 8 of the general conditions. Clause 8 of the general conditions provided the date of commencement would be:
- (b)… within 10 business days of the contractor receiving all of the following:
- (i)all information, evidence and consents required to be given by the owner under clause 7;
- (ii)satisfactory evidence of the owners’ capacity to pay the contract price pursuant to clause 11.1;
- (iii)any building approval required pursuant to clause 5.1;
- (iv)if a financial institution is providing loan money to the owner, a notice from the lender to the contractor that the works may commence; and
- (v)a signed copy of the Engineers specification and confirmation if required under clause 11.11(d).
- Clause 7 concerned evidence of the owners’ title to the land. According to the owners a copy of their title was given to Bax shortly after the contract was entered into.
- The owners were asked how they were funding the build and they said from savings. There was no finance involved. No further information about savings was sought by Bax.
- By item 14 of the schedule, Bax was responsible for obtaining building approval.
- By item 7(c) of the schedule, foundations data was also the responsibility of Bax.
- Clearly Bax was satisfied with the information provided from outset because Bax required nothing more before starting work, albeit after long delay.
- I conclude the owners satisfied their obligations under clause 8 shortly after signing the contract on 18 April 2016. I determine the date of commencement was therefore no later than 30 April 2016.
- According to the owners, Bax requested an initial delay to commencement of 8 weeks because of other work. It was not until more than 4 months had passed from commencement however that Bax started. I accept the evidence of the owners that there was no agreement struck to otherwise delay the date of commencement of work under the contract.
- By the contract practical completion was therefore scheduled for 243 days later, by 29 December 2016. When the owners’ solicitors gave the Notice to Remedy Breach on 27 April 2017, the date for practical completion had long passed and no extension of time for completion had been sought. In fact, as explained below, Bax had not even finished the fixing stage of the work by then.
- According to a diary kept by the owners, 12 March 2017 was the last day any worker attended the site.
- I conclude Bax had failed to proceed with due diligence as at date of service of the notice to remedy breach. The notice to remedy breach accurately identified the breach and was valid. Bax failed to remedy the breach within time. The owners were entitled to terminate the contract pursuant to the provisions of the contract which they did by written notice of 16 May 2017.
Termination under the general law
- The owners were also entitled to terminate the contract under the general law.
- The contract was a Master Builders Residential Renovation Contract - Level 2 comprising amongst other things a schedule, appendices to the schedule and general conditions.
- By clause 11.6 of the general conditions Bax was entitled to be paid the contract price progressively depending:
- (a)If method A or method B is stated in item 21 of the schedule on completion of the stages set out in the applicable method in part D of the appendix to the contract.
- Method B was chosen by the parties. In the appendix method B provided:
Deposit 5% $ 7,216.38
Sub floor stage 25% $ 36,081.88
Frame stage 15% $ 21,649.13
Fixing stage 35% $ 50,514.63
Practical Completion 20% $ 28,865.48
Total 100% $144,327.50
- The owners paid the deposit, the money for the sub floor stage and the frame stage after those stages were completed. On 15 December 2016, Bax issued invoice 503 claiming $50,514.63 for the fixing stage.
- Under the contract, ‘fixing stage’ was defined as:
That stage of the works when, apart from minor defects or minor omissions, all the internal linings, architraves, cornices, skirtings, doors to rooms, baths, shower trays, wet area tiling, built-in shelves, built-in cabinets and built-in cupboards are fitted and fixed in position
- Confusingly, Bax also issued on 15 December 2016 another version of invoice 503, claiming the same amount of $50,514.63 for 35% of the work under the contract, but this time describing the claim as completion of the enclosed stage of the work. There was no enclosed stage under method B. That was only a stage under method A, which was not the method chosen under the contract.
- But, in any case, had method A been agreed upon, the enclosed stage comprised (and permitted the builder to claim proportionally) only 25% of the work, not 35%.
- On 7 February 2017 Bax tried again with another invoice, 531, describing this also as a claim for the fixing stage, but claiming this time for 20% of the work at a value of $28,865.48.
- These latter invoices cannot be reconciled with the stages agreed under the contract.
- On 8 March 2017 Bax issued invoice 547 purportedly for variations to the contract. The amount claimed was $17,971.57. The owners dispute they ever requested those variations save for requesting the installation of an ironing board ($74.25). None of the variations were in writing as required under the contract and the Queensland Building and Construction Commission Act 1991 (Qld) (‘the Act’).
- Also on 8 March 2017 Bax issued what was described as an Adjustment Note to the owners as follows:
Cabinetry kitchen allowance-$ 5,000.00
Cabinetry in laundry inc tub-$ 1,318.80
3 x mixers & 1 x shower rail-$ 156. 86
Tiling to bathroom floor & shower-$ 257.00
Tiling to laundry splashback- $10,055.46
- According to the owners, Bax asked them to have their own cabinetmaker do the cabinets and the owners agreed.
- It is not clear what the other items referred to in the Adjustment Note concern or what stage of work they relate to.
- The cabinets formed part of the work included in the fixing stage but not all the work remaining to be done. According to Mr Klemm, a building inspector from QBCC who inspected the property on 21 February 2017, there remained approximately 15-20% of the work under the fixing stage outstanding as at his date of inspection. When he attended, the cabinetry work had already been done, and therefore the 15-20% represented additional work yet required to complete the fixing stage.
- The bathroom work was noted as incomplete in Bax’s letter of 21 April 2017 giving a timeline for the work to do the bathroom, toilet and laundry.
- By late April 2017 Bax seems to have forgotten about the Adjustment Note. It reverted to its claim for full payment for the fixing stage regardless that it had not done any more work to complete the stage.
- In a letter from Bax to the owners on 21 April 2017 Bax put them on notice that the balance of invoice 503 ($25,514.63) was incurring interest ‘charged at 15% of $25,514.63, 51 days overdue = $533.30’. Solicitors acting for Bax reinforced the builder’s claim that it had completed the fixing stage by maintaining its demand for the balance monies for invoice 503 in a letter of 16 May 2017. In the letter they also claimed on behalf of Bax an amount of $11,223.29 for ‘painting … electrical completed to practical completion stage’ in respect of invoice 574 dated 28 April 2017 a copy of which was enclosed.
- In Rocci & Anor v Diploma Construction Pty Ltd, EM Heenan J said this about a building contract with stipulated stage payments:
The fact that a contract contains provisions for progress or staged payments will not change its character from being an "entire contract", at least in relation to the entitlement of any one of the periodical payments, when that is claimed, or to the final payment when that is demanded. In each case the builder will only be entitled to the progress payment or final payment if it has fully performed the obligations provided in the contract and has met the conditions for entitlement to that particular or final payment.
- I find that Bax had not completed the work required to entitle it to claim the fixing stage payment when it issued invoice 503. Further I find the work was still not done as at 16 May 2017, when the owners terminated the contract.
- Bax was accordingly, as at date of termination, in repudiation of a fundamental obligation under the contract to claim payment at completion of the agreed stages of work and not before. In consequence, Bax was in breach of the contract in demanding payment for the fixing stage (and by claiming payment for part of the practical completion stage as well).
- Bax was not willing to perform the contract according to its tenor.
- As stated in Sunbird Plaza Pty Ltd v Maloney & Ors:
Shepherd v Felt & Textiles of Australia Ltd [(1931) 45 CLR 359] stands as authority for the general proposition that a termination of a contract may be justified by reference to any ground that was valid at the time of termination, even though it was not relied on at the time and even though the ground actually relied on is found to be without substance.
- That principle has application here. Regardless as to whether or not the notice to remedy breach and subsequent termination notice was valid and effective pursuant to the grounds relied on in the notice, the owners were entitled under general law to terminate the contract consequent on the repudiation of the contract by Bax claiming payment for the fixing stage and maintaining that erroneous claim through to termination.
- QBCC suggests that Cousins T/as Cousins Housing Industries v Dumesny precludes reliance on the general principle of Shepherd v Felt. There the owner sought to justify termination relying on defective building work constituting breach and termination at common law, which was not a ground relied on in a termination notice given under the contract. The Tribunal determined the owner was obliged to follow the provisions of the contract about giving notice of the defective building work under the contract and allowing the builder an opportunity to rectify because the contract provided a ‘mechanism in the form of a code’ (at 291) concerning defective building work. That decision is perhaps understandable if based on a finding that the mechanism in the form of a code concerning defective building work rebutted the usual presumption that contracting parties do not intend to abandon common law remedies. There must be very clear words in the contract to conclude common law remedies are not available, however.
- With all due respect to the learned member in Cousins, I am not persuaded concerning the code argument. Any such proposition appears to have been soundly rejected out of hand by Henry J in Mousa & Anor v Vukobratich Enterprises Pty Ltd & Anor:
 Counsel for Mr Vukobratich emphasised the contract’s clause 20.1 conferred a means by which the Mousas could give notice of an intention to terminate should the company not remedy its breaches within 10 days. He relied on that clause to argue the breaches of warranty were not of such seriousness as to justify termination. It was also submitted the existence of clause 20.1 meant the company was given a “right” to a clause 20.1 notice and the opportunity to remedy or mitigate before termination. Clause 20.1 conferred no such right on the company. Nor did its existence suggest breaches of the kind alluded to in clause 20.1, which included if the company was “in substantial breach”, could not be of such a character as to justify termination without first being given a chance to rectify.
- I do not have to consider the matter further, however. The matter at hand is entirely different. It does not involve the so-called mechanism concerning rectification of defective building work under the contract. The contract at hand does not exclude otherwise available general law remedies. By clause 20.2:
If the contractor fails to remedy the substantial breach or breaches set out in a notice to it by the owner in accordance with clause 20.1 within the time stated in that notice, the owner may, without prejudice to any other rights or remedies, terminate this contract…
Owners’ own breach
- It is suggested the owners themselves were in breach of the contract when they terminated. Accordingly, it is submitted they were not entitled to terminate the contract as they did.
- The breaches are said to be:
- (a)First, that the owners gave directions to Bax’s workers;
- (b)that they denied Bax access to the site;
- (c)that they were asked to vacate the home to allow Bax to remove asbestos in the bathroom but did not; and
- (d)finally, that they engaged outside contractors to do work falling within the scope of the contract.
- In the letter of 8 March 2017 Bax raised the matter of the owners directing its employees to do work at the site. Only one instance was specifically cited in the letter, that of the owners asking a worker to fix an ironing board to a wall. There was also mention of the owners directing a supplier of windows for the job to change the order. The letter says there were other instances but gave no particulars about them.
- The owners deny refusing access to workers. Refusal of access seems unlikely given I find it clear the owners were always keen to have the work done and completed. I accept the evidence of the owners refuting the claim that they refused access or generally gave instructions to Bax’s workers. The matter about fitting the ironing board is minor to the point of being trivial.
- The letter of 8 March 2017 also raised an issue about asbestos. This appears to have been the first time the owners were informed they would have to vacate the property because asbestos in the bathroom had to be removed. It was a term of the contract that the owners could stay in the house during construction. If there was additional work necessary because the builder had not realised when contracting that asbestos was present and safety concerns dictated the owners leave, then a variation of the contract was both necessary and warranted. Bax said in the letter that the work might require an additional cost. There was no variation sought, however, but given the casual way the builder approached the scope of work under the contract, this is not surprising.
- The owners in any case told Bax before signing the contract that there was asbestos in the wet areas. I accept that. Indeed Mr Klemm said when he attended the site in February 2017 he immediately identified asbestos in the bathroom. As an experienced contractor one might surmise Bax saw that very early in the contract too.
- The letter of 8 March 2017 simply said ‘[a]s mentioned in previous phone calls, we are coming close to starting the bathroom.’ Given the inordinate delay and casual attendance at the house by Bax to that date it was entirely reasonable that the owners not act on such a vague statement until a precise date was set, if ever, if necessary.
- The owners say in a meeting on 18 April 2017 they were subsequently told by Ms Leanne Bax that Bax might be able to work around them and they might not have to leave the house. I accept that was said. Given the owners were entitled to stay in the home through construction and there was no agreed variation of that provision, and given they were told they might not have to leave in any case, the owners were not in breach in staying.
- There was also a suggestion that the owners were in breach as at date of termination because they engaged outside contractors to do work within the scope of the contract. As stated previously, according to the owners, Bax asked them to have their own cabinetmaker do the cabinets and the owners agreed. There was also work done on flooring. Mrs Richards said at hearing that they had to engage another builder to do flooring because Bax ‘didn’t do secret nailing.’
- The parties were casual about variations. I determine that the parties agreed to vary the contract whereby the owners would engage third party contractors to do some of the work within the scope of the contract. That concurrence did not extend to the bathroom work. There was an obligation under the contract for the builder to ensure any agreement to vary the works was in writing, and under the Act the builder faced potential penalty for that omission, but the changes to the contract were not rendered illegal, void or unenforceable thereby.
- As stated in Zahedpur v Idameneo (No 123) Pty Ltd:
None of the alleged breaches was of a term which was a condition of either contract. The performance of the contracts, if required in the respects alleged by the appellant, was not stated to be a condition precedent to the appellant’s obligation to perform them. And none of those breaches would have constituted a repudiation by the respondent. In general, a party in breach of a non-essential term is not prevented from rescinding for a fundamental breach or repudiation by the other party.
- As at date of termination, 16 May 2017, I find there was no absence of readiness and willingness on the part of the owners not to complete the contract amounting to repudiation of their obligations under the contract which precluded them from relying on breaches by Bax to terminate the contract. Any breaches by the owners were trivial matters of little consequence.
- The owners were entitled to and did validly terminate the building contract. They were entitled to claim under the statutory insurance scheme.
- QBCC say if that is the conclusion of the Tribunal the matter should be remitted to them for further determination according to law.
- The owners say it is more appropriate that the Tribunal simply substitute a decision that the owners’ claim for insurance cover be allowed. I conclude the latter is the appropriate course to follow. There is no suggestion that the claim was disallowed on any basis other than the owners had not been entitled to terminate the contract.
- The owners are elderly, the house remains unfinished and exposed. There should be no further delay.
 Exhibit 7.
 Section 28(3)(b), (c), (e).
 The builder’s representative Ms Leanne Bax was not permitted to give oral evidence at the hearing given the failure to file written statements of evidence.
 Transcript (‘T’) 1-53, Line (‘L’) 35-36.
 T1-80, L15.
 According to the dictionary to the general conditions the expression Engineer Specification and Confirmation referred to a document required under the contract to be signed by an engineer providing the design of any footings or slabs for the works under the contract.
 Exhibit 6, .
 Ibid .
 Ibid , item 327.
 Exhibit 4, page 132.
 Ibid page 99, clause 1.
 Exhibit 6, .
 Exhibit 4, page 134.
 Schedule 1B, s 40.
 T1-40, L33.
 Exhibit 6, page 13, item 297.
 Similar observations were made in a report prepared for the owners by another contractor who attended on 15 May 2017, immediately prior to termination. See Exhibit 4, pages 138-140.
 Ibid page 209.
  WASC 18.
 Ibid .
 (1988) 166 CLR 245.
 Ibid 262 (Mason CJ).
  QCCTB 23.
Concut Pty Ltd v Worrell  HCA 64 ; 75 ALJR 312.
  QSC 49. The breaches relied on in Mousa were serious defective building work as too the breaches relied on in Cousins.
 Exhibit 6, .
 Ibid -.
 Exhibit 4, page 182, item 1 of the contract.
 Exhibit 6, [12(b)].
 Ibid .
 T1-83, L33.
 T1-80, L15.
 Clause 12.3.
 Schedule 1B, s 40.
 Ibid s 44.
  QCA 134.
DTR Nominees Pty Ltd v Mona Homes Pty Ltd  HCA 12 ; (1978) 138 CLR 423, 433.
- Published Case Name:
Richards & Anor v Queensland Building and Construction Commission & Anor
- Shortened Case Name:
Richards v Queensland Building and Construction Commission
 QCAT 189
19 Jul 2019