Portelli v Kereszteny[2021] QCAT 228

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL

REASONS FOR DECISION

What is this Application about?

1. [1]
   Ms Portelli entered into an agreement with Mr Kereszteny. She agreed to  a price of  $55,800 and paid $46,800.00 to Mr Kereszteny for building works. Mr Kereszteny was not appropriately licensed. He did not complete the works and what he did complete was alleged to be defective.
2. [2]
   Mr Kereszteny did not file a response to the claim or engage with the Tribunal process despite being afforded multiple opportunities to do so.  On 29 October 2020 the Tribunal issued a direction stating that a final decision be issued  in favour  of  Ms Portelli against Mr Kereszteny conditional upon assessment of damages.
3. [3]
   These reasons set out the assessment of these  damages.

Assessment of damages

4. [4]
   Mr Kereszteny gave Ms  Portelli  two written agreements that had been signed by him. The first of these was on a form called the QBCC Minor Works Subcontract. This document included the following details: the project work was described as a bathroom extension and a walk-in wardrobe at an address in Brisbane. The price was $55,800, and Ms Portelli was listed as the principal and Mr Kereszteny as the  contractor.
5. [5]
   The second document, also dated 16 September 2017, was on a QBCC Minor Works Subcontract form. It included the following: the project work was described as bathroom extension plus walk-in wardrobe at an address in Brisbane; there was a description of work - extension of ensuite plus cupboard; subcontract process $40,000 with progress claims every 14 days; commencement date 21 September 2017 and a substantial completion  date 20 November 2017.
6. [6]
   Ms Portelli was unsure why there were two subcontracts as she only agreed to put her signature (initials) to the first subcontract.  From the uncontradicted evidence including the  existence of the two agreements and the actions between the parties there was a legally binding agreement that had been entered into by both parties to this matter.
7. [7]
   Ms Portelli submits, uncontradicted by any evidence from Mr Kereszteny,  that the agreement was entered into in good faith and consideration was paid by Ms Portelli.  The expressed  terms of the agreement were  that the works would be completed and although not expressly written there was an  implied term of the agreement that the works would be performed with proper skill and care. All the evidence before the Tribunal indicates that Mr Kereszteny has not completed the works according to the agreement and he had not performed the work with appropriate skill and care, and he was in breach of the agreement with Ms Portelli.
8. [8]
   Based on these written agreements and Mr Kereszteny’s actions Ms Portelli  took the step on 10 July 2020 of having her lawyers send a termination letter to Mr Kereszteny. She  stated that Mr Kereszteny had abandoned the project and therefore repudiated the contract. The work had been commenced on or about 5 October 2017. The only evidence before the Tribunal was Mr Kereszteny and his other subcontractors had ceased work in the first week of May 2018. The agreement was terminated by Ms Portelli on 10 July 2020 due to this abandonment by Mr Kereszteny. He was advised of this via a termination letter sent by her lawyers on 10 July 2020.
9. [9]
   Although the agreement between the parties was performed by an unlicensed builder and did not include formal statutory requirements of the builder’s licence number (the only number on this  document was not a valid builder’s licence) and a notice that the building owner has the right to withdraw,^[1] this does not make it illegal, void or unenforceable by the home owner.^[2]

Jurisdiction

10. [10]
    As set out in the Tribunal’s decision of  Zhang & Lin v Lane,^[3] in order to have jurisdiction in this matter the Tribunal must find that the work agreed to be performed by Mr Kereszteny is ‘reviewable domestic work’.^[4] The application relates to the performance of that work.^[5] The Tribunal may therefore award damages, interest thereon, restitution and costs.^[6]
11. [11]
    What is a domestic building contract is defined in section 3 of Schedule 1B of the Queensland Building and Construction Commission Act 1991 (Qld) (the Act) as a contract to carry out building work, construction management contract or another contract perhaps to manage the carrying out of domestic work.  Section 4 of Schedule 1B of the QBCC Act defines “domestic building work” as:

    1. (a)
       the erection or construction of a detached dwelling;
    2. (b)
       the renovation, alteration, extension, improvement or repair of a home;
    3. (c)
       removal or resiting work for a detached dwelling;
    4. (d)
       the installation of a kit home at a building site.
12. [12]
    S67AZN of  the QBCC Act  states  domestic  contracts are regulated under Schedule 1B of the same act. The QBCC Act defines as a domestic building contract for which the contract price is more than the regulated amount defined as $3,300 or a higher amount prescribed by regulation.
13. [13]
    The amount agreed upon was $55,800, a sum over the amount required to be a regulated contract. This has the effect that this is a level 2 contract. Requirements for a level 2 building contract can be found in  section 14(3) of Schedule 1B of the Act; that a contract must include the names of the parties, including the name of the building contractor. The written agreement in this case contains the names of the parties including the name of the building contractor, Mr Kereszteny.  Section 14(10) states a contract has effect if it complies with section 14(2). For this to occur  it must be that it is in written form, dated and signed by each party. Ms Portelli has initialled/marked/signed  the contract. Mr Kereszteny has signed in the place next to the word contractor. Ms Portelli has put initials or a signature next to the word Principal. This title does not change her role from that of homeowner to something else. The Acts Interpretation Act 1954(Qld) provides in its Schedule that the definition of signing includes attaching of a seal and relevantly in this case the making of a mark. An examination of Ms Portelli’s  application  to the Tribunal  contains a  very similar  marking  where she was to sign and date.   In the context of these proceedings and based on  the evidence before me I accept that Ms Portelli  has signed the contract  as per the requirements of s 1(2) of Schedule 1B. Therefore, the base requirements  for a building contact have been met by the agreement that was signed by both the applicant and  respondent.
14. [14]
    Section 44 of Schedule 1B of the QBCC Act notes:

Unless the contrary intention appears in this Act, a failure by a building contractor to comply with a requirement under this Act in relation to a domestic building contract does not make the contract illegal, void or unenforceable.

15. [15]
    Under the QBCC Act, Part 3  warranties are implied  into building contracts  by virtue of statutory warranties.  Such a warranty includes  that the work would be carried out in accordance with all relevant laws and legal requirements. Schedule 1B, Part 3, section 19 deals with implied warranties noting that the warranties mentioned in division 2 are part of every regulated contract, therefore those mentioned from section 20 onwards of division 2 indicate that they would automatically be part of the contract without having to be written down.
16. [16]
    It is well established law that terms can be implied into contracts in law as a necessary incident for the contract or on an ad hoc basis to give business efficacy to a contract. The test for this includes Codelfa Construction Pty Ltd v State Rail Authority of New South Wales^[7] where Mason J (as he then was) restated the five conditions:

    1. (a)
       It must be reasonable and equitable;
    2. (b)
       It must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it;
    3. (c)
       It must be so obvious as to go without saying;
    4. (d)
       It must capable of clear expression;
    5. (e)
       It must not contradict any express term of the contract.
17. [17]
    It would appear in these circumstances that any terms that are not written down in the document could be implied either on a statutory basis or based on business efficacy as set out in Codelfa.
18. [18]
    The fact that the applicable statutory warranties and building standards are not listed in the contract nor is the cooling off period does not prevent a building contract coming into force.
19. [19]
    It is clear by virtue of Part  3 of the QBCC Act that warranties cannot be contracted out of merely by leaving them out of the written document as has occurred here.
20. [20]
    I find that the agreement the parties entered meets requirements of a domestic building contract and the statutory  warranties provided  by the legislation have been incorporated into this contract.
21. [21]
    Ms Portelli uses the term negligence in some of her  submissions.  Like many  parties in Tribunal proceedings Ms Portelli did not, nor was she expected to,  plead her case with legal specificity. Although the  QBCC Act does provide  the Tribunal with some jurisdiction to  deal with a building matter via a claim in  negligence,  here the  primary relationship is that of contract.
22. [22]
    Ms Portelli’s evidence is uncontested. It included a list of defective works and incomplete works.

Defective works

1. (a)
   Hand towel rails x three - loose;
2. (b)
   Sand and repaint wall to bathroom vanity;
3. (c)
   Hallway gyprock and skirting boards to be replaced;
4. (d)
   Patch and paint throughout;
5. (e)
   Powder room and walk-in wardrobe 2 - Gyprock, skirting and cornices;
6. (f)
   Shower drain  not sufficient; holes in tiles at mixer taps, shower, and bath;
7. (g)
   All silicone done so far is uneven, messy, and lifting;
8. (h)
   Shower screen missing finishing;
9. (i)
   Bifold door hung incorrectly;
10. (j)
    Toilet cavity shelf;
11. (k)
    Powder room drain tiled over
12. (l)
    Bathroom wall mirror -fell off due to incorrect hanging;
13. (m)
    Damaged silicone on vanity;
14. (n)
    Powder room wall mirror damaged, four large holes  drilled   through the wood and filled with wood putty of a different colour;
15. (o)
    Pipework under vanity in bathroom not to code;
16. (p)
    Bi-fold door tracks need to be filled and painted;
17. (q)
    Bi-fold doors remove writing and re-stained;
18. (r)
    Gap in cornice  above the bi-folds;
19. (s)
    Walk in robe 1 - skirting to be replaced;
20. (t)
    Walk in robe 3: LHS skirting and RHS wall and skirting to be replaced (wet, muddy gyprock was used);
21. (u)
    No down pipe - defective due to water pooling and flooding and damaging side of extension;
22. (v)
    Existing hot water system damaged due to previous issue - needs to be replaced;
23. (w)
    No  building inspections carried out and no certificates of inspection have been issued.

23. [23]
    Mr Kereszteny was notified of this list of defective work on 23 April 2018.  The following item, the bathroom mirror, was rehung due to safety requirements by another contractor on 4 May 2018. Ms Portelli's evidence is that the rest of the work has not been rectified and she provided a quote from Second Nature Builders Pty Ltd for $49,818.52 for remedial and incomplete works.
24. [24]
    Ms Portelli also filed a report from Jim's Building Inspections dated July 2020 entitled  “Post Completion defect Report”.

Incomplete works

1. (a)
   Toilet roll holder;
2. (b)
   No power point or light switch covers;
3. (c)
   Kickboard to double vanity;
4. (d)
   Shower screen not sealed on edges and lumps of silicone or lower bottom framework.

25. [25]
    There is  no evidence from Mr Kereszteny  that contradicts Ms Portelli’s evidence. It is clear from the filed evidence that due to Mr Kereszteny  failing to secure  an opening in the roof of  the  extensions area, the area he was working on prior to a storm,   damage and flooding was caused. This damage is directly attributable  to the respondent’s failure to carry out his contractual responsibilities with proper skill and care. It therefore follows that the damage that flowed from this breach of contract is recoverable by Ms Portelli.  I find that Mr Kereszteny performed the work in breach of the implied  warranties that are imported into their contractual agreement  as it is a level 2 domestic building contract.
26. [26]
    Ms Portelli is entitled to damages because of Mr Kereszteny’s breaches of these warranties and his  breach of contractual terms.

Damages

Payment under Contract

27. [27]
    Because Mr Kereszteny is not an appropriate licensee, he is not entitled to payment for the work.^[8] It is up to him to make a statutory claim for reasonable remuneration for performing the work.^[9] No such claim has been made in this matter. The respondent  has  not in any way engaged with the Tribunal process. Mr Kereszteny is not entitled to any remuneration for the work done. However, Mr Kereszteny’s lack of entitlement to payment  does not mean that Ms Portelli is not entitled to recover the amount she paid to the respondent as an unlicensed builder.^[10]

Fixing the problem

28. [28]
    Ms Portelli is entitled to have the work performed as required by their agreement.^[11] I again refer to the decision  of Zhang & Lin v Lane. As found in that case  the applicant is  entitled to damages to restore her to the position, she would have been in had the wrongful acts not occurred.^[12] This can be summarised as the amount  that is required to rectify the defective work and the costs to complete.^[13]
29. [29]
    Originally the applicant requested that the Tribunal make multiple orders that  were  either not  supported by evidence, were open ended or incapable of calculation and quite simply outside of the jurisdiction of the Tribunal.
30. [30]
    In response to the Tribunal’s directions issued on 7 April 2021 Ms Portelli filed further submissions relating to the orders sought and  the monetary amount claimed.

Costs

31. [31]
    The applicant sought to be reimbursed  for the application process including QCAT application fee ($345.80). The general rule in building disputes is that a successful party is entitled to recover its costs from the other party.^[14] As Ms Portelli  incurred this fee to prove her  claim, I consider it in the interests of justice to award her the filing fee.^[15] The applicant  sought to recover costs incidental to her Tribunal application: printing and postage ($29). Postage costs and experts’ fees were awarded  in Budge & Anor v JMK Building Pty Ltd (No. 2).^[16] Costs can include preparation of reports  and I find that the $500  Ms Portelli paid for the Jim’s Building  Inspection Report is recoverable (see Pollard and Anor v Hornick^[17]).

Damages flowing from Mr Kereszteny’s breach of contract

32. [32]
    Ms  Portelli  has  incurred  council fees ($1,684.30) due to  Mr Kereszteny breaching his contractual obligations and failing to complete  the project in a timely manner and to  an appropriate standard. As such Ms Portelli has  incurred costs that she would not have  incurred had it not been for the actions of the respondent and should be reimbursed for these.
33. [33]
    I allow the  payment for costs caused by the respondent’s breach of contract. These include the following: Tom’s Building and Renovations - mirror rehung $165, the carpet $1,360.05  and $2,395.87; humidifiers $375, grout $32, jack hire $123, Danny the Protector $660, extra tiles $331.55, toilet connection $40, hot water system element  $266.55. These expenses would not have been incurred had it not been for the actions of the respondent. Mr Kereszteny’s actions caused Ms Portelli to take the  step of making sure the contract was terminated and to do this she engaged  lawyers to  engage with Mr  Kereszteny. Therefore,  she paid  her lawyers for work done in relation to contractual issues arising out of  the respondent’s breach ( $3,580.70 in total). I find this is foreseeable damage flowing from the  respondent’s actions and  therefore is  recoverable by Ms Portelli.

Payments to third parties

34. [34]
    The applicant  sought the money paid to “tradies” to be reimbursed to her. The  payments  that can be clearly identified as  payment to  tradies are as follows: 20 December 2017,  $2,550.00  to Matt – cabinet maker; 28 February 2018, $1,000 to tiler; 9 March 2018, $4,000 and 28 April 2018, $400 to tiler; 8 August $1,457.50 to Reece Plumber.
35. [35]
    Ms Portelli may well have felt a personal obligation to pay Mr Kereszteny’s  tradespersons, however she has no contractual requirement to do so and therefore I find these  payments are not recoverable.

What amounts are recoverable from Mr Kereszteny ?

Tribunal Costs

36. [36]
    After analysis of this claim and as set out above I find that the amount of  $874.80  may be awarded by the Tribunal.

Damages 

Rectification and completion works

37. [37]
    Based on the uncontested evidence before me I accept based on  the building inspection report and other evidence,  that there is work that  must be rectified and work that is not completed.^[18] Ms Portelli’s only detailed quote for remedial and rectification works is from Second Nature Builders Pty Ltd.^[19] It states that  the amount  quoted for remedial and incomplete works  is $49,818.52. Ms  Portelli alluded to other quotes, however she had not provided them and based on the available evidence I find that this is the amount  payable  by the respondent to the  applicant.

Other amounts payable due to  Mr  Kereszteny’s actions

38. [38]
    As discussed in paragraphs [32] and [33] of these reasons Ms Portelli has incurred other expenses due to the actions of Mr  Kereszteny. These expenses amount to  $7,783.32 and I find this amount to be recoverable by Ms Portelli.

Respondent not entitled to payment under the contract

39. [39]
    The contract’s  agreed price was  $55,800. Ms Portelli has paid less than this amount  ($46,800) due to withholding the last $9,000 of the agreed price due to non-completion. I find that no reduction is to be made for the unpaid final instalment of $9,000.00, because Mr Kereszteny was not entitled to any payment under the agreement and the works were not completed or performed to a proper standard.^[20]
40. [40]
    Accordingly, Ms Portelli is entitled to recover from Mr Kereszteny the amount  under the agreement of $55,800.00 plus damages of $57,601.84 (the cost of rectification and completion works plus other  payments made  that are attributable to Mr Kereszteny’s actions), equalling $113,401.84.

Orders

41. [41]
    The appropriate orders are that:

    1. (a)
       Alex Kereszteny to pay Vicki-Ann Portelli the sum of $113,401.84 by 4pm on 21 July 2021; and
    2. (b)
       Alex Kereszteny to pay Vicki-Ann Portelli costs of $874.80 by 4 pm on 21 July 2021.