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- Unreported Judgment
QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL
Harper Property Builders Pty Ltd v Queensland Building and Construction Commission  QCAT 56
HARPER PROPERTY BUILDERS PTY LTD
QUEENSLAND BUILDING AND CONSTRUCTION COMMISSION
General administrative review
26 February 2020
27 November 2019
The decision of the Queensland Building and Construction Commission that the contract between the Applicant and the homeowners has been validly terminated is confirmed.
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTIONS FOR BREACH – REPUDIATION AND NON-PERFORMANCE – whether notice of intention to terminate contract complied with – what is sufficient notice to the party in breach – reports referred to in notice – Generally – contractual right of termination – whether right to terminate at common law – whether notice effective to terminate on another ground
GENERAL ADMINISTRATIVE REVIEW – Queensland Building and Construction Commission – Home Warranty Insurance Scheme – where homeowners claimed defective building work – whether homeowners had properly terminated the contract – whether homeowners themselves in substantial breach for late payment of invoices – what is substantial breach
Queensland Civil and Administrative Tribunal Act 2009 (Qld), ss. 19, 20 and 24
Queensland Building and Construction Commission Act 1991 (Qld)
Associated Newspapers Ltd v Bancks (1951) 83 CLR 322
Byrnes v Jokana Pty Ltd  FCA 41
Centreplex Pty Ltd v Noah’s Rosehill Waters Pty Ltd  WASC 252
Freedom Homes Pty Ltd v Botros & Anor  2 Qd R 377
Hoenig v Issacs  2 All E R 176
Hounslow LBC v Twickenham Garden Developments Ltd  1 Ch 233
Minion v Graystone Pty Ltd  1 Qd R 157
Ross T. Smyth & Co. Ltd. v. T. D. Bailey, Son & Co.  3 All E.R. 60
Rubel Bronze & Metal Co Ltd v Vos  1 KB 315
Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359
Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245
United Petroleum Pty Ltd v 7-Eleven Stores Pty Ltd  1 Qd R 272
Re White Industries (Qld) Pty Ltd (1990) QSC 10
J Mitchenson instructed by Crouch & Lyndon Lawyers
S Monaghan for the Commission
REASONS FOR DECISION
- On 8 October 2015, the Applicant entered into a Queensland Master Builders Residential Building Contract (Level 2) (‘Contract’) with David and Melanie Holland (‘the Hollands’) to undertake building work (‘the Works’) at the Hollands’ residence. Adrian Justin Harper was at the time and still is the sole Director of the Applicant.
- The building work included raising the existing house and constructing screw pier foundations. The Contract price was for $300,650.88 consisting of $292,650.88 plus an adjustable provisional sum of $8,000 for a piling contractor. From November 2015 to February 2016, the Applicant sent the Hollands six (6) invoices. Each of these invoices was paid by the Hollands.
- Mr Holland gave evidence that in or about February 2016, he became concerned with the progress of the Works.
- On 28 June 2016, the Hollands served a Notice of Intention to Terminate the Contract (‘the Notice’) on the basis that the Applicant had failed to provide probative evidence that it had performed certain rectification work the subject of the Notice.
- The Applicant submits that the Hollands were in substantial breach of the Contract at the time of giving the Notice by failing to make payments on time and, therefore, under the terms of the Contract were precluded from terminating the Contract.
- The Hollands lodged a complaint with the Respondent who determined that the Hollands had validly terminated the Contract (‘QBCC Decision’) and claimed for non-completion under the statutory insurance scheme.
- The Applicant seeks an order setting aside the QBCC Decision and asks the Tribunal to substitute the decision with its own decision that the Contract was not validly terminated by the Hollands.
- By section 19 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘QCAT Act’) the Tribunal must decide the review in accordance with the QCAT Act and the Queensland Building and Construction Commission Act 1991 (Qld) (hereafter referred to as the ‘QBCC Act’). The Tribunal has all the functions of the decision maker.
- By section 20 of the QCAT Act the review is a fresh hearing on the merits. The purpose of the review is to reach the correct and preferable decision.
- Section 24 of the QCAT Act provides that the Orders that can be made by the Tribunal upon review are:
- (a)the decision is confirmed; or
- (b)the decision is set aside and substituted with the Tribunal’s own decision; or
- (c)the decision is set aside and the matter returned to the Commission to reconsider the decision with directions the Tribunal considers appropriate.
- It is important to bear in mind that these proceedings are not a domestic building dispute wherein relief for breach of contract is sought. Rather, the proceedings are a review of the internal review decision of the Commission, addressing the QBCC decision.
The threshold question
- The Applicant alleges that the Hollands could not terminate the Contract because they were, at the time, in substantial breach of the Contract themselves. It is convenient to deal with this issue first as, if correct, it would determine the matter.
- Clause 20.3 of the Contract provided that the owner may not terminate the Contract if the owner is in substantial breach of this Contract.
- ‘Substantial breach’ is defined as:
…a party’s failure to perform a substantial obligation under this contract (such as, for example, the owner’s failure to make payment on time).
- As a preliminary point I fail to understand how the Hollands could be in substantial breach for late payment of invoices in the absence of a Notice by the Applicant to that effect. I note that the delay in payment of other invoices, not referred to above, arose from the Hollands’ bank in not processing the invoices expeditiously. The text messages in relation to payment of invoices show that the Applicant was accepting of the reasons for late payment. There was no suggestion that it considered the Hollands to be in breach, at the time. To be in substantial breach the Applicant would have to be entitled to terminate the Contract. That would not occur under Clause 21.2 until the appropriate Notice had been given and not complied with.
- Clause 11.6 provides:
The Contractor is entitled to claim payment of the Contract progressively, at the following times:
- (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, and for the following amounts:
- (i)the amount stated for the relevant Stage in Part D of the Appendix;
- (ii)any unpaid adjustment to the Contract Price under this Contract;
- (iii)any other amount due and payable by the Owner to the Contractor under the Contract or otherwise.
- Method B was selected as stated in Item 21 of the Contract and the amounts are set out below together with payments actually paid:
No Stage % of Contract Value (incl GST) Paid
1 Deposit 10% $30,065.09 $30,065.00
2 House raise 10% $30,065.09 $30,065.09
3 Sub Floor Stage 20% $60,130.18 $60,130.18
4 Framing Stage 10% $30,065.09 $30,065.09
5 Roof Stage 15% $45,097.63 $45,097.63
6 Lock up 25% $75,162.72 $75,162.72
7 Fixing Off 5% $15,032.54
8 P C 5% $15,032.54
Total 100% $300,650.88
- The Applicants allege that the Hollands purported to terminate the Contract on 19 July 2016. At this time, the Hollands had not paid the last three invoices rendered by the Applicant – namely:
- (a)Invoice 72 issued 5 March 2016 for the sum of $2,693.40;
- (b)Invoice 76 issued 10 April 2016 for the sum of $12,127.00; and
- (c)Invoice 78 issued 20 June 2016 for the sum of $15,032.64.
- The above invoices 72, 76 and 78 were not stage payments and were either variations or adjustments due and payable under the contract.
- Mr Holland gave evidence that he did not pay Invoice 72 because the Applicant refused to break down the invoice any further. He says he asked the Applicant on multiple occasions for a breakdown of what the charge was for.
- The invoice is dated 5 March 2016 included the following:
Fridge relocation plus materials, water point electrical point install - $1,443.40
- An email dated 8 June 2016 which appears to be a variation, purported to explain the invoice as follows:
Internal Cupboard Head Height Adjustment
To raise up the cupboard head heights as discussed to a 2400 head height
Hallway from entry on right side, spare bedroom1, bedroom 2, bedroom 3
Quote price Sub-total 1436.99
- The Applicant submits that the invoice clearly articulates the work done and the cost of that work. In my opinion there appears to be little correlation between the initial invoice and the variation, save for the cost.
- Mr Holland, in his statement, said that he requested a breakdown of the charge, particularly, in the circumstances, where the fridge location came about because of an error with incorrect installation of windows, affecting the size and location of the fridge.
- Mr Holland was not satisfied that the hours claimed were performed. He was present at the Works when the alleged work was undertaken.
- Mr Harper in his statement says that the work in Invoice 72 was requested by Mr Holland but he did not provide a written variation document for the work. In that case it could not be considered due and payable under Clause 12.3 of the Contract.
- This invoice dated 10 April 2016 is described as follows:
Provision sum piling contractor $7,297.27
New floor on rear of existing house $1863.64
Extra cornice $409.09
Cladding removal and install $1,454.55
- Mr Harper gave evidence that the provisional sum was for an additional amount charged by the piling contractor. According to Mr Holland it was related to ‘hitting rock’. The claim was made four months after it was allegedly incurred.
- Appendix Part B allowed a provisional sum of $8,000 (incl GST) for the piling contractor. Clause 9.5 and Clause 11 provide that any additional amount in respect of a Provision Sum Item, is to be added to the Contract Price and the Applicant is entitled to claim for it, as an unpaid adjustment to the Contract.
- Item 3 of the Contract provided that the contract price of $300,650.88 included $8,000.00 for the provisional sum for piling. Mr Harper has not provided detail of what the piling contractor charged. The amount he claims coincidentally is the provisional sum less GST. A provisional sum in a contract is an amount to cover the expenditure of an amount which is unknown at the time of entering into the contract. The contract is adjusted according to whether the actual costs exceeds the provisional sum or is less than the provisional sum. Mr Holland alleges Invoice 63 relates to the Stage 2 payment, included Footings and piers and was paid in full. There is no evidence that the cost of piling exceeded the provisional sum. In my opinion, the amount claimed has not been substantiated.
- In respect to the other items referred to in the invoice, there is no written variation document for the additional work. Again, the sum in the invoice could not be said to be due and owing under the Contract.
- This invoice dated 20 June 2016 is described as follows:
Internal lining, internal stairs, internal flooring, $13,665.95
internal fix out timber, external all decks hand
rails balustrades, external stairs, external garage
slab and driveway, timber pailings [sic], tiling work
complete to date
- This invoice inclusive of GST was the ‘fixing off’ stage payment. Mr Holland emailed the Applicant on 22 June 2016 to say that the stage was not complete as there was still a number of items which need to be addressed including ‘all wet area tiling and doors fitted.’ Mr Holland asked for the invoice to be reissued when the items had been attended to. Mr Harper says that Mr Holland has no expertise in building to be able to comment on such matters.
- The Applicant did not respond to Mr Holland’s request. Pursuant to Clause 11.6 the builder is entitled to payment of a stage on completion of work for that stage. It appears that the Stage had not been completed when the invoice was presented. The Pro-Check report relating to an inspection of the Works on 19 August 2016 revealed numerous areas of incomplete work within that stage.
- It follows that the Hollands were not in substantial breach of the Contract, within the meaning of that term, contained in the Contract.
Termination under the Contract
- The Hollands purported to terminate the Contract pursuant to Clause 20. That clause gave the Hollands a defined contractual right to terminate the Contract if:
- (a)The Hollands were not in substantial breach of the Contract themselves;
- (b)The Hollands had provided written notice to the Applicant to remedy a specified substantial breach of the Contract; and
- (c)The Applicant had failed to remedy the substantial breach specified in the written notice within ten (10) business days.
- The Applicant alleges it remedied the alleged substantial breach set out in the Notice of Intention to Terminate within ten (10) business days. Therefore, the Applicant alleges that the Hollands were not entitled to terminate the Contract.
Chronology leading up to, and following termination
- The following facts do not appear to be disputed.
- In April 2016, the Hollands requested Pro-Check Building Services to investigate the Works. Pro-Check produced a report following an inspection on 12 April 2016. Pro-Check found the overall condition of the renovation was below industry standard. The report detailed the defective and incomplete Works and included photographs.
- The report was provided to the Applicant on or about 12 April 2016.
- On 11 May 2016, the Commission conducted an inspection of the Works following the filing of an early dispute resolution case (‘EDR’) lodged by the Hollands.
- On 11 May 2016, the Applicant and the Hollands entered into an EDR agreement to remedy the incomplete and defective Works.
- On 30 May 2016, the Hollands engaged Morgan Consulting Engineers to inspect and provide a report. The report is dated 8 June 2016.
- On receipt of the Morgan report the Applicant spoke by telephone to a Mr Plotkin of Blade Pile Pty Ltd, the manufacturer of the screw piles.
- On 27 June 2016, the Applicant sent to Mr Plotkin a draft design of the additional footing beams the Applicant intended to construct.
- On 28 June 2016, Skelton Law, the Holland’s solicitors, served the Notice on the Applicant.
- On 2 July 2016, the Applicant engaged Jayanta Bhattacharya of JP Engineers and Architects in Victoria to design footing beams to rectify the screw piers.
- On 7 July 2016, Mr Bhattacharya issued the Applicant with:
- (a)Structural drawings for the construction of the footing beams; and
- (b)A Form 15 – Compliance Certificate for Building Design or Specification in respect of the construction of the footing beams.
- The Applicant claimed compliance with the Notice by 12 July 2016.
- On 14 July 2016, Mr Bhattacharya issued a Form 16 certifying that the remedial work had been completed in accordance with the structural engineering drawings he had provided.
- On 14 July 2016, the Hollands sent a letter to the Applicant advising that the time for compliance with the Notice had expired at midnight on 12 July 2016. The letter further stated that unless the Applicant provided to the Hollands, the certifier or the Hollands’ solicitors “probative evidence” that it had complied with the Notice of Intention to Terminate by 12 noon on 15 July 2016, the Hollands would terminate the contract and file a formal complaint with the Commission.
- At 11:48am on 15 July 2016, the Applicant sent to Mr Fenwick (the Commission’s Building Inspector) a copy of the engineering drawings provided by Mr Bhattacharya, the Form 15 and the Form 16.
- At 1:03pm on 15 July 2016, the Applicant’s solicitors forwarded the same documentation to the Hollands’ solicitors.
- On 19 July 2016, the Holland’s solicitors served a Notice of Termination of Contract on the Applicant’s solicitors.
- The Hollands filed their complaint with the Commission on 26 July 2016.
- On 27 July 2016 or 16 August 2016, the Applicant, by way of letter from its solicitors, advised that the Hollands’ conduct constituted a repudiation of the Contract which was accepted by the Applicant.
- On 29 August 2016, Booth Engineers & Associates Pty Ltd, engaged by the Hollands, provided a report on the footings following an inspection of the Works on 24 August 2016.
- By letter dated 1 September 2016 the Commission advised the Applicant that it considered that the Hollands had validly terminated the Contract, that the Hollands were not in substantial breach at the time of termination and the Applicant’s purported termination of the Contract was invalid.
- On 28 September 2016 the Applicant lodged an internal review application.
- On 17 October 2016, Cornell Engineers prepared a structural engineer’s report at the request of Sergon Building Consultants on behalf of the Commission.
- Sergon Building Consultants provided a Scope of Works dated 22 November 2016.
- The internal review was completed on 22 December 2016.
- The Applicant was advised by letter dated 13 January 2017 that the Hollands’ claim under the Home Warranty Scheme of $200,000.00 had been approved.
Early Dispute Resolution (EDR)
- On 11 May 2016, the Commission conducted an inspection of the Works following the filing of an early dispute resolution case (‘EDR’) lodged by the Hollands. Following the inspection, the parties entered into an EDR agreement to remedy the incomplete and defective works.
- The Applicant was to undertake actions specified in the EDR Agreement by close of business on 16 May 2016. Mr Holland states that the work identified in the EDR was not carried out. The applicant was to provide a revised program for the owner’s consideration, but no such program was provided, and Mr Harper showed little interest in attending to the matters. Mr Fenwick, the QBCC inspector, intervened but it appears that nothing was achieved before the Notice was served.
- Mr Harper addressed some of the issues in his statement filed 11 September 2018. He says that, in his opinion, obtaining the Pro-Check report was premature given he was still undertaking the Works. That is a surprising conclusion in view of the contents of that report. He also says that before he could progress the matter further, he received the Notice. Mr Harper’s response appears consistent with Mr Holland’s concern that Mr Harper showed little interest in carrying out the Works, there was minimal to no contact and phone calls and texts went unanswered.
- Mr Holland says that the work was not completed and remained defective which was confirmed by the second Pro-Check report, the Booth report and the Cornell report.
Owner’s entitlement to terminate under the Contract
- The Contract provides, relevantly:
‘Business days’ is defined as:
‘meaning a day that is not: a Saturday or Sunday; or a public holiday in the place in which any relevant act is to be or may be done’
‘Substantial breach’ is defined as:
‘a party’s failure to perform a substantial obligation under this Contract (such as, for example, the Owner’s failure to make payment on time)’.
10.1 Warranties relating to the carrying out of the Works
The Contractor warrants that the Contractor will carry out the Works
(a) in an appropriate manner;
(b) with reasonable care and skill;
(c) in accordance with the Plans and Specifications;
(d) with reasonable diligence; and
(e) in accordance with all relevant laws and legal requirements including, for example, the Building Act 1975.
20. OWNER’S RIGHT TO TERMINATE CONTRACT
20.1 Owner’s right to give notice of intention to terminate Contract
If the Contractor:
(a) fails to proceed with the Works with due diligence or in a competent manner;
(b) unlawfully suspends the carrying out of the Works;
(c) refuses or persistently neglects to remove or remedy defective work or improper materials so that the progress of the Works is significantly, adversely affected;
(d) is unable to complete the Works;
(e) fails to effect or maintain any insurance policy required by this Contract; or
(f) is otherwise in Substantial Breach of this Contract;
the Owner may give written notice to the Contractor by hand, registered post of facsimile transmission:
(g) describing each alleged Substantial Breach of this Contract by the Contractor; and
(h) stating the Owner’s intention to terminate this Contract unless the Contractor remedies the alleged Substantial Breach or Breaches within ten (10) Business Days after receiving the Owner’s notice.
20.2 If the Contractor fails to remedy Substantial Breach, Owner may terminate Contract
If the Contractor fails to remedy the Substantial Breach or Breaches set out in a notice given 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 by further written notice to the Contractor provided that such a notice of termination must not be given unreasonably or vexatiously and, if so given, then such purported notice of termination is void, and of no force and effect.
20.3 Owner may not terminate Contract in certain circumstances
The Owner may not terminate this Contract if the Owner is in Substantial Breach of this Contract.
The Notice of Intention to Terminate
- The Notice served on the Applicant on 28 June 2016 was in the following terms:
The facts provided to us by our client [sic], we have concluded that the following substantial breach of the above essential terms of the contract has been made by the Contractor and needs to be rectified.
The Screw Pile Pad Footings and their connections to the SHS columns they are intended to support, all in accordance with Job No. 15.3358 Drawing No. G06, and identified as follows:
- Photographs on page 31 and 32 of the Pro-check report; and
- Photographs 3, 5, 6, 7, 8, 9, 10, 13 of the Structural Inspection Report of MORGAN Consulting Engineer.
Have not been installed by the Contractor in:
- An appropriate and skilful way;
- With reasonable care and skill;
- In accordance with the plans and specifications;
- With reasonable diligence; and
- In accordance with all relevant laws and legal requirements including, for example, the Building Act 1975
As a consequence of the above the Contractor has demonstrated it has failed to proceed with the works with due diligence and in a competent manner and by not rectifying the defective work it has refused and persistently neglected to remove or remedy defective work or improper materials so that the progress of the works is significantly affected.
The Contractor can remedy the above substantial breach by following the recommendations set out in the MORGAN Consulting Engineer report:
- Obtain advice from the screw pier designer/manufacturer/installer as to whether the observed offsets are permissible.
- If the observed offsets are permissible then engage an engineer to design extensions to each affected headstock.
- If the observed offsets are not permissible then engage an engineer to design the necessary remedial works, such as additional footings beams or additional floor framing.
And rectify the defective work in accordance with the engineer’s design.
- The Applicant concedes that Clause 20 gave the Hollands a defined contractual right to terminate the Contract in circumstances where they were not in substantial breach of the Contract themselves and the Applicant had failed to remedy a specified substantial breach within the stated time of ten (10) business days.
- The Applicant says that it followed the recommendations in the Morgan Report:
- (a)It consulted the screw pile manufacturer who advised that the Offset Issue was not permissible;
- (b)It provided the screw pile manufacturer with a draft design of the footing beams it intended to use to rectify the Offset Issue;
- (c)It was advised by the screw pile manufacturer that the proposed design for the footing beams was ‘more than adequate’ to rectify the Offset Issue and that the screw pile manufacturer had confirmed as such with his own structural engineers;
- (d)It engaged Mr Bhattacharya, a qualified engineer, to design the footing beams necessary to rectify the Offset Issue;
- (e)It obtained a Form 15 in respect of the footing beams;
- (f)It constructed the footing beams in accordance with the structural engineering designs provided by Mr Bhattacharya; and
- (g)It obtained a Form 16 certifying that the remedial work had been carried out in accordance with the structural engineering design provided by Mr Bhattacharya.
- The Applicant submits that it had remedied the alleged substantial breach specified by the Hollands in the Notice within ten (10) business days, consequently, the Hollands were not entitled to terminate the Contract.
- The Applicant submits that the Notice required it to rectify the pad footings and their connections to the SHS columns identified in:
- (a)Photographs on page 31 and 32 of the Pro-check report; and
- (b)Photographs 3, 5, 6, 7, 8, 9, 10, 13 of the Structural Inspection Report of Morgan Consulting Engineers.
- The Applicant submits that it completed the remedial work in accordance with the recommendations contained in the Morgan Report on 12 July 2019 – the day it was contractually required to do so under Clause 20.1. The Applicant informed the Hollands as such that same day. By remedying the “substantial breach” specified in the Notice within ten (10) business days, the Hollands’ right to terminate did not arise.
- I have extracted only criticism of the footings from the respective reports. The reports contain much more criticism of the standard of the Applicant’s workmanship but I have referred only to comments relating to the matters to which the Notice and Morgan report referred.
Pro-Check report dated 19 August 2016
- Under 7.2 Footings and stumps, some of the criticism is as follows:
- (3)Defective work. Installation defect. Some stumps had timber and other materials used to pack under the stump base plates.
Timber packers must not be used irrespective of whether the stumps are timber concrete or steel.
Packers must be corrosion resistant, incompressible, and cover the whole area of support.
In new work packing is defective if it is non-durable, compressible, or does not provide minimum bearing area as required by AS1684 and in accordance with QBCC Standards and Tolerances Guide 4.05
- (8)Defective work. Some stump base plates are totally unsupported, without nuts on the load-bearing rods on the underside of the plate, to support the stump
- (11)Defective work. Some stumps only had two bolts into the concrete pad, with the bracket showed 4 holes. Refer to the engineering drawings.
Booth Engineers & Associates Pty Ltd report dated 29 August 2016
- On their inspection on 24 August 2016 only a small proportion of the proposed footing beams appears to have been installed. The report is critical of the work in that Mr Bhattacharya’s design was not completed. They noted that numerous posts were still eccentric to screw pier caps, some were too high above the screw pier caps and filled excessively and in a non-tradesperson like fashion. The standard of workmanship was grossly inadequate, and the detail did not comply with the engineering designs for the property.
- The report went on to comment that the footings were clearly not in compliance with issued RPEQ designs for the property. They also noted that the footings did not comply with either the relevant approved design or the QBCC Standards and Tolerance Guide – Section 2.00 ‘Footings Slabs and Set Out’. In particular, the construction was clearly breaching Clause 2.03 of the Tolerance Guide (with many posts clearly more than 50 mm from footings) and excessive heights of mortar packing between the base of posts and the top of screw pier caps.
Cornell Engineers report dated 17 October 2016
- The report was requested by the Sergon Building Consultants retained to prepare a scope of works for the insurance claim. The Works were inspected on 22 September 2016.
- The steel SHS posts had not been constructed on the centreline of the screw pier pile caps. The steel post had been installed too short and grout under the base plates was excessive and had slumped providing inadequate support to the posts. The steel posts had not been adequately protected against corrosion for an external environment.
- The drawings by DEQ Engineers showed the SHS post with a 12 mm base plate and 4-M16 chemset bolts connected to the pile directly above the screw pier. According to clause 7.2 of AS2159 the Australian Standard for Piling - Design and Installation, the permitted positional tolerance of land-based piers was 75 mm.
- Rectification work had already been attempted by installing strip footings between some pole caps. However, the as-constructed beams were inadequate in that they had not been installed throughout the entire building and had not addressed the issue of the incorrectly positioned base plates.
- The Applicant was critical of the Commission in not having these experts available for cross-examination. Instead, the Commission relied upon a desktop review by a consulting engineer, Mr Robert Hughes. Mr Hughes had not inspected the Works but reviewed the respective expert reports and expressed his opinion based on the findings contained in those reports. He agreed with the conclusions. Such a course was not ideal; however, I proceeded with the hearing on that basis. It follows that the weight to be given to the other expert reports is lessened by reason of the fact that the Applicant has not had an opportunity of cross-examining the experts. On the other hand, the reports are supported by photographs and other documents which detail some very shoddy workmanship and a failure to follow the plans and specifications. Mr Harper concedes that he did not follow the DEQ plans and specifications.
- The matters to be determined are:
- (a)Was the work to be remedied only those items referred to in the Notice?
- (b)What work was to be remedied?
- (c)Was the work remedied?
- (d)Was it remedied in the time frame stipulated?
- The Applicant submits that the Notice required to remedy specific pad footings specified in the photographs (as opposed to all of the pad footings on the property). This it says it did. According to the Applicant it follows then that the Hollands were not entitled to terminate the Contract on the grounds that the Applicant had failed to remedy other defective pad footings under the Contract or at common law.
- It is not contested that the time for compliance with the Notice was close of business on 12 July 2016.
- The Applicant claims it completed the remedial work in accordance with the recommendations contained in the Morgan Report on 12 July 2016 – the day it was contractually required to do so under Clause 20.1.
- The Commission is critical of the Applicant’s attempts. It details them in its submissions as follows:
- (a)The Applicant failed to adequately inform Mr Plotkin about the state of all screw piers in order for him to appropriately advise how to address issues raised by the Hollands;
- (b)On the Form 15 Compliance Certificate for Design, it nominated ‘reinforced concrete edge beams on ground’ and ‘reinforced concrete internal beams on ground’. The Form 15 expressly excluded all concrete piers and stumps already existing on the site;
- (c)On the Form 16 Inspection Certificate, it nominated ‘foundation beams (edge beams and internal beam) connected between stumps/post as per the attached red coloured markup’;
- (d)Engineering reports of Morgan, Booth and Cornell note that one quarter of a total sixty (60) posts were offset from the piers, defective and requiring rectification. The Applicant failed to rectify the defective construction relating to all screw piers and installed footing beams as reinforcement for only seven (7) of those sixty (60) defective posts, and failed to remedy the issue;
- (e)Mr Bhattacharya gave evidence that he did not inspect the Works before issuing the Form 16, but he provided the Form 16 as he was satisfied with the original works and rectification works carried out by the Applicant;
- (f)The original work did not comply with Australian Standards; and
- (g)The ongoing existence of defective piers beyond the rectification afforded by the Notice constituted significant defective work, which gave rise to a right to terminate the Contract for substantial breach.
- The first criticism seems well placed. Mr Harper contacted the pier designers Blade Pile on or about 27 June 2016 before the Notice was served. He spoke to a Mr Plotkin. Mr Plotkin recalls that Mr Harper described only one pier as being offset /defective. Emails from Mr Harper to Mr Plotkin can certainly be construed as only relating to one pier. I expect that Mr Plotkin’s response may have been different had he known the extent of the piers affected. I find that Mr Harper did not disclose to Mr Plotkin the full extent of the defective installation of the pads and piers.
- On 2 July 2016, the Applicant engaged Mr Bhattacharya, a qualified engineer, to design the footing beams connecting individual posts/ pier locations. Mr Bhattacharya practices in Victoria and at no time inspected the property before or after the work was carried out. He provided a schematic foundation layout plan and foundation section details. He approved the modifications from photographs and issued a Form 16 on that basis. Such a practice was disapproved by Mr Robert Hughes, consulting engineer, and also, implicitly, by Booth Engineers.
- The contents of the Form 15 is as described by the Commission, the effect of which means that only part of the design of the proposed rectification work has been certified by Mr Bhattacharya.
- Surprisingly, Mr Bhattacharya did not see anything wrong with the original piers. He was very difficult to understand when giving evidence by telephone and I am not satisfied he fully understood the question. If he did, then he did not fully appreciate the state of the Works when asked to provide a solution. However, I am of the opinion that he could not properly inspect the rectification work and issue a Form 16 based on the photographic evidence he was provided with.
- Mr Harper says that between 8 and 11 July 2016 he prepared the necessary steel reinforcement for the footing beams in accordance with Mr Bhattacharya’s structural engineering drawings. Prior to pouring the concrete he showed Mr Bhattacharya photographs of the completed reinforcement work. Between 12 and 14 July 2016 the concrete was poured. Mr Bhattacharya then issued the Form 16 for the 7 specific footing beams.
- Mr Harper corrected his earlier statement contained in his first statement that the concrete was poured between 12 and 14 July 2016 and now says that the concrete was poured shortly after the rectification work was completed on 11 July 2016. I accept that.
The law relating to termination under a contractual clause
- Hudson’s Building and Engineering Contracts, referring to the general rule concerning modern termination clauses, said:
Express notice requirements are often in ‘two tier’ form … In every case the clause must be carefully considered and closely followed in all respects, both as to the contents and timing of the notices, but the courts will usually regard the notices as commercial documents, and the modern approach is to interpret notice clauses with regard to their commercial purpose [Mannai Investments Co Ltd v Eagle Star Assurance  AC 749]. Provided a reasonable recipient of the notice can be left in no reasonable doubt as to its meaning the form of words used will usually not be important.
- Megarry J in Hounslow LBC v Twickenham Garden Developments Ltd in referring to the requirements of a termination clause said as follows:
I do not read this condition as requiring the architect, at his peril, to spell out accurately in his notice further and better particulars, as it were, of the particular default in question. All that I think the notice need do is to direct the contractor's mind to what is said to be amiss: and this was plainly done by this notice. If the contractor had sought particulars of the alleged default and had been refused then, other considerations might have arisen.
- In Re White Industries (Qld) Pty Ltd a notice of intention to terminate was given in accordance with a provision similar to Clause 20.1 of the Contract in this case. The issue before the Court was that the notice gave insufficient detail of the breaches. Byrne J said at page 4:
Plainly the requirement imposed by cl. 12. 01 that the notice must not only "specify" but also "detail the default relied on" was intended to ensure that the builder was adequately informed of the allegations of breach of contract made by the proprietor. It is only if the notice descends to such particularity that the builder could avail himself of the opportunity cl. 12.02 provides to remedy the default " in terms consistent with this Agreement" and avoid the proprietor's determining the contract, with all the serious consequences that step involves.
- The phrase used in Clause 20.1, it could be argued, does not require the same degree of particularity but requires the Owner to give a notice describing each alleged substantial breach of this contract.
- It was argued on the Applicant’s behalf that the Notice required only that the Applicant rectify the specific pad footings and their connections to the SHS columns in the photographs identified in the Notice. In other words, other substantial breaches not identified in the Notice, such as other pad footings that required rectification did not have to be attended to, to satisfy the terms of the Notice.
- Byrne J went on at page 6 to observe:
It was said for the proprietor that the sufficiency of the notice could be established if regard were had to what had gone before between proprietor and builder. It is not necessary for present purposes to decide whether the notice cl.12.01 requires must be self-contained or else may be effective if it incorporates by reference material not actually served with it. The present notice does not clearly identify any document or other matter that might provide the detail the notice itself ignores.
- In the more recent decision of United Petroleum Pty Ltd v 7-Eleven Stores Pty Ltd the Court of Appeal held that the proper construction of the termination clause was to be determined by what a reasonable person in the parties’ position would have understood it to mean having regard to its text, the surrounding circumstances known to them and the purpose and object of the transaction.
- In the present case the Notice was preceded not only by the Pro-Check report but also the Morgan Report which is identified in the Notice. I accept that the rectification work the Applicant perceived he was required to complete by 12 July 2020 was completed by that time. However, that was based on the Applicant’s interpretation of what was required under the Notice.
- However, the Notice, together with the Morgan report to which it made reference, and indeed, also the Pro-Check report identified the full extent of the deficiencies of the piling/pier and pads. In carrying out the rectification work the Applicant failed to address those matters.
- It is with respect, fanciful to suggest that piers not identified in the Notice but incompetently installed and obvious on inspection need not have been rectified to satisfy the substantial breach as they are not specifically identified in the Notice. Such a literal interpretation of the Notice is not borne out by the cases I have referred to.
- In my opinion, the termination of the Contract by the Hollands was valid.
Termination at law
- The Commission submits in the alternative that it can rely upon termination at common law, on grounds that it was unaware of at the time of giving the Notice. The Commission submits that unless expressly established by the terms of the Contract, a contractual right to terminate for breach does not replace any right of termination arising by operation of law. It refers to three categories:
Repudiation – A contract is repudiated if the repudiating party manifests an intention no longer to be bound by, or to fulfil it in a manner substantially inconsistent with that party's contractual obligations. The repudiation must appear clearly and without ambiguity. Termination of the contract without justification amounts to repudiation which entitles the other party to elect to accept the termination and sue for damages;
Breach of an essential term – An essential term is one either expressly specified as such in the contract or of such importance to the promise that a party would not have entered into the contract unless they have been assured of a strict or substantial performance; or
Breach of an intermediate term causing substantial loss of benefit – An intermediate term is one which is neither essential nor inessential, but capable of operating as either, depending upon the gravity of breach.
- The Commission submits that the Applicant's defective construction of the screw piers and the failure to rectify the defective work as identified in the Notice represents a breach of an essential term under the Contract and at law.
- It further submits that applying the test of essentiality from Associated Newspapers Ltd v Bancks it is likely that the Hollands would not have entered into the Contract had they known that the Works would not be carried out in an appropriate and skillful way, with reasonable care and skill, with reasonable diligence, and/or in accordance with relevant laws and legal requirements. In particular, it's likely that the Hollands would not have entered into the Contract had they known that the Works would not be performed in accordance with the relevant engineering drawings of DEQ Consulting Engineers, with the consequence being that the screw pile pad footings and their connection to the SHS columns were defective.
- As stated earlier, Mr Harper conceded in oral evidence that the Works were not carried out appropriately in accordance with the DEQ plans and specifications.
- The Commission refers to the decision of Allsop J in Byrnes v Jokana Pty Ltd where he said:
…whatever be the most appropriate expression of the degree of seriousness required to amount to circumstances which entitle termination, it is also necessary to identify the kinds of factors to which the court will or may have regard, in addition to the question of interpretation and construction of the contract, in assessing the seriousness of any breach.
- Allsop J referred to a number of relevant considerations in assessing the degree of seriousness required to warrant termination. The following are pertinent:
- (a)The uncertainty or not surrounding future compliance with the Contract;
- (b)The history of the standard of contractual compliance hitherto;
- (c)The ability to remedy the defective work without affecting the quality of the remaining work;
- (d)The ability of either party to cure the breach; and
- (e)The expressed or otherwise evident attitude of the party in breach of its obligations.
- In addition, the Commission refers to the gross nature of the defective work as an additional consideration.
- The list of defects listed in the expert reports are varied and far reaching. Rectification required lifting the dwelling off its stumps two metres to provide sufficient working height under the dwelling to enable full access to the grouted pads and pile caps. The extent and level of defects reveal a serious departure from the standard of workmanship to be expected. One cannot avoid the conclusion that the workmanship was shoddy and there could be little confidence that many of the defects would have been identified by the time of practical completion let alone rectified by the Applicant. Indeed, by the time of practical completion, many of the defects would be covered and not apparent on inspection.
- Mr Harper, from the time the Hollands raised their first concerns, demonstrated little awareness of the seriousness of their complaints. Phone calls and texts went unanswered. Even when faced with the first Pro-Check report he thought the complaint was premature. He failed to comply with the EDR in any way.
- In the present case, what is relied upon in the alternative, is a repudiation of the Contract at law by the Applicant. In my opinion the four relevant considerations referred to by Allsop J are apposite here. The applicant’s conduct up to its purported compliance with the Notice raised serious doubts about the Applicant’s future compliance with the Contract and its ability to complete the Contract on time.
- The history of compliance up to that time showed little commitment to completing the Works in a tradesmanlike manner. The Applicant failed to take the EDR process seriously. The literal approach to compliance with the Notice and refusal to address the other deficiencies in the footings and stumps apparent in the Morgan report raises doubts as to whether the Applicant was serious in its intention to comply with the Contract in the future.
- The remedying of the defective work required extensive rectification and included adding fill to the sub-floor area under the dwelling and lifting the dwelling two metres to provide sufficient working height under the building to jackhammer and demolish much of the footings. This would necessarily cause disruption to work already completed.
- The Applicant’s response to the Commission’s alternative submission that the owners can terminate the Contract on other grounds they were previously unaware of, is that a party cannot rely upon an undisclosed ground for termination if there is a contractual precondition for notice to be given and an opportunity to remedy the default. It submits that requirement was not complied with.
- The decision of Shepherd v Felt & Textiles of Australia Ltd is relied upon as authority that at common law an innocent party who terminated on one ground may rely upon any other available ground for termination.
- In Sunbird Plaza Pty Ltd v Maloney, Mason CJ (with whose reasons Deane, Dawson and Toohey JJ agreed) described the general proposition for which Shepherd stands as authority in the following terms:
... 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.
- In a recent decision of Centreplex Pty Ltd v Noah’s Rosehill Waters Pty Ltd, Le Miere J outlined the legal principles concerning the right to terminate a contract:
Where a promisee elects to terminate the contract, what matters is whether the promisee is entitled to do so, not the basis stated by the promisee for doing so. 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.
- Similar statements can be found in Freedom Homes Pty Ltd v Botros & Anor, where McPherson JA said:
As the tribunal member correctly observed, termination of a contract can as a matter of law later be justified on any sufficient ground available to a party claiming to terminate a contract even if that specific ground was not relied on at the time of termination.
- Moynihan J agreed and said at  of his reasons:
It is true that the ground found to justify the builder's termination was not that relied on at the time and that the member found that the ground which had been relied on was not sustainable. There is however clear authority that the termination of the contract can be justified on any sufficient ground available even if that specific ground was not relied on at the time of termination: Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359; Minion v. Graystone Pty Ltd  1 Qd R 157.
- The Applicant relies on the authority of United Petroleum Pty Ltd v 7-Eleven Stores Pty Ltd. There the Court of Appeal held that if the principle in Shepherd v Felt & Textiles of Australia Ltd was capable of application, it could only apply in a form adapted to conform to the contractual requirements for a valid avoidance of the contract. In that case the appellant attempted to rely upon the notice as being a notice to terminate on another ground where the giving of a notice was a pre-condition of the right to terminate. The Court held that there was no question of any abandonment of a common law remedy in that case as the relevant right was not a common law right of termination for breach of contract but a right of avoidance which was created and defined by the parties. The Court held that the notice could not be construed as giving sufficient notice on the alternative ground.
- Generally, a breach consisting of mere negligent omissions or bad workmanship where the work is substantially completed does not go to the root of the contract in the ordinary lump sum contract.
- The Contract provides a contractual basis for termination of the Contract in circumstances where the Contractor ‘refuses or persistently neglects to remove or remedy defective work or improper materials so that the progress of the Works is significantly, adversely affected.’
- As the Contract expressly provides for termination on the very grounds that the Commission says entitled the Hollands to terminate at common law then, in accordance with what was said in United Petroleum Pty Ltd v 7-Eleven Stores Pty Ltd, that right is one created and defined by the parties’ Contract.
- Taking all matters into account, I am of the opinion that the Notice is not sufficient notice to the Applicant of the wider basis for termination. It would require a greater degree of specificity in accordance with Clause 20.1(c) of the Contract. In my opinion, there is, in this case, no basis at common law to terminate the Contract.
- However, for the reasons given earlier, I am of the opinion that the decision of the Commission that the Contract had been validly terminated should be confirmed and I order accordingly.
 Exhibit 3 (Statement of Adrian Harper), paragraph 8.
 Exhibit 3 (Statement of Adrian Harper), annexure AJH-5, page 32.
 Exhibit 12.
 Statement of Adrian Justin Harper filed 7 November 2019, paragraph 6.
 Exhibit 7, Mr Holland’s statement, paragraph 28.
 Exhibit 2, page 399.
 The former date appears to be the date of a draft letter (Exhibit 2, page 303-307) to be emailed. It is incomplete in some details. This draft appears in the Commission’s material. The final letter (Exhibit 3 (Statement Adrian Harper), annexure AJH-10) was also sent by email.
 Exhibit 2, page 279.
 Exhibit 3.
 Exhibit 7, Statement of David Holland, paragraph 37.
 Exhibit 2, Cornell report, pages 402 and 408.
 Exhibit 7. See Exhibit 9, Statement of David Holland.
 Exhibit 10.
 Statement of Robert Macdonald Hughes, dated 22 July 2019, paragraph 37.
 Exhibit 2, page 378.
 Exhibit AH 8.
 Hudson’s Building and Engineering Contracts, 12th ed) [8-045].
  1 Ch 233, 265.
 (1990) QSC 10
  1 Qd R 272
 (1951) 83 CLR 322.
  FCA 41, .
 Exhibit 2, page 410.
 Exhibit 2, page 410.
 (1931) 45 CLR 359.
 (1988) 166 CLR 245, 262.
  WASC 252,  His Honour footnoted the following references: Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359; Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245, 262 and 274-275.
  2 Qd R 377, .
  1 Qd R 272.
 Ibid, .
 Hoenig v Issacs  2 All ER 176.
 Clause 20.1(c).
- Published Case Name:
Harper Property Builders Pty Ltd v Queensland Building and Construction Commission
- Shortened Case Name:
Harper Property Builders Pty Ltd v Queensland Building and Construction Commission
 QCAT 56
26 Feb 2020