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Tapscott Homes Pty Ltd v Queensland Building and Construction Commission and Cherry[2024] QCAT 437

Tapscott Homes Pty Ltd v Queensland Building and Construction Commission and Cherry[2024] QCAT 437

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL

CITATION:

Tapscott Homes Pty Ltd v Queensland Building and Construction Commission and Cherry [2024] QCAT 437

PARTIES:

Tapscott Homes Pty Ltd

(applicant)

v

Queensland building and construction Commission

(first respondent)

Nathan cherry

(second respondent)

REBECCA CHERRY

(third respondent)

APPLICATION NO:

GAR597-22

MATTER TYPE:

General administrative review matters

DELIVERED ON:

4 October 2024

HEARING DATE:

26 September 2024

HEARD AT:

Brisbane

DECISION OF:

Member Sammon

ORDERS:

  1. The decision of the Queensland Building and Construction Commission to allow a claim by Mr and Mrs Cherry under the statutory insurance scheme in the Queensland Building and Construction Commission Act 1991 (Qld) is set aside.
  2. The Tribunal orders that the application by Mr and Mrs Cherry under the statutory insurance scheme in the Queensland Building and Construction Commission Act 1991 is refused.

CATCHWORDS:

ADMINISTRATIVE LAW – ADMINISTRATIVE TRIBUNALS – QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL – general administrative review – application by builder to review a decision by the Queensland Building and Construction Commission (QBCC) to allow a claim by building owner under the statutory insurance scheme – the effect of purported variation to contract – whether the builder validly terminated a building contract – whether the building owner also purported to terminate the contract – the rights of the builder and the building owner under contract and at law – where the Tribunal reviews the decision of the QBCC about valid termination of the contract by the builder and sets aside a claim under the statutory scheme in favour of the building owner

Australian Consumer Law, s 23, s 24, s 25(f)

Planning Act 2016 (Qld), s 164

Queensland Building and Construction Commission Act 1991 (Qld), s 67WA, s 67WC, s 86, s 87, s 108D, schedule 1B, s 14, the Dictionary (schedule 2 to the Act)

Queensland Building and Construction Commission Regulation 2018 (Qld), schedule 6, s 3, s 4, s 6

Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 20, s 24

Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No. 3) [2012] VSC 99

Hopper & Anor v Queensland Building and Construction Commission & Anor (No. 2) [2019] QCAT 212

Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61

Perera v Bold Properties (Qld) Pty Ltd [2023] QDC 99

APPEARANCES &

REPRESENTATION:

Applicant:

E Mijo instructed by Ceres Law

First Respondent:

SE Seefeld instructed by Holding Redlich

Second and

Third Respondent:

BJ Saal (solicitor) of Saal and Associates

REASONS FOR DECISION

Background

  1. [1]
    The applicant, Tapscott Homes Pty Ltd (‘Tapscott’) has applied to the Tribunal to set aside a decision made by the Queensland Building and Construction Commission (‘QBCC’) to allow a claim made by Mr and Mrs Cherry, under the statutory insurance scheme[1] established by part 5 of the Queensland Building and Construction Commission Act 1991 (Qld) (‘the QBCC Act’). The Cherrys made their claim as ‘owners’ of a residential house to be built for them by Tapscott under a contract. It is common ground between the parties that the Cherrys fall within the meaning of a ‘consumer’ within the meaning of that term as defined in s 67WA of the QBCC Act.
  2. [2]
    The Tribunal has the jurisdiction to review the decision by the QBCC to allow the claim, under a combination of s 87 and s 86(1)(i) of the QBCC Act, in particular, under the latter provision for:
  1. a decision that a domestic building contract has been validly terminated having the consequence of allowing a claim for non-completion under the statutory insurance scheme;
  1. [3]
    In doing so, the Tribunal is exercising its review jurisdiction under chapter 2, part 1, division 3 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘the QCAT Act’). In particular, under s 20(1) of the QCAT Act, the purpose of the review is to produce the ‘correct and preferable decision’. Under s 20(2) the Tribunal must hear and decide a review of a reviewable decision by way of a fresh hearing on the merits.
  2. [4]
    Under s 24 of the QCAT Act, in the review jurisdiction, the Tribunal may:
  1. confirm or amend the decision; or
  1. set aside the decision and substitute its own decision; or
  1. set aside the decision and return the matter for reconsideration to the decision-maker for the decision, with the directions the tribunal considers appropriate.
  1. [5]
    Details of the statutory insurance scheme are contained in schedule 6 of the Queensland Building and Construction Commission Regulation 2018 (Qld) (‘the QBCC Regulation’). The Cherrys made their claim under s 6 of schedule 6, on the basis that ‘residential construction work’ was carried out by Tapscott under a ‘fixed price residential contract’ and the contract ‘ended’ within two years after the day work started under the contract, and the work to construct the house is incomplete.
  2. [6]
    The term ‘ends’ is defined in s 4 of schedule 6, for a fixed price residential contract. The Cherrys rely on s 4(1)(a) on the basis that the contract was validly terminated by them, on the default of Tapscott as the ‘licensed contractor’.
  3. [7]
    In summary, the Cherrys contend that they validly terminated the contract, because of repudiation of the contract by Tapscott, in purporting to terminate the contract for non-compliance with a variation to the contract, namely variation number 2. The Cherrys say that they accepted the repudiation and themselves terminated the contract, for the meaning of when a fixed price residential contract ‘ends’ under s 4(1)(a).
  4. [8]
    Variation 2 was to substitute steel beams for the timber beams that had originally been provided for under the contract, at an increased price to the contract.

Common ground

  1. [9]
    All of the parties agree about several points concerning application of schedule 6 of the QBCC Regulation.
  2. [10]
    The contract is the standard Housing Industry Association (‘HIA’) ‘Queensland Peace of Mind New Home Construction Contract (QC2)’. The contract included a special condition:

Contract signed pending engineering & colour selections.

  1. [11]
    For the purposes of defined terms in the contract, the Cherrys are the ‘owner’ and Tapscott is the ‘builder’.
  2. [12]
    The parties agree that the contract was signed on or about 23 December 2020,[2] as the last day Tapscott was open for business before the Christmas break, in order to allow the Cherrys to be eligible to obtain a home owner’s grant. The contract is in evidence before the Tribunal, together with other documentary evidence in a ‘Hearing Book’ which is exhibit 1.
  3. [13]
    During the hearing, all of the parties helpfully agreed to the following propositions:
    1. the contract is a ‘domestic building contract’ for the definition of that term in the Dictionary (schedule 2) to the QBCC Act;
    2. there was a statutory policy of insurance in force under schedule 6 of the QBCC Regulation;
    3. the Cherrys were ‘consumers’ within the meaning of that term for the purposes of s 67WA of the QBCC Act concerning the statutory insurance scheme;
    4. the contract was for ‘primary insurable work’ under s 67WC of the QBCC Act, again, concerning the statutory insurance scheme;
    5. Tapscott was a ‘building contractor’ as defined in the Dictionary to the QBCC Act;
    6. Tapscott was a ‘licensed contractor’ as defined in the Dictionary to the QBCC Act;
    7. the contract was for a ‘fixed price residential contract’ as defined in s 3 of schedule 6 of the QBCC Regulation;[3]
    8. the Cherrys made a non-completion claim to the QBCC in respect of claimed non-completion of works on the contract or about 28 July 2022.
  4. [14]
    The parties also helpfully agreed to the following findings of fact contained in the QBCC statement of reasons (‘SOR’) dated 23 January 2023, contained in exhibit 1 before the Tribunal:
    1. on 30 December 2020, the Cherrys and Tapscott entered into the HIA contract for a total amount of $518,632.15 for the construction of a two storey home;[4]
    2. on 23 December 2020, a QBCC insurance policy was raised for the dwelling;[5]
    3. the Cherrys made payments to Tapscott as follows:
      1. 10 November 2020 - a preliminary invoice of $5,000;
      2. 19 February 2021 - a deposit invoice of $20,477.89;
      3. 2 September 2021 - an invoice representing construction of the slab, of $76,433.68.[6]
  5. [15]
    The total payments made by the Cherrys to Tapscott under the contract was $101,911.57.[7]
  6. [16]
    Work commenced on the contract on 19 August 2021 with an anticipated practical completion date of 5 March 2022.[8]

Contractual clause on variation

  1. [17]
    What is also not in issue between the parties is that Tapscott gave the Cherrys a document relevantly headed ‘Variation-(VTO #2)’ dated 4 February 2022. What is a live issue in this matter is the application and effect of clause 19 of the contract, which is the clause which Tapscott relies upon to cause a legally binding variation to the contract. Relevantly, the contents of clause 19 are as follows.  
  2. [18]
    First, clause 19.1 describes the required ‘Contents of a variation document’.[9] For a variation that would increase the price of the contract, it is relevantly as follows:
  1. 19.1
    A variation document must be in writing, in readily legible English, and in all cases, state:
  1. the work required to carry out the variation;
  1. the date of the request of the variation;
  1. the price of the variation;
  1. for an increase in contract price, when that price becomes payable ...
  1. the change to the contract price because of the variation; and
  1. if there will be a delay because of the variation, a reasonable estimate of that delay.[10]
  1. [19]
    Clause 19.2 describes when the builder must give the owner a copy of the variation document and does not appear to be in issue in this matter.
  2. [20]
    The effect of clause 19.3 is in issue in this matter and is as follows:
  1. 19.3
    The owner must agree to the variation in writing prior to the builder commencing the variation works.
  1. [21]
    Clause 19.4 is not relevant on the facts of this matter. It provides that the builder may withdraw the request for the variation or acceptance of same if the variation is agreed, and the owner has not within five working days approved the variation in writing. There is no suggestion in this case that Tapscott withdrew variation 2.
  2. [22]
    Clause 19.5 is also not relevant. It provides for the builder not being required to create a variation document where the relevant work is required to be carried out urgently. That is not the case here.
  3. [23]
    Clause 19.6 makes clear that it is not necessary for the price of a variation to be agreed between the parties, prior to the work under the variation being carried out by the builder. Clause 19.6 states:
  1. 19.6
    If the price of a variation is not agreed, the price is:
  1. for additional work, the reasonable price for that work including an amount for the builder’s margin...
  1. [24]
    The term ‘reasonable price’ is not defined in the contract.
  2. [25]
    Although it is not necessary for the price to be agreed, the effect of clause 19.3 still remains, that the owner must agree to the variation, which is defined in clause 35 to be, as far as relevant to this matter, ‘additional work’.
  3. [26]
    Clause 19.7 provides when the price of a variation is payable by the owner and is in the following terms:
  1. 19.7
    The price of a variation is due and payable at the next progress payment after it is carried out unless a different time is agreed.
  1. [27]
    The effect, and application, of clause 19.8 has significance for this matter, and is as follows:
  1. 19.8
    The owner must not refuse a request by the builder for a variation where the variation is required for the works to comply with the law.
  1. [28]
    By way of brief introduction to the relevant point, Tapscott says that the variation to include steel beams in the construction of the house instead of timber beams is required for the works to comply with the law.
  2. [29]
    Clause 19.9 concerns the builder’s obligation to use reasonable endeavours to match the colour and grain of any natural materials and is not relevant.
  3. [30]
    In my view, if the parties to the contract do not agree to the price of a variation, the builder may include the reasonable price for the work in the next progress payment.[11] If the owner disputes the amount claimed by the builder in that progress payment, then the matter can be dealt with by way of the dispute resolution clause contained in clause 34 of the contract. Operation of that clause requires one party to give to the other written notice of such a dispute.

The history to variation 2

  1. [31]
    In the second half of 2020, the Cherrys met with Mr Brett Tapscott, Director of Tapscott Homes Pty Ltd to discuss Tapscott building a house for the Cherrys. The Cherrys provided Mr Tapscott with draft house plans. By that time, both parties appear to have been aware of the requirements to obtain a $25,000 building grant made available to stimulate the building industry during the COVID era. Importantly, the close-off date for the grant was such that the grant would only apply to contracts signed before 31 December 2020.
  2. [32]
    The evidence which I accept is that both Tapscott and the Cherrys entered into a ‘Preliminary Agreement’ dated 16 October 2020, under which those parties agreed that the Cherrys requested Tapscott to carry out preliminary works for the Cherrys ‘in connection with and in preparation for the construction of a proposed building site’.[12] The price payable by the Cherrys to Tapscott for the preliminary works was stated to be $5,000. Mrs Cherry gave evidence that the $5,000 became part of the price for the overall building contract. Indeed, that is the effect of clause 4 of the ‘Addendum to the Agreement’, that if the owner enters into a building agreement with the builder for construction of the proposed work, all monies paid by the owner under the Preliminary Agreement will be credited against the contract price of the building agreement. If a building agreement was not entered into, the total price was non-refundable.[13]
  3. [33]
    The items of the preliminary works which the Cherrys authorised and requested Tapscott to do are listed on the first page of the Preliminary Agreement. The item of interest is item (i), to:

Arrange and obtain for the preparation of engineer’s drawings, design and computations.

  1. [34]
    Evidence given by Mr Tapscott, both in his first affidavit,[14] and in oral evidence before me, is that by December 2020, the engineering drawings had not been completed. In oral evidence, Mr Tapscott explained, and I accept, that the effect of the building grants scheme, together with the effect of the COVID pandemic, was that the engineers simply could not prepare the relevant drawings by that time. In my view, that evidence is confirmed by Mr Tapscott’s first affidavit, which I do not think is contested, that the engineering drawings were not received by Tapscott until on or about 14 June 2021.[15]
  2. [35]
    This meant that by December 2020, it had not been possible to complete the engineering work, but by that time the Cherrys were anxious to have the contract signed so that they could obtain the benefit of the home owner’s grant.
  3. [36]
    To accommodate the engineering drawings not being available by the time that the contract needed to be signed in order for the Cherrys to receive the benefit of the home owner’s grant (31 December 2020), Mr Tapscott inserted a ‘special condition’ in the HIA contract as follows:

Contract signed pending engineering & colour selections.

  1. [37]
    That special condition clearly caused concern to Mrs Cherry. In her first affidavit,[16] she explains, and I accept, that on the morning of 24 December 2020, she contacted Mr Tapscott by telephone to discuss the contract and ask why the ‘unexpected clause’ had made its way into the contract.
  2. [38]
    Mrs Cherry says, and I accept, that Mr Tapscott informed her that the clause was there because ‘they had not completed the engineering yet’. I accept that Mrs Cherry asked Mr Tapscott to remove the special condition which he refused to do. In Mr Tapscott’s second affidavit,[17] he says that because he was still awaiting the engineering drawings, he would not proceed without the special condition. In the end result, and with the deadline looming for qualification of the home owner’s grant on 31 December 2020, the Cherrys signed the fixed price contract.[18] It is therefore not contested between the parties that the contract contains the special condition.
  3. [39]
    In paragraph 11 of Mr Tapscott’s first affidavit, he deposes to the engineering drawings being received on or about 14 June 2021. It is implicit from his affidavit that the drawings were provided to the Cherrys, because Mr Tapscott says that on or about 16 June 2021, the Cherrys requested that the engineering drawings be amended. The final engineering drawings were received on or about 21 June 2021. The engineering drawings are attached to Mr Tapscott’s first affidavit and marked BT6. The same plans are also attached to the SOR and I was taken to page 248 by counsel for the QBCC during his opening statement at the hearing of this matter.
  4. [40]
    The engineering plans show steel beams being used as bearers that support the flooring of the upper level of the building.
  5. [41]
    There was then a long break between the signing of the contract in December 2020, to when work commenced, as agreed by the parties, on 19 August 2021. The work done then was to construct the concrete slab on which the house was to be built. Mr Tapscott gave oral evidence that the reason for the delay between signing the contract and the slab being constructed was again due to the COVID pandemic, with consequent shortage of materials. By that time, supplies for trusses were taking between six and eight months to be supplied after ordering.
  6. [42]
    In the evidence of Mrs Cherry, which is not contested, constructing the slab was the last physical work done in constructing the house.
  7. [43]
    Mr Tapscott then says that the engineering drawings had a consequence of change of construction of the building, in that the engineering drawings and conditions of building approval necessitated that some beams in the downstairs portion of the residence needed to be constructed of steel rather than the wooden beams for which provision had been made in the contract.[19]
  8. [44]
    The most critically significant event for this matter was then that on 4 February 2022, Tapscott issued variation 2 to the Cherrys.[20]

The contents of variation 2

  1. [45]
    Variation 2 is written on what appears to be a standard form used by Tapscott for the purpose of processing variations under a contract. It states that the variation is in accordance with the contract:

Clause 19, Variations & Clause 11. Compliance with requirements of local and other authorities or (Contract QCI 2015) Clause 20. Variations & Clause 11. Compliance with requirements of local another authorities.

  1. [46]
    The reference to ‘Contract QCI 2015’ appears to be a reference to the comparative clause numbers dealing with variations in a previous version of the HIA standard home building contract. No point was taken by any party about references to an earlier iteration of a HIA contract and the reference is redundant.
  2. [47]
    The document then states that it is for a variation, checking two boxes on the standard form variation, about the reason for it. The two boxes checked in the document are that it is a variation:

required by law

requested by the Contractor/Contractor Representative for the following reasons:

as per HAI [sic] Schedule 3. Special Conditions.[21]

  1. [48]
    There is then provision on the Tapscott standard variation form to describe ‘The change to the Works is as follows’. The text inserted in the space for the description of the change to the works is:

Supply and install additional steel beams including crane hire as per engineering.

  1. [49]
    The form then states that the variation will change the price payable by the Owner to be to increase the price by $9,895.00. The same section of the form makes provision for when the payment for the variation is due, which is stated to be at the ‘Framework’ stage.
  2. [50]
    The form contains what appears to be a digital signature of Mr Tapscott, and the date the variation was issued (4 February 2022). There is a section on the form asking the owner to review, sign and promptly forward back to the builder, a signed copy of the notice.
  3. [51]
    Variation 2 then prompted a flurry of emails between Tapscott and the Cherrys, which  will be necessary for me to analyse in detail. However, it is certainly the case that variation 2 had a profound effect on the fate of the contract. I will illustrate that by the objective facts about actions taken by the parties asserting their rights under the contract, as a consequence of variation 2, before returning to the parties’ respective positions about the legal effect of variation 2 under the contract.

Objective facts on the consequences of variation 2

  1. [52]
    First, it is clear that the Cherrys did not sign and return variation 2 to Tapscott.
  2. [53]
    Second, on 16 February 2022, Tapscott issued a notice of suspension of the works to the Cherrys. The notice of suspension stated that it was issued in accordance with clause 18 (Suspension of works) of the contract, under:

clause 18.1(i) of the QC 2 contract, for a failure to comply with clause 19.8 of the contract.

The owners have refused a request by the builder for a variation, where the variation is required for the works to comply with the law, the variation also formed part of the HIA QC 2 contract special conditions.[22]

  1. [54]
    The notice of suspension then references the special condition of the contract in the following terms:

... pending engineering/form 15, finalised on 21/06/2021 and pending colour selections.

  1. [55]
    Pausing there, the clause of the contract invoked by the notice of suspension, in clause 18.1(i) is as follows:
  1. 18.1
    The builder may by written notice to the owner suspend the carrying out of the works if:

…

  1. the owner is otherwise in substantial breach of this contract.
  1. [56]
    The expression ‘substantial breach’ is not defined in the contract and I will return to the meaning of the term for the contract further in these reasons for decision.
  2. [57]
    By 1 March 2022, the Cherrys had obtained the services of a solicitor, Saal & Associates. On that date, Saal & Associates wrote to Tapscott, relevantly contending that Tapscott was in breach of the contract under clause 19.7 (the variations clause) by requesting payment prior to the variation 2 works commencing.
  3. [58]
    On 7 April 2022, Tapscott issued a second notice of suspension of the works.[23] That second notice of suspension also invoked, as the reason for it, that the Cherrys may not, pursuant to clause 19.8 of the contract, refuse a request for a variation where the variation is required for the works to comply with the law. The notice elaborates on that ground, and states that the Cherrys have refused to authorise variation 2, and they were therefore in substantial breach of the contract.
  4. [59]
    On 19 April 2022, the Cherrys sent to Tapscott a notice to remedy an alleged breach of the contract, in a document headed ‘Notice of intention to terminate contract’.[24] The breaches allege that variation 2 was invalid, and ‘of no force and effect’, and that Tapscott was not entitled to issue either of the notices of suspension. Ultimately, the Cherrys did not proceed to terminate the contract in reliance on the Notice of intention to terminate contract.
  5. [60]
    On 22 June 2022, Tapscott, through its solicitor, issued a notice to rectify a breach of the contract, relying on the Cherrys’ refusal to authorise variation 2 which the solicitor contended constituted a breach of clause 19.8.
  6. [61]
    On 26 July 2022, the solicitor for Tapscott issued a contract termination notice to the Cherrys through their solicitor on the basis that the Cherrys had failed to remedy the breach identified in the notice dated 22 June 2022.
  7. [62]
    Mrs Cherry says that there was an attempt made by her, in July 2022, for early dispute resolution by the QBCC. However, in evidence given by Mr Tapscott, he said he did not receive any contact from the QBCC about any proposal for early dispute resolution by the QBCC.
  8. [63]
    There is no documentary evidence before the Tribunal that establishes that the QBCC contacted Mr Tapscott about a proposal for early dispute resolution. The only objective documentary evidence about the point is attachment RJC11 to the first affidavit of Mrs Cherry, which is a letter from the QBCC to Mrs Cherry dated 28 July. It says that the author was ‘not able to help you reach an agreement with [Tapscott] to resolve your dispute’. The letter does not say why the author was not able to help to do so.
  9. [64]
    On 4 August 2022, the Cherrys, through their solicitor, contacted Tapscott through its solicitor, in a letter explaining that the Cherrys contended that Tapscott had repudiated the contract by wrongfully purporting to terminate the contract, the Cherrys accepted the repudiation and then terminated the contract themselves.[25]
  10. [65]
    On 27 July through to 24 August 2022, the Cherrys completed and submitted their application to the QBCC for a home warranty insurance claim. That claim was approved on 7 October 2022.[26] In a decision notice by the QBCC dated 13 December 2022, the QBCC said that it had been unable to conduct an internal review within the required period. The effect was therefore to affirm the initial decision to approve the claim.
  11. [66]
    Tapscott filed its application in the tribunal to review that decision on 15 December 2022.

The positions of the parties on variation 2

  1. [67]
    Each of the parties had a different position about the effect of variation 2.
  2. [68]
    Tapscott’s position is that variation 2 was valid under the contract, and the Cherrys did not accept it, which Tapscott contends led to the Cherrys being in ‘substantial breach’ of the contract, for the purposes of both suspension of the works under the contract under clause 18, and also termination of the contract under clause 25.
  3. [69]
    The QBCC’s position is that the variation was valid, and that the Cherrys accepted the variation, which meant that the Cherrys were not in ‘substantial breach’ of the contract which meant that Tapscott did not have a lawful basis to suspend, and then terminate the contract. That meant that the contract ended, for the purposes of s 4 of the QBCC Regulation, on the default of Tapscott, meaning that the Cherrys had a valid claim under s 6 of the QBCC Regulation.
  4. [70]
    For their part, the Cherrys contend that variation 2 was invalid, for several reasons, meaning that there was in reality nothing valid for the Cherrys to accept, and so they were not in ‘substantial breach’ of the contract. They submit that had the effect that Tapscott did not have a lawful entitlement to suspend the works under clause 18 or terminate the contract under clause 25. In that case, the Cherrys were entitled to treat the purported termination of the contract by Tapscott as being repudiation of the contract, which the Cherrys accepted, and terminated the contract, which also led to the conclusion that the contract ended because it was validly terminated on the default of Tapscott under s 4 of the QBCC Regulation. That meant that the Cherrys had a valid claim under the statutory insurance scheme, and that the application by Tapscott to review the decision of the QBCC to approve the claim should be dismissed by the Tribunal.
  5. [71]
    It is therefore necessary to next consider whether variation 2 was valid under the contract.

Was variation 2 valid under the contract?

QBCC position on validity of clause 2

  1. [72]
    The Tribunal directed the QBCC to file in the Tribunal and give to the other parties, a document stating the QBCC position on whether variation 2 was a valid variation required by law. The QBCC filed and served two position documents:
    1. a document dated 3 May 2023 submitting that variation 2 was ‘required by law’ and also addressing the question of whether a failure to comply with a variation required by law was a ‘substantial breach’ of the contract;
    2. a document filed on 6 June 2023 elaborating on the first question and also submitting that variation 2 was a valid variation document under the requirements of clause 19.1 of the contract.
  2. [73]
    At the hearing of this matter, counsel for Tapscott adopted the reasoning by the QBCC in these documents.
  3. [74]
    The first QBCC position document refers to the special condition in the contract, that it was signed ‘pending engineering and colour selections’. It then refers to the ‘Building Specification’ contained in the contract, and in particular, under paragraph 2 headed ‘Engineers Requirements and Local Authority Requirements’, the following paragraph:

Should the Council or any other authority require special engineering detail from the Builder [prior to or during construction], the additional costs, including all labour and equipment hire costs will be charged to the Owner by way of a Variation to the Contract.

  1. [75]
    Mr Tapscott gave evidence in cross-examination that no particular ‘special engineering detail’ was required. However, that is not the end of the story concerning an obligation for steel beams to be substituted for timber beams, as a requirement of law. If there is, independently of the text from the specification quoted in the previous paragraph, a requirement of law that requires a variation to the contract, then the requirement of law will trigger the entitlement of the builder to issue a variation to the owner under clause 19 of the contract.
  2. [76]
    The first QBCC position document notes that the building approval was issued by a building certifier on 26 July 2021.[27] The documents approved in the building approval include documents prepared by Engage Consulting Engineers, comprising ‘Form 15 & Engineering’ dated 14 June 2021.[28] The relevant Form 15, which is a compliance certificate for building design or specification is also contained in exhibit 1,[29] and is certified by the engineer from Engage Consulting Engineers and dated 21 June 2021. The components certified include the lower storey bracing and tie down plan.[30] That is the document I refer to above in paragraph [39] that I was taken to by counsel for the QBCC during his opening statement showing steel beams used as bearers to support the flooring of the upper level of the building.
  3. [77]
    The first QBCC position document then refers to condition 6 of the certifier’s approval that work is not to commence on the frame stage of the building until full details, relevantly of the floor framing, had been submitted to and approved by the building certifier. Condition 34 required that all structural framing be designed and installed in accordance with engineer (RPEQ)[31] plans and reports.
  4. [78]
    The first QBCC position document refers to the effect of s 164 of the Planning Act 2016 (Qld) as containing a requirement that Tapscott was required to carry out the building work in accordance with the building approval. I agree. The QBCC submits that it follows that the works described in variation 2 were required by law. I also agree with that proposition.
  5. [79]
    For her part, Mrs Cherry also agreed that it was necessary for the floor to the upper storey to be supported by steel beams instead of the timber beams first proposed in the specification included for the purposes of the quote for the contract, then the contract.[32]
  6. [80]
    The second QBCC position document submits that variation 2 complied with the requirements for a variation document contained in clause 19.1(a)-(f), set out above in these reasons, when analysing the application of clause 19. The QBCC entertains some doubt about whether the requirement of paragraph (e) had been complied with, that a variation must state the change to the contract price because of the variation.
  7. [81]
    The QBCC ultimately comes to the position that the better view is that variation 2 did comply with that requirement because of text in the variation that it will ‘increase the price by $9,895 (inc GST)’. I agree that paragraph has been complied with.

The Cherrys’ position on validity of variation 2

  1. [82]
    For their part, the Cherrys submit that variation 2 was invalid, and of no effect, for several reasons.

The Cherrys’ reliance on Perera

  1. [83]
    The first submission that variation 2 was invalid was because it is analogous to, or ‘on all fours with’ (as Mr Saal, the solicitor who appeared for the Cherrys put it), with a decision of the Queensland District Court in Perera v Bold Properties (Qld) Pty Ltd.[33] Mr Mijo who was counsel for Tapscott submitted that the case is distinguishable from the present case, and therefore did not apply.
  2. [84]
    In that decision, His Honour Judge Barlow KC found a special condition, which was a contract price increase clause, to be void and therefore of no legal effect. By application of Perera, the Cherrys submit that the special condition of the contract in this case, that the contract was signed ‘pending engineering’ and also void.
  3. [85]
    The contract in Perera was also for construction of a house, and, as in this case, for a fixed price. The relevant price increase clause was special condition 7, which relevantly read as follows:
  1. In the event that commencement has not taken place by the anticipated start date ... the builder reserves the right, at the builders [sic] sole discretion, to increase the contract price to the current base price of the house type, which is the subject of this contract and identified in the Contract Tender to the builder’s current base price for that house type.
  1. [86]
    The builder, Bold Properties, purported to rely on that special condition to increase the price of the contract. The Pereras, who were the applicants in that case and to be the owners of the house, submitted that special condition 7 was void and unenforceable at law for the following reasons:
    1. it was void for uncertainty under recognised principles of contract law; and
    2. the contract failed to provide a sufficient price escalation warning concerning the special condition, as required by the QBCC Act; and
    3. the condition was an ‘unfair contract provision’, contrary to s 25(f) of the Australian Consumer Law (‘ACL’).
  2. [87]
    His Honour found that special clause 7 was uncertain under common law principles which made it, and its potential effect, uncertain and it was therefore unenforceable.[34] His Honour found that the scope of the price increase clause left the builder without any real constraint or reference criteria by which a price increase may be determined, and may be checked by the owners. Rather, the builder may fix whatever price it determined as its ‘current base price’ for the house type, including a price that has no correlation to the price that it agreed to charge the owners.[35] Further, that the clause states that the right of the builder to increase the price was at the builder’s sole discretion ‘added additional uncertainty into the provision, as it would allow the builder to determine arbitrarily whether or not it would rely on the provision’.[36]
  3. [88]
    In the present case, it is important to focus on the specific contractual provision which Tapscott relied on for the variation. It is not the special condition that the contract was ‘signed pending engineering’. Instead, it was clause 19, the specific focus of which is variation to the work for the contract. The effect of the clause in Perera was that it allowed the builder to unilaterally change the entire price for the contract. That contrasts sharply with the effect of clause 19, which only allows for a variation to the existing contract price already agreed between the parties.
  4. [89]
    Secondly, a change to the price of the contract caused by variation under clause 19 is not at the sole discretion of the builder. Instead, for the variation to proceed, the owner must agree to it prior to the builder commencing the variation works.[37] All that clause 19.3 of the contract in the present case requires, is that the owner agree to the ‘variation’ in writing. Importantly, the variation is relevantly defined in the interpretation clause of the contract to mean an addition or change to the ‘works’. The clause does not require the owner and the builder to agree to the price of the variation before the builder may proceed with the variation.
  5. [90]
    If the price of the variation is not agreed, the price, under clause 19.6 for additional work is the ‘reasonable price for that work’ including an amount for the builder’s margin. Although clause 19.7 provides that the price of a variation is due and payable at the next progress payment, where the parties cannot agree about the reasonableness of the price, and the price remains in dispute between the parties, that may be subject to the ‘Disputes’ clause contained in clause 34 of the contract.
  6. [91]
    Finally, a considerable amount of objectivity (in contrast to unilateral discretion of the builder) is injected into clause 19, through the effect of clause 19.8 that the owner must not refuse a request by the builder for a variation where the variation is required for the works to comply with the law. I have found that the variation was necessary in this case to comply with the law.
  7. [92]
    The second basis for the decision in Perera that the Cherrys rely upon, is that there was non-compliance with the requirements of s 14 of schedule 1B of the QBCC Act. Schedule 1B contains requirements for ‘domestic building contracts’, of which the parties agree the contract in this case is a species. As relied upon by the Cherrys in this case, s 14(6) requires a warning to be stated on the contract that the contract price may be changed under a provision of the contract. Section 14(7) requires the warning and explanation must be in a prominent position on the first page of the contract schedule. Section 108D of the QBCC Act prohibits contracting out of the provisions of the Act, which of course includes schedule 1B.
  8. [93]
    The relevant warning in the contract in Perera did not include special condition 7.[38] Judge Barlow found that the failure to include special condition 7 in the relevant warning part of the contract rendered it void because of the effect of s 108D of the QBCC Act. Mr Saal, who appears for the Cherrys, submitted that the same outcome should follow in this case, because the special condition that the contract was subject to, that it was signed ‘pending engineering’ is not listed on the first page of the schedule.
  9. [94]
    I do not accept that proposition. As I have recorded in considering the first submission based on Perera, the contractual clause through which the price was increased was not the special condition, but instead the condition under which variations may be made, clause 19. That condition is specifically contained under the warning which is on the first page of Schedule 1 (‘Particulars of contract’).
  10. [95]
    Finally on Perera, Judge Barlow found special condition 7 in that case to be void because it did not comply with s 23, s 24 and s 25 of the ACL.
  11. [96]
    Section 23 of the ACL provides that a term of a ‘consumer contract’ is void where that term is unfair and the contract is a standard form contract. Assuming for the sake of the submission that the HIA contract is a ‘consumer contract’, s 24 provides that a contract is unfair if:
    1. it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and
    2. it is not reasonably necessary in order to protect the legitimate interests of the party who would be disadvantaged by the term; and
    3. it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.[39]
  12. [97]
    In determining whether a term is unfair, s 24(2) provides that a court may take into account such matters as it considers relevant but must take into account the extent to which the term is ‘transparent’, and the contract as a whole.[40] Under s 24, a term is ‘transparent’ if it is expressed in reasonably plain language, is legible, presented clearly, and readily available to any party affected by the term.
  13. [98]
    Section 25 of the ACL, in listing examples of clauses which may be unfair includes, of relevance to this case, s 25(f) which is as follows:

A term that permits, or has the effect of permitting, one party to vary the upfront price payable under the contract without the right of another party to terminate the contract.[41]

  1. [99]
    In my opinion, the variations clause in the contract which was the basis for variation 2 in this case suffers from none of the vices which Judge Barlow decided applied in Perera. It is certainly transparent, within the requirements of s 24(3).
  2. [100]
    In my opinion, clause 19 as the variations clause is not unfair in application of the tests contained in s 24 of the ACL. It does not cause a ‘significant imbalance’ of the parties’ rights and obligations under the contract. Instead, it is a carefully worked out balance of rights between the builder and the owner. In particular, and in the application of clause 19 in this case, clause 19.8 makes clear that the owner must not refuse a request by a builder for the variation where the variation is required for the works to comply with the law. If it were otherwise an owner could, by refusing the variation, require the builder to infringe the law.
  3. [101]
    Clause 19 does not permit the builder to vary the ‘upfront’ price of a contract, under s 25(f) of the ACL. As illustrated in this case, application of variation clause 19 contemplates variation to the ‘up front price’ already agreed by the parties at the outset, if during the life of the contract, there is the need for the builder to vary the works, including in this case, to comply with the law.
  4. [102]
    In conclusion on this point, I find that clause 19 as the operative clause for variation 2, is not void or invalid as being in conflict with the ACL as was submitted to me.
  5. [103]
    In fairness to the Cherrys, I apprehend that they submit that the special clause is invalid under the ACL even if it is not the direct cause of variation 2.
  6. [104]
    I also conclude that the special condition in the contract in this case is not invalid under the ACL on application of the provisions in it relied upon it by the Cherrys.
  7. [105]
    There is no imbalance between the parties because of the special condition, and it does not confer ‘an unconstrained right to adjust the contract price by an arbitrary amount’, as Judge Barlow found was the effect of clause 7 in Perera.[42] Instead, it is a clause which allows the finalisation of engineering to apply to the contract, which is a requirement of law.
  8. [106]
    There is nothing unilateral in the special condition in this case which confers on Tapscott, an ‘unconstrained right’ to adjust the contract price by an arbitrary amount. Instead, the engineering is left to the engineer, a professional who was not an employee of Tapscott. Indeed, as Mrs Cherry concedes in her first affidavit, she understood that the steel beams which were required as a result of the engineering, were ‘essential to our build, and we are willing to contribute towards them.’[43]
  9. [107]
    Once the engineer had done his work, it was a matter for Tapscott to implement the engineering requirements (which were required by law) through the means provided in the contract, by application of the variations clause, clause 19.

Breach of the Preliminary Agreement

  1. [108]
    The Cherrys submit that the special condition is invalid because it was in breach of the requirement of the ‘Preliminary Agreement’ discussed above in these reasons, and in particular, that Tapscott did not complete something it was required to do, which is arrange and obtain engineer’s drawings, design and computations.
  2. [109]
    The evidence given by Mr Tapscott on this question, which I accept, is that it was simply not possible for him to have the engineer’s work completed by the time that the Cherrys wanted the contract signed, in order to have the benefit of a home owner’s grant. Proof of the time taken by the engineer in Engage Consulting Engineers to complete the engineering process is that it took him until May 2021 to provide the engineering and until June 2021 for the drawings to be finalised. The Cherrys requested some amendment to the engineering drawings between 14 June 2021 and 21 June 2021.[44]
  3. [110]
    The engineer’s Form 15 certificate was not signed until 14 June 2021, and then it was necessary for the certifier to approve the works which occurred on 26 July 2021.
  4. [111]
    Importantly, and this is where the Cherrys’ submission on this point must fail, there was no time stated in the Preliminary Agreement by which Tapscott had to provide the works done under the Preliminary Agreement, including the engineering work. On that basis, there is no breach by Tapscott of the Preliminary Agreement, let alone that the delay in the engineering work meant that variation 2, based on a requirement of law, became invalid.
  5. [112]
    Even if there was a breach of the agreement, on the basis that delivery of the outcomes did not occur within a specified time, given the effect of the COVID pandemic, and that finalisation of the engineering drawings was out of Tapscott’s hands, I would find that any non-compliance with the Preliminary Agreement as to the time for delivery of the outcomes on engineering work, was ‘frustrated’ within the common law of frustration of contracts. That would relieve both parties of their obligations under the preliminary agreement, except for the fact that both parties, with realisation that the engineering work had not been done by the time the substantive contract was signed, nonetheless signed the substantive contract.

Inaccuracy in variation 2

  1. [113]
    Next, the Cherrys contend that variation 2 is invalid because of inaccuracies in it, in two respects:
    1. the steel beams were not truly ‘additional’ as stated in variation 2, but instead in substitution for the timber beams which had previously been provided for in the contract;
    2. variation 2 did not reflect a deduction that should be made because the timber beams previously provided for would not need to be supplied and installed.
  2. [114]
    There was certainly some inaccuracy about variation 2 issued by Mr Tapscott, and he admitted as much under cross-examination. However, what counts, as far as the legal position between the parties is concerned, is the requirements and effect of the contract.
  3. [115]
    For her part, when Mrs Cherry gave evidence on the first ground of inaccuracy, and in the correspondence and negotiation over the price of the variation, she said she knew that the beams were in substitution for the timber beams.
  4. [116]
    My view of the evidence is that Mrs Cherry knew that the steel beams were in substitution for timber beams, and not in that sense ‘additional’, as far ago as 22 September 2021. That was the date of an email from Mr Tapscott to Mrs Cherry[45] which relevantly says:

Regarding the steel beams, we had a conversation about this prior to signing the contract, as I recall you had reservations about signing a contract subject to the engineering and did give assurance that I thought I had everything covered. To explain the additional cost here is the cost to put in steel instead of timber. In all my years as a builder I had never been asked to install steel beams so this is totally due to the design of your home and the discretion of the engineer.

  1. [117]
    Shortly before variation 2 was issued, on 4 February 2022, Mrs Cherry, in an email dated 30 January 2022 to Mr Tapscott[46] asked for confirmation:

... that the variation for steel beams completes all outstanding items under our contract and there will be no more additional costs for our build unless we specifically request a change?

  1. [118]
    It appears to me that the state of the evidence is that whilst Mrs Cherry was naturally concerned about variations that would increase the cost of the building to her, she accepted the need for the steel beams. 
  2. [119]
    An email dated 11 February 2022 records a response by Mrs Cherry to variation 2 through use of a ‘HelloSign’ system of electronic responses to documents used in administration of the contract. Mrs Cherry says:

While we are willing to help out and pay a reasonable difference between timber & steel beams, we are not prepared to pay the excessive price requested. They are NOT[47] additional. The post and beam layout has not changed since before signing the contract.

  1. [120]
    That recognises Mrs Cherry’s knowledge that the steel beams were not additional to the timber beams, but in replacement of the timber beams. The second sentence quoted above is incorrect. After the contract was signed, the engineering drawings approved by the certifier included the Form 15 by the engineer and the engineer’s drawings which clearly indicate steel beams were required to support the flooring of the upper level of the house.
  2. [121]
    In an email dated 16 February 2022 from Mrs Cherry to Mr Tapscott,[48] she said:

We have declined variation #2 for steel beams as we do not consider it a reasonable price. We would like to negotiate with you a reasonable price for the difference between timber beams and steel beams.

  1. [122]
    In my opinion, the purpose of clause 19.1(a) of the contract that the variation document state ‘the work required to carry out the variation’ is to inform the house owner about the nature of the work proposed by the builder, so that the owner can, with knowledge of the work proposed, either agree or disagree to the work contemplated in the proposed variation taking place.
  2. [123]
    On the facts of this case, likely before the issue of variation 2 and certainly after it was issued, Mrs Cherry knew the scope of the works proposed by the variation for the purposes of either agreeing or not agreeing to the work proposed. Her main concern was not with the need for the work, but with the additional cost of the steel beams.
  3. [124]
    Also, there was a sense in which the steel beams were ‘additional’, in that they were not included in the original design. Certainly, Mrs Cherry was mostly concerned about the additional cost of the beams, and as long ago as September 2021, in the email from Mr Tapscott referred to above, he described the variation in terms of additional cost.
  4. [125]
    Overall, given my finding on the purpose of clause 19.1(a) I find that any lack of precision in the description of the work required to carry out the variation does not render variation 2 invalid.
  5. [126]
    The second ground of inaccuracy in variation 2 is that it does not properly reflect any deduction in the cost of the variation the cause of the timber beams already factored into the contract price.
  6. [127]
    Strictly speaking, clause 19.1 does not require the variation to state a recognition for the contract price to reflect a reduction for the contract price to offset an increase in the price because of works that are in substitution of work which was earlier proposed in the contract. Clause 19.1(e) requires that a variation document state ‘the change to the contract price because of the variation’.
  7. [128]
    Clause 19 specifically, and the structure of the contract more generally, recognises that the builder and the owner may have a legitimate difference about the price for a variation. Clause 19.6(a) recognises that if the price of a variation is not agreed, then the price for additional work is the ‘reasonable price for that work’ including an amount for the builder’s margin. The builder may invoice for that work and the price is due and payable at the next progress payment after that variation work is carried out unless a different time is agreed. Moreover, a dispute between the parties about the price for the variation is a matter that can go to dispute resolution under the dispute resolution clause in clause 34.1 of the contract.
  8. [129]
    The evidence shows that the parties were actually negotiating the price of variation 2 at the time that the contract was suspended by Tapscott. Several significant matters occurred on Wednesday 16 February 2022:
    1. the morning began with Mrs Cherry's email sent at 9:08am ‘We have declined variation #2 for steel beams as we do not consider it a reasonable price’, and that she would like to negotiate with Mr Tapscott a reasonable price for the difference between the timber beams and steel beams;
    2. then at 3:34pm that day, Tapscott sent an email to Mrs Cherry acknowledging Mrs Cherry earlier declining variation 2 and recognising that the Cherrys would like to negotiate a reasonable price for the difference between timber beams and steel beams and that Tapscott issued the first notice of suspension ‘while both parties seek to resolve this dispute’. The first notice of suspension was attached to that email;
    3. at 9:37pm that night, Mrs Cherry sent an email to Tapscott stating that the Cherrys did not accept the notice of suspension saying that there were no grounds for it. Mrs Cherry stated that she had not refused a request by the builder for a variation where the variation is required for the works to comply with the law and that they were willing to pay a reasonable price for the difference between the timber and steel beams, but the price proposed by Tapscott was excessive. Mrs Cherry said ‘Therefore, your suspension of works is not valid and it does not apply’. She reiterated that she would like to negotiate a reasonable price for the difference between the timber and steel beams.
  9. [130]
    Even whilst the contract was under suspension, Tapscott responded to the last email from Mrs Cherry in an email dated 18 February 2022. A Lisa McMillan from Tapscott said that construction on the house could not continue without the dispute about variation 2 and the costs of the steel beams being resolved. She stated that Tapscott was open to negotiate a reasonable price for the difference between the timber and steel beams. She pointed out that Tapscott was not obligated to show quotes provided by suppliers but did step out the components required for the steel beams and the dollar amount for supply and installation of the steel beams as against the dollar amount for the supply of timber beams. That email offered reduction for the current price to supply and install the steel beams, and proposed the amount of $7,961.00 as the revised price of the variation.
  10. [131]
    The email ended with the proposition that once both parties agreed on a resolution to the dispute, an amended variation 2 noting the agreed reduction in price would be drafted and sent to the parties for signature.
  11. [132]
    There never was an agreement on the price of variation 2, or a specific response by the Cherrys to the cost proposal contained in the email from Tapscott dated 18 February 2022. Instead, the next correspondence on behalf of the Cherrys to Tapscott was the letter from Saal & Associates dated 1 March 2022, contending that variation 2 was invalid and of no force end effect. That letter appears to have ended any further negotiation about the price of the variation.
  12. [133]
    Overall, given the requirements of clause 19, and that it is not necessary for the builder and the homeowner to agree on the price of a variation, and that the difference in opinion can go to dispute resolution, I find that variation 2 was not invalid because it did not include a calculation for reduction to the variation to reflect the value assigned for timber beams which would no longer be required.

Correct characterisation of the response by Mrs Cherry

  1. [134]
    It is then necessary to analyse whether Mrs Cherry rejected or accepted variation 2.
  2. [135]
    Tapscott submits that Mrs Cherry did reject variation 2, which put the Cherrys in ‘substantial breach’ of the contract, for the purposes of suspension of the contract under clause 18.1(a), and subsequently entitled Tapscott to terminate the contract under clause 25.2(k) on the basis that the Cherrys were, in each case, in ‘substantial breach’ of the contract.
  3. [136]
    For its part, the QBCC submits that when the entirety of the evidence is taken into account, I should find that Mrs Cherry did accept the variation.
  4. [137]
    When I asked Mr Saal, who appeared for the Cherrys, whether his clients’ position was that Mrs Cherry accepted the variation, he responded that the Cherrys accepted the need for the beams, but the variation was not necessary to comply with the law, and also that variation 2 was invalid for reasons described above in this decision.
  5. [138]
    Part of the entirety of the evidence relied upon by the QBCC is paragraph 19 of         Mrs Cherry’s statement which refers to attachment RJC12 to her statement which is an email from Mrs Cherry to Tapscott dated 8 February 2022.[49] Relevantly, the QBCC says the significance of that email is that after receiving variation 2, the Cherrys emailed Mr Tapscott and told him that ‘there is no need to hold up ordering the steel beams as we understand they are essential to our build, and we are willing to contribute towards them’.
  6. [139]
    However, Mr Mijo who appeared for Tapscott points out, and I think correctly, the scope of the variation was not only to supply the steel beams but to ‘supply and install additional steel beams, including crane hire as per engineering’.[50] That is, as well as Tapscott supplying the steel beams, which necessarily required Tapscott to order them, the variation was also to install them. In my opinion, that piece of evidence falls short of the Cherrys approving or agreeing to the variation.
  7. [140]
    It is true that the Cherrys did not agree to the price of the variation as proposed by Tapscott, and that clause 19 of the contract does not require agreement on price for an owner to accept a variation. However, the contract does contemplate an owner rejecting a variation for any reason, including the cause of the proposed price.
  8. [141]
    In my opinion, the salient piece of evidence that establishes that the Cherrys rejected the variation is the email from Mrs Cherry to Mr Tapscott dated 16 February 2022 at 9:08am, where she says:

We have declined variation #2 for steel beams as we do not consider it a reasonable price.

  1. [142]
    Her non-acceptance of the price is the reason for the refusal of the variation, but in my view, in that email, she made very clear that the Cherrys rejected the variation.

Was the failure of the Cherrys to agree to variation 2 a ‘substantial breach’ of the contract?

  1. [143]
    It is next necessary for me to determine whether the failure of the Cherrys to agree to variation 2 was a ‘substantial breach’ of the contract for the purposes of Tapscott exercising the power to suspend work on the contract under clause 18, then to purport to terminate it under clause 25. As illustrated above, the ground for each action was that the Cherrys were in ‘substantial breach’ of the contract.
  2. [144]
    As Mr Seefeld, who appeared for the QBCC, pointed out during the course of his opening of the case, the expression ‘significant breach’ is not exhaustively defined in the contract. However, there are some instances where the contract does describe what is a ‘substantial breach’ for particular circumstances.
  3. [145]
    Clause 25.1 states that the builder is in substantial breach of the contract if the builder does the things specified in that clause, such as suspending the carrying out of the works, other than under clause 18, or the builder’s licence is cancelled. On the other hand, clause 25.2 states that the owner is in substantial breach of the contract if the owner does not, amongst other things, pay progress payments, or pay the deposit, or ‘is otherwise in substantial breach’ of a contract.
  4. [146]
    Decided cases, especially on building contracts, will be helpful in determining whether the non-acceptance by the Cherrys was a substantial breach by them of the contract, given that the term ‘substantial breach’ is not defined so as to deal with a rejection of a variation. Mr Seefeld helpfully provided me with the following decisions on the meaning of a ‘substantial breach’ of a contract, and the effect of a substantial breach on the fate of a contract. Neither of the other parties submitted that those cases did not correctly state the law for the purposes of application to this case. Those decisions are:
    1. the decision of the High Court in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited;[51]
    2. the decision of the Supreme Court of Victoria in Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No. 3);[52]
    3. a decision by this Tribunal in Hopper & Anor v Queensland Building and Construction Commission & Anor (No. 2).[53]
  5. [147]
    In Koompahtoo, the High Court acknowledged that there are two circumstances in which there can be a breach of contract by one party that entitles the other party to terminate. The first is where the obligation with which there has been a failure to comply has been agreed by the contracting parties to be essential.[54] That is the case here, in that the parties have agreed that ‘substantial breach’ of the contract is a sufficient ground for a party to terminate the contract, and suspend it, even though that term is not comprehensively defined for all purposes under the contract.
  6. [148]
    The second circumstance about which the High Court spoke, is where there has been a sufficiently serious breach of a ‘non-essential term’.[55] Given the use of the trigger event in the contract in this case, of ‘substantial breach’ of the contract, that second circumstance is of less importance. The High Court said whether a term is essential or non-essential is a matter of interpreting the contract and the parties’ intentions in the event of a breach of contract, and the effect of the breach on the contract.
  7. [149]
    Helpful guidance, in interpretation of the expression ‘substantial breach’ in the context of a building contract is provided in the decision of Dura. There, Dixon J held that:[56]

As regards the place that the conduct in breach must reach on the continuum from trivial to repudiatory, the adjective ‘substantial’ provides guidance. It requires that the conduct in breach be of real or actual significance with respect to the important qualities of the bargain. Trivial or inconsequential conduct will not suffice, but it is unnecessary to show conduct that goes to the ‘root of the contract’. The consequences of the conduct must be material, or important, to the substance of the contract.

  1. [150]
    In my view, the Cherrys were in substantial breach of the contract by refusing to accept the variation. The consequences of them refusing the variation under clause 19.3 conflicted with the requirement in that clause that the parties must agree to the variation in writing prior to Tapscott commencing the variation works.
  2. [151]
    In this case, the variation was for a fundamental part of the construction of the house. This was no mere difference of opinion on a minor part of the works, such as the make and model of a laundry tap. Simply, as the Cherrys did not agree to the variation, Tapscott could not undertake the work of supplying and installing the steel beams. It would have been unlawful for Tapscott to construct the house relying on the timber beams only. The contract simply could not progress once the Cherrys refused the variation. It would not have been possible for Tapscott to ‘build around’ the rejection of the variation. The variation was a vital component to construction of the upper level floor. That meant that Tapscott could not continue with the building work and therefore receive the price that it was going to receive for completion of the house.
  3. [152]
    I therefore find that the Cherrys were in ‘substantial breach’ of the contract. That entitled Tapscott to suspend the works under clause 18.1(i), on both occasions that Tapscott issued a notice of suspension to the Cherrys.
  4. [153]
    That meant that Tapscott was entitled to issue a notice to the Cherrys to rectify a breach of the contract which it did on 22 June 2022, relying on the Cherrys’ refusal to authorise variation 2. It also means that Tapscott was entitled to issue a contract termination notice to the Cherrys, which Tapscott did on 26 July 2022, on the basis that by refusing the variation, the Cherrys were ‘otherwise in substantial breach’ of the contract for the purposes of clause 25.2(k). I find that Tapscott was lawfully entitled to, and did, terminate the contract on that date.
  5. [154]
    That finding precludes the need for me to consider whether the Cherrys were entitled to contend that Tapscott had repudiated the contract by wrongfully purporting to terminate the contract on 26 July 2022, that the Cherrys accepted that repudiation and then terminated the contract themselves. My finding also precludes the need to consider the submission by the Cherrys that Tapscott was not entitled to give a notice to remedy breach on the basis that Tapscott was itself in substantial breach of the contract, for the purposes of clause 25.6.

Did Tapscott require the Cherrys to pay for the variation before the work was done?

  1. [155]
    I will also consider a point made by Saal & Associates when writing to Tapscott on   1 March 2022, contending that Tapscott was in breach of the contract under clause 19.7 by requesting payment prior to the variation 2 works commencing.
  2. [156]
    It is far from clear that Tapscott, in variation 2, was either requesting or requiring payment prior to the variation 2 works commencing. There is no requirement for early payment for variation 2 in the variation document itself. All it asks for (and does not require) is that the Cherry:

Please review, sign and promptly forward back to the builder a signed copy of this VTO notice.

  1. [157]
    It is that variation document that has legal significance under the contract. However, even in other correspondence from Tapscott to Mrs Cherry, what Mr Tapscott does is ask Mrs Cherry to sign and return the variation. In an email from him to Mrs Cherry dated 8 February 2022,[57] he says:

Can I please ask you to sign the steel variation and return asap please so I can order steel, we are expecting frames onsite next week and steel lead times are blowing out.

  1. [158]
    What then followed was an email from Mrs Cherry to Mr Tapscott also dated 8 February 2022,[58] where she relevantly said:

We will review variation #2 and get back to you about it soon but there is no need to hold up ordering the steel beams as we understand they are essential to our build, and we are willing to contribute towards them.

  1. [159]
    On her own evidence, Mrs Cherry then said that on 11 February 2022, the Cherrys declined variation 2.[59] She confirmed declining variation 2 in her email to Mr Tapscott dated 16 February 2022.[60]
  2. [160]
    I therefore find on the evidence that Tapscott did not require or insist that the Cherrys pay for the cost of the variation prior to when it was otherwise due under the contract.[61] Tapscott did request the Cherrys to sign the variation and return it before undertaking ordering the steel beams as Tapscott was entitled to do, until receiving a signed variation under the contract.

Conclusion

  1. [161]
    My finding that Mrs Cherry declined variation 2, and that amounted to a substantial breach of the contract, means that the contract did not ‘end’ in a way described in s 4 of the QBCC Regulation schedule 6, by the Cherrys validly terminating the contract on the default of Tapscott as the licensed contractor. That means that the Cherrys’ claim on the statutory insurance scheme should not have been approved by the QBCC. The correct and preferable decision under s 20 of the QCAT Act is to set aside the QBCC decision, and instead substitute a decision that the Cherrys do not have a valid claim on the statutory insurance scheme under the QBCC Act, and I so order.
  2. [162]
    This means that it is unnecessary for me to consider the reasoning in the Tribunal’s decision in Hopper, though that case is helpful in demonstrating how the common law rights of a party, when the other party repudiates the contract, give an entitlement to the innocent party to terminate a contract for breach, in the context of a claim under the statutory insurance scheme. The outcome of that case was a finding that the builder had delayed the process of the works unreasonably, to the point where Mr and Mrs Hopper were justified in terminating the contract. The outcome is not applicable to this case.

Footnotes

[1]Known as the ‘Queensland Home Warranty Scheme’.

[2]But in any event, before 31 December 2020 which was the cut-off day for eligibility for the relevant home loan grant.

[3]The propositions in paragraphs (a)-(g) have meaning for the purposes of a claim on the statutory insurance scheme under s 6 of schedule 6 of the QBCC Regulation.

[4]SOR, paragraph 27.

[5]SOR, paragraph 28.

[6]SOR, paragraph 29.

[7]SOR, paragraph 30.

[8]SOR, paragraph 32. What is also not in issue, as I understand it, is that Tapscott issued an extension of time notice under the contract as a result of which the new practical completion date was 23 September 2022 - see paragraphs 33 and 34 of the SOR.

[9]To use the heading for that clause, contained in the margin of the contract.

[10]The terms in bold font mean that they are defined in clause 35 ‘Interpretation’ of the contract. Relevantly, the term ‘variation’ is defined to mean an addition or change to the works. No party contended that the variation to substitute steel beams for the timber beams is not a variation within the meaning of that definition.

[11]Unless a different time is agreed between the parties under clause 19.7, and there is no suggestion of that here.

[12]The Preliminary Agreement is contained in exhibit 1, as an attachment to the SOR, at pp 31-33. The text quoted is from p 31 of the SOR.

[13]Page 33 of the SOR.

[14]Affirmed on 19 May 2023, contained in exhibit 1 under tab 9, paragraph 8.

[15]Paragraph 11.

[16]Sworn 30 May 2023, contained in exhibit 1, under tab 10, paragraphs 9-11.

[17]Contained in exhibit 1, under tab 12 at paragraph 2.

[18]Paragraph 11 of Mrs Cherry’s first affidavit.

[19]Mr Tapscott’s first affidavit affirmed on 18 May 2023, paragraph 14.

[20]It is attached to the SOR in exhibit 1, as pp 269-270.

[21]That is in my view an obvious reference to the sole special condition that the contract was signed ‘pending engineering & colour selections’.

[22]SOR p 278.

[23]By this time, Tapscott had also obtained the services of a solicitor, Ceres Law. That firm had responded to the letter from Saal & Associates dated 1 March 2022, in a letter from Ceres Law, dated 1 April 2022.

[24]The document is attached to the SOR, commencing at p 306. It is also attached to Mrs Cherry’s first  affidavit as attachment RJC7.

[25]SOR pp 328-331.

[26]Paragraph 36 of Mrs Cherry’s first affidavit.

[27]Attached to the SOR commencing at p 254.

[28]Attached to the SOR, p 255.

[29]Attached to the SOR commencing at p 237.

[30]Attached to the SOR, p 248.

[31]Under the Professional Engineers Act 2002 (Qld).

[32]Mrs Cherry’s first affidavit at paragraph 19.

[33][2023] QDC 99 (‘Perera’).

[34]At [33].

[35]Paragraph [29].

[36]Paragraph [31].

[37]Clause 19.3.

[38]Perera, [38].

[39]Paragraphs [67] and [68] of Perera.

[40]Paragraph [69].

[41]Paragraph [79].

[42]Paragraph [81].

[43]Paragraph 19 of her first affidavit.

[44]Mr Tapscott’s first affidavit, paragraph 11.

[45]Attachment BT11 to the first affidavit of Mr Tapscott, at p 127.

[46]Also contained in BT11, at p 127. See also emails from Mrs Cherry in the same attachment, dated 3 February 2022 (p 126), 4 February 2022 (p 126) and 7 February 2022 (p 125).

[47]Emphasis in original.

[48]Page 282 of the SOR.

[49]Page 55 of the attachments to Mrs Cherry’s affidavit.

[50]My emphasis.

[51][2007] HCA 61 (‘Koompahtoo’).

[52][2012] VSC 99 (‘Dura’).

[53][2019] QCAT 212 (‘Hopper’).

[54]Koompahtoo, [47].

[55]At [49].

[56]At [447].

[57]Attachment BT11 to Mr Tapscott’s first affidavit, p 124.

[58]Attachment RJC12 to Mrs Cherry’s first affidavit, p 55.

[59]Paragraph 21 of her first affidavit.

[60]SOR, p 282.

[61]See also a letter from Ceres Law, the solicitor for Tapscott dated 1 April 2022 (SOR p 292), where Ceres Law refers to instructions from Tapscott that it did not request payment for variation 2 prior to placing an order for additional steal steel beams but instead that the Cherrys would not be required to pay the variation upfront, but variation 2 simply needed to be accepted and signed by the Cherrys.

Close

Editorial Notes

  • Published Case Name:

    Tapscott Homes Pty Ltd v Queensland Building and Construction Commission and Cherry

  • Shortened Case Name:

    Tapscott Homes Pty Ltd v Queensland Building and Construction Commission and Cherry

  • MNC:

    [2024] QCAT 437

  • Court:

    QCAT

  • Judge(s):

    Member Sammon

  • Date:

    04 Oct 2024

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
Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2012] VSC 99
2 citations
Jump To
Cite 1 - [2012] VSC 99
Cite 2 - [2012] VSC 99
Hopper v Queensland Building and Construction Commission (No. 2) [2019] QCAT 212
2 citations
Jump To
Cite 1 - [2019] QCAT 212
Cite 2 - [2019] QCAT 212
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61
2 citations
Jump To
Cite 1 - [2007] HCA 61
Cite 2 - [2007] HCA 61
Perera v Bold Properties (QLD) Pty Ltd(2023) 3 QDCR 132; [2023] QDC 99
2 citations
Jump To
Cite 1 - [2023] QDC 99
Cite 2 - [2023] QDC 99

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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