G. Lazy J. Pastoral Pty Ltd v Queensland Building Services Authority
[2000] QDC 220
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- Unreported Judgment
- G. Lazy J. Pastoral Pty Ltd v Queensland Building Services Authority[2000] QDC 220
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G. Lazy J. Pastoral Pty Ltd v Queensland Building Services Authority[2000] QDC 220
G. Lazy J. Pastoral Pty Ltd v Queensland Building Services Authority[2000] QDC 220
DISTRICT COURT OF QUEENSLAND
CITATION: | G. Lazy J. Pastoral Pty Ltd v Queensland Building Services Authority [2000] QDC 220 |
PARTIES: | G. LAZY J. PASTORAL PTY LTD (appellant) -v- QUEENSLAND BUILDING SERVICES AUTHORITY (respondent) |
FILE NO/S: | Appeal No. 3365 of 1998 |
DIVISION: | Chambers jurisdiction |
PROCEEDING: |
|
ORIGINATING COURT: | District Court |
DELIVERED ON: | 11th May 2000 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 8th May 2000 |
JUDGE: | Forde D.C.J. |
ORDER: | Appeal dismissed. Costs reserved for further argument. |
CATCHWORDS: | Construction of standard contract – right to challenge builder’s certificate Queensland Building Services Authority Act 1991 s. 66 Triden Contractors Ltd. v. Belvista Pty. Ltd. (1986) 3 BCL 203 Sabemo Ltd. v. De Groot (1991) 8 BCL 132 Modern Engineering (Bristol) Ltd. v. Gilbert-Ash (Northern) Ltd. (1974) AC 689 Ascim (Southern) Ltd. v. Danish Contracting and Development Co. Ltd. (1989) 47 BLR 59 |
COUNSEL: | Mr A. Collins for the Appellant Mr H. Fraser Q.C. with him Mr M. Williams for the Respondent |
SOLICITORS: | LeMass’ Solicitors for the Appellant Queensland Building Services Authority on its own behalf |
INTRODUCTION
- [1]This is an appeal from a decision of the Queensland Building Tribunal dated 6th July, 1998. Leave to appeal was granted on 27th August, 1998. The substance of the appeal is that the learned Member of the Tribunal erred as a matter of law in his interpretation of the meaning and effect of the contract between the Appellant, G. Lazy J. Pastoral Pty Ltd and a builder, Confitt Constructions Pty Ltd. The contract was for the construction of a dwelling at Peronne Place, Brookfield. The Respondent, Queensland Building Services Authority, administers a statutory insurance scheme which provided insurance cover to proprietors involved in residential construction work in certain circumstances. The Respondent, under the terms of the policy, agreed to compensate the Appellant as the insured if it suffered loss as a result of the non-completion of the contract. In fact, the builder went into liquidation and did not complete the contract. On 28th August, 1997, the builder issued a certificate pursuant to clause 14 of the contract. On or about 1st September, 1997, the Appellant made a payment of $55,000.00 to the builder on the basis that the building was at the pre-paint stage.
- [2]In fact it is common ground on this appeal that an inspection of the building would have revealed that it was not at that stage. The Respondent contends that the builder was not entitled to such a payment and therefore, the monies were not due to the builder. In that event, clause 2.3 of the insurance policy provides that the Respondent is entitled to reduce the amount of compensation payable under the policy of insurance by that amount.
FACTUAL BACKGROUND
- [3]The relevant clause as provided in the schedule to the contract is:
“14. PAYMENT
Progress Payments
The Proprietor shall pay the Builder the Contract Sum calculated and adjusted as provided by this contract in accordance with the following provisions:
- .
- The Proprietor shall pay the Builder the Deposit (if applicable) stated in the Schedule upon the signing of the contract.
- .
- The progress payment for each stage shall consist of:
- _
- the percentage of the Contract Sum applicable to that stage as stated in the Schedule, or the amount stated in the Schedule to be paid at that stage…
- _
Either
- a)…
- b)Payment at Negotiated Schedule Stages
- .
- The Builder shall be entitled to claim a progress payment when the Builder has reached the stage of the Works described in the Schedule herein
- .
- The Builder shall at the relevant stage certify in writing to the Proprietor that the stage has been reached and the Proprietor shall pay the amount of any such certificate with five(5) days of receipt of the certificate.”
The Schedule on the first page of the contract provided as follows:
“Negotiated percentages of the Contract Sum to be paid at the following stages:
Deposit 13,7005%
Stage 1 Base 55,00020%
2.Frame 41,30015%
3.Lock-up 96,00035%
4.Pre-paint 55,00020%
5.Practical Completion 13,700 5%”
- [4]Although the Respondent paid some monies under the policy to complete the dwelling, it refused to pay the sum of $55,000.00 on the basis that the certificate delivered by the builder demanding payment was invalid and should not have been paid. In other words, the Appellant paid monies to the builder before they become due under the contract.
- [5]The question for determination on this appeal is, if the works had not reached the pre-paint stage, was the Appellant as Proprietor still obliged to pay upon receipt of the certificate?
RELEVANT LEGAL PRINCIPLES
- [6]The questions of implied terms and paramountcy were not argued orally on this appeal even though they formed the bases of the learned Member’s reasons The question of paramountcy is referred to in the written submissions of the parties. Counsel for the Appellant submitted that in making the payment at the pre-paint stage, as duly certified by the builder, the Appellant did no more or less than it was obliged to do by the terms of the contract. He relied on the cases of Triden Contractors Ltd. v. Belvista Pty. Ltd. (1986) 3 BCL 203 and Sabemo Ltd. v. De Groot (1991) 8 BCL 132.
- [7]Counsel for the Appellant argues that clause 14 puts the builder in the same position as an architect occupies in many of the standard contracts. In other words, the builder is wearing two hats. It is submitted that the contract provides no express mechanism for the Appellant as Proprietor to challenge the veracity of the certificate. Clause 24 states that a failure to pay any money due and owing to the builder within the specified time is a substantial breach of the contract. Clause 24 makes no mention of any correlative right in the Appellant to determine the contract due to error or lack of good faith by the builder in the certifying process. In other words, it is argued the contract prohibits any set-off being raised against the certificate. In Triden’s case op. cit. , an independent architect provided the progress certificate. It was held that pursuant to the clause in that contract, the amount of the certificate became due and payable on the presentation of same to the proprietor notwithstanding that the proprietor had a valid cross-claim or set-off. In accordance with the terms in that case, upon a true construction of the contract, the proprietor is bound to pay the amount of the architect’s certificate without deduction. A similar approach was adopted in Sabemo op. cit. notwithstanding that the disputes had been referred to arbitration.
- [8]In the present case and in Triden , the builder had a right to suspend work or terminate the contract if the proprietor failed to pay. In Sabemo op. cit. at 143, it was remarked by Giles J. that this lead to the conclusion that the proprietor was bound to pay the amount of the certificate without deduction. It is common to all the cases referred to that it is a question of construction of the particular contract. Counsel for the Appellant also relied upon the fact that there was an absence of qualification in the progress certificates compared to the final certificate where the debt could be challenged on completion. This distinction was referred to in Sabemo at p.143. However, there is no such clause in the present case. The Respondent contends that such a difference favours the interpretation of Clause 14 viz. that the work was to be done before the certificate is effective to allow entitlement to monies.
- [9]Mr. Fraser Q.C. for the Respondent argued that the issue was the interpretation of the contract and it was not a question of the right to counter-claim. He stated that clause 14 had two aspects, namely, whether the work claimed for was in fact completed and whether a certificate had issued. Obviously, the latter had occurred in the present case but it required the first step to occur and as it had not, it was submitted that the monies were not due as the pre-paint stage had not been reached and the builder was therefore not entitled to claim the progress payment. As was observed by Diplock L.J. in Modern Engineering (Bristol) Ltd. v. Gilbert-Ash (Northern) Ltd. (1974) AC 689 at 719 “…the certified sum is not sacrosanct”. There was provision in that case, however, for the contractor to deduct from payments certified as due to the sub-contractor the amount of any bona fide contra accounts. Mr. Fraser distinguished both Triden and Subemo on the ground that a third party, the architect, certified in that instance. It was submitted that it fell to the proprietor in the present case to determine whether the builder had reached the stage claimed for.
- [10]S.66(3) of the Queensland Building Services Authority Act 1991 provides:
“An instalment of the contract price does not become due under a contract to which this section applies until the contractor has given the consumer an account for payment of the instalment accompanied by a certificate to the effect that the building work has been completed to the relevant stage.”
There was no reference in the submissions to any failure to provide an account.
- [11]Counsel for the Respondent argues that if there was a dispute , it was capable of resolution under clause 25 of the contract. One must start with the presumption that:
“each party is to be entitled to all those remedies for its breach as would arise by operation of law…To rebut that presumption one must be able to find in the contract clear unequivocal words in which the parties have expressed their agreement that this remedy shall not be available in respect of the breach of that particular contract”: Modern Engineering op. cit. 718.
- [12]It was submitted that a payment is not due or overdue in circumstances in which the builder wrongly claims monies without any entitlement under clause 14 and the proprietor has no obligation to pay same. It was submitted that the parties could never have intended that builders could “wrongly” certify that unearned payments could be obtained. The Respondent relied principally on the decision of Ascim (Southern) Ltd. v. Danish Contracting and Development Co. Ltd. (1989) 47 BLR 59.
- [13]In Ascim, the defendant Dancon were constructing a hotel in London. Acsim agreed to design and instal the mechanical installation for the hotel. Dancon was in the position of building owner and main contractor. Dancon contended that the amount of Ascim’s claim in the interim application was not “money otherwise due” under the sub-contract, and that Dancon were entitled to defend themselves against that claim by showing that Ascim had not done all the work in respect of which the claim is made, and/or that the amount was wrongly calculated, and/or that the work done had been badly done in breach of the sub-contract and was worth less than the sum claimed in respect of it. Acsim contended that Dancon had no right to defend save under clause 15 of the contract. Another basis relied on is not relevant for present purposes. Clause 15 gave Dancon the right to set off against any money due any claim for loss incurred by it for any breach by Ascim subject to a time limitation which had passed.
- [14]Clause 13(2) in Ascim was of similar effect to clause 14 in the present case, according to the Respondent. Clause 13(2) provided that “interim payments shall comprise the total value of the sub-contract works properly executed and of materials and goods properly on site”. It was contended by Dancon that the works had not been properly executed within the meaning of clause 13(2). Ralph Gibson L.J. held at p. 70:
“The words of clause 15 as they stand do not, in my judgment, affect the right of a contractor to defend a claim for an interim payment by showing that the sum claimed includes sums to which the sub-contractor is not entitled under the terms of the contract or to defend by showing that, by reason of the sub-contractors breaches of contract, the value of the work is less than the sum claimed under the ordinary right of defence established in Mondel v. Steel.”
- [15]In the present case as was the position in Ascim, there are no “clear express words”, or “other sufficient demonstration”, showing the intention on the part of the Appellant to “abandon its remedy, arising by operation of law, to defend itself against an invoice which claims more than the proper value of the work done”: Ascim at 72. Also, in Ascim as with the present case, there was no provision for an independent third party who was to assess the instalment payment. Another point of distinction between the present case and Triden and Subemo, op. cit., is that the latter cases involved monthly claims by the builder to the architect, not stage by stage. There was provision to suspend the contract until payment was made in that case as well. It was the subject of comment by Ralph Gibson L.J. that there were “strong commercial incentives to avoid conflict on the amount of instalments”.(p.73). A similar comment would be applicable in relation to most dwellings. A builder would be anxious to advance a proper claim and to receive payment to allow him to meet his commitments. A proprietor will be anxious not to cause a builder to “suspend work as a result of an unjustifiable failure to pay”(p.73).
- [16]In the circumstances of this case, I find that the Respondent was justified in refusing to indemnify the Appellant in respect of the payment of the sum of $55,000.00. The builder was not entitled to make a claim within the meaning of clause 14, as the dwelling had not reached the pre-paint stage. Notwithstanding the certificate, the Appellant was entitled to challenge the right of the builder to the payment. Although this results in a harsh decision for the Appellant, the construction which I have placed on the contract accords with the authorities and will allow other proprietors to challenge such certificates when appropriate. It may mean that proprietors should seek professional advice before making such progress payments to ensure that the work has been carried out to the stage so certified.
- [17]ORDERS
The appeal is dismissed. The question of costs is reserved for further argument.