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- Unreported Judgment
QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL
Sharma & Ors v Woolfson  QCAT 271
Ian Anthony Woolfson
21 July 2020
On the papers
CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – OTHER MATTERS – what terms are included in the contract – where contract breached – where loss of rental income claimed on the basis of breach of contract
Queensland Building and Construction Commission Act 1991 (Qld)
Queensland Civil and Administrative Tribunal Act 2009 (Qld)
Augustine & Anor v SJ Builders Pty Ltd & Anor  QCAT 248
Bartlett v Contrast Constructions Pty Ltd  QCATA 199
C Czarnikow Ltd v Koufos  1 AC 35
Carpenter v McGrath (1996) 40 NSWLR 39
Castle Constructions Pty Ltd v Fekala Pty Ltd (2006) 65 NSWLR 648;  NSWCA 133
Daniel John Marino v Keith Howe  QCAT 390
Environmental Systems Ply Ltd v Peerless Holdings (2008) 19 VR 358
GEC Alsthom Australia Ltd v City of Sunshine (Unreported, FCA, 20 February 1996, Ryan J)
Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145
Harrison & Anor v Meehan  QCATA 197
Lyons v Dreamstarter Pty Ltd  QCATA 142
Lyons v Dreamstarter Pty Ltd  QCATA 71
Mair Renovations v Miller  QCAT 317
Partington & Anor v Urquhart (No 4)  QCATA 96
Rainbow Builders Pty Ltd v The State of Queensland through the Department of Housing and Public Works (No 2)  QCAT 497
Robinson v Harman (1848) 1 Ex 850
Rigall & Anor v Thompson  QCA 144
Seven Seas Properties Ltd v Al-Essa (No 2)  1 WLR 1083
Stewart v Scott trading as Fantasy Pools Brisbane  QCAT 110
Tamawood Ltd v Paans  QCA 111
The Commonwealth v Amann Aviation (1991) 174 CLR 64
Victoria Laundry (Windsor) Ltd v Newman Industries Ltd  2 KB 528
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld)
REASONS FOR DECISION
- This is a building dispute and the parties to this dispute are Kiran, Asham and Rabin Sharma and Ian Anthony Woolfson.
- A related decision is Woolfson v Queensland Building and Construction Commission & Anor  QCAT. I note that Rabin Sharma was not a party in that matter. In that case Member Browne ordered that the decision of the Queensland Building and Construction Commission (QBCC) of 9 May 2018 that the contract has been validly terminated at the default of the licensee and therefore to allow the claim under the Queensland Home Warranty Scheme was confirmed. Although that decision was made by the Tribunal exercising its review jurisdiction and not its original jurisdiction, as I am in this matter, there is an enormous degree of commonality between these two matters arising as they do from a contract for renovation works to a residential property in Brisbane.
- Where appropriate, I will refer to the summary of facts in that decision and also relevant findings
- The first reference is the factual summary of events – see Woolfson v Queensland Building and Construction Commission & Anor  QCAT.
- (a)Ian Woolfson entered into a contract with Rabin Sharma, Kiran Sharma and Ashan Sharma for the completion of certain renovation works to a residential property in Brisbane, Queensland.
- (b)During completion of the renovation work, a dispute arose between Mr Woolfson and the Sharmas about the building work performed and money paid under the contract. One of the disputed issues concerned progress payment 6 (‘PP6’) issued by Mr Woolfson and alleged by him to be owing under the contract.
- (c)Following attempts made by the parties to resolve the disputed issues, the Sharmas exercised their rights to terminate the contract by issuing to Mr Woolfson a notice of intention to terminate followed by a notice of termination. The Sharmas later complained to the Queensland Building and Construction Commission (‘QBCC’) about the building work performed by Mr Woolfson. Relevantly, the Sharmas alleged that some items of building work were defective and/or incomplete.
- (d)The QBCC inspected the building work and reviewed the correspondence exchanged between Mr Woolfson and the Sharmas. The QBCC determined that the contract had been validly terminated by the Sharmas and referred the matter to its insurance branch for assessment. An independent report was prepared following an inspection of the building work by Sergon Building Consultants (‘Sergon’).
- (e)Following an internal review of the QBCC’s decision to accept the Sharmas’ claim under the Insurance Scheme, the QBCC confirmed its decision dated 9 May 2018 that the contract has been validly terminated at the default of the licensee.
- (f)Mr Woolfson wants to review the QBCC’s decision dated 9 May 2018. Mr Woolfson says that the contract has not been properly terminated by the Sharmas. Mr Woolfson says that there was a delay to the commencement of the building work because of a change in the plans by the Sharmas. Mr Woolfson submits that there were many variations to the contract, and he did not get paid for all the work performed by him. Mr Woolfson submits that the Sharmas did not terminate the contract correctly and did not identify the specific items of substantial breach in the Notice of Intention to Terminate. Mr Woolfson says that the Sharmas did not pay PP6 in the full amount as invoiced by him. Further, Mr Woolfson says that the building works were never stopped or suspended by him and that practical completion was reached but the Sharmas refused to meet with him to enable all of the forms to be signed and completed.
- (g)Further, Mr Woolfson says that he did everything he could to give the Sharmas a beautiful home referring to extra work performed by him that he says he did not claim for from the Sharmas. Mr Woolfson says that after the Sharmas complained to the QBCC, he requested a site meeting that was refused. Mr Woolfson says that he was always prepared to attend to any alleged defective work, after practical completion was signed by the Sharmas.
- The current proceedings were commenced by the Applicants (the Sharmas) on 26 September 2018. At that time, they provided the following in response to the question that they were seeking for the Tribunal (final orders):
- The sum of $3995.00 for legal advice and fees form (sic) Craig Ray;
- Loss of rental income sum $38 400.00 and $400.00 to the building certification for extension of time;
- Defective work. Some defective plaster and paint work has been done;
- The front fence needed rectification due to defect - estimated cost $4000; and
- Cost in total $49,695.00.
- On 23 January 2020 further directions were issued in the proceedings. The Sharmas filed submissions in response to these directions. From these submissions it appears that the final orders now being requested by the Sharmas are as follows:
- The Applicant are seeking a Final Order for damages in the amount of $38 00 for lost rental income for the period 4 August 2017 to 14 July 2018;
- The Applicant are seeking a Final Order for Damages in the Amount of $8,256.86 for rectification of the fence and the outdoor BBQ area (invoices supplied to support this amount); and
- The Applicant are seeking Final Order in the amount of $6,510.35 (inclusive of GST) for legal expenses incurred throughout this matter
- Although the Applicants did not specify this, the orders sought may be divided into the categories of: (i) damages arising from a breach of the terms of the building contract itself; (ii) consequential damages that flow from the breach of the building contract; and (iii) costs.
Is there a counter application?
- Mr Woolfson has not made a counter application based on his submissions. However throughout his submissions to the Tribunal, Mr Woolfson provides comment on issues that he continues to feel aggrieved by including a statement that the Sharmas still owed him over $1,000 from the original contract final payment; $2,500 from an unpaid variation; $12,000 for an extra 52m2 of hardwood flooring which was not in the contract; $10,000 for the renovation of the original house which was not in the contract; $14,000 for the additional work, earthworks and concrete foundations. He also made a comment that the “Sharmas have done very well financially from huge discounts and money they have not paid me and the $67,000 given to them by the QBCC and still they demand more.”
- As previously noted, I accept the findings in the related matter of GAR189-18. I am tasked with deciding the outcome of a building dispute, I am not sitting in an appellate jurisdiction reconsidering the finding of fact made by Member Browne in GAR189-18. Having had the benefit of reading all the material before me filed in BDL257-18, there is no material that rises to a level that would justify in any way coming to a different decision in relation to the contract. This includes whether the contract was properly terminated; whether there was practical completion and whether any money, particularly the final payment, was still owed to Mr Woolfson.
- I accept the findings of Member Browne in relation to the following aspects of the contractual relationship between Mr Woolfson and the Sharmas, in particular, the findings at paragraph 57 of that decision, that Mr Woolfson failed to complete the works with due diligence from early August 2017; that the works did not reach practical completion as required under the contract; as at September 2017 there were a number of defects and incomplete work and that finding was supported by independent evidence (Sergon). At paragraph 60 Member Browne found that the contract was lawfully terminated by the Sharmas on 13 December 2017; it was noted there that Mr Woolfson was given time to remedy the breach as required under the general conditions of the contract; at paragraph 61 of that decision the learned member found that Mr Woolfson was in breach of contract by issuing and demanding payment for stage six work (PP6) that was not completed and it was also found that Mr Woolfson was not entitled under the contract to issue an invoice for PP6 because the stage six work was not completed by him e.g. the kitchen work, which was a prime cost. It was therefore found that the Sharmas had appropriately terminated the contract; the Member in that case found that there had not been practical completion of the house at the time declared by Mr Woolfson for this to have occurred.
- Although this is not the same type of matter in the sense that GAR189-18 was a general administrative review matter and this is a building dispute, there is much commonality in fact. Based on the evidence currently before me, I have insufficient evidence for me to come to any conclusion on the issues outlined above other than the findings for the decision reached by Member Browne. There is simply no evidence to support the claims made by Mr Woolfson and indeed a weight of evidence against the propositions he advances. The learned member in GAR189-18 made these findings after the opportunity to see the parties in an oral hearing on 19 and 20 February 2019 and to assess their credit.
- On 28 February 2020 Mr Woolfson makes several allegations that can be summarised under the heading of the inappropriateness of the Sharmas making a claim when they have already received a payout under the QBCC Home Warranty Scheme. It must be clarified that the current building dispute and the payment by QBCC to the Sharmas represent separate matters. In response to directions issued by the Tribunal on 28 October 2018, the Sharmas were required to file material in relation to the status of any claim under the Home Warranty Scheme and whether the works claimed in this particular dispute were the same as the works claimed under the Home Warranty Scheme. It was the Sharmas’ response that the items claimed in this dispute are separate and different to the ones claimed under the Home Warranty Scheme. I accept this submission.
- I have had the opportunity to consider all the material filed in the matter of BDL257-18. I find based on this that Mr Woolfson’s submissions do not reach a standard higher than that of observations or a response to directions. I do not accept that he has filed a counterclaim in these circumstances. He seeks to traverse issues that have already been decided in GAR189-18 and to make unsupported claims against the Sharmas. I find that there is no counterclaim made in this matter and I will proceed on the basis that I am only dealing with the Application from the Sharmas.
- As per Member Kanowski’s decision of Stewart v Scott trading as Fantasy Pools Brisbane the Tribunal has jurisdiction to decide a ‘building dispute’ – see section 77(1) of the Queensland Building and Construction Commission Act 1991 (Qld) (‘QBCC Act’). Whether the dispute here is a building dispute as defined depends, through a chain of definitions, on whether it is ‘domestic building work’ as defined in section 4 of Schedule 1B of the QBCC Act:
What is central to all definitions of a building dispute is that the essence of the contract or agreement entered into by all parties is one for the building construction, construction or associated works in this case with a domestic dwelling.
- In the current matter, there is no issue taken by either party that there was a contract entered into between Mr Woolfson and the Sharmas for renovations of a home owned by the Sharmas. A copy of the contract was filed in the Tribunal on 31 October 2018. An email trail between the Sharmas and Mr Woolfson indicated that the contract had been received by the Sharmas after being sent by to them by Mr Woolfson. Attached to the QBCC Standard Contract for Renovation Level 2 were a set of architectural plans dated August 2014. All material filed indicates that the architectural plans formed a part of the contract. The other material attached to this contract was a Prime Cost Items Schedule. The dispute in this circumstance does not lie with this not being a building dispute per se but rather the parties take issue with the meaning of aspects of the contract and what, if any, consequential damages flow from this contract.
- Mr Woolfson has not made a counter application. In his submissions Mr Woolfson stated he continues to feel aggrieved by many issues, including that he believed that the Sharmas still owed him over $12,000 from the original contract’s final payment which he said was:
- (a)$2,500 from an unpaid variation;
- (b)$12,000 for an extra 52m2 of hardwood flooring which was not in the contract;
- (c)$10,000 for the renovation of the original house which was not in the contract;
- (d)$14,000 for the additional work, earthworks in concrete foundations;
- I accept the findings in the related matter of GAR189-18 and I accept that Member Browne made the following findings: at paragraph 57 of that decision that Mr Woolfson failed to complete the works with due diligence from early August 2017; that the works did not reach practical completion as required under the contract; as at September 2017 there were a number of defective and incomplete works; this was supported by independent evidence in the form of a report from Sergon; and paragraph 60 where Member Browne found the Contract was lawfully terminated by the Sharmas on 13 December 2017.
- I accept that Mr Woolfson was given time to remedy the breach as required under the general conditions of the contract. At paragraph 61 of her decision Member Browne found that Mr Woolfson was in breach of contract by issuing and demanding payment for Stage 6 (PP6) work that was not completed. The learned member was also found that Mr Woolfson was not entitled by the Contract to request PP6 payment because the Stage 6 work was not completed by him. It was therefore found that the Sharmas had appropriately terminated the contract and I note that there had not been Practical Completion of the house at the time declared by Mr Woolfson for this to have occurred.
- Having reviewed the information before me and giving consideration to the legislation and the case law I am satisfied that this is a building dispute within the jurisdiction of the Tribunal and I find that I have the jurisdiction to deal with this matter as a building dispute under the QBCC Act.
Damages arising from a breach of the terms of the building contract
The Applicants’ submissions
- In this Tribunal proceeding, the Sharmas have filed a ‘Schedule for QBCC Level 2 Renovation Extension and Repair Contract New Home Construction Contract’. This document contains details such as the progress payment amounts. It also includes underneath each party’s signatures that the owner and contractor agreed that the contractor shall carry out the work described in this contract for the total price it provides. There is a heading “This Contract Includes” and it states, “planned specifications and any other contract documents described in Item 5 of the Contract Schedule”. The Contract indicates that there were plans attached to the Contract. Those plans are exhibited as part of the Contract and are plans drawn by Ian Webb, Architect. These plans are dated August 2014.
- A question for my determination is whether the items claimed are part of the terms of the contract. The items may be described as the rectification of the fence and the outdoor barbecue bench. Various invoices have been submitted. These include the following: an invoice for the relocation of the metre behind the metre box from APA Group Asset Management for the amount of $660.00; an invoice from Randall Electrics and Trade Services dated 23 April 2019 for $104.50 for fence lighting; extracts of text messages from Strazzo Painters dated 30 August 2018 and 2 September 2018 which evidenced the total cost of painting the fence at $3,075 (of this amount the Applicant wished to claim an amount of $645.00 from that total invoice for the cost of painting the fence); email correspondence between Rapid Rendering and the Applicant dated 7 September 2019 and 10 September 2019 with respect to the rendering of the fence at a cost of $330; email correspondence from the Respondent dated 6 September 2017 which noted the cost to rectify the fence in the amount of $1,400 inclusive of GST; an invoice from Safe Electrical dated 16 August 2018 for $1,972.25 which includes work done on the fence and outdoor barbecue bench. The Applicants wish to claim $400 from the total invoice for the cost of electrical work to the fence; a remittance advice from Jabiru Plumbing Services Pty Ltd for plumbing work on the outdoor barbecue bench at the cost of $1,003.46 dated 23 April 2019; an invoice from Focus On Kitchens dated 29 March 2019 showing $4,156 for the outdoor barbeque; an invoice from Elite Plumbing & Gas dated 23 July 2018 for $517 for the relocation of the gas metre and the extension of the existing gas line to the new metre location for the barbecue and a copy of a Form 57 reminder notice for lapsing approval dated 22 September 2017 with an extension fee in the amount of $400. In total $8,256.86.
Are the items claimed part of the terms of the contract?
- From the evidence before the Tribunal there are drawings provided by the architect and attached to the contract; these form a part of the contractual terms. An examination of the contract plans reveal that the fence and electricals are referred to in writing and on the plans. The term BBQ appears on the plans. Therefore, based on an objective reading of the contract I accept that these were all items provided for in the terms of the contract. Based on the evidence before me in the form of the contract that has been filed, I accept that the need to pay for the items claimed arises out of the respondent’s breach of contractual terms. The extension fee arises as a direct consequence of Mr Woolfson’s failure to fulfil his contractual duties and therefore is recoverable. I find that the material filed by the applicant relating to these costs supports the amounts claimed and that these amounts are reasonable. I accept that there has been a breach of contract, the claimed items are provided for in the contract and that the issue of the extension of the approval notice is also something that reasonably flows from the respondent’s breaches of the Contract.
- The respondent makes few concessions or in fact makes few cogent submissions in relation to these issues. He does make a comment in one of the email trails that he is unable to provide a BBQ if it is not included in the plans. A plain reading of the plans reveals BBQs on the plans for both the ground floor and the first floor. The plans provide a scale and therefore items on the plans can be interpreted according to that scale. Giving the contractual terms their everyday meaning and adopting an objective approach to interpretation of this contract, the terms of this building contract include the fence and BBQs. Even if not specifically mentioned the requirements to properly finish the fence and to make the BBQs function (e.g. BBQ, electricity, sink etc waterproofing) will be implied as terms of the contract. This is a matter of business efficacy. In the absence of any compelling evidence to the contrary I can only accept the objective evidence. This is not a matter of what was believed by the parties, it is a matter for objective analysis of the terms of the Contract. Based on objective contract theory that is applicable in Australia the claimed items were required to be paid for by the Sharmas due to the breach of contract by Mr Woolfson. These items are either explicit or implied terms of the contract or reasonably flow from the breach of the Contract by Mr Woolfson. The Sharmas have provided reasonable invoices. Mr Woolfson appears to have not answered this evidence in any detail or specificity. I find in favour of the Sharmas and order that Mr Woolfson pay the Sharmas the sum of $8,256.86 within 28 days of the publication of this decision.
The applicants’ submissions on loss of rent and mitigation of damages
- In the submissions dated 19 February 2020, under the heading “LOSS OF RENTAL INCOME”, the Sharmas detail their claim:
- As to the request in Direction 1 (a) of the Directions of Member Brown (sic) dated 23 January 2020 ('the Directions') the Applicant are claiming loss of rental income as a consequential loss from the Respondent's breach of the Building Contract.
- As to the request in Direction 1 (b)(i) of the Directions, there is no provision in the Building Contract which expressly sets out any type of loss that either party wished to exclude from the Building Contract, that is, there is no exclusion clause in the Contract. As such, consequential loss is not a type of loss excluded under the Contract entered into between the parties on 30 August 2016.
- As to the request to establish how the claimed rent is recoverable as a matter of law and fact, the Applicant make the following comments:
- The Applicant refer to Augustine & Anor v SJ Builders Ply Ltd & Anor  QCAT 248 and notes that the Appeal Tribunal has previously provided guidance concerning claims for consequential loss. The Appeals Tribunal in Harrison & Anor v Meehan  QCATA 197 noted that a claim for consequential loss is first subject to the rules in Hadley v Baxendale:
"prescribe the measure of damages in respect of breach of contract to include not only damage naturally resulting from the breach ("i,e. according to the usual course of things") but also damage which might reasonably be or supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it".
“Additional or special knowledge know to both parties may widen or contract the scope of liability for breach. These rules have been merged in a single principle."
- In Augustine & Anor v S J Builders Ply Ltd & Anor [2018) QCAT 248 ('Augustine'), Member Gardiner further makes reference to the guidance provided by the Appeals Tribunal in Harrison & Anor v Meehan  QCATA 197 with reference to the cases of Environmental Systems Ply Ltd v Peerless Holdings (2008) 19 VR 358 and GEC Alsthom Australia Ltd v City of Sunshine (Unreported, FCA, 20 February 1996, Ryan J) before making a determination at  that the claim (in Augustine) is more than a normal loss arising from a domestic building contract and is characterised more properly as a consequential loss.
- In Augustine, Member Gardiner at  states that "what is important is whether renting the home on completion was within the contemplation of both parties at the time they made the contract and that loss of rent would be a probable result of a breach of the Contract".
- In Augustine, Member Gardiner at  ultimately found there was no evidence that the builder was aware of the intention to rent the property and there was no evidence to show it was within the contemplation of both parties at the time they entered into the Contract. To contrast Augustine, with the facts of the present dispute before the Tribunal, the Applicant submit that the Respondent was aware prior to and at the time of entering into the Building Contract, that the Applicant intended to move into the property at (first address) and rent out the property at (second address) upon the completion of work at (first address). This is evidenced by:
- The verbal exchange between the Applicant (Kiran) and the Respondent on or about 18 August 2016. The Applicant recall the following exchange, using words to the effect:
Respondent: Will you be borrowing money from the bank for the build?
Applicant (Kiran): No.
Respondent: Will you be selling (second address)?
Applicant (Kiran): No, upon completion of the renovation work at (first address), we will move into that property and rent out the property at (second address) to produce a rental income.
- An email from the Respondent to the Applicant dated 30 October 2016 which states "I understand you will be renting out (second address) once you've moved in to (first address), so it would appear that you have already missed out on many $1000s in rent”. A copy of that email is attached hereto and marked "Annexure 1".
- An email from the Respondent to Craig Ray & Associates Solicitors dated 20 November 2018 in which the Respondent states that the Applicant are "losing rent". A copy of that email correspondence is attached hereto and marked 'Annexure 2'.
- As the respondent was aware prior to and at the time of entering into the Building Contract that the Applicant intended to rent out the property, it was in the contemplation of both parties at the time they made the Contract.
- As a consequence of the Respondent's failure to complete the premises within the Completion Period (being 195 days from the commencement of works on 14 November 2016), the applicant suffered a loss of rental income and that loss was a probable and reasonably foreseeable result of a breach of the Contract. Under the Contract, the Respondent was required to deliver the premises at (first address) on 4 August 2017 so that the Applicant could take up residence in the property at (first address) and rent out the property at (second address). The Applicant had advertised that the property at (second address) was available to rent from 4 August 2017. The Applicant had paid advertising fees for the premises. The Respondent failed to deliver the premises at (first address) on 4 August 2017 and the Applicant were unable to move into the premises at (first address) as it was unhabitable, which meant that the Applicant had to remain in the premises at (second address). The Applicant had to withdraw the premises at (second address) from the rental market until 14 July 2018, being the date that the Applicant were able to move into (first address). The Applicant suffered a Joss in rental income from 4 August 2017 until 13 July 2018 as a result of the Applicant having to remain in (second address) until such time as the premises at (first address) was habitable.
- The Applicant have actively taken steps to mitigate their losses throughout this dispute including:
- On 20 November 2017 Craig Ray & Associates caused a letter to be sent to the Respondent. Attached hereto and marked Annexure 3 is a copy of that correspondence.
- On 28 November 2017 Craig Ray & Associates issued a notice to remedy breach pursuant to Clause 26 of the Contract. Attached hereto and marked Annexure 4 is a copy of that correspondence.
- On 13 December 2017, Craig Ray & Associates issued a notice to terminate the Contract pursuant to Clause 26 as a result of the Respondent's failure to comply with the notice to remedy breach. Attached hereto and marked Annexure 5 is a copy of that correspondence.
- On 15 December 2017, the Applicant (Kiran) filed a complaint with QBCC for non-completion.
- On 22 June 2018, the Applicant entered into a Deed of Settlement with QBCC in full and final settlement of the non-completion claim.
- On 24 April 2018, QBCC directed the Respondent to rectify and complete five (5) items at the property at (first address). The Respondent failed to complete four (4) out of the five (5) items in accordance with QBCC's guidelines. Nevertheless, the property at (first address) was habitable on 14 July 2018.
- The Applicant were able to move into (first address) on 14 July 2018 and the Applicant promptly arranged a Tenancy for (second address) to mitigate any further rental losses. A copy of that Tenancy Agreement is attached hereto and marked Annexure 6.
The respondent’s submissions on loss of rent and mitigation of damages
- Mr Woolfson argues that he was unaware that the Sharmas were going to use the property next door, that they were residing in, as a rental property once they moved into the property the subject of the relevant contract. He submits that he became aware of this sometime between January 2017 and June 2017.
- Mr Woolfson’s claim is that on 31 July 2017 the house was habitable. He does not accept the Sharmas’ claim that they have done all that they can to mitigate any losses that may have arisen from a loss of rent. He argues that he should not be made liable for any loss of income from an inability to rent out the property next door to the house he renovated.
- In submitted emails Mr Woolfson made comments about the parties being unable to move into the property without his certification. He said that he was withholding certification until he was paid by the Sharmas. On 6 September 2017 Mr Woolfson sent an email saying that he was at practical completion stage.
- Included in an email to the Sharmas dated 6 September 2017 was the comment:
a friendly reminder, leaving windows and doors open so you or any unauthorised person can enter the building, will cancel any insurance and is illegal as you know as I'm the builder and the only person who can authorised entry into the site until handover is completed then it's a good idea to get your own insurance.
- On 30 October 2017 Mr Woolfson emailed the Sharmas with the subject heading of “completion”. He said that the site had been available for occupancy for 10 weeks, everything was completed as on the drawings and water, power and gas were working. He wrote that he had not handed over the keys as he wanted to because he needed all the monies to be finalised before handover. He made a reference to the following:
I understand you'll be renting out (second address) once you've moved into (first address), so it would appear you have already missed out on many $1000s in rent and many more if we do not agree on completion. Your rental losses will soon be more than the money remaining in the contract.
- On 20 November 2017, in an email addressed to Craig Ray (solicitor) he stated “I want to remind everyone involved, there is only one person who can hand over the keys and the certification papers, and that is me. I would like to hand them over but the Sharmas do not want them. I will not handover until all the money is paid”. Nothing in these emails indicates that it is Mr Woolfson’s view that the Sharmas could move into the house.
- All of this information indicates that Mr Woolfson appeared to be of the belief that he had not handed over or completed the contract. He stated it would be “illegal” for the Sharmas to enter the building therefore it would have been impossible for the Sharmas to move in.
- I refer to Member Browne’s findings in paragraph 44 of GAR189-19 where she does not accept Mr Woolfson's evidence that the practical completion was reached on 1 August 2017. Paragraph 45 of that decision details his response to the question of whether he had provided documents in relation to practical completion. He said no he had not but that he tried to walk through the property with the Sharmas.
- The applicants seek to recover damages to compensate for their loss, occasioned by the respondent’s breach of the building contract, in the form of lost rent. This came about because the applicants were unable to move into the subject premises due to a lack of practical completion; they were forced to accommodate themselves in the interim, in the house next door (to the respondent’s knowledge) which they owned. Their evidence is that, had they been able to move in to the subject premises in a timely way, as contemplated by the contract, they would have thereafter been able to rent the neighbouring house out, at the claimed rate, rather than be required to live in it and thus forego that rent. This lost rent claim is thus pursued for the period of the established delay; the applicant could not move into premises which were not practically complete and are entitled to recover the consequential loss. The debate arises, of course, in the context that the parties excluded from the contract the possible resort to a liquidated damages clause; thus, the damages flowing from the breach fall to be assessed according to general principles.
- Recoverability of consequential damages of this kind is subject, of course, to the principles of remoteness of damage. The matter was canvassed in Riggall & Anor v Thompson where Fraser J. A. said at :
…The broad principle is that an award of damages for breach of contract is designed to put the innocent party in the position that party would have been in had the defaulting party performed the contract; the party who sustains loss as a result of a breach of contract is, “so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.” (see Robinson v Harman (1848) 1 Ex 850 at 855, approved in The Commonwealth v Amann Aviation (1991)174 CLR 64). That principle is qualified by the principles concerning remoteness of damage established in Hadley v Baxendale and developed in later decisions. The relevant law was summarised by Brennan J in The Commonwealth v Amann Aviation Pty Ltd:
Where a contract is rescinded for breach, the innocent party loses the benefit of performance of the contract so far as the contract remains unperformed. And there may be other losses resulting from the breach. The rule in Hadley v Baxendale prescribes the condition on which damages can be awarded in respect of a loss sustained by reason of a breach of contract:
“Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, ie, according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.”
Applying the rule in C Czarnikow Ltd v Koufos, Lord Reid said that:
The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.
The measure of damages prescribed by Robinson v Harman ensures that the parties to the contract are kept to the benefits and the burdens of the contract they have made: the plaintiff recovers no more than the net benefit he would have received under the contract; the defendant acquires no right to profit by his breach. (some citations omitted).
Further discussion of loss of rent and mitigation of damages in the current case
- In GAR189-18 Member Browne found that in the absence of any evidence as to proper notice being given under clause 23 of the contract that under the contract the completion date was on or about 11 June 2017. In GAR189-18 the independent evidence of the building consultants (dated 9 March 2018) stated that the works were reported as being of medium quality and having reached the second fixing stage. Based on Sergon’s inspection it was reported as 98% complete but not 99% complete which would be practical completion. Member Browne’s finding was that they had not reached practical completion in accordance with the contract. Further the learned member found that at early August 2017 there was incomplete and defective work. No certification was received by the Sharmas and post this date (September 2017) Mr Woolfson had subcontractors (plumbers) working on the site.
- Mr Woolfson summitted no evidence that would cause me to differ from these findings. For completeness I find that even in the event of a hypothetical circumstance where the decision in GAR189-18 did not exist there is still sufficient material filed in BDL257-18 alone for me to made the findings I have on the relevant issues in this matter e.g. contractual terms, practical completion, the time the Sharmas could move into the property etc. I accept that it was reasonable for the Sharmas not to move into the premises as practical completion by Mr Woolfson has not been reached at any time. Mr Woolfson has not at any stage provided them with certification of the property.
- I accept the chronology set out in paragraph two of the Sharmas’ 19 February 2020 submissions i.e. that they actively took steps to mitigate their losses. I find that the works did not reach practical completion in August 2017 (see Member Browne’s finding in GAR189-18). Due to this there was a process that needed to be commenced to resolve the situation. This included termination of the contract and initiation of the QBCC process. A direction to rectify was issued in April 2018 and I accept that the parties could not move into the renovated property until 14 July 2018. Mr Woolfson submits that the Applicants could have moved into their property at a much earlier date. I do not accept this submission based on the evidence before me including the emails and submissions authored by Mr Woolfson.
- The Sharmas took the course of terminating the contract and I accept that it was legally terminated by them. They also took the reasonable action of referring this matter to the QBCC for potential resolution. They gave Mr Woolfson a list of defects or incomplete items on 28 November 2017 and they gave him time to remedy his breach. All of these things are taken as attempts to mitigate their loss of rent arising out of Mr Woolfson’s breach of contract.
- Mr Woolfson’s claim is that on 31 July 2017 the house was habitable. This does not accord with the learned member’s findings based the evidence of the QBCC and Sergon in GAR189-18. It does not accord with the evidence filed in the current proceedings. Mr Woolfson does not deny that he went overseas in September of 2017. The building works were not complete then, hand over had not taken place. At that point in time the Sharmas had not received certification of completion of the project.
- Mr Woolfson’s email dated 6 September 2017 contained statements that indicated a misguided understanding of the QBCC's role in disputes. He stated that he would pass the matter onto the QBCC who would correspond with the Sharmas’ lawyer at their own expense. Although unclear, his comments in this email may be interpreted as Mr Woolfson indicating that he believed the QBCC would be legally representing him or representing him in some way. This is incorrect.
- Included in an email to the Sharmas was the comment:
a friendly reminder, leaving windows and doors open so you or any unauthorised person can enter the building, will cancel any insurance and is illegal as you know as I'm the builder and the only person who can authorised entry into the site until handover is completed then it's a good idea to get your own insurance.
- He wrote “I look forward to seeing this complete.” Clearly from Mr Woolfson’s own words he believed that the project was not complete.
- In his email trail to the Sharmas Mr Woolfson refers to the term “practical completion”. These comments are inconsistent with other parts of his emails that refer to needing to have the job completed. He informed the Sharmas that it would be “illegal” for them to move in without paying him more money.
- All of this information indicates that Mr Woolfson appeared to be of the belief that he had not handed over or completed the contract. He stated it would be “illegal” for the Sharmas to enter the building therefore it would have been impossible for the Sharmas to move in.
- I find that even on Mr Woolfson's version of events alone as at completion, including certification, had not occurred and he had not handed the property over.
- On 20 November 2017, in an email addressed to Craig Ray (solicitor), he stated “I want to remind everyone involved, there is only one person who can hand over the keys and the certification papers, and that is me. I would like to hand them over but the Sharmas do not want them. I will not hand over until all the money is paid”. Nothing in these emails indicates that it is Mr Woolfson’s opinion that the Sharmas could move into the house.
- The Sharmas’ solicitor issued a list of several items that were defective or incomplete works. On 20 November 2017 the solicitors provided the particulars of items being identified as incomplete or defective. On 28 November 2017 the Sharmas gave Mr Woolfson written notice pursuant to clause 26 of the contract. This notice to rectify gave Mr Woolfson up to 10 days to rectify or termination would occur.
- On 12 December 2017 the Sharmas’ legal representative wrote to Mr Woolfson referring to the letter of 28 November 2017, stating that they were terminating the contract. As already stated, I accept that the contract was appropriately terminated by the Sharmas.
- On 15 December 2017, two days after the notice to terminate had been issued the applicant filed a complaint with the QBCC for non-completion and defects. In April 2018 the QBCC directed the Respondent to complete five items at the property. The Respondent failed to complete four out of five of those items. The QBCC commissioned an independent report from Sergon. That report stated that the house had not reached practical completion. I find that based on the evidence before me, including the information provided in the form of emails and submissions from the Respondent, that the renovated property was not ready for the Sharmas to move into at the end date of the contract in July 2017. Due to the actions of the Respondent and his failure to complete the contract and rectify the items that were defective the Applicants could not move into the house the subject of the contract until July 2018. It is Mr Woolfson’s breach of contract that has set in motion the chain of events that led to the Sharmas being unable to move into the house until after the process with the QBCC had been completed.
- In GAR189-19 Member Browne found that under the contract the completion date was on or about 11 June 2017. In that decision the independent evidence of the building consultants (dated 9 March 2018) was that the works were reported as being medium quality and having reached the second fixing stage. Based on their inspection it was reported as 98% complete but not 99% complete which would be practical completion. Member Browne’s finding was that they had not reached practical completion in accordance with the contract. Further she found that at early August 2017 there was incomplete and defective work. No certification was received by the Sharmas and post this date (September 2017) Mr Woolfson had subcontractors (plumbers) working on the site. No evidence provided by either party in the current proceeding would provide a basis for me to decide this issue in any manner that is different to the decision in GAR189-18.
- Mr Woolfson submits that he became aware of the Sharmas’ intention to rent out the property next door to the building site sometime between January 2017 and June 2017. Mr Woolfson fails to provide any further details of how this was revealed to him. This lack of specificity is in sharp contrast to the level of detail submitted by the Sharmas on this issue. There are several cases that have discussed damages that would not be within the knowledge of the parties e.g. knowledge of the outcome of a planning decision, however the current case is not similar to those and is distinguishable on the facts.
- I find that even on Mr Woolfson's version of events alone as at the time of termination of the contract in December 2017 completion had not occurred and he had not handed the property over. The Sharmas then had to await the QBCC process of inspections and the QBCC issuing of a notice to rectify to Mr Woolfson. This meant that the they could not move into their not practically completed, uncertified house until it was completed and there was certification. This meant they had to continue to reside in the property next door. This obviously meant that property could not be rented out as planned.
- I find that the Sharmas took all reasonable steps to mitigate their losses throughout the dispute. I note that the applicants were able to move into the renovated house on 14 July 2018. They promptly arranged a tenancy for the house next door to mitigate any further losses. I accept that $800 is a reasonable amount for rent of the property next door to the renovated property. Based on the evidence before me including the evidence of the McGrath Real Estate, the general tenancy agreement for the property and the amount that the property is rented for ($800) I accept that the weight of the evidence supports the market value of such a property being $800.
- Thus my conclusion on this issue is that, given the Respondent was aware of the Applicants’ general circumstances, and that they would not be able to move into the subject premises if not practically complete, he or the reasonable person in his position would have realised that the identified loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach, or that loss of that kind should have been within his contemplation. Thus the loss is recoverable.
- In the circumstances I find the amount claimed is reasonable. The preponderance of evidence in this matter supports the finding that damages such as a loss of rent following from Mr Woolfson’s breach should have been within the reasonable contemplation of the parties. Therefore I find that the applicants are entitled to damages in the amount of $38,800 for the lost rental income between 4 August 2017 and 13 July 2018.
- I order that Mr Woolfson pay Kiran, Asham and Rabin Sharma the sum of $38,800 for the lost rental income between 4 August 2017 and 13 July 2018.
- The Guide to Costs provided to QCAT members indicates the following in relation to Building matters:
Section 77(3)(h) of the QBBC Act provides that in building disputes the Tribunal may award costs, so the usual position as to costs in the Tribunal is displaced. It means that the Tribunal can make a costs order that is justified in the circumstances. It is a broad general discretion which must be exercised judicially, not upon irrelevant or extraneous considerations but upon facts connected with or leading up to the litigation: Lyons v Dreamstarter Pty Ltd  QCATA 142 Judge Kingham.
Under s.77 the question of costs is to be addressed in markedly different terms from s.100 of the QCAT Act. The High Court has said that there is no automatic rule that costs follow the event, but the discretion to award costs starts with the proposition that it is just and reasonable that a party who causes another to incur costs should reimburse the other party for them. Otherwise, the factors affecting the discretion will vary in each case: Lyons v Dreamstarter Pty Ltd  QCATA 71 Justice Alan Wilson.
The discretion to award costs must be exercised judicially and in accordance with established principles. A successful litigant is, generally speaking, entitled to an order of costs, and to deprive a successful party of their costs is an exceptional measure: Rainbow Builders Pty Ltd v The State of Queensland through the Department of Housing and Public Works (No. 2)  QCAT 497 Senior Member Brown.
In building cases, unlike in the QCAT Act, there is no strong contra-indication against a costs order. But it remains necessary to consider whether an award of costs is justified in the circumstances: Bartlett v Contrast Constructions Pty Ltd  QCATA 199 Senior Member O'Callaghan, Member Paratz.
Section 77(3)(h) is a “modifying provision” so that it prevails over both sections 100 and 102 of the QCAT Act: Partington & Anor v Urquhart (No 4)  QCATA 96 Snr Member Howard and Member Traves , , which concerned costs of the appeal in a building case.
As in Tamawood Ltd v Anor v Paans, whether it was necessary for a successful party to reasonably incur the cost of legal representation to achieve a satisfactory outcome is a relevant consideration in exercising the broad discretion under s.77: Mair Renovations v Miller  QCAT 317 Member Browne.
- All of this information repeated from the QCAT Guide to Costs has been relevant in my consideration of this matter. I accept the premise that the Sharmas have been successful litigants in this case. I accept that I have the power to award costs under section 77(3)(h) of the QBCC Act. I take no issue with that concept however it is the nature of the costs sought in this proceeding which causes me to consider whether it is appropriate to grant them. Decisions such as Tamawood Ltd v Anor v Paans were made in the context of legal representatives who appeared on the record on behalf of their clients. This is not the case for the Sharmas.
- The costs the Sharmas seek are costs associated with their engagement of solicitors for legal advice. Not all of this advice was obtained in relation to the current proceeding. They have claimed for invoices issued by their solicitors for dates long before the commencement of this building dispute in QCAT. They have also claimed for invoices for services received post the commencement of this application.
- The Tribunal may grant leave for a party to be represented. Section 43(3) of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act) sets out a number of circumstances that the Tribunal may consider as supporting the giving of leave, including that the proceeding is likely to involve complex questions of fact or law and that all of the parties have agreed to the party being represented in the proceeding.
- At no time have the Sharmas made an application to QCAT for leave to be legally represented. The granting of leave to be legally represented is required as a necessary step to enable parties to be represented in proceedings such as this one. In the case of Daniel John Marino v Keith Howe it is clearly stated in paragraph 4 of those reasons that “parties in tribunal proceedings should represent themselves unless the interests of justice require otherwise.” The first step to leave being granted is that leave is applied for. This process provides procedural fairness to the other party as they have an opportunity to made submissions on their views about legal representation for the other party. Such an application also provides the Tribunal with submissions to assist it in exercising its discretion regarding the granting of leave to be legally represented. Section 43(3)(b) of the QCAT Act sets out a number of circumstances that the Tribunal may consider as supporting the giving of leave, including that the proceeding is likely to involve complex questions of fact or law and/or that all of the parties have agreed to the party being represented in the proceeding. In this case the Tribunal was never afforded the opportunity to consider these factors due to the Sharmas’ lack of application to be legally represented. The respondent was denied the opportunity to make submissions on the issue of legal representation.
- In a letter submitted to the Tribunal on 19 February 2020 under the signatures of Craig Ray and Joshua Ray it is stated “ Our office does not represent our clients in relation to this current proceeding before the tribunal and has not appeared at any hearing on behalf of our clients in relation to this dispute.” Further in this letter they write “We do not consider it necessary to file an Application for Leave to Appear as we are not formally appearing on behalf of our clients”. It appears from this information that the Sharmas wish to recover costs for payments to solicitors who say they do not represent them in this dispute. Further the Sharmas seek payment for solicitors who appear to have advised them to unilaterally circumvent the statutory requirement to apply for leave to be legally represented. This in turn has denied the respondent the opportunity to make submissions to the Tribunal about an application for leave to be legally represented. When parties are involved in a dispute such as this one it is well recognised that all of the parties must be afforded procedural fairness by the Tribunal.
- If I were to grant the costs for lawyers who say they do not represent parties in tribunal matters and who have ignored the statutory process clearly mandated for the granting of legal representation at QCAT I would be denying the respondent the opportunity to make submissions. Further I would be attempting to retrospectively apply the s 43 of the QCAT Act considerations in the absence of any submissions on the issue of whether legal representation should be granted. The Sharmas’solicitors appear to indicate via their filed correspondence that they decided to ignore the process as they felt it unnecessary for them to comply with it. I find that this proposition is incorrect.
- I refer to the provisions of s 43 of the QCAT Act. The Sharmas’ submissions appear to indicate that some of the factors set out in the section may apply in this case. I find that a consideration of these factors in the absence of an application and at this end of the proceedings is moot. There is a statutory regime for the granting of representation. This is premised on the statutory legislative intention that most parties represent themselves unless leave is given by the Tribunal for them to do so.
- An application must be made under s 43 of the QCAT Act for leave to be legally represented. This process provides procedural fairness to the other party involved in that it allows that party to make submissions about whether the leave for representation should be granted. The decision before me is not whether I would have granted such representation or indeed whether it should have been granted. There is simply no application before the Tribunal and to consider the reasonableness of an application under s 43 of the QCAT Act would be a matter of making assumptions about material that is not before the Tribunal. The Sharmas’ submissions of 19 February 2020 state that they had been requested to provide information as to complex areas of law in relation to consequential loss and issues of costs. Further they said it was unreasonable to expect the applicants to be able to comment on these matters without legal advice and assistance. They submit that they were instructed by Senior Member Brown at a directions hearing on 29 August 2019 to seek assistance from a solicitor with respect to issues of consequential loss relevant to the proceedings. Whilst the statement in the paragraph above may or may not be accurate the Sharmas’ submissions do not provide evidence to support this being proof that they could recover the costs of seeking such advice.
- The Tribunal has not had the benefit of fully considering the relevant issues in the way they are in intended to be considered i.e. by an application to be granted leave to be legally represented. The Sharmas and their solicitors have ignored the statutory regime whereby there is an opportunity for people to formally file for leave to be legally represented. This regime provides an opportunity for the other parties to make applications in response to an application for legal representation. Without this there is a denial of due process. Essentially other parties cannot effectively assess the potential expenses of the litigation given an adverse outcome. A granting of costs orders for legal fees in circumstances where solicitors describe themselves as not representing parties in the dispute before the Tribunal means that the other party to the dispute has no way of knowing what potential costs may be claimed.
- It is mere assumption as to whether this is a circumstance where it may have been appropriate for legal representatives to be granted leave to appear. I cannot speculate on this. What is clear is that there was no application for leave to be legally represented. The solicitors referred to in the Sharmas’ submissions do not appear as solicitors on the record for this matter; they specifically stated that they are not formally appearing on behalf of their clients.
- For all of the reasons set out in the previous paragraphs I find it impossible to order that Mr Woolfson pay the costs to the Sharmas for solicitors who are by their very own words not formally appearing on behalf of their clients. There appears to be some misunderstanding about when an application for leave to be represented is required. The QCAT Act is clear – parties are expected to represent themselves in matters such as this one unless they apply to the Tribunal to be granted leave to be legally represented and are granted such leave.
- Dealing with the reference to Senior Member Brown, as another member I do not speculate what his intention was in those circumstances. I do not accept that his comments in any way displace the statutory requirement that the parties are required to apply for leave to be legally represented. No application has never been forthcoming.
- In the submissions received 19 February 2020 the Sharmas seek the following costs: in total $6,510.35 inclusive of GST; the first invoice was dated 29 November 2018 in the amount of $572.00; the second invoice was dated 19 January 2018 for $2,750; the third invoice is dated 17 September 2018 for the amount of $236.50. The Sharmas filed this application in the Tribunal on 26 September 2018. These invoices are claims that predate this filing date. These are not costs of this action. 26 September 2018 is when this matter commenced in the Tribunal; any claims for any legal expenses prior to that cannot be entertained by the Tribunal.
- The final two invoices were for $1,428.35 dated 12 September 2019 and an invoice dated 19 February 2020. The QCAT Act provides very clearly for a statutory regime whereby parties do apply for legal representation. On a plain reading of the QCAT Act it is clear that parties are expected to represent themselves unless leave to be legally represented is granted. In these circumstances the applicants and their solicitors have attempted to circumvent the established statutory regime to apply for leave to be legally represented and have chosen not to do so. I find that they have no entitlement to an order of costs for legal expenses.
- I order:
- Mr Woolfson pay Kiran, Asham and Rabin Sharma damages in the sum of $8256.86 within 28 days of the publication of this decision.
- Mr Woolfson pay Kiran, Asham and Rabin Sharma damages in the amount of $38,800 for the lost rental income between 4 August 2017 and 13 July 2018 within 28 days of the publication of this decision.
- Kiran, Asham and Rabin Sharma’s application for costs for legal expenses is refused.
  QCAT,  - .
  QCAT 110, .
 ‘Building dispute’, ‘domestic building dispute’ and ‘reviewable domestic work’ in Schedule 2 to the QBCC Act.
 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352.
 Applicant submissions dated 19 February 2020, paragraphs 1 to 3.
  QCA 144.
 For examples of knowledge being absent, see Victoria Laundry (Windsor) Ltd v Newman Industries Ltd  2 KB 528; Seven Seas Properties Ltd v Al-Essa (No 2)  1 WLR 1083 at 1088–1089; Carpenter v McGrath (1996) 40 NSWLR 39 at 61; Castle Constructions Pty Ltd v Fekala Pty Ltd (2006) 65 NSWLR 648;  NSWCA 133 at –.
  QCA 111.
 Daniel John Marino v Keith Howe  QCAT 390.
- Published Case Name:
Sharma & Ors v Woolfson
- Shortened Case Name:
Sharma v Woolfson
 QCAT 271
21 Jul 2020