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Partington v Urquhart[2015] QCATA 67

Partington v Urquhart[2015] QCATA 67

CITATION:

Partington & Anor v Urquhart [2015] QCATA 67

PARTIES:

Phillip Partington

Evelyn Partington

(Applicants/Appellants)

v

John Urquhart t/as Hart Renovations

(Respondent)

APPLICATION NUMBER:

APL131-13

MATTER TYPE:

Appeals

HEARING DATE:

15 September 2014

HEARD AT:

Brisbane

DECISION OF:

Senior Member O'Callaghan

Member Favell

DELIVERED ON:

19 May 2015

DELIVERED AT:

Brisbane

ORDERS MADE:

  1. Appeal allowed.
  2. The claim and cross claim is returned to the Tribunal for rehearing according to law.

CATCHWORDS:

APPEAL – whether building reached enclosed stage – whether builder entitled to make stage claim – where element of enclosed stage not completed – whether tribunal entitled to rely on opinion evidence to decide if the enclosed stage reached – whether mistake of law

Domestic Building Contracts Act 2000 (Qld), s 43, s 44, s 45

Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 48, s 102, s 142

Ownit Homes Pty Ltd v Batchelor (1983) 2 Qd R 124

Urguhart v Partington [2013] QCAT 133

Thompson Residential Pty Ltd v Hart & Anor [2014] QDC 132

APPEARANCES:

APPLICANT:

Phillip Partington

Evelyn Partington

RESPONDENT:

John Urquhart

REPRESENTATIVES:

APPLICANT:

Phillip Partington and Evelyn Partington represented by Ms S McNeil of Counsel instructed by Blue Fox Legal

RESPONDENT:

John Urquart represented by Mr S B Whitten of Counsel instructed by Saal and Associates Lawyers

REASONS FOR DECISION

Senior Member O'Callaghan

  1. [1]
    In this matter, I have had the benefit of reading Member Favell’s reasons in draft. I agree with his reasons, and conclusions, and the order he proposes.

Member Favell

  1. [2]
    In early 2008 Mr and Mrs Partington decided to carry out a major renovation to their house in Sherwood. This included lifting the house, building in underneath and adding an extension.
  2. [3]
    Plans for the project were prepared by an architect, Nicole Western, and engineering design drawings were prepared by Morgan Consulting Engineers Pty Ltd.[1]
  3. [4]
    In early 2008 the Partingtons spoke to Mr Urquhart about the renovation and asked for a quote. Mr Urquhart engaged quantity surveyors, Total Estimating Services, to prepare a costing for the work. Their cost estimate was $561,617.38 and with other additions including the builder’s margin, the total price quoted to carry out the work in accordance with the plans was over $740,000.00. The discussions continued and there were some variations to the work to be undertaken and by 21 July 2008 Mr Urquhart gave the Partingtons a quote of $483,742.00 which quote was accepted.
  4. [5]
    On 4 August 2008 a standard HIA contract was signed by the parties. It included a payment schedule which provided for payment at various stages namely deposit, raise house, base, frame, enclosed, fixing and PC.
  5. [6]
    Work commenced on the house soon after the contract was signed and on the 20 April 2009 Mr Urquhart sent a tax invoice to the Partingtons for the enclosed stage together with the cost of variations. The enclosed stage claim was for $145,122.00 with the total invoice being $151,669.41.
  6. [7]
    The Partingtons did not pay the progress claim. They contended that the house had not reached the enclosed stage and an agreed list of items of defective work had not been addressed by the builder.
  7. [8]
    By August 2009 all work had stopped and Mr Urquhart had removed all of his tools from the site.
  8. [9]
    On 29 January 2010 Mr Urquhart gave the Partingtons a notice to remedy breach in accordance with clause 28 of the contract. The Partingtons did not pay the stage payment and therefore did not remedy the alleged breach.
  9. [10]
    On 18 February 2010 Mr Urquhart purported to terminate the contract pursuant to clause 28 of the contract.
  10. [11]
    Mr Urquhart filed an application in the Tribunal claiming moneys due under the contract, damages, interest and cost for breach of contract.
  11. [12]
    The Partingtons filed a response to the application contending that the contract was not lawfully terminated by Mr Urquhart and the works did not reach the enclosed stage. They claimed damages for defective and incomplete building work.
  12. [13]
    The application came on for hearing in the Tribunal on 20 August 2012 and at that stage it was agreed between the parties that the issues the Tribunal had to decide were as follows:
    1. a)
      Did the building works reach the enclosed stage by 20 April 2009?
    2. b)
      Did Mr Urquhart lawfully terminate the contract on 18 February 2010?
    3. c)
      If no to (a) what was the value of Mr Urquhart’s quantum merit claim, if any?
    4. d)
      If no to (b) what was the value of Mr Urquhart’s quantum merit claim if any?
    5. e)
      If yes to (b) what damages flowed from the Partingtons breach including interest?
    6. f)
      What are the defects, if any, to the enclosed stage?
    7. g)
      What is the value of the cost to rectify for incomplete building work to the enclosed stage?
    8. h)
      If the contract was lawfully terminated by Mr Urquhart what damages are claimed by the Partingtons and what damages are recoverable?[2]
  13. [14]
    The Tribunals decision was delivered on 19 February 2013 and the learned Senior Member found that the works had reached the enclosed stage.[3]
  14. [15]
    On the basis of the finding that the enclosed stage had been reached the learned Senior Member found that the contract obliged the Partingtons to pay the progress claim and a failure to do so put them in substantial breach. He found that as a consequence of them not paying the progress claim Mr Urquhart was entitled to terminate and the termination was lawful.[4]
  15. [16]
    During the hearing there was a dispute between the parties about the extent of any defective and incomplete work and if there was defective work whether Mr Urquhart should be held liable for the cost of rectification. Exhibit 1 was a Scotts schedule prepared by the various experts who inspected the house. It listed the defective and incomplete work some of which was in dispute and some agreed.
  16. [17]
    The learned Senior Member accepted what he described as the comprehensive report of Mr Ray Groom of J Groom Building Consultants as identifying the work undertaken by Mr Urquhart that requires rectification and the work that should have been completed by him up until he left the job.[5]
  17. [18]
    At [71] the learned Senior Member set out the various defects found and the cost he accepted as associated with rectifying the defects. Much of the costing was agreed by the experts.
  18. [19]
    The learned Senior Member found that the total cost of rectification was $68,735.00.[6] He took into account that there were some defects that the builder would have attended to during the next stage of works which would have saved him on cost of rectification. He identified those items which in his view totalled about $20,000.00. He said that Mr Urquhart would have saved the builders margin and some savings on material and it would be a fair discount to take account of that saving and allow $6,000.00 on the cost of rectification and completion which reduced the Partingtons accessed damages to $62,500.00.
  19. [20]
    The learned Senior Member then dealt with Mr Urquhart’s claim for damages before dealing with the Partingtons counter-claim.[7]
  20. [21]
    Clause 28.8 of the contract set out the agreed damages that could be recovered by the builder as a debt as the greater of the following amounts:
  1. (a)
    5% of the contract price; or
  1. (b)
    damages including:
  1. (i)
    The costs of all work carried out by the contractor under the contract;
  1. (ii)
    The costs to the contractor of any materials purchased by the contractor and delivered to the site or ordered by the contractor from suppliers which orders could not be cancelled;
  1. (iii)
    The costs of the contract at quitting the site;
  1. (iv)
    The contractors margin on the total works payable under sub paragraph (i), (ii) and (iii);
  1. (v)
    Default interest on any unpaid moneys under clause 33;
  1. (vi)
    All other costs and losses incurred by the contractor as a consequence of this contract being ended.
  1. [22]
    The damages claimed exceeded 5% of the contract price and accordingly the learned Senior Member accessed the damages under the various heads set out in clause 28.8 (b).
  2. [23]
    The learned Senior Member at [76] said:

The contract price for the construction of the renovations was $483,742.00. The amount paid by the Partingtons up to the enclosed stage was as follows:

Deposit  5 %               $24,187.00

Raise house stage  8 %               $41,762.20

Base stage  10%               $48,374.00

Frame stage  15%               $72,561.00

That is a total of $186,884.20. The balance that would have been payable would have been $296,858.00. In addition, to the enclosed stage payment of $145,122.00 (30%) there were variations of $6,547.41 for additional works.[8]

  1. [24]
    After taking into account the contentions by the parties and the evidence concerning the total cost of the job and after deducting the amount paid by the Partingtons he found the total cost of work carried out and material supplied was $189,913.42.[9]
  2. [25]
    The learned Senior Member then deducted $62,000.00 to take into account the total costs of work and materials and calculated the contractors margin as $25,582.00 ($127,913.00 x 20%).[10]
  3. [26]
    The learned Senior Member allowed $60,170.00 as default interest calculated at the interest rate of 15.68% on $127,913.00 from the date of termination of the contract on 18 February 2010 to the date of judgement.
  4. [27]
    $1,100.00 was allowed for pre contract quantity surveyors cost.
  5. [28]
    The Tribunal found the assessed damages of the applicant as:

Cost of work and materials to date of termination               $189,913.00

Contractor‘s margin of 20%               $ 25,582.00

Termination costs               $ 181.00

Interest of outstanding money               $ 60,170.00

Quantity Surveyor‘s cost               $ 1,100.00

Total               $276,946.00[11]

  1. [29]
    Because the learned Senior Member assessed the Partingtons damages for rectification and completion work at $62,000.00 he ordered that the Partingtons pay to Mr Urquhart the sum of $214,946.00 by 29 March 2013.
  2. [30]
    The learned Senior Member also ordered that the Partingtons pay to Mr Urquhart the costs thrown away as a result of an adjournment of the hearing and the experts conclave listed for 22 August 2011 to be agreed or assessed.
  3. [31]
    The Partingtons filed an application seeking leave to appeal.
  4. [32]
    The grounds of appeal are:
  1. The tribunal erred in law in determining the building had reached the enclosed stage.
  1. The tribunal erred in law in determining the extent of the defects and the cost of rectifying defects and the building work undertaken by Mr Urquhart.
  1. The tribunal erred in ordering the respondent/applicant for leave to pay default interest.
  1. The tribunal erred in law in ordering the respondent/applicant for leave to pay costs.
  1. The respondent/applicant for leave was denied natural justice and procedural fairness.
  1. Other grounds may be raised following the obtaining advice from solicitors who have now been engaged.
  1. [33]
    The Partingtons seek the following:
  1. A declaration that the building had not reached the enclosed stage as at the date Mr Urquhart issued the progress claim for the enclosed stage.
  1. The costs of rectification of Mr Urquhart’s defective building work be recognised by the tribunal in accordance with the law.
  1. The liability of the respondent/applicant for leave to pay default interest be reconsidered in accordance with law.
  1. The order that the respondent/applicant for leave pay Mr Urquhart’s costs be set aside.
  1. Mr Urquhart pay the costs of this application for leave to appeal and the appeal.
  1. [34]
    On the 26 March 2013 the Partingtons filed an application to stay the decision dated 19 February 2013 primarily on the basis that they would suffer significant prejudice and hardship.
  2. [35]
    On the 28 May 2013 the application to stay the decision was refused.
  3. [36]
    Subsequent to the order made in relation to costs, the Tribunal on 11 June 2013 ordered the Partingtons pay Mr Urquhart $11,693.50 in costs by 31 July 2013.
  4. [37]
    The application for leave to appeal and appeal is made pursuant to s 142(1), s 142(3)(a)(iii) (in the respect of the cost order) and s 142(3)(b) of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act).
  5. [38]
    Section 142 provides:

142 Party may appeal

  1. (1)
    A party to a proceeding may appeal to the appeal tribunal against a decision of the tribunal in the proceeding if a judicial member did not constitute the tribunal in the proceeding.

Note

See section 149 for appeals against decisions of the tribunal if a judicial member constituted the tribunal.

  1. (3)
    Also—
  1. (a)
    an appeal under subsection (1) against any of the following decisions of the tribunal may be made only if the party has obtained the appeal tribunal’s leave to appeal—
  1. (i)
    a decision in a proceeding for a minor civil dispute;
  1. (ii)
    a decision that is not the tribunal’s final decision in a proceeding;
  1. (iii)
    a costs order; and
  1. (b)
    an appeal under subsection (1) on a question of fact, or a question of mixed law and fact, may be made only if the party has obtained the appeal tribunal’s leave to appeal.

Note—

An enabling Act that is an Act may confer appeal jurisdiction on the tribunal for decisions of other entities. See, for example, the Body Corporate and Community Management Act 1997.

  1. [39]
    The Partingtons appeal findings said to be contained in paragraphs [48], [57], [59], [81], [82], and the findings at paragraphs [84] – [86].
  2. [40]
    The Partingtons seek leave to appeal the findings contained at paragraphs [77] and [72].
  3. [41]
    It is convenient to deal with each finding sought to be appealed or for which leave to appeal is sought in chronological order.

The Findings at paragraph [48]

  1. [42]
    The findings at [48] are:

The submissions from the respondents, and the evidence from Mr Groom and Mr Salmon, is not persuasive when compared with the consensus of the industry experts who attended the site meeting in August 2009 whose evidence can leave little doubt that the building had reached the enclosed stage. In the face of this evidence I have no alternative but to make a finding consistent with this evidence that the works had reached the enclosed stage.

The Findings at paragraph [57]

  1. [43]
    The content of paragraph [57] is as follows:

It is clear that the Partingtons did not pay the first progress claim for the enclosed stage although the financier was authorised to make the payment at one stage. The second progress claim was also not paid within the required period. Mrs Partington says that the August progress payment was never received by her until 29 January 2012. The point of whether the invoice was sent is unclear. Mr Urguhart does not say in his material that it was sent although he did say in an email to Mr Newton subsequent to the date of the invoice that it was being prepared. The evidence is unclear on the point. It does not appear as an attachment to the email to Mr Newton on 31 August 2009, despite Mr Urguhart‘s evidence that it was. However, it was sent with the notice to remedy breach in January 2010 in substantially the same form as that sent in May 2009. Although I am prepared to accept Mrs Partington‘s evidence that she did not get it in August, It cannot see that it makes any difference to the outcome because payment of the enclosed stage payment was discussed at the meeting on 13 August 2009, there was an expectation that it would be paid and the Partingtons did not respond to the Notice sent on 29 January 2010.

The Finding at paragraph [59]

  1. [44]
    The content of paragraph [59] was as follows:

As a consequence of not paying the progress claim, the applicant was entitled to terminate so I therefore find that his termination was lawful.

The Finding at paragraph [72]

  1. [45]
    The content of paragraph [72] is as follows:

Total cost of rectification is $68,735.00. I indicated that there are some defects that the builder would have attended to during the next stage of the works which would have saved him on cost of rectification. I have identified those items with an asterisk above. They total about $20,000.00. Mr Urguhart would have saved at least the builder‘s margin and some savings on materials. In my view a fair discount for this saving would be to allow $6,000 on the cost of rectification and completion. This then reduces the respondents assessed damages to $62,500.00.

The Finding at paragraph [77]

  1. [46]
    The content of paragraph [77] is as follows:

Mr Urguhart has provided a spreadsheet which sets out the total cost of the job at $396,970.39. Mrs Partington was critical, rightly, of some of the items of expenditure which included such things as employee superannuation, travelling allowances, rostered days off and sick pay etc. which were not applicable to the job. The applicant concedes that these expenditure items should not be charged to the job and has allowed a credit of $20,797.62. this reduces the cost of the job to the enclosed stage to $376,172.77.

The Finding at paragraph [81]

  1. [47]
    The content of paragraph [81] is as follows:

The amount claimed for the contractor‘s margin is 20% of $189,913.42 which is $37,982.68 on the total amount of cost of the job not paid for. However the cost to rectify and complete a significant amount of this work must be taken into account when determining on what amount the 20% margin should apply to. It would be unfair to the owners to allow a contractor‘s margin on that work that is not of a satisfactory standard and does not comply with the Building Code and the Australian Standards. Not all of the applicant‘s work meets this criteria. Therefore if the total cost of work and materials is reduce by $62,500.00 being the cost of rectification the contractors margin is ($189,913 - $62,000 = $127,913 x 20%) is $25,582.00.

The Finding at paragraph [82]

  1. [48]
    The content of paragraph [82] is as follows:

The unpaid sum under the contract was the progress payment to the enclosed stage plus variations of $155,669.00 ($145,122.00 plus variations of $6,547.00). However, taking into account the extent of rectification and the associated cost the applicant was never entitled to the full claim and to award interest on a sum he was not going to recover would be unjust to the Partingtons. I therefore propose to allow contractual interest at 15.68% (which I accept from applicant‘s submissions to be Commonwealth Bank overdraft interest rate plus 5%) on $127,913.00 from the date of termination of the contract on 18 February 2010 to the date of judgment in the sum of $60,170.00. In assessing interest I am also mindful of the fact that Partington‘s have retained the progress claim of $145,122.00 to their own benefit, even if some of it has been spent on rectification.

The findings at paragraph [84-86]

  1. [49]
    The contents of paragraphs [84]-[86] are as follows:

[84] The Partingtons have made a raft of claims premised on the basis that I would find the applicant in breach of the contract. As I have found to the contrary the only claim they have is for the cost to rectify defective work carried out by Mr Urguhart or his subcontractors.

[85] Referring to Appendix 6 of Mrs Partingtons submissions I will briefly deal with her ‘heads of damage’.

Rental, Removalist and L/Ds costs: These costs may be recoverable if they were incurred as a result of the applicant‘s breach of contract. As the contract was lawfully terminated by the applicant the respondent‘s must bear responsibility for these extra costs.

Inspections and Reports: I cannot see how the costs of these reports are recoverable in the circumstances. They, at best, may recoverable as part of the respondents costs of the proceedings if a costs order was made in their favour.

Cost of Rectification: The claim made is for $182,513.76 in reliance on the report from Mr Groom. There are a couple of thing to say about the Summary (in Appendix 6). Firstly, the builder‘s margin is included in Mr Groom‘s cost estimate for each item of rectification work. Secondly, is seems that GST has been included twice. Thirdly, I have considered each item and have come to a different conclusion on some of the items of rectification. Fourthly, because I found the Partingtons in breach I allowed a discount on the cost of rectification because Mr Urguhart would have attended to some rectification as the job progressed in line with what was said in Onwit Homes.

Valuation to rectify Remaining Defects: This also refers to the defects in the Groom report and the Ray report that have already been dealt with. As for the Barac Quotation, there was no evidence about this and at the commencement of the hearing any reliance on Mr Barac evidence was abandoned by the respondents.

Administering the Project: there may be some substance to this claim if some evidence was produced about the cost to administer the cost of rectification. The mere assertion of $1,000/wk for 28.57 weeks is not sufficient for me to make a finding about the reasonableness or otherwise about this claim.

Legals: If this is a claim for costs it will be discussed below. The submission that the respondents have spent $135,000 on legals is disturbing and demonstrates how counter productive contentious litigation in domestic building cases can be rather than resolution at mediation.

[86] It follows that the Partingtons are only entitled to recover the cost of rectification as assessed above.

  1. [50]
    The Partingtons also seek leave to appeal the Tribunal’s order that they pay Mr Urquhart’s costs thrown away as a result of an adjournment of the hearing and experts conclave listed for 22 August 2011 on the grounds that the Tribunal erred in finding Mr Urquhart was caused disadvantage by the Partingtons conduct in not advising Mr Urquhart that they intended to engage Mr Groom (an expert) and not producing the report only days out from the hearing.
  2. [51]
    They contend that all of the errors of mixed law and fact involved errors of fact such that no reasonable arbiter of fact could have come to the conclusion of fact arrived at by the Tribunal and accordingly may be treated as errors of law for which leave to appeal is not required.
  3. [52]
    The Partingtons point out that at the time the tax invoice for the claimed completion of the enclosed stage was issued on 20 April 2009 the front door of the house had not been installed and nothing had been temporarily installed as a front door. They submit that because of that the house had not reached the enclosed stage.
  4. [53]
    The front door was installed by the Partingtons at some time prior to 8 July 2009. They were required to supply the door but not to install it under the terms of the contract.
  5. [54]
    A further invoice for the enclosed stage amount dated the 25 August was issued by Mr Urquhart but the Partingtons contend that they did not receive the invoice.
  6. [55]
    On 29 January 2010 Mr Urquhart gave the Partingtons a notice to remedy breach under clause 28 of the contract. That notice to remedy included a copy of the August invoice.
  7. [56]
    The Partingtons contend that the notice to remedy was meaningless and that the contract was already at an end because Mr Urquhart had ceased work for some eight months. They say that he had not given any notice to the Partingtons that he was suspending work and he was in substantial breach of the contract as he failed to carry out work with reasonable skill and care in accordance with the plans. They say that by late 2009 Mr Urquhart had abandoned the contract and evinced an intention not to be bound by its terms and they were entitled to accept his conduct as repudiation of the contract and treat the contract as being at an end.
  8. [57]
    They contend that Mr Urquhart was not entitled to give the notice to remedy while he remained in substantial breach of the contract and the Partingtons were not in breach of their payment obligations because the house had not reached the enclosed stage at any relevant time.
  9. [58]
    They contend that the notice of termination was ineffective because the notice to remedy was ineffective and the contract was already at an end. Alternatively they contend that the notice of termination was not in accordance with the contract and amounted to a repudiation of the contract.
  10. [59]
    They also contend that the default interest rate under the contract is a penalty because it is not a genuine pre-estimate of loss and damage in the event of a substantial breach of the contract.
  11. [60]
    The Partingtons submit the building had not reached the enclosed stage for four reasons namely:
    1. a)
      the front door had not been installed and accordingly the external doors were not fixed;
    2. b)
      structural floor sheeting had not been laid on the second level of the house;
    3. c)
      the building work undertaken was not in accordance with the plans and specifications; and
    4. d)
      the building work undertaken was of such low standard that a significant portion of the work would have to be undone and redone. At the date of the second enclosed stage invoice they rely on (b), (c) and (d) above.
  12. [61]
    Enclosed stage’ is defined in the contract as follows:

enclosed stage, for a building, means the stage when –

  1. (a)
    the external wall coating is fixed; and
  1. (b)
    the roof covering is fixed, but without –
  1. (i)
    Soffit linings necessarily having been fixed;
  1. (ii)
    For a tile roof – pointing necessarily having been done;
  1. (iii)
    For a metal roof – scriving and final screwing off necessarily having been done; and
  1. (c)
    the structural flooring is laid; and
  1. (d)
    the external doors are fixed (even if only temporarily) but, if a lockable door separating the garage from the rest of the building has been fixed, without the garage doors necessarily having been fixed; and
  1. (e)
    the external windows are fixed (even if only temporarily).
  1. [62]
    The Partingtons complain that the Tribunal did not properly consider the appropriate construction of the term ‘enclosed stage’ but rather adopted the opinion evidence of the experts as to the meaning of enclosed stage. That meant that the Tribunal did not give any consideration, or alternatively any proper consideration, to the meaning of ‘structural flooring’ as that term is used in the definition of enclosed stage in the contract but proceeded to adopt the builder’s expert’s conclusion that the term ‘structural flooring’ means ‘ground floor slab’ and excludes the upper floor.
  2. [63]
    They submit that that conclusion is incorrect.
  3. [64]
    The Partingtons also contend that the building partially constructed by Mr Urquhart was not in accordance with the contract because the height of the ceiling in the master bedroom would necessarily be below legal height, the works were not in substantial compliance with the plans for specifications and the non-compliance with the plans and specifications was such that the building that was supposed to have reached the enclosed stage was not the building that Mr Urquhart was contracted to build.
  4. [65]
    The Partingtons submit that the Tribunal erred in finding that the contract had been lawfully terminated because the building had not reached the enclosed stage either at the time of issuing the first enclosed stage invoice or the second enclosed stage invoice and the Partingtons were not required to pay either of the invoices. They say that the enclosed stage invoice was not issued by Mr Urquhart (the contractor under the contract) rather it was issued by JB and B Urquhart trading as Hart Renovations and Mr Urquhart was in substantial breach of the contract at the time of issuing each of the enclosed stage invoice, the notice to remedy and the notice of termination. They say that pursuant to clause 19 of the contract a notice to remedy is ineffective if the party issuing the notice to remedy is in substantial breach.
  5. [66]
    They contend that in the circumstances there were no grounds upon which Mr Urquhart could issue the notice to remedy breach or terminate the contract pursuant to clause 28 of the contract.
  6. [67]
    Even if a valid payment claim was given the Partingtons contend that Mr Urquhart was in substantial breach of the contract because the completion date had passed, no notice of an extension had been given, Mr Urquhart had ceased or abandoned the works, no notice of suspension had been given and Mr Urquhart was in breach of implied warranties of the Domestic Building Contracts Act 2000 (Qld) (DBC Act) particularly s 43, s 44 and s 45.
  7. [68]
    Clause 28.1 of the contract provides as follows:

The owner is entitled to give a notice to remedy breach under sub-clause 28.3 if the contractor is in substantial breach of this contract. The contractor is in substantial breach of this contract if the contractor:

  1. (a)
    suspends the carrying out of the works, otherwise than under clause 19;
  1. (b)
    has their contractor’s licence cancelled or suspended; or
  1. (c)
    is otherwise in substantial breach of this contract.
  1. [69]
    Clause 28.7 provides as follows:

Neither party is entitled to give a notice to remedy breach while that party is in substantial breach of this contract. A notice given by a party in substantial breach is ineffective.

  1. [70]
    The Partingtons submit that Mr Urquhart was at the time of the issuing of the notice to remedy in substantial breach of the contract, the notice to remedy was ineffective and Mr Urquhart was not entitled to terminate the contract under clause 28.4.
  2. [71]
    The Partingtons further submit that the Tribunal erred in its assessment of damages by finding that the costs of all work carried out by the contractor under the contract was $376,172.77, finding that the amount of the contractors margin was $25,582.00, finding that the damages for rectification and completion work was assessed at $62,000.00 and finding that Mr Urquhart was entitled to default interest in the amount of $60,170.00.
  3. [72]
    They point to the identification by the Tribunal of Exhibit 5 as being the source of the figure of $396,970.39 in paragraph [77] when in fact Exhibit 5 is a ledger which shows a total of $307,192.74. They point out that the figure mentioned in paragraph [77] may have come from a table prepared by Mr Ray at page 25 of his report which was not the actual cost of work that one of the methods Mr Ray used as a sensibility check.
  4. [73]
    The Partingtons submit that the Tribunal’s assessment of Mr Urquhart’s cost of works included errors of law namely:
    1. a)
      Finding that the cost of work was $396,970.39 which was the claimed value of the work completed as assessed by the builders expert Mr Ray and which included corrections in ‘builder’s margins’ at 16% and GST which cannot be contracted as cost of work;
    2. b)
      Including GST in the total cost of work or alternatively at least in the cost of items totalling $67,543.48 for which GST was not payable;
    3. c)
      Failing to deduct employee allowances such as superannuation, sick-leave and rostered days off totalling $13,096.08;
    4. d)
      Alternatively failing to consider whether employee costs such as superannuation, travel allowances, rostered days off and sick pay are rightly costs of work or are part of the contractors administration costs and overheads covered by the contractors margin;
    5. e)
      Failing to consider the Partingtons’ other objections to Mr Urquhart’s claimed costs of work totalling about $60,000.00 including claim costs for which no invoices were provided, claim costs for which there was no evidence that the costs were applicable to the Partingtons’ job and claim costs that were described as ‘sales; Partington, Phil and Evelyn’ totalling $4,791.69.
  5. [74]
    The Partingtons contend that the Tribunal’s calculation of damages payable to Mr Urquhart involved a further error of law by failing to consider the contract documentation as a whole in determining that the damages included a contractor’s margin of 20% when the agreed contractors margin was 16%.
  6. [75]
    Clause 38.1 of the contract defines ‘contractors margin’ as the percentage of amount to cover the contractor’s administration costs, overheads and profit being 20%. They contend that the contractor’s margin was 16% in relevant quotations, assessments and reports and that clause 38.1 was varied in writing by the parties. Alternatively they say that 20% would be an unenforceable penalty.
  7. [76]
    The Partingtons also submit that the Tribunal’s assessment of the cost of rectifying defective work was an error of law in that there was a failure to consider the evidence tendered by the Partingtons and there was a finding that was contrary to the evidence and which no reasonable arbiter of fact could have made based on the evidence.
  8. [77]
    They contend that the Tribunal erred in its assessment of the rectification costs in respect of defects as follows:
    1. a)
      Item 11.1 – ponding water to rear patio slab (insufficient fall).[12]
    2. b)
      Item 11.14 – master bedroom ceiling height.[13]
    3. c)
      Item 11.15 – champherboards not installed as contracted.[14]
    4. d)
      Item 11.23 – kitchen wall/column construction as being incorrectly installed resulting in a 2.15mm wide wall rather than a 90mm wall as designed.[15]
  9. [78]
    They say that the assessment of the appealed rectification costs involved errors of law namely a refusal to consider evidence as to the actual costs of rectifying the defects, making assessments that no reasonable arbiter of fact could have made on the evidence and applying Ownit Homes Pty Ltd v Batchelor[16] in the circumstances and reducing the assessed rectification costs by $6,000.00.
  10. [79]
    They contend that the Tribunal did not consider a quote from Peter Michelsen Building Service dated 12 June 2012 which provided a price of $36,650.00 to remove and replace concrete to external areas including termite barrier and a total price of $176,860.00 including builders margin and GST to rectify the defective work undertaken by Mr Urquhart. They also contend that the Tribunal did not consider the quote from Steve Barac dated 30 July 2011 which quoted a price of $32,400.00 for the removal and reinstatement of back slab and block wall.
  11. [80]
    They submit that the Tribunal erred in law and in fact in allowing only $1,617.00 to rectify the significant defect in the master bedroom ceiling height and that on proper assessment the Tribunal should have allowed at least Mr Groom’s amount of $12,980.00.
  12. [81]
    The Partingtons also contend that the Tribunal’s decision to allow only $15,247.00 to correct the champherboard installation involved errors of law. Those errors were said to be incorrectly allowing Mr Ray’s estimate for the supply of hardwood weatherboards rather than hardwood champherboards, not considering the evidence in relation to the actual cost of replacement hardwood champherboards, considering an estimate of one half of the amount required to fix the defect and not considering the increased costs of dealing with hardwood champherboards.
  13. [82]
    So far as the kitchen wall/column construction is concerned the Partingtons complain that the Tribunal should not have accepted Mr Ray’s estimate of rectification costs as they were unreasonable in the circumstances.
  14. [83]
    The Partingtons contend that the Tribunal’s decision to award default interest involved errors of law. The errors are said to be that Mr Urquhart was not entitled to default interest because his termination was unlawful, the default interest provision is a non-enforceable penalty or in the alternative it would be unjust and incongruous to allow default interest in the circumstances.
  15. [84]
    In the event that the Partingtons are successful on their appeal and the Tribunal’s findings in relation to the enclosed stage and termination of the contract will be reversed the Partingtons contend that their cross-claim will need to be considered.
  16. [85]
    The Partingtons also complain about the costs order made. They submit that the basis of the costs order being that the Groom Report was the catalyst for the adjournment was not the case. They submit that all parties and the Tribunal were aware prior to the listed hearing date that the Partingtons intended to file further evidence. They say that Mr Urquhart had filed an amended application on 3 June 2011 which included a quantum meruit claim which substantially changed the nature of the proceedings and his solicitors had informed the Partingtons that they would also need to file further evidence. Mr Wilde did not comment on the defective work. The Tribunal noted that neither party was sufficiently prepared for the hearing to proceed. Thus, the costs order was inconsistent with s 48 and s 102 of the QCAT Act.
  17. [86]
    The Partingtons submit that the issues raised in their appeal are of significant public interest. They say some registered builders and representatives of the Queensland Building Services Authority have an incorrect understanding of the meaning of enclosed stage and structural flooring in both the standing building contract used by many builders in the DBC Act.
  18. [87]
    They contend that some builders and representatives of the BSA incorrectly believe that:
    1. a)
      there is no contractual or statutory requirement that a building comply with specifications, drawings and applicable standards for it to be found to reach a particular stage of construction;
    2. b)
      structural flooring’ means ‘ground floor slab’;
    3. c)
      a building has reached a particular stage of construction notwithstanding a substantial part of the building will have to be removed and replaced;
    4. d)
      a particular stage of the building project can be reached even if that stage has not been completed; and
    5. e)
      a builder can leave a building site without giving the contractually required notices to a home owner and still recover damages.
  19. [88]
    For the reasons which follow it will not be necessary to consider most of the issues set out herein and contended for by the Partingtons.
  20. [89]
    Mr Urquhart at the hearing of this application and appeal objected to what was considered to be some fresh evidence and the agitation of issues which were not argued at the hearing at first instance. For reasons which follow it is not necessary to deal with those matters.
  21. [90]
    The submissions of Mr Urquhart were generally that the building had reached the enclosed stage and they were entitled to claim the progress payment. When that claim was not paid they were entitled to send the notice to remedy breach and when there was no response to that notice it was entitled to terminate the contract pursuant to it’s provisions.
  22. [91]
    Mr Urquhart says that their conduct in making the claim and giving the notice made it clear that the contract had not been abandoned. They deny being in substantial breach of the contract.
  23. [92]
    Mr Urquhart contended that the learned Senior Member at first instance was entitled to consider the opinion evidence given in determining whether the building had reached the enclosed stage and that even if that stage was not reached when the invoice of 20 April 2009 was given it was at that stage when the notice was sent by the Partingtons had affixed the door.
  24. [93]
    Mr Urquhart contended that the Partingtons were estopped from raising the issue of the construction not having been reached the enclosed stage and pointed to evidence given at the hearing and conduct of the Partingtons.
  25. [94]
    Mr Urquhart claims he was entitled to claim and be paid the enclosed stage notwithstanding that the front door was not affixed because the Partingtons failure to affix the door prevented Mr Urquhart from fulfilling and that conduct ‘obviated the need for’ Mr Urquhart to affix the door before asserting the enclosed stage had been reached.
  26. [95]
    Further Mr Urquhart submits that the finding made by the learned Senior Member at first instance concerning ‘structural flooring’ was correct.
  27. [96]
    They say the issue of the extent of rectification work needed should not be allowed to be raised at this stage to support a submission that the construction had not reached the enclosed stage but in any event even if there were defects that fact did not mean the construction was not at the enclosed stage. Similar submissions were made in respect of the alleged non completion of the ‘frame stage’ and defects in the slab.
  28. [97]
    Mr Urquhart denied that there had been a suspension of works or that he was otherwise in substantial breach or had repudiated the contract.

WAS THE ENCLOSED STAGE REACHED?

  1. [98]
    The significant part of this appeal and application for leave to appeal is whether Mr Urquhart was entitled to issue the enclosed stage progress claim and be paid for that claim.
  2. [99]
    The term ‘enclosed stage’ was defined in the contract. It required that the external door to be fixed and structural flooring laid.
  3. [100]
    The term ‘structural flooring’ was not defined in the contract.
  4. [101]
    At the time the claim was first made in April 2009 the external door was not fixed at all. Subsequently it was fixed by 8 July 2009.
  5. [102]
    Based on some opinion evidence given as to whether the stage was reached the learned Senior Member determined that the enclosed stage was reached. In my view the determination of whether the stage was reached should not have been the subject of opinion evidence. It was a matter of applying the facts to the definition.
  6. [103]
    If the external doors were not fixed then, as a matter of law, the building had not reached the ‘enclosed stage’ and the builder was not entitled to make the ‘enclosed stage’ progress claim. In my view the learned Senior Member erred in law when he decided otherwise.
  7. [104]
    The definition of ‘enclosed stage’ does not refer to flooring other than as ‘structural flooring’. It does not limit structural flooring to a ‘slab’. If structural flooring on the second level was not laid then the ‘enclosed stage’ had not been reached. In my view the learned Senior Member erred in law when based on a number of opinions given in evidence he decided otherwise.
  8. [105]
    In my view the learned Senior Member has not decided the factual matters necessary to decide whether the definition of ‘enclosed stage’ was met and to decide that the ‘enclosed stage’ was reached in those circumstances was also an error of law.
  9. [106]
    I agree with McGill SC DCJ in Thompson Residential Pty Ltd v Hart & Anor[17] that where the term ‘enclosed stage’ is defined, ‘it is not a question of whether the building is enclosed in a practical sense. The contract means what it says.
  10. [107]
    Further, the interpretation of the term does not in my view depend on some industry practice. The definition spells out the relevant facts to be determined for the decision as to whether the stage is reached.
  11. [108]
    In my view the term ‘structural flooring’ can be any flooring that is structural. The nature of the second level flooring as described in the evidence[18] has a structural element. It includes bearers and joists and the flooring attached to bear a load. In my view the word ‘laid’ requires the affixing of the flooring to bearers and joists that are connected to structural components of the building. If that was not done then the enclosed stage has not been reached.
  12. [109]
    The learned Senior Member having found that the Partingtons had breached the contract and Mr Urquhart was entitled to the enclosed stage claim did not consider the Partington’s cross claim.
  13. [110]
    On the basis that the appeal should be allowed because the learned Senior Member erred at law in finding the enclosed stage was reached and Mr Urquhart was entitled to make that progress claim the claim and cross claim is returned to the Tribunal for rehearing according to law.

Footnotes

[1] Urguhart v Partington [2013] QCAT 133 at [1].

[2]  Exhibit 6.

[3] Urguhart v Partington [2013] QCAT 133 at [48].

[4]  Ibid, at [58]-[59].

[5]  Ibid, at [70].

[6]  Ibid, at [72].

[7]  Ibid, at [73].

[8]  Ibid, at [76].

[9]  Ibid, at [79].

[10]  Ibid, at [81].

[11]  Ibid, at [87].

[12]  Ibid, at [71(k)].

[13]  Ibid, at [71(n)].

[14]  Ibid, at [71(o)].

[15]  Ibid, at [71(w)].

[16]  (1983) 2 Qd R 124.

[17]  [2014] QDC 132 at [37].

[18]  Exhibit 22, Evidence of Mr Salmon Transcript of Proceedings p 357.

Close

Editorial Notes

  • Published Case Name:

    Phillip Partington and Evelyn Partington v John Urquhart t/as Hart Renovations

  • Shortened Case Name:

    Partington v Urquhart

  • MNC:

    [2015] QCATA 67

  • Court:

    QCATA

  • Judge(s):

    Senior Member O'Callaghan, Member Favell

  • Date:

    19 May 2015

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2013] QCAT 13314 Jun 2016Claim for debt and damages for breach of contract arising out of construction contract: Senior Member Oliver.
Primary Judgment[2015] QCATA 6719 May 2015Appeal allowed: Senior Member O'Callaghan and Member Favell.
Notice of Appeal FiledFile Number: 6079/1519 Jun 2015-
Appeal Determined (QCA)[2016] QCA 8708 Apr 2016Application for leave to appeal granted; appeal against [2015] QCATA 67 allowed; orders of QCATA set aside; matter remitted to QCATA for determination: Margaret McMurdo P, Morrison JA and Henry J.
Appeal Determined (QCA)[2016] QCA 19905 Aug 2016Costs Judgment: Margaret McMurdo P, Morrison JA and Henry J.

Appeal Status

Appeal Determined (QCA)

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