Clemens v Flower[2005] QDC 378

DISTRICT COURT OF QUEENSLAND

1. [1]
   These appeals arise out of the construction of a house at Scarborough by Mr Flower, a builder, for the owners Mr and Mrs Clemens and the contract they entered into for that work. They fell into dispute about what, if anything, the Clemens’ owed Mr Flower when they took possession of the house. The dispute was determined by a Member of the Commercial and Consumer Tribunal (CCT) in December 2004 who, after a hearing over several days, ordered that they pay Mr Flower $72,248.88.

2. [2]
   Earlier this year this court gave leave to appeal that decision and another, about costs, made shortly afterwards by the Member^[1]; and, stayed the CCT orders until the appeal was determined.  It was subsequently heard on 16 May 2005.  Later, Mr Flower applied to re-open some aspects of the appeal and to have the stay lifted and that application was heard, and refused, on 1 August 2005.

3. [3]
   The primary question in the appeal concerns the terms of the contract, and the learned Member’s construction of part of it. Ancillary questions touch upon the way he calculated some of the amounts which go to make up the sum the Clemens’ were ordered to pay. A final question concerns his subsequent decision to vacate a costs order he made when he handed down the primary judgment, following receipt of a letter from the respondent’s solicitor, and to invite further submissions about costs.

4. [4]
   On appeal this court has power to confirm, annul, vary or reverse the decision of the CCT^[2] and, for the reasons which follow, is inclined to do so here.  There is also a power to remit the matter to the CCT for further hearing.  Questions of costs and finality dictate against that course.

5. [5]
   The hearing before the learned Member took three days, in December 2004. Relevantly, he found that the contract between the builder and the owners was the full contract and there were no further oral or collateral contracts; but, nevertheless, that work additional to that specified in the contract was performed by the builder and his subcontractors at the express request of the owners, who were told that work would involve extra cost, but (in some instances) not how much; and, further, that when the owners took possession, as they did, by entering and changing the locks in mid October 2003, they were still indebted to the builder.

6. [6]
   It is not in issue that on 17 October 2003 the builder sent the Clemens’ a Notice of Substantial Breach under cl 28.3 of the contract, asserting a breach arising from those events.

7. [7]
   On 6 November 2003, the Clemens’ commenced proceedings in the CCT seeking an order that the Tribunal determine the amount of money payable by them to Mr Flower under the contract. On 28 November 2003, he filed a defence and counterclaim seeking, among other things, a declaration that he was entitled to validly terminate the contract, although it was not until 12 February 2004 that he elected to do so, in correspondence between solicitors.

8. [8]
   The learned Member decided that the termination was proper and lawful and entitled the builder to recover the costs of construction plus a builder’s margin, and default interest, pursuant to cl 28.8 of the contract, in an amount eventually calculated (with interest) at $72,248.88. This was over and above the $251,878 the Clemens’ had paid, and ignored their claims to further credits of $11,396, and for the alleged cost of remedying defective work.

9. [9]
   The first error of law alleged below is that the learned Member neglected to determine or make any orders concerning the owners’ claims that the builder retained, and should deliver up, certain property still in his possession. An order about these matters was sought in the owners’ pleadings. While the matter had largely resolved by the time the appeal was heard it was not disputed that some of these items were only delivered this year, and a mirror and some plans remain undelivered. The matter was, it appears, overlooked.

10. [10]
    The second claimed error concerns the finding that the builder’s right to terminate was unaffected by the owners’ commencement of proceedings in the CCT. Clause 28 of the contract provided:

28.3 If a party is in substantial breach of this contract, then the other party may give to that party a written notice to show cause:

 (a) specifying the substantial breach;

 (b) requiring that the substantial breach be rectified within 10 working days after the notice is given under this contract; and

 (c) stating that, if the substantial breach is not rectified, the other party intends to end this contract.

28.4 If the party in substantial breach does not rectify or commence to substantially rectify the substantial breach stated in the notice to show cause within 10 working days of receiving that notice, the other party may end this contract by giving a separate notice to that effect.

28.5 A party is not entitled to end this contract if, within 5 working days of receiving the notice to show cause, the party in substantial breach refers the question as to whether the other party has the right to end this contract for determination by the Queensland Building Tribunal under clause 37.

28.6 If a reference for determination is made under subclause 28.5 the carrying out of the works is suspended and the notice to show cause is not effective until the Queensland Building Tribunal has made a determination.

11. [11]
    More than the five days mentioned in cl 28.5 passed between the builder’s notice and the Clemens referral to the CCT, and the learned Member also concluded that, in its terms, that referral was not one determinative of the question whether the builder could rightfully terminate. Reliance was placed upon the decision in Gianfriddo v Garra Constructions Pty Ltd (1971) VR 289, but the case is authority for nothing more than the proposition that the validity of a notice terminating a contract is not affected by the referral of the matters in issue to a court and is not, it seems to me, determinative of the question whether the time limits set out in cl 28.5 might be construed as a procedural matter, and not of the essence of the contract.

12. [12]
    As a number of other decisions show, if there is nothing in the contract which suggests time must always be construed as essential, the court will lean against that construction^[3].  At the highest, the owners’ failure to act within the prescribed time meant that they were exposed to the risk of an election by the builder, which was not made.  The terms of the referral, which asked whether the amount claimed by the owner was payable, was on any reasonable inference simply a less than precise way of addressing the matters in dispute between lay parties, particularly in the face of the builder’s Notice of Substantial Breach.  The contrary finding in the CCT  must, in those circumstances, involve an error of law which is properly appellable.

13. [13]
    It is necessary, then, to determine the proper adjustment of money between the parties under the contract, in accordance with the Domestic Building Contracts Act 2000.  That exercise is to be undertaken in light of the earlier mentioned findings of the learned Member, many of which were based upon issues of credit which were not, and could not reasonably be, attacked.

14. [14]
    It was not in issue that at the time the owners took possession the house was substantially completed and, in terms of cl 25.2, “practically completed”. What the proceedings ought to have resolved, then, is the quantum of the “final claim” under cl 38.1. The calculations must start by reference to the contract price of $259,000, which was subject to an agreed variation signed by the owners on 16 June 2003 of $3,238.

15. [15]
    The learned Member then allowed a further $10,116 for the cost of a retaining wall and fence and associated work. This variation did not include a specific price when it was signed by the male owner but recorded that “…the price will be worked out in accordance with the contract”.  This was held to be sufficient for the purposes of cls 20.7 and 20.8 of the contract and, together with the proven additional amounts for other prime cost and provisional sums of $12,970, appears to be unassailable.

16. [16]
    A further amount of $19,665 was claimed for additional work alleged to be undertaken at the request of the owners, but not capable of being related to any prime cost or provisional sum item, and not the subject of any variation document. These claims were allowed, in an amount of $10,591.91 but some of them including, in particular, amounts for additional paths and driveways were attacked on the basis they were neither provisional sums, nor proper variations. No specific finding appears to have been made but the evidence indicates the builder could properly avail himself of s 84(4), which permits recovery of an amount for a variation if there are exceptional circumstances and the builder would suffer unreasonable hardship, and would not be unfair to the owner. The findings at paras 82-89, while containing no reference to that part of the legislation, carry the sufficiently strong implication that the learned Member was persuaded to that view, and it was plainly open.

17. [17]
    The total of these claims is $295,915.91.

18. [18]
    This calculation then attracted non-contentious credits to the owners concerning prime cost and provisional sum items and other matters of $10,213 and, in the balance, revealed a final itemised account of $285,702.91.

19. [19]
    What then remained unresolved were the owners’ cross-claims for additional credits, and for allegedly defective work. The learned Member identified the Clemens’ claims for $11,396 for additional credits but, by reason of his method for determining the adjusted contract price, did not deal with them. Particulars of them were in evidence in the proceeding and do not appear to have been disputed, and they should be brought into the calculation to the owners’ credit.

20. [20]
    As to defects, on 6 October 2003 the builder presented a Certificate of Practical Completion to the owners, who signed and dated it while noting five minor defects or omissions and, later, the owners, through their solicitors, asserted a claim for credits of $2,510 for five items. These claims do not appear to have been accepted by the learned Member and were also rejected by the builder’s expert witness on estimation, Mr Sim, whom the learned Member accepted.

21. [21]
    At the time of possession the owners had paid $251,878. They owed the builder $285,702.91, less the additional credits of $11,396 – ie, $22,428.91.

22. [22]
    Under cl 33.1 an owner who does not pay amounts properly owing to the builder by the due date is obliged to pay default interest, calculated by reference to the Commonwealth Bank Overdraft Index Rate, plus 5 per cent. The learned Member used a base rate of 9.55 per cent without, it is said, receiving evidence but the matter is one of common knowledge and there is no allegation the figure used was wrong. At the time the owners accepted the premises were practically completed and took possession they were indebted to the builder for $22,428,91. The learned Member allowed interest up to the date of his judgment, for 313 days. On the sum now found to be payable that would amount to $2,798.

23. [23]
    In lieu, therefore, of the order made in the CCT it is ordered that the applicants pay the respondent $25,227.39; and, that the respondent forthwith deliver up a mirror, and plans in his possession. I will hear further submissions about interest, and costs.

24. [24]
    The second appeal in the matter concerns, firstly, an order about costs made by the learned Member when he handed down his decision on the principal appeal on 21 December 2004. The order was that each party bear its own costs. The builder’s solicitors wrote privately to the Member asking that the question of costs be reopened under the CCT Act and, without reverting to the owners or their lawyers, he published a further decision on 24 December 2004, to the effect that, after consideration of the correspondence, he had determined to vacate the costs order and give directions for the provision of further submissions about costs.

25. [25]
    That decision was said to rest on s 50(5) which permits the Tribunal to vary or revoke an order or direction on the application of a party, or on its own initiative, but the section is in a part the Act dealing with case management and, read as a whole, is clearly limited to procedural matters.

26. [26]
    Under Part 5, Division 7 there is a clear legislative emphasis upon the notion that each party will bear its own costs, although Part 6, Division 7 allows for a system of settlement offers with the consequence that, under s 142, if a settlement offer which exceeds the ultimate award the tribunal must award the offeror costs. The section must be read, however, in a way which gives proper regard to ss 70 and 71 which appear to maintain a discretion about costs. Here, it is unclear whether the learned Member took these matters into account; and, the decision to reopen costs has unfortunate overtones touching questions of natural justice.

27. [27]
    I am satisfied this separate appeal should, too, be allowed. The parties are also at odds whether, in that event, the matter should be remitted to the CCT, or not. The better course is to determine any questions which might arise about costs in the present appeals, and I will hear further submissions in that respect.