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- Unreported Judgment
Carter v HK Developments Pty Ltd QCATA 65
Carter & Anor v HK Developments Pty Ltd  QCATA 65
HK Developments Pty Ltd
On the papers
Senior Member O'Callaghan
2 March 2016
Grounds of appeal – identification of errors of law by the Tribunal – s 67 Domestic Building Contracts Act 2000 (Qld) – penalty provision – entire contract – quantum meruit – assessment of damages – pleadings in the Tribunal
Domestic Building Contracts Act 2000 (Qld), s 67, s 69, s 70, s 71
Avilake Pty Ltd v Tucker and Anor  QCATA 211
Commonwealth v Amann Aviation Pty Ltd  HCA 54
Constructions P/L v Stork Food Systems Aust P/L  QSC 179
Hoenig v Isaacs  All ER 176
Mertens v Home Freehold (1921) 2 KB 526
Osland v Secretary to the Department of Justice (No. 2) (2010) 241 CLR 320
Ownit Homes Pty Ltd v Batchelor (1983) 2 QdR 124
Pavey & Matthews Pty Ltd v Paul (1986) 162 CLR 221
Rana v Military Rehabilitation and Compensation Commission  FCAFC 80
Robinson v Harman (1848) 1 Exch 850
Rocci v Anor v Diploma Construction Pty Ltd  WASC 18
Tan Hung Nguyen & v Luxury Design Homes Pty Limited  NSWCA 178
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act).
REASONS FOR DECISION
Senior Member O'Callaghan
- I sat with Member Howe in this matter. I have had the benefit of reading his reasons in draft. I agree with his reasons, and his conclusions, and the orders he proposes.
- HK Developments Pty Ltd is a building contractor. Mr and Mrs Carter are property owners. The parties entered into a building contract in February 2010. The contract price was $670,000. Work commenced in March 2010. There were quite a few variations to the contract.
- The parties fell out and on 4 February 2011 the builder gave notice to the owners purporting to suspend work under the contract. On 5 February 2011 the owners gave notice to the builder of intention to terminate the contract. On 16 February 2011 they terminated the contract.
- The builder commenced proceedings in the Tribunal in March 2011 seeking payment of $67,000 as money owing for the completion payment under the contract, plus $21,793.06 for variations, plus interest and costs.
- The owners filed a response and counter-application, then an amended response and counter-application. The owners sought an order that they were not liable to pay the final completion payment, and alternatively sought damages for breach of contract, liquidated damages for delay, interest and costs.
- The matter was first heard in the Tribunal in September 2013 and April 2014. The learned Member hearing the matter ordered the owners pay the builder $79,841.45.
- The owners paid that amount to the builder but also appealed the decision. On appeal the Appeal Tribunal set aside the Tribunal decision and returned the matter for rehearing. The builder was ordered to pay the sum of $79,841.45 into the QCAT trust account pending rehearing.
- The Appeal Tribunal disagreed with the learned Member’s findings concerning the validity of variation claims by the builder and the consequent effect that had on the right of the builder to suspend work under the contract. The Appeal Tribunal found no error with the calculation of damages for incomplete or defective work. The matter was returned to the Tribunal for rehearing on the issue of rightful termination of the contract, quantum meruit and other issues.
- The matter was reheard in July 2015. The Tribunal found the owners had been entitled to terminate the contract and the builder was in breach. The Tribunal ordered the builder to pay the owners $52,278.07 for damages for breach of contract, liquidated damages and interest. The issue of costs remained to be addressed. The owners have appealed the amount of the award to them.
Grounds of Appeal
- The owners submit the appeal involves questions of law. If so appeal is of right and no leave to appeal required.
- However the errors of law concerned should be clearly identified in the grounds of appeal. That is not the case here. The owners submitted two outlines of argument which are confusingly repetitive on some points interspersed with comments which potentially raise a number of errors of law. In the circumstances it is appropriate that the Appeal Tribunal endeavour to formulate the errors of law the appellants identify in the decision appealed from. Given the issues so identified are errors of law, leave to appeal is not necessary.
First Ground of Appeal
The learned member erred in failing to apply section 67 of the Domestic Building Contracts Act 2000 (DBCA) so as to preclude the builder from claiming the whole or part of the completion payment under the contract.
- Section 67, say the owners, stipulates that a builder cannot receive all or part of the completion payment for the practical completion stage of a staged building contract unless the practical completion stage has been reached.
- The learned Member, they say, erred in allowing the builder a quantum meruit claim in respect of the work done for that stage and in undertaking an assessment of damages for breach of contract. They submit s 67 precludes any claim where that claim involves work in respect of the final completion stage of the contract. The “principle” of entire contracts has like application to the completion payment so as to preclude the builder’s claim being heard.
- Section 67 relevantly provides:
- The building contractor under a regulated contract must not demand all or part of the completion payment unless the practical completion stage has been reached.
Maximum penalty—100 penalty units.
- The building contractor under a regulated contract must not receive all or part of the completion payment unless—
- the practical completion stage has been reached; and
- if the building owner claims the stage has been reached with minor defects or minor omissions—the first and second requirements stated in subsections (4) and (5) have been complied with.
Maximum penalty—100 penalty units.”
- The learned Member found at the rehearing the contract had been validly terminated by the owners in reliance on clause 20 of the contract. The suspension of work notice given by the builder was invalid, practical completion had not been reached and the owners were entitled to terminate the contract. The owners do not dispute that finding.
- However the learned Member said she would consider whether the builder was entitled to a quantum meruit claim for the value of the work performed, subject to the progress payments made under the contract and the owners entitlement or otherwise to damages. The owners submission is that s 67 precluded such examination. The builder’s claim should have been dismissed.
- The learned Member rejected what she said was the owners’ submission that s 67 applied to make the contract an entire contract. She said s 67 was a penalty provision which did not assist in the interpretation of the contract. The learned Member said she must turn to the contract itself to see if it disclosed an entire contract intention. To the contrary she found, having particular regard to clauses 20.5 and 21.3 of the contract, that the contract was not intended to be an entire contract.
- The owners say the learned Member misunderstood their submission. Their submission, they say, was not whether the contract was entire or divisible, but rather that the completion payment under the contract should be viewed as ‘entire’ in light of s 67 of the DBCA. They maintain the ‘principle’ of entire contract was only raised as an issue in so far as the statute reflects the principle. Accordingly clause 20.5 of the contract could not grant a contractor a right to part or all of the completion payment by way of quantum meruit or otherwise because that would contradict the requirements of s 67.
- Clause 20 of the contract bears the title Owner’s Rights to Terminate Contract. Clause 20.5 provides:
Contractor entitled to reasonable price if Contract ended. If the Contract is ended under this clause the Contractor is entitled to a reasonable amount for the value of the Works carried out under the Contract to the date the Contract is ended.
- The significance of termination of entire contracts based on a party’s repudiation of obligations under the contract is that only those rights accrued due as at date of termination continue and are enforceable. An entire contract is to be contrasted with divisible contracts. A contract may make provision for staged payments but still be considered an entire contract. Whether a contract is an entire contract has been held to be a matter of construction of the contract.
- The advantage in entire contracts to an owner in a building dispute is explained by the New South Wales Court of Appeal in Tan Hung Nguyen & v Luxury Design Homes Pty Limited: “
…the owner may get the benefit of valuable works not entirely completed by the builder without having to pay for them, unless the circumstances are such as to justify a quasi-contractual remedy. So a builder who has not fully completed the work, through no fault of the owner, cannot overcome his difficulty by ignoring the contract and sue on a quantum meruit for the work he has done. However, the rigours of this rule are often considerably reduced because, in a large number of cases where there is not entire performance, the owner may decide to sue the builder for damages for breach of contract. If he does, he will, on general principles of damages for breach of contract, have to give credit for what he would have had to pay had the contract been properly performed.
- That advantage mentioned is sought by the owners here based on the effect of s 67. They submit they didn’t sue the builder, the builder sued them and their primary position or defence was simply to deny its right to do so. Any claim to damages was an alternate claim depending on whether or not the primary position failed.
- Section 67 imposes a potential monetary sanction to discourage builders from demanding or receiving a completion payment early, that is, before practical completion stage is reached.
- Where a monetary penalty is imposed, by s 69 a court may order the builder to refund the monies to the owner for breach of a payment section under the Act. Payment section is defined in the dictionary to the DBCA to include s 67. Section 69(4) provides that such refund of money pursuant to order does not prevent the building contractor from later demanding and receiving payment of the amount “under the contract as part of … the contract price”.
- Section 67 appears in Division 3 of Part 5 of the DBCA entitled Payments Relating to Contracts. Sections 69, 70 and 71 are to be found in Division 4 of Part 5, entitled Consequences of Contravening Requirements Relating to Payments. By s 70 if a court or the Tribunal makes a payment order against a builder, and the builder contravenes that order, the owner is entitled to end the contract by giving notice under the section. By s 71(2) if a building contract ends by s 70 notice, ‘The building contractor is entitled to receive a reasonable amount for the contracted services provided to the time the contract is ended.’ However by s 71(3) ‘…the building contractor is not entitled to receive an amount that is more than the amount the building contractor would have been entitled to receive under the contract.’
- The entitlement of the builder to receive a reasonable amount for his work up to time of termination appears to be a remarkable contradiction to the requirements of s 67. There is no exception made where the only outstanding payment concerned is the completion payment. It seems clear that s 67 is not intended to alter the terms of the contract agreed between the parties save that whilst executory the completion payment must not be claimed other than in accordance with the statutory requirements of s 67. But once terminated, the entitlement of the parties, including the builder in breach, is to be ascertained by the terms of the contract agreed between them. Those terms may make the contract entire, or they may make the contract divisible. If the latter, then despite s 67, if the builder does not achieve practical completion and the parties agree on remuneration for work performed and goods supplied to date of termination, then the builder is entitled to a payment. That entitlement however is not to the completion payment but reflects an agreement between the parties as to their respective rights should the contract terminate without achieving practical completion.
- The learned Member was correct in finding that s 67 was a penalty provision which did not assist in interpreting the building contract after the contract was terminated.
- In Tan Hung Nguyen clause 24 of the contract there provided, upon the builder suspending work or failing to proceed diligently, that, after due notice was given:
…the owner may end this contract by giving written notice to that effect to the contractor….
If the reasonable cost of completion of the work exceeds that which would have otherwise been due under the contract the difference will be a debt payable by the contractor to the owner. Should the reasonable cost of completion be less than otherwise due under the contract the difference will be a debt payable to the contractor….
- All members of the Court of Appeal concluded the clause disclosed an intention that the contract was not intended to be an entire contract.
- Hodgson JA said at :
In my opinion, cl 24 discloses an intention that, if the contract is terminated for the default of the builder, then cl 24 should apply to the adjustment of the rights of the parties. It is true that it is expressed in terms that the owner “may” give a notice requiring remedy, and that the owner “may” end the contract by written notice; but in my opinion this does not indicate that the owner has the alternative of bringing about termination outside cl 24 so as to escape the adjustments described by cl 24. It may be that, where the builder is guilty of repudiatory conduct, the owner can accept the repudiation without following the procedures proscribed by cl 24. However, in my opinion cl 24 indicates the intention of the parties as to how their rights are to be adjusted if the contract is terminated for default of the builder, even if its procedures are not followed: it makes it clear that the parties did not intend the contract to be an entire contract.” (Italics added)
- In the matter at hand, clause 20.5 entitled Contractor entitled to reasonable price if Contract ended provided ‘If the Contract is ended under this clause the Contractor is entitled to a reasonable amount for the value of the Works carried out under the Contract to the date the Contract is ended.’
- The learned Member was correct in my opinion in concluding the inclusion of that clause meant the parties did not intend the contract to be an entire contract. The statutory requirements of section 67 had no effect on that intention after termination of the contract. Clause 20.5 reflected the intention of the parties as to how their rights would be adjusted after termination pursuant to clause 20. The entitlement of the builder to reasonable remuneration, or quantum meruit, arose from the express terms of the building contract clause 20.5. That agreement as to the rights of the parties following termination on the basis of clause 20 survives termination of the building contract.
- Any such adjustment by monies payable to the builder was not payment of the completion payment or part of it but an entirely separate matter based on fair recompense for work done and unpaid. Accordingly there is no error of law disclosed in the learned members conclusion about the limited effect of s 67 on the right of the builder to claim a reasonable amount for the value of work done under the contract and unpaid after termination.
Second Ground of Appeal
The learned member erred in allowing the builder an amount for the value of work done to the date the contract ended where the builder failed to lead any evidence as to the value of such work.
- The question as formulated is a question of law rather than mixed law and fact. The learned member notes in her reasons for decision that the builder did not provide evidence as to the value of the work performed. The objection is largely academic however given the failure of the owners ‘primary position’ with respect to s 67 and therefore introducing for consideration and determination the owners alternate claim to damages for breach of contract.
- The general rule of measure of damages referred to as the rule in Robinson v Harman then applied to the effect the owners were entitled to recover that amount which put them, as far as money could do so, in the same position they would have been in had the contract been fulfilled by the builder. But that means credit had to be given for any benefit acquired under the contract. ‘The corollary of the principle in Robinson v. Harman is that a plaintiff is not entitled, by the award of damages upon breach, to be placed in a superior position to that which he or she would have been in had the contract been performed’. The benefit the owners acquired under the contract was the value of work done by the builder. That value must be taken into account.
- The learned Member adopted that course in assessing the owners damages. The damages claim was based on the owners figures of net loss. Whilst the learned Member acknowledges the absence of any evidence from the builder on its value of work in end result she gives credit for the value of that work as the difference between the value of the contract minus costs of rectification and costs of incomplete work.
- But in any case the value of the contract has been relied on in other cases to calculate the reasonable value of work done (quantum meruit). In Cook’s Constructions P/L v Stork Food Systems Aust P/L Martin J said:
An authority frequently referred to in this area is Flett v Deniliquin Publishing Co Ltd in which Herron CJ said:
‘In a case of quantum meruit the value of the services rendered is, as the Latin expression implies, a claim for what the services reasonably were worth. It is therefore properly assessed at the normal market rate or price prevailing when the benefit was received. In seeking a measure of reasonable reward, the parties’ ineffective contract may be looked at for this purpose and in some cases the degree of benefit conferred on the defendant may be taken into account: Way v Latilla  3 All ER 739. But there must be some evidence of a market or prevailing price. ... The use of a price stated in a contract as evidence, but as evidence only, on the question of amount, was also confirmed in Pavey & Matthews Pty Ltd v Paul, Gino D’Alessandro Constructions Pty Ltd v Powis, and Iezzi Constructions Pty Ltd v Watkins Pacific (Qld) Pty Ltd.http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/qld/QSC/2008/179.html?query=%221964%2d5%20NSWR%20383%22 - fn137
- In Pavey & Matthews Pty Ltd Deane J said:
The fact that the action which can be brought on a common indebitatus count consistently with the Statute of Frauds is founded on an obligation arising independently of the unenforceable contract does not mean that the existence or terms of that contract are necessarily irrelevant…. In many cases, such as where the claim is for money lent or paid, the obligation to make restitution will plainly involve the obligation to pay the precise amount advanced or paid. In those cases where a claim for a reasonable remuneration or price is involved, the unenforceable agreement may, as Jordan C.J. pointed out in Horton v. Jones (No. 1) (see above), be referred to as evidence, but again as evidence only, on the question of the appropriate amount of compensation.
- The use of the difference between the contract price and the costs of rectification and costs of incomplete work adopted by the learned Member here was appropriate under either head of claim (quantum meruit or calculation of damages for breach of contract).
- This ground of appeal is not made out
Third Ground of Appeal
The learned member erred in allowing the builder an amount for the value of work done to the date the contract ended where the claim of the builder was limited to recovery of the completion payment under the contract.
- There is no requirement for formal pleadings in the Tribunal. Given the dispute about termination pursuant to clause 20 and in light of clause 20.5 a claim in quantum meruit fell appropriately for consideration and determination.
- As explained in Avilake Pty Ltd v Tucker and Anor, the issues for determination are usually derived from a consideration of what is set out in the initiating application, any response or counter-application, and generally from the statements of evidence filed and perhaps interlocutory directions given. The Queensland Civil and Administrative Tribunal Act 2009 requires the Tribunal to be accessible, fair, just, economical, informal and quick and to act with as little formality and technicality as that Act, any enabling Act and a proper consideration of the case permits. This is particularly so where parties are self-represented. ‘It would be contrary to the current practice of the Tribunal to dismiss a claim simply because the relief sought had not been precisely formulated or pleaded, here damages for breach of contract as opposed to money due under the contract.’
- This ground of appeal is not made out.
- Having dealt with the arguments raised by the owners under the various grounds of appeal discerned from the submissions of the owners, and no error of law being found, the appeal should be dismissed.
 Osland v Secretary to the Department of Justice (No. 2) (2010) 241 CLR 320, at .
 Rana v Military Rehabilitation and Compensation Commission  FCAFC 80 at .
Rocci v Anor v Diploma Construction Pty Ltd  WASC 18 at ; Ownit Homes Pty Ltd v Batchelor (1983) 2 QdR 124, at 134-135.
 Hoenig v Isaacs  All ER 176, at 181 per Denning LJ
  NSWCA 178
 Ibid, at  per McColl JA citing Hudson's Building & Engineering Contracts (Sweet & Maxwell 1995, 11th Edition) at p476.
Tan Hung Nguyen & v Luxury Design Homes Pty Limited  NSWCA 178,  per Hodgson JA; Note, the claim in quantum meruit here is not dependent on any fictional implied contract between the parties but the express agreement of the parties, (the artificial basis of implied contract has been discounted since Pavey & Matthews Pty Ltd v Paul (1986) 162 CLR 221 and the right now viewed as a claim to restitution or based on unjust enrichment; see Lumbers v W Cook Builders Pty Ltd (in liquidation)  HCA 27).
 (1848) 1 Exch 850 per Parke B. at p 855: ‘The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.’
 Commonwealth v Amann Aviation Pty Ltd  HCA 54 per Mason CJ and Dawson J at .
 Mertens v Home Freehold (1921) 2 KB 526.
  QSC 179.
 Op cit at 257.
  QCATA 211.
 Ibid, at .
- Published Case Name:
Carter & Anor v HK Developments Pty Ltd
- Shortened Case Name:
Carter v HK Developments Pty Ltd
 QCATA 65
Senior Member O'Callaghan, Member Howe
02 Mar 2016