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Sutton Constructions Pty Ltd v Wilkes[2021] QCAT 282

Sutton Constructions Pty Ltd v Wilkes[2021] QCAT 282

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL

CITATION:

Sutton Constructions Pty Ltd v Wilkes & Anor [2021] QCAT 282

PARTIES:

Sutton Constructions pty Ltd

(applicant)

v

Michael Wilkes

Richard Sachs

(respondents)

APPLICATION NO:

BDL012-20

MATTER TYPE:

Building matters

DELIVERED ON:

16 August 2021

HEARING DATE:

On the papers

HEARD AT:

Brisbane

DECISION OF:

Senior Member Brown

ORDERS:

  1. The application for miscellaneous matters filed 12 March 2021 is refused.
  2. The application is listed for a three (3) day hearing in Brisbane on a date and time to be advised.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – DISCOVERY AND INTERROGATORIES – DISCOVERY OF DOCUMENTS – DISCRETION OF COURT AND POWER TO ORDER – where the applicant is a builder – where the respondents are homeowners – where the respondents contracted with the applicant to perform building work – where there is dispute as to whether the contract was a cost-plus contract or a fixed price contract – where the respondents seek production of documents which are said to form the basis of the initial quote prepared by the applicants before the parties entered into the contract – whether production of the documents should be ordered

Domestic Building Contracts Act 2000 (Qld), s 55

Queensland Building and Construction Commission Act 1991 (Qld), s 62

Byrnes v Kendle (2011) 243 CLR 253.

Cannon & Anor v Saunders [2017] QCATA 4

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337

Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) and Others (2001) 188 ALR 566

Franklins Pty Ltd v Metcash Trading Ltd (2009) NSWLR 603.

John Burke Ltd v Insurance Commissioner [1963] Qd R 587

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104.

Secured Income Real Estate (Australia) Ltd v St. Martins Investments Pty Ltd (1979) 144 CLR 596

Waratah Coal Pty Ltd v Nicholls & Anor [2013] QSC 68

 

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

What is this application about?

  1. [1]
    The applicant and the respondents entered into a contract for the renovation of the respondents’ house (the contract). The applicant says that the contract was a cost plus contract. The respondents say that the contract was a fixed price contract. The building works commenced and progressed for a period of time. The parties then fell into dispute. The applicant is seeking from the respondents money it says is owing under the contract. The respondents have counterclaimed for the recovery of overpayments of amounts paid to the applicant and damages for defective, incomplete and unlawful works.
  2. [2]
    The parties have filed their statements of evidence. The matter appeared to be ready to proceed to a hearing. The respondents have however filed an application seeking disclosure of documents which are said to form the basis of a quote for building work prepared by the applicant before the parties entered into the building contract. They say that the documents are relevant to the determination of issues in dispute in the proceedings. The application for disclosure falls to be determined.

Disclosure of documents in tribunal proceedings

  1. [3]
    By s 62(3) of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act) the tribunal may give a direction requiring a party to produce a document or another thing, or provide information, to the tribunal or another party.
  2. [4]
    An order for the production of documents will generally only be made where the documents are described with particularity, and have demonstrated direct relevance to the issues in dispute.[1] In a proceeding where there are no pleadings and no entitlement to disclosure, specific disclosure will be ordered in an appropriate case if to do so is in the interests of justice and if it facilitates the just and expeditious resolution of the real issues in the proceedings at a minimum of expense.[2]

The dispute

  1. [5]
    Central to the dispute, and the present application for disclosure, is the issue of whether the contract entered into by the parties was for a fixed price or was a cost-plus contract.
  2. [6]
    The evidence of the applicant is that between August 2018 and September 2018 work was undertaken by the applicant in preparing an estimate for the renovation works to be carried out on the respondents’ dwelling. The applicant says that at a meeting on or about 3 October 2018, a quotation for the project was discussed with the respondents (the quote). The quote was for $857,000.00 inclusive of GST.[3] Subsequently, on 18 October 2018, the parties signed the contract.
  3. [7]
    The evidence of the respondents is that on 3 October 2018 Mr Sachs, Mr Sutton (the principal of the applicant) and the applicant’s project manager had a meeting at which the quote was discussed. Mr Sutton agrees that the quote was discussed however certain details regarding the content of the discussions between the parties are disputed.
  4. [8]
    What does not appear to be in dispute is that Mr Sachs advised the applicant that a number of items of building work contained in the quote would be undertaken by the respondents themselves. It seems reasonably uncontentious that the parties discussed a commensurate reduction in the cost of the works. 
  5. [9]
    The respondents say that a draft contract was forwarded to them by the applicant subsequent to the meeting on 3 October 2018. The draft contract is not in evidence. The respondents say that it was for a fixed price of $650,000.00.
  6. [10]
    On 18 October 2018 the parties signed the contract. The contract is a Master Builders Queensland, Residential Renovation Contract, Level 2. The fixed price component of the contract price is left blank in the contract schedule. The amounts for prime cost items and provisional sums are noted as ‘$0.00’. The total contract price is also noted in the schedule as ‘$0.00’. The deposit is noted as $32,500.00 being 5% of the contract price. The contract schedule describes the works as: ‘Renovation of existing dwelling on a Cost Plus 20% basis. Works to be as instructed by Owner.’ The contract schedule provides for progress payments to be submitted fortnightly.
  7. [11]
    The contract contains a number of special conditions. Special condition 1 provides ‘All costs incurred by the Contractor will be charged to the Owner on a Cost Plus 20% basis’. Special condition 3 provides ‘Claims will be issued on the Friday of each fortnight following commencement.’

The documents sought by the respondents

  1. [12]
    The documents sought by the respondents are described as:

Printouts of the Costs Schedule, Timber List, Job Specifications and any other summary, information or trade or material breakdowns available on the Solo Assist software program and any other documents in the applicant’s possession including worksheets, quotes or calculations forming the basis of the quote that appears as Annexure MS-01 to the statement of Malcolm Sutton dated 10 September 2020.

  1. [13]
    The Solo Assist software program is referred to in the statement of evidence of the respondent Sachs who states that the applicant’s project manager advised Sachs that the price referred to in the quote had been calculated through the use of an industry standard building estimation software package.[4] Sachs states that the project manager subsequently advised him that the package used was Solo Assist which was able to provide a detailed breakdown of a construction estimate.[5]
  2. [14]
    I do not understand it to be contentious, on the applicant’s case, that the quote was prepared using the Solo Assist program.

What do the parties say?

  1. [15]
    The respondents say:
  1. (a)
    Prior to entering into the contract, the applicant provided them with the quote;
  2. (b)
    The parties negotiated exclusions to the scope of works to arrive at a contract price of $650,000.00;
  3. (c)
    The contract was a standard form Master Builders fixed price residential renovation contract with a special condition identifying that costs incurred by the contractor would be charged on a cost plus basis;
  4. (d)
    The respondents’ architect states there are relatively minimal differences between the works as completed and the works depicted on the drawings that formed the basis of the quote;
  5. (e)
    The respondents have obtained an opinion from a quantity surveyor that the value of the works completed by the applicant is in the order of $740,985.00;
  6. (f)
    How the quote came into existence is critically relevant to the following issues:
  1. Whether the parties did agree to a contract price of $650,000.00;
  2. Whether the amount the applicant was entitled to receive under the contract could be accurately calculated when the contract was entered into;
  3. The extent to which the applicant properly and comprehensively calculated the quote will be relevant to the question of whether the applicant exercised reasonable competency and economy in undertaking the building work and whether costs claimed by the applicant were reasonably and properly incurred;
  4. The extent to which the applicant obtained and worked out detailed pricing ‘up front’ will be significant to the question of whether the applicant has breached ss 14(3)(e), 14(5), 30, 34 and 40 of schedule 1B of the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act).
  • [16]
    The respondents say that resolving the conflict in the evidence between the parties regarding the pre-contractual discussions will inform the question of whether or not the contract was a cost plus contract and if it was, whether the applicant acted reasonably by appropriately budgeting the price from the start.
  • [17]
    The applicant says:
    1. (a)
      The documents sought by the respondents do not ‘probably relate’ to a matter in question in the proceeding;
    2. (b)
      The contract was not made for a fixed price of $857,000.00 (the amount of the quote) or on the terms proposed by the quote;
    3. (c)
      It is clear from the evidence of the respondent, Richard Sachs, that:
      1. The respondents chose to make a cost plus contract because they proposed the applicant would construct a lined building shell with wiring and plumbing;
      2. The precise scope of work was not determined;
      3. Mr Sachs understood the benefits and risks associated with entering into a cost plus contract;
    4. (d)
      The calculations behind the quote are irrelevant to the question whether the building contract is a cost plus contract given the evidence of Mr Sachs that:
      1. He relied upon his own independently sourced building costs;
      2. The cost plus contract was entered into to allow the respondents to have direct control of the ultimate scope and cost of the building works;
    5. (e)
      The amount payable by the respondents to the applicant under the cost plus contract will be determined by identifying the work undertaken by the applicant and the reasonable cost of that work;
    6. (f)
      The documents sought by the respondents are irrelevant to whether the amount the applicant was to receive could be accurately calculated when the contract was entered into on a cost plus basis and are also irrelevant to:
      1. Identifying the ultimate scope of the work completed by the applicant; and
      2. Whether the applicant exercised reasonable competency and economy in undertaking the work.

Consideration

  1. [18]
    As I have noted, the respondents say that the circumstances in which the quote came into existence is important to the following:
    1. (a)
      Whether the contract is a fixed price contract or a cost plus contract;
    2. (b)
      Whether the amount the applicant was entitled to receive under the contract could be accurately calculated when the contract was entered into;
    3. (c)
      Whether the costs claimed by the applicant were reasonably and properly incurred.
  2. [19]
    The construction of a contract is a question of law.[6] A contract must be construed as a whole having regard to the factual and legal context and taking a common sense approach. Where the words of a contract are not ambiguous, the words must be given their plain meaning.[7]
  3. [20]
    It is not clear from the response, the respondents’ evidence or the respondents’ submissions whether their case is that the contract does not contain the entirety of the terms of the parties’ bargain or that the terms of the contract are ambiguous in some respect.
  4. [21]
    As a statement of general principle, once the parties have embodied their agreement in a contract, extrinsic evidence is not normally admissible to add to, subtract from, vary or contradict the terms of the written agreement. The court (or tribunal) must look to the written contract to determine its terms and their meaning and effect unless one of the exceptions to the parol evidence rule applies.
  5. [22]
    In Carter on Contract the parol evidence rule is expressed thus:

The parol evidence rule excludes the use of extrinsic evidence in determining the meaning or legal effect of words used in a document which the parties have adopted as contractual or as evidencing their contract in whole or in part. Properly applied, the rule has the effect of excluding extrinsic evidence to determine what the contract means, not what terms constitute the contract.  From this perspective, the rule protects the completeness and integrity of the writing.

This perspective suggests that the formulation approved by Isaacs J in Gordon v Macgregor is not today to be applied to determine ‘what the contract really was’, it is restricted to what was ‘really meant’. This includes the legal effect of the document and the terms stated. (footnotes omitted)[8] (emphasis added)

  1. [23]
    There is therefore a distinction to be drawn between whether the parol evidence rule applies and the effect of the rule when it does apply. As is apparent from the passage from Carter, the parol evidence rule is not applied to restrict evidence about the terms of the contract but rather restricts evidence going to the interpretation of the terms. Evidence may be led of prior negotiations in order to establish objective background facts known to both parties and the subject matter of the contract however any such statements or actions are superseded by, and merged in, the contract.
  2. [24]
    In order for evidence of surrounding circumstances to be admissible as an aid to the interpretation of a contract, the word or expression in question must be susceptible of more than one meaning.[9] Evidence of surrounding circumstances does not however include the parties’ negotiations[10] which is in fact evidence of the expectations of the parties and cannot be used to construe the parties’ written agreement.[11]
  3. [25]
    Neither parties’ submissions address directly the issue of the application of the parol evidence rule. The respondents submissions in particular do not address whether the documents sought are relevant to establishing the terms of the contract or are relevant to determining what the terms of the contract mean. 
  4. [26]
    It is clear from the respondents’ submissions that they consider the documents the subject of the present application to be directly relevant to the parties’ pre-contractual negotiations. It is also clear that the respondents’ case is that the contract was a fixed price contract.[12] In the response to the original building dispute application, the respondents refer to various contractual provisions they rely upon as support for the contention that the contract was for a fixed price:
    1. (a)
      The contract nominated a deposit payable of $32,500.00 as representing 5% of the contract price;
    2. (b)
      Clause 11.4 of the contract required the respondents to pay a fixed contract price;
    3. (c)
      Clause 11.6 permitted the applicant to make claims for the payment of the contract price progressively.
  5. [27]
    The respondents do not identify any term or terms of the contract which they say are ambiguous and in relation to which the documents sought would be an aid to interpretation. Indeed, it seems to me that such a submission would be inconsistent with the clear terms of the contract. Nowhere in the contract is an actual fixed price identified or referred to. Rather it seems reasonably clear that, on its face, the contract was a cost plus contract.
  6. [28]
    Where a party asserts that the terms of a contract are ambiguous the party must establish that the ambiguity is identifiable in the language of the contract and not, for example, demonstrable by extrinsic evidence. From their submissions it seems that the respondents’ case is that any ambiguity upon which they rely will be established by reference to the extrinsic evidence (in the form of the documents sought to be produced) as opposed to the contract itself. As I have observed, the contract appears clear on its face. Secondly, the documents which the respondents seek production of go to the pre-contractual negotiations between the parties. Evidence of pre-contractual negotiations is only admissible if it provides knowledge of surrounding circumstances and relates to objective facts known directly or inferentially to both parties.[13] Such evidence is not admissible in order to construe the contract[14] or in order to understand the actual intentions of the parties.[15]
  7. [29]
    Although their submissions are not entirely clear on the point, it appears that the respondents’ assert the documents are relevant either in construing the contract or in support of their case as to the actual intentions of the parties when they entered into the contract. In either case, it is difficult to conclude that it would be in the interests of justice to order production of documents that are prima facie inadmissible.
  8. [30]
    In the absence of any specific assertion by the respondents as to ambiguity in the terms of the contract I am unable to conclude that the documents sought by the respondents are relevant to the determination of an issue in the proceedings. The respondents’ case would seem to be that the operative agreement between the parties was not contained in the written and signed contract. I would observe that the respondents do not rely upon s 77(3)(e) of the QBCC Act and seek an order for rectification of the contract nor do they assert that the contract was executed by mistake or that there was any misrepresentation by the applicant that induced them to enter into the contract.
  9. [31]
    The respondents say that the documents are relevant to whether the contract is a cost plus contract for the purposes of schedule 1B of the QBCC Act. ‘Cost plus contract’ is defined in the Act as:

cost plus contract means a domestic building contract under which the amount the building contractor is to receive under the contract can not be accurately calculated when the contract is entered into, even if prime cost items and provisional sums are ignored.[16]

  1. [32]
    Prior to the repeal of the Domestic Building Contracts Act 2000 (Qld) (‘DBC Act’) and the incorporation of the legislative provisions relating to domestic building contracts into the QBCC Act, the DBC Act strictly circumscribed the circumstances in which a cost plus contract could be entered into, the content of any such contract and the consequences of non-compliance by a building contractor with the statutory requirements.[17] In particular, a building contractor who entered into a cost plus contract in contravention of the requirements of the DBC Act was not able to enforce the contract against the building owner.[18] It is relevant that these restrictions did not find their way into schedule 1B of the QBCC Act. The QBCC Act (as it was prior to the repeal of the DBC Act) and the repealed DBC Act together provided a legislative scheme in relation to the regulation of domestic building contracts and domestic building work. That legislative scheme continued with the repeal of the DBC Act and its incorporation into the QBCC Act as schedule 1B. Regard may be had to the history of a legislative scheme to enable the intention of the legislature to be ascertained.[19] Schedule 1B of the QBCC Act contains no prohibition, or restrictions, upon the entering into of cost plus contracts. Accordingly, even if the statutory definition of ‘cost plus contract’ is not satisfied in a particular case, schedule 1B of the QBCC Act provides for no consequences in circumstances where a cost plus contract is entered into. It is clear that the intention of the legislature was, in repealing the DBC Act and incorporating the Act into schedule 1B, to remove the very significant restrictions on, and consequences of, the entering into of cost plus contracts.
  2. [33]
    The respondents refer to the relevance of the documents to possible breaches by the applicant of ss 14(3)(e), 14(5), 30, 34 and 40 of schedule 1B of the QBCC Act.  The provisions upon which the respondents rely either do not prescribe a consequence for non-compliance or prescribe a statutory penalty for breach. Once a statutory penalty has been provided for an offence the rule of the common law in determining the legal consequences of commission of the offence is thereby diminished.[20]  In respect of those provisions of the QBCC Act to which I have referred, where a penalty for breach is prescribed the legislature has provided such a penalty and no further consequence should flow. Further, s 44 of schedule 1B provides that, absent a contrary intention in the Act, failure by a building contractor to comply with a requirement under the Act in relation to a domestic building contract does not make the contract illegal, void or unenforceable.
  3. [34]
    Accordingly, whether the applicant complied with the provisions of schedule 1B of the QBCC Act relied upon by the respondents is not an issue relevant to the final determination of either the application or the counter application.  
  4. [35]
    The final ground upon which the respondents say the documents are relevant relates to whether the costs claimed by the applicant were reasonably and properly incurred. The respondents say that it was an implied term of the contract that the applicant would exercise reasonable competency and economy in carrying out the works and all costs claimed would be reasonably and properly incurred.
  5. [36]
    Assuming for present purposes that such a term may be implied into the contract the issue is, are the documents relevant to whether the term was breached by the applicant? It seems to me that the documents underpinning a quote prepared before the parties signed a cost plus contract, before commencement of the works, and where the scope of works was significantly revised between the preparation of the quote and the execution of the contract could not be said to be relevant. The evidence as to whether the work carried out and the costs incurred by the applicant were reasonable and proper will concern the actual building works undertaken by the applicant and the cost of materials and labour incurred and charged to the respondents. It will presumably then be a matter for the respondents to lead evidence that the works were not reasonable or necessary and/or that the costs incurred and claimed by the applicant were unreasonable or unnecessary.

Conclusion

  1. [37]
    I am not persuaded that the documents sought by the respondents are relevant to the determination of an issue in the proceedings nor am I persuaded that it is in the interests of justice for an order for the production of the documents to be made.
  2. [38]
    The application for the production of documents is refused.
  3. [39]
    The parties have filed submissions in relation to the directions to be made progressing the matter to a hearing. I decline to make any detailed directions as have been suggested until such time as hearing dates have been set. I will, at this stage, order that the matter be listed for a 3 day hearing on dates to be advised.

Footnotes

[1] Cannon & Anor v Saunders [2017] QCATA 4.

[2] Waratah Coal Pty Ltd v Nicholls & Anor [2013] QSC 68.

[3] Statement of Malcolm Sutton dated 10 September 2020 at [2.6].

[4] Statement of Richard Sachs dated 8 October 2020 at [18].

[5] Ibid.

[6] Ryan v Worthington [2015] QCA 201.

[7] Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 (‘Codelfa’).

[8] JW Carter, LexisNexis, Carter on Contract (online at 28 July 2021) [13-010].

[9] Ibid, per Mason J, Stephen and Wilson JJ agreeing.

[10] Ibid.

[11] Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) and Others (2001) 188 ALR 566.

[12] Response dated 9 March 2020, annexure ‘A’ at [2(f)].

[13] Byrnes v Kendle (2011) 243 CLR 253.

[14] Secured Income Real Estate (Australia) Ltd v St. Martins Investments Pty Ltd (1979) 144 CLR 596; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104.

[15] Franklins Pty Ltd v Metcash Trading Ltd (2009) NSWLR 603.

[16] QBCC Act, Schedule 1B (Definition of “cost plus contract”).

[17] DBC Act, s 55.

[18] DBC Act, s 55(3).

[19] John Burke Ltd v Insurance Commissioner [1963] Qd R 587.

[20] Yango Pastoral Co Pty Ltd and Others v First Chicago Australia Ltd and Others (1978) 21 ALR 585 per Mason J.

Close

Editorial Notes

  • Published Case Name:

    Sutton Constructions Pty Ltd v Wilkes & Anor

  • Shortened Case Name:

    Sutton Constructions Pty Ltd v Wilkes

  • MNC:

    [2021] QCAT 282

  • Court:

    QCAT

  • Judge(s):

    Senior Member Brown

  • Date:

    16 Aug 2021

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Byrnes v Kendle (2011) 243 CLR 253
2 citations
Jump To
Cite 1 - (2011) 243 CLR 253
Cite 2 - (2011) 243 CLR 253
Cannon v Saunders [2017] QCATA 4
2 citations
Jump To
Cite 1 - [2017] QCATA 4
Cite 2 - [2017] QCATA 4
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 C.L R. 337
2 citations
Jump To
Cite 1 - (1982) 149 C.L R. 337
Cite 2 - (1982) 149 C.L R. 337
Fitzwood Pty Ltd v Unique Goal Pty Ltd (2001) 188 ALR 566
2 citations
Jump To
Cite 1 - (2001) 188 ALR 566
Cite 2 - (2001) 188 ALR 566
Franklins Pty Ltd v Metcash Trading Ltd (2009) NSWLR 603
2 citations
Jump To
Cite 1 - (2009) NSWLR 603
Cite 2 - (2009) NSWLR 603
John Burke Ltd v Insurance Commissioner [1963] Qd R 587
2 citations
Jump To
Cite 1 - [1963] Qd R 587
Cite 2 - [1963] Qd R 587
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104
2 citations
Jump To
Cite 1 - (2015) 256 CLR 104
Cite 2 - (2015) 256 CLR 104
Ryan v Worthington [2015] QCA 201
1 citation
Jump To
Cite 1 - [2015] QCA 201
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
2 citations
Jump To
Cite 1 - (1979) 144 CLR 596
Cite 2 - (1979) 144 CLR 596
Waratah Coal Pty Ltd v Nicholls [2013] QSC 68
2 citations
Jump To
Cite 1 - [2013] QSC 68
Cite 2 - [2013] QSC 68
Yango Pastoral Co. Pty. Ltd. and others v First Chicago Australia and others (1978) 21 ALR 585
1 citation
Jump To
Cite 1 - (1978) 21 ALR 585

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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