MCC Pty Ltd v Greer[2022] QCAT 410

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL

REASONS FOR DECISION

1. [1]
   This matter involves a building dispute in which, following a 5 day hearing, I ordered the claim of the applicant builder (‘the builder’) be dismissed and the counter application by the respondent owners (‘the respondents’) also be dismissed.
2. [2]
   At issue was the construction of the contract, the builder’s claim for payment for variation work performed and the respondents’ counter application for the cost of rectifying defects with respect to that variation work.
3. [3]
   Following appeal the matter has been remitted to me for further rehearing according to law and in accordance with the reasons given by the Appeal Tribunal.
4. [4]
   It was common ground between the parties in the hearing at first instance that the variations were variations of the contract.^[1] The matter argued in dispute was the builder’s entitlement to payment for those variations given the builder’s failure to comply with the requirements set by Part 7 of the then in force Domestic Building Contracts Act 2000 (Qld) (‘DBCA’),^[2] coupled with an absence of exceptional circumstances warranting the Tribunal conferring an entitlement on the builder for payment pursuant to s 84(4) DBCA.
5. [5]
   All claims about defective work concerned the variation work.
6. [6]
   On appeal, the respondents submitted that the variations comprised no part of the “contract price” on any basis.^[3] Contract price is the amount payable under the contract for the contracted services, including any adjustments made by variations of the contract.^[4] On appeal the respondents effectively argued, for the first time, that the variations were not variations of the contract.
7. [7]
   In light of that fresh argument, raised apparently without opposition from the builder, the Appeal Tribunal said:

1. [77]
   The learned member embarked upon the exercise of valuing the variation works rather than determining the contract price agreed between the parties. In assessing the Greers’ entitlement to damages for MCC’s breach the learned member was first required to make a finding as to what was agreed between the parties in relation to the variation works. This included making findings as to the scope of works, the price of the works and any other relevant matters including, for example, the completion date for the works as varied. In failing to proceed in this manner, the learned member was unable to make findings as to what amount was due and payable under the contract as varied.

1. [78]
   On a proper construction of s 84, MCC had no right to recover amounts for the unpaid non-compliant variations in the absence of the tribunal’s approval. In proceeding as he did to value the variation works, the learned member undertook the process set out at s 84(6)(b) of the DBCA. In the absence of compliance by MCC with ss 79, 80, 82 and 83 of the DBCA this process was only triggered if the builder successfully applied to the tribunal for approval to recover an amount for the unpaid variation works pursuant to s 82(2)(b) of the DBCA. Section 84(6) of the DBCA specifically provides that a builder’s entitlement to recover an amount for a variation is either the amount stated in a compliant variation document or, if there is no compliant variation document, the cost of carrying out the variation plus a reasonable profit.

1. [79]
   The Greers say that the variation claims did not meet the requirements under clause 12 of the fixed price contract, which were identical to those found in ss 79 to 82 of the DBCA and that the invalid variation claims never formed part of the contract price on any basis. That may be so. But as part of determining the contract price a determination as to what was agreed to between the parties was first required to be made. This necessarily involved a consideration of the terms of the contract and compliance, or otherwise, by the parties with the contract.

8. [8]
   The remitter from the Appeal Tribunal requires me to determine, as precursor to a determination of the respondents’ claim for costs of rectification of defective building work associated with the builder’s variations, what was agreed between the parties in relation to the variation works. I must determine what the contract price of the works was under the contract as varied, if any, as well as the scope of work under the contract as varied, and any other relevant matters.
9. [9]
   To that end I directed the parties to file submissions, and directing them to specifically address the following:

   1. (a)
      whether the value of the non-compliant variation work is agreed to be                       $162,009.54;
   2. (b)
      if not, what value and whether further evidence is necessary to establish that  value;
   3. (c)
      whether the non-compliant variation work was within MCC’s scope of work under the contract;
   4. (d)
      if not on what basis the Greers claim damages for breach of contract in respect of MCC’s defective work performing the non-compliant variation work
10. [10]
    The parties made submissions after an extended period of time but failed to address the abovementioned relevant matters. The parties were given further directions to make submissions and advised the matter would be determined on the papers, subject to no objection being raised as to that proposed course. There was no objection raised.
11. [11]
    The parties made further submissions.

The respondents’ case

12. [12]
    The respondents say they never agreed to the variations or to a price for them. The price was not $162,009.54:

There was no agreement by the parties to any of the variation claims, save for variation 6 (ensuite floor) totalling $2,267.00. MCC did not agree to the assessment of the variations made in progress certificate 1 that it had claimed. There was therefore never any agreement as to the scope or price of those variations, as required by clause 12, save other than variation 6.^[5]

13. [13]
    Variation 6 concerned the ensuite floor ($2,267), over which there was no claim for rectification of defective work.^[6]
14. [14]
    Clause 12 of the contract referred to by the respondents provides, amongst other things, as follows:

12.1Notice required when party requests a variation

Either party may give to the other a written notice requesting a variation of the Works.

12.2Contractor not obliged to perform variation

The Contractor, may at its discretion, agreed to carry out any variation requested by the owner.

12.3Agreement to vary Works

The parties may agree to vary the Works by adding or omitting work from the Works.

The Contractor must ensure that the parties’ agreement to vary the Works is put in writing in a variation document signed by the contractor and the Owner within the shortest practicable time and before any work the subject of the variation is carried out.

15. [15]
    As to whether the non-compliant variation work was within MCC’s scope of work under the contract, the respondents say^[7] none of the claimed variations were within MCC’s scope of work under the contract.^[8] Because the builder did not comply with clauses 12.3 and 12.4 of the contract and there was never any agreement between the parties about price, there was never any increase to the contract price by the variations.^[9] The contract price remained the original $132,559.80:

The only proper valuation of any variation under the contract is that agreed by the parties in accordance with clause 12. MCC never complied with clause 12, despite repeated requests by Mrs Greer and the architect for variation proposals to be submitted and for those to be agreed.^[10]

There was therefore no further amount payable, by way of an adjusted Contract Price, to MCC over and above that paid and the first progress claim.^[11]

16. [16]
    As to the respondents’ entitlement to claim the costs of rectifying defective “variations”, the claim is based on the builder’s breach of the s 43 and s 44 warranties of the DBCA:

1. 43
   Compliance with legal requirements

The building contractor warrants the subject work will be carried out in accordance with all relevant laws and legal requirements, including, for example, the Building Act 1975.

1. 44
   Standard of work and exercise of care and skill

The building contractor warrants the subject work will be carried out—

1. (a)
   in an appropriate and skilful way; and

1. (b)
   with reasonable care and skill.

The builder’s case

17. [17]
    The builder says the contract price included the value of the variations and totalled $294,659.34. The value of the variation work was $162,099.54.
18. [18]
    The variation work was performed “under the direction of the contract”.^[12] It is unclear what that means but the builder goes on to submit:

1. 18
   In their written submissions dated 20 September 2022, the respondents submitted that the applicant was not entitled to compensation for the price of the variation work on the basis that the work was done outside of the agreement between the parties. They submit that there was “always a binding contract on foot” between the parties and that the only work claimable by the applicant is the work done under that existing contract.

1. 19
   The applicant submits that such an assertion is incorrect as a matter of law. The works were done in furtherance of the existing agreement between the parties (this being that the applicant perform urgent flood repair and rectification work along with additional renovations as directed by the respondents) and would never have been performed by the own volition of the applicant had that existing agreement not been in place. The applicant performed work for the respondents and is entitled to payment for the performance of that work.^[13]

19. [19]
    The builder says even if the respondents are correct that the variation work falls outside the agreement between the parties the builder is entitled to compensation for the work it has performed for the respondents.

Consideration

20. [20]
    Contract price is defined in the DBCA as:

1. 6
   Meaning of contract price

1. (1)
   This section does not apply to a cost plus contract.

1. (2)
   The contract price, for a domestic building contract, is the total amount payable under the contract for the contracted services.

…

1. (5)
   If a contract is varied, the reference in subsection (2) to the total amount payable under the contract is a reference to the total amount payable under the contract, as varied.

21. [21]
    Variation is defined in the DBCA as:

1. 16
   Meaning of variation

1. (1)
   A variation, of a domestic building contract, is—

1. (a)
   an addition of domestic building work to the subject work; or

1. (b)
   an omission from the subject work.

22. [22]
    What is left unsaid by that definition is that neither a builder, nor owner, can unilaterally force the other party to vary an agreed contract between them, save in very limited circumstances. Aside from the very limited circumstances, mutual intention to vary existing contractual terms is required.^[14]
23. [23]
    The learned authors of Hudson’s Building and Engineering Contracts^[15] say this about variations absent mutual agreement:

Unauthorised alterations or variations of the physical work, whether voluntary or involuntary on the part of the Contractor, far from entitling them to extra payment, will usually be a breach of contract, for which damages are in principle recoverable.^[16]

24. [24]
    In Moratic Pty Ltd v Gordon [2007] NSWSC 5 Brereton J stated the principle in simple terms:

… contractual variation requires a mutual intention to vary the existing contractual terms, and consideration.^[17]

25. [25]
    That statement was approved by McColl JA in Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd [2018] NSWCA 213:

Contractual variation requires a mutual intention to vary the existing contractual terms and consideration. Consideration can be found in the mutual abandonment of existing rights, the conferment of new benefits by each party on the other, or the incurring of liability to an increased detriment.^[18]

26. [26]
    In Lumbers v W Cook Builders Pty Ltd (in liquidation) [2008] HCA 27 the plurality of the High Court said this about work done conferring a benefit and a claim for payment for the work absent agreement about the work being done:

1. 82
   Likewise, it is essential to consider whether the facts of the present case yield to analysis as a claim for work and labour done, or money paid, because where one party (in this case, Builders) seeks recompense from another (here the Lumbers) for some service done or benefit conferred by the first party for or on the other, the bare fact of conferral of the benefit or provision of the service does not suffice to establish an entitlement to recovery.  As Bowen LJ said in Falcke v Scottish Imperial Insurance Company :

"The general principle is, beyond all question, that work and labour done or money expended by one man to preserve or benefit the property of another do not according to English law create any lien upon the property saved or benefited, nor, even if standing alone, create any obligation to repay the expenditure.  Liabilities are not to be forced upon people behind their backs any more than you can confer a benefit upon a man against his will."                                            (emphasis added)

…  For the purposes of this case the critical observations to make are first that Builders' restitutionary claim does not yield to analysis as a claim for work and labour done or money paid and secondly, that Builders' restitutionary claim, if allowed, would redistribute not only the risks but also the rights and obligations for which provision was made by the contract the Lumbers made with Sons.

27. [27]
    In Potts v T & M Buckley Pty Ltd t/a Shailer Constructions [2010] QCAT 638 Member Fitzpatrick referred to a decision by Dowsett J in Balfour Beatty Power Construction Australia Pty Ltd v Kidston Goldmines Ltd ^[19] where his Honour had this to say about a provision for variations of contract in the matter before him:

Clause 40 contemplates a written instruction coupled with a written agreement including agreement as to the cost of the variation. Indeed, because of the possibility that the scope of the contract may be varied entitling the builder to refuse the variation, it is critical to any operation of cl.40 that the price be fixed in advance. The question therefore is whether or not it is possible to characterize a variation pursuant to an oral request with no prior agreement as to price as a variation pursuant to cl.40. To state the problem in that way is, I feel, to give the answer. It is clear that the variations here alleged, adopting the most favourable view possible to the builder, do not fall within cl.40. This is not to shut out the builder from any claim with respect to the “H” poles if that work in fact be subject to formal requirements and time limits in the original contract, for the builder to make a claim pursuant to any agreement or implied agreement which it is felt can be spelt out from the various conversations and items of correspondence between the parties concerning this issue. It is implicit in what I have said that the issues of waiver and estoppels are unlikely to alter the position. If the application be not within cl.40 by virtue of the fact that it is not identifiable as a cl.40 variation, then other than in exceptional cases, it would be unlikely that either waiver or estoppels could be raised in such a way as to bring the matter within cl.40. The builder is left to his other rights.

28. [28]
    In the matter before Member Fitzpatrick she concluded:

1. [65]
   On this reasoning I find that the oral direction by Mr Rendall and Mr Buckley to the applicant to install colorbond fascia to purlins at eave gutters to the main building was not a variation to the contract within clause 5 of the subcontract or the Variation Procedure. In particular, Mr Rendall and Mr Buckley were of the opinion at that time that the work was part of the subcontract works. They could not be construed as engaging in a conscious act to direct a variation. Further, they did not put the direction in writing as required by clause 5. Nor was there any agreement as to the price of the variation.

1. [66]
   Having made this finding it is unnecessary for me to consider the impact on the applicant’s claim, of a lack of writing with respect to the direction to perform the work.

1. [67]
   Any entitlement the applicant may have to payment for the variation cannot be pursuant to the contract.

29. [29]
    There is no provision in the contract at hand giving the builder unilateral power to vary the work under the contract, save for clause 13, variations required in compliance with statute law and clause 14, latent defects discovered in the course of the build. Neither clause has application here.
30. [30]
    In the decision at first instance I accepted the evidence of Mrs Greer and the architect, Ms Bosanquet, about the interaction of the parties concerning variations.  Their evidence was that the builder was instructed not to perform any variation work unless a prior estimate of the cost of the work was first provided and approval for the variation work to be done given. This was of course no more than that required under the general conditions of contract and Part 7 of the DBCA.
31. [31]
    The builder was reminded to adhere to those requirements on many occasions,  but the builder ignored Mrs Greer, ignored the architect, and simply went ahead and did extra work, without approval, and without giving estimates of its cost.
32. [32]
    The builder’s conduct was largely in consequence of the builder’s mistaken view that the contract was a cost plus one.
33. [33]
    Indeed Mr Scroope said at that hearing that his view of the written contract was “… a Clayton’s contract. It was a contract to get me on site and to get me started so the Greers could be in before Christmas.”^[20] Furthermore, at the time of construction, he was ignorant of any requirement to have variations in writing, and was not aware of the existence of the DBCA^[21] (and therefore the Part 7 variation provisions).
34. [34]
    I make the following findings. Prior to the variation work being done there was never any agreement between the parties that the builder would perform any variation work without prior approval, nor agreement about the scope of work of the variations, nor agreement between the parties about the price of the variation work or time of performance.
35. [35]
    The result is that none of the extra work done by the builder beyond the original scope of work of the contract constituted variations of the contract. The extra work done by the builder did not alter the scope of work under the contract or affect the contract price.
36. [36]
    Any recovery by the builder for the value of the extra work performed could not be pursuant to the contract, but sought outside the four walls of the contract.^[22]
37. [37]
    The claimed variations formed no part of the contract.

The breach of warranty claims

38. [38]
    The respondents’ claim is for the cost of rectifying these same non-contractual variations. The claim  is based on breach of statutory warranties imposed, says the respondents, by virtue of s 43 and s 44 of the DBCA.
39. [39]
    The warranties provide:

1. 43
   Compliance with legal requirements

The building contractor warrants the subject work will be carried out in accordance with all relevant laws and legal requirements, including, for example, the Building Act 1975.

1. 44
   Standard of work and exercise of care and skill

The building contractor warrants the subject work will be carried out—

1. (a)
   in an appropriate and skilful way; and

2. (b)
   with reasonable care and skill.(emphasis added)

40. [40]
    Subject work is defined in the Schedule 2 dictionary of the DBCA as follows:

subject work, for a domestic building contract, means—

1. (a)
   the domestic building work carried out, being carried out or to be carried out under the contract; or

2. (b)
   the domestic building work the carrying out of which has been, is being or is to be managed under the contract.

41. [41]
    I have determined however, that the variation (extra) work done by the builder was not work carried out or to be carried out under the domestic building contract. Therefore the variation work was not subject work as defined for the purpose of application of the warranties under the DBCA.
42. [42]
    For similar reason the warranties agreed under clause 10 of the contract, which only applied to Works under the contract as defined, have no application either. Works under the contract is defined in clause 1 of the contract as “the whole of the work to be carried out by the contractor under the contract, a description of which is contained in item 3 of the schedule, and includes variations to the Works.”
43. [43]
    The respondents have no claim against the builder for defects in the variation work based on warranties imposed by the DBCA or based on warranties agreed between the parties for work performed pursuant to the contract.

The builder’s fresh claim

44. [44]
    As stated above, any recovery by the builder for the value of the variation work could not be pursued inside the four walls of the contract, but I found at hearing below that the builder was not entitled to a claim in quantum meruit in respect of the extra work either.^[23]
45. [45]
    The builder seems to bring the claim in quantum meruit again, in this remitter. The builder says that even if the Tribunal finds that the variation work falls outside the agreement between the parties:

The works were done in furtherance of the existing agreement between the parties (this being that the Applicant perform urgent flood repair and rectification work along with additional renovations as directed by the Respondents) and would never have been performed by the own volition of the Applicant had that existing agreement not been in place. The applicant performed work for the Respondents and is entitled to payment for the performance of that work.^[24]

46. [46]
    In so far as the submission is that extra work was done because the builder had a different (incorrect) understanding of the contract terms, that does not assist the builder. The builder was bound by the contract in the terms construed at first instance.
47. [47]
    As to the assertion that the builder’s “argument was accepted”^[25] in Champion Homes Sales Pty Ltd v DCT Projects Pty Ltd [2015] NSWSC 616 at [139] and Built Qld Pty Ltd v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd [2021] QSC 224 at [494], it is not made clear what the builder’s argument is that finds support from those authorities.
48. [48]
    The passage by Ball J in Champion Homes Sales Pty Ltd relied on appears at [139]:

On the other hand, if there is no agreement in relation to a variation and no payment in respect of it, with the result that no agreement can be inferred, then Champion Homes is entitled to recover a reasonable amount in respect of the relevant work – assuming that the work was not included in the original contract. 

49. [49]
    That comment must be read in context. The parties there had agreed that there would be some variations of the work to be performed, concerning which the parties would not agree on price. They had agreed that in those circumstances a “Modification Agreement” would apply and that agreement provided a price mechanism to resolve the problem, and those variations not dealt with by the Modification Agreement were to be “generally governed by cl 17 of the contract.”^[26] Clause 17.5 of the contract provided:

If the price of a variation is not agreed prior to it being carried out that price includes:

1. (a)
   the deduction of the reasonable cost of all deletions from the building works; and

2. (b)
   the addition of the total cost of all extra work plus the builder’s margin applied to that cost.^[27]

50. [50]
    A formula to calculate the reasonable cost for such variations was therefore to be found in the contracts.
51. [51]
    As for Built Qld Pty Ltd, that had nothing to do with variations, but rather concerned provisional sums of money under a contract.
52. [52]
    Neither cited authority contended with the constraints imposed by the Part 7 DBCA variation strictures and sanctions, and in neither authority was there an issue about no agreement between the parties to have variation work performed.
53. [53]
    The builder also says, even if the Tribunal finds that the variation works fall outside the agreement between the parties the Tribunal must accept that the builder is entitled to compensation for the work it has performed for the respondents. That is not so. Leaving aside the Part 7 DBCA factor, the variation work was done without the consent of the respondents and outside the terms of contract, and there is no available quantum meruit claim available for such work for the reasons explained in Mann v Peterson Constructions Pty Ltd:^[28]

To allow a restitutionary remedy by way of a claim for the reasonable value of work performed unconstrained by the terms of the applicable contract would undermine the parties' bargain as to the allocation of risks and quantification of liabilities, and so undermine the abiding values of individual autonomy and freedom of contract.

… (this would) allow a windfall to the respondent that is distinctly inconsistent with the respect due to the contract made by the parties as the charter whereby their commercial risks were allocated between them and their liabilities limited. To allow a restitutionary claim would be to "subvert the default remedial regime of contract law, to which the parties, by contracting, have submitted", and accordingly to subvert the contractual allocation of risk.^[29]

54. [54]
    Given my finding that the respondents’ claims based on breach of warranties must fail, it is unnecessary to address any claim of unjust enrichment of the respondents for costs of recovery of defective variation work.

Conclusion

55. [55]
    The variations were not variations of the contract. They formed no part of the scope of work of the contract. The builder cannot claim payment for them.
56. [56]
    Concomitantly, the respondents have no claim for breach of statutory warranty or contractual warranty with respect to any defects in such work performed by the builder.
57. [57]
    The orders made at first instance are confirmed.