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- Kusters v Queensland Building and Construction Commission[2024] QCAT 592
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Kusters v Queensland Building and Construction Commission[2024] QCAT 592
Kusters v Queensland Building and Construction Commission[2024] QCAT 592
QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL
CITATION: | Kusters v Queensland Building and Construction Commission [2024] QCAT 592 |
PARTIES: | tony kusters (applicant) v queensland building and construction commission (respondent) |
APPLICATION NO: | GAR260-20 |
MATTER TYPE: | Building matters |
DELIVERED ON: | 13 December 2024 |
HEARING DATE: | 24 September 2024 |
HEARD AT: | Brisbane |
DECISION OF: | Member Scott-Mackenzie |
ORDERS: | The internal review decision of Queensland Building and Construction Commission made 8 June 2020 a domestic building contract between Nigel Gary Borresen and Leonie Jane Borresen and Western Downs Plumbing and Building Supplies trading as ShedsnHomes Ipswich dated 4 September 2017 had been validly terminated having the consequence of allowing a claim for non-completion under the statutory insurance scheme is confirmed. |
CATCHWORDS: | GENERAL ADMINISTRATIVE REVIEW – BUILDING – INTERNAL REVIEW OF DECISION A DOMESTIC BUILDING CONTRACT HAS BEEN VALIDLY TERMINATED – whether owners in substantial breach of the contract – whether owners precluded from terminating the contract – whether contractor in substantial breach of the contract – whether owners validly terminated the contract Queensland Building and Construction Commission Act 1991 (Qld), s 85A, s 86, s 87, s 67Y Queensland Building and Construction Commission Regulation 2003 (Qld) (now repealed), sch 2C, sch 6, s 1, s 4, s 6 Queensland Civil and Administrative Act 2009 (Qld), s 17, s 24 Allen & Taylor v Queensland Building and Construction Commission [2020] QCAT 63 Demir v Vision Built Pty Ltd (Building and Property) [2024] VCAT 1073 DJJ Promotions Pty Ltd v Gianacopoulos [2019] VCAT 177 Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No. 3) [2012] VSC 99 WP & SB Cusack v Raceberry Pty Ltd [2013] QCAT 330 Mazelow Pty Ltd v Herberton Shire Council [2003] 1 Qd R 174 Queensland Building Services Authority v Fox [2005] QDC 129 Stojanovski v Australian Dream Homes [2015] VSC 404 Wilson v Kyle [2021] VSC 537 |
APPEARANCES & REPRESENTATION: | |
Applicant: | Self-represented |
Respondent: | Ms Cooper of Counsel, instructed by HWL Ebsworth Lawyers |
REASONS FOR DECISION
Application
- [1]On 20 July 2020 the applicant (‘Mr Kusters’) made application to the Tribunal to review a decision of the respondent (‘QBCC’) made 8 June 2020 (‘internal review decision’) that a domestic building contract between Nigel Gary Borresen and Leonie Jane Borresen (‘Mr and Mrs Borresen’ together and ‘Mr Borresen’ and ‘Mrs Borresen’ separately) and Western Downs Plumbing and Building Supplies trading as ShedsnHomes Ipswich (‘Western Downs’) dated 4 September 2017 had been validly terminated having the consequence of allowing a claim for non-completion under the statutory insurance scheme (‘application’).
Background
- [2]The following facts are not in dispute.
- [3]On 4 September 2017 Mr and Mrs Borresen and Western Downs Plumbing and Building Supplies trading as ShedsnHomes Ipswich entered a Master Builders Queensland Residential Building Contract – Level 2 (‘building contract’) for the construction of a domestic residential building (‘building work’) at 90 Tatham Road, Haigslea (‘site’).
- [4]The contractor’s licence number specified in the building contract was that issued to Western Downs Irrigation and Building Supplies Pty Ltd. Mr Kusters is a former director and representative of the company. The company, on 4 April 2020, was deregistered.
- [5]On 13 March 2018 Somerset Regional Council issued an approval for the building work. The work commenced in around April 2018 or May 2018.
- [6]On 27 September 2018 GMA Certification Group (‘GMA’) inspected the frame erected by Western Downs and identified several defects preventing further work until the defects were rectified.
- [7]On about 9 October 2018 the frame collapsed and was removed from the site. A new frame was erected by Western Downs in early to mid-2019.
- [8]On 18 July 2019 Western Downs ceased work on the site. Subsequently, on 23 July 2019, Mr Kusters sent to Mr and Mrs Borresen a without prejudice offer to mutually terminate the building contract. They rejected the offer the same day.
- [9]The next day, 24 July 2019, GMA issued a certificate for the inspection of the ‘frame stage items’ undertaken on 26 June 2019.
- [10]On 26 November 2019 Mr and Mrs Borresen, by their lawyers, gave to Western Downs a notice of intention to terminate the building contract under clause 20.1 (‘Mr and Mrs Borresen’s notice of intention to terminate the building contract’).
- [11]On 10 December 2019 Mr Kusters made a further without prejudice offer to Mr and Mrs Borresen to mutually terminate the building contract. The offer was rejected by them the same day.
- [12]On 12 December 2019 Mr and Mrs Borresen’s lawyers sent to Western Downs’ lawyers an email purporting to terminate the building contract under clause 20.2 (‘Mr and Mrs Borresen’s termination notice’). The same day, Western Downs lawyers sent to Mr and Mrs Borresen’s lawyers an email:
- rejecting Mr and Mrs Borresen’s termination notice;
- alleging Mr and Mrs Borresen are in substantial breach of the building contract by reason of the following:
- taking possession of the building work (including by having the internal gyprock painted and having their own contractors access the work) without Western Downs’ permission; and
- giving directions to Western Downs’ subcontractors,
with the consequence they were not able to terminate the contract under clause 20.3; and
- asserting Mr and Mrs Borresen’s purported termination of the contract amounts to a repudiation of the contract, which has been accepted by Western Downs (‘Western Downs’ termination notice’).
- [13]On 16 December 2019 Mr and Mrs Borresen’s lawyers sent to Western Downs’ lawyers a letter:
- rejecting Western Downs’ termination notice;
- rejecting the allegation Mr and Mrs Borresen are in substantial breach of the building contract;
- asserting there was no repudiatory conduct for which Western Downs could properly elect to accept and terminate the building contract; and
- maintaining Mr and Mrs Borresen’s termination notice is valid.
- [14]On 18 December 2019 Mr and Mrs Borresen lodged a non-completion claim for residential construction work with QBCC (‘non-completion claim’).
- [15]On 9 April 2020 QBCC determined the building contract had been validly terminated and allowed the non-completion claim under the statutory insurance scheme (‘original decision’).
- [16]On 11 May 2020 Mr Kusters applied to QBCC for internal review of the original decision.
- [17]On 8 June 2020 QBCC confirmed the original decision, finding the building contract was validly terminated and allowing the non-completion claim.
Internal review decision
- [18]In submissions to QBCC dated 11 May 2020, Mr Kusters asserted that at a time after completion of the frame stage, when Western Downs had partially completed the plasterboard and internal lining, Mr and Mrs Borresen unlawfully took possession of the site and installed internal walls. In doing so, Western Downs further asserted, Mr and Mrs Borresen were in substantial breach of the building contract in that:
- they took possession of the building work when not entitled to do so by carrying out painting of gyprock using a scissor lift on hire by Western Downs without permission, supervision or instruction (ground 1);
- interfered with Western Downs carrying out the building work in that:
- they installed walls without any engineering design, inspection or approval, creating, amongst other things, a workplace health and safety risk which obstructed, interfered with, and hindered Western Downs in carrying out the balance of the building work;
- the installation of the internal walls by Mr and Mrs Borresen should not have been carried out until after practical completion of the building work. The installation of the walls prior to Western Downs completing the ceilings sheeting portion of the work obstructed, interfered with and hindered Western Downs carrying out the work as planned and priced as Western Downs would then have been required to cut the ceiling sheets prior to installation resulting in additional labour and material costs (ground 2); and
- communicated with and instructed Western Downs’ subcontractors to carry out the internal wall installation (ground 3).
- [19]In relation to ground 1, the decision-maker:
- was not satisfied Mr and Mrs Borresen had demonstrated a failure or refusal to perform a substantial obligation under the building contract to render them in substantial breach; and
- was not satisfied Mr and Mrs Borresen repudiated the building contract to evince an intention no longer to be bound by the contract, or to fulfil it only in a manner substantially inconsistent with their obligations, and considered Mr and Mrs Borresen’s conduct demonstrated they were ready and willing to perform their contractual obligations.
- [20]The decision-maker made like findings in relation to grounds 2 and 3.
- [21]The decision-maker found Western Downs was in breach of the building contract in that:
- it failed to bring the building work to practical completion by the date for practical completion, 11 December 2018;
- it failed to proceed with the building work with due diligence or in a competent manner; and
- it unlawfully suspending the carrying out of the building work.
- [22]The decision-maker identified further substantial breaches of the building contract by Western Downs in that it claimed progress payments before completion of the designated stages.
- [23]The decision-maker concluded Western Downs repudiated the building contract by reason of the following:
- failing to progress the building work with due diligence and in a competent manner, including:
- failing to achieve compliance with frame stage inspection and failing to rectify defective work identified by the certifier at the site;
- persistent delay in progressing the work at the site;
- failing to adequately supervise the work at the site;
- failing to pay subcontractors, resulting in several leaving the site; and
- failing to order materials, despite being paid for same in the early stage of the building contract, or ordering materials which were the incorrect size/shape;
- ceasing the building work at the site without adequate explanation or giving a suspension notice, in accordance with the procedural requirements under the contract; and
- proposing a mutual termination of the contract (which was not accepted by Mr and Mrs Borresen) on several occasions (26 July 2019, 21 October 2019 and 10 December 2019).
- [24]She further concluded Mr and Mrs Borresen had validly terminated the building contract.
Mr Kusters’ statement of evidence
- [25]Mr Kusters, on 29 November 2022, filed a statement of evidence. He sets out a summary of the background to the proceeding. To the extent mentioned, it does not significantly depart from the summary set out in the internal review decision or earlier in these reasons for decision.
- [26]Mr Kusters, in paragraph 31, states:
On or about 26 June 2019, GMA inspected an aspect of the frame, being the mezzanine area and identified some “defects” that required rectification. The layout of the mezzanine floor had been altered in consultation with the designing engineer per the Owners’ specific requests, so the “defects” identified by GMA and the necessary rectification works, were a direct result of changes to the design at the Owners’ request. These requests were made by Nigel Borresen of the Owners, both verbally over the phone and in person at the Site, as he wished to accommodate his daughter who intended to move into the dwelling with the Owners ...
- [27]In paragraph 33, he continues:
Without Western Downs permission, the Owners accessed the Site and arranged for their own independently engaged contractors to perform works at the Site without my knowledge and the Owners even used a scissor lift hired by Western Downs without my knowledge or permission. At no time did I authorise the Owners to do these things, nor did I authorise any of my subcontractors to be an authorised representative of Western Downs for the purposes of providing any authority or permission for the Owners to access and perform works at the Site.
- [28]Mr Kusters refers to Mr and Mrs Borresen’s notice of the intention to terminate the building contract and termination notice. He asserts:
The owners were not entitled to terminate the Contract because clause 20.3 provides that “the Owner[s] may not terminate this Contract if the Owner[s] [are] in substantial breach of the Contract”. For this reason, I took the Owners Purported Termination Notice as a repudiation of the Contract because it clearly evinced an intention to be no longer bound by the Contract, and so, I instructed Western Downs’ solicitors to accept the Owners repudiation and terminate the Contract on the basis of the Owners repudiation …
Mr Borresen’s statement of evidence
- [29]On 24 May 2024 QBCC filed a statement of evidence of Mr Borresen. In paragraphs 1 – 44 he sets out the background to the application. Once again, it does not significantly depart from the background in the internal review decision, Mr Kusters’ statement of evidence, or earlier in these reasons for decision.
- [30]Mr Borresen then goes on to respondent to paragraphs 31 and 33 of Mr Kusters’ statement of evidence set out in paragraphs 26 and 27 of these reasons for decision. In response to paragraph 31, Mr Borresen states:
- Mr Kusters’ statement is incorrect. There was never, and still is not, any intention for our daughter to move into the dwelling on the Property. Myself and Leonie never had any intention to modify the upstairs mezzanine level of the dwelling, and it was in fact referred to as the library on the architect’s plans dated 20 June 2019 (see page 238 of exhibit “NB-28”).
- With respect to the alteration of the layout of the mezzanine floor, this came about as a result of the defective work by Western Downs.
- At some point between the frame collapse in October 2018, referred to in paragraph 18 above, and June 2019, we decided we would like to include two additional bedrooms and one bathroom on the mezzanine level. As outlined in paragraph 26 above, Mr Kusters advised this would be possible.
- We engaged our architect to update the layout plans to reflect the addition of the two bedrooms and a bathroom, so that we could submit this to GMA for approval. These changes were only in relation to the internal framing for the mezzanine level and were not in any way a structural change to the design. As mentioned in paragraph 3 above, Western Downs was responsible for the engineering design under the Contract.
- On 7 June 2019, I had a discussion with Mr Kimmince regarding the construction of the mezzanine floor. We discussed that the mezzanine floor was not constructed properly as it was not holding weight. In addition to that many walls were out of alignment. Mr Kimmince then provided some additional bracing underneath the mezzanine floor to assist with this.
- On 22 June 2019, I emailed the updated architectural drawings reflecting the addition of the two bedrooms and one bathroom to Mr Kusters to pass on to the certifiers. That email also informed Mr Kusters that we had engaged Mr Kimmince to construct the additional walls and install the plaster for the mezzanine level (at our cost).
- On 26 June 2019, when GMA inspected the frame, they were not happy with the structural design, and asked the engineers to assess the site for rectification. As outlined in paragraph 28 above, the defects found by the certifiers related to a number of structural aspects of the build including:
- additional posts installed outside the engineering design;
- tie-down not in accordance the approved design; and
- bracing not in accordance with the approved design.
- These defects were not and could not have been related to the (non-structural) alteration to the layout of the mezzanine floor because construction of the bedrooms and bathroom had not been completed at the time of GMA’s inspection.
- On 2 July 2019, the engineers came on site and were happy with the structural posts that Mr Kimmince had put in, however were not happy with the mezzanine floor and wanted more bracing along the media/main bathroom wall.
- At all times Western Downs was responsible for the structural design of the dwelling. As outlined in paragraph 19 above, Mr Kusters changed the design of the dwelling due to the frame collapse. Mr Kimmince also put in some additional bracing under the mezzanine floor to prevent it from bouncing. Neither of these alterations to the design were at our request, or in any way due to our request to add some rooms on the mezzanine level but rather were due to issues with the structure of the dwelling, which was the sole responsibility of Western Downs.
- In any case, we had consulted Mr Kusters in relation to the change in design. We sent Mr Kusters the updated designs prepared by our architects so that they could be sent to the certifiers for approval however he had failed to pass these on.
- On or around 18 July 2019, I made a telephone call to GMA to ask whether they needed to reinspect the frame prior to certifying the works and, if so, whether they had received the revised drawings for the mezzanine from Mr Kusters. I was advised that ‘Chris’ would call me back regarding the inspection and that they had not received any revised drawings.
- Following that conversation, I emailed GMA the revised drawings as outlined in paragraph 31 above.
- [31]He disagrees with paragraph 33 of Mr Kusters’ statement of evidence, responding in the following terms:
- I do not agree with Mr Kusters’ statement. On or about 9 July 2019, we were advised by Mr Kimmince that the scissor lift was required to be removed from the atrium so they could put the big doors in, and that a painter was required to paint the atrium before this occurred.
- At this point in time, it was my understanding that Mr Kimmince was in charge of coordinating the works on site because:
- Mr Kusters was rarely on site; and
- Mr Kimmince seemed to be managing the project as he was our main point of contact for the works at the site, and appeared to have responsibility for overseeing the works including arranging for the supply and delivery of materials, instructing trades (including the plasters) when to commence works and liaising with us to discuss concerns with the quality of the works.
- Accordingly, I was under the impression that the instruction by Mr Kimmince to have the painter attend site was given on behalf of Western Downs. For this reason, we complied with Mr Kimmince’s request. Under Appendix F of the Contract, we were responsible for all internal fit-out other than plumbing rough in and plaster works, so engaging a painter was our responsibility. In that regard, we worked collaboratively with Western Downs to accommodate this.
- Further, given the request was urgent, we engaged a painter to paint the ceiling and high areas only, with such work being conducted on about 16 July 2019. This work was conducted after hours and when no other trades engaged by Western Downs were on site, including during the afternoon and night and over the course of a weekend.
- As the painting was completed after hours, it had no impact on any of the other subcontractors.
Legislative framework
- [32]A decision of QBCC a domestic building contract has been validly terminated having the consequence of allowing a claim for non-completion under the statutory insurance scheme is a reviewable decision.[1] Reviewable decision is defined in section 86 of the Queensland Building and Construction Commission Act 1991 (Qld) (‘QBCC Act’) to include an internal review decision, defined in section 85A of the Act.
- [33]A person affected by a reviewable decision of QBCC, by virtue of section 87 of the Act, may apply, as provided under the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘QCAT Act’), to the Tribunal for a review of the decision. The Tribunal’s review jurisdiction is the jurisdiction conferred on the Tribunal by an enabling Act to review a decision made or taken to have been made by another entity under that Act.[2]
- [34]I am satisfied the Tribunal has jurisdiction to review the internal review decision.
- [35]In a proceeding for a review of a reviewable decision, the Tribunal may:
- confirm or amend the decision; or
- set aside the decision and substitute its own decision; or
- set aside the decision and return the matter for reconsideration to the decision-maker for the decision, with the directions the Tribunal considers appropriate.[3]
Hearing
- [36]The application was heard by the Tribunal on 24 September 2024.
- [37]Mr Kusters was self-represented. Ms Cooper of the counsel, instructed by HWL Ebsworth Lawyers, appeared on behalf of the QBCC.
Oral evidence
Mr Kusters
- [38]The hearing book, in two volumes, was tendered in evidence and marked as exhibit 1.
- [39]Mr Kusters gave sworn evidence. He confirmed the contents of his statement of evidence, document four in the hearing book.
- [40]In cross-examination by Ms Cooper, Mr Kusters confirmed he was the sole director and authorised representative of Western Downs.
- [41]Mr and Mrs Borresen lived in a shed on the site about 40 to 50 metres from the building work during construction.
- [42]He was asked whether Western Downs last worked on the site in July 2019. He responded he thinks there were deliveries of material to the site after that date but would need to check records.
- [43]Mr Kusters was taken to annexure NB-19 to his statement of evidence, at page 831 and following in volume 2 of the hearing book, an email sent by him to Mr and Mrs Borresen on 23 July 2019 containing a without prejudice offer to mutually terminate the building contract. There, he states it is “… too hard to manage this size job from this distance …” and “… I cannot be there 2-3 times a week which is what is required …”
- [44]He was also taken to an email part of annexure NB-24 to his statement sent by him to Mr Borresen on 10 December 2019, at page 858 of volume two of the hearing book, containing a without prejudice offer to mutually terminate the contract, on terms.
Mr Borresen
- [45]Mr Borresen gave sworn evidence. He confirmed the contents of his statement of evidence, document five in volume two of the hearing book.
- [46]In further evidence in chief, Mr Borresen stated he and Mrs Borresen signed the building contract on 4 September 2017. On 26 November 2019 they gave to Mr Kusters notice of intention to terminate the contract.
- [47]There was a caravan on the site. He and Mrs Borresen lived in the caravan throughout the building work.
- [48]He and Mrs Borresen were responsible for the electrical work. It needed to be carried out prior to installation of the gyprock. Access was provided for under the building contract and was not queried by Mr Kusters.
- [49]Mr Borresen was taken to paragraph 45 of his statement of evidence and annexure NB-28, a diary maintained by him during the building work. He explained that early in the building contract, he felt he needed to keep a diary. It was updated at least daily or on interaction with people on site.
- [50]Mr Kimmince, a contractor, was on site. He made decisions. Mr Kusters rarely attended.
- [51]Mr Borresen conceded he did not know the extent of Mr Kimmince’s authority.
- [52]Mr Borresen was taken to paragraph 50 of his statement of evidence, and his diary at page 966 in volume two in the hearing book. He explained the changes to the mezzanine were sent to Mr Kusters on 27 June 2019. Construction of the mezzanine had already commenced.
- [53]Subcontractors asked questions seeking clarification; he did not direct them.
- [54]Mr Borresen was taken to photographs in the diary, at page 965 of volume two of the hearing book, showing the building work on 20 September 2018 before the collapse of the frame, the rebuilt frame on 23 March 2019 and the building work on 29 June 2019.
- [55]The diary, Mr Sorenson stated, records the building work carried out between the end of June 2019 and November 2019 when the notice of intention to terminate the building contract was given to Mr Kusters. The diary records that on 13 July 2019 a plasterer informed him the home was moving/shaking in the wind.
- [56]He and Mrs Borresen were not given notice the building work was ceasing. They were not given a notice to remedy breach of the building contract.
- [57]In cross examination by Mr Kusters, Mr Borresen conceded he was offered mutual termination of the building contract. Two extra bedrooms were constructed without a variation of the building contract.
- [58]Mr Borresen was asked about the use of the scissor lift. He conceded he did not ask about insurance or whether the lift was on hire. He was instructed to bring the painter in at the time he did.
- [59]He did not use other equipment.
- [60]In re-examination, Mr Borresen stated the two bedrooms were not included in the building contract; they were part of the internal fit out.
- [61]At the time the parties entered the building contract, the QBCC Act and Queensland Building and Construction Commission Regulation 2003 (Qld) (now repealed) (‘QBCC Regulation’) current as at 3 July 2017, as is submitted by Ms Cooper, were in force.
- [62]The statutory insurance scheme is established by part 5 of the QBCC Act. The assistance available under the scheme is that prescribed by regulation.[4] The assistance a consumer for residential construction work is entitled to claim under the scheme if the work is incomplete is set out in part 2 of schedule 2C to the QBCC Regulation.[5] Relevantly, assistance for the reasonable cost of completing residential construction work is provided for in division 2 of part 2 of schedule 2C. The division applies to a consumer for residential construction work if, inter alia:
- the work is carried out under a fixed price residential lot contract; and
- the contract within two years after the day work starts under the contract; and
- the work is incomplete.
Consideration
Issues
- [63]The issues to be decided by the Tribunal are narrowly focused. First, were Mr and Mrs Borresen in substantial breach of the building contract when they purported to give to Mr Kusters notice of termination and thereby precluded from terminating the contract by clause 20.3? (Issue one)
- [64]Secondly, on the assumption Mr and Mrs Borresen were not precluded from terminating the contract, did Mr and Mrs Borresen validly terminate the contract? (Issue two)
Building contract
- [65]Access to the site is provided for in clause 7.3 of the building contract. The party nominated in item 13 of the schedule to the contract is responsible for providing and maintaining access to the site for any persons, vehicles or machinery reasonably necessary for carrying out the building work. The person so nominated is the ‘Owner’.
- [66]Clause 11.12 of the building contract prohibits the owner from interfering with the carrying out of the building work. Subclause (a) provides:
The Owner must not obstruct, interfere with or hinder the carrying out of the Works. The Owner must take all reasonable steps to prevent all others from obstructing, interfering with or hindering the carrying out of the Works.
- [67]The consequences of the owner taking possession of the works when not entitled to do so are provided for in clause 17.10. It provides:
If the Owner takes Possession of the Works when not entitled to do so under this Contract, the Works are deemed to have reached Practical Completion without any defects or omissions on the Day that the Owner takes Possession, and the Owner is liable to the Contractor for any loss or damage that the Contractor may incur or suffer as a result.
- [68]Possession is defined in clause 1 of the building contract. It means:
... when the Works, or any part of the Works, are taken over, occupied or used by the Owner or the Owner’s employees, other contractors or agents ...
- [69]The owner’s rights to terminate the building contract are set out in clause 20. Clause 20.1 provides:
If the Contractor:
- fails to proceed with the Works with due diligence or in a competent manner;
- unlawfully suspends the carrying out of the Works;
- refuses or persistently neglects to remove or remedy defective work or improper materials so that the progress of the Works is significantly, adversely affected;
- is unable to complete the Works;
- fails to effect or maintain any insurance policy required by this contract; or
- is otherwise in Substantial Breach of this contract,
the Owner may give a written notice to the Contractor by hand, registered post or facsimile transmission:
- describing each alleged Substantial Breach of this Contract by the Contractor; and
- stating the Owner’s intention to terminate this Contract unless the Contractor remedies the alleged Substantial Breach or Breaches within ten (10) Business Days after receiving the Owner’s notice.
- [70]Giving the clause its natural or ordinary meaning, the acts or omissions in clauses 20.1(a) – (e) are substantial breaches. The clause, however, is not exhaustive.
- [71]If the contractor fails to remedy the substantial breach or breaches set out in a notice given to it by the owner in accordance with clause 20.1 within the time stated in the notice, the owner may, without prejudice to any other rights or remedies, terminate the contract by further written notice to the contractor provided that such a notice of termination must not be given unreasonably or vexatiously and, if so given, then such purported notice of termination is void, and of no force and effect.[6]
- [72]Clause 20.3 is important in the context of the issues to be decided by the Tribunal. It provides:
The Owner may not terminate this Contract if the Owner is in Substantial Breach of this Contract.
- [73]Substantial Breach is defined in clause 1 of the building contract. It means:
… a party’s failure or refusal to perform a substantial obligation under this Contract (such as, for example, the Owner’s failure to make payment on time) …
- [74]The contractor’s rights to terminate the building contract are set out in clause 21. Clause 21.1 provides:
If the Owner:
- fails to comply with any of its obligations under Clause 7;
- fails to comply with any of its obligations under Clause 11;
- fails to provide the Contractor with any direction or other information requested by the Contractor under Clause 9;
- fails to give to the Contractor a written notice agreeing to a variation in accordance with Clause 12.5, 13.3 or 14.3 within five (5) Business Days after receiving a variation document provided by the Contractor;
- fails to remedy any Substantial Breach of this Contract set out in a suspension notice given in accordance with Clause 16.2 within ten (10) Business Days after receiving that notice; or
- is otherwise in Substantial Breach of this Contract,
the Contractor may give a written notice to the Owner:
- describing the relevant breach or breaches of this Contract by the Owner; and
- stating the Contractor’s intention to terminate this Contract unless the Owner remedies the breach or breaches within ten (10) Business Days after receiving the Contractor’s notice.
- [75]Again, giving the clause its natural or ordinary meaning, the acts or omissions in clauses 21.1(a) – (e) are substantial breaches. The clause is not exhaustive.
- [76]Clause 21.2 provides:
If the Owner fails to remedy the Owner’s breach or breaches of this Contract set out in a notice given to the Owner by the Contractor in accordance with Clause 21.1 within the time stated in that notice, the Contractor may, without prejudice to any other right or remedies, terminate this Contract by further written notice to the Owner.
- [77]Part E of the appendix to the building contract provides that the internal fit out, other than plumbing rough-in and plaster work, is not included in the contract price but is shown on the plans and specifications.
- [78]Part F of the appendix, the owner supplied items, provides that the owner will supply the following materials:
- electrical – all rough in and fit out;
- all internal fit out other than plumbing rough in and plaster works.
- [79]Part J, the special conditions, under the heading Scope of Works, repeats “All internal fit out by others unless part of this scope of works”.
Alleged breaches by Western Downs
- [80]Mr and Mrs Borresen’s notice of intention to terminate the building contract was contained in a letter sent by their lawyers to Western Downs’ lawyers dated 26 November 2019. Relevantly, it reads:
Notice to Remedy Breach - Pursuant to Clause 20.1 of the Contract
We hereby notify your client of the following breaches of the Contract:
- Your client is in breach of clause 8.3 of the Contract, being that your client has failed to bring the works to practical completion by the date for practical completion which was 11 December 2018 (“date of practical completion”). This is calculated based on a 244 day construction period for construction (being 170 days plus 74 days allowed variations) after the start dated of 11 April 2018 (being 30 days after full Council approval on 12 March 2018).
- Your client is in breach of clause 20.1(a) of the Contract in that the contractor has failed to proceed with the works with due diligence or in a competent manner.
- Your client is in breach of clause 21(b) of the Contract in that your client has unlawfully suspended the carrying out of the works.
Full particulars of each of the breaches are contained in the attached table detailing:
- Description of defect or item of non-complete work.
- Reference to the relevant section of the Contact which constitutes the substantial breach.
- Rectification work required.
Further, due to the extent of the breaches, the property is not suitable for occupation. As at the date of this letter, your client is 350 days outside of the required practical completion date of 11 December 2018 (see above).
We again note that the last carpenter left site on 18 July 2019 and there has been no progress on site to date, a period of nearly 19 weeks. Our client hereby gives your client ten working days’ notice pursuant to clause 20.1 of the Contract of our client's intention to terminate the Contract if your client fails to remedy the listed substantial breaches of this letter, being by Tuesday 9 December 2019 at 5pm.
- [81]The attached table is reproduced in the schedule to these reasons for decision.
Alleged breaches by Mr and Mrs Borresen
- [82]The breaches of the building contract alleged by Western Downs were first articulated in an email sent by its lawyers to Mr and Mrs Borresen’s lawyers on 12 September 2019 in response to a letter sent by Mr and Mrs Borresen’s lawyers to Western Downs’ lawyers earlier the same day containing Mr and Mrs Borresen’s notice of termination. Relevantly, the email reads:
We are instructed that your clients are in substantial breach of the contract in that, inter alia:
- your clients have possessed the Works are without our client’s permission. We are instructed that your client’s [sic.] have had the internal gyprock painted and have had the own contractors access and use the Works; and
- your clients have given directions to our client’s subcontractors.
In accordance with clause 20.3 of the Contract, your clients are not permitted to terminate the Contract. Your clients’ purported termination of the Contract is unlawful and not authorised by the Contract.
- [83]Western Downs expanded on the alleged substantial breaches in submissions to QBCC dated 11 May 2020. They are contained in three grounds set out in paragraph [18] of these reasons for decision.
- [84]In paragraph 36 of his statement of evidence, Mr Kusters states correspondence sent on behalf of Western Downs to Mr and Mrs Borresen on 10 December 2019, “... noted that the Owners remained in breach of the Contract by having installed walls in the upstairs areas and having painted areas of the downstairs area of the dwelling at the Site …”
- [85]The alleged breaches may be summarised in the following terms. First, Mr and Mrs Borresen took possession of the building work by painting gyprock and using a scissor lift on hire by Western Downs.
- [86]Secondly, they took possession of the building work by installing internal walls.
- [87]Thirdly, they gave instructions to Western Downs subcontractors to install internal walls.
Issue one: Were Mr and Mrs Borresen in substantial breach of the building contract when they purported to give to Mr Kusters notice of termination and thereby precluded from terminating the contract by clause 20.3?
- [88]The facts said to constitute the alleged breaches by Mr and Mrs Borresen, it is to be observed, occurred long before Western Downs first alleged Mr and Mrs Borresen are in substantial breach of the building contract. In the meantime, two offers to mutually terminate the contract had been made and rejected, and Mr and Mrs Borresen had given to Western Downs the notice of the intention to terminate the contract and notice of termination.
- [89]Mr Borresen explained in evidence the circumstances giving rise to the alleged breaches. I accept his evidence.
- [90]Mr and Mrs Borresen were responsible for the electrical work and fit out. Necessarily, the work was carried out by them during the building work. It was carried out, I find, by arrangement with, and with the consent of, Western Downs. They did not take possession of the building work to do so and did not obstruct, interfere with or hinder the carrying out of the building work.
- [91]A scissor lift, on about 9 July 2019, was in the atrium of the home. It needed to be relocated to instal doors. Mr Kimmince, whom, I find, Western Downs cloaked with apparent authority for the building work, and Mr Borresen understood was in charge Mr Kusters rarely being on site, asked Mr Borresen to engage a painter to paint the entry prior to the scissor lift being relocated. He did so.
- [92]The painter carried out the work after hours. No other trades were present at the time and the painting did not interfere with other building work.
- [93]Whilst it is not entirely clear, I assumed the installation of the internal walls about which Mr Kusters complains are those installed on the mezzanine floor. They were installed following the preparation of architectural plans and engineering approval. Mr and Mrs Borresen engaged Mr Kimmince to carry out the work.
- [94]Mr Kusters, I find, was aware of the changes to the mezzanine floor. He did not object, either to the changes or Mr Kimmince carrying out the work.
- [95]I accept, as one would expect, there were communications between Mr and Mrs Borresen and Western Downs subcontractors. Other than in respect of the installation of internal walls on the mezzanine floor about which Mr Kusters was aware and did not object, there is no satisfactory or other evidence Mr and Mrs Borresen gave instructions to Western Downs subcontractors to instal internal walls.
- [96]Mr and Mrs Borresen, I find, were not in breach of the building contract at the time they purported to terminate the contract. It follows they were not in substantial breach of the contract and therefore precluded from terminating the contract by clause 20.3.
- [97]In case I am wrong, and the matters alleged by Western Downs constituted breaches of the contract, I have considered whether the breaches were substantial breaches.
- [98]In Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No. 3),[7] (‘Dura’) the Supreme Court of Victoria (Dixon J) considered the meaning of the term ‘substantial breach’. His Honour referred to the decision of the Queensland Court of Appeal in Mazelow Pty Ltd v Herberton Shire Council[8] where MacPherson JA, with whom Williams JA and Muir J agreed, in considering the meaning of the term in the context of clause 44 of AS 2124-1992, observed:
The expression “substantial breach” is widely and not exhaustively defined. By cl. 44.7, it includes various acts or omissions some of which might in some circumstances amount to repudiatory conduct by the Principal. However, none of those defined acts or omissions extends to a final and definitive refusal to perform the contract any further.[9]
- [99]In Dura, the Court then continued:
In context, the court was distinguishing substantial breach from a breach that would justify a common law determination. The requirement of a substantial breach is not that high and, when read with cl 44.1, shows that the parties have agreed that the contractual right to terminate has expanded the common law rights that otherwise may be available. In each case there is no question that the nature of the breach can be substantial, having regard to the express provisions of cl 44.2. 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.[10]
- [100]In Allen & Taylor v Queensland Building and Construction Commission,[11] the Tribunal, at [36], observed that to establish a contractor is in substantial breach of a construction contract, the principal does not have to go as far as to show the breach goes to the very root of the contract. The Member referred to the passage from the decision of Dixon J in Dura, at [447], and continued:
- [37]Dixon J qualified the above statement somewhat in Stojanovski v Australian Dream Homes,[12] acknowledging that the understanding of what is ‘substantial’ may differ from the parties’ perspective. It is certainly important to an owner that the builder carry out the works in a proper and workmanlike manner. His Honour went on to say:
What is difficult to assess is where the parties, on the continuum from ‘real or of substance as distinct from ephemeral or nominal’ to ‘considerable, solid, big, or really important,’ intended the word ‘substantial’ to operate in order to evaluate the seriousness of the breach for the purpose enlivening the owner’s rights. Each of the grounds set out in clause 20.1 [here, clause 39.2] that enlivens the owners right to serve a default notice is a significant matter that a reasonable reader will understand to involve a real and significant risk that the owner will not get what he bargained for from the builder’s performance of the contract. It is not a ground that could be characterised as being of minor significance to the risk that the owner is not receiving what he bargained for. However, although I do not think that the contractual context limits the qualification of a breach which is substantial to only those breaches considered to be ‘considerable, solid, big, really important’, because it is preferable to apply the language chosen by the parties rather than a synonym with different nuances.[13]
- [38]It is against these criteria that the Tribunal will determine, on an objective assessment of the conduct of the builder, whether the breaches alleged by the applicants in the Notice, and at common law, are substantial and give rise to an entitlement to terminate under clause 39.
- [101]Recently, in Demir v Vision Built Pty Ltd (Building and Property),[14] a decision of the Victorian Civil and Administrative Tribunal, Member Feeney likewise referred to the passage from the decision of Dixon J in Dura cited above. The Member, at [51] and [52], then continued:
- [51]The owner’s counsel also referred to the Supreme Court decision of Stojanovski v Australian Dream Homes[15] (‘Stojanovski’) which considered what type of breach is “substantial” when construing a clause in a construction contract in the form of an MBA New Homes Contract. In DJJ Promotions Pty Ltd v Gianacopoulos[16] Senior Member Walker helpfully summarised the learned Judge’s conclusions in Stojanovski as follows:
- Whether a builder is in substantial breach of the Contract is to be evaluated at the time the notice was sent;
- The term ‘substantial’ may have various shades of meaning. Having regard to the context, it may mean ‘large or weighty’ or ‘real or of substance as distinct from ephemeral or nominal’;
- Although a substantial breach is one that is more than ephemeral or de minimis in its character, the concept and purpose of evaluating, and limiting, the kind of breach that enlivens an owner’s right to serve a default notice is given context by reference to the terms of the contract as a whole. It is unhelpful to paraphrase the qualifying condition introduced by the word ‘substantial’ by using the phrase ‘only really important breaches’ because that is not the language;
- Whether a breach is a substantial breach is a question of fact and the answer to the legal question: “What was intended by ‘substantial’?” is that the nature and the consequences of the breach must satisfy that description and, in the present context, be ample or considerable or important;
- The proper approach is to first identify the term or terms breached, and then evaluate the breach by considering its nature and consequences;
- The time specified in the notice to remedy the breach is that set out in the contract, even though rectification might take longer, although the time allowed might be relevant to the question whether termination was reasonable in the circumstances.
- [52]Further the Tribunal is to consider each breach and place it in context with the surrounding circumstances in order to determine whether or not the party alleged to have breached the contract, was in substantial breach of the contract.[17]
- [102]Clause 20.1 of the building contract provides guidance on the breaches constituting substantial breaches of the contract. Having regard to the terms of the contract and given the substance of the breaches alleged and the circumstances in which they occurred, and assuming contrary to my finding the matters alleged did not constitute breaches of the contract, such breaches, I find, were not substantial breaches within the meaning of the clause 20 of the contract.
- [103]It follows Mr and Mrs Borresen were not precluded by subclause 20.3 from terminating the contract.
Issue two: On the assumption Mr and Mrs Borresen were not precluded from terminating the contract by clause 20.3, did Mr and Mrs Borresen validly terminate the contract?
- [104]Mr Kusters did not challenge the grounds of Mr and Mrs Borresen’s notice of intention to terminate the building contract or notice of termination, other than to assert Mr and Mrs Borresen were in substantial breach of the contract and hence precluded by clause 20.3 from terminating the contract. The evidence they did so is largely confined to that provided by them, assisted by an analysis of the evidence provided by QBCC.
- [105]It is not disputed the building work was carried out under a fixed price residential contract.[18]
- [106]Mr and Mrs Borresen and Western Downs entered the building contract on 4 September 2017. The building works commenced in or around April 2018 or May 2018.
- [107]Mr and Mrs Borresen purported to terminate the building contract on 12 December 2019. Western Downs did likewise, the same day.
- [108]It follows that if Mr and Mrs Borresen validly terminated the building contract, they did so within two years, as required by section 6(b) of schedule 2C to the QBCC Regulation.
- [109]It is not disputed the building work was incomplete.[19]
- [110]A fixed price residential contract ends if, inter alia, the contract is validly terminated on the default of the licensed contractor.[20]
- [111]QBCC draws attention to the decision of the District Court of Queensland (McGill DCJ) in Queensland Building Services Authority v Fox[21] for guidance on when a fixed price residential contract is validly terminated. The case was decided under the predecessor to schedule 6 to the Queensland Building and Construction Commission Regulation 2018 (Qld).
- [112]There, the respondent elected to terminate a fixed price residential contract in response to the contractor’s repudiation of the contract or joined in the termination of the contract by abandonment, or the contract had been terminated by the dissolution of the contractor. His Honour held that any of these was enough to satisfy the clause.[22]
- [113]Mr and Mrs Borresen asserted in the notice of intention to terminate the building contract that Western Downs was in substantial breach of the contract on three grounds:
- it failed to bring the building work to practical completion by the date for practical completion in breach of clause 8.3 of the contract (ground one);
- it failed to proceed with the building work with due diligence or in a competent manner in breach of clause 20.1(a) of the contract (ground two); and
- it unlawfully suspended the carrying out of the building work in breach of clause 20.1(b) of the contract (ground three).
- [114]In relation to ground one, the date for practical completion was 11 December 2018. The evidence shows, and I accept, that when Mr and Mrs Borresen gave the notice of intention to terminate the building contract to Western Downs, the building work was 350 days past the date for practical completion and had only reached the frame stage.
- [115]The ground of substantial breach is established.
- [116]In relation to ground two, the evidence shows, and I accept:
- the building work commenced around April 2018 or May 2018;
- the frame was erected around September 2018 and collapsed on about 9 October 2018;
- the new frame was not erected until early to mid-2019;
- on 26 June 2019 GMA inspected the frame and identified defects requiring rectification; and
- on 18 July 2019 the building work ceased.
- [117]Further, Mr Borresen gave evidence, which I accept, Mr Kusters was rarely on site. He complained about managing the building work from a distance.
- [118]I find Western Downs did not proceed with the building work with due diligence or in a competent manner. The second substantial breach of the building contract is established.
- [119]In relation to the third ground, the evidence shows, and I accept, the building work ceased on 18 July 2019. It was suspended by Western Downs without written notice in accordance with clause 16.2 of the building contract or otherwise.
- [120]Western Downs, I find, was in substantial breach of the building contract for unlawfully suspending performance of the building work.
- [121]It follows, and I so find, Western Downs were in substantial breach of the building contract when Mr and Mrs Borresen gave to it notice of intention to terminate the contract and notice of termination. The notices were validly given and were effective in terminating the contract.
Summary
- [122]In summary, I find:
- Mr and Mrs Borresen were not in substantial breach of the building contract when they purported to terminate the contract and, hence, were not precluded by clause 20.3 of the contract from doing so;
- Western Downs was in substantial breach of the contract when Mr and Mrs Borresen gave to it notice of intention to terminate the contract and notice of termination; and
- Mr and Mrs Borresen validly terminated the contract.
- [123]It follows the decision of QBCC must be confirmed.
Order
- [124]The internal review decision of QBCC made 8 June 2020 a domestic building contract between Mr and Mrs Borresen and Western Downs dated 4 September 2017 has been validly terminated having the consequence of allowing a claim for non-completion under the statutory insurance scheme is confirmed.
Schedule
Item no. | Description of defect/non-complete work | Provision of contract | Rectification work required |
External | |||
Labour to finish tie down and rectify framing issues that do not comply with the Building Code of Australia (BCA). | 8.3 20.1(a) 21(b) | Completion of the works | |
Supply and install ceiling batten and noggin, and straightening framing in readiness to sheet walls. | 8.3 20.1(a) 21(b) | Completion of the works | |
Supply and install plaster sheeting for walls and ceiling (excludes rooms upstairs). | 8.3 20.1(a) 21(b) | Completion of the works | |
Supply and install 6mm villaboard for bathrooms. | 8.3 20.1(a) 21(b) | Completion of the works | |
Labour to install insulation where sisalation was installed. | 8.3 20.1(a) 21(b) | Completion of the works | |
Supply and install 90mm cove cornice. | 8.3 20.1(a) 21(b) | Completion of the works | |
Labour to batten out soffit. | 8.3 20.1(a) 21(b) | Completion of the works | |
Install battens to batten out soffit 450 centres with 40mm as installed elsewhere. | 8.3 20.1(a) 21(b) | Completion of the works | |
Install 4.5mm Soffit sheeting to outdoor living and soffits. | 8.3 20.1(a) 21(b) | Completion of the works | |
Install joiner strips and screws for soffits. | 8.3 20.1(a) 21(b) | Completion of the works | |
Supply and install flashings for fascia, around windows, to be 4 fold and 350mm girth. | 8.3 20.1(a) 21(b) | Completion of the works | |
Supply and install flashing for eve trim corners and capping, to be 3 fold and 140mm girth. | 8.3 20.1(a) 21(b) | Completion of the works | |
Supply Colourbond custom orb to replace wall sheets that have been damaged by blowing around paddock. | 8.3 20.1(a) 21(b) | Completion of the works | |
Labour to install remaining wall sheeting. | 8.3 20.1(a) 21(b) | Completion of the works | |
Hire of scissor lift to carry out remainder of high work. | 8.3 20.1(a) 21(b) | Completion of the works | |
Scaffolding hire for planks and tresses to carry out internal works. | 8.3 20.1(a) 21(b) | Completion of the works | |
Delivery cost for multiple suppliers. | 8.3 20.1(a) 21(b) | Completion of the works | |
Purchase and installation of miscellaneous bolts, screws and silicone. | 8.3 20.1(a) 21(b) | Completion of the works |
Footnotes
[1] QBCC Act, s 86(1)(i).
[2] QCAT Act, s 17(1).
[3] QCAT Act, s 24(1).
[4] QBCC Act, s 67Y.
[5] QBCC Regulation, s 1(1).
[6] Building contract, cl 20.2.
[7] [2012] VSC 99.
[8] [2003] 1 Qd R 174, at 182.
[9] Ibid, at [10].
[10] Dura, at 447.
[11] [2020] QCAT 63.
[12] [2015] VSC 404.
[13] Ibid, [55].
[14] [2024] VCAT 1073.
[15] [2015] VSC 404, see particularly [52]-[56].
[16] [2019] VCAT 177, [145].
[17] Wilson v Kyle [2021] VSC 537, [11].
[18] QBCC Regulation, sch 2C, s 6(a).
[19] QBCC Regulation, sch 2C, s 6(c).
[20] QBCC Regulation, sch 2C, s 4(1)(a).
[21] [2005] QDC 129.
[22] Ibid, at [43]. See also WP & SB Cusack v Raceberry Pty Ltd [2013] QCAT 330.